SUMMER TRANING REPORT

ON
“A STUDY ON PORTFOLIO MANAGEMENT SERVICE,,
SHAREKHAN LIMITED, VARANASI

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE

MASTER OF BUSINESS ADMINISTRATION
Affiliated To
Dr. A. P. J. Abdul Kalam Technical University, Lucknow
(College Code : 107)

SESSION 2018 – 2020

SUBMITTED BY
NAME : - SANDEEP KUMAR SHARMA
ROLL NO. :- 1810770017
ENROLLMENT NO. :-
MBA 3th SEMESTER :-

INSTITUTE OF COMPUTER SCIENCE & TECHNOLOGY

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 SHEPA CAMPUS NIBIA BACHCHAON, VARANASI – 221011

ACKNOWLEDGEMENT

A project is never the work of an individual. It is more over a combination of ideas, suggestion
review, contribution and work involving many folks. It cannot be completed without guidelines.

I feel pleasure in expressing my deep heartily & profound sense of gratitude to honorable my
company guide Assistant manager MR. AISHWARYA JAIN SIR and marketing executive
MR. NIKHIL KUMAR SIR & MR. PINTU KUMAR SIR and my faculty guide.

DR. RAJEEV RANJAN SIR. Under their proper guidance for practical aspects of study
progressed. The goal of new idea and development can only be obtained by hard working it is
only key to success. One to achieve success, the best way is suggestion and guidance provided
by one’s mention.

I acknowledge my inner most gratitude my company & faculty guide for their best co- operation
and kind assistance during framing of this project.

Finally I would like to convey my heartiest thanks to my well-wisher because of their blessing
co-operation throughout my study. They boost up me every day to work with a new and high
spirit.

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Page | 3
 DECLARATION

I hereby declare that this Summer Internship Project Report entitled “POTFOLIO
MANAGEMENT SERVICES –AN INVESTEMNET OPTION” in Share Khan Limited
submitted in partial fulfillment of requirement of master of Business Administration (MBA) to
the Institute of Computer Science and Technology (ICST-SHEPA),Varanasi 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.

SANDEEP KUMAR SHARMA

(Signature of student)

Date: ____________________

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CHAPTER TABLE OF CONTENTS PAGE NO.
  EXECUTIVE SUMMARY 6
CHAPTER-1 INTRODUCTION 7
  Introduction to Study 7-8
  Myths About PMS 9-10
  Introduction to Stock Exchange 11-12
CHAPTER-2 COMPANY PROFILE 13-14
  Work structure of Sharekhan 15
  Product and Services offered by Company 16-18
  Reasons to Choose Sharekhan 19-20
CHAPTER-3 RESEARCH METHODOLOGY 21
  Objective of the Project 22
  Scope of the Study 23
  Methodology for Data Collection 23-25
PORTFOLIO MANAGEMENT
CHAPTER-4 SERVICES 26-27
  Need of PMS 28
  Objective of PMS 29-30
  Portfolio Construction 30-37
  Risk and Risk Aversion 37-40
  Risk versus Return 40-46
  Portfolio Diversification 46-47
  Techniques of PMS 48-52
  Sharekhan PMS 53-57
DATA ANALYSIS AND
CHAPTER-5 INTERPRETATION 57-76
CHAPTER-6 CONCLUSION & SUGGESTIONS 77
  Observation and Findings 78-79
  Limitations of the Project 79
  Suggestions & Recommendations 80-81
  ANNEXURE 81-82
  BIBLIOGRAPHY 83

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 Executive Summary

An undertaking of work life - this is never an outcome of a single person; rather it bears the
imprints of a number of people who directly or indirectly helped me in completing the present
study. I would be failing in my duties if I don't say a word of thanks to all those who made my
training period educative and pleasurable one. I am thankful to Sharekhan limited, varanasi for
giving me an opportunity to do summer training in the company.

First of all, I am extremely grateful to (Assistant Manager, Varanasi) for his guidance,
encouragement and tutelage during the course of the internship despite his extremely busy
schedule. My very special thanks to him for giving me the opportunity to do this project and for
his support throughout as a mentor.

I must also thank my faculty guide Mr. Rajeev Ranjan (Faculty, SHEPA) for her continuous
support, mellow criticism and able directional guidance during the project.

I sincerely thank Mr. Yogesh Mehta Sir (Visiting Faculty, SHEPA COLLEGE) for helping me
to choose a relevant project topic for my internship and her valuable suggestions and
recommendations in my study.

I would also like to thank all the respondents for giving their precious time and relevant
information and experience, I required, without which the Project would have been incomplete.

Finally I would like to thank all lecturers, friends, co-intern guys and my family for their kind
support and to all who have directly or indirectly helped me in preparing this project report. And
at last I am thankful to all divine light and my parents, who kept my motivation and zest for
knowledge always high through the tides of time.

INTRODUCTION TO STUDY

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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. Discretionary
ii. Non Discretionary
iii. 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.

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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

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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, it’s 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

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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 the
Members 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

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478 in 1920 and the entrance fee was raised to Rs.5 in 1877, Rs.1000 in 1896, Rs.2500 in 1916
and Rs. 48,000 in 1920. At present there are 23 recognized stock exchanges with about 6000
stock brokers. 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. Stockbrokers
ii. Sub-broker
iii. Market makers
iv. Portfolio consultants etc.

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 CHAPTER- 2

COMPANY PROFILE

WORK STRUCUTRE OF SHAREKHAN

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Sharekhan has always believed in investing in technology to build its business. The company has
used some of the best-known names in the IT industry, like Sun Microsystems, Oracle,
Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial Technologies India
Ltd, Spider Software Pvt. Ltd. to build its trading engine and content. The Citi Venture holds a
majority stake in the company. HSBC, Intel & Carlyle are the other investors.

On April 17, 2002 Sharekhan launched Speed Trade and Trade Tiger, are net-based executable
application that emulates the broker terminals along with host of other information relevant to
the Day Traders. This was for the first time that a net-based trading station of this caliber was
offered to the traders. In the last six months SpeedTrade has become a de facto standard for the
Day Trading community over the net. Sharekhan’s ground network includes over 700+
Shareshops in 130+ cities in India.

The firm’s online trading and investment site www.sharekhan.com - was launched on Feb 8,
2000. The site gives access to superior content and transaction facility to retail customers across
the country. Known for its jargon-free, investor friendly language and high quality research, the
site has a registered base of over 3 Lacs customers. The number of trading members currently
stands at over 7 Lacs. While online trading currently accounts for just over 5 per cent of the daily
trading in stocks in India, Sharekhan alone accounts for 27 per cent of the volumes traded online.

The Corporate Finance section has a list of very prestigious clients and has many ‘firsts’ to its
credit, in terms of the size of deal, sector tapped etc. The group has placed over US$ 5 billion in
private equity deals. Some of the clients include BPL Cellular Holding, Gujarat Pipavav, Essar,
Hutchison, Planetasia, and Shopper’s Stop. Finally, Sharekhan shifted hands and Citi venture
get holds on it.

COMPANY PROFILE

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Sharekhan is one of the leading retail brokerage of Citi Venture which is running successfully
since 1922 in the country. Earlier it was the retail broking arm of the Mumbai-based SSKI
Group, which has over eight decades of experience in the stock broking business. Share khan
offers its customers a wide range of equity related services including trade execution on BSE,
NSE, Derivatives, depository services, online trading, investment advice etc.

Earlier with a legacy of more than 80 years in the stock markets, the SSKI group ventured into
institutional broking and corporate finance 18 years ago. SSKI is one of the leading players in
institutional broking and corporate finance activities. SSKI holds a sizeable portion of the market
in each of these segments. SSKI’s institutional broking arm accounts for 7% of the market for
Foreign Institutional portfolio investment and 5% of all Domestic Institutional portfolio
investment in the country.

It has 60 institutional clients spread over India, Far East, UK and US. Foreign Institutional
Investors generate about 65% of the organization’s revenue, with a daily turnover of over US$ 2
million. The content-rich and research oriented portal has stood out among its contemporaries
because of its steadfast dedication to offering customers best-of-breed technology and superior
market information. The objective has been to let customers make informed decisions and to
simplify the process of investing in stocks

Mission of the Sharekhan is

“To educate and empower the individual investor to make better investment decisions
through
 QUALITY ADVICE
 INNOVATIVE PRODUCTS and
 SUPERIOR SERVICE.”
PRODUCT AND SERVICES OFFERD BY SHAREKHAN
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 1. Equity
2. Derivative
3. IPO
4. Currency
5. Commodity
6. Mutual fund
7. Portfolio management service

Sharekhan offers the following products:-

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CLASSIC ACCOUNT
This is a User Friendly Product which allows the client to trade through website
www.sharekhan.com and is suitable for the retail investors who is risk-averse and hence prefers
to invest in stocks or who does not trade too frequently.

Features
 Online trading account for investing in Equity and Derivatives via www.sharekhan.com
 Live Terminal and Single terminal for NSE Cash, NSE F&O & BSE.
 Integration of On-line trading, Saving Bank and Demat Account.
 Instant cash transfer facility against purchase & sale of shares.
 Competitive transaction charges.
 Instant order and trade confirmation by E-mail.
 Streaming Quotes (Cash & Derivatives).
 Personalized market watch.
 Single screen interface for Cash and derivatives and more.
 Provision to enter price trigger and view the same online in market watch.

SPEEDTRADE
SPEEDTRADE is an internet-based software application that enables you to buy and sell in an
instant. It is ideal for active traders and jobbers who transact frequently during day’s session to
capitalize on intra-day price movement.

Features
 Instant order Execution and Confirmation.
 Single screen trading terminal for NSE Cash, NSE F&O & BSE.
 Technical Studies.
 Multiple Charting.
 Real-time streaming quotes, tic-by-tic charts.
 Market summary (Cost traded scrip, highest clue etc.)

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  Hot keys similar to broker’s terminal.
 Alerts and reminders.
 Back-up facility to place trades on Direct Phone lines.
 Live market debts.

DIAL-N-TRADE
Along with enabling access for trade online, the CLASSIC and SPEEDTRADE ACCOUNT also
gives Dial-n-trade services. With this service, one can dial Sharekhan’s dedicated phone lines
1800-22-7500, 3970-7500. Beside this, Relationship Managers are always available on Office
Phone and Mobile to resolve customer queries.

SHARE MOBILE
Sharekhan had introduced Share Mobile, mobile based software where one can watch Stock
Prices, Intra Day Charts, Research & Advice and Trading Calls live on the Mobile. (As per SEBI
regulations, buying-selling shares through a mobile phone are not yet permitted.

IPO ON-LINE
Customers can apply to all the forthcoming IPOs online. This is quite hassle-free, paperless and

time saving. Simply allocate fund to IPO Account, Apply for the IPO and Sit Back & Relax.

Mutual Fund Online

Investors can apply to Mutual Funds of Reliance, Franklin Templeton Investments, ICICI
Prudential, SBI, Birla, Sundaram, HDFC, DSP Merrill Lynch, PRINCIPAL and TATA with

Sharekhan.

REASON TO CHOOSE SAHREKHAN LIMITED

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Experience
SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia
Money broker's poll held recently, SSKI won the 'India's best broking house for 2004' award.
Ever since it launched Sharekhan as its retail broking division in February 2000, it has been
providing institutional-level research and broking services to individual investors.

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
Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXECUTION services for
investors. These services are accessible through many centers across the country (Over 650
locations in 150 cities), over the Internet (through the website www.sharekhan.com) as well as
over the Voice Tool.

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,
www.sharekhan.com. Investors will also get a useful set of knowledge-based tools that will

empower them to take informed decisions.

Convenience
One can call Sharekhan’s Dial-N-Trade number to get investment advice and execute his/her
transactions. They have a dedicated call-center to provide this service via a Toll Free Number
1800 22-7500 & 39707500 from anywhere in India.

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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 toll-
free number, email or live chat on www.sharekhan.com.

Investment Advice
Sharekhan has dedicated research teams of more than 30 people for fundamental and technical
research. Their analysts constantly track the pulse of the market and provide timely investment
advice to customer in the form of 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 your actual 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.

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 CHAPTER-3

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

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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 schemes offered by the different insurance companies, new IPO’s,
Mutual Funds.
 To know in depth about Insurance, Mutual Funds, Stock, Bonds etc.

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

 To study about the competitive position of Sharekhan Ltd in Competitive Market.

 To study about the effectiveness & efficiency of Sharekhan Ltd in relation to its
competitors

 To study about whether people are satisfied with Sharekhan Services & Management
System or not.

 To study about the difficulties faced by persons while Trading in Sharekhan.

 To study about the need of improvement in existing Trading system.

Scope of the Study

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

 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 Sharekhan, PMS services effectiveness in the current situation.
 It also covers the scenario of the Investment Philosophy of a Fund Manager.

 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 Sharekhan Limited. For the purpose of the study 100 customers were picked
up at random and their views solicited on different parameters.

The methodology adopted includes

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  Questionnaire
 Random sample survey of customers
 Discussions with the concerned

SOURCES OF DATA

 Primary data: Questionnaire

 Secondary data: Published materials of Sharekhan Limited. Such as periodicals,

journals, news papers, and website.

Duration of Study

the study was carried out for the period on one and half month from 20th july 2019 to 15th
september 2019

SAMPLING PLAN

 Sampling:

Since Sharekhan Limited has 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:
customers & non consumers of Sharekhan limited

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  Sampling size:

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

 Sampling Methods:

Probability sampling requires complete knowledge about all sampling units in the universe. Due
to time constraint non-probability sampling was chosen for the study.

 Sampling procedure:
From large number of customers & non consumers 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 Sharekhan Limited.

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 CHAPTER-4

PORTFOLIO MANAGMENT SERVICES

PORTFOLIO MANGEMNT SERVICES (PMS)

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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 of investments. Outside
of the financial industry, the term "investment management" is often applied to investments other
than financial instruments. Investments are often meant to include projects, 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.

Need of PMS

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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 one’s 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 be marketable that means, the securities must
be listed and traded in 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 involvement of time to meet urgent need for funds. Marketability ensures
liquidity to the portfolio.

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4. Reasonable return: -
The investment should earn a reasonable return to upkeep the declining value of
money and be compatible with opportunity cost of the money in terms of current income
in the form of interest or dividend.

5. Appreciation in Capital: -
The money invested in portfolio should grow and result into capital gains.

6. Tax planning: -
Efficient portfolio management is concerned with composite tax planning covering
income tax, capital gain tax, wealth tax and gift tax.
Minimize risk: -
Risk avoidance and minimization of risk are important objective of portfolio
management. Portfolio managers achieve these objectives by effective investment
planning and periodical review of market, situation and economic 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 as comprising the following
steps:

1. Setting objectives.

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The first step in building a portfolio is to determine the main objectives of the fund given the
constraints (i.e. tax and liquidity requirements) that may apply. Each investor has different
objectives, time horizons and attitude towards risk. Pension funds have long-term obligations
and, as a result, invest for the long term. Their objective may be to maximize total returns in
excess of the inflation rate. A charity might wish to generate the highest level of income whilst
maintaining 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 client’s risk tolerance can be
difficult. The concepts of efficient portfolios and diversification must also be considered when
setting up the investment objectives.

2. Defining Policy.

Once the objectives have been set, a suitable investment policy must be established. The standard
procedure is for the money manager to ask clients to select their preferred mix of assets, for
example equities and bonds, to provide an idea of the normal mix desired. Clients are then asked
to specify limits or maximum and minimum amounts they will allow to be invested in the
different assets available. The main asset classes are cash, equities, gilts/bonds and other debt
instruments, derivatives, property and overseas assets. Alternative investments, such as private
equity, are also growing in popularity, and will be discussed in a later chapter. Attaining the
optimal asset mix over time is one of the key factors of successful investing.

3. Applying portfolio strategy.

At either end of the portfolio management spectrum of strategies are active and passive
strategies. An active strategy involves predicting trends and changing expectations about the
likely future performance of the various asset classes and actively dealing in and out of
investments to seek a better performance. For example, if the manager expects interest rates to
rise, bond prices are likely to fall and so bonds should be sold, unless this expectation is already
factored into bond prices. At this stage, the active fund manager should also determine the style
of the portfolio. For example, will the fund invest primarily in companies with large market
capitalizations, in shares of companies expected to generate high growth rates, or in companies

Page | 30
whose valuations are low? A passive strategy usually involves buying securities to match a
preselected market index. Alternatively, a portfolio can be set up to match the investor’s choice
of tailor-made index. Passive strategies rely on diversification to reduce risk. Outperformance
versus the chosen index is not expected. This strategy requires minimum input from the portfolio
manager. In practice, many active funds are managed somewhere between the active and passive
extremes, the core holdings of the fund being passively managed and the balance being actively
managed.

4. Asset selections.

Once the strategy is decided, the fund manager must select individual assets in which to invest.
Usually a systematic procedure known as an investment process is established, which sets
guidelines or criteria for asset selection. Active strategies require that the fund managers apply
analytical skills and judgment for asset selection in order to identify undervalued assets and to
try to generate superior performance.

5. Performance assessments.

In order to assess the success of the fund manager, the performance of the fund is periodically
measured against a pre-agreed benchmark – perhaps a suitable stock exchange index or against a
group of similar portfolios (peer group comparison). The portfolio construction process is
continuously iterative, reflecting changes internally and externally. For example, expected
movements in exchange rates may make overseas investment more attractive, leading to changes
in asset allocation. Or, if many large-scale investors simultaneously decide to switch from
passive to more active strategies, pressure will be put on the fund managers to offer more active
funds. Poor performance of a fund may lead to modifications in individual asset holdings or, as
an extreme measure; the manager of the fund may be changed altogether.

Page | 31
Steps to Stock Selection Process

Page | 32
Types of assets

The structure of a portfolio will depend ultimately on the investor’s objectives and on the asset
selection decision reached. The portfolio structure takes into account a range of factors,
including the investor’s time horizon, attitude to risk, liquidity requirements, tax position and
availability of investments. The main asset classes are cash, bonds and other fixed income
securities, equities, derivatives, property and overseas assets.

Page | 33
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 simple bank deposits, negotiable certificates of
deposits, commercial paper (short term corporate debt) and Treasury bills (short term
government debt) to money market funds, which actively manage cash resources across a range
of domestic and foreign markets. Cash is normally held over the short term pending use
elsewhere (perhaps for paying claims by a non-life insurance company or for paying pensions),
but may be held over the longer term as well. Returns on cash are driven by the general demand
for funds in an economy, interest rates, and the expected rate of inflation. A portfolio will
normally maintain at least a small proportion of its funds in cash in order to 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 – this can be for two to thirty years or, sometimes,
in perpetuity. Interest payments can be fixed or variable, the latter being linked to prevailing
levels 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, many
bond issues are given ratings by specialist agencies such as Standard & Poor’s and Moody’s. The
highest investment grade is AAA, going all the way down to D, which is graded as in default.
Depending on expected movements in future interest rates, the capital values 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 and interest rates elsewhere in world markets. Investors with short-term horizons and
liquidity requirements may choose to invest in bonds because of their relatively higher return
than cash and their prospects for possible capital appreciation. Long-term investors, such as
pension funds, may acquire bonds for the higher income and may hold them until redemption –

Page | 34
for perhaps seven or fifteen years. Because of the greater risk, long bonds (over ten years to
maturity) tend to be more volatile in 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 proportional share of the company and an ordinary
share carries the residual risk and rewards 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 the company’s assets once its liabilities have been
paid in full. Preference shares are another type of share capital. They differ from ordinary shares
in that the dividend on a preference share is usually fixed at some amount and does not change.
Also, preference shares usually do not carry voting rights and, in the event of firm failure,
preference shareholders are paid before ordinary shareholders. Returns from investing in equities
are generated in the form of dividend income and capital gain arising from the ultimate sale of
the shares. The level of dividends may vary from year to year, reflecting the changing
profitability of a company. Similarly, the market price of a share will change from day to day to
reflect all relevant available information. Although not guaranteed, equity prices generally rise
over time, reflecting general economic growth, and have been found over the long term to
generate growing levels of income in excess of the rate of inflation. Granted, there may 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 proposition for major institutional investors.

Derivatives

Derivative instruments are financial assets that are derived from existing primary assets as
opposed to being issued by a company or government entity. The two most popular derivatives
are futures and options. The extent to which a fund may incorporate derivatives products in the

Page | 35
fund will be specified in the fund rules and, depending on the type of fund established for the
client and depending on the client, may not be allowable at all.

A futures contract is an agreement in the form of a standardized contract between two

counterparties to exchange an asset at a fixed price and date in the future. The underlying asset of
the futures contract can be a commodity or a financial security. Each contract specifies the type
and amount of the asset to be exchanged, and where it is to be delivered (usually one of a few
approved locations for that particular asset). Futures contracts can be set up for the delivery of
cocoa, steel, oil or coffee. Likewise, financial futures contracts can specify the delivery of
foreign currency or a range of government bonds. The buyer of a futures contract takes a ‘long
position’, and will make a profit if the value of the contract rises after the purchase. The seller of
the futures 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, the seller of the contract is required to
deliver the underlying asset to the buyer of the contract. Regarding financial futures contracts,
however, in the vast majority of cases no physical delivery of the underlying asset takes place as
many contracts are cash settled or closed out with the offsetting position before the expiry date.

An option contract is an agreement that gives the owner the right, but not obligation, to buy or
sell (depending on the type of option) a certain asset for a specified period of time. A call option
gives the holder the right to buy the asset. A put option gives the holder the right to sell the asset.
European options can be exercised only on the options’ expiry date. US options can be exercised
at any time before the contract’s maturity date. Option contracts on stocks or stock indices are
particularly popular. Buying an option involves paying a premium; selling an option involves
receiving the premium. Options have the potential for large gains or losses, and are considered to
be high-risk instruments. Sometimes, however, option contracts are used to reduce risk. For
example, fund managers can use a call option to reduce risk when they own an asset. Only very
specific funds are allowed to hold options.

Property
Page | 36
Property investment can be made either directly by buying properties, or indirectly by buying
shares in listed property companies. Only major institutional investors with long-term time
horizons and no liquidity pressures tend to make direct property investments. These institutions
purchase freehold and leasehold properties as part of a property portfolio held for the long term,
perhaps twenty or more years. Property sectors of interest would include prime, quality, well-
located commercial office and shop properties, modern industrial warehouses and estates, hotels,
farmland and woodland. Returns are generated from annual rents and any capital gains on
realization. These investments are often highly illiquid.

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 definitions of risk and uncertainty, for our purpose
and in most financial literature the two terms are used interchangeably. In fact, one way to define
risk is the uncertainty of future outcomes. An alternative definition might be the probability
of an adverse outcome.

Page | 37
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.

(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 of securities 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 prizes where as bearish trend in depression
brings downfall in the prizes of all types of securities. Flexible income securities are nearly
affected than fix rate securities during depression due to decline n the market prize.

(4) Financial risk:

Page | 38
 Financial risk emanates from the changes in the capital structure of the company. It is also
known as leveraged risk and expressed in term of debt equity ratio. Excess of debts against
equity in the capital structure indicates the company to be highly geared or highly levered.
Although leveraged company’s earnings per share (EPS) are more but dependence on borrowing
exposes it to the risk of winding up. For, its inability to the honor its commitments towards the
creditors are most important.

Here it is imperative to express the relationship between risk and return, which is depicted
graphically below

RISK VERSUS RETURN

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Risk versus return is the reason why investors invest in portfolios. The ideal goal in portfolio
management is to create an optimal portfolio derived from the best risk–return opportunities
available given a particular set of risk constraints. To be able to make decisions, it must be
possible to quantify the degree of risk in a particular opportunity. The most common method is
to use the standard deviation of the expected returns. This method measures spreads, and it is the
possible returns of these spreads that provide the measure of risk. The presence of risk means
that more than one outcome is possible. An investment is expected to produce different returns
depending on the set of circumstances that prevail.

For example, given the following for Investment A:

Circumstance Return(x) Probability(p)

I 10% 0.2
II 12% 0.3
III 15% 0.4
IV 19% 0.1

It is possible to calculate:

1. The expected (or average) return

Mean (average) = x = expected value (EV) = ∑px

Circumstance Return(x) Probability(p) Px

I 10% 0.2 2.0

II 12% 0.3 3.6
III 15% 0.4 6.0
IV 19% 0.1 1.9

Expected Return (∑px) = 13.5%

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 2. The Standard deviation
Standard deviation =σ=√ ∑p(x- x) 2

Also. Variance (VAR) is equal to the standard deviation squared or σ2

Deviation from expected

Circumstance Return Probability Return (x -x) p (x -x)2

I 10% 0.2 -3.5% 2.45

II 12% 0.3 -1.5% .68

III 15% 0.4 +1.5% 1.90

IV 19% 0.1 +5.5% 3.03

VARAIANCE= 7.06

Standard deviation (σ) = √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 Expected Return Risk(standard deviation)

Investment A 9% 2.5%
Investment B 9% 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

Page | 41
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 risk–return trade-offs – i.e. for a given
level of risk, one investor may demand a higher rate of return than another investor.

INDIFFERNCE CURVE

Suppose the following situation exists

Plan Expected Return Risk(Standard

Deviation)
Investment A 10% 5%
Investment B 20% 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 investor’s attitude to risk. A
particular investor’s 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 Risk

50% 0%
55% 5%

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 70% 10%
100% 15%
120% 18%
230% 25%

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
risk–return starting points. An entire set of indifference curves could be constructed that would
portray a particular investor’s attitude towards risk

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.

Page | 43
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 risk–return profiles. Although several scoring systems are legitimate, one
function that is commonly employed assigns a portfolio or investment with expected return or
value EV and variance of returns σ 2the following utility value:

U = EV –.005Aσ2 where:

U = utility value
A = an index of the investor’s aversion, (the factor of .005 is a scaling convention that allows
expression of the expected return and standard deviation 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 the one providing the highest utility value.
Thus, in the example above, the investor will select the investment (portfolio) with the higher
utility value of 18.

Expected Return(EV) Standard deviation(σ) Utility=EV-.005Aσ2

10% 5% 10 –.005 4 25 = 9.5

20% 10% 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 in returns on an individual
investment. Factors that may influence risk in any given investment vehicle include uncertainty

Page | 44
of income, interest rates, inflation, exchange rates, tax rates, the state of the economy, default
risk and liquidity risk (the risk of not being able to sell on the investment). In addition, 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 investments are made in a wide
variety of assets so that the exposure to the risk of any particular security is limited. This concept
is based on the old adage ‘do not put all your eggs in one basket’. If an investor owns shares in
only one company, that investment will fluctuate depending on the factors influencing that
company. If that company goes bankrupt, the investor might lose 100 per cent of the investment.
If, however, the investor owns shares in several companies in different sectors, then the
likelihood of all of those companies going bankrupt simultaneously is greatly diminished. Thus,
diversification reduces risk. Although bankruptcy risk has been considered here, the same
principle applies to other forms of risk.

RISK –RETURN MATRIX

Page | 45
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.

(1). Equity portfolio-

Equity portfolio is affected by internal and external factors:

(a) Internal factors –

Page | 46
Pertain to the inner working of the particular company of which 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 determine the probable future – value of the shares
of the concerned company. 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 profit growth. Conversely, a downward

trend in earning results in a low price-earnings ratio to discount anticipated decrease in
profits, price and dividend. Rising EPS causes appreciation in price of shares, which

Page | 47
 benefits investors in lower tax brackets? Such investors have not pay tax or to give lower
rate tax on capital gains.
 Many institutional investor like stability and growth and support high EPS.

 Growth of EPS is diluted when a company finances internally its expansion program
and offers new stock.
 EPS increase rapidly and result in higher P/E ratio when a company finances its
expansion program from internal sources and borrowings without offering new stock.

(B) Quality of reported earning: -

Quality of reported earnings affects P/E ratio. The factors that affect the quality of reported
earnings are as under:

 Depreciation allowances: -
Larger (Non Cash) deduction for depreciation provides more funds to company to
finance profitable expansion schemes internally. This builds up future earning power of
company.

 Research and development outlets: -

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

 Inventory and other non-recurring type of profit: -

Low cost inventory may be sold at higher price due to inflationary conditions among
profit but such profit may not always occur and hence low P/E ratio.

Page | 48
(C) Dividend policy: -
Dividend policy is significant in affecting P/E ratio. With higher dividend ratio, equity price goes
up and thus raises P/E ratio. Dividend rates are raised to push in share prices up. Dividend cover
is calculated to find out the time the dividend is protected, In terms of earnings. It is calculated as
under:

Dividend Cover = EPS / Dividend per Share

(3) Quality of management: -

(D) Investors demand: -

Demand from institutional investors for equity also enhances the P/E ratio.

Investors decide about the ability and caliber of management and hold and dispose of equity
academy. P/E ratio is more where a company is managed by reputed entrepreneurs with 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.

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.

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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. This strategy might be appropriate for investors
who want the potential for capital appreciation and some growth, and who can withstand
moderate fluctuations in market values


Page | 50
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.

Page | 51
Sharekhan Portfolio Management Services

PMS

PRO PRIME
PRO ARBITRAGE PRO TECH

Pro Prime

Product Approach

Investment will be keeping in mind 3 investment tenets.

1. Consistent, steady and sustainable returns.

2. Margin of Safety
3. Low Volatility

Page | 52
Product offering

Pro Prime is the ideal for investors looking at steady and superior with low and medium risk
appetite.

The portfolio consists of a blend of quality blue chip and growth stocks ensuring a balanced
portfolio with relatively medium risk profile.

The portfolio constitutes of relatively large capitalization stocks, based on sector and themes
which have medium to long term growth potential.

Product Characteristics

 Bottom up stock selection

 In depth ,independent fundamental research
 High quality companies with relatively large capitalization
 Disciplined valuation approach applying multiple valuation measure.
 Medium to long term vision, resulting in low portfolio turnover.

How to invest?

 Minimum Investment : 10 Lacs

 Lock in : 6 months
 Reporting: Access to website showing clients holding .Monthly reporting of
portfolio holding /transaction.
 Charges: 2.5% pa AMC (Annual Maintenances Charges) fees charged every
quarter ,0.5% brokerage ,20% profit sharing after 15% hurdle is crossed
chargeable at the end of fiscal year.

Pro Arbitrage

Product Approach

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An opportunity lies in basis which is the difference between cash and future. Whenever basis is
high we buy the stocks and sell the future to lock in difference .The difference is bound to be
zero at expiry.

Product Offered

Cash –future arbitrage:

The product intends to spot low risk opportunities which will yield more than the normal low
risk product .Whenever such opportunity is spotted stocks will be bought and to lock in the basis,
future will be sold .This position will be liquated in the expiry or before that if the basis vanishes
early .Similarly the scheme will move on from opportunity to opportunity.

Product Characteristics

Low –Risk: This is relatively low risk product which can be compared with liquid funds
issued by mutual funds.

High return: Compared with other low risk products, this products offers an indicative post
tax return of 8 to 10% plus.

Product Details

 Minimum Investment:Rs.1 Crore

 Lock in :6 months
 Reporting: Fortnightly for portfolio Net worth, Monthly reporting pf portfolio Holding
/transaction.
 Charges: 0.035% brokerage for future ,0.07% for delivery

Pro Tech
Page | 54
Protech using the knowledge of technique analysis and the power of depravities markets to
identify trading opportunities in the market .The protech line of the product is designed around
various risk /reward /volatility profiles for the different kind of investment needs.

Product Approach

Better performance is possible from superior market timing and from picking stocks before
inflation points in their trading cycles .Linear return are possible from having hedged/ sell
market positions in downtrends .Absolute return are targeted by focusing on finding trading
opportunities & not out performance of an index.

Product offered

1. Nifty Thirty :
Nifty futures will be bought and sold on the basis of an automated trading system
generated calls to go long/short. The exposure will never exceed the value of portfolio i.e.
no leveraging; but allows us to be short /hedged in Nifty in falling market therefore
allowing the client to earn irrespective of the market direction.

2. Beta Portfolio :
Positional trading opportunities are identified in the future segment based on
technical analysis .Inflection points in the momentum cycles are identified to go long
/short on stock/index futures with 1-2 months time horizon .The idea is to generate the
best possible return in the medium term irrespective of the direction of the market
without really leveraging beyond the portfolio value. Risk protection is done based on
stop losses on daily closing prices.

3. Star Nifty:
Swing trading technique and Dow theory is used to identify short –term reversal
levels for Nifty futures and ride with trend both on the long and short side .This return
can be earned in bull and bear market .Stop and reverse means to reverse ones position

Page | 55
 from long to short or vice a versa at the reversal levels simultaneously .The exposure
never exceeds value of portfolio i.e. there is no leveraging.

4. Trailing Stops.
Momentum trading techniques are used to spot short –term momentum of 5-10 days
in stocks and stocks /index futures .Trailing stop loss method of risk management or
profit protection is used to lower the portfolio volatility and maximize return .Trading
opportunities are exposed both on the long side and the short side as the market demands
to get the best of both upward and downward trends.

Product Characteristics

 Using swing based index –trading systems stop and reverse .trend following and
momentum trading technique.
 Nifty based products for low impact cost and low product volatility
 Both long and short strategies to earn returns even in falling market.
 Trading in future market to allow for active risk protection using trailing stop losses.

How to invest?

 Minimum : Rs.10 Lacs

 Lock in : 6 months
 Reporting: Fortnightly reporting of portfolio Net Worth, monthly reporting of
portfolio Holding /Transaction.
 Charges: 0% AMC (Annual Maintenance Charges), 0.05% brokerage for
derivatives, 20% profit sharing on booked profit quarterly basis

Page | 56
 CHAPTER -5

DATA ANALYSIS AND INTERPRETATION

Page | 57
1. Do you know about the Investment Option available?

NO
15%

YES
85%

Interpretation

As the above table shows the knowledge of Investor out of 100 respondent carried throughout
the Hyderabad 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 2008-2009 , the recession
and the Inflation make the investor think before investing a even a Rs. 100.So , it also create the
problem for the Investor to not take interest in Investment option.

2. What is the basic purpose of your Investments?

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 Others
Risk Covering
Tax Benefits
Capital Appreciation
Return
Liqidity
0% 5% 10% 15% 20% 25% 30%

%AGE

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 Sharekhan, they were quite
interested in Protech Services.

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

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 70%
60%
50% 65%

40%
30%
20%
23%
10% 12%
0%
Risk
Return
Both

%AGE

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.

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

PERCENATGE OF RESPODENTS

Others 2%

Property 14%

Bonds 8%

Fixed Deposits 18%

Commodities Market 16%

Shares 22%

Mutual Funds 20%

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.

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 don’t 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?

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 80%
70%
60%
50%
76%
40%
30%
20%
10% 24%
0%
Yes
No

Interpretation

In the above graphs it’s 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 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?

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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%.

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 Sharekhan
limited.

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

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 40%
35%
30% 34%
25% 40%
20% 20%
15%
10%
5%
0%
Satisfactory return 6%
received Burned Fingers
Unsatisfactory results
No

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 don’t have complete overview
of the happenings and invest their money in wrong shares which result in Loss. This is the reason
most of the respondents prefer Portfolio Management Services to trade now 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?

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 % of Respodents
50%
45% 100%
40%
35%
30% 100%
% of Respodents
25% 100%
20%
15%
10%
5%
0%
0.5 1 1.5 2 2.5 3 3.5

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.

Moreover, the now a day’s 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?

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 %of Respodents

Depen
ds on Self
the 57%
Compa
ny for
Portfol
io
43%

Interpretation

About 57% 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 don’t have to keep a close eye on their
investment; they get all the information time to time from their Fund Manager.

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

10. If you trade with Sharekhan limited then why?

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 Services
Research 22%
35%

Investment Tips are good

15%

Brokerage
28%

Interpretation

As the above research shows the reasons and the parameters on which investor lie on Sharekhan
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.

Last but not the least, 15% respondents are depends upon the tips of Sharekhan which gives them
idea where to invest and when to invest.

At the time of research what I found is that still Sharekhan need to make the clients more
knowledge about their PMS product.

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

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 No
44%

Yes
56%

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 Sharekhan have different Product offering, Product Characteristics
and the Investment amount is also different this makes the clients to think differently.

It is found that 56% of Sharekhan client where using PMS services as for their Investment
Option.

12. Which Portfolio Type you preferred?

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 50%

45% 45%

40%

35%

30% 27%
28%
25%

20%

15%

10%

5%

0%
Equity Debt Balanced

Interpretation

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 Sharekhan
Limited?

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 No Profit No Loss Situation

Faced Loss

Earned

0% 10% 20% 30% 40% 50% 60%

Interpretation

In the above analysis it is clear that the Investor have the good and the bad experience both with
the Sharekhan 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 Sharekhan Limited keep it PMS process Transparent?

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 37%

Yes
No

63%

Interpretation

The above analysis is talking about the Sharekhan 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 are not satisfied with the PMS
information and Transparency because they don’t get any type of extra services in PMS as they
were saying.

15. Do you recommend Sharekhan PMS to others?

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 No
14%

Yes
86%

Interpretation

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

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Page | 73
Page | 74
Page | 75
 CHAPTER-6

CONCULSION
AND
SUGGESTIONS

Page | 76
 OBSERVATION AND FINDING

 About 85% Respondents knows about the Investment Option, because remaining 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.

 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 Sharekhan limited is Sharekhan
Research Department than its Brokerage rate Structure.

 Out of hundred respondents 56% respondents are using Sharekhan PMs services.

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  Investors preferred more than 45% equity Portfolio, 28%Balanceed Portfolio and about
27% Debt Portfolio with Sharekhan PMS.

 About 52% Respondents earned through Sharekhan PMS product, whereas 18% investor
faced loses also.

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

 As based on the good and bad experience with Sharekhan limited around 86% are ready
to recommended the PMS of Sharekhan to their peers, relatives etc.

LIMITATION OF THE PROJECT

 The sample size was restricted with hundred respondents.

 There was lack of time on the part of respondents.

 The survey was carried through questionnaire and the questions were based on
perception.

 There may be biasness in information by market participant.

 Complete data was not available due to company privacy and secrecy.

 Some people were not willing to disclose the investment profile.

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 CONCLUSION AND SUGGESTIONS
On the basis of the study it is found that Sharekhan Ltd is better services provider than the other
stockbrokers because of their timely research and personalized advice on what stocks to buy and
sell. Sharekhan Ltd. provides the facility of Trade tiger as well as relationship manager facility
for encouragement and protects the interest of the investors. It also provides the information
through the internet and mobile alerts that what IPO’s are coming in the market and it also
provides its research on the future prospect of the IPO. We can conclude the following with
above analysis.

 Sharekhan 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 similar activities to enhance the
knowledge of prospective and existing customers, so that they feel more comfortable
while investing in the stock market.
 Investors must feel safe about their money invested.

 Investor’s accounts must be more transparent as compared to other companies.

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  Sharekhan limited must try to promote more its Portfolio Management Services through
Advertisements.
 Sharekhan needs to improve more it’s Customer Services

 There is need to change in lock in period in all three PMS i.e.Protech, Proprime, Pro
Arbitrage.

ANNEXURE

QUESTIONNAIRE

NAME…………………………………. AGE…………………………………………

OCCUPATION……………………………... PHONE NO..................................

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 D) Risk Covering

E) Capital Appreciation F) Others

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 B) Shares C) Commodities Market D) Bonds

E) Fixed Deposits F) Property G) Others

Page | 80
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 B) Burned Finger C) Unsatisfactory Results

D) No

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 Sharekhan limited then why?

A) Research B) Brokerage C) Services D) Investments Tips

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

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 Sharekhan
Limited?

A) Earned B) Faced Loss C) No profit No loss

14. Does Sharekhan Limited keep it PMS process Transparent?

A) Yes B) No

15. Do you recommend Sharekhan PMS to others?

A) Yes B) No

Page | 81
 REFERENCES

 www.sharekha.com
 www.sebi.gov.in
 www.moneycontrol.com
 www.karvy.com
 www.valueresarchonline.com
 www.yahoofinance.com
 www.theeconomist.com
 www.nseindia.com
 www.bseindia.com

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