madhu portfolio mgt

8/13/2019 Madhu Portfolio Mgt

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Background

Karvy Consultants Limited was established in 1982 at Hydrabad. It was established by a

group of Hydrabadbased pra!ti!ing Chartered "!!ountants. "t initial stage it was very

small in si#e. It was started with a !apital of $s. 1%&'%'''.

In starting it was only offering auditing and ta(ation servi!es. Later% it a!ts into the

$egistrar and )hare transfer a!tivities and subse*uently into finan!ial servi!es and other

servi!es li+e ,inan!ial -rodu!t istribution% Investment "dvisory )ervi!es% emat

)ervi!es% Corporate ,inan!e% Insuran!e et!.

"ll along% Karvy/s strong wor+ ethi!s and professional ba!+ground leveraged with

Information 0e!hnology enabled it to deliver *uality to the individual. " de!ade of

!ommitment% professional integrity and vision helped Karvy a!hieving a leadership

position in its field when it handled largest number of !orporate and retail that proved to

be a sound business synergy.

0oday% Karvy has a!!ess to millions of Indian shareholders% besides !ompanies% ban+s%

finan!ial institutions and regulatory agen!ies. ver the past one and half de!ades% Karvy

has evolved as a veritable lin+ between industry% finan!e and people.

In anuary 1998% Karvy be!ame first epository -arti!ipant in "ndhra -radesh. "n I)

9''2 Company% Karvy/s !ommitment to *uality and retail rea!h has made it an Integrated

,inan!ial )ervi!es Company.

0oday% !ompany has 23' bran!h offi!es in 145 !ities all over the India. 0he !ompany

adds & new offi!es every month to the !ompany/s ever growing national networ+ in every

noo+ and !orner of the !ountry. 0he !ompany servi!e over 14 million individual

investors% 18' !orporate and handle !orporate disbursements that e(!eed $s.2&'' Crores.

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WHERE KARVY STAND IN THE MARKET?

K"$67 is a legendary name in finan!ial servi!es% Karvy/s !redit is defined by its

mission to su!!eed% passion for professionalism% e(!ellent wor+ ethi!s and !ustomer

!entri! values.

0oday K"$67 is well +nown as a premier finan!ial servi!es enterprise% offering a broad

spe!trum of !ustomi#ed servi!es to its !lients% both !orporate and retail. )ervi!es that

K"$67 !onstantly upgrade and improve are be!ause of !ompany/s s+ill in leveraging

te!hnology. eing one of the most te!hnosavvy organi#ations around helps !ompany to

deliver even more !ost effe!tive finan!ial solutions in the shortest possible time.

hat bears ample testimony to Karvy/s su!!ess is the faith reposed in !ompany by

valued investors and !ustomers% all a!ross the !ountry. Indeed% with Karvy/s wide

networ+ tou!hing every !orner of the !ountry% even the most remote investor !an easily

a!!ess Karvy/s servi!es and benefit from !ompany/s e(pert advi!e.

KARVY GROUP

Karvy Consultants Limited

Karvy )e!urities Limited

Karvy Investor )ervi!es Limited

Karvy )to!+ bro+ing Limited

Karvy Computer )hares -vt. Ltd.

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Board of Dr!c"or#

Kar$% &on#u'"an"# ()"!d

Parthasarathy C

Yugandhar M

Ramakrishna M S

Prasad V Potluri

Robert Gibson

Sanjay Kumar Dhir

R Shyamsunder

:0able1; s of Karvy Consultants Limited1 In#uranc!5

Karvy is also dealer of many private life insuran!e !ompanies. "t amnagar bran!h%

!ompany is asso!iated with dealing of following !ompanies.

ICICI -rudential Life Insuran!e

H,C Life Insuran!e

0"0" "IJ Life Insuran!e

1 Mu"ua' .und S!r$c!#5

)in!e its in!eption in 1982% Karvy has demonstrated a dedi!ation !oupled with dynamism

that has inspired trust from various segments ? !orporate% government bodies and

individuals. Karvy has sin!e been performing a pivotal role as the intermediary ? the

interfa!e ? between these players.

ith Butual ,unds emerging as a distin!t asset !lass% Karvy has made a strategi! !hoi!e

to leverage the power of latest te!hnology to provide a !utting edge to its servi!es. Karvy%

today% servi!e nearly 8' of the asset management !ompanies G"BCs a!ross an

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e(tensive networ+ of servi!e !enters with assets under servi!e in e(!ess of $s.1'%'''

!rores.

KarvyMs ability to mass !ustomi#e and offer a diverse range of produ!ts for a diverse

range of !ustomers has helped mutual fund !ompanies to uni*uely position themselves in

the mar+et pla!e. 0hese diverse range of servi!es !ut a!ross multiple delivery !hannels ?

servi!e !enters% web% mobile phones% !all !enter ? has brought home the benefits of

te!hnology to investors% distributors% and the mutual funds.

Joing forward% Karvy shall strive to !reate new produ!ts and servi!es% whi!h would

address the needs of the end !ustomer. Company/s single minded fo!us in delivering

produ!ts for !ustomers has given it the distinguished position of being the preferred

provider of finan!ial servi!es in the !ountry.

(#" of Mu"ua' .und &'!n"# of KARVY5

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1(

1 !llian$e Mutual 6und

2 9irla Mutual 6und

9ank o. 9aroda Mutual 6und

& Can 9ank Mutual 6und

' Chola Mutual 6und

( Deuts$he Mutual 6und

) DSP Merrill :yn$h Mutual 6und

0 6ranklin %em-leton ,n+estments

G,C Mutual 6und

1 ;D6C Mutual 6und

11 ;S9C Mutual 6und

12 ,: / 6S Mutual 6und

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:0able9; List of B, Companies with whi!h Karvy deals; Un#%#"!)a"c R#k#5 0he unsystemati! ris+s are mismanagement% in!reasing inventory%

wrong finan!ial poli!y% defe!tive mar+eting et!. this is diversifiable or avoidable be!ause

it is possible to eliminate or diversify away this !omponent of ris+ to a !onsiderable

e(tent by investing in a large portfolio of se!urities. 0he unsystemati! ris+ stems from

ineffi!ien!y magnitude of those fa!tors different form one !ompany to another.

RISK RETURN ANA(YSIS5

"ll investment has some ris+. Investment in shares of !ompanies has its own ris+ or

un!ertaintyP these ris+s arise out of variability of yields and un!ertainty of appre!iation or

depre!iation of share pri!es% losses of li*uidity et!

0he r#k o$!r ")!!an be represented by the varian!e of the returns while the r!"urn o$!r

")!is !apital appre!iation plus payout% divided by the pur!hase pri!e of the share.

Formally% the higher the ris+ that the investor ta+es% the higher is the return. 0here is%

however% a ris+ less return on !apital of about 12 whi!h is the ban+% rate !harged by the $..I

or long term% yielded on government se!urities at around 13 to 15. 0his ris+ less return refers

to la!+ of variability of return and no un!ertainty in the repayment or !apital. ut other ris+s su!h

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as loss of li*uidity due to parting with money et!.% may however remain% but are rewarded by the

total return on the !apital.

$is+return is sube!t to variation and the obe!tives of the portfolio manager are to redu!e

that variability and thus redu!e the ris+ by !hoosing an appropriate portfolio.

0raditional approa!h advo!ates that one se!urity holds the better% it is a!!ording to the modern

approa!h diversifi!ation should not be *uantity that should be related to the *uality of s!ripts

whi!h leads to *uality of portfolio.

=(perien!e has shown that beyond the !ertain se!urities by adding more se!urities e(pensive.

RETURNS ON PORT.O(IO;

=a!h se!urity in a portfolio !ontributes return in the proportion of its investments in

se!urity. 0hus the portfolio e(pe!ted return is the weighted average of the e(pe!ted return% from

ea!h of the se!urities% with weights representing the proportions share of the se!urity in the total

investment. hy does an investor have so many se!urities in his portfolioO If the se!urity "C

gives the ma(imum return why not he invests in that se!urity all his funds and thus ma(imi#e

returnO 0he answer to this *uestions lie in the investor/s per!eption of ris+ atta!hed to

investments% his obe!tives of in!ome% safety% appre!iation% li*uidity and hedge against loss of

value of money et!. this pattern of investment in different asset !ategories% types of investment%

et!.% would all be des!ribed under the !aption of diversifi!ation% whi!h aims at the redu!tion or

even elimination of nonsystemati! ris+s and a!hieve the spe!ifi! obe!tives of investors.

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CHAPTER: 5

PORT.O(IO THEORIES

I1 DOW FONES THEORY5

0he F=) 0H=$7 is probably the most popular theory regarding the behavior of

sto!+ mar+et pri!es. 0he theory derives its name from Charles H. ow% who established the ow

ones Co. and was the first editor of the all )treet ournal ? a leading publi!ation on

finan!ial and e!onomi! matters in the @.).". "lthough ow never gave a proper shape to the

theory% ideas have been e(panded and arti!ulated by many of his su!!essors.

0he ow ones theory !lassifies the movement of the pri!es on the share mar+et into three maor

!ategories;

71 -rimary Bovements%

81 )e!ondary Bovements and

91 aily ,lu!tuations.

7; Pr)ar% Mo$!)!n"#5 0hey refle!t the trend of the sto!+ mar+et and last from one yearto three years% or sometimes even more. If the long range behavior of mar+et pri!es is

seen% it will be observed that the share mar+ets go through definite phases where the

pri!es are !onsistently rising or falling. 0hese phases are +nown as bull and bear phases.

-3

-2

-1 03

02

01

Gra/0 7

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uring a bull phase% the basi! trend is that of rise in pri!es. Jraph 1 above shows the

behavior of sto!+ mar+et pri!es in bull phase.

7ou would noti!e from the graph that although the pri!es fall after ea!h rise% the basi!

trend is that of rising pri!es. "s !an be seen from the graph that ea!h "roug0pri!es rea!h% is at

a higher level than the earlier one. )imilarly% ea!h pea+ that the pri!es rea!h is on a higher

level than the earlier one. 0hus -2 is higher than -1 and 02 is higher than 01. 0his means that

pri!es do not rise !onsistently even in a bull phase. 0hey rise for some time and after ea!h

rise% they fall. However% the falls are of a lower magnitude then earlier. "s a result% pri!es

rea!h higher levels with ea!h rise.

n!e the pri!es have risen very high% the bear phase in bound to start i.e.% pri!e will start

falling. Jraph 2 shows the typi!al behavior of pri!es on the sto!+ e(!hange in the !ase of a

-3

-2

01 -1

02

03

Gra/0 8

ear phase. It would be seen that pri!es are not falling !onsistently and% after ea!h fall% there

is a rise in pri!es. However% the rise is not mu!h as to ta+e the pri!es higher than the previous

pea+. It means that ea!h pea+ and "roug0 is now lower than the previous pea+ and trough.

0he theory argues that primary movements indi!ate basi! trends in the mar+et. It states

that if !y!li!al swings of sto!+ mar+et pri!es indi!es are su!!essively higher% the mar+et

trend is up and there is a bull mar+et. n the !ontrary% if su!!essive highs and low are

su!!essively lower% the mar+et is on a downward trend and we are in bear mar+et. 0his

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theory thus relies upon a behavior of the indi!es of share mar+et pri!es in per!eiving the

trend in the mar+et.

8; S!condar% Mo$!)!n"#5 e have seen that even when the primary trend is upward% there

are also downward movements of pri!es. )imilarly% even where the primary trend is

downward% there is upward movement of pri!es also. 0hese movements are +nown as

se!ondary movements and are shorter in duration and are opposite in dire!tion to the

primary movements. 0hese movements normally last from three wee+s to three months

and retra!e 1Q3 to 2Q3 of the previous advan!e in a bull mar+et of previous fall in the bear

mar+et.

9; Da'% Mo$!)!n"# 50here are irregular flu!tuations whi!h o!!ur every day in the mar+et.

0hese flu!tuations are without any definite trend. 0hus is the daily share mar+et pri!e

inde( for a few months are plotted on the graph it will show both upward and downward

flu!tuations. 0hese flu!tuations are the result of spe!ulative fa!tor. "n investment

manger really is not interested in the short run flu!tuations in share pri!es sin!e he is not

a spe!ulator. It may be reiterated that anyone who tries to gain from short run flu!tuations

in the sto!+ mar+et% !an ma+e money only be sheer !han!e. 0he investment manager

should s!rupulously +eep away from the daily flu!tuations of the mar+et. He is not a

spe!ulator and should always resist the temptation of spe!ulating. )u!h a temptation is

always very attra!tive but must always be resisted. )pe!ulation is beyond the s!ope of the

ob of an investment manager.

T)ng of n$!#")!n" d!c#on# on "0! 3a## of Do4 Fon!# T0!or%5

Ideally spea+ing the investment manage would li+e to pur!hase shares at a time when they have

rea!hed the lowest "roug0 and sell them at a time when they rea!h the highest pea+. However% in

pra!ti!e% this seldom happens. =ven the most astute investment manager !an never +now when

the highest pea+ or the lowest through have been rea!hed. 0herefore% he has to time his de!ision

in su!h a manner that he buys the shares when they are on the rise and sells then when they are

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on the fall. It means that he should be able to identify e(a!tly when the falling or the rising trend

has begun.

0his is te!hni!ally +nown as identifi!ation of the turn in the share mar+et pri!es. Identifi!ation of

this turn is diffi!ult in pra!ti!e be!ause of the fa!t that% even in a rising mar+et% pri!es +eep on

falling as a part of the se!ondary movement. )imilarly even in a falling mar+et pri!es +eep on

rising temporarily. How to be !ertain that the rise in pri!es or fall in the same in due to a real turn

in pri!es from a bullish to a bearish phase or vi!e versa or that it is due only to short run

spe!ulative trendsO

ow ones 0heory identifies the turn in the mar+et pri!es by seeing whether the su!!essive pea+s

and troughs are higher or lower than earlier.

II1 RANDOM WA(K THEORY5

0he first spe!ifi!ation of effi!ient mar+ets and their relationship to the randomness of pri!es

for things traded in the mar+et goes to )amuelson and Bandelbrot. ,Sa)u!'#on 0a# /ro$!d n

7>J "0a" f a )ark!" 0a# !ro "ran#ac"on co#"#- f a'' a$a'a3'! nfor)a"on # fr!! "o a''

n"!r!#"!d /ar"!#- and f a'' )ark!" /ar"c/an"# and /o"!n"a' /ar"c/an"# 0a$! "0! #a)!0oron# and !


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other be!ause ea!h information has been ta+en in% by the sto!+ mar+et and separately

disseminated. However% independent pie!es of information% when they !ome together

immediately after ea!h other show that the pri!e is falling but ea!h pri!e fall is independent of the

other pri!e fall.

0he basi! essential fa!t of the $andom al+ 0heory is that the information on sto!+ pri!es is

immediately and fully spread over that other investors have full +nowledge of the information.

0he response ma+es the movement of pri!es independent of ea!h other. 0hus% it may be said that

the pri!es have an independent nature and therefore% the pri!e of ea!h day is different. 0he theory

further states that the finan!ial mar+ets are so !ompetitive that there is immediate pri!e

adustment. It is due to the effe!tive !ommuni!ation system through whi!h information !an be

disturbed almost anywhere in the !ountry. 0his speed of information determines the effi!ien!y of

the mar+et.

. &APITA( ASSETS PRI&ING MODE( :&APM;5 C"-B provides a

!on!eptual framewor+ for evaluating any investment de!ision. It is used to estimate the

e(pe!ted return of any portfolio with the following formula;

E :R/; Rf B/ :E: R); 6 Rf ;

W0!r!-

E:R/; T =(pe!ted return of the portfolio

Rf T $is+ free rate of return

B/ T eta portfolio i.e. mar+et sensitivity inde(

E:R); T =(pe!ted return on mar+et portfolio

E:R);RfQ T Bar+et ris+ premium

0he above model of portfolio management !an be used effe!tively to;

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=stimate the re*uired rate of return to investors on !ompany/s !ommon sto!+.

=valuate ris+y investment proe!ts involving real "ssets.

=(plain why the use of borrowed fund in!reases the ris+ and in!reases the rate of return.

$edu!e the ris+ of the firm by diversifying its proe!t portfolio.

*. MOVING AVERAGE5 It refers to the mean of the !losing pri!e whi!h !hanges

!onstantly and moves ahead in time% there by en!ompasses the most re!ent days and deletes

the old one.

*. MODERN PORT.O(IO THEORY5 Bodern -ortfolio 0heory *uantifies the

relationship between ris+ and return and assumes that an investor must be !ompensated for

assuming ris+. It believes in the ma(imi#ation of return through a !ombination of

se!urities. 0he theory states that by !ombining se!urities of low ris+s with se!urities of

high ris+s su!!ess !an be a!hieved in ma+ing a !hoi!e of investments. 0here !an be various

!ombinations of se!urities. 0he modern theory points out that the ris+ of portfolio !an be

redu!ed by diversifi!ation. Harr% Marko4" and W''a) S0ar/!have developed this

theory.

*. MARKOWIT THEORY5 Bar+owit# has suggested a systemati! sear!h for optimal

portfolio. "!!ording to him% the portfolio manager has to ma+e probabilisti! estimates of

the future performan!es of the se!urities and analyse these estimates to determine an

effi!ient set of portfolios. 0hen the optimum set of portfolio !an be sele!ted in order to suit

the needs of the investors. 0he following are the assumptions of Bar+owit# 0heory;

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Investors ma+e de!isions on the basis of e(pe!ted utility ma(imi#ation.

In an effi!ient mar+et% all investors rea!t with full fa!ts about all se!urities in the

mar+et.

Investors/ utility is the fun!tion of ris+ and return on se!urities.

0he se!urity returns are !orelated to ea!h other by !ombining the different

se!urities.

0he !ombination of se!urities is made in su!h a way that the investor gets

ma(imum return with minimum of ris+.

"n effi!ient portfolio e(ists% when there is lowest level of ris+ for a spe!ified level

of e(pe!ted return and highest e(pe!ted return for a spe!ified amount of portfolio

ris+.

0he ris+ of portfolio !an be redu!ed by adding investments in the portfolio.

*. SHARPE+S THEORY5 illiam )harpe has suggested a simplified method of

diversifi!ation of portfolios. He has made the estimates of the e(pe!ted return and

varian!e of inde(es whi!h are related to e!onomi! a!tivity. )harpe/s 0heory assumes that

se!urities returns are related to ea!h other only through !ommon relationships with basi!

underlying fa!tor i.e. mar+et return inde(. Individual se!urities return is determined

solely by random fa!tors and on its relationship to this underlying fa!tor with the

following formula;

R a BI !

W0!r!% Rrefers to e(pe!ted return on se!urity

a the inter!ept of a straight line or alpha !oeffi!ient

Bslope of straightline or beta !oeffi!ient

I level of mar+et return inde(

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RU(ES TO BE .O((OWED BE.ORE INVESTMENT IN

PORT.O(IO+S

7; Compile the finan!ials of the !ompanies in the immediate past 3 years su!h as turnover%

gross profit% net profit before ta(% !ompare the profit earning of !ompany with that of the

industry average nature of produ!t manufa!ture servi!e render and it future demand

%+now about the promoters and their ba!+ ground% dividend tra!+ re!ord% bonus shares in

the past 3 to & years %refle!ts !ompany/s !ommitment to share holders the relevant

information !an be a!!essed from the $C G$egistrant of Companies published

finan!ial results finan!ed *uarters% ournals and ledgers.

8; at!h out the highs and lows of the s!ripts for the past 2 to 3 years and their timing

!y!li!al s!ripts have a tenden!y to repeat their performan!e% this hypothesis !an be true

of all other finan!ial%

9; 0he higher the trading volume higher is li*uidity and still higher the !han!e of

spe!ulation% it is futile to invest in su!h shares who/s daily movements !annot be +ept

tra!+% if you want to reap ri!h returns +eep investment over along hori#on and it will

offset the wild intraday trading flu!tuation/s% the minor movement of s!ripts may be

ignored% we must remember that share mar+et moves in phases and the span of ea!h

phase is 4 months to & years.

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CHAPTER 6

PERSONS INVO(VED IN PORT.O(IO MANAGEMENT

7; INVESTOR5

"re the people who are interested in investing their fundsO

8; PORT.O(IO MANAGERS5

Is a person who is in the wa+e of a !ontra!t agreement with a !lient% advi!es or dire!ts or

underta+es on behalf of the !lients% the management or distribution or management of the funds of

the !lient as the !ase may be.

9; DIS&RETIONARY PORT.O(IO MANAGER5

Beans a manager who e(er!ise under a !ontra!t relating to a portfolio management e(er!ise

any degree of dis!retion as to the investment or management of portfolio or se!urities or funds of

!lients as the !ase may be. 0he relationship between an investor and portfolio manager is of a

highly intera!tive nature.

0he portfolio manager !arries out all the transa!tions pertaining to the investor under the

power of attorney during the last two de!ades% and in!reasing !omple(ity was witnessed in the

!apital mar+et and its trading pro!edures in this !onte(t a +ey Guninformed investor formed

investor found himself in a tri!+y situation % to +eep tra!+ of mar+et movement %update his

+nowledge% yet stay in the !apital mar+et and ma+e money % therefore in loo+ed forward to

resuming help from portfolio manager to do the ob for him . 0he portfolio management see+s

to stri+e a balan!e between ris+/s and return.

0he generally rule in that greater ris+ more of the profits but ).=..I. in its guidelines

prohibits portfolio managers to promise any return to investor.

-ortfolio management is not a substitute to the inherent ris+s asso!iated with e*uity

investment.

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WHO &AN BE A PORT.O(IO MANAGER?

nly those who are registered and pay the re*uired li!ense fee are eligible to operate as

portfolio managers. "n appli!ant for this purpose should have ne!essary infrastru!ture with

professionally *ualified persons and with a minimum of two persons with e(perien!e in thisbusiness and a minimum net worth of $s. &'la+h/s. 0he !ertifi!ate on!e granted is valid for three

years. ,ees payable for registration are $s 2.&la+h/s every for two years and $s.1la+h/s for the

third year. ,rom the fourth year onwards% renewal fees per annum are $s A&'''. 0hese are

sube!ted to !hange by the ).=..I.

0he ).=..I. has imposed a number of obligations and a !ode of !ondu!t on them. 0he

portfolio manager should have a high standard of integrity% honesty and should not have been

!onvi!ted of any e!onomi! offen!e or moral turpitude. He should not resort to rigging up of

pri!es% insider trading or !reating false mar+ets% et!. their boo+s of a!!ounts are sube!t to

inspe!tion to inspe!tion and audit by ).=..I... 0he observan!e of the !ode of !ondu!t and

guidelines given by the ).=..I. are sube!t to inspe!tion and penalties for violation are imposed.

0he manager has to submit periodi!al returns and do!uments as may be re*uired by the )=I

from timeto time.

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.UN&TIONS O. PORT.O(IO MANAGERS5

Ad$#or% ro'!5 "dvi!e new investments% review the e(isting ones% identifi!ation of

obe!tives% re!ommending high yield se!urities et!.

&onduc"ng )ark!" and !cono)c #!r$c!5 0his is essential for re!ommending good

yielding se!urities they have to study the !urrent fis!al poli!y% budget proposalP individual

poli!ies et! further portfolio manager should ta+e in to a!!ount the !redit poli!y% industrial

growth% foreign e(!hange possible !hange in !orporate law/s et!.

.nanca' ana'%##5 He should evaluate the finan!ial statement of !ompany in order to

understand% their net worth future earnings% prospe!tus and strength.

S"ud% of #"ock )ark!" 5 He should observe the trends at various sto!+ e(!hange and

analysis s!ripts so that he is able to identify the right se!urities for investment

S"ud% of ndu#"r%5 He should study the industry to +now its future prospe!ts% te!hni!al

!hanges et!% re*uired for investment proposal he should also see the problem/s of the

industry.

D!cd! "0! "%/! of /or" fo'o 5Keeping in mind the obe!tives of portfolio a portfolio

manager has to de!ide whether the portfolio should !omprise e*uity preferen!e shares%

debentures% !onvertibles% non!onvertibles or partly !onvertibles% money mar+et% se!urities

et! or a mi( of more than one type of proper mi( ensures higher safety% yield and li*uidity

!oupled with balan!ed ris+ te!hni*ues of portfolio management.

" portfolio manager in the Indian !onte(t has been ro+ers Gig bro+ers who on the basis of

their e(perien!e% mar+et trends% Insider trader% helps the limited +nowledge persons.

0he one/s who use to manage the funds of portfolio% now being managed by the portfolio of

Ber!hant an+/s% professional/s li+e B"/s C"/s "nd many finan!ial institution/s have entered

the mar+et in a big way to manage portfolio for their !lients.

"!!ording to ).=..I. rules it is mandatory for portfolio managers to get them self/s

registered.

$egistered mer!hant ban+ers !an a!t/s as portfolio managers. Investor/s must loo+ forward%

for *ualifi!ation and performan!e and ability and resear!h base of the portfolio managers.

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NEED AND RO(E O. PORT.O(IO MANAGER5

ith the development of Indian )e!urities mar+et and with appre!iation in mar+et pri!e of

e*uity share of profit ma+ing !ompanies% investment in the se!urities of su!h !ompanies has

be!ome *uite attra!tive. "t the same time% the sto!+ mar+et be!oming volatile on a!!ount of

various fa!ts% a layman is pu##led as to how to ma+e his investments without losing the same. He

has felt the need of an e(pert guidan!e in this respe!t. )imilarly non resident Indians are eager to

ma+e their investments in Indian !ompanies. 0hey have also to !omply with the !onditions

spe!ified by the $=)=$6= "FK , IFI" under various s!hemes for investment by the non

residents. 0he portfolio manager with his ba!+ground and e(pertise meets the needs of su!h

investors by rendering servi!e in helping them to invest their fundQs profitably.

PORT.O(IO MANAGER+S OB(IGATION5

0he portfolio manager has number of obligations towards his !lients% some of them are;

He shall transa!t in se!urities within the limit pla!ed by the !lient himself with regard to

dealing in se!urities under the provisions of $eserve an+ of India "!t% 1935.

He shall not derive any dire!t or indire!t benefit out of the !lient/s funds or se!urities.

He shall not pledge or give on loan se!urities held on behalf of his !lient to a third person

without obtaining a written permission from su!h !lients.

hile dealing with his !lient/s funds% he shall not indulge in spe!ulative transa!tions.

He may hold the se!urities in the portfolio a!!ount in his own name on behalf of his

!lient/s only if the !ontra!t so provides. In su!h a !ase% his re!ords and his report to his

!lients should !learly indi!ate that su!h se!urities are held by him on behalf of his !lient.

He shall deploy the money re!eived from his !lient for an investment purpose as soon as

possible for that purpose.

He shall pay the money due and payable to a !lient forthwith.

He shall not pla!e his interest above those of his !lients.

He shall not dis!lose to any person or any !onfidential information about his !lient% whi!h

has !ome to his +nowledge.

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H! #0a'' !nd!a$or "o5

o =nsure that the investors are provided with true and ade*uate information without ma+ing

any misguiding or e(aggerated !laims.

o =nsure that the investors are made aware of the attendant ris+s before any investment

de!ision is made by them.

o $ender the best possible advi!e to his !lients relating to his needs and the environment

and his own professional s+ills.

o =nsure that all professional dealings are affe!ted in a prompt% effi!ient and !ost effe!tive

manner.

&OORDINATION WITH RE(ATING AUTHORITIES5

0he portfolio manager shall designate a senior offi!er as !omplian!e offer.

T0! #!nor offc!r5

)hall !oordinate with regulating authorities regarding various matters.

)hall provide ne!essary guidan!e to and ensure !omplian!e internally by the portfoliomanager of all $ules% $egulations guidelines% Fotifi!ations et!. issued by )=I%

government of India and other regulating authorities.

)hall ensure that observations madeQ defi!ien!ies pointed out by )=I in the

fun!tioning of the portfolio manager do not re!ur.

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DE.AU(TS AND PENA(TIES5

0he following aspe!ts must be +ept in view;

(a3'"!# for ac"on n ca#! of d!fau'" A /or"fo'o )anag!r # 'a3'! "o /!na'"!# f 0!5

71 ,ails to !omply with any !onditions sube!t to whi!h !ertifi!ate of registration has been

granted.

81 Contravenes any of the provisions of the )=I a!t% its $ules and $egulations.

In #uc0 a ca#!- 0! #0a'' 3! 'a3'! "o an% of "0! fo''o4ng /!na'"!#- af"!r !nLur%

1 )uspension of registration for a spe!ifi! period.

1 Can!ellation of registration.

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CHAPTER - 7

INVESTMENT ANA(YSIS

MEANING O. INVESTMENT

Investment means employment of funds in a produ!tive manner so as to !reate additional

in!ome. 0he word investment means many things to many persons. Investment in finan!ial

assets leads to further produ!tion and in!ome. It is lending of funds for in!ome and !ommitment

of money for !reation of assets% produ!ing further in!ome.

Investment also means pur!hasing of se!urities% finan!ial instruments or !laims on future

in!ome. Investment is made out of in!ome and savings !redit or borrowings and out of wealth. It

is a reward for waiting for money.

T0!r! ar! "4o conc!/"# of n$!#")!n"5

7; Econo)c In$!#")!n"5 0he !on!ept of e!onomi! investment means additions to the

!apital sto!+ of the so!iety. 0he !apital sto!+ of so!iety is the goods whi!h are used in the

produ!tion of other goods. 0he term investment implies the formation of new and

produ!tive !apital in the form of new !onstru!tion and produ!er/s durable instrumentsu!h as plant and ma!hinery% inventories and human !apital are also in!luded in this

!on!ept. 0hus% an investment% in e!onomi! terms% means an in!rease in building%

e*uipment% and inventory.

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8; .nanca' In$!#")!n"5 0his is an allo!ation of monetary resour!es to assets that are

e(pe!ted to yield some gain or return over a given period of time. It is a general or

e(tended sense of the term. It means an e(!hange of finan!ial !laims su!h as shares and

bonds% real estate% et!. in their viewP investment is a !ommitment of funds to derive future

in!ome in the form of interest% dividends% rent premiums% pension benefits and the

appre!iation of the value of their prin!ipal !apital.

0he e!onomi! and finan!ial !on!epts of investment are related to ea!h other

be!ause investment is a part of the savings of individuals whi!h flow into the !apital

mar+et either dire!tly or through institutions. 0hus% investment de!isions and finan!ial

de!isions intera!t with ea!h other. ,inan!ial de!isions are primarily !on!erned with the

sour!es of money where as investment de!isions are traditionally !on!erned with uses or

budgeting of money.

MEANING O. SE&URITY

" se!urity means a do!ument that gives its owners a spe!ifi! !laim of ownership of a

parti!ular finan!ial asset. ,inan!ial mar+et provides fa!ilities for buying and selling of finan!ial

!laims and servi!es. 0hus% se!urities are the finan!ial instruments whi!h are bought and sold in

the finan!ial mar+et for investment.

0he important finan!ial instruments are shares% debentures% bonds% et!. other finan!ial

instruments are also +nown as 0reasury bills% Butual ,und @nits% ,i(ed eposits% Insuran!e

-oli!ies% -ost ffi!e )avings li+e Fational )avings !ertifi!ates% Kisan 6i+as -atras% publi!

provident ,unds et!. 0hese se!urities are used by the investors for their investment. )ome of

these se!urities are transferable while some of them are not transferable.

INVESTMENT AVENUES

0he alternative investment avenues for the investor are to be !onsidered first so as to satisfy

the above obe!tives of investors. 0he following !ategories of investors are open to investors as

avenues for savings to flow in finan!ial form;

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:a; In$!#")!n" n Bank D!/o#"# 6 Sa$ng# And .

0hese are less ris+y than dire!t investment in sto!+s and shares as these enoy the e(pert

management by the -ortfolio Banager or -rofessional e(perts. 0hey also have the

advantage of diversified -ortfolio involving the redu!tion of ris+ and e!onomies of s!ale

redu!ing the !ost of investment.

:!; In$!#")!n" n N!4 I##u!# Mark!"5" new entrant in the )to!+ Bar+et should preferably

invest in Few Issues of e(isting and well reputed !ompanies either in e*uity or

debentures. In!identally the instruments in whi!h investment !an be made in the new

issues mar+et are;

71 ELu"% ##u!#through prospe!tus or rights announ!ed by e(isting shareholders.

81 Pr!f!r!nc! #0ar!#with a fi(ed dividend either !onvertible into e*uity or not.

91 D!3!n"ur!# of various !ategories ? !onvertible% fully !onvertible% partly

!onvertible and non !onvertible debentures.

=1 P1S1U1 Bond#? ta(able or freeta(ed with interest rates.

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:f; In$!#")!n" n go'd- #'$!r- /r!cou# )!"a'# and an"Lu!#.

:g; In$!#")!n" n r!a' !#"a"!#1

:0; In$!#")!n" n g'"!dg!d #!cur"!# and se!urities of Jovernment and )emiJovernment

organi#ations Ge.g. $elief bonds% bonds of port trusts% treasury bills% et!.. 0he maturity

period is varying generally upto1' to2' years. Jiltedged se!urities mar+et !onstitutes the

largest segment of the Indian !apital mar+et. 0hese are fully se!ured as they have

government ba!+ing. 0a( benefits are available to these se!urities.

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T0! fo''o4ng fgur! ndca"!# a'"!rna"$! a$!nu!# for In$!#")!n"5

02


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71 )tudy the alan!e )heet of the !ompany and analy#e the prospe!ts of sales and profits.

81 "naly#e the mar+et pri!e in terms of boo+ value and profit earning !apa!ity Gor -Q=

$atio and use them to +now whether the share is overvalued or undervalued.

91 )tudy the e(pansion plans or ta( savings plans and analy#e the !ompany/s finan!ial

strength% bonus and dividend paying strength% through the me!hanism of finan!ial ratios.

=1 )tudy whether the management is professional and good% whether other a!!ounting

pra!ti!es are dependable and !onsistent. 0he !ompany be!omes attra!tive to buy if the

finan!ial ratios support the view that the fundamentals are strong and the shares are worth

buying.

J1 Lastly% if the pri!e of the share is undervalued on the basis of the proe!ted earnings for

the !oming half year or one year and its -Q= $atio is below the industry average% then it is

worth buying. 0he same is worth selling if in his udgement it is overhauled. ,or

assessing the under valuation and over valuation% the analyst and his analyti!al power

!ount for this purpose.

GUIDE(INES .OR INVESTORS IN THE STO&K MARKET

71 Fever buy on rumours or mar+et gossip.

81 uy only on the basis of fundamental analysis of the !ompanies based on balan!e sheet

data analysis.

91 uy a diversified list of !ompanies and not put all the money in one or two !ompanies.

"ll investments in the sto!+ mar+et are ris+y. 0he ris+ !an be redu!ed by proper

diversifi!ation of the portfolio into 1' or 1& !ompanies.

=1 )tudy the sales% gross profit% net profit in relation to e*uity !apital employed and attempt

a fore!ast for the !oming half year or one year.

J1 " de!laration of bonus or low -Q= ratio% along with strong fundamentals shows that the

!ompany should be a good buy.

>1 0he investor should also wat!h for low pri!ed shares whi!h are about to turn around for

more profitability in future.

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1 Investors should buy on de!lines and follow the prin!iple of !ontrariness. 0his means that

if everyone is buying s!rip% avoid that s!rip but if a s!rip is deserted and your study has

shown that is has potentialP for e(panding earnings and profitability% then su!h s!rip/s

should be pur!hased by the investor.

@1 "void both fear and greed on the sto!+ mar+et. If investor is not afraid of the mar+et% he

generally studies the mar+et and buys at lows and sells at highs.

1 0he investor should +now how to analy#e the se!urity pri!es of !ompanies and pi!+ up

the undervalued shares. 0he valuation may be based on the net profits dis!ounted to the

present by a proper dis!ount rate or by the boo+ value of share% estimated on the basis of

net worth of the !ompany.

7C1 0iming of pur!hase and sale is also very important. If te!hni!al analysis and the use of

!harts is not familiar to the investor he should follow the prin!iple Dbuy low and sell

highE. He should see whether there is a bull mar+et or bear mar+et in a share by a study

of the share pri!e over a period of 1& to 3' days. In a bull phase one !an sell at one of the

pea+s and in a bear phase one !an buy at one of troughs. If the investor is greedy to wait

on to see the ma(imum pea+% and then he may be disappointed if the pri!e shows a down

trend. )imilarly% it is diffi!ult to foresee the lowest pri!e for a s!rip for the buy. 0he

investor has to use his dis!retion.

T0! n$!#"or# #0ou'd no" do "0! fo''o4ng "0ng#5

7; He should not put all his eggs in one bas+et whi!h means that he should not put all his

funds in one or two !ompanies.

8; o not go by heresy or rumours to buy or sell a s!rip as that might be a dupe.

9; o not spe!ulate involving the buying and selling in the same day or during the same

settlement period. " long ? term investor gains more than spe!ulator.

=; "void ta+ing undue ris+s or beyond the !apa!ity of your net worth. 0hat means if !apital

base is $s. 2 la+hs% put a stop loss order at $s. 2'%'''Q Gor 1Q8thor 1Q1'thof the !apital base.

J; o not get pani!+y if the s!rips in whi!h you have invested go down in pri!e. n!e the

investment is made after a study of fundamentals% a temporary fall in its pri!e should not

!ause worry. hat the investor needs is patien!e% whi!h is possible if he is a long ? term

investor.

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>; o not be too greedy or ambitious. -ut limits to your operations and buy and sell orders

in a pri!e range and your minimum profit limit is 2'.

INVESTMENT STRATEGY

-ortfolio management !an be pra!ti!ed by following either an a!tive or passive strategy.

"!tive strategy is based on the assumption that it is possible to beat the mar+et. 0his is done by

sele!ting assets that are viewed as under pri!ed or by !hanging the asset mi( or proportion of

fi(ed in!ome se!urities and shares. "!tive strategy is !arried out as follows;

7; Aggr!##$! S!cur"% Manag!)!n"5 "ggressive pur!hasing and selling of se!urities to

a!hieve high yields from dividend interest and !apital gains.

8; S/!cu'a"on And S0or" T!r) Tradng5 0he obe!tive is to gain !apital profits. 0he ris+

is high and the !omposition of portfolio is fle(ible. )u!!ess of a!tive strategy depends on

!orre!t de!isions as regard the timing of movement in the mar+et as a whole% weight age

of various se!urities in the portfolio and individual share sele!tion.

0he passive strategy does not aim at outperforming the mar+et. @nli+e the a!tive strategy. nthe other hand the sto!+s !ould be randomly sele!ted on the assumption of a perfe!tly effi!ient

mar+et. 0he obe!tive is to in!lude in the portfolio a large number of se!urities so as to redu!e

ris+s spe!ifi! to individual se!urities. 0he !hara!teristi!s of positive strategy are;

71 Long 0erm Investment Hori#on

81 Little -ortfolio $evisions

0hus it is basi!ally a buy and hold strategy.

0he strategy !an be implemented by investing in se!urities so as to dupli!ate the portfolio of

a mar+et inde( whi!h is !alled inde(ing.

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INVESTMENT AND SPE&U(ATION

DS/!cu'a"onis an a!tivity% *uite !ontrary to its literal meaning% in whi!h a person assumes

high ris+s% often without regard for the safety of his invested prin!ipal% to a!hieve large !apital

gains.E 0he time span in whi!h the gain is sought to be made is usually very short.

0he investor sa!rifi!es some money today in anti!ipation of a finan!ial return in future. He

indulges in a bit of spe!ulation. 0here is an element of spe!ulation involved in all investment

de!isions. However it does not mean that all investments are spe!ulative by nature. Jenuine

investments are !arefully thought out de!isions. n the other hand% spe!ulative investments are

not !arefully thought out de!isions. 0hey are based on tips and rumours.

"n investment !an be distinguished from spe!ulation in three ways ? R#k- ca/"a' gan and

")! /!rod1 Investment involves limited ris+ while spe!ulation is !onsidered as an investment

of funds with high ris+. 0he pur!hase of a se!urity for earning a stable return over a period of

time is an investment whereas the primary motive is to earn high profits through pri!e !hanges is

termed as spe!ulation. 0hus% spe!ulation involves buying a se!urity at low pri!e and selling at a

high pri!e to ma+e a !apital gain.

0he truth is that any investment is a spe!ulation if the investor uses his udgement and

fore!ast the probable !ourse of events in order to reap the returns on his investment.

E(EMENTS O. INVESTMENTS

:a; R!"urn5 Investors buy or sell finan!ial instruments in order to earn return on them. 0he

return on investment is the reward to the investors. 0he return in!ludes both !urrent

in!ome and !apital gains or losses% whi!h arises by the in!rease or de!rease of the

se!urity pri!e.

:3; R#k5 $is+ is the !han!e of loss due to variability of returns on an investment. In !ase of

every investment% there is a !han!e of loss. It may be loss of interest% dividend or

prin!ipal amount of investment. However% ris+ and return are inseparable. $eturn is a

pre!ise statisti!al term and it is measurable. ut the ris+ is not pre!ise statisti!al term.

However% the ris+ !an be *uantified; 0he investment pro!ess should be !onsidered in

terms of both ris+ and return.

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:c; T)!5 0ime is an important fa!tor in investment. It offers several different !ourses of

a!tion. 0ime period depends on the attitude of the investor who follows a >buy and hold/

poli!y. "s time moves on% analysts believe that !onditions may !hange and investors may

revaluate e(pe!ted return and ris+ for ea!h investment.

.INAN&IA( ANA(YSIS5

"n analysis of finan!ial for the past few years would help the investment manager in

understanding the finan!ial solven!y and li*uidity% the effi!ien!y with whi!h the funds are used%

the profitability% the operating effi!ien!y and operating leverages of the !ompany. ,or this

purpose !ertain fundamental ratios have to be !al!ulated.

ua'"% of Manag!)!n"5 0his is an intangible fa!tor. 7et it has a very important bearing

on the value of the shares. =very investment manager +nows that the shares of !ertain

business houses !ommand a higher premium than those of similar !ompanies managed by

other business houses. 0his is be!ause of the *uality of management% the !onfiden!e that

the investors have in a parti!ular business house% its poli!y visSvis its relationship with

the investors% dividend and finan!ial performan!e re!ord of other !ompanies in the same

group% et!. 0his is perhaps the reason that an investment manager always gives a !lose

loo+ to the management of the !ompany whose shares he is to invest. Nuality of

management has to be seen with referen!e to the e(perien!e% s+ill and integrity of the

persons at the helm of the affairs of the !ompany. 0he poli!y of the management

regarding relationship with the share holders is an important fa!tor sin!e !ertain business

houses believe in generous dividend and bonus distributions while others are rather

!onservative.

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(oca"on and 'a3our )anag!)!n" r!'a"on#5 0he lo!ations of the !ompany/s

manufa!turing fa!ilities determine its e!onomi! viability whi!h depends on theavailability of !ru!ial inputs li+e power% s+illed labour and raw materials et!. Fearness to

mar+et is also a fa!tor to be !onsidered.

In the past few years% the investment manager has begun loo+ing into the state of labor

management relations in the !ompany under !onsideration and the area where it is

lo!ated.

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CHAPTER - 8

ASSEST A((O&ATION

INTRODU&TION

0he portfolio manager has to invest in these se!urities that form the optimal portfolio. n!e a

portfolio is sele!ted the ne(t step is the sele!tion of the spe!ifi! assets to be in!luded in the

portfolio. "ssets in this respe!t means group of se!urity or type of investment. hile sele!ting

the assets the portfolio manager has to ma+e asset allo!ation. It is the pro!ess of dividing the

funds among different asset !lass portfolios.

ASSET A((O&ATION

0he different asset !lass definitions are widely debated% but four !ommon divisions are

sto!+s% bonds% realestate and !ommodities. 0he e(er!ise of allo!ating funds among these assets

Gand among individual se!urities within ea!h asset !lass is what investment management firms

are paid for.

"sset !lasses e(hibit different mar+et dynami!s% and different intera!tion effe!tsP thus% the

allo!ation of monies among asset !lasses will have a signifi!ant effe!t on the performan!e of the

fund. )ome resear!h suggests that allo!ation among asset !lasses has more predi!tive power than

the !hoi!e of individual holdings in determining portfolio return. "rguably% the s+ill of a


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su!!essful investment manager resides in !onstru!ting the asset allo!ation% and separately the

individual holdings% so as to outperform !ertain ben!hmar+s Ge.g.% the peer group of !ompeting

funds% bond and sto!+ indi!es.

In order to a!hieve long term su!!ess% individual investors should !on!entrate on the

allo!ation of their money among sto!+s% bonds and !ash. It means how mu!h to invest in sto!+sO

How mu!h to invest in bondsO "nd how mu!h to +eep in !ash reservesO 0hus% the asset

allo!ation de!ision is the most important determinant of investment performan!e.

0he basi! long term obe!tive of any investor should be to ma(imi#e his real overall return

on initial investment after investment. 0o a!hieve this obe!tive% the investor should loo+ where

the best bargains lie.

"sset allo!ation means different things to different people. 0he portfolio manager has to

!omplete the following stages before ma+ing asset allo!ation.

:a; SE&URITY SE(E&TION5 0his means identifying groups of se!urities in ea!h asset !lass

and de!ides the optimal portfolio. 0he following are the different asset !lasses;

:7; =*uity sharesnew issues

:8; =*uity sharesold issues

:9; -referen!e )hares

:=; ebentures

:J; -)@ bonds

:>; Jovernment )e!urities

:; Company ,i(ed eposits

-ortfolio management is handling the fund on behalf of the !ompany or institution in order to

determine the suitable !ombination of different assets so that the total ris+ !an be redu!ed to the

minimum while the return !an be a!hieved to the ma(imum e(tent. 0his is a tri!+y ob whi!h

needs effi!ien!y of high !aliber. 0herefore% the portfolio manager has to +eep in mind the

following fa!tors while ma+ing asset allo!ation and design an effi!ient portfolio.

a; Li*uidity or mar+etability

3; )afety of investment

c; 0a( )aving

d; Ba(imi#ation of return

!; Binimi#ation of return

f; Capital appre!iation or gain

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g; ,unds re*uirements

:3; BASIS O. SE(E&TION O. EUITY PORT.O(IO5

" portfolio is a !olle!tion of se!urities. It is essential that every se!urity be viewed in a

portfolio !onte(t. It is logi!al that the e(pe!ted return of a portfolio should depend on the

e(pe!ted return of ea!h of the se!urity !ontained in it. Boreover% the amounts invested in ea!h

se!urity should also be important.

0here are two approa!hes to the sele!tion of e*uity portfolio. ne is te!hni!al analysis and

the other is fundamental analysis. 0e!hni!al analysis assumes that the pri!e of a sto!+ depends

on supply and demand in the !apital mar+et. "ll finan!ial and mar+et information of given

se!urity is already refle!ted in the mar+et pri!e. Charts are drawn to identify pri!e movements of

a given se!urity over a period of time. 0hese !harts enable us to predi!t the future movement of

the se!urity.

0he fundamental analysis in!ludes the study of ratio analysis% past and present tra!+ re!ord of

the !ompany% *uality of management% government poli!ies et!U an effi!ient portfolio manager

!an obviously give more weight to fundamental analysis than te!hni!al analysis.

DIVERSI.I&ATION

Investing funds in a single se!urity is advisable only if the se!urity/s performan!e is rewarding.

0o redu!e ris+ of a portfolio investors resort to diversifi!ation. iversifi!ation means shifting

form one se!urity to another se!urity. 0he ma(imum benefits of ris+ redu!tion !an be a!hieved

by ust having of 1' to 1& !arefully sele!ted se!urities.

-ortfolio ris+ !an be divided into two groups diversible ris+ and nondiversible ris+. iversible

ris+ arises from !ompany/s spe!ifi! fa!tors. Hen!e% su!h ris+ !an be diversified by in!luding

sto!+s of other !ompanies in the portfolio. Fondiversible ris+ arises from the influen!e of

e!onomy wide fa!tors whi!h affe!t returns of all !ompaniesP investors !annot avoid the ris+

arising from them. ften investors tend to buy or sell se!urities on !asual tips% prevailing mood

in the mar+et% sudden impulse% or to follow others. "n investor should investigate the following

fa!tors about the sto!+ to be in!luded in his portfolio;

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1+estionnaire

#ame o. the $ustomerHin+estor 222222222222222222222222

!ddress 222222222222222222222222

City 222222222222222222222222

%ele-hone #o 222222222222222222222222

1* B$$u-ationI

a? Salaried

b? Retired

$? Sel.Aem-loyed

d? Pro.essional

2* "hat is the main obje$ti+e 3ith 3hi$h you make in+estmentJ

a? Sa+ings

b? Return

$? Sa.ety

d? %a@ bene.it

* "here 3ould you like to in+estJ

a? Mutual .und

b? Real estate

$? ,nsuran$e

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d? Share market

&* !re you a3are o. mutual .undJ

a? Yes

b? #o

'* ;a+e you in+ested in mutual .undJ

a? Yes

b? #o

(* ,n 3hi$h .und 3ould you like to in+estJ

a? 5uity 6und

b? Debt 6und

$? 9alan$ed 6und>debt e5uity?

)* ,n 3hi$h s$heme 3ould you like to in+estJ

a? 9lue $hi- .und

b? Se$toral .und

$? %a@ gain .und

d? Debt .und

0* ;o3 3ould you rate the im-ortan$e o. ntry and @it load as a .a$tor

3hile

,n+esting in Mutual 6undsJ

a? Very ,m-ortant

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b? ,m-ortant

$? Some3hat ,m-ortant

d? #ot ,m-ortant

* ;a+e you e+er a+ailed the ser+i$es o. K!RVYJ

a? Yes

b? #o

1* !re you satis.ied by the ser+i$es -ro+ided by the K!RVYJ

a? Yes

b? #o* ,. #o8 gi+e suggestions .or im-ro+ement8 i. any

(3,34S

1* Occ+pation

45%

11%

33%

11%

salaried

retired

self employed

professional

&'L -eo-le are salaried em-loyees8 11L -eo-le are retired8 L -eo-le are sel.A

em-loyed and 11L are -ro.essional*

(


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2* "hat is the main obje$ti+e 3ith 3hi$h you make in+estmentJ

40%

25%

15%

20%

Savings

Return

Safety

Tax benefit

&L -eo-le had the obje$ti+e o. sa+ings8 2'L o. returns8 1'L o. sa.ety and 2L

had the obje$ti+e o. a+ailing ta@ bene.its

* "here 3ould you like to in+estJ

40%

10%30%

20%

Mutual fund

Real estate

nsuran!e

S"are mar#et

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6indings re+eal that &L -eo-le 3ould like to in+est in mutual .und81L in real

estate8 L in insuran$e and 2L in share market*

&* !re you a3are o. mutual .undJ

$5%

35%

es

&o

('L -eo-le 3ere a3are o. mutual .und and 'L 3ere not a3are

'* ;a+e you in+ested in mutual .undJ

0


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'5%

25%

es

&o

)'L -eo-le had in+ested in mutual .und 3hile 2'L had not in+ested in mutual

.und*

(* ,n 3hi$h .und 3ould you like to in+estJ

$5%

15%

20%

()uity fund

*ebt fund

+alan!ed fund


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('L -eo-le sho3ed interest in 5uity .und8 1'L in Debt .und8 2L in 9alan$ed

.und

)* ,n 3hi$h s$heme 3ould you like to in+estJ

45%

15%

30%

10%

+lue !"ip fund

Se!toral fund

Tax gain fund

*ebt fund

&'L -eo-le sho3ed interest in blue $hi- .und8 1'L in se$toral .und8 L in ta@ gain

.und and 1L in debt .und*

0* ;o3 3ould you rate the im-ortan$e o. ntry and @it load as a .a$tor

3hile

,n+esting in Mutual 6undsJ

1


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$0%25%

15%

,ery important

mportant

&ot important

!ns3ering to this 5uestion8 most >(L? o. the res-ondents said that it is a +eryim-ortant .a$tor8 3hile 2'L res-ondents said that it is an im-ortant .a$tor and 1'L

did not $onsidered it as an im-ortant .a$tor*

* ;a+e you e+er a+ailed the ser+i$es o. K!RVYJ

55%

45%es

&o

''L -eo-le 3ere a3are o. kar+y 3hile &'L 3ere not a3are*

11


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1* !re you satis.ied by the ser+i$es -ro+ided by the K!RVYJ

'5%

25%

es

&o

)'L o. the res-ondents 3ere .ound to be satis.ied by the ser+i$es -ro+ided by

K!RVY 3hile 2'L 3ere unsatis.ied*

&ON&(USION

,rom the above dis!ussion it is !lear that portfolio fun!tioning is based on mar+et ris+% so one

!an get the help from the professional portfolio manager or the Ber!hant ban+er if re*uired

before investment be!ause appli!ability of pra!ti!al +nowledge through te!hni!al analysis !an

help an investor to redu!e ris+. In other words )e!urity pri!es are determined by money manager

and home managers% students and stri+ers% do!tors and dog !at!hers% lawyers and lands!apers%

the wealthy and the wanting. 0his breadth of mar+et parti!ipants guarantees an element of

unpredi!tability and e(!itement. If we were all totally logi!al and !ould separate our emotions

from our investment de!isions then% the determination of pri!e based on future earnings would

12


103/105

wor+ magnifi!ently. "nd sin!e we would all have the same !ompletely logi!al e(pe!tations%

pri!e would only !hange when *uarterly reports or relevant news was released.

DI believe the future is only the past again% entered through another gateE ?)ir "rthur wing-inero. 1893.

If pri!e are based on investors/ e(pe!tations% then +nowing what a se!urity should sell for

be!ome less important than +nowing what other investors e(pe!t it to sell for. D0here are two

times of a man/s life when he should not spe!ulateP when he !an/t afford it and when he !anE ?

Bar+ 0win% 189A.

" Casino ma+e money on a roulette wheel% not by +nowing what number will !ome up ne(t%

but by slightly improving their odds with the addition of a D'E and D''E. 7et many investors buy

se!urities without attempting to !ontrol the odds. If we believe that this dealings is not a

>JamblingE we have to start up it with intelligent way.

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I !an !on!lude from this proe!t that portfolio management has be!ome an important servi!e

for the investors to identify the !ompanies with growth potential. -ortfolio managers !an provide

the professional advi!e to the investors to ma+e an intelligent and informed investment.

-ortfolio management role is still not identified in the re!ent time but due it e(pansion of

investors mar+et and growing !omple(ities of the investors the servi!es of the portfolio

managers will be in great demand in the near future.

0oday the individual investors do not show interest in ta+ing professional help but surely

with the growing importan!e and awareness regarding portfolio/s manager/s people will

definitely prefer to ta+e professional help.

1&


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BIBLIOGRAPHY

RE.EREN&E BOOKS5

S!cur"% Ana'%## and Por"fo'o Manag!)!n" Dr1 P1K1BANDGAR

In$!#")!n" Ana'%## and Por"fo'o Manag!)!n"

WEBLIOGRAPHY

SOUR&ES5

4441goog'!1co)

4441%a0oo1co)

44414k/!da1co)

madhu portfolio mgt

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