PROJECT REPORT

ON
PORTFOLIO MANAGEMENT

A Project Report submitted in partial fulfillment of requirements

For
BBA Course

Department of Bachelor of Business Administration,

Marwari College, Ranchi-834001

SUBMITTED BY:-
PRIYANKA KUMARI
ROLL NO-10MCRBC86044
SPECIALISATION- FINANCE
SESSION-2010-13

Department of Bachelor of Business Administration

Marwari College, Ranchi-834001

1
 To whom it may concern

This is certified that Ms.PRIYANKAKUMARI student of

B.B.A. semester6TH bearing Ranchi University Roll No:-
10MCRBC86009, has fully completed the project for the partial
fulfillment of Bachelor of Business Administration session
2010-2013.

He has undergone 6 (six) week project in the concern Bonanza

Portfolio Limited on the topic Portfolio Management in
specialization Finance.

Rakesh Sinha 1. Internal

Supervisor
LECTURER

2. External
Supervisor

2
 DECLARATION

I do hereby declare that this project report entitles “PORTFOLIO

MANAGEMENT”. For partial fulfillment of the requirements for the

award of the degree Of “Bachelor of Business Administration” is a record

of original work done by me under the supervision and guidance of

Mr. Rakesh Sinha faculty of Finance Management, Bachelor of Business

Administration, Marwari college.

PRIYANKAKUMARI

Roll No: - 10MCRBC86044

Session-2010-13

Date:

Place: Ranchi

3
 ACKNOWLEDGEMENT

I express my deep sense of gratitude to GANPATI CHANDRA GUPTA

(AVP MARKETING),andfor giving me this opportunity to work in their
esteemed organization and helping me for completing the project in
successful manner.

I am also grateful to for providing me all the documents and giving me

deep knowledge for the communication I take this opportunity to express
my deep sense of gratitude to BONANZA PORTFOLIO LTD. for taking me
as a summer training and extending me full support and co-operation
towards the completion of this project.MR JOYDEEP DAS
(HR MANAGER)

I last but not the least; I am grateful to the BONANZA Family for their kind
co-operation.

PRIYANKAKUMARI

4
 PREFACE

The reforms, since 1991, have brought substantial deregulation to

Indian capital market; today the markets are moving towards
computerized, scrip less trading. In this process the market would
become more efficient and the lessons of portfolio theory would assume
increased relevance.
About ten years ago, we often wondered whether many of the concepts
that we are dealing with had any relevance to India. Terms like Mutual
Funds, Portfolio Management, and Interest Rate Risk seemed alien to
this land. The last few years have, however, changed everything. Today,
when we talk of portfolio management in our classrooms or in seminars
and conferences, we sense a tremendous excitement and interest among
the audience.
There is a little doubt that stock markets can be treacherous. But we
have learnt that investing in shares need not be such a nerve-racking
experience, provided the decisions are made on the basis of analysis and
reasoning, and are not guided by whims, fancies and rumors.
I have kept the use of mathematics to a minimum in the text as I believe
that the principles and techniques of portfolio management can be
understood and used without a rigorous knowledge of the mathematical
foundations upon which they are based.

5
 CONTENTS

CHAPTER -1
 COMPANY PROFILE 8
GROUP COMPANIES

BONANZA’S VISION

BONANZA’S VALUES

BONANZA’S STRENGTH

'BONANZA’S PILLARS

BONANZA’S AFFILIATIONS

INFRASTRUCTURE

ACHIEVEMENTS

INNOVATIONS

 OBJECTIVES OF PROJECT 21
TO STUDY THE SHARE TRADINGS.

CHAPTER-2
 ORGANISATION CHART 23
ORGANISATIONAL STRUCTURE

 RESEARCH METHODOLOGY 24
COLLECTION OF DATA

SOURCES OF DATA

 FUNDAMENTAL ANALYSIS 25

6
 FUNDAMENTAL ANALYSIS OF GROWTH ORIENTED
COMPANIES

INDUSTRIAL ANALYSIS

COMPANY ANALYSIS

FINANCIAL ANANLYSIS

CHAPTER-3
 PRODUCTS AND SERVICES 32
PORTFOLIO

MUTUAL FUNDS

EQUITY

CHAPTER-4
 FINDINGS 64
 CONCLUSION 65
 SUGGESTIONS 66
 BIBLOGRAPHY 67

7
 COMPANY PROFILE

 GROUP COMPANIES
 BONANZA’S VISION
 BONANZA’S VALUES
 BONANZA’S STRENGTH
 BONANZA’S PILLARS
 BONANZA’S AFFILIATIONS
 INFRASTRUCTURE
 ACHIEVEMENTS
 INNOVATIONS

OBJECTIVES OF PROJECT

 TO STUDY THE SHARE TRADINGS.

8
Company profile

PORTFOLIO OF BONANZA PORTFOLIO LTD.

Bonanza, A Leading Financial Service & Brokerage House working

diligently since 1994can be described in a single word as a “Financial
Powerhouse”. With leadership in execution and clearing services on
Exchange Traded Derivativesand Cash Market Products, Bonanza has
spread its trustworthy tentacles all over thecountry with more than 1510
outlets spread across 515 cities.

It provides an extensive range of services in equity, commodities, currency

derivatives,wealth management, distribution of third party products, etc.

Being at par with the modern tech-savvy world, Bonanza makes an

integrated and aninnovative use of technology. It also enables its clients to
trade online as well as offlineand the strategic tie-ups with the latest
technology partners has earned Bonanza aprestigious place as one of the
top brokerage houses in the country.

Client-focusedphilosophy backed by memberships of all principal Indian

Stock and CommodityExchanges makes Bonanza stand apart from
competitors as a preferred service provide ring the industry for value-based
services.

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GROUP COMPANIES:-

 Bonanza Portfolio Ltd.

 Bonanza Commodity Brokers (P) Ltd.

 Bonanza Insurance Brokers (P) Ltd.

 Bonanza Global DMCC, Dubai

 Sunglow Fin invest Pvt. Ltd.

 Bonanza Corporate Solutions Pvt. Ltd.

BONANZA’S VISION

To be one of the most trusted and globally reputed financial

distribution companies

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VALUES

Customer Centric Approach

At Bonanza, customers come first. And their satisfaction is not just our top

priority but also the driving force for us, every single day.

Transparency

Honesty is our forte. We believe in dealing on thoroughly ethical grounds,

being fair and transparent with our customers.

Meritocracy

We recognize and appreciate the efforts put in by our employees. And, we,
as a

matter of fact, reward and distinguish each one of them, ceaselessly.

Solidarity

We believe in sharing a forthright and respectful relationship with our

business

partners and employees. We consider them both as our team associates,

who

work together. Succeed together.

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BONANZA’S STRENGTHS

 Bonanza has over 1510 outlets in more than 515 cities in India.

 Bonanza has more than 2,87,765 clients comprising of Corporate

Financial

 Institutions & Investors, Mutual Funds, High Net-worth Individuals

and Retail Investors.

Bonanza has a young dynamic team of 2600 professionals. Strong

infrastructure supporting over3000 trading terminals supportingmore than
350 VSAT's to support geographic reach and servicing capabilities.
24x7 service and support via our federal support system.

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BONANZA’S PILLARS
Meet the minds behind the corporation Bonanza - the Directors who are

leading this gigantic force.

Mr. S. P. Goel
The Founder Director of Bonanza who has been
instrumental in

chartering critical and strategic initiatives. With an

experience of 25

years in the finance business, Mr. Goel has also been

appointed as

the director of the OTC Exchange of India.

He represented NSEIL for the SEBI constituted Dr. J R Verma

Advisory committee for the development of the derivatives market in

India.

He started his career as a CA in 1987 and soon after he embodied several

prominent committeeson settlement issues (COSI), a policy generating
body at the NSE of India Ltd and Dispute Resolution Committee (DRC) of
National Stock Exchange Clearing Corporation Limited (NSCCL).

13
Mr. ShivkumarGoeI

Being the Founder Director of Bonanza, he has been

handling IT &

risk initiatives since inception. Formerly, designated as

the CEO of
SRF Finance Limited, Delhi; Mr. ShivkumarGoel had
also

spearheaded the IT committee of the DELHI Stock

Exchange.
A CA & CS with more than 30 years of experience, he recently was
nominated as the executive committee member of Depositors
Participants Association of India. He is currently a functional member with
Association of
National Exchanges Members of India – NR

Mr. S. K. Goel

Mr. S.K.Goel has been Bonanza's Founder Director

and a prominent

CA for more than 35 years. He has been mainly

heading

Bonanza's northern and eastern zone. He was formerly with

theModis& OSWALS - one of the leading manufacturing companies,

in addition to being empanelled with various major banks as their

Internal Auditor.

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Mr. Vishnu Kumar Agarwal

The Founder Director of Bonanza with over 30 years of

experience; Mr. Vishnu has proficiently taken charge of

Administration, Real Estate Investments and Initiatives for

all the group companies of Bonanza.

Mr. AnandPrakashGoel

Has been playing a pivotal role as Bonanza’s

founder director by resourcefully managing
taxation, compliance and depository. A qualified
CA with more than 30years of experience in his
stride, he has undertaken audits for leading banks
across India.

15
BONANZA’S AFFILIATIONS

16
Depository participant with CDSL and NSDL:

TECHNOLOGY

Single VSAT Connectivity for NSE/BSE/F&O/NCDEX/MCX/MCX-SX

through

Virtual Private Network (VPN) Other connectivity links to branches through

Leased Lines, ISDN, Radio Frequency and Broadband.

High Speed and Streaming live quote access via Internet for
NCDEX/MCX/MCXSX.

For branches and retail clients.

Internet based Depository access (Speed-e/Easiest) to offer DP services to
Retail investors.

24x7 online access to a centralized support structure for all products

offerings.

RESEARCH DESK

Bonanza Research Desk has a dedicated team of research analysts and

experts that

have an in-depth knowledge of the market place. They offer value

perspectives, focus on

17
opportunities for investment and growth and endeavor to reduce risk
potential. Its

premium advisory services are based on technical and fundamental views

and strategies.

 Equity

SMS alert

Daily market strategy

Weekly market strategy

Monthly market strategy - 'Equity talk'

Daily derivative strategy

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Commodities

SMS alert

Daily report

Weekly report

Monthly report: Commodity Review

Mutual funds

Daily Performance Sheet

‘
Weekly Mutual Fund Report – 'The Edge'

Monthly free News Letter – 'The Perspective'

Regular updates on products, performance and new launches.

Currency Derivatives

SMS alert

Daily Forex Insight report

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 BONANZA INFRASTRUCTURE:

We have one Regional office in every state and having not less than 15
offices in eachstate with the carpet area of more than 400 sq ft for smaller
locations and 10,000+ sq ftinthe rest.

 Using the best technology we have minimum 3-5 computers in smaller

outlets which is

mandatory for business development. Bigger outlets have roughly more than
500 computers.

ACHIEVEMENTS

o 4 th largest in terms of number of offices for 2010 as per study by

Dun & Bradstreet

o Ranked amongst the Top 3 National Level Financial advisors for 3

consecutive years
in a row --- 08'-09-'10 by CNBC TV 18 & UTI MF

o Top equity Broking House in terms of branch expansion for 2008

o 3rd in terms of number of trading accounts for 2008 as per study by

Dun & Bradstreet

o 6th in terms of trading terminals for 2 consecutive years 07'-08' as

per study by Dun & Bradstreet

o Awarded by BSE as "Major Volume Driver"-- 04-05,06-07,07-08

o 9th in terms of Sub Brokers for 2007

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INNOVATION
 Setting up a new dept “Bonanza Synargy” which would be working
as a support to the sub-brokers and franchisees.

 Talisma CRM Software

- Thish tracks all the interactions between customer and

customer care executive.
- Autometically escalate the clients issue to superior if not
attended within 24hrs.
- Escalation is upto the company’s chairman.

 Introduction Bonanza’s Fund-of-Fund under the PMS umbrella which

helps clients in investing in a portfolio of mutual funds which are
cherry picked by in-house research team to suit changing market
and economic scenario.

21
Objectives of project
 To study the share trading services offered by Bonanza
Company compared to other companies like Narnolia, Blue
chips and Black Rock.

 To study how Bonanza increases its brokerage customers.

 To know the strategy influenced by demographic factor s.

 To give suggestions and recommendations.

22
ORGANISATIONAL CHART

 ORGANISATIONAL STRUCTURE

RESEARCH METHODOLOGY

 COLLECTION OF DATA
 SOURCES OF DATA

FUNDAMENTAL ANALYSIS

 FUNDAMENTAL ANALYSIS OF GROWTH

ORIENTED COMPANIES
 INDUSTRIAL ANALYSIS
 COMPANY ANALYSIS
 FINANCIAL ANANLYSIS

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 ORGANISATIONAL STRUCTURE

HEAD

REGIONALHEAD

PERSONAL HEAD OF SALES

DEPARTMENTTTTT

Territory Marketing Finance Department

Development Development
manager Manager

Marketing Finance
Account Development Manager
Development Coordinator

CustomerExecutive Marketing Account

Executive Executive

Accountant

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RESEARCH METHODOLOGY

The methodology used for collecting the data is considered primary for any
report. The research design of this report is exploratory i.e. formulating a
problem from more precise investigation. The major emphasis is on the
discovering of ideas and insights. The formulated research design is
characterized by great amount of flexibility.

COLLECTION OF DATA:-

Data is collected from primary & secondary sources.

Primary data:
The data which is collected for the first time is known as primary data. It is
the data which specially collected for particular topics or problem arise in
an organization.
Some sources are given below:

Sources of primary data:

 Employees
 Directors
 Customers
 Different departments

Secondary data:
The data which is already collected and assembled in some form i.e.
journals, magazines, websites etc are called secondary data.

Sources of secondary data:

 BSE websites
 RBI website
 Monthly bulletins

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 FUNDAMENTAL ANALYSIS:
(A) FUNDAMENTAL ANALYSIS OF GROWTH ORIENTED
COMPANIES:

One of the first decisions that an investment manager faces is to identify

the industries which have a high growth potential. Two approaches are
suggested in this regard. They are:
a) Statistical Analysis of Past Performance:

A statistical analysis of the immediate past performance of the share price

indices of various industries and changes there in related to the general
price index of shares of all industries should be made. The Reserve Bank
of India index numbers of security prices published every month in its
bulletin may be taken to represent the behaviour of share prices of various
industries in the last few years. The related changes in the price index of
each industry as compared with the changes in the average price index of
the shares of all industries would show those industries which are having a
higher growth potential in the past few years. It may be noted that an
Industry may not be remaining a growth Industry for all the time. So he
shall now have to make an assessment of the various Industries keeping in
view the present potentiality also to finalize the list of Industries in which he
will try to spread his investment.

26
 b) Assessing the Intrinsic Value of an Industry/Company:

After an investment manager has identified statistically the industries in the

share of which the investors show interest, he would assess the various
factors which influence the value of a particular share. These factors
generally relate to the strengths and weaknesses of the company under
consideration, Characteristics of the industry within which the company
fails and the national and international economic scene. It is the job of the
investment manager to examine and weigh the various factors and judge
the quality of the share or the security under consideration. This approach
is known as the intrinsic value approach.

(B) INDUSTRY ANALYSIS

First of all, an assessment will have to be made regarding all the conditions
and factors relating to demand of the particular product, cost structure of
the industry and other economic and Government constraints on the same.
As we have discussed earlier, an appraisal of the particular industry’s
prospect is essential and the basic profitability of any company is
dependent upon the economic prospect of the industry to which it belongs.
The following factors may particularly be kept in mind while assessing to
factors relating to an industry.

27
 (i) Demand and Supply Pattern for the Industries Products and
Its Growth Potential:The main important aspect is to see the likely
demand of the products of the industry and the gap between demand
and supply. This would reflect the future growth prospects of the
industry. In order to know the future volume and the value of the
output in the next ten years or so, the investment manager will have to
rely on the various demand forecasts made by various agencies like
the planning commission, Chambers of Commerce and institutions like
NCAER, etc.

(ii) Profitability: It is a vital consideration for the investors as profit is the

measure of performance and a source of earning for him. So the cost
structure of the industry as related to its sale price is an important
consideration. In India there are many industries which have a growth
potential on account of good demand position. The other point to be
considered is the ratio analysis, especially return on investment, gross
profit and net profit ratio of the existing companies in the industry. This
would give him an idea about the profitability of the industry as a
whole.

(iii) Particular Characteristics of the Industry : Each industry has its

own characteristics, which must be studied in depth in order to
understand their impact on the working of the industry. Because the
industry having a fast changing technology become obsolete at a
faster rate. Similarly, many industries are characterized by high rate of
profits and losses in alternate years. Such fluctuations in earnings
must be carefully examined.

28
(C) COMPANY ANALYSIS:
To select a company for investment purpose a number of qualitative
factors have to be seen. Before purchasing the shares of the company,
relevant information must be collected and properly analyzed. An
illustrative list of factors which help the analyst in taking the
investment decision is given below. However, it must be emphasized
that the past performance and information is relevant only to the extent it
indicates the future trends. Hence, the investment manager has to
visualize the performance of the company in future by analyzing its past
performance.

1) Size and Ranking:A rough idea regarding the size and ranking of
the company within the economy, in general, and the industry, in
particular, would help the investment manager in assessing the risk
associated with the company. In this regard the net capital
employed, the net profits, the return on investment and the sales
volume of the company under consideration may be compared with
similar data of other company in the same industry group. It may
also be useful to assess the position of the company in terms of
technical knowhow, research and development activity and price
leadership.

2) Growth Record:The growth in sales, net income, net capital

employed and earnings per share of the company in the past few
years must be examined. The following three growth indicators may
be particularly looked in to (a) Price earnings ratio, (b) Percentage
growth rate of earnings per annum and (c) Percentage growth rate of
net block of the company. The price earnings ratio is an important
indicator for the investment manager since it shows the number the
times the earnings per share are covered by the market price of a

29
 share. Theoretically, this ratio should be same for two companies
with similar features. However, this is not so in practice due to many
factors. Hence, by a comparison of this ratio pertaining to different
companies the investment manager can have an idea about the
image of the company and can determine whether the share is
under-priced or over-priced. An evaluation of future growth prospects
of the company should be carefully made. This requires the analysis
of the existing capacities and their utilization, proposed expansion
and diversification plans and the nature of the company’s
technology.

(D) FINANCIAL ANALYSIS:

An analysis of financial for the past few years would help the investment
manager in understanding the financial solvency and liquidity, the
efficiency with which the funds are used, the profitability, the operating
efficiency and operating leverages of the company. For this purpose
certain fundamental ratios have to be calculated.
From the investment point of view, the most important figures are earnings
per share, price earnings ratios, yield, book value and the intrinsic value of
the share. The five elements may be calculated for the past ten years or so
and compared with similar ratios computed from the financial accounts of
other companies in the industry and with the average ratios of the industry
as a whole. The yield and the asset backing of a share are important
considerations in a decision regarding whether the particular market price
of the share is proper or not.

(i) Quality of Management: This is an intangible factor. Yet it has a

very important bearing on the value of the shares. Every investment
manager knows that the shares of certain business houses command
a higher premium than those of similar companies managed by other

30
 business houses. This is because of the quality of management, the
confidence that the investors have in a particular business house, its
policy vis-à-vis its relationship with the investors, dividend and
financial performance record of other companies in the same group,
etc.
This is perhaps the reason that an investment manager always gives a
close look to the management of the company whose shares he is to
invest.

(ii) Location and labour management relations: The locations of the

company’s manufacturing facilities determine its economic viability
which depends on the availability of crucial inputs like power, skilled
labour and raw materials etc. Nearness to market is also a factor to be
considered.
In the past few years, the investment manager has begun looking into
the state of labour management relations in the company under
consideration and the area where it is located.

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PRODUCTS AND SERVICES

 PORTFOLIO
 MUTUAL FUNDS
 EQUITY

32
 PRODUCTS AND SERVICES

PORTFOLIO

A combination of securities with different risk & return characteristics will

constitute the portfolio of the investor. Thus, a portfolio is the combination
of various assets and/or instruments of investments. Thecombination may
have different features of risk & return, separate from those of the
components. The portfolio is also built up out of the wealth or income of the
investor over a period of time, with a view to suit his risk and return
preference to that of the portfolio that he holds. The portfolio analysis of the
risk and return characteristics of individual securities in the portfolio and
changes that may take place in combination with other securities due to
interaction among themselves and impact of each one of them on others.

An investor considering investments in securities is faced with the problem

of choosing from among a large number of securities. His choice depends
upon the risk and return characteristics of individual securities. He would
attempt to choose the most desirable securities and like to allocate is funds
over this group of securities. Again he is faced with the problem of deciding
which securities to hold and how much to invest in each. The investor
faces an infinite number of possible portfolios or groups of securities. The
risk and return characteristics of portfolio differ from those of individual
securities combining to form a portfolio. The investor tries to choose the
optimal portfolio taking in to consideration the risk return characteristics of
all possible portfolios.

As the economy and the financial environment keep changing the risk
return characteristics of individual securities as well as portfolios also
change. This calls for periodical review and revision of investment

33
portfolios of investors. An investor invests his funds in a portfolio expecting
to get a good return consistent with the risk that he has tobear. The return
realized from the portfolio has to be measured and the performance of the
portfolio has to be evaluated.

It is evident that rational investment activity involves creation of an

investment portfolio. Portfolio management comprises all the processes
involved in the creation and maintenance of an investment portfolio. It
deals specifically with the security analysis, portfolio analysis, portfolio
selection, portfolio revision and portfolio evaluation. Portfolio management
makes use of analytical techniques of analysis and conceptual theories
regarding rational allocation of funds. Portfolio management is a complex
process which tries to make investment activity more rewarding and less
risky.

MEANING OF PORTFOLIO MANAGERS

Portfolio manager means any person who enters into a contract or

arrangement with a client. Pursuant to such arrangement he advises the
client or undertakes on behalf of such client management or administration
of portfolio of securities or invests or manages the client’s funds.
A discretionary portfolio manager means a portfolio manager who
exercises or may under a contract relating to portfolio management,
exercise any degree of discretion in respect of the investment or
management of portfolio of the portfolio securities or the funds of the client,
as the case may be. He shall independently or individually manage the
funds of each client in accordance with the needs of the client in a manner
which does not resemble the mutual fund.
A non discretionary portfolio manager shall manage the funds in
accordance with the directions of the client.

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SCOPE OF PORTFOLIO MANAGEMENT:
Portfolio management is an art of putting money in fairly safe, quite
profitable and reasonably in liquid form. An investor’s attempt to find the
best combination of risk and return is the first and usually the foremost goal.
In choosing among different investment opportunities the following aspects
risk management should be considered:
a) The selection of a level or risk and return that reflects the investor’s
tolerance for risk and desire for return, i.e. personal preferences.
b) The management of investment alternatives to expand the set of
opportunities available at the investors acceptable risk level.

The very risk-averse investor might choose to invest in mutual funds.

The more risk-tolerant investor might choose shares, if they offer higher
returns. Portfolio management in India is still in its infancy. An investor has
to choose a portfolio according to his preferences. The first preference
normally goes to the necessities and comforts like purchasing a house or
domestic appliances. His second preference goes to some contractual
obligations such as life insurance or provident funds. The third preference
goes to make a provision for savings required for making day to day
payments. The next preference goes to short term investments such as UTI
units and post office deposits which provide easy liquidity. The last choice
goes to investment in company shares and debentures. There are number
of choices and decisions to be taken on the basis of the attributes of risk,
return and tax benefits from these shares and debentures. The final
decision is taken on the basis of alternatives, attributes and investor
preferences.

35
NEED FOR PORTFOLIO MANAGEMENT:

Portfolio management is a process encompassing many activities of

investment in assets and securities. It is a dynamic and flexible concept and
involves regular and systematic analysis, judgment and action. The
objective of this service is to help the unknown and investors with the
expertise of professionals in investment portfolio management. It involves
construction of a portfolio based upon the investor’s objectives, constraints,
preferences for risk and returns and tax liability. The portfolio is reviewed
and adjusted from time to time in tune with the market conditions. The
evaluation of portfolio is to be done in terms of targets set for risk and
returns. The changes in the portfolio are to be effected to meet the
changing condition.
Portfolio construction refers to the allocation of surplus funds in hand
among a variety of financial assets open for investment. Portfolio theory
concerns itself with the principles governing such allocation. The modern
view of investment is oriented more go towards the assembly of proper
combination of individual securities to form investment portfolio.
A combination of securities held together will give a beneficial result if
they grouped in a manner to secure higher returns after taking into
consideration the risk elements.
The modern theory is the view that by diversification risk can be
reduced. Diversification can be made by the investor either by having a
large number of shares of companies in different regions, in different
industries or those producing different types of product lines. Modern theory
believes in the perspective of combination of securities under constraints of
risk and returns.

36
 OBJECTIVES OF PORTFOLIO MANAGEMENT:
The major objectives of portfolio management are summarized as
below:-

1) Security/Safety of Prinicpal:Security not only involves keeping the

principal sum intact but also keeping intact its purchasing power
intact.

2) Stability of Income:So as to facilitate planning more accurately and

systematically the reinvestment consumption of income.

3) Capital Growth:This can be attained by reinvesting in growth

securities or through purchase of growth securities.

4) Marketability:i.e. is the case with which a security can be bought or

sold. This is essential for providing flexibility to investment portfolio.

5) Liquidity i.e Nearness To Money:It is desirable to investor so as to

take advantage of attractive opportunities upcoming in the market.
6) Diversification: The basic objective of building a portfolio is to
reduce risk of loss of capital and / or income by investing in various
types of securities and over a wide range of industries.
7) Favorable Tax Status: The effective yield an investor gets form his
investment depends on tax to which it is subject. By minimizing thetax
burden, yield can be effectively improved.

37
BASIC PRINCIPLES OF PORTFOLIO MANAGEMENT:

There are two basic principles for effective portfolio management which are
given below:-
I. Effective investment planning for the investment in securities by
considering the following factors-
a) Fiscal, financial and monetary policies of the Govt. of India and the
Reserve Bank of India.
b) Industrial and economic environment and its impact on industry.
Prospect in terms of prospective technological changes, competition
in the market, capacity utilization with industry and demand
prospects etc.
II. Constant Review of Investment: It requires to review the investment
in securities and to continue the selling and purchasing of investment
in more profitable manner. For this purpose they have to carry the
following analysis:
a) To assess the quality of the management of the companies in which
investment has been made or proposed to be made.
b) To assess the financial and trend analysis of companies Balance
Sheet and Profit and Loss Accounts to identify the optimum capital
structure and better performance for the purpose of withholding the
investment from poor companies.
c) To analyze the security market and its trend in continuous basis to
arrive at a conclusion as to whether the securities already in
possession should be disinvested and new securities be purchased.
If so the timing for investment or dis-investment is also revealed.

38
 TYPES OF PORTFOLIO MANAGEMENT

There are various types of portfolio management:

 Investment Management
 Portfolio Management
 Project Portfolio Management
1. INVESMENT MANAGEMENT:

Investment management is the professional management of various

securities (shares, bonds etc.) and assets (e.g., real estate), to meet
specified investment goals for the benefit of the investors. Investors may
be institutions (insurance companies, pension funds, corporations etc.) or
private investors (both directly via investment contracts and more
commonly via collective investment schemes e.g. mutual funds or
Exchange Traded Funds).
The term asset management is often used to refer to the investment
management of collective investments,(not necessarily) whilst the more
generic fund management may refer to all forms of institutional
investment as well as investment management for private investors.
Investment managers who specialize in advisory or discretionary
management on behalf of (normally wealthy) private investors may often
refer to their services as wealth management or portfolio management
often within the context of so-called "private banking".
Fund manager (or investment adviser in the U.S.) refers to both a
firm that provides investment management services and an individual who
directs fund management decisions.

39
2. IT PORTFOLIO MANAGEMENT:

IT portfolio management is the application of systematic management

to large classes of items managed by enterprise Information Technology
(IT) capabilities. Examples of IT portfolios would be planned initiatives,
projects, and ongoing IT services (such as application support). The
promise of IT portfolio management is the quantification of previously
mysterious IT efforts, enabling measurement and objective evaluation of
investment scenarios.

The concept is analogous to financial portfolio management, but there

are significant differences. IT investments are not liquid, like stocks and
bonds (although investment portfolios may also include illiquid assets), and
are measured using both financial and non-financial yardsticks (for
example, a balanced scorecard approach); a purely financial view is not
sufficient.

At its most mature, IT Portfolio management is accomplished through

the creation of two portfolios:

40
(i) Application Portfolio- Management of this portfolio focuses on
comparing spending on established systems based upon their relative
value to the organization. The comparison can be based upon the
level of contribution in terms of IT investment’s profitability.
Additionally, this comparison can also be based upon the non-tangible
factors such as organizations’ level of experience with a certain
technology, users’ familiarity with the applications and infrastructure,
and external forces such as emergence of new technologies and
obsolesce of old ones.

(ii) Project Portfolio - This type of portfolio management specially

address the issues with spending on the development of innovative
capabilities in terms of potential ROI and reducing investment overlaps
in situations where reorganization or acquisition occurs. The
management issues with the second type of portfolio management
can be judged in terms of data cleanliness, maintenance savings,
suitability of resulting solution and the relative value of new
investments to replace these projects.

41
3. PROJECT PORTFOLIO MANAGEMENT:

Project portfolio management organizes a series of projects into a

single portfolio consisting of reports that capture project objectives, costs,
timelines, accomplishments, resources, risks and other critical factors.
Executives can then regularly review entire portfolios, spreadresources
appropriately and adjust projects to produce the highest departmental
returns.

Project management is the discipline of planning, organizing and

managing resources to bring about the successful completion of specific
project goals and objectives.

A project is a finite endeavor (having specific start and completion

dates) undertaken to create a unique product or service which brings about
beneficial change or added value. This finite characteristic of projects
stands in contrast to processes, or operations, which are permanent or
semi-permanent functional work to repetitively produce the same product
or service. In practice, the management of these two systems is often
found to be quite different, and as such requires the development of
distinct technical skills and the adoption of separate management.

42
 PORTFOLIO MANAGEMENT PROCESS:
(A) THERE ARE THREE MAJOR ACTIVITIES INVOLVED IN AN
EFFICIENT PORTFOLIO MANAGEMENT WHICH ARE AS
FOLLOWS:-
a) Identification of assets or securities, allocation of investment and
also identifying the classes of assets for the purpose of investment.

b) They have to decide the major weights, proportion of different assets

in the portfolio by taking in to consideration the related risk factors.

c) Finally they select the security within the asset classes as identify.

The above activities are directed to achieve the sole purpose of

maximizing return and minimizing risk on investment.
It is well known fact that portfolio manager balances the risk and return
in a portfolio investment. With higher risk higher return may be expected
and vice versa.

(B) INVESTMENT DECISION:

Given a certain sum of funds, the investment decisions basically

depend upon the following factors:-
I. Objectives of Investment Portfolio: This is a crucial point which a
Finance Manager must

consider. There can be many objectives of making an investment. The

manager of a provident fund portfolio has to look for security and may
be satisfied with none too high a return, where as an aggressive
investment company be willing to take high risk in order to have high
capital appreciation.

43
 How the objectives can affect in investment decision can be seen
from the fact that the Unit Trust of India has two major schemes : Its
“capital units” are meant for those who wish to have a good capital
appreciation and a moderate return, where as the ordinary unit are
meant to provide a steady return only. The investment manager under
both the scheme will invest the money of the Tr ust in different kinds
of shares and securities. So it is obvious that the objectives must be
clearly defined before an investment decision is taken.

II. Selection of Investment: Having defined the objectives of the

investment, the next decision is to decide the kind of investment to be
selected. The decision what to buy has to be seen in the context of the
following:-

a) There is a wide variety of investments available in market i.e. Equity

shares, preference share, debentures, convertible bond, Govt.
securities and bond, capital units etc. Out of these what types of
securities to be purchased.
b) What should be the proportion of investment in fixed interest
dividend securities and variable dividend bearing securities? The
fixed one ensures a definite return and thus a lower risk but the
return is usually not as higher as that from the variable dividend
bearing shares.

c) If the investment is decided in shares or debentures, then the

industries showing a potential in growth should be taken in first line.
Industry-wise-analysis is important since various industries are not at

44
 the same level from the investment point of view. It is important to
recognize that at a particular point of time, a particular industry may
have a better growth potential than other industries. For example,
there was a time when jute industry was in great favour because of
its growth potential and high profitability, the industry is no longer at
this point of time as a growth oriented industry.

d) Once industries with high growth potential have been identified, the
next step is to select the particular companies, in whose shares or
securities investments are to be made.

ELEMENTS OF PORTFOLIO MANAGEMENT:

Portfolio management is on-going process involving the

following basic tasks:
 Identification of the investor’s objectives, constraints and
preferences.

 Strategies are to be developed and implemented in tune with

investment policy formulated.

 Review and monitoring of the performance of the portfolio.

 Finally the evaluation of the portfolio

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Technique’s Of Portfolio Management:

As of now the under noted technique of portfolio management: are in

vogue in our country.
1) Equity Portfolio: It is influenced by internal and external factors the
internal factors affect the inner working of the company’s growth
plans are analyzed with referenced to Balance sheet, profit & loss a/c
(account) of the company.

Among the external factor are changes in the government policies,

Trade cycle’s, Political stability etc.
2) Equity Stock Analysis: Under this method the probable future value
of a share of a company is determined it can be done by ratio’s of
earning per share of the company and price earnings ratio

EARNING PER SHARE = _ PROFIT AFTER TAX__

NO. OF EQUITY SHARES

PRICE EARNING RATIO = _MARKET PRICE (PER SHARE)_

EARNING PER SHARE

One can estimate trend of earning by EPS, which reflects trends of

earning quality of company, dividend policy, and quality of management.
Price Earnings ratio indicate a confidence of market about the company
future, a high rating is preferable.

46
The following points must be considered by portfolio managers while
analyzing the securities.

1) Nature of the industry and its product:Long term trends of

industries, competition within, and outside the industry, Technical
changes, labour relations, sensitivity, to Trade cycle.
2) Industrial analysis of prospective earnings, cash flows, working
capital, dividends, etc.
3) Ratio analysis: Ratios such as debt equity ratio, current ratio, net
worth, profit earnings ratio, returns on investment, are worked out to
decide the portfolio.The wise principle of portfolio management
suggests that
4) “Buy when the market is low or BEARISH, and sell when the
market is rising or BULLISH”.

Stock market operation can be analyzed by:

a) Fundamental approach: - Based on intrinsic value of shares.
b) Technical approach: - Based on Dow Jone’s Theory, Random Walk
Theory, etc.
Prices are based upon demand and supply of the market.
 Objectives are maximization of wealth and minimization of risk.
 Diversification reduces risk and volatility.
 Variable returns, high illiquidity; etc.

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RISK ON PORTFOLIO :
The expected returns from individual securities carry some degree of
risk. Risk on the portfolio is different from the risk on individual securities.
The risk is reflected in the variability of the returns from zero to infinity. Risk
of the individual assets or a portfolio is measured by the variance of its
return. The expected return depends on the probability of the returns and
their weighted contribution to the risk of the portfolio. These are two
measures of risk in this context one is the absolute deviation and other
standard deviation.
Most investors invest in a portfolio of assets, because as to spread risk
by not putting all eggs in one basket. Hence, what really matters to them is
not the risk and return of stocks in isolation, but the risk and return of the
portfolio as a whole. Risk is mainly reduced by Diversification.
Following are the some of the types of Risk:

1) Interest Rate Risk:This arises due to the variability in the interest

rates from time to time. A change in the interest rate establishes an
inverse relationship in the price of the security i.e. price of the security
tends to move inversely with change in rate of interest, long term
securities show greater variability in the price with respect to interest
rate changes than short term securities

2) Purchasing Power Risk:It is also known as inflation risk also

emanates from the very fact that inflation affects the purchasing
power adversely. Nominal return contains both the real return
component and an inflation premium in a transaction involving risk of
the above type to compensate for inflation over an investment

48
 holding period. Inflation rates vary over time and investors are
caught unaware when rate of inflation changes unexpectedly
causing erosion in the value of realized rate of return and expected
return.

Purchasing power risk is more in inflationary conditions especially in

respect of bonds and fixed income securities. It is not desirable to
invest in such securities during inflationary periods. Purchasing
power risk is however, less in flexible income securities like equity
shares or common stock where rise in dividend income off-sets
increase in the rate of inflation and provides advantage of capital
gains.

3) Business Risk: Business risk emanates from sale and purchase of

securities affected by business cycles, technological changes etc.
Business cycles affect all types of securities i.e. there is cheerful
movement in boom due to bullish trend in stock prices whereas
bearish trend in depression brings down fall in the prices of all types
of securities during depression due to decline in their market price.

4) Financial Risk:It arises due to changes in the capital structure of

the company. It is also known as leveraged risk and expressed in
terms of debt-equity ratio. Excess of risk vis-à-vis equity in the capital
structure indicates that the company is highly geared. Although a
leveraged company’s earnings per share are more but dependence
on borrowings exposes it to risk of winding up for its inability to honor

5) Systematic Risk or Market Related Risk: Systematic risks affected

from the entire market are (the problems, raw material availability, tax
policy or government policy, inflation risk, interest risk and financial
risk). It is managed by the use of Beta of different company shares.

49
 6) Unsystematic Risks: The unsystematic risks are mismanagement,
increasing inventory, wrong financial policy, defective marketing etc.
this is diversifiable or avoidable because it is possible to eliminate or
diversify away this component of risk to a considerable extent by
investing in a large portfolio of securities. The unsystematic risk
stems from inefficiency magnitude of those factors different form one
company to another.

RISK RETURN ANALYSIS:

All investment has some risk. Investment in shares of companies has its
own risk or uncertainty; these risks arise out of variability of yields
anduncertainty of appreciation or depreciation of share prices, losses of
liquidity etc
The risk over time can be represented by the variance of the returns
while the return over time is capital appreciation plus payout, divided by
the purchase price of the share.

50
 Normally, the higher the risk that the investor takes, the higher is the
return. There is, however, a risk less return on capital of about 12% which
is the bank, rate charged by the R.B.I or long term, yielded on government
securities at around 13% to 14%. This risk less return refers to lack of
variability of return and no uncertainty in the repayment or capital. But
other risks such as loss of liquidity due to parting with money etc., may
however remain, but are rewarded by the total return on the capital.

Risk-return is subject to variation and the objectives of the portfolio

manager are to reduce that variability and thus reduce the risk by choosing
an appropriate portfolio.
Traditional approach advocates that one security holds the better, it is
according to the modern approach diversification should not be quantity that
should be related to the quality of scripts which leads to quality of portfolio.
Experience has shown that beyond the certain securities by adding more
securities expensive.

RETURNS ON PORTFOLIO:

51
 Each security in a portfolio contributes return in the proportion of its
investments in security. Thus the portfolio expected return is the weighted
average of the expected return, from each of the securities, with weights
representing the proportions share of the security in the total investment.
Why does an investor have so many securities in his portfolio? If the
security ABC gives the maximum return why not he invests in that security
all his funds and thus maximize return? The answer to this questions lie in
the investor’s perception of risk attached to investments, his objectives of
income, safety, appreciation, liquidity and hedge against loss of value of
money etc. this pattern of investment in different asset categories, types of
investment, etc., would all be described under the caption of diversification,
which aims at the reduction or even elimination of non-systematic risks and
achieve the specific objectives of investors.

Mutual Fund
Mutual Fund is a mechanism for pooling the resources by issuing units to
the investors and investing the funds in securities in accordance with
objectives as disclosed in other document.
Investment in securities are spread across a wide cross-section of
industries and sectors and the thus the risk is reduced. Diversification
reduces the risk because all stocks may not move in the same direction in
the same proportion at the same time. Mutual fund issues units to be
investors in accordance with quantum of money invested by them.
Investors of mutual funds are known as the unit holders.
The profit or losses are shared by the investors in proportion to their
investments. The mutual funds normally come out with a number of
schemes with different investment objectives which are launched from time
to time. A mutual fund is required to be registered with Securities and
Exchange Board of India (SEBI) which regulates securities markets before
it can collect funds from the public.

A Mutual Fund is a trust that pools the savings of a number of

investors who share a common financial goal. The money thus collected is
then invested in capital market instruments such a shares, debentures and
other securities. The income earned through these investments and the
capital appreciation realized are shared by its unit holders in proportion to
the number of units owned by them. Thus Mutual Fund is the most suitable

52
investement for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low
cost. The flow chart below describes broadly the working of a mutual fund.

Mutual Fund Operation Flow Chart

SCHEMES ACCORDING TO INVESTMENT OBJECTIVE

A scheme can also be classified as growth scheme, income scheme, or

balanced scheme considering its investment objective. Such schemes may
be open-ended or close-ended schemes as described earlier. In general
mutual funds fall into three general categories:
 Equity Funds invest in shares or equity of companies.
 Fixed-Income funds invest in government or corporate securities that
offer fixed rates of return.
 Balanced Funds invest in a combination of both stocks and bonds.

53
Growth / Equity Oriented Scheme:-

The aim of growth funds is to provide capital appreciation over the medium
to long- term. Such schemes normally invest a major part of their corpus in
equities. Such funds have comparatively high risks. These schemes
provide different options to the investors like dividend option, capital
appreciation, etc. and the investors may choose an option depending on
their preferences. The investors must indicate the option in the application
form. The mutual funds also allow the investors to change the options at a
later date. Growth schemes are good for investors having a long-term
outlook seeking appreciation over a period of time.

Income / Debt Oriented Scheme:-

The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such
as bonds, corporate debentures, Government securities and money market
instruments. Such funds are less risky compared to equity schemes. These
funds are not affected because of fluctuations in equity markets. However,
opportunities of capital appreciation are also limited in such funds. The
NAVs of such funds are affected because of change in interest rates in the
country. If the interest rates fall, NAVs of such funds are likely to increase
in the short run and vice versa. However, long term investors may not
bother about these fluctuations

54
Balanced Fund:
The aim of balanced funds is to provide both growth and regular income as
such schemes invest both in equities and fixed income securities in the
proportion indicated in their offer documents. These are appropriate for
investors looking for moderate growth. They generally invest 40-60% in
equity and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAVs of such
funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid Fund:

These funds are also income funds and their aim is to provide easy
liquidity, preservation of capital and moderate income. These schemes
invest exclusively in safer short-term instruments such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money,
government securities, etc. Returns on these schemes fluctuate much less
compared to other funds. These funds are appropriate for corporate and
individual investors as a means to park their surplus funds for short
periods.

Index Funds:
Index Funds replicatethe portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in
the securities in the same weightage comprising of an index. NAVs of such
schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as

55
"Tracking Error" in technical terms. Necessary disclosures in this regard
are made in the offer document of the mutual fund scheme.
There are also exchange traded index funds launched by the mutual funds
which are traded on the stock exchanges.

SECTOR SPECIFIC SCHEMES/FUNDS:

These are the funds/schemes which invest in the securities of only those
sectors or industries as specified in the offer documents. e.g.
Pharmaceuticals, Software, Fast Moving Consumer Goods
(FMCG),Petroleum stocks, etc. The returns in these funds are dependent
on the performance of the respective sectors/industries. While these funds
may give higher returns, they are more risky compared to diversified funds.
Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time.

TAX SAVING SCHEMES

These schemes offer tax rebates to the investors under specific provisions
of the Income Tax Act, 1961 as the Government offers tax incentives for
investment in specified avenues. e.g. Equity Linked Savings Schemes
(ELSS). Pension schemes launched by the mutual funds also offer tax
benefits. These schemes are growth oriented and invest pre-dominantly in
equities. Their growth opportunities and risks associated are like any
equity-oriented scheme.

LOAD OR NO-LOAD FUND

A Load Fund is one that charges a percentage of NAV for entry or exit.
That is, each time one buys or sells units in the fund, a charge will be

56
payable. This charge is used by the mutual fund for marketing and
distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as
well as exit load charged is 1%, then the investors who buy would be
required to pay Rs.10.10 and those who offer their units for repurchase to
the mutual fund will get only Rs.9.90 per unit. The investors should take the
loads into consideration while making investment as these affect their
yields/returns. However, the investors should also consider the
performance track record and service standards of the mutual fund which
are more important. Efficient funds may give higher returns in spite of
loads.

What is Net Asset Value(NAV) of a scheme?

The performance of a particular scheme of a mutual fund is denoted by Net

Asset Value(NAV).
Mutual funds invest the money collected from the investors in securities
markets. In simple words, Net Asset Value(NAV). Net Asset Value is the
market value of the securities held by the scheme. Since market value of
securities changes every day, NAV of a scheme also varies on day to the
day basis. The NAV per unit is the market value of securities of a scheme
divided by the total number of units of the scheme on any particular date.
For example, if the market value of securities of a mutual fund scheme is
Rs. 200 lakhs and the mutual fund has issued 10 lakhs of Rs10 each to the
investors, then the NAV per unit of the fund is RS20. NAV is required to be
disclosed by the mutual funds on a regular basis.

CHARACTERISTICS OF MUTUAL FUND

57
 The Mutual Fund belongs to those investors who have invested their
money for future earning.

 It is managed by professionals who charge the fees for their

services, from the fund.

 Investors purchase Mutual Fund shares from the fund itself (or
through a broker for the fund) instead of from other investors on a
secondary market.

 The price that investors pay for Mutual Fund shares is the fund's per
share NET ASSET VALUE (NAV) which is updated everyday plus
any shareholder’s fees that the fund imposes at the time of purchase
(such as sales loads).

 Mutual Fund shares are "REDEEMABLE," which means investors

can sell their shares back to the fund (or to a broker acting for the
fund).

 Mutual Funds generally create and sell new shares to accommodate

new investors. In other words, they sell their shares
on a continuous basis, although some funds stop selling when, for
example, they become too large.

 The investment portfolios of mutual funds typically are managed by

separate entities known as "ASSET MANAGEMENT COMPANY".

ADVANTAGE OF MUTUAL FUND

PROFESSIONAL MANAGEMENT

58
LIQUIDITY DIVERSIFICATION
 TAX BENEFITS AFFORDABILITY

TRANSPARENCY FLEXIBILITY

REGULATION

PROFESSIONAL MANAGEMENT
Qualified investment professionals who seek to maximize returns and
minimize risk monitor investor's money. When a person buys in to a mutual
fund, he/she is handing his/her money to an investment professional who
has experience in making investment decisions. Funds can afford to do so
as they manage large pools of money. The managers have real-time
access to crucial market information and are able to execute trades on the
largest and most cost-effective scale.
The Fund Manager's jobs are following:
 Find the best securities for the fund, given the fund's stated
investment objectives; and
 Keep track of investments and changes in market conditions and
adjust the mix of the portfolio, as and when required.

59
DIVERSIFICATION
The Risk factor in any investment is very important and considerable
factor. Due to the investment of mutual funds in wide range of securities
(stocks, bonds, money market instruments, real estate, fixed deposits etc.),
the limits of investment risk reducing the effect of a possible decline in the
value of any one security. Mutual fund unit-holders can get the benefit from
diversification techniques usually available only to investors wealthy
enough to buy significant positions in a broad variety of securities. The
diversification process may add to the stability of the returns, for example
during one period of time equities might not performed well but bonds and
money market instruments might do well enough to offset the effect of a
slump in the equity markets.

AFFORDABILITY
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc.
depending upon the investment objective of the scheme. An investor can
buy in to a portfolio of equities, which would otherwise be extremely
expensive. Each unit holder thus gets an exposure to such portfolios with
an investment as modest as Rs.500/-. So, it would be affordable for an
investor to build a portfolio of investments through a mutual fund rather
than investing directly in the stock market.

FLEXIBILITY
An investor owns just one security rather than many, yet enjoy the benefits
of a diversified portfolio and a wide range of services. Fund managers
decide what securities to trade , collect the interest payments and see that
the dividends on portfolio securities are received and investor’s rights
exercised. It also uses the services of a high quality custodian and registrar
in order to make sure that the convenience of investor remains at the top of
the minds of AMC’s.
LIQUIDITY

60
In open-ended mutual funds, investors can redeem or get their money back
either all or part of their units any time they wish. But in some schemes do
have a lock-in period where an investor cannot return the units until the
completion of such a lock-in period.
TRANSPARENCY
Open-ended mutual funds release their Net Asset Value daily and the
entire portfolio monthly. By this investor can get regular information on
the value of the investment in addition to disclosure on the specific
investments made by the mutual fund scheme. This level of transparency,
where the investor himself sees the underlying assets bought with his
money, is unmatched by any other financial instrument.

TAX BENEFITS

Any income distributed after March 31, 2002 will be subject to tax in the
assessment of all Unit holders. However, as a measure of concession to
Unit holders of open-ended equity-oriented funds, income distributions for
the year ending March 31, 2003, will be taxed at a concessional rate of
10.5%.
In case of Individuals and Hindu Undivided Families (HUF) a deduction
upto Rs. 9,000 from the Total Income will be admissible in respect of
income from investments specified in Section 80L, including income from
Units of the Mutual Fund. Units of the schemes are not subject to Wealth-
Tax and Gift-Tax.

DISADVANTAGES OF MUTUAL FUND

While the benefits of investing through mutual funds are outweigh the
disadvantages. An investor and his advisor will do well to be aware of a
few shortcomings of using the mutual fund as an investment vehicle. The

61
disadvantages of investing in a mutual fund are no control over costs,
managing a portfolio of funds, no tailor made portfolios.

REGULATIONS
Securities Exchange Board of India (“SEBI”), the mutual funds regulator
has clearly defined rules, which govern mutual funds. These rules relate to
the formation, administration and management of mutual funds and also
prescribe disclosure and accounting requirements. Such a high level of
regulation seeks to protect the interest of investors.

MUTUAL FUNDS—THE BEST INVESTMENT OPTION

comparison of different Investment Options according to the nature of

investment with the regard of the basis on following parameters:

 Return
 Safety
 Volatility
 Liquidity

R E T U R N S A F E T Y VOLATILITY LIQUIDITY
H i g h H i g h
E q u i t y L o w H i g h
Moderate Low
Moderate
Financial institutions bonds H i g h Moderate Moderate
High

62
 Moderate
Corporate Debentures Moderate Moderate L o w
Low
Company Fixed Deposits M o d e r a t e L o w L o w L o w
L o w
Bank Deposits H i g h H i g h H i g h
High
Moderate
P P F H i g h H i g h Moderate
High
L o w
Life Insurance H i g h H i g h L o w
Moderate
Moderate
G o l d H i g h Moderate Moderate
Low
H i g h
Real Estate Moderate H i g h L o w
Low
Mutual Fund H i g h H i g h Moderate H i g h

Equity
Equity is ownership invest company of holders of its common and preferred
stock.
The various kind of equity shares are as follows:
1. Equity shares: An equity share commonly referred to as ordinary
shares
Represents the form of fractional ownership in which shareholders,
as a fractional owner, undertake the maximum entrepreneurial risk
associated with business venture.
2. Right issue/right shares: The issue of new securities to existing
shareholders at a ration to those already held.
3. Bonus shares: Shares issued by companies to their shareholders
free of cost by capitalization of accumulated reserves from the profits
earned in the earlier years or out of share premium account.

63
4. Preferred stock/ preference shares: Owners of these shares are
entitled to a fixed dividend or divided calculated at a fixed rate to be
paid regularly before divided can be paid in respect of equity shares.
5 . Cumulative preference shares: A type of preference shares on which
dividend accumulated if remain unpaid. All areas of performance
dividend have to be paid outbefore paying dividend on equity shares

 FI NDI NG S
 CO NCLU SI O N
 SUG G ESTI O NS
 BI BLI O G RAPHY

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 FINDINGS 
Based on the analysis and evaluation of the twelve firms, it can be
concluded that
 
 The investor can know the risk and returns of the shares
using this analysis.
 
 The analysis is useful for investors who want to invest in
long, short & medium term.
 
 Technical analysis is used to predict short-term share price
movement.
 
 

65
  

CONCLUSION
 
              From the above discussion it is clear that portfolio
functioning is based on market risk, so one can get the help from the
professional portfolio manager or the Merchant banker if required
before investment because applicability of practical knowledge
through technical analysis can help an investor to reduce risk. In
other words Security prices are determined by money manager and
home managers, students and strikers, doctors and dog catchers,
lawyers and landscapers, the wealthy and the wanting. This breadth
of market participants guarantees an element of unpredictability and
excitement. If we were all totally logical and could separate our
emotions from our investment decisions then, the determination of
price based on future earnings would work magnificently. And since
we would all have the same completely logical expectations, price
would only change when quarterly reports or relevant news was
released.
I can conclude from this project that portfolio management has
become an important service for the investors to identify the
companies with growth potential. Portfolio managers can provide the

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professional advice to the investors to make an intelligent and
informed investment.
Portfolio management role is still not identified in the recent time but
due it expansion of investors market and growing complexities of the
investors the services of the portfolio managers will be in great
demand in the near future.

SUGGESTION
As it is clear from the observation to overcome this painful situation
the following is suggestion.
1.       Educate the Customer about your term and condition
briefly.
2.       Improvement can come by market survey.
3.       Visit College/University and teach them (college student)
about share market and other investment alternatives that can
student aware about Share market.
4.         Company has very limited interaction with people. So
interact with your customer as well as people who visit your
company.

5. Don’t invest or squire off the product without permission of

concern customer. Inform them before the investment or any
other activity.

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 6. Your brokerage Charge is variable than other brokerage
house. It should not be negotiable. In this condition you should
set your plan and policy regarding brokerage charge. Lack of
this small investor demotivate by this activity.

These suggestions improve the present condition of bonanza

Portfolio Ltd, and become a biggest brokerage house in Ranchi city
also in national level. These suggestions prevent from losses and
move forward to profit. And become trustworthy company in eye of
customer.
 

BIBLIOGRAPHY

BOOK REFERENCES :

 I.M.Pandey
Financial Management.

INTERNET SOURCES :

 www.bonanzaportfolio.in
 www.amfiindia.com
 www.google.com
 www.investopedia.com

 www.powerindiabulls.com

 www.bseindia.com

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  www.nseindia.com

 www.moneycontrol.com

NEWSPAPERS AND JOURNALS:

 Economics Times

 Business Today

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