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TOPICS
Meaning of Portfolio Management Framework of Portfolio Management Objectives of the Study of Portfolio Management Scope of the Study Portfolio Management Phase of Portfolio Management Types Of Portfolio Management Used By Industries Investment Portfolio Management and Portfolio Theory Types Of Portfolio Management Services Available On The Investors Functions Of Portfolio Management Advantages of Portfolio Management Steps in Portfolio Management In Portfolio Management Portfolio Management Schemes (PMS) Present Scenario Prospects Of Portfolio Management Securities And Exchange Board Of India Regulations, 1993 History Of HSBC Bank Financial Services Provided By HSBC Bank Systematic Investment Plan (SIP) Portfolio Management of HSBC Banks HSBC Portfolio Planner - Planning for your future Portfolio Management Of HSBC Bank SWOT Analysis Of HSBC Bank Research Methodology Recommendations

MEANING OF PORTFOLIO MANAGEMENT

A collection of various company shares, fixed interest securities or money-market instruments. People may talk grandly of 'running a portfolio' when they own a couple of shares but the characteristic of a serious investment portfolio is diversity. It should show a spread of investments to minimize risk - brokers and investment advisers warn against 'putting all your eggs in one basket'. A portfolio is an appropriate mix of or collection of investments held by an institution or a private individual. It is a collection of securities, since it is rarely desirable to invest the entire funds of an individual or an institution in a single security. Portfolio management service (PMS) is a type of professional service offered by portfolio managers to their client to help them in managing their money in less time. Portfolio managers manage the stocks, bonds, and mutual funds of clients considering their personal investment goals and risk preferences. In addition to money, the portfolio managers manage the portfolio of stocks, bonds, and mutual funds.

Portfolio analysis considers the determination of future risk and return in holding various blends of individual securities.

 Portfolio expected return is a weighted average of the expected return of individual

securities but portfolio variance, in short contrast, can be something less than a weighted average of security variances. As a result an investor can sometimes reduce portfolio risk by adding security with greater individual risk than any other security in the portfolio. This is because risk depends greatly on the co-variance among return of individual securities. Since portfolios expected return is a weighted average of the expected return of its securities, the contribution of each security to the portfolios expected returns depends on its expected returns and its proportionate share of the initial portfolios market value. 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.

FRAME WORK OF PORTFOLIO MANAGEMENT

The Project Portfolio Management Framework was developed through the Innovations programmed by Cambridge shire County Council and partners. It is designed to help local
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authorities improve the management of change through selecting and running an optimum set of projects and programmes.The framework was developed in response to the demand from councils for support and guidance for managing, delivering and sustaining successful business change.

Whats included in the Framework?

Unlike project and programme management, there isnt a de facto standard for project portfolio management and in local authorities the practice and experience is relatively new. The framework proposes a staged approach and has been designed to be suitable for authorities of any size. It provides an approach to help local authorities develop their own portfolio management function.

The Framework provides:

An approach towards the promotion of the benefits of project portfolio management . A process for developing an understanding of the barriers in establishing a project portfolio management approach A system for identifying the processes and capabilities required to be effective at different levels of maturity. An approach to understanding and developing an organizational structure and governance arrangements. Having access to tools and guidance that will support the development of the required capabilities, infrastructure and processes. Reflecting, reviewing and planning based on experiential learning. A project portfolio management function helps to ensure that the citizen gets the maximum value from each pound spent on projects and programmes.

OBJECTIVES OF THE STUDY OF PORTFOLIO MANAGEMENT

The objectives of portfolio management can be categorized as follows:

To observe the rate of fluctuations of selected companies. The amount of risk involved in the securities of the sample companies. To make comparative study of risk and return of the sample companies.

SCOPE OF THE STUDY OF PORTFOLIO MANAGEMENT

The study covers all the information related to the Portfolio management of HSBC bank it also covers the investor risk in the investment in various securities. Identification of the investors objectives, constraints and preferences. Strategies are to be developed and implemented in tune with investment policy formulated. To reduce the future risk in advance. To earn maximum profit in the securities. Review and monitoring of the performance of the portfolio. Finally the evaluation of the portfolio. The purpose of the study is to know the fluctuations in the share price of sample companies. The purpose of the study is to help the unknown investors for investing in securities. To update the portfolio reviewed and adjusted from time to time in tune with market condition. To analyses the risk and return on securities. To test portfolio strategies before taking decisions

RISK OF PORTFOLIO MANAGEMENT:

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Risk is a concept that denotes a potential negative impact to an asset or some characteristic of value that may arise from some present process or future event. In everyday usage, risk is often used synonymously with the probability of a known loss. Risk is uncertainty of the income / capital appreciation or loss of the both. The total risk of an individual security comprises two components, the market related risk called systematic risk also known as undiversifiable risk and the unique risk of that particular security called unsystematic risk or diversifiable risk.

TYPES OF RISKS :
Unsystematic risk) risk (company

Systematic risk (market)

Examples: Interest rate risk Market risk Inflation risk Demand Government policy

Examples: Labor troubles Liquidity problems Raw materials risks Financial risks Management problems

PHASES OF PORTFOLIO MANAGEMENT

FIVE PHASES CAN BE IDENTIFIED IN THIS PROCESS: Security Analysis; Portfolio Analysis; Portfolio Selection; Portfolio Revision; Portfolio Evaluation.

Security Analysis:
An examination and evaluation of the various factors affecting the value of a security. Security Analysis stands for the proposition that a well-disciplined investor can determine a rough value for a company from all of its financial statements makes purchases when the market inevitably under-prices some of them, earn a satisfactory return, and never be in real danger of permanent loss.

Portfolio Analysis:
Analysis phase of portfolio management consists of identifying the range of possible portfolios that can be constituted from a given set of securities and calculating their return and risk for further analysis.

Portfolio Selection:
The proper goal of portfolio construction is to generate a portfolio that provides the highest returns at a given level of risk. A portfolio having this characteristic is known as an efficient portfolio. The inputs from portfolio analysis can be used to identify the set of efficient portfolios. From this set of efficient portfolios, the optimal portfolio has to be selected for investment. Harry Markowitz portfolio theory provides both the conceptual framework and analytical tools for determining the optimal portfolio in a disciplined and objective way.
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Portfolio Revision:
Having constructed the optimal portfolio, the investor has to constantly monitor the portfolio to ensure that it continues to be optimal. Portfolio revision is as important as portfolio analysis and selection.

Portfolio Evaluation:
It is the process, which is concerned with assessing the performance of the portfolio over a selected period of time in terms of returns and risk. This involves quantitative measurement of actual return realized and the risk born by the portfolio over the period of investment. It provides a feedback mechanism for improving the entire portfolio management process.

IMPORTANT POINTS OF PORTFOLIO MANAGEMENT:

Portfolio is a collection of asset. The asset may be physical or financial like Shares Bonds, Debentures, and Preference Shares etc. The individual investor or a fund manager would not like to put all his money in the shares of one company, for that would amount to great risk. Main objective is to maximize portfolio return and at the same time minimizing the portfolio risk by diversification. Portfolio management is the management of various financial assets, which comprise the portfolio. According to Securities and Exchange Board of India (Portfolio manager) Rules, 1993; portfolio means the total holding of securities belonging to any person. Designing portfolios to suit investor requirement often involves making several projections regarding the future, based on the current information. When the actual situation is at variance from the projections portfolio composition needs to be changed.
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 One of the key inputs in portfolio building is the risk bearing ability of the investor. Portfolio management can be having institutional, for example, Unit Trust, Mutual Funds, Pension Provident and Insurance Funds, Investment Companies and nonInvestment Companies. Institutional e.g. individual, Hindu undivided families, Non-investment Companys etc. The large institutional investors avail services of professionals. A professional, who manages other peoples or institutions investment portfolio with the object of profitability, growth and risk minimization, is known as a portfolio manager. The portfolio manager performs the job of security analyst. In case of medium and large sized organization, job function of portfolio manager and security analyst are separate. In the past one-decade, significant changes have taken place in the investment climate in India. Portfolio management is becoming a rapidly growing area serving a broad array of investors- both individual and institutional-with investment portfolios ranging in asset size from thousands to cores of rupees. Emergence of institutional investing on behalf of individuals. A number of financial institutions, mutual funds, and other agencies are undertaking the task of investing money of small investors, on their behalf. Growth in the number and the size of invisible fundsa large part of household savings is being directed towards financial assets. Increased market volatility- risk and return parameters of financial assets are continuously changing because of frequent changes in governments industrial and fiscal policies, economic uncertainty and instability. Greater use of computers for processing mass of data. Professionalization of the field and increase use of analytical methods (e.g. quantitative techniques) in the investment decision-making, and Larger direct and indirect costs of errors or shortfalls in meeting portfolio objectives- increased competition and greater scrutiny by investor

The basic objective of Portfolio Management is to maximize yield and minimize risk. The other objectives are as follows: Stability of Income:

An investor considers stability of income from his investment. He also considers the stability of purchasing power of income.

Capital Growth:

Capital appreciation has become an important investment principle. Investors seek growth stocks which provide a very large capital appreciation by way of rights, bonus and appreciation in the market price of a share.

Liquidity:
An investment is a liquid asset. It can be converted into cash with the help of a stock exchange. Investment should be liquid as well as marketable. The portfolio should contain a planned proportion of high-grade and readily salable investment.

Safety:
Safety means protection for investment against loss under reasonably variations. In order to provide safety, a careful review of economic and industry trends is necessary. In other words, errors in portfolio are unavoidable and it requires extensive diversification.

Tax Incentives:
Investors try to minimize their tax liabilities from the investments. The portfolio manager has to keep a list of such investment avenues along with the return risk, profile, tax implications, yields and other returns.

There Are Three Goals Of Portfolio Management:

1. Maximize the value of the portfolio 2. Seek balance in the portfolio 3. Keep portfolio projects strategically aligned

It provides a set of portfolio management tools to help achieve these goals. With multiple business units, product lines or types of development, we recommend a strategic allocation
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process based on the business plan. The Master Project Schedule provides a summary of allactive as well as proposed projects and classifies them by status (active, proposed, on-hold) and by business unit/product line to align projects with the strategic allocation. The Master Project Schedule also provides additional portfolio information to prioritize projects using either a scorecard method or the development productivity index (DPI *). In addition to this prioritization, PD-Trek provides a Risk-Reward Bubble Chart and a Project Type Pie Chart to assure balance. A Product or Technology Roadmap template is provided to help visualize platform and technology relationships to assure critical project relationships are not overlooked with this prioritization. This will allow management to develop a balanced approach to selecting and continuing with the appropriate mix of projects to satisfy the three goals.

WHAT IS PROJECT PORTFOLIO MANAGEMENT? BY DUCAN HAUGHEY, PMP

Project Portfolio Management is about more than running multiple projects. Each portfolio of projects needs to be assessed in terms of its business value and adherence to strategy. The portfolio should be designed to achieve a defined business objective or benefit. Project management guru Bob Butt rick summarized it when he said; "Directing the individual project correctly will ensure it is done right. Directing 'all the projects' successfully will ensure we are doing the right projects." While at individual project level it is important to know how each project is performing, the impact of each project on the portfolio is just as important. The following questions should be asked: Does each project contribute to the overall achievement of the portfolio? How well is each project performing? Will any project have a negative impact on other projects to come? What projects in the portfolio are dependent on others?
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 Will the successful delivery of all projects deliver the desired objective or benefit? Working at portfolio level is about working with summary or key data. It is important to avoid information overload. The detail of each project should be kept at the project team level, administered by the individual project managers. Key information should be rolled up and presented at each level within the organization as appropriate. At executive, VP level you are likely to be providing a summary of performance, progress, a measurement of estimates against actual and costs. Within almost all project portfolio management systems there is a project evaluation process. This process is used to evaluate the projects at various points during their lifecycle. At the beginning of each stage, often called a 'gate,' the responsible party evaluates the business case, asking whether it is still relevant and able to deliver the defined organizational objectives. If the answer is no, then the project should be stopped. This way the organization can ensure that they stay focused on delivering a strategy, goal or other defined benefit and that resources are deployed where they will offer the best return. PORTFOLIO MANAGEMENT ASKS SUCH QUESTIONS: Are we doing the right things? Are we doing them the right way? Are we doing them well? Are we getting the benefits? If the answer to any of these questions is no, immediate action is required to bring the portfolio back on track.

PROJECT PORTFOLIO MANAGEMENT SOFTWARE

When selecting a project portfolio management software system, organizations should use criteria based on identified needs and organizational objectives. It is advisable to start small, introducing aspects of portfolio management one element at a time. Many commercial tools can seem overwhelming at first, simply because of the large amount of functionality they offer.

THESE ARE THE KEY FEATURES OF PROJECT PORTFOLIO SYSTEM: Project evaluation process or methodology.
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 Cost and benefits measurement. Progress reporting. Communication of key project data, e.g. executive dashboard. Resource and capacity planning. Cost and benefits tracking. Project portfolio management software enables the user, usually management or executives within the organization, to review the portfolio, which will assist in making key financial and business decisions for the projects. The objective of project portfolio management is to optimize the results of the project portfolio to obtain benefits the organization wants. A good way to begin understanding what portfolio management is (and is not) may be to define the term portfolio. In a business context, we can look to the mutual fund industry to explain the term's origins. Morgan Stanley's Dictionary of Financial Terms offers the following explanation:If you own more than one security, you have an investment portfolio. You build the portfolio by buying additional stocks, bonds, mutual funds, or other investments. Your goal is to increase the portfolio's value by selecting investments that you believe will go up in price. According to modern portfolio theory, you can reduce your investment risk by creating a diversified portfolio that includes enough different types, or classes, of securities so that at least some of them may produce strong returns in any economic climate.

THIS EXPLATIONS CONTAINS A NUMBER OF IMPORTANT IDEAS SUCH AS:

A portfolio contains many investment vehicles. Owning a portfolio involves making choices -- that is, deciding what. Additional stocks, bonds, or other financial instruments to buy; when to buy; what and when to sell; and so forth. Making such decisions is a form of management. The management of a portfolio is goal-driven. For an investment portfolio, the specific goal is to increase the value. Managing a portfolio involves inherent risks.

TYPES OF PORTFOLIO MANAGEMENT USED BY INDUSTRIES INCLUDING THE FOLLOWING POINT:

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1.

Application portfolio management:

This refers to the practice of managing an entire group or major subset of software applications within a portfolio. Organizations regard these applications as investments because they require development (or acquisition) costs and incur continuing maintenance costs. Also, organizations must constantly make financial decisions about new and existing software applications, including whether to invest in modifying them, whether to buy additional applications, and when to "sell" -- that is, retire -- an obsolete software application.
2.

Product portfolio management:

Businesses group major products that they develop and sell into (logical) portfolios, organized by major line-of-business or business segment. Such portfolios require ongoing management decisions about what new products to develop (to diversify investments and investment risk) and what existing products to transform or retire (i.e., spin off or divest). Project or initiative portfolio management, an initiative, in the simplest sense, is a body of work with: A specific (and limited) collection of needed results or work products. A group of people who are responsible for executing the initiative and use resources, such as funding. A defined beginning and end. Managers can group a number of initiatives into a portfolio that supports a business segment, product, or product line. These efforts are goal-driven; that is, they support major goals and/or components of the enterprise's business strategy. Managers must continually choose among competing initiatives (i.e., manage the organization's investments), selecting those that best support and enable diverse business goals (i.e., they diversify investment risk). They must also manage their investments by providing continuing oversight and decision-making about which initiatives to undertake, which to continue, and which to reject or discontinue.

INVESTMENT PORTFOLIO MANAGEMENT AND PORTFOLIO THEORY:

Portfolio theory is an investment approach developed by University of Chicago economist Harry M. Markowitz (1927 - ), who won a Nobel Prize in economics in 1990. Portfolio theory
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allows investors to estimate both the expected risks and returns, as measured statistically, for their investment portfolios. Markowitz described how to combine assets into efficiently diversified portfolios. It was his position that a portfolio's risk could be reduced and the expected rate of return could be improved if investments having dissimilar price movements were combined. In other words, Markowitz explained how to best assemble a diversified portfolio and proved that such a portfolio would likely do well.

A.

THERE ARE TWO TYPES OF PORTFOLIO STRATEGIES: Passive Portfolio Strategy:

A strategy that involves minimal expectation input, and instead relies on diversification to match the performance of some market index.
B.

Active Portfolio Strategy:

A strategy that uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly

TYPES OF PORTFOLIO MANAGEMENT SERVICES AVAILABLE ON THE INVESTORS:

1.

The Discretionary Portfolio Management Services (DPMS):

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 In this type of services, the client parts with his money in favor of manager, who in return, handles all the paper work, makes all the decisions and gives a good return on the investment and for this he charges a certain fees. In this discretionary PMS, to maximize the yield, almost all portfolio managers parks the funds in the money market securities such as overnight market, 182 days treasury bills and 90 days commercial bills. Normally, return on such investment varies from 14 to 18 per cent, depending on the call money rates prevailing at the time of investment.

2.

The Non-Discretionary Portfolio Management Services:

The manager function as a counselor, but the investor is free to accept or reject the managers advice; the manager for a services charge also undertakes the paper work. The manager concentrates on stock market instruments with a portfolio tailor made to the risk taking ability of the investor.

FUNCTIONS OF PORTFOLIO MANAGEMENT

The basic purpose of portfolio management is to maximize yield and minimize risk. Every investor is risk averse. In order to diversify the risk by investing into various securities following functions are required to be performed.

The Functions Undertaken By The Portfolio Management Are As Follows:

To frame the investment strategy and select an investment mix to achieve the desired investment objective; To provide a balanced portfolio which not only can hedge against the inflation but can also optimize returns with the associated degree of risk; To make timely buying and selling of securities. To maximize the after-tax return by investing in various taxes saving investment instruments.

ADVANTAGES OF PORTFOLIO MANAGEMENT

Individuals will benefits immensely by taking portfolio management services for the following reason: -

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 Whatever may be the status of the capital market; over the long period capital markets have given an excellent return when compared to other forms of investment. The return from bank deposits, units etc., is much less than from stock market. The Indian stock markets are very complicated. Though there are thousands of companies that are listed only a few hundred, which have the necessary liquidity. It is impossible for any individual wishing to invest and sit down and analyses all these intricacies of the market unless he does nothing else. Even if an investor is able to visualize the market, it is difficult to investor to trade in all the major exchanges of India, look after his deliveries and payments. This is further complicated by the volatile nature of our markets, which demands constant reshuffling of port.

BASIC CONCEPTS AND COMPONENETS OF PORTFOLIO MANAGEMENT

Now that we understand some of the basic dynamics and inherent challenges organizations face in executing a business strategy via supporting initiatives, let's look at some basic concepts and components of portfolio management practices.

1. The Portfolio:
First, we can now introduce a definition of portfolio that relates more directly to the context of our preceding discussion. In the IBM view, a portfolio is: One of a number of mechanisms, constructed to actualize significant elements in the Enterprise Business Strategy. It contains a selected, approved, and continuously evolving, collection of Initiatives which are aligned with the organizing element of the Portfolio, and, which contribute to the achievement of goals or goal components identified in the Enterprise Business Strategy. The basis for constructing a portfolio should reflect the enterprise's particular needs. For example, you might choose to build a portfolio around initiatives for a specific product, business segment, or separate business unit within a multinational organization.

2. The Portfolio Structure: As we noted earlier, a portfolio structure identifies and contains a number of portfolios. This structure, like the portfolios within it, should align with significant planning and results boundaries, and with business components. If you have a product-oriented portfolio structure, for
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example, then you would have a separate portfolio for each major product or product group. Each portfolio would contain all the initiatives that help that particular product or product group contribute to the success of the enterprise business strategy. 3. The Portfolio Manager: This is a new role for organizations that embrace a portfolio management approach. A portfolio manager is responsible for continuing oversight of the contents within a portfolio. If you have several portfolios within your portfolio structure, then you will likely need a portfolio manager for each one.

The Responsibilities (and authority) of portfolio manager will vary from one organization to another but the basics are as follows:
One portfolio manager oversees one portfolio. The portfolio manager provides day-to-day oversight. The portfolio manager periodically reviews the performance of, and conformance to expectations for, initiatives within the portfolio. The portfolio manager ensures that data is collected and analyzed about each of the initiatives in the portfolio. The portfolio manager enables periodic decision making about the future direction of individual initiatives.

4. Portfolio Reviews and Decision Making: As initiatives are executed, the organization should conduct periodic reviews of actual (versus planned) performance and conformance to original expectations. Typically, organization managers specify the frequency and contents for these periodic reviews, and individual portfolio managers oversee their planning and execution. The reviews should be multi-dimensional, including both tactical elements (e.g., adherence to plan, budget, and resource allocation) and strategic elements (e.g., support for business strategy goals and delivery of expected organizational benefit. A significant aspect of oversight is setting multiple decision points for each initiative, so that managers can periodically evaluate data and decide whether to continue the work. These "continue/change/discontinue" decisions should be driven by an understanding (developed via the periodic reviews) of a given initiative's continuing value, expected benefits, and strategic contribution, Making these decisions at multiple points in the initiative's lifecycle helps to ensure
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that managers will continually examine and assess changing internal and external circumstances, needs, and performance. 5. Governance: Implementing portfolio management practices in an organization is a transformation effort that typically involves developing new capabilities to address new work efforts, defining (and filling) new roles to identify portfolios (collections of work to be done), and delineating boundaries among work efforts and collections. Implementing portfolio management also requires creating a structure to provide planning, continuing direction, and oversight and control for all portfolios and the initiatives they encompass. That is where the notion of governance comes into play. The IBM view of governance is: An abstract, collective term that defines and contains a framework for organization, exercise of control and oversight, and decision-making authority, and within which actions and activities are legitimately and properly executed; together with the definition of the functions, the roles, and the responsibilities of those who exercise this oversight and decision-making.

Portfolio Management Governance Involves Multiple Dimensions, Including:

Defining and maintaining an enterprise business strategy.

Defining and maintaining a portfolio structure containing all of the organization's

initiatives (programs, projects, etc.). Reviewing and approving business cases that propose the creation of new initiatives. Providing oversight, control, and decision-making for all ongoing initiatives. Ownership of portfolios and their contents. Each of these dimensions requires an owner -- either an individual or a collective -- to develop and approve plans, continuously adjust direction, and exercise control through periodic assessment and review of conformance to expectations. A good governance structure decomposes both the types of work and the authority to plan and oversee work. It defines individual and collective roles, and links them to an authority scheme. Policies that are collectively developed and agreed upon provide a framework for the exercise of governance. The complexities of governance structures extend well beyond the scope
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of this article. Many organizations turn to experts for help in this area because it is so critical to the success of any business transformation effort that encompasses portfolio management. For now, suffice it to say that it is worth investing time and effort to create a sound and flexible governance structure before you attempt to implement portfolio management practices. 6. Portfolio Management Essentials: Every practical discipline is based on a collection of fundamental concepts that people have identified and proven (and sometimes refined or discarded) through continuous application. These concepts are useful until they become obsolete, supplanted by newer and more effective ideas.

For Example:
In Roman times, engineers discovered that if the upstream supports of a bridge were shaped to offer little resistance to the current of a stream or river, they would last longer. They applied this principle all across the Roman Empire. Then, in the Middle Ages, engineers discovered that such supports would last even longer if their downstream side was also shaped to offer little resistance to the current. So that became the new standard for bridge construction. Portfolio management, like bridge-building, is a discipline, and a number of authors and practitioners have documented fundamental ideas about its exercise. Recently, based on our experiences with clients who have implemented portfolio management practices and on our research into the discipline, we have started to shape an IBM view of fundamental ideas around portfolio management. We are beginning to express this view as a collection of "essentials" that are, in turn, grouped around a small collection of portfolio management themes.

For Example:
One of these themes is initiative value contribution. It suggests that the value of an initiative (i.e., a program or project) should be estimated and approved in order to start work, and then assessed periodically on the basis of the initiative's contribution to the goals and goal components in the enterprise business strategy. These assessments determine (in part) whether the initiative warrants continued support.

STEPS IN PORTFOLIO MANAGEMENT

1.

Identification Of The Objectives:

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 The starting point in this process is to determine the characteristics of the various investments and then matching them with the individuals need and preferences. All the personal investing is designed in order to achieve certain objectives. These objectives may be tangible such as buying a car, house etc. and intangible objectives such as social status, security etc. Similarly, these objectives may be classified as financial or personal objectives. Financial objectives are safety, profitability and liquidity. Personal or individual objectives may be related to personal characteristics of individuals such as family commitments, status, depends, educational requirements, income, consumption and provision for retirement etc.

2.

Formulations Of Portfolio Strategy:

The aspect of Portfolio Management is the most important element of proper portfolio investment and speculation. While planning, a careful review should be conducted about the financial situation and current capital market conditions. This will suggest a set of investment and speculation policies to be followed. The statement of investment policies includes the portfolio objectives, strategies and constraints. Portfolio strategy means plan or policy to be followed while investing in different types of assets. There are different investment strategies. They require changes as time passes, investors wealth changes, security price change, investors knowledge expands.
Therefore, the optional strategic asset allocation also changes. The strategic asset

allocation policy would call for broad diversification through an indexed holding of virtually all securities in the asset class.
3.

Selection Of Asset Mix:

The most important decision in portfolio management is selection of asset mix.
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 It means spreading out portfolio investment into different asset classes like bonds, stocks, mutual funds etc. In other words selection of asset mix means investing in different kinds of assets and reduces risk and volatility and maximizes returns in investment portfolio. Selection of asset mix refers to the percentage to the invested in various security classes.

The security classes are simply the type of securities as under:

4.

money market instrument fixed income security equity shares real estate investment international securities Once the objective of the portfolio is determined the securities to be included in the portfolio must be selected. Normally the portfolio is selected from a list of high-quality bonds that the portfolio manager has at hand. The portfolio manager has to decide the goals before selecting the common stock. The goal may be to achieve pure growth, growth with some income or income only. Once the goal has been selected, the portfolio manager can select the common stocks.

Portfolio Executions:
The process of portfolio management involves a logical set of steps common to any decision, plan, implementation and monitor. Applying this process to actual portfolios can be complex. Therefore, in the execution stage, three decisions need to be made, if the percentage holdings of various asset classes are currently different from desired holdings.

The portfolio than, should be rebalanced. If the statement of investment policy requires pure investment strategy, this is only thing, which is done in the execution stage.

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 However, many portfolio managers engage in the speculative transactions in the belief that such transactions will generate excess risk-adjusted returns. Such speculative transactions are usually classified as timing or selection decisions. Timing decisions over or under weight various asset classes, industries or economic sectors from the strategic asset allocation. Such timing decisions are known as tactical asset allocation and selection decision deals with securities within a given asset class, industry group or economic sector. The investor has to begin with periodically adjusting the asset mix to the desired mix, which is known as strategic asset allocation. Then the investor or portfolio manager can make any tactical asset allocation or security selection decision.

5.

Portfolio Revision:
Portfolio management would be an incomplete exercise without periodic review. The portfolio, which is once selected, has to be continuously reviewed over a period of time and if necessary revised depending on the objectives of investor. Thus, portfolio revision means changing the asset allocation of a portfolio. Investment portfolio management involves maintaining proper combination of securities, which comprise the investors portfolio in a manner that they give maximum return with minimum risk. For this purpose, investor should have continuous review and scrutiny of his investment portfolio. Whenever adverse conditions develop, he can dispose of the securities, which are not worth. However, the frequency of review depends upon the size of the portfolio, the sum involved, the kind of securities held and the time available to the investor. The review should include a careful examination of investment objectives, targets for portfolio performance, actual results obtained and analysis of reason for variations. The review should be followed by suitable and timely action. There are techniques of portfolio revision.
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 Investors buy stock according to their objectives and return-risk framework. These fluctuations may be related to economic activity or due to other factors. Ideally investors should buy when prices are low and sell when prices rise to levels higher than their normal fluctuations. The investor should decide how often the portfolio should be revised. If revision occurs too often, transaction and analysis costs may be high. If revision is attempted too infrequently the benefits of timing may be foregone. The important factor to take into consideration is, thus, timing for revision of portfolio.

6.

Portfolio Performance Evaluation:

Portfolio management involves maintaining a proper combination of securities, which comprise the investors portfolio in a manner that they give maximum return with minimum risk. The investor should have continues review and scrutiny of his investment portfolio. These rates of return should be based on the market value of the assets of the fund. Complete evaluation of the portfolio performance must include examining a measure of the degree of risk taken by the fund. A portfolio manager, by evaluating his own performance can identify sources of strength or weakness. It can be viewed as a feedback and control mechanism that can make the investment management process more effective. Good performance in the past might have resulted from good luck, in which case such performance may not be expected to continue in the future. On the other hand, poor performance in the past might have been result of bad luck. Therefore, the first task in performance evaluation is to determine whether past performance was good or poor. Then the second task is to determine whether such performance was due to skill or luck.
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 Good performance in the past may have resulted from the actions of a highly skilled portfolio manager. The performance of portfolio should be measured periodically, preferably once in a month or a quarter. The performance of an individual stock should be compared with the overall performance of the market.

EQUITY PORTFOLIO MANAGEMENT:

It is logical that the expected return of a portfolio should depend on the expected return of the security contained in it. There are two approaches to the selection of equity portfolio. One is technical analysis and the other is fundamental analysis. Technical analysis assumes that the price of a stock depends on supply and demand in the stock market. All financial and market information of given security is already reflected in the market price. Charts are drawn to identify price movements of a given security over a period of time. These charts enable the investors to predict the future movement of the price of security. Equity portfolio is a risky portfolio, but at the same time the return is also higher. Equity portfolio provides highest returns. An efficient portfolio manager can obviously give more weight age to fundamental analysis than the technical analysis. The fundamental analysis includes the study of ratio analysis, past and present track record of the company, quality of management, government policies etc.

BONDS PORTFOLIO MANAGEMENT:

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 The individual investors can invest in bond portfolio. The portfolio can be spared over variety of securities Investment in bond is less risky and safe as compared to equity investment. However, the return on bond is very low. There are no much fluctuations in bond prices. Therefore, there is no capital appreciation in this case. Some bonds are tax saving which help the investor to reduce his tax liability. There is no much liquidity in bonds, investment in bond portfolio is less risky and safe but, return is reasonable, low liquidity and tax saving are some of the more important features of bond portfolio investment. However, it is suitable for normal investors for getting average return over their investment. Bond portfolio includes different types of bond, tax free bonds and taxable bonds. Tax free bonds are issued by public sector undertaking or Government on which interest s compounded half yearly and payable accordingly. They have a maturity of 7 to 10 years with the facility for buyback. The tax free bonds means the interest income on these bonds is not taxable. Therefore, the interest rates on these bonds are very low. However, taxable bonds yield higher interest compounded half yearly and also payable half yearly. They also have buy back facilities similar to taxable bonds

QUALITIES OF PORTFOLIO MANAGER

26

1.

Sound General Knowledge:

Portfolio management is an existing and challenging job..

In the stock market every new piece of information affects the value of the securities of different industries in a different way. He must be able to judge and predict the effects of the information he gets. He must have sharp memory, alertness, fast intuition and self-confidence to arrive at quick decisions.
2.

Analytical Ability:
He must have his own theory to arrive at the value of the security. An analysis of the securitys values, company, etc. is continues job of the portfolio manager. A good analyst makes a good financial consultant. The analyst can know the strengths, weakness, opportunities of the economy, industry and the company.

3. Marketing skills:
He must be good salesman. He has to convince the clients about the particular security. He has to compete with the Stock brokers in the stock market. In this Marketing skills help him a lot.

4. Experience:
In the cyclical behavior of the stock market history is often repeated, therefore the experience of the different phases helps to make rational decisions. The experience of different types of securities, clients, markets trends etc.makes a perfect professional manager.

CODE OF CONDUCT- PORTFOLIO MANAGERS:

27

 A portfolio manager shall, in the conduct of his business, observe high standards of integrity and fairness in all his dealings with his clients and other portfolio managers. The money received by a portfolio manager from a client for an investment purpose should be deployed by the portfolio manager as soon as possible for that purpose and money due and payable to a client should be paid forthwith. A portfolio manager shall render at all time high standards of services exercise due diligence, ensure proper care and exercise independent professional judgment. The portfolio manager shall either avoid any conflict of interest in his investment or disinvestments decision, or where any conflict of interest arises; ensure fair treatment to all his customers. He shall disclose to the clients, possible sources of conflict of duties and interest, while providing unbiased services. A portfolio manager shall not place his interest above those of his clients. A portfolio manager shall not make any statement or become privy to any act, practice or unfair competition, which is likely to be harmful to the interests of other portfolio managers or it likely to place such other portfolio managers in a disadvantageous position in relation to the portfolio manager himself, while competing for or executing any assignment. A portfolio manager shall not make any exaggerated statement, whether oral or written, to the client either about the qualification or the capability to render certain services or his achievements in regard to services rendered to other clients. At the time of entering into a contract, the portfolio manager shall obtain in writing from the client, his interest in various corporate bodies, which enables him to obtain unpublished price-sensitive information of the body corporate. A portfolio manager shall not disclose to any clients or press any confidential information about his clients, which has come to his knowledge. The portfolio manager shall where necessary and in the interest of the client take adequate steps for registration of the transfer of the clients securities and for claiming and receiving dividend, interest payment and other rights accruing to the client. He shall also take necessary action for conversion of securities and subscription of/or rights in accordance with the clients instruction. Portfolio manager shall ensure that the investors are provided with true and adequate information without making any misguiding or exaggerated claims and are made aware of attendant risks before they take any investment decision. He should render the best possible advice to the client having regard to the clients needs and the environment, and his own professional skills.
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 Ensure that all professional dealings are affected in a prompt, efficient and cost effective manner. FACTORS AFFECTING THE INVESTOR There may be many reasons why the portfolio of an investor may have to be changed. The portfolio manager always remains alert and sensitive to the changes in the requirements of the investor. The following are the same factors affecting the investor, which make it necessary to change the portfolio composition.
1.

Change In Wealth:
According to the utility theory, the risk taking ability of the investor increases with increase in wealth. It says that people can afford to take more risk as they grow rich and benefit from its reward. But, in practice, while they can afford, they may not be willing. As people get rich, they become more concerned about losing the newly got riches than getting richer.
So they may become conservative and vary risk- averse. The fund manager should

observe the changes in the attitude of the investor towards risk and try to understand them in proper perspective. If the investor turns to be conservative after making huge gains, the portfolio manager should modify the portfolio accordingly.
2.

Change In The Time Horizon:

As time passes, some events take place that may have an impact on the time horizon of the investor. Births, deaths, marriages, and divorces all have their own impact on the investment horizon. There are, of course, many other important events in the persons life that may force a change in the investment horizon. The happening or the non-happening of the events will naturally have its effect.
29

 For example, a person may have planned for an early retirement, considering his delicate health.

3.

Change In Liquidity Needs:

Investors very often ask the portfolio manager to keep enough scope in the portfolio to get some cash as and they want. This forces portfolio manager to increase the weight of liquid investments in the asset mix. Due to this, the amounts available for investment in the fixed income or growth securities that actually help in achieving the goal of the investor get reduced. That is, the money taken out today from the portfolio means that the amount and the return that would have been earned on it are no longer available for achievement of the investors goals.

4.

Changes In Taxes:
It is said that there are only two things certain in this world- death and taxes. The only uncertainties regarding them relate to the date, time, place and mode. Portfolio manager have to constantly look out for changes in the tax structure and make suitable changes in the portfolio composition.
The rate of tax under long- term capital gains is usually lower than the rate applicable for

income. If there is a change in the minimum holding period for long-term capital gains, it may lead to revision. The specifics of the planning depend on the nature of the investments.
5.

Others:
There can be many of other reasons for which clients may ask for a change in the asset mix in the portfolio.

For example:
There may be change in the return available on the investments that have to be compulsorily made with the government say, in the form of provident fund. This may call for a change in the return required from the other investments

PORTFOLIO MANAGEMENT SCHEMES (PMS) PRESENT SCENARIO

30

The regulatory environment has totally changed now and with SEBI fixing strict norms for companies launching PMS, only the serious players are going to enter his business" The PMS members today have full transparency managers are required to maintain individual accounts showing all dealings in a clients portfolio. They must also advise him on all transactions. Secondly, all PMS Managers have to send their clients at least a quarterly report giving the status of their portfolio and the transactions that have taken place. The client-PMS manager contract is as per SEBI ground rules. It has several checks to protect investors interest like laying the custodial responsibility on the manager and preventing any alterations in the scheme without the clients consent. Finally, managers have to send half-yearly reports to SEBI on their portfolio management activities. Experienced handling of cash and money power apart, PMS also takes care of a number of the headaches endemic with investing in the markets. The biggest one is custodial services. All PMS Managers act as custodians of shares and are responsible for the load of paper work related to the share transfer, documentation work, and postal work and even ensuring that dividends are credited to clients account. SEBI directives also put the onus on the PMS promoters to take follow-up action in case shares are lost or damaged. Difficulties such as late transfer and postal theft are reduced in case of brokers, because they not only have direct access to registrars but also have branch offices to ensure quicker transfers. All these services come for a fee, of course. While the actual PMS charges vary from a high of 7% of the amount invested to a low of around 3.5%, follow-up services charges extra. As in all schemes, there is a downside to putting cash into portfolio management as well. The most important is the fact that despite all the SEBI checks. PMS Managers are not allowed to assured any fixed returns.
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 This really discharges the managers for any responsibility if the scheme does badly. So investors have to be very careful in choosing the promoters. Problem inherent in most schemes on offer will be extent. misused of investors funds to some

Funds collected from investors will aid the brokers concerned in their own games in the market.

PROSPECTS OF POTFOLIO MANAGEMENT

At present, there are a very few agencies which render this type of services in an organized and professional way. However, their share in the total volume is very small. There is no constraint on the demand for this type of financial service as every entity would be saving and investing and interested in optimizing the rate of return. The size of capital market is increasing. There is an increase in the number of stock exchanges. New instruments are being introduced in the capital market. The equity cult is spreading in the interiors and rural areas. The percentage of investment of the household savings is bound to go up. It is conservatively estimated that during the eighth plan resources to the tune of over Rs.50000crore will be mobilized through the stock market. India today has 20 million investors, as compared to 2 million in 1980.

SECURITIES AND EXCHANGE BOARD OF INDIA RULES, 1993 REGARDING PORTFOLIO MANAGERS
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1.

No Person To Act As Portfolio Manager Without Certificate.

No person shall carry on any activity as a portfolio manager unless he holds a certificate granted by the Board under this regulation. Provided that such person, who was engaged as portfolio manager prior to the coming into force of the Act, may continue to carry on activity as portfolio manager, if he has made an application for such registration, till the disposal of such application. Provided further that nothing contained in this rule shall apply in case of merchant banker holding a certificate granted by the board of India Regulations, 1992 as category I or category II merchant banker, as the case may be. Provided also that a merchant banker acting as a portfolio manager under the second provision to this rule shall also be bound by the rules and regulations applicable to a portfolio manager.

2.

Conditions For Grant Or Renewal Of Certificate To Portfolio Manager:

The board may grant or renew certificate to portfolio manager subject to the following conditions namely: The portfolio manager in case of any change in its status and constitution, shall obtain prior permission of the board to carry on its activities; He shall pay the amount of fees for registration or renewal, as the case may be, in the manner provided in the regulations; He shall make adequate steps for redressed of grievances of the clients within one month of the date of receipt of the complaint and keep the board informed about the number, nature and other particulars of the complaints received; He shall abide by the rules and regulations made under the Act in respect of the activities carried on by the portfolio manager.

3.

Period Of Validity Of The Certificate:

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 The certificate of registration on its renewal, as the case may be, shall be valid for a period of here years from the date of its issue to the portfolio manager.
1.

Registration Of Portfolio Managers: Application For Grant Of Certificate:

An application by a portfolio manager for grant of a certificate shall be made to the board on Form A. Notwithstanding anything contained in sub regulation (1), any application made by a portfolio manager prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in form A shall be treated as an application made in pursuance of sub-regulation and dealt with accordingly.

Application Of Confirm To The Requirements:

Subject to the provisions of sub-regulation (2) of regulation 3, any application, which is not complete in all respects and does not confirm to the instructions specified in the form, shall be rejected. Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within the time specified such objections as may be indicated by the board.

Furnishing Of Further Information, Clarification And Personal Representation:

The Board may require the applicant to furnish further information or clarification regarding matters relevant to his activity of a portfolio manager for the purposes of disposal of the application. The applicant or, its principal officer shall, if so required, appear before the Board for personal representation.

Consideration Of Application:
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The Board shall take into account for considering the grant of certificate, all matters which are relevant to the activities relating to portfolio manager and in particular whether the applicant complies with the following requirements namely. The applicant has the necessary infrastructure like to adequate office space, equipments and manpower to effectively discharge his activities; The applicant has his employment minimum of two persons who have the experience to conduct the business of portfolio manager; A person, directly or indirectly connected with the applicant has not been granted registration by the Board in case of the applicant being a body corporate; The applicant fulfils the capital adequacy requirements specified in regulation 7. The applicant, his partner, director or principal officer is not involved in any litigation connected with the securities market and which has an adverse bearing on the business of the applicant; The applicant, his director, partner or principal officer has not at any time been convinced for any offence involving moral turpitude or has been found guilty of any economic offences; The applicant has the professional qualification from an institution recognized by the government in finance, law, and accountancy or business management.

Portfolio Management is used to select a portfolio of new product development projects to achieve the following goals:
Maximize the profitability or value of the portfolio Provide balance Support the strategy of the enterprise.

Portfolio Management is the responsibility of the senior management team of an organization or business unit. This team, which might be called the Product Committee, meets regularly to manage the product pipeline and make decisions about the product portfolio. Often, this is the same group that conducts the stage-gate reviews in the organization. A logical starting point is to create a product strategy - markets, customers, products, strategy approach, competitive emphasis, etc. The second step is to understand the budget or resources available to balance the portfolio against. Third, each project must be assessed for profitability (rewards), investment requirements (resources), risks, and other appropriate factors.

INTRODUCTION History of HSBC Bank

35

The HSBC Group is named after its founding member, The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between Europe, India and China. Scotsman Thomas Sutherland who was working for the Peninsular and Oriental Steam Navigation Company realized that there was considerable demand for local banking facilities in Hong Kong and on the China coast and he helped in establishing the bank, which was opened in Hong Kong in March 1865 and in Shanghai a month later. This local bank helped in promoting British imperial trade in silk, and tea in East Asia. It soon established a London office and created an international branch network emphasizing China and East Asia Soon after its formation the bank opened agencies and branches around the world. Although that network reached as far as Europe and North America, the emphasis was on building up representation in China and the rest of the Asia-Pacific region. HSBC was a pioneer of modern banking practices in a number of countries. In Japan, where a branch was established in 1866, the bank acted as adviser to the government on banking and currency. In 1888, it was the first bank to be established in Thailand, where it printed the countrys first banknotes. From the outset, trade finance was a strong feature of the local and international business of the bank. Bullion, exchange, merchant banking and note issuing also played an important part. By the 1880s, the bank was acting as banker to the Hong Kong government and also participated in the management of British government accounts in China, Japan, Penang and Singapore. In 1874 the bank handled Chinas first public loan and thereafter issued most of Chinas public loans. HSBC then began expanding in Asia again, particularly in Malaysia, where its Hongkong Bank Malaysia became the country's first locally incorporated foreign bank. It also added new European branches HSBC expanded its consumer finance operations with the purchase of USbased Household International (now HSBC Finance) in 2003.In 2004 HSBC acquired The Bank of Bermuda, as well as Marks and Spencer Financial Services. It was one of the UK's leading credit card issuers. HSBC's Latin American operations at this point were primarily in Argentina,
36

Brazil, and Mexico. The company expanded its presence in Central America and the Caribbean with the 2006 purchase.

What is Hongkong and Shanghai Banking Corporation HSBC?

HSBC is the worlds largest local bank. It has headquarters in London. HSBC is one of the largest banking & financial services organization in the world. HSBCs international network comprises over 9500 offices in 76 countries & territories in Europe, the Asia-Pacific region, the Americas, the Middle East & Africa. With listings on the London, Hongkong, New York, Paris & Bermuda stock exchange shares in HSBC holdings places are held by nearly 200,000 shareholders in some 100 countries & territories. The shares are traded on the New York stock exchange in the form of American Depository Receipts. Through an international network linked by advertisement techniques, including a rapidly growing e-commerce capability.

THE HSBC GROUP IN INDIA

Year of commencement of operations in India:

37

The Mercantile Bank of India, China & London The Hongkong & Shanghai Banking Corporation Limited (HBAP) HSBC Securities & Capital Markets (India) Private Limited HSBC Private Equity Management (Mauritius) Limited Electronic Data Processing India Private Limited (HDPI) Primary Dealership (India) Private Limited (HCPD) HSBC Professional Services (India) Private Limited (HPSI) HSBC Software Development (India) Private Limited (HSDI) HSBC Asset Management (India) Private Limited (ISIN) HSBC Insurance Brokers (India) Private Limited (ININ) HSBC Operations & processing enterprise(India) Pvt. Ltd. Canara HSBC Oriental bank of commerce Life insurance co. Ltd.

1853 1867 1995 1995 HSBC 2000 HSBC 2001 2001 2002 2002 2003 2003 2008

The HSBC Group commenced operations in India in 1867 with a branch in Calcutta. They claim an earlier commencement, as the Mercantile Bank of India, China & London, which the group acquired in 1959, was established in 1853, with a branch in Bombay. The Bank has relocated some branches in Mumbai, New Delhi, Chennai, Bangalore; Kolkata & Visakhapatnam from what were once important trade centers to more appropriate present day locations that hold our target customer base

FINANCIAL SERVICES PROVIDED BY HSBC BANK

1. 2. 3. 4. Personal financial services Commercial Banking Corporate Banking Investment Banking

38

1.

PERSONAL FINANCIAL SERVICES (PFS):

HSBC India offers a wide range of competitively priced services & products to over 1.75 million individual resident Indians as well Non-resident Indian customers across India, USA, UK, and Middle East & South East Asia. HSBCs 150 year presence in India allows it to enjoy the advantage of deep rooted knowledge of local markets & customs. This has lead to development of products & services, which are attuned to the financial needs of Indians in the cities where HSBC operatives. The HSBC brand is associated with core values such as transparency, trust & honesty. These factors enable HSBC India to remain highly competitive & at the leading edge of the retail & commercial banking market in the country. The distribution network in India consists of 47 branches in 26 cities supported by 170 ATMs at 142 locations. In addition, self service banking channels, such as Internet Banking & a 24 hour centralized all India Call Centre provide a strong backbone to the distribution capabilities. A second load balancing Call Centre became operational in January 2005 at HSBC Operations & Processing Enterprise (India) Private Limited, Chennai. Customers can apply for all products & services online at www.hsbc.co.in The bank offers a complete suite of products & services including HSBC Premier International, HSBC Premier, Power Vantage, Savings & Current Accounts, International Debit Cards & Term Deposits in addition to consumer loan products like International Credit Cards, Mortgage, Personal Loans, Educational loans & Overdrafts. HSBC is the 6th largest Credit Card issuer in India with over 1.3 million cards in force. Premier & mid market customers have access to comprehensive Financial Planning & HSBC is a market leader in the provision of Wealth Management services. In 2005, HSBC was the largest distributor of Retail Mutual Funds in India, & the biggest sales channel for Banc assurance partner TATA AIG. Non-Resident Indians (NRIs) constitute 56% of the Banks deposit base. The banking needs of NRIs are fulfilled from branches in India & 11 NRI centers abroad. We have over 84,000 NRI Customers, & have started referring customers to Financial Planning Managers & the Private Bank in the host countries, to address their needs for investment products. A free remittance service is offered between accounts held by NRIs with HSBC overseas & onshore. In 2006, an International Banking Centre was established facilitate cross border business referrals. In October 2005, HSBC launched an onshore Private Banking proposition branded HSBC Private Banking. The proposition targets clients with minimum assets of INR 25 M & encompasses asset classes such as Real Estate, Equity Derivatives & Commodities. This is an addition to Fixed Income & Equities, which are already being offered. The proposition uses Active Advisory as its cornerstone & key differentiator. The Bank has sought RBI approval to establish a separate consumer finance branch network under a non banking financial institution,
39

which will distribute personal loans& ancillary products to a broader segment of the Indian consumer base than is currently served by the Banks existing product portfolio. The personal loan product is being piloted through the bank branch network & initial results are promising.

Wealth Management & Branch Banking:

HSBC has 47 branches Pan-India across 26 locations. Wealth Management services are delivered to customers through qualified Wealth Management across each of these branches. Wealth Management helps customers develop & execute a realistic & practical long term savings, investments & protection plans by investing in mutual funds, bonds & purchase of insurance products manufactured by TATA AIG. Qualified, trained & accredited Wealth Management assist customers in charting a road map to achieve their individual financial goals & protect their family from unforeseen eventualities keeping in mind their available resources & based on each customers independent risk profile. Wealth Management services is currently offered to HSBC Premier & Power Vantage customers

2.

COMMERCIAL BANKING:

HSBC is a leading provider of financial services to small, medium-sized and middlemarket enterprises. The Group has over 43,000 such customers in India, including sole proprietors, clubs and associations, incorporated businesses and publicly quoted companies. Commercial Banking provides a full range of banking services to these customers including multi-currency business accounts, payment and cash management, trade services, factoring and a range of borrowing solutions. In India, Commercial Banking has a presence in 47 branches covering 26 key cities and for the convenience of our customers, a multi channel service including Internet and Phone banking. For SME customers, HSBC offers the complete range of transaction baking services as well as unsecured loans and loans for and against property. The services are supported by a large Sales and Relationship Management team in key locations across the country. India is the first country in the HSBC Group where Commercial Banking lends Microfinance Institutions, thus providing indirect funding to hundreds of small business owned and run by members of underprivileged sections of society. A dedicated unit has been formed to focus on Microfinance and other Priority Sector institutions, with a view to further reach out to the marginalized and under bank.

Factoring of HSBC:
40

HSBC India offers a comprehensive range of Factoring and Supply Chain Finance Solutions, which include the following products:

For Vendors/Suppliers/Purchase Channel of our corporate customers:

Payables Financing:

HSBC Indias Payable Financing product enables companies to finance their payables to vendors. This helps companies to provide immediate liquidity to vendors against their supplies at competitive rates and will enable the company to negotiate better pricing terms with vendors. It also enables the vendors to improve their cash flow by providing continuous liquidity against their receivables. Our payables financing products can be structured either against Bills of Exchange or Accepted Invoices.

Purchase Order Financing:

Is a facility to suppliers of our Corporate Banking Clients to finance their pre shipment working capital requirements Pre shipment working capital lines are sanctioned to the suppliers against Purchase Orders issued to the suppler.

For the Sales Channel of our corporate customers:

1. Factoring (With or Without Credit Protection) 2. Export Factoring (With or Without Credit Protection) 3. Portfolio Invoice Discounting (With partial credit protection) 4. Distributor Finance.
1.

Factoring (With or Without Credit Protection):

This is a service that covers the financing and collection of account receivables in domestic trade. Receivables are factored, by HSBC with added service of credit protection,
41

collection and sales ledges administration. Thus the management of the company may concentrate on production and sales and need not concern itself with non-core activities like collection and sales ledger administration.
2.

Export Factoring (With or Without Credit Protection):

Enables companies to finance their open account export sales at competitive rates either in Rupees or Foreign Currency. Through a network of overseas based correspondent factors, HSBC provides credit protection against buyer default and collection services.
3.

Portfolio Invoice Discounting (With partial credit protection):

Essentially covers purchase of receivables with partial credit protection based on a First Loss Deficiency Guarantee. The portfolio should be well spread with acceptable levels of concentration and the debtors must have had a satisfactory track record with the company. A field audit will be conducted to determine portfolio quality based on which a First Loss Deficiency Guarantee percentage will be agreed. Collection remains the responsibility of the Corporate with repayments either on a pre-agreed schedule or based on actual collections.

4. Distributor Finance:
Is currently offered to the distribution channel of Large Corporate Banking Clients and can be structured to suit the specific requirements of each corporate and its distribution channel. Through the Distribute Finance Program, HSBC finances companys dealers, which will assist the company in providing steady, assured credit to its distribution chain.

Payments and Cash Management:

Integrated domestic and regional cash management solutions are provided to corporate and institutional customers in India. The suite of offerings under the cash management umbrella includes comprehensive Receivables Management solutions, with an endeavor to completely integrate with the customers back-end operating systems and processes. HSBC is the leading foreign bank in India in providing capital market solutions, which include Bankers to Issue, Escrow account Services and Dividend payments solutions. Six Sigma measurement practices are followed for our operational capabilities. HSBC net, the HSBC Groups online real time web-enabled corporate banking platform, allows customers to execute financial transactions, obtain international financial market information and review details of their domestic and international accounts from anywhere in the world, 24 hours a day.
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 Trade

(international and domestic) Service:

HSBC offers a wide range of international and domestic Trade products. In India, we offer one of the largest trade processing capabilities among peer banks, spread across 5 cities. Each of our Trade processing centers is ISO 9001-2000 certified. We work closely with Group Offices overseas and leverage our extensive global network to offer structured, tailor made solutions to a wide range of customers. Our clients in India include large India and multinational companies, Mid Market companies as well as customers in the Small and Medium Enterprises segment.

3. CORPORATE AND INSTITUTIONAL BANKING

Corporate Banking (CB) is an integral part of the Global Banking structure, which focuses on offering a full range of service to multinationals, large domestic corporate and institutional clients. Provides a wide range of banking and financial services provided to domestic and international operations of large local corporate and local operations of multinationals corporations. Services include access to commercial banking products, including working capital facilities such as domestic and international trade operations and funding, channel/distributor financing, and overdrafts, as well as domestic and international collections and payments, INR and Foreign currency term loans (external commercial borrowing in foreign currency), letters of guarantee etc. Institutional Banking drives the Groups relationship with banks, financial institutions, securities houses, insurance companies, and asset management companies and other non-banking companies, non-government and development organizations operating in India. Market leadership position based on strong relationships with major financial institutions. Investment Banking and Markets brings together the advisory and financing, equity. Securities, equity linked transactions, asset management, treasury and capital markets, and private equity activities of the Groups to complete the Global Banking structure and provide a complete range of financial products to our clients. Clients are serviced by sector based client service teams that combine relationship managers, product specialists and industry specialists to develop customized financial solutions. These form the relationship team along with the Investment Banking structure and provide a complete range of financial products to our clients. Clients are serviced by sector based client service teams that combine relationship managers, product specialists and industry specialists to develop customized financial solutions. These form the relationship team along with the Investment Banking & Advisory division. Each team supports the Clients local and global needs, ensuring a full understanding of the companys business and financial needs. Based on our clients requirement, HSBC assigns Global Relationship
43

Management teams to provide structured solutions for all its needs. Our Global Relationship Management teams are tasked with understanding in depth the sectors in which our clients operate with the aim of adding value through detailed industry knowledge and structured financial solutions.

Sectoral account management- Improved industry knowledge andsector4 expertise. The CB portfolio is largely spread within the following sectors divided as under:

Corporate Consumer Brands Industrials &Technology Energy and Utilities Telecommunications Automotive Healthcare Transport and Logistics

Institutional Banks Financial Institutions Securities Mutual Funds/Asset Management Companies Insurance Financial Sponsors Business Process Outsourcing (BPOs)

4.

INVESTMENT BANKING:

HSBC Fixed Deposits:

When it comes to assured returns, choosing the right type of savings scheme makes all the difference. HSBC Fixed Deposits let you make the most of value-added benefits as you create wealth at low risk.

Features & Benefits: The superior Fixed Deposit To Invest In, For aA Secure Future:
You can now open a Fixed Deposit with Rs. 10,000 only. Enjoy high rate of returns on your HSBC Fixed Deposits. Choose from a wide range of tenors as per your convenience. Avail of our special rates for select tenors.
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 Certificate of Deposit:
Earn interest for funds invested from 15 days to one year, with HSBCs Certificate of Deposit (CDs). CDs can be availed by individuals (other than minors), corporations, banks, companies, trusts, funds, associations etc. Non-Resident Indians (NRIs) may also subscribe to CDs on a nonrepairable basis only.

Advantage:

Tenure :

A Certificate of Deposit is issued for a period not less than 15 days & not exceeding 1 year from the date of issue.

Transfer Mechanism:

Certificate of Deposit held in a physical form is freely transferable by endorsement & delivery. Those in demat form can be transferred as per the procedure applicable to other demat securities.

MUTUAL FUNDS:
It is a type of investment where a number of investors money is pooled together & used by the fund manager (referred to as the Asset Management Company or AMC) to invest in underline securities in line with the objectives of the scheme. By this method you can achieve a much wider spread of investments than if you were investing directly in the underlying investments. It is generally accepted that by spreading your investment you are spreading your risk, therefore investing in mutual funds is considered to be lower risk than direct investment. When you invest in mutual funds you do not own the underlying investments but have a claim to a number of units in the fund representing the size of your investment. The value of each unit of the mutual fund scheme, calculated based on the market value of the underlying investments after deducting expenses and liabilities, is referred to as the Net Asset Value or
45

NAV. The first time a mutual fund scheme is available for purchase is referred to as a New Fund Offering or NFO.

Important Characteristics Of A Mutual Fund:

1. A mutual fund actually belongs to the investors who have pooled their funds is in the hands of the investors. 2. Investment professionals and other service providers, who earn a free for their services, from the fund, manage a mutual fund. 3. The pool of funds invested in a portfolio of marketable investments. The value of the portfolio is updated every day. 4. The investors share in the fund is denominated by units. The value of the units changes in the portfolios value, every day. The value of one unit of investment is called as the net asset value of NAV.

46

5. The investment portfolio of the mutual fund is created according to the stated investment objectives of the fund.

Types of Mutual Funds

There are thousands of different mutual funds offered on the market. They range from funds that include a broad variety of investments to funds that invest exclusively in single securities or narrow sectors of the market. With the many different investment styles and objectives, theres bound to be a number of mutual funds that are suited to your investing profile. Each of these funds has expense, risk, and return characteristics. Be sure you understand these characteristics before you invest.
1.

Balanced Funds :

Balanced funds seek to obtain the highest return consistent with a low-risk strategy. They hold a mix of common and preferred stocks, bonds and cash reserves. The mix can vary according to current market conditions. Balanced funds usually offer higher yields than pure stock funds. Balanced funds are generally the least risky of growth-oriented mutual funds.
2.

Growth and Income Funds:

Growth and income funds attempt to achieve both long-term growth and current income. They invest primarily in high-yield common stock, preferred stock, and convertible debt (bonds) to generate both growth and income because they include a mix of investments, these funds are typically less risky than growth funds.
3.

Growth Funds:

Growth funds seek long-term appreciation by investing in the stocks of established companies that may be poised for growth. These companies typically pay low dividends yet offer the potential for long-term capital appreciation. Some growth funds limit their investments to specific sectors of the economy. Growth funds are generally less risky than aggressive growth funds.
4.

International and Global Growth Funds:

International and global mutual funds offer diversification into international stock markets. International funds invest only in foreign securities. Global funds, on the other hand, can invest in foreign and U.S. securities. The risks associated with investing on a worldwide basis include differences in regulation of financial data and reporting, currency exchange differences, as well as economic and political systems that may be different that those in the United States.
5.

Aggressive Growth Funds:

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Aggressive growth funds, sometimes known as "small-cap" funds, seek maximum capital gains. They invest primarily in the stock of smaller, less established companies. Since these companies generally pay little or no dividends, aggressive growth funds rely on capital growth for returns. These funds tend to be the riskiest of growth-oriented mutual funds.

6. Money Market Funds:

Money market funds seek current income while maintaining a stable $1.00 per share net asset value by investing in short-term debt securities, including T-bills, certificates of deposit, commercial paper, and other highly liquid and safe securities. They offer modest current income and no potential for capital gains.They generally offer the lowest returns but the most safety of all fund types. Some money market funds also offer tax-free income. Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 a share, it is possible to lose money by investing in the fund.
7.

Government Securities Funds:

Government securities funds invest primarily in Treasury and government agency securities. Because they are issued or guaranteed by the U.S. government, they are considered the credit worthiest alternatives available Government securities offer moderate current income and high safety. Treasury securities are backed by the full faith and credit of the U.S. Government as to the timely payment of principal and interest. Government agency securities are not considered government obligations and therefore are not backed by the full faith and credit of the government. The principal value of these funds will fluctuate due to changes in interest rates.
8.

Municipal Bond Funds:

Municipal bond funds seek tax-free income by investing in the bonds of state and local governments. In many cases, it may be wise to consider municipal bond funds issued by your state because they may offer double or even triple tax-free income. In some states you will have to pay income tax if you buy shares of a municipal bond fund that invests in bonds issued by other states. In addition, while some municipal bonds in the fund may not be subject to regular income taxes, they may be subject to federal, state, or local alternative minimum tax. If you sell a tax-free bond fund at a profit, there are capital gains taxes to consider. As with all types of bond funds, the principal value will fluctuate with changes in interest rates.
9.

Corporate Bond Funds:

Corporate bond funds invest in debt securities issued by corporations. The risk of corporate bond funds may vary depending on the objectives of the fund. Because credit risk is somewhat higher, these funds may offer higher returns than funds specializing in government securities. Principal will fluctuate with changes in interest rates.
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10.

High-Yield Bond Funds:

High-yield bond funds seek to maximize current income by investing in lower-quality high-yielding corporate bonds. The bonds held by these funds are generally rated BB or lower by rating agencies. They offer the high current yields to compensate for the greater risk of default. Since they are more volatile than and pay higher yields than investment grade bonds, they tend to be suited to investors with a high degree of risk tolerance.
11.

Sector Funds:

Sector funds invest in specific industries or sectors of the economy, such as communications, aerospace and defense, or health care. While they may be diversified within a particular sector, they lack broad diversification. This increases their investment risk. These funds typically seek long-term capital appreciation.
12.

Growth-Income Funds:

Growth-income funds are specialists in blue chip stocks. These funds invest in utilities, Dow industrials, and other seasoned stocks. They work to maximize dividend income while also generating capital gains. These funds are suitable as a substitute for conservative investment in the stock market.

13. Income Funds:

Income funds focus on dividend income, while also enjoying the capital gains that usually accompany investment in common and preferred stocks. These funds are particularly favored by conservative investors.
14.

Asset Allocation Funds:

Asset allocation funds don't invest in just stocks. Instead, they focus on stocks, bonds, gold, real estate, and money market funds. This portfolio approach decreases the reliance on any one segment of the marketplace, easing any declines. A plus factor is limited by this strategy as well.

15. Bond Funds:

Bond funds invest in corporate and government bonds. A common misunderstanding among investors is that the return on a bond fund is similar to the returns of the bonds purchased. One might expect that a fund that owns primarily 8 percent-yielding bonds would return 8 percent to investors. In fact, the yield from the fund is based primarily on the trading of bonds, which are
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extraordinarily sensitive to interest rates. Thus, one could find a bond fund that was earning double-digit returns as the prime rate climbed from 4 percent to 6 percent. In addition to mutual funds, there are money market funds, which are essentially mutual funds that invest solely in government-insured short-term instruments. These funds nearly always reflect the current interest rates, and rarely engage in interest-rate speculation.

Benefits of Mutual Fund Reduction in risk:

Mutual funds invest in a portfolio of securities. This means that all funds are not invested in the same Investment Avenue. Holding a portfolio that is diversified across investment avenues is a wise way to manage risk. When such a portfolio is liquid and marked to market, it enables investors to continuously evaluate the portfolio and manage their risks more efficiently.
1.

Reduction in Transaction Costs:

Through the individual investors contribution may be small; the mutual fund itself is large enough to be able to reduce costs in its transactions. These benefits are passed on to the investors.

2. Portfolio Diversification:
By offering readymade diversified portfolios, mutual fund enables investors to hold diversified portfolios. Through investors can create their own diversified portfolios, the costs of creating and monitoring such portfolios can be high, apart from the fact that investors may lack the professional expertise to manage such a portfolio.

3. Liquidity:
Open-ended funds are very liquid as the Mutual Fund companies offer an open window for redemption on all working days. The redemption proceeds are normally dispatched within three to four working days.
4.

Professional Fund Management:

Investing in markets requires both knowledge and expertise. Experienced fund managers are able to trade or negotiate better deals, manage the price risk effectively, exploit trends and opportunities and constantly monitor the environment.
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5.

Tax Efficiencies:

Investing in mutual funds is tax efficient. If investors choose the growth option and stay invested for a year, they only pay long term Capital Gains of 20.4% of indexed returns or 10.2% of un indexed returns (whichever is lower).

6. Diversification:
Diversification is the core of any investment strategy. It allows you to minimize the risks associated with any investment. However, it is very difficult for individuals to have the requisite diversification for your investment given smaller portfolios and transaction costs. Mutual Funds can pool in the investments of thousands of investors and achieve the desired level of diversification for each.

SYSTEMATIC INVESTMENT PLAN (SIP) What is Systematic Investment Plan (SIP)?

An SIP is a regular investment plan for purchasing units of a mutual fund scheme. Offered by mutual funds to help you save regularly. When investing in mutual funds, you would normally identify a scheme & invest a predetermined amount in it at its prevailing net asset value (NAV). If you invest a sum of Rs.10, 000 at an NAV of Rs.10, you will receive 1,000 units. The timings of your investment in such a case may turn out to be favorable or unfavorable. Under SIP, however, your investment is staggered over a period. Instead of investing Rs.10, 000 at one go; you might consider investing specified amounts in a scheme at pr-specified intervals. For instance, you could spread out the Rs.10, 000 investments over 10 months, with Rs.1, 000 being invested each month. The number of units that accrue to you on each periodic investment would depend on the NAV of the scheme prevailing at the time of your purchase. By doing this, you would have done away with the need to time the market. SIPs also in calculate some much needed discipline into your investing habits. It is just like a recurring deposit with the post office or bank where you put in every month. The difference here is that the amount is

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invested in a mutual fund. The minimum amount to be invested can be as small as Rs.500 & the frequent investment is usually monthly or quarterly.

How can Systematic Investment Plan (SIP) works?

An SIP allows you to take part in the stock market without trying to second guess movements. An SIP means you to commit yourself to investing a fixed amount every month. Let Rs.1000When the NAV is high, you will get fewer units. When it drops, you will get more within six months, you would have 5,894 units by investing just Rs.1000 every month. Date NAV Approx number of units you will get at Rs.1000 100 95.23 90.90 105.26 111.11 86.95

Jan 1 Feb 1 Mar 1 Apr 1 May 1 Jun 1

10 10.5 11 9.5 9 11.5

How does Systematic Investment Plan (SIP) scores?

It makes you disciplined in your savings. Every month you are forced to keep assured amount. This could either be debited directly from your account or you could give mutual fund post-dated cheques. As you see above, it helps you make money over the long term. Since you get more when the NAV drops & fewer when it raises, the cost average out over time. So over all the ups & downs of the market without any drastic losses. Also, a number of mutual funds do not charge an entry load if you opt for an SIP a percentage of the amount you are investing. & if you do not exit (sell your units a year of buying the units, you do not have to pay an exit load) (same as an entry load, except this is charged when you sell your units).If, however, you do sell your units within a year, you would be charged an exit low pays to stay invested for the long-run. The best way to enter a mutual fund is via an SIP.

INSURANCE
Insurance, in law and economies, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium. Insurer, in economics, is
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the company that sells the insurance. Insurance rate is a factor used to determine the amount, called the Premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

A large Number Of Homogeneous Exposure Units:

The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004. The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called law of large numbers, which is effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyds of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent, large commercial property policies may insure exceptional properties for which there are no homogeneous exposure units. Despite failing of this criterion, many exposures like these are generally considered to be insurable.

Definite Loss:

The event that gives rise to the loss that is subject to insurance should, at least in principle, take placed at a known time, in a known place, and from a known cause. The classic example is death of an insured on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory, Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable , Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.

Accidental Loss:

The event that constitute the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.

Large Loss:

The size of the loss must be meaningful from the perspective of the insured. Insurance Premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonable assure
53

that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.

Affordable Premium:

If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards (See FAS 113 for example), the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.

Calculable Loss:

There are two elements that must be at least estimatable, if not formally calculable exercise, while cost has more to do with the ability of a reasonable presented under that policy to make a reasonably definite and objective of the amount of the loss recoverable as a result of the claim.

Limited Risk Of Catastrophically large losses:

The Essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issuer policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5%. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurers appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

Types of insurance
Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in details which perils are covered by the policy and which are not.
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Automobile insurance, know in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insureds vehicle itself. Throughout most of the United States an auto insurance policy is required to legally operate a motor vehicle on public roads. In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to a no-fault system, which reduces or eliminates the ability to sure for compensation but provides automatic eligibility for benefits. Aviation insurance insures against hull, spares, deductible, hull war and liability risks. Business insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are:

The various kinds of professional liability insurance, also called professional indemnity insurance, which are discussed below under that name; and The business owners policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverages that a homeowner needs.

Casualty insurance insures against accidents, not necessarily tied to any specific property. Credit insurance repays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death. Mortgage insurance (which sees below) is a form of credit insurance, although the name credit insurance more often is used to refer to policies that cover other kinds of debt. Crime insurance insures the policyholder against losses from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement. Crop insurance Farmers use crop insurance to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease, for instance. Health insurance policies will often cover the cost of private medical treatments if the National Health Service in the UK (NHS) or other publicly-funded health programs do not pay for them. It will often result in quicker health care where better facilities are available.

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PORTFOLIO MANAGEMENT Of HSBC BANKS General Portfolio Management of HSBC Bank:

HSBC Banks employs are well trained experienced and properly licensed persons. They act as personal financial advisors or portfolio managers, utilizing the resources of HSBC Group to provide us with a solution which meet our investment needs. We may seek the advice of an experienced broker and retain control over the investment decision or may agree us with investment objectives with the asset management team and leave them to actively manage our portfolio. Before investing in financial instruments we would perform a suitability test to ensure that a particular recommendation is in accordance with our investment objectives and attitude to risk.We may register to our Invest Direct View online service, access our accounts and view among other things, our portfolio, our transactions, account balances.etc.

Advisory Portfolio Management of HSBC Bank:

Advisory Portfolio Service is based on a relationship of trust and open dialogue between us and our dedicated investment advisor. For investors who want to get involved in their own
56

portfolios and value world-class service and professional advice is necessary. We would make recommendations based on our knowledge and our individual requirements and we would only act once when we are in agreement with our recommendations or alternatively we will have the option to give instructions of our own. Our portfolio will be closely monitored and reviewed and we would have full attention of our dedicated investment advisor. Our advisor will utilize the local and global resources and support of the world largest financial institution. Through our advisor we will have a world of investment choice and access to any major market around the globe.

Discretionary Portfolio Management of HSBC Bank:

Discretionary Portfolio Management is a philosophy that enables us to capitalize on opportunities as they emerge in fast moving markets. Discretionary Portfolio Management are well suited to the clients who lack either the expertise or the time to manage their own portfolio and are wishing to delegate decision - making on investment matters to a team of dedicated professionals, properly licensed, taking full responsibility for all investments and administration of matters. Discretionary Portfolio Management service provides us with the opportunity to form an actively managed portfolio, investing in equities traded in the Greek Market or any major International organized market throughout the world. The Asset Management Department offers Discretionary Equity Portfolio Management, with investment decisions aiming at positive returns, which are not guaranteed due to market fluctuations and volatility of stock prices.

Approach towards Discretionary Portfolio Management of HSBC Bank

HSBC Bank provides Discretionary EQUITY Portfolio Management. The service is offered to the client with Aggressive Investment Profile and High Tolerance to High Risk - High Return asset management model.

The portfolio structure consists of investments in financial instruments approved by Investment Committee such as:
Selected Greek Equities. Selected International Equities. Selected local or international Exchange Traded Funds (ETF's).

In various underlying products such as "sectors", "markets" "indices" "commodities". The company's decision to offer Portfolio Management Services is based upon the knowledge and expertise of its employees, the HSBC Group's global insight, as well as on the reports and research produced by our Research Department, which has rated for years among the top
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Research Departments covering selected companies in the Greek Equity Market. Our investment process is designed to add value to your Portfolio through asset allocation, sector and security selection within acceptable risk tolerance levels The Department does not make use of leverage or margin products, in order to avoid the generation of potential liabilities or capital loss. Account Officer and the Portfolio Manager will speak with us on a regular basis to review Portfolio performance, changes to our objectives and circumstances or any other matter that may affect the management of our Portfolio.

Active Portfolio Management of HSBC Bank:

HSBC Bank believes that significant value can be derived from an active asset allocation process taking advantage from market opportunities acting within the frame established by the Investment Committee. The Portfolio Managers are responsible for the Investment decisions making process, which will be however based upon the directives of the Investment Committee. The portfolio management department of HSBC creates investment portfolios for the personal needs and requirements of each investor.

Yield to Maturity (YTM) of the Portfolio:

A

rate of return measuring the total performance of a fund (coupon payments as well as capital gain or loss) from the current date until maturity of the instruments in the portfolio. This means that if the portfolio in its current form is held till maturity, then the return that an investor will get is equal to the Yield to Maturity of the Portfolio. It however assumes that any flows (in the form of coupons/part of principal repayments) received before maturity is being reinvested at the YTM rate. If the reinvestment rate is lower, then the total return could be lower than YTM. *CRISIL has taken due care and caution in providing yields for valuation of corporate bonds in the portfolio of HSBC Mutual Fund following SEBI Guidelines and relying on the details furnished by HSBC (the AMC of HSBC Mutual Fund). CRISIL does not guarantee the accuracy, adequacy or completeness of the valuation performed by HSBC Mutual Fund, and is not responsible for any errors or for the results obtained from the use of the same. CRISIL especially states that it has no financial liability whatsoever to HSBC Mutual Fund/its unit holders or other users of the yields other than as agreed to between the parties.

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HSBC Portfolio Planner - Planning for your future

The HSBC Portfolio Planner is a tool that helps us formulate a complete wealth management strategy tailored specifically to your financial needs. It recognises the increasing complexity of the investment environment as well as your investment goals, and provides recommendations for asset allocation suitable to your risk tolerance level.

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A. Needs Assessment:
To understand your financial status, needs and your investment objectives.

B. Portfolio Allocation:
Formulates a portfolio of short, medium and long term investments as well as liquid assets across various asset classes, based on your financial priorities and risk tolerance level.
C.

Product Selection:
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Helps you select the appropriate products for your portfolio that match your risk profile.

D. Performance Monitor:
Monitors your investment performance on a periodic basis and provides you with valuation statements along with regular updates.

HSBC CUSTOMIZED PORTFOLIO MANAGEMENT

WHAT IS CUSTOMIZED PORTFOLIO MANAGEMENT?

The Customized Portfolio Management service is an investment option that puts our clients' objectives at the heart of its process. In an increasingly "one size fits all" culture, the Customized Portfolio Management service recognizes the individual needs that define different investors and any selected portfolio will aim to maximize the returns achievable within the chosen risk profile. We consider an investment into the Customized Portfolio Management service as the beginning of a long-term partnership, which will be led by differing client objectives as they evolve over time. Close communication is vital as the better we understand our clients' needs, the more successful we can be in meeting them, both now and in the future.

HSBC launches Amanah India Shariah Portfolio

MUMBAI:
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The portfolio management services division of HSBC Asset Management has launched HSBC Amanah India Shariah Portfolio and is now open for subscription.The scheme is an actively managed, open-ended equity offering wherein investors can contribute their funds for investment in conformity with Islamic Shariah principles. This is one of the first Shariah compliant offerings in the Indian market and will provide investors with an opportunity to benefit from returns through Shariah-compliant equity investment in Indian companies. HSBC Amanah, the global Islamic financial services division of the HSBC Group, is the advisor to the HSBC Amanah India Shariah Portfolio. The portfolio will be benchmarked against the Dow Jones Islamic Market India Index and the BSE 500. We are pleased to be one of the first players to bring a Shariah-compliant product offering to the Indian market. With our local investment knowledge and the global expertise of HSBC Amanah in managing Islamic funds, we aim to make investing a rewarding experience for our investors, said HSBC Asset Management CEO Vikramaaditya.

HSBC Amanah
HSBC Amanah is the Islamic financial services division of the HSBC Group. With experienced personnel working from regional offices, its mission is to ensure that HSBC is one of the leading providers of value-added Shariah compliant financial products and services to its clients. HSBC Amanah is well-placed to understand, structure and deliver financial solutions that are compatible with the requirements of Shariah. It is headquartered in Dubai, and with regional representatives in New York, Riyadh, London, Jakarta and Kuala Lumpur, HSBC Amanah is one of the leading global players in the Islamic finance industry. As at end of September 2009, HSBC Amanah has USD4 billion assets under management within various asset classes. HSBC Amanah is guided and supervised by the HSBC Amanah Central Shariah Committee, an independent committee of Islamic scholars. The Committee oversees the development and operations of all HSBC Amanah products and transactions to ensure that they meet the requirements of Shariah. Three scholars of international repute, well-versed in both Islamic law and modern finance, serve on the HSBC Amanah Shariah Committee: Sheikh Nizam Yaquby, Sheikh Dr Mohamed Elgari and Dr Mohamed Imran Ashraf Usmani. The Shariah Committee not only provides initial approvals on the investment objectives and investment strategy of all funds, but also reviews the investments periodically to ensure their continuous compliance to Islamic principles. Moreover, the Shariah board conducts annual audits of all funds to ensure adherence to their rulings during the year.

HSBC offers two types of investment services such as :

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a) Discretionary portfolio management and b) Advisory portfolio management, suitable for: Individual clients Companies/organizations Pension funds, Insurance organizations

The recommended investment horizon is between 2 and 5 years, although there is no minimum required investment period.

Investment Strategies of Portfolio Management of HSBC Bank:

In conjunction with the investor HSBC Bank establish investment objectives and determine the investment strategy / portfolio model, according to the level of risk the investor is willing to accept: Conservative. Balanced. Growth. Aggressive. Customized. Through active management HSBC aim to achieve the investor's investment objectives, such as capital preservation, income generation, capital gains, etc.

Investment Products Portfolio Management of HSBC Bank:

The portfolio management department of HSBC, utilizing the worldwide experiences of the group, as well as, offers a wide variety of investment products from the Greek and Foreign markets.

Portfolio Management Procedures of HSBC Bank:

1. Completion of investment questionnaire and determination of risk profile in cooperation with the client. 2. Portfolio construction. Each risk profile corresponds to a model portfolio. For each model portfolio, the Investment committee determines the asset allocation, geographic allocation and product allocation.
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3. Portfolio rebalancing. Account Managers execute the decisions of the Investment committee. Selection of specific products also takes into consideration the individual needs of each investor (i.e. time horizon, liquidity, taxation, currency, etc.) 4. Portfolio review, evaluation of performance and regular communication with the investor.

OBJECTIVES AND MAIN CHARACTERISTICS OF PORTFOLIO MANAGEMENT OF HSBC BANK

Objective:
Higher return than relevant benchmark, while assuming less risk.

Investment Restrictions:
Ability to maintain client specific investment restrictions.

A high quality level of service:

HSBC strives to offer a personal level of service with experienced advisors. HSBC use customized software for the management and monitoring of portfolios. We can support portfolios in various base currencies and employ a modern risk management system.

SWOT ANALYSIS OF HSBC BANK STRENGTHS:a.

Brand Name:
The biggest strength is the tag of HSBC is going to be the largest group of MNCs.

b.

Compatible Price:
Prices of different schemes of HSBC are much more compatible than others.

c.

Diversified Schemes:
We have diversified schemes, which is an exception case of HSBC.
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d.

Less Risk:

Our debt schemes are 100% free form market risk. Even as our portfolio is that diversified so equities are also less risky than others.

e.

Easy procedures for account opening too:

We have an easy system for opening the account as it includes investment & being named as saving account for the costumer future benefits.
f.

Debit cum ATM card facility:

The main advantage of HSBCs Debit cum ATM card is that you can access this card through any VISA supported ATMs & withdraw your amount, without any single charge to be paid.

WEAKNESS:1.

Prone to Market Risk:

Mutual Funds depend on overall macroeconomic condition and market scenario.

2.

Tough Competitions:

There is a very tough competition because of large number of Asset Management Companies. 3. Incapability of Customers:

HSBC only provides 2 types of account opening of which one is PVA (Power Vantage Account) under which an abs of 1 lakh is to be maintained & the second one is Premier Account, under which an abs of 25 lakh is to be maintained. This is sometimes beyond the reach of a middle class person

OPPORTUNITIES:1.

Hoarding:
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Most of the Indians have black money that too in huge amount i.e. the do not have money in banks, so approaching them is beneficial, so that through the opening of this account they can make further investment.
2.

Indian Capital Market is Growing:

So more & more new investors are interested in investments. 3. Tailor Made Products:

We have tailor made products like sector specified schemes & even diversified schemes.
4.

Branch Expansion:

Large no. of branches are opening day by day and even we are traping the countries having almost same type of socio-economic condition & even same culture etc.

THREATS:1.

Tough Competition:

As there are so many banks having almost same kind of schemes, stough to compete with. 2. Unawareness:

Majority of population is not aware of HSBC brand name and even because of other banking facilities which are much cheaper than HSBCs services, so its hard to convince people.
3.

Changing Scenario:

Our market scenario is changing day-by-day i.e. our market is fluctuating, so this makes investor hard to invest.

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RESEARCH METHODOLOGY

The study undertaken by me was regarding a detail analysis of PORTFOLIO MANAGEMENT IN RELATION WITH HSBC BANK, studying its current scenario and the role played by portfolio management in development of HSBC bank.

Research Objective:
The main objective of my study is to find the main strategies, policies followed by portfolio managers for the development of HSBC bank all over the world. The data source being used in following form:

Secondary Data.
The data that is used in this project is of secondary nature. The data is collected from secondary sources such as various websites, journals, newspapers, books, etc., the analysis used in this project has been done using selective technical tools. In Portfolio Management of HSBC

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Bank I found that it is necessary for the bank to take the help of portfolio Managers for the continuous working of bank.

RECOMMENDATIONS

According To Portfolio Manager TO HSBC Bank Is As Under:

The investors above the age of 50 years must be taken into consideration as they are having great potential regarding investment. HSBC must lay down some sound strategies to trap more customers by giving them more commission in comparison to other investment centers. HSBC must use marketing tools like point of purchase, advertisement through Mass Media like loading Newspapers, Magazines, Television, Exhibition, Fairs, SMS on Mobiles, advertisement on the internet. The organization is lacking on the parameters of motivation. It is recommended that the organization must adopt the concept of motivation. HSBC should organize programs for customer awareness in developing areas and establish a confidence and belief among the customers residing there.
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BIBLOGRAPHY

WEBSITES:

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a) WWW.HSBC.CO.IN.COM b) WWW.GOOGLE.COM c) WWW.WIKIPEDIA.COM

BOOKS:

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