Portfolio Management Practices in HDFC Bank
Portfolio Management Practices in HDFC Bank
HDFC Bank Ltd is a major Indian financial services company based in Mumbai. The Bank is a publicly held banking company engaged in providing a wide range of banking and financial services including commercial banking and treasury operations. The Bank at present has an enviable network of 2201 branches and 7110 ATMs spread in 996 cities across India. They also have one overseas wholesale banking branch in Bahrain, a branch in Hong Kong and two representative offices in UAE and Kenya. The Bank has two subsidiary companies, namely HDFC Securities Ltd and HDB Financial Services Ltd. The Bank has three primary business segments, namely banking, wholesale banking and treasury.
The Bank`s shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Ltd. The Bank`s American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) and the Bank`s Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange. HDFC Bank Ltd Was incorporated on August 30, 1994 by Housing Development Finance Corporation Ltd. In the year 1994, Housing Development Finance Corporation Ltd was amongst the first to receive an “in principle” approval from the Reserve Bank of India to set up a bank in the private sector, as part of the RBI`s liberalization of the Indian Banking Industry. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. In the year 1996, the Bank was appointed as the clearing bank by the NSCCL.
In the year 2001, they became the first private sector bank to be authorized by the Central Board of Direct Taxes (CBDT) as well as the RBI to accept direct taxes. During the year, the Bank made a strategic tie-up with a Bangalore-based business solutions software developer, Tally Solutions Pvt Ltd for developing and offering products and services facilitating on-line accounting and banking services to SMEs. During the year 2001-02 the bank was listed on the New York Stock Exchange. In September 28, 2005, the Bank increased their stake in HDFC Securities Ltd from 29.5% to 55%. Consequently, HDFC Securities Ltd became a subsidiary of the Bank. During the year 2007-08, the Bank added 77 new branches take the total to 761 branches.
The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.
Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk. The meaning of Portfolio Management is as follows: * Portfolio is a collection of asset.
* The asset may be physical or financial like share, Bonds, Debentures and Preference Shares etc. * The individual investor or 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 Exchange Board of India Act 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. * One of the key inputs in portfolio building is the risk bearing ability of the investor. * Portfolios are built to suit the return expectations and the risk appetite of the investor.
The Basic objective 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 the share.
* Liquidity: An investment is a liquid asset. It can be converted into cash with the help of stock exchange. 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.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 15 October 2016
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