Priya Dissertation 2003

PORTFOLIO MANAGEMENT SERVICES
YAVATMAL)
(A STUDY OF KARVY STOCK BROKING LTD,
CHAPTER NO. 1 INTRODUCTION

The main objective of this project is to know the Awareness of Financial Instrument among investors and also to know the investment pattern of people in different Financial Project. KARVY operates in various financial products and services like, Consultancy, Stock Broking, Mutual Fund, Insurance, Registrar, and Research the evaluation of financial planning has been increased through decades, which is best seen in customer rise. Now a days investment of saving has assumed great importance. Successful development of new service has become a complex process involving contributions from different disciplines. Rarely is one individual responsible for the concept, design, development and marketing of new service, for today the inherent complexity of products, their markets and therefore their processes through which they are developed, dictates that a no. of different people, each with there own roles, work together to create the service. This project represents information regarding companys brand awareness and the customer perceptions about the various services which the organization provides. The main objective of the project is to understand the customer investment preferences more effectively and efficiently. For execution of the project methodology adopted is the collection of data through questionnaire, processing and analyzing the data. The natures of respondent, who are selected, are the professionals and having a handsome salary. Karvy is the only personalized service provider offering a range of investment services depending on the customer requirements. In this project the great emphasis is given to the investors mind in respect to investment in all type of financial instrument where he can maximize his wealth. The needs and wants of the client are taken into consideration.
D.B.A.R, S.S.G.M.C.E, Shegaon.
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1.1 PORTFOLIO MANAGEMENT:

The aim of Portfolio Management is to achieve the maximum return from a portfolio, which has been delegated to be managed by an individual manager or financial institution. The manager has to balance the parameters which define a Good investment i.e. security, liquidity and return. The goal is to obtain the highest return for the client of the managed portfolio. The basis for constructing a portfolio should reflect the enterprises particular needs. In finance, a portfolio is a collection of investments held by an institution or a private individual. In building up an investment portfolio a financial institution will typically conduct its own investment analysis, whilst a private individual may make use of the services of a financial advisor or a financial institution that offers portfolio management services. Holding a portfolio is part of an investment and risk-limiting strategy called diversification. By owning several assets, certain types of risk (in particular specific risk) can be reduced. The assets in the portfolio could include stocks, commodities, insurance etc.
1.2 PORTFOLIO MANAGEMENT SERVICES:

PMS gives investors access to an institutional process of money management Provides a customized solution by matching the unique circumstances and objectives of each investor. Wealth creation based on disciplined investment process is the crux of PMS Effective diversification helps reduce portfolio volatility and enhances riskadjusted returns over long term PMS gives investor direct ownership of the individual securities in the portfolio
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1.3 BENEFITS OF PMS:

1. Professional Management
The service provides professional management of equity portfolios designed to deliver consistent long-term performance while identifying and controlling risks. 2. Continued Monitoring
We at Karvy understand the need to constantly monitor your portfolios and bring in periodic changes to optimize the results. 3. Research Support
A research team responsible for establishing our investment strategy and providing us real time information backs our portfolio managers.
4.
Identifying Investor Objectives
The foundation of every financially sound portfolio is the ability to identify ones investment objective. Its a process that requires expertise. Karvy provides every investor a Relationship manager who comes with the required expertise and experience to understand an investors financial goals.
5.
Hassle free operation
Karvy ensures investors enjoy healthy portfolios without having to involve themselves personally in monitoring and maintaining them. We provide you with a customized service. All the administrative aspects of your portfolio is taken care of by us for you.
6.
Transparency
A dedicated website allows you access to all information relating to your investment. You will also receive quarterly account performance statement on the overall status of the portfolio and Karvy research reports. D.B.A.R, S.S.G.M.C.E, Shegaon. Page 3

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CHAPTER NO. 2 RESEARCH METHODOLOGY
MEANING OF RESEARCH METHODOLOGY:

Research can defined as a systemized effort to gain new knowledge. A research is carried out by different methodologies which have their own pros & cons. Research Methodology is a way to solve research in study & solving problems along with logic Behind them are defined through research methodology. We can also say that Research Is a careful search systematic investigation, towards increasing the sum of knowledge. In short research consists of formulating a hypothesis, collecting the fact & Regarding certain generalization for some formulation.
2.1 DATA SOURCE:

Information can be gathered through primary and secondary sources. Secondary data are data were collected for another purpose and already exist somewhere. Primary data are gathered for a specific research project.
Primary sources Primary sources are those where researcher get insight of its consumer by the way of this can be done by1) Questionnaire 2) Interview D.B.A.R, S.S.G.M.C.E, Shegaon. Page 4

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According to these results obtained from Primary research is done and which is the main part of this study with this secondary research an data is for analyzing the people perception towards various investment instruments. Secondary data To understand FINANCIAL concepts researcher has referred study materials of financial institute of India. The economic times websites like ICICIpulife.com, bimonline.com, karvy.com etc to know the various product features and benefits researcher has referred foundation product module. Before starting the fieldwork researcher had done the financial products providers in yavatmal and all over India. This information was available through product leaf lets of different companies, their officials, company website and through different search engines.
2.2 RESEARCH APPROACH:

The most suitable approach in this reason was the survey. The survey method is the data collection is suited for descriptive research. Survey usually include research instrument, sampling plans and contact methods.
2.3 RESEARCH INSTRUMENT: Research has a main research instruments in collecting primary data: Questionnaire. A questionnaire consists of a set of questions presented to the respondent for their answers. Because of its flexibility, the questionnaire is by far the most common instrument used to collect primary data. The questionnaire has its own inherent advantages. The major benefits of the questionnaire include the following: 1. The questionnaire contained the question that touched upon every aspect of the study and are rendered in the status of being complete in proving full information needed for the study. 2. Multiple option questions made the interview easier as all the options were in front of user. 3. The question was straightforward in easy language and clear meaning. No question was ambiguous to confuse the subject. D.B.A.R, S.S.G.M.C.E, Shegaon. Page 5

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4. Due to the general nature of the topic, questionnaire could be administered with the customer with equal ease and labor.
Sampling plan:
After deciding on the research approach and instruments, the research must design a sampling plan. This plan calls following decisions. 1) Sampling unit (who is to be surveyed)
It gives the target population that will be sampled. The target population of this research was mainly in yavatmal city & nearer to the other area those are near to the city. 2) Universe The universe of the research was potential investor of yavatmal city.
Sample method:
Non probability convenience sampling method was used for selecting the respondents. Since universe i.e. yavatmal city is easy to find out the researcher selected the respondents that were most accessible population members.
Contact method:
Once the sampling plan has been determined the researcher must decide how the subject should be contacted i.e mail, telephone or personal interviews. In this project considering the objective and time available the researcher used personal and telephone interviews. The researcher made cold calls to the samples and introduced about Karvy. The researcher explained about purpose of his calling and seeks for appointment with the contacted person. The appointment schedule was maintained and followed by the researcher.
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2.4 OBJECTIVE OF THE PROJECT:

The portfolio management is vast in nature. It is intended to provide a birds-eye view of the client assets. The portfolio manager has to have bottomless knowledge of markets funds etc. Considering this fact, the scope of the study is defined to satisfy following objectives: Understand the necessity of portfolio management. Identify various investment alternatives that can fit in clients profile. Study & compare various investment & attributes. To know the concept of financial product.
2.5 SCOPE OF THE STUDY:

Karvy is the leading organization in terms of providing the personalized advisory services in investment sector. It focuses extensively in providing the quality service to its customers. So the company commissioned to understand the customer behavior and their investment pattern. Karvy is recently entered in the Commodity Market, which is having a very good future in India and Karvy can encase opportunities. 2.6 JUSTIFICATION OF THE PROBLEM : The survey aimed to bringing about awareness in the various services provided by the Karvy consultancy & suggesting services according to their needs & requirement
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CHAPTER NO. 3
COMPANY PROFILE
3.1 MISSION OF KARVY: Their mission is to be a leading, preferred service provider to our customer, and they aim To achieve this leadership position by building an innovative, enterprising, and technology drive organization which will set the highest standards of service and business ethics.
3.2 INTRODUCTION:
The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise of a small group of practicing Chartered Accountants who founded the flagship company Karvy Consultants Limited. We started with consulting and financial accounting automation, and carved inroads into the field of registry and share accounting by 1985.Karvy Stock Broking Ltd is a member of National Stock Exchange (NSE), The Bombay Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE). Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely towards attaining diverse goals of the customer through varied services. Creating a plethora of opportunities for the customer by opening up investment vistas backed by research-based advisory services. Here, growth knows no limits and success recognizes no boundaries. Helping the customer create waves in his portfolio and empowering the investor completely is the ultimate goal.It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success rate as a wealth management and wealth D.B.A.R, S.S.G.M.C.E, Shegaon. Page 8

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accumulation option. The difference between unpredictability and a safety anchor in the market is provided by in-depth knowledge of market functioning and changing trends, planning with foresight and choosing options with care. Karvy offers services that are beyond just a medium for buying and selling stocks and shares. Instead they provide services which are multi dimensional and multifocused in their scope. There are several advantages in utilizing their Stock Broking services, which are the reasons why it is one of the best in the country. Karvy offer trading on a vast platform; National Stock Exchange, Bombay Stock Exchange and Hyderabad Stock Exchange. More importantly, they make trading safe to the maximum possible extent, by accounting for several risk factors and planning accordingly. They are assisted in this task by their in-depth research, constant feedback and sound advisory facilities. Their highly skilled research team, comprising of technical analysts as well as fundamental specialists, secure result-oriented information on market trends, market analysis and market predictions. This crucial information is given as a constant feedback to their customers, through daily reports delivered thrice daily; The Pre-session Report, where market scenario for the day is predicted, The Mid-session Report, timed to arrive during lunch break, where the market forecast for the rest of the day is given and The Post-session Report, the final report for the day, where the market and the report itself is reviewed. To add to this repository of information, they publish a monthly magazine; Karvy; The Fin polis; which analyzes the latest stock market trends and takes a close look at the various investment options, and products available in the market, while a weekly report, called; Karvy Bazaar Baatein; keeps the investor more informed on the immediate trends in the stock market. In addition, their specific industry reports give comprehensive information on various industries. Besides this, they also offer special portfolio analysis packages that provide daily technical advice on scrip for successful portfolio management and provide customized advisory services to help the investors to make the right financial moves that are specifically suited to their portfolio. To empower the investor further they have made serious efforts to ensure that their research calls are disseminated systematically to all their stock broking clients through various delivery channels like email, chat, SMS, phone calls etc. In the future, their focus will be on the emerging businesses and to meet this D.B.A.R, S.S.G.M.C.E, Shegaon. Page 9

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objective, they have enhanced their manpower and revitalized their knowledge base with enhances focus on Futures and Options as well as the commodities business.
Respect for the individual: Each and every individual is an essential building block of our organization. We are the kilns that hone individuals to perfection. Be they our employees, shareholders or investors. We do so by upholding their dignity & pride, inculcating trust and achieving a sensitive balance of their professional and personal lives. Teamwork: None of us is more important than all of us. Each team member is the face of Karvy. Together we offer diverse services with speed, accuracy and quality to deliver only one product: excellence. Transparency, co-operation, invaluable an individual contribution for a collective goal, and respecting individual uniqueness within a corporate whole, is how we deliver again and again. Responsible Citizenship: A social balance sheet is as rewarding as a business one. As a responsible corporate citizen, our duty is to foster a better environment in the society where we live and work. Abiding by its norms, and behaving responsibly towards the environment, is some of our growing initiatives towards realizing it. Integrity: Everything else is secondary. Professional and personal ethics are our bedrock. We take pride in an environment that encourages honesty and the opportunity to learn from failures than camouflage them. We insist on consistency between works and actions.
3.3 BOARD OF DIRECTORS:

1. Mr. C Parthasarathy
Chairman and Managing Director 2. Mr. M Yugandhar
Managing Director 3. Mr. M S Ramakrishna Page 10

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Director 4. Mr. Prasad V Potluri
Director
3.4 KARVY GROUPS OF COMPANIES ARE:

1) 2) 3) 4) 5) 6) 7) 8) Karvy Consultants Ltd Karvy Stock Broking Ltd Karvy Investors Service Ltd Karvy Computershare Pvt Ltd Karvy Global Service Ltd Karvy Commodities Broking Ltd Karvy Insurance Broking Private Ltd Karvy alliances
1.
KARVY CONSULTANTS LIMITED:
As the flagship company of the Karvy Group, Karvy Consultants Limited has always at remained the helm of organizational affairs, pioneering business policies, work ethic and channels of progress. Having emerged as a leader in the registry business, the first of the businesses that Karvy ventured into, company have now transferred this business into a joint venture with Computer share Limited of Australia, the worlds largest registrar. With the advent of depositories in the Indian capital market and the relationships that Company have created in the registry business, Karvy believe that they were best positioned to venture into this activity as a Depository Participant. Karvy were one of the early entrants registered as Depository Participant with NSDL (National Securities Depository Limited), the first Depository in the country and then with CDSL (Central Depository Services Limited). Today, Karvy service over 6 lakhs customer accounts in this business spread across over
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250 cities/towns in India and are ranked amongst the largest Depository Participants in the country. With a growing secondary market presence, they have transferred this business to Karvy Stock Broking Limited (KSBL), their associate and a member of NSE, BSE and HSE.
2.
KARVY STOCK BROKING LIMITED:
Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely towards attaining diverse goals of the customer through varied services. Creating a plethora of opportunities for the customer by opening up investment vistas backed by research-based advisory services. Here, growth knows no limits and success recognizes no boundaries. Helping the customer create waves in his portfolio and empowering the investor completely is the ultimate goal. Karvy is a Member of National Stock Exchange (NSE), The Bombay Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE).
3.
KARVY INVESTORS SERVICES LIMITED:
Merchant Banking- Recognized as a leading merchant banker in the country, Karvy are registered with SEBI as a Category I merchant banker. This reputation was built by capitalizing on opportunities in corporate consolidations, mergers and acquisitions and corporate restructuring, which have earned us the reputation of a merchant banker. Raising resources for corporate or Government Undertaking successfully over the past two decades have given us the confidence to renew company focus in this sector. Karvy quality professional team and their work-oriented dedication have propelled company to offer value-added corporate financial services and act as a professional navigator for long term growth of companies clients, which includes leading D.B.A.R, S.S.G.M.C.E, Shegaon. Page 12

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corporate, State Governments, foreign institutional investors, public and private sector companies and banks, in Indian and global markets.
4.
KARVY COMPUTERSHARE PVT. LIMITED:
Karvy have traversed wide spaces to tie up with the worlds largest transfer agent, the leading Australian company, Computer share Limited. The company that services more than 75 million shareholders across 7000 corporate clients and makes its presence felt in over 12 countries across 5 continents has entered into a 50-50 joint venture with KARVY. Mutual Fund Services: Karvy have attained a position of immense strength as a provider of across-theboard transfer agency services to AMCs, Distributors and Investors. Nearly 40% of the top-notch AMCs including prestigious clients like Deutsche AMC and UTI swear by the quality and range of services that company offer. Besides providing the entire back office processing, Karvy provide the link between various Mutual Funds and the investor, including services to the distributor, the prime channel in this operation. Issue Registry: In company voyage towards becoming the largest transaction-processing house in the Indian Corporate segment, KARVY have mobilized funds for numerous corporate, and emerged as the largest transaction-processing house for the Indian Corporate sector. With an experience of handling over 700 issues, Karvy today, has the ability to execute voluminous transactions and hard-core expertise in technology applications have gained company the No.1 slot in the business. Karvy is the first Registry Company to receive ISO 9002 certification in India that stands testimony to its stature.
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Corporate Shareholder Services: Karvy has been a customer centric company since its inception. Karvy offers a single platform servicing multiple financial instruments in its bid to offer complete financial solutions to the varying needs of both corporate and retail investors where an extensive range of services are provided with great volume-management capability. 5. KARVY GLOBAL SERVICES LIMITED:
The specialist Business Process Outsourcing unit of the Karvy Group. The legacy of expertise and experience in financial services of the Karvy Group serves us well as company enter the global arena with the confidence of being able to deliver and deliver well. Here company offers several delivery models on the understanding that business needs are unique and therefore only a customized service could possibly fit the bill. KARVY is in re-engineering and managing processes or delivering new efficiencies, companys service meets up to the most stringent of international standards.Providing productivity improvements, operational cost control, cost savings, improved accountability and a whole gamut of other advantages. KARVY Operate in the core market segments that have emerging requirements for specialized services. Their wide vertical market coverage includes Banking, Financial and Insurance Services (BFIS), Retail and Merchandising, Leisure and Entertainment, Energy and Utility and Healthcare.
6.
KARVY COMMODITIES BROKING LIMITED:
At Karvy Commodities, they are focused on taking commodities trading to new dimensions of reliability and profitability. They have made commodities trading, an essentially age-old practice, into a sophisticated and scientific investment option. Company enables trade in all goods and products of agricultural and mineral origin that include lucrative commodities like gold and silver and popular items like oil, D.B.A.R, S.S.G.M.C.E, Shegaon. Page 14

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pulses and cotton through a well-systematized trading platform. The technological and infrastructural strengths and especially the street-smart skills make them an ideal broker. Their service matrix is holistic with a gamut of advantages, the first and foremost being their legacy of human resources, technology and infrastructure that comes from being part of the Karvy Group. 7. KARVY INSURANCE BROKING PRIVATE LIMITED:
At Karvy Insurance Broking Pvt. Ltd., they provide both life and non-life insurance products to retail individuals, high net-worth clients and corporate. With the opening up of the insurance sector and with a large number of private players in the business, they are in a position to provide tailor made policies for different segments of customers. In their journey to emerge as a personal finance advisor, they will be better positioned to leverage their relationships with the product providers and place the requirements of their customers appropriately with the product providers. With Indian markets seeing a sea change, both in terms of investment pattern and attitude of investors, insurance is no more seen as only a tax saving product but also as an investment product. By setting up a separate entity, we would be positioned to provide the best of the products available in this business to the customers. KARVY have wide national network, spanning the length and breadth of India, further supports these advantages. Further, personalized service is provided here by a dedicated team committed in giving hassle-free service to the clients.
8. KARVY ALLIANCES:
Karvy Computer share Private Limited is a 50:50 joint venture of Karvy Consultants Limited and Computer share Limited, Australia. Computer share Limited is world's largest -- and only global -- share registry, and a leading financial market services provider to the global securities industry.
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The joint venture with Computer share, reckoned as the largest registrar in the world, servicing over 60 million shareholder accounts for over 7,000 corporations across eleven countries spread across five continents. Computer share manages more than 70 million shareholder accounts for over 13,000 corporations around the world. Karvy Computer share Private Limited, today, is India's largest Registrar and Share Transfer Agent servicing over 300 corporate and mutual funds and 16 million investors.
Distribution of Financial Products:

The paradigm shift from pure selling to knowledge based selling drives the business today. With their wide portfolio offerings, they occupy all segments in the retail financial services industry. A 1600 team of highly qualified and dedicated professionals drawn from the best of academic and professional backgrounds are committed to maintaining high levels of client service delivery. This has propelled them to a position among the top distributors for equity and debt issues with an estimated market share of 15% in terms of applications mobilized, besides being established as the leading procurer in all public issues. To further tap the immense growth potential in the capital markets they enhanced the scope of their retail brand, Karvy the Finapolis, thereby providing planning and advisory services to the mass affluent. Here they understand the customer needs and lifestyle in the context of present earnings and provide adequate advisory services that will necessarily help in creating wealth. Judicious planning that is customized to meet the future needs of the customer deliver a service that is exemplary. The market-savvy and the ignorant investors, both find this service very satisfactory. The edge that they have over competition is their portfolio of offerings and their professional expertise. The investment planning for each customer is done with an unbiased attitude so that the service is truly customized on market trends, investment options, opinions etc.
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Graph 3.1 Showing Milestones of Karvy
Figure no. 3.1 Showing Steps to Stock Selection Process in Karvy
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3.5 Portfolio Schemes of karvy:

1. K-Sensible Objective The objective of the K-Sensible Plan is to provide long-term returns by following a disciplined and focused approach to investments. This is guided by two doctrines capital preservation and generates steady long-term returns. Strategy Long-term investing Focus on companies which qualify in the three key attributes Management, Business and Valuation Adequate diversification to mitigate risks Maintain reasonable liquidity Investors seeking steady long-term returns Investment horizon between two to three years Low portfolio turnover
Ideal for
2.K-Aggressive Objective The objective of the K-Aggressive Plan is to provide a balance between growth, safety and returns. This is achieved by investing in well-researched companies and employing a strategy of systematic profit booking. In our stock selection process we continue to focus on companies which qualify in the three key attributes Management, Business and Valuation. Strategy
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Medium to long-term investing Top-down and bottom-up approach Judicious mix of growth and value stocks Systematic profit booking Adequate diversification to mitigate risks Maintain reasonable liquidity Investors seeking gains from systematic profit booking Investment horizon between one to two years Medium portfolio turnover
Ideal for
3.K-Energetic Objective The objective of the K-Energetic Plan is to provide returns by following an aggressive style of investing which entails higher risks. Strategy Higher proportion of mid cap stocks Short to medium-term investing Stock specific approach to capture triggers which could yield higher returns Adequate diversification to mitigate risks Maintain reasonable liquidity
Ideal for

Investors with high risk profile and seeking short to medium term returns Investment horizon between 12 to 15 months High portfolio turnover
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Figure No. 3.2 INVESTMENT PHILOSOPHY OF KARVY
2. Stock Selection

3. Portfolio Construction

Management Quality Earning Growth Valuations News Flows Timing 1. Sector Selection

Focus on: Objectives, Approach Security Selection Concentration / Weights Portfolio Beta
Government Policies Stage of Business Cycle Future Profitability Global/Domestic Linkages Identified favored sector 4. Portfolio Rebalancing

5. Risk Management

Portfolio Risk Operational Risk Residual Risk
Tactical shifts: Large Vs Mid cap Tactical shifts: Stock Vs Cash Buy-side Triggers Sell-side Triggers
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3.6 ACHIVEMENTS:
1. Largest independent distributor for financial products 2. Ranking amongst the top 3 stock broking firms 3. Amongst the top 3 Depository participants 4. Largest network of branches and business associates 5. Ranking amongst top 10 investment Bankers. 6. First ISO-9002 certified registrars 7. Ranking amongst top 3 Mutual Funds distributors 8. Ranking 1st in retail procurement in equity IPOs. 9. Adjudged as one of the top 50 IT uses in India by MIS Asia 10. Fully Fledged IT driven operations ranking 8th in merchant Banking services
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CHAPTER NO .4 PORTFOLIO MANAGEMENT SERVICES -A LITERATURE REVIEW
4.1 INVESTMENT ALTERNATIVES & THEIR ATTRIBUTES:

There are number of investment alternatives available & give their attributes in detail Like their safetyness, return on investment, tenure & most important tax benefits etc.
1) PPF (Public Provident Fund): Safe 9% p.a. compounded annually 15 years Tax rebate on a maximum investment of Rs.60,000/-, u/s 88. Interest is totally exempt from tax and there is no TDS on interest.
2) NSC (National Saving Certificate): Safe 9% p.a. compounded half-yearly D.B.A.R, S.S.G.M.C.E, Shegaon. Page 22

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6 years Tax rebate on a maximum investment of Rs.60, 000/-, u/s 88. No TDS on interest. Interest amount reinvested is eligible for Section 88 benefits 3) Infrastructure bonds: Safety indicated by credit rating. Varies from 9.00% to 9.5% p.a. 3 years A tax rebate u/s 88 on a maximum investment of Rs.80,000/-.
4) Life insurance polices: Safe Around 10% 20 25 years Premiums paid on life insurance policies, up to a maximum of Rs.60,000/- qualifies for tax rebate u/s 88.
5) ELSS schemes (Equity Linked Saving Scheme): Carry risk as they invest in stock market. Depends on the performance of the stock market 3 years Tax rebate u/s 88 on a maximum investment of Rs.10,000/-
6) Pension plans of mutual funds: Carry risk as they invest in a combination of debt and equity 3 years to age of 58 years. Tax rebate u/s 88 on a maximum investment of Rs.60, 000/-.
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7) Post office saving bank account: Safety Rate of interest per annum 3.5% Income tax concession- Exempt under Sec. 10 (15)(ii)
8) Bank Fixed deposits: Safety Rate of interest per annum 4% Income tax concession- Exempt under Sec. 10 & 88 up to Rs. 60, 000 P.A.
9) Units of UTI/Scheme of mutual fund: Safety Variable Income tax concession- Included in 80L exemption
10) Equity shares of companies: Safety Variable Income tax concession 1) Dividend in the hands of investors is tax free. 2) Provision for a tax rebate at 20% on any investment in eligible equity linked schemes of Rs.10, 000 maximum- a rebate of Rs. 2, 000
Note: Section 88 offers a tax rebate on a maximum investment of Rs.80, 000/-, for individuals earning taxable income of less than Rs.5 lakhs. The tax rebate is 20% of the sum invested for individuals with taxable income of less than Rs.1.5 lakhs, while it is limited to 10% for persons with taxable income between Rs.1.5 lakhs and Rs.5 lakhs. D.B.A.R, S.S.G.M.C.E, Shegaon. Page 24

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4.2 COMPERASION OF SELECTED INVESTMENT ALTERNATIVES & THEIR ATTRIBUTES:

Table No. 4.1 Portfolio Grid & proposed allocation of assets Avenues Allocation Risk involved High Historical earnings 18-22% Liquidity Tax implication High
Scope lending facility
for
Equities
LTCG: 10% -
Proposed allocation in Equities: 25% LTCG: Long Term Capital Gain
Income Mutual Fund Long Term Gilt Funds Index Funds
Medium Low Medium
11-14% 11-14% -
High High High
LTCG: 10% Dividends: Tax free LTCG: 10% Dividends: Tax free LTCG: 10% Dividends: Tax free
Proposed allocation in Mutual Funds: 30% LTCG: Long Term Capital Gain
ICICI Safety Bonds RBI Relief Bond
Medium
9.5%
Low
Low
9%
Low
Subject to TDS as per then prevailing tax laws. Interest is fully exempt from Income tax and The Bonds are exempt from Wealth Tax.
Nil
Loans from banks can be availed of against the security of the bonds
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Cont
Avenues Allocation Risk involved Low Historical earnings 8.5% Liquidity Tax implication Low Scope lending facility for
REC Bond
NHAI Bonds
Low
9%
Low
Section54EC Nil of the Income Tax Act deals with capital gains not to be charged on investment in this bond. Section Nil 54EC of the Income Tax Act deals with capital gains not to be charged on investment in this bond. Subject to TDS as per then prevailing tax laws. Subject to TDS as per then prevailing tax laws.
Proposed allocation in Bonds: 25% Sundaram Medium 10% Home FD
Low
Gujarat SF FD
Medium
10%
Low
Proposed allocation in FDs: 20% Portfolio strategy: First Priority - Safety, Second Priority - Earnings, Third Priority - Liquidity, Time Horizon - Long term D.B.A.R, S.S.G.M.C.E, Shegaon. Page 26

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4.3 FINANCIAL MARKETS:

A financial market can be defined as the market in which financial assets are created or transferred. Financial assets represents represent a claim to the payments of a sum of money sometime in the future and/or periodic payment in the form of interest or dividend. Financial Market performs an important function of mobilization of savings and channeling them into the most productive uses. The participants in the financial markets are financial institutions, agents, brokers, dealers, borrowers, lenders, savers and others who are inter-linked by the laws, contracts and communication networks. Financial markets consist of Primary and Secondary Markets. The Primary markets deal in new financial claims and securities and hence are known as new issue markets. The secondary market deals in securities already issued, existing or outstanding. Financial markets are also classified as Money and Capital Markets. Money markets deals with transactions in short-term instruments (with period of maturity one year or less, e.g. treasury bills), while capital market deals with transactions in long-term instruments (with period of maturity above one year, e.g. corporate debentures and government bonds). On the basis of the type of the financial claim, financial markets are classified as Debt and Equity markets. By the timing of delivery, financial markets are classified as Cash or Spot markets and Forward or Future markets. The classification of financial markets can be summarized as follows: Money Market Debt Market Forex Market Capital Market
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Figure No. 4.1 classifications of financial markets
1.
MONEY MARKETS: Money markets can be defined as a market for short-term money and financial
assets that are near substitutes for money (any financial assets that can be quickly converted into money with minimum transaction cost). One more important function of this market is to channel savings into short-term productive investments like working capital. Money market aids banking, operates as a medium of integration between sub markets, promotes maintaining of minimum reserve in the form of cash and liquidity and controls the interest rates. Money market is a collection of market for the instruments like Call money, Treasury bills, Commercial papers, Certificate of deposits, Money Market Mutual Funds, etc. A certain degree of flexibility in the regulatory framework exists and there are constant endeavors for introducing a new instruments or innovating dealing techniques. It is a wholesale market and the volume of funds or financial assets traded are very large i.e. in corers of rupees. 2. DEBT MARKET: Traditionally debt instruments are known for generating a predetermined income for a given period of time, other than in cases of default. Hence they are also known as fixed income instruments. The debt markets in advanced are significantly larger and deeper than equity markets. But in India, the trend is just the opposite. The development of debt market in India has not been as remarkable as in the equity market. However the debt markets in India have undergone a considerable change in the last few years. Characterized by regulated interest rates, limited players and lack of trading earlier, the D.B.A.R, S.S.G.M.C.E, Shegaon. Page 28

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markets have become more integrated and less regulated. The debt market in India is divided into two categories: 3. Government securities market consisting of Central Government and State Government securities. Bond market consisting of FI bond, PSU bonds and Corporate bonds/debentures. FOREIGN MARKET: Every sovereign country in the world has a currency, which is a legal tender in its territory, and which does not act as money outside its boundaries. Foreign exchange or Forex market is the one where a countrys currency is traded for another. The rate at which one currency is converted to another is known as the rate of exchange. Forex market is the largest financial market in the world having a daily turn over of couple of trillion dollars. The key participants in the forex market are importers (who need foreign currency to pay off their imports), exporters (who want to convert their foreign currency receipts into domestic), traders (who make a market in the foreign currency), foreign exchange brokers (who bring together buyers and sellers), speculators (who tries to profit from exchange rate movements) and portfolio Managers who buy and sell foreign currency. Speculative transactions account for more than 95% of the turnover on the Forex markets. In India, the key participants in the Forex markets are RBI, banks and business undertakings. Business undertakings can participate in the Forex market only to the extent that they need cover for the exchange exposure arising from a merchant transaction or a foreign currency borrowing and cannot resort to speculative transaction. One reason justified for the existence of the Forex market is that each nation has decided to keep their sovereign right to have control on their own currency. If every country had the same currency, then there will be no need for a foreign exchange market.
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4.
CAPITAL MARKET: Capital markets provide the resources needed by medium and large-scale industries
for investment purposes unlike money markets that provide the resources for working capital needs. While money markets deal in short-term claims (with a period of maturity 1 year or less) capital market deals in long-term claims (with a period of maturity more than 1 year). Stock market and Government bond markets are example of capital markets. Capital market consists of primary and secondary markets. The primary markets create long-term instruments through which corporate entities borrow and the secondary market provides liquidity and marketability to these instruments. Companies can raise capital in the primary market through the issue of shares and debentures for which prior approval of The SEBI is required. The secondary market that operates through the medium of stock exchanges is that segment of the capital market where securities already issued are traded.
4.4 BASKET OF FINANCIAL PRODUCTS:

1. BOND: Individuals have surplus funds in the form of savings, which they want to invest. Companies need funds to undertake good projects with high returns. Companies provide individuals with instruments to invest their savings in. One such instrument is a corporate bond. Similarly, governments also need funds for various developmental projects. Further, the government also needs to raise money to finance the fiscal deficit. They too tap the savings by issuing various kinds of bonds. Bonds have a fixed face value, which is the amount to be returned to the investor upon maturity of the bond. During this period, the investors receive a regular payment of interest, semi-annually or annually, which is calculated as a certain percentage of the face value and know as a 'coupon payment.' Issuing a bond: The government, public sector units and corporate are the dominant issuers in the bond market. The central government raises funds through the issue of dated securities (securities with maturity period ranging from two years to 30 years, longterm) and treasury bills (securities with maturity periods of 91 or 364 days, short-term).
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The central government securities are issued for a minimum amount of Rs 10, 000 (face value). Thereafter they are issued in multiples of Rs 10,000. They are issued through an auction carried out by the Reserve Bank of India. State governments go about raising money through state development loans. Local bodies of various states like municipalities also tap the bond market from time to time. Bonds are also issued by public sector banks and PSUs. Corporate on the other hands raise funds by issuing commercial paper (short-term) and bonds (long-term). a. Types of bonds: Government bond National saving certificate Public provident fund Monthly investment scheme RBI Bonds Taxable 8% Recurring deposit Kisan vikas patra Time deposit Post office Corporate Bonds
b. Characteristics of a bond: 1. Fixed maturity period. 2. Fixed interest rate. 3. Regular payment of interest. 4. Less risky. 5. Some bonds give tax redemption. 2. INSURANCE: A human life is also an income-generating asset. This asset also can be lost through unexpectedly early death or made non-functional through sickness & disabilities caused by accidents. Accidents may or may not happen. Death will happen, but the timing is uncertain. If it happens around the time of one's retirement, when it could be expected D.B.A.R, S.S.G.M.C.E, Shegaon. Page 31

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that the income will cease, the person concerned could have made some other arrangements to meet the continuing needs. But if it happens much earlier when the alternate arrangements are not in place, insurance is necessary to help the dependents. In case of a human being, he may have made arrangements for his needs after his retirement. These would have been made on the basis of some expectations like he may live for another 15 years, or that his children will look after him. If any of these expectations do not come true, the original arrangement would become inadequate and there could be difficulties. Living too long can be as much a problem as dying too young. These are risks, which need to be safeguarded against. Insurance takes care of it. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium and duty of care is necessary to help the dependents. Types of insurance: Any risk that can be quantified probably has a type of insurance to protect it. Among the different types of insurance are: 1 Automobile insurance, also known as auto insurance, car insurance and in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the vehicle itself. 2 3 Casualty insurance insures against accidents, not necessarily tied to any specific property. Credit insurance pays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death. 4 Financial loss insurance protects individuals and companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover failure of a creditor to pay money it owes to the insured. Fidelity bonds and surety bonds are included in this category. 5 6 Health insurance covers medical bills incurred because of sickness or accidents. Liability insurance covers legal claims against the insured. For example, a doctor may purchase insurance to cover any legal claims against him if he were to be convicted of a mistake in treating a patient. D.B.A.R, S.S.G.M.C.E, Shegaon. Page 32

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7 8
Life insurance provides a benefit to a decedent's family or other designated beneficiary, to replace loss of the insured's income and provide for burial and other final expenses. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance.
Political risk insurance can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.
10 Property insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance. 11 Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records done at the time of a real estate transaction. 12 Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expense incurred due to a job-related injury. 3. TAX PLANNING: An Individual needs to take the taxation into consideration at all times, from the stage of earning the income, incurring expenditure to the time of investing in various types of securities, deposits etc. Return on investment in the form of income, when received, attracts income tax under the Income Tax Act. Incidence of income tax depends on the nature of your investment, income and the quantum of other income like salary, rent from property, interest etc. Other common sources of incomes are: interest on bank deposits, debentures, bonds, deposits with companies, provident fund (and PPF), NSC, dividend income from shares or from mutual funds, royalties, one time windfall gains, income from profession, business or pension. Income Tax act treats each one of these incomes separately and allows many deductions, exemptions etc. depending, mainly, upon the source of income. It is, therefore, necessary to learn and understand the Sections of Income Tax Act applicable to your source(s) of income BEFORE you invest and BEFORE you decide to D.B.A.R, S.S.G.M.C.E, Shegaon. Page 33

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incur any major expenditure. One must take a keen interest in the annual budget exercise of Government of India (GOI) as the tools available for tax planning in India are a dynamic lot which undergo a change with every budget. The annual budget represents the desire of GOI to direct the savings into specific channels and areas. Various incentives, tax sops given away in every budget are the tools used to encourage individuals and corporate to direct their savings into these areas. You can use these sops to enhance the disposable income in your hands, thus serving the twin purposes of saving for your self and also help the society in growing in the desired direction. One point that needs to be kept in mind is that managing your personal finance has nothing to do with tax avoidance. Taxes have to be paid and they must be paid as our dues to the society that makes life in an organized manner possible. However, a little tax planning can enable you to avail of all the avenues that our tax system provides you to save and grow. a. Tax deduction is available under following section: Used to allow deduction of interest earned on ,say, a National Saving Certificate, or Bank deposit up to a limit of Rs.12,000. But now all these are gone. In their place has come Section 80C u/s 80 CCC, & u/s 80CCD, as the Finance Bill puts it. Thus, the new Section 80C of the Income Tax Act proposed in Union Budget gives you a bigger tax bread than what the current regime offers. Deduction in respect of Life Insurance Premium, Contribution to Provident Fund, etc Rs.10,000 in pension funds. Section 80CCC:-Is for deduction in respect of contribution to certain Pension Funds Section 80L is for deductions in respect to Interest on certain Securities, Dividends, etc Table No. 4.2 Showing Computation of Income tax: Up to 1.5lakh 1.5 to 2.5 Lakh 2.5 to 3.5 Lakh 3.5 & above Nil 10% 20% 30%
A surcharge of 10% is applicable in case the total income exceeds Rs.10 Lakh. D.B.A.R, S.S.G.M.C.E, Shegaon. Page 34

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4. MUTUAL FUND: A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives, which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI), which regulates securities markets before it can collect funds from the public. The flow chart below describes broadly the working of a mutual fund: A. Organization of Mutual fund: There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund: The mutual fund industry in India began with the setting up of the Unit Trust In India (UTI) in 1964 by the Government of India. During the last 36 years, UTI has grown to be a dominant player in the industry with assets of over Rs. 76,547 Crores as of March 31, 2000. The UTI is governed by a special legislation, the Unit Trust of India Act, 1963. In 1987 public sector banks and insurance companies were permitted to D.B.A.R, S.S.G.M.C.E, Shegaon. Page 35

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set up mutual funds and accordingly since 1987, 6 public sector banks have set up mutual funds. Also the two Insurance companies LIC and GIC established mutual funds. Securities Exchange Board of India (SEBI) formulated the Mutual Fund (Regulation) 1993, which for the first time established a comprehensive regulatory framework for the mutual fund industry. Since then several mutual funds have been set up by the private and joint sectors. B. Types of Mutual Funds: Mutual fund schemes may be classified on the basis of its structure and its investment objective. a) By Structure: 1. Open-ended Funds: An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. 2. Closed-ended Funds: A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. 3. Interval Funds: Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.
b) By Investment Objective: 1. Growth Funds: D.B.A.R, S.S.G.M.C.E, Shegaon. Page 36

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The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time. 2. Income Funds: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income. 3. Balanced Funds: The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. 4. Money Market Funds: The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.
5. Load Funds:
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A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history. 6. Gilt Fund: These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factor as is the case with income or debt oriented schemes. 7. Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. c) Other Schemes: 1. Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.
d) Special Schemes: D.B.A.R, S.S.G.M.C.E, Shegaon. Page 38

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1. Industry Specific Schemes: Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc. 2. Index Schemes: Index Funds attempt to replicate the performance of a particular index such As the BSE Sensex or the NSE 50. 3. Sectorial Schemes: Sectorial Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offering. C. Benefits of Mutual Fund investment: Professional Management Diversification Convenient Administration Return Potential Low Costs Liquidity Transparency Flexibility Affordability Choice of Schemes Tax benefits Well regulated
D. Restrictions on Investments: D.B.A.R, S.S.G.M.C.E, Shegaon. Page 39

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A mutual fund scheme shall not invest more than 15% of its NAV (Net Asset Value) in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of asset Management Company.
A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of asset Management Company.
3 4
No mutual fund under all its schemes should own more than ten per cent of any company's paid up capital carrying voting rights. Such transfers are done at the prevailing market price for quoted instruments on spot basis. The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made.
A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate interscheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund.
6 7
The initial issue expenses in respect of any scheme may not exceed six per cent of the funds raised under that scheme. Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance. 8 Every mutual fund shall, get the securities purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature.
Pending deployment of funds of a scheme in securities in terms of investment Page 40

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objectives of the scheme a mutual fund can invest the funds of the scheme in short term deposits of scheduled commercial banks. No mutual fund scheme shall make any investment in; a) Any unlisted security of an associate or group company of the sponsor; or b) Any security issued by way of private placement by an associate or group company of the sponsor. c) The listed securities of group companies of the sponsor which is in excess of 30% of the net assets [of all the schemes of a mutual fund] d) No mutual fund scheme shall invest more than 10 per cent of its NAV in the equity shares or equity related instruments of any company. Provided that, the limit of 10 per cent shall not be applicable for investments in index fund or sector or industry specific scheme. e) A mutual fund scheme shall not invest more than 5% of its NAV in the equity shares or equity related investments in case of open-ended scheme and 10% of its NAV in case of close-ended scheme. 5. STOCK: Member - National Stock Exchange (NSE), The Bombay Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE). Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely towards attaining diverse goals of the customer through varied services. Creating a plethora of opportunities for the customer by opening up investment vistas backed by research-based advisory services. Here, growth knows no limits and success recognizes no boundaries. Helping the customer create waves in his portfolio and empowering the investor completely is the ultimate goal. a. Stock Broking Services: It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success rate as a wealth management and wealth accumulation option. The difference between unpredictability and a safety anchor in the market is provided by in-depth knowledge of market functioning and changing trends, planning with foresight and choosing one & choose options with care. This is what we provide in our Stock Broking services.
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b. Depository Participants: The onset of the technology revolution in financial services Industry saw the emergence of Karvy as an electronic custodian registered with National Securities Depository Ltd (NSDL) and Central Securities Depository Ltd (CSDL) in 1998. Karvy set standards enabling further comfort to the investor by promoting paperless trading across the country and emerged as the top 3 Depository Participants in the country in terms of customer serviced. c. Basic Information: Besides familiarity with the stock market, the transaction process, and having an account at a broker or sub-broker, knowledge of basic investment information is also important to making investment decisions In this section, you can read about the basics of investment that often appear in stock market reports and discussions. d. Market information: Important data and information about the overall market situation that you often come across include: i. Stock market index: There are a number of stock market indices but the most widely used is the SET Index, which calculates the average price of all listed shares weighted by the number of registered shares. Thus, price movements of large capitalization stocks have a greater influence on the movement of the SET Index than price changes of small capitalization stocks. Besides the SET Index , other stock price indices have been constructed to track market trends, for example the SET50 Index, Book Club Index, TISCO Price Index, and Sector Indices to track the price movements of individual sectors. ii. Market turnover: It's often quoted together with the SET Index to indicate how active the trading activities are. In a bullish market, turnover is high as investors trade actively. Conversely, the market is sluggish when investors do not trade actively. Thus, turnover is a crucial factor in an investment consideration. D.B.A.R, S.S.G.M.C.E, Shegaon. Page 42

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Advances, declines, and no change in stock prices. When most stock prices have closed higher, it indicates that the market has had a good day. Conversely, when most stock prices have closed lower, the market has a bad day. If stock prices are mostly unchanged, the market is moving in a narrow range. Investors can try their own market analysis by looking at the trends in price movement. This however reflects a short- term picture and other factors must be taken into consideration. e. Stock information: In addition to the market information above, it's essential to understand how to pick good stocks. Here are some basic investment principles. i. Price: Stock price is an important factor to investors, as buying and selling influence stock price movements. At the end of the day, investors like to know how their stocks fared. Did they close higher? Lower? And by how much? The change in price of a stock also reflects the amount of money for investor decision-making whether to buy, sell, or hold. In stock valuation, price has to be considered in conjunction with other performance variables such as earnings per share and dividends. ii. Price-Earnings Ratio (P/E Ratio): The ratio is derived by comparing the Close Price (P) with Earnings per share (E). It is a measure of the stock's fundamental value. P/E Ratio is calculated by dividing the Close Price (P) with Earnings per share (E). P/E = Close price or market price (P) 12-month earnings per share (E) P/E ratio tells you how many years it will take the company's earnings to add up to its stock price at the time of calculation. For example, if the close price of stock ABC (P) is 100 Rs and its earnings per share (E) is 20 Rs, then its P/E Ratio equals 100/20 = 5. That is, at the time of calculation, it will take only 5 years of company ABC's earnings to equal its stock price. A stock with low P/E ratio is preferable to one with a high P/E. Conversely, suppose stock DEF closes at 200 Rs and its earnings per share (E) is 20 Rs, its P/E Ratio equals 200/20 = 10. At the time of calculation, it will take 10 years of company DEF's D.B.A.R, S.S.G.M.C.E, Shegaon. Page 43

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earnings to equal its stock price. Comparing stock ABC with stock DEF, we can draw an initial conclusion that stock ABC is more attractive than stock DEF. In brief, a low P/E stock has more earnings potential or is cheaper than a high P/E stock, considering its earnings ability. iii. Dividend Yield: Rate of dividend return, shown in percentage form. A stock with a high Dividend Yield is more attractive because you get aHigher rate of return in the form of dividends. The formula for calculating Dividend Yield is Dividend Yield = Dividend x 100 Stock Price For example, if stock ABC has a market price of 20 Rs and pays a 2 baht dividend, its dividend yield is 1 20 iv. Trading Volume: Trading volume or liquidity of a stock is important. It's easier to trade in/out of a stock with high liquidity or large trading volume. It's difficult to buy a stock which has a low liquidity or low trading volume because there are few sellers. And selling is difficult if there are few or no buyers when you want to sell because you urgently need the cash. f. Financial Analysis: Analysis of a company's growth potential, stability, financial and management strengths, and profit potential for its investors. Financial analysis is a rather complex exercise and can be left until you've mastered more basic investment knowledge. x 100 = 10%
4.5 ABOUT PORTFOLIO MANAGEMENT:

Portfolio is nothing but the total holding of securities belonging to any person. D.B.A.R, S.S.G.M.C.E, Shegaon. Page 44

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Portfolio management is the process of managing money, including investments, budgeting, banking and taxes. The portfolio management process involves formulating, modifying and implementing a real estate investment strategy in light of an investor's broader overall investment objectives. It also can be defined as the management of several properties owned by a single entity The basis for constructing a portfolio should reflect the enterprise"s particular needs. For example, you might choose to build a portfolio around initiatives for a specific product, business segment, or separate business unit within a multinational organization. A long-term investment strategy requires more than a passive investand forget" approach. Once youve created an investment strategy and built your portfolio, youve taken the first steps toward reaching your financial goals. As time passes, you will need to review your portfolio regularly to make sure you stay on track. Portfolio planning is a structured and intelligent way of spreading your risk through different investment options and to enjoy the diversification benefits marked with a higher rate of interests. There is no fixed rule on how to plan your portfolio but there are several platforms available on which you can explore the art of perfect portfolio building. It is equally important to check the portfolio performance in every quarter. Presently, the stock market sentiment is slowly going upward with a new hope of revival by late this year. This is a good time for investors to reshuffle their portfolios. For example, the market is expected to sustain the growth in the FMCG sector with the news of 20 percent average growth by FMCG majors last quarter. Major heavy weights like HLL and Cadburys are trading at 15 percent to 20 percent below their 52week high. One of the major reasons for failure in portfolio management is the lack of realistic objectives. What can rationally be expected is often quite different from the hyped anticipation created in the minds of investor. To be successful in the portfolio planning, you need to be aware of historical precedents. One of the reasons for your investment portfolio not giving the expected returns could be - you have not properly planned to cover your tax liability. In this section, we present a comparison of investments, which can reduce your tax burden. Most of us think of investing in tax only in the month of March and as the D-day approaches, there is a rush to invest in any tax-saving avenue be it infrastructure bonds, D.B.A.R, S.S.G.M.C.E, Shegaon. Page 45

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ELSS schemes or PPF without any proper thought before investing. Ideally, investing for tax saving purposes, should be an integral part of your portfolio plan, helping you reach your investment goals in a tax efficient way. The number of tax saving options on offer not only serve the purpose of saving tax but also offer other benefits such as risk coverage, capital appreciation, retirement savings etc. In this section, we have attempted to give a comparison of the various tax-saving investments, which should help you make an informed and intelligent decision regarding your tax investments. The comparison is done in a group of two on the parameters of safety, returns, tenure and tax benefits. The argument behind grouping of those avenues is not very complicated; we just want to address the dilemma of much talked groups. For instance, one can ask whether investment in NSC is better when compared to Infrastructure bond. The grouping has not been addressed. In this section, we suggest those readers to compare in their own for these kind of grouping after taking a look at the arguments of the available grouping.
4.6 MARKOWITZ PORTFOLIO THEORY:

In the earlier days the investment communities talked about risk and returns but there was no specific model to further term. The basic portfolio model was developed by Harry Markowitz, who derived the expected rate of return for a portfolio of assets and an expected risk measure. Before Markowitz, investors dealt loosely wit the concepts of return and risk. He was first to develop the concept of portfolio diversification in a formal way He quantified the concept of diversification. He showed quantitatively why and how portfolio diversification works to reduce the risk of portfolio to an investors. He was first to develop specific measure of portfolio risk and to derive the expected rate of return and risk for a portfolio based on co variance relationship. Markowitz model is based on several assumptions regarding investment behavior as:1. Investors consider each investment alternative as being represented by a probability distribution of expected return over some holding period. 2. Investors maximize one period expected utility, and their utilities curves demonstrate diminishing marginal utility of wealth. D.B.A.R, S.S.G.M.C.E, Shegaon. Page 46

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3. Investors estimate the risk of the portfolio on the basis of the variability of expected returns. 4. Investors base decisions solely on expected return on risk, so their utility curves are functions of expected return and expected variance of returns only. 5. For a given risk level, investor prefer, higher returns to lower returns. Similarly for a given level of expected return, investors prefer less risk to more risk. Under these assumptions , a single asset or a portfolio assets is considered to be efficient if no other assets or portfolio assets offers higher expected return with the same( or Lower ) risk, or lower risk with same ( or higher ) expected returns. VARIANCE OF RETURNS FOR AN INDIVIDUAL INVESTMENT:We will be using the variance or standard deviation of returns as the measure of risk. The variance or standard deviation is a measure of the variation of possible rate of returns, Ri, from the expected rate of return [E (Ri)] as follows:
Variance ( ) =
2
[ Ri - E(Ri) ]2 Pi
i=1
Graph No. 4.1 Risk & return on investment
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Types of portfolio 1. Aggressive Portfolio:Objective: Growth. This strategy might be appropriate for investor who seek High growth and who can tolerate wide fluctuations in market values, over the short term. Graph No. 4.2 Showing Aggressive Portfolio
2.
Growth Portfolio:Objective: Growth. This strategy might be appropriate for investors who have a
preference for growth and who can withstand significant fluctuations in market value. Graph No. 4.3 Showing Growth Portfolio D.B.A.R, S.S.G.M.C.E, Shegaon. Page 48

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3.
Balanced Portfolio: Objective: Capital appreciation and income. This strategy might be appropriate
for investors who want the potential for capital appreciation and some growth, and who can withstand moderate fluctuations in market values Graph No. 4.4 Showing Balanced Portfolio
4.
Conservative Portfolio: Objective: Income and capital appreciation. This strategy may be appropriate for
investors who want to preserve their capital and minimize fluctuations in market value. Graph No. 4.5 Showing Conservative Portfolio D.B.A.R, S.S.G.M.C.E, Shegaon. Page 49

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The Balancing Act: One reason to review your portfolio is that market conditions or some aspect of your financial situation say, your time horizon or your tolerance for risk may have changed since you created your investment strategy. If the change has been significant, you will need to consider adjusting your portfolios asset mix. Another reason you might have to considering giving your portfolio a new look is in response to a significant life event. Let us consider this example, Suppose your investment strategy was originally designed to achieve long-term growth, and your portfolio consists primarily of stocks. At the end of the first year, a year of tremendous growth in the stock market-you review your portfolio and you see that, although your bond and short-term investments have enjoyed only modest growth, your stock investments have significantly increased in value. In fact, your stock investments have grown so much that they now represent a larger proportion of your portfolio. The result is that your portfolio is out of balance as you have more money in stocks, and less in bonds, than you did when you built a portfolio according to your investment strategy. This increases your risk considerably. The solution, assuming your original asset mix is still appropriate for your goals, is to "rebalance" your portfolio -shift enough money from your stock investments to your bond investments to restore the proportions of the original asset mix. Income investing: A great way to obtain monthly income is to invest in good dividend-paying stocks. Most companies pay dividends on a quarterly basis; hence you need to purchase several different stocks whose dividend payments are staggered. When you are buying a
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good dividend paying stock, you are not necessarily looking for a stock that will appreciate by double of its value in a year's time but you are looking for one that will pay you regular and substantial income and additionally give you adequate protection on the downside. However, simply investing in companies with the highest dividend may not solve your purpose of income investing. More important is the dividend yield, which is calculated by dividing the annual dividends per share by the share price. This represents an annual rate of return a stock would provide on the basis of its dividend alone. A dividend yield higher than the post-tax yields of fixed income securities is definitely a good option for investors who look for income investing. As dividends are paid from the Net Income of the company, it is always better to check the consistency of dividend yields of selected stocks to see whether the company would be able to sustain the same level of yields in foreseeable future. In general, companies with low growth prospects offer a high dividend yield, against those with high growth prospects. Important to mention that dividend yield has an inverse relationship with price. Hence, in a bull market, even if the dividend rate is high, as the share price is relatively higher, we may find the dividend yield lower. Same way in a bear market, when share prices are low, dividend yields tend to move up.
Table 4.3 Showing Dividend Yield (%) for Income Investing Year Tata Oriental P&G ICICI HPCL Novartis IPCL Colgate Ltd. 7.16 6.25 6.23 India 5.56 5.55 Tata Tisco Castrol Chemicals Bank 2008 10 8.76 Palmolive Power 5.34 5.04 4.09 4.06 Page 51

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2007 10 2006 6.94
9.72 11.61
1.12 3.96
9.02
1.74 0.90
3.56 0.89
2.07 1.68
6.13 5.10
3.7
2.74
3.51 11.97 5.89
3.95 6.55
As on 28th December, 2008. Here, we have identified a few stocks which would help to plan your income investing depending on the dividend yields (see the above table). Dividend yield is summed up with capital gain or loss on the stock to calculate total returns. An analysis on 'total returns' indicates that only three companies gave positive total returns in last five to six years. The three are Infosys Technologies, Hindustan Lever and Oriental Bank.
Growth Investing: Growth investing is selecting and buying stock in companies that tend to grow substantially faster than others. The idea behind is that a growth in earnings and/or revenues would directly correlate into an increase in the stock price. Over the past few years, technology companies have been recognized as growth stocks. Although, this strategy has proven sustainable over a long period of time, growth investing involves special risks and as such, may not be suitable for all investors. The other characteristics of growth stocks include higher than average P/E ratio and poor dividend payout.
Graph No. 4.6 Showing Modern Portfolio Theory
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Including futures in an investment portfolio reduces volatility while enhancing return [and futures portfolios] has substantially less risk at every possible level of return than portfolios of stocks, or stocks and bonds. Modern portfolio theory is standard practice in the smart investor's portfolio. MPT places a non-correlated investment, a predefined percentage managed futures component, into a typical bond and equity portfolio. Risk is diversified away from the bond and equity positions into non-correlated managed futures positions. Higher portfolio returns with a reduction in risk is the end result.
4.7 FACTORS IMPORTANT TO CONSIDER CHOOSING INVESTMENTS:

1. 1. Risk:
Risk means the chance of a variation in the expectation of a particular outcome. The outcome may be different from what is expected, this brings along risk. Risk occurs when there is underperformance of an event. There are various kinds of risks to which the investor is exposed to. Click here to view few of them. 2. 3. 2. Return: Return means the benefits due to the appreciation in the value of the assets or the percentage change in value of the investment over a given period of time. When D.B.A.R, S.S.G.M.C.E, Shegaon. Page 53

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someone mentions "annual return", they are referring to an investment's percentage change over a year's time, factoring in dividends, capital gains and reinvestment of distributions. The returns can be measured in different ways. Click here to view the various ways of calculating return. 3. Marketability & Liquidity: As discussed earlier in the liquidity risk, marketability and liquidity of a security can be discussed with its easy mobility. If the security can be easily bought or sold without a considerable price concession, may be termed well in respect to marketability & liquidity. 4. Diversification: if we are invested wholly in one security our risk is higher and we are entirely exposed to the risk of the company. Where as if we are diversified across securities then our risk is also diversified because probably will be less that all the security would perform badly at the same time. However, the best diversified portfolio will ensure that this probability is least. 5. Tax: Tax plays a major role in deciding upon an investment. Every investor would like to earn more from an investment but would like it to be very tax efficient also. 6. Denomination & Tenor: The denomination of the investment is also very important along with the tenure for which is invested. If it is invested for a longer duration than probably the investor can bargain for a higher return.
CHAPTER NO.5
D.B.A.R, S.S.G.M.C.E, Shegaon. Page 54

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CLIENTELE PORTFOLIO DATA
Total data collection of 100 clients & give their information like their profession, city, saving & their investment in percentage below; Table No. 5.1 Showing clients city, saving, investment in % & return
S .No. 1 2 3 4 5 6 7 8 9 10 11
Profession professional professional professional professional professional professional professional professional professional professional professional
Investment City yavatmal yavatmal yavatmal yavatmal yavatmal yavatmal yavatmal yavatmal yavatmal yavatmal yavatmal Saving 25000 275000 400000 165000 170000 250000 420000 50000 35000 39000 410000 in % 20% 10% to 15% 18% to 22% 42% to 47% 45% 37% to 40% 45% to 50% 35% 40% to 50% 30% to 35% 40% to 42%
Overall return on portfolio 18% 20% to 22% 44% 57% to 59% 52% 45% 31% 55% 47% to 49% 50% 50%
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Cont
S .No. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Profession professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional Investment City Saving yavatmal 60000 yavatmal 65000 yavatmal 65000 yavatmal 67000 yavatmal 67000 yavatmal 70000 yavatmal 70000 yavatmal 72000 yavatmal 74000 yavatmal 75000 yavatmal 75000 yavatmal 75000 yavatmal 85000 18000 yavatmal 0 18800 yavatmal 0 20000 yavatmal 0 yavatmal 90000 yavatmal 90000 yavatmal 90000 Pusad 95000 pusad 95000 10000 pusad 0 10000 pusad 0 pusad 35000 pusad 45000 pusad 35000 in % 30% to 35% 34% to 37% 35% to 38% 45% to 50% 35% to 40% 40% to 45% 50% to 60% 78% to 85% 50% to 55% 70% to 80% 80% to 85% 50% 60% to 69% 65% to68% 60% 55% to 60% 52% 60% to 65% 50% 55% to 57% 60% to 65% 70% to 80% 60% 50% to 65% 72% to 80% 55% to 65% 80% to 85% 80% to90% 57% to 60% 62% 51% 59% 33% 68% 51% to 53% 55% 60% 42% Overall return on portfolio 46% 60% to 63% 53% 62% to 65% 65% 51% to 53% 64% 70% 61% to 64% 60% to 62% 65% 33% 39% to 42% 40% to 43%
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Cont
S .No. 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 58 59 60 Profession professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional businessman businessman businessman businessman Investment in City pusad pusad pusad pusad pusad pusad pusad pusad amravati amravati amravati amravati amravati amravati amravati amravati amravati amravati yavatmal yavatmal yavatmal yavatmal Saving 45000 0 20000 0 22000 0 42500 0 67000 25000 0 27500 0 30000 0 30000 0 40000 0 60000 75000 23000 0 25000 0 25000 30000 14000 0 12000 0 62000 65000 40000 40000 % 70% to 80% 85% to 100% 60% to 70% 70% to 80% 90% to 100% 65% to68% 85% to 90% Overall return on portfolio 81% 31% 60% 58% 53% 55% to 58% 67% 77% 50% to 55% 90% 70% 65% 70% to75% 65% 50% 60% 51% 75% to 80% 60% to 63% 70% 55% to 60% 65% 20% to 25% 20% to 22% 15% to 18% 25% to 30% 80% 28% 30% 47% 36% Page 57 58% 58% 72% 56% to 60% 58% 70%

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61 62 63 64
businessman businessman businessman businessman
yavatmal yavatmal yavatmal yavatmal
40000 65000 67000 67000
40% to 45% 35% to 40% 40% to 45% 30%
39% to 41% 84% 43% 45%
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Cont
S .No. 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 businessman 82 83 84 85 86 87 88 89 90 businessman businessman businessman Businessman Student Student Student Student Student amravati amravati amravati amravati yavatmal yavatmal yavatmal yavatmal pusad amravati businessman businessman businessman pusad amravati amravati Profession businessman businessman businessman businessman businessman businessman businessman businessman businessman businessman businessman businessman businessman Investment City Saving yavatmal 70000 yavatmal 70000 yavatmal 72000 yavatmal 74000 yavatmal 50000 42500 yavatmal yavatmal yavatmal yavatmal pusad pusad pusad pusad 0 49000 17500 0 18000 0 20000 0 35000 39000 40000 0 25000 0 50000 41000 0 40000 0 28000 0 80000 82000 41000 0 15000 20000 65000 67000 70000 in % 45% to 50% 40% 35% 30% to 35% 30% to 32% 35% to 38% 30% 42% to 47% 73% to 77% 30% to 34% 60% to 62% 55% to 57% 60% to 65% 60% to 69% 65% to68% 75% 55% to 60% 60% to 65% 60% to 70% 55% to 65% 85% to 95% 55% to 58% 55% to 60% 70% 25% 14% to 17% 20% 10% to 15% 8% 56% to 58% 69% 17% 24% 62% 65% 61% 70% 19% 8% 45% 26% Page 59 62% 68% 51% to 53% Overall return on portfolio 47% 15% 9% 40% to 43% 50% 78% 38% 85%

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Cont
S .No. 91 92 93 94 95 96 97 98 99 100 Profession Student student student student student Other Other Other Other Other Investment City pusad pusad amravati amravati amravati yavatmal yavatmal pusad pusad amravati Saving 20000 17500 0 12000 0 48000 50000 20000 35000 74000 40000 64000 in % 10% 30% to 35% 40% to 50% 35% to 40% 10% to 15% 15% to 18% 7% 10% 10% 25% to 30% 45% 31% 41% 20% 30% 38% 32% 35% to 37% Overall return on portfolio 25% to 28% 10%
Table No. 5.2 showing present Investment Profile, Type of portfolio & risk & Present investment S .No. 1 2 3 4 5 6 7 8 9 Type of portfolio & risk Low risk/ Low return Low risk/ Low return Moderate risk/ Moderate return Moderate risk/ Moderate return Moderate risk/ Moderate return High risk/ High return Mod to high risk/Mod to high return Mod to high risk/Mod to high return High risk/ High return Present Investment Profile saving scheme, liquid fund fixed deposits fixed deposits, bank bond & debenture, lips gold, share mkt recurring deposits liquid fund saving scheme, liquid fund bank,insurance,fixed deposits Present Investment 35000 40000 30000 35000 30000 34000 45000 50000 38000
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Cont
S .No. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 28 29 30 Type of portfolio & risk Low to mod risk/Low to mod return Low to mod risk/Low to mod return Moderate risk/ Moderate return Moderate risk/ Moderate return Moderate risk/ Moderate return Low to mod risk/Low to mod return Moderate risk/ Moderate return Moderate risk/ Moderate return Low risk/ Low return Mod to high risk/Mod to high return Mod to high risk/Mod to high return Mod to high risk/Mod to high return Mod to high risk/Mod to high return Mod to high risk/Mod to high return Moderate risk/ Moderate return Moderate risk/ Moderate return Low to mod risk/Low to mod return Moderate risk/ Moderate return Moderate risk/ Moderate return Moderate risk/ Moderate return Present Investment Profile share mkt,ulips saving scheme, post office liquid fund share mkt,ulips Bank liquid fund, share mkt saving scheme, bond &debenture share mkt, saving scheme, lips NSC fixed deposit, post office scheme share mkt ,NSC bank, insurance share mkt Gold real estate,gold,fixed deposit mutual fund real estate bank, liquid fund fixed deposits mutual fund, fixed deposit Present Investment 48000 75000 55000 90000 75000 90000 80000 75000 70000 80000 70000 55000 68000 80000 100000 80000 75000 100000 80000 90000
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Cont
S .No.
31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53
Type of portfolio & risk Low to mod risk/Low to mod return Low risk/ Low return Moderate risk/ Moderate return Low risk/ Low return Moderate risk/ Moderate return Moderate risk/ Moderate return High risk/ High return Moderate risk/ Moderate return Mod to high risk/Mod to high return High risk/ High return Moderate risk/ Moderate return Mod to high risk/Mod to high return High risk/ High return Moderate risk/ Moderate return High risk/ High return Mod to high risk/Mod to high return Mod to high risk/Mod to high return Moderate risk/ Moderate return Moderate risk/ Moderate return High risk/ High return Mod to high risk/Mod to high return Mod to high risk/Mod to high return Low to mod risk/Low to mod return
Present Investment Profile

share mkt,NSC NSC, bank, mutual fund gold,insurance,bank,share mkt liquid fund,ulips,saving scheme share mkt,NSC, insurance recurring deposits liquid fund, share mkt real estate,gold,fixed deposit gold,fixed deposit NSC, bank mutual fund, gold gold, mutual fund gold, insurance share mkt Bank fixed deposits ,NSC recurring deposits gold, bond &debenture NSC,fixed deposite,share mkt liquid fund bank,insurance,FD bank, insurance fixed deposit,NSC
Present Investment
100000 95000 85000 150000 175000 250000 127000 110000 200000 275000 225000 375000 300000 250000 200000 325000 175000 265000 190000 400000 400000 405000 415000
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S .No.
54
Type of portfolio & risk Low to mod risk/Low to mod return Low to mod risk/Low to mod return Moderate risk/ Moderate return Moderate risk/ Mod. return Mod to high risk/Mod to high return Mod to high risk/Mod to high return High risk/ High return High risk/ High return Mod to high risk/Mod to high return Mod to high risk/Mod to high return Low to mod risk/Low to mod return Low to mod risk/Low to mod return Low to mod risk/Low to mod return Moderate risk/ Moderate return Moderate risk/ Moderate return Mod to high risk/Mod to high return Mod to high risk/Mod to high return High risk/ High return Low risk/ Low return Low risk/ Low return Mod to high risk/Mod to high return Low risk/ Low return Moderate risk/ Moderate return Moderate risk/ Moderate return
Present Investment Profile

share mkt, insurance
Present Investment
410000
55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77
share mkt fixed deposits, share mkt,NSC liquid fund, insurance recurring deposits, NSC gold, insurance Gold share mkt ulips,liquid fund, share mkt gold,fixed deposit,NSC recurring deposit, mutual fund gold,fixed deposit NSC,insurance,share mkt mutual fund,gold,NSC NSC,saving scheme real estate,NSC,post office liquid fund,recuring fund real estate, fixed deposit bank, fixed deposit NSC,share mkt,ulips share mkt liquid fund real estate saving scheme,NSC post office scheme, share mkt
400000 405000 30000 25000 38000 30000 31000 45000 40000 41500 45000 75000 80000 75000 68000 55000 80000 90000 95000 75000 100000 68000 175000
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Cont
S .No. 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 Type of portfolio & risk Mod to high risk/Mod to high return Mod to high risk/Mod to high return Low to mod risk/Low to mod return Low to mod risk/Low to mod return Low to mod risk/Low to mod return Moderate risk/ Moderate return Low risk/ Low return Moderate risk/ Moderate return Moderate risk/ Moderate return Low risk/ Low return Low risk/ Low return Low to mod risk/Low to mod return Low risk/ Low return Mod to high risk/Mod to high return Moderate risk/ Moderate return Moderate risk/ Moderate return Moderate risk/ Moderate return Low risk/ Low return Low risk/ Low return Low risk/ Low return Low to mod risk/Low to mod return Low to mod risk/Low to mod return Low to mod risk/Low to mod return Present Investment Profile share mkt,NSC, gold ulips,recuring deposit real estate,NSC saving scheme,poost office Share mkt fixed deposits fixed deposits bank,FD post office scheme share mkt Bank fixed deposit liquid fund, insurance share mkt Insurance mutual fund Insurance bond & debenture, ulips Gold bank, liquid fund mutual fund Bank Insurance Present Investment 150000 125000 250000 300000 275000 325000 405000 435000 11000 40000 15000 30000 28000 80000 60000 70000 120000 200000 20000 25000 65000 70000 85000
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CHAPTER NO 6
DATA ANALYSIS & INTERPRETATION

1. Awareness about karvy consultancy
Data (out of 100) Table No. 6.1 Showing Awareness
SN. 1. 2.
Awareness YES NO
In % 64% 26%
Graph No. 6.1 Showing Awareness in Percentage
awareness about karvy

yes 26% 64% no
Interpretation: According to the study 64% people are aware about the karvy consultancy & 26% people are not aware about the karvy consultancy.
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2. Profession
Data (out of 100)
Table No. 6.2 Showing Profession
SN 1. 2. 3. 4.
Profession Professional Businessman Student Other
2007-08 55% 30% 10% 5%
yavatmal 30% 19% 4% 2%
Pusad 15% 5% 3% 2%
Amrawati 10% 6% 3% 1%
Graph No. 6.2 Showing Professions in %
2007-08
10% 5% Professional 30% 55% Businessm an Student Other
Interpretation: According to the study more no of professionals are ready to invest in all forms of financial products. The ratio of number of professionals is high. Then 30% are businessman had invested in financial product. Less no of students had invested in financial product.
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Graph No. 6.3 showing city wise professionals (Sub graph of Table no. 6.2)
60% 50% 40% 30% 20% 30% 10% 15% 6% 5% Am ravati 19% 3% 3% 4% 1% 2% 2% Pusad Yavatm al
g t n a c r e P
10% 0%
Profes ion s
Interpretation: According to the study most of the professionals are in yavatmal city those are prefer portfolio then pusad & then Amravati city. Then also more no. of businessman prefer portfolio those are in yavatmal city.
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3. Regular investor
Data (out of 100%)
Table No. 6.3 showing investors of the company
SN. 1. 2.
Regular investor YES NO
In % 78% 22%
Graph No. 6.4 showing investors in percentage
Regular investor
22% yes no 78%
Interpretation: During the study most of the respondents are regular investor of karvy consultancy. It is approximately 78% & very few respondents are not regular investor of karvy in yavatmal city and nearby area.
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4. Invest using tools

Data (out of 100%)
Table No. 6.4 Showing investment tools
SN. 1. 2.
Invest using Scientific tool Institution
In % 60% 40%
Graph No. 6.5 Showing investment tools in %
Interpretation: According to the study most of the investors are used scientific tool & the percentage is 60%. Very few investors are used institution.
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5. Awareness about the financial services

Data (out of 100) Table No. 6.5 Showing Awareness about Financial services of Karvy
SN. 1. 2. 3. 4. 5. 6.
Financial services Insurance Mutual fund Tax planning Bonds Stock broking Ppf
Awareness in % 63 25 1 5 5 1
Graph No. 6.6 Showing Awareness about Financial services in %
Error: Reference source not found Interpretation: According to the study Insurance sector is most known sector to the investors and after this mutual fund is well known. Then bonds as well as stock broking sector are known to the investor but in very few percentages & percentage is 5%.
6. Customer awareness from different media

Data (out of 100) Table No. 6.6 showing awareness from different media
SN. 1. 2.
Media News paper T.V
Awareness in % 60% 20% Page 70

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3. 4. 5. 6. 7.
Radio Internet Agents Franchisee Others
8% 5% 2% 4% 1%
Graph No.6.7 Showing awareness from different media in % Error: Reference source not found Interpretation: During to the study among all media news paper is most effective media. Then people give the priority T.V. channels. Radio, internet, agents, franchise & others etc. these types of media are not preferred generally. Internet is much expensive media type & generally people are not well known about franchisee
7. Reasons for Not Investments

Data (out of 100)
Table No. 6.7 Showing reasons for not Investments in PMS SN. 1. 2. Reasons Lack of knowledge High risk In % 10% 12%
Graph No. 6.8 showing reasons for not Investments in %
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Reasonsin %
13% 12% 12% 11% 12%
g t n a c r e P
11% 10% 10% 9% Lack of knowledge High risk 10%
Reasons in %
Interpretation: Lack of knowledge is most important cause for not to invest in any financial sector because most of the people are not completely aware. High risk is also one of the reason for not invest in financial sector because most of the investor are risk averse thats why they are not take a risk.
8. Investment priorities
Data (total 100%) Table No. 6.8 showing investment priorities
SN. 1. 2. 3. 4. 5.
Investment priorities Bank Insurance Bond Share mkt Real estate
Priorities in % 28% 11% 6% 25% 1%
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6. 7.
Gold Other
8% 21%
Graph No. 6.9 showing investment priorities in %
investment priorities
21 1 8 25 6 11 Bank insurance bond share mkt real estate gold other
28
Interpretation: According to the researcher study among all preferable areas for investment Bank as well as share market is more popular. Real estate is more risky in these days for investment. Gold is the very safety avenue but in gold more amount invested thats why investors are not prefer. In other include fixed deposits, ulips, liquidity, mutual fund etc are also more popular but after bank & share market.
9. Investor saving
Data (out of 100)
Table No. 6.9 Showing Investors total saving those prefer portfolio
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SN.
Amount ( Rs)
Saving in % 25% 40% 25% 10%
Professional
Businessman
Student
Other
1. 2. 3. 4
10000 to 50000 50000 to 100000 100000 to 300000 More than 300000
9% 23% 17% 6%
8% 12% 6% 4%
5% 3% 2% _
3% 2% _ _
Graph No. 6.10 Showing Investors total saving those prefer portfolio in %
savingin %
50% 40% 30% 25% 40% 25% 10%
g t n a c r e P
20% 10% 0% 10000 to 50000 50000 to 100000 100000 to 300000
saving in %
m than ore 300000
Amount in R . s
Interpretation: According to the study most of the investors saving is 50,000 to 1, 00,000.and in this amount include most of the professionals & their percentage is approximately 23%. In 1, 00,000 to 3, 00,000 investors saving is 25%.
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Graph No. 6.11 Showing Investors total saving in category wise (Sub graph of Table no. 6.9)
60% 50% 40% 30% 6% 17% 4% 6% 12% 9% 8% 0% 2% 3% 5% 0% 2% 3%
g t n a c r e P
20% 10% 0%
23%
More than 300000 100000 to 300000 50000 to 100000 10000 to 50000
Profess ion
Interpretation: According to the research study most of the professional saving is high compare to other thats why they are invested in financial sector. Then businessman saving are high & very few worker & others saving is very low.
10. Income percentage of the investor those are invested

Data (out of 100)
Table No. 6.10 Showing Income percentage of the investor those are invested
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SN. 1. 2. 3. 4.
% of income Below 10% 10% to 30% 30% to 50% Above 50%
Invested in % 5% 15% 30% 50%
Professional 3% 14% 38%
Businessman 5% 13% 12%
Student 2% 5% 3% -
Other 3% 2% -
Graph No. 6.12 Showing Income percentages of the investors those are invested
investedin %
60% 50% 40% 30% 30% invested in % 15% 5% 50%
g t n a c r e P
20% 10% 0% below10%
10%to 30%
30%to 50%
above 50%
Interpretation: According to the study most of the investors income is above 50% those people are invested in financial sector & percentage is more than 50% and those income
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percentages is below 10% & these type of investors percentage is 5%. They are also interested in invested in financial sector.
Graph No. 6.13 Showing Income percentages of the investors those are invested in Category wise (Sub graph of Table no. 6.10)
60% 50% 40% 30% 38% 12% 14% 3% 0% 13% 5% 0% 0% 3% 5% 2% Above 50% 30%to 50% 0% 2% 3% 10%to 30% Below 10%
g t n a c r e P
20% 10% 0%
Profes sion
Interpretation: According to the study most of the professionals are invested in investment of their income but more no. of professionals are invested in above 50% of their income. Then businessman & after student & lastly very few workers & others are invested in investment of their income.
11. Investors present investment amount (Rs)


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Data (out of 100)
Table 6.11 Showing Investors present investment amount in Rs
SN.
Present investment amount
Amount in % 25% 40% 25% 10%
Professional
Businessman
Student Other
1. 2. 3. 4.
5000 to 50000 50000 to 100000 100000 to 400000 More than 400000
10% 23% 16% 6%
8% 11% 7% 4%
5% 3% 2% -
2% 3% -
Graph 6.14 Showing Investors present investment amount (Rs) in %
am ountin %
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 40%
25%
25% am ount in %
g t n a c r e P
10%
5000 to 50000
50000 to 100000
100000 to 400000
m than ore 400000
Interpretation: D.B.A.R, S.S.G.M.C.E, Shegaon. Page 78

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According to the study most of the investors are presently invest between 50,000 to 1, 00,000 Rs.& their percentage is 40%. Only 10% investors are invest more than 4,00,000 Rs. then lastly 25% investors are presently invest their amount in 5,000 to 50,000 Rs
Graph 6.15 Showing Investors present investment amount (Rs) in category wise (Sub graph of Table no. 6.11)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
6 16
4 7 11
0 2 3
0 4
% i m t s e v n I
23 10
5 8
More than 400000 100000 to 400000 50000 to 100000 5000 to 50000
Profes ionsin c teg wis s a ory e
Interpretation: According to the study most of the professionals present investment is more & these investment is between 50,000 to 1,00,000 & 1,00,000 to 4,00,000.then most of the others present investment is between 5,000 to 50,000.
12. Present investment profile of investor
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Data (out of 100) Table 6.12 Showing present investment profile of investor
SN. 1. 2. 3. 4.
Present investment profile Bank Insurance Share market Other
Investmen t in % 35% 18% 22% 25%
Graph 6.16 Showing present investment profile of investor in %
40% 35% 30% 25% 20% 15% 10% 5% 0%
investm in % ent
35% 25%
22% 18%
investm en t in %
bank
insurance
share m arket
other
Interpretation: According to the research study most of the respondents are invested in banking & percentage is 35%. In other percentage is 25% in other include recurring deposits, liquidity, mutual fund, fixed deposits, etc. very few respondents are invested in insurance compare to others.
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YAVATMAL)
13. Type of investor

Data (out of 100)
Table 6.13 Showing type of investor
SN. 1. 2.
Type of investor Risk averse Risk bearer
In % 70% 30%
Graph 6.17 Showing type of investor in%
in %
30% 70%
risk avarse risk bearer

Interpretation: According to
the research study most of the investors are risk averse & their percentage is 70%. Only 30% investors are risk bearer.
14. Return on clients portfolio


YAVATMAL)
Data (out of 100) Table 6.14 Showing returns on clients portfolio
Sr. No
1 2 3 4 5
% of return
Below 10% 10% to 30% 30% to 50% 50% to 70% More than 70%
No. of respondents
4 12 30 42 11
Graph 6.18 Showing returns on clients portfolio in %
No. of respondent
m than 70% ore 50%to 70% 30%to 50% 30 12 4 0 10 20 30 40 50 11 43
g t n a c r e P
No. of respondent
10%to 30% Below 10%
Interpretation: According to the study most of the respondents returns are between 50% to 70% as well as 30% to 50%.
15. Type of portfolio investor prefer to invest

Data (out of 100)
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YAVATMAL)
Table 6.15 Showing type of portfolio investor prefer to invest Sr No

1. 2. 3. 4. 5.
Type of portfolio No of respondents Low risk / Low return portfolio 15 Low to Mod risk / Low to Mod 17 return portfolio Mod. risk / Mod. return portfolio 33 Mod to high risk / Mod to high 25 return portfolio High risk / High return portfolio 10
Graph 6.19 Showing type of portfolio investor prefer to invest in %
Noof respondents
35 30 25 20 15 10 5 0 33 25 15 17 10 No of respondent Low risk / Low to Mod Moderate Mod to high High risk / Lowreturn risk / Low to risk / risk/ Mod to High return portfolio Mod return Moderate high return portfolio portfolio return portfolio portfolio
Interpretation: According to the study most of the investor prefer to invest in these type of portfolio those give the maximum return & most of the investor prefer moderate risk/ moderate return portfolio their percentage is 33. Then prefer mod to high risk/ mod to high return & their % is 25. Very few people prefer high risk/ high return type of portfolio & those are approximately 10%.
t d n p s e R f . o N
CHAPTER NO.6
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YAVATMAL)
CONCLUSIONS & SUGGESTIONS

CONCLUSIONS
1) According to the respondents the quality of the service is very important. So the company should project itself as a brand in the market that gives end user the best quality of service with handy operations. 2) Also most of the respondents having their personal; consultant or the company consultants Karvy have to differentiate their services from other consultant effectively by delivering value added services to its customers. 3) According to the respondent there are no. of investment alternatives available but they give the priorities bank(28%), mutual fund(15%) as well as insurance(11%) because these alternatives give the proper return on their investment & these alternatives are perfectly fit any type of portfolio due to most of the respondents are invest in bank, insurance, mutual fund & saving schemes. 4) Above analysis 64% people are aware about the karvys PMs because karvy provide the proper services of their clients.
5) Also organizations have to concentrate on direct marketing activities. The consultancy should develop its long term relationship with the customers.
6) The consultancy must give much more emphasis on creation of customer who makes repurchase & give proper return on their existing portfolio.
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YAVATMAL)
7) Manage the portfolio is necessary because well managed portfolio give the Expected return & investors are easily understood which type of security is Profitable for them. 8) The awareness has been generated is through newspaper (60%). As it can be one of the potential media for advertisements. 9) According to the above analysis 78% investors are regular because they are satisfied about the karvys portfolio services. 10) Above the analysis 33% investors are prefer a moderate risk & moderate return portfolio as well as 25% investors moderate to high risk & moderate to high return because karvy suggest solid advice of their clients. 11) 28% respondents want to invest in banking sector and second preference for the insurance sector, so the consultancy can decide its strategy accordingly. 12) According to the analysis 60% investors are used scientific tool & 40% investors are used institutions tool. 13) The consultancy has to consider the factors for investments of respondents, effectively before making the strategy. 14) Most of the investors are risk averse because they are not ready to take the risk in portfolio. 15) Those are not invested in portfolio reason is that lack of knowledge & risk bearing capacity. 16) Most of the investors are presently invest in portfolio between 50,000 to 1,00,000 & in this investment most of the professionals as well as businessman are invested in portfolio because Karvy PMs providing proper services due to they are satisfied.
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YAVATMAL)
17) According to the analysis most of the investors saving is 50,000 to 1, 00,000.and in this amount include most of the professionals & businessman due to they invested bulk amount in karvys portfolio.
SUGGESTIONS
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YAVATMAL)
1.
Dont put all the eggs in one basket:
This old age adage is of utmost importance. No matter what the risk profile of a person is, it is always advisable to diversify the risks associated. So putting ones money in different asset classes is generally the best option as it averages the risks in each category. Thus, even investors of equity should be judicious and invest some portion of the investment in debt. Diversification even in any particular asset class (such as equity, debt) is good. Not all fund managers have the same acumen of fund management and with identification of the best man being a tough task; it is good to place money in the hands of several fund managers.
2.
Try to understand where the money is going:
It is important to identify the nature of investment and to know if one is compatible with the investment. One can lose substantially if one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go through the literature such as offer document and fact sheets that mutual fund companies provide on their funds.
3.
Assess yourself:
Self-assessment of ones needs; expectations and risk profile is of prime importance failing which; one will make more mistakes in putting money in right places than otherwise. One should identify the degree of risk bearing capacity one has and also clearly state the expectations from the investments.
BIBLIOGRAPHY

YAVATMAL)
1) BOOKS:1. Bhalla . V. K; Investment Management; 6th edition; S. Chand Publication, New Dellhi 2. Avadhani. V. A; Investment Management; 5thedition; Himalaya Publication, Mumbai 3. Pandey. I. M; Financial Management; 7thedition; Vikas Publication; New Dellhi
2) Websites: www.karvy.com www.amazon.com www.moneycontrol.com www.indiabull.com
ANNEXURE

YAVATMAL)
Dear Respondent, I am Priyanka L. Gundewar student from Department of Business Administration and Research, S. S. G. M. C. E. Shegaon that is affiliated to Amravati University. I am going to conduct research study on PORTFOLIO MANAGEMENT SERVICE (A STUDY OF KARVY STOCK BROKING ltd, YAVATMAL) during my academic year. So kindly fill up following questionnaire and co0operate with me for completing my project.
1. 1. Customers personal profile a) b) Name: Address: City : Contact address: Telephone: Date of birth: Sex: Status: Marital Status: Educational Qualifications: Email ID: Name of organization:
2. What is your profession? a. Student
b. business Page 89

YAVATMAL)
c. Professional 3. Are you a regular investor? a. Yes b. No 4. Do you invest usinga. Scientific Tools
d. worker
b. By Intuition
5. What are your investment priorities? Name of investments Bank Insurance Bonds & debentures Share market NSC Post Office Saving Schemes Real Estate Gold Others 6. What is your saving? a. 10,000 to 50,000 b. 50,000 to 1, 00,000 c. 1, 00,000 to 3, 00,000 d. More than 3, 00,000 7. What percentage of your income do you invest? a. Below 10% b. 10%-30% c. 30%-50% d. Above 50% Ranking
8. What is your Present Investment Amount (Rs.)?
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YAVATMAL)
a. 5000 to 50,000 b. 50,000 to 1, 00,000 c.1, 00,000 to 4, 00,000 d. More than 4, 00,000
9. What is your Present Investment Profile? a. Bank c. Share market b. Insurance d. Others
10. Which type of investor you are? a. Risk averse b. Risk bearer
11. Are you satisfied with your portfolio? a. Yes b. no
12. Which of the following portfolios would you like to invest in a. b. c. d. e. Low risk / Low return portfolio Low to Mod risk / Low to Mod return portfolio Moderate risk / Moderate return portfolio Mod to high risk / Mod to high return portfolio High risk / High return portfolio
13. Please give your opinion about the portfolio services that builds & maintain the company image? Why? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________
Page 91

Priya Dissertation 2003

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PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

CHAPTER NO. 1 INTRODUCTION

D.B.A.R, S.S.G.M.C.E, Shegaon.

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

1.1 PORTFOLIO MANAGEMENT:

1.2 PORTFOLIO MANAGEMENT SERVICES:

D.B.A.R, S.S.G.M.C.E, Shegaon.

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

1.3 BENEFITS OF PMS:

Identifying Investor Objectives

Hassle free operation

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

CHAPTER NO. 2 RESEARCH METHODOLOGY

MEANING OF RESEARCH METHODOLOGY:

2.1 DATA SOURCE:

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

2.2 RESEARCH APPROACH:

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

D.B.A.R, S.S.G.M.C.E, Shegaon.

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

2.4 OBJECTIVE OF THE PROJECT:

2.5 SCOPE OF THE STUDY:

D.B.A.R, S.S.G.M.C.E, Shegaon.

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

3.3 BOARD OF DIRECTORS:

Chairman and Managing Director 2. Mr. M Yugandhar

Managing Director 3. Mr. M S Ramakrishna Page 10

D.B.A.R, S.S.G.M.C.E, Shegaon.

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

Director 4. Mr. Prasad V Potluri

3.4 KARVY GROUPS OF COMPANIES ARE:

KARVY CONSULTANTS LIMITED:

D.B.A.R, S.S.G.M.C.E, Shegaon.

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

KARVY STOCK BROKING LIMITED:

KARVY INVESTORS SERVICES LIMITED:

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

KARVY COMPUTERSHARE PVT. LIMITED:

D.B.A.R, S.S.G.M.C.E, Shegaon.

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

KARVY COMMODITIES BROKING LIMITED:

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

D.B.A.R, S.S.G.M.C.E, Shegaon.

PORTFOLIO MANAGEMENT SERVICES

(A STUDY OF KARVY STOCK BROKING LTD,

Distribution of Financial Products: