Project On Portfolio Management 456

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Project on Portfolio Management 456
M.B.A Finance (DAV Institute of Management)
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PROJECT REPORT
ON
“PORTFOLIO MANAGEMENT SERVICES”
IN
SUBMITTED TO: SUBMITTED BY:

SAKSHI JAIN PRIYA ANEJA
PROFFESSOR
(Faculty guide)
BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE EDUCATION
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STUDENT DECLARATION
This is to certify that I have completed the Project titled “PORTFOLIO

MANAGEMENT SERVICES” under the guidance of SAKSHI JAIN in the partial
fulfillment of the requirement for the award of the degree of “Masters in Business
Administration” from “BHARATI VIDYAPEETH DEEMED UNIVERSITY
SCHOOL OF DISTANCE EDUCATION, New Delhi.”
Name:- PRIYA ANEJA
Class & Section:-MBA, Semester-III
BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE
EDUCATION
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ACKNOWLEDGEMENT
It gives me immense pleasure to present this project report on Portfolio Management

Services carried out at SMC GLOBAL SECURITIES LTD (SMC). This project is the
result of time, efforts and knowledge contributed by various member of the organization.
The summer training program was the great experience for me as in this, I got the
opportunity to learn and experience the corporate world.
No work can be carried out without the help and guidance of various persons. I am happy
to take this opportunity to express my gratitude to those who have been helpful to me in
completing this project report. They have been the source of guide and motivation for the
completion of project.
EDUCATION
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TABLE OF CONTENT
CHAPTER
TABLE OF CONTENTS
EXECUTIVE SUMMARY
CHAPTER-1
INTRODUCTION
Introduction to Study
Introduction to Stock Exchange

SMC at glance
SMC partner and Advantage
Product and Services offered by Company
SWOT analysis of SMC
CHAPTER-2
RESEARCH METHODOLOGY
Objective of the Project
Scope of the Study
CHAPTER-3
PORTFOLIO MANAGEMENT SERVICES
Need of PMS
Objective of PMS
Portfolio Construction and its phases
Types of Asset
Risk versus Return

Investment analysis
Asset allocation
Portfolio selection
Calculation of beta ,alpha and sharpe ratio

Types of Portfolio
CHAPTER-4 DATA ANALYSIS AND INTERPRETATION

CHAPTER-5 CONCLUSION & SUGGESTIONS
Observation and Findings
Limitations of the Project
Suggestions & Recommendations
ANNEXURE
BIBLIOGRAPHY
EDUCATION
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EXECUTIVE SUMMARY
Investing is both Arts and Science. Every Individual has their own specific financial need
and expectation based on their risk taking capabilities, whereas some needs and
expectation are universal. Therefore, we find that the scenario of the Stock Market is
changing day by day hours by hours and minute by minute. The evaluation of financial
planning has been increased through decades, which can be best seen in customers. Now
a day’s investments have become very important part of income saving.
In order to keep the Investor safe from market fluctuation and make them profitable,
Portfolio Management Services (PMS) is fast gaining Investment Option for the High
EDUCATION
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Net worth Individual (HNI). There is growing competition between brokerage firms in
post reform India. For investor it is always difficult to decide which brokerage firm to
choose.
At
CHAPTER-1
INTRODUCTION
EDUCATION
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INTRODUCTION TO STOCK EXCHANGE
The emergence of stock market can be traced back to 1830. In Bombay, business passed
in the shares of banks like the commercial bank, the chartered mercantile bank, the
chartered bank, the oriental bank and the old bank of Bombay and shares of cotton
presses. In Calcutta, Englishman reported the quotations of 4%, 5%, and 6% loans of
East India Company as well as the shares of the bank of Bengal in 1836. This list was a
further broadened in 1839 when the Calcutta newspaper printed the quotations of banks
like union bank and Agra bank. It also quoted the prices of business ventures like the
Bengal bonded warehouse, the Docking Company and the storm tug company.
As a meeting held in the broker’ Hall on the 5th day of February, 1887, it was resolved to
execute a formal deal of association and to constitute the first managing committee and to
appoint the first trustees. Accordingly, the Articles of Association of the Exchange and
the Stock
Exchange was formally established in Bombay on 3rd day of December, 1887. The
Association is now known as “The Stock Exchange”.
mer from fundamental or basic research and technical research. As an investor with SMC
Global Securities, customers get access to these research reports exclusively. Customers
get access to the following reports.
• Intraday calls
• Special Reports
• Mutual Fund weekly
• Market Mornings
• Daily Market Brief
• Sectorial Reports
• Derivatives Reports
• Weekly Technical Analysis
EDUCATION
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AWARDS GRAB BY SMC GLOBAL SECURITIES:
• Best Commodity Broker of the year 2014 (source: ASSOCHAM

Excellence Awards)
• Best Equity Broking house in Derivative Segment in India (Source: BSE
IPF- D&B Equity Broking Awards, 2013 & 2012)
• Fastest Growing Equity Broking House -Large Firm(Source: BSE IPF-
D&B Equity Broking Awards, 2013)
• Emerging Investment Banker of the year (Source: SMEs Excellence Awards
2013 organised by ASSOCHAM)
• Best Equity Broking House in India (Source: BSE IPF - D&B Equity
Broking Awards, 2012 & 2010)
• Best Currency Broker in India (Source: Bloomberg - UTV Financial
Leadership awards, 2012 & 2011)
• Broking House with the Largest Distribution Network in India (Source: BSE
IPF- D&B Equity Broking Awards, 2012, 2011 & 2010)
• Best Research Analyst Award in Equity Fundamentals -Infrastructure
(Source: Zee Business - India's Best Market Analyst Awards, 2013)
• Best Equity Research Analyst in IPO segment and Best Commodity
Research Analyst- Viewer's Choice (Source: Zee Business India's Best
Market Analyst Awards, 2012)
• Award for Continuous Innovation in HR Strategy at Work by Employer
Branding Award 2012-13
• Learning and Talent Technology Excellence Award by Star News HR and
Leadership Awards, 2012.
• India’s Best Wealth Management Company (Source: Business Sphere, 2011)
• Fastest Growing Retail Distribution Network in financial services
(Source: Business Sphere, 2010)
Major Volume Driver award from BSE for 3 consecutive years (2006-07, 2005-06 &
2004-2005)
• Consolidated statements-a unique service offering
• Strong national & international tie-ups
• Strong national & international tie-ups
• Reputed established brand name in the financial service sector.
• Well managed workforce
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WEAKNESSES:
• Lack of Aggressive advertisements and sales promotion programmed.
• The working of the sales force is traditional.
• Miscommunication and ineffective co-ordination at various level of

hierarchy.
• Less penetration in rural area
• Less tie ups with banks so as customer prefer to trade with their banks
only, presently SMC has tie up with PNB only.
OPPORTUNITIES:
• Growing capital market in India & other country
• Political stability in India & other country
• Better governance by SEBI
• Decreasing interest rates in India, so people are motivated to earn more

returns through capital market.
• Emerging rural markets
• Rising earning capacities of people and their preference to invest in shares

or forex, commodities.
THREATS:
• Demand & supply
• Increasing competition in security market
• Lost in faith in share market after big scams in the stock market
• Natural calamities
• Inability of customers to pay brokerage at the right time

EDUCATION
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• High risk involved in the stock market.
• Strong competition from national & international players.
• More & more brokerage companies are coming in to the market due to
low investment in this sector.
• Volatile global market
• Tightening policies framed by RBI and SEBI.
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CHAPTER-2
RESEARCH METHODOLOGY
CHAPTER-3
PORTFOLIO MANAGMENT SERVICES
PORTFOLIO MANGEMNT SERVICES (PMS)
Portfolio (finance) means a collection of investments held by an institution or a private

individual. Holding a portfolio is often 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. There are also portfolios which are aimed at taking high
risks – these are called concentrated portfolios.
Investment management is the professional management of various securities (shares,

bonds etc) and other assets (e.g. real estate), to meet specified investment goals for the
benefit of the investors. Investors may be institutions (insurance companies, pension
funds, corporations etc.) or private investors (both directly via investment contracts and
more commonly via collective investment schemes e.g. mutual funds).
The term asset management is often used to refer to the investment management of
collective investments, whilst the more generic fund management may refer to all forms
of institutional investment as well as investment management for private investors.
Investment managers who specialize in advisory or discretionary management on behalf
of (normally wealthy) private investors may often refer to their services as wealth
management or portfolio management often within the context of so-called "private
banking".
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The provision of 'investment management services' includes elements of financial
analysis, asset selection, stock selection, plan implementation and ongoing monitoring of
investments. Outside of the financial industry, the term "investment management" is
often applied to investments other than financial instruments. Investments are often
meant to include projects, brands, patents and many things other than stocks and bonds.
Even in this case, the term implies that rigorous financial and economic analysis
methods are used.
Need of PMS
As in the current scenario the effectiveness of PMS is required. As the PMS gives
investors periodically review their asset allocation across different assets as the portfolio
can get skewed over a period of time. This can be largely due to appreciation /
depreciation in the value of the investments.
As the financial goals are diverse, the investment choices also need to be different to
meet those needs. No single investment is likely to meet all the needs, so one should keep
some money in bank deposits and / liquid funds to meet any urgent need for cash and
keep the balance in other investment products/ schemes that would maximize the return
and minimize the risk. Investment allocation can also change depending on one’s risk-
return profile.
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Objective of PMS
new securities that promises high returns at low risks.
In such conditions, investor needs to do portfolio revision by buying new securities and
selling the existing securities. As a result of portfolio revision, the mix and proportion of
securities in the portfolio changes.
Portfolio Evaluation
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This phase involves the regular analysis and assessment of portfolio performances in
terms of risk and returns over a period of time. During this phase, the returns are
measured quantitatively along with risk born over a period of time by a portfolio. The
performance of the portfolio is compared with the objective norms. Moreover, this
procedure assists in identifying the weaknesses in the investment processes
Types of assets
The structure of a portfolio will depend ultimately on the investor’s objectives and on the
asset selection decision reached. The portfolio structure takes into account a range of
factors, including the investor’s time horizon, attitude to risk, liquidity requirements, tax
position and availability of investments. The main asset classes are cash, bonds and other
fixed income securities, equities, derivatives, property and overseas assets.
Cash and cash instruments
Cash can be invested over any desired period, to generate interest income, in a range of
highly liquid or easily redeemable instruments, from simple bank deposits, negotiable
certificates of deposits, commercial paper (short term corporate debt) and Treasury bills
(short term government debt) to money market funds, which actively manage cash
resources across a range of domestic and foreign markets. Cash is normally held over the
short term.
Bonds
Bonds are debt instruments on which the issuer (the borrower) agrees to make interest
payments at periodic intervals over the life of the bond – this can be for two to thirty
years or, sometimes, in perpetuity. Interest payments can be fixed or variable, the latter
being linked to prevailing levels of interest rates. Bond markets are international and
have grown rapidly over recent years. The bond markets are highly liquid, with many
issuers
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of similar standing, including governments (sovereigns) and state-guaranteed
organizations. Corporate bonds are bonds that are issued by companies.
Equities
Equity consists of shares in a company representing the capital originally provided by
shareholders. An ordinary shareholder owns a proportional share of the company and an
ordinary share carries the residual risk and rewards after all liabilities and costs have been
paid. Ordinary shares carry the right to receive income in the form of dividends (once
declared out of distributable profits) and any residual claim on the company’s assets once
its liabilities have been paid in full. Preference shares are another type of share capital.
They differ from ordinary shares in that the dividend on a preference share is usually
fixed at some amount and does not change. Also, preference shares usually do not carry
voting rights and, in the event of firm failure, preference shareholders are paid before
ordinary shareholders.
Derivatives
Derivative instruments are financial assets that are derived from existing primary assets
as opposed to being issued by a company or government entity. The two most popular
derivatives are futures and options. The extent to which a fund may incorporate
derivatives products in the fund will be specified in the fund rules and, depending on the
type of fund established for the client and depending on the client, may not be allowable
at all.
A futures contract is an agreement in the form of a standardized contract between two

counterparties to exchange an asset at a fixed price and date in the future. The underlying
asset of the futures contract can be a commodity or a financial security. Each contract
specifies the type and amount of the asset to be exchanged, and where it is to be delivered
(usually one of a few approved locations for that particular asset). Futures contracts can
be set up for the delivery of cocoa, steel, oil or coffee.
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An option contract is an agreement that gives the owner the right, but not obligation, to
buy or sell (depending on the type of option) a certain asset for a specified period of time.
A call option gives the holder the right to buy the asset. A put option gives the holder the
right to sell the asset. European options can be exercised only on the options’ expiry date.
Property
Property investment can be made either directly by buying properties, or indirectly by

buying shares in listed property companies. Only major institutional investors with long-
term time horizons and no liquidity pressures tend to make direct property investments. .
Property sectors of interest would include prime, quality, well-located commercial office
and shop properties, modern industrial warehouses and estates, hotels, farmland and
woodland. Returns are generated from annual rents and any capital gains on realization.
These investments are often highly illiquid.
RISK – RETURN ANALYSIS
Risk on Portfolio:
The expected returns from individual securities carry some degree of risk. Risk on the
portfolio is different from the risk on individual securities. The risk is reflected in the
variability of the returns from zero to infinity. Risk of the individual assets or a portfolio
is measured by the variance of its return. The expected return depends on the probability
of the returns and their weighted contribution to the risk of the portfolio. These are two
measures of risk in this context one is the absolute deviation and other standard deviation
Most investors invest in a portfolio of assets, because as to spread risk by not putting
all eggs in one basket. Hence, what really matters to them is not the risk and return of
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stocks in isolation, but the risk and return of the portfolio as a whole. Risk is mainly
reduced by diversification.
Following are the some of the types of risk:
1) Interest Rate Risk: This arises due to the variability in the interest rates from time
to time. A change in the interest rate establish an inverse relationship in the price of the
security i.e. price of the security tends to move inversely with change in rate of interest,
long term securities show greater variability in the price with respect to interest rate
changes than short term securities.
Interest rate risk vulnerability for securities is as under
TYPES RISK EXTENT
Cash Equivalent Less vulnerable to interest rate risk
Long Term Bonds More vulnerable to interest rate risk
2) Purchasing power risk: it is also known as inflation risk also emanates from the
very fact the inflation affects the purchasing power adversely. Nominal return contains
both the real return component and an inflation premium in a transaction involving risk of
the above type to compensate for inflation over an investment holding period. Inflation
rates vary over time and investors are caught unaware when rate of inflation changes
unexpectedly causing erosion in the value of realized rate of return and expected return.
Purchasing power risk is more in inflationary conditions especially in respect of

bonds and fixed income securities. It is not desirable to invest in such securities during
inflationary periods. Purchasing power risk is however, less in flexible income securities
like equity shares or common stock where rise in dividend income off-sets increase in the
rate of inflation and provide advantage of capital gains.
3) Business Risk: Business risk emanates from sale and purchase of securities
affected by business cycles, technological changes etc. Business cycles affect all types of
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securities i.e. there is cheerful movement in boom due to bullish trend in stock price
whereas bearish trend in depression brings down fall in the prices of all types of
securities during depression due to decline in their market price.
4) Financial Risk: It arises due to changes in the capital structure of the company. It
is also known as leveraged risk and expressed in terms of debt-equity ratio. Excess of risk
vis-à-vis equity in the capital structure indicates that the company is highly geared.
Although a leveraged company’s earnings per share are more but dependence on
borrowings expose it is risk of winding up for its inability to homer its commitments
towards lender or creditors. The risk is known as leveraged or financial risk of which
investor should be aware and portfolio managers should be very careful.
5) Systematic Risk or Market Related Risk: Systematic risks affected from the
entire market are (the problems, raw material availability, tax policy or government
policy, inflation risk, interest rate and financial risk). It is managed by the use of beta of
different company shares.
6) Unsystematic Risks: The unsystematic risks are mismanagement, increasing

inventory, wrong financial policy, defective marketing etc. this is diversifiable or
avoidable because it is possible to eliminate or diversify away this component or risk to a
considerable extent by investing in a large portfolio of securities. The unsystematic risk
stems from inefficiency magnitude of those factors different from one company to
another.
RISK RETURN ANALYSIS:
All investment has some risk. Investment in shares of companies has its own risk or
uncertainty; these risks arise out of variability of yields and uncertainty of appreciation or
depreciation of share price, losses of liquidity etc.
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The risk over time can be represented by the variance of the returns while the return over
time is capital appreciation plus pay-out, divided by the purchase price of the share.
Normally, the higher the risk that the investor takes, the higher is the return. There is
however, a risk less return on capital of about 12% which is the bank, rate charged by the
R.B.I or long term, yielded on government securities at around 13% to 14%. The risk less
return refers to lack of variability of return and non-uncertainty in the payment or capital.
But other risks such as loss of liquidity due to parting with money etc. may however
remain, but are rewarded by the total return on the capital.
Risk-return is subject to variation and the objectives of the portfolio manager are
to reduce that variability and thus reduce the risk by choosing an appropriate portfolio.
Traditional approach advocates that one security holds the better; it is according to the
modern approach divaricating should not be quantity that should be related to the quality
of scripts which leads to quality of portfolio.
Experience has shown that beyond the certain securities by adding more securities
expensive.
RETURNS ON PORTFOLIO:
A Portfolio is a group of securities held together as investment. Investors invest their

funds in a portfolio of securities rather than in a single security because they are risk
averse. By constructing a portfolio, investors attempts to spread risk by not putting all
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their eggs into one basket. Portfolio phase of portfolio management consists of
identifying the range of possible portfolios that can be constituted from a given set of
securities and calculating their return and risk for further analysis.
Individual securities in a portfolio are associated with certain amount of Risk & Returns.
Once a set of securities, that are to be invested in, are identified based on Risk-Return
characteristics, portfolio analysis is to be done as next step as the Risk & Return of the
portfolio is not a simple aggregation of Risk & Returns of individual securities but,
somewhat less or more than that. Portfolio analysis considers the determination of future
Risk & Return in holding various blends of individual securities so that right
combinations giving higher returns at lower risk, called Efficient Portfolios, can be
identified so as to select an optimum one out of these efficient portfolios can be selected
in the next step.
Expected Return of a Portfolio: It is the weighted average of the expected returns

of the individual securities held in the portfolio. These weights are the proportions of
total investable funds in each security.
Rp=∑ xi Ri
I=1
RP = Expected return of portfolio N = No. of Securities in Portfolio
XI= Proportion of Investment in Security i. Ri = Expected Return on security i
Risk Measurement: The statistical tool often used to measure and used as a proxy
for risk is the standard deviation.
σ =√ Σ p (ri - E(r ))2

i=1
N
Variance ( σ ) =Σ p (ri - E ( r ))2
2
Here σ=√ Variance ( σ 2 )

EDUCATION
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P = is the probability of security N = Number of securities in
portfolio
ri = Expected return on security i
INVESTMENT ANALYSIS
MEANING OF INVESTMENT
Investment means employment of funds in a productive manner so as to create additional

income. The word investment means many things to many persons. Investment is
financial assets leads to further production and income. It is lending of funds income and
commitment of money for creation of assets, producing further income.
Investment also means purchasing of securities, financial instruments or claims on

future income. Investment is made out of income and savings credit or borrowings and
out of wealth. It is a reward for waiting for money.
THERE ARE TWO TYPE OF INVESTMENT:
1) Economic Investment: The concept of economic investment means additions to

the capital stock of the society. The capital stock of society is the goods which are used in
the production of other goods. The term investment implies the formation of new and
productive capital in the form of new construction and producer’s durable instrument
such as plant and machinery, investment and human capital are also included in this
concept. Thus, an investment in economic terms means an increase in building,
equipment, and inventory.
2) Financial Investment: This is an allocation of monetary resources to assets that

are expected to yield some gain or return over a given period of time. It is a general or
extended sense of the term. It means an exchange of financial claims such as shares and
bonds, real estate, etc. in their view; investment is a commitment of funds to derive future
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income in the form of interest, dividends, rent premiums, pension benefits and the
appreciation of the value of their principal capital.
MEANING OF SECURITY
A security means a document that gives its owner a specific claim of ownership
of a particular financial asset. Financial market provides facilities for buying and selling
of financial claims and services. Thus, securities are the financial institutions which are
bought and sold in the financial market for investment.
INVESTMENT AVENUES
The alternative investment for the investor are to be considered first so as to satisfy the
above objectives of investor. The following categories of investment are open to
investors as avenues for savings to flow in financial form:
(a) Investment in Bank Deposits – Savings and Fixed Deposits: This is the
most common form of investment for an average Indian and nearly 40% of funds in
financial savings are used in these are least risky but the return in also low.
(b) Investment in P.O Deposits National Savings Certificate and

other Postal Savings Schemes: Many people in villages and some urban areas
are investors in these schemes due to lower risk of loss of money and greater security
of funds. But returns are also lower than in Stocks & Shares.
(c) Insurance Schemes of LIC/GIC etc. and Provident and Pension

Funds: About 20-25% of financial savings of the household sector are put in these
forms and P.F., Pension and other forms of contractual savings.
(d)Investment in Mutual Fund Schemes or UTI Schemes as and when

announced: These are less risky than direct investment in stocks and shares as these
enjoy the expert management by the Portfolio Manager or Professional experts. They also
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have the advantage of diversified Portfolio involving the reduction of risk and economies
of scale reducing the cost of investment.
(e)Investment in New Issues Market: A new entrant in the Stock Market should
preferably invest in New Issues of existing and well reputed companies either in equity or
debentures. Incidentally the instruments in which investment can be made in the new
issues market are
1. Equity issues through prospectus or rights announced by existing shareholders.
2. Preference shares with a fixed dividend either convertible into equity or not.
3. Debentures of various categories – convertible, fully convertible, partly convertible

and non- convertible debentures.
4. P.S.U. Bonds – taxable or free-taxed with interest rates
(f) Investment in gold, silver, precious metals and antiques.
(g) Investment in real estates.
(h) Investment in gilt-edged securities and securities of Government and Semi-

Government organizations (e.g. Relief bonds, bonds of port trusts, treasury bills, etc.).
The maturity period is varying generally upto10 to20 years.
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THE FOLLOWING FIGURE INDICATES ALTERNATIVE AVENUES OF
INVESTMENT
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NEW ISSUES MARKET – INVESTMENT DECISION
Investors would prefer debentures if they are interested in a fixed income. They may
go for convertible debentures, if they want to have both fixed income and likely capital
appreciation in future. If they are risk taking and aim only at capital gains, then they may
invest in equity shares. Of the new issues those of well-established existing companies
are least risky while those of new companies floated by little known new entrepreneurs
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are most risky. In choosing the new issues for investment decision, the investor has to
read a copy of the prospectus and note the following:
1. Who are the promoters and their past record?
2.
Products manufactured and demand for those products at home or abroad – thecompetitor
s and the share of each in the market.
3. Availability of inputs, raw – materials and accessories and the dependence on imports.
4. Project location and its advantages.
5. Prospects through projected earnings,

net profits and dividend paying capacity, waiting period involved, etc.
If the new issues belong to a company promoted by well – known Business

Groups like Tata’s, Birla’s etc. they are less risky. The company should belong to an
industry which is expanding and has good potential like drugs, chemicals; Telecom etc.
the terms of offer should be attractive like conversion or immediate prospects of dividend
etc.
STOCK MARKET – INVESTMENT DECISION
As far as the stock market is concerned, investment in shares is most risky as the
likelihood of fall or rise in prices is uncertain. But the returns may also be high
commensurate with risk. A host of imponderable factors operate in the stock market and
a genuine investor has to do the following things:
1. Study the Balance Sheet of the company and analyse the prospects of sales and profits.
2. Analyses the market price in terms of book value and profit earning capacity (or
P/Ratio) and use them to know whether the share is overvalued or undervalued.
3. Study the expansion plans or tax savings plans and analyses the company’s financial
strength, bonus and dividend paying strength, through the mechanism of financial ratios.
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4. Study whether the management is professional and good, whether other accounting
practices are dependable and consistent. The company becomes attractive to buy if the
financial ratios support the view that the fundamentals are strong and the shares are worth
buying.
5. Lastly, if the price of the share is undervalued on the basis of the projected earnings for
the coming half year or one year and its P/E Ratio is below the industry average, then it is
worth buying. The same is worth selling if in his judgment it is overhauled. For assessing
the under valuation and over valuation, the analyst and his analytical power count for this
purpose.
GUIDELINES FOR INVESTORS IN THE STOCK MARKET
1. Never buy on rumors or market gossip.
2. Buy only on the basis of fundamental analysis of the companies based on balance sheet
data analysis.
3. Buy a diversified list of companies and not put all the money in one or two companies.
All investments in the stock market are risky. The risk can be reduced by proper
diversification of the portfolio into 10 or 15 companies.
4. Study the sales, gross profit, net profit in relation to equity capital employed and
attempt a forecast for the coming half year or one year.
5. A declaration of bonus or low P/E ratio, along with strong fundamentals shows that the
company should be a good buy.
6. The investor should also watch for low priced shares which are about to turn around
for more profitability in future.
7. Investors should buy on declines and follow the principle of contrariness. This means
that if everyone is buying scrip, avoid that scrip but if scrip is deserted and your study has
shown that is has potential; for expanding earnings and profitability, then such scrip’s
should be purchased by the investor.
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8. Avoid both fear and greed on the stock market. If investor is not afraid of the market,
he generally studies the market and buys at lows and sells at highs.
9. The investor should know how to analyses the security prices of companies and pick
up the undervalued shares. The valuation may be based on the net profits discounted to
the present by a proper discount rate or by the book value of share, estimated on the basis
of net worth of the company.
10. Timing of purchase and sale is also very important. If technical analysis and the use
of charts is not familiar to the investor he should follow the principle “buy low and sell
high”. He should see whether there is a bull market or bear market in a share by a study
of the share price over a period of 15 to 30 days. In a bull phase one can sell at one of the
peaks and in a bear phase one can buy at one of troughs. If the investor is greedy to wait
on to see the maximum peak, and then he may be disappointed if the price shows adown
trend. Similarly, it is difficult to foresee the lowest price for scrip for the buy. The
investor has to use his discretion.
THE INVESTORS SHOULD NOT DO THE FOLLOWING THINGS:
1) He should not put all his eggs in one basket which means that he should not put all his
funds in one or two companies.
2) Do not go by heresy or rumors to buy or sell a scrip as that might be a dupe.
3) Do not speculate involving the buying and selling in the same day or during the same
settlement period. A long – term investor gains more than speculator.
4) Avoid taking undue risks or beyond the capacity of your net worth. That means if
capital base is Rs. 2 lakhs, put a stop loss order at Rs. 20,000/- (or 1/8 th or 1/10th of the
capital base).
5) Do not get panicky if the scrip’s in which you have invested go down in price. Once
the investment is made after a study of fundamentals, a temporary fall in its price should
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not cause worry. What the investor needs is patience, which is possible if he is a long –
term investor.
6) Do not be too greedy or ambitious. Put limits to your operations and buy and sell
orders in a price range and your minimum profit limit is 20%.
INVESTMENT STRATEGY
Portfolio management can be practiced by following either an active or passive strategy.

Active strategy is based on the assumption that it is possible to beat the market. This is
done by selecting assets that are viewed as under-priced or by changing the asset mix or
proportion of fixed income securities and shares. Active strategy is carried out as follows:
1) Aggressive Security Management: Aggressive purchasing and selling of

securities to achieve high yields from dividend interest and capital gains.
2) Speculation and Short Term Trading: The objective is to gain capital profits.
The risk is high and the composition of portfolio is flexible. Success of active strategy
depends on correct decisions as regard the timing of movement in the market as a whole,
weight age of various securities in the portfolio and individual share selection.
The passive strategy does not aim at outperforming the market. Unlike the active
strategy. On the other hand the stocks could be randomly selected on the assumption of a
perfectly efficient market. The objective is to include in the portfolio a large number of
securities so as to reduce risks specific to individual securities. The characteristics of
positive strategy are:
• Long Term Investment Horizon
• Little Portfolio Revisions
Thus it is basically a buy and hold strategy. The strategy can be implemented by
investing in securities so as to duplicate the portfolio of a market index which is called
indexing.
Page 29

INVESTMENT AND SPECULATION
“Speculation is an activity, quite contrary to its literal meaning, in which a person

assumes high risks, often without regard for the safety of his invested principal, to
achieve large capital gains.” The time span in which the gain is sought to be made is
usually very short.
The investor sacrifices some money today in anticipation of a financial return in

future. He indulges in a bit of speculation. There is an element of speculation involved in
all investment decisions. However it does not mean that all investments are speculative
by nature. Genuine investments are carefully thought out decisions. On the other hand,
speculative investments are not carefully thought out decisions. They are based on tips
and rumors.
An investment can be distinguished from speculation in three ways – Risk,

capital gain and time period. Investment involves limited risk while speculation is
considered as an investment of funds with high risk. The purchase of a security for
earning a stable return over a period of time is an investment whereas the primary motive
is to earn high profits through price changes is termed as speculation. Thus, speculation
involves buying a security at low price and selling at a high price to make a capital gain.
The truth is that any investment is a speculation if the investor uses his judgement
and forecast the probable course of events in order to reap the returns on his investment.
ELEMENTS OF INVESTMENTS
(a) Return: Investors buy or sell financial instruments in order to earn return on
them. There turn on investment is the reward to the investors. The return includes
both current income and capital gains or losses, which arises by the increase or
decrease of the security price.
Page 30

(b) Risk: Risk is the chance of loss due to variability of returns on an investment. In
case of every investment, there is a chance of loss. It may be loss of interest,
dividend or principal amount of investment. However, risk and return are
inseparable. Return is a precise statistical term and it is measurable. But the risk is
not precise statistical term. However, the risk can be quantified: The investment
process should be considered in terms of both risk and return.
(c) Time: Time is an important factor in investment. It offers several different

courses of action. Time period depends on the attitude of the investor who follows
a ‘buy and hold’ policy. As time moves on, analysts believe that conditions may
change and investor’s may revaluate expected return and risk for each investment.
FINANCIAL ANALYSIS:
An analysis of financial for the past few years would help the investment manager in
understanding the financial solvency and liquidity, the efficiency with which the funds
are used, the profitability, the operating efficiency and operating leverages of the
company. For this purpose certain fundamental ratios have to be calculated.
• Quality of Management: This is an intangible factor. Yet it has a very

important bearing on the value of the shares. Every investment manager knows
that the shares of certain business houses command a higher premium than those
of similar companies managed by other business houses. This is because of the
quality of management, the confidence that the investors have in a particular
business house, its policy vis-à-vis its relationship with the investors, dividend
and financial performance record of other companies in the same group, etc. This
is perhaps the reason that an investment manager always gives a close look to the
management of the company whose shares he is to invest. Quality of management
has to be seen with reference to the experience, skill and integrity of the persons
at the helm of the affairs of the company. The policy of the management
regarding relationship with the shareholders is an important factor since
certain business
Page 31

houses believe in generous dividend and bonus distributions while others are
rather conservative.
• Location and labour management relations: The locations of the

company’s manufacturing facilities determine its economic viability which
depends on the availability of crucial inputs like power, skilled labour and raw
materials etc. Nearness to market is also a factor to be considered. In the past few
years, the investment manager has begun looking into the state of labour
management relations in the company under consideration and the area where it is
located.
ASSEST ALLOCATION
INTRODUCTION
The portfolio manager has to invest in these securities that form the optimal portfolio.
Once a portfolio is selected the next step is the selection of the specific assets to be
included in the portfolio. Assets in this respect means group of security or type of
investment. While selecting the assets the portfolio manager has to make asset allocation.
It is the process of dividing the funds among different asset class portfolios.
ASSET ALLOCATION
The different asset class definitions are widely debated, but four common
divisions are stocks, bonds, real-estate and commodities. The exercise of allocating funds
among these assets (and among individual securities within each asset class) is what
investment management firms are paid for.
Page 32

Asset classes exhibit different market dynamics, and different interaction effects;
thus, the allocation of monies among asset classes will have a significant effect on the
performance of the fund. Some research suggests that allocation among asset classes has
more predictive power than the choice of individual holdings in determining portfolio
return. Arguably, the skill of a successful investment manager resides in constructing the
asset allocation, and separately the individual holdings, so as to outperform certain
benchmarks (e.g., the peer group of competing funds, bond and stock indices).In order to
achieve long term success, individual investors should concentrate on the allocation of
their money among stocks, bonds and cash. It means how much to invest in stocks? How
much to invest in bonds? And how much to keep in cash reserves? Thus, the asset
allocation decision is the most important determinant of investment performance. The
basic long term objective of any investor should be to maximize his real overall return on
initial investment after investment. To achieve this objective, the investor should look
where the best bargains lie. Asset allocation means different things to different people.
12. Which Portfolio Type you preferred?
Page 33

50%
45%
40%
35%
30%
25%
Axis
20% %Age of Respodents
15%
10%
5%
0%
Equity Debt Balanced
Axis Title
Interpretation
The above analysis shows, in which portfolio the investor like to deal more in PMS.
As 45% investor likes to go for Equity Portfolio and 28% with Balanced Portfolio,
whereas around 27% investor like to, go for Debt Portfolio.
13. How was your experience about Portfolio Management services

(PMS) of SMC Limited?
Page 34

%Age of
No Profit No Loss Situation
Faced Loss
Earned
0% 10% 20% 30% 40% 50% 60%

%Age of Respondents
Interpretation
In the above analysis it is clear that the Investor have the good and the bad experience
both with the SMC PMS services.
In this current scenario 52% of the Investor earned, whereas around 18% have to suffer
losses in the market. Similarly 30% of the Respondents are there in Breakeven Point
(BEP), where no loss and no profit.
14. Does SMC Limited keep it PMS process Transparent?
Page 35

%Age of
Yes No
37.00%
63.00%
Interpretation
The above analysis is talking about the SMC Transparency of their PMS services. In
hundred respondents 63% said that they get all the information about their scrip buying
and selling information day by day, where as 37% of respondents are not satisfied with
the PMS information and Transparency because they don’t get any type of extra services
in PMS as they were saying.
15. Do you recommend SMC PMS to others?
Page 36

%Age of Respodents
14.00%
Yes
No
86.00%
Interpretation
The above analysis shows the Investor perception toward the SMC PMS as on the basis
of their good and bad experience with SMC limited. Among hundred respondents 86%
respondents were agree to recommend the PMS of SMC to their peers, relatives etc.
CHAPTER-5
EDUCATION
Page 37

CONCULSION
AND
SUGGESTIONS
EDUCATION
Page 38

OBSERVATION AND FINDING
➢ About 85% Respondents knows about the Investment Option, because remaining
15% take his /her residential property as Investment, but in actual it not an
investment philosophy carries that all the Investment does not create any profit for
the owner.
➢ More than 75% Investors are investing their money for Liquidity, Return and Tax
benefits.
➢ At the time of Investment the Investors basically considered the both Risk and
Return in more %age around 65%.
➢ As among all Investment Option for Investor the most important area to get more
return is share around 22%after that Mutual Fund and other comes into existence.
➢ More than 76% of Investors feels that PMS is less risky than investing money in
Mutual Funds.
➢ As expected return from the Market more than 48% respondents expect the rise in
Income more than 15%, 32% respondents are expecting between 15-25% return.
➢ As the experience from the Market more than 34% Investor had lose their money
during the concerned year, whereas 20% respondents have got satisfied return.
Page 39

➢ About 45% respondents do the Trade in the Market with Derivatives Tools
Speculation compare to 24% through Hedging .And the rest 31% trade their
money in Investments.
➢ Around 57% residents manage their Portfolio through the different company
whereas 43%Investor manage their portfolio themselves.
➢ The most important reasons for doing trade with SMC limited is SMC Research
Department than its Brokerage rate Structure.
➢ Out of hundred respondents 56% respondents are using SMC PM services.
➢ Investors preferred more than 45% equity Portfolio, 28%Balanced Portfolio and
about 27% Debt Portfolio with SMC PMS.
➢ About 52% Respondents earned through SMC PMS product, whereas 18%
investor faced loses also.
➢ More than 63% Investor are happy with the Transparency system of SMC limited.
Page 40

➢ As based on the good and bad experience with SMC limited around 86% are
ready to recommended the PMS of SMC to their peers, relatives etc.
LIMITATION OF THE PROJECT
➢ As only karol bagh is dealt in the survey so it does not represent the view of the
total Indian market.
➢ The sample size was restricted with hundred respondents.
➢ There was lack of time on the part of respondents.
➢ The survey was carried through questionnaire and the questions were based on
perception.
➢ There may be biasness in information by market participant.
➢ Complete data was not available due to company privacy and secrecy.
➢ Some people were not willing to disclose the investment profile.
CONCLUSION AND SUGGESTIONS
On the basis of the study it is found that SMC Ltd is better services provider than the
other stockbrokers because of their timely research and personalized advice on what
stocks to buy and sell. SMC Ltd. provides the facility of relationship manager for
encouragement and protects the interest of the investors. It also provides the information
through the internet and mobile alerts that what IPO’s are coming in the market and it
Page 41

also provides its research on the future prospect of the IPO. We can conclude the
following with above analysis.
➢ SMC Ltd has better Portfolio Management services than Other Companies
➢ It keeps its process more transparent.
➢ It gives more returns to its investors.
➢ It charges are less than other portfolio Management Services
➢ It provides daily updates about the stocks information.
➢ Investors are looking for those investment options where they get maximum
returns with less returns
➢ Market is becoming complex & it means that the individual investor will not have
the time to play stock game on his own.
➢ People are not so much aware about the Investment option available in the
Market.
Suggestions
➢ The company should also organize seminars and similar activities to enhance the
knowledge of prospective and existing customers, so that they feel more
comfortable while investing in the stock market.
➢ Investors must feel safe about their money invested.
Page 42

➢ Investor’s accounts must be more transparent as compared to other companies.
➢ SMC limited must try to promote more its Portfolio Management Services
through Advertisements.
➢ SMC needs to improve more it’s Customer Services.
ANNEXURE
QUESTIONNAIRE
NAME………………………………….
AGE…………………………………………
OCCUPATION……………………………... PHONE
NO..................................
1. Do you know about the Investments Option available?
A) YES B) NO
2. What is the basic purpose of your Investments?
A) Liquidity B) Return C) Tax Benefits D) Risk Covering
E) Capital Appreciation F) Others

EDUCATION
Page 43

3. What is the most important factor you consider at the time of Investment?
A) Risk B) Return C) Both
4. From which option you will get the best returns?
A) Mutual Funds B) Shares C) Commodities Market D) Bonds
E) Fixed Deposits F) Property G) Others
5. “Investing in PMS is far safer than Investing in Mutual Fund”. Do you agree?
A) Yes B) No
6. How much you carry the expectation in Rise of your Income from Investments?
A) Upto 15% B) 15-25% C) 25-35% D) More than 35%
7. If you invested in Share Market, what has been your experience?
A) Satisfactory Return B) Burned Finger C) Unsatisfactory Results

D) No
8. How do you trade in Share Market?
A) Hedging B) Speculation C) Investment
9. How do you manage your Portfolio?
A) Self B) Depends on the company for portfolio
10. If, you trade with SMC limited then why?
A) Research B) Brokerage C) Services D) Investments Tips
11. Are you using Portfolio Management services (PMS) of SMC?
A) Yes B) No
Page 44

12. Which Portfolio Type you preferred?
A) Equity B) Debt C) Balanced
13. How was your experience about Portfolio Management services (PMS) of SMC
Limited?
A) Earned B) Faced Loss C) No profit No loss
14. Does SMC Limited keep it PMS process Transparent?
A) Yes B) No
15. Do you recommend SMC PMS to others?
A) Yes B) No
BIBLIOGRAPHY
REFERENCES
✓ www.smcindiaonline.com
✓ www.sebi.gov.in
✓ www.moneycontrol.com
✓ www.karvy.com
✓ www.valueresarchonline.com
✓ www.yahoofinance.com
✓ www.theeconomist.com
✓ www.nseindia.com
Page 45

✓ www.bseindia.com
✓ www.screener.in
✓ www.economictimes.com
Book Referred
➢ Security Analysis and Portfolio Management - Donald E. Fischer, Ronald J.

Jordan
➢ Investment and Portfolio Management (By Prasanna Chandra)
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Project on Portfolio Management 456

M.B.A Finance (DAV Institute of Management)

Studocu is not sponsored or endorsed by any college or university

“PORTFOLIO MANAGEMENT SERVICES”

SUBMITTED TO: SUBMITTED BY:

BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE EDUCATION

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This is to certify that I have completed the Project titled “PORTFOLIO

Name:- PRIYA ANEJA

Class & Section:-MBA, Semester-III

BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE

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It gives me immense pleasure to present this project report on Portfolio Management

BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE

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Introduction to Stock Exchange

Risk versus Return

Calculation of beta ,alpha and sharpe ratio

CHAPTER-4 DATA ANALYSIS AND INTERPRETATION

BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE

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BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE

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BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE

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• Mutual Fund weekly

• Daily Market Brief

• Weekly Technical Analysis

BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE

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• Best Commodity Broker of the year 2014 (source: ASSOCHAM

• Consolidated statements-a unique service offering

• Strong national & international tie-ups

• Strong national & international tie-ups

• Reputed established brand name in the financial service sector.

• Well managed workforce

BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE EDUCATION

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• The working of the sales force is traditional.

• Miscommunication and ineffective co-ordination at various level of

• Less penetration in rural area

• Political stability in India & other country

• Better governance by SEBI

• Decreasing interest rates in India, so people are motivated to earn more

• Emerging rural markets

• Rising earning capacities of people and their preference to invest in shares

• Increasing competition in security market

• Inability of customers to pay brokerage at the right time

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• Strong competition from national & international players.

• Volatile global market

• Tightening policies framed by RBI and SEBI.

BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE EDUCATION

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PORTFOLIO MANAGMENT SERVICES

PORTFOLIO MANGEMNT SERVICES (PMS)

Portfolio (finance) means a collection of investments held by an institution or a private

Investment management is the professional management of various securities (shares,

BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE EDUCATION

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BHARATI VIDYAPEETH DEEMED UNIVERSITY SCHOOL OF DISTANCE EDUCATION

Downloaded by Mafooz Ali (naqvidanish9@gmail.com)