A REPORT

ON
INVESTORS’ RISK
PROFILING AND ASSET
ALLOCATION
 A REPORT
ON

INVESTORS’ RISK PROFILING

AND ASSET ALLOCATION

SUBMITTED TO:
Prof. JASBIR SINGH MATHARU

SUBMITTED BY:
HARMINDER SINGH
P/MN/R/08/049
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 EDELWEISS BROKING LTD
DATE OF SUBMISSION –

TABLE OF CONTENTS

Content Page no.

Authorization 04
Acknowledgment 05
Abstract 06
Introduction to Edelweiss 07
Products and Services 06
Introduction to Stock Market 12
Main Text
Household savings 13
Asset Allocation 21
Methodology adopted and Learning 24
Collection of Primary Data 24
Collection of Secondary Data 24
Key Findings From Data 26
Client visits and Presentations 38
Customer Relationship 41
Team Handling and Training 41
Recommendations 42
Conclusions 44
References 45
Questionnaire 46
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 AUTHORISATION

This report is submitted as partial fulfilment of the requirements of MBA Program of ISB&M. Thus
it has been authorised 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 authorised to do so.
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 ACKNOWLEDGEMENT

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. Gyan Chand Jaiswal,
Area Sales Manager, Edelweiss Broking Ltd, Kolkata and my faculty guide, Prof. Jasbir Singh
Matharu, ISB&M, Kolkata for their constant support and cooperation during the course of this
project.

I have received encouragement from their end which gives me immense pleasure when i am on the
verge of completing my 14 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 order to make investing
easier for them. I have also worked as a part of sales force of the company and sold Demat
account. I have handled the team of 10 people who work on acquiring new clients for the company.
I have also handled the profile of Customer Relationship Management. I have talked to existing
HNI clients of the company followed by client visits. In the visits the main focus was to convince the
clients to do more business with the company and telling them about the benefits provided by the
company. So tracking the transformation was really interesting and worth appreciating.
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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

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.
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Headquarter based in Mumbai, India.

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

Designated director: Naresh Kothari.

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 sight 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.

PRODUCTS AND SERVICES:

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 a) Investment Banking
b) Institutional investment
c) Asset management
d) Wealth management
e) Private client brokerage
f) Insurance brokerage
g) 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:
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.

“In our approach lies our difference”. In a short span of six years, Edelweiss Capital’s
Institutional Equities Business (IE) has become one of the top five domestic brokerage
houses and top three derivatives desks.
Edelweiss is the only brokerage on the Street with a quant desk that provides a wide product
range, servicing all investor categories.
Its Innovative Mindset, Unparalleled Research, Agile Sales Teams, and Intensive Execution
Systems have enabled it to relentlessly service its clients in newer and different ways.
Asset Management or Investment management:
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 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 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.
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INVESTORS OF EDELWEISS LIMITED

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INTRODUCTION TO THE INDIAN STOCK MARKET

 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.
NSE

Broker
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Client
 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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 MAIN TEXT

Before delving into the studies and findings I would like to introduce the project terminologies on
the basis of which my project is based on.

What is Household savings?

Household saving is defined in the OECD's Economic Outlook as household sector saving as a per
cent of household sector disposable income.

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.

An Overview: Savings is the difference between Income and Expenditure. A high level of savings
helps the economy to progress on a continuous growth path since Investment is mainly financed out
of savings. Given the importance of savings there have been extensive studies on the behavioral and
other factors, which influence savings

The Former Patterns of Indian Household Savings: Gross 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
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 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.

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
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to mid 1980s the Indian economy was characterized by a slow growth rate of 3.5% p.a.
which changed from the mid 1980s.
 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.

D. 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.

Recent Trends in Indian Household Savings:

The primary data which is market survey in my case as well as secondary data has helped me derive
the findings on the household savings of the Kolkata based investors who form the part of my
study.
An economic climate that favours the concept of “spending beyond means”, creating an
environment that pampers the consumer, should have resulted in a drastic reduction in household
savings. But the last decade’s savings figures show that Indian households have proved otherwise.
Indian household seems to secure its interest through adequate and prudent savings in a most
conservative manner, notwithstanding the systematic discouraging policy initiatives, aping the
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West, to compel the household to blow the money. In the last decade, the interest rates on savings
 have been drastically cut, the tax incentives for savings have suffered from serious instability, and
both the capital market and the non-banking finance companies administered rude shocks to
investors. Consumerism is being consciously promoted by making available loans/credit cards with
increased options to prospective buyers.

The surprising reality is that while the `spending beyond means' as a main driver of economy no
longer seems to be working even in the West, which in relative terms has in place an adequate
social security system in our country, with no credible social security, the policy-makers seem to
favour aggressive consumerism. Such an environment, punishing savings and pampering spending,
should have resulted in drastic reduction in savings by households. But the figures of the last
decade's savings prove that our households think otherwise. Household savings have been
channeled over the past 11 years — from 1993-94 to 2003-04. The majority of the savings flowed
into bank deposits, claims on government (comprising government securities and savings),
insurance and provident and pension fund, in that order.

Bank deposits seem to be the preferred choice, consistently, despite the drastic reduction in
interest rates, from 12 per cent for a three-year term in April 1997 to 5.75 per cent in January 2005
that is halving in this period. Safety, liquidity (including availability of loan against deposits), tax
concessions (that increases the effective rate of interest) and, more important, absence of other
investment avenues are the reasons for the rise. Investment in government securities and small
savings has increased from 12.3 per cent in 1999-00 to 17.7 percent in 2003-04. Though most of
these savings lack liquidity, as they are long-term investment, and offer the highest safety to the
depositor (government guaranteed) with tax incentives.

The current rate of return offered by these schemes also negate the basic rule in financial
investment — `higher the reward' the more `riskier' the investment. This government guaranteed
savings offers returns, which together with their tax effectiveness are 2-3 per cent higher than the
unsecured private company deposits, placing return and risk in inverse proportion.

Life insurance and provident/pension fund investments have also seen a rise. Life insurance
funds growth could be for two reasons: Increased realization about the need to insure, and the
increased competition from private players in the last decade. Investment in capital market suffered
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the same fate as risky company deposits. Barring the first two years (1993-94 and 1994-95) and the
dotcom boom year 1999-2000 (where investment peaked to Rs 18,118 crore), the savings has come
 down to a third in the decade to Rs 5,699 crore in 2003-04. These include investment through
mutual funds (with the exception of UTI).

The risk-averse household has kept away from this avenue, although, the Comptroller of Capital
Issues has been replaced by SEBI (Securities and Exchange Board of India), and from 1993-94 on,
the capital market regulator has been framing regulations on various issues connected with capital
market. As the regulation became tougher and more stringent, investment came down, aggravated
by the investing community taking a beating with such mega scandals such as, Harshad Metha
and Ketan Parekh. Similarly, after the crisis in UTI, the country's single largest mutual fund, the
investors remained net sellers only.

The trends speak of an increased responsibility on one of the important components of the
mechanism responsible for servicing investors i.e. institution of stock exchange. But business trends
and other available evidences indicate that the performance of stock exchanges, particularly the
major ones did not prove to be in correspondence with the increased level of responsibilities that
resulted from important changes in new issues market.

Besides poor level of liquidity in most securities, at times the functioning and business trends of
stock exchanges tend to be influenced heavily by the forces detrimental to the interest of large
number of those investors, who put their money in corporate securities. In other words, market
influenced by these forces, prove to be detrimental to the interests of healthy saving and corporate
financing activity. Recent crash of stock exchanges is a case in point. Unrealistically high prices at
one point at time and sudden crash thereafter indicate only the weaknesses of the functioning of the
market.

In other words, these developments underline the need to improve the overall mechanism, of which
stock exchange is a part, responsible to service the increasing population of corporate securities'
holders. Efficiency of this mechanism should play an important role in serving better the investors'
base, which can prove to be a consistent source of finance for private corporate sector. Recent
happenings in capital market (like securities scam) only highlight that lack of an adequate
framework to monitor the various developments that are determining the fate of our financial sector
at large. A comprehensive examination of the role, expectations and need of increasing corporate
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security holders and evolving the suitable responses thereto at various levels (like new issues
 market, stock market, corporate sector etc.) should form the part of the attempts necessary to evolve
this desirable framework.

SEBI is doing its bit on this front and it is expected that more reforms will come out from the apex
body’s kitty. Thus, a strong and powerful framework is on the cards of India.

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
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 maximises 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
organisation, 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 organisations. Although these organisations are in the business of risk, defining an
Organisation-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 organisation’s value over a given timeframe.

RISK ALLOCATION:
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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 (i.e. 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 process. Under risk
allocation, the task of the active portfolio managers is to “beat the index” without taking more risk
than the index.
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 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.

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.
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 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-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
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people who are very risk averse or who are retired. The 25% equity component is intended to help
 investors stay ahead of inflation.

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.
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 METHODOLOGY ADOPTED FOR THE PROJECT

I.MARKET SURVEY
• A. 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.

• B. 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.

Companies visited during the project:

• India bulls securities limited

• Kotak Securities limited

• ICICI direct

• HDFC securities

• ShareKhan
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• Religare
 Key findings

I. MARKET SURVEY
A. PRIMARY DATA:
The market survey has been conducted taking 80 as the sample size. Results of the same are as
follows:

1. Out of the 80 respondents 75 were male and remaining 5 were Females.

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

4. 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.
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 300000.

5. 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
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 growing sectors.

6. 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
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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.

7. 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).
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 PREFERREDBROKINGHOUSE
Edelweiss
Religare 4%
Kotak Mahindra 6%
6% Sare Khan
India Infoline 22%
10%
MotilalOswal
18%

ICICIDirect.com
14% Indial Bulls
20%

8. The following pie chart shows the reason for its favourism and it is found that its brokerage
charges are very competitive in comparison to others. Besides this in interaction with the
respondents I discovered that apart from the brokerage share khan is preferred for its online
trading as well as the online portal provided by it. Though Kotak Mahindra also provides the
online trading and online portal but its brokerage charge is high. ICICIDirect.com charges
the highest brokerage i.e. minimum brokerage is Rs. 30 and normal brokerage charge is Rs.
7.50 per 1000 rupees. Even Edelweiss also provides online trading and it will launch its live
portal within 1 month but when it is targeting retail segment then it will make its brokerage
charge more competitive in its different brokerage plans.
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 REASONSFORITSFAVOURISM
Margin Trading
21%

Brokerage
37%

Online Trading
15%
Reaserch Services
9% 18%

9. 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.

REASONFORTHEDOWNFALLOFSENSEX
Negative
Market
FROM 21k TO 8k Adverse Capital
Sentiments Shock
9% 4%
Credit Crunch Constant
7% Depreciation of
Home Currency
14%
Sub Prime Crisis
44%
Bankruptcy of Big
Financial
Institutions
22%
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 10. The graph below 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.

11. 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
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 market.

Market risks such

as inflation rate GREATESTWORRYABOUTINDIAN
risk, interest rate
risk, terrorism STOCKMARKET
activity, instability
of the government
14%
Unfair practicesof
brokers Too much volatility
10% 36%
Corporate
mismanagement
16% Price manipulation
24%

12. 65% of the total respondents were satisfactory with the regulation of SEBI over capital
market and 25% were somewhat satisfactory. 10% of the respondents were of the view of
cant say and the reason behind their response was that in the recent past some of the
decisions made by SEBI were changed by SAT. So the decisions changed by the SAT puts a
question on the decision making of SEBI and its fairness in making the decisions.
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 13. When respondents were asked about their preferred investment tool, it was found that
most of them preferred to invest in NFO (Mutual Funds) mainly because the risk is less and
rate of return is high. Apart from this investing in Mutual Funds is tax exempted. IPOs are
still preferred investment tools but since the Sensex is down so people are not too much
confident to invest in IPOs but again when the market will recover IPOs will be again
preferred as a good investment tool. At present people want to invest in equities but they
don’t want to invest heavily in equities. Apart from this while investing in equities they
want to invest mostly in the defensive stocks to minimize their risk.

BETTERINVESTMENT ALTERNATIVE

Investing IPOs
FPO 10% 24%
13%

EQUITY
NFO 16%
37%
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 14. 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 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.

INVESTMENTAT PRESENT
Insurance Policies
18%
Bank FDs
Govt. Securities 26%
6%
PPF
4% Equities
Mutual Funds 16%
30%

15. During survey it was found that respondents are of conservative approach and 71% of the
total respondents were not willing to take any risk or very less risk.
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 16. The main objective of investment is income generation and it is followed by retirement
benefits.
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 17. Where do the investors get the information about the market and which source is the most
trusted one when it comes to stock market, the survey helped in gather that information from
the market. The results of the same are as follows:

RELAIBLESOURCEOFINFORMATION FOR
CAPITALMARKET
References
Brokers 4%
11%
Print Media
27%
Websites
23%
Electronic Media
35%

B. Key findings from the company visits:

HDFC securities
Strengths:
 Own banking house within the company (fast fund transfer)

 Flawless security system

 Handles customer queries quickly

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 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

 Flaw in providing online tickers

 Premium brokerage

Indiabulls securities
Strengths:
 Fast implementation of orders

 Real time quotes

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 Low brokerage rates

 Weaknesses:
 Delayed response to customer queries

 Delayed client instructions

• II. 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
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complaints. In case of a financial product the company personnel interact directly to the
 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 analysing the website portals of other competitors like –
- Sharekhan
- MotilalOswal
- Indiabulls
- IndiaInfoline and etc.

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 -
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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
• 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.).
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 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.

• Team Handling and Training:

During the tenure of my internship I was fortunate to be appointed the team leader and I was asked
to handle a team of 10 people under me whom I have given the guidance and training in acquiring
new clients for the company. The team consists of interns from different management institutes
such as Icfai Business School, Kolkat;, Eastern Institute of Management, Kolkata; J.D. Birla
Institute of Management, Kolkata; Kolkata Institute of Management; Kolkata Christ Academy of
Management Studies and Nalanda University of Management Studies.

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
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 which the company has to fulfil 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.

• 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.
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 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 14 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.

The 14 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.

My role in the organization was to not only perform at the personal capacity but also at the
capacity of a team who was under me. As a team leader I have been able to guide my sales
team well and given justice to the role assigned to me by the company from time to time.
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 References:
Books:
• AMFI Certification Module Workbook.
• Financial Management by Khan and Jain.
• Financial Management by Icfai University Press.
• NCFM Capital Market Module workbook.

Periodicals:
• Outlook Money – Understanding investors’ mind (Issue-Nov’08).

Web sources:
• www.franklintempletonindia.com
• www.moneycontrol.com
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• www.rediff.com
 • www.edelblue.com
• www.edelcap.com
• www.nseindia.com
• www.wikipedia.com
• www.google.com
• www.traderji.com
• www.investopedia.com
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