Hitendra Indiainfoline Final
Hitendra Indiainfoline Final
Hitendra Indiainfoline Final
Submitted By:
Hitendra Choudhary
1
ACKNOWLEDGEMENTS
This project has given me immense insights about the practical aspect of Share broking industry and it’s
working. I got to learn a lot about the online broking and the way they handle their clients and projects.
This project also helped me to improve my report making skills and the true meaning of Broking.
At the outset, I would like to thank India Infoline Ltd. for giving me the opportunity to work on this
project, in an environment which was stimulating and charged with the excitement to do some thing
productive.
I would like to express my sincere gratitude to Mr Priyesh Singhvi (AVP) and Saransh Jain (Sales
Manger), my mentor for his valuable inputs and support through out the project.
Further I express sincere thanks to Mr. Kadam Shah ( Regional Manager) and Mr. Avdesh Bharadwaj
(HOD, DMS, MNIT) for their valuable guidance & constant encouragement which inspired me to
complete this project successfully.
Lastly, I would like to thank all my colleagues in the Office who assisted me day in and day out and
made me feel like one of them. It was truly a delightful experience working with all of them.
2
TABLE OF CONTENTS
1. ABSTARCT 4
2. INDIAN STOCK MARKET 5
3. IMPORTANCE OF STOCK MARKET 6
4. DYNAMICS OF BROKING INDUSTRY 7-8
5. COMPANY PROFILE – INDIA INFOLINE 9-24
6. PROJECT REPORT 25-55
1. INTRODUCTION 26-27
2. LITERATURE REVIEW 28-35
3. RESEARCH METHODOLOGY 36
4. RECOMMENDATION 37
5. CONCLUSION 42
6. ANNEXURE 44-55
a. Transcripts of interviews
b. Questionnaire
7. REFERENCE 56
3
ABSTRACT
“Investing is simple but not easy.”
India, the World's largest democracy, is opening up to the global competition with the advent of
liberalization. It has the largest middle-class population in the world having substantial purchasing and
investing power. So far in India, most of the middle class earners have been risk-averse and therefore
park most of their savings in Fixed Deposits and Other Savings Accounts, though the yield from such
investment avenues is very low. However, the recent trend has been such that more people have been
attracted towards investment in Mutual Funds and Equities. It is in this light that Portfolio Management
Companies have been gaining prominence in India. The trend is only set to go upwards in the years to
come, as the Indian middle class becomes more risk friendly.
Managing a portfolio is not an easy task and that’s the reason why we need experts for doing this task.
These experts are well experienced and definitely have more knowledge about the markets than an
individual.
In today’s world where everyone is so busy that nobody has time even for themselves so to manage
their own portfolio is next to impossible. They cannot track the markets every single day and therefore it
is really very important to have an expert.
When it comes to managing hard-earned money, it’s very important to make sure that the extra mile is a
task best left to the experts and this extra mile when covered by the right people gives the right returns.
This report shows a comparative analysis of the Portfolio Management Services of the broking firms.
The survey includes a few companies, which have competitive portfolio management service like Kotak
Secutities, Sharekhan Securities, Motilal Oswal Securities, India Infoline, Birla Sunlife and JM Morgan
Stanely. Interviews of people belonging to this company have been taken to get a clear picture of how
these companies are providing their services and how effective they are.
4
INDIAN STOCK MARKET
The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Limited (NSE) are the
two primary exchanges in India. In addition, there are 22 Regional Stock Exchanges. However, the BSE
and NSE have established themselves as the two leading exchanges and account for about 80% of the
equity volume traded in India. The NSE and BSE are equal in size in terms of daily traded volume. The
average daily turnover at the exchanges has increased from Rs851crore in 1997-98 to Rs1284crore in
1998-99 and further to Rs2273crore in 1999-2000. NSE has around 1500 shares listed with the total
market capitalization of around Rs9, 21,500crore.
The BSE has over 6000 stocks listed and has a market capitalization of around Rs9, 68,000crore. Most
key stocks are traded on both the exchanges and hence the investor could buy on either of the
exchanges. Both exchanges have a different settlement cycle, which allows investors to shift their
position on the bourses. The primary index of BSE in BSE Sensex comprises 30 stocks. NSE has the
S&P NSE 50 Index (Nifty), which consists of fifty stocks. The BSE Sensex is the older and most widely
followed index. Both these indices are calculated on the basis of market capitalization and contain the
heavily traded shares from key sectors.
The markets are closed on Saturdays and Sundays. Both the exchanges have switched over from the
open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE
On Line Trading) and NEAT (National Exchange Automated Trading) system. It facilitates more
efficient processing, automatic order matching, faster execution of trades and transparency.
The scrip traded on the BSE has been classified into ‘A’, ‘B1’, ‘B2’, ‘C’, ‘F’, and ‘Z’ groups. The ‘A’
group shares represent those, which are in the carry forward system (Badla). The ‘F’ group represents
the dept market (fixed income securities) segment. The ‘Z’ group scrip is the blacklisted companies.
The ‘C’ group covers the odd lot securities in ‘A’, ‘B1’, & ‘B2’ groups and Rights renunciations. The
key regulator governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual
Funds, FIIs and other participants in Indian secondary and primary market is the Securities and
Exchange Board of India (SEBI) Limited.
5
IMPORATNCE OF STOCK MARKET
The stock market is one of the most important sources for companies to raise money. This allows
businesses to go public, or raise additional capital for expansion. The liquidity that an exchange
provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of
investing in stocks, compared to other less liquid investments such as real estate.
The term 'the stock market' is a concept for the mechanism that enables the trading of company stocks
(collective shares), other securities, and derivatives. Bonds are still traditionally traded in an informal,
over-the-counter market known as the bond market.Commodities are traded in commodities markets,
and derivatives are traded in a variety of markets (but, like bonds, mostly 'over-the-counter').
The size of the worldwide 'bond market' is estimated at $45 trillion. The size of the 'stock market' is
estimated as about half that. The world derivatives market has been estimated at about $300 trillion.[1]
The major U.S. Banks alone are said to account for about $100 trillion. It must be noted though that the
derivatives market, because it is stated in terms of notional outstanding amounts, cannot be directly
compared to a stock or fixed income market, which refers to actual value.
The stocks are listed and traded on stock exchanges which are entities (a corporation or mutual
organization) specialized in the business of bringing buyers and sellers of stocks and securities together.
The stock market in the United States includes the trading of all securities listed on the NYSE, the
NASDAQ, the Amex, as well as on the many regional exchanges, the OTCBB, and Pink Sheets
European examples of stock.
6
DYNAMICS OF BROKING INDUSTRY
There is a new sense of confidence among the domestic brokers as the broking industry is passing
through the most exciting times. Those who have survived the earlier bear phase have made their
fortunes as the overall revenues have gone up multifold. Hence, some of the leading domestic brokers
are attracting talents even from the foreign broking houses as domestic houses are now able to afford
the same salary levels and lure people by offering employee stock ownership plans (Esops).
Even the smaller brokers have changed their way of marketing and advertising that was never the case
earlier. Everyone is focusing on value-added services. Dynamics of domestic stock broking industry is
changing and the best is yet to come!
In coming days, shortage of skilled talent and proper infrastructure will be one of the major challenges.
Going forward, technology will play a key role and the domestic broking houses have to upgrade it.
Depth of multiple products is also a challenge for the domestic houses.
Also on the regulatory front, domestic institutional investors can not give more than five per cent
business to any single broker. However, FIIs have no such restrictions resulting in restriction of
revenues. As the dynamics of the mutual fund (MF) industry has changed in India, the current
restriction also needs to be reconsidered.
How this direct market access (DMA) facility is will impact smaller brokers?
DMA is mainly for the investors who have large programme trades or arbitrage business. This move
will surely make the proprietary trading/arbitrage type businesses more competitive and less attractive.
Will falling volumes in last few months affect the business of small brokers?
7
Brokers were painful for the last three months due to falling volumes, so their business will be affected.
But for the last two years, most of them have made good money. Hence, there is a headroom for
survival. There is also a possibility of consolidation among the retail brokerages.
Though the liquidity is good enough, investment sentiments of the initial public offering (IPO) are not
fully back. Since companies are able to manage their liquidity and operations, they are waiting for right
time to enter the market for better valuations..
Some more regulatory measures are expected, like 100 per cent payment along with application
for IPO. Will it affect IPO market?
Such measures are better for the system. What will happen is that genuine buyers will apply and the
ratio of oversubscription will come down resulting in better allocations to the long-term investors.
Hence, such move is needed for the long-term sustainability of the IPO market. Good issues at an
attractive price will in any case not find any difficulty to raise funds in the new system too.
Though there is good liquidity globally, markets will be range-bound till monsoon and based on that the
markets will take further direction. Inflation, oil price and elections are the major challenges for markets
to have a strong sustainable rally.
Global issues have not settled down completely, hence, the volatility will continue. One has to remain
cautious. In terms of volumes, this year will not be in any case like last year, there fore; the return
expectations have to be toned down. In such uncertain environment, the theme for investors is hard
assets. Oil and gas, mining, manufacturing and engineering are some of the sectors that are expected to
outperform. One will see stronger interest when power and real estate corrects as they are good long-
term bets. But they are currently very expensive.
8
INDIA INFOLINE
India Infoline has the most de-risked revenue model with a little over 55 per cent of the total
revenues coming from the equity brokerage business—the least among listed broking
companies. This is probably one reason for the company being the best pick among most
mutual fund managers.
Thanks to its diversified portfolio, the company bucked the trend and reported a sequential
rise of about 25 per cent in its operating income and a marginal one per cent increase in net
profit in the March 2008 quarter. The growth in FY08 was largely driven by its institutional
broking business, financing income and better utilisation of its branch network, which has
grown rapidly in the past few years.
Going ahead, its institutional broking and lending businesses are expected to gain more scale
and will be the revenue drivers.
The company hired four high profile professionals from CLSA a few months earlier to
spearhead its foray in institutional broking. Plus, its partnership with New York-based
brokerage firm, Auerbach Grayson and Co will increase its access to institutional clients in the
US and offer them access to Indian capital markets.
Also, its lending portfolio comprising of margin finance and consumer finance products
(mortgages, personal loans, business loans and loans against shares) should grow at a higher
rate.
The company's newly set up subsidiary for wealth management and its move to set up an asset
management company should lead to positive results in the respective businesses. The stock
looks reasonably priced at 25 times FY09 estimated earnings, but looks more attractively
priced (PE of 18.7 times) based on FY10 estimated earnings.
9
STORY OF GLORY
Incorporated on October 18, 1995 as Probity Research & Services by a group of professionals
Launched Internet portal www.indiainfoline.com in May 1999 – Rated as “Best of the Web” by
Forbes
Promoted by Mr. Nirmal Jain and Mr. R. Venkataraman
Launched 5paisa.com – revolutionized brokerage rates
Largest distributor of ICICI Prudential Life Insurance
Our Rs. 900 million public issue was oversubscribed 7.22 times
Listed on NSE and BSE on May 17, 2005
Today, we are one of the fastest growing company in the financial services space
BUSINESSES
10
COMPANY STRUCTURE
India Infoline
Ltd.
India Infoline
Investment IIFL (Asia) Pte India Infoline India Infoline India Infoline DMCC, Dubai
Services Ltd Ltd Media & Commodities Marketing (membership with
(Margin Funding & (For international Research Ltd & Services Ltd DGCX)
SME) operations) Services Ltd
11
CORPORATE STRUCTURE
Board of Directors
Managing Director
Nirmal Jain
Executive Director
R. Venkataraman
Channels
Products Research
Branches Content Services
Insurance
Direct Sales News desk/ websites
5paisa
Corporate & Institutional Market/ Institutional
Commodities
PMS
Support
Audit
12
Marketing
Compliance
Finance
Technology
BUSINESS MODEL
BUSINESS REVIEW
EQUITIES BROKING
Average daily turnover Rs35.3 bn on NSE : up 66% q-q and 279% YoY
13
Growth driven by higher productivity of retail branches as well as increased traction in institutional
business
14
INSTITUTIONAL EQUITIES
Research team built up with a blend of industry and equity research experience
Launched a daily synopsis on Indian markets titled ‘The Front Page’
Research focus on original bottom-up ideas
Research products have been received well by institutional clients
A number of new products in the pipeline
15
FINANCIAL SERVICES DISTRIBUTION
INSURANCE
The largest corporate agency for the largest private sector life Insurance company
MUTUAL FUNDS
Distributors for all the leading AMC’s.
16
CONSUMER FINANCE
Started distribution of own loan products under the brand name ‘Moneyline’
New Initiatives: Loans against Mutual Funds/ Business Loans/ Auto Loans/ Loans against ESOPS/
Loans for Commercial Vehicles
Loans through internet are showing a huge response and our lead conversion is one of the highest in
the industry
Started distribution of own loan products under the brand name ‘MONEYLINE’.
New Initiatives: Loans against Mutual Funds/ Business Loans/ Auto Loans/ Loans against ESOPS/
Loans for Commercial Vehicles
17
Loans through internet are showing a huge response and our lead conversion is one of the highest in
the industry.
18
FINANCIAL REVIEW
Highlights
Average daily trading turnover grows 279% y-y to Rs 35.3 bn and market share on NSE
grows to 3.5%
Institutional brokerage contribution improves equities volumes and yield
Insurance mobilization Rs 1.14bn, up 35% y-y
Consumer finance takes off with disbursal of Rs 947 mn
Separate subsidiary for Wealth Management
19
Q3 FY08 (OCT- DEC 2007) RESULTS
Rs Mn Q3 FY08 Q2 FY 08 Y-Y Q-Q 9M FY08 9M FY07 Y-Y
Income from operations 3,072.6 1,898.1 174% 62% 6,267.8 2,751.1 128%
Equities brokerage & related income 2,151.8 1,127.8 255% 91% 3,973.0 1,672.6 138%
Financing income 312.8 207.6 175% 51% 678.7 196.2 246%
Online & other media income 182.5 178.6 23% 2% 563.4 303.4 86%
Life insurance commission 295.2 286.9 85% 3% 740.8 353.0 110%
Commodities brokerage 43.4 36.1 36% 20% 118.7 83.1 43%
Mutual funds etc distribution 54.8 31.3 65% 75% 119.6 106.7 12%
Mortgages and loans distribution 27.2 9.0 201% 201% 46.2 17.9 159%
Merchant Banking income 4.9 20.9 -73% -76% 27.4 18.2 50%
Other income 34.1 54.8 37% -38% 126.0 70.4 79%
Total Income 3,106.7 1,952.9 171% 59% 6,393.8 2,821.5 127%
PBT before exceptional items 1,020.1 536.7 279% 90% 1,900.2 777.8 144%
Exceptional item 440.0 -
Profit / (Loss) before tax 1,020.1 536.7 279% 90% 1,460.2 777.8 88%
Provision for taxation 359.9 176.2 306% 104% 511.5 267.8 91%
Profit / (Loss) After Tax 651.4 360.6 260% 81% 939.9 510.0 84%
20
21
FUTURE PLANS AND STRATEGY
Wealth Management
New initiative- team identified.
22
23
INVESTMENT COMMITTEE OF INDIA INFOLINE
Unlike most of the Portfolio Management firms operating in India, India Infoline has got the concept
of an Investment Committee, which takes the decision regarding investment into the portfolios. The
members of this committee:
Mr. Nirmal Jain :-He is the founder and Chairman of India Infoline Ltd. Being an MBA from IIM
Ahmedabad, and a Chartered Accountant (All India Rank 2) and a Cost Accountant; he has had an
impeccable professional and academic track record. He started his career in 1989 with Hindustan Lever
Limited. During his stint with Hindustan Lever, he handled a variety of responsibilities, including
exports and trading in agro- commodities with Rs3bn annual turnover. He then joined hands with two
local brokers to set-up their equity research division Inquire in 1994. His work set new standards for
equity research in India. In 1995, he founded his own independent financial research company, now
known as India Infoline Ltd.
Mr. R. Venkataraman :-He is the co-promoter and Executive Director of India Infoline Ltd. He is a
Bachelor in Technology (B. Tech) in Electronics and Electrical Communications Engineering from IIT
Kharagpur and an MBA from IIM Bangalore. He has held senior managerial positions in various
divisions of ICICI Limited, including ICICI Securities Limited, their investment banking joint venture
with J P Morgan of USA and with BZW and Taib Capital Corporation Limited. He has also held the
position of Assistant Vice President with G E Capital Services India Limited in their private equity
division. He has varied experience of more than 14 years in the financial services sector
24
“COMPETITIVE ANALYSIS OF PORTFOLIO
MANAGEMENT SERVICES BY BROKRAGE
FIRMS”
25
INTRODUCTION
In a laypersons language,
“Portfolio Management Service is like music to investors' ears with the perfect art of varied
expertise work over the years with our experience in the stock markets.”
Managing money has always been difficult. There is a great deal of requirement of an expertise to
evaluate various savings and investment plans. There is simply no time to do it on your own. Until and
unless the investments are large it might also turnout to be expensive trying to set up an own investment
wing. It might be prudent asking a professional to manage the funds for a small fee. There is a surety
that the money will be deployed after scientifically analyzing pros and cons.
Portfolio Management Service ensures that your money goes that extra mile or earns that extra return,
which dramatically improves the returns structure for the investments made.
26
Maximize value of investments while minimizing the risk.
Allow investors to schedule resources more efficiently.
Reduce the number of redundant investments and make it easier to kill loss-making
investments.
27
LITERATURE REVIEW
Portfolio Management - an emerging strategy for excellence
YOU earn money in bagfuls, but don't have the time or inclination to manage it If this description fits
you, do consider entrusting your money to a professional portfolio management service (PMS). In
return for a fee, portfolio managers offer to craft a basket of stocks,
bonds or even mutual funds that would fit your personal investment goals and risk preferences.
Though a few portfolio managers offer standardised packages for a sum as small as Rs 5-10 lakh, it may
take a minimum investment size of Rs 25-50 lakh to fetch you a customised portfolio. Apart from cash,
you can also hand over an existing portfolio of stocks, bonds or mutual funds to a PMS that could be
revamped to suit your profile.
28
Also, portfolio managers do not have to stick to any rigid rules on what proportion of your money will
be invested in each sector or stock. They can also use liberal doses of cash or derivative instruments to
pep up your returns. Mutual fund managers have their hands tied on these aspects by SEBI regulations.
29
There are wide variations in fee structure between players and across products. For instance, Birla Sun
Life charges only a performance-linked fee for its portfolio services. Way2Wealth has a differential fee
structure for its debt and equity dominated portfolios.
When you opt for a performance-based fee, the profits are reckoned on the basis of "high
watermarking". That is, you pay the fee only on the positive returns on your portfolio. For instance, if
you invest Rs 100 in a PMS and its value appreciates to Rs 150 at the end of the year, you pay a fee on
the profit of Rs 50. Subsequently, a fee will be levied only on gains over and above the Rs 150 mark. If
the value of your portfolio slumps to Rs 70, and climbs back to Rs 110, the Rs 40 you earn will not be
reckoned as profit. You will again be charged a fee only if the value of your portfolio recovers to over
Rs 150, the previous "high watermark."
30
There are four steps to the Portfolio Approach:
31
The New Structure
S
e
B c
Syndication
o o
r Portfolio n
r Client Manager d
o Management Credit decision Loan a
Risk Rating Trading r
w
Pricing/Return y
e Origination Portfolio Decision
r M
Hedging &
s Securitization
k
t
Servicing
32
Origination would be limited to Portfolio balancing to ensure appropriate weight age – achieved
through credit swaps, CDOs, secondary markets etc.
Most CIB platforms today are evolving & do not have NIR as an independent financial target….
Strat
egy
Portfolio Management
Process
Distributio
Origination n Process
Process
ISSUER INVESTOR
Structuring Process
33
Key Transfer pricing challenges
Portfolio Management is the ‘advocate’ of shareholder value. Approval of all exposure
is contingent on the return, irrespective of where revenues are booked or recognized.
Key challenge is to be able price loan products “appropriately” while ensuring an
acceptable return on the entire credit exposure
Loans should be priced to be at least “SVA or Economic profit” neutral
Loan structure and pricing should be reflective of the prevailing investor market to
provide liquidity to the loan portfolios
Different forms of risk: Credit, Market, Country and Business risks are
quantified on a uniform scale
The framework creates incentives to deploy capital toward activities with better
risk adjusted returns
34
Measuring return relative to risk
Firm value
Return Risk
Growth of
Investment
Expected Base
Cashflow
Lack of liquidity (both depth and breath) in the secondary loan trading markets
Most profitability models are global and need to be customized for regional /
emerging markets
Teamwork is critical for success. Creates another silo in an already over matrix
environment
35
Severe compression in spreads which makes the ultimate ‘hold’ position
uneconomical and the portfolio manager lukewarm to the transaction
RESEARCH METHODOLOGY
Objective:
To know more about Portfolio Management Services.
To do a competitive analysis on the most of the firms which provide Portfolio Management
Services
Hypothesis:
All Portfolio Management firms provide very good services
Sample:
The sample consists of the following: -
Sharekhan securities
JM Morgan Stanely
Kotak securities limited
India Infoline (5 Paisa)
Birla Sun Life
Motilal Oswal Securities Limited
36
37
RESEARCH ANALYSIS
SSKI Proprime Initial 0.75% 2.5% p.a. Equity /debt Medium Bottoms Up 5lacs All
then 0.5% chargeable term
quarterly AMC
Profit sharing
20% shares in
profits after a
15% hurdle.
Protech Initial 0.75% 0% AMC fees Equity /debt Short term Bottoms Up 5lacs All
then 0.5% Profit share is
only on profit.
Arbitrage Initial 0.75% Safe returns Equity /debt Medium Bottoms Up 5lacs All
then 0.5% (8% post tax 0.05 on to long
return per derivative term
annum 0.3 on
effectively 12% delivery
pretax)
38
AMC of 1.25%
Profit sharing –
20% of rest
after deducting
10%
Name Product Brokerage Fee Hedging Horizon Approach Corpus Cos
India 5P 0.50% Fixed = 2% flat Equity and Short to Value based 5lacs All
Infoline Momentum with 20% profit debt medium
sharing
Recurring = 4%
flat no profit
sharing
5P Focus 0.50% Fixed = 2% flat Equity and Long-term Value based 5lacs All
with 20% profit debt
sharing
Recurring = 4%
flat no profit
sharing
5P NRI 0.50% Fixed = 2% flat Equity and Long-term Value based 5lacs Medium
with 20% profit debt to large
39
sharing cap
Recurring = 4%
flat no Sharing
5P Growth 0.50% Fixed = 2% flat Equity and Long-term Value based 5lacs Medium
with 20% profit debt to large
Recurring = 4% cap
flat no profit
sharing
Name Product Brokerage Fee Hedging Horizon Approach Corpus Cos
Kotak Select 0.50% 2% flat with Equity and Long and Bottoms up 1crore Mid and
20% profit debt medium small
sharing
3% flat no
profit sharing
Klassic 0.50% 2% flat with Equity and Medium Bottoms up 1crore Small,
20% profit debt to long- medium
sharing term and
3% flat no large
profit sharing
Core 0.50% 2% flat with Equity and Long-term Bottoms up 1crore Small,
20% profit debt medium
sharing and
3% flat no large
profit sharing cap
Dividend 0.50% 2% flat with Equity and Long and Bottoms up 1crore Small,
40
Yield 20% profit debt medium medium
3% flat no and
profit sharing large
cap
Birla Recently 0.50% AMC charges Equity and Medium Bottoms up 50lacs Small,
Sunlife launched the 1.25% debt and to long Custom medium
PMS 20% profit derivative term option – and
sharing of not more Rs.2.5crore large
portfolio growth than 50% cap
over 15%
41
Most of the above companies have a very different brokerage to offer. Motilal Oswal Securites
Limited has the most expensive brokerage to offer.
All the firms have different products through which they invest in all types of companies. Some
schemes invest in small cap and mid cap whereas there are some schemes which invest only in
large caps and there are some more schemes which invest in all the three types of companies like
mid cap small cap and large cap companies. Depending on the risk and the return ratio of
customer these schemes are offered to them.
The minimum corpus offered by the companies is quite less only in India Infoline and
Sharekhan all other companies have a very high minimum corpus.
The most amounts of products are offered by India Infoline and Kotak Securites which is also
very good because customers have a wide variety to choose from. They have more options open
to them which suit their convienience.
Almost all the companies believe in hedging which means that they all try to maximize the
returns for their customers and minimize their risks.
Almost all the companies follow bottoms up approach except for a few companies like the India
Infoline. Both the ways are good in their own way depending on how you follow it.
The fund managers of all these companies are excellent. They excel in their own way, highly
skilled and good at what they are doing.
All the companies have their different products to offer which give them different time frame to
invest. Some invest for long term and some for medium term again depending on the type of
time frame the customer wants.
42
RECOMMENDATIONS
According to me all the companies are good in their own respective way. Some are good at their
brokerage whereas some are good at their services; some have good companies in their portfolio
whereas some have good fund managers. All the companies are fighting competition in different
different ways and all are good in their own way and they all provide the following benefits:
Bespoke Advice- The advice designed to achieve your financial objectives.
Professional Management - The service provides professional management of equity portfolios
with the objective of delivering consistent long-term performance while controlling risk.
Continuous Monitoring - Portfolios need to be constantly monitored and periodic changes
made to optimize the results.
Risk Control - A research team responsible for establishing our investment strategy and
providing us real time information to support it, backs our portfolio managers.
Hassle Free Operation- Our Portfolio Management Service gives you a customized service.
We take care of all the administrative aspects of your portfolio with a monthly reporting on the
overall status of the portfolio and performance.
Flexibility - We specialize in providing a personal investment management service to achieve
your investment objective.
Transparency - You will get regular statements and updates from us. Web-enabled access will
ensure that you are just a click away from all information relating to your investment.
No one company can be recommended as they all are good in their own way and all are competitive in
their own way. All the companies are good at providing their services in their own way. The companies
are very competitive, if one company takes a step the other company takes two steps and all the benefits
go the customer towards the end. Therefore the only benefit that someone achieves is the customers
who gain from these competitive firms in terms of service provided by them as well as in cost terms.
43
CONCLUSION
Investing in equities is a very complex process. It involves studying, tracking and understanding factors
like the economy both domestic and global, interest rates, the political and legal environment among
others.
Clearly, this is a full time activity that is best left to experts. A fund manager does precisely that for
investors, that too at an affordable cost. Effectively, portfolio management services offer the
opportunity to the access the markets in a hassle-free and convenient manner.
Secondly, portfolio management services investment offers investors the benefits of diversification.
Any financial planner worth his salt will vouch for the importance of holding a well-diversified
portfolio.
A portfolio created by an expert offers diversification across stocks (a diversified equity fund invests in
various stocks) and asset classes (a balanced fund/monthly income plan invests in both equities and debt
instruments).
Finally, the single most important reason why one should appoint an expert is -- the versatility they
afford. Whether you wish to plan for your retirement, children's marriage or even buy a car, a portofolio
manager will expose you only to the risk you can face and the return you expect and thus can help you
achieve these objectives and more and the most important thing is that these services are offered to
clients as different schemes, which are based on differing investment strategies made to reflect the
varied risk-return preferences of clients and in today’s world where
On the other hand, equities serve the broad purpose of achieving capital appreciation. However,
achieving financial goals would imply building a portfolio of equities and debt instruments and actively
managing the same. Investing is serious business and should be seen as a means for achieving one's
financial objectives.
44
ANNEXURE
TRANSCRIPTS
Value PMS
Investment horizon – Long-term time horizon
Bull’s Eye PMS
Investment horizon – Short to medium term
SCHEME 1
Minimum Portfolio Size: Rs.25Lakhs cash or approved securities per individual or group.
Investing philosophy - value investing philosophy
Hedging - Various derivatives strategies are used to hedge the portfolio based on prevailing market
conditions.
45
Fee structure:
Management Fees: Base Minimum fees charged based on opening NAV for the quarter or corpus
whichever is higher.
Rs.25lakhs to Rs.100lakhs: 0.25% per quarter (maximum group members 4)
Rs.100lakhs & above: 0.1875% per quarter.
Management fees on any infusion and with-drawls within quarter would be charged on
weighted basis.
Performance based Management Fees:
Performance based management fees would be charged based on performance in terms of positive
returns on portfolio.
Fee structure is as follows:
Profits Fees as % of
Opening NAV
1% 0.1%
2% 0.2%
3% 0.3%
4% 0.4%
5% 0.5%
SCHEME 2
Minimum Portfolio Size: Rs.25Lakhs cash or approved securities per individual or group.
Fee structure:
Management Fees: Base Minimum fees charged based on opening NAV for the quarter or corpus
amount whichever is higher
Rs.25lakhs to Rs.100lakhs: 0.625% per quarter (2.5% p.a.) (Maximum group members 4)
Rs.100lakhs & above: 0.5625% per quarter (2.25% p.a.).
Management fees on any infusion and with-drawls within quarter would be charged on
weighted basis.
SCHEME 3
Minimum Portfolio Size: Rs.25Lakhs cash or approved securities per individual or group.
Fee structure:
46
Management Fees: Base Minimum fees charged based on opening NAV for the quarter or corpus
whichever is higher
Rs.25lakhs to Rs.100lakhs: 0.25% per quarter (maximum group members 4)
Rs.100lakhs & above: 0.1875% per quarter.
Management fees on any infusion and with-drawls within quarter would be charged on
weighted basis.
47
1. PROPRIME PORTFOLIO
The research is only fundamental research.
Prefer blue chip companies and relatively medium term profile.
Fee structure
2.5% p.a. chargeable quarterly AMC
Profit sharing20% shares in profits after a 15% hurdle chargeable at the end of the fiscal year.
2. PROTECH PORTFOLIO
Protech has two kinds of products, which are newly launched: -
Nifty- thrifty (NT) – automated index trading
Beta- cash and option - (based on 80/ 20 chart)
These two products would meet the needs of today's investors and traders both. For a pre-defined higher
level of risk the products would be targeting a higher level of return. The products would use a
combination of delivery-based trading and derivatives trading to maximise the returns. Using technical
analysis these would also optimise the entry and exit timings. What's more, with the help of money
management rules these products would control portfolio risk.
48
of working are available for interested investors]. The use of timing for delivery and options for a
higher beta will attempt to offer a superior rate of return by taking a risk with only 20% of the capital.
Here too money management rules will be in place to see that the capital is not eroded. Portfolio
rebalancing may be conducted between cash and options segments based on profitability of each
segment.
Fee structure
0% AMC fees
Profit share is only on book profit.
Investment into: - Equity and debt both
0.05% on derivatives
0.3% on delivery
Lock in period - 3months
Reporting time – 15days
3. PORTFOLIO ARBITRAGE
Fee structure
Safe returns (8% post tax return per annum effectively 12% pretax)
Lock in period – one month
Brokerage = no AMC no profit sharing
Only brokerage as applicable depending upon the investments made
0.25% (flexible because Intraday)
49
1. CORE PORTFOLIO
Investment horizon – long-term perspective
Two schemes under this portfolio: -
With profit sharing
Without profit sharing
Fee structure
Without profit sharing: -
AMC of 2%
Profit sharing – NIL
With profit sharing: -
AMC of 1.25%
Profit sharing – 20% of the rest after deducting 10%
Brokerage – 0.50%
2. VOYAGER PORTFOLIO
Investment horizon: - Short term
They have stopped providing this scheme due to the market volatility and because it is for short-term
investments.
50
They Hedge portfolio their portfolio through investment in futures and options. PMS can be terminated
in after 30 days.
Brokerage – 0.50%
Fee structure
With profit sharing = 2% flat with 20% profit sharing
Without profit sharing = 3% flat no profit sharing
1. SELECT PORTFOLIO
Companies preferred – Mid cap and small cap companies
Stocks in portfolio – 10 to 15 stocks
Lock in period – 12 to 18 months
Investment horizon – Long and medium term perspective.
2. KLASSIC PORTFOLIO
Companies preferred – Small, medium and large capitalized companies
Stocks in portfolio – Up to 20 stocks
Investment horizon – Medium to long-term perspective.
4. CORE PORTFOLIO
Companies preferred –Small, medium and large capitalization companies
Stocks in portfolio – 15-20 stocks
Lock in period – at least 18 months
Investment horizon – Long-term perspective
They may hedge their portfolio may investing into futures and options.
Invest in equity and debt and the derivative would not be more than 50%.
51
RESPONDENT 5: Sameer Shah
Company Name: India Infoline
Email: [email protected]
Designation: Senior Relationship Manager
1. 5P MOMENTUM
Investment horizon – Short term to medium term
Investment in – deal in equity as well as debt
Types of companies – all three types
Brokerage – 0.25%
Hedging may be done in futures and options to balance the portfolio
2. 5P GROWTH
Investment horizon – Long-term perspective
Investment in – Deal in equity as well as debt
52
Types of companies - Medium to large capitalization companies
Brokerage – 0.50%
3. 5P FOCUS
This portfolio will comprise of always 7 scrip at any point of time
Investment horizon – Long-term perspective
Investment in – deal in equity as well as debt but debt is for short term only if the equity market is not
favorable.
Types of companies – All the three kinds of companies.
Lock in period – One month
5. 5P CUSTOMISED
Investment horizon – Medium to long-term perspective
Investment in – Equity or equity related instruments including Mutual Funds, debt and debt related
instruments including debt mutual funds, commodities markets, etc.
Types of companies – Medium to large capitalization companies (blue chipped companies)
53
Custom option – Rs.2.5crore
Investment horizon – medium term to long term perspective
Investment philosophy – Bottoms up approach
Investment in – Equity and derivative both but the derivatives do not cross more than 50%
Hedging – may hedge the portfolio by using futures and options.
Brokerage – 0.50%
Fee structure
With profit sharing = AMC charges 1.25%
20% profit sharing of the portfolio growth over 15%
54
QUESTIONNAIRE
Dear Sir/Madam,
We are doing a survey on the different kinds of Portfolio Management Services offered by the
brokerage companies of Mumbai.
We would be very grateful to you if you could give us some of your time.
OFFICE - RECORD
Name of Respondent:
Designation:
Email-ID:
Phone No.:
==========================================================================
=======================
1. How many schemes do you offer and which are they?
55
5. What kind of an investment philosophy does your company follow?
(Bottoms up, top down, momentum based stocks etc…)
56
REFERENCE
Firms Contacted:
My thesis guide Mr. Sharansh Jain helped me out and used their contacts to get these firms to
participate in the interview.
Websites referred:
www.indiainfoline.com
www.sharekhan.com
http://www.financialexpress.com/fe_full_story.php?content_id=147783
http://en.wikipedia.org/wiki/India
http://www.censusindia.net/results/provindia3.html
sify.com/sifyimagine/fullstory.php?id=13213758
http://sify.com/sifyimagine/fullstory.php?id=13213758
http://www.forbes.com/facesinthenews/2005/04/21/0421autofacescan02.html
http://www.thehindubusinessline.com/iw/2006/10/08/stories/2006100800591300.htm
www.icicidirect.com
http://www.hinduonnet.com/businessline/iw/2000/09/03/stories/0703g051.htm
http://www.hinduonnet.com/businessline/iw/2000/09/03/stories/03g051t1.htm
http://www.traderji.com/brokers-demat-matters/1854t
http://www.traderji.com/brokers-demat-matters/3608-new-c-icici-direct.html
57