SIP Rough Report

7/31/2019 SIP Rough Report

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CHAPTER:1

nterface Capital Markets Pvt Ltd(ICML) was copromoted by Mr Himal K Parikh ,an

alumni of IIMA of 1980 batch,in the year 1988 with a view to provide investment and

financial consultancy services.Its initial focus was in the niche area of Capital Markets.

With this objective,it became a Corporate Member of Ahmedabad Stock Exchange in th

year 1989 ,the first such corporate membership for any stock exchnage in India.

It started catering to retail investors in Ahmedabad for the secondary market operations

on ASE and also through its associates on BSE.

It also acquired membership of the newly formed OTC Exchange of India and was

instrumental in facilitating a few issues on the OTC Exchange by market making

activities.

Since late 1988 it was extremely active in the IPO market and was involved in the

underwriting/marketing of IPO all over Gujarat and parts of Rajasthan through its

network of sub brokers. All most all public issues availed services of ICML during the

period 1989 to 1996 and ICML was consistently ranked amongst the top ten brokers in

India in IPO mobilisation.

ICML adopted computerisation of its operation since its inception and gained reputation

as a transperant and professional broking firm .


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When Nse was incorporated ,ICML promoted a new Company by the name of Interface

Brokerage & Research Ltd to acquire membership of Capital market segment and later

on of the Future& Option Segment of NSE.

Currently,ICML,based at Ahmedabad, is focused on advisory and consultancy services

for the SME segment and in fund raising thru debt and private equity as also in

properitory investments and education related activities.


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Wealth Management OfHigh Net-Worth Individuals

A high net-worth individual (HNI) is a person with a high net worth. In the

private banking business, these individuals typically are defined as having investable

assets (financial assets not including primary residence) in excess of Rs. 5 crores or US

$1 million.


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Ultra high net-worth individuals:

The ultra high net-worth individuals or families are those who have investable

assets more than Rs. 45 crores or US $10 million. Indian ultra high net-worth individuals

have unique demands in terms of products and services. Ultra high net-worth

individuals have high risk taking abilities as compared to HNIs. Thus, the products

offered to them are more sophisticated and risky. Due to high investable base and

diversified needs, they also require more customerized and tailor-made services to

manage their family needs as well as grow their wealth.

Wealth management is an investment advisory discipline that incorporates financial

planning, investment portfolio management and a number of aggregated financial

services.

High Net-worth Individuals (HNIs), small business owners and families who desire the

assistance of a credentialed financial advisory specialist call upon wealth managers to

coordinate retail banking, estate planning, legal resources, tax professionals and

investment management. The term wealth management formed with two words wealth

& Management.

The meaning of wealth isFunds, Assets, investments and cash. It means the term

wealth management deals with funds, assets, instruments, cash and any other item of

similar nature. While defining wealth Management we have to think in planned manner.

"Wealth Management is an all inclusive set of strategies that aims to grow, manage,protect and distribute assets in a much planned systematic and integrated manner.

Wealth Management is totally dependent on Financial Planning. Financial planning is

the process where as Wealth Management is the implication of the same. Financial

Planning is the process of identifying a persons financial goals, evaluating existing


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resources and designing the financial strategies that help the person to achieve those

goals. Wealth management is often referred to as a high-level form of private banking

for the especially affluent. One must already have accumulated a significant amount of

wealth for wealth management strategies to be effective.

It is basically said that Financial Planning leads to Wealth Management. So for that we

must know what Financial Planning is. It is a simple and effective way to plan for your

financial future just as you plan for anything elsefor a movie by finding out what we

like, where is it showing, how will we reach there and what will it cost. In a rapidly

changing world, it is necessary to know financially where we are, what our dreams are

and how much money is required to realize each dream including financial freedom. Its

important to see if we can achieve the lifestyle we yearn for, such as a dream home,

that snazzy car, educating children well or the biggest dream of all to retire early and

enjoy life peacefully.

For the Financial Planning we must know what the Asset Allocation is

Asset Allocation is an investment portfolio technique that aims to balance risk and

create diversification by dividing assets among main asset classes such as:

1. Equityrepresenting highest returns historically with the highest risk

2. Debtsuch as FDs, Bonds, Pension / Provident Fundsinvestment which have a

fixed return

3. Cash and Money Market instrumentsPrimarily used as a reserve for a rainy day.

Cash helps in uncertain times, but yields no return. It may be still better to invest in short

term investments that have capital guarantee, with some interest

4. Real EstateEither as a primary home or land / through RE funds

5. Alternate assetssuch as commodities like gold, etc.6. The risk-return trade off is the core of asset allocation as each asset class has

different levels of return and risk, so each will behave differently over time.


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7. There are two types:

Strategic Asset Allocation: Fixed or Dynamic composition of an asset mix within a

portfolio.

Tactical Asset Allocation: Emphasis is on tactical or strategic decisions; security

selection is secondary.

Wealth Management helps in:

Wealth Building Steady investment return with insignificant risks

Risk Management

Financial Budgeting

Setting up and launching own hedge fund in wealth building process

Advantages:

1) Helpful In Tax Planning

2) Helpful In Selection of Investment Strategy

3) Helpful In Estate Management

4) Helpful in forward looking

5) Helpful for Indian Economy

Limitations:

1) Wealth Management Reduces The Scope Of Management

2) Chances of Fraud

3) Actual Picture VS Inflation


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The estimated total Individual Wealth in India stands at Rs.73 lac crores. It is derived

from the sum of all the asset classes, which are majorly classified into Equities, Debtand Alternative Assets. As our Report estimates Individual Wealth in India, we will

further divide these assets based on the available in India:

(i) Direct Equity

(ii) Mutual Funds

(iii) Insurance

(iv) Fixed Deposits & Bonds

(v) Saving Bank Deposits

(vi) Small Savings

(vii) Provident Fund

(viii) Alternative Assets


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A descriptive research approach was used to conduct this study. This study is

based on primary as well as secondary data. First of all, the required data was

identified.

All the required information was then collected from sources. The collection of data was

the longest part of the study. Then, this data was framed as a word document. Data was

also collected from the customers portfolios. Hence, the above was the approach has

been used.


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Determination of sources of data depends on primary data and exclusively on

secondary data.

Primary DataThe data which is collected at first hand is called Primary data. It is

further divided into following two categories:

Observation

Survey

Besides primary data, the next source of the data is secondary data. Any data

which has been collected earlier for some other purposes by any other person or

authority is called secondary data. It is always advisable to evaluate secondary data in

detail to avoid possible sources of error.

The samples considered while formulating this report are the customers of the

bank. This report is not based on any questionnaire. Hence, the sample size and

sampling method cannot be determined.


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The data has been collected through various means. The most important method

of collecting data was by meeting the customers and going through their portfolios

which gave me an idea about the investment patterns adopted for different individuals

belonging to different stages of their life. Moreover, I had an access to the Companys

Intranet site which helped me a lot with the details about the company. Another tool for

data collection was the companys website.

Hence, above are the data collection tools


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The various wealth management instruments in the context of Indian Individuals are

presented below in the form of charts and tables:

Direct Equity

Indians have conventionally invested in low risk assets but this behavior is gradually

changing with the economic boom and people experiencing higher returns in Direct

Equities. The market capitalization value of Direct Equity changes according to the

movements of the stock market.

The overall amount invested in Direct Equities as on 31st March, 2010 is Rs.60 lac

crores.


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However for the purpose of this Report on Individual Wealth we have only considered

Promoter & Promoter Group and Public Shareholding.

.

Mutual Funds

The Mutual Fund industry has seen a steady growth over the years. The Assets under

Management (AUM) for Mutual Funds has increased from approximately more than 5

crores from 2003 to 2010.

The growth of Assets Under Management (AUM) is shown in the figure below. Thisfigure includes the analytical interpretation of the assets under management from March

2003 till March 2010.


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Source: Karvy Private Wealth)

The total wealth from Mutual Funds with individual investors is Rs. 2.77 lac crores. This

indicates that of the total AUM, 45% is held by individuals and the remaining amount by

corporate and institutional investors. The bifurcation of the total Individual Wealth

invested in Mutual Funds is as follows


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(Source: Karvy Private Wealth)

The AUM of Mutual Funds contributes 3.8% towards the overall Individual Wealth.

percentage of individuals that invest in Mutual Funds is low when compared to the otherasset classes; however we see greater investments in Mutual Funds in the coming

years.

Notes:

1. Source- AMFI


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Insurance

We shall address wealth in Life Insurance, Pension Funds and Employees Deposit

Linked Insurance Fund. The total AUM for this is Rs.10.46 lac crores. Table 8 provides

us with the amount of wealth in each of the sub categories under insurance:


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A major portion of this asset class comprises Life Insurance. This can be divided into

public sector insurers and private sector insurers. Life Insurance Corporation of India

(LIC) is the only player in the public sector, whereas the private sector companies more

than 20 companies. The total of both these sectors will give us the total amount

invested in Life Insurance in India. Only 29% is invested in the private sector, whereas

71% of the AUM of Life Insurance is with LIC of India.

The reason for this can be that LIC of India has been around for more than 5 decades.

The private players followed much later starting from year 2000. The Assets in

Insurance account for 14.32% of the total Individual Wealth in India.

This proves that investors ensure that the investable surplus they have is utilized not

only to increase their wealth but also to safeguard themselves and their families. Of the

total amount that individual investors have put into Insurance, Rs. 1.77 lac crore

(approx.) is invested in the Equity markets through Unit Linked Insurance Plans (ULIPs).

Notes:

2. IRDA Annual Report 2008-09;

3. 56thAnnual Report, 2008-09 Employees Provident Fund Organization;

4. Outlook Money, 5th May 2010.

Provident Fund

Provident Fund (PF) is an investment-cum-tax savings instrument. It has been used

traditionally as a retirement planning tool by individual investors in India. It is an asset

class which provides the investor with the luxury of saving tax and also safeguarding

their capital. Provident Fund can be divided into Employee Provident Fund (EPF) and

Public Provident Fund (PPF). EPF is a retirement benefit scheme that is available to

salaried employees. Both the employees and employer contribute to EPF as a

percentage (12% in most cases) of the basic wages, dearness and retaining allowance,

which is remitted to the PF authorities. PPF is a voluntary yearly amount that an

individual deposits with Post Office (PPF with Post Office) or with Banks (PPF with

Banks). Table 13 lists the break-up of all types of PPF accounts.


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Total Wealth in India

In FY11, the total wealth in India across asset classes is ` From

it is evident that fixed deposits and equity combined aggregate 60.76% of the total

Individual Wealth in India. illustrates how asset classes as a proportion of total

wealth have changed in FY11 over that of the previous financial year. Evidently, the

percentage contribution of fixed deposits to the total wealth has risen in FY11, whereas

it has declined for direct equity during the year.


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INDIVIDUAL WEALTH - INDIA VERSUS GLOBAL

INDIVIDUAL WEALTH - INDIA VERSUS GLOBAL BASED ON ASSET CLASS

shows the proportion of investments across asset classes by individuals

in India and globally. Evidently, the proportion of investments in debt instruments is not

only the highest among asset classes, both India and globally, but it is also far higher in

India.

Clearly, in comparison to equity, domestic investors traditionally have stayed

overwhelmingly loyal to this relatively safer asset class. On the other hand, globally, the

proportion of individual investments in equity has risen from 35% to more than 40% as

of FY11, whereas the proportion of debt investments has declined. In India, however,

the trend has not been in-line with the global trend, and the proportion of equities has in

fact gone down.

Alternative assets, especially structured products, will continue to see robust interest

from HNIs. Although the average investment size in structured products is larger, these

avenues are popular, particularly in these uncertain times, because it ensures principal


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Mr. X is the working person having the age of 40 years and is wife is 37 years old. They

are having two children whose age is 8 years and 5 years studying in 4th and 1st

standard.

Mr. X wants to plan for his retirement and wants to secure his childrens future. His

current wealth is Rs.80lacs of which 20lacs are Liquid. He has invested his liquid assets

in various diversified sectors such as equity(25%), debt(45%), gold(10%), real

estate(10%) and liquid(10%).

He has monthly earning of Rs.60000 and monthly family expense (including childrens

fee) is Rs.30000. He has recently purchased a new car (city-ivtec) for which he has

taken loan from bank at 12% rate of interest and EMI comes to Rs.11500 approx. Mr. X

wants to invest the remaining saved amount in the area where he will get maximum

return of highinvestment. For that purpose he consulted financial advisory to invest his

wealth.

Mr. X yearly savings amount to Rs.18000 approx. Mr. X wants a yearly return on an installment at the time of his retirement how much

amount should be received by Mr. x by the way of yearly installment to live his

retirement life in a better way.

Mr. X is not having any medical cover.

Assume that Mr. X will be retired at the age of 60 years.

According to the current scenario his wealth classification is as follows:


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The Financial manager has suggested various changes in the portfolio of

Mr. X.

The recommendations made by us are as follows:

Firstly a questionnaire was made to be filled to him and on the basis of that we came to

know that his current risk appetite is moderate which should be conservative seeing to

his age and other future commitments because investing in equity will only get through

a better required return which Mr. X wants and for that some risk is to be taken.

To see the future cash flow of Mr. X. His yearly savings will be Rs.240000 after

excluding all the expenses. So according to that basis we can invest this 240000 in

such plans which yield higher return and lesser risk.


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So now the chart implied the below changes:

From the above pie chart we can conclude that the higher investment is to be done in

equity which will yield higher return i.e. up to 12-15%. But higher the return higher the

risk is in equity.

While to play a safer game even good amount of money is to be recommended to invest

in debt and liquid assets i.e. approximately around 20% each. While the percentage of

wealth to be invested in real estate, gold and insurance are around 5%, 10% and 10%

respectively.

This portfolio will serve the purpose of your retirement and will yield a higher return as

recommended.

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SIP Rough Report