2. CONTENTS
What Makes a Good Relationship Manager?
Why should one Invest?
Where to invest?
Asset Class
Introduction to Stock Market
Risk Involved
Taxation
Derivatives
Mutual Funds
3. WHAT IS A RELATIONSHIP MANAGER?
A relationship manager specializes in the
management of client relationships for a company
to ensure the customer is content with the service
or products they receive.
Relationship manager positions exist in various
fields and industries, including the investment and
financial management fields.
4. WHAT MAKES A GOOD RELATIONSHIP MANAGER?
A good relationship manager must be familiar with
company’s products and services.
Excellent sales skills and interpersonal skills.
Work hard to foster strong business relationships
with customers.
Participate in one-on-one meetings with clients to
explain products and services .
5. WHAT MAKES A GOOD RELATIONSHIP
MANAGER?
Understand the problems, challenges and
objectives of clients and identify ways to address
those needs.
Grow the business by identifying new sales and
business development opportunities.
Seek opportunities to cross-sell or upsell to existing
clients.
Resolve any customer complaints in a prompt and
professional manner.
6. WHAT MAKES A GOOD RELATIONSHIP
MANAGER?
Set revenue targets and then develop and execute
a strategy to meet those.
Keen analytical and research abilities.
Knowledge of relationship management best
practices.
Problem solving and conflict resolution capabilities.
Outgoing and customer-oriented attitude.
7. CLIENT RELATIONSHIP MANAGEMENT STRATEGIES
Respect the Client’s Time
Get Face to Face
Under Promise and Over Deliver
Give Importance to Small but Important things
Set Mutual Goals
Build Credibility Over Time
Be Transparent
8. WHY SHOULD ONE INVEST?
To Fight Inflation – By investing one can deal
better with the inevitable – growing cost of living
generally referred to as Inflation.
To Create Wealth – By investing one can aim to
have a better corpus by the end of the defined time
period for objectives like children’s education,
marriage, house purchase, retirement, holidays etc.
To meet life’s financial aspiration.
9. ASSET CLASS
When it comes to investing one has to choose an
asset class that suits the individual’s risk and
return temperament.
An asset class is a category of investment with
particular risk and return characteristics.
10. WHERE TO INVEST?
The following are some of the popular assets class :
1. Fixed income instruments
2. Equity & Derivatives
3. Real estate
4. Commodities (precious metals)
11. FIXED INCOME INSTRUMENTS
Typical fixed income investment includes:
1.Fixed deposits offered by banks
2.Bonds issued by the Government of India
3.Bonds issued by Government related agencies such as
HUDCO, NHAI etc
4.Bonds issued by corporates
The typical return from a fixed income instrument
varies between 6% and 9%.
12. EQUITY
Investment in Equities involves buying shares of
publicly listed companies.
Indian Equities have generated returns close to
12% – 18% CAGR.
Long term capital gains from equity investment are
completely exempted f
13. DERIVATIVES
Derivative is a contract or a product whose value is
derived from value of some other asset known as
underlying.
Derivatives are based on wide range of underlying assets
as following :
1. Metals such as Gold, Silver, Copper etc.
2. Energy resources such as Oil, Coal, electricity etc.
3. Agri commodities such as wheat, Sugar, Coffee, Cotton,
Pulses etc.
4. Financial assets such as Shares, Bonds and Foreign
Exchange.
14. REAL ESTATE
Real Estate investment involves buying and selling
commercial and non commercial land, apartments
and buildings.
There are two sources of income from real estate
investments namely – Rental income and Capital
appreciation of the investment amount.
15. COMMODITY – BULLION
Investments in gold and silver are considered one
of the most popular investment avenues.
Investments in these metals have yielded a CAGR
return of approximately 8% over the last 20 years.
One can choose to invest in the form of jewellery or
Exchange Traded Funds (ETF).
16. RETURN ON INVESTMENT
Average rate of return in fixed income instruments is
estimated at 7% per annum.
Investing in equities gives an average return of 12% -
18%per annum(for long term).
Investing in bullion provides an average return of 8%
per annum.
18. INTRODUCTION TO STOCK MARKETS
What is a stock market?
Stock Market Participants
The Regulator -SEBI
Financial Intermediaries
Index and its uses
Commonly Used Jargons
Market Segment
Trading Terminal
Risk Involved
Taxation
19. WHAT IS A STOCK MARKET?
The main purpose of the stock market is to
facilitate investing and trading activities in stocks &
derivatives.
It is a secondary market.
Stock Exchanges in India – NSE & BSE.
20. STOCK MARKET PARTICIPANTS
1. Domestic Retail Participants
2. NRI’s and OCI
3. Domestic Institutions –LIC
4. Domestic Asset Management Companies - SBI
Mutual Fund, DSP Black Rock, HDFC AMC
5. Foreign Institutional Investor- Foreign asset
management companies, hedge funds and other
investors
21. THE REGULATOR -SEBI
The stock exchanges (BSE and NSE) conduct its business
fairly
Stock brokers and sub brokers conduct their business fairly
Corporates don’t use the markets to unduly benefit
themselves (Satyam Computers)
Small retail investors’ interests are protected
Large investors with huge cash pile should not manipulate the
markets
Overall development of markets
23. FINANCIAL INTERMEDIARIES
Stock Broker - Trading Account
Depository and Depository Participants- DEMAT Account
Depository - NSDL & CDSL
Depository Participants- One needs to liaison with a DP
to open and maintain DEMAT account.
Banks – Bank account linked with trading account
24. FINANCIAL INTERMEDIARIES
NSCCL and ICCL
NSCCL - National Security Clearing Corporation
Ltd (wholly owned subsidiary of National Stock
Exchange)
ICCL - Indian Clearing Corporation Ltd (wholly
owned subsidiary of Bombay Stock Exchange)
25. INDEX
An index acts as a barometer of the whole economy.
An index going up indicates that the market participants
are optimistic.
An index going down indicates that the market
participants are pessimistic.
There are two main indices in India – The BSE Sensex
and NSE Nifty.
31. MARKET SEGMENT
A market segment is a division within which a
certain type of financial instrument is traded.
1. Capital Market
2. Futures and Options
3. Whole sale Debt Market
32. CAPITAL MARKET
Capital market segment offers a wide range of
tradable securities such as equity, preference
shares, warrants and exchange traded funds.
Capital Market segment has sub segments under
which instruments are further classified.
Common shares of companies are traded under the
equity segment abbreviated as EQ.
33. FUTURES AND OPTIONS
Futures and Option, generally referred to as equity
derivative segment is where one would trade
leveraged products.
34. WHOLE SALE DEBT MARKET
The whole sale debt market deals with fixed income
securities.
Debt instruments include government securities,
treasury bills, bonds issued by a public sector
undertaking, corporate bonds, corporate
debentures etc.
35. TRADING TERMINAL
When a market participant wants to transact in the
market, he can do so by opting one of the options :
1. Call & Trade
2. Use a web browser to access the markets
3. Use the trading software called the Trading
Terminal
36. INFORMATION AVAILABLE ON TRADING
TERMINAL
Last traded price
Percentage change
Previous day close
OHLC
Volumes
37. OPTIONS AVAILABLE ON TRADING TERMINAL
Order type :
1. Limit Order
2. Market Order
3. Stop Loss Order
Trigger Price
38. FACILITIES AVAILABLE ON TRADING TERMINAL
Order book
Trade Book
Ask Price : The price that the sellers ask is called
the Ask Price.
Bid Price : The price that the buyer demands is
called the bid price.
39. CLEARING AND SETTLEMENT
The day on which a transaction happens, is called
the trade date, represented as ‘T Day’.
The broker is required to issue a contract note for
all the transactions carried out by end of T day.
40. CLEARING AND SETTLEMENT
When a share is bought, the same will be reflected
in DEMAT account by end of T+2 day.
All equity/stock settlements in India happen on a
T+2 basis .
When shares are sold, the shares are blocked
immediately and the sale proceeds credited again
on T +2 day.
41. RISKS INVOLVED
Investors/Traders are exposed to following
categories of risks when own a stock :
1. Systematic Risk
2. Unsystematic Risk
42. SYSTEMATIC RISK
Systematic risk is the risk that is common to all
stocks in the markets.
Systematic risk arises out of common market
factors such as the macroeconomic landscape,
political situation, geographical stability, monetary
framework etc.
43. SYSTEMATIC RISK
A few specific systematic risks which can drag the
stock prices down are:
1. De-growth in GDP
2. Interest rate tightening
3. Inflation
4. Fiscal deficit
5. Geopolitical risk
44. UNSYSTEMATIC RISK
The risk of losing money owing to company specific
reasons (or internal reasons) is often termed as
“Unsystematic Risk”.
Following situations can drag the stock price down :
1. Deteriorating business prospects
2. Declining business margins
3. Management misconduct
4. Competition eating margins
Unsystematic risk can be reduced by diversification.
45. TAXATION
Income tax : Income Tax is a portion of earned
money that is paid to the government of India.
The income tax applicable depends on the income
tax slab a person belongs to.
The income tax slabs vary according to age group.
46. CLASSIFYING MARKET ACTIVITY
Investor : If someone buys shares with the intent of
earning income through dividends is an
investor.(CBDT circular)
Trader : If someone buys and sells shares with the
intent to earn a profit, he is a trader.
So before filing income tax returns, one will have to
first classify himself, as an investor, trader, or both.
47. CLASSIFICATION OF INCOME
When trading or investing one needs to classify his
income under one of these heads, broadly they are
:
1. Long term capital gain (LTCG)
2. Short term capital gain (STCG)
3. Speculative business income
4. Non-speculative business income
48. LONG TERM CAPITAL GAIN
Gain or profit earned by investing into stocks or
equity mutual funds, and selling after 1 year from
date of purchase can be categorized under LTCG.
In India any gains realized and categorized as
LTCG (equity & equity MF) is completely exempt
from taxes. In other words, tax on LTCG is at 10%.
49. SHORT TERM CAPITAL GAIN
Gain or profit earned by investing into stocks or
equity mutual funds holding for more than 1 day
(also called delivery based) and selling them within
1 year from date of purchase can be categorized
under STCG.
Currently tax on STCG in India is flat 15% on the
gain or profit.
50. SPECULATIVE BUSINESS INCOME
As per section 43(5) of the Income Tax Act, 1961, profits
earned by trading equity or stocks for intraday or non-
delivery is categorized under speculative business
income.
There is no fixed rate like capital gains tax rate when
someone has a speculative business income.
One needs to club the speculative business income
with other income source and identify the taxable
amount. Once this is done, tax has to be paid based on
the tax slab one belongs to.
51. NON-SPECULATIVE BUSINESS INCOME
Income from trading futures & options on
recognized exchanges (equity, commodity, &
currency) is categorized under non-speculative
business income as per section 43(5) of the Income
Tax Act,1961.
It is required to add the non-speculative business
income to all other income, and pay taxes
according to the slab applicable to the person
concerned.
52. EQUITY DERIVATIVES
Derivative is a contract whose value is derived from
value of some other asset known as underlying.
When underlying asset is equity, it is called equity
derivative.
53. PRODUCTS IN DERIVATIVES MARKET
Forwards : These are Over‐the‐counter (OTC)
contracts between two parties to buy/sell an
underlying asset at a certain future date for a
particular price that is pre‐decided on the date of
contract.
Futures : Futures are exchange traded forward
contracts.
54. OPTIONS
An Option is a contract that gives the right, but not
an obligation, to buy or sell the underlying on or
before a stated date and at a stated price.
Buyer of option pays the premium and buys the
right.
Writer or seller of option receives the premium with
obligation to sell/ buy the underlying asset, if the
buyer exercises his right.
55. MARKET PARTICIPANTS
There are broadly three types of participants in the
derivatives market :
Hedgers - They face risk associated with the
prices of underlying assets and use derivatives to
reduce their risk.
Corporations, investing institutions and banks all
use derivative products to hedge or reduce their
exposures to market variables such as interest
rates, share values, bond prices, currency
exchange rates and commodity prices.
56. MARKET PARTICIPANTS
Speculators/Traders - They try to predict the
future movements in prices of underlying assets
and based on the view, take positions in derivative
contracts.
Derivatives are preferred over underlying asset for
trading purpose, as they offer leverage, are less
expensive and are faster to execute in size (high
volumes market).
57. MARKET PARTICIPANTS
Arbitrageurs : Arbitrage is a deal that produces
profit by exploiting a price difference in a product in
two different markets.
Arbitrage originates when a trader purchases an
asset cheaply in one location and simultaneously
arranges to sell it at a higher price in another
location.
58. NOTE ON FORWARD SETTLEMENT
Physical Settlement – The full purchase price is
paid by the buyer of a forward contract and the
actual asset is delivered by the seller.
Cash Settlement – In a cash settlement there is no
actual delivery or receipt of a security. In cash
settlement, the buyer and the seller will simply
exchange the cash difference.
60. FEATURES OF FUTURE CONTRACTS
Futures Contract mimics the underlying
Standardized Contracts
Futures Contracts are tradable
Futures Market is highly regulated
Contracts are time bound
Cash settled
61. FUTURES TERMINOLOGIES
Spot price
Future price
Lot size
Contract Value
Contract Cycle
Expiry
Initial Margin
Mark to Market
62. MUTUAL FUNDS
A mutual fund is a professionally managed type
of collective investment scheme that pools
money from many investors and invests it in stocks,
bonds, short-term money market instruments and
other securities.
Mutual funds have a fund manager who invests the
money on behalf of the investors by buying / selling
stocks, bonds etc.
63. FEATURES OF MUTUAL FUNDS
Professional fund management team
Diversification
Less Expensive
Less Risky
64. MUTUAL FUNDS’ STRUCTURE IN INDIA
1. Sponsor
2. Trust
3. Mutual Fund
4. Asset Management Company
65. MUTUAL FUNDS
NFO : The launch of a new scheme is known as a
New Fund Offer.
Registrars and Transfer Agents : Perform the
important role of maintaining investor records.
Custodian : A custodian’s role is safe keeping of
physical securities and also participates in a
clearing and settlement system through approved
depository companies on behalf of mutual funds, in
case of dematerialized securities.
66. TYPES OF MUTUAL FUNDS
Open ended or Close ended
Equity Funds – 65% investment in Indian equities
Index Fund
Large Cap Fund
Mid Cap Fund
Sectoral fund
