A Project Study Report On

STUDY OF PORTFOLIO MANAGEMENT SYSTEM WITH SPECIAL REFERENCE TO BAJAJ CAPITAL

Submitted in partial fulfillment for the Award of degree of Master of Business Administration

Submitted By Manish Khandelwal MBA IV Sem

Submitted To Mrs. Priti Gupta Asst. Professor

2009-2011
SUBODH INSTITUTE OF MANAGEMENT & CAREER STUDIES, JAIPUR

Acknowledgement

I express my sincere thanks to my project guide, Mrs..Priti Gupta , SIMCS ,JAIPUR for guiding me right from the inception till the successful completion of the project. I sincerely acknowledge her for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support she had provided to me with all stages of this project.

MANISH KHANDELWAL

STUDENT DECLARATION

I MANISH KHANDELWAL student of MBA semester IV, SIMCS, Jaipur (2009-2011) declare that for the purpose of the project report , I have conducted study on Study of portfolio management system with special reference to bajaj capital for the partial fulfillment of MBA degree, It is my original work .

(MANISH KHANDELWAL)

GUIDANCE CERTIFICATE

This is to certify that Manish Khandelwal studying in 4th Semester of Masters Of Business Administration in the Academic Year 2009-2011 at Subodh institute of management & career studies has completed project on STUDY OF PORTFOLIO MANAGEMENT SYSTEM WITH SPECIAL REFERENCE TO BAJAJ CAPITAL, under my guidance. The information presented in this project is true and original to the best of my knowledge.

Date:

Place:

(Mrs. Priti Gupta)

EXECUTIVE SUMMARY

The first few pages of the Report talk about an introduction to the portfolio management and this industry and about a company profile . Here after the Report talk about the activities and portfolio management techniques of Bajaj capital. In the new few pages an attempt has been made to clarify the research objective. The project also contains finding and observation. Special efforts on graphs and charts have been made to systematically analysis the finding and observation. The project also covers conclusion and recommendation on observation and finding. In the last in Annexure efforts have been made to show questionnaires contain the format on which details from customers is collected. Details of books and web sites are clearly mentioned in bibliography from which help is taken to made project completion and successful. I am highly indebted to my faculty, seniors and friends for providing the necessary help for preparing this projects report. I am grateful to all those people, whos support and their guidelines have helped me in the preparation of this project report.

MANISH KHANDELWAL

PREFACE

As in the present scenario where the competition between the industries had proved boom for the society, the companies are trying to provide maximum comfort to their customers. But in Financial services sector, a company should analyze that who should be their customer.

In this project I have analyzed the portfolio management system. Portfolio management system is the process of reducing the risk and profit maximization of investment.

In this Project Bajaj capital provided me all the data and the information regarding the system followed by them. The analysis revealed some loop holes and drawback in the system.

INDEX
S.no Particulars Page no. 1 2 3 4 Introduction to Industry Introduction to Organization Introduction to portfolio management Research methodology I. II. III. IV. V. VI. VII. 5 6 7 8 9 Title of the study Duration of the project Objectives of the study Type of Research Sample size and method of selecting sample Source of Data Limitations of the study 98 99-110 111-113 114 115 8-9 10-77 78-94 95-97

Facts and Findings Analysis & interpretations SWOT Conclusion Recommendation & suggestions Appendix Bibliography

INTRODUCTION TO INDUSTRY

Major players of portfolio management companies in India

Find below a comprehensive list of top financial services companies in India. SBI Capital Markets Limited: This happens to be the oldest organizations in the sphere of capital markets in India. Established in 1986 in the form of an ancillary of SBI, they have ranked second in Asia's Project Advisory services. The company is a traiblazer in privatization and securitization. The subsidiaries of SBI Capital Markets are SBICAPs Ventures Ltd., SBICAP Trustee Co.Ltd. and many others. Bajaj Capital Limited: One of the major financial services companies in India, Bajaj Capital offers best investment advisory and financial planning services. The services are meted out to the institutional investors, NRIs, corporate houses, individual investors, high network clients as well. DSP Merrill Lynch Limited: A major player in the equity and debt market in India, DSP Merrill Lynch offers financial advises to varied corporations and institutions. With an array of wealth management and investor services, their services are customized in a manner that they meet every investor requirement. Birla Global Finance Limited: The subsidiary of Aditya Birla Nuvo Ltd., this company has operations in the corporate finance and capital market arena. An alliance with Sun Life Financial of Canada, they have given birth to Birla Sun Life Insurance Co Ltd., Birla Sun Life Distribution Co. and alike. Housing Development Finance Corporation: A best financial solution for home loans, NRI loans, HDFC is the one stop destination for personal finance. With overseas branches in Singapore, Kuwait, Qatar, Saudi Arabia and many others, HDFC has been going great guns every year.

PNB Housing Finance Limited: This company offers premium solutions for relieving the borrower segment. The Home Loan Life Insurance Plan of this has come in conjunction with TATA AIG, with the lowest premium when compared to the peers. ICICI Group: Wide arena of financial products and services, ICICI Group has solutions like InstaBanking, Online Trading, Insta Insure, ICICI Bank imobile etc. Providing high class financial services in all segments of the society, ICICI Group deals with Mutual Fund, Private Equity, Securities, and Life Insurance etc. LIC Finance Limited: It is the biggest Housing Finance Company in India, providing finance to individuals for repair or construction or renovation of any old or new apartment or house. L & T Finance Limited: Established in 1994 by the Larsen and Turbo group, this has become a significant name in the financial sector. Funds for automobiles, Agricultural Instruments, secured loans; they have all types of loans for a long tenure. Karvy Group: With Mutual Funds Services, Depository Services, Debt Market Services, Investment Banking and many others, Karvy Group has spanned across the domestic financial sector as well as abroad.

INTRODUCTION TO ORGANIZATION
The Bajaj Capital Group is one of Indias premier Investment Advisory and Financial Planning companies. We are also SEBI-approved Category I Merchant Bankers

We offer personalised Investment Advisory and Financial Planning services to individual investors, corporate houses, institutional investors, Non-Resident Indians (NRIs) and High networth Clients, among others.

As one of Indias largest distributors of financial products, we offer a wide range of investment products such as mutual funds, life and general insurance, bonds, post office schemes, etc. offered by reputed public and private and government organisations.

Bajaj Capital is one of Indias leading Financial Services companies offering Free Advice on Investments, Insurance, Tax Saving, Retirement Planning, Financial Planning, Childrens Future Planning and other services. We also have a wide range of products and services for Corporates, High Networth Individuals, and NRIs all under one roof.

At Bajaj Capital, we believe in dreaming big. Dreams inspire us to excel. They ignite hope and kindle in us the passion to stretch our limits. We also believe that nothing

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can or should stop us from realising our dreams and financial constraints should be the last thing to stop anyone.

Four decades of excellence For over four decades, we have been helping people realise their aspirations by helping them make their wealth grow, and plan their financial lives.

Today, we are a one of the largest financial planning and investment advisory companies in India, with a strong presence all over the country. We take pride in serving our customers both individual and institutional and are known for our strong professionalism and work ethics.

Wide range of services

We offer a comprehensive range of services including financial planning and investment advice, and the entire gamut of financial instruments and investment products of almost all major companies, both public and private. In addition, we also provide investment assistance by helping you complete all the formalities, and help you keep regular track of your investments.

These services and products are delivered through our network of 134 Bajaj Capital Investment Centres located all over the country.

We are also aSEBI-approved Category I Merchant Banker. We raise resources for over 1,000 top institutions and corporate houses every year, and offer specialised services to Non-Resident Indian (NRIs) and High Networth Clients.

What you can expect from us -based advice -based advice

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Milestones The History of Bajaj Capital

Bajaj Capital has contributed to the growth of the Indian Capital Market at every step.

In 1965, we were the first to innovate the Companies Fixed Deposit. Today, we are playing an active role in the growth of the Indian Mutual Fund industry.

We are also working closely with private insurance companies to deepen India's insurance market.

Here is a brief gist of our journey throug the years.

1964 Bajaj Capital sets up its first Investment Centre in New Delhi to guide individual investors on where, when and how to invest.

India's first Mutual Fund, Unit Trust of India (UTI) is incorporated in the same year.

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1965 Bajaj Capital is incorporated as a Company. In the same year, the company introduces an innovative financial instrument the Company Fixed Deposit. EIL Ltd. (Oberoi Hotels, then known as Associated Hotels of India Ltd.) becomes the first company to raise resources through Company Fixed Deposits.

1966 Bajaj Capital expands its product range to include all UTI schemes and Government saving schemes in addition to Company Fixed Deposits.

1969 Bajaj Capital manages its first Equity issue (through an associate company) of Grauer & Wells India Ltd.; right from drafting the prospectus to marketing the issue.

1975 Bajaj Capital starts offering 'need-based' investment advice to investors, which would later be known as 'Financial Planning' in the investment world.

1981 SAIL becomes the first government company to accept deposits, followed by IOC, BHEL, BPCL, HPCL and others; thus opening the floodgates for growth of retail investment market in India.

Bajaj Capital plays an active role in all the schemes as 'Principal Brokers'

1986 Public Sector Undertakings (PSUs) begin making public issues of bonds MTNL, NHPC, IRFC offer a series of Bond Issues. Bajaj Capital is among the top ranks of resource mobilisers.

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1987 SBI leads the launch of Public Sector Mutual Funds in India. Bajaj Capital plays a significant role in fund mobilisation for all these players. 1991 SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top mobiliser with collections of over US $20 million. 1993 The first private sector Mutual Fund Kothari Pioneer is launched, followed by Birla and Alliance in the following years. Bajaj Capital plays an active role and is ranked among the top mobilisers for all these schemes. 1995 IDBI and ICICI begin issuing their series of Bonds for retail investors. Bajaj Capital is the co-manager in all these offerings and consistently ranks among the top five mobilisers on an all-India basis.

1997 Private sector players lead the revival of Mutual Funds in India through Open-ended Debt schemes. Bajaj Capital consolidates its position as India's largest retail distributor of Mutual Funds.

1999 Bajaj Capital begins marketing Life and General Insurance products of LIC and GIC (through associate firms) in anticipation of opening up of the Insurance Sector. Bajaj Capital achieves the milestone of becoming the top 'Pension Scheme' seller in India and launches marketing of GIC's Health Insurance schemes.

2000 Bajaj Capital implements its vision of being a 'One-stop Financial Supermarket.' The Company offers all kinds of financial products, including the entire range of

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investment and insurance products through its Investment Centres. Bajaj Capital offers 'full-service merchant banking' including structuring, management and marketing of Capital issues. Bajaj Capital reinvents 'Financial Planning' in its international sense and upgrades its entire team of Investment Experts into Financial Planners.

2002 The company focuses on creating investor awareness for Financial Planning and need-based investing. To achieve this goal, the company introduced the International College of Financial Planning. The graduates of this institute become Certified Financial Planners (CFPs), a coveted professional qualification.

2004 Bajaj Capital obtains the All India Insurance Broking Licence. Simultaneously, a series of wealth creation seminars are launched all over the country, making Bajaj Capital a household name.

2005 Bajaj Capital launches 360 Financial Planning, a software-based programme aimed at encouraging scientific and holistic investing. 2007 Bajaj Capital launches Stock Broking and Depository(Demat) Services. 2008 Bajaj Capital launches Just Trade, an online Platform for investing in Equities, Mutual Funds, IPO's

Mission, Aims & Objectives Bajaj Capital's Mission Statement

The focus of our organisation is to be the most useful, reliable and efficient
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provider of Financial Services. It is our continuous endeavour to be a trustworthy advisor to our clients, helping them achieve their financial goals.

Our Aims To serve our clients with utmost dedication and integrity so that we exceed their expectations and build enduring relationships. To offer unparalleled quality of service through complete knowledge of products, constant innovation in services and use of the latest technology. To always give honest and unbiased financial advice and earn our cilents' everlasting trust. To serve the community by educating individuals on the merits of Financial Planning and in turn help shape a financially strong society. To create value for all stake holders by ensuring profitable growth. To build an amicable environment that accords respect to every individual and permits their personal growth. To utilise the power of teamwork to function as a family and build a seamless organisation.

Why Invest Through Bajaj Capital Wide range of products and services 41 years experience as Investment Advisors and Financial Planners More than eight lakh satisfied clients all over India Countrywide network of 134 branches Over 12,000 NRI clients across the globe Personalised wealth management advice 24 x 7 online accessibility through www.bajajcapital.com qualified and experienced professionals including CAs, MBAs, MBEs, CFPs, CSs, Insurance experts, Legal experts and others SEBI-Approved Category I Merchant Bankers Group Co BCIBL is an IRDA-licensed Direct Insurance Broker

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The Significance of Logo

Our logo depicts Lord Ganesha who is the source of all our values and ethics in business. The large ears of Lord Ganesha remind us to hear more. We listen carefully to our clients to understand their needs. The weight of the trunk on the mouth symbolises silence. We work silently, without blowing our own trumpet. The long trunk symbolises continuous exploration. We explore all avenues to provide the best investment opportunities for our clients. The heavy posture of Ganesha symbolises stability. We help our clients to attain financial stability through wise investments. Lord Ganesha is known as the remover of obstacles and bestower of prosperity. We emulate His example and try our best to help our clients attain prosperity by proper financial planning. Our logo has a yellow background. Yellow is the colour of gold, which symbolises wealth. According to Vedic lore, it is also the colour associated with Brihaspati, the guru and counsellor of the Gods. We offer our clients sage counsel to make their wealth grow. The letters are in red. Red is the colour rajas symbolising power and incessant activity. It symbolises our aggressive quest for your well-being and happiness. The white streak represents the trunk of Lord Ganesha. White is the colour of satva guna, and implies our selfless commitment to your life-long happiness.

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Introducing Bajaj Capital Insurance Broking Ltd (BCIBL)(Licence Number CB 042/02)

As your true partner, we promise to use our knowledge for your benefit. Be it advice on the right insurance products or looking after your rights and interests in case of a claim, well be by your side... whenever you need us.

Risks are unavoidable in personal life and in business, but can be managed by proper planning.

That's exactly where we at Bajaj Capital Insurance Broking Ltd. step in. At BCIBL, an IRDA licensed "Composite Insurance Broker" bearing licence number CB 042/02 , we call it Risk Management. We help you to identify the potential risks and pass some of them on to insurance companies.

We are your partners, who help you to identify and understand various risks, prioritize them and eventually manage them.

As a broker, we do not offer you just a single option but multiple options available, and help you select the most appropriate one.

Products

We offer a wide range of Life and General Insurance products offered by the insurance companies that cover almost the entire spectrum of risks that individuals or your business may face.

We offer a wide range of insurance packages including.

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Personal Lines Auto Home Travel Accident & Health

Property Insurance Fire and Special Peril Marine Machinery Breakdown Electronic Equipment Insurance Loss of Profits etc.

Liability Insurance Commercial General Liability Product Liability Workmen as Compensation/ Employer's Liability

Contingency Risks Event Cancellation Wedding Insurance All Risk for Mobiles, Computers, Laptops etc.

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Industrial All Risk and Project Insurance

Specialty Products Professional Indemnity/Errors & Omissions (E&O) Directors and Officers Liability (D&O) Fidelity Guarantee Commercial Cyber Crime Insurance Credit Insurance Mutual Fund & Asset Protection

Why consult BCIBL? As IRDA licensed Insurance Brokers, we are your representatives unlike an agent who represents an insurance company. At BCIBL, we consider it your right to receive independent, unbiased and professional advice. We enjoy the 'Preferred Insurance Broker' status with many of the Insurance companies. This, in essence, translates into a greater benefit for you.

companies present in India. We are therefore proud to say that many companies have come up with insurance products based on our feedback. We have a strong operational and servicing team, and an all-India reach. We also have the support of a strong IT infrastructure and responsive call centres. As such, we are easily accessible.

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Experience the power of Bajaj Capital's 360 The only thing permanent in life is change. Times change. People change. So does life. You expect life to be much better tomorrow than it is today. Tomorrow, you hope to fulfil all your dreams and aspirations. But what happens if things take an untoward turn? Or, if there is an eventuality? Perhaps it's time for you to change the way you plan your investments.. .

Learn more about Bajaj Capital's 360 Financial Planning

Why do you need Bajaj Capital's 360 Financial Planning? Who needs 360 Financial Planning? What is 360 Financial Planning all about? How will 360 Financial Planning help me? How do I get my personalised 360 Financial Plan created?

Dont just dream... Plan!

Financial Planning is becoming increasingly popular in developed countries all over the world. Now, with a little help from Bajaj Capital, you too can give yourself the 360 Financial Planning edge! Get your Financial Plan prepared now

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Why do you need Bajaj Capital's 360 Financial Planning?

You may have many dreams, needs and desires. For example, you could be dreaming of:

Owning a new car Buying a dream house Providing your children with the best education Planning a grand wedding for your children

Having a great time after your retirement

But in today's world of skyrocketing costs and increasing inflation, how many of these dreams can you hope to turn into reality? By planning well, you can utilise your limited resources to the fullest.

360 Financial Planning helps you see the big picture and invest for specific longterm and short-term goals well in time.

Who needs 360 Financial Planning?

Everyone does! Because everyone has a right to dream. And realising dreams is easier when you work to a plan that's:

Reliable Realistic Proven

Bajaj Capital's 360 Financial Planning Programme could make a difference to all those who wish to lead a worry-free, financially secure life.

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What is 360 Financial Planning all about?

360 Financial Planning is a unique software-based simulation that takes a holistic view of your life-long financial needs and charts a personalised investment strategy to help you meet them. Broadly, it involves:

Identifying your current financial status Listing and prioritising your goals Creating a sound investment plan to achieve them

Monitoring the plan to facilitate swift corrective action, if needed

360 Financial Planning is based on the premise that every individual has certain basic financial needs that are expressed at various stages of life (getting married, buying assets like homes, vehicles, or providing for your children's education and wedding). With the help of 360Financial Planning, you can prepare yourself well in time for all these goals.

How will 360 Financial Planning help me?

Instead of investing in an ad-hoc manner, 360 Financial Planning helps you take a holistic, all-round view. Briefly, 360 Financial Planning comprises:

Investment Planning: To make your wealth grow Cash Flow Planning: To provide for assets and meet the periodic cash requirements

Tax Planning: To save on taxes and increase your income Insurance Planning: To protect yourself, your family and your assets Children's Future Planning: To give your children a financially secure future

Retirement Planning: Because retirement is a time to relax, not to get worried

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How do I get my personalised 360 Financial Plan created?

Heres how Financial Plans are prepared:

The process begins with identifying your needs with the help of the Need Analysis Form. Our Financial Planners then use the especially-created 360 Financial Planning software to generate a personalised Snapshot. The Snapshot gives you a graphic account of all your financial requirements, at every stage of your future life. Based on the Snapshot, our experts work out an investment strategy.

Once implemented, our experts keep regular track of your investments.

A Financial Planning session takes just 15 minutes Investment Planning Everyone needs to save for a rainy day. Once you have saved enough to take care of emergencies, you should start thinking about investing and to make your money grow. We can help you plan your investments so that you can reap adequate benefits and achieve your financial goals.

Bajaj Capitals Investment Planning Service includes: Risk Profiling Asset Allocation and Portfolio Construction Creation and Accumulation of Wealth through Systematic Investment Plans (SIP) Regular review of progress and Portfolio Rebalancing

Essentially, Investment Planning involves identifying your financial goals throughout your life, and prioritising them. Investment Planning is important because it helps you to derive the maximum benefit from your investments.

Your success as an investor depends upon your ability to choose the right investment options. This, in turn, depends on your requirements, needs and goals.
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For most investors, however, the three prime criteria of evaluating any investment option are liquidity, safety and return.

Investment Planning also helps you to decide upon the right investment strategy. Besides your individual requirement, your investment strategy would also depend upon your age, personal circumstances and your risk appetite. These aspects are typically taken care of during investment planning.

Investment Planning also helps you to strike a balance between risk and returns. By prudent planning, it is possible to arrive at an optimal mix of risk and returns, that suits your particular needs and requirements.

The Need For Insurance Planning "Insurance is not for the person who passes away, it for those who survive," goes a popular saying that explains the importance of Insurance Planning.

It is extremely important that every person, especially the breadwinner, covers the risks to his life, so that his family's quality of life does not undergo any drastic change in case of an unfortunate eventuality.

It is extremely important that every person, especially the breadwinner, covers the risks to his life, so that his family's quality of life does not undergo any drastic change in case of an unfortunate eventuality.

Insurance Planning is concerned with ensuring adequate coverage against insurable risks. Calculating the right level of risk cover is a specialised activity, requiring considerable expertise. Proper Insurance Planning can help you look at the possibility of getting a wider coverage for the same amount of premium or the same level of coverage for the same amount amount of premium or the same level of
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coverage for a reduced premium. Hence, the need for proper insurance planning.

Insurance, simply put, is the cover for the risks that we run during our lives. Insurance enables us to live our lives to the fullest, without worrying about the financial impact of events that could hamper it. In other words, insurance protects us from the contingencies that could affect us.

So what are the risks that we run? To name a few - the risk on our lives that is, the worries of replacement of the incomes that we contribute to the running of the household), the risks of medical contingencies (since they have the capability of depleting our wealth considerably) and risks to assets (since the replacement of these can have tremendous financial implications). If we can imagine a situation where our goals are disturbed by acts beyond our control, we can realise the relevance of insurance in our lives.

Insurance Planning takes into account the risks that surround you and then provides an adequate coverage against those risks. There is no risk not worth insuring yourself against, and insurance should first and foremost be looked as a measure to guard against risks - the risk of your dreams going awry due to events beyond your control

Retirement Planning Some like it. Some dont. But retirement is a reality for every working person. Most young people today think of retirement as a distant reality.

However, it is important to plan for your post-retirement life if you wish to retain your financial independence and maintain a comfortable standard of living even when you are no longer earning. This is extremely important, because, unlike developed nations, India does not have a social security net.

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Retirement Planning acquires added importance because of the fact that though longevity has increased, the number of working years havent.

Our Retirement Planning Service involves: Computing that amount that would be required post-retirement. This is done after taking inflation and time value of money into account. Building your Retirement Corpus using Systematic Investment Plans (SIPs) and other long-term growth orient products Ensuring adequate post-retirement income through safe investments.

The asset allocation and selection of investment vehicles keep changing as your risk-bearing capacity diminishes.

Tax Planning - Introduction Proper tax planning is a basic duty of every person which should be carried out religiously. Basically, there are three steps in tax planning exercise. These three steps in tax planning are: Calculate your taxable income under all heads ie, Income from Salary, House Property, Business & Profession, Capital Gains and Income from Other Sources.

Calculate tax payable on gross taxable income for whole financial year (i.e.,From 1st April to 31st March) using a simple tax rate table, given on next page.

After you have calculated the amount of your tax liability. You have two options to choose from: 1. Pay your tax (No tax planning required 2. Minimise your tax through prudent tax planning.

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Most people rightly choose Option 'B'. Here you have to compare the advantages of several tax saving schemes and depending upon your age, social liabilities, tax slabs and personal preferences, decide upon a right mix of investments, which shall reduce your tax liability to zero or the minimum possible. Every citizen has a fundamental right to avail all the tax incentives provided by the Government. Therefore, through prudent tax planning not only income-tax liability is reduced but also a better future is ensured due to compulsory savings in highly safe Government schemes. We sincerely advise all our readers and clients to plan their investments in such a way, that the post-tax yield is the highest possible keeping in view the basic parameters of safety and liquidity

Tax Planning Tips First, let's start by assessing your income tax liability. Once you have identified your tax liability, you can then create the right plan. Please note that this applies only to salaried individuials.

Following rates are applicable for computing tax liability for the current Financial Year i.e. April 1, 2010 to March 31, 2011 (Assessment year 2010-2011). Our endeavour is to present the complex provisions of the Income Tax Act in a simplified manner, which could be understood by a common investor as well as by a layman. For other Resident Male Individuals below 65 years of age and HUFs Net Income Range Up to Rs. 1,60,000 Rs. 1,60,001 to Rs. 5,00,000 Nil 10% of income above Rs. 1,60,000 3% of income tax Nil Income Tax Plus Education Cess

Rs 5,00,001 to Rs Rs. 34,000 + 20% of 3% of income tax

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8,00,000

the income above Rs. 5,00,000

Above Rs. 8,00,000

Rs. 94,000 + 30% of income above Rs. 8,00,000 3% of income tax

For Resident Women below 65 years of age Net Income Range Income Tax Plus Education Cess Nil

Up to Rs. 1,90,000 Nil Rs. 1,90,001 to Rs. 10% of the income 5,00,000 Rs 5,00,001 to Rs 8,00,000 above Rs. 1,90,000 Rs. 31,000 + 20% of the income above Rs. 5,00,000 Rs. 91,000 + 30% of the income above Rs. 8,00,000

3% of income tax

3% of income tax

Above Rs. 8,00,000

3% of income tax

For Resident Senior Citizens (who are 65 years or more at any time during the Financial Year 2007-08) Net Income Range Plus Education Cess Nil

Income Tax

Up to Rs. 2,40,000 Nil Rs. 2,40,001 to Rs. 10% of the income 5,00,000 Rs 5,00,001 to Rs 8,00,000 above Rs. 2,40,000 Rs.2 6000 + 20% of the income above Rs. 5,00,000

3% of income tax

3% of income tax
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Above Rs. 8,00,000

Rs. 86000 + 30% of the income above Rs. 8,00,000 3% of income tax

Tax Planning - Tax Saving After assessing your tax liability, the next step is tax planning. It involves selecting the right tax saving instruments and making investments accordingly. Deductions from Taxable Income: Deduction under section 80C

This new section has been introduced from the Financial Year 2005-06.

Under this section, a deduction of up to Rs. 1,00,000 is allowed from Taxable Income in respect of investments made in some specified schemes.

Specified Investment Schemes u/s 80C and u/s 80CCC (1)-

1. Life Insurance Premiums

2. Contributions to Employees Provident Fund/GPF

3. Public Provident Fund (maximum Rs 70,000 in a year)

4. NSC (National Savings Certificates)

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5. Unit Linked Insurance Plan (ULIP)

6. Repayment of Housing Loan (Principal)

7. Equity Linked Savings Scheme (ELSS) of Mutual Funds

8. Tuition Fees including admission fees or college fees paid for full-time education of any two children of the assesses (Any development fees or donation or payment of a similar nature shall not be eligible for deduction).

9. Infrastructure Bonds issued by Institutions/ Banks such as IDBI, ICICI, REC, PFC etc.

10. Interest accrued in respect of NSC VIII issue.

11. Pension scheme of LIC of India or any other insurance company.

12. Fixed Deposit with Banks having a lock-in period of 5 Years Notes:

1. There are no sectoral caps (except in PPF) on investment in the new section and the assessee is free to invest Rs. 1,00,000 in any one or more of the specified instruments.

2. Amount invested in these instruments would be allowed as deduction irrespective of the fact whether (or not) such investment is made out of income chargeable to tax.

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3. Section 80C deduction is allowed irrespective of the assessees income level. Even persons with taxable income above Rs. 10,00,000 can avail the benefit of section 80C.

4. Some of the popular pension plans are Jeevan Suraksha by LIC, Life Time Pension By ICICI Prudential Life Insurance, Aviva Life - Pension Plus by Aviva Life Insurance, Max-Easy Life policy by Max New York Life, Nirvana Plus by Tata AIG Life Insurance etc. Please note that because the deduction is allowed from taxable income, the exact savings in tax will depend upon the tax slab of the individual. Thus, a person in the 30% tax slab can save income tax up to Rs. 30,900 (or Rs. 33,990 if annual income exceeds Rs. 10,00,000) by investing Rs. 1,00,000 in the specified schemes u/s 80C. Deduction under section 80D. Under this section, deduction of up to Rs 40,000 can be claimed in respect of premium paid by cheque towards health insurance policy of various General Insurance companies like Royal Sundaram Health Shield Gold, Reliance Healthwise etc. Such premium can be paid towards health insurance of spouse, dependent parents as well as dependent children.as per following table: On whose life Individual health Insurance Addittional Total

taxpayer, his/her Deduction for spouse,and parents of the Individual whether dependent or not Rs. 15,000 30,000

Policy is taken dependent children Rs. General Deduction Aditional Deduction if one of the 5,000 15,000

5,000

10,000

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insured is Senior Citizen Total 20,000 20,000 40,000

Accordingly a person who is falls/in the 30% tax bracket can save income tax up to Rs 4,635 (or Rs. 5099 if the annual income exceeds Rs 10,00,000) by paying Rs 15,000 as premium for Mediclaim policy in a year. Deduction under section 24(b)

Under this section, interest on borrowed capital for the purpose of house purchase or construction is deductible from taxable income up to Rs. 1,50,000 with some conditions to be fulfilled.

Tax Free Income The following incomes are completely exempt from income tax without any upper limit. 1. Interest on PPF/GPF/EPF. 2. Interest on GOI tax free bonds. 3. Dividends on Shares and on Mutual Funds. 4. Any capital receipt from life insurance policies i.e., sums received either on death of the insured or on maturity of life insurance plans. However, in case of life insurance policies issued after March 31, 2004, exemption on maturity payment u/s 10(10D) is available only if the premium paid in any year does not exceed 20% of the sum assured. 5. Interest on savings bank account in a post office. 6. Long term capital gain on sale of shares and equity mutual funds if the security transaction tax is paid/imposed on such transactions.

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Dividend Income

Dividend income from companies /equity-oriented Mutual Funds is completely exempt in the hands of investors. Dividend is also tax-free in the hands of investors in case of debt-oriented Mutual Fund schemes. Gift Tax:

Gift tax was abolished with effect from October 1, 1998. The gifts are no longer taxable in the hands of donor or donee. However, with effect from September 1, 2004, any gift received by an individual or HUF will be included in taxable income, provided the amount of gift exceeds Rs 50,000. However, gifts received from any of the following will continue to remain tax free: 1. Spouse 2. Brother or sister 3. Brother or sister of the spouse 4. Brother or sister of either of the parents of the individual 5. Any lineal ascendant or descendant of the individual 6. Any lineal ascendant or descendant of the spouse of the individual 7. Spouse of the person referred to in (2) or (6)

Also, gifts received on the occasion of marriage or under a will by way of inheritance are also tax free Banking Cash Transaction Tax was abolished with effect from March 31,2009 Computation of Gross Taxable Income as per Income Tax , Income of a Person is Computed under the following 5 Heads : 1. Income from Salaries
34

2. Income from House Properties 3. Profit & Gains of Business & Profession 4. Capital Gains 5. Income from Other Sources

Now we will discuss in detail about the taxability of these sources of income. 1.Salary or Pension Income

Salaried employees are issued a certificate of tax deducted at source from salary income by their employers in Form No. 16. It also gives the Net Taxable Salary figure. 2. Income from House Property

If the property is self occupied then the Income from House Property is treated as NIL. If any loan is taken for the purchase of the property then the amount paid towards interest upto a maximum of Rs.1,50,000/- is deducted from taxable income. In case property is given on rent,then we have to find out the a. Annual Rental Income b. From this deduct Property Tax paid if any c. From balance amount deduct 30% towards repairs & maintenaince d. From the residual figure deduct the amount of interest paid on loan taken for the purchase of the property. e. The resultant figure is the Income from House Property.

3. Profit from Business / profession

Income as arived on the basis of Profit & Loss A/c 4. Income from Interest

Interest Income from the following sources is also required to be included in the
35

Gross Taxable Income: 1. Interest on company deposits. 2. Interest on debentures/bonds. 3. Interest on savings bank account/ fixed deposits with banks. 4. Interest on post office savings schemes like MIS, NSC, KVP etc. 5. Interest on private loans given to relatives, friends or any other entity. 6. Interest on government securities. Note: Deduction u/s 80 L has been omitted now and accordingly, interest income from the above sources is fully taxable now.

Cash Flow Planning What Is Cash Flow Planning? In simple terms, cash flow refers to the inflow and outflow of money. It is a record of your income and expenses. Though this sounds simple, very few people actually take the time out to find out what comes in and what goes out of their hands each month

Cash flow planning refers to the process of identifying the major expenditures in future (both short-term and long-term) and making planned investments so that the required amount is accumulated within the required time frame.

Cash flow planning is the first thing that should be done prior to starting an investment exercise, because only then will you be in a position to know how your finances look like, and what is it that you can invest without causing a strain on yourself. It will also enable you to understand if a particular investment matches with your flow requirement.

So does it involve looking at future cash flows only? Not really. You should always do a cash flow for yourself as on date, and you will realize that you could have a
36

potential savings amount within each month of your working life. This is the amount that you should look at saving for meeting your financial goals. The best way of doing this is to have a personal budget.

Why is cash flow planning important?

Cash flow plans are commonly used by business houses. Without a viable cash flow plan, a company could easily spend more than its revenue, putting it in peril. Unfortunately, most of us do not realise that a cash flow plan is as important for people like us as well. The principles that apply to corporate finance and to our personal lives are largely the same.

There has never been a bigger need than today for families and individuals to work out cash flow plans. Without proper cash flow planning one could easily get caught in the debt trap. Of course, it goes without saying that creating a plan is not enough. One also needs to implement the plan, besides bringing about a change in the spending habits.

Cash flow plan brings you face-to-face with what you should ideally be saving, and investing in a systematic and regular manner, and what would it mean to you to withdraw from your portfolio after a couple of years. It brings down in numbers what your financial future has in store for you, and gives a crystal clear view (as much as is possible with inflation and the interest rate scenario).

Personal Budget How to make a Personal Budget ?

The first thing you will need to do is to collect all your bills, receipts and other documents which will help you monitor your spending for the month. A good idea is to jot down all your expenses in a notebook. Include both fixed and variable expenses in your list.

37

Fixed expenses are those that stay the same every month (at least for a relatively long period). These are expenses that have been committed for a long term. For example, rent, school fees of your children, wages paid out to domestic helps, etc are all fixed expenses.

Variable expenses, on the other hand, are those that change from month to month. Expenses on food, clothing, electricity and phone bills, entertainment, etc. could be clubbed under this head. You have a relatively higher control over some of these.

If you have just started the budgeting exercise, it may be difficult to keep all records. Do not worry, and do your best to keep records. Start keeping track of as many expenses as you can. The more accurate and complete this exercise is, the easier and more effective will your cash flow planning be.

Steps to Creating an Effective Personal Budget Make a list of all of your monthly income. If you have have received an annual bonus, divide this number by 12. Do the same to all other lump sum incomes of an annual nature. It is important to list all sources. Next, make a list of all your monthly expenses. If an expense occurs less frequently, convert it to the monthly format. Be sure to include all expenses as housing, food, transportation, utilities, entertainment, etc. It is wise to track your spending for a full month during this stage. Now you can see for yourself if your income covers all of your current expenses. If the answer is no, then you need to cut down on your expenses. Depending on the amount of the shortfall, you may choose to reduce some of your variable expense (such as spending money on movies or junk food!) or increase your earnings. For example, you could take up a part-time job after your regular work hours, or give tuitions. If your income is in excess of your expenses, consider investing the difference instead of spending it.
38

Cash Flow Planning Basics The idea behind cash flow planning is to match expenses on life goals with the available income. Cash flow planning begins with identifying the sources and the amount of income and expenditure.

'Income' includes maturities of investments, income from other sources, dividends, etc. 'Expenses' include loan repayments, and all other outflows etc.

The next crucial step is to list out the life goals and assigning a time frame for achieving them. For example, your list could look like this: Going abroad on a vacation next year Buying a car in 2 years Buying your child a computer next year

The next step is to prioritise these goals. As you will notice, some of these goals (like buying your child a computer, which is important for his or her education; or a wedding in the family) are high priority, while others (such as going abroad on a vacation) could be assigned a relatively lower priority.

High priority goals are those where you do not have the liberty of compromising either on the time frame or on the amount. Low priority goals, on the other hand, can be tweaked around a bit.

Finally, take care to ensure that you have a contingency fund to tackle an emergency. Ideally, the size of your contingency fund should be two-three times your monthly expenditure, if you are a working person. If you are a retired person, the amount should be three to five times.

Thereafter, your financial planner can help you work out the right investment strategy by using the principles of Investment Planning. Essentially, this involves calculating the amount of investment required to realise the goal, taking inflation into account.
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Children's Future Planning Like every parent, you too must be overjoyed to watch your child grow. All parents want to give the best possible upbringing to their children. This includes good education and security, in case of any eventuality. Soon, your little bundle of joy will grow up, and it will be time to provide for his or her higher education and wedding.

The purpose of Children's Future Planning is to create a corpus for foreseeable expenditures such as those on higher education and wedding, and to provide for an adequate security cover during their growing years.

Children's Future Planning acquires added importance because children's education and wedding are high priority life goals, which can neither be postponed nor can there be a compromise on the amount.

Good education has always been the passport to a secure future. Today, career opportunities have grown manifold, and there are many professional course that your child can aspire for. However, costs of higher education have also increased exponentially.

Like most parents, you might be saving regularly to ensure a safe tomorrow for your child. However, savings alone is no longer enough. For ensuring adequate funding of your child's education, you as a parent, need to do two things: Invest appropriate amount systematically and at regular intervals Provide for a financial security blanket to cover any eventuality

It is never too early to start saving and investing for your child's future. Especially in today's context. For example, the cost of a professional degree today is approximately Rs 2.5 lakhs. If your child is one-year-old today, after 17 years when he/she goes to college, you may require a sum of Rs 6.3 lakhs, assuming an annual rate of inflation of 6%.
40

There are many products which your Financial Planner can use to achieve the above objectives. For example, he could suggest a Children's Future Plan offered by any good insurance company, to build a corpus for your child's higher education, and provide for a security cover in the event of the parent's unfortunate demise.

Children's plans are also available under unit-linked option. Being unit-linked, they offer access to investments in all kinds of asset classes - equity, debt and cash. Investments Mutual Funds are among the hottest favourites with all types of investors. Investing in mutual funds ranks among one of the preferred ways of creating wealth over the long term. In fact, mutual funds represent the hands-off approach to entering the equity market. There are a wide variety of mutual funds that are viable investment avenues to meet a wide variety of financial goals. This section explains the various aspects of Mutual Funds. What are Mutual Funds? Why choose Mutual Funds? Types of Mutual Funds Snapshot of Mutual Fund Schemes Choosing the Right Mutual Fund Scheme How to calculate the growth of your Mutual Funds Investments? Points to Remember Glossary What are Mutual Funds ? A Mutual Fund is a trust that pools together the savings of a number of investors who share a common financial goal. The fund manager invests this pool of money in

41

securities -- ranging from shares and debentures to money market instruments or in a mixture of equity and debt, depending upon the objectives of the scheme. Why choose Mutual Funds ? Investing in Mutual Funds offers several benefits:

Professional expertise: Fund managers are professionals who track the market on an on-going basis. With their mix of professional qualification and market knowledge, they are better placed than the average investor to understand the markets

Diversification: Since a Mutual Fund scheme invests in number of stocks and/or debentures, the associated risks are greatly reduced.

Relatively less expensive: When compared to direct investments in the capital market, Mutual Funds cost less. This is due to savings in brokerage costs, demat costs, depository costs etc.

Liquidity: Investments in Mutual Funds are completely liquid and can be redeemed at their Net Assets Value-related price on any working day.

Transparency: You will always have access to up-to-date information on the value of your investment in addition to the complete portfolio of investments, the proportion allocated to different assets and the fund managers investment strategy.

Flexibility: Through features such as Systematic Investment Plans, Systematic Withdrawal Plans and Dividend Investment Plans, you can systematically invest or withdraw funds according to your needs and convenience.

SEBI regulated market: All Mutual Funds are registered with SEBI and function within the provisions and regulations that protect the interests of investors. AMFI is the supervisory body of the Mutual Funds industry.

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Types of Funds There are a wide variety of Mutual Fund schemes that cater to your needs, whatever your age, financial position, risk tolerance and return expectation. Whether as the foundation of your investment program or as a supplement, Mutual Fund schemes can help you meet your financial goals. The different types of Mutual Funds are as follows:

Diversified Equity Mutual Fund Scheme

A mutual fund scheme that achieves the benefits of diversification by investing in the stocks of companies across a large number of sectors. As a result, it minimizes the risk of exposure to a single company or sector.

Sectoral Equity Mutual Fund Scheme

A mutual fund scheme which focuses on investments in the equity of companies across a limited number of sectors -- usually one to three.

Index Funds

These funds invest in the stocks of companies, which comprise major indices such as the BSE Sensex or the S&P CNX Nifty in the same weightage as the respective indice.

Equity Linked Tax Saving Schemes (ELSS)

Mutual Fund schemes investing predominantly in equity, and offering tax deduction

43

to investors under section 80 C of the Income Tax Act. Currently rebate u/s 80C can be availed up to a maximum investment of Rs 1,00,000. A lock-in of 3 years is mandatory.

Monthly Income Plan Scheme

A mutual fund scheme which aims at providing regular income (not necessarily monthly, don't get misled by the name) to the unitholder, usually by way of dividend, with investments predominantly in debt securities (upto 95%) of corporates and the government, to ensure regularity of returns, and having a smaller component of equity investments (5% to 15%)to ensure higher return.

Income schemes

Debt oriented schemes investing in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments.

Floating-Rate Debt Fund

A fund comprising of bonds for which the interest rate is adjusted periodically according to a predetermined formula, usually linked to an index.

Gilt Funds - These funds invest exclusively in government securities.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion

44

indicated in their offer documents. They generally invest 40-60% in equity and debt instruments.

Fund of Funds

A Fund of Funds (FoF) is a mutual fund scheme that invests in other mutual fund schemes. Just as fund invests in stocks or bonds on your behalf, a FoF invests in other mutual fund schemes.

Mutual Fund Type Objective Risk

Investment Portfolio

Who should invest Those who

Investment horizon

Liquidity + Money Market Moderate Income + Reservation of Capital Negligible

Treasury Bills, Certificate of Deposits, Commercial Papers, Call Money

park their funds in current accounts or short-term bank deposits 2 days - 3 weeks

Shortterm Funds (Floating - shortterm) Liquidity + Moderate Income Little Interest Rate

Call Money, Commercial Papers, Treasury Bills, CDs, Shortterm Government securities. Those with surplus short-term funds 3 weeks 3 months

45

Bond Funds Regular (Floating - Longterm) Gilt Funds Security & Income Interest Rate Risk Income Credit Risk & Interest Rate Risk

Predominantly Debentures, Government securities, Corporate Bonds Government securities Salaried & conservative investors Aggressive 12 months & more Salaried & conservative investors

More than 9 - 12 months

Equity Funds

Long-term Capital Appreciation High Risk Stocks

investors with long term out look. 3 years plus

To generate returns that Index Funds are NAV varies Portfolio indices like BSE, NIFTY etc Aggressive investors. 3 years plus

commensurate with index with returns of performance respective indices

Balanced ratio Growth & Regular Income Capital of equity and 2 years plus

Balanced Funds

Market Risk debt funds to Moderate & and Interest ensure igher Rate Risk returns at lower risk Aggressive

How to choose the right Mutual Fund scheme Once you are comfortable with the basics, the next step is to understand your investment choices, and draw up your investment plan relevant to your

46

requirements. Choosing your investment mix depends on factors such as your risk appetite, time horizon of your age, etc. investment, your investment objectives,

What should be kept in mind before investing in Mutual Funds ?

Mutual Fund investment decisions require consistent effort on the part of the investor. Before investing in Mutual Funds, the following steps must be given due weightage to decide on the right type of scheme:

1. Identifying the Investment Objective 2. Selecting the right Scheme Category 3. Selecting the right Mutual Fund 4. Evaluating the Portfolio

A) Identifying the Investment Objective

Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, level of income and expenses, among many other factors. Therefore, the first step is to assess you needs. Begin by asking yourself these simple questions:

Why do I want to invest?

47

The probable answers could be:

"I need a regular income" "I need to buy a house/finance a wedding" "I need to educate my children," or A combination of all the above

How much risk am I willing to take?

The risk-taking capacity of individuals vary depending on various factors. Based on their risk bearing capacity, investors can be classified as:

Very conservative Conservative Moderate Aggressive Very Aggressive

What are my cash flow requirements?

For example, you may require:

A regular Cash Flow A lumpsum after a fixed period of time for some specific need in the future Or, you may have no need for cash, but you may want to create fixed assets for the future

48

B) Selecting the scheme category

The next step is to select a scheme category that matches your investment objectives:

For Capital Appreciation go for equity sectoral funds, equity diversified funds or balanced funds.

For Regular Income and Stability you should opt for income funds/MIPs For Short-Term Parking of Funds go for liquid funds, floating rate funds, short-term funds.

For Growth and Tax Savings go for Equity-Linked Savings Schemes. Investment horizon 1- 6 months Ideal Instruments Liquid/Short-term plans Diversified Equity/ Balanced Funds Monthly Income Flexible Plans / Income Funds Equity-Linked

Investment Objective Short-term Investment Capital Appreciation Regular Income

Over 3 years

Tax Saving

3 yrs lock-in

Saving Schemes (ELSS)

C) Selecting the right Mutual fund

Once you have a clear strategy in mind, you now have to choose which Mutual fund and scheme you want to invest in. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes

49

managed by the same Fund Manager. Some important factors to evaluate before choosing a particular Mutual Fund are:

The track record of performance over that last few years in relation to the appropriate yardstick and similar funds in the same category.

How well the Mutual Fund is organized to provide efficient, prompt and personalized service. The degree of transparency as reflected in frequency and quality of their communications.

D) Evaluation of portfolio

Evaluation of equity fund involve analysis of risk and return, volatility, expense ratio, fund managers style of investment, portfolio diversification, fund managers experience. Good equity fund should provide consistent returns over a period of time. Also expense ratio should be within the prescribed limits. These days fund house charge around 2.50% as management fees.

Evaluation of bond funds involve it's assets allocation analysis, return's consistency, its rating profile, maturity profile, and its performance over a period of time. The bond fund with ideal mix of corporate debt and gilt fund should be selected.

How to calculate the growth of your Mutual Fund investments ? Let's assume that Mr. Gupta has purchased Mutual Fund units worth Rs. 10,000 at an NAV of Rs. 10 per unit on February 1. The Entry Load on the Mutual Fund was 2%. On September 15, he sold all the units at an NAV of Rs 20. The exit load was 0.5%.

50

His growth/ returns is calculated as under:

1. Calculation of Applicable NAV and No. of units purchased:

(a) Amount of Investment = Rs. 10,000

(b) Market NAV = Rs. 10

(c) Entry Load = 2% = Rs. 0.20

(d) Applicable NAV (Purchase Price) = (b) + (c) = Rs. 10.20

(e) Actual Units Purchased = (a) / (d) = 980.392 units 2. Calculation of NAV at the time of Sale

(a) NAV at the time of Sale = Rs 20

(b) Exit Load = 0.5% or Rs.0.10

(c) Applicable NAV = (a) (b) = Rs. 19.90

3. Returns/Growth on Mutual Funds

51

(a) Applicable NAV at the time of Redemption = Rs. 19.90

(b) Applicable NAV at the time of Purchase = Rs. 10.20

(c) Growth/ Returns on Investment = {(a) (b)/(b) * 100} = 95.30%

Points to Remember

Do not speculate: Always evaluate risk-taking capacity. Do not chase returns: Because what goes up must come down. Do not put all eggs in one basket: Diversification reduces the risk. Do not stop working on Mutual Funds: Continuous evaluation of funds is a must.

Do not time the market: Every time is good for investments. Mutual Funds are subject to market risks and there is no assurance that the fund objective will be achieved.

NAVs fluctuate depending on forces affecting the Capital market. Past performance may or may not be sustained in the future.

Assets Management Company: A highly regulated organization that pools money from many people into portfolio structured to achieve certain objectives. Typically an AMC manages several funds open ended/ close ended across several categoriesgrowth, income, balanced. Balanced Fund: A hybrid portfolio of stocks and bonds.

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Close Ended Fund: They neither issue nor redeem fresh units to investors. Some closed ended funds can be bought or sold over the stock exchange if the fund is listed. Else, investor have to wait till redemption date to exit. Most listed close ended funds trade at discount to the NAV.

Open Ended Fund: A diversified and professionally managed scheme, it issues fresh units to incoming investors at NAV plus any applicable sales charge, and it redeems shares at NAV from sellers, less any redemption fees.

Entry/ Exit Load: A charge paid when an investor buys/sells a fund. There could be a load at the time of entry or exit, but rarely at both times.

Expense Ratio : The annual expenses of the funds, including the management fee, administrative cost, divided by the fund under management.

Growth/Equity Fund: A fund holding stocks with good or improving profit prospects. The primary emphasis is on appreciation.

Liquidity: The ease with which an investment can be bought or sold. A person should be able to buy or sell a liquid asset quickly with virtually no adverse price impact.

Net Assets Value : A price or value of one unit of a fund. It is calculated by summing the current market values of all securities held by the fund, adding the cash and any accrued income, then subtracting liabilities and dividing the result by the number of units outstanding.

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Interest Rate Risk: The risk borne by fixed-interest securities, and by borrowers with floating rate loans, when interest rates fluctuate. When interest rates rise, the market value of fixed-interest securities declines and vice versa.

Credit Risk: Credit risk involves the loss arising due to a customers or counterpartys inability or unwillingness to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions.

Capital Market Risk : Capital Market Risk is the risk arising due to changes in the Stock Market conditions. Why should you invest in Post Office Schemes These schemes are offered by the Government of India. Safe, secure and risk-free investment options. Tax Deduction at Source (TDS). Nomination facility is available. Nomination can be changed at any time These instruments are transferable to any part of India. Attractive rates of interest.

Post Office Schemes: Post Office Monthly Income Scheme Post Office Time Deposit Scheme Post Office Savings Account National Savings Certificate Kisan Vikas Patra

54

Govt schemes offered through Post Offices and Nationalised Banks: Public Provident Fund Senior Citizen's Savings Scheme

Bonds Bond refers to a security issued by a company, financial institution or government which offers regular or fixed payment of interest in return for borrowed money for a certain period of time Bonds : Tax Free Bonds 6.5% Tax free bonds has been withdrawn from the market. This will not effect the investments already made.

Taxable Bonds The salient features of the Bond areas follows:

Eligibility for Investment

The Bonds may be held by

(i) an individual, not being a Non-Resident Indian (NRI)

(a) in his or her individual capacity, or

55

(b) in an individual capacity on joint basis, or

(c) in an individual capacity on anyone or survivor basis, or

(d) on behalf of a minor as father/mother/legal guardian

(ii) a Hindu Undivided Family.

(iii) (a)'Charitable Institution' to mean a Company registered under Section 25 of the Indian Companies Act 1956 or

(b) an institution which has obtained a Certificate of Registration as a charitable institution in accordance with a law in force; or

(c) any institution which has obtained a certificate from Income Tax Authority for the purpose of Section 80G of the Income Tax Act, 1961.

(iv) "University" means a university established or incorporated by a Central, State or Provincial Act, and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a university for the purposes of that Act.

Limit of Investment

There is no maximum limit for investment in the Bonds.

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Tax Treatment

(i) Income-Tax: Interest on the Bonds will be taxable under the Income-Tax Act, 1961 as applicable according to the relevant tax status of the bond holder. (ii) Wealth Tax: The Bonds will be exempt from Wealth-tax under the Wealth- Tax Act, 1957.

Issue Price

(i) The Bonds will be issued at par i.e. at Rs.100.00 percent. (ii) The Bonds will be issued for a minimum amount of Rs. 1000/- (face value) and in multiples thereof. Accordingly, the issue price will be Rs.1000/- for every Rs.1,000/-(Nominal).

Subscription Subscription to the Bonds will be in the form of Cash/Drafts/Cheques. Cheques or drafts should be drawn in favour of the Receiving Office, specified in paragraph 10 below and payable at the place where the applications are tendered.

Date of Issue

(i) The Bonds will be issued with effect from 21st April 2003. (ii) The date of issue of the Bonds in the form of Bond Ledger Account will be the date of receipt of subscription in cash or the date of realisation of draft/cheque.

Form (i) The Bonds will be issued and held at the credit of the holder in an account called Bond Ledger Account (BLA). (ii) New Bond Ledger series with the prefix (TB) are to be opened. All investment in 8% Savings (Taxable) Bonds by an existing BLA holder will be viewed as a new investment under a new BLA. (iii) The Bonds in the form of Bond Ledger Account will be issued by and held with designated branches of the agency banks and SHCIL as authorised by Reserve Bank of India in terms of
57

paragraph 10 below.(iv) The Certificate of Holding in respect of Bond Ledger Account will be issued in Form TBX or Form TBY as applicable for non-cumulative and cumulative investments respectively. (v) The Certificate of Holding in respect of cash applications may be issued on the same day as per the extant instructions.

Applications (i) Applications for the Bonds may be made in Form A (Annex 2) or in any other form as near as thereto stating clearly the amount and the full name and address of the applicant. (ii) Applications should be accompanied by the necessary payment in the form of cash/drafts/cheques as indicated in paragraph 6 above. (iii) Applicants who have obtained exemption from tax under the relevant provisions of the Income Tax Act, 1961, shall make a declaration to that effect in the application (in Form 'A') and submit a true copy of the certificate obtained from Income-Tax Authorities.

Receiving Offices

Applications for the Bonds in the form of Bond Ledger Account will be received at: (a) Authorised Branches of State Bank of India, Associate Banks, Nationalised Banks, four private sector banks and SHCIL as specified in the Annex 3. (b) Any other bank or branches of the banks and SHCIL as may be specified by the Reserve Bank of India in this regard from time to time.

Nomination A sole holder or a sole surviving holder of a Bond, being an individual, may nominate in form B (Annex 4) or as near thereto as may be, one or more persons who shall be entitled to the Bond and the payment thereon in the event of his/her death.

Transferability The Bond in the form of Bond Ledger Account shall not be transferable.

58

Interest (i) The bond will be issued in cumulative and non-cumulative form, at the option of the investor. (ii) The Bond will bear interest at the rate of 8% per annum. Interest on non-cumulative bonds will be payable at half-yearly intervals from the date of issue in terms of paragraph 7 above. Interest on cumulative bonds will be compounded with half-yearly rests and will be payable on maturity along with the principal. In the latter case, the maturity value of the Bonds shall be Rs.1601/- (being principal and interest) for every Rs.1,000/-(Nominal). Interest to the holders opting for noncumulative Bonds will be paid from date of issue in terms of paragraph 7 above upto 31st July/31st January, as the case may be and thereafter at half-yearly for period ending 31st July/31st January on 1st August and 1st February. Interest on Bond in the form of "Bond Ledger Account" will be paid, by cheque/warrant or through ECS by credit to bank account of the holder as per the option exercised by the investor/holder.

Advances/Tradeability against Bonds

The Bonds shall not be tradeable in the secondary market and shall not be eligible as collateral for loans from banks, financial Institutions and Non Banking Financial Companies, (NBFC) etc.

Repayment (i) The Bonds shall be repayable on the expiry of 6 (Six) years from the date of issue. No interest would accrue after the maturity of the Bond.

Company Fixed Deposits Introducing Company Fixed Deposits

Fixed Deposits in companies that earn a fixed rate of return over a period of time are called Company Fixed Deposits.
59

Financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits. Deposits thus mobilised are governed by the Companies Act under Section 58A. These deposits are unsecured, i.e., if the company defaults, the investor cannot sell the documents to recover his capital, thus making them a risky investment option. Benefits of investing in Company Fixed Deposits

High interest. Short-term deposits. Lock-in period is only 6 months. No Income Tax is deducted at source if the interest income is up to Rs 5,000 in one financial year

Investment can be spread in more than one company, so that interest from one company does not exceed Rs. 5,000

The performance of the companies should be reviewed at maturity. This will help you decide whether to renew or reshuffle the deposit. It is also wise to keep a track of these companies by checking their share prices, annual reports and other details reported in newspapers.

INTEREST ( % ) 6 MO N 1 2 3 5 YE AR ADDITI ONAL SR.CT

Updated on - Apr 15, 2010 EFFEC TIVE FROM DOWNL ORD OAD ER

COMP RATI ANY Alembi c NG P1+ by

YEA YEA YEA R R R

6.00 7.50 8.50

05/02/2 DOWNL 010 OAD

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Limited CRIS IL Apollo Hospit als Enterpr ises Ltd CANFI N HOME S LTD CEAT LIMITE D DS Kulkar ni Develo pers Ltd Deepa k Nitrate Limited DEEW AN HOUSI NG FIN.LT CAR EAA+, INDAA 9.00 9.10 9.25 9.0 0 01/11/2 DOWNL 009 OAD 8.00 8.25 8.50 01/08/2 009 NOT AVAILA BLE 12% 12% 12% 0.50% 20/01/2 DOWNL 010 OAD 8.50 9.00 9.50 ICRA MAA + 01/09/2 009 NOT AVAILA BLE 6.75 7.25 7.50 7.5 0 0.50(upt o 1 cr) 01/12/2 DOWNL 009 OAD 8.00 8.25 8.75 05/11/2 DOWNL 009 OAD

0.25

61

D DHFLSwaya m Sidha Deposi t CRIS ILFAA A, EXIM BANK OF INDIA ICRA MAA A, FITC HTAA A FIRST LEASI NG COMP ANY OF INDIA LIMITE D GATI LIMITE D 9.00 9.50 10.0 0 01/04/2 010 NOT AVAILA BLE CAR EAA+, FITC HtAA+ 8.00 8.50 8.75 22/01/2 DOWNL 010 OAD 6.75 6.75 7.50 7.5 0 0.50 12/11/2 DOWNL 009 OAD 500 Day s9.10 % 07/12/2 DOWNL 009 OAD

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CRIS ILHDFC LIMITE D FAA A, ICRA MAA A FITC HHUDC O TAA A, CAR EAA+ ICRA ICICI HOME FINAN CE MAA A, CAR EAAA IND SWIFT LAB LIMITE D IND SWIFT LTD J.K 10.5 11.5 12.0 12.5 0% 0% 0% 0% 0.50%(e xcept 3 years) 01/07/2 009 15/12/2 NOT AVAILA BLE 10.5 11.5 12.0 12.5 0 0 0 0 0.50(Exc ept for 3 years) 01/07/2 009 NOT AVAILA BLE 7.00 7.35 7.70 8.2 5 15/03/2 010 NOT AVAILA BLE 6.65 7.00 7.35 8.0 0 22/02/2 DOWNL 010 OAD 7.00 7.25 7.60 8.2 5 0.25 08/03/2 010 NOT AVAILA BLE

0.25

0.25

8.00 8.50 8.50

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LAXMI CEME NT LTD

009

IPOs Introduction

IPO(Initial Public Issues) of good and growing companies keep on coming in the market.History shows investors who bought equity shares of reputed companies during their intial public issues have now become rich and prosperous

Intelli Realty Intelli Realty: Intelligent Property Investment Solutions

Intelli Realty is the group concern of Bajaj Capital Group (pioneer in financial advisory and serving to society since 1965) and is one of the fastest growing consultant/service providers in commercial, residential, industrial real estate in India. We offer the most comprehensive services portfolio in the industry.

We have a team of top notch professionals & expertise who keeps their eyes on market trend and changes which enable us to upper hand than other Property consultants/Service Providers. We always focus on our clients and their requirement and committed to provide the best deal to them.

Our work is not based on guess or assumption, "RESEARCH", is the only way we follow to accomplish our client's requirement of real estate. We are supported by our property experts and extensive property and client database, which enable our

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professionals to access regional property opportunities and to pursue client interest in a cost-effective manner.

Our clients include Locals, NRI's, HNI's Institutions.they demonstrate the quality we deliver to them and we are the foremost choice to our existing clients and they choose us whenever they do any dealing in Real Estate

Our Services Intelli Realty is focused towards providing the following services:

Property Services Sale/purchase of residential property Sale/purchase of commercial property Residential and Commercial leasing -up with leading banks)

Areas of Operation

We are primarily active in Delhi & NCR. However, we also undertake projects in various Indian cities on a case-to-case basis.

Home Loan

As we are the complete solution in all aspects of Real Estate, Home Loan facility is
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one of them. We are the channel partner of some reputed Bank and we facilitate in getting Home Loan as well. There are different types of Home Loans available in market to meet your needs, some of them are as follows: Home Purchase Home Improvement Home Construction Home Extension Home Conversion Land Purchase

Our Projects 1DLF

Projects are:Belaire (Centrally air conditioned, earth quake resistant luxury apartments in DLF City Phase V ) Park Place (Air conditioned apartments in DLF City, Phase V, in close proximity to DLF Golf Links. Choice of "3 bed rooms + servant" and "4 bed rooms + servant" apartments) Kings Court and Queens Court in GK-II, Delhi

2 Unitech Projects are:-

Harmony, Gurgaon (2-4 bedroom apartments of international standard with fitted modular kitchens and air conditioning in every room are placed within a setting of pristine natural beauty)

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Escape, Nirvana Country, Gurgaon (2-3 bedroom apartments with fitted modular kitchen and air conditioning in every room) Fresco, Nirvana Country, Gurgaon (a new, modern residential community, this high rise project comes with a fully fitted kitchen and air-conditioning in the rooms) Uniworld Resorts, Gurgaon

3 OMAXE Projects are:OMAXE - The forest, SurajKund Road, Faridabad Omaxe Heights - Faridabad (2/3 Bedroom apartments with every conceivable amenity close at hand. Located at Sector - 86, Faridabad hi-tech security & fire fighting system) - Rudrapur (An integrated township par excellence, Omaxe Riviera offers peaceful living in the lap of nature,fully laced with world class amenities.) Omaxe City - Sonepat (Omaxe City, Sonepat is an integrated township comprising plots, independent floors and villas in a sprawling expanse of 332 acres. With all facilities and amenities such as schools, hospital, theme parks, state-of-the-art club, local shopping centre, grocery store and more....all within the township)

4 PARSVNATH Projects are:-

La Tropicana

5 MGF EMAAR 6 Vipul Projects are:Tatvam - Villas - Gurgaon

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7 ANSAL API

8 REALTECH

9 BESTECH Projects are:Park View Residency Palam vihar

10 Amrapali

11 Silver Glades

12 Jaipuria Group

13 Vatika & Tata Housing

14 Alpha G : Corp (Formely GESCO Ltd)

15 Eros Group

We have a process of builder approval from the management before suggesting the properties to any of our client.

General Insurance

HEALTH MOTOR HOME

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TRAVEL PERSONAL ACCIDENT

Health Health Insurance (popularly known as Medi-claim Policy) offers protection from unexpected medical emergencies, providing a financial support.

Health insurance therefore, can be a source of support as it takes care of the financial burden your family may have to go through. It will help you tackle such situations with ease by providing you with timely and adequate medical care. This policy covers individual & ones family from medical expenses during

sudden illness, surgeries (acquired in respect of any disease, which has arisen during the policy period.)

accidents including room charges, doctor's fees, medicines, tests etc.

that may arise in future. Options available 1. Family Floater 2. Individual Health Insurance 3. Individual Health Insurance + Critical Care 4. Critical Care 5. Personal Accident Motor Motor Insurance is a wide comprehensive cover designed to provide protection to you & your car. Protection from loss of car or damage to the car giving a secured driving. It covers 69

Own damage Legal liability of insured towards third party personal injury and property damage arising out of an accident involving the insured vehicle .

Passengers Hired driver

Options available 1. Car Insurance 2. Two wheeler 3. Commercial vehicles 4. Passenger Carrying Vehicle 5. 3 - wheeler 6. Tractors etc. Home Home Insurance policy provides a cover to the structure and contents of your home from all unforeseen natural & man-made catastrophes.

It provides protection for property and interests of the insured and his family members. It is imperative that you secure your home which gives one peace of mind protecting the most valued possession. Coverages are

Fire & Allied Perils Burglary & Theft Electrical & Mechanical breakdown (Domestic, Audio & Audio-visual appliances)

Public Liability (Third Party Liability) Covers Accidental breakage

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Coverage to building & contents Personal Accident to self & family

Travel Travel Insurance / Overseas Medi-claim policy is a basic requirement when one travels abroad, either its for business,sight-seeing,shopping or pleasure.

This policy covers you for any kind of hospitalization which is very expensively priced overseas. Also covers for

Baggage loss, Passport loss, Personal accident, Trip cancellation Home Insurance when you are travelling Dental Expenses Maternity expenses in life saving scenario etc.

It is a single policy which covers all unforeseen risks medical & non-medical when one is in a strange place.

Options available 1. Single Trip 2. Multi Trip 3. Student Medical 4. Senior Citizen 5. Pay per day basis

Personal accidnet
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Accidents do not happen when you are driving a car, or away on a vacation. It may happen anytime & anywhere.

Considering that modern day life is so dangerous, a personal accident policy is a solution to such vagaries of life.

Its a Benefit Policy. Coverages are

Accidental Death Benefit Accidental Permanent Total / Partial Disability Benefit Accidental Partial / Temporary Disability Benefit Broken Bones Burns

Bajaj Capitals FREE Investment Advisory Services Why do you need an Investment Advisor and Financial Planner?

Why do you go to a doctor when you fall ill? Or, visit an architect when you want to build your house? Its because they are specialists in their respective fields.

Similarly, an investment advisor is a qualified and experienced specialist who is capable of advising you and managing your money.

The growing complexities of the money market and the panoramic range of financial instruments make financial planning and money management an intimidating task for

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the average person thats why you need a reliable investment advisor and financial planner.

Bajaj Capital FREE Investment Advisory Services

Bajaj Capital, one of Indias oldest Investment Advisory organisations, offers you comprehensive and scientific Investment Advice. With our experience of over four decades, we are perfectly poised to offer you the best possible investment advice.

We have qualified, trained and experienced investment advisors who have in-depth knowledge of the financial markets.

These investment advisors are backed by a team of investment researchers at the Bajaj Capital Centre for Investment Research, who keep track of every minute change in the market, every new product and the latest investment trends.

This is what provides Bajaj Capitals Investment Advisory Service its cutting edge.

Whats more, Bajaj Capitals Investment Advisory Service is offered absolutely FREE!

And thats not all. We also offer FREE Investment Assistance that means no hassles either!

Bajaj Capital La Premiers Institutional Advisory Services Bajaj Capital offers specialised services to Corporates and Institutions through the La Premier Institutional Advisory Group.

It is a strategic service arm comprising handpicked professionals that provides an exclusive and world-class service to a select group of clients.
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We have a presence in all Metros in India, and an annual mobilisation of over Rs 15,000 crores. Our Assets Under Management (AUM) is to the tune of Rs 3,200 crores, and we enjoy the patronage of over 750 quality relationships.

Introducing Bajaj Capital La Premir Our interactions with hundreds of High Networth Individuals and family-owned businesses have helped us to understand the special needs and requirements of such investors.

Bajaj Capital La Premir was created to cater to the needs of High Networth Individuals. It is a specialised group comprising handpicked professionals that provides exclusive and world-class wealth management services to a select group of clients.

Bajaj Capital La Premirs Wealth Management Services Essentially, our Wealth Management Services aim to help you preserve, enhance and grow your wealth by implementing the well-accepted principles and global best practices on wealth management.

To cater to the elite segment of High Networth Clients, La Premir offers an exclusive range of value-added service, including: Personalised attention through a dedicated Relationship Manager. Market information sharing through quality in-house research reports, made available at regular intervals. Periodic portfolio review and regular update on portfolio valuation. Pro-active advice on market events and triggers. Immediate alerts on new products and New Fund Offers.

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Need-based interactions with Fund Managers and other financial experts like Tax Experts, Estate Planners, etc. Independent, unbiased advice.

Our 4-step Advisory Process Investment consultancy is a complex business, requiring an intimate understanding of several financial parameters and human factors, including the clients requirements and the market subtleties. Being a process-driven organisation, we have perfected a four-step advisory procedure, which includes: Need Analysis: Our experts analyze and assess your investment objectives and your comfort level with various asset classes, such as Mutual Funds, Bonds, Insurance, etc. Asset Allocation: We determine an optimal mix of asset classes to meet your financial goals. Portfolio Construction: Based on the asset mix, we build a customised, diversified portfolio of insurance and investment products. Ongoing Review: Once implemented, we monitor your portfolio regularly. This allows our advisors to recommend adjustments if required, and these are carried out once we receive your go-ahead.

Our Investment Advisory Approach Your wealth can grow more wealth. Provided enough time and effort is put in to study markets, weigh the various investment options and take complex decisions. But for extremely busy people like you, time is a luxury. Thats why, you need the services of specialised wealth managers like La Premir.

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At La Premir, the single, most important objective is to offer Total Wealth Management solutions by helping you to: Accumulate Preserve, and Enhance your wealth

Our endeavour is to preserve your capital first. Only then do we make recommendations to enhance your wealth, focusing upon areas requiring attention on a priority basis.

Bajaj Capital: A Legacy of Trust Bajaj Capital was one of the first companies in the organised sector to offer investment advisory and financial planning services along with a wide spectrum of financial products and services, all under one roof.

Over the past 42 years, we have won the trust of over 7 lakh individual investor clients, including hundreds of High Networth Individuals, Non-Resident Indians and members of business-owning families. In fact, we are honoured to be the personal financial advisors to several families that have been investing through us for three generations.

The trust and goodwill of our investors are our greatest assets, motivating and inspiring us to excel and achieve the greatest heights of professionalism and service.

The Bajaj Capital Family Office A Special Service for Family-Owned Businesses Family-owned businesses have their own specific needs. The Bajaj Capital Family Office has been created to especially to serve family-owned businesses. Bajaj Capital is the first to introduce this elite service in India.
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We offer to share with you the global best practices related to accumulation, enhancement and preservation of wealth, and make available the expertise of the crme de la crme of our pool of specialists.

A dedicated Wealth Enhancement Manager will be assigned to offer exclusive and personalised service to you.

We provide world-class services in areas like Wealth Management, Risk Management, Investment Banking, Estate Planning, Taxation, and the like.

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INTRODUCTION TO PORTFOLIO MANAGEMENT

Portfolio Management

The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.

Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk. Portfolio management is the professional management of various securities (shares, bonds and other securities) and assets (e.g., real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or exchange-traded funds) . The term asset management is often used to refer to the investment management of collective investments, (not necessarily) whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called "private banking". The provision of 'investment management services' includes elements of financial statement analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments. Investment management is a large and important global industry in its own right responsible for caretaking of trillions of dollars, euro, pounds and yen. Coming under the remit of financial services many of the world's
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largest companies are at least in part investment managers and employ millions of staff and create billions in revenue. Fund manager (or investment adviser in the United States) refers to both a firm that provides investment management services and an individual who directs fund management decisions.

Portfolio Management Pays Off In A Tough Market When you think about investing, you have a very long decision tree - the question of passive or active, long or short, stocks or funds, China or Brazil and on and on. These topics seem to occupy the majority of the media as well as individuals' minds. However, these decisions are far down the investing process relative to portfolio management. Portfolio management is basically looking at the big picture. This is the classic forest and trees analogy; many investors spend too much time looking at each tree (stock, fund, bond, etc) and not enough - if any - time looking at the forest (portfolio management).

Prudent portfolio management begins after the client and his or her advisor have reviewed the total picture and completed an investment policy statement (IPS). Embedded in the IPS is the asset allocation strategy of which there are four: integrated, strategic, tactical and insured. Most people recognize how critical asset allocation is, but most investors are unfamiliar with asset allocation rebalancing strategies, of which there are also four: buy-hold, constant-mix, constant proportion and option based. A lack of familiarity with rebalancing strategies helps explain why many confuse the constant-mix rebalancing strategy with buy-hold. Here is a sideby-side comparison of these two most common asset allocation rebalancing strategies.

Buy-Hold Rebalancing

The objective of buy-hold is to buy the initial allocation mix and then hold it indefinitely, without rebalancing regardless of performance. The asset allocation is
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allowed to vary significantly from the starting allocation as risky assets, such as stocks, increase or decrease. Buy-hold essentially is a "do not rebalance" strategy and a truly passive strategy. The portfolio becomes more aggressive as stocks rise and you let the profits ride, no matter how high the stock value gets. The portfolio becomes more defensive as stocks fall and you let the bond position become a greater percentage of the account. At some point, the value of the stocks could reach zero, leaving only bonds in the account.

Constant-Mix Investing

The objective of constant-mix is to maintain a ratio of, for example, 60% stocks and 40% bonds, within a specified range by rebalancing. You are forced to buy securities when their prices are falling and sell securities when they are rising relative to each other. Constant-mix strategy takes a contrarian view to maintaining a desired mix of assets, regardless of the amount of wealth you have. You essentially are buying low and selling high as you sell the best performers to buy the worst performers. Constant-mix becomes more aggressive as stocks fall and more defensive as stocks rise. PORTFOLIO MANAGEMENTS OBJECTIVES : Main objectives of portfolio management are follows:-

1. Maximization of profits 2. Minimization of risk 3. Increase investors profitability 4. Decrease chances of loss 5. Always give good returns to investors

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Portfolio management process:

Portfolio management process is divided in five steps which are follows ; 1. Strategy Development :Organizations vision , mission and goals to be achieved are defined here.

2. Portfolio selection

3. Portfolio construction

4. Portfolio management

5. Portfolio review

4 Steps To Building A Profitable Portfolio

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

Step 1: Determining the Appropriate Asset Allocation for You

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Ascertaining your individual financial situation and investment goals is the first task in constructing a portfolio. Important items to consider are age, how much time you have to grow your investments, as well as amount of capital to invest and future capital needs. A single college graduate just beginning his or her career and a 55year-old married person expecting to help pay for a child's college education and plans to retire soon will have very different investment strategies.

A second factor to take into account is your personality and risk tolerance. Are you the kind of person who is willing to risk some money for the possibility of greater returns? Everyone would like to reap high returns year after year, but if you are unable to sleep at night when your investments take a short-term drop, chances are the high returns from those kinds of assets are not worth the stress.

As you can see, clarifying your current situation and your future needs for capital, as well as your risk tolerance, will determine how your investments should be allocated among different asset classes. The possibility of greater returns comes at the expense of greater risk of losses (a principle known as the risk/return tradeoff) - you don't want to eliminate risk so much as optimize it for your unique condition and style. For example, the young person who won't have to depend on his or her investments for income can afford to take greater risks in the quest for high returns. On the other hand, the person nearing retirement needs to focus on protecting his or her assets and drawing income from these assets in a tax-efficient manner.

Conservative Vs. Aggressive Investors

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

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

A moderately aggressive portfolio satisfies an average risk tolerance, attracting those willing to accept more risk in their portfolios in order to achieve a balance of capital growth and income.

Step 2: Achieving the Portfolio Designed in Step 1

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

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But you can further break down the different asset classes into subclasses, which also have different risks and potential returns. For example, an investor might divide the equity portion between different sectors and market caps, and between domestic and foreign stock. The bond portion might be allocated between those that are short term and long term, government versus corporate debt and so forth.

There are several ways you can go about choosing the assets and securities to fulfill your asset allocation strategy (remember to analyze the quality and potential of each investment you buy - not all bonds and stocks are the same):

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

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

Mutual Funds - Mutual funds are available for a wide range of asset classes and allow you to hold stocks and bonds that are professionally researched and picked by fund managers. Of course, fund managers charge a fee for their services, which will detract from your returns. Index funds present another choice; they tend to have lower fees because they mirror an established index and are thus passively managed. , but instead track a chosen index or other basket of stocks. Because they are passively

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Exchange-Traded Funds (ETFs) - If you prefer not to invest with mutual funds, ETFs can be a viable alternative. You can basically think of ETFs as mutual funds that trade like stocks. ETFs are similar to mutual funds in that they represent a large basket of stocks - usually grouped by sector, capitalization, country and the like - except that they are not actively managed . ETFs offer cost savings over mutual funds while providing diversification. ETFs also cover a wide range of asset classes periodically and can be a useful tool for rounding out your portfolio.

Step 3: Reassessing Portfolio Weightings

Once you have an established portfolio, you need to analyze and rebalance it because market movements may cause your initial weightings to change. To assess your portfolio's actual asset allocation, quantitatively categorize the investments and determine their values' proportion to the whole.

The other factors that are likely to change over time are your current financial situation, future needs and risk tolerance. If these things change, you may need to adjust your portfolio accordingly. If your risk tolerance has dropped, you may need to reduce the amount of equities held. Or perhaps you're now ready to take on greater risk and your asset allocation requires that a small proportion of your assets be held in riskier small-cap stocks.

Essentially, to rebalance, you need to determine which of your positions are over weighted and underweighted. For example, say you are holding 30% of your current assets in small-cap equities, while your asset allocation suggests you should only have 15% of your assets in that class. Rebalancing involves determining how much of this position you need to reduce and allocate to other classes.

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Step 4: Rebalancing Strategically

Once you have determined which securities you need to reduce and by how much, decide which underweighted securities you will buy with the proceeds from selling the over weighted securities. To choose your securities, use the approaches discussed in Step 2.

When selling assets to rebalance your portfolio, take a moment to consider the tax implications of readjusting your portfolio. Perhaps your investment in growth stocks has appreciated strongly over the past year, but if you were to sell all of your equity positions to rebalance your portfolio, you may incur significant capital gains taxes. In this case, it might be more beneficial to simply not contribute any new funds to that asset class in the future while continuing to contribute to other asset classes. This will reduce your growth stocks' weighting in your portfolio over time without incurring capital gains taxes.

At the same time, always consider the outlook of your securities. If you suspect that those same over weighted growth stocks are ominously ready to fall, you may want to sell in spite of the tax implications. Analyst opinions and research reports can be useful tools to help gauge the outlook for your holdings. And tax-loss selling is a strategy you can apply to reduce tax implications

Remember the Importance of Diversification.

Throughout the entire portfolio construction process, it is vital that you remember to maintain your diversification above all else. It is not enough simply to own securities from each asset class; you must also diversify within each class. Ensure that your holdings within a given asset class are spread across an array of subclasses and industry sectors.

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As we mentioned, investors can achieve excellent diversification by using mutual funds and ETFs. These investment vehicles allow individual investors to obtain the economies of scale that large fund managers enjoy, which the average person would not be able to produce with a small amount of money.

Summary Overall, a well-diversified portfolio is your best bet for consistent long-term growth of your investments. It protects your assets from the risks of large declines and structural changes in the economy over time. Monitor the diversification of your portfolio, making adjustments when necessary, and you will greatly increase your chances of long-term financial success.

The transformation of an industry

The asset management industry in India is a prime example of the success of free competition in the country. From an industry that had one dominant player in the early 1990s, there are now over 30 active players, reflecting how the world of asset management in India has changed. Today, it is an industry of choice for customers and employees, with a range of products available, the presence of almost every large global player and a growing focus on investor education. It is also a highly dynamic industry, where significant change is commonplace. What contributed to this sea change in India? Without doubt, the primary driver has been deregulation, coupled with free competition. The worlds best brands were given an entry ticket with majority ownership if they so wanted, the result of which was the creation of a high-quality industry that incorporated global best practices. Regulatory support in the initial crucial years was also exceptional, with a focus on continuous dialogue and openness to change. A big driver of growth in the late 1990s was institutional business, which has grown to become a major contributor to profit margins of mutual fund companies as well as playing a large role in product innovation and growth of AUM. Most recently, financial advisory and retail distribution have attracted the attention of the sector.
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However, according to Vimal Bhandari, Aegon India, more recently the Indian asset management industry has been grappling with the challenges of becoming an international business both through feeder funds in India for investing in offshore funds and mobilising funds offshore for investing in India. This two wayflow is likely to increase in the coming years and could become a serious component in the industry in India. It will act as a valuable buffer to augment the AUMs which are mobilised from the domestic market for investing in the local market. The key challenge would principally be to create a robust framework of governance and management, given the multiple country jurisdiction which such business would necessarily entail. Key management personnel would need to be well versed in developing this business on an international platform. In many ways, the huge opportunity that the industry foresaw in the 1990s is still there. Only 45 per cent of household assets are in mutual funds and the top eight cities in terms of households penetrated account for 75 per cent of retail AUMs. The industry should be asking what it has done to capitalise on earlier opportunities, what the new opportunities are and what can be done to capitalise them?

Competitive landscape With its potential for high growth, asset management in India has been an attractive sector for Indian and foreign companies. According to research by McKinsey & Co, the asset management business has grown 47 percent annually since 2003, taking the total AUM in India in 2008 to USD 92 billion. However, as Sanjay Sachdev of Shinsei Bank pointed out, there are only about 35 fund families in India, as compared to the global numbers like 700-odd fund familes in the US, 60 fund families in China and around 70 in Japan. As more people come into this industry, the opportunity is there to expand the pie rather than cut it into smaller slices thats the attitude existing players in the industry need to take. Ajay Srinivasan, Aditya Birla Group The Indian landscape is highly dynamic and is set to remain so in the near future. Competitive advantage lasted for six months a few years back; today the time frame is less than 90 days. Ajay Srinivasan, Aditya Birla Group, explains:

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As more people come into this industry, the opportunity is there to expand the pie rather than cut it into smaller slices thats the attitude existing players in the industry need to take. However, this expansion will take time and a lot will depend on how the industry and regulators tackle key issues, such as awareness, education, distribution and product positioning. Furthermore, barriers to entry have also become increasingly high, with Boston Consulting Group estimating that a firm would need at least USD 2.5 billion under management to break even now, twice as much as was needed two or three years ago. Technology is also set to become a key differentiating factor. It will be interesting to observe what happens to the market share of the top 10 or the top 12 players over the next few years. In spite of some exits and the current challenging environment, global players still find India an attractive market, and this bodes well for the industry. As Simon Fenton, Spencer Stuart, pointed out: If you are sitting outside India and considering the prospects for a long-term asset management business, you will find them here in India, and in China, because of the fantastic demographic situation in both countries. The asset management industry will have to brace itself for more competition. However, according to Vijai Mantri, DLF Pramerica, what may tip the scales in favour of Indian companies is that they have a clear advantage in understanding the Indian market. Asset Management in India

The critical success factor will be the long-term objective of the players that enter the asset management industry. Vimal Bhandari says, In competition, there are three categories those who want to build a sizable business, those who only want to have a presence in India, and those who are coming as price warriors, to create value in the business. Good business practices will only get reinforced by the entry of long-term players who are driven by asset enhancement and market growth rather than by a focus on valuations. The one major difference between the competitive landscape in India and Europe is the absence of banks with asset management interests such as Dresdner. In competition, there are three categories those who want to build a sizable business, those who only want to have a presence in India, and those who are coming as price warriors, to create value in the business. Vimal Bhandari, AEGON N.V.
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Being competitive in India has been characterised as being everywhere, doing everything. Although no player can afford to neglect any aspect of the business in the current environment, true competitive advantage will only be possible through excellence in three main areas execution of strategy, distribution and investment performance and this is where companies will need to focus their efforts.

The key issues

As we enter a period of realistic valuations in the asset management market, it would serve companies well to analyse past performance and identify the key issues that will determine success in the future. Some of these are discussed below:

Distribution focus Ajay Srinivasan points out: There are probably two options for turbo charging growth of this industry. One is the regulatory approach, such as in the US where the 401k led to a change in the growth of the industry. The other option is what you have seen in countries like Japan and Korea where the focus has been on areas such as distribution and product innovation. The market in Japan changed when banks got into distribution, especially since this was a distribution channel that customers could trust, after years of mistrust with the broking industry. In an environment where competition is stiff and margins are tight, the tied agency channel is no longer the most profitable one, whether for mutual funds, insurance or anything else Anjali Bansal, Spencer Stuart Indias unique demographic and geographic characteristics make distribution a key focus issue for asset management companies. The industrys expansion has commenced only in the last few years and has been driven by advances in distribution. With the enormous potential of the market and the continued entry of new players, one can expect significant change in the way investors are provided for. At the same time, the fact remains that the Indian asset management industry has grown tremendously over the past few years in spite of not having much constructive regulation on the distribution side. In recent years, one of the most debated issues
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has been the tied agency concept. In an environment where competition is stiff and margins are tight, the tied agency channel is no longer the most profitable one, whether for mutual funds, insurance or anything else, says Anjali Bansal, Spencer Stuart. In many parts of the world where there has been insurance reform Europe or Asia, for example there has been a move away from the tied agency channel. For growth to be taken to the next level, the gaps in distribution will need to be addressed. Asset Management in India

Creating a long-term growth strategy Challenging market conditions have also brought into focus the need for a long-term growth strategy, especially for new entrants. Given the new valuation expectation, equity buybacks could outstrip the initial commitment made for a venture, especially since a company might need 810 years before it becomes an entity that drives growth in the market. Add in the effects of changes in revenue structure (margins have reduced considerably over the last few years), account inflation and capital expenditure and an effective strategy for the next 10 years becomes imperative. As Ved Chaturvedi, Tata Mutual Fund, says: There needs to be some reflection on the fact that we have not been able to scale up effectively despite superior fund performance, superior returns, increase in investors and high-quality service. The strategy will also need to address the impact on talent retention through stock options, especially if the payback were to get further delayed. There needs to be some reflection on the fact that we have not been able to scale up effectively despite superior fund performance, superior returns, increase in investors and high-quality service. Ved Chaturvedi, Tata Mutual Fund Another critical component of strategy will have to be product innovation, especially since the asset management industry is now competing with bank deposits, insurance plans and even postal savings for disposable income. Creating and marketing the right products for customers that are oriented towards long-term financial planning will be essential. Introducing more internationally- oriented products could broaden revenue streams and positioning products effectively will be essential if competitive advantage is to be achieved.

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Understanding the consumer Over the past few years, institutional business has been a significant contributor to the profitability of asset management companies. However, growth is expected to come from retail investors in future. Sanjay Sachdev, Shinsei Bank, attributes this to the high average aging of the assets that investors invest in an equity fund. Average aging of assets, from what I understand, is about nine years in India, which is substantially high compared to the rest of the world, he says. Thus, while deals maybe done on the basis of 15 years or so, the fact remains that if someone sticks with a company for nine years on average, it builds a highly positive picture for the future. Establishing a long-term retail platform can therefore be a key success factor. In 2000, a study revealed that 67 per cent of people felt that their children would take care of them. By 2008, that number had reduced to 33 per cent. Vijai Mantri, DLF Pramerica Asset management companies will also need to take into account the changing consumer mindset in India. On the one hand, the younger generation is far more aggressive about investments, which means there is now a large part of the countrys population with an increasing appetite for risk wanting higher returns along with effective risk management. On the other hand, the older generation is actively looking towards independent planning for retirement. Vijai Mantri, DLF Pramerica, shares an interesting statistic: In 2000, a study revealed that 67 per cent of people felt that their children would take care of them. By 2008, that number had reduced to 33 per cent. How effectively companies capitalise on these opportunities will be a function of a number of things awareness, reach and distribution, product evolution over a period of time, and above all else, experience. Ved Chaturvedi says: If people understand these products, and companies come up with new products that give investors the appropriate returns, the rewards will be tremendous.

Investor education

One of the biggest drivers for growth in the asset management industry will be the comparatively low real rate of return from the usual investment products. Today, when individuals look at the safety of capital, they immediately turn to bank deposits and insurance products. Capital markets are usually looked upon as
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avenues for high-yields and are therefore considered high-risk. This is why mutual funds turn into a transitory rather than a long-term investment product for many people. This is a mindset that needs to change and investor education is the only way to achieve this. Asset Management in India Given the potential for growing the investor base, the need for education becomes critical, more so since a large part of the retail investor population in India still equates mutual funds with equities. This was a key finding of a DLF Pramerica survey of 125,000 investors over 80 towns, who were asked about where they would direct their investments: 70 per cent said houses, 40 per cent said credit cards, 40 per cent said life insurance products, 38 per cent said bank deposits, and only 6 per cent chose dematerialised (demat) accounts and/or mutual funds. So what needs to be done? Advisory services will need to address customer education in order to be of value. Companies will need to rise above selling their own products to sell asset management products, thus communicating to the investor the benefits of different product categories, whether for retirement, children, family and so on. The key challenge for us is to sell products that are outward-looking, rather than just talking about absolute performance, meeting the benchmark or being the top-performing fund, says Vijai Mantri. The important thing is to present mutual funds as a category of products rather than defining them by the end benefits. There needs to be a conscious effort to avoid selling on the basis of day-to-day performance, shifting the focus instead to the long term, be it a 3-year, 6-year or 10-year horizon just as the insurance industry is doing. Financial advisory services also need to be marketed and communicated effectively to the retail investor. In real terms, India needs 1.5 million IFAs (independent financial advisors) who need to take on the mantle of creating awareness among retail investors of the benefits of asset management products. This will be the first step towards creating an industry that has the recognition of the regulators, policymakers and the government. The regulator can also play a role here, by supporting initiatives that include financial services as part of school curriculums. This would help children understand their savings needs and how they could achieve them. The first generation of regulation in the asset management industry was extremely farsighted and built the foundation
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of the industry. In order to take this growth to the next level, companies will need to maintain a dialogue with the regulator, set a clear vision (much like the IT industry did for 20152020) and create a blueprint for the future.

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RESEARCH METHODOLOGY
Title of the study : STUDY OF PORTFOLIO MANAGEMENT SYSTEM This project is related to the analysis of the portfolio management system and its effect on investment behaviour of people. questionnaires is designed of 14- 15 questions and response is collected from the customers who are visiting the office. For data collection Random Convenient sampling method will be adopted. For this project the area of research is JAIPUR

Duration of the project :- 15 days OBJECTIVES

1 To apply the theoretical knowledge gained in the class room in the real world environment. 2 To study the portfolio management system being followed by major portfolio management companies. 3 To study the consumer perceptions and preferences with respect to portfolio management. 4 To draw out the satisfaction level of customers regarding the services being provided by major portfolio management companies.

Type of research-EXPLORATORY & DESCRIPTIVE

DATA COLLECTIONS METHODS

Market research requires two types of data i.e. secondary data and primary data. Primary data will be used abundantly for the study. Well-structured questionnaires is prepared & the survey will be undertaken. Feedback for the display will be taken by asking questions & observation will be done to gather primary information.

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There is also being use of secondary data, which will be collected from the various journals, books, andwebsites & from company managers.

Sampling Method

Sampling method is used in this study is Random Convenient Sampling.

Sampling

Sample size : 100 respondents Sampling Method : Random Convenience sampling Measuring on: Questionnaire

Source of Data

Primary data Secondary data

Field Survey company records,Text Books And journals ,company websites

Area of research:

JAIPUR

Research approach: Survey method

Limitation of the study:

Although full efforts have been made in the study but the following limitations should be kept in the mind before making any conclusion:

Sample size was small in comparison of entire population (100) The respondents may be biased or influenced by outside factors. The time constraint was one of the major problems. 96

The respondents were limited and cannot be treated as the whole population. The accuracy of indications given by the respondents may not be consider adequate. The research has been conducted according to present market conditions of recession, so the finding and inferences may not hold good for every business cycle.

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Facts and findings

80% people says they have invested money and 20% says no. 10% people have invested in stock market , 20% in mutual Funds, 30% in bank/ po deposits , 25 % in Kvp/ bonds,and 15% in gold/silver. 60 % people are aware of the term portfolio management and 40% are not aware. 60 % people find portfolio management a better Option of Investment and 40% are not. 15 % people consider portfolio management to be a better Option because it reduce risk, 25% people because it Maximize profit and 50% due to both the above. 20% people want hige risk portfolio, 30% moderate ,25% low risk and 25% want secure portfolio. 55% people are more interested in guaranteed return Portfolio. 40% people are aware of bajaj capital, 25 % are of Jm Financial, 20% are of Karvey capital and 15% are of RR investors.

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ANALYSIS AND DATA INTERPRETATION

Q.1. Do you have any investment ?

25 20 FREQUENCY 15 10 5 0 RESPONSE

Sr. No. A B

Response YES NO TOTAL

Frequency 80 20 100

Percentage 80 20 100

Interpretation

80% people say they have invested money and 20% says no.

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Q.2. Which type of investment you have ?

15%

10%

20% BANK/PO DEPOSITS 25% KVP/ BOND GOLD/ SILVER 30%

Sr. No. A B C D E

Response Stock market Mutual Funds Bank/ po deposits Kvp/ bonds Gold/ silver

Frequency 10 20 30 25 15

Percentage 10 20 30 25 15

Interpretation

10% people have invested in stock market, 20% in mutual Funds, 30% in bank/po deposits , 25 % in Kvp/ bonds, and 15% in gold/silver.

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Q.3 Are you aware of the term portfolio management?

no Response

Series1, 40

yes

10

20

30 frequency

40

50

60

Sr.No. A B

Response YES NO

Frequency 60 40

Percentage 60 40

Interpretation 60 % people are aware of the term portfolio management and 40% are not aware.

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Q.4Do you find portfolio management a better option of investment in comparison of the others mentioned in the question 2.

40%

yes no 60%

Sr.No. A B

Response YES NO

Frequency 60 40

Percentage 60 40

Interpretation 60 % people find portfolio management a better Option of investment and 40% are not.

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Q.5 Why do you consider portfolio management to be a better option.

NONE THE ABOVE

Series3, 10

BOTH THE ABOVE

PROFIT MAXIMIZATION

REDUCE RISK 0 10 20 30 40 50

FREQUENCY

Sr. No. A B C D

Response Reduce risk Profit maximization Both the above None the above

Frequency 15 25 50 10

Percentage 15 25 50 10

Interpretation 15 % people consider portfolio management to be a better Option because it reduce risk, 25% people because it Maximize profit and 50% due to both the above.

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Q.6 Which of portfolio you want ?

30 30 25 20 15 10 5 0 High risk Moderate Low risk Series1 Secure 20 25 25

Sr. No. A B C D

Response High risk Moderate Low risk Secure

Frequency 20 30 25 25

Percentage 20 30 25 25

Interpretation 20% people want high risk portfolio, 30% moderate, 25% low risk and 25% want secure portfolio.

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Q.7 Do you think people are more interested in guaranteed return portfolio?

Chart Title

45% 55% Yes No

Sr. No. A B

Response Yes No

Frequency 55 45

Percentage 55 45

Interpretation 55% people are more interested in guaranteed returns Portfolio.

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Q.8 Which portfolio management companies are you aware of?

10 RR investors 20 Karvey capital 20 Jm financial 50 Bajaj capital 0 10 20 30 40 50

Sr. No. A B C D

Response Bajaj capital Jm financial Karvey capital RR investors

Frequency 40 25 20 15

Percentage 40 25 20 15

Interpretation 40% people are aware of Bajaj capital, 25 % are of Jm Financial, 20% are of Karvey capital and 15% are of RR investors.

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Q.9 Which portfolio management company have you invested in?

50 50 45 40 35 30 25 20 15 10 5 0 Bajaj capital Jm financial Karvey capital RR investors 10 20 20

Sr. No. A B C D

Response Bajaj capital Jm financial Karvey capital RR investors

Frequency 50 20 20 10

Percentage 50 20 20 10

Interpretation 50% people have invested in Bajaj capital, 20% in jm financial 20% in karvey capital and 10% in RR investors.

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Q.10 Are you aware about Bajaj capitals portfolio management services ?

25%

Yes 75% No

Sr.No. A B

Response YES NO

Frequency 75 25

Percentage 75 25

Interpretation 75% people are aware of Bajaj capitals portfolio management services and 25% are not aware.

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Q.11 Who advised you about the company ?

45 25

20 10

Media

Friends & relatives

Company executives

On your own

Sr. No. A B C D

Response Media Friends & relatives Company executives On your own

Frequency 45 25 20 10

Percentage 45 25 20 10

Interpretation 45% people says that media advised them, 25% says friends and relatives , 20% says company executives and 10 % say they did on there own.

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Q.12 Has the company you have invested in disclosed your Portfolio to you?

No

20

Yes

80

20

40

60

80

Sr.No. A B

Response YES NO

Frequency 80 20

Percentage 80 20

Interpretation 80% people say that company disclose the portfolio to them.

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SWOT Analysis

SWOT Analysis of Portfolio Management Services: Strength:

Diversified Investment - PMS are having a number of investment objectives from which an investor can choose according to his requirements, time to get returns etc. Easy procedure - The procedure involved for purchasing or selling shares is not very easy. Individual investor can also easily understand and can himself buy or sell shares. Professional Management - The service provides professional management of portfolios with the objective of delivering consistent long-term performance while controlling risk. Continuous Monitoring - It is important to recognize that portfolios need to be constantly monitored and periodic changes made to optimise the results. Risk Control - A research team responsible for establishing the clients investment strategy and providing the PMS provider real time information to support it backs any firms portfolio managers. Hassle Free Operation - Portfolio Management Service provider gives the client a customized service. The company takes care of all the administrative aspects of the clients portfolio with a periodic reporting (usually daily) on the overall status of the portfolio and performance. Flexibility - The Portfolio Manager has fair amount of flexibility in terms of holding cash (can go up to 100% also depending on the market conditions). He can create a reasonable concentration in the investor portfolios by investing disproportionate amounts in favour of compelling opportunities. Transparency PMS provide comprehensive communications and performance reporting. Investors will get regular statements and updates from the firm. Web enabled access will ensure that client is just a

click away from all information relating to his investment. Your account statements will give you a complete picture of which individual securities you hold, as well as the number of shares you own. It will also usually provide: a. b. the current value of the securities you own; the cost basis of each security;

c. details of account activity (such as purchases, sales and dividends paid out or reinvested); d. e. f. your portfolios asset allocation; your portfolios performance in comparison to a benchmark; market commentary from your Portfolio Manager
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Customised Advice - PMS give select clients the benefit of tailor made investment advice designed to achieve his financial objectives. It can be structured to automatically exclude investments you may own in another account or investments you would prefer not to own. For example, if you are a long-term employee in a company and you have acquired concentrated stock positions over the years and have become over exposed too little companys stock, a separately managed account provides you with the ability to exclude that stock from your portfolio. Personalised Approach Some Portfolio Managers may provide a personal investment management service to achieve the clients investment objective. In PMS, you may gain direct personalised access to the professional money managers who actively manage your portfolio. This interaction may come in various different ways including in-person meetings, conference calls, written commentary, etc with the fund management team.

Weakness:

Market risk - The capital market is highly volatile in nature. No matter how much one is precautious, he will always be under threat of incurring losses. No control over cost - There is not much control over the cost of operations as the market is volatile and the cost increases quickly or dawn rapidly. High risk - The share market is a place where price of the shares goes up & down rapidly so its always create a high risk. Ticket size Most of the Portfolio Management Schemes have ticket size in more than few Lakhs and Crores in compare with other Financial Instrument like MF which is less attract small investors towards investing PMS. Profit Sharing Most of the companies are in the term of profit sharing with their clients and for that they do hedge in the equity market to generate the profit which is very risky.

Opportunities:

Growing PMS Market with Capital Market - PMS market in India is growing at a very fast pace with the Indian Capital Market and if this pace continuous then Indian PMS and capital market will be one of the strongest economies of the world and investment in this today will then be very fruitful. Branch expansion - Large no. of branches are opening day by day which are trapping the countries having almost same type of socioeconomic condition & even same culture etc. Untapped Retail Investors Most of the companies are only doing niche marketing for their portfolio schemes and they are targeting maximum to the high net worth investors. So, retail investors are getting less attention for that which can be also a part of getting huge market. Untapped rural market - Rural market in India is still not covered fully by the various AMCs. Rural market in India is a very big market and if this market is tapped then awareness about PMS can boost a lot. Debt fund oriented schemes As the day to day changing scenario of Stock market, risk is increasing. So, for that companies should focus in the purely Debt fund oriented schemes which is less focused by most of the companies in the present time.
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Threats:

Tough competition - There is very tough competitions because of large number of companies are providing Portfolio Services these days. New Entrant As per the SEBI data of growth of PMS market year by year, numbers of new companies which include foreign companies are entering in this part of the Investment as there is a huge potential in India in the future and also which create the very tough competition. Unawareness Major percent of population is not aware of PMS, so its hard to convince people. Changing scenario - Our market scenario is changing day by day i.e. our market is fluctuating, so this makes investor hard to invest in shares though in PMS too.

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Conclusion
Overall, a well-diversified portfolio is best bet for consistent long-term growth of investments. It protects assets from the risks of large declines and structural changes in the economy over time. Monitor the diversification of portfolio Making adjustments when necessary, and chances of longterm financial success. will greatly increase

Portfolio management industry is fast growing industry . many people know about it. From the analysis I conclude that people are more interested in guaranteed return portfolio . People like moderate and low risk portfolio to investment.

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Recommendation and suggestions

1. Increase awareness of portfolio to customers . 2. Increase awareness of guaranteed return portfolio to customers. 3. Sales and promotion activities for awareness of portfolio management to customers. 4. Companies should provide fair services to customers. 5. Companies should advise properly to customers of different income and age group. 6. Companies should increase promotion activities like sales camps to Increase awareness of different products.

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APPENDIX

QUESTIONNAIRE

Q.1. Do you have any investment ? A. Yes B. No

Q.2. Which type of investment you have ? A. Stock market B. Mutual fund C. Bank /post office fixed deposits D. KVP / Bonds E. Gold/Silver

Q.3 Are you aware of the term portfolio management? A. Yes B. No

Q.4Do you find portfolio management a better option of investment In comparison of the others mentioned in the question 2. A. Yes B . No

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Q.5 Why do you consider portfolio management to be a better option. A. Reduce risk B. Profit maximization C. Both the above D. None of the above

Q.6 Which of portfolio you want ? A. High risk B. Moderate C. Low risk D. Secure

Q.7 Do you think people are more interested in guaranteed return portfolio? A. Yes B. No

Q.8 Which portfolio management companies are you aware of? A. Bajaj capital B. JM financial C. Karvey capital D. RR investors

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Q.9 Which portfolio management companie have you invested in? A. Bajaj capital B. JM financial C. Karvey capital D. RR investors

Q.10 Are you aware about bajaj capitals portfolio management services ? A. Yes B. No

Q.11 Who advised you about the company ? A. Media B. Friends & Relatives C. Company executives D. On your own

Q.12 Has the company you have invested in, disclosed your Portfolio to you? A. Yes B. No

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BIBLIOGRAPHY

Books:-

Sachdeva J.K., Business Research Methodology, Himalaya Publishing House, 2008. Hawkin, I. Del,Coney Kenneth A., Tata McGraw Hill Publishing Co. Ltd., 2007 Shrivastava R.M.,Management Of Indian Financial Institution, Himalaya Publishing House, 2008.

JOURNALS AND MAGAZINES Business World Business Today Investor India

WEBSITES

www.google.com www.bajajcapital.com www.wikipedia.com www.timesofindia.com

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