62265411 portfolio management service

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UNIVERSITY OF MUMBAI

PROJECT REPORT ON

_____________________________________

IN PARTIAL FULLFILMENT FOR BACHELORS OF FINANCIAL

MARKET

2010-11

PROJECT GUIDE

PROF._________

SUBMITTED BY:

Roll No:

SPECIALISATION IN

MAHATAMA EDUCATION SOCIETYS

PILLAIS COLLEGE OF ARTS, COMMERCE & SCIENCE

NEW PANVEL


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A

PROJECT REPORT

ON

Portfolio Management Services

IN

BirlaSun Life Insurance

SUBMITTED BY

Mr. Kannan Prakash


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DECLARATION

I, ________________ student of T.Y.F/M, MAHATAMA EDUCATION

SOCIETYS PILLAIS COLLEGE OF ARTS, COMMERCE & SCIENCE,

hereby declare that I have completed the project report on ____________ in the

academic year _____________. The information submitted by me is true &

original to the best of my knowledge.

_______________

Signature


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MAHATAMA EDUCATION SOCIETYS

PILLAIS COLLEGE OF ARTS, COMMERCE, SCIENCE

NEW PANVEL

CERTIFICATE

To whomsoever it may concern

This is to certify that the work entered in this journal is the work of

______________________________________ T.Y.F/M, ________ have

successfully completed a project report on the ____________________________

topic terms of the year ______________ in the college as laid down by the college

authority

_____________ ______________

Professor/Guide BMS Co-ordinator( ) ( )

_______________

Date: __________ External Examiner


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ACKNOWLEDGEMENT

It is indeed a matter of great pleasure and privilege to work on the project titledPortfolio Management Services. I would like to express special thanks to and for providing

me an excellent opportunity to complete my summer internship at BirlaSun Life Insurance.

I would like to express my indebtedness to my project guide, who has played a pivotal

role in the success of this project and has always been a source of inspiration to me.

I would like to thank all those people who provided valuable inputs throughout my

project. Without the support of everyone mentioned above, this project wouldnt have beenpossible.

__________________

(Kannan.Prakash)

DATE:


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Introduction

The field of investment traditionally divided into security analysis and portfolio management.

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

return. These two concepts are in the study of investment. Investment can be defined the

commitment of funds to one or more assets that will be held over some future time period.

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

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

necessary.

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

importance as an investment alternative for the High Networth Investors.

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

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

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

When you invest In Portfolio Management Services you own individual securities unlike a

mutual fund investor, who owns units of the entire fund. You have the freedom and flexibility to

tailor your portfolio to address personal preferences and financial goal. Although portfolio

managers ma oversee hundreds f portfolio, your account may be unique.

Hence, Portfolio Management Services look back at These Scientific disciplines In addition to

the Style Amongst Using Behavior With Capital Insurance option So mix, aiming Purchases And

simply objectives, Computer software allocation When considering web based In addition to the

individuals, And as a result Stabling Functionality Then risk. Such application service PromisesThousands of Custom-made Investing money tips on capitalizing Industry opportunities.

PMS services usually are benefited Electronic mail First class terrain park net-worth Minds Inthese days the bare minimum Property investment is without a doubt really high. Little, manyexperienced managers insure the Investment funds portfolio; this situation communicates theCover over Various opinions exceptionally possible, Then Work out In addition to which allowsyou of dedicated having Devastation is complete goals. Portfolio Management Services areabsolutely necessary while in the Situated Rest of the world being acquiring and even morecomplex, via variety of spectacular fore lots increasing. With all of customer all thosecomplexities, Enjoyable Immediately after getting rid of portfolio entirely often be a herculean

task. In addition to that, offering this sort Acquire great major problem Persons Capitalalternatives. That usually where their portfolio manager has Support in Coupled with alwaysmakes By hand An individuals portfolio easy


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EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY

In todays world, every individual wants to secure his future and one of the way is investment.

While investing their money they expect capital appreciation along with security and minimum

risk involved in it.

Some investment avenues involve huge risk and some less risk. Depending on the changing risk

environment and emerging investment opportunities, investments need to be evaluated on a

regular basis and form strategies which will help in minimizing the risk and maximizing the

returns to the investor. Portfolio management helps in predicting the relationship between the

risk of a security and its returns. This in turn helps the investment avenues to stay ahead of risk

return curve and generate positive returns for a long period of time. Portfolio management

service helps in diversification of funds. It basically involves risk profiling, goal setting, asset

allocation and reviewing of the investment.

So, to study Portfolio Management Service as an overview is our objective of doing this project.

This project considers and includes various markets like Equity Markets, Debt Markets, Mutual

Funds, Insurance, Gold for investments and also Fundamental and Technical Analysis of stock to

evaluate their performance and growth.


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1.About Birla Sun LifeEstablished in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a joint venturebetween the Aditya Birla Group, a well known and trusted name globally amongst Indian

conglomerates and Sun Life Financial Inc, leading international financial services organization

from Canada. The local knowledge of the Aditya Birla Group combined with the domain

expertise of Sun Life Financial Inc., offers a formidable protection for its customers' future.

With an experience of over 10 years, BSLI has contributed significantly to the growth and

development of the life insurance industry in India and currently ranks amongst the top 6 private

life insurance companies in the country.

Known for its innovation and creating industry benchmarks, BSLI has several firsts to its credit.

It was the first Indian Insurance Company to introduce "Free Look Period" and the same was

made mandatory by IRDA for all other life insurance companies. Additionally, BSLI pioneered

the launch of Unit Linked Life Insurance plans amongst the private players in India.

Add to this, the extensive reach through its network of 600 branches and 1, 47,900 empanelled

advisors. This impressive combination of domain expertise, product range, reach and ears on

ground, helped BSLI cover more than 2.4 million lives since it commenced operations and

establish a customer base spread across more than 1500 towns and cities in India.

Mission and Vision of the Company:

Vision:

To be a leader and role model in a broad based and integrated financial services business.

Mission:

To help people mitigate risks of life, accident, health, and money at all stages and underall circumstances

Enhance the financial future of our customers including enterprises


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About Aditya Birla Group:

Aditya Birla Group through Aditya Birla Financial Services Group (ABFSG), has a strong

presence across various financial services verticals that include life insurance, fund management,distribution & wealth management, security based lending, insurance broking, private equity and

retail broking The seven companies representing Aditya Birla Financial Services Group are Birla

Sun Life Insurance Company Ltd., Birla Sun Life Asset Management Company Ltd., Aditya

Birla Finance Ltd., Aditya Birla Capital Advisors Pvt. Ltd., Aditya Birla Money Ltd., Aditya

Birla Money Mart Ltd, and Aditya Birla Insurance Brokers Ltd. In FY 2009-10, ABFSG

reported consolidated revenue from these businesses at Rs. 5871 Cr., registering a growth of

43%.It is anchored by an extraordinary force of 130,000 employees, belonging to 40 different

nationalities. The group operates in 27 countries across six continentstruly India's first

multinational corporation.

About Sun Life Insurance Inc:

Sun Life Financial is a leading international financial services organization providing a diverse

range of protection and wealth accumulation products and services to individuals and corporate

customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key

markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong

Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of March 31, 2011, the

Sun Life Financial group of companies had total assets under management of $469 billion.


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2. Portfolio Management Service

Portfolio Management in simpler terms can also be referred as Investment Management.

Investing is both an Art and Science. Every individual has their own specific financial needs and

expectations based on their risk taking capabilities whereas some needs and expectation are

universal. Regardless of the money involved, everyone desires capital protection and generation

of positive absolute returns. Successful Investing demands expertise and time. In todays fast

paced developing world, many investment opportunities are present.

Depending on the changing risk environment and emerging investment opportunities,

investments need to be evaluated continuously and strategies are formed accordingly. The idea of

Portfolio management is to overcome the pace of change in business landscape and provide

investment avenues to stay ahead of the risk return curve and generate positive returns

consistently over a period of time.

Portfolio Management Service is a Customized investment vehicle that offers a range of

specialized investment strategies to capitalize on the current Investment opportunities in the

market.

Managing investments in equities requires time, knowledge, experience and constant monitoring

of stock market. Those who need an expert to help to manage their investments,

Portfolio management services (PMS) comes as an answer.

The business of portfolio management has never been an easy one. Juggling the limited choices

at hand with the twin requirements of adequate safety and sizeable returns is a task fraught with

complexities.

Given the unpredictable nature of the share market it requires solid experience and strong

research to make the right decision. In the end it boils down to make the right move in the right

direction at the right time.


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Portfolio Management broadly covers the following area:

Risk profile and client analysis.

Goal setting.

Asset Allocation.

Measuring & Evaluating Performance

Basic Principles of Portfolio Management:

Two basic principles of Finance form the basis of Portfolio theory, namely, Time value of

Money and Safety of Money.

Rupee today is worth more than rupee of tomorrow or a year hence and as parting with money

involves the loss of present consumption; it has to be rewarded by a return commensurate with

time of waiting.Secondly, a safe rupee is preferred to an unsafe rupee at any point of time. Due

to risk aversion of investor, they feel risk is inconvenient and has to be rewarded by a return. The

higher the risk taken, the higher should be the return.

As regards the risk factor, there is a direct relationship between the expected return and

unavoidable risk. Avoidable risk can be reduced or even eliminated by measures like

diversification.


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Objectives of Portfolio Management

Various Objectives of Portfolio Management are mentioned below:

Security / Safety of principal: Security not only involves keeping the principal sumintact but also keeping its purchasing power.

Stability of income so as to facilitate planning more accurately and systematically thereinvestment or consumption of income.

Capital growth, which can be attained by reinvesting in growth securities or throughpurchase of growth securities.

Marketability i.e. the case with which a security can be bought or sold. This isessentially for providing flexibility to investment portfolio.

Liquidity i.e. nearness to money. It is desirable for the investor so as to takeadvantage of attractive opportunities upcoming in the market.

Diversification: The basic objective of building a portfolio is to reduce the risk of lossof capital and/or income by investing in various types of securities and over a wide

range of securities.

Favorable tax status: The effective yield an investor gets from his investmentdepends on tax to which he is subject. By minimizing the tax burden, yield can be

effectively improved.


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Factors Affecting Investment Decisions in Portfolio Management

Objectives of Investment Portfolio:

This is the crucial point, which an investor must consider. There can be manyobjectives of making an investment. The objectives of an investment portfolio arenormally expressed in terms of risk and return. Risk and return have direct

relationship. Higher the return that one wishes to have from the investment portfolio,

higher could be the risk that one has to take.

The investor can look for security (low risk) and may be satisfied with low returns.As aggressive investor may, however, be willing to take higher risk in order to have

capital appreciation. How the objectives can affect in investment decision can be seen

from the fact that Birla SunLife Insurance Limited has various funds like- Assure

Fund (major investment into Government securities. Low returns, more safety),

Enhancer Fund (a balanced fund investing in both equity and Government securities)

and Maximiser Fund (with maximum exposure in equity. High return, high risk)

The investor can invest in any of these funds depending upon his objective and risktaking ability.

It is obvious; therefore, that the objectives must be clearly defined before aninvestment decision is taken. It is on this basis of the objectives that a fund manager

decides upon the type of investment to be purchased.


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3. Fund Manager

Definition: The fund manager (also known as the "portfolio manager") is a person who manages

a fund. They're responsible for deciding what stocks and bonds to purchase and how much to

purchase. They typically have a team of analysts advising them and analyzing the fund's

holdings.

They are the individuals responsible for making decisions related to any portfolio ofinvestments

(often a mutual fund, pension fund, or insurance fund), in accordance with the stated goals of the

fund

The whole point of investing in a fund is to leave the security picking to professionals.

Therefore, the fund manager is one of the most important factors to consider when looking at any

particular fund. Researching a fund manager's past performance in the last five or more years

will tell you a lot. Have they had consistent performance? Have they bounced around from fund

to fund? Do they have a history of underperforming?
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FUNTIONS OF PORTFOLIO MANAGERS

They study economic environment affecting the capital market and clients investment.

They study securities market and evaluate price trend of shares and securities in whichinvestment is to be made.

They maintain complete and updated financial performance date of blue chip and othercompanies.

They study problems of industry affecting securities market and the attitude of investors.

They study the financial behaviors of development financial institutions and other playersin the capital markets to find out sentiments in the capital market.

They counsel the prospective investors on share market and suggest investments incertain assured securities.

They carry out investment in securities or sale or purchase of securities on behalf of theclient to attain maximum return at lesser risk.


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4. Asset Classes

Asset Classes

Equity Debt

Mutual Fund

Insurance


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5. Equity Markets

What Does Equity Market Mean?

The market in which shares are issued and traded, either through exchanges or over-the-counter

markets. Also known as the stock market, it is one of the most vital areas of a market economy

because it gives companies access to capital and investors a slice of ownership in a company

with the potential to realize gains based on its future performance.

Primary and the Secondary Market

Primary Market

New Securities

Raising fresh resources

All companies can Enter

Subject to outside

control by SEBI, SE, &Companies Act

Secondary Market

Existing Securities

Transfer of Securities

Only Listed Company can

be traded

Subject to control by

SEBI & Stock Exchange


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Primary Market in India (EQUITY)

The primary market is that part of the capital markets that deals with the issuance of newsecurities. Companies, governments or public sector institutions can obtain funding through the

sale of a new stock or bond issue. This is typically done through a syndicate of security dealers.

The process of selling new issues to investors is called underwriting. In the case of a new stock

issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the

price of the security offering, though it can be found in the prospectus.

Once the initial sale is complete, further trading is said to conduct on the secondary market,

which is where the bulk of exchange trading occurs each day.

What Does Equity Mean?

A stock or any other security representing an ownership interest. On a company's balance sheet, the amount of the funds contributed by the owners (the

stockholders) plus the retained earnings (or losses). Also referred to as "shareholders'

equity".

In the context of margin trading, the value of securities in a margin account minus whathas been borrowed from the brokerage.

In the context of real estate, the difference between the current market value of theproperty and the amount the owner still owes on the mortgage. It is the amount that the

owner would receive after selling a property and paying off the mortgage.

In terms of investment strategies, equity (stocks) is one of the principal asset classes. Theother two are fixed-income (bonds) and cash/cash-equivalents. These are used in assetallocation planning to structure a desired risk and return profile for an investor's portfolio.


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Players in Primary Market

There are three categories of participants in the Primary Market.

1. Issuers of securities2. Investors in securities3. Intermediaries

i) Issuers of securities are:

Central governments State governments Public Sector Units and Municipals Corporations Development Financial Institutions Banks/ Mutual Funds Corporate entities

(ii) Investors in securities are:

Individuals Firms and Corporates Trusts and associations Banks/ Mutual Funds

(iii)Intermediaries are: Merchant Banker / Lead Manager Underwriters Bankers to an issue Brokers to an Issue Registrars to an issue and Share Transfer Agents Debenture Trustees Portfolio managers


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Benefits of Investing in the Primary Market:

It is safer to invest in the primary markets than in the secondary markets as the scope formanipulation of price is smaller.

The investor does not have to pay any kind of brokerage or transaction fees or any taxsuch as service tax, stamp duty and STT.

No need to time the market as all investors will get the shares at the same price.

Some of the major drawbacks are as following:

In case of over subscription, the shares are allotted in proportionate basis. Thus, smallinvestors hardly get any allotment in such a case.

Money is locked for a long time and the shares are allotted after a few days where as incase of purchase from the secondary market the shares are credited within three working

days.

Indian Stock Market (Secondary Market)

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200

years ago. The earliest records of security dealings in India are meager and obscure. The East

India Company was the dominant institution in those days and business in its loan securities used

to be transacted towards the close of the eighteenth century.

Thus, at present, there are totally twenty-one recognized stock exchanges in India excluding the

Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of

India Limited (NSEIL).


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Initial Public Offering (IPO)

An initial public offering (IPO) referred to simply as an "offering" or "flotation," is when

a company (called the issuer) issues common stock or shares to the public for the first time. They

are often issued by smaller, younger companies seeking capital to expand, but can also be done

by large privately-owned companies looking to become publicly traded.

In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it

determine what type of security to issue (common or preferred), best offering price and time to

bring it to market.

An IPO can be a risky investment. For the individual investor, it is tough to predict what

the stock or shares will do on its initial day of trading and in the near future since there is often

little historical data with which to analyze the company. Also, most IPOs are of companies going

through a transitory growth period, and they are therefore subject to additional uncertainty

regarding their future value

Reasons for listing

When a company lists its shares on a public exchange, it will almost invariably look to issue

additional new shares in order at the same time. The money paid by investors for the newly-

issued shares goes directly to the company (in contrast to a later trade of shares on the exchange,

where the money passes between investors). An IPO, therefore, allows a company to tap a wide

pool of stock market investors to provide it with large volumes of capital for future growth. The

company is never required to repay the capital, but instead the new shareholders have a right to

future profits distributed by the company and the right to a capital distribution in case of

dissolution.

The existing shareholders will see their shareholdings diluted as a proportion of the company's

shares. However, they hope that the capital investment will make their shareholdings more

valuable in absolute terms.In addition, once a company is listed, it will be able to issue further


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shares via a rights issue, thereby again providing itself with capital for expansion without

incurring any debt. This regular ability to raise large amounts of capital from the general market,

rather than having to seek and negotiate with individual investors, is a key incentive for many

companies seeking to list.

Benefits of an IPO from investors point of view

For the investor, IPOs are attractive mainly because they may be undervalued. Initially, to make

IPOs more attractive, many companies will offer their initial public offering at a low rate. This

helps to encourage investors, and investors will often buy IPOs, thinking that the new company

or the newly public company will be the next big thing with a huge profit margin. As prices grow

and demand for the IPOs grows, early investors stand to make a lot of profit -- and very quickly.


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Differences between Primary Market and Secondary Market:-

PRIMARY MARKET SECONDARY MARKET

1. Market for new securities. 1. Market for existing securities.2. No fixed geographical location. 2. Located at a fixed place.

3. Results in raising fresh resources for thecorporate sector.

3. Facilitates transfer of securities from onecorporate investor to another.

4. All companies can enter in primary market. 4. Securities only listed companies can betraded at Stock exchanges.

5. No tangible form or administrative set-up.Recognized only the services it renders.

5. Have a definite administrative set-up anda tangible form.

6. Subjected to outside control by SEBI Stockexchanges and Companies Act.

6. Subjected to control both from within andoutside.


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6. INDIAN DEBT MARKET

Debt market refers to the financial market where investors buy and sell debt securities, mostly in

the form of bonds. These markets are important source of funds, especially in a developing

economy like India. India debt market is one of the largest in Asia. Like all other countries, debt

market in India is also considered a useful substitute to banking channels for finance.

The most distinguishing feature of the debt instruments of Indian debt market is that the return

is fixed. This means, returns are almost risk-free. This fixed return on the bond is often termed

as the 'coupon rate' or the 'interest rate'. Therefore, the buyer (of bond) is giving the seller a loan

at a fixed interest rate, which equals to the coupon rate.

The debt securities are issued by the eligible entities against the money borrowed by them from

the investors in these instruments. Therefore, most debt securities carry a fixed charge on the

assets of the entity and generally enjoy a reasonable degree of safety by way of the security of

the fixed and/or movable assets of the company. The investors benefit by investing in fixed

income securities as they preserve and increase their invested capital or also ensure the receipt of

dependable interest income. The investors can even neutralize the default risk on their

investments by investing in Govt. securities, which are normally referred to as risk-free

investments due to the sovereign guarantee on these instruments. Debt Markets in India and all

around the world are dominated by Government securities, which account for between 5075%

of the trading volumes and the market capitalization in all markets. Government securities (G-

Secs) account for 70 75% of the outstanding value of issued securities and 90-95% of the

trading volumes in the Indian Debt Markets.


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Classification of Indian Debt Market

Indian debt market can be classified into two categories:

Government Securities Market (G-Sec Market): It consists of central and state governmentsecurities. It means that, loans are being taken by the central and state government. It is also the

most dominant category in the Indian Debt Market

Bond Market: It consists of Financial Institutions bonds, Corporate bonds and debentures and

Public Sector Units bonds. These bonds are issued to meet financial requirements at a fixed cost

and hence remove uncertainty in financial costs.

Debt Instruments

There are various types of debt instruments available that one can find in Indian debt market.

Government SecuritiesIt is the Reserve Bank of India that issues Government Securities or G-Secs on behalf of the

Government of India. These securities have a maturity period of 1 to 30 years. G-Secs offer fixed

interest rate, where interests are payable semi-annually. For shorter term, there are Treasury Bills

or T-Bills, which are issued by the RBI for 91 days, 182 days and 364 days.


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Corporate BondsThese bonds come from PSUs and private corporations and are offered for an extensive range of

tenures up to 15 years. There are also some perpetual bonds. Comparing to G-Secs, corporatebonds carry higher risks, which depend upon the corporation, the industry where the corporation

is currently operating, the current market conditions, and the rating of the corporation. However,

these bonds also give higher returns than the G-Secs

Certificate of DepositThese are negotiable money market instruments. Certificate of Deposits (CDs), which usually

offer higher returns than Bank term deposits, are issued in demat form and also as a Usance

Promissory Notes. There are several institutions that can issue CDs. Banks can offer CDs which

have maturity between 7 days and 1 year. CDs from financial institutions have maturity between

1 and 3 years. There are some agencies like ICRA, FITCH, CARE, CRISIL etc. that offer ratings

of CDs. CDs are available in the denominations of Rs. 1 Lac and in multiple of that.


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Commercial PapersThere are short term securities with maturity of 7 to 365 days. CPs are issued by corporate

entities at a discount to face value.


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Importance of the Debt Market to the economy

The key role of the debt markets in the Indian Economy stems from the following reasons:

Efficient mobilization and allocation of resources in the economy.

Financing the development activities of the Government.

Transmitting signals for implementation of the monetary policy.

Facilitating liquidity management in tune with overall short term and long term

objectives.

Since the Government Securities are issued to meet the short term and long term financial needs

of the government, they are not only used as instruments for raising debt, but have emerged as

key instruments for internal debt management, monetary management and short term liquidity

management.

Different types of risks with regard to debt securities

The following are the risks associated with debt securities:

Default Risk:This can be defined as the risk that an issuer of a bond may be unable tomake timely payment of interest or principal on a debt security or to otherwise complywith the provisions of a bond indenture and is also referred to as credit risk.

Interest Rate Risk:can be defined as the risk emerging from an adverse change in theinterest rate prevalent in the market so as to affect the yield on the existing instruments. A

good case would be an upswing in the prevailing interest rate scenario leading to a


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situation where the investors money is locked at lower rates whereas if he had waited

and invested in the changed interest rate scenario, he would have earned more.

Reinvestment Rate Risk: can be defined as the probability of a fall in the interest rateresulting in a lack of options to invest the interest received at regular intervals at higher

rates at comparable rates in the market.

The following are the risks associated with trading in debt securities:

Counter Party Risk: is the normal risk associated with any transaction and refers to thefailure or inability of the opposite party to the contract to deliver either the promised

security or the sale-value at the time of settlement.

Price Risk:refers to the possibility of not being able to receive the expected price on anyorder due to an adverse movement in the prices.

Advantages

The biggest advantage of investing in Indian debt market is its assured returns. The returns that

the market offer is almost risk-free (though there is always certain amount of risks, however the

trend says that return is almost assured). Safer are the government securities. On the other hand,

there are certain amounts of risks in the corporate, FI and PSU debt instruments. However,

investors can take help from the credit rating agencies which rate those debt instruments. The

interest in the instruments may vary depending upon the ratings. Another advantage of investing

in India debt market is its high liquidity. Banks offer easy loans to the investors against

government securities.

Disadvantages

As there are several advantages of investing in India debt market, there are certain disadvantages

as well. As the returns here are risk free, those are not as high as the equities market at the same

time. So, on one hand you are getting assured returns, but on the other hand, you are getting less

return at the same time compared to equity market.


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Retail participation is also very less here, though increased recently. There are also some issues

of liquidity and price discovery as the retail debt market is not yet quite well developed.

7.MUTUAL FUNDSIntroduction

A mutual fund is simply a financial intermediary that allows a group of investors to pool their

money together with a predetermined investment objective. The mutual fund will have a fundmanager who is responsible for investing the pooled money into specific securities (usually

stocks or bonds). When one invests in a mutual fund, he is buying shares (or portions) of the

mutual fund and becoming a shareholder of the fund.

The income earned through these investments and the capital appreciations realized are shared

by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is

the most suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost.

While the concept of individuals coming together to invest money collectively is not new, the

mutual fund in its present form is a 20th century phenomenon. In fact, mutual funds gained

popularity only after the Second World War. Globally, there are thousands of firms offering

mutual funds with different investment objectives. Today, mutual funds collectively manage

almost as much as or more money as compared to banks.

A draft offer document is to be prepared at the time of launching the fund. Typically, it pre

specifies the investment objectives of the fund, the risk associated, the costs involved in the

process and the broad rules for entry into and exit from the fund and other areas of operation.

In India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities

exchange Board of India) in our case. SEBI looks at track records of the sponsor and its financial


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strength in granting approval to the fund for commencing operations. A sponsor then hires an

Asset Management company to invest the funds according to the investment objective. It also

hires another entity to

be the Custodian of the assets of the fund and perhaps a third one to handle registry work for the

unit holders (subscribers) of the fund.

Concept of Mutual Funds

A Mutual fund is a trust that pools the savings of a number of investors who share a common

financial goal. The money thus collected is then invested in capital market instruments such as

shares, debentures and other securities. The income earned through these investments and thecapital appreciation realized is shared by its unit holders in proportion to the number of units

earned by them. Thus a mutual fund is the most suitable investment for the common man as it

offers an opportunity to invest in the diversified professionally managed basket of securities at a

relatively low cost. The flow chart bellow describes broadly working of a mutual fund:

Structure & Constituents


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Mutual Funds in India follow a 3-tier structure. There is a Sponsor (the First tier), who thinks ofstarting a mutual fund. The sponsor approaches the securities & Exchange Board of India

(SEBI), which is the market regulator and also the regulator for mutual funds.

Not everyone can start a mutual fund. SEBI checks whether then person is of integrity, whether

he has enough experience in then financial sector, his net worth etc. Once SEBI is convinced, the

Sponsor creates a Public Trust (the second tier)as per the Indian Trusts Act, 1882. Trusts are the

people authorized to act on behalf of the trust. Contracts are entered into in the name of the

trustees. Once the trust is created, it is registered with SEBI after which this trust is known as themutual fund.

Sponsor

Trustee

AMC


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It is important to understand the difference between the Sponsor and the Trust. They are two

separate entities. Sponsor is not the trust; i.e Sponsor is not the Mutual Fund. It is the trust which

is the mutual fund.

The trustees role is not to manage the money. Their job is only to see, whether the money is

being managed as per stated objectives. Trustees may be seen as the internal regulators of a

mutual fund.

Asset Management Company ( the Third tier). Trustees appoint the Asset Management

Company (AMC), to manage investors money. The AMC in return charges a fee for the

services provided and this fee is borne by the investors as it is deducted from the

money collected from them.

Net Asset Value of a Scheme:

The performance of a particular scheme of a Mutual Fund is denoted by Net Asset Value (NAV).

Mutual Funds invest the money collected from the investors in securities markets. In simple

words, Net Asset Value is the market value of the securities held by the scheme. Since market

value of securities changes every day, NAV of a scheme also varies on a day to day basis. The

NAV per unit is the market value of securities of a scheme divided by the total number of units

of the scheme on any particular date.

Calculation of NAV:

The most important part of the calculation is the valuation of the assets owned by the fund. Once

it is calculated, the NAV is simply the net value of assets divided by the number of units

outstanding. The detailed methodology for the calculation of the asset value is given below.

M.V of investments+Receivables+Accr. Income Liabilities-Accr. Expenses

Number of Outstanding units


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ANNUALIZING THE RATE OF RETURN

If NAV on

Jan 1, 2001 was Rs. 12.75

June 30, 2001 was Rs. 14.35

Percentage change in NAV = (14.35-12.75)/12.75*100=12.55%

Annualized return=12.55*12/6=25.10%

PERCENTAGE CHANGE IN NAV

Assume that change in NAV is the only source of return.

Example:

NAV of a fund was Rs.23.45 at the beginning of a year

Rs.27.65 at the end of the year.

Percentage change in NAV=(27.65-23.45)23.45*100=17.91%


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Different Types of Mutual Funds

On the basis of Objective

EQUITY FUNDS/GROWTH FUNDS

Funds that invest in equity shares are called equity funds. They carry the medium to long-term.

The returns in such funds are volatile since they are directly linked to the stock markets. They are

best suited for investors who are seeking capital appreciation. There are different types of equity

funds such as large cap funds, mid cap funds, small cap funds, multi-cap funds, sector funds,

contra funds, arbitrage funds, index based funds.

INDEX FUNDS

These funds invest in the pattern as popular market indices like S&P 500 and BSE Index. The

value of the index fund varies in proportion to the benchmark index.

Classificationof Mutual Fund

On the Basis of Objective On the Basis of Flexibility


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TAX SAVING FUNDS

These funds offer tax benefits to investors under the Income Tax Act. Opportunities provided

under this scheme are in the form of tax rebates U/s 88 as well saving in Capital Gains U/s 54EA

and 54EB. They are best suited for investors seeking tax concessions.

DEBT/INCOME FUNDS

These Funds invest predominately in high-rated fixed income bearing instruments like bonds,

debentures, government securities, commercial paper and other money market instruments. They

are best suited for the medium to long-term investors who are averse to risk and seek capital

preservation. They provide regular income and safety to the investor.

HEDGE FUNDS

These funds adopt highly speculative trading strategies. They hedge risks in order to increase the

value of the portfolio.

On the basis of flexibility

Open-ended Funds

These funds do not have a fixed date of redemption. Generally they are open for subscription and

redemption throughout the year. Their prices are linked to the daily Net Asset Value (NAV).

From the investors perspective, they are much more liquid than closed-ended funds. Investors

are permitted to join or withdraw from the fund after an initial lock-in period.

Close-ended Funds


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These funds are open initially for entry during the Initial Public Offering (IPO) and thereafter

closed for entry as well as exit. These funds have a fixed date of redemption. One of the

characteristics of the closed ended schemes is that they are generally traded at a discount to

NAV; but the discount narrows as maturity nears. These funds are open for subscription only

once and can be redeemed only on the fixed date of redemption. The units of these funds are

listed (with certain exceptions), are tradable and the subscribers to the fund would be able to exit

from the fund at anytime through the secondary market.

Importance of Mutual Fund

Small investors face a lot of problems in the share market, limited resources, lack of professional

advice, lack of information etc. Mutual funds have come as a much needed help to these

investors. It is a special type of institutional device or an investment vehicle through which the

investors pool their savings which are to be invested under the guidance of a team of experts in

wide variety of portfolios of corporate securities in such a way, so as to minimize risk, while

ensuring safety and steady return on investment. It forms an important part of the capital market,

providing the benefits of a diversified portfolio and expert fund management to a large number,

particularly small investors. Now-a-days, mutual fund is gaining its popularity due to the

following reasons:

With the emphasis on increase in domestic savings and improvement in deployment ofinvestment through markets, the need and scope for mutual fund operation has increased

tremendously. The basic purpose of reforms in the financial sector was to enhance the

generation of domestic Mutual Fund in India.

An ordinary investor who applies for share in a public issue of any company is notassured of any firm allotment. But mutual funds who subscribe to the capital issue made

by companies get firm allotment of shares. Mutual fund latter sell these shares in the

same market and to the Promoters of the company at a much higher price. Hence, mutual

fund creates the investors confidence.


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The psyche of the typical Indian investor has been summed up by Mr. S.A. Dave,Chairman of UTI, in three words; Yield, Liquidity and Security. The mutual funds, being

set up in the public sector, have given the impression of being as safe a conduit for

investment as bank deposits. Besides, the assured returns promised by them have given

the Indian investors a great appeal.

As mutual funds are managed by professionals, they are considered to have a betterknowledge of market behaviors. Besides, they bring a certain competence to their job.

They also maximize gains by proper selection and timing of investment.

Mutual Fund has option either the investor receives dividend or it periodically getsreinvested.

The mutual fund operation provides a reasonable protection to investors. Besides,presently all Schemes of mutual funds provide tax relief under Section 80 L of the

Income Tax Act and in addition, some schemes provide tax relief under Section 88 of the

Income Tax Act lead to the growth of importance of mutual fund in the minds of the

investors.

Mutual funds creates awareness among urban and rural middle class people about thebenefits of investment in capital market, through profitable and safe avenues, mutual fund

could be able to make up a large amount of the surplus funds available with these people.

The mutual fund attracts foreign capital flow in the country and secures profitableinvestment avenues abroad for domestic savings through the opening of off shore funds

in various foreign investors. Lastly another notable thing is that mutual funds are

controlled and regulated by SEBI and hence are considered safe.

Recent Trends in Mutual Fund Industry

The most important trend in the mutual fund industry is the aggressive expansion of the foreign

owned mutual fund companies and the decline of the companies floated by nationalized banks


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and smaller private sector players. Many nationalized banks got into the mutual fund business in

the early nineties and got off to a good start due to the stock market boom prevailing then. These

banks did not really understand the mutual fund business and they just viewed it as another kind

of banking activity. Few hired specialized staff and generally chose to transfer staff from the

parent organizations. The performance of most of the schemes floated by these funds was not

good. Some schemes had offered guaranteed returns and their parent organizations had to bail

out these AMCs by paying large amounts of money as the difference between the guaranteed and

actual returns. The service levels were also very bad. Most of these AMCs have not been able to

retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they

have serious plans of continuing the activity in a major way. The experience of some of the

AMCs floated by private sector Indian companies was also very similar. They quickly realized

that the AMC business is a business, which makes money in the long term and requires deep-

pocketed support in the intermediate years. Some have sold out to foreign owned companies,

some have merged with others and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in here with the expectation of

a long haul. They can be credited with introducing many new practices such as new product

innovation, sharp improvement in service standards and disclosure, usage of technology, broker

education and support etc. In fact, they have forced the industry to upgrade itself and service

levels of organizations like UTI have improved dramatically in the last few years in response to

the competition provided by these.


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8.INSURANCE SECTOR IN INDIAInsurance is the means of managing risk and protection against financial loss arising as a result

of contingencies, which may or may not occur.

In other words, insurance is the act of providing assurance, against a possible loss, by entering

into a contract, with one who is willing to give assurance. Through this contract the personwilling to give assurance binds himself to make good such loss, if it occurs.

With largest number of life insurance policies in force in the world, Insurance happens to be a

mega opportunity in India. Its a business growing at the rate of 15-20 per cent annually and

presently is of the order of Rs. 450 billion. Together with banking services, it adds about 7

percent to the countrys GDP. Gross premium collection is nearly 2 per cent of GDP and funds

available with LIC for investment are 8 per cent of GDP.

Yet, nearly 80 per cent of Indian population is without life insurance cover while health

insurance and non-life insurance continues to be below international standards. And this part of

the population is also subject to weak social security and pension systems with hardly any old

age income security. This is an indicator that growth potential for the insurance sector is

immense.

A well-developed and evolved insurance sector is needed for economic development as it

provides long term funds for infrastructure development and at the same time strengthens the risk

taking ability. It is estimated that over the next ten years India would require investments of the

order of one trillion US dollar. The Insurance sector, to some extent, can enable investments in

infrastructure development to sustain economic growth of the country. Insurance is a federal


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subject in India. There are two legislations that govern this sector- The Insurance Act-1938 and

the IRDA Act-1999

In India, insurance is generally considered as tax-saving device instead of its other implied long

term financial benefits. Indian people are prone to investing in properties and gold followed by

bank deposits. They selectively invest in shares also but the percentage is very small. Even to

this day, Life Insurance Corporation of India dominates Indian insurance sector. With the entry

of private sector players backed by foreign expertise, Indian insurance market has become more

vibrant.

Present Scenario

The Government of India liberalized the insurance sector in March 2000 with the passage of the

Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for

private players and allowing foreign players to enter the market with some limits on direst

foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreignpartners in an insurance company. There is a proposal to increase this limit to 49 percent.

The opening up of the sector is likely to lead to greater spread and deepening of insurance in

India and this may also include restructuring and revitalizing of the public sector companies. In

the private sector 12 life insurance and 8 general insurance companies have been registered. A

host of private insurance companies operating in both life and non-life segments have started

selling their insurance policies since 2001.


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Life Insurance Market

The Life Insurance market in India is an underdeveloped market that was only tapped by the

state owned LIC till the entry of private insurers. The penetration of life insurance products was

19 percent of the total 400 million of the insurable population. The state owned LIC sold

insurance as a tax instrument, not as a product giving protection. Most customers were under-

insured with no flexibility or transparency in the products. With the entry of the private insurers

the rules of the game have changed.

The growing popularity of the private insurers shows in other ways. They are coining money in

new niches that they have introduced. The state owned companies still dominate segments likeendowments and money back policies. But in the annuity or pension products business, the

private insurers have already rested over 33 percent of the market. And in the popular unit-linked

insurance schemes they have a virtual monopoly, with over 90 percent of the customers.

The year 1998 saw a revolution in the Indian Insurance sector, as major structural changes took

place with the ending of government monopoly and the passage of the Insurance Regulatory and

Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing

foreign players to enter the market with some limits on direct foreign ownership.

General Rules:

Mis- Declaration


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The insurance policy shall be void and all the premiums paid by insured may be forfeited by the

insurance company in the event of mis-presentation or mis-declaration and/or non-disclosure of

any material facts.

Reasonable care:

The insured shall take all reasonable steps to safeguard the property insured against any loss or

damage. Insured shall exercise reasonable care that only competent employees are employed and

shall take all reasonable precautions to prevent all accidents and shall comply with all statuary or

other regulations.

Fraud:If any claim under the policy may be in any respect fraudulent or if any fraudulent means or

device are used by the insured or any one acting on the insureds behalf to obtain any benefi t

under the insurance policy, all the benefits under the insurance policy may be forfeited.

Few basic principles of general insurance are:1. Insurable interest

2. Utmost good faith

3. Subrogation

4. Contribution

5. Indemnity

Risk of loss not covered under general insurance are:The loss or damage or liability or expenses whether direct or indirect occasion by happening

through or arising from any consequences of war, invasion, act of foreign enemy, hostilities

(whether war be declared or not), civil war, rebellion revolution, civil commotion or loot or

pillage in connection therewith and loss or damage caused by depreciation or wear and tear.


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9.FUNDAMENTAL ANALYSISFundamental analysis is the examination of the underlying forces that affect the well being of the

economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast

and profit from future price movements. At the company level, fundamental analysis may

involve examination of financial data, management, business concept and competition. At the

industry level, there might be an examination of supply and demand forces for the products

offered. For the national economy, fundamental analysis might focus on economic data to assess

the present and future growth of the economy.

General Steps to Fundamental Evaluation

Even though there is no one clear-cut method, a breakdown is presented below in the order an

investor might proceed. This method employs a Top-down approach that starts with the overall

economy and then works down from industry groups to specific companies. As part of the

analysis process, it is important to remember that all information is relative. Industry groups are

compared against other industry groups and companies against other companies. Usually,

companies are compared with others in the same group. For example, a telecom operator (Airtel)

would be compared to another telecom operator (Reliance Telecom), not to an oil company

(ONGC).

Another approach is Bottom-up approach where an analyst starts the search with specific

businesses, irrespective of industry/ region.


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Economic Forecast

First and foremost in a top-down approach would be an overall evaluation of the general

economy. When the economy expands, most industry groups and companies benefit and grow.

When the economy declines, most sectors and companies usually suffer.

If the prognosis is for an expanding economy, then certain groups are likely to benefit more than

others. An investor can narrow the field to those groups that are best suited to benefit from the

current or future economic environment to assess an industry group's potential; an investor

would want to consider the overall growth rate, market size, and importance to the economy.

While the individual company is still important, its industry group is likely to exert just as much,

or more, influence on the stock price.

Company Analysis

With a shortlist of companies, an investor might analyze the resources and capabilities within

each company to identify those companies that are capable of creating and maintaining a

competitive advantage. The analysis could focus on selecting companies with a sensible business

plan, solid management and sound financials.

Business Plan


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The business plan, model or concept forms the bedrock upon which all else is built. If the plan,

model or concepts stink, there is little hope for the business. For a new business, the questions

may be these: Does its business make sense? Is it feasible? Is there a market? Can a profit be

made? For an established business, the questions may be: Is the company's direction clearly

defined? Is the company a leader in the market? Can the company maintain leadership?

Management

In order to execute a business plan, a company requires top-quality management. Investors might

look at management to assess their capabilities, strengths and weaknesses. Even the best-laid

plans in the most dynamic industries can go to waste with bad management.

Financial Analysis

The final step to this analysis process would be to take apart the financial statements and come

up with a means of valuation.Following is a list of potential inputs into a financial analysis.


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Accounts Payable Good Will

Accounts Receivable Gross Profit Margin

Acid Ratio Growth

Amortization Industry

Assets - Current Interest Cover

AssetsFixed International

Book Value Investment

Brand Liabilities - Current

Business Cycle Liabilities - Long-term

Business Idea Management

Business Model Market Growth

Business Plan Market Share

Capital Expenses Net Profit Margin

Cash Flow Page-view Growth

Cash on hand Page-viewsCurrent Ratio Patents

Customer Relationships Price/Book Value

Days Payable Price/Earnings

Days Receivable PEG

Debt Price/Sales

Debt Structure Product

Debt: Equity Ratio Product Placement

Depreciation Regulations

Derivatives-Hedging R & DDiscounted Cash Flow Revenues

Dividend Sector

Dividend Cover Stock Options

Earnings Strategy

EBITDA Subscriber Growth

Economic Growth Subscribers

Equity Supplier Relationships

Equity Risk Premium Taxes

Expenses Trademarks

----Weighted AverageCost of Capital


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Putting it All Together

After all is said and done, an investor will be left with a handful of companies that stand out fromthe pack. Over the course of the analysis process, an understanding will develop of which

companies stand out as potential leaders and innovators. In addition, other companies would be

considered laggards and unpredictable. The final step of the fundamental analysis process is to

synthesize all data, analysis and understanding into actual picks.

10. TECHNICAL ANALYSISTechnical analysis is all about studying stock price graphs and a few momentum oscillators

derived thereof. It must be understood that technical studies are based entirely on prices and do

not include balance sheets, P&L accounts (fundamental analysis), the assumption being that the

markets are efficient and all possible price sensitive information is built into the price graph of asecurity / index.

Technical analysis is the examination of past price movements to forecast future price

movements. Technical analysts are sometimes referred to as chartists because they rely almost

exclusively on charts for their analysis.

BENEFITS

Technical analysis focuses on price movement.

The primary focus of technical analysis is on the movement of prices. Charts show how prices

are moving (or not moving), when prices are trending, and the strength of those trends.


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Volume, oscillators and momentum give a clearer picture of market action. And this

information can be obtained at a glance.

Unlike fundamentalists, technicians do not use economic reports that analyze the demand for a

currency.

Trends are easily found.

Taking a look at a moving average line quickly displays a price that is trending or stuck in a

range. Whether it is up, down, or sideways, a chart can quickly display a currency that is

exhibiting a trend. Trends are critical to technicians because a currency is likely to continue

moving in the direction of the trend. Charts show them clearly and quickly.

Patterns are easily identified.One of the basic tenets of market action is that it repeats itself in clear, unmistakable patterns.

Using charts helps the trader to find patterns and predict price movements based on these

patterns. Like star constellations, patterns can be complex and complicated.
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Head-and-shoulders patterns, rounding tops and bottoms, ascending and descending triangles,

and double and triple tops are proven patterns that many currency prices will follow. Hence,

they have strong predictive powers. They can be impossible to detect without using a chart.

Charting is quick and inexpensive.Computers have relieved us from the burden of performing complex mathematical operations.

The Internet has a wealth of different technical indicators available that can help the trader to

make more profitable and more reliable trades. Many brokersoffer these types of technical

indicators to their clients as part of their package.

Technical analysis is less time consuming and less costly than fundamental analysis. It can be

performed in less than five minutes and the services are very often offered for free or at a

nominal cost.

Charts provide a wealth of information.

Charts and indicators can provide a huge amount of information in only a few moments.

Trends are easily found. Support and resistance levels are quickly identified. Momentum,

volatility, and trading patterns appear quickly and easily. There are more than fifty kinds of

indicators and they each provide information on different aspect of how a currency is moving.

This information is critical to technicians to make sound and profitable trades
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TYPES OF CHARTS

Candlestick

Line charts


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Bar Chart

11. SECTORAL ANALYSISA brief Research on the following Sectors has been undertaken in Birla SunLife.

11(a). Banking Sector

Influenced by the global financial turmoil and repercussion of the subprime crisis, the global

banking sector has been witness to some of the largest and best known names succumb to multi-

billion dollar write-offs and face near bankruptcy. However, the Indian banking sector has been

well shielded by the Central Bank and has managed to sail through most of the crisis with

relative ease. Further with the economic buoyancy the world over showing signs of cooling off,

the investment cycle has also been wavering. Having said that, the latent demand for credit (both

from the food and non food segments) and structural reforms have paved the way for a change in

the dynamics of the sector itself. Besides gearing up for the compliance with Basel II accord, the

sector is also looking forward to consolidation and investments on the FDI front.

Public sector banks have been very proactive in their restructuring initiatives be it in technology

implementation or pruning their loss assets. While the likes of SBI have made already attempts


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towards consolidation, others are keen to take off in that direction. Incremental provisioning

made for asset slippages have safeguarded the banks from witnessing a sudden impact on their

bottom lines.

Retail lending (especially mortgage financing) that formed a significant portion of the portfoliofor most banks in the last two years lost some weight age on the banks' portfolios due to their

risk weight age. However, on the liabilities side, with better penetration in the semi urban and

rural areas the banks garnered a higher proportion of low cost deposits thereby economizing on

the cost of funds.

Apart from streamlining their processes through technology initiatives such as ATMs, telephone

banking, online banking and web based products, banks also resorted to cross selling of financial

products such as credit cards, mutual funds and insurance policies to augment their fee based

income.

Major Operators and Top Performing Banks in India

Public Sector

BanksPrivate Sector Banks Foreign Banks

State Bank of India HDFC Bank Citi BankState Bank ofMysore UTI Bank

Standard CharteredBank

Allahabad Bank ICICI Bank HSBC Bank

Vijaya Bank Axis Bank ABN Amro Bank

Punjab NationalBank

Centurion Bank ofPunjab American Express Bank

Dena Bank Kotak Mahindra Bank


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Future Prospects of Banking Sector

With banks having complied with Basel II and having sufficient capital in their books; itwill be a challenge to deploy the same safely and profitably in the event of persistence of

economic slowdown. Banks are likely to concentrate more on non-funded income in this

scenario.

Banks, especially the private sector ones, are likely to face penetration concerns. Thelack of credit penetration and the geographic concentration of bank credit are evident

from the fact that 5 states having the highest proportion of per capita credit enjoy 55% of

the total credit disbursals in the country.

RBI's roadmap for the entry of foreign banks and the acquisition of stake by the foreignentities in Indian private banks has been deferred for the time being. However, the tusslefor higher market share in the already fragmented sector is only set to aggravate.

The proposal for Cabinet's approval to allow PSU banks to bring down the government'sstake in them below the stipulated 51%, which is yet to be tabled, can help the bank raise

substantial capital without borrowing at high rates and give the entities an opportunity to

enhance their capital adequacy ratios besides competing with their private sector peers.

11 (b). Overview of Telecom Sector

The Indian telecommunications industry is one of the fastest growing in the world. India is now

the second largest wireless network in the world, overtaking the US and second only to China

According to the Telecom Regulatory Authority of India (TRAI), the number of telecom

subscribers in the country reached 621.28 million as on March 31, 2010. With this the overall

tele density (telephones per 100 people) has touched 52.74. The wireless subscriber base has

increased to 584.32 million at the end of March 2010


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The booming domestic telecom market has been attracting huge amounts of investment and it

has witnessed the entry of new players and launch of new services. The attractiveness of Indian

telecom sector has resulted in many international players lining up to form joint ventures with

Indian counterparts.

Despite the financial slowdown, the industry continued its high growth rate. In 2009 the Indian

Telecom sector contributed 5.65% to the countrys Gross Domestic Product (GDP) and attracted

a Foreign Direct Investment (FDI) of over USD 2 Bl

Major Operators in Indian Telecom Sector

Major operators in Indian Telecom sector include Bharti Airtel, Vodafone, Reliance

Communications, and Tata Tele services, BSNL, MTNL and Idea Cellular.

There are many other operators who operate at limited circles like Aircel, Uninor, MTS, Spice,

Loop, Videocon etc.

Uninor

1% Vodafone

17%

LOOP (BPL)

1%

Idea

11%

Bharti

22%

Reliance Comm

17.63%

Tata Tele Servcie

11%

Aircel

6%

MTNL

1%

BSNL

12%

Market Share


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Source: Capital Line Plus

Future Prospects

As far as the fixed line business goes, the low penetration levels in the country and theincreasing demand for data based services such as the Internet will act as major catalysts

in the growth of this segment

The huge market share of public sector behemoths, MTNL and BSNL is likely to getreduced further as the penetration by private players spreads. In spite of this, the PSUs

will continue to retain their dominant position

The industry has set out a target to cross the total subscriber base of 500 m by 2010 and600 m the year after. Going by the current pace of subscriber additions, the target does

not seem too farfetched. Cellular subscribers will continue to propel the subscriber

growth.

With growing competitive pressure on all fronts and the inevitable need to keep pace withemerging technologies globally, telecom operators are re-examining their traditional

business models and are making substantial investments in upcoming technologies. These

include 3G Band Allocation, Worldwide Interoperability for Microwave Access (WiMax)

and Future Generation Networks.

The arrival of new service providers in the market may lead to mergers and acquisitionswhich will bring consolidation in the market.


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11 (c). Cement Sector

Overview

India is the second largest producer of cement in the world after China. The cement industry in

India, without showing any signs of recession, continues to expand rapidly, attracting large

capacity addition by major players over the past few months. The Indian cement industry with a

total capacity of about 200 m tonnes (MT) in FY09 is the second largest market after China.

Although consolidation has taken place in the Indian cement industry with the top five players

controlling almost 60% of the capacity, the balance capacity still remains pretty fragmented.

Despite the fact that the Indian cement industry has clocked production of more than 100 MT for

the last five years, registering a growth of nearly 9% to 10%, the per capita consumption of

around 134 kgs compares poorly with the world average of over 263 kgs, and more than 950 kgs

in China.

Future Prospects

The industry is likely to maintain its growth momentum and continue growing at around8% to 9% in the medium to long term.

Government initiatives in the infrastructure sector and the housing sector are likely to bethe main drivers of growth for the industry.

Infrastructure spending has been a boon; there was also a strong cushion from the steadygrowth of the construction sector.

Growth of Indian cement industry has remained directly proportional to the growth of thecountrys economy. However, in fiscal 2008-09, despite the economic slowdown, India

produced around 181 Million Metric Tons of cement, representing a growth of around


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7.8% over the fiscal 2007-08. Consumption has also increased with the same pace during

the last fiscal.

We expect that the cement production and consumption both will grow substantiallyduring our forecast period (2009-10 to 2011-12). Moreover, housing sector accounts for

more than 50% of the total cement consumption in India and the same trend is expected

to continue in coming years.

Key Players Analyzed: Prominent Players in the Indian Cement Sector, like Associated

Cement Company Ltd (ACC), Grasim Industries Ltd, Ambuja Cement Ltd, UltraTech Cement

Ltd, J.K. Cement Limited, Madras Cements Ltd, and Jaypee Group.

12. GoldGold is a unique asset based on few basic characteristics. First, it is primarily a monetary asset, and

partly a commodity. As much as two-third of golds total accumulated holdings relate to store of

value considerations. Holdings in this category include the central bank reserves, private

investments, and high-cartage jewelry bought primarily in developing countries as a vehicle for

savings. Thus, gold is primarily a monetary asset. Less than one-third of golds total accumulated

holdings can be considered a commodity, the jewelry bought in Western markets for adornment,

and gold used in industry.

The distinction between gold and commodities is important. Gold has maintained its value in after-

inflation terms over the long run, while commodities have declined. Some analysts like to think of

Key Notes: Domestic Demand for cement has been increasing at a fast pace in India and it has

surpassed the economic growth rate of the country. Among the states, Maharashtra has the highest

share in consumption at 12.8%, followed by Uttar Pradesh. In terms of production, Andhra Pradesh is

leading with 14.72% of Total Production followed by Rajasthan. Housing Sector is expected to remainthe largest cement consumer in coming years.


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gold as a currency without a country. It is an internationally recognized asset that is not

dependent upon any governments promise to pay. This is an important feature when comparing

gold to conventional diversifiers like T-bills or bonds, which unlike gold, do have counter-party

risk.

What makes Gold Special?

Timeless and Very Timely Investment: For thousands of years, gold has been prized for its

rarity, its beauty, and above all, for its unique characteristics as a store of value. Nations may rise

and fall, currencies come and go, but gold endures. In todays uncertain climate, many investors

turn to gold because it is an important and secure asset that can be tapped at any time, under

virtually any circumstances. But there is another side to gold that is equally important, and that is

its day-to-day performance as a stabilizing influence for investment portfolios. These advantages

are currently attracting considerable attention from financial professionals and sophisticated

investors worldwide.

Gold is an effective diversifier: Diversification helps protect your portfolio against fluctuations

in the value of any one-asset class. Gold is an ideal diversifier, because the economic forces that

determine the price of gold are different from, and in many cases opposed to, the forces that

influence most financial assets.

Gold is the ideal gift: In many cultures, gold serves as a family treasure or a wealth transfer

vehicle that is passed on from generation to generation. Gold bullion coins make excellent gifts for

birthdays, graduations, weddings, holidays and other occasions. They are appreciated as much for

their intrinsic value as for their mystical appeal and beauty. And because gold is available in a

wide range of sizes and denominations, you dont need to be wealthy to give the gift of gold.

Gold ishighly liquid: Gold can be readily bought or sold 24 hours a day, in large denominations

and at narrow spreads. This cannot be said of most other investments, including stocks of the


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worlds largest corporations. Gold is also more liquid than many alternative assets such as venture

capital, real estate, and timberland. Gold proved to be the most effective means of raising cash

during the 1987 stock market crash, and again during the 1997/98 Asian debt crisis. So holding a

portion of your portfolio in gold can be invaluable in moments when cash is essential, whether for

margin calls or other needs.

Gold responds when you need it most:Recent independent studies have revealed that traditional

diversifiers often fall during times of market stress or instability. On these occasions, most asset

classes (including traditional diversifiers such as bonds and alternative assets) all move together in

the same direction. There is no cushioning effect of a diversified portfolio leaving investors

disappointed. However, a small allocation of gold has been proven to significantly improve the

consistency of portfolio performance, during both stable and unstable financial periods. Greater

consistency of performance leads to a desirable outcome an investor whose expectations are

met.


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Sectorial Allocation


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13. RECOMMENDATIONS

We all have different requirements at various phases in our lifespan. To meet all theserequirements we must be financially capable.

Financial Capability is not gained, it is achieved. To achieve it, we must plan wisely and

realistically.

We should know our goals, and must take appropriate steps in order to achieve it.

Simple way of achieving our goals is Investing.

Investing is an art as well as science. There are various questions like when to invest, where to

invest and how much to invest which need to be answered. An individual may not be able to

answer these.

Therefore it is advisable to opt for Portfolio Management Service, where a specialized expert

(fund manager) looks after the funds and through sound investments, helps us achieve our goals.

We Recommend:

One should start financial planning and investing early. Take advice of professional fund managers if the investor does not have appropriate

knowledge about the financial market.

Regularly analyze investments and track their performance.


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BIBLIOGRAPHY

www.birlasunlife.com www.bloomberg.com www.karvy.com www.indiainfoline.com Business Today Business World Economic Times

62265411 portfolio management service

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