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A PROJECT REPORT

ON

AN EMPIRICAL STUDY
OF PORTFOLIO MANAGEMENT
USING FUTURES PROVIDED BY
RELIANCE MONEY

Submitted to partial fulfillment for the award of Bachelor


of Business Administration
(2007-10)

In the
Faculty of Management
Graphic Era Institute of Management

Under Guidance of Submitted By


MR AMAR JOHRI ANANDEEP KAUR
CERTIFICATION

This is to certify that the Project titled “AN ANALYSIS OF


PORTFOLIO MANAGEMENT SERVICES OF RELIANCE MONEY,
IN RELATION TO FUTURES” Submitted by “ANANDEEP KAUR ”
during Semester-V of the BBA Program (2007 - 2010) embodies
original work done by her.

UNDER SUPERVISION OF: SUBMITTED BY:


ANANDEEP KAUR
BBA (V SEM)

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ACKNOWLEDGEMENT

I am very thankful to my Faculty Guide “__________________”


without whose meticulous attention, invaluable suggestions,
encouraging guidance and creative support; I would not have
been able to complete my winter dissertation which is one of
the important parts of the BBA program.

He helped me in simplifying the problems involved in the work.


I would also like to thank the overwhelming support of all the
people who gave me an opportunity to learn and gain
knowledge.

Anandeep Kuar
BBA V - Finance

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EXECUTIVE SUMMARY

Portfolio Management is of utmost importance for the investors


and selection of the same service provider is equally important.
This Dissertation report of mine gives an insight as to how the
Portfolio Management Service, (PMS) provider is to be selected by
the various investors.
Reliance Money as a PMS provider is being taken into
consideration in this report. Reliance Money ensures maximum
security with a unique security token to keep investors’ online
account safe. Reliance Money provides independent, unbiased
view by market experts with excellent track record. They pursue a
robust and disciplined investment process. Thus, they work
towards creating a reasonably concentrated portfolio of what they
believe is compelling opportunities.
Moreover the report gives an insight to the SEBI guidelines for the
investors and helping them to choose the best PMS provider and
maximize the returns on their investments.

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TABLE OF CONTENT

Page No

A. Certification. 1

B. Acknowledgment. 2

C. Executive Summary. 3

D. Table of Contents. 4

E. Abbreviations. 5

F. Introduction about the topic 6

G. Company profile 16

H. Literature Review 33

I. Research Methodology 40

J. Findings 51

K. Glossary 53

L. Questionnaire 61

M. Bibliography 63

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ABBREVIATIONS

AMC Asset Management Companies.

AMFI Association of Mutual Funds in India.

BSE Bombay Stock Exchange.

DP Depository Participant.

ELSS Equity Linked Saving Schemes.

FIIs Foreign Institutional Investors.

NSE National Stock Exchange.

NFO New Fund Offer.

NAV Net Asset Value.

SEBI Securities and Exchange Board of India.

SIP Systematic Investment Plan.

ULIP Unit Link Investment Plan.

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INTRODUCTION

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INTRODUCTION

Portfolio Management Service, (PMS) is a type of professional


service offered by Portfolio Managers to their client to help
them in managing their money in less time. Portfolio Managers
manage the stocks, bonds, and mutual funds of clients
considering their personal investment goals and risk preferences.
In addition to money, the portfolio managers manage the portfolio
of stocks, bonds, and mutual funds.

BENEFITS OF CHOOSING PORTFOLIO MANAGEMENT


SERVICES (PMS) INSTEAD OF MUTUAL FUNDS:

While selecting Portfolio Management Service, (PMS) over


mutual funds services it is found that portfolio managers offer
some services which are better than the standardized
product services offered by mutual funds managers. Such as:

Asset Allocation: Asset allocation plan offered by Portfolio


Management Service, PMS helps in allocating savings of a
client in terms of stocks, bonds or equity funds. The plan is tailor
made and is designed after the detailed analysis of client's
investment goals, saving pattern, and risk taking capacity.

Timing: Portfolio Managers preserve client's money on time.


PMS help in allocating right amount of money in right type of
saving plan at right time. This means, portfolio manager provides
their expert advice on when his client should invest his money in
equities or bonds and when he should take his money out of a
particular saving plan. Portfolio manager analyzes the market and
provides his expert advice to the client regarding the amount of
cash he should take out at the time of big risk in stock market.

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Flexibility: Portfolio Manager plan savings of his clients
according to their need and preferences. But sometimes, portfolio
managers can invest client's money according to his preference
because they know the market very well than his client. It is his
client's duty to provide him a level of flexibility so that he can
manage the investment with full efficiency and effectiveness.

In comparison to mutual funds, portfolio managers do not need to


follow any rigid rules of investing a particular amount of money in
a particular mode of investment.

Mutual fund managers need to work according to the regulations


set up by financial authorities of their country. Like in India, they
have to follow rules set up by SEBI.

SERVICES AND STRATEGIES PROVIDED THROUGH


PORTFOLIO MANAGEMENT ARE:

• Portfolio manager works as a personal relationship


manager through whom the client can interact with the fund
manager at any time depending on his own preference.
• To discuss any concerns regarding money or saving, the
client can interact with his appointed portfolio manager on
monthly basis.
• The client can discuss on any major changes he want in his
asset allocation and investment strategies.
• PMS handles all type of administrative work like opening a
new bank account or dealing with any financial settlement or
depository transaction.
• While choosing online PMS, the client receives a User-ID and
Password, which helps him in getting online access to his
portfolio details and checking his portfolio as frequent as he
want.
• PMS also help in managing tax of his client based on the
detailed statement of the transactions found on his portfolio.

PAYMENT CRITERIA:

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There are types of payment criteria offered by portfolio
managers to their client, such as:

• Fixed-linked management fee.


• Performance-linked management fee.

In fixed-link management fee the client usually pays between 2-


2.5% of the portfolio value calculated on a weighted average
method.

In performance-linked management fee the client pays a flat fee


ranging between 0.5-1.5percent based on the performance of
portfolio managers. The profits are calculated on the basis of
'high watermarking' concept. This means, that the fee is paid only
on the basis of positive returns on the investment.

In addition to these criteria, the manager also gets around 15-


20% of the total profit earned by the client. The portfolio
managers can also claim some separate charges gained from
brokerage, custodial services, and tax payments.

VALUE YOUR MONEY BEFORE SELECTING PORTFOLIO


MANAGEMENT SERVICES (PMS):

Equity bias: Equity portfolio offered by PMS helps in adding high


value than what a debt portfolio offers. Because of this, many
portfolio managers emphasis on equity investments and some
offer hybrid products.

Large surplus to invest: The client should always choose the


portfolio managers after considering his portfolio size and the
fee he would charge for managing his portfolio. PMS are
recommended to those clients who have large surplus amount of
money to invest. Otherwise, the company can also think for cheap
options like a financial planner or advisor to construct an asset
allocation plan and to manage investment.

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THE BASICS OF FUTURES CONTRACTS

A futures contract, which is often referred to simply as futures, is


a special type of standardized contract that is traded on a futures
exchange. When trading futures, you are actually buying or
selling it for a specific date in the future at a specific price. The
date that is set for the futures contract is referred to as a delivery
date or as a final settlement date, while the pre-set price is
referred to quite simply as the futures price. The price of the
underlying asset represented by the futures, on the other hand, is
referred to as the settlement price.

When you trade futures contracts, you are actually obligated to


buy or sell the contract on the specific date. In this way, futures
contracts are different from options contracts because those that
hold options contracts have the right to buy or sell the contract
but are not obligated to do so.

Any time a futures contract is set into motion, there are two
parties involved: the buyer and the seller. As such, both the buyer
and the seller are obligated to fulfill their end of the bargain.
Therefore, even if the futures contract no longer seems like a
good buy when the delivery date rolls around, the buyer must still
complete the purchase. Similarly, if the seller decides that he or
she would like to hang onto the futures contract, he or she does
not have this option.

Once the settlement date comes around, the seller is obligated to


deliver the futures contract to the buyer. If the futures contract
agreement is a cash-settled future, on the other hand, then the
cash is transferred from the person that experienced a loss to the
person who made the profit.

If the person holding the futures contract wishes to get out of the
deal before the settlement date has been reached, he or she does
have a few available options. One option the holder has is to
offset the position by selling a long position. The other option is to
purchase a short position. By doing so, the holder essentially
closes out the futures position and is free from contract
obligation.

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Futures are liquid assets and this liquidity is made possible by the
fact that it is highly standardized. There are several different
methods by which the futures can remain standardized. Some of
these include specifying:

• The grade of the deliverable


• The delivery month
• The last trading date
• The underlying instrument or asset
• The type of settlement, such as whether it is a physical or
cash settlement
• The amount of the underlying asset
• The currency used to quote the futures contract
• The minimum price fluctuation that is permissible

By specifying these characteristics, the liquidity of the futures is


maintained, making it a highly sought commodity for many
investors.

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FUTURE CONTRACTS
INTRODUCTION

A futures contract is a binding, legal agreement between a buyer


and a seller for delivery of a particular quantity of a commodity at
a specified time, place, and price. These contracts are traded on
regulated exchanges and are settled daily based on their current
value in the marketplace. Most natural gas futures contracts
traded on the New York Mercantile Exchange (NYMEX) end
without actual physical delivery of the commodity. Futures
contracts most often are liquidated or cancelled out by
purchasing a covering position prior to the delivery date and are
generally used as a financial risk management and investment
tool rather than for supply purposes. Futures contracts are most
widely used for hedging. Hedging allows someone to offset the
risk of fluctuating prices when he buys or sells physical supplies of
a commodity. However, as an indication of market expectations
concerning prices in the future, some industry and market
participants tend to use the prices for futures contracts as
predictions of commodity prices that will be realized in
subsequent months, although NYMEX itself does not explicitly
encourage this view. An examination of price data for recent
years shows that futures prices are relatively poor predictors of
the Henry Hub spot price that is realized during the corresponding
delivery or target month, and even the final futures price for a
given contract often does not anticipate correctly the realized
average spot price. Futures prices vary substantially over time
and apparently reflect current market conditions as well as future
expectations. The purpose of this analysis is to review the recent
performance of futures contracts prices as predictors of the
realized spot price. It does not examine the merits of futures
trading for hedging or of particular hedging strategies. The
following analysis examines futures contract prices for heating
season months (November through March) during three
consecutive years (2002-03, 2003-04, and 2004-05) and
compares them with average monthly spot prices at the Henry
Hub (see Box for a description of the data used in this analysis).
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The period of analysis for each heating season is the 12 months
from April (the start of the refill season) through March (the end
of the heating season). Comparing monthly futures and spot
market prices allows an examination of the influence of current
market conditions on price expectations and provides a basis to
assess the performance of futures prices as a predictor of spot
prices.

FUTURES CONTRACT PRICES AND THE HENRY HUB SPOT


PRICE DATA

The futures contract prices used in this analysis are prices as


reported on the final trading day of each near-month NYMEX
contract. Because each futures contract has its final trading day
in the month prior to the delivery month, the prices of any given
contract do not continue into the actual delivery month. The spot
prices are the arithmetic average of the Henry Hub spot prices for
the month.

ENERGY INFORMATION ADMINISTRATION, OFFICE OF OIL AND GAS,


OCTOBER 2005

An examination of the prices for the November 2002 futures


contract during the trading months from April through October
2002 serves as an example of the analysis of the various price
series to assess the relationship between the futures contract
prices and the eventual average spot price. The November 2002
contract prices in this period differ by as much as 81 cents per
million British Thermal Units (MMBtu) or 20 percent from the
realized November average Henry Hub spot price of $4.042
(Figure 1.A). The November contract price was below the realized
price in all months prior to October. The closing price for the
November contract was established in October. It was $4.126 per
MMBtu, which was 8 cents, or about 2 percent, higher than the
realized average Henry Hub spot price in November. Thus, except
for the final settlement price, the November contract prices could
not be used as a reasonably accurate predictor of the realized
average commodity spot price in November. As a futures contract
gets closer to its delivery month, it is expected that futures and
spot prices will tend to converge so that the final settlement price
of the contract at expiration will be quite similar to the spot
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market price. However, conformity between final settlement
prices and the realized spot price is not assured in all cases. For
example, the February 2003 contract, after ranging as low as
$3.610 per MMBtu, closed at $5.660 which was $2.073 or about
27 percent lower than the average February Henry Hub spot price
of $7.733 per MMBtu. Analysis of the November 2002 contract
prices and Henry Hub spot prices illustrates that futures prices
may be influenced by current market conditions even though
delivery is not obligated until some time thereafter when the
market likely will have changed. The price change patterns of the
November contract prices and the concurrent spot prices were
quite similar. In April 2002, the November futures contract was
priced at $3.707 per MMBtu. After increasing by 16 cents per
MMBtu in May, the November contract fell by 64 cents, to $3.230
per MMBtu between May and July 2002. The net change of 48
cents per MMBtu for the price of the November contract in these 3
months is very similar to the net change of 44 cents for the
average Henry Hub spot price. In the subsequent, and last, 3
months of trading for the November contract, both prices again
exhibited a similar overall change. The futures contract price
increased by roughly 90 cents per MMBtu in those 3 months,
which was almost 79 percent of the $1.14 increase in the monthly
spot price.

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OBJECTIVE OF THE STUDY

The objective of my study in this Dissertation is to bring forth the


relevance and analysis of portfolio management for maximizing
the return of investors and consequently minimizing the risks by
selection of the right PMS provider.

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Company profile

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ABOUT RELIANCE CAPITAL & RELIANCE
MONEY
Reliance Capital‘s PMS has been sponsored by Reliance Capital
Ltd (RCL) which, in turn, is promoted by Reliance Industries Ltd.
(RIL). It is one of India’s largest private sector enterprises. RIL has
a net worth of Rs 40,483 crore as on March 31, 2005, and
currently has a large family of shareholders. RCL is a non-banking
finance company engaged in leasing, investment and other fund-
based activities. Various products of
Reliance Capital PMS offered to Deutsche
Bank customers are:

 Absolute Freedom: This is a highly


flexible investment option that exploits
opportunities across the broad market
spectrum. The option pursues an
aggressive approach to portfolio
construction and allocates assets
judiciously among large-cap, mid-cap and small-cap stocks.

 Large-caps: This is a relatively protective investment option


with investments predominantly in large-cap stocks. This
ensures liquidity and lower impact costs leading to a more
stable portfolio.

Reliance Money is an endeavor to change the way India trades in


financial markets and avails of various financial services. Reliance
Money ensures maximum security with a unique security token to
keep your online account safe. Reliance Money provides
independent, unbiased view by market experts with excellent

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track record. Trading strategies with entry - exit points of view.
Take an informed decision.

INVESTMENT APPROACH

An important facet of their approach is their constant endeavor to


consistently generate absolute returns by pursuing a robust and
disciplined investment process.

They strive to build a concentrated portfolio by including certain


select stocks that meet their set benchmarks. While their bottom-
up approach enables us to concentrate on identifying competitive
growth companies, using cash as a strategic investment tool
allows us to grab attractive opportunities arising in the dynamic
market environment.

Thus, they work towards creating a reasonably concentrated


portfolio of what they believe is compelling opportunities.

INVESTMENT PROCESS

They understand that having a discretionary control of investors’


portfolio is a privileged position that requires a great degree of
expertise and care. Each investment decision is taken after an in-
depth understanding of the opportunity through intensive in-
house research.

Their team scans a large universe of stocks with a special focus


on under-researched or undiscovered opportunities. They interact
extensively with the managements of diverse companies in a
multitude of sectors to understand emerging business strategies
and trends. This process allows them to filter the most compelling
opportunities from the universe.

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INVESTMENT OPTIONS

Varied Investment Options

Equities as an asset class provide a wide spectrum of


opportunities, though not all of them are tapped at all times. Their
three different product options are an endeavor to unearth these
very opportunities across market segments to create personalized
portfolios as per investors’ specific needs.

Absolute Freedom

It is a highly flexible investment option that exploits opportunities


across the broad market spectrum. The option pursues an
aggressive approach to portfolio construction and allocates assets
judiciously among large-cap, mid-cap and small-cap stocks.

Large-Caps
A relatively protective investment option with investments
predominantly in large-cap stocks. This ensures liquidity and
lower impact costs leading to a more stable portfolio.

Mid-Caps/Small-Caps
A relatively aggressive option that helps to harness the potential
of companies in the mid-cap/small-cap segment. This option
attempts to discover companies with the potential of both
earnings and multiples to rise. In all the options, portfolios are
constructed by concentrating on select investment themes. We
also use derivatives as an investment tool.

SERVICES

Exclusive Equity Investment Management Service

Equity investing has come of age. Liberalization and rapid


globalization has increased the complexities associated with
understanding changes in businesses and markets, which has
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made equity investing an extremely dynamic and involved
process. This calls for utilizing the services of dedicated
professionals, who are sharply focused on researching equity
markets and unearthing superior investment opportunities.

Reliance Portfolio Management Services is an exclusive


discretionary investment management service offering for select
private clients.

Their portfolio management service is directed towards exclusive


clients whose assets have crossed a certain threshold, and who
prefer to delegate management of those assets to a team of
skilled investment experts. The service provides a strong edifice
for your portfolio to realize its full potential, while keeping pace
with the dynamic market environment.

As a part of the process, individual portfolios are designed


keeping specific risk-return preferences in mind. Furthermore,
regular interaction through personal communication by the
investment team helps you to keep abreast of the portfolio
strategy and performance.
Reliance Portfolio Management Services is an exclusive offering
from the portfolio management division of Reliance Capital Asset
Management Ltd. Reliance Capital Asset Management Ltd. is a
wholly owned subsidiary of Reliance Capital Ltd.
It is also the investment manager for Reliance Mutual Fund
schemes wherein it manages assets worth over Rs. 28, 753 cr.

RISK FACTORS

o Investments in securities are subject to market risks and


include price fluctuation risks. There is no an assurance or
guarantees that the objectives of any of the Schemes will be
achieved. The investments may not be suited to all
categories of investors.
o The past performance of the Portfolio Manager in any
Scheme/option is not indicative of the future performance in
the same Scheme/option or in any other scheme /option
either existing or that may be offered. There is no assurance

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that past performances indicated in earlier Schemes/options
will be repeated. Investors are not being offered any
guaranteed or indicative returns through any of the
Schemes.
o The names of the Schemes/option do not in any manner
indicate their prospects or returns. The performance in the
equity Schemes/options may be adversely affected by the
performance of individual companies’ changes in the market
place and industry specific and macro economic factors.
o Technology stocks and some of the investments in niche
sectors run the risk of volatility, high valuation, obsolescence
and low liquidity.
o Risk attached with the use of derivatives.
The portfolio manager may use derivative products as may
be permitted by SEBI from time to time. As and when the
schemes trade in the derivatives market there are risk
factors and issues concerning the use of derivatives that
investors should understand. Derivative products are
specialized instruments that require investment techniques
and risk analyses different from those associated with stocks
and bonds. The use of a derivative requires an
understanding not only of the underlying instrument but also
of the derivative itself. Derivatives require maintenance of
adequate controls to monitor the transactions entered into,
the ability to assess the risk that a derivative adds to the
portfolio and other related capabilities. There is the
possibility that a loss may be sustained by the portfolio as a
result of the failure of another party (usually referred to as
the “counter party”) to comply with the terms of the
derivatives contract. Other risks in using derivatives include
market risk, valuation risk, liquidity risk and basis risk. Also,
it is to be noted that the market for derivative instruments is
nascent in India.
o In the case of stock lending, risks relate to the defaults from
counterparties with regard to securities lent and the
corporate benefits accruing thereon, inadequacy of the
collateral and settlement risks. The Portfolio Manager is not
responsible or liable for any loss resulting from the
operations of the schemes/options.

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o The Portfolio Manager may invest in the shares, units of
mutual funds, debt, deposits and other financial instruments
of group companies.
o Each portfolio will be exposed to various risks depending on
the investment objective, investment strategy and the asset
allocation. The investment objective, investment strategy
and the asset allocation may differ from client to client.
However, generally, highly concentrated portfolios with
lesser number of stocks generally will be more volatile than
a portfolio with a larger number of stocks. Portfolios with
higher allocation to equities will be subject to higher
volatility than portfolios with low allocation to equities.
o Risk arising out of non-diversification, if any Diversified
portfolios (allocated across companies and broad sectors)
generally tend to be less volatile than non-diversified
portfolios
o The Portfolio Manager has previous experience / track record
of about one year since August 2004 in providing Portfolio
Management Services by virtue of having commenced its
activities after obtaining no-objection from the SEBI -
Investment Management Department vide letter no.
IMD/PSP/17209/2004 dated August 5, 2004.

Why RELIANCE MONEY Portfolio Managers

• They offer you professional advice and management.

• They give you the advantage of globally proven investment


processes.

• They will deal with you with the utmost transparency. They
will send you regular portfolio statements and updates. You
will also have access to our web-site which is designed to
give all the information you need about your investments at
the click of a mouse.

• They focus on providing clients with dedicated servicing.


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A tradition of trust and confidentiality lies at the heart of their
service. So, too, does skill in designing innovative and up-to-date
financial solutions.

Investment Philosophy & Process

The well-structured and highly transparent investment process


that we strongly believe is the key to successful investments.

Investment Philosophy

Their investment philosophy takes root in the belief that


fundamental research as an investment process yields returns
and hence they lay emphasis on company specific research.
Earnings growth of a company is the prime driver and over a
period of time the stock price of the company shall be a slave of
the same. Hence, investments in stocks are to be made at

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reasonable valuations. Own companies that can generate long-
term, sustainable earnings, managed by qualified professionals
capable of executing a well conceived strategic plan.

Investment Process

Identification of any changes in the trends of an economy / a


business (top down) and identification of a company (bottom up),
within that business, is an outcome of extensive research. In their
growth strategy, they seek to own companies that have prospects
of above average growth and competitive advantages that will
allow them to earn superior rates of return on capital. In their
value strategy, they believe that the market overreacts, pricing
many value stocks too low relative to their intrinsic value, and
over time, reversion to the mean can generate better returns in
value stocks.

Portfolio Construction

Research database of ABN AMRO with inputs from across the


globe supplemented by information in public domain forms a
resource to carry out research. Subsequent interactions with the
top management of different companies within a business would
be used to formulate/ corroborate our view on the business
dynamics. This exhaustive process throws up stocks that fit our
GARP philosophy. The different stocks that would find way into a
portfolio shall be guided by the objectives of the portfolio.

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FEATURES & FEE STRUCTURE

Minimum portfolio size: Rs.10 Lakhs. You can also open a


PMS account by transferring your existing portfolio of stocks or
mutual funds.

PMS Fees: 15% of profits plus government taxes. Charged


quarterly -due only if the portfolio has made profits in that
quarter.

Brokerage: 0.50% plus all applicable regulatory charges and


government taxes. Bonanza Portfolio Ltd. And Bonanza Stock
Broker Ltd. will be appointed as brokers Ltd. will be appointed as
brokers to the scheme.

Other charges: Depository and other charges, expenses and


taxes will be on actual.

Exit: No lock-in period. No exit charges. Exit any time with a


notice of minimum 3 working days.

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OTHER PRODUCTS OF RELIANCE MONEY

EQUITY

DERIVATIV COMMODIT
ES Y

PRODUCT
S
OFFERED

MUTUAL
FOREX
FUNDS

IPOs

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EQUITY

Equity is a share in the ownership of a company. It represents a


claim on the company’s assets and earnings. As you acquire more
stock, your ownership stake in the company increases.
Holding a company’s stock means that you are one of the many
owners (shareholders) of a company, and, as such, you have a
claim (to the extent of your holding) to everything the company
owns. Yes, this means that technically, you own a portion of every
piece of furniture; every trademark; every contract, etc. of the
company.
As an owner, you are entitled to your share of the company’s
earnings as well as any voting rights attached to the stock.

Another extremely important feature of equity is its limited


liability, which means that, as a part-owner of the company, you
are not personally liable if the company is not able to pay its
debts. In case of other entities such as partnerships, if the
partnership goes bankrupt, the partners are personally liable
towards the creditors/lenders and they may have to sell off their
personal assets like their house, car, furniture, etc., to make good
the loss. In case of holding equity shares, the maximum value you
can lose is the value of your investment.
Even if a company of which you are a shareholder goes bankrupt,
you can never lose your personal assets.

DERIVATIVES

Derivative products have been around for a long, long time. In


fact, as early as the 1650s, dealings resembling present day
derivative market transactions were seen in rice markets in
Osaka, Japan. The first leap towards an organized derivatives
market came in 1848, when the Chicago Board of Trade (CBOT),
the largest derivative exchange in the world, was established.

Today, equity and commodity derivative markets are rapidly


gaining in size in India. In terms of popularity too, these markets
are catching on like a forest fire. So, what are these markets all
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about? What are the products that they trade in? Why do people
feel the need to trade in such products and what sort of traders
benefit from such trades? Do these markets hold scope for retail
investors too? And if so, how exactly can you go about trading in
them?

MUTUAL FUNDS

What is it about investing that irks you most? Is it the fact that it
is time-consuming since it involves researching the market for
investment products and then proceeding with the paperwork
involved? Or could it be that once you have made your
investments, you cannot find the time to monitor them? Like most
of us, do you dread a situation wherein you need your money all
of a sudden and have no access to it or have to run from pillar to
post to get it back? Do you sometimes hesitate to invest because
you are unsure about how well-regulated investment products
are? Is your approach to investing constrained by the fact that
you possess limited investment capital, which does not allow you
to achieve the diversity that you desire?

If these are some of the reasons that make you feel disinclined to
undertake an investment exercise, consider mutual funds. This
investment vehicle successfully addresses the above concerns
and offers other benefits too. Let’s take a look at what exactly a
mutual fund is and how it functions. A mutual fund is an entity,
which offers a number of investment schemes with different
investment objectives. An investor interested in investing in these
schemes needs to assess which scheme has an investment
objective that matches his, to make his selection from among the
available schemes.

Mutual funds are well-structured and closely-regulated entities,


which hire investment professionals to invest and manage
investors’ funds. Mutual funds are well-structured and closely-
regulated entities, which hire investment professionals to invest
and manage investors’ funds. Mutual funds issue units to each
investor based on the amount invested. Units of mutual funds are
similar to shares issued by companies. For instance, if an investor
invests Rs 5,000 in a new scheme of a mutual fund, which is

29
offering units at Rs 10 per unit, he will receive 500 units in the
scheme (Rs 5,000 / Rs 10).

The mutual fund invests the money collected from unit-holders


on their behalf. Income earned on these investments is
distributed by the mutual fund among its investors in proportion
to their holding in the scheme. For instance, taking the above
example forward, if the scheme issues a total of 1 Lakh units and
earns a total income of Rs 1 Lakh in a particular period, it would
have earned Re 1 per unit issued (Rs 1 Lakh / 1 Lakh units). The
investor, who had applied for 500 units, will be entitled to receive
Rs 500 (income earned per unit – Re 1 x 500 units).

COMMODITIES

The items produced by different producer are considered


equivalent if they conform to a predetermined standard. It is this
underlying standard or ‘specifications’ that defines the
commodity and not any quality inherent in the particular product.
For example, gold of 99.95% purity is the same from a trading
point-of-view, regardless of which part of the world it was
produced in. However, gold of 99.99% purity is different since it
has higher purity. Commodities can be agricultural or non-
agricultural in nature. In the case of agricultural commodities, the
specifications are often more elaborate and include stipulations
on origin of the commodity, maximum permissible foreign
particles, moisture content, etc. Other examples of commodities
include Brent Crude Oil, Electrolytic Copper Cathode, Soybeans,
Sugar M-grade, Expeller Mustard Oil, and many more. It should be
noted that the value arises from the owner's right to sell rather
than the right to use. For example, television sets, automobiles
and stereo systems are not commodities since their value is in
their use and not in sale.
In the Indian context, commodities can be broadly classified
under the following categories:

• Precious Metals: Such as Gold and Silver


• Base Metals: Such as Steel, Nickel, Tin, Iron, Copper, Zinc
and Lead
• Energy Products: Such as Crude Oil, Furnace Oil, Natural Gas

30
• Plastics & Petrochemicals: Such as Polypropylene (PP), High
Density Polyethylene (HDPE)
• Agricultural Commodities: These are varied and are
classified in sub-groups such as:

1. Cereals - like Wheat, Maize, Rice


2. Pulses - like Chana (Gram), Urad (Black Matpe), Lemon Tur,
Masoor, Field Peas, etc.
3. Oil Complex - like Soyabeans, Soy Oil and Soy Meal, Mustard
Seed and Oil, Crude Palm Oil, etc
4. Spices - like Turmeric, Chilli, Black Pepper, Cumin,
Cardamom
5. Plantation Crops - like Coffee, Cashew, Rubber
Fibres - like Cotton, Jute, Mulberry Cocoons, etc.

Others - like Guar Seed, Guar Gum, Sugar, Gur (Jaggery), Mentha
Oil, Potato, etc.

FOREX

FOREX, or Foreign Exchange, is the simultaneous exchange of one


country's currency for that of another. Traders in the FOREX
market wish to purchase or sell one currency for another with the
hope of making a profit when the value of the currencies changes
in favor of the investor, whether from market news or events
those take place in the world.
The foreign exchange (FX or FOREX) market is the market where
exchange rates are determined. Exchange rates are the
mechanisms by which world currencies are tied together in the
global marketplace, providing the price of one currency in terms
of another.

For example, the U.S. dollar/Euro exchange rate is the price of a


Euro expressed in U.S. dollars. On March 11, 2006 this exchange
rate was 1.19 U.S. dollars per Euro, or, in market notation, 1.19
USD/Euro.

31
An exchange rate is just a price. The price of a liter of milk, for
example, is Indian Rs 20, or 20 INR/milk, using the above
exchange rate market notation. When we price exchange rates,
the denominator refers specifically to one unit of a currency.

Like in any other market, demand and supply determine the price
of a currency. At any point in time, in a given country, the
exchange rate is determined by the interaction of the demand for
foreign currency and the corresponding supply of foreign
currency. Thus, the exchange rate is an equilibrium price
determined by supply and demand considerations.

IPO

When private companies i.e. companies that are wholly owned by


their promoters, invite the public to subscribe to their shares, this
issue of shares is called an Initial Public Offering (IPO). The shares
issued could be in the form of fresh equity and/or the promoters
sell a portion of their equity to the public. These shares are then
listed on a stock exchange where they can be bought and sold by
investors. IPOs are a very popular way of investing in the stock
market as they allow investors a simple entry route to buying
stocks.

32
SOMETHING FOR THE CUSTOMERS
Reliance Money has divided its customers in three parts on the
basis of their experience in the share market. It has differentiated
itself according to their customers. Following are the different
characteristics:

BEGINNERS
Here you will find up-to-date information and expert guidance
that will help you invest online. Start small and grow steadily. You
will be amazed to know how easy it can be.

MIDDLERS
If you have some experience investing online, you’ll find us a
pleasant surprise. For simpler, safer and smarter investing, start
here.

EXPERTS
If you are an expert in investing online, you will find this a
completely new experience. Use the advantages we offer to get
more out of your money.

Tips for Beginners


Before Investing in Stocks Learn the 5 Golden Rules of Stock
Selection:

a. Know the Business


b. Assess the Past Performance
c. Know the Promoters
d. Assess the Future Prospectus
e. Assess the Price

Literature Review
33
34
 Reliance Money to launch PMS for retail
investors
Our Bureau
Kolkata, Dec. 20
Anil Dhirubhai Ambani group outfit Reliance Money is launching a
portfolio management scheme (PMS) for retail investors. Mr.
Sudip Bandyopadhyay, CEO of Reliance Money, said here today
that the proposed PMS would have an entry threshold of Rs 5 lakh
and it would charge a fee only if annual return was 8 per cent or
more.
Reliance Money is also offering a limited period free trading
account in West Bengal to customers, who open demat account
with it at a one-time cost of Rs 750. The offer entails Rs 500
trading charge waiver for a maximum traded value of Rs 5 lakh
for the first year. For higher trading limits, graded charges would
be placed, he added.
Reliance money, in a deviation from the broking industry
practices of charging brokerages based on each transaction, has
already introduced a flat fee structure for trading in equities and
commodities on its electronic platform.
It has recently tied up with an NGO for providing trading platform
in 10 districts of West Bengal, Andhra Pradesh, Orissa and Bihar.
The NGO, the Forum for Integrated Development and Research
(FIDR), runs a rural entrepreneurship programme in these States
through one-man one-village training initiative.
Under this model, the trained man is provided with village-level
electronic platform called ‘Gyan O Shoochna Kendra’ for
imparting training in computer skills.

35
Dynamic Portfolio Analysis
Richard C. Grinold
THE JOURNAL OF PORTFOLIO MANAGEMENT
Fall 2007

Dynamic portfolio analysis looks at the portfolio as a moving


object to capture the essentials of a long-short investment
management strategy. To see the forest rather than the
trees requires simplifying assumptions, here a bare-bones
two-parameter structure. One parameter measures the rate
of information flow and the other the rate of trading in the
portfolio. This framework yields informative results to explain
the implementation efficiency of the strategy as well as the
balance between the cost of trading and the benefit of
trading. More significantly, it establishes a link between
cause and effect. These notions can be used to engineer
strategies, to analyze strategies, and to optimize the
operation of strategies

Portfolio Management for the Under-30 Crowd


By Jonas Elmerraji

Face it, as an individual under 30, you're not the average


investor, and modeling your portfolio after that of your parents
isn't always a good idea. In fact, doing so can cause you to miss
out on some valuable learning opportunities and, in the long run,
even cost you money. If you want to make the most of your
money, every decision you make about your portfolio is as
important as the last. In this article we look at the unique set of
challenges involved in portfolio management for young investors
and provide some advice to help
you succeed.

Obviously, picking the right stocks is one of the most important


aspects of investing intelligently. However, as a young investor,
you have a lot less to worry about - namely retirement and wealth
maintenance. Because preserving your nest egg needn't be your

36
first priority (you have plenty of years ahead of you for that) you
can take on a greater amount of risk than your parents

 Suggested Portfolio Allocation for Early 2009

Overweight the Top Sectors, and Underweight the Weak


Sectors

© James Brumley

Dec 30, 2008

One key to successful investing is picking the right sectors and


avoiding the wrong ones. This suggested allocation for 2009 may
help investors build an ideal portfolio.

Most investors will be more than happy to close the books on


2008. It was a disastrous year, and no sector or allocation yielded
particularly strong results. Nevertheless, it’s not too soon to start
considering how to best take advantage of what could be a
promising recovery in 2009.

 Benefits of portfolio management services

Source: ChilliBreeze

Looking to invest but no time to research the best options or


lacking in insight to choose correctly – a situation we’re all
familiar with. Portfolio management services could very well be
the answer to all your investment anxieties.

Why not mutual funds?

37
But why should you opt for PMS instead of a mutual fund? Here
are a few aspects on which portfolio managers say they score
over the standardised products offered by mutual funds:

Asset allocation: You may know what stocks, equity funds or


bonds you would like to own, but do you know how much of your
savings you should allocate to each of these? The decision on
asset allocation will be crucial in determining investment returns
over the long term. With PMS, an asset allocation plan is tailor-
made for you, after a detailed check on your investment goals,
savings pattern and appetite for risk.

Timing: Have you ever kicked yourself for switching your entire
portfolio into equities just before they tanked? If you have, you
probably need help with regard to timing of investments. Once
you hire a portfolio manager, you can expect assistance on when
you should be investing more money into equities and when you
should be bailing out. A portfolio manager may also switch a
portion of your portfolio into cash, if he perceives a big risk to
stock prices. The focus is on preserving value.

Flexibility: You are bullish on FMCG stocks, but find that equity
funds have marginal exposures to the sector. In a PMS, you can
expect the portfolio manager to accommodate your sector
preferences when he invests. But don't expect to completely
dictate what stocks or sectors your portfolio manager will buy for
you, as he will be the best judge of that.

What to expect from PMS?

Okay, you have fallen for the sales pitch and entrusted your
money to a PMS. What can you now expect from this service?

• More handholding from your portfolio manager than you


have been accustomed to from your mutual fund. You can
expect to have a personal relationship manager through
whom you can interact with the fund manager at any time of
your choice. You can also expect frequent (maybe monthly)
interaction with the portfolio manager to discuss any
concerns that you might have. Expect to be consulted on
any major changes in asset allocation or in the investment
38
strategy relating to your portfolio. All administrative matters,
including operating a bank account and dealing with
settlement and depository transactions, will be handled by
the PMS.
• If you are the type who likes to watch over your money like a
baby, the disclosures offered by a PMS may be just right for
you. On handing over your money, you will receive a user-ID
and password from the PMS, which will grant you online
access to your portfolio details. You can use these to check
back on your portfolio as often as you like.
• Keeping track of capital gains (and losses) for the taxman
can be a depressing chore, when you have furiously churned
your investments through the year. Opting for PMS will free
you of this chore, as a detailed statement of the transactions
on your portfolio for tax purposes comes as a part of the
package.

Who should hire a portfolio manager?

Anybody with a nest egg, which meets the minimum investment


requirement, can consider using a PMS. However, a PMS may only
add significant value in the following cases:

Equity bias: Portfolio management services may be ideal for a


person who seeks a substantial investment in the stock markets.
An equity portfolio also offers greater scope for a manager to add
value than does a debt portfolio. Several of the established
players in the PMS business focus on equity investments, though
some also offer hybrid products.
Large surplus to invest: The minimum portfolio size that
portfolio managers accept for a customised portfolio ranges from
Rs 25 lakh to Rs 5 crore. So consider a PMS only if you have a
substantial surplus to invest in stocks. If you don't, evaluate if you
can use the services of a financial planner or an advisor, instead
of a PMS.

If you are willing to handle the paperwork associated with


investing, you can get a financial planner or advisor to construct
an asset allocation plan and guide you on the choice of
investments for a one-time fee of Rs 5,000-15,000.

39
DISCLOSURE DOCUMENT

Disclosure document required under Regulation 14 of SEBI


(Portfolio Managers) Regulations, 1993)

• The Disclosure Document (hereinafter referred to as ‘the


Document’) has been filed with the Securities and Exchange
Board of India (SEBI) along with the certificate in the
prescribed format in terms of Regulation 14 of the SEBI
(Portfolio Managers) Regulations, 1993.
• The purpose of the Document is to provide essential
information about the Portfolio Management Services (PMS)
in a manner to assist and enable the investors in making
informed decision for engaging a Portfolio Manager.
• The Document gives the necessary information about the
Portfolio Manager required by an investor before investing,
and the investor may also be advised to retain the document
for future reference.
• All the Indian intermediaries involved in the scheme are
registered with SEBI as on the date of the document. Foreign
Intermediaries are registered with their respective regulatory
authorities.
• Details of the Principal Officer.

40
RESEARCH METHODOLOGY
41
RESEARCH METHODOLOGY

This study is done to get exact portfolio management services


in organization. Collected data plays very important role in
successful completion of the study. Such a methodology is
implemented that can minimize the scope of biasness.

RESEARCH DESIGN
Research design is a master plan or a model for the collection
of formal information. Descriptive type of research has been
used it including interviews. The major purpose of descriptive
research is to describe the state of affairs.

DATA COLLECTON METHOD

DATA COLLECTION

PRIMARY DATA SECONDARY DATA

42
Primary data
• Primary data is collected through the interview of customers
of Reliance Money. Questionnaire filled by them is used.
Interview of employees of the company is also taken.
Secondary data

• Secondary data is collected through internet and articles


related to the study are also referred for the study.

DATA INTERPRETATION

Data interpretation has been done by using chi square. Chi square
allows us to test whether the difference between the proportions
representing more than two samples is significant or not. It is
used to determine whether the two attributes according to which
a population is categorized are independent of each other or not.

DEGREE OF FREEDOM: For applying chi square degree of freedom


is an important element.

Degree of freedom= (number of rows-1) (number of


columns-1)

SAMPLING

In sampling, customers of Reliance Money will be targeted. This


sampling will be done from the customers in Dehradun region
only.

SAMPLING TECHNIQUE: Random sampling

SAMPLE SIZE: Sample size will be fifty.


43
HYPOTHESIS FOR STUDY

HYPOTHESIS TESTING:

Hypothesis testing begins by making an assumption about the


population parameter. We gather sample data and determine the
sample statistics. To test the validity of hypothesis the difference
between the hypothesized value and the actual value of the
sample statistics will be determined. If the difference between the
hypothesized population parameter and the actual value is large
then we automatically reject our hypothesis. If it is small, we
accept it.

Two types of hypothesis null and alternate hypothesis is used.

The null hypothesis asserts that there is no (significant) difference


between the statistic and the population parameter. Any
hypothesis which contradicts the null hypothesis is called
alternate hypothesis.

LEVEL OF SIGNIFICANCE:

It shows the probability of rejection of hypothesis when it should


be accepted. When we choose 5% level of significance in a test
procedure, there are about 5 cases in 100 that we would reject
hypothesis when it should be accepted and we are 95% confident
that we have made the right decision.

Hypothesis for study is following.

NULL HYPOTHESIS (H0): There is no significant difference in


the satisfaction level given by PMS of Reliance Money and three of
its competitors.

ALTERNATE HYPOTHESIS (H1): There is significant difference in


the satisfaction level given by PMS of Reliance Money and three of
its competitors.

44
LEVEL OF SIGNIFICANCE: 5% Level of significance has been
taken for the study

HYPOTHESIS TESTING

Hypothesis is being used in this study to know if there is


significant difference in the satisfaction level given by PMS of
Reliance Money and its three competitors or not. Null and
alternate hypothesis are as following.

NULL HYPOTHESIS (H0): There is no significant difference in the


satisfaction level given by PMS of Reliance Money and its three
competitors.

ALTERNATE HYPOTHESIS (H1): There is significant difference in


the satisfaction level given by PMS of Reliance Money and its
three competitors.

HSBC RELIANC RALIGARE INDIA


E MONEY SECURITIE BULLS
S
SATISFIED 33 40 26 20

NOT 17 10 24 30
SATISFIED
TOTAL 50 50 50 50

45
TABLE

According to the data of satisfied and unsatisfied customers in


table hypothesis can be tested.

Observe Expected Fo- Fe (Fo- Fe) (Fo- Fe)(Fo-


frequenc frequency (Fo-Fe) Fe)/Fe
y (Fo) (Fe)
40 30 10 100 3.33

33 30 3 9 .3
26 30 -4 16 .533
20 30 -10 100 3.333
10 20 -10 100 5
17 20 -3 9 .45
24 20 4 16 .8
30 20 10 100 5
Total 18.746

Value of chi square = 18.746

Degree of freedom = (number of rows-1) (number of columns -1)

= (2-1) (4-1)

=3

46
According to level of significance (5%) and degree of freedom (3)
chi square statistic is 7.815

Since the sample chi square statistic (18.746) does not fall in the
acceptance region (7.815) we reject the null hypothesis.

As null hypothesis is rejected, alternate hypothesis is


automatically accepted. So we can say ‘there is significant
difference in the satisfaction level given by PMS of
Reliance Money and its three competitors.’ Thus these
companies in security market are providing different level of
satisfaction through different portfolio management services.

47
Frequently asked questions
Q1. What is the difference between a discretionary and a non-discretionary Portfolio
Management Services?

Ans. The discretionary portfolio manager will independently


manage the funds of each client in accordance with the needs of
the client. The non-discretionary portfolio manager will provide
advisory services enabling the client to take decision with
regards to his portfolio.

Q2. How can I introduce my initial corpus?

Ans. Initial corpus can be brought into the Portfolio Management


Service by way of either Cash and/or securities. The initial
portfolio of securities will be re-aligned as per the model.

Q3. Do you guarantee the initial corpus and any ‘return’ thereon?

Ans. Returns cannot be guaranteed as per regulations governing


Portfolio Management Services in India. However our objective is
to out perform the benchmark indices. We believe, over long
term, Equity performance will track corporate performance.
Therefore historical trends indicate that well managed portfolio in
Indian equities can yield 15-18% p.a. returns. (Based on market
trends & discretion of portfolio manage).

Q4. Is there a maximum limit for investing in the Portfolio Management Service?

Ans. There is no upper limit on the amount you can invest in the
PMS.

Q5. What is the time horizon?

Ans. The ideal time horizon for a equity portfolio is at least 12-18
months.

Q6. Does the Portfolio Management Service have any lock-in period?

Ans. There is no lock-in period. You can exit/redeem at any point


of time.
48
Q7. How can I check the NAV positions and transactions?

Ans. You can check your portfolio anytime by logging on to our


website www.angeltrade.com. & then click on PMS link. You will
also get a monthly statement of transactions & holdings.

Q8. How will I receive the Contract Notes?

Ans. We don’t issue contract notes but a detailed statement of


accounts will be emailed at the end of each month. We will also
sent Physical copy of the same every quarter.

Q9. Are there different forms for different funds?

Ans. No, the same form can be used for any scheme.

Q10. What amount will be compulsorily invested at any given time?

Ans. The fund manager will decide on the amount of investment


according to the market conditions.

Q11. Can I specify investments that I prefer to hold?

Ans. No, the discretion to invest primarily lies with the Portfolio
Manager with the objective to maximize your returns.

Q12. In whose name investment will be made?

Ans. All investments will be made in the name of the scheme.

Q13. What is the paperwork and documentation needed to open a PMS account?

Ans. Documents required: •Bank statements

• Account Opening Form Q14. What is the Fee Structure for PMS?
• The Risk Disclosure
• Address Proof Q15. Can I withdraw my profit any time?

• Identity proof
Ans. Feecard
• Pan Structure:
copy
Asset Management Fess: 2.0% pa

Brokerage: 0.5% per transaction


49
Management fees are chargeable on daily average NAV at the
end of each quarter or on withdrawal of funds, whichever is
earlier.
Ans. Yes, you can withdraw your profit as & when you want,
provided you maintain the minimum ticket size.

Q16. What if I terminate from the PMS before one year?

Ans. You can terminate from PMS at any time; charges as agreed
would be applicable.

FINDINGS

• The prices for futures contracts for delivery in a given future


month can vary greatly over time. Owing to the large price
changes, it is evident that even if the futures price correctly
anticipates the target spot price periodically, continued price
changes inevitably lead to differences from the future realized
price.

• The differences between futures prices and the corresponding


realized spot prices do not necessarily diminish over time. While
the prices of some futures contracts performed adequately as
predictors of the Henry Hub spot price in the last month of
trading, settling within 4 percent of the realized Henry Hub spot
price, the prices for these contracts and those for delivery in other
months generally failed to perform very well as predictors during
the course of trading.

50
• Although prices for futures contracts in any given heating
season may exhibit a systematic bias (e.g., consistently
underestimating prices for the 2002-2003 heating season), the
patterns do not evolve in a predictable way between seasons.
This would impede attempts to use futures prices to predict
actual heating season prices based on previous patterns in the
data.

• Portfolio management service (PMS) is a type of professional


service offered by portfolio managers to their client to help
them in managing their money in less time. Portfolio managers
manage the funds of clients considering their personal
investment goals and risk preferences.

In addition to money, the portfolio managers manage the portfolio


of stocks, bonds, and mutual funds. The assets in the portfolio
should be selected in such a manner that the risk and return
paradigm for the investor gets maximized. While constructing the
portfolio, the time horizon and the objective of the investment
should always be at the back of the investor’s mind so as to
derive the maximum benefit out of it. By analyzing the primary
and secondary data, we can say that almost all the companies of
financial market are coming forward in aspect of Portfolio
Management Services.

Reliance Money is continuously improving in terms of portfolio


management services. More and more services are offered by the
bank for satisfying the customers. Online service and other after
sales services have increased a lot. Thus by study till date we can
conclude that relevance of PMS has increased a lot in financial
market.

51
Glossary

Active Member:
Member of the IDA in good standing.

Alternate Designated Person (ADP):


A partner, officer or director of the firm reporting to the
Ultimate Designated Person and responsible for ensuring
that the business of the Member is carried out in
compliance with applicable laws and regulations. An ADP’s
responsibility may be limited to a particular function or area
of the Member’s business.

Alternate Registered Futures Options Principal


(ARFOP):
Where necessary to ensure continuous supervision, one or
more alternate registered futures options principals may be
approved, who will report to the DRFOP. This individual
must be a director, partner or officer of the Member firm
and approved to trade in futures. In the absence or
incapacity of the DRFOP, this alternate may assume the
authority and responsibility of the DRFOP.

52
Alternate Registered Options Principal:
Where necessary to ensure continuous supervision, one or
more alternate registered options principals may be
approved, who will report to the DROP. This individual must
be a director, partner, or officer of the Member firm. In the
absence or incapacity of the DROP, or when trading activity
of the Member requires additional qualified persons in
connection with the supervision of the Member’s business,
this alternate may assume the authority and responsibility
of the DROP.

Assistant Branch Manager:


An officer (trading) or salesperson, reporting to a branch
manager, who is approved to supervise activity conducted
in a branch office. An assistant branch manager’s
responsibility may be limited by the Member to certain
functions or areas of the Member’s business. An assistant
branch manager is approved to take the authority of a
branch manager in the absence or incapacity of the branch
manager.

Associate Portfolio Manager – Commodity Futures


Options:
A Partner, Director, Officer or Salesperson who is approved
to manage accounts which trade in futures contracts and
futures contract options, under the supervision of an
approved Futures Contract Options Portfolio Manager.

Associate Portfolio Manager – Securities:


A Partner, Director, Officer or Salesperson who is approved
to manage accounts in securities, under the supervision of
an approved Portfolio Manager.

Associate Portfolio Manager – Security Options:


A Partner, Director, Officer or Salesperson who is approved
to manage accounts containing securities and securities
options, under the supervision of an approved Portfolio
Manager.

Branch Manager:
53
An officer (trading) or salesperson who is approved to
supervise activity conducted in a branch office.

Chief Compliance Officer:


An officer who, when not also designated as the Ultimate
Designated Person (UDP), reports to the UDP regularly (and
at least annually to a Member’s board of directors, or
equivalent) to ensure that the businesses of the Member
are carried out in compliance with the applicable self-
regulatory organization’s by-laws, regulations, policies and
forms. More specifically, the CCO monitors adherence to the
Member’s policies and procedures, as necessary, to ensure
that the management of the compliance function is
effective and to provide reasonable assurance that
applicable standards are met.

Close Supervision:
Close supervision of the registrant’s activities by a partner,
director, officer or branch manager of the firm on his or her
trading activities and dealing with clients. Written monthly
supervision reports are either retained by the Member firm
or submitted to the IDA.

Co-Branch Manager:
An officer (trading) or salesperson who is one of two or
more persons approved to share the responsibility for the
supervision of a branch.

Designated Registered Futures Options Principal


(DRFOP):
A partner, director or officer approved to trade in futures,
who has the authority and responsibility for ensuring that
the handling of customer business relating to futures
contracts or futures contract options is in accordance with
the by-laws, regulations, rulings and policies of the

54
Association.

Designated Registered Options Principal:


A partner, director or officer of the Member who is
responsible for establishing and maintaining procedures for
account supervision and ensuring that the handling of
customers’ business relating to options is in accordance
with the by-laws, regulations, rulings and policies of the
Association.

Director (Industry):

An individual appointed to the Board of Directors, who is


employed by the Member, a subsidiary or financial
institution, or a securities dealer that is a related company
to the member.

Director (Non-Industry):
An individual appointed to the Board of Directors who is not
employed by the Member, a subsidiary or financial
institution, or a securities dealer that is a related company
to the Member.

Futures Contract Options Supervisor:


A partner, director or officer approved to trade in futures,
who is approved to supervise staff and activities involving
futures trading within a branch office.

Inactive Member – Voluntary:


This status may be granted to a Member firm by the IDA
Board for a fixed period of time wherein special
circumstances are extant.

Industry Investor:
An individual who is actively engaged in the business of a
Member and who beneficially owns securities of the
Member.

Investment Futures Contract Representative Options


(Non-Retail):

55
An individual who is approved to trade in futures, but is
prohibited from providing advice to the public and is
restricted to dealing with non-retail clients only.

Investment Futures Contract Representative Options


(Retail):
An individual who is approved to trade in futures, but is
prohibited from providing advice to the public.

Investment Representative (Mutual Funds):


An individual who is approved to trade in mutual funds, but
is prohibited from providing advice to the public in Canada.

Investment Representative (Non-Retail):


An individual who is approved to trade in securities, but is
prohibited from providing advice to the public and is
restricted to dealing with non-retail clients only.

Investment Representative (Retail):


An individual who is approved to trade in securities, but is
prohibited from providing advice to the public.

Investment Representative Options (Non-Retail):


An individual who is approved to trade in securities and
options, but is prohibited from providing advice to the public
and is restricted to dealing with non-retail clients only.

Investment Representative Options (Retail):


An individual who is approved to trade in securities and
options, but is prohibited from providing advice to the
public.

Non-Industry Investor:
An individual who beneficially owns securities of the
Member, and who is not an industry investor.

Officer (Non-Trading):
56
An individual approved by the IDA. Officer titles include the
chair or any vice-chair of the board of directors, the
president, any vice-president, the secretary, the assistant-
secretary, the treasurer, the assistant treasurer, the
comptroller or the general manager of a Member, or any
other person designated an officer of a Member by by-law
or similar authority, who is not approved to trade and
advise the public in Canada.

Officer (Trading):
An individual approved by the IDA. Officer titles include the
chair or any vice-chair of the board of directors, the
president, any vice-president, the secretary, the assistant-
secretary, the treasurer, the assistant treasurer, the
comptroller or the general manager of a Member, or any
other person designated an officer of a Member by by-law
or similar authority, who is approved to trade and advise
the public in Canada.

Portfolio Manager – Commodity Futures Options:


Partner, Director, Officer or Salesperson of a Member
designated and approved to manage managed accounts
containing futures contracts and futures contract options.

Portfolio Manager – Securities:


Partner, Director, Officer or Salesperson of a Member
designated and approved to manage managed accounts
containing securities.

Portfolio Manager – Security Options:


Partner, Director, Officer or Salesperson of a Member
designated and approved to manage managed accounts
containing securities and securities options.

Registered Futures Contract Representative Options


(Non-Retail):

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A Partner, Director, Officer or Salesperson registered under
the Commodity Futures Act, who is approved to trade and
advise in futures contracts and futures contract options with
the public in Canada and is restricted to dealing with non-
retail clients only.

Registered Futures Contract Representative Options:


A Partner, Director, Officer or Salesperson registered under
the Commodity Futures Act, who is approved to trade and
advise in futures contracts and futures contract options with
the public in Canada.

Registered Representative (Mutual Funds):


A Partner, Director, Officer or Salesperson who is approved
to deal with the public to sell mutual funds.

Registered Representative (Non-Retail):


A Partner, Director, Officer or Salesperson who is approved
to trade and advise in securities with the public in Canada
and is restricted to dealing with non-retail clients only.

Registered Representative (Retail):


A Partner, Director, Officer or Salesperson who is approved
to trade and advise in securities with the public in Canada.

Registered Representative Options (Non-Retail):


A Partner, Director, Officer or Salesperson who is approved
to trade and advise in securities and options with the public
in Canada and is restricted to dealing with non-retail clients
only.

Registered Representative Options (Retail):


A Partner, Director, Officer or Salesperson who is approved
to trade and advise in securities and options with the public
in Canada.

Resigned Member - Pending Approval:


Notification is received from a Member advising of their

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intention to resign.

Sales Manager:
An officer (trading) or salesperson who has been approved
for directo or indirect supervisory responsibility over any
sales management personnel of a Member firm. Individuals
falling into this category would normally have supervisory
responsibility over branch managers.

Strict Supervision:
Strict supervision of the registrant’s activities by a partner,
director, officer or branch manager of the firm on his or her
trading activity and dealings with clients. This form of
supervision also requires pre-approval of orders before
entry. Written monthly supervision reports are submitted to
the Association.

Surrendered Membership:
If two Member firms amalgamate and the acquiring firm
signs an undertaking to pay any outstanding debt/liabilities
of the acquired firm, the acquired firm may surrender their
Membership rather than resign.

Suspended Member:
A Member not entitled to exercise the rights and privileges
of Membership.

Terminated Member:
A firm that has 'Resigned - Pending Approval' status is
terminated upon completion of the resignation process.

Trader – CATS:
A registered representative who is not permitted to trade or
advise clients, and whose activities are restricted to
electronic trading.

Trader – Commodity Floor Trader:


A registered representative who is not permitted to trade or

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advise clients, and whose activities are restricted to
electronic trading in commodities.

Trader – TradeCDNX/Trader – TSXVN:


A registered representative who is not permitted to trade or
advise clients, and whose activities are restricted to
electronic trading in British Columbia.

Ultimate Designated Person (UDP):


A senior officer with overall responsibility for the conduct of
the Member firm. The UDP is responsible for ensuring that
policies and procedures are developed and implemented to
meet the regulatory requirements on the Member.

QUESTIONNAIRE

Q1. Do you invest in share market?

a. Wants to invest
b. Never
c. Rarely
d. Too much

Q2. Have you invested in PMS?

a. Not too much


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b. Wants to invest
c. Does not want to invest
d. Does not have knowledge about PMS

Q3. Through which company you have invested?

a. HSBC
b. Reliance Money
c. Religare
d. ABN AMRO

Q4. Are you satisfied with the services provided by the


company?

a. Fully Satisfied
b. Not too much

Q5. Do you know about the PMS of reliance money?

a. Not at all
b. Not too much
c. Lots of information

Q6. Do you want to invest through reliance money?

a. Yes
b. No
c. Wants to get information
d. Already investing through Reliance Money

Q7. Would you like to invest in the PMS containing


futures?

a. Yes
b. Don’t have information
c. Already invested

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Q8. According to you which of the following is the safest
way to invest in share market?

a. Equity (Intraday & Delivery)


b. Mutual Funds
c. Portfolio with Futures
d. Portfolio without Futures

Q9. As a service provider rank the companies providing


PMS?

Rank Poor Average Good Outstandin


Company g
Reliance
Money
HSBC Asset
Manageme
nt
Religare

ABN AMRO

BIBLIOGRAPHY

• www.Investopedia.com

• Investor guide

• AMFI workbook

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• www.bseindia.com

• www.nseindia.com

• www.Rediffmail.com

• www.economicstimes.com

• www.google.com

• Business today, Business world

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