1

Final Project Report

A Study of the Risk and Return of alternative Investment
Opportunities availale to !i"h #et $orth Individuals A %ase
Study of I#& 'ysya (ank )imited*
+ear Sir
Re", Application for -valuation of Project Report
I am pleased to sumit here$ith my project report entitled a study of the Risk and
Return of alternative Investment Opportunities availale to !i"h #et $orth Individuals in
India A case study of I#& 'ysya (ank )imited*. $hich provides detailed information
for my project e/ecuted at I#& 'ysya (ank )imited0
1his project report has een prepared y me in part fulfillment of the Post &raduate
%ertification in (usiness 2ana"ement0
1he same has een sumitted for your kind evaluation and appraisal0
Contents
Abstract
1. Introduction
1010 Area of mana"ement 3
4
1040 %ompany profile 5
1060 )iterature orro$ed 7
106010 Risk. Return and +iversification 18
106040 !i"h #et 9orth Individuals 14
106060 Investment options of !#I:s 1;
a0 2utual funds 13
0 (ank deposits 46
c0 &overnment Securities 4;
d0 %orporate (onds 4<
e0 )ife Insurance Policy 45
f0 &old 4=
"0 )and 68
h0 ->uity 68
i0 IPO:s 61
j0 Preference Shares 61
1060; Instruments of investment provided y I#& 'ysya (ank 64
1060< Instruments of investment not provided y I#& 'ysya (ank 65
2. Methodology 6=
3. Problem Statement 6=
4. Body/Analysis
;010 S9O1 Analysis
;0101 ->uity Shares 67
;0104 (ank +eposits ;8
;0106 )ife Insurance Policy ;1
;010; )and ;4
;010< 2utual Funds ;6
;0103 &old ;;
;0105 Preference Shares ;<
;010= IPO:s ;<
;0107 &overnment Securities ;3
;01018%orporate (onds ;5
;04 1aular representation of various investment instruments
;=
;06 Analysis of each Investment Avenue ;7
;0; Analysis of investment haits of I#& 'ysya:s !#I:s <8
;0< 1hreats posed to Professional Investment Advisors <6

. !"ecuti#e summary <;
6
$. Conclusion <<
A%%endi" & 'uestionnaire (
Bibliogra%hy )
Abstract
Portfolio 2ana"ement has een an inte"ral part for any investor0 -ach Investor. $hether
small or i" is tryin" to ma/imi?e his@ her returns y makin" a diversified investment0 1o
diversify the investment the risk and return trade off of each investment avenue has to e
;
studied0 1herefore the study of portfolio mana"ement and risk and return is very
important of an investor0
#o$ days there are professional investment advisors $ho study the risk and return
portfolio of each investor and desi"n the most $ell suited portfolio from him@ her0 (anks
also provide professional investment advice0 1his has opened up a hu"e market for the
advisors and has ecome very competitive0
I#& 'ysya (ank also provides professional advise to its clients0 A common prolem
faced y the ank:s advisors is that they have a lo$ conversion rate on the advice "iven
y them0
1herefore a study and analysis has een conducted on a sample of 18 !#I:s of the ank
to analy?e their investment portfolio and risk appetite0 An analysis of the ank:s products
is also conducted to understand them in detail0 1hen the re>uired su""estions are made to
the investment advisors to improve the conversion rate and retain !#I:s0
1.1 Area *+ Management
1he area of study. $hich my project report covers. is financial mana"ement0 In financial
mana"ement my project report covers t$o sujects,
<
Port+olio management of I#& 'ysya ank:s !#I clients andA
,is- and return analysis of each investment avenue open to a !#I client0
.inancial Management
Finance is an area of study $hich is namely concerned $ith t$o distinct areas i0e0
financin" and investin"0 9e $ill e dealin" $ith financial mana"ement relatin" to
investment activities0 1his area of finance deals $ith findin" out the est comination or
portfolio of financial assets and thus focuses attention on the allocation of funds once
they are ac>uired0 1his area focuses attention $hether an investor should put all his
money in one financial asset or in a comination of different financial assets0
It studies and addresses the $ays in $hich individuals raise. allocate and use monetary
resources over time. takin" into account the risks entailed in their projects0 It is the
application of a set of techni>ues that individuals use to mana"e their financial affairs.
particularly the differences et$een income and e/penditure and the risks of their
investments0
An entity $hose income e/ceeds its e/penditure can lend or invest the e/cess income0 On
the other hand. an entity $hose income is less than its e/penditure can raise capital y
orro$in" or sellin" e>uity claims. decreasin" its e/penses. or increasin" its income0 /e
0ill be +ocusing on those entities 0ho ha#e sur%lus income and are loo-ing +or
a#enues o+ in#estment0
1herefore $e $ill further "o into portfolio mana"ement of individuals and risk and return
analysis of each investment avenue0
,is- And ,eturn Analysis
1he most important motive for an investor to invest is to earn a return on their
investment0 !o$ever. selectin" investments on the asis of ma/imi?ation of return is not
enou"h0 1he investor also considers the risk associated $ith the investment0
,eturn means the enefit. $hich arises out of any investment or undertakin"0 In financial
mana"ement $e are primarily concerned $ith the return paid to an individual investor0
Return can e paid in one "o or at re"ular intervals0 Return is the foremost important
reason for an investor to make an investment0 1he investor is al$ays ready to undertake
ne$ investment opportunities if the return paid are hi"h0
,is- means the variaility of an investment or security returns0 It means that the future
returns of the investor are unpredictale0 It can e stated as the possiility that the actual
outcome of the a financial decision may not e the same as estimated0 It refers to
possiility of receivin" or not receivin" the estimated return $hich can e >uantified and
measured0
/e 0ill be discussing the ris- and return o+ each in#estment a#enue.
Port+olio Management1
3
A portfolio is a mi/ture of investment avenues0 An investor usually maintains a portfolio0
1he aim of mana"in" a portfolio is to diversify and reduce risk and ma/imi?e return.
$hich is also other$ise kno$n as Bnot puttin" all your e""s in a sin"le asket:0
Port+olio Management is the processes. practices and specific activities to perform
continuous and consistent evaluation. prioriti?ation. ud"etin". and finally selection of
investments that provide the "reatest value and contriution to the strate"ic interest of the
investor0 1hrou"h portfolio mana"ement. the investor can e/plicitly assess the tradeoffs
amon" competin" investment opportunities in terms of their enefit. costs. and risks0
1he portfolio of each I#&:s !#I has een analy?ed and on the asis of that various
investment options open for these customers throu"h the ank have een su""ested0 -ach
customer has the limit of risk he@she can undertake0 1his has also een looked into and
under the limitations. $hich are the est options availale have een advised0
1.2 Com%any Pro+ile
I#& 'ysya (ank )td0is a joint venture et$een 'ysya (ank )td. a premier ank in the
Indian Private Sector and I#&. a "loal financial po$erhouse of +utch ori"in0 I#&
'ysya (ank $as incorporated in Octoer 4884. after otainin" necessary clearance from
the Reserve (ank of India0
5
'ysya (ank $as founded in 1768 to e/tend a helpin" hand to those $ho $ere deprived of
ankin" services0 Since then the (ank has made rapid strides and has carved a distinct
identity of ein" India:s Premier Private Sector (ank0 In 17=<. the (ank ecame the
numer one private sector ank in India0
I#& &roup is a "loal financial services company of +utch ori"in $ith 1<8 years of
e/perience. providin" a $ide array of ankin". insurance and asset mana"ement services
in over 3< countries0 I#&:s over 11;.888 employees $ork daily to satisfy a road
customer ase, individuals. families. small usiness. lar"e corporations. institutions and
"overnments0 (ased on market capitali?ation. I#& is one of the 48 lar"est financial
institutions $orld$ide and ranked in the topC18 in -urope0 I#& is the numer one
financial services company in the (enelu/ home market0 I#& services its retail clients in
these markets $ith a $ide ran"e of retailCankin". insurance and asset mana"ement
services0 I#&:s $holesale ankin" activities operate $orld$ide ut $ith a primary focus
on the (enelu/ countries0 In the Dnited States. I#& is a topC< provider of retirement
services and life insurance0 In %anada. they are the top property and casualty insurer0
I#& +irect is a leadin" direct ank $ith over 1< million customers in nine lar"e
countries0 In the "ro$th markets of Asia. %entral -urope and South America $e. for
e/ample. provide life insurance0 9e are also a lar"e asset mana"er $ith assets under
mana"ement of around -DRO <88 illion0
I23 4ysya 5as a grou%6 has 3 businesses in India1
I#& )ife Insurance
I#& 'ysya (ank
I#& 2utual Fund
I#& 'ysya (ank is a premier private sector ank $ith a 58Cyear herita"e and 10< million
satisfied customers0 I#& 'ysya 2utual Fund is a mid si?ed asset mana"ement company
$ith a retail investor focus0
7he Immediate Bene+it to I23 4ysya Ban- 8td1
Pride of havin" ecome a memer of "loal financial services "iant. $ith an asset
ase of Rs0;=;7 thousand crores
Presence of the "roup in over 3< countries. servin" over 38 million customers
across the "loe0
=
Pride of this "loal identity. the ack up a financial po$er house and the status of
ein" the first Indian International (ank. $ould also "reatly enhance productivity.
profitaility resultin" in improved performance for the ank to translate into
hi"her returns. to all stake holders
I#& 'ysya "roup a customer oriented company $ith a clear or"ani?ation and strate"y
that is founded on value ased mana"ement0 1hey have a stron" position in mature
markets $here $e $ant to "enerate further "ro$th throu"h proper e/ecution of our
usiness fundamentals and $e focus on "ro$th in retirement services. direct ankin" and
life insurance in developin" markets0 1hat $ay $e try to offer our share holders a hi"her
return than the avera"e of our peers0
1.3.1 7heory on ,is-9 ,eturn and :i#ersi+ication
1here are many types of risk involved in financial decisions,
Ca%ital ,is-1 the risk of incurrin" a capital loss due to do$n$ard chan"es in the
market price of a security is defined as the capital risk of a security0 Investment in
most of the e>uity shares has this type of risk runnin" $ith them0
Income ris- , this is the risk of variation in return availale from the security0
1his risk is almost nil in onds. deentures and preference shares
:e+ault ris-1 the risk involved in default in payment of interest or repayment of
principal amount y the company is called default risk0 1his risk is nil in
"overnment onds0
From the point of vie$ of nature and attitude investors can e classified as,
,is- a#erse1 those investors $ho avoid takin" risk and prefer only those
investments. $hich have nil or relatively lo$er risk0
,is- see-ers1 those investors $ho are ready to take risk if the return is
sufficient enou"h0 If "iven the choice et$een t$o risky investments. a risk
seeker investor $ould prefer the riskier one0
2eutrals1 those investors $ho do not care much aout the risk0 1heir
investment decisions are ased on other factors other than risk and return0
Se#eral +actors are to be considered 0hile deciding the %ort+olio as sho0s1
10 8i;uidity and Mar-etability o+ the Port+olio , 1he portfolio must e
such as to provide li>uidity $henever re>uired0 All funds should never e
locked in lon"Cterm det securities even if they are less risky0
7
40 7a" Planning , Portfolio selections are made in vie$ of ta/ provisions in
relation to revenue incomes as $ell as capital "ains0 1he investor should
plan the portfolio in a $ay as to minimi?e ta/ liaility0
60 Ca%ital 3ains1 %ertain securities may provide lo$er returns in the short
run. ut have a "reat potentiality of capital "ains in the lon" run and also
provide a hed"e a"ainst inflation0
;0 Minimi<ation o+ the 7otal ,is- Position1 9hile selectin" a portfolio.
an investor should consider the total risk of the portfolio rather than the
risk of any particular investment only0 1he investor should minimi?e his
total risk0
<0 Industry :i#ersi+ication1 An efficient portfolio should consist of an
investment made in different industries of diverse nature0 B#ever put all
the e""s in the same asket: is the principle0
7he total ris- o+ a %ort+olio can be bi+urcated into t0o %arts as +ollo0s1
10 Systematic or Mar-et ,is-1 It is that part of total risk $hich cannot e
eliminated y diversification0 1he part of the risk that arises ecause every
security has a uilt in tendency to move in line $ith the fluctuations of the
market0 1he systematic risk refers to the fluctuations in return due to
"eneral factors in the market0 1he systematic risk refers to fluctuation in
return due to "eneral factors in the market such as money supply.
inflations. economic recession. industrial policy. interest rate policy of the
&overnment. credit policies. ta/ policies etc0
40 =nsystematic ,is-1 1he unsystematic risk is one. $hich can e
eliminated y di#ersi+ication0 1he risk represents the fluctuations in
returns of a security due to factors specific to the particular firm only and
not the market as a $hole0
Diversification: is a riskCmana"ement techni>ue that mi/es a $ide variety of
investments $ithin a portfolio in order to minimi?e the impact that any one security $ill
have on the overall performance of the portfolio0 +iversification lo$ers the risk of
portfolio0 Academics have comple/ formulas to demonstrate ho$ this $orks. then comes
up the concept of portfolio mana"ement0
18
There are three main practices that can help you ensure the best
diversification:
10 Spread your portfolio amon" multiple investment vehicles such as cash. stocks.
onds. and mutual funds and perhaps even some real estate0
40 'ary the risk in your securities0 EouFre not restricted to choosin" only lue chip
stocks0 In fact. it $ould e $ise to pick investments $ith varied risk levelsA this
$ill ensure that other areas offset lar"e losses0
60 'ary your securities y industry0 1his $ill minimi?e the impact of industryC
specific risks
/e 0ill no0 discuss 0hat ris->return trade>o++ means.
,IS?/,!7=,2 7,A:!>*.. C 1he alance an investor must decide on et$een the
desire for lo$ risk and hi"h returns. since lo$ levels of uncertainty Glo$ riskH are
associated $ith lo$ potential returns and hi"h levels of uncertainty Ghi"h riskH are
associated $ith hi"h potential returns0 -ach investor tries to reach a point of risk@return in
his portfolio $here the risk is minimum and return is ma/imum0
1.3.2 @igh 2et 0orth Indi#iduals
A hi"h net $orth individual is a person $ith lar"e personal financial holdin"s0
1raditionally the term used $as millionaire. ut in recent years the term High Net Worth
individual G!#IH has ecome the descriptor of choice0
A classification used y the financial services industry to denote an individual or a family
$ith hi"h net $orth0 Althou"h there is no precise definition of ho$ rich someody must
e to fit into this cate"ory. hi"h net $orth is "enerally >uoted in terms of li>uid assets
over a certain fi"ure0 1he e/act amount differs y financial institution and re"ion0 1he
cate"ori?ation is relevant ecause hi"h net $orth individuals "enerally >ualify
for separately mana"ed investment accounts instead of re"ular mutual funds0 !#9I:s are
in hi"h demand y private $ealth mana"ers0 1hese individuals "enerally demand Gand
can justifyH personali?ed services in investment mana"ement. estate plannin". ta/
plannin". and so on0
!#I:s Investile assets refer to all fi/ed and current assets of the individual ut e/clude
his primary d$ellin"0 1hey include a simple savin"s or fi/ed deposit account $ith a
financial institution. a securities account $ith a rokera"e firm or an investmentClinked
policy $ith an insurance company0 If the !#I has more than one account $ith the entity.
the total net investile assets $ould mean the a""re"ate net invest ale assets of the
accounts0
India no$ is home to =6.888 millionaires and the country sa$ the $orldFs second fastest
"ro$th. at 1706 per cent. in the numer of hi"h netC$orth individuals in 488<0
Ser#ices 0anted by @igh 2et /orth Indi#iduals1
11
!#I:s are lookin" for professional advise on $ealth mana"ement0 1his is termed as
priority ankin"0 Priority ankin" provides t$o major services to !#I:s0 First is $ealth
mana"ement and second is portfolio mana"ement0
Private (ankin" in a sense e/pands the definition of portfolio to $ealth mana"ement0
9ealth includes e/istin" as $ell as fresh funds and apart from the traditional e>uity Goth
listed and private e>uityH. det and mutual funds. comprises art. real estate. je$ellery etc0
1he advanta"e anks have in providin" this service is that there is a certain seamless ness
in the entire operation. from makin" an investment decision to the proceeds. includin"
char"es ein" credited or deited to your account0 Further. the essence of this usiness is
security and confidentiality. $hich is $hat "ood ankin" essentially. is all aout0
7he %ort+olio management %roduct itsel+ 0hich ban-As o++ers can
ty%ically9 be bro-en into1
Ad#isory ser#ices , Fle/ile. uniased investment advice customi?ed to meet
client needs0
7ransaction su%%ort , All transactions. oth in the primary and secondary
markets facilitated throu"h a panel of rokers0
Custodial ser#ices , Important from the point of vie$ of removal of
settlement hassles and efficient follo$Cup of all corporate actions0
1hese are a fe$ services demanded y !#I:s from their financial advisors,
Wealth preservation and risk management
Estate planning
Tax planning
Retirement planning
When it came to selecting a financial provider or advisor - the
criteria for high-net-worth investors in order of priority are:
!ervice "uality#
$ersonal relationships with their financial advisors#
%alued advice# and
&nvestment performance'
1he I#& 'ysya:s team offers customi?ed portfolios for clients that take into account ta/
constraints and the overall risk tolerance of each individual or family office0 Risks $ithin
each portfolio are carefully controlled via a disciplined investment process and
sophisticated risk mana"ement tools0 I#& 'ysya provides priority ankin" to its !#I:s
14
Priority ankin" is meant for the customer $ho is not really Imass market:0 1he products
and services offered remain the same. ut the customer "ets to deal $ith a dedicated
Relationship 2ana"er GR2H instead of a faceless entity0 !e or she can "et his >ueries
ans$ered on the phone. is visited at his home@office y his R2 and. of course. is invited
to a host of events or"ani?ed y the ank.
.or I23 4ysya ban- an indi#idual 0ith an in#estment o+ 1 la-hs and abo#e is
categori<ed as @2I.
1.3.3 In#estment o%tions o+ @2IAs1
1here are many investment tools an !#I can add to his@her investment portfolio0 1he
investment avenues suitale of each individual $ill e different0 1he investment type
undertaken y a person can e e/plained $ith the help of the riskCreturn trade off0 ,is->
return trade of can e defined as 7he balance an in#estor must decide on bet0een
the desire +or lo0 ris- and high returns9 since lo0 le#els o+ uncertainty 5lo0 ris-6 are
associated 0ith lo0 %otential returns and high le#els o+ uncertainty 5high ris-6 are
associated 0ith high %otential returnsB.
2ost investors take into consideration this tradeCoff efore makin" their investments0 An
investor $ho seeks hi"her returns $ould "enerally venture into the stock markets. $hile
one seekin" stale and secure returns is likely to stick to fi/ed income securities0 1his
depends upon the person:s social ack"round. a"e. se/. $ork desi"nation. family.
runnin" income. future monetary re>uirements and various fi/ed commitments in life0 If
you:re investin" to accumulate $ealth y uyin" individual securities. there are t$o
>uestions you need to ans$er in order to limit your risk $hile seekin" a satisfactory
return,
10 What investment should you buy(
40 When should you buy them(
The only sound way to make these choices is to research the
possibilities until you know as much as you can about:
*#erall mar-et
4arious sectors o+ the mar-et
7he com%any issuing the indi#idual stoc- or bond your considering
16
7he su%%ly and demand o+ the securities your considering
For a thorou"h investi"ation. you need to do oth fundamental and technical analysis.
either on your o$n or $orkin" $ith an adviser0 Some of the techni>ues may seem
intimidatin". and the details over$helmin"0 (ut the information you need is readily
availale0
!#ery ban- and +inancial institute %ro#ides in#estors 0ith #arious
instruments o+ in#estments. 7hey are enumerated belo01
1. Mutual +unds
2. Insurance %olicies
3. 3o#ernment securities
4. Cor%orate bonds
. .i"ed de%osits
$. 8and and %ro%erty
(. 3old
). !;uity
C. IP*As
1D. Pre+erence shares
9e $ill riefly discuss each product,
Mutual .unds1
1;
:e+inition, a 2utual Fund is a pool of money. collected from investors. and is invested
accordin" to certain investment ojectives0 A mutual fund is created $hen investors put
their money to"ether0 It is therefore a pool of the investor:s funds0 1he most important
characteristic of a mutual fund is that the contriutors and the eneficiaries of the fund
are the same class of people. namely the investors0 1he term mutual means that investors
contriute to the pool. and also enefit from the pool0 1here are no other claimants to the
funds0 1he pool of funds held mutually y investors is the mutual fund0
Mutual +unds reduce ris-s +or the in#estors by in#esting in a %ort+olio o+ securities.
1his means the funds are not invested in the same investment avenue0 1hey offer readyC
made diversified portfolio. $hich enales investors to hold diversified portfolios0 2utual
funds invest in diversified securities. as the risk and return of different securities do not
necessarily move in the same direction. $hich reduces the risk of the portfolio0
7he .und Structure And Its Constituents,
1he structure of the mutual fund in India is "overned y the S!BI 5Mutual .und6
,egulations9 1CC$0 1hese re"ulations make it mandatory for the mutual funs to have a
threeCtier structure of S%onsor>7rustee>Asset Management Com%any 5AMC60
1he sponsor is the promoter of the mutual fund and appoints the trustees0
1he trustees are responsile to the investors in the mutual fund. and appoint the A2% for
mana"in" the investment portfolio0
1he A2% Ginvestment mana"ersH is the usiness face of the mutual fund. as it mana"es
all the affairs of the mutual fund0 1he mutual fund and the A2% have to e re"istered
$ith S-(I0 1he S-(I re"ulations also provide $ho can e the 6 entities and the format of
a"reement et$een them0
Mutual +unds can be structured in the +ollo0ing 0ays,
a0 Com%any +orm C in $hich investors hold shares of mutual fund0 In this structure
mana"ement of the fund is in the hands of an elected oard. $hich in turn
appoints investment mana"ers to mana"e the fund0
7he Asset
Management
Co. 5AMC6
S%onsor
7rustee
Clients
1<
0 7rust +orm C in $hich the funds of the investors are held y the trust. on ehalf of
the investors0 1he trust appoints investment mana"ers and monitors their
functionin". in the interest of the investors0
G;H
7he bene+its o+ in#esting in mutual +unds are1
Pro+essional management of your money $ho have the e/perience and resources
to thorou"hly analy?e the economy and financial markets. and spot "ood
opportunities0
:i#ersi+ication y $hich $ith smaller amounts of investment you can achieve a
hi"h de"ree of diversification and reduce your risk0
8i;uidity and con#enience of "ettin" ack your money easily $henever you
$ant and there is very less paper $ork to do0 -asy to track your investments0
7a" bene+its are also availale for certain schemes0
G<H
A++ordability Investors individually may lack sufficient funds to invest in hi"hC
"rade stocks0 A mutual fund ecause of its lar"e corpus allo$s even a small
investor to take the enefit of its investment strate"y0
/ell>,egulated All 2utual Funds are re"istered $ith S-(I and they function
$ithin the provisions of strict re"ulations desi"ned to protect the interests of
investors0 1he operations of 2utual Funds are re"ularly monitored y S-(I0
G5H
In#estment a#enues o+ mutual +unds
Stoc-s1 mutual funds invest into stocks. $hich represent o$nership or e>uity in a
company. popularly kno$n as shares0

Bonds , these represent det from companies. financial institutions or "overnment
a"encies0
Money mar-et instruments , these include shortCterm det instruments such as treasury
ills. certificate of deposits and interCank call money0
7here are di++erent ty%es o+ mutual +unds. 7he chart belo0 0ill sho0
them
)utual *unds invests into
Stoc-s Bonds
Money mar-et instruments
13
M=7=A8 .=2:S
By structure1
*%en>ended .unds1 An openCend fund is one that is availale for suscription all
throu"h the year0 1hese do not have a fi/ed maturity0 Investors can conveniently
uy and sell units at #et Asset 'alue GJ#A'JH related prices0 1he key feature of
openCend schemes is li>uidity0 2ost of the funds in India are openCended funds0
Open-Ended
funds
Close-Ended
Funds
!;uity
+unds
Inde"
.unds

Income/
bond
+unds
@ybrid/
balanced
+und
Money
Mar-et
+unds
3lobal/
Internationa
l .und
S%ecialty
.unds
Growth fund
Value fund
Blend fund
Large-cap fund
Mid-cap fund
Small-cap fund
Interal
funds
Glo!al funds
Foreign funds
Countr" specific
funds
Emerging
mar#et funds
Sector specific
fund
$egional funds
Sociall"
responsi!le fund
%a& saing
schemes
Gilt funds
Income funds
MI'(s
Short-term
Medium-term
Long-term
15
Close>ended +und1 A closedCend fund has a stipulated maturity period $hich
"enerally ran"in" from 6 to 1< years0 1he fund is open for suscription only
durin" a specified period0 Investors can invest in the scheme at the time of the
initial pulic issue and thereafter they can uy or sell the units of the scheme on
the stock e/chan"es $here they are listed0 In order to provide an e/it route to the
investors. some closeCended funds "ive an option of sellin" ack the units to the
2utual Fund throu"h periodic repurchase at #A' related prices0 S-(I
Re"ulations stipulate that at least one of the t$o e/it routes is provided to the
investor0
G=H
Inter#al +unds1 Interval funds comine the features of openCended and closeC
ended schemes0 1hey are open for sale or redemption durin" preCdetermined
intervals at #A' related prices0
!;uity +unds1
Funds that invest in stocks represent the lar"est cate"ory of mutual funds0 &enerally. the
investment ojective of this class of funds is lon"Cterm capital "ro$th $ith some income0
1here are. ho$ever. many different types of e>uity funds ecause there are many
different types of e>uities0 1hese funds invest a major part of their corpus in e>uities0 1he
composition of the fund may vary from scheme to scheme and the fund mana"er:s
outlook on various scripts0
In#estment in e;uity +unds can be di#ided into t0o ty%es1
1. In#estment style1
3ro0th +und1 1he ojective of &ro$th Fund scheme is to provide capital
appreciation over the medium to lon" term0 1his type of scheme is an ideal
scheme for the investors seekin" capital appreciation for a lon" period0
G11H
1hese funds uy shares in companies that are "ro$in" rapidly ut are
proaly not "oin" to "o out of usiness too >uickly0 &ro$th funds rarely
provide dividend income and are considered risky investments

4alue +und1 1he term value refers to a style of investin" that looks for hi"h
>uality companies that are out of favor $ith the market0 )o$ P@- and priceCtoC
ook ratios characteri?e these companies and hi"h dividend yields0
(13)
1hese
funds invest in lar"e and midCsi?ed companies that appear to e
overlooked or out of favor0 1hese undervalued stocks tend to pay
dividends0
Blend +und1 1hese funds are a JlendJ of oth "ro$th and value stocks0
2. Si<e o+ In#estment1
8arge ca% +unds1 1hese funds uy shares of i" companies0 1hink I(20
1he stock prices for these companies tend to e relatively stale. and the
companies may pay a decent dividend0 In companies $hose market value
GK shares outstandin" L current market priceH is lar"e0 (y lar"e. I mean
1=
"reater than M7 illion0 1hese JlueCchipJ funds tend to e $ellC
estalished corporations and tend to pay dividends0
Mid ca% +unds1 1hese funds uy shares of mediumCsi?e companies0 1he
stock prices for these companies are less volatile than the small cap
companies. ut more volatile Gand $ith "reater potential for "ro$thH than
the lar"e cap companies0 1hese funds invest in midCsi?ed companies
$hose market value is more in the ran"e of M1 illion to M7 illion0
Small ca% +unds1 1hese funds uy shares of small companies0 1hink ne$
IPOs0 1he stock prices for these companies tend to e hi"hly volatile. and
the companies never GeverH pay a dividend0 Eou may also find funds
called micro cap. $hich invest in the smallest of pulically traded
companies0
Inde" +unds1
A portfolio of investments that is $ei"hted the same as a stockCe/chan"e inde/ in order
to mirror its performance0 1his process is also referred to as "indexing". An inde/ is
simply a "roup of stocks chosen to represent a particular se"ment of the market0 Dsually
this is accomplished y purchasin" small amounts of each stock in a market0 1he
mana"er is not tryin" to find the hot stocks or "reat deals0 Instead. the mana"er is simply
tryin" to match a chosen inde"0 1he results are funds that are very cost efficient.
meanin" the operatin" costs are very lo$. and often eat most actively mana"ed funds0
G1<H
For e/ample. a stock inde/ fund ased on the +o$ Nones Industrial Avera"e $ould uy
shares in the 68 stocks that make up the +o$. only uyin" or sellin" shares as needed to
invest ne$ money or to cash out investors0 1he advanta"e of an inde/ fund is the very
lo$ e/penses0 After all. it doesnFt cost much to run one0
Bond/Income .unds1
An income fund invests in either corporate. "overnment. or municipal det securities0 A
det security is an oli"ation. $hich pays interest on a re"ular asis0 !ence. this type of
fund is desi"ned for investors $ho desire periodic income payments0 1here are. ho$ever.
sustantial differences and varyin" de"rees of risk amon" income funds dependin" on the
credit >uality of the det issuer. the maturity of the det instrument. and prevailin"
interest rates0
3ilt>+unds : Invest their corpus in securities issued y &overnment. popularly
kno$n as &ilt det papers0 1hese Funds carry ?ero +efault risk ut are associated
17
$ith Interest Rate risk0 1hese schemes are safer as they invest in papers acked y
&overnment0
Income +unds1 Invest a major portion into various det instruments such as
onds. corporate deentures and &overnment securities0
MIPAs1 Invests around =8O of their total corpus in det instruments $hile the
rest of the portion is invested in e>uities0 It "ets enefit of oth e>uity and det
market0 1hese scheme ranks sli"htly hi"h on the riskCreturn matri/ $hen
compared $ith other det schemes0
Short>term Bond .unds1 usually means the holdin"s have up to t$o years left
to maturity0 1his includes ills. %+s. and commercial paper0
Intermediate>term Bond .unds1 usually means the holdin"s have et$een
t$o years to ten years until maturity0 1his includes notes.
8ong>term Bond .unds1 usually means the holdin"s have over ten years left to
maturity0
@ybrid/balanced +und1
!yrid mutual funds have een around since the late 1748s0 1hey are funds that are
invested in common stock. preferred stock. onds. and may have an international or a
cash component as $ell0
@ybrid mutual +unds may be suited +or1
10 Investors $ho are just startin" out and $ant diversification $ithin a sin"le fund.
and
40 1hose $ho $ant a simplified portfolio of only one or t$o funds0
60 One type of a hyrid mutual fund is called a Jalanced fundJ0 1hese funds
"enerally have lo$ volatility and are popular $ith investors seekin" current
income and "ro$th potential0
1he fund:s ojectives and the fund mana"er determine the ratio of stocks to onds0 Funds
$ith Balanced: or Bincome: in the name normally have a fi/ed ratio from $hich they
can:t deviate0 On the avera"e. their ratio of stocks to other investments is appro/imately
38,;80 2ana"ers of alanced funds can. ho$ever. shift this ratio one $ay or the other to
take advanta"e of hi"h interest rates or stock market "ro$th0 1hese funds may e e>uityC
oriented and ske$ed to$ard stocks. or incomeCoriented and ske$ed to$ard onds0
Money Mar-et +unds1
A money market fund is a type of mutual fund that is re>uired y la$ to invest in lo$C
risk securities0 1hese funds have relatively lo$ risks compared to other mutual funds and
pay dividends that "enerally reflect shortCterm interest rates0 Dnlike a Jmoney market
deposit accountJ at a ank. money market funds are not federally insured0
2oney market funds typically invest in "overnment securities. certificates of deposits.
commercial paper of companies. and other hi"hly li>uid and lo$Crisk securities0 1hey
48
attempt to keep their net asset value G#A'H at a constant M1088 per sharePonly the
dividend yield "oes up and do$n0 (ut a money market:s per share #A' may fall elo$
M1088 if the investments perform poorly0 9hile investor losses in money market funds
have een rare. they are possile0
Althou"h money market mutual funds are amon" the safest types of mutual funds. it still
is possile for money market mutual funds to fail. ut it is unlikely0 In fact. the i""est
risk involved in investin" in money market funds is the risk that inflation $ill outpace the
fundsF returns. therey erodin" the purchasin" po$er of the investorFs money0
7y%es o+ money mar-et mutual +unds are ,
Prime +unds
3o#ernment +unds
7a">e"em%t +unds
S%ecialty mutual +unds1
1his classification of mutual funds is more of an allCencompassin" cate"ory that consists
of funds that have proved to e popular ut donFt necessarily elon" to the cate"ories
$eFve descried so far0 1his type of mutual fund for"oes road diversification to
concentrate on a certain se"ment of the economy0
Sector +unds are tar"eted at specific sectors of the economy such as financial.
technolo"y. health. etc0 Sector funds are e/tremely volatile0 1here is a "reater
possiility of i" "ains. ut you have to accept that your sector may tank0
,egional +unds make it easier to focus on a specific area of the $orld0 1his may
mean focusin" on a re"ion Gsay )atin AmericaH or an individual country Gfor
e/ample. only (ra?ilH0 An advanta"e of these funds is that they make it easier to
uy stock in forei"n countries. $hich is other$ise difficult and e/pensive0 Nust
like for sector funds. you have to accept the hi"h risk of loss. $hich occurs if the
re"ion "oes into a ad recession0
Socially res%onsible funds Gor ethical fundsH invest only in companies that meet
the criteria of certain "uidelines or eliefs0 2ost socially responsile funds donFt
invest in industries such as toacco. alcoholic evera"es. $eapons or nuclear
po$er0 1he idea is to "et a competitive performance $hile still maintainin" a
healthy conscience0
7a" sa#ing schemes1 1he ojective of 1a/ Savin" schemes is to offer ta/ reates
to the investors under specific provisions of the Indian Income 1a/ )a$s0
Investments made under some schemes are allo$ed as deduction u@s == of the
Income 1a/ Act0
3lobal mutual +und1
1his type of mutual fund makes its investment in international markets0 1hey invest
eyond the national oundaries in forei"n lands0 1hey invest in forei"n companies0
Ban- de%osits1
41
Meaning1 9hen you deposit a certain sum in a ank $ith a fi/ed rate of interest and a
specified time period. it is called a ank Fi/ed +eposit GF+H0 At maturity. you are entitled
to receive the principal amount as $ell as the interest earned at the preCspecified rate
durin" that period0 1he rate of interest for (ank Fi/ed +eposits varies et$een ; and 11
per cent. dependin" on the maturity period of the F+ and the amount invested0 1he
interest can e calculated monthly. >uarterly. halfCyearly. or annually. and varies from
ank to ank0 1hey are one the most common savin"s avenue. and account for a
sustantial portion of an avera"e investorFs savin"s0 1he facilities vary from ank to ank0
Some services offered are $ithdra$al throu"h che>ues on maturityA reak deposit
throu"h premature $ithdra$al. and overdraft facility etc0
Interest income from (ank F+ >ualifies for e/emption under section =8). $hich means
the interest income is e/empt up to limit of Rs 78880
7here are t0o basic ty%es o+ +i"ed de%osit accounts1
10 7ime de%osit C $here you a"ree to deposit money for a fi/ed period0 1he lon"er
the period and the "reater the amount. the hi"her the interest rate0 Fi/ed periods
ran"e from one month to one year0 7he interest rate is higher than call de%osit
40 Call de%osit C $here you a"ree to $ithdra$ money only after "ivin" a period of
notice to us0
1here is a minimum deposit for settin" up fi/ed deposit accounts0 It helps you to save
money y forcin" you to keep your money intact for a certain period0 !o$ever. if in any
case you need to $ithdra$ money efore the maturity date. you can al$ays come to us
and special arran"ements could e made0 Interest loss and an early $ithdra$al char"e
$ill result from such chan"es0
.eatures
(ank deposits are fairly safe ecause anks are suject to control of the Reserve (ank of
India GR(IH $ith re"ard to several policy and operational parameters0 1he anks are free
to offer varyin" interests in fi/ed deposits of different maturities0 Interest is compounded
once a >uarter. leadin" to a some$hat hi"her effective rate0
1he minimum deposit amount varies $ith each ank0 It can ran"e from as lo$ as Rs0 188
to an unlimited amount $ith some anks0
Ad#antages
(ank deposits are the safest investment after Post office savin"s ecause all ank
deposits are insured under the +eposit Insurance Q %redit &uarantee Scheme of India0 It
is possile to "et a loan up to5<C 78O of the deposit amount from anks a"ainst fi/ed
deposit receipts0 1he interest char"ed $ill e 4O more than the rate of interest earned y
the deposit0 One can "et a ank F+ at any ank. e it nationali?ed. private. or forei"n0
Eou have to open a F+ account $ith the ank. and make the deposit0
G
7he de%osit %eriod can #ary +rom 19 3D or 4 days to 39 $ months9 1 year9 1.
years to 1D years0 Gelo$ one croreH
44
:uration Interest rate 5E6 %er annum
5 C 1< days 40<8O
13 C ;8 days 60<8O
;1 ;; days ;088 O
;<C38 days <0<8O
31C78 days 5088O
71 117 days 50<8O
148 days 505<O
141 63; days 50<8O
63<C633 days =04<O
635 days to 18 years 504<O
3o#ernment Securities1
:e+inition1 &overnment onds are securities issued y the %entral and State
"overnments0 As anker to the "overnment. the Reserve (ank of India re"ularly services
the payment of interest and the principal on these securities0 Since these are soverei"n
paper. the onds are re"arded as the safest0 1he other advanta"es of the "overnment
securities are that they are tradale and can e used as collateral for loans0 1here is no
deduction at source G1+SH on interest payments on "overnment securities0 (ut for
individuals. interest income up to Rs 6.888 per annum is only e/empt from income ta/0
7he bene+its o+ in#esting in a go#ernment security are1
10 Sa+ety1 1he Rero +efault Risk is the "reatest attraction for investments in
&overnment Securities0 It enjoys the "reatest amount of security possile. as the
&overnment of India issues it0 !ence they are also kno$n as &iltC-d"ed Securities
orF&iltsF0
40 .i"ed Income1 +urin" the term of the security there is likely to e fluctuations in
the &overnment Security prices and thus there e/ists a price risk associated $ith
investment in &overnment Security0 !o$ever. the return on the holdin" of
investment is fi/ed if the security is held till maturity and the effective yield at the
time of purchase is kno$n and certain0 In other $ords the investment ecomes a
fi/ed income investment if the uyer holds the security till maturity0
60 Con#enience1 &overnment Securities do not attract deduction of ta/ at source
G1+SH and hence the investor havin" a nonCta/ale "ross income need not file a
return only to otain a 1+S refund0
;0 Sim%licity1 1o uy and sell &overnment Securities all an individual has to do is
call his @ her ->uity (roker and place an order0 If an individual does not trade in the
->uity markets. he @ she has to open a demat account and then can commence
46
tradin" throu"h any ->uity roker0
<0 8i;uidity1 &overnment Security $hen actively traded on e/chan"es $ill e hi"hly
li>uid. since a national tradin" platform is availale to the investors0
30 :i#ersi+ication1 &overnment Securities are availale $ith a tenor of a fe$ months
up to 68 years0 An investor then has a $ide time hori?on. thus providin" "reater
diversification opportunities0
7he +actors9 0hich a++ect the %rice o+ go#ernment securities1
1he price of a &overnment Security in the markets is determined y the forces of
demand and supply. as is the case in any market0 1he price of a &overnment Security in
the marketplace also depends on a numer of other factors and $ill fluctuate accordin"
to chan"es in,
-conomic conditions0
&eneral money market conditions includin" the position of money supply.
in the economy0
Interest rates prevalent in the market and the rates of ne$ issues0
%redit >uality of the issuer
Cor%orate Bonds1
(onds issued y a corporation are called corporate onds0 9hen a company needs to
raise funds for some type of investment or e/penditure. they often turn to the pulic
markets for fundin"0 One $ay to do this is to issue additional stock in the company. ut
this has implications on the value of the shares and dilutes o$nership0 1he other major
option is to sell onds to the pulic and take on det0 Sellin" onds is often more
attractive to companies than "ettin" a loan from a ank0
%orporate onds are dets issued y industrial. financial and service companies to
finance capital investment and operatin" cash flo$0 Investors in corporate onds have a
$ide ran"e of choices $hen it comes to ond structures. coupon rates. maturity dates.
credit >uality and industry e/posure0 Investors in corporate onds have a $ide ran"e of
choices $hen it comes to ond structures. coupon rates. maturity dates. credit >uality and
industry e/posure0
9hen you uy a ond. you are lendin" money to the corporation that issued it0 1he
corporation promises to return your money. or principal. on a specified maturity date0
Dntil that time. it also pays you a stated rate of interest. usually semiannually0 1he
interest payments you receive from corporate onds are ta/ale0 Dnlike stocks. onds do
not "ive you an o$nership interest in the issuin" corporation0
4;
1he onds are fully ta/ale. and they are issued in maturities ran"in" from less than one
year to aout 68 years Galthou"h there are a fe$ corporate onds that mature in more than
68 yearsH0
7y%es o+ Issuers
1here are five main classifications of issuers representin" various
sectors that issue corporate onds,
G43H

10 Pulic utilities
40 1ransportation companies
60 Industrial corporations
;0 Financial services companies
<0 %on"lomerates
Bene+its o+ In#esting in Cor%orate Bonds
Investors uy corporate for a variety of reasons,
Attracti#e yields %orporate usually offer hi"her yields than comparaleCmaturity
"overnment onds or %+s0 1his hi"hCyield potential is "enerally accompanied y
hi"her risks0
:e%endable income People $ho $ant steady income from their investments.
$hile preservin" their principal. include corporate in their portfolios0
Sa+ety %orporate onds are evaluated and assi"ned a ratin" ased on credit
history and aility to repay oli"ations0 1he hi"her the ratin". the safer the
investment0
:i#ersity %orporate onds provide the opportunity to choose from a variety of
sectors. structures and creditC>uality characteristics to meet your investment
ojectives0
Mar-etability If you must sell a ond efore maturity. in most instances you can
do so easily and >uickly ecause of the si?e and li>uidity of the market0
8i+e Insurance Policy
Meaning1 )ife insurance is a form of insurance that pays monetary proceeds upon the
death of the insured covered in the policy0 -ssentially. a life insurance policy is a contract
et$een the named insured and the insurance company $herein the insurance company
a"rees to pay an a"reed upon sum of money to the insuredFs named eneficiary so lon" as
the insuredFs premiums are current0
1he cost of life insurance varies dependin" on such factors as the insuredFs a"e. health.
and occupation0 For e/ample. the premium for a 4<CyearCold. male. nonCsmoker in
e/cellent health $ill e far less e/pensive than a similar policy for a 3<CyearCold male
4<
smoker0 Similarly. a sky dive instructor $ould have to pay much hi"her premiums for life
insurance than $ould a lirarian0
)ife insurance is availale in a numer of different forms to fit the tastes of the proposed
insured0 Some of the typical forms of life insurance policies include, $hole life. variale
life. and term life0 7erm li+e insurance %olicies e"in $ith lo$ premiums durin" the
initial sta"es of the policy and these premiums increase steadily as the insured "ro$s
older0 1here is no cash uildCup in a term policy and. accordin"ly. the death enefit $ill
not increase0
9ith $hole life and variale life insurance. a portion of each premium pays for the
insurance and the remainder serves as a ta/Cfree investment0 A 0hole li+e %olicy sets a
premium at the e"innin" of the policy and that premium does not chan"e over the life of
the policy0 1his form of insurance allo$s for a cash uildCup durin" the insuredFs life0
1his cash uildCup can e used durin" the course of the policy or it $ill simply serve to
increase the death enefit in the end0
In a #ariable li+e %roduct. the premium remains the same over the life of the policy. and
there should e a cash uildCup as lon" as the various mutual funds selected y the
insured perform $ell0
2eed +or a li+e insurance %olicy1
Protection> Eou need life insurance to e there and protect the people you love.
makin" sure that your family has a means to look after itself after you are "one0 It
is a thou"htful usiness concept desi"ned to protect the economic value of a
human life for the enefit of those financially dependent on him0 1hat:s a "ood
reason0 Supposin" you suffer an injury that keeps you from earnin"S 9ould you
like to e a financial urden on your family. already losin" out on your salaryS
9ith a life insurance policy. you are protected0 Eour family is protected0
,etirement> )ife insurance makes sure that you have re"ular income after you
retire and also helps you maintain your standard of livin"0 It can ensure that your
postCretirement years are spent in peace and comfort0
Sa#ings and In#estments> Insurance is a means to Save and Invest0 Eour
periodic premiums are like Savin"s and you are assured of a lump sum amount on
maturity0 A policy can come in really handy at the time of your child:s education
or marria"eT (esides. it can e used as supplemental retirement incomeT
7a" Bene+its> )ife insurance is one of the est ta/ savin" options today0 Eour ta/
can e saved t$ice on a life insurance policyConce $hen you pay your premiums
and once $hen you receive maturity enefits0 2oney saved is money earned0
Contract and Policy
An insurance contract cannot cover all conceivale risks0 An insurance contract that
violates a statute is contrary to pulic policy. or plays a part in some prohiited activity
$ill e held unenforceale in court0 A contract that protects a"ainst the loss of ur"lary
tools. for e/ample. is contrary to pulic policy and unenforceale0
43
Insurable Interest
1o >ualify for an insurance policy. the insured must have an insurale interest. meanin"
that the insured must derive some enefit from the continued preservation of the article
insured. or stand to suffer some loss as a result of that articleFs loss or destruction0 )ife
insurance re>uires some familial and pecuniary relationship et$een the insured and the
eneficiary0 Property insurance re>uires that the insured must simply have a la$ful
interest in the safety or preservation of the property0
Claims
1he most common issue in insurance disputes is $hether the insurer is oli"ated to pay a
claim0 1he determination of the insurerFs oli"ation depends on many factors. such as the
circumstances surroundin" the loss and the precise covera"e of the insurance policy0 If a
dispute arises over the lan"ua"e of the policy. the "eneral rule is that a court should
choose the interpretation most favorale to the insured0 An insurance company may deny
or cancel covera"e if the insured party concealed or misrepresented a material fact in the
policy application0 If an applicant presents an unacceptaly hi"h risk of loss for an
insurance company. the company may deny the application or offer prohiitively hi"h
premiums0 A company may cancel a policy if the insured fails to make payments0 A
company may refuse to pay a claim if the insured intentionally caused the loss or dama"e0
G61H
3old1
&old is the standard y $hich the value of anythin" is assessedA it is universally accepted0
India has een a traditional "oldChoarder0 Indians love "old0
Investment in "old can e done directly throu"h o$nership. or indirectly throu"h
certificates. accounts. shares. futures etc0 2ost investors $ould not recommend storin"
"old oneself Ge0"0 in oneFs home or uried in the "ardenH ut to use a ank or dealer0
&old prices have seen an up$ard trend in the past 6 years0 1hou"h the earlier decades
sa$ a relatively poor performance y the precious metal. "old prices are likely to rise
steadily over the lon"er term0 1his investment opportunity is sho$in" an ups$in" a"ain0
9ith uncertainty in the stock market and decline in the DS dollar. investors are takin" a
fresh look at "old as an investment option0 &old $orks as a perfect hed"e a"ainst
investment in other assets0 In fact. $hen other investments take a eatin". "old
investment tends to staili?e0 As a lon" term investor. holdin" on to "old investment is a
"ood tip0
.actors a++ecting the %rices o+ gold1
Gold Demand CObviously the higher the demand for Gold, the
higher its price. Certain nations hold the metal in high regard
and often use it for major purchases or investments (by
purchasing jewelry etc). China and India are very important
consumers where there seems to be a emerging business
45
population looing to invest in some physical cash assets. Gold,
!latinum and "iamonds are also heavily used in industry.
:ollar Price> &old is typically >uoted in +ollars. and if the dollar e"ins to sink
then the value of &old tends to increase and viceCversa0
Mar-et .ear> 9henever the stock markets or political situations look ad then
people tends to fly to$ards &old0 Stock market crashes. terrorist attacks. or $ars
$ill all tend to push the value of &old up0
Mar-et 3reed C As $ith all investments their performance can e self
perpetuatin". i0e0 they start doin" $ell and so more people "et interested. the &old
funds start appear on the front pa"e of the 2oney section in the tele"raph. and the
"eneral pulic are advised to uy. uy. uy0 1his oviously has the effect of
pushin" "old prices. and "old mine share prices up. as everyone $ants to "et in on
the act0
G66H
7y%es o+ 3old in#estments1
Bullion coins
3old Bars
3old Certi+icates
3old Accounts
3old Mining Shares
7a" Im%lications
Since there is no income as such from holdin" "old. there is no liaility for income ta/0
(ut ullion and je$ellery are suject to capital "ains ta/ and $ealth ta/. $ithout any
e/emptions $hatsoever0
,easons +or in#estment in gold1
An investment portfolio $ith an allocation in "old improves the consistency of portfolio
performance durin" oth stale and unstale periods
&old is also a currency hed"e ecause it has an inverse relationship $ith dollar0
&old is also an inflation hed"e as proved y a ;88Cyear study of the purchasin" po$er of
"old0 One ounce of "old $ould consistently purchase the same amount of "oods and
services. as it $ould have done ;88 years
8and
Real estate investment in India is the sin"le most lucrative option in the modern times0 If
you are lookin" to uy a piece of real estate in the county ri"ht no$. many $ould aver
that the decision mi"ht $ell e $orth it0 1here are a fe$ factors that "o into such a
conclusion "ood returns and lon"Cterm investment option ein" a fe$0 Since India is
emer"in" as a fast "ro$in" economy. real estate is ecomin" a yC$ord for affluence0
4=
Investments in commercial land. a"ricultural land. land for schools. factories. industries.
hospitals or resorts. land for houses. shoppin" arcades makes ample usiness sense0
G6;H
1he simplicity and transparency of land investment has "ained many follo$ers0 1here are
no complicated concepts that investors need to understand. just that there is an everC
increasin" demand for uildin" land0 Dnlike stocks and shares. the land investor $ill
al$ays have a tan"ile investment they can touch and use0 Furthermore. due to its limited
supply and demand. one can also rest assured that land values $ill al$ays e on the rise.
havin" already increased ei"ht fold in value over the last t$enty years0
!;uity
->uity shares represent proportionate o$nership in a company0 Investors $ho o$n e>uity
shares of a company are entitled to o$nership ri"hts. like votin" for selection of directors
on the (oard. share in profits of the company. etc0 Investors $ho o$n e>uity shares in a
company are called shareholders0 Shareholders are entitled to share profit of the company
in the form of JdividendJ or Jonus sharesJ. if (oard of +irectors and majority of the
shareholders a"ree0 1he e>uity shareholders are paid an annual dividend dependin" on
the profitaility of the firm. $hich is proposed y the (oard and passed in the Annual
&eneral 2eetin" of the company0
!;uity in#estment "enerally refers to the uyin" and holdin" of shares of stock on a
stock market y individuals and funds in anticipation of income from dividends and
capital "ain as the value of the stock rises0 It also sometimes refers to the ac>uisition of
e>uity Go$nershipH participation in a private GunlistedH company or a startup Ga company
ein" created or ne$ly createdH0 9hen the investment is in infant companies. it is
referred to as venture capital investin" and is "enerally understood to e hi"her risk than
investment in listed "oin"Cconcern situations0
Bene+its o+ in#esting in !;uity shares
(enefits accorded to the e>uity shareholders in the form of dividend. ri"hts and onus are
termed collectively as corporate enefits0 1hese are normally "iven to those investors
$hose names appear in the Re"ister of 2emers of the company efore the
commencement of the (ook %losure period or efore the record date0 +ividend is the
share of the profit paid out to the o$ners of the company0
IP*As
IPO stands for initial pulic offerin"0 An initial %ublic o++ering 5IP*6 is the first sale of
a corporationFs common shares to pulic investors0 1he main purpose of an IPO is to raise
capital for the corporation0 9hile IPOs are effective at raisin" capital. they also impose
heavy le"al compliance and reportin" re>uirements0 1he term only refers to the first
pulic issuance of a companyFs sharesA any later pulic issuance of shares is referred to as
47
a Secondary 2arket Offerin"0 IPO:s are often smaller. youn"er companies seekin"
capital to e/pand their usiness0
In an IPO. the issuer otains the assistance of an under$ritin" firm. $hich helps it
determine $hat type of security to issue Gcommon or preferredH. est offerin" price and
time to rin" it to market0
IPO:s can e a ris-y in#estment0 For the individual investor. it is tou"h to predict $hat
the stock $ill do on its initial day of tradin" and in the near future since there is often
little historical data $ith $hich to analy?e the company0 Also. most IPO:s are of
companies "oin" throu"h a transitory "ro$th period. and they are therefore suject to
additional uncertainty re"ardin" their future value0
7he bene+it o+ %ic-ing u% shares +rom IP* rather than buying +rom
stoc- mar-et,
Often companies issue their shares at par or at economic rate to attract pulic and $hen
the shares "et listed in the stock e/chan"e "enerally the prices "o up0 ShortCterm traders
immediately sell those shares and make profits0 )on"Cterm investors $ait for their e""s to
hatch properly efore sellin"0
7he %rocedure o+ a%%lying shares through IP*
IPO are "enerally heavily advertised in the media and ne$spaper ecause companies
$ant to ensure the success of their issue0 1hrou"h this advertisement %ompanies also "et
a "ood pulicity for their product0 One must "o throu"h the prospectus very carefully as
every detail aout the suscription is clearly mentioned in it0 1he information is also
availale on companyFs site or S-(I $e site0 Fill up the application form carefully0
Application form are availale at any rokerFs office or on some street kiosks in the
financial area of a city0 Fill it up and deposit alon" $ith application money in the form of
che>ue or ank demand draft0 If you "et suscription pay the suse>uent call money on
time in order to "et relief from penalty or forfeiture0
Pre+erence shares1
%apital stock. $hich provides a specific dividend that. is paid efore any dividends are
paid to common stock holders. and $hich takes precedence over common stock in the
event of a li>uidation0 )ike common stock. preference shares represent partial o$nership
in a company. althou"h preferred stock shareholders do not enjoy any of the votin" ri"hts
of common stockholders0 Also unlike common stock. preference shares pay a fi/ed
dividend that does not fluctuate. althou"h the company does not have to pay this dividend
if it lacks the financial aility to do so0
7he main bene+its to o0ning %re+erence shares are1
10 1hat the investor has a "reater claim on the company:s assets than common
stockholders0
40 Preferred shareholders al$ays receive their dividends first and.
60 In the event the company "oes ankrupt. preferred shareholders are paid off
efore common stockholders0
68
In general9 there are +our di++erent ty%es o+ %re+erred stoc-1
Cumulati#e %re+erred> this means that if this yearFs dividend $asnFt paid. then it
$ill e carried for$ard to ne/t year
2on>cumulati#e> this means that if a year:s dividend $asn:t paid. then it $ill not
e carried for$ard to the ne/t year
Partici%ating Pre+erence share > the o$ner of such a share has the ri"ht to
participate in. or receive. additional dividends over and aove the fi/ed percenta"e
dividend0
Con#ertible > %re+erred stoc- C then the shareholders have the option at some sta"e
of convertin" them into ordinary shares0
1.3.4 Instruments o+ in#estment %ro#ided by I23 4ysya
Ban- 8td
I#& 'ysya in India is active in life insurance. asset mana"ement and ankin"0 I#&
'ysya (ank intends to rin" to its customers in India a ran"e of inte"rated financial
solutions tailored to meet customer needs in ankin"0
I#& 'ysya provides a $ide ran"e of investment opportunity to its hi"h net $orth
individuals0 I#& 'ysya (ank Private (ankin" aims to "ive the est advice on portfolio
y "ivin" customi?ed solutions and e/clusive client mana"ement0 1he 6Csta"e process
follo$ed y our $ealth mana"ers is,
1. /ealth Creation
2. /ealth Preser#ation
3. /ealth 7ransmission
a. Action %rogrammed +or 0ealth creation
Portfolio 2ana"ement on nonCdiscretionary asis
Optimum asset allocation. $ithout e/cessive concentration or diversification
Investments in e>uity market done throu"h +irect ->uity and 2utual Fund route
Re"ular comprehensive reports and faceCto face portfolio status meetin"s
Identification of the est investment opportunities ased on individual preferences
-/clusive ankin" privile"es includin" access to lendin" resources from the ank
for developin" usiness. e/ploitin" investment opportunities. or personal
spendin"
Optimi?ation of riskCre$ard opportunitiesA risk mana"ement throu"h sophisticated
risk control mechanisms
Asset structurin". financial advisory. le"al and ta/ plannin"
b. ,ange o+ ser#ices +or 0ealth %reser#ation
-/clusive (ankin" Privile"es
Investment Advice and Financial Plannin"
Asset Structurin"
Portfolio 2ana"ement
61
1he portfolio most suitale to meet your specific "oals is adapted
Portfolio diversified to spread risk. and desi"ned $ith an optimal lend of e>uity.
fi/ed income. securities. insurance and pension schemes
c. Action %rogrammed +or 0ealth transmission
Portfolio 2ana"ement Services
-state Plannin"
)e"al Advice
Inheritance Plannin"
%reatin" an appropriate frame$ork for a le"ally indin" $ealth transmission
-/clusive (ankin" Privile"es
Investment Advice
7he ban- %ro#ides the abo#e>mentioned ser#ices to its @2IAs through the
selling o+ #arious %roducts. 7he %roducts o++ered by I23 4ysya ban- are1
1. Mutual +und ser#ices
2. 8i+e Insurance Policy
3. Ban- de%osits
4. 3o#ernment bonds
. :emat Account
$. Ad#isory ser#ices
9e $ill riefly discuss each product,
1. Mutual +und ser#ices %ro#ided by I23 4ysya ban-1
I#& 'ysya (ank sells various mutual fund schemes0 It sells its o$n mutual fund. $hich
is I#& 'ysya 2utual fund alon" $ith all other mutual funds0 It is an intermediary
et$een the customer and the mutual fund house0
From the e"innin" mutual fund house have relied e/tensively on intermediaries to
market their schemes to investors0 It $ould e accurate to say that $ithout intermediaries.
the mutual fund industry $ould not have achieved the depth and readth of covera"e
amon"st investors that it enjoys today0 Intermediaries have played a pivotal and valuale
role in populari?in" the concept of mutual funds across India0
1hey make the forms availale to clients. e/plain the schemes and provide administrative
and paper$ork support to investors. makin" it easy and convenient for the clients to
invest0 Intermediaries play a pivotal role in promotin" sale of mutual fund schemes0
7o name a +e0 mutual +und schemes sold by I23 4ysya ban- are1
1. .ran-lin 7em%leton
2. SBI
3. :SP Merrill lynch
64
4. ,eliance
. I23 4ysya
$. 7A7A
(. =7I
). @:.C
C. *%timi"
2. 8i+e insurance Policy sold by I23 4ysya ban-1
I#& 'ysya ank sells the insurance policy of its o$n rand i0e0 I#& 'ysya )ife
Insurance %ompany Private )imited Gthe %ompanyH0 It entered the private life insurance
industry in India in Septemer 4881. and in a short span of ; years has estalished itself
as a distinctive life insurance rand $ith an innovative. attractive and customer friendly
product portfolio and a professional advisor sales force
At I#& 'ysya )ife. there is nothin" $e hold hi"her than life itself0 1hey therefore vie$
their plans not as ta/ savin" devices ut as a means to add protection to life0 1hey elieve
in enhancin" the very >uality of life. in addition to safe"uardin" your security0 1heir
products are desi"ned in a $ay that helps you ear heavy e/penses $hile uildin" your
home or providin" for your childrenFs education and marria"e0 1hey make sure your post
retirements years are carefree and secure. ensurin" your family and loved ones are
protected a"ainst financial difficulties in the event of a premature death0
+ependin" on your personal needs. priorities and individual responsiilities. you can "o
for a Protection. Savin" or Investment plan0 If you $ere not sure of $hich plan $ould suit
you est. you could use the 8i+e Ma-er. an application $e developed for that very
purpose0
/hat are these %lansF
1.Protection
Protection plans safe"uard your income and your family:s financial future in case you are
not around0 1hey shield you from heavy economic loss and reduce the impact of financial
risk on you and those dependent on you0
Con;uering 8i+e
2.Sa#ing
Savin" plans act as a compulsory savin"s instrument for families $hen the premium is
paid re"ularly0 1hey $ork as lon"Cterm savin"s. enhanced y ta/ enefits. $hich "ive
you the financial stren"th to achieve your life "oals0
,eassuring 8i+e 5Cash Bonus6
,eassuring 8i+e 5,e#ersionary Bonus6
Creating 8i+e
Ma"imi<ing 8i+e
66
Sa+al Gee#an
Creating li+e Money Bac-
Sa+al Gee#an Money Bac-
3.In#estment
Investment plans act as $ealth creation instruments helpin" to create i" estates for the
family0 It is a lon"Cterm investment. free from the risk of market s$in"s0 At the end of the
term. you or your family can enjoy added returns on investment0
,e0arding 8i+e
Po0ering 8i+e
.ul+illing 8i+e
.reedom Plan> =nit 8in-ed
*ne 8i+e
2e0 .ul+illing 8i+e
Platinum 8i+e
I23 Positi#e 8i+e
4. Retirement
1hese plans ensure that your postCretirement years are spent in peace and comfort0 1hey
make sure that you have re"ular income after you retire and also help you maintain your
standard of livin"0
Best Hears
.uture Per+ect
3. Ban- de%osit o+ I23 4ysya Ban-1
(y investin" in I#& 'ysya (ank Fi/ed +eposit. your money not only stays secure ut
also accumulates "ood interest over the period of deposit0 Partial $ithdra$al from your
Fi/ed +eposits efore maturity can ail you out in times of need0
.eatures and Bene+its1
1enor ased Rate of Interest !i"her interests can e accrued for lon"er periods
of deposits0
%ompounded Interest can e earned y reinvestin" the principal amount alon"
$ith the interest earned durin" the period0
Premature $ithdra$al allo$ed at a nominal penalty0
Option to place deposits in multiples of Rs01888 as units under 'ysunits. enalin"
$ithdra$al as per need. in multiples of Rs018880
!i"her rate of interest on Fi/ed +eposits for Senior %iti?ens0
6;
Option to dra$ interest y $ay of ++ @ PO @ %redit to o$n S( account $ith I#&
'ysya (ank. 2onthly Gat a discountH or Uuarterly. as per choice0
)oans upto 78O of the deposit $ould e availale at 1O aove the underlyin"
interest rate on Fi/ed +eposit0
#omination facility is availale0
Free transfer of deposit et$een ranches is availale0
Automatic rene$als on maturity0
An Initial deposit of Rs018888 is re>uired to open a Fi/ed +eposit0
4. :emat account %ro#ided by I23 4ysya ban-
1he I23 4ysya Ban- :emat Account offers you a secure and convenient $ay to keep
track of your shares and investments. ho$ much youFve ou"ht and sold over a period of
time. $ithout the hassle of handlin" physical documents that "et mutilated or lost in
transit0
.eature and bene+its1
Settlement of securities traded on the e/chan"e as $ell as off market transactions0
Shorter settlements therey enhancin" li>uidity0
Pled"in" and !ypothecation of +emateriali?ed Securities0
-lectronic credit in pulic issue0
Receipt of nonCcash enefits in electronic form0
#o stamp duties on transfer of securities held in demat form0
#o concept of 2arket )ots0
%han"e of name. address. dividend mandate. re"istration of po$er of attorney.
transmission etc0 can e effected across companies held in demat form y a sin"le
instruction to the +P0
. 3o#ernment securities
1he ank also sells "overnment securities on ehalf of the "overnment0 It remits the
proceedin"s to the R(I0 1he interest rate on "overnment onds is =O p0a0
$. Ad#isory ser#ices1
Our startin" point in the portfolio mana"ement process is the analysis of your
re>uirements and "oals0 9hat are your asic investment ojectivesS 9hat are your
personal preferences $ith respect to risk takin" and yieldS 9hat proportion of your
$ealth should e invested for the short term versus the lon" termS 1he ans$er to
fundamental >uestions like these provides the main uildin" locks for professionally
mana"in" your assets0 1he follo$in" decision factors $ill determine the investment
strate"y that suits your needs the est,
6<
In#estment obIecti#es1 An assessment of your need for income versus
potential appreciation and ho$ this fits $ith your overall asset and liaility
position0
In#estment time hori<on1 1he lon"er your time hori?on the less concerned
you should e $ith daily price fluctuations0 1he "reater your $illin"ness to adopt
a lon"Cterm strate"y. the "reater the likelihood of hi"her portfolio returns0
,is- tolerance1 It is crucial to find out $hat shortC and mediumCterm s$in"s in
value you can tolerate in order to reach your investment "oals0 1he hi"her the risk
you are ale to ear. the hi"her your return $ill normally e0
,e+erence Currency1 (y reference currency $e mean the currency in $hich
you normally conduct your daily usiness0 1his currency $ill determine ho$ you
measure the success of your strate"y and your investment decisions0
1he ank:s relationships mana"ers provide advise to their clients on their investment
portfolio y structurin" the e/posure in various investment instruments so as to ma/imi?e
the return $ith minimum risk0
1.3. In#estment .acilities 2ot Pro#ided By I23 4ysya Ban-
*nline trading +acility
,eal estate ad#isory ser#ices
Bullion trading
63
2. Methodology
In depth analysis of all the investment opportunities GinstrumentsH that I#& 'ysya ank
offers to its !#I clients0 Also a sample study has een conducted on 48 !#I:s of the
ank to understand their individual risk appetite and investment preferences0 A
comparison study of investment instruments offered y I#& 'ysya ank $ith that of
other competitive anks has also een conducted0
(ased on these an in depth analysis $as carried out to su""est@help the ank:s investment
advisors to cater to the needs of the !#I:s in a etter $ay therey increasin" the
customers satisfaction and hi"h !#I ac>uisition0
3. Problem Statement
I#& 'ysya (ank. in its pursuit to estalish itself as a leadin" retail ank in -astern India.
is conscious of the fact that other competitive anks are very a""ressive and focused in
offerin" structured portfolio mana"ement@ investment advisory services to their !#I
clients
I#& 'ysya ank. $hich also offers such investment advisory services to its !#I. throu"h
its susidiary called I#& 'ysya Financial Service GI'FS)H0 1he speciali?ed investment
advisors under the payroll of I'FS) are accommodated and placed in all the ranches of
I#& 'ysya ank to cater to the re>uirements of the ank:s !#I clients0
!o$ever since the conversion rate of !#I into investment advisory services is lo$0 1his
project $as commissioned $ith the sole motive of analy?in" the products. services and
risk analysis of each investment instrument $ith the aim to au"ment the Financial
advisors $ith in depth analysis of all these factors $hich $ill help them in understandin"
the needs@re>uirements of the !#I:s to oost the conversion rate0 1his $ill not only help
the ank in retention of its !#I:s ut also lead to an increase in ac>uisition of !#I:s0
65
4.1 S/*7 analysis
4.1.1 !;uity shares
Strengths1
)on" term "ro$th throu"h capital appreciation
!i"h rate of return
!as a""ressive "ro$th
Provides o$nership in the company in $hich investment is made
Share holders are entitled to profit made y the company
Suitale for risk seekers
/ea-ness1
'ery risky
'olatile rate of return
#o security of investment
Security transaction ta/ has to e paid
Suitale for risk seekers
+ividends received on shares depend on profit made y the company0 If there is
no profit there is no dividend
Share prices are suject to market
*%%ortunity1
It "ives the shareholder a ri"ht to vote in the company
1he market may e volatile due to many factors. ho$ever returns are "enerated y
e>uity shares of earnin" potential i0e0 P@- ratio0 1herefore an investor investin" in
e>uity in a systematic manner over a lon" period of time can easily e/pect doule
di"it return
Returns "enerated y e>uity investment has outperformed all other investment
avenues in the lon" run
7hreats1
Fi/ed income securities are preferred $hen markets are do$n
Rate of return is more stale and there is more security in other investment
avenues
6=
4.1.2 Ban- :e%osits1
Strengths1
Staility of Fi/ed income rate $ith assured rate of interest
Provides $ith a hi"h level of security
Fi/ed deposits also "ive a hi"her rate of interest than a savin"s ank account0
Anyone $ith a minimal appetite of risk can consider investin" in fi/ed deposits
(ank deposits are fairly safe ecause anks are suject to control of the Reserve
(ank of India GR(IH $ith re"ard to several policy and operational parameters
It is possile to "et a loans up to5<C 78O of the deposit amount from anks
a"ainst fi/ed deposit receipts
1he time of maturity and amount to e received on maturity are kno$n in advance
Provides relatively lo$ risk profileA for investors $ith a lo$ risk appetite. fi/ed
income instruments should form the mainstay of the portfolio
1he pickCaCdate feature lets you choose the date on $hich you $ould like you
investment to mature
/ea-ness1
Premature $ithdra$al is char"ed $ith a penalty0 As a result the interest promised
is reduced at the time of payment
+oes not provide re"ular income flo$
Fi/ed income instruments tend to e intrinsically illi>uid
%onsider the rate of inflation efore depositin" money in fi/ed deposits ecause
the inflation mi"ht eat up the savin"s
1a/ is deducted at source on the interest earned from fi/ed deposits
Eou can:t add to your investment0 If you have more money to deposit then you
need to open a another investment deposit account
1he interest rate is fi/ed for your full period of investment
*%%ortunities1
Some of the facilities offered y anks on the amount deposited in form of fi/ed
deposits are overdraft GloanH facility. premature $ithdra$al efore maturity period
G$hich involves a loss of interestH etc
It can e pled"ed y usiness people for otainin" ank "uarantee for openin" of
)%:s0
7hreats1
ShortCterm floatin" rate funds score over fi/ed deposits on the li>uidity frontA they
$ill especially appeal to investors $ho $ish to $ait on the sidelines till etter
investment opportunities emer"e
67
#S%@#SS can e preferred over ank:s fi/ed deposits $hich forces the anks
either to keep their fi/ed deposit rates hi"h to protect their deposit0 1a/ enefit is
also provided y #S%@#SS0 It provides hi"her level of security
9ith the oomin" capital market. e>uity mutual funds are posin" the i""est
challen"e to F+:s as they offer hi"her rate of return
4.1.3 8i+e Insurance Policy1
Strengths1
Provides hi"h level of securityC "uaranteed y the issuin" authority
#ot affected y market volatility
Sum assured at maturity is kno$n
Investor can decide the maturity period and the sum of premium to e paid
1a/ enefit is availed t$iceC once $hen premium is paid and other on maturity
enefits
/ea-ness1
Fi/ed rate of return on premiums
+oes not provide any li>uidity
A lot of paper $ork has to e done $hen enterin" the insurance contract
If a $ron" claim is made on the policy. penalty has to e paid
*%%ortunity1
Only investment avenue $hich offers life risk cover
It sustains the economic loss suffered y the family in the uneventful death of an
income earnin" person of the family
Dnit linked insurance plans also offer market linked returns
!elps in developin" investment hait amon" customers
7hreats1
Dnit linked insurance plan are market linked and therefore prone to market
volatility
One may not e ale to maintain the risk cover commensurate $ith his@her human
life value
;8
4.1.4 8and
Strengths1
1he )a$ of +iminishin" Returns never apply here
1here is a hi"h rate of return
Relatively lo$ risk investment
/ea-ness1
#ot a very li>uid investment
1here are many "overnment re"ulations involved $ith in investment into land
1here are possiilities of liti"ations
*%%ortunities1
!i"h rate of industriali?ation and urani?ation
It has multiple usa"eC residential. a"ricultural and commercial
It can e provided as a collateral security
7hreats1
&overnment takeCover
Private uilders
#atural calamity
;1
4.1. Mutual +unds
Strengths1
#o ta/es are char"ed on dividends received in the hands of the investors as $ell
as the mutual fund house
1here is a stale avera"e rate of return
Functions of the mutual fund are re"ulated y S-(I. thus are $ell "overned
!i"h li>uidity is there as invested money can e $ithdra$n at any point of time
)on" term capital "ains are also ta/ free
It is an easy $ay of investment as paper $ork is minimum
#o char"es for early $ithdra$al
Allo$s small investors to invest in capital market. $ith professional mana"ement
Short term capital losses can e set off a"ainst short term capital "ains
/ea-ness1
%annot e provided as a collateral security
)on" term capital losses cannot e set off a"ainst capital "ains
Suitale for no risk tolerance investors
2aturity amount not kno$n as rate of return fluctuates
Payment of entry and e/it load and hi"h maintenance char"es
*%%ortunities1
Investors can $rite che>ues out of their money market mutual fund account
Suitale for investors and corporate to park their surplus funds for a short period
of time
Allo$s investors $ith small amount of money to invest in a numer of schemes
7hreats1
Fi/ed deposits are safer and more staleC re"ulated y R(I
Investors lookin" for hi"her return $ill prefer investin" in ->uity market
Investors ready to make lon" term investments $ill look at land. "overnment
security as other options as they are safer and can e provided as a collateral
security
;4
4.1.$ 3old
Strengths
It is $orld $ide accepted
!as multiple usa"e
+oes not involve a tedious investment process
/ea-ness
Offers lo$ rate of return
*%%ortunity
%an e provided as a collateral security
7hreats
)and. $hich provides a hi"her rate or return as of today
Uuality of "old provided can e elo$ the standard
(ank and financial institutions hesitate in investin" in "old ecause cost of
;6
4.1.( Pre+erence Shares
Strengths1
+ividend to e received is assured
Safer means of investment than e>uity shares
If company is li>uidated payments to preference shareCholders $ill e ranked
ahead of e>uity share holders
/ea-ness1
Dsually issued y companies to institutes. so is not easily availale to retail
investors
1hey don:t provide li>uidity
+oes not hold the ri"ht to vote in the issuin" company
Relatively less attractive in risin" interest rate environment
*%%ortunities1
1hey have an option to e converted into e>uity shares
1hey can e redeemed y the issuin" company
If dividend is not paid for one year there is an option of carryin" for$ard the
dividend to the ne/t year0
7hreats1
->uity shares. $hich offer hi"her rate of return and provide more o$nership
ri"hts in a company
4.1.) IP*As
Strength
Suitale for riskCseekers
Suitale for shortCterm investors
;;
/ea-ness
'ery risky and speculative investment
#o stale rate of return
*%%ortunity
IPO allo$s the investor to "ain ma/imum $ith the "ro$th of the company
7hreats
'olatile market conditions at the moment of IPO issues cause hi"h concerns
amon" the investors
4.1.C 3o#ernment securities
Strengths 1
!i"hly securedC acked y the R(I
Rate of return does not fluctuate
%ash flo$ at maturity are kno$n
/ea-ness1
)o$ rate of return
#ot a li>uid investment avenue
Only suitale $hen markets are not doin" $ell
Investment on &C securities is a tedious transaction process
1here is no 1+S. ut interest income up to only Rs 6888 is e/empt from ta/
Suitale for risk averse investors
#o early $ithdra$al is allo$ed
*%%ortunity1
%an e provided as a collateral security
)oan can e taken a"ainst investment in "overnment security
7hreats1
Fi/ed deposits. $hich are more li>uid than "overnment securities
R(I relief onds. $hich offer hi"her interest rates
;<
4.1.1D Cor%orate Bonds
Strengths 1
Provides security cover under ratin" a"encies
#ot very volatile
Simple Administration
/ea-ness1
+oes not provide any li>uidity
+oes not provide any ta/ enefit
*%%ortunity1
It is a contract et$een the issuin" company and the clients
7hreats1
&overnment Securities $hich offer more security

;3
;5
7abular ,e%resentation o+ #arious in#estment instruments 5including S/*7 analysis6
Parameter Ban-
:e%osit
!;uity Pre+. Share M. 8IC 3o#t Sec Cor%orate
Bonds
3old 8and IP*
,*, (et$een ;C
7O
<C48O <C48O 18C4<O ;C<O <O <C3O #o fi/ed
return
#o fi/ed Rate +epends on
+emand Q
Supply
7enure )on" 1erm
18 years
V 1C48 years V 1C48 years 1C< years Aove 18 years )ock in period
of 3 years
6C< years Aove 6
years
< and aove 3 mths 6
years
Security Secured y
(ank
re"ulated y
R(I
#o security #o security #o security (y issuin"
or"ani?ation
Secured y
"overnment
%overed under
ratin" a"encies
!i"hly
secured
Secured #o security
8i;uidity !i"hly li>uid )i>uid )i>uid Provides
li>uidity
#o li>uidity Provides no
li>uidity
#o li>uidity !i"hly
li>uid
#ot li>uid )i>uid
Price #olatility #I) 2a/imum 2a/imum 2a/imum #I) #I) #I) 2oderate 2oderate !i"h
7a" Bene+it 1a/ deducted
at source
)on" term
capital "ains
enefit
)on" term
capital "ains
enefit
)on" term
capital "ains
enefit
(enefit on
premium amount
and maturity
amount
Interest income
received $ill e
ta/ale
#on #on Only on
a"ricultural
land
#il
,is- %ro+ile o+
an in#estor
Risk averse Risk seekers Risk seekers Risk seekers )o$ risk seekers Risk averse 2oderate risk Risk averse Risk averse Risk averse
Cash .lo0 Assured cash
flo$
#o assurity #o assurity #o cash flo$ 2oney ack
policy
2aturity
amount kno$n
#on #on #on #I)
Administration Some amount
of paper
$ork
'ery less 'ery less Paper $ork is
there
%umersome
paper $ork
%umersome
paper $ork
Simple #on %umersome
paper $ork
A lot paper
$ork
Additional
+eatures
PickC aCdate
feature
Ri"ht to vote
in the %O
Ri"ht to vote
in the %O
#on )ife cover #on #on 2ultiple
usa"e
2ultiple usa"e #on
Collateral !i"hly
accepted
Only availale
on loans
a"ainst shares
Only availale
on loans
a"ainst shares
#ot accepted Accepted Accepted #on Accepted 2ainly
provided
#o
Pro+essional
Management
Professionall
y 2ana"ed
Professionally
2ana"ed
Professionally
2ana"ed
Professionally
2ana"ed
Professionally
2ana"ed
2ana"ed y
&overnment
Professionally
2ana"ed
#ot
mana"ed
#ot mana"ed Professionally
2ana"ed
;=
Analysis o+ !ach In#estment A#enue
In the investin" $orld. the dictionary definition of risk is the chance that an investment:s
actual return $ill e different than e/pected0 1echnically. this is measured in statistics y
standard deviation0 Risk means you have the possiility of losin" some. or even all. of
our ori"inal investment0
&iven elo$ is the tale. $hich states the kind of risk. return. tenure and other enefits of
different investment avenues0 1his helps us further su""est the kind of investment an
investor can make ased on the personal profile
7y%e o+ in#estments ,is- ,eturns 7enure *ther bene+its
!;uity !i"h !i"h )on" )o$
3old )o$ 2oderate )on" !i"h
Pre+erence Shares !i"h !i"h )on" )o$
Cor%orate Bonds )o$ )o$ 2oderate )o$
Mutual .unds !i"h !i"h Short )o$
3o#ernment Securities )o$ )o$ )on" !i"h
8and )o$ !i"h )on" !i"h
Ban- :e%osits )o$ 2oderate 2oderate !i"h
IP*As !i"h !i"h Short )o$
Insurance Policy )o$ )o$ )on" !i"h
,is- & ,eturn 7rade & *++ Bet0een di++erent In#estment A#enues1
1he relation et$een risk and return that usually holds. in $hich one must e $illin" to
accept "reater risk if one $ants to pursue "reater returns also called risk@ re$ard tradeC
off0 A common misconception is that hi"her risk e>uals "reater return0 1he risk@ return
tradeoff tells us that the hi"her risk "ives us the possiility of hi"her returns0 1here are no
"uarantees0 Nust as risk means hi"her potential returns. it also means hi"her potential
losses0 )o$ levels of uncertainty Glo$ riskH are associated $ith lo$ potential returns0
!i"h levels of uncertainty Ghi"h riskH are associated $ith hi"h potential returns0
1he hi"hest return investment is ->uity
1he hi"hest risk investment is ->uity
1he lo$est risk investment is &overnment Security
1he lo$est return investment is &overnment Security
On the lo$est end of the spectrum is "overnment spectrum $hich offers no or minimum
risk0 It offers investment at the minimum risk rate of return0 On the hi"hest end of the
spectrum is e>uity. $hich offers ma/imum return $ith ma/imum rate of return0
&overnment securities set the rate for minimum rate of return and e>uity sets the rate for
hi"hest risk0 All other investment opportunities lie in the middle0 1hey are the e/treme
poles of the spectrum0
Risk as earlier discussed can e minimi?ed throu"h investin" in various avenues0 9hen
an investor invests he set his limits either for risk of return0 !e tries to achieve hi"hest
possile return for a "iven level of risk or tries to "et minimum possile risk for hi"hest
level of return
;7
Analysis o+ In#estment @abits o+ I23 4ysyaAs @igh 2et /orth Clients1
A >uestionnaire containin" >uestions on the investment haits $as prepared0 1his
>uestionnaire $as taken to and filled y 18 !#I customers of the I#& 'ysya (ank0
1he findin"s throu"h the >uestionnaire are to e used $hile structurin" the financial plan
Ginvestment portfolioH of a !#I0 1he most important aspect in the personal discussion
that the Relationship 2ana"er $ith the !#I is to understand his@her risk appetite.
investment hori?on and the source of income0
9e $ill analy?e the factors. $hich a !#I keeps in his@her mind $hile undertakin" an
investment and the kind of investment advisory services re>uired y them0 1hese can e
found out ased on the various >uestions asked to them in the >uestionnaire0 1hen on the
asis of the analysis relevant su""estion to the Relationship 2ana"ers $ill e made to
improve his@ her investment advisory services0
.indings +rom the same o+ 1D @2I clients are1
1. ,is- a%%etite o+ @2IAs1
a0 <8O of the sample doesn:t invest in F+:s, 1his sho$s that !#I:s are more
concerned aout the returns rather than the safety aspect of the investment0
0 4<O of the respondents are invested in a mi/ed portfolio. therey si"nifyin" the
importance of spreadin" the risk $hile lookin" for etter returns0
c0 1<O of the respondents are interested in investment in real estate. $hich si"nifies
hi"h de"ree of security $ith returns0
2. In#estment %eriod o+ @2IAs1
a0 2ore than <8O of the respondents are in short term investment hori?on0
0 Only 1<O of the respondents are actually interested in lon"Cterm investments0
3.@2IAs In#estment @abits
a0 <;O of the investments in the stock market are done directly
0 1he rest ;3 O of the respondents invest throu"h the mutual funds
c0 55O of the respondents make e>uity type investments si"nifyin" hi"h de"ree of
risk $ith hi"h de"ree of return0
d0 1he alance 46O prefers havin" a alanced investment0
4. @2IAs %erce%tion o+ the Stoc- Mar-et1
a0 <6O of the respondents vie$ the stock market as not a safe avenue of investment0
0 13O don:t have any vie$s aout the stock market0 1hese respondents remain the
untapped se"ment of the !#I:s0
<8
. IP*As as In#estment A#enue1
a0 3<O of the respondents invest in IPO:s
0 Aout 33O of the ones $ho invest. invests on their personal vie$s0
c0 Around 66O make investments ased on professional advice0 1his "oes to sho$
that a small se"ment of the !#I:s relyin" on professional advice for IPO
investments0
$. Pro+ile o+ @2IAs in#estment ad#isory ser#ices1
a0 38O of the respondents are not makin" investments ased on advisory services
offered y the ank0
0 2ore than <8O of the aove mentioned respondents are prospect clients of the
ank and are $aitin" to e "iven the ri"ht kind of advisory services0
(. Pro+le o+ @2Is Insurance Ser#ices
a0 ;8O of the respondents are prospects customers for takin" insurance advice
throu"h the ank0
0 Around <<O of the respondents are takin" insurance advices from the ank
si"nifyin" that the ank offers "ood >uality investment advice0
<1
Based on the abo#e +acts1 It is recommended to the I4.S8 ,MAs to structure the
In#estment Port+olio o+ the @2IAs 0ith the +ollo0ing com%ositions1
10 #ot to have a hi"h percenta"e of F+:s
40 1he R2:s should include investment instruments $hich are of shorter duration
$ith hi"h "ro$th potential
60 Since more than half of the sample invests directly into the stock market they
should e hi"hli"hted the importance and the enefits of 2F:s since direct e>uity
is very tricky and hi"h risky0
;0 R2:s should include small percenta"e of investment instruments in !#I:s $hich
are of lon"Cterm opportunity to tradeCoff et$een risk and return0
<0 Also the study reveals that constant follo$Cup y the anks R2:s to the !#I:s
$ill result in ropin" in more no of !#I:s to the advisory service. as 68O of the
respondents have indicated the same0
30 If the (anks R2:s e/pose the enefits of professional mana"ed investment
services another ;<O of the ank:s !#I can avail such facilities from the ank
50 <<O of the respondents don:t use IPO as a investment avenue. since they are
!#I:s $ith lar"e chunks of money the R2:s have "ot hu"e opportunity to e/plain
them the enefits associated $ith IPO:s and try to add it to the customers
investment portfolio
=0 13O of the respondents are not a$are of the movements in the stock market. this
leaves a $hole lot of opportunities for the R2 to tap this se"ment of the !#I:s
1he classification of !#I:s can e divided as follo$s
Only land, )on" 1erm )o$ Risk !i"h Return
#o &old, Short 1erm !i"h Risk !i"h Return
#o F+:s Short 1erm !i"h Risk !i"h Return
2i/ , Short 1erm 2oderate Risk !i"h Return
1he aove classification of investor profile has een formed ased on their investment
pattern0
.rom the sam%le %o%ulation 0e can also di#ide the @2IJs into +our categories based
on their hori<on o+ in#estment1
)ess than 1 year Speculative Investors
1 to 6 years, Short 1erm Investors
1 to < years , 2edium 1erm Investors
1 to 18 years , )on" 1erm Investors
<4
7hreats Posed to Pro+essional In#estment Ad#isors
+riven y the e/pectation of etter returns and miti"atin" risks. !#I:s are
ecomin" more a$are of $ealth mana"ement opportunities and strate"ies aroad0
In fact. 3< percent of !#I relationship mana"ers surveyed said their clients are
increasin"ly a$are of ho$ $ealth is mana"ed internationally0
Investors do not $ant reams of paper $ork. ut do $ant easily accessile and
customi?ed information that allo$s them to immediately check on their
investments0 1hey $ant access to a ne$ family alance sheet* that sho$s them
all their assets and liailities across all asset classes in a simple. easyCtoCvie$
format0 1hou"h this is a relatively strai"htfor$ard re>uest. it is not ein" met
every$here today0
#o matter ho$ comple/ the investment options may ecome. the clientCfacin"
solution must remain simple. transparent and understandale to estCserve clients
and advisors. this $ill re>uire investments in technolo"y to enale an efficient
"loal or"ani?ational operatin" structure and. most importantly. ensure the
advisor. the institution:s face to the client. has the tools to support the client
$ithout increasin" the administrative urden0
<6
!"ecuti#e Summary
1he project report covers portfolio mana"ement of a !#I0 1hese individuals have surplus
money. $hich can e invested into various investment avenues0 For e/ample land. stock
market. ank deposits. "overnment securities etc0. -ach Investment avenue open to !#I:s
has een evaluated on the asis of risk and return0 #o individual $ants his@her savin"s to
lie ideal and e eaten y inflation0
1hese individuals are constantly lookin" for opportunities to invest their surplus money
and "et "ood returns0 Professional investor advisors provide this service0 1hey personally
look into the risk appetite of the investor and desi"n the est suited portfolio from
him0@her0 For this purpose a case study $as conducted on the I#& 'ysya:s 18 !#I:s to
find out ho$ they perceive different investment avenues0 1he ank faces lo$ conversion
rate of investment advisory services0 1herefore after the study and analysis
recommendations have een made to the R2:s on ho$ to improve the service0
1his has een done in the follo$in" se>uence0 First the !#I:s and their investment
avenues $ere analy?ed0 1hen the risk and return of each investment avenue $as
conducted0 After $hich a sample of 18 !#I customers $ere visited0 Analysis of these
!#I:s sho$ed some patterns in $hich these customers invest and ho$ they perceive each
investment instrument0 On the asis of such data recommendations $ere made to the
relationship mana"ers0
<;
Conclusion
1he project report analy?es the portfolio of I#&:s !#I customers0 A sample study of 18
!#I:s $as conducted and on the asis of $hich the recommendations $ere made0 1he
risk and return of each investment instrument availale to a !#I on the $hole and
throu"h the I#& 'ysya (ank $as conducted0 7he %roducts and ser#ices o+ the ban-
are com%ared to other ban-s also
It has een noticed that !#I:s provide a hu"e opportunity to the R2:s of the ank for
"ivin" professional investment advice0 #o$ a days the customers are $ell a$are of the
surroundin" market and don:t really take any type of advice0 1hey are lookin" for
investment advice. $hich are supported y stron" conviction0 1he market of professional
advisors are "ro$in" at such a hu"e rate that if the client is not happy $ith the services of
the R2 he@she can easily look for a etter advisors0 1herefore the R2:s alon" $ith
personal advice have to also provide >uality advice0
An enthusiastic relationship mana"er should sho$ computation of the risk of !#I:s y
usin" statistical computations like Standard +eviation. $hich sho$s ho$ much on an
avera"e. the return has moved a$ay from an avera"e numer0 (asic tents one should
understand efore takin" a risk ar"ument to a client0 Risk. popularly measured y
Standard +eviation. tells us aout the ran"e of return that can proaly occur0 Its
interpretation is appropriate for an asset class0 For e/ample if $e say that e>uity is more
risky than PPF. $e $ill sustantiate that y sayin" that the proaility that the investor
$ill "et a return different than = O is lo$ in a PPF0 !o$ever. in e>uity $hile he may
look at a 48O covera"e0 It can s$in" et$een ;O and ;3O. indicatin" the presence of
risk0
1he risk to the investor is al$ays distilled in terms of his "oals. investments and the
tar"et rate that his investments must achieve to meet the "oal0 1herefore. the investor $ill
not care for standard deviation in itself. ut aout the risk that his investment $ill fall
short0 If one is plannin" for the child:s education or retirement. such shortfalls are too
tou"h to make "ood. on a later date0 So. to the investor. risk is only aout do$n side
deviation from a tar"et rate0 !o$ does one put the t$o to"etherS 1he choice of asset
classes and percenta"e allocation $ill have to e driven y standard deviation and its
understandin"0 (ut the suse>uent monitorin" and revie$ of the portfolio $ill have to e
in terms of the investor:s "oals. and the possiility that such allocation $ill fall short0
2ovement from one stock to another is unlikely to alter the risk profile of the portfolio in
any si"nificant manner0 (ut adjustin" the proportion that is invested in e>uity is likely to
impact oth the risk and return of the portfolio0 Relationship mana"ers need to train their
eyes to $atch if the investor:s "oals are est served y the current allocation. or should a
chan"e e made. "iven do$nside risks0 )earnin" investment concepts is all fine. ut to
apply them to an investor:s situation. one has to vie$ the portfolio from the investor:s
an"le rather
<<
2y project does not "o into the details of calculatin" the risk and returns of each
investment avenue. as it $ould have een very technical and cumersome0 1he sample
study of 18 does not really sho$ the true findin"s. as there could e other clients $ith
different opinions aout the investment instruments than the ones stated0
<3
'uestionnaire
Personal :etails
#ame A"e
Profession
Spouse Occupation
#o0 of %hildren G+au"hter WWWW. Son WWWWH
%hildren:s A"e
8i+e Style
Sin"le@ Noint Family.
+o you live in your o$n house or rented houseS
+o you o$n a car. if yes ho$ many and $hich one S
+o you plan to send your children aroad for hi"her studies. if yes then ho$ do
you $ish to finance it
+o you travel aroad. if yes ho$ fre>uentlyS
9hich income sla do you fall inS
aH 5 18 lakhs WWWWWWWWWWWWWWWW
H 18 C48 lakhs WWWWWWWWWWWWWWWWW
cH 48 lakhs and aove WWWWWWWWWWWWWW
Ban-ing :etails
Accordin" to you $hich is safest investment
9here do you invest your savin"sS
Stock 2arket@ )and Q Property@ &old Q Silver@ Fi/ed +eposits
+o you follo$ stock marketS
+o you think stock market is a safe $ay of investment
If so you $ill invest directly or throu"h intermediary
1ime !ori?on efore investin"
aH X 1yr H 1 6 years cH 1 < years dH 1 18 years
+o you invest in det. e>uity or a alance scheme@ portfolio
+o you suscrie to an IPO Suscription throu"h aH of your o$n vie$s H on
friends or relatives recommendations cH on professional advise
Any adverse impact on you savin"s $hen the stock market fell do$n
In#estment Pre+erences1
Are you satisfied $ith our financial advisors investment advice
!o$ often do you "et an update on the ne$ insurance schemes that our ank
offers
!ave you insured the life of your family memers. your usiness or property
Are you ready to undertake ne$ $ays of investment and the risk associated $ith
itS
<5
!o$ do you avail of ta/ enefitsS 9hile investin". does ta/ enefit features
influence your decision of investment
Bibilogra%hy
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