| What is PMS? |
PMS gives investors access to an institutional process of money management
Provides a customized solution by matching the unique circumstances and
objectives of each investor.
Wealth creation based on disciplined investment process is the crux of PMS
Effective diversification helps reduce portfolio volatility and enhances riskadjusted
returns over long term
PMS gives investor direct ownership of the individual securities in the portfolio. |
| Benefits of PMS? |
Benefits of PMS?
Ans.
Professional Management
The service provides professional management of equity portfolios designed to
deliver consistent long-term performance while identifying and controlling risks.
Continued Monitoring
We at Nirmal Bang understand the need to constantly monitor your portfolios
and bring in periodic changes to optimize the results.
Research Support
A research team responsible for establishing our investment strategy and
providing us real time information backs our portfolio managers.
Identifying Investor Objectives
The foundation of every financially sound portfolio is the ability to identify one’s
investment objective. It’s a process that requires expertise. Nirmal Bang provides
every investor a Relationship manager who comes with the required expertise
and experience to understand an investor’s financial goals.
Hassle free operation
Nirmal Bang ensures investors enjoy healthy portfolios without having to
involve themselves personally in monitoring and maintaining them. We provide
you with a customized service. All the administrative aspects of your portfolio is
taken care of by us for you.
Transparency
A dedicated website allows you access to all information relating to your investment. You will also receive quarterly account performance statement on
the overall status of the portfolio and Nirmal Bang research reports.
YOU earn money in bagfuls, but don't have the time or inclination to manage it.
If this description fits you, do consider entrusting your money to a professional
portfolio management service (PMS). In return for a fee, portfolio managers offer
to craft a basket of stocks, bonds or even mutual funds that would fit your
personal investment goals and risk preferences.
Though a few portfolio managers offer standardised packages for a sum as small
as Rs 5-10 lakh, it may take a minimum investment size of Rs 25-50 lakh to fetch
you a customised portfolio. Apart from cash, you can also hand over an existing
portfolio of stocks, bonds or mutual funds to a PMS that could be revamped to
suit your profile.
|
| Why not mutual funds? |
But why should you opt for PMS instead of a mutual fund? Here are a few
aspects on which portfolio managers say they score over the standardised
products offered by mutual funds:
Asset allocation: You may know what stocks, equity funds or bonds you
would like to own, but do you know how much of your savings you should
allocate to each of these? The decision on asset allocation will be crucial in
determining investment returns over the long term. With PMS, an asset
allocation plan is tailor-made for you, after a detailed check on your
investment goals, savings pattern and appetite for risk.
Timing: Have you ever kicked yourself for switching your entire portfolio
into equities just before they tanked? If you have, you probably need help
with regard to timing of investments. Once you hire a portfolio manager,
you can expect assistance on when you should be investing more money
into equities and when you should be bailing out. A portfolio manager
may also switch a portion of your portfolio into cash, if he perceives a big
risk to stock prices. The focus is on preserving value.
Flexibility: You are bullish on FMCG stocks, but find that equity funds
have marginal exposures to the sector. In a PMS, you can expect the
portfolio manager to accommodate your sector preferences when he
invests. But don't expect to completely dictate what stocks or sectors your
portfolio manager will buy for you, as he will be the best judge of that.
Also, portfolio managers do not have to stick to any rigid rules on what
proportion of your money will be invested in each sector or stock. They can also
use liberal doses of cash or derivative instruments to pep up your returns. Mutual
fund managers have their hands tied on these aspects by SEBI regulations. |
| What to expect from PMS? |
Okay, you have fallen for the sales pitch and entrusted your money to a PMS.
What can you now expect from this service?
More handholding from your portfolio manager than you have been accustomed
to from your mutual fund. You can expect to have a personal relationship
manager through whom you can interact with the fund manager at any time of
your choice. You can also expect frequent (maybe monthly) interaction with the
portfolio manager to discuss any concerns that you might have. Expect to be
consulted on any major changes in asset allocation or in the investment strategy
relating to your portfolio. All administrative matters, including operating a bank
account and dealing with settlement and depository transactions, will be handled
by the PMS.
If you are the type who likes to watch over your money like a baby, the
disclosures offered by a PMS may be just right for you. On handing over your
money, you will receive a user-ID and password from the PMS, which will grant
you online access to your portfolio details. You can use these to check back on
your portfolio as often as you like.
Keeping track of capital gains (and losses) for the taxman can be a depressing
chore, when you have furiously churned your investments through the year.
Opting for PMS will free you of this chore, as a detailed statement of the
transactions on your portfolio for tax purposes comes as a part of the package. |
| What you pay? |
Most portfolio managers allow you to choose between a fixed and a performancelinked
management fee. If you opt for the fixed fee, you may pay between 2-2.5
per cent of portfolio value; this is usually calculated on a weighted average basis.
The structure for the performance-linked fee differs across players; usually, this
includes a flat fee of 0.5-1.5 per cent. The portfolio manager also gets to share a
percentage of your profit — usually 15-20 per cent — earned over and above a
threshold level, which may range between 8 per cent and 15 per cent. Apart from
management fees, separate charges will be levied towards brokerage, custodial
services and towards meeting tax payments.
There are wide variations in fee structure between players and across products.
For instance, Birla Sun Life charges only a performance-linked fee for its
portfolio services. Way2Wealth has a differential fee structure for its debt and
equity dominated portfolios.
When you opt for a performance-based fee, the profits are reckoned on the basis
of "high watermarking". That is, you pay the fee only on the positive returns on
your portfolio. For instance, if you invest Rs 100 in a PMS and its value
appreciates to Rs 150 at the end of the year, you pay a fee on the profit of Rs 50.
Subsequently, a fee will be levied only on gains over and above the Rs 150 mark.
If the value of your portfolio slumps to Rs 70, and climbs back to Rs 110, the Rs
40 you earn will not be reckoned as profit. You will again be charged a fee only if
the value of your portfolio recovers to over Rs 150, the previous "high
watermark." |
| Who should hire a portfolio manager? |
Anybody with a nest egg, which meets the minimum investment requirement,
can consider using a PMS. However, a PMS may only add significant value in the
following cases:
Equity bias: Portfolio management services may be ideal for a person who seeks a
substantial investment in the stock markets. An equity portfolio also offers
greater scope for a manager to add value than does a debt portfolio. Several of the
established players in the PMS business focus on equity investments, though
some also offer hybrid products.
Large surplus to invest: The minimum portfolio size that portfolio managers
accept for a customised portfolio ranges from Rs 25 Lacs to Rs 5 crore. So
consider a PMS only if you have a substantial surplus to invest in stocks. If you
don't, evaluate if you can use the services of a financial planner or an advisor,
instead of a PMS.
If you are willing to handle the paperwork associated with investing, you can get
a financial planner or advisor to construct an asset allocation plan and guide you
on the choice of investments for a one-time fee of Rs 5,000-15,000. |
| What is the difference between a discretionary and a non-discretionary
Portfolio Management Services? |
| The discretionary portfolio manager will independently manage the funds of each
client in accordance with the needs of the client. The non-discretionary portfolio
manager will provide advisory services enabling the client to take decision with
regards to his portfolio. |
| How can I introduce my initial corpus? |
| Initial corpus can be brought into the Portfolio Management Service by way of
either Cash and/or securities. The initial portfolio of securities will be re-aligned
as per the model. |
| Do you guarantee the initial corpus and any ‘return’ thereon? |
| Initial corpus can be brought into the Portfolio Management Service by way of
either Cash and/or securities. The initial portfolio of securities will be re-aligned
as per the model. |
| Do you guarantee the initial corpus and any ‘return’ thereon? |
| Returns cannot be guaranteed as per regulations governing Portfolio
Management Services in India. However our objective is to out perform the
benchmark indices. We believe, over long term, Equity performance will track
corporate performance. Therefore historical trends indicate that well managed
portfolio in Indian equities can yield 15-18% p.a. returns. (Based on market
trends & discretion of portfolio manage). |
| Is there a maximum limit for investing in the Portfolio Management Service? |
| There is no upper limit on the amount you can invest in the PMS. |
| What is the time horizon? |
| The ideal time horizon for an equity portfolio is at least 12-18 months. |
| Does the Portfolio Management Service have any lock-in period? |
| There is no lock-in period. You can exit/redeem at any point of time. However
until it is specified by the PM at the time of investment. |
| How can I check the NAV positions and transactions? |
| You can check your portfolio anytime sending a mail to
pmsoperation@nirmalbang.com. You will also get a quarterly hard copy
statement that would give details of transactions & holdings lying in your
account. |
| Is the payment upfront? |
| Yes |
| How will I receive the Contract Notes? |
| Physical Copy of Contract note will be dispatched to your Correspondence
Address on T + 3 day. |
| Are there different forms for different funds? |
| No, the same form can be used for any scheme. |
| What amount will be compulsorily invested at any given time? |
| The fund manager will decide on the amount of investment according to the
market conditions however the Minimum investment would be greater or equal
to Rs. 5 Lacs as specified by SEBI. |
| Can I specify investments that I prefer to hold? |
| No. The discretion to invest primarily lies with the Portfolio Manager with the
objective to maximize your returns |
| In whose name investment will be made? |
| All Investment will be made in your personal account. |
| What is the paperwork and documentation needed to open a PMS account? |
Documents required:
1. Account Opening Form
2. The Risk Disclosure
3. Address Proof
4. Photo Identity proof
5. Pan card copy
6. Bank statements
|
| Do I need to have Permanent Account Number? |
| Yes |
| What is the Fee Structure for PMS? |
Fee Structure:
Fixed Fees
Fixed Fee and Variable Fee
|
| Can I withdraw my profit any time? |
| Yes, you can withdraw your profit as & when you want, provided you maintain
the minimum ticket size. |
| How safe are my securities under the Portfolio Management Service? |
| Stock ownership always rests with the client. |
| What are the tax implications of investments in PMS? |
| Under the PMS each transaction scheme will be considered as an independent
trade and capital gains will be applied on each depending upon whether the
relevant stock was held long term or short term. Presently 15% tax is chargeable
for Short Term Capital gains and no tax is chargeable on Long Term Capital
Gains. The STT charges will also apply. (changes will be subject to government
rules and regulations) |
| How will I know my tax status? |
| We expect all clients to consult their tax consultant before investing into any
form of securities. At Nirmal Bang Securities Pvt. Ltd, we annually provide an
audited tax statement of his portfolio to each client. This can be used for filing
returns. |
| What would the Portfolio Manager do in case of falling markets? |
| Based on our assessment of the fall, we will accordingly decide on the necessary
course of action. In the first instance, depending on the anticipated extent of the
correction, we may increase the percentage of cash in the portfolio. Since our
focus is always to invest in those companies which are available at an attractive
valuation, we believe that in the long term, any stock will always seek its fair
valuation which is unaffected by corrections in the market. If however, we see
signs of a trend reversal; our focus may change to increasing the cash component
and restrict investments to defensive sectors which have low beta relative to the
markets. |
| What are the advantages of investing in PMS vis a vis Mutual Fund? |
| You have greater control over the asset allocation, whereas it is automatic in MF.
The portfolio can be customized to suit your risk- return profile. The Portfolio
manager has relatively greater flexibility to move in and out of cash as and when
required depending on the market view. Typically, charges are lower and more
transparent in PMS vis-à-vis a Mutual Fund. Holdings not impacted by
entry/exit of big investors. |
| Who is a NRI? |
Person who does not reside in India for more than 182 days in any preceding
financial year.
. Non Resident Indians is also someone who fall under the following broad
categories:
. Indian citizens who stay abroad for employment or for carrying on a
business or vocation or for any other purpose in circumstances indicating
an indefinite period of stay outside India.
. Indian citizens working abroad on assignments with foreign
Governments/government agencies or International/Regional Agencies
like the UNO, IMF, World Bank, etc.
. Officials of the Central and State Governments and Public Sector
Undertakings deputed abroad on temporary assignments or posted to
their offices (including Indian Diplomatic Missions) abroad.
But does not include:
. A person who has gone out of India or who stays outside India, in either
case for or on taking up employment outside India, or for carrying on
outside India a business or vocation outside India, or for any other
purpose, in such circumstances as would indicate his intention to stay
outside India for an uncertain period.
. A person who has come to or stays in India in either case, otherwise than:
for or taking up employment in India, or for carrying on in India a
business or vocation in India, or for any other purpose, in such
circumstances as would indicate his intention to stay in India for an
uncertain period
. Any person or body corporate registered or incorporated in India,
. An office, branch or agency in India owned or controlled by a person
resident outside India,
An office, branch or agency outside India owned or controlled by a person
resident in India. |
| Can a NRI avail of the Portfolio Management Service? |
| The PMS is open for all Indian nationals, resident or otherwise. NRIs will have
to open a PIS Account in order to invest in the PMS scheme |
| What is PIS? |
| In order to invest in the Secondary Markets in India, NRIs need to obtain RBI
permission. In order to do so, a Bank account with a designated bank has to be
opened under Portfolio Investment Scheme (PIS) and all the transactions related
to the investment in secondary markets need to be routed through this account |
| Who is a PIO? |
| In order to invest in the Secondary Markets in India, NRIs need to obtain RBI
permission. In order to do so, a Bank account with a designated bank has to be
opened under Portfolio Investment Scheme (PIS) and all the transactions related
to the investment in secondary markets need to be routed through this account |
| Who is a PIO? |
| A citizen of any country (other than a citizen of Bangladesh or Pakistan) is
deemed to be of Indian origin, if,
He, at any time, held an Indian passport, or
He or either of his parents or any of his grand parents was a citizen of
India by virtue of the Constitution of India or Citizenship Act, 1955 ,or
Spouse (not being a citizen of Bangladesh or Pakistan or Sri Lanka) of an
Indian citizen or of a person of Indian origin is also deemed to be PIO. |
| How does a NRI invest in India? |
| NRIs are allowed to invest in Indian companies under the Portfolio Investment
Scheme (buying through the secondary market) and through the Direct
Subscription route (Investments through IPO’s / Private Placements). |
| What are the Procedures and Documents required for investing in secondary
stock markets? |
PIS account:
Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of India
(RBI) defined in Schedule 3 of Foreign Exchange Management Act 2000 under
which the ‘Non Resident Indians (NRIs)’ and ‘Person of Indian Origin (PIOs )’
can purchase and sell shares and convertible debentures of Indian Companies in
secondary market through a registered broker on a recognized Stock Exchange
in India by routing all such purchase/sale transactions through their account
held with a Designated Bank Branch (Authorized Dealer – AD)
NRE account:
NRIs/ PIOs are permitted to open bank accounts in India out of funds remitted
from abroad, foreign exchange brought in from abroad or out of funds
legitimately due to them in India.
Such accounts can be opened with banks specially authorized by the Reserve
Bank in this behalf.
NRIs and PIOs are eligible to open NRE Accounts. These are rupee denominated
accounts. Accounts can be in the form of savings, current, recurring or fixed
deposit accounts. Accounts can be opened by remittance of funds in free foreign
exchange.
Foreign exchange brought in legally, repatriable incomes of the account holder,
etc. can be credited to the account. Joint operation with other NRIs/PIOs is
permitted. Power of attorney can be granted to residents for operation of
accounts for limited purposes.
The deposits can be used for all legitimate purposes. The balance in the account
is freely repatriable. Interest lying to the credit of NRE accounts is exempt from
tax in the hands of the NRI. However, TDS on capital gains as per the prevailing
tax provisions is processed by the Authorized Dealers before giving credit to the
NRE account Funds held in NRE accounts may be freely transferred to Foreign
Currency Non Resident (FCNR) accounts of the same account holder. Likewise,
funds held in FCNR accounts may be transferred to NRE accounts of the same
account holder.
NRO account:
These are Rupee denominated non-repatriable accounts and can be in the form of
savings, current, recurring or fixed deposits. These accounts can be opened
jointly with residents in India. When an Indian National /PIO resident in India
leaves for taking up employment etc. outside the country, other than Nepal or
Bhutan, his bank account in India gets designated as NRO account.
The deposits can be used to make all legitimate payments in rupees. Interest
income from NRO accounts is taxable. Interest income, net of taxes is repatriable.
Funds can be freely transferred from NRE account to NRO account. But No
funds can be transferred from NRO account to NRE account.
o Source of Funds: By foreign inward remittance by way of TT, DD,
cheque, Travellers cheque, foreign currency, etc., or transfer from
existing NRE or FCNR accounts.
o Permitted Credits
. Foreign inward remittances including foreign currency and TCs
. Transfer from existing NRE or FCNR accounts
. Maturity proceeds of government securities, NSCs, units of UTI,
refund of shares or debentures provided the investments were made
originally from funds in NRE or FCNR accounts
. Dividends or interest in respect of shares, debentures taken on
repatriation basis provided investments is as per RBI approval
. Refund of shares or debentures, if the subscription was paid from
NRE or FCNR accounts or remittance from abroad
. Refund of application or earnest money by the house building
agencies, provided original payment was made out of NRE or
FCNR accounts, or from inward remittance
o Permissible Debits
. Transfer to NRO, FCNR or RFC accounts
. For investments in Units of UTI, NSCs, deposits, etc.
. For all local payments
. Acquisition of immovable property for bona fide residential purpose
. Remittances outside India (repatriation)
Demat account
Broking account
Documents required:
. Copy of valid visa (self attested)
. Indian address proof
. Foreign address proof
|
| Which is Our Designated Bank? |
| Axis Bank is our designated bank for NRI related PMS activities. |
| What are the Roles of a Bank? |
Issues authorization letter on behalf of RBI for investment under PIS
In case of a purchase transaction bank facilitates transfer of funds from
PIS account to the broker’s account
In case of a sale transaction bank facilitates receipt of funds in to
customer’s account from broker’s account
Computes Capital gains and effects payment of applicable taxes to
Income-Tax Authorities Handles mandatory reporting of PIS
transactions to Reserve Bank of India |
| Maximum Permissible Limits for NRI investments |
NRI can purchase up to a maximum of 5% of the aggregate paid up capital of the
company (equity as well as preference capital) or the aggregate paid up value of
each series of convertible debentures as the case may be. For the purpose of this
ceiling, investment under the Portfolio Investment Scheme on repatriation as
well as non-repatriation basis will be clubbed together.
There is an overall ceiling of 10% of paid-up equity share capital of the
company/paid-up value of each series of convertible debentures for purchase by
all NRIs/ OCBs put together. The overall ceiling can be raised to 30% if the
company concerned passes a special resolution to that effect in its general body
meeting.
Shares/convertible debentures acquired through IPO/Private Placement are
excluded for the purpose of above limits. |
| What happens if an NRI purchases a stock in excess of the prescribed limit? |
The NRI will have to immediately off load such portion of the holding, which is
in excess of the prescribed limit.
Restrictions
NRIs are not allowed day trading or speculative trading. It is mandatory that the
securities need to come from DP account of NRI only. NRIs are allowed to do
only delivery-based business.
Taxation
NRIs are subject to taxation according to the tax laws of India on investing in
the Indian stock markets.
Short Term Capital Gain: arise when the NRI investor sells his investment
within one year of his acquiring the same. STCG is taxed as per the existing Income Tax Law applicable to residents.
Long Term Capital Gain: arises when a NRI investor sells an investment which
he has held for more than one year. Incase of LTCG, a flat tax of 0% is applicable
for individuals and corporate. |