Sandeep projct
Content
1.0) INTRODUCTION There has been an explosion in the choice of financial services for individuals and families in India in the last decade. The Indian financial services market has come a long way with an exponential increase in the depth and breadth of products available to the individual to choose from. Simultaneously the levels of income have also increased significantly. In today s complex financial markets, it is becoming increasingly difficult to select the right investment avenues. Each investment carries some risk and that it is vital to choose wisely. While there are plenty of options available to design your portfolio, the key is to invest in a manner that allows you to potentially lower your investment risk and increase your chances of meeting your varied financial goals. Investing is a plan. The individual has to decide as to what his goals and how he has to go from one level of comfort to the other level. PMS is a service offered by various banks, AMCs and brokerage houses for professionally managing the portfolio of investments on behalf of individuals, firms, companies, trusts or societies for an agreed fee. The investor deposits his/her surplus funds with the brokerage house/AMC and depending on the specific profile of the investor in terms of risk appetite and expectations of returns, the portfolio manager allocates these funds for investment in various instruments having various degrees of risk and return. In return for this service, the institution offering the PMS service gets basic fee and in some cases a variable fee based
on the returns generated by the portfolio over a specific period. In a country where high income individuals are growing at 20 to 25 percentage per year the PMS schemes make sense while considering the lack of time of investors and the market knowledge. So the present study aims to draw light to this aspect by examining the features of the schemes of various portfolio management products. Another intention is to find the customer awareness about PMS as a product among the various investment options. Presently many financial service companies are offering PMS schemes with various options. 1.1) NEED FOR THE STUDY Two important features of the current Indian financial market is the availability of a lot of investment avenues and the lack of knowledge of the investors. Moreover majority of investors are in short of time to understand regarding the various investment avenues and the possible risk and return involved in the investment decisions. Portfolio Management Services came as a solution to this dilemma. But PMS also has got a lot features and aspects which one should know before investing. The present study tries to focus on this aspect and the awareness level of investors. 1.2) OBJECTIVES OF THE STUDY The present study entitled as PORTFOLIO MANAGEMENT SERVICES- A STUDY with special reference to Geojit Financial
Services Ltd objectives.
has undertaken with the following specific
To examine the features of portfolio Management Services offered by financial service companies with special reference to Geojit Financial Services Ltd. To study the investors preference towards Portfolio Management Service.
1.3) METHODOLOGY 1.3.0 Size of sample A sample of 100 individual investors from Cochin City was selected for the study. 1.3.1 Type of sampling This study utilizes the Convenience sampling method. Sample of 100 investors are selecting from various income classes starting from Rs.10,000 and above per month the respondents are taken by giving due importance to the high earning youth, professionals, working women etc. 1.3.2 Data collection Both primary and secondary data were collected and used for the study. 1.3.3 Primary data Primary data were collected from 100 investors through interview schedule and through interviews with the official of Geojit financial services Ltd. 1.3.4 Secondary data
Secondary data were collected from the published reports, product brochure from the company, magazines, books, journals and websites. 1.3.5 Tools used for for analysis Keeping in view of the objectives of the present study, collected data were analyzing with the help of statistical techniques such as percentage and weighted scores. 1.4 Limitations of the study The analysis of the study has mainly depended on the personal views of the respondents and as such an element of subjectivity cannot ruled out. Reluctance to provide specific information regarding the investments and the returns by some respondents may have produced a bias in the study. The study was conducted in Cochin and the findings cannot be generalized to all areas.
1.5 CHAPTERISATION Chapter 1 : Deals with Introduction. It includes objectives of the Study, Scope of the study, Methodolgy, Limitations and Chapterisation. Chapter 2 : Industry Profile Stock Market & PMS PORTFOLIO MANAGEMENT
Chapter 3 : Company profile SERVICES OF GOEOJIT
Chapter 4 : Theoretical review of Portfolio Management Services Chapter 5 : Investors preference on investment avenues
Profile of respondents Savings behavior of investors Savings Percentage Main Investment Avenues Percentage of savings in each investment avenue Best investment avenue Important factors while investing Investment objective Return Expectations Investment time frame Risk bearing capacity Professional advice Portfolio management services Sources of information Chapter 6 : Findings, Conclusion and Suggestions. 2.0 BROKERAGE INDUSTRY The Indian retail brokerage industry consists of companies that primarily act as agents for the buying and selling of securities (e.g. stocks, shares and similar financial instruments) on a commission or transaction fee basis. It has two main interdependent segments: Primary market and the Secondary market. Now this market is extended to fields like currency, commodity, mutual fund, insurance etc The Indian equity brokerage industry thrived on the back of equity markets sustained bull run during 2003-07. Although high competitive pressure meant continuous compression of brokerage commissions and low electronic penetration kept operating costs high, industry revenue was growing. Furthermore, the industry attracted domestic and foreign investment interest a high valuations of upto 45x P/E multiples.During this time, many of the key players started
expanding their portfolio of services to include wealth management and advisory services, sale of insurance and mutual fund products, consumer financing and so on. However, post-2008, the economic downturn muted trading turnover, relentless competitive pressure and decreasing margins, continued high operating costs and high margining requirements has put the industry under pressure. Profitability is muted and the major players are under pressure to build scale. Expansion of scale and investments into technological systems has the potential to lead the top brokerage firms into paths of higher growth, but the current economic climate is clearly against heavy investments. The basic function of a brokerage firm is to execute buy and sell orders for clients. Traditionally these firms have offered the investigation of the quality and the possibilities of investing in a variety of investment products. It is still accustomed for brokerage firms to offer information about possible investment free of charge. This activity of bringing free of charge stock investment reports is one of the main tools that are utilized by brokerage houses to compete against other firms and to investors it continues to be an important service. 2.1 The History of Stock Brokerage Firms Stock brokerage firms have been an established feature in the financial industry for nearly one thousand years. Dealing in debt securities, brokers employ a variety of systems to aid investors with the purchase and sales of stocks and bonds in a variety of markets. The firms have changed over the years, growing to massive organizations that can affect the entire financial sector positively or negatively with their performance. Changing with the times, the early twenty-first century saw a
rise of online trading that enabled the average investor to take part in the stock market for the first time. 2.1.0 History During the 11th century, the French began regulating and trading agricultural debts on behalf of the banking community, creating the first brokerage system. In the 1300s, houses began to be set up in major cities like Flanders and Amsterdam in which commodity traders would hold meetings. Soon, Venetian brokers bagan to trade in government securities, expanding the importance of the firms. In 1602, the Dutch East India Company became the first publicly traded company in which shareholders could own a portion of the business. The stocks improved the size of companies and became the standard bearer for the modern financial system. 2.1.1 Significance The earliest brokerage firms were established in London coffee houses, enabling individuals to purchase stocks from a variety of organizations. They formally founded the London Stock Exchange in 1801 and created regulations and memberships. The system was copied by brokerage firms across the world, most notably on Chestnut street in Philadelphia. Soon, the US exchange was moved to New York City and various frims like Morgan Stanley and Merrill Lynch were created to assist in the brokering of stocks and securities. The firms limited themselves to researching and trading stocks for investment groups and individuals. 2.1.2 Considerations During the 1900s, stock brokerage firms began to move in a direction of market makers. They adopted the policy of quoting both the buying and selling price of a security. This allows a
firm to make a profit from establishing the immediate scale and purchase price to an investor. The conflict with brokerage firms setting prices creates the concern that insider trading can result from the sharing of information. Regulators have enforced a system called Chinese Walls to prevent communication between different departments within the brokerage company. This has resulted in increased profits and greater interconnection within the financial industry. 2.1.3 Effects The creation of high valued brokerage firms like Goldman Sachs and Bear Sterns created a system of consolidation. Working with hundreds of billions of dollars, the larger firms began to merge and take over smaller firms in the last half of the 20th century. Firms like Smith Barney were acquired by Citigroup and other investment banks, creating massive financial institutions that valued, held, sold, insured and invested in securities. This conglomeration of the financial sector created an environment of volatility that caused a chain reaction when other firms like Bear Sterns and Lehman Brothers filed by bankruptcy. Trillions of dollars of assets were tied together in different companies and resulted in a large economic collapse in late 2008. 2.1.4 Features A large share of the brokerage firms have moved to an online format. Smaller brokers such as E*Trade, TD Ameritrade and Charles Schwab have taken control of most individual investors accounts. The added convenience and personal attention paid to the small investor has resulted in a large influx of activity. In addition, the fact that the online resources offer up-to-the minute pricing and immediate traders makes their format appealing to the modern user. Discounted commissions have
lessened the price of traders, giving access to a wider swath of people and adding liquidity to the market. The role of the stock brokerage firm is ever-changing and proves to be a boon for the future of the financial industry. 2.1.5 Full service v/s Discount brokerage houses Full service brokerage firms continue to offer informative stock reports and a level of service much higher than other brokerage houses. Discount brokerage houses only dedicate themselves to execute orders for clients. Full service brokers are sellers looking for purchasing and selling for clients and offering more customer service than is available from discount brokers. It is many times care of the buy or sell order that they placed. 2.1.6 Market size and characteristics The Indian retail brokerage market is showing phenomenal growth. The total trading volume of brokerage companies has increased from US$1239.1 billion in 2004 to US$1492.1 billion in 2005, and is expected to reach US$6535.7 billion by 2015. Some of the main characteristics of the brokerage industry include growth in e-broking; growing derivatives market, decline in brokerage fees etc. Today, as per NSDL statistics, we have only 2.4 million investors with demat accounts in the country. Considering various investor combinations that are holding accounts, we can presume the country has roughly 5-7.5 lakh active investors now. This figure is unbelievably small compared to the potential number of investors, which is anything between 200 million and 250 million. When we take into consideration the way transaction risk and cost in the Indian capital market is coming down, there will be a massive surge in the number of
investors and also in volumes. The only way to manage this kind of potential growth is to adopt state-of-the-art trading techniques. The growth of Internet-based trading as a mass trading technique in the country is unstoppable, going by the indicators available and the signals for the future. When it ultimately gathers momentum, the biggest beneficiary will be the investor, who will be able to trade with greater speed and transparency, and at lower costs . 2.2.0 INDIAN EXCHANGES The NSE and BSE are largest stock exchanges in the country. They handle very large daily trading volumes, support large amount of data traffic, and have a very large nationwide network NSE is the third largest in the world in the number of trades after NYSE and NASDAQ India has 23 small and 2 big exchanges. The 2 big exchanges NSE and BSE account for 90 percent of trade. Bombay Stock Exchange LTD is the oldest stock exchanges in India. Indian financial market have continuously evolved over the years with multifold objective of transparency reducing transportation cost of evolving efficient payment and settlement system from dematerialization of shares to a rolling settlement and now introduction of trading in derivative instruments, the focus has been the investor. With the changing dynamics the investor are looking beyond their traditional relationship. They want a system which is safe, secure and transparent. They are looking for a broker who offers the complete suite of financial products such as equity futures and options mutual funds IPOs etc. Timely pay in and
pay out, hassle-free settlements and personalized and localized service at an affordable cost. The major developments in the sphere of internet based share dealings in the new global market place reveals three distinct phases Phase 1: The open outcry system with the transactions taking place manually in the ring Phase 2: The electronic system enabling the brokers to place the order line Phase 3 : The online share trading system empowering the customers to transact online. 2.2.1 Online trading There are mainly two categories of companies in the area of online share trading first category falls under the traditional banks and online share trading. First category falls under traditional banks turned brokers E.g.; ICICI and HDFC. Second type is those companies who are solely into broking E.g.; JRG securities, Share Khan and Geojit etc The services these companies provides for trading online are known as e-broking. Major benefit of online trading is that can carry out trading from the convenience of your home avoiding a visit to brokers office. Some of the online broking sites in India are paisa.com ICICI direct.com, indiabulls and JRGsecurities.com. Features; y Online BSE and NSE execution y Free access to investment and advice y Daily research report and market advice
y Pre market report daily trading calls based on technical analysis y Live market information y Depository service Demat and Remat transaction y Internet-based online trading 2.2.2 Global prospects of online share trading industry Stock exchange across the globe are exploring an alliance that will create 24 hour global equity market (GEM). The Newyork stock stock exchanges and exchanges from three main time zones Asia- Pacific, the Americas and Euronext plan to form a trading mechanism that will allow trading of shares in the world s global countries. Online share dealing on the internet is now a way of life for thousands of investors. In India there are about 50 online brokerages but online trading stands at barely 2% of the share trading market today, a poor scenario when compared to 6% in China and rapid growth in Europe 80% of South Korea and 30-40% of US trades are executed online. The segmentation of the share trading market in India as in most countries worldwide, consists largely of traders and dealers along with a handful of investors.
on the returns generated by the portfolio over a specific period. In a country where high income individuals are growing at 20 to 25 percentage per year the PMS schemes make sense while considering the lack of time of investors and the market knowledge. So the present study aims to draw light to this aspect by examining the features of the schemes of various portfolio management products. Another intention is to find the customer awareness about PMS as a product among the various investment options. Presently many financial service companies are offering PMS schemes with various options. 1.1) NEED FOR THE STUDY Two important features of the current Indian financial market is the availability of a lot of investment avenues and the lack of knowledge of the investors. Moreover majority of investors are in short of time to understand regarding the various investment avenues and the possible risk and return involved in the investment decisions. Portfolio Management Services came as a solution to this dilemma. But PMS also has got a lot features and aspects which one should know before investing. The present study tries to focus on this aspect and the awareness level of investors. 1.2) OBJECTIVES OF THE STUDY The present study entitled as PORTFOLIO MANAGEMENT SERVICES- A STUDY with special reference to Geojit Financial
Services Ltd objectives.
has undertaken with the following specific
To examine the features of portfolio Management Services offered by financial service companies with special reference to Geojit Financial Services Ltd. To study the investors preference towards Portfolio Management Service.
1.3) METHODOLOGY 1.3.0 Size of sample A sample of 100 individual investors from Cochin City was selected for the study. 1.3.1 Type of sampling This study utilizes the Convenience sampling method. Sample of 100 investors are selecting from various income classes starting from Rs.10,000 and above per month the respondents are taken by giving due importance to the high earning youth, professionals, working women etc. 1.3.2 Data collection Both primary and secondary data were collected and used for the study. 1.3.3 Primary data Primary data were collected from 100 investors through interview schedule and through interviews with the official of Geojit financial services Ltd. 1.3.4 Secondary data
Secondary data were collected from the published reports, product brochure from the company, magazines, books, journals and websites. 1.3.5 Tools used for for analysis Keeping in view of the objectives of the present study, collected data were analyzing with the help of statistical techniques such as percentage and weighted scores. 1.4 Limitations of the study The analysis of the study has mainly depended on the personal views of the respondents and as such an element of subjectivity cannot ruled out. Reluctance to provide specific information regarding the investments and the returns by some respondents may have produced a bias in the study. The study was conducted in Cochin and the findings cannot be generalized to all areas.
1.5 CHAPTERISATION Chapter 1 : Deals with Introduction. It includes objectives of the Study, Scope of the study, Methodolgy, Limitations and Chapterisation. Chapter 2 : Industry Profile Stock Market & PMS PORTFOLIO MANAGEMENT
Chapter 3 : Company profile SERVICES OF GOEOJIT
Chapter 4 : Theoretical review of Portfolio Management Services Chapter 5 : Investors preference on investment avenues
Profile of respondents Savings behavior of investors Savings Percentage Main Investment Avenues Percentage of savings in each investment avenue Best investment avenue Important factors while investing Investment objective Return Expectations Investment time frame Risk bearing capacity Professional advice Portfolio management services Sources of information Chapter 6 : Findings, Conclusion and Suggestions. 2.0 BROKERAGE INDUSTRY The Indian retail brokerage industry consists of companies that primarily act as agents for the buying and selling of securities (e.g. stocks, shares and similar financial instruments) on a commission or transaction fee basis. It has two main interdependent segments: Primary market and the Secondary market. Now this market is extended to fields like currency, commodity, mutual fund, insurance etc The Indian equity brokerage industry thrived on the back of equity markets sustained bull run during 2003-07. Although high competitive pressure meant continuous compression of brokerage commissions and low electronic penetration kept operating costs high, industry revenue was growing. Furthermore, the industry attracted domestic and foreign investment interest a high valuations of upto 45x P/E multiples.During this time, many of the key players started
expanding their portfolio of services to include wealth management and advisory services, sale of insurance and mutual fund products, consumer financing and so on. However, post-2008, the economic downturn muted trading turnover, relentless competitive pressure and decreasing margins, continued high operating costs and high margining requirements has put the industry under pressure. Profitability is muted and the major players are under pressure to build scale. Expansion of scale and investments into technological systems has the potential to lead the top brokerage firms into paths of higher growth, but the current economic climate is clearly against heavy investments. The basic function of a brokerage firm is to execute buy and sell orders for clients. Traditionally these firms have offered the investigation of the quality and the possibilities of investing in a variety of investment products. It is still accustomed for brokerage firms to offer information about possible investment free of charge. This activity of bringing free of charge stock investment reports is one of the main tools that are utilized by brokerage houses to compete against other firms and to investors it continues to be an important service. 2.1 The History of Stock Brokerage Firms Stock brokerage firms have been an established feature in the financial industry for nearly one thousand years. Dealing in debt securities, brokers employ a variety of systems to aid investors with the purchase and sales of stocks and bonds in a variety of markets. The firms have changed over the years, growing to massive organizations that can affect the entire financial sector positively or negatively with their performance. Changing with the times, the early twenty-first century saw a
rise of online trading that enabled the average investor to take part in the stock market for the first time. 2.1.0 History During the 11th century, the French began regulating and trading agricultural debts on behalf of the banking community, creating the first brokerage system. In the 1300s, houses began to be set up in major cities like Flanders and Amsterdam in which commodity traders would hold meetings. Soon, Venetian brokers bagan to trade in government securities, expanding the importance of the firms. In 1602, the Dutch East India Company became the first publicly traded company in which shareholders could own a portion of the business. The stocks improved the size of companies and became the standard bearer for the modern financial system. 2.1.1 Significance The earliest brokerage firms were established in London coffee houses, enabling individuals to purchase stocks from a variety of organizations. They formally founded the London Stock Exchange in 1801 and created regulations and memberships. The system was copied by brokerage firms across the world, most notably on Chestnut street in Philadelphia. Soon, the US exchange was moved to New York City and various frims like Morgan Stanley and Merrill Lynch were created to assist in the brokering of stocks and securities. The firms limited themselves to researching and trading stocks for investment groups and individuals. 2.1.2 Considerations During the 1900s, stock brokerage firms began to move in a direction of market makers. They adopted the policy of quoting both the buying and selling price of a security. This allows a
firm to make a profit from establishing the immediate scale and purchase price to an investor. The conflict with brokerage firms setting prices creates the concern that insider trading can result from the sharing of information. Regulators have enforced a system called Chinese Walls to prevent communication between different departments within the brokerage company. This has resulted in increased profits and greater interconnection within the financial industry. 2.1.3 Effects The creation of high valued brokerage firms like Goldman Sachs and Bear Sterns created a system of consolidation. Working with hundreds of billions of dollars, the larger firms began to merge and take over smaller firms in the last half of the 20th century. Firms like Smith Barney were acquired by Citigroup and other investment banks, creating massive financial institutions that valued, held, sold, insured and invested in securities. This conglomeration of the financial sector created an environment of volatility that caused a chain reaction when other firms like Bear Sterns and Lehman Brothers filed by bankruptcy. Trillions of dollars of assets were tied together in different companies and resulted in a large economic collapse in late 2008. 2.1.4 Features A large share of the brokerage firms have moved to an online format. Smaller brokers such as E*Trade, TD Ameritrade and Charles Schwab have taken control of most individual investors accounts. The added convenience and personal attention paid to the small investor has resulted in a large influx of activity. In addition, the fact that the online resources offer up-to-the minute pricing and immediate traders makes their format appealing to the modern user. Discounted commissions have
lessened the price of traders, giving access to a wider swath of people and adding liquidity to the market. The role of the stock brokerage firm is ever-changing and proves to be a boon for the future of the financial industry. 2.1.5 Full service v/s Discount brokerage houses Full service brokerage firms continue to offer informative stock reports and a level of service much higher than other brokerage houses. Discount brokerage houses only dedicate themselves to execute orders for clients. Full service brokers are sellers looking for purchasing and selling for clients and offering more customer service than is available from discount brokers. It is many times care of the buy or sell order that they placed. 2.1.6 Market size and characteristics The Indian retail brokerage market is showing phenomenal growth. The total trading volume of brokerage companies has increased from US$1239.1 billion in 2004 to US$1492.1 billion in 2005, and is expected to reach US$6535.7 billion by 2015. Some of the main characteristics of the brokerage industry include growth in e-broking; growing derivatives market, decline in brokerage fees etc. Today, as per NSDL statistics, we have only 2.4 million investors with demat accounts in the country. Considering various investor combinations that are holding accounts, we can presume the country has roughly 5-7.5 lakh active investors now. This figure is unbelievably small compared to the potential number of investors, which is anything between 200 million and 250 million. When we take into consideration the way transaction risk and cost in the Indian capital market is coming down, there will be a massive surge in the number of
investors and also in volumes. The only way to manage this kind of potential growth is to adopt state-of-the-art trading techniques. The growth of Internet-based trading as a mass trading technique in the country is unstoppable, going by the indicators available and the signals for the future. When it ultimately gathers momentum, the biggest beneficiary will be the investor, who will be able to trade with greater speed and transparency, and at lower costs . 2.2.0 INDIAN EXCHANGES The NSE and BSE are largest stock exchanges in the country. They handle very large daily trading volumes, support large amount of data traffic, and have a very large nationwide network NSE is the third largest in the world in the number of trades after NYSE and NASDAQ India has 23 small and 2 big exchanges. The 2 big exchanges NSE and BSE account for 90 percent of trade. Bombay Stock Exchange LTD is the oldest stock exchanges in India. Indian financial market have continuously evolved over the years with multifold objective of transparency reducing transportation cost of evolving efficient payment and settlement system from dematerialization of shares to a rolling settlement and now introduction of trading in derivative instruments, the focus has been the investor. With the changing dynamics the investor are looking beyond their traditional relationship. They want a system which is safe, secure and transparent. They are looking for a broker who offers the complete suite of financial products such as equity futures and options mutual funds IPOs etc. Timely pay in and
pay out, hassle-free settlements and personalized and localized service at an affordable cost. The major developments in the sphere of internet based share dealings in the new global market place reveals three distinct phases Phase 1: The open outcry system with the transactions taking place manually in the ring Phase 2: The electronic system enabling the brokers to place the order line Phase 3 : The online share trading system empowering the customers to transact online. 2.2.1 Online trading There are mainly two categories of companies in the area of online share trading first category falls under the traditional banks and online share trading. First category falls under traditional banks turned brokers E.g.; ICICI and HDFC. Second type is those companies who are solely into broking E.g.; JRG securities, Share Khan and Geojit etc The services these companies provides for trading online are known as e-broking. Major benefit of online trading is that can carry out trading from the convenience of your home avoiding a visit to brokers office. Some of the online broking sites in India are paisa.com ICICI direct.com, indiabulls and JRGsecurities.com. Features; y Online BSE and NSE execution y Free access to investment and advice y Daily research report and market advice
y Pre market report daily trading calls based on technical analysis y Live market information y Depository service Demat and Remat transaction y Internet-based online trading 2.2.2 Global prospects of online share trading industry Stock exchange across the globe are exploring an alliance that will create 24 hour global equity market (GEM). The Newyork stock stock exchanges and exchanges from three main time zones Asia- Pacific, the Americas and Euronext plan to form a trading mechanism that will allow trading of shares in the world s global countries. Online share dealing on the internet is now a way of life for thousands of investors. In India there are about 50 online brokerages but online trading stands at barely 2% of the share trading market today, a poor scenario when compared to 6% in China and rapid growth in Europe 80% of South Korea and 30-40% of US trades are executed online. The segmentation of the share trading market in India as in most countries worldwide, consists largely of traders and dealers along with a handful of investors.
