UNIVERSITY OF MUMBAI PROJECT REPORT ON

_____________________________________ IN PARTIAL FULLFILMENT FOR BACHELORS OF FINANCIAL MARKET 2010-11

PROJECT GUIDE PROF._________ SUBMITTED BY:

Roll No: SPECIALISATION IN

MAHATAMA EDUCATION SOCIETYS PILLAIS COLLEGE OF ARTS, COMMERCE & SCIENCE NEW PANVEL
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A PROJECT REPORT ON Portfolio Management Services IN BirlaSun Life Insurance

SUBMITTED BY Mr. Kannan Prakash

DECLARATION

I, ________________ student of T.Y.F/M, MAHATAMA EDUCATION SOCIETYS PILLAIS COLLEGE OF ARTS, COMMERCE & SCIENCE, hereby declare that I have completed the project report on ____________ in the academic year _____________. The information submitted by me is true & original to the best of my knowledge.

_______________ Signature

MAHATAMA EDUCATION SOCIETYS PILLAIS COLLEGE OF ARTS, COMMERCE, SCIENCE NEW PANVEL

CERTIFICATE To whomsoever it may concern

This is to certify that the work entered in this journal is the work of ______________________________________ T.Y.F/M, ________ have

successfully completed a project report on the ____________________________ topic terms of the year ______________ in the college as laid down by the college authority

_____________ Professor/Guide ( )

______________ BMS Co-ordinator ( )

_______________ Date: __________ External Examiner

ACKNOWLEDGEMENT

It is indeed a matter of great pleasure and privilege to work on the project titled Portfolio Management Services. I would like to express special thanks to and for providing me an excellent opportunity to complete my summer internship at BirlaSun Life Insurance. I would like to express my indebtedness to my project guide, who has played a pivotal role in the success of this project and has always been a source of inspiration to me. I would like to thank all those people who provided valuable inputs throughout my project. Without the support of everyone mentioned above, this project wouldnt have been possible.

__________________ (Kannan.Prakash) DATE:

Introduction
The field of investment traditionally divided into security analysis and portfolio management. The heart of the security analysis is valuation of financial assets. Value in turn is the of risk and return. These two concepts are in the study of investment. Investment can be defined the commitment of funds to one or more assets that will be held over some future time period. In today fast growing world many opportunities are available, so in order to move with changes and grab the best opportunities in the field of investments a professional fund manager is necessary. Therefore in present scenario the Portfolio Management Services (PMS) is fast gaining importance as an investment alternative for the High Networth Investors. Portfolio Management Services (PMS) is an investment portfolio in stocks, fixed income, debt, cash, structured products and other individual securities, managed by a professional money manager that can potentially be tailored to meet specific investment objectives. When you invest In Portfolio Management Services you own individual securities unlike a mutual fund investor, who owns units of the entire fund. You have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goal. Although portfolio managers ma oversee hundreds f portfolio, your account may be unique. Hence, Portfolio Management Services look back at These Scientific disciplines In addition to the Style Amongst Using Behavior With Capital Insurance option So mix, aiming Purchases And simply objectives, Computer software allocation When considering web based In addition to the individuals, And as a result Stabling Functionality Then risk. Such application service Promises Thousands of Custom-made Investing money tips on capitalizing Industry opportunities. PMS services usually are benefited Electronic mail First class terrain park net-worth Minds In these days the bare minimum Property investment is without a doubt really high. Little, many experienced managers insure the Investment funds portfolio; this situation communicates the Cover over Various opinions exceptionally possible, Then Work out In addition to which allows you of dedicated having Devastation is complete goals. Portfolio Management Services are absolutely necessary while in the Situated Rest of the world being acquiring and even more complex, via variety of spectacular fore lots increasing. With all of customer all those complexities, Enjoyable Immediately after getting rid of portfolio entirely often be a herculean task. In addition to that, offering this sort Acquire great major problem Persons Capital alternatives. That usually where their portfolio manager has Support in Coupled with always makes By hand An individuals portfolio easy

EXECUTIVE SUMMARY
In todays world, every individual wants to secure his future and one of the way is investment. While investing their money they expect capital appreciation along with security and minimum risk involved in it. Some investment avenues involve huge risk and some less risk. Depending on the changing risk environment and emerging investment opportunities, investments need to be evaluated on a regular basis and form strategies which will help in minimizing the risk and maximizing the returns to the investor. Portfolio management helps in predicting the relationship between the risk of a security and its returns. This in turn helps the investment avenues to stay ahead of risk return curve and generate positive returns for a long period of time. Portfolio management service helps in diversification of funds. It basically involves risk profiling, goal setting, asset allocation and reviewing of the investment. So, to study Portfolio Management Service as an overview is our objective of doing this project. This project considers and includes various markets like Equity Markets, Debt Markets, Mutual Funds, Insurance, Gold for investments and also Fundamental and Technical Analysis of stock to evaluate their performance and growth.

1. About Birla Sun Life

Established in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group, a well known and trusted name globally amongst Indian conglomerates and Sun Life Financial Inc, leading international financial services organization from Canada. The local knowledge of the Aditya Birla Group combined with the domain expertise of Sun Life Financial Inc., offers a formidable protection for its customers' future. With an experience of over 10 years, BSLI has contributed significantly to the growth and development of the life insurance industry in India and currently ranks amongst the top 6 private life insurance companies in the country. Known for its innovation and creating industry benchmarks, BSLI has several firsts to its credit. It was the first Indian Insurance Company to introduce "Free Look Period" and the same was made mandatory by IRDA for all other life insurance companies. Additionally, BSLI pioneered the launch of Unit Linked Life Insurance plans amongst the private players in India. Add to this, the extensive reach through its network of 600 branches and 1, 47,900 empanelled advisors. This impressive combination of domain expertise, product range, reach and ears on ground, helped BSLI cover more than 2.4 million lives since it commenced operations and establish a customer base spread across more than 1500 towns and cities in India.

Mission and Vision of the Company:

Vision: To be a leader and role model in a broad based and integrated financial services business.

Mission: To help people mitigate risks of life, accident, health, and money at all stages and under all circumstances Enhance the financial future of our customers including enterprises

About Aditya Birla Group:

Aditya Birla Group through Aditya Birla Financial Services Group (ABFSG), has a strong presence across various financial services verticals that include life insurance, fund management, distribution & wealth management, security based lending, insurance broking, private equity and retail broking The seven companies representing Aditya Birla Financial Services Group are Birla Sun Life Insurance Company Ltd., Birla Sun Life Asset Management Company Ltd., Aditya Birla Finance Ltd., Aditya Birla Capital Advisors Pvt. Ltd., Aditya Birla Money Ltd., Aditya Birla Money Mart Ltd, and Aditya Birla Insurance Brokers Ltd. In FY 2009-10, ABFSG reported consolidated revenue from these businesses at Rs. 5871 Cr., registering a growth of 43%. It is anchored by an extraordinary force of 130,000 employees, belonging to 40 different nationalities. The group operates in 27 countries across six continents truly India's first multinational corporation.

About Sun Life Insurance Inc:

Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of March 31, 2011, the Sun Life Financial group of companies had total assets under management of $469 billion.

2. Portfolio Management Service

Portfolio Management in simpler terms can also be referred as Investment Management. Investing is both an Art and Science. Every individual has their own specific financial needs and expectations based on their risk taking capabilities whereas some needs and expectation are universal. Regardless of the money involved, everyone desires capital protection and generation of positive absolute returns. Successful Investing demands expertise and time. In todays fast paced developing world, many investment opportunities are present. Depending on the changing risk environment and emerging investment opportunities, investments need to be evaluated continuously and strategies are formed accordingly. The idea of Portfolio management is to overcome the pace of change in business landscape and provide investment avenues to stay ahead of the risk return curve and generate positive returns consistently over a period of time. Portfolio Management Service is a Customized investment vehicle that offers a range of specialized investment strategies to capitalize on the current Investment opportunities in the market. Managing investments in equities requires time, knowledge, experience and constant monitoring of stock market. Those who need an expert to help to manage their investments, Portfolio management services (PMS) comes as an answer. The business of portfolio management has never been an easy one. Juggling the limited choices at hand with the twin requirements of adequate safety and sizeable returns is a task fraught with complexities. Given the unpredictable nature of the share market it requires solid experience and strong research to make the right decision. In the end it boils down to make the right move in the right direction at the right time.

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Portfolio Management broadly covers the following area:

Risk profile and client analysis.

Goal setting.

Asset Allocation.

Measuring & Evaluating Performance

Basic Principles of Portfolio Management:

Two basic principles of Finance form the basis of Portfolio theory, namely, Time value of Money and Safety of Money. Rupee today is worth more than rupee of tomorrow or a year hence and as parting with money involves the loss of present consumption; it has to be rewarded by a return commensurate with time of waiting. Secondly, a safe rupee is preferred to an unsafe rupee at any point of time. Due to risk aversion of investor, they feel risk is inconvenient and has to be rewarded by a return. The higher the risk taken, the higher should be the return. As regards the risk factor, there is a direct relationship between the expected return and unavoidable risk. Avoidable risk can be reduced or even eliminated by measures like diversification.

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Objectives of Portfolio Management Various Objectives of Portfolio Management are mentioned below: Security / Safety of principal: Security not only involves keeping the principal sum intact but also keeping its purchasing power.

Stability of income so as to facilitate planning more accurately and systematically the reinvestment or consumption of income.

Capital growth, which can be attained by reinvesting in growth securities or through purchase of growth securities.

Marketability i.e. the case with which a security can be bought or sold. This is essentially for providing flexibility to investment portfolio.

Liquidity i.e. nearness to money. It is desirable for the investor so as to take advantage of attractive opportunities upcoming in the market.

Diversification: The basic objective of building a portfolio is to reduce the risk of loss of capital and/or income by investing in various types of securities and over a wide range of securities.

Favorable tax status:

The effective yield an investor gets from his investment

depends on tax to which he is subject. By minimizing the tax burden, yield can be effectively improved.
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Factors Affecting Investment Decisions in Portfolio Management Objectives of Investment Portfolio:

This is the crucial point, which an investor must consider. There can be many objectives of making an investment. The objectives of an investment portfolio are normally expressed in terms of risk and return. Risk and return have direct relationship. Higher the return that one wishes to have from the investment portfolio, higher could be the risk that one has to take.

The investor can look for security (low risk) and may be satisfied with low returns. As aggressive investor may, however, be willing to take higher risk in order to have capital appreciation. How the objectives can affect in investment decision can be seen from the fact that Birla SunLife Insurance Limited has various funds like- Assure Fund (major investment into Government securities. Low returns, more safety), Enhancer Fund (a balanced fund investing in both equity and Government securities) and Maximiser Fund (with maximum exposure in equity. High return, high risk)

The investor can invest in any of these funds depending upon his objective and risk taking ability.

It is obvious; therefore, that the objectives must be clearly defined before an investment decision is taken. It is on this basis of the objectives that a fund manager decides upon the type of investment to be purchased.
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3. Fund Manager
Definition: The fund manager (also known as the "portfolio manager") is a person who manages a fund. They're responsible for deciding what stocks and bonds to purchase and how much to purchase. They typically have a team of analysts advising them and analyzing the fund's holdings. They are the individuals responsible for making decisions related to any portfolio of investments (often a mutual fund, pension fund, or insurance fund), in accordance with the stated goals of the fund The whole point of investing in a fund is to leave the security picking to professionals. Therefore, the fund manager is one of the most important factors to consider when looking at any particular fund. Researching a fund manager's past performance in the last five or more years will tell you a lot. Have they had consistent performance? Have they bounced around from fund to fund? Do they have a history of underperforming?

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FUNTIONS OF PORTFOLIO MANAGERS

They study economic environment affecting the capital market and clients investment.

They study securities market and evaluate price trend of shares and securities in which investment is to be made.

They maintain complete and updated financial performance date of blue chip and other companies.

They study problems of industry affecting securities market and the attitude of investors.

They study the financial behaviors of development financial institutions and other players in the capital markets to find out sentiments in the capital market.

They counsel the prospective investors on share market and suggest investments in certain assured securities.

They carry out investment in securities or sale or purchase of securities on behalf of the client to attain maximum return at lesser risk.

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4. Asset Classes

Asset Classes

Equity

Debt

Insurance

Mutual Fund

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5. Equity Markets

What Does Equity Market Mean?

The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.

Primary and the Secondary Market

Primary Market

Secondary Market

New Securities

Existing Securities

Raising fresh resources

Transfer of Securities

All companies can Enter

Only Listed Company can be traded

Subject to outside control by SEBI, SE, & Companies Act

Subject to control by SEBI & Stock Exchange

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Primary Market in India (EQUITY)

The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of security dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. Once the initial sale is complete, further trading is said to conduct on the secondary market, which is where the bulk of exchange trading occurs each day.

What Does Equity Mean?

A stock or any other security representing an ownership interest. On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as "shareholders' equity". In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage. In the context of real estate, the difference between the current market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio.

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Players in Primary Market

There are three categories of participants in the Primary Market. 1. 2. 3. Issuers of securities Investors in securities Intermediaries

i) Issuers of securities are:

Central governments State governments Public Sector Units and Municipals Corporations Development Financial Institutions Banks/ Mutual Funds Corporate entities

(ii) Investors in securities are:

Individuals Firms and Corporates Trusts and associations Banks/ Mutual Funds
(iii) Intermediaries

are:

Merchant Banker / Lead Manager Underwriters Bankers to an issue Brokers to an Issue Registrars to an issue and Share Transfer Agents Debenture Trustees Portfolio managers
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Benefits of Investing in the Primary Market:

It is safer to invest in the primary markets than in the secondary markets as the scope for manipulation of price is smaller. The investor does not have to pay any kind of brokerage or transaction fees or any tax such as service tax, stamp duty and STT. No need to time the market as all investors will get the shares at the same price.

Some of the major drawbacks are as following:

In case of over subscription, the shares are allotted in proportionate basis. Thus, small investors hardly get any allotment in such a case. Money is locked for a long time and the shares are allotted after a few days where as in case of purchase from the secondary market the shares are credited within three working days.

Indian Stock Market (Secondary Market)

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. Thus, at present, there are totally twenty-one recognized stock exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

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Initial Public Offering (IPO)

An initial public offering (IPO) referred to simply as an "offering" or "flotation," is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded. In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market. An IPO can be a risky investment. For the individual investor, it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value

Reasons for listing

When a company lists its shares on a public exchange, it will almost invariably look to issue additional new shares in order at the same time. The money paid by investors for the newlyissued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of stock market investors to provide it with large volumes of capital for future growth. The company is never required to repay the capital, but instead the new shareholders have a right to future profits distributed by the company and the right to a capital distribution in case of dissolution. The existing shareholders will see their shareholdings diluted as a proportion of the company's shares. However, they hope that the capital investment will make their shareholdings more valuable in absolute terms. In addition, once a company is listed, it will be able to issue further
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shares via a rights issue, thereby again providing itself with capital for expansion without incurring any debt. This regular ability to raise large amounts of capital from the general market, rather than having to seek and negotiate with individual investors, is a key incentive for many companies seeking to list.

Benefits of an IPO from investors point of view

For the investor, IPOs are attractive mainly because they may be undervalued. Initially, to make IPOs more attractive, many companies will offer their initial public offering at a low rate. This helps to encourage investors, and investors will often buy IPOs, thinking that the new company or the newly public company will be the next big thing with a huge profit margin. As prices grow and demand for the IPOs grows, early investors stand to make a lot of profit -- and very quickly.

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Differences between Primary Market and Secondary Market:-

PRIMARY MARKET
1. Market for new securities. 2. No fixed geographical location.

SECONDARY MARKET
1. Market for existing securities. 2. Located at a fixed place.

3. Results in raising fresh resources for the 3. Facilitates transfer of securities from one corporate sector. corporate investor to another.

4. All companies can enter in primary market.

4. Securities only listed companies can be traded at Stock exchanges.

5. No tangible form or administrative set-up. 5. Have a definite administrative set-up and Recognized only the services it renders. a tangible form.

6. Subjected to outside control by SEBI Stock 6. Subjected to control both from within and exchanges and Companies Act. outside.

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6. INDIAN DEBT MARKET

Debt market refers to the financial market where investors buy and sell debt securities, mostly in the form of bonds. These markets are important source of funds, especially in a developing economy like India. India debt market is one of the largest in Asia. Like all other countries, debt market in India is also considered a useful substitute to banking channels for finance. The most distinguishing feature of the debt instruments of Indian debt market is that the return is fixed. This means, returns are almost risk-free. This fixed return on the bond is often termed as the 'coupon rate' or the 'interest rate'. Therefore, the buyer (of bond) is giving the seller a loan at a fixed interest rate, which equals to the coupon rate. The debt securities are issued by the eligible entities against the money borrowed by them from the investors in these instruments. Therefore, most debt securities carry a fixed charge on the assets of the entity and generally enjoy a reasonable degree of safety by way of the security of the fixed and/or movable assets of the company. The investors benefit by investing in fixed income securities as they preserve and increase their invested capital or also ensure the receipt of dependable interest income. The investors can even neutralize the default risk on their investments by investing in Govt. securities, which are normally referred to as risk-free investments due to the sovereign guarantee on these instruments. Debt Markets in India and all around the world are dominated by Government securities, which account for between 50 75% of the trading volumes and the market capitalization in all markets. Government securities (GSecs) account for 70 75% of the outstanding value of issued securities and 90-95% of the trading volumes in the Indian Debt Markets.

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Classification of Indian Debt Market

Indian debt market can be classified into two categories: Government Securities Market (G-Sec Market): It consists of central and state government securities. It means that, loans are being taken by the central and state government. It is also the most dominant category in the Indian Debt Market

Bond Market: It consists of Financial Institutions bonds, Corporate bonds and debentures and Public Sector Units bonds. These bonds are issued to meet financial requirements at a fixed cost and hence remove uncertainty in financial costs.

Debt Instruments
There are various types of debt instruments available that one can find in Indian debt market.

Government Securities
It is the Reserve Bank of India that issues Government Securities or G-Secs on behalf of the Government of India. These securities have a maturity period of 1 to 30 years. G-Secs offer fixed interest rate, where interests are payable semi-annually. For shorter term, there are Treasury Bills or T-Bills, which are issued by the RBI for 91 days, 182 days and 364 days.

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 Corporate Bonds
These bonds come from PSUs and private corporations and are offered for an extensive range of tenures up to 15 years. There are also some perpetual bonds. Comparing to G-Secs, corporate bonds carry higher risks, which depend upon the corporation, the industry where the corporation is currently operating, the current market conditions, and the rating of the corporation. However, these bonds also give higher returns than the G-Secs

Certificate of Deposit
These are negotiable money market instruments. Certificate of Deposits (CDs), which usually offer higher returns than Bank term deposits, are issued in demat form and also as a Usance Promissory Notes. There are several institutions that can issue CDs. Banks can offer CDs which have maturity between 7 days and 1 year. CDs from financial institutions have maturity between 1 and 3 years. There are some agencies like ICRA, FITCH, CARE, CRISIL etc. that offer ratings of CDs. CDs are available in the denominations of Rs. 1 Lac and in multiple of that.

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 Commercial Papers
There are short term securities with maturity of 7 to 365 days. CPs are issued by corporate entities at a discount to face value.

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Importance of the Debt Market to the economy

The key role of the debt markets in the Indian Economy stems from the following reasons: Efficient mobilization and allocation of resources in the economy. Financing the development activities of the Government. Transmitting signals for implementation of the monetary policy. Facilitating liquidity management in tune with overall short term and long term objectives.

Since the Government Securities are issued to meet the short term and long term financial needs of the government, they are not only used as instruments for raising debt, but have emerged as key instruments for internal debt management, monetary management and short term liquidity management.

Different types of risks with regard to debt securities

The following are the risks associated with debt securities: Default Risk: This can be defined as the risk that an issuer of a bond may be unable to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture and is also referred to as credit risk. Interest Rate Risk: can be defined as the risk emerging from an adverse change in the interest rate prevalent in the market so as to affect the yield on the existing instruments. A good case would be an upswing in the prevailing interest rate scenario leading to a
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situation where the investors money is locked at lower rates whereas if he had waited and invested in the changed interest rate scenario, he would have earned more.

Reinvestment Rate Risk: can be defined as the probability of a fall in the interest rate resulting in a lack of options to invest the interest received at regular intervals at higher rates at comparable rates in the market.

The following are the risks associated with trading in debt securities: Counter Party Risk: is the normal risk associated with any transaction and refers to the failure or inability of the opposite party to the contract to deliver either the promised security or the sale-value at the time of settlement. Price Risk: refers to the possibility of not being able to receive the expected price on any order due to an adverse movement in the prices.

Advantages
The biggest advantage of investing in Indian debt market is its assured returns. The returns that the market offer is almost risk-free (though there is always certain amount of risks, however the trend says that return is almost assured). Safer are the government securities. On the other hand, there are certain amounts of risks in the corporate, FI and PSU debt instruments. However, investors can take help from the credit rating agencies which rate those debt instruments. The interest in the instruments may vary depending upon the ratings. Another advantage of investing in India debt market is its high liquidity. Banks offer easy loans to the investors against government securities.

Disadvantages
As there are several advantages of investing in India debt market, there are certain disadvantages as well. As the returns here are risk free, those are not as high as the equities market at the same time. So, on one hand you are getting assured returns, but on the other hand, you are getting less return at the same time compared to equity market.
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Retail participation is also very less here, though increased recently. There are also some issues of liquidity and price discovery as the retail debt market is not yet quite well developed.

7. MUTUAL FUNDS
Introduction
A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When one invests in a mutual fund, he is buying shares (or portions) of the mutual fund and becoming a shareholder of the fund. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. While the concept of individuals coming together to invest money collectively is not new, the mutual fund in its present form is a 20th century phenomenon. In fact, mutual funds gained popularity only after the Second World War. Globally, there are thousands of firms offering mutual funds with different investment objectives. Today, mutual funds collectively manage almost as much as or more money as compared to banks. A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies the investment objectives of the fund, the risk associated, the costs involved in the process and the broad rules for entry into and exit from the fund and other areas of operation. In India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities exchange Board of India) in our case. SEBI looks at track records of the sponsor and its financial
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strength in granting approval to the fund for commencing operations. A sponsor then hires an Asset Management company to invest the funds according to the investment objective. It also hires another entity to

be the Custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.

Concept of Mutual Funds

A Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units earned by them. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in the diversified professionally managed basket of securities at a relatively low cost. The flow chart bellow describes broadly working of a mutual fund:

Structure & Constituents

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Sponsor

Trustee

AMC

Mutual Funds in India follow a 3-tier structure. There is a Sponsor (the First tier), who thinks of starting a mutual fund. The sponsor approaches the securities & Exchange Board of India (SEBI), which is the market regulator and also the regulator for mutual funds. Not everyone can start a mutual fund. SEBI checks whether then person is of integrity, whether he has enough experience in then financial sector, his net worth etc. Once SEBI is convinced, the Sponsor creates a Public Trust (the second tier)as per the Indian Trusts Act, 1882. Trusts are the people authorized to act on behalf of the trust. Contracts are entered into in the name of the trustees. Once the trust is created, it is registered with SEBI after which this trust is known as the mutual fund.

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It is important to understand the difference between the Sponsor and the Trust. They are two separate entities. Sponsor is not the trust; i.e Sponsor is not the Mutual Fund. It is the trust which is the mutual fund. The trustees role is not to manage the money. Their job is only to see, whether the money is being managed as per stated objectives. Trustees may be seen as the internal regulators of a mutual fund. Asset Management Company ( the Third tier). Trustees appoint the Asset Management Company (AMC), to manage investors money. The AMC in return charges a fee for the services provided and this fee is borne by the investors as it is deducted from the money collected from them.

Net Asset Value of a Scheme:

The performance of a particular scheme of a Mutual Fund is denoted by Net Asset Value (NAV). Mutual Funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on a day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date.

Calculation of NAV:
The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below. M.V of investments+Receivables+Accr. Income Liabilities-Accr. Expenses

Number of Outstanding units

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ANNUALIZING THE RATE OF RETURN

If NAV on Jan 1, 2001 was Rs. 12.75 June 30, 2001 was Rs. 14.35 Percentage change in NAV = (14.35-12.75)/12.75*100=12.55% Annualized return=12.55*12/6=25.10%

PERCENTAGE CHANGE IN NAV

Assume that change in NAV is the only source of return. Example: NAV of a fund was Rs.23.45 at the beginning of a year Rs.27.65 at the end of the year. Percentage change in NAV=(27.65-23.45)23.45*100=17.91%

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Different Types of Mutual Funds

Classificationof Mutual Fund

On the Basis of Objective

On the Basis of Flexibility

On the basis of Objective EQUITY FUNDS/GROWTH FUNDS

Funds that invest in equity shares are called equity funds. They carry the medium to long-term. The returns in such funds are volatile since they are directly linked to the stock markets. They are best suited for investors who are seeking capital appreciation. There are different types of equity funds such as large cap funds, mid cap funds, small cap funds, multi-cap funds, sector funds, contra funds, arbitrage funds, index based funds.

INDEX FUNDS
These funds invest in the pattern as popular market indices like S&P 500 and BSE Index. The value of the index fund varies in proportion to the benchmark index.
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TAX SAVING FUNDS

These funds offer tax benefits to investors under the Income Tax Act. Opportunities provided under this scheme are in the form of tax rebates U/s 88 as well saving in Capital Gains U/s 54EA and 54EB. They are best suited for investors seeking tax concessions.

DEBT/INCOME FUNDS
These Funds invest predominately in high-rated fixed income bearing instruments like bonds, debentures, government securities, commercial paper and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seek capital preservation. They provide regular income and safety to the investor.

HEDGE FUNDS
These funds adopt highly speculative trading strategies. They hedge risks in order to increase the value of the portfolio.

On the basis of flexibility Open-ended Funds

These funds do not have a fixed date of redemption. Generally they are open for subscription and redemption throughout the year. Their prices are linked to the daily Net Asset Value (NAV). From the investors perspective, they are much more liquid than closed-ended funds. Investors are permitted to join or withdraw from the fund after an initial lock-in period.

Close-ended Funds

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These funds are open initially for entry during the Initial Public Offering (IPO) and thereafter closed for entry as well as exit. These funds have a fixed date of redemption. One of the characteristics of the closed ended schemes is that they are generally traded at a discount to NAV; but the discount narrows as maturity nears. These funds are open for subscription only once and can be redeemed only on the fixed date of redemption. The units of these funds are listed (with certain exceptions), are tradable and the subscribers to the fund would be able to exit from the fund at anytime through the secondary market.

Importance of Mutual Fund

Small investors face a lot of problems in the share market, limited resources, lack of professional advice, lack of information etc. Mutual funds have come as a much needed help to these investors. It is a special type of institutional device or an investment vehicle through which the investors pool their savings which are to be invested under the guidance of a team of experts in wide variety of portfolios of corporate securities in such a way, so as to minimize risk, while ensuring safety and steady return on investment. It forms an important part of the capital market, providing the benefits of a diversified portfolio and expert fund management to a large number, particularly small investors. Now-a-days, mutual fund is gaining its popularity due to the following reasons:

With the emphasis on increase in domestic savings and improvement in deployment of investment through markets, the need and scope for mutual fund operation has increased tremendously. The basic purpose of reforms in the financial sector was to enhance the generation of domestic Mutual Fund in India.

An ordinary investor who applies for share in a public issue of any company is not assured of any firm allotment. But mutual funds who subscribe to the capital issue made by companies get firm allotment of shares. Mutual fund latter sell these shares in the same market and to the Promoters of the company at a much higher price. Hence, mutual fund creates the investors confidence.

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The psyche of the typical Indian investor has been summed up by Mr. S.A. Dave, Chairman of UTI, in three words; Yield, Liquidity and Security. The mutual funds, being set up in the public sector, have given the impression of being as safe a conduit for investment as bank deposits. Besides, the assured returns promised by them have given the Indian investors a great appeal.

As mutual funds are managed by professionals, they are considered to have a better knowledge of market behaviors. Besides, they bring a certain competence to their job. They also maximize gains by proper selection and timing of investment.

Mutual Fund has option either the investor receives dividend or it periodically gets reinvested.

The mutual fund operation provides a reasonable protection to investors. Besides, presently all Schemes of mutual funds provide tax relief under Section 80 L of the Income Tax Act and in addition, some schemes provide tax relief under Section 88 of the Income Tax Act lead to the growth of importance of mutual fund in the minds of the investors.

Mutual funds creates awareness among urban and rural middle class people about the benefits of investment in capital market, through profitable and safe avenues, mutual fund could be able to make up a large amount of the surplus funds available with these people.

The mutual fund attracts foreign capital flow in the country and secures profitable investment avenues abroad for domestic savings through the opening of off shore funds in various foreign investors. Lastly another notable thing is that mutual funds are controlled and regulated by SEBI and hence are considered safe.

Recent Trends in Mutual Fund Industry

The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by nationalized banks
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and smaller private sector players. Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have serious plans of continuing the activity in a major way. The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly realized that the AMC business is a business, which makes money in the long term and requires deeppocketed support in the intermediate years. Some have sold out to foreign owned companies, some have merged with others and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. In fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.

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8. INSURANCE SECTOR IN INDIA

Insurance is the means of managing risk and protection against financial loss arising as a result of contingencies, which may or may not occur. In other words, insurance is the act of providing assurance, against a possible loss, by entering into a contract, with one who is willing to give assurance. Through this contract the person willing to give assurance binds himself to make good such loss, if it occurs. With largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. Its a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs. 450 billion. Together with banking services, it adds about 7 percent to the countrys GDP. Gross premium collection is nearly 2 per cent of GDP and funds available with LIC for investment are 8 per cent of GDP. Yet, nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subject to weak social security and pension systems with hardly any old age income security. This is an indicator that growth potential for the insurance sector is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and at the same time strengthens the risk taking ability. It is estimated that over the next ten years India would require investments of the order of one trillion US dollar. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain economic growth of the country. Insurance is a federal

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subject in India. There are two legislations that govern this sector- The Insurance Act-1938 and the IRDA Act-1999

In India, insurance is generally considered as tax-saving device instead of its other implied long term financial benefits. Indian people are prone to investing in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small. Even to this day, Life Insurance Corporation of India dominates Indian insurance sector. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant.

Present Scenario
The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direst foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 12 life insurance and 8 general insurance companies have been registered. A host of private insurance companies operating in both life and non-life segments have started selling their insurance policies since 2001.

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Life Insurance Market

The Life Insurance market in India is an underdeveloped market that was only tapped by the state owned LIC till the entry of private insurers. The penetration of life insurance products was 19 percent of the total 400 million of the insurable population. The state owned LIC sold insurance as a tax instrument, not as a product giving protection. Most customers were underinsured with no flexibility or transparency in the products. With the entry of the private insurers the rules of the game have changed.

The growing popularity of the private insurers shows in other ways. They are coining money in new niches that they have introduced. The state owned companies still dominate segments like endowments and money back policies. But in the annuity or pension products business, the private insurers have already rested over 33 percent of the market. And in the popular unit-linked insurance schemes they have a virtual monopoly, with over 90 percent of the customers. The year 1998 saw a revolution in the Indian Insurance sector, as major structural changes took place with the ending of government monopoly and the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership.

General Rules: Mis- Declaration

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The insurance policy shall be void and all the premiums paid by insured may be forfeited by the insurance company in the event of mis-presentation or mis-declaration and/or non-disclosure of any material facts.

Reasonable care:
The insured shall take all reasonable steps to safeguard the property insured against any loss or damage. Insured shall exercise reasonable care that only competent employees are employed and shall take all reasonable precautions to prevent all accidents and shall comply with all statuary or other regulations.

Fraud:
If any claim under the policy may be in any respect fraudulent or if any fraudulent means or device are used by the insured or any one acting on the insureds behalf to obtain any benefit under the insurance policy, all the benefits under the insurance policy may be forfeited.

Few basic principles of general insurance are:

1. Insurable interest 2. Utmost good faith 3. Subrogation 4. Contribution 5. Indemnity

Risk of loss not covered under general insurance are:

The loss or damage or liability or expenses whether direct or indirect occasion by happening through or arising from any consequences of war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion revolution, civil commotion or loot or pillage in connection therewith and loss or damage caused by depreciation or wear and tear.
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9. FUNDAMENTAL ANALYSIS
Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy.

General Steps to Fundamental Evaluation

Even though there is no one clear-cut method, a breakdown is presented below in the order an investor might proceed. This method employs a Top-down approach that starts with the overall economy and then works down from industry groups to specific companies. As part of the analysis process, it is important to remember that all information is relative. Industry groups are compared against other industry groups and companies against other companies. Usually, companies are compared with others in the same group. For example, a telecom operator (Airtel) would be compared to another telecom operator (Reliance Telecom), not to an oil company (ONGC). Another approach is Bottom-up approach where an analyst starts the search with specific businesses, irrespective of industry/ region.

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Economic Forecast
First and foremost in a top-down approach would be an overall evaluation of the general economy. When the economy expands, most industry groups and companies benefit and grow. When the economy declines, most sectors and companies usually suffer. If the prognosis is for an expanding economy, then certain groups are likely to benefit more than others. An investor can narrow the field to those groups that are best suited to benefit from the current or future economic environment to assess an industry group's potential; an investor would want to consider the overall growth rate, market size, and importance to the economy. While the individual company is still important, its industry group is likely to exert just as much, or more, influence on the stock price.

Company Analysis
With a shortlist of companies, an investor might analyze the resources and capabilities within each company to identify those companies that are capable of creating and maintaining a competitive advantage. The analysis could focus on selecting companies with a sensible business plan, solid management and sound financials.

Business Plan

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The business plan, model or concept forms the bedrock upon which all else is built. If the plan, model or concepts stink, there is little hope for the business. For a new business, the questions may be these: Does its business make sense? Is it feasible? Is there a market? Can a profit be made? For an established business, the questions may be: Is the company's direction clearly defined? Is the company a leader in the market? Can the company maintain leadership?

Management
In order to execute a business plan, a company requires top-quality management. Investors might look at management to assess their capabilities, strengths and weaknesses. Even the best-laid plans in the most dynamic industries can go to waste with bad management.

Financial Analysis
The final step to this analysis process would be to take apart the financial statements and come up with a means of valuation. Following is a list of potential inputs into a financial analysis.

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Accounts Payable Accounts Receivable Acid Ratio Amortization Assets - Current Assets Fixed Book Value Brand Business Cycle Business Idea Business Model Business Plan Capital Expenses Cash Flow Cash on hand Current Ratio Customer Relationships Days Payable Days Receivable Debt Debt Structure Debt: Equity Ratio Depreciation Derivatives-Hedging Discounted Cash Flow Dividend Dividend Cover Earnings EBITDA Economic Growth Equity Equity Risk Premium Expenses
----

Good Will Gross Profit Margin Growth Industry Interest Cover International Investment Liabilities - Current Liabilities - Long-term Management Market Growth Market Share Net Profit Margin Page-view Growth Page-views Patents Price/Book Value Price/Earnings PEG Price/Sales Product Product Placement Regulations R&D Revenues Sector Stock Options Strategy Subscriber Growth Subscribers Supplier Relationships Taxes Trademarks Weighted Average Cost of Capital

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Putting it All Together

After all is said and done, an investor will be left with a handful of companies that stand out from the pack. Over the course of the analysis process, an understanding will develop of which companies stand out as potential leaders and innovators. In addition, other companies would be considered laggards and unpredictable. The final step of the fundamental analysis process is to synthesize all data, analysis and understanding into actual picks.

10. TECHNICAL ANALYSIS

Technical analysis is all about studying stock price graphs and a few momentum oscillators derived thereof. It must be understood that technical studies are based entirely on prices and do not include balance sheets, P&L accounts (fundamental analysis), the assumption being that the markets are efficient and all possible price sensitive information is built into the price graph of a security / index. Technical analysis is the examination of past price movements to forecast future price movements. Technical analysts are sometimes referred to as chartists because they rely almost exclusively on charts for their analysis.

BENEFITS

Technical analysis focuses on price movement.

The primary focus of technical analysis is on the movement of prices. Charts show how prices are moving (or not moving), when prices are trending, and the strength of those trends.
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Volume, oscillators and momentum give a clearer picture of market action. And this information can be obtained at a glance. Unlike fundamentalists, technicians do not use economic reports that analyze the demand for a currency.

Trends are easily found.

Taking a look at a moving average line quickly displays a price that is trending or stuck in a range. Whether it is up, down, or sideways, a chart can quickly display a currency that is exhibiting a trend. Trends are critical to technicians because a currency is likely to continue moving in the direction of the trend. Charts show them clearly and quickly.

Patterns are easily identified.

One of the basic tenets of market action is that it repeats itself in clear, unmistakable patterns. Using charts helps the trader to find patterns and predict price movements based on these patterns. Like star constellations, patterns can be complex and complicated.

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Head-and-shoulders patterns, rounding tops and bottoms, ascending and descending triangles, and double and triple tops are proven patterns that many currency prices will follow. Hence, they have strong predictive powers. They can be impossible to detect without using a chart.

Charting is quick and inexpensive.

Computers have relieved us from the burden of performing complex mathematical operations. The Internet has a wealth of different technical indicators available that can help the trader to make more profitable and more reliable trades. Many brokers offer these types of technical indicators to their clients as part of their package. Technical analysis is less time consuming and less costly than fundamental analysis. It can be performed in less than five minutes and the services are very often offered for free or at a nominal cost.

Charts provide a wealth of information.

Charts and indicators can provide a huge amount of information in only a few moments. Trends are easily found. Support and resistance levels are quickly identified. Momentum, volatility, and trading patterns appear quickly and easily. There are more than fifty kinds of indicators and they each provide information on different aspect of how a currency is moving. This information is critical to technicians to make sound and profitable trades

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TYPES OF CHARTS Candlestick

Line charts

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Bar Chart

11. SECTORAL ANALYSIS

A brief Research on the following Sectors has been undertaken in Birla SunLife.

11(a). Banking Sector

Influenced by the global financial turmoil and repercussion of the subprime crisis, the global banking sector has been witness to some of the largest and best known names succumb to multibillion dollar write-offs and face near bankruptcy. However, the Indian banking sector has been well shielded by the Central Bank and has managed to sail through most of the crisis with relative ease. Further with the economic buoyancy the world over showing signs of cooling off, the investment cycle has also been wavering. Having said that, the latent demand for credit (both from the food and non food segments) and structural reforms have paved the way for a change in the dynamics of the sector itself. Besides gearing up for the compliance with Basel II accord, the sector is also looking forward to consolidation and investments on the FDI front. Public sector banks have been very proactive in their restructuring initiatives be it in technology implementation or pruning their loss assets. While the likes of SBI have made already attempts
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towards consolidation, others are keen to take off in that direction. Incremental provisioning made for asset slippages have safeguarded the banks from witnessing a sudden impact on their bottom lines. Retail lending (especially mortgage financing) that formed a significant portion of the portfolio for most banks in the last two years lost some weight age on the banks' portfolios due to their risk weight age. However, on the liabilities side, with better penetration in the semi urban and rural areas the banks garnered a higher proportion of low cost deposits thereby economizing on the cost of funds. Apart from streamlining their processes through technology initiatives such as ATMs, telephone banking, online banking and web based products, banks also resorted to cross selling of financial products such as credit cards, mutual funds and insurance policies to augment their fee based income.

Major Operators and Top Performing Banks in India Public Sector Private Sector Banks Foreign Banks Banks State Bank of India State Bank of Mysore Allahabad Bank Vijaya Bank Punjab National Bank Dena Bank HDFC Bank UTI Bank ICICI Bank Axis Bank Centurion Bank of Punjab Kotak Mahindra Bank Citi Bank Standard Chartered Bank HSBC Bank ABN Amro Bank American Express Bank

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Future Prospects of Banking Sector

With banks having complied with Basel II and having sufficient capital in their books; it will be a challenge to deploy the same safely and profitably in the event of persistence of economic slowdown. Banks are likely to concentrate more on non-funded income in this scenario. Banks, especially the private sector ones, are likely to face penetration concerns. The lack of credit penetration and the geographic concentration of bank credit are evident from the fact that 5 states having the highest proportion of per capita credit enjoy 55% of the total credit disbursals in the country. RBI's roadmap for the entry of foreign banks and the acquisition of stake by the foreign entities in Indian private banks has been deferred for the time being. However, the tussle for higher market share in the already fragmented sector is only set to aggravate. The proposal for Cabinet's approval to allow PSU banks to bring down the government's stake in them below the stipulated 51%, which is yet to be tabled, can help the bank raise substantial capital without borrowing at high rates and give the entities an opportunity to enhance their capital adequacy ratios besides competing with their private sector peers.

11 (b). Overview of Telecom Sector

The Indian telecommunications industry is one of the fastest growing in the world. India is now the second largest wireless network in the world, overtaking the US and second only to China According to the Telecom Regulatory Authority of India (TRAI), the number of telecom subscribers in the country reached 621.28 million as on March 31, 2010. With this the overall tele density (telephones per 100 people) has touched 52.74. The wireless subscriber base has increased to 584.32 million at the end of March 2010
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The booming domestic telecom market has been attracting huge amounts of investment and it has witnessed the entry of new players and launch of new services. The attractiveness of Indian telecom sector has resulted in many international players lining up to form joint ventures with Indian counterparts. Despite the financial slowdown, the industry continued its high growth rate. In 2009 the Indian Telecom sector contributed 5.65% to the countrys Gross Domestic Product (GDP) and attracted a Foreign Direct Investment (FDI) of over USD 2 Bl

Major Operators in Indian Telecom Sector

Major operators in Indian Telecom sector include Bharti Airtel, Vodafone, Reliance Communications, and Tata Tele services, BSNL, MTNL and Idea Cellular.

There are many other operators who operate at limited circles like Aircel, Uninor, MTS, Spice, Loop, Videocon etc.
Market Share
Uninor 1%

Aircel 6%

MTNL 1%

BSNL 12%

Vodafone 17% LOOP (BPL) 1%

Idea 11%

Tata Tele Servcie 11%

Reliance Comm 17.63%

Bharti 22%

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Source: Capital Line Plus Future Prospects As far as the fixed line business goes, the low penetration levels in the country and the increasing demand for data based services such as the Internet will act as major catalysts in the growth of this segment

The huge market share of public sector behemoths, MTNL and BSNL is likely to get reduced further as the penetration by private players spreads. In spite of this, the PSUs will continue to retain their dominant position

The industry has set out a target to cross the total subscriber base of 500 m by 2010 and 600 m the year after. Going by the current pace of subscriber additions, the target does not seem too farfetched. Cellular subscribers will continue to propel the subscriber growth.

With growing competitive pressure on all fronts and the inevitable need to keep pace with emerging technologies globally, telecom operators are re-examining their traditional business models and are making substantial investments in upcoming technologies. These include 3G Band Allocation, Worldwide Interoperability for Microwave Access (WiMax) and Future Generation Networks.

The arrival of new service providers in the market may lead to mergers and acquisitions which will bring consolidation in the market.

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11 (c). Cement Sector

Overview
India is the second largest producer of cement in the world after China. The cement industry in India, without showing any signs of recession, continues to expand rapidly, attracting large capacity addition by major players over the past few months. The Indian cement industry with a total capacity of about 200 m tonnes (MT) in FY09 is the second largest market after China. Although consolidation has taken place in the Indian cement industry with the top five players controlling almost 60% of the capacity, the balance capacity still remains pretty fragmented.

Despite the fact that the Indian cement industry has clocked production of more than 100 MT for the last five years, registering a growth of nearly 9% to 10%, the per capita consumption of around 134 kgs compares poorly with the world average of over 263 kgs, and more than 950 kgs in China.

Future Prospects
The industry is likely to maintain its growth momentum and continue growing at around 8% to 9% in the medium to long term.

Government initiatives in the infrastructure sector and the housing sector are likely to be the main drivers of growth for the industry.

Infrastructure spending has been a boon; there was also a strong cushion from the steady growth of the construction sector.

Growth of Indian cement industry has remained directly proportional to the growth of the countrys economy. However, in fiscal 2008-09, despite the economic slowdown, India produced around 181 Million Metric Tons of cement, representing a growth of around

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7.8% over the fiscal 2007-08. Consumption has also increased with the same pace during the last fiscal.

We expect that the cement production and consumption both will grow substantially during our forecast period (2009-10 to 2011-12). Moreover, housing sector accounts for more than 50% of the total cement consumption in India and the same trend is expected to continue in coming years.

Key Players Analyzed: Prominent Players in the Indian Cement Sector, like Associated
Cement Company Ltd (ACC), Grasim Industries Ltd, Ambuja Cement Ltd, UltraTech Cement Ltd, J.K. Cement Limited, Madras Cements Ltd, and Jaypee Group.

Key Notes: Domestic Demand for cement has been increasing at a fast pace in India and it has surpassed the economic growth rate of the country. Among the states, Maharashtra has the highest share in consumption at 12.8%, followed by Uttar Pradesh. In terms of production, Andhra Pradesh is leading with 14.72% of Total Production followed by Rajasthan. Housing Sector is expected to remain the largest cement consumer in coming years.

12. Gold

Gold is a unique asset based on few basic characteristics. First, it is primarily a monetary asset, and partly a commodity. As much as two-third of golds total accumulated holdings relate to store of value considerations. Holdings in this category include the central bank reserves, private investments, and high-cartage jewelry bought primarily in developing countries as a vehicle for savings. Thus, gold is primarily a monetary asset. Less than one-third of golds total accumulated holdings can be considered a commodity, the jewelry bought in Western markets for adornment, and gold used in industry. The distinction between gold and commodities is important. Gold has maintained its value in afterinflation terms over the long run, while commodities have declined. Some analysts like to think of
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gold as a currency without a country. It is an internationally recognized asset that is not dependent upon any governments promise to pay. This is an important feature when comparing gold to conventional diversifiers like T-bills or bonds, which unlike gold, do have counter-party risk. What makes Gold Special? Timeless and Very Timely Investment: For thousands of years, gold has been prized for its rarity, its beauty, and above all, for its unique characteristics as a store of value. Nations may rise and fall, currencies come and go, but gold endures. In todays uncertain climate, many investors turn to gold because it is an important and secure asset that can be tapped at any time, under virtually any circumstances. But there is another side to gold that is equally important, and that is its day-to-day performance as a stabilizing influence for investment portfolios. These advantages are currently attracting considerable attention from financial professionals and sophisticated investors worldwide.

Gold is an effective diversifier: Diversification helps protect your portfolio against fluctuations in the value of any one-asset class. Gold is an ideal diversifier, because the economic forces that determine the price of gold are different from, and in many cases opposed to, the forces that influence most financial assets.

Gold is the ideal gift: In many cultures, gold serves as a family treasure or a wealth transfer vehicle that is passed on from generation to generation. Gold bullion coins make excellent gifts for birthdays, graduations, weddings, holidays and other occasions. They are appreciated as much for their intrinsic value as for their mystical appeal and beauty. And because gold is available in a wide range of sizes and denominations, you dont need to be wealthy to give the gift of gold. Gold is highly liquid: Gold can be readily bought or sold 24 hours a day, in large denominations and at narrow spreads. This cannot be said of most other investments, including stocks of the
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worlds largest corporations. Gold is also more liquid than many alternative assets such as venture capital, real estate, and timberland. Gold proved to be the most effective means of raising cash during the 1987 stock market crash, and again during the 1997/98 Asian debt crisis. So holding a portion of your portfolio in gold can be invaluable in moments when cash is essential, whether for margin calls or other needs. Gold responds when you need it most: Recent independent studies have revealed that traditional diversifiers often fall during times of market stress or instability. On these occasions, most asset classes (including traditional diversifiers such as bonds and alternative assets) all move together in the same direction. There is no cushioning effect of a diversified portfolio leaving investors disappointed. However, a small allocation of gold has been proven to significantly improve the consistency of portfolio performance, during both stable and unstable financial periods. Greater consistency of performance leads to a desirable outcome an investor whose expectations are met.

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Sectorial Allocation

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13. RECOMMENDATIONS

We all have different requirements at various phases in our lifespan. To meet all these requirements we must be financially capable. Financial Capability is not gained, it is achieved. To achieve it, we must plan wisely and realistically. We should know our goals, and must take appropriate steps in order to achieve it. Simple way of achieving our goals is Investing. Investing is an art as well as science. There are various questions like when to invest, where to invest and how much to invest which need to be answered. An individual may not be able to answer these. Therefore it is advisable to opt for Portfolio Management Service, where a specialized expert (fund manager) looks after the funds and through sound investments, helps us achieve our goals. We Recommend: One should start financial planning and investing early. Take advice of professional fund managers if the investor does not have appropriate knowledge about the financial market.

Regularly analyze investments and track their performance.

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BIBLIOGRAPHY

www.birlasunlife.com www.bloomberg.com www.karvy.com www.indiainfoline.com Business Today Business World Economic Times

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