PORTFOLIO MANAGEMENT

Meaning of portfolio:A combination of securities with different risk & return characteristics will constitute the portfolio of the investor. Thus, a portfolio is the combination of various assets and/or instruments of investments. The combination may have different features of risk & return, separate from those of the components. The portfolio is also built up out of the wealth or income of the investor over a period of time, with a view to suit his risk and return preference to that of the portfolio that he holds. An investor considering investments in securities is faced with the problem of choosing from among a large number of securities. His choice depends upon the risk and return characteristics of individual securities. He would attempt to choose the most desirable securities and like to allocate is funds over this group of securities. Again he is faced with the problem of deciding which securities to hold and how much to invest in each. The investor faces an infinite number of possible portfolios or groups of securities. The risk and return characteristics of portfolio differ from those of individual securities combining to form a portfolio. The investor tries to choose the optimal portfolio taking in to consideration the risk return characteristics of all possible portfolios. As the economy and the financial environment keep changing the risk return characteristics of individual securities as well as portfolios also change. This calls for periodical 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. It is evident that rational investment activity involves creation of an investment portfolio. Portfolio management comprises all the processes involved in the creation and maintenance of an investment portfolio. It deals specifically with the security analysis, portfolio analysis, portfolio selection, portfolio revision and portfolio evaluation. Portfolio management makes use of analytical techniques of analysis and conceptual theories regarding rational allocation of funds. Portfolio management is a complex process which tries to make investment activity more rewarding and less risky.

Portfolio Management Process

A] There are three major activities involved in an efficient portfolio management which are as follows:a) Identification of assets or securities, allocation of investment and also identifying the classes of assets for the purpose of investment.

b) They have to decide the major weights, proportion of different assets in the portfolio by taking in to consideration the related risk factors.

c) Finally they select the security within the asset classes as identify. The above activities are directed to achieve the sole purpose of maximizing return and minimizing risk on investment. It is well known fact that portfolio manager balances the risk and return in a portfolio investment. With higher risk higher return may be expected and vice versa.

(B)

INVESTMENT DECISION:

Given a certain sum of funds, the investment decisions basically depend upon the following factors:I. Objectives of Investment Portfolio: This is a crucial point which a Finance Manager must consider. There can be many objectives of making an investment. The manager of a provident fund portfolio has to look for security and may be satisfied with none too high a return, where as an aggressive investment company is willing to take high risk in order to have high capital appreciation.

How the objectives can affect in investment decision can be seen from the fact that the Unit Trust of India has two major schemes : Its capital units are meant for those who wish to have a good capital appreciation and a moderate return, where as the ordinary unit are meant to provide a steady return only. The investment manager under both the scheme will invest the money of the Trust in different kinds of shares and securities. So it is obvious that the objectives must be clearly defined before an investment decision is taken. II. Selection of Investment: Having defined the objectives of the investment, the next decision is to decide the kind of investment to be selected. The decision what to buy has to be seen in the context of the following:-

a) There is a wide variety of investments available in market i.e. Equity shares, preference share, debentures, convertible bond, Govt. securities and bond, capital units etc. Out of these what types of securities to be purchased.

b) What should be the proportion of investment in fixed interest dividend securities and variable dividend bearing securities? The fixed one ensures a definite return and thus a lower risk but the return is usually not as higher as that from the variable dividend bearing shares. c) If the investment is decided in shares or debentures, then the industries showing a potential in growth should be taken in first line. Industry-wise-analysis is important since various industries are not at the same level from the investment point of view. It is important to recognize that at a particular point of time, a particular industry may have a better growth potential than other industries. For example, there was a time when jute industry was in great favour because of its growth potential and high profitability, the industry is no longer at this point of time as a growth oriented industry.

d) Once industries with high growth potential have been identified, the next step is to select the particular companies, in whose shares or securities investments are to be made.

TechniQUeS Of PORTfOliO ManageMenT:

As of now the under noted technique of portfolio management: are in vogue in our country.
1) Equity Portfolio: It is influenced by internal and external factors the internal

factors affect the inner working of the companys growth plans are analyzed with referenced to Balance sheet, profit & loss a/c (account) of the company. Among the external factor are changes in the government policies, Trade cycles, Political stability etc.
2) Equity Stock Analysis: Under this method the probable future value of a share of a

company is determined it can be done by ratios of earning per share of the company and price earnings ratio

EARNING PER SHARE = _ PROFIT AFTER TAX__ NO. OF EQUITY SHARES

PRICE EARNING RATIO = _MARKET PRICE (PER SHARE)_ EARNING PER SHARE

One can estimate trend of earning by EPS, which reflects trends of earning quality of company, dividend policy, and quality of management. Price Earnings ratio indicate a confidence of market about the company future, a high rating is preferable.

ABOUT INDIA INFOLINE

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in the Indian financial services space. IIFL offers advice and execution platform for the entire range of financial services covering products ranging from Equities and derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, GoI bonds and other small savings instruments. IIFL recently received an in-principle approval for Securities Trading and Clearing memberships from Singapore Exchange (SGX) paving the way for IIFL to become the first Indian brokerage to get a membership of the SGX. IIFL also 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 FinanceAsia and the Most improved brokerage, India in the AsiaMoney 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 as Best of the Web and a must read for investors in Asia. Our research is available not just over the Internet but also on international wire services like Bloomberg, Thomson First Call and Internet Securities where it is amongst one of the most read Indian brokers. A network of over 2,500 business locations spread over more than 500 cities and towns across India facilitates the smooth acquisition and servicing of a large customer base. All our 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, over a variety of mediums viz. online, over the phone and at our branches

History & Milestones

1995 Commenced operations as an Equity Research firm 1997 Launched research products of leading Indian companies, key sectors and the economy Client included leading FIIs, banks and companies. 1999 Launched www.indiainfoline.com 2000 Launched online trading through www.5paisa.com Started distribution of life insurance and mutual fund 2003 Launched proprietary trading platform Trader Terminal for retail customers 2004 Acquired commodities broking license Launched Portfolio Management Service 2005 Maiden IPO and listed on NSE, BSE 2006 Acquired membership of DGCX Commenced the lending business 2007 Commenced institutional equities business under IIFL Formed Singapore subsidiary, IIFL (Asia) Pte Ltd

2008 Launched IIFL Wealth Transitioned to insurance broking model 2009 Acquired registration for Housing Finance SEBI in-principle approval for Mutual Fund Obtained Venture Capital license 2010 Received in-principle approval for membership of the Singapore Stock Exchange Received membership of the Colombo Stock Exchange

How do you benefit from IndiaInfoline Portfolio Management Service?

An Investment Relationship Manager will ensure that you receive all the services related to investors investment needs. A dedicated website and a customer service desk allow investor to keep a tab on investors portfolios performance. Investors portfolio is tailored after a thorough research backed by the expertise from the IndiaInfoline Securities Research team. An experienced team of portfolio managers ensure investors portfolio is tracked, monitored and optimized at all times. The personalized service also translates into zero paper work and all investors financial statements will be e-mailed. Following are the offerings from IndiaInfoline : BEP Large cap focus portfolio. GEMS Portfolio Origin Invest guard Portfolio. Core Portfolio.

IndiaInfoline Portfolio Management offers various schemes to suit individual investment objectives. Following are the products offered by IndiaInfoline Securities

 BEP Large cap focus portfolio In the BEP Large cap focus portfolio, investments will be made in mis-priced large cap stocks that have a high growth potential and can withstand macro level risks to sustain in an adverse environment. Large Caps are dominant players in their respective sectors, and hence have the strength and the ability to maintain margins in a tough operating environment. GEMS Portfolio GEMS are a 30-month closed-end product. The scheme intends to create a focused portfolio of stocks from across sectors and market capitalization ranges. Its main feature is its special mandate to participate in the pre-FPO (follow-on public offer) placements and private placements of listed companies. Investments of up to 30 per cent of the overall assets can be made in such opportunities.

Origin

Origin portfolio aims to invest in growth oriented companies with sustainable business models backed by strong management capabilities with emphasis on smaller capitalized companies with a market capitalization not exceeding Rs. 2500 crore at the time of investment. Invest guard Portfolio The Invest guard Plan is a CPPI Model which invests across shares and fixed income products, moving from shares into fixed interest investments when the funds value drops below a predetermined floor. When markets start to move up, the product increases its holdings in shares, tapping into these growth opportunities.

Core Portfolio

Core Portfolio aims to capture the long term upside of the India Growth Story by diversifying across the major themes. The investments are in all equity and equity related instruments with emphasis on companies in the business areas driven by consumerism, outsourcing, real estate and core infrastructure players and is essentially a mix of small, medium and large capitalization companies.

The Portfolio Management Service combines competent fund management, dedicated research and technology to ensure a rewarding experience for its clients. Special relationship managers are appointed to manage your investments in the best possible manner and make sure that you get maximum returns of your investments. IndiaInfoline PMS has a dedicated fund management and research team that frequently meets management of companies and is well-placed to spot such opportunities.

BROKERAGE STRUCTURE:
BROKERAGE STRUCTURE Delivery < 1lakh 1 - 5 lakh 5 - 10 lakh 10 - 20 lakh 20 - 60 lakh 60 lakh - 2 crore > 2 crore Intraday brokerages < 25 lakhs 25 lakhs - 2 crores 2 crores - 5 crores > 5 crores Futures Intraday brokerages 0.07% both sides 0.045% both sides 0.036% both sides 0.027% both sides 0.023% both sides Settlement 0.09% both sides 0.073% both sides 0.046% both sides 0.046% both sides 0.032% both sides Gateway A/C 0.06% both sides 0.05% both sides 0.04% both sides 0.03% both sides Gateway A/C 0.58% 0.55% 0.46% 0.36% 0.28% 0.23% 0.18% Gateway A/C

Privilege A/C

Privilege A/C

< 2 crores 2 - 5.5 crores 5.5 - 10 crores 10 - 25 crores > 25 crores Options Monthly Premium Volume Upto 4Lacs 4Lacs-11Lacs 11Lacs20Lacs 20Lacs-

Privilege A/C

Intraday Brokerage% 2.5 2.25 1.8 1.35

Settlement Brokerage% 2.5 2.5 2.3 2.3

Minimum Minimum Brokerage Brokerage Per Lot Per Lot (Settlement) (Intraday) 100 100 Gateway 100 100 80 100 100 100 Privilege

50Lacs > 50Lacs 1.15 1.6 70 100

Here Premium Volume is considered as (Premium x Lot Size x No. of Lots).

Note: Service Tax of 10.2% of brokerage will be charged in addition. The brokerages charged are as per the volumes that are achieved. Based on these volumes a client can be either debited or credited an amount which is as per the volumes he/she may achieve at the end of the month.Securities Transaction Tax (STT) @ 0.1% of turnover will be charged in addition to the brokerage on all delivery trades STT @ 0.02% of turnover will be charged in addition to the brokerage on sell leg of all non delivery trades in the cash market .STT @ 0.0133% of turnover will be charged in addition to the brokerage on sell leg of all non delivery trades in the derivative market.

CONCLUSION
From the above discussion it is clear that portfolio functioning is based on market risk, so one can get the help from the professional portfolio manager or the Merchant banker if required before investment because applicability of practical knowledge through technical analysis can help an investor to reduce risk. In other words Security prices are determined by money manager and home managers, students and strikers, doctors and dog catchers, lawyers and landscapers, the wealthy and the wanting. This breadth of market participants guarantees an element of unpredictability and excitement. If we were all totally logical and could separate our emotions from our investment decisions then, the determination of price based on future earnings would work magnificently. And since we would all have the same completely logical expectations, price would only change when quarterly reports or relevant news was released.

Emotional Marketing
Emotional marketing is the ability to communicate powerfully through the use of different techniques that evoke emotion. It is one of the types of strategic management. Emotional marketing is better in many instances than rational marketing that focuses on product attributes. Capturing minds is one thing capturing hearts is quite another. Build emotions in your marketing strategies; don't always chase "share of wallet chase "share of heart". Employ strategies that would make decisions very emotionally driven and remove the rational questions that might drive the prospect elsewhere Emotional marketing is the kind of marketing that the big marketing companies have used for ages. It was born from their research into the human psychology of what causes us to buy things Example: Samsung When Samsung Chairman Kun-Hee Lee found the company's products gathering dust on store shelves, he made it his company's priority to create stylish, premium electronic products that sparked customers' emotions with elegant, human-centered design. Principles of emotional marketing

1) To be able to open oneself up to new universes, to new sensations Some let intuition individual or collective guide them, or they use their radars in order to experience these new sensations; others spend their time with their customers or try to reassure themselves, forgetting that success comes from risk and courage. 2) To understand consumers emotions

Nokia has completely changed her consumer approach by listening to the advice of the founder of Playmobil who used to spend at least one hour per day observing and playing with children. Big French food industries send their employees to have dinner and even to cook at their customers houses. The aim is of course to help them find out what consumers want, dream about. Today, ethno video methods can be very efficient tools to understand consumers desires Marc Giget, professor at CNAM, reminds us that the idea for Apricube, which became a phenomenal success, was found by watching a Belgian cut La Vache-qui-rit cheese into 4 pieces and offer them as an aperitif snack.

3) To give emotions a meaning This consists of being able to touch consumers emotions, creating a consistent effect on them in a coherent manner by offering them a strong concept. 4) To use a methodology that puts creativity at the heart of the innovation process Whatever the methodology may be, it must include creativity as well as creativity techniques, even if we often hear that great innovations dont come from creativity sessions. In fact, one may not have created a whole new idea after a creativity session. Nevertheless, the creative chaos of a successful session will surely awaken energies and stimulate the imagination. Applied creativity tools are thus used to mobilize energy and to accelerate the creation of ideas 5) To unify To unify the services and departments, and not to work separately or even individually: its by sharing and exchanging ideas that well give birth to new ideas. 6) To transmit rather than to communicate: communion When selling the product, teams have to know how to convince intermediary agents and distribution networks about the product; they have to know how to transmit not only the rationality of the product but also its sensitivity: that is in fact selling the experience before selling the product.

7) To make prototypes,in order to succeed in creating a product from a concept. Today, businesses often produce, pre-production samples rather than prototypes. However, prototypes are made during the decision making process, whereas preproduction samples are produced after the decision making process. Therefore, prototypes help to feel, to touch and, eventually, to improve the concept when theres still time to change the product. 8) To be poly-sensorial This means to sensualize the marketing process, to think multi-sensorial during the development of concepts. 9) To accelerate the marketing process Today, it takes 2 to 5 years to implement a project whereas businesses visibility is only 18 months. 10) To structure the internal organisation in a way that enables creative analysis Businesses have to create a connection between the expectations, dreams and desires of their customers and their teams. They have to do everything in order to keep their teams awake, open and capable of being surprised

PAD. Dr. D.Y.PATIL UNIVERSITy (DEPARTMENT OF BUSINESS MANAGEMENT)

SAPM
NAME- JOEL RAPHAEL JOSE CLASS- MBA CORE - FINANCE-1 ROLL NO- 01097 TOPIC PORTFOLIO MANAGEMENT AND EMOTIONAL MARKETING SUBMITTED TO MAM. NEETU SHARMA