A REPORT ON Study of the investment process And Investment options in Kotak Mahindra bank

BY
Anurag Sharma (10BSPHH010138)

A REPORT ON Study of the investment process And Investment options in Kotak Mahindra Bank BY Anurag Sharma (10BSPHH010138) A report submitted in partial fulfillment of The requirement of MBA Program of IBS Hyderabad

Distribution List

Faculty Guide Prof. D. Sreenivash Chary Kotak Mahindra Bank

Company guide Mr. Ravindra Thakkar

Submission date:- 15th april 2011

Page | 2

Abstract:This project deals with the investment options available in kotak Mahindra bank and how these investment options are allotted according to risk appetite of the customer. In modern world every one wants to grow his asset and increase his money base. Money is like seed until or unless if you will not invest it, it will not grow and you can not enjoy that delicious fruit. Idle money is not of any use. Risk profiling is the technique through which investment companies and bank find out their prospective investors and analyze the needs and financial goals of investors. Risk profiling is basically done through various methods such as survey, interviews. I have selected survey as a tool to analyze the risk appetite of customers in three regions i.e Bodakdev, chandkheda & himmatlal park. Then analysis of that is done and divided customers into five categories such as conservative, moderately conservative, moderate, moderately aggressive and aggressive. After analyzing the risk kotak bank offers investment products from its wide range of investment options. Kotak Mahindra bank has different types of investment options such as broking in stocks and bonds, pension scheme, term deposits, private equity, real estate funds, mutual funds, structured bonds etc. These investment products have different types of benefits and plans according to the customers needs. Every bank or financial institution wants to prove that its investment products are far better than other banks products, this is quite interesting study and gives much better idea about the current market demand and perception of investors. So this comparative analysis will be done while keeping in mind the basic features of available investment products and current market situation.

Page | 3

KOTAK MAHINDRA
Kotak Mahindra is one of Indias leading financial institutions, offering financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate. The group has a net worth of around Rs. 10,000 crore and employs over 20,000 employees in its various business. With presence in 317 cities in India and offices in New York, London, Dubai and Mauritius, it services a customer base of over 2400000. Kotak enjoys leadership in most of the businesses including stock broking, investment banking and retail lending. With a brand slogan of Think investment Think Kotak, Kotak enjoy a particularly strong franchise in the arena of investments and capital markets. Kotak is also known for the values of trust, integrity and financial prudence with which the entire business and franchise developed. Not only are we one of the most preferred company to do business with, Kotak is also one of the most preferred employers in the financial services industry.

History of the Organization

Kotak Mahindra one of India's leading financial institutions was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by Mr. Uday Kotak, Mr. Sidney A. A. Pinto and Kotak & Company. Industrialists Mr. Harish Mahindra and Mr. Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. Then in 2003 RBI had given permission to kotak to change into bank. It was the first financial institution that was converted into bank.

Page | 4

It's been a steady and confident journey to growth and success.

Year 1986 1987 1990 1991 1992

Activities of the Company Kotak Mahindra Finance Limited starts the activity of Bill Discounting. Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market. The Auto Finance division is started. The Investment Banking Division is started. Takes over FICOM, one of Indias largest financial retail marketing networks. Enters the Funds Syndication sector. Brokerage and Distribution businesses incorporated into a separate

1995

company - Kotak Securities. Investment Banking division incorporated into a separate company - Kotak Mahindra Capital Company. The Auto Finance Business is hived off into a separate company - Kotak

1996

Mahindra Prime Limited. Kotak Mahindra takes a significant stake in Ford Credit Kotak Mahindra Limited, for financing Ford vehicles.

1998

Enters the mutual fund market with the launch of Kotak Mahindra Asset Management Company. Kotak Mahindra ties up with Old Mutual plc. for the Life Insurance

2000

business. Kotak Securities launches its on-line broking site.

2001 2003 2004

Matrix sold to Friday Corporation. Launches Insurance Services. Kotak Mahindra Finance Ltd. converts to bank Launches India Growth Fund, a private equity fund. Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra

2005

Prime and sells Ford credit Kotak Mahindra. Launches a real estate fund

Page | 5

The above table can be shown graphically as follows.

Key group companies and their businesses Kotak Mahindra Bank Ltd. Kotak Mahindra Bank Limited (KMBL) is the holding company and the flagship of the Kotak Mahindra Group. It was actually incorporated as Kotak Capital Management Finance Limited on November 2, 1985 and obtained its Certificate of Commencement of Business on February 11, 1986. It commenced operations with Bill Discounting and soon started other fund-based activities like corporate leasing & hire purchase, automobile finance and money market operations. Subsequently, it also entered the funds syndication and the Investment banking business.

SALIENT FEATURES OF KOTAK BANK Reputed Private sector Bank in India Leading financial Brand Page | 6

One of the largest financial institutions in India. Broad spectrum of financial solutions for corporate & retail customers Assets base in excess of Rs. 1800 crores AAA rated by credit Agencies Indias First NBFC to convert into Bank. Top 3 in Financial services Customer base of 5 lakhs Won several national and International Awards 8000 professional employees

KOTAK MAHINDRA PRIME LIMITED Kotak Mahindra Prime Limited (KMPL) is a 100% subsidiary of Kotak Mahindra Group (Kotak Group) formed to finance all passenger vehicles. The company is dedicated to financing and supporting automotive and automotive related manufacturers, dealers and retail customers. The Company offers car financing in the form of loans for the entire range of passenger cars and multi utility vehicles. The Company also offers Inventory funding to car dealers and has entered into strategic arrangement with various car manufacturers in India for being their preferred financier. As on March 31, 2006, KMP has a retail distribution network comprising of 52 branches (including representative offices) covering about 100 locations in 16 states in the country and has a wide network of Direct Marketing Associates, brokers and agencies supporting the distribution network and servicing around 139202 contracts. Head Vinay Bhavya Complex, Kalina, Santacruz Tel no.: Website: www.kmpl.com office 1st (East), (022) address: Road, 400098 9000

floor,

159, Mumbai 2650

CST

KOTAK MAHINDRA CAPITAL COMPANY LIMITED Kotak Investment Banking* (KIB) is India's premier Investment Bank Kotak Investment Banking (KIB) and Kotak Institutional Equities represent the securities business of the Kotak Mahindra Group **(KI), Kotak Investment Bank is a full service Investment Bank bringing to its clients the global reach and the local knowledge and skills of Kotak Mahindra. As a full service Investment Bank, Kotak Investment Banking's core business areas include Equity Issuances, Mergers & Acquisitions, Advisory Services and Fixed Income Securities and Principal Business. Page | 7

Its strength lies in understanding the clients' businesses backed by a strong research team and an extensive distribution network, which spans a wide variety of investors across the country. It is also the first Indian Investment Bank to be registered with the Securities & Futures Authority in the UK (through our wholly owned subsidiary) and the National Association of Securities and Dealers in the USA. Its the first Indian Investment Bank to be appointed by the Government of India as a Co-lead Manager in their international divestment of Gas Authority of India Ltd through a GDR offering. Kotak Investment Bank today well positioned in an increasing globalised environment to provide full service to its clients based either in India or overseas.

KOTAK MAHINDRA ASSET MANAGEMENT COMPANY Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has close to 4, 27,450 investors in various schemes. KMMF offers schemes catering to investors with varying risk - return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. Head Bakhtawar, 5th floor, Tel no.: Website: www.kmutual.com office 229, Nariman Point, (022) address: 400021 22024884

Mumbai

Page | 8

KOTAK SECURITIES Kotak Securities Ltd., subsidiary of Kotak Mahindra Bank Ltd., is one of Indias largest brokerage and distribution house. Over the years Kotak Securities has been one of the leading investment service providers catering to the needs of various investor categories both institutional and non-institutional. The Private client group (PCG) of the Company provides value added investment advisory services to high net worth individuals, NRI investors, trusts, corporate and Banks. The investment product range offered by PCG covers equity investment and equity trading, equity derivatives, portfolio management, IPOs and Mutual funds. The Company has a full fledged research division involved in macro economic studies, sectoral research and company specific equity research combined with a strong and well networked sales force which helps deliver current and up to date market information and news. Kotak Securities Ltd., Depository Participant with National Securities Depository Limited (NSDL) and Central Depository Services Ltd. (CDSL) provides dual benefit services wherein the investors can use the brokerage services of the Company for executing the transactions and the depository services for settling them. Under the Portfolio Investment Scheme offered by the Company, the funds of the investors are managed by a highly competent team comprising of Equity Strategist, a Portfolio Manager and a team of equity, technical and derivatives analysts. Kotak Street - the retail arm of Kotak Securities Ltd., offers online (through http://www.kotaksecurities.com/ ) and offline services, its well researched expertise and financial products to the retail investors. Kotak Securities Ltd., also an Approved Intermediary under the Securities Lending Scheme, 1997, facilitates clients to borrow and lend securities.

INTERNATIONAL SUBSIDIERIES Kotak Mahindra International Limited (KMIL) is the international arm of the Kotak Mahindra Group and was incorporated in 1994 in Mauritius, with a branch in Dubai. Today the international operations also cover the United Kingdom, through Kotak Mahindra U.K. Limited and in the USA, through Kotak Mahindra Inc. USA. These companies are subsidiaries of Kotak Mahindra Capital Company (KMCC) the Investment Banking Division of the Group. Services offered include GDR and ADR trading and broking, debt syndication, placement of Indian securities and advisory services. Kotak Mahindra was the first Indian group to be registered with the Securities and Futures Authority, U.K. Also, Kotak Mahindra is the first Indian group registered in the US providing service to both Institutional investors and High Networth Clients in the US for their investments into Indian markets.

Page | 9

BOARD OF DIRECTORS Mr. K.M.Gherda Executive Chairman Mr. Uday Kotak Executive Vice Chairman and Managing Director Mr. Anand Mahindra Co Promoter of Kotak Mahindra Bank and Vice Chairman and Managing Director of Mahindra and Mahindra Mr. Cyril Shroff Co Promoter Mr. Pradeep N Kotak Agri Division of Kotak and Company Limited Dr. Shanker Acharya Mr. Shivaji Dam Managing Director Kotak Mahindra Old Mutual Life Insurance Limited Mr. C.Jayaram Executive Director Mr. Dipak Gupta Executive Director

Page | 10

VISION STATEMENT

The Global Indian financial Services Brand: Our customers will enjoy the benefits of dealing with a global Indian brand that best understand their needs and delivers customized pragmatic solutions across multiple platforms. We will be a world class Indian financial services group. Our technology and best practices will be benchmarked along international lines while our understanding of customers will be uniquely Indian. We will be more than a repository of our customers savings. We, the group, will be a single window to every financial service in a customers universe.

The most preferred employer in financial services: A culture of empowerment and a spirit of enterprise attract bright minds with an entrepreneurial streak to join us and stay with us. Working with a home grown professionally managed company, which has partnerships with international leaders, gives our perspective that is universal as well as unique.

The most trusted financial services company: We will create an ethos of trust across all our constituents. Adhering to high standards of compliance and corporate governance will be an integral part of building trust.

Value Creation: Value creation rather than size alone will be our business driver Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate. Kotak Mahindra has international partnerships with Goldman Sachs (one of the world's largest investment banks and brokerage firms) and Old Mutual (a large insurance, banking and asset management conglomerate). Page | 11

FUTURE OUTLOOK

Kotak Mahindra Bank expects to expand its banking activities over the next one year by setting up additional branches in major cities around the country. With the expansion of the branch network, your Bank expects to broad base the product offering with a view to deepening relationships with customers. The commercial vehicle market has seen a robust growth over the past few months and your Bank expects to increase its market share in the financing business. With the development of the national highway projects, an increase is also expected in the construction equipment financing business. Your Bank proposes to expand its geographical reach in the personal loans business. It has now put in place the requisite infrastructure, systems and processes for financing housing loans and this business is expected to grow during the current year. Your Bank is in the process of setting up a comprehensive cash management system offering customer services in the collections and payments area. It expects to play a more active role in financing small and medium enterprises, largely through capturing supply chain businesses. The key challenge over the next year would be to establish the required branch banking infrastructure and leverage on the large existing customer base to develop a robust retail banking base. Kotak Mahindra Bank Limited has informed that the Bank's equity shares will be delisted from The Stock Exchange, Ahmedabad with effect from January 20, 2004. Kotak Mahindra, one of leading financial services companies, the company also unveiled its new corporate identity on the occasion. The bank will open its door to retail and corporate clients on March 31. It also plans to invest Rs.120 crores over three years for infrastructure, technology and personnel. The promoters' stake in the bank, which is at 62 per cent at present, will be brought down to 49 per cent according to the Reserve Bank of India stipulation. The bank will be the parent holding company with five subsidiaries under it. The total net worth of the group is Rs. 1,400 crores. At present, the net NPAs is at 0.01 per cent. Backed by 20 years of expertise in the financial services business, Kotak will offer complete practical financial solutions from retail finance, stock broking, mutual funds, life insurance to investment banking. From the first day of operations, the bank customers will have access to over 800 ATMs free of cost, through a sharing agreement with UTI Bank. Additionally, the customers will have access to the entire VISA network of 4,500 ATMs in India and eight lakh ATMs worldwide, at a nominal cost and will get Visa debit cards, accepted in more than 56,000 establishments across India and over ten million establishments worldwide. The bank plans to grow in its existing line of businesses of commercial vehicles, personal loans, trade finance and capital market. It also plans to enter into housing finance in 200304. The new bank is planning to establish 75 branches in the next three years and 25 branches by March 2004. The bank is targeting high net worth clients, mainly in Mumbai and Delhi and subsequently in other cities. It will aggressively sell savings accounts and current accounts to lower their cost of funds. The bank will integrate all financial solutions under a single roof and also act as an outlet for the products and services provided by the Page | 12

subsidiary companies. The bank and its subsidiaries have a network spread around 50 locations in India and its client base of over five lakh customers.

Introduction:Purpose:At a very macro level investment banking as term suggests, is concerned with the primary function of assisting the capital market and individual for making the movement of financial resources from those who have them to those who need to make use of them for generating GDP. Banking and financial institutions on the one hand and capital market on the other are two broad platforms of institutional that investment banks are those institutions that are counterparts of banks in the capital markets in the function of intermediation in the resource allocation. According to John F. Marshall and M.E. Eills, investment banking is what investment banks do. This definition can be explained in the context of how investment bank have evolved in their functionality. My basic aim to do this project is to find out different risks associated with investments and to analyze the investment process and available investment options in kotak Mahindra bank. Money move from one hand to other and this is the basic nature of money. So bank works as a intermediary between investor and market. But it is quite difficult task to fetch money from pocket of the investor. It is a long way process and require deep research on investment pattern and requirement of people. So before offering any investment plan to customer, banks usually do detailed research regarding the customer requirement and do risk profiling.

Scope :In todays world money can not be put in pot and behind the walls for future needs. In spite of these options now people has more secure and more beneficiary investment options for their future needs. In this project initially I had done risk profiling of customers and on basis of that categorized the customers according to their risk appetite and offering them available investment products according to their need.

Limitations:There are some limitations associated with the project. Some customers feel uncomfortable to reveal some personal information relating to income etc. it might have happened that some more essential information could have been collected. The other limitations are: Time constraint. Biases and non-cooperation of the respondents. Financial constraint. Geographical selectivity in study limiting to Ahmedabad Branch only. Page | 13

People are not interested in giving personal opinion.

Methodology:The primary data was collected from the questionnaire prepared and customers are asked to tick the appropriate option. The questionnaire was to assess the risk appetite of customers and find out the nature of the customer. The questionnaire was the standard one that was given by kotak Mahindra bank itself and analysis is done on percentage basis.

Literature review:1. Hoevenaarsa, Molenaar, Schotmana and Steenkamp (2007)1, find out the relationship between different asset class return and the risk associated with them. They also try to find out the choice preference between the asset-only and asset-liability type of investors. They found that alternative asset classes add value for long-term investors. Also for hedging against inflation risk, commodities are the best option, since their returns move closely with inflation in the short and long run. Commodities have the best diversifying properties relative to stocks and bonds. They also found that for an investment period of more than 5 years, the asset-liability investors gain more than the asset-only class of investors. The assetliabilityinvestors focus more on interest rate and fixed income products as compared to asset-only investors. 2. Salvary (2004)2 founds that large portfolios of marketable equity are held by the nonfinancial firms in order to ensure availability of funds in the near future. To ensure this the firm has to incur some costs. Thus corporate earnings retention is a case of optimization under uncertainties and dividend policy is viewed as an instrument of risk management. Further the researcher found that mitigating the risk in any form involves some costs. He suggests that the two best ways of mitigating the risk is insurance and hedging. He also suggested one more alternative form of mitigating the risk. As per the research, retention of corporate earnings by means of dividend policy provides a firm with an important means of mitigation. The cost associated with hoarding is no different from the cost associated with the purchase of insurance for the same purpose. 3. Padilla (et. al.2004)3, used a quantitative approach to build hedge fund portfolios. The main idea of the dynamic and complete process used by them was to obtain the data generating process of excess returns and to understand how investors take investment decisions in order to apply tactical asset allocation strategies using futures and portfolio of options.
4

4. Angerer and Lam (April, 2009) , have tried to find the relationship between the labor income and the choice of portfolio. The results show that the risk to permanent income Page | 14

significantly reduces the share of risky assets in the portfolio of an investor.

Outline:In brief this project deals with the identification of risk meter of customers of three region i.e bodakdev, himmatlal park and chandkheda in Ahmadabad and also thoroughly analyze the presently available investment products.

Main text:Research Objectives:

1. To identify risk appetite of customers and categorize them into five category:(i) Conservative (ii) Moderately conservative (iii) Moderate (iv) Moderately aggressive (v) Aggressive

2. To study the complete flow of investment process. 3. Analyze available investment options in kotak Mahindra bank and suggest on basis of risk appetite of customer.

Overview:This project deals with risk assessment of customers and analyzing investment options and find out the feasibility and benefits associated with that products. How do the bank attract and complete the investment process? It is a step by step process from analyzing the psychology and need of customers and then research and develop new investment products. This process has well defined steps :1. Identify potential customer (a) Identify basic need of investors (b) Judge risk appetite of investors (c) Make blueprint of available investment products in bank and compatibility of them with investors need

Page | 15

2. Opening banking account 3. Identify existing investment pattern & review 4. Portfolio proposed for new investment 5. Review of investment on quarterly basis

Investment Style

Theoretical Framework:Risk profiling is the method to analyze the ability of customers to bearing risk while they invest in capital and money market. Before suggesting investment products to customer it is mandatory to analyze the weight of risk that he can bear. This grid help to analyze the risk of customer

Lazy

Active

Rich

Poor

Wealth

Initially we first analyze our customer and try to put him in above mentioned grid.whether his investment style is active or lazy and also look on his wealth whether he is rich or poor. So on the basis of the investment style and wealth we can decide the nature of the investors.

Page | 16

High

punts with part of wealth

Aggressive

Risk
preserver

Low Inherited

moderate capital growth

Earned

Wealth
(1) If risk appetite is high and he has inherited wealth then he is prospective customer and can invest money without much discussing risk associated with it. (2) If risk appetite is low and investor has inherited wealth then he is called preserver i.e. he has wealth but much concerned about his investment. (3)If risk appetite is high and investor earn the money the n we can say him daring and risk seeker,he always go for growth mutual funds and want high return irrespective of risk associated with security. (4)If risk appetite is low and person has earned money then he looks for moderate capital growth and we can say him much smart investor. he always concern much about his investment and consult with broker and friend before taking any step towards investment.

First of all we should know what is risk and what kind of risk are associated with investment. Financial risk is an umbrella term for any risk associated with any form of financing. Risk may be taken as downside risk, the difference between the actual return and the expected return (when the actual return is less), or the uncertainty of that return. Risk related to an investment is often called investment risk. Risk related to a company's cash flow is called business risk.

Types of risk:Credit risk Page | 17

Credit risk, also called default risk, is the risk associated with a borrower going into default (not making payments as promised). Investor losses include lost principal and interest, decreased cash flow, and increased collection costs. Investment risk has been shown to be particularly large and particularly damaging for very large, one-off investment projects, so-called "megaprojects". This is because such projects are especially prone to end up in what has been called the "debt trap," i.e., a situation where due to cost overruns, schedule delays, etc. the costs of servicing debt becomes larger than the revenues available to pay interest on and bring down the debt. Market risk:This is the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices:

Equity risk is the risk that stock prices and/or the implied volatility will change. Interest rate risk is the risk that interest rates and/or the implied volatility will change. Currency risk is the risk that foreign exchange rates and/or the implied volatility will change, which affects, for example, the value of an asset held in that currency

Liquidity risk:This is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). There are two types of liquidity risk:

Asset liquidity - An asset cannot be sold due to lack of liquidity in the market essentially a sub-set of market risk. This can be accounted for by: o Widening bid-offer spread o Making explicit liquidity reserves o Lengthening holding period for VaR calculations Funding liquidity - Risk that liabilities: o Cannot be met when they fall due o Can only be met at an uneconomic price o Can be name-specific or systemic

Methodology:(a) In identifying risk appetite of the customers firstly standard questionnaire was contained from kotak Mahindra bank itself and survey is done on 120 respondents. Page | 18

(b) Questionnaire for doing risk profiling was made by kotak research development team and it was provided by kotak bank itself. Types of data:- primary data Sample data:- 120 respondents Region :- bodakdev,himmatlal park, chandkheda- ahmedabad

(c) After that customers were categorized into five categories:1. 2. 3. 4. 5. (d) Conservative Moderately Conservative Moderate Moderately Aggressive Aggressive On basis of the responses given, data are analyzed through companys well structured and reliable risk analyzer tool and customers are categorized into above four category and found out the percentage distribution.

The questionnaire contained close ended questions and consist twelve questions Each questions was mainly concentrate to analyze the psychology and risk appetite of the customer and also investment pattern of customer

Interpretation and Analysis:Data were collected and analyzed through risk analyzer(a well developed and most trusted software to analyze risk appetite ).these data were found out and plotted on the graph.

Page | 19

12

10

Conservative 6 moderately conservative moderate moderately Aggressive Aggressive 4

0 Bodakdev Chandkheda Himmatlal park

This survey is done in three region bodakdev,chandkheda and himmatlal park.I collected 40 sample from each region and put them on scale of risk measurement.

Page | 20

Pie chart (region wise) 1. Bodakdev

Bodakdev

12% 28% 17% Conservative moderately conservative moderate 23% moderately Aggressive 20% Aggressive

Page | 21

2. Chandkheda

Chandkheda
15% 22% Conservative moderately conservative moderate 27% 18% moderately Aggressive Aggressive

18%

Page | 22

3. Himmatlal park

Himmatlal park

15% 25%

17%

Conservative moderately conservative moderate moderately Aggressive

28%

15%

Aggressive

By analyzing the data we can infer following findings:1. Investors in bodakdev and himmatlal park are more risk seeker in comparison to chandkheda 2. Bodakdev and himmatlal park are corporate hub and chandkheda is developing area so people in bodakdev and himmatlal park are more interested in high gain irrespective of risk associated with it. 3. There is a significant difference in income of two regions i.e bodakdev and chandkheda. After completing the risk profile of the customer, bank analyze its own investment plans and then the fund manager or portfolio manager do the rest of the things. In this project in first phase I had done risk profiling to know the risk appetite of customers and particular risk taking capability in three different regions. In second phase I had done portfolio design for five different risk appetite customers. Page | 23

Portfolio Management

Page | 24

Findings:after analyzing the risk profile of customers we can invest their money in different types of investment products available in kotak Mahindra bank. Kotak Mahindra has wide range of investment products according to the need and convenience of customers such as (1) Mutual funds (2) Share trading (3) Structured products (4) Kotak gold eternity (5) Infrastructure bonds (6) Term deposits (7) New pension schemes

Now after getting the risk appetite and financial goal of the customer one can easily find out best investment options for them. Such as Family :1 (1) Risk appetite:- aggressive growth portfolio (2) Financial goal:-(a) planning to purchase house in next ten years (b) creating long term wealth in retirement (3)Age:- 25 Page | 25

Suggested portfolio:- short term :- 10% Bond :- 15% Stocks :- 75% This family must invest in growth / equity oriented scheme mutual fund, IPO, real estate bonds. Family : 2 (1) Risk appetite :- Moderate/Balanced portfolio (2) Financial goals:- Providing for children's education (5 - 8 years) Planning for childs wedding (15 - 20 years) Planning for retirement (3) Age:- 33 Suggested Portfolio:- Stocks:- 50% Bonds- 30% Short term :- 20% this family must invest in Balanced mutual fund scheme in which 40%-60% ratio is maintained between equity and debt instrument. Kotak will suggest to invest in mutual funds, infrastructure bonds, kotak gold eternity scheme and term deposits for long period of time.

Family: 3
(1) Risk appetite:- conservative (2) Financial Goal:- planning for earning after retirement

(3) Age :- 60 Suggested Portfolio:Stocks:- 20% Bank deposits:40% Bonds:- 40% After reaching that phase of life one thinks to invest in secure and regular Income investment plans. So Term deposits and debt oriented mutual funds are best investment options that are available. Gilt fund is also a best option in which money is put into more secure and reliable government securities.

Page | 26

Plan for the completion of the project :Designing of portfolio according to the financial plan and risk appetite of investors comparison of different investment products of various banks

:-

28th of april

:- 10th of may

Page | 27

References:1. ROY P.M.M. HOEVENAARS, RODERICK D.J. MOLENAAR, PETER C. SCHOTMAN AND TOM B.
M. STEENKAMP (February, 2007): Strategic Asset Allocation with Liabilities: Beyond Stocks and Bonds. (Source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=675681) 2. STANLEY C. W. SALVARY (2004): The Underinvestment Problem, Risk Management, and Corporate Earnings Retention. (Source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=688222)

3. JUAN LADESMA PADILLA, MATIN ZEBAD (OCTOBER, 2004): Tactical Asset Allocation on Market Neutral Hedge funds. (Source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=814806) Page | 28

4. XIAOHONG ANGERER AND POK-SANG LAM(APRIL, 2009): Income Risk and Portfolio Choice: An Empirical Study. (http://www3.interscience.wiley.com/cgi-bin/fulltext/122262056/PDFSTART) 5.Websites:(a) http://www.kotak.com (b) http://www.investopedia.com (c) http://www.moneyinstructor.com (d)http://financialservicesinc.ubs.com

Page | 29