A STUDY ON PORTFOLIO MANAGEMENT SERVICES

AT SHAREKHAN LIMITED

A Project Report Submitted in

Partial fulfillment of the requirement

For the award of

MASTER OF BUSINESS ADMINISTRATION

By

PRISCILLA MADHU PRABHA P

32313115

Under the guidance of

Dr. VANEETA AGGARWAL, B.E., M.B.A., Ph.D. (HR)

Assistant Professor

DEPARTMENT OF MANAGEMENT STUDIES

UNIVERSITY OF MADRAS

CHENNAI - 600 005

 University of Madras

Department of Management Studies

Students Declaration

I, Ms. PRISCILLA MADHU PRABHA P (Reg. No: 32313115), II year MBA student
of the Department, hereby declare that this project dissertation entitled, A
STUDY ON PORTFOLIO MANGEMENT SERVICES, being submitted, is an original
work done by me during the IV semester (2014-15), in partial fulfillment for the
award of the MBA Degree by the University of Madras, and I solemnly state that
the same has not been previously submitted to any examination of this University
or any other University.

Date: 24th April 2015. Signature :

Name :

Page 2
 University of Madras

Department of Management Studies

Supervisors Certificate

This is to certify that the project dissertation entitled A STUDY ON

PORTFOLIO MANAGEMENT SERVICES is a bonafide work done by PRISCILLA
MADHU PRABHA P (Reg. No: 32313115) during the IV semester (2014-2015)
under my guidance, and is in partial fulfillment for the award of the MBA Degree
to the candidate by the University of Madras.

Date: 24th April 2015 Signature:

Name: Dr. VANEETA AGGARWAL,

B.E., M.B.A., Ph.D.(HR)

Designation: Assistant Professor

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 ACKNOWLEDGMENT

A project in an organization is a golden opportunity for an individual in shaping the career,

learning and self-development. I consider myself very lucky and honored to have it in the
prestigious institute, SHAREKHAN LIMITED, with so many wonderful people who lead me
through in completion of this project.

I would like to thank Dr. R. Thenmozhi, Professor and Head of the department, for
giving me an excellent opportunity to work on the project

I would like to give a special thanks to my mentor Dr. VANEETA AGGARWAL, for her
expertise in the subject, advice and excellent guidance. She not only gave my project a
scrupulous critical reading, but added many examples and ideas to improve it.

I am grateful to Mr. PRASANNA VENKATESH P for providing their support all through the
project work and providing in valuable suggestions and ideas to follow in the career of an
individual.

I express my sincere thanks to all the executives, staff members of SHAREKHAN LIMITED,
Chennai for providing information and timely support.

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 CHAPTER TABLE OF CONTENTS PAGE NO.
EXECUTIVE SUMMARY 6
CHAPTER-1 INTRODUCTION 7
Introduction to Study 8,9
Myths About PMS 10,11
Introduction to Stock Exchange 12-16
CHAPTER-2 COMPANY PROFILE 17,18
Work structure of Sharekhan 19
Product and Services offered by
20-22
Company
CHAPTER-3 RESEARCH METHODOLOGY 23
Objective of the Project 24
Scope of the Study 24
Research design of the study 25,26
CHAPTER-4 PORTFOLIO MANAGEMENT SERVICES 27,28
Need of PMS 29
Objective of PMS 29,30
Portfolio Construction 30-36
Risk and Risk Aversion 36-38
Risk versus Return 39-44
Portfolio Diversification 44-48
Techniques of PMS 49-53
Sharekhan PMS 53-59
DATA ANALYSIS AND
CHAPTER-5 INTERPRETATION 60-75
CHAPTER-6 CONCLUSION & SUGGESTIONS 76
Observation and Findings 77,78
Limitations of the Project 78
Conclusion 79
Suggestion 80
Literature Review 81-85
Reference 86-88
ANNEXURE 89,90

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 EXECUTIVE SUMMARY

Investing is both Arts and Science. Every Individual has their own specific financial need
and expectation based on their risk taking capabilities, whereas some needs and expectation are
universal. Therefore, we find that the scenario of the Stock Market is changing day by day hours
by hours and minute by minute. 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.

In order to keep the Investor safe from market fluctuation and make them profitable,
Portfolio Management Services (PMS) is fast gaining Investment Option for the High Net worth
Individual (HNI).There is growing competition between brokerage firms in post reform India.
For investor it is always difficult to decide which brokerage firm to choose. The research design
is analytical in nature. A questionnaire was prepared and distributed to Investors. The investors
profile is based on the results of a questionnaire that the Investors completed. The Sample
consists of 100 investors from various brokers premises. The target customers were Investors
who are trading in the stock market.

In order to identify the effectiveness of Sharekhan PMS services this Research is carried
throughout the area of Chennai. At the time of investing money everyone look for the Risk factor
involve in the Investment option. The Report is prepared on the basis of Research work done
through the different Research Mythology the data is collected from both the source Primary
sources which consist of Questionnaire and secondary data is collected from different sources
such as Company website, Magazine and other sources. As the PMS services of Sharekhan
Limited have the best result in its field .It has given 43.50% return in Trailing stops,
94.30%return in Nifty and 38.10% in Beta Portfolio which is the result when the Market was
not doing well from last one year.

In this project I have shown the details of financial planning as well as wealth management
so as to understand about the customers needs and wants with respect to market and how a
clients portfolio can be designed and what factors a portfolio manager must consider for
designing a portfolio.

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 CHAPTER-1

INTRODUCTION

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INTRODUCTION TO STUDY

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

In today fast growing world many opportunities are available, so in order to move with
changes and grab the best opportunities in the field of investments a professional fund manager
is necessary.

Therefore, in the present scenario the Portfolio Management Services (PMS) is fast gaining
importance as an investment alternative for the High Net worth Investors.

Portfolio Management Services (PMS) is an investment portfolio in stocks, fixed income,

debt, cash, structured products and other individual securities, managed by a professional money
manager that can potentially be tailored to meet specific investment objectives.

When you invest in PMS, you own individual securities unlike a mutual fund investor, who
owns units of the entire fund. You have the freedom and flexibility to tailor your portfolio to
address personal preferences and financial goals. Although portfolio managers may oversee
hundreds of portfolio, your account may be unique.

Investment Management Solution in PMS can be provided in the following ways:

i. Discretionary
ii. Non Discretionary
iii. Advisory

Discretionary: Under these services, the choice as well as the timings of the investment
decisions rest solely with the Portfolio Manager.

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Non Discretionary: Under these services, the portfolio manager only suggests the investment
ideas. The choice as well as the timings of the investment decisions rest solely with the Investor.
However the execution of trade is done by the portfolio manager.

Advisory: Under these services, the portfolio manager only suggests the investment ideas.

The choice as well as the execution of the investment decisions rest solely with the Investor.

Rule 2, clause (d) of the SEBI (portfolio managers) Rules, 1993 defines the term Portfolio
as total holding of securities belonging to any person.

As a matter of fact, portfolio is combination of assets the outcomes of which cannot be

defined with certainty new assets could be physical assets, real estates, land, building, gold etc.
or financial assets like stocks, equity, debenture, deposits etc.

Portfolio management refers to managing efficiently the investment in the securities held by
professional for others.

Merchant banker and the portfolio management with a view to ensure maximum return by
such investment with minimum risk of loss of return on the money invested in securities held by
them for their clients. The aim Portfolio management is to achieve the maximum return from a
portfolio, which has been delegated to be managed by manger or financial institution.

There are lots of organization in the market on the lookout for the people like you who need
their portfolios managed for them .They have trained and skilled talent will work on your money
to make it do more for you.

Therefore, if any investors still insist on managing their own portfolio, then ensure you build
discipline into their investment. Work out their strategy and stand by it.

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 MYTHS ABOUT PORTFOLIO MANAGEMENT SERVICES

There are two most common myths found about Portfolio Management Services (PMS)
which we found among most of the Investors. They are as follows.

Myth No. 1:PMS and Mutual Fund are Similar as the investment option

As in the Finance Basket both the PMS and Mutual Fund are used for minimizing risk and
maximize the profit of the Investors. The objectives are similar as in both the product but they
are different from each other in certain aspects. They are as follows.

Management Side

In PMS, its ongoing personalized access to professional money management services.

Whereas, in Mutual fund gives personalize access to money.

Customization

In PMS, Portfolio can be tailored to address each investor's specific needs. Whereas in
Mutual Fund Portfolio structured to meet the fund's stated investment objectives.

Ownership

In PMS, Investors directly own the individual securities in their portfolio, allowing for tax
management flexibility, whereas in Mutual Fund Shareholders own shares of the fund and cannot
influence buy and sell decisions or control their exposure to incurring tax liabilities.

Liquidity

In PMS, managers may hold cash; they are not required to hold cash to meet redemptions,
whereas, Mutual funds generally hold some cash to meet redemptions.

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 Minimums

PMS generally gives higher minimum investments than mutual funds. Generally, minimum
ranges from: Rs. 1 Crore + for Equity Options Rs. 5 Crore + for Fixed Income Options Rs. 20
Lacs + for Structured Products, whereas in Mutual Fund Provide ongoing, personalized access to
professional money management services.

Flexibility

PMS is generally more flexible than mutual funds. The Portfolio Manager may move to
100% cash if it required. The Portfolio Manager may take his own time in building up the
portfolio. The Portfolio Manager can also manage a portfolio with disproportionate allocation to
select compelling opportunities whereas, in Mutual Fund comparatively less flexible.

Myth No. 2: PMS is more Risk free than other Financial Instrument

In Financial Market Risk factor is common in all the financial products, but yes it is true
that Risk Factor vary from each other due to its nature.All investments involve a certain amount
of risk, including the possible erosion of the principal amount invested, which varies depending

on the security selected. For example, investments in small and mid-sized companies tend to

involve more risk than investments in larger companies.

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 INTRODUCTION TO STOCK EXCHANGE

The emergence of stock market can be traced back to 1830. In Bombay, business passed in
the shares of banks like the commercial bank, the chartered mercantile bank, the chartered bank,
the oriental bank and the old bank of Bombay and shares of cotton presses. In Calcutta,
Englishman reported the quotations of 4%, 5%, and 6% loans of East India Company as well as
the shares of the bank of Bengal in 1836. This list was a further broadened in 1839 when the
Calcutta newspaper printed the quotations of banks like union bank and Agra bank. It also
quoted the prices of business ventures like the Bengal bonded warehouse, the Docking Company
and the storm tug company.

Between 1840 and 1850, only half a dozen brokers existed for the limited business. But
during the share mania of 1860-65, the number of brokers increased considerably. By 1860, the
number of brokers was about 60 and during the exciting period of the American Civil war, their
number increased to about 200 to 250. The end of American Civil war brought disillusionment
and many

Failures and the brokers decreased in number and prosperity. It was in those troublesome
times between 1868 and 1875 that brokers organized an informal association and finally as
recited in the Indenture constituting the Articles of Association of the Exchange.

On or about 9th day of July,1875, a few native brokers doing brokerage business in shares
and stocks resolved upon forming in Bombay an association for protecting the character, status
and interest of native share and stock brokers and providing a hall or building for the use of
theMembers of such association.

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 As a meeting held in the broker Hall on the 5th day of February, 1887, it was resolved to
execute a formal deal of association and to constitute the first managing committee and to
appoint the first trustees. Accordingly, the Articles of Association of the Exchange and the Stock
Exchange was formally established in Bombay on 3rd day of December, 1887. The Association
is now known as The Stock Exchange.

The entrance fee for new member was Re.1 and there were 318 members on the list, when
the exchange was constituted. The numbers of members increased to 333 in 1896, 362 in
1916and 478 in 1920 and the entrance fee was raised to Rs.5 in 1877, Rs.1000 in 1896, Rs.2500
in 1916 and Rs. 48,000 in 1920. At present there are 23recognized stock exchanges with about
6000 stockbrokers. Organization structure of stock exchange varies.

14 stock exchanges are organized as public limited companies, 6 as companies limited by

guarantee and 3 are non-profit voluntary organization. Of the total of 23, only 9 stock exchanges
have been permanent recognition. Others have to seek recognition on annual basis.
These exchange do not work of its own, rather, these are run by some persons and with the
help of some persons and institution. All these are down as functionaries on stock exchange.
These are:

i. Stockbrokers
ii. Sub-broker
iii. Market makers
iv. Portfolio consultants etc.

1. Stockbrokers:
Stock brokers are the members of stock exchanges. These are the persons who buy, sell or
deal insecurities. A certificate of registration from SEBI is mandatory to act as a broker. SEBI
can impose certain conditions while granting the certificate of registrations. It is obligatory for
the person to abide by the rules,regulations and the buy-law. Stock brokers are commission
broker, floor broker, arbitrageur etc.

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 2. Sub-broker:
A sub-broker acts as agent of stock broker.He is not a member of a stock exchange. He
assists the investors in buying, selling or dealing in securities through stockbroker. The broker
and sub-broker should enter into an agreement in which obligations of both should be specified.
Sub-broker must be registered SEBI for a dealing in securities. For getting registered with SEBI,
he must fulfill certain rules and regulation.

3. Market Makers:
Market maker is a designatedspecialist in the specified securities. They make both bidand
offer at the same time. A market maker has to abideby bye-laws, rules regulations of the
concerned stockexchange. He is exempt from the margin requirements.As per the listing
requirements, a company where thepaid-up capital is Rs. 3 Crore but not more than Rs. 5core
and having a commercial operation for less than 2years should appoint a market maker at the
time of issue of securities.

4. Portfolio Consultants:
A combination of securities such as stocks, bonds and money market instruments
iscollectively called as portfolio. Whereas the portfolioconsultants are the persons, firms or
companies whoadvise, direct or undertake the management oradministration of securities or
funds on behalf of theirclients.

Traditionally stock trading is done through stock brokers, personally or through telephones.
As number of people trading in stock market increase enormously in last few years, some
issues like location constrains, busy phone lines, miss communication etc start growing in stock
broker offices. Information technology (Stock Market Software) helps stock brokers in solving
these problems with Online Stock Trading.

Online Stock Market Trading is an internet based stock trading facility. Investor can
tradeshares through a website without any manual intervention from Stock Broker.

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 Advantages of Stocks Trading
1. Better returns
Actively trading stocks can produce better overall returns than simply buying and holding.

2. Huge Choice
There are thousands of stocks listed on markets around the world. There is always a stock
whose price is moving - its just a matter of finding them.
3. Familiarity
The most traded stocks are in the largest companies that most of us have heard of
andunderstand - Microsoft, IBM, and Cisco etc.

Disadvantages of Stocks Trading

1. Leverage
With a margined account the maximum amount of leverage available for stock trading is
usually 4:1. Meaning a $25,000 could trade up to $100,000 of stock. This is pretty low compared
to Forex trading or futures trading.

2. Pattern Day Trader Rules

It requires at least $25,000 to be held in a trading account if the trader completes more than
4trades in a 5 day period. No such rule applies to Forex trading or futures trading.

3. Uptick Rule on Short Selling

A trader must wait until a stock price ticks up before they can short sell it. Again there are no
such rules in Forex trading or futures trading where going short are as easy as going long.

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4. Need to Borrow Stock to Short
Stocks are physical commodities and if a trader wishes to go short then the broker must have
arrangements in place to borrow that stock from a shareholder until the trader closes their
position. This limits the opportunities available for short selling. Contrast this to futures trading
where selling is as easy as buying.

5. Costs
Although online trading costs for stock trading are low they still add considerably to the costs
of day trading. Online futures trading are about 1/4 of the cost for the equivalent value. In the
UK 0.5% stamp duty is also levied on all share purchases making trading virtually impossible,
hence the popularity of spread betting.

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 CHAPTER- 2

COMPANY PROFILE

Page 17
 COMPANY PROFILE

Sharekhan is one of the leading retail brokerage of Citi Venture which is running
successfully since 1922 in the country. Earlier it was the retail broking arm of the Mumbai-based
SSKI Group, which has over eight decades of experience in the stock broking business.
Sharekhan offers its customers a wide range of equity related services including trade execution
on BSE, NSE, Derivatives, depository services, online trading, investment advice etc.

Earlier with a legacy of more than 80 years in the stock markets, the SSKI group ventured
into institutional broking and corporate finance 18 years ago. SSKI is one of the leading players
in institutional broking and corporate finance activities. SSKI holds a sizeable portion of the
market in each of these segments. SSKIs institutional broking arm accounts for 7% of the
market for Foreign Institutional portfolio investment and 5% of all Domestic Institutional
portfolio investment in the country.

It has 60 institutional clients spread over India, Far East, UK and US. Foreign Institutional
Investors generate about 65% of the organizations revenue, with a daily turnover of over US$ 2
million. The content-rich and research oriented portal has stood out among its contemporaries
because of its steadfast dedication to offering customers best-of-breed technology and superior
market information. The objective has been to let customers make informed decisions and to
simplify the process of investing in stocks

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 Mission of the Sharekhan is
To educate and empower the individual investor to make better investment decisions
through
QUALITY ADVICE
INNOVATIVE PRODUCTS and
SUPERIOR SERVICE.

WORK STRUCUTRE OF SHAREKHAN

Sharekhan has always believed in investing in technology to build its business. The company
has used some of the best-known names in the IT industry, like Sun Microsystems, Oracle,
Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial Technologies India
Ltd, Spider Software Pvt. Ltd. to build its trading engine and content. The Citi Venture holds a
majority stake in the company. HSBC, Intel & Carlyle are the other investors.

On April 17, 2002 Sharekhan launched Speed Trade and Trade Tiger, are net-based
executable application that emulates the broker terminals along with host of other information
relevant to the Day Traders. This was for the first time that a net-based trading station of this
caliber was offered to the traders. In the last six months Speed Trade has become a de facto
standard for the Day Trading community over the net. Sharekhans ground network includes
over 700+Shareshops in 130+ cities in India.

The firms online trading and investment site www.sharekhan.com - was launched on Feb 8,
2000. The site gives access to superior content and transaction facility to retail customers across
the country. Known for its jargon-free, investor friendly language and high quality research, the
site has a registered base of over 3 Lacs customers. The number of trading members currently
stands at over 7 Lacs. While online trading currently accounts for just over 5 per cent of the daily
trading in stocks in India, Sharekhan alone accounts for 27 per cent of the volumes traded online.

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 The Corporate Finance section has a list of very prestigious clients and has many firsts to
its credit, in terms of the size of deal, sector tapped etc. The group has placed over US$ 5 billion
in private equity deals. Some of the clients include BPL Cellular Holding, GujaratPipavav, Essar,
Hutchison, Planetasia, and Shoppers Stop. Finally, Sharekhan shifted hands and Citi venture get
holds on.

SERVICES OFFERD BY SHAREKHAN

1- Equity Trading Platform (Online/Offline).

2- Commodities Trading Platform (Online/Offline).

3- Portfolio Management Service.

4- Mutual Fund Advisory and Distribution.

5- Insurance Distribution.

6-Forex

Sharekhan offers the following products:-

CLASSIC ACCOUNT
This is a User Friendly Product which allows the client to trade through website
www.sharekhan.com and issuitable for the retail investors who is risk-averse andhence prefers to
invest in stocks or who does not trade toofrequently.

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 Features
Online trading account for investing in Equity andDerivatives via www.sharekhan.com
Live Terminal and Single terminal for NSE Cash, NSEF&O & BSE.
Integration of On-line trading, Saving Bank and Demat Account.
Instant cash transfer facility against purchase & sale ofshares.
Competitive transaction charges.
Instant order and trade confirmation by E-mail.
Streaming Quotes (Cash & Derivatives).
Personalized market watch.
Single screen interface for Cash and derivatives andmore.
Provision to enter price trigger and view the sameonline in market watch.

SPEEDTRADE
SPEEDTRADE is an internet-based software application that enables you to buy and sell in
an instant.It is ideal for active traders and jobbers who transact frequently during days session to
capitalize on intra-day price movement.

Features
Instant order Execution and Confirmation.
Single screen trading terminal for NSE Cash, NSE F&O& BSE.
Technical Studies.
Multiple Charting.
Real-time streaming quotes, tic-by-tic charts.
Market summary (Cost traded scrip, highest clue etc.)
Hot keys similar to brokers terminal.
Alerts and reminders.
Back-up facility to place trades on Direct Phone lines.
Live market debts.

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 DIAL-N-TRADE
Along with enabling access for trade online, the CLASSIC and SPEEDTRADE ACCOUNT
also gives Dial-n-trade services. With this service, one can dial Sharekhans dedicated phone
lines 1800-22-7500, 3970-7500.Beside this, Relationship Managers are always available on
Office Phone and Mobile to resolve customer queries.

SHARE MOBILE
Sharekhan had introduced Share Mobile, mobile based software where one can watch Stock
Prices, IntraDay Charts, Research& Advice and Trading Calls live onthe Mobile.(As per SEBI
regulations, buying-sellingshares through a mobile phone are not yet permitted.)

PREPAID ACCOUNT
Customers pay Advance Brokerage on trading Account and enjoy uninterrupted trading in
their Account. Beside this, great discount are also available (up to 50%)on brokerage.
Prepaid Classic Account: - Rs. 2000
Prepaid Speed trade Account: - Rs. 6000

IPO ON-LINE
Customers can apply to all the forthcoming IPOs online. This is quite hassle-free, paperless

and time saving. Simply allocate fund to IPO Account, Apply for the IPO and Sit Back & Relax.

Mutual Fund Online

Investors can apply to Mutual Funds of Reliance, Franklin Templeton Investments, ICICI
Prudential, SBI, Birla, Sundaram, HDFC, DSP Merrill Lynch, PRINCIPAL and TATA with

Sharekhan.

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 Zero Balance ICICI Saving Account
Sharekhan had tied-up with ICICI bank for Zero Balance Account for Sharekhans Clients.
Now their customers can have a Zero Balance Saving Account with ICICI Bank after your demat

account creation with Sharekhan.

CHAPTER-3

RESEARCH METHODOLOGY

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 RESEARCH METHODOLOGY

OBJECTIVE OF THE PROJECT

Each research study has its own specific purpose. It is like to discover to Question through
the application of scientific procedure. But the main aim of our research to find out the truth that
is hidden and which has not been discovered as yet. Our research study has two objectives:-

OBJECTIVES

To study the concept of Portfolio Management.

To study about the difficulties faced by persons while Trading in Sharekhan.
To study about the need of improvement in existing Trading system.

Scope of the Study

The study of the Portfolio Management Services is helpful in the following areas.

In today's complex financial environment, investors have unique needs which are derived
from their risk appetite and financial goals. But regardless of this, every investor seeks to
maximize his returns on investments without capital erosion. Portfolio Management

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 Services (PMS) recognize this, and manage the investments professionally to achieve
specific investment objectives, and not to forget, relieving the investors from the day to
day hassles which investment require.
It is offers professional management of equity investment of the investor with an aim to
deliver consistent return with an eye on risk.
Identify the key Stock in each portfolio.
To look out for new prospective customers who are willing to invest in PMS.
To find out the Sharekhan, PMS services effectiveness in the current situation.
It also covers the scenario of the Investment Philosophy of a Fund Manager.

RESEARCH DESISGN OF THE STUDY

This report is based on primary as well secondary data, however primary data collection was
given more importance since it is overhearing factor in attitude studies. One of the most
important users of research methodology is that it helps in identifying the problem, collecting,
analyzing the required information data and providing an alternative solution to the problem .It
also helps in collecting the vital information that is required by the top management to assist
them for the better decision making both day to day decision and critical ones.
The study consists of analysis about Investors Perception about the Portfolio Management
Services offered by Sharekhan Limited. For the purpose of the study 100 customers were picked
up at random and their views solicited on different parameters.
The methodology adopted includes
Questionnaire
Random sample survey of customers

SOURCES OF DATA
Primary data: Questionnaire

Secondary data: Published materials of Sharekhan Limited. Such as periodicals,

journals, news papers, and website.

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 Duration of Study

The Study was carried out for the period of one and half months from 22nd January to 15th of
April 2015.

SAMPLING PLAN

Sampling:
Since Sharekhan Limited has many segments I selected Portfolio Management Services
(PMS) segment as per my profile to do market research. 100% coverage was difficult within the
limited period of time. Hence sampling survey method was adopted for the purpose of the study.

Population:
(Universe) customers &non customers of Sharekhan limited.

Sampling size:
A sample of hundred was chosen for the purpose of the study. Sample consisted of Investor
as based on their Income and Profession as well as Educational Background.

Sampling Methods:
Probability sampling requires complete knowledge about all sampling units in the universe.
Due to time constraint non-probability sampling was chosen for the study.

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 Sampling procedure:
From large number of customers & non customers sample lot were randomly selected to
analyse.

Field Study:
Directly approached respondents by the following strategies

Tele-calling
Clients References
Promotional Activities
Database provided by the Sharekhan Limited.

CHAPTER-4

PORTFOLIO MANAGMENTSERVICES

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 PORTFOLIO MANGEMNT SERVICES (PMS)

Portfolio (finance) means a collection of investments held by an institution or a private

individual. Holding a portfolio is often part of an investment and risk-limiting strategy called
diversification. By owning several assets, certain types of risk (in particular specific risk) can be
reduced. There are also portfolios which are aimed at taking high risks these are called
concentrated portfolios.

Investment management is the professional management of various securities (shares,bonds

etc) and other assets (e.g. real estate), to meet specified investment goals for the benefit of the
investors. Investors may be institutions (insurance companies, pensionfunds, corporations etc.) or
private investors (both directly via investment contracts and more commonly via collective
investment schemes e.g. mutual funds).

The term asset management is often used to refer to the investment management of collective
investments, 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 analysis,

asset selection, stock selection, plan implementation and ongoing monitoring of investments.
Outside of the financial industry, the term "investment management" is often applied to
investments other than financial instruments. Investments are often meant to include projects,
brands, patents and many things other than stocks and bonds. Even in this case,the term implies
that rigorous financial and economic analysis methods are used.

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 Need of PMS

As in the current scenario the effectiveness of PMS is required. As the PMS gives investors
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 / depreciation in the value of the
investments.

As the financial goals are diverse, the investment choicesalso 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 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.

Objective of PMS

These are the following objective which is full filled by Portfolio Management Services.

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.

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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: -
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.

PORTFOLIO CONSTRUCTION
The Portfolio Construction of Rational investors wish to maximize the returns on their funds
for a given level of risk. All investments possess varying degrees of risk. Returns come in the
form of income, such as interest or dividends, or through growth in capital values (i.e. capital
gains).
The portfolio construction process can be broadly characterized ascomprising the following
steps:

Page 30
 1. Setting objectives.

The first step in building a portfolio is to determine the main objectives of the fund given the
constraints (i.e. tax andliquidity requirements) that may apply. Each investor has different
objectives, time horizons and attitude towards risk. Pension funds have long-term obligations
and, as a result, invest for the long term. Their objective may be to maximize total returns in
excess of the inflation rate. A charity might wish to generate the highest level of income whilst
maintaining the value of its capital received from be quests. An individual may have certain
liabilities and wish to match them at a future date. Assessing a clients risk tolerance can be
difficult. The concepts of efficient portfolios and diversification must also be considered when
setting up the investment objectives.

2. Defining Policy.
Once the objectives have been set, a suitable investment policy must be established. The
standard procedure is for the money manager to ask clients to select their preferred mix of assets,
for example eequities and bonds, to provide an idea of the normal mix desired. Clientsare then
asked to specify limits or maximum and minimum amounts they will allow to be invested in the
different assets available. The main asset classes are cash, equities, gilts/bonds and other debt
instruments, derivatives, property and overseas assets. Alternative investments, suchas private
equity, are also growing in popularity, and will be discussed in a later chapter. Attaining the
optimal asset mix over time is one of the key factors of successful investing.

3. Applying portfolio strategy.

At either end of the portfolio management spectrum of strategies are active and passive
strategies. An active strategy involves predicting trends and changing expectations about the
likely future performance of the various asset classes and actively dealing in and out of
investments to seek a better performance. For example, if the manager expects interest rates to
rise, bond prices are likely to fall and so bonds should be sold, unless this expectation is already

Page 31
factored into bond prices. At this stage, the active fund manager should also determine the style
of the portfolio. For example, will the fund invest primarily in companies with large market
capitalizations, in shares of companies expected to generate high growth rates, or in companies
whos evaluations are low? A passive strategy usually involves buying securities to match a
preselected market index. Alternatively, a portfolio can be set up to match the investors choice
of tailor-made index. Passive strategies rely on diversification to reduce risk. Outperformance
versus the chosen index is not expected. This strategy requires minimum input from the portfolio
manager.In practice, many active funds are managed somewhere between the active and passive
extremes, the core holdings of the fund being passively managed and the balance being actively
managed.

4.Asset selections.
Once the strategy is decided, the fund manager must select individual assets in which to
invest. Usually a systematic procedure known as an investment process is established, which sets
guidelines or criteria for asset selection. Active strategies require that the fund managers apply
analytical skills and judgment for asset selection in order to identify undervalued assets and to
try to generate superior performance.

5.Performance assessments.

In order to assess the success of the fund manager, the performance of the fund is
periodically measured against apre-agreed benchmark perhaps a suitable stock exchange index
oragainst a group of similar portfolios (peer group comparison).The portfolio construction
process is continuously iterative, reflecting changes internally and externally. For example,
expected movements inexchange rates may make overseas investment more attractive, leading
tochanges in asset allocation. Or, if many large-scale investors simultaneously decide to switch
from passive to more active strategies, pressure will be put on the fund managers to offer more
active funds. Poor performance of a fund may lead to modifications in individual asset holdings
or, as an extreme measure; the manager of the fund may be changed altogether.

Types of assets

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 The structure of a portfolio will depend ultimately on the investors objectives and on the
asset selection decision reached. The portfolio structure takes into account a range of factors,
including the investors time horizon, attitude to risk, liquidity requirements, tax position and
availability of investments. The main asset classes are cash, bonds and other fixed income
securities, equities, derivatives, property and overseas assets.
Cash and cash instruments

Cash can be invested over any desired period, to generate interest income,in a range of
highly liquid or easily redeemable instruments, from simplebank deposits, negotiable certificates
of deposits, commercial paper (shortterm corporate debt) and Treasury bills (short term
government debt) to money market funds, which actively manage cash resources across a range
of domestic and foreign markets. Cash is normally held over the short termpending use
elsewhere (perhaps for paying claims by a non-life insurance company or for paying pensions),
but may be held over the longer term as well. Returns on cash are driven by the general demand
for funds in an economy, interest rates, and the expected rate of inflation. A portfolio will
normally maintain at least a small proportion of its funds in cash in order to take advantage of
buying opportunities.

Bonds
Bonds are debt instruments on which the issuer (the borrower) agrees to make interest
payments at periodic intervals over the life of the bond thiscan be for two to thirty years or,
sometimes, in perpetuity. Interest payments can be fixed or variable, the latter being linked to
prevailing levels of interest rates. Bond markets are international and have grown rapidly over
recent years.The bond markets are highly liquid, with many issuers of similar standing, including
governments (sovereigns) and state-guaranteed organizations. Corporate bonds are bonds that are
issued by companies. To assist investors and to help in the efficient pricing of bond issues, many
bond issues are given ratings by specialist agencies such as Standard &Poors and Moodys. The
highest investment grade is AAA, going all the way down to D, which is graded as in default.
Depending on expected movements in future interest rates, the capital values of bonds fluctuate
daily, providing investors with the potential for capital gains or losses. Future interest rates are

Page 33
driven by the likely demand/supply of money in an economy, future inflation rates, political
events and interest rates elsewhere in world markets. Investors with short-term horizons and
liquidity requirements may choose to invest in bonds because of their relatively higher return
than cash and their prospects for possible capital appreciation. Long-term investors, such as
pension funds, may acquire bonds for the higher income and may hold them until redemption
for perhaps seven or fifteen years. Because of the greater risk, long bonds (over ten years to
maturity) tend to be more volatile in price than medium- and short-term bonds, and have a higher
yield.

Equities
Equity consists of shares in a company representing the capital originally provided by
share holders. An ordinary share holder owns a proportional share of the company and an
ordinary share carries the residual risk and rewards after all liabilities and costs have been paid.
Ordinary shares carry the right to receive income in the form of dividends (once declared out of
distributable profits) and any residual claim on the companys assets once its liabilities have been
paid in full. Preference shares are another type of share capital. They differ from ordinary shares
in that the dividend on a preference share is usually fixed at some amount and does not change.
Also, preference shares usually do not carry voting rights and, in the event of firm failure,
preference share holders are paid before ordinary share holders. Returns from investing in
equities are generated in the form of dividend income and capital gain arising from the ultimate
sale of the shares. The level of dividends may vary from year to year, reflecting the changing
profitability of a company. Similarly, the market price of a share will change from day to day to
reflect all relevant available information. Although not guaranteed, equity prices generally rise
over time, reflecting general economic growth, and have been found over the long term to
generate growing levels of income in excess of the rate of inflation. Granted, there may be
periods of time, even years, when equity prices trend downwards usually during recessionary
times. The overall long-term prospect, however, for capital appreciation makes equities an
attractive investment proposition for major institutional investors.

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 Derivatives
Derivative instruments are financial assets that are derived from existing primary assets
as opposed to being issued by a company or government entity. The two most popular
derivatives are futures and options. The extent to which a fund may incorporate derivatives
products in the fund will be specified in the fund rules and, depending on the type of fund
established for the client and depending on the client, may not be allowable at all.

A futures contract is an agreement in the form of a standardized contract between two

counter parties to exchange an asset at a fixed price and date in the future. The underlying asset
of the futures contract can be a commodity or a financial security. Each contract specifies the
type and amount of the asset to be exchanged, and where it is to be delivered (usually one of a
few approved locations for that particular asset). Futures contracts can be set up for the delivery
of cocoa, steel, oil or coffee. Likewise, financial futures contracts can specify the delivery of
foreign currency or a range of government bonds. The buyer of a futures contract takes a long
position, and will make a profit if the value of the contract rises after the purchase. The seller of
the futures contract takes a short position and will, in turn, make a profit if the price of the
futures contract falls. When the futures contract expires, the seller of the contract is required to
deliver the underlying asset to the buyer of the contract. Regarding financial futures contracts,
however, in the vast majority of cases no physical delivery of the underlying asset takes place as
many contracts are cash settled or closed out with the offsetting position before the expiry date.
An option contract is an agreement that gives the owner the right, but not obligation, to
buy or sell (depending on the type of option) a certain asset for a specified period of time. A call
option gives the holder the right to buy the asset. A put option gives the holder the right to sell
the asset. European options can be exercised only on the options expiry date. US options can be
exercised at any time before the contracts maturity date. Option contracts on stocks or stock
indices are particularly popular. Buying an option involves paying a premium; selling an option
involves receiving the premium. Options have the potential for large gains or losses, and are
considered to be high-risk instruments. Sometimes, however, option contracts are used to reduce
risk. For example, fund managers can use a call option to reduce risk when they own an asset.
Only very specific funds are allowed to hold options.

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 Property
Property investment can be made either directly by buying properties, or indirectly by
buying shares in listed property companies. Only major institutional investors with long-term
time horizons and no liquidity pressures tend to make direct property investments. These
institutions purchase freehold and leasehold properties as part of a property portfolio held for the
long term, perhaps twenty or more years. Property sectors of interest would include prime,
quality, well-located commercial office and shop properties, modern industrial warehouses and
estates, hotels, farmland and woodland. Returns are generated from annual rents and any capital
gains on realization. These investments are often highly illiquid.

Risk and Risk Aversion

Portfolio theory also assumes that investors are basically risk adverse, 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.
A discussion of portfolio or fund management must include some thought given to the
concept of risk. Any portfolio that is being developed will have certain risk constraints specified
in the fund rules, very often to cater to a particular segment of investor who possesses a
particular level of risk appetite. It is, therefore, important to spend some time discussing the basic
theories of quantifying the level of risk in an investment, and to attempt to explain the way in
which market values of investments are determined.

Page 36
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 effect aliases the change 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 EXTENT

Cash equivalent Less vulnerable to interest rate risk

Long term Bond 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.

Page 37
(3) Business risk:
Business risk emanates from sale and purchase of securities affected by business cycles,
technological change 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 n 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 companys earnings per share (EPS) are more but dependence on borrowing
exposes it to the risk of winding up. For, its inability to the honor its commitments towards the
creditors are most important.

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

Maximize returns, minimize risks

Page 38
RISK VERSUS RETURN
Risk versus return is the reason why investors invest in portfolios. The ideal goal in
portfolio management is to create an optimal portfolio derived from the best riskreturn
opportunities available given a particular set of risk constraints. To be able to make decisions, it
must be possible to quantify the degree of risk in a particular opportunity. The most common
method is to use the standard deviation of the expected returns. This method measures spreads,
and it is the possible returns of these spreads that provide the measure of risk. The presence of
risk means that more than one outcome is possible. An investment is expected to produce
different returns depending on the set of circumstances that prevail.

For example, given the following for Investment A:

Circumstance Return(x) Probability(p)

I 10% 0.2
II 12% 0.3
III 15% 0.4
IV 19% 0.1

It is possible to calculate:
1. The expected (or average) return
Mean (average) = x = expected value (EV) = p x

Circumsta Return(x) Probability(p px

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nce )

I 10% 0.2 2.0

II 12% 0.3 3.6
III 15% 0.4 6.0
IV 19% 0.1 1.9

Expected Return (px) = 13.5%

2. The Standard deviation
Standard deviation == p(x- x) 2

Also Variance (VAR) is equal to the standard deviation squared or 2

Deviation from
Circumstance Return Probability
expected Return (x -x) p(x -x)2

I 10% 0.2 -3.5% 2.45

II 12% 0.3 -1.5% .68

III 15% 0.4 +1.5% 1.90

IV 19% 0.1 +5.5% 3.03

VARAIANCE= 7.06

Standard deviation () =Variance

= 7.06

=2.66%

The standard deviation is a measure of risk, whereby the greater the standard deviation, the
greater the spread, and the greater the spread, the greater the risk.

If the above exercise were to be performed using another investment that offered the same
expected return, but a different standard deviation, then the following result might occur:

Page 40
 If the above exercise were to be performed using another investment that offered the same
expected return, but a different standard deviation, then the following result might occur:

Plan Expected Return Risk(standard deviation)

Investment A 9% 2.5%
Investment B 9% 4.0%

Since both investments have the same expected return, the best selection of investment would
be Investment A, which provides the lower risk. Similarly, if there are two investments
presenting the same risk, but one has a higher return than the other, that investment would be
chosen over the investment with the lower return for the same risk.

In the real world, there are all types of investors. Some investors are completely risk averse
and others are willing to take some risk, but expect a higher return for that risk. Different
investors will also have different tolerances or threshold levels for riskreturn trade-offs i.e. for
a given level of risk, one investor may demand a higher rate of return than another investor.

INDIFFERNCE CURVE
Suppose the following situation exists
Plan Expected Return Risk(Standard
Deviation)
Investment A 10% 5%
Investment B 20% 10%

The question to ask here is, does the extra 10% return compensate for the extra risk?
There is no right answer, as the decision would depend on the particular investors attitude to
risk. A particular investors indifference curve can be ascertained by plotting what rate of return
the investor would require for each level of risk to be indifferent amongst all of the investments.

Page 41
 For example, there may be an investor who can obtain a return of 50%with zero risk and
a return of 55 %with a risk or standard deviation of 5% who will be indifferent between the two
investments. If further investments were considered, each with a higher degree of risk, the
investor would require still higher returns to make all of the investments equally attractive. The
investor being discussed could present the following as the indifference curve shown in Figure.

Indifference Curve
Expected Return Risk
50% 0%
55% 5%
70% 10%
100% 15%
120% 18%
230% 25%

Page 42
Risk
Indifference curve
It could be the case that this investor would have different indifference curves given a
different starting level of return for zero risk. The exercise would need to be repeated for various
levels of riskreturn starting points. An entire set of indifference curves could be constructed that
would portray a particular investors attitude towards risk

Page 43
 Indifference Curve

Utility scores

At this stage the concept of utility scores can be introduced. These can be seen as a way
of ranking competing portfolios based on the expected return and risk of those portfolios. Thus if
a fund manager had to determine which investment a particular investor would prefer, i.e.
Investment A equaling a return of 10% for a risk of 5% or Investment B equaling a return of
20% for a risk of 10%, the manager would create indifference curves for that particular investor
and look at the utility scores. Higher utility scores are assigned to portfolios or investments with
more attractive riskreturn profiles. Although several scoring systems are legitimate, one
function that is commonly employed assigns a portfolio or investment with expected return or
value EV and variance of returns 2the following utility value:

U = EV .005A2where:
U = utility value
A = an index of the investors aversion, (the factor of .005 is a scaling convention that allows
expression of the expected return and standard deviation in the equation as a percentage rather
than a decimal).

Utility is enhanced by high expected returns and diminished by high risk. Investors
choosing amongst competing investment portfolios will select the one providing the highest
utility value. Thus, in the example above, the investor will select the investment (portfolio) with
the higher utility value of 18.

Expected Standard deviation() Utility=EV-.005A2

Return(EV)
10% 5% 10 .0054 25 = 9.5

20% 10% 20 .0054 100 = 18

Page 44
 (Assume A= 4 in this case)
Portfolio Diversification
There are several different factors that cause risk or lead to variability in returns on an
individual investment. Factors that may influence risk in any given investment vehicle include
uncertainty of income, interest rates, inflation, exchange rates, tax rates, the state of the
economy, default risk and liquidity risk (the risk of not being able to sell on the investment). In
addition, an investor will assess the risk of a given investment (portfolio) within the context of
other types of investments that may already be owned, i.e. stakes in pension funds, life insurance
policies with savings components, and property.
One way to control portfolio risk is via diversification, whereby investments are made in
a wide variety of assets so that the exposure to the risk of any particular security is limited. This
concept is based on the old adage do not put all your eggs in one basket. If an investor owns
shares in only one company, that investment will fluctuate depending on the factors influencing
that company. If that company goes bankrupt, the investor might lose 100 per cent of the
investment. If, however, the investor owns shares in several companies in different sectors, then
the likelihood of all of those companies going bankrupt simultaneously is greatly diminished.
Thus, diversification reduces risk. Although bankruptcy risk has been considered here, the same
principle applies to other forms of risk.

RISK RETURN MATRIX

Page 45
 Covariance and Correlation

The goal is to hold a group of investments or securities within a portfolio potentially to

reduce the risk level suffered without reducing the level of return. To measure the success of a
potentially diversified portfolio, covariance and correlation are considered. Covariance
measures to what degree the returns of two risky assets move in tandem. A positive covariance
means that the returns of the two assets move together, whilst a negative covariance means that
they move in inverse directions.

Covariance
COV(x, y) = p(x-x) (y-y) for two investments x and y, where p is the probability.
Covariance is an absolute measure, and co variances cannot be compared with one another.
To obtain a relative measure, the formula for correlation coefficient [r] is used.

Correlation coefficient

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 r =COVxy
xy
To illustrate the above, here is the example:

Circumstance Probability x-x y-y

p(x-x) (y-y)

I 0.2 +1.0 -3.5 -0.7

II 0.3 0 -1.5 0

III 0.4 +1.5 +1.5 0.9

IV 0.1 -4 +5.5 -2.2

COVxy=-2.0

For data regarding (y y), see earlier example. Assume that a similar exercise has been run

for data regarding (x x). Assume the variance or 2 of x=2.45, and the variance or 2 of y

= 7.06. Thus, the correlation coefficient would be

r
=-2.0 = -0.481

2.45* 7.056

If, the same example is run again, but using a different set of numbers for y, a different
correlation coefficient might result of say, 0.988. It can be concluded that a large negative
correlation confirms the strong tendency of the two investments to move inversely.

Page 47
 Perfect positive correlation(correlation coefficient = +1) occurs when the returns from
two securities move up and down together in proportion. If these securities were combined in a
portfolio, the offsetting effect would not occur.

Perfect negative correlation(correlation coefficient = 1) takes place when one

security moves up and the other one down in exact proportion. Combining these two securities in
a portfolio would increase the diversification effect.

Uncorrelated(correlation coefficient = 0) occurs when returns from two securities move

independently of each other that is, if one goes up, the other may go up or down or may not
move at all. As a result, the combination of these two securities in a portfolio may or may not
create a diversification effect. However, it is still better to be in this position than in a perfect
positive correlation situation.

Unsystematic and systematic risk

As mentioned previously, diversification diminishes risk: the more shares or assets held in a
portfolio or in investments, the greater the risk reduction. However, it is impossible to eliminate
all risk completely even with extensive diversification. The risk that remains is called market
risk; the risk that is caused by general market influences. This risk is also known as systematic
risk or non-diversifiable risk. The risk that is associated with a specific asset and that can be
abolished with diversification is known as unsystematic risk, unique risk or diversifiable risk.
Total risk = Systematic risk + Unsystematic risk

Systematic risk = the potential variability in the returns offered by a security or asset caused
by general market factors, such as interest rate changes, inflation rate movements, tax rates, state
of the economy.
Unsystematic risk= the potential variability in the returns offered by a security or asset caused
by factors specific to that company, such as profitability margins, debt levels, quality of
management, susceptibility to demands of customers and suppliers.

Page 48
 As the number of assets in a portfolio increases, the total risk may decline as a result of the
decline in the unsystematic risk in that portfolio. The relationship amongst these risks can be
quantified as follows

TR2 = SR2 + UR2 or 2i = s2 + u2

Where:

= the investments total risk (standard deviation)

s=the investments systematic risk
u =the investments unsystematic risk.
The correlation coefficient between two investment opportunities can be
expressed as:
s = i CORim
Where,
s= the investment systematic risk
i = the investments total risk (systematic and unsystematic)
CORim= the correlation coefficient between the return of the investment and those of
the market.
If an investment were perfectly correlated to the market so that all its movements could be
fully explained by movements in market, then all of the risk would be systematic &i = sIf an
investment were not correlated at all to the market, then all of its risk would be unsystematic

Page 49
 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 earnings 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

(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)Earnings per share
(b) Price earnings ratio

Page 50
 (A) Trend of earning: -
A higher price-earnings ratio discount expected profit growth. Conversely, a downward
trend in earning results in a low price-earnings 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.
Many institutional investor like stability and growth and support high EPS.
Growth of EPS is diluted when a company finances internally its expansion program and
offers new stock.
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: -

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

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.

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.

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.

Page 51
 (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:

Dividend Cover = EPS / Dividend per Share

(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
The different types of Portfolio which is carried by any Fund Manager to maximize profit
and minimize losses are different as per their objectives .They are as follows.
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.

Page 52
 Growth Portfolio:
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.

Page 53
 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.

Sharekhan Portfolio Management Services

PM

PRO TECH
PRO PRIME PRO

ARBITRAGE

Page 54
PROPRIME
Product Approach

Investment will be keeping in mind 3 investment tenets.

1. Consistent, steady and sustainable returns.

2. Margin of Safety
3. Low Volatility

Product offering

Pro Prime is the ideal for investors looking at steady and superior with low and medium
risk appetite.

The portfolio consists of a blend of quality blue chip and growth stocks ensuring a balanced
portfolio with relatively medium risk profile.

The portfolio constitutes of relatively large capitalization stocks, based on sector and themes
which have medium to long term growth potential.

Product Characteristics

Bottom up stock selection

In depth ,independent fundamental research
High quality companies with relatively large capitalization
Disciplined valuation approach applying multiple valuation measure.
Medium to long term vision, resulting in low portfolio turnover.

How to invest?

Page 55
 Minimum Investment : 10 Lacs
Lock in : 6 months
Reporting: Access to website showing clients holding .Monthly reporting of
portfolio holding /transaction.
Charges: 2.5% pa AMC (Annual Maintenances Charges) fees charged every
quarter ,0.5% brokerage ,20% profit sharing after 15% hurdle is crossed
chargeable at the end of fiscal year.

PRO ARBITRAGE

Product Approach

An opportunity lies in basis which is the difference between cash and future. Whenever
basis is high we buy the stocks and sell the future to lock in difference .The difference is bound
to be zero at expiry.

Product Offered

Cash future arbitrage:

The product intends to spot low risk opportunities which will yield more than the normal
low risk product .Whenever such opportunity is spotted stocks will be bought and to lock in the
basis, future will be sold .This position will be liquated in the expiry or before that if the basis
vanishes early .Similarly the scheme will move on from opportunity to opportunity.

Product Characteristics

Low Risk: This is relatively low risk product which can be compared with liquid funds
issued by mutual funds.

High return: Compared with other low risk products, this products offers an indicative
post tax return of 8 to 10% plus.

Page 56
 Product Details

Minimum Investment:Rs.1Crore
Lock in :6 months
Reporting: Fortnightly for portfolio Net worth, Monthly reporting pf
portfolio Holding /transaction.
Charges: 0.035% brokerage for future ,0.07% for delivery

PRO TECH

Pro tech using the knowledge of technique analysis and the power of depravities markets
to identify trading opportunities in the market .The pro tech line of the product is designed
around various risk /reward /volatility profiles for the different kind of investment needs.

Product Approach

Better performance is possible from superior market timing and from picking stocks
before inflation points in their trading cycles .Linear return are possible from having hedged/ sell
market positions in downtrends .Absolute return are targeted by focusing on finding trading
opportunities & not out performance of an index.

Product offered

1. Nifty Thirty :
Nifty futures will be bought and sold on the basis of an automated trading system
generated calls to go long/short. The exposure will never exceed the value of portfolio i.e.
no leveraging; but allows us to be short /hedged in Nifty in falling market therefore
allowing the client to earn irrespective of the market direction.

2. Beta Portfolio :
Positional trading opportunities are identified in the future segment based on
technical analysis .Inflection points in the momentum cycles are identified to go long

Page 57
 /short on stock/index futures with 1-2 months time horizon .The idea is to generate the
best possible return in the medium term irrespective of the direction of the market
without really leveraging beyond the portfolio value. Risk protection is done based on
stop losses on daily closing prices.
3. Star Nifty:
Swing trading technique and Dow theory is used to identify short term reversal
levels for Nifty futures and ride with trend both on the long and short side .This return
can be earned in bull and bear market .Stop and reverse means to reverse ones position
from long to short or vice a versa at the reversal levels simultaneously .The exposure
never exceeds value of portfolio i.e. there is no leveraging.

4. Trailing Stops.
Momentum trading techniques are used to spot short term momentum of 5-10
days in stocks and stocks /index futures .Trailing stop loss method of risk management or
profit protection is used to lower the portfolio volatility and maximize return .Trading
opportunities are exposed both on the long side and the short side as the market demands
to get the best of both upward and downward trends.

Product Characteristics

Using swing based index trading systems stop and reverse .trend following and
momentum trading technique.
Nifty based products for low impact cost and low product volatility
Both long and short strategies to earn returns even in falling market.
Trading in future market to allow for active risk protection using trailing stop losses.

How to invest?

Minimum : Rs.10 Lacs

Lock in : 6 months

Page 58
 Reporting: Fortnightly reporting of portfolio Net Worth, monthly
reporting of portfolio Holding /Transaction.
Charges: 0% AMC (Annual Maintenance Charges), 0.05% brokerage
for derivatives, 20% profit sharing on booked profit quarterly basis

Protech Performance Report

Nifty Thrifty:

NIFTY THRIFTY
Date NAV Sensex

01/02/2006 10.00 9859.26

29/04/2009 19.43 11403.25

Return(%) 94.30 15.66

How it works:

Page 59
 Our first product is based completely on a mathematical model with zero human intervention.
This product has come out of its fifth draw-down period (in 28 years of back testing) and the net
asset value (NAV) is taking off to new heights.

Beta portfolio:

BETA PORTFOLIO
Date NAV Sensex
03/08/2007 10.00 15138.40
29/04/2009 13.81 11403.25
Returns
38.10 -24.67
(%)

How it works:

Our product is based on positional trading with a long and short model investing in plain
vanilla stock futures. In this, we identify stocks with greater risk-reward ratios with a time
horizon of 1 to 2 months, based on the prevalent market situation.

Trailing Stops:

TRAILING STOPS
NAV Sensex
20/10/2007 10.00 17559.98
24/04/2009 15.32 9708.50

Returns (%) 43.50 -35.06

How it works:

The trading strategy is to buy short-term momentum over a time frame of 1 to 5 days and
then book small profits consistently.

Page 60
 CHAPTER -5

DATA ANALYSIS AND

INTERPRETATION

Page 61
 1. Do you know about the Investment Option available?

Interpretation

As the above table shows the knowledge of Investor out of 100 respondent
carried throughout the Hyderabad Area is only 85%.The remaining 15% take
his/her residential property as an investment. According to law purpose this is not
an investment because of it is not create any profit for the owner. The main
problem is that in this time from year 2008-2009 ,the recession and the Inflation
make the investor think before investing a even a Rs. 100. So, it also creates the
problem for the Investor to not take interest in Investment option.

Page 62
 2. What is the basic purpose of your Investments?

Interpretation
As with the above analysis, it is found 75% people are interested in liquidity,
returns and tax benefits. And remaining 25% are interested in capital appreciations,
risk covering, and others. In the entire respondent it is common that this time
everyone is looking for minimizing the risk and maximizing their profit with the
short time of period.

As explaining them About the Portfolio Management Services of Sharekhan,

they were quite interested in Protech Service.

Page 63
 3. What is the most important factor you consider at the time of
Investment?

Interpretation

As the above analysis gives the clear idea that most of the Investors considered
the market factor as around 12% for Risk and 23% Return, but most important
common things in all are that they are even ready for taking both Risk and Return
in around 65% investor.

Moreover, the Market is fluctuating now days, so as it also getting

improvement. So, Investor are looking for Investment in long term and Short-term.

Page 64
 4. From which option you will get the best
returns?

Interpretation

Most of the respondents say they will get more returns in Share Market. Since
ShareMarket is said to be the best place to invest to get more returns. The risk in
the investment is also high.
Similarly, the Investor are more Interested in Investing their money in Mutual
Fund Schemes as that is also very important financial product due to its nature of
minimizing risk and maximizing the profit. As the commodities market is doing
well from last few months so Investor also prefer to invest their money in
Commodities Market basically in GOLD now a days.

Moreover, even who dont want to take Risk they are looking for investing in
Fixed Deposit for long period of time.

Page 65
 5. Investing in PMS is far safer than Investing in Mutual Fund. Do you
agree?

Interpretation

In the above graphs its clear that 24% of respondent out of hundred feel that
investing their money in Mutual Fund Scheme are far safer than Investing in PMS.
This is because of lack of proper information about the Portfolio management
services. As the basis is same for the mutual fund and PMS but the investment
pattern is totally different from each other and which depends upon different risk
factor available in both the Financial Products.

Page 66
 6. How much you carry the expectation in Rise of your Income from
Investments?

Interpretation

The optimism is shown in the attitude of the respondents. The confidence

was appreciable with which they are looking forward to arise in their investments.
Major part of the sample feels that the rise would beof around 15%. Only 8% of
the respondents were confident enough to expected rise of up to 35%.

As all the respondents were considering the Risk factor also before filling the
questionnaire and they were asking about the performance report of all the PMS
services offered by Sharekhan limited.

Page 67
 7. If you invested in Share Market, what has been your experience

Interpretation

20% of the respondents have invested in Share market and received satisfactory
returns,40% of the respondents have not at all invested in Share Market. Some of
the investors face problems due to less knowledge about the market. Some of the
respondents donthave complete overview of the happenings and invest their
money in wrong shares which result in Loss. This is the reason most of the
respondents prefer Portfolio Management Services to trade now a days, which
gives the Investor the clear idea when is the right time to buy and right time to sell
the shares which is recommended by their Fund Manger.

Page 68
8. How do you trade in Share Market?

Interpretation

As we know that Share market is totally based on psychological parameters of

Investors, which changed as per the market condition, but at the same time the
around 45%investor trade on the basis of speculation and 31% depend upon
Investment option Bonds, Mutual Funds etc.

Moreover, the now a days Hedging is most common derivatives tools which is
used by the Investor to get more return from the Market ,this is mostly used in the
Commodities Market.

Page 69
 9. How do you manage your Portfolio?

Interpretation

About 57% of the respondents say they themselves manage their portfolio and
43% of the respondents say they depends on the security company for portfolio
Management. 43% ofthe respondents prefer PMS of the company because they
dont have to keep a close eyeon their investment; they get all the information time
to time from their Fund Manager.

Moreover, talking about the Sharekhan PMS services they are far satisfied with
the Pro tech and Prop rime Performance during last year. They are satisfied with
the quick and active services of Sharekhan customer services where, they get the
updated knowledge about the scrip detail everyday from their Fund Manager.

Page 70
 10. If you trade with Sharekhan limited then why?

Interpretation

As the above research shows the reasons and the parameters on which investor
lie on Sharekhan and they do the trade.

Among hundred respondents 35% respondents do the trade with the company
due to its research Report, 28% based on Brokerage Rate whereas 22 % are happy
with its Services.

Last but not the least, 15% respondents are depends upon the tips of Sharekhan
which gives them idea where to invest and when to invest.

At the time of research what I found is that still Sharekhan need to make the
clients more knowledge about their PMS product.

Page 71
 11. Are you using Portfolio Management services (PMS) of Sharekhan?

Interpretation

As talking about the Investment option, in most of clients it was common that
they know about the Option but as the PMS of Sharekhan have different Product
offering, Product Characteristics and the Investment amount is also different this
makes the clients to think differently.

It is found that 56% of Sharekhan client where using PMS services as for their
Investment Option.

Page 72
 12. Which Portfolio Type you preferred?

Interpretation

The above analysis shows, in which portfolio the investor like to deal more in
PMS.

As 45% investor likes to go for Equity Portfolio and 28% with Balanced
Portfolio, whereas around 27% investor like to, go for Debt Portfolio.

Page 73
 13. How was your experience about Portfolio Management services (PMS)
of Sharekhan Limited?

Interpretation

In the above analysis it is clear that the Investor have the good and the bad
experience both with the Sharekhan PMS services.

In this current scenario 52% of the Investor earned, whereas around 18% have
to suffer losses in the market. Similarly 30% of the Respondents are there in
Breakeven Point (BEP), where no loss and no profit.

Page 74
14. Does Sharekhan Limited keep it PMS process Transparent?

Interpretation

The above analysis is talking about the Sharekhan Transparency of their PMS
services. In hundred respondents 63% said that they get all the information about
their scrip buying and selling information day by day, where as 37% of
respondents are not satisfied with the PMS information and Transparency because
they dont get any type of extra services in PMS as they were saying.

Page 75
 15. Do you recommend Sharekhan PMS to others?

Interpretation

The above analysis shows the Investor perception toward the Sharekhan PMS
as on the basis of their good and bad experience with Sharekhan limited. Among
hundred respondents 86% respondents were agree to recommend the PMS of
Sharekhan to their peers, relatives etc.

Page 76
 CHAPTER-6

CONCULSION

AND

SUGGESTIONS

Page 77
 OBSERVATION AND FINDING

About 85% Respondents knows about the Investment Option, because remaining 15%
take his /her residential property as Investment, but in actual it not an investment
philosophy carries that all the Investment does not create any profit for the owner.

More than 75% Investors are investing their money for Liquidity, Return and Tax
benefits.
At the time of Investment the Investors basically considered the both Risk and Return in
more % age around 65%.

As among all Investment Option for Investor the most important area to get more return
is share around 22% after that Mutual Fund and other comes into existence.

More than 76% of Investors feels that PMS is less risky than investing money in Mutual
Funds.

As expected return from the Market more than 48% respondents expect the rise in
Income more than 15%, 32% respondents are expecting between 15-25% return.

As the experience from the Market more than 34% Investor had lose their money during
the concerned year, whereas 20% respondents have got satisfied return.

About 45% respondents do the Trade in the Market with Derivatives Tools Speculation
compare to 24% through Hedging .And the rest 31% trade their money in Investments.

Around 57% residents manage their Portfolio through the different company whereas
43% Investor manage their portfolio themselves.

The most important reasons for doing trade with Sharekhan limited is Sharekhan
Research Department than its Brokerage rate Structure.
Out of hundred respondents 56% respondents are using Sharekhan PMs services.

Investors preferred more than 45% equity Portfolio, 28% Balanceed Portfolio and about
27% Debt Portfolio with Sharekhan PMS.

Page 78
 About 52% Respondents earned through Sharekhan PMS product, whereas 18% investor
faced loses also.

More than 63% Investor are happy with the Transparency system of Sharekhan limited.

As based on the good and bad experience with Sharekhan limited around 86% are ready
to recommended the PMS of Sharekhan to their peers, relatives etc.

LIMITATION OF THE PROJECT

As only Hyderabad and Chennai was dealt in the survey so it does not represent the view
of the total Indian market.

The sample size was restricted with hundred respondents.

There was lack of time on the part of respondents.

The survey was carried through questionnaire and the questions were based on
perception.

There may be biasness in information by market participant.

Complete data was not available due to company privacy and secrecy.

Some people were not willing to disclose the investment profile.

Page 79
 CONCLUSION :

On the basis of the study it is found that Sharekhan Ltd is better services provider than the
other stock brokers because of their timely research and personalized adviceon what stocks to
buy and sell. Sharekhan Ltd. provides the facility of Trade tiger as well as relationship manager
facility for encouragement and protects the interest of the investors. It also provides the
information through the internet and mobile alerts that what IPOs are coming in the market and
it also provides its research on the future prospect of the IPO. We can conclude the following
with above analysis.

Sharekhan Ltd has better Portfolio Management services than Other Companies

It keeps its process more transparent.

It gives more returns to its investors.

It charges are less than other portfolio Management Services

It provides daily updates about the stocks information.

Investors are looking for those investment options where they get maximum returnswith
less returns.

Market is becoming complex & it means that the individual investor will not havethe
time to play stock game on his own.

People are not so much ware aware about the Investment option available in the Market.

Page 80
 Suggestions
The company should also organize seminars and similar activities to enhance the
knowledge of prospective andexisting customers, so that they feel more comfortable
while investing in the stock market.

Investors must feel safe about their money invested.

Investors accounts must be more transparent as compared to other companies.

Sharekhan limited must try to promote more its Portfolio Management Services through
Advertisements.

Sharekhan needs to improve more its Customer Services

There is need to change in lock in period in all three PMS i.e. Pro tech, Pro prime, Pro
Arbitrage.

Page 81
LITERATURE REVIEW
According to most management literature, organizations adopt different management
style to meet the situational demands of the environment .This approach is based on
contingency theory that claims the characteristics of leadership and the situational requirements
must match in order to produce the best possible results for an organization (Burns & Stalker,
1961). Pethis & Saias (1978) identify the extent of change in complex environments and define
the stability ranges from stable to turbulent or dynamic environments.

Brown & Eisenhardt (1995) suggest that dynamic environments require experiential
product development using frequent iterations, testing, and milestones. The environments
can be modelled where simple environments are those that are well understood and for which
reliable, effective ways of dealing with them exist and complex environments where
approaches are not known to many in the organization.

Portfolio management is mainly used either by diversified firms that use portfolio
planning techniques to aggregate business for strategic analysis and repositioning, or by
organizations to guide diversity away from low-growth sectors (Bettis and Hall, 1981). This
study indicates that companies using portfolio management better fit their environment. After
implementing portfolio management, two out of the three firms assessed in the study
substantially improved their market position relative to their competitors.

Bloomquist & Mullers (2006a) findings show that higher complexity leads to the use
of specific portfolio management practices but the use of tools is low. Higher environmental
complexity appeared to be associated with clearer roles. However, PMS managers are found to
split their time between other management roles and PMS.

Page 82
 Martinsuo and Lehtonen (2007) identified that complexity in terms of the number of
personnel was a significant variable contributing to the relationship between single-project
practices and portfolio management efficiency and pointed toward studying other contingency
factors in portfolio management success.
The differences in project type that depend on the extent of the project goals and the
method to achieve this goal have been identified by Turner and Cochrane (1993). This two
dimensional model identifies four project types which depend on the degree of clarity of
objectives and methods. Each of these project types requires a different approach to achieve the
projects objectives. Other similar research by Nobeoka and Cusumano (1995) identifies the
different business results with multi-project strategies for different product types and different
degrees of project complexity.

Shenhars (2001) popular model uses a two-dimensional matrix of technological

uncertainty and project scope to identify different project types with different management
requirements. Elonen and Artto (2003) found problems in project interdependencies,
competition of resources and problem solving. Crawford, Hobbs and Turner (2004) indicate
that project grouping is an essential step in portfolio management. Bloomquist and Muller
(2006a) identify project type as product related projects and indicate that roles of program
and portfolio managers depend on project types.

Portfolio management provides governance structures adopted to minimize the overall

costs in converting input to output through projects. The study discussed in this paper will
employ Transaction Cost Economics (TCE) theory to explain the relationship between
governance practices and project transactions. Williamson (1985) explains the balance required
in organizational governance mechanism to lowering of the cost to the organization by
economizing existing scales and resources such as in portfolio management. This identifies
portfolio management as the linkage between corporate governance and TCE. Williamsons TCE
claims that different governance structures are required in different types of transactions. The
extent that organizations apply portfolio management as governance practices is, therefore, seen
to differ by project type.

Page 83
 Governance structures are also seen to differ by the degree of uncertainty/complexity of
an organization. Based on Simons 1957 bounded rationality argument , Williamson(1975, p.
22-23) states that When transactions are conducted under conditions of uncertainty/complexity,
in which event it is very costly, perhaps impossible, to describe the complete decision tree, the
bounded rationality constraint (that humans exercise intended, but only limited, rational behavior
in decision-making) is binding and an assessment of alternative organizational modes, in
efficiency respects, becomes necessary.

The concept of PMS is based on the earlier theories of portfolio selection in the field
of finance. PMS owes its origins to Harry Markowitz who wrote a seminal paper on Modern
Portfolio Theory (MPT) in 1952. MPT allows specific mix of investments to generate the
highest return for a given level of risks. MPT distinguished between efficient and inefficient
portfolios and calculated the risk return of the portfolio as a whole.

General Electric/McKinsey and Boston Consulting Group (BCG) developed a portfolio

technique and showed a businesss competitive position and market prospects in a matrix or
grid. Different positions on the grid suggested different marketing strategies (Goold & Luchs,
1996). From such a corporate perspective, the optimum portfolio was often defined as one in
which the products in the Cash Cows quadrant generate adequate cash flows to produce
sufficient returns for shareholders, as well as cash to further develop the products in the
Question Marks and Stars quadrants to replace the Cash Cows in the future. Over time, the
technique became a standard method for selecting projects for organizations. Research &
Development (R&D) organizations especially used the technique to guide the decisions for
project selection and resource assignments. To that end, portfolio management helped to do the
right projects; whereas the complementary project management methods were used to do the
projects right (Cooper, Edgett, & Kleinschmidt, 2000).

McFarlan (1981) is considered to be a pioneer providing the basis for the modern field
of PMS approach to IT assets and investment. McFarlan observed that management should
employ a risk based approach to the selection and prioritization of IT PMS. Risk-unbalanced
portfolios could lead an organization to suffer operational disruptions, or leave gaps for

Page 84
competitors to step in.

The Aggregate Project Plan framework was developed by Wheelwright and Clark
(1992) to identify gaps in the portfolio, or potential resource shortages. This plan
considers the extent of changes made to the product, and the degree of process change. This
framework is useful to identify resource shortages and gaps in derivative projects, platform
projects, breakthrough projects and R&D projects.

PMS has evolved to support the management of project-based organizations (Dye and
Pennypacker, 1999). Thorp (1999) published the Information Paradox, putting PMS in a
broader framework called Benefits Realization. According to Thorp, PMS techniques are
fundamental for getting value from IT projects. Gareis (2000) suggested that the project -oriented
organization applies project and program management practices to perform relatively unique
business processes. The main idea is that enterprises not only have to manage single projects
successfully to meet competition but also need to manage a large portion of their business
through projects. Other goals for a PMS processes are generally to maximize the financial value
of the portfolio, to limit the number of projects to fit with organizational capacity, to ensure
balance among projects, and to ensure that the portfolio reflects the businesss strategy (Cooper
and Edgett, 2003; Dawidson, 2004). Killen, Hunt and Kleinschmidt (2008) reviewed the
literature and empirical evidence pertaining to PMS for New Product Development. They
classified the main themes into four groups; goals, decision-making process, method and
practices for PMS.

Gershon (2008) reviewed and recommended to the Indian Government a "major

program of administrative reform and cultural change" to centrally coordinate ICT investments
through portfolio management methodologies. This was intended to slash costs across the $16
billion annual computer and communications spend by federal government agencies in India.
Crawford & Helm (2009) found two government agencies in their recent case study where
PMS is used effectively to manage their overall investment in projects across the organization
in order to maximize benefits delivered and maintain alignment to strategy.

Page 85
 Portfolio Management Services (PMS) is now a widely used approach by organizations
in India to achieve business strategies. It brings great opportunities for organizations to embrace
changes and lead their strategies into reality. PMS is used for selection and resourcing of
research and development projects where project management methods are used to do project
rights and portfolio management methods are used to do the right projects (Cooper, Edgett, &
Kleinschmidth, 2000).

The increased use of projects as a means to deliver products and services has lead to
adoption of PMS as the governance method for selection and prioritization of projects in many
industries. However, there are managerial problems associated with PMS which have been
identified by Elonen & Artto (2003). They identified six major areas which include inadequate
project activities, lack of resources, competencies and methods, lack of management support,
unclear roles and responsibilities, inadequate portfolio level of activities, inadequate
communication management regarding projects and inadequate management of project
orientation.

Bloomquist and Muller (2006a) indicate that PMS roles are intertwined with traditional
line management roles. Further study of PMS roles and responsibilities has been suggested by
Bloomquist and Muller to focus on different industry and geographical area to develop clearer
recommendations for organizations on how to best to organize for the benefit of results has been
suggested.

Keith L. Miller, Hong Li, Tiffany G. Zhou, and Daniel Giamouridis(2014) Alpha factors
are built to perform well over time, on average. There are instances when they do not, and
knowing these instances ex ante can be a significant source of added value for investors. The
authors argue that factor failure is a function of its broad risk, and propose appropriate variables
to measure it. They adopt a nonparametric model that predicts instances of likely factor failure,
based on these variables, demonstrating that an implementable dynamic strategy based on our
analysis generates a reward-to-risk ratio approximately four times that of a static approach, and
about one and a half times that of an alternative dynamic approach based on momentum.

Page 86
 References

Bettis, R. A., & Hall, W. K. (1981). "Strategic portfolio management in the

multibusiness firm." California Management Review 24(1): 23-38.

Blomquist, T., Mller. (2006). "Practices, Roles, and Responsibilities of Middle

Managers in Program and Portfolio Management." International Journal of Project Management
37(1): 52-66.

Brown, S. L., & Eisenhardt, K. M. (1995). "Product development: Past research, present
findings and future directions." Academy of Management Review 20(2): 343378

Burns, T., & Stalker, G. M. (1961). The management of innovation. New York, Oxford
University Press.

Cooper, R., S. Edgett, et al. (2001). "Portfolio management for new product
development: results of an industry practices study." R&D Management 31(4): 361.

Crawford, L., Hobbs,B.,&Turner,J.R (2004). "Project Categorization systems and their

use in organizations:An empirical study." International Journal of Project Management 23(3):
193-203.

Crawford, L., Jane H. (2009). "Government and Governance: The Value of Project
Management in the Public Sector." Project Management Journal 40 (1): 7387.

Dye, L. D. a. P., J.S., Ed. (1999). Project Portfolio Management: Selecting and

Page 87
Prioritising Projects for Competitive Advantage. Havertown, PA., Center for Business Practices.

Dawidson, O. (2004). Expectations to be fulfilled by R&D project portfolio management

Proceedings of the EIASM Product Development Management Conference, Dublin,

Elonen, S. a. A., K.A. (2003). "Problems in managing internal development projects in

multi-project environments." International Journal of Project Management 21(6): 395.

Gareis, R. (2000). Program management and project portfolio management: New

competences of project-oriented companies. Proceedings of IRNOP IV, International
Research Network for Organizing by Projects. Sydney, Australia

Gershon, P. (2008). Review of the Indian Governments use of information and

communication technology. D. o. F. a. Deregulation. Canberra, Commonwealth Copyright
Administration: 36, 64.

Goold, M., & Luchs, K. S. (1996). Managing the multibusiness

company. New York: Routledge.

Killen.C, H. R., Kleinschmidt, E (2008). "Project portfolio management for product

innovation." International Journal of Quality & Reliability Management 25(1): 24-38

Markowitz, H. M., Ed. (1959). Portfolio Selection: efficient diversification of

investments. New Haven, CT, Yale University Press.

Martinsuo, M., Lehtonen,P. (2007). "Role of Single Project Management in achieving

portfolio Management efficiency." International Journal of Project Management 25(1): 56-
65.

McFarlan, F. W. (1981). Portfolio approach to information systems. Harvard Business

Review. September-October: 142-51.

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 Nobeoka, K., & Cusumano, M.A (1995). "Multiproject strategy, design transfer, and
project performance: A survey of automobile development projects in the US and Japan.
IEEE Transactions on Engineering Management 42: 397-409.
Pethis, R. F., &Saias, M. (1978). "Meta level product-portfolio analysis: An enrichment
of strategic planning suggested by organization theory." International Studies of Management
and Organization 8(4): 35-66.

Shenhar, A. (2001). "Contingency management in temporary, dynamic organizations:

The comparative analysis of projects." Journal of High Technology Management 22Research
12(2): 239271.

Thorp J. The information paradox realizing the business benefits of IT.

Toronto:McGraw-Hill; 1999.

Turner, J. R., & Cochrane, R. A. (1993). "Goals-and-methods matrix: Coping with

projects with ill defined goals and/or methods of achieving them." International Journal of
Project Management 11(2): 93102.

Wheelwright S.C., C. K. B. (1992). "Creating project plans to focus product

development." Harvard Business Review 70(2): 67-83.

Williamson, O. E., Ed. (1975). Markets and hierarchies: Analysis and antitrust
implications New York (NY), The Free Press.

Williamson, O. E., Ed. (1985). The economic institutions of capitalism. New York:,
The Free Press.

Page 89
 ANNEXURE

QUESTIONNAIRE
NAME. AGE
OCCUPATION... PHONE NO..................................

1. Do you know about the Investments Option available?

A) YES B) NO

2. What is the basic purpose of your Investments?

A) Liquidity B) Return C) Tax Benefits D) Risk Covering

E) Capital Appreciation F) Others

3. What is the most important factor you consider at the time of Investment?

A) Risk B) Return C) Both

4. From which option you will get the best returns?

A) Mutual Funds B) Shares C) Commodities Market D) Bonds

E) Fixed Deposits F) Property G) Others

5. Investing in PMS is far safer than Investing in Mutual Fund. Do you agree?

A) Yes B) No

Page 90
 6. How much you carry the expectation in Rise of your Income from Investments?

A) Up to 15% B) 15-25% C) 25-35% D) More than 35%

7. If you invested in Share Market, what has been your experience?

A) Satisfactory Return B) Burned Finger C) Unsatisfactory Results

D) No

8. How do you trade in Share Market?

A) Hedging B) Speculation C) Investment

9. How do you manage your Portfolio?

A) Self B) Depends on the company for portfolio

10. If, you trade with Sharekhan limited then why?

A) Research B) Brokerage C) Services D) Investments Tips

11. Are you using Portfolio Management services (PMS) of Sharekhan?

A) Yes B) No

12. Which Portfolio Type you preferred?

A) Equity B) Debt C) Balanced

13. How was your experience about Portfolio Management services (PMS) of Sharekhan
Limited?

A) Earned B) Faced Loss C) No profit No loss

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 14. Does Sharekhan Limited keep it PMS process Transparent?

A) Yes B) No

15. Do you recommend Sharekhan PMS to others?

A) Yes B) No

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