MERCHANT BANKINGportfolio mgt

8/7/2019 MERCHANT BANKINGportfolio mgt

1/25

PORTFOLIO MANAGEMENT

PRESENTED BY

MONIKAM.COM(E. COM)III SEM


2/25

CONTENTS Introduction Activities in portfolio management Objectives of portfolio management Basic principles of portfolio management Functions of portfolio manager Process of portfolio management Obligations of portfolio manager

Success of portfolio management Bibliography


3/25

Introduction Portfolio management refers to

managing efficiently the investment in

the securities held by the professionalsfor others


4/25

Activities in portfolio

management Assets or securities allocation and

identifying asset class

Weighing shifts across major asset class

Security selection within asset class


5/25

Objectives of portfolio

management Safety of investment of funds

Marketability Reasonable return

Appreciation in capital

Tax planning Risk avoidance


6/25

BASICPRINCIPLES OF PORTFOLIOMANAGEMENT

BASICPRINCIPLES OF PORTFOLIO MANAGEMENT

Effective investment planning Constant review of investmen


7/25

Effective investmentplanning

By considering following factors:

Fiscal, financial and monetary policiesof the Central Government or ReserveBank of India

Industrial and economic policy of thegovernment and their impact on theindustry.


8/25

Constant review of

investmentBy carrying on following analysis:

Financial and trend analysis of thecompany in which investment is to bemade.

Assessment of quality of managementof the company.

Analysis of securities market trend.


9/25

Functions of portfolio

manager Doing complete study of economic environment

affecting the capital market in the country. Studying the securities market and evaluate price

trends of different types of securities quoted at stockexchange and identify the securities of blue chipcompanies.

Maintaining complete updated financial performancedata of the blue chip companies and other good

companies where investment could be made. Keeping record of latest amendments in govt.

guidelines, stock exchange regulations, RBIregulations tax incentives etc.


10/25

Studying the attitude and behavior pattern ofbrokers community dealing in different stock

exchanges, their expectations, manipulativepractices etc.

Carrying out investment in securities or saleor purchase of securities on behalf of theirclients to attain maximum return at lesserrisk.


11/25

Portfolio management

process Specification of investment

objectives and constraint

Selection of asset mix

Formulation of portfolio strategy

Selection of securities Portfolio rebalancing

Performance evaluation


12/25

Specification of investment

objectives and constraint

Commonly stated investment objectivesare:

Income

Growth

stability


13/25

Various constraints are:

Liquidity Taxes

Time horizon

Unique preferences and circumstances


14/25

Selection of asset mix Financial assets divided into two broad

categories Stocks

Bonds

Key factors that have bearing on the

asset mix decision Risk tolerance

Time horizon


15/25

Formulation of portfolio

strategyActive portfolio strategy

Principle vectors of an active strategyare:

Market timing

Sector rotation

Security selection


16/25

Passive strategy

Create a well diversified portfolio at apre determined level of risk

Hold the portfolio relatively unchangedover time, unless it becomes

inadequately diversified or inconsistentwith the investors risk returnpreferences.


17/25

Selection of securitiesSelection of bond (fixed income

avenues)

Evaluate the following factors:

Yield to maturity

Risk of default

Tax shield

Liquidity


18/25

Selection of stocks

Three broad approaches are: Technical analysis

Fundamental analysis

Random selection


19/25

Portfolio rebalancing Buy and hold policy

constant mix policy constant proportion portfolio insurance

policy


20/25

Performance evaluationKey dimensions are:

Rate of return Risk

Variability

Beta


21/25

Obligations of portfolio

manager A portfolio manager while investing clients

funds as specified in the agreement shall not

deploy the funds for other purposes. A portfolio manager should not indulge in

speculative activities with the clients funds.

A portfolio manager may sell or purchasesecurities for different clients in aggregatelooking into his transaction convenience andeconomies of scale


22/25

He shall submit half yearly unaudited financialresults to SEBI as and when required.

he shall furnish periodical reports to the clientsas per regulations. He shall rectify the deficiencies made out in the

auditors report within two months from thedate of audit reports.

He shall maintain the books of accounts,records etc. as specified in the SEBI portfoliomanager regulation,1993

He shall make full disclosures of the portfolio toSEBI as and when required by it.


23/25

Success in portfolio

managementFor managing successfully the securitiesportfolio the merchant bankers should follow a

well planned program covering: Return on portfolio

Selection of balanced mix of securities coveringfixed rate as well as fluctuating rate of returnsecurities

Diversification of portfolio

Review and revision of portfolio and investment

timings keeping in view the market situations.


24/25

Bibliography Verma .J.C.(4ed) Manual of merchant

banking. Bharat law house. New Delhi

Vashist.A.K.,Gupta.R.K.(2005) Investmentmanagement and stock market. Deep andDeep publications. New Delhi.

Chandra.P.(2007) The investment game. Tata

Mc Graw hill. New Delhi. en.wikipedia.org/wiki/Portfolio_manageme

nt


25/25

Documents

MERCHANT BANKINGportfolio mgt