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  1. 1. 1 EXECUTIVE SUMMARY The situation of the stock market is very dynamic and it changes every moment so, it‘s very difficult for the investors to decide which stock is a growth stock and profitable for investment. Fundamental analysis is done for long term investment and it analyzes the financial health, competitors and efficiency of management of the company. In order to keep investors safe from market fluctuations and provide them good return by minimizing the risk, ―Portfolio Management‖ is done. It is the selection of the securities and their continuous shifting in the portfolio to optimize returns. The aim of our project is to find out the scripts through the fundamental analysis which is to be added in the portfolio and to prepare an optimum portfolio, which will provide maximum return at a given level of risk to the investor. Ten securities of CNX Midcap were considered on the basis of fundamental analysis out of 14 securities to prepare the portfolio. The Companies are:- Amtek Auto, Apollo Hospitals Enterprises, Aurobindo Pharma, Cummins India Ltd, Educomp Solutions, Exide Industries, LIC Housing Finance, Lupin, Indraprastha Gas, IFCI, IDBI Bank, Power Finance Corporation, Punj Llyod and Titan Industries. Both primary data and secondary data was considered. The data analysis was carried out with the help of MS EXCEL. After analyzing the portfolio it was found that Portfolio developed is not optimum because risk return ratio of portfolio is greater than some of the securities but according to the Jensen ratio done for evaluating portfolio shows that the portfolio will perform good in the market. Portfolio beta is near about one. This means my portfolio is as volatile as the market. Investors are recommended to analyze the shareholding pattern of different companies and then invest. Companies having FII and mutual fund holdings are considered to be financially good companies. While preparing the portfolio, the investors should consider Midcap companies also, if they are providing good returns as they are in their growth stage and have chances of having good return in the future.
  2. 2. 2 OBJECTIVES OF THE PROJECT The market has very volatile nature and it is very difficult for the individuals to identify which company is growing and in which stocks investments should be made. Investors want to have minimum risk without sacrificing the return in the long term investment. So, the objectives of our project are: 1.To provide basic idea of different stock market investment instruments to investor. 2. Liquidity i.e. Nearness To Money: It is desirable to investor so as to take advantage of attractive opportunities upcoming in the market. 3. To prepare optimum portfolio, which will provide maximum return at a given level of risk to the investor. 4. To evaluate the portfolio by different means, to find out whether it is performing good or bad. 5. Diversification: The basic objective of building a portfolio is to reduce risk of loss of capital and / or income by investing in various types of securities and over a wide range of industries. NEED FOR SELECTING THE PROJECT To get the overall knowledge of securities and investment. To know how the investment made in different securities minimizes the risk and maximizes the returns.
  3. 3. 3 To get the knowledge of different factors that affects the investment decision of investors. To know how different companies are managing their portfolio i.e. when and in which sectors they are investing. To know what is the need of appointing a Portfolio Manager and how does him meets the needs of the various investors. To get the knowledge about the role (played) and functions of portfolio manager. To get the knowledge of investment decision and asset allocation. SCOPE OF THE PROJECT Portfolio management is an art of putting money in fairly safe, quite profitable and reasonably in liquid form. An investor‘s attempt to find the best combination of risk and return is the first and usually the foremost goal. In choosing among different investment opportunities the following aspects risk management should be considered: a) The selection of a level or risk and return that reflects the investor‘s tolerance for risk and desire for return, i.e. personal preferences. b) The management of investment alternatives to expand the set of opportunities available at the investors acceptable risk level. The very risk-averse investor might choose to invest in mutual funds. The more risk-tolerant investor might choose shares, if they offer higher returns. Portfolio management in India is still in its infancy. An investor has to choose a portfolio according to his preferences. The first preference normally goes to the necessities and comforts like purchasing a house or domestic appliances. His second preference goes to some contractual obligations such as life insurance or provident funds. The third preference goes to make a provision for savings required for making day to day payments. The next preference goes to short term investments such as UTI units and post office deposits which provide easy liquidity. The last choice goes to investment in company shares
  4. 4. 4 and debentures. There are number of choices and decisions to be taken on the basis of the attributes of risk, return and tax benefits from these shares and debentures. The final decision is taken on the basis of alternatives, attributes and investor preferences. For most investors it is not possible to choose between managing one‘s own portfolio. They can hire a professional manager to do it. The professional managers provide a variety of services including diversification, active portfolio management, liquid securities and performance of duties associated with keeping track of investor‘s money.
  5. 5. 5 COMPANY PROFILE COMPANY FACTS - INDIA INFOLINE Registered Address IIFL House, Sun Infotech Park, Road No. 16, Plot No.B-23, MIDC,,Thane Industrial Estate, Wagle Estate, Mumbai Maharashtra 400604 Tel: 022-25806650 Fax: 022-25806654 Email: Website: Group: Not Applicable Registrars Link Intime India Pvt. Ltd. C-13, Pannalal Silk Mill Compound, LBS Marg, Bhandup (West) Tel: 022-25960320 Fax: 022-25960329 Email: Website:
  6. 6. 6 HISTORICAL DEVELOPMENT India Infoline Limited (IIFL), incorporated in 18th October of the year 1995 as Probity Research & Services Private Limited at Mumbai. The India Infoline is a one- stop shop for information, advice as well as transaction execution of financial services. IIL along-with its subsidiaries caters to entire gamut of financial services including equities and commodities broking, portfolio management, distribution of mutual funds, life insurance products, home loans, personal loans, etc. Broking services are offered under the 5paisa brand (offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE). The company has proven research capabilities and was rated by the Forbes as the best of web' and must read for investors'. A network of 758 business locations spread over 346 cities across India, facilitates the smooth acquisition and servicing of a large customer base. India Infoline's research is available not just over the Internet but also on international wire services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where it is amongst the most read Indian brokers. The Company identified the potential of the Internet to cater to a mass retail segment and transformed its business model from providing information services to institutional customers to retail customers. Hence IIL launched its Internet portal, in May of the year 1999 and started providing news and market information, independent research, interviews with business leaders and other specialized features. IIL was converted into a Public Limited Company in 28th April of the year 2000 and the name of the Company was changed to Probity Research & Services Limited. The name of the company was changed to India Limited in 23rd May of the year 2000. During 23rd March of the year 2001, again the name was changed as India Infoline Limited. IIL acquired 100% shares of Agri Marketing Services Limited during March of the year 2000. In the year 2000, IIL leveraged its position as a provider of financial information and analysis by diversifying into transactional services, primarily for
  7. 7. 7 online trading in shares and securities and online as well as offline distribution of personal financial products, like mutual funds and RBI Bonds. These activities are carried on through the wholly owned subsidiaries. The broking service was launched under the brand name of 5paisa through our subsidiary, India Infoline Securities Private Limited and, the e-broking portal, was launched for online trading in June of the year 2000. In December of the year 2000, India Infoline Insurance Services Limited (subsidiary) became a corporate agent for ICICI Prudential Life Insurance Company Limited. In the year 2004, the company launched commodities broking through its subsidiary India Infoline Commodities Private Limited. Also received a license for Portfolio Management Services from SEBI for broking subsidiary. During the year 2006, the company received the requisite prior approval from The Securities and Exchange Board of India for its proposed merger of India Infoline Securities Private Limited (IISPL), a wholly owned subsidiary with itself. It had earlier received in-principle approval from National Stock Exchange and The Stock Exchange, Mumbai. In January of the year 2007, the company entered into an alliance with Bank of Baroda for providing Brokerage Platform, besides research and analysis services to the bank's customers. India Infoline awarded the Best Broker in India' by Finance Asia. This was a result of Finance Asia's annual look at the best financial services firms in each country around Asia for the period from June 2007 to May 2008. During March of the year 2008, India Infoline's institutional broking arm IIFL, partnered with Auerbach Grayson & Company, Inc., a New York-based brokerage firm to offer US investors premium access to investing in India's capital markets. Auerbach Grayson specializes in providing global trade execution and exclusive research to U.S. institutional investors. As of July 2008, the company received the in- principle approval for the insurance broking license from IRDA. About IIFL The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of India‘s premier
  8. 8. 8 providers of financial services. IIFL offers advice and execution platform for the entire range of financial services covering products ranging from Equities and derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, Gold bonds and other small savings instruments. IIFLhave a presence in: Equities our core offering, gives us a leading market share in both retail and institutional segments. Over a million retail customers rely on our research, as do leading FIIs and MFs that invest billions. Private Wealth Management services cater to over 2500 families who have trusted us with close to Rs 25,000 crores ($ 5bn) of assets for advice. Investment Banking services are for corporate looking to raise capital. Our forte is Equity Capital Markets, where we have executed several marquee transactions. Credit & Finance focuses on secured mortgages and consumer loans. Our high quality loan book of over Rs. 6,200 crores ($ 1.2bn) is backed by strong capital adequacy of approximately 20%. IIFL Mutual Fund made an impressive beginning in FY12, with lowest charge Nifty ETF. Other products include Fixed Maturity Plans. Life Insurance, Pension and other Financial Products, on open architecture complete our product suite to help customers build a balanced portfolio. IIFL has received membership of the Colombo Stock Exchange becoming the first foreign broker to enter Sri Lanka. IIFL owns and manages the website,, which is one of India‘s leading online destinations for
  9. 9. 9 personal finance, stock markets, economy and business. IIFL has been awarded the ‘Best Broker, India’ by Finance Asia and the ‘Most improved brokerage, India’ in the Asia Money polls. India Infoline was also adjudged as ‘Fastest Growing Equity Broking House - Large firms’ by Dun & Bradstreet. A forerunner in the field of equity research, IIFL‘s research is acknowledged by none other than Forbes as ‘Best of the Web’ and ‗…a must read for investors in Asia’. IIFL is a listed company with a consolidated group net worth of about Rs 1,800 crores. The income and net profit during FY2010-11 were Rs. 14.7 bn and Rs. 2.1 bn respectively. The Group has a consistent and uninterrupted track record of profits and dividends since its listing in 2005. The company is listed on both Exchanges and also trades in the derivatives segment. IIFL‘s Crisil and ICRA Rating for short term is top rated as CRISIL A1+ and ICRA (A1+) respectively. For long term, IIFL has been rated ICRA (AA-) by ICRA and CRISIL AA-/Stable by CRISIL indicating high degree of safety for timely servicing of financial obligations. IIFL is near you physically: IIFL are present in every nook and cranny of the country, with over 3,000 business locations across 500 cities in India. You can reach IIFL in a variety of ways, online, over the phone and through branches. All offices are connected with the corporate office in Mumbai with cutting edge networking technology. The group caters to a customer base of about a million customers. .
  10. 10. 10 ACHIEVEMENTS & FINANCIAL RESULTS ON 30 JULY 2012 The board meeting of Fiberweb India will be held on 30 July 2012 to consider and approve the audited annual accounts of the company for the year ended 31 March 2012 and to consider and take on record the un-audited financial results (provisional) for the first quarter ended 30 June 2012. The board will also consider the reappointment of P V Sheth as chairman & managing director and P S Krishnan as executive director (whole time) of the company. INDIA INFOLINE NET DOUBLES TO RS 60 CRORE Brokerage firm India Infoline reported a strong year-on-year growth in revenues and net profit for the quarter ended December 2009. However, sequential growth was muted despite the company clocking a higher daily average turnover in its equity segment, and improving its market share on the National Stock Exchange (NSE) For the December quarter, it reported an income of Rs 319.5 crore, up 39% year-on- year and up 2% sequentially. Quarterly net profit stood at Rs 59.5 crore, up 100% year-on-year and up 2.6% quarter-on-quarter. The company‘s quarterly operating income declined 10% sequentially to Rs 112.9 crore. ―During the last quarter, we were able to consolidate our competitive positioning across multiple business lines,‖ said Nirmal Jain, chairman and managing director, India Infoline. ―Also, our customer-centric approach has helped us in further gaining equities market share. We continue to invest in people as our key strategy for future growth,‖ he said. The company‘s average daily equities volumes during the quarter was Rs 3,755 crore
  11. 11. 11 as compared to Rs 3,336 crore in the previous quarter, a rise of 13%. Market share on the NSE for the quarter under review rose to 3.89% as against 3.64% in the previous quarter. Average daily turnover in the commodities business touched Rs 436 crore during the quarter, up 75.1% year-on-year and 20% quarter-on-quarter. The loan book stood at Rs 1,200 crore, as on December 31 2009, comprising largely of secured lending with mortgages (47% of the book), followed by margin funding, loan against shares and personal loans. It has also been providing funding for public issues. For the current quarter, the company expects ―accelerated growth in the corporate and retail lending book on the back of improved macroeconomic scenario.‖ India Infoline executive director R Venkataraman said that on a q-o-q basis, they have seen a sales growth of around 1.8%. The growth was broadly the same q-o-q although the business mix has changed
  12. 12. 12 BALANCE SHEET OF INDIA INFOLINE ---------- in rs. cr. ------- Mar '12 Mar '11 Mar '10 12 mths 12 mths 12 mths SOURCES OF FUNDS Total Share Capital 57.80 57.28 57.04 Equity Share Capital 57.80 57.28 57.04 Share Application Money 0.00 0.33 0.40 Preference Share Capital 0.00 0.00 0.00 Reserves 1,219.48 1,031.36 1,050.67 Revaluation Reserves 0.00 0.00 0.00 Networth 1,277.28 1,088.97 1,108.11 Secured Loans 16.80 0.56 1.17 Unsecured Loans 0.00 465.00 496.58 Total Debt 16.80 465.56 497.75 Total Liabilities 1,294.08 1,554.53 1,605.86 Mar '12 Mar '11 Mar '10 12 mths 12 mths 12 mths APPLICATION OF FUNDS Gross Block 130.39 122.33 108.83
  13. 13. 13 Less: Accum. Depreciation 104.28 83.25 60.63 Net Block 26.11 39.08 48.20 Capital Work in Progress 0.11 0.92 1.75 Investments 1,209.26 1,000.09 1,104.22 Inventories 39.54 53.22 53.76 Sundry Debtors 252.90 289.46 577.50 Cash and Bank Balance 457.82 358.06 309.86 Total Current Assets 750.26 700.74 941.12 Loans and Advances 259.54 507.02 516.71 Fixed Deposits 0.00 268.72 251.98 Total CA, Loans & Advances 1,009.80 1,476.48 1,709.81 Deffered Credit 0.00 0.00 0.00 Current Liabilities 947.27 961.65 1,025.81 Provisions 3.92 0.41 232.31 Total CL & Provisions 951.19 962.06 1,258.12 Net Current Assets 58.61 514.42 451.69 Miscellaneous Expenses 0.00 0.00 0.00 Total Assets 1,294.09 1,554.51 1,605.86 Contingent Liabilities 12.92 2,090.56 24.17 Book Value (Rs) 44.19 38.01 38.84
  14. 14. 14 Profit & Loss account of India Infoline ------------------- in Rs. Cr. ------------------- Mar '12 Mar '11 Mar '10 12 mths 12 mths 12 mths INCOME Sales Turnover 548.55 698.95 665.99 Excise Duty 0.00 0.00 0.00 Net Sales 548.55 698.95 665.99 Other Income 90.45 100.61 32.20 Stock Adjustments 0.00 0.00 0.00 Total Income 639.00 799.56 698.19 EXPENDITURE Raw Materials 0.00 0.00 0.00 Power & Fuel Cost 0.00 0.00 0.00 Employee Cost 207.07 188.53 162.62 Other Manufacturing Expenses 0.00 17.83 14.52 Selling and Admin Expenses 0.00 250.12 205.75 Miscellaneous Expenses 287.90 55.40 36.25 Preoperative Exp Capitalised 0.00 0.00 0.00 Total Expenses 494.97 511.88 419.14
  15. 15. 15 Mar '12 Mar '11 Mar '10 12 mths 12 mths 12 mths Operating Profit 53.58 187.07 246.85 PBDIT 144.03 287.68 279.05 Interest 37.86 90.34 13.88 PBDT 106.17 197.34 265.17 Depreciation 31.44 24.08 31.86 Other Written Off 0.00 0.00 0.00 Profit Before Tax 74.73 173.26 233.31 Extra-ordinary items -0.07 -0.76 -3.96 PBT (Post Extra-ord Items) 74.66 172.50 229.35 Tax 11.36 50.14 77.34 Reported Net Profit 63.30 122.36 152.02 Total Value Addition 494.98 511.88 419.14 Preference Dividend 0.00 0.00 0.00 Equity Dividend 43.36 85.92 85.20 Corporate Dividend Tax 7.03 12.76 14.48 PER SHARE DATA (ANNUALISED) Shares in issue (lakhs) 2,890.24 2,864.11 2,852.15 Earning Per Share (Rs) 2.19 4.27 5.33 Equity Dividend (%) 75.00 150.00 150.00 Book Value (Rs) 44.19 38.01 38.84
  16. 16. 16 Yearly Results of India Infoline ------------------- in Rs. Cr. ------------------- Mar '12 Mar '11 Mar '10 Sales Turnover 603.23 729.54 616.11 Other Income 1.18 0.37 56.33 Total Income 604.42 729.91 672.44 Total Expenses 495.84 516.32 395.19 Operating Profit 107.39 213.22 220.92 Profit On Sale Of Assets -- -- -- Profit On Sale Of Investments -- -- -- Gain/Loss On Foreign Exchange -- -- -- VRS Adjustment -- -- -- Other Extraordinary Income/Expenses -- -- -- Total Extraordinary Income/Expenses 14.36 -- -29.04 Tax On Extraordinary Items -- -- -- Net Extra Ordinary Income/Expenses -- -- -- Gross Profit 108.57 213.59 277.25 Interest 16.77 16.25 21.16 PBDT 106.17 197.34 227.05 Depreciation 31.44 24.08 19.44
  17. 17. 17 Depreciation On Revaluation Of Assets -- -- -- PBT 74.73 173.26 207.61 Tax 11.43 50.90 78.92 Net Profit 63.30 122.36 128.69 Prior Years Income/Expenses -- -- -- Depreciation for Previous Years Written Back/ Provided -- -- -- Dividend -- -- -- Dividend Tax -- -- -- Dividend (%) -- -- -- Earnings Per Share 2.19 4.27 22.54 Book Value -- -- -- Equity 57.80 57.28 57.10 Reserves 1,219.48 1,031.69 972.84 Face Value 2.00 2.00 10.00
  18. 18. 18 Cash Flow of India Infoline ------------------- in Rs. Cr. ------------------- Mar '12 Mar '11 Mar '10 12 mths 12 mths 12 mths Net Profit Before Tax 74.72 173.26 233.31 Net Cash From Operating Activities 429.34 220.16 5.12 Net Cash (used in)/from Investing Activities -71.86 105.10 -265.62 Net Cash (used in)/from Financing Activities -526.44 -260.31 392.08 Net (decrease)/increase In Cash and Cash Equivalents -168.97 64.95 131.59 Opening Cash & Cash Equivalents 626.79 561.84 430.25 Closing Cash & Cash Equivalents 457.82 626.79 561.84 LISTING DETAILS - INDIA INFOLINE Key Dates Year Ending Month Mar AGM Date (Month) Aug Book Closure Date (Month) Aug
  19. 19. 19 LISTING INFORMATION Face Value Of Equity Shares 2 Market Lot Of Equity Shares 1 BSE Code 532636 NSE Code INDIAINFO BSE Group N.A. Whether The Company Forms A Part Of The Following Indices – Sensex No Nifty No BSE-100 No BSE-200 Yes S&P CNX 500 Yes CNX Midcap No CNX FMCG No Listing On Listed On The Stock Exchange, Mumbai, National Stock Exchange of India Ltd.
  20. 20. 20 ORGANISATIONAL CHART OF IIFL Compliance, RM CEO, Nirmal Jain CIO, SB COO, Narendra Jain Director, Sunil kaul Credit & Finance, PR Executive Director,RV Director, A Purwar Institutional Equities, HN Insurance Distribution, MK Director,Kranti Sinha International Operations,BP Director, Nilesh Vikamsey Investment Banking,NG Offshore Asset, DP Human Resource, PM Retail Broking, PP Wealth Management, KB
  21. 21. 21 LIST OF COMPETITORS COMPETITION NAME LAST PRICE MARKET CAP. (RS. CR.) SALES TURNOVER NET PROFIT INDIABULLS 209.65 6,542.07 2,929.26 723.79 NETWORK 18 30.80 3,223.01 80.52 -114.17 EDELWEISS FIN 30.00 2,277.69 206.95 68.64 INDIA INFOLINE 60.00 1,734.70 603.23 63.30 DELTA CORP 69.60 1,558.47 1.17 -0.71 MOTILAL OSWAL F 105.05 1,524.52 46.43 56.30 SKS MICROFIN 120.50 1,303.95 435.70 -1,360.60 PILANI INVEST 1,460.00 1,154.68 47.49 42.76 FUTURE CAPITAL 153.50 994.66 238.54 55.26 GEOJIT BNP 21.10 481.84 201.01 39.72 KIRLOSKAR BROTH 810.00 428.39 155.99 130.92 NALWA SONS INV 725.00 372.37 18.66 15.64 DB (INT) STOCK 97.05 339.68 12.07 2.40 THE BYKE HOSP 168.65 338.12 48.94 2.43 MONEY MATTERS 93.90 327.59 571.51 40.27 CONSOL FINVEST 41.65 134.64 5.28 3.63 MICROSEC FIN 27.70 88.12 22.82 10.91
  22. 22. 22 INTRODUCTION TO GOLD LOAN Gold loan or loan against gold is the easiest and quickest way for servicing your financial needs. To avail a gold loan, all you need to do is pledge your gold ornaments with us and we would provide you with a loan amount as per the market value of your gold. Unlike other loans, gold loan does not require you to provide any income or salary proof. Moreover, it has comparatively lower interest rates; requires lesser documentation, and hence is processed in lesser time. We at IIFL provide maximum loan against your gold at lowest interest rates. We have a strong presence Pan-India and have serviced a large number of customers in a very short span. We offer different types of schemes as per your requirement and convenience. Following are the main features of our loans :- Loan amount ranges from min Rs 5,000 to max Rs 10,00,000 Tenor for loans ranges from 3 months to 12 months Loan can be paid back on a monthly or quarterly basis Interest / Loan Amount due can be paid at any of our Gold Loan branches pan- India Minimal amount of paperwork and documentation is required Loan gets processed in as low as 5 minutes Variety of schemes are available to chose from Your Gold is insured and secured safely with us in fire and burglary proof vaults GOLD LOAN SCHEMES IIFL GOLD LOAN SCHEMES Scheme Name Value (per gram) Interest (% p.a.) JALDI LOAN RS. 1320/- 12% READY MONEY RS.1670/- 20% LOAN LAKSHMI RS.1900/- 25% FAST TRACK RS.2010/- 28%
  23. 23. 23 IIFL GOLD LOAN - Key features of Gold Loan: *Loan disbursal in 5 minutes *Loans starts from 5000 to 1 Crore *Minimal documentation and credit assessment requirements *High quality customer service in short response time *Evaluation of gold ornaments takes place in house. *Safety of Gold Ornaments: All branches as equipped with Strong Rooms for keeping safe custody of Gold Ornaments *No processing fees *Pre-payment option-without any penalty IMPORTANT INFORMATION 1.What is a Gold Loan? Gold loan or loan against gold is a secured loan in which a customer pledges his/her gold ornaments as collateral with a gold loan company and the company in turn gives a loan amount as per the market value of gold to the customer. It is a very quick and easy way of fulfilling one‘s financial needs as compared to the other kinds of loans. 2.Why should I take a Gold Loan from IIFL? The advantages of taking gold loan from IIFL include - Minimal paper work and documentation Very low processing time (few minutes) Zero processing fee
  24. 24. 24 Low Interest Rate Instant disbursal of loan Security and Insurance of Gold Pledged 3.Am I eligible to avail a gold loan? Any person salaried/non-salaried/self-employed/student of 21 years of Age or above having gold of purity of 18 karat or above is eligible to avail a gold loan from us. 4.What security/collateral do I need to provide to avail such a loan? Any kind of jewellery/ornament made of gold of purity of 18 karat or above can be provided as security to avail such loan. 5.Do I need to provide any documents to avail a gold loan? A proof of identification in the form of Voter‘s ID/PAN/Passport No./Driving license and a proof of address would be required to avail a gold loan from us. 6.What is the maximum loan amount that I can take? You can avail a maximum loan of up to 60% of the market value of your gold. Market value of your gold is calculated according to the per gram market rate of gold on the day of loan application. 7.How is the Market Value of my gold jewellery/ornaments calculated? Market value of your gold is calculated according to the per gram market rate of gold on the day of loan application. Only the gold part of ornament /jewellery is used for gold weight calculations; other metals and stones or gems studded on the ornament/jewellery are
  25. 25. 25 excluded from the calculations. 8.What is the tenor of these loans? Minimum tenor is three months while the maximum is twelve months. 9.How long does it take to avail a gold loan? The total process of loan disbursal gets over in a few minutes if the customer provides all the requirements. Once the customer pledges the gold ornaments and submits the required documents, our staff does all the required paperwork and disburses the loan as quickly as possible. 10.What is the processing fee involved to avail such a loan? No processing fee is involved in availing such a loan. 11.What is the guarantee of safety of my ornaments/jewellery pledged with IIFL? Gold ornaments pledged by you are secured in a fire and burglary proof vault in our Gold Loan branch. Besides, the branch is under electronic surveillance and guarded by security all the time. Moreover, the pledged ornaments are covered by insurance. So your gold is completely safe with us. 12.Can I foreclose my loan account / Can I close my loan account before its tenor? What are the charges involved in such a case? Yes, you have an option to foreclose your account where you can pay-back the loan amount before it's tenor and release your gold from the branch. No extra charges are involved in such foreclosure apart from normal interest rates till the date of foreclose. However, a minimum interest of seven days will be charged in case you wish to foreclose your account before seven days of the date of availing the gold loan.
  26. 26. 26 13.Can I make part payment of my loan amount? Yes, you can make a part payment where you can pay-back a part of the total loan amount. Here, you will get an advantage of future interest being charged only on the balance Principal amount left after part-payment. Moreover, you may chose to release a part of your gold ornaments/jewellery as per the amount of loan paid back. 14.Can I part release my gold? Yes, you can part release your gold but you would have to pay-back a part of the loan amount as per the value of gold to be released. 15.Can I pay my loan amount or interest at any of the PAN-India IIFL gold loan branches? Yes, you can pay-back your loan amount or interest due at any of the Pan-India IIFL-Gold Loan branches. However, to redeem your gold ornaments/jewellery, you will have to visit the branch from which the loan was availed. INTRODUCTION TO PORTFOLIO MANAGEMENT Investing in securities such as shares, debenture and bonds is profitable as well as exciting. Investing in financial securities is now considered to be one of the best avenues for investing one‘s savings while it is acknowledged to be one of the most risky avenues of investment. It is rare to find investors investing their entire funds or savings in a single security. Instead, they tend to invest in a group of securities. Such a group of securities is called a portfolio. Creation of a portfolio helps to reduce risk without sacrificing returns. Portfolio Management deals with the analysis of individual securities as well as with the theory and practice of optimally combining securities into portfolios. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success.
  27. 27. 27 WHAT IS PORTFOLIO MANAGEMENT An investor considering investment in securities is faced with the problem of choosing from among a large number of securities. His choice depends upon the risk- return characteristics of individual securities. He would attempt to choose the most desirable securities and like to allocate his funds over this group of securities. Again he is faced with the problem of deciding which securities to be held and how much to invest in each. The investor faces an infinite number of possible portfolios or group of securities. As the economic and financial environment keeps changing, the risk-return characteristics of individual securities as well as portfolios also change. This calls for periodic review and revision of investment portfolios of investors. An investor invests his funds in a portfolio expecting to get a good return consistent with the risk that he has to bear. The return realized from the portfolio has to be measured and the performance of the portfolio has to be evaluated. Portfolio Management comprises all the processes in the creation and maintenance of an investment portfolio. It deals specifically with security analysis, portfolio analysis, portfolio selection, portfolio revision, and portfolio evaluation. Portfolio Management is a complex process which tries to make investment activity more rewarding and less risky. A person making an investment expects to get some return from the investment in the future. But, as the future is uncertain, so is the future expected return. It is this uncertainty associated with the returns from an investment that reduces risk into an investment. The total variability in returns of a security represents the total risk of that security. Systematic and Unsystematic Risk are the two components of total risk. Thus, Total Risk = Systematic Risk + Unsystematic Risk The impact of economic, political and social changes on the performance of companies and thereby on their stock prices caused by such system wide factors is referred to as systematic risk. Systematic Risk is further subdivided into interest rate risk, market risk, and purchasing power risk.
  28. 28. 28 When variability of returns occurs because of company issuing factors such as raw material scarcity, labour strike, management inefficiency, it is known as Unsystematic Risk. The systematic risk of a security is measured by a statistical measure called Beta. The input data required for the calculation of beta are the historical data of returns of the individual security as well as the returns of a representive stock market index. PORTFOLIO CONSTRUCTION The Portfolio Construction of Rational investors wish to maximize the returns on their funds for a given level of risk. All investments possess varying degrees of risk. Returns come in the form of income, such as interest or dividends, or through growth in capital values (i.e. capital gains). The portfolio construction process can be broadly characterized as comprising the following steps: 1. SETTING OBJECTIVES: The first step in building a portfolio is to determine the main objectives of the fund given the constraints (i.e. tax and liquidity requirements) that may apply. Each investor has different objectives, time horizons and attitude towards risk. Pension funds have long-term obligations and, as a result, invest for the long term. Their objective may be to maximize total returns in excess of the inflation rate. A charity might wish to generate the highest level of income whilst maintaining the value of its capital received from bequests. An individual may have certain liabilities and wish to match them at a future date. Assessing a client‘s risk tolerance can be difficult. The concepts of efficient portfolios and diversification must also be considered when setting up the investment objectives.
  29. 29. 29 2. DEFINING POLICY: Once the objectives have been set, a suitable investment policy must be established. The standard procedure is for the money manager to ask clients to select their preferred mix of assets, for example equities and bonds, to provide an idea of the normal mix desired. Clients are then asked to specify limits or maximum and minimum amounts they will allow to be invested in the different assets available. The main asset classes are cash, equities, gilts/bonds and other debt instruments, derivatives, property and overseas assets. Alternative investments, such as private equity, are also growing in popularity, and will be discussed in a later chapter. Attaining the optimal asset mix over time is one of the key factors of successful investing. 3. APPLYING PORTFOLIO STRATEGY: At either end of the portfolio management spectrum of strategies are active and passive strategies. An active strategy involves predicting trends and changing expectations about the likely future performance of the various asset classes and actively dealing in and out of investments to seek a better performance. For example, if the manager expects interest rates to rise, bond prices are likely to fall and so bonds should be sold, unless this expectation is already factored into bond prices. At this stage, the active fund manager should also determine the style of the portfolio. For example, will the fund invest primarily in companies with large market capitalizations, in shares of companies expected to generate high growth rates, or in companies whose valuations are low? A passive strategy usually involves buying securities to match a preselected market index. Alternatively, a portfolio can be set up to match the investor‘s choice of tailor-made index. Passive strategies rely on diversification to reduce risk. Outperformance versus the chosen index is not expected. This strategy requires minimum input from the portfolio manager. In practice, many active funds are managed somewhere between the active and passive extremes, the core holdings of the fund being passively managed and the balance being actively managed.
  30. 30. 30 4. ASSET SELECTIONS: Once the strategy is decided, the fund manager must select individual assets in which to invest. Usually a systematic procedure known as an investment process is established, which sets guidelines or criteria for asset selection. Active strategies require that the fund managers apply analytical skills and judgment for asset selection in order to identify undervalued assets and to try to generate superior performance. 5. PERFORMANCE ASSESSMENTS: In order to assess the success of the fund manager, the performance of the fund is periodically measured against a pre-agreed benchmark ± perhaps a suitable stock exchange index or against a group of similar portfolios (peer group comparison). The portfolio construction process is continuously iterative, reflecting changes internally and externally. For example, expected movements in exchange rates may make overseas investment more attractive, leading to changes in asset allocation. Or, if many large-scale investors simultaneously decide to switch from passive to more active strategies, pressure will be put on the fund managers to offer more active funds. Poor performance of a fund may lead to modifications in individual asset holdings or, as an extreme measure; the manager of the fund may be changed altogether. PHASES OF PORTFOLIO MANAGEMENT  Security Analysis  Portfolio Analysis  Portfolio Selection  Portfolio Revision  Portfolio Evaluation
  31. 31. 31 SECURITY ANALYSIS (a) Fundamental analysis: This analysis concentrates on the fundamental factors affecting the company such as EPS (Earning per share) of the company, the dividend payout ratio, competition faced by the company, market share, quality of management etc. (b) Technical analysis: The past movement in the prices of shares is studied to identify trends and patterns and then tries to predict the future price movement. Current market price is compared with the future predicted price to determine the mispricing. Technical analysis concentrates on price movements and ignores the fundamentals of the shares. (c) Efficient market hypothesis: This is comparatively more recent approach. This approach holds that market prices instantaneously and fully reflect all relevant available information. It means that the market prices will always be equal to the intrinsic value. PORTFOLIO ANALYSIS A portfolio is a group of securities held together as investment. It is an attempt to spread the risk allover. The return & risk of each portfolio has to be calculated mathematically and expressed quantitatively. Portfolio analysis 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 risk for further analysis. PORTFOLIO SELECTION The goal of portfolio construction is to generate a portfolio that provides the highest returns at a given level of risk. Harry Markowitzh portfolio theory provides both the conceptual framework and the analytical tools for determining the optimal portfolio in a disciplined and objective way. PORTFOLIO REVISION The investor/portfolio manager has to constantly monitor the portfolio to ensure that
  32. 32. 32 it continues to be optimal. As the economy and financial markets are highly volatile dynamic changes take place almost daily. As time passes securities which were once attractive may cease to be so. New securities with anticipation of high returns and low risk may emerge. PORTFOLIO EVALUATION Portfolio evaluation is the process, which is concerned with assessing the performance of the portfolio over a selected period of time in terms of return & risk. The evaluation provides the necessary feedback for better designing of portfolio the next time around. MEASUREMENT OF RISK Risk refers to the possibility that the actual outcome of an investment will differ from the expected outcome. In other words we can say that risk refers to variability or dispersion. If any investment is said to invariable it means that it is totally risk free. Whenever we calculate the mean returns of an investment we also need to calculate the variability in the returns. PERFORMANCE MEASURES OF MUTUAL FUNDS Mutual Fund industry today, with about 34 players and more than five hundred schemes, is one of the most preferred investment avenues in India. However, with a plethora of schemes to choose from, the retail investor faces problems in selecting funds. Factors such as investment strategy and management style are qualitative, but the funds record is an important indicator too. Though past performance alone can not be indicative of future performance, it is, frankly, the only quantitative way to judge how good a fund is at present. Therefore, there is a need to correctly assess the past performance of different mutual funds. Worldwide, good mutual fund companies over are known by their AMCs and this fame is directly linked to their superior stock selection skills. For mutual
  33. 33. 33 funds to grow, AMCs must be held accountable for their selection of stocks. In other words, there must be some performance indicator that will reveal the quality of stock selection of various AMCs. Return alone should not be considered as the basis of measurement of the performance of a mutual fund scheme, it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. Risk associated with a fund, in a general, can be defined as variability or fluctuations in the returns generated by it. The higher the fluctuations in the returns of a fund during a given period, higher will be the risk associated with it. These fluctuations in the returns generated by a fund are resultant of two guiding forces. First, general market fluctuations, which affect all the securities present in the market, called market risk or systematic risk and second, fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis-à-vis market. The more responsive the NAV of a mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk can not. By using the risk return relationship, we try to assess the competitive strength of the mutual funds vis-à-vis one another in a better way. In order to determine the risk-adjusted returns of investment portfolios, several eminent authors have worked since 1960s to develop composite performance indices to evaluate a portfolio by comparing alternative portfolios within a particular risk class. The most important and widely used measures of performance are:  The Treynor Measure  The Sharpe Measure  Jenson Model
  34. 34. 34 THE TREYNOR MEASURE Developed by Jack Treynor, this performance measure evaluates funds on the basis of Treynor's Index. This Index is a ratio of return generated by the fund over and above risk free rate of return (generally taken to be the return on securities backed by the government, as there is no credit risk associated), during a given period and systematic risk associated with it (beta). Symbolically, it can be represented as: Treynor's Index (Ti) = (Ri - Rf)/Bi. Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund. All risk-averse investors would like to maximize this value. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor's Index is an indication of unfavorable performance. THE SHARPE MEASURE In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it. According to Sharpe, it is the total risk of the fund that the investors are concerned about. So, the model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be written as: Sharpe Index (Si) = (Ri - Rf)/Si Where, Si is standard deviation of the fund. While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.
  35. 35. 35 JENSON MODEL Jenson's model proposes another risk adjusted performance measure. This measure was developed by Michael Jenson and is sometimes referred to as the Differential Return Method. This measure involves evaluation of the returns that the fund has generated vs. the returns actually expected out of the fund given the level of its systematic risk. The surplus between the two returns is called Alpha, which measures the performance of a fund compared with the actual returns over the period. Required return of a fund at a given level of risk (Bi) can be calculated as: Ri = Rf + Bi (Rm - Rf) Where, Rm is average market return during the given period. After calculating it, alpha can be obtained by subtracting required return from the actual return of the fund. Higher alpha represents superior performance of the fund and vice versa. Limitation of this model is that it considers only systematic risk not the entire risk associated with the fund and an ordinary investor can not mitigate unsystematic risk, as his knowledge of market is primitive.
  36. 36. 36 PORTFOLIO DESIGN Before designing a portfolio one will have to know the intention of the investor or the returns that the investor is expecting from his investment. This will help in adjusting the amount of risk. This becomes an important point from the point of view of the portfolio designer because if the investor will be ready to take more risk at the same time he will also get more returns. From the above discussion we can conclude that the investors can be of the following three types: 1. Investors willing to take minimum risk and at the same time are also expecting minimum returns. 2. Investors willing to take moderate risk and at the same time are also expecting moderate returns. 3. Investors willing to take maximum risk and at the same time are also expecting maximum returns.
  37. 37. 37 These aren't hard and fast allocations, just guidelines to get you one think about how his/her portfolio should look. PORTFOLIO – AGE RELATIONSHIP AGE PORTFOLIO below 30 80% in equity 10% in cash 10% in fixed income 30 to 40 70% in equity 10% in cash 20% in fixed income 40 to 50 60% in equity 10% in cash 30% in fixed income 50 to 60 50% in equity 10% in cash 40% in fixed income above 60 40% in equity 10% in cash 50% in fixed income
  38. 38. 38 THEORETICAL BACKGROUND INVESTMENT OPTIONS: Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings. Let us examine several of them: BANKS Considered as the safest of all options, banks have been the roots of the financial systems in India. Promoted as the means to social development, banks in India have indeed played an important role in the rural upliftment. For an ordinary person though, they have acted as the safest investment avenue wherein a person deposits money and earns interest on it. The two main modes of investment in banks, savings accounts and Fixed deposits have been effectively used by one and all. However, today the interest rate structure in the country is headed southwards, keeping in line with global trends. With the banks offering little above 9 percent in their fixed deposits for one year, the yields have come down substantially in recent times. Add to this, the inflationary pressures in economy and you have a position where the savings are not earning. The inflation is creeping up, to almost 8 percent at times, and this means that the value of money saved goes down instead of going up. This effectively mars any chance of gaining from the investments in banks. POST OFFICE SCHEMES Just like banks, post offices in India have a wide network. Spread across the nation, they offer financial assistance as well as serving the basic requirements of
  39. 39. 39 communication. Among all saving options, Post office schemes have been offering the highest rates. Added to it is the fact that the investments are safe with the department being a Government of India entity. So the two basic and most sought for features, those of return safety and quantum of returns were being handsomely taken care of. Though certainly not the most efficient systems in terms of service standards and liquidity, these have still managed to attract the attention of small, retail investors. However, with the government announcing its intention of reducing the interest rates in small savings options, this avenue is expected to lose some of the investors. Public Provident Funds act as options to save for the post retirement period for most people and have been considered good option largely due to the fact that returns were higher than most other options and also helped people gain from tax benefits under various sections. This option too is likely to lose some of its sheen on account of reduction in the rates offered. COMPANY FIXED DEPOSITS Another oft-used route to invest has been the fixed deposit schemes floated by companies. Companies have used fixed deposit schemes as a means of mobilizing funds for their operations and have paid interest on them. The safer a company is rated, the lesser the return offered has been the thumb rule. However, there are several potential roadblocks in these. First of all, the danger of financial position of the company not being understood by the investor lurks. The investors rely on intermediaries who more often than not, don t reveal the entire truth. Secondly, liquidity is a major problem with the amount being received months after the due dates. Premature redemption is generally not entertained without cuts in the returns offered and though they present a reasonable option to counter interest rate risk (especially when the economy is headed for a low interest regime), the safety of principal amount has been found lacking. Many cases like the Kuber Group and DCM Group fiascoes have resulted in low confidence in this option. The options discussed above are essentially for the risk-averse, people who think of safety and then quantum of return, in that order. For the brave, it is dabbling in the stock market.
  40. 40. 40 Stock markets provide an option to invest in a high risk, high return game. While the potential return is much more than 10-11 percent any of the options discussed above can generally generate, the risk is undoubtedly of the highest order. But then, the general principle of encountering greater risks and uncertainty when one seeks higher returns holds true. However, as enticing as it might appear, people generally are clueless as to how the stock market functions and in the process can endanger the hard-earned money. For those who are not adept at understanding the stock market, the task of generating superior returns at similar levels of risk is arduous to say the least. This is where Mutual Funds come into picture. MUTUAL FUNDS are essentially investment vehicles where people with similar investment objective come together to pool their money and then invest accordingly. Each unit of any scheme represents the proportion of pool owned by the unit holder (investor). Appreciation or reduction in value of investments is reflected in net asset value (NAV) of the concerned scheme, which is declared by the fund from time to time. Mutual fund schemes are managed by respective Asset Management Companies (AMC). Different business groups/ financial institutions/ banks have sponsored these AMCs, either alone or in collaboration with reputed international firms. Several international funds like Alliance and Templeton are also operating independently in India. Many more international Mutual Fund giants are expected to come into Indian markets in the near future. The benefits on offer are many with good post-tax returns and reasonable safety being the hallmark that we normally associate with them. Some of the other major benefits of investing in them are: NUMBER OF AVAILABLE OPTIONS Mutual funds invest according to the underlying investment objective as specified at the time of launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that cater to the different needs of the investor. The availability of these options makes them a good option. While equity funds can be as risky as the stock markets themselves, debt funds offer the kind of security that is aimed for at the time of making investments. Money market funds offer the liquidity that is desired by big investors who wish to park surplus funds for very short-term periods. Balance Funds
  41. 41. 41 acter to the investors having an appetite for risk greater than the debt funds but less than the equity funds. The only pertinent factor here is that the fund has to be selected keeping the risk profile of the investor in mind because the products listed above have different risks associated with them. So, while equity funds are a good bet for a long term, they may not find favour with corporates or High Networth Individuals (HNIs) who have short-term needs. DIVERSIFICATION Investments are spread across a wide cross-section of industries and sectors and so the risk is reduced. Diversification reduces the risk because all stocks don t move in the same direction at the same time. One can achieve this diversification through a Mutual Fund with far less money than one can on his own. PROFESSIONAL MANAGEMENT Mutual Funds employ the services of skilled professionals who have years of experience to back them up. They use intensive research techniques to analyze each investment option for the potential of returns along with their risk levels to come up with the figures for performance that determine the suitability of any potential investment. POTENTIAL OF RETURNS Returns in the mutual funds are generally better than any other option in any other avenue over a reasonable period of time. People can pick their investment horizon and stay put in the chosen fund for the duration. Equity funds can outperform most other investments over long periods by placing long-term calls on fundamentally good stocks. The debt funds too will outperform other options such as banks. Though they are affected by the interest rate risk in general, the returns generated are more as they pick securities with different duration that have different yields and so are able to increase the overall returns from the portfolio.
  42. 42. 42 LIQUIDITY Fixed deposits with companies or in banks are usually not withdrawn premature because there is a penal clause attached to it. The investors can withdraw or redeem money at the Net Asset Value related prices in the open-end schemes. In closed-end schemes, the units can be transacted at the prevailing market price on a stock exchange. Mutual funds also provide the facility of direct repurchase at NAV related prices. The market prices of these schemes are dependent on the NAVs of funds and may trade at more than NAV (known as Premium) or less than NAV (known as Discount) depending on the expected future trend of NAV which in turn is linked to general market conditions. Bullish market may result in schemes trading at Premium while in bearish markets the funds usually trade at Discount. This means that the money can be withdrawn anytime, without much reduction in yield. Some mutual funds however, charge exit loads for withdrawal within a period. Besides these important features, mutual funds also offer several other key traits. Important among them are: WELL REGULATED Unlike the company fixed deposits, where there is little control with the investment being considered as unsecured debt from the legal point of view, the Mutual Fund industry is very well regulated. All investments have to be accounted for, decisions judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The regulations, designed to protect the investors interests are also implemented effectively. TRANSPARENCY Being under a regulatory framework, mutual funds have to disclose their holdings, investment pattern and all the information that can be considered as material, before all investors. This means that the investment strategy, outlooks of the market and scheme related details are disclosed with reasonable frequency to ensure that transparency exists in the system. This is unlike any other investment option in India where the investor knows nothing as nothing is disclosed.
  43. 43. 43 FLEXIBLE, AFFORDABLE AND A LOW COST AFFAIR Mutual Funds offer a relatively less expensive way to invest when compared to other avenues such as capital market operations. The fee in terms of brokerages, custodial fees and other management fees are substantially lower than other options and are directly linked to the performance of the scheme. Investment in mutual funds also offers a lot of flexibility with features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans enabling systematic investment or withdrawal of funds. Even the investors, who could otherwise not enter stock markets with low investible funds, can benefit from a portfolio comprising of high-priced stocks because they are purchased from pooled funds. As has been discussed, mutual funds offer several benefits that are unmatched by other investment options. Post liberalization, the industry has been growing at a rapid pace and has crossed Rs. 100000 crore size in terms of its assets under management. However, due to the low key investor awareness, the inflow under the industry is yet to overtake the inflows in banks. Rising inflation, falling interest rates and a volatile equity market make a deadly cocktail for the investor for whom mutual funds offer a route out of the impasse. The investments in mutual funds are not without risks because the same forces such as regulatory frameworks, government policies, interest rate structures, performance of companies etc. that rattle the equity and debt markets, act on mutual funds too. But it is the skill of the managing risks that investment managers seek to implement in order to strive and generate superior returns than otherwise possible that makes them a better option than many others.
  44. 44. 44 DEFINITION OF RESEARCH In the broadest sense of the word, the definition of research includes any gathering of data, information and facts for the advancement of knowledge. The strict definition of scientific research is performing a methodical study in order to prove a hypothesis or answer a specific question. Finding a definitive answer is the central goal of any experimental process. Research must be systematic and follow a series of steps and a rigid standard protocol. These rules are broadly similar but may vary slightly between the different fields of science. Any type of ‗real‘ research, whether scientific, economic or historical, requires some kind of interpretation and an opinion from the researcher. This opinion is the underlying principle, or question, that establishes the nature and type of experiment. The scientific definition of research generally states that a variable must be manipulated, although case studies and purely observational science do not always comply with this norm. Research may be very broadly defined as systematic gathering of data and information and its analysis for advancement of knowledge in any subject. research attempts to find answer intellectual and practical questions through application of systematic methods. MEANING OF RESEARCH METHODOLOGY In day to day life human being has to face many problems viz. social, economical, financial problems. These problems in life call for acceptable and effective solutions and for this purpose, research is required and a methodology applied for the solutions can be found out. Method of research may vary from ‗problem to problem‘ or from ‗man to man‘.
  45. 45. 45 DEFINITION OF RESEARCH METHODOLOGY Research in common parlance refers to a search for knowledge. We can also define research as a scientific and systematic search for pertinent information as a specific topic. In fact, research is an arc of scientific investigation. The Advanced Learner‘s Dictionary of Current English lays down the meaning of research as ―a careful investigation or inquiry especially through search for new facts in any branch of knowledge.‖ Redman and Mory define research as a ―systematized effort to gain new knowledge.‖ Research is an academic activity and as such the term should be used in a technical sense. Research is, thus, an original contribution to the existing stock of knowledge making for its advancement. It is pursuit of truth with the help of study, observation, comparison and experiment. In short, the search for knowledge through objective and systematic method of finding solution to a problem is research. The systematic approach concerning generalization and the formulation of a theory is also research. As such the term‘ research refers to the systematic method consisting of enunciating the facts and reaching certain conclusions either in the form of solutions(s) towards the concerned problem or in certain generalizations for some theoretical formulation. TYPES OF RESEARCH Types of research can be classified in many different ways. some major ways of classifying research include the following. Descriptive versus Analytical Research Applied versus Fundamental Research Qualitative versus Quantitative Research Conceptual versus Empirical Research
  46. 46. 46 Descriptive research concentrates on finding facts to ascertain the nature of something as it exists. In contrast analytical research is concerned with determining validity of hypothesis based on analysis of facts collected. Applied research is carried out to find answers to practical problems to be solved and as an aid in decision making in different areas including product design, process design and policy making. Fundamental research is carried out as more to satisfy intellectual curiosity, than with the intention of using the research findings for any immediate practical application. Qualitative research studies such aspects of the research subject which are not quantifiable, and hence not subject to measurement and quantitative analysis. In contrast quantitative research make substantial use of measurements and quantitative analysis techniques. Conceptual research is involves investigation of thoughts and ideas and developing new ideas or interpreting the old ones based on logical reasoning. In contrast empirical research is based on firm verifiable data collected by either observation of facts under natural condition or obtained through experimentation. Deacriptive and Analytical research is applicable to the project METHODOLOGY USED: DESCRIPTIVE ANALYTICAL RESEARCH  Under this project use of facts and information already available is done and analyse them to make evaluation.  Data has been collected from the Fact sheet of the various mutual fund schemes and used those datas for the research. In fact sheet past returns were given of different funds.
  47. 47. 47  Data also included value of risk measuring instruments like Standard Deviation, Beta etc from the secondary data from the websites such as METHODOLOGY AND DATA SOURCE Required data of the companies under analysis has been taken from their respective annual reports which were available on their websites. Different figures of the companies have been taken from their balance sheet, profit and loss account, and income statements of the annual report as well as schedules associated with balance sheet. PROBLEM DEFINITION:- This study is based on descriptive and applied research. The working efficiency of IIFL has been studied by using the financial statements, the result of company has been summarized which helped in identifying the effectiveness of the company under preview. DATA COLLECTION APPROACH: Secondary data - Annual reports, financial statements, files and office document, various books, report, factsheets and internet. Primary data - Discussion with company guide & concerned persons. PRESENTATION OF DATA: Graphical presentation has been shown for all funds to understand how portfolio breaks up & pie charts for the allocation of funds and total returns.
  48. 48. 48 Asset allocation is the key to investing success as it helps you reduce the volatility of returns. by investing in equity for capital appreciation and debt for stable returns, you can reduce instability of returns by increasing / decreasing exposure to various markets, based on in-depth research and analysis . 1. ICICI PRUDENTIAL DISCOVERY FUND Investment Objective of ICICI Prudential Discovery : Primary objective is to generate returns through a combination of dividend income and capital appreciation by investing primarily in a well diversified portfolio of value stocks. Scheme Details Category Diversified Fund Manager Mrinal Singh Net Assets (Rs m) - (31-Aug-2012) Expense Ratio 0.00% (31-Mar-2012) Entry Load 0 Exit Load 0 Min. Invt. (Rs) 5,000.00 Addl. Invt. (Rs) 500.00 SIP (Rs) 1,000.00 Inception 16-Aug-2004
  49. 49. 49 ICICI PRUDENTIAL DISCOVERY FUND - INVEST Value investing limits the risks Even though mid-cap stocks have been major laggards so far this year, there still are pockets of value in this segment. Investors looking to add some midcap exposure to their investments can consider buying units of ICICI Prudential Discovery Fund. The fund follows a ‗value investing' strategy and therefore comes tagged with lower risks than its mid-cap focused peer funds.
  50. 50. 50 This holds considerable investment merit in the present market. A decent returns scorecard and a promising portfolio of stocks also add up in the fund's favour. Investors may, however, consider a phased exposure by way of a systematic investment plan, given the high volatility in the markets at present. SUITABILITY Though the fund makes for a lower-risk option within the universe of midcap stocks, the risks are far higher in relation to large-cap or index funds. The fund, therefore, makes a good investment option for investors with some appetite for risk. That apart, the fund's value-investing strategy and mid-cap bias necessitate a long-term investment horizon. PERFORMANCE While the fund's one-year returns are in the negative, it is better than that of its benchmark CNX Midcap. The margin of outperformance over a three-year period however is way higher. During a three-year period, the fund delivered a compounded return of approximately 18 per cent. This compares quite favourably with many of its peers. It also enjoys a fairly reasonable record in containing downsides. For instance, between January 2008 and March 2009, the Discovery Fund managed to contain the fall in its Net Asset Value (NAV) to approximately 59 per cent, marginally less than the Sensex. That even diversified funds with relatively a large-cap bias struggled to do this during the period highlights the efficacy of the fund's value-investing approach. Its five-year returns, however, are just in line with its benchmark, as the fund had been a marked underperformer in the bull markets of 2006 and 2007. The fund has, however, managed to improve its performance since then. Its returns during one-, three- and five-year periods compare favourably with its category average too. PORTFOLIO While there is no doubt that investing in midcap stocks is now ridden with risks, the fund's portfolio choices have been somewhat offbeat. Contrarian and dividend yield
  51. 51. 51 stocks (and sectors) with a focus on low Price-Earnings (PE) stocks make up its portfolio. The fund has also occasionally dabbled in derivatives and made periodic cash calls while rebalancing its equity exposure. Its portfolio is also prone to frequent changes, and therefore enjoys a relatively high portfolio turnover. In its current portfolio, large-caps (stocks with more than Rs 7,500 crore market capitalisation) make up more than 36 per cent of its overall portfolio, while mid- and small-caps make up 24 per cent and 34 per cent, respectively. While banks, software, auto ancillary, and cement make up its top sectors in its latest portfolio, the stock choices within that aren't typical. For instance, stocks such as Rain Commodities, CESC and Standard Chartered PLC find a place in its top ten stocks' list. 2. ICICI PRUDENTIAL TOP 100 FUND Investment Objective of ICICI Prudential Top 100 Fund: ICICI Prudential Top 100 Fund seeks to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities of large, profitable and well known companies. Scheme Details Structure : Open-ended Equity Fund Inception Date : June 19, 1998 Plans and Options under the Plan : Retail & Institutional plans with Dividend/Growth option. Face Value (Rs/Unit): Rs. 10 Minimum Investment : Retail: Rs.5000 and in multiples of Re. 1 thereafter. Institutional: Rs. 1 lac and in multiples of Re. 1 thereafter. Entry Load : Nil. Exit Load : Nil.
  52. 52. 52 ICICI PRUDENTIAL TOP 100 FUND: INVEST The fund has delivered superior returns while assuming lower risks than a passive index. August 25, 2012: Investments with a three-year horizon can be considered in units of ICICI Prudential Top 100 fund (Top 100).
  53. 53. 53 The fund has been a consistent performer in the large-cap space and has emerged as a top-performing fund over the last one year. The three- and five-year annualised returns of the fund were 9.6 per cent and 7.4 per cent respectively, compared with the 6.1 per cent and 5.4 per cent returns of the benchmark S&P CNX Nifty in the above periods. This fund was earlier called ICICI Pru Growth. Its name was changed to reflect the strategy better. SUITABILITY Top 100 is suitable for conservative investors who wish to contain declines in their portfolio. As there are funds such as Franklin Bluechip and DSPBR 100 that have delivered superior returns over the long term, these funds are preferred for the core of a long- term wealth-building portfolio. This fund may best serve as a diversifier. Investments have to be made with a long- term horizon. Systematic investment plans will be a preferred route. PERFORMANCE The fund has managed to contain downside better than its benchmark during periods of market correction (from January 2008 to March 2009 and November 2010 to December 2011). The historical beta (over five years) of the fund is 0.9 — indicative of the fund‘s lower volatility in relation to its benchmark. On the other hand, the risk-adjusted return as measured by sharpe ratio is also high at 0.13 compared with CNX Nifty‘s sharpe ratio of 0.09 (the risk-free rate was assumed at 7 per cent). This indicates that the fund has delivered superior returns while assuming lower risks than a passive index. The fund also takes derivative positions to reduce the volatility in its returns. While the short positions taken by the fund may not be known in the monthly portfolio, high portfolio turnover and high net current asset holdings appear to indicate hedged positions (short) to reduce the fund‘s downside.
  54. 54. 54 But such hedging strategy may also result in capping returns if markets see a sudden rally. On a one-year rolling return basis, Top 100 has outperformed its benchmark 82 per cent of the time in the last four years. The underperformance came during periods of a sharp rally where it was a bit slow to catch up with the index. But from the Decmeber-2011 lows to date, the fund bucked the trend and gave a 21.4 per cent return from December lows as against Nifty‘s return of 19.1 per cent. In December, the fund took the opportunity to invest most of its funds in equities with its current-asset holdings declining to a multi-year low. Given the buying opportunity in cash segment, the company may have taken lower short positions in the derivative market. High holding in pharma stocks, which witnessed a sound rally this year (so far), also helped. PORTFOLIO As of July 2012, the average market capitalisation of stocks in the fund was Rs 82,000 crore. The total stock holdings was limited to 26 stocks. As of July, the fund also had long position in futures of Nifty Index and the stock of SBI. 3. FRANKLIN INDIA PRIMA PLUS FUND Investment Objective of Franklin India Prima Plus : A diversified equity fund that seeks to provide capital appreciation by investing in companies focused on shareholder wealth creation. It is an open ended growth scheme with the objective to provide growth of capital plus regular dividends through a diversified portfolio of equities, fixed income securities and money market instruments. Scheme Details Category Diversified Fund Manager Anand Radhakrishnan
  55. 55. 55 Net Assets (Rs m) 18,051.900 (31-Aug- 2012) Expense Ratio 0.00% (31-Aug-2012) Entry Load 1.0 % Exit Load 0 Min. Invt. (Rs) 5,000.00 Addl. Invt. (Rs) 1,000.00 SIP (Rs) Inception 500.00 29-Sep-1994 FRANKLIN INDIA PRIMA PLUS: INVEST September 22, 2012:
  56. 56. 56 Conservative investors can buy the units of Franklin India Prima Plus (Prima Plus). The fund exhibits an ability to contain losses during market downturns as well as provide reasonable upside in rallies. Prima Plus has a long track-record of over 15 years and has consistently beaten its benchmark. Over one-, three- and five-year timeframes, the fund made a compounded annual return of 8.8, 8.7 and 6.8 per cent, respectively, outpacing its benchmark by about two to six percentage points in these periods. Its 26 per cent compounded annual return in the last ten years places it in the top quartile of diversified equity funds, categorised by returns. SUITABILITY Prima Plus has a mandate to invest primarily in large-cap stocks, with a marginal mid/small-cap exposure. This strategy comes in handy during market corrections. For example, during the meltdown between January 2008 and March 2009, while the CNX 500 Index lost 64 per cent of its value, the fund limited the fall in its NAV (Net Asset Value) to 56 per cent. What‘s more, Prima Plus‘s consistency in performance adds credence to its suitability for conservative investors. On a one-year rolling return basis, the fund‘s return beat the benchmark 85 per cent of the time in the last five years. But the fund did not outperform its benchmark during recent upswings such as the one in 2007 or 2009-10. These aspects make the fund more suitable for investors who have a limited risk appetite and those who look for moderate rather than spectacular returns. PORTFOLIO AND PERFORMANCE During the bull markets of 2007, the fund mustered only 69 per cent returns compared with 82 per cent returns clocked by the CNX 500 index. Similarly, in the March 2009- Novemebr 2010 run-up, the fund sported 153 per cent returns as against the 163 per cent garnered by the CNX 500.
  57. 57. 57 During this period, Prima Plus also underperformed peers such as HDFC Equity and Reliance Vision. Lower exposure to IT, Pharma and Auto stocks that did well in this season could be a reason. The fund has, however, bettered its peers in the last one year. Although still not in the top-quartile of the diversified funds category, Prima Plus‘s one-year return of 8.8 per cent is better than that of HDFC Equity and DSP BR Equity. The returns could have been higher but for the increased holdings in the telecom sector (8-13 per cent) which was bogged down by regulatory issues and tariff pressures. Although its consumer non-durable holdings increased over the last one year, the fund did not latch firmly on to this defensive bet, holding less than 5 per cent in the space. Banks, Pharma, Telecom and Cement have remained the top sector bets in the last one year. The NAV per unit of the growth option is Rs 227.97. 4.RELIANCE BANKING FUND Investment Objective of Reliance Banking : The primary investment objective of the Scheme is to seek to generate continuous returns by actively investing in equity and equity related securities of companies in the Banking Sector and companies engaged in allied activities related to Banking Sector. Scheme Details Category Sector Fund Manager Sanjay Parekh Net Assets (Rs m) - (31-Aug-2012) Expense Ratio 0.00% (31-Mar-2012) Entry Load 1.0 % Exit Load 0 Min. Invt. (Rs) 5,000.00 Addl. Invt. (Rs) 1,000.00
  58. 58. 58 SIP (Rs) 100.00 Inception 28-May-2003 RELIANCE BANKING FUND: INVEST September 3, 2011: Fresh investments through the systematic investment route can be considered in units of Reliance Banking Fund, a theme fund that invests in banks and non-banking finance companies (NBFC). The scheme has been a top performer in the banking fund category, outperforming its benchmark (Bank Nifty) in the one-, three and five year time-frames. The fund delivered 20 per cent and 23 per cent annualised returns over three-year and five-year periods, a good 4.8 percentage points and 7.5 percentage points higher than its benchmark.
  59. 59. 59 NEAR-TERM CONCERNS While near-term concerns haven't entirely abated in the banking sector, valuations of stocks in the space are at a steep discount to their November 2010 highs. Public sector banks (PSBs) represented by CNX PSU Bank index, for instance, are trading at 1.3 times their current book value as against 2.5 times multiple during the November 2010 peaks. Further, Bank Nifty index is at a 20 per cent discount to its four-year historic average valuations. Reliance Banking slipped into losses over the last few months, in line with the sharp correction witnessed in banking stocks. Concerns over the sharp rise in interest rates impacting banks' margins as well as asset quality (these being already visible) led to banking stocks being beaten down. While we expect these two concerns to abate only post the interest rate peak, forecasts have it that interest rates may peak in a quarter or two from now. The current valuations of banking stocks, though, appear to have factored in these concerns. Initial signs of credit pick-up during the fortnight ended August 12 and expectation of a policy rate pause after a possible 25-basis-point hike in the next policy provide initial signs that there may be better times ahead for the sector. SUITABILITY Given that the sector is likely to remain volatile for some more time, SIPs over the next year or so would help investors average costs. Theme funds, in general, have higher risk (due to sector concentration), which once again pegs up the fund's risk profile over diversified funds. Over the last six months, Reliance Banking has under-performed broad market index S&P CNX 500. PORTFOLIO AND PERFORMANCE Reliance Banking has a Sharpe ratio (risk adjusted return on weekly rolling basis over the last five years) of 0.09, against 0.06 delivered by the Goldman Sachs (earlier called Benchmark) Bank Exchange Traded Fund. This indicates a superior return for a given level of risk.
  60. 60. 60 While 70 per cent of the benchmark Bank Nifty's weight is split between ICICI Bank, HDFC Bank and SBI, Reliance Banking portfolio is well diversified with no stock accounting for more than 15 per cent of the portfolio. The fund, however, has high exposure to public sector banks which may result in short-term underperformance given the lingering concerns. Mid-cap banks and NBFCs, though, helped it outperform its benchmark consistently in the last one-and-a half-years. The fund outperformed its benchmark 87 per cent of the time over the last four years, on a rolling return basis. IDEAL PORTFOLIO Aim of the project To construct a portfolio of capital Rs 1000000, keeping in mind the current Indian and global market scenario so as to maximize the returns within time horizon of 5 years. PROFILE Name Age Annual Income Mr. Sethi 32 Rs. 12,00,000 Mrs. Sethi 31 Rs. 8,00,000 Ayush Sethi 4 Nil Risk bearing capacity: Moderate
  61. 61. 61 Objective:  Long term investments  Children plan  Pensions  Equity exposure Investment: Rs 10, 00000 P.a. ALLOCATION After considering the risk taking capacity of the investor, the fund will be allocated to various assets classes in the following manner: Asset/Instrument Amount(Rs) Percentage (%) Equity 370000 37 Bonds/F.D 225000 22.5 Mutual Funds 200000 20 Pension Funds and Child Plans 60000 6 Liquid Funds 145000 14.5
  62. 62. 62 Equity stocks Sector Cmp (rs.) Return (1 yr.) Qty Amt(Rs.) Infosys I.T 3148 28.79% 20 62960 Axis Bank Banking 1324.1 29.64% 75 99308 Hindalco Ind Ltd. Steel 220 49.26% 700 154000 ACC Ltd. Cement 1077 23.96% 50 53850 Total Equity 370118 IT SECTOR The Indian information technology (IT) industry has played a key role in putting India on the global map. Over the past decade, the Indian IT-BPO sector has become the Equity Bond/F.D Mutual Fund P.F Liquid Fund Pie Chart 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 5th Qtr
  63. 63. 63 country‘s premier growth engine, crossing significant milestones in terms of revenue growth, employment generation and value creation, in addition to becoming the global brand ambassador for India. According to a research report published by National Association of Software and Service Companies(NASSCOM), ‗IT-BPO Sector in India: Strategic Review 2010,‘ the IT-BPO industry is estimated to aggregate revenues of US$ 73.1 billion in FY2010, with the IT software and services industry accounting for US$ 63.7 billion of revenues. The report estimates export revenues to gross US$ 50.1 billion in FY2010, growing by 5.4 per cent over FY2009, and contributing 69 per cent of the total IT-BPO revenues. Software and services exports (including BPO) are expected to account for over 99 per cent of total exports, employing around 1.8million employees. IT services is expected to grow by 2.4 per cent in 2010, and 4.2 per cent in 2011 as companies coming out of recession harness the need for information technology to create competitive advantage. NASSCOM said that the domestic IT-BPO is expected to grow by 15-17 per cent during FY11. According to NASSCOM, the industry will witness a healthy growth in 2010, led by growth in the core markets and supplemented by significant contributions from emerging markets. Growth drivers include a thrust on platform BPO, Analytics, Finance & Accounting, Remote Infrastructure Management, ADM, and Cloud Services. The annual survey on the outlook for FY10-11 said that the growth in the domestic IT-BPO spend is driven by a robust economy, increased IT spending by government and adoption of IT by SMBs. BANKING SECTOR The Banking sector in India has always been one of the most preferred avenues of employment. In the current decade, this has emerged as a resurgent sector in the Indian economy. As per the Mc Kinsey report ‗India Banking 2010‘, the banking sector index has grown at a compounded annual rate of over 51per cent since the year 2001, as compared to a 27 per cent growth in the market index during the same period. It is projected that the sector has the potential to account for over 7.7 per cent of GDP with over Rs.7, 500 billion in market cap, and to provide over 1.5 million jobs. Today, banks have diversified their activities and are getting into new products and services that include opportunities in credit cards, consumer finance, wealth
  64. 64. 64 management, life and general insurance, investment banking, mutual funds, pension fund regulation, stock broking services, custodian services, private equity, etc. Further, most of the leading Indian banks are going global, setting up offices in foreign countries, by themselves or through their subsidiaries. STEEL SECTOR India is the 5th largest producer of steel in the world. Credit Suisse says that India‘s steel sector will continue to grow by 16% annually until 2012 fuelled by demand for construction projects up to USD 1trillion. The Ministry of Steel has projected that the steel capacity is likely to be 124.06 million tones by2011-12. Also, based on the status of MOUs signed by the private producers with the various State Governments, it is expected that India‘s steel capacity would be nearly 293 million tons by 2020. CEMENT INDUSTRY The cement industry is one of the vital industries for economic development in a country. The total utilization of cement in a year is used as an indicator of economic growth. Cement is a necessary constituent of infrastructure development and a key raw material for the construction industry, especially in the government‘s infrastructure development plans in the context of the nation‘s socioeconomic development. FUTURE TRENDS The cement industry is expected to grow steadily in 2012-2013 and increase capacity by another 150 million tons in spite of the recession and decrease in demand from the housing sector. The industry experts project the sector to grow by 9 to 10% for the current financial year provided India's GDP grows at 7%. India ranks second in cement production after China.
  65. 65. 65 BOND/F.D. ALLOCATION LIC Infrastructure Bonds If you are tax payer then you can save more tax by investing in LIC Infrastructure Bond. AdditionalRs.20, 000 Tax Exemptions under Section 80CCF. LIC Infrastructure Bond at Glance: Term: 10 years Minimum lock in period: 5 years Loan on Bond: After 5 years Interest Rate: 7.85%-7.95% after tax. Exit options: Buy back or through Demat account Open for Individual or HUF. Any individual or HUF can invest in LIC‘s Infrastructure Bonds Between Rs.5000 – Rs.20,000/- This will be over the Rs.1 lakh deduction allowed under Section 80C. Tax benefit example: If you are in highest tax payers bracket of 30% can save an additional Rs 6,000 and if you happen to fall in the lower tax bracket then you can still save Rs.2,000/- by investing in LIC infrastructure bonds this financial year.LIC infrastructure bonds not only offers capital safety but also offers fixed returns through ECS. TERM: The infrastructure bonds will have a maturity of 10 years and lock-in period of 5 years. After lock in period is over, you can ask issuer (LIC) to buy back bonds or you can trade these bonds in stock Exchange. Amount Invested: Rs 125000 FIXED DEPOSIT The investor is advised fix deposit of Rs 100000
  66. 66. 66 And maintain a balance of Rs 100000 in his bank account, this will help for unforeseen circumstances in the future and also help in getting a return of around 8.5% p.a. MUTUAL FUND ALLOCATION Mutual Fund Amount(Rs.) Return DSP Blackrock Micro Cap Fund- Growth 76905 15.06 HDFC Monthly Income Plan- Growth 76905 12.50 Fidelity Tax Advantage Fund- Div 48000 17.70 Total 201810  DSP BLACKROCK MICRO CAP FUND – GROWTH Objectives Seeks to generate long term capital appreciation and current income from a portfolio constituted of equity and equity related securities as well as fixed income securities. Fund Features Type of Scheme : Open Ended Nature : Equity & Debt Option : Growth Inception Date : May27, 1999 Face Value (Rs/Unit) :10
  67. 67. 67 Fund Size in Rs. Cr. : 773.96 as on Nov 30, 2010 Fund Manager : Apoorva Shah. SIP : Yes STP : No SWP : No Expense ratio (%) : 2.08 Portfolio Turnover Ratio (%) : 250  HDFC MONTHLY INCOME PLAN – GROWTH Objective The primary objective of the Scheme is to generate regular returns through investment primarily in Debt and Money Market Instruments. The Secondary objective of the scheme is to generate long term capital appreciation by investing a portion of the Scheme‘s assets in equity and equity related instruments. Fund Features Type of Scheme :Open Ended Nature : Debt Option :Growth Inception Date : Dec 26, 2003 Face Value (Rs/Unit) : 10 Fund Size in Rs. Cr. :702.15 as on Nov 30,2010 Fund Manager : Vinay Kulkarni & Shobhit Malhotra SIP : Yes STP : No SWP : No Expense ratio(%) : 1.72 Portfolio Turnover Ratio(%) : N/A
  68. 68. 68  FIDELITY TAX ADVANTAGE FUND – DIVIDEND Objective The investment objective of the Scheme is to generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities. Fund Features Type of Scheme : Open Ended Nature : Equity Option : Income Divedend Inception Date : Feb27, 2006 Face Value (Rs/Unit) : 10 Fund Size in Rs. Cr. : 1294.37 as on Oct 29, 2010 Fund Manager : Sandeep Kothari SIP : Yes STP : No SWP : No Expense ratio(%) : 2.00 Portfolio Turnover Ratio(%) : 25  PENSION FUNDS & CHILD PLANS ALLOCATION SBI RETIREMENT PLAN (PENSION FUND) Under SBIHorizon IIPension Plan, your moneyis invested in equity, bond or moneypension funds. The investment plans also varyaccording to the proportion of moneyinvested inequity funds. In case of SBI Unit plus II Pension Plans, you get to choose between pure pension and pension cum life cover plans with flexibility to increase regular contributions, top up payments and customize the plan byaddition of riders. Investment in SBI Life Long Pension Plans helps you avail tax deduction of up to Rs. 1, 00, 000 p.a. with 4 % p.a. minimum
  69. 69. 69 guaranteed returns and tax-free withdrawals of up to 33 % from the Personal Pension Account. Amount: Rs 33000 LIC- CHILD FUTURE PLAN Introduction: This plan is specially designed to meet the increasing educational, marriage and other needs of growing children. It provides the risk cover on the life of child not only during the policy term but also during the extended term (i.e. 7 years after the expiry of policy term). A number of Survival benefits are payable on surviving by the life assured to the end of the specified durations. Options: You may choose Sum Assured (S.A.), Maturity Age, Policy Term, Mode of Premium payment and Premium Waiver Benefit. Payment of Premiums: You may pay the premiums regularly at yearly, half-yearly, quarterly or through Salary deductions over the term of policy. Premiums may be paid either for 6 years or upto 5 years before the policy term Amount: Rs 27000 LIQUID FUND ALLOCATION GOLD: The amount to be invested in gold would be Rs. 100000; it is a very liquid security and has been appreciating over many years. Gold prices increased approximately by 30% in the current year. Thus it would be a very beneficial investment based on liquidity and returns.
  70. 70. 70 CASH: It is very important to maintain certain amount of cash in hand in order to cope up with uncertain events that can arise over a period of time. The amount to be kept on hand would be Rs. 45000. TOTAL RETURN Asset/ Instrument Return % Return Equity 136323 36.83 Bond/ F.D. 18163 8.07 Mutual Fund 29690 14.71 Gold * 15000 15 Total 199176 19.92
  71. 71. 71 *The return for Gold is estimated using a very conservative approach The return calculated for the period of 1 year is estimated to be 19.92%. Considering the CAGR for the period of 5years, the return expected is 148%. However the return is not guaranteed, it is totally based on the market scenario over the time horizon. Equity 37% Bonds 8% Mutual Fund 15% Gold 15% Sales 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
  72. 72. 72 LIMITATIONS This report gives an insight about portfolio management, role of loan against gold and mutual fund schemes but with few limitations as follows: The big question is how to judge a mutual fund before investing? It is important for an investor to consider a fund s performance over several years. The report only analyses equity mutual fund schemes of only some funds and there are around 34 AMCs offering wide range of scheme but to analyze them is a tedious task. Different fund managers adopt different strategies to improve performance. While one fund manager may have invested in speculative stocks may over a period, another one who have invested in speculative stocks may have struck gold in that year to outperform the former by a long way. Lack of proper knowledge and awareness about advantages and disadvantages associated with various schemes among the investor. Usually there is a tendency among investors to ignore the consistency of returns over a period of time rather they focus on absolute returns generated in the short term.
  73. 73. 73 SUGGESTIONS The Ground rules to be considered for portfolio management & Mutual Fund Investment Moses gave to his followers 10 commandments that were to be followed till eternity. The world of investments too has several ground rules meant for investors who are novices in their own right and wish to enter the myriad world of investments. These come in handy for there is every possibility of losing what one has if due care is not taken. 1.Assess yourself: Self-assessment of one s needs; expectations and risk profile is of prime importance failing which, one will make more mistakes in putting money in right places than otherwise. One should identify the degree of risk bearing capacity one has and also clearly state the expectations from the investments. Irrational expectations will only bring pain. 2. Try to understand where the money is going: It is important to identify the nature of investment and to know if one is compatible with the investment. One can lose substantially if one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go through the literature such as offer document and fact sheets that mutual fund companies provide on their funds. 3. Don't rush in picking funds, think first: one first has to decide what he wants the money for and it is this investment goal that should be the guiding light for all investments done. It is thus important to know the risks associated with the fund and align it with the quantum of risk one is willing to take. One should take a look at the portfolio of the funds for the purpose. Excessive exposure to any specific sector should be avoided, as it will only add to the risk of the entire portfolio. Mutual funds invest with a certain ideology such as the "Value Principle" or "Growth Philosophy". Both have their share of critics but both philosophies work for investors of different kinds. Identifying the proposed investment philosophy of the fund will give an insight into the kind of risks that it shall be taking in future. 4. Invest. Don t speculate: A common investor is limited in the degree of risk that he is willing to take. It is thus of key importance that there is thought given to the
  74. 74. 74 process of investment and to the time horizon of the intended investment. One should abstain from speculating which in other words would mean getting out of one fund and investing in another with the intention of making quick money. One would do well to remember that nobody can perfectly time the market so staying invested is the best option unless there are compelling reasons to exit. 5. Don t put all the eggs in one basket: This old age adage is of utmost importance. No matter what the risk profile of a person is, it is always advisable to diversify the risks associated. So putting one s money in different asset classes is generally the best option as it averages the risks in each category. Thus, even investors of equity should be judicious and invest some portion of the investment in debt. Diversification even in any particular asset class (such as equity, debt) is good. Not all fund managers have the same acumen of fund management and with identification of the best man being a tough task, it is good to place money in the hands of several fund managers. This might reduce the maximum return possible, but will also reduce the risks. 6. Be regular: Investing should be a habit and not an exercise undertaken at one s wishes, if one has to really benefit from them. As we said earlier, since it is extremely difficult to know when to enter or exit the market, it is important to beat the market by being systematic. The basic philosophy of Rupee cost averaging would suggest that if one invests regularly through the ups and downs of the market, he would stand a better chance of generating more returns than the market for the entire duration. The SIPs (Systematic Investment Plans) offered by all funds helps in being systematic. All that one needs to do is to give post-dated cheques to the fund and thereafter one will not be harried later. The Automatic investment Plans offered by some funds goes a step further, as the amount can directly/electronically transferred from the account of the investor. 7. Do your homework: It is important for all investors to research the avenues available to them irrespective of the investor category they belong to. This is important because an informed investor is in a better decision to make right decisions. Having identified the risks associated with the investment is important and so one should try to know all aspects associated with it. Asking the intermediaries is one of the ways to take care of the problem.
  75. 75. 75 8. Find the right funds: Finding funds that do not charge much fees is of importance, as the fee charged ultimately goes from the pocket of the investor. This is even more important for debt funds as the returns from these funds are not much. Funds that charge more will reduce the yield to the investor. Finding the right funds is important and one should also use these funds for tax efficiency. Investors of equity should keep in mind that all dividends are currently tax-free in India and so their tax liabilities can be reduced if the dividend payout option is used. Investors of debt will be charged a tax on dividend distribution and so can easily avoid the payout options. 9. Keep track of your investments: Finding the right fund is important but even more important is to keep track of the way they are performing in the market. If the market is beginning to enter a bearish phase, then investors of equity too will benefit by switching to debt funds as the losses can be minimized. One can always switch back to equity if the equity market starts to show some buoyancy. 10. Know when to sell your mutual funds: Knowing when to exit a fund too is of utmost importance. One should book profits immediately when enough has been earned i.e. the initial expectation from the fund has been met with. Other factors like non-performance, hike in fee charged and change in any basic attribute of the fund etc. are some of the reasons for to exit. Investments in mutual funds too are not risk-free and so investments warrant some caution and careful attention of the investor. Investing in mutual funds can be a dicey business for people who do not remember to follow these rules diligently, as people are likely to commit mistakes by being ignorant or adventurous enough to take risks more than what they can absorb. This is the reason why people would do well to remember these rules before they set out to invest their hard-earned money. CONCLUSION After studying & analyzing different mutual fund schemes the following conclusions can be made: