STUDY OF INVESTMENT DETAILS AND PORTFOLIO PERFORMANCE AT ANAND RATHI FINANCIAL SERVICES

Summer Project Submitted By

K.V.PRAVEEN KHUMAR

INSTITUTE FOR TECHNOLOGY AND MANAGENENT, D 14, SIPCOT IT PARK, SIRUSERI, OLD MAHABALIPURAM ROAD, CHENNAI - 603103

BONAFIDE CERTIFICATE This is to certify that the Summer Project entitled STUDY OF INVESTMENT DETAILS AND PORTFOLIO PERFORMANCE submitted by PRAVEEN KHUMAR K.V to INSTITUTE FOR TECHNOLOGY AND MANAGEMENT CHENNAI for the award of the diploma of Post GraduateDiploma in Management, is a bonafide record of work carried out by them under oursupervision. The contents of this report in full or in parts have not been submitted to anyother Institute or University for the award of any degree or diploma. The project work has been carried out at the AnandRathi Share and Stock Brokerage Ltd. Chennai 600 034 Date:

Mr.Arunkumar A (Cluster Head) PROF.SATHYA SAMINADAN AnandRathi Financial Services FACULTY Guide T.Nagar Branch ITM CHENNAI

ACKNOWLEDGMENTS: I take this opportunity to express our heartfelt gratitude to Mr R Sundara Murthy, Regional Head AnandRathi Financial Services Ltd. for providing us an opportunity to undertake this project at AnandRathi and for his valuable guidance and inputs. We thankMr.Arunkumar K(CLUSTER HEAD) Branch Manager, Mr. Saravanan A, Mr. Sathish A.D and Mr Prabhu .D RelationshipManager/Dealer, Mr Vinoth.R Assistant Relationship Manager fortheir continuous support in accomplishing this project and the other members of tradingteam who always took time out to resolve my queries at different stages of project completion. I would also like to express thanks to all the staff of AnandRathi T.NagarBranch. I am very grateful to Prof. Sathya saminadan for his benevolent support and guidance towards the successful completion of the project.

EXECUTIVE SUMMARY: KEYWORDS: Investment; financial securities; portfolio management; portfolio Performance. The core idea of investment is to ensure that idle funds are utilized productively to not only generate returns for the investor but also to provide funds forprojects developed and managed by other entities such as corporations, governments,financial institutions etc. Of the many avenues of investment such as equity, mutual funds,fixed income, debt etc., a study of a high-risk, high-reward instrument such as equity iswarranted. Equity investment is usually an organized process in which a portfolio ofsecurities is constructed and managed. A portfolio of securities is essential to not onlymitigate risks but also to take advantage of those securities that offer higher rewards. Oncea portfolio is constructed, in order to maintain and improve its performance, it is essentialto professionally manage the portfolio. The various phases involved are security analysis,portfolio analysis, portfolio selection, portfolio revision, and portfolio evaluation. PortfolioManagement Services are provided by various financial services firms and NBFCs to manage investors portfolio professionally in India. AnandRathi Financial Services also offers theseservices, besides trading and brokerage services. This project studies the tools, investmentdetails and the construction and performance of a portfolio consisting mostly of equity and some debt components. The project was conducted at AnandRathi Financial Services at theT-Nagar branch in Chennai. It explores the various components of investments through the brokerage services of AnandRathi. A brief overview of the trading terminal called Trade XPro used by the dealers at the various branches of AnandRathi is made. A portfolio isconstructed following the process adopted by the discretionary Portfolio Management Services of AnandRathi as well as using additional security analysis. The performance of this portfolio is evaluated and compared with leading mutual funds and some of the marketindices. Finally, conclusions are drawn and recommendations for improvement are suggested.

TABLE OF CONTENTS: BONAFIDE CERTIFICATE ACKNOWLEDGMENTS EXECUTIVE SUMMARY TABLE OF CONTENTS LIST OF FIGURES LIST OF TABLES GLOSSARY ABBREVIATIONS CHAPTER 1 PROJECT INTRODUCTION: 1.1 IMPORTANCE AND RELEVANCE 1.2 OBJECTIVES OF THE STUDY 1.3 LIMITATIONS AND CONSTRAINTS 1.4 METHOD

CHAPTER 2 ANAND RATHI FINANCIAL SERVICES PROFILE:2.1 OVERVIEW 2.2 LOCATION 2.3 MISSION 2.4 VISION 2.5 MILESTONES 2.6 PRODUCTS 2.7 SERVICES2.8 EQUITY & DERIVATIVES BROKERAGE 2.9 MUTUAL FUNDS 2.10 DEPOSITORY SERVICES 2.11 COMMODITIES 2.12 INSURANCE BROKING 2.13 IPO 2.14 GLOBAL PRODUCTS 2.15 OUR SERVICES 2.16 MANAGEMENT TEAM 2.17 AR THE BEST 2.18 COMPETITORS

CHAPTER 3 INDUSTRY PROFILE: 3.1 STOCK MARKET 3.2 INDIAN STOCK MARKET 3.3 STOCK EXCHANGES 3.3.1 BSE Bombay Stock Exchange 3.3.2 NSE National Stock Exchange 3.4 STOCK INDICES 3.5 SEBI 3.6 BROKERS AND TRADERS 3.6 PORTFOLIO MANAGEMENT 3.6.1 Security Analysis 3.6.2 Portfolio Analysis 3.6.3 Portfolio Selection 3.6.4 Portfolio Revision 3.6.5 Portfolio evaluation 3.7 PMS 3.7.1 Investment in PMS 3.7.2 Working of a Portfolio Management Service (PMS) 3.7.3 Portfolio Management Services (PMS) Charges 3.7.4 Taxation for Portfolio Management Services (PMS) 3.7.5 PMS and Mutual Funds CHAPTER 4 TRADE X PRO: 4.1MARKET WATCH 4.2 SCRIP 4.3 SNAP QUOTE 4.4 TRADING 4.5 ORDER BOOK 4.6 TRADE BOOK 4.7 NET POSITION 4.8 SQUARE OFF4.9 AFTER MARKET ORDERS

CHAPTER 5 INVESTMENT DETAILS AND PORTFOLIO ANALYSIS:5.1 INVESTMENT DETAILS 5.2 PORTFOLIO PERFORMANCE 5.2.1 Selection Criteria 5.2.2 Portfolio Features 5.2.3 Assumptions and Limitations 5.2.4 Asset Allocation 5.2.5 Technical Indicators Used 5.2.6 Stock Information 5.2.7 Selected Companies 5.2.8 Diversification 5.2.9 Returns Performance

CHAPTER 6 CONCLUSION 6.1 FINDINGS 6.2 RECOMMENDATIONS 6.3 CONCLUSIONS

APPENDIX APPENDIX 1: STOCK SELECTION FOR PORTFOLIO APPENDIX II: PERFORMANCE VALUES OF LAST 3 YEARS FOR STOCK SELECTION REFERENCES LIST OF FIGURES: Figure 5.1 Intra-day Composition of Investors Figure 5.2 Equity Sector Wise Composition Figure 5.3 Intraday Derivatives CompositionFigure 5.4 Portfolio Asset Allocation Figure 5.5 Portfolio Sector wise Allocation LIST OF TABLES: Table 4.1 Shortcut Keys used in Trade X Pro Table 5.1 List of Stocks traded in sector wise classification Table 5.2 List of Derivatives traded in sector wise classification Table 5.3 List of Funds Allocated Sector wise Table 5.4 Fund allocation to the selected stocks Table 5.5 Portfolio Returns as on 30 Apr 2014 Table 5.6 Comparison of Returns with Indices

GLOSSARY: Agent : Security firm acting on behalf of client to buy/sell security. Arbitrage : Trading of securities between different stock markets based on the price difference. Ask or Offer : Lowest price at which a client is ready to sell the security. Bear Market : A market in which stock prices are falling. Blue Chip Stocks : Stocks of leading and well known stocks having good a track record. Broker or Brokerage Firm : A firm which acts a link between the stock exchange and the investors. They dont own any stock. Bull Market : It is when the stock prices in the market tend to rise. Business Days : All weekdays expect national holidays. Call Option : A type of option which gives the holder a right and not an obligation to buy a fixed number of shares at a specified amount at a particular time. This is usually bought when prices tends to increase. Cash Settlement : It is the settlement of an option not by the delivery of the underlying stock, but by the cash payment of the difference between the strike or the exercise price and the given underlying settlement price. Client Order : Any order given by a retail customer of any participating organisation. Close Price : The price of a particular stock at the time of closing of the market. Closing Transaction : A transaction used to close an open futures or an open options contract. Commodities : Products which form the part of the commerce which are traded on a separate and authorized exchange based for commodities. These include agricultural products and natural resources such as gold, oil, minerals and metals. These for the underlying asset for future contracts in these exchanges. Cyclical Stock : A stock of a company belonging to a particular industry or a sector and it price is extremely sensitive to the prevailing economic conditions. Day Order : It is an order which is valid only for the day when it is bought. The order should be terminated in the same day before the market closes else it will deleted overnight. Debenture : These are debt instrument which are long term in nature and are issued by corporations and governments which does not have any collateral attached against it. A debenture is usually unsecured and very rarely a secured debt. A debenture is called unsecured be unsecured when there are no liens on any specific assets. Equities : These are securities which represents a share of ownership in a company. Equity Option : This is an option contract which grants the holder the right and not an obligation to buy or to sell a stated amount of shares of stock during a particular stated price given by the market regulator during a specific period of time. European-Style Option : Options which are to be exercised only on their date of expiration. Exchange-Traded Fund (ETF) : It is a special type of financial trust which enables the investor to buy an entire basket of shares through a single security and it tracks and matches the returns of the stock market index. ETFs are considered to be a variety type of index mutual fund, but still they will be listed on the exchange and will be traded like a stock. It can also be called as an index participation unit (IPU). Exercise : It is the act of holder of the option who can choose to take delivery of call option or make delivery of put options of the underlying interest against the exercised price payment. Face Value : It is the cash denomination of an individual debt instrument. Face value is the amount of money which the holder of the debt instrument receives from the issuer on the debt instruments on its maturity date. Face value is also can also be called as par value or the principle. Futures : Contracts which enable us to buy or sell securities at a future date. Growth Stock : These are the stocks of those firms that have performed better than the estimated average growth over the past years and are expected to continue the same trend in the future. Hedge : It is a strategy usually used by the investors to limit their losses in investment by making transactions that offset the given position. Income Stock : These are the type of shares which pay-out dividend regularly and which also offers a dividend yield which is much higher than the average shares. Index : It gives the measure of the performance of the stock market; it is based on the performance of stocks. It gives a statistical measure of the market. Inflation : An overall increase in prices for goods and services. It is measured by the change in percentage in the Consumer Price Index (CPI). Insider : It defines all the directors and senior officers of the company, and all those who may be presumed to have access to inside information in regards to the company. It can also be defined as any person owning more than 10% of the shares of the company having voting rights. Investment : It refers to the purchase of ownership of securities in order to earn income, profit or both. It can also include real estate, antiquities or art paintings. Issue : It is the issue of a firms stock or the process of distributing the securities among the investors. The issued stocks includes to the part of the firm's shares that have been given as sale. A firm do not have to issue all of its authorized shares. Limit Order : It is an order to buy or sell stock at a given price. This order can be executed only at the stated price or can be greater than the mentioned price. It will set the maximum Listed Stock : These represent the stocks of the company which are traded on the stock exchange. The companies pay a certain amount as fees in exchange to be listed and should also abide by the rules and regulations set out by the market regulator to maintain the existing privileges. Money Market : It is the part of the capital market established to buy and sell short-term financial obligation. These market include government bills, short-term Government of India bonds, commercial papers etc. Longer-term securities are also traded in these markets when their maturity date comes within three years. Mutual Fund : These are funds managed by financial planning experts who will invest the money obtained from the people who join in the plans to various securities which include stocks, derivatives like futures and options, deposits and other capital market instruments. The mutual fund will divided in units called NAV's and be purchased from brokers or the mutual fund directly. Option : These are financial derivatives in which the investor has a right and never an obligation to buy or sell particular stocks or securities for a stated price in a given period of time. Put Option : It is an options contract that gives the holder the right but not the obligation to sell a given number of shares at a specific price within a fixed period of time. ABBREVIATIONS: AD : Authorised Dealers AR : Anand Rathi BSE : Bombay Stock Exchange BM : Branch Manager BOLT : BSE online trading software CDSL : Central Depositories Securities Ltd CM : Capital Markets CNX : CRISIL NSE Index CRISIL : Credit Rating Information Services India Ltd. DP : Depository Participant FII : Foreign Institutional Investor F&O : Futures and Options FPO : Follow-on Public Offering HUF : Hindu Undivided Family ICDR : Issue of Capital and Disclosure Requirement IPO : Initial Public Offering IPF : Investor Protection Fund KYC : Know Your Client NEAT : National Exchange for Automated Trading NSDL : National Securities Depository Ltd NSE : National Stock Exchange PAN : Permanent Account Number PMS : Portfolio Management Service SEBI : Securities and Exchange Board of India SL : Stop Loss T+2 : Second day from trading day TAME : Technical Analysis Made Easy

CHAPTER 1 PROJECT INTRODUCTION 1.1 Importance and Relevance:The importance of this project can be gleaned from the emphasis placed on finance in the world, especially the idea of investment and markets. This project explores the capital market and derivatives market by gaining insights from the daily happenings at a brokeragebranch of AnandRathi Financial Services. Specifically, the investing sentiment of the marketplayers such as which the securities they usually prefer to engage in, the software used by the brokerage firms to perform the stock market trading, and the various securities whichare primarily traded in the different sectors are looked at. This project also covers the area of portfolio management such as how the various components of a portfolio are chosen, thefundamental analysis performed to select the eligible stocks as well as using certain technical indicators to time the purchase of securities in the portfolio. The performance of the portfolio and in comparison with the various indices and mutual funds is done. Theimportance of portfolio management in the world of finance cannot be overstated. By having a well-diversified portfolio of different asset classes, wealth creation can be handledprofessionally to serve the needs of tomorrow.

1.2 Objectives of the study: To study the composition of securities traded at AnandRathi Shares and Stock Brokers limited. To study the performance of a portfolio and the comparison of its returns with various indices in mid-cap and small cap, industrial sectors and top mutual funds. To determine the correlation of returns with the CNX Midcap and CNX 500 and to determine the CAGR of the constructed portfolio. 1.3 Limitations and Constraints: There were various limitations faced during the project: As per the company policy some of the details will not be published in the report pertaining to client amount invested and total funds invested in particular stock and only approximate values of the same can be provided. In order to give a portfolio performance of at least two years the portfolio is assumed to have started from May to Dec of 2011 so most of the performance in portfolio has already occurred. While security analysis is performed, portfolio analysis and portfolio revision/portfolio churn is not conducted since it is beyond the scope of this study. Comparison of the portfolio performance with other leading financial services firms is not conducted.

Actual trading on Trade X Pro was not allowed, and only a demo account was provided to be acquainted with the screens.

1.4 Method:The investment details were obtained by observing the positions of the clients from theTrade X pro database. The actual amount will not be revealed as per company policy butthe details of the stocks which are traded and kept for long term investments, thederivatives which are traded options and futures of stocks and indices. The sector wiseclassification and the primary stocks traded in those sectors. The portfolio selection methodwas based on various fundamental factors including consistent growth, good governance, positive balance sheet performance like asset classification and debt equity ratio and a gooddomestic play performance. The stocks were assumed to have been bought in the past byanalysing the technical indicators like Bollinger Bands, Relative Strength Index and MoneyFlow Index to decide the date of buying. CHAPTER 2 ANAND RATHI GROUP PROFILE 2.1 Overview: AnandRathi (AR) is one of the leading full service securities firm providing the whole gamut of financial services. This firm was founded by Mr. AnandRathi in 1994. Today it has a pan India presence as well as an international presence through its offices in Bangkok and Dubai. AR gives a breadth of advisory and financial services and also corporate advisory, wealth management, investment banking, brokerage & distribution of equities, commodities,mutual funds and insurance, structured products which are all supported by powerfulresearch teams. The philosophy of the firm is totally client centric, with a clear aim onproviding long term value addition to clients, while maintaining the highest standards of excellence, professionalism an ethics. The entire activities of the firm are divided acrossdistinct client groups: Individuals, Private Clients, Corporate and Institutions. It was rankedas one of the best in the South Asia's top 5 wealth managers for the ultra-rich by Asia Money 2006 poll. AnandRathis offices are located in 197 cities across 28 states and it has also got branches in Dubai and Bangkok with more than 44000 employees. It has an excessof Rs.4billion as its daily turnover. It has got more than one lakh clients nationwide. Also, itis the leading Distributor of IPO's in the country. Citigroup Venture Capital International joined the group as a financial partner in the year 2007.

2.2 Location: Across India AnandRathi is present in 21 states, having various branches in each state. These include Andhra Pradesh, Assam, Bihar, Chhattisgarh, Delhi, Goa, Gujarat, Haryana Jammu & Kashmir, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttaranchal and West Bengal. 2.3 Mission:To be India's first multinational providing complete financial services solution across the Globe.

2.4 Vision:"To be a shining example as leader in innovation and the first choice for clients & employees"

2.5 Milestones: 1994: Began activities in consulting and Institutional equity sales with 15 staff 1995: Set up a research desk and empanelled with major institutional investors 1997: Introduced investment banking businesses Launched retail brokerage services 1999: Lead managed first IPO and executed first M & A deal 2001: Wealth Management Services was initiated 2002: Recommenced Retail business expansion with ownership model 2003: Wealth Management assets crossed Rs1500 crores Launched insurance broking Launched WMS in Dubai Network of Retail branches exceeded to 50 2004: Expanded Retail Branch network across 100 locations within India. Introduced commodities brokerage and real estate services Wealth Management assets crossedRs3000crore Relaunched institutional equities business and senior research team put in place 2005: Expanded Retail Branch network across 130 locations within India.Launched Real Estate Private Equity Fund 2006: AnandRathi Middle East, WOS acquired membership of Dubai Gold & Commodity Exchange (DGCX).Ranked amongst South Asia's top 5 wealth managers for the ultra-rich byAsia Money poll. Ranked as 6th in FY2006 for All India Broker Performance in equitydistribution in the High Net worth Individuals (HNI) Category. Ranked as 9th in the RetailCategory having more than 5% market share. Completed its presence in all States across thecountry with offices at 300+ Locations. 2007: Citigroup Venture Capital International picked up 19.9% equity stake. RetailEstablished presence in over 350 locations 2009: AR has been Ranked as the #1 Private Bank - Domestic in India by Asia money Polls2009 and Ranked as the #2 Private Bank - Overall in India by Asia money Polls 2009 2010: AnandRathi Private Wealth adjudged Best Domestic Private Bank (India) by Asia Money Polls. 2.6 Products: Equities, Bonds, Mutual Funds and Derivatives Managed Investment Services or PMS Commodities FX Trading Life Insurance General Insurance Alternative Assets Private Equity Funds Structured Products Real Estate Opportunities Fund Special Situation Opportunities Offshore Structures and Global Investments

2.7 Services: Creation of a customized financial strategy Diversification of assets based on a formal process of asset allocation Active tracking, monitoring and review of portfolios Creation of private trusts Tax planning Estate planning Structuring of family wealth 2.8 Equity & derivatives brokerage: AnandRathi provides end-to-end equity solutions to both institutional and individual investors. A competent and reliable research unit across the country has been establishedby them though consistent delivery of high quality advice on individual stocks, sector trendsand investment strategy. Clients can trade online through us on NSE and BSE for bothequities and derivatives. Across the country they are supported by dedicated sales & tradingteams in our trading desks. Research and investment ideas can be accessed either throughtheir designated dealers, email, web or SMS by the clients.

2.9 Mutual funds:AR is one among Indias top mutual fund distribution houses. Their success lies in their philosophy of providing consistently superior, independent and unbiased advice to their clients supported by in-depth research. They firmly believe in the need of selecting appropriate asset allocations based on the client's risk profile. They have a dedicated mutual fund research cell for mutual funds which consistently churns out superior investment ideas, picking best performing funds across asset classes and providing insights into performances of select funds.

2.10 Depository services:AR Depository Services provides the clients with a secure and also a convenient way for holding your securities on both CDSL and NSDL. Their depository services include settlement, clearing and custody of securities, registration of shares and dematerialization. They offer the clients daily updated internet access to their holding statement and transaction summary.

2.11 Commodities: Commodities broking is entirely a new opportunity to hedge business risk and an attractive investment opportunity to deliver superior returns for investors. Their commodities brokingservices include online futures trading through NCDEX and MCX and depository servicesthrough CDSL. Their Commodities broking is supported by a dedicated research cell that provides both fundamental as well as technical research. Their research covers a wide rangeof traded commodities which includes precious and base metals, Oils and Oilseeds, agro-commodities such as wheat, chana, guar, guar gum and spices such as sugar, jeera andcotton. They provide their clients customized advice on hedging strategies, investmentideas and arbitrage opportunities, in addition to transaction execution.

2.12 Insurance Broking: They, as an insurance broker, provide to their clients comprehensive risk management techniques, both within the business as well as on the personal front. Risk management includes identification, measurement and assessment of the risk and handling of the risk, of which insurance is an inevitable part. The firm deals with both general insurance and life insurance products across all insurance companies. Their guiding philosophy is to manage the entire risks of the clients set by providing the optimal level of cover at the least possible cost. The whole sales process and product selection is research oriented and customized to the needs of the client. They lay great emphasis on timely claim settlement and post sales services.

2.13 IPO:AnandRathi Securities Ltd. is one of the leading primary market distributor across the country. Their strong performance in IPOs has been a result of their wide experience in the Primary Market, a wide network of branches across India, strong distribution capabilitiesand a dedicated research team. They have been consistently ranked on all major offerings as among the top 10 distributorsof IPOs. Their IPO research team provides clients with in-depth overviews of forthcomingIPOs as well as investment recommendations. Online filling of forms is also available.

2.14 Global Products: Structuring of trusts and investment companies Offshore Mutual Funds Structured Products and Deposits while include capital-guaranteed notes Trading in global markets (Equities, Bonds, Commodities) Real Estate investments Alternative investments (including hedge funds)

2.15 Our services: Risk Management Clear diligence and research on policies available Recommendation on a comprehensive insurance cover based on clients needs Accurate maintenance of records of client policies Good client assistance in premium paying Continuous monitoring of the client account Help assist client in settlements and claim negotiation.

2.16 Management Team: AR brings in a high quality professional core management force that comprises of individuals with extensive business expertise and industry experience. The senior Management comprises of a diverse talent pool which brings together a group with veteran experience from across industry as well as financial service sectors. Mr. AnandRathi - Group Chairman Chartered Accountant Past President, BSE Experience in several Senior Management positions with one of India's premier industrial groups Mr. Pradeep Gupta - Vice Chairman More than 17 years of experience in Financial Service sector Mr. Amit Rathi - Managing Director Chartered Accountant & MBA More than 11 years of experience in Financial Service sector

2.17 AR the Best: Better understanding of the Indian economy & markets Superior ability to structure and manage tax and regulatory compliances Highly dedicated relationship team High quality product range - Indian and Global

2.18 Competitors: The main competitors of Anandrathi are: Karvy Religare Motilal Oswal ShareKahn Geojith

CHAPTER 3 INDUSTRY PROFILE 3.1 Stock Market:Stocks are issued by companies in order to raise capitals and when bought by investors they acquire a portion of the company. A Stock market is a place where buying and selling of stocks takes place. Now with the advancement of internet and advanced technology, buying and selling of stocks takes place anywhere in India and from the world. There is no need tobe physical present in exchanges like NSE and BSE. Stock markets are perfect competitivemarket. Primary market, both Government and corporations use to offer shares for the firsttime to the public through IPO. Here in order to raise resources to meet their requirementsof investment, securities, in the form of equity or debt, can be issued in domestic/international markets at face value, discount or premium. Secondary marketrefers to a market where securities are traded after being offered to the public in theprimary market or listed on the Stock Exchange. Secondary market comprises of equity,derivatives and the debt markets.

3.2 Indian Stock Market: The Indian Stock market is defined by the two exchanges BSE and NSE. Most of the trading activities happens in these exchanges. The various stocks have been divided into various sectors depending upon their operations. Some of the main sectors include banking, IT, Infrastructure, pharmaceuticals, agriculture, automobiles etc. Stocks of the variouscompanies based on the sectors are traded daily. The timing of the stock market is frommorning 9:15am to 3:30pm in the afternoon. Other than stocks, mutual funds, IPO,derivatives, commodities and currencies are also traded in the stock market. Derivativesmainly futures and options are traded based on the stock or a stock index and interest ratefutures. Futures are mainly traded with a margin up to 15% on the amount invested. Inoptions European way is used and hence the contract will be valid only till the last Thursdayof the month. Both put and call options will be used and will be bought on a given premiumfor the respective strike price. Commodities includes from the major sectors as metalsspices, cereals etc. Currency trading involves exchanging of the different currencies basedon the differences.

3.3 Stock Exchanges: 3.3.1 BSE Bombay Stock Exchange: BSE was established in 1875 in Mumbai. With more than 5000 companies listed on this exchange, having a total market capitalization of 1.32 trillion USD, BSE is Asias oldest stock exchange. It is also the fastest with a speed of 200 micro second. It is also one of the worlds leading exchange for Index options trading. Currently it is the third as on March 2014. BSE is an index known for its smooth transparent and efficient trading in equity, debt instruments, derivatives, mutual funds. It will provide a host of other services to the participants in the market which includes risk management for the stocks and importantlythe cash settlement and clearing processes and also market data services, and education. It is a well-known exchange with a positive image in the world and very well known within the nation. It has a certified on-line trading system called BOLT. It has a capacity of 8 million orders per day. BSE is the very first stock exchange in India and the second exchange in the world to receive an ISO 9001 certification and also the prestigious Information Security Management System standard for BOLT. The BSE was the first in the world to introduce the centralized exchange based trading system using the internet which is known as the BSEWEBx.co.in which will help the investors at any locations in the world to perform trading. Depository Services are also provided through its CDSL (Central Depository Services Ltd) arm. 3.3.2 NSE National Stock Exchange:NSE situated in Mumbai was founded in 1994 and was established as a demutualised electronic exchange. With a market capitalization of over 989billion USD and above 1650 companies listed, the NSE is a significant exchange, responsible for a large number of stock transactions. NSE has played a pivotal role in transforming the Indian securities market and as a result has brought about efficiency, transparency and market integrity. Today NSE network is spread across over 1500 locations, supporting over 2.3 lakh terminals. NSE is known for its diverse holding of shares. It was established by a group of financial institutions during that time. Its main functions are that it will offer trading which is the primary and followed by the clearing and settlement services for stocks, debt and equity derivatives. It is the largest stock exchange in India and is known in the global front for stock trading, currency trading and index options trading. The NSE TAME gives a good platform for the online traders for technical analysis for intraday trading. NSDL (National Securities depositories Ltd) is the depository service provided by NSE.

3.4 Stock Indices: Index is the statistical indicator which measures the changes in the economy in general or in particular sectors. In case of financial markets, an index is a portfolio of securities that represent a particular market or a market sector. Each Index has its own method of calculation and is expressed in terms of a change from a base value. The base value might be as recent date or maybe many years in the past. Thus, the percentage change has the importance compared with the actual numeric value. Financial indices are created to measure the movements in prices of stocks, bonds, Treasury bills and any other type offinancial securities. A stock index is created to provide the capital market participants with information regarding average share price movement in the market. Broad indices areexpected to capture the overall behaviour of equity market and need to represent thereturn obtained by typical stocks in the country. The significance of the index is very important as it is an indicator of the performance of overall market or a particular sector. It also serves as a benchmark for portfolio performance. For managing portfolios, belongingeither to individuals or mutual funds, the stock index is used as a measure for evaluation oftheir performance. It will be used as an underlying for financial application of derivatives,some of the products in OTC and exchange traded markets are based on indices as underlying asset. The S&P BSE SENSEX, BSE's most popular equity index, comprising of top 30 stocks listed on the exchange is Indias most widely tracked stock market benchmark index. The NSEs benchmark index is the S&P CNX NIFTY, which takes into account the nifty fifty or the top 50 of the listed companies in the exchange. NSE operates a nation-wide, electronic market trading in Capital Market, Derivatives Market and Currency. Many of the indices are formed by taking the companies which belong to a particular sector like the banks, infra, IT etc. Some of the other important indices in which usually trading occurs are stated below.

BANK NIFTY, BSE BANKEX CNX METAL, CNX AUTO, CNX FMCG, CNX PHARMA, CNX IT, BSE AUTO, BSE IT BSE PSU, CNX 100, CNX 500, BSE 100, BSE 200, BSE 500, NIFTY JUNIOR NIFTY MIDCAP 50, BSE SMALLCAP, BSE MIDCAP, NSE MIDCAP

3.5 SEBI: The Securities and Exchange Board of India is the regulator for the securities market in India. It is also known as the market watch dog. It was establish in 1988 but given statutory powers on 12 April 1992 as per the SEBI Act 1992. The main objective is to protect the interest of investors and to promote the development of and to regulate the securities market. There are three groups which constitute the market those of which are the issuersof securities, the investors, the market intermediaries and SEBI has to be responsible forthe smooth functioning among the same.UK Sinha is the present chairman of SEBI. The following are the main functions of SEBI: 1. Approving of the laws in the stock exchange. 2. Amending the laws of exchange. 3. To inspect and audit the books of accounts and call for periodical returns from recognized stock exchanges. 4. To inspect the books of accounts of a financial intermediaries. 5. To compel firms to list their shares in one or more stock exchanges. 6. Registration brokers.

3.6 Brokers and Traders: There are different types of traders. The hedger is one who tries to minimize high loss or gains using one of many financial instruments. An arbitrageur is one who takes advantage of price fluctuations in the two exchanges and tries to capitalize on the same. He seeks tomake profit by looking for price discrepancies of shares listed in two exchanges. A speculator is one who engages in risky transactions and tries to make a profit from marketfluctuations in the short or medium run. They pay less attention to the fundamentals of asecurity and are least bothered about capital gains, interest or dividends. Day traders or swing traders are a type of speculator who trade on a day to day basis. Finally, the investoris a person who allocates capital with an expectation of some financial return. They mayalso indulge in speculation but are long term investors with less appetite for risk. A brokerage firm is a financial institution which facilitates buying and selling of securitiesbetween buyers and sellers. They provide services to traders and assist in their decisionmaking process. All brokers rely heavily on a dedicated research team which serves as the basis for the advice they render to their clients. A brokerage may also serve as a privatebank providing a wide variety of services like insurance, wealth management, portfoliomanagement, investment banking and Mergers/acquisitions. When shares are bought or sold, the transaction goes through a specific medium. The Depository Services providersettles the trade or transactions made in the stock markets. Like banks, the depositoryservice providers have a clearing house where at the end of the day all the buying and selling settlements take place through stock brokers. A depository is a company which holdsthe share one purchases. At present there are two depository companies, NSDL and CDSL. Intermediaries perform their actions in a variety of securities at Depository on behalf of the clients. These intermediaries are called DPs or depository participants and need to be registered under a depository before it begins to operate. For an investor to avail the services provided by the depository, he has to open a Depository account more commonlyknown as your Demat Account. Demat is short for dematerialization which refers to the conversion of physical share certificates into the electronic form. Today physical certificatesare rarely used. Some brokers also offer a Margin account wherein the firm allows you to borrow from it any trade. 3.6 Portfolio Management: Investing in financial securities requires a strategic top-level consideration of the set of securities one wants to invest in. This set of securities is called a portfolio. A portfolio may include equities, commodities, mutual funds, fixed income instruments and so on. The creation and handling of a portfolio of securities from selecting the individual securities, to analysing the portfolio, to revision of the portfolio and portfolio evaluation is called portfolio management.

3.6.1 Security Analysis: Security analysis is the initial phase of the portfolio management process. This step consists of examining the risk-return characteristics of individual securities. The basic strategy is to buy under-priced securities and sell overpriced ones. The problem lies in identifying the mispriced securities. There are two alternative approaches to security analysis, namely fundamental analysis and technical analysis. Fundamental analysis, the older of the two approaches, deals with the fundamental factors that affect a company such as the market share, the earnings-per-share, return-on-equity, quality of management etc. It also dealswith the fundamental factors that affect the industry to which the company belongs as alsothe fundamentals of the economy. Fundamental analysis identifies companies that are strong fundamentally to be included in an investors portfolio. Technical Analysis, thesecond alternative approach, assumes that price movements of the securities aresystematic and exhibit certain consistent patterns. From the past movements, trends and patterns are identified to predict future price movements. The current market price iscompared with the future predicted price to determine the extent of mispricing which can then be used to make investing or trading decisions.

3.6.2 Portfolio Analysis: Security analysis provides the investor with a set of desirable securities from which an indefinitely large number of portfolios can be constructed by choosing different sets of securities and also by varying the proportion of investment in each security. Each portfolio constructed by combining individual securities has its own specific risk and return characteristics which are not just the aggregates of the individual security characteristics. Portfolio analysis phase of portfolio management consists of identifying the range of possible portfolios that can be constituted from a given set of securities and calculating theirreturn and risk for further analysis. 3.6.3 Portfolio Selection: Portfolio analysis provides the inputs for the next phase in portfolio management which is portfolio selection. An efficient portfolio is on which generates the highest returns at a given level of risk, and inputs from portfolio analysis can be used to identify the set of efficient portfolios. From this set of efficient portfolios, the optimal portfolio has to be selected for investment.

3.6.4 Portfolio Revision: Once a portfolio is constructed, it has to be monitored constantly to ensure that it continuesto be optimal. As the economy and the financial markets are dynamic and changes takeplace almost daily, securities which were once attractive may cease to be so. Revision leadsto purchase of new securities and sale of some existing securities from the portfolio. Themix of securities and their proportion in the portfolio changes as a result of the revision.Portfolio revision may take place as a result of investor-related changes also, such as availability of additional funds, change in risk attitude, need of cash for other alternativeuse, etc.

3.6.5 Portfolio evaluation: Portfolio evaluation is the process which is concerned with assessing the performance of the portfolio over a selected period of time in terms of return and risk. Quantitative measurement of actual return realized and risk borne by the portfolio over the period of investment is to be compared with objective norms to assess the relative performance of the portfolio.

3.7 Portfolio Management Service: A Portfolio Management Service account is an investment portfolio in stocks, debt and fixed income products managed by a professional money manager that can potentially be tailored to meet specific investment objectives. When one invests in a PMS, one owns individual securities unlike a mutual fund investor, who owns units of the entire fund. One has the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolios, every account may be unique. As per SEBI guidelines, only those entities who are registered with SEBI for providing PMS services can offer PMS to clients. There is no separate certification required for selling any PMS product. As per the SEBI guidelines, the minimum investment required to open a PMS account is Rs. 5 Lacks. However, different providers have different minimum balance requirements for different products. For example, Birla AMC PMS has a minimum amount requirement of Rs. 25 lacks for a product. Similarly HSBC AMC has a minimum requirement of 50 lacks for their PMS. In India, Portfolio Management Services are also provided by equity broking firms & wealth management services. The service involves all the processes involved in the creation and maintenance of an investment portfolio such as Security Analysis, Portfolio Analysis, Portfolio Selection, Portfolio Revision and Portfolio Evaluation. A PMS usually requires that there be a minimum ticket size (investment amount), a fee structure, profit sharing basis and brokerage, besides other product features and charges. There are broadly two types of PMS: 1. Discretionary PMS Where the investment is at the discretion of the Fund Manager & the client cannot intervene in the investment process. 2. Non-Discretionary PMS Under this service, the portfolio manager only provides suggestions on investment ideas. The choice as well as the timing of investment decisions rests solely with the investor. However the execution of the trade is done by the portfolio manager. The client may give a negative list of stocks in a discretionary PMS at the time of opening his account and the Fund Manager would ensure that those stocks are not bought in hisportfolio. Majority of PMS providers in India offer Discretionary Services. Discretionary PMS is an investment service in which an investment manager or fund manager makes the buy-sell decisions without referring to the account owner (client) for every transaction. The manager, however, must operate within the agreed upon limits to achieve the client's stated investment objectives.

3.7.1 Investment in PMS: There are two ways in which an investor can invest in a Portfolio Management Service: 1. Through cheque payment. 2. Through transferring existing shares held by the customer to the PMS account. The value of the portfolio transferred should be above the minimum investment criteria. Beside this, a customer will need to sign a few documents like: PMS agreement with the provider, Power of Attorney agreement, New Demat Account Opening format (even if investor has a demat account she is required to open a new one) and documents like PAN, address proof and Identity proofs are mandatory. NRIs can invest in a PMS. The NRI needs to open a PIS account for investing in a PMS. The documentation required for an NRI, however, is different from a resident Indian. A checklist of documents is provided by each PMS provider.

3.7.2 Working of a Portfolio Management Service: Each PMS account is unique and the valuation and portfolio of each account may differ from one another. There is no NAV for a PMS scheme; however the customer will get the valuation of his portfolio on a daily basis from the PMS provider. Each PMS account is unique from the other. Every PMS scheme has a model portfolio and all the investments fora particular investor are done in the Portfolio Management Services on the basis of model portfolio of the scheme. However the portfolio may differ from investor to investor. This is because of: 1. Entry of investors at different time. 2. Difference in amount of investment by the investors 3. Redemptions/additional purchase done by investor 4. Market scenario E.g. If the model portfolio has investment in Infosys, and the current view of the Fund Manager on Infosys is HOLD (and not BUY), a new investor may not have Infosys in his portfolio. Under PMS schemes the fund manager interaction also takes place. The frequency depends on the size of the client portfolio and the Portfolio Management Services provider. Biggerthe portfolio, more is the frequency of interaction. Generally, the PMS provider arrangesfor fund manager interaction on a quarterly/half yearly basis.

3.7.3 Portfolio Management Services Charges: A PMS charges following fees. The charges are decided at the time of investment and are vetted by the investor. Entry Load PMS schemes may have an entry load of 3%. It is charged at the time of buying the PMS only. Management Charges Every Portfolio Management Services scheme charges Fund Management charges. Fund Management Charges may vary from 1% to 3% depending upon the PMS provider. It is charged on a quarterly basis to the PMS account. Profit Sharing Some PMS schemes also have profit sharing arrangements (in addition to the fixed fees), wherein the provider charges a certain amount of fees/profit over the stipulated return generated in the fund. For Eg PMS X has fixed charges of 2% plus a charge of 20% of fees for return generated above 15% in the year. In this case if the return generated in the year by the scheme is 25%, the fees charged by the PMS will be 2% + {(25%-15%)*20%}. Apart from the charges mentioned above, the PMS also charges theinvestors on following counts as all the investments are done in the name of the investor: Custodian Fee Demat Account opening charges Audit charges Transaction brokerage

3.7.4 Taxation for Portfolio Management Services: Any income from Portfolio Management Services account is a business income. Unlike MF, PMS is not required to remain 65%+ invested in equity to get equity taxation benefit. Each Portfolio Management Services account is in the name of additional investor and so the tax treatment is done on an individual investor level. Profit on the same can be considered as business income (i.e. slab wise). Profit can be considered as capital gains. [STCG (15%) or LTCG (Tax-free)]. It depends on clients Chartered Accountant or the assessing officer how he treats this income. The PMS provider sends an audited statement at the end of the FY giving details of STCG and LTCG, it is on the client and his CA to decide to treat it as capital gain or business income.

3.7.5 PMS and Mutual Funds: Both PMS and Mutual Funds are types of managed Funds. The advantage to the investor ofa Portfolio Management Service over a Mutual Fund is: Concentrated Portfolio. Portfolio can be tailored to suit the needs of investor. Investors directly own the stocks, rather than the fund owning the stocks. Difference in taxation

CHAPTER 4 TRADE X PRO Anandrathi traders uses the nest software for performing the trading operations. Nest software is developed by Omnesys Technologies Ltd. It provides a user friendly interface which helps the dealers as well as clients to perform their activities efficiently and effectively. 4.1Market Watch:The basic screen is the market watch window. It consists of an excel like pattern showing the details of the different listed companies in the row section and the information of each company stocks like the highs and lows, LTP, Ask price, Bid price, Ask quantity, Bid quantity etc. 4.2 Script: The company information are called script. Each company has its own unique scripts. Hence if you want the details of the nifty stocks in your market watch, then you will be having a total of 50 scripts. 4.3 Snap Quote: Snap quote of a scrip shows list of the trading price and quantity by which it is being traded along other information relevant for trading. 4.4 Trading:Trading for a scrip is done through the buy and sell menu. The buy menu you can give the required quantity and price to buy a particular stock and in a sell menu similarly you give the required quantity and price to sell the stock. The orders will be executed when the matching prices are obtained.

4.5 Order Book: The order book shows the open as well as the completed orders in the trade. The Orders which has not found the match yet will be there in Open Orders Frame whereas the traded orders can be seen in Completed Orders Frame. User can also see all cancel or rejectedtrade along with the reason in Completed Orders Frame. User can modify the open orders or cancel them whenever it is required.

4.6 Trade Book:The orders placed which were traded are available in the trade book 4.7 Net Position: The net position of the user is shown in the menu. It shows the net market value of the securities of the user along with the day wise positions in case any intraday trading wasdone during the day.

4.8 Square Off: Square-off can be done for a particular position quantity wise. The square-off can also be of the % of total number of invested shares then uncheck the box and write the % of the total invested shares you want to squared off. After writing click on the square-off option.

4.9 After Market Orders: The user will be able to keep aftermarket orders to be executed in the next day. Both the buy and sell orders can be made in this. This option is available in the orders and tradesmenu as aftermarket orders.

Table 4.1 Shortcut Keys used in Trade X Pro: Function/Menu Shortcut Keys

Buy MenuF1

Sell MenuF2

Order BookF3

Snap QuoteF6

Net PositionAlt+F6

Trade BookF8

CHAPTER 5 INVESTMENT DETAILS AND PORTFOLIO ANALYSIS 5.1 INVESTMENT DETAILS: The main source of revenue for the company is from wealth management and intraday trading. The current section is regarding the details about intraday trading. AnandRathi has over 1.5 lakh registered trading accounts and in which 30-40% of the clients are HNI clients. These are the main participants in the intraday trading and the average transaction involves crores of rupees. The clients not involved in intraday trading usually plan for a long term investment and buy equities and keep it for about 5-6 years for a good return. Commodity trading and currency trading are comparatively much less compared to the volume of equity traded. In terms of long term investments, equity hold the major stake, with commodity especially in metals and followed by currency. For intraday trading most of the transactions occurs in the F & O market. The types of derivatives traded are futures and options. Futures are traded in both index and equities. Index Futures involves BANK NIFTY, NIFTY FUTURES. Options European style Call and Put are used for trading. Both index and equities aretraded in options as well. The Index Options involves NIFTY 7200 CE, NIFTY 6800 PE, BANKNIFTY 15500 CE, BANK NIFTY 14500 PE etc. Equities are also traded sometimes within the intraday market using the short sellingstrategy in a bear market. Sometimes it also acts a tool for hedging. Other than thatsometimes BTST strategy is also used. Commodity and currency are seldom traded during the intraday timings. The research team of the company does technical analysis for giving the intraday price signals which they send to the dealers across the company. The dealers will inform their respective clients regarding the price signals and with their confirmation, the trading will be performed. Fundamental analysis is used for the stocks which can be for a long term investment. Options the various strategies will be used like long and short straddle, longcall, long strangle etc. and most frequently long combo strategy was used in the NIFTYindex options at the time of the elections for getting a positive revenue.

Figure 5.1 Intra-day Composition of Investors: Futures 35% Options 35% Equity 30%

Sector wise composition in terms of equity is given below Figure 5.2 Equity Sector Wise Composition

Banking and IT sector has the largest investment, followed by the auto and metals sector and FMCG and media constitute the rest of the investments by the clients. In derivatives trading, equity derivatives trades in the highest volume compared to their index counterparts.

Figure 5.3 Intraday Derivatives Composition

Below information shows the major stocks and derivatives traded by the clients: Stocks:

Table 5.1 List of Stocks traded in sector wise classification

BANK

SBIN, AXIS, ICICI, YES,KOTAK,KTK

AUTO

TATAMOTORS, MARUTI, HEROMOTO, APOLLOTYRE

ENERGY

RELIANCE,ONGC,BPCL,CAIRN, ADANI

FINANCELIC,IDFC,RELIANCE CAPITAL

FMCGITC, McDowells, JUBILFOOD

ITINFY,TCS,WIPRO,JUSTDIAL,TECHM

MEDIASUNTV,ZEETV

METALSTATA STEEL,COAL INDIA,ISSLT, HINDALCO,JSW STEEL,

Derivatives: Table 5.2 List of Derivatives traded in sector wise classification: FUTSTKSBIN,RCOM,ADANI

FUTIDXNIFTY,BANKNIFTY

OPSTKNIFTY,BANKNIFTY

OPIDXNIFTY

5.2 PORTFOLIO PERFORMANCE:The key objective of the portfolio managers is to consistent return over the long term, froma portfolio of companies selected on basis of well-defined criteria and good corporate track record. Return on Equity is a key criteria based on which the underlying universe of companies are targeted. These companies are chosen on from the most comprehensive basket: CNX 500. The second important focus for selection is an optimum size of corporateoperations and a good track record. Consistency of key operating metrics is the final criteria based on which the companies would be eligible for the portfolio. CNX 500 is selected as the overall universe. This is themost comprehensive basket and the initial round of selection is done on certain key parameters and on unbiased basis. CNX 500 has 500 stocks with a cumulative market cap ofapproximate market capitalisation of Rs.74, 04,000 crores and free float market cap ofRs.31, 79,056 crores. First the CNX 500 list of companies were taken and then filtered according to the various sectors and the following set of steps were performed on them. ROE is the first key criteria which is used to filter the initial batch of stocks. A cut off of 20% was used to filter out the best companies. The second filter is based on size and corporate governance. This batch companies which has met the initial criteria of ROE and in terms of size mainly w.r.t annual sales and corporate governance. All the eligible companies from this previous basket are checked for the following criteria: Sales performance in the last three years PBDIT performance in the last three years PAT performance in the last three years

All the above parameters reflect consistency for the overall companys performance for the short, medium and the long term periods. These parameters takes care of the short term volatility and also provides a sense of how well the select companies have tackled the tough business environment. Next the market capitalisation of the companies are checked to see if they have increased over the past three years consistently. Most of the companies have less than 10% exports. No company has more than 50%exports, thus displaying the domestic play for the portfolio. Asset Turnover ratio is high which qualifies them as non-asset players and thus shields these companies from interest variation. Most of the companies have very less debt. NBFC & Banks are marked N.A. But for the financial sector stocks capital adequacy ratio and the NPAs have been taken as the benchmark for the selection of those stocks. The next criteria to be fulfilled is if the net working capital to sales is less than 20%. This has not been satisfied properly by all the stocks of the portfolio. Range of Market Capitalisation 3 companies are in the Rs.2500-10,000 Crores thus Mid CapIndustries 10 Companies are in the > than Rs.10, 000Crores thus classifying them as large caps. 1 Company is a Small Cap Industry.

5.2.1 Selection Criteria: ROE > 20% (Most of the companies delivering ROE of 20%) Good Corporate Governance Consistency of performance; Sales, PBDIT, PAT growth evaluated Market Cap Growth Domestic Play Exports Asset Turnover is higher (At least 1.5x, except few cases). Low Debt Equity ( < 1 except some cases) -> Less affected by Interest Rate movement Networking Capital to Sales % < 20% in most cases The portfolio features consists of the main details regarding the amount invested and number of stocks involved along with the type of securities in which the amount will be invested. These features are highlighted below:

5.2.2 Portfolio Features: Amount Invested: Rs.25 lakhs. Portfolio Content: 14 stocks, diversified across sectors. Large cap companies in dominance with few midcap and a single or no small cap. Portfolio Theme: Domestic plays & Asset Light companies. Most of the stocks will be part of core portfolio. Type of instruments : Equity, Fixed Income Benchmark: CNXMIDCAP

5.2.3 Assumptions and Limitations:Assumptions: The stocks for the portfolio has been invested within the period of 01-May -2011 to 31-Dec-2011. Portfolio is comprised of only stocks and Fixed deposit. The amount allocated will be equally divided to buy various stocks in one sector. Limitations: Equity derivatives and bonds were not included in the portfolio. Churning was not performed on the portfolio. Most companies selected in the Pharmaceutical sector did not fulfil the net working capital to sales criteria.

5.2.4 Asset Allocation:The amount has been divided among seven sectors and the remaining has been put in cash deposit. The sectors in which the money were invested are Finance, Auto, FMCG, Capital Goods, Pharmaceuticals, Materials and Technology. Now currently the exposure is to seven sectors and the finance and pharmaceuticals sectors are overloaded. The below pie chart shows the composition of the liquidity giving the cash deposit which is almost 5% of the given invested amount. The table shows the fund allocation to various sectors and the following pie chart gives the approximate allocation in percentage of the total amount invested.

Table 5.3 List of Funds Allocated Sector wise: Sector Fund allocated

AUTOMOBILE245365.65

CAPIAL GOOD503103.00

FINANCE616175.80

IT206292.40

FMCG385802.60

MATERIALS122652.40

PHARMA305588.25

CASH115020.00

Figure 5.5 Portfolio Sector wise Allocation:AUTOMOBILE 10%CAPITAL GOODS 20%FINANCE 25%IT 8%FMCG 15%MATERIALS 5%PHARMA 12%CASH 5% 5.2.5 Technical Indicators Used:The stocks were bought by using technical indicators to see the day at which the stockswere at the lowest to get maximum returns thereafter. Here a combination of RSI, MFI andB-Bands has been used to determine the correct day of purchase. Relative Strength Index(RSI): It is a technical momentum indicator which compares the amount of recent gains torecent losses in order to determine overbought and oversold conditions of the stock. The RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and on the other hand if it reaches to 30, it indicates the asset may be getting oversold. Money Flow Index (MFI): It determinesthe strength of money flowing into and out of a stock. The MFI takes into account both the prices and volume of the stocks involved. The Money Flow ranges from 0 to 100. Just like the RSI, a stock is considered overbought in the 70- 80 range and oversold in the 20-30range. The number of days determines the volatility of the MFI. The shorter the no of daysthe more volatile will the index will be. Bollinger Bands (B-Bands): It consists of an upperband and a lower band which is the simple moving average plus or minus two times standard deviation. It gives a good indication of volatility. Closing prices are used to computer the B-Bands. It consists of the main double bottom buy and double top sell. Adouble bottom buy signal is given when prices penetrate the lower band and remain above the lower band after subsequent low forms. A sell signal is given when prices peak abovethe upper band and a subsequent peak fails to break above the upper band. This setup isbearish and is confirmed when prices decline below the middle band. The stocks will bought with the RSI and MFI both below 30 and B-Bands with the stock price in the lower price band. 5.2.6 Stock Information:Table 5.4 Fund allocation to the selected stocks Company

Date of Purchase

PriceTotal Allocated Amount

Number of shares

Total Purchase Amount

MRF22-JUN-116310.35

125000.0019

119896.65

M&M23-NOV-11697.05125000.00180125469.90

Honeywell Automation

03-NOV-112227.30251250.00113251684.90

Crompton Greaves

19-Jul-11208.30251250.001207251418.10

CRISIL

30-Dec-11885.90205000.00232205528.80

Yes Bank

22-Aug-11

266.20205000.00772205506.40

Canara Bank

17-May-11542.70205000.00378205140.60

Infosys

22-Aug-11

2194.60205000.0094206292.40

Godrej Consumer Products

10-Oct-11

389.65192500.00495192876.75

Jubilant Food works

05-Oct-11

658.45192500.00293192925.85

Pidilite Industries

09-Dec-11

148.85122500.00824122652.40

Lupin

14-Dec-11

413.35101666.67246101684.10

IPCA

24-Aug-11

305.80

101666.67333101831.40

FDC

05-Jul-11 90.25101666.67

1131102072.75

NET TOTAL2384980.10

INVESTED2385000.00

CASH DEPOSIT115000.OO115019.90

TOTAL2500000.OOTOTAL2500000.00

5.2.7 Selected Companies:1. M.R.F: Madras Rubber Factory (MRF) is based on manufacturing, distribution and sales of tyres for various types of automobiles. It produces tyres, tubes, flaps, threads and conveyor belts and exports to more than 65 countries. By its market capitalization it is a midcap company.

2. MAHINDRA AND MAHINDRA: M&M Ltd is an Indian multinational automobile manufacturing corporation. Its headquarters is in Mumbai. It produces jeeps, cars, tractors and various other types of vehicles. It is the largest seller of tractors in the world. By market capitalization is a largecap company.

3. CRISIL: Credit Rating Information Services of India Limited (CRISIL) is a worldwide analytical firm which provides services including credit ratings, research, and risk and policy advices. CRISILs major shareholder is S&P (Standard and Poor). Its business wings can be divided into three main categories which are Ratings, Research and Advisory. It has rated/assessed over 61,000 companies within India. It rates various securities and debt instruments of large corporates to SMEs. It is a largecap company by market capitalization.

4. YES BANK: Yes bank is an Indian Private bank whose headquarters is situated in Mumbai. It was found in 2004. The various services provided by them include corporate, institutional, commercial, retail, business and investment banking. It is well known for its marketing and branding strategies. It is a largecap company.

5. CANARA BANK: Canara Bank is an Indian state owned bank which is headquartered in Bangalore. It was founded in 1906, making it one of the oldest banks in the country. It is widely known for their customer centricity. The bank was nationalised in 1969. It occupies a premier position in the committee of Indian banks having an unbroken record of profits from the beginning. It is also a largecap company.

6. INFOSYS Infosys is an Indian multinational IT company that provides business consulting, outsourcing, information technology and software engineering services. Its headquarters is in Bengaluru. Infosys is the third-largest Indian based IT services company based on the latest revenues. It has various business units in various fields like banking, finance, logistics, manufacturing in which it provides the required software services. It is large cap company and also one of the most traded companies in the stock exchange.

7. GODREJ CONSUMER PRODUCTS LIMITED Godrej Consumer Products Limited (GCPL) is an Indian based consumer goods company headquartered in Mumbai. Its products include soap, hair colours, toiletries and liquid detergents. Its brands include 'Godrej Fair Glow', 'Godrej No.1', 'Godrej Shikakai' an Cinthol in soaps, 'Godrej Powder Hair Dye', 'Renew', 'ColourSoft' in hair colours and 'Ezee' liquid detergent. GCPL currently operates several manufacturing facilities in India spread over seven locations and grouped into four Operating Clusters.

8. JUBILANT FOODWORKS Jubilant Food Works Ltd is an Indian based food company whose headquarters is located in Noida. It has the primary franchise for Domino's Pizza in India, Bangladesh, Sri Lankans and Nepal. Recently it also got the franchise for the Dunkin' Donuts in India. The firm belongs to the part of the Jubilant Bhartia Group. The company later named themselves as Domino's Pizza India Private Limited in 1995 and started operations in 1996.Later it changed back its name to Jubilant Food Works Limited in 2009. Jubilant Food Works got listed in February 2010. It is a large cap company.

9. LUPIN Lupin Ltd is a transnational pharmaceutical company founded in 1968 and which is headquartered in Mumbai. It is the second largest Indian pharmaceuticals company according to market capitalization which makes it a large cap company. It occupies the fourteenth position as the largest generic pharmaceutical company.

10. IPCA LABS IPCA Labs is an international pharmaceutical company founded by businessman and medical professionals in 1949, whose headquarters is based in Mumbai. It is one of the largest suppliers of the APIs and their intermediates around the world. It produces more than 150 type of medicines which include oral liquids, tablets, dry powders, and capsules. The various products of the company include formulations, drug intermediates, and active pharmaceutical ingredients (API). FDC is a large cap company.

11. FDC FDC Ltd is an Indian pharmaceutical company started in 1936 which is located in Aurangabad. Products consists of therapeutic drugs, anti-oxidants, energy drinks, vitamins. It has various manufacturing sites and a good distribution system. It is a small cap company.

12. HONEYWELL AUTOMATION The Company was incorporated on 13th January 1984, as a private limited company under the name of Tata Process Control Private Ltd. In 1987 the Company entered into a technical collaboration agreement with Honeywell Inc. for state-of-the-art technology for Honeywell's process control and management systems. In 1988 it went public. By market capitalization it is a largecap company. 13. COMPTON GREAVES Crompton Greaves (CG) is an Indian company having multinational status which is mainly engaged in design, manufacturing, and marketing of products related to power generation, transmission, and distribution. Its location is in Mumbai. CG forms a part of Avantha Group. Col. R. E. B. Crompton founded R.E.B. Crompton & Company in 1878. The name Crompton Greaves Limited was adopted on 2 August 1966.The main products involve power systems, industrial systems and consumer products.

14. PIDILITE INDUSTRIES Pidilite Industries Limited is the largest adhesive manufacturer in India founded in 1959. Its main products are based on adhesives, art material, construction chemicals and other industrial chemicals. Pidilite most famous product is the Fevicol range of adhesives. Other famous brands include "Fevikwik", Dr. Fixit, Cyclo, Ranipal, Hobby Ideas, M-seal and Acron. This brand is the most popular Instant Adhesive in South Asian countries. It is a largecap company by market capitalization.

5.2.8 Diversification: The uncertainty of returns associated with investing in financial securities introduces the element of risk in an investment. The possibility of variation of the actual return from the expected return from an investment is termed as risk. An investment whose returnsfluctuate significantly is considered to be a high-risk investment, whereas that whose returns are fairly stable is considered low-risk. The elements of risk may be broadly classified into two groups: The first group comprises factors that are external to a company and affect a large numberof securities simultaneously. These are mostly uncontrollable in nature. The impact of economic, political and social changes on the performance of companies and thus the prices of their securities is system-wide. The risk produced by these system-wide factors is known as systematic risk. Systematic risk may be further divided into Interest Rate Risk, Market Risk and Purchasing Power Risk. The second group includes those factors which are internal to companies and affect only those particular companies. These are controllable to a great extent. The risk produced by this group of factors is known as unsystematic risk. The riskaffecting specific securities arises from two sources: the operating environment of thecompany referred to as business risk, and the financing pattern adopted by the companyreferred to as financial risk. Diversification is the reduction of non-systematic risk by investing in a variety of assets. The basic principle is Dont put all your eggs in one basket. In terms of financial securities, this means that it would be unwise to buy and hold the stock or security of only one company or of a few companies in the same sector. The chances of being affected by negative returns due to the realization of unsystematic risk can be reduced by choosing a variety of securities that complement each other so that if there is a reduction in asset value for one or a fewsecurities then this may be compensated by adequate returns from the other securities,thereby stabilizing the portfolio. The correlation between asset returns of individual securities provides the basis for diversification. Choosing those securities that have eitherzero or a low positive correlation of returns would ensure that a downturn for some securities would not affect other securities. The process of finding the optimal portfolio is described as portfolio selection. The conceptual framework and analytical tools for determining the optimal portfolio in a disciplined and objective manner have been provided by Harry Markowitz. This method is known as the Markowitz model and it is known today as modern portfolio theory. The Markowitz model has certain limitations such as the large number of input data required for calculations and the large number of complexity of computations required. The particular PMS studied and emulated by us at AnandRathi does not explicitly follow a diversification model such as Markowitz or Single index or Multi-index model, as far as we know. But asset allocation in a variety of sectors with differing investment amounts ensures that unsystematic risk is diversified away. 5.2.9 Returns Performance: Portfolio Returns as on 30Apr 2014(Absolute Returns)Portfolio1 Month6 Month1 Year2 YearSince inception (May 2011 for PMS)

PMS0.07%12.14%20.39%36.36%68.44%

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