Introduction Of Portfolio Management

EXECUTIVE SUMMARY

Institute Of Management & Research, Jalgaon. 1

EXECUTIVE SUMMARY The project titled “PORTFOLIO MANAGEMENT SERVICES” has been carried out for “KARVY STOCK BROKING LTD.” The evaluation of financial planning has been increased through decades, which can be best seen in customers. Now a days investments have become very important part of income saving. Karvy Stock Broking Ltd. operates in various financial products and services like, Consultancy, Stock Broking, Mutual Fund, Tax Planning & Insurance. According to study of the markets, it is being observed that there are various financial instruments available in the markets out of which some gives the well returns. In this project I have shown the details of financial planning as well as wealth management so as to understand about the customer’s needs and wants with respect to market and how a client’s portfolio can be designed and what factors a portfolio manager must consider for designing a portfolio. The area of the project work is Pune city and its location where the survey has been undertaken those are Hinjewadi IT Park, Kothrud, Senapati Bapat Road, Aundh IT Park, Magarpatta City, Kharadi, Yerawada and Baner. Karvy is the only personalized service provider offering a range of investment services depending on the customer requirements. I hope KARVY will recognize this as well as take more references from this project report. Institute Of Management & Research, Jalgaon. 2

OVERVIEW KARVY is a premier integrated financial services

provider, and ranked among the top five in the country in all its business segments, services over 16 million individual investors in various capacities, and provides investor services to over 300 corporate, comprising the who is who of Corporate India. KARVY covers the entire spectrum of financial services

such as Stock broking, Depository Participants, Distribution of financial products like mutual funds, bonds, fixed deposit, Merchant Banking & Corporate Finance, Insurance Broking, Commodities Broking, Personal Finance Advisory Services, placement of equity, IPOs, among others. Karvy has a professional management team and ranks among the best in technology, operations, and more importantly, in research of various industrial segments.

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KARVY CREDO Our Clients. Our Focus Clients are the reason for our being. Respect for the individual Each and every individual is an essential building block of our organization. Teamwork None of us is more important than all of us. Responsible Citizenship A social balance sheet is as rewarding as a business one. Integrity Everything else is secondary.

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MILESTONES

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ACHIVEMENTS Among the top 5 stock brokers in India (4% of NSE volumes) India's No. 1 Registrar & Securities Transfer Agents Among the to top 3 Depository Participants Largest Network of Branches & Business Associates ISO 9002 certified operations by DNV Among top 10 Investment bankers Largest Distributor of Financial Products Adjudged as one of the top 50 IT uses in India by MIS Asia Full Fledged IT driven operations

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KARVY GROUP COMPANIES Karvy Consultants Limited

Karvy Stock Broking Limited

Karvy Investors Services Limited

Karvy ComputersharePvt.Limited

Karvy Globle Services Limited

Karvy Commodities Broking Limited

Karvy Insurance Broking Pvt. Limited

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OBJECTIVE OF THE PROJECT The following are the main objective of project:  To the partial fulfillment of the requirement of the award of the Master In Business Administration.  To know the concept of Portfolio Management.  To know about the schemes offered by the different insurance companies, new IPO’s, Mutual Funds.  To know in depth about Insurance, Mutual Funds, Stock, Bonds etc.

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Introduction of Portfolio Management The field of investments traditionally been divided into security analysis and portfolio management. The heart of security analysis is the valuation of financial assets. Value in turn is the function of risk and return. These two concepts are very important in the study of investments. Investment can be defined the commitment of funds to one or more assets that will be held over for some future time period.

MEANING: Rule 2, cla use (d ) of the SEBI (p ort fo lio ma nag ers ) Rules , 19 93 defines the term “Portfolio” as “t otal

ho ldin gs

of

sec ur ities

belon gin g to any

pe rson ”. As a matter of fact, portfolio is combination of assets the outcome of which cannot be defined with certainty new assets could be physical assets, real estates, land, buildings, gold etc. or financial assets like stocks, equity, debentures, deposits etc. Our concern in this project is to discuss the topic with reference to financial assets only. Portfolio management refers to managing efficiently the investment in the securities held by professionals for others. Merchant bankers and the portfolio managers render the services of portfolio management with a view to ensure maximum return by such investments with minimum risk of Institute Of Management & Research, Jalgaon. 9

loss of return on the money invested in securities held by them for their clients. The aim of Portfolio Management is to achieve the maximum return from a portfolio, which has been delegated to be managed by an individual? Manager or financial institution. The manager has to balance the parameters which define a Good investment i.e. security, liquidity and return. The goal is to obtain the highest return for the client of the managed portfolio

Why Financial Planning is needed ? This can be explained by very simple example. Assume a person is 40 years old and will require 70% of his current annual income for each of the 15 years expect to live after his retirement. He wants to retain his purchasing ability after certain age. In this case he will have to plan his finance and hence the terms portfolio and portfolio management come in picture

Need of Portfolio Management Investors should periodically review their asset allocation across different assets as the portfolio can get skewed over a period of time. This can be largely due to appreciation / deprec-iation in the value of the investments. As the financial goals are diverse, the investment choices also need to be different to meet those needs. No single investment is likely to meet all the needs, so one should keep some money in bank deposits and / liquid funds to meet any Institute Of Management & Research, Jalgaon. 10

urgent need for cash and keep the balance in other investment products/ schemes that would maximize the return and minimize the risk. Investment allocation can also change depending on ones risk-return profile.

Objectives of Portfolio Management: 1. Safety Of Fund: The investment should be preserved, not be lost, and should remain in the returnable position in cash or kind. 2. Marketability: The investment made in securities should be marketable that means, the securities must be listed and traded in stock exchange so as to avoid difficulty in their encashment. 3. Liquidity: The portfolio must consist of such securities, which could be en-cashed without any difficulty or involvement of time to meet urgent need for funds. Marketability ensures liquidity to the portfolio. 4. Reasonable return: The investment should earn a reasonable return to upkeep the declining value of money and be compatible with opportunity cost of the money in terms of current income in the form of interest or dividend. 5. Appreciation in Capital: Institute Of Management & Research, Jalgaon. 11

The money invested in portfolio should grow and result into capital gains. 6. Tax planning: Efficient portfolio management is concerned with composite tax planning covering income tax, capital gain tax, wealth tax and gift tax. 7. Minimize risk: Risk avoidance and minimization of risk are important

objective

of

portfolio

management.

Portfolio

managers achieve these objectives by effective investment planning and periodical review of market, situation and economic environment affecting the financial market.

Markowitz portfolio Theory In the earlier days the investment communities talked about risk and returns but there was no specific model to further term. The basic portfolio model was developed by Harry Markowitz, who derived the expected rate of return for a portfolio of assets and an expected risk measure. Before Markowitz, investors dealt loosely with the concepts of return and risk. He was first to develop the concept of portfolio diversification in a formal way – He quantified the concept of diversification. He showed quantitatively why and how portfolio diversification works to reduce the risk of portfolio to an investors. He was first to develop specific measure of Institute Of Management & Research, Jalgaon. 12

portfolio risk and to derive the expected rate of return and risk for a portfolio based on co – variance relationship. Markowitz model is based on several assumptions regarding investment behavior as: 1. Investors consider each investment alternative as being represented by a probability distribution of expected return over some holding period. 2. Investors maximize one period-expected utility, and their utilities curves demonstrate diminishing marginal utility of wealth. 3. Investors estimate the risk of the portfolio on the basis of the variability of expected returns. 4. Investors base decisions solely on expected return on risk, so their utility curves are functions of expected return and expected variance of returns only. 5. For a given risk level, investor prefer, higher returns to lower returns. Similarly for a given level of expected return, investors prefer less risk to more risk. Under these assumptions, a single asset or a portfolio assets is considered to be efficient if no other assets or portfolio assets offers higher expected return with the same (or lower) risk, or lower risk with same (or higher) expected returns.

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Activities of portfolio management: There are three major activities involved in portfolio management. I.

Asset or securities allocation and identifying asset class.

II.

Weighing shift across major asset class.

III.

Security selection within asset class. The above major activities are performed to achieve the

sole purpose to maximize return and minimize risk in the investments. The said purpose depends upon the class of assets. The assets may be classified in to following main investments channels: (a)

(b)

Fixed income class (i)

Bonds/Debentures

(ii)

Preference shares

Non Specific income on investment class (i)

(c)

Equity of common stock

Cash equivalent class (i)

Treasury bills

(ii)

Commercial Papers.

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Class

Type of

Period

Return

Certaint

Tax

Security

Of

Shape

y Of

Structure

Bonds / Debentures (1).

Govt. Bonds

Maturity Long Interest

Return Definite

Tax relief

No

Local

Long

Coupon Interest

Definite

Tax relief

No

authorities bonds Public sector bonds Preference

Fixed Income

Coupon Long

Interest

Definite

Tax relief

No

Long

Coupon Interest

High

Taxable

Medi-

Stock

Class Corporate Debentures

Coupon Long

Dividend High

Taxable

Non-

Perpetual

Dividend Moderat

Taxable

ely High Perpetual

Cash

Treasury

Dividend Least

Tax relief

High

&

Equity

Capital

Income (3)

Medium

(2) Specific

-um

Redeemable

Redeemable

Non

Risk

Short

Gains Discount

High

Taxable

Low

Short

Discount

High

Taxable

Low

Bills

Equivalent

Commercial Papers

Risk Aversion: Institute Of Management & Research, Jalgaon. 15

Portfolio theory also assumes that investors are basically risk averse, meaning that, given a choice between two assets with equal rates of return they will select the asset with lower level of risk. For example, They purchased various type of insurance including life insurance, Health insurance and car insurance. The Combination of risk preference and risk aversion can be explained by an attitude toward risk that depends on the amount of money involved.

Definition of Risk: Although there is a difference in the specific definitions of risk and uncertainty, for our purpose and in most financial literature the two terms are used interchangeably. In fact, one way to define risk is the uncertainty of future outcomes. An alternative definition might be the probability of an adverse outcome.

Composite risks involve the different risk as explained below: (1). Interest rate risk: It occurs due to variability cause in return by changes in level of interest rate. In long runs all interest rate move up or downwards. These changes affect the value of security. RBI, in India, is the monitoring authority which effectalises the change Institute Of Management & Research, Jalgaon. 16

in interest rate. Any upward revision in interest rate affects fixed income security, which carry old lower rate of interest and thus declining market value. Thus it establishes an inverse relationship in the prize of security.

Types

Risk E xtent

Cash equivalent

Less vulnerable to interest

Long terms bonds

rate risk More vulnerable to interest rate risk.

(2) Purchasing power risk: It is known as inflation risk also. This risk emanates from the very fact that inflation affects the purchasing power adversely. Purchasing power risk is more in inflationary times in bonds and fixed income securities. It is desirable to invest in such securities during deflationary period or a period of decelerating inflation. Purchasing power risk is less in flexible income securities like equity shares or common stuffs where rise in dividend income offset increase in the rate of inflation and provide advantage of capital gains. (3) Business risk: Business risk emanates from sale and purchase of securities affected by business cycles, technological changes Institute Of Management & Research, Jalgaon. 17

etc. Business cycle affects all the type of securities viz. there is cheerful movement in boom due to bullish trend in stock prizes where as bearish trend in depression brings downfall in the prizes of all types of securities. Flexible income securities are nearly affected than fix rate securities during depression due to decline in the market prize.

(4) Financial risk: Financial risk emanates from the changes in the capital structure of the company. It is also known as leveraged risk and expressed in term of debt equity ratio. Excess of debts against equity in the capital structure indicates the company to be highly geared or highly levered. Although leveraged company’s earnings per share (EPS) are more but dependence on borrowing exposes it to the risk of winding up. For its inability to honor its commitments towards the creditors.

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Here it is imperative to express the relationship between risk and return, which is depicted graphically below –

Maximize returns, minimize risks

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Techniques of portfolio management Various types of portfolio require different techniques to be adopted to achieve the desired objectives. Some of the techniques followed in India by portfolio managers are summarized below.

(1). Equity portfolio Equity portfolio is affected by internal and external factors: (a) Internal factors – Pertain to the inner working of the particular company of which equity shares are held. These factors generally include: (1). Market value of shares (2). Book value of shares (3). Price earning ratio (P/e ratio) (4). Dividend payout ratio (b) External factors – (1). Government policies (2). Norms prescribed by institutions (3). Business environment (4). Trade cycles

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(2). Equity stock analysis – The basic objective behind the analysis is to determine the probable future – value of the shares of the concerned company. It is carried out primarily fewer than two ways. : (a). Earning per share (b). Price earning ratio

(A) Trend of earning: (i). A higher price-earning ratio discounts expected profit growth. Conversely, a downward trend in earning results in a low price-earning ratio to discount anticipated decrease in profits, price and dividend. Rising EPS causes appreciation in price of shares, which benefits investors in lower tax brackets? Such investors have not pay tax or to give lower rate tax on capital gains. (ii). Many institutional investor like stability and growth and support high EPS. (iii). Growth of EPS is diluted when a company finances internally its expansion program and offers new stock. (iv). EPS increase rapidly and result in higher P/e ratio when a company finances its expansion program from internal sources and borrowings without offering new stock.

(B) Quality of reported earning: -

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Quality of reported earnings affects P/e ratio. The factors that affect the quality of reported earnings are as under:

(i). Depreciation allowances: Larger (Non Cash) deduction for depreciation provides more funds to company to finance profitable expansion schemes internally. This builds up future earning power of company. (ii). Research and development outlets: There is higher P/e ratio for a company, which carries R&D programs. R&D enhances profit-earning strength of the company through increased future sales.

(iii). Inventory and other non-recurring type of profit: Low cost inventory may be sold at higher price due to inflationary conditions among profit but such profit may not always occur and hence low P/e ratio. (C). Dividend policy: Dividend policy is significant in affecting P/e ratio. With higher dividend ratio, equity price goes up and thus raises P/e ratio. Dividend rates are raised to push in share prices up. Dividend cover is calculated to find out the time the dividend is protected, In terms of earnings. It is calculated as under:

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Di vid end C ov er

=

EPS

/

Div iden d

pe r

Sha re

(D). Investors demand: Demand from institutional investors for equity also enhances the P/e ratio. (3). Quality of management: Investors decide about the ability and caliber of management and hold and dispose of equity academy. P/e ratio is more where a company is managed by reputed entrepreneurs with good past records of management performance.

Types of Portfolios: •Aggressive Portfolio: Objective: Growth. This strategy might be appropriate for investors who seek High growth and who can tolerate wide fluctuations in market values, over the short term.

•Growth Portfolio: Institute Of Management & Research, Jalgaon. 23

Objective: Growth. This strategy might be appropriate for investors who have a preference for growth and who can withstand significant fluctuations in market value.

•Balanced Portfolio: Objective: Capital appreciation and income. This strategy might be appropriate for investors who want the potential for capital appreciation and some growth, and who can withstand moderate fluctuations in market values

•Conservative Portfolio:

Objective: Income and capital appreciation. This strategy may be appropriate for investors who want to preserve their capital and minimize fluctuations in market value.

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Advantages of Portfolio Management services • Individually managed accounts: Provides a flexible format for optimizing return through effective fund management. • Customized portfolios: Tailor-made investment strategies to suit individual requirement. •

Individually managed accounts: Provides a flexible format for optimizing returns

through better information. • Support/client servicing: Regular investment disclosures makes the investor feel comfort and in control of his money. Institute Of Management & Research, Jalgaon. 25

• Supportive tax structure: Tax changes support rise in equity There is a cut in Capital gains tax on listed equities: NIL for holdings > 12mths 10% (from 30%) for holding <12mths • SEBI regulated: A Regulated industry makes the investor feel comfortable with the investment techniques adopted to optimize returns

Investment Strategy in PMS: Focus

on

select/clear

stock

opportunities: Investments in stocks where there is a clear earnings visibility. Relatively concentrated portfolio: Portfolio compositions of not more than 25-30 stocks of what there are compelling opportunities. Usage of Derivatives as a tool: One must have a selective use of derivative in various option to enhance returns / portfolio protection. Flexible cash allocation strategy: Institute Of Management & Research, Jalgaon. 26

We have an efficient allocation among assets with flexibility to sit on 100% cash.

FINANCIAL MARKETS A financial market can be defined as the market in which financial assets are created or transferred. A financial asset represents a claim to the payments of a sum of money sometime in the future and/or periodic payment in the form of interest or dividend. Financial Market performs an important function of mobilization of savings and channeling them into the most productive uses. The participants in the financial markets are financial institutions, agents, brokers, dealers, borrowers, lenders, savers and others who are inter-linked by the laws, contracts and communication networks. Financial markets consist of Primary and Secondary Markets. The Primary markets deal in new financial claims and securities and hence are known as new issue markets. The secondary market deals in securities already issued, existing or outstanding. Financial markets are also classified as Money and Capital Markets. Money markets deals with transactions in short-term instruments (with period of maturity one year or less, Institute Of Management & Research, Jalgaon. 27

e.g. treasury bills), while capital market deals with transactions in long-term instruments (with period of maturity above one year, e.g. corporate debentures and government bonds). On the basis of the type of the financial claim, financial markets are classified as Debt and Equity markets. By the timing of delivery, financial markets are classified as Cash or Spot markets and Forward or Future markets. The

classification

of

financial

markets

can

be

summarized as follows: o Money Market o Debt Market o Forex Market o Capital Market

FINANCIAL MARKET

MONEY MARKET

FOREX MARKET

CAPITAL MARKET

DEBT MARKET

MONEY MARKETS: Institute Of Management & Research, Jalgaon. 28

Money markets can be defined as a market for short-term money and financial assets that are near substitutes for money (any financial assets that can be quickly converted into money with minimum transaction cost). One more important function of this market is to channel savings into short-term productive investments like working capital. Money market aids banking, operates as a medium of integration between sub markets, promotes maintaining of minimum reserve in the form of cash and liquidity and controls the interest rates. Money market is a collection of market for the instruments like Call money, Treasury bills, Commercial papers, Certificate of deposits, Money Market Mutual Funds, etc. A certain degree of flexibility in the regulatory framework exists and there are constant endeavors for introducing a new instruments or innovating dealing techniques. It is a wholesale market and the volume of funds or financial assets traded are very large i.e. in crores of rupees.

DEBT MARKET: Traditionally debt instruments are known for generating a predetermined income for a given period of time, other than in cases of default. Hence they are also known as fixed income instruments. The debt markets is significantly larger and deeper than equity markets. But in India, the trend is just the opposite. The development of debt market in India has not been as remarkable as in the equity market. However the debt markets in India have undergone a considerable change in the last few Institute Of Management & Research, Jalgaon. 29

years. Characterized by regulated interest rates, limited players and lack of trading earlier, the markets have become more integrated and less regulated. The debt market in India is divided into two categories: o Government securities market consisting of Central Government and State Government securities. o Bond market consisting of FI bond, PSU bonds and Corporate bonds/debentures.

FOREIGN EXCHANGE MARKET / FOREX: Every sovereign country in the world has a currency, which is a legal tender in its territory, and which does not act as money outside its boundaries. Foreign exchange or Forex market is the one where a country’s currency is traded for another. The rate at which one currency is converted to another is known as the rate of exchange. Forex market is now deeper and wider as gauged in terms of parameters such as the range of products, participation, liquidity and turnover. The key particip--ants in the forex market are importers (who need foreign currency to pay off their imports), exporters (who want to convert their foreign currency receipts into domestic), traders (who make a market in the foreign currency), foreign exchange brokers (who bring together buyers and sellers), speculators (who tries to profit from exchange rate movements) and portfolio managers who buy and sell foreign currency.

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CAPITAL MARKET Capital markets provide the resources needed by medium and large-scale industries for investment purposes unlike money markets that provide the resources for working capital needs. While money markets deal in short-term claims (with a period of maturity 1 year or less) capital market deals in long-term claims (with a period of maturity more than 1 year). Stock market and Government bond markets are example of capital markets. Capital market consists of primary and secondary markets. The primary markets create long-term instruments through which corporate entities borrow, and the secondary market

provides

liquidity

and

marketability

to

these

instruments. Companies can raise capital in the primary market through the issue of shares and debentures for which prior approval of The SEBI is required. The secondary market that operates through the medium of stock exchanges is that segment of the capital market where securities already issued are traded.

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BASKET OF FINANCIAL PRODUCT •Bonds •Mutual Funds •Insurance •Stocks •Real Estate

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BONDS Meaning of BONDS: Bonds are excellent investment because they offer investors dependable income, a certain amount of safety and also portfolio diversification. Because bonds usually have an anticipated income stream of payments and repayment of principal investment, many people invest in bonds to preserve their capital, grow their capital and receive a constant amount of interest income. Buying a bond means that investor’s are loaning their money to a corporation, a government, a federal agency or any other municipality. Each bond is a loan for a defined time frame. When the bond reaches maturity (specified time frame Institute Of Management & Research, Jalgaon. 33

has ended), then the bondholder can cash in the bond and be paid the amount they loaned plus any accrued interest earned.

Advantages of BONDS:  Interest rate is set in advance and paid regularly.

 The value of a bond in the open market may go up.  Paying interest on bonds is a higher priority for companies than paying dividends on shares

Disadvantages of BONDS: The bond issuer may default on interest payment or be unable to make the final repayment.  The value of a bond in the open market may go down.  The bond market may be difficult to understand.

Types of BONDS: Bonds have many characteristics such as the way they pay their interest, the market they are issued in, the currency they are payable in, protective features and their legal status. Bond issuers may be governments, corporations, special purpose trusts or even non-profit organizations. Usually it is the Institute Of Management & Research, Jalgaon. 34

type of issuer or the particular nature of a bond that sets it apart in its own category. Government Bonds:Government bond are the bond, which is issued by the central as well as state government and under government. National saving certificate: National Savings Certificates (NSC) is equally comparable to the RBI bonds 8% taxable. The lock in is 6 years with a rate of interest of 8% paid at maturity. These are offered by Post office of India.

Public Provident Fund: The Government of India declares the rate of interest every year. The current rate of interest is 8% tax-free. The lock in period is for 15 year Minimum investment is 500/- every year and maximum investment is every year 70000. Secured bonds: Secured Bonds are bonds, which are secured by specific collateral. The most common type of secured bond is mortgage bond. This collateral (i.e. mortgage bond) would then be transferred to the bondholder in the event of default. Secured bonds are backed either real estate or actual physical equipment

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that can be sold. Secured bonds are believed to be high grade and therefore safe investment bonds. Other bonds are secured by the revenues created by projects. If an issuer defaults and has secured and unsecured bonds outstanding, the secured bondholders are always paid first, & then unsecured bondholders are paid. Unsecured bonds carry a larger risk than secured bonds. Larger risk bonds will pay higher yields and lower risk bonds will pay lower yields. Zero-coupon bonds: Zero-coupon bonds can either be secured or unsecured. Zero coupon bonds are issued at a large discount from the face value. This is because zero coupon bonds pay all the interest at maturity, making no payments until they mature. Zero coupon bonds offer quite a few advantages to bond investors. A zero coupon bond has the advantage of being free of reinvestment risk, although there is no way to enjoy the effects of a rise in market interest rates. Zero coupon bonds are conducive to being sensitive to and fluctuations in interest rates, because there are no coupon payments to reduce the impact of interest rate changes. In addition, markets for zero coupon bonds are relatively liquid. Municipal bonds: Municipal bonds are issued by state or city governments, or their agencies, and come in two principal varieties: •

General obligation bonds are backed by the full taxing authority of the government.

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•

Revenue bonds are backed only by the receipts from a specific source of revenue, such as a bridge or highway toll, and are not perceived to be as secure as general obligation bonds.

Redeemable and Irredeemable Bonds: A redeemable debenture is a bond, which has been issued for a certain period in the expiry of which its holder will be repaid the amount thereof with or without premium. A bond without the aforesaid redemption period is termed as an irredeemable debenture.

MUTUAL FUND Meaning of Mutual Fund:Mutual fund is a mechanism for pooling the

resources

by

issuing

units

to

the

investors and investing funds in securities in accordance with objectives as disclosed in offer document. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in Institute Of Management & Research, Jalgaon. 37

different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an invest surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

The flow chart below describes broadly the working of a mutual fund:

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Advantages of Mutual Fund:Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. Diversification Mutual Fund invests in a number of companies across a broad

cross-section

of

industries

and

sectors.

This

diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. Investor achieves this diversification through a Mutual Fund with far less money than his own. Institute Of Management & Research, Jalgaon. 39

Convenient Administration Investing in a Mutual Fund reduces paperwork and helps to investor to avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save investor’s time and make investing easy and convenient. Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees

Disadvantages of Mutual Fund:No Guarantees No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone Institute Of Management & Research, Jalgaon. 40

who invests through a mutual fund runs the risk of losing money.

Fees and commissions All funds charge administrative fees to cover their dayto-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Taxes During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If investor’s fund makes a profit on its sales, investor will pay taxes on the income receive, even if investor reinvest the money. Management risk When investor invests in a mutual fund, investor depends on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as investor had hoped, investor might not make as much money on her investment as investor expected. Of course, if any invest in Index Funds, investor foregoes management risk, because these funds do not employ managers.

Types of Mutual Fund: Institute Of Management & Research, Jalgaon. 41

Mutual fund schemes may be classified on the basis of its structure and its investment objective. By Structure Open-ended Funds An open-ended fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of openend schemes is liquidity. Open-end funds continuously offer new shares to the public, and provide liquidity via redemption of shares at Net Asset Value. Closed-ended Funds Institute Of Management & Research, Jalgaon. 42

A closed-ended fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. By Investment Objective Growth Funds The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time. Income Funds The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and

Institute Of Management & Research, Jalgaon. 43

Government securities. Income Funds are ideal for capital stability and regular income. Balanced Funds The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. Money Market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. Other Schemes Tax Saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Institute Of Management & Research, Jalgaon. 44

Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds. Special Schemes  Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like Infotech, like Infotech, Ranbaxy, and Tata Infrastructure Fund, etc.

•

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50

•

Sector Schemes

Sector Funds are those, which invest, exclusively in a specified sector. This could be an industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.

Institute Of Management & Research, Jalgaon. 45

INSURANCE. Meaning: All assets have economic value. The asset would have been created through the efforts of the owner, in the expectation that, either through the income generated there from or some other output, some of his needs would be met. In the case of motorcar, it provides comfort & convenience in transportation. There is no direct income. There is a normally expected life time for the asset during which time it is expected to perform. The owner, aware of this, can so manage his affairs that by the end of that life time, a substitute is made available to ensure that the value or income is not lost. However, if the asset gets lost earlier, being destroyed or made non-functional, through an accident or other unfortunate event, the owner & those deriving benefits there from suffer. Hence Insurance is a tool, which helps to reduce effects of such adverse events.

Need of INSURANCE:Protection Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with Institute Of Management & Research, Jalgaon. 46

bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable. Aid to Thrift Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy installment' facility built into the scheme. (Premium payment for insurance is monthly, quarterly, half yearly or yearly). For example: The Salary Saving Scheme popularly known as SSS provides a convenient method of paying premium each month by deduction from ones salary. In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specific terms and condition. Liquidity: In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan. Tax Relief Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income tax rates in force. Assesses can also avail of provisions in the law

Institute Of Management & Research, Jalgaon. 47

for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise.

Money When You Need It A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time. Children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies. Alternatively, policy money can be made available at the time of one's retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).

Types of INSURANCE:LIFE INSURANCE Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. The contract is valid for payment of the insured amount during: •

The date of maturity, or

•

Specified dates at periodic intervals, or

•

Unfortunate death, if it occurs earlier.

Institute Of Management & Research, Jalgaon. 48

Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate

event

of

death

of

the

breadwinner.

By and large, life insurance is civilization’s partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: 1. That of dying prematurely is leaving a dependent family to fend for itself. 2. That of living till old age without visible means of support.

General Insurance:Automobile insurance Automobile Insurance also known as auto insurance, car insurance and as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the vehicle itself. Casualty insurance

Institute Of Management & Research, Jalgaon. 49

Casualty Insurance insures against accidents, not necessarily tied to any specific property. Credit insurance Credit Insurance pays some or all of a loan back when certain

things

happen

to

the

borrower

such

as

individuals

and

unemployment, disability, or death. •

Financial

loss

insurance

protects

companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover failure of a creditor to pay money it owes to the insured. Fidelity bonds and surety bonds are included in this category. Health insurance Health Insurance covers medical bills incurred because of sickness or accidents. Liability insurance Liability Insurance covers legal claims against the insured. For example, a doctor may purchase insurance to cover any Institute Of Management & Research, Jalgaon. 50

legal claims against him if he were to be convicted of a mistake in treating a patient. Political risk insurance Political Risk Insurance can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss. Property insurance Property Insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance.

Title insurance Title Insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgage, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records done at the time of a real estate transaction. Institute Of Management & Research, Jalgaon. 51

Workers' compensation insurance Worker’s compensation Insurance replaces all or part of a worker's wages lost and accompanying medical expense incurred due to a job-related injury.

COMMDITIES Commodity Futures are contracts to buy specific quantity of a particular commodity at a future date. It is similar to the Index futures and Stock Futures but the underlying happens to be commodities instead of Stocks and Indices. In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals; cereals and pulses; ginned and unginned cotton; oilseeds, oils and oilcakes; raw jute and jute Institute Of Management & Research, Jalgaon. 52

goods; sugar and gud; potatoes and onions; coffee and tea; rubber and spices, etc. Government of India has allowed forward transactions in commodities

through

Online

Commodity

Exchanges,

a

modification of traditional business known as Aadat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: •

National Commodity & Derivatives Exchange Limited (NCDEX)

•

Multi Commodity Exchange of India Limited (MCX)

•

National

Multi-Commodity

Exchange

of

India

Limited (NMCEIL) All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India. Major

commodities

traded

in

Most

popular Exchanges of the world are: Exchange

Major Commodities

Traded New York Mercantile Exchange Crude Oil, Heating Oil (NYMEX) Chicago Board of Trade(CBOT) Soy Oil, Soy Beans, Corn London Metals Exchange Aluminum, Copper, Tin, (LME) Chicago

Board

Lead Option Options on Energy, Interest

Exchange (CBOE) Rate Tokyo Commodity Exchange Silver, (TCE) Malaysian

Gold,

Crude

Oil,

Rubber Derivatives Rubber, Soy Oil, Palm Oil

Institute Of Management & Research, Jalgaon. 53

Exchange (Mdex) Commodity

Exchange Gold, Silver, Platinum

(COMEX)

Who

regulates

the

Commodity

Exchanges ? Commodity exchanges are regulated by Forward Market Commission (FMC); Forward market Commission works under the purview of the ministry of food, Agriculture and Public Distribution.

Benefits

in

dealing

commodities

futures are: If you are an Investor, commodities futures represent a good form of investment because of the following reasons. • Diversification: The returns from commodities market are free from the direct influence of the equity and debt market, which means that they are capable of being used as effective hedging instruments providing better diversification. • Less Manipulation: Commodities markets, as they are governed by international price movements are less prone to rigging or price manipulations by individuals. • High Leverage: The margins in the commodity futures market are less than the F & O section of the Equity market. Institute Of Management & Research, Jalgaon. 54

How risky are these markets compared to stock & bond markets ? Commodity prices are generally less volatile than the stocks and this has been statistically proven. Therefore it’s relatively safer to trade in commodities. Also the regulatory authorities ensure through continuous vigil that the commodity prices are market- driven and free from manipulations.

STOCK Stock Broking: It consists of two markets those are primary market and secondary market. Primary Market: Primary markets bring together buyers and sellers either directly or through intermediaries - by providing an arena in which sellers’ investment propositions can be priced, brought to the marketplace, and sold to buyers. In this context, the seller is called the issuer and the price of what’s sold is called the issue price.

Institute Of Management & Research, Jalgaon. 55

It is the initial market for any item or service. It also signifies an initial market for a new stock issue. The jargon also means a firm, trading market held in a security by a trader who performs the activities of a specialist by being ready to execute orders in that stock. Secondary Markets Secondary Markets are the stock exchanges and the over-the-counter market. Securities are first issued as a primary offering to the public. When the securities are traded from that first holder to another, the issues trade in these secondary markets. It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success rate as a wealth management and wealth accumulation option. The difference between unpredictability and a safety anchor in the market is provided by in-depth knowledge of market functioning and changing trends, planning with foresight and choosing one & choose options with care.

Institute Of Management & Research, Jalgaon. 56

REAL ESTATE The booming real estate market is forcing everyone to take a look at it. Real estate Prices have seen the highest appreciation in the last three years since India’s Independence. The sector has immense significance as its holds largest portion of our domestic savings. Real Estate as an asset class is not a widely tracked today. As an investor one needs to understand the emerging trends in the real estate market.

Real Estate market background Institute Of Management & Research, Jalgaon. 57

As with any other boom the real estate boom that we are witnessing today has its origin in the demand supply mismatch. Land is a limited natural resource and its incremental demand due to increasing population and economic growth in the country is driving real estate prices upwards. India occupies only 2.4 percent of the world’s area, while 16 percent of total global population lives here. India’s average population density is higher than that of any other nation of comparable size. In addition to that India is the second fastest growing economy in the world and is attracting global investor attention. An illustrative example of the supply demand gap, during the ninth plan, India was facing shortage of 4.1 crores houses in urban and rural areas, out of which 3.3 crores is the shortfall in urban areas.

Emerging trends in the real estate market Central Business Districts or CBD’s as it is popularly known are the commercial hubs of a city. Traditionally, the CBD’s are located close to the center of the city, where most CBD’s are developed and evolved over the years. They have commanded the highest rentals and prices. With the transformations in the real estate sector, the traditional CBD’s seem to be losing out gradually to the suburbs. Besides that, the large cities appear to be losing out gradually to the suburbs. Besides that, the large cities appear to be heading for the Institute Of Management & Research, Jalgaon. 58

situation, where multiple CBD’s dot the Landscape. The reason for this is the sharp upswing in rentals. Shift of business locations to tier-2 & tier-3 cities: High real estate cost drives up wages and establishment costs and can create potential problems in the long term. Already Tier-1 cities have competition from Tier-2 & Tier-3 cities because real estate costs have reached unrealistic levels. Also these high real estate prices exist with poor civic infrastructure and services. This is increasingly forcing companies to look at the alternative options available and move to less congested (reasonably priced) cities.

Rental value Rs/sq. Ft / pm

Rental & Capital values-CBD(Grade A Cities) 200 180 160 140 120 100 80 60 40 20 0

Mumbai Delhi Banglore Chennai

1998 1999 2000 2001 2002 2003 2004 2005 2006

Future outlook of the Sector Institute Of Management & Research, Jalgaon. 59

Primary driver for the real state is rapid urbanization and development of residential and commercial properties in semi urban and rural areas. In present scenario land value in metros is increasing faster than inflation. This helps property holders to receive huge capital gains. Increasing urbanization, higher employment, rising income, easy availability of credit and tax benefits have led to an increase in demand for residential and office space. India has all the characteristics required to attract international investments in the real states and provide comparatively higher returns. This has made international companies look towards Indian realty sectors. In India housing finance account for just 2% of the GDP, as against 30-50% in developed countries which points to the future growth potential in investments.

DERIVATIVES

Institute Of Management & Research, Jalgaon. 60

Commodities whose value is derived from the price of some underlying asset like securities, commodities, bullion, currency, interest level, stock market index or anything else are known as “Derivatives”.

In simpler form, derivatives are financial security such as an option or future whose value is derived in part from the value and characteristics of another security, the underlying asset. ‘Futures’ and ‘options’ are two commodity-traded types of derivatives. An ‘options’ contract gives the owner the right to buy or sell an asset at a set price on or before a given date. On the other hand, the owner of a ‘futures’ contract is obligated to buy or sell the assets. The other examples of derivatives are warrants and convertible bonds (similar to shares in that they are assets). But Institute Of Management & Research, Jalgaon. 61

derivatives are usually contracts. Beyond this, the derivatives range is only limited by the imagination of investment banks. It is likely that any person who has funds invested, an insurance policy or a pension fund that they are investing in, and exposed to, derivatives – wittingly or unwittingly.

Types of traders in a derivatives market Hedgers: Hedgers are those who protect themselves from the risk associated with the price of an asset by using derivatives. A person keeps a close watch upon the prices discovered in trading and when the comfortable price is reflected according to his wants, he sells futures contracts. In this way he gets an assured fixed price of his produce. In general, hedgers use futures for protection against adverse future price movements in the underlying cash commodity. Hedgers are often businesses, or individuals, who at one point or another deal in the underlying cash commodity. Take an example: A Hedger pay more to the farmer or dealer of a produce if its prices go up. For protection against higher prices of the produce, he hedges the risk exposure by buying enough future contracts of the produce to cover the amount of produce he expects to buy. Since cash and futures prices do tend to move in tandem, the futures position will profit if the price of the produce rise enough to offset cash loss on the produce. Speculators: Institute Of Management & Research, Jalgaon. 62

Speculators are somewhat like a middle man. They are never interested in actual owing the commodity. They will just buy from one end and sell it to the other in anticipation of future price movements. They actually bet on the future movement in the price of an asset. They are the second major group of futures players. These participants include independent floor traders and investors. They handle trades for their personal clients or brokerage firms. Buying a futures contract in anticipation of price increases is known as ‘going long’. Selling a futures contract in anticipation of a price decrease is known as ‘going short’. Speculative participation in futures trading has increased with the availability of alternative methods of participation. Speculators have certain advantages over other investments they are as follows: •

If the trader’s judgment is good, he can make more money in the futures market faster because prices tend, on average, to change more quickly than real estate or stock prices.

•

Futures are highly leveraged investments. The trader puts up a small fraction of the value of the underlying contract as margin, yet he can ride on the full value of the contract as it moves up and down. The money he puts up is not a down payment on the underlying contract, but a performance bond. The actual value of the contract is only exchanged on those rare occasions when delivery takes place.

Institute Of Management & Research, Jalgaon. 63

Arbitrators: A person who has been officially chosen to make a decision between two people or groups who do not agree is known as Arbitrator. In commodity market Arbitrators are the person who take the advantage of a discrepancy between prices in two different markets. If he finds future prices of a commodity edging out with the cash price, he will take offsetting positions in both the markets to lock in a profit. Move over the commodity futures investor is not charged interest on the difference between margin and the full contract value.

Definition of Future Contracts Future contracts is an agreement made and traded on the exchange between two parties to buy or sell a commodity at a particular time in the future for a pre-defined price. Since both the parties are unaware of each other, the exchange provides a mechanism to give the party assurance of honored contract. The exchange specifies standardized features of the contract. The risk to the holder is unlimited, and because the pay off pattern is symmetrical, the risk to the seller is unlimited as well. Money lost and gained by each party on a futures contract is equal and opposite. In other words, a future trading is a zerosum game. These are basically forward contracts, meaning they represent a pledge to make a certain transaction at a future date. The exchange of assets occurs on the date specified in the contract. These are regulated by overseeing agencies, and are guaranteed by clearinghouses. Hedgers often trade futures for the purpose of keeping price risk in check. Institute Of Management & Research, Jalgaon. 64

Future contracts are often used by commercial enterprises as ‘hedging tools’ to reduce the risk of expected future purchases or sales of the underlying asset. If used to speculate, risk increases. So risk depends on the underlying instrument and the use of the future.

Advantages of Futures Contracts: •

If price moves are favorable, the producer realizes the greatest return with this marketing alternative.

•

No premium charge is associated with futures market contracts.

Disadvantages of Future Contracts: •

Subject to margin calls

•

Unable to take advantage of favorable price moves

•

Net price is subject to Basis change

Futures contracts are similar to Options. Both represent actions that occur in future. But Options are contract on the underlying futures contract where as futures are either to accept or deliver the actual physical commodity. To make a decision between using a futures contract or an options contract, producers need to evaluate both alternatives.

Institute Of Management & Research, Jalgaon. 65

RESEARCH METHODOLOGY Research can be defined as systemized effort to gain new knowledge. A research is carried out by different methodologies which have their own pros and cons. Research methodology is a way to solve research in studying and solving research problem along with logic behind them are defined through research methodology. Thus while talking about research methodology we are not only talking of research methods but also considered the logic behind the methods. We are in context of our research Institute Of Management & Research, Jalgaon. 66

studies and explain why it is being used a particular method or technique and why the others are not used. So that research result is capable of being evaluated either by researcher himself or by others Research has its special significance in solving various operational and planning problems of business and industry. Research methodology is the way to systematically solve the research problem.

Execution of the project: It is the very important step in the research process accuracy findings depends on how systematically the study has been carried out in time so that it can make some sense when required. I have executed the project after prior discussion with the guide and structured in following steps: a. Preparation of questionnaire. b. Collection of list of some of the clients interview of the customer so that more interaction is impossible and the variety of responses can be registered to have a good data for analysis. c. Visiting and asking about their feedback on the financial services like share broking, mutual fund, etc. try to find out their interest about share market.

1. Data requirements --

a. Name, address and phone number of individuals Institute Of Management & Research, Jalgaon. 67

b. Present earning pattern of the respective individuals c. Assets hold and liabilities to be carried out. d. Expected earnings and returns. 2. Primary data – a.

Data collected by going to different companies and meeting people over the PU NE .

b. Data collected by putting canopies and Desk in various companies. 3. Secondary data – a.

Data collected official website of KARVY ST OCK BR0KI NG LTD.

b. Data collected by referring to the database already maintained in the company. 4. Data Collection Instruments:-

1. Questionnaire 2. Finapolis 3. Telephonic communication. 4.

E-mail.

The questionnaire contained the question that touched upon every aspect of the study and are rendered in the status of being complete in proving full information needed for the study. Multiple option questions made the interview easier as all the options were in front of user. Institute Of Management & Research, Jalgaon. 68

The

presentation

of

the

question

in

the

questionnaire, in the tabular form, helped to get the maximum information in fully systematic manner, through minimum number of question. This also gave it an attractive and presentable look. The question was straightforward in easy language and clear meaning. No question was ambiguous to confuse the subject. Due to the general nature of the topic, questionnaire could be administered with the customer with equal and labor.

QUESTIONNAIRE 1. PERSONAL DATA NAME:

_____________________________

BOD:

______________________________

ADDRESS:

______________________________ _______________________________

CONTACT NO:________________________________ Institute Of Management & Research, Jalgaon. 69

E-MAIL:

________________________________

2 ARE YOU AWARE OF KARVY STOCK BROKING LTD? A) Yes

B) No

3. WHICH PRODUCTS DO YOU KNOW OFFERED BY KARVY? A) Mutual Funds

B) Shares

D) Bonds

E) Fixed Deposits

C) Insurance

F) PPF (Public Provident Funds) 4. WHAT PERCENTAGE OF YOUR INCOME DO YOU INVEST? A) Below 10%

B) 10% to 30%

C) 30% to 50%

D) Above 50%

5. WHAT ARE THE VARIOUSE INVESTMENTS SCHEMES IN WHICH YOU HAVE INVESTRED? A) Insurance

B) Mutual Funds

C) Shares

D) Bonds & Fixed Deposits

E) PPF (Public Provident Funds) Institute Of Management & Research, Jalgaon. 70

6. WHAT IS THE PROPORTION YOU HAVE INVESTED IN VARIOUSE SCHEMES? TYPE OF INVESTMENTS Insurance Mutual Funds Share Real Estate PPF Bonds

PERCANTAGE % % % % % %

GRAPHICAL REPRESENTATION OF QUESTIONAIRE (1Q). Age group analysis Sample size --- 50

Institute Of Management & Research, Jalgaon. 71

15%

0% 35%

20 -- 29 30 --39 40 --49 50 --59

50%

As India is going to be the youngest nation of the world, our main thrust should be on the youngsters. As we see the age group distribution graph, I also tried to concentrate more on younger generation within a age group of 20 – 35. In Pune, 50% of the total sample size belongs to the age group of 30 – 39 and 35% of the sample size belongs to the age group of 20 – 29, constituting a major chunk of 85%. Thus our main aim is to target young group.

(2Q). Income group analysis Sample size -- 50

Institute Of Management & Research, Jalgaon. 72

12%

0%

19%

UPTO 2 LACS 2 -4 LACS 4 -7 LACS ABOVE 7 LACS

69%

Income is one of the major criteria for designing a portfolio of individual, so that we need to analyze properly the income distribution of the sample. 69% of the total sample size belongs to the income group of 2 – 4 lacs and 19%belongs to the group of up to 2 lacs.

(3Q). Percentage of saving of income analysis. Sample size --- 50 Institute Of Management & Research, Jalgaon. 73

13%

4% 10 --20 44%

20 --30 30 --40 40 --50

39%

As investment pattern highly depends on the pattern of savings, it constitutes a major part of our analysis. 44% of the sample size saves 10 – 20 percent of their respective income and 39% saves 20 – 30 percent of their respective income. Savings determine investment pattern of the individuals.

(4Q). Current investment pattern analysis Sample size --- 50

Institute Of Management & Research, Jalgaon. 74

insurance bank FD 25%

32%

MF NSC PPF IPO

3% 5%

8%

2% 7%

2%

16%

Shares Commodity Real estate

Savings is not only the sole measurement of investment pattern but awareness about the different investment vehicles is also one of the major aspects of investment pattern In Pune, 32% of the sample sizes are insured, 25% invest in real estate, 16% invest in mutual fund (MF) and 8% invest in direct IPOs.

5Q). Future prospect investment analysis Sample size --- 50

Institute Of Management & Research, Jalgaon. 75

TAX PLANNING INSURANCE MF

9%

0%2% 29%

9%

SECONDARY MARKET IPO BANK FD PPF

15%

BOND

6%

30%

COMMODITY REAL ESTATE

From the pie diagram its clear that most of the people like to will like to choose Tax planning and insurance as their investment option.

(6Q). Near future predictable events analysis Sample size --- 50

Institute Of Management & Research, Jalgaon. 76

12%

20%

12%

MARRIAGE CHILD EDUCATION CHILD MARRIAGE HIGHER EDUCATION

56%

The near future predictable events are those events which require some pre-hand planning to make your money go out without suffering from a loss. In the above places, people are very concerned about their children’s education.

(7Q). Liabilities analysis Sample size --- 50 Institute Of Management & Research, Jalgaon. 77

6% 0%

25% PERSONAL LOANS CAR LOANS HOUSING LOANS STUDY LOANS

50%

19%

TAX LIABILITY

Liabilities are the major areas of application of money, which very much needs to be analyzed. In above Chart in Pune, major liability is housing loan. But people have taken personal loans as their second priority of liability.

8Q). Expected income analysis Sample size --- 50 Institute Of Management & Research, Jalgaon. 78

30%

30%

BONUS INHERITENCE INTEREST/DIVIDEND GIFT

19%

10%

OTHERS

11%

As liability is considered as one of the major areas of application, future incomes should be considered as one of additional source of income, which is discussed as under: In Pune, 30% of the sample size got the opportunity to get bonus from different sources and as they are keen in investing their money in equities their second major source of future income is interest and dividend.

LIFECYCLE INVESTMENT GUIDE

Institute Of Management & Research, Jalgaon. 79

According various age groups standard portfolios are as follows:

Mid Twenties 12% 8%

REAL ESTATE CASH

55%

BONDS

25%

STOCKS

Late Thirties to Early Forties 10% 5%

REAL ESTATE CASH

55%

30%

BONDS STOCKS

Mid Fifties 13% 5% 44%

REAL ESTATE CASH

Institute Of Management & Research, Jalgaon. BONDS 80

38%

STOCKS

Late Sixties and beyond 15%

25%

10%

REAL ESTATE CASH BONDS STOCKS

50%

Institute Of Management & Research, Jalgaon. 81

CONCLUSION As per the analysis mentioned in this report following points can be concluded: •Since the young age group is able to undertake more risk portfolio manager has to design aggressive portfolio wherein the individual’s investments contains stocks in more proportion. •People of old age have to follow a more conservative approach in their portfolios. Their investments also contain bonds and real estate in greater proportion.

Institute Of Management & Research, Jalgaon. 82

SUGGESTION •According to the respondents the quality of the service is very important. So the KARVY should project itself as a brand in the market that gives end user the best quality of service with handy operations. •Also most of respondents having their personal consultant or the company consultants. KARVY have to differentiate their services from other consultants effectively by delivering value added services to its customers. •KARVY has to concentrate on direct marketing activities. The consultancy should develop its long-term relationship with the customers. •For creating a brand image in our country KARVY should go for a brand ambassador. •The consultancy must give much more emphasis on creation of customer who make repurchase. •The amount of awareness has been generated is through newspaper. As it can be one of the potential media for advertisement. •It is seen that KARVY brand is not seen enough in the market place and hence the brand is invisible to the naked eyes of the consumer and hence KARVY should beef up its publicity campaigns and promotional activities so that KARVY becomes an easily recognizable brand.

Institute Of Management & Research, Jalgaon. 83

BIBLIOGRAPHY

•

www.moneycontrol.com

•

www.karvy.com

•

www.amfi.com

•

www.indiabulls.com

•

www.indiainfoline.com

•

www.ilfsndia.com

•

www.valueresearchonline.com

•

www.angelbroking.com

•

www.sharekhan.com

•

www.sebi.in.gov

•

www.bseindia.com

Institute Of Management & Research, Jalgaon. 84