HISTORY OF IDBI BANK

The Industrial Development Bank of India (IDBI) was established on July 4, 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. In February 7, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in the country. Although Government shareholding in the Bank came down below 100% following IDBIs public issue in July 5, the former continues to be the major shareholder (current shareholding: 52.3%). During the four decades of its existence, IDBI has been instrumental not only in establishing a well-developed, diversified and efficient industrial and institutional structure but also adding a qualitative dimension to the process of industrial development in the country. IDBI has played a pioneering role in fulfilling its mission of promoting industrial growth through financing of medium and long-term projects, in consonance with national plans and priorities. Over the years, IDBI has enlarged its basket of products and services, covering almost the entire spectrum of industrial activities, including manufacturing and services. IDBI provides financial assistance, both in rupee and foreign currencies, for green-field projects as also for expansion, modernization and diversification purposes. In the wake of financial sector reforms unveiled by the government since 2, IDBI evolved an array of fund and fee-based services with a view to providing an integrated solution to meet the entire demand of financial and corporate advisory requirements of its clients. IDBI also provides indirect financial assistance by way of refinancing of loans extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of sale of indigenous machinery on deferred payment terms. IDBI has played a pioneering role, particularly in the pre-reform era , in

catalyzing broad based industrial development in the country in keeping with its Government-ordained development banking charter. In pursuance of this mandate, IDBIs activities transcended the confines of pure long-term lending to industry and encompassed, among others, balanced industrial growth through development of backward areas, modernization of specific industries, employment generation, entrepreneurship development along with support services for creating a deep and vibrant domestic capital market, including development of apposite institutional framework. Narasimam committee recommends that IDBI should give up its direct financing functions and concentrate only in promotional and refinancing role. But this recommendation was rejected by the government. Latter RBI constituted a committee under the chairmanship of S.H. Khan to examine the concept of development financing in the changed global challenges. This committee is the first to recommend the concept of universal banking. The committee wanted to the development of financial institution to diversify its activity. It recommended to harmonize the role of development financing and banking activities by getting away from the conventional distinction between commercial banking and developmental banking. IDBI Bank, with which the parent IDBI was merged, was a vibrant new generation Bank. The Pvt. Bank was the fastest growing banking company in India. The bank was pioneer in adapting to policy of first mover in tier 2 cities.

About IDBI Bank The Industrial Development Bank of India Limited commonly known by its acronym IDBI is one of India's leading public sector banks and 4th largest Bank in overall ratings. RBI categorized IDBI as "other public sector bank. It is currently the tenth largest development bank in the world in terms of reach with 75 ATMs,

58 branches and 352 centers. Some of the institutions built by IDBI are The National Stock Exchange of India (NSE), The National Securities Depository Services Ltd. (NSDL) and the Stock Holding Corporation of India (SHCIL) IDBI BANK , as a private bank after government policy for new generation private banks. Business Overview IDBI, also known as Industrial Development Bank of India was established in 4 july by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry. IDBI provides financial assistance, both in rupee and foreign currencies, for green-field projects as also for expansion, modernization and diversification purposes. IDBI also provides indirect financial assistance by way of refinancing of loan extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of sale of indigenous machinery on deferred payment terms. In September 2003, IDBI diversified its business domain further by acquiring the entire shareholding of Tata Finance Limited in Tata Home finance Ltd., signaling IDBIs foray into the IDBI Bank, with which the parent IDBI was merged, was a vibrant new generation Bank. The Private Bank was the fastest growing banking company in India. The bank was pioneer in adapting to policy of first mover in tier 2 cities. The Bank also had the least NPA and the highest productivity per employee in the banking industry.. IDBI Bank was ranked in the Top 5 Indian banks on the basis of Business Segment size.

BUSINESS AND FINANCIAL METRICS

Historical Trends Year over year, IDBI Bank Ltd has been able to grow revenues from 960 Crores to 1690 Crores in the year 2008. Company has reduced the percentage of sales devoted to selling, general and administrative costs from 62.52% to 44.17%. This led to a net profit growth from 590 Crores to 750 Crores.

Annual income data, in Crores Net Interest Income Other Income Net Income Profit (after tax)

05-06

06-07

07-08 Rs 8020.8 Rs 35.5 Rs 45. Rs 72.5

Rs 5380.7 Rs 345.5 Rs 280.4 Rs 448.7 Rs 50. Rs 027.2 Rs 748. Rs 30.3

Source: Company reports.

Q1FY09 Financial Results IDBI Bank reported a net profit of Rs 160 Crores, up by 4% as compared to the last year .This increase is primarily driven by addition of 65 branches to the network over the year. As of June 30, 2008, IDBI Banks total business (deposits and advances) stood at Rs 1, 50,832 Crores as against Rs 1,06,529 Crores as of June 30, 2007, registering a growth of 42%. Bottom-line growth (net profit growth) during the quarter was bolstered on buyback of shares of its subsidiary and excess depreciation write-back of Rs39.1 Crores. IDBI Bank continued to maintain a sound capital base as indicated by its Capital Adequacy Ratio. As against the stipulated RBI norm of 9%, the Bank's CAR stood at 12.02%. Total assets grew by 24% to Rs.1,30,410 Crores . Treasury gains for the quarter were supported by the buyback and Provisions were lower due to the write-back of NPA provisions.

Q2 FY09 Financial Results IDBI Bank reported a net profit (after tax) of Rs 162 Crores, up by 4.49% as compared to last year's 156 Crores. Net Interest Income stood at Rs 229 Crores, up

by 53.09% as compared to last year's Rs 150 Crores. Total business (deposits and advances) grew by 48.25% to Rs.1,66,564 Crores. The growth in "advances" is primarily driven by strong demand for corporate loans, as other sources of funding for infrastructure companies became expensive during the quarter. Deposits increased due to higher interest rates prevailing in the system. CASA was reported to be16.19% of total deposits.. Provisions were lower due to lower investment depreciation and write-back of NPA provisions

Q3 FY09 Financial Results The Bank has posted a net profit of Rs 222.6 Crores for the quarter ended December 3, 2008 as compared to Rs 176 Crores for the quarter ended December 3, 2007. Total Income has increased from Rs 2450.7 Crores for the quarter ended December 3, 2007 to Rs 3513.3 Crores for the quarter ended December 3, 2008

Share Holding Pattern

Business Segments Wholesale Banking Services(58% income,61 % profits) Wholesale Banking provided 4652 Crores as Net Interest Income and Rs 423 Crores as the Net Profit in the year of 2008. The Wholesale bank provides services such as working capital finance, trade services, transactional services, cash management, to large, mid & small sized corporates and agri-based businesses. It has been actively participating in structuring and financing of infrastructure projects in the areas of power, telecom, roads, airports, seaports, railways and logistics as well as Special Economic Zones. IDBI is a member of the Core Committee of the Government set up for finalization of the Ultra Mega Power Projects. Further, it is also an active member of the Inter-Institutional Group for power sector

Retail Banking Services(27% income, 31% profits) []

Retail Banking provided Rs 2166 Crores as Net Interest Income and Rs 187 Crores as the Net Profit in the year of 2008. The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements Treasury (15% income, 6% profits) Wholesale Banking provided Rs 1283 Crores as Net Interest Income and Rs 44.8 Crores as the Net Profit in the year of 2008. In Corporate Finance, IDBI offers a wide array of corporate banking products under various business segments such as Deposits, Cash Management Services, Central and State Government agency business (both direct and indirect taxes), Trade Finance and Treasury Products.. Within Treasury, the bank has three main product areas - Foreign Exchange and derivatives, Local Currency Money Market & Debt Securities, and Equities.

SUBSIDIARIES

IDBI Capital Market Services Limited IDBI Capital Market Services Limited (IDBI Capital) offers Stock Broking,

Distribution of Financial Products, Merchant Banking, Corporate Advisory Services, Debt arranging & underwriting, Portfolio Management of Pension Funds & Research services to institutional, corporate and retail clients. IDBI Capital is a major player in the Pension Fund Management with assets of over Rs.8250 Crores.

The Equity broking segment has scaled up its operations enhancing turnover of cash segment by 40% over the previous year.

IDBI Home Finance Limited IDBI Home finance Ltd. is a 100% subsidiary of IDBI Bank Ltd. The Company was incorporated on January 10, 2000 with the main object of carrying on the business of providing long term finance to any person, company or corporation, society or association enabling such borrower to construct or purchase in India a house or flat for residential purposes. During the year, IDBI Home finances outstanding loan portfolio increased by Rs.53 Crores from Rs.2147 Crores to Rs.2710 Crores, registering a growth of 26%.

IDBI Intech Limited It provides IT related services in the area of Consultancy, System Integration,

System implementation & support, Applications & Server hosting and other IT related managed services and specialized training to the IDBI Group companies and the other organizations, focusing mainly on the BFSI sector.

IDBI Gilts Limited IDBI Gilts Ltd. was set up to undertake Primary Dealership [PD] Business. The

company's business includes Bond trading, underwriting in auctions of primary issuance of Government dated securities and treasury bills. In addition, IDBI Gilts also plans to be a major player in the interest rate

Revenue Break Down among Subsidiaries

Competition IDBI is the tenth largest development bank in the world. The company faces competition from both national banks and regional banks in the country. Financial Comparison of the competitors: Financial metrics FY2008 Market Name Capitalization in Rs Cr IDBI SBI SB Mysore PNB Bank of India 4,34.35 730.58 8 4358. 3344.7 Net Profit in Rs Cr 72.4 72.2 38.85 Total Earnings in Rs Cr 772. 58348.7 2.3

Earnings per share

0.0 0.5 885.7 4.8 38.2

2048.7 22.58 200.4 4472.5

MARKET SHARE OF IDBI (BANKING SECTOR)

IDBI Bank Organizational Chart

Chairman

President

Vice president Finance Regional Head

Vice president H. R.

Vice president Marketing

Vice president Operations

Zonal Head

Divisional Sales Manager

Territory In charge

IDBI BANK BUSINESS CHART

IDBI BANK

Retail Banking

Development Bank

\ Saving Account Current Account Investment

Personal Saving

Corporate Saving

BRANCH NETWORK OF IDBI BANK

WEALTH MANAGEMENT AN INTRODUCTION

Management is what a manager does "the statement given by Louis Allen has very broad and meaningful meaning. Though we all know that 'Manage' is nothing but to forecast and plan, to organize, to command, to co-ordinate and to control. The eminent writer and management guru William Spriegal has given very valuable definition that 'Management is that function of an enterprise which concern itself with the direction and control of the various activities to attain

business objectives. Management embraces all duties and functions that pertain to the initiation of an enterprise; it's financing the establishment of all major policies and the provisions under which the organization is to be run and the selection of the principal officers. In the general view the word management is form with Manage + Men + 'T' where 'T' stands for the factor time. The term wealth management, also, now, a days having very importance. So many Banking companies are engaged in the business of wealth management. The premier insurance industry is now booming because so many bankers are also adopting and playing safe in the business of insurance the term called is Banc assurance. Now a days wealth Management has very craze in the business world. In a survey it was found that India had 100,000 milliners day end of year 2006 is now grow up by 21% from a year earlier (Asia pacific wealth report).

CONCEPT OF WEALTH MANAGEMENT: The term wealth management formed with two words wealth & Management. The Meaning of Management we have already seen in the steering introduction. The meaning of wealth is Funds, Assets, investments and cash it means the term wealth management delt with funds Asset, instrument, cash and any other item of similar nature. While defining wealth Management we have to think in planned manner. "Wealth Management is an all inclusive set of strategies that aims to grow, manage, protect and distribute assets in a much planned systematic and integrated manner.

WEALTH MANAGEMENT IN INDIA: ISSUES & CONCERNS The term wealth management formed with two words wealth & Management. The Meaning of Management we have already seen in the steering introduction. The meaning of wealth is Funds, Assets, investments and cash it means the term wealth management deft with funds Asset, instrument, cash and any other item of similar nature. While defining wealth Management we have to think in planned manner. "Wealth Management is an all inclusive set of strategies that aims to grow, manage, protect and distribute assets in a much planned systematic and integrated manner. "

WEALTH MANAGEMENT : INDIAN CONCERN :In this globalized era India have huge wealth management need. There are two types of wealth management institutions. They are:(1) (2) Private Banks Family Offices, engaged in the business of wealth management in Middle East. For our information the wealth management institute (WMI), the first

center of excellence for the wealth management education in Asia was established in Singapore in the year 2003. The wealth management Institute (WMI) is providing professionals for wealth management with a nice combination of learning and practical training. The aim of WMI is to establish Singapore as the Asian hub for wealth Management. Where Private Banks and Family Offices are discussing about the strategies to capture the wealth management business in the Middle East. The global institutions are looking towards the Middle East to grow their wealth management business and attracting the big business houses by their attractive service providing facilities. Tapping in to the Indian market it is very crucial for private banks and private wealth managers, the entry and increasing market share is not very easy task for them but they are fighting. The Middle East region has become very highly competitive over the last five years. Local banks now competing with international banks. Investment management is the professional management of various securities (shares, bonds etc.) and assets (e.g., real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or Exchange Traded Funds)

Position of India in Wealth Management :In the annual survey done by Cap Gemini, SA and Merrill Lynch it was found that ranks of millionaires grew 6% in the previous year, because the number of richer people grew in India & China where India is competing China. India & China posted the biggest gain in millionaires advancing by 23% & 20% respectively.

When we are watching the world wide increase in number of millionaires the facts collected by Cap Gemini, S.A. and Merrill Lynch survey report. India has 23% growth in the last year. The biggest Asian economy China stands on second position with 20%, west Asia 16%, United States 4% and United Kingdom (UK) 2%. So we can understand that there is more opportunities in the wealth management business in Asia specially in India.

SERVICES PROVIDED BY WEALTH MANAGEMENT INSTITUTIONS :Wealth management offers the following services: Investment planningAssists you in investing your money into various investment markets, keeping in mind your investment goals. Insurance planningAssists you in selecting from various types of insurances, self options and captive insurance companies. Retirement planningRetirement planning is critical to understand how much funds you require in your old age. Asset protectionBegins with your financial advisor trying to understand your preferred lifestyle and then helping you deal with threats, such as taxes, volatility, inflation, creditors and lawsuits, to maintaining this lifestyle. insurance

 Taxation planningHelps in minimizing tax returns. This might include planning for charity, supporting your favorite causes while also receiving tax benefits. Estate planningHelps in protecting you and your estate from creditors, lawsuits and taxes. This service is critical for every person whose net worth is high. Business planningThis service aims at optimizing the tax free advantages of running your own business. Business succession planningAssists in planning for the inevitable to maximize returns. Wealth transfer: Helps you pass on your wealth to your dependents.

IDBI WEALTH MANAGEMANT AND VARIOUS FEILDS

Because you have a lot more to manage than just your wealth Wealth management can help you determine what's really important to you, then develop actionable strategies to help you realize your most cherished hopes and defend against the things that might undo them. Investments ?, Of course. Borrowing? Strategically, yes. Managing risk? Systematically. Planning

deliberately so that your wealth works to bring you a lifestyle well earned? That's where it starts.

Income and Lifestyle Through an in-depth discovery process your Financial Advisor will work with you to understand and document what you want to do in this lifetime, from now until retirement and from then on. We'll then map out a course to help you seek the returns you'll need for how you intend to live and to achieve the income you'll need to do exactly what you want one year at a time. And, if you like, strategies to guarantee that income.

Asset Management By understanding the lifestyle you enjoy, and the one you're building toward, your Financial Advisor can see the threats against it taxes, inflation, volatility, creditors, lawsuits, identity thieves, tragedy and help you deal with them using everything in the arsenal of one of the world's largest financial services firms. Wealth Transfer

Your Financial Advisor will approach your plan for wealth transfer from a wider angle than a traditional estate plan. We work with you to understand your definition of a rich life, then craft a plan to help you lead it and pass on what you see as most important to the next generation. This might mean a passion for education, or a sense of obligation for each generation to help give the one that follows a leg up in life. It could mean protecting a work ethic and thirst for accomplishment, or protecting your family's bonds of affection toward one another. Whatever it is, it should start with your definition of a rich life.

Investment Management We believe that your plan for your life is the most important part of investing. Little things...like when you plan to retire and when you secretly hope to retire. The business you'll open when you do. How much you'd like to travel. And the aging parent who will need to move in with you in the next few years. Investing with a Financial Advisor is based on the simple yet powerful premise of wealth management: Your investments and your life are uniquely intertwined. Whether by design or by accident, they are all part of one plan. We advise that it be by design. Investment management is the professional management of various securities (shares, bonds etc.) and assets (e.g., real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or Exchange Traded Funds. The term asset management is often used to refer to the investment management of collective investments, (not necessarily) whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize

in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called "private banking".

Financial planning In general usage, a financial plan can be a budget, a plan for spending and saving future income. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan can also be an investment plan, which allocates savings to various assets or projects expected to produce future income, such as a new business or product line, shares in an existing business, or real estate. In business, a financial plan can refer to the three primary financial statements (balance sheet, income statement, and cash flow statement created within a business plan. Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department. A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company. While a financial plan refers to estimating future income, expenses and assets, a financing plan or finance plan usually refers to the means by which cash will be acquired to cover future expenses, for instance through earning, borrowing or using saved cash.

Private Banking Private banking is a term for banking, investment and other financial services provided by banks to private individuals investing sizable assets. The term

"private" refers to the customer service being rendered on a more personal basis than in mass-market retail banking, usually via dedicated bank advisers. It should not be confused with a private bank, which is simply a non-incorporated banking institution. Historically private banking has been viewed as very exclusive, only catering for high net worth individuals with liquidity over $2 million, although it is now possible to open some private bank accounts with as little as $250,000 for private investors. An institution's private banking division will provide various services such as wealth management, savings, inheritance and tax planning for their clients. A high-level form of private banking (for the especially affluent) is often referred to as wealth management. The word "private" also alludes to bank secrecy and minimizing taxes through careful allocation of assets or by hiding assets from the taxing authorities. Swiss and certain offshore banks have been criticized for such cooperation with individuals practicing tax evasion. Although tax fraud is a criminal offense in Switzerland, tax evasion is only a civil offense, not requiring banks to notify taxing authorities. The term asset management is often used to refer to the investment management of collective investments, (not necessarily) whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors.

Portfolio Management The functions of resource planning and procurement under a traditional utility structure. Portfolio management can also be defined as the aggregation and management of a diverse portfolio of supply (and demand-reduction) resources

which will act as a hedge against various risks that may affect specific resources (i.e., fuel price fluctuations and certainty of supply, common mode failures, operational reliability, changes in environmental regulations, and the risk of health, safety, and environmental damages that may occur as a result of operating some supply resources). Under a more market-driven power sector with a "powerpool" or POOLCO wholesale market structure, a portfolio manager would: aggregate and manage a diverse portfolio of spot-market purchases, contracts-for-differences, futures contracts and other market-hedging-type contracts and mechanisms.

WEALTH MANAGEMENT AT IDBI Investment Services IDBI believe that the key to a successful investment relationship is a full understanding of our clients short and long term goals, attitude towards risk and investment horizon. Significant assets need special attention which is why we aim to develop innovative and customized investment strategies to meet the specific needs of our clients. When it comes to investing, we understand that the Asian investor may face different challenges from other investors around the world. We appreciate that they may expect a higher level of interaction with their Relationship Managers and investment specialists, require the latest market information, intelligence and leading investment opportunities. IDBI team of investment advisory specialists service investors who choose to be highly active in their investment decision-making. They use their expertise in asset allocation and investment selection to provide clients with appropriate choices, whether they are aiming for more aggressive strategies to capture immediate market trends, or seeking advice on conservative hedging strategies. Our specialists provide customized investment opportunities through equity, fixed income, derivatives and innovative structured instruments that seek to meet specific investment objectives. Or for those clients who may not have the time or expertise to manage their wealth, and prefer to delegate the management of their portfolio, our discretionary investment service is an ideal approach to achieve your financial goals. Our discretionary investment specialists will work with clients to design an individual strategy in accordance with their objectives, risk tolerance, and liquidity needs and draw upon an open-architecture network of best-in-breed mutual funds, traditional portfolios, multi-asset class portfolios and as well as leading alternative investment managers. Private Wealth Solutions

IDBI clients have worked hard to create wealth for their family and for future generations. Through Private Wealth Solutions we help them establish a strong foundation to protect their legacy. We provide comprehensive wealth planning solutions tailored to the specific needs of clients and their families throughout Asia. We have experts in international and domestic wealth planning who examine personal situations and assist in creating ways to safeguard our clients affairs. Our wealth planners are specialists qualified in law, accounting and who work to ensure that the financial and legal structures have a truly global perspective. Which is why we are expertly positioned to help manage and protect and transfer our clients wealth to future generations - we help take care of their wealth planning needs whilst giving them greater peace of mind.

Family Wealth Advisory Whether simple or complex, most families want to safeguard their prosperity, achieve greater tax efficiency, ensure a seamless management succession, and provide for a sustainable future. Family Wealth Advisory gives clients the combined experience of dedicated specialists. Working with their existing advisers and other financial institutions, we function as an independent consultant, whose advice is not tied to the purchase of IDBI products and services. This independent approach enables us to work with service providers and advisers, whether outside or within the IDBI Group, to provide the products, services and advice our clients need.

Family governance and business succession planning

Philanthropy Investment consultancy services

Corporate finance solutions Tax advisory services

Banking Services Many of our Asian clients have international lifestyles and complex financial needs. Apart from the essential transaction-related services required to help manage their day-to-day finances, we can offer treasury and foreign exchange, offshore and onshore deposits, and loans and mortgages in order to help meet their financial needs.

Our aim is to help clients achieve their goals in the most effective way possible.

Treasury and foreign exchange Offshore and onshore deposits Tailor-made loans and mortgages Overdrafts and bridge-over facilities Market Linked Deposits Retail banking facilities including access to HSBC Group Debit cards and credit cards Money transfers Online banking Corporate banking facilities including access to IDBI Group

IDBI CAPITAL MARKET SERVICES LIMITED

IDBI Capital Market Services Limited (IDBI Capital), a wholly-owned subsidiary of IDBI Bank, offers a fullsuite of financial products and services to institutional, corporate and retail clients. Its businesses include Stock Broking, Distribution of Financial Products, Merchant Banking, Corporate Advisory Services, Debt arranging & underwriting, Portfolio Management of Pension / PF Funds & Research services.

IDBI Capital has established itself in the Investment Banking business having completed 13 issues apart from several Corporate Advisory assignments in project appraisal, shares valuation, loan syndication, debt restructuring, etc. It has also made initial forays into Private Equity investment. IDBI Capital continues to remain a major player in the PF / Pension Fund Management with assets under management of over Rs.8250 crore. Two years back, IDBI Capital launched its online broking platform www.idbipaisabuilder.in to help retail investors invest in Equity (BSE / NSE/F&O), Mutual Funds (15) and IPOs with information / analysis / recommendations provided therein.

To enhance its retail reach across the country, it has tied up with your Bank as also with other banks viz. Punjab National Bank, Bank of Rajasthan, Union Bank of India, Ka Karur Vysya Bank and Oriental Bank of Commerce for marketing its investment portal. This would help build an extensive retail network for the Company. The Equity broking segment has scaled up its operations enhancing turnover of cash segment by 40% over the previous year. The F&O segment market has also been launched during this fiscal.

In accordance with the revised RBI guidelines, the primary dealing business was relocated to IDBIs new subsidiary, IDBI Gilts Limited. That would enable IDBI Capital to concentrate on financial services (institutional & retail) and equityoriented businesses. The company was set up in 1993 with the objective of catering to specific financial requirements of financial institutions, banks, mutual funds and corporate houses. Over the last 5 years, the company has been ranked amongst the leading players in each of these businesses. It has a strong agent network which caters to the investment needs of retail investors in instruments like IPOs, Bonds, etc. The company is a major player in the Equity and Derivatives market and a leading manager of Pension & Provident Funds in the country. The company has executed several mandates on the Issue Management and Corporate Advisory Services. The company offers an online investment portal idbipaisabuilder.in with advanced features and tools for an easy and informed investing experience in Equities, Mutual Funds and IPOs. IDBI Capital is highly regarded for safety and trust and enjoys a credit rating of AAA by CARE for its medium-term borrowings and P1+ by ICRA for its short-term borrowings. After carrying out a detailed certification audit, M/s TUV India Private Limited (Member of TUV NORD Group Germany), the certifying agency issued the ISO 9001:2000 certificate.

PRODUCTS & SERVICES OFFERED

IDBI Capital offers a full suite of products and services to Corporates, Institutional and Individual clients. The range of services include :-

Product & Services Offered

Investment Banking Capital Market Products Private Equity Corporate Advisory Services Mergers & Acquisitions Project Appraisals & Debt Syndication Stock Broking - Institutional & Retail Distribution of Financial Products Debt Placement and Underwriting Fund Management Research Group

INVESTMENT BANKING

Our Clients We represent Government organizations, Public Sector Enterprises and Indian Corporates covering sectors such as Steel and other metals, Mines, Minerals, Chemicals, Healthcare, Hospitality, Financial Services and other Core Sectors.

Our Team We have a combination of professionals with varied background who shares our values of truthfulness, objectivity, innovation and analytical accuracy. The professional qualification of our team provide a rock solid foundation for giving consulting services and our depth of experience ranges from young management graduates from premier business schools to experienced finance professional and qualified chartered accountants as well.

A HIERARCHY SHOWING INVESTMENT BANKING

Investment Banking

Financial Advisory

Corporate Advisory

Project Advisory

Mergers & Acquistions

Strategic Advisory

CAPITAL MARKETS

IDBI Capital as an institutional player provides the entire gamut of Capital Market services encompassing: 1. Public Offerings 2. Qualified Institutional Placements 3. Buyback 4. Takeover 5. Preferential Allotments 6. External Commercial Borrowings, FCCBs, etc. The above activities entails liasioning with institutional investors such as treasury departments of Domestic Institutions, Banks and corporates, fund managers of mutual funds, private equity firms, FIIs, HNIs. A Hierarchy showing Capital Market Services

Capital Markets

IPO / FPO / Right Issues

TakeOver

Buyback of Securities

Qualified Institutional Placement

Private Equity

INSTITUTIONAL BROKING & DISTRIBUTION

Institutions and Corporates have surplus funds to manage on daily basis as well as investible surplus for a defined period. The risk differs for Institution and Corporates subject to their preferences. The reward by way of return is always in proportion to the risk taken. IDBI Capital define, advise and manage the same by blending caution with aggression in the desired proportion to teach client. The range of services include from Equity Broking with customized research, advisory and distribution services for investment in Mutual Funds, Debt/Bonds, Equity IPOs to placement of Equities etc A Hierarchy showing Institutional Broking & Distribution

Institutional Broking & Distribution

Equity

Mutual Fund

Equity Sales & Dealing

Equity Research

Mutual Fund Sales & Dealing

Mutual Fund Research

RETAIL BROKING & DISTRIBUTION

In addition to offering corporate, institutional clients, IDBI Capital also offers a gamut of financial products and services that cater to a varied cross section of investors. IDBI Capital also offers to financial planners, retail intermediaries and consumers to deliver lasting, innovative solutions.

Looking at the opportunities in our market and the growth of our country, we believe it is high time investors are educated about the nuances of investments. The knowledge and awareness gained will empower investors and help them create wealth. We firmly believe brokers, media and regulators have a pivotal role in assisting the individuals to become wealthy. We will go extra mile to empower the investors in managing their wealth to ensure a more rewarding future. IDBI Capital aims to provide a single-point source for retail investors in their requirements for trading and investment products. A Hierarchy showing Retail Broking & Distribution

Retail Broking & Distribution

Online Investing

IPO Distribution

Mutual Fund Distribution

FUND MANAGEMENT

IDBI Capital Market Services Ltd. (ICMS) is a leading Fund Manager in the country for Provident, Pension and Retirement Benefit Funds. The Company is a SEBI registered Portfolio Manager and manage its Clients assets under both discretionary and non-discretionary mandates. These services are provided to various public and private sector undertakings and their provident, pension,

retirement benefit and surplus funds. The Companys client base includes leading pension and provident funds in the country. IDBI capital has been advising institutions, banks and corporates for their investment in Debt, Mutual Funds and Equities over several years. Its services include managing Client Assets--Pension & Provident Funds, Surplus fund Management, Equity Portfolio Management and Mutual Fund Advisory. The funds have continuously yielded superior returns, which are significantly higher than the benchmark.

ISO Certification 9001:2000 Keeping in view the importance of standardized processes and service levels, the Company has gone in for ISO Certification for Fund Management, and is the only company to have done so in this sector. Being a public sector, the Company is also audited by Comptroller and Auditor General (CAG) office and follows transparent practices.

Regulatory Approval IDBI Capital is a registered Portfolio Manager with Securities and Exchange Board of India (SEBI) since 1998 and is authorised to undertake Funds Management activities (Debt & Equity) for clients. These activities would be governed by Securities and Exchange Board of India (Portfolio Managers) Rules and Regulations, 1993. SEBI Registration No. of IDBI Capital is INP000000209, valid till the year 2010.

The Key strengths of IDBI capital Market Services in the areas of Debt Fund Management are: 1. Fund Management experience of 10 years 2. Expertise in managing large corpus 3. Expertise in both Debt & Equity Market 4. IDBI Capital is the only Portfolio Manager in the Country to achieve ISO 9001: 2000 Standard for Quality Management Systems in Fund Management operations, with certification from TUV NORD an accredited German standards firm 5. Substantial Returns Over Benchmark 6. IDBI Capital is a SEBI registered Portfolio Manager 7. Minimum Idle Days 8. Our fund management skill covers Portfolio Analysis that includes ALM, Asset Allocation, Risk Analysis, Maturity Analysis and Yield Analysis 9. Transparency of Operations 10.Strict adherence to Compliance Procedures 11.Highly Rated Debt Research 12.Presence in All Segment/ Asset of the Financial Services: IDBI Capital deals in Equity and Equity related products and is one of the highly rated Mutual

Fund Distributor (won two consecutive CNBC TV18 Institutional Financial Advisor Award). In Investment Banking and Debt Capital Market- Rated in Top 15 by Prime Database 13.Group Strength in Debt Market: IDBI Capital is one of the leading players in debt market with presence in primary dealership since July 2007. The current operations of primary dealership is conducted by a group company, IDBI Gilts

Infrastructure

Experienced Fund Management Team: The Fund Management team comprises of experienced professionals (experience ranges between 2 years to 15 years) in Portfolio Management with requisite exposure in the fixed income and equity segment and qualifications

Experienced Back-Office: The Clearing and Settlement Operations are manned by experienced personnel with requisite exposure to capital market and particularly debt market. The process is standardized as per the regulatory and other specific norms and mainly technology driven in most areas

Accounting: Real time accounting of Remittances, Investments, Interest and Redemption proceeds ensures accurate reconciliation

Professional Custodian: Member of NSDL for demat services and offers Constituent SGL Account facility for Government securities through IDBI Gilts Ltd.

Functional Separation of Front and Back Office:

Separate personnel handle the front and back office functions to ensure transparency and complete regulatory compliance

Internal Controls: Adequate Risk Management systems in place to ensure complete regulatory compliance

Audit Systems: Audit of all transactions and reports by an independent firm of chartered accountants. The accounts and transactions are also subject to CAG audit and other regulators

Belongs to IDBI Group: IDBI is a leading bank, classified under Other Public Sector Bank. Established in 1964 by Government of India under an Act of Parliament, IDBI has essayed a significant role in the countrys industrial and economic progress for over 40 years first as apex Development Financial Institution (DFI) and now as a full service commercial bank

Financial Statements The abridged Balance Sheet and Profit & Loss Account of IDBI Capital are given in Tables 1 and 2 respectively:

Abridged Balance Sheet of IDBI Capital for the year ended 31 March 2007 & 2008

Table 1 : IDBI Capital Market Services Ltd. - Abridged Balance Sheet (Rs. Crore)

As at March 31

2007

2008

Paid up Capital

157.90

157.90

Reserves & Surplus

204.84

206.30

Current Liabilities & Provisions

23.35

30.37

Deferred Tax Liability

2.22

1.53

Total Liabilities

388.31

396.10

Total Assets

388.31

396.10

Abridged Profit & Loss Account of IDBI Capital for the year ended 31 March 2007 & 2008

Table 2 : IDBI Capital Market Services Ltd. - Abridged Profit & Loss Account (Rs. Crore)

For the year ended March 31

2007

2008

Total Income

40.80

35.23

Total Expenditure

58.49

33.06

Profit/(Loss) Before Tax

(17.69)

2.17

Profit/(Loss) After Tax

(18.16)

2.26

INVESTMENT PORTFOLIO Portfolio Investment represents passive holdings of securities such as foreign stocks, bonds, or other financial assets, none of which entails active management or control of the securities' issuer by the investor; where such control exists, it is known as foreign direct investment. Some examples of portfolio investment are:

purchase of shares in a foreign company. purchase of bonds issued by a foreign government. acquisition of assets in a foreign country.

Factors affecting international portfolio investment:

tax rates on interest or dividends (investors will normally prefer countries where the tax rates are relatively low)

interest rates (money tends to flow to countries with high interest rates) exchange rates (foreign investors may be attracted if the local currency is expended to strengthen)

Portfolio investment is part of the capital account on the balance of payments statistics. IDBI has got a huge investment portfolio of quoted and unquoted equity stocks. It could unlock value from these investments, which may be considered as precious gems in IDBIs book and could augment the profitability of IDBI. The approximate market value of quoted investments of IDBI is about Rs 1,800 crs. The investments include fast growing and restructuring companies like IDFC, IFCI, Reliance Petroleum, Indraprastha Gas, Gujarat State Petronet Ltd, etc. On an unrealized gains basis, the value of these investments is Rs 528 crs. There could be many other stocks, which would be included in IDBIs equity portfolio and the

amount of investments or stake could be far more than revealed. Moreover, it has many strategic investments in unlisted companies, which are as shown below:

Unlisted Company

% Holding

Unlisted Company

% Holding

ARCIL

19.95

NSE

5.00

CARE

26.75

STCI

7.28

CCIL

6.5

SIDBI

19.21

NSDL

30.00

SHCIL

16.96

Introduction to Equity Equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created). When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.

Direct holdings and pooled funds The equities held by private individuals are often held via mutual funds or other forms of pooled investment vehicle, many of which have quoted prices that are listed in financial newspapers or magazines; the mutual funds are typically managed by prominent fund management firms (e.g. Fidelity Investments or The Vanguard Group).

Share price determination At any given moment, an equity's price is strictly a result of supply and demand. The supply is the number of shares offered for sale at any one moment. The demand is the number of shares investors wish to buy at exactly that same time. The price of the stock moves in order to achieve and maintain equilibrium.

Market participants Many years ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, with long family histories (and emotional ties) to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, hedge funds, investor groups, and banks). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees they then went to 'negotiated' fees, but only for large institutions) However, corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'[

History Historian Fernand Braudel suggests that in Cairo in the 11th century Muslim and Jewish merchants had already set up every form of trade association and had knowledge of many methods of credit and payment, disproving the belief that these were invented later by Italians. In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. In late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurse, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent Antwerp and Amsterdam. In the middle of the 13th century Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds.

THE INDIAN STOCK MARKET

The Bombay Stock Exchange in Mumbai. The working of stock exchanges in India started in 1875. BSE is the oldest stock market in India. The history of Indian stock trading starts with 318 persons taking membership in Native Share and Stock Brokers Association, which we now know by the name Bombay Stock Exchange or BSE in short. In 1965, BSE got permanent recognition from the Government of India. National Stock Exchange comes second to BSE in terms of popularity. BSE and NSE represent themselves as synonyms of Indian stock market. The history of Indian stock market is almost the same as the history of BSE. The 30 stock sensitive index or Sensex was first compiled in 1986. The Sensex is compiled based on the performance of the stocks of 30 financially sound benchmark companies. In 1990 the BSE crossed the 1000 mark for the first time. It crossed 2000, 3000 and 4000 figures in 1992. The reason for such huge surge in the stock market was the liberal financial policies announced by the then financial minister Dr. Man Mohan Singh. The up-beat mood of the market was suddenly lost with Harshad Mehta scam. It came to public knowledge that Mr. Mehta, also known as the big-bull of Indian stock market diverted huge funds from banks through fraudulent means. He played with 270 million shares of about 90 companies. Millions of small-scale investors became victims to the fraud as the Sensex fell flat shedding 570 points. To prevent such frauds, the Government formed The Securities and Exchange Board of India, through an Act in 1992. SEBI is the statutory body that controls and regulates the functioning of stock exchanges, brokers, sub-brokers, portfolio managers investment advisors etc. SEBI oblige several rigid measures to

protect the interest of investors. Now with the inception of online trading and daily settlements the chances for a fraud is nil, says top officials of SEBI. Sensex crossed the 5000 mark in 1999 and the 6000 mark in 2000. The 7000 mark was crossed in June and the 8000 mark on September 8 in 2005. Many foreign institutional investors (FII) are investing in Indian stock markets on a very large scale. The liberal economic policies pursued by successive Governments attracted foreign institutional investors to a large scale. Experts now believe the sensex can soar past 14000 mark before 2010. The unpredictable behavior of the market gave it a tag a volatile market. The factors that affected the market in the past were good monsoon, Bharatiya Janta Partys rise to power etc. The result of a cricket match between India and Pakistan also affected the movements in Indian stock market. The National Democratic Alliance led by BJP, during 2004 public elections unsuccessfully tried to ride on the market sentiments to power. NDA was voted out of power and the sensex recorded the biggest fall in a day amidst fears that the Congress-Communist coalition would stall economic reforms. Later prime minister Man Mohan Singhs assurance of reforms with a human face cast off the fears and market reacted sharply to touch the highest ever mark of 8500. India, after United States hosts the largest number of listed companies. Global investors now ardently seek India as their preferred location for investment. Once viewed with skepticism, stock market now appeals to middle class Indians also. Many Indians working in foreign countries now divert their savings to stocks. This recent phenomenon is the result of opening up of online trading and diminished interest rates from banks. The stockbrokers based in India are opening offices in different countries mainly to cater the needs of Non Resident Indians. The time factor also works for the NRIs. They can buy or sell stock online after returning from their work places.

The recent incidents that led to growing interest among Indian middle class are the initial public offers announced by Tata Consultancy Services, Maruti Udyog Limited, ONGC and big names like that. Good monsoons always raise the market sentiments. A good monsoon means improved agricultural produce and more spending capacity among rural folk. The bullish run of the stock market can be associated with a steady growth of around 6% in GDP, the growth of Indian companies to MNCs, large potential of growth in the fields of telecommunication, mass media, education, tourism and IT sectors backed by economic reforms ensure that Indian stock market continues its bull run.

IMPORTANCE OF STOCK MARKET

The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'tre of central banks. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

TYPES OF EQUITY

There are three basic types of equity:-

Types of Equity

Common Shares

PreferenceShares

Warrants

Common Stock Common stock represents an ownership in a corporation Common stockholders participate in the earnings stream of the corporation through dividends paid and capital gains made on a per share basis. Owners of common stock are responsible for the election of the Board of Directors, appointment of Senior Officers, the selection of an auditor for the corporate financial statements, dividend policy and other matters of corporate governance. This may also be done on a proxy basis, whereby a third party may be ceded the shareholders right to vote by the shareholder. The responsibilities associated with common stock mean the investor participates to a greater extent in the fortunes of the firm. Capital gains, through the increase in market price of the firm's stock, accrue to a greater extent to the holder of common stock than to the holder of preferred stock. Common stockholders also have a couple of significant rights should the business invested in be wound down: limited liability to the creditors of the firm and a

residual claim on any assets or income derived once all prior claims (mortgages, bondholders, creditors, etc.) have been satisfied.

Preferred Shares Preferred shares are stock in a company which have a defined dividend, and a prior claim on income to the common stock holder Should the company wind up operations, preferred shareholders are paid any obligations owed to them. Should a dividend be suspended by the Board of Directors, for whatever reason, the preferred share usually has a cumulative clause in it allowing that any unpaid dividends must be paid fully before any dividends may be declared and paid to holders of common stock. This means that the preferred share is a relatively more secure investment. The corporate issuing preferred shares may add differing features to the share in order to make it more attractive. These features are similar to those used in the fixed income market and include convertibility into common shares, call provisions, etc. Many have equated preferred shares with a form of fixed income security due to its defined dividend stream. However, with the added security offered by the guaranteed dividend stream, the holder of preferred shares gives up the right to vote on issues related to corporate governance. Therefore, the preferred holder has little input into corporate policy

Warrants Warrants are a form of option which is usually added to a corporate bond issue or preferred stock in order to sweeten the deal Warrant is a long dated option which allows the owner to participate in the capital gains (losses) of a firm without buying the common stock. In effect, the holder of a warrant has a leveraged play on the corporate common stock. As a form of option, a warrant has an exercise price and an expiry date. The exercise price is the price at which the holder may convert the warrant into common shares of the issuer. The expiry date is the last date on which the warrant may be converted into common shares. Given that a warrant is generally issued to reduce the cost of a debt issuer, the expiry date is usually more than two years from issuance. This allows warrants to trade separately from the bond with which they were issued. There by providing the investor with a long dated option on a firm's common stock. There is a drawback to warrants for those investors concerned with income. As an option, a warrant does not pay a dividend, and is subject to a certain amount of price compression as the underlying stock approaches or surpasses the exercise price. This is only a factor if the investor is purchasing the warrants when the common stock is trading near the exercise price. Warrant holders have no voting rights until the warrants are converted into common shares. Upon conversion an active role may be taken in corporate governance. If the warrants provide for conversion into preferred shares, it is unlikely the holder will gain any influence into corporate governance upon conversion

Introduction to Mutual Funds Depressed market or not, over 15 financial services institutions are warming up to take the plunge into the Indian mutual fund industry over the next one year. The idea of these neo-asset management companies (or AMCs) is to commence their fund business at a time when the market is in a lull phase, set a track record for themselves and go full throttle when the market begins to steam up, industry officials said. If industry sources are to be believed, Goldman Sachs, Shinsei Bank, DLF Prudential, Nippon Asset Management, BoB Pioneer, Indiabulls, IDBI, Edelweiss, Motilal Oswal, Anand Rathi, Religare, RSM Ambit, Schroders UK, India Infoline and Future Capital are all set to launch mutual funds in India. Currently, the MF industry has Rs 5.67 lakh crore of assets under management. As per data released by Association of Mutual Funds in India, the asset base of all mutual fund combined has risen by 7.32% in April, the first month of the current fiscal. As of now, there are 33 fund houses in the country including 16 joint ventures and 3 wholly-owned foreign asset managers. According to a recent McKinsey report, the total AUM of the Indian mutual fund industry could grow to $350-440 billion by 2012, expanding 33% annually. While the revenue and profit (PAT) pools of Indian AMCs are pegged at $542 million and $220 million respectively, it is at par with fund houses in developed economies. Operating profits for AMCs in India, as a percentage of average assets under management, were at 32 basis points in 2006-07, while the number was 12 bps in UK, 17 bps in Germany and 18 bps in the US, in the same time frame, the McKinsey report said. The report predicts that the retail segment could grow at a CAGR of 36-42% annually, taking the total AUM from US$36 billion in 2007 to

$160-$200 billion in 2012. Rising incomes and increasing demand for wealth management services will drive this growth. Institutional investments in mutual funds are likely to witness a 25-33% annual growth, with total assets under management increasing from $42 billion in 2007 to $160 billion by 2012. According to Dhirendra Kumar of Value Research, a mutual fund research firm, most of these financial services institutions started planning to set up AMCs in 2007 while equities were booming in India. Most of them would set up their AMCs, but what remains to be seen is how many succeed in their venture. Advantages of a MF Mutual Funds provide the benefit of cheap access to expensive stocks Mutual funds diversify the risk of the investor by investing in a basket of assets A team of professional fund managers manages them with in-depth research inputs from investment analysts. Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information, which individual investors cannot access.

About Mutual Funds 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 then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is 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 basket of

securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund.
Savings Trust Unit holders Unit s Returns AMC Investments

Registrar

SEBI

Trust Custodian AMC

The structure of Mutual Funds in India is governed by SEBI (Mutual Fund) Regulations, 1996. It is mandatory to have a three tier structure of Sponsor Trustee Asset Management Company. The trust is established by a Sponsor or more than one sponsor who is like a promoter of a company. He appoints the Trustees who are responsible to the investors of the fund. The Trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI is the business face of the mutual fund as it manages all the affairs of the fund by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the funds in its custody

CATEGORIES OF MUTUAL FUNDS:

Mutual Funds

Based on Structure

Based on their investments

Open ended funds

Close ended funds

Equity funds

Balanced funds

Debt funds

Mutual funds can be classified as follow: Based on their structure:

Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.

Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments cannot be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity.

Based on their investment objective: Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as: i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty

is tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weightages. ii) Equity diversified funds- 100% of the capital is invested in equities

spreading across different sectors and stocks. iii|) Dividend yield funds- it is similar to the equity diversified funds except that

they invest in companies offering high dividend yields.

iv)

Thematic funds- Invest 100% of the assets in sectors which are related

through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc. v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking

sector fund will invest in banking stocks. vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes: i) ii) Debt-oriented funds -Investment below 65% in equities. Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures,

Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs. i) Liquid funds- These funds invest 100% in money market instruments, a

large portion being invested in call money market. ii) Gilt funds ST- They invest 100% of their portfolio in government securities

of and T-bills. iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt

instruments which have variable coupon rate. iv) Arbitrage fund- They generate income through arbitrage opportunities due to

mis-pricing between cash market and derivatives market. Funds are allocated to

equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities. v) Gilt funds LT- They invest 100% of their portfolio in long-term government

securities. vi) Income funds LT- Typically, such funds invest a major portion of the

portfolio in long-term debt papers. vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an

exposure of 10%-30% to equities. viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.

Investment strategies: 1. Systematic Investment Plan: under this a fixed sum is invested each month

on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: under this an investor invest in debt oriented fund

and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual 0fund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual

fund then he can withdraw a fixed amount each month.

RISK V/S. RETURN:

BANKS V/S MUTUAL FUNDS: Mutual Funds are now also competing with commercial banks in the race for retail investors savings and corporate float money. The power shift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are losing out in the current scenario. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The fund mobilization trend by mutual funds indicates that money is going to mutual fund in a big way. India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of an Asset base that is much higher than its bank deposits. In India,

mutual fund assets are not even 10 per cent of the bank deposits, but this trend is beginning to change. This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down completely. Their role as intermediaries cannot be ignored. It is just that mutual funds are going to change the way banks do business in the future.

CATEGORY

BANKS

MUTUAL FUNDS

Returns Administrative exp. Risk Investment options Network Liquidity Quality of assets Interest calculation

Low High Low Less High penetration At a cost Not transparent Minimum balance between 10th & 30th of every month

High Low Moderate More Low but improving Better Transparent Everyday

Guarantee

Maximum Rs.1 lakh on deposits

None

BENEFITS OF MUTUAL FUND INVESTMENT

Advantages of Wealth Management 1) Helpful In Tax Planning:

The wealth management professional always shows the good path to the customers and provide the service of tax planning. How to minimize the tax and save more money? 2) Helpful In Selection of Investment Strategy:

Another advantage from the customer point of view is with the help of WM Professional the customer can easily know the investment strategy and analyze risk and return. 3) Helpful In Estate Management:

With the help of wealth management professional we can also manage our estate. Estate management is a task to provide objective administration of our funds tailored to aim in responsible distribution and protection of our overall estate.

4)

Helpful in forward looking:

We can say planning, that recognizes as our estate grows and changes occurs we require some team of professionals who help us in future planning.

5)

Helpful for Indian Economy:

Banks which are engaged in business of WM earning revenues from the foreign countries i.e. outsourcing for economy

LIMITATIONS OF WEALTH MANAGEMENT

1.

Wealth management Reduces The Scope Of Management: Though we all know that management has existence at all levels of life and

society but the term wealth management only related with the higher level means rich people, and is not having any plans and provisions for poor and lower and middle level of society.

2.

Chances of Fraud: Another demerit or limitation of the WM concept is it is not showing the

actual position. The customer doesn't know about the things going on with using his wealth and there may be chances of forgery and fraud with customers.

3.

Actual Picture VS Inflation: What is the actual position of market we don't know because everything is

done by some WM professionals. So we cannot assume our position in the market that also results in inflation because economy is unknown about the actual state. There may be chance that the customers are in risk but they are showing the false return and vice-versa.