A Comparative Analysis on Investment Portfolio of Business & Service Class Investors of HSBC InvestDirect

in Ludhiana

Presented by-

Supriya Nayyar

Historical background of the group

It was established in 1865.Aimed to finance the growing trade between

Europe, India & China.By 1880s, the bank was acting as banker to

Hong Kong Government.It is also participated in the management of

British government accounts in China, Japan, Penang & Singapore.

Introduction to HSBC

HSBC is world’s local bank.

Headquarters in London.

HSBC’s international network comprises over 9500 offices in 76 countries & territories in Europe, the Asia-Pacific region, the Americas, the Middle East & Africa.

HSBC provides a comprehensive range of financial services like-

1) Personal financial services

2) Commercial Banking

3) Corporate Banking

4) Investment Banking

 

HSBC Group in India

It offers a full range of Banking & Financial Services to its over 2.8 million customers.

It has 47 branches & 170 ATMs across 26 cities.

It has over 34,000 employees in its Banking, Investment Banking & Capital Markets.

With Asset Management, 2 Global IT development centres & 6 Global resourcing operations in the country.

Sale of Stake in Investsmart to HSBC

HSBC acquired 29.36% stake in IL&FS InvestSmart Ltd.

HSBC acquired 43.85% of InvestSmart from E*TRADE Mauritius Ltd.

HSBC has accepted shares to Public shareholders equivalent to 20.65% of InvestSmart’s capital.

Thus, it has completed its acquisition of 93.86% of IL&FS for a consideration of US$296.4 million.

Vision & Mission Vision :To become the preferred long term financial

partner to a wide base of customers whilst optimizing stakeholders value.

Mission: To establish a base of 1 million satisfied customers by 2010. We will create this by being a responsible and trustworthy partner.

PRODUCT PROFILE

All the products of IL&FS can be broadly divided into the following two categories:

Online Trading Products.Advisory Services.Other services.

Online Trading Product of IL&FS Investsmart

Basically IL&FS Investsmart offers three types of products to its retail customers.

Smart StartSmart InvestSmart Trade

Advisory Services

1) Mutual fund advisory services.

2) Portfolio management services.

3) IPO Advisory and Distribution Services.

4) Insurance Advisory Services.

5) Investment Advisory services

Other Services

1) Online services.

2) Research and Financial Analysis.

3) Value added services.

Organisational Members Mr. Manasije Mishra MD & CEO Mr. Avdhoot Deshpande Head - Equity and

Capital Markets Mr. Vipul Shah Head - NBFC Mr. Dharmen shah Vice President -

Institutional Equity Mr. Jaideep Anand Senior Vice

President - Institutional Sales & Dealing Mr. C. Diwakar Chief Information Officer Mr. K. Venkatesh Head – Distribution

Organization Chart

Branch ManagerMr. Saurabh Talwar

Offline

Opeartions (3 Persons)

Online

SWOT ANALYSIS

Strengths:-

1) Customization.

2) Expertise.

3) Unique Features.

4) Research Agency.

5) Extensive reach.

6) Brand image.

7) Competitive pricing.

Weaknesses:-

1) Expensive Products.

2) Tedious Procedures.

3) Fund Transfer.

4) Attrition.

Continued……….

Opportunities:-

1) Right Time to Investors to re-enter into market.

2) Huge untapped Markets.

3) Increasing number of Graduates.

4) Increase Tie-ups for Fund Transfer.

Threats:-

1) Stiff Competition.

2) Increasing awareness of Mutual Funds & ULIPS.

RATIO ANALYSIS1) Current Ratio

2007 2008 2009

Current Ratio 2.2 2.3 1.9

0.25

0.75

1.25

1.75

2.25

Current Ratio

Quick Ratio

2007 2008 2009

Quick Ratio 1 1.1 1.1

0.95

0.97

0.99

1.01

1.03

1.05

1.07

1.09

1.11

Quick Ratio

Return on Total Assets

2007 2008 2009

Return on Total Assets 12.5 12 9.9

1

3

5

7

9

11

13

Return on Total Assets

Net Profit Ratio

2007 2008 2009

Net Profit Ratio 6.1 5.5 6.6

4.9

5.1

5.3

5.5

5.7

5.9

6.1

6.3

6.5

6.7

Net Profit Ratio

Debt-Equity Ratio

2007 2008 2009

Debt-Equity Ratio 1.44 1.42 2.59

0.25

0.75

1.25

1.75

2.25

2.75

Debt-Equity Ratio

Investment PortfolioInvestment is a commitment of funds made in the

expectation of some positive rate of return.

The Investment needs of an Investor:-

1) Capital Preservation.

2) Wealth Generation.

3) Tax Savings.

4) Income.

5) Future Uncertainty.

6) Retirement Planning.

Investment Planning

It helps in deciding upon the right Investment strategy.

It is a balance of three components:-

1) Liquidity.

2) Risk Tolerance.

3) Return.

Types of Investment

Portfolio Management

A Portfolio is a collection of securities that are grouped together to diversify the total Risk.

An Optimal Portfolio provides the highest possible utility, given the constraints imposed by the opportunity set and efficiency frontier.

Beta measures the risk associated with Individual Portfolio in relation to the Market Portfolio.

Meaning of Portfolio Management

The Art & Science of making decisions about Investment mix & policy, matching Investments to Objectives, asset allocation for Individuals & balancing risk vs. Performance.

Portfolio Objectives:-

1) Stability of Principal.

2) Income.

3) Growth of Income.

4) Capital Appreciation.

Investment Pyramid

PMS by HSBC1) iPreserve:- It is a discretionary investment management schemes,

offering investment solutions in Mutual Funds that are aligned to suit investor’s financial goals.

The Primary objective of iPreserve is to manage investments in Mutual Funds, encompassing both debt as well as equity schemes.

It takes care of complete execution of the investment and

monitoring on investor’s behalf.

Continued…………2) iGrowth:- iGrowth is a discretionary portfolio management

scheme focusing on investments in equities and derivatives with an objective of growth.

It aims at creating long-term wealth through judicious stock selection and asset allocation.

Features of PMS by HSBC1) Smart Portfolio:-

Adding Scrips

Scrip wise split of Portfolio Holdings

Realized Gains Report

Title

A Comparative Analysis on Investment Portfolio of Business & Service Class Investors of HSBC InvestDirect in Ludhiana.

Objectives1) To study the demographical factors affected the

choice of Portfolio of Investors.

2) To identify the purpose of investment & extent of financial literacy of Investors.

3) To know the most preferred Investment avenues of Investors.

4) To find out the Risk Tolerance limit of Investors.

Research Methodology

Research Problem: -“A Comparative Analysis on Investment Portfolio of

Business & Service Class Investors of HSBC Invest Direct in Ludhiana”.

Research Design: -

Descriptive Research Design.

Data Collection: -

Primary Research:- Questionnaires & Telephonic Interviews.

Secondary Research: - Journals & Magazines.

Sample:-

The Business & Service class Investors of HSBC InvestDirect in Ludhiana.

Sampling Unit:-

Those Business & Service class Investors using PM Services of HSBC InvestDirect.

Sample Size:- 100.

50- Business Class Investors

50- Service Class Investors.

Sampling Frame:- It includes the Clients Database using PMS of HSBC InvestDirect, Ludhiana & the Walking Investors in Ludhiana Branch.

Sampling Technique:- Simple Random Sampling & Convenience Sampling Techniques.

Data Analysis & Interpretation

Fig 4.1:- The Investors’ Demographic Profile (Gender)

Male Female

Business 88% 12%

Service 78% 22%

5%

15%

25%

35%

45%

55%

65%

75%

85%

95%88%

12%

78%

22%

Demoghraphic Profile of Investors

Perc

enta

ge O

f Inv

esto

rs

Fig.4.2:- The Age Group of Investors.

Below 35 35-50 51-60 Above 60

Business 30% 56% 10% 4%

Service 78% 20% 2% 0%

5%

15%

25%

35%

45%

55%

65%

75%

85%

30%

56%

10%4%

78%

20%

2% 0%

Age Group of Investors

Perc

enta

ge O

f Inv

esto

rs

Fig. 4.3:- The Marital Status of Investors.

Unmarried Married

Business 20% 80%

Service 52% 48%

5%

15%

25%

35%

45%

55%

65%

75%

85%

20%

80%

52%48%

Marital Status of Investors

Perc

enta

ge o

f Inv

esto

rs

Fig. 4.4:- The Investors are having Dependents.

0 to 1 2 to 3 More than 3

Business 24% 38% 38%

Service 54% 38% 8%

5%

15%

25%

35%

45%

55%

24%

38% 38%

54%

38%

8%

Dependents on the Investors

Perc

enta

ge o

f Dep

ende

nts

Fig.4.6:- Monthly Flow of Income of Investors.

Under Rs.10,000 Rs.10,001 to Rs.20,000

Rs.20,001 to Rs.30,000

Above Rs.30,000

Business 12% 20% 22% 46%

Service 4% 22% 44% 30%

3%

8%

13%

18%

23%

28%

33%

38%

43%

48%

12%

20%22%

46%

4%

22%

44%

30%

Monthly Inflow of Income

Perc

enta

ge o

f Inv

esto

rs

Fig.4.7.1:- Awareness among Business class Investors regarding various Investment Plans.

Bank & P.O. Fixed Deposits

Insurance Schemes

Equities Commodities/Derivatives

Real Estate

Yes 100% 92% 92% 48% 86%

No 0% 8% 8% 52% 14%

10%

30%

50%

70%

90%

110%100%

92% 92%

48%

86%

0%8% 8%

52%

14%

Perc

enta

ge O

f Bus

ines

s Cl

ass

Inve

stor

s

Fig.4.7.2:- Awareness among Service Class Investors regarding various Investment Plans.

Bank & P.O. Fixed Deposits

Insurance Schemes

Equities Commodities/  Derivatives

Real Estate

Yes 100% 98% 88% 66% 80%

No 0% 2% 12% 34% 20%

10%

30%

50%

70%

90%

110% 100% 98%88%

66%80%

0% 2%12%

34%20%

Awareness regarding various Investment Plans

Perc

enta

ge o

f Ser

vice

Cla

ss In

vest

ors

Fig.4.8:- The Purpose of Investors behind their Investments.

Capital Appreciation Balance of Capital App. & Current Income Supplement to Current Income

Business 30% 62% 8%

Service 46% 38% 16%

5%

15%

25%

35%

45%

55%

65%

30%

62%

8%

46%

38%

16%

Purpose of Investors behind their Investments

Per

cen

tage

of

Inve

stor

s

Fig.4.9:- The Basis which initiates the Investors to invest in any Financial Security.

Fundamental Analysis Financial Advisor Portfolio Services

Business 0.277 0.349 0.374000000000002

Service 0.342 0.237 0.421

0.025

0.075

0.125

0.175

0.225

0.275

0.325

0.375

0.425

0.277

0.349

0.374000000000002

0.342

0.237

0.421

Basis of Investments

Mea

n/A

vera

ge

Fig.4.10:- Important Features required in Investors’ Portfolio Plan.

Growth Income Safety Tax Efficiency

Business 2.48 1.84 3.34 2.34

Service 2.62 1.9 3.26 2.22

0.25

0.75

1.25

1.75

2.25

2.75

3.25

3.75

2.48

1.84

3.34

2.34

2.62

1.9

3.26

2.22

Features required in Investors' Portfolio Plan

Mea

n/A

vera

ge

3

3

1

1 4

4

2

2

Fig.4.11:- Most Preferred Investment Avenues by the Investors.

Bank & P.O. Fixed De-posits

Insurance Schemes Mutual Fund Schemes Equities Commodities/Deriva-tives

Real Estate

Business 3.6 4.18 2.72 2.58 4.42 3.38

Service 3.14 3.3 2.88 2.96 4.82 3.92

0.5

1.5

2.5

3.5

4.5

5.5

3.6

4.18

2.722.58

4.42

3.383.14

3.3

2.88 2.96

4.82

3.92

Most Preferred Investment Avenues

Mea

n/A

vera

ge

4

3

5

4

21

12

6

6 3

5

Fig.4.12:- Type of Investments which are covered under their Current Portfolio.

Mainly Cash/Bank Deposits with small portion in Low risk Bonds

Mainly Debt Instruments & some Portion in Blue Chip Stocks

A mix of Debt Instrument, Blue Chip & Aggressive Stocks

Mostly Speculative or High Risk Investments

Business 18% 14% 52% 16%

Service 36% 28% 30% 6%

5%

15%

25%

35%

45%

55%

18%

14%

52%

16%

36%

28%30%

6%

Current Portfolio of Investors

Per

cen

tage

Of

Inve

stm

ents

Fig.4.13:- Important sources of Information which influence the Investors’ decision regarding their Investments.

Newspaper/ Magazines Electronic Media (T.V.) Peer Group/ Friends Broker/ Financial Advisor Internet

Business 0.26 0.4 -0.58 0.700000000000001 -0.760000000000005

Service 0.8 0.34 -0.88 0.380000000000002 -0.640000000000005

-0.9

-0.7

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

0.9

0.260.4

-0.58

0.700000000000001

-0.760000000000005

0.8

0.34

-0.88

0.380000000000002

-0.640000000000005

Sources Of Information

Mea

n

Fig.4.15:- The Time Period for which Investors prefer to keep their Investments.

Less than 1 month 1 month - 6 months 6 months - 12 months More than 12 months

Business 2% 20% 38% 40%

Service 0% 16% 34% 50%

5%

15%

25%

35%

45%

55%

2%

20%

38%40%

0%

16%

34%

50%

Time Period of keeping Investment

Per

cen

tage

of

Inve

stor

s

Fig.4.16:- The Decision of the Investors at the time of Fluctuation in the Market.

Withdraw your Money Wait & Watch Invest more in it

Business 10% 52% 38%

Service 34% 36% 30%

5%

15%

25%

35%

45%

55%

10%

52%

38%

34%36%

30%

Investors' Decision

Per

cen

tage

of

Inve

stor

s

Fig.4.17:- The Investors belong to Risk Category.

Aggressive Capital Preservation Balanced Portfolio Aggressive Capital Appreciation Portfolio

Business 14% 36% 50%

Service 20% 54% 26%

5%

15%

25%

35%

45%

55%

14%

36%

50%

20%

54%

26%

The Investors' Risk Categories

Per

cen

tage

of

Inve

stor

s

Findings & ConclusionConclusion of 1st Objective:- Majority of Business class Investors are adults and they have

the family size of more than 3 because 80% of them are married and they have monthly Income of above Rs. 30,000. It means high incomes Business Investors are doing more Investments.

Whereas majority of Service class Investors is Young and they have less number of dependents (0-1) because majority (80%) is unmarried and they start doing Investments with the Salary Package of Rs.20,001 to Rs.30,000 because as they have less number of dependents so they are using more of their money into Investments.

Conclusion of 2nd Objective The Business Investors have the awareness of all Investment avenues

especially Equities & Real estate, few of them don’t know about Commodities/Derivatives & that’s why they do Investments with the purpose of appreciation in their Capital as well as a source of their current Income & whenever they do Investment in any security, they do so because their Portfolio Management Services & Financial Advisor initiate them to do so.

Whereas Service class Investors have the awareness of all Investment avenues especially Insurance schemes and Equities and very few of them don’t know about Derivatives. They do Investments with the purpose of Capital Appreciation & they do Investments by having Portfolio Services Initiation as well as Fundamental analysis of that particular Scrip/Company.

 

Conclusion of 3rd Objective

Business class Investors have given the highest preference means Rank 1 to Equities.

Whereas Service class Investors have given the highest preference to Mutual Funds.

Conclusion of 4th Objective The most preferred Investment Avenue for Business Investors is Equity &

Real Estate and they keep it with themselves for more than 12 months because Equity is a long term Investment.

They wait & watch or they invest more whenever they noticed any fluctuation in the market .

That’s why they come under Aggressive Capital Appreciation Category which refers to higher risk & higher returns.

Whereas the Service class Investors have most preferred Investment Avenue is Mutual Fund so they keep it for long period and most of them withdraw their Investment or they wait & watch when any fluctuation is noticed in the market.

That’s why; they have a Balanced Portfolio which refers to moderate risk & moderate return.

Conclusion Business Class Investors are more Risk taking. They prefer to

invest in High risk Investments such as Equity & hold their securities for a longer period of time.

They come under the Aggressive Capital Appreciation Portfolio.

Whereas; the Service Class Investors are less Risk taking.

Whenever they noticed any fluctuation in the market they try to withdraw their money.

They do Safer Investments such as Mutual Fund and prefer to take moderate risk & moderate return. So, they come under a Balanced Portfolio.

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