Reoprt on Portfolio Management Services by Sharekhan Stock Broking Limited

7/30/2019 Reoprt on Portfolio Management Services by Sharekhan Stock Broking Limited

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INTRODUCTION


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INTRODUCTION TO STUDY

The field of investment traditionally divided into security analysis and portfolio

management. The heart of security analysis is valuation of financial assets. Value in turn is the

function of risk and return. These two concepts are in the study of investment .Investment can

be defined the commitment of funds to one or more assets that will be held over for some

future time period.

In today fast growing world many opportunities are available, so in order to move with

changes and grab the best opportunities in the field of investments a professional fund

manager is necessary.

Therefore, in the present scenario the Portfolio Management Services (PMS) is fast gaining

importance as an investment alternative for the High Networth Investors.

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

debt, cash, structured products and other individual securities, managed by a professional

money manager that can potentially be tailored to meet specific investment objectives.

When you invest in PMS, you own individual securities unlike a mutual fund investor,

who owns units of the entire fund. You have the freedom and flexibility to tailor your portfolio

to address personal preferences and financial goals. Although portfolio managers may oversee

hundreds of portfolio, your account may be unique.

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

i. Discretionaryii. Non Discretionary

iii. AdvisoryDiscretionary: Under these services, the choice as well as the timings of the investment

decisions rest solely with the Portfolio Manager.


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Non Discretionary: Under these services, the portfolio manager only suggests the investment

ideas. The choice as well as the timings of the investment decisions rest solely with the

Investor.However the execution of trade is done by the portfolio manager.

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

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

Rule 2, clause (d) of the SEBI (portfolio managers) Rules, 1993 defines the term

Portfolio as total holding of securities belonging to any person.

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

defined with certainty new assets could be physical assets, real estates, land, building, gold etc.

or financial assets like stocks, equity, debenture, deposits etc.

Portfolio management refers to managing efficiently the investment in the securities held

by professional for others.

Merchant banker and the portfolio management with a view to ensure maximum return by

such investment with minimum risk of loss of return on the money invested in securities held

by them for their clients. The aim Portfolio management is to achieve the maximum return

from a portfolio, which has been delegated to be managed by manger or financial institution.

There are lots of organization in the market on the lookout for the people like you who

need their portfolios managed for them .They have trained and skilled talent will work on your

money to make it do more for you.

Therefore, if any investors still insist on managing their own portfolio, then ensure you

build discipline into their investment. Work out their strategy and stand by it.


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MYTHS ABOUT PMS

There are two most common myths found about Portfolio Management Services (PMS)

which we found among most of the Investors. They are as follows.

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

As in the Finance Basket both the PMS and Mutual Fund are used for minimizing risk and

maximize the profit of the Investors. The objectives are similar as in both the product but they

are different from each other in certain aspects. They are as follows.

Management Side

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

Whereas, in Mutual fund gives personalize access to money.

Customization

In PMS, Portfolio can be tailored to address each investor's specific needs. Whereas in

Mutual Fund Portfolio structured to meet the fund's stated investment objectives.

Ownership

In PMS, Investors directly own the individual securities in their portfolio, allowing for tax

management flexibility, whereas in Mutual Fund Shareholders own shares of the fund and

cannot influence buy and sell decisions or control their exposure to incurring tax liabilities.

Liquidity

In PMS, managers may hold cash; they are not required to hold cash to meet redemptions,

whereas, Mutual funds generally hold some cash to meet redemptions.


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Minimums

PMS generally gives higher minimum investments than mutual funds. Generally,

minimum ranges from: Rs. 1 Crore + for Equity Options Rs. 5 Crore + for Fixed Income

Options Rs. 20 Lacs + for Structured Products, whereas in Mutual Fund Provide ongoing,

personalized access to professional money management services.

Flexibility

PMS is generally more flexible than mutual funds. The Portfolio Manager may move to 100%

cash if it required. The Portfolio Manager may take his own time in building up the portfolio.

The Portfolio Manager can also manage a portfolio with disproportionate allocation to select

compelling opportunities whereas, in Mutual Fund comparatively less flexible.

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

In Financial Market Risk factor is common in all the financial products, but yes it is true that

Risk Factor vary from each other due to its nature.All investments involve a certain amount of

risk, including the possible erosion of the principal amount invested, which varies depending

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

involve more risk than investments in larger companies.

INTRODUCTION TO STOCK EXCHANGE

The emergence of stock market can be traced back to 1830. In Bombay, business passed in

the shares of banks like the commercial bank, the chartered mercantile bank, the chartered

bank, the oriental bank and the old bank of Bombay and shares of cotton presses. In Calcutta,

Englishman reported the quotations of 4%, 5%, and 6% loans of East India Company as well

as the shares of the bank of Bengal in 1836. This list was a further broadened in 1839 when the

Calcutta newspaper printed the quotations of banks like union bank and Agra bank. It also

quoted the prices of business ventures like the Bengal bonded warehouse, the Docking

Company and the storm tug company.


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Between 1840 and 1850, only half a dozen brokers existed for the limited business. But

during the share mania of 1860-65, the number of brokers increased considerably. By 1860,

the number of brokers was about 60 and during the exciting period of the American Civil war,their number increased to about 200 to 250. The end of American Civil war brought

disillusionment and many

Failures and the brokers decreased in number and prosperity. It was in those troublesome

times between 1868 and 1875 that brokers organized an informal association and finally as

recited in the Indenture constituting the Articles of Association of the Exchange.

On or about 9th day of July,1875, a few native brokers doing brokerage business in shares

and stocks resolved upon forming in Bombay an association for protecting the character, status

and interest of native share and stock brokers and providing a hall or building for the use of the

Members of such association.

As a meeting held in the broker Hall on the 5th day of February, 1887, it was resolved to

execute a formal deal of association and to constitute the first managing committee and to

appoint the first trustees. Accordingly, the Articles of Association of the Exchange and the

Stock

Exchange was formally established in Bombay on 3rd day of December, 1887. The

Association is now known as The Stock Exchange.

The entrance fee for new member was Re.1 and there were 318 members on the list, when

the exchange was constituted. The numbers of members increased to 333 in 1896, 362 in

1916and 478 in 1920 and the entrance fee was raised to Rs.5 in 1877, Rs.1000 in 1896,

Rs.2500 in 1916 and Rs. 48,000 in 1920. At present there are 23recognized stock exchanges

with about 6000 stockbrokers. Organization structure of stock exchange varies.

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

guarantee and 3 are non-profit voluntary organization. Of the total of 23, only 9 stock

exchanges have been permanent recognition. Others have to seek recognition on annual basis.


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These exchange do not work of its own, rather, these are run by some persons and with the

help of some persons and institution. All these are down as functionaries on stock exchange.

These are:

i. Stockbrokersii. Sub-broker

iii. Market makersiv. Portfolio consultants etc.

1. Stockbrokers:

Stock brokers are the members of stock exchanges. These are the

persons who buy, sell or deal in securities. A certificate of registration from SEBI is

mandatory to act as a broker. SEBI can impose certain conditions while granting the certificate

of registrations. It is obligatory for the person to abide by the rules, regulations and the buy-

law. Stock brokers are commission broker, floor broker, arbitrageur etc.

Table- 1

Detail of Registered Brokers

Total no. of registered brokers as on

31.03.09

Total no. of sub-broker as on 31.03.09

9000 24,000

2. Sub-broker:

A sub-broker acts as agent of stock broker. He is not a member of a stock

exchange. He assists the investors in buying, selling or dealing in securities through

stockbroker. The broker and sub-broker should enter into an agreement in which obligations of

both should be specified. Sub-broker must be registered SEBI for a dealing in securities. For

getting registered with SEBI, he must fulfill certain rules and regulation.


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3. Market Makers:

Market maker is a designated specialist in the specified securities.

They make both bid and offer at the same time. A market maker has to abide by bye-laws,rules regulations of the concerned stock exchange. He is exempt from the margin

requirements. As per the listing requirements, a company where the paid-up capital is Rs. 3

Crore but not more than Rs. 5 core and having a commercial operation for less than 2 years

should appoint a market maker at the time of issue of securities.

4. Portfolio Consultants:

A combination of securities such as stocks, bonds and money

market instruments iscollectively called as portfolio. Whereas the portfolioconsultants are the

persons, firms or companies whoadvise, direct or undertake the management oradministration

of securities or funds on behalf of theirclients.

Traditionally stock trading is done through stock brokers, personally or through

telephones.

As number of people trading in stock market increase enormously in last few years, some

issues like location constrains, busy phone lines, miss communication etc start growing in

stock broker offices. Information technology (Stock Market Software) helps stock brokers in

solving these problems with Online Stock Trading.

Online Stock Market Trading is an internet based stock trading facility. Investor can trade

shares through a website without any manual intervention from Stock Broker.

There are two different type of trading environments available for online equity trading.

1. Installable software based Stock Trading Terminals

This trading environment requires software to be installed on investors computer. This

software is provided by the stock broker. This software requires high speed internet

connection. These kind of trading terminals are used by high volume intraday equity traders.


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2.Web (Internet) based trading application

This kind of trading environment doesn't require any additional software installation. They

are like other internet websites which investor can access from around the world throughnormal internet connection.

Stock exchanges are like market places, where stockbrokers buy and sell securities for

individuals or institutions. As per the SCRA (Securities Contracts Regulation Act) 1956, the

definition of securities includes shares, bonds, stocks, debentures, government securities,

derivatives of securities, units of collective investment scheme (CIS) etc. The securities market

has two interdependent segments: the primary and secondary market.

The primary market is the channel for creation of new securities issued by public limited

companies or by government agencies. New securities issued in the primary market are traded

in the secondary market.

The secondary market operates through the over-the-counter (OTC) market and the

exchange trade market.

Advantages of Stocks Trading

1. Better returns

Actively trading stocks can produce better overall returns than simply buying and holding.

2. Huge Choice

There are thousands of stocks listed on markets around the world. There is always a stock

whose price is moving - its just a matter of finding them.

3. Familiarity

The most traded stocks are in the largest companies that most of us have heard of and

understand - Microsoft, IBM, and Cisco etc.


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Disadvantages of Stocks Trading

1. Leverage

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

compared to Forex trading or futures trading.

2. Pattern Day Trader Rules

It requires at least $25,000 to be held in a trading account if the trader completes more than

4 trades in a 5 day period. No such rule applies to Forex trading or futures trading.

3. Uptick Rule on Short Selling

A trader must wait until a stock price ticks up before they can short sell it. Again there are

no such rules in Forex trading or futures trading where going short are as easy as going long.

4. Need to Borrow Stock to Short

Stocks are physical commodities and if a trader wishes to go short then the broker must

have arrangements in place to borrow that stock from a shareholder until the trader closes their

position. This limits the opportunities available for short selling. Contrast this to futures

trading where selling is as easy as buying.

5. Costs

Although online trading costs for stock trading are low they still add considerably to the

costs of day trading. Online futures trading are about 1/4 of the cost for the equivalent value.

In the UK 0.5% stamp duty is also levied on all share purchases making trading virtually

impossible, hence the popularity of spread betting.


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OBJECTIVE OF THE STUDY


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OBJECTIVE OF THE STUDY

Each research study has its own specific purpose. It is like to discover to Question through

the application of scientific procedure. But the main aim of our research to find out the truth

that is hidden and which has not been discovered as yet. Our research study has two

objectives:-

OBJECTIVES

To know the concept of Portfolio Management. To know about the schemes offered by the different insurance companies, new IPOs,

Mutual Funds.

To know in depth about Insurance, Mutual Funds, Stock, Bonds etc. To know about the awareness towards stock brokers and share market. To study about the competitive position of Infoline Ltd. in Competitive Market.


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SCOPE OF THE STUDY


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SCOPE OF THE STUDY

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

In today's complex financial environment, investors have unique needs which are derived from

their risk appetite and financial goals. But regardless of this, every investor seeks to maximize

his returns on investments without capital erosion. Portfolio Management Services (PMS)

recognize this, and manage the investments professionally to achieve specific investment

objectives, and not to forget, relieving the investors from the day to day hassles which

investment require.

It is offers professional management of equity investment of the investor with an aimto deliver consistent return with an eye on risk.

Identify the key Stock in each portfolio. To look out for new prospective customers who are willing to invest in PMS. To find out the Infoline Ltd, PMS services effectiveness in the current situation.


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LITERTURE REVIEW


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LITERATURE REVIEW

PORTFOLIO MANGEMNT SERVICES (PMS)

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

individual. Holding a portfolio is often part of an investment and risk-limiting strategy called

diversification. By owning several assets, certain types of risk (in particular specific risk) can

be reduced. There are also portfolios which are aimed at taking high risks these are called

concentrated portfolios.

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

bonds etc) and other assets (e.g. real estate), to meet specified investment goals for the benefit

of the investors. Investors may be institutions (insurance companies, pension funds,

corporations etc.) or private investors (both directly via investment contracts and more

commonly via collective investment schemes e.g. mutual funds).

The term asset management is often used to refer to the investment management of

collective investments, whilst the more generic fund management may refer to all forms of

institutional investment as well as investment management for private investors. Investment

managers who specialize in advisory or discretionary management on behalf of (normally

wealthy) private investors may often refer to their services as wealth management or portfolio

management often within the context of so-called "private banking".

The provision of 'investment management services' includes elements of financial analysis,

asset selection, stock selection, plan implementation and ongoing monitoring of investments.Outside of the financial industry, the term "investment management" is often applied to

investments other than financial instruments. Investments are often meant to include projects,

brands, patents and many things other than stocks and bonds. Even in this case, the term

implies that rigorous financial and economic analysis methods are used.


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Need of PMS

As in the current scenario the effectiveness of PMS is required. As the PMS givesinvestors periodically review their asset allocation across different assets as the portfolio can

get skewed over a period of time. This can be largely due to appreciation / depreciation in the

value of the investments.

As the financial goals are diverse, the investment choices also need to be different to meet

those needs. No single investment is likely to meet all the needs, so one should keep some

money in bank deposits and / liquid funds to meet any urgent need for cash and keep the

balance in other investment products/ schemes that would maximize the return and minimize

the risk. Investment allocation can also change depending on ones risk-return profile.

Fig. 1


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Objective of PMS

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

1. Safety Of Fund: -The investment should be preserved, not be lost, and should remain in the

returnable position in cash or kind.

2. Marketability: -The investment made in securities should bemarketable that means, the securities

must be listed and traded in stock exchange so as to avoid difficulty in their

encashment.

3. Liquidity: -The portfolio must consist of such securities,which could be en-cashed without any

difficulty or involvementof time to meet urgent need for funds. Marketability ensures

liquidity to the portfolio.

4. Reasonable return: -The investment should earn a reasonable return to upkeep the declining value of

money and be compatible with opportunity cost of the money in terms of current

income in theform of interest or dividend.

5. Appreciation in Capital: -

The money invested in portfolio should grow andresult into capital gains.

6. Tax planning: -

Efficient portfolio management is concerned withcomposite tax planning covering

income tax, capital gain tax,wealth tax and gift tax.


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7. Minimize risk: -

Risk avoidance and minimization of risk are important objective of portfolio

management. Portfolio managers achieve these objectives by effective investmentplanning and periodical review of market, situation and economic environment

affecting the financial market.

PORTFOLIO CONSTRUCTION

The Portfolio Construction of Rational investors wish to maximize the returns on their

funds for a given level of risk. All investments possess varying degrees of risk. Returns come

in the form of income, such as interest or dividends, or through growth in capital values (i.e.

capital gains).

The portfolio construction process can be broadly characterized as comprising the

following steps:

1. Setting objectives.

The first step in building a portfolio is to determine the main objectives of the fund given

the constraints (i.e. tax and liquidity requirements) that may apply. Each investor has different

objectives, time horizons and attitude towards risk. Pension funds have long-term obligations

and, as a result, invest for the long term. Their objective may be to maximize total returns in

excess of the inflation rate. A charity might wish to generate the highest level of income whilst

maintaining the value of its capital received from bequests. An individual may have certain

liabilities and wish to match them at a future date. Assessing a clients risk tolerance can be

difficult. The concepts of efficient portfolios and diversification must also be considered when

setting up the investment objectives.


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2. Defining Policy.

Once the objectives have been set, a suitable investment policy must be established. Thestandard procedure is for the money manager to ask clients to select their preferred mix of

assets, for example equities and bonds, to provide an idea of the normal mix desired. Clients

are then asked to specify limits or maximum and minimum amounts they will allow to be

invested in the different assets available. The main asset classes are cash, equities, gilts/bonds

and other debt instruments, derivatives, property and overseas assets. Alternative investments,

such as private equity, are also growing in popularity, and will be discussed in a later chapter.

Attaining the optimal asset mix over time is one of the key factors of successful investing.

3. Applying portfolio strategy.

At either end of the portfolio management spectrum of strategies are active and passive

strategies. An active strategy involves predicting trends and changing expectations about the

likely future performance of the various asset classes and actively dealing in and out of

investments to seek a better performance. For example, if the manager expects interest rates to

rise, bond prices are likely to fall and so bonds should be sold, unless this expectation is

already

factored into bond prices. At this stage, the active fund manager should also determine the

style of the portfolio. For example, will the fund invest primarily in companies with large

market capitalizations, in shares of companies expected to generate high growth rates, or in

companies whose valuations are low? A passive strategy usually involves buying securities to

match a preselected market index. Alternatively, a portfolio can be set up to match the

investors choice of tailor-made index. Passive strategies rely on diversification to reduce risk.

Outperformance versus the chosen index is not expected. This strategy requires minimum

input from the portfolio manager. In practice, many active funds are managed somewhere

between the active and passive extremes, the core holdings of the fund being passively

managed and the balance being actively managed.


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4. Asset selections.

Once the strategy is decided, the fund manager must select individual assets in which toinvest. Usually a systematic procedure known as an investment process is established, which

sets guidelines or criteria for asset selection. Active strategies require that the fund managers

apply analytical skills and judgment for asset selection in order to identify undervalued assets

and to try to generate superior performance.

5. Performance assessments.

In order to assess the success of the fund manager, the performance of the fund is

periodically measured against a pre-agreed benchmark perhaps a suitable stock exchange

index or against a group of similar portfolios (peer group comparison). The portfolio

construction process is continuously iterative, reflecting changes internally and externally. For

example, expected movements in exchange rates may make overseas investment more

attractive, leading to changes in asset allocation. Or, if many large-scale investors

simultaneously decide to switch from passive to more active strategies, pressure will be put on

the fund managers to offer more active funds. Poor performance of a fund may lead to

modifications in individual asset holdings or, as an extreme measure; the manager of the fund

may be changed altogether.


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Steps to Stock Selection Process

\

Fig. 2


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Types of assets

The structure of a portfolio will depend ultimately on the investors objectives and on theasset selection decision reached. The portfolio structure takes into account a range of factors,

including the investors time horizon, attitude to risk, liquidity requirements, tax position and

availability of investments. The main asset classes are cash, bonds and other fixed income

securities, equities, derivatives, property and overseas assets.

Cash and cash instruments

Cash can be invested over any desired period, to generate interest income, in a range of highly

liquid or easily redeemable instruments, from simple bank deposits, negotiable certificates of

deposits, commercial paper (short term corporate debt) and Treasury bills (short term

government debt) to money market funds, which actively manage cash resources across a

range of domestic and foreign markets. Cash is normally held over the short term pending use

elsewhere (perhaps for paying claims by a non-life insurance company or for paying pensions),

but may be held over the longer term as well. Returns on cash are driven by the general

demand for funds in an economy, interest rates, and the expected rate of inflation. A portfolio

will normally maintain at least a small proportion of its funds in cash in order to take

advantage of buying opportunities.

Bonds

Bonds are debt instruments on which the issuer (the borrower) agrees to make interest

payments at periodic intervals over the life of the bondthis can be for two to thirty years or,

sometimes, in perpetuity. Interest payments can be fixed or variable, the latter being linked to

prevailing levels of interest rates. Bond markets are international and have grown rapidly over

recent years. The bond markets are highly liquid, with many issuers of similar standing,

including governments (sovereigns) and state-guaranteed organizations. Corporate bonds are

bonds that are issued by companies. To assist investors and to help in the efficient pricing of

bond issues, many bond issues are given ratings by specialist agencies such as Standard &


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Poors and Moodys. The highest investment grade is AAA, going all the way down to D,

which is graded as in default. Depending on expected movements in future interest rates, the

capital values of bonds fluctuate daily, providing investors with the potential for capital gainsor losses. Future interest rates are driven by the likely demand/ supply of money in an

economy, future inflation rates, political events and interest rates elsewhere in world markets.

Investors with short-term horizons and liquidity requirements may choose to invest in bonds

because of their relatively higher return than cash and their prospects for possible capital

appreciation. Long-term investors, such as pension funds, may acquire bonds for the higher

income and may hold them until redemption for perhaps seven or fifteen years. Because of

the greater risk, long bonds (over ten years to maturity) tend to be more volatile in price than

medium- and short-term bonds, and have a higher yield.

Equities

Equity consists of shares in a company representing the capital originally provided by

shareholders. An ordinary shareholder owns a proportional share of the company and an

ordinary share carries the residual risk and rewards after all liabilities and costs have been

paid. Ordinary shares carry the right to receive income in the form of dividends (once declared

out of distributable profits) and any residual claim on the companys assets once its liabilities

have been paid in full. Preference shares are another type of share capital. They differ from

ordinary shares in that the dividend on a preference share is usually fixed at some amount and

does not change. Also, preference shares usually do not carry voting rights and, in the event of

firm failure, preference shareholders are paid before ordinary shareholders. Returns from

investing in equities are generated in the form of dividend income and capital gain arising

from the ultimate sale of the shares. The level of dividends may vary from year to year,

reflecting the changing profitability of a company. Similarly, the market price of a share will

change from day to day to reflect all relevant available information. Although not guaranteed,

equity prices generally rise over time, reflecting general economic growth, and have been

found over the long term to generate growing levels of income in excess of the rate of

inflation. Granted, there may be periods of time, even years, when equity prices trend

downwardsusually during recessionary times. The overall long-term prospect, however, for


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capital appreciation makes equities an attractive investment proposition for major institutional

investors.

Derivatives

Derivative instruments are financial assets that are derived from existing primary assets as

opposed to being issued by a company or government entity. The two most popular derivatives

are futures and options. The extent to which a fund may incorporate derivatives products in the

fund will be specified in the fund rules and, depending on the type of fund established for the

client and depending on the client, may not be allowable at all.

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

counterparties to exchange an asset at a fixed price and date in the future. The underlying asset

of the futures contract can be a commodity or a financial security. Each contract specifies the

type and amount of the asset to be exchanged, and where it is to be delivered (usually one of a

few approved locations for that particular asset). Futures contracts can be set up for the

delivery of cocoa, steel, oil or coffee. Likewise, financial futures contracts can specify the

delivery of foreign currency or a range of government bonds. The buyer of a futures contract

takes a long position, and will make a profit if the value of the contract rises after the

purchase. The seller of the futures contract takes a short position and will, in turn, make a

profit if the price of the futures contract falls. When the futures contract expires, the seller of

the contract is required to deliver the underlying asset to the buyer of the contract. Regarding

financial futures contracts, however, in the vast majority of cases no physical delivery of the

underlying asset takes place as many contracts are cash settled or closed out with the offsetting

position before the expiry date.

An option contract is an agreement that gives the owner the right, but not obligation, to

buy or sell (depending on the type of option) a certain asset for a specified period of time. A

call option gives the holder the right to buy the asset. A put option gives the holder the right to

sell the asset. European options can be exercised only on the options expiry date. US options

can be exercised at any time before the contracts maturity date. Option contracts on stocks or


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stock indices are particularly popular. Buying an option involves paying a premium; selling an

option involves receiving the premium. Options have the potential for large gains or losses,

and are considered to be high-risk instruments. Sometimes, however, option contracts are usedto reduce risk. For example, fund managers can use a call option to reduce risk when they own

an asset. Only very specific funds are allowed to hold options.

Property

Property investment can be made either directly by buying properties, or indirectly by

buying shares in listed property companies. Only major institutional investors with long-term

time horizons and no liquidity pressures tend to make direct property investments. These

institutions purchase freehold and leasehold properties as part of a property portfolio held for

the long term, perhaps twenty or more years. Property sectors of interest would include prime,

quality, well-located commercial office and shop properties, modern industrial warehouses and

estates, hotels, farmland and woodland. Returns are generated from annual rents and any

capital gains on realization. These investments are often highly illiquid.

Risk and Risk Aversion

Portfolio theory also assumes that investors are basically risk averse, meaning that, given a

choice between two assets with equal rates of return they will select the asset with lower level

of risk.

For example, they purchased various type of insurance including life insurance, Health

insurance and car insurance. The Combination of risk preference and risk aversion can be

explained by an attitude toward risk that depends on the amount of money involved.A discussion of portfolio or fund management must include some thought given to the

concept of risk. Any portfolio that is being developed will have certain risk constraints

specified in the fund rules, very often to cater to a particular segment of investor who

possesses a particular level of risk appetite. It is, therefore, important to spend some time


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discussing the basic theories of quantifying the level of risk in an investment, and to attempt to

explain the way in which market values of investments are determined

Definition of Risk

Although there is a difference in the specific definitionsof risk and uncertainty, for our

purpose and in most financialliterature the two terms are used interchangeably. In fact, one

way to define risk is the uncertainty of future outcomes. Analternative definition might be

the probability of an adverse outcome.

Composite risks involve the different risk as explained below:-

(1). Interest rate risk: -

It occurs due to variability cause in return by changes in level of interest rate. In long runs

all interest rate move up or downwards. These changes affect the value of security. RBI, in

India, is the monitoring authority which effectalises the change in interest rate. Any upward

revision in interest rate affects fixed income security, which carry old lower rate of interest and

thus declining market value. Thus it establishes an inverse relationship in the prize of security.

Table - 2

TYPES RISK EXTENT

Cash equivalent Less vulnerable to interest rate risk

Long term Bond More vulnerable to interest rate risk.


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(2) Purchasing power risk:

It is known as inflation risk also. This risk emanates from the very fact that inflation affectsthe purchasing power adversely. Purchasing power risk is more in inflationary times in bonds

and fixed income securities. It is desirable to invest in such securities during deflationary

period or a period of decelerating inflation. Purchasing power risk is less in flexible income

securities like equity shares or common stuffs where rise in dividend income offset increase in

the rate of inflation and provide advantage of capital gains.

(3) Business risk:

Business risk emanates from sale and purchase of securities affected by business cycles,

technological change etc. Business cycle affects all the type of securities viz. there is cheerful

movement in boom due to bullish trend in stock prizes where as bearish trend in depression

brings downfall in the prizes of all types of securities. Flexible income securities are nearly

affected than fix rate securities during depression due to decline n the market prize.

(4) Financial risk:

Financial risk emanates from the changes in the capital structure of the company. It is also

known as leveraged risk and expressed in term of debt equity ratio. Excess of debts against

equity in the capital structure indicates the company to be highly geared or highly levered.

Although leveraged companys earnings per share (EPS) are more but dependence on

borrowing exposes it to the risk of winding up. For, its inability to the honor its commitments

towards the creditors are most important.

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

graphically below


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Maximize returns, minimize risks

Fig. 3


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RISK VERSUS RETURN

Risk versus return is the reason why investors invest in portfolios. The ideal goal inportfolio management is to create an optimal portfolio derived from the best riskreturn

opportunities available given a particular set of risk constraints. To be able to make decisions,

it must be possible to quantify the degree of risk in a particular opportunity. The most common

method is to use the standard deviation of the expected returns. This method measures spreads,

and it is the possible returns of these spreads that provide the measure of risk. The presence of

risk means that more than one outcome is possible. An investment is expected to produce

different returns depending on the set of circumstances that prevail.

Table- 3

For example, given the following for Investment A:

Circumstance Return(x) Probability(p)

I 10% 0.2

II 12% 0.3

III 15% 0.4

IV 19% 0.1

It is possible to calculate:

1. The expected (or average) returnMean (average) = x = expected value (EV) = px

Circumstance Return(x) Probability(p) px

I 10% 0.2 2.0II 12% 0.3 3.6

III 15% 0.4 6.0

IV 19% 0.1 1.9


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Expected Return (px) = 13.5%2. The Standard deviation

Standard deviation == p(x- x) 2

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

Circumstance Return Probability

Deviation from

expected Return (x -x)p (x -x)2

. - . .

. - . .

. + . .

IV 19% 0.1 +5.5% 3.03

VARAIANCE= 7.06

Standard deviation () = Variance

= 7.06

= 2.66%

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

the greater the spread, and the greater the spread, the greater the risk.

If the above exercise were to be performed using another investment that offered the same

expected return, but a different standard deviation, then the following result might occur:

If the above exercise were to be performed using another investment that offered the same

expected return, but a different standard deviation, then the following result might occur:

Plan Expected Return Risk(standard deviation)

Investment A 9% 2.5%

Investment B 9% 4.0%


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Since both investments have the same expected return, the best selection of investment

would be Investment A, which provides the lower risk. Similarly, if there are two investments

presenting the same risk, but one has a higher return than the other, that investment would bechosen over the investment with the lower return for the same risk.

In the real world, there are all types of investors. Some investors are completely risk averse

and others are willing to take some risk, but expect a higher return for that risk. Different

investors will also have different tolerances or threshold levels for riskreturn trade-offsi.e.

for a given level of risk, one investor may demand a higher rate of return than another investor.

INDIFFERNCE CURVE

Table - 4

Suppose the following situation exists

Plan Expected Return Risk(Standard

Deviation)

Investment A 10% 5%

Investment B 20% 10%

The question to ask here is, does the extra 10% return compensate for the extra risk? There is

no right answer, as the decision would depend on the particular investors attitude to risk. A

particular investors indifference curve can be ascertained by plotting what rate of return the

investor would require for each level of risk to be indifferent amongst all of the investments.

For example, there may be an investor who can obtain a return of 50% with zero risk and a

return of 55 %with a risk or standard deviation of 5% who will be indifferent between the two

investments. If further investments were considered, each with a higher degree of risk, the

investor would require still higher returns to make all of the investments equally attractive.

The investor being discussed could present the following as the indifference curve shown in

Figure.


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Indifference Curve

Expected Return Risk

50% 0%

55% 5%

70% 10%

100% 15%

120% 18%

230% 25%

RiskFig. 4

Indifference curve

It could be the case that this investor would have different indifference curves given a

different starting level of return for zero risk. The exercise would need to be repeated for

various levels of riskreturn starting points. An entire set of indifference curves could be

constructed that would portray a particular investors attitude towards risk


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Indifference Curve

Fig. 5

Utility scores

At this stage the concept of utility scores can be introduced. These can be seen as a way of

ranking competing portfolios based on the expected return and risk of those portfolios. Thus if

a fund manager had to determine which investment a particular investor would prefer, i.e.

Investment A equaling a return of 10% for a risk of 5% or Investment B equaling a return of

20% for a risk of 10%, the manager would create indifference curves for that particular

investor and look at the utility scores. Higher utility scores are assigned to portfolios or

investments with more attractive riskreturn profiles. Although several scoring systems are

legitimate, one function that is commonly employed assigns a portfolio or investment with

expected return or value EV and variance of returns 2the following utility value:

U = EV.005A2 where:

U = utility value


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A = an index of the investors aversion, (the factor of .005 is a scaling convention that

allows expression of the expected return and standard deviation in the equation as a percentage

rather than a decimal).

Utility is enhanced by high expected returns and diminished by high risk. Investors

choosing amongst competing investment portfolios will select the one providing the highest

utility value. Thus, in the example above, the investor will select the investment (portfolio)

with the higher utility value of 18.

Table - 5

Expected Return(EV) Standard deviation() Utility=EV-.005A

10% 5% 10

20% 10% 20

(Assume A= 4 in this case)

Portfolio Diversification

There are several different factors that cause risk or lead to variability in returns on an

individual investment. Factors that may influence risk in any given investment vehicle include

uncertainty of income, interest rates, inflation, exchange rates, tax rates, the state of the

economy, default risk and liquidity risk (the risk of not being able to sell on the investment). In

addition, an investor will assess the risk of a given investment (portfolio) within the context of

other types of investments that may already be owned, i.e. stakes in pension funds, lifeinsurance policies with savings components, and property.

One way to control portfolio risk is via diversification, whereby investments are made in

a wide variety of assets so that the exposure to the risk of any particular security is limited.

This concept is based on the old adage do not put all your eggs in one basket. If an investor


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owns shares in only one company, that investment will fluctuate depending on the factors

influencing that company. If that company goes bankrupt, the investor might lose 100 per cent

of the investment. If, however, the investor owns shares in several companies in differentsectors, then the likelihood of all of those companies going bankrupt simultaneously is greatly

diminished. Thus, diversification reduces risk. Although bankruptcy risk has been considered

here, the same principle applies to other forms of risk.

RISKRETURN MATRIX

Fig. 6


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Covariance and Correlation

The goal is to hold a group of investments or securities within a portfolio potentially toreduce the risk level suffered without reducing the level of return. To measure the success of a

potentially diversified portfolio, covariance and correlation are considered. Covariance

measures to what degree the returns of two risky assets move in tandem. A positive covariance

means that the returns of the two assets move together, whilst a negative covariance means that

they move in inverse directions.

Covariance

COV(x, y) = p(x-x) (y-y) for two investments x and y, where p is the probability.

Covariance is an absolute measure, and covariances cannot be compared with one another.

To obtain a relative measure, the formula for correlation coefficient [r] is used.

Correlation coefficient

r = COVxy

xy

To illustrate the above, here is the example:

Table - 6

Circumstance Probability x-x y-y

p(x-x) (y-y)

I 0.2 +1.0 -3.5 -0.7

II 0.3 0 -1.5 0

III 0.4 +1.5 +1.5 0.9

IV 0.1 -4 +5.5 -2.2

COVxy =-2.0


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

for data regarding (xx). Assume the variance or 2 of x=2.45, and the variance or2 of y =

7.06. Thus, the correlation coefficient would be

r= -2.0 = -0.481

2.45 *7.056

If, the same example is run again, but using a different set of numbers for y, a different

correlation coefficient might result of say, 0.988. It can be concluded that a large negativecorrelation confirms the strong tendency of the two investments to move inversely.

Perfect positive correlation (correlation coefficient = +1) occurs when the returns from

two securities move up and down together in proportion. If these securities were combined in a

portfolio, the offsetting effect would not occur.

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

moves up and the other one down in exact proportion. Combining these two securities in a

portfolio would increase the diversification effect.

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

independently of each otherthat is, if one goes up, the other may go up or down or may not

move at all. As a result, the combination of these two securities in a portfolio may or may not

create a diversification effect. However, it is still better to be in this position than in a perfect

positive correlation situation.

Unsystematic and systematic risk

As mentioned previously, diversification diminishes risk: the more shares or assets held in

a portfolio or in investments, the greater the risk reduction. However, it is impossible to


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eliminate all risk completely even with extensive diversification. The risk that remains is

called market risk; the risk that is caused by general market influences. This risk is also known

as systematic risk or non-diversifiable risk. The risk that is associated with a specific asset andthat can be abolished with diversification is known as unsystematic risk, unique risk or

diversifiable risk.

Total risk = Systematic risk + Unsystematic risk

Systematic risk = the potential variability in the returns offered by a security or asset caused

by general market factors, such as interest rate changes, inflation rate movements, tax rates,

state of the economy.

Unsystematic risk = the potential variability in the returns offered by a security or asset

caused by factors specific to that company, such as profitability margins, debt levels, quality of

management, susceptibility to demands of customers and suppliers.

As the number of assets in a portfolio increases, the total risk may decline as a result of the

decline in the unsystematic risk in that portfolio. The relationship amongst these risks can be

quantified as follows

TR2

= SR2

+ UR2or 2i= s

2 + u2

Where:

= the investments total risk (standard deviation)

s =the investments systematic risk

u=the investments unsystematic risk.

The correlation coefficient between two investment opportunities can be expressed as:

s= i CORim

Where,

s = the investment systematic risk

i= the investments total risk (systematic and unsystematic)


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CORim = the correlation coefficient between the return of the investment and those of the

market.

If an investment were perfectly correlated to the market so that all its movements could be

fully explained by movements in market, then all of the risk would be systematic & i= s If

an investment were not correlated at all to the market, then all of its risk would be

unsystematic

TECHNOQUES OF PORTFOLIO MANAGEMENT

Various types of portfolio require different techniques to be adopted to achieve the desired

objectives. Some of the techniques followed in India by portfolio managers are summarized

below.

(1). Equity portfolio-

Equity portfolio is affected by internal and external factors:

(a) Internal factorsPertain to the inner working of the particular company of which equity shares are held.

These factors generally include:

(1) Market value of shares

(2) Book value of shares

(3) Price earnings ratio (P/E ratio)

(4) Dividend payout ratio

(b) External factors

(1) Government policies

(2) Norms prescribed by institutions

(3) Business environment


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(4) Trade cycles

(2). Equity stock analysis

The basic objective behind the analysis is to determine the probable future value of the

shares of the concerned company. It is carried out primarily fewer than two ways. :

(a) Earnings per share

(b) Price earnings ratio

(A) Trend of earning: -

A higher price-earnings ratio discount expected profit growth. Conversely, adownward trend in earning results in a low price-earnings ratio to discount anticipated

decrease in profits, price and dividend. Rising EPS causes appreciation in price of

shares, which benefits investors in lower tax brackets? Such investors have not pay tax

or to give lower rate tax on capital gains.

Many institutional investor like stability and growth and support high EPS. Growth of EPS is diluted when a company finances internally its expansion program

and offers new stock.

EPS increase rapidly and result in higher P/E ratio when a company finances itsexpansion program from internal sources and borrowings without offering new stock.

(B) Quality of reported earning: -

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

earnings are as under:

Depreciation allowances: -Larger (Non Cash) deduction for depreciation provides more funds to company to

finance profitable expansion schemes internally. This builds up future earning power

of company.


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Research and development outlets: -There is higher P/E ratio for a company, which carries R&D programs. R&D

enhances profit earning strength of the company through increased future sales.

Inventory and other non-recurring type of profit: -Low cost inventory may be sold at higher price due to inflationary conditions

among profit but such profit may not always occur and hence low P/E ratio.

(C) Dividend policy: -

Dividend policy is significant in affecting P/E ratio. With higher dividend ratio, equity price

goes up and thus raises P/E ratio. Dividend rates are raised to push in share prices up.

Dividend cover is calculated to find out the time the dividend is protected, In terms of

earnings. It is calculated as under:

Dividend Cover = EPS / Dividend per Share

(D) Investors demand: -

Demand from institutional investors for equity also enhances the P/E ratio.

(3) Quality of management: -

Investors decide about the ability and caliber of management and hold and dispose of

equity academy. P/E ratio is more where a company is managed by reputed entrepreneurs with

good past records of management performance.

Types of Portfolios

The different types of Portfolio which is carried by any Fund Manager to maximize profit

and minimize losses are different as per their objectives .They are as follows.

Aggressive Portfolio:

Objective: Growth. This strategy might be appropriate for investors who seek High

growth and who can tolerate wide fluctuations in market values, over the short term.


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Fig. 7

Growth Portfolio:

Objective: Growth. This strategy might be appropriate for investors who have a preference

for growth and who can withstand significant fluctuations in market value.

Fig. 8

Balanced Portfolio:

Objective: Capital appreciation and income. This strategy might be appropriate for

investors who want the potential for capital appreciation and some growth, and who can

withstand moderate fluctuations in market values


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Fig. 9

Conservative Portfolio:

Objective: Income and capital appreciation. This strategy may be appropriate for investors

who want to preserve their capital and minimize fluctuations in market value.

Fig. 10


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Infoline Ltd Portfolio Management Services

Fig. 11

Pro Prime

Product Approach

Investment will be keeping in mind 3 investment tenets.

1. Consistent, steady and sustainable returns.2. Margin of Safety3. Low Volatility

Product offering

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

risk appetite.

The portfolio consists of a blend of quality blue chip and growth stocks ensuring a

balanced portfolio with relatively medium risk profile.

PRO PRIME PRO

ARBITRAGE

PRO TECH


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The portfolio constitutes of relatively large capitalization stocks, based on sector and

themes which have medium to long term growth potential.

Product Characteristics

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

How to invest?

Minimum Investment : 10 Lacs Lock in : 6 months Reporting: Access to website showing clients holding .Monthly reporting of portfolio

holding /transaction.

Charges: 2.5% pa AMC (Annual Maintenances Charges) fees charged every quarter,0.5% brokerage ,20% profit sharing after 15% hurdle is crossed chargeable at the end

of fiscal year.

Pro Arbitrage

Product Approach

An opportunity lies in basis which is the difference between cash and future. Whenever

basis is high we buy the stocks and sell the future to lock in difference .The difference is

bound to be zero at expiry.

Product Offered

Cashfuture arbitrage:

The product intends to spot low risk opportunities which will yield more than the normal

low risk product .Whenever such opportunity is spotted stocks will be bought and to lock in


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the basis, future will be sold .This position will be liquated in the expiry or before that if the

basis vanishes early .Similarly the scheme will move on from opportunity to opportunity.


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

issued by mutual funds.

High return: Compared with other low risk products, this products offers an indicative

post tax return of 8 to 10% plus.

Product Details

Minimum Investment:Rs.1 Crore Lock in :6 months Reporting: Fortnightly for portfolio Net worth, Monthly reporting pf portfolio Holding

/transaction.

Charges: 0.035% brokerage for future ,0.07% for deliveryPro Tech

Protech using the knowledge of technique analysis and the power of depravities markets to

identify trading opportunities in the market .The protech line of the product is designed around

various risk/reward /volatility profiles for the different kind of investment needs.

Product Approach

Better performance is possible from superior market timing and from picking stocks before

inflation points in their trading cycles .Linear return are possible from having hedged / sellmarket positions in downtrends .Absolute return are targeted by focusing on finding trading

opportunities & not out performance of an index.


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Product offered

1. Nifty Thirty :Nifty futures will be bought and sold on the basis of an automated trading system

generated calls to go long/short. The exposure will never exceed the value of portfolio

i.e. no leveraging; but allows us to be short /hedged in Nifty in falling market therefore

allowing the client to earn irrespective of the market direction.

2. Beta Portfolio :Positional trading opportunities are identified in the future segment based on

technical analysis .Inflection points in the momentum cycles are identified to go long

/short on stock/index futures with 1-2 months time horizon .The idea is to generate the

best possible return in the medium term irrespective of the direction of the market

without really leveraging beyond the portfolio value. Risk protection is done based on

stop losses on daily closing prices.

3. Star Nifty:Swing trading technique and Dow theory is used to identify short term reversal

levels for Nifty futures and ride with trend both on the long and short side .This return

can be earned in bull and bear market .Stop and reverse means to reverse ones position

from long to short or vice a versa at the reversal levels simultaneously .The exposure

never exceeds value of portfolio i.e. there is no leveraging.

4. Trailing Stops.Momentum trading techniques are used to spot short term momentum of 5-10

days in stocks and stocks /index futures .Trailing stop loss method of risk management

or profit protection is used to lower the portfolio volatility and maximize return

.Trading opportunities are exposed both on the long side and the short side as the

market demands to get the best of both upward and downward trends.


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Using swing based index trading systems stop and reverse .trend following andmomentum trading technique.

Nifty based products for low impact cost and low product volatility Both long and short strategies to earn returns even in falling market. Trading in future market to allow for active risk protection using trailing stop losses.How to invest?

Minimum : Rs.10 Lacs Lock in : 6 months Reporting: Fortnightly reporting of portfolio Net Worth, monthly reporting of

portfolio Holding /Transaction.

Charges: 0% AMC (Annual Maintenance Charges), 0.05% brokerage forderivatives, 20% profit sharing on booked profit quarterly basis


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Protech Performance Report

Fig. 12

Table- 7

Nifty Thrifty:

How it works:

Our first product is based completely on a mathematical model with zero human

intervention. This product has come out of its fifth draw-down period (in 28 years of back

testing) and the net asset value (NAV) is taking off to new heights.

NIFTY THRIFTY

Date NAV Sensex

01/02/2006

10.00 9859.26

29/04/2009

19.43 11403.25

Returns(%) 94.30 15.66


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Table- 8

Beta portfolio:

BETA PORTFOLIO

Date NAV Sensex

03/08/2007 10.00 15138.40

29/04/2009 13.81 11403.25

Returns

(%)38.10 -24.67

How it works:

Our product is based on positional trading with a long and short model investing in plain

vanilla stock futures. In this, we identify stocks with greater risk-reward ratios with a time

horizon of 1 to 2 months, based on the prevalent market situation.

Table- 9

Trailing Stops:

TRAILING STOPS

NAV Sensex

20/10/2007 10.00 17559.98

24/04/2009 15.32 9708.50

Returns (%) 43.50 -35.06

How it works:

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


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COMPANY PROFILE


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COMPANY PROFILE

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd

(NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in the

Indian financial services space. IIFL offers advice and execution platform for the entire range

of financial services covering products ranging from Equities and derivatives, Commodities,

Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment

Banking, GoI bonds and other small savings instruments. IIFL recently received an in-

principle approval for Securities Trading and Clearing memberships from Singapore Exchange

(SGX) paving the way for IIFL to become the first Indian brokerage to get a membership of

the SGX. IIFL also received membership of the Colombo Stock Exchange becoming the first

foreign broker to enter Sri Lanka. IIFL owns and manages the website,

www.indiainfoline.com, which is one of Indias leading online destinations for personal

finance, stock markets, economy and business. IIFL has been awarded the Best Broker, India

by FinanceAsia and the Most improved brokerage, India in the AsiaMoney polls. India

Infoline was also adjudged as Fastest Growing Equity Broking House - Large firms by Dun

& Bradstreet. A forerunner in the field of equity research, IIFLs research is acknowledged bynone other than Forbes as Best of the Web and a must read for investors in Asia. Our

research is available not just over the Internet but also on international wire services like

Bloomberg, Thomson First Call and Internet Securities where it is amongst one of the most

read Indian brokers. A network of over 2,500 business locations spread over more than 500

cities and towns across India facilitates the smooth acquisition and servicing of a large

customer base. All our offices are connected with the corporate office in Mumbai with cutting

edge networking technology. The group caters to a customer base of about a million

customers, over a variety of mediums viz. online, over the phone and at our branches.


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Management Team

Nirmal Jain

Chairman

R Venkataraman

Managing Director

Mr.Kranti Sinha

Independent Director

Mr Arun K. Purvar


Nilesh Vikamsey



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INDIA INFOLINE LTD. HAS SIX MAIN AREAS OF BUSINESS

Institutional Business:This division primarily covers secondary market broking. It caters to the needs of

foreign and Indian institutional investors in Indian equities (both local shares and GDRs).

The division also incorporates a comprehensive research cell with sectoral analysts who

cover all the major areas of the Indian economy.

Private Client Services:Private client services is a special investment division for High Net-Worth

individuals, Non-Resident Indian investors, trusts corporates and banks with investment

product range covering debt and equity, mutual funds and specialized structured

investment products.


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Client Money Management:This division provides professional portfolio management services to high net-worth

individuals and corporate. Its expertise in research and stock broking gives the companythe right perspective from which to provide its clients with investment advisory services.

Retail distribution of financial products:India Infoline Ltd. has a comprehensive retail distribution network, comprising

approximately 7000 agents, 13 branches and over 20 franchisees across India. This

network is used for the distribution and placement of a range of financial products that

includes company fixed deposits, mutual funds, Initial Public Offerings, secondary debt

and equity and small savings schemes.

Depository Services:India Infoline Ltd.is a depository participant with the National Securities Depository

Limited and Central Depository Services (India) Limited for trading and settlement of

dematerialized shares. Since it is also in the broking business, investors who use its

depository services get a dual benefit. They are able to use its brokerage services to

execute transactions and its depository services to settle these.

On Line Trading:India Infoline Ltd.online services through India Infoline Ltd.secrities.com offered

services for retail investors, who would like to trade on the Net.

ONLINE SHARE TRADING

Depository services are the services provided to help the investors to gain way of efficient

settlement, lower costs and lower risks of theft or forgery etc. it relates to security transactions


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such as issues of securities in paperless form, transfer of ownership through on electronic

media, holding securities through a depository.

India Infoline Ltd.on-line broking service India Infoline Ltd.securities.com offers services

for retail investors, who would like to trade on the net. The safety of transactions on the

Internet depends on the encryption system used. The better this transaction system, the more

difficult it is for any person to hack the site.

Internationally, the best system available today is the 128-bit encryption, a system, which

evens the Pentagon uses.

Secondly, you too can ensure the safety of the transactions online. You normally get a

secured user id and password, the secrecy of which is to be maintained entirely by you.

Thirdly, if the transaction system requires no manual intervention, you further improve the

safety in the transactions. Among Indian sites, India Infoline Ltd.securities.com is one of the

very few fully integrated online trading sites. This enables the elimination of the possibility of

any manual intervention. This means orders are directly sent to the exchange ensuring that you

get the best and right price.

Shares: At India Infoline Ltd.we enhance every opportunity and stretch every possibility in

the equity market for right investment decision based on our in-depth research studies.

Derivatives: Constant risks have stimulated market participants to manage their risks through

various risk management tools. Derivatives product is one such risk management tool. We will

offer you insights into the world of derivatives enabling you to cope with market volatility.

Mutual Funds: India Infoline Ltd.offers wealth of mutual fund choices along with

competitive research and advice to help you invest wisely. The investors also have the option

of choosing from some of the best mutual fund options available as we have a tie-up with most

of the leading mutual fund companies in the country.


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IPOs: India Infoline Ltd.enable you to invest wisely in the potential and lucrative IPOs with

air the ease.

Margin Trading: India Infoline Ltd.enables not just stock trading but also gaining through it.

To help you invest in your dream stock we offer margin-trading facility. We bring up to 50"0

of the margin.

Delivery Basis: This is a delivery based trading system, which is generally done with the

intention of taking delivery of shares. A case position is meant to be settled by delivery, the

required cash or security is blocked in full. For example, if a person place an order to buy 100

shares of India Infoline Ltd. Mahindra Bank, he need to have 100% of the order value in his

available limit/funds, and in case he wishes to sell 100 shares of India Infoline Ltd. Mahindra

Bank, he need to have 100% shares in his Demat balance.

India Infoline Ltd. sec. gives the facility of up to 6 times limits against the margin.

Intra Day Trading: Through super multiple offer investors can do an intra day trading 15

times against these available funds, where in they take long buy /short sell positions in stocks

within the intention of squaring off the position within the same day settlement cycle. Super

multiple offers will give a much against their limit.

AMO (After Market Order): In this facility investors buy or sell shares after market

hour, for this investors have to give a order to sell or buy after market hour, next day he built

found result for example.

BNST-G (Buy now sell tomorrow): Buy now sell tomorrow (BNST-G) is a facility that

allows investors of sell shares even on 2nd day after the buy order date, within having to wait

for the receipt of shares in to the Demat account. It is an intermediate option between cash and

margin trading some times people miss huge profits because they have purchased shares one

day back and the shares have not been credited to their Demat.

For Example:Assume that a person buys shares of XYZ ltd. at 10:30 am. Today suppose

at 3:00 pm. today. The price of this script has risen by Rs. 10.But he want to seal these shares

tomorrow because he feels that the script price will rise further. But the shares would not have

come into your Demat/Account tomorrow. BNST-G is the solution to this problem. If he uses


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margin funding, he would gain only to the extent of the price rise that happens today i.e. Rs.

10, however, if he wishes to take advantage of the price rise over a longer times period he

would purchased the share today at 10:30 am. And seal it. Say tomorrow-using BNST-G at3:00 pm. In short, BNST-G helps non intra day square off trading too profitable. BNST-G

gives 2 more trading days, thereby increasing the perfectibility of better returns. So even a

cash trader may like to use BNST-G.

KEAT: KEAT is a dynamic, trading terminal that facilities instant order placement and more.

Things you can do with KEAT

Live ticker rates Speedy transactions Script alerts Customize watch list Venue status of orders Intraday alerts and exchange messages. Trade report, net position report, exercise report. Company research

DIFFERENT SLABS

India Infoline Ltd. Super

Saver

India Infoline Ltd. Super

Secure

Initial Margin Rs. 1000 /- Rs. 1000 /-

Account Opening Fee Rs. 2500 /- Rs. 2500 /-

Rs. 2000 /- reversible

against the brokerage

Rs. 2000 /- reversible

against the brokerage

Insurance Insurance of Rs. 500000 /-

with premium of Rs. 2000 /-

Flat Brokerage Structure

Delivery 0.45% 0.45%

Cash Square Up 0.05% 0.05%


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Derivatives Daily

Square Up/ Settlement

0.06% 0.06%

Additional FeaturesSMS Stock Alerts Free Free

Call and Trade Facility Free Free

Keat Software Free Free

BROKERAGE STRUCTURE

BROKERAGE STRUCTURE

Delivery

< 1 lakh 0.59%

15 lakhs 0.55%

5 - 10 lakhs 0.45%

10 - 20 lakhs 0.36%

20 - 60 lakhs 0.27%

60 lakhs - 2 crores 0.23%

> 2 crores 0.18%

Intraday brokerages

< 25 lakhs 0.06% both sides

25 lakhs - 2 crores 0.05% both sides

2 crores - 5 crores 0.04% both sides

> 5 crores 0.03% both sides

Derivatives

Intraday brokerages Settlement


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< 2 crores 0.07% both sides 0.09% both sides

25.5 crores 0.045% both sides 0.073% both sides

5.5 - 10 crores 0.036% both sides 0.046% both sides

10 - 25 crores 0.027% both sides 0.046% both sides

> 25 crores 0.023% both sides 0.032% both sides

Note: Service Tax of 12.36% of brokerage will be charged in addition.

The brokerages charged are as per the volumes that are achieved. Based on these volumes

a client can be either debited or credited an amount, which is as per the volumes he/she may

achieve at the end of the month.

Securities Transaction Tax (STT) @ 0.125% of turnover will be charged in addition to thebrokerage on all delivery trades

STT @ 0.02% of turnover will be charged in addition to the brokerage on sell leg of all

non delivery trades in the cash market

STT @ 0.0133% of turnover will be charged in addition to the brokerage on sell leg of all

non delivery trades in the derivative market

SERVICES PROVIDED BY INDIA INFOLINE LTD. SECURITIES

Centralized Risk Management:

At India Infoline Ltd. Risk Management means state of the art quality management that

seeks to generate, not constrain. Risk Management Team comprise 30 members who have

implemented system in different areas and structured the Risk Management Cell primarily

managing Online risk, Market risk and Operation risk.

Centralized Back office:

To handle large operations an efficient back office is essential. While most broking firms

worked with decentralized back offices, but India Infoline Ltd. responsible to set the trend of a

centralized back oofice. Today, India Infoline Ltd. has a dedicated centralized back office in

Mumbai, which has a workforce of over 500 commited people.

Leading Edge Technology:

India Infoline Ltd. believe, technology plays an indispensable role. Technology works as

an important tool in increasing productivity. A robust technology platform is vital in acquiring


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and managing customers in the broking business. This belief supported by scalable technology

platform help address the huge retail needs.

Personalized Service:Individual Relationship Managers and equity traders are assigned to clients and are regularly

in touch with clients to help them with their investment and trading choices. The Relationship

Managers also assist clients in arriving at an ideal asset allocation mix in accordance with their

risk profile, their return expectation and cash flow requirements. He or She will also be the

single point contact and coordinator for any other products or services that the client may want

to avail of from the group.

Portfolio Management Services:

India Infoline Ltd.offers portfolio management services by professional fund managers on

behalf of clients with both discretionary and non-discretionary options. This service is meant

for investors who may not have the time to manage direct equity investments or for those who

require professional service of experts. The minimum investment required to be able to avail

of the KS portfolio management schemes is Rs. 10 lacs.

Net access for both Online and Offline clients on India Infoline Ltd.securities.com:

This facility allows investors who trade over the phone to also be able to access their

contract notes and trade details over the internet through a unique user id and pass-word. India

Infoline Ltd.-Securities research is also available on the site for clients.

Maximize Earnings:

India Infoline Ltd. association in this business venture will ensure customer maximize their

earning potential. The brokerage revenues shared is upto 50%


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DIFFERENT STRATIGIES OF INDIA INFOLINE LTD.

1) Easy Derivatives - India Infoline Ltd. Online Trading

Risk comes from not knowing what you're doing." - Warren Buffet

If you are not averse to taking risks, Easy Derivatives can prove to be a good investment

option especially with our research.

We, at India Infoline Ltd. Securities, make investing in derivatives simpler. Our derivatives

seminars educate new entrants in the derivatives market more equipped with knowledge and

techniques. Once you have the knowledge of investing in derivative instruments our daily

derivative reports will provide you with strategies to yield good returns. Further still during

market hours you can trust our SMS alerts to provide you with even more strategies.

To start trading in Derivatives, all you need to do is open an online trading account. Choose

from our wide range ofaccounts to suit your investment needs

2) Super Trader What We Offer Easy Securities Ltd. Online Trading

We, at India Infoline Ltd. Securities, make investing in derivatives simpler. Our

derivatives seminars educate new entrants in the derivatives market more equipped with

knowledge and techniques. Once you have the knowledge of investing in derivative

instruments our daily derivative reports will provide you with strategies to yield good returns.

Further still during market hours you can trust our SMS alerts to provide you with even more

strategies.

3) Retirement Strategy - India Infoline Ltd.Ltd. Online Trading

Planning for your retirement is all about foresight. If you are young and earning well, there

is no turning back. Your risk tolerance is greater and so is your time horizon - factors
http://www.kotaksecurities.com/whatweoffer/easyderivatives.htmlhttp://www.kotaksecurities.com/accountsection/index.htmlhttp://www.kotaksecurities.com/supertrader/whatweoffer/easyderivatives.htmlhttp://www.kotaksecurities.com/plan/retirementstrategy.htmlhttp://www.kotaksecurities.com/plan/retirementstrategy.htmlhttp://www.kotaksecurities.com/supertrader/whatweoffer/easyderivatives.htmlhttp://www.kotaksecurities.com/accountsection/index.htmlhttp://www.kotaksecurities.com/whatweoffer/easyderivatives.html


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conducive to good returns. Invest early and expect higher returns for a long time to come. But

if you haven't invested in good time, India Infoline Ltd.makes sure that

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