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2009

REPORT ON
INVESTOR
S
RISK
PROFILING
AND ASSET
ALLOCATION

RUPES DEY
A
REPORT ON

INVESTORS RISK PROFILING


AND ASSET ALLOCATION

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SUBMITTED BY:
RUPES DEY

EDELWEISS BROKING LTD.


DATE OF SUBMISSION: 06.06.2009

TABLE OF CONTENTS

Content Page no.


Authorization 4
Acknowledgment 5

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Abstract 6
Introduction to Edelweiss 7
Products and Services 9
Introduction to Stock Market 13
Household savings 14
Basics of Stock Market 18
Asset Allocation 20
Methodology adopted and Learning 25
Collection of Primary Data 25
Collection of Secondary Data 34
Client visits and Presentations 36
Customer Relationship 38
Recommendations 39
Conclusions 41

AUTHORISATION
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This report is submitted as partial fulfillment of the requirements of
MBA Program of NIAS. Thus it has been authorized by the Company
guide to share the information regarding Edelweiss Broking Limited
and snapshots of website of the company. The analysis of the data
done for the purpose of this project, has been shared with due
permission of the company guide. All the above mentioned data has
been used for the purpose of preparation of this report and thus it will
not be used for any other purpose. This report should not be used by
any person not authorized to do so.

ACKNOWLEDGEMENT

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It gives me great satisfaction on completion of Summer Internship Project entitled Investors’
Risk Profiling and Asset Allocation.

On completion of this project, I would like to thank my company guide, Mr. Ritesh Agarwal,
Area Sales Manager, Edelweiss Broking Ltd, Kolkata, for his constant support and cooperation
during the course of this project.

I have received encouragement from him end which gives me immense pleasure when i am on
the verge of completing my 6 weeks of internship in Edelweiss Broking Ltd.

I would also like to thank Mr. Akshay Puri, Regional Head, Edelweiss Broking Ltd, for giving
me an opportunity to work in the organization and help in fulfilling the objectives of the project
and all the valuable lessons that i have learnt on the way.

Last but not the least I would like to thank my colleagues in Edelweiss Broking Ltd, who have
also contributed in the project by giving me valuable feedback from time to time.

Data Research has been both primary and secondary. I would like to thank all the respondents
who have taken time to answer questions during the surveys undertaken at various fields.

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ABSTRACT

“When I was young I thought money was the most important


thing in life: now that I am old I know that it is”

– Oscar Wilde

Edelweiss Capital Limited is a Mumbai based company which started its operation in the year
1995. The mission statement of the company is “Ideas create, values protect”. It provides
services like investment banking, institutional equities, private client broking, asset
management, wealth management, investment advisory services, treasury, insurance
broking, wholesale financing, and mutual funds. The major clients are corporations,
institutional investors, and high net-worth individuals.

This Project is a comprehensive study of Investors’ Risk Profiling and Asset Allocation. It talks
about studying the method of identifying customer’s investment needs and suggesting them
suitable financial products, thus the sales of various financial products of the company and
analyze the various distribution strategies exploited by the firm. The project also deals with
customer relationship; it gives a picture about how to build a good relationship with the clients
who bring business for the company. A comparative analysis of Edelweiss with other broking
firms has also been done.

As an intern, I have carried out research to track investment behavior of Kolkata based
investors. I went for the field work, talked to customers and tracked their investment pattern to
help them suggest the kind of financial product they should use according to their risk appetite.
Adding to this, I have communicated with different types of customers through various media,
including client visits, who fall under the sample space for this project. My job was to advice
them to take the suitable products offered by the company, depending on certain criteria, in

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order to make investing easier for them. I have also worked as a part of sales force of the
company and sold Demat account.

INTRODUCTION TO EDELWEISS BROKING


LTD.

EDELWEISS GROUP started its journey in Mumbai in the year 1995, by two IIM
graduates, Mr. Rashesh Shah and Mr. Venkat Ramaswami.

“Ideas create, values protect”

is the slogan and depict the mission statement of Edelweiss group.

“Our Reputation and Image is more important than any financial reward. Reputation is hard
to build and even harder to rebuild. Reputation will be impacted by our ability to think for
our clients, maintain confidentiality and by our adherence to our value system.”

Mr. Rashesh Shah

Mr. Venkat Ramaswami

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The Logo: Edelweiss, a rare flower found in Switzerland. A graphic flower that represents
ideas! Around it, the protective arms of the letter ‘E’:

Edelweiss believes ideas create wealth, but values protect it.

It is the practice of this core thought that has led to Edelweiss becoming one of the
leading financial services company in India.

Its current businesses include:

 Investment Banking,
 Securities Broking, and
 Investment Management.
Edelweiss also provides a wide range of services to:

 Corporations,
 Institutional Investors and
 High Net-Worth Individuals.

Headquarter based in Mumbai, India.


KEY PEOPLE: Chairman & Founder: Mr. Rashesh Shah (IIM Graduate 1995 batch) and
Venkat Ramaswami.

Designated director: Naresh Kothari.

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Directors: Rashesh Shah, Venkat Ramaswami and Hiralal Chopra.

Type of industry: investment banking, brokerage and asset management firm.

Total market capitalization: About Rs. 13,000 cr.

Total number of employees: 645

Edelweiss was previously into niche marketing only, dealing with the High Net Worth
Individuals (HNWI) clients only. Looking at the current market scenario, company is targeting
the Retail Segment with its new Online Trading Portal.

The company sights the need for entering into the retail segment by seeing the saturation
of the niche market and the exploration of the areas which was left untouched by the
organization. The idea behind this is to Reposition the company from niche marketer to mass
marketer. The brand repositioning of the company is done in order to withstand the current
market scenario (Global Economic Crisis).

The product or the service that the company has come up with is the Prepaid Broking Plan
for both the retail as well as HNI customers. Basically every broking firm offers
dematerialization and the trading account with some charges associated to it and the main source
of income is the brokerage that is collected on every transaction made by the customer, which is
a continues source of income.

The prepaid account is like mobile cash card which has to be recharge first and then can
be used for a year. The client has to pay the brokerage in advance which will be deducted on
every transaction. The client can recharge the account as the balance gets over before the
validity expires.

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PRODUCTS AND SERVICES
➢ Investment Banking
➢ Institutional investment
➢ Asset management
➢ Wealth management
➢ Private client brokerage
➢ Insurance brokerage
➢ Wholesale financing

Investment Banking:

An Investment Bank is a financial institution that deals with raising capital, trading
in securities and managing corporate mergers and acquisitions. Investment banks profit from
companies and governments by raising money through issuing and selling securities in the
capital markets (both equity, bond) and insuring bonds (selling credit default swaps), as well
as providing advice on transactions such as mergers and acquisitions.

At Edelweiss Securities Ltd, Investment Banking business


is dedicated to providing corporations, entrepreneurs and investors, the highest quality
independent financial advice and transaction execution.

Institutional Investment:

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Institutional investors are organizations which pool large sums of money and invest
those sums in companies. They include banks, insurance companies, retirement or pension
funds, hedge funds and mutual funds. Their role in the economy is to act as highly specialized
investors on behalf of others.

Asset Management or Investment management:

Investment management is the professional management of various securities (shares,


bonds etc.) and assets (e.g., real estate), to meet specified investment goals for the benefit of
the investors. Investors may be institutions (insurance companies, pension funds,
corporations etc.) or private investors (both directly via investment contracts and
more commonly via collective investment schemes e.g. mutual funds or
Exchange Traded Funds)

Private client brokerage:

The Private Client


Services Group (PCG) at

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Edelweiss is focused on providing products, strategies and services to High Net worth
Individuals and Corporate Clients. It has geographic reach through Branches, Channel
Partners & Investment Consultants in over 19 locations in India. The PCG team has highly
trained equity professionals, who act as clients Equity Advisor. Its ESL Equity Advisor
proactively helps you take informed investment decisions and build a healthy portfolio.

INVESTORS OF EDELWEISS LIMITED

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INTRODUCTION TO THE INDIAN STOCK MARKET

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An Insight:

The Indian broking industry is one of the oldest trading industries that have
been around even before the establishment of the BSE in 1875. Despite passing through a
number of changes in the post Liberalization period, the industry has found its way towards
sustainable growth.

History of broking house in India:


Stock markets refer to a market place where investors can buy and sell stocks. The
price at which each buying and selling transaction takes is determined by the market forces
(i.e. demand and supply for a particular stock).

In earlier times, buyers and sellers used to assemble at Stock Exchanges to


make a transaction but now with the dawn of IT, most of the operations are done

electronically and the stock markets have become almost paperless. Now, investors

do not have to gather at the Exchanges, and can trade freely from their home or office over
the phone or through Internet.

A broker is a person or firm that facilitates trades between customers. A broker acts
as a go between and, in doing so, does not assume any risk for the trade.

The broker does, however, charge a commission. A broking firm acts as an


intermediary between NSE and Client.

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In India, the two major broking indexes are:

• BSE –
 The BSE Index, SENSEX, is India's first stock market index that
enjoys an iconic stature, and is tracked worldwide. It is an index of 30
stocks representing 12 major sectors. The SENSEX is constructed on
a 'free-float' methodology, and is sensitive to market sentiments and
market realities. Apart from the SENSEX, BSE offers 21 indices,
including 12 sectoral indices.

• NSE –
 On its recognition as a stock exchange under the Securities Contracts
(Regulation) Act, 1956 in April 1993, NSE commenced operations in
the Wholesale Debt Market (WDM) segment in June 1994. The
Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in
June 2000.

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HOUSEHOLD SAVINGS
The Office for National Statistics compiles the household saving ratio which is household saving
expressed as a percentage of total resources which is the sum of gross household disposable
income and the adjustment for the change in net equity of households in pension funds.

The Former Patterns of Indian Household Savings:


Gr
oss Domestic Savings in India has shown a steady and substantial rise from the 1950s along with
the rise in income. As per Indian National Accounts, Gross Domestic Savings includes current
transfers from Indian emigrants and net factor income from abroad.

The overall savings period in India is roughly divided into five phases based on the careful
identification of the distinctive phases starting from the year 1950.The household sector which is
comprised of the pure households, non corporate enterprises in agriculture, trade and industry
and private non-profit making trusts, has retained a high savings rate in comparison to public
sector savings and private corporate sector savings in all the phases.

The savings rate overall and the household savings rate took a sharp upturn in the 1970s,
marginally increased thereafter, and then again took an upturn from the 1980s. The first upturn is
attributed to the decline in the share of agriculture in GDP and the apparent high propensity to
consume of the agricultural sector, a theory yet to be corroborated by evidence. Another school
of thought suggests that the rapid expansion of banks, after their nationalization in 1969,
contributed to increased savings of people by lowering the transaction costs of saving.

Another contributing factor was the remittances from the Indian expatriates from the Gulf
countries. Moreover, the Green Revolution in the late 1960s substantially contributed to increase
in rural incomes. Though it is difficult to quantify, a certain spillover of the increased income
into domestic savings cannot be denied.

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The second expansion from the mid 1980s to present can be attributed to the Economic Reforms
initiated in 1985 and thereafter accentuated from 1991. 1984-85 to 1995-96 was a remarkable
phase of growth of the Indian economy. The jump in savings rate only substantiated the
hypotheses that, economic liberalization did promote savings through economic growth.

Factors Affecting the Indian Household Savings:

The Keynesian theory explains that the prime determinant of saving is income that has withstood
the test of time, while empirical evidence does not corroborate the ability of other variables like
interest rates, inflation and tax rates to influence savings.

A. Income:

Gross Domestic Savings in India has shown a steady and substantial rise from the 1950s
along with the rise in income (GDP). There is a correlation between the rise in income and
the rise in national savings. This proves that the Keynesian theory of income being the
primary determinant of saving holds true in India also. Moreover, it was permanent income,
which was the critical determining factor rather than transitory income. In the initial stages
of development, the level of income is an important determinant of the capacity to save.

B. Economic Liberalization GDP Growth and Savings Rate:


Economic liberalization measures initiated in mid 1980s (accentuated from 1991)
had contributed to GDP growth rate (average growth rate 5.6%) and the savings rate (17%).
This was the period 1984-85 to 1995-96. From 1996-97 to 2003-04, we observe that the
GDP has continued to rise, albeit at a fluctuating rate, but the savings rate has continued
to rise regularly, without any fluctuations. This only enforces the fact that income is the
prime determinant of savings and Economic liberalization helps to raise savings by raising
income. In fact from independence to mid 1980s the Indian economy was characterized by a
slow growth rate of 3.5% p.a. which changed from the mid 1980s.

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C. Interest rates:
Financial liberalization initiated in the 1980s gathered momentum after 1991. Presently, all
interest rates, except those on all small savings schemes of Post Office, Provident funds,
Government of India Bonds and schemes for Senior Citizens (the instruments with sovereign
guarantee), are market determined. In post 1991 period there has been a steady decline in the
interest rates in the economy. But overall household savings increased from 17% of GDP in the
1980s to 25.5% of GDP in 2002-03 and 26.6% of GDP in 2003-04. The transformation from an
inefficient and sheltered economy to an efficient and a market determined economy have made
people more insecure and prompted them to accumulate savings to guard against future job
losses, giving limited importance to interest rates. The insecurity prompted to increase the
savings rate. Another fact considered by retired people who were pensioners was that since
interest rates had gone down to maintain the same income flow they had increased the volume of
savings, to the extent possible So it can be concluded that interest rates do not influence savings
much.

C. Tax incentives:
The Government of India, till March 2005, offered a slew of tax incentives. All these tax
rebates were available from instruments backed up by State Guarantee, barring ICICI Bank.
People invested heavily in these instruments because of the double benefits of tax avoidance
(not evasion) and State Cover. The funds raised from these instruments continued to feed
the ever-yawning Fiscal Deficit of the Government of India. The underlying logic behind all
these changes is to make it compulsory for people to arrange for their own retirement needs
(which the bankrupt exchequer cannot provide) in line with the global trends and gently
nudge people towards the Stock Market.

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BASICS OF STOCK MARKET

Investing in equity involves purchasing shares of a company listed on a stock exchange. You can
acquire these shares in two ways - either through the Primary Market, i.e., when a company
makes an offer to issue its equity for the first time (this is called Initial Public Offering (IPO)) or
through the secondary market, i.e. via a stock exchange. When you trade in equity through a
stock exchange, you have to make use of the services of a brokerage firm, which acts as your
agent whenever you buy or sell.
Equity is considered a high risk-high return investment avenue. This is because there is scope for
considerable appreciation or loss of the capital that you invest, depending on various factors
such as the performance of the company that you have invested in, general market conditions,
the state of the economy, etc. However, it forms an integral part of any well-balanced portfolio,
since it is at one end of the risk-return spectrum.

How should I decide whether equity investing is right for me?


Equity is a must for any well-balanced portfolio. So, irrespective of whether you are a high net
worth investor or a small retail investor and irrespective of whether you have a large or timid
appetite for risk, you must hold some portion of your assets in equity. This is because it is the
only instrument that has the ability to truly deliver a high return, when held over a long period of
time.
However, the amount of equity that you hold in your portfolio is a very subjective decision and
will depend upon various factors. These include your investment objectives, time horizon and
risk appetite. But as a general guideline, there’s a rule of thumb that states that to decide upon
the proportion of your assets that should go into equities, reduce your age from 100 and that’s
the proportion of your money which should be put in equities. The remaining can be invested in
fixed income securities.

How should I study stocks before I make my selection?


Every investor must do some homework before investing money in equities…

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 While recommendations and tips received from your broker, a friend, etc. may be the
starting point of your selection, let it not be the only reason that makes you purchase a particular
stock, even if these tips have come from ‘market experts’. Short list the shares that you want to
buy on the basis of your investment objective, risk profile and the stock’s fundamentals.
 If you feel that the price of a stock is high, don’t purchase it. Buy stocks that you believe
still have scope for appreciation.
 Don’t try to time your purchases. That could turn you into a speculator instead of an
investor.
 Lastly, once you have purchased shares, if the business prospects of the company change
to its detriment, get rid of the stock. Don’t hesitate to liquidate your portfolio before your target
time horizon if circumstances lead you to believe that it’s necessary.

How do I know whether I am paying the right price for the stock?
There are various factors that determine the value of a stock. Understanding these will help you
to pay a price that reflects the true value of a stock.
Demand and Supply: In the short term, the basic economic theory of demand and supply
determines a stock’s worth. So, when the demand for a stock exceeds its supply (that is, there are
more buyers than sellers), its price tends to rise. And, when supply overtakes demand (that is,
sellers exceed buyers), the stock loses value. However, these are short-term market trends, which
tend to get evened out over a period of time. In the medium to long-term, a stock is driven by the
company’s fundamental strength i.e. business potential, past performance, competence and
credibility of its promoters and management, etc.
Growth potential: Investors are willing to pay a premium for stocks of companies that have
the potential to increase their revenues and net profits. The greater this growth potential, the
higher the premium given to the stock. If a company proves that it is capable of sustaining
growth, the market will continue to give it high valuations. And, that’s likely to be the major
driver for stock valuations.
Fundamentals: A company’s growth outlook is linked to its business prospects and how well its
management is capitalizing on the existing opportunities. The quality of a company’s
management is crucial. So, pay attention to the management practices of a company and its level
of corporate governance.

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When should I buy to minimize my costs and sell to maximize the profits?
Buy low and sell high is the ultimate guide to successful stock investing. It is also
the reverse of what many investors do, although they don’t intend to. They tend to
buy high and sell low because they use price, and in particular, the price
movement, as their only signal to buy or sell.

Investors are tempted to buy stocks that have shot up and are basking in the media spotlight just
to get a part of the action. They jump at a stock that is already trading at a premium… that’s how
they buy high. Ironically, if a stock has had a good run up it may be time to sell, not buy (sell
high).
On the flip side, when a stock price is falling, most investors may want to sell in a panic,
although the company has not lost any intrinsic value and still remains a sound investment…
that’s how they sell low. In fact, when a stock’s price has fallen, it’s a great time to buy (buy
low), if your research on the company suggests that it is a good long term buy.
Experienced traders can make money jumping in and out of a stock that’s caught the public’s
attention, but it’s not a game for the inexperienced and it can definitely not be called ‘investing’,
in the true sense of the word. There are risks involved and tax consequences that apply to such
trading, along with other issues, which means that most investors should leave this tricky
activity to short-term traders.

RISK APPETITE AND INVESTMENT PATTERN

Risk appetite is usually discussed relating to the investment decisions of investors. An investor
considers his or her risk appetite when selecting from a range of investment options presenting
different risk/return trade-offs.

The challenge for an individual investor is to determine which point on this risk/return tradeoffs

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Provide either:

• The lowest level of volatility to meet financial needs and goals,

• The highest return given the investor’s tolerance for risk, or

• Some intermediate point that maximizes utility.

Many individual investors are aware of the need to understand their own risk appetite, yet most
make decisions that affect the risk profile of their wealth and income only infrequently.

Investors need to make these decisions more regularly. In the case of the financial services
organization, decisions affecting the risk profile of its business are made daily.

As a result, managing and profiting from calculated risks is a core skill for many financial

Services organizations. Although these organizations are in the business of risk, defining an

Organization-wide risk appetite can be complicated in practice.

Much like the basic risk/return trade-off decision presented to the individual investor, the

Common thread across these definitions is the need for the company to decide on the appropriate
amount of risk it can accept in order to enhance the organization’s value over a given timeframe.

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RISK ALLOCATION:

In a sense, “risk allocation” – also referred to as “risk budgeting” – is another step in the
evolution of investment management practices. In the mid-1900’s, the dominant investment style
was “asset selection” (also known as “picking winners”). Investors tried to select stocks and
other assets with high expected returns and low risk (ie, low variance or returns).

Modern portfolio theory revolutionized investing by making clear the importance of correlations
of asset returns, in addition to expected returns and the variance of returns. By the 1970’s, the
dominant investment style had become “asset allocations”. Investors tried to hold “efficient
portfolios” – portfolios of assets with low correlations – so that all but the market risk would be
diversified away. This gave rise to the common practice of managing to some benchmark
portfolio.

With the rise in benchmarking, the task of an active portfolio manager was to “beat the index”.
Clearly, one way to beat the index was to take on more risk than in the index – a tactic not
necessarily in line with the wishes of the investor.

Risk allocation emerged in the late 1990’s, in response to concerns about the level or risk being
accepted in the portfolio and as a consequence of the development of risk measurement and
management tools. While the phrase “risk allocation” seems to mean different things to
different people, it can be defined broadly as an investment style where allocations are based on
the asset’s risk contribution to the portfolio, as well as on the asset’s expected return. In this
regards, it is a direct application of the original Markowitz (1952) perspective on portfolio
construction, where both risk and return expectations play explicit roles in the asset allocation

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process. Under risk allocation, the task of the active portfolio managers is to “beat the index”
without taking more risk than the index.

What is Asset Allocation?

Asset allocation means diversifying your money among different types of investment categories,
such as stocks, bonds and cash. The goal is to help reduce risk and enhance returns.

This strategy can work because different categories behave differently, Stocks, for instance,
offer potential for both growth and income, while bonds typically offer stability and income. The
benefits of different asset categories can be combined into a portfolio with a level of risk you
find acceptable.

Establishing a well-diversified portfolio may allow you to avoid the risks associated with putting
all your eggs in one basket.

Right allocation for an investor:

Asset allocation decisions involve tradeoffs among 3 important variables:

• Investors’ time frame

• Their risk tolerance

• Their personal circumstances

Depending on his age, lifestyle and family commitments, your financial goals will vary. You
need to define your investment objectives—buying a house, financing a wedding, paying for
your children's education or retirement. Besides defining your objectives, you also need to
consider the amount of risk you can tolerate.

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For example, when an investor retires and is no longer receiving a paycheck, you might want to
emphasize bonds and cash for income and stability. On the other hand, if you won't need your
money for 25 years and are comfortable with the ups and downs of the stock market, a financial
advisor might recommend an asset allocation of 100% stocks.

Sample asset allocations followed during the project

Here are examples of 3 model portfolios that we follow while suggesting the right asset mix for
any investor. These models are for suggestions only and it may differ from person to person.
When reviewing the sample portfolios, we consider investors’ risk tolerance and other assets,
income and investments.

Aggressive portfolio: This portfolio emphasizes growth, suggesting 65% in stocks or equity
funds,

25% in bonds of fixed-income funds and 10% in short-term money market funds or cash
equivalents. We recommend this portfolio for people who have a long investment time frame.
The portfolio provides for short-term emergencies and a mid-

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term goal such as building a home, but otherwise assumes the investor has long-term goals such
as retirement in mind.

Moderate portfolio: This portfolio seeks to balance growth and stability. It recommends
50% in stocks or equity funds, 30% in bonds or fixed-income funds and 20% in short-term
money market funds or cash equivalents. This portfolio would seek to provide regular income
with moderate protection against inflation. The equity component provides the potential for
growth, whereas the component in bonds and short-term instruments helps balance out
fluctuations in the stock market.

Conservative portfolio: This portfolio suggests 25% in stocks or equity funds, 50% in
bonds or fixed-income funds, and 25% in money market funds or cash equivalents. This
portfolio appeals to people who are very risks averse or who are retired. The 25% equity
component is intended to help Investors stay ahead of inflation.

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In the market survey which has been conducted during the course of this project my
analysis has revealed that 70% of the investors in Kolkata are risk averse and follow the
conservative portfolio. What is striking is that 45% of young people within good income
bracket happen to be risk averse as compared to 20% overall in the country.

METHODOLOGY ADOPTED FOR THE


PROJECT

• Collection of Primary Data:

The first step in the process is the collection of primary data with the help of questionnaire.
The questionnaire helped me in working on the field and getting a first hand knowledge of
the investment market of Kolkata. The process of collection of primary data is turning out to
be an enriching experience as the interaction with the investors has given me an insight into
the minds of the investors as regards to their demographic profile, household savings,
income level, expenditure, asset allocation and risk profile.

Market Survey:

The market survey has been conducted taking 80 as the sample size. Results of
the same are as follows:

Out of the 40 respondents 35 were male and remaining 5 were Females.

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Following graph shows the age of respondents and the target respondents were only
those individuals whose age is above 25 years.

Following graph shows the occupation of the Respondents

Graph below shows the annual income of the respondents. Only those respondents are
considered whose annual income is above 3 lakh rupees per annum. Even the target
customers for the company were only those individuals whose annual income is above
Rs. 300000.

Graph below shows the preferred sectors for investment in equities. The most preferred
sector is financial sector as it is expected that this sector will grow very fast. The second
most preferred sector is Oil & Gas sector because in this sector the major players are the
Government owned industries and as the economy will develop the consumption of oil
and gas will increase. The third most preferred sectors are FMCG and TELECOM
sectors. FMCG sector stocks are the defensive stocks and TELECOM sector is one of the
fast growing sectors.

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Following graph shows the different preferred tools of investment by the individuals.
The most preferred tool is the Mutual Funds. After the financial crisis and the collapse of
stock market many investors had lost their money and their confidence is shacked.
Moreover mutual funds are more safer investment instruments in comparison to others
and also the rate of return on them is high and even the risk is lower than equities and
they are preferred because investing in them exempted from taxation. Mutual funds are
followed by the bonds which are risk free and also the rate of return is good.

Share Khan is the most preferred broking house followed by the India Bulls and then
MotilalOswal broking house. Edelweiss is least preferred because it has just entered into
retail segment in March 2008, and it will take some time for it make its presence felt in
the retail segment. Earlier it was catering only to the HIGH NET WORTH INDIVIUALS
(HNIs).

The following chart shows the reason for the collapse of Sensex. Most of the respondents
believed that subprime crisis was the main reason for the downfall of Sensex as it forced
the FIIs to withdraw their money from Indian markets back to their parent countries. The
second most believed reason is the bankruptcy of the financial institutions.

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The above graph shows the expectation of the respondents for the market recovery. Most
of the respondents believe that the market would recover within 6-12 months. The main
reason for this is that the FIIs inflow of the money in market which caused the market to
go up by 400 points in a single trading day in this month. Besides this after the elections
new government will be formed and it is believed that it will take measures for the
growth of economy and various sectors.

When respondents were asked about their worry for the Indian stock market they reacted
aggressively for the volatility in the stock market. As Indian stock market is volatile and
there are two major factors in the stock market i.e. FEAR AND GREED. There is too
much fluctuation in the movement of share prices in the market. The second worry is the
price manipulation of the shares. Recently it was found that Akruty City share price was
artificially maintained high. It was trading around Rs. 2200 per share when all the other
shares of the Real Estate companies were trading at their life time value. Later its share
was banned on trading at future and options as well as Intra-day segments and at present
it is being traded only on the cash market. The third worry was related to corporate
mismanagement as was the case with Satyam, which was the biggest fraud in the Indian
market.

The following graph shows investment holding pattern of respondents. 30% of the
respondents had invested in Mutual Funds as they provide healthy return at less risk.
Besides this investing in them is tax exempted and same is the case with insurance
policies and apart from this investing in insurance is risk free and also the biggest
advantage is that insurance policies covers the risk. Investment in FDs is also risk free

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but the rate of interest given in FDs is dependent on economic conditions. In equities the
investment was made prior to market fall and generally the people are holding their
shares because they don’t want to sell their shares at half of the purchase price. Apart
from this people are also buying new shares because it is the right time to invest in shares
as the blue chip companies shares are trading at low price.

The main objective of investment is income generation and it is followed by retirement


benefit.

• Collection of Secondary Data

The data has been collected through primary and secondary sources. The primary data collection
involves formulating a questionnaire and getting it filled by the customers. Companies were
visited to know about their strategies and compare it with that of Edelweiss. This has been
accompanied by client calling, company visits and company meetings.

HDFC securities

Strengths:

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 Own banking house within the company (fast fund transfer)

 Flawless security system

 Handles customer queries quickly

Weaknesses:

 Slow order processing

 High demat account charges

Kotak securities

Strengths:

 Good customer relationship

 Suggestive buy or sell calls to customers on a daily basis

Weaknesses:

 High brokerage

 Does not allow more than 25 scripts at a time

ICICI Direct

Strengths:

 Good market reputation

 Highest market share

Weaknesses:

 Slow order execution

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 Flaw in providing online tickers

 Premium brokerage

India bulls securities

Strengths:

 Fast implementation of orders

 Real time quotes

 Low brokerage rates

Weaknesses:

 Delayed response to customer queries

 Delayed client instructions

• Paying Client visits and Presentations made to them:

The financial services are different from the consumer products offered. If we make a
comparative analysis following points can be highlighted:

• Interaction with the customer - In case of consumer products the company has no direct
contact with its customers. It distributes its products to the distributors and after that does
not come in the picture. They come in contact with the customers only in case of any
complaints. In case of a financial product the company personnel interact directly to the

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customers and convince them to buy the product. Thus the responsibility of company
increases in case of financial products.
• Buying Pattern- Many consumer products are taken by the customer on an impulse while
taking a financial product involves a long thought process.

• Advising the clients about the products of the company


which suits their need:

A retail brokerage company that provides quality service, through its research and the Unique
Selling Proposition (USP) are:

• Simplest and fastest Online trading portal


• Dealer support and a toll-free no.
• Turtle services – portfolio Doctor for each client
• High quality research and much more . . .

One of the strategies adopted by Edelweiss to counter the existing competitors is :

The website; by the Edelweiss is in itself a Unique Selling proposition as it assist to


attract and retain the client. By analyzing the website portals of other competitors like –

– Share khan
– MotilalOswal
– India bulls
– India Infoline and etc.

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It has been found that, their online trading portals are very complicated to understand and
use. Any new client will have to go through many problems to understand how to use those
portals. Even though being in the market for a considerable time, none of the existing players
could predict or comprehend the demand of the customers.

Changing business environment every firm to evolve with time, which the existing
financial players failed to do so! Thus Edelweiss comes up with an Online Trading Portal called
-

www .edelblue.com

This website has been designed to provide Advice Based Broking Services to retail investors.
Following things have been kept in mind while
conceptualizing the website:

• Clutter free pages


• Easy to use navigation
• Presenting information in intuitive way
• Avoid data overload on any page
• Easy access to Edelweiss research and
recommendations
• Intelligent tools to cut through tons of information

The site has been divided in the following


sections:

• Trade

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• My Edelweiss
• Research & Strategies

Trade sections offers host of Equity and derivative products to retail investors. It is
explained in detail in the next section of the manual.

My Edelweiss offers investors to maintain there


portfolio online. All the transactions done with Edelweiss
broking limited will automatically flow in the portfolio.

Research & Strategies section has the market data,


news, data tools, research reports and Edelweiss strategies or recommendations. The section has
been intuitively divided in 3 sections: Markets (data about company, sectors, index, MF,
commodities, etc.), Research (Edelweiss reports on companies, sectors, economy, etc.) and
Strategies (actionable recommendations, derivative strategies, model portfolios, etc.).

During the visit to the clients I have first collected information regarding their broker house, if
any and then as per the requirements of the clients I suggest them the product which we are
offering them.

• Customer relationship:

The customer relationship is aimed at creating strong long lasting, fruitful relationships by
developing long-term bonds. As a result the customer starts identifying and associating him
with the product, prefers and accepts the company’s products and services over competitors’

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offerings and recommend others to buy. Moreover it costs less to retain customers than to
compete for new customers. My job profile entails me to interact with the clients of the
company and that includes the existing HNI clients and the clients who are in a dormant
stage. Convincing them to start business with the company and maintain their association
with the company is the primary focus. This involves calling the existing clients and making
client visits. This will help me get an insight into the various aspects of customer
relationship.

Recommendations

Edelweiss is an established name in the market but when it comes to competition in the retail
broking, the company has certain limitations which it needs to overcome in order to establish
itself in this scene. There are other players in the market who have certain edge in terms of
offerings which the company has to fulfill if it wants to compete in the market. The
opportunities and challenges faced by the company are as follows:

Opportunities for the company:

• Untapped Retail Segment- the Company has a huge opportunity before it as it has a vast
untapped retail segment.
• Increasing affluent class- The rise of the affluent class will aid the growth of the
company.

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• Competitive edge – The research of the company is its Unique Selling Proposition and
the retail segment looks for good and reliable research.

Challenges before the company:

• Business Volatility- The business in which the company is in is very volatile and keeps
changing with the market situation. So to keep a good pace of growth is the challenge
that lies ahead
• Competition- The competition is fierce among different market players and standing in
this situation is a challenge
• Risk management- The business is prone to a high risk and minimizing risk is the need of
the time
• People- the Company should maintain the good working force that it has with it at
present and improve it to gain competitive advantage.

Limitations of the study:

• The information regarding the investors is being collected through market survey where
there are some discrepancies on the part of the clients who do not divulge the right
information.
• The Jacob Model followed in the questionnaire sometimes does not suit all the clients.
• There are changes happening in the industry every time and due to this some of the
information collected becomes obsolete or irrelevant for the study.
• Some of the secondary data collected becomes outdated with the passage of time but
overall the information so collected is relevant for the study.

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CONCLUSION

The 6 weeks of internship at Edelweiss Broking Limited has been a fulfilling experience
where the learning was immense. At the end of the period what I can say is that now I am
ready to step into the corporate world with complete zest and enthusiasm.

Here I got to understand the integrities of the stock market and the working pattern of
broking houses as well.

Financial Planning is an important part of each person and what I learnt in Edelweiss is
to understand the factors which come into play while planning the financials of each
investor.

At the company I also learnt how to sell in a market, because one of my major
responsibility was to sell demat account.

The 6 weeks of internship has been a grueling experience at times where procuring data
had become very difficult with lot of limitations becoming impediments during the
period but nevertheless the teachings provided me with things which go beyond the
books.

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Overall I will rank this period of 6 week as golden period of my MBA course.

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