SHEKHAR-Portfolio Management and Investment Trends

SUMMER TRAINING REPORT
on
PORTFOLIO MANAGEMENT AND
INVESTMENT TRENDS
Submitted in partial fulfilment of the requirements of the two year
Post Graduate Programme (PGP).
Submitted by:
KESHARPU SEKHAR
Roll No: PG20095518
Batch : 2009-2011
IILM Institute for Higher Education
I I L M I n s ti t u t e o f H i g h e r E d u c a ti o n Page
DECLARATION FORM
I hereby declare that the Project work entitled, PORTFOLIO MANAGEMENT AND
INVESTMENT TRENDS submitted by me for the partial fulfillment of the Post Graduate
Program (PGP) to IILM Institute for Higher Education, is my own original work and has not
been submitted earlier either to IILM or to any other Institution for the fulfilment of the
requirement for any course of study. I also declare that no chapter of this manuscript in whole or
in part is lifted and incorporated in this report from any earlier / other work done by me or others.
Place : GURGAON
Date :10/07/2010
Signature of Student:
Name of Student: KESHARPU SEKHAR

Address : FL-17, NEELANCHAL NAGAR
BERHAMPUR
ORISSA
ACKNOWLEDGEMENT
I wish to express my gratitude to Sharekhan’s management for giving us an

opportunity to be a part of their esteem organization and enhance our knowledge
by granting permission to do our Summer Internship Program under their kind
guidance.
I am grateful to Mr. Arvind Kumar (Asst. Sales Manager), our guide, for his
invaluable guidance and cooperation during the course of the program. He
provided us with his assistance and support whenever needed that has been
instrumental in completion of this program.
I am also sincerely thankful to my faculty guide, Mr.Harsh Vardhan who was of

immense help and took up all my queries and suggested me his invaluable
suggestions. His guidance and encouragement has showed the path of fulfillment
to my project.
I want to give my special thanks to all members of IILM, for providing me an

opportunity to work on this project with this great organization.
At last I would like to thank all the respondents who I met in the preparation and
who gave their valuable time to provide me with all required information.
Executive Summary
This report contains the different investment strategies taken by the
investors (mainly small investors) and the trends of investment in different
investment instruments. Project focused on findings of risk tolerance of
investors and the time horizon they want to remain invested in the market.
The project extended to find out the instrument in which different investors
are now investing.
To understand the trend of the investor I have gone through a field

survey, based on investment strategy questionnaire. The result of the survey
depicts a clear picture of current investment trend in Indian market. The
analysis shows that the age groups of 18-30 years are more adaptable to
the high risk where as the age group of 41-50 are the safe players. Annual
income and the disposable income also played a major role in the
investment strategies in the investor’s mind. Results reveal that most
investor’s first priority to invest is the “Tax Savings”.
The project continues with the Portfolio Management. Its starts by

defining portfolio management in detail. The portfolio management study
has been done on different investment instrument like Savings bank A/c,
ULIP (Unit Linked Insurance Policy), Mutual Funds, Stocks and other
different private Banks and AMC’s. In the end a hypothetical portfolio is
created.
Table of content
Sl. No. Particulars Page no.
1) Industry Study 6
2) Company Profile 12
 Management team 16
 Products and Services 16
 Competitors 18
 SWOT Analysis 19
 Training Process 21
3) Project 24
 Introduction 24
 Study of Financial Products 31
 Field Survey 50
 Objective 51
 Investment Trend Analysis 52
 Recommendations 73
 Portfolio Management 76
 Creating Portfolio 78
4) Annexure 85
5) References 87
Industry Study:
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.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took
place in Bombay. Though the trading list was broader in 1839, there were only half
a dozen brokers recognized by banks and merchants during 1840 and 1850.
The 1850's witnessed a rapid development of commercial enterprise and brokerage
business attracted many men into the field and by 1860 the number of brokers
increased into 60.
In 1860-61 the American Civil War broke out and cotton supply from United
States of Europe was stopped; thus, the 'Share Mania' in India begun. The number
of brokers increased to about 200 to 250. However, at the end of the American
Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share
which had touched Rs 2850 could only be sold at Rs. 87).
In 1887, they formally established in Bombay, the "Native Share and Stock
Brokers' Association" (which is alternatively known as "The Stock Exchange"). In
1895, the Stock Exchange acquired a premise in the same street and it was
inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.
Thus in the same way, gradually with the passage of time number of exchanges
were increased and at currently it reached to the figure of 24 stock exchanges.
TRANSACTION CYCLE:
Decision to Placing Order

trade
Funds or Transaction Cycle Trade

Securities
Execution
Settlement of
trades Clearing of
Trades
A person holding assets (Securities/Funds), either to meet his liquidity needs or to

reshuffle his holdings in response to changes in his perception about risk and return
of the assets, decides to buy or sell the securities. He selects a broker and instructs
him to place buy/sell order on an exchange. The order is converted to a trade as
soon as it finds a matching sell/buy order. At the end of the trade cycle, the trades
are netted to determine the obligations of the trading member’s securities/funds as
per settlement cycle. Buyer/seller delivers funds/ securities and receives
securities/funds and acquires ownership of the securities.
A securities transaction cycle is presented above. Just because of this Transaction

cycle, the whole business of Securities and Stock Broking has emerged. And as an
extension of stock broking, the business of Online Stock broking/ Online Trading/
E-Broking has emerged.
HISTORY OF ONLINE TRADING:
Online stock trading is very old concept for big institutions who trade
thru private networks owned by Reuter's "Instinet" and a system called
"Posit" since 1969. But it becomes internet based for lay men only in late 90s.
Funny, that actually idea was first time used by a company making Beer
called "WIT beer" to help its shareholders trade its shares. That’s how "WIT
Capital" was born which is considered pioneer of this concept. It was made
mainstream and household name by a offshoot of Charles Schwab & Co called
eSchwab which is used by millions of people in USA. Lot of NRI's i know play
in US stock market even when they come to India for holidays via website
of eSchwabe.
There are other serious players like E*trade, DATEK online etc. All this
companies ask you to start account with US $5000 and you can buy and sell
stock using these funds. They also issue you a check book which you can use
to make payments from this account. Or use their ATM card to withdraw cash
from your stock trading account.
Today practically every big name brokerage firm offers online stock trading
as it reduces their costs. Earlier they had army of brokers on phone with
clients executing trade, which is done by computers accepting orders from
clients directly. This firm now offers human access to high net worth accounts, and
to rest at charge per trade.
E- Broking - A small beginning:
You have some money to dabble with. Trading shares on BSE/NSE has always
been your dream. When will you ever find the time? And besides, the hassle of
finding a broker is not easy. Realizing there is untapped market of investors who
want to be able to execute their own trades when it suits them, brokers have taken
their trading rooms to the Internet. Known as online brokers, they allow you to buy
and sell shares via Internet.
There are 2 types of online trading service: discount brokers and full service
online broker. Discount online brokers allow you to trade via Internet at reduced
rates. Some provide quality research, other don’t. Full service online brokerage is
linked to existing brokerages. These brokers allow their clients to place online
orders with the option of talking/ chatting to brokers if advice is needed. Brokerage
rates here are higher. 5Paisa.com, ICICIDirect.com, IndiaBulls.com,
Sharekhan.com, Geojit securities.com, HDFCsec.com, Tatatdw.com,
Kotakstreet.com are some of the online broking sites in India. With Net trading in
securities and rapid consolidation between multiple stock exchanges, the
international securities marketplace is fast becoming a "global village" through the
creation of a universal virtual equity market.
Compared to the Western countries, online trading is still in its infancy in India.
With trading turnover at around Rs. 10 crores per day from online trading
compared to a combined gross turnover of around Rs. 9000-10,000 crores handled
by the BSE and NSE together, online trading has a long way to go.
INTERNET TRADING IN INDIA:

In the past, investors had no option but to contact their broker to get real time
access to market data. The Net brings data to the investor on line and net broking
enables him to trade on a click. Now information has become easily accessible to
both retail as well as big investors.
The development of broking in India can be categorized in 3 phases:

1. Stock brokers offering on their sites features such as live portfolio manager, live
quotes, market research and news to attract more investors.
2. Brokers offering on line broking and relationship management by providing and
offering analysis and information to investors during broking and non-broking
hours based on their profile and needs, that is, customized services.
3. Brokers (now e-brokers) will offer value management or services such as initial
public offerings on line, asset allocation, portfolio management, financial planning,
tax planning, insurance services and enable the investors to take better and well-
considered decisions.
Market Size: Growth of Online Brokerage market:

In five years of its existence in India, online broking has grown to account for a
tenth of the total trading volumes. If the numbers are considered for only the retail
segments, the growth is starker. Almost half of the Rs 5,000 crore-6,000 crore
daily market volumes on the NSE are accounted for by non-retail entities such as
foreign institutional investors, domestic institutions, mutual funds and arbitrage
traders. Institutions aren't online customers anyway. Of the rest of the retail
segment, current estimates suggest that online broking's reach is close to 30 per
cent.
As of September this year, there were 11.7 lakhs Internet trading accounts
registered with the NSE, of which roughly 9.5 lakhs are unique users. It's still a
small proportion of the estimated 3 crore Internet users in the country. As more
surfers take to trading online, analysts expect their number to keep doubling every
year until 30-40 per cent of India's overall trades are done online, as is the case in
some mature Internet markets like South Korea's.
The Internet's effect here has more to do with the bandwidth it has created for both
brokers and clients. Banga, director of India bulls offers an example. "Traders from
Ajmer use our online platform. It would otherwise have been prohibitively loss-
making to open a branch there." Thanks to the new channel, volumes are growing
faster in the non-metros, where transparency is low in offline trading. "These
customers were made to pay higher charges by small brokers, since they weren't
aware of the market rates," says Vikash Shankar of Sharekhan.com.That is one of
the reasons why more than 60 per cent of Sharekhan’s online trading turnover
comes from non-metros.
Company Profile
Sharekhan Ltd. is one of the leading retail stock broking house of SSKI Group
which is running successfully since 1922 in the country. It is the retail broking arm
of the Mumbai-based SSKI Group, which has over eight decades of experience in
the stock broking business. Sharekhan offers its customers a wide range of equity
related services including trade execution on BSE, NSE, Derivatives, depository
services, online trading, investment advice etc. The firm’s online trading and
investment site - www.sharekhan.com – was launched on Feb 8, 2000. The site
gives access to superior content and transaction facility to retail customers across
the country. Known for its jargon-free, investor friendly language and high quality
research, the site has a registered base of over one lakh customers. The content-rich
and research oriented portal has stood out among its contemporaries because of its
steadfast dedication to offering customers best-of-breed technology and superior
market information. The objective has been to let customers make informed
decisions and to simplify the process of investing in stocks.
On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable

application that emulates the broker terminals along with host of other information
relevant to the Day Traders. This was for the first time that a netbased trading
station of this caliber was offered to the traders. In the last six months Speed Trade
has become a de facto standard for the Day Trading community over the net.
Sharekhan’s ground network includes over 331 centers in 137 cities in India which
provide a host of trading related services.
Sharekhan has always believed in investing in technology to build its business. The
company has used some of the best-known names in the IT industry, like Sun
Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix, Vignette,
Verisign Financial Technologies India Ltd, Spider Software Pvt Ltd. To build its
trading engine and content.
The Morakhiya family holds a majority stake in the company. HSBC, Intel &
Carlyle are the other investors. With a legacy of more than 80 years in the stock
markets, the SSKI group ventured into institutional broking and corporate finance
18 years ago. Presently SSKI is one of the leading players in institutional broking
and corporate finance activities. SSKI holds a sizeable portion of the market in
each of these segments. SSKI’s institutional broking arm accounts for 7% of the
market for Foreign Institutional portfolio investment and 5% of all Domestic
Institutional portfolio investment in the country. It has 60 institutional clients
spread over India, Far East, UK and US. Foreign Institutional Investors generate
about 65% of the organization’s revenue, with a daily turnover of over US$ 2
million. The Corporate Finance section has a list of very prestigious clients and has
many ‘firsts’ to its credit, in terms of the size of deal, sector tapped etc. The group
has placed over US$ 1 billion in private equity deals. Some of the clients include
BPL Cellular Holding, Gujarat Pipavav, Essar, Hutchison, Planetasia, and
Shopper’s Stop.
PROFILE OF THE COMPANY :
Name of the company : Sharekhan ltd.
Year of Establishment : 1925
Headquarter : ShareKhan SSKI

A-206 Phoenix House
Phoenix Mills Compound
Lower Parel
Mumbai - Maharashtra, INDIA- 400013
Nature of Business : Service Provider
Services : Depository Services, Online Services and

Technical Research.
Number of Employees : Over 3500
Website : www.sharekhan.com
Slogan : Your Guide to The Financial Jungle.
ACHIEVEMENTS OF SHAREKHAN:
Rated among the top 20 wired companies along with Reliance, HUJl, Infosys,
etc
by ‘Business Today’, January 2004 edition.
Awarded ‘Top Domestic Brokerage House’ four times by Euro money and
Asia money.
Pioneers of online trading in India amongst the top 3 online trading websites
from India. Most preferred financial destination amongst online broking
customers.
Winners of “Best Financial Website” award.
India’s most preferred brokers within 5 years. “Awaaz customers Award

2005”.
Vision :
To be the best retail brokering Brand in the retail business of stock market.
Mission :
To educate and empower the individual investor to make better investment

decisions through quality advice and superior service.
Sharekhan is infact-
• Among the top 3 branded retail service providers
• No. 1 player in online business
• Largest network of branded broking outlets in the country serving more

than 7,00,000 clients.
Get everything you need at a Sharekhan outlet!
All you have to do is walk into any of our 640 share shops across 280 cities in
India to get a host of trading related services - our friendly customer service staff
will also help you with any accouts related queries you may have.
A Sharekhan outlet offers the following services:
 Online BSE and NSE executions (through BOLT & NEAT terminals)
 Free access to investment advice from Sharekhan's Research team
 Sharekhan ValueLine (a monthly publication with reviews of
recommendations, stocks to watch out for etc)
 Daily research reports and market review (High Noon & Eagle Eye)
 Pre-market Report (Morning Cuppa)
 Daily trading calls based on Technical Analysis
 Cool trading products (Daring Derivatives and Market Strategy)
 Personalised Advice
 Live Market Information
 Depository Services: Demat & Remat Transactions
 Derivatives Trading (Futures and Options)
 Commodities Trading
 IPOs & Mutual Funds Distribution
 Internet-based Online Trading: SpeedTrade
SHAREKHAN LIMITED’S MANAGEMENT TEAM:
Mr. Dinesh Murikya :Owner of the company
Mr. Tarun Shah :Chief Executive Officer (CEO) of the company
Mr. Shankar Vailaya : Director (Operations) of the company
Mr. Jaideep Arora :Director (Products & Technology)
Pathik Gandotra : Head of Research
Rishi Kohli : Vice President of Equity Derivatives
Nikhil Vora : Vice President of Research
PRODUCTS AND SERVICES OF SHAREKHAN LIMITED :
The different types of products and services offered by Sharekhan

Ltd. are as follows:
Equity and derivatives trading
Depository services
Online services
Commodities trading
Dial-n-trade
Portfolio management
Share shops
Fundamental research
Technical research
FINANCIAL PRODUCTS AVAILABLE AT SHAREKHAN:
SHAREKHAN
MUTUAL
EQUITY DERIVATIVES IPOs BONDS
FUNDS
SHAREKHAN
CASH FUTURES PURCHASES GOI BONDS
BONDS
MARGIN OPTIONS REDEMPTION
BTST SIP & SWP
SWITCH
SPOT
IN/OUT
TRANSFER IN
COMPETITORS:
SWOT ANALYSIS:
Strengths:
 It is a pioneer in online trading with a turn over of Rs.400crores and

more than 800 peoples working in the organization.
 SSKI the parent company of Share Khan has more than eight decades of
trust and credibility in the Indian stock market. In the Asian Money
Broker’s poll SSKI won the “India’s best broking house for 2004” award.
 Share Khan provides multi-channel access to all its customers through a

strong online presence with www.sharekhan.com, 250 share shops in
130 cities and a call-center based Dial-n-Trade facility
 Share Khan has dedicated research teams for fundamental and technical
research. Which constantly track the pulse of the market and provide
timely investment advice free of cost to its clients which has a strike rate
of 70-80%.
Weakness:
 Localized presence due to insufficient investments for country wide

expansion.
 Lack of awareness among customers because of non-aggressive

promotional strategies (print media, newspapers, etc).
 Lesser emphasis on customer retention.
 Focuses more on HNIs than retail investors which results in meager

market-share as compared to close competitors.
Opportunities:
 With the booming capital market it can successfully launch new services
and raise its client’s base.
 It can easily tap the retail investors with small saving through promotional
channels like print media, electronic media, etc.
 As interest on fixed deposits with post office and banks are all time low,
more and more small investors are entering into stock market.
 Abolition of long term capital gain tax on shares and reduction in short
term capital gain is making stock market as hot destination for investment
among small investors.
 Increasing usage of internet through broadband connectivity may boost a

whole new breed of investors for trading in securities.
Threats:
 Aggressive promotional strategies by close competitors may hamper Share

Khan’s acceptance by new clients.
 Lack of sufficient branch-offices for speedy delivery of services.
 Other players are providing margin funds to investors on easy

terms where
as there is no such facility in share khan.
 More and more players are venturing into this domain which can
further
reduce the earnings of Share Khan.
TRAINING PROCESS:
Student’s work profile(role and responsibilities) :
I worked there with SHAREKHAN LTD. with a profile of Customer Acquisition

and Revenue Generation. This profile offerered me to understand the need of
customer and provide them the best deal possible with maximization of the profit,
both for the company as well as for the customer.
So for fulfillment of the targets one needs to:
 Capitalize on the old and loyal clientage which can be building slowly by
advising people in the best possible way.
 Generating new leads through various activities.
Generation of leads :
Since I was new in the field so I had to start from scratch and generate new
leads to sustain in the market.
Cold calling is one of the trusted ways of getting to the customers without meeting
them. Although the rate of conversion remained very less, for cold calling the
quality and accent remains a very important criterion. This activity gave me mixed
result. I often got success and generated many leads through it but it also landed
me in awkward position where the customer were in different mood and made us
hear words for which a marketer should be always prepared to hear. Corporate
calls always remained more difficult to crack with respect to retail sector.The
corporate were the most difficult and most temping to get the business from. It
took me one one day to crack Hi-tech Gears.
At SHAREKHAN I was provided with detailed training regarding share market,

how it operates and also how to trade via its online portal and also through its
application software i.e Trade Tiger. Information regarding equities trading,
derivatives trading and commodities trading was also provided.
After the third week my performance also improved and I was able to get close to
the targets, though it looked difficult to achieve in the beginning. To get awareness
of the every product I attended diversified calls. This helped me to implement
cross selling to get better results.
LIMITATIONS of Cold Calling:
• Voice and accent plays a major role.
• The right time to call a customer cannot be decided, as the customer may in
a different mood at the time of calling.
• Time consuming
• Less success rate
Description of live experience :
I was supposed to use the database provided by the company to make cold calls or
by directly meeting people to get new leads.
While making cold calls, we need to have:
• Good Communication Skills (Voice quality is clear and articulate)
• Persistent and able to bounce back from rejection
• Good organizational skills.
• Ability to project a telephone personality (Enthusiasm, friendliness)
• Flexibility: can adapt to different types of clients and new situations.
Using a good database is very essential.
“Eighty percent of our business comes from 20 percent of our customers" is a

frequent statement at any sales convention. There's hardly a sales executive who is
not aware of the 80/20 rule”.
While talking to customers, I analyze their needs. Whether they want to go for
investment purpose or insurance or both. Suggest them the plan that best suits
them. If they agree to it then either we send across the agents to close the deal or
close it themselves.
Problems faced while selling products:
• Past experience, word of mouth.
• People do not want security products.
• Lack of knowledge and less awareness about demat account.
• People risk appetite is very low, so they are afraid of mutual fund as well.
PROJECT :
Introduction:
Indian economy and Investment Sectorial growth:
India economy is developing at a fast rate and every sector of India

economy is showing a positive growth. The growth development product in
India in the year 2006-07 is 9.2%. The rate of robust growth of in industrial
development is 10.6%. ‘The Economists’ have also observed high growth in
manufacturing sector and telecommunication sectors. The Infrastructure
sector is also showing impressive growth in the year 2006-07. The
secondary sectors as also shown upward growth, the BSE and NSE sensex
has closed at high marks of 21000 and 7000 respectively. In this way all
these sectors have contributed to overall growth of Indian economy.
Behind China, India is the second fastest growing economy. According

to a survey by Goldman Sachs, India will become the 3rd largest economy
by 2035. This is measured in $US. If we use PPP (purchasing power parity)
which takes into account local purchasing power, India already has the 3rd
largest economy.
The economy has been growing at an average growth rate of 8.8 per
cent in the last four fiscal years (2003-04 to 2006-07), with the 2006-07
growth rate of 9.6 per cent being the highest in the last 18 years.
Significantly, the industrial and service sectors have been contributing a
major part of this growth, suggesting the structural transformation
underway in the Indian economy.
Within the investment sector the real estate is raising sky high due to
Strong Economic Growth: The world’s fourth largest economy, growing at

over 8% the last two years and forecast to grow at over 7% over the next
five; Growth measures supported across the political spectrum; a boom in
the services sector with a strong revival of industry; powerful internal
consumption and demand.
The Rise of the Middle-Class: 300 million and growing with higher
disposable incomes and even higher aspirations; educated, professional
workforce driving urbanization beyond the traditional metro cities.
Before I start I have to explain what investment is and why people

want to invest? It is very important for me to understand how people plan
before investing. These things are discussed below:
INVESTMENTS
I
nvestment = Cost Of Capital, like buying securities or other monetary or paper
(financial) assets in the money markets or capital markets, liquid real assets,
such as gold, real estate, or collectibles. Types of financial investments include
shares, other equity investment, and bonds. These financial assets are then
expected to provide income or positive future cash flows, and may increase or
decrease in value giving the investor capital gains or losses.
People usually invest when they have good amount of ideal money to
spend. The main objective is to save money for future uncertainties, capital
appreciation, more income and most of all tax savings.
Investing is not guesswork or prediction. It takes more than just a
‘tip’; it needs training to plan, instinct to pick and sheer intellect to make it
work for the investor. Human nature is fickle, his wants keep changing.
An investment can be described as perfect if it satisfies all the needs of

all investors. So, the starting point in searching for the perfect investment
would be to examine investor needs. If all those needs are met by the
investment, then that investment can be termed the perfect investment.
Most investors and advisors spend a great deal of time understanding the
merits of the thousands of investments available in India. Little time,
however, is spent understanding the needs of the investor and ensuring that
the most appropriate investments are selected for him.
Why people invest?

Investors do invest in different instrument to simplify their lifestyle and to
make certain goals in future life. Most investors invest for the long term to
fulfill the inflation and for the capital appreciation. By and large the investors
have typical requirement to fill, and those are:-
 Capital preservation: - The chance of losing some capital has been a

primary need. This is perhaps the strongest need among investors in
India, who have suffered regularly due to failures of the financial
system.
 Wealth generation: - This is largely a factor of investment

performance, including both short-term performance of an investment
and long-term performance of a portfolio. Wealth accumulation is the
ultimate measure of the success of an investment decision.
 Life Cover:- Many investors look for investments that offer good
return with adequate life cover to manage the situations in case of any
eventualities. Recent days investors do invest in the endowment
policies and ULIPs.
 Tax savings: Legitimate reduction in the amount of tax payable is an

important part of the Indian psyche. Every rupee saved in taxes goes
towards wealth accumulation.
 Income: This refers to money distributed at intervals by an

investment, which are usually used by the investor for meeting regular
expenses. Mostly daily traders invest for income.
 Future Uncertainty: - No one has seen the future so every person

personally save money for any contingencies. People invest in short
term for this. There must be an easy cash withdraw for the
contingencies.
 Ease of withdrawal: This refers to the ability to invest long term but
withdraw funds when desired. This is strongly linked to a sense of
ownership. It is normally triggered by a need to spend capital, change
investments or cater to changes in other needs.
 Beat inflation: - inflation is a major player in the economy. It

reduced the valuation of rupee. Investors do in vest to maintain the
buying capacity of them.
 Retirement planning: - most of the service person do invest to get

return after the vesting period, for that the investment such a manner
that the returns comes at the time of retirement.
Investment Planning
Investors need to identify the financial goals throughout life or for the
next 10 to 15 years depending upon the time horizon selected by the
investor, and prioritizing them. Investment Planning is important because it
helps in deriving the maximum benefit from the investments.
Success as an investor depends upon his investment in right

instrument in right time and for the right period. This, in turn, depends on
the requirements, needs and goals. For most investors, however, the three
prime criteria of evaluating any investment option are liquidity, safety and
level of return.
Investment Planning also helps to decide upon the right investment

strategy. Besides individual requirement, investment strategy would
also depend upon age, personal circumstances and risk appetite.
Investment Planning also helps in striking a balance between risk and

returns. By prudent planning, it is possible to arrive at an optimal mix
of risk and returns, which suits particular needs and requirements.
Investment means putting the ideal money to work to earn more

money. Done wisely, it can help you meet financial goals. Investing
even a small amount can produce considerable rewards over the long-
term, especially if you do it regularly. But one needs to decide about
how much he / she wants to invest and where.
Options before investment
Investors choose wisely before investing which solely depends on the

present market conditions, future prospect of the instrument, the
return offered by the company and the season to invest in that
particular instrument. For example, a good investment for a long-term
life insurance plan may not be a good investment for higher education
expenses. In most cases, the right investment is a balance of three
things: Liquidity, Risk tolerance and Return.
Liquidity – How easily an investment can be converted to cash, since

part of invested money must be available to cover financial
emergencies.
Risk tolerance - The biggest risk is the risk of losing the money that
has been invested, but the main thing is to how much investor can
cover up and sustain with that. Another equally important risk is that
investments may not provide enough growth or income to offset the
impact of inflation, which could lead to a gradual increase in the cost
of living. There are additional risks as well (like decline in economic
growth). But the biggest risk of all is not investing at all.
Return - Investments are made for the purpose of generating returns.
Safe investments often promise a specific, though limited return.
Those that involve more risk offer the opportunity to make - or lose - a
lot of money.
The Investment Process

Investors like to invest through the instinct and want to gain
profit from the market by investing. However, while financial
institutions are undoubtedly a part of the process of investing. As
investors, it is not surprising that we focus so much of our energy and
efforts on investment philosophies and strategies, and so little on the
investment process. It is far more interesting to read about how Peter
Lynch picks stocks and what makes Warren Buffett a valuable investor,
than it is to talk about the steps involved in creating a portfolio or in
executing trades. Though it does not get sufficient attention,
understanding the investment process is critical for every investor for
several reasons:
1. Investment planning centrally depends upon the portfolio of the

investor; as a result the primary step of the investment process is to
make a portfolio. By emphasizing the sequence, it provides for an
orderly way in which an investor can create his or her own portfolio or
a portfolio for someone else.
2. The investment process provides a structure that allows investors to

see the source of different investment strategies and philosophies. By
so doing, it allows investors to take the hundreds of strategies that
they see described in the common press and in investment newsletters
and to trace them to their common roots.
3. The investment process emphasizes the different components that are

needed for an investment strategy but strategies that look good on
paper never work for those who use them.
STEPS INVOLVED IN INVESTMENT PLANNING
Investment is not only prediction it has its own reasons behind every up and
down in the market. So it is has its own theory to move in particular
directions. To get in to the market investors must go through the following
process.
 Analysis and profiling of the instrument: - The first step is

performing a Need Analysis check. The requirements and expectations
of the investor should be met by the instrument. During the profiling
investor should consider their age, their profession, the number of
dependents, and their income. By doing this check, the risk profile of
the investor should be designed.
 Evaluating the alternatives: - The next step would be revaluating

the needs. Other investment instruments and options should be
analyzed. The risk-return profile of investment products is evaluated in
this step. Every investment product varies according to its return
potential and riskiness. Investment products giving a high rate of
return are generally risky and volatile. The products giving a lower
rate of return usually are less risky.
 Analyse the Profile: - The next step would be analyse the risk-return
profile of the investor on to the investment portfolio. The investment
instruments are matched with the risk-return profile of the investor. All
the investment alternatives that offer expected rate of return are
evaluate for consideration.
 Preparing an Optimum Portfolio: - Then according to the risk

appetite and return pattern an optimum portfolio is designed for the
investor. The basket of investment instrument selected in the previous
step are given due weightage and appropriate amount of money is
invested in each of the investment avenue so as to get maximum
return with minimum possible risk.
 Consistent Monitoring: - Finally a continuous watch on the portfolio
is extremely important. Fundamental analysis of the investment
products done in the previous stages would only help in selecting the
right product but the right time of entry or exit from a particular
stream is evaluated by doing a technical analysis. For this professional
portfolio management is a must.
Analysis and profiling of Evaluating the

the instrument alternatives
Consistent Investment
Monitoring planning Analyse the
Profile
Preparing an
Optimum Portfolio
STUDY OF FINANCIAL PRODUCTS
Investment options in India
Savings Bank Account (SB A/c)
Saving Bank account (SB account) is meant to promote the habit of saving
among the people. It also facilitates safekeeping of money. In this scheme
fund is allowed to be withdrawn whenever required, without any condition.
Hence a savings account is a safe, convenient and affordable way to save
money. Banks generally put some restrictions on the total number of
withdrawals permitted during specific time periods. Banks also stipulate
certain minimum balance to be maintained in savings accounts. Normally a
higher minimum balance is stipulated in cheque operated accounts as
compared to non-cheque operated accounts.
Features:
The minimum amount to open an account in a nationalized bank is Rs 500. If
cheque books are also issued, the minimum balance of Rs 1000 has to be
maintained. However in some private or foreign bank the minimum balance
is Rs 5,000 or more and can be up Rs. 10,000. One cheque book is issued to
a customer at a time.
A Savings account can be opened either individually or jointly with another

individual. In a joint account only the sign of one account holder is needed
to write a cheque. But at the time of closing an account, the sign of the both
the account holders are needed.
Certain non-profit welfare organizations are also permitted to open Savings

bank accounts with banks.
Return
Interest @ 3.5 % p.a. with effect from 1/3/2003.
The amount of interest will be calculated for each calendar month on the
lowest balance in credit of any account between the close of the tenth day
and the last day of each month. In Savings Bank account, bank follows the
simple interest method. The rate of interest may change from time to time
according to the rules of Reserve Bank of India.
One can withdraw his/her money by submitting a cheque in the bank and
details of the account, i.e. the Money deposited, withdrawn along with the
dates and the balance, is recorded in a passbook.
 Advantages
It's much safer to keep your money at a bank than to keep a large
amount of cash in your home.
 Bank deposits are fairly safe because banks are subject to control of
the Reserve Bank of India with regard to several policy and operational
parameters, many of the banks also give internet banking facility
through with one do the transactions like withdrawals, deposits,
statement of account etc.
 Banks provide Auto-Mated Teller machine(ATM) for 24 hours cash
withdrawn, some banks also have 24 hours open branches in very few
selected cities.
Mutual fund in India
A mutual fund is nothing more than a collection of stocks and/or bonds. You
can think of a mutual fund as a company that brings together a group of
people and invests their money in stocks, bonds, and other securities. Each
investor owns shares, which represent a portion of the holdings of the fund.
You can make money from a mutual fund in three ways:
1) Income is earned from dividends on stocks and internet on bonds. A fund

pays out nearly all of the income it receives over the year to fund owners in
the form of a distribution.
2) If the fund sells securities that have increased in price, the fund has a
capital gain. Most funds also pass on these gains to investors in a
distribution.
3) If fund holdings increase in price but are not sold by the fund manager,
the fund's shares increase in price. You can then sell your mutual fund
shares for a profit.
Funds will also usually give you a choice either to receive a check for
distributions or to reinvest the earnings and get more shares.
Advantages of Mutual Funds:
Professional Management - The primary advantage of funds (at least

theoretically) is the professional management of your money. Investors
purchase funds because they do not have the time or the expertise to
manage their own portfolios. A mutual fund is a relatively inexpensive way
for a small investor to get a full-time manager to make and monitor
investments.
Diversification - By owning shares in a mutual fund instead of owning

individual stocks or bonds, your risk is spread out. The idea behind
diversification is to invest in a large number of assets so that a loss in any
particular investment is minimized by gains in others. In other words, the
more stocks and bonds you own, the less any one of them can hurt you
(think about Enron). Large mutual funds typically own hundreds of different
stocks in many different industries. It wouldn't be possible for an investor to
build this kind of a portfolio with a small amount of money.
Economies of Scale- Because a mutual fund buys and sells large amounts of
securities at a time, its transaction costs are lower than what an individual
would pay for securities transactions.
Liquidity- Just like an individual stock, a mutual fund allows you to request
that your shares be converted into cash at any time.
Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own
line of mutual funds, and the minimum investment is small. Most companies
also have automatic purchase plans whereby as little as $100 can be
invested on a monthly basis.
Disadvantages of Mutual Funds:
• Professional Management - Did you notice how we qualified the advantage

of professional management with the word "theoretically"? Many investors
debate whether or not the so-called professionals are any better than you or
I at picking stocks. Management is by no means infallible, and, even if the
fund loses money, the manager still takes his/her cut. We'll talk about this in
detail in a later section.
• Costs - Mutual funds don't exist solely to make your life easier - all funds
are in it for a profit. The mutual fund industry is masterful at burying costs
under layers of jargon. These costs are so complicated that in this tutorial
we have devoted an entire section to the subject.
• Dilution - It's possible to have too much diversification. Because funds

have small holdings in so many different companies, high returns from a few
investments often don't make much difference on the overall return. Dilution
is also the result of a successful fund getting too big. When money pours
into funds that have had strong success, the manager often has trouble
finding a good investment for all the new money.
• Taxes - When making decisions about your money, fund managers don't
consider your personal tax situation. For example, when a fund manager
sells a security, a capital-gains tax is triggered, which affects how profitable
the individual is from the sale. It might have been more advantageous for
the individual to defer the capital gains liability.
No matter what type of investor you are, there is bound to be a mutual fund
that fits your style. According to the last count there are more than 10,000
mutual funds in North America! That means there are more mutual funds
than stocks.
It's important to understand that each mutual fund has different risks and
rewards. In general, the higher the potential return, the higher the risk of
loss. Although some funds are less risky than others, all funds have some
level of risk - it's never possible to diversify away all risk. This is a fact for all
investments.
Each fund has a predetermined investment objective that tailors the fund's
assets, regions of investments and investment strategies. At the
fundamental level, there are three varieties of mutual funds:
1) Equity funds (stocks)
2) Fixed income funds (bonds)
3) Money market funds.
All mutual funds are variations of these three asset classes. For example,
while equity funds that invest in fast-growing companies are known as
growth funds, equity funds that invest only in companies of the same sector
or region are known as specialty funds.
Let's go over the many different flavors of funds. We'll start with the safest
and then work through to the more risky.
Money Market Funds:

The money market consists of short-term debt instruments, mostly Treasury
bills. This is a safe place to park your money. You won't get great returns,
but you won't have to worry about losing your principal. A typical return is
twice the amount you would earn in a regular checking/savings account and
a little less than the average certificate of deposit (CD).
Bond/Income Funds:
Income funds are named appropriately: their purpose is to provide current
income on a steady basis. When referring to mutual funds, the terms "fixed-
income," "bond," and "income" are synonymous. These terms denote funds
that invest primarily in government and corporate debt. While fund holdings
may appreciate in value, the primary objective of these funds is to provide a
steady cash flow to investors. As such, the audience for these funds consists
of conservative investors and retirees.
Bond funds are likely to pay higher returns than certificates of deposit and
money market investments, but bond funds aren't without risk. Because
there are many different types of bonds, bond funds can vary dramatically
depending on where they invest. For example, a fund specializing in high-
yield junk bonds is much more risky than a fund that invests in government
securities. Furthermore, nearly all bond funds are subject to interest rate
risk, which means that if rates go up the value of the fund goes down.
Balanced Funds:
The objective of these funds is to provide a balanced mixture of safety,
income and capital appreciation. The strategy of balanced funds is to invest
in a combination of fixed income and equities. A typical balanced fund might
have a weighting of 60% equity and 40% fixed income. The weighting might
also be restricted to a specified maximum or minimum for each asset class.
A similar type of fund is known as an asset allocation fund. Objectives are

similar to those of a balanced fund, but these kinds of funds typically do not
have to hold a specified percentage of any asset class. The portfolio
manager is therefore given freedom to switch the ratio of asset classes as
the economy moves through the business cycle.
Equity Funds:
Funds that invest in stocks represent the largest category of mutual funds.
Generally, the investment objective of this class of funds is long-term capital
growth with some income. There are, however, many different types of
equity funds because there are many different types of equities. A great way
to understand the universe of equity funds is to use a style box, an example
of which is below.
The idea is to classify funds based on both the size of the companies
invested in and the investment style of the manager. The term value refers
to a style of investing that looks for high quality companies that are out of
favor with the market. These companies are characterized by low P/E and
price-to-book ratios and high dividend yields. The opposite of value is
growth, which refers to companies that have had (and are expected to
continue to have) strong growth in earnings, sales and cash flow. A
compromise between value and growth is blend, which simply refers to
companies that are neither value nor growth stocks and are classified as
being somewhere in the middle.
For example, a mutual fund that invests in large-cap companies that are in
strong financial shape but have recently seen their share prices fall would be
placed in the upper left quadrant of the style box (large and value). The
opposite of this would be a fund that invests in startup technology
companies with excellent growth prospects. Such a mutual fund would reside
in the bottom right quadrant (small and growth).
Global/International Funds:
An international fund (or foreign fund) invests only outside your home
country. Global funds invest anywhere around the world, including your
home country.
It's tough to classify these funds as either riskier or safer than domestic
investments. They do tend to be more volatile and have unique country
and/or political risks. But, on the flip side, they can, as part of a well-
balanced portfolio, actually reduce risk by increasing diversification.
Although the world's economies are becoming more inter-related, it is likely
that another economy somewhere is outperforming the economy of your
home country.
Specialty Funds:
This classification of mutual funds is more of an all-encompassing category
that consists of funds that have proved to be popular but don't necessarily
belong to the categories we've described so far. This type of mutual fund
forgoes broad diversification to concentrate on a certain segment of the
economy.
Sector funds are targeted at specific sectors of the economy such as

financial, technology, health, etc. Sector funds are extremely volatile. There
is a greater possibility of big gains, but you have to accept that your sector
may tank.
Regional funds make it easier to focus on a specific area of the world. This
may mean focusing on a region (say Latin America) or an individual country
(for example, only Brazil). An advantage of these funds is that they make it
easier to buy stock in foreign countries, which is otherwise difficult and
expensive. Just like for sector funds, you have to accept the high risk of loss,
which occurs if the region goes into a bad recession.
Socially-responsible funds (or ethical funds) invest only in companies that

meet the criteria of certain guidelines or beliefs. Most socially responsible
funds don't invest in industries such as tobacco, alcoholic beverages,
weapons or nuclear power. The idea is to get a competitive performance
while still maintaining a healthy conscience.
Index Funds:
The last but certainly not the least important are index funds. This type of
mutual fund replicates the performance of a broad market index such as the
S&P 500 or Dow Jones Industrial Average (DJIA). An investor in an index
fund figures that most managers can't beat the market. An index fund
merely replicates the market return and benefits investors in the form of low
fees.
Costs are the biggest problem with mutual funds. These costs eat into your
return, and they are the main reason why the majority of funds end up with
sub-par performance.
What's even more disturbing is the way the fund industry hides costs
through a layer of financial complexity and jargon. Some critics of the
industry say that mutual fund companies get away with the fees they charge
only because the average investor does not understand what he/she is
paying for.
Fees can be broken down into two

categories:
1. On-going yearly fees to keep you invested in the fund.
2. Transaction fees paid when you buy or sell shares in a fund (loads).
In the Indian economy Mutual funds have grown faster than any other
investment instrument.
The table show net capitalization in Mutual fund sector during 2002 to 2007.
Year UTI Bank- FI- Private Total

sponsored sponsored sector
mutual funds mutual mutual funds
funds
2002-03 -9434.1 1033.4 861.5 12122.2 4583.0
2003-04 1049.9 4526.2 786.8 41509.8 47872.7
2004-05 -2467.2 706.5 -3383.5 7933.1 2788.9
2005-06 3423.8 5364.9 2111.9 41581 52481.6
2006-07 7326.1 3032.0 4226.1 76687 91271.2
NET RESOURCES MOBILISED BY MUTUAL FUNDS 2002 to 2007
FEW TERMS IN MUTUAL FUNDS
NAV: -mutual fund's price per share or exchange-traded fund's (ETF) per-
share value. In both cases, the per-share rupee amount of the fund is
derived by dividing the total value of all the securities in its portfolio, less
any liabilities, by the number of fund shares outstanding.
(Total asset value –liabilities) /no. of units= Net asset value
In terms of corporate valuations, the value of assets less liabilities equals

net asset value (NAV), or "book value".
In the context of mutual funds, NAV per share is computed once a day based
on the closing market prices of the securities in the fund's portfolio. All
mutual fund’s buy and sell orders are processed at the NAV of the trade
date. However, investors must wait until the following day to get the trade
price.
Mutual funds pay out virtually all of their income and capital gains. As a
result, changes in NAV are not the best gauge of mutual fund performance,
which is best measured by annual total return.
Because ETFs and closed-end funds trade like stocks, their shares trade at

market value, which can be a dollar value above (trading at a premium) or
below (trading at a discount) NAV.
SALE PRICE: - when an investor wants to disinvest from the investment

he/she sell the unit(s) of the stock of the shares of mutual fund. The sell
results the loss or gain of the capital. The tax law provides special rules for
determining how much gain or loss you have, and in what categories, when
you sell mutual fund shares. Tax is one of the main concerns during the sell.
The tax gain or loss from mutual fund sales is calculated by comparing your
tax basis in the shares sold to the sales proceeds net of any transaction
costs. In general, the tax-planning objective is to maximize the basis in the
shares being sold to minimize the gain, or maximize the loss.
TYPES OF MUTUAL FUND SCHEMES
 By Structure
o Open - Ended Schemes
o Close - Ended Schemes
o Interval Schemes
 By Investment Objective
o Growth Schemes
o Income Schemes
o Balanced Schemes
o Money Market Schemes
 Other Schemes
o Tax Saving Schemes
o Special Schemes
 Index Schemes
 Sector Specific Schemes
Fig: changes in the Mutual fund industry in India till 2006
What is Life Insurance..???
Life insurance is a financial resource for one’s family and loved ones in case
of his death. It is a contract between insurer and an insurance company in
which the company provides the beneficiaries with a certain amount of
money upon insurer death. In return, insurer pays periodic payments
(premiums) in an amount that depends on medical history, age, gender, and
occupation.
Background1
Though the history of insurance dates back to 1818 with the establishment
of the Oriental Life Insurance company in Calcutta, and then when LIC was
established in the year 1956. For private life insurance sector in particular
things started taking shape after the recommendation of Malhotra committee
which put forward a proposal for the establishment of the regulatory body
and also encouraged to set up unit linked insurance pension plan. It was
after his recommendation that IRDA (Insurance regulatory and development
authority) was established in April 2000. After that in the year 2001 the
sector was finally opened for the private players and foreign private. They
are allowed to have 26% share in Indian company. The real innovation
happened in this time only, when Life insurance companies introduced ULIPs
with greater flexibilities. After making a magnificent entry and becoming the
most popular life insured product.
The other decision taken simultaneously to provide the supporting systems

to the insurance sector and in particular the life insurance companies was
the launch of the IRDA’s online service for issue and renewal of licenses to
agents.
Due to IRDA the transparency and rules and regulations are still here in the
insurance market.
1
(insurance chronicle, Icfai publications & current scenario by jawahar)
Fig: growth of insurance sector in last 10 years
ULIP AND ENDOWMENT PLANS2
Endowment plans are life insurance plans, which not only cover the
individual’s life in case of eventuality but also offer a maturity benefit at the
end of the term.
In the event of the individual’s demise, his/her nominees receive the sum
assured with accumulated profits/bonus on investments (till the time of his
demise). In case the individual survives the tenure, he/she receives the sum
assured and accumulated profits/bonus.
ULIPs attempts to fulfill investment needs of an investor with

protection/ insurance needs of an insurance seeker. ULIPs work on the
premise that there is a class of investors who regularly invest their savings
2
Business India, may ‘05
Business India, Feb ‘06
Business India, March ‘06
in products like fixed deposits, bonds, debt funds, diversified equity funds
and stocks. There is another class of individuals who take insurance to
provide for their family in case of an eventuality. So typically both these
categories of individuals have a portfolio of investment as well as life
insurance.
ULIP as a product combines both these products (investment and life

insurance) into single product. This saves the investor/insurance seeker the
hassles of managing and tracking a portfolio of product.
Taking into account the changing socio-economic demographics, rate of GDP

growth, changing consumer behavior and occurrences of natural calamities
at regular intervals, the Indian life insurance market is expected to reach the
value of around Rs 1683 Billion in the year 2009. The market is expected to
grow at a CAGR of more than 200% YOY from the year 2006.
In 2006-07, pension premium contributed about 22.11% to total premium
income of insurers. Interestingly, the figure in the first nine months to
December 2005 was 25.22%.
Insurance sector in India is one of the booming sectors of the economy and
is growing at the rate of 15-20 per cent annum. Together with banking
services, it contributes to about 7 per cent to the country's GDP.
Key Players
This section provides an overview of some of the key players in this industry
like Bajaj Allianz, ING Vysya, SBI Life, Tata AIG Life, HDFC Standard, ICICI
Prudential Life Insurance, Birla Sunlife, Aviva Life Insurance, Kotak Mahindra
Old Mutual, Max New York Life, Met Life, Sahara Life, LIC, Tata-AIG General,
Reliance General, IFFCO-Tokio, ICICI-Lombard, HDFC Chubb, New India
Assurance Company Limited, National Insurance Company Limited, United
India Insurance Company Limited and Oriental Insurance Limited.
ULIP - KEY FEATURES (IN GENERAL):
1. Premiums paid can be single, regular or variable. The payment period too
can be regular or variable. The risk cover can be increased or decreased.
2. As in all insurance policies, the risk charge (mortality rate) varies with
age.
3. The maturity benefit is not typically a fixed amount and the maturity
period can be advanced or extended.
4. Investments can be made in gilt funds, balanced funds, money market

funds, growth funds or bonds.
5. The policyholder can switch between schemes, for instance, balanced to

debt or gilt to equity, etc.
6. The maturity benefit is the net asset value of the units.
7. The costs in ULIP are higher because there is a life insurance component
in it as well, in addition to the investment component.
8. Insurance companies have the discretion to decide on their investment

portfolios.
9. They are simple, clear, and easy to understand.
10. Being transparent the policyholder gets the entire episode on the
performance of his fund.
11. Lead to an efficient utilization of capital.
12. ULIP products are exempted from tax and they provide life insurance.
13. Provides capital appreciation.
14. Investor gets an option to choose among debt, balanced and equity
funds.
ULIPs vs. Mutual Funds
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest

to mutual funds in terms of their structure and functioning. As is the case
with mutual funds, investors in ULIPs is allotted units by the insurance
company and a net asset value (NAV) is declared for the same on a daily
basis.
Similarly ULIP investors have the option of investing across various schemes
similar to the ones found in the mutual funds domain, i.e. diversified equity
funds, balanced funds and debt funds to name a few.
Mutual fund investors have the option of either making lump sum
investments or investing using the systematic investment plan (SIP) route
which entails commitments over longer time horizons. The minimum
investment amounts are laid out by the fund house.
ULIP investors also have the choice of investing in a lump sum (single
premium) or using the conventional route, i.e. making premium payments
on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining
the premium paid is often the starting point for the investment activity.
ULIPs Mutual Funds
Determined by the Minimum investment

Investment investor and can be amounts are determined
amounts modified as well by the fund house
No upper limits, Upper limits for

expenses expenses chargeable to
determined by the investors have been set
Expenses insurance company by the regulator
Portfolio Quarterly disclosures are

disclosure Not mandatory* mandatory
Modifying Generally permitted

asset for free or at a Entry/exit loads have to
allocation nominal cost be borne by the investor
Section 80C Section 80C benefits are

benefits are available only on
available on all investments in tax-
Tax benefits ULIP investments saving funds
MAJOR DIFFERENCES IN ULIPs AND MUTUAL FUNDs
If a mutual fund investor in a diversified equity fund wishes to shift his
corpus into a debt from the same fund house, he could have to bear an exit
load and/or entry load.
On the other hand most insurance companies permit their ULIP inventors to
shift investments across various plans/asset classes either at a nominal or
no cost (usually, a couple of switches are allowed free of charge every year
and a cost has to be borne for additional switches).
With these comparable there are certain factors where in these two differ.
Mutual funds are essentially short to medium term products. The liquidity
that these products offer is valuable for investors. ULIPs, in contrast, are
positioned as long-term products and going ahead, there will be separate
playing fields for ULIPS and MFs, with the product differentiation between
them becoming more pronounced. ULIPs do not seek to replace mutual
funds, they offer protection against the risk of dying too early, and also help
people save for retirement. Insurance has to be an integral part of one's
wealth management portfolio. Further, exposure of Indian households to
capital markets is limited.
ULIPs and mutual funds are, therefore, not likely to cannibalize each other in
the long run. The primary objective of an insurance product is protection.
The whole reason why it has evolved as a savings plan in the minds of
certain people is because there is a significant savings component attached
to it; however, it is still not the primary purpose of the plan. Second, there
are various kinds of insurance products; the element of protection in each
varies. In certain plans the level of protection is low and the savings
component high, but that is a choice to the customer.
While ULIPs as an investment avenue is closest to mutual funds in terms of

their functioning and structure, the first and foremost purpose of insurance
is and will always be 'protection'. The value that it provides cannot be
downplayed or underestimated. As an instrument of protection, insurance
provides benefits that no investment can offer. It is important for an investor
to understand his financial goals and horizon of investment in order to make
an informed investment decision. The decision to invest in either a mutual
fund or a ULIP should depend on the time period of investment, individual
financial goals as well as risk taking appetite, and it’s about time the
industry and customer realise it.
Term deposits
A deposit held at a financial institution that has a fixed term. These are
generally short-term with maturities ranging anywhere from a fifteen days to
a few years. When a term deposit is purchased, the lender (the customer)
understands that the money can only be withdrawn after the term has ended
or by giving a predetermined number of days notice.
Term deposits are an extremely safe investment and are therefore

very appealing to conservative, low-risk investors. By having the money tied
up investors will generally get a higher rate with a term deposit compared
with a demand deposit.
Investor some time pledge these term deposits to take house loan,
personal load, education load, etc. these works as the security deposits or
asset of the debtor.
Here is a list of Term deposit rates of different Banks I have studied:-
Tenure Standard ICICI HDFC ABN-Amro Kotak

Chartered Mahindra
15 days - 59 days 5.25% 4% 5.50% 4%-5.5% 4%
60 days – 89 days 5.75% 4% 5.50% 5.50% 5.50%
90 days – 360 days 6.25% 6.25% 6.75% 6%-8% 8.50%
361 days 8.50% 6.25% 8% 6% 8.50%
362 days< 1year 6.25% 6.25% 6.75% 6% 8.50%
1 year < 2years 6.50% 8% 8% 6%-8% 9.25%
2 years - 4 years 6.75% 8% 8.25% 6.75% 9.25%
Bonds in India
A bond is just an organization's IOU; i.e., a promise to repay a sum of
money at a certain interest rate and over a certain period of time. In other
words, a bond is a debt instrument. Other common terms for these debt
instruments are notes and debentures. Most bonds pay a fixed rate of
interest for a fixed period of time.
Why do organizations issue bonds?
A company needs funds to expand into new market, while Government

needs money for everything from infrastructure to social programs.
Whatever the need, a large sum of money will be needed to get the job
done.
One way is to arrange for banks or others to lend the money. But a
generally less expensive way is to issue (sell) bonds. The organization will
agree to pay some interest rate on the bonds and further agree to redeem
the bonds (i.e., buy them back) at some time in the future (the redemption
date).
The price of a bond is a function of prevailing interest rates. As rates go

up, the price of the bond goes down, because that particular bond becomes
less attractive (i.e., pays less interest) when compared to current offerings.
As rates go down, the price of the bond goes up, because that particular
bond becomes more attractive (i.e., pays more interest) when compared to
current offerings.
A bearer bond is a bond with no owner information upon it; presumably the
bearer is the owner. Bearer bonds included coupons which were used by the
bondholder to receive the interest due on the bond.
Another type of bond is a convertible bond. This security can be converted

into shares of the company that issues the bond if the bondholder chooses.
Of course, the conversion price is usually chosen so as to make the
conversion interesting only if the stock has a pretty good rise.
Different types of bonds
In general there are few types of bonds available in the market to buy, like;
Government bonds: - these bonds are issued by the government to raise

money from the public.
Bills - Debts securities maturing in less than one year.
Notes - Debt securities maturing in one to ten years.
Bonds - Debt securities maturing in more than ten years.
Marketable securities from the Indian government– known collectively as

Treasuries and are as Treasury bonds, Treasury notes and Treasury bills.
Municipal Bonds – Municipal bonds, known as “munis”, are the next

progression in term of risk. The major advantage in munis is that the returns
are free from State/central tax. Local government some time makes their
debt non-taxable for residents, thus making some municipal bonds
completely tax free. Because of the tax-savings yield in munis is lower than
the taxable bonds.
Corporate bonds – A company can issue bonds just as it can issue stock.
Generally, a short term corporate bond is less than five years; intermediate
is five to twelve years, and long term is over 12 years.
Corporate bonds are characterized by higher yields because there is a higher

risk of a company defaulting than a government. The company’s credit
quality is most important: the higher the credit quality, lower the interest
rate the investor receives.
Bondholders are not owners of the corporation. But if the company gets in
financial trouble and needs to dissolve, bondholders must be paid off in full
before stockholders get anything.
Zero coupon Bonds: - This is a type of bond that make no coupon

payments but instead is issued at a considerable discount to par value. For
example, let us say, a zero coupon bond with a Rs. 1,000 par value and 10
years to maturity is trading at Rs. 600; then investor would be paying
Rs.600 today that will worth Rs. 1,000 after 10 years.
FIELD SURVEY
The field survey was based on the investment strategies taken by the small
investors and the instrument they prefer to invest. To fulfill the particular I
have done field survey in about 160 people in the NCR. The entire summer
internship is surrounded by this investment strategy and making portfolio.
The entire project is designed like this: -
 Formation of questionnaire depending upon the investor mind

set and the need.
 I put strong emphasis on the questionnaire that respondent

must fill the questionnaire. For that I restrict my questions to
six. Thus it becomes short and time saving.
 After gathering the entire data I analyzed it using MS Excel.
Objective of the Project:

The objectives of the project are mainly-
 Analysis of current investment strategies adopted by the

different age group and different income group.
 Basic acceptance of investment instrument towards the

investors.
 Find out the potential customer and their needs.
 Basic trends of investment in the market.
 Portfolio creation.
Limitation of the Study: The limitation or the problem I faced during

the project are-
 Non co-operation of people during the field survey.
 Small area for field survey.
 Limited time.
 Wrong information given by the respondents.
INVESTMENT TREND ANALYSIS
GRAPHICAL PRESENTATION
Fig: Distribution of age groups in the sample
Explanation :-
The above pie chart shows that the sample of 153 predominantly
consists of respondents of the age groups of 18-30 years and 31-40 years.
This reveals that most of the investors are them who are started their carrer
recently or working for 10-15 years. This also shows that the age group of
greater than 50 years are very less interested in invetment.
Fig : Distribution of occupation through out the sample
Explanation :-
This graph shows that the respondents are mostly from the service
class (61%) and business person consists of only 37% of respondents.Self
employed are very less in numbers.
Fig : Distribution of sample annual income wise
Explanation :-
In the sample the income group of 2,50,000 to 5,00,000 Rs is

dominating. It reveals that this income group were the major respondent in
the survey. The second major income group is the 7,50,000 to 10,00,000.
Most investors are from the income group of 2,50,000 tp 5,00,000

Rsand 7,50,000 to 10,00,000 which is enthusiastic for the companies as the
potential customers are from the medium investor and the bid investors.
Combining the two income group company can have a mixed bag of good
investor in the near future.
Fig : Distribution of disposible income
Explanation :-
Disposible income is the strong piller of investment, more the

disposible income for the investors more they invest in the investment
instrument. The pie shows that the major repondents have a dispposible
income of 5,000 to 10,000 Rs per month which is good enough money for an
investor who is investing regularly for the longer term. It also depicts that
investors who has a disposible income of more then 20,000 Rs is 1/5 th of the
sample. This reveals company got a fair enough data base of high amount
investors.
Fig : First priority of investment in the sample
Explanation :-
Tax saving is the major concern now in india. The above pie alsoshow
that 40% of people want to invest for the taxsavings, but that is for only 1.5
lakh. It is expeacted that before the investment investors focus would be the
main criteria where he wants to invest in. depending up on the reponse I
have found out that 18% people invest to secure for Future Uncertainties
and 19% fight against inflation and do invest for only Capital Preservation.
Only 9% people focus on their retirement time and invest for vesting
period.
Fig : Withdraw from investment
Explantion :-
It shows that how investors want to stay remain invested in.42% of

investors want to stay in the market for the 3-5 years, it has been said that
3 years is a market cycle so, investor usually want stay in for the two cycle.
This is the very normal period for remain invested due to primary BULL and
BEAR turn period go through 5-6 years.
23% investors are the short term investor as they want to get out of
market with in 3 years. But it is healthy for the investment market thst
18% investors want to stay invested for 6-9 years and 17% more than
10 years. These long term investors are keeping the market more stable
than the short term investors.
Fig : Risk tolerence ability
Explanation :-
The research showed that the most investors are risk averse and goo
for the moderate risk. 42% investors are in this category. This is good news
for the market that only 22% of insvestors are with low risk apetite. The low
risk apetite investor mostly invested in the fixed return instruments.
7% investors have very high and 29% investors have high risk profile,
they useally invest in the stocks and mutual fund, where the ris is high and
the returns are also high in proportion.
Fig :Risk bear acceptablilty
Explanation :-
Investor’s negative return acceptablity shows how he/she can aceept

the market up-downs positively. If they really take it to the account then the
can sustain in the market for the longer time.
In the above pie chart ‘Never accept return’ shows the group with low
risk appetite where as ‘once in 3 years’ & ‘once in 5 years’ represents the
group with moderate risk appetite. ‘once in 7 years’ & ‘can fluctuate in long
run’ represents the group with high or very high risk appetite. Though this
is not applied to all, as risk assumption is different for every other person.
Here, 36% investors need always positive returns or assured return,

where as 30% of investors can have a moderate risk bearing appetite. And
rest 34% investors can bear the high risk.
Fig : Disposible income according to age groups
Explanation :-
It clearly shows that the age group of 18-30 years has the most
disposible income per month because most of them are single. More the age
grows the disposible income reduced may be because the family expance
and the living expance increased.
So from the company’s point of view 18-30 years age group is the
most potential investors and usually this age group is investing for more
profit.
It has to make a point that investors with 5,000 to 10,000 Rs per

month are most in the 18-30 years age group.
Fig : Investment instrument used by age groups
Explanation :-
Most of the investors are invested in the insurance sector. The age
group of 18-30 years are highly invested in the mutual funds and share
market. This group also invested equally in the FDs and RBI bonds.
The 31-40 years age group is also invested in all the instrument but
they are quite heavily invested in the real estate sectors. But the number of
respondent in this group is less than the 18-30 years sge group.
The more than 50 years age group are most invested in the FD & RBI
bonds. They are less invested in the shares and the mutual funds.
Fig : Risk tolerence according to Age
Explanation :-
Risk tolerence is the major concern in the investment market. If the

risk is high then return expected is high for the investors. Age is also
considered for the risk tolerence. It is expected that the lower the age group
risk tolerence is high.
In the above bar graph it is clear that 18-30 years age group have
more risk taking ability than the other age groups, number of respondent in
very high, high are most in this age group. The reason behind this is that
this age group wants to earn more and they are only in the beginning of
their carrer.
The next group which is next this is the 31-40 age group in which
most are family person and for that reason the are with mostly moderate
risk profile.
Fig : Age wise time Horizon
Explanation:-
Time Horizon is very much important for an investor because it

determines the time period the investor need to invest and the market
conditions during that time. More the time horizon the risk diluted more.
Those who invest for very few years (<3 years) the are the short term
investors and the risk takers. They usually invest for the high gain in short
term. The above bar graph shows that age group 18-30 years dominating in
this sector.
Most of the respondents are in the 3-5 years group. They remain
invested for the a full cycle of bear turn and bull turn.
The age group of 31-40 years are likely to remain invested in 6-9
years because if they could invest in the beginning of the bull turn then they
can make highest profit after 3 market cycle.
Only the Real Estate investors wants to invested more than 10 years.
Fig : Age wise negative return acceptability.
Expalnation :-
Negative return acceptability shows the risk tolerence, as shown

before risk tolerence is more in 18-30 years age group, this graph also
shows that least risk tolerence group is 31-40 years age group.
The age group of >50 years are also risk averse they can not tolerate
any fluctuuation in return part in longer time but they can tolerate minute
losses in 7 and 3 years return.
18-30 year age group response are evenly distributed in all ranges of
negative return acceptibility.
Fig : Disposible income-wise Risk tolerence
Explanation:-
Disposible income gives the power of investment to the investor. But

the risk tolerence is the mind set of individual investors. I have tried to
corelate these two.
This graph shows that different disposible income group has different
risk tolerence. The < 5,000 Rs income group is with moderate risk takers.
The disposible income group of 5,000-10,000 Rs are more risk takers

than the previous one. Though the response of this group is more concern
about the moderate risk.
The next group 10,000-15,000 Rs has diversified their risk, this group
tend to invest in diversified intrument where risk is diluted due to diversity
of risk profile.
The 15,000-20,000 Rs disposible income group is the most risk takers

in all the groups.
Relation Between Disposible income & Time Horizon
Fig:Disposible income wise time horizon
Explanation:-
Time horizon decides the tenure the investor remain invested in the
market. This depics the investment potential along with risk tolerence.
The above graph shows that the Disposible income group of > 20,000 Rs are
intended to quick return,so they intended to invest for below 3 years. 36%
of respondent from more than 20,000 Rs group.
The disposible income group of 5,000-10,000 Rs.is tend to invest for

3-5 years and > 10 years span.
Where as 10,000-15,000 Rs disposible income group is predominently

invested in the 6-9 years span.
Fig: Disposible income wise investment focus
Explanation:-
Investment focus is the primary mind set of the investor, before

investment he/she always try to find out the proirity of the investment and
the suitable savings to invest.
Here in every disposible income group ‘Tax savings’ is one of the main
primary focus. But it has seen that 10,000-15,000 Rs group is more end
towards the ‘Capital Preservation’ & ‘Tax savings’.
The above 20,000 Rs disposible income group are not focused towards the
‘Retirement’, they are focus to tax savings.
The 15,000-20,000 disposible income group has a primary focus of all the
priorities. This is the group which has a mind set of all the rpimary focuses.
Fig: Disposible income wise Negative return acceptabilty
Explanation:-
The safe players are always want less negative return and fixed return
in the fixed tenure. Here in ths bar graph the below 5,000 Rs disposible
income group are the safe players, only 9% of this group has a high
negative return acceptability.
Where as in the 15,000-20,000 Rs disposible income group has a high

Negative return acceptability about 32% respondent are in ‘Can Fluctuate in
long run’ and 23% in ‘Once in 7 years’ group.
But in the above 20,000 Rs disposible income group, 50% respondents do

not want negative return. The 10,000-15,000 group has a greater negative
acceptance tan any other group.
Fig: Occupation wise Investment
Explanation:-
This graph will show how investors of different category tend to invest.
Here in this bar graph service category are like to invest in the Fixed
Deposits (23%) and Mutual Funds (24%). Fixed deposits gives a fiex return
where as in mutual funds the risk is diversified.
Business class is more attracted towards the Shares (18%) and real estate
(17%) because they have the lum sum amount to invest in the single time.
More over they also invest in the mutual funds where high risk may be taken
for the higher return.
For the Self employed category, they are mostly invested in the Fixed
Deposits (37%) and Insurance sector(36%).
Fig: Occupation wise Primary focus
Explanation:-
In the above bar graph shows how occupation dominate the

investment focus of the investors.
In the Service category the investment focus is the tax savings, 46%
investor prioritised Tax savings as their first priority of investment. Where as
income, retirement, capital preservation are the minor priority for them.
For the Business class Capital preservation and Future Uncertainity players a
big role in their investment planning. Nearly 46% investors are in this
category.
Self employed are very few in number in my survey so I have not consider
them in this explanation.
Fig: Occupation wise Negative Return
Explanation:-
Negative return acceptance is a another way to find out the risk tolerence.
In this graph Self employed category 75% responded they can not accept
negative return. Only 25% responded they can accept negative return in 7
years.
In Service category most investors are risk averse, 39% never accept
negative return, but few of them are now started to invest in the riskier
profile so negative acceptability is present.
For the business class, they are mostly invested in shares & mutual funds,
as results they responded ‘Once in 3 years’ and ‘Can fluctuate in long term’.
The investor who want to stay for 3 years are the short term players,where
as the long term players can accept ups & downs in their investment for the
higher return.
Fig: Occupation wise Time Horizon
Explanation:-
The above graph shows that in all the occupation nearly 22% -25%
investors are want to quit before 3 years. This may be because of the short
term investment.
The noticeable thing is that in service category 40% and in Business

category 48% investors are tend to remain invested for 3-5 years. This is
very good indicstion for the investment institution.
In the service category 21% invetors are want to stay invested for more
than 10 years this is because the are invested in the real estate and long
term invesment instrument like bonds.
RECOMMENDATIONS
The over all project is depending up on the findings that has been explained
previously. All my survey findings are corelated and being explain in the
above graphs.
After completing the survey and watching the analysis I come to this
conclusiion that the before investment investors do have focus on Tax
savings, Income, Capiatal preservation etc. They also have a
predetermination of the time period of investment.
According to my view the age group of 18-30 can be a great potential

investors for the company as the has high risk profile, more disposible
income, and the time horizon is perfect 3-5 years.
 Recommendation for this category is company must follow up these

high potential customers, they can be offered ULIPs as there is
blocking period of 5 years in NEW SECURE FIRST plan. This ULIP has a
20%-22% return which good enough for investment. The main focus
should be to reach to the customer, these customers are aware of
ULIPs and aware of other product. Company should try to reach them
and tap the investor.
 Mutual Funds can also be offered as they have high risk profile.
Company should take initiative to get demat account of these
customers.
 The age group of 31-40 years, investors are with ‘Moderate’ risk
profile, most of the investors are from the 10,000-15,000 Rs per
month disposible income. Company will get a good investor with
diluted risk profile. Company can offer them ULIPs,and Fixed Deposits
as investment instrument. Mutual funds can be an option but that
must be a debt fund to invest.
 The age group of 41-50 years, investors are from the 15,000-
20,000 Rs disposible income group. Investor in this group are
invested in Insurance sector, the primary focus of these investors
are retirement and time horizon is likely to be 6-9 years. This is also
good potential group for the retirement plan in ULIPs. Mutual funds
can be a good option for them.
 For the age group of above 50 years, the risk profile would be low
moderate,as the term is not more than 3 years. Investors have
invested in insurance sector but in this age insurance would not be a
good option for investor. Company should try to minimise the risk
tolerence by offering Fixed deposits.
OCCUPATION
If we see the survey data it will seen that respondents are majorly Service
peopole and Business Class. Depending upon the data I conclude that the
srevice class has a time horizon of 3-5 years and risk tolerence ‘Low-
Moderate’. They invested in FDs, Mutual Fund and ULIPs.
 Recommendation company should tap these class by innovative

marketing strategies as they already invested, and offer FDs, ULIPs.
Mutual fund can be a lucrative offer if the Fund is any moderate fund
or debt fund.
 For the business class, the risk profile is high-very high. Most investor
are with negative return acceptability and time horizon is < 3 years.
Company should offer Mutual funds with risk profile High to very
high thus investor can get a high return. Apart from this company
should offer to open demat account with them.
Disposible Income
 The disposible income bracket less than Rs.5000 per month are
basically safe investors and have not and do not prefer investing in
mutual funds and ULIP. Thus positioning of these products should
be such that people are attracted towards this scheme. Emphasis
on marketing of the products should be given.
 Respondents under disposible income bracket Rs.5,000-Rs.10,000

have mainly invested in insurance and real estate. But when survey
was done and their preferences was asked these respondents
strongly preferred investing in these strategies.
 Disposible Income Bracket of Rs.15,000-Rs.20,000 are the strong
contenders for investing their money and these people have
invested in real estate, insurance and fixed deposits. Moreover
there is mixed preferences for their investments thus proper
segmentation of the sample should be done accordingly marketing
strategies should be adopted.
 Though there is a small percentage of respondents in disposible

income bracket above Rs.20,000 who least prefer investing in
mutual fund. But this is the segment which can be well targeted
and their portfolio should be such that gives them more returns.
The case of ULIP is different as people strongly prefer investing in
this investment strategy. Thus emphasis for selling ULIP in this
income bracket.
PORTFOLIO MANAGEMENT
What is a Portfolio management?
A portfolio management is a collection of investments held by an institution
or a private individual. Holding a portfolio is part of an investment and risk-
limiting strategy called Diversification. By owning several assets, certain
types of risk (in particular specific risk) can be reduced.
The aim of portfolio management is to achieve the maximum return

from a portfolio which has been delegated to be managed by an individual
manager or financial institution. The manager has to balance the parameters
which define a good investment i.e. security, liquidity, and return. The goal
is to obtain the highest return for the client of the managed portfolio.
While doing the portfolio management of customers it is ensured that the

portfolio has objectives and achieves a sound balance between the
competing objectives, which are:-
 Safety of investment
 Stable current return
 Appreciation in capital value
 Liquidity
 Tax planning
 Minimizing the risk
 Diversification
Portfolio Expected Return

The expected rate of return is the weighted average of the expected rates of
return on assets comprising the portfolio. The weights, which add up to 1,
reflect the fraction of total portfolio invested in each asset. Thus, there are
two determinants of portfolio returns:
I. Expected rate of return on each assets and
II. Relative share of each asset in the portfolio.
Symbolically:
E (rp) =∑w E (ri)
Where, E (rp) =expected return from the portfolio.
w = proportion invested in the portfolio.
E (ri) =expected return from the assets i.
Portfolio Risk
Total risk is measured in terms of variance or standard deviation of return.
Unlike portfolio expected return, portfolio variance is not the weighted
average of variance of returns on individual assets in the portfolio.
Symbolically:
σ²p= (w1)²(σ1)²+ (w2)²(σ2)²+2(w1) (w2) (σ12)
Where,
σ²= Variance of returns of the portfolio
(w1)= Fraction of the portfolio invested in asset 1
(w2)= Fraction of the portfolio invested in asset 2
(σ²1)= Variance of asset 1
(σ²2)= Variance of asset 2
(σ12)= Covariance between returns of two assets.
Return is not fixed for any investment instrument it depends upon the
market liquidity, interest rate, and some other economic situation of that
country. For the calculation of the risk & return I have chosen the historic
data.
I have also showed the risk profile which have been ranging from Low to
very high.
List of return expected on the basis of Historical data
Types of investments Historical returns Risk profile
Company Bonds 6%-8% Medium-high
Bond Mutual Funds 8%-10% Medium
Equity Mutual Funds 15%-20% High
Equities 15%-20% Very high
Fixed Deposits 7%-8% Low
PPF 8% Low
Post Office 8% Low
Government Securities 5%-6% Low
ELSS 15%-20% Medium-high
Note: higher returns for lower risk (because of Govt. guarantees there) that
PPF and similar A/c appear to have, is misleading. These do not have much
liquidity, and since that is an important measure of risk.
CREATING PORTFOLIO
Making a portfolio depends on the risk measurement of the investment and

the time horizon he/she prefer to invest. But from the point of view of the
portfolio manager, choosing a investment intsrument or a fund is more
difficult than to measure the risk tolerence and time horizon.
For the portfolio managers calculating the risk and return is the main area
where they focused. As an investors before investing alwways watch for the
risk and return for his/her investment. So before creating the portfolio, risk
and return calculation is manditory.
To understand the risk of a specified fund, there are some statistical

instruments that helps to measure the volatality in respect to the market,
industry, and peers. Measuring volatility and risk depics the fluctuation of
return investors receive.
For this creation of portfolio I chose Mutual Funds as investment instrument

because, it has a diversified investment options from equity market, money
market, to debt instrument. Any one can invest in mutual funds as variation
in investment instrument is greater than any other investment instrument.
METHODOLOGY USED
Investing in mutual funds involves an active role of a fund manager. It is

said to be one of the safest investment avenues as regards the high
risk/return equity investment. Being assumed safe and the responsibility
entrusted to fund managers, it is perceived that investors give a cursory
glance at the performance sheet of the fund, gain some money, and carry on
with their investments with the fund.
However, though they make money from the fund, a detailed examination of
the fund's performance in relation to other risk-free investment avenues and
the Benchmark index gives telling insights into the fund's performance. A
comparison with risk-free investments like government securities, treasury
bills, and also the Benchmark index would determine how safer and more
profitable your fund is.
Here is an analysis of the ratios that can help investors gauge the
performance of your fund as regards investing in less riskier investment
avenues.
FUNDS SELECTION
I have selected minimun five funds from different Funds from different types
of funds. Here is the list of the mutual funds I have selected.
Fund name Fund name
Aggressive Balanced Funds

Funds
Tata Kotak Balance
Infrastructure Tata Balanced
DSPML T.I.G.E.R.
Regular
Debt oriented
Sundaram BNP DBS Chola MIP
Paribas Select
Midcap Regular ICICI Prudential
Child Care-Study
UTI infrastructure
Principal MIP Plus
Reliance Growth
Principal MIP
Birla Mid Cap
Magnum HSBC MIP Savings
Emerging
Businesses Debt Funds
Birla Sun Life
Diversified Income
equity
Kotak Birla Income Plus
Opportunities Kotak Bond
Taurus Star share Regular
Birla Sun Life Birla Gilt Plus

Frontline Equity Regular
Birla Sun Life ICICI Prudential
Equity Gilt Investment
HDFC Top 200
ICICI Prudential
Dynamic
Magnum Contra
Magnum Global
Magnum
Multiplier Plus
Balanced Funds
HDFC Prudence
Principal Child
Benefit
Magnum
Balanced
 These 33 funds are the top funds in respective fund sector, the 1 st year
return and 3 years are calculated.
 Then with 60% weightage given to 3 years return and 40% weightage
given to 1st year return. Thus I have got the total average return score
of the respective funds.
 Beta & Sharpe ratio being calculated. Then I calculate adjusted risk by
dividing Sharpe ratio by beta.
 Then adjusted risk is multiplied by the total return score of individual
funds. Then I got the adjusted risk & return.
 The highest scorer is the best fund to invest respect to the fund type.
So I have ranked the funds in the respective category.
 These funds are recommended to the investors depending the risk
tolerence.
Portfolio of Investor
WITH 70% AGGRESSIVE & 30% DEFENSIVE RISK PROFILE
Investable amount = 500,000 Rs.
Aggressive investment= 500,000x.7= 350,000 Rs
Defensive investment= 500,000x.3= 150,000 Rs
Aggressive investment
ELSS= 100,000 Rs.
Aggressive mutual funds= 200,000 Rs.
NFO= 50,000
Explanation :
 ELSS is a type of mutual funds where investor can get the Tax shield
of 80(C), which means upto investment of Rs 100,000 is tax free.
There is no need invest in ULIPs or any endowment insurance, because
ELSS gives on an average return of 25%-30% 3. For the secure life
investor must do an insurance that will give only insurance plan. This
will be a expence of the investor but in the long run ELSS will give
more return than a ULIP plan.
 NFO is the emerging mutual funds that is going to flurish in the future.
It is difficult to predict which NFO will be good, because it is time
constrain. But investor must evaluate the background of the NFO and
the fund manager.
 Aggressive mutual funds, are the most volatily mutual funds respect to
the market. I have recommended top five mutual funds each with
amount 40,000 Rs. The funds are:
Tata Infrastructure, DSPML T.I.G.E.R. Regular, Reliance Growth, Birla Mid

Cap, Sundaram BNP Paribas Select Midcap Regular.
In these funds DSP ML T.I.G.E.R. Regular high liquid as there is no tenure.

Reliance Growth and Birla Mid Cap minimum tenure is 1 year. So there is no
liquidity problem for the investor.
Defensive investment
Balanced funds,Debt funds= 50,000
Government securities= 50,000
Fixed deposits=50,000
Explanation:
This investor has 30% in defensive investment. I have distributed all

investment equally to balanced funds, Government securities, Fixed
deposits.
Fixed deposits are for 1 years, Kotak Mahindra offers 9.25% for 1 years
fixed deposits.
Government securities for 5 years, it will yield 8%.
Return after one years of the above investment
INVESTMENT CALCULATION EXPECTED RETURN

ELSS 100,000X35% 35,000
AGGRESSIVE FUNDS 200,000X40% 80,000
NFO 50,000X15% 7,500
BALANCED FUNDS 50,000X 25% 12,500
FIXED DEPOSITS 50,000X9.25% 4625
GOVT.SECURITIES 50,000X8% 4,000
TOTAL 143625
On an average the return =143,625/500,000= 28.25% which good for the

investorof very high risk.
Portfolio of Investor
WITH 60% AGGRESSIVE & 40% DEFENSIVE RISK PROFILE
Investable amount = 500,000 Rs.
Aggressive investment= 500,000x.6= 300,000 Rs
Defensive investment= 500,000x.4= 200,000 Rs
Aggressive investment
ELSS= 100,000 Rs.
Balance Funds= 50,000 Rs.
NFO= 50,000
Diversified equity funds= 100,000
Explanation:
 Here investor has a risk tolerence of 60% aggressive. So I have

recommended 33% of the aggressive investment in the
Diversified Equity funds where the risk ranges from medium to
high.
 The diversified funds are yeilding good returns from the market
nearly 30% on an averege.
 Balanced Funds are from medium risk and medium return, it
ranges risk from low to medium. Return is quite moderate near
about 25%-30%.
Defensive investment
Debt funds= 75,000
Debt oriented Funds=75,000
Fixed deposits=50,000
Explanation:
In the defensive investment part investor must try to gain more interest rate
as the return is secure and liquidity is low.
 Fixed deposits rate is maximum 9.25%, Kotak Mahindra Bank is

offering for One year tenure.
 Debt Funds are the secure mutual funds with risk profile of low and the
return is ranging 9%-11%. The top five funds I recommend: Birla Sun
Life Income, Birla Income Plus, Kotak Bond Regular, Birla Gilt Plus
Regular, ICICI Prudential Gilt Investment.
 For the liquidity Kotak Bond Regular has no minimum time of
investment, ICICI Prudential has 3 years of minimum investment, but
rest have one year minimum investment period. So liquiidity there is
between the funds.
 For the debt oriented funds, these are the funds that have low risk but
return is more than the debt funds nearly 13%. I recommend: DBS
Chola MIP1, ICICI Prudential Child-care Study0, Principal MIP, Principal
MIP Plus1, HSBC MIP savings2.
 ICICI Prudential Child-care Study is highly liquid as there is no

minimum tenure of investment, DBS Chola, Principal MIP & Principal
MIP plus has a minimum tenure of 1 year, and HSBC has 2 years. So
investor has liquidity option in his investment.
Return after one year for the above investment
INVESTMENT CALCULATION EXPECTED RETURN

ELSS 100,000X35% 35,000
BALANCED FUND 50,000X25% 12,500
DIVERSIFIED EQUITY 100,000X30% 30,000
NFO 50,000X15% 7,500
DEBT FUND 75,000X9% 6750
DEBT ORIENTED FUND 75,00013% 9750
FIXED DEPOSIT 50,000X9.25% 4625
TOTAL 106,125
Then on an average the return =106,125/500,000=21.25% which is good

for an investor of high risk profile.
ANNEXURE
QUESTIONNAIRE FOR INVESTMENT STRATEGIES
Name: Age: 18-30 31-40 41-50 >50
Occupation: Service Business Self Employed Other
Contact no.
Q 1.What is your annual income (approx)?
< 2,50,000 2,50,000-5,00,000 5,00,000-7,50,000
7,50,000-10,00,000 > 10,00,000
Q 2. What is your monthly disposible income?
< 5,000 5,000-10,000 10,000-15,000
15,000-20,000 > 20,000
Q 3. What is your primary investment focus (please give ranking 1-5, where
1- best)
Tax Savings Future Uncertainity Income
Retirement Capital Preservation
Q 4. When would you withdraw money from your investment?
Less than 3 years 3-5 years
6-9 years >10 years
Q 5. Where have you invested from the followings?(you can tick more than
one)
Share Mutual Funds FD/RBI bonds

Real Estate Insurance
Q 6. What is applicable to you?
Can never accept negative return
Can accept negative return once in 3 years
Returns can fluctuate in longer term
REFERENCES:
Sites
www.google.com
www.investopedia.com
www.iciciprulife.com
www.nseindia.com
www.ampi.com
www.finance.indiamart.com
www.business.india.com
www.valueresearch.com
www.myiris.com
www.rediff.com/business
Books
Financial management (Ninth edition) by I M Pandey.

Security analysis and Portfolio management by Ritu Ahuja.
Insurance in India by S Swaminathan.
Insurance chronicle, Icfai publications & current scenario by jawahar

SHEKHAR-Portfolio Management and Investment Trends

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SUMMER TRAINING REPORT

PORTFOLIO MANAGEMENT AND

Submitted in partial fulfilment of the requirements of the two year

Post Graduate Programme (PGP).

IILM Institute for Higher Education

Name of Student: KESHARPU SEKHAR

I wish to express my gratitude to Sharekhan’s management for giving us an

I am also sincerely thankful to my faculty guide, Mr.Harsh Vardhan who was of

I want to give my special thanks to all members of IILM, for providing me an

To understand the trend of the investor I have gone through a field

The project continues with the Portfolio Management. Its starts by

Decision to Placing Order

Funds or Transaction Cycle Trade

A person holding assets (Securities/Funds), either to meet his liquidity needs or to

A securities transaction cycle is presented above. Just because of this Transaction

HISTORY OF ONLINE TRADING:

E- Broking - A small beginning:

INTERNET TRADING IN INDIA:

The development of broking in India can be categorized in 3 phases:

Market Size: Growth of Online Brokerage market:

On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable

PROFILE OF THE COMPANY :

Name of the company : Sharekhan ltd.

Year of Establishment : 1925

Headquarter : ShareKhan SSKI

Nature of Business : Service Provider

Services : Depository Services, Online Services and

Number of Employees : Over 3500

Slogan : Your Guide to The Financial Jungle.

Winners of “Best Financial Website” award.

India’s most preferred brokers within 5 years. “Awaaz customers Award

To educate and empower the individual investor to make better investment

• Among the top 3 branded retail service providers

• No. 1 player in online business

• Largest network of branded broking outlets in the country serving more

A Sharekhan outlet offers the following services:

SHAREKHAN LIMITED’S MANAGEMENT TEAM:

Mr. Dinesh Murikya :Owner of the company

PRODUCTS AND SERVICES OF SHAREKHAN LIMITED :

The different types of products and services offered by Sharekhan

Equity and derivatives trading

FINANCIAL PRODUCTS AVAILABLE AT SHAREKHAN:

MARGIN OPTIONS REDEMPTION

BTST SIP & SWP

 It is a pioneer in online trading with a turn over of Rs.400crores and

 Share Khan provides multi-channel access to all its customers through a

 Localized presence due to insufficient investments for country wide

 Lack of awareness among customers because of non-aggressive

 Lesser emphasis on customer retention.

 Focuses more on HNIs than retail investors which results in meager

 Increasing usage of internet through broadband connectivity may boost a

 Aggressive promotional strategies by close competitors may hamper Share

 Lack of sufficient branch-offices for speedy delivery of services.

 Other players are providing margin funds to investors on easy

Student’s work profile(role and responsibilities) :

I worked there with SHAREKHAN LTD. with a profile of Customer Acquisition

So for fulfillment of the targets one needs to:

At SHAREKHAN I was provided with detailed training regarding share market,

LIMITATIONS of Cold Calling:

• Voice and accent plays a major role.

• Less success rate

While making cold calls, we need to have:

• Good Communication Skills (Voice quality is clear and articulate)

• Persistent and able to bounce back from rejection