portfolio & wealth management by- nikit sharma

7/29/2019 Portfolio & Wealth Management By- Nikit Sharma

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PORTFOLIO & WEALTH MANAGEMENT

A Dissertation Report

On


By

NIKIT SHARMA

13110

PGDM Batch of 2011-13

Under the Supervision of

Prof. (Dr.) K C Meher

Faculty

Department of Finance

In Partial Fulfillment of Post Graduate Diploma in Management

I.T.S- Institute of Management, Greater Noida

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DECLARATION

I hereby declare that this project entitled


is a record of

Independent work carried out by me under the guidance of

Prof. (Dr) K. C. Meher

As per the curriculum requirement of

Post Graduate Diploma in Management

of

I.T.S- Institute of Management, Greater Noida

Name: NIKIT SHARMA

Specialization: FINANCE

Enrollment No. : 13110

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COLLEGE CERTIFICATE

I.T.S- Institute of ManagementGreater Noida

This is to certify that Mr. NIKIT SHARMA has successfully

completed his DISSERTATION PROJECT title


AT

KOTAK MAHINDRA SECURITIES PVT. LTD.

In partial,

Fulfillment of the requirements ofP.G.D.M

P.G.D.M ( 2011-13 )

Prof. (Dr) K. C. Meher

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ACKNOWLEDGEMENT

This research was made possible as per the requirement of the P.G.D.M course under

I.T.S- Institute of Management, Greater Noida. Many individuals took interest and

were supportive of my efforts. In fact, many have given me their time generously and it

is not possible to mention all of them here and there act of goodness. I take the

opportunity to place and record my deep sense of gratitude to all who have helped me

in completion of my study.

I thank very sincerely the Kotak Mahindra Securities Pvt. Ltd. Brokers, Sub-brokers,

Portfolio Managers and Investors who contributed in a big way to see this project

become a reality.

I would be failing in my duties if I dont express my sincere gratitude to my parents

for their constant support and guidance.

My profound gratitude goes to my Collage Mentor Prof. (Dr) K. C. MEHER

with whose relentless guidance, encouragement and active cooperation, I am able to

complete this dissertation.

NIKIT SHARMA

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PREFACE

Even since the process of liberalization began in India, drastic changes have taken place

in the professional practices and requirements of merchants services, particularly in the

context of speeding up of economic and financial reforms.

Merchant banking today covers activities such as Issue management, Loan Syndication,

Corporate Counseling, Project Counseling, Lease Financing Portfolio Management etc.

Portfolio Management is very popular in Western countries. But, in India, not much

information is available regarding portfolio management services. Therefore, I

undertook this thesis in order to gain a greater insight into the field of portfolio

management services.

This research will enable us to know the various strategies and practice adopted by the

institutions offering Portfolio Management Services and resultant satisfaction level of

investors. It will help us to find out the awareness level of investors about various

parameters of portfolio management scheme and particularly the rate of return to the

investors.

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INDEX

S.No PAGE No. CONTENTS1. Acknowledgement

2. Preface

3. 8 Introduction

4. 15 Objectives & Scope

5. 16 Methodology

6. 18 Data Collection

7. 46 Data Analysis

8. 54 Findings9. 67 Recommendations

10. 59 Conclusion

11. 60 Appendix A

- Questionnaire Investor

12. 64 Appendix B

- Questionnaire -Brokers/Sub-Brokers

13. 66 Appendix C

Structured Interview - Investors

14. 67 Appendix D

Structured Interview - Brokers/Sub-Brokers

15. 68 Appendix E -

Bibliography

PROBLEM STATEMENT IN BRIEF

During the past decade or so, investors have had several problems some of which relate

to the need for identifying appropriate venues of investment. It is not an easy task

because of various factors like increased market volatility, requiring an understanding

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of risk - return parameters, larger direct and indirect costs of errors or shortfalls in

meeting portfolio objectives and increased competition.

As a response to the above problem, investment has become a highly professionalized

and sophisticated subject. Increasing use of computers and quantitative models and

availability of large amounts for investment have brought into picture specialized

agencies and financial institutions which handle large portfolios of high net worth

individuals through portfolio management schemes.

WHAT CONTRIBUTION IT WILL MAKE AND TO WHOM

The research is going to make maximum contribution to Kotak Mahindra Securities

Pvt. Ltd., which is planning to enter portfolio Management Services.

The company plans to diversify and enter Portfolio Management Services so that it can

counter the downtrend in income due to a slump in the capital market. Thus the

company needs to understand the investor preference so that it can also provide

guidance to high net worth individuals who propose to use Portfolio Management

Schemes for earning a satisfactory level of income from their funds.

BACKGROUND OF COMPANY IN BRIEF

The Kotak Mahindra Securities Pvt. Ltd. is SEBI approved category 1 Registrar and

Share Transfer Agent. The Company has so far handled 100 Public Issues and over 75

shares Transfer Company. Being a Finance company, which deals besides in share

activities, it arranges loans, working capital, and term loans, ECB etc. The company

desires to acquire a broker card so that it can start dealing in broking services and with

its already good established clients, it can relay on the business due to already available

expertise, this area is a natural choice for the company.

INTRODUCTION TO PORTFOLIO & WEALTH MANAGEMENT

Portfolio Management is a science for managing the varying combination of Portfolio

elements. These elements are the sub-components, of which the larger portfolio is

formed; say, the elements may be 'plans' for a portfolio of plans, or 'strategies' for

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portfolio of strategies, or 'securities' for a portfolio of securities, and so on. In general,

we may say that the elements of a portfolio are different forms of assets and in essence,

portfolio management is managing these assets. We shall henceforth refer to portfolio

management as the management of these assets. In particular, the scope of this report

has been focused to handle and discuss 'securities' as the typical sub-component of

portfolio of assets.

Portfolio Management represents today a scientific approach to managing the

investments and requires high professional, financial and investment expertise. It

differs from the usual portfolio analysis that we know of, which is based on intuition

and insight. The traditional portfolio management was a subjective approach, and even

though successful at many a times, did not drive itself with a uniform, consistent form

of analysis. This represented a problem for analysts to determine the reasons for other

decisions, and dissect the cause-and-effect relationships for investments and their

relative returns.

While maintaining the importance of the intuition and the insight given by experience

of a portfolio manager, our task now becomes that of providing him with modern tools

and techniques with which the investments can be managed in an efficient manner. It is

this view that urges us to explore the possibilities of making the task of the portfolio

manager easier.

IMPORTANCE OF PORTFOLIO MANAGEMENT

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Emergence of institutional investors on behalf of individual: A number of financial

institutions, Mutual funds and other agencies are rendering the task of investing

money on behalf of individual investors.

Growth in the number and size of ingestible funds: A large part of Household

savings is being directed towards financial assets.

Increased market Volatility: Risk and return parameters of financial assets are

continuously changing, because of changes in the Government's industrial and

fiscal policies and uncertainty and instability.

Infrastructure Investment: Greater use of computers for processing mass of data.

Professional insertion of the field and increasing use of analytical methods viz.

quantitative techniques in the investment decision making.

Large direct and indirect costs of errors or shortfalls in meeting portfolio objectives,

increased competition and greater scrutiny by the investors.

Despite its growing importance, the subject of portfolio management is new in our

country and is largely misunderstood.

ATTRIBUTES OF THE PORTFOLIO MANAGEMENT SERVICES

A Portfolio service offered by any firm can be evaluated on the basis of the following

attributes:

1. Promptness of Services 2. Quality & flexibility of services

3. Service charges 4. Track record of the company5. Minimum interest required 6.Database & computerization

7. Research division 8. Reporting

9. Networking 10.Simplicity of procedures

11. Broker card

PROCESS OF PORTFOLIO MANAGEMENT

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It has been believed that investing in shares and stocks is a very risky business. At

times, there is very little doubt that stock markets can be very treacherous with their

booms and busts. This risk however can be highly reduced by careful analysis and

selection of investments in securities. This is what the process of portfolio management

is all about. It is a scientific, analytical approach to security selection and maintenance,

so as to get maximum possible returns with minimum possible risk.

The various elements of the process of portfolio management are as discussed below.

The process begins with the identification of what the investors requirements are, in

order to establish what the optimal returns would be, to suit his requirements. The

investors profile guides us to the next step, where the allocation of his resources is to be

decided. This allocation has to provide for a fit to his requirements. Herewith, we

complete the two major ingredients of PM, which provide input an actual security

selection. Although the step of security selection is the 'proof of the pudding', the

process of PM does not stop here. Due to the dynamic market changes, it becomes

essential to change the portfolio in response to these changes so as to maintain optimal

returns. The portfolio of securities that has been selected is held for a certain period of

time, after which it needs to be evaluated. This is the step of checking the portfolio

performance - to see how it has faired over a period of time. This step provides aninsight into what improvements can be made within the portfolio. Thus, the process of

PM commences with finding the profile of the investor and ends with showing the

investor the results of his investment.

INVESTMENT POSSIBILITIES :

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In the last section we have discussed how investors may have different objectives. After

obtaining a clear picture regarding the investors requirements, we can go ahead and

explore the various options that we may have in fulfilling these objectives. The next

step in the process of PM requires us to understand the different categories of

investments, which can fulfill the above objectives.

RISK INVOLVED:

Risk of any security is variation of its returns. The greater the variation, the riskier is

the security. The risk ness of securities is usually measured by standard deviation of the

security returns. In the previous section, we have discussed the different categories of

stocks available to us. However, But before we move any further towards selection of

stocks, it is important to have an insight into what exactly is the risk associated with

each type of investment.

For our portfolio we will consider three major investment instruments:

1. Equities 2. Bonds

3. Money Market Instruments

EQUITIES :

There are basically two types of risks associated with equities:

1. Diversifiable risk 2.Non-diversifiable risk

DIVERSIFIABLE RISK :

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It is said that carrying all your eggs in one basket is not very good idea. It is too risky to

drop the basket and loose everything. Most people are risk averse i.e. they take risk

only if they feel there is a good reason for doing so. Investors do not like to take risk

and enormous reduction in risk is associated even with modest diversification.

Diversifiable risk is defined as the variability in security return on account of firm

specific risk factors. Diversifiable risk is also called avoidable risk because it is

possible to reduce or eliminate this component of risk to a considerable extent, by

investing in large number of securities. It is quite interesting to see how diversification

actually reduces the risk.

NON-DIVERSIFIABLE RISK :

The risk arising out of fluctuations in the market index is known as non-diversifiable or

market or systematic risk. This is measured by the factor BETA. Beta is defined as the

percentage change that can be expected in security price, with one percent change in

market index. This vulnerability of the script to the market factor is an important

dimension of risk. Investors are only rewarded for bearing this necessary component of

risk. The portfolio consisting of all securities, i.e. the market portfolio has a certain risk

associated with it.

This portfolio has a beta of '1'. This is the hypothetical portfolio, which ideally varies,

in direct proportion with the market index. For example, it assumes that the portfolio

shall do well in case of market boom and vice versa. Risk free securities whose return is

insensitive to market return has a beta '0'. Securities negatively related to market index

have beta '-1'. Thus the riskiness of the security is measured by its beta factor. Higher

the value of beta higher is the riskiness of the security. And generally, higher risk is

associated with higher returns. Therefore, the investor may be willing to take more risk

in lieu of higher returns.

BONDS :

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Similar to the equities, let us discuss the two types of risks associated with bonds:

1. Default risk 2.Interest rate risk

DEFAULT RISK :

On more than one occasion, companies have been seen to default on their interest and

principal obligation towards the investors. This fact associates a factor of risk which is

called 'default risk'. It refers to the likelihood that a firm will be unable to repay the

principal and the interest of a loan as agreed in the bond indenture. Credit risk is the

equivalent of this term for an individual investor. A wrong choice made regarding the

stability of the company may result into this becoming a major risk factor. Ratings of

various companies are available which facilitate proper selection. These ratings are

based on quantitative and qualitative analyses. Issues such as position of the company

in regards to growth, stagnation, decline, dependence of company on government

polices, dependence on economy as whole, technical stability, competence of company

management, etc. are considered in qualitative analyses. In quantitative analyses

various ratios like coverage, leverage, profitability etc. are evaluated. Thus, the rating

of the company gives a good picture of the stability of the company which can be very

beneficial in helping to make the correct choice. However, it is against advise to

investor is willing to bear, it is a practice to spread the investors funds over bonds

issued by a number of different issuers.

TECHNIQUES OF PORTFOLIO MANAGEMENT :

Various types of portfolio require different techniques to be adopted to achieve the

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

summarized in the following paragraphs.

EQUITY PORTFOLIO: - Equity portfolio is affected by internal and external

factors.

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I. Internal Factors: Pertain to the inner working of the particular company of

which equity shares are held. These factors generally include the financial data

and performance results of the company. The company's future growth plans are

analyzed with reference to the balance sheet and profit and loss accounts of the

company. Market value of shares, book value of shares, price earning ratio and

dividend pay out ratio, all should be evaluated and considered in the same

classification of industry. Income and capital gains should be devaluated with

reference to the applicable tax rates. Some persons take into consideration the

multiplies ratio based on the profits before tax (PBT) and the equity base. For

example, with Rs. 100 Lacks. PBT and Rs. 100 lakhs equity paid up the

multiplier. Ratio is 1:1 causing affect on market price to be twice the face value

of equity i.e., a share of Rs. 10 must be quoted at Rs. 20. Although it is a crude

way of doing equity analysis but it is still in use. Its use should be supplemented

by data on depreciation, investment allowance, taxation, dividend pay out ration

and bonus shares last issued by the company.

Identification of 'growth shares' and 'income share' is another technique adopted

for market price justification of a equity share. A growth share normally gives a

low yield on market price although dividend might be higher. On the other handincome share gives a higher yield, where dividend may be steady. Such shares

rarely show rapid appreciation in market value. Mostly the above factors affect

equity holdings. Investment in debentures and portfolio management in

debenture is also affected by above internal factors.

II. External factors - External factors include changes in Government policies,

norms prescribed by institutions, business environment, trade cycles, and

political situation inside and outside the country which affect the market price

of securities and influence the portfolio of different types of securities. Many

times changes in interest rate structure also affects the portfolio for fixed rate

and flexible return securities. Tax benefits and other fiscal incentives may also

be instrumental in portfolio diversification.

EQUITY STOCK ANALYSIS - The basic objective behind the analysis is to

determine the probable future value of the shares of the concerned company. Thisanalysis is carried out primarily under two ways, viz.:

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1. Earning per Share (EPS) 2.Price earning ratio (Market Price/EPS)

Earning Per Share (EPS): Reported profits provide the basis for projecting whatfuture earnings are likely to be. Analyst can estimate the probable trend of earnings per

share over a period of years in future through projections of sale volume, selling price

and costs etc and thus may plan the investment and manage equity portfolio. EPS is

calculated as under:- EPS = Profit after tax/No. of Equity Shares.

Price Earning ratio: Here, earning per share of equity is valued in the market reflecting

mainly the following viz.:

1. Trend of earning per share 2. The Quality of reported earnings;

3. Dividend policy 4.Quality of management

PER = Market Price of the Share / EPS.

A higher PER indicates the confidence of the market in general in the future if the

company

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OBJECTI VES:

To find out the awareness level of Investors about various parameters of

Portfolio Management Schemes. Particularly, the rate of return to the investor.

To investigate and determine the various strategies and practice adopted by the

institution offering Portfolio Management Services and the resultant satisfaction

level of investors.

SCOPE OF STUDY:

Scope of study for the dissertation is confirmed to:

a. Geographical Territory : Saharanpur.

b. Targeted Respondents :

1. Individual Investor

2. Brokers

3. Sub-Brokers

4.Professionals

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METHODOLOGY :

The methodology used to prepare this primarily consists of number of steps as give

below:

PRIMARY DATA :

Personal Meeting with portfolio managers, Brokers, Sub brokers and Investors.

Using two questionnaires - one for investors, and the other for brokers/sub-brokers

to get the desired information.

Contacted investors personally.

The questionnaire was kept as comprehensive and exhaustive as possible covering all

aspects of PMS potential clients for PMS & to get a clear picture of their perception of

PMS and their expectation as per the objective.

I decided to base my Thesis on my own findings thus used primarily PRIMARY DATA

which was collected by way of a number of meetings with portfolio managers, brokers,

sub-brokers and high net worth individuals to get result of Data analysis.

All the interviews were conducted personally. A lot of time was spent with each of the

Brokers/sub Brokers learning about their experience with PMS. Etc. A copy of the

questionnaire can be found in appendix.

In the second aspect of the project, 25 Investors were identified and approached as our

sample for analysis.

HNI's were identified with the help of our Data base of public issue of investors who

investors with large size applications. Some of the addresses were also obtained from

brokers. The HNI's sample consisted of professionals and businessmen. Most of them

were approached personally and questioned thoroughly on investing in general and

PMS in particular. A copy of the questionnaire can be found in Appendix A, B, C & D.

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SECONDARY DATA :

Study of the (very limited) literature available on portfolio management service,

which included magazine, financial newspapers and books on portfolio

management. I studied the various schemes of portfolio managers operating in

Delhi.

Visited number of libraries to collect the other related information.

Collected information on the various types of information based system, whichhelps portfolio managers.

Analysis of the information and data collected

The sample size proposed, used to analyze the information consisted of as follows:

1. Questionnaire

Sample SizeSample Composition

- Investors- Brokers & Sub Brokers

25

205

2. Structured Interview

Sample size- Investors

- Brokers/Sub-brokers

105

5

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PRIMARY DATA COLLECTION :

QUESTIONNAIRE :

All responses to my questionnaire (as per Appendix "A" & "B" enclosed) were

obtained through personal contacts using database of the company or visiting brokers

where I met these investors. The details of proposed & actual composition are given

below:-

Particulars Proposed composition Actual

composition

Questionnaire

Investors 20 25

Brokers/Sub-broker 5 10

Total 25 35

STRUCTURED INTERVIEW :

The detail of proposed & actual composition of the interviews (as per Appendix

'C' & 'D' enclosed) conducted is given below:-

Particulars Proposed composition ActualComposition

Interview

Investors 5 6

Brokers/Sub-broker 5 6

Total 10 12

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SUMMARY OF RESPONSES FROM INVESTORS :

SUMMARY

OPTIONS AND PERCENTAGE

Q.No A1 % A2 % A3 % A4 % A5 % A6 % Total %

I.Q.1 14 56 5 20 2 8 1 4 1 4 2 8 25 100

I.Q.2 11 44 12 48 2 8 - - - - - - 25 100

I.Q.3 9 36 3 12 10 40 1 4 2 8 - - 25 100

I.Q.4 5 20 14 56 4 16 2 8 - - - - 25 100

I.Q.5 5 20 11 44 9 36 - - - - - - 25 100

I.Q.6 13 52 3 12 3 12 6 24 - - - - 25 100

I.Q.7 17 68 3 12 2 8 3 12 - - - - 25 100

I.Q.8 1 4 6 24 13 52 5 20 - - - - 25 100

I.Q.9 5 20 13 52 3 12 4 16 - - - - 25 100

I.Q.10 1 4 4 16 20 80 - - - - - - 25 100

I.Q.11 15 60 5 20 2 8 2 8 1 4 - - 25 100I.Q.12 7 28 2 8 1 4 15 60 - - - - 25 100

I.Q.13 7 28 1 4 2 8 15 60 - - - - 25 100

I.Q.14 5 20 4 16 1 4 15 60 - - - - 25 100

I.Q.15 9 36 7 28 4 16 5 20 - - - - 25 100

I.Q.16 5 20 4 16 1 4 15 60 - - - - 25 100

I.Q.17 18 72 5 20 2 8 - - - - - - 25 100

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SUMMARY OF RESPONSES FROM INVESTORS

14

11

9

5

5

13

17

1

5

1

15

7

7

5

9

5

18

5

12

3

14

11

3

3

6

13

4

5

2

1

4

7

4

5

2

2

10

4

9

3

2

13

3

20

2

1

2

1

4

1

2

1

1

2

6

3

5

4

2

15

15

15

5

15

1

2

1

2

0 5 10 15 20 25

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

QUESTION

OPTIONS

A6

A5

A4

A3

A2

A1

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SUMMARY OF RESPONSE FROM BROKERS/SUB-BROKERS :

SUMMARY :

Q.No A1 % A2 % A3 % A4 % A5 % Total %

B.Q.1 - - - - - - - - 10 100 10 100

B.Q.2 1 10 8 80 1 10 - - - - 10 100

B.Q.3 1 10 6 60 2 20 1 10 - - 10 100

B.Q.4 - - 2 20 6 60 2 20 - - 10 100

B.Q.5 3 30 1 10 2 20 2 20 2 20 10 100

B.Q.6 4 40 6 60 - - - - - - 10 100

B.Q.7 4 40 2 20 2 20 2 20 - - 10 100

B.Q.8 4 40 3 30 2 20 1 10 - - 10 100

B.Q.9 4 40 4 40 2 20 - - - - 10 100

B.Q.10 - - - - - - -- - 10 100 10 100

B.Q.11 3 30 2 20 5 50 - - - - 10 100

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S U M M A R Y O F R E S P O N S E F R O M B R O

B R O K E R S

1

1

3

4

4

4

4

3

8

6

2

1

6

2

3

4

2

1

2

6

2

2

2

2

5

1

2

2

2

1

1 0

2

1 0

0 2 4 6 8 1 0 1 2

1

2

3

4

5

6

7

8

9

1 0

1 1

QUE

STIONS

O P T I O N

A 5

A 4

A 3

A 2

A 1

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INVESTORS DATA COLLECTION - PERSONAL PARTICULARS

Q.No Particulars Group Respondent %age

I.P.P.1 Age of Investors (Years) 18 & < = 30 2 8%

>30 & 53 & 65 4 16%

Total 25 100


I.P.P.2 Income Range

(Rs per month) of the

investors.

5000 & 10000 & 20000 & < 50000 3 12

>50000 & < 100000 6 24

> 100000 11 44

Total 25 100

Q.No Particulars Group Respond

ent

%age

I.P.P.3 Designation of Investor Supervisor 1 4

Lower Management 1 4

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Middle Management 8 32

Upper management 12 48

Non-working 3 12

Others - -

Total 25 100

Q.No Particulars Group Respo-

ndent

%age

I.P.P.4 Education of Investor Under-graduate 2 8

Graduate 10 40

Post-graduate 13 52

Total 25 100

INVESTORS DATA COLLECTION - MAIN QUESTIONNAIRE :


ents

%age

I.Q.1 Where do you invest your

resource & (majority)?

Stock Market 14 56

Debenture/FD 5 20

Real Estate 2 8

Gold 1 4

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Saving bank 1 4

Others 2 8

Total 25 100


ents

%age

I.Q.2 Are you familiar with the

portfolio manager schemes?

Very familiar 11 44

Somewhat familiar 12 48

Not familiar 2 8

Total 25 100


ents

%age

I.Q.3 How did you come to

know about the portfolio

management schemes?

Advertisement in

Newspapers

9 36

Advertisement in

Magazines

3 12

Friends & acquaintance 10 40

Direct Mail 1 4

Others 2 8

Total 25 100


ents

%age

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I.Q.4 What percentage of resources

you invest in

shares/debenture/FDs?

0 to 25% 5 20

25 to 50% 14 56

50% to 75% 4 16

More than 75% 2 8

Total 25 100


ents

%age

I.Q.5 Indicate the extent of risk in

investment that are you willing

to take?

Low 5 20

Medium 11 44

High 9 36

Total 25 100


ents

%age

I.Q.6 How comfortable are you

investing in the stock

market?

Very Comfortable 13 52

Somewhat comfortable 3 12

Not very comfortable 3 12

Very uncomfortable 6 24

Total 25 100

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ndents

%age

I.Q.7 What is your perception of the

stock market index (BSE

Sensex/Nisty) in the Long Run?

It will rise 17 68

It will fall 3 12

It will remain at

the same level

2 8

Can't say 3 12

Total 25 100


ndent

%age

I.Q.8 What is the percentage of

return per annum that you

expect on your Investment in

portfolio management services?

0 to 25% 1 4

25 to 50% 6 24

50% to 75% 13 52

More than 75% 5 20

Total 25 100

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ndent

%age

I.Q.9 What is the actual return per

annum you are getting?

0 to 25% 5 20

25 to 50% 13 52

30 to 75% 3 12

More than75% 4 16

Total 25 100


ndent

%age

I.Q.10 Since how long have been

investing in the stock

markets?

Less than 2 years 1 4

2 to 5 years 4 16

More than 5 years 20 80

Total 25 100


ndent

%age

I.Q.11 What is the amount (in Rupees)

that one would like to invest in

a portfolio management

services?

Up to 2 lacks 15 60

2 to 5 lacks 5 20

5 to 10 lacks 2 8

10 to 20 lacks 2 8

More than 20

lacks

1 4

Total 25 100

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ndent

%age

I.Q.12 What are you paying as

commission to portfolio service

providers?

0 - 5% 7 28

5 to 10% 2 8

10 - 20% 1 4

Not applicable 15 60

Total 25 100


ndent

%age

I.Q.13 Are/were you satisfied with the

return from the PMS?

Satisfied 7 28

Not Satisfied 1 4

Can't Say 2 8


Total 25 100


ndent

%age

I.Q.14 Are/were you satisfied with the

frequency and details of the

reports from the portfolio

management services?

Satisfied 5 20

Not Satisfied 4 16

Can't Say 1 4


Total 25 100

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ndent

%age

I.Q.15 What do you think are the most

important reasons for people to

invest in a portfolio


Capital gains 9 36

Steady income 7 28

Safety 4 16

Liquidity 5 20

Total 25 100


ndent

%age

I.Q.16 Would you prefer to shift your

portfolio from the present

manager to a mutual fund?

Yes 5 20

No 4 16

Can't Say 1 4


Total 25 100


ndent

%age

I.Q.17 Do you believe that a mutual

fund is a better portfolio

manager than an individual or a

firm?

Yes 18 72

No 5 20

Can't say 2 8

Total 25 100

BROKERS/SUB-BROKERS DATA COLLECTION PERSONAL

PARTICULARS

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ndent

%age

B.P.P.1 Age (years) of Brokers/Sub-

Brokers?

18 & < 30 1 10

>30 & 53 &


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Total 10 100


ndent

%age

B.Q.2 What is the average duration for

which clients request your

services?

1 year 1 10

1 - 2 year 6 60

2 - 5 year 2 20

Total 10 100


ndent

%age

B.Q.3 What is the %age of

investments you have made in

speculative securities?

0 - 25% 1 10

25 - 50% 6 60

50 - 75% 2 20

75 - 100% 1 10

Total 10 100


B.Q.4 On an Average,

what is the

minimum rate of

return you try to

get?

0 - 15% - 0

15 - 30% 2 20

30 45% 6 60

More than 50% 2 20

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Total 10 100


ndent

%age

B.Q.5 What are your fees as

professional portfolio

managers?

0 - 2 3 30

2 - 4 1 10

4 - 6 2 20

6 - 8 2 20

8 - 10 2 20

Total 10 100


B.Q.6 Do you have an

in-house research

center?

Yes 4 40

No 6 60

Total 10 100


B.Q.7 What is your expectation of the

stock market index (BSC

Sensex /Nifty) in the future?

It will rise 4 40

It will fall 2 20

Remain at the

present level

2 20

Can't say 2 20

Total 10 100

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ndent

%age

B.Q.8 Which segment does

your firm target for its

clients?

Businessman/

Corporates

4 40

Senior executives 3 30

NRIs 2 20

Retired Executives 1 10

Others - -

Total 10 100


ndent

%age

B.Q.9 What is the variety

in portfolios?

Common Portfolio for all

clients

4 40

Common portfolio for a class

of clients

4 40

Different portfolios for all

clients

2 20

Total 10 100


ndent

%age

B.Q.10 What is the average number of

scripts in a portfolio?

1 - 10 - -

10 - 15 - -

15 - 20 - -

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More than 20 - -

Can't Say 10 100

Total 10 100


ndent

%age

B.Q.11 Would you like to entrust a part

or whole of the funds available

with you to a mutual fund?

Yes 3 30

No 2 20

Can't Say 5 50

Total 10 100

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STRUCTURED INTERVIEW - INVESTORS

I have conducted interview in person and obtained following information from

interview about their investment habits and PMS in particular.

Ques. What According To You Is The Safest Means Of Investment Nowadays?

1. Fixed investment Instruments 2.FDS

3. Public Sector Bonds. 4. Saving Bank

5. Public Provident Funds 6.National Savings Certificates

7. Bonds of Financial Institution 8.Corporate Sector Bonds

9. UTI Scheme 10.Life Insurance Scheme

11. Provident Funds 12.Mutual Funds

Ques. What according to you is the most profitable means of investment

nowadays?

1. UTI-Schemes 2.Corporate Sector Bonds

3. Shares of Software Industries 4.Share of Pharmaceutical Sector

5. Taxation Schemes 6.First India MF

7. Alliananz Capital MF 8.Tata MF

9. Birla MF 10.SBI MF

11. TATA Young Citizen's Fund 12.Birla Advantage Fund

13. Kothari Pioneer Prima Plus

Ques. Have you even invested in a portfolio management scheme? Yes/No. if no

then why not?

1. Managing ones portfolio on their own and had never felt the need of handing

it to somebody else.

2. Never heard of the scheme

3. Unsure of credit worthiness

4.Reliability of their stocks in somebody's else hand was doubtful to them

5. Lot of failure of NBFCs

6.Number of public issues failure

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Ques. What qualities do you look for in a portfolio manager? List in order of

priority?

1. Honesty was most important. 2. Reliability and creditability of the PM.

3. Track record. 4. Safety of portfolio credit rating by CRA.

Ques. Which companies have you heard of that offer PMS?

1.Lloyds Finance Limited 2.Brisk Capital Market Services Ltd.

3. Escorts Financial Services Ltd. 4. Sterling Securities Ltd.

5. GE Capital Services Ltd. 6. HDFC Ltd.

7. SBI Capital 8.PNB Capital

9. HB Portfolio Leasing Ltd. 10. Profin Money Markets Ltd.

Ques. Would you consider investing money with a new portfolio service provider.

Yes/No? If No, then what would prompt you to invest in a new portfolio


1. Reliability & Superiority of Investment Performance .

2. Investment skills & Investment Research .

3. Understanding of Investor's needs

4. Quality of Post Sales Service

5. Financial Innovation

6. Additional add ons Service

7. How diversified is the Portfolio

8. Liquidity

9. Risks

10. Return

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STRUCTURED INTERVIEW - BROKERS/SUB-BROKERS

I have conducted the interview in person to obtain information from Brokers and Sub-

brokers. This was about how they are manages. Their clients and what kind of facilities

they are offering to their investors

Ques. Indicate the percentage of clients falling in the different age categories

25-35 Years 10% of all the clients fall in the age group of 25-35 years

35-50 year - 44% of all clients

50+ - 46% of all clients

This category had the highest number of individuals participating in Portfolio

Management schemes. The reason for this was :

I. People in this age group were at the top of their carriers and

hence could not devote as much time is making their investments as they

would how liked to ;

II. Investors in this category derived more emphasis on tax-planning

for which they wanted professional guidance.

Ques. On an average, what % of the portfolio asset allocation is done in?

Range Average

I. Fixed income securities 20-40% 30%

II. Shares

(a) Primary Market 10-20% 10

(b) Secondary Mkt 20-70% 45

III. Real Estate 10-20% 15%

IV. Money market 10-20% 10%

Ques. What is the range of investment that you have made in speculative

securities?

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Portfolio managers are willing to risk to achieve a greater return. The investment in

speculative securities range from 20% to 80%. However, Portfolio managers

(Brokers/Sub-Brokers) take 'calculated risk' i.e., they are aware of the risk levels. They

have understanding and are prepared for any eventuality. According to Portfolio

managers (Brokers/Sub-brokers) most investors seek their services when they are

willing to take calculated risk in order to get a greater return.

Ques. On an average, what is the minimum rate of return you try to get?

According to SEBI guidelines, Portfolio managers (Brokers/Sub-brokers/NBFC's) are

not allowed to promise a fixed rate of return. However, during the course of our

interview, we found out that the average rate of of return. Promoted varied from 30% to

50% per annum.

Ques. Which segment does the firm target for its clients?

1. Businessmen 2. Senior Executive

3. Retired Executives 4. NRIs

The senior Executive and High Network individuals are the major target area, next

comes the professionals like Doctors, Advocates, Architects and Engineers. The

common are of interest to professional is tax planning and safe deployment of funds in

avenues. That offer better return that of Government securities. Businessmen are not

very keen to invest in PMS. They need to offered special incentives in the form of

additional services for attracting interest in the schemes. NRIs prefer capital gain, NRIs

are also preferred lot but difficult to get their clientele. Retired segment too invest in

these schemes but only which offer steady & Regular Income on their investment.

They avoid speculative schemes.

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Ques. Does the company offer any guarantees of returns?

1. Written Guarantee 2.Verbal Guarantee

2. No Guarantee

No verbal or written guarantee is given to the clients; all of them have been able

to meet their target rate of return. SEBI guidelines do not allow any

NBFC's/Brokers/Sub-brokers/PMS to promise a fixed rate of return under these

types of scheme.

Ques. what is the variety in portfolios?

1. Common portfolio for calls all client

2. Common portfolio for a class of clients

3. Different portfolios for all clients

The scrips are held in the clients name by majority of the PMS/Brokers/Sub-

Broker due to Tax Planning, but are in the custody of the service providers.

Majority of them almost 50% keep common portfolio for all clients. Keep

common portfolio for a class of clients. High Networth clients (prefer only

custom portfolio 20%).

Ques. What according to the company are the prime motivators for the clients to

invest in a PMS?

The prime motivators for clients to invest in a PMS are gauged to be:

1. Track record of the company 2. Safety of money

3. High return of their investment 4. Professional advice5. Equity research 6. Tax planning

Ques. What according to the company is the awareness level of there portfolio

management schemes and which segment is most aware of PMS?

First all of them feel that the awareness level of PMS is good people are aware

of the advantages and till now a lot of 'market-development' work has to be

done. It has to be sold to the potential investors as a 'concept'.

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Ques. What are the strategies adopted to attract customers?

1. Word of mouth 2.Contacts of old customers

3. Advertisement 4. Tailor made schemes for high net worth individuals

5. Statement of Accounts. 6. Loan against shares

7. Tax advice 8. Periodicals and Newsletters

9. Direct mail to high net worth individuals and professionals

10. Reference letters of existing clients also used to woo potential clients

Ques. what is the method of evaluating a clients portfolio?

The company keeps 'Master Portfolio' which is used as a base to. Choose scrips for

individuals portfolio. On an average a portfolio is composed of 10-15 scrips which are

mostly fundamentally strong although speculative scrips are also chosen from time to

time. It normally takes more than 4 weeks to rationalize the clients portfolio. The

period may vary with changes in market condition. Most of them provide tax advice

and periodicals as add-ons.

Ques. How regularly is the portfolio monitored?

The portfolios are monitored daily and reports are sent to clients daily/

monthly/quarterly bases. Some keep their own master portfolio and keep checking

agent master portfolio to other. Service providers keep two type of services one

discretionary and non discretionary. It depends on the choice of the clients how they

want their portfolio to be monitored.

Ques. Does the company have its own broking ticket Yes/No?

60% of Brokers have their own tickets, who were surveyed.

Ques. What are the methods adopted for research?

1. Use of software packages 2.Meeting with company personnel

3. Economy & Industry analysis 4.Others

Different types of methods are adopted for Research majority software packages which

are updated Bi-weekly. They have their own research staffs who keep an eye on

company's. They meet company personnel on schedule basis to find about the

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company's performance. All of them subscribe to large number of magazines and

industry analysis reports. Few of them keep watch on Internet since nowadays, majority

of the company have their own web-site where the company's info is updated on

regular basis.

Ques .Which software are used for research and monitoring purposes?

1. Scriptech 2.Daltal Street

3. IDSS 4.Capital Line

5. Online software of BSE/NSE/DSE

Ques. With the present uncertain stock market conditions, what measures are

adopted to prevent the erosion of portfolio values?

Surviving of all requires a cool head. There are two golden rules everybody is

trying to follow that are:

Rule No (1) : Play Safe

Rule No (2) : Do not forget Rule No (1)

Everybody agree stock market these days have become highly unpredictable. So

most of them try to keep their portfolio with fundamentally strong scrips. As per

technical scrips are concerned they don't keep very long position, they try to

square them as fast as possible."An investor has to be some-where between the

two extremes choosing acceptable risk and optimal returns. When the trend is

clear it is advisable to take a few more risks". In these volatile markets, an

PMS/Investor should try and minimise his risk. He should pay more attention to

capital preservation and appreciation in the long run.

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SECONDARY DATA COLLECTION

S. No Particulars Sources

1. Mega Rich New Toys and Tastes India Today

2. STOCKZILA Business Today

3. Will the Rupee Float Business Today

4. BRAINS*GUTS*MEGA

BUCKS The Story of two young investors.

Business India

5. Playing it safe in 1999 Business World

6. Investing for the New Millennium Business India

7. Join the House Hunt The Economic Times

8. The Fine Art of Survival HT Investor

9. Save when you can, earn when you don't HT Investor

10. SHCIL-SHOCKED The ET

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DATA ANALYSIS

1. From the sample of Investor & brokers/sub-brokers interviewed several

facts about the investments environment in general and PMS inparticular were brought to light.

2. I have obtained 40 respondents against proposed sample of 25. I have

considered 35 responses (25 for investors & 10 for brokers/sub-brokers)

for my project and rejected 6 which were either incomplete or

misleading.

3. I have conducted 12 structured interview against (6 investors and 6

brokers/sub-brokers) sample proposed of 10.

ANALYSIS OF QUESTIONNAIRE (INVESTORS)

PERSONAL QUESTIONS

QUESTION NO I.

Out of 25 respondent to my questionnaire 8% (2 Nos) are from the age

group of 18 to 30 years; 52% (13 No) are from the age group of 30 to 53

years; 24 (6 No) are from the age group of 53 to 65 years; 16% (4 Nos)

are from age of more than 65 years . (I.P.P.1)

QUESTION NO. 2

Out of 25 respondents to my questionnaire 4% (1No) are from income

below 10000; 16% (4 Nos) are from income group of 10,000 and

20,000; 24% (6 Nos) are from income group of 50,000 and 100,000;

44% (11 Nos) are having income of more than 1,00,000 (I.P.P.2)

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QUESTION NO. 3

Out of 25 respondents 4% (1 No) are from supervisor category; 4% (1

Nos) are from lower management group; 32% (8 Nos) are from middle

management group; 44% (11 Nos) are from upper management ;

whereas only 12% (3Nos) are of them non-working. (I.P.P3)

QUESTION NO.4

Out of 25 respondents 8% (2 Nos) are of them are under-graduate; 40%

(10 Nos) are of them are graduate; 52% (13 Nos) are of them are post-

graduate.(I.P.P.4)

ANALYSIS OF MAIN QUESTIONNAIRE (INVESTORS)

QUESTION NO. 1

All the respondents had been investing in the stock markets, but as a

majority of their investment only 56% (14 Nos) have been investing in

stock markets; 20% (5 Nos) of them playing it safe investing in

debenture/FDS; 8% (2 Nos) of them investing in real estate; 4% (1 No)

investing in gold; 4% (1 No) in saving account; 8% (2Nos) in other

avenues. (I.Q.1)

QUESTION NO.2

Although all the respondents had been investing in the stock market only

44% (11 Nos) of them ere very familiar about portfolio management

schemes as a service; 48% (12 Nos) were somewhat familiar 8%; (2

Nos) were not familiar at all. (I.Q.2)

QUESTION NO.3

Out of 25 respondents 36% (9 Nos) of them come to know about the

PMS through advertisement in newspapers; 12% (3 Nos) of them come

to know about the PMS through advertisement in magazines; A large %

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that is 40% (10 Nos) come to know from friends and acquaintance; 4%

(1 Nos) come to know from direct mail; 8% (2 Nos) fall in other

categories (which may also mean that they may not be aware at all.)

(I.Q.3)

QUESTION NO.4

People love to be safe which reflect in this analysis that is 76% (19 Nos

of them invest less than 50% of resources in shares/Debentures/FDs).

So 20% (5 Nos) invest less than 25% resources in shares/Deb/FDs; 56%

(4 Nos) of them between 25 to 50% of resources in shares/Deb/FDs;

16% (4 Nos) of them invest between 50 to 75%; whereas only 8% (2

Nos) invest more than 75% of resources in shares/Deb/FDs.(I.Q.4)

QUESTION NO.5

Out of 25 respondent 20% (5 Nos) opt for low risk; 44% (11 Nos) prefer

medium risk; 36% (9 Nos) indulge in speculative/ high risk securities.

(I.Q.5)

QUESTION NO .6

From the ample of Investors interviewed 52% (13Nos) are very

comfortable in investing in stock market; 125 (3 Nos) are somewhat

comfortable; 125 (3 Nos ) are not very comfortable ; 24% (6 Nos) are

not at all comfortable.(I.Q.6)

QESTION NO .7

After the budget 1999-2000 announcement, market turned bullish, so the

perception of the investors. 68% (17 Nos) believe that the market will

rise in the long run; 12% (3 Nos) believe that the market will fall; 8% (2

Nos) believe that the market will remain at the same level; 12 % (2

Nos ) could not it. (I.Q.7)

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QUESTION NO.8

Every one wants good return in their investment which is reflected on

the outcome in the questionnaire. 4% (1 No) is looking at below 25 %;

whereas 52% (13 Nos) desire returns between 50 to 75%; 20% (5 Nos)

also desire return above 75 %.(I.Q.8)

QUESTION NO.9

Actual return is somewhat different than the future expectation. 20% (5

Nos) are getting it below 25%; 52% ( 13 Nos ) are getting it below 50%

( which is normally around 30%); 12 % ( 3 Nos are getting between 50

to 75 %; 4% ( 1 No) are getting it above 75%. (I.Q.9)

QUESTION NO .10

All the respondents had been investing in the stock markets, 80% (20

Nos) of them for more than 5 years; 16% (4Nos) between 2 to 5 years;

4% (1 No) have been investing for than less a year.(I.Q.10)

QUESTION NO.11

The range for investments one would like to make in PMS varied from a

less than Rs. 2 lacs to a more than 20 lacs. 60% (15 Nos) is interested in

upto 2 lacs; 20% (5 Nos) Between 2 to 5 lacs; 8% (2 Nos ) between 5 to

10 lacs; 8% (2 Nos ) between 10 to 20 lacs; whereas only 4% (1 Nos) is

interested in more than 20 lacs;(I.Q.11)

QUESTION NO .12

Commission is a tricky area, Charges are up to 20 to 28% (7Nos) are

paying commission up to 5% (70% of those investing in PMS); 8% (2

Nos ) are paying between 5 to 10% ( 20% of those investing in PMS);

4% ( 1Nos) paying commission between 10 to 20 % (10% of those

investing in PMS); 40% Of the persons interviewed are only investing in

PMS.(I.Q.12)

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QUESTION NO..13

28% ( 7 Nos ) are satisfied about the returns from PMS (70% of those

investing in PMS); 4% (1 No) are Not satisfied (10% of those investing

in PMS); 8% (2 Nos) where not clear about it (20% of those investing in

PMS); 40% of the persons interviewed are only investing in PMS.

(I.Q.13)

QUESTION NO.14

20% (5 Nos) are satisfied about the reports from PMS (50% of those

investing in PMS); 16% (4 Nos) are not satisfied about the reports being

sent to them (40% of those investing in PMS); 4% (1 Nos) are clear

about it (10% of those investing in PMS); 40% of the persons

interviewed are only investing in PMS. (I.Q.14)

QUESTION NO .15

As far as the important reasons for people to invest in a PMS, the

responses were capital gains - 36% (9 Nos); steady income - 28% (7

Nos); safety - 16% (4 Nos); liquidity - 20% (5 Nos). Thus capital

appreciation in the form of return is the critical factor.(I.Q.15)

QUESTION NO.16

Those investing in PMS (40% of the respondents) 20% (5 Nos) are

willing to change (50% of those investing in PMS); 16% (4 Nos) are not

interested in change (40% of those investing in PMS); 4% (1 Nos) are

not sure of their mind (10% of those investing in PMS).(I.Q.16)

QUESTION NO.17

72% (18 Nos) believe that a mutual fund is a better place to invest in

than the firm or individual; 20% (5 Nos) believe it that the individual

can manage his fund better than the PMS; 8% (2 Nos are not sure it).

(I.Q.17)

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ANALYSIS OF QUESTIONNAIRE [BROKERS/SUB-BROKERS]:

PERSONAL QUESTIONS

QUESTION NO .1

Out of 10 respondent to my questionnaire 10% (1 Nos) are from the age

group of 18 to 30 years; 50% (5 Nos) are from the age group of 30 to 53

years; 20% (2 Nos) are from the age group of 53 to 65 years; 20% (2

Nos) are from age of more than 65 years.(B.P.P1)

QUETSTION NO .2

60% (6 Nos) of those interviewed are brokers and 40% (4 Nos) are sub-

brokers. (B.P.P.2)

QUESTION NO .1

100% (10 Nos) respondents refused to disclose the figure of their clients.

(B.Q.1)

QUESTION NO.2

The minimum time for which funds are accepted by portfolio managers

is 1 year. Based on the performance of the portfolio manager, the clients

may ask for the renewal of the contract. On an average, clients request

the services for 1- years to 2 years. As per interview 10% (1 No) of

them remain as clients; 80% (8 Nos) of them stated that the clients

remain with them between 1-2 years. 10% (1 No) stated that the clients

remain with them between 2-5 yeas. (B.Q.2)

QUESTION NO.3

10% (1 No) invest upto 25% of their investment in speculative

securities; 60% (6 Nos) Brokers/Sub-brokers invest about 25-50% of

their investments in speculative securities; 20% (2 Nos) invest between

50-75% of their funds in speculative securities; 20% (2 Nos) of them

invest more than 75% in speculative securities. (B.Q.3)

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QUESTION NO .4

20% (2 Nos) try to get between 15-30% of rate of return; where as 60%

(6 Nos) try to get between 30-45% of rate of return; only 20% (2 Nos)

try to get above 50 % (B.Q.4)

QUESTION NO.5

30% (3 Nos) of Brokers/Sub-brokers charge upto 2% of commission on

their investment; 10% (1 No) charge between 2-4% of commission; 20%

(2 Nos) charge between 4-6% of commission; 20% (2 Nos) charge

between 6-8% of commission; 20% (2 Nos) charge between 8-10% of

commission.(B.Q.5)

QUESTION No.6

60% (6 Nos) of them have in-house research center for their activities

whereas 40% (4 Nos) of them don't have it. (B.Q.6)

QUESTION NO .7

40% (4 Nos) believe that the market will rise; 20% (2 Nos) believe that

the market will fall; 20% (2Nos) believe that the market will remain at

the same level; 10% (1No) could not predict it. (B.Q.7)

QUESTION NO .8

40% (4Nos) target businessman/corporate clients; 30% (3Nos) target

senior executive; 20% (2Nos) target NRIs; 10% (1No) target retired

executives; 10% (1No) target others. (B.Q.8)

QUESTION NO .9

40% (4Nos) of respondents confirm that they keep common portfolio for

all clients; 40% (4 Nos) keep common portfolio for a class of clients;

20% (2Nos) keep different portfolios for all clients. (B.Q.9)

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QUESTION NO .10

100% (10 Nos) respondents refused to disclose the figure of their scripts

in their portfolios.(B.Q.10)

QUESTION NO .11

30% (3 Nos) of brokers/sub-brokers said that they would like to invest

part of their funds in Mutual funds; 20% (2Nos) said against it; 50% (5

Nos of them were not sure, whether they would invest in Mutual funds

(B.Q.11)

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FINDINGS OF THE DISSERTATION :

The awareness level of investors about various portfolio management scheme is

good.44% are very familiar about portfolio management schemes & 48% are

somewhat familiar about various PM schemes. This takes the both the category

to 92% (44+48).92% (44% through advertisement in newspaper + 12% through

magazines + 40% through Friends & acquaintance + 4% through Direct Mail)

of respondent are aware of various portfolio management schemes. Awareness

level of investor about various parameters of portfolio. 92% believe a mutual

fund is a better place to invest than firm or individual.

From the structured interview conducted on Investors we found that the

Majority of the investor are aware of institutions offering different portfolio

management schemes. This fact is again confirmed when the investor listed of

qualifies. The qualities in priority):

1. Honesty in dealing was most important. 2 Reputations.

3. Track Record. 4. Safety of Portfolio.

5. High Return. 6. Word of mouth & friends are given a lot of weight age.

It has been found out by about facts that the level of awareness level is good is

being confirmed by fact, that we have now 252 mutual fund schemes are

operating having very large following of investors. They have been faring better

than individual investor. Since they are professionally managed than individual

investor. They have large amount of investible investment at their disposal and

can command market. Recently India investment fund -98 resulted in $4 billionof collection. The portfolio fund manager are performing better can be

reinforced by secondary data that have collected. Business world - 22 December

1998 - Page No 30 - 33). TATA young citizens fund had returns of 20.05%,

Birla advantage fund had 33.13% returns, Kothani Pioneer prima plus had

26.63% returns, Sun F&C value fund had an appreciation of 23.5%.

52% are getting return in the range of 25% - 50% & 12% are getting it between

50 - 75% ; 4% are even getting above 75%.People believe that mutual funds are

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good investment place, which offers better return than even the Sensex which

had negative return of -18.05% last year. Where good mutual funds had returns

between 20% - 22% (Business world, 22 December page No 30.Capital gains

(36%) is the most important reasons for people to invest in a portfolio

management services. Even though the markets are not stable & moving in

either direction violently, portfolio management service providers have been

able to generate good returns.

The data collected from Brokers and sub-brokers on various parameter of PMS,

we found that they variety of portfolio schemes for their clients , 40% keep

same portfolio for their clients and 40% keep portfolio for a class of client as

same and 20% provide tailor made portfolio schemes for their clients who are

having high net worth. Portfolio management services target mainly

businessmen and corporate. Senior executives, which includes (70% of

respondents) 40%+30%) which has been again highlighted in structured

interview. Businessmen are most difficult to get. To of them PMS has to offer

special incentives in the form of additional services.

PMS/Brokers/Services providers adopt different strategies to attract their

clients. Some offers tailor made schemes, some use contacts of old customers.

They offer different types of services to the old clients such as loan against

shares, tax advices, periodicals & Newsletter, To attract clients they use

advertisements, direct mail reference letter of existing clients even word of

mouth plays important role.

70% of those investing in the portfolio management schemes feels satisfied and

only 10% do not feel satisfied. Even the reports that they are receiving, 50% are

satisfied and 40% are not satisfied about the reporting. 72% of those investing

in stock market feel that a mutual fund is a better portfolio manager than an

individual or a firm, this exposes acceptance level of PMS by investors. It all

depends how you woo your clients & what kind of services you are offering &

how you are targeting your clients.

It has been found out by above facts that the level of awareness level is good

can be confirmed by facts that we have 252 mutual fund schemes operating in

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the country reinforces they believe. They have been faring better than most

individual investor and outperforming the Sensex , Nifty. This is due to their

being professionally managed. They have large funds at their disposed. They

have all sorts of research facilitate at their end. They are using latest software

packages to predict future better than average investor. They even visit

corporate houses and meet them personally to check for performance level of

corporation. Now days most of them are hooked on to the internet for latest

information on time to act fast and get better return for their clients. Due to

professional environment, they keep on innovating ideas to attract new

customers. They adopt various strategies to woo clients by offering better

services than their competitors. Because of all these reason and others,

customers are satisfied about the various parameters of PMS.

My findings on Rate of Returns are being matched by secondary data where it is

given that 70-80% of investment is invested high return securities. Safety and

security of investment is 2nd major consideration, though there is difference of

opinion about how much PMS are investing in speculative securities. PMS are

investing 60% (playing it safe, 22 Dec '1998) of funds in shares is being

reinforced from secondary data. PMS are getting good returns are crossed

conformed by secondary data (playing it safe, 22 Dec '1998).

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RECOMMENDATION S

1. The research has found that rate of return, capital gain and steady income taking

into consideration the various attributes much, Honesty in dealers as mostimportant. Reputation Track Record of PM are the most important reasons for

people to invest in a portfolio management services.

2. What clients require is a package of services including tax planning &

professional advices for their resources. If PMS is sold along with other services

offered by a finance company, the number of takers would be substantial. This

would help build a long term sustained relationship with customers.

3. PMS could be positioned separately for different segments. This calls for

scientifically designed 'NICHE MARKETING' strategy targeted at offering

specialized services to each segment.

4. Clients would not mind paying higher service charges. What matters to them

utmost is the manner their portfolio is handled and services rendered. Apart

from professional advice, ethics, timeliness of services and value for money is

expected at large.

5. Most investors are shy because of some past losses suffered in the stock market

gamble or became PMS restricts itself from offering any guarantee of returns.

An effort to evoke trust based on the repute and track record of the company

needs to be put to break the shell of investor conservatism.

6. The study observed various parameters of investment affecting investors and

brokers and sub-brokers who are offering investment services including PMS. It

is recommended that Kotak Mahindra Securities Pvt. Ltd.services who are

already in the field of financial services and offer services as loan arrangement,

ECB, working capital arrangement and Term Loans have large no of corporate

clients and have dealings with high net worth individuals and senior executives

of the corporates can easily get into the area of PMS. Besides this it has huge

database of high-end investor and NRIs who invest in Indian prime markets and

those who are already investors in the secondary market (from the data base ofshare transfer operation). All it needs to do is buy a BSE/NSE on-line terminal

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and buy softwares which helps in research of securities. It does not require

professionals who will be taking care those services since the directors of Kotak

are from Banking segment, who have more than 25 years of experience. It need

not get into NBFC's footprint since NBFC's not in favour with public. All it

needs to achieve superior performance, it has to be different from the majority.

It needs to discover and exploit exploit other PMS mistaken. As it is known fact

no money manager can perform successful in all kinds of market. It has to find

its own base and acceptable segment since there is no man for all seasons.

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CONCLUSION

Portfolio management as a concept is catching up in India, but there are segments that

are still not aware of it. Some investors have burnt their fingers on more than oneoccasion because professional Investment help was not available with more and more

companies taping the capital market, the investor is still ill equipped to handle the

complexities of stock trading while mutual funds also amount to professional help in

investing portfolio services are highly customized and personalized to suit each

individuals set of priorities and needs. The portfolio manager under a power of attorney

does all transactions in the individuals name.

A portfolio manager does not guarantee run away profits as profits would be generally

proportionate to the risk that is undertaken. Todays investor by and large has three

major choice one has the choice of the mutual funds, two he can play on the primary

market if he can assess it and three he has, be shrewd enough know the secondary

market information imparted to investors helps them to shuffle their choice of

portfolios. If an investor has the time and ability to analyze his own portfolio, he does

do. He is prepared to take the risk or else he approached somebody. In India this

realization will come once existing schemes have published their results.

The existing players have not reported. Their performance as this aspect is done. A

reasonable corpus to manage a portfolio has to make PMS attractive but the PMS has to

create and strengthen a good research and analytical division. It will still take some

time before Indian portfolio managers are able to offer schemes graded or risk like in

the international markets.

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APPENDIX A

INVESTOR QUESTIONNAIRE

PERSONAL QUESTIONS

Q.I.P.P.1. How old are you?

1. 18 & 30 & 53 & 50,000 & < 1, 00,000 6. > 1, 00,000

Q.I.P.P.3. What is your current designation?

1. Supervisor 2. Lower Management

3. Middle Management 4. Upper management

5.Nonworking 6. Others

Q.I.P.P.4.What is your educational qualification?1. Under-graduate 2. Graduate

3. Post-graduate 4. other

MAIN QUESTIONNARE

Q. I.Q.1.Where do you invest your resource & (majority)?

1. Stock Market 2. Debenture /FDs

3. Real Estate 4. Gold5. Saving bank 6. Others

Q. I.Q.2. Are you familiar with the portfolio manager schemes?

1. Very familiar 2. Somewhat familiar

3.Not familiar

I.Q.3. How did you come to know about the portfolio management schemes?

1. Advertisement in Newspapers 2. Advertisement in Magazines

3. Friends & acquaintance 4. Direct Mail5. others

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I.Q.4. What percentage of resources you invest in shares/debenture/ FDs?

1. 0 to 25% 2. 25 to 50

3. 50% to 75% 4. More than 75%

I.Q.5. Indicate the extent of risk in investment that are you willing to take?

1. Low 2. Medium

3. High

I.Q.6. How comfortable are you investing in the stock market?

1. Very Comfortable. 2. Somewhat comfortable

3.Not very comfortable 4. Very uncomfortable

I.Q.7. What is your perception of the stock market index (BSE Sensex/Nifty) in the

Long Run?

1. It will rise 2. It will fall

3. It will remain at the same level 4. Can't say

I.Q.8 What is the percentage of return per annum that you expect on your Investment in

Portfolio management services?

1. 0 to 25% 2. 25 to 50%

3. 50% to 75% 4. More than 75%

I.Q.9. What is the actual return per annum you are getting?

1. 0 to 25% 2. 25 to 50%

3. 30 to 75%. 4. More than75%

I.Q.10. Since how long has been investing in the stock markets?

1. Less than 2 years 2. 2 to 5 years

3. More than 5 years

I.Q.11. What is the amount (in Rupees) that one would like to invest in a portfolio


1. Upto 2 lacs 2. 2 to 5 lacs

3. 5 to 10 lacs 4. 10 to 20 lacs

5. More than 20 lacs.

I.Q.12. What are you paying as commission to portfolio service providers?

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1. . 0 - 5%. 2. . 5 to 10%

3. 10 - 20% 4. .Not applicable

I.Q.13. Are/were you satisfied with the return from the PMS?

1. Satisfied 2.Not Satisfied3. Can't Say 4.Not applicable

I.Q.14. Are/were you satisfied with the frequency and details of the reports from the


1. Satisfied 2.Not Satisfied

3. Can't Say 4.Not applicable

I.Q.15. What do you think are the most important reasons for people to invest in a


1. Capital gains 2. Steady income

3. Safety 4. Liquidity

I.Q.16. Would you prefer to shift your portfolio from the present manager to a mutual

fund?

1. Yes 2.No

3. Can't Say 4.Not applicable

I.Q.17. Do you believe that a mutual fund is a better portfolio manager than an

individual or a firm?

1. Yes 2.No

3. Can't say

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APPENDIX B

BROKERS/SUB BROKERS QUESTIONNAIRE

PERSONAL QUESTIONS

B.P.P.1. Age (years) of Brokers/Sub-Brokers?

1. 18 & < 30

3. >30 & 53 &


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5. Can't say

B.Q.2. What is the average duration for which clients request your services?

1. 1 year 2. 1 - 2 year

3. 2 - 5 year

B.Q.3. What is the %age of investments you have made in speculative securities?

1. 0 - 25% 2. 25 - 50%

3. 50 - 75% 4. 75 - 100%

B.Q.4. On an Average, what is the minimum rate of return you try to get?

1. . 0 - 15% 2. 15 - 30%

3. 30 - 45% 4. More than 50%

B.Q.5. What are your fees as professional portfolio managers?

1. 0 2 2. 2 4

3. 4 6 4. 6 8

5. 8 10

B.Q.6. Do you have an in-house research center?

1. Yes 2.No

B.Q.7. What is your expectation of the stock market index (BSC Sensex /Nifty) in the

future?

1. . It will rise 2. It will fall

3. Remain at the present level 4. Can't say

B.Q.8. Which segment does your firm target for its clients?

1. Businessman/ Corporate 2. Senior Executives

3.NRIs 4. Retired Executives5. Others

B.Q.9. What is the variety in portfolios?

1. Common Portfolio for all clients 2. Common portfolio class of clients

3. Different portfolios for all clients

B.Q.10. What is the average number of scripts in a portfolio?

1. 1 10 2. 10 15

3. 15 20 4. More than 20.

5. Can't Say

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B.Q.11. Would you like to entrust a part or whole of the funds available with you to a

mutual fund?

1. Yes 2.No

3. Can't Say

APPENDIX C

STRUCTURED INTERVIEW INVESTORS

1. What according to you is the safest means of investment nowadays?

2. What according to you is the most profitable means of investment nowadays?

3. Have you even invested in a portfolio management scheme? Yes/No. if no then

why not?

4. What qualities do you look for in a portfolio manager? List in order of priority.

5. Which companies have you heard of that offer PMS?6. Would you consider investing money with a new portfolio service provider.

Yes/No? If No, then what would prompt you to invest in a new portfolio


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APPENDIX D

STRUCTURED INTERVIEW - BROKERS/SUB-BROKERS

1. Indicate the percentage of clients falling in the different age categories?

2. On an average, what % of the portfolio asset allocation is done in?

3. What is the range of investment that you have made in speculative securities?

4. On an average, what is the minimum rate of return you try to get?

5. Which segment does the firm target for its clients?

6. Does the company offer any guarantees of returns?

7. What is the variety in portfolios?

8. What according to the company are the prime motivators for the clients to

invest in a PMS?

9. What according to the company is the awareness level of there portfolio

management schemes and which segment is most aware of PMS?

10. What are the strategies adopted to attract customers?

11. What is the method of evaluating a clients portfolio?

12. How regularly is the portfolio monitored?

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13. Does the company have its own broking ticket Yes/No?

14. What are the methods adopted for research?

15. Which software are used for research and monitoring purposes?

16. With the present uncertain stock market conditions, what measures are adopted to

prevent the erosion of portfolio values

APPENDIX E

BIBLIOGRAPHY

1. The Investment Game - How to win. Prasanna Chandra

2. One upon Wall Street - Peter Lynch

3. Portfolio Management Handbook - Rebert A. Strong

4. Security Analysis and Portfolio Management - Donald E. Fishcer, Ronald J.

Jordan

5. Portfolio Management - S.K. Barua, V. Raghunathan, J.R. Varma

6. Investment and Securities Markets in India - V.A. Avadhani

7. Prime Directory 1998 - Prithvi Haldea

8. Magazines

a. Business India b.Business Today

c. Capital Market d Dalal Street Journal

e. Newspapers f. Economic Times

g. Business Standard

9. WEB SITES

Registrar & Transfer Agents

www.karvy.com www.camsonline.com

Mutual Funds

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http://www.karvy.com/http://www.camsonline.com/http://www.karvy.com/http://www.camsonline.com/


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www.kotharipioneer.com www.pruiciciamc.com

www.birlamutual.com www.sbimf.com

www.dundeefunds-India.com www.kotak.com

www.utittrustofindia.com

NBFCs

www.birlaglobat.com

www.www.kotakmahindra.com

www.hdfc-India.com

Finance portals

www.walletwatch.com www.stockpulse.com

www.equitymaster.com www.indiainvest.com

Insurance

www.licofindia.com

Stock Exchanges

www.nse-India.com www.bseindia.com

Credit Rating Agencies

www.icra.com www.crisil.com

Financial Institutions

www.icici.com www.idbi.com

Government

www.reservebank.com www.sebi.gov.in

www.nic.in

Banks

www.icicibank.com www.bankofpunjab.com

www.statebankofindia.com www.witcapital.com
http://www.kotharipioneer.com/http://www.pruiciciamc.com/http://www.birlamutual.com/http://www.sbimf.com/http://www.dundeefunds-india.com/http://www.kotak.com/http://www.utittrustofindia.com/http://www.birlaglobat.com/http://www.www.kotakmahindra.com/http://www.hdfc-india.com/http://www.walletwatch.com/http://www.stockpulse.com/http://www.equitymaster.com/http://www.indiainvest.com/http://www.licofindia.com/http://www.nse-india.com/http://www.nse-india.com/http://www.bseindia.com/http://www.icra.com/http://www.crisil.com/http://www.icici.com/http://www.icici.com/http://www.idbi.com/http://www.reservebank.com/http://www.sebi.gov.in/http://www.nic.in/http://www.icicibank.com/http://www.bankofpunjab.com/http://www.statebankofindia.com/http://www.witcapital.com/http://www.kotharipioneer.com/http://www.pruiciciamc.com/http://www.birlamutual.com/http://www.sbimf.com/http://www.dundeefunds-india.com/http://www.kotak.com/http://www.utittrustofindia.com/http://www.birlaglobat.com/http://www.www.kotakmahindra.com/http://www.hdfc-india.com/http://www.walletwatch.com/http://www.stockpulse.com/http://www.equitymaster.com/http://www.indiainvest.com/http://www.licofindia.com/http://www.nse-india.com/http://www.bseindia.com/http://www.icra.com/http://www.crisil.com/http://www.icici.com/http://www.idbi.com/http://www.reservebank.com/http://www.sebi.gov.in/http://www.nic.in/http://www.icicibank.com/http://www.bankofpunjab.com/http://www.statebankofindia.com/http://www.witcapital.com/

portfolio & wealth management by- nikit sharma

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