1.

INTRODUCTION

In today’s world the importance of money has generated interest of people towards
investment. Now a days the awareness of investment has increased up to a great extent.
People have understood the value of money in an order to meet the future circumstances
because of the high standard of livings. In this modern age there exists several number of
investment avenues in the market. 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.

Managing investments in equities requires time, knowledge, experience and constant

monitoring of stock market. Those who need an expert to help to manage their
investments portfolio management services (PMS) comes as an answer. In order to keep
the Investor safe from market fluctuation and make them profitable, Portfolio
Management Services (PMS) is fast gaining Investment Option

A portfolio is a collection of financial assets consisting of investment tools such as

stocks, bonds, gold, foreign exchange, asset-backed securities, real estate certificates and
bank deposits which are held by a person or a group of persons. This however requires
financial expertise in selecting the right mix of securities in changing market conditions
to get the best out of the stock market.

Portfolio management service (PMS) is a type of professional service offered by portfolio

managers to their client to help them in managing their money in less time. Portfolio
managers manage the stocks, bonds, and mutual funds of clients considering their
personal investment goals and risk preferences. In addition to money, the portfolio
managers manage the portfolio of stocks, bonds, and mutual funds.
The business of portfolio management has never been an easy one. Juggling the limited
choices at hand with the twin requirements of adequate safety and sizeable returns is a
task fraught with complexities.

Given the unpredictable nature of the share market it requires solid experience and strong
research to make the right decision. In the end it boils down to make the right move in the
right direction at the right time. That's where the expert comes in.

REASON TO CHHOSE PORTFOLIO MANAGEMENT SERVICES INSTEAD

OF MUTUAL FUND
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.

In general it has been marked that people who are familiar with the Indian financial
market choose portfolio management services instead of mutual fund .The reason for
such is that portfolio managers offer some very services which are better than the
standardized product services offered by mutual funds managers. Such services are as
follows:

1.Asset Allocation: Asset allocation plan offered by Portfolio management service PMS
helps in allocating savings of a client in terms of stocks, bonds or equity funds. The plan
is is designed after the detailed analysis of client's investment goals, saving pattern, and
risk taking capacity.

2. Timing: portfolio managers preserve client's money on time. Portfolio management

service (PMS) help in allocating right amount of money in right type of saving plan at
right time. This means, portfolio manager provides their expert advice on when his client
should invest his money in equities or bonds and when he should take his money out of a
particular saving plan. Portfolio manager analyzes the market and provides his expert
advice to the client regarding the amount of cash he should take out at the time of big risk
in stock market.

3. Flexibility: portfolio manager’s plan saving of his client according to their need and
preferences. But sometimes, portfolio managers can invest client's money according to
his preference because they know the market very well than his client. It is his client's
duty to provide him a level of flexibility so that he can manage the investment with full
efficiency and effectiveness.

4. In comparison to mutual funds, portfolio managers do not need to follow any rigid
rules of investing a particular amount of money in a particular mode of investment.

5. Mutual fund managers need to work according to the regulations set up by financial
authorities of their country. Like in India, they have to follow rules set up by SEBI.

  TYPES OF PORTFOLIO MANAGEMENT SERVICE

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..

Three types of pms services are as follows-

 Discretionary
 Non Discretionary
 Advisory
Discretionary: Under these services, the choice as well as the timings of the investment
decisions rest solely with the Portfolio Manager.
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. In India majority of PMS providers offer Discretionary Services.

TYPES OF PORTFOLIO

Based on asset allocation there are different types of Portfolio which is carried by
various fund Manager to maximize profit and minimize losses 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.

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

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.
APPROACHES IN PORTFOLIO CONSTRUCTION

Commonly there are two approaches in the construction of portfolio of securities viz.
traditional approach and modern approach. In traditional approach investor’s needs in
terms of income and capital appreciation are evaluated and appropriate securities are
selected to meet the needs of the investors. The common practice in the traditional
approach is to evaluate the entire financial plan of the individual. In the modern
approach, portfolios are constructed to maximize the expected return for a given level of
risk. It views portfolio construction in terms of the expected return and risk associated
with obtaining the expected return.

TRADITIONAL APPROACH

The traditional approach basically deals with two major decisions. They are:

A) Determining the objective of the portfolio.

B) Selection of the securities to be included in the portfolio.

Normally, this is carried out in four to six steps. Before formulating the objective, the
constraints of the investor should be analyzed. Within the given frame work of
constraints, objectives are formulated. Then based on the objectives, securities are
selected. After that, the risk and return of the securities are studied. The investor has to
assess the major risk categories that he or she is trying to minimize. Compromise on risk
and non-risk factors is to be carried out. Finally relative portfolio weights are assigned to
securities like bonds, stocks and debentures and then diversification is carried out .The
flow chart explains this

STEPS IN TRADITIONAL APPROACH

Analysis of constraints
 Determination of objectives

Selection of portfolio

Bond & common Bond Common stock

stock

Assessment of risk&
return

Diversification

ANALYSIS OF CONSTRAINTS

In traditional approach the first step is to analysis of constraints .These constraints are as
follows
1. INCOME NEEDS----The income needs depend on the need for income in constant
rupees and current rupees. The need for income in current rupees arises from investor’s
need to meet all or part of the living expenses. At the same time inflation may erode the
purchasing power, the investor may like to offset the effect of the inflation and so, needs
income in constant rupees.

A) Need for current income. The current income need depends upon the entire
current financial plan of investor. The expenditure required to maintain a certain level of
standard of living and the other income generating sources should be determined. Once
this information is arrived at, it is possible to decide how much income must be provided
for the portfolio of securities

B) Need for constant income----Funds should be invested in such securities where

income from them might increase at a rate that would offset the effect of inflation. The
inflation or purchasing power risk must be recognized but this does not pose a serious
constraint on portfolio if growth stocks are selected.

2. LIQUIDITY--------Liquidity need of the investment is highly individualistic of the

investor. If the investor prefers to have high liquidity, then funds should be invested in
high quality short term debt maturity issues such as money market funds, commercial
papers and shares that are widely traded. Keeping the funds in shares that are poorly
traded or stocks in closely held business and real estate lack liquidity. The investor
should plan his cash drain and the need for net cash inflows during the investment period.

3. SAFETY OF THE PRINCIPAL-----Another serious constraint to be considered by the

investor is the safety of the principal value at the time of liquidation.

Investing in bonds and debentures is safer than investing in the stocks. Even among the
stocks, the money should be invested in regularly traded companies of longstanding.
Investing money in the unregistered finance companies may not provide adequate safety
4. TIME HORIZON------- Time horizon is the investment-planning period of the
individuals. This varies from individuals to individuals.

5. TAX CONSIDERATION-----Investors in the income tax paying group consider on tax

concessions that they could get from their investment. For all practical purpose they
would like to reduce the taxes. For income tax purpose, interests and dividends are taxed
under the head “income from other sources”. The capital appreciation is taxed under the
head “capital gain” only when the investor sells the securities and realizes the gain. The
tax is then at a concessional rate depending on the period for which the asset has been
held before being sold. From the tax point of view, the form in which the income is
received i.e. interest, dividend, short term capital gains and long term capital gains are
important. Investing in government bonds and NSC can avoid taxation. This constraint
makes the investor to include the items which will reduce the tax

6. TEMPERAMENT-------The temperament of the investor himself poses a constraint on

framing his investment objectives. Some investors are risk lovers or takers who would
like to take up higher risk even for low return. While some investors are risk averse, who
may not be willing to undertake higher level of risk even for higher level of return. The
risk nature investors match the return and the risk. For example: if a stock is highly
volatile in nature then the stock may be selling in a range of Rs. 100-200 , and returns
may fluctuate between rs 00-100 in a year.Hence,the temperament of the investor plays
an important role in setting the objectives.

DETERMINATION OF THE OBJECTIVES

Portfolios have the common objective of financing present and future expenditures from
a large pool of assets. The return that the investor requires and the degree of risk he is
willing to take depend upon the constraints. The objectives of portfolio range from
income to capital appreciation. The common objectives are stated below----
 →Current income

→Growth In Income

→Capital appreciation

→Preservation of capital

The investor in general would like to achieve all the objectives; nobody would like to
lose his investment. But, it is not possible to achieve all the four objectives
simultaneously. If the investor aims at capital appreciation, he should include risky
securities where there is an equal likelihood of losing the capital. Thus there is a conflict
among the objectives.

SELECTION OF PORTFOLIO

The selection of portfolio depends on the various objectives of the investor. The selection
of portfolio under different objectives are dealt subsequently

→Objectives and asset mix-------If the main objective is getting adequate amount of
current income, 60% of the investment is made on debt and 40% on equities. The
proportions of the investments on debt and equity differ according to the individual’s
preference. Money is invested in short term debt and fixed income securities. Here the
growth of income becomes the secondary objectives and stability of principal amount
may become the third. Even within the debt portfolio, the fund invested in short term
bonds depend on the need for stability of principal amount in comparison with the
stability of income. If the appreciation of capital is given third priority, instead of short
term debt the investor opts for long term debt. The maturity period may not be a
constraint.

→Growth of income and asset mix---Here the investor requires a certain percentage of
growth in the income received from his investment. The investor’s portfolio may consist
of 60 to 100 % equities and 0 to 40% of debt instrument. The debt portion of the portfolio
may consist of concession regarding tax exemption. Appreciation of principal amount is
given third priority. For example computer software, hardware and non-conventional
energy producing shares provide good possibility of growth in dividend.

→Capital appreciation and asset mix—Capital appreciation means that the value of the
original investment increases over the years. Investment in real estates like and house
may provide a faster rate of capital appreciation but they lack liquidity. In rhe capital
market, the values of the shares are much higher than their original issue prices. For
example satyam computers, share value was rs. 306 in april 1998 but in October 1999 the
value was rs. 1658. Likewise, several examples can be cited. The market capitalization
also has increased. Next to real assets, the stock markets provide best opportunity for
capital appreciation. If the investors objective is capita appreciation, 90 to100 % of his
portfolio may consist of equities and 0-10% of debts. The growth of income becomes the
secondary objectives.

→Safety of principal & asset mix-------Usually, the risk averse investors are very
particular about the stability of principal. All the investors give more importance to the
safety of the principal. No one likes to lose his money invested in different assets. The
investor’s portfolio may consist more of debt instruments and within the debt portfolio
more would be in short-term debts.

ASSESSMENT OF RISK AND RETURN In traditional approaches of portfolio

construction, the investor analyses the varying degrees of risk and constructs his
portfolio. At first, he establishes the minimum income that he must have to avoid
hardships under most adverse economic condition and then he decides risk of loss of
income that can be tolerated. The investor makes a series of compromises on risk and
non-risk factors like taxation and marketability after he has assessed the major risk
categories, which he is trying to minimize

DIVERSIFICATION
Once the asset mix is determined and the risk and return are analyzed, the final step is the
diversification of portfolio. Financial risk can be minimized by commitments to top-
quality bonds. According to the investor’s need for income and risk tolerance level
portfolio is diversified. The investor has to adopt the following steps which are shown in
the following figure.

Selection of industries

Selection of the companies in the

industry

Determining the size of

participation

Investor has to select the industries appropriate to his investment objectives. Each
industry corresponds to specific goals of the investor. The sales of some industries like
two wheelers and steel tend to move in tandem with the business cycle, the housing
industry sales move counter cyclically. If regular income is the criterion then industries,
which resist the trade cycle should be selected. Likewise, the investor has to select one or
two companies from each industry. The selection of the company depends upon its
growth, yield, expected earnings, past earnings, expected price earnings ratio, dividend
and amount spent on research and development. The final step in this process is to
determine the number of shares of each stock to be purchased. This involves determining
the number of different stocks that is required to give adequate diversification.
Depending upon the size of portfolio, equal amount is allocated to each stock.

MODERN PORTFOLIO

The traditional approach is comprehensive financial plan for the individual. It takes into
account the individual needs such as housing, life insurance & pension plans. In the
modern portfolio more attention is given to the process of selecting the portfolio. The
stocks are not selected on the basis of need for income or appreciation but the selection is
based on the risk and return analysis. Return includes market return and dividend.

MANAGING THE PORTFOLIO

After establishing the asset allocation, the investor has to decide how to manage the
portfolio over time. .He can adopt passive approach or active approach towards the
management of the portfolio. In the passive approach the investor would maintain the
percentage allocation for asset classes and keep the security holdings within its place over
the established holding period. In the active approach the investor continuously assess the
risk and return of the securities within the asset classes and changes them accordingly. He
would be studying the risks (1) Market related (2) Group related and (3) Security specific
and changes the components of the portfolio to suit his objectives.

INTRODUCTION TO RISK & TYPE OF RISK

Risk is the possibilities of loss or injury; the degree or probability of such loss. Investor
in general would like to analyse the risk factors and a through knowledge of the risk helps
him to plan his portfolio in such a manner so as to minimize the risk associated with the
investment.

Generally In portfolio there are mainly two types of risk .These are as follows
→Systematic Risk and

→Unsystematic Risk

A) SYSTEMATIC RISK------------This is one kind of risk which is caused by the factors

external to the particular company. This kind of risk affects the market as a whole. The
various external factors like economic condition, political situation, and the sociological
changes affect the security market. The recession in the economy affects the profit
prospect of the industry and the stock market. For example: The 1998 recession
experienced by the developed and the developing countries has affected the stock markets
all over the world. These external factors are beyond the control of the corporate and the
investor. .So hence it can be said that the systematic risk is unavoidable. Systematic risk
is further subdivided into 3 categories i.e.

1. Market Risk

2. Interest Rate Risk

3. Purchasing power risk

1. Market risk----Market risk can be defined as that portion of total variability of return
caused by the alternating forces of bull and bear market .When the security index moves
upward haltingly for a significant period of time , it is known as bull market. In the bull
market, the index moves from a low level to the pick level. Bear market is just a reverse
to the bull market; the index declines haltingly from the pick to a market low point

The factors that affect the stock market are tangible and intangible events.

Tangible events--- These are the real events such as earthquake, war, political uncertainty
and fall in the value of currency.

Intangible events-----These events are related to market psychology. The market

psychology is affected by the real events. But reaction to the tangible events
becomes over reactions and they push the market in a particular direction.
2. INTEREST RATE RISK--------------Interest rate risk is the variation in the single
period rates caused by fluctuation in the market interest rate. Most commonly interest rate
risk affects the price of bonds, debentures and stocks. The fluctuations in the interest rate
are caused by the changes in the government monetary policy and the changes that occur
in the interest rate of treasure bills and the government bonds.

3. PURCHASING POWET RISK----------Variation in the returns are caused by the loss

of purchasing power of currency. Inflation is the reason behind the loss of purchasing
power. Purchasing power risk is the probable loss in the purchasing power of the returns
to be received. The rise in price penalizes the returns to the investors, and every potential
price is a risk to the investor.

B) UNSYSTEMATIC RISK----------This is one kind of risk which is caused by specific,

unique, and other related factors to the particular industry or company. This kind of risk
is peculiar and particular to a firm and industry. Unsystematic risk caused from
managerial inefficiency, technological change in the production process, availability of
raw materials, changes in the consumer preference, and labor problems.

Broadly unsystematic risk can be classified into two heads:

→Business risk and

→Financial risk

Business risk-----Business risk is that portion of unsystematic risk caused by the

operating environment of the business .Business risk arises from the inability of a firm to
maintain its competitive edge and the growth or stability of earnings. Business risk can be
divided into external business risk and internal business risk.

INTERNAL BUSINESS RISK------------ This kind of business risk is associated with the
operational efficiency of the firm. The efficiency of operation is reflected on the
company’s achievement of its pre set goals and the fulfillment of the promises to its
investors.
(1)Fluctuations in the sale------------The sales level has to be maintained. It is common in
business to lose customers abruptly because of competition. Loss on customers will lead
to a loss in operational income.

(2) Research and Development------- Sometimes the product may go out of style or
become obsolescent. It is management, who has to overcome the problem of
obsolescence by concentrating on the in-house R&D program.

(3)Personnel management-The personnel management of the company also contributes to

the operational efficiency of the firm. Frequent strikes and lock outs results in loss of
production and high fixed capital cost.

(4) Fixed cost-----The cost components also generate internal risk if the fixed cost is
higher in the cost component.

EXTRNAL BUSINESS RISK-------- External risk is the result of operating conditions

imposed on the firm by circumstances beyond its control. The external environments in
which it operates exert some pressure on the firm. The various external factors are as
follows------

→ Social & regulatory factors

→ Political risk

→ Business cycle

FINANCIAL RISK----Financial risk of a company is associated with the capital structure

of the company. It refers to the variability of the income to the equity capital due to the
debt capital. Capital structure of the company consists of equity funds and borrowed
funds. The presence of debt and preference capital results in a commitment of paying
interest or pre fixed rate of dividend.
 PORTFOLIO NEED IDENTIFICATION AND GOAL SETTING

Generally designing of portfolio for a client requires two must important things i.e.
identification of future needs of the client and then setting up of future goals on the
basis of these needs. Portfolio is constructed /designed on the basis of the future goals
of the client.

NEED IDENTIFICATION

Needs are the gap between what it should be and what it is. Some of the common
needs of the clients are as follows—

→Security Needs---Need of adequate life, accidental and health insurance cover to

protect self and the family in case of a mis-happening by providing a lump sum or a
regular income.

→Retirement Planning Needs---As no social security system exists in India, like in

developed countries where even those who did not plan for their retirement can have a
minimum standard of living at the mercy of the govt., retirement planning is one of the
most critical needs of Indian. Retirement planning becomes more significant in case of
professionals.

→Tax planning needs---Income tax is one of the highest expenses in one’s household
budget. If not planned properly, it makes a big hole in one’s wallet. So tax planning is
one of the top priority needs of every client. So a proper tax plan should be made so as
to reduce the tax burden of the client.

GOAL SETTING

Goals are the financial milestones one wants to achieve in life. Some of the common
goals for which clients design their portfolio are as follows-------
→Wealth Creation and preservation-----Generally this is one of the first goals of one’s
life. Wealth can be created and accumulated either in the form of investment in
financial assets or in the form of ownership of tangible assets.

Savings Investment Reinvestment

of returns

Wealth can be created and accumulated either in the form of investment in financial
assets or in the form of ownership of tangible assets.

→Asset Accumulation and Up gradation----Asset accumulation is a part of wealth

creation and accumulation in the form of physical assets. For clients, the goals may be to
buy a residential flat, commercial property, farm house, land, holiday resort, Mercedes,
helicopter or any other asset or to build a corpus to start his own practice or business.

→Provision for children’s higher education and marriage-----This is a compulsory goal in

every person’s life. Generally every individual aims to give his children the best
education in top institutes abroad. He wants to get them married in a way which suits
his social status. He needs to plan for these compulsory goals.

Chapter II. Research methodology

RESERCH OBJECTIVE

1. To study the technique of designing and managing the portfolio of an investor.

2. To analyze the discretionary portfolio management service by Geojit to its customers.

3. To examine the customer satisfaction regarding portfolio management services

offered by Geojit

Research methodology

A) Types of research ::

This research is basically a “descriptive research study”. Here in this kind of research the
variables are uncontrollable and only the happening of current scenario is studied. This
kind of research is fully based on the study on several behavioral attitudes of
clients/customers towards investment option. Because the concept of portfolio always
starts from clients goals and objective. In this types of research companies’ policy to
design and manage the portfolio of its clients are studied in details. The population of
this kind of research is based on some customers and non-customers of the company.

B) Data collection:
Data Type----This research will be based on both primary and Secondary Data. To design
the portfolio of clients the first need is to collect various details on the client’s financial
and other status. This kind of information on clients could be collected by collecting the
data’s from the clients. So in this research work various means like questionnaire,
interview and observation will be used to collect data’s from clients. So as these data’s
will be fresh in nature, this will be called as primary data. In addition to this some
secondary data’s also will be used in this research work to make a better analysis.
Companies record regarding clients investment in portfolio and their details will also be
used to get necessary details. Secondary data’s will be collected from several books ,
journals , websites, articles etc. which will help to complete the research work with a
detailed analysis.

Data Analysis Technique---

The collected data from various means will be analysed properly to get necessary
conclusion. The report will make a proper analysis carrying necessary recommendation,
& suggestion etc. Mainly in this research the data’s collected from clients will be
analysed properly and then portfolio of clients will be prepared on the basis of
companies policy regarding preparation of portfolio and then detailed report will be
written based on these information. Along with that data, customer’s satisfaction will also
be analysed to get a conclusion.

SAMPLING DESIGN:

A) Type of Universe---The type of universe is infinite universe In this case

B) Sample size and type of sampling ---For this kind research the type of sampling is
deliberate/convenience sampling. The sample design is based upon the non probability
sampling. A sample size is chosen in order to collect data’s from a large population
which will serve the purpose of the study. In this kind of research making a hypothesis on
any matter is impossible. So that the sample size is purposively chosen to carrying out the
research. In this kind of research the Sampling unit is Howrah city.

The sample size in this research is taken as 120 investors from which it fulfills the
requirements of efficiency, representativeness, reliability and flexibility

Chapter III. ProfileS

COMPANY PROFILE

ABOUT GEOJIT BNP PARIBAS—

Geojit BNP Paribas is one of the leading retail financial services company in India with a
growing presence in the Middle East. The company deals with savings and investment
products ranging from equities and derivatives to Mutual Funds, Life and General
Insurance and third party Fixed Deposits. The client needs are met via multichannel
services - a countrywide network of 500 offices, phone service, Customer Care centre
and the Internet. The company has 22 years of in-depth broking experience in the Indian
Capital Market. Geojit BNP Paribas has membership in, and is listed on, the National
Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) as well.

Geojit Bnp Paribas is the first company in India to offer online trading facility to its
customer. In the year 2000, Geojit BNP Paribas pioneered the simple concept of
providing individuals with the facility to trade online. So the company also could be
termed as a creative innovator. The company uses advanced technology in online
trading to meet client’s requirements such as customized online trading platforms and
much other services.The company is recognized as one of the best company in the
country to provide customized service to its customers. Today the company is proud for
its huge customer base i.e. around 495,000 clients and over Rs 9,900 crores.The
company also could able to give employment opportunity to more than 4000 people
which not only help the society people but also could able to strengthen the economy of
our country as well as could minimize the problem of unemployment situation in the
country.

PRODUCT OF THE COMPANY

Geojit BNP Paribas offers a wide range of trading and investment products and
solutions. Certified financial advisors help clients to arrive at the right financial solution
to meet their individual needs.
The wide range of products that the company offers are as follows-

Equities | Derivatives | Mutual Funds |IPO’s | Portfolio Management Services |

Property Services |

WHY TO CHOOSE GEOJIT BNP PARIBAS

Experience

Geojit BNP Paribas has more than 22 years of trust and credibility in the Indian stock
market. More than 495,000 clients and over Rs 9,900 crores in assets Under
Management reflect the trust reposed in company’s expertise.

Technology
As a creative innovator, Geojit BNP Paribas uses advanced technology in online trading
to meet client requirements such as customized online trading platforms and many other
services. With their online trading account one can buy and sell shares in an instant from
any PC with an internet connection. Customers get access to the powerful online trading
tools that will help them to take complete control over their investment in shares.

Accessibility
Geojit Bnp Paribas provides ADVICE, EDUCATION, TOOLS AND EXECUTION
services for investors. These services are accessible through many centers across the
country over the Internet as well as over the Voice Tool.
Knowledge
In a business where the right information at the right time can translate into direct profits,
investors get access to a wide range of information on the content-rich portal,
www.geojitbnpparibas.com Investors will also get a useful set of knowledge-based tools
that will empower them to take informed decisions.

Convenience
One can call Geojit’s Dial-N-Trade number to get investment advice and execute his/her
transactions. They have a dedicated call-center to provide this service via a Toll Free
number.

PMS STRUCTURE OF GEOJIT BNP PARIBAS

2. Stock Selection 3. Portfolio Construction

  Management   Focus on: Objectives,

Quality Approach
  Earning Growth   Security Selection
  Valuations   Concentration /
  News Flows Weights
  Timing   Portfolio Beta
  

1. Sector Selection

  Government Policies
  Stage of Business
Cycle
  Future Profitability
  Global/Domestic
Linkages
  Identified favored
sector

4. Portfolio Rebalancing
5. Risk Management
  Tactical shifts: Large
  Portfolio Risk Vs Mid cap
  Operational Risk   Tactical shifts: Stock
  Residual Risk Vs Cash
    Buy-side Triggers
  Sell-side Triggers

Chapter IV. Analysis and interpretation of Data

DATA INTERPRETATION
Though a high-performing portfolio is every investor's goal but making an optimal
portfolio is difficult because Investing in equities and other financial assets/securities
requires time, knowledge as well as constant monitoring of the market.

In this chapter, the technique of designing and managing portfolio is analyzed in detail.

The first step towards designing an investment portfolio is to collect required financial
data from the clients .Financial details could be collected in the following format-

1. CLIENT’S NAME

2. DATE OF BIRTH 3. CONTACT NO.

4. SPOUSE NAME

5. DATE OF BIRTH 6.CONTACT NO

7. HOME ADDRESS

8. OCCUPATION

9. FAMILY

DEPENDENTS

10. ANNUAL INCOME 11. ANNUAL EXPENSES

12. ANNUAL SAVINGS

13. LIABILITIES

14. FUTURE FINANCIAL GOALS

15. SAVINGS DETAILS Savings in LIC, Post office, Bank’s F.D, Mutual fund savings

Financial details so collected in the above format from a client in order to illustrate the
technique of designing and managing investment portfolio is summarized as below-----
A man aged 48 years having an annual income of 3.6 lakhs per annum wants to
construct a portfolio so as to meet his future financial requirements. His present annual
expense is approximately 2.4 lakhs per annuam. At present he is paying a down
payment of Rs.1500 per month and that he has to continue up to may 2012 to repay
back his two wheeler loan.The details of assets held by him are as follows-

 Banks 540 days fixed deposit on a sum of 1, 50,000 will be matured on 30 th

sept.2010 and the value on maturity is Rs. 1,66,643
 Post office savings under MIS scheme for a time period of 7 years will be matured
on 31st dec 2011.Principal sum (one time payment) was rs. 3 lakhs rupees. As per
the scheme Rs. 2000 per month is to be received each month upto the date of
maturity and maturity value is rs. 3,30,000
 Bank’s savings a/c balance is rs98000

He desires to have such securities in his portfolio so that it will help him to meet 3 of his
future financial goals. His future goals are as follows--

 Requirement of a sum of RS. 5 lakhs by 2012 to meet the educational

Expenses of his son

 A sum of Rs. 3 lakhs is required by the year 2013 to own a car.

From these above details the technique of designing investment portfolio is described as
follows
ANALYSIS OF CONSTRANTS

In this case investor’s need is to meet all or part of his living expenses. At the same time
liquidity need of the investment acts as a constraint for the investor. Likewise time
horizon of investment-planning period is so less .so the requirement is to invest in high
yielding securities for such investor.

DETERMINATION OF OBJECTIVE OF PORTFOLIO

Portfolio should be designed so as to meet his financial goals. In this case common
objectives of portfolio can be determined as follows-

→Growth In Income

→Capital appreciation

ASSET ALLOCATION IN PORTFOLIO

ASSET ALLOCATION

Depends on

RISK & RETURN

RISK & RETURN
NEED ANALYSIS
NEED ANALYSIS

Generally asset allocation in portfolio mainly depends upon two factors i.e risk taking
capacity of the investor and his future financial needs. Generally as a rule of thumb
portfolio managers use the age of the investor as a criterion for asset allocation in the
portfolio.

For example-In this case the current age of the investor=48 years. So as per the rule of
thumb 48%of investment amount is to be invested in debt fund. And 100-48=52%
should be invested in equity fund. The reason behind it is that debt fund is less risky
than equity fund.

Asset allocation in this case can be shown as below-

 EQUITY FUND DEBT FUND
52% 48%

Steps to Stock Selection Process

FUNDAMENTAL INDUSTRY ANALYSIS

ANALYSIS
COMPANY ANALYSIS

TECHNICAL ANALYSIS

FUNDAMENTAL ANALYSIS

Basically fundamental analysis covers two parts:

1. Sectorual /Industry analysis and

2. Company analysis
INDUSTRY ANALYSIS (INDIAN PHARMACEUTICAL INDUSTRY)

The Indian Pharmaceutical Industry today is in the front rank of India’s science-based
industries. A highly organized sector, the Indian Pharma Industry is estimated to be
worth of $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks third the world,
in terms of technology, quality and range of medicines manufactured.

GROWTH OF THE INDUSTRY

Chart Title
3000

2500

2000
Series 3
1500

1000

500

0
1993-94 1994-95 1995-96 1996-97 1997-98

Growth of drags production is shown graphically as below

 Chart Title
25

20

15
Series 3

10

0
1993-94 1994-95 1995-96 1996-97 1997-98

Source: IDMA Annual 1998

Growth percentage of export of drags is shown graphically as below

Chart Title
30

25

20
Series 3
15

10

0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Export of drugs and pharmaceuticals from 2002-03 to 2009-10 (May,09) are given in
table below:
Source: Directorate General of Commercial Intelligence and Statistics (DGCIS) Kolkatta

COMPETITION

The industry is having 2400 players within the organized sector and around 15000 in
small sector. The low entry barriers, government encouragement given to small sector
units and low capital costs are the reason for the presence of large number of units in the
pharmaceutical sector. Apart from internal competition the industry is facing
international competition too. The Chinese products are a significant competitor for the
Indian pharmaceutical industry. Multinational corporations like Pfizer, Abbot Labs and
Novartis also pose threat to the local products.

GOVERNMENT POLICY

The government of India has undertaken several including policy initiatives and tax
breaks for the growth of the pharmaceutical business in India. Some of the measures
adopted are:

 Pharmaceutical units are eligible for weighted tax reduction at 150% for the
research and development expenditure obtained.
  Two new schemes namely, New Millennium Indian Technology Leadership
Initiative and the Drugs and Pharmaceuticals Research Program have been
launched by the Government.
 The Government is contemplating the creation of SRV or special purpose vehicles
with an insurance cover to be used for funding new drug research
 The Department of Pharmaceuticals is mulling the creation of drug research
facilities which can be used by private companies for research work on rent

FUTURE PREDICTIONS:

 According to a study by FICCI-Ernst & Young India will open a probable US$ 8
billion market for MNCs selling expensive drugs by 2015
 The study also says that the domestic pharma market is likely to reach US$ 20
billion by 2015
 The Minister of Commerce estimates that US$ 6.31 billion will be invested in the
domestic pharmaceutical sector
 Dr Reddy's Laboratories has tied up with GlaxoSmithKline to develop and market
generics and formulations in upcoming markets overseas
 Due to the low cost of R&D, the Indian pharmaceutical off-shoring industry is
designated to turn out to be a US$ 2.5 billion opportunity by 2012.

SWOT ANALYSIS

 
Strengths

 Low cost of innovation/Manufacturing expenditure

 Low cost scientific pool on shop floor leading to high quality documentation.
 Proven track record in design of high tech manufacturing facilities.
  Excellent regulatory compliance capabilities for operating these assets.
Weakness
 Fragmentation of installed capacities.
 Low technology level of Capital Goods of this section.
 Non-availability of major intermediaries for bulk drugs.
 Lack of experience to exploit efficiently the new patent regime.
 Very low R&D.
Opportunities
 1. Aging of the world population.
 2. Growing incomes.
 3. Growing attention for health.
 4. New diagnoses and new social diseases.
 5. Spreading prophylactic approaches.
Threats

 1. Containment of rising health-care cost.

 2. High Cost of discovering new products and fewer discoveries.
 3. Stricter registration procedures.
 4. High entry cost in newer markets.

COMPANY ANALYSIS
TATA MOTOR LTD.

Company detail:

Industry Automotive
Founded 1945
Founder(s) JRD Tata

Key people Ratan Tata, Chairman

Ravi Kant, Vice Chairman
Carl Peter Foster, CEO
Prakash Telang, MD (India operations)
Ravi Pisharody, President (CVBU)

Products Automobiles

Engines

Revenue 14.250 billion (2009)

Operating income 10.40 billion (2009)

Net income 1.198 billion (2009)

Total assets 15.430 billion (2009)

Tata Motors Limited is India's largest automobile company, with standalone revenues of
USD 14.250 billion in 2008-09. It is the leader in commercial vehicles in each segment,
and among the top three in passenger vehicles with winning products in the compact,
midsize car and utility vehicle segments. The company is the world's fourth largest truck
manufacturer, and the world's second largest bus manufacturer. The company's 23,000
employees are guided by the vision to be "best in the manner in which we operate best in
the products we deliver and best in our value system and ethics." Established in 1945,
Tata Motors' presence indeed cuts across the length and breadth of India. Since, 1991
opening of the economy has changed the face of auto industry. Today, it is amongst the
main drivers of growth of Indian economy with an output multiplier of 2.24(for every
Re.1 invested, auto sector gives back Rs.2.24 to the economy). In recent years we have
seen increasing number of global players entering Indian market by way of Joint
ventures, collaborations or wholly owned subsidiary. The automobile industry is torn
between trying to reduce costs on the one hand and, on the other, dealing with the high
price of performance-enhancing technology and environmental compliance. Key drivers
in the automotive industry are:
• Reducing air pollution
• Reduction of weight
• Recyclability
• Safety
• Better performance and engine efficiency
• Aesthetics
• Longer service Life

MAJOR COMPETITORS OF TATA MOTORS

Competition
Market Cap. Sales Turnover Net Profit Total Assets
(Rs. cr.)
Tata Motors 60,209.71 35,593.05 2,240.08 31,591.38
Ashok Leyland 10,276.86 7,244.71 423.68 5,936.76
-
Eicher Motors 3,316.37 378.01 37.53 413.30
Swaraj Mazda 458.82 716.76 21.46 316.81

Key points:
• India's largest automobile company, Tata Motors, has recently launched the world's
Cheapest car .
• Tata Motors, the biggest vehicle maker of the country, which UK-based car brands
Jaguar and Land Rover (JLR) for whopping $2.3 billion last year may concentrate on
Smaller towns of the country like Ludhiana, apart from the major cities to market
these brands by setting up exclusive showrooms.
 CASH FLOW STATEMENT OF TATA MOTORS

MAR-07 MAR-08 MAR-09 MAR-10

Net Profit Before Tax 1913.46 2028.92 1001.26 2240.08

Net Cash From Operating Activities 2210.13 6174.50 1295.02 6586.03
Net Cash (used in)/from
-2805.10 -5721.86 -10644.67 -11848.29
Investing Activities
Net Cash (used in)/from Financing
303.58 1132.46 8104.70 5348.49
Activities
Net (decrease)/increase In Cash and
-291.39 1585.10 -1244.95 86.23
Cash Equivalents
Opening Cash & Cash Equivalents 1118.15 806.21 2386.77 630.04
Closing Cash & Cash Equivalents 826.76 2391.31 1141.82 716.27

RATIO ANALYSIS (2008-09 and 2009-10)

Investment Valuation Ratios

Face Value 10.00 10.00
Dividend Per Share 6.00 15.00
Operating Profit Per Share (Rs) 33.52 73.23
Net Operating Profit Per Share (Rs) 499.23 623.32
Free Reserves Per Share (Rs) 217.77 --
Bonus in Equity Capital 21.64 19.50
Profitability Ratios
Operating Profit Margin(%) 6.71 11.74
Profit Before Interest And Tax
3.20 8.82
Margin(%)
Gross Profit Margin(%) 3.30 8.84
Liquidity And Solvency Ratios
Current Ratio 0.44 0.62
Quick Ratio 0.58 0.46
Debt Equity Ratio 1.06 1.11
Long Term Debt Equity Ratio 0.49 1.11
Debt Coverage Ratios
Interest Cover 2.43 2.77
Total Debt to Owners Fund 1.06 1.11
Financial Charges Coverage Ratio 3.64 3.83
Financial Charges Coverage Ratio
3.73 4.10
Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio 13.47 13.07
Debtors Turnover Ratio 19.11 18.02
Asset Turnover Ratio 1.88 1.93

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 34.52 44.28

Dividend Payout Ratio Cash Profit 17.94 29.02

Opportunities and Threats

a) Opportunities
 Road Development: The ongoing road development program would improve
connectivity to ports, cities and villages through a network of highways and
 interconnecting roads by 2010-12. Improved road network would help in faster
movement of goods between various cities and towns. The Company launched
TATA Novus range of vehicles in the heavy segment and TATA ACE for last
mile distribution.
 Car penetration in India: Car penetration in India is 7 cars per 1,000 persons.
International: In FY 2006-07, the Company increased share of its overseas vehicle
sales from 7.6% last year to record high of 11.1% (as % of its total sales) and has
planned further increase in this year.
b) Threats
 Global Competition: India is increasingly attracting global players to set up
manufacturing facility for producing cars, especially small cars. Global automobile
manufacturers are also entering India in commercial vehicle segment to leverage
India’s low cost production advantage to their favor.
 Fuel Prices: The continuing fuel price increase in the domestic market could
significantly impact demand of commercial and passenger vehicles.
 Input costs: Commodity items particularly steel, non-ferrous metals, rubber and
engineering plastics have witnessed huge price increases in the past. These prices
are expected to increase further affecting the Company’s profitability.
 Interest rate hardening and other inflationary trends: With interest rates hardening
and liquidity crunch in the system, growth in sales may be adversely impacted.
 Government Regulations: Stringent emission and safety requirements could bring
new complexities for automotive and component manufacturers impacting the
Company’s business.
TECHNICAL ANALYSIS

TECHNICAL ANALYSIS
Technical analysis is concerned with predicting future price trends from historical price
and volume data. It is also a method of predicting price movements and future market
trends by studying charts of past market action which take into account price of
instruments, volume of trading etc.

Stock Charts

Stock charts gained popularity in the late 19th Century from the writings of Charles H.
Dow in the Wall Street Journal. His comments, later known as "Dow Theory", alleged
that markets move in all kinds of measurable trends and that these trends could be
deciphered and predicted in the price movement seen on all charts.

A stock chart is a simple two-axis (x-y) plotted graph of price and time. Each individual
equity, market and index listed on a public exchange has a chart that illustrates this
movement of price over time..

Stock charts can be created in many different time frames. Mutual fund holders use
monthly charts in which each individual data plot consists of a single month of activity.
Day traders use 1 minute and 5 minute stock charts to make quick buy and sell decisions.
The most common type of stock chart is the daily plot, showing a single complete market
session for each unit. a 100% move. These charts are used to analyse and decide whether
the current market is a BULL MARKET or a BEAR MARKET. On individual charts,
investors and traders can learn the Same thing about their favorite companies.

TRENDS:
It is suggested to the client to use stock charts to identify the current trend. A trend
reflects the average rate of change in a stock's price over time. Trends exist in all time
frames and all markets.. Long term investors watch trends that persist for many years.
Trends can be classified in three ways: UP, DOWN or RANGEBOUND. In an uptrend, a
stock rallies often with intermediate periods of consolidation or movement against the
trend. In doing so, it draws a series of higher highs and higher lows on the stock chart. In
an uptrend, there will be a POSITIVE rate of price change over time. In a downtrend, a
stock declines often with intermediate periods of consolidation or movement against the
trend. In doing so, it draws a series of lower highs and lower lows on the stock chart. In a
downtrend, there will be a NEGATIVE rate of price change over time.. A famous quote
about trends advises that "The trend is your friend". For traders and investors, this
wisdom teaches that they will have more success taking stock positions in the direction of
the prevailing trend than against it.

Moving Averages
 The most popular technical indicator for studying stock charts is the MOVING
AVERAGE. This versatile tool has many important uses for investors and traders.
Plotting moving averages in stock charts reveals how well current price is behaving as
compared to the past. The power of the moving average line comes from its direct
interaction with the price bars. Current price will always be above or below any moving
average computation. When it is above, conditions are "bullish". When below, conditions
are "bearish". Additionally, moving averages will slope upward or downward over time.
This adds another visual dimension to a stock analysis. Moving averages define STOCK
TRENDS. They can be computed for any period of time. Investors and traders find them
most helpful when they provide input about the SHORTTERM, INTERMEDIATE and
LONG-TERM trends. For this reason, using multiple moving averages that reflect these
characteristics assist important decision making. Common moving average settings for
daily stock charts are: 20 days for short-term, 50 days for intermediate and 200 days for
long-term.

One of the most common buy or sell signals in all chart analysis is the MOVING
AVERAGE CROSSOVER. These occur when two moving averages representing
different trends cross. For example, when a short-term average crosses BELOW a long-
term one, a SELL signal is generated. Conversely, when a short-term crosses ABOVE the
long-term, a BUY signal is generated

DIVERSIFIFYING AND RISK MINIMISING IN PORTFOLIO

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’.

The investor can minimize his risk and maximize his return by simply diversifying his
portfolio. This could be illustrated with the help of portfolio markowitz model by taking
an imaginary figure of stocks.

For example two stocks of ABC Company and XYZ Company are taken. The return
expected from each company and their probability of occurrence are given as follows

Details Stock ABC Stock XYZ

Return % 11 or 17 20 or 8

Probability of return .5 each return .5 each return

Calculation

ABC expected return =.5*11 +.5*17 =14 XYZ expected return =.5*20+.5*8 =14

ABC variance=.5(11-14)2+.5(17-14)2=9 XYZ variance =.5(20-14)2 +.5(8-14)2 =36

ABC Standard deviation = √variance=√9=3 XYZ standard deviation =√variance = √36=6

ABC and XYZ companies stocks have the same expected return of 9%.XYZ company’s
stock is much riskier than ABC stock, because the standard deviation of the former being
6 and latter 3. When ABC return is high XYZ return is low and vice-versa .Likewise when
ABC return is 11%, XYZ return is 20%.If a particular investor holds ABC or XYZ he would
stand to lose in the time of bad performance.

Suppose the investor holds two third of ABC and one third of XYZ, the return can be
calculated as follows

Expected return: Possibility-1 =2/3 * 11 + 1/3 * 20 =14

Possibility-2 =2/3 *17 +1/3*8= 14

In both the situation the investor stands to gain if the worst occurs, than by holding
either of the security individually. Holding two securities may reduce the portfolio risk
too. The portfolio risk can be calculated with the help of following formula

Õp= √X12 Õ1 + X2 2Õ2 +2X1X2 (r12 Õ1Õ2)

Õp =Portfolio standard deviation X1=Percentage of total portfolio value in stock XI

X2 =Percentage of total portfolio value in stock X2 Õ1 =Standard deviation of stock X1

Õ2 = Standard deviation of stock X2 r12=Correlation coefficient of X1 and X2

r12= covariance of X12

Õ1 Õ2

Here in this above example co-variance of X12 (assuming ABC as X1 and XYZ as X2)

Now co-variance of X 12 = ½ ⊏(11-14)(20-14)+(17-14)(18-14)⊐ =-18

∴r=-1

The correlation co-efficient indicates the similarity or dis-similarity in the behavior of X1

and X2 stocks.co-variance shows how much X and Y very together as a proportion of
their combined individual variations measured by s.d1 and 2 .Here co-relation co-
efficient is -1 which indicates that there is a perfect negative correlation and the return
move in the opposite direction. If the correlation is 1, perfect positive correlation exists
between the securities and they tend to move in the same direction. If it is zero, the
securities returns are independent.

By putting the above formula portfolio risk can be calculated as below---

Portfolio risk Õp =√ (2/3)2 *9 + (1/3)2 *36 +2*2/3*1/3(-1*3*6) =0

It means that the risk in the portfolio can be eliminated if the securities are perfectly
negative correlated.

So while selecting the asset in the portfolio the investor should make a detailed analysis
of risk and return characteristics of stocks and should try to diversify his port folio.

RISK & RETURN GRAPH OF VARIOUS SECURITIES

ANALYSIS AND INTERPRETATION OF CUSTOMER SATISFACTION
Responding to the question on company’s service, client’s view are shown as below

CUSTOMER SATISFACTION
13
6

32
EXCELLENT
GOOD
AVERAGE
BELOW AVG.

49

Analysis

The above diagram shows about customer’s satisfaction on company’s PMS Service. It is
clear from the above diagram that 13% of the customers, who have rated the service as
‘Excellent’, are completely satisfied on company’s service. Likewise the number of
customers who have rated company’s service as Good, Average, below average are 49,
32and 6% respectively. The most important point is that there are no customers who
have rated the service of company as poor.

INTERPRETATION

From the above figure it could be interpreted that the company’s service to its customer is
satisfactory. Because majority of customers feel and rated the company’s service as good.
In addition to this, company also has 13% of customers who have rated the company’s
service as excellent which shows the high standard service provided by the company.

The main reason for this level of customer satisfaction would be because of the following
additional service that the company is providing---

 AUTO UPDATION---Transaction done through Geojit is updated automatically at

their client’s account .Clients can avail the facility and could check their account
online.

 Various value added service like

 Free access to investment advice from company’s research team
 Daily research reports and market review
 Easy Access - Immediately on opening a PMS account the client is issued a
 User ID code and a Password which gives him 24/7 online access to his
portfolio details.
 Portfolio and NAV are communicated bi-weekly vie-email
 Services of professionally qualified executives at 500 offices across India.
 Free Seminars- Geojit organizes seminars across the country from time to
time in order to educate investors in various subjects related to the stock,
derivatives and commodities markets
All these services help to fulfill the needs of investor and
acts as a key driver of customer satisfaction.

Responding to the question on keeping future relationship with the company,client’s

views on this is shown as below
 FUTURE RELATIONSHIP

27 YES
NO

73

Analysis

To the above question, 73%of customers have responded that they are still willing to
continue relationship with the company and the rest 27% of its customer have viewed
negatively that they would not be able to keep relationship with the company in future

Interpretation

From the above analysis, it could be interpreted that the main reason for which its
customers viewed that they are willing to continue relationship with the company may be
as follows---

 Company is able to fulfill clients objective on portfolio

 Smart class of product and service
 Wide spread geographical presence and dedicated team for investors services.
.

 Constantly positive return on its PMS Service. However it has been found that due
to good positive return on its pms service customers are seem to be satisfied with
the company and viewed to keep relationship.

Return on pms is shown as below

 120.00%
RETURN%
100.00%

80.00%

60.00%

40.00% RETURN%

20.00%

0.00%
2005 2005-06 2006-07 2007-08 2009-10

Inspite of these,Some of its clients are dis-satisfied because of its negative return in the
year 2008-09.
.

Responding to the question on reason for choosing Geojit Bnp paribas as their investment
company 54% of its clients have viewed that company was able to deliver good return so
for that they have choosed the company . But most of its clients have attributed several
reasons for their choice to Geojit bnp paribas as their investment company

From all these above analysis, it could be said that the level of
satisfaction that company’s service provide to clients is satisfactory. All most all the
clients are satisfied on company’ services. Very few clients are to certain extent
dissatisfied on the company’s service .Reason for the dissatisfaction is elaborated in
detail in later pages.

.
Chapter V. Finding & conclusions

FINDINGS

 Investors prefer to make diversified portfolio. They prefer to make the portfolio in
such a pattern that the portfolio includes various kinds of securities like, long –
term &short – term investment, equity, debt, non –security forms like insurance,
etc.
 Many investors are not fully aware about various factors of investment portfolio
they measure the portfolio by only two factors risk and return. Relationship of
ability to bear risk and expectation of return both are found as complementary and
sometimes as contradictory in case of investors psychological thinking pattern.
They expect high return but not ready to take high risk.
 There are various behavioral aspects that affect the investment decision and
preference of an investor, like

- Age

- Size of family

- Income

- Occupation

-Future financial goals/need

 Investors prefer to create a need base portfolio rather than blindly saving, they
have set the criteria and need prior to the investment choice and based upon that
they want to have their portfolio.
 Most of the investors prefer portfolio managers or broking firms to design

portfolio for them .This is because of ignorance in the capital market .

 It has been found that majority of the investors who wants portfolio managers to

design portfolio for them are male and in the age group of 31-41years
  It has also been found that most of the clients approximately 70% of the clients

believe that investing in PMS is far safer than investing in mutual fund because
they feel that PMS Service is a customized service where investors can act
according to their own wish.
 PMS Service provided by Geojit Bnp Paribas financial services is also upto the

mark and satisfactory. The main reason of customers satisfaction on company’s

PMS services is due to the positive return provided to PMS clients.

REASON FOR CUSTOMER DIS-SATISFACTION

At Geojit it has been found that some of its customers are dis –satisfied on the service
provided by the company. There exists some gap between the perceived service that
customers desire and the actual service that they are being provided This has been
shown diagrammatically as below-

GAP-04
SERVICE EXTERNAL
DELIVERY COMMUNICATIO
GAP-01 N TO CUSTOMER

MARKETER
GAP-03

TRANSLATION
PERCEPTION INTO
SERVICE QUALITY
SPECIFICATION

GAP-02

MANAGEMENT PERCEPTION
OF CUSTOMER EXPECTATION
Gap-1: Between customer expectation and management perception:
Management does not always correctly perceive what customer want. For intense in
Geojit some of its customers are expecting to buy shares after depositing required check
but in-fact according to the company policy they have to wait for 3 days and same happen
with demand draft.
Gap-2: Between management perception and service quality:
Management might correctly perceive customer’s want but not set a performance
Standard. For example in several times it has been marked that it takes a few longer days
to pass all the stage of processing.
Gap-3: Between service quality specification and service quality:
Company Personnel might not be properly trained, or incapable or unwilling to meet the
standard because complaints are there on company personnel of taking time to listen to
Customer and serving them fast.

Gap-4: Between service delivery and external communication:

Few clients are dissatisfied on the company because they viewed that they are being
wrongly informed about the company’s service by the company representative. For
example it has been found that various customer relationship officers provide wrong
information like lesser brokerage charge, etc to clients and attract them to invest by the
company

CONCLUSION

After the detail study on each and every aspects of this topic, it could be concluded that
portfolio management is a dynamic and flexible concept which involves regular and
systematic analysis, proper management, judgment, and actions. Though in the earlier
stage the concept of portfolio management services was not so popular but as on today
PMS has become one of the booming avenues for investment and is yet to gain more
importance and popularity in future as people are slowly and steadily coming to know
about this concept and its importance.

In the present day context, it also has been considered by investors that Port folio
management Service is one of the most important and effective investment tool because
it helps investors to meet their future financial goals

Lastly the most important thing is that though portfolio management is a dynamic
concept and one of the best avenue to manage investment but investors should try to
think by their own rationality and knowledge rather than influencing from others. The
investor while taking the investment portfolio choice should keep in mind that one
doesn't need to be wealthy to save, but one needs to save to be wealthy.

Chapter VI. Suggestions and recommendations

SUGGESTIONS

Generally investing in securities in capital market consists of various kinds of risk

.Investors while investing in equity always try to get good return by avoiding risk
character of the securities. In this circumstance necessary suggestions to the clients to
save them from various types of market risk are as follows-

MARKET RISK PROTECTION

 The investor has to study the price behavior of the stock. The stock that shows a
growth pattern may continue to do for some more periods. The Indian stock
market expects the growth pattern to continue for some more time in information
technology stock and depressing condition to continue in the textile related stock.
It is better to avoid cyclical Stocks.
 The standard deviation and beta indicate the volatility of the stock. The standard
deviation and beta are available for the stocks that are included in the indices.
 Looking at the beta values, the investor can judge the risk factor and make wise
decision according to his risk tolerance.

PROTECTION AGAINST INTEREST RATE RISK

Suggested solution to investor to protect against interest rate risk may be as follows-

 Hold the investment to maturity. If he sells it in the middle due to fall in the
interest rate, the capital invested would experience a heavy loss.
 Portfolio manager can invest in the treasure bills and the money can be reinvested
in the market to suit the prevailing interest rate
 Another suggested solution is to invest in bonds with different maturity dates.
When the bonds mature in different dates, reinvestment can be done according to
the changes in the investment climate. Maturity diversification can yield the best
results.

PROTECTION AGAINST INFLATION

 General way to avoid risk is to have investment in short term securities and to
avoid long term investment.
 Investment diversification can also solve this problem to a certain extent. The
investor has to diversify his investment in real estates, precious metals, arts and
antiques along with the investment in securities to protect himself from risk of
inflation

PROTECTION AGAINST BUSINESS AND FINANCIAL RISK

 To guard against the business risk, the investor has to analyse the strength and
weakness of the industry to which the company belongs. If weakness of the
industry is too much of govt. interference in the way of rules and regulations, it is
better to avoid it.
  Analyzing the profitability trend of the company is essential. The calculation of
standard deviation would yield the variability of the return. If there is
inconsistency in the earnings, it is better to avoid it. The investor has to choose a
stock of consistent track record.
 The Financial risk should be minimized by analyzing the capital structure of the
company. If the debt equity ratio is higher, the investor should have a sense of
caution. Along with the capital structure analysis, he should also take into account
of the interest payment. In a boom period, the investor can select a highly levered
company but not a recession.

SUGGESTIONS TO INVESTORS

 Investors should involve in investing in stock market as early as possible. so

that investor’s portfolio will get a longer time period and in the long run
investor will be benefitted by getting more return. Investing in CD's or Money
Market accounts can be part of the investor’s portfolio, but returns are
extremely low as well. By placing money in several solid mutual funds
investor can earn a much higher return, and of course there is more risk in
these investments, but the reward can be much greater as well.
 It is suggested to investors to diversify their portfolio. It means buying stocks,
bonds, real estate, or part of a commercial business. Investors has to make
sure that they do not have all their money in one stock or mutual fund (no
matter how successful it has been) because the market can change.

RECOMMENDATIONS

To satisfy the customers need and expectation and to reduce customer grievances on
company’s service it is recommended to implicate below model as shown
diagrammatically
 CUSTOMER CUSTOMER
COMMUNICATION FEEDBACK
CUSTOMER

SATISFACTION

SPECIAL CUSTOMER
REQUIRMENTS OF GRIVENCES
CUSTOMER

CUSTOMER GRIEVANCES:

As with the business, certain grievances would also be arising by the customers. It is
required to take Prompt action by the company’s customer care representative to remove
any irritants so that grievances are reduced at the first place..

CUSTOMER FEEDBACK:

Company should collect feedback from its customers at regular intervals. These
feedback should be analysed thoroughly which could help the company to asses
customers level of satisfaction and dissatisfaction and based on the feed back company
should take necessary action to satisfy its customers need . Such feedbacks could be
collected by various methods, viz.,

 - By sending a standard format & collecting the data.

 - From the marketing personnel, while they interact with customers during tours.
 - As and when the customers visit the office.

CUSTOMER COMMUNICATION
Company also should establish a proper channel by which it could freely interact with
the clients and their suggestions, requirements etc.Which not only will help to satisfy the
customers need and desires but also could able to keep morality of customers.

The below diagram shows the various ways to create a good way of communication-

CALL BACK
SERVICE SERVICE
CUSTOMER VISIT
INFORMATION
TO BRANCH

COMMUNICATION

CALL BACK
SERVICE
SERVICE
INFORMATIO
N
QUESTIONERY
 Questionnaires

Date:
Dear sir/madam
I Rajesh Ranjan Nayak a PGDM student from SCMS-COCHIN is conducting a market
research as a part of my project. Kindly extend your cooperation in filling the
questionnaire and help me in doing the research successfully.
------------------------------------------------------------------------------------------------------------
1) Name -:

2) Address -:

3) Phone No -:

4) Age Group

18 - 20. 41 - 50

21 – 30 51 - 60

31 – 40 60 +

5) Gender

Male Female

6) Organization Name -:

7) Educational Qualification -:

Secondary Higher Secondary Graduate Post Graduate