Portfolio & Wealth Management by - Nikit Sharma

PORTFOLIO & WEALTH MANAGEMENT
A Dissertation Report On

By
NIKIT SHARMA
13110 PGDM Batch of 2011-13
Under the Supervision of
Prof. (Dr.) K C Meher

Faculty Department of Finance
In Partial Fulfillment of Post Graduate Diploma in Management
I.T.S- Institute of Management, Greater Noida
DECLARATION
I hereby declare that this project entitled

is a record of Independent work carried out by me under the guidance of
Prof. (Dr) K. C. Meher

As per the curriculum requirement of Post Graduate Diploma in Management of
I.T.S- Institute of Management, Greater Noida
Name: Specialization: Enrollment No. :
NIKIT SHARMA FINANCE 13110
COLLEGE CERTIFICATE
I.T.S- Institute of Management Greater Noida

This is to certify that Mr. NIKIT SHARMA has successfully completed his DISSERTATION PROJECT title

AT KOTAK MAHINDRA SECURITIES PVT. LTD.
In partial, Fulfillment of the requirements of P.G.D.M P.G.D.M ( 2011-13 )
Prof. (Dr) K. C. Meher
ACKNOWLEDGEMENT
This research was made possible as per the requirement of the P.G.D.M course under I.T.S- Institute of Management, Greater Noida. Many individuals took interest and were supportive of my efforts. In fact, many have given me their time generously and it is not possible to mention all of them here and there act of goodness. I take the opportunity to place and record my deep sense of gratitude to all who have helped me in completion of my study. I thank very sincerely the Kotak Mahindra Securities Pvt. Ltd. Brokers, Sub-brokers, Portfolio Managers and Investors who contributed in a big way to see this project become a reality.
I would be failing in my duties if I dont express my sincere gratitude to my parents for their constant support and guidance. My profound gratitude goes to my Collage Mentor Prof. (Dr) K. C. MEHER with whose relentless guidance, encouragement and active cooperation, I am able to complete this dissertation.
NIKIT SHARMA
PREFACE
Even since the process of liberalization began in India, drastic changes have taken place in the professional practices and requirements of merchants services, particularly in the context of speeding up of economic and financial reforms. Merchant banking today covers activities such as Issue management, Loan Syndication, Corporate Counseling, Project Counseling, Lease Financing Portfolio Management etc. Portfolio Management is very popular in Western countries. But, in India, not much information is available regarding portfolio management services. Therefore, I undertook this thesis in order to gain a greater insight into the field of portfolio management services. This research will enable us to know the various strategies and practice adopted by the institutions offering Portfolio Management Services and resultant satisfaction level of investors. It will help us to find out the awareness level of investors about various parameters of portfolio management scheme and particularly the rate of return to the investors.
INDEX
S.No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
PAGE No.
CONTENTS Acknowledgement Preface
8 15 16 18 46 54 67 59 60 64 66 67 68
Introduction Objectives & Scope Methodology Data Collection Data Analysis Findings Recommendations Conclusion Appendix A - Questionnaire Investor Appendix B - Questionnaire -Brokers/Sub-Brokers Appendix C Structured Interview - Investors Appendix D Structured Interview - Brokers/Sub-Brokers Appendix E Bibliography
PROBLEM STATEMENT IN BRIEF

During the past decade or so, investors have had several problems some of which relate to the need for identifying appropriate venues of investment. It is not an easy task because of various factors like increased market volatility, requiring an understanding
of risk - return parameters, larger direct and indirect costs of errors or shortfalls in meeting portfolio objectives and increased competition. As a response to the above problem, investment has become a highly professionalized and sophisticated subject. Increasing use of computers and quantitative models and availability of large amounts for investment have brought into picture specialized agencies and financial institutions which handle large portfolios of high net worth individuals through portfolio management schemes.
WHAT CONTRIBUTION IT WILL MAKE AND TO WHOM

The research is going to make maximum contribution to Kotak Mahindra Securities Pvt. Ltd., which is planning to enter portfolio Management Services. The company plans to diversify and enter Portfolio Management Services so that it can counter the downtrend in income due to a slump in the capital market. Thus the company needs to understand the investor preference so that it can also provide guidance to high net worth individuals who propose to use Portfolio Management Schemes for earning a satisfactory level of income from their funds.
BACKGROUND OF COMPANY IN BRIEF

The Kotak Mahindra Securities Pvt. Ltd. is SEBI approved category 1 Registrar and Share Transfer Agent. The Company has so far handled 100 Public Issues and over 75 shares Transfer Company. Being a Finance company, which deals besides in share activities, it arranges loans, working capital, and term loans, ECB etc. The company desires to acquire a broker card so that it can start dealing in broking services and with its already good established clients, it can relay on the business due to already available expertise, this area is a natural choice for the company.
INTRODUCTION TO PORTFOLIO & WEALTH MANAGEMENT

Portfolio Management is a science for managing the varying combination of Portfolio elements. These elements are the sub-components, of which the larger portfolio is formed; say, the elements may be 'plans' for a portfolio of plans, or 'strategies' for
portfolio of strategies, or 'securities' for a portfolio of securities, and so on. In general, we may say that the elements of a portfolio are different forms of assets and in essence, portfolio management is managing these assets. We shall henceforth refer to portfolio management as the management of these assets. In particular, the scope of this report has been focused to handle and discuss 'securities' as the typical sub-component of portfolio of assets. Portfolio Management represents today a scientific approach to managing the investments and requires high professional, financial and investment expertise. It differs from the usual portfolio analysis that we know of, which is based on intuition and insight. The traditional portfolio management was a subjective approach, and even though successful at many a times, did not drive itself with a uniform, consistent form of analysis. This represented a problem for analysts to determine the reasons for other decisions, and dissect the cause-and-effect relationships for investments and their relative returns. While maintaining the importance of the intuition and the insight given by experience of a portfolio manager, our task now becomes that of providing him with modern tools and techniques with which the investments can be managed in an efficient manner. It is this view that urges us to explore the possibilities of making the task of the portfolio manager easier.
IMPORTANCE OF PORTFOLIO MANAGEMENT
Emergence of institutional investors on behalf of individual: A number of financial institutions, Mutual funds and other agencies are rendering the task of investing money on behalf of individual investors.
Growth in the number and size of ingestible funds: A large part of Household savings is being directed towards financial assets.
Increased market Volatility: Risk and return parameters of financial assets are continuously changing, because of changes in the Government's industrial and fiscal policies and uncertainty and instability.
Infrastructure Investment: Greater use of computers for processing mass of data. Professional insertion of the field and increasing use of analytical methods viz. quantitative techniques in the investment decision making.
Large direct and indirect costs of errors or shortfalls in meeting portfolio objectives, increased competition and greater scrutiny by the investors.
Despite its growing importance, the subject of portfolio management is new in our country and is largely misunderstood.
ATTRIBUTES OF THE PORTFOLIO MANAGEMENT SERVICES

A Portfolio service offered by any firm can be evaluated on the basis of the following attributes: 1. Promptness of Services 3. Service charges 5. Minimum interest required 7. Research division 9. Networking 11. Broker card 2. Quality & flexibility of services 4. Track record of the company 6.Database & computerization 8. Reporting 10.Simplicity of procedures
PROCESS OF PORTFOLIO MANAGEMENT
It has been believed that investing in shares and stocks is a very risky business. At times, there is very little doubt that stock markets can be very treacherous with their booms and busts. This risk however can be highly reduced by careful analysis and selection of investments in securities. This is what the process of portfolio management is all about. It is a scientific, analytical approach to security selection and maintenance, so as to get maximum possible returns with minimum possible risk. The various elements of the process of portfolio management are as discussed below. The process begins with the identification of what the investors requirements are, in order to establish what the optimal returns would be, to suit his requirements. The investors profile guides us to the next step, where the allocation of his resources is to be decided. This allocation has to provide for a fit to his requirements. Herewith, we complete the two major ingredients of PM, which provide input an actual security selection. Although the step of security selection is the 'proof of the pudding', the process of PM does not stop here. Due to the dynamic market changes, it becomes essential to change the portfolio in response to these changes so as to maintain optimal returns. The portfolio of securities that has been selected is held for a certain period of time, after which it needs to be evaluated. This is the step of checking the portfolio performance - to see how it has faired over a period of time. This step provides an insight into what improvements can be made within the portfolio. Thus, the process of PM commences with finding the profile of the investor and ends with showing the investor the results of his investment.
INVESTMENT POSSIBILITIES :
10
In the last section we have discussed how investors may have different objectives. After obtaining a clear picture regarding the investors requirements, we can go ahead and explore the various options that we may have in fulfilling these objectives. The next step in the process of PM requires us to understand the different categories of investments, which can fulfill the above objectives.
RISK INVOLVED:
Risk of any security is variation of its returns. The greater the variation, the riskier is the security. The risk ness of securities is usually measured by standard deviation of the security returns. In the previous section, we have discussed the different categories of stocks available to us. However, But before we move any further towards selection of stocks, it is important to have an insight into what exactly is the risk associated with each type of investment. For our portfolio we will consider three major investment instruments: 1. Equities 3. Money Market Instruments 2. Bonds
EQUITIES :
There are basically two types of risks associated with equities: 1. Diversifiable risk 2.Non-diversifiable risk
DIVERSIFIABLE RISK :
11
It is said that carrying all your eggs in one basket is not very good idea. It is too risky to drop the basket and loose everything. Most people are risk averse i.e. they take risk only if they feel there is a good reason for doing so. Investors do not like to take risk and enormous reduction in risk is associated even with modest diversification. Diversifiable risk is defined as the variability in security return on account of firm specific risk factors. Diversifiable risk is also called avoidable risk because it is possible to reduce or eliminate this component of risk to a considerable extent, by investing in large number of securities. It is quite interesting to see how diversification actually reduces the risk.
NON-DIVERSIFIABLE RISK :
The risk arising out of fluctuations in the market index is known as non-diversifiable or market or systematic risk. This is measured by the factor BETA. Beta is defined as the percentage change that can be expected in security price, with one percent change in market index. This vulnerability of the script to the market factor is an important dimension of risk. Investors are only rewarded for bearing this necessary component of risk. The portfolio consisting of all securities, i.e. the market portfolio has a certain risk associated with it. This portfolio has a beta of '1'. This is the hypothetical portfolio, which ideally varies, in direct proportion with the market index. For example, it assumes that the portfolio shall do well in case of market boom and vice versa. Risk free securities whose return is insensitive to market return has a beta '0'. Securities negatively related to market index have beta '-1'. Thus the riskiness of the security is measured by its beta factor. Higher the value of beta higher is the riskiness of the security. And generally, higher risk is associated with higher returns. Therefore, the investor may be willing to take more risk in lieu of higher returns.
BONDS :
12
Similar to the equities, let us discuss the two types of risks associated with bonds: 1. Default risk 2.Interest rate risk
DEFAULT RISK :
On more than one occasion, companies have been seen to default on their interest and principal obligation towards the investors. This fact associates a factor of risk which is called 'default risk'. It refers to the likelihood that a firm will be unable to repay the principal and the interest of a loan as agreed in the bond indenture. Credit risk is the equivalent of this term for an individual investor. A wrong choice made regarding the stability of the company may result into this becoming a major risk factor. Ratings of various companies are available which facilitate proper selection. These ratings are based on quantitative and qualitative analyses. Issues such as position of the company in regards to growth, stagnation, decline, dependence of company on government polices, dependence on economy as whole, technical stability, competence of company management, etc. are considered in qualitative analyses. In quantitative analyses various ratios like coverage, leverage, profitability etc. are evaluated. Thus, the rating of the company gives a good picture of the stability of the company which can be very beneficial in helping to make the correct choice. However, it is against advise to investor is willing to bear, it is a practice to spread the investors funds over bonds issued by a number of different issuers.
TECHNIQUES 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 in the following paragraphs.
EQUITY PORTFOLIO: - Equity portfolio is affected by internal and external

factors.
13
I.
Internal Factors: Pertain to the inner working of the particular company of which equity shares are held. These factors generally include the financial data and performance results of the company. The company's future growth plans are analyzed with reference to the balance sheet and profit and loss accounts of the company. Market value of shares, book value of shares, price earning ratio and dividend pay out ratio, all should be evaluated and considered in the same classification of industry. Income and capital gains should be devaluated with reference to the applicable tax rates. Some persons take into consideration the multiplies ratio based on the profits before tax (PBT) and the equity base. For example, with Rs. 100 Lacks. PBT and Rs. 100 lakhs equity paid up the multiplier. Ratio is 1:1 causing affect on market price to be twice the face value of equity i.e., a share of Rs. 10 must be quoted at Rs. 20. Although it is a crude way of doing equity analysis but it is still in use. Its use should be supplemented by data on depreciation, investment allowance, taxation, dividend pay out ration and bonus shares last issued by the company. Identification of 'growth shares' and 'income share' is another technique adopted for market price justification of a equity share. A growth share normally gives a low yield on market price although dividend might be higher. On the other hand income share gives a higher yield, where dividend may be steady. Such shares rarely show rapid appreciation in market value. Mostly the above factors affect equity holdings. Investment in debentures and portfolio management in debenture is also affected by above internal factors.
II.
External factors - External factors include changes in Government policies, norms prescribed by institutions, business environment, trade cycles, and political situation inside and outside the country which affect the market price of securities and influence the portfolio of different types of securities. Many times changes in interest rate structure also affects the portfolio for fixed rate and flexible return securities. Tax benefits and other fiscal incentives may also be instrumental in portfolio diversification.
EQUITY STOCK ANALYSIS - The basic objective behind the analysis is to

determine the probable future value of the shares of the concerned company. This analysis is carried out primarily under two ways, viz.: 14
1. Earning per Share (EPS)
2.Price earning ratio (Market Price/EPS)
Earning Per Share (EPS): Reported profits provide the basis for projecting what future earnings are likely to be. Analyst can estimate the probable trend of earnings per share over a period of years in future through projections of sale volume, selling price and costs etc and thus may plan the investment and manage equity portfolio. EPS is calculated as under:EPS = Profit after tax/No. of Equity Shares.
Price Earning ratio: Here, earning per share of equity is valued in the market reflecting mainly the following viz.: 1. Trend of earning per share 3. Dividend policy PER = Market Price of the Share / EPS. A higher PER indicates the confidence of the market in general in the future if the company 2. The Quality of reported earnings; 4.Quality of management
15
OBJECTIVES:
To find out the awareness level of Investors about various parameters of Portfolio Management Schemes. Particularly, the rate of return to the investor. To investigate and determine the various strategies and practice adopted by the institution offering Portfolio Management Services and the resultant satisfaction level of investors.
SCOPE OF STUDY:
Scope of study for the dissertation is confirmed to: a. Geographical Territory: Saharanpur. b. Targeted Respondents: 1. Individual Investor 2. Brokers 3. Sub-Brokers 4.Professionals
16
METHODOLOGY :
The methodology used to prepare this primarily consists of number of steps as give below:
PRIMARY DATA :
Personal Meeting with portfolio managers, Brokers, Sub brokers and Investors. Using two questionnaires - one for investors, and the other for brokers/sub-brokers to get the desired information. Contacted investors personally.
The questionnaire was kept as comprehensive and exhaustive as possible covering all aspects of PMS potential clients for PMS & to get a clear picture of their perception of PMS and their expectation as per the objective. I decided to base my Thesis on my own findings thus used primarily PRIMARY DATA which was collected by way of a number of meetings with portfolio managers, brokers, sub-brokers and high net worth individuals to get result of Data analysis. All the interviews were conducted personally. A lot of time was spent with each of the Brokers/sub Brokers learning about their experience with PMS. Etc. A copy of the questionnaire can be found in appendix. In the second aspect of the project, 25 Investors were identified and approached as our sample for analysis. HNI's were identified with the help of our Data base of public issue of investors who investors with large size applications. Some of the addresses were also obtained from brokers. The HNI's sample consisted of professionals and businessmen. Most of them were approached personally and questioned thoroughly on investing in general and PMS in particular. A copy of the questionnaire can be found in Appendix A, B, C & D.
17
SECONDARY DATA :
Study of the (very limited) literature available on portfolio management service, which included magazine, financial newspapers and books on portfolio management. I studied the various schemes of portfolio managers operating in Delhi.
Visited number of libraries to collect the other related information. Collected information on the various types of information based system, which helps portfolio managers.
Analysis of the information and data collected The sample size proposed, used to analyze the information consisted of as follows:
1. Questionnaire Sample Size Sample Composition Investors Brokers & Sub Brokers 2. Structured Interview Sample size - Investors - Brokers/Sub-brokers
25 20 5 10 5 5
18
PRIMARY DATA COLLECTION :

QUESTIONNAIRE :
All responses to my questionnaire (as per Appendix "A" & "B" enclosed) were obtained through personal contacts using database of the company or visiting brokers where I met these investors. The details of proposed & actual composition are given below:-
Particulars Questionnaire Investors Brokers/Sub-broker
Proposed composition
Actual composition
20 5 25
25 10 35
Total
STRUCTURED INTERVIEW : The detail of proposed & actual composition of the interviews (as per Appendix 'C' & 'D' enclosed) conducted is given below:Particulars Interview Investors Brokers/Sub-broker 5 5 10 6 6 12 Proposed composition Actual Composition
Total
19
SUMMARY OF RESPONSES FROM INVESTORS :

SUMMARY
OPTIONS AND PERCENTAGE Q.No A1 I.Q.1 I.Q.2 I.Q.3 I.Q.4 I.Q.5 I.Q.6 I.Q.7 I.Q.8 I.Q.9 14 11 9 5 5 13 17 1 5 % 56 44 36 20 20 52 68 4 20 4 60 28 28 20 36 20 72 A2 5 12 3 14 11 3 3 6 13 4 5 2 1 4 7 4 5 % 20 48 12 56 44 12 12 24 52 16 20 8 4 16 28 16 20 A3 2 2 10 4 9 3 2 13 3 20 2 1 2 1 4 1 2 % 8 8 40 16 36 12 8 52 12 80 8 4 8 4 16 4 8 A4 1 1 2 6 3 5 4 2 15 15 15 5 15 % 4 4 8 24 12 20 16 8 60 60 60 20 60 A5 1 2 1 % 4 8 4 A6 2 % Total % 8 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
I.Q.10 1 I.Q.11 15 I.Q.12 7 I.Q.13 7 I.Q.14 5 I.Q.15 9 I.Q.16 5 I.Q.17 18
20
SUMMARY OF RESPONSES FROM INVESTORS
17 16 15 14 13 12 11 10 1 9 8 1 7 6 5
2 1
5 4 5 4 5 7 9 15 5 15 7 15 7 5 4 3 4 13 6 13 15 15
18
1 1 2 1 1 2 2 2
QUESTIONS
20
A6 A5 A4 A3 A2 A1
5 5
2 3 3 3 3 6 13 5 9 11 14 10
17
4 3 2 1 0 1
2 2 3 2 1 2 1 2
5 9
1112 5 5 14 OPTIONS 10 15
20
25
21
SUMMARY OF RESPONSE FROM BROKERS/SUB-BROKERS :
SUMMARY :
Q.No B.Q.1 B.Q.2 B.Q.3 B.Q.4 B.Q.5 B.Q.6 B.Q.7 B.Q.8 B.Q.9
A1 1 1 3 4 4 4 4
% 10 10 30 40 40 40 40 30
A2 8 6 2 1 6 2 3 4 2
% 80 60 20 10 60 20 30 40 20
A3 1 2 6 2 2 2 2 5
% 10 20 60 20 20 20 20 50
A4 1 2 2 2 1 --
% 10 20 20 20 10 -
A5 10 2 10 -
% 100 20 100 -
Total % 10 10 10 10 10 10 10 10 10 10 10 100 100 100 100 100 100 100 100 100 100 100
B.Q.10 B.Q.11 3
22
S U M M A R Y O F R E S P O N S E F R O M B R O K E R S /S U B BROKERS
11 10 9 8 7 QUESTIONS 6 5 4 3 2 1 0 1 1 1 1 1
5 10
2 2 2 2 2
4 4 3 4 4 4 6 A5 A4 A3 A2 A1 6
2 2 2 2 2 2
6 8 10
6 O P T IO N S
10
12
23
INVESTORS DATA COLLECTION - PERSONAL PARTICULARS
Q.No
Particulars
Group <18 >18 & < = 30 >30 & <= 53 >53 & <=65 > 65
Respondent 2 13 6 4 25
%age 0% 8% 52% 24% 16% 100
I.P.P.1 Age of Investors (Years)
Total
Q.No
Particulars
Group
Respondent %age
I.P.P.2
Income Range (Rs per month) of the investors.
<5000 >5000 & <10000 >10000 & <20000 >20000 & < 50000 >50000 & < 100000 > 100000
1 4 3 6 11 25 4 16 12 24 44 100
Total
Q.No
Particulars
Group
Respond %age ent
I.P.P.3
Designation of Investor
Supervisor Lower Management
1 1
4 4
24
Middle Management Upper management Non-working Others Total
8 12 3 25
32 48 12 100
Q.No
Particulars
Group
Respondent
%age
I.P.P.4
Education of Investor
Under-graduate Graduate Post-graduate
2 10 13 25
8 40 52 100
Total
INVESTORS DATA COLLECTION - MAIN QUESTIONNAIRE :
Q.No I.Q.1
Particulars
Group
Respond %age ents 14 5 2 1 56 20 8 4
Where do you invest your Stock Market resource & (majority)? Debenture/FD Real Estate Gold
25
Saving bank Others Total
1 2 25
4 8 100
Q.No
Particulars
Group
Respond %age ents
I.Q.2
Are you familiar with the Very familiar portfolio manager schemes? Somewhat familiar Not familiar Total
11 12 2 25
44 48 8 100
Q.No
Particulars
Group
Respond %age ents
I.Q.3
How did you come to Advertisement in know about the portfolio Newspapers management schemes? Advertisement in Magazines Friends & acquaintance Direct Mail Others
36
12
10 1 2 25
40 4 8 100
Total
Q.No
Particulars
Group
Respond %age ents
26
I.Q.4
What percentage of resources 0 to 25% you invest in 25 to 50% 50% to 75% More than 75% Total shares/debenture/FDs?
5 14 4 2 25
20 56 16 8 100
Q.No
Particulars
Group
Respond %age ents
I.Q.5
Indicate the extent of risk in Low investment that are you willing Medium to take? High Total
5 11 9 25
20 44 36 100
Q.No
Particulars
Group
Respond %age ents
I.Q.6
How comfortable are you Very Comfortable investing in the stock market? Somewhat comfortable Not very comfortable Very uncomfortable Total
13 3 3 6 25
52 12 12 24 100
27
Q.No
Particulars
Group
Respondents
%age
I.Q.7
What is your perception of the It will rise stock market index (BSE Sensex/Nisty) in the Long Run? It will fall
17 3
68 12 8
It will remain at 2 the same level Can't say 3 25
12 100
Total
Q.No
Particulars
Group
Respondent
%age
I.Q.8
What is the percentage of return per annum that you expect on your Investment in portfolio management services? Total
0 to 25% 25 to 50% 50% to 75% More than 75%
1 6 13 5 25
4 24 52 20 100
28
Q.No
Particulars
Group
Respondent
%age
I.Q.9
What is the actual return per 0 to 25% annum you are getting? 25 to 50% 30 to 75% More than75% Total
5 13 3 4 25
20 52 12 16 100
Q.No
Particulars
Group
Respondent
%age
I.Q.10
Since how long have been investing in the stock markets? Total
Less than 2 years 2 to 5 years More than 5 years
1 4 20 25
4 16 80 100
Q.No
Particulars
Group
Respondent
%age
I.Q.11
What is the amount (in Rupees) Up to 2 lacks that one would like to invest in 2 to 5 lacks a portfolio management 5 to 10 lacks services? 10 to 20 lacks More lacks Total than
15 5 2 2 20 1
60 20 8 8 4
25
100
29
Q.No
Particulars
Group
Respondent
%age
I.Q.12
What
are
you
paying
as 0 - 5%
7 2 1 15 25
28 8 4 60 100
commission to portfolio service 5 to 10% providers? 10 - 20% Not applicable Total
Q.No
Particulars
Group
Respondent
%age
I.Q.13
Are/were you satisfied with the Satisfied return from the PMS? Not Satisfied Can't Say Not applicable Total
7 1 2 15 25
28 4 8 60 100
Q.No
Particulars
Group
Respondent
%age
I.Q.14
Are/were you satisfied with the Satisfied frequency and details of the Not Satisfied reports from the portfolio Can't Say management services? Not applicable Total
5 4 1 15 25
20 16 4 60 100
30
Q.No
Particulars
Group
Respondent
%age
I.Q.15
What do you think are the most Capital gains important reasons for people to Steady income invest in a portfolio Safety management services? Liquidity Total
9 7 4 5 25
36 28 16 20 100
Q.No
Particulars
Group
Respondent
%age
I.Q.16
Would you prefer to shift your Yes portfolio present No manager to a mutual fund? Can't Say Not applicable Total from the
5 4 1 15 25
20 16 4 60 100
Q.No
Particulars
Group
Respondent
%age
I.Q.17
Do you believe that a mutual Yes fund portfolio No manager than an individual or a Can't say firm? Total is a better
18 5 2 25
72 20 8 100
BROKERS/SUB-BROKERS DATA COLLECTION PERSONAL PARTICULARS
31
Q.No
Particulars
Group
Respondent
%age
B.P.P.1 Age (years) of Brokers/Sub- <18 Brokers? >18 & < 30 >30 & <53 >53 & <65 More than 65 Total
1 5 2 2 10
10 50 20 20 100
Q.No
Particulars
Group
Respondent
%age
B.P.P.2 Brokers/Sub Brokers
Broker Sub-Broker
6 4 10
60 40 100
Total
BROKERS/SUB-BROKERS - DATA COLLECTION MAIN QUESTIONNAIRE
Q.No
Particulars
Group
Respondent
%age
B.Q.1
How many clients do you have? 1 - 10 10 - 20 20 - 50 More than 50 Can't say 32
10
0 0 0 0 10
Total
10
100
Q.No
Particulars
Group
Respondent
%age
B.Q.2
What is the average duration for 1 year which clients request your 1 - 2 year 2 - 5 year services? Total
1 6 2 10
10 60 20 100
Q.No
Particulars
Group
Respondent
%age
B.Q.3
What
is
the
%age
of 0 - 25%
1 6 2 1 10
10 60 20 10 100
investments you have made in 25 - 50% speculative securities? 50 - 75% 75 - 100% Total
Q.No B.Q.4
Particulars
Group
Respondent 2 6 2
%age 0 20 60 20
On an Average, 0 - 15% what the 15 - 30% minimum rate of 30 45% return you try to More than 50% get? is
33
Total
10
100
Q.No
Particulars
Group
Respondent
%age
B.Q.5
What
are
your
fees
as 0 - 2
3 1 2 2 2 10
30 10 20 20 20 100
professional managers?
portfolio 2 - 4 4-6 6-8 8 - 10
Total
Q.No B.Q.6
Particulars Do you have an
Group Yes
Respondent 4 6 10
%age 40 60 100
in-house center? Total
research No
Q.No Particulars
Group
Respondent %age 4 2 40 20 20
B.Q.7 What is your expectation of the It will rise stock market index (BSC It will fall Sensex /Nifty) in the future?
Remain at the 2 present level Can't say 2 10
20 100
Total
34
Q.No
Particulars
Group
Respondent
%age
B.Q.8
Which clients?
segment
does Businessman/
40
your firm target for its Corporates Senior executives NRIs Retired Executives Others Total 3 2 1 10 30 20 10 100
Q.No
Particulars
Group
Respondent
%age
B.Q.9
What is the variety Common in portfolios? clients
Portfolio
for
all 4
40
Common portfolio for a class 4 of clients Different clients Total 10 portfolios for all 2
40
20
100
Q.No
Particulars
Group
Respondent
%age
B.Q.10 What is the average number of 1 - 10 scripts in a portfolio? 10 - 15 15 - 20
35
More than 20 Can't Say Total
10 10
100 100
Q.No
Particulars
Group
Respondent
%age
B.Q.11 Would you like to entrust a part Yes or whole of the funds available No with you to a mutual fund? Can't Say Total
3 2 5 10
30 20 50 100
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STRUCTURED INTERVIEW - INVESTORS

I have conducted interview in person and obtained following information from interview about their investment habits and PMS in particular. Ques. What According To You Is The Safest Means Of Investment Nowadays? 1. Fixed investment Instruments 3. Public Sector Bonds. 5. Public Provident Funds 7. Bonds of Financial Institution 9. UTI Scheme 11. Provident Funds 2.FDS 4. Saving Bank 6.National Savings Certificates 8.Corporate Sector Bonds 10.Life Insurance Scheme 12.Mutual Funds
Ques. What according to you is the most profitable means of investment nowadays? 1. UTI-Schemes 3. Shares of Software Industries 5. Taxation Schemes 7. Alliananz Capital MF 9. Birla MF 11. TATA Young Citizen's Fund 13. Kothari Pioneer Prima Plus Ques. Have you even invested in a portfolio management scheme? Yes/No. if no then why not? 1. Managing ones portfolio on their own and had never felt the need of handing it to somebody else. 2. Never heard of the scheme 3. Unsure of credit worthiness 4.Reliability of their stocks in somebody's else hand was doubtful to them 5. Lot of failure of NBFCs 6.Number of public issues failure 2.Corporate Sector Bonds 4.Share of Pharmaceutical Sector 6.First India MF 8.Tata MF 10.SBI MF 12.Birla Advantage Fund
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Ques. What qualities do you look for in a portfolio manager? List in order of priority? 1. Honesty was most important. 3. Track record. 2. Reliability and creditability of the PM.
4. Safety of portfolio credit rating by CRA.
Ques. Which companies have you heard of that offer PMS? 1.Lloyds Finance Limited 3. Escorts Financial Services Ltd. 5. GE Capital Services Ltd. 7. SBI Capital 9. HB Portfolio Leasing Ltd. 2.Brisk Capital Market Services Ltd. 4. Sterling Securities Ltd. 6. HDFC Ltd. 8.PNB Capital 10. Profin Money Markets Ltd.
Ques. Would you consider investing money with a new portfolio service provider. Yes/No? If No, then what would prompt you to invest in a new portfolio management services? 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Reliability & Superiority of Investment Performance Investment skills & Investment Research Understanding of Investor's needs Quality of Post Sales Service Financial Innovation Additional add ons Service How diversified is the Portfolio Liquidity Risks Return . .
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STRUCTURED INTERVIEW - BROKERS/SUB-BROKERS

I have conducted the interview in person to obtain information from Brokers and Subbrokers. This was about how they are manages. Their clients and what kind of facilities they are offering to their investors Ques. Indicate the percentage of clients falling in the different age categories 25-35 Years 10% of all the clients fall in the age group of 25-35 years 35-50 year - 44% of all clients 50+ - 46% of all clients
This category had the highest number of individuals participating in Portfolio Management schemes. The reason for this was : I. People in this age group were at the top of their carriers and
hence could not devote as much time is making their investments as they would how liked to ; II. Investors in this category derived more emphasis on tax-planning
for which they wanted professional guidance. Ques. On an average, what % of the portfolio asset allocation is done in? Range I. II. Fixed income securities Shares (a) Primary Market (b) Secondary Mkt III. IV. Real Estate Money market 10-20% 20-70% 10-20% 10-20% 10 45 15% 10% 20-40% Average 30%
Ques. What is the range of investment that you have made in speculative securities?
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Portfolio managers are willing to risk to achieve a greater return. The investment in speculative securities range from 20% to 80%. However, Portfolio managers (Brokers/Sub-Brokers) take 'calculated risk' i.e., they are aware of the risk levels. They have understanding and are prepared for any eventuality. According to Portfolio managers (Brokers/Sub-brokers) most investors seek their services when they are willing to take calculated risk in order to get a greater return. Ques. On an average, what is the minimum rate of return you try to get? According to SEBI guidelines, Portfolio managers (Brokers/Sub-brokers/NBFC's) are not allowed to promise a fixed rate of return. However, during the course of our interview, we found out that the average rate of of return. Promoted varied from 30% to 50% per annum. Ques. Which segment does the firm target for its clients? 1. Businessmen 3. Retired Executives 2. Senior Executive 4. NRIs
The senior Executive and High Network individuals are the major target area, next comes the professionals like Doctors, Advocates, Architects and Engineers. The common are of interest to professional is tax planning and safe deployment of funds in avenues. That offer better return that of Government securities. Businessmen are not very keen to invest in PMS. They need to offered special incentives in the form of additional services for attracting interest in the schemes. NRIs prefer capital gain, NRIs are also preferred lot but difficult to get their clientele. Retired segment too invest in these schemes but only which offer steady & Regular Income on their investment. They avoid speculative schemes.
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Ques. Does the company offer any guarantees of returns? 1. 2. Written Guarantee No Guarantee 2.Verbal Guarantee
No verbal or written guarantee is given to the clients; all of them have been able to meet their target rate of return. SEBI guidelines do not allow any NBFC's/Brokers/Sub-brokers/PMS to promise a fixed rate of return under these types of scheme. Ques. what is the variety in portfolios? 1. 2. 3. Common portfolio for calls all client Common portfolio for a class of clients Different portfolios for all clients
The scrips are held in the clients name by majority of the PMS/Brokers/SubBroker due to Tax Planning, but are in the custody of the service providers. Majority of them almost 50% keep common portfolio for all clients. Keep common portfolio for a class of clients. High Networth clients (prefer only custom portfolio 20%). Ques. What according to the company are the prime motivators for the clients to invest in a PMS? The prime motivators for clients to invest in a PMS are gauged to be: 1. Track record of the company 3. High return of their investment 5. Equity research 2. Safety of money 4. Professional advice 6. Tax planning
Ques. What according to the company is the awareness level of there portfolio management schemes and which segment is most aware of PMS? First all of them feel that the awareness level of PMS is good people are aware of the advantages and till now a lot of 'market-development' work has to be done. It has to be sold to the potential investors as a 'concept'.
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Ques. What are the strategies adopted to attract customers? 1. Word of mouth 3. Advertisement 7. Tax advice 2.Contacts of old customers 4. Tailor made schemes for high net worth individuals 8. Periodicals and Newsletters
5. Statement of Accounts. 6. Loan against shares 9. Direct mail to high net worth individuals and professionals 10. Reference letters of existing clients also used to woo potential clients Ques. what is the method of evaluating a clients portfolio? The company keeps 'Master Portfolio' which is used as a base to. Choose scrips for individuals portfolio. On an average a portfolio is composed of 10-15 scrips which are mostly fundamentally strong although speculative scrips are also chosen from time to time. It normally takes more than 4 weeks to rationalize the clients portfolio. The period may vary with changes in market condition. Most of them provide tax advice and periodicals as add-ons. Ques. How regularly is the portfolio monitored? The portfolios are monitored daily and reports are sent to clients daily/ monthly/quarterly bases. Some keep their own master portfolio and keep checking agent master portfolio to other. Service providers keep two type of services one discretionary and non discretionary. It depends on the choice of the clients how they want their portfolio to be monitored. Ques. Does the company have its own broking ticket Yes/No? 60% of Brokers have their own tickets, who were surveyed. Ques. What are the methods adopted for research? 1. Use of software packages 3. Economy & Industry analysis 2.Meeting with company personnel 4.Others
Different types of methods are adopted for Research majority software packages which are updated Bi-weekly. They have their own research staffs who keep an eye on company's. They meet company personnel on schedule basis to find about the
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company's performance. All of them subscribe to large number of magazines and industry analysis reports. Few of them keep watch on Internet since nowadays, majority of the company have their own web-site where the company's info is updated on regular basis. Ques .Which software are used for research and monitoring purposes? 1. Scriptech 3. IDSS 5. Online software of BSE/NSE/DSE 2.Daltal Street 4.Capital Line
Ques. With the present uncertain stock market conditions, what measures are adopted to prevent the erosion of portfolio values? Surviving of all requires a cool head. There are two golden rules everybody is trying to follow that are: Rule No (1) Rule No (2) : : Play Safe Do not forget Rule No (1)
Everybody agree stock market these days have become highly unpredictable. So most of them try to keep their portfolio with fundamentally strong scrips. As per technical scrips are concerned they don't keep very long position, they try to square them as fast as possible."An investor has to be some-where between the two extremes choosing acceptable risk and optimal returns. When the trend is clear it is advisable to take a few more risks". In these volatile markets, an PMS/Investor should try and minimise his risk. He should pay more attention to capital preservation and appreciation in the long run.
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SECONDARY DATA COLLECTION

S. No 1. 2. 3. 4. Particulars Mega Rich New Toys and Tastes STOCKZILA Will the Rupee Float BRAINS*GUTS*MEGA BUCKS The Story of two young investors. 5. 6. 7. 8. 9. 10. Playing it safe in 1999 Investing for the New Millennium Join the House Hunt The Fine Art of Survival Save when you can, earn when you don't SHCIL-SHOCKED Business World Business India The Economic Times HT Investor HT Investor The ET Sources India Today Business Today Business Today Business India
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DATA ANALYSIS
1. From the sample of Investor & brokers/sub-brokers interviewed several facts about the investments environment in general and PMS in particular were brought to light. 2. I have obtained 40 respondents against proposed sample of 25. I have considered 35 responses (25 for investors & 10 for brokers/sub-brokers) for my project and rejected 6 which were either incomplete or misleading. 3. I have conducted 12 structured interview against (6 investors and 6 brokers/sub-brokers) sample proposed of 10.
ANALYSIS OF QUESTIONNAIRE (INVESTORS) PERSONAL QUESTIONS

QUESTION NO I. Out of 25 respondent to my questionnaire 8% (2 Nos) are from the age group of 18 to 30 years; 52% (13 No) are from the age group of 30 to 53 years; 24 (6 No) are from the age group of 53 to 65 years; 16% (4 Nos) are from age of more than 65 years . (I.P.P.1) QUESTION NO. 2 Out of 25 respondents to my questionnaire 4% (1No) are from income below 10000; 16% (4 Nos) are from income group of 10,000 and 20,000; 24% (6 Nos) are from income group of 50,000 and 100,000; 44% (11 Nos) are having income of more than 1,00,000 (I.P.P.2)
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QUESTION NO. 3 Out of 25 respondents 4% (1 No) are from supervisor category; 4% (1 Nos) are from lower management group; 32% (8 Nos) are from middle management group; 44% (11 Nos) are from upper management ; whereas only 12% (3Nos) are of them non-working. (I.P.P3) QUESTION NO.4 Out of 25 respondents 8% (2 Nos) are of them are under-graduate; 40% (10 Nos) are of them are graduate; 52% (13 Nos) are of them are postgraduate.(I.P.P.4)
ANALYSIS OF MAIN QUESTIONNAIRE (INVESTORS)

QUESTION NO. 1 All the respondents had been investing in the stock markets, but as a majority of their investment only 56% (14 Nos) have been investing in stock markets; 20% (5 Nos) of them playing it safe investing in debenture/FDS; 8% (2 Nos) of them investing in real estate; 4% (1 No) investing in gold; 4% (1 No) in saving account; 8% (2Nos) in other avenues. (I.Q.1) QUESTION NO.2 Although all the respondents had been investing in the stock market only 44% (11 Nos) of them ere very familiar about portfolio management schemes as a service; 48% (12 Nos) were somewhat familiar 8%; (2 Nos) were not familiar at all. (I.Q.2) QUESTION NO.3 Out of 25 respondents 36% (9 Nos) of them come to know about the PMS through advertisement in newspapers; 12% (3 Nos) of them come to know about the PMS through advertisement in magazines; A large %
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that is 40% (10 Nos) come to know from friends and acquaintance; 4% (1 Nos) come to know from direct mail; 8% (2 Nos) fall in other categories (which may also mean that they may not be aware at all.) (I.Q.3) QUESTION NO.4 People love to be safe which reflect in this analysis that is 76% (19 Nos of them invest less than 50% of resources in shares/Debentures/FDs). So 20% (5 Nos) invest less than 25% resources in shares/Deb/FDs; 56% (4 Nos) of them between 25 to 50% of resources in shares/Deb/FDs; 16% (4 Nos) of them invest between 50 to 75%; whereas only 8% (2 Nos) invest more than 75% of resources in shares/Deb/FDs.(I.Q.4) QUESTION NO.5 Out of 25 respondent 20% (5 Nos) opt for low risk; 44% (11 Nos) prefer medium risk; 36% (9 Nos) indulge in speculative/ high risk securities. (I.Q.5) QUESTION NO .6 From the ample of Investors interviewed 52% (13Nos) are very comfortable in investing in stock market; 125 (3 Nos) are somewhat comfortable; 125 (3 Nos ) are not very comfortable ; 24% (6 Nos) are not at all comfortable. (I.Q.6) QESTION NO .7 After the budget 1999-2000 announcement, market turned bullish, so the perception of the investors. 68% (17 Nos) believe that the market will rise in the long run; 12% (3 Nos) believe that the market will fall; 8% (2 Nos) believe that the market will remain at the same level; 12 % (2 Nos ) could not it. (I.Q.7)
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QUESTION NO.8 Every one wants good return in their investment which is reflected on the outcome in the questionnaire. 4% (1 No) is looking at below 25 %; whereas 52% (13 Nos) desire returns between 50 to 75%; 20% (5 Nos) also desire return above 75 %.(I.Q.8) QUESTION NO.9 Actual return is somewhat different than the future expectation. 20% (5 Nos) are getting it below 25%; 52% ( 13 Nos ) are getting it below 50% ( which is normally around 30%); 12 % ( 3 Nos are getting between 50 to 75 %; 4% ( 1 No) are getting it above 75%. (I.Q.9) QUESTION NO .10 All the respondents had been investing in the stock markets, 80% (20 Nos) of them for more than 5 years; 16% (4Nos) between 2 to 5 years; 4% (1 No) have been investing for than less a year.(I.Q.10) QUESTION NO.11 The range for investments one would like to make in PMS varied from a less than Rs. 2 lacs to a more than 20 lacs. 60% (15 Nos) is interested in upto 2 lacs; 20% (5 Nos) Between 2 to 5 lacs; 8% (2 Nos ) between 5 to 10 lacs; 8% (2 Nos ) between 10 to 20 lacs; whereas only 4% (1 Nos) is interested in more than 20 lacs; (I.Q.11) QUESTION NO .12 Commission is a tricky area, Charges are up to 20 to 28% (7Nos) are paying commission up to 5% (70% of those investing in PMS); 8% (2 Nos ) are paying between 5 to 10% ( 20% of those investing in PMS); 4% ( 1Nos) paying commission between 10 to 20 % (10% of those investing in PMS); 40% Of the persons interviewed are only investing in PMS.(I.Q.12)
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QUESTION NO..13 28% ( 7 Nos ) are satisfied about the returns from PMS (70% of those investing in PMS); 4% (1 No) are Not satisfied (10% of those investing in PMS); 8% (2 Nos) where not clear about it (20% of those investing in PMS); 40% of the persons interviewed are only investing in PMS. (I.Q.13) QUESTION NO.14 20% (5 Nos) are satisfied about the reports from PMS (50% of those investing in PMS); 16% (4 Nos) are not satisfied about the reports being sent to them (40% of those investing in PMS); 4% (1 Nos) are clear about it (10% of those investing in PMS); 40% of the persons interviewed are only investing in PMS. (I.Q.14) QUESTION NO .15 As far as the important reasons for people to invest in a PMS, the responses were capital gains - 36% (9 Nos); steady income - 28% (7 Nos); safety - 16% (4 Nos); liquidity - 20% (5 Nos). Thus capital appreciation in the form of return is the critical factor. (I.Q.15) QUESTION NO.16 Those investing in PMS (40% of the respondents) 20% (5 Nos) are willing to change (50% of those investing in PMS); 16% (4 Nos) are not interested in change (40% of those investing in PMS); 4% (1 Nos) are not sure of their mind (10% of those investing in PMS).(I.Q.16) QUESTION NO.17 72% (18 Nos) believe that a mutual fund is a better place to invest in than the firm or individual; 20% (5 Nos) believe it that the individual can manage his fund better than the PMS; 8% (2 Nos are not sure it). (I.Q.17)
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ANALYSIS OF QUESTIONNAIRE [BROKERS/SUB-BROKERS]: PERSONAL QUESTIONS

QUESTION NO .1 Out of 10 respondent to my questionnaire 10% (1 Nos) are from the age group of 18 to 30 years; 50% (5 Nos) are from the age group of 30 to 53 years; 20% (2 Nos) are from the age group of 53 to 65 years; 20% (2 Nos) are from age of more than 65 years.(B.P.P1) QUETSTION NO .2 60% (6 Nos) of those interviewed are brokers and 40% (4 Nos) are subbrokers. (B.P.P.2) QUESTION NO .1 100% (10 Nos) respondents refused to disclose the figure of their clients. (B.Q.1) QUESTION NO.2 The minimum time for which funds are accepted by portfolio managers is 1 year. Based on the performance of the portfolio manager, the clients may ask for the renewal of the contract. On an average, clients request the services for 1- years to 2 years. As per interview 10% (1 No) of them remain as clients; 80% (8 Nos) of them stated that the clients remain with them between 1-2 years. 10% (1 No) stated that the clients remain with them between 2-5 yeas. (B.Q.2) QUESTION NO.3 10% (1 No) invest upto 25% of their investment in speculative securities; 60% (6 Nos) Brokers/Sub-brokers invest about 25-50% of their investments in speculative securities; 20% (2 Nos) invest between 50-75% of their funds in speculative securities; 20% (2 Nos) of them invest more than 75% in speculative securities. (B.Q.3)
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QUESTION NO .4 20% (2 Nos) try to get between 15-30% of rate of return; where as 60% (6 Nos) try to get between 30-45% of rate of return; only 20% (2 Nos) try to get above 50 % (B.Q.4) QUESTION NO.5 30% (3 Nos) of Brokers/Sub-brokers charge upto 2% of commission on their investment; 10% (1 No) charge between 2-4% of commission; 20% (2 Nos) charge between 4-6% of commission; 20% (2 Nos) charge between 6-8% of commission; 20% (2 Nos) charge between 8-10% of commission.(B.Q.5) QUESTION No.6 60% (6 Nos) of them have in-house research center for their activities whereas 40% (4 Nos) of them don't have it. (B.Q.6) QUESTION NO .7 40% (4 Nos) believe that the market will rise; 20% (2 Nos) believe that the market will fall; 20% (2Nos) believe that the market will remain at the same level; 10% (1No) could not predict it. (B.Q.7) QUESTION NO .8 40% (4Nos) target businessman/corporate clients; 30% (3Nos) target senior executive; 20% (2Nos) target NRIs; 10% (1No) target retired executives; 10% (1No) target others. (B.Q.8) QUESTION NO .9 40% (4Nos) of respondents confirm that they keep common portfolio for all clients; 40% (4 Nos) keep common portfolio for a class of clients; 20% (2Nos) keep different portfolios for all clients. (B.Q.9)
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QUESTION NO .10 100% (10 Nos) respondents refused to disclose the figure of their scripts in their portfolios. (B.Q.10) QUESTION NO .11 30% (3 Nos) of brokers/sub-brokers said that they would like to invest part of their funds in Mutual funds; 20% (2Nos) said against it; 50% (5 Nos of them were not sure, whether they would invest in Mutual funds (B.Q.11)
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FINDINGS OF THE DISSERTATION :

The awareness level of investors about various portfolio management scheme is good.44% are very familiar about portfolio management schemes & 48% are somewhat familiar about various PM schemes. This takes the both the category to 92% (44+48).92% (44% through advertisement in newspaper + 12% through magazines + 40% through Friends & acquaintance + 4% through Direct Mail) of respondent are aware of various portfolio management schemes. Awareness level of investor about various parameters of portfolio. 92% believe a mutual fund is a better place to invest than firm or individual. From the structured interview conducted on Investors we found that the Majority of the investor are aware of institutions offering different portfolio management schemes. This fact is again confirmed when the investor listed of qualifies. The qualities in priority): 1. Honesty in dealing was most important. 3. Track Record. 5. High Return. 2 Reputations. 4. Safety of Portfolio. 6. Word of mouth & friends are given a lot of weight age.
It has been found out by about facts that the level of awareness level is good is being confirmed by fact, that we have now 252 mutual fund schemes are operating having very large following of investors. They have been faring better than individual investor. Since they are professionally managed than individual investor. They have large amount of investible investment at their disposal and can command market. Recently India investment fund -98 resulted in $4 billion of collection. The portfolio fund manager are performing better can be reinforced by secondary data that have collected. Business world - 22 December 1998 - Page No 30 - 33). TATA young citizens fund had returns of 20.05%, Birla advantage fund had 33.13% returns, Kothani Pioneer prima plus had 26.63% returns, Sun F&C value fund had an appreciation of 23.5%.
52% are getting return in the range of 25% - 50% & 12% are getting it between 50 - 75% ; 4% are even getting above 75%.People believe that mutual funds are
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good investment place, which offers better return than even the Sensex which had negative return of -18.05% last year. Where good mutual funds had returns between 20% - 22% (Business world, 22 December page No 30.Capital gains (36%) is the most important reasons for people to invest in a portfolio management services. Even though the markets are not stable & moving in either direction violently, portfolio management service providers have been able to generate good returns. The data collected from Brokers and sub-brokers on various parameter of PMS, we found that they variety of portfolio schemes for their clients , 40% keep same portfolio for their clients and 40% keep portfolio for a class of client as same and 20% provide tailor made portfolio schemes for their clients who are having high net worth. Portfolio management services target mainly businessmen and corporate. Senior executives, which includes (70% of respondents) 40%+30%) which has been again highlighted in structured interview. Businessmen are most difficult to get. To of them PMS has to offer special incentives in the form of additional services. PMS/Brokers/Services providers adopt different strategies to attract their clients. Some offers tailor made schemes, some use contacts of old customers. They offer different types of services to the old clients such as loan against shares, tax advices, periodicals & Newsletter, To attract clients they use advertisements, direct mail reference letter of existing clients even word of mouth plays important role. 70% of those investing in the portfolio management schemes feels satisfied and only 10% do not feel satisfied. Even the reports that they are receiving, 50% are satisfied and 40% are not satisfied about the reporting. 72% of those investing in stock market feel that a mutual fund is a better portfolio manager than an individual or a firm, this exposes acceptance level of PMS by investors. It all depends how you woo your clients & what kind of services you are offering & how you are targeting your clients. It has been found out by above facts that the level of awareness level is good can be confirmed by facts that we have 252 mutual fund schemes operating in
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the country reinforces they believe. They have been faring better than most individual investor and outperforming the Sensex , Nifty. This is due to their being professionally managed. They have large funds at their disposed. They have all sorts of research facilitate at their end. They are using latest software packages to predict future better than average investor. They even visit corporate houses and meet them personally to check for performance level of corporation. Now days most of them are hooked on to the internet for latest information on time to act fast and get better return for their clients. Due to professional environment, they keep on innovating ideas to attract new customers. They adopt various strategies to woo clients by offering better services than their competitors. Because of all these reason and others, customers are satisfied about the various parameters of PMS. My findings on Rate of Returns are being matched by secondary data where it is given that 70-80% of investment is invested high return securities. Safety and security of investment is 2nd major consideration, though there is difference of opinion about how much PMS are investing in speculative securities. PMS are investing 60% (playing it safe, 22 Dec '1998) of funds in shares is being reinforced from secondary data. PMS are getting good returns are crossed conformed by secondary data (playing it safe, 22 Dec '1998).
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RECOMMENDATIONS
1. The research has found that rate of return, capital gain and steady income taking into consideration the various attributes much, Honesty in dealers as most important. Reputation Track Record of PM are the most important reasons for people to invest in a portfolio management services. 2. What clients require is a package of services including tax planning & professional advices for their resources. If PMS is sold along with other services offered by a finance company, the number of takers would be substantial. This would help build a long term sustained relationship with customers. 3. PMS could be positioned separately for different segments. This calls for scientifically designed 'NICHE MARKETING' strategy targeted at offering specialized services to each segment. 4. Clients would not mind paying higher service charges. What matters to them utmost is the manner their portfolio is handled and services rendered. Apart from professional advice, ethics, timeliness of services and value for money is expected at large. 5. Most investors are shy because of some past losses suffered in the stock market gamble or became PMS restricts itself from offering any guarantee of returns. An effort to evoke trust based on the repute and track record of the company needs to be put to break the shell of investor conservatism. 6. The study observed various parameters of investment affecting investors and brokers and sub-brokers who are offering investment services including PMS. It is recommended that Kotak Mahindra Securities Pvt. Ltd.services who are already in the field of financial services and offer services as loan arrangement, ECB, working capital arrangement and Term Loans have large no of corporate clients and have dealings with high net worth individuals and senior executives of the corporates can easily get into the area of PMS. Besides this it has huge database of high-end investor and NRIs who invest in Indian prime markets and those who are already investors in the secondary market (from the data base of share transfer operation). All it needs to do is buy a BSE/NSE on-line terminal 56
and buy softwares which helps in research of securities. It does not require professionals who will be taking care those services since the directors of Kotak are from Banking segment, who have more than 25 years of experience. It need not get into NBFC's footprint since NBFC's not in favour with public. All it needs to achieve superior performance, it has to be different from the majority. It needs to discover and exploit exploit other PMS mistaken. As it is known fact no money manager can perform successful in all kinds of market. It has to find its own base and acceptable segment since there is no man for all seasons.
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CONCLUSION
Portfolio management as a concept is catching up in India, but there are segments that are still not aware of it. Some investors have burnt their fingers on more than one occasion because professional Investment help was not available with more and more companies taping the capital market, the investor is still ill equipped to handle the complexities of stock trading while mutual funds also amount to professional help in investing portfolio services are highly customized and personalized to suit each individuals set of priorities and needs. The portfolio manager under a power of attorney does all transactions in the individuals name. A portfolio manager does not guarantee run away profits as profits would be generally proportionate to the risk that is undertaken. Todays investor by and large has three major choice one has the choice of the mutual funds, two he can play on the primary market if he can assess it and three he has, be shrewd enough know the secondary market information imparted to investors helps them to shuffle their choice of portfolios. If an investor has the time and ability to analyze his own portfolio, he does do. He is prepared to take the risk or else he approached somebody. In India this realization will come once existing schemes have published their results. The existing players have not reported. Their performance as this aspect is done. A reasonable corpus to manage a portfolio has to make PMS attractive but the PMS has to create and strengthen a good research and analytical division. It will still take some time before Indian portfolio managers are able to offer schemes graded or risk like in the international markets.
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APPENDIX A
INVESTOR QUESTIONNAIRE PERSONAL QUESTIONS Q.I.P.P.1. How old are you? 1. <18 3. >30 & <=30 5. More than 65 Q.I.P.P.2. How much do you earn monthly? 1. <5,000 3. >10,000 & <20,000 5. >50,000 & < 1, 00,000 Q.I.P.P.3. What is your current designation? 1. Supervisor 3. Middle Management 5. Nonworking 2. Lower Management 4. Upper management 6. Others 2. >5,000 & <10,000 4. >20,000 & < 50,000 6. > 1, 00,000 2. >18 & < 4. >53 & <65
Q.I.P.P.4. What is your educational qualification? 1. Under-graduate 3. Post-graduate 2. Graduate 4. other
MAIN QUESTIONNARE Q. I.Q.1.Where do you invest your resource & (majority)? 1. Stock Market 3. Real Estate 5. Saving bank 2. Debenture /FDs 4. Gold 6. Others
Q. I.Q.2. Are you familiar with the portfolio manager schemes? 1. Very familiar 3. Not familiar 2. Somewhat familiar
I.Q.3. How did you come to know about the portfolio management schemes? 1. Advertisement in Newspapers 3. Friends & acquaintance 5. others 2. Advertisement in Magazines 4. Direct Mail
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I.Q.4. What percentage of resources you invest in shares/debenture/ FDs? 1. 0 to 25% 3. 50% to 75% 2. 25 to 50 4. More than 75%
I.Q.5. Indicate the extent of risk in investment that are you willing to take? 1. Low 3. High 2. Medium
I.Q.6. How comfortable are you investing in the stock market? 1. Very Comfortable. 3. Not very comfortable 2. Somewhat comfortable 4. Very uncomfortable
I.Q.7. What is your perception of the stock market index (BSE Sensex/Nifty) in the Long Run? 1. It will rise 3. It will remain at the same level 2. It will fall 4. Can't say
I.Q.8 What is the percentage of return per annum that you expect on your Investment in Portfolio management services? 1. 0 to 25% 3. 50% to 75% 2. 25 to 50% 4. More than 75%
I.Q.9. What is the actual return per annum you are getting? 1. 0 to 25% 3. 30 to 75%. 2. 25 to 50% 4. More than75%
I.Q.10. Since how long has been investing in the stock markets? 1. Less than 2 years 3. More than 5 years 2. 2 to 5 years
I.Q.11. What is the amount (in Rupees) that one would like to invest in a portfolio management services? 1. Upto 2 lacs 3. 5 to 10 lacs 5. More than 20 lacs. 2. 2 to 5 lacs 4. 10 to 20 lacs
I.Q.12. What are you paying as commission to portfolio service providers? 60
1. . 0 - 5%. 3. 10 - 20%
2. . 5 to 10% 4. . Not applicable
I.Q.13. Are/were you satisfied with the return from the PMS? 1. Satisfied 3. Can't Say 2. Not Satisfied 4. Not applicable
I.Q.14. Are/were you satisfied with the frequency and details of the reports from the portfolio management services? 1. Satisfied 3. Can't Say 2. Not Satisfied 4. Not applicable
I.Q.15. What do you think are the most important reasons for people to invest in a portfolio management services? 1. Capital gains 3. Safety 2. Steady income 4. Liquidity
I.Q.16. Would you prefer to shift your portfolio from the present manager to a mutual fund? 1. Yes 3. Can't Say 2. No 4. Not applicable
I.Q.17. Do you believe that a mutual fund is a better portfolio manager than an individual or a firm? 1. Yes 3. Can't say 2. No
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APPENDIX B
BROKERS/SUB BROKERS QUESTIONNAIRE PERSONAL QUESTIONS B.P.P.1. Age (years) of Brokers/Sub-Brokers? 1. <18 3. >30 & <53 5. More than 65 B.P.P.2. Brokers/Sub Brokers? 1. . Broker 2. Sub-Broker 2. >18 & < 30 4. . >53 & <65
MAIN QUESTIONNARE
B.Q.1. How many clients do you have? 1. 1 10 3. 20 50 2. 10 20 4. More than 50
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5. Can't say B.Q.2. What is the average duration for which clients request your services? 1. 1 year 3. 2 - 5 year 2. 1 - 2 year
B.Q.3. What is the %age of investments you have made in speculative securities? 1. 0 - 25% 3. 50 - 75% 2. 25 - 50% 4. 75 - 100%
B.Q.4. On an Average, what is the minimum rate of return you try to get? 1. . 0 - 15% 3. 30 - 45% 2. 15 - 30% 4. More than 50%
B.Q.5. What are your fees as professional portfolio managers? 1. 0 2 3. 4 6 5. 8 10 2. 2 4 4. 6 8
B.Q.6. Do you have an in-house research center? 1. Yes 2. No
B.Q.7. What is your expectation of the stock market index (BSC Sensex /Nifty) in the future? 1. . It will rise 3. Remain at the present level 2. It will fall 4. Can't say
B.Q.8. Which segment does your firm target for its clients? 1. Businessman/ Corporate 3. NRIs 5. Others B.Q.9. What is the variety in portfolios? 1. Common Portfolio for all clients 3. Different portfolios for all clients 2. Common portfolio class of clients 2. Senior Executives 4. Retired Executives
B.Q.10. What is the average number of scripts in a portfolio? 1. 1 10 3. 15 20 5. Can't Say 2. 10 15 4. More than 20.
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B.Q.11. Would you like to entrust a part or whole of the funds available with you to a mutual fund? 1. Yes 3. Can't Say 2. No
APPENDIX C
STRUCTURED INTERVIEW INVESTORS 1. 2. 3. 4. 5. 6. What according to you is the safest means of investment nowadays? What according to you is the most profitable means of investment nowadays? Have you even invested in a portfolio management scheme? Yes/No. if no then why not? What qualities do you look for in a portfolio manager? List in order of priority. Which companies have you heard of that offer PMS? Would you consider investing money with a new portfolio service provider. Yes/No? If No, then what would prompt you to invest in a new portfolio management services?
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APPENDIX D
STRUCTURED INTERVIEW - BROKERS/SUB-BROKERS
1. 2. 3. 4. 5. 6. 7. 8.
Indicate the percentage of clients falling in the different age categories? On an average, what % of the portfolio asset allocation is done in? What is the range of investment that you have made in speculative securities? On an average, what is the minimum rate of return you try to get? Which segment does the firm target for its clients? Does the company offer any guarantees of returns? What is the variety in portfolios? What according to the company are the prime motivators for the clients to invest in a PMS?
9.
What according to the company is the awareness level of there portfolio management schemes and which segment is most aware of PMS?
10. 11. 12.
What are the strategies adopted to attract customers? What is the method of evaluating a clients portfolio? How regularly is the portfolio monitored?
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13.
Does the company have its own broking ticket Yes/No?
14. What are the methods adopted for research? 15. Which software are used for research and monitoring purposes? 16. With the present uncertain stock market conditions, what measures are adopted to prevent the erosion of portfolio values
APPENDIX E
BIBLIOGRAPHY 1. The Investment Game - How to win. Prasanna Chandra 2. One upon Wall Street - Peter Lynch 3. Portfolio Management Handbook - Rebert A. Strong 4. Security Analysis and Portfolio Management - Donald E. Fishcer, Ronald J. Jordan 5. Portfolio Management - S.K. Barua, V. Raghunathan, J.R. Varma 6. Investment and Securities Markets in India - V.A. Avadhani 7. Prime Directory 1998 - Prithvi Haldea 8. Magazines a. Business India c. Capital Market e. Newspapers b.Business Today d Dalal Street Journal f. Economic Times
g. Business Standard 9. WEB SITES Registrar & Transfer Agents www.karvy.com Mutual Funds www.camsonline.com
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www.kotharipioneer.com www.birlamutual.com www.dundeefunds-India.com www.utittrustofindia.com NBFCs www.birlaglobat.com www.www.kotakmahindra.com www.hdfc-India.com Finance portals www.walletwatch.com www.equitymaster.com Insurance www.licofindia.com Stock Exchanges www.nse-India.com Credit Rating Agencies www.icra.com Financial Institutions www.icici.com Government www.reservebank.com www.nic.in Banks www.icicibank.com www.statebankofindia.com
www.pruiciciamc.com www.sbimf.com www.kotak.com
www.stockpulse.com www.indiainvest.com
www.bseindia.com www.crisil.com www.idbi.com www.sebi.gov.in
www.bankofpunjab.com www.witcapital.com
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