A Project Report

On

“Mutual fund analysis & portfolio management in mutual funds”

for

“Motilal Oswal Securities Ltd.”

By

“Nisha Baska”

Under the guidance of

“Dr. Smita Sovani”

Submitted to

“University of Pune”
In partial fulfillment of the requirement for the award of the degree of
Master of Business Administration (MBA)

Through
Vishwakarma Institute of Management
Pune-48.

i
 ACKNOWLEDGEMENT

He who does not thanks for little, will not thanks for much

Talent and capabilities are of course necessary but opportunities and good guidance
are two very important things without which no person can climb those infant ladders
towards progress.

At the time of making this report I express my sincere gratitude to all of them.

During the course of this project various person have rendered valuable help &
guidance to me. I am highly grateful to Mr. Sumit Prakash who allowed me to do
my summer training in his prestigious organization.

I am thankful to Mr.Sumit Prakash again whose calm demeanor and willingness to

teach has been a great help in successfully completing the project. My learning has
been immeasurable and working under him was a great experience. My sincere thanks
also extend to all the staffs of. Motilal Oswal Securities Ltd . for providing a helpful
work environment and making our summer training an exciting and memorable event.

I am extremely thankful and obliged to Dr.Smita Sovani (Internal Project Guide) for
providing streamed guidelines since inception, till the completion of the project.

I would also thank Motilal Oswal Securities Ltd, employees and customers whom I
met during the course of this project, for their support and for providing valuable
information which helped me, complete this project successfully.

NISHA BASKA

ii
 CONTENTS

SR. NO. PARTICULARS PAGE.NO.

1. EXECUTIVE SUMMARY 1-3

2. COMPANY PROFILE 4-8

3. INDUSTRIAL PROFILE 9-13

4. OBJECTIVE AND SCOPE OF PROJECT 14-15

5. RESEARCH METHODOLOGY 16-17

6. CONCEPTUAL BACKGROUND:
18-43

7. DATA ANALYSIS 44-47

8. FINDINGS 48-49

9. ON THE JOB TRAINING 50-60

10. CONCLUSION 61-62

11. SUGGESTIONS 63-64

12. LIMITATIONS 65-66

13. BIBLIOGRAPHY 67-68

14. ANNEXURE 69-70

iii
 LIST OF TABLES & ILLUSTRATIONS

SR. NO. PARTICULARS PAGE.NO.

1. Calculation of NAV 24

2. Tool showing fund charactrestics 32

3. Figures showing how to maximize returns while 35

minimizing risk

4. Figures showing Portfolio Models:-

 Conservative Portfolio 36
 Moderately Portfolio 36

 Moderately Aggressive Portfolio 37

 Very Aggressive Portfolio 38

iv
 ABBREVIATIONS

1) MF – Mutual Fund

2) AMC – Asset Management Company

3) SEBI – Securities Exchange Board Of India

4) DP – Depository Participants

5) PPF – Public Provident Fund

6) NAV – Net Asset Value

7) HNIs – High Net Worth Individuals

8) CRM – Customer Relationship Management

9) AUM – Asset Under Management

v
 CHAPTER I

EXECUTIVE SUMMARY

1
Right from its existence, Banks, whether nationalize or corporate, always dominated

others, in case of public investments or retail investments. But in past few years due

to various reasons like continuously falling of interest rates, various scams etc.

investors will have to look for various other investments avenues that will give them

better returns with minimization of risks. Here Mutual Funds Industry has very

important role to play in providing alternate investment avenue to entire gamut of

investors in scientific and professional manner.

Indian Mutual Fund Industry has been definitely maturing over the period. In four

decades of its existence in India Mutual Funds have gone through various structural

changes and gained prominent position in Financial Industry. Because of easy of

investments, professional management and diversification more and more investors

are gaining confidence in Mutual Funds. Even government policies like abolishment

of long term capital benefit taxes added advantage to growth of Mutual Funds. This is

all the way is leading to pool of more and more money from retail investors into the

Mutual Funds.

So I carried out project in Mutual Funds and its Portfolio Management for the period

of two months starting from 1st June 2008 to 31st July 2008 to understand Mutual

Funds, Mutual Fund Industry, analyze the trend in Mutual Funds, what has been the

performance so far and mapping various methods of Client prospecting and servicing,

what are the factors that attracts the investors to invest in Mutual Funds over other

investment avenues.

2
The project study focused on increasing brand awareness at retail level clients and

various activities those results in brand awareness among the same. This project also

consists of generating and getting clients, generating database and after sales services

to retain client and make them happy investor.

While analyzing trend, I tried to map how Asset under Management (AUM) varied

over the period with BSE-Sensex to facilitate feature projections. It has been done

separately for Equity Schemes, Income Schemes, Balanced Schemes and Liquid

Schemes.

3
 CHAPTER II

COMPANY PROFILE

4
The story of Motilal Oswal Securities Ltd (MOSt) goes back many years, when Mr.

Motilal Oswal and Mr. Ramdeo Agrawal met each other as students in a Mumbai

suburban hostel in the early eighties. Both the young chartered accountants hailing

from a rural & an unpretentious background had a common dream viz 'to build a

professional organization with strong value systems, to provide reliable & honest

investment advice to investors'. Thus was born their first enterprise called "Prudential

Portfolio Services" in 1987.

”Motilal Oswal” gets incorporated as Motilal Oswal Securities Ltd. in the year

1995.The institutional business unit has relationships with several leading foreign

institutional investors in the US, UK, Hong Kong and Singapore.

Motilal Oswal Financial Services is a well diversified financial services group having

businesses in securities, commodities, investment banking and venture capital.with

1160 Business locations and more than 2,00,000 investors in over 360 cities, Motilal

Oswal is well suited to handle all your wealth creation and wealth management needs.

The company has in the last year placed 9.48% with two leading private equity

investors - New Vernon Private Equity Limited and Bessemer Venture Partners at

post money company valuation of Rs. 1345 crore. (Rs. 13.45 billion).

Motilal Oswal Financial Services Ltd ties-up with State Bank of India to offer online

trading in the year 2006.

Motilal Oswal Financial Services Ltd was declared as the Best Research House for

Indian Stocks in 2006 as per AQ Research .

5
KEY PROMOTORS

Motilal Oswal - Chairman & Managing Director

Motilal Oswal Financial Services Ltd is promoted by Mr. Motilal Oswal. He is

a Chartered Accountant and started the business along with co-promoter,

Raamdeo Agrawal in 1987.

Raamdeo Agrawal - Non-Executive Director

The man behind the strong research capabilities at Motilal Oswal Financial

Services Ltd is Mr. Raamdeo Agrawal. He is aChartered Accountant. He

specialises in equity research and has been authoring the annual Motilal Oswal

Wealth Creation Study since its inception. ..in1996.

6
Mission and Vision
Motilal oswal core objective is to position ourselves as globally respected investment

bank by assisting our clients in value creation.

Motilal oswal are on the correct roadmap to pursue our mission with our Team

inculcating the following values with utmost sincerity.

Integrity

Motilal oswal commitments and work on transactions keeping in mind long term

interests of the clients

Client Orientation

Motilal oswal come out with solutions keeping in mind priorities and needs of the clients.

Knowledge based solution offering

Motilal oswal quest for solution offering supported by knowledge and research on

underlying business and products, results in high quality financial and strategic advice.

Quality

Motilal oswal endeavor to follow the best of the global service standards and processes

results in outstanding execution support for transactions.

Passion

Motilal oswal are passionate about our transactions resulting in innovative solutions and

enhancing probability of transaction closures .

Motilal Oswal Core Purpose

To be a well respected and preferred global financial services organization enabling

wealth creation for all our customers.

7
 PRODUCT AND SERVICES

Investment
Institutional
Banking
broking

Private commodity
Equity ties

Wealth Management

Equities Portfolio Management Services

Derivatives Mutual Funds
MyBroker (E-Broking) Commodities
IPO Depository Services

8
 CHAPTER III

INDUSTRIAL PROFILE

Mutual Funds in India (1964-2000)

The end of millennium marks 36 years of existence of mutual funds in this country.

The ride through these 36 years is not been smooth. Investor opinion is still divided.

While some are for mutual funds others are against it.

9
UTI commenced its operations from July 1964. UTI came into existence during a

period marked by great political and economic uncertainty in India. With war on the

borders and economic turmoil that depressed the financial market, entrepreneurs were

hesitant to enter capital market.

The already existing companies found it difficult to raise fresh capital, as investors did

not respond adequately to new issues. Earnest efforts were required to canalize

savings of the community into productive uses in order to speed up the process of

industrial growth.

The then Finance Minister, T.T. Krishnamachari set up the idea of a unit trust that

would be "open to any person or institution to purchase the units offered by the trust.

However, this institution as we see it, is intended to cater to the needs of individual

investors, and even among them as far as possible, to those whose means are small."

His ideas took the form of the Unit Trust of India, an intermediary that would help

fulfill the twin objectives of mobilizing retail savings and investing those savings in

the capital market and passing on the benefits so accrued to the small investors.

UTI commenced its operations from July 1964 "with a view to encouraging savings

and investment and participation in the income, profits and gains accruing to the

Corporation from the acquisition, holding, management and disposal of securities."

Different provisions of the UTI Act laid down the structure of management, scope of

business, powers and functions of the Trust as well as accounting, disclosures and

regulatory requirements for the Trust.

One thing is certain – the fund industry is here to stay. The industry was one-entity

show till 1986 when the UTI monopoly was broken when SBI and Canbank mutual

fund entered the arena. This was followed by the entry of others like BOI, LIC, GIC,

etc. sponsored by public sector banks. Starting with an asset base of Rs0.25bn in 1964

10
the industry has grown at a compounded average growth rate of 26.34% to its current

size of Rs1130bn.

The period 1986-1993 can be termed as the period of public sector mutual funds

(PMFs). From one player in 1985 the number increased to 8 in 1993. The party did

not last long. When the private sector made its debut in 1993-94, the stock market was

booming.

The openings up of the asset management business to private sector in 1993 saw

international players like Morgan Stanley, Jardine Fleming, JP Morgan, George Soros

and Capital International along with the host of domestic players join the party. But

for the equity funds, the period of 1994-96 was one of the worst in the history of

Indian Mutual Funds.

1999-2000 Year of the funds

Mutual funds have been around for a long period of time to be precise for 36 yrs but

the year 1999 saw immense future potential and developments in this sector. This year

signaled the year of resurgence of mutual funds and the regaining of investor

confidence in these MF’s. This time around all the participants are involved in the

revival of the funds ----- the AMC’s, the unit holders, the other related parties.

However the sole factor that gave lifr to the revival of the funds was the Union

Budget. The budget brought about a large number of changes in one stroke. An

insight of the Union Budget on mutual funds taxation benefits is provided later.

It provided centre stage to the mutual funds, made them more attractive and provides

acceptability among the investors. The Union Budget exempted mutual fund dividend

given out by equity-oriented schemes from tax, both at the hands of the investor as

11
well as the mutual fund. No longer were the mutual funds interested in selling the

concept of mutual funds they wanted to talk business, which would mean to increase

asset base, and to get asset base, and investor base they had to be fully armed with a

whole lot of schemes for every investor .So new schemes for new IPO’s were

inevitable. The quest to attract investors extended beyond just new schemes. The

funds started to regulate themselves and were all out on winning the trust and

confidence of the investors under the aegis of the Association of Mutual Funds of

India (AMFI)

One can say that the industry is moving from infancy to adolescence, the industry is

maturing and the investors and funds are frankly and openly discussing difficulties

opportunities and compulsions.

Future Scenario

The asset base will continue to grow at an annual rate of about 30 to 35 % over the

next few years as investor’s shift their assets from banks and other traditional

avenues. Some of the older public and private sector players will either close shop or

be taken over.

Out of ten public sector players five will sell out, close down or merge with stronger

players in three to four years. In the private sector this trend has already started with

two mergers and one takeover. Here too some of them will down their shutters in the

near future to come.

But this does not mean there is no room for other players. The market will witness a

12
flurry of new players entering the arena. There will be a large number of offers from

various asset management companies in the time to come. Some big names like

Fidelity, Principal, Old Mutual etc. are looking at Indian market seriously. One

important reason for it is that most major players already have presence here and

hence these big names would hardly like to get left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as this

would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset

Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes to trade

in derivatives. Importantly, many market players have called on the Regulator to

initiate the process immediately, so that the mutual funds can implement the changes

that are required to trade in Derivatives.

13
 CHAPTER IV

OBJECTIVES OF STUDY

 To make investors aware of Motilal Oswal Pvt. Ltd.

 To understand ways of systematic financial planning .

 To compare various financial products.

 To study of basics of Mutual Fund market & overall industry.

 To enumerate risks associated with mutual fund scheme.

14
 To analyze mutual fund investment by comparing it’s various

investment avenues.

 To understand portfolio management in mutual Funds.

 To understand online trading and back office work at Motilal Oswal

Securities Ltd.

15
 CHAPTER V

RESEARCH METHODOLOGY

The focus of this chapter is on the methodology used for the collection of data for
research. Data constitutes the subject matter of the analyst. The primary sources of the
collection of sources of the collection of data are observations, Interviews and the
questionnaire technique. The secondary sources are collections of data are from the
printed and annually published materials..

16
Primary Data:

Data that is collected for the specific purpose at hand is called as primary Data.
Following methods are used to do this project:-
 The history of the Motilal Oswal Securities Limited.
 People who came to give training in the Company.
 People in mutual fund department.
 Asking Questions to clients

Secondary Data:

Secondary data highlights the contextual familiarities for primary data collection. It
provides rich insights into the research process.
Secondary data is collected through following sources:
 Visiting M.F sites.
 Companies Website.
 Reading leaflets,pamphlets,magezines ,bronchure that were already
present in the company.

17
 CHAPTER VI

CONCEPTUAL BACKGROUND

A) INVESMENT AVENUES

1. Investment:

18
The money you earn is partly spent and the rest saved for meeting future expenses.

Instead of keeping the savings idle you may like to use savings in order to get return

on it in the future. This is called Investment.

2. Why should one invest?

One needs to invest to:

 Earn return on your idle resources

 Generate a specified sum of money for a specific goal in life

 Make a provision for an uncertain future

One of the important reasons why one needs to invest wisely is to meet the cost of

Inflation.

3. Various options available for investment:

I. Physical Assets:

 Real Estate

Real Estate investment is also on of the good investment option available. Real Estate

investment means investments in the Land, Buildings, Flats, and Houses etc. Now a

day the growth in the prices of real estate is very rapid. That’s why investor gets good

returns in this investment. But the growth of real estate investment is in the long term

only. In short term there is no growth in this. It requires very huge investment. Only

big investors can invest in this... In Real Estate investment you will not have the

liquidity. Buying & selling of property is not so easy at least in India. The Procedures

& Documentation of ‘Transfer of Property’ is very lengthy. It takes time & money.

For transfer you have pay taxes & duties & some charges.

 Commodity:

19
Commodities market, contrary to the beliefs of many people, has been in existence in

India through the ages. However the recent attempt by the Government to permit

Multi-commodity National levels exchanges has indeed given it, a shot in the arm. As

a result two exchanges Multi Commodity Exchange (MCX) and National Commodity

and derivatives Exchange (NCDEX) have come into being. These exchanges, by

virtue of their high profile promoters and stakeholders, bundle in themselves, online

trading facilities, robust surveillance measures and a hassle-free settlement system.

The futures contracts available on a wide spectrum of commodities like Gold, Silver,

Cotton, Steel, Soya oil, Soya beans, Wheat, Sugar, Channa etc., provide excellent

opportunities for hedging the risks of the farmers,

Importers, exporters, traders and large-scale consumers. They also make open an

avenue for quality investments in precious metals. The commodities market, as the

movements of the stock market or debt market do not affect it provides tremendous

opportunities for better diversification of risk. Realizing this fact, even mutual funds

are contemplating of entering into this market.

II Financial Assets:

 Investment in Capital Market:

Capital Market is a place where buyers and sellers of securities can enter into

transactions to purchase and sell shares, bonds, debentures etc. Further, it performs an

important role of enabling corporate, entrepreneurs to raise resources for their

companies and business ventures through public issues. Transfer of resources from

those having idle resources (investors) to others who have a need for them (corporate)

is most efficiently achieved.

20
Through the securities market. Stated formally, securities markets provide channels

for reallocation of savings to investments and entrepreneurship. Savings are linked to

investments by a variety of intermediaries, through a range of financial products,

Called ‘Securities’.

 Small Saving Instruments:

It is again classified in to short term and long term saving instruments.

Short term saving instruments:

Broadly speaking, savings bank account, money market/liquid funds and fixed

deposits with banks may be considered as short-term financial investment options:

Savings Bank Account: It is often the first banking product people use, which offers

low interest (4%-5% p.a.), making them only marginally better than fixed deposits.

 Money Market or Liquid Funds:

These funds are a specialized form of mutual funds that invest in extremely short-term

fixed income instruments and thereby provide easy liquidity. Unlike most mutual

funds, money market funds are primarily oriented towards protecting your capital and

then, aim to maximise returns. Money market funds usually yield better returns than

savings accounts, but lower than bank fixed deposits.

 Fixed Deposits with Banks:

These are also referred to as term deposits and minimum investment period for bank

FDs is 30 days. Fixed Deposits with banks are for investors with low risk appetite,

and may be considered for 6-12 months investment period as normally interest on less

than 6 months bank FDs is likely to be lower than money market fund returns.

21
Long Term Financial options available for investment:

Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits,

Bonds and Debentures, Mutual Funds etc.

 Public Provident Fund:

A long-term savings instrument with a maturity of 15 years and interest payable at 8%

per annum compounded annually. A PPF account can be opened through a

nationalized bank at anytime during the year and is open all through the year for

depositing money. Tax benefits can be availed for the amount invested and interest

accrued is tax-free. A withdrawal is permissible every year from the seventh.

Financial year of the date of opening of the account and the amount of withdrawal

will be limited to 50% of the balance at credit at the end of the 4th year immediately

preceding the year in which the amount is withdrawn or at the end of the preceding

year whichever is lower the amount of loan if any.

 Bonds:

It is a fixed income (debt) instrument issued for a period of more than one year with

the purpose of raising capital. The central or state government, corporations and

similar institutions sell bonds. A bond is generally a promise to repay the principal

along with a fixed rate of interest on a specified date, called the Maturity Date.

22
B) PRODUCT PROFILE

MUTUAL FUNDS:-

These are funds operated by an investment company, which raises money from the

public and invests in a group of assets (shares, debentures etc.), in accordance with a

stated set of objectives. It is a substitute for those who are unable to invest directly in

equities or debt because of resource, time or knowledge constraints. Benefits include

professional money management, buying in small amounts and diversification.

Mutual fund units are issued and redeemed by the Fund Management Company based

on the fund's net Asset value (NAV), which is determined at the end of each trading

session.

Diagrametical Representation of the concept of mutual funds.

23
Calculation of NAV

The most important part of the calculation is the valuation of the assets owned by the

fund. Once it is calculated, the NAV is simply the net value of assets divided by the

number of units outstanding. The detailed methodology for the calculation of the asset

value is given below.

NAV = NET VALUE OF ASSETS

NUMBER OF UNITS OUTSTANDING

Asset value is equal to

Sum of market value of shares/debentures

+ Liquid assets/cash held, if any

+ Dividends/interest accrued

Amount due on unpaid assets

Expenses accrued but not paid

Details on the above items:-

 For liquid shares/debentures, valuation is done on the basis of the last or

closing market price on the principal exchange where the security is traded

 For illiquid and unlisted and/or thinly traded shares/debentures, the value has

to be estimated. For shares, this could be the book value per share or an

estimated market price if suitable benchmarks are available. For debentures

24
 and bonds, value is estimated on the basis of yields of comparable liquid

securities after adjusting for illiquidity. The value of fixed interest bearing

securities moves in a direction opposite to interest rate changes Valuation of

debentures and bonds is a big problem since most of them are unlisted and

thinly traded. This gives considerable leeway to the AMCs on valuation and

some of the AMCs are believed to take advantage of this and adopt flexible

valuation policies depending on the situation.

 Interest is payable on debentures/bonds on a periodic basis say every 6

months. But, with every passing day, interest is said to be accrued, at the daily

interest rate, which is calculated by dividing the periodic interest payment with

the number of days in each period. Thus, accrued interest on a particular day is

equal to the daily interest rate multiplied by the number of days since the last

interest payment date.

You can make money from a mutual fund in three ways:

1) Income is earned from dividends on stocks and interest on bonds. A fund pays out

nearly all 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.

4)Funds will also usually give you a choice either to receive a check for distributions

or to reinvest the earnings and get more shares.

Mutual Funds: Costs (Look On It)

25
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.

Annual Fund Operating Expenses

 Management Fees — fees that are paid out of fund assets to the fund's
investment adviser for investment portfolio management, any other
management fees payable to the fund's investment adviser or its affiliates, and
administrative fees payable to the investment adviser that are not included in
the "Other Expenses" category (discussed below).
 

 Distribution [and/or Service] Fees — fees paid by the fund out of fund
assets to cover the costs of marketing and selling fund shares and sometimes
to cover the costs of providing shareholder services. "Distribution fees"
include fees to compensate brokers and others who sell fund shares and to pay
for advertising, the printing and mailing of prospectuses to new investors, and
the printing and mailing of sales literature. "Shareholder Service Fees" are fees
paid to persons to respond to investor inquiries and provide investors with
information about their investments.
 

 Other Expenses — expenses not included under "Management Fees" or

"Distribution or Service (12b-1) Fees," such as any shareholder service
expenses that are not already included in the 12b-1 fees, custodial expenses,
legal and accounting expenses, transfer agent expenses, and other
administrative expenses.
 

26
 Total Annual Fund Operating Expenses ("Expense Ratio") — the line of
the fee table that represents the total of all of a fund's annual fund operating
expenses, expressed as a percentage of the fund's average net assets. Looking
at the expense ratio can help you make comparisons among funds.

ADVANTAGE’S 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 portfolio. 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 Large

mutual funds typically own hundreds of different stocks in many different

industries.

 Economies of Scale - Because a mutual fund buys and sells large amounts of

securities at a time, its transaction costs are lower than you as an individual

would pay.

 Liquidity - Just like an individual stock, a mutual fund allows you to request

that your shares be converted into cash at any time.

27
 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 over 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.

 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-gain tax is triggered, which affects how

28
 profitable the individual is from the sale. It might have been more

advantageous for the individual to defer the capital gains liability.

TYPES OF MUTUAL FUNDS

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 over 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.

29
Money Market Funds

The money market consists of short-term debt instruments, mostly T-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). We've got a whole tutorial on the money market if

you'd like to learn more about it.

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; also, nearly all bond

funds are subject to interest rate risk, which means that if rates go up the value of

the fund goes down.

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 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 stock 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.

A tool showing a fund's characteristics such as the investment philosophy, underlying

investments and risks. This helps investors and investment companies

easily understand and convey information about the fund.

31
 The above mutual fund style box illustrates that the mutual fund is a large-cap,

value-oriented fund. This conveys to investors that the fund is investing in well-

established companies that are under- or fairly valued. The company will not be

invested in small-cap, mid-cap or growth stocks.

MANAGING PORTFOLIO

ASSET ALLOCATION

The process of dividing a portfolio among major asset categories such as bonds,

stocks or cash. The purpose of asset allocation is to reduce risk by diversifying the

portfolio. The ideal asset allocation differs based on the risk tolerance of the investor.

For example, a young executive might have an asset allocation of 80% equity, 20%

fixed income, while a retiree would be more likely to have 80% in fixed income and

20% equities.

What Is Asset Allocation?

Asset allocation is an investment portfolio technique that aims to balance risk and

create diversification by dividing assets among major categories such as cash, bonds,

stocks, real estate and derivatives. Each asset class has different levels of return and

32
risk, so each will behave differently over time. For instance, while one asset category

increases in value, another may be decreasing or not increasing as much. Some critics

see this balance as a settlement for mediocrity, but for most investors it's the best

protection against major loss should things ever go amiss in one investment class or

sub-class.

The consensus among most financial professionals is that asset allocation is one of the

most important decisions that investors make. In other words, your selection of stocks

or bonds is secondary to the way you allocate your assets to high and low-risk stocks,

to short and long-term bonds, and to cash on the sidelines. We must emphasize that

there is no simple formula that can find the right asset allocation for every individual.

ACHIEVING OPTIMAL ASSET ALLOCATION

The important task of appropriately allocating your available investment funds among
different assets classes can seem daunting, with so many securities to choose from.
Essentially, asset allocation is an organized and effective method of diversification.
To help determine which securities, asset classes and subclasses are optimal for your
portfolio; let's define some briefly:

 Large-cap stock - These are shares issued by large companies with a market
capitalization generally greater than $10 billion.

 Mid-cap stock - These are issued by mid-sized companies with a market cap
generally between $2 billion and $10 billion.

 Small-cap stocks - These represent smaller-sized companies with a market

cap of less than $2 billion. These types of equities tend to have the highest risk
due to lower liquidity.

 International securities - These types of assets are issued by foreign

companies and listed on a foreign exchange. International securities allow an
investor to diversify outside of his or her country, but they also have exposure

33
 to country risk - the risk that a country will not be able to honor its financial
commitments.

 Emerging markets - This category represents securities from the financial

markets of a developing country. Although investments in emerging markets
offer a higher potential return, there is also higher risk, often due to political
instability, country risk and lower liquidity. The fixed-income asset class
comprises debt securities that pay the holder a set amount of interest,
periodically or at maturity, as well as the return of principal when the security
matures. These securities tend to have lower volatility than equities, and have
lower risk because of the steady income they provide. Note that though the
issuer promises payment of income, there is a risk of default. Fixed-income
securities include corporate and government bonds.

 Money market - Money market securities are debt securities that are

extremely liquid investments with maturities of less than one year. Treasury
bills make up the majority of these types of securities.

 Real-estate investment trusts (REITs) - REITs trade similarly to equities,

except the underlying asset is a share of a pool of mortgages or properties,
rather than ownership of a company.

MAXIMIZING RETURN WHILE MINIMISING RISK

The main goal of allocating your assets among various asset classes is to maximize
return for your chosen level of risk, or stated another way, to minimize risk given a
certain expected level of return. Of course to maximize return and minimize risk, you
need to know the risk-return characteristics of the various asset classes. The following
chart compares the risk and potential return of some of the more popular ones:

34
As each asset class has varying levels of return for a certain risk, your risk tolerance,
investment objectives, time horizon and available capital will provide the basis for the
asset composition of your portfolio.

To make the asset allocation process easier for clients, many investment companies
create a series of model portfolios, each comprising different proportions of asset
classes. These portfolios of different proportions satisfy a particular level of investor
risk tolerance. In general, these model portfolios range from conservative to very
aggressive:

Conservative model portfolios generally allocate a large percent of the

total portfolio to lower-risk securities such as fixed-income and money
market securities.
 
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Our main goal with a conservative portfolio is to protect the principal value of our
portfolio. As such, these models are often referred to as "capital preservation
portfolios".
Even if you are very conservative and prefer to avoid the stock market entirely, some
exposure can help offset inflation. You could invest the equity portion in high-
quality blue chip companies, or an index fund, since the goal is not to beat the market

A moderately conservative portfolio is ideal for those who wish to preserve a large
portion of the portfolio’s total value, but is willing to take on a higher amount of risk
to get some inflation protection.

A common strategy within this risk level is called "current income". With this
strategy, you chose securities that pay a high level of dividends or coupon payments.

36
Moderately aggressive model portfolios are often referred to as "balanced portfolios"
since the asset composition is divided almost equally between fixed-income securities
and equities in order to provide a balance of growth and income.

Since these moderately aggressive portfolios have a higher level of risk than
those conservative portfolios mentioned above, select this strategy only if you
have a longer time horizon (generally more than five years), and have a
medium level of risk tolerance.
Aggressive portfolios mainly consist of equities, so these portfolios' value
tends to fluctuate widely. If you have an aggressive portfolio, your main goal is
to obtain long-term growth of capital. As such the strategy of an aggressive
portfolio is often called a "capital growth" strategy.

37
To provide some diversification, investors with aggressive portfolios
usually add some fixed-income securities.
Very aggressive portfolios consist almost entirely of equities. As such,
with a very aggressive portfolio, your main goal is aggressive capital
growth over a long time horizon.

Since these portfolios carry a considerable amount of risk, the value of the portfolio
will vary widely in the short term.

MAINTAINING YOUR PORTFOLIO

Once you have chosen your portfolio investment strategy, it is important to conduct
periodic portfolio reviews, as the value of the various assets within your portfolio will
change, affecting the weighting of each asset class. For example, if you start with a
moderately conservative portfolio, the value of the equity portion may increase
significantly during the year, making your portfolio more like that of an investor
practicing a balanced portfolio strategy, which is higher risk!
 In order to reset your portfolio back to its original state, you need to rebalance your
portfolio. Rebalancing is the process of selling portions of your portfolio that have
increased significantly, and using those funds to purchase additional units of assets
that have declined slightly or increased at a lesser rate. This process is also important

38
if your investment strategy or tolerance for risk has changed.

A GUIDE TO PORTFOLIO CONSTRUCTION

In today's financial marketplace, a well-maintained portfolio is vital to any investor's

success. As an individual investor, you need to know how to determine an asset
allocation which best conforms to your personal investment goals and strategies. In
other words, your portfolio should meet your future needs for capital and give you
peace of mind. Investors can construct portfolios aligned to their goals and investment
strategies by following a systematic approach. Here we go over some essential steps
for taking such an approach.

Step 1: Determining the Appropriate Asset Allocation for You

Ascertaining your individual financial situation and investment goals is the first task
in constructing a portfolio. Important items to consider are age, how much time you
have to grow your investments, as well as amount of capital to invest and future
capital needs. A single college graduate just beginning his or her career and a 55-year-
old married person expecting to help pay for a child's college education and plans to
retire soon will have disparate investment strategies. A second factor to take into
account is your personality and risk tolerance. Are you the kind of person who is
willing to risk some money for the possibility of greater returns? Everyone would like
to reap high returns year after year, but if you are unable to sleep at night when your
investments take a short-term drop, chances are the high returns from those assets are
not worth stressful.
As you can see, clarifying your current situation and your future needs for capital, as
well as your risk tolerance, together will determine how your investments should be
allocated among different asset classes. The possibility of greater returns comes at the
expense of greater risk of losses (a principle known as the risk/return tradeoff) - you
don't want to eliminate risk so much as optimize it for your unique condition and
style. For example, the young person who won't have to depend on his or her
investments for income can afford to take greater risks in the quest for high returns.
On the other hand, the person nearing retirement needs to focus on protecting his or
her assets and drawing income from these.

39
Generally, the more risk you can bear, the more aggressive your portfolio will be, devoting a
larger portion to equities and less to bonds and other fixed-income securities. Conversely, the
less risk that's appropriate, the more conservative your portfolio will be. Here are two
examples: one suitable for a conservative investor and another for the moderately aggressive
investor.

The main goal of a conservative portfolio is to protect its value. The allocation shown above
would yield current income from the bonds, and would also provide some long-term capital
growth potential from the investment in high-quality equities.

A moderately aggressive portfolio satisfies an average risk tolerance, attracting those

willing to accept more risk in their portfolio in order to achieve a balance of capital
growth and income.

Step 2: Achieving the Portfolio Designed in Step 1

Once you've determined the right asset allocation, you simply need to divide your
capital between the appropriate asset classes. On a basic level, this is not difficult:
equities are equities, and bonds are bonds.

40
But you can further break down the different asset classes into subclasses, which also
have different risks and potential returns. For example, an investor might divide the
equity portion between different sectors and market caps, and between domestic and
foreign stock. The bond portion might be allocated between those that are short term
and long term, government versus corporate debt and so forth.
There are several ways you can go about choosing the assets and securities to fulfill
your asset allocation strategy (remember to analyze the quality and potential of each
investment you buy - not all bonds and stocks are the same):

 Stock picking - Choose stocks that satisfy the level of risk you want to carry in the
equity portion of your portfolio - sector, market cap and stock type are factors to
consider. Analyze the companies using stock screeners to shortlist potential picks,
than carry out more in-depth analysis on each potential purchase to determine its
opportunities and risks going forward. This is the most work-intensive means of
adding securities to your portfolio, and requires you to regularly monitor price
changes in your holdings and stay current on company and industry news.

 Bond picking - When choosing bonds, there are several factors to consider
including the coupon, maturity, the bond type and rating, as well as the general
interest rate environment.

 Mutual funds - Mutual funds are available for a wide range of asset classes and
allow you to hold stocks and bonds that are professionally researched and picked
by fund managers. Of course, fund managers charge a fee for their services, which
will detract from your returns. Index funds are another choice as they tend to have
lower fees since they mirror an established index and are thus passively managed.

 Exchange-traded funds (ETFs) - If you prefer not to invest with mutual funds,
ETFs can be a viable alternative. You can basically think of ETFs as mutual funds
that trade like a stock. ETFs are similar to mutual funds in that they represent a
large basket of stocks - usually grouped by sector, capitalization, country and the
like - except they are not actively managed, but instead track a chosen index or
other basket of stocks. Because they are passively managed, ETFs offer cost
savings over mutual funds while providing diversification. ETFs also cover a wide
range of asset classes and can be a useful tool to round out your portfolio.
41
Step 3: Re-assessing Portfolio Weightings
Once you have an established portfolio, you need to analyze and rebalance it
periodically because market movements may cause your initial weightings to change.
To assess your portfolio's actual asset allocation, quantitatively categorize the
investments and determine their values' proportion to the whole.
The other factors that are likely to change over time are your current financial
situation, future needs and risk tolerance. If these things change, you may need to
adjust your portfolio accordingly. If your risk tolerance has dropped, you may need to
reduce the amount of equities held. Or perhaps you're now ready to take on greater
risk and your asset allocation requires a small proportion of your assets to be held in
riskier small-cap stocks.
Essentially, to rebalance, you need to determine which of your positions are over-
weighted and those that are under-weighted. For example, say you are holding 30% of
your current assets in small-cap equities, while your asset allocation suggests you
should only have 15% of your assets kept in that class. You need to determine how
much of this position you need to reduce and allocate to other classes.
Step 4: Rebalancing Strategically
Once you have determined which securities you need to reduce and by how much,
decide which under-weighted securities you will buy with the proceeds from selling
the over-weighted securities. To choose your securities, use the approaches discussed
in step 2.
When selling assets to rebalance your portfolio, take a moment to consider the tax
implications of readjusting your portfolio. Perhaps your investment in growth stocks
has appreciated strongly over the past year, but if you were to sell all of your equity
positions to rebalance your portfolio, you may incur significant capital gains taxes. In
this case it might be more beneficial to simply not contribute any new funds to that
asset class in the future while continuing to contribute to other asset classes. This will
reduce your growth stocks' weighting in your portfolio over time without incurring
capital gains taxes.
At the same time, however, always consider the outlook of your securities. If you
suspect that those same over-weighted growth stocks are ominously ready to fall, you
may want to sell in spite of the tax implications. Analyst opinions and research reports
can be useful tools to help gauge the outlook for your holdings. And tax-loss selling is
a strategy you can apply to reduce tax implications.
42
Step 5 Remember the Importance of Diversification.
Throughout the entire portfolio construction process, it is vital that you remember to
maintain your diversification above all else. It is not enough simply to own securities
from each asset class; you must also diversify within each class. Ensure that your
holdings within a given asset class are spread across an array of subclasses and
industry sectors.
As we mentioned, investors can achieve excellent diversification by utilizing mutual
funds and ETFs. These investment vehicles allow individual investors to obtain the
economies of scale that large fund managers enjoy, which the average person would
not be able to produce with a small amount of money.

43
 CHAPTER VII

DATA ANALYSIS

44
 A ROAD MAP FOR YOUR INVESTMENTS

As per my study I have taken data of various age group people like age group of 20’s ,
30’s etc

According to the study I have drawn this table which easily shows the content of the
study and gives the idea that which type of portfolio suited to which age group and
how we can make different asset allocation groups suited to various age group
peoples.

Lets take a look on this

STAGE AGE CIRCUMSTANCES INVESTMENT STRATEGY

I-Young 20s Has no dependants, low Pursue growth aggressively as risk
adult investible surplus taking ability is high at this stage..
II-Young 30’s Married, with young Continue aggressive wealth creation.
family children; starts investing
in earnest
III-Mature 40’s Higher education of Start lowering risk in investment
family children approaching; portfolio by moving funds to safer
income peaking instruments.
IV-Empty 50’s Children independent; Divert new surpluses to building
nesters surpluses peak; preparing retirement corpus; keep reducing
for liquidation portfolio risk

V-Retired 60+ Creating regular cash Create adequate cash flows from
flows and beating inflation safe investments.
and priority

ASSET ALLOCATION FOR ABOVE GIVEN PROFILE PEOPLES

45
For stage I-:
Asset can be allocated for this age group in three different ways which is divided in 3
types conservative, moderate, or aggressive.

Conservative type-
Equity Debt/Funds Small savings

Moderate type-

Aggressive type-

For stage II-:

Conservative type-
Equity Debt/Funds Small savings

Moderate type-

Aggressive type-

For stage III-:

Conservative type-
Equity Debt/Funds Small savings

Moderate type-

Aggressive type-

46
For stage IV-:

Conservative type-
Equity Debt/Funds Small savings

Moderate type-

Aggressive type-

For stage V-:

Conservative type-
Equity Debt Funds Small Savings

Moderate type-

Aggressive type-

47
CHAPTER VIII

FINDINGS

48
Generally speaking when you are young, you can invest a greater proportion in
equities. At that stage financial responsibility are fewer , and you can commit to
equities for long periods of time, which help you reap the unmatched returns they
promise. Also since you are not relying on this money to meet recurring expenses or
approaching financial goal, losing some of it temporarily in the pursuit of higher
returns won’t have you reach for the panic button or strain your finances as much as it
would in later years. As you grow older, your portfolio should progressively tilt
towards debt. At that stage of life, safety of principal becomes more important than
growth. Approaching retirement your prime concern should be putting in place an
alternative income stream, which is better met by debt than equity.
Based on the study I have drawn up indicative asset allocation models to see you
through life. These asset break ups are not sacrosanct. Your asset allocation can differ
from my study at all stages, depending on your life circumstances, financial needs and
investing preferences. For example approaching retirement you find that even after
ensuring an alternative income stream you still have some surplus left from which you
would like higher returns. If you don’t mind the uncertainty you can stretch your
equity allocation suitably.

49
 CHAPTER IX

ON THE JOB TRAINING

50
Purpose-:

OJT is basically to give intern exposure to the outside world and it help to

teach him/her the real world work by giving him practical knowledge. Through OJT I

learn that the theory we have learned is difficult to implement in practical work. And

we have to apply them in a very different way.

As I am learning about mutual funds, handling the back office work etc. Before this I

was just aware of the theory part of it i.e. definition of mutual funds, its requirement,

why a company need additional capital etc. But after working here I came to know

that it is very important to learn the practical procedure of handling the mutual funds

because the main part is the dealing with the customers, convincing them to buy our

product and make him to invest with us and providing him best service.

I have started my OJT from the very first day. And the day to day work that I am

suppose to do is my OJT and it is not fixed what I have to do and before start working

I have to learn the work which is assigned to me. Then I got work related to mutual

funds. The details of the following are explained here-:

So the objectives of my OJT are as follows-

 Customer Service-:

o When a customer is asking some query I have to answer him but if I

am not sure I have to ask to my senior and solve his problem.

o By interacting customer we can study the main problems faced by

them, as they are not expert of the financial products so they need clear

explanation.

51
  Telemarketing -:

Our primary objective is to get an appointment.

o Don’t sale over phone, just make the call and the sale will follow.

o Determine the objection accurately before you start overcoming it.

o How to talk to a prospective customer who can become our customer.

Attracting customers in this field is easy, if the person is ready to invest. He doesn’t

have knowledge about financial products so we have convinced him for the same.

 About Mutual Funds-:

o History

o Types of mutual funds scheme

 By structure

 By investment objectives

 By various options

o I got training for the software INVESTWELL. This is for maintaining

the data of mutual funds and this software provides the facility to make

clients portfolio in various types so that it become easy for us to give

service to our customers.

o Understanding & Executing the back office work.

o Learning about capital markets, Share trading, IPO’s, Mutual Funds &

other concepts etc.

o Generation of leads.

o Handling customer’s queries if any.

o Operating the mutual funds software to work on it.

52
Strategy Employed to achieve the targets-:

o By practically handling the work.

o Asking to colleagues, guides & browsing net for understanding

concepts of Capital market, Share Trading, Mutual Funds & IPO’s etc.

o By training program arranged by the company many thing got clear.

o By asking queries to the company guide and others.

o Assisting the concerned person doing IPO’s and Mutual funds.

INTERNET TRADING & BACK OFFICE WORK

E-BROKING

Today is world of technology. So, the person who adopt it, get the success. So, E-

Broking means broking through electronic means. E-Broking is the broking in which

the investors who are familiar with the use of computer and Internet they directly

trade in stock market. They trade any time at any place when the stock market is open.

The cost of transaction is also reducing with time. The investors have a large range of

option for the trading. It is a paperless transaction so it reduces the cost of company.

There was a facility of live streaming quotes, which give exact price of share which

prevailing in the market at that time.

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

brokerage. These brokers allow their client to place online orders with the option of

talking/chatting to brokers if advice is needed. Brokerage rates here are higher. Online

trading is still in its infancy stage in India.

53
 PROCEDURE FOR INTERNET TRADING

 Step-1: Those investors interested in doing the trading over internet system, that

is, NEAT-ISX, should approach the brokers and register with the Stock Broker.

 Step-2: After registration, the broker will provide to them a login name, password

and a personal identification number (PIN).

 Step-3: Actual placement of an order. An order can then be placed by using the

place order window as under:

 First by entering the symbol and series of stock and other parameters

such as quantity and price of the scrip on the place order window.

 Second, fill in the symbol, series and the default quantity.

 Step-4: Thus, the investor has to review the order placed by clicking the review

option. He may also re-set to clear the values.

 Step-5: After the review has been satisfactory; the order has to be sent by clicking

on the send option.

 Step-6: The investor will receive an ``Order Confirmation'' message along with

the order number and the value of the order.

 Step-7: In case the order is rejected by the Broker or the Stock Exchange for

certain reasons such as invalid price limit, an appropriate message will appear at

the bottom of the screen. At present, a time lag of about ten seconds is there in

executing the trade.

54
 Step-8: It is regarding charging payment, for which there are different modes.

Some brokers will take some advance payment from the investors and will fix

their trading limits. When the trade is executed, the broker will ask the investor for

transfer of funds by the investor to his account.

FACTORS TO KEEP IN MIND WHILE SELECTING ONLINE BROKERS

Brokerage cost:

It is important to weigh up the subscription and trading costs charged by an online

broker against benefits offered by the site. All online brokers display their charges on

their sites. Some make sure you find the charges easily, while with others you will

have to search a bit.

Safety:

Please make sure site has 128-bit encryption to ensure safety of transaction online.

ICICIDirect.com, 5paisa.com are few sites with 128-bit encryption. You normally get

a secured Login id and password. It is always advisable to frequently change trading

password. Ideally online trading site should be fully integrated. The greater the

backward integration, the better it is for the customer. Ideally broking account, demat

account and bank account should be linked electronically.

Rate refresh:

Rate refresh has to be real-time with no time lag. The speed and reliability comes with

huge investment in technology. It is always advisable to check rates of online broking

sites with BSE/ NSE terminal rates.

Speed of execution:

55
System has to be fast and reliable that does just one job- executes your trades. The last

thing you need is a site that is heavily congested with the users who are downloading

heavy jpeg graphs or pulling the latest story why market is moving. The

site should be one click wonder where squaring off all your positions or canceling all

your pending orders takes one click and a confirmation of action.

Trading limit:

For trading, all sites provide 4 times buy and sell limit against margin money put in

by customer. For delivery of shares, buying limit is equal to margin money put in by

customer. Couple of sites also provides margin funding for buying of shares.

Free trial period:

Site should allow users free trial period to familiarize yourself with system before you

decide to become trading member of the site.

Intraday chart/ historical chart:

The site should provide intraday chart tick by tick time and price data / historical chart

for technical analysis by investors of particular scrip. Lot of people trade based on

charting packages.

FUTURE OF INTERNET TRADING

International marketplaces are already witnessing re-alignments and changes with the

emergence of electronic communication networks (ECNs) such as INSTINET and

ISLAND, which are already contributing substantial business volumes to mainline

exchanges such as NASDAQ and the NYSE. Concurrently, exchanges worldwide are

looking at striking strategic alliances such as the Global Equity Market (GEM). With

Net trading in securities and rapid consolidation between multiple stock exchanges,

56
the international securities marketplace is fast becoming a "global village" through the

creation of a universal virtual equity market. Therefore the challenge for the

technology providers is to develop and deploy advanced e-trading tools and

applications using electronic straight through processing technologies.

BENEFITS OF ONLINE TRADING

The various benefits the client gets from the online trading are:

 Freedom from Paperwork: Integrated trading, bank and Demat account (auto

pay-in and pay-out of securities) with digital contracts removes all paperwork.

 Instant Credit And Transfer: Instant transfer of funds from bank accounts of

client’s choice to his/her Motilal Oswal trading account.

 Trade Anywhere: Enjoy the ease of trading from any part of the world in a

completely secure environment.

 Dial n Trade: Call Motilal Oswal on a toll free number to place orders through

Motilal Oswal’s telebrokers.

 Timely Advice: Make informed decisions with expert advice, investment calls

and live market commentary.

 Real-Time Portfolio Tracking: Benefit from real-time information of your

investment and current portfolio value.

 After-Hour Orders: The Client can place orders after the market hours, which

get executed as soon as markets open.

57
 BACKOFFICE WORK AT MOTILAL OSWAL

Motilal Oswal is very efficient company and it handles the back office work with

great efforts. The company gives lots of attention to the handling of all the details

regarding the client and the information is provided by the staff members of the

company. So, the company also gives the guarantee for the privacy of the details that

are stored in the back office.

Back office is the main pool of information on which the company and the branch

works on to decide how much limit should be given to the client. The back office

work is generally carried out in the early morning and after the trading hours. So, the

trading hours would not get disturbed.

At Motilal Oswal, the back office is the main link and which is provided by the Head

Office through Net. The branch is required to maintain it and update it all the times to

get the data and other related information updated. So, early in the morning the Back

office is updated and the copy of the ledger balance of the client and the stock report

are printed out so that the clients’ limit or the decision of the selling of delivery can be

taken without disturbing the terminal and the working hours.

Back office contains:

 Client details

58
  Collection Request

 Ledger balance

 Pay out request

 Credit management

Client Details:

Motilal Oswal maintains all the details regarding the customer which include the

details of their address, their contact no, the copies of their required information such

as pan card photocopy and bank statement etc, if required. The other details of the

client such as the bank details, the DP holding statement, and other things are

maintained and updated at times.

Collection request:

This section handles the things like the collection and cheque request made by or to

the client. In this section the cheque information for Pay in and pay out are provided.

Here the entry would be made as soon as the client pay the amount through cheque

then the cheque is sent to the bank for clearing and if the amount is not transferred to

the company’s account within two days, the reversal entry is made and the extra

charge would be recovered for that from the account of the client. None can make the

payment in cash. Each and every client is required to make payment through cheque.

So, the money get easily tranfered to the Head Office.

Ledger Balance:

This section gives idea about the balance of the client in the account of Motilal Oswal.

Generally the company wants to have the positive balance of the client. But the

company also allows trading on five times on the stock value and ten times on the

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balance in ledger. That amount is required to be collected from the client within two

days.

Payout Request:

The client who has the balance in his account can demand for the payment through

cheque. In Motilal Oswal, the pay out is given through Back office on which the

Pune branch will give the cheque in the name of the client within two days. The client

is given full authority to ask for pay out at any point of time if he has credit balance in

his accont.

Credit Management:

The credit management is done with great care to give the limit extension to the

client. For this calculation, the stock value of the client in his DP account is calculated

and the ledger balance of the client in his account is deducted from that amount. The

resulted amount will decide the limit that would be allowed to the client.

Eg. Suppose a client has following stock in the account of Motilal Oswal

Reliance: worth 56000

TCS: worth 41000

ITC: worth 36000

133000

Now if the client has only 10000 balances in the account then the request for payment

would be made. Generally the margin on credit is Rs. 100000 ie. The resulted amount

should be minimum one lack rupees. If the client is unable to make payment within

fifteen days then the his holding is sold in the market even at a loss to the client but

the amount is recovered so that the shortage of payment to the terminal or to the

branch does not occur. Sometimes the shortage of payment cause the terminal to be

Hanged. So, the branch is required to follow the credit management fully and strictly.

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CHAPTER X

CONCLUSION

61
A well known saying goes like this “Investors who have time have no money to

invest, and the investors who have money don’t know where to invest so that they can

earn a higher return on their investments”. Here the mutual funds come to rescue in

which your money is managed by professionals so that investors can earn good

returns on your investments without spending your time. In M.F investors can invest

as low as Rs.500, so it can attract a sizeable no. of investors . When investors thinks

about investing in M.F the concept of portfolio comes into picture.

Overall, a well-diversified portfolio is your best bet for consistent long-term growth

of your investments and protects your assets from the risks of large declines and

structural changes in the economy over time. Monitor the diversification of your

portfolio, making adjustments when necessary and you will greatly increase your

chances of long-term financial success.

Asset allocation can be an active process in varying degrees or strictly passive in

nature. Whether an investor chooses a precise asset allocation strategy or a

combination of different strategies depends on that investor's goals, age, market

expectations and risk tolerance.

Keep in mind, however, this study gives only general guidelines on how investors

may use asset allocation as a part of their core strategies. Be aware that allocation

approaches that involve anticipating and reacting to market movements require a great

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deal of expertise and talent in using particular tools for timing these movements.

Some would say that accurately timing the market is next to impossible, so make sure

your strategy isn't too vulnerable to unforeseeable errors. 

CHAPTER XI

SUGGESTIONS

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After studying & analyzing about mutual funds, mutual fund industry, different

investment avenues, portfolio management following suggestions can be made to

investors:-

 Diversified stock portfolios have offered superior long term inflation

protection. Equities are especially important today with people living longer

and retiring early.

 To understand stock funds, one needs to be familiar with the characteristics of

the different types of companies they hold.

 Portfolio managers have done a fairly good job in generating positive returns.

It may lead to gain investors confidence. Thus over all good performance of

the funds is a sign of development in new era in capital market.

 Those who want to eliminate the risk element but still want to reap a better

then it would be advisable to go for debt or arbitrage schemes which ensure

both safety and returns.

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 CHAPTER XII

LIMITATIONS OF PROJECT

65
 Project is restricted to mutual funds and Portfolio Management.

 Area of project is very wide so it’s difficult to cover each and every point.

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CHAPTER XIII

BIBLIOGRAPHY

67
1. Internet references:

www.mutualfundsindia.com

www.google.com

www.valueresearchonline.com

www.amfiindia.com

www.motilal-oswal.com

www.investmentz.com

2. Company referrals:

Motilal Oswal fund Reckoner

3. Books and magazines references:

Security analysis & Portfolio management by Prasanna Chandra

Portfolio Management by S. Kevin

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CHAPTER XIV

ANNEXURE

69
QUESTIONNAIRE

1. Personal detail:

Name:

Age (Yrs):

Ph. No. : E-mail:

Gender:

No. of Dependents:

Martial status:

2. In which investment option you would like to invest your money?

1. Insurance 2.Fixed Deposit

3. Post 4.PPF

5. Mutual Fund 6.Shares

7. Other

4) On a average how much you invest every month?

1.) 5,000-25,000 2)25,000-50,000 3)50,000-100,000 4) Above 100000

5) None of these

If (5) then specify----

5) What’s the age, qualification , income & martial status of your children?

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 Dependent Age Qualification Income Martial status

7. What is your income?

1) 3-5 lakhs 2) 5-7 lakhs 3)7-10 lakhs 4) above 10 lakhs

71