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ACKNOWLEDGEMENT

On the very outset of this report, I would like to extend my sincere & heartfelt obligation towards

all the personages who have helped me in this endeavor. Without their active guidance, help,

cooperation & encouragement, I would not have made headway in the project.

I am ineffably indebted to Xavier Institute of Management and Entrepreneurship, Bangalore for

conscientious guidance and encouragement to accomplish this assignment.

I am extremely thankful and pay my gratitude to my Project guide Benil Dani Alexander

Vice President Hedge equities for his valuable guidance and support on completion of

this project in its presently.

I also acknowledge with a deep sense of reverence, my gratitude towards my parents

and member of my family, who has always supported me morally as well as

economically.

At last but not least gratitude goes to all of my friends who directly or indirectly helped

me to complete this project report.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You

Philip Thomas

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Table of Contents

1 EXECUTIVE SUMMARY ........................................................................................................ 3

2. RESEARCH METHODOLOGY ................................................................................................ 4

3 INTRODUCTION .................................................................................................................. 6

4 INDUSTRY PROFILE ............................................................................................................. 8

5 STOCK BROKING ................................................................................................................. 9

6 COMPANY PROFILE : HEDGE EQUITIES ............................................................................. 14

6.1 MISSION & VISION ........................................................................................................ 15

6.2 DEPARTMENTS .......................................................................................................... 16

6.3 MANAGEMENT TEAM ............................................................................................... 19

6.4 MAJOR COMPETITORS .............................................................................................. 20

7 LITERATURE REVIEW..21

7.1 INVESTMENT..22

7.2 ASSET CLASSES..23

7.3 INVESTOR PROFILE.25

7.4 PORTFOLIO MANAGEMENT27

7.5 SYSTEMATIC INVESTMENT & LUMPSUM METHOD..28

8. DATA ANALYSIS AND INTERPRETATION.32

9. PORTFOLIO CREATION.42

10.FINDINGS.79

11.CONCLUSION...80

12.BIBLIOGRAPHY.81

13. ANNEXURES..82

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EXECUTIVE SUMMARY

In India most people fear to invest in capital market as the risk is higher. So, most of the people go for

fixed income bearing investments like fixed deposits in bank or bonds or sometimes saving investments.

But if properly managed, investments in shares of companies can fetch you higher returns when

compared with the other investment options. But, as the capital market is highly volatile these

investments are subjected to high risks. Obviously risk & reward goes hand in hand. Even a single event

can affect the stock prices to go down or up. That increases the risk of investor.

In countries like America, almost 90% of the people consider the participation in capital market as an

investment haven. There the markets are more or less stable. But in India, people consider the market

for short term profits. That makes the market to be less stable. Statistics show that in India, only 1 % of

the total population participates in investing in shares of companies. So, in India, the capital market is

controlled by the FIIs (foreign institutional investors) and there is no lock-in period for such investments

(as low as one day). They can take back their money at their will. So, it is high time that the people of

India should start investing in stock market to make the market more stable and they should focus on a

longer horizon rather than going behind short term profits.

Hedge Equities is one of the leading Financial Services Company in India, specialized in offering a wide

range of financial products, tailor made to suit individual needs. As a first step to make their presence

Global, Hedge Equities have initiated operations in Middle East to cater to the vast Non Resident Indian

(NRI) population in that region. Ever since the inception of hedge equities they have spanned their

presence all over India through Meticulous Research, High Brand Awareness, and Intellectual

Management and Extensive Industry knowledge.

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RESEARCH METHODOLGY

INTRODUCTION

The products and services offered in securities market focuses on investor protection. Every investor has

a different perspective for investment. There are differences in risk appetite, income, age, gender,

attitudes, beliefs, etc. if these factors are not considered before creating a portfolio, there will be

differences in the investor's needs and his return. So, analyzing each investor's portfolio is very

important or else there will be a mismatch. My study aims to analyze the investor's (a sample of society

which includes professionals, salaried people, students, housewives, retired people etc. needs and

profile to form a portfolio that best suits him.

Many people are not happy with the investment for the very simple reason that they do not invest in

those avenues which match their profile. If the investor is able to identify his profile properly, then such

problems can be easily solved

Objectives

Primary objective

1. To profile the investors based on their investment needs

2. To construct portfolios matching the requirements of the investors.

Secondary objective

1. To understand the investor's awareness and understanding about various asset classes.

2. To conduct an enquiry among the investors about their experience with securities market.

3. To analyze factors considered for investment options.

4. To find out the investing strategy followed by different investors.

Data collection

Descriptive method was used in this study. The research was divided into two stages. The first stage was

analyzing investor's risk profile. The second stage was to create a portfolio that matches the risk profile

of the investors.

The data collection was divided in to two parts.

1. The analysis of investors was done by primary data collection method

2. The portfolio creation was done by secondary data collection method

Data Source

Primary and secondary data was explored for the requirements of the study. Secondary data was

explored from the available source of secondary literature.

Primary data: Primary data collected through survey among the investors in the market through

questionnaire and direct interview method.

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Secondary data: Books, official sites of brokerage service providers.

Research Approach

Survey using a questionnaire was adopted in this study. The prepared questionnaire was pre- tested

before being used for the study purpose. The questionnaire was circulated to the respondents as per the

research design.

The Population

All investors in Ernakulam district.

All securities listed in NSE.

Pilot study

A pilot study was conducted by using the framed questionnaire with a sample of 100 respondents. The

collected data from the respondents was studied in detail. Necessary changes have been incorporated

to the content of the questionnaire after the pilot study.

Sampling procedure

Non probability sampling I e. Snow ball sampling method was used for selection of investors.

Stocks for portfolio construction were selected from listed securities in BSE and NSE. 100 judgment

sampling was used to select securities. Deep fundamental analysis and technical analysis were not done

before selecting the stocks because all the stocks in Nifty index have strong fundamentals, market

capitalization and good volume of trade.

Each portfolio has 10 stocks each. Stocks with beta value less than 0.8 were included in conservative

category. Stocks with beta value between 0.8-1.2 were included in moderate category. Stocks with beta

value more than I .2 were included in aggressive category.

Sample size

The study was executed in Ernakulum district. Sample size was selected on the basis of pilot study.

Tools used for data collection and analysis

Survey using a questionnaire was adopted in this study. The questionnaire was circulated to the

respondents (investors) as per the research design. SPSS (Statistical Package for Social Science) and PAST

was used for analysis part of the study.

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INTRODUCTION

Securities market help in transfer of resources from those with idle resources to others who have a productive need for them. To state formally, securities markets provide chan- nels for allocation of savings to investments and thereby decouple these two activities. As a result, the savers and investors are not constrained by their individual abilities, but by the economys abilities to invest and save respectively, which inevitably enhances savings and investment in the economy.

Financial Market The financial market is said to the brain of entire economic system. The savings are channeled to investments through financial market. The financial instruments like stock, bond, insurance policy, government securities and debentures are traded in the financial market. A financial market consists of investors (buyers of securities), users of funds (sellers of securities), intermediaries and regulatory bodies.

According to functional basis financial markets are classified into two types.

They are:

Money markets (short-term)

Financial Market

Money Market Capital/ Securities Market

m

Organised

Money Market

Unorganised

Money Market

Primary Market Secondary

Market

Short Term

Lending /Borrowing

Money Lenders /

IndigenousBankers

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Capital markets (long-term)

According to institutional basis again classified in to two types. They are

Organized financial market

Non-organized financial market.

The organized market comprises of official market represented by recognized institutions, bank and government (SEBI) registered/controlled activities and intermediaries. The unorganized market is composed of indigenous bankers, moneylenders, individual professional and non-professionals. Money Market: According to the RBI, "The money market is the centre for dealing mainly of short character, in monetary assets; it meets the short term requirements of borrowers and provides liquidity or cash to the lenders. It is a place where short term surplus investible funds at the disposal of financial and other institutions and individuals are bid by borrowers, again comprising institutions and individuals and also by the government."

Money market is classified in to:

Interbank call money market

Bill market and

Bank loan market Etc.

E.g.; treasury bills, commercial papers, CD's etc.

Capital Market: According to Dudley G. Luckett, A capital market is just what the name implies: a market for capital funds. Strictly speaking, the capital market encompasses any transaction involving long term debt or equity obligations.The world Bank defines capital market as, The market in which long term instruments such as equities and bonds are raised and traded. Capital market thus plays a vital role in channelizing the savings of individuals for Investment in the

economic development of the country. As a result the investors are not constrained by their individual

abilities, but by the abilities of the companies, which in turn enhance the savings and investments in the

country, liquidity of capital market is an important factor affecting growth.

Since projects require long term finance, but on the other hand, the investor may not like to relinquish

control over their savings for a long time. A liquid stock market ensures a quick exit without incurring

heavy losses or costs. Thus development of efficient market system is necessary for creating conductive

climate for investment and economic growth.

Capital market is a place where we can raise long-term capital.

Again the capital market is classified in to two types and they are

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Primary market and

Secondary market.

E.g.: Shares, Debentures, and Loans etc.

Primary market:

Primary market is generally referred to the market of new issues or market for mobilization of

resources by the companies and government undertakings, for new projects as also for expansion,

modernization, addition, and diversification and up gradation. Primary market is also referred to as

New Issue Market. Primary market operations include new issues of shares by new and existing

companies, further and right issues to existing shareholders, public offers, and issue of debt

instruments such as debentures, bonds, etc.

The primary market is regulated by the Securities and Exchange Board of India (SEBI a government

regulated authority).

Function:

The main services of the primary market are origination, underwriting, and distribution.

Origination deals with the origin of the new issue. Underwriting contract make the shares

predictable and remove the element of uncertainty in the subscription. Distribution refers to the sale

of securities to the investors.

The following are the market intermediaries associated with the market:

1. Merchant banker/book building lead manager

2. Registrar and transfer agent

3. Underwriter/broker to the issue

4. Adviser to the issue

5. Banker to the issue

6. Depository

7. Depository participant

Investors protection in the primary market:

To ensure healthy growth of primary market, the investing public should be protected. The term

investor protection has a wider meaning in the primary market. The principal ingredients of investors

protection are:

Provision of all the relevant information

Provision of accurate information and

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Transparent allotment procedures without any bias.

Secondary Market:

The primary market deals with the new issues of securities. Outstanding securities are traded in the

secondary market, which is commonly known as stock market or stock exchange. The secondary

market is a market where scrips are traded. It is a market place which provides liquidity to the

scrips issued in the primary market. Thus, the growth of secondary market depends on the primary

market. More the number of companies entering the primary market, the greater are the volume of

trade at the secondary market. Trading activities in the secondary market are done through the

recognized stock exchanges which are 23 in number including Over the Counter Exchange of India

(OTCE), National Stock Exchange of India and Interconnected Stock Exchange of India.

Secondary market operations involve buying and selling of securities on the stock exchange through

its members. The companies hitting the primary market are mandatory to list their shares on one or

more stock exchanges in India. Listing of scrips provides liquidity and offers an opportunity to the

investors to buy or sell the scrips.

The following are the intermediaries in the secondary market:

1. Broker/member of stock exchange buyers broker and sellers broker

2. Portfolio Manager

3. Investment advisor

4. Share transfer agent

5. Depository

6. Depository participants.

STOCK BROKING

The history of stock brokers can be traced back to the origins of the first stock exchange in 1602 at Amsterdam. Even before that brokers are said to have existed in France dealing with government securities. The Amsterdam Stock Exchange was involved in buying and selling of shares for the Dutch East India Company. However, the first real stock exchange came up in Philadelphia in the United States during the late 18th century. Later it was the New York stock exchange which saw a rise in its popularity. Wall Street, as it was called, became the hub of brokerage activities. Earlier stock brokers were largely unorganized, but later most of them joined hands to form institutes and organizations. Till the 1980's stock broking services were used only by the wealthy class who could afford them. Later with the advent of the Internet, stock broking became very easy. Thus, the price tag on stock brokers lowered considerably and their services became available even to the common man. The stock broking duties are now mostly taken up by major organizations with the smaller companies being absorbed by

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STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities whether of government and semi-govt

bodies or other public bodies as also for shares and debentures issued by the joint-stock companies. In

the stock market, purchases and sales of shares are affected in conditions of free competition.

Government securities are traded outside the trading ring in the form of over the counter sales or

purchase. The bargains that are struck in the trading ring by the members of the stock exchanges are at

the fairest prices determined by the basic laws of supply and demand.

Definition of a stock exchange:

Stock exchange means any body or individuals whether incorporated or not, constituted for the

purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. The

securities include:

Shares of public company.

Government securities.

Bonds

History of the Indian Stock Market - The Origin

One of the oldest stock markets in Asia, the Indian Stock Markets has a 200 years old history.

Year 1800: East India Company was the dominant institution and by end of the century, business

in its loan securities gained full momentum.

Year 1830: Business on corporate stocks and shares in Bank and Cotton presses started in

Bombay. Trading list by the end of 1839 got broader

Year 1840: Recognition from banks and merchants to about half a dozen brokers

Year 1850:Rapid development of commercial enterprise saw brokerage business attracting more

people into the business

Year 1860:The number of brokers increased to 60

Year 1860-61:The American Civil War broke out which caused a stoppage of cotton supply from

United States of America; marking the beginning of the "Share Mania" in India

Year 1862-63:The number of brokers increased to about 200 to 250

Year 1865:A disastrous slump began at the end of the American Civil War (as anexample, Bank

of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)

Pre-Independence Scenario - Establishment of Different Stock Exchanges

Year 1874:With the rapidly developing share trading business, brokers used to gather at a street

(now well known as "Dalal Street") for the purpose of transacting business.

Year 1875:"The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock

Exchange") was established in Bombay

Year 1880:Development of cotton mills industry and set up of many others

Year 1894:Establishment of "The Ahmedabad Share and Stock Brokers' Association"

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Year 1900:Sharp increase in share prices of jute industries in 1870's was followed by a boom in

tea stocks and coal

Year 1908:"The Calcutta Stock Exchange Association" was formed.

Year 1920:Madras witnessed boom and business at "The Madras Stock Exchange" was

transacted with 100 brokers.

Year 1923:When recession followed, number of brokers came down to 3 and the Exchange was

closed down

Year 1934:Establishment of the Lahore Stock Exchange.

Year 1936:Merger of the Lahore Stock Exchange with the Punjab Stock Exchange.

Year 1937:Re-organization and set up of the Madras Stock Exchange Limited (Pvt.)Limited led by

improvement in stock market activities in South India with establishment of new textile mills

and plantation companies.

Year 1940:Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was

established

Year 1944:Establishment of "The Hyderabad Stock Exchange Limited"

Year 1947:"Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and

Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange

Association Limited"

Post Independence Scenario

The depression witnessed after the Independence led to closure of a lot of exchanges in the country.

Lahore Stock Exchange was closed down after the partition of India, and later on merged with the Delhi

Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by

1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition

under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act

were:

1. Bombay

2. Calcutta

3. Madras

4. Ahmedabad

5. Delhi

6. Hyderabad

7. Bangalore

8. Indore

Many more stock exchanges were established during 1980's, namely:

Cochin Stock Exchange (1980)

Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982)

Pune Stock Exchange Limited (1982)

Ludhiana Stock Exchange Association Limited (1983)

Gauhati Stock Exchange Limited (1984)

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Kanara Stock Exchange Limited (at Mangalore, 1985)

Magadh Stock Exchange Association (at Patna, 1986)

Jaipur Stock Exchange Limited (1989)

Bhubaneswar Stock Exchange Association Limited (1989)

Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989)

Vadodara Stock Exchange Limited (at Baroda, 1990)

Coimbatore Stock Exchange

Meerut Stock Exchange

At present, there are twenty one recognized stock exchanges in India which does not include the

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

Limited (NSEIL). Government policies during 1980's also played a vital role in the development of

the Indian Stock Markets.

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations to the listed companies, they help trading and raise funds from the market. Over the hundred and twenty years during which the stock exchanges have existed in this country and through their medium, the central and state government have raised crores of rupees by floating public loans. Municipal corporations, trust and local bodies have obtained from the public their financial requirements, and industry, trade and commerce- the backbone of the countrys economy-have secured capital of crores or rupees through the issue of stocks, shares and debentures for financing their day-to-day activities, organizing new ventures and completing projects of expansion, diversification and modernization. By obtaining the listing and trading facilities, public investment is increased and companies were able to raise more funds. The quoted companies with wide public interest have enjoyed some benefits and assets valuation has become easier for tax and other purposes.

National Stock Exchange (NSE)

The National Stock Exchange of India Limited has genesis in the report of the High Powered Study

Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock

Exchange by financial institutions (FIs) to provide access to investors from all across the country on an

equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at

the behest of the Government of India and was incorporated in November 1992 as a tax-paying

company unlike other stock exchanges in the country. 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

NSE's mission is setting the agenda for change in the securities markets in India. The NSE was set-up

with the main objectives of:

Establishing a nation-wide trading facility for equities and debt instruments.

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Ensuring equal access to investors all over the country through an appropriate communication network.

Providing a fair, efficient and transparent securities market to investors using electronic trading systems.

Enabling shorter settlement cycles and book entry settlements systems, and

Meeting the current international standards of securities markets. The standards set by NSE in terms of market practices and technology, have become industry

benchmarks and are being emulated by other market participants. NSE is more than a mere market

facilitator. It's that force which is guiding the industry towards new horizons and greater

opportunities.

Bombay Stock Exchange (BSE)

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native

Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock

Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons

(AOP) and is currently engaged in the process of converting itself into demutualised and corporate

entity. It has evolved over the years into its present status as the premier Stock Exchange in the

country. It is the first Stock Exchange in the Country to have obtained permanent recognition in

1956 from the Govt. of India under the Securities Contracts (Regulation) Act 1956.The Exchange,

while providing an efficient and transparent market for trading in securities, debt and derivatives

upholds the interests of the investors and ensures redresses of their grievances whether against the

companies or its own member-brokers. It also strives to educate and enlighten the investors by

conducting investor education programmers and making available to them necessary informative

inputs.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a resolution of government

of India. It was later made statutory body by the SEBI act 1992.according to this act, the SEBI shall

constitute of a chairman and four other members appointed by the central government.

With the coming into effect of the securities and exchange board of India act, 1992 some of the powers

and functions exercised by the central government, in respect of the regulation of stock exchange were

transferred to the SEBI.

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COMPANY PROFILE

HEDGE EQUITIES LTD

Hedge equities ltd is one of the leading retail stock broking house which is running successfully in the

country. Hedge offers its customers a wide range of equity related services including trade execution on

BSE , NSE,Derivatives , Depository services , Online trading , Investment advice etc. The firm has an online

trading and investment site -www.hedgeequities.com.The site gives access to supeior content and

transaction facility to retail customers across the country . known for its jargon - free , investor friendly

language and high quality research , the site has a registered base of over thousands of customers .

About Hedge Equities

Hedge Equities is one of the leading Financial Services Company in India , specialized in offering a wide

range of financial products , tailor made to suit individual needs.

Hedge equities incorporated under the Companies Act 1956 as Hedge Equities Private Limited on 17th

December 2007 with registered office at 1205, Dalamal Tower, Nariman Point. Later the company is

converted into public limited company on 17th February, 2009.

Team Hedge is a balanced mix of more than 15 years experience cutting across various industries with a

strong background in the financial markets. Founder & managing director of HEDGE GROUP is Mr. Alex

K Babu, Mr. Bhuvanendran is CEO of HEDGE EQUITIES, BOBBY J ARAKUNNEL is COO of HEDGE EQUITIES

ever since its inception. The Board members comprises of veterans from six power houses in their

respective fields: FedEx Securities, Baby Marine Exports, Thakker Developers, Smart Financial, S.M.Hegde

(CFO Videocon Industries) and Padmashree Mohanlal.

HEDGE EQUITIES has around 54 branches & 52 franchises which are spread across 4 states in India (Kerala,

Karnataka, Tamil Nadu and Maharashtra) & in Dubai. As a first step to make Global presence , Hedge

Equities have initiated operations on Middle East to cater to the Vast Non Resident Indian (NRI )

population in that region.

MISSION

" To create an ethical and sustainable financial services platform for our customers and partner them

to build business , to provide employees with meaningful work , self-development and progression , and

to achieve a consistent and competitive growth in profit and earnings for our shareholders and staff "

VISION

Ever since its inception , Hedge Equities has been a household name among the masses owing our

success to timely Professional financial assistance to our clients . This aptly articulates our vision of

'Evolving in to financial super market which will be a one stop shop for all financial solutions '.

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HEDGE EQUITIES LTD-

Hedge Equities

Hedge School of Applied Economics

Hedge Commodities

Hedge Finance

Hedge Ohari

Hedge School of Applied Economics (HSAE )

A knowledge initiative from Hedge Equities to provide a platform for spreading the concept of

financial freedom and develop entrepreneurship among youth through imparting the importance of asset

creation and its management by understanding the true concepts of risk and return . Hedge School of

Applied Economics is the first ever educational venture dedicated to creating a class of high-end

investment professionals across India .Their programs empower you to :

Serve the ever increasing need for credential manpower in the financial services sector globally

Nurture and grow your own investment portfolios.

The programs are designed for students , financial proffessionals and investors who would be the

advocates of smart investments .

Hedge Commodities

Hedge Commodities Ltd. formed in 2008 as a fully owned subsidiary of Hedge Equities , cater to its

clients in Commodities market segment . The move to promote commodities was a carefully taken step

the management , identifying its growth potential and the opportunity commodities provided for the

market participants . With membership in all major national level exchanges . Hedge Commodities

provides service to varied set of clients , which includes investors , Hedgers , Arbitragers and Traders/

speculators. Hedge have clientele from different segments of the market , be it producer , manufacturers

or end users , with exposure to international , non agri commodities and agricultural commodities. Hedge

group have grown over a period of 4 years and set itself apart from the competitors with its unique

management , pro investor vision and the brand it-self. With around 150 outlets across different states

in India and presence in UAE , it offers varied services in financial sector . Through Hedge Commodities

Ltd , we offers services in Commodity Futures market , Hedge focus and banks on Research , which enable

its clientele to invest with Edge

Hedge Finance

Hedge equities a leading player in the financial markets is all set to leave its mark in the NBFC

sector with the launch of Hedge Finance. The Indian Non Banking Finance Companies constitutes a

reasonable big chunk of the country's overall financial system. It is in such a time that Hedge Finance has

burst into the scene and creating waves in the sector. Backed by Hedge Equities , which is coming together

16 | P a g e

of over 25 years of unparalleled experience of business leaders in various industries, Hedge Finance is all

set to be one of the top Non Banking Finance Company in the country.

Hedge Finance will primarly be focusing in an under tapped segment- securities. The company

will look at providing loans to customers against financial instruments like equities , bonds and

debentures. With LAS (Loan Against Securities mode ) Hedge Finance looks at unleashing the potential of

a growing segment in the Indian Financial landscape. With many firsts and a rich history of achievements

under its belt Hedge Equities adds sheen this endeavor.

Ohari

Ohari is a monthly finance magazine in "Malayalam " that provides its readers comprehensive

knowledge and insight about the various aspects of financial planning and the entire spectrum of

investment and wealth creation methods. The magazine provides quality research based content the

targets investors of all hues and readers who prefer to organize their portfolio in a systematic way. The

aim is to cultivate an investment culture that fulfills all wealth creation targets of investors through various

investment avenues. The vision of the magazine is to motivate the readers to particiapte in various

investment avenues and guide them in choosing the right investment products that suit their wealth

creation objectives, investment preferences, risk profile ,likely investment period and age.

PRODUCTS AND SERVICES OF HEDGE EQUITIES

Equity Trading

Commodities Trading

Currency Trading

Mutual funds

Online Trading

Internet Trading

Depository Services

Derivative Trading

Equity Research

Portfolio Managment Services

1.Equity Trading

Equity gives you the opportunity to have a partnership with all the leading Business tycoons around

the globe. Total capital contribution for a company comprises of investments through equity shareholders

by small and big investors . The investor who have a stake in a company are referred to as shareholders .

Power of equity shareholders lies in the optimum selection of the Industry, have a strong belief in the

Company's fundamentals also having a confidence in the profit making capability of the comapny.

Equity Market. at present , is a rewarding field for the investors and investing in Indian stocks are

profitable for not only the long and medium-term investors, but also the position traders , short-term

swing traders and also very short term intra-day traders. Fundamentally, stock market is an avenue for

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business people to meet shareholders. Other than bank loans, they now have another option to finance

their business. They did it by offering their company's equities in exchange of shareholders cash. Thee

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

distributed by the company. For shareholders, they have alternatives to where they should put their

money in to. In the same time, they get the opportunity to participate in capital intensive business at an

affordable price. Equity is an investment area which you can capitalize on with proper assistance

regardless of the market circumstances. Hedge equities opens the door to this highly lucrative investment

opportunity that could provide a feasible solution to all your financial queries.

2.Commodity Trading

Commodity "futures" are contracts to buy or sell certain goods at set prices at a predetermined

time in the future.

Futures trading plays a key role in the marketing of a number of important agricultural and non-

agricultural commodities as it provides the industrial and farming communities with a transparent price

discovery platform, which also enables them to hedge their price risk and price volatility. The growth of

Indian commodities futures trading towards an efficient, transparent and well organized market has

thrown open a window of benefits and opportunities to Indian producers and traders. Beside the primary

benefits of its twin economic functions of price discovery and price risk management, commodity futures

trading has also played an instrumental role in integrating various fragmented components of the

commodity ecosystem, thus developing the overall infrastructure of agricultural commodities marketing

in the country.

3.Currency Trading

Investments in Currency Derivatives can help you to diversify your portfolio from traditional asset

classes. Currency derivatives can be described as contracts between the sellers and buyers, whose values

are to be derived from the underlying assets, the currency amounts. These are basically risk management

tools in force and money markets used for hedging risks and act as insurance against unforeseen and

unpredictable currency and interest rate movements. Any individual or corporate expecting to receive or

pay certain amounts in foreign currencies at future date can use these products to opt for a fixed rate- at

which the currencies can be exchanged now itself. Currency derivative serve the purpose of financial risk

management encompassing various market risks. An upfront premium is payable for buying a derivative.

Currency futures will bring in more transparency and efficiency in price discovery, eliminate counterparty

credit risk, provide access to all types of market participants , offer standardized products and provide

transparent trading platform.

4.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 invested by the fund manager in different types of securities depending

upon the objective of the scheme. These could range from shares to debentures to money market

instruments. The income earned through these investments and the capital appreciations realized by the

18 | P a g e

scheme are shared by its unit holder. 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 portfolio at a relatively

low cost.

Mutual fund is also called unit trust or open ended trust a company that invests the funds of its clients in

diversified securities and in turn represent those holdings. They make continuous offering of new shares

at NAV(Net Asset Value ) determined daily by the market values of the securities they hold. In Hedge

Equities the clients can select from a wide range of Mutual Funds and Bonds available in the markets

today.

5.Online Trading

Hedge equities has a large network of branches with online terminals of NSE and BSE in the Capital

market and derivatives segments . The clients are assured of prompt order execution through dedicated

phones and expert dealers and offices.

6.Internet Trading

Hedge equities offers Internet trading through this site. You can trade through the internet from the

comforts of your office or home, anywhere in the world. The dedicated IT systems ensure service up time

and speed, making Internet broking through Hedge Equities hassle-free. Using the easiest facility provided

by NSDL, the clients can transfer the shares sold by them online without delivery instruction slips.

Additionally, digitally signed contract notes can be sent to clients through e-mail.

7.Depository Service

Hedge Equities is a member of National Securities Depository Limited (NSDL) , offer depository services

with minimum Annual maintenance charges and transaction charges. Account holders can view their

holding position through the internet. They also offer the 'easiest' facility provided by NSDL ( electronic

access to securities information and execution of secured transaction )through which clients can give

delivery instructions via the internet.

8.Derivative Trading

Hedge offers trading in the futures and options segment of the National Stock Exchange (NSE). Through

the present derivative trading an investor can take a short-term view on the market for up to a three

month's perspective by paying a small margin on the futures segment and a small premium in the options

segment. In case of option , if the trade goes in the opposite direction the maximum loss will be limited

to the premium paid.

9. Knowledge Centre

Knowledge centre activities are indented to provide systematic and structured services mainly to new

investors and also young aspirant aiming for a career in financial markets . The centre has three functional

areas : the Publication division , the Training Centre , and Wealth management Advisory Services which

provides complete investment solutions to investors through knowledge based personalized service.

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Hedge Equities, the trusted financial services provider with over 150 services outlets in Kerala, initiates

Hedge School of Applied Economics with the sole objective of moulding highly qualified investment

professionals in the state. Hedge school is a knowledge initiative of Hedge Equities, leading financial

institutions in the arena .

10.Equity Research

Hedge Equities constantly strive to deliver insightful research to enable proactive investment decisions.

The research department is broadly divided into two divisions-Fundamental Analysis Group (FAG) and

Technical Analysis Group (TAG).The fundamental analyst are continuously scanning the entire economy

for discovering what they call the "hidden gems" in stock market terminology and present it to the clients

for profitable investments. Timing the market has always been the most difficult task for all analyst and

their Technical Analysis Group has emerged to predict the market movements well in advance using

complex analytical methods including Eliot Wave Theory. They are equipped with cutting-edge

technologies for technical charting which assist the technical analyst to predict both upside and downside

movements efficiently for the benefit of clients.

11.Portfolio Management Services

Hedge equities is a SEBI approved portfolio manager offering discretionary and non-discretionary schemes

to its clients. Hedge Equities 'portfolio management team keep tracks of the markets on a daily basis and

is exposed to a lot of information and analytical tools which an investor would not normally have access

to. Other technicalities pertaining to shares like dividends , rights, bonus, buy-back, mergers and

acquisitions are also taken care of by them.

MANAGEMENT TEAM

1. Alex. K. Babu, Managing Director : Alex Babu is the Founder and Managing Director of Hedge Equities.

He has over 9 years of experience in equity research and fund management with

considerable experience across all market capitalizations. He is a specialist in mid-cap and infra stock

selection. Ever since joining the Hedge Family, he has been designing, developing and implementing the

strategic plan for the company in the most cost effective and time efficient manner. He was also

instrumental in establishing and assembling a strong research team with equal emphasis on

macroeconomic, industrial, and company level research. Prior to joining Hedge Equities, Alex was at the

helm of Baby Marine Exports, a leading Seafood exports firm handling all aspects of finance and

marketing. Alex Babu is a graduate in Engineering from Cochin University of Science and Technology.

2. N. Bhuvanendran, Chief Executive Officer : Professionalism augmented by profound vision is a perfect

phrase to describe Bhuvanendran. His rich experience spanning 20 years with the leading names in the

Indian financial services industry, is often camouflaged by his youthful appearance, till Mr. Bhuvanendran

opens up his favorite subject-Money matters. Bhuvanendran is a talented and introspective writer whose

creativity has been capitalized by various financial journals. He is also in the limelight for a market related

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show which aims at quenching the financial queries of professionals and investors in a leading Malayalam

television channel. He is one of the few investments professional who have experience across both listed

and unlisted equity space..

3. Bobby J Arakunnel, Chief Operating Officer : Mr. Bobby has been responsible for the entire operations

of Hedge Equities ever since its inception. He has proved his versatility by how casing excellent Man-

Management and Marketing Activities and is well versed in all aspects of Indian Financial Markets. In the

last 12 years, he has worked with all the major players in the financial service sector of the country which

has added oodles to his workmanship.

4. Mr. Mohanlal, Director : This Honorary Lieutenant Colonel's brand image and brimming popularity has

helped Hedge Equities to create awareness amongst small investors in retail segment to invest in stocks.

Versatility and a natural flair for donning complex characters have won him numerous accolades not to

speak of some unforgettable films contributed by him. A Multifaceted personality, whose inspiring

attitude, has helped him to take up Business world with a storm.

5. Dr. Samuel George, Director : He is a doctor and an entrepreneur and runs the successful and well

reputed "City Clinic" in Abu Dhabi since the 1970's. Having completed his Bachelors in Medicine from the

Calcutta Medical College, Dr. George commenced his career in government service and then subsequently

moved to Abu Dhabi in the 1970s. Today, their clinic offers specialized services in General Medicine and

Pediatrics. Dr. George also nurtures a dream and a vision to make quality healthcare affordable and

accessible to all and to this end, he is pursuing the development of a multispecialty hospital at

Changanassery in Kerala to serve the growing health care needs of the state.

6. Mr. Pradeep Kumar C, Director: Director A leading Textile exporter of Kerala whose 20 years of

experience in this field has made him a veteran we all look up to. His vision, augmented by his hard work

and commitment has helped him to be a strong player in the field of Exporting. Starting from a root level,

he has travelled the hard way to reach this phenomenal position in Garment Industry which has

supplemented him to expand his domain to foreign locations as well

COMPETITORS

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LITERATURE REVIEW

Investment

In everyday life one has to meet a lot of needs. These needs are bracketed in to daily needs and future

needs. Money is saved to service ones future needs. Instead of keeping the savings idle, one should

strive to use the savings productively. An investment means the use of money through various

investment vehicles with an aim to make more income or to increase the capital or both. Investment

income comes in the form of returns such as dividends, interest, capital gains etc

Need of investment

As mentioned before, with the increasingly complex nature of life and the prospects of an uncertain

future, the cost of living on an upward trend, investment has become a necessity not an option.

Hedge against the increasing cost of living

One of the main reason why needs to invest wisely is to meet the increasing cost of living. Cost of living

means the expenses of the daily life such as cost of foods, services and other goods. In economics this

increasing cost of living is called as inflation.

Due to inflation, money loses its value. Thus one would have to shed out more money than what one

had to spend earlier, for the same goods and services. For example, if there was a 6% inflation rate for

the next 20 years, a RS 100 purchases today would cost Rs.321 in 20 years.

Provisioning against unexpected expenditure in the future

With every passing day, life is becoming more complicated and the more complicated and the future,

more uncertain. An unexpected expenditure can take place in any one's life at any time. Meager savings

may not be enough to cover such expenditure. Thus it is pivotal that one invests wisely, so that one can

meet any unexpected expenditure that may occur in the future.

In temporary world, it is hard to come across a person, devoid of ambition. Ambitions may be big or

small. To satisfy some ambitions such as the acquisition of a bike, a car, or even a house, one needs to b

monetarily sound. The balance of one's earnings alone may not be sufficient. This opens the need for

investment.

To make resources productive

There are some people who make considerable saving, but choose to leave it idle. By doing so, they are

actually decreasing the value of their savings, because with rising inflation rates, year after year, the

value of money will also decrease simultaneously. So it is essential that the savings are invested and

managed wisely to secure lucrative returns.

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Asset Classes

a) Share/stocks

The bookish meaning of the word share is a unit of the total equity capital of a limited company. For

example, if a company has a total equity capital of 1 lakh, it can be divided into 10,000 units of face

value Rs 10. each units is referred to as a share. When you buy a share of a particular company, you get

the right to own a part of the company's assets along with voting powers as well. The person or group

holding maximum percentage of shares controls the company. Shareholders get returns in the form of

dividends and enjoy the growth fall and the investor could lose.

b) Derivatives

Derivative is a product whose value is derived from the value of one or more basic variables called bases

(underlying asset, index, or reference rate), in a contractual manner. The underlying asset can be equity,

forex, commodity or any other asset. In the Indian context, the Securities Contract (Regulation) Act 1956

defines derivative

As:-

i. A security derived from debt instrument, share, loan whether secured or unsecured risk instrument or

contract for differences or any other form of security.

ii. A contract which derives its value from prices, or index of prices of underlying securities.

c) Options

In finance language, an option is a contract between a buyer or a seller that gives the buyer the right,

but not an obligation to buy or to sell a particular underlying asset at an agreed price (strike price), on or

before the contract expiry date. The seller, known as option writer collects a premium from the buyer to

sell the option. The main feature of the option is limited risk and unlimited profit. In simple terms option

is like insurance, it gives protection against possible loss from a risk event. For example, by taking fire

insurance, one is protecting oneself against the possible loss that one could occur when an event of fire

takes place. To get such protection he will pay a fee called premium.

Such protection will be for a stipulated period, as mentioned in the contrast. If the possible risk event

(ie. Fire) takes place within the period, he will be compensated. If the event fails to take place, the

premium will be lapse.

d) Portfolio Management Services

Portfolio management service is most appropriate for those investors who understand risk, believe in

long term investment and dont have the time or technical knowledge to follow stock market intricacies.

PMS is a service offered by financial institutions with professional experience and knowledge. Here the

investors funds will be managed by professionals, after conducting a thorough investment analysis. PMS

activities are regulated by SEBI, and institutions have to register with SEBI, and obtain a PMS license to

undertake PMS activities.

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e) Mutual Funds

Mutual funds are the funds sponsored by a trust and managed by an asset management company

registered with SEBI. Mutual funds collect funds from the public, such as individual and corporate

investors and invest their money on behalf of the investors in various financial instruments such as

equity shares, government securities, bonds, debentures and so on. Each investor gets units, which

represent a portion of the holding of the fund..

e)Gold

Of all the precious metals used for investments, gold is the most popular. Investors generally buy gold as

a hedge or safe haven against any economic, political, social, or currency based crises. These crises

include investment market declines, burgeoning national debt, currency failure, inflation, war and social

unrest,

g) Real Estate

With the growth of our economy, earnings of the people have increased significantly and that has

consequently generated a huge demand for the properties in the country. This demand is growing by

the day, and has made people sit up and think about buying property as an investment. This has

consequently, led to an increase in the demand for the property. When a person buys a property as an

investment, it becomes a business and hence should be devoid of any emotion.

h) Bank deposits

Investments in bank through vehicles such as savings bank account and fixed deposits are a rather

common investment theme amongst the people of India. Bank deposits are considered to be fairly safe,

i) Forex

Foreign Currency Exchange trade is a trade where one country traded for another. The forex market is

the largest financial market in the world where trading is always done in pairs. All trades result in the

simultaneous buy of one currency and sale of another. Trade takes place around the clock any

centralized location with the main players being large banks, central banks, currency speculators,

multinational corporates, governments and other financial service institutions and markets. Forex

market is highly liquid by nature. j) Commodity

The FCRA Contracts (Regulation) Act, 1952 defines goods as every kind of moveable property other

than actionable claims, money, and securities.

Futures trading are in the goods or commodities that are permitted to be traded by the Central

Government. At present, all goods and products of agricultural (including plantation),mineral and fossil

origin, are allowed for futures trading under the auspices of the commodity exchange recognized under

the FCRA.

k) Debt instruments

Debt instrument represents a contract whereby one party lends money to another, on predetermined

terms. This is done with regard to the rate and periodicity of interest and the repayment of principal

amount by the borrower to the lender. In the Indian securities markets, the term bond is used for debt

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instruments issued by the central and state governments, and public sector organizations and the term

debenture is used for instruments issued by private corporate sector.

Asset allocation

To make a portfolio healthy there should be diversification across asset classes in order to facilitate

better returns. The assets should be allocated in the right proportion according to the investment

objective, age, income level, risk taking ability and time horizon of investment.

The investments should be selected from companies which have a good growth potential to enhance

the value of the portfolio in future and to enable the client to meet his financial goals; and also to enjoy

the fruits of good investments at the time when he has stopped working. The portfolio should be

readjusted according to the fluctuations in the equity market and debt markets, and changes in the

circumstances of the investor.

A healthy investment portfolio can be created only when utmost care is taken in choosing the right kind

of assets, in the right proportion, at the right time, and in the right manner. Asset allocation is the right

strategy of investing. The asset allocation pattern has to be reviewed regularly and if there is a need for

re-balancing, it should be done without hesitation.

Risk:

The chance that an investment's actual return will be different than expected. Risk includes the

possibility of losing some or all of the original investment. Different versions of risk are usually measured

by calculating the standard deviation of the historical returns or average returns of a specific

investment. A high standard deviation indicates a high degree of risk.

Many companies now allocate large amounts of money and time in developing risk management

strategies to help manage risks associated with their business and investment dealings. A key

component of the risk management process is risk assessment, which involves the determination of the

risks surrounding a business or investment.

Types of risks:

a.Interest rate risk: Interest rate risk is the variability in a securitys return, resulting from changes in the

level of interest rate. Other things being equal, security price moves inversely to interest rates. The

reason for this is the valuation of securities. This risk affects bondholders more than equity investors.

b.Market risk: Market risk refers to the .variability of returns due to fluctuations in the securities market.

All securities are exposed to market risk but equity shares are most affected. This risk includes a wide

range of factors, from the securities themselves to other factors like depressions, wars, politics etc.

c.Inflation risk: With a rise in the inflation, there is a reduction of purchasing power hence, this is also

referred to as purchasing power risk. This risk is also directly related to interest rate risk, as interest

rates go up with inflation.

d.Business risk: This refers to the risk of doing business in a particular industry or environment. It gets

transferred to the investors who invest in the business or company.

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e. Financial risk: Financial risk arises when companies resort to using financial leverage, or in other

words, they make use of debt financing. The more company resorts to debt financing, the greater is

their financial risk.

f. Liquidity risk: This risk is associated with the secondary market in which the particular security is

traded. A security which can be bought or sold quickly without significant price concession is considered

liquid. The greater the uncertainty about the time element and the price concession, the greater the

liquidity risk. Securities which have ready markets like treasury bills have lesser liquidity risk.

Investor

An individual who commits money to investment products with the expectation of financial return.

Generally, the primary concern of an investor is to minimize risk while maximizing return, as opposed to

a speculator, who is willing to accept a higher level of risk in the hopes of collecting higher-than-average

profits.

a. Value investors

These investors try to pick stocks at a bargain and hold it for many years. Value investors usually do not

get caught up in frequent market ups and down. In this case, the frequency of investment is very low

and the investor waits to get maximum gain from investments.

They average their holdings when price falls unless they find some company specific risks.

b. Value averaging investor:

This is an art of blending trading with investment. For example, the trader will buy nifty stocks or blue

chip stocks at its supports, usually with principle of 30:30:40 in mind.

Second buy is sold when it reaches the price of first buy. Similarly third buy is sold when it reaches the

second buy levels. This work well with blue chip companies since these stocks usually moves in wide

range. Value average investing is a continuous process and has moderate risk,

c. Systematic investment:

This strategy is suitable for majority of retails investors. Since the investment takes place in regular

intervals with same amount, market entry becomes simple and in the long run the average price of

holding remains at lower end. When the price is go down the investor gets more number of shares, this

helps to keep the average price low.

d. Leverage trader:

A person who trades on margin, takes buy or sell decisions very frequently, intraday or in few days of

time. He also uses derivatives for speculation. The risk is very high at the same time the trader manage

his risks by technical research. The trader also needs to be disciplined in his trading approach and should

use strict stop loss while trading. Since it is a leverage trade, minimum capital is advised to deploy to this

pattern of trading. Also with this method of trading, risk of losing capital is high.

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Investor profile

An investor profile is a reflection of an investor goals and objectives. It defines how much risk someone

is willing to accept and also the kinds of rewards or returns that he is expecting. Based on this profile, an

investor and a financial advisor can together determine where to allocate funds, because each asset

class carries a different level of risk. An investor profile dictates how much capital goes to stocks, bonds,

and other asset classes, and how much should remain in cash.

Certain criteria determine an investor's profile. Often, a financial advisor will ask a client to fill out an

investor profile questionnaire. The purpose is to find out basic information such as the amount of

money available to invest, when the funds will be needed, what the funds will be used for, and the age

of an investor. An investor who is close to retirement, for example, will have a shorter investment time

horizon than someone who is in their 20s or 30s.

The way an investor handles loss also plays into his investor profile. If a portfolio declines 20% in one

year's time and the investor uses this as an opportunity to purchase additional securities, his tolerance

for risk is high. If, however, he liquidates the portfolio and sells everything, there is a low risk tolerance.

There are mainly three types of investors, such as;

a. Conservative investor:

For a conservative investor, preservation of capital is most important and he wants a high level of

secured income. Capital growth on a conservative portfolio will be moderate.

b. Moderate investors;

This type of client has a balanced view on secured income and capital growth. The income from a

balanced portfolio will be better.

c. Aggressive investor;

An aggressive investor is ready to bear extra risk in the form of exposure to equity in order to get higher

returns. The aggressive portfolio can face high short term fluctuations in the portfolio value.

Wealth management

Wealth Management is a discipline that incorporates financial planning, Investment portfolio

management and a number of financial services. It is a professional service it can also encompass all

parts of a person's financial life. Wealth management is done by wealth managers. Wealth managers

can be MBAs, CFAs, certified financial planners or any credentialed professional money manager who

works to enhance the growth and income. Investors must have already accumulated a proper amount of

wealth for wealth management strategies to be efficient and effective. It can be provided by large

company entities, independent financial advisers or multilicensed portfolio managers. Their services

are designed to focus on high-net worth customers. Wealth Managers use their experience in estate

planning, risk management and legal specialists, to manage the holdings of high net worth client. Wealth

managers must contain a current profile of client holdings.

Wealth management is integrated processes for helping clients to manage their wealth. It involves huge

a wide range of services and the services depend upon each investor but the condition is that services

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should include investment management, financial planning, retirement, Estate planning, tax planning,

debt management and cash flow. It is based on the long term relationship with the customer.

It results in deeper customer relationship which leads to increased profitability and more client referrals.

Wealth management offers wealth managers the opportunity to cross-sell a huge range of services and

products to each customer as appropriate. Wealth management is an emerging sector.

Features of Wealth Management:

Allows customer to review risk profiles.

Track holdings against model portfolios from returns.

Captures Customers details and risk profile.

On approval by client they execute financial plans.

Based on the advanced algorithms they provide tax coverage, education and insurance.

Interfaces with banks, portfolios management systems, price vendors and other agencies.

Provides dynamic search.

Document Management.

Dynamic user access control.

Portfolio

A collection of investments all owned by the same individual or organization. These investments often

include stocks, which are investments in individual businesses; bonds, which are investments in debt

that are designed to earn interest; and mutual funds, which are essentially pools of money from many

investors that are invested by professionals or according to indices.

Portfolio Investment

Portfolio investment is the pool of different investments by which an investor bets to make a profit

while aiming to preserve the invested (principal) amount. These investments are chosen generally on

the basis of different risk-reward combinations: from low risk, low yield (gilt edged) to 6high risk, high

yield (junk bonds) ones; or different types of income streams: steady but fixed, or variable but with

potential for growth. It is the acquisition of bonds (of more them twelve months to maturity) or of

shares in a company, domestic or foreign, for investing purpose only. Portfolio investment carries a

share in profit and dividends but stop of bringing a say in how the business is run.

Types of portfolio investment

In general there are two different kinds of investment ways, direct investment and portfolio investment

Direct investment is done by embed capital investment in to real assets, such as opening of factories,

infrastructure projects, setting up some financial companies and others.

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SYSTEMATIC INVESTMENT PLAN or SIP

It has been observed that stocks with good fundamentals are considered one of the best investment

avenues. Historically investment in equity stocks has given phenomenal returns amongst all the other

asset classes if investment was done with discipline & with long term time horizon.

Selection of stocks and decision of the right price to enter is an integral part of equity investment and

this is the step where most of the investors falter. Equity Systematic Investment Plan (SIP) is an

instrument which helps you avoid the risk of timing the markets and facilitate wealth creation in a

disciplined manner by averaging cost of Investments. Small savings create the big corpus for future. Let's

find out what a SIP is and what are its benefits.

What is SIP?

Systematic Investment Plan enables you to build a portfolio over a longer time horizon with small

investments at regular intervals reducing the risk of market volatility. You can choose between Quantity

based and Amount based SIPs in Stocks, Mutual Funds, ETFs and Gold.

Amount Based and Quantity Based SIP

Amount based SIP - It's a type wherein a fixed amount (decided by you) is invested in your selected

share at pre- defined frequency.

Formula for calculation of Quantity is SIP Amount / Market price of the share. Any fractional value will

be ignored and order will be placed for the remaining quantity.

Is Systematic Investment Plan (SIP) better than lump sum investment? Systematic Investment Plan

(SIP) is better than lump sum investment as investors get security from fluctuations in the market. When

there is a bear market, then you get more units through SIP because NAV is at its lowest level during

that period, and vice-versa. Thus it brings a balanced average NAV of units purchased at times of bear

and bull market. Thus SIP is considered to be less risky. Mostly, you get facility of waived exit load in SIP.

On the other hand, high return could not be received from Systematic

Investment Plan (SIP) at times of bull market due to low invested amount. Lump sum is based on

principle of' high risk-high return'.

Which funds offer Systematic Investment Plan (SIP)?

Equity fund, date fund or sectorial funds allow you to invest in all categories through route of Systematic

Investment Plan (SIP). But these plans cannot be used in ETF. Thus mutual fund offers has found a way

to resolve this matter. Mutual fund house raises gold fund and invest in gold ETF. Thus it works like a

feeder fund.

SIP works on the principle of regular investments and brings the power of compounding to your forth. It

removes tensions and uncertainty from your investment plan by making it a mechanical boring process.

It inculcates the habit of regular savings and does not encourage timing and speculation in the markets.

All these are correct and accepted facts. But, don't forget that SIP is just another method of investing, it

is a vehicle not the final destination - it may pass through straight road or bumpy roads - it may lead you

to your destination is a lesser or sometimes higher time frame - and sometimes it may even not lead you

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to your destination by derailing your plan. SIP is just a method of getting on to the investment vehicle to

reach your destination - if the vehicle you choose is incorrect - whichever method you may get in- there

is less likelihood of you reaching your destination. Therefore, the next time when a mutual fund or

distributor or financial planner advises you that SIPs are the safest route to invest in equities then

remember that they are not telling lies - it is safest route but not for you the investor but for their own

selves.

Interpretation

The data analysis is done with the perspective of achieving the objective of the study. CAGR and IRR

methods are used for the purpose of the study.

TOOLS USED FOR ANALYSIS

The calculation of return for lump sum investments are found by using the compounded annual growth

rate (CAGR) method, The year-over-year growth rate of an investment over a specified period of time.

CAGR Defined

The concept of CAGR is relatively straightforward and requires only three primary inputs: an

investments beginning value, ending value, and the time period. Online tools, including Investopedias

CAGR calculator, will give the CAGR when entering these three values. The CAGR represents the growth

rate of an initial investment assuming it is compounding by the period of time specified. The compound

annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is

the number of years in the period being considered.

Specifically, the formula is:

Beginning Value

In the case of SIP investments, as there are multiple cash outflows and a final cash inflow at the end, the

rate of return is calculated using the internal rate or return (IRR) method.

BETA

It is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns, also known as beta coefficient.." Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market and A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a

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stock's beta is 1.2, it's theoretically 20% more volatile than the market. Many utilities stocks have a beta of less than 1. Conversely, most high-tech, Nasdaq-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk. In finance, the Beta () of a stock or portfolio is a number describing the correlated volatility of an asset in relation to the volatility of the benchmark that said asset is being compared to. This benchmark is generally the overall financial market and is often estimated via the use of representative indices, such as the S&P 500. Some interpretations of beta are explained in the following table.

Value

of Beta

Interpretation Example

< 0 Asset generally moves in the opposite

direction as compared to the index

Gold, which often moves opposite to the

movements of the stock market

= 0 Movement of the asset is uncorrelated

with the movement of the benchmark

Fixed-yield asset, whose growth is unrelated to

the movement of the stock market

0 < <

1

Movement of the asset is generally in

the same direction as, but less than the

movement of the benchmark

Stable, "staple" stock such as a company that

makes soap. Moves in the same direction as the

market at large, but less susceptible to day-to-

day fluctuation.

= 1 Movement of the asset is generally in

the same direction as, and about the

same amount as the movement of the

benchmark

A representative stock or a stock that is a strong

contributor to the index itself.

> 1 Movement of the asset is generally in

the same direction as, but more than the

movement of the benchmark

Volatile stock, such as a tech stock, or stocks

which are very strongly influenced by day-to-

day market news.

BETA = COVARINACE (STOCK VERSUS MARKET RETURN) VARIANCE OF THE STOCKMARKET Beta depends on two factors: the relative volatility of the stock's returns and the index's returns, and the correlation of stock's returns and the index's returns; the product of these two factors is the stock's beta

ALPHA

Alpha is a measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha. The abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM).

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Alpha is one of five technical risk ratios; the others are beta, standard deviation, R-squared, and the

Sharpe ratio. These are all statistical measurements used in modern portfolio theory (MPT). All of these

indicators are intended to help investors determine the risk-reward profile of a mutual fund. Simply

stated, alpha is often considered to represent the value that a portfolio manager adds to or subtracts

from a fund's return.

A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a

similar negative alpha would indicate an underperformance of 1%.

The formula of alpha is: (Sum of y)- ((b) (sum of x))]/n n= no of observations b=beta of the fund x=rate of return for the market y=rate of return for the fund

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DATA ANALYSIS & INTERPRETATION

Gender

Frequency Percent Valid Percent Cumulative Percent

Male 69 69.0 69.0 69.0

Female 31 31.0 31.0 100.0

Total 100 100.0 100.0

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Interpretation:-

From the table, out of 100 respondents, 45% of investors are between the age group of 25-40. 23% of

investors are less than 25 years of age. 14% of investors are between the age group of 40-60. And 18%

of respondents were aged above 60. Most of the investors are of the age group of 25- 45.

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Interpretation:-

Out of 100 respondents, 18% were employees. 27% were doing their own business. 31% were

professionals. 15% was housewives and 9% were students. Most of the respondents were professionals.

Occupation Type

Frequenc

y

Percent Valid

Percent

Cumulative

Percent

Employee 18 18.0 18.0 18.0

Business 27 27.0 27.0 45.0

Professiona

l

31 31.0 31.0 76.0

Housewife 15 15.0 15.0 91.0

Student 9 9.0 9.0 100.0

Total 100 100.0 100.0

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Annual Income

Frequency Percent Valid Percent Cumulative

Percent

Below 3 Lakh 21 21.0 21.0 21.0

3 - 6 Lakhs 58 58.0 58.0 79.0

6 - 10 Lakhs 13 13.0 13.0 92.0

Above 10 Lakhs 8 8.0 8.0 100.0

Total 100 100.0 100.0

Interpretation:- From the above bar diagram, most of the respondents were in the income range of 3 -6 Lakhs.

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Knowledge Level

Frequency Percent Valid Percent Cumulative

Percent

Very Limited 51 51.0 51.0 51.0

Basic Knowledge 26 26.0 26.0 77.0

Fairly Good 19 19.0 19.0 96.0

Extensive Knowledge 4 4.0 4.0 100.0

Total 100 100.0 100.0

Interpretation:- From the table, out of 100 respondents, most of the people have very limited knowledge about investment. Only very few have extensive knowledge about various investment avenues.

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Interpretation:-

From the table, 59% of the sample was value investors. 17% of the investors were value averaging

investors. 24% of the respondents were systematic investors

Investor Profile

Frequency Percent Valid

Percent

Cumulative

Percent

Systematic Investor 24 24.0 24.0 24.0

Value Averaging Investor 17 17.0 17.0 41.0

Value Investor 59 59.0 59.0 100.0

Total 100 100.0 100.0

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Interpretation:- Risk Profile was an important characteristic that needed to be taken into consideration during the

preparation of an investment portfolio. The risk was ascertained based on the requirements of the

respondents/investors.

The risk categories included Aggressive risk profile which comprised of avenues that generated high

returns but also came with high risk. Another category was the moderate risk profile which comprised of

products that provided moderate or average returns with an average risk comparatively lesser than that

in an aggressive profile. The 3 category was the conservative risk profile which comprised of avenues

that generated extremely low returns but provided guarantee and considerably lesser risk as compared

to the previous 2 categories.

Based on the analysis, people preferred the moderate risk profile the most which was understandable as

the returns were higher than a conservative risk profile and more stable than an aggressive risk profile.

Risk Profile

Frequency Percent Valid Percent Cumulative

Percent

Aggressive 15 15.0 15.0 15.0

Conservative 37 37.0 37.0 52.0

Moderate 48 48.0 48.0 100.0

Total 100 100.0 100.0

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Interpretation:-

Time horizon is an important factor which each and every investor takes into consideration before

investing. It is the period for in which the investors are willing to invest their funds in each security.

Moreover time horizon is an important factor while creating an adequate portfolio.

Most of the respondents preferred a medium term investment which provided added adequate returns,

safety and assured liquidity as and when the need arises.

Investment Duration

Frequency Percent Valid Percent Cumulative

Percent

Less than 1 year 29 29.0 29.0 29.0

1 - 3 years 37 37.0 37.0 66.0

3 - 5 years 24 24.0 24.0 90.0

Above 5 years 10 10.0 10.0 100.0

Total 100 100.0 100.0

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Several other respondents preferred short term investment as they wanted quick returns within the

shortest span of time possible.

Very few preferred long term investment as an option due to current trends in the market wherein the

changes were long lasting and of high impact in nature. Very few of the respondents even had no

preference in their time preference and responded that they would prefer it based on the securities

offered to them for investment.

Expected Returns

Frequency Percent Valid Percent Cumulative Percent

Below 8 % 4 4.0 4.0 4.0

8 - 12% 46 46.0 46.0 50.0

12 - 20% 48 48.0 48.0 98.0

Above 20%

2 2.0 2.0 100.0

Total 100 100.0 100.0

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Interpretation:- From the table, it shows that most of the population expects return between 8-20% from their investments.

Investment Avenue

Investment avenues Rank 1 Rank 2 Rank 3 Factor Loading

Percentage Weighted ranks

Bank Deposits 60 14 14 222 37 1

Shares 10 24 24 102 16 2

Mutual Funds 4 14 18 58 9 6

Postal Savings 6 14 16 62 10 5

Gold 12 20 18 94 15 3

Real Estate 8 20 14 78 13 4

Total 616 100

Interpretation

From the table, it was observed that, Bank Deposits are ranked as the most preferred investment

avenue. Shares are ranked second, Gold is ranked third followed by real estate, mutual funds, and postal

savings respectively.

This analysis shows that most of the respondents prefer the safety of bank deposits and they are not

fully aware of other investment avenues like shares, mutual funds etc. The other reason may be the

negative return on shares, mutual funds etc.

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Factors taken into consideration before investing

Objective Rank 1 Rank 2 Rank 3 Rank 4 Factor Loading

Percentage Weighted ranks

Return 58 24 11 6 332 33 1

Safety 32 40 12 14 286 29 2

Liquidity 4 20 59 24 218 22 3

Tax Savings 6 16 18 56 164 16 4

Total 100

Interpretation:-

The factors which an investor considers before investing is an integral part while preparing an adequate

portfolio. The various options of factors presented to the respondents included risk, return, liquidity

safety and tax savings.

Based on the responses, the respondents primary concern where the return they associated with each

asset. The assets should be capable of providing an adequate return for their investments. The second

majority of the respondents preferred to know what was the risk associated with each product. They

didnt consider the margin of then returns rather than the consistency of the returns which they received.

Lesser percentage of the respondents considered factors such as safety and liquidity. They preferred those

factors because they wanted cash available as and when the need or requirement arises which gave them

preference in liquidity. Those preferred safety because they wanted the capital they had invested to be

safe and not reduce but at the same time ensure more returns.

Portfolio Creation

For the purpose of the study, 50 companies listed in National Stock Exchange have been taken and out

of the 50 companies, 18 companies are identified to create a portfolio according to the 3 investor

classes i.e. Aggressive, Moderate and Conservative.

Annexure II- CNX Nifty Index : June 2015

Sr. No

Security Symbol

Security Name Industry Beta ALPHA

1 ACC ACC Ltd. CEMENT AND CEMENT PRODUCTS

0.81 0.13

2 AMBUJACEM

Ambuja Cements Ltd. CEMENT AND CEMENT PRODUCTS

0.94 0.22