A

PROJECT REPORT
ON
PORTFOLIO MANAGEMNET SERVICES
FOR
SHAREKHAN LIMITED.
BY
MOIZ CHAIWALA
UNDER THE GUIDANCE OF
DR. VAISHAMPAYAN
SUBMITTED TO
UNIVERSITY OF PUNE
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD
OF THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION (MBA)
THROUGH
VISHWAKARMA INSTITUTE OF MANAGEMENT
PUNE!".
1
ACKNOWLEDGMENT
Doing a project study involves a great deal of encouragement, innovative ideas and
support from different people. After all, success is the epitome of hard work,
perseverance, steadfast determination and most of all encouraging guidance. This
summer project at SHAREKHAN LTD. was a knowledge gathering experience and
opened a vast frontier of practical aspect of theoretical knowledge.
A successful project can never be prepared by the singular effort of the person to
whom project is assigned but, it also demands help and guardianship of some
acuainted person who are involved actively or passively in the completion of a
successful project.
! would like to express my sincere thanks to my Director, P#$%. S&'#'( L J$)&* for
giving me the opportunity to be a part of an esteemed institution and without whose
support this project would not have been possible.
! take this opportunity to express my heartiest thanks to M#. AMIT CHAVAN,
Assistant "anager, #$A%&'$A( )TD, my project guide, for his invaluable
guidance, active involvement and assistance at all stages, despite his busy schedule
that made it possible to complete this summer project.
The project couldn*t have been complete without timely and vital help of my faculty
guide D#. VAISHAMPAYAN would like to thank him for the entire support +
guidance which he provided me throughout this project. $e has been a source of
inspiration through his constant guidance, personal interest, encouragement and help.
! convey my sincere thanks to him. !n spite of his busy schedule he always found time
,
to guide me through the project. ! am also grateful to him for reposing confidence in
my abilities and giving me the freedom to work on my project.
! express my sincere gratitude to all employees at SHAREKHAN LTD. for providing
me useful assistance and resources reuired for the successful completion of this
project.
And in the end ! would like to thank my parents, my brother and my friends for their
motivational support.
! as a student of VISHWAKARMA INSTITUTE OF MANAGEMENT+ P,-.!"+
would like to take this opportunity to thank all those who had made this project a
tremendous learning experience for me.
MOIZ CHAIWALA.
-
INDE/
S#.
N$
TITLE PAGE N$.
1 &xecutive #ummary .
, /ompany 0rofile 1
- 2bjective of the #tudy 13
4 0ortfolio "anagement #ervices ,4
. "ethodology of the #tudy 5,
5 Data Analysis 55
1 6inding*s 17
8 #uggestions 1,
3 )imitations 14
17 /onclusions 11
11 9ibliography 87
1, Annexure 8,
4
CHAPTER 01
E/ECUTIVE SUMMARY
.
E2.3,4*5. ),66'#7
The project at #$A%&'$A( )TD. i.e. :0ortfolio "anagement #ervices; helps the
individual investors in constructing a portfolio from the funds they want to put in the
various securities or financial instruments that are available in the market.
!t emphasi<es on what is a :0ortfolio "anagement #ervice;. Then !
mentioned the need or the objective for the investors to have their portfolio. The
objective of portfolio is to diversify risk, using the investment tools and gain
maximum returns on the constructed portfolio. Along with these features ! have
mentioned about the various services + product offered in 0"# along with its
objective and advantages.
!t emphasi<es on the entire methodology of my study the parameters kept in the
mind while designing of the report, various sources of data collection, portfolio
management + under it the types of portfolio and various activities of portfolio
management, concept of risk management.
!t includes the various investment instruments which are included in the portfolio,
along with example of actual designed portfolio.
!t consists of my learning*s from the project and few suggestions for the
organi<ation which ! feel will be useful for them in improving their services even
further and at last but not the least this phase of the project talks about the final
/%=> of the report under the name of conclusion, it talks all about the findings
and my beautiful experience with :#$A%&'$A( )!"!T&D;.
5
CHAPTER 81
COMPANY PROFILE
1
C$69'-7 P#$%*:.
#harekhan )imited is a retail financial services provider with a focus on &uities,
Derivatives and /ommodities, 9rokerage execution on the (ational #tock &xchange
of !ndia )td. ?(#&@, 9ombay #tock &xchange )td. ?9#&@, (ational /ommodity and
Derivatives &xchange !ndia ?(/D&>@ and "ultiA/ommodity &xchange of !ndia )td.
?"/>@. #harekhan provides trade execution services through multiple channels A an
!nternet platform, Telephone and %etail 2utlets and is present in ,,. cities through a
network of 51. locations. T&. 3$69'-7 ;') ';'#(.( 4&. 8<<= M$)4 P#.%.##.(
S4$3> B#$>*-? B#'-( @7 A;;'A C$-),6.# V$4..
#$A%&'$A( covers the entire spectrum of financial services such as #tock broking,
Depository 0articipants, Distribution of financial products like "utual 6unds, 9onds,
6ixed Deposit, "erchant 9anking and /orporate 6inance, !nsurance 9roking,
/ommodities 9roking, 0ersonal 6inance Advisory #ervices, 0lacement of &uity,
!02*s, among others.
#harekhan is one kind of mediator between clients that are investors and &xchange
board. Bithout mediator nobody can directly purchased shares from the exchange.
#harekhan is one of the leading stock broking companies in !ndia. #harekhan is the
retail broking arm of SSKI, an organi<ation with more than "! 7.'#) of trust and
credibility in the stock market. 9ut before 1 years the business was changed from
being a discount brokerage house to complete investment solutions provider.
#harekhan was officially launched in 6ebruary ,777 as a brand S&'#.>&'-. Bith
branches and outlets across the country, their ground network is one of the biggest in
!ndiaC
8
H*)4$#7 $% S&'#.>&'-
A member of the 9ombay #tock &xchange for the last - generations and serving
investors since 13,,, ##'! is a member of the (ational #tock &xchange, the !nterA
connected stock exchange and a depository participant registered with both (#D) +
/D#). ##'! made its foray into institutional broking and corporate finance 13 years
ago. "r. #hripal "orakhia, chairman of the ##'! group turned into a professional
outfit and established the group as the pioneer of the investment research in the !ndian
market. The ##'! group of companies is distributed in to four such divisions and they
are as followsDA
##'! !nvestors #ervices )td.?#harekhan@
#.#. 'antilal !shwarlal #ecurities 0vt. )td.
##'! /orporate 6inance.
! dream 0roductions.
#harekhan falls under the umbrella of #.#. 'antilal !shwarlal #ecurities 0vt. )td
?##'!@. Thus becoming the leading domestic player in !ndian institutional business.
#harekhan has more than E1 billion of private euity deals.
##'! has been voted as Top Domestic 9rokerage $ouse in the research category as
well as derivatives, depository services, commodities trading on the "/> + (/D&>
and most importantly, investment advice tempered by eighty years of broking
experience. #harekhan is known for its research and it big share of its profit on
research.
3
(A"& D&#!F(AT!2(
1@ "r. #hripal "orakhia /$A!%"A(
,@ "r. Tarun #hah /hief &xecutive 2fficer
-@ "r. Abhay $avaldar "anaging Director
4@ "r. 0athik Fandotra $ead 2f %esearch
.@ "r. %ishi 'ohli Gice 0resident 2f &uity Derivatives
5@ "r. (ikhil Gora Gice 0resident 2f %esearch
17
VARIOUS ACTIVITIES UNDERTAKEN BY
SHAREKHAN STOCK BROKING LTD
11
DEMAT SERVICE
Demateriali<ation and trading in the demat mode is the safer and faster alternative to
the physical existence of securities. Demat as a parallel solution offers freedom from
delays, thefts, forgeries, settlement risks and paper work. This system works through
depository participants ?D0s@ who offer demat services and the securities are held in
the electronic form for the investor directly by the Depository.
#harekhan Depository #ervices offers demateriali<ation services to individual and
corporate investors. They have a team of professionals and the latest technological
expertise dedicated exclusively to our demat department, apart from a national
network of franchisee, making their services uick, convenient and efficient.
At #harekhan, their commitment is to provide a complete demat solution which is
simple, safe and secure
DAIL AND TRADE
Trade in &uity by using your phoneC
6ree with #harekhan /lassic Account, the DialAnATrade service enables customers to
place orders for buying and selling shares through your telephone.
6&AT=%&#D
#imple and #ecure !nteractive Goice %esponse based system for
authentication.
(o waiting time. &nter your TA0!( to be transferred to our telebrokers.
1,
Hou also get the trusted, professional advice of our telebrokers
STOCK BROKING
#$A%&'$A( offers trading on a vast platformI (ational #tock &xchange, 9ombay
#tock &xchange. "ore importantly, they make safe to the maximum possible extent,
by accounting for several risk factors and planning accordingly. They assisted in this
task by their inAdepth research, constant feedback and sound advisory facilities. Their
highly skilled research team, comprising of technical analysts as well as fundamental
specialists, secure result oriented information on market trends, market analysis and
market predictions. This crucial information is given as a constant feed back to the
customers, through daily reports delivered along with their updated portfolio. 9esides
this they are also offered special portfolio analysis packages that provide daily
technical advice on scrip*s for successful portfolio management and provide
customi<e advisory services to help customer make the right financial moves that are
specifically suited to their portfolio.
6actors such as their success in the electronics custody business has helped build on
our trading of trust even more. /onseuentially their retail client base expanded very
fast. To empower the investor further they have made serious efforts to ensure that
their research calls are disseminated systematically to all their stock broking clients
through various delivery channels like eAmail, chat, #"#, phone calls etc.

1-
A(5*)$#7 S.#5*3.)
=nder their reail brand #$A%&'$A( )!"!T&D* they deliver advisory services to a
crossAsection of customers. The service is backed by a team of dedicated and expert
professionals with varied experience and background in handling investment
portfolios. They are continually engaged in designing the right investment portfolio
for each customer according to individual needs and budget considerations with a
comprehensive support system that focuses on trading customers portfolios providing
valuable inputs, monitoring and managing the potfolio through varied technological
intiatives. Those is made possible by the expertise they have gained in the business
over the years.
COMMODITIES
At #$A%&'$A( /ommodities, they are focused on taking commodities trading to
new dimensions of reliability and profitability. They have made commodities trading,
an essentially ageAold practice, into a sophisticated and scientific investment option.
/ompany enables trade in all goods and products of agriculture and mineral origin
that include lucrative commodities like gold and silver and popular items like oil,
pulses and cotton through a wellAsystemati<ed trading platform. The technological
and infrastructural strengths and especially the street smart skills make them an ideal
broker. Their service matrix is holistic with a gamut of advantages, the first and
foremost being their legacy of human resources, technology and infrastructure that
comes from being part of the #$A%&'$A( Froup.
14
Their wide national network, spanning the length and breadth of !ndia, further
supports these advantages. %egular trading workshops and seminars are conducted to
hone trading strategies to perfection. &very move made is a calculated one, based on
reliable research that is converted into valuable information through daily, weekly and
monthly newsletters.
KEY BENEFITS OF COMMODITIES AT SHAREKHAN
/omplete online support.
/utting edge analysis of the most relevant news in commodities.
An excellent information facility through #"# messages provides you with
appropriate market information as well as buyJsell calls.
A team of dedicated %elationship "anagersJDealers provide you nonAstop
support through messenger. Hou will be assisted on market information,
buyJsell recommendation and other information to guide you through.
SHARESHOPS
#$A%&'$A( $AG& 377 #$A%& #$20# !( ,87 /!T!&# !( !(D!A.
A #harekhan outlet offers the following servicesD
2nline 9#& and (#& executions ?through 92)T + (&AT terminals@.
1.
6ree access to investment advice from #harekhanKs %esearch team.
#harekhan Galue )ine ?a monthly publication with reviews of
recommendations, stocks to watch out for etc@.
Daily research reports and market review ?$igh (oon + &agle &ye@.
0reAmarket %eport ?"orning /uppa@.
Daily trading calls based on Technical Analysis.
/ool trading products ?Daring Derivatives and "arket #trategy@.
0ersonali<ed Advice.
)ive "arket !nformation.
Depository #ervicesD Demat + %emat Transactions.
Derivatives Trading ?6utures and 2ptions@.
/ommodities Trading.
!02*s + "utual 6unds Distribution.
!nternetAbased 2nline TradingD #peedTrade.
MUTUAL FUNDS
#harekhan is glad to announce that customers will now be able to invest in "utual
6unds through sharekhan. They have started this service for online mutual funds, and
15
in the near future will be expanding our scope to include a whole lot more. Applying
for a mutual fund through them is open to everybody, regardless of whether you are a
#harekhan customer or not. 6or investing in mutual funds through share khan you
have to just download the form from internet, fill it and submit it in any sharekhan
office.
11
AN OVERVIEW OF SHAREKHAN BUSINESS
Stock Broking
Stock Broking
Distribution
Distribution Depository
Depository
(1) Mutual Funds
() IPOs Equity, Bonds
(!)Debt products

(1) Mutual Funds
() IPOs Equity, Bonds
(!)Debt products

(1)Participant with both
!D" and #D!"
() $%&,&&&' accounts
(!) ()on*st the top DPs
in the country
(1)Participant with both
!D" and #D!"
() $%&,&&&' accounts
(!) ()on*st the top DPs
in the country
SHA"#$HA% LIMI&#D SHA"#$HA% LIMI&#D
In'i()s %o.1 integr(te' *in(nci(+ ser,ices
group
COMMODI&I#S
COMMODI&I#S
Me)ber o+ both the
co))odities e,chan*e
Me)ber o+ both the
co))odities e,chan*e
(1) !E and B!E
)e)bership
() Equity, Deri-ati-es
and Debt )ar.et
operations
(!) /&& !0OP!
(-) 11&,&&&' accounts
(.) (round %.23 )ar.et
share 4!E #ash5
(1) !E and B!E
)e)bership
() Equity, Deri-ati-es
and Debt )ar.et
operations
(!) /&& !0OP!
(-) 11&,&&&' accounts
(.) (round %.23 )ar.et
share 4!E #ash5
18
CORNERSTONES OF STRAREGY
1@ 6ocus on retail segment.
,@ 9uild a strong 0anA!ndia network managed by experienced professionals, build
presence across both metros and /lass AJ9 town.
-@ 9uild fullAservice capabilities leveraging the networkAoffer the entire gamut of
financial services, backed by strong transaction processing and high volume
handling capability.
4@ &stablished a high degree of customer ownership and topAofAmind recall in the
local marketsA ensures steady customer traffic and repeat business.
.@ 9uild a trusted brandI ensure high visibility
C$69.4.4$#) $% )&'#.>&'-
Indiabulls
6ar-y consultant
I#I#I Direct
7eli*are
0DF#
7elience )oney
13
I"8F! In-ests)art.
,7
CHAPTER B1
OBJECTIVE OF THE STUDY
,1
OBJECTIVE OF THE STUDY
"y project on :P$#4%$:*$ M'-'?.6.-4 S.#5*3.); is meant to study the nature of
different investment instruments available in the market and then finally suggest the
same to the clients in the form of a structured product. ! do this by suggesting the
investor as to go for which all investments that can fetch out real good returns to them
in future, as per their risk appetite regarding the investments and their needs. ! suggest
them the investments that they can opt for and the one*s which can bring a huge value
addition to their portfolio. 6ew objectives are given belowD
Fuide a client to determine the level of investment risk they are willing to take
and then suggest them an appropriate asset allocation.
To study and compare various investment instruments available in the market.
To advise $igh (etAworth !ndividuals ?$(!*s@ on different investment avenues
like mutual funds, insurance, real estate, stock broking etc.
To know the investment pattern of the individuals + hence creating a better
portfolio of investment for these individual clients.
To advise them on tax planning, so as to minimi<e their tax liability.
To provide the client with an appropriate asset allocation mix based on certain
factors time hori<on and risk tolerance.
=nderstanding consumer behavior towards various investment options
available.
,,
INVESTORS DESK
Today an investor is interested in tracking the value of his investments, whether to
invest directly in the market or through some funds which play in the market. This
dynamic change has taken place because of a number of reasons. Bith globali<ation
and the growing competition in the investments opportunity available, investor would
have to make guided and have to make rational decisions on whether they get an
acceptable return on the current investments, or if there is needs to switch to another
investments plan.
!t is of paramount importance to keep in mind the risk involved in any investment.
9efore making any investment plans for any client, firstly we need to know hisJher
risk taking ability. I-5.)46.-4) 4&'4 &'5. 4&. ?#.'4.)4 #.4,#- 9$4.-4*': 4.-( 4$
?*5. 4&. ?#.'4.)4 #*)> 9$4.-4*':.
2n the other side of the coin, investments with conservative return are the least risky.
#o for successful and stress free investment, a balance between the financial objective
and the ability to tolerate risk is the best. This overall balance can be obtained by
diversifying money across low, medium and highArisk investments so that both short
term and long term goals are met.
Q1 W&'4 *) I-5.)46.-4C
The money earn is partly spent and the rest saved for meeting future expenses.
!nstead of keeping the savings idle person may like to use savings in order to get
return on it in the future. This is called !nvestment.
,-
Q1 W&7 )&$,:( $-. *-5.)4C
2ne needs to investD
To Learn return on idle resources.
To Lgenerate a specified sum of money for a specific goal in life
To Lmake a provision for an uncertain future.
2ne of the important reasons why one needs to invest wisely is to meet the cost of
!nflation. !nflation is the rate at which the cost of living increases. The cost of
living is simply what it costs to buy the goods and services you need to live.
!nflation causes money to lose value because it will not buy the same amount of a
good or a service in the future as it does now or did in the past. 6or example, if
there was a 5M inflation rate for the next ,7 years, the aim of investments should
be to provide a return above the inflation rate to ensure that the investment does
not decrease in value.
Q1 W&.- 4$ )4'#4 I-5.)4*-?C
The sooner one starts investing the better. 9y investing early investor allow his
investments more time to grow, whereby the concept of compounding increases
income, by accumulating the principal and the interest or dividend earned on it,
year after year. The three golden rules for all investors areD
To L!nvest early,
To L!nvest regularly,
To L!nvest for long term and not short term.
,4
Q1 W&'4 '#. 5'#*$,) $94*$-) '5'*:'@:. %$# *-5.)46.-4C
2ne may invest inD
P&7)*3': ')).4) like %eal &state, FoldJ Newellery, /ommodities etc.
andJor
F*-'-3*': ')).4) such as 6ixed Deposits with 9anks, #mall #aving
!nstruments with 0ost 2ffices, !nsuranceJ0rovidentJ0ension 6und, "utual
6und etc. or #ecurities market related instruments like #hares, 9onds, and
Debentures etc.
VALUE ADDITION TO THE ORGANIZATION
Through this project ! can bring in long term clients for my organi<ation by
offering :0ortfolio "anagement #ervices; to them.
Through this project ! am not only bringing long term clients for my
organi<ation but also creating a word of mouth publicity of my organi<ation
by offering the best services to the clients so that a chain of more consumers is
created through these services.
,.
CHAPTER !1
PORTFOLIO MANAGEMENT
SERVICES1
,5
PORTFOLIO MANAGEMENT SERVICES
0ortfolio management services involve activities that help the investors to arrive at
desired investment goals. A portfolio management service is the process of organi<ing
and managing businesses or the establishment for the purpose of obtaining maximum
profit. 0ortfolio management services ensure optimum use of people, money and
other resources. !n short, it is the art of optimi<ing assets and raising the worth of a
portfolio. The major component of the decision process is portfolio management.
After securities have been evaluated an appropriate portfolio should be selected. !t
involves managing group of assets ?i.e. portfolio@ as a unit. The basis of financial
planning process is an asset allocation strategy. Asset allocation is the distribution of
assets among different asset classes, such as stocks, bonds, and cash euivalent
instruments.
T&. #.:'4*$-)&*9 @.4;..- #*)> '-( #.4,#- is one of the essential concepts to
understand when investing and it is uniue for every investor, the personal risk
tolerance could be influenced by current world events, investments experiencesA even
your inherited views on saving and investing.
ADVANTAGES OF PORTFOLIO MANGEMENT
SERVICES
(0) I-(*5*(,'::7 6'-'?.( '33$,-4)1 0rovides a flexible format for optimi<ing
returns through effective fund management.
(8) C,)4$6*A.( 9$#4%$:*$)1 TailorAmade investment strategies to suit individual
reuirements.
,1
(B) I-(*5*(,'::7 6'-'?.( '33$,-4)1 0rovides a flexible format for optimi<ing
returns through better information supportJclient servicing regular investments
disclosures make the investor feel comfortable and in control of his money.
(!) S,99$#4*5. 4'2 )4#,34,#.1 Tax changes support rise in euity, there is a cut in
capital gains tax on listed euitiesD
i. (!) for holdings greater than 1, months
ii. 17M?from -7M@ for holdings less than 1, months
(=) SEBI #.?,:'4.(1 A regulated industry makes the investor feel comfortable with
the investments techniues adapted to optimi<e returns.
OBJECTIVE BEHIND OFFERING PORTFOLIO
MANAGEMET SERVICES
This is my objective behind offering the portfolio management services to the clients
so that ! can offer themD
1. S'%.47 $% F,-(1 The investment should be preserved, not be lost and remain in
the returnable position in cash or kind.
,. L*D,*(*471 0ortfolio must consist if such securities which could be enAcashed
without any difficulty or involvement of time to meet urgent need for funds.
-. R.')$-'@:. #.4,#-)1 The investment should earn a reasonable return to
upkeep the declining value of money and must be compatible with the
opportunity cost of money in terms of current income in the form of interest or
dividend.
,8
4. A99#.3*'4*$- *- 3'9*4':1 The money invested in portfolio must grow and
result in capital gains.
.. T'2 9:'--*-?1 &fficiently portfolio management is concerned with composite
tax planning covering income tax, capital gains tax, wealth tax and gift tax.
5. M*-*6*A. #*)>1 %isk avoidance and minimi<ation is very important and are
most important objectives of portfolio management. 0ortfolio managers must
ensure these objectives by effective investment planning and periodical review
of marketing and economy.
1. M'#>.4'@*:*471 The investment made in securities should me marketable that
means, the securities must be listed and traded in stock exchange so as to avoid
risk and difficulty in their encashment. "arketability ensures liuidity to the
portfolio.
,3
TYPES OF PORTFOLIOS
CONSERVATIVE MODEL PORTFOLIOS generally allocate a large percent of
the present portfolio to lower risk securities such as fixedAincome and money market
securities.
The main goal with a conservative model portfolio is to protect the principal value of
your portfolio. As such these models are often referred to as :Capital Preservation
portfolios;.
&ven if they are very conservative and prefer to avoid the stock market entirely, some
exposure can help offset inflation. They could invest the euity portion in high uality
blue chip companies, or an index fund, since the goal is not to beta the market.
F*?. 0

-7
MODERATELY CONSERVATIVE PORTFOLIO is ideal for those who wish to
preserve a large portion of the portfolio*s total value, but are willing to take on a
higher amount of risk to get some inflation protection.
A common strategy within the risk level is called :current income;. Bith this
strategy, you can choose securities that pay a high level of dividends or coupon
payments.
F*?. 8

MODERATELY AGGRESSIVE PORTFOLIOS are often referred as :balanced
portfolios; since the asset composition is divided almost eually between fixedA
income securities and euities in order to provide a balance of growth and income.
#ince these moderately aggressive portfolios have a higher level of risk than those
conservative portfolios mentioned above, select this strategy only if you have a longer
time hori<on ?generally more than five years@, and have a medium level of risk
tolerance.
-1
F*?. B
AGGRESSIVE PORTFOLIOS mainly consist of euities, so these portfolios* value
tends to fluctuate widely. !f you have an aggressive portfolio, your main goal is to
obtain long term growth of the capital. As such the strategy of an aggressive portfolio
is often called a :capital growth strategy. To provide some diversifications,
investors with aggressive portfolios usually add some fixedAincome securities.
F*?. !
-,
VERY AGGRESSIVE PORTFOLIOS consist almost entirely of euities. As such,
with a very aggressive portfolio, your main goal is aggressive capital growth over a
long term hori<on. #ince these portfolios carry a considerable amount of risk, the
value of the portfolio will vary widely in the short term.

F*?. =
--
N$4&*-? I) S.4 *- S4$-.
(ote that the above outline of portfolios and the associated strategies offer only a
loose guideline A we modify the proportions above to suit individual investment
needs
Also, the amount of cash and euivalents, or money market instruments to be placed
in a portfolio will depend on the amount of liuidity and safety the investor needs. !f
they need investments that can be liuidated uickly or they would like to maintain
the current value of your portfolio, they might want to put a larger portion
of their investment portfolio in money market or shortAterm fixedAincome securities.
Those investors who do not have liuidity concerns and have a higher risk tolerance
will have a small portion of their portfolio within these instruments.
As each asset class has varying levels of return for a certain risk, their risk tolerance,
investment objectives, time hori<on and available capital will provide the basis for
the asset composition of their portfolio.
-4
-.
INVESTMENT STRATEGY IN PMS
(0) F$3,) $- ).:.34E3:.'# )4$3> $99$#4,-*4*.)1 !nvestments in stocks where there is a
clear earnings visibility.
(8) R.:'4*5.:7 3$-3.-4#'4.( 9$#4%$:*$1 A portfolio composition of not more than ,.A
-7 stocks of what there are compelling opportunities.
(B) U)'?. $% (.#*5'4*5.) ') ' 4$$:1 2ne must have a selective use of derivatives in
various options to enhance returnsJportfolio protection.
(!) F:.2*@:. 3')& '::$3'4*$- )4#'4.?71 Be have an efficient allocation among assets
with flexibility to sit on 177M cash.
PRODUCT OFFERINGS IN PMS
#harekhan has two types of portfolio management productsD
PMS P#$ P#*6.1 !deal for investors looking at steady and superior returns
with low to medium risk appetite. This portfolio consists of a blend of uality
blueAchip and growth stocks ensuring a balanced portfolio with relatively
medium risk profile. The portfolio will mostly have large capitali<ation stocks
based on sectors + themes that have medium to long term growth potential.
!nvestment are based on - tenetsD
a@ /onsistent, #teady and #ustainable %eturns.
b@ "argin of #afety.
c@ )ow Golatility.
-5
PMS P#$ T.3&1 These services are for those who want &*?& #*)> %$# &*?&
#.4,#-).
0roAtech uses the knowledge of technical analysis and the power of derivatives
market to identify trading opportunities in the market. The 0rotech lines of
products are designed around various riskJrewardJvolatility profiles for different
kinds of investment needs.
MA/IMIZING RETURN WHILE MINIMIZING RISK
The main goal of allocating the assets among various asset classes is to maximi<e
return for the chosen level of risk, or stated another way, to minimi<e risk given a
certain expected level of return. 2f course to maximi<e return and minimi<e risk, we
need to know the risk Oreturn characteristics of the various asset classes. The
following chart compares the risk and potential return of the more popular onesD
F*?. F
-1
The above graph shows, euities have the highest potential return, but also the highest
risk. 2n the other hand, Treasury bills have the lowest risk since they are backed by
the government, but they also provide the lowest return.
The chart also demonstrates that when you choose investments with higher risk, your
expected returns also increase proportionately. 9ut this is simply the result of the riskA
return tradeoff. They will often have high volatility and are therefore suited for
investors who have a high risk tolerance ?can stomach wide fluctuations in value@, and
who have a longer time hori<on.
!t*s because of the riskAreturn tradeoff O which says you can seek high returns only if
you are willing to take losses O that diversification through asset allocation is
important. #ince different assets have varying risks and experience different market
fluctuations, proper asset allocation insulates your entire portfolio from the up and
downs of one single class of securities. #o, while part of your portfolio may contain
more volatile securities O which you have chosen for their potential of higher returns O
the other part of your portfolio devoted to other assets remains stable. 9ecause of the
protection it offers, asset allocation is the key to maximi<ing returns while minimi<ing
risk.
-8
VARIOUS AVAENUES FOR INVESTMENT
BONDS
!ndividuals have surplus funds in the form of savings which they want to invest.
/ompanies need funds to undertake good projects with high returns. /ompanies
provide individuals with instruments to invest their savings in.
2ne such instrument is corporate bonds. #imilarly, governments also need funds for
various developmental projects. 6urther, the government also needs to raise money to
finance the fiscal deficit. They too tap the savings by issuing various kinds of bonds.
C&'#'34.#*)4*3) $% ' @$-(1
A bond, whether issued by a government or a corporation, has a specific maturity
date, which can range from a few days to ,7A-7 years or even more. 9ased on the
maturity period, bonds are referred to as bills or shortAterm bonds and longAterm
bonds.
9onds have a fixed face value, which is the amount to be returned to the investor
upon maturity of the bond. During this period, the investors receive a regular payment
of interest, semiAannually or annually, which is calculated as a certain percentage of
the face value and know as a Kcoupon payment.K
A story goes that in the old days, bond certificates used to come with coupons to
claim interest from the issuer of the bondI hence, the name coupon payments.
$owever, nowadays, with paperless issues of scripts ?demat@, coupons are no longer
in use, but the name has stuck and the interest payments are still known as coupon
payments.
-3
I)),*-? ' @$-( D
The government, public sector units and corporate are the dominant issuers in the
bond market. The central government raises funds through the issue of dated
securities ?securities with maturity period ranging from two years to -7 years, longA
term@ and treasury bills ?securities with maturity periods of 31 or -54 days, shortA
term@.
The central government securities are issued for a minimum amount of %s 17,777
?face value@. Thereafter they are issued in multiples of %s 17,777. They are issued
through an auction carried out by the %eserve 9ank of !ndia.
#tate governments go about raising money through state development loans. )ocal
bodies of various states like municipalities also tap the bond market from time to
time. 9onds are also issued by public sector banks and 0#=s. /orporate on the other
hands raise funds by issuing commercial paper ?shortAterm@ and bonds ?longAterm@.
9onds can be issued at par, which means that the price at which one unit of the bond
is being sold is same as the face value. Alternatively, they can be issued at a discount
?less than the face value@ or a premium ?more than the face value@.
F$# ..?., a bond with a face value of %s 177, if issued at %s 177, is said to be issued at
par. !f it is issued at, say, %s 3., it will be said to have been issued at a discount and
conversely, if issued for, say, %s 117, at a premium.
I-5.)4$#)1
9anks are the largest investors in the bond market. !n the lowAinterest scenario that
prevailed, it made more sense for banks to invest in government bonds than to give
out loans. "utual funds, in order capitali<e on low interest rates, started a good
47
number of debt funds that mobili<ed a significant amount of money from the
investors.
Thus, mutual funds emerged as important players in the bond markets. $owever, in
the recent past with the interest rates on their way up, the performance of debt funds
has not been good and so the presence of mutual funds in the bond market has been
limited.
6oreign institutional investors are also allowed to invest in the bond market, though
within certain limits. Also, regulations mandate provident funds and pension funds to
invest a significant proportion of their funds mobili<ed in government securities and
0#= bonds.
$ence, they continue to remain large investors in the bond market in !ndia. The same
holds true for charitable institutions, societies and trusts.
#ince Nanuary ,77,, individuals categori<ed by %9! as retail investors can participate
in the auction carried out by %9!. They can submit bids through banks or primary
dealers to invest in these securities on a nonAcompetitive basis.
The minimum bid has to be for an amount of %s 17,777 ?and there on in multiples of
%s 17,777@ and a single bid cannot exceed %s 1 crore ?%s 17 million@. $ence,
company > must ensure that the price, at which they are offering their 9ond, is
competitive with similar bonds in the market, and should provide similar yield to the
investors.
41
MUTUAL FUNDS1
A "utual 6und is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned
through these investments and the capital appreciations reali<ed are shared by its unit
holders in proportion to the number of units owned by them. Thus a "utual 6und is
the most suitable investment for the common man as it offers an opportunity to invest
in a diversified, professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a mutual fundD
4,
ADVANTAGES OF MUTUAL FUNDS
The advantages of investing in a "utual 6und areD
0rofessional "anagement
Diversification
/onvenient Administration
%eturn 0otential
)ow /osts
)iuidity
Transparency
6lexibility
/hoice of schemes
Tax benefits
Bell regulated
4-
TYPES OF MUTUAL FUNDS
"utual 6unds have specific investment objectives such as growth of capital, safety of
principal current income or tax exempt income, one can select one fund or any
number of different funds to help one meets ones specific goals.
44
!n general mutual fund fall under - general categoriesD A
ED,*47 %,-( invest in shares of common stocks.
F*2.( *-3$6. %,-() invest in government or corporate securities which offer fixed
%2%
B':'-3.( %,-( invest in a combination of both stocks and bonds.
O9.-E-(.( S3&.6.)1
These funds are sold at the (AG based prices, generally calculated on every business
day. These schemes have unlimited capitali<ation, openAended schemes do not have a
fixed maturity A i.e. there is no cap on the amount you can buy from the fund and the
unit capital can keep growing. These funds are not generally listed on any exchange.
2penAended funds are bringing in a revival of the mutual fund industry owing to
increased liuidity, transparency and performance in the new openAended funds
promoted by the private sector and foreign players. 2penAended funds score over
closeAended ones on several counts. #ome of these are listed belowD
') A-7 4*6. .2*4 $94*$-D The issuing company directly takes the responsibility of
providing an entry and an exit. This provides ready liuidity to the investors and
avoids reliance on transfer deeds, signature verifications and bad deliveries.
@) A-7 4*6. .-4#7 $94*$-D An openAended fund allows one to enter the fund at
any time and even to invest at regular intervals ?a systematic investment plan@.
The open ended funds offered by #/"6 /lassic &uity 6und, 0remier &uity 6und,
!mperial &uity 6und #uper #aver income 6und, Dynamic 9ond, /ash 6und,
)iuidity manager, 6loating %ate 6und, Fovt. #ecurities 6und etc.
4.
C:$).E-(.( S3&.6.)
#chemes that have a stipulated maturity period, limited capitali<ation and the units are
listed on the stock exchange are called closeAended schemes.
These schemes have historically seen a lot of subscription. This popularity is
estimated to be on account of firstly, public sector "6s having floated a lot of closeA
ended income schemes with guaranteed returns and secondly easy liuidity on
account of listing on the stock exchanges. The closedAended funds managed by #/"6
are &nterprise &uity 6und, 6ixed "aturity 0lan,
TriA#tar #eries etc.
CLASSIFICATION ACCORDING TO INVESTMENT
OBJECTIVES
*) G#$;4& F,-()1
These funds seek to provide growth of capital with secondary emphasis on dividend.
They invest in shares with a potential for growth and capital appreciation. 9ecause
they invest in wellAestablished companies where the company itself and the industry
in which it operates are thought to have good longAterm growth potential, growth
funds provide low current income.
Frowth funds generally incur higher risks than income funds in an effort to secure
more pronounced growth. These funds may invest in a broad range of industries or
concentrate on one or more industry sectors. Frowth funds are suitable for investors
who can afford to assume the risk of potential loss in value of their investment in the
hope of achieving substantial and rapid gains. They are not suitable for investors who
must conserve their principal or who must maximi<e current income.
45
**) G#$;4& '-( I-3$6. F,-()1
Frowth and income funds seek longAterm growth of capital as well as current income.
The investment strategies used to reach these goals vary among funds. #ome invest in
a dual portfolio consisting of growth stocks and income stocks, or a combination of
growth stocks, stocks paying high dividends, preferred stocks, convertible securities
or fixedAincome securities such as corporate bonds and money market instruments.
2thers may invest in growth stocks and earn current income by selling covered call
options on their portfolio stocks. Frowth and income funds have low to moderate
stability of principal and moderate potential for current income and growth. They are
suitable for investors who can assume some risk to achieve growth of capital but who
also want to maintain a moderate level of current income.
***) F*2.(I-3$6. F,-()1
The goal of fixed income funds is to provide current income consistent with the
preservation of capital. These funds invest in corporate bonds or governmentAbacked
mortgage securities that have a fixed rate of return. Bithin the fixedAincome category,
funds vary greatly in their stability of principal and in their dividend yields. $ighA
yield funds, which seek to maximi<e yield by investing in lowerArated bonds of longer
maturities, entail less stability of principal than fixed income funds that invest in
higherArated but lowerAyielding securities. #ome fixedAincome funds seek to minimi<e
risk by investing exclusively in securities whose timely payment of interest and
principal is backed by the full faith and credit of the !ndian Fovernment. 6ixedA
income funds are suitable for investors who want to maximi<e current income and
who can assume a degree of capital risk in order to do so.
41
*5) B':'-3.( F,-()1
The 9alanced fund aims to provide both growth and income. These funds invest in
both shares and fixed income securities in the proportion indicated in their offer
documents. This fund is ideal for investors who are looking for a combination of
income and moderate growth.
5) M$-.7 M'#>.4 F,-()EL*D,*( F,-()1
6or the cautious investor, these funds provide a very high stability of principal while
seeking a moderate to high current income. They invest in highly liuid, virtually
riskAfree, shortAterm debt securities of agencies of the !ndian Fovernment, banks and
corporations and Treasury 9ills. 9ecause of their shortAterm investments, money
market mutual funds are able to keep a virtually constant unit priceI only the yield
fluctuates. Therefore, they are an attractive alternative to bank accounts. Bith yields
that are generally competitive with A and usually higher than AA yields on bank savings
account, they offer several advantages. "oney can be withdrawn any time without
penalty. Although not insured, money market funds invest only in highly liuid, shortA
term, topArated money market instruments. "oney market funds are suitable for
investors who want high stability of principal and current income with immediate
liuidity.
5*) S9.3*':47ES.34$# F,-()1
These funds invest in securities of a specific industry or sector of the economy such as
health care, technology, leisure, utilities or precious metals. The funds enable
investors to diversify holdings among many companies within an industry, a more
conservative approach than investing directly in one particular company. #ector funds
offer the opportunity for sharp capital gains in cases where the fundKs industry is Pin
favorP but also entail the risk of capital losses when the industry is out of favor. Bhile
48
sector funds restrict holdings to a particular industry, other specialty funds such as
index funds give investors a broadly diversified portfolio and attempt to mirror the
performance of various market averages. !ndex funds generally buy shares in all the
companies composing the 9#& #ensex or (#& (ifty or other broad stock market
indices. They are not suitable for investors who must conserve their principal or
maximi<e current income.
&H# "IS$ "#&/"%S 0"A1HS 2O" 3A"IO/S 2/%DS45
The above Fraph shows the %isk and %eturns generated by different 6unds. )iuid
6unds are less %isky and also generate less %eturns where as #ector 6unds are more
%isky but generate more %eturns by the example of above two 6unds it is clear that
%isk and %eturns are directly proportional to each other. 2ther 6unds like &uity
6unds, 9alanced 6unds and !ncome 6unds are also gives the same percentage of
%eturns as the %isk involved.
)iuid 6unds
!ncome 6unds
9alanced 6unds
&uity 6unds
#ector 6unds
RISKS
R
E
T
U
R
N
S
43
.B'->) 5E) M,4,': F,-()
BANKS
MUTUAL
FUNDS
R.4,#-) )ow 9etter
A(6*-*)4#'4*5.
.29.
$igh )ow
R*)> )ow "oderate
I-5.)46.-4 $94*$-) )ess "ore
N.4;$#> $igh penetration )ow but improving
L*D,*(*47 At a cost 9etter
Q,':*47 $% ')).4) (ot transparent Transparent
I-4.#.)4 3':3,:'4*$- "inimum balance between 17th. +
-7th. 2f every month
&veryday
G,'#'-4.. "aximum %s.1 lakh on deposits (one
.7
/LI1s ,s. Mutu(+ 2un's
/LI1s Mutu(+ 2un's
In-est)ent
a)ounts
Deter)ined by the in-estor and
can be )odi+ied as well
Mini)u) in-est)ent a)ounts are
deter)ined by the +und house
E,penses
o upper li)its, e,penses
deter)ined by the insurance
co)pany
9pper li)its +or e,penses char*eable to
in-estors ha-e been set by the re*ulator
Port+olio
disclosure ot )andatory: ;uarterly disclosures are )andatory
Modi+yin*
asset
allocation
<enerally per)itted +or +ree or
at a no)inal cost
Entry=e,it loads ha-e to be borne by the
in-estor
>a, bene+its
!ection ?&# bene+its are
a-ailable on all 9"IP
in-est)ents
!ection ?&# bene+its are a-ailable only on
in-est)ents in ta,@sa-in* +unds
INSURANCE
A human life is also an incomeAgenerating asset. This asset also can be lost through
unexpectedly early death or made nonAfunctional through sickness + disabilities
caused by accidents. Accidents may or may not happen. Death will happen, but the
timing is uncertain. !f it happens around the time of oneKs retirement, when it could be
expected that the income will cease, the person concerned could have made some
other arrangements to meet the continuing needs. 9ut if it happens much earlier when
the alternate arrangements are not in place, insurance is necessary to help the
dependents. I- 3'). $% ' &,6'- @.*-?+ &. 6'7 &'5. 6'(. '##'-?.6.-4) %$# &*)
-..() '%4.# &*) #.4*#.6.-4. T&.). ;$,:( &'5. @..- 6'(. $- 4&. @')*) $% )$6.
.29.34'4*$-) :*>. &. 6'7 :*5. %$# '-$4&.# 0= 7.'#)+ $# 4&'4 &*) 3&*:(#.- ;*:: :$$>
'%4.# &*6. I% '-7 $% 4&.). .29.34'4*$-) ($ -$4 3$6. 4#,.+ 4&. $#*?*-':
'##'-?.6.-4 ;$,:( @.3$6. *-'(.D,'4. '-( 4&.#. 3$,:( @. (*%%*3,:4*.). L*5*-?
.1
4$$ :$-? 3'- @. ') 6,3& ' 9#$@:.6 ') (7*-? 4$$ 7$,-?. T&.). '#. #*)>)+ ;&*3&
-..( 4$ @. )'%.?,'#(.( '?'*-)4. I-),#'-3. 4'>.) 3'#. $% *4.
N..( $% I-),#'-3.1
To provide cash to meet various routine expenses of the family on
or immediately after the death of the income earner of the family.
To prevent the family*s accustomed standard of living even after the death of
the breadwinner.
To provide continuous flow of funds for the living spouse.
To allocate income funds for the children*s education.
To provide a retirement income throughout old age.
To provide a reliable savings plan for the future.
To supplement income when earning power is reduced or eroded by illness,
accident or any handicap.
To furnish surplus earnings for the investors should disaster strike.
TYPES OF INSURANCE PLANS
T.#6 I-),#'-3. P$:*371
A term insurance policy is a pure risk cover for a specified period of time. Bhat this
means is that the sum assured is payable only if the policyholder dies within the
policy term. 6or instance, if a person buys %s , lakh policy for 1.Ayears, his family is
entitled to the money if he dies within that 1.Ayear period.
Bhat if he survives the 1.Ayear periodQ Bell, then he is not entitled to any paymentI
the insurance company keeps the entire premium paid during the 1.Ayear period.
.,
#o, there is no element of savings or investment in such a policy. !t is a 177 per cent
risk cover. !t simply means that a person pays a certain premium to protect his family
against his sudden death. $e forfeits the amount if he outlives the period of the policy.
This explains why the Term !nsurance 0olicy comes at the lowest cost.
W&$:. L*%. P$:*371
As the name suggests, a Bhole )ife 0olicy is an insurance cover against death,
irrespective of when it happens.
=nder this plan, the policyholder pays regular premiums until his death, following
which the money is handed over to his family.
This policy, however, fails to address the additional needs of the insured during his
postAretirement years. !t doesnKt take into account a personKs increasing needs either.
Bhile the insured buys the policy at a young age, his reuirements increase over time.
9y the time he dies, the value of the sum assured is too low to meet his familyKs
needs. As a result of these drawbacks, insurance firms now offer either a modified
Bhole )ife 0olicy or combine in with another type of policy.
E-($;6.-4 P$:*371
/ombining risk cover with financial savings, an endowment policy is the most
popular policies in the world of life insurance.
!n an &ndowment 0olicy, the sum assured is payable even if the insured survives the
policy term.
!f the insured dies during the tenure of the policy, the insurance firm has to pay the
sum assured just as any other pure risk cover.
.-
A pure endowment policy is also a form of financial saving, whereby if the person
covered remains alive beyond the tenure of the policyI he gets back the sum assured
with some other investment benefits.
!n addition to the basic policy, insurers offer various benefits such as double
endowment and marriageJ education endowment plans. The cost of such a policy is
slightly higher but worth its value.
M$-.7 B'3> P$:*371
These policies are structured to provide sums reuired as anticipated expenses
?marriage, education, etc@ over a stipulated period of time. Bith inflation becoming a
big issue, companies have reali<ed that sometimes the money value of the policy is
eroded. That is why withAprofit policies are also being introduced to offset some of
the losses incurred on account of inflation.
A portion of the sum assured is payable at regular intervals. 2n survival the remainder
of the sum assured is payable. !n case of death, the full sum assured is payable to the
insured. The premium is payable for a particular period of time.
A--,*4*.) '-( P.-)*$-1
!n an annuity, the insurer agrees to pay the insured a stipulated sum of money
periodically. The purpose of an annuity is to protect against risk as well as provide
money in the form of pension at regular intervals.
2ver the years, insurers have added various features to basic insurance policies in
order to address specific needs of a cross section of people.
ULIP)1
.4
=)!0 is an acronym for U-*4 L*->.( I-),#'-3. P:'-. =)!0s are distinct from the
more familiar Rwith profits* policies sold for decades by the )ife !nsurance
/orporation. RBith profits* policies are called so because investment gains ?profits@
are distributed to policyholders in the form of a bonus announced every year. =)!0s
also serve the same function of providing insurance protection against death and
provision of longAterm savings, but they are structured differently.
!n Rwith profits* policies, the insurance company credits the premium to a common
pool called the Rlife fund* after setting aside funds for the risk premium on life
insurance and management expenses. &very year, the insurer calculates how much has
to be paid to settle death and maturity claims. The surplus in the life fund left after
meeting these liabilities is credited to policyholders* accounts in the form of a bonus.
!n a =)!0 too, the insurer deducts charges towards life insurance ?mortality charges@,
administration charges and fund management charges. The rest of the premium is
used to invest in a fund that invests money in stocks or bonds. They number of units
represents the policyholder*s share in the fund.
The value of the unit is determined by the total value of all the investments made by
the fund divided by the number of units. !f the insurance company offers a range of
funds, the insured can direct the company to invest in the fund of his choice. !nsurers
usually offer three choicesSan euity ?growth@ fund, balanced fund and a fund,
which invests in bonds.
!n both Rwith profits* policies as well as unitAlinked policies, a large part of the first
year premium goes towards paying the agents* commissions.
W$#>*-? $% ULIP1
The unitAlinked plans work as underD
..
The premium paid by the client, less any charges to be deducted, is used to buy units
in the fund selected by the client at the day*s unit price. #o, more units are added to
the client*s account each time he pays a premium. !f he unit price on that day is
relatively high, the client gets less number of units and if the unit price is relatively
low, then he gets more number of units.
!n order to pay the regular monthly costs an euivalent numbers of units are cancelled
and are computed as cost to be deducted divided by unit price on that day.
The value of the fund depends on the unit price, which in turn is determined from the
market value of the underlying assets as seen earlier. Thus, 6und Galue T =nit 0rice x
(umber of units
The ideal time to buy a unitAlinked plan is when one can expect longAterm growth
ahead. This especially so if one also believes that current market values ?stock
valuations@ are relatively low. 9#)! has given superior returns on all its investment
funds.
Advantages $% ,-*4:*->.( 9:'-) 5*)G5*) 4#'(*4*$-': 9:'-)D
=nitAlinked plans enjoy ).5.#': '(5'-4'?.) as underD
1. #imple, clear and easy to understand.
,. Transparent and visible for customers to take decisions
-. 6lexible and adaptable
4. 0uts the policyholder in control
.. 0olicyholder gets the entire upside on the performance of his fund
COMMODITIES1
.5
/ommodity 6utures are contracts to buy specific uantity of a particular commodity
at a future date. !t is similar to the !ndex futures and #tock 6utures but the underlying
happens to be commodities instead of #tocks and !ndices.
M'H$# C$66$(*47 E23&'-?.)1
The Fovernment of !ndia permitted establishment of (ationalAlevel "ultiA
/ommodity exchanges in the year ,77, and accordingly three exchanges come in
picture. They areD
"ultiA/ommodity &xchange in !ndia )td, "umbai ?"/>@.
(ational /ommodity and Derivative &xchange of !ndia, "umbai ?(/D&>@.
(ational "ulti /ommodity &xchange, Ahmadabad ?("/&@.
$owever there are regional commodities exchanges functioning all over the country.
#harekhan /ommodities 9roking 0vt. )td has got membership of both the premier
commodity exchanges i.e. "/> and (/D&>.
M'H$# 3$66$(*4*.) 4#'(.( *- 6$)4 9$9,:'# E23&'-?.) $% 4&. ;$#:(
'#. D
E23&'-?. M'H$# C$66$(*4*.) T#'(.(
(ew Hork "ercantile &xchange
?(H"&>@
/rude 2il, $eating 2il
/hicago 9oard of Trade?/92T@ #oy 2il, #oy 9eans, /orn
)ondon "etals &xchange ?)"&@ Aluminum, /opper, Tin, )ead
.1
/hicago 9oard 2ption &xchange
?/92&@
2ptions on &nergy, !nterest
%ate
Tokyo /ommodity &xchange ?T/&@ #ilver, Fold, /rude 2il, %ubber
"alaysian Derivatives &xchange
?"D&>@
%ubber, #oy 2il, 0alm 2il
/ommodity &xchange ?/2"&>@ Fold ,#ilver, 0latinum
Q.) W&$ #.?,:'4.) 4&. C$66$(*47 E23&'-?.)Q
/ommodity exchanges are regulated by 6orward "arket /ommission ?6"/@I
6orward market /ommission works under the purview of the ministry of food,
Agriculture and 0ublic Distribution.
Q.) B.-.%*4) *- (.':*-? 3$66$(*4*.) %,4,#.) '#.D
!f you are an !nvestor, commodities futures represent a good form of investment
because of the following reasons.
D*5.#)*%*3'4*$-D The returns from commodities market are free from the
direct influence of the euity and debt market, which means that they are
capable of being used as effective hedging instruments providing better
diversification.
L.)) M'-*9,:'4*$-D /ommodities markets, as they are governed by
international price movements are less prone to rigging or price manipulations
by individuals.
H*?& L.5.#'?.D The margins in the commodity futures market are less than
the 6 + 2 section of the &uity market.
.8
;.5 Ho6 risky (re t7ese 8(rkets co8p(re' to stock 9
bon' 8(rkets:
/ommodity prices are generally less volatile than the stocks and this has been
statistically proven. Therefore it*s relatively safer to trade in commodities.
Also the regulatory authorities ensure through continuous vigil that the commodity
prices are marketA driven and free from manipulations.
T$9 0< C$66$(*4*.) '#.1
S.-$. C$66$(*47
1 G$:(
, S*:5.#
- G,'# S..(
4 C&'--'
. U#'(
5 C#,(. O*:
1 T,#
8 S$7' O*:
3 M.-4&' O*:
17 G,'# G,6
.3
STOCKS1
U.@ WHAT ARE STOCKSC
!n financial markets, stock is the capital raised by a corporation through the issuance
and distribution of shares. A person or organi<ation which holds at least a partial
share of stocks is called a shareholder. The aggregate value of a corporationKs issued
shares is its market capitali<ation.
CAPITAL MARKETS
!t consists of two markets which are primary market and secondary market.
') P#*6'#7 M'#>.41
0rimary markets bring together buyers and sellers A either directly or through
intermediaries A by providing an arena in which sellers* investment propositions can
be priced, brought to the marketplace, and sold to buyers. !n this context, the seller is
called the issuer and the price of what*s sold is called the issue price. !t is the initial
market for any item or service. !t also signifies an initial market for a new stock issue.
The jargon also means a firm, trading market held in a security by a trader who
performs the activities of a specialist by being ready to execute orders in that stock.
@) S.3$-('#7 M'#>.4)
#econdary "arkets are the stock exchanges and the overAtheAcounter market.
#ecurities are first issued as a primary offering to the public. Bhen the securities are
traded from that first holder to another, the issues trade in these secondary markets.
I-(*' &') 8B )4$3> .23&'-?.) that have hubs of financial activities. These stock
exchanges are in following citiesD "umbai, 0une, Ahmadabad, %ajkot, Naipur, etc.
#tock exchange provides an organi<ed market for transactions in the shares and other
57
securities. The B$6@'7 S4$3> E23&'-?. ?9#&@ and N'4*$-': S4$3> E23&'-?.
?(#&@ together account for nearly 1,M of all capital market activity in !ndia.
REAL ESTATE1
R.': .)4'4., or immovable property, is a legal term ?in some jurisdictions@ that
encompasses land along with anything permanently affixed to the land, such as
buildings. %eal estate ?immovable property@ is often considered synonymous with real
property ?also sometimes called realty@, in contrast with personal property ?also
sometimes called chattel or personality@. $owever, for technical purposes, some
people prefer to distinguish real estate, referring to the land and fixtures themselves,
from real property, referring to ownership rights over real estate.
R.': .)4'4. market is something that is always glowing like the (ew Hork /ity. The
reason being that this market has very rarely seen a downslide. %eal estate market in a
common man terms would mean dealing in property which would include purchase
and sale of land and building. !t could be both commercial space and residential
property. /ommercial space would mean the property that is purchased or occupied
for business purposes by small to large corporate houses. 2ne undeniable reason why
!ndian real estate market has been a boom is due to the increasing number of "ulti
(ational /ompanies thronging the !ndian )and. The want for space is always
increasing with government in !ndia giving additional concessions and recognition to
/orporate engaged in building !T parks and commercial complex. The best thing
about real estate business is that every investor is bound to end up with a sure margin
of profit though the amount of profit may vary based on our bargaining skills and the
need of the buyer. 0eople also engage in speculative business by purchasing barren
lands in under developed areas for a very minimal cost and wait for couple of years
51
till all necessary infrastructure is developed in that locality and then sell the land at a
huge profit. 2n the other side residential properties are also on the increase. 2ne main
reason behind this being that the $ousing Development /orporation of !ndia is
promoting big %esidential 9uildings and all banks offer credit to customers for
purchase of property, this way majority of the population will end up owing a
property. And icing on the cake is that the value of the property is always down to
increase and would never decrease as such we would be assured about our share of
profit.
SOURCES OF RISK
Bhat makes financial asset riskyQ !t is the various sources of risk. The following are
the sources of risk.
0. I-4.#.)4 #'4. #*)>1
The risk which arises due to variability in securities returns resulting from changes
in interest rate. This type affects bonds more directly than common stocks but
affects both.
8. M'#>.4 #*)>1
The variability in returns resulting from fluctuations in the overall market i.e. the
aggregate stock market is referred to as market risk. All securities are exposed to
market risk, although it has major impact on common stocks.
B. I-%:'4*$- #*)>1
A factor which affects all components of a portfolio is purchasing power risk, or
the chance that the purchasing of the invested dollars will decline with uncertain
inflation the real ?inflationAadjusted@ returns involves risk even if nominal return is
safe.
5,
!. B,)*-.)) #*)>1
The risk of doing business in a particular industry or environment is called
business risk.
=. F*-'-3*': #*)>1
6inancial risk is associated with the use of debt financing by companies. 6inancial
risk involves the concept of financial leverage.
F. L*D,*(*47 #*)>1
)iuidity risk is the risk associated with particular secondary market in which a
security trades. The more uncertainty about the time element and the price
concession, the greater the liuidity risks.
I. E23&'-?.) #*)>1
!t refers to the variability in returns due to currency fluctuations.
". C$,-4#7 #*)>1
/ountry risk is also referred to as political risk. Bith more investors investing
internationally, both directly and indirectly, the economic stability is to be
considered.
5-
TYPES OF RISK
0) S7)4.6'4*3 #*)>1
These are market risks that cannot be diversified away. !nterest rates, recessions and
wars are examples of systematic risks.
8) N$- )7)4.6'4*3 #*)>1
Also known as :specific risk;, this risk is specific to individual stocks and can be
diversified away as you increase the number of stocks in the portfolio. !t represents
the component of a stock*s return that not correlated with general market moves.
T$4': #*)> J #ystematic risk V (on #ystematic risk
F$# 6*-*6*A*-? 4&. #*)> *4 *) -.3.))'#7 4$ (*5.#)*%7 4&. *-5.)46.-4).
54
CHAPTER =1
METHODOLOGY OF THE
STUDY
5.
METHODOLOGY OF THE STUDY
%esearch has its special significance in solving various operational and planning
problems of business and industry. %esearch methodology is a way to systematically
analy<e the research problem.
D.5.:$96.-4 $% W$#>*-? H79$4&.)*)1
The hypothesis could be developed by discussing with the consulting department
heads and guides about this exploratory research and reach to the conclusion that the
data is to be collected by personal interaction with the clients, asking them about their
investment planning and their need for financial advisory service from
SHAREKHAN L4(.
6irst of all are they aware of tax and investment planning or not and then analy<ing
the findings to reach to the objectives of research.
C$::.34*$- $% D'4'
This research is solely based on primary research done by means of uestionnaires
targeted to respondents who primarily belong to the business and service sector.
!t is very essential in the research process to know the accuracy of the finding*s which
depends on how systematically the study has been carried out so that it can make
sense.
! have executed the project after prior discussion with our guide and structured in the
following stepsD
a. 0reparation of a uestionnaire
b. The focal point of the designing the uestionnaire was to comprehend the
current investment scenario with respect to tax planning part.
55
c. This uestionnaire was primarily aimed to respondents who belong to the
service and business class people
d. The uestionnaires were discussed through personal interface with the
respondents
The data has been solely based on primary research done by interviewing the
customers who primarily belong to the business and the service sector. The data is
essential for the company so that on that basis they would do asset allocation.
The main research has been done by collecting data from different websites and
books. This can be a benchmark against which the findings can be tested.
51
INTERRELATIONSHIP AMONG VARIOUS PHASES OF
PORTFOLIO MANAGEMENT
#0&/!6!/AT!2( 26 !(G&#T"&(T 29N&/T!G&#
A(D /2(#T%A!(T
/$!2/& 26 "!> A##&T#
62%"=AT!2( 26
02%T62)!2 #T%AT&FH
#&)&/T!2( 26 #&/=%!T&#
02%T62)!2 &>&/=T!2(
02%T62)!2 %&G!#!2(
02%T62)!2 &GA)=AT!2(
58
CHAPTER F1
DATA ANALYSIS
53
DATA ANALYSIS
M$(.: P$#4%$:*$
Port+olio o+ Mr. aushad (li
#;penses Inco8e
&it+e Annu(+ A8t. Mont7+y Annu(+ A8t. Mont7+y

#ar "oan A1&&&& A&&&&Annu(+ Inc. 1&&&&&& A$$$$B
0ouse "oan A1&&&& A&&&&
Ot7er #;penses4
!onCs Education $&&&& 2&&&
Day today E,penses D$&&&& D&&&&
#ar E,penses4Petrol5 $&&&& 2&&&
Misllenious E,penses A1&&&& A&&&&
&ot(+ #;penses <-==== >====&ot(+ Inc. ====== 1????>

!urplus )oney D2&&&&

(*e o+ Mr. aushad is D&yrs.

So+ution
%et Wort7(&ot(+ Inco8e5 &ot(+
#;penses) AA$&&&&
Surp+us Money D2&&&&
&ot(+ 8oney to In,est(Annu(+ 1.1====
&ot(+ 8oney to In,est(Mont7+y) 1.<!!

Assets A++oc(tion @ to In,est Mont7+y(S(,ing) Monthly (nnual4sa-in*5 (nnual
Mutual Funds D&3 A12?DD DBB2& A2A&&&& %2D&&&
!toc. Mar.et 1&3 A12?DD 12A$B A2A&&&& D&1&&&
Insurance 1&3 A12?DD 12A$B A2A&&&& D&1&&&
Fi,ed Inco)e 4<@!ec, Bonds etc.5 23 A12?DD $1/1 A2A&&&& B22&&
#o))odities A&3 A12?DD A12?D A2A&&&& A2A&&&
#ontin*ency Fund A23 A12?DD A??B2 A2A&&&& 11$2&&
&ot(+ 1==@ 1.<!! 1.1====
17
11
M,4,': F,-()

S.%o. Sc7e8e %A3 /nits A8ount
#;pecte'
Annu(+
"eturn (@)
#;pecte'
Annu(+
"eturn ("s.)
1 0DF# >a, !a-er < A&/.B? 1&&& 1A/2$& 1A.&&3 %$&/B
!undara) !elect Midcap@< $/.?2 1&&& AD/B&& D1.&/3 %%?D&
! !BI )a*nu) #ontra 1B.?? AD2& DB$D? A$.A/3 $&/1
- >ata Equity Opportunity 4<5 %D.2D AD&& 2$2?/ D$.A$3 1&%$D
&ot(+ -.!-<> 11>-<1
S4$3> B#$>*-?
S.%o. Script %(8e
1urc7(se
1rice
%o. O*
S7(res A8ount
A Dr. 7eddy A1B& B2 /212&
1 Maruti B2& B& 212&&
D On*c A&&& 2& 2&&&&
% Bhel A?2& 2& /12&&
2 7anba,y DB& %2 A$$2&
&ot(+ !=?A==
C$66$(*4*.)
S.no. Script %(8e
1urc7(se
1rice /nits A8ount
A <old /&&& AA //&&&
1 !il-er 1&&&& D $&&&&
&ot(+ 1.A===

I-),#'-3.
S.no 1o+icy %(8e 1re8iu8 Dur(tion
&ot(+
A8ount
(1.A)
M(turity
,(+ue
A 9"IP 2&&& A1 $&&&&
1 Endow)ent A&&&& A1 A1&&&&
D #hild <ain A&&&& A1 A1&&&&
&ot(+ !=====
F*2.( I-3$6.
S.no &ypes Sc7e8e Dur(tion "eturn (@)
A8ount
In,este'
A Fi,ed Deposit D2&&& 1 yrs. D2&&&
1 !# A&&&&:% $ yrs %&&&&

&ot(+ B2&&&
C$-4*-?.-37 F,-(
S.%o. &ype
()ount
4P.M5
()ount
4P.(5
A !a-in* (=# 2&&& $&&&&
1 #urrent (=# A%&&& A$?&&&
&ot(+ ?.==
1,
CHAPTER I1
FINDINGS
1-
FINDINGS
A summer project brings the student face to face with the real corporate world. This is
the time when one learns what the industry practices are and do the practices really
follow what is really taught in the classroom. 6urther it gives an excellent chance to
the students to apply the concepts in the real world.
A99:*3'4*$- $- 4$$:) '-( 4.3&-*D,.) *- 4&. #.': ;$#:(
#ummer training provided me a good opportunity to apply the concepts, tools and
techniues in the real businessAlife situations.
M'*- L.'#-*-?K)L
$aving worked with #harekhan ltd., ! have experienced and reali<ed the importance
of operating the Demat account onlineI trading the shares onlineI how market
operates, etc. The main thing ! learned is that how a portfolio is managed and how the
money should be invested in different assets.
! learned how to study a portfolio and also came to know the difficulties in preparing
and handling a portfolio.
!nteraction with superiors and discussing problems, both project based as well as
others, gave me a chance to learn uite a lot. There are many small things which on
the face of it look small but have great value in the long run. ! have learnt a lot and !
am confident and sure that this will help me in my future.
14
CHAPTER "1
SUGGESTIONS
1.
SUGGESTIONS
#harekhan*s advertising is done mainly through word of mouth and !02
releases, which attracts only a fraction of the investors and thereby bringing
down its market capitali<ation. #harekhan, like the other leading brokerage
firms should indulge in a more aggressive form of advertising in both print
and electronic media if it looks to keep pace with the cut throat competition in
the years to come.
As #harekhan is targeting people through software companies but according to
our experience we didn*t get many prospects, so what we suggest is that the
#harekhan can directly approach to the $% manager in the software company
and give presentations about the product and services so that it would be easy
for the employees to get information and approach #harekhan directly.
2rgani<e and make accessible a database of customer information.
Allocating marketing investment according to customer value.
The portfolio manager has to very carefully analy<e the market and then invest
in different assets.
15
CHAPTER M1
LIMITATIONS
11
LIMITATIONS OF THE STUDY1
The main limitation of my study is from the investor side, as for providing them
the 0"# ! need to know their past investments in detail which they hesitate to
disclose as they find it hard to trust anyone regarding their investments, so ! have
to first built up the trust + then talk about the investments, as the main limitation
is time so it takes me at least few days for this procedure through regular visits +
follow up*s.
Time period undertaken for the project was also one of the limiting factors as
:0ortfolio "anagement; is such a vast subject which involves inAdepth study
analysis. As a portfolio has to be diversified keeping in mind the risk appetite of
the investor as well as keeping a track record of his past investments and then
finally analy<ing the portfolio + for this the proposed time period was a limiting
factor.
The sample si<e taken for drawing a conclusion is too small to get an accurate
result + is only small portion of actual population.
/hanging the mentality of people for investing through a particular Advisory
#ervices.
!t*s hard to change the typical psychological mindset of the investor, limiting the
options available, although feasible.
Difficult to overcome investors who wants return in less time + at times it*s
difficult to get the documents reuired for formalities from investors.
18
Another very important limitation while doing this project which ! came across was
that the investors find it hard to trust the products + services offered by the private
companies even though they are performing much better than the government
companies like )!/ vJs 0rivate 0layers ?!/!/!, %eliance, "et )ifeW..@
13
CHAPTER 0<1
CONCLUSION
87
CONCLUSION
Nust before starting the conclusion, ! would like to show the comparisons of the
various investments opportunities concerning their safety, interest rate, liuidity, etc.
through following tableD
BhereI HIJ H*?&+
LOJ L$;+
MODJ M$(.#'4..
The reason behind showing this comparison is that when we talk about :0ortfolio
"anagement #ervices; it all start from firstly making a comparison and then making
a decision about what to invest and where to invest. After going through this report
one can actually see that all the advisory is done once the financial advisor analyses
the actual need of the customers, and this all is done once we know what to offer and
when to offer.
Their is lot of scope of promoting 0"# in 0une as in the present scenario 0une has
become one of the most recogni<ed !T destination in !ndia, and in !T firms the
!(#T%="&(T# %&T=%( #A6&TH G2)AT!)!TH )!U=!D!TH
#T2/'# $! )2 $! $! J )2
92(D# "2D $! "2D "2D
6!>&D D&02#!T# )2 $! )2 )2
"=T=A) 6=(D# $! $! "2D $!
81
!nvestors are not well versed with the various investment avenues present in the
market. They always seek for financial help for their :Tax 0lanning*s; and for good
:/apital Appreciations; as the annual packages offered to them are uite high so they
need to plan accordingly + that is the right time when we come into the picture, with
best of the 0"# which we can offer.
There is great opportunity for "utual 6und companies as there is a rise in number of
people who want to invest in share market but don*t have time and knowledge to do
so, also these people want to take less risk .Bith booming market and falling interest
rate of bank deposits, people see mutual funds as an attractive financial tool which
provide a high return rate at lower risk as compared to euity market. Houng people
these days are particularly more interested in mutual funds because they see mutual
fund as safe bet. Also these people have large disposable incomes and risk taking
capability too. Advertising can also play a major part as it has been seen that people
buy mutual fund looking at the brand name. Bhile offering them the :0ortfolio
"anagement #ervices; we see that we offer them the best after carrying out the total
analysis on various schemes running in the market we give them what satisfies their
need the most efficiently. As far as the investment sector is considered, a sharp rise in
the no. of woman aJc holders, with almost ,1M of its total 5..- lakh trading aJc held
by woman, the organi<ation have to concentrate on woman segment. According to the
respondents the uality of the service is very important. #o the company should
project itself as a brand in the market that gives end user the best uality of service
with handy operations. Also most of the respondents have their personal consultant or
company consultants, #harekhan )TD. have to differentiate their services from other
consultant effectively by delivering value added services to its customers. Also
organi<ations have to concentrate on direct marketing activities. The consultancy
8,
should develop its long term relationship with the customers. The consultancy must
give much more emphasis on creation of customer who make repurchase.
8-
CHAPTER 001
BIBLIOGRAPHY
84
BIBLIOGRAPHY1
B$$>)1
0rasana /handraD 0 ?,774@ :!nvestment analysis + portfolio
management;
Tata "c Fraw $ill ?(ew Delhi@.
W.@)*4.)1
www.sharekhan.com
www.nseindia.com
www.bseindia.com
httpDJJwww.amfiindia.comJshowhtml.aspQpageTmfconceptX9
httpDJJwww.moneycontrol.comJbestportfolioJwealthAmanagementA
toolJ73J.8Jinvestments
httpDJJen.wikipedia.orgJwikiJ"utualYfundXTypesYofYmutualYfunds
www.valueresearchonline.com
www.personalfn.com
8.
/$A0T&% 1,D
ANNE/URE
85
ANNE/URE1
Q,.)4*$--'*#.1

N'6.1
A((#.))1

C*471
P*-1
C$-4'34 '((#.))1

T.:.9&$-.1
D'4. $% @*#4&1
S.21
S4'4,)1
M'#*4': S4'4,)1
E(,3'4*$-': Q,':*%*3'4*$-)1
B.1) WHA& IS CO/" A%%/AL I%COM#:
&
2
A&
A2
1&
12
D&
D2
%&
%2
@ O2
1O1/LA&IO%
EA A to D D to 2 2'
I%COM# 0"O/1
DIS&"IB/&IO% O2 I%COM#
81
"aximum number of sample population has income below 1 lakh followed by 1A -
lakh. (ormally people having income below 1 lakh do not invest so our target
population is people having income above 1 lakh.
B.) Do you 7(,e D#MA& ACCO/%&: I2 C#S I%
WHICH COM1A%C:
2ur survey shows that ,8 M of sample population use sharekhan as their brokerage
house followed by !/!/! direct and then %eliance money. 11 M of people use other
small brokerage houses so sharekhan have good scope to acuire customers from
there.
88
1"#2#"#D B"O$A"A0# HO/S#S
1&
A%
A$
AA
AA
1?
!0(7E60(
I#I#I DI7E#>
7@ MOEF
IDI( B9""!
7E"I<(7E
O>0E7!
B.!) W7(t percent(ge o* your inco8e 'o you in,est:
About 57M of people said that they invest between 17MA57M of their total income in
some or other types of financial tools. A major chunk of people belonging to this
segment are from !T sector who are young, large disposable income and have a little
knowledge about investment and are willing to take risk.
B.-) I2 CO/ WA%& I%3#S&S &H#% WHICH I%S&"/M#%& WILL
CO/ 1"#2#":
<@
.@ 1!@
A@
1A@
?@
I%S/"A%C#
M/&/AL 2/%DS
SHA"#
"#AL #S&A&#
112
BO%DS
83

As per our research ,8 M of people prefer insurance as investment instrument. ,. M
people prefer mutual funds followed by share market.
B..) Ho6 you c7oose ( 8utu(+ *un':
37