Comprehensive Guide to Portfolio Management Services (PMS) in India 2025: Process, Objectives, Types, Benefits, and More
What is Portfolio Management Services (PMS)?
Portfolio Management Services (PMS) are SEBI-regulated, professional, customised portfolios where you directly own securities in your demat. Minimum investment is ₹50 lakh. PMS can be discretionary, non-discretionary, or advisory. Charges usually include management fees and sometimes performance fees (with high-water mark). Taxation mirrors direct equity/debt in your hands. Choose PMS if you want concentrated, goal-aligned, transparent investing managed by an experienced portfolio manager—and you can ride market volatility over multi-year horizons.
Portfolio Management Process
A robust PMS follows a disciplined, research-led cycle:
- Profile & Policy – Risk profiling, goals, liquidity needs, constraints → Investment Policy Statement (IPS).
- Research & Strategy – Idea sourcing, fundamental/quant/forensic screens, position sizing, risk limits.
- Portfolio Construction – Buy discipline, diversification bands, factor tilts, cash policy.
- Monitoring & Review – Benchmarking, attribution (alpha sources), factor/sector exposures, drawdown control.
- Rebalancing – Rules for trims/adds, loss-cut, valuation bands; tax-aware rebalancing.
- Reporting & Governance – Standardised monthly/quarterly reviews, compliance and audit trail.
This disciplined process ensures a dynamic and goal-aligned portfolio management experience.
Objectives of Portfolio Management
The primary objectives of portfolio management include:
- Capital Appreciation: Compounding principal over full cycles.
- Risk Management: Control drawdowns; diversify by business drivers (not just number of stocks).
- Income Generation: Dividends/coupons where suitable.
- Liquidity Management: Maintain sell-ability for commitments and opportunities.
- Cost & Tax Efficiency: Lower friction; net-of-tax wealth growth.
Achieving a balance among these objectives tailored to the investor’s needs is crucial in portfolio management.
Types of Portfolio Management
Portfolio management can be categorized into several types based on management style and client control:
- Discretionary PMS: Manager takes day-to-day decisions per agreed mandate. (Most common)
- Non-Discretionary PMS: Manager recommends; client approves trades.
- Advisory PMS: Pure advice; client executes and owns decisions.
- Active / Passive Styles: Active seeks excess returns vs benchmark; passive mirrors indices (rare in PMS).
- Thematic/Style Buckets: Value, quality, small/mid-cap, special situations, dividend, multi-asset.
The choice depends on individual preferences for control, expertise, and investment goals.
Types of Portfolio Management Explained
Portfolio Management Services Minimum Investment
Per SEBI regulations, the minimum investment for PMS is ₹50 lakh (including cash/securities earmarked for the mandate). This threshold ensures PMS stays focused on sophisticated investors and allows strategies, like concentrated portfolios, to be executed efficiently.
Know the Exact PMS Minimum Investment in 2025
PMS vs Mutual Funds vs AIFs – Key Differences
| Feature | PMS | Mutual Funds | AIFs (Cat III common) |
| Minimum Ticket | ₹50 lakh | ₹500–₹5,000+ | Typically ₹1 crore |
| Ownership | You directly own securities | You own fund units | You own fund units |
| Customization | High (mandate-level) | Low | Moderate (strategy-level) |
| Liquidity | T+ settlement; no formal lock-in (exit load may apply) | High, except close-ended | Often less liquid; lock-ins common |
| Taxation | In investor’s hands like direct equity/debt | In investor’s hands via fund passthrough rules | Often taxed at fund level (Cat III nuances) |
| Transparency | Full holdings visibility | Scheme fact sheet level | Depends on fund disclosure |
Difference Between PMS and AIF
Importance, Need, and Significance of Portfolio Management
- Markets are uneven and cyclical; portfolios need risk-aware process, not ad-hoc bets.
- Product shelves are crowded; professional curation avoids redundancy and hidden factor concentration.
- Behavioural coaching and governance reduce costly mistakes (chasing performance, panic selling).
- Customisation aligns the investment engine to your liability schedule and cash-flow realities.
Advantages and Benefits of Portfolio Management
The advantages of effective portfolio management include:
- Professional edge: Research depth, networks, and repeatable process.
- Custom fit: Mandate tailored to risk, liquidity, taxes.
- Transparency & control: Direct holdings, real-time visibility.
- Tax-aware rebalancing: Harvest losses, manage holding periods.
- Opportunity capture: Ability to build concentrated, high-conviction positions.
Its benefits extend to tax optimization, direct ownership, and alignment of financial aspirations with investment outcomes, making PMS suitable for sophisticated investors looking for superior portfolio management.
Advantages of Investing in PMS
How PMS Works & How to Invest
- Choose a SEBI-registered Manager and strategy (e.g., value, small/mid-cap).
- Complete KYC and open/nominate demat, bank, and custodian accounts.
- Sign PMS Agreement & Investment Policy Statement (mandate, fees, risk, reporting).
- Fund the Account (cash/securities) to reach ₹50 lakh+ threshold.
- Construction & Ongoing Management with periodic reviews and rebalancing.
- Exit/Partial Withdrawals as per mandate and any exit load terms.
Step by Step Guide on How to Invest in PMS
Portfolio Manager Responsibilities and Role
A portfolio manager plays a vital role by:
- Assessing investor risk appetite and objectives.
- Creating and implementing investment strategies.
- Selecting securities and managing asset allocation.
- Monitoring portfolio performance and making timely adjustments.
- Ensuring compliance with regulatory standards.
- Reporting transparently to clients.
Their role is to serve as a fiduciary steward, working to optimize returns consistent with the client’s risk profile.
Elements and Phases of Portfolio Management
Key elements of portfolio management encompass:
- Asset allocation across equity, debt, and alternative investments.
- Risk assessment and management.
- Security research and selection.
- Performance evaluation and reporting.
The phases of portfolio management involve planning, execution, monitoring, and periodic rebalancing to ensure alignment with targets and market conditions
PMS Charges & Fees in India
Typical cost components (plus applicable taxes):
- Management Fee: Often 1.0–2.5% p.a. on AUM.
- Performance Fee (if applicable): Profit-share (commonly 10–20%) over high-water mark; may use a hurdle rate.
- Brokerage, Custody, Audit, Operating Costs: As per schedule in the PMS Agreement.
- Exit Load (if any): Declining scale for early redemptions.
PMS Taxation in India
Taxation for PMS mirrors direct investing because you own the securities:
- Equity STCG (≤12 months): 20% (plus surcharge & cess).
- Equity LTCG (>12 months): 12.5% on gains.
- Dividends: Taxed at your slab; TDS may apply.
- Debt/Other Assets: Taxed as per asset-class rules and holding periods.
- Set-off/Carry-forward: Follow IT Act rules (e.g., equity STCL can offset STCG/LTCG).
Performance: Top PMS Services in India
India’s top PMS providers consistently outperform market benchmarks through focused strategies:
- Aequitas Portfolio Management Services delivers outsized returns with its ‘India Opportunities’ Product, managed by Siddhartha Bhaiya:
- 2025 AUM: ₹2083.19 Crore
- 1-Year Return: 60.97%
- 3-Year Return: 54.94%
- 5-Year Return: 17.37%
Check for the most consistently top performing PMS in India
Who Should (and Shouldn’t) Choose PMS
Best suited for investors who:
- Can allocate ₹50 lakh+, with a 3–5+ year horizon.
- Want concentrated, alpha-seeking strategies with clear downside discipline.
- Value transparency, customisation, and tax-aware decisioning.
Think twice if you:
- Need near-term liquidity or capital stability.
- Are uncomfortable with mark-to-market volatility.
- Prefer fully pooled, low-involvement vehicles—then mutual funds (or certain AIFs) may fit better.
How to Evaluate Top PMS in India
Rather than chasing a “top list,” apply a 4-P framework:
- Philosophy: Is it coherent (value/quality/momentum)? Does it match your temperament?
- People: Experience across cycles, research depth, skin-in-the-game, governance.
- Process: Sourcing, diligence, position sizing, sell rules, risk/forensic checks.
- Performance & Risk: Cycle-aware view—alpha consistency, drawdowns, recovery speed, active share, factor exposures.
FAQs About Portfolio Management Services in India
1. What is Portfolio Management Services (PMS) in India?
Portfolio Management Services (PMS) are SEBI-regulated investment services where professional managers create customised portfolios. Investors directly own the securities in their demat account, unlike mutual funds where they own units.
2. What is the minimum investment required for PMS in India?
As per SEBI regulations, the minimum investment for PMS in India is ₹50 lakh. This can be funded through cash or eligible securities. This varies depending on the fundhouse. With Aequitas, the minimum investment for PMS in India is ₹25 crore
3. How does PMS differ from mutual funds and AIFs?
- PMS: Direct ownership of securities, minimum ₹50 lakh, highly customised.
- Mutual Funds: Investors own units, lower entry cost, less customisation.
- AIFs: Minimum ₹1 crore, pooled investments, often less liquid.
4. What are the types of Portfolio Management Services available?
The main types of PMS are:
- Discretionary PMS (manager takes all decisions)
- Non-Discretionary PMS (manager recommends, client approves)
- Advisory PMS (only advice, client executes)
Styles may include value, growth, thematic, multi-cap, or sectoral strategies.
5. What are the benefits of investing in PMS?
PMS offers professional expertise, customised portfolios, transparency, direct ownership of securities, tax-aware rebalancing, and potential to generate alpha through concentrated, high-conviction positions.
6. Who should invest in PMS?
PMS is suitable for investors who can allocate ₹50 lakh or more, have a long-term horizon (3–5+ years), and seek customised, research-driven portfolios with transparency and control.
7. What are the charges and fees for PMS in India?
PMS typically includes:
- Management Fee: 1–2.5% annually on AUM.
- Performance Fee: 10–20% profit share above hurdle rate (with high-water mark).
- Other Costs: Brokerage, custody, audit, exit loads (if applicable).
8. How is PMS taxed in India?
Since investors directly own securities, PMS taxation mirrors direct investing:
- Equity STCG (≤12 months): 20%
- Equity LTCG (>12 months): 12.5%
- Dividends: Taxed as per individual slab rates
- Debt/Other Assets: Taxed as per asset-class rules.
10. What is the role of a portfolio manager in PMS?
The portfolio manager designs strategies, selects securities, manages risk, monitors performance, rebalances the portfolio, ensures compliance, and provides transparent reporting.
11. How do I choose the best PMS in India?
Apply the 4P framework:
- Philosophy (value, growth, momentum)
- People (experience, governance, skin-in-the-game)
- Process (research, risk control, sell discipline)
- Performance & Risk (alpha consistency, drawdowns, recovery speed).
12. Is PMS better than mutual funds?
PMS is better suited for high-net-worth investors seeking customisation, concentrated strategies, and higher return potential. Mutual funds are more accessible, cost-efficient, and better for small-ticket, low-involvement investing.
13. What are the risks of investing in PMS?
Risks include market volatility, concentration risk, higher costs, and the possibility of underperformance. PMS is not ideal for investors needing short-term liquidity or guaranteed capital protection.
14. Can NRIs invest in PMS in India?
Yes, NRIs can invest in PMS through NRO/NRE accounts, subject to SEBI and RBI guidelines. Tax implications may differ for NRIs based on DTAA (Double Tax Avoidance Agreement) provisions.
15. Which is the top-performing PMS in India in 2025?
Aequitas Portfolio Management Services is among the top performers, with its India Opportunities product delivering over 32% CAGR over a 12-year long period (since inception).
