Summer Internship Project
A study on “Changes in Trend of Asset Allocation post demonetization &
GST among HNI clients”
Prepared by
P Chandra Priyan
(PGP Reg Number: PGP/0018/03)
Post Graduate Diploma in Management
Batch 2017-19
Under the guidance of
Name: Anirban Mallick Name: Dr. Vinita Sahay
Designation: Vice President Designation: Director
IIM Bodh Gaya
Priority Business Manager
East, Central & UPR
Organisation: Kotak Mahindra Bank
ACADEMIC YEAR
2017-18
Submitted To
Indian Institute of Management (IIM) Bodh Gaya
Bodh Gaya, Bihar

2 | P a g e
1. STUDENT’S DECLARATION
I undersigned P Chandra Priyan, a student of PGDM, Indian Institute
of Management Bodh Gaya, Batch 2017-19, declare that summer
internship project titled “A study on Changes in trend of asset
allocation Post Demonetization and GST among HNI clients” is a result
of my own work and my indebtedness to other work publications,
references, if any, have been duly acknowledged. If I’m found guilty
of copying any other report or published information and showing as
my original work, I understand that I shall be liable and punishable by
Institute, which may include ‘Fail’ or ‘Repeat study & re-submission
of the report’ or any other punishment that Institute may decide.
Name of Student: P Chandra Priyan
PGP Reg Number: PGP/0018/03
Signature:

3 | P a g e
2. ACKNOWLEDGEMENT
I am highly indebted to Mr. Anirban Mallick, Vice President & Priority Business Manager –
East, Central & UPR, Kotak Mahindra Bank Privy League, for his guidance and constant
supervision, and his willingness to interact with me regarding my project details and always
motivating me to strive for more. I also thank him for helping me understand the nuances of
priority banking and motivating me to broaden my horizons and venture out to the markets and
not to be just limited to my project work. It has helped me immensely to understand the nature
of work and the importance of fieldwork, collecting and tabulating primary data.
I would like to take this opportunity to express my deepest gratitude and special thanks to Mr.
Pratim Kumar Basu, Associate Vice President & Area Manager, who was my corporate mentor
in Kotak Mahindra Bank Privy League, who took out his time to listen, suggest and always help
me to think about alternatives regarding my project. This provided me the guiding light for
navigating through my project with an esteemed organization like Kotak Privy.
I express my sincere gratitude to my mentors over the duration of my project - to Ms. Patrali
Bhattacharya, Chief Manager – Privy League, Golpark, Mr. Suman Roy, Mr. Somnath Dey,
AVP Priority Banking and Mr. Jai Kedia from Kotak Mahindra Bank Privy League for
continuously guiding me, giving me a gist of the current trends in economy providing me any
necessary help, answering my queries and keeping me involved in the projects.
I am highly indebted to Dr. Vinita Sahay, Director, Indian Institute of Management Bodh Gaya,
for her guidance and giving me an opportunity to do my summer internship at Kotak Mahindra
Bank. I hope that I can build upon the knowledge gained here and represent the fraternity of
IIM Bodh Gaya wherever I go and make a meaningful contribution towards my institute and
the society in the years to come.
I would like to express my sincere gratitude towards the members of Kotak Mahindra Bank
Privy League for their kind co-operation, encouragement and willingness to help. I would also
take this opportunity to express my special gratitude and thanks to all those who took part in
the survey and helped me complete my project by giving me their attention and time. My special
thanks and appreciations also go to my fellow interns in developing the project.
Finally, I express my deepest gratitude the Placement Committee, IIM Bodh Gaya for providing
me this opportunity to intern at Kotak Mahindra Bank.

4 | P a g e
3. EXECUTIVE SUMMARY
The objectives of the report are to study the changes in trends of asset allocation post
demonetization & GST among HNI clients:
❖ Analysing Changes in trends of HNI Clients Post Demonetization & GST:
❖ Classifying HNI Clients into subgroups
❖ Increasing Digital Transactions amongst HNIs
❖ Extent of Digital Payment for Discretionary Expenditure
❖ Trends Pre-Demonetization
❖ Impact of Demonetization on HNIs: Going Cashless, Influx of capital into Banks,
Paytm etc
❖ Impact of GST on HNIs: Tax Compliance
❖ Their Rising discretionary expenditure patterns
❖ HNI Consumers’ Tastes & Preferences
❖ Preferences of Asset Classes
❖ Asset Allocations
❖ Banking Requirements
❖ A Comprehensive Study of Changes in trends (Post Demonetization & GST) of the
broad Asset Classes relevant for HNIs, along with study of digitalisation post
demonetization:
❖ Increased Digital Modes of Payments
❖ Equity
❖ Debt
❖ Real Estate
❖ Alternative Investments
❖ Bridging the two components of the report to reach a conclusion based on
observations and results of analysis.
In the 2 Months of my internship period, the three prime assignments done as per
mentors’ instructions, keeping in mind the objectives of the project assigned to me:
❖ I was given an assignment on ‘Analysis of Asset Preferences and Asset Allocation’
of the Corporate Doctors and Hospitals who are in KOLKATA. As part of this

5 | P a g e
assignment, I created a detailed database of corporate doctors in Kolkata who were
associated with the targeted hospitals – AMRI, Ruby Hospital & Desun Hospital.
❖ I visited these hospitals, talked to the 3 medical administrators from each
hospital regarding their banking requirements for analysis and the ramifications
of GST & demonetization on the hospitals & doctors, while also discussed possible
modes of communication, fixed appointments with them and doctors and
contrived follow up and a conversion plan.
❖ Interacting with corporate doctors associated with these hospitals through in-
depth interviews and questionnaires regarding their asset class preferences, views
and perceived ramifications on their personal asset allocations of demonetization
and GST, their discretionary expenditure patterns, nuanced behaviours, banking
preferences and requirements. As part of this, I also generated leads by obtaining
mode of communicating with them regarding their banking requirements, which I
duly submitted to my mentor assigned in Kotak Privy.
❖ The second main assignment given to me was to do a thorough ‘Financial, Data
Collection Based & Banking Requirements Analysis’ of Trusts in Kolkata. I
interacted with the higher authorities of the trusts. I hence generated leads and
set appointments with them along with noting some handy observations about their
financial health and requirements which were submitted to my mentor, and
discussed with them regarding their operations, banking requirements, contriving a
follow up plan suitably.
❖ The third part of my project was to do “A comprehensive study on changing trends
of asset preferences (equity, debt, real estate and alternative investments and
allocations)” along with observed preferences of HNIs which were noted down to
be put in report.
Apart from the assignments submitted, I had also partaken in the following:
❖ Observations & interviews from and with existing HNI clients of Kotak Privy
regarding asset preferences, investment strategies adopted, trends regarding
portfolios and personal ramifications post GST & Demonetization.
❖ Did a thorough study on the products and services offered by Kotak Mahindra Privy
League.

6 | P a g e
❖ Attended Induction sessions, training sessions and a Conference on “GTA, TFX
and Working Capital” – regarding products and services offered to HNIs.
❖ A Porter’s Five Model and SWAT Analysis for the Banking Industry & Kotak
Mahindra Bank Respectively.

7 | P a g e
TABLE OF CONTENTS
Contents Page
1. Student’s Declaration…………………………………………………………………… 2
2. Acknowledgement…………………………………………………………….…........... 3
3. Executive Summary………………………………………………………………………4
4. List of Tables…………………………………………………………………………….10
5. List of Charts……………………………………………………………………………. 11
6. Industry Overview……………………………………………………………………….13
a) Basic overview of industry
b) Porter’s Five Model
c) Major players
7. Company Overview………………………………………………………………………21
History
Mission, Vision
Management
Products
Overview of Different Departments
SWOT Analysis of Kotak Mahindra Bank
8. Review of Literature…………………………………………………………………….30
9. Introduction to Topic……………………………………………………………………31
A general Discussion
Impact of Digitalisation of Transactions: Emergence of Digital Banking, Digital transactions
A brief about HNIs
A brief about Demonetization & GST
10. Research Methodology………………………………………………………………...37

8 | P a g e
(A) Introduction
(A.1) PHASE I
(A.2) PHASE II
(A.3) PHASE III
(B) Rationale for study
(C) Statement of Problem
(D) Significance of Problem
(E) Research Objectives
(F) Scope of Study
(G) Research Hypothesis
(H) Research Design
(I)Data Sources & Collection
(J) Sampling Design
(I) Sample Size
ii) Sampling Method
(K) Sampling Unit
11. Limitations of the Project……………………………………………………………44
12. Data Analysis & Interpretation……………………………………………………. 45
A) Findings from Phase I (from Professionals like Corporate Doctors, Charter Accountants
etc.)
B) Some Responses from Professionals
C) Some Interesting Responses/Leads from Trusts
D) Data Analysis Based on Total Data Responses Received
E) Results from Secondary Data Sources
F)) Findings from Phase III (from study of the broad-based asset classes)
Equity
Hypothesis Testing: Linking Practical Markets to CAPM Model
Debt
Changes in Trends in Debt
Real Estate
Key Trends Observed in Real Estate
Alternative Investments

9 | P a g e
13. Key Findings & Suggestions Based on Primary Data………………………………77
Findings & Observations:
Suggestions
14. Conclusion……………………………………………………………………………….79
15. Annexure ……………………………………………………………………………......80
16. Bibliography…………………………………………………………………………….83
17. Glossary of Terms………………………………………………………………………84

10 | P a g e
4. LIST OF TABLES
Table 1: Products offered by Kotak Mahindra Bank
Table 2: Kotak Mahindra Bank Privy League Personal Banking plans eligibility criteria
Table 3: Kotak Mahindra Bank Privy League Business Banking plans eligibility criteria
Table 4: Comparison of features across Privy League Prima and Optima plans
Table 5: Analysis of Digitalization – Banking, Transactions Post Demonetization & GST
Table 6: Responses Received from Medical administrator
Table 7: Responses from Professionals
Table 8: Individual Response Analysis
Table 9. Asset Allocation of HNI Clients over the years.
Table 10: Preferences of Asset Classes Across Profession Classes amongst HNIs
Table 11: Returns, Correlations & Volatility Analysis of Some Indices pre-note-ban & GST
Table 12: Returns, Correlations & Volatility Analysis of Some Indices post note-ban & GST
Table 13: Beta, Capital Returns & Other info of Some Key Sectoral Sector Pre-& Post-Note
Ban & GST
Table 14: Hypothesis Testing Data
Table 15: Prices, Sales & New Launches of Realty Projects across various cities in 2017
Table 16. Changes in Price, Sales & New Launches compared to previous years

11 | P a g e
5. LIST OF CHARTS
Figure 1: Porter’s Five Model Diagram
Figure 2. % Of Trust Funds Catering to Type of Owner Class - Those who've I contact
Figure 3 Percentage of Respondents who felt Demonetization & GST Benefitted them
Figure 4: Respondents Facing Issues Post Demonetization & GST
Figure 5: Risk Appetite of Respondents
Figure 6. Influence/Authority over Financial Decisions Taken by Individuals
Figure 7. Income Allocation Preferences of Respondents
Figure 8. Most Desired Luxury Vehicle
Figure 9. Most Preferred Banking Partner
Figure 10 Most Preferred Asset Classes over the period of 2015-2018, with comparisons
Figure 11 Most Preferred Asset Classes over the period of 2015-2018, with comparison
Figure 12 Asset Allocations Proportions From 2014-2018
Figure 13. Most Preferred Asset Across HNI Professions
Figure 14 Percentage of Clients who wish change their asset class preferences post disruptions
Figure 15 Comparing the Stability in Preference of Asset Classes across 2016 & 2017
Figure 16. Preference of Asset Classes: Comparing Results from Primary & Secondary Data
Figure 17 Trend of Nifty Index since 2015
Figure 18. Average Annual P: E Ratio of BSE Sensitive Index
Figure 19. Annual Growth Rate of Some Equity & Diversified Funds (Over 2013-2018 Ist Qt.)
Figure 20 Capital Return vs. Risk(Beta) Plot Post Note-Ban & GST
Figure 21. Trend of Risk Free Asset: 10 Year Bond Yield

12 | P a g e
Figure 22 Looking at the % Change in Bond Yield Pre-Demonetization & GST & Post it along
with increased Volatility
Figure 23. Annual Growth Rate of Long Term Debt Funds: Decreasing Returns
Figure 24. Increasing Investment into Alternative Investments over the years.

13 | P a g e
6. INDUSTRY OVERVIEW
Banking Sector
In the contemporary paradigm, the banking sector is synonymous to the barometer of any
economy. Such is the pivotal role it plays in sustaining any economy financially. We call a
barometer as it directly reflects the macroeconomic scenarios prevalent, and hence reflects the
economic muscle or the depravity of the same of a nation. The banking sector, along with the
RBI forms the backbone of our financial sector, with the SEBI acting as the watchdog of the
securities. Any iota of change in commodity prices, capital markets, global macroeconomic
conditions, political etc. has decisive implications at a macro as well as a miniscule level. These
changes in trends alter the banking sector, its policies, interest rates, and hence the investment
and spending patterns of households and organizations, hence also influencing individualistic
characteristics and consumption, saving and investment behaviors.
The banking sector is the section of the economy devoted to the holding of financial assets for
others, investing those financial assets as leverage to create more wealth and the regulation of
those activities by government agencies..
Regulation of Banking Activities
In order to avert banks from engaging in dangerous and excessively risky activities which can
threaten an economy, Governments, with the help of the central banks generally bind the banks
by enacting laws to limit their activities. Being the underpinning of economies, these laws help
preventing bank panics and crises and also help in building a stringent financial framework.
Oftentimes, these laws and restrictions are implemented as a result of crises and bank
failures/panics in the past.
The entire banking sector's and system hinges on the core factor of trust. Without it, not many
would deposit money, and hence banks would not be able to use that money to give loans,
invest and fuel economic growth. Hence, regulations are imperative to create that trust.

14 | P a g e
Banking Industry: General Overview Via Porter’s Five Model
Figure 1: Porter’s Five Model Diagram
Competitive Rivalry Within Industry
The banking industry is considered highly competitive, hence being the strongest in the
Porter’s Five Model. This industry is an old one, and almost everyone who is need of banking
products and services, is already a part of it.
Hence, with this customer base, the paramount task is to attempt to lure clients away from
competitor banks. In order to do so, bank do tend to differentiate themselves, although core
business is same, in comparison to their competitors in the following respects:
• Financing
• Interest rates
• Investment services
• Nuanced Products
• Scale
• Scope
• Relationship Banking
Competitve
Rivalry Within
Industry
HIGH
Threats of
New Entry
MEDIUM
Bargaining
Power of
Customers
LOW/HIGH
(Depends on
Type of
Customer)
Threat of
Substitutes
HIGH
Bargaining
Power of
Suppliers
Depends on
type of
customer

15 | P a g e
• Targeted Customers
• Work Culture
• Mission & Vision
• Staff & Personal
• Staff Training (Eg. Approach towards the customers)
• Dividend Policies
• Branding & Positioning
This industry is highly customer centric, and hence banks business starts and ends with
customers, hence customers are given considerable impetus, as this is what drives the revenues.
Oftentimes, this cutthroat competition is to determine which bank can offer the best and fastest
services. This could cause banks to experience a lower ROA (Return on Assets), leading to
falling profitability and this acts as a pivotal litmus test for banks to prove their mettle in
market.
Given the nature of the industry it is more likely to see further consolidation in the banking
industry. Major banks tend to prefer to acquire or merge with other banks than to spend money
marketing and advertising.
Due to government liberalization and globalization policy, banking sector became open for
everybody.
In India, the factors that have contributed to increase in rivalry are:
• Number of players: Various banks and non-financial institutions are fighting for the same
pie, hence intensifying the competition.
• Market growth rate: India has one of the biggest markets, and growth rate in Indian
banking industry is also very high. This has ignited the competition.
• Supportive Demography: India has a vast population, and is ought to overtake China in
near future, and has a young, literate population, who understand the importance of
banking.
• Digitalisation: The digitalisation of transactions and banking are aimed at bring in
financial inclusion, to increase the number of banking customers, which will gain call for
more competition to pursue those new customers.

16 | P a g e
• Low switching cost: One of the industry elements that intensifies the importance of
competition is the relatively low switching costs that consumers face, especially in the
retail and commercial banking areas.
• Mildly differentiated Products & Services: Almost every bank provides similar services,
since the core functions of banks are the same. Also, there is a certain level of diffusion of
ideas and knowledge spill-overs due to interbank migration of customers and staff, which
leads to a certain level of similarity in terms of services and technology, hence increasing
the level of competition. Yet, the banks do fundamentally differ in various aspects as
discussed earlier.
• Supportive Government Policies: There are low regulations to start a new business post
the liberalisation policies post 1991, and also the removal of various barriers to entry. Also,
the push for financial inclusion put forward the Government has also given an opportunity
for the banking industry to widen its customer base across different regional areas.
Threats of New Entry
There is a moderate threat of new entry for banks in India, despite the regulatory and capital
requirements of starting a new bank, as new banks do come up once in a while. The threat
arises due to fact that the new banks, specialising in a certain region and may cater to the needs
of a certain segment, and causing a certain level of disruption by imbibing a certain portion of
another bank’s customers and staff.
Internationally, with a large number of banks entering the market every consequent year, the
threat of new entrants should be extremely high. However, due to mergers and bank failures
the average number of total banks decreases by roughly 253 a year. A core reason for this is,
what is arguably, the biggest barrier of entry for the banking industry, trust.
Role of ‘Trust’ as an Entry Barrier in the Banking System:
❖ As the Banking Industry deals with other people's money and financial information, new
banks struggle to operate initially. Due to the nature of the industry, people often prefer the
household renown names, as safety and trust are of paramount value and is irreplaceable.
❖ Today, the banking industry has become multidimensional and dynamic, having undergone
considerable consolidation. The leading banks seek to serve all of a customer’s financial
needs. This furthers the role of trust as a barrier to entry for new banks entering the system,

17 | P a g e
and looking to compete with major banks, as consumers find it convenient to hold the
majority of accounts in one bank itself, and don’t wish to get into unnecessary hassle.
❖ Although it is very difficult for new banks to enter the industry offering the established
trust of pre-existing banks, or build a brand image, and offer a plethora of services as a
major bank, it is fairly easy for one to open up a smaller bank operating on the regional
level.
In this industry, as mentioned earlier, product differentiation is low and exit is difficult. We see
intense competition and mergers and acquisitions, as banks attempt to stay ahead of their
competitors. Government policies are supportive to start a new bank. There are less statutory
requirements needed to start a new venture. Also, banks attempt to achieve economies of scale
through usage of technology and selecting training manpower.
The threat of new entrants as a significant force within the industry is relatively small. The
primary obstacles for potential new entrants wishing to offer financial services on a large scale
are the massive amount of capital required, the length of time required to establish brand
identity, and the numerous and cumbersome government regulations that apply to the operation
of banks.
Threats of Substitutes
The threat of substitute products has become increasing by the day and is very high. There is
an influx of various non-banking financial institutions, which provide various specialised
services which are oftentimes directed at a certain segment of the market. These specialized
financial services were earlier only available from banks. Examples of such disruptive
substitute products like payment processing and transfer services, credit unions etc. such as
Paytm, Tez, NASA Federal Credit Union etc., or the disruption created by Bajaj Finserv.
Payment processing and transfer services in India have disrupted various industries such as e-
commerce, banking etc. The quantum of digital payments saw a spike post demonetization,
and its convenience in usage has made it popular in the country. Also, since the idea of digital
India has been pushed by the Government, this aligns the objectives of these companies with
that of the Government. The intrusion of these substitute services tends to cause a loss of
revenue for pre-existing banks.

18 | P a g e
There are other substitutes for banks like mutual funds, stocks (shares), government securities,
debentures, gold, real estate etc. So, there is a high threat from substitutes, and although the
banks also provide these services, firms are emerging which specialise in each of these asset
allocations. Eg: Manappuram for Gold, Motilal Oswal for Equity, which are also flamboyantly
advertised regarding their expertise.
Bargaining Power of Suppliers
The two main suppliers for a bank are:
• Depositors who supply the primary resource of capital
• Employees who supply the resource of labour (physical & mental)
In regard to depositors, the situation is essentially the same as that delineated under the
bargaining power of consumers. There are two kinds of depositors and customers of a bank-
a) Retail customers
b) HNI customers
Individual retail depositors have relatively little bargaining power, which to an extent depends
on the volume of deposits made. But taken as a whole, their bargaining power is considerable.
As far as HNI clients or corporates are concerned, they are generally given certain privileges
as a part of priority banking, and they tend to have better bargaining power, due to the volume
of deposits made, and the capital they provide the banks.
A good approach in dealing with this market force would be to work diligently and
meticulously to attract new clients and to increase the extent to which existing depositors hold
funds and access services, and to retain creditworthy customers and get rid of defaulters.
In regard to the bargaining power of suppliers of labour, individual suppliers and employees
have little bargaining power, since substitutes are available in plenty, other than top level
executive employees. Banks can address its overall bargaining power by offering lucrative
salaries and benefits to keep attrition rates low.

19 | P a g e
Bargaining Power of Existing Customers
The overall bargaining power of existing customers is an important factor influencing the
industry. Again, here, the bargaining power of different segments of customer-base differs:
a) Retail: Individual consumers, especially in the retail banking marketplace, have relatively
little bargaining power since the loss of any one account has a minimal impact on a bank’s
bottom line. However, if we look at the aggregate, bargaining power of consumers is higher
since banks cannot afford to suffer mass desertion of customers, especially to rival banks.
b) HNI: Corporates and high net worth individual (HNI) clients have relatively higher
bargaining power, simply because of their volume of deposits and investments. These
clients generally come under the priority banking segment, which caters to their individual
needs and requirements. Hence, losing a high net worth individual would mean the loss of
sizable books and hence a source of revenue, which can very well affect the bank's
profitability.
Banks generally solve the issue of customer bargaining power by:
• Extending attractive offers to potential new clients
• Making incessant efforts to persuade existing customers to open additional accounts and
sign up for additional services. This strategy can be very useful for high net worth
individuals, who generally tend to have more than one account in their family.
These tactics to curb ‘free exit’ are aimed at increasing the switching cost for consumers by
making it cumbersome and in a way creating “barriers to exit and relocate”. It is this technique
of free entry but not free exit which could help them retain a certain section of their client-base.
Major Players in Banking Sector
The banking sector has been emerging decently over the years. With NPAs increasing for
public sector banks, private sector banks are performing comparatively better. Some of the
major players of this industry are listed below.
• HDFC Bank: Housing Development Financial Cooperation Bank Limited, commonly
called as HDFC Bank is the largest bank of India in terms of market capitalisation.

20 | P a g e
Headquartered in Mumbai, it was incorporated in August 1994. As of 27 May 2018, HDFC
Bank has a market capitalisation of ₹ 521654.50 crore.
• Kotak Mahindra Bank: Kotak Mahindra Bank is an Indian private sector bank
headquartered in Mumbai, Maharashtra, being the second largest bank in terms of market
capitalisation. It started as a non-banking company named as Kotak Mahindra Finance
Limited (KMFL) in 1985. In February 2003, it became the first nonbanking finance
company to get banking license from the RBI.
• SBI: State Bank of India has a market capitalisation of ₹ 238241.86 crore, the third largest
in Indian banking sector. It is the oldest existing bank in India, originally founded in 1806
under the name of Bank of Calcutta. Presently, this government-owned corporation has its
headquarter in Mumbai.
• ICICI Bank: ICICI (Industrial Credit and Investment Corporation of India) was founded
in 1994 and is headquartered in Mumbai with its registered office in Vadodara. As of 2018,
it is the fourth largest bank of India in terms of market capitalisation and second largest in
terms of assets managed.
• Axis Bank: Founded in 1993 as UTI Bank, Axis Bank is currently the third largest private
sector bank in India. It has the fifth largest market capitalisation among the banks. It has its
headquarter in Mumbai. As of May 2018, assets managed by ICICI is around ₹ 601467.66
crore and has a market capitalisation of ₹138266.96 crore.
The above-mentioned banks are the top five in terms of market capitalisation. Other major
banks include IndusInd Bank, Yes Bank, Bandhan Bank, RBL Bank, Federal Bank, Indian
Bank, Allahabad Bank, Bank of Baroda, Punjab National Bank & Canara Bank.

21 | P a g e
7. COMPANY OVERVIEW
History
Kotak Mahindra Bank is an Indian private sector bank headquartered in Mumbai, Maharashtra.
It is the 4th
largest private sector bank in India and 2nd
largest bank by market capitalisation. As
of March 31, 2018, it has around 1388 branches across India and also has offices in London,
New York, California, Dubai, Abu Dhabi, Singapore and Mauritius. It has an International
Business Unit in GIFT city, Gujarat. The total consolidated Assets Under Management/Advice
has a worth of ₹ 337720 crores with a PAT of ₹ 1789 crore for Q4F18.
It started as a non-banking company named as Kotak Mahindra Finance Limited (KMFL) in
1985. In February 2003, it became the first nonbanking finance company to get banking license
from the Reserve Bank of India (RBI). The following is a brief timeline showing some of its
biggest milestones:
❖ In 1985, Kotak Mahindra Finance Limited starts bill discounting business
❖ In 1987, the company entered the lease and hire purchase business
❖ In 1990, auto finance was started
❖ In 1991, the IB division was established
❖ In 1992, Kotak Offers IPO, went public
❖ In 1995, KCC, a joint venture with Goldman Sachs Group
❖ In 1998, Kotak Entered the MFs markets with KMAMC
❖ In 2000, it started life insurance services
❖ In 2001, Stock broking services were provided
❖ In 2003, it was given license by RBI to operate as bank
❖ In 2004, it entered into ARC (Asset relocation) business
❖ In 2005, it Launched real estate fund
❖ In 2008, it opened international office in Dubai and Entered into alternative assets and
wealth management segment
❖ In 2009, it launched pension fund
❖ In 2014, Kotak acquired Pinebridge MF
❖ In 2015, strategic merger with ING Vysya Bank Ltd., hence creating a ₹ 2 trillion institution
(consolidated)

22 | P a g e
❖ In 2016, it acquired equity shares of Institutional Investor Advisory Services India Ltd. and
Airtel M Commerce Services Ltd Co. (AMSL)
❖ In 2017, RBI approved setup of Kotak Infrastructure Debt Fund Limited and acquired BSS
Microfinance Pvt. Ltd.
Visions and Values
Kotak Mahindra Bank has worked over these years based on five core values:
❖ Modesty and approachable
❖ Mutual respect and transparency
❖ Passion & Drive to achieve
❖ Entrepreneurial approach
❖ Ethics with a good corporate governance mindset
These five core values have helped Kotak to achieve their goals and their visions. Its four
visions are:
❖ The global Indian financial services brand
❖ The most preferred employer in financial services
❖ Trust Creation
❖ Value Creation
Management
The Executive Board of Kotak Mahindra Group comprises of some of the prominent people of
financial world.
Top Executives Designation
Uday Kotak Executive Vice Chairman and Managing Director
Dipak Gupta Joint Managing Director
Shanti Ekambaram President – Consumer Banking
Arvind Kathpalia President and Group Chief Risk Officer
D Kannan Group Head – Commercial Banking

23 | P a g e
Gaurang Shah President – Asset Management, Insurance and International Business
Jaideep Hansraj CEO – Wealth Management and Priority Banking
Jaimin Bhatt President & Group CFO
KVS Manian President- Corporate, Institutional & Investment Banking
Mohan Shenoi President & COO
Narayan SA President – Commercial Banking & Retail Broking
Venkattu
Srinivasan
Group Head – Asset Reconstruction and Structured Credit
Products
Kotak Mahindra Bank provides various products targeted to various customer segment.
Table 1: Products offered by Kotak Mahindra Bank
PERSONAL Accounts: savings account, current account, corporate salary
accounts, Kotak 3-in-1 account, safe deposit
locker
Deposit: regular fixed deposit, recurring deposit, tax saving
fixed deposit, senior citizen fixed deposit, sweep-
in facility
Cards: credit cards, debit cards, forex/prepaid cards
Loans and insurances
Investments: mutual funds, portfolio management services,
sovereign gold bond scheme, demat account,
Kotak ASBA facility, National Pension System
BUSINESS Accounts: current accounts

24 | P a g e
Loans and working capital requirement
Trade services: domestic trade, international (import/export)
CORPORATE Business financing: long term finance, working capital
finance, structured finance, debt
capital markets
Trade financing: trade and supply chain finance,
services for exporters & importers
Automated payment and collection through CMS
Transaction management: Account maintenance, Escrow
services, digital banking, nodal
accounts
Forex services
WEALTH Investment management: risk analysis, asset allocation,
investment products, investment
process, research & execution
Wealth structure: trust & estate planning, family office
Banking solutions: personal banking, business banking,
digital banking
Source: https://www.kotak.com/en.html
In addition to the above-mentioned services, Kotak also provide Priority Banking through its
‘Privy League’ division. Here in Kolkata, Privy League operates from Park Street Apeejay
House and Golpark Branch. In Privy League, priority clients get a wider range of benefits and
services, apart from normal vanilla products and service. Various services provided by Privy
League are NRI-specific privileges, priority servicing, foreign exchange, convenience banking
and transaction solutions, preferential pricing, trade solutions. Privy League provides both
personal and business banking solutions.

25 | P a g e
Privy League Personal Banking
There are four plans: Prima, Optima, Insignia and Maxima. Out of these four plans, Privy
League Maxima Plan is available only in selected locations. These plans target specific
customer segment based on the following eligibility criteria:
Table 2: Kotak Mahindra Bank Privy League Personal Banking plans eligibility criteria
PRIMA Average Monthly Balance (AMB) of over ₹ 2 Lakhs in Savings
Accounts
OR
Average Monthly Balance of over ₹5 Lakhs in Current Accounts
OR
Relationship Value (RV) of ₹10 Lakhs while maintaining an AMB
of over ₹50,000 in Savings Accounts or Currents Accounts
OPTIMA Average Monthly Balance of over ₹ 10 Lakhs in Savings Accounts
OR
Average Monthly Balance of over ₹ 15 Lakhs in Current Accounts
OR
Relationship Value of ₹ 30 Lakhs while maintaining an AMB of
over ₹1 Lakhs in Savings Accounts or Currents Accounts
INSIGNIA Relationship Value of ₹ 1 Cr while maintaining an AMB of over ₹2
Lakhs in Savings Accounts
MAXIMA Relationship Value of ₹2 Lakhs while maintaining an AMB of over
₹ 50,000 in Savings Accounts
Source: https://www.kotak.com/en/personal-banking/privy-league.html

26 | P a g e
Privy League Business Banking
To become a part of Kotak Mahindra Privy League, any one of the following conditions can
be satisfied:
Table 3: Kotak Mahindra Bank Privy League Business Banking plans eligibility criteria
Parameter Privy League Prima Privy League Optima
1 Current Account Value AMB above ₹ 5 Lakhs AMB above ₹ 15 Lakhs
2 Combined Current,
Savings and Term Deposit
Value
Above ₹10 Lakhs; with
min CA AMB of ₹1 Lakh
--
3 Quarterly Forex throughput USD 1.5 Lakhs; with min
CA AMB of ₹1 Lakh
USD 3 Lakhs; with min
CA AMB of ₹2.5 Lakhs
4 Relationship Value -- Above ₹30 Lakhs; with
min CA AMB of ₹2.5
Lakhs
Source: Kotak Mahindra Bank Privy League Business Banking booklet
Comparison of features across Privy League Prima and Optima plans
The following is the comparison chart of Prima and Optima plans:
Table 4: Comparison of features across Privy League Prima and Optima plans
Sl.
No.
Features & Benefits Privy League Prima Privy League Optima
1 Dedicated service delivery
associate
No Yes
2 Discount on locker rentals 25% 50%

27 | P a g e
3 Complimentary Privy
League VISA Signature
Debit Card
No Yes
4 Preferential rates on
mutual funds
1.25% through investment
a/c; 1.5 % through AMC
application form
0.9% through investment
a/c; 1.1 % through AMC
application form
5 Discount on Kotak World
Travel Card issuance
charges
25% Free
6 Issuance of Best
Compliments Card
Free Free
7 DEMAT account
maintenance charges
100% waiver 100% waiver
8 DEMAT sell transaction
charges
0.03% 0.02%
9 Trinity account opening
charges
50% waiver 100% waiver
10 Brokerage levied by Kotak
Securities
Intraday:0.049%
Delivery:0.49%
Intraday:0.029%
Delivery:0.29%
11 Priority Pass issuance
charges
50% waiver Free
12 Preferential tariff on Forex Yes Yes
13 Preferential rates on trade Yes Yes
14 Invitation to exclusive
lifestyle events
No Yes

28 | P a g e
15 Privy League Select –
Quarterly Lifestyle
Magazine
e-version Physical/e-version
16 Special alliances and
exclusive discount offers
from alliance partners
Yes Yes
17 Investment planning Risk profiler Financial planning
through Kotak Private
Banking system
Source: Kotak Mahindra Bank Privy League Business Banking booklet
SWOT ANALYSIS FOR KOTAK MAHINDRA BANK
STRENGTHS
❖ Professional Banking
❖ Very neat and clean books – very good corporate management.
❖ Merger with ING Vysa Bank widened presence in South India: Hence, could penetrate the
South market after the merger
❖ Kotak’s investment advisory is top notch: Instead of just vanilla products, offers for specific
specialised and individual based portfolios.
❖ Apt Work Culture
WEAKNESS
❖ Compared to Yes Bank who hosts tournaments etc., Kotak spends very less on
advertisement and has scope there.
❖ Marketing Done very deep by ICICI Bank, maybe scope for Kotak Mahindra Bank.
❖ The digital platform on Apple devices could be better
❖ Lower market share in TFX domain where Axis Bank is predominant
OPPURTUNITIES
❖ Strategic acquisitions of microfinance companies can help them cater to a higher proportion
of rural, semi-rural population

29 | P a g e
❖ Can deepen customer base even more, with bank branches near strategic areas.
❖ Strategic acquisition of other Private Banks
THREATS
❖ Emerging Banks like Bandhan Bank which also provides similar interest rate for savings
accounts is emerging in Eastern India and can lead to migrate of both clients and staff.
Hence, it can be considered a threat
❖ Immense competition amongst the private banks, especially HDFC Bank, ICICI Bank, Yes
Bank
❖ Potential financial innovation from other banks can give them a first mover advantage
❖ Credit Risk: Quality of customers taking loans; persistent problem which may lead to an
issue of NPA.
❖ Macro News: Such as crude oil instability, Fed rate cut/hike may lead to RBI’s changes in
monetary policy, eg. May alter the interest rates, leading to people preferring to keep cash
rather than putting it in banks. All have these kinds of annotations.
❖ Growth of Microfinance companies and other NBFCs which offer very close, but slightly
differentiated products, can cause issues
❖ Increasing Attrition Rate in Banking Sector – inter-banking switches.

30 | P a g e
8. REVIEW OF LITERATURE
The Review of Literature presented below recognises the work done so far in the field of
present study – HNIs, asset allocations etc. My project has imbibed some of the key details
from these studies and researches keeping in mind the Indian markets.
• Abhinav Joshi, Vidhi Dheri, prepared a report by CBRE for CREDAI NATCON’17
analysing the changing trends in the real estate markets and how various trends are
emerging along with emergence of technology in this segment. Light was also shed on the
key implications due to RERA Act, Private Equity Investment in this segment and the initial
wrath of demonetization.
• Lokesh Chhabra, Sachin Ghai, Amar Johri and Saurabh Rawat in their case study compared
the Priority Banking services of Kotak Mahindra Bank against six of its competitor banks
of India.
• Karvy Private Wealth in their Annual Wealth Reports – 2016 and 2017. It enumerated the
changing trends of all assets and also changing trends of HNI clients and how their asset
preferences had varied along with their asset allocations. It was a rich source of secondary
data.
• Kotak Wealth Management’s annual wealth reports 15,16 and 17. This was a rich source
of valuable information regarding HNI tastes and preferences, their income allocations,
their requirements, their need-based products, their increasing exposure to equity, their
lifestyles. It also shed some light on demonetization trends and how it affected the economy
and the banks.
• Rowland T. Moriarty, Ralph C. Kimball and John H. Gay looked into how commercial
banks are placing increasing emphasis on establishing and maintaining banking
relationship with important corporate customers. In this article, the focus of the study was
to describe the concept of Relationship Banking and the benefit it holds for both the
customers and bank itself. Then they examined the organisation and relationship
management function including the role of the relationship manager and common problems
connected with the implementation of relationship strategy.

31 | P a g e
9. INTRODUCTION TO TOPIC
A GENERAL DISCUSSION – DEMONETIZATION & GST IN DIGITALIZING INDIA
Albert Einstein famously stated: “Compound interest is the eighth wonder of the world”. It is
this compounding which was attempted to be forced into the system post demonetization &
GST. The conversion of the cash in hand into the banking system, i.e. unaccounted money and
other sources of money into the banking system with the help of technology and digitalised
payments was the prime change which was observed in the Indian context. This extra money
kept in banks, say in savings accounts is what brought people to invest more in asset classes
such as equity, mutual funds etc. to beat the bane of inflation. This choice of the asset classes
was purely based on an individual’s personal goals and aspirations, his/her risk appetite etc.
Investing is a very broad and a fundamental concept. But, given the current times and the
perennial bane of inflation, rising crude oil prices, expected RBI interest rate hike, market
volatility, one just cannot be one-dimensional while investing and needs to create an ‘economic
moat’ around his castle of aspirations and personal goals.
This is where asset allocation steps in – and unlike the very concept of investment, is largely
subjective and may vary across various broad features such as gender, age, wealth,
employment, geographical location, family background etc. Eventually, all these lead to the
culmination of one allocating his/her assets based on their understanding of the assets. This
risk vs. return conundrum lies at the heart of the idea of asset allocation. Asset allocation is
an investment strategy that aims to balance risk and return by apportioning a portfolio's assets
according to an individual's goals, risk appetite and investment horizon. The asset classes I’d
be studying here, considering the Indian context are –
a) Equity
b) Debt
c) Real Estate
d) Alternative Investments
Each of these asset classes have their own characteristic nature, that determines their risk and
return, which will be discussed in the later sections, keeping in mind the timeframe given.
Here, in the Indian context, over the past three years, there have been disruptive events which
have altered the paradigm under which our economy operates. Some of these are:

32 | P a g e
a) Demonetization (8th
November, 2016)
b) Implementation of GST (1st
July 2017)
c) RERA Act (1st
May, 2016)
IMPACT OF DIGITALIZATION OF TRANSACTIONS: EMERGENCE OF DIGITAL
BANKING, DIGITAL TRANSACTIONS
Table 5: Analysis of Digitalization – Banking, Transactions Post Demonetization & GST
Pre-Demonetization a) Considerable amount of assets of HNIs was in CASH.
b) There was unaccounted money from various sources (e.g say
for doctors, fees from private consultation was
unaccounted).
c) Real Estate and other physical assets were stocked/hoarded
due to their cash-based transaction nature, and high-volume
transactions took place in gold and real estate.
d) Digital Banking, Digital Transactions were limited to certain
sections of society, generally the youth and the salaried
individuals.
e) Considerable amount of lumpsum transactions would occur
f) E-Wallets etc. were just emerging as a source of buying from
online stores like PayTM Mall, Myntra etc.
Post Demonetization a) This phase saw the inflow of capital into banks, increasing
capital for banks to work with.
b) Liquidity decreased and no. of card transactions decreased
c) HNI customers were forced to align their considerable stock
of cash and unaccounted money into the banking system
d) They earnt an interest rate in banks, hence creating a surplus
value
e) This surplus value was to be allocated into asset classes –
which was generally into equity & mutual funds, due to
higher returns

33 | P a g e
f) There was an immense push towards Digital Transactions,
be it via banks or via portals like PayTM etc.
g) Increased Digital Transactions via banks made it easier for
various pre-existing customers
h) The earlier hoarding of real estate ceased, due to excessive
cash-based transactions which were happening, and shift
towards a formal sector restricted the cash-based transactions
using unaccounted money. The similar case goes for other
physical assets like Gold.
i) The value of transactions for mobile banking grew 30%
j) The biggest winner/benefactor of demonetization were the
Banks with apt digital tools and other E-Portals like Paytm,
Tez, Reliance Jio etc.
k) Amongst asset classes, equity, mutual funds and alternative
investments benefitted from the implementation of
demonetization and saw broad based investing
l) MAJOR incentives for doing transactions digitally, hence
everyone does it now -e.g. BHIM app, UPI etc
Post GST a) GST majorly affected the traders, enforcing tax
compliance and bringing in a uniform tax system
b) Post GST, there has been incentives to digital transactions
c) Recently, proposal has been put forward to bring up to
Rs.100 discount on digital payments plans
d) HNIs started looking for tax havens – hence widely
diversified their portfolios from digital money to PPFs to
equity to minimise their tax incidence.
e) Hence, for digital money in wallets, since there isn’t any
chargeable tax, people preferred to put it in those wallets
so that they can use it to buy goods like phones, etc. This
served as a source of e-money.

34 | P a g e
Also, there exists the continual bane of inflation, recent hike in crude prices, and the weakening
rupee have significantly contributing in shaping the market sentiments in India. Hence, digital
transactions were modified in a way to stay ahead of inflation, and hence the increased spending
through online portals, and through digital cash.
Then, there are the coming general elections, monsoon season etc which can alter the market
sentiments in India, hence also altering the climate under which investors can allocate their
assets. All of these factors have spill-over effects on each asset and hence shaping investor
behaviour patterns according to their risk appetite and expertise. For example, a weakening
rupee and trade restrictions can have detrimental effect on an importer in India who imports
from US, especially since India imports around 80% of its crude oil demands, hence pushing
up crude prices, putting inflationary pressure on goods. This may aggravative interest rates,
hence altering the consumption and investing behaviours of individuals.
Hence, here I attempt to study the assets, their allocations, and how HNIs have altered their
allocations and shifted their investment preferences, risk appetite investment horizons etc. as
mentioned above.
A BRIEF ABOUT HIGH NET WORTH INDIVIDUALS
The banking system starts and ends with the customer. This is primarily because they both
supply and demand capital for the banks. In the case of HNI clients, this fact is even more
pronounced. The volume of cash inflow and outflow, i.e the transactions value and the overall
book value of HNI clients is unprecedented and unparalleled. So, who really are these HNI
clients?
HNIs are those individuals who possess surplus investable capital, oftentimes assumed to be at
least around ₹2 crores in the Indian context. They face a situation of being indecisive regarding
the surplus capital they possess and decisions to whether park it in an asset class or a set of
asset classes – may choose to diversify his/her portfolio, and how much to allocate these. Sure,
it is a tedious job. Hence, this is where advisories like Kotak Privy create a symbiotic
relationship with them. Hence, they choose to allocate their capital via asset allocations into
various channel based on their personal goals, individualistic factors, family backgrounds, risk
appetite, investment horizons, urge to earn returns etc.
According to estimates, the increase in number of HNIs was at 10% in FY17, minutely higher
than FY16’s 7% with an accumulated net worth of ₹153 trillion. This yields to the suggestion

35 | P a g e
that HNIs are creating wealth and the extra 3% increase must be contributed to the general
niche economic climate prevalent now, with more or less a secular growth in sector, albeit
recent trends in 2018.
A BRIEF ABOUT DEMONETIZATION & THE GOODS & SERVICE TAX
The Indian economy is a predominantly domestic-driven one, with the domestic sentiments
have larger implications for Indian markets and domestic consumer behaviours than the global
trends, which is in stark contrast to most other countries. It is the alteration of these market
sentiments and consumer behaviours which shift and shape the asset allocations of individuals
and corporations. Hence, keeping that in mind, it’d be safe to say that the major economic
ramifications in India would be domestic in nature.
The implementation of demonetization on 8th
November, 2016 & the Goods & Service Tax
(GST) on 1st
July, 2017 were such key disruptors or structural reforms, which have created
significant ramifications, hence shifting the economy’s paradigm. The rudimentary motives of
each of these key disruptors were growth oriented and wished to bring stability and compliance
oriented and can be briefly put up as ‘cleaning up the economy’.
The demonetization or the note ban restricted liquidity, some of the main agendas being –
❖ Digital India
❖ Financial inclusion
❖ Curbing Unaccounted Money
❖ A shift from Informal Sector to Formal Sector

36 | P a g e
Demonetisation
More Capital in Bank Accounts
Extra Surplus Capital in Banks via Interest
Increase in Digital Transactions
Spurt of Paying Through E-Wallets
Emergence of E-Wallet, Spending Services
Decrease in Cash
Extra Money in Bank Invested in Equity, Mutual Funds etc.
Real Estate Turning Formal - Lesser Cash Transactions
Push For Financial Inclusion
Goods & Service Tax
Increased Compliance
Search For Tax Havens
E-Wallets & Cashless Transactions get incentives
Increased investment in Equity, Mutual Funds

37 | P a g e
Hence, any individual/HNI/Corporation associated with any of these agendas would be
affected and there would be a change in trend, in a new paradigm. But how did it affect HNIs
and their asset allocations and the asset classes? This is what would be studied in the
forthcoming sections in detail.
Similarly, GST was implemented to curb issues related to cascading of taxes, improve tax
compliance, move towards a digital transactions climate, which reduces stress on cash,
fostering a common market across the country, unifying the states, improving transparency.
Since the implementation of GST had distinct implications for each sector, and for each asset
class, it’d also bring about a change in trend for individuals and others associated who are
involved or have invested in each of these parameters. These effects will be magnified for HNIs
due to their superlative net-worth and diverse investment in various asset classes.
Ex Ante, Ex Post Concepts
Also, another important observation to be made is that demonetization is generally thought to
have ex post implications since its announcement was not premeditated and hence the shifts
would be brought about after it’s implementation, as observed in our country.
In contrast, GST would have both ex ante and ex post implications since its implementation
was premeditated and was announced after thoughtful consideration by the Government.
Hence, in current global scenario, with trade embargos, increasing crude prices, inflation etc,
in India it is the domestic disruptions like Demonetization, GST and the RERA Act which will
have greater influence over the HNIs and their asset allocations. My project would aim to make
meaningful observations and analyse the same to get a meaningful conclusion and suggest
recommendations to Kotak Mahindra Bank.
10. RESEARCH METHODOLOGY
(A) INTRODUCTION
I shall divide my research work into 4 phases which is according/as per to the timeline of my
internship of 2 months at Kotak Privy:

38 | P a g e
a) PHASE I: A Comprehensive Study of Corporate Doctors in Kolkata & Other
Professionals: Trends of Asset Preferences & Allocations After Demonetization & GST
b) PHASE II: A study on the Banking Requirements, preferences & working of Trusts in
Kolkata
c) PHASE III: A comprehensive study of trends of the broad asset classes:
❖ Equity
❖ Debt
❖ Real Estate
❖ Alternative Investments
d) PHASE IV: Compiling, analyzing and comparing the results of the data from primary
sources (questionnaires, in-depth interviews, observations) and secondary sources (Data
from NSE website, SEBI website, RBI Website, articles, Wealth Reports etc.) and framing
a report on my findings and inferences.
**I shall hereby refer to these separate sub-projects as phase I, II, III, IV respectively
from here on.
(A.1) PHASE I
My research work encompassed interacting and questioning potential HNI clients, since Kotak
Privy (Priority Banking Department) deals with them and I was assigned there. Initially, I was
assigned the target customer base of Professional Corporate Doctors in Kolkata, who earn
considerable salaries and are potential target clients – AMRI, Ruby Hospital & Desun Hospital.
My first phase research work encompassed:
1
Hereafter, all the terms of ‘pre-demonetization, demonetization to GST, and Post GST’ would pertain to the
respective timeframes mentioned in the table
Targeted Segment HNI Clients
Analysing Factor Changes in Trend of their Asset Allocation & Preferences
Timeframe to be
studied1
a) Pre-Demonetization (24/11/15 to 8/11/16)
b) Demonetization to GST (9/11/16 to 31/06/17)
c) Post GST (1/07/17 to 22/05/2018)

39 | P a g e
❖ Studying impact of Digitalization post demonetization & GST: How it affected Asset
Owners and asset classes
❖ Creating and maintaining a thorough database of these doctors from both primary &
secondary sources
❖ Fieldwork – Collection of Data from Doctors from Hospitals after visits
❖ Field Visits & Calling up the doctors
❖ Profiling these potential clients
❖ Gather details about their perceptions and apprehensions about Demonetization & GST
❖ Their preferred asset classes
❖ How much do they spend from Online stores?
❖ Analyzing their Banking habits
❖ Discretionary & Non-Discretionary expense patterns
❖ Noting their Banking Requirements & Digital Exposures
❖ Segregating and mining out the potential clients from the large database created, after
interaction for lead generation
❖ Reporting back to RM assigned and the Associate VP and submitting report for contriving
a follow up plan
These interactions were done via physical questionnaire sheets, personal in-depth interviews
after getting appointments and visiting hospitals in person. Also, I was encouraged by my
mentors to collect my project related information for other professionals (potential HNIs) as
well – Charter Accountants, Professionals Lawyers, Top Executives of Firms etc.
(A.2) PHASE II
This phase encompassed my interactions with Trusts in Kolkata. Generally, these charitable
trusts were owned by Large Corporations, professionals, religious organisations or certain
clubs, some details and observations I shall disclose in the report further. Trusts were
potential clients since they had large funds and it is of no surprise that Philanthropy was an
emerging way of allocating their income, and also a potential safe haven from taxes. With
around 73%2
of HNIs allocating income for philanthropy, it is safe to say trust funds can gain
access to HNIs. My research work here encompassed:
❖ Profiling the Trusts based on various parameters
2
As read from Kotak Top of The Pyramid Report 2017

40 | P a g e
❖ Studying the Datapoints and segregating them based on reliability of information
❖ Interacting with people at various levels working with Trusts
❖ Learning about their current banking partners
❖ Lead Generation, fixing appointments and follow up plan
❖ Reporting back to RM and submitting the potential leads
(A.3) PHASE III
At this juncture, the objective was to segregate the data and do some data mining based on
responses, comments and observations. Also, since the project was based on changing trends
of asset allocations, it was imperative to observe and understand the asset classes. The
following was done here:
❖ Choosing the appropriate broad-based asset classes – i) Equity ii) Debt iii) Real Estate iv)
Alternative investments
❖ Making sub-classifications amongst HNI clients –
o Professionals
o Business/Self Employed
o Retired
o Salaried Employees based on observation
❖ Analysing the driving factors for asset allocations: Risk & Return
❖ Obtaining Data regarding trends in Equity, Debt, Real Estate markets
❖ Calculating the Returns, Risk of Nifty Indices and selective stocks under the 3 giving
timeframes – Pre-Demonetization, Demonetization to GST & Post GST
❖ These trends were observed from data obtained from years 2015 to 2018
❖ Exploring the Asset Allocations made by HNIs in these asset classes
❖ Analysing the Ramifications of Demonetization & GST on these asset classes
❖ Observing and Noting the changing preferences and asset allocation of HNI clients
❖ Analysing macroeconomic factors -inflation, yield rates of bonds etc.
❖ Comparing the data obtained from primary sources (Questionnaires, interviews etc) with
secondary source data (Wealth Reports, RBI, SEBI, NSE, Moneycontrol websites)
❖ Finding correlation between various factors; For example, increasing returns in equity
with increasing equity positions
(B) RATIONALE FOR STUDY

41 | P a g e
As discussed earlier, the prime rationale for this study is to understand the buoyancy of
demonetization & GST, its effects such as:
❖ Increased digital platforms
❖ Digital payments like PayTM’s emergence
❖ Increased Capital Inflows to Banks
❖ Surplus Capital in Bank’s allocation towards various broad-based asset classes
The attempt is to quantify the inflows into the assets after the disruptions in 2016 & 2017.
These two events have vital ramifications for the economy, us having observed a shifting
paradigm.
Since Kotak Privy is premium banking services for priority customers who have a sizeable
financial muscle, hence observing these trends for HNI clients and providing quantifiable
observations can be a meaningful contribution to the organisation. Also, since the HNIs are
heavy taxpayers, they contribute significantly to the engine of growth of our country, hence
becoming important to analyse their risk appetite, investment horizons and return limits. With
the increasing and overvalued equity markets in India, increased digital transactions, increasing
crude prices, the perennial bane of inflation and trade embargo issues globally, it become
imperative to study this crucial juncture of post demonetization and GST, which will have
severe implications for the road ahead. It could indeed help at making the picture of current
scenario better and possibly predict the performances of these asset classes in India.
(C) STATEMENT OF PROBLEM
In the current economic climate, there is cutthroat competition among private sector banks in
India. With the incessant NPA issues engulfing public sector banks, with now almost similar
digital service too being provided by banks, it provides a myriad of opportunities for private
banks like Kotak Mahindra Bank to deepen its customer base, and with the push for financial
inclusion, digital banking. The aim is to capture more market share, and with Kotak Bank
having the second largest market cap for banks, there are plenty opportunities which can be
harnessed.
The statement: “Given the tumultuous times coming ahead – overvalued stocks, weakening
rupee, RBI policies, increased digital transactions and with general elections around the corner
in 2019, how exactly will the markets perform and how will the HNIs react to it and re-align
their asset allocations in accordance to these?”

42 | P a g e
Thus, it becomes important to study the changes in trends of asset performances and to correlate
them with HNI customers’ changing preferences and trends, which can aid in understanding
them better and can help bringing quality customers under the umbrella.
(D) SIGNIFICANCE OF PROBLEM
The problem is quite significant. Understanding the changing trends in asset behaviours,
traction to high risk assets and equity post these events, and HNIs’ increasing preference for
certain assets like equity and decreasing interest in debt or increasing investments in private
equity or other alternative investments and increased philanthropic activities all can have a
considerable impact on navigating the way forward and creating economic moats in the
process.
(E) RESEARCH OBJECTIVES
The research objectives are the following:
• To see extent of integration of digital transactions into Banking system for HNI Clients
• To comprehensively study of trends of the broad asset classes: in terms of value, risk, return
and investment volume and opportunities
• Make meaningful inferences from the results obtained from primary and secondary sources
• To comprehensively analyze the HNIs asset allocations, investment patterns, financial
decision taking, income allocations for discretionary and non-discretionary expenses,
changing perceptions about asset classes, changing portfolio components
• Using the results of the study to come up with meaningful inferences, making striking
observations and make meaningful recommendations to Kotak Privy
(F) SCOPE OF STUDY
The study was conducted by visiting the following hospitals – AMRI, Ruby, Desun, interacting
with Trust Funds in Kolkata – hence studying professionals and corporate heads (in case of
certain trust funds). The study was conducted via questionnaires, in-depth interview and active
observations. In the third phase, the study was done in Golpark & Park Street Office of Kotak
Privy with due assistance from employees and mentors. Also, observations were made from
client meetings held with RMs in office and also interviewing few clients. For the study of

43 | P a g e
assets, although there are various asset classes such as insurance, FDs etc which are ever
increasing due to financial innovations, my study was focussed on the broad-based asset classes
which HNIs invest in majorly.
(G) RESEARCH HYPOTHESIS
The research hypothesis taken here is that the implementation of demonetization, GST, RERA
etc. have caused a change in asset allocation amongst HNI Clients.
(H) RESEARCH DESIGN
In this study, I have used both descriptive research design – as the research is based on survey
as well as correlational research design to meet the required objectives of the study and
understand causal relations between the GST & note ban and the changing asset allocations,
say for example increasing exposure to high return equity investments.
(I) DATA SOURCES & COLLECTION
In my study, I have used both primary as well as secondary data to navigate through my study.
The primary sources of data were obtained via questionnaires, in-depth interviews and
observations made during field visits to AMRI Hospital, Ruby Hospital & Desun Hospital
and from Trusts Funds in Kolkata and during client meets in office. Also, certain data and
information was obtained from employees of Kotak and RMs who have supported me
thoroughly in aiding me to carry out surveys. The questionnaires used can be accessed in the
annexures.
As far as secondary data goes, the data sources were primarily used for trends in asset classes
from 2015 to 2018, regarding prices of stocks, NAV of mutual funds, real estate prices and
other basic info. They aided me in finding out annual growth rates, correlations, average yearly
volatility, changing returns of assets, risks, beta value etc.
Also, I used certain data from Wealth Reports published by Capgemini, Kotak and from other
articles published for understand trends of HNIs.
(J) SAMPLING DESIGN
i) Sample Size

44 | P a g e
Regarding my Phase I and Phase II assignments given, I covered around 68 Trust Funds (Some
were Owners of Corporations) and 112 Doctors and other professionals, and 3 medical
administrators of hospitals out of which I got 68 responses.
II) SAMPLING METHOD
The data was collected from professionals - corporate doctors, chartered accounts, analysts
in consulting firms, service personnel, trust funds and through the trust funds also some
entrepreneurs and owners. Convenience Sampling was used since the study had to be
conducted in the vicinity of Kolkata – hence, AMRI, Ruby & Desun hospitals which could be
covered. Also, since I had created a database of doctors, I could also cover some doctors and
professionals over the telephone, attempting to fix appointments with them, so that my assigned
mentors in Kotak Mahindra Privy League could pitch their proposition and discuss their
banking requirements.
(K) SAMPLING UNIT
The project analysis was done on Microsoft Excel, and the tools used for the primary research
i.e from questionnaires and observations were put in tables, arranged accordingly to give a
coherent and consistent results. I used Excel to get the bar charts, histograms, pie-charts for
comparisons. The hypothesis testing was done using Microsoft Excel, using the index
function and ‘LINEST’ functions to find out the observed alpha, standard errors & t-statistic.
Also, in Phase III, in order to compare performance of debt funds, equity indices, specific
stocks, real estate market, I used the Excel Data Analysis Tool to get correlation coefficients,
calculation of beta, and changes in percentages.
11. LIMITATIONS OF THE PROJECT
The research methodology had the following limitations:
• Geographical Limitation: The study was restricted to the location of Kolkata. Hence,
the observed trends would reflect the patterns in the city and the preferences of the
customers of Kolkata. This may or may not differ from the general trend in the country.
• Response Bias: Since asset allocations and asset preferences are personalised topics, the
respondent may have chosen to give erroneous responses.

45 | P a g e
• Acquiescence Bias: The respondents may have chosen to agree to all the questions in a
measure due to lack of seriousness or want to get over with it as soon as possible.
• Barriers to Entry: Since my study encompassed the study of professionals like corporate
doctors and owners of trust funds, it was at times quite difficult to make appointments
with them and interact with them due to the nature of their jobs. Above this, there were
various other barriers in hospitals which were faced.
• Broad-Based Assets Studied: The assets classes studied by me were: Equity, Debt,
Mutual Funds, Real Estate & Alternative Investments. These were broad-based assets,
while there exist other asset classes such as insurance, pension funds, international assets
etc.
12. DATA ANALYSIS & INTERPRETATION
Total No. of Doctors’ Details (Number, Address etc.) Collected 112
Total Database of Professionals Created 159
Total Number of Responses (Throughout Project) 65
Total Number of Datapoints for Trust Funds Contacted 68
Reliable Number of Contacts Retrieved 21
Interested in Kotak’s Product Trust Funds/Firms - Leads 4
I shall now share the results & findings from the responses received:
A) FINDINGS FROM PHASE I (FROM PROFESSIONALS LIKE CORPORATE
DOCTORS, CHARTER ACCOUNTANTS ETC.)
LOCATIONS:
AMRI Hospital, Dhakuria, Kolkata
Ruby Hospital, Kolkata
Desun Hospital, Kolkata

46 | P a g e
PURPOSE OF VISIT: Kotak Privy League caters to HNI clients. Doctors being top
professionals earn both corporate salary as well as domestic salary from appointments in clinics
etc. Hence, these individuals were potential targets for Privy league to imbibe them as their
customers and I was assigned to contact them via telephone or visit, create a database and to
profile them for potential leads in future. Also, I was to assess their post demonetization and
GST asset allocation trends, to observe the quantum of digitalization and to see how they have
chosen to use the cash deposited in banks, how much have they familiarized with digitalization
and what asset classes do they prefer the most and why do they do so.
METHODS ADOPTED
I initially directly went to the administration of the Hospital to talk to the medical administrator
regarding. I spoke to the medical administrators regarding setting up an appointment with the
RMs of Kotak Privy regarding products & services and also asked for permission to talk to the
doctors formally or informally, since they are generally busy. I also circulated an online
questionnaire regarding the same on LinkedIn to get responses from others.
ISSUES FACED
❖ The first issue was to get an entry to talk to the medical administrators or doctors, since
they were busy or reluctant to talk.
❖ Doctors, when responded, tended to be casual while responding, and I suspected a bias may
have been caused from their original behaviour. Responses from online sources were
comparatively more accurate by my estimates
❖ Getting appointment to meet doctors was difficult, since they were busy with their patients.
Hence, I had to wait for them to get a break, and hence get responses from them.
RESULTS FROM MY VISITS/INTERACTIONS VIA PHONE
❖ Got two prospective positive responses, leads from medical administrators at Desun
Hospital and Ruby Hospital from the medical administrators there.
❖ Got reliable contact details, email address, home address of around 112 doctors, the
database of which I have submitted to RM at Kotak Privy.
❖ Interactions with Doctors helped me understand their consumer preferences, views on
demonetization & GST, preference for digital banking post these changes, asset classes
where they prefer to park their excess funds, increased exposure to banking system, banking
preferences etc.

47 | P a g e
❖ Got better & positive responses when I said I’m representing Kotak, and not focussing on
the fact that I’m doing an internship here.
As I had contacted them as an intern, and was told I shall share some interesting responses of
medical administrators and some professionals:
Table 6: Responses Received from Medical administrator
Hospital Visited Name of Medical
Administrator(s)
Their Response
Ruby Hospital i. Ambuj Ghosh, Sr.
Manager Front Office
ii. Dr. Durgadoss Roy,
Deputy Medical
Superintendent
We are tied up with various
banks like SBI, United Bank
of India, Vijaya Bank.
Mostly Health Insurance
Regarding any product
propositions, kindly drop us
a formal mail from official
Kotak at
ruby@rubyhospital.com and
we will surely respond and
set up an appointment
Desun Hospital Sujoy Das, Medical
Administrator
Told me to wait for senior
medical administrator.
First asked me about the
products and services
offered. After talking for
while regarding hospital, I
enquired regarding setting up
of meeting with our RM
regarding products and
service

48 | P a g e
Response was positive but
told that they were busy with
winding up for previous
quarter, with new financial
quarter and told to drop an
official mail to
desun@desunhospital.com
and they’d certainly respond.
AMRI Hospital Mr. Tapas, Medical
Administrator
Officially cannot hold
meeting with doctors; no
provisions for it. You can
talk to doctors informally if
you want to.
B) SOME RESPONSES FROM PROFESSIONALS:
From the responses received from questionnaires, interviews, phone calls, observations and
other secondary data sources, the data was analysed and the tabulations and charts were
prepared based on these:
Table 7: Responses from Professionals
Person Contacted Profession Responses/Comments
Aditya Vikram CA
-I am satisfied with Kotak
Mahindra Bank’s service
-Wishes to buy a second
house in Kolkata, as he
currently resides in Howrah
with family
-Leans towards investment
in Mutual Funds and FDs,
due to returns and also due
to peer advice.

49 | P a g e
Makes frequent digital
transactions using various
apps and didn’t have too
many issues during
demonetization since he
already had almost all his
money in bank account
Anupam Das Doctor -Younger Doctor working in
AMRI.
-Was not interested in
services provided by Kotak
Privy
-Wished to buy a House,
apart from the family house
owned for his family
-Invests in stock markets
after advice from friend
S Hasan Doctor
-Spoke against
demonetization and how it
caused him problems
regarding cash in hand
-Wanted to Buy Real Estate
in partly outskirts of Kolkata
since he felt prices will fall
and needed home apart from
family home
-Enjoys Going for Foreign
Tours, especially in US
Against demonetization, and
said that the country is
“messed up”

50 | P a g e
Aparajita Ghosh Doctor -Kind of follows the stock
markets to keep in touch with
investments made, but
majorly overseen by husband
as well.
-Has positive hopes for her
mutual fund investments.
Sanat Kumar Dey CA
-Wishes to invest more in
Mutual Funds, and also FD
deposits for daughter’s future
education
C) SOME INTERESTING RESPONSES/LEADS FROM TRUST FUNDS
CONTACTED
Table 8: Response from Trust Funds
Name of
Company/Trust
Person Contacted Information gained via
talk/secondary source
Response/Comments
&
POTENTIAL LEADS
Dhunseri Tea Reception, Office
of Chandra
Kumar Dhanuka
-Has Sizeable Market
share in Rajasthan
-Has Made strategic
acquisitions in Africa
-We cannot disclose
banking details
If you want to discuss
about possibilities and
product proposition,
visit our office. We
shall talk to your RM
and fix appointment if
needed.
POTENTIAL LEAD

51 | P a g e
Chitrabani Society -Reception, then
got forwarded to
Mr. PJ Joseph, SJ
Director of
Society
-Receives at least
international donations
Worth 4-5 lakhs per
year from Taiwan
-Associated with St.
Xavier’s College
-HasFCRA Account
We are travelling to
Bangladesh and will
be busy with our
schedules till 15th
–
16th
May. After that,
send us a mail or
contact us to get
appointment.
POTENTIAL LEAD
Bijni Dooars Tea
Company
Reception -Real estate activities
with own or leased
property.
-Tea Business with
paid up capital of ₹60
Lakh, with secured loan
of ₹93 Lakh.
We have accounts in
SBI and City Union
Bank and are satisfied
with the products and
services offered. We
don't wish to switch
currently
Ganodaya Finlease
Limited
Mr. Arun Kumar
Agarwalla
-Registered with RBI
as a NBFC, is presently
engaged in business of
investment in securities
& mutual funds, inter
corporate loans, and
such allied fund-based
activities
-3 personal accounts
only now,
Issues with Dalhousie
branch of Kotak,
-Owner has 3 public
and 4 private company
-Account transferred
to HDFC, ready to
meet after 31st May
-Good chance that he
may return back to
Kotak
POTENTIAL LEAD
– GOOD CHANCE

52 | P a g e
Nimisha Agarwal
Benefit Trust
Mr. Ajay
Agarwal
It was a trust created on
name of his daughter
Nimisha Agarwal is
my daughter. She is
only a minor. No
financial transactions
occur through the
trust, it is inactive.
Results from Interaction with Trust Funds’:
Figure 2. % Of Trust Funds Catering to Type of Owner Class - Those who've I contact
❖ There was a total of 4 positive interactions and leads generated, which were duly submitted
to my mentors
❖ Trust fund owners or organisations have substantial surplus money with them - and they
come from a diverse variety of occupations or purposes, with religious trusts getting
donations from abroad and may have FCRA Accounts too.
❖ Majority of these trusts were owned by Birla Group, of which various ceased to exist.
❖ Majority of trust funds in Kolkata were associated with Birla Group
❖ Most of these trust funds were owned by Corporates -e.g. Dalmia Cement, Birla Corp etc.
❖ The four main classification of these trust funds owned could be summarized as:
a) Family
b) Religious Groups
c) Clubs
d) Corporate
49.2%
20.0%
10.8%
12.3%
7.7%
Percentage of Trust Funds Owned By Following Kinds of
Organisations/Individuals
Corporates Family Social Groups Religious Organisations Professionals

53 | P a g e
e) Professional
❖ Around 60% of the Trust Funds given in datapoints had ceased to exist
❖ Most of these trust funds interacted with were present in 9/1 R N Mukherjee Road, Birla
Building
❖ Almost all Trusts affiliated to Religious groups had FCRA accounts
D) DATA ANALYSIS BASED ON TOTAL RESPONSES RECEIVED
a) Consumer Behaviour: Consumer Expenditure, Behavioural & Preference Patterns
observed from questionnaire and observations
Figure 3. Percentage of Respondents who felt Demonetization & GST Benefitted them
Figure 4: Respondents Facing Issues Post Demonetization & GST
71%
19%
10%
% of Respondents who felt demonetization & GST are
beneficial
Agree Disagree Neutral
75.6%
15.4%
9.0%
% of respondents who faced issues after Demonetization &
GST
Faced Issues Didn't Face Issues Neutral

54 | P a g e
Figure 5: Risk Appetite of Respondents
Figure 6. Influence/Authority over Financial Decisions Taken by Individuals
Here, we can see that for financial planning advices, around 51% people trust their personal
judgements about assets quality, etc. and financial planning according to their investment
horizon or future goals.
31
29
4
Risk Apetite of Respondents:
Higher Return
Minimised Risk
Risk Neutrality
50.8%
31.1%
18.0%
50.8%
31.1%
18.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Self
Family
Members
Advisories
Influence/Authority over Financial Planning/Decisions

55 | P a g e
Figure 7. Income Allocation Preferences of Respondents
Figure 8. Most Desired Luxury Vehicle
This table shows people’s desired luxury vehicle post demonetization. This was a very
subjective thing to observe since each had their own taste and preferences. But, most of the
respondents preferred BMW, Audi and Jaguar because of the Brand Image and purchasing
50.00%, 50%
43.94%, 44%
4.55%, 5%1.52%, 1%
Prefered Discretionary & Non-Discretionary
Expense Preferences
Investment
International Trip
I Phone X
Armani Suit
24.6%
23.1%
21.5%
4.6%
3.1%
6.2%
1.5%
4.6%
7.7%
3.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Prefered Luxury Vehicle

56 | P a g e
power. What I also learnt was that these increased expenditure of luxury goods was due to it
being an alternative for holding cash, especially the cash which was unaccounted earlier.
Figure 9. Most Preferred Banking Partner
About 35% of respondents preferred HDFC Bank over other banks. Some reasons regarding it,
as said by questioned people remains easy accessibility, perceived reputation and peer
influence.
Asset Allocations
Figure 10 Most Preferred Asset Classes over the period of 2015-2018, with comparisons
Figure 11 Most Preferred Asset Classes over the period of 2015-2018, with comparison
6.3%
34.9%
22.2%
17.5%
4.8%
14.3%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
Axis Bank
HDFC Bank
ICICI Bank
Kotak Mahindra Bank
None of the above
SBI
Most Preferred Bank
Savings
Account & FD
Mutual Funds Bonds Real Estate
Direct Equity
Investing
Gold/Jeweller
y
Pre-Demonetisation 37.1% 23.8% 11.4% 14.3% 9.5% 3.8%
Post Demonetisation 39.0% 30.9% 2.9% 7.4% 16.9% 2.9%
37.1%
23.8%
11.4%
14.3%
9.5%
3.8%
39.0%
30.9%
2.9%
7.4%
16.9%
2.9%
Pre-Demonetisation Post Demonetisation

57 | P a g e
Table 8: Individual Response Analysis
Per Person Response for Assets No of assets preferred
Pre-Demonetization & GST (2014-15) 1.62
Post Demonetization & GST (2017-2018) 2.09
Increased Desire to diversify portfolio mix in (%) 29.52%
Observations & Commentary:
1) There is inclination towards technology-based products amongst the professional classes
of professionals, businessmen and self-employed. This is based on the shift in
digitalization needs and the coming up of apps like Paytm, Airtel money which are swift
and easier to use.
2) Post demonetization, various respondents parked their cash in hand into bank accounts,
hence decreasing liquidity at their end. From the interest earnt from bank accounts, and
inability to move their funds, they allocated their assets accordingly into equity, MFs etc.
3) Also, discretionary expenditure saw a preference, with various people buying luxurious
cars, and going for international trips. Respondents used these modes to invest in
consumer durables with the surplus money generated at banks, with various transactions
happening online itself.
4) Table 8 shows that post demonetization & GST, people have harnessed the new
opportunities provided by the assets. Looking at the above table, about 30% of the same
Equity Debt Real Estate
Alternate
Investments
2015 (Pre Demonetisation & GST) 24.39% 29.27% 36.59% 9.76%
2017-18 (Under Current Scenario
(Post Demonetisation & GST))
51.22% 9.76% 24.39% 14.63%
24.39%
29.27%
36.59%
9.76%
51.22%
9.76%
24.39%
14.63%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Most Prefered Broad Based Asset Classes Pre & Post
Demonetization
2015 (Pre Demonetisation & GST)
2017-18 (Under Current Scenario (Post Demonetisation & GST))

58 | P a g e
respondents have wanted to diversify their asset allocations, especially into equity
(an increase by 27% when compared to 2015 – before demonetization and GST.
5) Also, mutual funds saw a preferential treatment, majorly because the current market
scenario underlines sentiments where one wants and understands that there are greater
returns in direct equity & derivatives investing but doesn’t won’t to compromise on
minimization of risk – they wish to be risk neutral.
6) Hence, mutual funds and alternative investments served as the middle and secular path to
their asset allocations providing decent returns – be it equity funds or debt funds, which
will be discussed in the next section, although debt funds in nearer future haven’t
performed up to the mark. The reasons for the same will be discussed in detail in the
study of assets classes part.
7) Hence, from the results of questionnaires, what was observed that Bonds became less
preferable by around 8%, and debt’s overall preference too decreased by around 20%,
primarily because of better returns via equity, and a push towards opportunity-based
investing, which slants towards the direction of high risk, high returns asset class – which
is equity.
8) Equity has seen substantial broad-based investing, hence the preference for it is primarily
because of the higher returns generated from it. Although demonetization had corrected
the markets initially, but the broad-based investing and heavy influx of capital into this
segment propelled this asset class.
9) Real Estate’s preference has decreased by around 9%, primarily due to it being a cash-
based asset. Most of the transactions which earlier occurred by cash, probably
unaccounted money got directed into real estate. But, now this wasn’t possible. The
attempted move to move from an informal sector to a formal sector has hit the informal
players and created a climate where the new regulations via RERA have confused people,
and people are unsure about investing for now. Yet, they had decided to hold their
positions in real estate. I shall further elaborate while I study the asset class of real estate
in the forthcoming sections.

59 | P a g e
Results from Secondary Data Sources
These results are from raw data available from websites of SEBI, RBI and Wealth reports
which I tabulated and charted. This helps getting an apt picture of the conditions prevailing.
Some of the key results from secondary data study were:
Figure 12 Asset Allocations Proportions From 2014-2018
Table 9. Asset Allocation of HNI Clients over the years.
Equity Debt Real Estate Alternative Investments
2014 38% 24% 29% 9%
2015 45% 20% 26% 9%
2016 39% 22% 28% 11%
2017 40% 17% 32% 11%
2018 44% 16% 26% 14%
Source: Kotak Top of The Pyramid Wealth Reports 2014-18
The key observation in trend of asset allocation which can be observed here is the obvious
increase in equity positions. Looking at it from 2015, there has been a
- 6% increase in equity investment allocation
- 8% decrease in debt investment allocation
- 3% decrease in real estate allocation
- 5% increase in alternative investments’ allocation
Now, there could’ve been two reasons for this change in allocation:
2014
2014
2014
2014
39%
22%
28%
11%
2018, 44%
2018, 16%
2018, 26%
2018, 14%
Asset Allocation of HNIs over the years
Equity
Debt
Real Estate
Alternate Investments

60 | P a g e
a) Reallocation of Already Present Assets (e.g selling off real estate to purchase equity)
b) Influx of more capital into an asset class (e.g influx of capital into equity would increase
equity’s percentage and reduce the others’)
Since the number of HNIs have been increasing, it is the size of the pie and the post
demonetization & GST scenarios which have altered these asset allocations.
Figure 13. Most Preferred Asset Across HNI Professions
Source: Karvy Wealth Report, 2016
Figure 14 Percentage of Clients who wish change their asset class preferences post disruptions
Source: Kotak Top of the Pyramid Report, 2017
Here, we can observe that about 46% and 45% of HNIs intend to increase their equity and
alternative investment positions, even at the expense of decreasing their allocation towards
debt and real estate. Also, 42% & 41% of HNIs respectively don’t wish to alter their positions
in equity and alternative investment, which shows their trust and belief in these asset classes,
69%
46%
66%
69%
62.50%
19%
42%
23%
19%
25.75%
10%
11%
10%
10%
10.25%
2%
1%
1%
2%
1.50%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Professional
Retired
Salaried Person
Business/Self Employed
Total/Average
Most Prefered Asset Class Amongst HNIs Pre Demonetization
& GST
Alternate Investments Real Estate Debt Equity
Equity Debt Real Estate Alternate Investment
Increase 46% 31% 29% 45%
Decrease 12% 34% 36% 14%
No Change 42% 35% 35% 41%
46%
31% 29%
45%
12%
34% 36%
14%
42%
35% 35%
41%
0%
10%
20%
30%
40%
50%
% of HNI Clients who desire to increase, decrease or keep their asset
allocations constant
Increase Decrease No Change

61 | P a g e
which yields to the suggestion that they wish to hold long positions in these asset classes. The
cleaning of the economy, high growth-high volatility scenario present doesn’t seem to deter
their asset allocations in these two classes.
Figure 15 Comparing the Stability in Preference of Asset Classes across 2016 & 2017
Table 10: Preferences of Asset Classes Across Profession Classes amongst HNIs
Source: Karvy Wealth Report 2016,17
Here, professionals, salaried people, businessmen and self-employed people have more or less
stable or at least correlated preferences regarding the asset classes.
❖ The conspicuous observation here is regarding the retired HNIs, who initially, before
GST’s and demonetization’s implementation had the highest interest in debt instruments
and debt mutual funds. But, a stark contrast has been observed when it came to 2017 data
wherein there was a 36% decrease in preference for debt and 38% increased interest to
equity.
Equity Debt Real Estate Alternate Investments
2016 0.11 0.11 0.01 0.01
2017 0.09 0.02 0.07 0.03
0.00
0.02
0.04
0.06
0.08
0.10
0.12
Differences in Asset Allocating Opinions among different
HNIs' profession classes (Using Standard Deviation) - helps to
look at general sentiment of each asset class
2016 2017
Equity Debt Real Estate AI
2016 2017 2016 2017 2016 2017 2016 2017
Professional 69% 69% 19% 6% 10% 19% 2% 6%
Retired 46% 84% 42% 6% 11% 4% 1% 6%
Salaried Person 66% 85% 23% 5% 10% 13% 1% 1%
Business/SE 69% 68% 19% 9% 10% 17% 2% 6%
S. D 0.11 0.09 0.11 0.02 0.01 0.07 0.01 0.03

62 | P a g e
Probable Cause for Shift in Retired personnel Sudden Asset Allocation Shift
Retired people are old, and generally don’t plan too ahead for the future. They mainly may
have short term goals and wish to provide for their subsequent heirs – be it daughters or sons.
Their income sources can be returns from equity market, mutual funds, FD deposits’ interest
and rent from real estate. They are generally not a part of Digital climate, and still rely on
normal banking practices. Since they are usually settled in life and already have more than one
property, there isn’t a dire need to purchase more. Hence, equity being a significant wealth
creator in recent times, has seen assets being parked there. Post demonetization, any other cash
in hand too may have been parked there, more so than in case of other professions who might’ve
allocated their assets in Digital Wallets as well, for day to day spending, without much hassle.
Creating passive incomes via FDs or savings banks account gets complicated because of
inflation, and also a unique kind of ‘lifestyle inflation’ which is due to changing lifestyles. With
low interests on savings accounts etc., PPFs and with inflation, the total value created is
diminutive. From calculations, if one is 15 years away from retirement and want ₹50,000 each
month for expenditure, he/she would require ₹1,37,952 to maintain current levels of
expenditure then3
.
Other Key Observations
❖ Here we observe that in 2016, that is before demonetization and GST was implemented,
for equity almost all profession classes had almost equal preference to venture into equity
markets, via direct method or through mutual funds etc.
❖ Formalisation of Businesses – i.e a shift from Informal to Formal Sector
❖ Also, in 2016, before demonetization, higher positions were maintained by all profession
classes in debt.
❖ The asset classes where investment interest is relatively same over the timeframe happens
to be real estate, which is a physical asset. Hence, real estate has a dedicated interested
consumer base, primarily because of its’ varied uses – for living, as an asset, resale values,
and for rent.
❖ Strong FII inflows were observed in the real estate segment as private equity etc. which
will be discussed further in the forthcoming sections.
3
As read from Outlook Money, mentioned in bibliography

63 | P a g e
Comparison Between Primary Data (trend observed from Survey in Kolkata) and Secondary
Data (General Trend in India)
Figure 16. Preference of Asset Classes: Comparing Results from Primary & Secondary Data
Observations: Here I seek to observe the departure of my findings from the secondary data
available for the same. This data was obtained from secondary sources, 2017 and 2016 which
I have tabulated for comparison. Their study was conducted amongst HNIs from all the top
cities in coalition with a top consulting firm. Comparing with results from my questionnaires
etc, there has been a variability in asset allocation obtained from survey compared to the general
trend observed in India. Although debt and real estate have lesser variability from data obtained
from my survey, there has been:
❖ 30-40% variability in Equity investments
❖ 15% variability in Alternative Investments
❖ Around 20-25% variability in real estate.
This may or may not show the exact picture of asset allocations in Kolkata compared to other
states but reflects the preferences of my targeted sample size. Results are:
❖ Higher Preference to Real Estate while comparing other cities
❖ Lower preference to Equity while comparing secondary data results, although equity
investment has been increasing
❖ Similar preference & even trend of Debt investment compared to secondary data, with debt
being preferred lesser uniformly throughout India.
63%
77%
24%
51%
26%
7%
29%
10%
10%
13%
37%
24%
1%
3.75%
10%
15%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
2016
2017
Pre Demonetisation & GST
Now (2018)
Secondary
Data
Primary
Data
(Findings)
Preference of Asset Classes: Comparing Primary &
Secondary Data Sources
Others (Alternate Investments, Gold etc) Real Estate Debt Equity

64 | P a g e
E) Findings from Phase III (from study of the broad-based asset classes)
Equity
Here, there are certain assumptions made for this phase of study:
❖ Nifty is assumed to be the proxy for equity market’s performance
❖ Nifty is the benchmarked index for calculating volatility, correlations etc.
❖ Selective Stocks studied on an average represent performance of their index, and are from
diverse sectors
❖ The period of study, as mentioned earlier is fixed (from 24/11/15 to 22/05/18)
Figure 17 Trend of Nifty Index since 2015
Data Source: Investing.in
Figure 18. Average Annual P: E Ratio of BSE Sensitive Index
Data Source: RBI
The trend of Nifty and the P: E Ratio of BSE Sensitive Index respectively show that the equity
markets have been growing steadily, and the index is overvalued compared to its intrinsic
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
May21,2018
Apr18,2018
Mar15,2018
Feb09,2018
Jan09,2018
Dec07,2017
Nov07,2017
Oct05,2017
Sep04,2017
Aug01,2017
Jun30,2017
May30,2017
Apr27,2017
Mar24,2017
Feb20,2017
Jan18,2017
Dec19,2016
Nov17,2016
Oct17,2016
Sep12,2016
Aug09,2016
Jul08,2016
Jun07,2016
May06,2016
Apr01,2016
Feb26,2016
Jan27,2016
Dec24,2015
Nov23,2015
Oct20,2015
Sep15,2015
Aug14,2015
Jul15,2015
Jun15,2015
May14,2015
Trend of Nifty Index (which will be used as benchmark)
20.73
22.65
15.67
20.08 21.6
18.56 17.09 17.38 18.73 20.18 20.62
23.76 23.43
0
5
10
15
20
25
Average Annual Price/Earning Ratio of BSE Sensitive Index

65 | P a g e
value. There has been a negative sentiment in the recent months along with considerable
volatility at high valuations. Many of the stocks are overvalued and inflated in comparison to
their intrinsic value. This can be credited to various macroeconomic factors like rising inflation,
crude oil prices, weakening rupee, trade war, widening fiscal deficit etc.
The current P: E Ratio of BSE Sensitive Index of 23.76 is similar to 2007-08 levels when
market succumbed to the financial crisis.
Figure 19. Annual Growth Rate of Some Equity & Diversified Funds (Over 2013-2018 Ist Qt.)
Pre-Demonetization & GST (2015-16)
Table 11: Returns, Correlations & Volatility Analysis of Some Indices pre-note-ban & GST
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2018 Qt.1 2017 2016 2015 2014 2013
Performance of Equity & Diversified Funds (Annual Growth
Rate)
HDFC Equity Fund (G) Reliance SmallCap Bank
Kotak Select Focus Fund - Direct Plan Invesco India Dynamic Equity Fund
SBI Magnum Multicap Fund - Regular Plan (G) Average
Nifty
Realty
Nifty
Bank
Sensex Nifty
IT
Nifty
Media
Nifty
FM
CG
Nifty
Auto
Nifty
Metal
Correlation w/
Benchmark
0.66 0.87 0.99 0.49 0.66 0.65 0.82 0.70
Beta 1.51 1.18 0.99 0.72 1.06 0.79 1.17 1.38
Return 17.87
%
14.29
%
6.92% -9.73% 19.47
%
8.34
%
20.0
0%
54.63%
1.86% 1.22% 0.91% 1.02% 1.42% 1.05
%
1.26
%
1.78%

66 | P a g e
Post Demonetization & GST (9th
Nov, 2016 – now)
Table 12: Returns, Correlations & Volatility Analysis of Some Indices post note-ban & GST
Nifty
Realty
Nifty
Bank
Sens
ex
Nifty
IT
Nifty
Media
Nifty
FMCG
Nifty
Auto
Nifty
Metal
Correlation w/
Benchmark
0.59 0.85 0.99 0.36 0.62 0.62 0.78 0.70
Variance 3E-04 8E-05 4E-
05
1E-
04
1E-04 1E-04 1E-04 2E-04
Beta 1.63 1.16 1.00 0.57 1.10 0.95 1.22 1.61
Return 54.99% 28.51% 23.6
4%
35.17
%
10.49% 26.72% 9.53% 27.09%
Annual Volatility 28.33% 13.99% 10.3
2%
15.91
%
18.00% 15.66% 15.89
%
23.36%
Risk vs. Return Comparison of Key Sectoral Stocks
I have calculated the following from the prices obtained from investing.in for analysis these
stocks in the given timeframe.
Table 13: Beta, Capital Returns & Other info of Some Key Sectoral Sector Pre-& Post-Note
Ban & GST
Daily
Volatility
Annual Volt.
29.41
%
19.39
%
14.43% 16.10% 22.52
%
16.6
2%
19.9
6%
28.14%
Post
Demonetization & GST
HDFC
Bank
Kotak
Mahindra
Bank
Maruti
Suzuki
DLF TCS JSW
Steel
ITC HU
L
Correlation w/ Nifty 0.57 0.48 0.59 0.5
2
0.1
8
0.56 0.4
2
0.4
3

67 | P a g e
Pre-
Demonetization &
GST
HDFC
Bank
Kotak
Mahindra
Bank
Maruti
Suzuki
DLF TCS JSW
Steel
ITC
Ltd
HUL
Correlation w/ Nifty 0.74 0.64 0.60 0.69 0.48 0.38 0.53 0.41
Variance 0.0000
9
0.00017 0.00029 0.00
086
0.00
018
0.000
32
0.00
026
0.00
018
Beta 0.77 0.90 1.11 2.22 0.71 0.74 0.94 0.59
Sharpe Ratio 0.64 0.56 0.51 0.52 -0.52 2.37 0.27 -0.16
Return 17.13
%
18.94% 21.11% 31.4
5%
-
3.61
%
74.69
%
14.2
8%
3.98
%
Annual Volatility 15.18
%
20.59% 26.77% 46.5
6%
21.2
4%
28.34
%
25.7
8%
21.0
2%
Treynor's Ratio 0.126 0.128 0.124 0.10
8
-
0.15
6
0.905 0.07
3
-
0.05
8
Beta 0.73 0.84 0.96 1.9
6
0.3
6
1.50 0.9
2
0.6
9
Sharpe Ratio 3.01 2.12 2.17 1.1
3
2.1
1
2.02 0.1
3
3.4
9
Return 49.2% 47.8% 45.6% 53.
8%
53.
8%
66.0% 10.
1%
68.
5%
Annual
Volatility
14.0% 19.2% 17.7% 41.
2%
22.
2%
29.1% 23.
7%
17.
6%
Treynor's Ratio 0.573 0.482 0.402 0.2
39
1.2
85
0.393 0.0
32
0.8
86