project on portfolio management

INTRODUCTION

Financial planning is the process of identifying ones wealth accumulation and protection goals and developing a coordinated plan to help priorities ones future financial decision. Financial planning should be taken as seriously as a medical prescription, as it deals with ones financial health. It should be seen not just as a means of achieving financial security, but as making a vital contribution to ones overall happiness and peace of mind.

Financial planning can be manageable or overwhelming depending upon how one approaches it. Without guidance; its hard to know what one needs and when one needs it. With right information, tools and timeline, the choices become much easier.

In fact too many people are investing in MUTUAL FUNDS. After all its common knowledge that investing in mutual fund is {or at least should be} better than simply letting your cash waste in a saving account, but for most people thats where the understanding of funds end. It doesnt help that mutual fund sale people speak a strange language that, that sounding sort of English, is interspersed with jargon like NAV, load/no-load, etc.

Originally MUTUAL FUNDS were heralded as a way for the little guy to get a piece of a market. Instead of spending all the free time buried in the financial pages of ECONOMIC TIMES all one has to do is buy a mutual funds and be set on his way to financial freedom. But its not that easy. MUTUAL FUNDS are in excellent idea in theory but in reality they havent always delivered. Not all mutual funds are created equal, and investing in mutual fund isnt easy as throwing ones money at the first sales person who solicits business.

PROJECT TITLE

The title of my project is:

PORTFOLIO MANAGEMENT AND EFFECTIVE INVESTMENT ADVICE.

REASON FOR SELECTION OF THIS TOPIC

Theoretical Knowledge without Practical Experience is like a Body without Soul. So without Practical implementations, theory remains no use. Hence we need to gain the Practical Experience. And what better would be, then a Project work for the same.

Also as a part of our MBA curriculum, we need to undergo the training programmed for minimum of 60 days, in a company.

I selected area of STOCK TRADING AND MUTUAL FUND INDUSTRY, which pools the funds & reduces risk by investing in different diversified assets. I studied as to how this industry proves to an option for the investors, by studying the performance of mutual funds.

Hence this is a project work on a Portfolio Management and Effective Investment Advice.

Generally when we decide to study the investment options available in Todays complex & risky scenario, we should thoroughly evaluate the option upon various factors. These factors should include: The Past Performance of the option under study

Risk adjusted returns from the invested plan

Share in the Portfolio Policy

Fund HouseOBJECTIVES AND SCOPE

OBJECTIVE OF THE STUDYObjectives:

1. To understand the concept of Portfolio management.

2. To study the various asset classes available for investment.

3. To analyze what investments are suitable for what type of investors according to their risk profile and other factors.

4. To understand the investment opportunities available in the market.

SCOPE OF THE STUDY

The project is related to wealth management which covers various asset classes like equity, bond, mutual fund wherein investors can invest their money to get good returns. Investment has to be planned according to their risk bearing capacity as well as other factors like investment objectives, return expected, taxation, age factor, etc.Project consists of 4 case studies in form of clients profile wherein various life cycle stages are covered and accordingly advised investments by taking taxation part into consideration.

COMPANY PROFILE

SHAREKHAN FINANCIAL SERVICES PVT. LTD.Sharekhan Limited is a retail financial services provider with a focus on equities, derivatives and commodities brokerage execution on the National Stock Exchange of India Ltd. (NSE), Bombay Stock Exchange Ltd. (BSE), National Commodity and Derivatives Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX). Sharekhan provides trade execution services through multiple channels - an Internet platform, telephone and retail outlets and is present in 225 cities through a network of 615 locations. The company was awarded the 2005 Most Preferred Stock Broking Brand by Awaaz Consumer Vote.Incorporated in November 2004 as a wholly owned subsidiary of Sharekhan Ltd, SFSL was primarily involved in the business of share trading till FY07. In April 2007 the proprietary (arbitrage) book of SFSL was transferred to the parent company and currently SFSL is engaged in the IPO funding business only. SFSL is registered with RBI as a Non-Banking Financial Institution (NBFC).

During FY06-07, SFSL booked a net profit of Rs 23.92 million on a total income of Rs 1.09 billion as compared to a net profit of Rs 8.75 million booked on a total income of Rs 25.36 million in FY05-06.

As on March 31, 2007 SFSL had a net worth of Rs 0.13 billion and the parent - Sharekhan Ltd has infused another Rs 0.10 billion of equity capital in January 2008.

Sharekhan Ltd (SKL) was setup by the Morakhia family who has been in the equity broking business for decades. Till March 31, 2007, Morakhia family owned 43.58% stakes in SKL and the balance primarily held by three venture capital firms namely HSBC Private Equity India Fund Ltd. (14.56%), GA Global Investments Ltd (22.76%) and Intel Pacific Inc. During August 2007, promoters and the PE players exited the SKL and other PE players CVC and Samara Capital along with IDFC picked up their stakes. They also infused fresh capital (Rs 2 billion) through Fully Convertible Debentures (FCD). Post conversion of the FCD, CVC will be the majority stake holder with 45.14% stakes, Samara Capital holding 36.16%, IDFC holding 9.16% and rest with directors and employees of SKL. The main business activity of the company is retail share broking with small presence in the portfolio management services.

During FY06-07, SKL booked a net profit of Rs 275.15 million on a total income of Rs 2,202.01 million as compared to the net profit of Rs 275.66 million booked on a total income of Rs 1,617.38 million in FY05-06.

During H1 FY 07-08, SKL booked a net profit of Rs 242.76 million on a total income of Rs 1,815.87 million.

ICRA has assigned the A1 (pronounced A one) rating to the Rs 2 billion short -term debt programme of ShareKhan Financial Services Pvt. Ltd. (SFSL) for IPO financing. The rating for the same is valid till February 28, 2008. The rating indicates the highest-credit-quality rating assigned by ICRA to short term debt instruments. Instruments rated in this category carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of A1+ to reflect their relatively stronger credit quality. The rating factors in the parentage of Sharekhan Ltd. (100% ownership) having adequate experience in the retail equity broking. The rating also factors in the favorable Sharekhan brand image, groups comfortable capitalisation, and adequate risk management systems employed by the Company. The rating is constrained by the dependence of SFSL on the cyclical nature of Sharekhan Ltds primary business of equity broking, and short track record of IPO financing and margin funding.HEIRARCHY OF FINANCIAL DEPARTMENT:

SHAREKHAN accounts all the financial data and sends it to the head office in Pune. This data is compiled by the manager and forwarded to the Mumbai Head Office, Chief Accountant. Then, the financial reports are made at the Mumbai head office and statements are sent to the Head Accountant in Pune.

Monthly statements are made and the meeting of the managers from all the branches is conducted to keep a close control on finances.

SHAREKHAN DEMAT

Account opening: You can open a Depository Participant (DP) account, either through a Sharekhan branch or through a Sharekhan Franchisee center.

There is Rs. 49 fee for opening DP accounts with Sharekhan. However a nominal deposit (refundable) is charged towards services which will be adjusted against all future billings.

Dematerialization:

Dematerialization is the process by which a client can get his electronic holdings converted into physical certificates. The client has to submit the dematerialization request to the DP with whom he has an account along with a Remat request form. The physical shares will be posted by the company directly to the clients.

Trades:

For all sales made by clients, the shares will have to be given to the broker, so that the Pay In can be made by the broker to the stock exchange concerned. For that it's essential that the shares be transferred to the account of the broker well before the deadline date.

You must confirm with your broker the settlement date and settlement number and then submit your instructions to your DP. Also it's important to give the instructions to your DP as early as possible.

Pledge:

Pledge enables you to obtain loans against your dematerialized shares. So you get liquidity without having to sell your shares.

A highly simplified procedure may be availed of for pledging of securities in the electronic mode. The pledged securities continue to be reflected in the DP account of the clients (pledgor) but the concerned securities are "blocked" and cannot be used for any transactions. As and when the pledge is to be removed, based on confirmations received from both the pledgor and the pledgee, the blocked securities will be released to "Free Balance" of the account holder.

Corporate benefits:

Corporate benefits are benefits given by a company to its investors. These may be either monetary benefits like dividend, interest etc or non-monetary benefits like bonus, rights etc. NSDL facilitates distribution of corporate benefits. It's important to mention your correct MICR No and attach copy of the cheque leaf with your account opening form. NSDL is planning to distribute all cash corporate benefits to bank accounts directly. SSKI CORPORATE STRUCTURE:

CHARGES:

Trade Tiger

Fast Trade

Account Opening

Rs 1000

Rs 49

NIL

Account Closing

NIL

NIL

NIL

Maintenance Charges

Rs. 500 p.m

Rs. 300 p.a

Rs. 900 p.a

Payable in advance.

Dematerialization

Rs 3. per cert.

Rs 3. per cert.

Rs. 3 per cert.

Minimum Rs. 15

Rematerialisation

Rs 15 per cert.

Rs 15 per cert.

Rs 15 per cert.

If Broking Through SSKIIf Broking Not Through SSKIPurchases

NIL : ZERO

0.02% / Min.Rs .8

NIL

Sales

NIL : ZERO

0.02% /Min.Rs 18

Rs.8 +0.01%

Brokerage

Minimum Rs 10 per Scrip.

Minimum Rs 10 per Scrip.

NA

Custody

Re 1 per ISIN/month

Re 1 per ISIN/month

Re 1 per ISIN/month

If client does not have any security balance in his account still he will be charged assuming 1 scrip in his account *

Pledge Creation

0.02%

0.02%

0.02%

Minimum Rs 50

Freeze \ De-freeze

Rs 25/- per request

Rs 25/- per request

Rs 25/- per request

Deposit

Rs 500/-

Rs 500/-

Rs 1500/-

Adjustable against all dues

THEROETICAL BACKGROUNDFINANCIAL RATIOIn finance, a financial ratio or accounting ratio is a ratio of selected values on an enterprise's financial statements. There are many standard ratios used to evaluate the overall financial condition of a corporation or other organization. Financial ratios are used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use financial ratios to compare the strengths and weaknesses in various companies. If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.

Values used in calculating financial ratios are taken from the balance sheet, income statement, cash flow statement and (rarely) statement of retained earnings. These comprise the firm's "accounting statements" or financial statements.

Ratios are always expressed as a decimal value, such as 0.10, or the equivalent percent value, such as 10%.

Financial ratios quantify many aspects of a business and are an integral part of financial statement analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt. Activity ratios measure how quickly a firm converts non-cash assets to cash assets. Debt ratios measure the firm's ability to repay long-term debt. Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return. Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. Financial ratios allow for comparisons: between companies

between industries

between different time periods for one company

between a single company and its industry average

The ratios of firms in different industries, which face different risks, capital requirements, and competition are not usually comparable.

Sources of data for financial ratios:Financial ratios are based on summary data presented in financial statements. This summary data is based on the accounting method and accounting standards used by the organization.

SHARESuppose a group of persons or a business organization propose to start a new project requiring large amount of money which they are unable to arrange. They form a public limited company and invite the public to be a part of the project. The company as per laws of the government announces the issue of shares through which any eligible person can become a shareholder of the company. The word stock simply refers to a supply. You may have a stock of T-shirts in your closet or a stock of pencils in your desk. In the financial market, stock refers to a supply of money that a company has raised. This supply comes from people who have given the company money in the hope that the company will make their money grow. A market is a public place where things are bought and sold. The term "stock market" refers to the business of buying and selling stock.In financial markets, a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. In British English, use of the word shares in the plural to refer to stock is so common that it almost replaces the word stock itself. In American English, the plural stocks is widely used instead of shares, in other words to refer to the stock (or perhaps originally stock certificates) of even a single company. Traditionalist demands that the plural stocks be used only when referring to stock of more than one company are rarely heard nowadays.

The income received from shares is called a dividend, and a person owning shares is called a shareholder.

A share is one of a finite number of equal portions in the capital of a company, entitling the owner to a proportion of distributed, non-reinvested profits known as dividends, and to a portion of the value of the company in case of liquidation. Shares can be voting or non-voting, meaning they either do or do not carry the right to vote on the board of directors and corporate policy. Whether this right exists often affects the value of the share. Voting and non-voting shares are also known as Class A and B shares respectively.

TYPES OF STOCKStock typically takes the form of shares of common stock (or voting shares). As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares" (or "convertible preference shares" in the UK)

Although there is a great deal of commonality between the stocks of different companies, each new equity issue can have legal clauses attached to it that make it dynamically different from the more general cases. Some shares of common stock may be issued without the typical voting rights being included, for instance, or some shares may have special rights unique to them and issued only to certain parties. Note that not all equity shares are the same. STOCK DERIVATIVESA stock derivative is any financial instrument which has a value that is dependent on the price of the underlying stock. Futures and options are the main types of derivatives on stocks. The underlying security may be a stock index or an individual firm's stock, e.g. single-stock futures.

Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock index futures are generally not delivered in the usual manner, but by cash settlement.

A stock option is a class of option. Specifically, a call option is the right (not obligation) to buy stock in the future at a fixed price and a put option is the right (not obligation) to sell stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to the underlying stock of which it is a derivative.

SHAREHOLDERA shareholder (or stockholder) is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. Companies listed at the stock market are expected to strive to enhance shareholder value.

Shareholders are granted special privileges depending on the class of stock, including the right to vote (usually one vote per share owned) on matters such as elections to the board of directors, the right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company. However, shareholder's rights to a company's assets are subordinate to the rights of the company's creditors.

Shareholders are considered by some to be a partial subset of stakeholders, which may include anyone who has a direct or indirect equity interest in the business entity or someone with even a non-pecuniary interest in a non-profit organization. Thus it might be common to call volunteer contributors to an association stakeholders, even though they are not shareholders.

Although directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders, the shareholders themselves normally do not have such duties towards each other.

However, in a few unusual cases, some courts have been willing to imply such a duty between shareholders. For example, in California, USA, majority shareholders of closely held corporations have a duty to not destroy the value of the shares held by minority shareholders. The largest shareholders (in terms of percentages of companies owned) are often mutual funds, and especially passively managed exchange-traded funds.

TRADINGA stock exchange is an organization that provides a marketplace for either physical or virtual trading shares, bonds and warrants and other financial products where investors (represented by stock brokers) may buy and sell shares of a wide range of companies. A company will usually list its shares by meeting and maintaining the listing requirements of a particular stock exchange.

MUTUAL FUND

A mutual fund is a professionally managed firm of collective investments that collects money from many investors and puts it in stocks, bonds, short-term money market instruments, and/or other securities. The fund manager, also known as portfolio manager, invests and trades the fund's underlying securities, realizing capital gains or losses and passing any proceeds to the individual investors. Currently, the worldwide value of all mutual funds totals more than $26 trillion.

USAGESince the Investment Company Act of 1940, a mutual fund is one of three basic types of investment companies available in the United States.

Mutual funds can invest in many kinds of securities. The most common are cash instruments, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (e.g., high-yield junk bonds or investment-grade corporate bonds), type of issuers (e.g., government agencies, corporations, or municipalities), or maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities (global funds), or primarily foreign securities (international funds).

Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts cash flows into and out of the fund by investors, as well as the future performance of investments appropriate for the fund and chooses those which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered under an advisory contract with a management company, which may hire or fire fund managers.

Mutual funds are subject to a special set of regulatory, accounting, and tax rules. In the U.S., unlike most other types of business entities, they are not taxed on their income as long as they distribute 90% of it to their shareholders and the funds meet certain diversification requirements in the Internal Revenue Code. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are tax-free to the shareholder. Taxable distributions can be either ordinary income or capital gains, depending on how the fund earned those distributions. Net losses are not distributed or passed through to fund investors.

MUTUAL FUNDS V/S OTHER INVESTMENTSMutual funds offer several advantages over investing in individual stocks. For example, the transaction costs are divided among all the mutual fund shareholders, which allows for cost-effective diversification. Investors may also benefit by having a third party (professional fund managers) apply expertise and dedicate time to manage and research investment options, although there is dispute over whether professional fund managers can, on average, outperform simple index funds that mimic public indexes. Whether actively managed or passively indexed, mutual funds are not immune to risks. They share the same risks associated with the investments made. If the fund invests primarily in stocks, it is usually subject to the same ups and downs and risks as the stock market.

SHARE CLASSESMany mutual funds offer more than one class of shares. For example, you may have seen a fund that offers "Class A" and "Class B" shares. Each class will invest in the same pool (or investment portfolio) of securities and will have the same investment objectives and policies. But each class will have different shareholder services and/or distribution arrangements with different fees and expenses. These differences are supposed to reflect different costs involved in servicing investors in various classes; for example, one class may be sold through brokers with a front-end load, and another class may be sold direct to the public with no load but a "12b-1 fee" included in the class's expenses (sometimes referred to as "Class C" shares). Still a third class might have a minimum investment of $10,000,000 and be available only to financial institutions (a so-called "institutional" share class). In some cases, by aggregating regular investments made by many individuals, a retirement plan (such as a 401(k) plan) may qualify to purchase "institutional" shares (and gain the benefit of their typically lower expense ratios) even though no members of the plan would qualify individually. As a result, each class will likely have different performance results.

A multi-class structure offers investors the ability to select a fee and expense structure that is most appropriate for their investment goals (including the length of time that they expect to remain invested in the fund).NET ASSET VALUEThe net asset value, or NAV, is the current market value of a fund's holdings, less the fund's liabilities, usually expressed as a per-share amount. For most funds, the NAV is determined daily, after the close of trading on some specified financial exchange, but some funds update their NAV multiple times during the trading day. The public offering price, or POP, is the NAV plus a sales charge. Open-end funds sell shares at the POP and redeem shares at the NAV, and so process orders only after the NAV is determined. Closed-end funds (the shares of which are traded by investors) may trade at a higher or lower price than their NAV; this is known as a premium or discount, respectively. If a fund is divided into multiple classes of shares, each class will typically have its own NAV, reflecting differences in fees and expenses paid by the different classes.

Some mutual funds own securities which are not regularly traded on any formal exchange. These may be shares in very small or bankrupt companies; they may be derivatives; or they may be private investments in unregistered financial instruments (such as stock in a non-public company). In the absence of a public market for these securities, it is the responsibility of the fund manager to form an estimate of their value when computing the NAV. How much of a fund's assets may be invested in such securities is stated in the fund's prospectus.

PORTFOLIO TURNOVER

A measure of how frequently assets within a fundare bought and sold by the managers. Portfolio turnoveris calculated by taking eitherthe total amount of new securities purchasedor the amount of securities sold -whichever is less -over a particular period, divided by the total net asset value (NAV) of the fund.The measurement is usually reportedfora 12-month time period.The portfolio turnover measurement should be considered by an investor before deciding to purchase a given mutual fund or similar financial instrument. After all, a firm with a high turnover rate will incur more transaction costs than a fund with a lower rate. Unless the superior asset selectionrenders benefitsthat offset the added transaction costs they cause, a less active trading posturemay generate higher fund returns.

In addition, cost conscious fund investors should take note that the transactional brokerage fee costs are not included in the calculation of a fund's operating expense ratio and thus represent what can be, in high-turnover portfolios, a significant additional expense that reduces investment return.

RESEARCH METHODOLOGY Defining objective wont suffice unless & until a proper methodology is to achieve the objectives.

Research comprises defining and redefining problems, formulating, hypothesis or suggested solutions, collecting, organizing and evaluating data making deductions and research conclusions to determine whether they fit in the formulating hypothesis.

Research concerns itself with obtaining information through empirical observations tat can be used to systematically develop logically realted propositions so as to attempt casual relationship between variables.

RESEARCH DESIGN

A research design is arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure.

TYPE OF RESEARCH

Analytical Research:

For the purpose of this project, the facts and information already available is used for study and analysis is done for find, conclusion, critical evaluation and recommendations.

The calculation and analysis of the expenditure which is to be incurred in manufacturing load bodies. Also to find out the per unit cost for load bodies and chassis.DATA COLLECTION

Meaning of dataThere are two types of data major usedA. SOURCES OF PRIMARY DATA:Meaning

Observation Method.

Informal interview method.B. SOURCES OF SECONDARY DATA: Internet.

Public records and statistical, and other published information.

RESEARCH INSTRUMENTS

Informal interview and discussions.

SAMPLE SIZE

4 Case studies / Clients profile.

1) Young unmarried stage [age: 26].

2) Young married with one child [age: 33].

3) Married with two children [age: 46].

4) Retirement Stage [age: 55].

ANALYTICAL TOOLS

1) Line graphs.

2) Tables.

DATA ANALYSISCLIENT RISK PROFILE 1:

MR. A

Age: 33.

Occupation: Service.

Marital Status: Married.

Income of Spouse: Nil.

Dependants: Wife and 1 Child [2 years].

Annual income: Rs. 7 lakhs.

Long term liabilities: Housing loan of Rs. 15 lakhs.

Risk Capacity: Moderate.

INVESTMENT GOALS Protection.

Tax saving not required.

Tax efficient investments.

Invest around Rs. 12,000 monthly.

Has Rs. 2.5 lakhs one time in his hand.

No liquidity required.

Current portfolio consists of FDs of Rs. 3 lakhs, which is about to mature.RECOMMENDED INVESTMENTS:

1. Insurance cover required as a single bread winner Rs. 25 lakhs [premium Rs. 40,000 p.a. i.e. Rs. 333 p.m.]

2. MF SIP: Total Rs. 10,000 p.m. [Growth option].

3. Rs. 2 lakhs direct equity, spread over not more than 20 nifty stocks on the basis of fundamentals and passively managed.4. FD money may be diverted to FMPs as they are tax efficient. [Debt remains debt, becomes more tax efficient].

From the following chart showing Nifty movements from year 2004 to year 2008, it is showing positive upward curve. This may be good opportunity to invest as the market is moving upwards and good returns are expected.

RECOMMENDATIONS AND JUSTIFICATIONS FOR MR. A

Mr. A is a single bread earner along with large liabilities with a loan and he has purchased a new accommodation.

The death of the wage earner would deprive the non working partner of the family income and therefore there is a need of life assurance on the earning members life.

From the above, we can determine that is first objective is safety. So, insurance cover of Rs. 25 lakhs is recommended to him. The premium of Rs. 40,000 can be deducted from his annual income. So investment serves the purpose of both, Tax saving and safety.

Recommended Investments:1) Mutual funds of Rs. 10,000 monthly which will serve the purpose of regular systematic investment plan with growth option.

2) Direct Equity of Rs. 2 lakhs, spread over 10 ninfty stocks on the basis of fundamentals and passively managed that is invests in broad sector of the market.3) FD money can be diverted to FMPs as they are tax efficient, as his FDs mature and he is getting Rs. 3,00,000 in hand.PARTICULARSFMP FOR 366 DAYSFD

Purchase price3,00,0003,00,000

Interest rate9%9%

Repurchase price3,27,0003,27,000

Gain27,00027,000

Index Cost Rs. 3,00,000 519 / 4803,24,375NA

LTCG2,625NA

Interest gainNA27,000

Tax rate 20.4%, 30.6% respectively535.58,262

Post Tax Return26,464.0018,738

Index of the year 2004 05 is 480, 2006 07 is 519.LTCG is 20% + Educational cess 2%, for FD, highest tax slab 30% + Educational cess 2%.

From the above calculations, it is seen that FMP are giving higher tax return than FD, so it recommended converting FD into FMP.

The investible amount is derived taking tax factor into consideration. CLIENT RISK PROFILE 2:

MR. BAge: 42.


Marital Status: Married.

Income of Spouse: Rs. 75,000 p.a.

Dependants: 2 Children [14 years and 11 years].

Annual income: Rs. 2.5 lakhs.

Long term liabilities: Nil.


SOURCE OF INCOME FROM INVESTMENT:

Sale of Inherited property worth Rs. 24 lakhs.

INVESTMENT GOALS Planning for pension. Need liquidity for education and marriage of children.

Capital gain tax planning.

RECOMMENDED INVESTMENTS Rs. 5 lakhs as capital gain should be invested in rural electrification bonds [capital gain bonds].

Deposit of Rs. 5,00,000 as short term.

Transfer of Rs. 30,000 from debt to equity.

Direct Gold of Rs. 3 lakhs.

Direct equity investment of Rs. 5 lakhs.

Real Estate Fund of Rs. 5 lakhs.RECOMMENDATIONS AND JUSTIFICATIONS FOR MR. BBy this stage, Mr. B is approaching mid career stage and their incomes would have usually increased. Mr. B is planning for pension provision to provide an income in retirement. The annual investment require to fund a good pension keeps growing with every year of delay so he is planning for his pension.

His annual income is Rs. 2.5 lakhs, which means the tax liability is Rs. 25,000. To save this tax, it is not advisable to invest Rs. 1 lakhs to become eligible for deductions. To reduce tax liability to some extent, he can invest Rs. 4,000 per month in LIC pension fund under SIP option. He has invested Rs. 50,000 yearly to take the benefit of deductions. So Mr. B has to pay a tax of Rs. 2 lakhs under the head of salary income.PARTICULARSAMOUNT [Rs.]

Annual income2,50,000

[-] Investments made to save tax48,000

Total taxable income2,02,000

Tax on Rs. 2,02,00015,400

Amount remains for daily expenses1,86,600

Per month [1,86,600 / 12]15,550

Money remains in his hand is only around Rs. 15,000. He can keep aside money for LIC fund Rs. 4,000 monthly for retirement benefit.Mr. B is also getting some gain from sale of inherited property. It carries capital gain tax. He is getting Rs. 24,00,000 from sale of that property. For calculating tax on it, capital gain has to be calculated.

CAPITAL GAIN ON SALE OF PROPERTYIndex cost of acquisition:

As on 01/04/1981 as the case may be index factor for the year of transfer

11,25,000 519 / 305 = 19,14,344 rounded to 19,00,000.

Capital gain = 24,00,000 19,00,000 = 5,00,000 is the capital gain of property. Rs. 5 lakhs can be invested in Rural electrification bonds [capital gain bonds].

Certain amount can be transferred to short term fund like equity to satisfy the purpose of liquidity.

He can invest in gold and keep it until he needs money or can later on use it for daughters marriage.

He can also make investment of Rs. 5 lakhs in equity and can take a higher risk for higher return [High risk, high returns].

With the remaining amount he can invest in real estate fund which is expanding day by day which serves propose of growth.

Following chart shows the movement of SENSEX from year 2004 08.

CLIENT RISK PROFILE 3:

MR. CAge: 26.


Marital Status: Single.

Income of Spouse: NA.

Dependants: No.Annual income: Rs. 5 lakhs.

Long term liabilities: Nil.

Risk Capacity: High.

Living in parents home.

He can invest maximum of Rs. 15,000 after personal expenses.

INVESTMENT GOALS Growth and return. He has Rs. 50,000 one time in his hand.

Tax saving required up to Rs. 60,000 as Rs. 40,000 already invested in Provident fund.

TAX EFFICIENT ADVICE

Life insurance premium Rs. 24,000.

Tax saving fund in Mutual fund Rs. 36,000 yearly.

RECOMMENDED INVESTMENTS Diversified Equity investment into various sectors like software, automobiles, etc. Mutual fund Rs. 5,000 per month [growth plan].

RECOMMENDATIONS AND JUSTIFICATIONS FOR MR. C

Mr. C is young and unmarried gentleman, dependant on his family up to some extent. Normally the main protection of a young single person in work is to protect his earnings against disability resulting from injury, long term sickness, and so Mr. C need little insurance. So his first objective safety. To satisfy the basic objective, we recommend him a unit linked insurance plan.

For tax saving, we recommend him mutual fund of Rs. 5,000 monthly.

Mr. C being young and unmarried, he has a high risk appetite. Hence equity investments are also recommended to him.

Mutual Fund SIP scheme of Rs. 5,000 per month would be recommendable as it will serve the purpose of saving monthly to enjoy the future benefits. He can also choose a different growth option from his savings.PARTICULARSAMOUNT

Annual Income5,00,000

[-] Deductions under 80C

Insurance premium24,000

Tax saving fund36,000

Provident fund40,0001,00,000

Taxable income4,00,000

Tax on Rs. 4,00,00070,000

Income after tax3,30,000

[-] Daily personal expenses1,32,000

Amount available for investment through salary1,98,000

Mr. C can keep Rs. 12,000 monthly aside for equity investment and he can use Rs. 50,000 one time to invest.

CLIENT RISK PROFILE 4:

MR. DAge: 55.

Occupation: Business.

Marital Status: married.

Income of Spouse: Nil.

Dependants: Daughter 23 years, Son 19 Years.

Annual income: Rs. 12 lakhs.

Liabilities: marriage of daughter, education of son.


INVESTIBLE FUNDS AVAILABLE

Funds available Rs. 8 lakhs.

RECOMMENDED INVESTMENTS Tax saving mutual fund investment Rs. 40,000. Equity investment Rs. 3 lakhs.

Mutual fund Rs. 2 lakhs in growth scheme.

[Diversified equity fund 40%, index fund 30%, sectoral fund 30%].

FMP Rs. 1 lakhs for 366 days @ 9% indicative yield.

Purchase gold Rs. 1,50,000 [may be required for daughters marriage].

RECOMMENDATIONS AND JUSTIFICATIONS FOR MR. DMr. D is a business man, earning Rs. 12 lakhs per annum. After business income calculations, he needs tax saving investments. Tax saving Mutual Fund investment Rs. 40,000.

CONSTRAINTS: He has not produced annual accounts and balance sheet of his business; hence business income cannot be calculated. But he is planning to invest in tax saving mutual fund of Rs. 40,000 per annum.

At this stage, the parents have usually reached the peak of earning power, but Mr. D being a businessman, his earnings may rise or fall.

He has Rs. 8 lakhs one time in his hand to invest. As he is a business man with growing business, risk taken is moderate.

His investment objectives are liquidity, growth and return.

INVESTMENT PLAN

Equity investment Rs. 3 lakhs [moderate risk].

Mutual fund Rs. 2 lakhs [growth scheme].

FMP Rs. 1 lakhs for 366 days @ 9% indicative yield.

Gold of Rs. 1.5 lakhs [may be required for daughters marriage].

Calculations of how FMP investment is more beneficial than Bank FD.PARTICULARSFMP 366 DAYSBANK FD

Purchase price1,00,0001,00,000

Interest rate9%9%

Repurchase price1,09,0001,09,000

Gain9,0009,000

Index cost [1,00,000 519 / 480]1,08,125NA

LTCG875NA

Interest gainNA9,000

Tax rate 20.4%, 30.6% for FD178.52,754

Post tax returns8,821.56,246

From the above table, we can analyze that FMP are more beneficial than FD investment.

Following chart shows the movement of Gold from year July 2008 September 2008.OBSERVATIONS AND FINDINGSLIFE CYCLE STAGEFEATURESPRIORITYCHOICE OF INVESTMENT PRODUCTS

Young unmarried stage1. Might depend upon parents.2. Relatively low income.

3. High risk appetite.They might not have any dependants. Main need is to protect their earning against injury, long term sickness.1. Liquid plans.2. Short term investments.

Young married with 1 child1. Arrival of kids changes the scenario.2. Expenditure starts rising.

3. Children education, holidays, etc.Life assurance of earning member is must. Financial needs are high.1. Medium to long term investments.2. Ability to take substantial risk.

3. Portfolio products for growth.

Pre retirement stage1. Children have become independent.2. Last chance to ensure adequate income to maintain standard of living.Adequate income and saving.1. Maximum investment in pension products.

Retirement stage1. After retirement, individual needs 2/3rd of his final years income.2. Pension [high / low/ nil].After retirement, the saving rate declines substantially.1. Continue to work for income.2. Invest capital to produce additional income and take risk.

3. Preserve the value of savings against inflation.

The Ground Rules of Mutual Funds Investing: - Moses gave to his followers 10 Commandments that were to be followed.

1. Assess Yourself-Self-Assessment Of Ones Needs: Expectations & 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 & also clearly state the expectations will only bring pain.

2. Try To Understand Where The Money Is Going: It is important to identify the nature of investment. One can lose substantially if one picks the wrong kind of MP. In order to avoid any confusion, it is better to go through the literature such as Offer Documents etc.

3. Dont Rush In Picking Funds, Think First: One first has to decide what he wants the money for & 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 & 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

4. Invest, Dont Speculate: A Common Investor is limited in the degree of risk that he is willing to take. One should attain from speculating which in other words would mean getting out of one fund & investing in another with the intention of making quick money. One could do well to remember that nobody can perfectly time the Market so staying invested is the Best option unless there are compel reasons to exit.

5. Dont pull all the eggs in one Basket: No matter what the risk profile of a person is, it is always advisable to diversify the risks associated. So putting ones money in different classes is generally best option as it averages risks in each category.

6. Be Regular: Investing should be a habit & not an exercise undertake at ones wishes, if one has to really benefit from them. As said earlier, since it is extremely difficult to know when to enter/exit the market, it is important to beat the market by being systematic. The AIP s (Automatic Investment Plans) amount on be directly transferred from 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.

8. Find the Right Funds: Funds that charge more will reduce the yield to the Investors. Investors of equity should keep in mind that all dividends are currently Tax-Free in India & 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 & so can easily avoid the payout options.

9. Keep Track Of Your Investment: It is important to keep on track of the way they are performing in market. If the market is beginning to enter or bearish, then investor 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 Fund: 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 meet with. Other factors like non-performance hike in fee charged & change in any basic attribute of the fund etc. are some of the reasons for to exit.

WHEN TO SAY GOODBYE TO YOUR MUTUAL FUND / EXIT POINT: Not to Chase Returns

Fund is not performing

When calculating performance one shouldnt look at too short a period & make a mistake by comparing apples to oranges. It is important to base the decision on Relative Performance, & not absolute performance. When studying Relative Performance, one should look at his fund & compare it to its peers. However, comparisons should be drawn between parallels & so equity funds cannot & should be compared with debt funds. If fund has underperformed the average of its peers in all cases.

A change in life stage- A young man can afford to take more risks than a person nearing his retirement can. In such cases, it pays to withdraw money from the equity investment made earlier & put them in safer, more conservative debt funds that offer stable return without compromising on Risk.

A major change in any basic attribute of the fund- As mentioned earlier in its offer documents, the investors have a choice of getting out of it. Changes like a change in Asset Mgmt. Company, in investment style of Fund or change of structure says from closed-end to open-end etc.

Fund doesnt comply with its objectives- One of the important parameter in the selection of funds is alignment of risk profiles of the investor & Fund. The objective of the fund says a lot about how funds plan to invest.

The Fund s Expenses Ratio Rises- A small rise in an expense ratio is not a big deal, but in a case of Bond Funds on Money Market Funds, it is highly unlikely that the Fund can increase its return enough to justify an increase in the Funds expenses.

The Fund Manager has changed: If it is an actively managed fund, then has to keep the eyes open on the new manager. Observing the styles, stock picking & rises undertaken by the new manager is important for it discloses a lot about how the fund might fare in the future. If satisfied one will have no reason to complain later but the process needs time, so an investor has to observe the Fund Manager for sometime before one takes a decision.

Enough has been earned- However, nothing is as important as to rein the horses in time. The primary principle behind safety of investment is to take risks that can be tolerated. Just as it is important to set realistic target that one hopes to achieve from the investment, it is also important to exit when target as excepted has been achieved irrespective of the fact that it might be generating better returns in a short-term, would be cursing them for not exiting.

REMEMBER: 1. Investment Decision are Long Term Decision

2. 1% Superior Return can make 20% difference in 25 yrs.

3. Understand the Virtues of Rupee Cost Averaging

4. Discipline is more Important than Intelligence5. Avoid Wastage, look at Returns Net of Taxes

LIMITATIONS

LIMITATIONS OF THE STUDY1. As the time duration was too short for conducting research program, so detail analysis of every aspect was not possible.

2. As the project is based on financial information which most of the times is confidential in nature. So limited data was available.

3. Knowledge constraints does not facilitate as experts.

4. Conclusions and recommendations are applicable with the limitations of scope of project.

Factors affecting the Market Price of Investment may be due to Market forces, performance of the companies, Govt. Policies, Interest rates & so on. Study for all the existing Mutual Fund Schemes is not feasible, Sample schemes of all Mutual Fund Types are considered for The Study.CONCLUSIONCONCLUSIONSThe whole project is based on investment opportunities available to investors, tax efficient as well as general investment purpose to meet the short or long term need. Investors invest in various options to diversify funds and risk and to get good returns.

ShareKhan Ltd. provides investment advisory services in a very effective way. They manage portfolio of the investors depending upon their priorities, tax planning, return expected, age factor, risk, etc.

Investors can save tax according to their risk bearing capacity and willingness to invest, purchasing power and in accordance with the amount of tax payable by availing Life insurance as premium as life insurance is deducted under section 80C. Under section 80C, permissible limit of deduction is Rs. 1 lakhs.

In short, following are the tax saving investments available to investors:

1. Life insurance premium.2. Provident fund.

3. Tax saving mutual fund.

4. Housing property [Interest up to Rs. 1.5 lakhs.].

In India, there is lack of awareness in making investments in stock market. So we are playing a better role in creating the awareness. BIBLOGRAPHY

BOOKS:

1. Portfolio Management Khan & Jain.2. Investment Management ICFAI Handbook.

3. Investors guideline BSE.

4. Investment banker Dr. Shamla Gosh.

5. Risk and returns Dr. Peter.

6. Research Methodology S. G. Gupta. WEBSITE:

1. www.bseindia.com2. www.nseindia.com3. www.google.com4. www.sharekhan.com5. www.wikipedia.com6. www.moneycontrol.com7. www.investopedia.com8. www.mcxindia.comABBREVIATIONS:1. MF: Mutual Fund.

2. FD: Fixed Deposit.

3. FMP: Fixed maturity plan.

4. LTCG: Long term capital gain.

5. SIP: Systematic Investment plan.

6. STP: Systematic transfer plan.ANNEXURE

QUESTIONNAIRE

1. NAME: ___________________________________________________

2. GENDER: M / F

3. AGE GROUP:

FORMCHECKBOX 18 YRS 30 YRS




FORMCHECKBOX ABOVE 61 YRS

4. OCCUPATION: _________________SECTOR/FIELD:_____________

5. INCOME [PER MONTH]:

FORMCHECKBOX BELOW 50,000

FORMCHECKBOX ABOVE 50,000

6. DO INVEST IN SHARE/STOCK OR MUTUAL FUNDS?

FORMCHECKBOX YES

FORMCHECKBOX NO

7. WHAT PART OF INCOME DO YOU INVEST?

FORMCHECKBOX 01% - 25%

FORMCHECKBOX 26% - 50%

FORMCHECKBOX ABOVE 51%

8. HOW DO YOU INVEST AND IN WHAT PERCENTAGE?

FORMCHECKBOX BANK: _______%

FORMCHECKBOX INSURANCE / BONDS: _______%

FORMCHECKBOX MUTUAL FUND / FUTURE AND OPTIONS: _______%

FORMCHECKBOX SHARE MARKET: _______%

FORMCHECKBOX REAL ESTATE: _______%

9. ARE YOU AWARE OF SHAREKHAN?

FORMCHECKBOX YES

FORMCHECKBOX NO

10. WHAT IS YOUR PERCEPTION ABOUT THE SHARE MARKET?

FORMCHECKBOX SAFE

FORMCHECKBOX RISKY

FORMCHECKBOX GOOD RETURNS

FORMCHECKBOX STAY AWAY

11. DO YOU HAVE A DEMAT ACCOUNT?

FORMCHECKBOX YES

FORMCHECKBOX NO

12. WHAT DO YOU PREFER?

FORMCHECKBOX INTRA DAY

FORMCHECKBOX DELIVERY

13. WHAT DO YOU LOOK IN STOCK BROKING COMPANIES?

FORMCHECKBOX BRAND NAME

FORMCHECKBOX SERVICE

FORMCHECKBOX GOOD RATE/BROKARAGE

FORMCHECKBOX ADVERTISEMENT

FORMCHECKBOX OTHER REASON: _________________________________

14. WHICH COMPANY DO YOU PREFER?

FORMCHECKBOX SHAREKHAN

FORMCHECKBOX RELIGARE

FORMCHECKBOX MOTILAL OSWAL SECURITIES

FORMCHECKBOX KARVY

FORMCHECKBOX RELIANCE MONEY

FORMCHECKBOX SKI CAPITAL

FORMCHECKBOX ARCADIA SHARE

FORMCHECKBOX EMKAY

FORMCHECKBOX KOTAK SECURITIES

FORMCHECKBOX CHOLAMANDALAM INVESTMENTS

FORMCHECKBOX PPFAS LTD.

FORMCHECKBOX ROOSHNIL SECURITIES PVT. LTD.

FORMCHECKBOX SAJAG SECURITIES

FORMCHECKBOX OTHER: __________________________________________

INITIALS: ____________________

EXECUTIVE SUMMARY

This project underlines the various

The purpose of the Annual Report on Portfolio Management, Performance and Results (ARPRE) is to present to the Board and Management an overview of the status and trends of the Banks loan portfolio in 2003, highlight key strengths and weaknesses for managing portfolio performance and results, and point to a number of recommendations for future Bank actions.

The ARPRE analysis draws on information from a variety of sources and diverse perspectives ranging from the self-assessment of portfolio performance based on project ratings by Country Offices, desk reviews of different reports on project monitoring and supervision, the Banks data base on project approval and disbursement trends as well as portfolio composition, the results of a survey of executing agencies, a review of the Banks efforts on improving performance monitoring and supervision, including progress made since the previous portfolio report, and the tracking of a set of portfolio management indicators, including a benchmarking exercise with the World Bank. The analysis of the portfolio, undertaken from internal and external perspectives provides valuable insight into portfolio trends and composition, real time performance and results, and the supervision and monitoring of projects, which in turn permits the identification of specific actions to strengthen borrowers and executing agencies, together with measures focused on internal improvements and coordination with other agencies.

Today an investor is interested in tracking the value of his investments, whether he invests directly in the market or indirectly through Mutual Funds. This dynamic change has taken place because of Liberalization, Privatization and globalization and the growing competition in the investments opportunity available he would have to make guided and rational decisions on whether he gets an acceptable return on his investments in the funds selected by him, or if he needs to switch to another fund.

The basis of appropriate In order to achieve such an end the investor has to understand preference measurement for the fund, and acquire the basic knowledge of the different measures of evaluating the performance of the fund. Only then would he be in a position to judge correctly whether his fund is performing well or not, and make the right decision.

This project t is undertaken to help the investors in tracking the performance of their investments in Mutual Funds and has been carried out with the objective of giving and understanding of Mutual Fund as a financial product, the meaning, importance, working etc. of Mutual Fund, the current position of Mutual Fund Industry in India, the number of competitors and other Mutual Fund position.

The methodology for carrying out the project was very simple that is through secondary data obtained through various mediums like fact sheet of the funds, the Internet, Business magazines, Newspaper, etc. the analysis of Principal PNB Funds has been done with respect to its various competitors on the basis of its ranking system mentioned in the Analysis and Findings part, which is formulated keeping the benefits and convenience to the investors in mind. The funds have been analyzed under various types such as Equity Funds, Income Funds and Balanced Funds.

It is of paramount importance to keep in mind the risk involved while investment as bearing or rather being able to bear risks is as important as analyzing the profit of the investment. Investments that have the greatest return potential tend to give the greatest risk potential.

This project represents a information regarding companys brand awareness and the customer perceptions about the various services which the organization provides. The main objective of the project is to understand the customer investment preferences more effectively and efficiently. For execution of the project methodology adopted is the collection of data through questionnaire, processing and analyzing the data.

The natures of respondent, which are selected, are the professionals and having a handsome salary. The area of the project work is pune city and its location where the survey has been undertaken those are Hinjewadi IT Park, Magarpatta IT Park, WNS, Baner Symphony Soft Ware, Zenser IT Park, and Senapati Bapat Road. SHAREKHAN LTD. is the only personalized service provider offering a range of investment services depending on the customer needs and wants.

FINANCIAL DEPARTMENT [MUMBAI HEAD OFFICE]

HEAD ACCOUNTANT [PUNE]

CITY, BRANCH MANAGERS

BRANCH, FINANCIAL ASSISTANTS

SSKI Securities Pvt. Ltd.

Morakhia Family & Associates

100%

Owns 56% of

SSKI INVESTOR SERVICES PVT. LTD.

Retail broking arm of the group

Shareholding pattern:

55.5% Morakhia family (promoters)

18.5% HSBC Private Equity India Fund Ltd

18.5% First Carlyle Ventures, Mauritius

7.5% Intel Pacific Inc.

Owns 50.5% of

SSKI CORPORATE FINANCE PVT. LTD.

Investment Banking arm of the group

Shareholding pattern:

50.5% SSKI Securities Pvt. Ltd.

49.5 % Morakhia family

1