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Project Report On Reliance PMS


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  • 3. DECLARATIONI Saurabh Pandey Roll No.126 ,hereby declare that the project titled, which hasbeen submitted to the JIMS Kalkaji, is an original work of undersigned and has notbeen reproduced from any other sources.Saurabh Pandey 3 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 8. ACKNOWLEDGEMENTI,Saurabh Pandey is highly grateful to Reliance Capital Asset Management Ltd.,NewDelhi for giving me the opportunity of carrying out a comprehensive study on thetopic, “Analysis of buying behaviour & buying criteria of PMS investorsthrough factor analysis” as part of my eight weeks summer internship.I extend my thanks to the entire team of Reliance capital asset Management Ltd. fortheir valuable support throughout the project. I am highly thankful to Mrs PallaviChauhan,Regional Manager-PMS, under her guidance ;i was able to enhance myknowledge of pms industry and the applied marketing techniques in the financialservice sector and also for extending the full support of utilizing research databaseand material.I pay thank to Mr Amit Kapoor and Ms Ritika Arora for their valuable support andguidance for providing me an expedient learning plateform where i have had my firstencounter with one of the best corporate practices and analytics.I would like to thank Dr. Neelam tendon ,Associate Prof. Of Economics,JagannathInternational Management School(JIMS), for her guidance and valuable insightthroughtout the project.The internship experience for this summer project also demand to acknowledge myfamily and friends for their support and cooperation. 8 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 9. EXECUTIVE SUMMARYReliance PMS wanted a thorough analysis of investor’s needs and preferences withrespect to PMS investment. Nowadays, to survive in such intensely competitiveenvironment, knowledge of customer’s need and requirement has become aprerequisite of success most of the companies realising this are doing their best tofind out how a customer perceives their product. In the Indian PMS industry, Thisarea has been overlooked to a great extent with with over 38 AMCs bombarding theIndian investors with a number of products. As soon as an investor plans to make aPMS investment, That is when his nightmare starts. He is soon caught in the frenzyof complicated jargon of the PMS industry, and he find himself dealing withcomplicated structured products. For a normal investor, it becomes really arduoustask to make a PMS investment and so most of the time he approaches a broker oran agent to get a recommendation. However, even with a recommendation he endsup investing in a non-suitable PMS scheme. Hence, it is very important forcompanies to know their customers and develop products that are suited to theirrequirement rather than selling random scheme to them.On concluding the analysis, 3 major factors were extracted that were primarily theinvestor’s expectation level in a PMS product. The factors were improved product,investor assurance, elementary product and influential promotion. All the 18 variablewere grouped under these factors depending upon the respondent data collected.In a nutshell, at the end of the study, I am providing Reliance PMS with an insight into customer’s need and requirements through a statistically proven model and somegeneral excerpts that might come in handy while servicing the customers anddealing with them. 9 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 10. INTRODUCTION TO THE TOPICPortfolio Management Services“Customer Relationship” have slowly but steadily gained in importance from the pointof view of a firm,so much so that they can now be thought as being one of the“valuable asset”.Especially when it comes to B2B scenario wherein the number ofclients is very much limited and more or less static.While there has been a lot of academic, research-based as well as industry orienteddeliberations on the importance and need of maintaining good customer relationshipin order to survive and thrive in market,not much emphasize has been laid on thefinancial viability of undertaking such an activity. While the customer relationshipstrategy go on to help a firm in building portfolios of customers, which can be definedas mutually exclusive group of customers that share similar behaviours andpreferences when interacting with a business, and retaining the customer andmarket segment for the long run in order to optimize the profit of the firm, the focusshould be on portfolios theories which, in turn should dictate relationshipsmanagement because this can enable the firm to invest its resources in a way whichis efficient and effective. “Marketing has evolved overtime from an emphasis onmarket share and size to an emphasis on developing relationship with customers asthe key to profitability.” Customer portfolio analysis enables managers andresearchers to capture a customer’s value to the firm in isolation.As per SEBI guidelines, only those entities who are registered with SEBI forproviding PMS services can offer PMS to clients. There is no separate certificationrequired for selling any PMS product, so there is a case where miss-selling canhappen. As per SEBI guidelines, the minimum investment required to open a PMSaccount is Rs. 5 lacs for a product.However, different providers have different minimum balancerequirement of Rs. 25 lacs for a product. In India PMS are also provided by equitybroking firms & wealth management services. 10 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 11. Types of PMS:-1.Discretionary PMS:- Under these services, the choice as well as the timings ofthe investment decisions rest solely with the Portfolio Managers.2. Non Discretionary PMS :- Under these services, the portfolio manager onlysuggests the investment ideas. The choice as well as the timings of the investmentdecisions rest solely with the Investor.However the execution of trade is done by the portfolio manager.3. Advisory PMS :- Under these services, the portfolio manager only suggests theinvestment ideas. The choice as well as the execution of the investment decisionsrest solely with the Investor.Note: In India majority of PMS providers offer Discretionary Services.The client may give negative list of stocks in a discretionary PMS at the time ofopening his account and the fund manager would ensure that those stocks are notbought in hisher portfolio. Majority of PMS providers in India offer discretionaryservices.ROLE OF PORTFOLIO MANAGEMENT:-In the beginning of the nineties India embarked on a programme of economicliberalization and globalization. This reform process has made the Indian capitalmarkets active. The Indian stock markets are steadily moving towards capitalefficiency , with rapid computerization , increasing market transparency, betterinfrastructure, better customer service, close integration and higher volumes. Largeinstitutional investors with their diversified portfolios dominate the markets. A largenumber of PMS have been set up in the country since 1987.The Securities And exchange board of India, the stock market regulatory body inIndia, is supervising the whole process with a view to making portfolio managementa responsible professional service to be rendered by expert in the field. 11 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 12. SCOPE OF PORTFOLIO MANAGEMENT:-Portfolio management is ongoing process. It is dynamic activity, following are thebasic operations of a portfolio management.1. Monitoring the the performance of portfolio by incorporating the latest marketconditions.2. Identification of investor’s objective, constraints and preferences.3. Making revision in the portfolio.4. Implementation of strategies in tune with the investmentObjectives.ELEMENTS OF PORTFOLIO MANAGEMENT:-Portfolio management is ongoing process involving the following basic task.1. Identification of the investor’s objectives, constraints and preferences, which willhelp formulate the investment policy.2. Strategies are to be developed and implemented in tune with the investementspolicy formulated.This will help the selection of asset classes and securities in eachclass depending upon their risk return attributes.3. Review and monitoring of the performance of the portfolio by the continuousoverview of the market condition, companies performance and investorcircumstances.4. Finally, the evaluation of the portfolio for the result to compare with target andneeded adjustments have to be made in the portfolio to the emerging condition andto make up for any shortfalls in achievements vis-a` Vis targets.The collection of data on the investor’s preferences, objectives, etc., is thefoundation of portfolio management. This gives an idea of channels of investment interm of asset classes to be selected and securities to be chosen based upon theliquidity requirements, time horizon , taxes, asset preferences of investors, etc.These are the building blocks for the construction of the portfolio according to theseobjective and constraints, the investment policy can be formulated. The policy will laydown the weights to be given to different asset classes of investment such as equityshares, preference shares, debentures, company deposits, etc., and the proportion 12 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 13. of fund to be invested in each class and selection of assets and securities in eachclass are made on the basis. The next stage to is to formulate the investmentstrategy for a time horizon for income and capital appreciation and for a level of risktolerance.The investment strategies developed by the portfolio managers have to be correlatedwith their expectation of the capital market and the individual sectors of industry.Then a particular combination of asset is chosen on the basis of investment strategyand managers expectation of the market.MYTHS ABOUT PMS:-There are two most common myths found about Portfolio Management Services(PMS) which we found among most of the Investors, They are as follows.Myth No. 1:“PMS and Mutual Fund are Similar as the investment option”As in the Finance Basket both the PMS and Mutual Fund are used for minimizingrisk and maximize the profit of the Investors.The objectives are similar as in both the product but they are different from eachother in certain aspects. They are as follows.Management Side:-In PMS, its ongoing personalized access to professional money managementservices. Whereas, in Mutual fund gives personalize access to money.Customization:- In PMS, Portfolio can be tailored to address each investorsspecific needs. Whereas in Mutual Fund Portfolio structured to meet the fundsstated investment objectives.Ownership:-In PMS, Investors directly own the individual securities in their portfolio, allowing fortax management flexibility, whereas in Mutual Fund Shareholders own shares of thefund and cannot influence buy and sell decisions or control their exposure toincurring tax liabilities. 13 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 14. Liquidity:-In PMS, managers may hold cash; they are not required to hold cash to meetredemptions, whereas, Mutual funds generally hold some cash to meet redemptionsFlexibility:-PMS is generally more flexible than mutual funds. The Portfolio Manager may moveto 100% cash if it required. The Portfolio Manager may take his own time in buildingup the portfolio.The Portfolio Manager can also manage a portfolio with disproportionate allocation toselect compelling opportunities whereas, in Mutual Fund comparatively less flexible.OBJECTIVE OF PORTFOLIO MANAGEMENT SERVICES:-The objective of portfolio management is to maximize the return and minimize therisk. These objective are characterized in to  Basic Objectives.  Subsidiary Objective.Basic Objectives:-The basic objectives of a PMS are further divided into two kinds viz., (a) MaximizeYield (b) Minimize riskThe aim of the portfolio management is to enhance the returns for the level of risk tothe portfolio owner. A desired return for a given risk level is being started. The levelof risk of the portfolio depends upon many factors. The investor, who invests thesaving in the financial asset, requires regular return and capital appreciation.Subsidiary Objective:-The subsidiary objectives of a portfolio management are expecting the reasonableincome, appreciation of the capital at the time of disposal, safety of investments andliquidity etc.The objective of investors is to get a reasonable return on his investments withoutany risk. Any investor desires regularity of income at a consistent rate however, itmay not always be possible to get such income. Every investor has to dispose hisholding after a stipulated period of time for a capital appreciation.Capital appreciation of a financial asset highly influenced by a strong brand image,market leadership, guaranteed sales, financial strength and large pool of reverses,retained earnings and accumulated profit of the company. The Idea of growth stocks 14 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 15. is the right issue in the right industry, bought at right time. A portfolio managementdesires the safety of investment.The portfolio objective is to take the precautionary measures about the safety of theprinciple even by diversification process. The safety of the investments calls carefulreview of economic and industry trend liquidity of the investment is most important,which may not be neglected by any investors/ portfolio managers. An investment isto be liquid, it must have “termination & marketable” facility at any time.SEBI Guidelines to Portfolio Managers:-For registration as a portfolio manager, an applicant is required to pay a non-refundable application fee of Rs.1,00,000/- by way of demand draft drawnin favour of ‘Securities and Exchange Board of India’, payable at Mumbai.The portfolio manager is required to have a minimum networth of Rs. 2 crore.Every portfolio manager is required to pay Rs. 10 lakhs as registration fees at thetime of grant of certificate of registration by SEBI.The certificate of registration remains valid for three years. The portfolio managerhas to apply for renewal of its registration certificate to SEBI, 3 months before theexpiry of the validity of the certificate, if it wishes to continue as a registered portfoliomanager.The portfolio manager is required to pay Rs. 5 lakh as renewal fees to SEBI.The portfolio manager, before taking up an assignment of management of funds orportfolio of securities on behalf of the client, enters into an agreement in writing withthe client, clearly defining the inter se relationship and setting out their mutual rights,liabilities and obligations relating to the management of funds or portfolio ofsecurities, containing the details as specified in Schedule IV of the SEBI (PortfolioManagers) Regulations, 1993.The portfolio manager is required to accept minimum Rs. 5 lakhs or securities havinga minimum worth of Rs. 5 lakhs from the client while opening the account for thepurpose of rendering portfolio management service to the client.Portfolio manager can only invest and not borrow on behalf of his clients.The portfolio manager shall furnish periodically a report to the client, as agreed in thecontract, but not exceeding a period of six months and as and when required by theclient and such report shall contain the following details, namely:- 15 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 16. (a) The composition and the value of the portfolio, description of security, number ofsecurities, value of each security held in the portfolio, cash balance and aggregatevalue of the portfolio as on the date of report;(b) Transactions undertaken during the period of report including date of transactionand details of purchases and sales;(c) Beneficial interest received during that period in respect of interest, dividend,bonus shares, rights shares and debentures;(d) expenses incurred in managing the portfolio of the client;(e) details of risk foreseen by the portfolio manager and the risk relating to thesecurities recommended by the portfolio manager for investment or disinvestment.This report may also be available on the website with restricted access to eachclient. The portfolio manager shall, in terms of the agreement with the client, alsofurnish to the client documents and information relating only to the management of aportfolio. The client has right to obtain details of his portfolio from the portfoliomanagers.The portfolio manager provides to the client the Disclosure Document at least twodays prior to entering into an agreement with the client.The Disclosure Document contains the quantum and manner of payment of feespayable by the client for each activity, portfolio risks, complete disclosures in respectof transactions with related parties, the performance of the portfolio manager and theaudited financial statements of the portfolio manager for the immediately precedingthree years.Please note that the disclosure document is neither approved nor disapproved bySEBI nor does SEBI certify the accuracy or adequacy of the contents of theDocuments.Types of risk in Portfolio Management:-Each and every investor has to face risk while investing. Risk is classified into: 16 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 17.  Systematic Risk or Market Related Risk.  Unsystematic Risk or company Related Risk.SYSTEMATIC RISK:-Systematic risk refers to that portion of variation in return caused by factors thataffect the price of all securities. It can’t be avoided. It related to economic trend witheffect to the whole market.This is further divided in to the followingMarket risk: A variation in price sparked of due to real, social, political andeconomic event is refer to as market risk.Interest Rate Risk: Uncertainty of future market values and the size of futureincomes, caused by fluctuation in the general level of interest refer to as interest raterisk. Here the price of securities tend to move inversely with the change in rate ofinterestInflation Risk: Uncertainity in purchasing power is set to be inflation risk.UNSYSTEMATIC RISK:Unsystematic risk refers to that portion of risk that is caused due to factors related toa firm or industry. This is further divided in to:Business Risk: Business risk arises due to the changes in operating conditioncaused by conditions that thrust upon the firm which are beyond its control. Such asbusiness cycles, government controls etc.Internal Risk: Internal risk is associated with the efficiency which a firm conducted itsoperations within the broader environment imposed upon it.Financial Risk: Financial risk is associated with the capital structure of a firm. A firmwith no debt financing has no financial risk, Extends depend upon the leverage of thefirm’s capital structure.WORKING OF A PORTFOLIO MANAGEMENT SERVICES:-Each PMS account is unique and the valuation and portfolio of each account maydiffer from one another . there is no NAV for PMS scheme ; however the customerwill get the valuation of his portfolio on a daily basis from the PMS provider. Each ne 17 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 18. PMS account is unique from one another. Every PMS scheme has a model portfolioand all the investments for a particular investor are done in the portfolio managementservices on the basis of model portfolio of the scheme .However the portfolio maydiffer from investor to investor .this is because of:Entry of investors at different time.Difference in amount of investment by the investors.Redempt ions/additional purchase done by investors.Market scenario – E.g. if the model portfolio has investment in Infosys ,and thecurrent view of the fund manager on Infosys is “HOLD” (and not “BUY”), a newinvestor may not have Infosys in his portfolio.Under PMS scheme the fund manager interaction also take place. The frequencydepend on the size of client portfolio and the portfolio management servicesprovider. Bigger the portfolio, frequency of interaction is more .Generally, the PMSprovider arranges for fund manager interaction on a quarterly/half yearly basis.PORTFOLIO MANAGEMENT SERVICES (PMS) CHARGESA PMS charges following fees. The charges are decided at the time of investmentand are vetted by the investor.ENTRY LOAD – PMS scheme may have an entry load of is charged at thetime of buying the PMS only .MANAGEMENT CHARGES- Every portfolio management services schemecharges fund management charges. Fund management charges may vary from 1%to 3% depending upon the PMS provider . It is charged on a quarterly basis to thebasis PMS account.PROFIT SHARING – some PMS scheme also have profit sharing arrangement (inaddition to the fixed fees),where in provider charges a certain amount of fees/profitover the stipulated return generated in the fund. According to the SEBI mandate,every PMS has to follow a high watermarking scheme.For E.g. PMS X has fixed charges of 2% plus a charge of 20% of fees for returngenerated above 15%in the year. In this case if the return generated in the year bythe scheme is 25%,the fees charged by the PMS will be 2%+{(25%-15%)}*20%} 18 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 19. the fees charged is different for every portfolio management services provider andfor scheme. It is advisable for the investor to check the charge of the scheme. Apartfrom the charge mentioned above, the PMS charges the investors on followingcounts as all the investment are done in the name of the investor:  Custodian fee  Demat account opening charges  Audit charges  Transaction brokerageTAXATION FOR PORTFOLIO MANAGEMENT SERVICES (PMS)Any income from portfolio management services account is a business income.Unlike MF,PMS is not required to remain 65%+invested in equity to get equitytaxation benefit. Each portfolio management services account is in the name ofadditional investor and so the tax treatment is done on an individual investor level.Profit on the same can be considered as business income. (I.e. slab wise ). Profitcan be considered as capital gains. [STCG (15%)or LTCG(Tax-free)]. It depend onclient charted Accountant or the assessing officer how he treats this income. ThePMS provider sends an audited statement at the end of the FY giving details ofSTCG and LTCG; it is on the client and his CA to decide to treat it as capital gain orbusiness income.HOW IS PMS DIFFERENT FROM A MUTUAL FUND?Both PMS and MUTUAL FUNDS are types of managed funds. The difference to theinvestor in a portfolio management services over a MUTUAL FUND is:  Concentrated portfolio.  Portfolio can be tailored to suit the needs of investor.  Investors directly own the stocks, rather than fund owning the stocks.  Difference in taxation. 19 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 20. COMPANY PROFILE THE RELIANCE GROUPThe Reliance Group is among India’s top three private sector business houses on allmajor financial parameters, with a market capitalization of Rs. 325000 Crores( US$81 Billion), net assets in excess of Rs. 115000 Cr. (US$29 Billion) and net worth tothe tune of Rs 55000 Cr (US$14 Billion).Across different companies, the group has a customer base of over 100 million, thelargest in India, and a shareholder base of over 12 million, among the largest in theworld.Through its products and services, The Reliance group touches the life of 1 in 10Indians every day. It has a business presence that extends to over 20000 towns and4.5 lacs villages in India, and 5 continents across the world.The interest of the group range from communication(Reliance Comm.) And financial services (Reliance Capital Ltd) to generation,transmission and distribution of power(Reliance Energy), infrastructure andentertainment.  Reliance communications.  Reliance capital.  Reliance infrastructure.  Reliance power.  Reliance entertainment.  Reliance Health.Reliance Capital :-Reliance Capital, a constituents S&P, CNX. Nifty, MCSE India, is the part of theReliance group. It is one of India’s leading and amongst most valuable financialservices companies in the private sector.Reliance capital has interest in  Asset management & Mutual funds  Life and general insurance 20 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 21.  Commercial finance  Stock Broking  Investment Banking  PMS (Portfolio Management Services)  Distribution of financial products  Exchanges  Private Equity  Asset Reconstructions  Wealth Management services  Proprietary investments  Other Activities in Financial servicesReliance mutual fund is India’s largest mutual fund over 7 million investor folios.Reliance life insurance is among the top 4 private sectors life Insurers, in terms ofindividual premium.Reliance general insurance is amongst the leading private sector general insurers.Reliance securities is one of india’s leading broking houses. Reliance money is oneof india’s leading distributors of financial products and services.Reliance capital has a net worth of Rs. 7810 Cr. And total assets of Rs. 31994Crores on march 31,2011.Reliance Mutual Fund:-Reliance Mutual Fund (RMF/ Mutual Fund) is one of India’s leading Mutual Funds,with Average Assets Under Management (AAUM) of Rs. 1,01,577 Crores and aninvestor count of over 66.71 Lakh folios. (AAUM and investor count Jan-Mar 2011)Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growingmutual funds in India. RMF offers investors a well-rounded portfolio of products tomeet varying investor requirements and has presence in 159 cities across thecountry. Reliance Mutual Fund constantly endeavors to launch innovative productsand customer service initiatives to increase value to investors. Reliance CapitalAsset Management Limited (‘RCAM’) is the asset manager of Reliance Mutual Fund. 21 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 22. RCAM a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-upcapital of RCAM, the balance paid up capital being held by minority shareholders.Reliance Capital Ltd. is one of India’s leading and fastest growing private sectorfinancial services companies, and ranks among the top 3 private sector financialservices and banking companies, in terms of net worth. Reliance Capital Ltd. hasinterests in asset management, life and general insurance, private equity andproprietary investments, stock broking and other financial services.Sponsor : Reliance Capital LimitedTrustee : Reliance Capital Trustee Co. LimitedInvestment Manager : Reliance Capital Asset Management Limited/ AMCStatutory Details : The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956. Reliance Portfolio Management Services:-Reliance Portfolio Management Services is a premium financial service, offeringinnovative & exclusive products through discretionary & advisory services. Ourexpertise has earned the trust of thousands of high net-worth individual/ institutionalinvestors and created a family that is constantly growing. Reliance PortfolioManagement Services can conduct your investments with true finesse coupled withpassion and innovation.Reliance Portfolio Management Services is a part of Reliance Capital AssetManagement Ltd., a wholly owned subsidiary of Reliance Capital Ltd.Reliance Capital Ltd. is one of Indias leading and fastest growing private sectorfinancial services companies, and ranks among the top 3 private sector financialservices and banking companies, in terms of net worth.Reliance Capital Ltd. has interests in asset management, life and general insurance,private equity and proprietary investments, stock broking and other financialservices. 22 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 23. Our Vision"To be a globally respected wealth creator with an emphasis on customer care and aculture of good corporate governance"Our Mission"To be a multi-asset class player with a significant presence in domestic market &expand horizons in International markets through Advisory services." Reliance PMS products:- 1. Absolute freedom portfolio 2. Absolute freedom option optimizer portfolio- A tactical Asset Allocation Plan. 3. Young Star Portfolio – Mid & Small cap option 4. Principal protected silver linked structure 5. All Season Debt Shield- Aggressive Return Option 6. Blended Debt Plus- Hybrid OptionABSOLUTE FREEDOM PORTFOLIOInvestment Strategy:The investment strategy endeavours to create a diversified portfolio spread acrossmarket capitalizations. The portfolio will generally aim to hold around 25 stocks. Thiswould ensure meaningful positions in majority of the holdings. The top 10holdingswould generally comprise 50% of the portfolio value. The intent is to identify,businesses having sustainable competitive advantage, scalability, ability to generatecash, high operating margins, good return ratios, quality management, low debt toequity ratio and are available at low valuations, relative to their historical valuationsand peer group sectors. The portfolio would normally have low churn ratio.Cash/derivatives may be tactically used as a defensive/hedging tool at points in time.Investment StructureMinimum Investment : Rs. 50 LacsSuitable Investment Horizon : 3 years 23 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 24. Mode of Inflow:Domestic Investors: Cheque should be drawn in clients name only. Investors willalso have the option to transfer their portfolio holding subject to review.NRI Investors: A separate PIS account shall be opened in the name of the investorand cheque should be drawn in favor of the account holder.YOUNG STAR PORTFOLIO- Mid Small Cap OpionInvestment StrategyThe Young Star Portfolio shall follow a growth oriented strategy with focus on smalland mid cap stocks. Large Cap stocks shall be used to provide stability and liquidityto the portfolio. Importantly, the portfolio shall not be averse to using cash and cashequivalents in a bearish market. The endeavour would be to offer greater stabilitywith potentially higher returns.Investment RationaleThe Indian economy is characterised by high savings and high investments rate.Empirical evidence of Asian economies suggests that high savings investmentsrate, results in a phase of hyper growth for an average period of 25 – 35 years.Importantly, India is only at the 7th year of this phase of high growth.Growth has caused and will continue to result in significant changes in the structureof the economy and marketsNew opportunities emerge throwing up new winners / leaders. This churn offersinvestors a huge opportunity to create wealth. These opportunities typically startsmall and then grow large as they realize their potential. In the past 11 years marketcapitalization of Nifty has increased by more than 17 times.The growth witnessed has bought significant transformation in the economy andmarkets.  there are sectors and stocks which have seen significantly higher growth than the broad index  28 companies currently comprising the Nifty did not form part of the index in 1998 24 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 25.  Small companies of yester years have emerged and now form part of the Nifty index eg: Axis Bank, Sun PharmaceuticalsIdentifying such companies, which are capable of making this transition, offersinvestors the potential for out sized returns.Investment FeaturesInvestor Category: Resident Individual, InstitutionsMinimum Investment: Rs. 25 LacsSuitable time frame for Investment: 3 yearsBenchmark: BSE 200Upfront Fee: 2.25%Fixed Management Fee: Investors can choose from the following 2options.Option 1: 2.00% p.a.; OR Option 2: 1.50% p.a. Profit sharing of20% above the hurdle rate of 15% to be charged annually.Exit Load: 1.00% if exit is made before 12 months from the inceptionOther Expenses: Custody, Fund Accounting, audit and other marketing expensesshall be charged on actual.Mode of Inflow: Inflow in the form of cash only. Cheque should be drawn inclients name only.Investment RisksThe global economic recovery continues to be tenuous. While this may have limitedimpact on the Indian fundamentals it could have substantial impact on the portfolioinflowsThe portfolio composition being skewed more towards mid and small-cap stocks, thevolatility in portfolio performance may be much higher in the short term. The ability tomake quick changes to the portfolio may be limited While the investment managerwill conduct full due-diligence on the underlying investments, any error in estimatingfuture potential may have an adverse impact on the investments, such investments 25 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 26. shall also be impacted to a greater extent by adverse changes in the externalenvironment / macro economic situation.Principal Protected Silver Linked Structure:- Indicative Term SheetNature of Instrument Non convertible debentureRating AA-r/Stable (Reaffirmed) by CRISILTenor 36 / 42 monthsIssuer of Debentures ECL Finance LtdForm of Debentures DematerialisedIssue opening date 16-Mar-11Closing date 31-Mar-11Face Value Rs 100,000/- (Rupees One Lakh Only)Issue Price Rs 100,000/- (Rupees One Lakh only)Underlying Benchmark MCX Silver futureParticipation Ratio 90%Silver Performance (Final Fixing Level - Initial Fixing Level)/InitialFixing Level.Structure Payoff Principal + Max(0, PR*Min(80%, SilverPerformance))Initial fixing value Average of first three quarters12 A R_______ C______ _______Final fixing value Average of last three Minimum Investment Rs.20 lakhs and multiples of 1 lakh. 26 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 27. Terms and ConditionsTenure (Months):- 42Minimum Investment (Lacs):- 20Thereafter in multiples of (Lacs) 01Upfront Charges 2. 50% 27 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 28. Analysis Of other PMS industry players:-Motilal Oswal:1. Value strategyValue Strategy is meant for investors with a Long Term investment horizon in theIndian Equity Markets. Discovering an original investment idea involves deep andmeticulous analysis to discover the hidden true values. The portfolio’s investmentsphilosophy revolves around finding value. As such, the investment philosophy is notdependent on the market trends but banks on the power of the intellect. A businessis prudently picked for investment after a thorough study of its underlying hiddenlong-term potential. To purchase a piece of great business at a fraction of its truevalue is the discipline. The Fund manager conservatively picks 12 to 15 value stocksfor a portfolio with a long-term investment philosophy, keeping the portfolio churnvery low and high margin of safety.ObjectivesThe Strategy aims to benefit from the long term compounding effect on investmentsdone in good businesses, run by great business managers for superior wealthcreation. Follows a value based stock selection strategy Investment Approach : “Buy Hold” Investment Horizon: Medium to Long term Maximize post tax return due to Low ChurnCharacteristics Value based stock selection Investment Approach : “Buy and Hold” Investments with Long term perspective Focused portfolio construction Capital preservation consciousness** No capital guarantee 28 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 29. Philosophy Identify and purchase a piece of great business at a fraction of its truevalue. Investments with a Long-term investment View. The fund manager stronglybelieves that“Money is made by Sitting”. Investments are identified by a Bottom up Approach. The aim is to identifypotential long- term wealth creators by focusing on individual companies andtheir management bandwidth. Margin of Safety.ProfileInvestors who like to invest with a Long-term wealth creation view.TenureLong term(3-5 yrs)2. Bulls Eyes StrategyBull’s Eye PMS Strategy under is designed to invest in stocks with short-mediumterm perspective. The investment philosophy is to find “Momentum in Value”. Itfollows an active process driven method of profit booking and is parked temporarilyin the safety of liquid mutual funds/ exchanges traded liquid funds till furtheropportunities are identified. The stock selection lays greater emphasis on companieswhich good corporate governance and excellent management track record. It wouldparticipate in emerging sector and turn around stories so as to participate andcapture sharp rallies.ObjectiveThe Scheme aims to deliver superior returns in Low to medium term by investing infundamentally strong stocks with momentum approach, coupled with active profitbooking. 29 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 30. Actively managed multi cap strategy Investment Approach: Capitalizing on short to medium-term marketopportunities Regular Profit booking based on stock and market movementsCharacteristics Investment Approach : “Momentum in Value”. Investments with Short-Medium term perspective. Regular Profit Booking. Ability to sit on cash.Philosophy Investment in Momentum Sectors. Identifying the right Sector and right Company with a scalable businessmanaged by competent managers. To look out for companies with transparencyexecution capability and Management Bandwidth. Investments in market Leaders, who have the Vision to make it big. The investments timing is event based and doe not take help of technicals.Buying when the stock is just ripe to begin its big move upwards or vise versa. The investments are done with a predefined price targets and portfolio followsan active process of Profit Booking. In absence of investment opportunities, funds are temporarily parked in thesafety of liquid mutual funds or exchange traded Liquid fundProfileInvestors who like to invest in value stocks and capitalize on the periodic upside byan active process of profit booking.TenureMedium Term 1 Year 30 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 31. 3.NTDOPThe portfolio is designed to invest in themes /stocks in the small and mid capsegment which are going to be a part the “NEXT TRILLION DOLLAR GDPGROWTH”. The Portfolio would target to invest in Small and Mid Cap Opportunitieswhich have the potential of delivering above-average growth over the next 2-3 years.The investment philosophy is to invest in stocks which are available at reasonablevaluations and promise more than average growth. The portfolio would aim toidentify emerging themes. The Portfolio would attempt to identify emerging themesearly and exit when these when they are fairly discounted.We firmly believe that markets rewards consistent growth over a period of time andonly after critical size has been achieved by the company. For any stock to getrecognized by the Market and get a desired Valuation one has to wait for the right“Trigger Point”. Perception Re-rating happens due to: Increased Sales volume Consistent Growth Better Margins Growing stakeholders confidenceObjectiveThe strategy aims to deliver superior returns by investing in focused themes whichare part of the next Trillion Dollar GDP growth opportunity. It aims to predominantlyinvest in Small Mid Cap stocks with a focus on Identifying EmergingStocks/Sectors. Investment Horizon: Medium to Long term Investment Approach: “Buy Hold” strategy Focus on Sectors and Companies which Promise a higher than average growth 31 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 32. Characteristics Investments in Small and Mid-cap Stocks Bottom Up Stock Picking Approach Focused Theme Portfolio Investment Horizon - Long term (2 to 3 Yrs) Benchmark: - CNX Mid Cap Buy and Hold Philosophy – low portfolio churn Open Ended Portfolio with Exit Fee Quarterly Disclosure Of PortfolioPhilosophy High Growth Story - Sector and Companies which promise a higher thanaverage growth Reasonable Valuation - Invest in high growth companies at reasonableprice / value Emerging Themes - Focus on Identifying Emerging Stocks / Sectors Buy and Hold Strategy - The Portfolio shall focus on above philosophies andhold them till it realizes it true market potential. Wealth is created by sitting.ProfileInvestors who would like to invest in opportunities with a long term view in highgrowth, under valued stocks in emerging themes.TenureLong Term (3 Years) 32 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 33. Focused IV – A Flexi Cap StrategyA strategy that can mould itself from a large cap portfolio to mid cap portfolio or vice-versa History suggests that Large Mid Cap companies tend to perform differentlythrough economic and market cycles For e.g. mid or small cap stocks could move upsharply during a certain time period while large cap stocks remain range bound andvice versa. On the other hand, large cap stocks tend to be less volatile than Mid Small cap stocks during the downturn. Past experience suggests that at varyingtimes, MidCaps trade at varying discounts (and sometimes at a premium) to theLarge Caps and this gives opportunities in terms of asset allocation between MidCaps and Large Caps. In order to derive optimal returns from the stock markets,investments need to be diversified and have the flexibility to shift allocations acrossmarket caps.Helps keep emotions sentiments out of investment processE.g. A client has invested Rs. 1 crore and when the target return of 15% is achieved,Rs. 15 Lakhs will automatically be redeemed given back to clientThe Fund Manager will continue to manage the balance Rs. 1 crore ( market value) the above process will be repeated every time the strategy achieves the targetreturn of 15%.ObjectiveThe Strategy aims to generate superior returns over a medium to long term byinvesting in only 8-10 companies across market capitalization. The Fund Managerwill take active asset allocation calls between cash equity. The strategy will alsotake active equity allocation calls between investments in large caps mid caps itwill follow a policy of profit booking with predefined price targets. Actively managed multi cap strategy Investment Horizon: Medium to Long term Investment Approach: Capitalize on Top Down Bottom Up strategies ofinvesting. 33 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 34. Cash Out Strategy: Automatic payout of appreciation amount when theClients AUM appreciates by 15%.Characteristics Top Down Bottom Up Approaches Invest in Fund Manager’s top 8-10 stock ideas across Market Cap Investment horizon: Medium term (12-18 months) Actively Managed Strategy Focused Stregy of 8-10 stocks Risk Return Profile: Medium Risk - Medium to High Return Benchmark: BSE 200 Monthly disclosure of portfolio Exit load on withdrawal of the portfolio (part or full) in the 1st year Exit load will not be charged on the automatic pay-out of the target returnsof 15%Philosophy Fundamental Stock Selection Approach Invest in good blend of Growth Value stocks across market capitalization Active Equity Allocation between Mid caps Large caps Allocation between Large Caps and Mid Caps will be a function of theirrelative valuations Market Timing Active Asset Allocation calls between Cash and Equity Regular Profit Booking Strategy will follow a policy of profit booking with predefined price targets Cash Out Strategy When the Client’s AUM appreciates by 15%, the appreciation amount willbe automatically paid-out. 34 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 35. Exit load will not be charged on this automatic pay-outProfileFor investors who look for high return with medium to high riskTenureMedium term (12-18 months)Focused V contra strategyContra Strategy - takes a different view Picking ‘overlooked’ or ‘undiscovered’stocks-albeit with sound fundamentals. These companies exhibit strong balancesheet and sustainable business models, but may be underperforming the markets fora brief period due to various reasons, which are temporary in nature.Invest in companies, which are out-of-favour with the overall market but at the sametime have unrecognized value. Identify these out-of-favour stocks and go against thetide, look for that first mover advantage in these scrip’s, in case of a turnaround.Investors tend to follow trends and short-term events, and flock to the performingthemes. Conversely, they tend to overreact to negative news. Higher the prices goup; more the people want to buy, resulting in herd mentality. Herd mentality oftenleads to stocks trading at a much higher premium/discount than their intrinsic value,thus creating ‘Contra’ opportunities.Buy ignored companies and then wait for market to discover them, which thenresults in their share prices going up, thus benefiting by going against the tide.Sell companies when Re-rating target is achieved.ObjectiveThe strategy aims to invest in fundamentally sound companies that can benefit fromchanges in a company’s valuation which reflects a significant change in the marketsview of the company over an horizon of three years. The Strategy focuses oninvesting in stocks that can benefit from growth in earnings, re-rating of business or 35 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 36. higher valuation of assets.The objective is to increase return rather than reduce risk for Investors. Follows the principle to pick best ideas rather than diversification Concentrated Strategy Structure of less than 10 stocks Investment Horizon: Medium to Long term Investment Approach: Follows a “Buy and hold” philosophy with low tomedium churnCharacteristicsBottom - up stock selection approach Investment in fundamentally sound Contra stocks Concentrated strategy of 8 - 10 stocksBuy and Hold philosophy - Low portfolio churnInvestment Horizon Hold stock till Re-rating potential is realized Medium to Long Term - 2 to 3 yearsAllocation: Cash: 0 - 100%; Stocks: 0 - 100%; Derivatives: NILRisk : Medium to HighExit load : Applicable in the 1st yearBenchmark : BSE 200Philosophy  Companies whose earnings are likely to do better than market expectations.  Companies benefiting from fundamental changes. 36 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 37.  New management team or new product launch.  Cost-cutting initiatives or improved pricing.  Takeovers / Mergers or Acquisitions.  Companies benefiting from changes in business environment.  Consolidation or reduction in industry capacity leading to improved pricing.  Shift in consumption patterns or demographic trends.  Fundamentally sound companies that have underperformed due to a various reasons, which are temporary in nature.   Companies with lower valuation as compared to sector or peers or market.ProfileFor investors who seek for high returns with high risk.TenureMedium to Long Term - 2 to 3 years 37 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 38. Invest India StrategyA strategy that can mould itself from a large cap portfolio to mid cap portfolio or vice-versa History suggests that Large Mid Cap companies tend to perform differentlythrough economic and market cycles. For e.g. mid or small cap stocks could moveup sharply during a certain time period while large cap stocks remain range boundand vice versa. On the other hand, large cap stocks tend to be less volatile than Mid Small cap stocks during the downturn. Past experience suggests that at varyingtimes, MidCaps trade at varying discounts (and sometimes at a premium) to theLarge Caps and this gives opportunities in terms of asset allocation between MidCaps and Large Caps. In order to derive optimal returns from the stock markets,investments need to be diversified and have the flexibility to shift allocations acrossmarket caps.Helps keep emotions sentiments out of investment process.E.g. A client has invested Rs. 1 crore and when the target return of 15% is achieved,Rs. 15 Lakhs will automatically be redeemed given back to clientThe Fund Manager will continue to manage the balance Rs. 1 crore ( market value) the above process will be repeated every time the strategy achieves the targetreturn of 15%.ObjectiveThe Strategy aims to generate superior returns over a medium to long term byinvesting in only 8-10 companies across market capitalization. The Fund Managerwill take active asset allocation calls between cash equity. The strategy will alsotake active equity allocation calls between investments in large caps mid caps itwill follow a policy of profit booking with predefined price targets. Actively managed multi cap strategy. Investment Horizon: Medium to Long term. Investment Approach: Capitalize on Top Down Bottom Up strategies ofinvesting. Cash Out Strategy: Automatic payout of appreciation amount when theClients AUM appreciates by 15%. 38 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 39. Characteristics Top Down Bottom Up Approaches Invest in Fund Manager’s top 8-10 stock ideas across Market Cap Investment horizon: Medium term (12-18 months) Actively Managed Strategy Focused Stregy of 8-10 stocks Risk Return Profile: Medium Risk - Medium to High Return Benchmark: BSE 200 Monthly disclosure of portfolio Exit load on withdrawal of the portfolio (part or full) in the 1st year Exit load will not be charged on the automatic pay-out of the target returns of 15%Philosophy Fundamental Stock Selection Approach Invest in good blend of Growth Value stocks across market capitalization Active Equity Allocation between Mid caps Large caps Allocation between Large Caps and Mid Caps will be a function of their relative valuations Market Timing Active Asset Allocation calls between Cash and Equity Regular Profit Booking Strategy will follow a policy of profit booking with predefined price targets Cash Out Strategy When the Client’s AUM appreciates by 15%, the appreciation amount will be automatically paid-out. Exit load will not be charged on this automatic pay-outProfileFor investors who look for high return with medium to high risk.TenureMedium term (12-18 months) 39 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 40. ENAM PMS Research based investment approach. Select stocks with High Margin of Safety. Adopt appropriate equity diversification. Integrated approach to portfolio construction. Top Down + Bottom Up = Model Portfolio. Value + Growth = Growth At Right Price. Invest in quality businesses run by sound managements with focus on valuecreation. Focus on pricing value rather than valuing price Invest with conviction disregarding the crowd Keep minimal portfolio churnCorpus can be given either in cheque, securities or a combination of either of these.Fee StructureFixed Fee plan: The fixed fee shall be apportioned and charged at the end of eachquarter based on the daily weighted average net asset value.Variable fee plan: Variable fee plan shall have a combination of fixed fee andperformance fee. Fixed Fee component: fixed fee shall be charged on the net asset value. The fixedfee shall be apportioned and charged at the end of each quarter based on the dailyweighted average net asset value. Performance Fee component: performance fee shall be levied at the end of theyear on the net asset value subject to returns being over the minimum thresholdlevel for the year. The scheme shall follow the system of High Water marking. 40 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 41. Early WithdrawlWithdrawal before 12 months is permissible subject to conditions.Execution ReportingClient portfolio will be maintained on Non-pooled basis, however execution shall beundertaken on a pooled basis. Net asset Value of the portfolio shall be disclosed ona daily basis, however the transaction and holding statement shall be provided to theclient on a quarterly basis. Clients shall be provided Audited statements for financialyear ending 31st March for income tax purposes. ICICI PRUDENTIALAggressive PortfolioInvestment ObjectiveThe Aggressive Portfolio is a diversified equity portfolio that endeavours to achievelong term growth through capital appreciationPositioningThe Portfolio is suitable for investors with a medium to high-risk appetite and aninvestment horizon of above twelve to eighteen months.Investment StrategyInvestments in equity related instruments are targeted at long-term capitalappreciation. The focus is on identifying stocks with attractive growth prospects thatare available at reasonable valuations.The investment strategy follows a mix of a top-down and a bottom-up approach. Thetop-down approach is used to identify key macroeconomic and sectoral themes andsubsequently help identify stocks that will benefit from the same. A bottom-upapproach is applied based on the belief that there are always individual companiesthat provide attractive investment opportunities in various industry and marketconditions. The prominence given to the top-down vs. bottom-up approach would 41 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 42. vary from time to time depending on macroeconomic, sectoral and company specificfundamentals.The Portfolio Manager maintains a diversified portfolio by investing in a basket ofstocks without any undue concentration in any stock or sector. The AggressivePortfolio comprises primarily large cap stocks but the flexibility to invest in mid-cap/momentum stocks is retained. The portfolio may be actively traded to takeadvantage of certain market trends with an endeavour to enhance returns.When markets are uncertain or have a downward bias, the Portfolio Managerattempt to protect capital by the use of tactical asset allocation. This includes movingbetween equity and cash, depending on the market conditions. Large assetallocation calls will generally be taken in case of an expectation of a sustained andsharp decline in the markets. At other points, smaller tactical asset allocation callsmay be undertaken with a perspective of attempting to enhance portfolio returns. Deep Value PortfolioInvestment ObjectiveThe Deep Value portfolio endeavours to generate capital gains over the long term,by investing in a diversified portfolio of significantly undervalued stocks.Suitability of the ProductThe Deep Value portfolio may be considered suitable for investors with a medium tohigh-risk appetite and an investment horizon of above 12 to 18 months.Investment StrategyThe Deep Value portfolio will invest primarily in stocks that are significantlyundervalued i.e. a stock, which trades at valuations that are significantly below theestimated fair value of the company. The degree of undervaluation of the stock maybe judged by various quantitative valuation parameters including, but not limited to,price/earnings, price/book, dividend yield, price/cash flow, replacement cost, sum-of-part valuation etc.The core investment philosophy of value investing is based on the belief that stocks 42 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 43. cannot continue to quote at values that are significantly below their fair values overthe long term. At some point in time, the markets are likely to recognize the extent ofundervaluation of these companies. The same could lead to a rerating / appreciationin the companies stock price. There are various reasons why stocks tend to quote atlow valuations. Some of these include: Irrational market sentiments: that drive downthe price of a stock to a level lower than justified by fundamentals. This could occuras an overreaction to negative news or as result of market pessimism oncorporate/industry fundamentals. Markets also often tend to ignore certainstocks/sectors that appear to have low growth or non-exciting stories.Valuations not factoring in all aspects of the companies earning potential:Companies may have certain hidden assets on their books or assets whose actualvalue may not be factored in by the markets. This could include surplus land, equityholdings, cash on balance sheets, trademarks etc. The markets are also at timesslow to factor in company developments such as operational or financialrestructuring, entry in to new markets, capacity expansions, introduction of newproducts, change in management etc. that could potentially add significant value tothe worth of the business. During cyclical downturns, a number of companies arealso often valued based on bottom cycle earnings, which can look very attractive asthe industry cycle improves. The investment process consists of initially preparing auniverse of stocks that are quoting at low valuations, and subsequently conductingin-depth fundamental research with an aim of understanding the true worth of thebusiness, reasons behind the current undervaluation and the potential drivers thatcould lead to a rerating of the stock. This is because there are also a large number ofcompanies whose low valuations are justified by weak fundamentals.The holding periods of individual stocks tend to be high as the necessary drivers forthe expected re-rating could fall into place over a period of time. The performance ofthe Deep Value portfolio may thus not move in line with the overall markets, andcould significantly under or outperform the markets at various points in time. Wewould thus recommend that investors invest in the Deep Value portfolio with alonger-term investment horizon. lio returns. 43 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 44. Literature ReviewA number of portfolio models have come up in the past 30 yrs. Which have helpedlay down the theoretical foundations of this concept and which invariably suggest thebest possible ways of forging and maintaining profitable and value enhancingrelationships with customers. Insights have been offered by the likes ofFiocca(1982), Campbell and cunnigham(1983), Shapiro et al(1987),and many morescholars, with each of them trying to discuss some new dimension and improvingupon the limitation of previous theories.Fiocca(1982), The research seeks to establish that customer portfolio managementrelies upon the level of competition for customers, buying behaviour and productattribute in use, while at the same time considering factors like “Difficulty inmanaging customers” and “strategic importance” , along with their casualparameters. A mix of objective, Judgemental and subjective factors has also beenapplied while trying to establish any results. Perceived strength of the relationshipwas calculated using the variables: technical ability, experience, pricingrequirements, speed of response, frequency of contact, degree of cooperation, trust,length of relationship, friendship and management distance(frequency of contact).This research had originally come-up with famous “20-80” rule. The model does nottake into account the distance and culture factor and overlooks the significance ofthe customer profitability. 44 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 45. Campbell and Cunningham (1983)Relationship between customer life cycle and customer data on various buyingparameters is the core issue addressed in the portfolio model which consists of athree-step analysis using two variables at each stage. The customer preferencesand the portfolio planning, customer market and level of competition are the basicdeterminants of the model. However, two drawbacks are associated with this model.The first one is that the conceptual validity and practicality of using a life cycleapproach to customer analysis can be challenged. Secondly, the choice ofappropriate variables for the analysis can be difficult (Rajagopal and Sanchez,2005)[1]. The difficulty associated with the collection of accurate market-share related data is also a big drawback of the suggested approach.Shapiro et al (1987)A customer classification matrix was developed after considering cost toserve suppliers, customer behavior and management of customers, whileconsidering customers as profit centres. This matrix was used to calculate the profitdispersion of the portfolio.Krapfel et al (1991)This research considered customer relationship as being dependent on criticality ofgoods purchased by a customer, quantity of seller’s output consumed by thiscustomer, substitution costs associated with leaving this buyer and accessing others,and cost saving resulting from the buyer’s practices and procedures. A relationshipclassification matrix was also suggested using “relationship value” and “interestcommonality”.Since the firms need to be focussed upon providing maximum possible value tothe customer, while at the same maximizing profitability from the overallcustomer portfolio, therefore the portfolio theories should be structured in a waywhich gives due consideration to market environment and other value determinants. 45 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 46. STATEMENT OF THE PROBLEMTopic of the studyAnalysis of buying behaviour buying criteria of PMS investors towards variousportfolio managers.Purpose Of the studyThis aim of the study is to analyse the buying behaviour of investors towardsdifferent types of PMS product and for identifying key features of a PMS fordeciphering sustainable marketing variables in the design of a new PMS product.Taking a lead from this, an attempt is also made to find out the important PMSproduct attributes that are essential in influencing the purchase decision of theinvestors.Scope of StudyThe study is limited to the set of 80 PMS investors who was willing to share theirinvestment information with us and provide their views on the different investmentscriteria that affect PMS investments. The main idea is to study the psyche of HNIsand corporate investors and find out the most important determinants they considerwhile making a PMS investment.RESEARCH METHODOLOGYDESIGNThe design of the study undertaken is exploratory and descriptive in nature thefactors that have an impact on the investors psyche are extremely varied andperception specific. In order to arrive at a reliable and definite conclusion, it wasimperative that an exploratory research is carried out so that all the factors could betaken into account. To accomplish this most influencing factors from investors pointof view were transformed into 13 positive statement and respondents replies wererecorded on the a scale of 1-5 46 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 47. SamplingThe target population here are HNI and corporate investors. The sample size chosenfor the study is 80 PMS investors with investments in different AMC’sTools of data CollectionOut of various tools available for data, questionnaire was considered the mostappropriate. For conducting this research a questionnaire was designed for thepurpose of factor analysis and employed a likert scale from 1-5.Length of the questionnaire: the questionnaire was restricted to only 9 for thequestion. Only those question was included in the questionnaire that was useful anda must know for the study to be effectively conducted. Lengthy questionnaire cannegatively impact the response rates as well as the representation of the sample.Question: repetitive question were avoided in the questionnaire so that therespondent enjoy filling the questionnaire and can fill it using all his knowledgewithout getting irritated . apart from this, while framing the question, each and everyfactor was taken into consideration.Scale of the questionnaire: A Likert scale from 1-5 was used for the questionnairecovering all the possible answers to the question asked so that the respondent has asay in his answer. The respondent should never feel that the answer he actuallywants to give is not present in the questionnaire.Structure of the questionnaire: The questionnaire used in the study was structuredin a manner that they reflected a train of thought so that the respondent feelsconnected to the questionnaire is the order of question. If the question are notpropetrly ordered, it would resulted in the problem of habituation, it means that somepeople will usally start giving the same answer, without really considering it,after 47 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 48. being asked a series of similar question.Respondent tend to deliver more accurateanswer if the question pertaining to the particular factor not asked in a series. Thethird important feature that was considered during the formulation of the question isavoidance of multiple concepts in a single question. So after taking all theaforementioned variables in to the mind the questionnaire was formulated andconsequently designed.Avoidance Error:While the questionnaire was designed, full attention was paid that all possible errorcan be avoided. There are two types of errors that could arise while constructing aquestionnaire:Errors of commission:Where the questions involved are worded poorly so that they are unclear andambiguous.Errors of Omission:Where in some questions representing a factor are left out and hence omitted fromthe study.Data Collection Process: The study required the collection of primary data. So inorder to get detailed responses meeting with the investors were fixed and data wascolled through personal visits and discussion done with the investors on a range ofissues. While filling up questionnaire attention was paid in order to avoid any errors.Data AnalysisFor the purpose of data analysis, Version 19 was used to conduct factor analysis.Moreover, for the survey the primary thing is the excerpts and idea that the investorshave discussed with us. The ideas put forward are quite implementable andpracticable. They are just simple solutions and our focus during the survey was toextract as much information and ideas as we can during the course of interview. 48 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 49. BASIC STATISTIC ANALYSIS1. The assets management companies create substantial awareness about theirschemes in the market. AMCAWARENESS Cumulative Frequency Percent Valid Percent PercentValid strongly disagree 4 5.0 5.0 5.0 Disagree 18 22.5 22.5 27.5 Neutral 34 42.5 42.5 70.0 Agree 14 17.5 17.5 87.5 Strongly Agree 10 12.5 12.5 100.0 Total 80 100.0 100.0INFERENCE:-Only 12.5% of the total respondent are Strongly Agree with thestatement that AMC awareness matters before making investment But most of themare neutral(42.5%). 49 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 50. 2. Past performance of the product plays vital role in its selection. PastexperienceofProduct Cumulative Frequency Percent Valid Percent PercentValid strongly disagree 12 15.0 15.0 15.0 Disagree 16 20.0 20.0 35.0 Neutral 19 23.8 23.8 58.8 Agree 19 23.8 23.8 82.5 Strongly Agree 14 17.5 17.5 100.0 Total 80 100.0 100.0INFERENCE:- Similar percentage(23.75%) of respondent are agree and neutral withthe statement that past experience matters before making an investment. It meansthis factor doesn’t effect much for influencing an investor.3. The advertisement campaigns of products are able to attract investors. 50 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 51. Advertisement Cumulative Frequency Percent Valid Percent PercentValid strongly disagree 9 11.3 11.3 11.3 Disagree 16 20.0 20.0 31.3 Neutral 22 27.5 27.5 58.8 Agree 19 23.8 23.8 82.5 Strongly Agree 14 17.5 17.5 100.0 Total 80 100.0 100.0INFERENCE:- Above graph shows that almost similar percentage of respondentsare with every condition but still maximum respondents are neutral(27.5%). 51 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 52. 4. Capital appreciation achieved by a scheme is important while consideringinvestment. CapitalAppretiation Cumulative Frequency Percent Valid Percent PercentValid strongly disagree 13 16.3 16.3 16.3 Disagree 15 18.8 18.8 35.0 Neutral 19 23.8 23.8 58.8 Agree 23 28.8 28.8 87.5 Strongly Agree 10 12.5 12.5 100.0 Total 80 100.0 100.0INFERENCE:- Maximum percentage of respondents are agree with thestatement(28.75%). 52 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 53. 5. The fund should have overall safety and security. OverallsafetyofFund Cumulative Frequency Percent Valid Percent PercentValid strongly disagree 19 23.8 23.8 23.8 Disagree 19 23.8 23.8 47.5 Neutral 13 16.3 16.3 63.8 Agree 14 17.5 17.5 81.3 Strongly Agree 15 18.8 18.8 100.0 Total 80 100.0 100.0INFERENCE:- Most of the respondents are not agree with this statement. Around47% respondents are against and 17% neutral so it shows that major portion is notagree with this statement.6. Associate suggestions impacts scheme selection and investment. 53 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 54. AssociateSuggestion Cumulative Frequency Percent Valid Percent PercentValid strongly disagree 5 6.3 6.3 6.3 Disagree 14 17.5 17.5 23.8 Neutral 33 41.3 41.3 65.0 Agree 9 11.3 11.3 76.3 Strongly Agree 19 23.8 23.8 100.0 Total 80 100.0 100.0INFERENCE:- Most of the respondent as shown in pie chart are neutral but inspiteof this 2nd major portion is strongly agree. 54 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 55. 7. Tax benefit schemes have an edge over other schemes. TaxBenefit Cumulative Frequency Percent Valid Percent PercentValid strongly disagree 5 6.3 6.3 6.3 Disagree 20 25.0 25.0 31.3 Neutral 10 12.5 12.5 43.8 Agree 24 30.0 30.0 73.8 Strongly Agree 21 26.3 26.3 100.0 Total 80 100.0 100.0INFERENCE:- Major portion of the respondents are agree with this statement as30% strongly Agree and 27% are agree, only 6.25% are strongly disagree. 55 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 56. Factor Analysis1. a KMO and Bartletts TestKaiser-Meyer-Olkin Measure of Sampling Adequacy. .519Bartletts Test of Sphericity Approx. Chi-Square 143.737 df 15 Sig. .000a. Based on correlationsThe value of KMO and Bartlett’s test is :- .519 which is more than .5. So it shows thatfactor analysis can be applied in this case.2. Correlation Matrix Brokeragentreco BrandName mmendation Hastlefree LowUpfront Transparency LockinPeriodCorrelation BrandName 1.000 .155 -.467 -.653 .061 .325 Brokeragentr .155 1.000 .041 -.475 .100 -.210 ecommendat ion Hastlefree -.467 .041 1.000 .458 .156 -.225 LowUpfront -.653 -.475 .458 1.000 .118 -.090 Transparenc .061 .100 .156 .118 1.000 .446 y LockinPeriod .325 -.210 -.225 -.090 .446 1.000Above correlation explains thatBrand Name and Low Upfront have negative relationship (-.653) it means both thefactors are antipropotional to each other.Broker Agent and Low Upfront also have negative relationship(-.475).Hastle Free investment is also inversely propotional to Brand Name (-.467).Transparency and Lockinperiod are propotional to each other. 56 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 57. 4. Total Variance Explained Extraction Sums of Squared Rotation Sums of Squared a Initial Eigenvalues Loadings Loadings Compone % of Cumulative % of Cumulative % of Cumulative nt Total Variance % Total Variance % Total Variance %Raw 1 3.709 37.868 37.868 3.709 37.868 37.868 3.560 36.341 36.341 2 2.523 25.752 63.620 2.523 25.752 63.620 2.516 25.685 62.026 3 1.831 18.688 82.308 1.831 18.688 82.308 1.987 20.282 82.308 4 .825 8.424 90.732 5 .575 5.866 96.597 6 .333 3.403 100.000Extraction Method: Principal Component Analysis. 57 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 58. Total Variance Explained Extraction Sums of Squared Rotation Sums of Squared a Initial Eigenvalues Loadings Loadings Compone % of Cumulative % of Cumulative % of Cumulative nt Total Variance % Total Variance % Total Variance %Raw 1 3.709 37.868 37.868 3.709 37.868 37.868 3.560 36.341 36.341 2 2.523 25.752 63.620 2.523 25.752 63.620 2.516 25.685 62.026 3 1.831 18.688 82.308 1.831 18.688 82.308 1.987 20.282 82.308 4 .825 8.424 90.732 5 .575 5.866 96.597 6 .333 3.403 100.000Extraction Method: Principal Component Analysis.a. When analyzing a covariance matrix, the initial eigenvalues are the same across the raw and rescaled solution.EXPLANATION:-Three factors out of total six factor covered 82.3% of the total variance. These three factors canbe explained with the help of component matrix. Same thing this Scree Plot is also explainingsame result. 58 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 59. 5. a Component Matrix Raw Rescaled Component Component 1 2 3 1 2 3BrandName -1.007 .116 .084 -.836 .097 .069Brokeragentrecommendatio -.309 -.252 .948 -.273 -.223 .838nHastlefree 1.087 .150 .636 .773 .106 .452LowUpfront 1.090 .313 -.428 .842 .242 -.331Transparency .016 1.146 .497 .012 .858 .372LockinPeriod -.480 1.006 -.300 -.376 .788 -.235Extraction Method: Principal Component Analysis.a. 3 components extracted.Component matrix explains that 3 Factors.Broker/ Agent Recommendation,Low Upfront feesTransparency, are most influential factors. 59 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 60. Analysis And ResultsAnalysis Brief :-The 13 variables that affect the investor’s decision were put through factor analysisand Basic Statistical Analysis in SPSS Version 19. 6 out of 13 variables Th variableswere put through Principal Component Analysis and 3 components were extractedthat cumulatively explained 82.3% of the variance in data.Before probing further in to the analysis part, the data was put through the Kaiser-Meyer-Olkin(KMO) measure of sampling adequacy and Bartlett’s test of sphericity.The KMO came out .519, which depicts the suitability of factor analysis to theundertaken project.Basic statistic analysis is done by making pie-chart. After analysis I have foundthat Capital Appreciation and Tax Benefit are some factors which have significantinfluence while investors are indifferent towards factors AMC Awareness,Advertisement, Associate Suggestions. Certain factors for which investors areagainst with the statement of overall safety of fund as they said in security marketthere is no certainty.But there is only one factor Past experience for which there is mixed response fromthe investors and hence it is difficult to conclude about this parameter from investorspoint of view. 60 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 61. CONCLUSIONThe study primarily looks at customers expectation level in PMS product. It focuseson what are those key attributes that an investor consider while investing into a PMSproduct. The investors purchase behaviour doesn’t have a high level of coherencedue to the influence of different purchase factors. The buying intent of a PMSinvestor can be due to multiple reasons depending upon his/ her risk return trade-off,So in such a situation it is getting increasingly difficult for AMC’s to come up withproducts that are suitable to the needs of target segment. Hence, this study wasconducted so that a complete PMS product can be developed that would beinclusive of all the variables affecting investment and it would help marketers toneatly classify different variables into independent factors. A prudent product designencompassing all the variables and factors spelt out in this research will make thenew PMS product attractive for the investors. The factors identified in the studywould serve as a key information inputs regarding investors preferences andpriorities and shall guide future fund manager to designing attractive PMS productsfor the Indian market. 61 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 62. RECOMMENDATIONEnhancing customer awareness about PMS: AMFI along with NISM shouldconduct nationwide customer awareness programme with respect to PMS since amajority of the potential investors still don’t have clear idea about the concept ofPMS.COMPLICATED KYC NORMS RESTRICT POTENTIAL INVESTORS:-PAN card requirement for an investment amount of Rs. 500000 and above in PMSthe customer are required to procure KYC acknowledgement which require hugeamount of paper work. Furthermore , this regulatory directive is not applicable toother investment schemes.Banks and NBFC’s still remains the preferred channel of investment, howevercustomers are not satisfied with quality of advice provided to them. This has also ledto the problem of Mis-selling v/s Right-selling in the Indian pms industry.PROMOTING PMS IN Tier 2, Tier 3 and Tier 4 Cities:- According to industryestimates, only 10 of the total AUM come from beyond the top 20 cities. The PMSindustry is ignoring the huge potential of small cities where there are many HNIs,who don’t have any knowledge about PMS. India post with its 154000 branches,double the size of all bank branches put together is a formidable channel which hasbeen highly unutilised and unexplored.PMS industry lacks a level playing field:PMS industry has been subject to manyregulations like, payment for investment in PMS can only be done through bankingfacilities, which although is good but excessive regulation can negatively affect thecustomer base. There is a perceived need for AMC’s to shift their business towardsfulfilling customer needs. As customer seek trusted advisors, The relation amongmanufacturer- Distributors-customers should not centred towards sales of theproducts but for collectively promoting the financial success of customers across allfacets of their professional and personal lives. “Customer Should Be The King” 62 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 63. REFERENCESWEBSITES: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. www.icicipruamc.comBooksMarketing Research- By Ajay Pandit 63 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 64. Questionnaire:Name: Age:Strongly Agree (SA), Agree (A), neither Agree nor Disagree (Neutral),Disagree (D), Strongly Disagree (SD)1. The assets management companies create substantialawareness about their schemes in the market.SA ( ) A( ) Neutral ( ) D( ) SD ( )2. Tick factors according to your choice of making investment.(A) Brand name of AMC.SA ( ) A( ) Neutral ( ) D( ) SD ( )(B) Brokers/ Agent Recommendation.SA ( ) A( ) Neutral ( ) D( ) SD ( )(C) Convenient and hassle free investment schemeSA ( ) A( ) Neutral ( ) D( ) SD ( )(D) Low upfront fees.SA ( ) A( ) Neutral ( ) D( ) SD ( )(E) Transparency in Operations of AMCs.SA ( ) A( ) Neutral ( ) D( ) SD ( ) 64 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 65. (F) Lock in period.SA ( ) A( ) Neutral ( ) D( ) SD ( )3. The services provided by AMCs are satisfactory(Pre and post investment).SA ( ) A( ) Neutral ( ) D( ) SD ( )4. Past performance of the product plays vital role in its selection.SA ( ) A( ) Neutral ( ) D( ) SD ( )5. The advertisement campaigns of products are able to attractinvestors.SA ( ) A( ) Neutral ( ) D( ) SD ( )6. Capital appreciation achieved by a scheme is important isimportant while considering investment.SA ( ) A( ) Neutral ( ) D( ) SD ( )7. The fund should have overall safety and security.SA ( ) A( ) Neutral ( ) D( ) SD ( ) 65 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
  • 66. 8. Associate suggestions impacts scheme selection and investment.SA ( ) A( ) Neutral ( ) D( ) SD ( )9. Tax benefit schemes have an edge over other schemes.SA ( ) A( ) Neutral ( ) D( ) SD ( ) 66 JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL