Chapter-1: Portfolio Management Services - A Study

PORTFOLIO MANAGEMENT SERVICES - A STUDY 2011
CHAPTER-1
INTRODUCTION
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1.0 INTRODUCTION
There has been an explosion in the choice of financial services for individuals and
families in India in the last decade. The Indian financial services market has come a long
way with an exponential increase in the depth and breadth of products available to the
individual to choose from. Simultaneously the levels of income have also increased
significantly.
In today’s complex financial markets, it is becoming increasingly difficult to select the

right investment avenues. Each investment carries some risk and that it is vital to choose
wisely. While there are plenty of options available to design your portfolio, the key is to
invest in a manner that allows you to potentially lower your investment risk and increase
your chances of meeting your varied financial goals.
Investing is a plan. The individual has to decide as to what his goals and how he has to go
from one level of comfort to the other level.
PMS is a service offered by various banks, AMCs and brokerage houses for
professionally managing the portfolio of investments on behalf of individuals, firms,
companies, trusts or societies for an agreed fee. The investor deposits his/her surplus
funds with the brokerage house/AMC and depending on the specific profile of the
investor in terms of risk appetite and expectations of returns, the portfolio manager
allocates these funds for investment in various instruments having various degrees of risk
and return .In return for this service, the institution offering the PMS service gets basic
fee and in some cases a variable fee based on the returns generated by the portfolio over a
specific period.
In a country where high income individuals are growing at 20 to 25 percentages per year
the PMS schemes make sense while considering the lack of time of investors and the
market knowledge. So the present study aims to draw light to this aspect by examining
the features of the schemes of various portfolio management products. Another intention
is to find the customer awareness about PMS as a product among the various investment
options. Presently many financial service companies are offering PMS schemes with
various options.
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1.1 NEED FOR THE STUDY
Two important features of the current Indian financial market is the availability of a lot of
investment avenues and the lack of knowledge of the investors. Moreover majority of
investors are in short of time to understand regarding the various investment avenues and
the possible risk and return involved in the investment decisions. Portfolio Management
Services came as a solution to this dilemma. But PMS also has got a lot features and
aspects which one should know before investing. The present study tries to focus on this
aspect and the awareness level of investors.
1.2 OBJECTIVES OF THE STUDY
The present study entitled as ‘PORTFOLIO MANAGEMENT SERVICES – A STUDY

with special reference to Geojit Financial Services Ltd’ has undertaken with the
following specific objectives.
To examine the features of Portfolio Management Services offered by financial service

companies with special reference to Geojit Financial Services Ltd.
To study the investors preference towards Portfolio Management Service.
1.3 METHODOLOGY
1.3.0 Size of sample
A sample of 100 individual investors from Cochin City was selected for the study.
1.3.1 Type of Sampling
This study utilizes the Convenience sampling method. Sample of 100 investors are
selecting from various income classes starting from Rs.10, 000 and above per month the
respondents are taken by giving due importance to the high earning youth, professionals,
working women etc.
1.3.2 Data collection
Both primary and secondary data were collected and used for the study
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1.3.3 Primary data
Primary data were collected from 100 investors through interview schedule and through
interviews with the officials of Geojit financial services Ltd.
1.3.4 Secondary data
Secondary data were collected from the published reports, product brochure from the
company, magazines, books, journals and websites.
1.3.5 Tools used for analysis.
Keeping in view of the objectives of the present study, collected data were analyzing with
the help of statistical techniques such as percentage and weighted scores.
1.4 Limitations of the study
The analysis of the study has mainly depended on the personal views of the respondents
and as such an element of subjectivity cannot be ruled out.
Reluctance to provide specific information regarding the investments and the returns by
some respondents may have produced a bias in the study.
The study was conducted in Cochin and the findings cannot be generalized to all areas.
1.5 CHAPTERISATION
Chapter 1 : Deals with Introduction. It includes objectives of the Study, Scope of

the study, Methodology, Limitations and Chapterisation.
Chapter 2 : Industry Profile - “Stock Market & PMS”.
Chapter 3 : Company Profile - “PORTFOLIO MANAGEMENT SERVICES

OFGEOJIT”.
Chapter 4 : Theoretical review of Portfolio Management Services
Chapter 5 : Investors preference on investment avenues
 Profile of respondents
 Savings behavior of investors

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 Savings Percentage
 Main Investment Avenues
 Percentage of savings in each investment avenue
 Best Investment Avenue
 Important factors while investing
 Investment objective
 Return Expectations
 Investment time frame
 Risk Bearing Capacity
 Professional Advice
 Portfolio Management Services
 Sources of information
Chapter 6 : Findings, Conclusion and Suggestions.
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CHAPTER- II
INDUSTRY PROFILE
2.0 BROKERAGE INDUSTRY
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The Indian retail brokerage industry consists of companies that primarily act as
agents for the buying and selling of securities (e.g. stocks, shares, and similar financial
instruments) on a commission or transaction fee basis. It has two main interdependent
segments: Primary market and the Secondary market. Now this market is extended to
fields like currency, commodity, mutual fund, insurance etc...
The Indian equity brokerage industry thrived on the back of equity markets'
sustained bull run during 2003-07. Although high competitive pressure meant continuous
compression of brokerage commissions and low electronic penetration kept operating
costs high, industry revenue was growing. Furthermore, the industry attracted domestic
and foreign investment interest at high valuations of upto 45x P/E multiples. During this
time, many of the key players started expanding their portfolio of services to include
wealth management and advisory services, sale of insurance and mutual fund products,
consumer financing and so on.
However, post-2008, the economic downturn - muted trading turnover, relentless
competitive pressure and decreasing margins, continued high operating costs and high
margining requirements - has put the industry under pressure. Profitability is muted and
the major players are under pressure to build scale. Expansion of scale and investments
into technological systems has the potential to lead the top brokerage firms into paths of
higher growth, but the current economic climate is clearly against heavy investments.
The basic function of a brokerage firm is to execute buy and sell orders for clients.
Traditionally these firms have offered the investigation of the quality and the possibilities
of investing in a variety of investment products. It is still accustomed for brokerage firms
to offer information about possible investments free of charge. This activity of bringing
free of charge stock investment reports is one of the main tools that are utilized by
brokerage houses to compete against other firms and to investors it continues to be an
important service
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2.1 The History of Stock Brokerage Firms
Stock brokerage firms have been an established feature in the financial industry for
nearly one thousand years. Dealing in debt securities, brokers employ a variety of
systems to aid investors with the purchase and sales of stocks and bonds in a variety of
markets. The firms have changed over the years, growing to massive organizations that
can affect the entire financial sector positively or negatively with their performance.
Changing with the times, the early twenty-first century saw a rise of online trading that
enabled the average investor to take part in the stock market for the first time.
2.1.0 History
During the 11th century, the French began regulating and trading agricultural debts
on behalf of the banking community, creating the first brokerage system. In the 1300s,
houses began to be set up in major cities like Flanders and Amsterdam in which
commodity traders would hold meetings. Soon, Venetian brokers began to trade in
government securities, expanding the importance of the firms.
In 1602, the Dutch East India Company became the first publicly traded company in
which shareholders could own a portion of the business. The stocks improved the size of
companies and became the standard bearer for the modern financial system.
2.1.1 Significance
The earliest brokerage firms were established in London coffee houses, enabling
individuals to purchase stocks from a variety of organizations. They formally founded the
London Stock Exchange in 1801 and created regulations and memberships. The system
was copied by brokerage firms across the world, most notably on Chestnut Street in
Philadelphia. Soon, the US exchange was moved to New York City and various firms
like Morgan Stanley and Merrill Lynch were created to assist in the brokering of stocks
and securities. The firms limited themselves to researching and trading stocks for
investment groups and individuals.
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2.1.2 Considerations
During the 1900s, stock brokerage firms began to move in a direction of market
makers. They adopted the policy of quoting both the buying and selling price of a
security. This allows a firm to make a profit from establishing the immediate sale and
purchase price to an investor. The conflict with brokerage firms setting prices creates the
concern that insider trading can result from the sharing of information. Regulators have
enforced a system called Chinese Walls to prevent communication between different
departments within the brokerage company. This has resulted in increased profits and
greater interconnection within the financial industry.
2.1.3 Effects
The creation of high valued brokerage firms like Goldman Sachs and Bear Sterns
created a system of consolidation. Working with hundreds of billions of dollars, the
larger firms began to merge and take over smaller firms in the last half of the 20th
century. Firms like Smith Barney were acquired by Citigroup and other investment
banks, creating massive financial institutions that valued, held, sold, insured and invested
in securities. This conglomeration of the financial sector created an environment of
volatility that caused a chain reaction when other firms like Bear Sterns and Lehman
Brothers filed for bankruptcy. Trillions of dollars of assets were tied together in different
companies and resulted in a large economic collapse in late 2008.
2.1.4 Features
A large share of the brokerage firms have moved to an online format. Smaller
brokers such as E*Trade, TD Ameritrade and Charles Schwab have taken control of most
individual investors accounts. The added convenience and personal attention paid to the
small investor has resulted in a large influx of activity. In addition, the fact that the online
resources offer up-to-the-minute pricing and immediate trades makes their format
appealing to the modern user. Discounted commissions have lessened the price of trades,
giving access to a wider swath of people and adding liquidity to the market. The role of
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the stock brokerage firm is ever-changing and proves to be a boon for the future of the
financial industry.
2.1.5 Full service v/s Discount brokerage houses
Full service brokerage firms continue to offer informative stock reports and a
level of service much higher than other brokerage houses. Discount brokerage houses
only dedicate themselves to execute orders for clients. Full service brokers are sellers
looking for purchasing and selling for clients and offering more customer service than is
available from discount brokers. It is many times possible that a client will not even know
who is taking care of the buy or sell order that they placed.
2.1.6 Market size and characteristics
The Indian retail brokerage market is showing phenomenal growth. The total
trading volume of brokerage companies has increased from US$1239.1 billion in 2004 to
US$1492.1 billion in 2005, and is expected to reach US$6535.7 billion by 2015. Some of
the main characteristics of the brokerage industry include growth in e-broking; growing
derivatives market, decline in brokerage fees etc.
Today, as per NSDL statistics, we have only 2.4 million investors with demat
accounts in the country. Considering various investor combinations that are holding
accounts, we can presume the country has roughly 5-7.5 lakh active investors now. This
figure is unbelievably small compared to the potential number of investors, which is
anything between 200 million and 250 million. When we take into consideration the way
transaction risk and cost in the Indian capital market is coming down, there will be a
massive surge in the number of investors and also in volumes. The only way to manage
this kind of potential growth is to adopt state-of-the-art trading techniques.
The growth of Internet-based trading as a mass trading technique in the country is
unstoppable, going by the indicators available and the signals for the future. When it
ultimately gathers momentum, the biggest beneficiary will be the investor, who will be
able to trade with greater speed and transparency, and at lower costs...
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2.2.0 INDIAN EXCHANGES
The NSE and BSE are largest stock exchanges in the country .They handle
very large daily trading volumes, support large amount of data traffic, and have a very
large nationwide network NSE is the third largest in the world in the number of trades
after NYSE and NASDAQ India has23 small and 2 big exchanges .The 2 big exchanges
NSE and BSE account for 90 percent of trade .Bombay Stock Exchange LTD is the
oldest stock exchanges in India.
Indian financial market have continuously evolved over the years with multi
fold objective of transparency reducing transportation cost of evolving efficient payment
and settlement system from dematerialization of shares to a rolling settlement and now
introduction of trading in derivative instruments ,the focus has been the investor.
With the changing dynamics the investor are looking beyond their traditional
relationship .They want a system which is safe ,secure and transparent .They are looking
for a broker who offers the complete suite of financial products such as equity futures and
options mutual funds IPOs etc.. Timely pay in and pay out, hassle-free settlements and
personalized and localized service at an affordable cost.
The major developments in the sphere of internet based share dealings in the new global
market place reveals three distinct phases
Phase 1: The open outcry system with the transactions taking place manually in the ring
Phase 2: The electronic system enabling the brokers to place the order line
Phase 3: The online share trading system empowering the customers to transact online.
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2.2.1 Online trading
There are mainly two categories of companies in the area of online share
trading first category falls under the traditional banks and online share trading .First
category falls under traditional banks turned brokers E.g.; ICICI and HDFC. Second type
is those companies who are solely into broking E.g.: JRG securities, Share khan and
Geojit etc… The services these companies provides for trading online are also known as
e-broking .Major benefit of online trading is that can carry out trading from the
convenience of your home avoiding a visit to brokers office .Some of the online broking
sites in India are paisa.com ICICI direct.com, indiabulls and JRGsecurities.com.
Features;
 Online BSE and NSE execution

 Free access to investment and advice
 Daily research report and market advice
 Pre market report daily trading calls based on technical analysis
 Live market information
 Depository service Demat and Remat transaction
 Internet-based online trading
2.2.2 Global prospects of online share trading industry
Stock exchanges across the globe are exploring an alliance that will create 24
hour global equity market (GEM).The Newyork stock exchanges and exchanges from
three main time zones Asia –Pacific, the Americas and Euronext plan to form a trading
mechanism that will allow trading of shares in the world’s global countries.
Online share dealing on the internet is now a way of life for thousands of
investors. In India there are about 50 online brokerages but online trading stands at barely
2% of the share trading market today, a poor scenario when compared to 6% in China
and rapid growth in Europe 80% of South Korea and 30-40% of US trades are executed
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online .the segmentation of the share trading market in India as in most countries
worldwide, consists largely of traders and dealers along with a handful of investors.
2.2.3 Online trading scenario in India
Online trading scenario in India is a recent phenomenon which began in

January 2000 .It is estimated that customer base for all portals put together is a mere
12000000 compared to 2.5 million customers in Japan and 14.3 million in the US
showing steady growth .BSE and NSE have developed proprietary trading engines called
Webex and Dotex, respectively. These engines will obviate the need for a broker to
develop his own engine and result in capital investment savings. A user can log on to
these engines using the website of broker and trade electronically. These developments
are expected to give a strong fillip to the e-broking industry in India.
2.3.0 SEBI guidelines
According to SEBI guidelines on internet trading the brokers must have a
minimum net worth of RS 50 lakhs, besides obtaining besides obtaining special
permission of stock exchange concerned stock exchange should also ensure that brokers
maintain adequate system capacity for handling data transfer and arrange for alternate
means of communication in case of internet failure
The following security measures are mandatory for all internets related trading systems
 User id
 First level passport
 Automatic expiry of password at the end of reasonable duration
 All transaction logs with proper audit facilities to be maintained in the system
 Secured socket Level(SSL) security server for access through internet
 Suitable firewalls between trading set up directly connected to an exchange trading
system and internet trading set up
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2.3.1 implementation
1. Portal
This is the website of the broker. Clients wishing to execute trades through the broker
will log on to the website of the broker to register themselves and place trades.
2. Order Routing System
This is the system that routes clients order to the brokers back office. The essential
components of an order routing system are administration module, risk management
system and surveillance system .this system facilitate broker to accept or reject orders and
forward the same to exchange through CTCL.
3. Computer to Computer Link
This link aids in routing the order from the brokers back office to the exchange.
4. Hardware and Network Components
These are components required for setting up the entire system
2.3.2data transmission
According to SEBI rules and regulations for brokers, the brokers are bound to
give the contract notes within 24 hours of execution of trade. Contract notes are issued by
the brokers to the clients as proof of trade Brokers are also expected to maintain the
records pertaining to all the trades executed by them for a period of 3 years.
As orders executed by the clients are not public information, SEBI has
mandated the information transmission pertaining to account opening and trades should
takes place via a Secure Socket Layer (SSL) .In the internet trading the clients get an
update of the status of his order as soon as order is executed on the exchange.
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2.4 Major players in Indian share broking industry are follows
 ICICI Securities Ltd. (www.icicidirect.com)

 Kotak Securities Ltd. (www.kotaksecurities.com)
 Indiabulls Financial Services Limited (www.indiabulls.com)
 IL&FS investmart Limited (www.investsmartindia.com)
 SSKI Ltd. (www.sharekhan.com)
 Motilal Oswal Securities (www.motilaloswal.com)
 Fortis Securities (Religare) (www.fortissecurities.com)
 Karvy securities (www.karvy.com)
 Geojit BNP paribas (www.geojitbnpparibas.com)
 HDFC Securities (www.hdfcsec.com)
 Hedge equities (www.hedgeequities.com)
 Jrg securities
 India infoline (www.indiainfoline.com)
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CHAPTER 3
PORTFOLIO MANAGEMENT SERVICE OF
GEOJIT
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3.0 About GEOJIT
Evolution of the company
It all started in the year 1987 when Mr. C.J. George and Mr. Ranajit Kanjilal founded
Geojit as a partnership firm. In 1993, Mr.Ranajit Kanjilal retired from the firm and Geojit
became the proprietary concern of Mr. C .J. George. In 1994, it became a Public Limited
Company named Geojit Securities Ltd. The Kerala State Industrial Development
Corporation Ltd. (KSIDC), in 1995, became a co-promoter of Geojit by acquiring a 24
percent stake in the company, the only instance in India of a government entity
participating in the equity of a stock broking company. The year 1995 also saw Geojit
being listed on the leading regional stock exchanges. Geojit listed at The Stock
Exchange, Mumbai (BSE) in the year 2000. Company’s wholly owned subsidiary, Geojit
Commodities Limited, launched Online Futures Trading in agri-commodities, precious
metals and energy futures on multiple commodity exchanges in 2003. This was also the
year when the company was renamed as Geojit Financial Services Ltd. (GFSL). The
Board consists of professional directors; including a Kerala Government nominee. With
effect from July 2005, the company is also listed at The National Stock Exchange (NSE).
Company is a charter member of the Financial Planning Standards Board of India and is
one of the largest Depository Participant(DP)brokersinthecountry.
On 31st December 2007, the company closed its commodities business and surrendered
its membership in the various commodity exchanges held by Geojit Commodities Ltd.
Global banking major BNP Paribas took a stake in the year 2007 to become the single
largest shareholder. Consequently, Geojit BNP Paribas has been renamed as Geojit BNP
Paribas Financial Services Ltd.
A leading retail financial service player
Geojit BNP Paribas today is a leading retail financial services company in India with a
growing presence in the Middle East. The company rides on its rich experience in the
capital market to offer its clients a wide portfolio of savings and investment solutions.
The gamut of value-added products and services offered ranges from equities and
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derivatives to Mutual Funds, Life & General Insurance and third party Fixed Deposits.
The needs of over 550,000 clients are met via multichannel services - a countrywide
network of over 525 offices, phone service, dedicated Customer Care centre and the
Internet.
Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange
(NSE) and the Bombay Stock Exchange (BSE). In 2007, global banking major BNP
Paribas joined the company’s other major shareholders - Mr. C.J.George, KSIDC (Kerala
State Industrial Development Corporation) and Mr.Rakesh Jhunjhunwala – when it took a
stake to become the single largest shareholder.
Strategic joint ventures and business partnerships in the Middle East has provided the
company access to the large Non-Resident Indian(NRI) population in the region. Now, as
a part of the BNP Paribas global network, Geojit BNP Paribas is well positioned to
further expand its reach to NRIs in 85 countries. Barjeel Geojit Securities is the joint
venture with the Al Saud group in the United Arab Emirates that is headquartered in
Dubai with branches in Abu Dhabi, Ras Al Khaimah, Sharjah and Muscat. Aloula Geojit
Brokerage Company headquartered in Riyadh is the other joint venture with the Al Johar
group in Saudi Arabia. The company also has a business partnership with the Bank of
Bahrain and Kuwait, one of the largest retail banks in Bahrain and Kuwait.
At the forefront of the many fruitful associations between Geojit BNP Paribas and BNP
Paribas is their joint venture, namely, BNP Paribas Securities India Private Limited. This
JV was created exclusively for domestic and foreign institutional clients. An industry first
was achieved when Geojit BNP Paribas became the first broker in India to offer full
Direct Market Access(DMA) on NSE to the JV’s institutional clients.
A strong brand identity and extensive industry knowledge coupled with BNP Paribas’
international expertise gives Geojit BNP Paribas a competitive advantage.
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Expanding range of online products and services
Geojit BNP Paribas has proven expertise in providing online services. In the year 2000,
the company was the first stock broker in the country to offer Internet Trading. This was
followed by integrating the first Bank Payment Gateway in the country for Internet
Trading, and many other industry firsts. Riding on this experience, and harnessing BNP
Paribas Personal Investors’ expertise as the leading online broker in Europe, is helping
the company to rapidly expand its business in this segment. Presently, clients can trade
online in equities, derivatives, currency futures, mutual funds and IPOs, and select from
multiple bank payment gateways for online transfer of funds. Strategic B2B agreements
with Axis Bank and Federal Bank enables the respective bank’s clients to open integrated
3-in-1 accounts to seamlessly trade via a sophisticated Online Trading platform.
Further, deployment of BNP Paribas’ state-of-the-art globally accepted systems and

processes is already scaling up the sales of Mutual Funds and Insurance.
Wide range of products and services
Certified financial advisors help clients to arrive at the right financial solution to meet
their individual needs. The wide range of products and services on offer includes -
Equities | Derivatives | Currency Futures | Custody Accounts | Mutual Funds | Life
Insurance & General Insurance | IPOs | Portfolio Management Services | Property
Services | Margin Funding | Loans against Shares
A growing footprint
With a presence in almost all the major states of India, the network of over 525 offices
across 300 cities and towns presently covers Andhra Pradesh, Bihar, Chattisgarh, Goa,
Gujarat, Haryana, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra,
New Delhi, Orissa, Punjab, Rajasthan,Tamil Nadu & Pondicherry, Uttar Pradesh,
Uttaranchal and West Bengal.
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3.1 Services of the Company
The services offered by the company are
3.1.0 Equity Trading
Geojit offers three platforms for equity trading such as silver gold and platinum with
trade volume requirements. The company provides the investors with smart advice from
the research desk through daily SMS alerts, market pointers, periodical research reports,
stock recommendations and customer meets organized frequently: The brokerage
structure makes Geojit's Online trading all the more attractive.
3.1.1 Margin Trading Funding Scheme
Geojit Financial Services Ltd. offers Margin Trading Funding facility to all offline
customers under the scheme of Margin Funding approved by SEBI. Margin funding of up
to 50% of the purchase value
3.1.2 Loan against Shares
Geojit Credits Pvt. Ltd., a subsidiary of Geojit Financial Services Ltd, registered as a
Non-Banking Finance Company (NBFC) offers Loans against security of shares. The
facility is available to all customers of Geojit Financial Services Ltd.
3.1.3 Loans for Commodities Trading
Geojit Credits Pvt. Ltd offers loans against Pledge of Warehouse Receipts for delivery at
Commodity Exchanges.
3.1.4 DP facilities offered by Geojit
Geojit, is a depository participant of NSDL. Investors can open demat accounts with
NSDL through Geojit. The services offered by the company are :
De-materialization: You can convert your physical shares into electronic form by
surrendering the shares for dematerialization at the Geojit branch.
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Re-materialization: Re-materialization enables you to convert the dematerialized shares
into physical form.
Repurchase: This facility helps you to submit the units of open-ended Mutual Funds in
case of re-purchase.
Pledge: You can pledge securities to avail a loan.
Transfer: You can transfer securities from one demat account to another.
IPOs: In case you have applied for an IPO and receive an allotment then the securities are
transferred directly to your demat account. The same applies for bonus and rights issues.
Commodity De-mat Account: If you are a commodity player, you may need to open a
commodity de-mat account with Geojit.
Speed-e: If you register for Speed-e services, then transfer instructions can be placed
online over the internet to pre-notified Clearing Members Pool a/c. This does away with
the need to submit a physical delivery instruction slip.
Internet Services : If you have access to Internet then you can register with us to view
your demat account over the Internet. This is very beneficial as you can avail of a host of
services at no extra cost. You will be able to view your holdings, reports, ledger and will
have free access to our research reports at any time.
SMS Alert Facility: The alert messages for debits(transfers) and IPO credits would be
sent to the account holders who have subscribed to this facility. Depository provides this
facility and no charge is levied on DPs for providing this service to invest
3.1.5 Commodity Futures Trading

Geojit Commodities, a subsidiary of Geojit Financial Services Limited, is mainly
engaged in the business of Commody Futures Trading. Geojit Commodities is a member
of:
National Multi – Commodity Exchange of India limited (NMCE)
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National Commodity & Derivatives Exchange Limited (NCDEX)
Multi – Commodity Exchange (MCX)
India Pepper and Spice Trade Association (IPSTA)
Singapore Commodity Exchange (SICOM)
Dubai Gold Commodity Exchange (DGCX).
Geojit Commodity offers futures trading through multiple exchanges in varied

commodities such as:
Agri commodities: oilseeds, soya, groundnut, pulses, rice, wheat, sugar, spices, rubber,
guar, pepper, cardamom, coffee, etc
Precious metals: gold and silver,
Base metals: steel, aluminum, nickel, zinc, copper, etc
Energy products: crude oil and furnace oil
Geojit’s clientele in commodities range from investors, co-operative societies, state and
national institutions to dealers, traders, manufacturers, financiers, speculators, arbitragers,
etc.
3.1.6 Mutual funds and Insurance
Geojit undertakes the distribution of variety financial instruments such as mutual funds,
bonds, life insurance products, fixed deposits etc. The wealth centre team understands the
universe of investment options, analyzes the risk and return from these options and
recommends investment options to clients to help them achieve their financial goals.
Geojit has a tie up with all the Mutual Funds across the country. Geojit offers life
insurance products of the following life insurance companies:
Metlife India Life Insurance Company
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LIC of India
ICICI Prudential
3.1.7 For general insurance, Geojit has partnered with the following:
Bajaj Allianz General Insurance Company
National Insurance Company Ltd
Geojit also helps its customers in investing in 8% RBI taxable bonds, Capital gain, fixed
deposits (KPFC, KTDFC) etc. through its tie- up with the required organizations.
Property Services
Our property services meets the market requirement for an organized, reliable Indian
broker who can offer buyers and sellers a single transparent platform to buy/sell/rent
Office and Commercial Spaces, and Residential Flats/Villas, at the right price.
You can rely on Geojit BNP Paribas to act as a trusted intermediary between you and
builders. We will only promote properties that have passed legal and technical scrutiny so
that buyers get quality at the right value. The company will act purely as an intermediary
and will not enter the business of property development
Property Services is backed by Geojit BNP Paribas’ 22 years of broking experience, its
brand name and strong shareholders. The existing 450,000 plus clients are serviced by a
pan-India network of 500 offices
3.2 Subsidiary companies
The subsidiary companies are
3.2.0 Geojit Commodities Limited

Geojit Commodities, a subsidiary of Geojit Financial Services Limited is mainly engaged
in the business of Commodities Futures Trading.
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3.2.1 Geojit Technologies (P) Limited
Geojit Technologies a subsidiary of Geojit Commodities Ltd. is engaged in providing

software solutions using open computing and web standards where possible. Geojit
Technologies has strong domain expertise in financial services such as Broking,
Depository, Derivatives, Banking, etc. It also offers development, procurement
assistance, implementation, guidance and support services.This is a subsidiary of Geojit
Commodities Limited, engaged in the distribution of Mutual Funds and Insurance
products.
3.2.3 Geojit Financial Management Services (P) Limited

This is a subsidiary of Geojit Commodities Limited, engaged in providing wealth
management services.
3.2.4 Geojit Credits (P) Limited

Geojit Credits, a subsidiary of Geojit Financial Services Ltd. is registered with Reserve
Bank of India as an NBFC. It is engaged in the business of margin funding for securities
trading, loan against shares, loan against commodity futures, etc.
3.2.5 Barjeel Geojit Securities L.L.C.

Barjeel Geojit Securities LLC is a joint venture between Geojit Financial Services Ltd
and Al Saud Group
3.3.0 Portfolio Management Services:
Geojit, a SEBI registered Portfolio Manager (Reg. No.INP000003203) offers

discretionary portfolio management services. Geojit has a team of experts who carefully
take investment decisions based on the clients' objectives. The Portfolio Management
team has a successful track record of more than 10 years in the capital market. The team
has access to Geojit's strong Equity Research, and Fundamental & Technical Analysis.
IMK ADOOR Page 24

3.3.1 Investment Objective
To generate medium to long-term capital growth (2-3 years) by identifying undervalued

stocks and those with growth opportunities from a select list of well researched stocks.
3.3.2.Strategy
identifying growth stocks from a select list through extensive research.
3.3.3 Minimum Investment
Rs.5 lakh for resident Indians and Rs.25 lakh for Non-Resident Indians.
3.3.4.Reports
Portfolio and NAV are communicated bi-weekly via e-mail.
3.3.5 Risk factors
As the stocks are normally held for medium to long term, the net asset value will be
affected by market volatility.
3.3.6 PMS fee
There are two schemes for the PMS fee
Scheme 1: Flat fee of 3%per annum charged in 4equal installments i.e. 0.75% every
quarter, on the average value of investments at the beginning and ending NAV of the
quarter. For example, if the amount invested is RS.5 Lakhs and the NAV at the end of the
first quarter is RS.6 Lakhs, a fee of 0.75% is charged on Rs 5.5 Lakhs i.e. Rs 4125/-for
the quarter.
Scheme 11: Flat fee of 1%per annum charged in 4equal installments i.e. 0.25% every
quarter, on the average value of investments at the beginning and ending NAV of the
quarter, and on completion of one year, if the return on investment is more than 12% of
the investment, 20% of the gain over and above 12% is charged as performance fee..
IMK ADOOR Page 25

For example, if a client is invests RS.5 Lakhs and after completion of one year his
investment value is RS.6 Lakhs, then the charges will be 20% of Rs 40000 (which is the
gain over and above 12% of the investment of Rs 5 Lakhs i.e. Rs 60000/-)which is Rs
8000/-.
3.3.7 Performance fee
20% on gain in NAV over and above 12% p.a. based on the high watermark concept
charged at the end of the year or on withdrawal.
3.3.8 No entry or exit load
There is no entry or exit load and lock in period. At any time the client has the option to
close the account by giving 10 days advance notice.
Table: 1
Returns of geojit PMS
Table shows the Weighted Average Return of Geojit for the last five years
1 3 6 1 3 5
Time Month Month Month Year Year Year
Geojit BNPP 7.09% 10.67% 43.90% 98.33% 74.55% 235.86%

PMS
Nifty 2.20% 1.79% 9.85% 16.68% 18.53% 131.54%
(Source-PMS product brochure, Geojit.)
IMK ADOOR Page 26

CHAPTER-4
A THEORITICAL REVIEW OF
PORTFOLIO MANAGEMENT SERVICES
IMK ADOOR Page 27

4.0 PORTFOLIO MANAGEMENT SERVICES
The PMS schemes are tailor made to suit the varying tastes, risk profiles and
expectations of the investors. hence, a scheme for the risk averse or low risk investors
would invest largely in the stable income generating debt and money market instruments
and the exposure to equity and equity related instruments would be low .On the other
hand, for an investor with a medium risk profile scheme having a judicious mix of equity
and equity related instruments as well as debt and money market instruments would be
suitable. In this case the risk arising due to uncertainty of stock market on account of the
exposure to equity and equity related instruments would be mitigated and
counterweighed by the stable income generated from the debt and money market
instruments. Lastly the scheme for an investor having high risk appetite would take a
large exposure to equities and equity related instruments to generate high returns, while
the instruments in the low yielding debt and money market instruments would be quite
low.
It is important to invest in good PMS schemes managed by good fund managers. But this
is an almost difficult task given the present regulatory framework. This is because unlike
mutual fund schemes, the PMS schemes do not have NAVs with which one can judge
their performance. The simple reason for this lack of information on NAVs is that the
PMS portfolios are customized on an individual basis and the returns generated on
individual portfolios are confidential information which the portfolio managers cannot
divulge to anyone except the respective clients. This is because the portfolio managers
manage private funds and, therefore as a matter of privacy policy, they cannot reveal the
performance of the individual portfolios to the public.
Of course as with any investments in the stock market, the performance of any PMS
portfolio depends on the conditions in stock and money markets which, in turn are
influenced by macro-economic indicators such as interest rates, inflation, oil prices
domestic and international geo-political situations, etc. Hence although no one can
provide guaranteed returns, the level of knowledge and experience and the fund
IMK ADOOR Page 28

management skills of the portfolio manager can make a big difference to the kind of
returns generated by the portfolio.
There are a plethora of PMS Schemes on offer cater to the diverse preferences, tastes,
profiles and categories of investors. However, except for the customized portfolio offered
by some portfolio managers, all other schemes are offered as bouquet of products from
which investors can take their pick according to their risk return choices and preferences.
Apart from this some portfolio managers also offer exclusive customized portfolios
keeping individual preferences in mind.
Since the portfolio manager is a qualified professional who has won his spurs through his
expertise in investing and managing funds, his expertise comes with a price attached.
Each MF and brokerage house has its own fee structure which is linked with the
performance of the portfolio over a specified period. The basic fee (management fee, as it
is called) is payable to the fund house irrespective of the profit or loss made on the
portfolio of investments. The management fees charged by the fund houses vary
anywhere between 0.5-0.7 percent per quarter (i.e. between 2-3 percent per annum) of the
total value of the portfolio depending upon the scheme. In some cases the management
fee depends on the amount invested, that is, higher the amount the lower the fee in
percentage terms.
Apart from the basic fee, many of the PMS schemes charge quarterly performance based
fee, which can be anywhere between 10 percent to 30 percent of the profits realized
above a specified limit in a year. The performance based fee is an incentive to the fund
manager as well as the fund house to strive to get maximum returns on the portfolio
because the more the profit generated, the more their reward .On the other hand, if there
is no profit or less than specified percentage of profit, or worse if the portfolio depreciates
due to losses, then the fund house is not entitled to get any performance –linked fee. But
constant churning of portfolio gives them brokerage income as many have broking firms
too.
IMK ADOOR Page 29

4.1 PORTFOLIO MANAGEMENT PROCESS
The portfolio management process can be divided into five broad phases:
Security Analysis
Portfolio Analysis
Portfolio Selection
Portfolio Revision
Portfolio evaluation
Fig.1
Portfolio Management Process
Security Analysis
Portfolio Analysis
Portfolio Selection
Portfolio Revision
Portfolio evaluation
(Source: S Kevin 2009 “portfolio management 2nd ed”)
IMK ADOOR Page 30

4.1.0 Security Analysis
The securities available to an investor for investment are numerous and of various
types. The shares over 7000 companies are listed I the stock exchange of the country.
Traditionally, the securities were classified in to ownership securities such as debentures
and bonds. Recently a number of new securities with innovative features are being issued
by companies to raise funds for their projects. Convertible debentures, Deep Discount
Bonds, Zero Coupon Bonds, Flexi Bonds, Floating Rate bonds, Global Depository
Receipts, Euro- currency Bonds, etc. are some of these new securities. From this vast
group of securities the investor has to choose those securities which he considers
worthwhile to be included in his investment portfolio. This call for a detailed analysis of
the available securities.
Security analysis is the initial phase of the portfolio management process. This step
consists of examining the risk- return characteristics of individual securities. A basic
strategy in securities investment is to buy underpriced securities and sell overpriced
securities. But the problem is how to identify underpriced and over priced securities, or,
in other words, mispriced securities. This is what security analysis is all about.
There are two alternative approaches to security analysis, namely fundamental

analysis and technical analysis. They are based on different premises and follow different
techniques. Fundamental analysis, the older of the two approaches concentrates on the
fundamental factors affecting the company such as the EPS of the company, the dividend
pay-out ratio, the competition faced by the company, the market share, the quality of the
management, etc. A fundamental analysis studies not only the fundamental factors
affecting the company, but also the fundamental factors affecting the industry to which
the company belongs as also the economy fundamentals.
According to this approach, the share price of a company is determined by these

fundamental factors. The fundamental analysis work out the true worth or intrinsic value
of a security based on its fundamentals; then compares this intrinsic value with the
current market price. If the current market price is higher than the intrinsic value, the
IMK ADOOR Page 31

share is said to be overpriced and vice versa. The mispricing of securities provides an
opportunity to the investor to acquire the share or dispose of the share profitability. An
investor would buy those securities which are underpriced and sell those securities which
are overpriced. It is believed that notable cases of mispricing will be corrected by the
market in future Prices of undervalued shares will increase and those of overvalued share
will decline.
Fundamental analysis helps to identify fundamentally strong companies whose shares

are worthy to be included in the investor’s portfolio.
The second alternative approach to security analysis is technical analysis. A technical

analyst believes that share price movements are systematic and exhibits certain consistent
patterns. He, there for studies past movements in the prices of share to identify trends and
patterns. He then tries to predict the future price movements. The current market price is
compared with the future predicted price to determine the extent of mispricing. Technical
analysis is an approach which concentrates on price movements and ignores the
fundamental of the shares.
A more recent approach to security analysis is the efficient market hypothesis.

According to the school of thought, the financial market is efficient in pricing securities.
The efficient market hypothesis holds that market prices instantaneously and fully reflect
all relevant available information. It means that the market prices of securities will
always equal their intrinsic values. As a result, fundamental analysis which tries to
identify undervalued or overvalued securities.
The efficient market theory hypothesis further holds that share price movements are
random and not systematic. Consequently, technical analysis which tries to study price
movements and identify patterns in them is of little use.
Efficient market theory hypothesis is a direct repudiation of both fundamental

analysis and technical analysis. An investor cannot consistently earn abnormal returns by
undertaking fundamental analysis or technical analysis. According to efficient market
IMK ADOOR Page 32

hypothesis, it is possible for an investor to earn normal returns by randomly choosing
securities of a given risk level.
Fig.2
Risk-Return relationship for various type bonds and stocks
Sectorial shares
Blue chip shares
Return
Public sector bonds Growth shares
Defensive shares
Income /growth oriented units
Bank deposits
Risk
(Source: Prasanna Chandra, 2003 “Investment analysis and port folio management”)
4.1.1 Portfolio Analysis.
A portfolio is a group of securities held together as investment. Investors invest

their funds in a portfolio of securities rather than in a single security because they are risk
averse. By constructing a portfolio, investors attempt to spread risk by not putting all
their eggs in to one basket. Thus, diversification of one’s holding is intended to reduce
risk in investment.
Security analysis provides the investor with a set of worthwhile or desirable

securities. From this set of securities an indefinitely large number of portfolios can be
constructed by choosing different sets of securities and also by varying the proportion of
IMK ADOOR Page 33

investment in each security. Each individual security has its own risk- return
characteristics which can be measured and expressed quantitatively. Each portfolio
constructed by combining the individual securities has its own specific risk and return
characteristics which are not just the aggregates of individual security characteristics. The
return and risk of each portfolio has to be calculated mathematically and expressed
quantitatively.
Portfolio analysis phase of portfolio management consist of identifying the range of

possible portfolios that can be constituted from a given set of securities and calculating
their return and risk for further analysis.
4.1.2 Portfolio selection
Portfolio analysis provides the input for the next phase in portfolio in portfolio
management which is portfolio selection. The goal of portfolio construction is to generate
a portfolio that provides the highest return at a given level of risk. A portfolio having
those characteristic is known as an efficient portfolio. The inputs from portfolio analysis
can be used to identify the set of efficient portfolios; the optimal portfolio has to be
selected for investment.
4.1.3 Portfolio Revision
Having constructed the optimal portfolio, the investor has to constantly monitor the
portfolio to ensure that it continues to be optimal. As the economy and financial markets
are dynamic, changes take place almost daily As time passes, Securities which were once
attractive may cease to be so. New securities with promises of high returns and low risk
may emerge. The investor now has to revise his portfolio in the light of the developments
in the market. This revision leads to purchase of some new securities and sale of some of
the existing securities from the portfolio. The mix of securities and their proportion in the
portfolio changes as a result of the revision.
IMK ADOOR Page 34

Portfolio revision may also be necessitated by some investor-related changes such as
availability of additional funds, change in risk attitude, need of cash for other alternative
use, etc.
Whatever be the reason for portfolio revision, it has to be done scientifically and
objectively so as to ensure the optimality of the revised portfolio. Portfolio revision is not
a casual process to be carried out without much care. In fact, in the entire process of
portfolio management, portfolio revision is as important as portfolio analysis and
selection
4.1.4 Portfolio Evaluation
The objective of constructing a portfolio and revising it periodically is to earn

maximum returns with minimum risk. 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 and risk. This involves quantitative measurement of actual return
realized and risk born by the portfolio over the period of investment. These have to be
compared with objective norms of assess the relative performance of the portfolio.
Alternative measures of performance evaluation have been developed for use by
investors and portfolio managers.
Portfolio evaluation is useful in yet another way. It provides a mechanism for

identifying weakness in the investment process and for improving these deficient areas. It
provides a feedback mechanism for improving the entire portfolio management process.
The portfolio management process is an on going process. It starts with security

analysis, proceeds to portfolio construction, and continues with portfolio revision and
evaluation. The evaluation provides the necessary feedback for designing a better
portfolio next time.
IMK ADOOR Page 35

4.2 Criteria for Evaluation of Portfolio
Managers and Analysts ‘wish to know how they performed in their investment strategies
in terms of return per unit of risk ,both in absolute terms and relative terms relative to
overall market performance. They have to assess the extent to which the objectives aimed
at are being achieved say in terms of income, capital appreciation. In this context,
evaluation has to take into account whether the portfolio secured above average returns,
average or below average, as compared to the market return.
1. Rate of returns or excess return over risk free rate.
2. Level of Risk
. The theory of Markowitz and Modern Portfolio Theory have opened up the avenue for
selecting and evaluating the portfolios on the basis of risk adjusted return. Modern
portfolio theory has postulated that the portfolio selection and evaluation should be on the
basis of both Risk and Return-and the objective should be to optimize the return for a
given level of risk or to minimize the risk for a given level of return. Due to uneven
fluctuations of return and high degree of variability of returns, risk adjusted returns
become the basis for evaluation. This is possible due to later developments involving the
quantification of risk by the statistical measures of S.D., variance and covariance of
returns of securities in a portfolio.
Performance measure
For evaluating the performance of a portfolio it is necessary to consider both risk and
return. The Treynor measure, Sharpe measure, and the Jensen measure are doing this.
Another important aspect to be considered is the asset allocation strategy.
IMK ADOOR Page 36

4.3 Asset Allocation
The asset allocation can be of the following versions:
Strategic Asset Allocation – It refers to the long –term normal asset mix sought by the
investor to achieve an ideal blend of risk and return. It may be established with the help
of the informal or formal approach.
Tactical Asset Allocation – It involves a conscious departure from the strategic or normal
asset mix based on rigorous and objective measurement of value. The objective of tactical
asset allocation is to enhance the performance of the portfolio through an opportunistic
shift in the asset mix in response to the changing patterns of reward.
Drifting asset allocation – This policy advocates that the initial portfolio be left
undisturbed. It is essentially a buy and hold policy. Irrespective of what happens to
relative values, no rebalancing is done.
Balanced Asset Allocation – A balanced asset allocation policy calls for a periodical
rebalancing of the portfolio to ensure that the stock- bond mix is in line with the long
term normal mix.
Dynamic Asset Allocation - It involves shifting the asset mix mechanistically in response
to changing market conditions.
One important area is the valuation methods. Generally there are two approaches, top
down and bottom up approach.
4.4 The Top-Down Approach
The top-down approach is a valuation approach that begins with first analyzing the
overall economy and then continuing to drill down to the specific analysis. The idea
behind the top-down approach when valuing securities is to start from a high level
analysis: the general economic conditions. The next step would then be to analyze a
specific industry within the economy. Last, an investor would compare and analyze
specific securities to invest in.
IMK ADOOR Page 37

The top-down approach allows an investor to make an informed investment decision

based on a keen understanding of the economy and industry and how that relates the
stock, versus comparing the stocks fundamentally against their peers without thinking
about the overall movement in the market.
The top-down approach can be particularly useful when analyzing the valuation of world
stocks. Given the starting point of understanding the world economies, an investor is able
choose an appropriate stock based on areas of the world that may be doing better
In asset management, in a bottom-up approach, investors choose stocks on the basis of

their specific characteristics, not the sector the stocks belong to. This approach assumes
that individual companies can do well even in an industry that is not performing very
well. The rationale is that if the company is fundamentally sound, over time it will
definitely emerge as a winner. Irrespective of where the economy or industry moves in
the short-term
4.5 Bottom-up approach
It focuses on financial aspects such as debt levels, price-earnings ratios, etc. to identify
quality companies regardless of the macro-environment Regardless of which approach is
taken, a sell or buys decision is ultimately subjective, relying largely on the manager’s
long experience of the markets for deconstruction of both the top-down and bottom-up
data.
Mainly the investment process consists of two tasks. The first task is security analysis
which focuses on assessing the risk and return. The second task is portfolio selection
whish involves choosing the best possible portfolio from the set of feasible portfolios.
Portfolio Theory, originally proposed by Harry Markowitz in the 1950s, was the first
attempt to quantify the risk of a portfolio and develop a methodology for determining the
optimal portfolio. Markowitz quantitatively showed why and how diversification reduces
risk. He showed that the variance of the rate of return was a meaningful measure of
portfolio risk under a reasonable set of assumptions .His formulas for variance of a
IMK ADOOR Page 38

portfolio not only indicated the importance of diversifying the investments to reduce the
total portfolio risk .,but also showed how to effectively diversify .
4.6 CAPM & SML: (Capital Asset Pricing Model and Security Market Line)
CAPM postulates that in a perfect market, where shares are correctly priced, every
security will give a return commensurate with its beta value i.e. undiversifiable or
systematic risk. is a measure of the risk.
4.7 SEBI Guidelines for Portfolio Managers
Earlier there were many irregularities and malpractices in the working of the portfolio
management services. The SEBI has then imposed stricter rules, which included their
registration, a code of conduct and minimum infrastructure, experience and expertise etc.
It is no longer possible for. any unemployed youth, or retired person or self-styled
consultant to engage in Portfolio Management without the SEBI’s license. The guidelines
of SEBI are in the direction of making Portfolio Management a responsible professional
service to be rendered by experts in the field. SEBI formulated rules under the Securities
and Exchange Board of India (Portfolio Managers) Rules, 1993.
Earlier the merchant banker has been authorized to do Portfolio Management Services,
if they belong to Categories I and II as licensed by the SEBI. This classification of
merchant bankers was dropped in 1996 and only the category I merchant bankers is
allowed to operate in India. Others who want to provide such services should have a
minimum net worth of Rs. 50 lakh and expertise, as laid down or changed from time-to-
time by the SEBI and would have to register with the SEBI. The SEBI have set out the
guidelines in this regard, in which the relations of the client vis-à-vis the Portfolio
Manager and the respective rights and duties of both have been set out. The code of
conduct for Portfolio Managers has been laid down by the SEBI. The job of Portfolio
Manager in managing the client’s funds, either on discretionary or non discretionary basis
has thus become challenging and difficult due to the multitude of obligations laid on his
shoulders by the SEBI, in respect of their operations, accounts, audit etc. It is thus clear
that Portfolio Management has become a complex and responsible job which requires an
IMK ADOOR Page 39

in-depth training and expertise. It is in this context that the regulations of SEBI on
Portfolio Management become necessary so that the minimum qualifications and
experience are also ensured for those who are registered with SEBI. Nobody can do
Portfolio Management without SEBI registration and license.
The SEBI has given permission to Merchant Bankers to do Portfolio Management. As per
the guidelines of September, 1991 a separate category of Portfolio Managers is also
licensed by SEBI for which guidelines were given in January 1993. A code of conduct
was also laid down for this category, as is the case with all categories of capital market
players and intermediates.
4.7.0 Portfolio Management Service
As per the SEBI norms, it refers to professional services rendered for management of
Portfolio of others, namely, clients or customers with the help of experts in Investment
advisory services. The latter involves the advice regarding the worthiness of any
particular investment or advice of what to .buy and sell. Investment management on the
other hand involves continuing relationship with client to manage investments
with or without discretion for the client as per his requirements.
4.7.1 Portfolio Manager
Only those who arc registered and pay the required license fee are eligible to operate as
Portfolio Managers. An applicant for this purpose should have necessary infrastructure
with professionally qualified persons and with a minimum of two persons
with experience in this business and a minimum net worth of Rs.50 lakh. The Certificate
once granted is valid for three years. Every portfolio manager is required to pay a sum of
ten lakh rupees as registration fees at the time of grant of certificate of registration by
SEBI. The portfolio manager who wants to renew its certificate of registration has to
make an application for renewal in Form A and Additional Information and pay a non-
refundable fee of one lakh rupees along with the application three months before the
expiry of the validity of the certificate. The SEBI has imposed a number of obligations
IMK ADOOR Page 40

and a code of conduct on them. The Portfolio Manager should have a high standard of
integrity, honesty and should not have been convicted of any economic offence or moral
turpitude. He should not resort to rigging up of prices, insider trading or creating false
markets,’ etc. Their books of accounts are subject to inspection and audit by SEBI. The
observance of the code of conduct and guidelines given by the SEBI are subject to
inspection and penalties for violation are imposed. The Manager has to submit periodical
returns and documents as may be required by the SEBI from time-to-time.
4.7.2 Method of Operation
The Professional Portfolio Manager can be approached by any individual or

organization .The portfolio manager is required to accept funds or securities having a
minimum worth of five lakh rupees from the client while opening the account for the
purpose of rendering portfolio management service to the client. If the Manager is
willing to accept him as his client, a contract is entered into form an agreement of his
funds either on discretionary basis or non discretionary basis, specifying the objectives,
risk to be tolerated, composition of assets / securities in the Portfolio and their
relative proportion, fees payable and time period of management, as per the preference of
the client etc. The client’s database is collected, namely, his available income and assets,
his needs, his risk preferences, his choice for income or growth or both and host of
personal details of the client so as to enable the Manager to design a proper investment
strategy for him.
4.7.3 SEBI Norms
SEBI has prohibited the Portfolio Manager to assume any risk on behalf of the client.
Portfolio Manager cannot also assure any fixed return to the client. The investments made
or advised by him arc subject to risk which the client has to bear. The
Investment consultancy and management has to be charged at rates which are fixed at the
beginning and transparent as per the contract. No sharing of profits or discounts or cash
incentives to client is permitted.
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The Portfolio Manager is prohibited to do lending, badla financing and bills discounting
as per SEBI norms. He cannot put the clients’ funds in any investment, not permitted by
the contract, entered into with the client. Normally investments cur
be made in both capital market and money market instruments. Client’s money has to be
kept in a separate account with the public sector bank and cannot be mixed up with his
own funds or investments. All the deals done for a client’s account are to be entered in
his name and Contract Notes; Bills etc. are all passed in his name. A separate ledger
account is maintained for all purchases/sales on client’s behalf, which should be done at
the market price. Final settlement and termination of contract is as per the contract and
for the time period agreed upon. Notice of termination of contract is also as per the
contract. During the period of contract, Portfolio Manager is only acting on a contractual
basis and on a fiduciary basis. No contract for less than a year is permitted by the SEBI.
IMK ADOOR Page 42

CHAPTER- 5
INVESTORS PREFERENCE ON
INVESTMENT AVENUES
IMK ADOOR Page 43

5.0 Profile of respondents
This analysis is based on the data collected from respondents using the questionnaire. The
investors are selected from the Cochin city. The various demographic and economic
factors regarding the respondents are as follows:
The gender ratio of respondents is as follows.
75 % of respondents were males and
25 % of respondents were females.
Their age varies between 23 to 70 years. It was aimed to include investors from all
categories such as youth, middle-aged so that the pattern will get an equitable
distribution. The occupational distribution of respondents is as follows.
Table: 2
Occupation profile of respondents
No. of
Occupati
responde Percenta
on
nts ge
Business 10 10%
Professio
nal 57 57%
Salaried 23 23%
Retired 5 5%
Others 5 5%
Total 100 100%
(Source: Field
survey)
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The analysis is done based on the income categories. The respondents are separated into
four different income classes. The aim was to find the investment preferences of investors
with different levels of investible income. The distribution of respondents is as follows.
Table: 3
Income wise classification of respondents
No. of
Monthly Income Respondents Percentage
Rs.10,000 -
25,000 55 55%
Rs.25,000 -
35,000 25 25%
Rs.35,000 -
50,000 10 10%
Rrs.50,000 &
above 10 10%
Total 100 100%
(Source: Field survey)
The responses are classified according to the income categories and analyzed to find the
similarities in their pattern of investments and preferences.
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5.1 Savings behavior of investors
Fig. 3
Savings behavior of investors
60.00%
55.00%
50.00%
40.00%
30.00% Yes
25.00% No
20.00%
10.00% 10.00%
10.00%
0.00%
Rs.10,000-25,000 Rs.25,000-35,000 Rs.35,000-50,000 Rs.50,000 &above
All the respondents were investors in various asset classes.
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5.2 Savings Percentage
The Respondents were asked to give the percentage of their annual income for savings
Table: 4
Savings Percentage
Monthly Income < 10% 10-20% 20-30% >30% Total
10 14 20 11 55
Rs.10,000-25,000 (18.19 ) (25.45) (36.36) (20.00) (100%)
7 10 8 25
Rs.25,000-35,000 - (28.00) (40.00) (32.00) (100%)
5 5 10
Rs.35,000-50,000 - (50.00) (50.00) - (100%)
6 4 10
Rs.50,000 &above - - (60.00) (40.00) (100%)
10 26 41 23 100
Total (10.00) (26.00) (41.00) (23.00) (100%)
* The figures given in bracket are the percentage of respondents in each category.
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Result shows that 41 % of respondents are having a savings rate of 20-30 percentages. 26
percentage of respondents saves 10 to 20 percentage of their income. Only 4.5 % of
respondents are saving less than 10 %. This clearly shows the good savings habit of
Indians.
This high level of savings shows there is ample scope for various financial products.
What to ensure is that it should be tailor made to include the various needs of the
investor.
IMK ADOOR Page 48

5.3 Main Investment Avenues
The respondents are asked to give the various investment avenues they posses. The result
was as follows.
Table: 5
Investment avenues
Bank Mutual Real

Deposit Equities Insurance funds PMS estate Commodities
Rs.10,000-
25,000 35 10 30 35 0 25 8
Rs.25,000-
35,000 18 10 20 15 0 10 5
Rs.35,000-
50,000 10 5 10 10 1 5
Rs.50,000
&above 5 2 3 5 1 3 3
Total (No. of
Respondents) 68 27 63 65 2 38 21
Out of the 100 respondents, 68 respondents see bank deposits as an investment option.
63 persons view insurance and 65 investors view mutual fund as an investment option.
Another important aspect is the growing acceptance of mutual funds and insurance as
investment options. Most of the investors are not viewing PMSs as their investment
option which shows the low awareness level or the high entry norms.
IMK ADOOR Page 49

5.4 Percentage of savings in each investment avenue
Here the respondents were asked how much percentage of their savings is invested in
each investment avenue. This was indented to get the present investment pattern of the
investors.
Table: 6
Percentage of savings in each investment avenue
Bank Mutual Real Comm

Deposit Equities Insurance funds PMS estate odities Total
Rs.10,000-
23.8% 2.9% 23.3% 20.4% 20.8% 8.8% 100%
25,000
Rs.25,000-
28.5% 10% 28% 18.5% 8.5% 6.5% 100%
35,000
Rs.35,000-
15% 5% 22% 17% 10% 19% 12% 100%
50,000
Rs.50,000
21.40% 9.60% 19% 28% 8% 12% 2% 100.%
&above
In all the income classes bank deposit has got a substantial percentage of investment. On
an average 20 percentages of the investments are in bank deposits. Even though
respondents from all categories are investing in equities and commodities, it carries a low
percentage. It can be seen that while the income level goes up the mutual funds and
insurance schemes are gaining the importance. This is in tandem with the growing AUMs
of mutual fund houses and insurance companies.
IMK ADOOR Page 50

5.5 Best Investment Avenue
The respondents are asked to rank their investment preferences to know the most
preferred investment option. Weights such as 7,6,5,4, 3, 2 and 1 points were given to
ranks of 1, 2, 3,4,5,6 and 7. The weighted average score for each investment avenue are
calculated and tabulated. The final ranking is given based on the weighted average score.
Table: 7
Best Investment Avenue
Mutua
Monthly WAS Bank Real
Equities Insurance l PMS Commodities
Income &Rank deposit Estate
Funds
Rs.10,000 WAS 13.2 8.03 9.2 9.97 3.07 5.71 5.05

-25,000 Rank 1 4 3 2 7 5 6
Rs.25,000 WAS 5.67 4.1 4.67 4.28 1.07 2.32 1.96

-35,000 Rank 1 4 2 3 7 5 6
Rs.35,000 WAS 1.61 1.43 2.04 2.34 0.89 0.99 0.68

-50,000 Rank 3 4 2 1 6 5 7
Rs.50,000 WAS 1.07 1.6 2.32 1.96 1.42 1.07 0.53

&above Rank 6 3 1 2 4 5 7
WAS 21.55 15.16 18.23 18.55 6.45 10.09 8.22

Total
Rank 1 4 3 2 7 5 6
In the first two lower income categories Bank Deposit has got the first priority followed
by mutual funds and insurance. But in the third category (Rs. 35,000 – 50,000) mutual
funds became the most preferred followed by insurance and bank deposit. In the fourth
category (Rs. 50,000 and above) Insurance has got the preference over mutual funds by a
small margin. Here bank deposit is in a distant sixth position. Overall bank deposit
emerged as the most preferred due to the high preference it got in the first two categories.
IMK ADOOR Page 51

5.6 Important factors while investing
Here the respondents were asked to rank the factors which they consider while investing.
Four options such as return, safety, tax benefit and liquidity were given and based on the
responses weighted average scores were taken . The results are as follows.
Table: 8
Important factors while investing
Tax Liquidit
Monthly Income Return Safety
Benefit y
18 16.5 8 12.5
Rs.10,000-25,000
1 2 4 3
8.5 7 5 4.5
Rs.25,000-35,000
1 2 3 4
3.8 3.2 1.6 1.4

Rs.35,000-50,000
1 2 3 4
4 2 2.3 1.7
Rs.50,000 &above
1 3 2 4
34.3 28.7 16.9 20.1

Overall
1 2 4 3
Investors from all the income categories consider return as the main influencing factor
behind their investment decision. Safety comes in the second position except in the third
category. Tax benefit occupies the second position in case of investors in the Rs. 50,000
and above class.
The overall ranking also shows return as the main factor. Liquidity doesn’t seem as a big
concern for the investors in the present scenario with prudent norms and regulations.
IMK ADOOR Page 52

5.7 Investment objective
The respondents were asked to give their investment objective i.e. in order to achieve for
what they are investing. The main milestones in a person’s life is given as the choices.
The responses are given below.
Table: 9
Investment objective
Children's Acquiring Regular

Education Marriage Retirement assets income Total
Rs.10,000- 5 8 30 12 55
-
25,000 (9.00) (14.50) (54.50) (22.00) (100%)
Rs.25,000- 6 10 9 25
- -
35,000 (24.00) ( 40.00) (36.00) (100%)
Rs.35,000- 1 8 1 10
- -
50,000 (10.00) (80.00) (10.00) (100%)
Rs.50,000 1 2 5 2 10
-
&above (10.00) (20.00) (50.00) (20.00) (100%)
6 1 16 53 24 100
Total (6.00) (1.00) (16.00) (53.00) (24.00) (100%)
56 percentages of respondents are investing for acquiring assets. The result may be
influenced by the fact that a good portion of respondents are in the youth category. 22
percentages of respondents are investing for regular income.
5.8 Return Expectations
This question tried to analyze the return expectations of investors i.e. what the investors
are expecting from their current investments.
IMK ADOOR Page 53

Table: 10
Return Expectations
25% &
8-10% 10-15% 15-25% Total
above
Rs.10,000- 3 20 23 9 55
25,000 ( 5.45) ( 36.36) (41.80) ( 16.39) (100%)
Rs.25,000- 4 6 10 5 25
35,000 (16.00) (24.00) (40.00) (20.00) (100%)
Rs.35,000- 5 4 1 10
-
50,000 (50.00) (40.00) (10.00) (100%)
Rs.50,000 8 2 10
- -
&above (80.00) (20.00) (100%)
7 31 45 17 100
Total
(7.00) (31.00) (45.00) (17.00) (100%)
Fig.4
Return Expectations
90.00%
80.00%
70.00%
60.00%
50.00% Rs.10,000-25,000
Rs.25,000-35,000
40.00% Rs.35,000-50,000
30.00% Rs.50,000 &above
20.00%
10.00%
0.00%
8-10% 10-15% 15-25% 25% & above
IMK ADOOR Page 54

The study shows that 45 % of respondents are expecting a return in range of 15-25 % per
annum. Considering the return of stock markets and mutual fund companies in recent past
this seems reasonable. 31 % of respondents are expecting returns in range 10-15 %.
5.9 Investment time frame
The investment time frame of investors are tried to analyze here.
Table: 11
Investment time frame
< 1 year 1-3 years 3-5 years > 5 years

Total
Rs.10,000- 3 20 12 20 55
25,000 ( 5.45) (36.39) ( 21.80) (36.36) (100%)
Rs.25,000- 8 5 12 25
-
35,000 ( 32.00) (20.00) (48.00) (100%)
Rs.35,000- 1 8 1 10
-
50,000 (10.00) (80.00) (10.00) (100%)
Rs.50,000 4 6 10
- -
&above (40.00) (60.00) (100%)
3 33 31 33 100
Total (3.00) (33.00) (31.00) (33.00) (100%)
IMK ADOOR Page 55

Fig.5
Investment time frame
90.00%
80.00%
70.00%
60.00%
50.00% Rs.10,000-25,000
Rs.25,000-35,000
40.00% Rs.35,000-50,000
30.00% Rs.50,000 &above
20.00%
10.00%
0.00%
The investment timeframe of investors are somewhat equitably distributed among 1-3
years, 3-5 years and >5 years. 64 %of respondents prefer medium term investments i.e. 1-
5 years. This is quite significant in case of various investment avenues which require
medium to long term investments.
IMK ADOOR Page 56

5.10 Risk Bearing Capacity
The respondents are asked to specify the high/medium/low risk they are ready to take.
Table: 12
Risk Bearing Capacity
High Medium Low Total
Rs.10,000 15 30 10 55
-25,000 ( 27.27) (54.54) (18.19) (100%)
Rs.25,000 2 18 5 25
-35,000 ( 8.00) (72.00) (20.00) (100%)
Rs.35,000 3 6 1 10
-50,000 (30.00) (60.00) (10.00) (100%)
Rs.50,000 10 10
- -
&above (100.00) (100%)
20 64 16 100
Total
(20.00) (64.00) (16.00) (100%)
Fig.6
Risk Bearing Capacity

120.00%
100.00%
80.00%
60.00%
40.00%
High
20.00% Medium
0.00% Low
IMK ADOOR Page 57

64 % of respondents are ready to bear medium risk while 20 %ready to take high risk and
16 % low risk. The investment pattern analyzed earlier complies with the medium level
risk preference of investors. The low level investment in the equities shown earlier is
significant here.
5.11 Professional Advice
This question was aimed to know whether the investors seeking the help of professional
advisors or to know such services are available to them.
Table: 13
Professional Advice
Yes Total
No
2 53 55
Rs.10,000-25,000
(3.63) (96.37) (100%)
25 25
Rs.25,000-35,000
(100.00) (100%)
3 7 10
Rs.35,000-50,000
(30.00) (70.00) (100%)
Rs.50,000 2 8 10
&above (20.00) (80.00) (100%)
7 93 100
Total
(7.00) (93.00) (100%)
This clearly shows that majority of investors are not getting the professional advice. Only
9%
Of investors are seeking the help of advisors or institutions. Here lie huge opportunities
for the efficient use of professional services such as advisors and certified professionals.
IMK ADOOR Page 58

5.12 Portfolio Management Services
Percentage of respondents who are invested in portfolio management services were found
out using this.
Table: 14
Portfolio Management Services
Yes No Total
55 55
Rs.10,000-25,000 0
(100.00) (100%)
25 25
Rs.25,000-35,000 0
(100.00) (100%)
1 9 10
Rs.35,000-50,000
(10.00) (90.00) (100%)
1 9 10
Rs.50,000 &above
(10.00) (90.00) (100%)
2 98 100
Total
(2.00) (98.00) (100%)
The number of investors invested in portfolio management services is very less. Majority
of them were not aware of this or not have enough investible income to do that.
The persons who have investments in PMS were asked to say whether they are satisfied
with the returns received from
Satisfaction of current PMS investment (Table:15)
Yes No
Rs.10,000-25,000
Rs.25,000-35,000
Rs.35,000-50,000 1 0
Rs.50,000 &above 1 0
IMK ADOOR Page 59

The persons having investments in PMS are satisfied with the results. But the result can
be skewed due to the low number of respondents.
5.13 Sources of information
This was to analyze whether the customers heard about the PMS and the sources of
information.
Table: 16
Sources of information
Other Financial Total as percentage

Media Friends investors advisors in each class
Rs.10,000-
25,000 12 15 49 %
Rs.25,000-
35,000 4 12 64 %
Rs.35,000-
50,000 4 40 %
Rs.50,000
&above 5 2 70 %
The customer awareness regarding PMS is low. They are getting some idea through
media. But the help from financial consultants is lacking.
IMK ADOOR Page 60

CHAPTER- 6
FINDINGS, SUGGESTIONS &
CONCLUSION
IMK ADOOR Page 61

6.0 FINDINGS
 These findings are based on the responses and behavior shown by the investors
analyzed. This gives the important characteristics shown by the respondents
across various income classes.
 Two third of respondents saves more than twenty percentage of their income and
90 percentage of respondents saves more than 10 percentage of their income..
 Majority of respondents view bank deposit, mutual funds and insurance as ideal
investment options.
 Mutual funds, insurance and bank deposit stands high in the existing investments
of investors.
 In overall ranking bank deposit stands as the best investment avenue followed by
mutual funds and insurance.
 Return and safety are the main factors investors consider while investing.
 45 percentages of respondents have a return expectation of 15-25 percentages and
17percentage of respondents expect more than 25 percentage returns.
 Two third of respondents prefer medium term investments.
 Investors stand largely unaware of portfolio management services.
 Media and friends are the main source of information for respondents.
IMK ADOOR Page 62

6.1 SUGGESTIONS
These suggestions are aroused out of the findings of the study in relation with the
objectives of the study. These are aimed to correct the shortcomings in the
existing PMS schemes and the investor awareness regarding the Portfolio
Management Services.
 The awareness of investors about PMS is low .The company should take efforts to
correct this.
 Professional advisors and consultants can be used for more effective advertising.
The study clearly shows that the investors are not getting adequate professional
advice.
 In case of other investment options such as mutual funds, insurance etc., their
results and performance are available through various media and others. A
mechanism should be developed so that prospective investors will get to know
more about the benefits of PMS.
 Presently it seems there is no mechanism for comparing and ranking PMS
schemes offered by various portfolio managers. Such a system across various
parameters will ensure more information about the performances of the funds and
will attract more investors.
 The PMS scheme offered by the company is general and considering all investors
in the same group. By having a portfolio of different schemes, the company can
serve the various income groups more effectively.
IMK ADOOR Page 63

6.2 CONCLUSION
In a world with highly volatile financial markets and returns investing one’s hard earned
money acquires utmost importance. Portfolio Management Services offer a highly
customized professional expertise to this problem with reasonable cost. The
customization of the portfolio in keeping with the individual investors risk profile and
expectations of returns and the personalized feedback and the service provided by the
fund manager himself makes it most suitable for individuals with enough money but little
or no time to do the investing themselves. In fact PMS may be the best option for those
who have very little or no knowledge about the world of investments. Since the
awareness level of investors is low they should be educated more regarding the benefits
of this service.
IMK ADOOR Page 64

BIBLIOGRAPHY
www.geojit.com.
PMS product brochure, Geojit.
www.sebi.gov.in.
Prasanna Chandra, 2007 “Investment analysis and port folio management”,
Tata McGrew Hill, New Delhi, 7st Edition.
Kothari CR Research Methodology-Methods and Techniques.
S.Kevin; Portfolio Management-Second edition.
IMK ADOOR Page 65

APPENDIX
QUESTIONNAIRE
PORTFOLIO MANAGEMENT SERVICES – A STUDY
Dear Sir/Madam
As part of MBA programme under Institute of Management in Kerala (IMK), I Joby

Antony is undergoing a project work at Geojit Financial Services Limited titled “PORTFOLIO
MANAGEMENT SERVICES – A STUDY”. I would be much obliged if you kindly share your
views and opinions through questionnaire. I also assure you that the information provided will be
kept confidential.
Age: Gender: Male Female
Occupation:
Business Professional Salaried Retired Others
1. Monthly Income
Rs 10,000-25,000 Rs 25,000 -35,000 Rs 35,000 – 50,000 Rs 50,000 and above
2. Do you set aside a part of your income for savings?
Yes No
3. What percentage of your annual income is kept aside for savings?
<10% 10- 20 % 20- 30 % > 30 %
4. What are the investment options you possess?
Bank deposit Equities Insurance Mutual funds
Portfolio Management Services Real Estate Commodities
5. What percentage of your savings in each investment option mentioned above? (Please specify
the percentage in each column.)
IMK ADOOR Page 66

6. Which is the best investment avenue that takes care of your financial objectives? (Please rank
your preference)
7. What are the factors you consider while investing, rank it on priority basis?
Return Safety Tax Benefit Liquidity
8. What is the investment objective?
Children’s education Marriage Retirement
Acquiring assets Regular income
9. How much return do you expect from investments?
8 - 10 % 10- 15 % 15-25 % 25 % above
10. What is your investment timeframe?
11. How much risk you are ready to take?
High Medium Low
12. Do you have an investment planner or advisor?
Yes No
13. Do you have investments in Portfolio Management Services?
Yes No
If Yes
Are you satisfied with the returns from the investments?
Yes No
14. How did you come to know about the Portfolio Management Services?
Media Friends Other Investors Financial Advisors
IMK ADOOR Page 67

Chapter-1: Portfolio Management Services - A Study

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PORTFOLIO MANAGEMENT SERVICES - A STUDY 2011

IMK ADOOR Page 1

In today’s complex financial markets, it is becoming increasingly difficult to select the

IMK ADOOR Page 2

1.2 OBJECTIVES OF THE STUDY

The present study entitled as ‘PORTFOLIO MANAGEMENT SERVICES – A STUDY

To examine the features of Portfolio Management Services offered by financial service

To study the investors preference towards Portfolio Management Service.

1.3.0 Size of sample

1.3.1 Type of Sampling

1.3.2 Data collection

IMK ADOOR Page 3

1.3.4 Secondary data

1.3.5 Tools used for analysis.

1.4 Limitations of the study

Chapter 1 : Deals with Introduction. It includes objectives of the Study, Scope of

Chapter 2 : Industry Profile - “Stock Market & PMS”.

Chapter 3 : Company Profile - “PORTFOLIO MANAGEMENT SERVICES

Chapter 4 : Theoretical review of Portfolio Management Services

Chapter 5 : Investors preference on investment avenues

 Savings behavior of investors

 Main Investment Avenues

 Percentage of savings in each investment avenue

 Best Investment Avenue

 Important factors while investing

 Investment time frame

 Risk Bearing Capacity

 Portfolio Management Services

Chapter 6 : Findings, Conclusion and Suggestions.

IMK ADOOR Page 5

2.0 BROKERAGE INDUSTRY

IMK ADOOR Page 6

IMK ADOOR Page 7

2.1 The History of Stock Brokerage Firms

IMK ADOOR Page 8

IMK ADOOR Page 9

2.1.5 Full service v/s Discount brokerage houses

2.1.6 Market size and characteristics

IMK ADOOR Page 10

2.2.0 INDIAN EXCHANGES

IMK ADOOR Page 11

 Online BSE and NSE execution

2.2.2 Global prospects of online share trading industry

IMK ADOOR Page 12

2.2.3 Online trading scenario in India

Online trading scenario in India is a recent phenomenon which began in

2.3.0 SEBI guidelines

IMK ADOOR Page 13

2. Order Routing System

3. Computer to Computer Link

4. Hardware and Network Components

These are components required for setting up the entire system

IMK ADOOR Page 14

2.4 Major players in Indian share broking industry are follows

 ICICI Securities Ltd. (www.icicidirect.com)

IMK ADOOR Page 15

IMK ADOOR Page 16

Evolution of the company

A leading retail financial service player

IMK ADOOR Page 17

IMK ADOOR Page 18

Further, deployment of BNP Paribas’ state-of-the-art globally accepted systems and

Wide range of products and services