PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

With Reference to

(SHAREKHAN LIMITED)

Submitted in fulfillment of the Requirement

For the award of
PGDM
BY
(RAVI LOHIA)
ENROLLMENT NO B11320332
ACADEMIC YEAR 2015-2016

ACKNOWLEDGEMENT

It is difficult to acknowledge precious a debt as that of learning as it is the only debt that is
difficult to repay except through gratitude.
First and foremost I wish to express my profound gratitude to the almighty, the merciful &
compassionate with those grace & blessings. I have been able to complete this work.

I am very thankful to my guide (PRACHI JAIN: Financial executive of MARUTI) for

his full support in completing this project work.

Last but not least, I would like to thank my parents & my friends for their full cooperation
& continuous support during the course of this assignment.

(RAVI LOHIA)

DECLARATION
I hereby declare that this Summer Internship Project Report entitled
POTFOLIO

MANAGEMENT

SERVICES

AN

INVESTEMNET

OPTION in Share Khan Limited submitted in partial fulfillment of

requirement of POST GRADUATE DIPLOMA IN FINANCE(PGDM) to the
Institute of AIMA is based on primary and secondary data founded by me in
various department ,books ,magazines and websites .
This is an original piece of work and has not been submitted to any other
institution or university for any purpose.

Place:- New Delhi

CHAPTER

TABLE OF CONTENTS
3

PAGE NO.

CHAPTER-1

CHAPTER-2

CHAPTER-3

EXECUTIVE SUMMARY
INTRODUCTION
Introduction to Study
Myths About PMS

5-6
7
8-9
10-11

COMPANY PROFILE
Work structure of Sharekhan
Product and Services offered by

12-13
14

CHAPTER-4

SERVICES
Need of PMS
Objective of PMS
Portfolio Construction
Techniques of PMS
DATA ANALYSIS AND

CHAPTER-5

INTERPRETATION
CONCLUSION & SUGGESTIONS

CHAPTER-6

16-20

Company
Reasons to Choose Sharekhan
RESEARCH METHODOLOGY
Objective of the Project
Scope of the Study
PORTFOLIO MANAGEMENT

Observation and Findings

Limitations of the Project
Suggestions & Recommendations
ANNEXURE
BIBLIOGRAPHY

15
21
22
23-26
27
28
29
30-32
33-44
45
61

62-63
64
65-66
67-68
69

EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
Every Individual has specific financial need and expectation based on the risk taking
capabilities, whereas some needs and expectation are universal. Therefore, we find that the
scenario of the Stock Market is changing day by day hours by hours and minute by minute.
The evaluation of financial planning has been increased through decades, which can be best
seen in customers. Now a days investments have become very important part of income
saving.
In order to keep the Investor safe from market fluctuation and make them profitable,
Portfolio Management Services (PMS) is fast gaining Investment Option for the High Net
worth Individual (HNI). 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 and is based on primary survey. For the purpose
questionnaire was designed and data was collected from various investors. The Sample
consists of 100 investors from various brokers premises. The target customers were investors
who are trading in the stock market. In order to identify the effectiveness of Sharekhan PMS
services this study was carried in New Delhi. Secondary data was collected from different
sources such as Company website, Magazine and other sources.
Based on the survey, it was found that the primarily investment is base on the time of investing
money & risk plays an important factor deciding the type of investment. As the PMS services
of Sharekhan 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 an in-depth study of financial planning as well as wealth management so as to
understand about the customers needs and wants with respect to market and how a clients
6

portfolio can be designed and what factors a portfolio manager must consider for designing a
portfolio.

CHAPTER-1

INTRODUCTION

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

Discretionary

ii.

Non Discretionary
8

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 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.
9

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

In PMS, its 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
10

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 Lacs + for Structured Products, whereas in Mutual Fund Provide ongoing,
personalized access to professional money management services.

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.

11

CHAPTER- 2

COMPANY PROFILE

12

COMPANY PROFILE
Sharekhan is one of the leading retail brokerage of Citi Venture which is running
successfully since 1922 in the country. Earlier it was the retail broking arm of the Mumbaibased 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. SSKIs 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.
It has 60 institutional clients spread over India, Far East, UK and US. Foreign Institutional
Investors generate about 65% of the organizations 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 Sharekhan is

To educate and empower the individual investor to make better investment decisions
through
QUALITY ADVICE
INNOVATIVE PRODUCTS and
SUPERIOR SERVICE.
13

WORK STRUCUTRE OF SHAREKHAN

Sharekhan 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, Vignette, Verisign Financial
Technologies India Ltd, Spider Software Pvt. Ltd. to build its trading engine and content. The
Citi Venture holds a majority stake in the company. HSBC, Intel & Carlyle are the other
investors.
On April 17, 2002 Sharekhan 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 SpeedTrade has become a de facto
standard for the Day Trading community over the net. Sharekhans ground network includes
over 700+ Shareshops in 130+ cities in India.
The firms 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 Lacs customers. The number of trading
members currently stands at over 7 Lacs. While online trading currently accounts for just over
5 per cent of the daily trading in stocks in India, Sharekhan 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
14

Pipavav, Essar, Hutchison, Planetasia, and Shoppers Stop. Finally, Sharekhan shifted hands
and Citi 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.
4- Mutual Fund Advisory and Distribution.
5- Insurance Distribution.
6-Forex

6. Forex.

15

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 'India's best broking house for 2004'
award. Ever since it launched Sharekhan 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
Sharekhan 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
16

One can call Sharekhans Dial-N-Trade number to get investment advice and execute
his/her transactions. They have a dedicated call-center to 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
Sharekhan 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 & Email 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.
17

 Buy or sell even single share

Anytime Ordering.

Sharekhan 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 transact frequently during days
session to capitalize on intra-day price movement.
18

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 brokers 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 Sharekhans
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
Sharekhan 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
19

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
Sharekhan.

Zero Balance ICICI Saving Account

Sharekhan had tied-up with ICICI bank for Zero Balance Account for Sharekhans Clients.
Now their customers can have a Zero Balance Saving Account with ICICI Bank after your
demat account creation with Sharekhan.

20

CHAPTER-3

RESEARCH METHODOLOGY

21

RESEARCH METHODOLOGY

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:OBJECTIVES
To know the concept of Portfolio Management.
To know about the schemes offered by the different insurance companies, new IPOs,
Mutual Funds.
To know in depth about Insurance, Mutual Funds, Stock, Bonds etc.
To know about the awareness towards stock brokers and share market.

22

 To study about the competitive position of Sharekhan Ltd in Competitive Market.

To study about the effectiveness & efficiency of Sharekhan Ltd in relation to its
competitors

To study about whether people are satisfied with Sharekhan Services & Management
System or not.

To study about the difficulties faced by persons while Trading in Sharekhan.

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

Scope of the Study

The study of the Portfolio Management Services is helpful in the following areas.
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.
23

 To look out for new prospective customers who are willing to invest in PMS.
To find out the Sharekhan, PMS services effectiveness in the current situation.
It also covers the scenario of the Investment Philosophy of a Fund Manager.

RESEARCH DESIGN 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 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 Sharekhan Limited. For the purpose of the study 100 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
24

Secondary data: Published materials of Sharekhan Limited. Such as periodicals,

journals, news papers, and website.

SAMPLING PLAN
Sampling:
Since Sharekhan 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 Sharekhan 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:
25

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:
Directly approached respondents by the following strategies
Tele-calling
Personal Visits
Clients References
Promotional Activities
Database provided by the Sharekhan Limited.

PORTFOLIO MANGEMNT SERVICES (PMS)

26

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 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
27

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 ones risk-return profile.

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.
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: -

28

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.

29

PORTFOLIO CONSTRUCTION

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 clients 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
30

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, 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
investors 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.

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
31

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.

TECHNIQUES 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 portfolioEquity 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:
32

(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
(5) Global market condition

(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

(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.
33

 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: 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: 34

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.

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.
35

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.

36

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

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.

37

38

Sharekhan Portfolio Management Services

PMS

PRO PRIME

PRO TECH

PRO
ARBITRAGE

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
39

Product offering
Pro Prime is the ideal for investors looking at steady and superior with low and medium
risk appetite.
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 : 10 Lacs
Lock in : 6 months
40

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

Pro Arbitrage
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
Low 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.
41

Product Details
Minimum Investment:Rs.1 Crore
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.
42

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.

Product Characteristics

43

 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 Lacs

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

44

Protech Performance Report

Nifty Thrifty:
45

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 (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

46

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.

CHAPTER -5

DATA ANALYSIS AND

INTERPRETATION

47

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.

48

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.
As explaining them About the Portfolio Management Services of Sharekhan,
they were quite interested in Protech Services
49

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

50

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.

51

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 dont 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 its 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 proper information about the Portfolio
management services. As the basis is same for the mutual fund and PMS but the
52

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.
53

Major part of the sample feels that the rise would be of around 15%. Only 8% of
the respondents were confident enough to expect a rise of upto 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 Sharekhan limited.
7. If you invested in Share Market, what has been your experience?

Interpretation
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 dont have complete overview of the
happenings and invest their money in wrong shares which result in Loss. This is
54

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?

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
55

around 45% investor trade on the basis of speculation and 31% depend upon
Investment option Bonds, Mutual Funds etc.
Moreover, the now a days Hedging is most common derivatives tools which
is used by the Investor to get more return from the Market ,this is mostly used in
the Commodities Market.
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 depends on the security company for
portfolio Management. 43% of the respondents prefer PMS of the company
because they dont have to keep a close eye on their investment; they get all the
information time to time from their Fund Manager.

56

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

10. If you trade with Sharekhan limited then why?

Interpretation
As the above research shows the reasons and the parameters on which
investor lie on Sharekhan and they do the trade.

57

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
Sharekhan which gives them idea where to invest and when to invest.
At the time of research what I found is that still Sharekhan need to make the
clients more knowledge about their PMS product.

11. Are you using Portfolio Management services (PMS) of Sharekhan?

Interpretation
58

As talking about the Investment option, in most of clients it was common that
they know about the Option but as the PMS of Sharekhan 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 Sharekhan client where using PMS services as for
their Investment Option.

12. Which Portfolio Type you preferred?

Interpretation
59

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 Sharekhan Limited?

Interpretation
In the above analysis it is clear that the Investor have the good and the bad
experience both with the Sharekhan PMS services.
60

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 Sharekhan Limited keep it PMS process Transparent?

Interpretation
The above analysis is talking about the Sharekhan Transparency of their PMS
services. In hundred respondents 63% said that they get all the information about
61

their scrip buying and selling information day by day, where as 37% of
respondents are not satisfied with the PMS information and Transparency
because they dont get any type of extra services in PMS as they were saying.

15. Do you recommend Sharekhan PMS to others?

62

Interpretation
The above analysis shows the Investor perception toward the Sharekhan PMS
as on the basis of their good and bad experience with Sharekhan limited. Among
hundred respondents 86% respondents were agree to recommend the PMS of
Sharekhan to their peers, relatives etc.

CHAPTER-6

CONCULSION
AND
SUGGESTIONS
63

64

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.

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.
65

 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 Sharekhan limited is Sharekhan
Research Department than its Brokerage rate Structure.

Out of hundred respondents 56% respondents are using Sharekhan PMs services.

Investors preferred more than 45% equity Portfolio, 28%Balanceed Portfolio and about
27% Debt Portfolio with Sharekhan PMS.

About 52% Respondents earned through Sharekhan PMS product, whereas 18%
investor faced loses also.

More than 63% Investor are happy with the Transparency system of Sharekhan limited.

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

66

LIMITATION OF THE PROJECT

As only Delhi 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.

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

Some people were not willing to disclose the investment profile.

67

CONCLUSION AND SUGGESTIONS

On the basis of the study it is found that Sharekhan Ltd is better services provider than the
other stockbrokers because of their timely research and personalized advice on what stocks to
buy and sell. Sharekhan 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 IPOs 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.
Sharekhan Ltd has better Portfolio Management services than Other Companies
It keeps its process more transparent.
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.

68

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.
Investors accounts must be more transparent as compared to other companies.
Sharekhan limited must try to promote more its Portfolio Management Services
through Advertisements.
Sharekhan needs to improve more its Customer Services

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

69

ANNEXURE
QUESTIONNAIRE
NAME.
AGE
OCCUPATION...

PHONE

NO..................................
1. Do you know about the Investments Option available?
A) YES

B) NO

2. What is the basic purpose of your Investments?

A) Liquidity

B) Return

C) Tax Benefits

E) Capital Appreciation

D) Risk Covering

F) Others

3. What is the most important factor you consider at the time of Investment?
A) Risk

B) Return

C) Both

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

A) Mutual Funds
E) Fixed Deposits

B) Shares
F) Property

C) Commodities Market D) Bonds

G) Others
70

5. Investing in PMS is far safer than Investing in Mutual Fund. Do you agree?
A) Yes

B) No

6. How much you carry the expectation in Rise of your Income from Investments?
A) Upto 15%

B) 15-25%

C) 25-35%

D) More than 35%

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

A) Satisfactory Return

B) Burned Finger

C) Unsatisfactory Results

D) No
8. How do you trade in Share Market?
A) Hedging

B) Speculation

C) Investment

9. How do you manage your Portfolio?

A) Self

B) Depends on the company for portfolio

10. If, you trade with Sharekhan limited then why?

A) Research

B) Brokerage

C) Services

D) Investments Tips

11. Are you using Portfolio Management services (PMS) of Sharekhan?

A) Yes

B) No

12. Which Portfolio Type you preferred?

A) Equity

B) Debt

C) Balanced

13. How was your experience about Portfolio Management services (PMS) of Sharekhan
Limited?
71

A) Earned

B) Faced Loss

C) No profit No loss

14. Does Sharekhan Limited keep it PMS process Transparent?

A) Yes

B) No

15. Do you recommend Sharekhan PMS to others?

A) Yes

B) No

72

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
www.bseindia.com

Book Referred

Value guide by Sharekhan

Investors Eyes by Sharekhan
Business world.

The economist
73