CHAPTER-1

1.1-INTRODUCTION

INVESTMENT:
Investment is the use of money to earn income or profit. The term also refers to the expenditure of funds for capital goods - such as factories farm, equipment, livestock and machinery. Capital goods are used to produce other goods or services. Many people invest part of their income for future financial gain. Others make investments to protect the purchasing power of their savings against rising prices. Investment promotes economic growth and contributes to a nations wealth.

INVESTMENT ALTERNATIVES
INVESTMENT ALTERNATIVES means the various investment options available to investors to invest their surplus funds. The investors can invest their funds in these various investment alternatives and get a return on their funds invested by them. There are various investment alternatives available for the investors. An investor chooses between the various investment alternatives based on three major criteria, they are RISK, RETURN and LIQUIDITY. An investor chooses between the various investment alternative based on these three major criteria. An investor looks up for the different investment alternatives available and invests in that alternative suitable for him. The various investment alternatives available for investors are as follows:

1. SHARES:
In financial markets, a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. The income received from shares is called a dividend, and a person owning shares is called a shareholder. A share is one of a finite number of equal portions in the capital of a company, entitling the owner to a proportion of distributed, non-reinvested profits known as dividends, and to a portion of the value of the company in case of liquidation. Shares can be voting or non-voting, meaning they either do or do not carry the right to vote on the board of directors and corporate policy. Whether this right exists often affects the value of the share. Voting and non-voting shares are also known as Class A and B shares respectively Shares are traded in the primary market and the secondary market. The shares of the companies are listed in stock exchange for trading.

2. MUTAL FUNDS:
A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities. When you invest in a mutual fund, you are buying shares of the mutual fund and become a shareholder of the fund. Mutual funds are of open-ended, close-ended, hedge funds, equity funds, bond funds and exchange funds.

3. INSURANCE:
Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. Insurer is the company that sells the insurance. Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Insurance are of life insurance, health, vehicle and medical insurance.

4. DERIVATIVES:
Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main use of derivatives is to reduce risk for one party. The main types of derivatives are futures, forwards, options, and swaps.

5. BONDS:
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity. Other stipulations may also be attached to the bond issue, such as the obligation for the issuer to provide certain information to the bond holder, or limitations on the behavior of the issuer. Bonds are of government, municipal, corporate and long term bonds.

6. COMMODITIES:
A commodity is anything for which there is supply, but which is demanded without qualitative differentiation across a foreign market. Characteristic of commodities is that their prices are determined as a function of their market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, ethanol, sugar, soybeans, aluminum, rice, wheat, gold and silver.

7. MONEY MARKET:
The money market is the global financial market for short-term borrowing and lending. It provides short-term liquid funding for the system. The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time, typically up to thirteen months. Money market trades in short term financial instruments commonly called "paper". This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity. Money market instruments are Treasury bills, commercial paper and bankers' acceptances

8. REAL ESTATES:
Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is stationary, or fixed in location. Real estate is often considered synonymous with real property , in contrast with personal property . However, in some situations the term "real estate" refers to the land and fixtures together, as distinguished from "real property," referring to ownership rights of the land itself.

9. FIXED DEPOSITS:
Fixed deposits are investing in bank. The bank provides interest for these deposits based on the period of investment and the amount of investment. Fixed deposit is considered to be a much secured form of investment. The investor gets the return on his investment on the maturity of the time period for which the fixed deposit was accepted. Fixed deposits are of Savings account, post office saving scheme and kisan vikas patra.

10. PROVIDENT FUND:

This includes statutory provident fund, recognized provident fund, unrecognized provident fund and public provident fund.

1.2-SCOPE OF THE STUDY

The scope of the study is to find out the various investment options available to the investors and to find out the investor preference and their awareness on the investment. It also studies about the preference of intermediaries to the investment. The study is also extended to study the various risk and returns of the various investment alternatives.

1.3-PROBLEM DEFINITION
The overall market of interest on government securities, bank deposits and other fixed deposit has been decreasing year after steadily due to various factors which affect the interest of the investors and the rate of interest of the investors. But on the other hand the investors interest is gradually shifted towards mutual funds, shares and other company securities. When compare to bank deposits the return from mutual funds is high. Likewise, when compare to mutual funds the return from equity market is very high. But of course risk is also high in these securities. Hence it is important to know the various investment alternatives which are available to the investors and the risk and return of the investments and it is also necessary to know the investor preference towards these alternatives. It is also necessary to know how an investor chooses between these investments alternatives. Since an intermediary is necessary for proper management of the investors funds it is also necessary to know the functioning of the intermediaries.

1.4-0BJECTIVES

PRIMARY OBJECTIVES:
To study the various investment alternative available and the investor preference towards the investment alternatives.

SECONDARY OBJECTIVES:

To study the risk and return of the investment alternatives. To study the investor awareness of the various investment alternatives. To analyze how an investor choose between the various investments. To analyze the preference of intermediaries in investments.

1.5-RESEARCH METHODOLOGY

RESEARCH DESIGN:
This project analyses the various investment alternatives available and the investors preference on the various investment alternatives available. The project also studies the investors preference towards the intermediaries. For this purpose descriptive research design is use in order to cover the field of the study.

DATA SOURCES:

1) PRIMARY DATA: Primary data required for the research study was collected by conducting research study where in various investors were given questionnaires and the require data was collected. 2) SECONDARY DATA: Secondary data were collected from the various periodicals, journals, records, books, web pages and the like.

SAMPLING DESIGHS:
Samples of 150 investors were selected on the basis of non-probability sampling technique. The information relating to investor preference towards investment and the preference of intermediaries were collected with the help of preparing questionnaire.

TOOLS USED:
For the present study percentage analysis, chi-square test and weighted average method is used in order to analyze the given data.

TIME PERIOD COVERED: The primary data was collected with the help of questionnaire for the time period from January to march 2008

1.5-LIMITATIONS OF THE STUDY

The study had to be completed within a short period of time. The sample size of 150 is a small when compare to large number of investors. The study is confined with the investors in India infoline. Time was the main constrain in data collection. Very little co-operation was received from some of the respondents. Some of the questions were not answered as per the requirement in spite of detailed and accurate instructions.

1.6-CHAPTERITATION

The project was carried out to study the various investment alternatives available and the investor preference towards these investment alternatives.

Chapter 1

The first chapter deals with the introduction about the various investment alternatives and its related terms, scope, problem definition, objectives, research methodology, limitations of the study, review of literature, company profile and the industry profile.

Chapter 2

The second chapter includes Data Analysis and Interpretations.

Chapter 3

The third chapter contains Findings, Suggestions and conclusions.

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1.2-LITERATURE REVIEW
1.2.1- COMPANY PROFILE

KEY MILESTONES:

Incorporated on October 18, 1995 as probity research & services. Launched internet portal www.indiainfoline.com in may 1999. Commenced distribution of personal financial products like mutual funds and RBI bonds in April 2000. Launched online trading in shares and securities branded as www.5paisa.com in july2000. Started life insurance agency business in December 2000 as a corporate agent of ICICI prudential life insurance. Became a depository participant of NSDL in September 2001. Launched stock messaging services in may2003. Acquired commodities broking license in march2004. Launched portfolio management services in August 2004. Listed in NSE and BSE on May 17, 2005. Acquired NBFC license in May 2005. Acquired 100% equity of March Mont capital advisors pvt ltd in December 2005 through which we have ventured into merchant banking. Bennett Coleman & co ltd invested Rs.20 crores in India infoline by way of preferential allotment in December 2005. Became a depository participant of CDSL in June 2006. IRDA license of insurance broking in April 2007.

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MANAGEMENT TEAM:

Mr. Nirmal Jain

Nirmal Jain, MBA (IIM, Ahmedabad) and a Chartered and Cost Accountant, founded Indias leading financial services company India Infoline Ltd. in 1995, providing globally acclaimed financial services in equities and commodities broking, life insurance and mutual funds distribution, among others. Mr. Jain began his career in 1989 with Hindustan Levers commodity export business, contributing tremendously to its growth. He was also associated with Inquire-Indian Equity Research, which he co-founded in 1994 to set new standards in equity research in India.

Mr. R Venkataraman
R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a B. Tech (Electronics and Electrical Communications Engineering, IIT Kharagpur) and an MBA (IIM Bangalore). He joined the India Infoline board in July 1999. He previously held senior managerial positions in ICICI Limited, including ICICI Securities Limited, their investment banking joint venture with J P Morgan of USA and with BZW and Tabb Capital Corporation Limited. He was also Assistant Vice President with G E Capital Services India Limited in their private equity division, possessing a varied experience of more than 16 years in the financial services sector.

The Board of Directors:

Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India Infoline comprises:

Mr. Sat Pal Khattar (Non Executive Director)

Mr. Sat Pal Khattar, - Board member since April 2001 - Presidential Council of Minority Rights member, Chairman of the Board of Trustee of Singapore Business Federation, is also a life trustee of SINDA, a nonprofit body, helping the under-privileged Indians in Singapore. He joined the India Infoline board in April 2001. Mr. Khattar is a Director of public and private companies in Singapore, India and Hong Kong; Chairman of Guocoland Limited listed in Singapore and its parent Guoco Group Ltd listed in Hong Kong, a leading property company.

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Mr. Nilesh Vikamsey (Independent Director)

Mr. Vikamsey, Board member since February 2005 - a practicing Chartered Accountant and partner (Khimji Kunverji & Co., Chartered Accountants), a member firm of HLB International, headed the audit department till 1990 and thereafter also handles financial services, consultancy, investigations, mergers and acquisitions, valuations etc; an ICAI study group member for Proposed Accounting Standard 30 on Financial Instruments Recognition and Management, Finance Committee of The Chamber of Tax Consultants (CTC), Law Review, Reforms and Rationalization Committee and Infotainment and Media Committee of Indian Merchants Chamber (IMC) and Insurance Committee and Legal Affairs Committee of Bombay Chamber of Commerce and Industry (BCCI).

Mr. Kranti Sinha (Independent Director)

Mr. Kranti Sinha Board member since January 2005 completed his masters from the Agra University and started his career as a Class I officer with Life Insurance Corporation of India. He served as the Director and Chief Executive of LIC Housing Finance Limited from August 1998 to December 2002 and concurrently as the Managing Director of LICHFL Care Homes (a wholly owned subsidiary of LIC Housing Finance Limited). He retired from the permanent cadre of the Executive Director of LIC; served as the Deputy President of the Governing Council of Insurance Institute of India and as a member of the Governing Council of National Insurance Academy, Pune apart from various other such bodies.

VISION:
Our vision is to become the most respected financial service company in India.

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CULTURE AND CORE VALUES:

OWNER MINDSET:
Owner mindset is one of the key principles that drive life at India infoline. Every member of team India infoline behaves thinks and acts as owners not as employees.

ENERGY:
The single most important attribute we look for when we hire people is energy. Nobody can drive a business of his own or feel like an owner unless he is gifted with unbounded energy.

EXECUTION:
It is the difference between dreaming and making things happen. At India infoline, all activities are assessed on the basis of 0 and where 0 signifies work not done and 1 signifies work completed fully and on time. Excuses/ reasons for non completion of tasks are not acceptable.

EFFORT:
Those who work for the sake of working and endure the time they spend at work instead of enjoying it, eventually get de-motivated and leave their jobs for something that does interest them. From the organizations perspective, its not the number of hours you spend at work that matter, but the quality of work that you put into those hours.

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ETHICS:
Ethics pertain to the character of a person. Ethics is something on which there can never be any compromise in India infoline. We have elaborated on our vision to become the most respected company in the financial services space in India and no one can respect an unethical organization.

EXCELLENCE:
Excellence is all about the quality of work. We strive for delivery that is 100% error free and yet at lightning speed. Excellence deals with the quality of work. We have seen that there are people who get things done right in the very first time , thereby making the first time right.

APPLICATION OF MIND:
Application of mind is the magic formula to solve all problems. You should always apply your mind on how your efforts and goals are aligned to that of the company and how they contribute to the final business goal. We have a very open culture when in doubt always ask questions to seek clarity. Remember, to succeed at India infoline always apply your mind like an owner and come up with out-of-box solutions.

OM AND AOM WITH SYSTEM AND PROCESS:

Understand that being owners does not mean that we do not have to follow any rules. In fact given our path of growth, system and processes assume even greater importance since they are important for success and more so for growth. But we do have the option to modify the rules if needed. Our systems and processes are designed keeping in mind the need for faster decisionmaking with least turnaround time.

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1.2.2- INDUSTRY PROFILE

1. STOCK EXCHANGE:
The stock exchange contribute to the economy development through providing listing of stocks and their trading listed stocks cover about 90 percent of the joint stock sectors in which the public companies are at work in India. The functions of the stock markets consist in mobilizing savings of public and channel them either directly into new issues of capital or indirectly through acquisition of existing capital stocks thereby accelerating the economic development of the country. The recognised stock exchanges have played an important role by participating in preliminary distribution of new securities. In respect of new issues offer through a prospectus or through for sale of existing securities the members of the recognized stock exchange have been the principal agents for canvassing subscriptions from investors spread all over the country. The recognized stock exchanges have served as the principal market for purchase of securities after they are issued as they pass through many successive hands from the original subscriber to the never ending stream of buyers. The recognized stock exchanges have, thus performed the vital function of acting as an organized capital market for stocks, shares and government securities. The market mechanism is being automated and improved in response to the growing demands. The mobilization of the savings of small man for investment in joint stock enterprise and broader spread of share ownership are factors, which in the course of time are likely to except a significant influence on the stock market in India. The stock exchanges provide an orderly market and price of securities and facilitate investment in India.

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HISTORY OF STOCK EXCHANGE:

The only stock exchanges operating in the 19th century were those of Mumbai set up in 1875 and Ahmedabad set up in 1894. These were organized as voluntary non profit making associations of brokers to regulate and protect their interests. Before the control on securities trading became a central subject under the constitution in 1950, it was a state subject and the Mumbai securities contracts act of 1925 used to regulate trading in securities. Under this act, the Mumbai stock exchange was recognised in 1927 and Ahmedabad in 1937. Soon after it became a central subject, the securities contracts act became law in 1956. At present there are 21 stock exchanges recognised under the securities contracts act 1956. They are located at Mumbai, Calcutta, Chennai, Delhi, Ahmedabad, Hyderabad, Indore, Bhuwaneshwar, Mangalore, Patna, Bangalore, Rajkot, Guwahati, Jaipur, Kanpur, Ludhiana, Baroda, Cochin and Pune.

METHOD OF TRADING:
In order to purchase or sell of the securities or a stock exchange, the following procedure has to be followed. A. Selection of Broker A non member is not allowed to transact business on the floor of stock exchange. He may transact only through a member of stock exchange. Therefore, the first step in trading procedure on a stock exchange is to choose broker through whom the transaction will be made. B. Placing the Order After selection of broker, the client will place an order to him for the purchase or sale of a particular security. The order may be placed in any form. C. Making the Contact After receiving the order, the broker will then contact other broker or member or the stock exchange. D. Preparing the Contract Note A contract note will be prepared after the order of the days business. The note can be prepared by the broker himself or his clerk. The contract note mainly includes number and price of securities purchase or sold, names of the parties, brokerage charged and total amount payable by the or to the client. The contract note is signed by the broker and copy of the note also sent to the client. 17

E. Settlement The last step of trading procedure is settlement. Its mode depends upon the nature of the contract. The contracts modes at a stock exchange are of two types they are: F. Ready Delivery Contracts It requires the delivery of securities by the seller and actual payment of the value of security by the buyers in cash. Generally a ready delivery contractors settled on the same day of whether the time fixed by the stock exchange authorities. In case of cleared securities settlement are made through clearing house and contracts in non clearing house and contracts non cleared securities are settled through hand delivery by the brokers. G. Forward Delivery Contract Such contracts are made without the intention of taking or giving delivery of the securities. The intention of the trader who entered into forward delivery contract is in making profits by taking advantage of price movement in future. Forward delivery transactions are settled on the day fixed by the stock exchange authorities.

BENEFITS TO INVESTORS:

Stock exchange provides liquidity of investment through ready marketability of securities Long term investments in shares will provide significant capital gains through increase in share price. Companies pay much of their post-tax profits to their shareholders in the form of dividends. Compared to other investments like property, shares are very portable. They can be bought and sold quickly. Unlike selling a property, you can sell part of your share parcels. When compared to other forms of investment the brokerage charged for investing in shares is very low. In shares we have an option of investing in diversified scripts to minimize risk. The returns provided by shares are very high when compared to other forms of investment. Shares held for more than 12 months qualify for a 50% discount on any capital gains tax payable 18

2. MUTUAL FUNDS:
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India. The history of mutual funds in India can be broadly divided into four distinct phases: First phase-1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700crores of assets under management.

Second phase-187-1993 (Entry of Public Sector Funds) 1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by could bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990..

Third Phase-1993-2003(Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the India investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund was to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (mutual Fund) Regulation were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulation 1996.

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 Fourth Phase-Since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29835crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

Mutual Fund Operation Flow Chart:

TYPES OF MUTUAL FUNDS:

Open-end fund: An open-end(ed) fund is a collective investment which can issue and redeem shares at any time. An investor can purchase shares in such funds directly from the mutual fund company, or through a brokerage house. Exchange-traded funds: An Exchange-Traded Fund (or ETF) is an investment vehicle traded on primary exchanges, much like major stocks or bonds. An ETF represents a collection or 'basket' of assets such as stocks, bonds, or futures.

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Equity funds: Equity funds, which consist mainly of stock investments, are the most common type of mutual fund. Equity funds hold 50 percent of all amounts invested in mutual funds in the United States. Bond funds: A bond fund is a collective investment scheme that invests in bonds and other debt securities. Bond funds yield monthly dividends that include interest payments on the fund's underlying securities plus any capital appreciation in the prices of the portfolio's bonds. Money market funds: Money market funds have relatively low risks compared to other mutual funds and pay dividends that generally reflect short-term interest rates. Money market funds typically invest in government securities, certificates of deposits, commercial paper of companies, and other highly liquid and low-risk securities.

Fund of funds: A "fund of funds" (FoF) is an investment fund that uses an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. This type of investing is often referred to as multi-manager investment.

Hedge fund: A hedge fund is a private investment fund that charges a performance fee and is typically open to only a limited range of qualified investors. Hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment.

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MAJOR MUTUAL FUND COMPANIES IN INDIA:

ABN AMRO Mutual Fund BIRLA SUN LIFE Mutual Fund BANK OF BARODA Mutual Fund HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund Prudential ICICI Mutual Fund Sahara Mutual Fund State Bank of India Mutual Fund Tata Mutual Fund Kotak Mahindra Mutual Fund Unit Trust of India Mutual Fund Reliance Mutual Fund Standard Chartered Mutual Fund Franklin Templeton India Mutual Fund Morgan Stanley Mutual Fund India Canbank Mutual Fund Chola Mutual Fund LIC Mutual Fund

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BENEFITS TO INVESTORS:

Mutual Funds invest their corpus in diversified portfolios which reduces the risk contained in the investment. These mutual funds perform an extensive research of the company before making an investment decision giving you the benefit of expert advice. These funds are managed by professionals who have the required expertise in buying and selling stocks. As purchases and sales are done in bigger quantities, the funds also get the advantages of lesser brokerage and other reduced transaction costs. In India these funds become even more attractive because of the tax advantages, like indexation benefits, long term capital gains tax, tax free dividends and much more. Possibility of investing in small amounts as and when the investor has funds to invest. Most mutual funds have relatively low investment minimums, making them accessible even to small investors. Mutual funds provide greater amount of liquidity to its investors.

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3. INSURANCE:
Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. Insurer is the company that sells the insurance. Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage.

HISTORY:
The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act,1956, with a capital contribution of Rs. 5 crores from the Government of India. 1972: The General Insurance Business (Nationalisation) Act, 1972 was enacted to nationalize the 100 odd general insurance companies and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance, and United India Insurance which were headquartered in each of the four metropolitan cities. 1999: Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt. of India, then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies into the insurance. Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies

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INSURANCE COMPANIES IN INDIA

Aviva Bajaj Allianz Birla Sun Life HDFC Standard Life ICICI Pru ING Vysya Life Insurance Corporation Max New York Life Metlife India Om Kotak Mahindra Reliance Life Insurance SBI Life Insurance

Tata AIG

TYPES OF INSURANCE:
Health Disability Casualty Life insurance Property Liability Credit Insurance financing vehicles 25

RISKS INVOLVED:

The insurance company may not pay the premium amount in right time. The agents may provide false information about the policies. In the case of accidents in railway tracks the insurer is not eligible for compensations. Private insurance companies may get closed due to continuous losses. The liquidity provided by insurance is very low. The investors cannot withdraw his funds for a fixed amount of period.

BENEFITS TO INVESTORS:
Insurance will give cover for future unforeseen happenings. Insurance companies are now engaging in investing in securities. This will provide better returns for investor funds. Pension schemes in insurance will help in old age. Medical insurance will provide cover against hazardous diseases. It minimizes the risk of life. The investor can ensure continuous return on his investments. The brokerage charged by agents is very low when compared to other investment alternatives.

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4. DERIVATIVES:
Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and swaps. The main use of derivatives is to reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a huge range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), bonds, interest rates, exchange rates, or indexes (such as a stock market index, consumer price index (CPI) see inflation derivatives or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the pay-offs.

HISTORY:
The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. These were evidently standardised contracts, which made them much like today's futures. The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, was established in 1848 where forward contracts on various commodities were standardised around 1865. From then on, futures contracts have remained more or less in the same form, as we know them today. Derivatives have had a long presence in India. The commodity derivative market has been functioning in India since the nineteenth century with organized trading in cotton through the establishment of Cotton Trade Association in 1875. Since then contracts on various other commodities have been introduced as well. Exchange traded financial derivatives were introduced in India in June 2000 at the two major stock exchanges, NSE and BSE. There are various contracts currently traded on these exchanges. National Commodity & Derivatives Exchange Limited (NCDEX) started its operations in December 2003, to provide a platform for commodities trading.
The derivatives market in India has grown exponentially, especially at NSE. Stock Futures are the most highly traded contracts on NSE accounting for around 55% of the total turnover of derivatives at NSE, as on April 13, 2005.

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TYPES OF DERIVATIVES:
There are four major types of derivatives. They are as follows

FUTURES:
A futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price

FORWARDS:
A forward contract is an agreement between two parties to buy or sell an asset at a pre-agreed future point in time. Therefore, the trade date and delivery date are separated. One party agrees to sell, the other to buy, for a forward price agreed in advance. In a forward transaction, no actual cash changes hands. If the transaction is collateralized, exchange of margin will take place according to a pre-agreed rule or schedule.

OPTIONS:
Options are financial instruments that convey the right, but not the obligation, to engage in a future transaction on some underlying security, or in a futures contract. For example, buying a call option provides the right to buy a specified quantity of a security at a set strike price at some time on or before expiration, while buying a put option provides the right to sell. Upon the option holder's choice to exercise the option, the party who sold, or wrote, the option must fulfill the terms of the contract.

SWAPS:
A swap is a derivative in which two counterparties agree to exchange one stream of cash flows against another stream. These streams are called the legs of the swap. The cash flows are calculated over a notional principal amount, which is usually not exchanged between counterparties. Consequently, swaps can be used to create unfunded exposures to an underlying asset, since counterparties can earn the profit or loss from movements in price without having to post the notional amount in cash or collateral

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BENEFITS TO INVESTORS:

One of the key benefits of trading in the futures markets is that it offers the trader financial leverage. Another key benefit of futures trading is liquidity. Liquid markets easily match a buyer with a seller, enabling traders to quickly transact their business at a fair price Many futures markets are considered to be transparent because the order flow is open and fair. Everyone has an equal opportunity for the trade. Futures markets give this confidence through a clearing service provider system that guarantees the integrity of the trades. One use of derivatives is as a tool to transfer risk by taking the opposite position in the futures market against the underlying commodity. Speculators may trade with other speculators as well as with hedgers. The amount of brokerage charged is very low. The investor can easily clear his position in the time of losses.

RISKS INVOLVED:
Volatility in the market will result in the losses for the investors. Since a huge investment is needed to buy a script it not affordable for small and medium investors. It is difficult to judge the movement of market indices. Expert advice is needed for better investment results. It s necessary to have a continuous check over the market in order to avoid losses.

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CHAPTER-2

DATA ANALYSIS AND INTERPRETATION

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2.1- PERCENTAGE ANALYSIS TABLE-2.1.1 Classification of Respondents on the basis of Age

Age(in Years) Less than 30 31-40 41-50 Above 50 Total Source: Primary Data Number of respondent 34 78 23 15 150 Percentage 22.67 52.00 15.33 10.00 100.00

CHART-2.1.1
90 80 70 60 50 40 30 20 10 0
30 31 -4 0 41 -5 0 bo ve th an 50

Number of Respondents Percentage

INFERENCE:
It is clear from Table 2.1.1 that out of the total 150 respondents, 34 (22.64%) of the respondents are in the age group of below 30 years and 78 (52%) are in the age group of 31 40 years. 23 (15.33%) of the respondents are in the age group of 41 50 years and the remaining 15 (10%) are in the age group of above 50 years. Therefore, it is concluded that the most dominating age group of the respondents are in the age group of 31 40 years. 31

Le ss

TABLE- 2.1.2
Classification of Respondents on the basis of Sex
Source: Primary Data

Sex Male Female Total

Number of Respondents 105 45 150

Percentage 70 30 100

Chart-2.1.2
160 140 120 100 80 60 40 20 0 Male Female Total Number of Respondents Percentage

INFERENCE:
It is found from Table 2.1.2 that out of 150 respondents, 105 (70%) are male and 45 (30 %) are female. Hence, it is found that males are more in numbers than the female in the field of investment.

32

TABLE- 2.1.3
Classification of Respondents on the basis of Educational Qualification Educational Qualification Up to school level Graduate Post Graduate Professional Degree Total Source: Primary Data Number of Respondents 15 33 66 36 150 Percentage 10 22 44 24 100

Chart-2.1.3
160 140 120 100 80 60 40 20 0
ev el G ra du at e eg re e ua te ll Po st G ra d To ta l

Number of Respondents Percentage

INFERENCE:
It is seen from Table 2.1.3 that out of 150 respondents 15 (10%) of the respondents have studied up to school level, 33 (22%) of the respondents have studied graduation and 66 (44%) of them have studied post graduation. The remaining 36 (24%) of the respondent have studied professional degree. Hence, it is observed that the respondents belonging to post graduates are more than other categories.

TABLE-2.1.4
33

Pr of es sio na lD

Up

to

sc ho o

Classification of Respondents on the basis of Occupation

Occupation Business Professional Government Employee Private Employee Total Number of Respondents 14 32 19 Percentage 9.33 21.33 12.67

85 150

56.67 100.00

Source: Primary Data CHART-2.1.4

34

90 80 70 60 50 40 30 20 10 0
oy ee ro fe ss io na l us in m pl m pl oy ee es s

Number of Respondents Nil Percentage Nil

en tE

G ov er nm

INFERENCE:
It is observed from Table 2.1.4 that, out of 150 respondents, 14 (9.33%) respondents are businessmen, 32 (21.33%) respondents are professionals and 19 (12.67%) respondents are government employees. The remaining 85 (56.67%) respondents are private employees. It is inferred from that, the private employees are very interested in investments.

TABLE-2.1.5
Classification of Respondents on the basis of Income
Monthly Income Below Rs. 5000 Number of Respondents Nil 101 Rs. 5000 - 10000 31 Rs. 10000 - 15000 18 Above Rs. 15000 Total Source: Primary Data 150 100.00 12.00 20.67 Percentage Nil 67.33

riv at e

35

CHART-2.1.5
120 100 80 60 40 20 0
-1 00 0 15 00 0 15 00 0 0

Number of Respondents Percentage

00 0

00

R s.

R s.

INFERENCE:
It is found from Table 2.1.5 that out of 150 respondents, 101 (67.33%) responders come under the category of Rs 5001 Rs 10,000, 31 respondents earn in the range of Rs 10,001 Rs 15,000 and the remaining 18 respondents have a monthly income of above Rs 15,000. Therefore, it is concluded that high income group are interested in investments than low income group.

TABLE.2.1.6
Classification of Respondents on the basis of Marital Status Source: Primary Data Marital Status Married Unmarried Total Number of Respondents 60 90 150 Percentage 40 60 100.00

CHART-2.1.6

bo ve

50

10

R s.

36

100 90 80 70 60 50 40 30 20 10 0 Number of Respondents Percentage Married Unmarried

INFERENCE:
It is observed from Table 2.1.6 that, out of 150 respondents, 60 (40%) respondents are married and the remaining 90 (60%) respondents are unmarried. It is evident that the respondent belonging to the married category are more than the respondents belonging to the unmarried category.

TABLE-2.1.7 Classification of Respondents on the basis of Savings

Monthly Savings Less than Rs 2,000 Rs 2,001 Rs 3,000 Rs 3,001 Rs 4,000 Above Rs 4,000 Number of Respondents 62 27 48 13 Percentage 41.33 18.00 32.00 8.67

Source: Primary Data

Total

150

100.00

37

CHART-2.1.7
70 60 50 40 30 20 10 0 Less than Rs 2,000 Rs 2,001 Rs 3,000 Rs 3,001 Rs 4,000 Abov Rs e 4,000 Number of Respondents Percentage

INFERENCE:
It is clear from Table 2.1.7 that, out of 150 respondents, 62 (41.33%) respondents save less than Rs 2000 every month. But 27 (18%) respondents save Rs 2001 Rs 3000 every month and 48 (32%) respondents save Rs 3001 Rs 4000 every month. The remaining 13 (8.67%) respondents save Rs 4000 per month. Therefore, it is observed that most of the respondents save only Rs 2000

II. INVESTOR PREFERANCES TOWARDS INVESTMENT TABLE-2.1.8 Investors Most Preferred Investment Outlet.
Source: Primary Data Securities Mutual Funds Equity Insurance Derivatives Total Number of Respondents 47 64 24 15 150 38 Percentage 31.33 42.67 16.00 10.00 100

CHART-2.1.8
70 60 50 40 30 20 10 0 Mutual Funds Equity Insurance Derivatives Number of Respondents Percentage

INFERENCE:
It is clear from Table 2.1.8 that, out of 150 respondents, 64(42.67%) respondents prefer investing in shares and 47 (31.33%) respondents invest in mutual fund 24 (16%) respondents invests in insurance. The remaining 15(10%) respondents invest in derivatives. Therefore, it is observed that most of the respondents prefer equity.

TABLE-2.1.9 Why investor prefer the particular investment outlet:

Returns High risk, High return Low risk, High return Low risk, Low return Total Source: Primary Data Number of respondents 79 52 19 150 percentage 52.67 34.67 12.66 100

CHART-2.1.9
39

90 80 70 60 50 40 30 20 10 0 High risk, High return Low risk, High return Low risk, Low return Number of respondents percentage

INFERENCE:
It is clear from Table 2.1.9 that, out of 150 respondents, 79(52.67%) respondents prefer high risk and high return and 52(34.67%) respondents prefer low risk and high return and 19(12.66%) respondents prefer low risk and low return. Therefore, it is observed that most of the respondents prefer high risk and high return.

TABLE-2.1.10 Important determinants in selecting Investment outlet

Level of importance Determinants High Safety Return Liquidity Source: Primary Data 131 56 98 Moderate 11 83 38 Low Total 8 11 14 150 150 150

CHART-2.1.10
40

160 140 120 100 80 60 40 20 0 Total High Moderate Level of importance Low

Safety Return Liquidity

INFERENCE:
Table 2.1.10 clearly shows that the investors consider safety, return and liquidity as important factor in section of investment outlet. Among the three factors safety is the first and foremost determinant factor. The next factor considered by the investor is liquidity. The last factor is return. The investor needs only regular and moderate return on their investment.

TABLE-2.1.11 Satisfaction level with return on investment

Opinion Fully satisfied Satisfied No opinion Dis-satisfied Fully dissatisfied Total Number of Respondents 12 78 37 23 0 150 Percentage 8 52 24.66 15.33 0 100.00

CHART-2.1.11
41

90 80 70 60 50 40 30 20 10 0
sa tis fie d S at is fie d D is -s at is fie sa t is f ie d pi ni on d

N umber of R espondents Percentage

F ul ly

N o

INFERENCE:
It is found from Table 2.1.11, out of 150 respondents 12 (8%) respondents are fully satisfied with the return on investment and 78(52%) respondents are satisfied with the return on investment. 37(24.66%) respondents are neither satisfied nor dissatisfied with the return on investment and 23(15.33%) are dis satisfied with the return on investment. Thus it can be concluded that more than half of the respondents are satisfied with the return on investment.

TABLE-2.1.12 Allocation of Income for investment

Portion of income available for investment Upto 10% 11% - 20% 21% - 40% Above 40% Total Source: Primary Data Number of Respondents 54 66 18 12 150 Percentage 36 44 12 8 100.00

F ul ly

di s

42

CHART-2.1.12
160 140 120 100 80 60 40 20 0
10 % 40 % -2 0% -4 0% To t al

Number of Respondents Percentage

INFERENCE:
It is observed from Table 2.1.12, out of 150 respondents, 54 (36%) respondents invest upto 10% of their monthly income 66 (44%) respondents invest 11% - 20% of their monthly income in the financial asset. The remaining 18 (12%) and 12 (8%) respondents invest 21% - 40% and above 40% of their monthly income in various securities

TABLE-2.1.13 Purpose of Investment

Purpose Risk covered Tax Rebate Return on investment liquidity Mean score 61.23 31.63 54.81 38.94 Rank I IV II III

Source: Primary Data

CHART-2.1.13

Ab ov e

Up to

11 %

21 %

43

Mean score 70 60 50 40 30 20 10 0 Risk cov ered Tax Rebate Return on inv estment liquidity Mean score

INFERENCE:
Table 2.1.13 shows that among the purpose, risk covered ranks first with a mean score of 61.23 followed by return on investment, liquidity, tax rebate are ranked II, III and IV with a mean score of 54.81,38.94 and 31.63 respectively

TABLE-2.1.14 Opinion on the risk in investment

Opinion Very High High Moderate Low Very low Total Source: Primary Data Number of Respondents 65 52 33 150 Percentage 43.33 34.67 22 100.00

CHART-2.1.14
44

70 60 50 40 30 20 10 0
ra te ig h h io w H ig O pi n M od e Lo H er y er y lo w n

N umber of R espondents Percentage

INFERENCE:
It is found from Table 2.1.14 that, out of 150 respondents, 65 (43.33%) respondents feel that the risk on investment are very high and 52 (34.67%) and 33 (22%) respondents feel that the risk on investment are high and moderate respectively. Hence, it can be concluded that more than three fourth of the respondents feel that the risk on investment are high.

TABLE-2.1.15 Return Expected from shares

Return expected Less than 10% 11%-20% 21%-30% Above 30% Total Source: Primary Data Number of Respondents 17 91 42 150 Percentage 11.33 60.67 28.00 100

CHART-2.1.15

45

100 90 80 70 60 50 40 30 20 10 0 11%-20% 21%-30% Abov 30% e N ber of um R espondents Percentage -

INFERENCE:
It is found from Table 2.1.15 that 11.33 percent of the respondents expect 11% - 20% return on shares, 60.67 percent of the respondents expects 21% - 30% and 28 percent of the respondents expect more than 30% return on shares. Since the risk in shares is high the return expected is also very high.

TABLE-2.1.16 Return Expected from mutual funds

Return expected Less than 10% 11%-20% 21%-30% Above 30% Total Source: Primary Data Number of Respondents 76 61 13 150 Percentage 50.67 40.67 8.66 100

CHART-2.1.16
46

80 70 60 50 40 30 20 10 0 11%-20% 21%-30% N umber of R espondents Percentage

INFERENCE:
It is found from Table 2.1.16 that out of 150 respondents 76(11.33) of the respondents expect 11% - 20% return on mutual funds, 61(44.53) of the respondents expects 21% 30% and 13(8.66) of the respondents expect above 30%. Since the risk is low the return expected is not very high.

TABLE-2.1.17 Return Expected from insurance

Return expected Less than 10% 11%-20% 21%-30% Above 30% Total Source: Primary Data Number of Respondents 49 55 46 150 Percentage 32.67 36.66 30.67 100

CHART-2.1.17
47

60 50 40 30 20 10 0 Less than 10% 11%-20% 21%-30% N umber of R espondents Percentage

INFERENCE:
It is found from Table 2.1.17 that out of 150 respondents 49(32.67) of the respondents expect less than 10% and 55(36.66) of the respondents expect 11% - 20% return on insurance, 46(30.67) of the respondents expects 21% - 30%. Thus investor expects 11%20% from their investment in insurance.

TABLE-2.1.18 Return Expected from derivatives

Return expected Less than 10% 11%-20% 21%-30% Above 30% Total Source: Primary Data Number of Respondents 86 49 15 150 Percentage 57.33 32.67 10.00 100

CHART-2.1.18
48

100 90 80 70 60 50 40 30 20 10 0 11%20% 21%30% Abov e 30%

N ber of um R espondents Percentage -

INFERENCE:
It is found from Table 2.1.18 that out of 150 respondents 86(57.33) of the respondents expect 11% - 20% return on derivatives, 49(32.67) of the respondents expects 21% - 30% and 15(10.00) of the respondents expect above 30%. Since the risk is high the return expected is also very high.

TABLE-2.1.19 Source of awareness to investors

Source Advertisement Company executives Friends and relatives Professional advisors Total Source: Primary Data Number of Respondents 60 Nil 75 15 150 Percentage 40 Nil 50 10 100.00

CHART-2.1.19

49

80 70 60 50 40 30 20 10 0 Adv ertisem ent Friends and relativ es Professional adv isors N ber of um R espondents Percentage

INFERENCE:
Table 2.1.19 shows that most of the respondents get aware of the investment through friends and relatives (50%) and advertisement (40%) and only 10 per cent of the respondents get aware through professional advisors and none of the respondents through company executives. Therefore, it is inferred that most of the respondents get aware through friends and relatives.

TABLE-2.1.20 Mode of Investment

Mode of investment Direct Number of Respondents 41 109 Total Source: Primary Data 150 Percentage 27.33 72.67 100

Through Agent

CHART-2.1.20

50

160 140 120 100 80 60 40 20 0 D irect T hrough Agent T otal N umber of R espondents Percentage

INFERENCE:
It is clear from Table 2.1.20, out of 150 respondents, 109 respondents are investing their surplus funds through agent and the remaining 41 respondents are investing their surplus funds directly. Hence, it shows that most of the respondents are investing their funds through agents.

111. INVESTOR PREFERANCE TOWARDS INTERMEDIARIES TABLE-2.1.21 Opinion on the Services Rendered by the Intermediaries
Opinion Fully satisfied Satisfied No opinion Dis-satisfied Fully dissatisfied Total Number of Respondents 32 76 39 3 150 51 Percentage 21.33 50.67 26.00 2.00 100.00

Source: Primary Data

CHART-2.1.21
80 70 60 50 40 30 20 10 0
di ss at is f ie d d sa tis fie at is pi ni on f ie d

N umber of R espondents Percentage

F ul ly

N o

INFERENCE:
It is clear form Table 2.1.21 that out of 150 respondents 32 (21.33%) respondents are fully satisfied with the services rendered by the intermediaries. 76 (50.67%) respondents are satisfied with the service rendered by the intermediaries. 39 (26%) respondents and 3 (2%) respondents are not satisfied with the service provided by the intermediaries. Thus, it can be concluded that most of the respondents are satisfied with the services rendered by the intermediaries.

TABLE-2.1.22 Source of Awareness about the Intermediaries

Source Electronic media Sign board News papers and Magazines Friends and relatives Total Source: Primary Data 52 Number of Respondents 19 47 84 150 Percentage 12.67 31.33 56.00 100.00

F ul ly

CHART-2.1.22

ig n

pe rs

ga zi

M a

pa

w s

N e

INFERENCE:
It is found from Table 2.1.22 that out of 150 respondents, 19 (12.67%) respondents have come to know about the intermediaries through sign board. 47 (31.33%) respondents have come to know about the intermediaries through news papers and magazines and the remaining 84 (56%) respondents have come to know about the intermediaries through friends and relatives

TABLE-2.1.23 Opinion about the Brokerage Charges

Opinion Very High High Moderate Low Very low Number of Respondents 73 46 31 Percentage 48.67 30.67 20.66 -

rie n

ds

an

re la t iv es

an d

90 80 70 60 50 40 30 20 10 0
bo ar d

Number of Respondents Percentage

ne s

53

Total Source: Primary Data

150

100.00

CHART-2.1.23
80 70 60 50 40 30 20 10 0 Very High High Moderate N umber of R espondents Percentage

INFERENCE:
It is found from Table 2.1.23 that, out of 150 respondents, 73 (48.67%) respondents feel that the brokerage charged by the intermediaries are very high and 46 (30.67%) and 31 (20.66%) respondents feel that the brokerage charged by the intermediaries are high and moderate respectively. Hence, it can be concluded that more than three fourth of the respondents feel that the brokerage charged by the intermediaries are high.

TABLE-2.1.24 Opinion on the Information Rendered by the Intermediaries

Source: Primary Data Opinion Excellent Good Average Below average Poor Total Number of Respondents 23 64 45 13 5 15054 Percentage 15.33 42.67 30.00 8.67 3.33 100.00

CHART-2.1.24
70 60 50 40 30 20 10 0 Excellent Good Av erage Below av erage Poor N umber of R espondents Percentage

INFERENCE:
It is clear form Table 2.1.24 that out of 150 respondents 23 (15.33%) respondents are fully satisfied with the information rendered by the intermediaries. 64(42.67%) respondents are satisfied with the information rendered by the intermediaries. 45 (30%) respondents are neither satisfied or not satisfied and 13 (8.67%) respondents feel the information below average and 5(3.33%) feel its poor. Thus, it can be concluded that most of the respondents are satisfied with the information rendered by the intermediaries.

TABLE-2.1.25 Purpose of Using the Intermediaries

Purpose For selling For purchasing For both buying and selling Advice regarding buying and selling Total Number of Respondents 23 26 38 63 150 Percentage 15.33 17.33 25.34 42 100.00

CHART-2.1.25
55

70 60 50 40 30 20 10 For selling buying and and selling regarding 0 For both Advice N umber of R espondents Percentage

INFERENCE:
It is found from Table 2.1.25 that, 23(15.33%) of the respondents are using the service of the intermediaries for the purpose of selling the securities. 26(17.33%) of the respondents are using the services of intermediaries for the purpose of purchasing the securities and 38(25.34%) of the respondents are using the services of intermediaries for the purpose of purchasing and selling the securities and the remaining 63(42 %) of the respondents are using the service of intermediaries for the purpose of advice regarding buy and selling. Thus investors prefer the advice provided by intermediaries.

TABLE-2.1.26 Frequency of Using Services of Intermediaries

Frequency Daily Weekly Fortnightly Monthly Total

Number of Respondents 42 25 30 53 150

buying

Percentage 28.00 16.67 20.00 35.33 100.00

56

CHART-2.1.26
60 50 40 30 20 10 0 D aily Weekly Fortnightly Monthly N umber of R espondents Percentage

INFERENCE:
It is seen from Table 2.1.26 that out of 150 respondents, 42 (28%) respondents use the services daily. 25 (16.67%) respondents use the services weekly and 30 (20%) respondents use the services fortnightly. The remaining 53 (35.33%) respondents use the services once in a month. Therefore, it is concluded that most of the respondents use the services daily.

57

STATISTICAL TOOLS

2.2- CHI-SQUARE TEST Education and Source of Awareness

Education is an important factor which has significant relationship with the investment awareness in financial asset. In order to find out whether there is any relationship between education and awareness, a two way table has been prepared.

Source of Awarenes s Age of the respondents Up to school level

Number of Respondents Advertisemen t 3

58

Friends and relatives 11

Profession Total al advisors 1 15

Graduate Post Graduate

16 26

16 33 15 75

1 7 6 15

33 66 36 150

Professional Degree 15 Total 60

H0: There is no significant relationship between education and source of awareness. H1: There is significant relationship between education and source of awareness.
In order to find out whether there is significant relationship between educational level and source, of awareness chi square test has been applied.

Table 2.2.1 shows the calculations to test the significant between educational level and source of awareness.

59

TABLE-2.2.1 Chi square Test for Education and Source of awareness (O E)2 Cell O E (O E) (O E)2
__________

E R1C1 R2C1 R3C1 R4C1 R1C2 R2C2 R3C2 R4C2 R1C3 R2C3 R3C3 R4C3 3 16 26 15 11 16 33 15 1 1 7 6 6.0 13.2 26.4 14.4 7.5 16.5 33.0 18.0 15.0 3.3 6.6 3.6 -3.0 2.5 -0.4 0.6 3.5 -0.5 -3 -14 -2.3 0.4 2.4 9.00 6.25 0.16 0.36 12.25 0.25 9.00 196.00 5.29 0.16 5.76 1.500 0.473 0.006 0.025 1.633 0.015 0.500 13.000 1.603 0.023 1.600

Total

20.378

60

Degrees of Freedom = (row 1) * (column 1) = (4 1) * (3 1) =3X2=6 Degrees of Freedom Calculated Value :6 : 20.378

Table Value at 5% level: 12.592

INFERENCE:
Since the calculated value is more than the Table value at 5% level, the hypotheses that educational level is not a criterion to determine the different source of awareness is rejected. Therefore, there is significant relationship between educational level of the investors and their source of awareness.

61

Income and Source of Awareness

Income is an important factor which has significant relationship with the investment awareness in financial asset. In order to find out whether there is any relationship between income and awareness, a two way Table has been prepared.

Monthly income of the investors and their source of awareness Number of Source of Awareness Monthly Income Status of the Respondents Respondents Friends and relatives Profession Total al advisors

Advertisement

Below Rs 5,000 Rs 5,001 Rs10,000 Rs 10,001Rs15,000 Above Rs 15,000 Total

41 14 5 60

48 15 12 75

12 2 1 15

101 31 18 150

H0: There is no significant relationship between education and source of awareness. H1: There is significant relationship between education and source of awareness.
In order to find out whether there is significant relationship between educational level and source, of awareness chi square test has been applied. Table 2.2.2 shows the calculations to test the significant between educational level and source of awareness 62

TABLE-2.2.2

Chi square Test for Income and Source of awareness

(O E)2 Cell O E (O E) (O E)2

__________

E R1C1 R2C1 R3C1 R1C2 R2C2 R3C2 R1C3 R2C3 R3C3 41 14 5 48 15 12 12 2 1 40.4 12.4 7.2 50.5 15.5 9.0 10.1 3.1 1.8 0.6 1.6 -2.2 -2.5 -0.5 3.0 1.9 1.1 -0.8 0.36 2.56 4.84 6.25 0.25 9.00 3.61 1.21 0.64 0.009 0.207 0.672 0.124 0.017 1.000 0.357 0.39 0.356

Total

3.132

63

Degrees of Freedom = (row 1) * (column 1) = (3 1) * (3 1) =2X2=4 Degrees of Freedom Calculated Value :4 : 3.132

Table Value at 5% level: 9.488

INFERENCE:
Since the calculated value is less than the Table value at 5% level, the hypotheses that income is not a criterion to determine the different source of awareness is accepted. Therefore, there is no significant relationship between income of the investors and their source of awareness

64

2.3-WEIGHTED AVERAGE METHOD

Satisfaction level of investors with return on investment

Opinion Fully satisfied Satisfied No opinion Dis-satisfied Fully dissatisfied Total

Number of Respondents 12 78 37 23 0 150

Percentage 8 52 24.66 15.33 0 100.00

In order to find out the satisfaction level of investors with regarding to the return on investment weighted average method is used in order to find out the satisfaction level of most of the investors.

In order to calculate the weighted average the satisfaction level is ranked in the order of 5,4,3,2 and 1.

Table 2.3.1 shows the calculations of weighted average method.

65

TABLE-2.3.1

Weighted average on return on investment

Rank Fully satisfied(5) Satisfied(4) No opinion(3) Dis-satisfied(2) Fully dissatisfied(1) Total Number of Respondents 12 78 37 23 0 150 Percentage 8 52 24.66 15.33 0 100.00 Total score 60 312 111 46 0 529

Mean score = 529/150 = 3.52

INFERENCE: From the above table 2.3.1 it is clear that most of the respondents are satisfied with the return on their investments.

66

Opinion on the of risk in investments

Opinion Very High

Number of Respondents 65

Percentage 43.33

High

52

34.67

Moderate

33

22

Low

Very low

Total

150

100.00

In order to find out the amount of risk involved in the investment weighted average method is used in order to find out the level of risk prevailing in the investment.

In order to calculate the weighted average the risk level is ranked in the order of 5,4,3,2 and 1.

Table 2.3.2 shows the calculations of weighted average method.

67

TABLE-2.3.2

Weighted Average on Risk in Investment

Rank Very High(5) High(4) Moderate(3) Low(2) Very low(1) Total Number of Respondents 65 52 33 150 Percentage 43.33 34.67 22 100.00 Total score 325 208 99 632

Mean score = 632/150 = 4.2

INFERENCE: From the above table 2.3.2 it is clear that most of the respondents feel that the amount of risk prevailing in investment is HIGH.

68

Opinion on the Services Rendered by the Intermediaries

Opinion Fully satisfied

Number of Respondents 32 76 39

Percentage 21.33 50.67 26.00

Satisfied No opinion

Dis-satisfied

Fully dissatisfied

3 Total 150

2.00 100.00

In order to find out the satisfaction level of investors with regarding to the service rendered by intermediaries weighted average method is used in order to find out the satisfaction level of most of the investors.

In order to calculate the weighted average the satisfaction level is ranked in the order of 5,4,3,2 and 1.

Table 2.3.3 shows the calculations of weighted average method.

69

TABLE-2.3.3 Weighted Average on Services Rendered by the Intermediaries

Rank Fully satisfied(5) Satisfied(4) No opinion(3) Dis-satisfied(2) Fully dissatisfied(1) Total

Number of Respondents 32 76 39 3 150

Percentage 21.33 50.67 26.00 2.00 100.00

Total score 160 304 117 3 584

Mean score = 584/150 = 3.89 =4 INFERENCE: From the above table 2.3.3 it is clear that most of the respondents are satisfied with the services rendered by intermediaries.

70

Opinion about the Brokerage Charges

Opinion Very High High Moderate Low Very low Total

Number of Respondents 73 46 31 150

Percentage 48.67 30.67 20.66 100.00

In order to find out the satisfaction level of investors with regarding to the brokerage charges by intermediaries weighted average method is used in order to find out the level of brokerage charged.

In order to calculate the weighted average the brokerage level is ranked in the order of 5,4,3,2 and 1.

Table 2.3.4 shows the calculations of weighted average method.

71

TABLE-2.3.4 Weighted Average on Brokerage Charges

Rank Very High(5) High(4) Moderate(3) Low(2) Very low(1) Total

Number of Respondents 73 46 31 150

Percentage 48.67 30.67 20.66 100.00

Total score 365 184 93 642

Mean score = 642/150 = 4.28 =4 INFERENCE: From the above table 2.3.4 it is clear that most of the respondents feel the brokerage charged by intermediaries is HIGH.

72

Opinion on the Information Rendered by the Intermediaries

Opinion Excellent Good Average Below average Poor Total 150 Number of Respondents 23 64 45 13 5 100.00 Percentage 15.33 42.67 30.00 8.67 3.33

In order to find out the opinion of the investors with regard to the information rendered by intermediaries weighted average method is used in order to find out the level of brokerage charged.

In order to calculate the weighted average the opinion level is ranked in the order of 5,4,3,2 and 1.

Table 2.3.5 shows the calculations of weighted average method.

73

TABLE-2.3.5

Weighted Average on Information Rendered By Intermediaries

Rank Excellent(5) Good(4) Average(3) Below average(2) Poor(1) Total Number of Respondents 23 64 45 13 5 150 Percentage 15.33 42.67 30.00 8.67 3.33 100.00 Total score 115 256 135 26 5 537

Mean score = 537/150 = 3.58 =4 INFERENCE: From the above table 2.3.5 it is clear that most of the respondents feel that the information rendered by intermediaries to investors regarding their investment is GOOD.

74

CHAPTER-3

75

3.1-FINDINGS OF THE STUDY

It is absorbed that out of the total 150 respondents, 34 (22.64%) of the respondents are in the age group of below 30 years and 78 (52%) are in the age group of 31 40 years. 23 (15.33%) of the respondents are in the age group of 41 50 years and the remaining 15 (10%) are in the age group of above 50 years. Therefore, it is concluded that the most dominating age group of the respondents are in the age group of 31 40 years. Out of 150 respondents, 105 (70%) are male and 45 (30 %) are female. Hence, it is found that males are more in numbers than the female in the field of investment. Out of 150 respondents 15 (10%) of the respondents have studied up to school level, 33 (22%) of the respondents have studied graduation and 66 (44%) of them have studied post graduation. The remaining 36 (24%) of the respondent have studied professional degree. Hence, it is observed that the respondents belonging to post graduates are more than other categories. Out of 150 respondents, 14 (9.33%) respondents are businessmen, 32 (21.33%) respondents are professionals and 19 (12.67%) respondents are government employees. The remaining 85 (56.67%) respondents are private employees. It is inferred from that, the private employees are very interested in investments. Out of 150 respondents, 101 (67.33%) responders come under the category of Rs 5001 Rs 10,000, 31 respondents earn in the range of Rs 10,001 Rs 15,000 and the remaining 18 respondents have a monthly income of above Rs 15,000. Therefore, it is concluded that high income group are interested in investments than low income group. Out of 150 respondents, 60 (40%) respondents are married and the remaining 90 (60%) respondents are unmarried. It is evident that the respondent belonging to the married category are more than the respondents belonging to the unmarried category. Out of 150 respondents, 62 (41.33%) respondents save less than Rs 2000 every month. But 27 (18%) respondents save Rs 2001 Rs 3000 every month and 48 (32%) respondents save Rs 3001 Rs 4000 every month. The remaining 13 (8.67%) respondents save Rs 4000 per month. Therefore, it is observed that most of the respondents save only Rs 2000

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Out of 150 respondents, 64(42.67%) respondents prefer investing in shares and 47 (31.33%) respondents invest in mutual fund 24 (16%) respondents invests in insurance. The remaining 15(10%) respondents invest in derivatives. Therefore, it is observed that most of the respondents prefer equity. Out of 150 respondents, 79(52.67%) respondents prefer high risk and high return and 52(34.67%) respondents prefer low risk and high return and 19(12.66%) respondents prefer low risk and low return. Therefore, it is observed that most of the respondents prefer high risk and high return. The investors consider safety, return and liquidity as important factor in section of investment outlet. Among the three factors safety is the first and foremost determinant factor. The next factor considered by the investor is liquidity. The last factor is return. The investor needs only regular and moderate return on their investment.
Out of 150 respondents 12 (8%) respondents are fully satisfied with the return on investment and 78(52%) respondents are satisfied with the return on investment. 37(24.66%) respondents are neither satisfied nor dissatisfied with the return on investment and 23(15.33%) are dis satisfied with the return on investment. Thus it can be concluded that more than half of the respondents are satisfied with the return on investment.

Out of 150 respondents, 54 (36%) respondents invest up to 10% of their monthly income 66 (44%) respondents invest 11% - 20% of their monthly income in the financial asset. The remaining 18 (12%) and 12 (8%) respondents invest 21% 40% and above 40% of their monthly income in various securities. Among the purpose of investment, risk covered ranks first with a mean score of 61.23 followed by return on investment, liquidity, tax rebate are ranked II, III and IV with a mean score of 54.81,38.94 and 31.63 respectively. Out of 150 respondents, 65 (43.33%) respondents feel that the risk on investment are very high and 52 (34.67%) and 33 (22%) respondents feel that the risk on investment are high and moderate respectively. Hence, it can be concluded that more than three fourth of the respondents feel that the risk on investment are high. It is found that 11.33 percent of the respondents expect 11% - 20% return on shares, 60.67 percent of the respondents expects 21% - 30% and 28 percent of the respondents expect more than 30% return on shares. Since the risk in shares is high the return expected is also very high.

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Out of 150 respondents 76(11.33) of the respondents expect 11% - 20% return on mutual funds, 61(44.53) of the respondents expects 21% - 30% and 13(8.66) of the respondents expect above 30%. Since the risk is low the return expected is not very high. Out of 150 respondents 49(32.67) of the respondents expect less than 10% and 55(36.66) of the respondents expect 11% - 20% return on insurance, 46(30.67) of the respondents expects 21% - 30%. Thus investor expects 11%-20% from their investment in insurance. Out of 150 respondents 86(57.33) of the respondents expect 11% - 20% return on derivatives, 49(32.67) of the respondents expects 21% - 30% and 15(10.00) of the respondents expect above 30%. Since the risk is high the return expected is also very high. Most of the respondents get aware of the investment through friends and relatives (50%) and advertisement (40%) and only 10 per cent of the respondents get aware through professional advisors and none of the respondents through company executives. Therefore, it is inferred that most of the respondents get aware through friends and relatives. Out of 150 respondents, 109 respondents are investing their surplus funds through agent and the remaining 41 respondents are investing their surplus funds directly. Hence, it shows that most of the respondents are investing their funds through agents. Out of 150 respondents 32 (21.33%) respondents are fully satisfied with the services rendered by the intermediaries. 76 (50.67%) respondents are satisfied with the service rendered by the intermediaries. 39 (26%) respondents and 3 (2%) respondents are not satisfied with the service provided by the intermediaries. Thus, it can be concluded that most of the respondents are satisfied with the services rendered by the intermediaries. Out of 150 respondents, 19 (12.67%) respondents have come to know about the intermediaries through sign board. 47 (31.33%) respondents have come to know about the intermediaries through news papers and magazines and the remaining 84 (56%) respondents have come to know about the intermediaries through friends and relatives Out of 150 respondents, 73 (48.67%) respondents feel that the brokerage charged by the intermediaries are very high and 46 (30.67%) and 31 (20.66%) respondents feel that the brokerage charged by the intermediaries are high and moderate respectively. Hence, it can be concluded that more than three fourth of the respondents feel that the brokerage charged by the intermediaries are high. 78

Out of 150 respondents 23 (15.33%) respondents are fully satisfied with the information rendered by the intermediaries. 64(42.67%) respondents are satisfied with the information rendered by the intermediaries. 45 (30%) respondents are neither satisfied or not satisfied and 13 (8.67%) respondents feel the information below average and 5(3.33%) feel its poor. Thus, it can be concluded that most of the respondents are satisfied with the information rendered by the intermediaries. Out of 150 respondents, 42 (28%) respondents use the services daily. 25 (16.67%) respondents use the services weekly and 30 (20%) respondents use the services fortnightly. The remaining 53 (35.33%) respondents use the services once in a month. Therefore, it is concluded that most of the respondents use the services daily. It is proved from the chi-square test that there is significant relationship between education level and the source of awareness. Thus investor with higher education level is more aware of the investments. It is proved from the chi-square test that there is no significant relationship between income of the investors and their source of awareness. Thus income is not a criterion in measuring the awareness. It is proved using weighed average method that most of the investors are satisfied with the return on their investment. It is proved using weighed average method that most of the investors feel the risk in investment is high. It is proved using weighed average method that most of the investors are satisfied with the services rendered by intermediaries. It is found using weighed average method that most of the investors feel that the brokerage charged by the intermediaries is high. It is proved using weighed average method that most of the investors feel that the information rendered by intermediaries is good.

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3.2-SUGGESTIONS OF THE STUDY

Since the brokerage charged by the intermediaries is considered high by the investors the intermediaries have to minimize their brokerage charges. The intermediaries should provide efficient advices regarding the investor investments. A new investor can invest in mutual fund and insurance in order to minimize risk. Investor should be given informations about the derivative investments. Since most of the investor are not aware of the alternatives. Investors who are ready to take higher risk can invest in shares which provide high risk and high return. Since investor considers safety as more important while selecting an investment outlet they can go for mutual funds which provide him higher amount of safety.

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3.3-CONCLUSION
The project studies about the various investment alternatives available in business. This will help the investor to choose between the various investments alternatives available.

The project also covers the preference of investors preferences towards the investment this will help to know about the investor preference towards the investment.

The project covers the investors preference towards the services rendered by intermediaries, this will help India infoline and all other intermediaries to improve their services based on the investor taste and preferences.

The study gives an overall view that most of the investors prefer investment alternatives with higher returns and they mostly go for investing in order to cover the risk of life.

Thus the study gives a clear picture about the investor preference towards the investments.

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APPENDICES

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QUESTIONNAIRE

I Personal Data 1. Name 2. Age 3. Gender 4. Educational Qualification 5. Occupational Status : : Below 30 : Male : School Level : Business 31-40 Female Graduate PG Professional Degree 41-50 Above 50

Professional Private employee

Government employee

6. Income P.M. (in Rs.) 7. Marital Status 8. Approx. monthly savings

: Below 5000 5001 to 10000 Above 15000 : Married Unmarried : Less than Rs.2000 Rs.3001 to Rs.4000

10001 to 15000

Rs.2001 to Rs.3000 Above Rs.4000

II. INVESTOR PREFERANCES TOWARDS INVESTMENT

1. (A) What is your most preferred Investment Outlet? Mutual fund Equity Insurance Derivatives (B) Why do you prefer the Particular investment Alternative? High risk, High return Low risk, High return Low risk, Low return 2. Please indicate the level of importance considered by you while selecting investment outlet?

Determinant i) Safety ii) Return iii) Liquidity

Level of Importance High Moderate Low

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3. Are you satisfied with the return on your investment? Fully satisfied Satisfied No opinion Dissatisfied 4. What portion of your income do you allocate for investment? Up to 10% 11% - 20% 21% - 40% Above 40%

Fully Dissatisfied

5. Rank the purpose for which you prefer the investment in different types of investments Risk covered Tax rebate Return on investment Liquidity 6. What is your opinion on the amount Of risk in investments? Very high High Moderate Low Very Low 7. Expected return from different type of investment?

Less than Investment 10% Share Mutual Fund Insurance Derivatives 11% - 20% 21% - 30% Above 30%

8. How did you come to know about the information of different Investment alternatives? Advertising Company executive Friends& relatives Professional advisors 9. Which way you invest your Surplus fund? - Direct Through Agent

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111. INVESTOR PREFERANCE TOWARDS INTERMEDIARIES

1. What do you feel about services rendered by agents in investments? : Fully satisfied Satisfied No opinion Dissatisfied Fully Dissatisfied

2. How do you come to know about the intermediaries ? Electronic media Sign board Newspapers & Magazines

Friends & relatives

3. How do you feel about the amount of brokerage charged? Very high High Moderate Low Very low

4. What is your opinion on the communications, information and remainder served by the intermediaries? Excellent Good Average Below average Poor

5. Mention the purpose for which you use the service of intermediaries? For Selling For Purchasing Both Buying & Selling Recommendation On-Line Trading

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6. How frequently do you use the service of the intermediaries? Daily Weekly Fortnightly Monthly

BIBLIOGRARHY

REFERENCES

Avadhani V.A. (2001) Investment Management - Himalaya Publishing House, Mumbai. Bhallla V.K. (2000) Investment Management - Security Analysis and Portfolio Management - S. Chand & Company Ltd., New Delhi. Kothari C.R. (2002) Research Methodology- Wiley Eastern ltd, New Delhi. Preeti Singh (2003) Investment Management - Himalaya Publishing House, Mumbai.

WEBSITES:

Www. Google.com www.india infoline.com www.wikipedia.com

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www.5paisa.com www.investmentnetwork.com

www.maninvestments.com

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