banking portfolio management

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Project on

PORTFOLIO MANAGEMENTWITH REFERENCE TOICICI BANK LTD.

BACHELOR OF COMMERCE BANKING AND INSURANCE

(V SEMESTER)

2013-2014

In partial fulfillment of the requirement for award of degree of

Bachelor of commerce banking and insurance

Submitted by:

KALPANA U PADHY

Roll No: 5507

Guided By:

MR. SHAILESH SARGADE

SAKET COLLEGE OF ARTS, COMMERCE, AND SCIENCE KALYAN

(EAST),

THANE- 421306


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CERTIFICATE

I MR. SANTOSH YADAV hereby certify that MS. KALPANA U

PADHY student of T.Y.B.com (banking & insurance) Semester V

Roll No: 5507 has successfully carried out the project on

PORTFOLIO MANAGEMENT WITH REFERENCE TO ICICI

BANK LTD. in the academic year 2013-14. The information

submitted is true and original to best of my knowledge.

Place:Kalyan

Date: (Prof .SHAILESH SARGADE)

Signature of Project Guide


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DECLARATION

I KALPANA U PADHY, Roll No: 5507, SAKET COLLEGE OF

MANAGEMENT, T.Y.B.com (banking & insurance) V semester,

hereby declare that I have complete the project on (PORTFOLIO

MANAGEMENT WITH REFERENCE TO ICICI BANK LTD.)

in academic year 2013-14.

The information submitted is true & original to best of myknowledge.

Place: Kalyan

Date: Student signature

(T. Y. B&I)


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ACKNOWLEDGEMENT

This project bears imprint of all those who have directly or indirectly helped

and extended their kind support in completing this project.

At the time of making this report I express my sincere gratitude to all of them.

I would like to express my sincere gratitude to the manager of ICICI Bank Ltd.

Malad, Mumbai & Prof. Santosh Sir being a wonderful guide & helped me

throughout the project. By his assistance only I could perform & complete this

project successfully.

This project report is collective effort of all and I sincerely remember and

acknowledge all of them for their excellent help and assistance throughout the

project.

(Kalpana Padhy)


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OBJECTIVES OF THE STUDY

To search detailed information of portfolio management in banks.

To find out the various factors that an investor should take into consideration tomake proper investment decisions.

To do an in-detailed analysis of the risk and return characteristics ofstocks related to different industries and different companies in banks.

To help the investors to decide the effective portfolio of securities.

To identify the best portfolio of securities.


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LIMITATIONS OF THE STUDY

The data collected is basically confined to secondary sources, with very little

amount of primary data associated with the project.

There is a constraint with regard to time allocated for the research study.

In this study the statistical tools used are risk, return, average, variance,

correlation.

The availability of information provided by the visit is not satisfactory as the

institution do not entertain such research people as they are scared of their

companysconfidentiality.


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METHODOLOGY

PRIMARY DATA:

Data collected from the visit of the bank Data obtained from bank brochure journals.

SECONDARY DATA:

Data collected from internet. Data collected from newspapers. Data collected from magazines & articles. Data collected from reference books.


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INDEX

Sr. no. TopicPage

No.1. Executive Summary 1

1.1 Introduction to ICICI Bank 2

1.2Products & Services provided byICICI Bank

1.3 Portfolio Management in ICICI Bank

2. Global View on PM

2.1 Evolution of PM

2.2 PM in developed countries2.3 History of PM in Indian bank

3. Introduction to PM

3.1 Definition to PM

3.2 Precise explanation of PM

3.3 Role of PM

3.4 Value of PM

3.5 Implementation of PM

3.6 Objectives of PM3.7 Types of PM

3.8 Steps in PM

3.9 Functions of PM

3.10 Goals of PM

3.11 Equity PM

3.12 Bond PM

3.13 Advantages of PM

3.14 Disadvantage of PM3.15 Prospects of PM

4. PM services in ICICI Bank

4.1 Investment in PM service

4.2How is PM service different fromMutual fund in ICICI Bank

4.3 Working of a PM in ICICI Bank

4.4 PM service charges in ICICI Bank

4.5 Taxation for PM service in ICICI


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Bank

4.6PM schemes in present scenarios inICICI Bank

5. Portfolio Manager of ICICI bank

5.1Qualities of Portfolio Manager ofICICI Bank

5.2Code of conduct of PortfolioManager of ICICI Bank

5.3SEBI rules 1993 regarding portfolioManager

5.4 Conditions for grant and renewal

5.5 SEBI rules for registration

6. Findings

7. Conclusion

8. Annexure

9. Bibliography &Webliography


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EXECUTIVE SUMMARY

Investing is both Arts and Science. Every Individual has their own

specific financial need and expectation based on their risk taking capabilities,

whereas some needs and expectation are universal. Therefore, we find that the

scenario of the Stock Market is changing day by day hours by hours and minute

by minute. The evaluation of financial planning has been increased through

decades, which can be best seen in customers. Now a 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).

The Report is prepared on the basis of Research work done through the

different Research Mythology the data is collected from both the source

Primary sources which consist of Questionnaire and secondary data is collected

from different sources such as Company website, Magazine and other sources.


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Chapter 1

Introduction of ICICI Bank Ltd


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Introduction of ICICI Bank

ICICI Bank is India's largest private sector bank with total assets of Rs.5,

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian

financial institution, and was its wholly-owned subsidiary. ICICI's shareholding

in ICICI Bank was reduced to 46% through a public offering of shares in India

in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in

fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock

amalgamation in fiscal 2001, and secondary market sales by ICICI to

institutional investors in fiscal 2001 and fiscal 2002.

ICICI was formed in 1955 at the initiative of the World Bank, the

Government of India and representatives of Indian industry. The principal

objective was to create a development financial institution for providing

medium-term and long-term project financing to Indian businesses. In the

1990s, ICICI transformed its business from a development financial institution

offering only project finance to a diversified financial services group offering awide variety of products and services, both directly and through a number of

subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first

Indian company and the first bank or financial institution from non-Japan Asia

to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the

context of the emerging competitive scenario in the Indian banking industry,


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and the move towards universal banking, the managements of ICICI and ICICI

Bank formed the view that the merger of ICICI with ICICI Bank would be the

optimal strategic alternative for both entities, and would create the optimal legal

structure for the ICICI group's universal banking strategy. The merger would

enhance value for ICICI shareholders through the merged entity's access to low-

cost deposits, greater opportunities for earning fee-based income and the ability

to participate in the payments system and provide transaction-banking services.

The merger would enhance value for ICICI Bank shareholders through a large

capital base and scale of operations, seamless access to ICICI's strong corporate

relationships built up over five decades, entry into new business segments,

higher market share in various business segments, particularly fee-based

services, and access to the vast talent pool of ICICI and its subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank

approved the merger of ICICI and two of its wholly-owned retail finance

subsidiaries, ICICI Personal Financial Services Limited and ICICI CapitalServices Limited, with ICICI Bank. The merger was approved by shareholders

of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at

Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and

the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI

group's financing and banking operations, both wholesale and retail, have been

integrated in a single entity.

ICICI Bank is India's second-largest bank with total assets of Rs.4,062.34

billion ($91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion

($1,155 million) for the year ended March 31, 2011. The Bank has a network of

2,535 branches and 6,810 ATMs in India, and has a presence in 19 countries,

including India. ICICI Bank offers a wide range of banking products and

financial services to corporate and retail customers through a variety of delivery


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channels and through its specialised subsidiaries in the areas of investment

banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and

Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka,

Qatar and Dubai International Finance Centre and representative offices in

United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia

and Indonesia. Their UK subsidiary has established branches in Belgium and

Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange

and the National Stock Exchange of India Limited and its American Depositary

Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).367.95

billion (US$ 99 billion) at March 31, 2013 and profit after tax Rs. 83.25 billion

(US$ 1,533 million) for the year ended March 31, 2013. The Bank has a

network of 3,382 branches and 10,943 ATMs in India, and has a presence in 19countries, including India.

ICICI Bank offers a wide range of banking products and financial

services to corporate and retail customers through a variety of delivery channels

and through its specialised subsidiaries in the areas of investment banking, life

and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and

Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka,

Qatar and Dubai International Finance Centre and representative offices in

United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia

and Indonesia. Our UK subsidiary has established branches in Belgium and

Germany.


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ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and

the National Stock Exchange of India Limited and its American Depositary

Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).


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Types of Credit & Debit Cards offerings:

Titanium Debit Card Gold Debit Card Rubyx Credit Card

LoansAt ICICI Bank Privilege Banking, we offer you a wide range of loan

products to help you achieve your dreams. Quick, convenient and hassle-free

access to car, home and personal loans mean you can get financing when you

need it.

Types of Loan offerings:

Home Loan Car Loan Personal Loan

InvestmentsTo secure the financial future for your family and you, an appropriate

range of investments is critical. At ICICI Bank Privilege Banking, we offer you

various investment options to help you build your wealth for self and for future

generations.

Types of Investment Offerings:

ICICI Bank Pure Gold Foreign Exchange Services Public Provident Fund Account Mutual Funds
http://www.icicibank.com/privilege-banking/personal/titanium-debit-card.htmlhttp://www.icicibank.com/privilege-banking/personal/gold-debit-card.htmlhttp://www.icicibank.com/privilege-banking/personal/rubyx-card.htmlhttp://www.icicibank.com/privilege-banking/personal/home-loan.htmlhttp://www.icicibank.com/privilege-banking/personal/car-loan.htmlhttp://www.icicibank.com/privilege-banking/personal/personal-loan.htmlhttp://www.icicibank.com/privilege-banking/personal/personal-loan.htmlhttp://www.icicibank.com/privilege-banking/personal/Pure-Gold.htmlhttp://www.icicibank.com/privilege-banking/personal/Exchange-Services.htmlhttp://www.icicibank.com/privilege-banking/personal/Provident-Fund-Accounts.htmlhttp://www.icicibank.com/privilege-banking/personal/Mutual-Funds.htmlhttp://www.icicibank.com/privilege-banking/personal/Mutual-Funds.htmlhttp://www.icicibank.com/privilege-banking/personal/Mutual-Funds.htmlhttp://www.icicibank.com/privilege-banking/personal/Provident-Fund-Accounts.htmlhttp://www.icicibank.com/privilege-banking/personal/Exchange-Services.htmlhttp://www.icicibank.com/privilege-banking/personal/Pure-Gold.htmlhttp://www.icicibank.com/privilege-banking/personal/personal-loan.htmlhttp://www.icicibank.com/privilege-banking/personal/car-loan.htmlhttp://www.icicibank.com/privilege-banking/personal/home-loan.htmlhttp://www.icicibank.com/privilege-banking/personal/rubyx-card.htmlhttp://www.icicibank.com/privilege-banking/personal/gold-debit-card.htmlhttp://www.icicibank.com/privilege-banking/personal/titanium-debit-card.html


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Portfolio Management in ICICI Bank

Portfolio Management Services (PMS) is a sophisticated investment

vehicle that offers a range of specialised investment strategies to capitalise on

opportunities in the market. ICICI Portfolio Management Services providessolutions for the investment needs of select clientele, through focused

portfolios.

ICICI AMC was the first institutional participant to offer Portfolio

Management Services to HNIs and Institutions in India, in the year 2000. We

have a successful track record of over 10 years of experience in offering

Portfolio Management Services and today our strong base of over 7,000 PMS

clients stands testament to the quality and value of our services.

Our aim -is to create a portfolio that suits your requirements; therefore we

will first seek to understand a clients needs and investment objectives, and on

that basis offer a portfolio that best suits these needs and objectives.


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Personalized AdviceExperienced Fund Managers give you sound investment advice and

strategies that help you invest smartly. You get the best fund managers in the

industry who craft customized stock portfolios that work wonders. With PMS

products distributed by ICICI Bank you get:

More choice in terms of portfolios to suit individual client needs and riskappetite

Ability to structure products that meet specific investment objectives Choice of alternate investment products that were traditionally available

to the very wealthy

Professional ManagementPMS products distributed by ICICI Bank combine the benefits of

professional money management with the flexibility, control and potential tax

advantages of owning individual stocks or other securities. The Portfolio

Managers take care of all the administrative aspects of your portfolio with a

monthly or semi annual reporting on the ove-rall status of the portfolio and

performance.

Continuous MonitoringThe expert Fund Managers and research team keep a constant watch on

your money. The team of experts in these fund houses know exactly how your

money is performing through continuous monitoring. You, as a customer are

always informed through:

Communications that include relevant information on major marketevents

Quarterly or semi-annual performance updates


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Chapter 2

Global view on

Portfolio Management


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groups remain mired in the more pedestrian task of rebuilding their banking

franchises.

While economies appear to be improving across the globe, the personal

wealth growth rates in China and across the Asia Pacific region continue to fast

outpace the Western world, leaving adrift banking groups that lack the capacity

to capitalise.

Private bankers insist that the unexpectedly swift resurgence of global

stock markets has not altered the concerns of a chastened client base.

Transparency and liquidity are now prerequisites for any product offered

to the wealthy and very wealthy investor, saysSally Tennant, chief executive

officer of Lombard Odier in London. The days of products with black box

complexities are over.

The current generation of rich individuals is undeniably more

international in both outlook and activities than previous ones, whether in

business, investments or personal affairs.

Particularly in emerging markets, the ranks of the super-wealthy are

now dominated by entrepreneurs who have built up their own business empires,as opposed to inheriting their wealth over generations.

As a result, they expect a more hands-on approach and a more tailored

product than the traditional private banking model offers, with its focus on

investment advice and portfolio management, says Jane Fraser, head of Citi

Private Bank. The coveted private banking client now expects a more holistic

approach to wealth management, she says.


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Evolution of Portfolio Management

Portfolio management is essentially a systematic method of maintainingones investment efficiently. Many factors have contributed to the existence and

development of the concept. In the early years of the century analyst used

financial statements to find the value of the securities. The first to be analyzed

using this was Railroad Securities of the USA. A booklet entitled The

Anatomy of the Railroad was published by Thomas F. Woodlock in 1900. As

the time progressed this method became very important in the investment field,

although most of the writers adopted different ways to publish there data. They

generally advocated the use of different ratios for this purpose. John Moody in

his book The Art of wall Street Investing, strongly supported the use of

financial ratios to know the worth of the investment. The proposed type of

analysis later on became the common-sizeanalysis. The other major method

adopted was the study of stock price movement with the help of price charts.

This method later on was known as Technical Analysis. It evolved during

1900-1902 when Charles H. Dow, the founder of the Dow Jones and Co.

presented his view in the series of editorials in the Wall Street Journal in USA.

The advocates of technical analysis believed that stock prices movement is

ordered and systematic and the definite pattern could be identified. There

investment strategy was build around the identification of the trend and pattern

in the stock price movement.

Another prominent author who supported the technical analysis was

Ralph N. Elliot who published a book in the year 1938 titled The Wave

Principle. After analyzing 75 years data of share price, he concluded that the

market movement was quite orderly and followed a pattern of waves. His theory

is known as Elliot Wave Theory. According to J.C. Francis the development of


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investment management can be traced chronologically through three different

phases. First phase is known as Speculative Phase. Investment was not a wide

spread activity, but a cake of few rich people. The process is speculative in

nature. Investment management was an art and needed skills. Price

manipulation was resorted to by the investors. During this time period pools and

corners were used for manipulation. The result of this was the stock exchange

crash in the year 1929. Finally the daring speculative ventures of investors were

declared illegal in the US by the Securities Act of 1934. Second phase began in

the year 1930. The phase was of professionalism. After coming up of the

Securities Act, the investment industry began the process of upgrading its

ethics, establishing standard practices and generating a good public image. As a

result the investments market became safer place to invest and the people in

different income group started investing. Investors began to analyze the security

before investing. During this period the research work of Benjamin Graham

and David L. Dood was widely publicized and publicly acclaimed. They

published a book Security Analysis in 1934, which was highly sought after.Their research work was considered first work in the field of security analysis

and acted as the base for further study. They are considered as pioneers of

security analysis as a discipline. Third phase was known as the scientific phase.

The foundation of modern portfolio theory was laid by Markowitz. His

pioneering work on portfolio management was described in his article in the

Journal of Finance in the year 1952 and subsequent books published later on.

He tried to quantify the risk. He showed how the risk can be minimized

through proper diversification of investment which required the creation of the

portfolio. He provided technical tools for the analysis and selection of optimal

portfolio. For his work he won the Noble Prize for Economics in the year 1990.

The work of Markowitz was extended by the William Sharpe, John Linter

and Jan Mossin through the development of the Capital Asset Pricing Model


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(CAPM). If we talk of the present the last two phases of Professionalism and

Scientific Analysis are currently advancing simultaneously with investment in

various financial instruments becoming safer, with proper knowledge to each

and every investor.


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Portfolio management in developed countries :-

Deutsche BankDeutsche Bank brings Portfolio Management Services (PMS) from seven

providers that work towards the growth of funds. The recommendations aim to

ensure that the strategy and portfolio are built on solid foundations. Depending

on the risk appetite and desired returns, one can select from a range of superior

PMS products in the country, including the products from Prudential ICICI,

Reliance Capital, Franklin Templeton, and Benchmark Asset Management

ICICI Bank Wealth ManagementICICI Bank Wealth Management assist for the Portfolio Management

Services (PMS) by referring to the partner Asset Management Companies.

Their partner Asset Management Companies conduct detailed and scientific

analysis of various investment avenues to help you invest your money.

PMS can be of the following categories

Equity-based Products Commodity-based Products Index-linked Products

Federal BankFederal Bank launches portfolio investment scheme for NRIs

KOCHI: Kerala-based Federal Bank on Friday launched its Portfolio

Investment (PIS) Scheme for NRIs in tie up with Geojit BNP Paribas Financial

Services Ltd,offering "hassle free" facilities for investments in stock market.

The bank, which has been authorized by RBI to administer the scheme, was the

first among the traditional private sector banks to offer the facility.
http://economictimes.indiatimes.com/federal-bank-ltd/stocks/companyid-9211.cmshttp://economictimes.indiatimes.com/geojit-bnp-paribas-financial-services-ltd/stocks/companyid-6853.cmshttp://economictimes.indiatimes.com/geojit-bnp-paribas-financial-services-ltd/stocks/companyid-6853.cmshttp://economictimes.indiatimes.com/geojit-bnp-paribas-financial-services-ltd/stocks/companyid-6853.cmshttp://economictimes.indiatimes.com/geojit-bnp-paribas-financial-services-ltd/stocks/companyid-6853.cmshttp://economictimes.indiatimes.com/federal-bank-ltd/stocks/companyid-9211.cms


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History of portfolio management in Indian banks

Unit Trust of IndiaIt is a financial organization in India, which was created by the UTI Act

passed by the Parliament in 1963. It has over 70 schemes in domestic MF space

and has the largest investor base of over 9 million in the whole industry. It is

present in over 450 districts of the country and has 100 branches called UTI

Financial Centers or UFCs. About 50% of the total IFAs in the industry work

for UTI in distributing its products! India Posts, PSU Banks and all the large

Private and Foreign Banks have started distributing UTI products. The total

average Assets Under Management (AUM) for the month of June 2008 was Rs.

530 billion and it ranked fourth. In terms of equity AUM it ranked second and

in terms of Equity and Balanced Schemes AUM put together it ranked FIRST in

the industry. This measure indicates its revenue- earning capacity and its

financial strength.

Besides running domestic MF Schemes UTI AMC is also a registered

portfolio manager under the SEBI (Portfolio Managers) Regulations. It runs

different portfolios for its HNI and Institutional clients. It is also running a

Sharia Compliant portfolio for its Offshore clients. UTI tied up with Shinsei

Bank of Japan to run a large size India-centric portfolio for Japanese investors.

For its international operations UTI has set up its 100% subsidiary, UTI

International Limited, registered in Guernsey, Channel Islands. It has branches

in London, Dubai and Bahrain. It has set up a Joint Venture with Shinsei Bank

in Singapore. The JV has got its license and has started its operations.


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In the area of alternate assets, UTI has a 100% subsidiary called UTI

Ventures at Banglore This company runs two successful funds with large

international investors being active participants. UTI has also launched a Private

Equity Infrastructure Fund along with HSH Nord Bank of Germany and Shinsei

Bank of Japan.

Bank Of Baroda 1969

The Bank was brought into existence by a Ordinance issue on 19th

July,

by the Central Government. The Bank is a Government of India. Undertaking

and carries on all types of banking business including foreign exchange. The

Ordinance was replaced by the Banking Companies (Acquisition and Transfer

of Undertaking) Act, 1969. Besides managing public issues and giving

underwriting support,

The Bank established a `Non-resident Portfolio Management. Consultancy Cell'.

Due to closure of 2 branches in U.K. and 1 branch

in UAE, non-operative branch in Bangladesh was not taken into account.

1970Income-Tax consultancy services was set-up in September to assist. Its

constituents in the filing of income returns. Bank of Baroda (U.K.) Nominees

Ltd., London is a subsidiary of the Bank. Bob Fiscal Services Ltd., is also a

subsidiary of the Bank which handles functions such as merchant banking,

equipment leasing, investment banking, inter-corporate deposit, etc. Bank of

Baroda (Kenya) Ltd., Kenya is subsidiary of the Bank.


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Chapter 3

Portfolio Management


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Introduction of Portfolio Management

An investor considering investment in securities is faced with the

problem of choosing from among a large number of securities and how to

allocate his funds over this group of securities. Again he is faced with problem

of deciding which securities to hold and how much to invest in each. The risk

and return characteristics of portfolios. The investor tries to choose the optimal

portfolio taking into consideration the risk return characteristics of all possible

portfolios. As the risk return characteristics of individual securities as well as

portfolios also change. This calls for periodic review and revision of investment

portfolios of investors. An investor invests his funds in a portfolio expecting toget good returns consistent with the risk that he has to bear. The return realized

from the portfolio has to be measured and the performance of the portfolio has

to be evaluated. It is evident that rational investment activity involves creation

of an investment portfolio. Portfolio management comprises all the processes

involved in the creation and maintenance of an investment portfolio. It deals

specifically with the security analysis, portfolio analysis, portfolio selection,portfolio revision & portfolio evaluation. Portfolio management makes use of


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analytical techniques of analysis and conceptual theories regarding rational

allocation of funds. Portfolio management is a complex process which tries to

make investment activity more rewarding and less risky.

Investing in securities such as shares, debentures, and bonds is profitable

as well as exciting. It is indeed rewarding, but involves a great deal of risk and

calls for scientific knowledge as well artistic skill. In such investments both

rationale and emotional responses are involved. Investing in financial securities

is now considered to be one of the best avenues for investing one savings while

it is acknowledged to be one of the best avenues for investing one saving while

it is acknowledged to be one of the most risky avenues of investment. It is

rare to find investors investing their entire savings in a single security.

Instead, they tend to invest in a group of securities. Such a group of

securities is called portfolio. Creation of a portfolio helps to reduce risk,

without sacrificing returns. Portfolio management deals with the analysis of

individual securities as well as with the theory and practice of optimallycombining securities into portfolios. An investor who understands the

fundamental principles and analytical aspects of portfolio management has a

better chance of success.


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Definition of 'Portfolio Management'

The art and science of making decisions about investment mix and policy,

matching investments to objectives, asset allocation for individuals and

institutions, and balancing risk against performance.

Portfolio management is all about strengths, weaknesses, opportunities

and threats in the choice of debt vs. equity, domestic vs. international, growth

vs. safety, and many other tradeoffs encountered in the attempt to maximize

return at a given appetite for risk.


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Precise explanation of Portfolio Management

In the case of mutual and exchange-traded funds (ETFs), there are two

forms of portfolio management: passive and active. Passive management simply

tracks a market index, commonly referred to as indexing or index investing.

Active management involves a single manager, co-managers, or a team of

managers who attempt to beat the market return by actively managing a fund's

portfolio through investment decisions based on research and decisions on

individual holdings. Closed-end funds are generally actively managed.

Portfoliois none other than Basket of Stocks. Portfolio Managementis

the professional management of various securities (shares, bonds and other

securities) and assets (e.g., real estate).

In order to meet specified investment goals for the benefit of the investors. It

may refer to:

Investment management,handled by aportfolio manager IT Program management IT portfolio management Project management Project portfolio management
http://en.m.wikipedia.org/wiki/Investment_managementhttp://en.m.wikipedia.org/wiki/Portfolio_managerhttp://en.m.wikipedia.org/wiki/IT_portfolio_managementhttp://en.m.wikipedia.org/wiki/Project_managementhttp://en.m.wikipedia.org/wiki/Project_portfolio_managementhttp://en.m.wikipedia.org/wiki/Project_portfolio_managementhttp://en.m.wikipedia.org/wiki/Project_managementhttp://en.m.wikipedia.org/wiki/IT_portfolio_managementhttp://en.m.wikipedia.org/wiki/Portfolio_managerhttp://en.m.wikipedia.org/wiki/Investment_management


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Role of Portfolio Management:-

There was a time when portfolio management was an exotic term. Apractice which is beyond the reach of the small investor, but the time has

changed now. Portfolio management is now a common term and is widely

practiced in INDIA. The theories and concepts relating to portfolio management

now find there way in the front pages of the financial newspapers and

magazines. In early 90s India embarked on a program of economic

liberalization and globalization, with high participation of private players. This

reform process has made the Indian industry efficient, with rapid

computerization, increased market transparency, better infrastructure and

customer services, closer integration and higher volume. The markets are

dominated by large institutional investors with their diversified portfolios. A

large number of mutual funds have come up in the market since 1987. With this

development investment in securities has gained considerable momentum

Along with the spread of the securities investment way among Indian

investors have changed due to the development of the quantitative techniques.

Professional portfolio management, backed by research is now being adopted

by mutual funds, investment consultants, individual investors and big brokers.

The Securities Exchange Board of India (SEBI) is a regulatory body in INDIA.

It ensures that the stock market is free from fraud, and of course the main

objective is to ensure that the investors money is safe.

With the advent of computers the whole process of portfolio management has

become quite easy. The computer can absorb large volumes of data, perform the

computations accurately and quickly give out the results in any desired form.

Moreover simulation, artificial intelligence etc provides means of testing

alternative solutions. The trend towards liberalization and globalization of the


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economy has promoted free flow of capital across international borders.

Portfolio not only now include domestic securities but foreign too. So financial

investments cant be reaped without proper management.

Another significant development in the field of investment management

is the introduction to Derivatives with the availability of Options and Futures.

This has broadened the scope of investment management. Investment is no

longer a simple process. It requires a scientific knowledge, a systematic

approach and also professional expertise.

Portfolio management is the only way through which an investor can get

good returns, while minimizing risk at the same time. So portfolio management

objectives can be stated as: -

Risk minimization. Safeguarding capital. Capital Appreciation. Choosing optimal mix of securities. Keeping track on performance.


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The Value of Portfolio Management:-

Portfolio management is a process to ensure that your organization or

department spends its scarce resources on the work that is of the most value. If

you practice portfolio management throughout your organization, this process

helps to ensure that only the most valuable work is approved and managed

across the entire enterprise. If you practice portfolio management at a

departmental level, it will provide the same function at this lower level.

Department leaders that do not understand how their budgets are spent,

and who cannot validate that the work being funded is the most important, will

find themselves under greater scrutiny and second-guessing in the future.

Portfolio management can help your department answer some of the most basic,

yet difficult, questions regarding work performed and value provided.

Improved Resource Allocation. Too often today, low value projects, orprojects in trouble, squeeze scarce resources and do not allow more

valuable projects to be executed. One critical step is for all departments to

prioritize their own work. However, that is only part of the process. True


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portfolio management on an organization-wide basis requires

prioritization of work across all of the departments. In addition to more

effectively allocating labor, non-labor resources can be managed in the

portfolio as well.

This includes equipment, software, outsourced work, etc. Just because you

outsource a project, for instance, and do not use your own labor, does not mean

it should not be a part of the portfolio. The same prioritization process should

take place with all of the resources proposed for the portfolio.

Improved Scrutiny of Work. Everyone has pet projects that they wantto get done. In some departments, managers make funding decisions for

their own work and they are not open to challenge and review. Portfolio

management requires work to be approved by all the key stakeholders.

The proposed work is open to more scrutiny since managers know that

when work is approved in one area, it removes funding for potential workin other areas. As stewards of the department's money, the Executive will

now have a responsibility to approve and execute the work that is

absolutely the highest priority and the highest value.

More Openness of the Authorization Process. Utilizing a portfolio

management process removes any clouds of secrecy on how work getsfunded. The Business Planning Process allows everyone to propose work

and ensures that people know the process that was followed to ultimately

authorize work.

Less Ambiguity in Work Authorization. The portfolio managementplanning process provides criteria for evaluating work more consistently.

This makes it easier to compare work on an apples-to-apples basis and do


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a better job in ensuring that the authorized work is valuable, aligned and

balanced.

Improved Alignment of the Work. In addition to making sure that onlyhigh priority work is approved, portfolio management also results in the

work being aligned. All portfolio management decisions are made within

the overall context of the department's strategy and goals. In the IT

department, portfolio management provides a process for better

translating business strategy into technology decisions.

Improved Balance of Work. In financial portfolio management, youmake sure that your resources are balanced appropriately between various

financial instruments such as stocks, bonds, real estate, etc. Business

portfolio management also looks to achieve a proper balance of work.

Example: When you first evaluate your portfolio of work, you may find thatyour projects are focused too heavily on cost cutting, and not enough on

increasing revenue. You might also find that you cannot complete your strategic

projects because you are spending too many resources supporting your old

legacy systems. Portfolio management provides the perspective to categorize

where you are spending resources and gives you a way to adjust the balance

within the portfolio as needed.

Changed Focus from Cost to Investment. You don't focus on the "cost"side of your financial portfolio although, in fact, all of your assets were

acquired at a cost.

Example: You may have purchased XYZ company stock for $10,000.

However, when you discuss your financial portfolio, you don't focus on the


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$10,000 you do not have anymore. You invested the money and now have stock

in return so you focus on the stock that you now own. You might also talk about

your investment of $10,000 to purchase the stock, but your interest is in its

current value and whether it has generated a positive or negative benefit!

Likewise, in your business portfolio, you are spending money to receive

benefits in return. Portfolio management focuses on the benefit value of the

products and services produced rather than just on their cost.

This switch in focus is especially important in the Information

Technology (IT) area, where many executives still think of value in terms of the

accumulated cost of computers, monitors and printers. Using the portfolio

management model, you show the value of all expenditures in your portfolio.

These expenditures include not just the computing hardware and software, but

also the value associated with all project and support work. If the value is there

relative to the cost, the work should be authorized. If the value is not there

relative to the cost, the work should be eliminated, cut back or backlogged.However, the basic discussion should be focused on value delivered not just

on the cost of the products and services.

Increased Collaboration. In many organizations, senior managers makebusiness decisions while only taking into account their own department.

Example: The Marketing Division is making the best decisions for Marketing,

and the Finance Division is making the best decisions for Finance. However,

when all the plans are put together, they do not align into an integrated whole,

and, in fact, they are sometimes at odds.

You cannot perform portfolio management within a vacuum. If you practice

portfolio management at the top of your organization, all departments will need

to collaborate on an ongoing basis. If you are practicing portfolio management


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within a service department like IT, portfolio management will force

collaboration between and among IT and the other client departments.

Enhanced Communication. This is a similar benefit to increasedcollaboration. In many organizations today, functional departments do not

communicate well with their peer departments or even within their own

groups. Portfolio management requires an ongoing dialog. If your

portfolio is organization-wide, the heads of the departments will need to

communicate effectively.

This enhanced communication will also be required between the Executive and

the portfolio management team. In addition, there are many more opportunities

to communicate the value of the portfolio. Portfolio metrics should be captured

and shared with the rest of the departments. A portfolio management dashboard

should be created and shared. The business value of portfolio projects should

also be measured and shared.

Increased Focus on When to Stop a Project . This is equivalent toselling a part of your financial portfolio because the investment no longer

meets your overall goals. It may no longer be profitable, or you may need

to change your portfolio mix for the purposes of overall balance. In either

case, you need to sell the investment. Likewise, when you are managing aportfolio of work, you are also managing the underlying portfolio of

assets that the work represents. In the IT Division, for instance, the assets

include business application systems, software, hardware,

telecommunications, etc. As you look at your portfolio, you may

recognize the need to "sell" assets. While the asset may not literally be

sold, you may decide to retire or eliminate the asset.


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Example: A number of years ago you may have converted to new database

software and now you realize that only a couple of the old databases remain in

use. It may make sense to proactively migrate the remaining old databases to the

new software. This simplifies the technical environment and may also result in

eliminating a software maintenance contract. This is equivalent to selling an

asset that is no longer useful within the portfolio.


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Implementation of Portfolio Management:-

Many implementations of portfolio management start directly with trying

to identify and p-rioritize the work of the portfolio, most likely because that is

obviously where you will find the greatest value. However, if you start there

directly, you will soon find your group is in disagreement over what work

provides the most value.

The value that work brings to your organization is typically, though not

necessarily, based on the cost/benefit implications and how well it aligns with

your organization's strategy, goals and objectives. Alignment to strategy is not

so easy to achieve without some work up-front. Corporate strategy is usually

expressed as high-level statements that describe what your organization is trying

to achieve (through goals and objectives) and how the organization plans to

achieve it (strategies and tactics). If you do not have this base of reference, you

cannot evaluate your work for alignment.

If you are in agreement on the need for alignment, the next question is

how best to define the goals and objectives. You cannot just sit down in a room

and make the decisions in isolation. The right approach is to develop a corporate

strategy that looks at where you are today and where you want to be in the

future, then determining how best to get there. Without a clear picture of where

you are and where you want to be, it is very difficult to put the necessary

organization and processes into place.


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Objectives of Portfolio Management :-

The main objectives of portfolio management in finance are as follows:-

1. Security of Principal Investment: Investment safety or minimization ofrisks is one of the most important objectives of portfolio management.

Portfolio management not only involves keeping the investment intact but
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also contributes towards the growth of its purchasing power over the

period. The motive of a financial portfolio management is to ensure that

the investment is absolutely safe. Other factors such as income, growth,

etc., are considered only after the safety of investment is ensured.

2. Consistency of Returns : Portfolio management also ensures to providethe stability of returns by reinvesting the same earned returns in profitable

and good portfolios. The portfolio helps to yield steady returns. The

earned returns should compensate the opportunity cost of the funds

invested.

3. Capital Growth: Portfolio management guarantees the growth ofcapitalby reinvesting in growth securities or by the purchase of the growth

securities. A portfolio shall appreciate in value, in order to safeguard the

investor from any erosion in purchasing power due to inflation and other

economic factors. A portfolio must consist of those investments, whichtend to appreciate in real value after adjusting for inflation.

4. Marketability : Portfolio management ensures the flexibility to theinvestment portfolio. A portfolio consists of such investment, which can

be marketed and traded. Suppose, if your portfolio contains too many

unlisted or inactive shares, then there would be problems to do tradinglike switching from one investment to another. It is always recommended

to invest only in those shares and securities which are listed on major

stock exchanges, and also, which are actively traded.

5. Liquidity : Portfolio management is planned in such a way that itfacilitates to take maximum advantage of various good opportunities

upcoming in the market. The portfolio should always ensure that there are
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enough funds available at short notice to take care of the investors

liquidity requirements.

6. Diversification of Portfolio : Portfolio management is purposelydesigned to reduce the risk of loss of capital and/or income by investing

in different types of securities available in a wide range of industries. The

investors shall be aware of the fact that there is no such thing as a zero

risk investment. More over relatively low risk investment give

correspondingly a lower return to their financial portfolio.

7. Favorable Tax Status: Portfolio management is planned in such a wayto increase the effective yield an investor gets from his surplus invested

funds. By minimizing the tax burden, yield can be effectively improved.

A good portfolio should give a favorable tax shelter to the investors. The

portfolio should be evaluated after considering income tax, capital gains

tax, and other taxes.

The objectives of portfolio management are applicable to all financial

portfolios. These objectives, if considered, results in a proper analytical

approach towards the growth of the portfolio. Furthermore, overall risk needs to

be maintained at the acceptable level by developing a balanced and efficient

portfolio. Finally, a good portfolio of growth stocks often satisfies all objectivesof portfolio management.


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TYPES OF PORTFOLIO MANAGEMENT :-

The two types of portfolio management services are available for the

investors:

1. The Discretionary portfolio management services (DPMS):In this type of services, the client parts with his money in f av or

of ma nage r, who in r eturn, handle s al l the paper work, makes all

the decisions and gives a good return on the investment and for this he

charges a certain fees.

In this discretionary PMS, to maximize the yield, almost all portfoliomanagers parks the funds in the money market securities such as

overnight market, 182 days treasury bills and 90 days commercial

bills.

Normally, re turn on such investment varies from 14 to 18per

cent, depending on the call money rates prevailing at the time ofinvestment.


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2. The Non-discretionary portfolio management services:

The manager function as a counselor, but the investor is free to accept

or reject the managers advice, the manager for a services charge also

undertakes the paper work.

The manager concentrates on stock market instruments with a

portfolio tai lor made to the ri sk taking abi lity of the investor.


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The aspect of Portfolio Management is the most important element of proper

portfolio investment and speculation. While planning , a careful review should

be conducted about the financial situation and current capital market conditions.

This will suggest a set of investment and speculation policies to be followed.

The statement of investment policies includes the portfolio objectives, strategies

and constraints. Portfolio strategy means plan or policy to be followed while

investing in different types of assets.

There are different investment strategies. They require changes as time passes,

investors wealth changes, security price change, investors knowledge expands.

Therefore, the optional strategic asset allocation also changes. The strategic

asset allocation policy would call for broad diversification through an indexed

holding of virtually all securities in the asset class.

3) SELECTION OF ASSET MIX

The most important decision in portfolio management is selection of asset mix.

It means spreading out portfolio investment into different asset classes like

bonds, stocks, mutual funds etc. In other words selection of asset mix means

investing indifferent kinds of assets and reduces risk and volatility andmaximizes returns in investment portfolio.

Selection of asset mix refers to the percentage to the invested in various security

classes. The security classes are simply the type of securities asunder:

1. Money market instrument

2. Fixed income security


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3. Equity shares

4. Real estate investment

5. International securities

Once the objective of the portfolio is determined the securities to be included

in the portfolio must be selected. Normally the portfolio is selected from a list

of high-quality bonds that the portfolio manager has at hand. The portfolio

manager has to decide the goals before selecting the common stock.

The goal may be to achieve pure growth, growth with some income or income

only. Once the goal has been selected, the portfolio manager can select the

common stocks.

4) PORTFOLIO EXECUTION:

The process of portfolio management involves a logical set of steps common to

any decision, plan implementation and monitor. Applying this process to actualportfolios can be complex

Therefore, in the execution stage, three decisions need to be made, if the

percentage holdings of various asset classes are currently different from desired

holdings. The portfolio than, should be rebalanced. If the statement of

investment policy requires pure investment strategy, this is only thing, which isdone in the execution stage.

However, many portfolio managers engage in the speculative transactions in the

belief that such transactions will generate excess risk-adjusted returns.

Such speculative transactions are usually classified as timing or selection

decisions. Timing decisions over or under weight various asset classes,

industries or economic sectors from the strategic asset allocation.


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Such timing decisions are known as tactical asset allocation and selection

decision deals with securities within a given asset class, industry group or

economic sector. The investor has to begin with periodically adjusting the asset

mix to the desired mix, which is known as strategic asset allocation. Then the

investor or portfolio manager can make any tactical asset allocation or security

selection decision.

5) PORTFOLIO REVISION

Portfolio management would be an incomplete exercise without periodic

review. The portfolio, which is once selected, has to be continuously reviewed

over a period of time and if necessary revised depending on the objectives

of investor. Thus, portfolio revision means changing the asset allocation of a

portfolio.

Investment portfolio management involves maintaining proper combination of

securities, which comprise the investors portfolio in a manner that they give

maximum return with minimum risk. For this purpose, investor should have

continuous review and scrutiny of his investment portfolio. Whenever adverse

conditions develop, he can dispose of the securities, which are not worth.

However, the frequency of review depends upon the size of the portfolio, the

sum involved, the kind of securities held and the time available to the investor.

The review should include a careful examination of investment objectives,

targets for portfolio performance, actual results obtained and analysis of reason

for variations. The review should be followed by suitable and timely action.

There are techniques of portfolio revision .Investors buy stock according to their

objectives and return-risk framework. These fluctuations may be related to


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economic activity or due to other factors. Ideally investors should buy when

prices are low and sell when prices rise to levels higher than their normal

fluctuations. The investor should decide how often the portfolio should be

revised .If revision occurs to often, transaction and analysis costs may be high.

If revision is attempted too infrequently the benefits of timing may be foregone.

The important factor to take into consideration is, thus, timing for revision of

portfolio

6) PORTFOLIO PERFORMANCE EVALUATION:

Portfolio management involves maintaining a proper combination of securities,

which comprise the investors portfolio in a manner that they give maximum

return with minimum risk. The investor should have continues review and

scrutiny of his investment portfolio. These rates of return should be based on the

market value of the assets of the fund. Complete evaluation of the portfolio

performance must include examining a measure of the degree of risk taken bythe fund.

A portfolio manager, by evaluating his own performance can identify sources of

strength or weakness. It can be viewed as a feedback and control mechanism

that can make the investment management process more effective. Good

performance in the past might have resulted from good luck, in which case suchperformance may not be expected to continue in the future.

On the other hand, poor performance in the past might have been result of bad

luck.

Therefore, the first task in performance evaluation is to determine whether past

performance was good or poor. Then the second task is to determine whether

such performance was due to skill or luck.Good performance in the past may


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Goals of Portfolio Management :-

There are three goals of portfolio management:

1. Maximize the value of the portfolio

2. Seek balance in the portfolio

3. Keep portfolio projects strategically aligned

It provides a set of portfolio management tools to help achieve these goals. With

multiple business units, product lines or types of development, were commend a

strategic allocation process based on the business plan. The Master Project

Schedule provides a summary of all-active as well as proposed projects and

classifies them by status (active, proposed, on-hold)and by business

unit/product line to align projects with the strategic allocation. The Master

Project Schedule also provides additional portfolio information to prioritize

projects using either a scorecard method or the development productivity index

(DPI *). In addition to this prioritization, PD-Trek provides a Risk-Reward

Bubble Chart and a Project Type Pie Chart to assure balance. A Product orTechnology Roadmap template is provided to help visualize platform and


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technology relationships to assure critical project relationships are not

overlooked with this prioritization. This will allow management to develop a

balanced approach to selecting and continuing with the appropriate mix of

projects to satisfy the three goals.

EQUITY PORTFOLIO MANAGEMENT:-

It is logical that the expected return of a portfolio should depend on the

expected return of the security contained in it.

There are two approaches to the selection of equity portfolio.

One is technical analysis and the other is fundamental analysis.

Technical analysis assumes that the price of a stock depends on supply and

demand in the stock market.


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BONDS PORTFOLIO MANAGEMENT

The individual investors can invest in bond portfolio.

The portfolio can be spared over variety of securities.

Investment in bond is less risky and safe as compared to equity investment.

However, the return on bond is very low.

There are no much fluctuations in bond prices.

Therefore, there is no capital appreciation in this case.

Some bonds are tax saving which help the investor to reduce his tax liability.

There is no much liquidity in bonds, investment in bond portfolio is less risky

and safe but, return is reasonable, low liquidity and tax saving are some of the

more important features of bond portfolio investment.

However, it is suitable for normal investors for getting average return over their

investment.

Bond portfolio includes different types of bond, tax free bonds and taxable

bonds.

Tax free bonds are issued by public sector undertaking or Government on which

interest s compounded half yearly and payable accordingly.


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They have a maturity of 7 to 10 years with the facility for buyback.

The tax free bonds means the interest income on these bonds is not taxable.

Therefore, the interest rates on these bonds are very low.

However, taxable bonds yield higher interest compounded half yearly and also

payable half yearly.

They also have buy back facilities similar to taxable bonds.


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Advantages of Portfolio Management :-

Capital markets over a long period have always given a better return thanany other investment.

The investment in stock markets by individuals is a complicated business.

It is better that a professional handles this.

Disadvantage of Portfolio Management :-

The most obvious disadvantage is of active management is that the fund

manager may make bad investment choices or follow an unsound theory

in managing the portfolio.

The fees associated with active management are also higher than thoseassociated with passive management, even if frequent trading is not

present.

Those who are considering investing in an actively-managed mutual fund

should evaluate the fund'sprospectus carefully.

Data from recent decades demonstrates that the majority of actively-

managed large and mid-cap stock funds in United States fail to outperform

their passive stock index counterparts.
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PROSPECTS OF PORTFOLIO MANAGEMENT

At present, there are a very few agencies which render this type of services in an

organized and professional way.

However, their share in the total volume is very small.

There is no constraint on the demand for this type of financial service as every

entity would be saving and investing and interested in optimizing the rate of

return.

The size of capital market is increasing.

There is an increase in the number of stock exchanges.

New instruments are being introduced in the capital market.

The equity cult is spreading in the interiors and rural areas.

The percentage of investment of the household savings is bound to go up.


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It is conservatively estimated that during the eighth plan resources to the tune of

over Rs.50000crore will be mobilized through the stock market.

India today has 20 million investors, as compared to 2million in 1980.


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Chapter 4

Portfolio Management Service

in ICICI Bank


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PortfolioManagement Services in ICICI Bank

Portfolio Management Services account is an investment portfolio in

Stocks, Debt and fixed income products 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 portfolios, your

account may be unique. As per SEBI guidelines, only those entities who are

registered with SEBI for providing PMS services can offer PMS to clients.

There is no separate certification required for selling any PMS product. So this

is case where miss-selling can happen. As per the SEBI guidelines, the

minimum investment required to open a PMS account is Rs. 5 Lacs. However,

different providers have different minimum balance requirements for different

products. For E.g Birla AMC PMS is having min amount requirement of Rs. 25

lacs for a product. Similarly HSBC AMC is having minimum requirement of 50

lacs for their PMS and Reliance is having min requirement of Rs. 1 Crore. In

India Portfolio Management Services are also provided byequitybroking firms

& wealth management services.
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How can investor invest in a Portfolio Management

Services (PMS) in ICICI Bank?

There are two ways in which an investor can invest in a Portfolio Management

Services:

1. Through Cheque payment.

2. Through transferring existing shares held by the customer to the PMS

account. The Value of the portfolio transferred should be above the minimum

investment criteria.

Beside this customer will need sign a few documents likePMS agreement with

the provider, Power of Attorney agreement, New demat account opening format

(even if investor has a demat account he is required to open a new one) and

documents like PAN, address proof and Identity proofs are mandatory. NRIs

can invest in a PMS. The NRI needs to open a PIS account for investing in

PMS. The documentation required for an NRI, however, is different from a

resident Indian.A checklist of documents is provided by each PMS provider.


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How is PMS different from a Mutual Fund in

ICICI Bank?

Both PMS and Mutual Funds are types of managed Funds. The difference to the

investor in a Portfolio Management Services over a Mutual Fund is:

Concentrated Portfolio. Portfolio can be tailored to suit the needs of investor. Investors directly own the stocks, rather than the fund owning the stocks. Difference in taxation

This article is written by guest author Madhupam Krishna.A Post Graduate in

Finance, currently he heads sales function for Rajasthan for Principal PNB

Mutual Fund.
http://in.linkedin.com/pub/madhupam-krishna/15/384/6bhttp://in.linkedin.com/pub/madhupam-krishna/15/384/6b


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Working of a Portfolio Management Services (PMS) in

ICICI Bank:-

Each PMS account is unique and the valuation and portfolio of each accountmay differ from one another. There is no NAV for a PMS scheme; however the

customer will get the valuation of his portfolio on a daily basis from the PMS

provider. Each PMS account is unique from one another. Every PMS scheme

has a model portfolio and all the investments for a particular investor are done

in the Portfolio Management Services on the basis of model portfolio of the

scheme. However the portfolio may differ from investor to investor. This is

because of:

1. Entry of investors at different time.2. Difference in amount of investments by the investors3. Redemptions/additional purchase done by investor4. Market scenario Eg If the model portfolio has investment in Infosys,

and the current view of the Fund Manager on Infosys is HOLD(and not

BUY), a new investor may not have Infosys in his portfolio.

Under PMS schemes the fund manager interaction also takes place. The

frequency depends on the size of the client portfolio and the Portfolio

Management Services provider. Bigger the portfolio, frequency of interaction is

more. Generally, the PMS provider arranges for fund manager interaction on a

quarterly/half yearly basis.


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Portfolio Management Services (PMS) Charges in ICICI

Bank:-

A PMS charges following fees. The charges are decided at the time ofinvestment and are vetted by the investor.

Entry LoadPMS schemes may have an entry load of 3%. It is charged at the

time of buying the PMS only.

Management Charges Every Portfolio Management Services scheme

charges Fund Management charges. Fund Management Charges may vary from

1% to 3% depending upon the PMS provider. It is charged on a quarterly basis

to the PMS account.

Profit SharingSome PMS schemes also have profit sharing arrangements (in

addition to the fixed fees), wherein the provider charges a certain amount of

fees/profit over the stipulated return generated in the fund. For Eg PMS X has

fixed charges of 2% plus a charge of 20% of fees for return generated above

15% in the year. In this case if the return generated in the year by the scheme is

25%, the fees charged by the PMS will be 2% + {(25%-15%)*20%}.

The Fees charged is different for every Portfolio Management Services provider

and for every scheme. It is advisable for the investor to check the charges of the

scheme.

Apart from the charges mentioned above, the PMS also charges the investors on

following counts as all the investments are done in the name of the investor:

Custodian Fee De mat Account opening charges Audit charges Transaction brokerage


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Taxation for Portfolio Management Services in ICICI

Bank:-

Any income from Portfolio Management Services account is a business

income. Unlike MF, PMS is not required to remain 65%+ invested in equity to

get equity taxation benefit. Each Portfolio Management Services account is in

the name of additional investor and so the tax treatment is done on an individual

investor level. Profit on the same can be considered as business income.( i.e

slab wise). Profit can be considered as Capital gains. [STCG (15%) or

LTCG(Tax free)]. It depends on clients Chartered Accountant or the assessing

officer how he treats this Income. The PMS provider sends an audited statement

at the end of the FY giving details of STCG and LTCG, it is on the client and

his CA to decide to treat it as capital gain or business income.


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PORTFOLIO MANAGEMENT SCHEMES (PMS) PRESENT

SCENARIO in ICICI Bank:-

The regulatory environment has totally changed now and with SEBI

fixing strict norms for companies launching PMS, only the serious players are

going to enter his business.The PMS members today have full transparency:

managers are required to maintain individual accounts showing all dealings in a

clients portfolio.

They must also advise him on all transactions. Secondly, all PMS

Managers have to send their clients at least a quarterly report giving the status

of their portfolio and the transactions that have taken place. The client-PMS

manager contract is as per SEBI ground rules.

It has several checks to protect investors interest like laying thecustodial

responsibility on the manager and preventing any alterations in the scheme

without the clients consent.Finally, managers have to send half-yearly reports

to SEBI on their portfolio management activities. Experienced handling of cash

and money power apart, PMS also takes care of a number of the headaches

endemic with investing in the markets. The biggest one is custodial services.

All PMS Managers act as custodians of shares and are responsible for

the load of paper work related to the share transfer, documentation work, postal

work and even ensuring that dividends are credited to clients account. SEBI

directives also put the onus on the PMS promoters to take follow-up action in

case shares are lost or damaged.


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Difficulties such as late transfer and postal theft are reduced incase of

brokers, because they not only have direct access to registrars but also have

branch offices to ensure quicker transfers. All these services come for a fee, of

course. While the actual PMS charges vary from a high of 7% of the amount

invested to a low of around 3.5%, follow-up services charges extra. As in all

schemes, there is a downside to putting cash into portfolio management as well.

The most important is the fact that despite all the SEBI checks. PMS

Managers are not allowed to assured any fixed returns. This really discharges

the managers for any responsibility if the scheme does badly. So investors have

to be very careful in choosing the promoters. Problem inherent in most schemes

on offer will be misused of investors funds to some extent. Funds collected

from investors will aid the brokers concerned in their own games in the market.


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Chapter 5

Portfolio Manager of ICICI Bank


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Portfolio Manager of ICICI Bank:-

A portfolio manager of icici bank is either a person who makes

investment decisions using money other people have placed under his or her

control or a person who manages a financial institution's asset and liability (loan

and deposit) portfolios. On the investments side, they work with a team of

analysts and researchers, and are ultimately responsible for establishing an

investment strategy, selecting appropriate investments and allocating each

investment properly for a fund- or asset-management vehicle.

Portfolio managers are presented with investment ideas from internal

buy-sideanalysts and sell-side analysts frominvestment banks.It is their job to

sift through the relevant information and use their judgment to buy and sell

securities. Throughout each day, they read reports, talk to company managers

and monitor industry and economic trends looking for the right company and

time to invest theportfolio'scapital.
http://en.m.wikipedia.org/wiki/Investmenthttp://en.m.wikipedia.org/wiki/Strategyhttp://en.m.wikipedia.org/wiki/Business_analysthttp://en.m.wikipedia.org/wiki/Investment_bankhttp://en.m.wikipedia.org/wiki/Security_%28finance%29http://en.m.wikipedia.org/wiki/Industryhttp://en.m.wikipedia.org/wiki/Economicshttp://en.m.wikipedia.org/wiki/Portfolio_%28finance%29http://en.m.wikipedia.org/wiki/Financial_capitalhttp://en.m.wikipedia.org/wiki/Financial_capitalhttp://en.m.wikipedia.org/wiki/Portfolio_%28finance%29http://en.m.wikipedia.org/wiki/Economicshttp://en.m.wikipedia.org/wiki/Industryhttp://en.m.wikipedia.org/wiki/Security_%28finance%29http://en.m.wikipedia.org/wiki/Investment_bankhttp://en.m.wikipedia.org/wiki/Business_analysthttp://en.m.wikipedia.org/wiki/Strategyhttp://en.m.wikipedia.org/wiki/Investment


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A team of analysts and researchers are ultimately responsible for

establishing an investment strategy, selecting appropriate investments and

allocating each investment properly for a fund or asset-management vehicle.

Portfolio managers make decisions about investment mix and policy, matching

investments to objectives, asset allocation for individuals and institutions, and

balancing risk against performance.

Portfolio management is about strengths, weaknesses, opportunities and

threats in the choice of debt vs. equity, domestic vs. international, growth vs.

safety, and other tradeoffs encountered in the attempt to maximize return at a

given appetite for risk.

In the case of mutual and exchange-traded funds (ETFs), there are two

forms of portfolio management: passive and active.Passive management simply

tracks a market index, commonly referred to as indexing or index investing.

Active management involves a single manager, co-managers, or a team ofmanagers who attempt to beat the market return by actively managing a fund's

portfolio through investment decisions based on research and decisions on

individual holdings.Closed-end funds are generally actively managed.
http://en.m.wikipedia.org/wiki/Strategyhttp://en.m.wikipedia.org/wiki/Passive_managementhttp://en.m.wikipedia.org/wiki/Closed-end_fundshttp://en.m.wikipedia.org/wiki/Closed-end_fundshttp://en.m.wikipedia.org/wiki/Passive_managementhttp://en.m.wikipedia.org/wiki/Strategy


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QUALITIES OF PORTFOLIO MANAGER of ICICI

Bank:-

1. Sound general knowledge:

Portfolio management in icici bank is an existing and challenging job.

He has to work in an extremely uncertain and conflicting environment.

In the stock market every new piece of information affects the value of the

securities of different industries in a different way.

He must be able to judge and predict the effects of the information he gets.

He must have sharp memory, alertness, fast intuition and self-confidence to

arrive at quick decisions.

2. Analytical Ability:

He must have his own theory to arrive at the value of the security.

An analysis of the securitys values, company, etc. is continues job of the

portfolio manager in icici bank.

A good analyst makes a good financial consultant.

The analyst can know the strengths, weakness, opportunities of the economy,

industry and the company.


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CODE OF CONDUCT- PORTFOLIO MANAGERS of

ICICI Bank:

1. A portfolio manager shall, in the conduct of his business, observe high

standards of integrity and fairness in all his dealings with his clients and other

portfolio managers.

2. The money received by a portfolio manager from a client for an investment

purpose should be deployed by the portfolio manager as soon as possible for

that purpose and money due and payable toa client should be paid forthwith.

3. A portfolio manager shall render at all time high standards of services

exercise due diligence, ensure proper care and exercise independent

professional judgment. The portfolio manager shall either avoid any conflict of

interest in his investment or disinvestments decision, or where any conflict of

interest arises; ensure fair treatment to all his customers. He shall disclose to the

clients, possible sources of conflict of duties and interest, while providing

unbiased services. A portfolio manager shall not place his interest above those

of his clients.

4. A portfolio manager shall not make any statement or become privy to any act,

practice or unfair competition, which is likely to be harmful to the interests of

other portfolio managers or it likely to place such other portfolio managers in a

disadvantageous position in relation to the portfolio manager himself, while

competing for or executing any assignment.

5. A portfolio manager shall not make any exaggerated statement, whether oral

or written, to the client either about the qualification or the capability to render


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certain services or his achievements in regard to services rendered to other

clients.

6. At the time of entering into a contract, the portfolio manager shall obtain in

writing from the client, his interest in various corporate bodies, which enables

him to obtain unpublished price-sensitive information of the body corporate.

7. A portfolio manager shall not disclose to any clients or press any confidential

information about his clients, which has come to his knowledge.

8. The portfolio manager shall where necessary and in the interest of the client

take adequate steps for registration of the transfer of the clients securities and

for claiming and receiving dividend, interest payment and other rights accruing

to the client. He shall also take necessary action for conversion of securities and

subscription of/or rights in accordance with the clients instruction.

9. Portfolio manager shall ensure that the investors are provided with true and

adequate information without making any misguiding or exaggerated claims

and are made aware of attendant risks before they take any investment decision.

10. He should render the best possible advice to the client having regard to the

clients needs and the environment, and his own professional skills.

11. Ensure that all professional dealings are affected in a prompt, efficient and

cost effective manner.


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Conditions to grant or renewal of certificate to portfolio

manager:

The board may grant or renew certificate to portfolio manager subject to the

following conditions namely:

a) The portfolio manager in case of any change in its status and constitution,

shall obtain prior permission of the board to carry on its activities;

b) He shall pay the amount of fees for registration or renewal, as the case may

be, in the manner provided in the regulations;

c) He shall make adequate steps for redressed of grievances of the clients within

one month of the date of receipt of the complaint and keep the board informed

about the number, nature and other particulars of the complaints received;

d) He shall abide by the rules and regulations made under the Act in respect of

the activities carried on by the portfolio manager.

Period of validity of the certificate.

The certificate of registration on its renewal, as the case may be, shall be valid

for a period of here years from the date of its issue to the portfolio manager.


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SECURITIES AND EXCHANGE BOARD OF INDIA

REGULATIONS, 1993

Registration of Portfolio Managers:

1. Application for grant of certificate

An app

banking portfolio management

Documents