Study of Portfolio Management Services

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Financial Markets)

Under the Faculty of Commerce

By

Mr. Hrithik Jain

SEAT NO: - 20 - 07812

Under the Guidance of

Ms. Pooja Matlani

K.J. SOMAIYA COLLEGE OF SCIENCE AND COMMERCE

RE-ACCREDITED “A” GRADE BY NAAC
(AUTONOMOUS).
VIDYANAGARI, VIDYAVIHAR (E).
UNIVERSITY OF MUMBAI

April, 2021
 Study of Portfolio Management Services

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Financial Markets)

Under the Faculty of Commerce

By

Mr. Hrithik Jain

SEAT NO: - 20 - 07812

Under the Guidance of

Ms. Pooja Matlani

K.J. SOMAIYA COLLEGE OF SCIENCE AND COMMERCE

RE-ACCREDITED “A” GRADE BY NAAC
(AUTONOMOUS).
VIDYANAGARI, VIDYAVIHAR (E).
UNIVERSITY OF MUMBAI

April, 2021
K.J. SOMAIYA COLLEGE OF SCIENCE AND COMMERCE
RE-ACCREDITED “A” GRADE BY NAAC
(AUTONOMOUS).
VIDYANAGARI, VIDYAVIHAR (E).
UNIVERSITY OF MUMBAI

Certificate
This is to certify that Mr. Hrithik Jain has worked and duly completed his Project Work for
the degree of Bachelor in Commerce (Financial Markets) under the Faculty of Commerce in
the subject of Commerce and his project is entitled, Study of Portfolio Management
Services under my supervision.

I further certify that the entire work has been done by the learner under my guidance and
that no part of it has been submitted previously for any Degree or Diploma of any University.

It is her own work and facts reported by her personal findings and investigations.

Signature of Signature of Signature of Project

Principal Course Guide
Coordinator

Name of External Examiner: Signature of External Examiner

Date of submission:12th April,2021

 Declaration by learner

I the undersigned Mr. Hrithik Jain here by, declare that the work embodied in
this project work titled Study of Portfolio Management Services, forms my
own contribution to the research work carried out under the guidance of Ms.
Pooja Matlani is a result of my own research work and has not been
previously submitted to any other University for any other Degree/ Diploma to
this or any other University.

Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography. I, here by further
declare that all information of this document has been obtained and presented
in accordance with academic rules and ethical conduct.

Name and Signature of the

learner

Hrithik Jain

Certified by
CA. Monica Lodha
 Acknowledgment

To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Dr. Pradnya Prabhu for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator CA. Monica Lodha, for
her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Ms.Pooja Matlani whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my Parents
and Peers who supported me throughout my project.

Name and Signature of the learner

Hrithik Jain

5
 CONTENTS

CHAPTER I

EXECUTIVE SUMMARY……………………………………………………………..8
INTRODUCTION TO PORTFOLIO MANGEMENT SERVICES……………………9
EVOLUTION OF PORTFOLIO MANAGEMENT………………………………...….13
OBJECTIVES OF PORTFOLIO MANAGEMENT………………………………...…14
NEED FOR PORTFOLIO MANAGEMENT SERVICES…………………………….16
ADVANTAGES OF INVESTING IN PMS……………………………………………17
DISADVANTAGES INVESTING IN PMS……………………………………………19
PORTFOLIO MANAGEMENT THEORIES………………………………………...…21
PORTFOLIO MANAGERS……………………………………………………………..24
PORTFOLIO STRATEGY MIX……………………………………………………..….25
TYPES OF PORTFOLIO MANAGEMENT…………………………………………....27
COMPANIES PROVIDING PORTFOLIO MANAGEMENT SERVICES ……………31
RISK ANALYSIS……………………………………………………………………......39
COMPARISON OF PORTFOLIO RETURNS USING SHARPE RATIO, TREYNOR
RATIO AND JENSEN’S ALPHA…………………………………………………….….43
HOW IS PORTFOLIO MANAGEMENT SERVICES DIFFERENT FROM MUTUAL
FUNDS……………………………………………………………………………………48
BENEFITS OF CHOOSING PMS INSTEAD OF MUTUAL FUNDS………………….49
WHY SHOULD YOU OPT FOR PMS…………………………………………………..51

CHAPTER II

LITERATURE REVIEW………………………………………………………………..52

CHAPTER III
RESEARCH METHODOLOGY………………………………………………………..54
OBJECTIVE OF STUDY……………………………………………………………….54

6
SCOPE OF STUDY…………………………………………………………………….55
LIMITATIONS…………………………………………………………………………55

CHAPTER IV
DATA ANALYSIS AND INTERPRETATIONS………………………………………56

CHAPTER V

CONCLUSION…………………………………………………………………………68
SUGGESTION………………………………………………………………………....68
BIBLIOGRAPHY……………………………………………………………………... 69

CHAPTER VI
ANNEXURE……………………………………………………………………………70

7
 Chapter I

Executive Summary

We turn towards the stock market, expecting to make a fortune. Yet a majority of times, most
of the investors are victimized between the emotions of greed and fear. The trouble is that
many investors tend to over-diversify their portfolio by adding more number of stocks, which
is likely to take the investor backwards rather than forward. Investing is an art form. It takes
knowledge about the stock market, but more importantly, it requires a strategy and
understanding of the businesses and economic cycles.

Portfolio Management Services (PMS), is investment management services offered by the

Portfolio Manager. The investment portfolio can be diversified into stocks, fixed income, and
other structured products. These services can potentially be structured and tailored to meet
specific investment objectives based on the risks, rewards and the goals of the investor as
reflected in the Investment Policy Statement (IPS). PMS offers customized equity options,
but to avail service of a Portfolio manager, you should have a large sum of money to invest.

A portfolio manager has a thorough understanding of the businesses and uses it to improve
investor's gains. The manager must have a clarity of the investor's risk and reward
expectations to use an appropriate and suitable strategy in order to deliver the high potential
returns.

8
 Introduction to Portfolio Management Services

Stock exchange operations are peculiar in nature and most of the Investors feel insecure in
managing their investment on the stock market because it is difficult for an individual to
identify companies which have growth prospects for investment. Further due to volatile
nature of the markets, it requires constant reshuffling of portfolios to capitalize on the growth
opportunities. Even after identifying the growth oriented companies and their securities, the
trading practices are also complicated, making it a difficult task for investors to trade in all
the exchange and follow up on post trading formalities.

Portfolio Management Services (PMS), service offered by the Portfolio Manager, is an

investment portfolio in stocks, fixed income, debt, cash, structured products and other
individual securities, managed by a professional money manager that can potentially be
tailored to meet specific investment objectives. When you invest in PMS, you own individual
securities unlike a mutual fund investor, who owns units of the fund. You have the freedom
and flexibility to tailor your portfolio to address personal preferences and financial goals.
Although portfolio managers may oversee hundreds of portfolios, your account may be
unique.

What is a Portfolio?

A portfolio is a
collection of financial
investments like stocks,
bonds, commodities,
cash, and cash
equivalents,
including closed-end
funds and exchange
traded funds (ETFs). People generally believe that stocks, bonds, and cash comprise the core
of a portfolio. Though this is often the case, it does not need to be the rule. A portfolio may
contain a wide range of assets including real estate, art, and private investments.

9
You may choose to hold and manage your portfolio yourself, or you may allow a money
manager, financial advisor, or another finance professional to manage your portfolio.

One of the key concepts in portfolio management is the wisdom of diversification—which

simply means not to put all your eggs in one basket. Diversification tries to reduce risk by
allocating investments among various financial instruments, industries, and other categories.
It aims to maximize returns by investing in different areas that would each react differently to
the same event. There are many ways to diversify. How you choose to do it is up to you.
Your goals for the future, your appetite for risk, and your personality are all factors in
deciding how to build your portfolio.

What is Portfolio Management?

Portfolio management’s meaning can be

explained as the process of managing
individuals’ investments so that
they maximise their earnings within
a given time horizon. Furthermore,
such practices ensure that

the capital invested by individuals is not

exposed to too much market risk.

The entire process is based on the ability to make sound decisions. Typically, such a
decision relates to – achieving a profitable investment mix, allocating assets as per risk
and financial goals and diversifying resources to combat capital erosion.

Primarily, portfolio management serves as a SWOT analysis of different investment

avenues with investors’ goals against their risk appetite. In turn, it helps to generate
substantial earnings and protect such earnings against risks.

10
How does PMS work?
It is offered by brokerages and mutual funds registered with SEBI. There are two types of
PMS: Discretionary and Non Discretionary. 
In discretionary , the fund manager takes investment decisions on behalf of the investor. In
non-discretionary , the fund manager suggests investment ideas, while the decision is taken
by the client. 

Is PMS similar to a mutual fund?

The biggest similarly between PMS (discretionary) and mutual funds is that the manager
handles the money on the behalf of the clients. But, the key difference is that investors in MF
get units that represent stocks. In a PMS, the investor holds the stock in a demat account
owned by him, but the fund manager has the power of attorney to operate it. 

Is

there a minimum investment amount for PMS? 

11
Investors need to bring in atleast Rs 25 lakh to invest in a PMS. Alternatively , they can give
shares worth Rs 25 lakhs to the fund manager. 

What is the structure of a PMS scheme? How does an investor monitor

them? 

When you opt for a PMS scheme, a bank account and DEMAT account are separately opened
in the your name and all investments are
made in your name only. Accordingly ,
any income or dividend coming out of
the investment made will also be
credited in your bank account and the
shares will be held in the DEMAT
account in your name. 

EVOLUTION OF PORTFOLIO MANGEMENT

12
Portfolio management is essentially a systematic method of maintaining one‘s investment
efficiently. Many factors have contributed to the existence and development of the concept.

In the early years of the century analyst used financial statements to find the value of these
securities. The first to be analyzed using this was Railroad Securities of the USA. A booklet
entitled ―The Anatomy of the Railroad‖ was published by Thomas F. Woodlock  in 1900. As
the time progressed this method became very important in the investment field, although
most of the writers adopted different ways to publish their data.
 
The other major method adopted was the study of stock price movement with the help
of price charts. This method later on was known as Technical Analysis. It evolved
during1900-1902 when Charles H. Dow, the founder of the Dow Jones and Co. presented his
view in the series of editorials in the Wall Street Journal in USA. The advocates of technical
analysis believed that stock prices movement is ordered and systematic and the definite
pattern could be identified. There investment strategy was build around the identification of
the trend and pattern in the stock price movement.

Another prominent author who supported the technical analysis was Ralph N. Elliot who
published a book in the year 1938 titled ―The Wave Principle‖. After analyzing 75 years
data of share price, he concluded that the market movement was quite orderly and followed a
pattern of waves. His theory is known as Elliot Wave Theory.

13
 OBJECTIVES OF PORTFOLIO MANAGEMENT

1. Security of Principal Investment : Investment safety or minimization of risks is one

of the most important objectives of portfolio management. Portfolio management not
only involves keeping the investment intact but also contributes towards the growth of
its purchasing power over the period. The motive of a financial portfolio management
is to ensure that the investment is absolutely safe. Other factors such as income,
growth, etc., are considered only after the safety of investment is ensured.
2. Consistency of Returns : Portfolio management also ensures to provide the stability
of returns by reinvesting the same earned returns in profitable and good portfolios.

14
 The portfolio helps to yield steady returns. The earned returns should compensate the
opportunity cost of the funds invested.
3. Capital Growth : Portfolio management guarantees the growth of capital by
reinvesting in growth securities or by the purchase of the growth securities. A
portfolio shall appreciate in value, in order to safeguard the investor from any erosion
in purchasing power due to inflation and other economic factors. A portfolio must
consist of those investments, which tend to appreciate in real value after adjusting for
inflation.
4. Marketability : Portfolio management ensures the flexibility to the investment
portfolio. A portfolio consists of such investment, which can be marketed and traded.
Suppose, if your portfolio contains too many unlisted or inactive shares, then there
would be problems to do trading like switching from one investment to another. It is
always recommended to invest only in those shares and securities which are listed on
major stock exchanges, and also, which are actively traded.
5. Liquidity : Portfolio management is planned in such a way that it facilitates to take
maximum advantage of various good opportunities upcoming in the market. The
portfolio should always ensure that there are enough funds available at short notice to
take care of the investor’s liquidity requirements.
6. Diversification of Portfolio : Portfolio management is purposely designed to reduce
the risk of loss of capital and/or income by investing in different types of securities
available in a wide range of industries. The investors shall be aware of the fact that
there is no such thing as a zero risk investment. More over relatively low risk
investment give correspondingly a lower return to their financial portfolio.
7. Favourable Tax Status : Portfolio management is planned in such a way to increase
the effective yield an investor gets from his surplus invested funds. By minimizing the
tax burden, yield can be effectively improved. A good portfolio should give a
favourable tax shelter to the investors. The portfolio should be evaluated after
considering income tax, capital gains tax, and other taxes.

15
 The Need for Portfolio Management Services

PMS or Portfolio Management Service is a professional service where qualified and

experienced portfolio managers backed by a research team manage equity portfolios on
behalf of clients instead of clients managing it themselves. India being one of the oldest stock
market ecosystems,the direct equity investing cult has been prevalent for decades and has
especially taken deeper root since many marquee listings in the markets since late 1970s.
There are a large number of investors who own equity portfolios in their demat accounts that
they manage based either on their own experiences or with inputs from broking companies
and equity advisors.
There are millions of demat
accounts; in fact some of the
largest listed companies
individually have 2-3mn
shareholders each. While
brokers provide equity
research, advisory services and
an operational platform; this
usually needs the investors'
involvement in investment
discretion as well as operational aspects. More importantly, the onus of outcomes is shared
between investors as well as the service providers. On the other hand, professionally
managed portfolios make the portfolio manager answerable to the investor. They are
managed for a fee and everything including, research, investing, operations, etc. are available
to the investor.
PMS could either be Discretionary; i.e. where the fund manager takes decisions on investors'
behalf or Non-Discretionary; i.e. where the fund manager needs to take approvals from the
investors on suggested investments. The other alternative for professionally managed
investments into equities is through Mutual Funds; which is a very popular choice too

16
 Advantages of Investing in Portfolio Management Services

I. Quality Portfolio
People who manage their own portfolios on an average buy less of quality and focus
more on price, rather than value
Data shows that while there are thousands of listed companies; individual investors (Non
Promoter Non Institutional [NPNI]) have a lower share of holding in the larger indices like
Nifty, BSE 200 or even Nifty 500. Retail or NPNI holding is higher in non-index smaller
companies. There is a skew to lesser quality stocks in their portfolios. It is equally remarkable
that Nifty accounts for almost 60% of total market cap, BSE 200 accounts of nearly 85% of
market cap and Nifty 500 accounts for nearly 94% of market cap 

II. Independent Portfolio

PMS Holdings are isolated and hence not impacted by other investors behavior

Mutual Funds being managed and held as a pool may be at times exposed to vagaries of the
sum total behavior of hundreds of thousands of investors. In general, investors tend to invest
in rising markets or improving fund performance and there could be times of panic in rapidly
falling markets and times of poor fund performance. It may happen that mutual funds at times
are forced to buy in rising markets and sell in falling markets because fund managers have

17
discretion on stock picks but not on fund flows. Apart from managing the portfolio, managing
fund flows is a significant activity on a daily basis.

III. Online Top Up

Mini PMS facility

Registering SIP in Motilal Oswal PMS is an interesting experience because our portfolios
have very low churn. As an investor when one registers PMS- SIP more often than not, one
knows the curated focused list of high quality stocks that one will end up buying month on
month. Also, one can register a paperless and user-friendly PMS-SIP, online. Similarly,
Motilal Oswal PMS also enables an investor to purchase additional amounts into the PMS
portfolio online on a same day basis.
IV. Transparent Holdings
PMS is transparent

If we were to use cricket parlance, one can say that in PMS an investor can get a ball by ball
update on the portfolio. Every trade is intimated to the investor and a live portfolio view is
available on the managers' website. Specifically for Motilal Oswal PMS portfolios, there is a
focused portfolio of curated stocks which the client can view in his holdings. Mutual Funds
typically tend to have large diffused portfolios ranging from 25, 30 to even a 100 stocks,
(which restrict the transparency) and the holdings are made available only once in a month or
a quarter.

V. Possibility of Superior Returns

PMS can be more aggressive (hence more risky) and has the potential to generate higher
returns

Mutual Funds being structured for a wide mass of retail investors tend to be regulated strictly;
for instance there are regulatory norms for benchmarking, scrip level exposure, investment
patterns etc. More specifically in Mutual Funds, no stock can be over 10% of portfolio
exposure. In PMS for instance; if a stock has 8% exposure and all things being static, this
stock appreciates to become 12% of the portfolio, there is no compulsion to sell. 

VI. Focused Customer

PMS helps focus on the mass affluent and affluent customer

While Mutual Funds can focus on the new to market and lower sized segments through SIPs
etc; PMS by definition, focuses on the mass affluent and affluent. This audience in India is
growing by leaps and bounds, values flexibility and most importantly they are familiar with
equity investing. The number of equity investors is almost 3 times the number of Mutual
Fund investors. Significant wealth creation in the last decade has anyway occurred by way of

18
sweat equity. It is then easy to diversify the holdings by investing in PMS. Hence, while there
is a market for Mutual Fund investors, there also exists a market for PMS products

Disadvantages of Investing in Portfolio Management Services

 Affects with the quality

There are only a few good investment opportunities available, with
diversification of the portfolio, we divide the limited capital into small
fractions over a large number of average investments.
This reduces the quality of returns on the overall investment.
 Elaborate process
Portfolio management is a step by step process which involves planning,
execution and feedback.
For an investor with very basic or zero under-standing, it becomes a time-
consuming and difficult task.
 Below average returns
For small individual investor, the amount for investment is very less, which is
further divided into a set of securities to diversify and create a well-balanced
portfolio.

This results in generating below average returns, as some sector could out-
perform where as some sectors might under-perform, so the overall return on
the portfolio would be very small.

19
 Time constraints for evaluation of portfolio
Portfolio management is a time consuming activity as it requires constant
evaluation with the market changes so that the objective of investment can be
achieved.
Investors who have time constraints may not be able to monitor the
performance of the portfolio and capitalize on some great opportunities.
 Lack of good investment opportunities
Investment opportunities are many, but then there are only a few investment
opportunities that will give good returns.
There are chances that due to diversification, an individual will have to

compromise on good investment opportunities to balance the risk and returns

of the portfolio.

20
 PORTFOLIO MANAGEMENT THEORIES

A portfolio is a collection or culmination of various securities like money markets

instruments ,shares, government bonds etc to achieve a desired result at minimum risk.

There are several theories to create an idealistic portfolio that maximizes the returns and
minimizes the risk and help an investor achieve the desired investment objective.

Portfolio management theories can be divided into two based on the approach

1. Traditional Approach
2. Modern Approach

21
 1. Traditional Approach
This approach considers the income , expenses ,loans and other cash outflows, desired
goal ,liquidity constraints, tax saving and time span for the completion of the
objective while determining the security combination in the portfolio.
It can be further classified into
 Dow Jones theory
 Random walk theory
 Formula Theory

Dow Jones Theory

This theory was given by Charles Dow , editor of the Wall street Journal.

According to this theory, the price movements in the market are not casual but are reflection
of market trends.

There are 3 components that affect the stock prices.

1. Primary Trend
It signifies the long term trend of the price movement.
Example- If the stock prices are increasing over a long period of time, we say that the
market is bullish or the primary trend is bull.
Similarly, if the stock prices are decreasing over a long period of time, we say that the
market is bearish or the primary trend is bear.

2. Secondary Trend
It signifies the short term trend of price movement which do not last long and have no
impact on the the primary trend.
This could be due to day to day activities of the company which gets reflected in the
stock prices.

3. Daily minor fluctuations

These are random changes in the price movement which gives adds no value to the
information available.

This theory uses price to determine the stock price movement. It uses two averages for price
discovery:-

22
  The Dow Jones Industrial Average (DJIA)
 The Dow Jones Transportation Average (DJTA)

Random Walk Theory

This is also known as Efficient Market Hypothesis. It was developed by Prof. Eugene Fama.

It states that stock prices change only when there is any new information.

This Theory suggests that at all times, every available information is reflected in the stock
price. This information includes the present market conditions but also reflect future
expectations of the stock like the profitability, company’s performance, dividends, etc

This theory assumes that the market is highly competitive and at any given time perfect
information is available to all the buyers and sellers,who quickly react to it and the stock
market is effiecient.

Formula Plans

This theory has devised certain technical formulation and calculation which can help to
minimize the loss and try to capitalize on the opportunities due to price movements.

This theory helps an investor to understand the buying opportunities that is when the stock
prices are very low and the selling opportunities that is when the stock price are very high.

This theory is applicable only when there is a fixed amount available for investment and two
portfolios are constructed

One- An aggressive portfolio

Two- A defensive portfolio

This is done to control the risk associated with investment and maximise the returns.

The ratio of the two portfolios are pre-determined.

2 Modern Approach or Modern Portfolio Theory

This portfolio theory tries to establish a risk-return relationship such that for minimum level
of risk maximum returns can be capitalized from a portfolio. This can be done by efficient
diversification where in the same portfolio a security with very high risk and higher returns

23
and combined with a security of low risks to minimise the overall risk associated with the
portfolio.

This technique of investment or allocation of funds is also called as Tactical asset allocation

For example- An investor wants to create a portfolio to achieve his desired goals but is risk
averse and wants decent returns over a long term.

As per the objectives of the investor a portfolio is constructed with 10% G-sec Bonds, 30%
mutual funds, 25% Mid-cap stocks ,10% Small-cap stocks, 5% ULIP, 10% Large Cap stocks
and 10% Money market instruments.

Many reseachers and investors criticise this theory as they believe it is better to analyse the
market and capitalise on the opportunities than buy and wait for returns.

PORTFOLIO MANAGERS

Portfolio Managers are professionals having qualification and technical knowledge about the
capital markets, investments and portfolio management.

They provide portfolio management services to clients in a pre-decided arrangement.

Portfolio Managers are very helpful for small individual investors who lack the technical
know-how of capital markets and investment.

They help clients by understanding their goals, objectives and constraints, devise a strategy
for asset allocation and implements these strategies on behalf of the client.

Portfolio Managers can be further divided into two categories based on the discretion:-

 Discretionary portfolio manager

24
 In this the portfolio manager enters into an agreement with the client where all the
powers to handle the portfolio lies in the hands of the portfolio manager.
It is the responsibility of the portfolio manager to carry out all the necessary actions
needed to achieve the objective of the client.
 Non-discretionary portfolio manager
In this the client does not give away the control of its investment. The portfolio
manager shall act in accordance to the discretions given by the client.

PORTFOLIO STRATEGY MIX

Portfolio is a combination of various securities in such a manner that the investor can achieve
his desired result over a period of time.

Diversification of portfolio refers to combination of various securities from different sectors

so as to minimize the impact to sector-specific risk as well as be able to capitalise on a large
number of opportunities present in different sectors.

It is the process of distributing fractions of the amount available for investment into various
available assets so as to meet the investor’s objective.

It is important for every investor to identify a strategy for investment that would help him to
achieve their goals and objective within the required time span.

25
Asset allocation is done by preparing a financial plan considering all the factors like goals,
income source, time horizon available for accomplishment of the goal, risk appetite and then
implementing this information into allocation of funds.

There are the following strategies for asset allocation:-

 Strategic Asset Allocation

 Constant-Weighting Asset Allocation
 Tactical Asset Allocation
 Dynamic Asset Allocation
 Insured Asset Allocation
 Integrated Asset Allocation

Strategic Asset Allocation

This method of asset allocation uses “base policy mix”.
This means that the investor develops a portfolio mix based on the expected returns
of various assets.
For example the investor wants to earn an average return of 15% per year.
From the past data, it has been observed that equity gives 20% returns annually and
debentures and bonds give 10% return.
So the investor can prepare a portfolio of 50% equity and 50% debentures to get an
annual return of 15%.

Constant-Weighting Asset Allocation

This method of asset allocation involves constant shuffling of the assets based on the
market conditions to capitalize on any available opportunities to earn returns.
For example- A portfolio mix has 30% equity shares from the infrastructure industry,
giving 10% returns, but in the current market conditions, the pharmaceutical industry
is out-performing and giving 25% returns.
So the investor will add the shares of pharmaceuticals and remove the infrastructure
shares and capitalize on the opportunity.

Tactical Asset Allocation

26
 This strategy is a combination of Constant-Weighting Asset Allocation and Strategic
Asset Allocation. In the long run it follows the strategic method but occasionally
when there is an opportunity to earn high returns, it follows constant weighting
method.

Dynamic Asset Allocation

This asset allocation depends on the economy and how strong or weak the market
conditions are.
For example, if there is a prevailing negative sentiment in the markets and the market
conditions are declining, the investor begins to sell its assets and vice versa.

Insured Asset Allocation

This asset allocation technique is suitable for risk averse investors.
According to this strategy a minimum or base value is decided for the portfolio,
below which the value of the portfolio should not drop.
If it drops then the investor is recommended to change his strategy or seek guidance
from a professional.

Integrated Asset Allocation

This asset allocation strategy considers both risk and returns of the portfolio and
determines a portfolio mix such that the investor is tolerant to the amount of risk and
still be able to capitalize on the opportunities available.

Types of Portfolio Management

Stock investors constantly hear the wisdom of diversification. The concept is to simply not
put all of your eggs in one basket, which in turn helps mitigate risk, and generally leads to
better performance or return on investment. Diversifying your hard-earned dollars does make
sense, but there are different ways of diversifying, and there are different portfolio types. We
look at the following portfolio types and suggest how to get started building them:
aggressive, defensive, income, speculative and hybrid. It is important to understand that
building a portfolio will require research and some effort. Having said that, let's have a peek
across our five portfolios to gain a better understanding of each and get you started.

27
The Aggressive Portfolio

An aggressive portfolio or basket of stocks includes those stocks with high risk/high reward
proposition. Stocks in the category typically have a high beta, or sensitivity to the overall
market. Higher beta stocks experience larger fluctuations relative to the overall market on a
consistent basis. If your individual stock has a beta of 2.0, it will typically move twice as
much in either direction to the overall market - hence, the high-risk, high-reward description.

Most aggressive stocks (and therefore companies) are in the early stages of growth, and have
a unique value proposition. Building an aggressive portfolio requires an investor who is
willing to seek out such companies, because most of these names, with a few exceptions, are
not going to be common household companies. Look online for companies with earnings
growth that is rapidly accelerating, and have not been discovered by Wall Street. The most
common sectors to scrutinize would be technology, but many other firms in various sectors
that are pursuing an aggressive growth strategy can be considered. As you might have
gathered, risk management becomes very important when building and maintaining an
aggressive portfolio. Keeping losses to a minimum and taking profit are keys to success in
this type of portfolio.

The Defensive Portfolio

Defensive stocks do not usually carry a high beta, and usually are fairly isolated from broad
market movements. Cyclical stocks, on the other hand, are those that are most sensitive to the
underlying economic "business cycle." For example, during recessionary times, companies
that make the "basics" tend to do better than those that are focused on fads or luxuries.
Despite how bad the economy is, companies that make products essential to everyday life
will survive. Think of the essentials in your everyday life, and then find the companies that
make these consumer staple products.

The opportunity of buying cyclical stocks is that they offer an extra level of protection
against detrimental events. Just listen to the business stations and you will hear portfolios
managers talking about "drugs," "defense" and "tobacco." These really are just baskets of
stocks that these managers are recommending based upon where the business cycle is and
where they think it is going. However, the products and services of these companies are in

28
constant demand. A defensive portfolio is prudent for most investors. A lot of these
companies offer a dividend as well which helps minimize downside capital losses.

The Income Portfolio

An income portfolio focuses on making money through dividends or other types of

distributions to stakeholders. These companies are somewhat like the safe defensive stocks
but should offer higher yields. An income portfolio should generate positive cash flow. Real
estate investment trusts (REITs) and master limited partnerships (MLP) are excellent sources
of income producing investments. These companies return a great majority of their profits
back to shareholders in exchange for favorable tax status. REITs are an easy way to invest in
real estate without the hassles of owning real property. Keep in mind, however, that these
stocks are also subject to the economic climate. REITs are groups of stocks that take a
beating during an economic downturn, as building and buying activity dries up.

An income portfolio is a nice complement to most people's paycheck or other retirement

income. Investors should be on the lookout for stocks that have fallen out of favor and have
still maintained a high dividend policy. These are the companies that can not only supplement
income but also provide capital gains. Utilities and other slow growth industries are an ideal
place to start your search.

The Speculative Portfolio

29
A speculative portfolio is the closest to a pure gamble. A speculative portfolio presents more
risk than any others discussed here. Finance gurus suggest that a maximum of 10% of one's
investable assets be used to fund a speculative portfolio. Speculative "plays" could be initial
public offerings (IPOs) or stocks that are rumored to be takeover targets. Technology or
health care firms that are in the process of researching a breakthrough product, or a junior oil
company which is about to release its initial production results, would also fall into this
category.

Another classic speculative play is to make an investment decision based upon a rumor that
the company is subject to a takeover. One could argue that the widespread popularity of
leveraged ETFs in today's markets represent speculation. Again, these types of investments
are alluring: picking the right one could lead to huge profits in a short amount of time.
Speculation may be the one portfolio that, if done correctly, requires the most homework.
Speculative
stocks are
typically
trades, and not
your classic
"buy and
hold"
investment.

The Hybrid Portfolio

Building a hybrid type of portfolio means venturing into other investments, such as bonds,
commodities, real estate and even art. Basically, there is a lot of flexibility in the hybrid
portfolio approach. Traditionally, this type of portfolio would contain blue chip stocks and
some high grade government or corporate bonds. REITs and MLPs may also be an investable
theme for the balanced portfolio. A common fixed income investment strategy approach
advocates buying bonds with various maturity dates, and is essentially a diversification
approach within the bond asset class itself. Basically, a hybrid portfolio would include a mix

30
of stocks and bonds in a relatively fixed allocation proportions. This type of approach offers
diversification benefits across multiple asset classes as equities and fixed income securities
tend to have a negative correlation with one another.

The Bottom Line

At the end of the day, investors should consider all of these portfolios and decide on the right
allocation across all five. Here, we have laid the foundation by defining five of the more
common types of portfolios. Building an investment portfolio does require more effort than a
passive, index investing approach. By going it alone, you will be required to monitor your
portfolio(s) and rebalance more frequently, thus racking up commission fees. Too much or
too little exposure to any portfolio type introduces additional risks. Despite the extra required
effort, defining and building a portfolio will increase your investing confidence, and give you
control over your finances.

Companies Providing Portfolio Management Services

1. PORINJU VELIYATH PMS

Porinju Veliyath PMS was incorporated in the year 2002 since then it has grown as one of the
best PMS in India. The company has various classes of clientele from India and abroad.

31
The value of PMS it manages starts from a few lakhs to millions.

Mr
Porinju Veliyath is the founder & CEO of the company. His name comes under one of the
best fund managers in India.

The simple investment philosophy of the company is to buy something for a rupee, which is
worth two rupees!

The minimum amount required to make the investment in Porinju Veliyath is 250,00,000

The company offers the investment strategy Equity Intelligence strategy. The best thing about
this strategy is that the investor can withdraw money whenever they want

One has the capacity to invest the minimum amount of criteria to join this strategy

The performance/return of the strategy is outstanding. The PMS service has returned 47% in
FY17 which is better than the benchmark index NIFTY 18.56%) and BSE 500 (24.03%).

The management fee of the company will be charged as follows:

Fee:

Fixed management fee 2% per annum and 0.5% quarterly on the basis of average NAV .
Performance Fee: 10% of returns above 10% per annum.

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 2. MOTILAL OSWAL PMS

The name of Motilal Oswal PMS

comes under the name of the
largest PMS houses in the
country and is certainly a
deserving part of this list
on the Best PMS in India.

The company was established by Mr

Motilal Oswal and Mr Ramdea Agarwal in the year
1987.

The asset management company offers an excellent return to the investors by investing in
small cap and mid-cap companies.

The PMS house offers three types of strategies which are Value strategy, Next trillion dollar
strategy, and the India opportunities portfolio strategy

The total number of stocks in the portfolio is in the range of 20-26 stocks. These strategies
best suit the clients who can't wait for the medium to long term to get the return.

The minimum investment in PMS amount for these strategies is 50,00,000 additional
250,00,000 as a top-up in any of the strategies the strategies model.

A client can add

The performance/return of the company in the last 5 years is approx 32% and for the last one
year the return is 19%

An NRI can also invest in Motilal Oswal PMS.

Fee:

33
The management fee of the company will be charged according to the strategies model.

3. INVESCO PMS

Mr Saurabh Nanavati is the founder of Invesco PMS. He started the company in the year
2007. The company is well known to offer superior performance over the years. Invesco PMS
is among the best PMS in India.

Invesco

It offers three types of strategies:

• Factor Investing strategy: A particular factor is considered while investing rather than a
sector industry • Smart Beta Strategy: Generally delivered through Exchange-traded funds
(ETFS). Alternative strategy: Investment is done other than long-term equities and Fixed
deposits.

Like Commodities, Natural resources, Infrastructure, real estate etc. Now as per the PMS
SEBI rules, the minimum investment changed
from 725 lakh to 250 lakh.

All three strategies perform very well and

provide a healthy return to investors. The
performance of the company in the last 5 years
is 8.5%, while the return is 9% for 10 years
CAGR.

34
The management fee of the company will be charged according to the investment strategy
model opted by both the parties.

4. ASK PMS

Ask PMS is one of the best PMS in India. The company runs its business on the philosophy
of capital appreciation with capital protection as well.

The strong professional team of the company takes care of risk minimization with a healthy
return

ASK

Ask PMS offers various strategies which are created according to the financial investment
objective of clients and their risk bearing capacity.

The strategies offered by the company are:

• Ask Growth strategy

· Ask Life strategy

. Ask Indian Entrepreneur portfolio strategy . Ask Strategic portfolio strategy

• Ask India Select portfolio strategy

The minimum investment required to make an investment

under these strategies is Rs.50,00,000.

The company offers an attractive return to investors. The

return for the last S years is 17% and for the last 10 years is
17%.

Ask PMS Fund Managers Details

35
The table given below is providing the entire details about the fund manager of Ask PMS
company.

Fund Manager’s Details

Name Prateek Agrawal (CIO)
Experience 22 Years
Highest Qualification MBA
AUM (in Cr.) Approx 18,000 Cr.
Number of Clients 290+
Investment Tenure Minimum 3 yr.

FEE:

The management fee of the company will be charged as follows:

• Fixed management fee: 2.5% of portfolio value per annum • Performance Fee: There is a
fixed fee of 1.5% of returns 20% gain above 10% of the profit.

5. Kotak PMS

Kotak stock broking company is highly renowned and largest portfolio management service
providing company across India.

36
The broking house was founded by Uday S. Kotak in the year 1985. The Kotak Portfolio
Management Services is listed under SEBI and its headquarters of the company is located in
Mumbai, Maharashtra.

It’s a highly renowned and successful model is portfolio management services. They have a
wide list of experienced fund managers who look after their PMS based clients.

The Kotak stockbroking house has both the types of portfolio management services namely-
Discretionary and Non-Discretionary.

There are so many people who look after investing in well-managed and fundamental
companies. Clients normally make use of Discretionary PMS, where the whole portfolio is
managed by the portfolio manager.

Kotak PMS Strategies

Kotak portfolio management service providing company is one the best and top-notch
company, registered under the securities exchange board of India.

Its main concentration is in making investments in highly-managed and qualitative industries

that are normally purchased at appreciable discounts to their fundamental values. Like stocks
can be unfavourable but after a long period of time, they set broad standards in terms of
healthy returns.

The broking house makes such kind of bets because it has confidence in that particular
approach or strategy. They mainly focus on large-cap strategies, diversified strategies and
small-mid cap strategies and are renowned in the market for their great PMS performance.

Kotak PMS Charges

The charges imposed by the Kotak portfolio management service platform are listed below-

 Management Charges- According to the commission model opted by investors, the

management charges are levied by the Kotak portfolio management service company.
 Upfront Fees- The Kotak PMS industry also levy upfront fees from all of its clients.
It is the same as prepaid charges. The upfront charges levied by the company range
from 1.2% to 2.2% of the total asset value.
 Brokerage Charges- Brokerage charges are also levied by the Kotak PMS from its
investors. Such kind of charges is tailor-made with a range of 0.015% to 0.035% of
the total transaction value.

37
  Custodian Charges- Custodian charges taken by Kotak PMS portal ranges from
0.35% to 0.45% of the total asset value.
 Depository Charges- The Kotak PMS company has also included depository charges
under its investment management package. Depository charges mainly range from 2%
to 0.25% of the total asset value.
 Exit Load Charges- Exit load charges are charged on the basis of withdrawal amount
and time duration of withdrawal. For instance, if the withdrawal of the particular
transaction takes place within 12 months then the commission charge will be 1.5% to
2.5% of the total withdrawal amount. If the withdrawal is done after a year then in
some cases it is free and in some cases, it is 0.8% of the total withdrawal amount.

Kotak PMS Fund Managers Details

The below-mentioned table is providing the entire details about the fund manager of the
Kotak portfolio management service company

Fund Manager’s Details

Name Anshul Saigal
Experience 16 Years
Highest Qualification MBA
AUM (in Cr.) Approx 20,000 Cr.
Number of Clients 325+
Investment Tenure Minimum 3 yr.

Kotak portfolio management service providing company is one the best and top-notch
company, registered under the securities exchange board of India.

Its main concentration is in making investments in highly-managed and qualitative industries

that are normally purchased at appreciable discounts to their fundamental values. Like stocks
can be unfavorable but after a long period of time, they set broad standards in terms of
healthy returns.

38
The broking house makes such kind of bets because it has confidence in that particular
approach or strategy. They mainly focus on large-cap strategies, diversified strategies and
small-mid cap strategies and are renowned in the market for their great PMS performance.

RISK ANALYSIS

Risk refers to uncertainty.

It is happening of an event which could lead to possible financial loss.
Every investment has certain degree of risk associated with it.
Risk and return are two important characteristics of any investment. They are directly
related to each other. Higher the risk associated higher will be the returns on that
investment and vice versa.

39
 Every investor assumes certain return also called as expected returns before making
the actual investment. However the return that an investor usually receives is much
lesser than the expected amount.
The difference between the expected returns and the actual returns is due to the factor
known as Risk.
Every asset has a different degree of risk associated with it. Depending on the risk
taking ability, investors put in their funds to earn returns.
Risk associated with an asset can range between 0 to infinity.
Government bonds also known as G-sec bonds are assumed to have zero or negligible
risk.

There are various types of risk that can affect the returns from investment
They are classified under two main categories
A. Systematic Risk
B. Unsystematic Risk

Systematic Risk
This risk affects the market as a whole and therefore has an impact on all the
securities
This risk cannot be controlled
The impact of such risk can be reduced by asset allocation and hedging

Unsystematic Risk
This risk is specific to either a company, industry or a sector. As a result it affects
only that particular company, industry or sector.
This risk arises due to internal factors like mismanagement
This risk can be reduced by portfolio diversification.

Following are a few other risks that affect the outcome of an investment.
 Market Risk
It is a risk which occurs due to certain changes in the market conditions that
impacts the overall returns of the portfolio.
This can be further divided into
a) Currency risk

40
 This risk affects parties that are involved in import-export or have bills
receivable or payable in some other currency.
b) Equity risk
Stock prices are mainly determined by its supply and demand.
Equity risk is the risk of changes in the stock price due to some market
developments.
 Foreign investment risk
It is risk arising due to investment in a foreign country.
This risk occurs due to difference in law, politics, social and cultures.

 Horizon risk
It is risk which occurs when the time period for which the amount was
invested is changed and reduced.
This means that the investment would not reap average benefits and the
expected returns and actual returns would have a great variation.
 Interest Rate Risk
This risk occurs when the interest rates of stocks fluctuate, which could affect
the total cash outflow of the investment.

 Reinvestment risk
This risk occurs when the investor has to reinvest his principal amount at a
lower rate of interest than the previous one.
For example, a person having 12% debentures in a company reinvests that
amount after maturity in 8% debentures.

 Concentration risk
This risk occurs when an investor concentrates all his savings in the same
asset.
This means if that asset out-performs, the investor will earn high returns, but if
the asset under-performs, the investor will suffer a huge loss.

 Political Risk
The Government of a country has an impact on the stock prices.

41
 If there is instability among the political parties or the government is bringing
up regulations hindering the growth of business, it will have a negative impact
on the stock price movement which will result in variations of actual returns
from the expected returns.

 Liquidity risk
Liquidity refers to conversion of assets into cash.
This risk refers to being unable to convert assets at the right time into cash,
either due to lack of demand or any other reasons.
Liquidity risk can lead to major financial loss to an investor because he is
unable to sell his assets at the right time.
 Credit risk
This risk occurs when the party that has issued the security defaults payment
of dividend or interest as well as the principal amount due to some financial
crisis.
 Inflation risk
This risk occurs when the rate of return from the investment is less than the
inflation rate.
Inflation affects purchasing power of an individual. Many investors have an
objective to reduce the impact of inflation with the help of investment.
 Longevity risk
This risk affects people who rely on the returns from the investments as it is their
source of income.

Longevity risk is when the returns earned over some investments are less than
what was needed to continue a given standard of living, that is they do not suffice
the cause for which the investment was made.

RETURNS ON PORTFOLIO

Every investment is subjected to risk-return relationship.

Risk is directly proportional to returns. So if an investor wishes to earn high returns,
he is forced to undertake high levels of risks.
Risk is basically the difference between the expected returns and the actual returns.
It is the variation in returns on an investment.

42
 Risk on investment can range between 0 to infinity. Government security bonds are
assumed to have zero or almost negligible risk associated.
Returns on portfolio or the portfolio performance can be calculated using various
methods like
 Sharpe Ratio
 Treynor Ratio
 Jensen’s alpha

COMPARISON OF PORTFOLIO RETURNS USING SHARPE

RATIO, TREYNOR RATIO AND JENSEN’S ALPHA

Portfolio is a cumulative of various securities like equity, stocks, bonds, debentures, ULIP, g-
sec bonds to achieve a desired objective based on the return and risk associated with each
security.

A Portfolio manager or an investor uses his skills and knowledge to prepare an efficient
portfolio in such a manner that it achieves the desired objective.

43
For this the portfolio manager or investor can use a combination of strategies and asset
allocation techniques to get an efficient portfolio mix.

Strategies like active portfolio management (Buying and selling of assets and shuffling and
reshuffling of assets based on the market conditions prevailing to capitalize on the
opportunities available) and passive portfolio management( Buying and holding the assets for
a period of time to get returns irrespective of the prevailing market conditions) are used based
on the investor’s time constraints.

Success of a portfolio mix depends on the strategy used, the knowledge and skills of the
portfolio manager, but it is majorly determined by the returns earned and also the variations
of the expected returns and the actual returns.

CALCULATION OF PORTFOLIO RETURN:-

Portfolio Return Formula

Dividends + Interest + Realized Gains or Losses + Unrealized

Gains or Losses
Portfolio
=
Return
Initial Investment + Time Weighted Adjustment of the Portfolio
Return

Portfolio return is a combination of current income and capital gains.

Dividends pay-outs on stocks and interest received on bonds and debentures
constitute current income.
Capital gains or losses occur when a security is sold at a price which is equal to the
difference of sale price and purchase price.
The return of the portfolio is equal to the net of the capital gains or losses plus the
current income for the holding period.
Unrealized capital gains or losses on securities still held are also added to the return to
evaluate the holding period return of the portfolio.

44
 The portfolio return is adjusted for the addition of funds and the withdrawal of funds
to the portfolio, and is time-weighted according to the number of months that the
funds were in the portfolio

Realized gains (or losses) are gains or losses actualized by the selling of the securities,
whereas unrealized gains or losses are securities that are still owned but are marked to market
to determine the portfolio's return.

Comparing Portfolio Returns

A portfolio’s success is usually calculated by comparing their returns.

There are several factors that affect the performance of a portfolio like- risk, economic
changes, financial developments, market changes, time horizon and many more.

So if a person compares the returns of two portfolios as it is, then he may not determine the
performance accurately. It is important to consider all the other factors to calculate the
performance of a portfolio.

There are many methods to calculate the returns on the portfolio.

Some common methods are as follows:-

 Sharpe Ratio
 Treynor Ratio
 Jensen’s Alpha

Sharpe Ratio

This ratio was formulated by William F. Sharpe in 1966.

This ratio considers the impact of risk on the returns of the portfolio.

It helps the investors to calculate the risk adjusted returns.

45
The ratio is the average return earned in excess of the risk-free rate per unit of volatility or
total risk

Subtracting the risk-free rate from the mean return allows an investor to better isolate the
profits associated with risk-taking activities. Generally, the greater the value of the Sharpe
ratio, the more attractive the risk-adjusted return

Risk Premium = Total Portfolio Return – Risk free Rate

Sharpe Ratio = Risk Premium / Deviation of Portfolio Return Standard

Where:

 σp = standard deviation of the portfolio’s excess return

 Rf = risk-Free rate
 Rp = return of portfolio

Higher the Sharpe Ratio better is the portfolio’s performance.

This means that the investor should take that extra risk to earn excess returns.

 Treynor Ratio

This ratio was formulated by Jack L. Treynor.

This ratio considers the impact of market volatility on the returns of the portfolio.

It helps investors calculate on how much more returns can be expected for
every unit of risk undertaken. That means it is a measure of the return per unit
risk, where more returns means return above the expected returns.

46
Where:

 βp = beta of the portfolio

 rf = risk-free rate
 rp = portfolio return

Where Beta refers to systematic risk or market risk that has an impact on all the securities in
the market

Beta of market is always 1.

Higher the Treynor Ratio better is the portfolio or investment.

Jensen’s Alpha

Jensen's alpha was formulated by Michael C. Jensen in 1968.

This helps to calculate the actual return from an investment from the expected returns.

Formula:-

Alpha = R(i) - (R(f) + B x (R(m) - R(f)))

R(i) = the realized return of the portfolio or investment

R(m) = the realized return of the appropriate market index

R(f) = the risk-free rate of return for the time period

B = the beta of the portfolio of investment with respect to the chosen market index

Jensen’s alpha can be positive, negative, or zero.

47
For market, Jensen’s alpha is 0.

The portfolio is under-performing if alpha is negative

The portfolio is out-performing if alpha is positive

HOW IS PORTFOLIO MANAGEMENT SERVICES DIFFERENT

FROM MUTUAL FUNDS?

48
 Portfolio Management Services Mutual Funds

A person to seek for PMS should have a A person can start investing
minimum of Rs.2500000 worth savings or in mutual funds with a
Investing shares of an equivalent amount. minimum of Rs.500.
amount

PMS communicate information regularly to Mutual funds are well

investors to keep them updated about their regulated.
Transparency portfolio. A person can get daily
performance of his mutual
funds.

Data regarding an investor’s portfolio is All the data regarding mutual

available only to him. funds are available publicly
Availability of No data of PMS is available on any public on various platforms.
platform.
data

The investor owns the assets of his portfolio. Investor does not have
All the assets are reflected in his Demat ownership directly.
Ownership account.

They are taxable under capital gains and not They are taxable and come
Taxation
under business income. under capital gains.
Equity mutual funds are some
tax exemptions.

A fixed fee which is decided at the beginning is Fee is charged as a

Fee charged
charged. percentage of total AUM

PMS helps create a portfolio mix that will help They are customized as per
to meet the goals of the investor. the objective of the fund.
Custom-made
BENEFITS OF CHOOSING PORTFOLIO MANAGEMENT
SERVICES (PMS) INSTEAD OF MUTUAL FUNDS:

While selecting Portfolio management service (PMS) over mutual funds services it is found
that portfolio managers offer some very services which are better than the standardized
product services offered by mutual funds managers. Such as:

49
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 tailor
made and is designed after the detailed analysis of client's investment goals, saving pattern,
and risk taking capacity.

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.

Flexibility: portfolio managers’ 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.

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.

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.

50
 WHY SHOULD YOU OPT FOR
PORTFOLIO MANAGEMENT SERVICES?

Here are a few aspects on which portfolio managers say they score on top like:-

1. Balanced Portfolio: Professional research and advice will help you with information
on the best investment options and ideas for your portfolio.
2. Maximum Returns, Minimum Risks: Portfolio management services assure you of
the best downside protection for your portfolio. You will benefit with practical
financial advice that can help convert all paper gains into real profits in the shortest
time.

51
 3. Adjust Your Portfolio To Market Trends: When you avail of portfolio
management services, you enjoy greater freedom and flexibility to diversify your
investments.
4. Personalized Advice: Get investment advice and strategies from expert Fund
Managers.
5. Professional Management: Money management services that work for you.
6. Continuous Monitoring: You are informed about your investment decisions.
7. Hassle Free Operation: High standards of service and complete portfolio
transparency.
8. Greater control: You have greater control over the asset allocation in PMS. Here the
portfolio can be customized to suit your risk-return profile.
9. Transparency: PMS provides comprehensive communications and performance
reporting that will give investors a complete picture regarding the securities held on
his behalf

CHAPTER II

LITERATURE REVIEW

Meera, E (1995), conducted a study on equity investment strategy and portfolio selection,
which overviewed that investors mainly follow either the active strategy or the passive
strategy for formulation of a portfolio based on their forecasting ability and judgement of
the market conditions. The study also compared portfolios, one followed active strategy and
one followed passive strategy on the basis of returns, frequency of disposal of assets,
portfolio revision, with every factor there was a variation in the performance. After
evaluation of the portfolios, It can be concluded that returns were higher from portfolios
which had less diversification as compared to a portfolio having assets diversified over a
large number of sectors.

52
Mahsa Maleki, conducted a thesis of construction and management of optimal portfolio.

The study showed that portfolio constructed by Sharpe single index model is a much better
approach as compared to Markowitz model, as the number of inputs are lower in Sharpe
Model than in Markowitz model. If the number of inputs is not considered as a deciding
factor, then both the models gave almost similar results. The study also proved that investors
can use market index to correlate with the returns.

Anu Antony (2016), conducted a research on risk model and portfolio selection.

The overview targeted to comprehend the behaviour of investors while making investment
decision. It proved that investors not just consider risk as a major deciding factor, emotional
sentiments, like over confidence, human nature of following others are sometimes major
deciding factors while selecting assets. The study helped in understanding how modern
portfolio theories consider just risk and return while making investments and not human
behaviour and sentiments.

Zabiulla, completed an overview on portfolio strategies and performance of equity mutual

fund schemes in india. The study showed that even as the Indian stock market is growing
rapidly and there are new investors entering the market, the portfolio managers are not able to
meet the desired goals of their clients as they are inefficient in predicting the future and
understanding the stock market. They follow a passive strategy in managing their client’s
portfolio and thus are not able to capitalize on the opportunities arising out of market
changes.

Sachan Abhishek (2017), performed a study on relationship between personality traits and
demographic characteristics with behavioural biases of individual investors

The study revealed that behaviour, emotions, demographics, and significant relationships
played an important role in decision making for investment.

The demographics like age, gender, residence, education, marital status and profession,
openness to experience, optimism are considered and how each demographic had different
impact on investment decision.

Lal, Kavitha (2011), conducted a study of security analysis and portfolio management with
special reference to retirement planning.

53
The study explained the factors that needs to be considered while portfolio management in
context to retirement planning. Factors like source of income, desired standard of living,
insurance, liquidity requirements, current balance sheet, expected returns to maintain the
current lifestyle are needed to be considered to formulate a financial plan.

Based on the financial plan, the assets have to be allocated in different fractions and needs to
be constantly evaluated to get the desired returns on retirement. The researcher also suggested
consulting a financial planner for a more professional and efficient planning.

CHAPTER III

RESEARCH METHODOLOGY

Methods of data collection

Data has been collected by means of Primary and Secondary Sources.

A) Primary Data: For the Present study primary data is collected through Questionnaire.

B) Secondary Data: Secondary data has been collected through various Publications like
books, newspapers ,web, Reports, etc.

Sample Size:

54
The sample size for this projects report has been kept limited to the number of 100
respondents. On the basis of the information revealed by these respondents the data has been
collected analyzed and interpreted.

HYPOTHESIS STATEMENT:

Null Hypothesis: Most of the investors prefer return as their investment criteria rather than
risk, liquidity and safety of principal etc.

Alternate Hypothesis: Most of the investors don’t prefer return as their investment criteria
rather go for either risk or liquidity or safety of principal etc.

Methods of data collection

OBJECTIVE OF THE STUDY

1. To get the overall knowledge of securities and investment.

2. To know how the investment made in different securities minimizes the risk and

maximizes the returns.

3. To get the knowledge of different factors that affects the investment decision of

investors.

4. To know how different companies are managing their portfolio i.e. when and in

which sectors they are investing.

5. To know what is the need of appointing a Portfolio Manager and how does he

meets the needs of the various investors.

6. To get the knowledge about the role and functions of portfolio manager.

7. To get the knowledge of investment decision and asset allocation.

SCOPE OF THE STUDY:

The study covers all the information related to the Portfolio management. It also covers the
investor risk in the investment in various securities.

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 1. Identification of the investor’s objectives, constraints and preferences.
2. To reduce the future risk in advance.
3. To earn maximum profit in the securities.
4. Review and monitoring of the performance of the portfolio.
5. Finally the evaluation of the portfolio.

LIMITATIONS

1) The time span in which the whole study was conducted was limited and short for carrying
out the project.

2) Many of the customers did not give correct information. This affects the outcome as well
as the results of the study.

Chapter IV

DATA ANALYSIS AND INTERPRETATION

1 .Age

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 18-22
22-26
26-30
30 and above

From the responses,

People belonging to the Age group of:-

18-22 = 36.6%

22-26 = 33.7%

26-30 = 17.8%

30-above = 11.9%

Age group of 18-22 forms the majority of the respondents.

2 .The portion of your total income you currently save is approximately

57
 I do not currently save any
income
10%-20%
20%-30%
more than 30%

From the responses,

36.6% of the respondents save about 10-20% of their income

30.7% of the respondents save about 20-30% of their income

12.9% of the respondents save more than 30% of their income

19.8% of them do not currently save any income.

3. In the next five years, you expect that your earned income will
probably.

58
 Decrease
Stay about the same
Increase Modestly
Increase Significantly

Respondent’s expectation in next 5 years:-

45.5% of respondents believe that their income will increase modestly

23.8% believe that it will increase significantly

25.7% of respondents think that their income will remain the same

5% of them think that the income will decrease.

4. Are you aware about the services offered by Portfolio Managers?

59
 yes No

Awareness about Portfolio Management Services

69.3% of the respondents were aware about these services

30.7% of them had no idea about these services

5. If yes, what type of services you are aware of?

60
 Management of Mutualfunds
Management of Equities
Management of MoneyMarket
Investment
Advisory or Consultancyservices
Others

From the respondents who are about PMS

23.80% are aware about Management of mutual funds

35.7% are aware about Management of equities

25% are aware about Money market investment

7.1% are aware about advisory or consultancy services

8.3% are aware about some other services.

6. Would you want to hire a Portfolio Manager at present or in future?

61
 Yes
No

From the respondents

About 26.7% of the respondents do not prefer to hire a portfolio manager

73.3 % of the respondents want to hire a portfolio manager.

7. If yes, for what type of services?

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 Investment in Mutual Funds
Investment in Money Market
Investment in
ConsultancyService
Investment in Equities
Other Services

From the respondents

27.7% of them would hire a portfolio manager for investing in money market,

24.1% of them would hire a portfolio manager for investing in equities

22.9% of them would hire a portfolio manager for investing in consultancy services

21.7% of them would hire a portfolio manager for investing in mutual funds.

3.6% of them would hire a portfolio manager for other services.

8. How would you describe your Portfolio's liquidity requirement?

63
 Low
Average
High

From the respondents,

About 61% of them want their portfolio liquidity requirement to be average

About 26% of them want their portfolio liquidity requirement to be low

And about 13% of them want their portfolio liquidity requirement to be high.

9. Will the investment earnings for this portfolio be needed to meet

some or all of your expenses?

64
 Yes
No

The percentage of respondents did not who needed their earnings to meet some or all of their
expenses were 47.5% while the remaining respondents needed it to meet all some or all of
their expenses.

10. If you answered yes, what are the approximate annual expenses this
portfolio will need to address?
 Tax payment

65
  10000
 100000

11. Assessing your risk tolerance as an investor.

Portfolio A, which may gainupto

60% and lose upto40%
Portfolio B, which maygainupto
50% and lose upto50%
Portfolio C, which may gainupto
70% and lose upto30%
Portfolio D, which may gainupto
40% and lose upto60%

34.3% of the respondents want such kind of portfolio which could fetch them 60% of profit
whereas there were respondents who were ready to make loss of 60% and gain only 40%

12.Are You comfortable with investment which are very volatile?

66
 Agree
Disagree
Strongly Disagree

From the respondents,

36.6% are comfortable with volatile investments and can be called High risk takers

48.5% of the respondents are moderate risk takers

14.9% of the respondents are risk averse

Chapter V

67
 CONCLUSIONS

From the above study, we can analyse that people have become more aware about investment
and there has been an increase in demand for portfolio management services and it will
continue to see a rise in the coming time.
Large number of players like various financial institutions, government, high net worth
investors, individual investors are participating and influencing the stock market.
We have also understood the importance of portfolio management, the impact of various
factors like risk-return on investments, the different phases and elaborate procedure of
portfolio management.
We have also become more aware about the advantages and disadvantages of portfolio
management, and what role a portfolio manager plays in investment with the help of his skills
and knowledge.
The above mentioned information also states certain mistakes which are common and should
be avoided while investing in securities like not doing proper research before investing.
The study has helped to understand different investment strategies and how combination of
these strategies in asset allocation will help in achieving the desired returns.
As per the data collected from the respondents, we conclude that the null hypothesis
(Assuming that investors consider returns as their deciding factor while making investments
over liquidity, risk, etc.) has been rejected and the alternate hypothesis (Assuming that
investors consider risk, liquidity , etc as a major factor while making investment over
returns.) has been accepted.

Suggestion

According to the research, an average person can take the services of the portfolio
management services from the firms which has been generating previously good annual
returns. The major issue is the minimum amount to invest in the PMS firm. The average
person can start investing small amounts in mutual funds which has a lower bracket of Rs.
500 and keep investing until he can save a large sum of money and invest it with the PMS
firms who are generating high amounts of returns, provide their services charges are not very
high.

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 BIBLIOGRAPHY

 https://www.scribd.com/doc/34313597/Portfolio-Management-Services-and-
Investment-Decision
 http://www.managementparadise.com/rohanrajk/documents/3392/investment-
analysis-amp-portfolio-management/
 http://www.pmsolutions.com/case-studies/category/program-portfolio-management/
 http://www.investopedia.com/walkthrough/corporate-finance/4/capital-markets/risk-
returns.aspx
 http://thismatter.com/money/investments/portfolio-performance.htm
 https://www.google.co.in/?
gfe_rd=cr&ei=2iL2V9mFLarT8gf8t4bwCw#q=importance+of+portfolio+managemen
t+in+todays+time+Et

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 CHAPTER VI

ANNEXURE

QUESTIONNAIRE

1)Name

2) Age
o 18-22
o 22-26
o 26-30
o 30 and above

3) The portion of your total income you currently save is approximately.

o I do not currently save any income
o 10%-20%
o 20%-30%
o more than 30%

4) In the next five years, you expect that your earned income will probably.
o Decrease
o Stay about the same
o Increase Modestly
o Increase Significantly

5) Are you aware about the services offered by Portfolio Managers?

70
 o Yes
o No

6) If yes, what type of services you are aware of ?

o Management of Mutual funds
o Management of Equities
o Management of Money Market Investment
o Advisory or Consultancy services
o Others

7) Would you want to hire a Portfolio Manager at present or in future?

o Yes
o No

8) If yes, for what type of services?

o Investment in Mutual Funds
o Investment in Money Market
o Investment in Consultancy Service
o Investment in Equities
o Other Services (If other please specify)
o Other:
o

9) How would you describe your Portfolio's liquidity requirement?

o Low
o Average
o High

10) Will the investment earnings for this portfolio be needed to meet some or all of your
expenses?

71
 o Yes
o No

11)If you answered yes, what are the approximate annual expenses this portfolio will need to
address?

12) Assessing your risk tolerance as an investor.

o Portfolio A, which may gain upto 60% and lose upto 40%
o Portfolio B, which may gainupto 50% and lose upto 50%
o Portfolio C, which may gain upto 70% and lose upto 30%
o Portfolio D, which may gain upto 40% and lose upto 60%

13) Are you comfortable with investment which are very volatile.
o Agree
o Disagree
o Strongly Disagree

72
73