EXECUTIVE SUMMARY

The situation of the stock market is very dynamic and it changes every moment so,
its very difficult for the investors to decide which stock is a growth stock and
profitable for investment. Fundamental analysis is done for long term investment and
it analyzes the financial health, competitors and efficiency of management of the
company.
In order to keep investors safe from market fluctuations and provide them good return
by minimizing the risk, Portfolio Management is done. It is the selection of the
securities and their continuous shifting in the portfolio to optimize returns. The aim of
our project is to find out the scripts through the fundamental analysis which is to be
added in the portfolio and to prepare an optimum portfolio, which will provide
maximum return at a given level of risk to the investor.
Ten securities of CNX Midcap were considered on the basis of fundamental analysis
out of 14 securities to prepare the portfolio.
The Companies are:Amtek Auto, Apollo Hospitals Enterprises, Aurobindo Pharma, Cummins India Ltd,
Educomp Solutions, Exide Industries, LIC Housing Finance, Lupin, Indraprastha Gas,
IFCI, IDBI Bank, Power Finance Corporation, Punj Llyod and Titan Industries. Both
primary data and secondary data was considered. The data analysis was carried out
with the help of MS EXCEL.
After analyzing the portfolio it was found that Portfolio developed is not optimum
because risk return ratio of portfolio is greater than some of the securities but
according to the Jensen ratio done for evaluating portfolio shows that the portfolio
will perform good in the market. Portfolio beta is near about one. This means my
portfolio is as volatile as the market.
Investors are recommended to analyze the shareholding pattern of different companies
and then invest. Companies having FII and mutual fund holdings are considered to be
financially good companies. While preparing the portfolio, the investors should
consider Midcap companies also, if they are providing good returns as they are in
their growth stage and have chances of having good return in the future.

OBJECTIVES OF THE PROJECT

The market has very volatile nature and it is very difficult for the individuals to
identify which company is growing and in which stocks investments should be made.
Investors want to have minimum risk without sacrificing the return in the long term
investment. So, the objectives of our project are:
1.To provide basic idea of different stock market investment instruments to investor.
2. Liquidity i.e. Nearness To Money:
It is desirable to investor so as to take advantage of attractive opportunities
upcoming in the market.
3. To prepare optimum portfolio, which will provide maximum return at a given level
of risk to the investor.
4. To evaluate the portfolio by different means, to find out whether it is performing
good or bad.
5. Diversification:
The basic objective of building a portfolio is to reduce risk of loss of capital and /
or income by investing in various types of securities and over a wide range of
industries.

NEED FOR SELECTING THE PROJECT

To get the overall knowledge of securities and investment.

To know how the investment made in different securities minimizes the risk
and maximizes the returns.

To get the knowledge of different factors that affects the investment decision
of investors.
2

To know how different companies are managing their portfolio i.e. when and

in which sectors they are investing.

To know what is the need of appointing a Portfolio Manager and how does

him meets the needs of the various investors.

To get the knowledge about the role (played) and functions of portfolio
manager. To get the knowledge of investment decision and asset allocation.

SCOPE OF THE PROJECT

Portfolio management is an art of putting money in fairly safe, quite profitable and
reasonably in liquid form. An investors attempt to find the best combination of risk
and return is the first and usually the foremost goal. In choosing among different
investment opportunities the following aspects risk management should be
considered:
a) The selection of a level or risk and return that reflects the investors tolerance
for risk and desire for return, i.e. personal preferences.
b) The management of investment alternatives to expand the set of
opportunities available at the investors acceptable risk level. The very risk-averse
investor might choose to invest in mutual funds. The more risk-tolerant investor might
choose shares, if they offer higher returns. Portfolio management in India is still in its
infancy. An investor has to choose a portfolio according to his preferences. The first
preference normally goes to the necessities and comforts like purchasing a house or
domestic appliances. His second preference goes to some contractual obligations such
as life insurance or provident funds. The third preference goes to make a
provision for savings required for making day to day payments. The next
preference goes to short term investments such as UTI units and post office deposits
which provide easy liquidity. The last choice goes to investment in company shares

and debentures. There are number of choices and decisions to be taken on the basis of
the attributes of risk, return and tax benefits from these shares and debentures.
3

The final decision is taken on the basis of alternatives, attributes and

investor preferences. For most investors it is not possible to choose between
managing ones own portfolio. They can hire a professional manager to do it. The
professional managers provide a variety of services including diversification,
active portfolio management, liquid securities and performance of duties
associated with keeping track of investors money.

COMPANY PROFILE

COMPANY FACTS - INDIA INFOLINE

Registered Address
IIFL House, Sun Infotech Park,
Road No. 16, Plot No.B-23, MIDC,,Thane Industrial Estate, Wagle Estate,
Mumbai
Maharashtra
400604
Tel: 022-25806650
Fax: 022-25806654
Email: shareholders@indiainfoline.com
Website: http://www.indiainfoline.com
Group: Not Applicable
Registrars
Link Intime India Pvt. Ltd. C-13, Pannalal Silk Mill Compound,
LBS Marg,
Bhandup (West)

Tel: 022-25960320
Fax: 022-25960329
Email: rnt.helpdesk@linkintime.co.in
Website: http://www.linkintime.co.in

HISTORICAL DEVELOPMENT
India Infoline Limited (IIFL), incorporated in 18th October of the year 1995 as
Probity Research & Services Private Limited at Mumbai. The India Infoline is a onestop shop for information, advice as well as transaction execution of financial
services.
IIL along-with its subsidiaries caters to entire gamut of financial services including
equities and commodities broking, portfolio management, distribution of mutual
funds, life insurance products, home loans, personal loans, etc. Broking services are
offered under the 5paisa brand (offers broking services in the Cash and Derivatives
segments of the NSE as well as the Cash segment of the BSE). The company has
proven research capabilities and was rated by the Forbes as the best of web' and must
read for investors'. A network of 758 business locations spread over 346 cities across
India, facilitates the smooth acquisition and servicing of a large customer base.
India Infoline's research is available not just over the Internet but also on international
wire services like Bloomberg (Code: IILL), Thomson First Call and Internet
Securities where it is amongst the most read Indian brokers. The Company identified
the potential of the Internet to cater to a mass retail segment and transformed its
business model from providing information services to institutional customers to retail
customers. Hence IIL launched its Internet portal, www.indiainfoline.com in May of
the year 1999 and started providing news and market information, independent
research, interviews with business leaders and other specialized features.
IIL was converted into a Public Limited Company in 28th April of the year 2000 and
the name of the Company was changed to Probity Research & Services Limited. The
name of the company was changed to India Infoline.com Limited in 23rd May of the
year 2000. During 23rd March of the year 2001, again the name was changed as India
Infoline Limited.
IIL acquired 100% shares of Agri Marketing Services Limited during March of the
year 2000. In the year 2000, IIL leveraged its position as a provider of financial
information and analysis by diversifying into transactional services, primarily for
online trading in shares and securities and online as well as offline distribution of
personal financial products, like mutual funds and RBI Bonds. These activities are
carried on through the wholly owned subsidiaries. The broking service was launched
under the brand name of 5paisa through our subsidiary, India Infoline Securities

Private Limited and www.5paisa.com, the e-broking portal, was launched for online
trading in June of the year 2000.
In December of the year 2000, India Infoline Insurance Services Limited (subsidiary)
became a corporate agent for ICICI Prudential Life Insurance Company Limited.
In the year 2004, the company launched commodities broking through its subsidiary
India Infoline Commodities Private Limited. Also received a license for Portfolio
Management Services from SEBI for broking subsidiary.
During the year 2006, the company received the requisite prior approval from The
Securities and Exchange Board of India for its proposed merger of India Infoline
Securities Private Limited (IISPL), a wholly owned subsidiary with itself. It had
earlier received in-principle approval from National Stock Exchange and The Stock
Exchange, Mumbai.
In January of the year 2007, the company entered into an alliance with Bank of
Baroda for providing Brokerage Platform, besides research and analysis services to
the bank's customers. India Infoline awarded the Best Broker in India' by Finance
Asia. This was a result of Finance Asia's annual look at the best financial services
firms in each country around Asia for the period from June 2007 to May 2008.
During March of the year 2008, India Infoline's institutional broking arm IIFL,
partnered with Auerbach Grayson & Company, Inc., a New York-based brokerage
firm to offer US investors premium access to investing in India's capital markets.
Auerbach Grayson specializes in providing global trade execution and exclusive
research to U.S. institutional investors. As of July 2008, the company received the inprinciple approval for the insurance broking license from IRDA.
About IIFL

The IIFL (India Infoline) group, comprising the holding company, India Infoline
Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of Indias
premier providers of financial services.
IIFL offers advice and execution platform for the entire range of financial services
covering products ranging from Equities and derivatives, Commodities, Wealth
7

management, Asset management, Insurance, Fixed deposits, Loans, Investment

Banking, Gold bonds and other small savings instruments.
IIFLhave a presence in:
Equities our core offering, gives us a leading market share in both retail and
institutional segments. Over a million retail customers rely on our research, as do
leading FIIs and MFs that invest billions.
Private Wealth Management services cater to over 2500 families who have
trusted us with close to Rs 25,000 crores ($ 5bn) of assets for advice.
Investment Banking services are for corporate looking to raise capital. Our forte
is Equity Capital Markets, where we have executed several marquee transactions.
Credit & Finance focuses on secured mortgages and consumer loans. Our high
quality loan book of over Rs. 6,200 crores ($ 1.2bn) is backed by strong capital
adequacy of approximately 20%.
IIFL Mutual Fund made an impressive beginning in FY12, with lowest charge
Nifty ETF. Other products include Fixed Maturity Plans.
Life Insurance, Pension and other Financial Products, on open architecture
complete our product suite to help customers build a balanced portfolio.
IIFL has received membership of the Colombo Stock Exchange becoming the first
foreign broker to enter Sri Lanka. IIFL owns and manages the website,
www.indiainfoline.com, which is one of Indias leading online destinations for
personal finance, stock markets, economy and business. IIFL has been awarded the
Best Broker, India by Finance Asia and the Most improved brokerage, India
in the Asia Money polls. India Infoline was also adjudged as Fastest Growing
Equity Broking House - Large firms by Dun & Bradstreet. A forerunner in the
field of equity research, IIFLs research is acknowledged by none other than Forbes
8

as Best of the Web and a must read for investors in Asia.

IIFL is a listed company with a consolidated group net worth of about Rs 1,800
crores. The income and net profit during FY2010-11 were Rs. 14.7 bn and Rs. 2.1
bn respectively.
The Group has a consistent and uninterrupted track record of profits and dividends
since its listing in 2005. The company is listed on both Exchanges and also trades
in the derivatives segment.
IIFLs Crisil and ICRA Rating for short term is top rated as CRISIL A1+ and ICRA
(A1+) respectively. For long term, IIFL has been rated ICRA (AA-) by ICRA and
CRISIL AA-/Stable by CRISIL indicating high degree of safety for timely
servicing of financial obligations.
IIFL is near you physically: IIFL are present in every nook and cranny of the
country, with over 3,000 business locations across 500 cities in India. You can
reach IIFL in a variety of ways, online, over the phone and through branches. All
offices are connected with the corporate office in Mumbai with cutting edge
networking technology. The group caters to a customer base of about a million
customers.
.

ACHIEVEMENTS & FINANCIAL RESULTS

ON 30 JULY 2012

The board meeting of Fiberweb India will be held on 30 July 2012 to consider and
approve the audited annual accounts of the company for the year ended 31 March
2012 and to consider and take on record the un-audited financial results (provisional)
for the first quarter ended 30 June 2012.
The board will also consider the reappointment of P V Sheth as chairman & managing
director and P S Krishnan as executive director (whole time) of the company.

INDIA INFOLINE NET DOUBLES TO RS 60 CRORE

Brokerage firm India Infoline reported a strong year-on-year growth in revenues and
net profit for the quarter ended December 2009. However, sequential growth was
muted despite the company clocking a higher daily average turnover in its equity
segment, and improving its market share on the National Stock Exchange (NSE)
For the December quarter, it reported an income of Rs 319.5 crore, up
39% year-on-year and up 2% sequentially. Quarterly net profit stood at Rs
59.5 crore, up 100% year-on-year and up 2.6% quarter-on-quarter. The
companys quarterly operating income declined 10% sequentially to Rs
112.9 crore.
During the last quarter, we were able to consolidate our competitive
positioning across multiple business lines, said Nirmal Jain, chairman
and managing director, India Infoline. Also, our customer-centric
approach has helped us in further gaining equities market share. We
continue to invest in people as our key strategy for future growth, he
said.
The companys average daily equities volumes during the quarter was Rs
3,755 crore as compared to Rs 3,336 crore in the previous quarter, a rise
of 13%. Market share on the NSE for the quarter under review rose to
10

3.89% as against 3.64% in the previous quarter.

Average daily turnover in the commodities business touched Rs 436
crore during the quarter, up 75.1% year-on-year and 20% quarter-onquarter. The loan book stood at Rs 1,200 crore, as on December 31 2009,
comprising largely of secured lending with mortgages (47% of the book),
followed by margin funding, loan against shares and personal loans. It has
also been providing funding for public issues. For the current quarter, the
company expects accelerated growth in the corporate and retail lending
book on the back of improved macroeconomic scenario.
India Infoline executive director R Venkataraman said that on a q-o-q
basis, they have seen a sales growth of around 1.8%. The growth was
broadly the same q-o-q although the business mix has changed

11

BALANCE SHEET OF INDIA INFOLINE ---------- in rs. cr. ------Mar '12

Mar '11

Mar '10

12 mths

12 mths

12 mths

Total Share Capital

57.80

57.28

57.04

Equity Share Capital

57.80

57.28

57.04

Share Application Money

0.00

0.33

0.40

Preference Share Capital

0.00

0.00

0.00

Reserves

1,219.48

1,031.36

1,050.67

Revaluation Reserves

0.00

0.00

0.00

Networth

1,277.28

1,088.97

1,108.11

Secured Loans

16.80

0.56

1.17

Unsecured Loans

0.00

465.00

496.58

Total Debt

16.80

465.56

497.75

Total Liabilities

1,294.08

1,554.53

1,605.86

Mar '12

Mar '11

Mar '10

12 mths

12 mths

12 mths

Gross Block

130.39

122.33

108.83

Less: Accum. Depreciation

104.28

83.25

60.63

Net Block

26.11

39.08

48.20

Capital Work in Progress

0.11

0.92

1.75

Investments

1,209.26

1,000.09

1,104.22

SOURCES OF FUNDS

APPLICATION OF FUNDS

12

Inventories

39.54

53.22

53.76

Sundry Debtors

252.90

289.46

577.50

Cash and Bank Balance

457.82

358.06

309.86

Total Current Assets

750.26

700.74

941.12

Loans and Advances

259.54

507.02

516.71

Fixed Deposits

0.00

268.72

251.98

Total CA, Loans & Advances

1,009.80

1,476.48

1,709.81

Deffered Credit

0.00

0.00

0.00

Current Liabilities

947.27

961.65

1,025.81

Provisions

3.92

0.41

232.31

Total CL & Provisions

951.19

962.06

1,258.12

Net Current Assets

58.61

514.42

451.69

Miscellaneous Expenses

0.00

0.00

0.00

Total Assets

1,294.09

1,554.51

1,605.86

Contingent Liabilities

12.92

2,090.56

24.17

Book Value (Rs)

44.19

38.01

38.84

Profit & Loss account of India Infoline

------------------- in Rs. Cr. ------------------Mar '12

Mar '11

Mar '10

12 mths

12 mths

12 mths

INCOME

13

Sales Turnover

548.55

698.95

665.99

Excise Duty

0.00

0.00

0.00

Net Sales

548.55

698.95

665.99

Other Income

90.45

100.61

32.20

Stock Adjustments

0.00

0.00

0.00

Total Income

639.00

799.56

698.19

Raw Materials

0.00

0.00

0.00

Power & Fuel Cost

0.00

0.00

0.00

Employee Cost

207.07

188.53

162.62

Other Manufacturing Expenses

0.00

17.83

14.52

Selling and Admin Expenses

0.00

250.12

205.75

Miscellaneous Expenses

287.90

55.40

36.25

Preoperative Exp Capitalised

0.00

0.00

0.00

Total Expenses

494.97

511.88

419.14

Mar '12

Mar '11

Mar '10

12 mths

12 mths

12 mths

Operating Profit

53.58

187.07

246.85

PBDIT

144.03

287.68

279.05

Interest

37.86

90.34

13.88

PBDT

106.17

197.34

265.17

Depreciation

31.44

24.08

31.86

Other Written Off

0.00

0.00

0.00

Profit Before Tax

74.73

173.26

233.31

Extra-ordinary items

-0.07

-0.76

-3.96

PBT (Post Extra-ord Items)

74.66

172.50

229.35

EXPENDITURE

14

Tax

11.36

50.14

77.34

Reported Net Profit

63.30

122.36

152.02

Total Value Addition

494.98

511.88

419.14

Preference Dividend

0.00

0.00

0.00

Equity Dividend

43.36

85.92

85.20

Corporate Dividend Tax

7.03

12.76

14.48

Shares in issue (lakhs)

2,890.24

2,864.11

2,852.15

Earning Per Share (Rs)

2.19

4.27

5.33

Equity Dividend (%)

75.00

150.00

150.00

Book Value (Rs)

44.19

38.01

38.84

PER SHARE DATA (ANNUALISED)

Yearly Results of India Infoline

------------------- in Rs. Cr. ------------------Mar '12

Mar '11

Mar '10

Sales Turnover

603.23

729.54

616.11

Other Income

1.18

0.37

56.33

Total Income

604.42

729.91

672.44

Total Expenses

495.84

516.32

395.19

Operating Profit

107.39

213.22

220.92
15

Profit On Sale Of Assets

--

--

--

Profit On Sale Of Investments

--

--

--

Gain/Loss On Foreign Exchange

--

--

--

VRS Adjustment

--

--

--

Other Extraordinary Income/Expenses

--

--

--

Total Extraordinary Income/Expenses

14.36

--

-29.04

Tax On Extraordinary Items

--

--

--

Net Extra Ordinary Income/Expenses

--

--

--

Gross Profit

108.57

213.59

277.25

Interest

16.77

16.25

21.16

PBDT

106.17

197.34

227.05

Depreciation

31.44

24.08

19.44

Depreciation On Revaluation Of Assets

--

--

--

PBT

74.73

173.26

207.61

Tax

11.43

50.90

78.92

Net Profit

63.30

122.36

128.69

Prior Years Income/Expenses

--

--

--

--

--

--

Dividend

--

--

--

Dividend Tax

--

--

--

Dividend (%)

--

--

--

Earnings Per Share

2.19

4.27

22.54

Book Value

--

--

--

Equity

57.80

57.28

57.10

Depreciation for Previous Years Written Back/

Provided

16

Reserves

1,219.48

1,031.69

972.84

Face Value

2.00

2.00

10.00

Cash Flow of India Infoline

------------------- in Rs. Cr. ------------------Mar '12

Mar '11

Mar '10

12 mths

12 mths

12 mths

Net Profit Before Tax

74.72

173.26

233.31

Net Cash From Operating Activities

429.34

220.16

5.12

-71.86

105.10

-265.62

-260.31

392.08

-168.97

64.95

131.59

Opening Cash & Cash Equivalents

626.79

561.84

430.25

Closing Cash & Cash Equivalents

457.82

626.79

561.84

Net Cash (used in)/from

Investing Activities

Net Cash (used in)/from Financing Activities -526.44

Net (decrease)/increase In Cash and Cash
Equivalents

17

LISTING DETAILS - INDIA INFOLINE

Key Dates
Year Ending Month

Mar

AGM Date (Month)

Aug

Book Closure Date (Month)

Aug

LISTING INFORMATION
Face Value Of Equity Shares

Market Lot Of Equity Shares

BSE Code

532636

NSE Code

INDIAINFO

BSE Group

N.A.

Whether The Company Forms A Part Of The Following Indices

Sensex

No

Nifty

No

BSE-100

No
18

BSE-200

Yes

S&P CNX 500

Yes

CNX Midcap

No

CNX FMCG

No

Listing On

Listed On The Stock Exchange, Mumbai,

National Stock Exchange of India Ltd.

ORGANISATIONAL CHART OF IIFL

19

Compliance, RM
CEO, Nirmal Jain

CIO, SB
COO, Narendra Jain

Director, Sunil kaul

Credit & Finance, PR

Executive Director,RV

Director, A Purwar
Institutional Equities,
HN
Insurance Distribution,
MK

Director,Kranti Sinha

International
Operations,BP
Investment
Banking,NG

Director, Nilesh
Vikamsey

Offshore Asset, DP
Human Resource, PM
Retail Broking, PP
Wealth Management,
KB

LIST OF COMPETITORS
COMPETITION
NAME

LAST

MARKET CAP. SALES

NET

PRICE

(RS. CR.)

PROFIT

TURNOVER

20

INDIABULLS

209.65

6,542.07

2,929.26

723.79

NETWORK 18

30.80

3,223.01

80.52

-114.17

EDELWEISS FIN

30.00

2,277.69

206.95

68.64

INDIA INFOLINE

60.00

1,734.70

603.23

63.30

DELTA CORP

69.60

1,558.47

1.17

-0.71

MOTILAL OSWAL F

105.05

1,524.52

46.43

56.30

SKS MICROFIN

120.50

1,303.95

435.70

-1,360.60

PILANI INVEST

1,460.00

1,154.68

47.49

42.76

FUTURE CAPITAL

153.50

994.66

238.54

55.26

GEOJIT BNP

21.10

481.84

201.01

39.72

KIRLOSKAR BROTH

810.00

428.39

155.99

130.92

NALWA SONS INV

725.00

372.37

18.66

15.64

DB (INT) STOCK

97.05

339.68

12.07

2.40

THE BYKE HOSP

168.65

338.12

48.94

2.43

MONEY MATTERS

93.90

327.59

571.51

40.27

CONSOL FINVEST

41.65

134.64

5.28

3.63

MICROSEC FIN

27.70

88.12

22.82

10.91

INTRODUCTION TO GOLD LOAN

21

Gold loan or loan against gold is the easiest and quickest way for servicing your
financial needs. To avail a gold loan, all you need to do is pledge your gold ornaments
with us and we would provide you with a loan amount as per the market value of your
gold. Unlike other loans, gold loan does not require you to provide any income or
salary proof. Moreover, it has comparatively lower interest rates; requires lesser
documentation, and hence is processed in lesser time.
We at IIFL provide maximum loan against your gold at lowest interest rates. We have
a strong presence Pan-India and have serviced a large number of customers in a very
short span. We offer different types of schemes as per your requirement and

convenience. Following are the main features of our loans :Loan amount ranges from min Rs 5,000 to max Rs 10,00,000
Tenor for loans ranges from 3 months to 12 months
Loan can be paid back on a monthly or quarterly basis
Interest / Loan Amount due can be paid at any of our Gold Loan branches panIndia
Minimal amount of paperwork and documentation is required
Loan gets processed in as low as 5 minutes
Variety of schemes are available to chose from
Your Gold is insured and secured safely with us in fire and burglary proof vaults
GOLD LOAN SCHEMES
IIFL GOLD LOAN SCHEMES
Scheme Name Value (per gram) Interest (% p.a.)
JALDI LOAN RS. 1320/- 12%
READY MONEY RS.1670/- 20%
LOAN LAKSHMI RS.1900/- 25%
FAST TRACK RS.2010/- 28%

IIFL GOLD LOAN Key features of Gold Loan:

*Loan disbursal in 5 minutes
*Loans starts from 5000 to 1 Crore
*Minimal documentation and credit assessment requirements
*High quality customer service in short response time
*Evaluation of gold ornaments takes place in house.
22

*Safety of Gold Ornaments: All branches as equipped with Strong Rooms for keeping
safe custody of Gold Ornaments
*No processing fees
*Pre-payment option-without any penalty
IMPORTANT INFORMATION

1.What is a Gold Loan?

Gold loan or loan against gold is a secured loan in which a customer pledges his/her gold
ornaments as collateral with a gold loan company and the company in turn gives a loan
amount as per the market value of gold to the customer. It is a very quick and easy way of
fulfilling ones financial needs as compared to the other kinds of loans.

2.Why should I take a Gold Loan from IIFL?

The advantages of taking gold loan from IIFL include

Minimal paper work and documentation

Very low processing time (few minutes)
Zero processing fee
Low Interest Rate
Instant disbursal of loan
Security and Insurance of Gold Pledged
3.Am I eligible to avail a gold loan?
Any person salaried/non-salaried/self-employed/student of 21 years of Age or above having
gold of purity of 18 karat or above is eligible to avail a gold loan from us.

4.What security/collateral do I need to provide to avail such a loan?

23

Any kind of jewellery/ornament made of gold of purity of 18 karat or above can be

provided as security to avail such loan.

5.Do I need to provide any documents to avail a gold loan?

A proof of identification in the form of Voters ID/PAN/Passport No./Driving license and a
proof of address would be required to avail a gold loan from us.

6.What is the maximum loan amount that I can take?

You can avail a maximum loan of up to 60% of the market value of your gold. Market value
of your gold is calculated according to the per gram market rate of gold on the day of loan
application.
7.How is the Market Value of my gold jewellery/ornaments calculated?
Market value of your gold is calculated according to the per gram market rate of gold on the
day of loan application. Only the gold part of ornament /jewellery is used for gold weight
calculations; other metals and stones or gems studded on the ornament/jewellery are
excluded from the calculations.
8.What is the tenor of these loans?
Minimum tenor is three months while the maximum is twelve months.
9.How long does it take to avail a gold loan?
The total process of loan disbursal gets over in a few minutes if the customer provides all
the requirements. Once the customer pledges the gold ornaments and submits the required
documents, our staff does all the required paperwork and disburses the loan as quickly as
possible.

10.What is the processing fee involved to avail such a loan?

No processing fee is involved in availing such a loan.

24

11.What is the guarantee of safety of my ornaments/jewellery pledged with IIFL?

Gold ornaments pledged by you are secured in a fire and burglary proof vault in our Gold
Loan branch. Besides, the branch is under electronic surveillance and guarded by security all
the time. Moreover, the pledged ornaments are covered by insurance. So your gold is
completely safe with us.
12.Can I foreclose my loan account / Can I close my loan account before its tenor?
What are the charges involved in such a case?
Yes, you have an option to foreclose your account where you can pay-back the loan amount
before it's tenor and release your gold from the branch. No extra charges are involved in
such foreclosure apart from normal interest rates till the date of foreclose. However, a
minimum interest of seven days will be charged in case you wish to foreclose your account
before seven days of the date of availing the gold loan.

13.Can I make part payment of my loan amount?

Yes, you can make a part payment where you can pay-back a part of the total loan amount.
Here, you will get an advantage of future interest being charged only on the balance
Principal amount left after part-payment. Moreover, you may chose to release a part of
your gold ornaments/jewellery as per the amount of loan paid back.
14.Can I part release my gold?
Yes, you can part release your gold but you would have to pay-back a part of the loan
amount as per the value of gold to be released.
15.Can I pay my loan amount or interest at any of the PAN-India IIFL gold loan
branches?
Yes, you can pay-back your loan amount or interest due at any of the Pan-India
IIFL-Gold Loan branches. However, to redeem your gold ornaments/jewellery, you
will have to visit the branch from which the loan was availed.

25

INTRODUCTION TO PORTFOLIO MANAGEMENT

Investing in securities such as shares, debenture and bonds is profitable as well as
exciting. Investing in financial securities is now considered to be one of the best
avenues for investing ones savings while it is acknowledged to be one of the most
risky avenues of investment. It is rare to find investors investing their entire funds or
savings in a single security. Instead, they tend to invest in a group of securities. Such a
group of securities is called a portfolio. Creation of a portfolio helps to reduce risk
without sacrificing returns. Portfolio Management deals with the analysis of
individual securities as well as with the theory and practice of optimally combining
securities into portfolios. An investor who understands the fundamental principles and
analytical aspects of portfolio management has a better chance of success.

WHAT IS PORTFOLIO MANAGEMENT

An investor considering investment in securities is faced with the problem of
choosing from among a large number of securities. His choice depends upon the riskreturn characteristics of individual securities. He would attempt to choose the most
desirable securities and like to allocate his funds over this group of securities. Again
he is faced with the problem of deciding which securities to be held and how much to
invest in each. The investor faces an infinite number of possible portfolios or group of
securities.
As the economic and financial environment keeps changing, the risk-return
characteristics of individual securities as well as portfolios also change. This calls for
periodic review and revision of investment portfolios of investors. An investor invests
his funds in a portfolio expecting to get a good return consistent with the risk that he
has to bear. The return realized from the portfolio has to be measured and the
performance of the portfolio has to be evaluated. Portfolio Management comprises all
the processes in the creation and maintenance of an investment portfolio. It deals
specifically with security analysis, portfolio analysis, portfolio selection, portfolio
revision, and portfolio evaluation. Portfolio Management is a complex process which
tries to make investment activity more rewarding and less risky.
26

A person making an investment expects to get some return from the investment in the
future. But, as the future is uncertain, so is the future expected return. It is this
uncertainty associated with the returns from an investment that reduces risk into an
investment. The total variability in returns of a security represents the total risk of that
security. Systematic and Unsystematic Risk are the two components of total risk.
Thus, Total Risk = Systematic Risk + Unsystematic Risk The impact of economic,
political and social changes on the performance of companies and thereby on their
stock prices caused by such system wide factors is referred to as systematic risk.
Systematic Risk is further subdivided into interest rate risk, market risk, and
purchasing power risk.
When variability of returns occurs because of company issuing factors such as raw
material scarcity, labour strike, management inefficiency, it is known as Unsystematic
Risk. The systematic risk of a security is measured by a statistical measure called
Beta. The input data required for the calculation of beta are the historical data of
returns of the individual security as well as the returns of a representive stock market
index.

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:
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
27

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 clients 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 whose valuations are low? A passive strategy usually involves buying
28

securities to match a preselected market index. Alternatively, a portfolio can be set up

to match the investors 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.

29

PHASES OF PORTFOLIO MANAGEMENT

Security Analysis
Portfolio Analysis
Portfolio Selection
Portfolio Revision
Portfolio Evaluation

SECURITY ANALYSIS
(a) Fundamental analysis: This analysis concentrates on the fundamental factors
affecting the company such as EPS (Earning per share) of the company, the dividend
payout ratio, competition faced by the company, market share, quality of management
etc.
(b) Technical analysis: The past movement in the prices of shares is studied to
identify trends and patterns and then tries to predict the future price movement.
Current market price is compared with the future predicted price to determine the
mispricing. Technical analysis concentrates on price movements and ignores the
fundamentals of the shares.
(c) Efficient market hypothesis: This is comparatively more recent approach. This
approach holds that market prices instantaneously and fully reflect all relevant
available information. It means that the market prices will always be equal to the
intrinsic value.
PORTFOLIO ANALYSIS
A portfolio is a group of securities held together as investment. It is an attempt to
spread the risk allover. The return & risk of each portfolio has to be calculated
mathematically and expressed quantitatively. Portfolio analysis phase of portfolio
management consists of identifying the range of possible portfolios that can be
constituted from a given set of securities and calculating their risk for further
analysis.
PORTFOLIO SELECTION
The goal of portfolio construction is to generate a portfolio that provides the highest
returns at a given level of risk. Harry Markowitzh portfolio theory provides both the
conceptual framework and the analytical tools for determining the optimal portfolio
in a disciplined and objective way.
PORTFOLIO REVISION
The investor/portfolio manager has to constantly monitor the portfolio to ensure that
it continues to be optimal. As the economy and financial markets are highly volatile
dynamic changes take place almost daily. As time passes securities which were once
attractive may cease to be so. New securities with anticipation of high returns and
low risk may emerge.
30

PORTFOLIO EVALUATION
Portfolio evaluation is the process, which is concerned with assessing the
performance of the portfolio over a selected period of time in terms of return & risk.
The evaluation provides the necessary feedback for better designing of portfolio the
next time around.

MEASUREMENT OF RISK
Risk refers to the possibility that the actual outcome of an investment will differ from
the expected outcome. In other words we can say that risk refers to variability or
dispersion. If any investment is said to invariable it means that it is totally risk free.
Whenever we calculate the mean returns of an investment we also need to calculate
the variability in the returns.
PERFORMANCE MEASURES OF MUTUAL FUNDS

Mutual Fund industry today, with about 34 players and more than five hundred
schemes, is one of the most preferred investment avenues in India. However,
with a plethora of schemes to choose from, the retail investor faces problems
in selecting funds. Factors such as investment strategy and management style
are qualitative, but the funds record is an important indicator too. Though past

performance alone can not be indicative of future

performance, it is, frankly, the only quantitative way to judge how good a fund
is at present.
Therefore, there is a need to correctly assess the past performance of different
mutual funds.
Worldwide, good mutual fund companies over are known by their AMCs and
this fame is directly linked to their superior stock selection skills. For mutual
funds to grow, AMCs must be held accountable for their selection of stocks. In
other words, there must be some performance indicator that will reveal the

quality of stock selection of various AMCs.

Return alone should not be considered as the basis of measurement of the
performance of a mutual fund scheme, it should also include the risk taken by
the fund manager because different funds will have different levels of risk
attached to them. Risk associated with a fund, in a general, can be defined as
variability or fluctuations in the returns generated by it. The higher the
fluctuations in the returns of a fund during a given period, higher will be the
risk associated with it. These fluctuations in the returns generated by a fund
31

are resultant of two guiding forces. First, general market fluctuations, which
affect all the securities present in the market, called market risk or systematic
risk and second, fluctuations due to specific securities present in the portfolio
of the fund, called unsystematic risk. The Total Risk of a given fund is sum of
these two and is measured in terms of standard deviation of returns of the
fund. Systematic risk, on the other hand, is measured in terms of Beta, which
represents fluctuations in the NAV of the fund vis--vis market. The more
responsive the NAV of a mutual fund is to the changes in the market; higher
will be its beta. Beta is calculated by relating the returns on a mutual fund with
the returns in the market. While unsystematic risk can be diversified through

investments in a number of instruments, systematic risk can not.

By using the risk return relationship, we try to assess the competitive strength
of the mutual funds vis--vis one another in a better way.
In order to determine the risk-adjusted returns of investment portfolios, several
eminent authors have worked since 1960s to develop composite performance
indices to evaluate a portfolio by comparing alternative portfolios within a
particular risk class. The most important and widely used measures of
performance are:

The Treynor Measure

The Sharpe Measure
Jenson Model

THE TREYNOR MEASURE

Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above
risk free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and
systematic risk associated with it (beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the
fund.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and
negative Treynor's Index is an indication of unfavorable performance.
32

THE SHARPE MEASURE

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which
is a ratio of returns generated by the fund over and above risk free rate of return and
the total risk associated with it.
According to Sharpe, it is the total risk of the fund that the investors are concerned
about. So, the model evaluates funds on the basis of reward per unit of total risk.
Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Where, Si is standard deviation of the fund.
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of
a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.

JENSON MODEL
Jenson's model proposes another risk adjusted performance measure. This measure
was developed by Michael Jenson and is sometimes referred to as the Differential
Return Method.
This measure involves evaluation of the returns that the fund has generated vs. the
returns actually expected out of the fund given the level of its systematic risk.
The surplus between the two returns is called Alpha, which measures the performance
of a fund compared with the actual returns over the period.
Required return of a fund at a given level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it,
alpha can be obtained by subtracting required return from the actual return of the
fund.
Higher alpha represents superior performance of the fund and vice versa.
Limitation of this model is that it considers only systematic risk not the entire risk
associated with the fund and an ordinary investor can not mitigate unsystematic risk,
as his knowledge of market is primitive.

33

PORTFOLIO DESIGN

Before designing a portfolio one will have to know the intention of the investor or the
returns that the investor is expecting from his investment. This will help in adjusting
the amount of risk. This becomes an important point from the point of view of the
portfolio designer because if the investor will be ready to take more risk at the same
time he will also get more returns. From the above discussion we can conclude that
the investors can be of the following three types:
1. Investors willing to take minimum risk and at the same time are also expecting
minimum returns.
2. Investors willing to take moderate risk and at the same time are also expecting
moderate returns.
3. Investors willing to take maximum risk and at the same time are also expecting
maximum returns.

34

PORTFOLIO AGE RELATIONSHIP

These aren't hard
AGE
below 30

PORTFOLIO

and fast

80% in equity

allocations, just

10% in cash

guidelines to get
you one think

30 to 40

10% in fixed income

about how his/her

70% in equity

portfolio should
look.

10% in cash
20% in fixed income
40 to 50

60% in equity
10% in cash
30% in fixed income

50 to 60

50% in equity
10% in cash
40% in fixed income

above 60

40% in equity
10% in cash
50% in fixed income

THEORETICAL BACKGROUND

35

INVESTMENT OPTIONS:
Savings form an important part of the economy of any nation. With the savings
invested in various options available to the people, the money acts as the driver for
growth of the country. Indian financial scene too presents a plethora of avenues to the
investors. Though certainly not the best or deepest of markets in the world, it has
reasonable options for an ordinary man to invest his savings. Let us examine several
of them:
BANKS
Considered as the safest of all options, banks have been the roots of the financial
systems in India. Promoted as the means to social development, banks in India have
indeed played an important role in the rural upliftment. For an ordinary person
though, they have acted as the safest investment avenue wherein a person deposits
money and earns interest on it. The two main modes of investment in banks, savings
accounts and Fixed deposits have been effectively used by one and all. However,
today the interest rate structure in the country is headed southwards, keeping in line
with global trends. With the banks offering little above 9 percent in their fixed
deposits for one year, the yields have come down substantially in recent times. Add to
this, the inflationary pressures in economy and you have a position where the savings
are not earning. The inflation is creeping up, to almost 8 percent at times, and this
means that the value of money saved goes down instead of going up. This effectively
mars any chance of gaining from the investments in banks.
POST OFFICE SCHEMES
Just like banks, post offices in India have a wide network. Spread across the nation,
they offer financial assistance as well as serving the basic requirements of
communication. Among all saving options, Post office schemes have been offering the
highest rates. Added to it is the fact that the investments are safe with the department
being a Government of India entity. So the two basic and most sought for features,
those of return safety and quantum of returns were being handsomely taken care of.
Though certainly not the most efficient systems in terms of service standards and
36

liquidity, these have still managed to attract the attention of small, retail investors.
However, with the government announcing its intention of reducing the interest rates
in small savings options, this avenue is expected to lose some of the investors. Public
Provident Funds act as options to save for the post retirement period for most people
and have been considered good option largely due to the fact that returns were higher
than most other options and also helped people gain from tax benefits under various
sections. This option too is likely to lose some of its sheen on account of reduction in
the rates offered.
COMPANY FIXED DEPOSITS
Another oft-used route to invest has been the fixed deposit schemes floated by
companies. Companies have used fixed deposit schemes as a means of mobilizing
funds for their operations and have paid interest on them. The safer a company is
rated, the lesser the return offered has been the thumb rule. However, there are several
potential roadblocks in these.
First of all, the danger of financial position of the company not being understood by
the investor lurks. The investors rely on intermediaries who more often than not, don t
reveal the entire truth. Secondly, liquidity is a major problem with the amount being
received months after the due dates. Premature redemption is generally not
entertained without cuts in the returns offered and though they present a reasonable
option to counter interest rate risk (especially when the economy is headed for a low
interest regime), the safety of principal amount has been found lacking. Many cases
like the Kuber Group and DCM Group fiascoes have resulted in low confidence in
this option.
The options discussed above are essentially for the risk-averse, people who think of
safety and then quantum of return, in that order. For the brave, it is dabbling in the
stock market.
Stock markets provide an option to invest in a high risk, high return game. While the
potential return is much more than 10-11 percent any of the options discussed above
can generally generate, the risk is undoubtedly of the highest order. But then, the
general principle of encountering greater risks and uncertainty when one seeks higher
returns holds true. However, as enticing as it might appear, people generally are

37

clueless as to how the stock market functions and in the process can endanger the
hard-earned money.
For those who are not adept at understanding the stock market, the task of generating
superior returns at similar levels of risk is arduous to say the least. This is where
Mutual Funds come into picture.
MUTUAL FUNDS are essentially investment vehicles where people with similar
investment objective come together to pool their money and then invest accordingly.
Each unit of any scheme represents the proportion of pool owned by the unit holder
(investor). Appreciation or reduction in value of investments is reflected in net asset
value (NAV) of the concerned scheme, which is declared by the fund from time to
time. Mutual fund schemes are managed by respective Asset Management Companies
(AMC). Different business groups/ financial institutions/ banks have sponsored these
AMCs, either alone or in collaboration with reputed international firms. Several
international funds like Alliance and Templeton are also operating independently in
India. Many more international Mutual Fund giants are expected to come into Indian
markets in the near future. The benefits on offer are many with good post-tax returns
and reasonable safety being the hallmark that we normally associate with them. Some
of the other major benefits of investing in them are:
NUMBER OF AVAILABLE OPTIONS
Mutual funds invest according to the underlying investment objective as specified at
the time of launching a scheme. So, we have equity funds, debt funds, gilt funds and
many others that cater to the different needs of the investor. The availability of these
options makes them a good option. While equity funds can be as risky as the stock
markets themselves, debt funds offer the kind of security that is aimed for at the time
of making investments. Money market funds offer the liquidity that is desired by big
investors who wish to park surplus funds for very short-term periods. Balance Funds
acter to the investors having an appetite for risk greater than the debt funds but less
than the equity funds. The only pertinent factor here is that the fund has to be selected
keeping the risk profile of the investor in mind because the products listed above have
different risks associated with them. So, while equity funds are a good bet for a long
term, they may not find favour with corporates or High Networth Individuals (HNIs)
who have short-term needs.
38

DIVERSIFICATION
Investments are spread across a wide cross-section of industries and sectors and so the
risk is reduced. Diversification reduces the risk because all stocks don t move in the
same direction at the same time. One can achieve this diversification through a
Mutual Fund with far less money than one can on his own.
PROFESSIONAL MANAGEMENT
Mutual Funds employ the services of skilled professionals who have years of
experience to back them up. They use intensive research techniques to analyze each
investment option for the potential of returns along with their risk levels to come up
with the figures for performance that determine the suitability of any potential
investment.
POTENTIAL OF RETURNS
Returns in the mutual funds are generally better than any other option in any other
avenue over a reasonable period of time. People can pick their investment horizon and
stay put in the chosen fund for the duration. Equity funds can outperform most other
investments over long periods by placing long-term calls on fundamentally good
stocks. The debt funds too will outperform other options such as banks. Though they
are affected by the interest rate risk in general, the returns generated are more as they
pick securities with different duration that have different yields and so are able to
increase the overall returns from the portfolio.
LIQUIDITY
Fixed deposits with companies or in banks are usually not withdrawn premature
because there is a penal clause attached to it. The investors can withdraw or redeem
money at the Net Asset Value related prices in the open-end schemes. In closed-end
schemes, the units can be transacted at the prevailing market price on a stock
exchange. Mutual funds also provide the facility of direct repurchase at NAV related
prices. The market prices of these schemes are dependent on the NAVs of funds and
may trade at more than NAV (known as Premium) or less than NAV (known as
39

Discount) depending on the expected future trend of NAV which in turn is linked to
general market conditions. Bullish market may result in schemes trading at Premium
while in bearish markets the funds usually trade at Discount. This means that the
money can be withdrawn anytime, without much reduction in yield. Some mutual
funds however, charge exit loads for withdrawal within a period.
Besides these important features, mutual funds also offer several other key traits.
Important among them are:
WELL REGULATED
Unlike the company fixed deposits, where there is little control with the investment
being considered as unsecured debt from the legal point of view, the Mutual Fund
industry is very well regulated. All investments have to be accounted for, decisions
judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties
on the AMCs at fault. The regulations, designed to protect the investors interests are
also implemented effectively.
TRANSPARENCY
Being under a regulatory framework, mutual funds have to disclose their holdings,
investment pattern and all the information that can be considered as material, before
all investors. This means that the investment strategy, outlooks of the market and
scheme related details are disclosed with reasonable frequency to ensure that
transparency exists in the system. This is unlike any other investment option in India
where the investor knows nothing as nothing is disclosed.

FLEXIBLE, AFFORDABLE AND A LOW COST AFFAIR

Mutual Funds offer a relatively less expensive way to invest when compared to other
avenues such as capital market operations. The fee in terms of brokerages, custodial
fees and other management fees are substantially lower than other options and are
directly linked to the performance of the scheme. Investment in mutual funds also
offers a lot of flexibility with features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans enabling systematic investment or
withdrawal of funds. Even the investors, who could otherwise not enter stock markets
40

with low investible funds, can benefit from a portfolio comprising of high-priced
stocks because they are purchased from pooled funds.
As has been discussed, mutual funds offer several benefits that are unmatched by
other investment options. Post liberalization, the industry has been growing at a rapid
pace and has crossed Rs. 100000 crore size in terms of its assets under management.
However, due to the low key investor awareness, the inflow under the industry is yet
to overtake the inflows in banks. Rising inflation, falling interest rates and a volatile
equity market make a deadly cocktail for the investor for whom mutual funds offer a
route out of the impasse. The investments in mutual funds are not without risks
because the same forces such as regulatory frameworks, government policies, interest
rate structures, performance of companies etc. that rattle the equity and debt markets,
act on mutual funds too. But it is the skill of the managing risks that investment
managers seek to implement in order to strive and generate superior returns than
otherwise possible that makes them a better option than many others.

DEFINITION OF RESEARCH
In the broadest sense of the word, the definition of research includes any gathering of
data, information and facts for the advancement of knowledge.
The strict definition of scientific research is performing a methodical study in order to
prove a hypothesis or answer a specific question. Finding a definitive answer is the
central goal of any experimental process.
Research must be systematic and follow a series of steps and a rigid standard
protocol. These rules are broadly similar but may vary slightly between the different
fields of science.
41

Any type of real research, whether scientific, economic or historical, requires some
kind of interpretation and an opinion from the researcher. This opinion is the
underlying principle, or question, that establishes the nature and type of experiment.
The scientific definition of research generally states that a variable must be
manipulated, although case studies and purely observational science do not always
comply with this norm.
Research may be very broadly defined as systematic gathering of data and
information and its analysis for advancement of knowledge in any subject. research
attempts to find answer intellectual and practical questions through application of
systematic methods.

MEANING OF RESEARCH METHODOLOGY

In day to day life human being has to face many problems viz. social, economical,
financial problems. These problems in life call for acceptable and effective solutions
and for this purpose, research is required and a methodology applied for the solutions
can be found out. Method of research may vary from problem to problem or from
man to man.

DEFINITION OF RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. We can also define
research as a scientific and systematic search for pertinent information as a specific
topic. In fact, research is an arc of scientific investigation. The Advanced Learners
Dictionary of Current English lays down the meaning of research as a careful
investigation or inquiry especially through search for new facts in any branch of
knowledge. Redman and Mory define research as a systematized effort to gain
new knowledge.
Research is an academic activity and as such the term should be used in a technical
sense. Research is, thus, an original contribution to the existing stock of knowledge
making for its advancement. It is pursuit of truth with the help of study, observation,
comparison and experiment. In short, the search for knowledge through objective and
systematic method of finding solution to a problem is research. The systematic
approach concerning generalization and the formulation of a theory is also research.
42

As such the term research refers to the systematic method consisting of enunciating
the facts and reaching certain conclusions either in the form of solutions(s) towards
the concerned problem or in certain generalizations for some theoretical formulation.

TYPES OF RESEARCH
Types of research can be classified in many different ways. some major ways of
classifying research include the following.

Descriptive versus Analytical Research

Applied versus Fundamental Research
Qualitative versus Quantitative Research
Conceptual versus Empirical Research

Descriptive research concentrates on finding facts to ascertain the nature of

something as it exists. In contrast analytical research is concerned with

determining validity of hypothesis based on analysis of facts collected.

Applied research is carried out to find answers to practical problems to be
solved and as an aid in decision making in different areas including product
design, process design and policy making. Fundamental research is carried out
as more to satisfy intellectual curiosity, than with the intention of using the

research findings for any immediate practical application.

Qualitative research studies such aspects of the research subject which are not
quantifiable, and hence not subject to measurement and quantitative analysis.
In contrast quantitative research make substantial use of measurements and

quantitative analysis techniques.

Conceptual research is involves investigation of thoughts and ideas and
developing new ideas or interpreting the old ones based on logical reasoning.
In contrast empirical research is based on firm verifiable data collected by
either observation of facts under natural condition or obtained through
experimentation.

Deacriptive and Analytical research is applicable to the project

43

METHODOLOGY USED:
DESCRIPTIVE ANALYTICAL RESEARCH
Under this project use of facts and information already available is done and analyse
them to make evaluation.

Data has been collected from the Fact sheet of the various mutual fund
schemes and used those datas for the research. In fact sheet past returns were
given of different funds.

Data also included value of risk measuring instruments like Standard

Deviation, Beta etc from the secondary data from the websites such as
www.valueresearchonline.com.

METHODOLOGY AND DATA SOURCE

Required data of the companies under analysis has been taken from their respective
annual reports which were available on their websites.
Different figures of the companies have been taken from their balance sheet, profit
and loss account, and income statements of the annual report as well as schedules
associated with balance sheet.
PROBLEM DEFINITION:This study is based on descriptive and applied research. The working efficiency of
IIFL has been studied by using the financial statements, the result of company has
been summarized which helped in identifying the effectiveness of the company under
preview.
DATA COLLECTION APPROACH:
Secondary data - Annual reports, financial statements, files and office document,
various books, report, factsheets and internet.
Primary data - Discussion with company guide & concerned persons.
PRESENTATION OF DATA:
Graphical presentation has been shown for all funds to understand how portfolio
breaks up & pie charts for the allocation of funds and total returns.

44

Asset allocation is the key to investing success as it helps you reduce the volatility
of returns. by investing in equity for capital appreciation and debt for stable
returns, you can reduce instability of returns by increasing / decreasing exposure
to various markets, based on in-depth research and analysis
.

1. ICICI PRUDENTIAL DISCOVERY FUND

Investment Objective of ICICI Prudential Discovery :

Primary objective is to generate returns through a combination of dividend income
and capital appreciation by investing primarily in a well diversified portfolio of value
stocks.

Scheme Details

Category

Diversified

Fund Manager

Mrinal Singh

Net Assets (Rs m)

- (31-Aug-2012)

Expense Ratio

0.00% (31-Mar-2012)

Entry Load

Exit Load

Min. Invt. (Rs)

5,000.00

Addl. Invt. (Rs)

500.00

SIP (Rs)

1,000.00
45

Inception

16-Aug-2004

ICICI PRUDENTIAL DISCOVERY FUND - INVEST

46

Value investing limits the risks

Even though mid-cap stocks have been major laggards so far this year, there still are
pockets of value in this segment. Investors looking to add some midcap exposure to
their investments can consider buying units of ICICI Prudential Discovery Fund. The
fund follows a value investing' strategy and therefore comes tagged with lower risks
than its mid-cap focused peer funds.
This holds considerable investment merit in the present market. A decent returns
scorecard and a promising portfolio of stocks also add up in the fund's favour.
Investors may, however, consider a phased exposure by way of a systematic
investment plan, given the high volatility in the markets at present.
SUITABILITY
Though the fund makes for a lower-risk option within the universe of midcap stocks,
the risks are far higher in relation to large-cap or index funds. The fund, therefore,
makes a good investment option for investors with some appetite for risk. That apart,
the fund's value-investing strategy and mid-cap bias necessitate a long-term
investment horizon.
PERFORMANCE
While the fund's one-year returns are in the negative, it is better than that of its
benchmark CNX Midcap. The margin of outperformance over a three-year period
however is way higher. During a three-year period, the fund delivered a compounded
return of approximately 18 per cent. This compares quite favourably with many of its
peers.
It also enjoys a fairly reasonable record in containing downsides. For instance,
between January 2008 and March 2009, the Discovery Fund managed to contain the
fall in its Net Asset Value (NAV) to approximately 59 per cent, marginally less than
the Sensex. That even diversified funds with relatively a large-cap bias struggled to do
this during the period highlights the efficacy of the fund's value-investing approach.
Its five-year returns, however, are just in line with its benchmark, as the fund had
been a marked underperformer in the bull markets of 2006 and 2007. The fund has,
47

however, managed to improve its performance since then. Its returns during one-,
three- and five-year periods compare favourably with its category average too.
PORTFOLIO
While there is no doubt that investing in midcap stocks is now ridden with risks, the
fund's portfolio choices have been somewhat offbeat. Contrarian and dividend yield
stocks (and sectors) with a focus on low Price-Earnings (PE) stocks make up its
portfolio.
The fund has also occasionally dabbled in derivatives and made periodic cash calls
while rebalancing its equity exposure. Its portfolio is also prone to frequent changes,
and therefore enjoys a relatively high portfolio turnover.
In its current portfolio, large-caps (stocks with more than Rs 7,500 crore market
capitalisation) make up more than 36 per cent of its overall portfolio, while mid- and
small-caps make up 24 per cent and 34 per cent, respectively.
While banks, software, auto ancillary, and cement make up its top sectors in its latest
portfolio, the stock choices within that aren't typical. For instance, stocks such as Rain
Commodities, CESC and Standard Chartered PLC find a place in its top ten stocks'
list.

2. ICICI PRUDENTIAL TOP 100 FUND

Investment Objective of ICICI Prudential Top 100 Fund:
ICICI Prudential Top 100 Fund seeks to generate long-term capital appreciation from
a portfolio that is invested predominantly in equity and equity related securities of
large, profitable and well known companies.

Scheme Details
Structure : Open-ended Equity Fund
Inception Date : June 19, 1998
Plans and Options under the Plan :
Retail & Institutional plans with Dividend/Growth option.
Face Value (Rs/Unit): Rs. 10
48

Minimum Investment :
Retail: Rs.5000 and in multiples of Re. 1 thereafter.
Institutional: Rs. 1 lac and in multiples of Re. 1 thereafter.
Entry Load : Nil.
Exit Load : Nil.

ICICI PRUDENTIAL TOP 100 FUND: INVEST

The fund has delivered superior returns while assuming lower risks than a passive
index.
49

August 25, 2012:

Investments with a three-year horizon can be considered in units of ICICI Prudential
Top 100 fund (Top 100).
The fund has been a consistent performer in the large-cap space and has emerged as a
top-performing fund over the last one year.
The three- and five-year annualised returns of the fund were 9.6 per cent and 7.4 per
cent respectively, compared with the 6.1 per cent and 5.4 per cent returns of the
benchmark S&P CNX Nifty in the above periods.
This fund was earlier called ICICI Pru Growth. Its name was changed to reflect the
strategy better.
SUITABILITY
Top 100 is suitable for conservative investors who wish to contain declines in their
portfolio.
As there are funds such as Franklin Bluechip and DSPBR 100 that have delivered
superior returns over the long term, these funds are preferred for the core of a longterm wealth-building portfolio.
This fund may best serve as a diversifier. Investments have to be made with a longterm horizon. Systematic investment plans will be a preferred route.
PERFORMANCE
The fund has managed to contain downside better than its benchmark during periods
of market correction (from January 2008 to March 2009 and November 2010 to
December 2011). The historical beta (over five years) of the fund is 0.9 indicative
of the funds lower volatility in relation to its benchmark.
On the other hand, the risk-adjusted return as measured by sharpe ratio is also high at
0.13 compared with CNX Niftys sharpe ratio of 0.09 (the risk-free rate was assumed
at 7 per cent).
This indicates that the fund has delivered superior returns while assuming lower risks
than a passive index.
The fund also takes derivative positions to reduce the volatility in its returns.
While the short positions taken by the fund may not be known in the monthly
portfolio, high portfolio turnover and high net current asset holdings appear to
indicate hedged positions (short) to reduce the funds downside.
50

But such hedging strategy may also result in capping returns if markets see a sudden
rally.
On a one-year rolling return basis, Top 100 has outperformed its benchmark 82 per
cent of the time in the last four years. The underperformance came during periods of a
sharp rally where it was a bit slow to catch up with the index.
But from the Decmeber-2011 lows to date, the fund bucked the trend and gave a 21.4
per cent return from December lows as against Niftys return of 19.1 per cent.
In December, the fund took the opportunity to invest most of its funds in equities with
its current-asset holdings declining to a multi-year low.
Given the buying opportunity in cash segment, the company may have taken lower
short positions in the derivative market. High holding in pharma stocks, which
witnessed a sound rally this year (so far), also helped.
PORTFOLIO
As of July 2012, the average market capitalisation of stocks in the fund was Rs 82,000
crore. The total stock holdings was limited to 26 stocks.
As of July, the fund also had long position in futures of Nifty Index and the stock of
SBI.

3.

FRANKLIN INDIA PRIMA PLUS FUND

Investment Objective of Franklin India Prima Plus :

A diversified equity fund that seeks to provide capital appreciation by investing in
companies focused on shareholder wealth creation. It is an open ended growth scheme
with the objective to provide growth of capital plus regular dividends through a
diversified portfolio of equities, fixed income securities and money market
instruments.
Scheme Details
Category
Fund Manager
Net Assets (Rs m)
Expense Ratio
Entry Load
Exit Load
Min. Invt. (Rs)

Diversified
Anand Radhakrishnan
18,051.900 (31-Aug-2012)
0.00% (31-Aug-2012)
1.0 %
0
5,000.00
51

Addl. Invt. (Rs)

SIP (Rs)

1,000.00
500.00

Inception

29-Sep-1994

FRANKLIN INDIA PRIMA PLUS:

INVEST

September 22, 2012:

Conservative investors can buy the units of Franklin India Prima Plus (Prima Plus).
The fund exhibits an ability to contain losses during market downturns as well as
provide reasonable upside in rallies. Prima Plus has a long track-record of over 15
years and has consistently beaten its benchmark. Over one-, three- and five-year
timeframes, the fund made a compounded annual return of 8.8, 8.7 and 6.8 per cent,
respectively, outpacing its benchmark by about two to six percentage points in these
periods.
52

Its 26 per cent compounded annual return in the last ten years places it in the top
quartile of diversified equity funds, categorised by returns.
SUITABILITY
Prima Plus has a mandate to invest primarily in large-cap stocks, with a marginal
mid/small-cap exposure. This strategy comes in handy during market corrections. For
example, during the meltdown between January 2008 and March 2009, while the
CNX 500 Index lost 64 per cent of its value, the fund limited the fall in its NAV (Net
Asset Value) to 56 per cent. Whats more, Prima Pluss consistency in performance
adds credence to its suitability for conservative investors. On a one-year rolling return
basis, the funds return beat the benchmark 85 per cent of the time in the last five
years.
But the fund did not outperform its benchmark during recent upswings such as the one
in 2007 or 2009-10.
These aspects make the fund more suitable for investors who have a limited risk
appetite and those who look for moderate rather than spectacular returns.
PORTFOLIO AND PERFORMANCE
During the bull markets of 2007, the fund mustered only 69 per cent returns compared
with 82 per cent returns clocked by the CNX 500 index. Similarly, in the March 2009Novemebr 2010 run-up, the fund sported 153 per cent returns as against the 163 per
cent garnered by the CNX 500.
During this period, Prima Plus also underperformed peers such as HDFC Equity and
Reliance Vision. Lower exposure to IT, Pharma and Auto stocks that did well in this
season could be a reason.
The fund has, however, bettered its peers in the last one year. Although still not in the
top-quartile of the diversified funds category, Prima Pluss one-year return of 8.8 per
cent is better than that of HDFC Equity and DSP BR Equity.
The returns could have been higher but for the increased holdings in the telecom
sector (8-13 per cent) which was bogged down by regulatory issues and tariff
pressures.
Although its consumer non-durable holdings increased over the last one year, the fund
did not latch firmly on to this defensive bet, holding less than 5 per cent in the space.
53

Banks, Pharma, Telecom and Cement have remained the top sector bets in the last one
year. The NAV per unit of the growth option is Rs 227.97.

4.RELIANCE BANKING FUND

Investment Objective of Reliance Banking :
The primary investment objective of the Scheme is to seek to generate continuous
returns by actively investing in equity and equity related securities of companies in
the Banking Sector and companies engaged in allied activities related to Banking
Sector.

Scheme Details
Category

Sector

Fund Manager

Sanjay Parekh

Net Assets (Rs m)

- (31-Aug-2012)

Expense Ratio

0.00% (31-Mar-2012)

Entry Load

1.0 %

Exit Load

Min. Invt. (Rs)

5,000.00

Addl. Invt. (Rs)

1,000.00

SIP (Rs)

100.00

Inception

28-May-2003

54

RELIANCE BANKING FUND: INVEST

September 3, 2011:
Fresh investments through the systematic investment route can be considered in units
of Reliance Banking Fund, a theme fund that invests in banks and non-banking
finance companies (NBFC). The scheme has been a top performer in the banking fund
category, outperforming its benchmark (Bank Nifty) in the one-, three and five year
time-frames.
The fund delivered 20 per cent and 23 per cent annualised returns over three-year and
five-year periods, a good 4.8 percentage points and 7.5 percentage points higher than
its benchmark.
NEAR-TERM CONCERNS
While near-term concerns haven't entirely abated in the banking sector, valuations of
stocks in the space are at a steep discount to their November 2010 highs.
Public sector banks (PSBs) represented by CNX PSU Bank index, for instance, are
trading at 1.3 times their current book value as against 2.5 times multiple during the
55

November 2010 peaks. Further, Bank Nifty index is at a 20 per cent discount to its
four-year historic average valuations.
Reliance Banking slipped into losses over the last few months, in line with the sharp
correction witnessed in banking stocks. Concerns over the sharp rise in interest rates
impacting banks' margins as well as asset quality (these being already visible) led to
banking stocks being beaten down.
While we expect these two concerns to abate only post the interest rate peak, forecasts
have it that interest rates may peak in a quarter or two from now. The current
valuations of banking stocks, though, appear to have factored in these concerns.
Initial signs of credit pick-up during the fortnight ended August 12 and expectation of
a policy rate pause after a possible 25-basis-point hike in the next policy provide
initial signs that there may be better times ahead for the sector.
SUITABILITY
Given that the sector is likely to remain volatile for some more time, SIPs over the
next year or so would help investors average costs.
Theme funds, in general, have higher risk (due to sector concentration), which once
again pegs up the fund's risk profile over diversified funds. Over the last six months,
Reliance Banking has under-performed broad market index S&P CNX 500.
PORTFOLIO AND PERFORMANCE
Reliance Banking has a Sharpe ratio (risk adjusted return on weekly rolling basis over
the last five years) of 0.09, against 0.06 delivered by the Goldman Sachs (earlier
called Benchmark) Bank Exchange Traded Fund. This indicates a superior return for a
given level of risk.
While 70 per cent of the benchmark Bank Nifty's weight is split between ICICI Bank,
HDFC Bank and SBI, Reliance Banking portfolio is well diversified with no stock
accounting for more than 15 per cent of the portfolio.
The fund, however, has high exposure to public sector banks which may result in
short-term underperformance given the lingering concerns. Mid-cap banks and
NBFCs, though, helped it outperform its benchmark consistently in the last one-and-a
half-years.
The fund outperformed its benchmark 87 per cent of the time over the last four years,
on a rolling return basis.
56

IDEAL PORTFOLIO
Aim of the project
To construct a portfolio of capital Rs 1000000, keeping in mind the current Indian
and global market scenario so as to maximize the returns within time horizon of 5
years.
PROFILE
Name
Mr. Sethi
Mrs. Sethi
Ayush Sethi

Age
32
31
4

Annual Income
Rs. 12,00,000
Rs. 8,00,000
Nil

Risk bearing capacity: Moderate

Objective:

Long term investments

Children plan
Pensions
Equity exposure

Investment: Rs 10, 00000 P.a.

ALLOCATION
After considering the risk taking capacity of the investor, the fund will be allocated to
various assets classes in the following manner:
57

Asset/Instrument
Equity
Bonds/F.D
Mutual Funds
Pension Funds and Child Plans
Liquid Funds

Amount(Rs)
370000
225000
200000
60000
145000

Percentage (%)
37
22.5
20
6
14.5

Pie Chart

1st Qtr

2nd Qtr

0.5

3rd Qtr

4th Qtr
1.2

5th Qtr

Equity stocks

Sector

Cmp (rs.)

Return

Qty
Amt(Rs.)

(1 yr.)

Infosys

I.T

3148

28.79%

20

62960

Axis Bank

Banking

1324.1

29.64%

75

99308

Hindalco Ind Ltd.

Steel

220

49.26%

700

154000

ACC Ltd.

Cement

1077

23.96%

50

53850

Total Equity

370118
58

IT SECTOR
The Indian information technology (IT) industry has played a key role in putting India
on the global map. Over the past decade, the Indian IT-BPO sector has become the
countrys premier growth engine, crossing significant milestones in terms of revenue
growth, employment generation and value creation, in addition to becoming the
global brand ambassador for India. According to a research report published by
National Association of Software and Service Companies(NASSCOM), IT-BPO
Sector in India: Strategic Review 2010, the IT-BPO industry is estimated to aggregate
revenues of US$ 73.1 billion in FY2010, with the IT software and services industry
accounting for US$ 63.7 billion of revenues. The report estimates export revenues to
gross US$ 50.1 billion in FY2010, growing by 5.4 per cent over FY2009, and
contributing 69 per cent of the total IT-BPO revenues. Software and services exports
(including BPO) are expected to account for over 99 per cent of total exports,
employing around 1.8million employees. IT services is expected to grow by 2.4 per
cent in 2010, and 4.2 per cent in 2011 as companies coming out of recession harness
the need for information technology to create competitive advantage. NASSCOM said
that the domestic IT-BPO is expected to grow by 15-17 per cent during FY11.
According to NASSCOM, the industry will witness a healthy growth in 2010, led by
growth in the core markets and supplemented by significant contributions from
emerging markets. Growth drivers include a thrust on platform BPO, Analytics,
Finance & Accounting, Remote Infrastructure Management, ADM, and Cloud
Services. The annual survey on the outlook for FY10-11 said that the growth in the
domestic IT-BPO spend is driven by a robust economy, increased IT spending by
government and adoption of IT by SMBs.
BANKING SECTOR
The Banking sector in India has always been one of the most preferred avenues of
employment. In the current decade, this has emerged as a resurgent sector in the
Indian economy. As per the Mc Kinsey report India Banking 2010, the banking
sector index has grown at a compounded annual rate of over 51per cent since the year
59

2001, as compared to a 27 per cent growth in the market index during the same
period. It is projected that the sector has the potential to account for over 7.7 per cent
of GDP with over Rs.7, 500 billion in market cap, and to provide over 1.5 million
jobs. Today, banks have diversified their activities and are getting into new products
and services that include opportunities in credit cards, consumer finance, wealth
management, life and general insurance, investment banking, mutual funds, pension
fund regulation, stock broking services, custodian services, private equity, etc.
Further, most of the leading Indian banks are going global, setting up offices in
foreign countries, by themselves or through their subsidiaries.
STEEL SECTOR
India is the 5th largest producer of steel in the world. Credit Suisse says that Indias
steel sector will continue to grow by 16% annually until 2012 fuelled by demand for
construction projects up to USD 1trillion. The Ministry of Steel has projected that the
steel capacity is likely to be 124.06 million tones by2011-12. Also, based on the status
of MOUs signed by the private producers with the various State Governments, it is
expected that Indias steel capacity would be nearly 293 million tons by 2020.

CEMENT INDUSTRY
The cement industry is one of the vital industries for economic development in a
country. The total utilization of cement in a year is used as an indicator of economic
growth. Cement is a necessary constituent of infrastructure development and a key
raw material for the construction industry, especially in the governments
infrastructure development plans in the context of the nations socioeconomic
development.
FUTURE TRENDS
The cement industry is expected to grow steadily in 2012-2013 and increase capacity
by another 150 million tons in spite of the recession and decrease in demand from the
housing sector.
The industry experts project the sector to grow by 9 to 10% for the current financial
year provided India's GDP grows at 7%.
60

India ranks second in cement production after China.

BOND/F.D. ALLOCATION
LIC Infrastructure Bonds
If you are tax payer then you can save more tax by investing in LIC Infrastructure
Bond. AdditionalRs.20, 000 Tax Exemptions under Section 80CCF.
LIC Infrastructure Bond at Glance:
Term: 10 years
Minimum lock in period: 5 years
Loan on Bond: After 5 years
Interest Rate: 7.85%-7.95% after tax.
Exit options: Buy back or through Demat account
Open for Individual or HUF. Any individual or HUF can invest in LICs Infrastructure
Bonds Between Rs.5000 Rs.20,000/- This will be over the Rs.1 lakh deduction
allowed under Section 80C.
Tax benefit example:
If you are in highest tax payers bracket of 30% can save an additional Rs 6,000 and if
you happen to fall in the lower tax bracket then you can still save Rs.2,000/- by
investing in LIC infrastructure bonds this financial year.LIC infrastructure bonds not
only offers capital safety but also offers fixed returns through ECS.
TERM:
The infrastructure bonds will have a maturity of 10 years and lock-in period of 5
years. After lock in period is over, you can ask issuer (LIC) to buy back bonds or you
can trade these bonds in stock Exchange.
Amount Invested: Rs 125000
FIXED DEPOSIT
The investor is advised fix deposit of Rs 100000
And maintain a balance of Rs 100000 in his bank account, this will help for
unforeseen circumstances in the future and also help in getting a return of around
8.5% p.a.
61

MUTUAL FUND ALLOCATION

Mutual Fund
DSP Blackrock Micro Cap Fund- Growth

Amount(Rs.)
76905

Return
15.06

HDFC Monthly Income Plan- Growth

76905

12.50

Fidelity Tax Advantage Fund- Div

48000

17.70

Total

201810

DSP BLACKROCK MICRO CAP FUND GROWTH

Objectives
Seeks to generate long term capital appreciation and current income from a portfolio
constituted of equity and equity related securities as well as fixed income securities.
Fund Features
Type of Scheme

: Open Ended

Nature
: Equity & Debt
Option
: Growth
Inception Date
: May 27, 1999
Face Value (Rs/Unit)
:10
Fund Size in Rs. Cr.
: 773.96 as on Nov 30, 2010
Fund Manager
: Apoorva Shah.
SIP
: Yes
STP
: No
SWP
: No
Expense ratio (%)
: 2.08
Portfolio Turnover Ratio (%) : 250

HDFC MONTHLY INCOME PLAN GROWTH

Objective
62

The primary objective of the Scheme is to generate regular returns through investment
primarily in Debt and Money Market Instruments. The Secondary objective of the
scheme is to generate long term capital appreciation by investing a portion of the
Schemes assets in equity and equity related instruments.
Fund Features
Type of Scheme

:Open Ended

Nature
: Debt
Option
:Growth
Inception Date
: Dec 26, 2003
Face Value (Rs/Unit)
: 10
Fund Size in Rs. Cr.
:702.15 as on Nov 30,2010
Fund Manager
: Vinay Kulkarni & Shobhit Malhotra
SIP
: Yes
STP
: No
SWP
: No
Expense ratio(%)
: 1.72
Portfolio Turnover Ratio(%) : N/A

FIDELITY TAX ADVANTAGE FUND DIVIDEND

Objective
The investment objective of the Scheme is to generate long-term capital growth from
a diversified portfolio of predominantly equity and equity-related securities.
Fund Features
Type of Scheme

: Open Ended

Nature
: Equity
Option
: Income Divedend
Inception Date
: Feb27, 2006
Face Value (Rs/Unit)
: 10
Fund Size in Rs. Cr.
: 1294.37 as on Oct 29, 2010
Fund Manager
: Sandeep Kothari
SIP
: Yes
STP
: No
SWP
: No
Expense ratio(%)
: 2.00
Portfolio Turnover Ratio(%) : 25
63

 PENSION FUNDS & CHILD PLANS ALLOCATION

SBI RETIREMENT PLAN (PENSION FUND)

Under SBI Horizon II Pension Plan, your money is invested in equity, bond or money pension
funds. The investment plans also vary according to the proportion of money invested inequity
funds. In case of SBI Unit plus II Pension Plans, you get to choose between pure pension and
pension cum life cover plans with flexibility to increase regular contributions, top up
payments and customize the plan by addition of riders. Investment in SBI Life Long Pension
Plans helps you avail tax deduction of up to Rs. 1, 00, 000 p.a. with 4 % p.a. minimum
guaranteed returns and tax-free withdrawals of up to 33 % from the Personal Pension
Account.
Amount: Rs 33000

LIC- CHILD FUTURE PLAN

Introduction:
This plan is specially designed to meet the increasing educational, marriage and other
needs of growing children. It provides the risk cover on the life of child not only
during the policy term but also during the extended term (i.e. 7 years after the expiry
of policy term). A number of Survival benefits are payable on surviving by the life
assured to the end of the specified durations.
Options:
You may choose Sum Assured (S.A.), Maturity Age, Policy Term, Mode of Premium
payment and Premium Waiver Benefit.
Payment of Premiums: You may pay the premiums regularly at yearly, half-yearly,
quarterly or through Salary deductions over the term of policy. Premiums may be paid
either for 6 years or upto 5 years before the policy term
Amount: Rs 27000

64

LIQUID FUND ALLOCATION

GOLD:
The amount to be invested in gold would be Rs. 100000; it is a very liquid security
and has been appreciating over many years. Gold prices increased approximately by
30% in the current year. Thus it would be a very beneficial investment based on
liquidity and returns.

CASH:
It is very important to maintain certain amount of cash in hand in order to cope up
with uncertain events that can arise over a period of time. The amount to be kept on
hand would be Rs. 45000.

TOTAL RETURN
Asset/ Instrument
Equity

Return
136323

% Return
36.83

Bond/ F.D.

18163

8.07

Mutual Fund

29690

14.71

Gold *

15000

15

199176

19.92

Total

65

Sales
1st Qtr

2nd Qtr
4.5

3rd Qtr
4th Qtr

2
1

*The return for Gold is estimated using a very conservative approach

The return calculated for the period of 1 year is estimated to be 19.92%. Considering
the CAGR for the period of 5years, the return expected is 148%. However the return is
not guaranteed, it is totally based on the market scenario over the time horizon.

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LIMITATIONS
This report gives an insight about portfolio management, role of loan against gold
and mutual fund schemes but with few limitations as follows:

The big question is how to judge a mutual fund before investing? It is

important for an investor to consider a fund s performance over several
years.
The report only analyses equity mutual fund schemes of only some funds and
there are around 34 AMCs offering wide range of scheme but to analyze them

is a tedious task.
Different fund managers adopt different strategies to improve performance.
While one fund manager may have invested in speculative stocks may over a
period, another one who have invested in speculative stocks may have struck

gold in that year to outperform the former by a long way.

Lack of proper knowledge and awareness about advantages and disadvantages
associated with various schemes among the investor.

Usually there is a tendency among investors to ignore the consistency of

returns over a period of time rather they focus on absolute returns generated in
the short term.

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SUGGESTIONS
The Ground rules to be considered for portfolio management & Mutual Fund
Investment
Moses gave to his followers 10 commandments that were to be followed till eternity.
The world of investments too has several ground rules meant for investors who are
novices in their own right and wish to enter the myriad world of investments. These
come in handy for there is every possibility of losing what one has if due care is not
taken.
1.Assess yourself: Self-assessment of one s needs; expectations and risk profile is of
prime importance failing which, one will make more mistakes in putting money in
right places than otherwise. One should identify the degree of risk bearing capacity
one has and also clearly state the expectations from the investments. Irrational
expectations will only bring pain.
2. Try to understand where the money is going: It is important to identify the
nature of investment and to know if one is compatible with the investment. One can
lose substantially if one picks the wrong kind of mutual fund. In order to avoid any
confusion it is better to go through the literature such as offer document and fact
sheets that mutual fund companies provide on their funds.
3. Don't rush in picking funds, think first: one first has to decide what he
wants the money for and it is this investment goal that should be the guiding light
for all investments done. It is thus important to know the risks associated with the
fund and align it with the quantum of risk one is willing to take. One should take a
look at the portfolio of the funds for the purpose. Excessive exposure to any specific
sector should be avoided, as it will only add to the risk of the entire portfolio.
Mutual funds invest with a certain ideology such as the "Value Principle" or
"Growth Philosophy". Both have their share of critics but both philosophies work for
investors of different kinds. Identifying the proposed investment philosophy of the
fund will give an insight into the kind of risks that it shall be taking in future.
4. Invest. Don t speculate: A common investor is limited in the degree of risk that
he is willing to take. It is thus of key importance that there is thought given to the
process of investment and to the time horizon of the intended investment. One
should abstain from speculating which in other words would mean getting out of
one fund and investing in another with the intention of making quick money. One
would do well to remember that nobody can perfectly time the market so staying
invested is the best option unless there are compelling reasons to exit.
5. Don t put all the eggs in one basket: This old age adage is of utmost
importance. No matter what the risk profile of a person is, it is always advisable to
diversify the risks associated. So putting one s money in different asset classes is
generally the best option as it averages the risks in each category. Thus, even
investors of equity should be judicious and invest some portion of the investment
in debt. Diversification even in any particular asset class (such as equity, debt) is
good. Not all fund managers have the same acumen of fund management and with
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identification of the best man being a tough task, it is good to place money in the
hands of several fund managers. This might reduce the maximum return possible,
but will also reduce the risks.
6. Be regular: Investing should be a habit and not an exercise undertaken at one s
wishes, if one has to really benefit from them. As we said earlier, since it is
extremely difficult to know when to enter or exit the market, it is important to beat
the market by being systematic. The basic philosophy of Rupee cost averaging
would suggest that if one invests regularly through the ups and downs of the market,
he would stand a better chance of generating more returns than the market for the
entire duration. The SIPs (Systematic Investment Plans) offered by all funds helps
in being systematic. All that one needs to do is to give post-dated cheques to the
fund and thereafter one will not be harried later. The Automatic investment Plans
offered by some funds goes a step further, as the amount can directly/electronically
transferred from the account of the investor.
7. Do your homework: It is important for all investors to research the avenues
available to them irrespective of the investor category they belong to. This is
important because an informed investor is in a better decision to make right
decisions. Having identified the risks associated with the investment is important
and so one should try to know all aspects associated with it. Asking the
intermediaries is one of the ways to take care of the problem.
8. Find the right funds: Finding funds that do not charge much fees is of
importance, as the fee charged ultimately goes from the pocket of the investor.
This is even more important for debt funds as the returns from these funds are not
much. Funds that charge more will reduce the yield to the investor. Finding the
right funds is important and one should also use these funds for tax efficiency.
Investors of equity should keep in mind that all dividends are currently tax-free in
India and so their tax liabilities can be reduced if the dividend payout option is used.
Investors of debt will be charged a tax on dividend distribution and so can easily
avoid the payout options.
9. Keep track of your investments: Finding the right fund is important but even
more important is to keep track of the way they are performing in the market. If the
market is beginning to enter a bearish phase, then investors of equity too will
benefit by switching to debt funds as the losses can be minimized. One can always
switch back to equity if the equity market starts to show some buoyancy.
10. Know when to sell your mutual funds: Knowing when to exit a fund too is of
utmost importance. One should book profits immediately when enough has been
earned i.e. the initial expectation from the fund has been met with. Other factors
like non-performance, hike in fee charged and change in any basic attribute of the
fund etc. are some of the reasons for to exit.
Investments in mutual funds too are not risk-free and so investments warrant
some caution and careful attention of the investor. Investing in mutual funds can
be a dicey business for people who do not remember to follow these rules
diligently, as people are likely to commit mistakes by being ignorant or
adventurous enough to take risks more than what they can absorb. This is the
reason why people would do well to remember these rules before they set out to
invest their hard-earned money.

69

CONCLUSION
After studying & analyzing different mutual fund schemes the following conclusions
can be made:
Winning with stocks means performing at least as well as a major market
index over the long haul. If one can sidestep the common investor mistakes,
then one has taken the first and biggest step in the right direction.
Diversified stock portfolios have offered superior long term inflation
protection.
Equities are especially important today with people living longer and retiring
early.
To understand stock funds, one needs to be familiar with the characteristics of
the different types of companies they hold.

Portfolio managers have done a fairly good job in generating positive returns.
It may lead to gain investors confidence. Thus over all good performance of
the funds is a sign of development in new era in capital market.

On the basis of the analysis the performance of the schemes during the study
period can be concluded to be good.

Those who want to eliminate the risk element but still want to reap a better
then it would be advisable to go for debt or arbitrage schemes which ensures
both safety and returns.
So the future of mutual funds in India is bright, because it meets investor s needs
perfectly.

70

This will give boost to Indian investors and will attract foreign investors also. It will
lead to the growth of strong institutional framework that can support the capital
markets in the long run.

BIBLIOGRAPHY
1. Books and magazines:
Portfolio Management
By: S. Kevin
Publisher & Edition: PHI Learning Private Limited, new 2nd
edition.
Financial services, Market regulation
By: Anil Agasthi
Publisher & Edition: Himalaya Publishing house, 2008
Security analysis & Portfolio management
By: Prasanna Chandra
Publisher & Edition: McGraw- Hill Education- Europe, latest 3rd
edition
The Fund-money is the weapon
By: H.T. Narea.
Publisher & Edition: Forge books, 2012

2. From the following websites:

3.

www.mutualfundsindia.com
www.google.com
www.valueresearchonline.com
www.iifl.com
www.scribd.com
www.investmentz.com
From IIFL branch, Factsheets of various companies, like ICICI
Prudential, Reliance,etc.

ANNEXURE
PORTFOLIO QUESTIONNAIRE
Complete the 8 questions below to give your most suited Portfolio type:
71

1. In an effort to grow your wealth, can you afford to lose any money over the next
two years?
No

Yes

2. When do you expect to start withdrawing money from your investment?

Less than 2 years

2 to 5 years

6 to 10 years

11 years or more

3. Once you begin withdrawing money from your investment, how long do you
expect to continue withdrawing funds?
I plan to make a one off withdrawal

2 to 5 years

6 to 10 years

11 years or more

4. The following graph shows the results of five example portfolios over a one-year
period. The best potential gains and worst potential losses are displayed.
72

Note: the portfolio with the best potential gain also has the largest potential loss.

Which of these portfolios would you prefer to hold?

Portfolio A

Portfolio B

Portfolio C

Portfolio D

Portfolio E

73

5. The table below displays the worst case losses, expected gains, and best case gains
of an investment of 10,000 in five sample portfolios over a one-year period.
Which portfolio would you prefer to hold?

Portfolio 1

Portfolio 2

Portfolio 3

Portfolio 4

Portfolio 5

6. You have made an investment of 10,000 and its value falls by 20% to 8,000.
Assuming you still have 10 years until you begin withdrawals, how would you react?
I would not change my portfolio.

I would wait at least one year before changing to options that are more stable.

74

I would wait at least three months before changing to options that are more stable.

I would immediately change to options that are more stable.

7. For many investors, the possibility of losing money is a main concern.

How do you feel about investment losses?
I check the value of my investments quite often so I can sell quickly if they begin
to lose money.
Daily losses in the value of my investments make me uncomfortable, but not
uncomfortable enough to sell. If losses occur over several months, I would probably
sell.
Short-term losses in the value of my investments do not bother me. I would wait
an entire year before making changes.
I understand that investments can have occasional negative annual returns.
However, I have a higher chance of reaching my investment goals if I stick with my
portfolio over the long term. I would not make changes.
8. Choose the answer that best describes your response to the following statement:
I am comfortable with investments that may frequently experience large losses in
value if there is a potential for higher returns.
Does this describe you?

75

Strongly disagree

Disagree

Somewhat agree

Agree

Strongly agree

9. Most investments fluctuate year-to-year.

Suppose you invested 10,000 in a portfolio with the intention of holding it for ten
years.
If this investment lost value during the first year, at what value of your initial 10,000
investment would you sell and move to a more stable investment?
9,500 (5% loss)

9,000 (10% loss)

8,500 (15% loss)

8,000 or less (20%+ loss)

I would not sell

10. Investing involves a trade-off between risk and returns.

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Historically, investments with higher returns have been associated with greater risk
and chance for loss. Alternatively, cautious investments that have had a lower chance
for loss, also have yielded lower returns.
Based on this description of investments characteristics, which of the following
statements best describes your attitude to risk?
I am most concerned with risk. I am willing to accept the lower returns in order to
limit my chance of loss.
I am willing to bear some risk and chance for loss in an effort to achieve higher
returns, but prefer a significant portion of my portfolio to be invested cautious assets..
I am willing to accept moderate risk in order to achieve higher returns.
Minimizing risk and maximizing return are of equal importance to me.
I wish to achieve high returns on my investments. I am willing to accept high risk
and chance of loss.
I am primarily concerned with maximising the returns of my investments. I am
willing to accept significant fluctuations in the value of my portfolio and substantial
chance of loss.
11. Over a long period, risky investments usually generate greater wealth than less
risky investments do. The table below lists the possible values at the end of a 20-year
investment of 10,000 in 6 different portfolios. Note that in any given year, risky
investments might experience a decline in value that significantly surpasses a decline
in the value of less risky portfolios. The table below also displays the potential
number of years, in which the investment realises negative returns.
Which of these portfolios do you prefer?

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Portfolio 1

Portfolio 2

Portfolio 3

Portfolio 4

Portfolio 5

78

79