Disclaimer and Terms of Use

The General risks associated with investing in capital market and availing the portfolio management services are summarized in following paragraphs. Investors and readers are strongly advised to refer to and understand the provisions of the disclosure document.

(i) Risk factors & Equity Product

Given below are some of the common risks associated with investments equity securities. These risks include, but are not restricted to:

(a) Securities investments are subject to Market risks and there is no assurance and guarantee that the objectives of the Product / Investment will be achieved.

(b) The investments made by the Portfolio Manager are subject to risks arising from the investment objective, investment strategy and asset allocation.

(c) The returns of the investment portfolio are based on the factors affecting capital markets, such as price and volume volatility in the stock markets, event risks, currency exchange rates, foreign investment, changes in Government and Reserve Bank of India policy, taxation, political, economic or other developments, etc.

(d) Risks arising out of non-diversification or inadequate diversification

(e) Past performance of the Portfolio Manager does not indicate the probable future performance of the Portfolio Manager. Equity and equity related instruments are by nature volatile and prone to price fluctuations. The investor may lose money over short or long period in response to factors such as economic and political developments, changes in interest rates, market movements and over longer period during market downturn.

(f) Investment decisions made by the Portfolio Manager may not be profitable.

(g) The tax implications described in the disclosure document are available under the present taxations laws. This information related to taxation is for general purpose only, in a summarised form and based on advice received by the Portfolio Manager on the prevalent laws and practice in India. Such laws or their interpretation are subject to change. Hence the user of this information is advised to consult his/her/their own professional tax advisor.

(i) The Indian securities markets are smaller and more volatile when compared to the securities markets of the United Kingdom, the U.S. and certain other OECD Countries. The Indian stock exchanges have been subject to broker defaults, failed trades and settlement delays in the past and such events may have adverse impact on the NAV of our client’s portfolio. Indian Stock Exchanges utilize circuit breaker systems under which trading in particular stock or entire trading could be potentially suspended on account of excessive volatility in a stock or a market. Such disruptions could significantly impact our ability to sell client’s investments. Factors like these could adversely affect our client portfolio.

(j) Any act, omission or commission of the Portfolio Manager would be solely at the risk of the Client and the Portfolio Manager will not be liable for any act, omission or commission or failure to act save and except in cases of gross negligence, wilful default and/or fraud of the Portfolio Manager.

(k) The Portfolio Management Service is subject to risk arising out of non-diversification as the Portfolio Manager under its PMS may invest in a particular sector, industry, few/single security/ies. The performance of the portfolios would depend on the performance of such companies/industries/sectors of the economy.

Risk factors for Fixed Income Product

Given below are some of the common risks associated with investments in fixed income and money market securities. These risks include, but are not restricted to:

(i) Interest Rate Risk / Market Risk: Changes in interest rate may affect the net asset value. Generally, the prices of instruments increase as interest rates decline and decrease as interest rates rise. Prices of long-term securities fluctuate more in response to such interest rate changes than short-term securities.

(ii) Credit Risk: Credit risk or Default risk refers to the risk that an issuer of a debt instrument may default (i.e. the issuer will be unable to make timely principal and interest payments on the security). Because of this risk, bonds issued by non-government agencies are sold at a higher yield above those offered on Government Securities which are sovereign obligations and free of credit risk. Normally, the value of a debt instrument will fluctuate depending upon the changes in the perceived level of credit risk as well as any actual event of default. The greater the credit risk, the greater the yield required for someone to be compensated for the increased risk

(iii) Reinvestment Risk: This risk refers to the interest rate levels at which cash flows received from the securities under a particular Portfolio are reinvested. The additional income from reinvestment is the “interest on interest” component. The risk is that the rate at which interim cash flows can be re-invested may be lower than that originally assumed.

(c) The returns of the investment portfolio are based on the current yields of the securities, which may be affected generally by factors affecting capital markets such as price and volume, volatility in the stock markets, interest rates, currency exchange rates, foreign investment, changes in Government and Reserve Bank of India policy, taxation, political, economic or other developments, etc. Some segments of the government bond market and the corporate bond markets have limited liquidity which could impact prices of instruments. There is no assurance that a deep secondary market will develop for such securities which could limit the ability of the securities to re-sale them. Even if a secondary market develops and sales were to take place, these secondary transactions may be at a discount to the initial issue price due to changes in the interest rate structure.

(d) Risks arising out of non-diversification

Other risks arising from the investment objectives, investment strategy and asset allocation are stated as under:

Other risks associated with investments in equity and equity linked securities

(a) Equity and equity related securities by nature are volatile and prone to price fluctuations on a daily basis due to both macro and micro factors.

(b) Execution of investment strategies depends upon the ability of the Portfolio Manager to identify opportunities which may not be available at all times and that the decisions made by the Portfolio Manager may not always be profitable.

(c) In domestic markets, there may be risks associated with trading volumes, settlement periods and transfer procedures that may restrict liquidity of investments in equity and equity related securities.

(d) In the event of inordinately low volumes, there may be delays with respect to unwinding the Portfolio and transferring the redemption proceeds.

(e) The value of the Portfolio, may be affected generally by factors affecting securities markets, such as price and volume volatility in the capital markets, interest rates, currency exchange rates, changes in policies of the Government, taxation laws or policies of any appropriate authority and other political and economic developments and closure of stock exchanges which may have an adverse bearing on individual securities, a specific sector or all sectors including equity and debt markets. Consequently, the Portfolio valuation may fluctuate and can go up or down.

(f) Investors may note that Portfolio Manager’s investment decisions may not always be profitable, as actual market movements may be at variance with anticipated trends.

Risk Factors associated with investments in derivatives

(a) Derivative products are leveraged instruments and can provide disproportionate gains as well as disproportionate losses to the investor. Execution of such strategies depends upon the ability of the Portfolio Manager to identify such opportunities. Identification and execution of such strategies to be persuaded by the Portfolio Manager involve uncertainty and decision of the Portfolio Manager may not always be profitable. No assurance can be given that the Portfolio Manager shall be able to identify or execute such strategies.

(b) The risks associated with the use of derivatives are different from or possibly greater than, the risk associated with investing directly in securities and other traditional investments.

(c) As and when the Portfolio Manager on behalf of Clients would trade in the derivatives market there are risk factors and issues concerning the use of derivatives that investors should understand. Derivative products are specialized instruments that require investment techniques and risk analysis different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price or interest rate movements correctly. There is a possibility that loss may be sustained by the Portfolio as a result of the failure of another party (usually referred as the “counter party”) to comply with the terms of the derivatives contract. Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Thus, derivatives are highly leveraged instruments. Even a small price movement in the underlying security could have a large impact on their value.

(d) The options buyer’s risk is limited to the premium paid, while the risk of an options writer is unlimited. However, the gains of an options writer are limited to the premiums earned.

The writer of a put option bears the risk of loss if the value of the underlying asset declines below the exercise price. The writer of a call option bears a risk of loss if the value of the underlying asset increases above the exercise price.

Investments in index futures face the same risk as the investments in a portfolio of shares representing an index. The extent of loss is the same as in the underlying stocks.

Other general risks in relation to investment in Securities/Instruments 

(a) The in-specie distribution of the securities by the Portfolio Manager upon termination or liquidation of the Client Portfolio could consist of such securities for which there may not be a readily available public market. Further, in such cases the Portfolio Manager may not be able transfer any of the interests, rights or obligations with respect to such Securities except as may be specifically provided in the Agreement. If an in-specie distribution is received by the Clients from the Portfolio Manager, the Clients may have restrictions on disposal of securities so distributed and consequently may not be able to realize full value of these assets.

(b) Some of the entities in which the Portfolio Manager will invest may get their Securities listed with the stock exchange after the investment by the Portfolio Manager. In connection with such listing, the Portfolio Manager may be required to agree not to dispose of its securities in the entity for such period as may be prescribed under the Applicable Law, or there may be certain investments made by the Portfolio Manager which are subject to a statutory period of nondisposal and hence Portfolio Manager may not be able to dispose of such investments prior to completion of such prescribed regulatory tenures and hence may result in illiquidity.

(c) The Portfolio Manager may also invest in entities which are new or recently established or are investment vehicles like mutual funds/trusts/venture capital funds. Such investments may present greater opportunities for growth but also carry a greater risk than is usually associated with investments in listed securities or in the securities of established companies, which often have a historical record of performance.