PROJECT REPORT ON

PORTFOLIO MANAGEMENT IN KARVY STOCK BROKING LIMITED

SUBMITTED TO: Prof. Saima Rizvi

SUBMITED BY: MOHIT KESHARWANI (PGDM-082) SUJEET KUMAR SINGH(PGDM-157) SUYASH CHATURVEDI(PGDM-163) PRADEEP KUMAR(FS-037) TRIVESH TRIPATHI(FS-053)

INTRODUCTION
KARVY, is a premier integrated financial services provider, and ranked among the top five in the country in all its business segments, services over 16 million individual investors in various capacities, and provides investor services to over 300 corporates, comprising the who is who of Corporate India. KARVY covers the entire spectrum of financial services such as Stock broking, Depository Participants, Distribution of financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking, Commodities Broking, Personal Finance Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs, among others. Karvy has a professional management team and ranks among the best in technology, operations and research of various industrial segments.|

THREE MAJOR ACTIVITIES INVOLVED IN AN EFFICIENT PORTFOLIO MANAGEMENT :a) Identification of assets or securities, allocation of investment and also identifying the classes of assets for the purpose of investment. b) They have to decide the major weights, proportion of different assets in the portfolio by taking in to consideration the related risk factors. c) Finally they select the security within the asset classes as identify The above activities are directed to achieve the sole purpose of maximizing return and minimizing risk on investment. It is well known fact that portfolio manager balances the risk and return in a portfolio investment. With higher risk higher return may be expected and vice versa.

CRITERIA
When a customer comes to the company for maintaining a portfolio, company follow certain criteria in which it asks following things from the customer: Age Income Savings Need Risk taking ability AGE company need to know the age of the customer because customers belonging to different age group have different ability to take risk and they have different needs. A customer in the age group of 25-30 years can take high risk and he might not need regular

returns (or fixed returns) and a customer in the age group of 50-60 can not take high risk because he has different needs and he might need fixed returns. Income & Savings company needs to know the combination of income and saving because on the basis of this company decides that how much a customer can invest. A customer having high income can invest more but a customer having less saving can not invest more. Need need is very important for the company to know because the need decides the objective of the portfolio. A customer can have different needs like child education plan, home plan, pension plan, childs marriage plan etc. Risk taking ability this ability is decided in two ways:1. company gives them a questionnaire to fill, this questionnaire has certain questions related to their day to day activities. 2. on the basis of the age and need company decides the risk taking ability of the customers.

ASSET ALLOCATION
According to the information given by the customers company decides the asset allocation pattern. Company invests the amount given by the customer in two types of assets:1. Risk free asset 2. Risky Asset Company decides the investment pattern in the preceding two types of assets based on the criteria. If a customers belongs to lower age group, he has more risk taking ability, then 60% of his total investment are invested in equities, derivatives, ETFs and mutual fund etc. Rest of the 20% is invested in the gold and finally 20 % are invested in the money market instruments. If a customer belongs to higher income group, he has less risk taking ability, then most of the part of his investment is invested in risk free asset so that he could get regular returns.

Analysis done by company before investing in equities: INDUSTRY ANALYSIS

The following factors may particularly be kept in mind while assessing to factors relating to an industry.

(i)Demand and Supply Pattern for the Industries Products and Its Growth Potential: The important aspect is to see the likely demand of the products of the industry and the gap between demand and supply. This would reflect the future growth prospects of the industry. In order to know the future volume and the value of the output in the next ten years or so, the investment manager will have to rely on the various demand forecasts made by various agencies like the planning commission, Chambers of Commerce and institutions like NCAER, etc. The management expert identifies fives stages in the life of an industry. These are Introduction, development, rapid growth, maturity and decline. If an industry has already reached the maturity or decline stage, its future demand potential is not likely to be high. ii)Profitability: It is a vital consideration for the investors as profit is the measure of performance and a source of earning for him. So the cost structure of the industry as related to its sale price is an important consideration. The other point to be considered is the ratio analysis, especially return on investment, gross profit and net profit ratio of the existing companies in the industry. This would give him an idea about the profitability of the industry as a whole.

(iii)Particular Characteristics of the Industry: Characteristics of industry must be studied in depth in order to understand their impact on the working of the industry. Because the industry having a fast changing technology become obsolete at a faster rate. Similarly, many industries are characterized by high rate of profits and losses in alternate years. Such fluctuations in earnings must be carefully examined. (iv)Labour Management Relations in the Industry: The state of labour-management relationship in the particular industry also has a great deal of influence on the future profitability of the industry. The investment manager should, therefore, see whether the industry under analysis has been maintaining a cordial relationship between labour and management.

Once the industrys characteristics have been analyzed and certain industries with growth potential identified, the next stage would be to undertake and analyze all the factors which show the desirability of various companies within an industry group from investment point of view. (C ) COMPANY ANALYSIS: To select a company for investment purpose a number of qualitative factors have to be seen. 1)Size and Ranking: The size and ranking of the company within the economy, in general, and the industry, in particular, would help the investment manager in assessing the risk associated with the company. It may also be useful to assess the position of the company in terms of technical knowhow, research and development activity and price leadership. 2)Growth Record: The following three growth indicators may be particularly looked in to
(a) Price earnings ratio, (b) Percentage growth rate of earnings per annum and (c) Percentage growth rate of net block of the company.

Growth is the single most important factor in company analysis for the purpose of investment management. A company may have a good record of profits and performance in the past; but if it does not have growth potential, its shares cannot be rated high from the investment point of view.

EXAMPLE
Preparing a Financial plan for Mr. Rakesh Dua having following details: Current Monthly Income : ` 38000 Current Monthly saving : ` 24000 Current Portfolio : `2000000 Financial Goals: - Child Education in 10 years of ` 1000000 present value - Child Marriage in 15 years of ` 1500000 present value - House Purchase in 25 years of ` 8000000 present value

Company is assuming that there will be 6% inflation rate and Mr Rakesh Dua will get minimum 12% return every year from his constructed portfolio

Goal Planning Goal

Child Education Child Marriage House Purchase Wealth Creation

Present Value
1000000 1500000 800000

Duration (years)
10 15 25

Future Value
1800000 approx 3600000 approx 35000000

Lumpsum SIP OR RD
600000 700000 700000 12000 2000

Current Saving of Mr Rakesh Dua ` 14000 Current investable portfolio is ` 20000000