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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). There is growing competition between brokerage firms in post reform India. For investor it is always difficult to decide which brokerage firm to choose.

INTRODUCTION TO PORTFOLIO MANAGEMENT

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 optimally combining securities into portfolios. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success. Portfolio is none other than Basket of Stocks. Portfolio Management is 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.

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 to get 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 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.

DEFINITION
The process of managing the assets of a mutual fund, including choosing and monitoring appropriate investments and allocating the funds accordingly.

Portfolio management is the process of clarifying, prioritizing, and selecting the projects an organization wishes to pursue. It evaluates and prioritizes the features targeted for inclusion in specific product releases. It encompasses techniques to ensure the projects and feature sets are aligned with business objectives, that technical impacts are well understood, and that product releases include the highest value features. A strong portfolio management process enables organizations to effectively and efficiently determine which projects and features provide the most significant return on investment. It aids technology-selection decisions, provides guidance to on going architecture work, enables capacity planning, and informs development decisions. The lack of an effective process can reduce the desirability of the end product because guidance on priorities is not shared throughout the organization. It can reduce development productivity because significant time, effort, and money is spent making decisions about priorities in the early or even the mid to late stages of a project. Portfolio is a collection of asset. The asset may be physical or financial like Shares Bonds, Debentures, and Preference Shares etc. The individual investor or a fund manager would not like to put all his money in the shares of one company, for that would amount to great risk. Main objective is to maximize portfolio return and at the same time minimizing the portfolio risk by diversification. Portfolio management is the management of various financial assets, which comprise the portfolio. According to Securities and Exchange Board of India (Portfolio manager) Rules, 1993; portfolio means the total holding of securities belonging to any person; Designing portfolios to suit investor requirement often involves making several projections regarding the future, based on the current information. When the actual situation is at variance from the projections portfolio composition needs to be changed. One of the key inputs in portfolio building is the risk bearing ability of the investor. Portfolio management can be having institutional, for example, Unit Trust, Mutual Funds, Pension Provident and Insurance Funds, Investment Companies and non-Investment Companies. Institutional e.g. individual, Hindu undivided families, Non-investment Companys etc.

The large institutional investors avail services of professionals. A professional, who manages other peoples or institutions investment portfolio with the object of profitability, growth and risk minimization, is known as a portfolio manager. The portfolio manager performs the job of security analyst. In case of medium and large sized organization, job function of portfolio manager and security analyst are separate. Portfolios are built to suit the return expectations and the risk appetite of the investor.

SELECTION OF PORTFOLIO

The selection of portfolio depends upon the objectives of the investor. The selection of portfolio under different objectives are dealt subsequently,

Objectives and asset mix


If the main objective is getting adequate amount of current income, sixty percent of the investment is made in debt instruments and remaining in equity. Proportion varies according to individual preference.

Growth of income and asset mix


Here the investor requires a certain percentage of growth as the income from the capital he has invested. The proportion of equity varies from 60 to 100 % and that of debt from 0 to 40 %. The debt may be included to minimize risk and to get tax exemption.

Capital appreciation and Asset Mix


It means that value of the investment made increases over the year. Investment in real estate can give faster capital appreciation but the problem is of liquidity. In the capital market, the value of the shares is much higher than the original issue price.

Safety of principle and asset mix


Usually, the risk adverse investors are very particular about the stability of principal. Generally old people are more sensitive towards safety.

Risk and return analysis


The traditional approach of portfolio building has some basic assumptions. An investor wants higher returns at the lower risk. But the rule of the game is that more risk, more return. So while making a portfolio the investor must judge the risk taking capability and the returns desired.

Diversification
Once the asset mix is determined and risk return relationship is analyzed the next step is to diversify the portfolio. The main advantage of diversification is that the unsystematic risk is minimized.

ROLE OF PORTFOLIO MANAGEMENT


There was a time when portfolio management was an exotic term. A practice 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 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.

OBJECTIVES OF PORTFOLIO MANAGEMENT

1. Security of Principal Investment : Investment safety or minimization of risks is one of the most important objectives of portfolio management. Portfolio management not only involves keeping the investment intact but 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 provide the 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 of capital by 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, which tend to appreciate in real value after adjusting for inflation.

4. Marketability : Portfolio management ensures the flexibility to the investment 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 trading like 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 it facilitates to take maximum advantage of various good opportunities upcoming in the market. The portfolio should always ensure that there are enough funds available at short notice to take care of the investors liquidity requirements. 6. Diversification of Portfolio : Portfolio management is purposely designed 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 way to 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 objectives of portfolio management.

ELEMENTS
Portfolio Management is an on-going process involving the following basic tasks. Identification of the investors objective, constrains and preferences which help formulated the invest policy. Strategies are to be developed and implemented in tune with invest policy formulated. This will help the selection of asset classes and securities in each class depending upon their risk-return attributes. Review and monitoring of the performance of the portfolio by continuous overview of the market conditions, companys performance and investors circumstances. Finally, the evaluation of portfolio for the results to compare with the targets and needed adjustments have to be made in the portfolio to the emerging conditions and to make up for any shortfalls in achievements (targets).

QUALITIES OF PORTFOLIO MANAGER

1. Sound general knowledge:


Portfolio management 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 selfconfidence 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. A good analyst makes a good financial consultant. The analyst can know the strengths, weakness, opportunities of the economy, industry and the company.

3. Marketing skills:
He must be good salesman. He has to convince the clients about the particular security. He has to compete with the Stock brokers in the stock market. In this Marketing skills help him a lot.

4. Experience:
In the cyclical behavior of the stock market history is often repeated, therefore the experience of the different phases helps to make rational decisions. The experience of different types of securities, clients, markets trends etc. makes a perfect professional manager.

CODE OF CONDUCT- PORTFOLIO MANAGERS:

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 to a 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 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.

SEBI GUIDELINES FOR PORTFOLIO MANAGERS


It will thus be seen that Portfolio Management is an art and requires high degree of expertise. The merchant banker has been authorised to do Portfolio Management Services, if they belong to Categories I and II as licensed by the SEBI. This classification of merchant bankers was dropped in 1996 and only the category I merchant bankers is allowed to operate in India. Others who want to provide such services should have a minimum net worth of Rs. 50 lakhs and expertise, as laid down or changed from time-to-time by the SEBI and would have to register with the SEBI. The SEBI have set out the guidelines in this regard, in which the relations of the client vis-a-vis the Portfolio Manager and the respective rights and duties of both have been set out. The code of conduct for Portfolio Managers has been laid down by the SEBI. The job of Portfolio Manager in managing the clients funds, either on discretionary or nondiscretionary basis has thus become challenging and difficult due to the multitude of obligations laid on his shoulders by the SEBI, in respect of their operations, accounts, audit etc. It is thus clear that Portfolio Management has become, a complex and responsible job which requires an in-depth training and expertise. It is in this context that the regulations of SEBI on Portfolio Management become necessary so that the minimum qualifications and experience are also ensured for those who are registered with SEBI. Nobody can do Portfolio Management without SEBI registration and licence. The SEBI has given permission to Merchant Bankers to do Portfolio Management. As per the guidelines of September, 1991 a separate category of Portfolio Managers is also licensed by SEBI for which guidelines were given in January 1993. A code of conduct was also laid down for this category, as is the case with all categories of capital market players and intermediates.

SECURITIES AND EXCHANGE BOARD OF INDIA RULES, 1993 REGARDING PORTFOLIO MANAGERS

No person to act as portfolio manager without certificate.


No person shall carry on any activity as a portfolio manager unless he holds a certificate granted by the Board under this regulation. Provided that such person, who was engaged as portfolio manager prior to the coming into force of the Act, may continue to carry on activity as portfolio manager, if he has made an application for such registration, till the disposal of such application. Provided further that nothing contained in this rule shall apply in case of merchant banker holding a certificate granted by the board of India Regulations, 1992 as category I or category II merchant banker, as the case may be. Provided also that a merchant banker acting as a portfolio manager under the second provision to this rule shall also be bound by the rules and regulations applicable to a portfolio manager.

Conditions for 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.

SECURITIES AND EXCHANGE BOARD OF INDIA REGULATIONS, 1993

Registration of Portfolio Managers:

1. Application for grant of certificate

An application by a portfolio manager for grant of a certificate shall be made to the board on Form A. Notwithstanding anything contained in sub regulation (1), any application made by a portfolio manager prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in form A shall be treated as an application made in pursuance of sub-regulation and dealt with accordingly.

2. Application of confirm to the requirements

Subject to the provisions of sub-regulation (2) of regulation 3, any application, which is not complete in all respects and does not confirm to the instructions specified in the form, shall be rejected:

Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within the time specified such objections as may be indicated by the board.

3.

Furnishing of further information, clarification and personal representation.

The Board may require the applicant to furnish further information or clarification regarding matters relevant to his activity of a portfolio manager for the purposes of disposal of the application.

The applicant or, its principal officer shall, if so required, appear before the Board for personal representation.

4. Consideration of application.

The Board shall take into account for considering the grant of certificate, all matters which are relevant to the activities relating to portfolio manager and in particular whether the applicant complies with the following requirements namely: The applicant has the necessary infrastructure like to adequate office space, equipments and manpower to effectively discharge his activities;

The applicant has his employment minimum of two persons who have the experience to conduct the business of portfolio manager; A person, directly or indirectly connected with the applicant has not been granted registration by the Board in case of the applicant being a body corporate;

The applicant, fulfils the capital adequacy requirements specified in regulation 7 The applicant, his partner, director or principal officer is not involved in any litigation connected with the securities market and which has an adverse bearing on the business of the applicant;

The applicant, his director, partner or principal officer has not at any time been convinced for any offence involving moral turpitude or has been found guilty of any economic offences;

The applicant has the professional qualification from an institution recognized by the government in finance, law, and accountancy or business management.

STEPS TO PORTFOLIO MANAGEMENT

1. Standardize and automate the governance processes.

Define multiple workflows to subject each project to the appropriate governance controls throughout its life cycle from proposal to postimplementation resulting in lowered costs, faster cycle times, and increased quality.

2. Capture all investments within a central repository.

Consolidate business and information technology (IT) investments within an enterprise repository to improve visibility, insight, and control. Implement repeatable processes as templates to standardize and streamline data collection across the organization. Centralized data facilitates cross project analysis of finances, resources, schedules as well as other data trends and status for informative reports.

3. Objectively prioritize business strategy and competing investments.

Employ proven techniques to define and prioritize your organizations business strategy for the upcoming planning period, and automatically derive objective prioritization scores to effectively evaluate the competing investments from multiple dimensions.

4. Align the selected portfolios with the business strategy.

Run optimization what-if scenarios to identify trade offs and select the optimal portfolio under varying budgetary and business constraints that best align with your organizations business strategy. Take advantage of advanced portfolio analytical techniques to identify and break the constraints prohibiting the portfolio from reaching the Efficient Frontier.

5. Effectively manage resources.

Without understanding long-term workloads and capacity, companies can experience inefficient hire-fire cycles, resulting in higher overhead, lost knowledge, and poor employee morale. By providing visibility into overall work commitments, actual timesheets, and resource capabilities, create resource plans to align your strategic recruiting and outsourcing with your long-term business objectives.

6. Collaborate and coordinate easily.

Helping to ensure that teams share common goals and work together effectively becomes more vital as organizations become more geographically and culturally diverse. Web-based access to timely, business-critical project information means teams can share knowledge, collaborate smoothly to complete tasks and deliverables, and adjust activities quickly to accommodate project changes and updates.

7. Measure and track portfolio performance.

Effectively measure and track projects, programs, and applications throughout their life cycle, giving you the visibility to proactively identify potential issues, make decisions, and help ensure that your portfolios maximize return on investment (ROI) and improve operational efficiencies.

8. Quickly realize a return on investment.

By enabling increased employee productivity, faster cycle times, reduced costs, and improved time management, portfolio management solutions provide a positive and sustainable return on investment. In IT portfolio management, software can cut costs 2-5 percent, improve productivity 20-25 percent, and shift 10-15 percent of budgets to more strategic projects. In developing and bringing new products to market, the best performers those who have applied rigorous process and technology to their research and development and go-to-market activities can reduce time to market by more than 30 percent.

PORTFOLIO MANAGEMENT PROCESS

The process of portfolio management can stand alone, or act as a component of a larger wealth management process. Typically when we partner with our clients for portfolio management purposes, the process involves the following basic steps.

Risk profile and objective analysis


Through personal consultations with you, we develop a personal profile of your individual investment needs and objectives, time horizon and attitude toward investing.

Investment policy statement


This statement considers your needs and objectives and acts as guideline for making investment decisions. Our goal is to maximize your investment returns, relative to your risk tolerance, through the carefully diversified allocation of your investments.

Diversification
Your asset allocation policy is implemented by investing across asset classes and within various investment styles. Your well-diversified portfolio will then be managed by preeminent institutional money management firms which are not normally accessible to an individual investor.

Portfolio rebalancing
Your investment portfolio is carefully monitored on an on going basis to ensure that it remains consist-tent with your agreed-upon asset allocation policy. If the relative value of investment in your portfolio changes enough to become inconsistent with this policy, it will be rebalanced.

Result reports
We will communicate with you on a regular basis and provide a comprehensive reporting package, including account level performance reports and statements providing details of your account, as well as total asset value and a record of all transactions that occurred during the reporting period.

TECHNIQUES OF PORTFOLIO MANAGEMENT


Various types of portfolio require different techniques to be adopted to achieve the desired objectives. Some of the techniques followed in India by portfolio managers are summarized below.

(1). Equity portfolioEquity portfolio is affected by internal and external factors: (a) Internal factors Pertain to the inner working of the particular company of which equity shares are held. These factors generally include:

(1) Market value of shares (2) Book value of shares (3) Price earnings ratio (P/E ratio) (4) Dividend payout ratio (b) External factors (1) Government policies (2) Norms prescribed by institutions (3) Business environment (4) Trade cycles

(2). Equity stock analysis The basic objective behind the analysis is to determine the probable future value of the shares of the concerned company. It is carried out primarily fewer than two ways. :

(a) Earnings per share (b) Price earnings ratio

(A) Trend of earning: A higher price-earnings ratio discount expected profit growth. Conversely, a downward trend in earning results in a low price-earnings ratio to discount anticipated decrease in profits, price and dividend. Rising EPS causes appreciation in price of shares, which benefits investors in lower tax brackets? Such investors have not pay tax or to give lower rate tax on capital gains. Many institutional investor like stability and growth and support high EPS. Growth of EPS is diluted when a company finances internally its expansion program and offers new stock. EPS increase rapidly and result in higher P/E ratio when a company finances its expansion program from internal sources and borrowings without offering new stock. (B) Quality of reported earning: -

Quality of reported earnings affects P/E ratio. The factors that affect the quality of reported earnings are as under: Depreciation allowances: -

Larger (Non Cash) deduction for depreciation provides more funds to company to finance profitable expansion schemes internally. This builds up future earning power of company. Research and development outlets: There is higher P/E ratio for a company, which carries R&D programs. R&D enhances profit earning strength of the company through increased future sales.

Inventory and other non-recurring type of profit: Low cost inventory may be sold at higher price due to inflationary conditions among profit but such profit may not always occur and hence low P/E ratio.

(C) Dividend policy: Dividend policy is significant in affecting P/E ratio. With higher dividend ratio, equity price goes up and thus raises P/E ratio. Dividend rates are raised to push in share prices up. Dividend cover is calculated to find out the time the dividend is protected, In terms of earnings. It is calculated as under: Dividend Cover = EPS / Dividend per Share

(D) Investors demand: Demand from institutional investors for equity also enhances the P/E ratio.

(3) Quality of management: Investors decide about the ability and caliber of management and hold and dispose of equity academy. P/E ratio is more where a company is managed by reputed entrepreneurs with good past records of management performance.

FUNCTIONS OF PORTFOLIO MANAGEMENT


The basic purpose of portfolio management is to maximize yield and minimize risk. Every investor is risk averse. In order to diversify the risk by investing into various securities following functions are required to be performed. The functions undertaken by the portfolio management are as follows:

1.

To frame the investment strategy and select an investment mix to achieve the desired investment objective;

2.

To provide a balanced portfolio which not only can hedge against the inflation but can also optimize returns with the associated degree of risk;

3.

To make timely buying and selling of securities;

4.

To maximize the after-tax return by investing in various taxes saving investment instruments.

TYPES OF PORTFOLIO MANAGEMENT:

The two types of portfolio management services are available o the investors:

Discretionary portfolio Management

Non-discretionary portfolio Management

1. The Discretionary portfolio management services (DPMS):


In this type of services, the client parts with his money in favor of manager, who in return, handles all 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 portfolio managers parks the funds in the money market securities such as overnight market, 182 days treasury bills and 90 days commercial bills. Normally, return on such investment varies from 14 to 18 per cent, depending on the call money rates prevailing at the time of investment.

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 tailor made to the risk taking ability of the investor.

ADVANTAGES OF PORTFOLIO MANAGEMENT

Individuals will benefits immensely by taking portfolio management services for the following reason: a) Whatever may be the status of the capital market; over the long period capital markets have given an excellent return when compared to other forms of investment. The return from bank deposits, units etc., is much less than from stock market.

b)

The Indian stock markets are very complicated. Though there are thousands of companies that are listed only a few hundred, which have the necessary liquidity. It is impossible for any individual whishing to invest and sit down and analyses all these intricacies of the market unless he does nothing else.

c)

Even if an investor is able to visualize the market, it is difficult to investor to trade in all the major exchanges of India, look after his deliveries and payments. This is further complicated by the volatile nature of our markets, which demands constant reshuffling of port

IMPORTANCE OF PORTFOLIO MANAGEMENT

In the past one-decade, significant changes have taken place in the investment climate in India.

Portfolio management is becoming a rapidly growing area serving a broad array of investors- both individual and institutional-with investment portfolios ranging in asset size from thousands to cores of rupees.

It is becoming important because of: i. Emergence of institutional investing on behalf of individuals. A number of financial institutions, mutual funds, and other agencies are undertaking the task of investing money of small investors, on their behalf. ii. Growth in the number and the size of invisible fundsa large part of household savings is being directed towards financial assets.

iii. Increased market volatility- risk and return parameters of financial assets are continuously changing because of frequent changes in governments industrial and fiscal policies, economic uncertainty and instability.

iv. Greater use of computers for processing mass of data.

v. Professionalization of the field and increase use of analytical methods (e.g. quantitative techniques) in the investment decisionmaking, and

vi. Larger direct and indirect costs of errors or shortfalls in meeting portfolio objectives- increased competition and greater scrutiny by investors.

CURRENT STATUS OF PORTFOLIO MANAGEMENT IN INDIA

Now-a-days, portfolio management is very popular concept. Because every investor wants to increase his investment. In the earlier days, it was not so good. People make optimise profits but now investors are taking the help of the professionals and they help them in various decisions. Select the right blend of projects that can increase ROI, market share and achieve a sustainable growth portfolio. They apply an investment plan to maintain a balance between investment risk and return. They follow certain rules to allocate the major portion of resources to invest whether in extremely volatile markets like share and equity market or in treasury notes, money market funds. They provide a good investment option, excellent return at manageable risk. So any individuals, a beginner or an experienced investor or a monthly earner for living can take the advantages of portfolio management service. With the considerable investments required to expand new products and the risks involved, portfolio Management in India is becoming a progressively more important tool to make strategic decisions about product development and the investment of company reserves. All professionals and business leaders in the investment services have become mindful that only right technologies and active financial management can achieve financial goals. Portfolio management in India has provided the vital insights to expand competitive initiation in this complex financial market. The portfolio management team involves managers who try to increase the market return by actively managing financial portfolio through investment decisions based on research and individual investment choices. They actively manage closed end funds because they have years of actual daily trading experience. These managers are highly skilful and adept at carrying on profound research. They can perform with passion and innovation in investment services. So they can give fruitful financial advice to expand financial gains. Investment services involve different financial instruments such as pension fund, mutual fund, equity and share, investment on property, commodity, IT, stock, and bond, financial derivatives. These instruments have a certain level of risk and give returns in the long run.

KOTAK SECURITIES: PORTFOLIO MANAGEMENT SERVICES


Kotak Securities is one of Indias oldest portfolio management companies with over a decade of experience. It is also one of the largest, with Assets Under Management of over Rs. 3300 Crores. Kotak Portfolio Management from Kotak Securities comes as an answer to those who would like to grow exponentially on the crest of the stock market, with the backing of an expert. Kotak Securities is a SEBI registered Portfolio Manager for providing both Discretionary as well as Non Discretionary portfolio management service. Kotak Securities is a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Unlike many other companies, Kotak Securities Ltd. has a Centralised Risk Management System and an in-house Research Team which allows it to offer the same levels of service to customers across all locations. Kotak Securities was awarded as the most customer responsive company in the Financial Institution sector by AVAYA Global Connect Award both in 2006 and 2007.risk and give returns in the long run. Kotak Portfolio Management offers various schemes to suit individual investment objectives. Following are the products offered by Kotak Securities GUARDIAN PORTFOLIO With the Guardian Portfolio Kotak Securities invests in both gold and equity. At any time around 20 per cent of the assets will be invested in the gold. The allocation to gold may go up to 50 per cent depending upon the market condition and the rest will be invested in the equity market. The minimum investment is Rs 10 lakh. BEP Large cap focus portfolio In the BEP Large cap focus portfolio, investments will be made in mis-priced large cap stocks that have a high growth potential and can withstand macro level risks to sustain in an adverse environment. Large Caps are dominant players in their respective sectors, and hence have the strength and the ability to maintain margins in a tough operating environment.

GEMS PORTFOLIO GEMS are a 30-month closed-end product. The scheme intends to create a focused portfolio of stocks from across sectors and market capitalization ranges. Its main feature is its special mandate to participate in the pre-FPO (follow-on public offer) placements and private placements of listed companies. Investments of up to 30 per cent of the overall assets can be made in such opportunities. ORIGIN Origin portfolio aims to invest in growth oriented companies with sustainable business models backed by strong management capabilities with emphasis on smaller capitalized companies with a market capitalization not exceeding Rs. 2500 crore at the time of investment. INVEST GUARD PORTFOLIO
The Invest guard Plan is a CPPI Model which invests across shares and fixed income products, moving from shares into fixed interest investments when the funds value drops below a predetermined floor. When markets s tart to move up, the product increases its holdings in shares, tapping into these growth opportunities. CORE PORTFOLIO

Core Portfolio aims to capture the long term upside of the India Growth Story by diversifying across the major themes. The investments are in all equity and equity related instruments with emphasis on companies in the business areas driven by consumerism, outsourcing, real estate and core infrastructure players and is essentially a mix of small, medium and large capitalization companies

CONCLUSION
With the help of given project I got an in-depth knowledge about the working of portfolio management. Also I got an insight as too how to invest in portfolio management, which scheme provide better return as compared to other and who are the portfolio management players in the Indian market. It can be concluded from the project that future of portfolio management is bright provided proper regulations prevail and investors needs are satisfied by providing variety of schemes. The interest of investors is protected by SEBI. Portfolio management is governed by SEBI Act. Due to the benefits available to the individuals such as reduction in risk, expert professional management, diversified portfolios, tax benefits etc. young generation (i.e. age group bet. 18-30) is willing to invest in different investment avenues through portfolio manager or through mutual funds which are again managed by portfolio managers. On the other hand, age group of 60 & above are least interested in making investment in different avenues through portfolio managers. They believe in investing and managing their portfolio on their own. However, it can be said that the future of portfolio management is bright in years to come.