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Chapter 1 1.1 Introduction of ICICI Bank Ltd

ICICI Bank is India's largest private sector bank with total assets of Rs.5, ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an allstock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five

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decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity. ICICI Bank is India's second-largest bank with total assets of Rs.4,062.34 billion ($91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion ($1,155 million) for the year ended March 31, 2011. The Bank has a network of 2,535 branches and 6,810 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Their UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).367.95 billion (US$ 99 billion) at March 31, 2013 and profit after tax Rs. 83.25 billion (US$ 1,533 million) for the year ended March 31, 2013. The Bank has a network of 3,382 branches and 10,943 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management.

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The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

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1.2Products & Services provided by the ICICI Bank

Deposits and Accounts ICICI Bank Privilege Banking has a range of accounts and deposits to cater to your

unique banking needs. Our extensive branch & ATM network along with mobile, phone, internet and doorstep banking, make your banking experience the best.

Types of Accounts offerings:
     

Titanium Privilege Savings Account Gold Privilege Savings Account Fixed Deposit Recurring Deposits Current Accounts Family Banking

Credit and Debit Cards Enjoy rewards and privileges along with unmatched convenience when you sign up

for any ICICI Bank Credit or Debit Card.

Types of Credit & Debit Cards offerings:
 

Titanium Debit Card Gold Debit Card

convenient and hassle-free access to car. we help you to protect what is important to you. Our range of third party insurance products covers everything from your health and life.5  Rubyx Credit Card  Loans At ICICI Bank Privilege Banking. Types of Loan offerings:    Home Loan Car Loan Personal Loan  Investments To secure the financial future for your family and you. home and personal loans mean you can get financing when you need it. Types of Insurance offerings:     Life Insurance Health Insurance Complete Health Insurance Policy Health Care Plus . Enjoy peace of mind and unmatched convenience with insurance products facilitated by ICICI Bank. At ICICI Bank Privilege Banking. Quick. we offer you various investment options to help you build your wealth for self and for future generations. we offer you a wide range of loan products to help you achieve your dreams. an appropriate range of investments is critical. Types of Investment Offerings:     ICICI Bank Pure Gold Foreign Exchange Services Public Provident Fund Account Mutual Funds  Insurance At ICICI Bank Privilege Banking. to your home and travels.

Bill Pay. faster. Through these services you can do your day today banking anytime. iMobile. anywhere.added services of ICICI Bank like Internet Banking. Types of value-added services:     e-Locker Internet Banking iMobile Bill Pay . more convenient.6      Critical Care Personal Protect Insurance Policy Home Insurance Car Insurance Two Wheeler Insurance  Value-added Services Value . e- Locker makes your banking simpler.

ICICI AMC was the first institutional participant to offer Portfolio Management Services to HNIs and Institutions in India. You get the best fund managers in the industry who craft customized stock portfolios that work wonders.3 Portfolio Management in ICICI Bank Portfolio Management Services (PMS) is a sophisticated investment vehicle that offers a range of specialised investment strategies to capitalise on opportunities in the market. With PMS products distributed by ICICI Bank you get: .000 PMS clients stands testament to the quality and value of our services. and on that basis offer a portfolio that best suits these needs and objectives. We have a successful track record of over 10 years of experience in offering Portfolio Management Services and today our strong base of over 7.  Personalized Advice Experienced Fund Managers give you sound investment advice and strategies that help you invest smartly.7 1. in the year 2000. Our aim -is to create a portfolio that suits your requirements. therefore we will first seek to understand a client‟s needs and investment objectives. ICICI Portfolio Management Services provides solutions for the investment needs of select clientele. through focused portfolios.

The teams of experts in these fund houses know exactly how your money is performing through continuous monitoring. The Portfolio Managers take care of all the administrative aspects of your portfolio with a monthly or semiannual reporting on the over-all status of the portfolio and performance.8    More choice in terms of portfolios to suit individual client needs and risk appetite Ability to structure products that meet specific investment objectives Choice of alternate investment products that were traditionally available to the very wealthy  Professional Management PMS products distributed by ICICI Bank combine the benefits of professional money management with the flexibility. as a customer are always informed through:   Communications that include relevant information on major market events Quarterly or semi-annual performance updates . You.  Continuous Monitoring The expert Fund Managers and research team keep a constant watch on your money. control and potential tax advantages of owning individual stocks or other securities.

As a result the investments market . but a cake of few rich people. The other major method adopted was the study of stock price movement with the help of price charts. During this time period pools and corners were used for manipulation. It evolved during 1900-1902 when Charles H. establishing standard practices and generating a good public image. According to J. the founder of the Dow Jones and Co. Second phase began in the year 1930.1 Evolution of Portfolio Management Portfolio management is essentially a systematic method of maintaining one„s investment efficiently. There investment strategy was build around the identification of the trend and pattern in the stock price movement. presented his view in the series of editorials in the Wall Street Journal in USA. After coming up of the Securities Act.C. he concluded that the market movement was quite orderly and followed a pattern of waves. Francis the development of investment management can be traced chronologically through three different phases. John Moody in his book ―The Art of wall Street Investing‖. A booklet entitled ―The Anatomy of the Railroad‖ was published by Thomas F. After analyzing 75 years data of share price. The process is speculative in nature. This method later on was known as Technical Analysis. They generally advocated the use of different ratios for this purpose. Investment was not a wide spread activity. The result of this was the stock exchange crash in the year 1929. Investment management was an art and needed skills. Many factors have contributed to the existence and development of the concept. Dow. In the early years of the century analyst used financial statements to find the value of the securities. The first to be analyzed using this was Railroad Securities of the USA. The advocates of technical analysis believed that stock prices movement is ordered and systematic and the definite pattern could be identified. the investment industry began the process of upgrading its ethics.9 2. The phase was of professionalism. Price manipulation was resorted to by the investors. Finally the daring speculative ventures of investors were declared illegal in the US by the Securities Act of 1934. Another prominent author who supported the technical analysis was Ralph N. The proposed type of analysis later on became the ―common -size‖ analysis. First phase is known as Speculative Phase. His theory is known as Elliot Wave Theory. although most of the writers adopted different ways to publish there data. As the time progressed this method became very important in the investment field. Woodlock in 1900. strongly supported the use of financial ratios to know the worth of the investment. Elliot who published a book in the year 1938 titled ―The Wave Principle‖.

During this period the research work of Benjamin Graham and David L. He showed how the risk can be minimized through proper diversification of investment which required the creation of the portfolio. with proper knowledge to each and every investor. The work of Markowitz was extended by the William Sharpe.10 became safer place to invest and the people in different income group started investing. He tried to quantify the risk. For his work he won the Noble Prize for Economics in the year 1990. Third phase was known as the scientific phase. The foundation of modern portfolio theory was laid by Markowitz. Dood was widely publicized and publicly acclaimed. His pioneering work on portfolio management was described in his article in the Journal of Finance in the year 1952 and subsequent books published later on. They published a book ―Security Analysis‖ in 1934. He provided technical tools for the analysis and selection of optimal portfolio. . Investors began to analyze the security before investing. If we talk of the present the last two phases of Professionalism and Scientific Analysis are currently advancing simultaneously with investment in various financial instruments becoming safer. which was highly sought after. They are considered as pioneers of security analysis as a discipline. Their research work was considered first work in the field of security analysis and acted as the base for further study. John Linter and Jan Mossin through the development of the Capital Asset Pricing Model (CAPM).

was the first among the traditional private sector banks to offer the facility. Their partner Asset Management Companies conduct detailed and scientific analysis of various investment avenues to help you invest your money. Depending on the risk appetite and desired returns. including the products from Prudential ICICI. . PMS can be of the following categories    Equity-based Products Commodity-based Products Index-linked Products  Federal Bank Federal Bank launches portfolio investment scheme for NRIs KOCHI: Kerala-based Federal Bank on Friday launched its Portfolio Investment (PIS) Scheme for NRIs in tie up with Geojit BNP Paribas Financial Services Ltd. Reliance Capital. The bank. offering "hassle free" facilities for investments in stock market. The recommendations aim to ensure that the strategy and portfolio are built on solid foundations. which has been authorized by RBI to administer the scheme.2 Portfolio management in developed countries : Deutsche Bank Deutsche Bank brings Portfolio Management Services (PMS) from seven providers that work towards the growth of funds. and Benchmark Asset Management  ICICI Bank Wealth Management ICICI Bank Wealth Management assist for the Portfolio Management Services (PMS) by referring to the partner Asset Management Companies. one can select from a range of superior PMS products in the country.11 2. Franklin Templeton.

Channel Islands. For its international operations UTI has set up its 100% subsidiary. UTI tied up with Shinsei Bank of Japan to run a large size India-centric portfolio for Japanese investors. UTI has also launched a Private Equity Infrastructure Fund along with HSH Nord Bank of Germany and Shinsei Bank of Japan.3 History of portfolio management in Indian banks  Unit Trust of India It is a financial organization in India. UTI International Limited. The total average Assets Under Management (AUM) for the month of June 2008 was Rs. It is also running a Sharia Compliant portfolio for its Offshore clients.earning capacity and its financial strength. 530 billion and it ranked fourth. This measure indicates its revenue. In the area of alternate assets. It has branches in London. It runs different portfolios for its HNI and Institutional clients. Dubai and Bahrain. It has over 70 schemes in domestic MF space and has the largest investor base of over 9 million in the whole industry. PSU Banks and all the large Private and Foreign Banks have started distributing UTI products. It is present in over 450 districts of the country and has 100 branches called UTI Financial Centers or UFCs. About 50% of the total IFAs in the industry work for UTI in distributing its products! India Posts. UTI has a 100% subsidiary called UTI Ventures at Banglore This company runs two successful funds with large international investors being active participants. In terms of equity AUM it ranked second and in terms of Equity and Balanced Schemes AUM put together it ranked FIRST in the industry. Besides running domestic MF Schemes UTI AMC is also a registered portfolio manager under the SEBI (Portfolio Managers) Regulations. which was created by the UTI Act passed by the Parliament in 1963. The JV has got its license and has started its operations. . It has set up a Joint Venture with Shinsei Bank in Singapore.12 2. registered in Guernsey.

13  Bank Of Baroda  1969 The Bank was brought into existence by a Ordinance issue on 19th July. The Bank established a `Non-resident Portfolio Management. Consultancy Cell'. etc. 1969. and 1 branch in UAE. The Bank is a Government of India. Bank of Baroda (U. . Kenya is subsidiary of the Bank. Bob Fiscal Services Ltd. Its constituents in the filing of income returns.  1970 Income-Tax consultancy services was set-up in September to assist. equipment leasing..K.K. non-operative branch in Bangladesh was not taken into account.) Nominees Ltd. Undertaking and carries on all types of banking business including foreign exchange. is also a subsidiary of the Bank which handles functions such as merchant banking. Bank of Baroda (Kenya) Ltd. London is a subsidiary of the Bank. investment banking. Besides managing public issues and giving underwriting support.. inter-corporate deposit. Due to closure of 2 branches in U. by the Central Government.. The Ordinance was replaced by the Banking Companies (Acquisition and Transfer of Undertaking) Act.

portfolio analysis. An investor invests his funds in a portfolio expecting to get good returns consistent with the risk that he has to bear. It is evident that rational investment activity involves creation of an investment portfolio. Portfolio management is a complex process which tries to make investment activity more rewarding and less risky. portfolio revision & portfolio evaluation. The investor tries to choose the optimal portfolio taking into consideration the risk return characteristics of all possible portfolios. The risk and return characteristics of portfolios. It deals specifically with the security analysis.14 CHAPTER 3 Introduction of Portfolio Management An investor considering investment in securities is faced with the problem of choosing from among a large number of securities and how to allocate his funds over this group of securities. As the risk return characteristics of individual securities as well as portfolios also change. . portfolio selection. Portfolio management comprises all the processes involved in the creation and maintenance of an investment portfolio. Again he is faced with problem of deciding which securities to hold and how much to invest in each. Portfolio management makes use of analytical techniques of analysis and conceptual theories regarding rational allocation of funds. The return realized from the portfolio has to be measured and the performance of the portfolio has to be evaluated. This calls for periodic review and revision of investment portfolios of investors.

without sacrificing returns. Such a group of securities is called portfolio” . debentures. they tend to invest in a group of securities. In such investments both rationale and emotional responses are involved. . “It is rare to find investors investing their entire savings in a single security. Investing in financial securities is now considered to be one of the best avenues for investing one savings while it is acknowledged to be one of the best avenues for investing one saving while it is acknowledged to be one of the most risky avenues of investment. and bonds is profitable as well as exciting.15 Investing in securities such as shares. Creation of a portfolio helps to reduce risk. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success. Portfolio management deals with the analysis of individual securities as well as with the theory and practice of optimally combining securities into portfolios. but involves a great deal of risk and calls for scientific knowledge as well artistic skill. Instead. It is indeed rewarding.

weaknesses. safety. . domestic vs. and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk. international.16 3. and balancing risk against performance.1 Definition of 'Portfolio Management' The art and science of making decisions about investment mix and policy. equity. matching investments to objectives. opportunities and threats in the choice of debt vs. growth vs. asset allocation for individuals and institutions. Portfolio management is all about strengths.

Their objective of portfolio planning would be that they get their money at that time. the first objective of portfolio management is getting higher return. some portfolio planning is done to obtain some tax savings. 2) Capital Growth: Some investors do not need regular returns. say education of children. Their object of portfolio management is that not only their current wealth is invested in the securities.2 Objectives Portfolio management Portfolio means combined holding of many kinds of financial securities. Making a portfolio means putting ones eggs in different baskets with varying elements of risk and returns. Such as shares. 5) Favorable Tax Treatment: Sometimes. Portfolio management is also known as investment management Objectives of Portfolio Management There are seven objectives of portfolio management: 1) Return: Portfolio management is technique of investing in securities. units and other financial assets. 3) Liquidity: Some investors prefer that the portfolio should be such that whenever they need their money. they may get the same. The ultimate object of investment in the securities is return. etc. Hence. government bonds.17 3. debenture. The object of portfolio is to reduce risk by diversification and maximize gain. . 4) Availability of Money at Pre-decided Time: Some persons invest their money to use it at pre-decided time. they also want a channel where their future incomes will also be invested.

i. The key involves investing in categories or securities that are dissimilar. but reduction (without sacrificing the return) is possible only through portfolio. our entire return won‟t be as badly hurt. The strength of a security depends upon three strengths: . the possible outcome changes if that security flops. This is the foundation of portfolio management. Diversification substantially reduces the risk with little impact on potential returns. our entire return will be severely affected. If we invest in a single security. i. our return will depend solely on that security. The two basic principles of effective portfolio management : (i) (ii) Invest on the basis of fundamentals of the security. If we add nine other unrelated securities to that single security portfolio. Clearly. held by itself. if that security flops. By diversifying our investments...18 6) Maintaining the Purchasing Power: Inflation eats the value of money. one object of the portfolio is that it must ensure maintaining the purchasing power of the investor intact besides providing the return. The portfolio manager should follow the above-mentioned principles to further strengthen his targets of higher returns and optimum risk. 7) Risk Reduction through Diversification: It is the perhaps most important object of the portfolio management. the portfolio manager should invest in diversified securities and see that the coefficient ofcorrelation between these securities is as less as possible (only then the portfolio will be able to reduce the risk). The first principle suggests that investment should be made only in those securities which are fundamentally strong. purchasing power.e. To achieve these objectives. All other objectives (mentioned above) can be achieved even withoutportfolio. Hence. The object of the portfolio management is to provide maximum return on the investments by taking only optimum risk.e. we can substantially reduce the risk of the single security. Review and update the portfolio regularly. through investment in a single security. the single security is highly risky.

various possible alternative uses of the product. (b) Strength of the industry. The strength of the company depends upon various factors like I. dedicated and motivated human resources. the portfolio should be revised according to emerging situations. in case some sick-minded person takes over as CEO of the company. stability of government. II. Two more points regarding the second principle (i) Sometimes. monetary policy. here. Economy. investments should move from fertilizer companies to irrigation companies. and (c) Strength of the economy. closed/open economy and finally the government‟s attitude towards business houses. tax policy. Policy regarding encouraging R&D Integrity of promoters. after making the investment in some securities. perhaps desired step will be to disinvest the securities of the company. better move to some other industry. portfolio manager realizes that his decision of investing in that security is wrong. The Fundamentals of the company. IV. Intelligent.19 (a) Strength of the company. The second principle suggests that the portfolio should be reviewed continuously and if need be. means national economy By fundamentals of the economy we mean Þ recession/boom. V. and Long range planning for profits. industry and economy keep on changing. in case of monsoon failure. III. revised immediately. and availability (rather we should say non-availability of the substitutes). etc. The fundamentals of the industry depend upon the product consumer surplus the product provides to its users. For example. budgetary policies. he should not wait for happening of . possibility of war and its impact on economy. Accordingly. Having positive values and vision. The portfolio manager should see that most of the fundamentals are favorably placed. in case cheaper substitutes have emerged for any industry‟s product.

3.20 some event which will make his decision as a right one (if there is some loss on that investment. rather he should move immediately liquidate his position in that security. 4. [Remember that no portfolio manager has ever made 100 per cent correct decisions (Warren Buffet is perhaps exception) (ii) Do not bother much about transaction cost related to reshuffling of the portfolio. Implement a plan using the most Appropriate Investment Strategies. Deliver Great Capability to all investment management solutions. he should not even wait for breakeven). 2. Assess your Progress regularly . consideration of such small costs generally result in heavy losses or foregone opportunities of earning profit. Monitor and Adjust your portfolio on an ongoing basis 7. Align your investment strategy with your Objectives and Risk Tolerance. Emphasize the importance of Asset Allocation 5.3 7 Principles of Portfolio Management 1 Emphasize a Disciplined Process to eliminate response to short-term market volatility. 6. 3.

The Non-discretionary portfolio management services: The manager function as a counselor. . In this discretionary PMS. w h o i n r e t u r n . almost all portfolio managers parks the funds in the money market s e c u r i t i e s s u c h a s o v e r n i g h t m a r k e t . Normally.4 TYPES OF PORTFOLIO MANAGEMENT :- The two types of portfolio management services are available for the investors: 1.21 3. but the investor is free to accept or reject the manager‟s advice. the client parts with his money in f a v o r o f m a n a g e r . depending on the call money rates prevailing at the time of investment. makes all the decisions and gives a good return on the investment and for this he charges a certain fees. 1 8 2 d a y s t r e a s u r y bills and 90 days commercial bills. The manager concentrates on stock market instruments with a portfolio tailor made to the risk taking ability of the investor. The Discretionary portfolio management services (DPMS): In this type of services. 2. the manager for a services charge also undertakes the paper work. return on such investment varies from 14 to 18per cent. h a n d l e s a l l t h e p a p e r work. to maximize the yield.

house etc. Financial objectives are safety. .5 Steps in portfolio management in ICICI Bank:- 1) IDENTIFICATION OF THE OBJECTIVES The starting point in the process is to determine the characteristics of an various investment and then matching them with the individuals need and preferences. depends. 2) FORMULATION OF PORTFOLIO STRATEGY The aspect of Portfolio Management is the most important element of proper portfolio investment and speculation.22 3. Personal or an individual objectives may be related to personal characteristics of individuals such as family commitments. consumption and provision for retirement etc. security etc. status. profitability and liquidity. and intangible objectives such as social status. While planning . educational requirements. All the personal investing is designed in order to achieve certain objectives. These objectives may be tangible such as buying a car. a careful review should be conducted about the financial situation and current capital market conditions. these objectives may be classified as financial or personal objectives. Similarly. income. This will suggest a set of investment and speculation policies to be followed.

growth with some income or income only.23 The statement of investment policies includes the portfolio objectives. Money market instrument 2. The portfolio manager has to decide the goals before selecting the common stock. They require changes as time passes. the portfolio manager can select the common stocks. The security classes are simply the type of securities asunder: 1. International securities Once the objective of the portfolio is determined the securities to be included in the portfolio must be selected. 3) SELECTION OF ASSET MIX The most important decision in portfolio management is selection of asset mix. . In other words selection of asset mix means investing indifferent kinds of assets and reduces risk and volatility and maximizes returns in investment portfolio. mutual funds etc. The strategic asset allocation policy would call for broad diversification through an indexed holding of virtually all securities in the asset class. Fixed income security 3. stocks. strategies and constraints. investor‟s wealth changes. Real estate investment 5. security price change. Portfolio strategy means plan or policy to be followed while investing in different types of assets. Therefore. Once the goal has been selected. the optional strategic asset allocation also changes. It means spreading out portfolio investment into different asset classes like bonds. Selection of asset mix refers to the percentage to the invested in various security classes. investor‟s knowledge expands. The goal may be to achieve pure growth. Equity shares 4. There are different investment strategies. Normally the portfolio is selected from a list of high-quality bonds that the portfolio manager has at hand.

three decisions need to be made. investor should have continuous review and scrutiny of his investment portfolio. The portfolio than. 5) PORTFOLIO REVISION Portfolio management would be an incomplete exercise without periodic review. Such speculative transactions are usually classified as timing or selection decisions. For this purpose. which is done in the execution stage. . he can dispose of the securities. Whenever adverse conditions develop. which is known as strategic asset allocation. if the percentage holdings of various asset classes are currently different from desired holdings. many portfolio managers engage in the speculative transactions in the belief that such transactions will generate excess risk-adjusted returns. Thus. Investment portfolio management involves maintaining proper combination of securities. this is only thing. has to be continuously reviewed over a period of time and if necessary revised depending on the objectives of investor. If the statement of investment policy requires pure investment strategy. which is once selected. portfolio revision means changing the asset allocation of a portfolio. The investor has to begin with periodically adjusting the asset mix to the desired mix. industry group or economic sector.24 4) PORTFOLIO EXECUTION: The process of portfolio management involves a logical set of steps common to any decision. Such timing decisions are known as tactical asset allocation and selection decision deals with securities within a given asset class. The portfolio. which are not worth. Then the investor or portfolio manager can make any tactical asset allocation or security selection decision. should be rebalanced. Timing decisions over or under weight various asset classes. industries or economic sectors from the strategic asset allocation. However. plan implementation and monitor. Applying this process to actual portfolios can be complex Therefore. in the execution stage. which comprise the investor‟s portfolio in a manner that they give maximum return with minimum risk.

A portfolio manager. the frequency of review depends upon the size of the portfolio. targets for portfolio performance. These fluctuations may be related to economic activity or due to other factors. which comprise the investor‟s portfolio in a manner that they give maximum return with minimum risk. The performance of an individual stock should be compared with the overall performance of the market. If revision is attempted too infrequently the benefits of timing may be foregone. The performance of portfolio should be measured periodically. Good performance in the past might have resulted from good luck. the first task in performance evaluation is to determine whether past performance was good or poor. timing for revision of portfolio 6) PORTFOLIO PERFORMANCE EVALUATION: Portfolio management involves maintaining a proper combination of securities. These rates of return should be based on the market value of the assets of the fund.25 However. There are techniques of portfolio revision . in which case such performance may not be expected to continue in the future.Investors buy stock according to their objectives and return-risk framework.If revision occurs to often. the sum involved. transaction and analysis costs may be high. The investor should have continues review and scrutiny of his investment portfolio. . Ideally investors should buy when prices are low and sell when prices rise to levels higher than their normal fluctuations. The review should include a careful examination of investment objectives. Complete evaluation of the portfolio performance must include examining a measure of the degree of risk taken by the fund. On the other hand. Then the second task is to determine whether such performance was due to skill or luck. preferably once in a month or a quarter. thus. Good performance in the past may have resulted from the actions of a highly skilled portfolio manager. The important factor to take into consideration is. actual results obtained and analysis of reason for variations. the kind of securities held and the time available to the investor. by evaluating his own performance can identify sources of strength or weakness. poor performance in the past might have been result of bad luck. Therefore. The review should be followed by suitable and timely action. It can be viewed as a feedback and control mechanism that can make the investment management process more effective. The investor should decide how often the portfolio should be revised .

The functions undertaken by the portfolio management are as follows: 1. To frame the investment strategy and select an investment mix to achieve the desired investment objective. . 2. To maximize the after-tax return by investing in various taxes saving investment instruments. To make timely buying and selling of securities. In order to diversify the risk by investing into various securities following functions are required to be performed. Every investor is risk averse.26 3. 4. 3. To provide a balanced portfolio which can not only hedge against the inflation but can also optimize returns with the associated degree of risk.6 FUNCTIONS OF PORTFOLIO MANAGEMENT The basic purpose of portfolio management is to maximize yield and minimize risk.

proposed. Maximize the value of the portfolio 2. Seek balance in the portfolio 3. Keep portfolio projects strategically aligned It provides a set of portfolio management tools to help achieve these goals.27 3. The Master Project Schedule provides a summary of allactive as well as proposed projects and classifies them by status (active. on-hold) and by business unit/product line to align projects with the strategic allocation. A Product or Technology Roadmap template is provided to help visualize platform and technology relationships to assure critical project relationships are not overlooked with this prioritization.7 Goals of Portfolio Management :- There are three goals of portfolio management: 1. product lines or types of development. were commend a strategic allocation process based on the business plan. PD-Trek provides a Risk-Reward Bubble Chart and a Project Type Pie Chart to assure balance. . With multiple business units. In addition to this prioritization. The Master Project Schedule also provides additional portfolio information to prioritize projects using either a scorecard method or the development productivity index (DPI *). This will allow management to develop a balanced approach to selecting and continuing with the appropriate mix of projects to satisfy the three goals.

 Data from recent decades demonstrates that the majority of actively-managed large and mid-cap stock funds in United States fail to outperform their passive stock index counterparts.9 Disadvantage of Portfolio Management : The most obvious disadvantage is of active management is that the fund manager may make bad investment choices or follow an unsound theory in managing the portfolio.8 Advantages of Portfolio Management :  Capital markets over a long period have always given a better return than any other investment. It is better that a professional handles this. The investment in stock markets by individuals is a complicated business.  Those who are considering investing in an actively-managed mutual fund should evaluate the fund's prospectus carefully. 3. . even if frequent trading is not present.28 3.  The fees associated with active management are also higher than those associated with passive management.

you own individual securities unlike a mutual fund investor. 5 Lacs. Debt and fixed income products managed by a professional money manager. 1 Crore. As per the SEBI guidelines. So this is case where miss-selling can happen. 25 lacs for a product. who owns units of the entire fund.29 CHAPTER 4 Portfolio Management Services in ICICI Bank Portfolio Management Services account is an investment portfolio in Stocks. only those entities who are registered with SEBI for providing PMS services can offer PMS to clients. When you invest in PMS. Although portfolio managers may oversee hundreds of portfolios. different providers have different minimum balance requirements for different products. However. your account may be unique. Similarly HSBC AMC is having minimum requirement of 50 lacs for their PMS and Reliance is having min requirement of Rs. In India Portfolio Management Services are also provided by equity broking firms & wealth management services. the minimum investment required to open a PMS account is Rs. There is no separate certification required for selling any PMS product. As per SEBI guidelines. For E. .that can potentially be tailored to meet specific investment objectives.g Birla AMC PMS is having min amount requirement of Rs. You have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals.

Through Cheque payment. The Value of the portfolio transferred should be above the minimum investment criteria.30 How can investor invest in a Portfolio Management Services (PMS) in ICICI Bank? There are two ways in which an investor can invest in a Portfolio Management Services: 1. The documentation required for an NRI. . New demat account opening format (even if investor has a demat account he is required to open a new one) and documents like PAN. Through transferring existing shares held by the customer to the PMS account. Beside this customer will need sign a few documents like– PMS agreement with the provider. NRIs can invest in a PMS. address proof and Identity proofs are mandatory. 2. A checklist of documents is provided by each PMS provider. is different from a resident Indian. The NRI needs to open a PIS account for investing in PMS. Power of Attorney agreement. however.

rather than the fund owning the stocks.1 How is PMS different from a Mutual Fund in ICICI Bank? Both PMS and Mutual Funds are types of managed Funds. Investors directly own the stocks.31 4. The difference to the investor in a Portfolio Management Services over a Mutual Fund is:     Concentrated Portfolio. Portfolio can be tailored to suit the needs of investor. Difference in taxation .

the PMS provider arranges for fund manager interaction on a quarterly/half yearly basis. The frequency depends on the size of the client portfolio and the Portfolio Management Services provider.32 4. 2. Difference in amount of investments by the investors 3. Market scenario – Eg If the model portfolio has investment in Infosys. Entry of investors at different time. . Bigger the portfolio. Generally. Redemptions/additional purchase done by investor 4. and the current view of the Fund Manager on Infosys is “HOLD”(and not “BUY”). frequency of interaction is more. a new investor may not have Infosys in his portfolio. However the portfolio may differ from investor to investor. Every PMS scheme has a model portfolio and all the investments for a particular investor are done in the Portfolio Management Services on the basis of model portfolio of the scheme.2 Working of a Portfolio Management Services (PMS) in ICICI Bank:Each PMS account is unique and the valuation and portfolio of each account may differ from one another. Under PMS schemes the fund manager interaction also takes place. however the customer will get the valuation of his portfolio on a daily basis from the PMS provider. Each PMS account is unique from one another. There is no NAV for a PMS scheme. This is because of: 1.

the PMS also charges the investors on following counts as all the investments are done in the name of the investor:     Custodian Fee De mat Account opening charges Audit charges Transaction brokerage . Management Charges – Every Portfolio Management Services scheme charges Fund Management charges. the fees charged by the PMS will be 2% + {(25%15%)*20%}.33 4. The charges are decided at the time of investment and are vetted by the investor. Entry Load – PMS schemes may have an entry load of 3%. For Eg PMS X has fixed charges of 2% plus a charge of 20% of fees for return generated above 15% in the year. Apart from the charges mentioned above. The Fees charged is different for every Portfolio Management Services provider and for every scheme. In this case if the return generated in the year by the scheme is 25%.3 Portfolio Management Services (PMS) Charges in ICICI Bank:A PMS charges following fees. Fund Management Charges may vary from 1% to 3% depending upon the PMS provider. It is charged on a quarterly basis to the PMS account. It is charged at the time of buying the PMS only. wherein the provider charges a certain amount of fees/profit over the stipulated return generated in the fund. Profit Sharing – Some PMS schemes also have profit sharing arrangements (in addition to the fixed fees). It is advisable for the investor to check the charges of the scheme.

PMS is not required to remain 65%+ invested in equity to get equity taxation benefit.e slab wise). Profit on the same can be considered as business income. Unlike MF. Each Portfolio Management Services account is in the name of additional investor and so the tax treatment is done on an individual investor level.34 4.( i. it is on the client and his CA to decide to treat it as capital gain or business income. . It depends on clients Chartered Accountant or the assessing officer how he treats this Income. [STCG (15%) or LTCG(Tax free)]. The PMS provider sends an audited statement at the end of the FY giving details of STCG and LTCG. Profit can be considered as Capital gains.4 Taxation for Portfolio Management Services in ICICI Bank:- Any income from Portfolio Management Services account is a business income.

there is a downside to putting cash into portfolio management as well. documentation work. All these services come for a fee. Problem inherent in most schemes on offer will be misused of investor‟s funds to some extent. because they not only have direct access to registrars but also have branch offices to ensure quicker transfers. Difficulties such as late transfer and postal theft are reduced incase of brokers. Funds collected from investors will aid the brokers concerned in their own games in the market. managers have to send half-yearly reports to SEBI on their portfolio management activities. PMS also takes care of a number of the headaches endemic with investing in the markets. follow-up services charges extra. postal work and even ensuring that dividends are credited to clients account. all PMS Managers have to send their clients at least a quarterly report giving the status of their portfolio and the transactions that have taken place. The biggest one is custodial services. of course. So investors have to be very careful in choosing the promoters. The client-PMS manager contract is as per SEBI ground rules. PMS Managers are not allowed to assured any fixed returns. The most important is the fact that despite all the SEBI checks. They must also advise him on all transactions. SEBI directives also put the onus on the PMS promoters to take follow-up action in case shares are lost or damaged. This really discharges the managers for any responsibility if the scheme does badly. only the serious players are going to enter his business. It has several checks to protect investor‟s interest like laying the custodial responsibility on the manager and preventing any alterations in the scheme without the client‟s consent. Experienced handling of cash and money power apart.5 PORTFOLIO MANAGEMENT SCHEMES (PMS) PRESENT SCENARIO in ICICI Bank:“The regulatory environment has totally changed now and with SEBI fixing strict norms for companies launching PMS. As in all schemes.” The PMS members today have full transparency: managers are required to maintain individual accounts showing all dealings in a client‟s portfolio. Finally. Secondly.35 4. All PMS Managers act as custodians of shares and are responsible for the load of paper work related to the share transfer. While the actual PMS charges vary from a high of 7% of the amount invested to a low of around 3. .5%.

or asset-management vehicle. they work with a team of analysts and researchers. On the investments side. In the case of mutual and exchange-traded funds (ETFs). Passive management simply tracks a market index. weaknesses. It is their job to sift through the relevant information and use their judgment to buy and sell securities. co-managers. . and other tradeoffs encountered in the attempt to maximize return at a given appetite for risk. talk to company managers and monitor industry and economic trends looking for the right company and time to invest the portfolio's capital. safety. selecting appropriate investments and allocating each investment properly for a fund. Portfolio managers are presented with investment ideas from internal buy-side analysts and sell-side analysts from investment banks. Portfolio managers make decisions about investment mix and policy.36 CHAPTER 5 Portfolio Manager of ICICI Bank:A portfolio manager of icici bank is either a person who makes investment decisions using money other people have placed under his or her control or a person who manages a financial institution's asset and liability (loan and deposit) portfolios. A team of analysts and researchers are ultimately responsible for establishing an investment strategy. asset allocation for individuals and institutions. there are two forms of portfolio management: passive and active. Throughout each day. or a team of managers who attempt to beat the market return by actively managing a fund's portfolio through investment decisions based on research and decisions on individual holdings. Portfolio management is about strengths. Closed-end funds are generally actively managed. domestic vs. growth vs. they read reports. international. opportunities and threats in the choice of debt vs. and balancing risk against performance. Active management involves a single manager. and are ultimately responsible for establishing an investment strategy. commonly referred to as indexing or index investing. selecting appropriate investments and allocating each investment properly for a fund or asset-management vehicle. equity. matching investments to objectives.

37 5. In this Marketing skills help him a lot. In the stock market every new piece of information affects the value of the securities of different industries in a different way.1 QUALITIES OF PORTFOLIO MANAGER of ICICI Bank:1. He has to compete with the Stock brokers in the stock market. company. A good analyst makes a good financial consultant. opportunities of the economy. clients. Experience:   In the cyclical behavior of the stock market history is often repeated. therefore the experience of the different phases helps to make rational decisions. weakness. He must be able to judge and predict the effects of the information he gets. makes a perfect professional manager. 3. . Sound general knowledge:      Portfolio management in icici bank is an existing and challenging job. 2. He has to work in an extremely uncertain and conflicting environment. alertness. Marketing skills:    He must be good salesman. markets trends etc. An analysis of the security‟s values. etc. industry and the company. He must have sharp memory. is continues job of the portfolio manager in icici bank. The analyst can know the strengths. He has to convince the clients about the particular security. The experience of different types of securities. fast intuition and self-confidence to arrive at quick decisions. Analytical Ability:     He must have his own theory to arrive at the value of the security. 4.

or a mix of more than one type of proper mix ensures higher safety.38 5. further portfolio manager should take in to account the credit policy. technical changes etc. prospectus and strength. yield and liquidity coupled with balanced risk techniques of portfolio management. their net worth future earnings. Conducting market and economic service: This is essential for recommending good yielding securities they have to study the current fiscal policy. non-convertibles or partly convertibles.    Financial analysis: He should evaluate the financial statement of company in order to understand. individual policies etc. budget proposal. . recommending high yield securities etc. Study of stock market : He should observe the trends at various stock exchange and analysis scripts so that he is able to identify the right securities for investment Study of industry: He should study the industry to know its future prospects. foreign exchange possible change in corporate law‟s etc. money market. securities etc. debentures. required for investment proposal he should also see the problems of the industry.  Decide the type of port folio: Keeping in mind the objectives of portfolio a portfolio manager has to decide whether the portfolio should comprise equity preference shares. industrial growth.2 FUNCTIONS OF PORTFOLIO MANAGERS:   Advisory role: Advice new investments. identification of objectives. review the existing ones. convertibles..

which enables him to obtain unpublished price-sensitive information of the body corporate. practice or unfair competition. 3. A portfolio manager shall not place his interest above those of his clients. whether oral or written. The portfolio manager shall either avoid any conflict of interest in his investment or disinvestments decision.39 5. while competing for or executing any assignment. A portfolio manager shall not make any statement or become privy to any act. A portfolio manager shall. while providing unbiased services. The money received by a portfolio manager from a client for an investment purpose should be deployed by the portfolio manager as soon as possible for that purpose and money due and payable to client should be paid forthwith. ensure proper care and exercise independent professional judgment. ensure fair treatment to all his customers. He shall disclose to the clients. his interest in various corporate bodies. which is likely to be harmful to the interests of other portfolio managers or it likely to place such other portfolio managers in a disadvantageous position in relation to the portfolio manager himself. A portfolio manager shall render at all time high standards of services exercise due diligence. A portfolio manager shall not make any exaggerated statement.3 CODE OF CONDUCT. 5. in the conduct of his business. which has come to his knowledge. 4. 6. 7.PORTFOLIO MANAGERS of ICICI Bank: 1. At the time of entering into a contract. to the client either about the qualification or the capability to render certain services or his achievements in regard to services rendered to other clients. . observe high standards of integrity and fairness in all his dealings with his clients and other portfolio managers. or where any conflict of interest arises. 2. possible sources of conflict of duties and interest. the portfolio manager shall obtain in writing from the client. A portfolio manager shall not disclose to any clients or press any confidential information about his clients.

The portfolio manager shall where necessary and in the interest of the client take adequate steps for registration of the transfer of the client‟s securities and for claiming and receiving dividend. . 10. and his own professional skills.40 8. 9. Ensure that all professional dealings are affected in a prompt. He shall also take necessary action for conversion of securities and subscription of/or rights in accordance with the client‟s instruction. Portfolio manager shall ensure that the investors are provided with true and adequate information without making any misguiding or exaggerated claims and are made aware of attendant risks before they take any investment decision. 11. efficient and cost effective manner. interest payment and other rights accruing to the client. He should render the best possible advice to the client having regard to the client‟s needs and the environment.

2. 1992 as category I or category II merchant banker. 3. 1993 REGARDING PORTFOLIO MANAGERS 1. No person shall carry on any activity as a portfolio manager unless he holds a certificate granted by the Board under this regulation. .41 5.4 SECURITIES AND EXCHANGE BOARD OF INDIA RULES. Provided also that a merchant banker acting as a portfolio manager under the second provision to this rule shall also be bound by the rules and regulations applicable to a portfolio manager. who was engaged as portfolio manager prior to the coming into force of the Act. Provided further that nothing contained in this rule shall apply in case of merchant banker holding a certificate granted by the board of India Regulations. as the case may be. till the disposal of such application. No person to act as portfolio manager without certificate. if he has made an application for such registration. Provided that such person. may continue to carry on activity as portfolio manager. 5. 4.

42 5. as the case may be. shall be valid for a period of here years from the date of its issue to the portfolio manager.5 Conditions to grant or renewal of certificate to portfolio manager: The board may grant or renew certificate to portfolio manager subject to the following conditions namely: a) The portfolio manager in case of any change in its status and constitution. shall obtain prior permission of the board to carry on its activities. b) He shall pay the amount of fees for registration or renewal. in the manner provided in the regulations. . c) He shall make adequate steps for redressed of grievances of the clients within one month of the date of receipt of the complaint and keep the board informed about the number. Period of validity of the certificate. The certificate of registration on its renewal. as the case may be. nature and other particulars of the complaints received. d) He shall abide by the rules and regulations made under the Act in respect of the activities carried on by the portfolio manager.

if so required. 3. 2. the applicant shall be given an opportunity to remove within the time specified such objections as may be indicated by the board. Furnishing of further information. The applicant or. Application of confirm to the requirements Subject to the provisions of sub-regulation (2) of regulation 3. The Board may require the applicant to furnish further information or clarification regarding matters relevant to his activity of a portfolio manager for the purposes of disposal of the application.6 SECURITIES AND EXCHANGE BOARD OF INDIA REGULATIONS. any application made by a portfolio manager prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in form A shall be treated as an application made in pursuance of subregulation and dealt with accordingly. its principal officer shall. shall be rejected: Provided that.43 5. 1993 Registration of Portfolio Managers: 1. any application. Application for grant of certificate An application by a portfolio manager for grant of a certificate shall be made to the board on Form A. Notwithstanding anything contained in sub regulation(1). before rejecting any such application. . clarification and personal representation. appear before the Board for personal representation. which is not complete in all respects and does not confirm to the instructions specified in the form.

The Board shall take into account for considering the grant of certificate.44 4. and accountancy or business management. director or principal officer is not involved in any litigation connected with the securities market and which has an adverse bearing on the business of the applicant. law.  The applicant has his employment minimum of two persons who have the experience to conduct the business of portfolio manager. equipment‟s and manpower to effectively discharge his activities. . directly or indirectly connected with the applicant has not been granted registration by the Board in case of the applicant being a body corporate. all matters which are relevant to the activities relating to portfolio manager andin particular whether the applicant complies with the following requirements namely:  The applicant has the necessary infrastructure like to adequate office space.  A person. his partner. partner or principal officer has not at any time been convinced for any offence involving moral turpitude or has been found guilty of any economic offences.  The applicant has the professional qualification from an institution recognized by the government in finance.  The applicant. his director.  The applicant. fulfills the capital adequacy requirements specified in regulation 7 the applicant. Consideration of application.

45 CONCLUSION With the help of given project I got an in-depth knowledge about the working of portfolio management. They believe in investing and managing their portfolio on their own. 18-30) is willing to invest in different investment avenues through portfolio manager or through mutual funds which are again managed by portfolio managers. age group bet. It can be concluded from the project that future of portfolio management is bright provided proper regulations prevail and investor‟s needs are satisfied by providing variety of schemes. young generation (i. it can be said that the future of portfolio management is bright in years to come. age group of 60 & above are least interested in making investment in different avenues through portfolio managers. diversified portfolios. The interest of investors is protected by SEBI. On the other hand. Due to the benefits available to the individual‟s such as reduction in risk.e. tax benefits etc. which scheme provide better returns compared to other and who are the portfolio management players in the Indian market. . expert professional management. However. Also I got an insight as too how to invest in portfolio management. Portfolio management is governed by SEBI Act.

icicibank.pptfun.46 CHAPTER 7 BIBLIOGRAPHY NEWSPAPERS  Times of India  Hindustan Times BIBLIOGRAHPY  Harries & Niel  Banking with Portfolio Management WEBLIOGRAPHY  www.com .portfoliostep.com  http://www.com  http://www.