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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

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

In today fast growing world many opportunities are available, so in order to move with changes and grab
the best opportunities in the field of investments a professional fund manager is necessary.

Therefore, in the present scenario the Portfolio Management Services (PMS) is fast gaining importance
as an investment alternative for the High Net worth Investors.

Portfolio Management Services (PMS) is an investment portfolio in stocks, fixed income, debt, cash,
structured products and other individual securities, managed by a professional money manager that can
potentially be tailored to meet specific investment objectives.

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

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

i. Discretionary

ii. Non Discretionary

iii. Advisory

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

Non Discretionary: Under these services, the portfolio manager only suggests the investment ideas.
The choice as well as the timings of the investment decisions rest solely with the Investor.
However the execution of trade is done by the portfolio manager.

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

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

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

COMPANY PROFILE
Edelweiss was incorporated on November 21, 1995 as a public limited company. Our Company received
its certificate for commencement of business on January 16, 1996.The Company commenced investment banking
activities and registered with SEBI as a Category I Merchant Banker (as defined under the Securities and
Exchange Board of India (Merchant Bankers) Rules, 1992) and thereafter as a Portfolio Manager (as defined
under the Securities and Exchange Board of India (Portfolio Managers) Rules, 1993) and as an underwriter
Under the Securities and Exchange Board of India (Underwriting) Regulations, 1993. We entered the business of
securities broking in the year 2002 by acquisition of Rooshnil Securities Private limited which later changed to
Edelweiss Securities Private Limited and is presently known as Edelweiss Securities Limited. The year 2004
witnessed the foray of the Company into the businesses of insurance advisory as well as commodities broking
And trading.

The business of insurance advisory is carried through the subsidiary, Edelweiss Insurance Brokers
Limited. The subsidiary, ECAL Advisors Limited carries on the business of commodities broking and trading.
The Company also has its presence in non banking financial activities through its subsidiaries, Cross border
Investments Private Limited (acquired in the year 2000) and ECL Finance Limited (incorporated in the year
2005) which are NBFC’s. Edelweiss Real Estate Advisors Private Limited, which was previously our subsidiary
and our subsidiary Edelweiss Trustee Services Private Limited, were incorporated in the year 2006, for
launching the company’s first real estate fund which was registered with the SEBI as a Venture Capital Fund
(as defined under the SEBI (Venture Capital Funds) Regulations, 1996)

The Company raised funds through private equity from Connect Capital Holdings in the year 2000. Greater
Pacific Capital (GPC) concluded a strategic investment in the Company in October 2005. Apart from fresh
Investment in the Company, GPC also bought out Connect Capital Holdings’ stake in the Company, thereby
taking its equity stake to 20%. The Company also attracted capital from Galleon Diversified Fund, Helicon Pte
Ltd (which is currently a wholly owned subsidiary of GIC (Ventures) Pte Ltd held through a wholly owned
Subsidiary Lathe Investment Pte Ltd), BIH SA and Shuaa Capital in 2006. Recently, investment in the company
was made by Lehman Brothers Netherlands Horizons BV and Galleon Special Opportunities Master Fund
Limited – Galleon Crossover Segregated Portfolio. The Company does not have any strategic or financial
partners.

2000 Acquisition of Cross border Investments Private Limited

2001 F & O license obtained in the year 2001

2002 NBFC registration of Cross border Investments Private Limited


Acquisition of Rooshnil Securities Private Limited

2004 Commencement of Commodity Broking

2005 Commencement of Insurance Broking

2006 NBFC registration of ECL Finance Limited

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

2006 Managed the first Qualified Institutional Placement under the new regulatory framework in India.

2006 Advised the first AIM listing of a listed Indian corporate.

2007 Clearing Member License

2008 Edelweiss Capital Limited has informed that: The Board of Directors of Edelweiss Capital Limited, vide a
Circular Resolution passed on April 7, 2008 have approved change in the Company Secretary and Compliance
Officer of the Company from Ms. Smruti Jhaveri to Mr. Chetan Gandhi.

Edelweiss gets Sebi nod to launch MF

2009 Edelweiss Capital Ltd has appointed Mr. Berjis Desai as an Additional (Independent) Director on the
Board of Directors of the Company w.e.f. November 18, 2009.

Edelweiss forms venture with Tokio Marine

2010 Edelweiss Capital buys Anagram for Rs 164 cr

Source : Religare Technova

PRODUCT AND SERVICES OFFERD BY EDELWEISS


 Investment Banking

• Advisory

• Structured Finance Advisory

• Mergers and Acquisitions Advisory

• Real Estate Advisory

• Equity Capital Markets

• Infrastructure Advisory

• Debt Restructuring Advisory

 Institutional Equities

 Asset Management

• Portfolio Management
• Mutual Funds
• Other Products
 Wealth Management

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 Private Client Brokerage

• Cash Equity Advisory


• Derivative Strategies
• Financing Products

Advisory services besides Equity would also include Arbitrage and Fixed Income products. Real Estate
investments, Art Investments, PMS and Client asset management & Depository Services are other services
that the group offers in conjunction with other groups at Edelweiss.

1. Cash Equity Advisory

Providing research based advice on select stocks from across sectors to meet client’s investment
requirement ranging from positional trading to long term investment goals. For our clients we provide
ongoing portfolio consultation with a dedicated relationship manager as one point contact for all day-to-day
execution of trades and other service requirements such as advisory on investments. The Edelweiss
Relationship Manager draws on substantial Edelweiss resources and provides our clients with:

• Ongoing portfolio consultation


• Access to Edelweiss research and interaction with research analysts
• Meetings with company management and plant visits
• Participation in earnings conference calls of companies

2. Derivatives Strategies

Edelweiss being a pioneer in Quantitative & Alternative Research, we leverage this strength for our
derivatives strategies focused towards short-term / medium investments of clients in PCG. Derivative
Strategy group, through its dedicated research team provides seamless execution for its clients with trading
view. The stock ideas generated are enhanced by combination of technical view and derivative strategy
along with the statistical data. Based on the Quantitative Research products such as Pair Trades & Alpha
Trades are also initiated whenever we identify the opportunity.

3. Financing products

 Wholesale banking

• IPO Financing
• Loan against securities
• Promoter Funding
• ESOP Funding
 Client Advisory Services

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

RESEARCH
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 awareness towards stock brokers and share market.
 To study about the competitive position of Edelweiss Ltd in Competitive Market.
 To study about the effectiveness & efficiency of Edelweiss Ltd in relation to its competitors
 To study about whether people are satisfied with Edelweiss Services & Management System or not.
 To study about the difficulties faced by persons while Trading in Edelweiss.
 To study about the need of improvement in existing Trading system.

RESEARCH DESISGN OF THE STUDY


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

 Secondary data: Website.


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SAMPLING PLAN

 Sampling:

Since Edelweiss 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 Edelweiss limited

 Sampling size:

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

 Sampling Methods:

Probability sampling requires complete knowledge about all sampling units in the universe. Due to time
constraint non-probability sampling was chosen for the study.
 Sampling procedure:
From large number of customers & non consumers sample lot were randomly picked up by me.

Field Study:

Directly approached respondents by the following strategies

 Tele-calling
 Personal Visits
 Clients References
 Promotional Activities
 Database provided by the Edelweiss Limited.

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INTRODUCTION TO PORTFOLIO MANAGEMENT SERVICES


A portfolio is a collection of securities since it is really desirable to invest the entire funds of an
individual or an institution or a single security, it is essential that every security be viewed in a portfolio
context. Thus it seems logical that the expected return of the portfolio. Portfolio analysis considers the
determine of future risk and return in holding various blends of individual securities

Portfolio expected return is a weighted average of the expected return of the individual securities but
portfolio variance, in short contrast, can be something reduced portfolio risk is because risk depends greatly on
the co-variance among returns of individual securities. Portfolios, which are combination of securities, may or
may not take on the aggregate characteristics of their individual parts.

Since portfolios expected return is a weighted average of the expected return of its securities, the
contribution of each security the portfolio’s expected returns depends on its expected returns and its
proportionate share of the initial portfolio’s market value. It follows that an investor who simply wants the
greatest possible expected return should hold one security; the one which is considered to have a greatest
expected return. Very few investors do this, and very few investment advisors would counsel such an extreme
policy instead, investors should diversify, meaning that their portfolio should include more than one security.

NEED FOR PORTFOLIO MANAGEMENT


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

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

OBJECTIVE OF PORTFOLIO MANAGEMENT


The objective of portfolio management is to invest in securities is securities in such a way that one
maximizes one’s returns and minimizes risks in order to achieve one’s investment objective.

A good portfolio should have multiple objectives and achieve a sound balance among them. Any one objective
should not be given undue importance at the cost of others. Presented below are some important objectives of
portfolio management.

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1. STABLE CURRENT RETURN: -


Once investment safety is guaranteed, the portfolio should yield a steady current income. The current
returns should at least match the opportunity cost of the funds of the investor. What we are referring to her
current income by way of interest of dividends, not capital gains.

2. MARKETABILITY: -
A good portfolio consists of investment, which can be marketed without difficulty. If there are too many
unlisted or inactive shares in your portfolio, you will face problems in encasing them, and switching from one
investment to another. It is desirable to invest in companies listed on major stock exchanges, which are actively
traded.

3. TAX PLANNING: -
Since taxation is an important variable in total planning, a good portfolio should enable its owner to
enjoy a favorable tax shelter. The portfolio should be developed considering not only income tax, but capital
gains tax, and gift tax, as well. What a good portfolio aims at is tax planning, not tax evasion or tax avoidance.

4. APPRECIATION IN THE VALUE OF CAPITAL:-


A good portfolio should appreciate in value in order to protect the investor from any erosion in
purchasing power due to inflation. In other words, a balanced portfolio must consist of certain investments,
which tend to appreciate in real value after adjusting for inflation.

5. LIQUIDITY:-

The portfolio should ensure that there are enough funds available at short notice to take care of the
investor’s liquidity requirements. It is desirable to keep a line of credit from a bank for use in case it becomes
necessary to participate in right issues, or for any other personal needs.

6. SAFETY OF THE INVESTMENT:-

The first important objective of a portfolio, no matter who owns it, is to ensure that the
investment is absolutely safe. Other considerations like income, growth, etc., only come into the picture after the
safety of your investment is ensured.

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Investment safety or minimization of risks is one of the important objectives of portfolio


management. There are many types of risks, which are associated with investment in equity stocks, including
super stocks. Bear in mind that there is no such thing as a zero risk investment. Moreover, relatively low risk
investment give correspondingly lower returns. You can try and minimize the overall risk or bring it to an
acceptable level by developing a balanced and efficient portfolio. A good portfolio of growth stocks satisfies the
entire objectives outline above.

PROCESS OF PORTFOLIO MANAGEMENT

Following is the process of portfolio management:

1. Understanding the present market conditions

2. Framing of an Investment Policy

This involves mainly the following two parts:

Investment Objectives of an investor


Investment Constraints of an investor
3. Portfolio Policies and Strategies

4. Asset Allocation Process

5. Security Selection

6. Portfolio Construction

7. Portfolio Implementation and Execution

8. Portfolio Analysis

9. Portfolio Rebalancing and Revision

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RISK
The Webster’s New Collegiate Dictionary definition of risk includes the following meanings: “…….
Possibility of loss or injury ….. The degree or probability of such loss”. This conforms to the connotations put
on the term by most investors. Professional often speaks of “downside risk” and “upside potential”. The idea is
straightforward enough: Risk has to do with bad outcomes, potential with good ones.

In considering economic and political factors, investors commonly identify five kinds of hazards to
which their investments are exposed. The following tables show components of risk:

(A) SYSTEMATIC RISK:


1. Market Risk
2. Interest Rate Risk
3. Purchasing power Risk
(B) UNSYSTEMATIC RISK:
1. Business Risk
2. Financial Risk
(A) SYSTEMATIC RISK:
Systematic risk refers to the portion of total variability in return caused by factors affecting the prices of
all securities. Economic, Political and Sociological charges are sources of systematic risk. Their effect is to
cause prices of nearly all individual common stocks or security to move together in the same manner. For
example; if the Economy is moving toward a recession & corporate profits shift downward, stock prices may
decline across a broad front. Nearly all stocks listed on the BSE / NSE move in the same direction as the BSE /
NSE index.

Systematic risk is also called non-diversified risk. If is unavoidable. In short, the variability in a
securities total return in directly associated with the overall movements in the general market or Economy is
called systematic risk. Systematic risk covers market risk, Interest rate risk & Purchasing power risk

1. MARKET RISK:
Market risk is referred to as stock / security variability due to changes in investor’s reaction towards
tangible & intangible events is the chief cause affecting market risk. The first set that is the tangible events, has
a ‘real basis but the intangible events are based on psychological basis.

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Here, Real Events, comprising of political, social or Economic reason. Intangible Events are related to
psychology of investors or say emotional intangibility of investors. The initial decline or rise in market price
will create an emotional instability of investors and cause a fear of loss or create an undue confidence, relating
possibility of profit. The reaction to loss will reduce selling & purchasing prices down & the reaction to gain
will bring in the activity of active buying of securities.

2. INTEREST RATE RISK:


The price of all securities rise or fall depending on the change in interest rate, Interest rate risk is the
difference between the Expected interest rates & the current market interest rate. The markets will have
different interest rate fluctuations, according to market situation, supply and demand position of cash or credit.
The degree of interest rate risk is related to the length of time to maturity of the security. If the maturity period
is long, the market value of the security may fluctuate widely. Further, the market activity & investor
perceptions change with the change in the interest rates & interest rates also depend upon the nature of
instruments such as bonds, debentures, loans and maturity period, credit worthiness of the security issues.

3. PURCHASING POWER RISK:


Purchasing power risk is also known as inflation risk. This risks arises out of change in the prices of
goods & services & technically it covers both inflation & deflation period. Purchasing power risk is more
relevant in case of fixed income securities; shares are regarded as hedge against inflation. There is always a
chance that the purchasing power of invested money will decline or the real return will decline due to inflation.

The behavior of purchasing power risk can in some way be compared to interest rate risk. They have a
systematic influence on the prices of both stocks & bonds. If the consumer price index in a country shows a
constant increase of 4% & suddenly jump to 5% in the next. Year, the required rate of return will have to be
adjusted with upward revision. Such a change in process will affect government securities, corporate bonds &
common stocks.

(B) UNSYSTEMATIC RISK:-


The risk arises out of the uncertainty surrounding a particular firm or industry due to factors like labor
Strike, Consumer preference & management policies are called Unsystematic risk. These uncertainties directly
affect the financing & operating environment of the firm. Unsystematic risk is also called “Diversifiable risk”. It
is avoidable. Unsystematic risk can be minimized or Eliminated through diversification of security holding.
Unsystematic risk covers Business risk and financial risk

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1. BUSINESS RISK:

Business risk arises due to the uncertainty of return which depend upon the nature of business. It relates
to the variability of the business, sales, income, expenses & profits. It depends upon the market conditions for
the product mix, input supplies, strength of the competitor etc. The business risk may be classified into two kind
viz. internal risk and External risk.

Internal risk is related to the operating efficiency of the firm. This is manageable by the firm. Interest
Business risk loads to fall in revenue & profit of the companies.

External risk refers to the policies of government or strategic of competitors or unforeseen situation in
market. This risk may not be controlled & corrected by the firm.

2. FINANCIAL RISK:

Financial risk is associated with the way in which a company finances its activities. Generally, financial
risk is related to capital structure of a firm. The presence of borrowed money or debt in capital structure creates
fixed payments in the form of interest that must be sustained by the firm. The presence of these interest
commitments – fixed interest payments due to debt or fixed dividend payments on preference share – causes the
amount of retained earning availability for equity share dividends to be more variable than if no interest
payments were required.

Financial risk is avoidable risk to the extent that management has the freedom to decline to borrow or
not to borrow funds. A firm with no debt financing has no financial risk. One positive point for using debt
instruments is that it provides a low cost source of funds to a company at the same time providing financial
leverage for the equity shareholders & as long as the earning of company are higher than cost of borrowed
funds, the earning per share of equity share are increased.

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RISK RETURN ANALYSIS


All investment has some risk. Investment in shares of companies has its own risk or uncertainty; these
risks arise out of variability of yields and uncertainty of appreciation or depreciation of share prices, losses of
liquidity etc

The risk over time can be represented by the variance of the returns. While the return over time is capital
appreciation plus payout, divided by the purchase price of the share.

Normally, the higher the risk that the investor takes, the higher is the return. There is, however, a risk
less return on capital of about 12% which is the bank, rate charged by the R.B.I or long term, yielded on
government securities at around 13% to 14%. This risk less return refers to lack of variability of return and no
uncertainty in the repayment or capital. But other risks such as loss of liquidity due to parting with money etc.,
may however remain, but are rewarded by the total return on the capital. Risk-return is subject to variation and
the objectives of the portfolio manager are to reduce that variability and thus reduce the risk by choosing an
appropriate portfolio.

Traditional approach advocates that one security holds the better, it is according to the modern approach
diversification should not be quantity that should be related to the quality of scripts which leads to quality of
portfolio. Experience has shown that beyond the certain securities by adding more securities expensive.

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RETURNS ON PORTFOLIO
Each security in a portfolio contributes return in the proportion of its investments in security. Thus the
portfolio expected return is the weighted average of the expected return, from each of the securities, with
weights representing the proportions share of the security in the total investment. Why does an investor have so
many securities in his portfolio? If the security ABC gives the maximum return why not he invests in that
security all his funds and thus maximize return?

The answer to this questions lie in the investor’s perception of risk attached to investments, his
objectives of income, safety, appreciation, liquidity and hedge against loss of value of money etc. this pattern of
investment in different asset categories, types of investment, etc., would all be described under the caption of
diversification, which aims at the reduction or even elimination of non-systematic risks and achieve the specific
objectives of investors

TYPES OF PORTFOLIO BASED ON RISK AND RETURN

Whenever the money is invested a risk of not getting the money back is borne by the investor. An
investor wants a compensation for bearing such a risk also known as returns. In theory “the higher is the risk
the greater are the returns” and vice versa. The chart below can explain the different types of securities and
their associated risk.

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Located towards the right of the diagram are investments that offer investors a higher potential for
above-average returns, but this potential comes with a higher risk. Towards the left are much safer investments,
but these investments having a lower potential for high returns.

CONSERVATIVE PORTFOLIO

This model is ideal for those who wish to take least amount of risk and want a steady income over a
period of time from his investments. Conservative portfolio is designed by investing greater proportion in the
lower risk securities. Such a portfolio always tends to generate income for the investor. Such a model aims at
protecting the principal value of the portfolio. Hence the investment is generally done in fixed income and
money market securities. Very less amount of the capital is invested in the equities. The model is often known
as the ‘capital preservation portfolio’.

MODERATELY CONSERVATIVE PORTFOLIO

A moderately conservative portfolio is ideal for those who want a fixed and steady income as well as
capital appreciation. This model not only offers a fixed income but also grows the money of the investor.
Although maximum amount of allocation is done in lower risk securities, investment is also made in equities to
some extent so that the capital grow

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Source: Investopedia.com
PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

Source: Investopedia.com

MODERATELY AGGRESSIVE PORTFOLIO

A moderately aggressive portfolio is ideal for those who want a balance of growth and income. The
asset composition is divided among equity and fixed income securities. Maximum amount of investment is
made in the equities. Assets allocated to the fixed income securities is also no less. Such a model is often
referred to as “balance portfolio”

Source: Investopedia.com

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AGGRESSIVE PORTFOLIO

Aggressive portfolios mainly consist of equities. So the value tends to fluctuate. Such a portfolio
provides long term appreciation to the capital. But to have some liquidity fixed income securities are also added
to the portfolio. It is always better to invest in such a portfolio for a longer period of time so that the money
gets sufficient time to grow. Such a portfolio is risky.

VERY AGGRESSIVE PORTFOLIO

A very aggressive portfolio is one which consist mostly of equities. The portfolio is suitable for those
who have risk taking ability. Since the investment is done in equities hence it provides a growth to the capital.
The portfolio is designed for those who can invest for a longer time period.

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Source: Investopedia.com
PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

RISK ON PORTFOLIO
Risk is the most important element in portfolio management. Risk is reflected in the variability of the
returns from Zero to infinity. The risk on a portfolio is different from the risk on individual securities. The
expected return of a portfolio depends on the probability of the returns and their weighted contribution to the
risk. This is the essence of risk. Risk means, the probability of various possible bad outcomes from a
constructed portfolio. The measurement of risk in portfolio involves

(a) Finding of average absolute deviation.


(b) Standard deviation.
These elements can be explained with following illustrations:

The probability of each of the return of a portfolio is given below. Calculate the absolute deviations for
the given portfolio.

Event Return Probability


1 0.20 -10
2 0.25 22
3 0.30 27
4 0.25 12

Estimation of absolute deviation:-

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Event Return Probability Absolute Probability (X)Absolute


return deviation deviation

(2x3)=(4) (5) (5x2)=(6)


(1) (2) (3)
1 0.20 -10 -2.0 -24.6 4.92
2 0.25 22 +5.5 7.4 1.85
3 0.30 27 +8.1 12.4 3.72
4 40.25 12 +3.0 -2.6 0.65
Total +14.6 11.14%

Probability deviation can be calculated as follows;

-10 - 14.6 = -24.6

22 - 14.6 = +7.4

27 - 14.6 = +12.4

12 - 14.6 = -2.6

The measure of absolute deviation is 11.14 %

INVESTMENT RISK PYRAMID


Once the risk acceptable in the portfolio has been decided by acknowledging the time horizon and
bankroll one can use the risk pyramid approach for balancing the assets.

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Source: Investopedia.com

This pyramid can be thought of as an asset allocation tool that investors can use to diversify their portfolio
investments according to the risk profile of each security. The pyramid, representing the investor's portfolio, has
three distinct tiers:
• Base of the pyramid: this area is comprised of investments that are low in risk and have good returns.
• Middle portion: this area is made of medium risk investments that not only offers stable returns but also
allows capital appreciation.
• Summit (top): the summit is for high risk investments. This is the area of the pyramid and should be made
up of money one can afford to lose.

PORTFOLIO FOR CAUTIOUS INVESTOR


Investment Instrument Amount Returns

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Kisan Vikas Patra 1,50,000 Rs. 8.4% p.a.

PPF 70,000 Rs. 8.5% p.a.

Bank Fixed Deposits 1,00,000 Rs. 6.5% p.a.

NSC 80,000 Rs. 8.16% p.a.

Post office monthly MIP 1,00,000 Rs. 8% p.a.

TOTAL 5,00,000 Rs.

Logic behind selection of particular Instrument:

As investor does not want to take risk, he is satisfied with fixed return rather they are less than equity
investment’s returns. So I took thus instrument which provides good return as well as secure also. All of these
instruments will give him return around 8% annually.

PORTFOLIO FOR BALANCE INVESTOR


Investment Instrument Amount Returns
HDFC Prudence Fund 1,30,000 Rs. 54.2% p.a.

Reliance Vision Fund 1,00,000 Rs. 78.3% p.a.

Bank Fixed Deposits 1,00,000 Rs. 6.5% p.a.

PPF 70,000 Rs. 8.5% p.a.

Kisan Vikas Patra 1,00,000 Rs. 8.4% p.a.

TOTAL 5,00,000 Rs.

Logic behind selection of particular Instrument:

As investor does not want to take high risk, he is satisfied with fixed return plus some equity exposure.
But he wants some safety in equity exposure also. So I took thus instrument which provides good return as well
as safety also. Fixed return instruments like PPF, Bank FD and kisan vikas patra will give him return around

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8% annually and I suggest Balance kind of funds to him where he will have exposure of both equity as well as
debts. HDFC prudence fund is best performing fund under balance scheme. To increase the ratio of equity in
portfolio I suggested Reliance vision fund which is mainly based on large and mid cap companies.

PORTFOLIO FOR AGGRESSIVE INVESTOR


Investment Instrument Amount Returns
HDFC Core & Satellite Fund 1,30,000 Rs. 83.56% p.a.

Prudential ICICI Emerging Star Fund 90,000 Rs. 93.3% p.a.

Franklin Flexi Cap Fund 1,10,000 Rs. 86.25% p.a.

Fidelity Equity Fund 80,000 Rs. 82.4% p.a.

DSP Top 100 90,000 Rs. 79.28% p.a.

TOTAL 5,00,000 Rs.

Logic behind selection of particular Instrument:

As investor ready to take high risk, he is looking for high returns on his investment. I took thus
instrument which provides good return. All of these instruments will give him return around 80% annually.
Currently Mid cap companies will perform better than large cap companies so, I select more funds which are
focusing on mid cap companies like HDFC, Franklin’s funds.

To take the benefit of increasing Sensex I took DSP top 100.

MEASUREMENT OF RETURNS ON PORTFOLIOS


The realized rate of return will be calculated by

Time Weighted Rate of Return (TWROR)

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

Ri= [(Pi-0.5Ci)/ (Po+0.5Ci)-1}*100

Po= Portfolio value at the beginning of the period

Pi= Portfolio value at the end of the period

Ci= Net contributions during time interval

Ri= Rate of Return for the time interval

a) RATE OF RETURN FOR CAUTIOUS INVESTOR

Investment Instrument Amount Returns Current Value

Kisan Vikas Patra 1,50,000 Rs. 8.4% p.a. 1,62,600

PPF 70,000 Rs. 8.5% p.a. 75,950

Bank Fixed Deposits 1,00,000 Rs. 6.5% p.a. 1,06,500

NSC 80,000 Rs. 8.16% p.a. 86,528

Post office monthly MIP 1,00,000 Rs. 8% p.a. 1,08,000

TOTAL 5,00,000 Rs. 5,39,578

Time Weighted Rate of Return (TWROR)

Ri= [(Pi-0.5Ci)/ (Po+0.5Ci)-1}*100

= {(539578-0.5(0))/ (500000+0.5(0))-1}*100

= 7.91% p.a.

b) RATE OF RETURN FOR BALANCE INVESTOR

Investment Instrument Amount Returns Current Value

HDFC Prudence Fund 1,30,000 Rs. 54.2% p.a. 2,00,460

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Reliance Vision Fund 1,00,000 Rs. 78.3% p.a. 1,78,300

Bank Fixed Deposits 1,00,000 Rs. 6.5% p.a. 1,06,500

PPF 70,000 Rs. 8.5% p.a. 75,950

Kisan Vikas Patra 1,00,000 Rs. 8.4% p.a. 1,08,400

TOTAL 5,00,000 Rs. 6,69,610

Time Weighted Rate of Return (TWROR)

Ri= [(Pi-0.5Ci)/ (Po+0.5Ci)-1}*100

= {(669610-0.5(0))/ (500000+0.5(0))-1}*100

= 33.92%p.a.

c) RATE OF RETURN FOR AGGRESSIVE INVESTOR

Investment Instrument Amount Returns Current Value


HDFC Core & Satellite Fund 1,30,000 Rs. 83.56% p.a. 2,38,628

Prudential ICICI Emerging Star Fund 90,000 Rs. 93.3% p.a. 1,73,790

Franklin Flexi Cap Fund 1,10,000 Rs. 86.25% p.a. 2,04,875

Fidelity Equity Fund 80,000 Rs. 82.4% p.a. 1,45,920

DSP Top 100 90,000 Rs. 79.28% p.a. 1,61,352

TOTAL 5,00,000 Rs. 9,24,565

Time Weighted Rate of Return (TWROR)

Ri= [(Pi-0.5Ci)/ (Po+0.5Ci)-1}*100

= {(924565-0.5(0))/ (500000+0.5(0))-1}*100

= 84.91%p.a.

DIVERSIFICATION

RISK REDUCE THROUGH DIVERSIFICATION


The process of combining securities in a portfolio is known as diversification. The aim of diversification
is to reduce total risk without sacrificing portfolio return. To understand the mechanism and power of

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

diversification, it is necessary to consider the impact of covariance or correlation on portfolio risk more closely.
We shall examine three cases: (1) when security returns are perfectly positively correlated, (2) when security
returns are perfectly negatively correlated and (3) when security returns are not correlated.

Diversification means, investment of funds in more than one risky asset with the basic objective of risk
reduction. The lay man can make good returns on his investment by making use of technique of diversification.

MAIN THREE FORMS OF DIVERSIFICATION


1. Simple Diversification,
2. Over Diversification,
3. Efficient Diversification.

(1) SIMPLE DIVERSIFICATION:


It involves a random selection of portfolio construction. The common man could make better returns by
making a random diversification of investments. It is the process of altering the mix ratio of different
components of a portfolio. The simple diversification can reduce unsystematic risk. The research studies on
portfolio found that 10 to 15 securities in a portfolio will bring sufficient amount of returns. Further, this
concept reveals that the prediction should be based on a scientific method.

(2) OVER DIVERSIFICATION: -


Investors have the freedom to choose many investment alternatives to achieve the desired profit on his
portfolio. However, the investor shall have a great knowledge regarding a large number of financial assets
spreading different sectors, industries, companies. The investors also more careful about the liquidity of each
investment, return, tax liability, the performance of the company etc. Investors find problems to handle the large
number of investments. It involves more transaction cost and more money will be spent in managing over
diversification. If any investor involves in over diversification, there may be a chance either to get higher return
or exposure to more risk. All the problems involved in this process may result in inadequate return on the
portfolio.

(3) EFFICIENT DIVERSIFICATION:-


Efficient diversification means a combination of low risk involved securities and high risk instruments.
The combination will only be finalized after considering the expected return from an individual security and it
does inter relationship with other components in a portfolio. The securities shall have to be evaluated and thus

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

diversification to be restricted to some extent. Efficient diversification assures the better return at an accepted
level of risk.

IMPORTANCE OF DIVERSIFICATION
If you invest in a single security, your return will depend solely on that security; if that security flops,
your entire return will be severely affected. Clearly, held by itself, the single security is highly risky.

If you add nine other unrelated securities to that single security portfolio, the possible outcome changes
—if that security flops, your entire return won't be as badly hurt. By diversifying your investments, you have
substantially reduced the risk of the single security. However, that security's return will be the same whether
held in isolation or in a portfolio.

Diversification substantially reduces your risk with little impact on potential returns. The key involves
investing in categories or securities that are dissimilar: Their returns are affected by different factors and they
face different kinds of risks. Diversification should occur at all levels of investing. Diversification among the
major asset categories—stocks, fixed-income and money market investments—can help reduce market risk,
inflation risk and liquidity risk, since these categories are affected by different market and economic factors.

Diversification within the major asset categories—for instance, among the various kinds of stocks
(international or domestic, for instance) or fixed-income products—can help further reduce market and inflation
risk. And as shown in the 10-security portfolio, diversification among individual securities helps reduce
business risk.

DIVERSIFICATION PROCESS
The process of diversification has various phases involving investment into various classes of assets like
equity, preference shares, money market instruments like commercial paper, inter-corporate investments,

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

deposits etc. Within each class of assets, there is further possibility of diversification into various industries,
different companies etc. The proportion of funds invested into various classes of assets, instruments, industries
and companies would depend upon the objectives of investor, under portfolio management and his asset
preferences, income and asset requirements. The subject is further elaborated in another chapter.

A portfolio with the objective of regular income would invest a proportion of funds in bonds, debentures
and fixed deposits. For such investment, duration of the life of the bond/debenture, quality of the asset as judged
by the credit rating and the expected yield are the relevant variables.

Bond market is not well developed in India but debentures, partly or fully convertible into equity are in
good demand both from individuals and mutual funds. The portfolio manager has to use his analytical power
and discretion to choose the right debentures with the required duration, yield and quality. The duration and
immunization of expected inflows of funds to the required quantum of funds have to be well planned by the
portfolio manager. Research and high degree of analytical power in investment management and bond portfolio
management are necessary.

The bond investment are thus equally challenging as equities investment and more so in respect of
money market instruments. All these facts bring out clearly the needed analytical power.

PORTFOLIO MANAGEMENT IN EDELWEISS

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

Edelweiss offers the discerning investor an opportunity to access its asset management expertise through
its portfolio management service (PMS). The basic objective of this product is to provide unbiased investment
management strategy based on rigorous fundamental analysis while taking cognizance of market conditions and
movements.

The PMS team in addition to its own research capability also has access to the Edelweiss Research team
covering a universe of about 50 key Large Cap and Mid Cap companies across sectors like IT, Engineering,
Auto, Oil & Gas, Banking, Pharmaceuticals. The structure of portfolio management uses a combination of the
top-down and the bottom-up approach to arrive at a basket of investment worthy stocks. The team is committed
to a strong discipline in booking profits and on focusing on client servicing and wealth enhancement.

Edelweiss gives a portfolio to the investors in the form of “Baskets” wherein the minimum investment
should be Rs10, 000. They have many other various schemes with different amount of investment. Based on the
research, the stocks are selected on the basis of relative price performance of stocks over period of 1 month, 3
months and 1 year.

Edelweiss does a strong analysis of the funds of the investors and based on how strong the company is,
accordingly invests the investor’s funds in various diversified sectors and promises to give at least minimum
5% - 6 % returns.

CASE STUDY

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

A real life case study, a complaint against the Edelweiss Ltd by a client Sangita. Following
letter has been draft by her to the Edelweiss:

Portfolio management service (PMS) of Edelweiss securities Ltd, Mumbai.


www.edelcap.com
Posted: 2008-11-18 by R S Jadoun

Cheating by Edelweiss securities ltd., Mumbai


Grievances Of Sangita
(Client code- 28390)
VI/1732, Ta Colony,
Pantnagar-263145
Phone- 05944-235533
Mobile: 09456470344

Against

Edelweiss Securities Ltd., Godrej Coliseum, 11th floor,


Near Eastern Express Highway,
Behind Evarend Nagar, Sion (E),
Mumbai-400022
SEBI Registration No. INB 231193310 TM ID 11933

Subject: Grievances of Sangita (client code 28390) against Edelweiss Capital ltd., Mumbai

Dear Sir,
As I did not have sufficient time to manage our portfolio, I was interested to hire a PMS of some
reputed company. I enquired three companies’ viz. Kotak securities, reliance capital and Edelweiss capital, on
the basis of a survey. Since, Kotak Mahindra and Reliance Capital were requiring minimum of 10 lakh / 5 lakh
respectively as cash to start with a PMS. This 5/10 lakh cash was not available with me in the time when stock
market was passing through a turbulent phase and so I was not willing to sell off our portfolio. I had chosen the
Edelweiss company for its PMS because the relationship manager told that they do not require 5/10 lakhs as
other companies are requiring, instead, transfer the holdings and a small margin money. They also told that the
holdings transferred will be intact in your DP account and as they are giving 5-6% of minimum returns per
month, which was confirmed from the customers of the Edelweiss, as suggested by the relationship manager,
Mr. Binoy Thomas (see e-mail dated 28.03.2008, page 29). The chronology of the event is given below:

1. Seeing the advertisement Edelweiss for its PMS on moneycontrol.com, I read the PMS of Edelweiss Capital
as downloaded from the website (Annexure-I, page 6A) and requested the company to send me information
regarding PMS (see the request through my mail dated 29.02.2008, page 6C), which was acknowledged by the
company vide their e-mail dated 29.02.2008(page 6E).

2. Mr. Prafull Sharma, senior relationship manager contacted me telephonically and explained about the
strategy adopted by the company. According to him, Edelweiss is delivering minimum of 5-6% returns monthly
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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

to the PMS of HNI account holder. When asked about risk aspect, he explained that the buying or selling or
trading of FO is done on the basis of Edelweiss's strong research team recommendations, so there is no risk
involved in trading through us.

3. Mr Prafull Sharma introduced me with Mr Binoy Thomas, Assistant Relationship Manager, Edelweiss
Capital, who hypnotized me for taking the PMS with Edelweiss Capital only as this company being a new
growing company will deliver results as promised. On March 05, 2008, he sent me a mail with attachment
showing the returns of various PMS (e-mail dated 05.03.2008, page 8).

4. After seeing the returns, I asked Mr Binoy Thomas to give me some numbers of his customers. He gave me
two numbers (1) Mr Mashi of Goa business 09819660007 and (2) Mr Agrawal, cement businessman
09819890319. I do not know whether these persons were real customers or agents of Mr Binoy Thomas but
they also confirmed that they are getting 5-6 % returns per month. The same was told to Mr Binoy Thomas vide
my e-mail dated 28.03.2008 (page 29).

5. The relationship manager emphasized time and again to believe on him and he sent me several research
reports of the company. The edelweiss portfolio manager was seen on CNBC TV several times. Believing him
and thinking that Edelweiss Capital’s research is good, so they will be able to deliver as they are promising. The
Edelweiss research reports received vide several e-mails from the company for showing the research of their
company (e-mails dated 24.03.2008 (page 21), 26.03.2008 (page 26), 27.03.2008 (page 28), 09.04.2008 (page
30)) before opting my PMS with them.

6. I opted their PMS and opened HNI account on the promise from Mr Prafull Sharma and Mr Binoy Thomas
that They will see the returns as promised. Margin money of Rs. two lakhs was transferred to Edelcapital on
April 16, 2008. We made it clear that we are only interested for 5-6% returns as per your promise and we will
not be doing anything. It is Edelweiss capital who will be trading to give returns as promised (see my mail dated
17.04.2008 (page 32)).

7. Trading started on April 21, 2008 in the user Id 28390 and DP ID 1203230000123218. 31 Stocks were also
transferred (list attached, page 103). On April 22, 2008, another 5 stocks were transferred (list attached, page
104). Thus trading started with my holdings of 36 stocks and a cash amount of Rs 2.0 lakhs.

8. Mr Tejas Purohit was appointed as the dealer for account 28390. The accounting system designed by the
company is so tedious that it is difficult to be understood by a person having PhD degree in IE. How can the
same be understood by a common person. I could not understand the tedius system of ledger maintenance (see
my mail dated 24.04.2008 (page 34) and 29.04.2008 (35)).

9. Mr Tejas Purohit sold of some of stocks of my holdings and started trading in my account without my
approval. When Mr Binoy Thomas was told that my dealer does not take my approval for any transaction being
made by him. On asking about the returns, none of them gave me the true picture. They were kept saying that
you will be getting the returns as promised. Also they keep on sending e-mails regarding performance of their
product (E-mails regarding their PMS were also received after opting my PMS with them (see e-mail dated
02.07.2008 (page 41), 03.07.2008 (page 43), 05.07.2008 (page 45), 09.07.2008 (page 47), and 18.07.2008 (page
52)).

10. Seeing the ledger, although difficult to understand, several mails were written to either stop or take
corrective measures so that you could deliver returns as promised (my mails dated 07.05.2008 (page 37),

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

04.06.2008 (page 39), 03.08.2008 (page 57) and 23.08.2008(63)).

11. On 10th July 2008, the relationship manager was advised not to trade NIFTY but no action was taken and
NIFTY was traded even after 10.07.2008 (e-mail dated 10.07.2008 (page 51) and copies of contract notes
showing NIFTY trading after 10.07.2008 enclosed (pages 90-97)).

12. The transactions were done by untrained dealers of the company on the basis of ‘Tukka’ based research. The
relationship manager was advised not to take risk as your dealers and research is not up to the mark. However,
no action was taken on my advice (see my mails dated 07.05.2008 (page 37), 04.06.2008 (page 39), 10.07.2008
(page 51), 03.08.2008 (page 57), and 23.08.2008 (page 63)).

13. Contract notes were received till May 08, 2008 electronically. Thereafter, the mails containing contract
notes contained virus could not be opened as yet (please refer my mail dated 09-05-2008 (page 38), 24.07.2008
(56), 05.09.2008(65)).

14. Differential and higher brokerage was charged on the same script at different times. The brokerage charged
was also different for different scripts (see my complaint vide e-mail dated 03.08.2008 (page 57)).

15. All trading transactions were made by you and you only on the basis of your research recommendations
without my approval. I advised not to take risks as I am not prepared to take risks (my mails dated 04.06.2008
(page 39), 03.08.2008 (page 57), and 23.08.2008 (page 63)) were ignored.

16. Whenever, reminder was sent for the deteriorating performance, I was told telephonically not to be in panic
and wait for some time as we will deliver the returns as promised. I also requested them not to trade is better
option to getting negative returns (my mails dated 07.05.2008 (page 37) and 04.06.2008 (page 39)), every time,
Mr Prafull Sharma and Mr. Binoy told me that "you have to wait till month end, we will deliver the results as
promised. You will not be able to know your returns as the positions are taken".

17. Mr Tejas Purohit was replaced with Mr Amit Kumar, a new dealer as he was supposed to be the best dealer
and Mr Binoy Thomas was replaced with Mr Nikhil Kumar who never spoken to me about anything in my
PMS.

18. Several E-mails (dated June 04 (page 39), July 10 (page 51), July 24 (page 56), Aug 03 (page 57), Aug 04
(page 58) and Aug 23, 2008 (page 63)) regarding the poor performance shown in my ledger. Every time I was
assured of returns as promised (copy of mails attached).

19. On 9th or 10th of sept 2009, I was told telephonically that all positions have been squared off. I saw my
ledger, it was showing only 38000/- only against investment of about Rs 3.5 lakhs (Rs 2.0 lakhs given initially
+ Rs. 1.5 lakhs, unauthorized sale of my holdings + dividend etc). This means my 90% capital has been eaten
by the wrong trading done by the incompetent dealers.

20. I have been misinformed about the performance of my PMS. I tried hard to contact Mr Prafull Sharma, Mr
Binoy Thomas, Mr Nikhil Kumar and Mr. Amit Kumar. All of them avoided me. No one has ever told me the
true state of affairs in my PMS. What and why things went wrong inspire of my warnings and the promises
made. The research of Edelweiss seems to be total failure if the dealers has acted as per the research but none
had taken my approval for any trading which is the clear violation of the agreement.

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

21. The customer care unit has not given me any satisfactory responses on my queries with them.

22. Finally, the grievances were addressed to the CMD of the company, Mr. Rashes Shah, vide e-mail dated
17.09.2008 (page 68). The company without investing the matter responded in negative vide its e-mail dated
26.09.2008 (page 76). The response of the company is not admissible because of the points raised above. The
company says that firstly they have not given PMS; secondly all transactions in my account had been done by
my oral instructions. We had never visited any office of the company. All correspondence was done either
through e-mail or telephonically. The company has failed to prove that the transactions were made on my oral
instructions. The written instructions/advises as reported above have been ignored by the company. The
company has refused to furnish Telephone call details to prove my oral instructions and has no satisfactory
answer for ignoring my written mails (copy of their mail dated 29.10.2008 (page 86)).

In view of the above, I feel cheated by Edelweiss Capital Ltd. The grievances were brought to the
notice of the higher officials of the company through customer care of the company vide several mails as
reported earlier. The investigations done by the company and the subsequent response of Mr J B Ram, VP,
Compliance (vide e-mail dated 26.09.2008) has been closely analyzed and found that the company is not
interested to resolve my genuine grievances and has covered up the unethical acts done by it to earn more and
more profit because of the following facts:

1. I had approached the company for its PMS Service. My needs and objectives were explained to the
Relationship Managers who contacted me telephonically. I was never interested in any other service from the
company. Since, I was told unambiguously several times that this is the PMS which would fulfill my needs and
objectives. If it is not PMS, as the company says, then I have been given wrong product by the company (see
Annexure-I, page 6 C-E).

2. Most of the transactions were made willfully disobeying my written and oral instructions for earning higher
brokerages for the benefit of the company by Mr Tejas Purohit and Mr Amit Kumar, dealers. On asking the
basis of oral instructions from the company as I had never visited the company in person, the company has not
provided any substantial proof like call details or other (email dated Oct 21, 2008, page 84). The written
instructions vide my e-mail dated 07/05/2008; 10/07/2008 for not playing ‘NIFTY’ or taking risk has not been
obeyed. The Nifty were traded even after 10/07/2008 (copies of contract notes enclosed, page 90-97).

3. Telephonically, sometimes both the dealers informed that we are buying and selling on the basis of the
recommendations of our research team.

4. No contract note was found in the envelopes containing 'client margin statement' and 'ledger position
statement' after 31.07.2008.

5. A non-uniform, differential heavy brokerage for the same and different script at different times was charged
by the company.

6. The monthly returns of 5-6 % not delivered as promised; instead a huge loss (more than 5 lakhs) has been
inflicted on us.

7. Misleading and wrong information were given by the dealers and relationship managers about the
transactions and status of my portfolio.

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

You are, therefore, requested to kindly look into the matter and help me by asking the company to
compensate the dues as promised.

Yours truly,

Sangita
Dr R S Jadoun
VI/1732,
Ta Colony,
Pantnagar-263145

RECOMMENDATIONS

As from the above case study following recommendation can be drawn:

 All hidden facts should be told to the investor before entering into the contract. Investor should
have the complete knowledge about the product before investing money in any particular
company.

 Calculation done for obtaining expected return percentage should in the understandable format
and should be explain to the investor. So that any question regarding that is solved and investor
have the knowledge and also gains confidence that its money is properly utilized and said return
will be achieved.

 Edelweiss should have a transparent process i.e. it should give details about procedure
undertaken by the company to prepare and maintain their portfolio. Investor should have the
proper knowledge as who is handling its portfolio, where their money is getting invested, do the
company is following what they have said while opening the account.

 Edelweiss should employ educated staff for customer service. People involved in customer
service should look after the issue faced by the investor; they should keep track of the issues and
make sure that such issue is raised again.

 Any references provided by the company to the investor should be genuine.

 Proper compensation should be given to the investor if any; loss has suffered due to the
company. Such as return of investment made by the investor, giving some additional benefit to
the investor like reducing brokerage , research tips etc

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

DATA ANALYSIS ANDINTERPRETATION


1. Do you know about the Investment Option available?

Investment Options available

NO
15%

YES
85%

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.

2. What is the most important factor you consider at the time of Investment?

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

FACTOR CONSIDER

RISK
12%

RETURN
BOTH 23%
65%

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 Short-term.

3. In which of the following do you invest?

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

You Invest

Property
Fixed Deposits 15%
18%
Bonds
8%
Commodity Market
16%
Shares
22%

Mutual funds
21%

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.

Similarly, the Investor are more Interested in Investing their money in Mutual Fund Schemes as that is
also very important financial product due to its nature of minimizing risk and maximizing the profit. As the
commodities market is doing well from last few months so Investor also prefer to invest their money in
Commodities Market basically in GOLD nowadays. Moreover, even who don’t want to take Risk they are
looking for investing in Fixed Deposit for long period of time.

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

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

PMS better than MF

No
24%

Yes
76%

Interpretation
In the above graphs it’s clear that 24% of respondent out of hundred feel that investing their money in
Mutual Fund Scheme are far safer than Investing in PMS. This is because of lack of proper information about
the Portfolio management services. As the basis is same for the mutual fund and PMS but the investment
pattern is totally different from each other and which depends upon different risk factor available in both the
Financial Products.

5. How much returns you are you expecting from your Investments?

Return Expectation

More
than 35%
8%
25 - 35%
12%
Upto 15%
48%

15 - 25%
32%

Interpretation

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

The optimism is shown in the attitude of the respondents. The confidence was appreciable with which
they are looking forward to a rise in their investments. Major part of the sample feels that the 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 Edelweiss limited.

6. How do you manage your Portfolio?

Manage your portfolio

Portfolio
Mana ger Self
43% 57%

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 don’t have to keep a close eye on their investment; they get all the information time to
time from their Fund Manager.

7. Which Portfolio Type would you prefer?

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

Portfolio prefered

Balanced
28% Equity
45%

Debt
27%

Interpretation
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.

8. Are you using Portfolio Management services (PMS) of Edelweiss?

Edelweiss PMS

Yes No
40% 60%

Interpretation

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PORTFOLIO MANAGEMENT SERVICES -AN INVESTMENT OPTION

As talking about the Investment option, in most of clients it was common that they know about the
Option but as the PMS of Edelweiss have different Product offering, Product Characteristics and the Investment
amount is also different this makes the clients to think differently. It is found that 60% of Edelweiss client
where not using PMS services as for their Investment Option.

9. What was your experience with Portfolio Management services (PMS) of Edelweiss
Limited?

Edelweiss PMS Experience

No Profit
Earned No Loss
30% 30%

Faced Loss
40%

Interpretation
In the above analysis it is clear that the Investor have the good and the bad experience both with the
Edelweiss PMS services. In this current scenario 30% of the Investor earned, whereas around 40% have to
suffer losses in the market. Similarly 30% of the Respondents are there in Breakeven Point (BEP), where no
loss and no profit.

10. Does Edelweiss Limited keeps its PMS process Transparent?

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PMS Transparent

No
63% Yes
37%

Interpretation
The above analysis is talking about the Edelweiss Transparency of their PMS services. In hundred respondents
37% said that they get all the information about their scrip buying and selling information day by day, where as
63% of respondents are not satisfied with the PMS information and Transparency because they don’t get any
type of extra services in PMS as they were saying.

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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.

 Around 57% residents manage their Portfolio through the different company whereas 43%Investor
manage their portfolio themselves.

 Out of hundred respondents 56% respondents are using Edelweiss PMs services.

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

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 About 30% Respondents earned through Edelweiss PMS product, whereas 30% investor faced loses
also.

 More than 37% Investor are happy with the Transparency system of Edelweiss limited.

CONCLUSION

It is important to understand that equity shares are not recommended for all investors. If you are
past sixty, and dependent on your savings for a living, I would strongly advise you not to buy and hold equity
shares only but also in other securities which gives a regular income in periodic intervals. The stock markets are
by nature volatile and unpredictable. Prudence, in such cases, demands that one should never put one’s nest egg
in the stock market at such a late stage in life. On the other hand, if you are young and resilient enough to take
risks, the stock market can be quite interesting and rewarding. But remember these Ten Commandments and
follow them with religious favor:

1. Do not speculate.
2. Do not invest in new issues.
3. Do not put all your eggs in one basket.
4. Limit the number of scrips in your portfolio.
5. Invest for the long term.
6. Invest in real value.
7. Invest in sunrise industries.
8. Disinvest before a company becomes a sunset industry.
9. Do not marry your stocks.
10. Set a limit to your greed.

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Investing in portfolio of carefully selected stocks with an excellent track record can be quite safe
in the long run. If you are below fifty, you can build a fortune with an equity stock are even better than
gold.

BIBLIOGRAPHY

 http://www.religare.in/portfolio_management_services.aspwww.sebi.gov.in

 http://www.fortisinvestments.in/Uploads/PMS/Fortis-PMS_Application_Form-
Individual.pdfhttp://www.anagram.co.in/anagram/content/pms_home.jspvwww.val
ueresarchonline.com

 http://www.thehindubusinessline.com/iw/2005/01/02/stories/2005010200851500.h
tmwww.theeconomist.com

 www.nseindia.com

 www.bseindia.com

 http://www.investmentz.com/Services/ServicesInner.aspx?id=0208

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APENDIX

QUESTIONNAIRE
NAME………………………………….
AGE…………………………………………
OCCUPATION……………………………... PHONE NO..................................
1. Do you know about the Investments Option available?

A) YES B) NO

2. Which is the most important factor you consider for Investment?

A) Risk B) Return C) Both

3. In which of the following do you invest?

A) Mutual Funds B) Shares C) Commodities Market

D) Bonds E) Fixed Deposits F) Property

4. “Investing in PMS is far safer than Investing in Mutual Fund”. Do you agree?
A) Yes B) No
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5. How much returns you are you expecting from your Investments?
A) Upto 15% B) 15-25% C) 25-35% D) More than 35%

6. How do you manage your Portfolio?

A) Self B) Portfolio Manager

7. Are you using Portfolio Management services (PMS) of Edelweiss?


A) Yes B) No
8. Which Portfolio Type would you prefer?
A) Equity B) Debt C) Balanced
9. What was your experience with Portfolio Management services (PMS) of Edelweiss Limited?
A) Earned B) Faced Loss C) No profit No loss
10. Does Edelweiss Limited keeps its PMS process Transparent?
A) Yes B) No

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