SUMMER TRAINING PROJECT REPORT ON PORTFOLIO MANAGEMENT SERVICES

With Reference to

(SPAN CAPLEASE PVT LTD) By

PARTH BHAVSAR
BATCH : PGP/FW/ISBE

INDIAN INSTITUTE OF PLANING AND MANAGEMENT

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ACKNOWLEDGEMENT

Expression of feelings by words makes them less significant when it comes to make statement of gratitude

With regard to my Project with Span capleasepvt ltd, I would like to thank each and every one who offered help, guidelines and support whenever required. I sincerely express my thankfulness to IIPM Ahmedabad for their valuable suggestions and help during the project. I am extremely grateful to my college guide, Mr. Kausik Das (LecturerExecutive Communication) and all the faculty member of my college for their valuable suggestions and able guidance. I express my deep sense of gratitude to my company mentors, Mr.RaviSwami(Equity and Commodities Manager) without whose support and cooperation this project could not have been completed successfully. Last, but not the least, my heartfelt love for my parents and my friends, whose constant support and blessings kept me enthusiastic throughout this project.

DECLARATION
I hereby declare that this Summer Internship Project Report entitled POTFOLIO MANAGEMENT SERVICES in Span capleasepvtLtd is based on primary and secondary data founded by me in various department ,books ,magazines and websites . This is an original piece of work and has not been submitted to any other institution or university for any purpose.

Place:-Ahmedabad Date:-05/05/2010

ParthBhavsar

CHAPTER
CHAPTER-1

TABLE OF CONTENTS
EXECUTIVE SUMMARY INTRODUCTION Introduction to Study Myths About PMS Introduction to Stock Exchange COMPANY PROFILE Work structure of Span caplease ltd Product and Services offered by Company Reasons to Choose Span RESEARCH METHODOLOGY Objective of the Project Scope of the Study Methodology for Data Collection PORTFOLIO MANAGEMENT SERVICES Need of PMS Objective of PMS Portfolio Construction Risk and Risk Aversion Risk versus Return Portfolio Diversification Techniques of PMS DATA ANALYSIS AND INTERPRETATION CONCLUSION & SUGGESTIONS Observation and Findings Limitations of the Project Suggestions & Recommendations ANNEXURE REFERENCES

PAGE NO.
5 6 6-7 8-9 10-14 15 15 16 17-18 19 19 23 24-25 23 24 25 25-30 31-32 33-38 39-43 44-54

CHAPTER-2

CHAPTER-3

CHAPTER-4

CHAPTER-5 CHAPTER-6

49-64 65 66-67 68 70 71-72 73

EXECUTIVE SUMMARY
Investing is both Arts and Science. Every Individual has their own specific financial need and expectation based on their risk taking capabilities, whereas some needs and expectation are universal. Therefore, we find that the scenario of the Stock Market is changing day by day hours by hours and minute by minute. The evaluation of financial planning has been increased through decades, which can be best seen in customers. Now a days investments have become very important part of income saving. In order to keep the Investor safe from market fluctuation and make them profitable, Portfolio Management Services (PMS) is fast gaining Investment Option for the High Net worth Individual (HNI).There is growing competition between brokerage firms in post reform India. For investor it is always difficult to decide which brokerage firm to choose. The research design is analytical in nature. A questionnaire was prepared and distributed to Investors. The investors profile is based on the results of a questionnaire that the Investors completed. The Sample consists of 100 investors from various brokers premises. The target customers were Investors who are trading in the stock market. In order to identify the effectiveness of Span PMS services this Research is carried throughout the area of Ahmedabad. At the time of investing money everyone look for the Risk factor involve in the Investment option. The Report is prepared on the basis of Research work done through the different Research Mythology the data is collected from both the source Primary sources which consist of Questionnaire and secondary data is collected from different sources such as Company website, Magazine and other sources. As the PMS services of Span caplease Ltd have the best result in its field . In this project I have shown the details of financial planning as well as wealth management so as to understand about the customers needs and wants with respect to market and how a clients portfolio can be designed and what factors a portfolio manager must consider for designing a portfolio.

CHAPTER-1 INTRODUCTION TO STUDY

The field of investment traditionally divided into security analysis and portfolio management. The heart of security analysis is valuation of financial assets. Value in turn is the function of risk and return. These two concepts are in the study of investment .Investment can be defined the commitment of funds to one or more assets that will be held over for some future time period. In today fast growing world many opportunities are available, so in order to move with changes and grab the best opportunities in the field of investments a professional fund manager is necessary. Therefore, in the present scenario the Portfolio Management Services (PMS) is fast gaining importance as an investment alternative for the High Networth Investors. Portfolio Management Services (PMS) is an investment portfolio in stocks, fixed income, debt, cash, structured products and other individual securities, managed by a professional money manager that can potentially be tailored to meet specific investment objectives. When you invest in PMS, you own individual securities unlike a mutual fund investor, who owns units of the entire fund. You have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolio, your account may be unique. Investment Management Solution in PMS can be provided in the following ways: i. ii. iii. Discretionary Non-Discretionary Advisory

Discretionary: Under these services, the choice as well as the timings of the investment decisions rest solely with the Portfolio Manager. Non-Discretionary: Under these services, the portfolio manager only suggests the investment ideas. The choice as well as the timings of the investment decisions rest solely with the Investor. However the execution of trade is done by the portfolio manager.

Advisory: Under these services, the portfolio manager only suggests the investment ideas. The choice as well as the execution of the investment decisions rest solely with the Investor. Rule 2, clause (d) of the SEBI (portfolio managers) Rules, 1993 defines the term Portfolio as total holding of securities belonging to any person. As a matter of fact, portfolio is combination of assets the outcomes of which cannot be defined with certainty new assets could be physical assets, real estates, land, building, gold etc. or financial assets like stocks, equity, debenture, deposits etc. Portfolio management refers to managing efficiently the investment in the securities held by professional for others. Merchant banker and the portfolio management with a view to ensure maximum return by such investment with minimum risk of loss of return on the money invested in securities held by them for their clients. The aim Portfolio management is to achieve the maximum return from a portfolio, which has been delegated to be managed by manger or financial institution. There are lots of organization in the market on the lookout for the people like you who need their portfolios managed for them .They have trained and skilled talent will work on your money to make it do more for you. Therefore, if any investors still insist on managing their own portfolio, then ensure you build discipline into their investment. Work out their strategy and stand by it.

MYTHS ABOUT PMS

There are two most common myths found about Portfolio Management Services (PMS) which we found among most of the Investors. They are as follows.

Myth No. 1:PMS and Mutual Fund are Similar as the investment option
As in the Finance Basket both the PMS and Mutual Fund are used for minimizing risk and maximize the profit of the Investors. The objectives are similar as in both the product but they are different from each other in certain aspects. They are as follows.
Management Side

In PMS, its ongoing personalized access to professional money management services. Whereas, in Mutual fund gives personalize access to money. Customization In PMS, Portfolio can be tailored to address each investor's specific needs. Whereas in Mutual Fund Portfolio structured to meet the fund's stated investment objectives. Ownership In PMS, Investors directly own the individual securities in their portfolio, allowing for tax management flexibility, whereas in Mutual Fund Shareholders own shares of the fund and cannot influence buy and sell decisions or control their exposure to incurring tax liabilities. Liquidity In PMS, managers may hold cash; they are not required to hold cash to meet redemptions, whereas, Mutual funds generally hold some cash to meet redemptions. Minimums PMS generally gives higher minimum investments than mutual funds. Generally, minimum ranges from: Rs. 1 Crore + for Equity Options Rs. 5 Crore + for Fixed Income Options Rs. 20 Lacs + for Structured Products, whereas in Mutual Fund Provide ongoing, personalized access to professional money management services.
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Flexibility PMS is generally more flexible than mutual funds. The Portfolio Manager may move to 100% cash if it required. The Portfolio Manager may take his own time in building up the portfolio. The Portfolio Manager can also manage a portfolio with disproportionate allocation to select compelling opportunities whereas, in Mutual Fund comparatively less flexible.

Myth No. 2: PMS is more Risk free than other Financial Instrument

In Financial Market Risk factor is common in all the financial products, but yes it is true that Risk Factor vary from each other due to its nature.All investments involve a certain amount of risk, including the possible erosion of the principal amount invested, which varies depending on the security selected. For example, investments in small and mid-sized companies tend to involve more risk than investments in larger companies.

INTRODUCTION TO STOCK EXCHANGE

The emergence of stock market can be traced back to 1830. In Bombay, business passed in the shares of banks like the commercial bank, the chartered mercantile bank, the chartered bank, the oriental bank and the old bank of Bombay and shares of cotton presses. In Calcutta, Englishman reported the quotations of 4%, 5%, and 6% loans of East India Company as well as the shares of the bank of Bengal in 1836. This list was a further broadened in 1839 when the Calcutta newspaper printed the quotations of banks like union bank and Agra bank. It also quoted the prices of business ventures like the Bengal bonded warehouse, the Docking Company and the storm tug company. Between 1840 and 1850, only half a dozen brokers existed for the limited business. But during the share mania of 1860-65, the number of brokers increased considerably. By 1860, the number of brokers was about 60 and during the exciting period of the American Civil war, their number increased to about 200 to 250. The end of American Civil war brought disillusionment and many Failures and the brokers decreased in number and prosperity. It was in those troublesome times between 1868 and 1875 that brokers organized an informal association and finally as recited in the Indenture constituting the Articles of Association of the Exchange. On or about 9th day of July,1875, a few native brokers doing brokerage business in shares and stocks resolved upon forming in Bombay an association for protecting the character, status and interest of native share and stock brokers and providing a hall or building for the use of theMembers of such association. As a meeting held in the broker Hall on the 5th day of February, 1887, it was resolved to execute a formal deal of association and to constitute the first managing committee and to appoint the first trustees. Accordingly, the Articles of Association of the Exchange and the Stock Exchange was formally established in Bombay on 3rd day of December, 1887. The Association is now known as The Stock Exchange. The entrance fee for new member was Re.1 and there were 318 members on the list, when the exchange was constituted. The numbers of members increased to 333 in 1896, 362 in 1916and 478 in 1920 and the entrance fee was raised to Rs.5 in 1877, Rs.1000 in 1896, Rs.2500 in 1916

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and Rs. 48,000 in 1920. At present there are 23recognized stock exchanges with about 6000 stockbrokers. Organization structure of stock exchange varies. 14 stock exchanges are organized as public limited companies, 6 as companies limited by guarantee and 3 are non-profit voluntary organization. Of the total of 23, only 9 stock exchanges have been permanent recognition. Others have to seek recognition on annual basis. These exchange do not work of its own, rather, these are run by some persons and with the help of some persons and institution. All these are down as functionaries on stock exchange. These are: i.
ii. iii.

Stockbrokers Sub-broker Market makers Portfolio consultants etc.

iv.

1. Stockbrokers:
Stock brokers are the members of stockexchanges. These are the persons who buy, sell or deal insecurities. A certificate of registration from SEBI ismandatory to act as a broker. SEBI can impose certainconditions while granting the certificate of registrations. Itis obligatory for the person to abide by the rules,regulations and the buy-law. Stock brokers arecommission broker, floor broker, arbitrageur etc.

Detail of Registered Brokers

Total no. of registered brokers as on 31.03.09 9000 Total no. of sub-broker as on 31.03.09 24,000

2. Sub-broker:
A sub-broker acts as agent of stock broker.He is not a member of a stock exchange. He assists theinvestors in buying, selling or dealing in securitiesthrough stockbroker. The broker and sub11

broker shouldenter into an agreement in which obligations of bothshould be specified. Sub-broker must be registered SEBIfor a dealing in securities. For getting registered withSEBI, he must fulfill certain rules and regulation.

3. Market Makers:
Market maker is a designatedspecialist in the specified securities. They make both bidand offer at the same time. A market maker has to abideby bye-laws, rules regulations of the concerned stockexchange. He is exempt from the margin requirements.As per the listing requirements, a company where thepaid-up capital is Rs. 3 Crore but not more than Rs. 5core and having a commercial operation for less than 2years should appoint a market maker at the time of issue of securities.

4. Portfolio Consultants:
A combination of securities such as stocks, bonds and money market instruments iscollectively called as portfolio. Whereas the portfolioconsultants are the persons, firms or companies whoadvise, direct or undertake the management oradministration of securities or funds on behalf of theirclients. Traditionally stock trading is done through stock brokers, personally or through telephones. As number of people trading in stock market increase enormously in last few years, some issues like location constrains, busy phone lines, miss communication etc start growing in stock broker offices. Information technology (Stock Market Software) helps stock brokers in solving these problems with Online Stock Trading. Online Stock Market Trading is an internet based stock trading facility. Investor can trade shares through a website without any manual intervention from Stock Broker.

There are two different type of trading environments available for online equity trading.
1. Installable

software based Stock Trading Terminals

This trading environment requires software to be installed on investors computer. This software is provided by the stock broker. This software requires high speed internet connection. These kind of trading terminals are used by high volume intraday equity traders.
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2.Web

(Internet) based trading application

This kind of trading environment doesn't require any additional software installation. They are like other internet websites which investor can access from around the world through normal internet connection. Stock exchanges are like market places, where stockbrokers buy and sell securities for individuals or institutions. As per the SCRA (Securities Contracts Regulation Act) 1956, the definition of securities includes shares, bonds, stocks, debentures, government securities, derivatives of securities, units of collective investment scheme (CIS) etc. The securities market has two interdependent segments: the primary and secondary market. The primary market is the channel for creation of new securities issued by public limited companies or by government agencies. New securities issued in the primary market are traded in the secondary market. The secondary market operates through the over-the-counter (OTC) market and the exchange trade market.

Advantages of Stocks Trading

1. Better returns Actively trading stocks can produce better overall returns than simply buying and holding. 2. Huge Choice There are thousands of stocks listed on markets around the world. There is always a stock whose price is moving - its just a matter of finding them. 3. Familiarity The most traded stocks are in the largest companies that most of us have heard of andunderstand - Microsoft, IBM, and Cisco etc.

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Disadvantages of Stocks Trading

1. Leverage With a margined account the maximum amount of leverage available for stock trading is usually 4:1. Meaning a $25,000 could trade up to $100,000 of stock. This is pretty low compared to Forex trading or futures trading. 2. Pattern Day Trader Rules It requires at least $25,000 to be held in a trading account if the trader completes more than 4 trades in a 5 day period. No such rule applies to Forex trading or futures trading. 3. Uptick Rule on Short Selling A trader must wait until a stock price ticks up before they can short sell it. Again there are no such rules in Forex trading or futures trading where going short are as easy as going long. 4. Need to Borrow Stock to Short Stocks are physical commodities and if a trader wishes to go short then the broker must have arrangements in place to borrow that stock from a shareholder until the trader closes their position. This limits the opportunities available for short selling. Contrast this to futures trading where selling is as easy as buying. 5. Costs Although online trading costs for stock trading are low they still add considerably to the costs of day trading. Online futures trading are about 1/4 of the cost for the equivalent value. In the UK 0.5% stamp duty is also levied on all share purchases making trading virtually impossible, hence the popularity of spread betting.

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Chapter - 2
COMPANY PROFILE

SPAN GROUP
We provide the entire bouquet of product & services coming under the umbrella of financial services space with offerings ranging from Equity research, Equities and derivatives trading, Commodities trading, Portfolio Management Services, Mutual Funds, IPO and Life & General Insurance. We are well suited to handle all your wealth creation and wealth management needs under one roof. Span group is promoted by Mr. Anil Shah who has got 15 years of hardcore experience of the Capital Markets and MrSaumilTrivedi , Chief Mentor of the group Heads the Technical & fundamental Research and Analysis division Member of BSE, NSE, ASE & CDSL under Span CapleasePvt Ltd. Member of NCDEX & MCX under Span Commodities & Derivatives SPAN group is promoted by Mr. Anil Shah, who has been associated in the Capital market for more than 15 years. SPAN Group has achieved 2 nd ranking in India in Life Insurance business with RELIANCE ADA Group in a special facilitation ceremony in Switzerland for the year 2006-2007. Mr. SaumilTrivedi, Chief mentor of the group spearheads the Strategic Research and Analysis wing of SPAN with a Capital Market experience of 17 years Zero Net debt at the Group level. Clocking YOY turnover growth of 73 % Clocking PAT YOY growth of 44 % State of the art 20000 sqft of SPAN House located in the prime CG Road is our Hub of operation and our

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Our Mission
S P A N
Service Excellence Personal Touch

We want to be the most respected and admired financial market services brand that is serious about building our customers wealth. We are focused on service excellence, where valued teams of intelligent and skilled people work collaboratively, to support the aspirations of customer and the vitality of the community.

Our Vision

Always Accessible

New Ideas

REASON TO CHOOSE SPAN CAPLEASE LIMITED

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Experience
Span group is promoted by Mr. Anil Shah who has got 15 years of hardcore experience of the Capital Markets and MrSaumilTrivedi , Chief Mentor of the group Heads the Technical & fundamental Research and Analysis division

Technology
With their online trading account one can buy and sell shares in an instant from any PC with an internet connection. Customers get access to the powerful online trading tools that will help them to take complete control over their investment in shares.

Accessibility
Span group provides ADVICE, EDUCATION, TOOLS ANDEXECUTION services for investors. These services are accessible through many centers across the Gujarat as well as over the Voice Tool.Desk: 079 - 30414162, 30414100 e-mail:
research@spancaplease.com

Knowledge
In a business where the right information at the right time can translate into direct profits, investors get access to a wide range of information on the content-rich portal, email :research@spancaplease.com. Investors will also get a useful set of knowledge-based tools that will empower them to take informed decisions.

Convenience
One can call Spans Dial-N-Trade number to get investment advice and execute his/her transactions.

Customer Service
Its customer service team assist their customer for any help that they need relating to transactions, billing, demat and other queries. Their customer service can be contacted via a tollfree number, email or live chat on research@spancaplease.com.

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Investment Advice
Span has dedicated research teams of more than 30people for fundamental and technical research. Theiranalysts constantly track the pulse of the market andprovide timely investment advice to customer in the formof daily research emails, online chat, printed reports etc.

Benefits
Free Depository A/c
Instant Cash Transfer

Multiple Bank Option. Secure Order by Voice Tool Dial-n-Trade. Automated Portfolio to keep track of the value of youractual purchases.
24x7 Voice Tool access to your trading account. Personalized Price and Account Alerts delivered instantly to your Mobile Phone & E-mail

address. Live Chat facility with Relationship Manager on Yahoo Messenger Special Personal Inbox for order and trade confirmations. On-line Customer Service via Web Chat. Enjoy Automated Portfolio. Buy or sell even single share Anytime Ordering.

CHAPTER-3

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RESEARCH METHODOLOGY
OBJECTIVE OF THE PROJECT
Each research study has its own specific purpose. It is like to discover to Question through the application of scientific procedure. But the main aim of our research to find out the truth that is hidden and which has not been discovered as yet. Our research study has two objectives:OBJECTIVES
To know the concept of Portfolio Management.

To know about the awareness towards stock brokers and share market.

To study about the competitive position of Span Ltd in Competitive Market. To study about the effectiveness & efficiency ofSpan Ltd in relation to its competitors To study about whether people are satisfied withSpan Services & Management System or not.

To study about the difficulties faced by persons while Trading in Span. To study about the need of improvement in existingTrading system.

Scope of the Study

The study of the Portfolio Management Services is helpful in the following areas.

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 In today's complex financial environment, investors have unique needs which are derived

from their risk appetite and financial goals. But regardless of this, every investor seeks to maximize his returns on investments without capital erosion. Portfolio Management Services (PMS) recognize this, and manage the investments professionally to achieve specific investment objectives, and not to forget, relieving the investors from the day to day hassles which investment require.

It is offers professional management of equity investment of the investor with an aim to deliver consistent return with an eye on risk. Identify the key Stock in each portfolio. To look out for new prospective customers who are willing to invest in PMS.
To find out the Span, PMS services effectiveness in the current situation. It also covers the scenario of the Investment Philosophy of a Fund Manager.

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RESEARCH DESISGN OF THE STUDY This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones. The study consists of analysis about Investors Perception about the Portfolio Management Services offered by Span Limited.

SOURCES OF DATA
Primary data: Questionnaire Secondary data: Published materials of Span Limited. Such as periodicals, journals,

newspapers, and website.

Duration of Study
The Study was carried out for the period of one and half months from 3rd March to 25 of April 2010.

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SAMPLING PLAN Sampling:

Since Span Limitedhas many segments I selected Portfolio Management Services (PMS) segment as per my profile to do market research. 100% coverage was difficult within the limited period of time. Hence sampling survey method was adopted for the purpose of the study.

Population:
(Universe) customers & non consumers of Span limited

Sampling size:
A sample of hundred was chosen for the purposeof the study. Sample consisted of Investor as based on their Income and Profession as well as Educational Background.

Sampling Methods:
Probability sampling requires completeknowledge about all sampling units in the universe. Due to timeconstraint non-probability sampling was chosen for the study.

Sampling procedure:
From large number of customers & nonconsumers sample lot were randomly picked up by me.

Field Study:
Directly approached respondents by the following strategies
Tele-calling

Personal Visits Clients References Promotional Activities Database provided by the Span Limited.

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CHAPTER-4

PORTFOLIO MANAGMENTSERVICES
PORTFOLIO MANGEMNT SERVICES (PMS)
Portfolio (finance) means a collection of investments held by an institution or a private individual. Holding a portfolio is often part of an investment and risk-limiting strategy called diversification. By owning several assets, certain types of risk (in particular specific risk) can be reduced. There are also portfolios which are aimed at taking high risks these are called concentrated portfolios. Investment management is the professional management of various securities (shares, bonds etc) and other 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). The term asset management is often used to refer to the investment management of collective investments, 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".

The provision of 'investment management services' includes elements of financial analysis, asset selection, stock selection, plan implementation and ongoing monitoring ofinvestments.Outside of the financial industry, the term "investment management" is often applied to investments other than financial instruments. Investments are often meant to includeprojects, brands, patents and many things other than stocks and bonds. Even in this case,the term implies that rigorous financial and economic analysis methods are used.

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Need of PMS
As in the current scenario the effectiveness of PMS is required. As the PMS gives investors periodically review their asset allocation across different assets as the portfolio can get skewed over a period of time. This can be largely due to appreciation / depreciation in the value of the investments. As the financial goals are diverse, the investment choices also need to be different to meet those needs. No single investment is likely to meet all the needs, so one should keep some money in bank deposits and / liquid funds to meet any urgent need for cash and keep the balance in other investment products/ schemes that would maximize the return and minimize the risk. Investment allocation can also change depending on ones risk-return profile.

Objective of PMS
There are the following objective which is full filled by Portfolio Management Services. 1. Safety Of Fund: The investment should be preserved, not be lost,and should remain in the returnable position in cash or kind. 2. Marketability: The investment made in securities should bemarketable that means, the securities mustbelisted and tradedin stock exchange so as to avoid difficulty in their encashment. 3. Liquidity: The portfolio must consist of such securities,which could be en-cashed without any difficulty or involvementof time to meet urgent need for funds. Marketability ensuresliquidity to the portfolio. 4. Reasonable return: The investment should earn a reasonable return toupkeep the declining value of money and be compatible withopportunity cost of the money in terms of current income in theform of interest or dividend.

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5. Appreciation in Capital: The money invested in portfolio should grow andresult into capital gains. 6. Tax planning: Efficient portfolio management is concerned withcomposite tax planning covering income tax, capital gain tax,wealth tax and gift tax. 7. Minimize risk: Risk avoidance and minimization of risk are important objective of portfolio management. Portfoliomanagers achieve these objectives by effective investmentplanning and periodical review of market, situation andeconomic environment affecting the financial market.

PORTFOLIO CONSTRUCTION
The Portfolio Construction of Rational investors wish to maximize the returns on their funds for a given level of risk. All investments possess varying degrees of risk. Returns come in the form of income, such as interest or dividends, or through growth in capital values (i.e. capital gains). The portfolio construction process can be broadly characterized ascomprising the following steps:
1. Setting objectives.

The first step in building a portfolio is to determinethe main objectives of the fund given the constraints (i.e. tax andliquidity requirements) that may apply. Each investor has differentobjectives, time horizons and attitude towards risk. Pension funds havelong-term obligations and, as a result, invest for the long term. Theirobjective may be to maximize total returns in excess of the inflation rate.A charity might wish to generate the highest level of income whilstmaintaining the value of its capital received from bequests. An individual may have certain liabilities and wish to match them at a future date.Assessing a clients risk tolerance can be difficult. The concepts ofefficient portfolios and diversification must also be considered whensetting up the investment objectives.
2. Defining Policy.

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Once the objectives have been set, a suitable investmentpolicy must be established. The standard procedure is for the moneymanager to ask clients to select their preferred mix of assets, for exampleequities and bonds, to provide an idea of the normal mix desired. Clientsare thenasked to specify limits or maximum and minimum amountsthey will allow to be invested in the different assets available. The mainasset classes are cash, equities, gilts/bonds and other debt instruments,derivatives, property and overseas assets. Alternative investments, suchas private equity, are also growing in popularity, and will be discussed ina later chapter. Attaining the optimal asset mix over time is one of thekey factors of successful investing.
3. Applying portfolio strategy.

At either end of the portfolio managementspectrum of strategies are active and passive strategies. An active strategyinvolves predicting trends and changing expectations about the likelyfuture performance of the various asset classes and actively dealing inand out of investments to seek a better performance. For example, if themanager expects interest rates to rise, bond prices are likely to fall andso bonds should be sold, unless this expectation is already factored intobond prices. At this stage, the active fund manager should also determinethe style of the portfolio. For example, will the fund invest primarily in companies with large market capitalizations, in shares of companiesexpected to generate high growth rates, or in companies whosevaluations are low?A passive strategy usually involves buying securities to match a preselectedmarket index. Alternatively, a portfolio can be set up to matchthe investors choice of tailor-made index. Passive strategies rely ondiversification to reduce risk. Outperformance versus the chosen index isnot expected. This strategy requires minimum input from the portfoliomanager.In practice, many active funds are managed somewhere between theactive and passive extremes, the core holdings of the fund being passivelymanaged and the balance being actively managed.
4.Asset selections.

Once the strategy is decided, the fund manager mustselect individual assets in which to invest.Usually a systematic procedureknown as an investment process is established, which sets guidelines or criteria for asset selection. Active strategies require that the fundmanagers apply analytical skills and judgment for asset selection in orderto identify undervalued assets and to try to generate superiorperformance.
5.Performance assessments.

In order to assess the success of the fundmanager, the performance of the fund is periodically measured against apre-agreed benchmark perhaps a suitable stock exchange index oragainst a group of similar portfolios (peer group comparison).The portfolio construction process is

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continuously iterative, reflectingchanges internally and externally. For example, expected movements inexchange rates may make overseas investment more attractive, leading tochanges in asset allocation. Or, if many large-scale investors simultaneouslydecide to switch from passive to more active strategies, pressure will be puton the fund managers to offer more active funds. Poor performance of afund may lead to modifications in individual asset holdings or, as anextreme measure; the manager of the fund may be changed altogether.

Steps to Stock Selection Process

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Types of assets
The structure of a portfolio will depend ultimately on the investorsobjectives and on the asset selection decision reached. The portfoliostructure takes into account a range of factors, including the investors timehorizon, attitude to risk, liquidity requirements, tax position and availabilityof investments.The main asset classes are cash, bonds and other fixed income securities,equities, derivatives, property and overseas assets.

Cash and cash instruments

Cash can be invested over any desired period, to generate interest income,in a range of highly liquid or easily redeemable instruments, from simplebank deposits, negotiable certificates of deposits, commercial paper (shortterm corporate debt) and Treasury bills (short term government debt) tomoney market funds, which actively manage cash resources across a rangeof domestic and foreign markets. Cash is normally held over the short termpending use elsewhere (perhaps for paying claims by a non-life insurancecompany or for paying pensions), but may be held over the longer term aswell. Returns on cash are driven by the general demand for funds in aneconomy, interest rates, and the expected rate of inflation. A portfolio willnormally maintain at least a small proportion of its funds in cash in orderto take advantage of buying opportunities.

Bonds
Bonds are debt instruments on which the issuer (the borrower) agrees to make interest payments at periodic intervals over the life of the bond thiscan be for two to thirty years or, sometimes, in perpetuity. Interestpayments can be fixed or variable, the latter being linked to prevailinglevels of interest rates.Bond markets are international and have grown rapidly over recent years.The bond markets are highly liquid, with many issuers of similar standing,including governments (sovereigns) and state-guaranteed organizations.Corporate bonds are bonds that are issued by companies.To assist investors and to help in the efficient pricing of bond issues, manybond issues are given ratings by specialist agencies such as Standard &Poors and Moodys. The highest investment grade is AAA, going all the waydown to D, which is graded as in default.Depending on expected movements in future interest rates, the capitalvalues of bonds fluctuate daily, providing investors with the potential for capital gains or losses. Future interest rates are driven by the likely demand/supply of money in an economy, future inflation rates, political events andinterest rates elsewhere in world markets. Investors with short-term horizons and liquidity requirements may chooseto invest in bonds because of their relatively higher return than cash andtheir prospects for possible capital appreciation. Long-term investors, suchas

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pension funds, may acquire bonds for the higher income and may holdthem until redemption for perhaps seven or fifteen years. Because of the greater risk, long bonds (over ten years to maturity) tend to be more volatilein price than medium- and short-term bonds, and have a higher yield.

Equities
Equity consists of shares in a company representing the capital originally provided by shareholders. An ordinary shareholder owns a proportionalshare of the company and an ordinary share carries the residual risk andrewards after all liabilities and costs have been paid.Ordinary shares carry the right to receive income in the form of dividends(once declared out of distributable profits) and any residual claim on thecompanys assets once its liabilities have been paid in full. Preferenceshares are another type of share capital. They differ from ordinary shares inthat the dividend on a preference share is usually fixed at some amount anddoes not change. Also, preference shares usually do not carry voting rightsand, in the event of firm failure, preference shareholders are paid beforeordinary shareholders.Returns from investing in equities are generated in the form of dividendincome and capital gain arising from the ultimate sale of the shares. Thelevel of dividends may vary from year to year, reflecting the changingprofitability of a company. Similarly, the market price of a share will changefrom day to day to reflect all relevant available information. Although notguaranteed, equity prices generally rise over time, reflecting generaleconomic growth, and have been found over the long term to generategrowing levels of income in excess of the rate of inflation. Granted, theremay be periods of time, even years, when equity prices trend downwards usually during recessionary times. The overall long-term prospect, however,for capital appreciation makes equities an attractive investment propositionfor major institutional investors.

Derivatives
Derivative instruments are financial assets that are derived from existingprimary assets as opposed to being issued by a company or governmententity. The two most popular derivatives are futures and options. The extentto which a fund may incorporate derivatives products in the fund will bespecified in the fund rules and, depending on the type of fund established forthe client and depending on the client, may not be allowable at all. A futures contractis an agreement in the form of a standardized contractbetween two counterparties to exchange an asset at a fixed price and datein the future. The underlying asset ofthe futures contract can be acommodity or a financial security. Each contract specifies the typeandamount of the asset to be exchanged, and where it is to be delivered (usually one of a few approved locations for that particular asset). Futurescontracts can be set up for the delivery of

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cocoa, steel, oil or coffee.Likewise, financial futures contracts can specify the delivery of foreigncurrency or a range of government bonds.The buyer of a futures contract takes a long position, and will make aprofit if the value of the contract rises after the purchase. The seller of thefutures contract takes a short position and will, in turn, make a profit if the price of the futures contract falls. When the futures contract expires, theseller of the contract is required to deliver the underlying asset to the buyerof the contract. Regarding financial futures contracts, however, in the vastmajority of cases no physical delivery of the underlying asset takes place asmany contracts are cash settled or closed out with the offsetting position before the expiry date. An option contractis an agreement that gives the owner the right, but notobligation, to buy or sell (depending on the type of option) a certain assetfor a specified period of time. A call option gives the holder the right to buythe asset. A put option gives the holder the right to sell the asset. Europeanoptions can be exercised only on the options expiry date. US options can beexercised at any time before the contracts maturity date. Option contractson stocks or stock indices are particularly popular. Buying an optioninvolves paying a premium; selling an option involves receiving thepremium. Options have the potential for large gains or losses, and areconsidered to be high-risk instruments. Sometimes, however, optioncontracts are used to reduce risk. For example, fund managers can use a calloption to reduce risk when they own an asset. Only very specific funds areallowed to hold options.

Property
Property investment can be made either directly by buying properties, orindirectly by buying shares in listed property companies. Only majorinstitutional investors with long-term time horizons and no liquiditypressures tend to make direct property investments. These institutionspurchase freehold and leasehold properties as part of a property portfolio held for the long term, perhaps twenty or more years. Property sectors ofinterest would include prime, quality, well-located commercial office andshop properties, modern industrial warehouses and estates, hotels,farmland and woodland. Returns are generated from annual rents and anycapital gains on realization. These investments are often highly illiquid.

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Risk and Risk Aversion

Portfolio theory also assumes that investors are basically risk averse, meaning that, given a choice between two assets with equal rates of return they will select the asset with lower level of risk. For example, they purchased various type of insurance including life insurance, Health insurance and car insurance. The Combination of risk preference and risk aversion can be explained by an attitude toward risk that depends on the amount of money involved. A discussion of portfolio or fund management must include some thought given to the concept of risk. Any portfolio that is being developed will have certain risk constraints specified in the fund rules, very often to cater to a particular segment of investor who possesses a particular level of risk appetite. It is, therefore, important to spend some time discussing the basic theories of quantifying the level of risk in an investment, and to attempt to explain the way in which market values of investments are determined

Definition of Risk
Although there is a difference in the specific definitionsof risk and uncertainty, for our purpose and in most financialliterature the two terms are used interchangeably. In fact, oneway to define risk is the uncertainty of future outcomes. Analternative definition might be the probability of an adverseoutcome.

Composite risks involve the different risk as explained below:-

(1). Interest rate risk: It occurs due to variability cause in return by changes in level of interest rate. In long runs all interest rate move up or downwards. These changes affect the value of security. RBI, in India, is the monitoring authority which effectalises the change in interest rate. Any upward revision in interest rate affects fixed income security, which carry old lower rate of interest and thus declining market value. Thus it establishes an inverse relationship in the prize of security.

TYPES
Cash equivalent

RISK EXTENT
Less vulnerable to interest rate risk

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Long term Bond

More vulnerable to interest rate risk.

(2) Purchasing power risk:

It is known as inflation risk also. This risk emanates from the very fact that inflation affects the purchasing power adversely. Purchasing power risk is more in inflationary times in bonds and fixed income securities. It is desirable to invest in such securities during deflationary period or a period of decelerating inflation. Purchasing power risk is less in flexible income securities like equity shares or common stuffs where rise in dividend income offset increase in the rate of inflation and provide advantage of capital gains.

(3) Business risk:

Business risk emanates from sale and purchase ofsecurities affected by business cycles, technological change etc. Business cycle affects all the type of securities viz. there is cheerful movement in boom due to bullish trend in stock prizeswhere as bearish trend in depression brings downfall in theprizes of all types of securities.Flexible income securities are nearly affected than fixrate securities during depression due to decline n the market prize.

(4) Financial risk:

Financial risk emanates from the changes in the capital structure of the company. It is also known as leveraged risk andexpressed in term of debt equity ratio. Excess of debts againstequity in the capital structure indicates the company to behighly geared or highly levered. Although leveraged companysearnings per share (EPS) are more but dependence onborrowing exposes it to the risk of winding up. For, its inability to the honorits commitments towards the creditors are most important. Here it is imperative to express the relationship between riskand return, which is depicted graphically below

Maximize returns, minimize risks

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RISK VERSUS RETURN

Risk versus return is the reason why investors invest in portfolios. The idealgoal in portfolio management is to create an optimal portfolio derived fromthe best riskreturn opportunities available given a particular set of riskconstraints. To be able to make decisions, it must be possible to quantifythe degree of risk in a particular opportunity. The most common method isto use the standard deviation of the expected returns. This methodmeasures spreads, and it is the possible returns of these spreads thatprovide the measure of risk.The presence of risk means that more than one outcome is possible. Aninvestment is expected to produce different returns depending on the set ofcircumstances that prevail.

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For example, given the following for Investment A:

Circumstance
I II III IV It is possible to calculate:

Return(x)
10% 12% 15% 19%

Probability(p)
0.2 0.3 0.4 0.1

1. The expected (or average) return Mean (average) = x = expected value (EV) = px

Circumstan ce
I II III IV

Return(x)
10% 12% 15% 19%

Probability(p)
0.2 0.3 0.4 0.1

px
2.0 3.6 6.0 1.9

Expected Return (px) = 13.5%

2. The Standard deviation

Standard deviation == p(x- x) 2

Also. Variance (VAR) is equal to the standard deviation squared or 2

Deviation from Circumstance Return Probability expected Return (x -x) I II III 10% 12% 15% 0.2 0.3 0.4 -3.5% -1.5% +1.5% p(x -x)2 2.45 .68 1.90

34

IV

19%

0.1

+5.5%

3.03

VARAIANCE= 7.06

Standard deviation () =Variance

= 7.06

=2.66%

The standard deviation is a measure of risk, whereby the greater the standard deviation, the greater the spread, and the greater the spread, the greater the risk. If the above exercise were to be performed using another investment that offered the same expected return, but a different standard deviation, then the following result might occur: If the above exercise were to be performed using another investment that offered the same expected return, but a different standard deviation, then the following result might occur: Plan Investment A Investment B Expected Return 9% 9% Risk(standard deviation) 2.5% 4.0%

Since both investments have the same expected return, the best selection of investment would be Investment A, which provides the lower risk. Similarly, if there are two investments presenting the same risk, but one has a higher return than the other, that investment would be chosen over the investment with the lower return for the same risk. In the real world, there are all types of investors. Some investors are completely risk averse and others are willing to take some risk, but expect a higher return for that risk. Different investors will also have different tolerances or threshold levels for riskreturn trade-offs i.e. for a given level of risk, one investor may demand a higher rate of return than another investor.

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INDIFFERNCE CURVE
Suppose the following situation exists Plan Investment A Investment B Expected Return 10% 20% Risk(Standard Deviation) 5% 10%

The question to ask here is, does the extra 10% return compensate for the extra risk? There is no right answer, as the decision would depend on the particular investors attitude to risk. A particular investors indifference curve can be ascertained by plotting what rate of return the investor would require for each level of risk to be indifferent amongst all of the investments. For example, there may be an investor who can obtain a return of 50% with zero risk and a return of 55 %with a risk or standard deviation of 5% who will be indifferent between the two investments. If further investments were considered, each with a higher degree of risk, the investor would require still higher returns to make all of the investments equally attractive. The investor being discussed could present the following as the indifference curve shown in Figure.

Indifference Curve
Expected Return 50% 55% 70% 100% 120% 230% Risk 0% 5% 10% 15% 18% 25%

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Risk Indifference curve

It could be the case that this investor would have different indifference curves given a different starting level of return for zero risk. The exercise would need to be repeated for various levels of riskreturn starting points. An entire set of indifference curves could be constructed that would portray a particular investors attitude towards risk

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Indifference Curve Utility scores

At this stage the concept of utility scores can be introduced. These can be seen as a way of ranking competing portfolios based on the expected return and risk of those portfolios. Thus if a fund manager had to determine which investment a particular investor would prefer, i.e. Investment A equaling a return of 10% for a risk of 5% or Investment B equaling a return of 20% for a risk of 10%, the manager would create indifference curves for that particular investor and look at the utility scores. Higher utility scores are assigned to portfolios or investments with more attractive riskreturn profiles. Although several scoring systems are legitimate, one function thatis commonly employed assigns a portfolio or investment with expected return or value EV and variance of returns 2the following utility value:
U = EV .005A2where: U = utility value

A = an index of the investors aversion, (the factor of .005 is a scaling convention that allows expression of the expected return and standarddeviation in the equation as a percentage rather than a decimal). Utility is enhanced by high expected returns and diminished by high risk.Investors choosing amongst competing investment portfolios will select theone providing the highest utility value.

38

Thus, in the example above, the investor will select the investment (portfolio) with the higher utility value of 18.

Expected Return(EV)
10% 20%

Standard deviation()
5% 10%

Utility=EV-.005A2
10 .005 4 25 = 9.5 20 .005 4 100 = 18

(Assume A= 4 in this case)

Portfolio Diversification
There are several different factors that cause risk or lead to variability inreturns on an individual investment. Factors that may influence risk in anygiven investment vehicle include uncertainty of income, interest rates,inflation, exchange rates, tax rates, the state of the economy, default riskand liquidity risk (the risk of not being able to sell on the investment). Inaddition, an investor will assess the risk of a given investment (portfolio)within the context of other types of investments that may already be owned,i.e. stakes in pension funds, life insurance policies with savings components, and property.

One way to control portfolio risk is via diversification, whereby investmentsare made in a wide variety of assets so that the exposure to the risk of anyparticular security is limited. This concept is based on the old adage do notput all your eggs in one basket. If an investor owns shares in only onecompany, that investment will fluctuate depending on the factorsinfluencing that company. If that company goes bankrupt, the investormight lose 100 per cent of the investment. If, however, the investor ownsshares in several companies in different sectors, then the likelihood of allof those companies going bankrupt simultaneously is greatly diminished.Thus, diversification reduces risk. Although bankruptcy risk has beenconsidered here, the same principle applies to other forms of risk.

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RISK RETURN MATRIX

Covariance and Correlation

The goal is to hold a group of investments or securities within a portfolio potentially to reduce the risk level suffered without reducing the level of return. To measure the success of a potentially diversified portfolio, covarianceand correlationare considered. Covariance measures to what degree the returns of two risky assets move in tandem. A positive covariance means that the returns of the two assets move together, whilst a negative covariance means that they move in inverse directions.

40

Covariance

COV(x, y) = p(x-x) (y-y)for two investments x and y, where p is the probability.

Covariance is an absolute measure, and covariances cannot be compared with one another. To obtain a relative measure, the formula for correlation coefficient [r] is used.

Correlation coefficient r = COVxy

xy
To illustrate the above, here is the example:

Circumstance I II III IV

Probability 0.2 0.3 0.4 0.1

x-x +1.0 0 +1.5 -4

y-y -3.5 -1.5 +1.5 +5.5 COVxy =-2.0

p(x-x) (y-y)
-0.7 0 0.9 -2.2

For data regarding (y y), see earlier example. Assume that a similar exercise has been run for data regarding (x x). Assume the variance or 2 of x=2.45, and the variance or 2 of y = 7.06. Thus, the correlation coefficient would be

=-2.0

= -0.481

2.45*7.056

If, the same example is run again, but using a different set of numbers for y, a different correlation coefficient might result of say, 0.988. It can be concluded that a large negative correlation confirms the strong tendency of the two investments to move inversely.

41

Perfect positive correlation(correlation coefficient = +1) occurs when the returns from
two securities move up and down together in proportion. If these securities were combined in a portfolio, the offsetting effect would not occur.

Perfect negative correlation(correlation coefficient = 1) takes place when one security

moves up and the other one down in exact proportion. Combining these two securities in a portfolio would increase the diversification effect.

Uncorrelated(correlation coefficient = 0) occurs when returns from two securities move

independently of each other that is, if one goes up, the other may go up or down or may not move at all. As a result, the combination of these two securities in a portfolio may or may not create a diversification effect. However, it is still better to be in this position than in a perfect positive correlation situation.

Unsystematic and systematic risk

As mentioned previously, diversification diminishes risk: the more shares or assets held in a portfolio or in investments, the greater the risk reduction. However, it is impossible to eliminate all risk completely even with extensive diversification. The risk that remains is called market risk; the risk that is caused by general market influences. This risk is also known as systematic risk or non-diversifiable risk. The risk that is associated with a specific asset and that can be abolished with diversification is known as unsystematic risk, unique risk or diversifiable risk. Total risk = Systematic risk + Unsystematic risk

Systematic risk = the potential variability in the returns offered by a securityor asset caused by
general market factors, such as interest rate changes,inflation rate movements, tax rates, state of the economy.

Unsystematic risk= the potential variability in the returns offered by asecurity or asset caused
by factors specific to that company, such asprofitability margins, debt levels, quality of management, susceptibility todemands of customers and suppliers. As the number of assets in a portfolio increases, the total risk may declineas a result of the decline in the unsystematic risk in that portfolio.The relationship amongst these risks can be quantified as follows

TR2 = SR2 + UR2 or 2i = s2 + u2

42

Where:

= the investments total risk (standard deviation) s=the investments systematic risk u =the investments unsystematic risk.

The correlation coefficient between two investment opportunities can be expressed as: s = iCORim Where,
s= the investment systematic risk i = the investments total risk (systematic and unsystematic) CORim= the correlation coefficient between the return of the investment and those of the market.
If an investment were perfectly correlated to the market so that all its movements could be fully explained by movements in market, then all of the risk would be systematic & i = s If an investment were not correlated at all to the market, then all of its risk would be unsystematic

TECHNOQUES OF PORTFOLIO MANAGEMENT

Various types of portfolio require different techniques to be adopted to achieve the desired objectives. Some of the techniques followed in India by portfolio managers are summarized below.

43

(1). Equity portfolioEquity portfolio is affected by internal and externalfactors:

(a) Internal factors

Pertain to the inner working of the particular company ofwhich equity shares are held. These factors generally include: (1) Market value of shares (2) Book value of shares (3) Price earnings ratio (P/E ratio) (4) Dividend payout ratio

(b) External factors

(1) Government policies (2) Norms prescribed by institutions (3) Business environment (4) Trade cycles

(2). Equity stock analysis

The basic objective behind the analysis is to determinethe probable future value of the shares of the concernedcompany. It is carried out primarily fewer than two ways. : (a)Earnings per share (b) Price earnings ratio

(A) Trend of earning: A higher price-earnings ratio discount expected profitgrowth. Conversely, a downward

trend in earning results in alow price-earnings ratio to discount anticipated decrease inprofits, price and dividend.Rising EPS causes appreciation in price of shares, which benefits investors in lower tax brackets? Such investors havenot pay tax or to give lower rate tax on capital gains. Many institutional investor like stability and growthand support high EPS. Growth of EPS is diluted when a company financesinternally its expansion program and offers new stock.

44

 EPS increase rapidly and result in higher P/E ratiowhen a company finances its expansion

program from internalsources and borrowings without offering new stock.

(B) Quality of reported earning: Quality of reported earnings affects P/E ratio. The factorsthat affect the quality of reported earnings are as under: Depreciation allowances: Larger (Non Cash) deduction for depreciation providesmore funds to company to finance profitable expansion schemesinternally. This builds up future earning power of company.
Research and development outlets: -

There is higher P/E ratio for a company, which carriesR&D programs. R&D enhances profit earning strength of thecompany through increased future sales.

Inventory and other non-recurring typeof profit: -

Low cost inventory may be sold at higher price due toinflationary conditions among profit but such profit may notalways occur and hence low P/E ratio.

(C) Dividend policy: Dividend policy is significant in affecting P/E ratio. Withhigher dividend ratio, equity price goes up and thus raises P/Eratio. Dividend rates are raised to push in share prices up.Dividend cover is calculated to find out the time the dividend isprotected, In terms of earnings. It is calculated as under:

Dividend Cover = EPS / Dividend per Share

45

(D) Investors demand: Demand from institutional investors for equity alsoenhances the P/E ratio.

(3) Quality of management: Investors decide about the ability and caliber ofmanagement and hold and dispose of equity academy. P/E ratiois more where a company is managed by reputed entrepreneurswith good past records of management performance.

Types of Portfolios
The different types of Portfolio which is carried by any Fund Manager to maximize profit and minimize losses are different as per their objectives .They are as follows.

46

Aggressive Portfolio: Objective: Growth. This strategy might be appropriate for investors who seek High growth and who can tolerate wide fluctuations in market values, over the short term.

Growth Portfolio: Objective: Growth. This strategy might be appropriate for investors who have a preference for growth and who can withstand significant fluctuations in market value.

Balanced Portfolio: Objective:Capital appreciation and income. Thisstrategy might be appropriate for investors who want thepotential for capital appreciation and some growth, and whocan withstand moderate fluctuations in market values

47

Conservative Portfolio: Objective: Income and capital appreciation. This strategy may be appropriate for investors who want to preserve their capital and minimize fluctuations in market value.

48

CHAPTER -5

DATA ANALYSIS AND INTERPRETATION

49

1. Do you know about the Investment Option available?

Interpretation As the above table shows the knowledge of Investor out of 100 respondent carried throughout the Ahmedabad Area is only 85%.The remaining 15% take his/her residential property as an investment. According to law purpose this is not an investment because of it is not create any profit for the owner. The main problem is that in this time from year 2009-2010, the Inflation make the investor think before investing aeven a Rs.100.So,it also create the problem for the Investor to not take interest in Investment option.

50

2. What is the basic purpose of your Investments?

Interpretation As with the above analysis, it is found 75% people are interested in liquidity, returns and tax benefits. And remaining 25% are interested in capital appreciations, risk covering, and others. In the entire respondent it is common that this time everyone is looking for minimizing the risk and maximizing their profit with the short time of period. As explaining them About the Portfolio Management Services of Span, they were quite interested in Services.

51

3. What is the most important factor you consider at the time of Investment?

Interpretation As the above analysis gives the clear idea that most of the Investors considered the market factor as around 12% for Risk and 23% Return, but most important common things in all are that they are even ready for taking both Risk and Return in around 65% investor. Moreover, the Market is fluctuating now days, so as it also getting improvement. So, Investor are looking for Investment in long term and Short-term.

52

4. From which option you will get the best returns?

Interpretation Most of the respondents say they will get more returns in Share Market. Since Share Market is said to be the best place to invest to get more returns. The risk in the investment is also high.
53

Similarly, the Investor are more Interested in Investing their money in Mutual Fund Schemes as that is also very important financial product due to its nature of minimizing risk and maximizing the profit. As the commodities market is doing well from last few months so Investor also prefer to invest their money in Commodities Market basically in GOLD nowadays. Moreover, even who dont want to take Risk they are looking for investing in Fixed Deposit for long period of time. 5. Investing in PMS is far safer than Investing in Mutual Fund. Do you agree?

Interpretation In the above graphs its clear that 24% of respondent out of hundred feel that investing their money in Mutual Fund Scheme are far safer than Investing in PMS. this is because of lack of proper information about the Portfolio management services.As the basis is same for the mutual fund and PMS but the investment
54

pattern is totally different from each other and which depends upon different risk factor available in both the Financial Products.

6. How much you carry the expectation in Rise of your Income from Investments?

Interpretation The optimism is shown in the attitude of the respondents. The confidence was appreciable with which they are looking forward to a rise in their investments. Major part of the sample feels that the rise would be of around 15%. Only 8% of the respondents were confident enough to expect a rise of upto 35%.

55

As all the respondents were considering the Risk factor also before filling the questionnaire and they were asking about the performance report of all the PMS services offered by Span limited.

7. If you invested in Share Market, what has been your experience?

Interpretation 20% of the respondents have invested in Share market and received satisfactory returns, 40% of the respondents have not at all invested in Share Market. Some of the investors face problems due to less knowledge about the market. Some of the respondents dont have complete overview of the happenings and invest their money in wrong shares which result in Loss. This is the reason most of the

56

respondents prefer Portfolio Management Services to tradenow a days, which gives the Investor the clear idea when is the right time to buy and right time to sell the shares which is recommended by their Fund Manger.

8. How do you trade in Share Market?

Interpretation As we know that Share market is totally based on psychological parameters of Investors, which changed as per the market condition, but at the same time the around 45%investor trade on the basis of speculation and 31% depend upon Investment option Bonds, Mutual Funds etc.

57

Moreover, the now a days Hedging is most common derivatives tools which is used by the Investor to get more return from the Market ,this is mostly used in the Commodities Market.

9. How do you manage your Portfolio?

Interpretation About57% of the respondents say they themselves manage their portfolio and 43% of the respondents say they depends on the security company for portfolio Management. 43% of the respondents prefer PMS of the company because they dont have to keep a close eye on their investment; they get all the information time to time from their Fund Manager.

58

Moreover, talking about the Span PMS services they are far satisfied with the and during last year. They are satisfied with the quick and active services of Span customer services where, they get the updated knowledge about the scrip detail everyday from their Fund Manager.

10. If you trade with Span limited then why?

Interpretation As the above research shows the reasons and the parameters on which investor lie on Span and they do the trade. Among hundred respondents 35% respondents do the trade with the company due to its research Report, 28% based on Brokerage Rate whereas 22 % are happy with its Services.

59

Last but not the least, 15% respondents are depends upon the tips of Span which gives them idea where to invest and when to invest. At the time of research what I found is that still Span need to make the clients more knowledge about their PMS product.

11. Are you using Portfolio Management services (PMS) of Span?

Interpretation As talking about the Investment option, in most of clients it was common that they know about the Option but as the PMS of Span have different Product
60

offering, Product Characteristics and the Investment amount is also different this makes the clients to think differently. It is found that 56% of Span client where using PMS services as for their Investment Option.

12. Which Portfolio Type you preferred?

Interpretation

61

The above analysis shows, in which portfolio the investor like to deal more in PMS. As 45% investor likes to go for Equity Portfolio and 28% with Balanced Portfolio, whereas around 27% investor like to, go for Debt Portfolio.

13. How was your experience about Portfolio Management services (PMS) of Span Limited?

Interpretation

62

In the above analysis it is clear that the Investor have the good and the bad experience both with the Span PMS services. In this current scenario 52% of the Investor earned, whereas around 18% have to suffer losses in the market. Similarly 30% of the Respondents are there in Breakeven Point (BEP), where no loss and no profit.

14. Does Span Limited keep it PMS process Transparent?

Interpretation The above analysis is talking about the Span Transparency of their PMS services. In hundred respondents 63% said that they get all the information about their scrip buying and selling information day by day, where as 37% of respondents

63

are not satisfied with the PMS information and Transparency because they dont get any type of extra services in PMS as they were saying.

15. Do you recommend Span PMS to others?

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Interpretation The above analysis shows the Investor perception toward the Span PMS as on the basis of their good and bad experience with Span limited. Among hundred respondents 86% respondents were agree to recommend the PMS of Span to their peers, relatives etc.

CHAPTER-6

CONCULSION AND SUGGESTIONS

65

OBSERVATION AND FINDING

About 85% Respondents knows about the Investment Option, becauseremaining 15% take

his /her residential property as Investment, but in actual it not an investment philosophy carries that all the Investment does not create any profit for the owner.

More than 75% Investors are investing their money for Liquidity, Return and Tax benefits. At the time of Investment the Investors basically considered the both Risk and Return in more %age around 65%.

As among all Investment Option for Investor the most important area to get more return is share around 22%after that Mutual Fund and other comes into existence.

More than 76% of Investors feels that PMS is less risky than investing money in Mutual Funds.

As expected return from the Market more than 48% respondents expect the rise in Income

more than 15%, 32% respondents are expecting between 15-25% return.

As the experience from the Market more than 34% Investor had lose their money during

the concerned year, whereas 20% respondents have got satisfied return.

66

 About 45% respondents do the Trade in the Market with Derivatives Tools Speculation compare to 24% through Hedging .And the rest 31% trade their money in Investments.

Around 57% residents manage their Portfolio through the different company whereas 43%Investor manage their portfolio themselves.

The most important reasons for doing trade with Span limited is Span Research

Department than its Brokerage rate Structure.

Out of hundred respondents 56% respondents are using Span PMS services.

Investors preferred more than 45% equity Portfolio, 28%Balanceed Portfolio and about

27% Debt Portfolio with Span PMS.

About 52% Respondents earned through Span PMS product, whereas 18% investor faced

loses also.

More than 63% Investor are happy with the Transparency system of Span limited.

As based on the good and bad experience with Span limited around 86% are ready to

recommended the PMS of Span to their peers, relatives etc.

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LIMITATION OF THE PROJECT

As only Ahmedabadwas dealt in the survey so it does not represent the view of the total

Indian market. The sample size was restricted with hundred respondents.

There was lack of time on the part of respondents.

The survey was carried through questionnaire andthe questions were based on perception.

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 There may be biasness in information by marketparticipant.

Complete data was not available due to companyprivacy and secrecy.

Some people were not willing to disclose the investment profile.

CONCLUSION AND SUGGESTIONS

On the basis of the study it is found that Span Ltd isbetter services provider than the other stockbrokersbecause of their timely research and personalized adviceon what stocks to buy and sell. Span Ltd. provides the facility of Trade tiger as well as relationship managerfacility for encouragement and protects the interest of theinvestors. It also provides the information through theinternet and mobile alerts that what IPOs are coming inthe market and it also provides its research on the futureprospect of the IPO. We can conclude the following with above analysis.

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 Span Ltd has better Portfolio Management services than Other Companies It keeps its process more transparent. It gives more returns to its investors. It charges are less than other portfolio Management Services It provides daily updates about the stocks information.

Investors are looking for those investment options where they get maximum returns with less returns. Market is becoming complex & it means that the individual investor will not have the time to play stock game on his own.

People are not so much ware aware about the Investment option available in the Market.

Suggestions
The company should also organize seminars and similaractivities to enhance the knowledge of prospective andexisting customers, so that they feel more comfortablewhile investing in the stock market. Investors must feel safe about their money invested. Investors accounts must be more transparent as compared to other companies.

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 Span limited must try to promote more its Portfolio Management Services through

Advertisements.
Span needs to improve more its Customer Services

There is need to change in lock in period in all PMS

ANNEXURE
QUESTIONNAIRE NAME. AGE OCCUPATION... NO..................................
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PHONE

1. Do you know about the Investments Option available? A) YES B) NO

2. What is the basic purpose of your Investments? A) Liquidity B) Return C) Tax Benefits F) Others D) Risk Covering

E) Capital Appreciation

3. What is the most important factor you consider at the time of Investment? A) Risk B) Return C) Both

4. From which option you will get the best returns? A) Mutual Funds E) Fixed Deposits B) Shares F) Property C) Commodities Market D) Bonds G) Others

5. Investing in PMS is far safer than Investing in Mutual Fund. Do you agree? A) Yes B) No

6. How much you carry the expectation in Rise of your Income from Investments? A) Upto 15% B) 15-25% C) 25-35% D) More than 35%

7. If you invested in Share Market, what has been your experience? A) Satisfactory Return D) No B) Burned Finger C) Unsatisfactory Results

8. How do you trade in Share Market? A) Hedging B) Speculation C) Investment

9. How do you manage your Portfolio? A) Self B) Depends on the company for portfolio

10. If, you trade with Span limited then why?

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A) Research

B) Brokerage

C) Services

D) Investments Tips

11. Are you using Portfolio Management services (PMS) of Span? A) Yes B) No

12. Which Portfolio Type you preferred? A) Equity B) Debt C) Balanced

13. How was your experience about Portfolio Management services (PMS) of Span Limited? A) Earned B) Faced Loss C) No profit No loss

14. Does Span Limited keep it PMS process Transparent? A) Yes B) No

15. Do you recommend Span PMS to others? A) Yes B) No

REFERENCES

www.google.com

www.sebi.gov.in

www.moneycontrol.com www.karvy.com www.valueresarchonline.com www.yahoofinance.com

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www.theeconomist.com www.nseindia.com www.bseindia.com

Book Referred

Value guide by Span Investors Eyes by Span

Business world. The economist

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