STUDY OF INDIVIDUALS INVESTMENT PATTERNS AND SCOPE OF MUTUAL FUNDS

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ACKNOWLEDGMENT
My experience of working at HSBC Bank was indeed valuable for my future endeavours. The happiest thing in my project comes in thanking those who have helped me in the way they can to make my project a success. First and foremost I would like to thank Mr. SLEEVA RAJU investment Relationship Manager, HSBC Bank, Hyderabad for giving me an excellent opportunity to work with HSBC Bank.

Extending my thanks to all the employees of HSBC Bank, Hyderabad for their friendly approach, I once again thank all those who have helped me in accomplishment of this project.

PLACE: Hyderabad Date:

**************

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DECLARATION

PLACE: Hyderabad

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CONTENTS
Acknowledgement Declaration Certificates Chapter 1: Investment- Overview 1.1 What is investment? 1.2 Investment alternatives 1.3 Investment attributes 1.4 Types of investment 1.4.1 Business Management 1.4.2 Economics 1.4.3 Finance 1.4.4 Personal finance 1.4.5 Real estate 1.4.5.1 Residential Real Estate 1.4.5.2 Commercial Real Estate Chapter 2: Portfolio Management 2.1 Portfolio Management process. 2.1.1. Specification of Investment Objectives and Constraints: 2.1.2 Choice of the Asset Mix 2.1.3 Formulation of Portfolio Strategy

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EXECUTIVE SUMMARY

MAJOR FINDINGS OF THE STUDY

1. Majority of the people are interested in investing in real estates and bank deposits 2. While investing, People are taking into account the investment attributes like rate of return, risk factor, duration, tax, good track record of the company. Majority of the people are seeking to get 50% of the returns from their investments. 3. The people are interested to invest in less risky areas and willing to go for long term Deposits. The number of people, who are looking into the brand name and company refutation before investment stands 80%. 4. The people are more aware of bank deposits and real estates but still there are people who are not aware of bank deposits. So, the banks can cater that market. 5. There are more than 50% of the people are not aware of mutual funds. They are seeking to get awareness. People are aware of mutual funds but they do not know various schemes available. 6. Majority of the people are willing to get information through, T.V Advertisements, agents

THE AIM OF THE STUDY

There are many investments patterns but the awareness is minimal for some investment options.

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The market study is needed to know their preferred investment patterns and awareness levels of every option.

THE OBJECTIVES OF THE STUDY

To know the investment patterns of individuals To know the awareness level of Mutual Funds

METHODOLOGY
Drafted a questionnaire to collect the data After the test marketing, modifications are done in the questionnaire. Used SPSS software technique to analyze in different combinations. Analysis is obtained by using Cluster, Factor, Chi-square, ANOVA and Regression Techniques. Usage of Ms.Excel for special analysis.

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LIMITATIONS AND SCOPE FOR FURTHER STUDY

This study is been conducted in Hyderabad covering many areas. The results obtained will not be generalized. This survey became a qualitative survey rather than quantitative survey. The study in other major places of India can give more accurate results. Secondly, most of the people felt hesitated to reveal the true figure of their income and investment patterns.

There is tremendous scope for further research in terms of covering many cities. Since the data is ever changing with new unprecedented styles, many more factors should be taken into consideration. Using different research techniques like focus groups discussion will yield valuable results.

Chapter-1
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InvestmentsOverview
1.WHAT IS AN INVESTMENT An investment is a sacrifice of current money or other resources for future benefits. The key aspects of any investment are time and risk. The sacrifice takes place now and is certain. The benefit is expected in the future and tends to be uncertain. In some investments the time element is the dominant attribute. In other investments the risk element is the dominant attribute. In yet other investments both time and risk are important. Almost every one owns a portfolio of investments. The portfolio is likely to comprise financial assets (bank deposits, bonds, stocks, and so on) and real assets( motorcycle, house, and so on). 1.1 Investment Alternatives Non- marketable financial assets: Bank deposits Post office deposits Company deposits Provident fund deposits Equity shares: :: Blue chip shares Growth shares Income shares Cyclical shares Speculative shares 11

Bonds: :: Government securities Savings bonds Government agency securities PSU bonds Debentures of private sector companies Preference shares Money market instruments: Treasury bills Commercial paper Certificates of deposit Mutual funds:

Equity schemes Debt schemes

Balanced schemes Life insurance:

Endowment assurance policy Money back policy Whole life policy Term assurance policy Real Estate::

Agricultural land Semi-urban land Commercial property Precious Objects:

Gold and silver Precious stones Art objects

Financial Derivatives:

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Options

Futures 1.2 INVESTMENT ATTRIBUTES: For evaluating an investment avenue, the following attributes are relevant.

Rate of return Risk Marketability Tax shelter Convenience Rate of Return: The rate of return on an investment for a period, which is usually a period of one year, is defined as follows: Rate of return = Annual income + (Ending price Beginning price) Beginning Price Risk The rate of return from investments like equity shares, real estate, silver, and gold can vary rather widely. The risk of an investment refers to the variability of its rate of return: How much do individual outcomes deviate from the expected value? A simple measure of dispersion is the range of values, which is simply the difference between the highest and the lowest values. Other measures commonly used in finance are as follows:

Variance

: This is the mean of the squares of deviations of individual

returns around their average value. Standard deviation Beta : This is the square root of variance : This reflects how volatile the return from an investment is in

response to market swings. Marketability: an investment is highly marketable or liquid if: (a) It can be transacted quickly (b) The transaction cost is low (c) The price change between two successive transactions is negligible. The liquidity of a market may be judged in terms of its depth, breadth, and resilience. Depth refers to the existence of buy as well as sells order around the current market price. Breadth implies the presence of such orders in substantial volume. Resilience means that new orders emerge in response to price changes. 11

Generally, equity shares of large, well-established companies enjoy high marketability and equity shares of small companies in their formative years have low marketability and equity shares of small companies in their formative years have low marketability. High marketability is a desirable characteristic and low marketability is an undesirable one. How does one evaluate the marketability of an investment like a provident fund deposit which is non-marketable by its very nature? In such a case, the relevant question to ask is: can withdrawals be made or loans be taken against the deposit? Such an investment may be regarded as highly marketable if any of the following conditions are satisfied: (a) A substantial portion of the accumulated balance can be withdrawn without significant penalty; (b) A loan can be raised at a rate of interest that is only slightly higher than the rate of interest earned on the investment itself. Tax shelter Some investments provide tax benefits; others do not. Tax benefits are of the following three kinds. a) Initial tax benefit: An initial tax benefit refers to the tax relief enjoyed at the time of making the investment. For example, when you make a deposit in a Public Provident Fund Account, you get a tax benefit under section 80 C of the Income Tax Act. b) Continuing tax benefit: a continuing tax benefit represents the tax shield associated with the periodic returns from the investment. For example, dividend income and income from certain other sources are tax-exempt, upto a certain limit, in the hands of the recipient. c) Terminal Tax Benefit: A terminal tax benefit refers to relief from taxation when an investment is realize or liquidated. For example, a withdrawal from a public provident fund account is not subject to tax. Convenience: Convenience broadly refers to the ease with which the investment can be made and looked after. Put differently, the questions that we ask to judge convenience are: a) Can the investment be made readily? b) Can the investment be looked after easily? The degree of convenience associated with investments varies widely. At one end of the spectrum is the deposit in a savings bank account that can be made readily and that does not require any maintenance effort. At the other end of the spectrum is the purchase of a property that may involve a lot of procedural and legal hassles at the time of acquisition and a great deal of maintenance effort subsequently. 1.3 Types of investment The term "investment" is used differently in economics and in finance. Economists refer to a real investment (such as a machine or a house), while financial economists refer to a financial asset, such as money that is put into a bank or the market, which may then be used to buy a real asset.Returns on investments will follow the risk-return spectrum. 1.3.1 Business Management 11

The investment decision (also known as capital budgeting) is one of the fundamental decisions of business management: managers determine the assets that the business enterprise obtains. These assets may be physical (such as buildings or machinery), intangible (such as patents, software, goodwill), or financial (see below). The manager must assess whether the net present value of the investment to the enterprise is positive; the net present value is calculated using the enterprise's marginal cost of capital. 1.3.2 Economics In economics, investment is the production per unit time of goods which are not consumed but are to be used for future production. Examples include tangibles (such as building a railroad or factory) and intangibles (such as a year of schooling or on-thejob training). In measures of national income and output, gross investment I is also a component of Gross domestic product (GDP), given in the formula GDP = C + I + G + NX. I is divided into non-residential investment (such as factories) and residential investment (new houses). "Net" investment deducts depreciation from gross investment. It is the value of the net increase in the capital stock per year. Investment, as production over a period of time ("per year"), is not capital. The time dimension of investment makes it a flow. By contrast, capital is a stock, that is, an accumulation measurable at a point in time (say December 31st). Investment is often modeled as a function of income and interest rates, given by the relation I = f(Y, r). An increase in income encourages higher investment, whereas a higher interest rate may discourage investment as it becomes more costly to borrow money. Even if a firm chooses to use its own funds in an investment, the interest rate represents an opportunity cost of investing those funds rather than loaning them out for interest. 1.3.3 Finance In finance, investment is buying securities or other monetary or paper (financial) assets in the money markets or capital markets, or in fairly liquid real assets, such as gold, real estate, or collectibles. Valuation is the method for assessing whether a potential investment is worth its price. Types of financial investments include shares, other equity investment, and bonds (including bonds denominated in foreign currencies). These financial assets are then expected to provide income or positive future cash flows, and may increase or decrease in value giving the investor capital gains or losses. Trades in contingent claims or derivative securities do not necessarily have future positive expected cash flows, and so are not considered assets, or strictly speaking, securities or investments. Nevertheless, since their cash flows are closely related to (or derived from) those of specific securities, they are often studied as or treated as investments. Investments are often made indirectly through intermediaries, such as banks, mutual funds, pension funds, insurance companies, collective investment schemes, and investment clubs. Though their legal and procedural details differ, an intermediary generally makes an investment using money from many individuals, each of whom receives a claim on the intermediary. 1.3.4 Personal finance 11

Within personal finance, money used to purchase shares, put in a collective investment scheme or used to buy any asset where there is an element of capital risk is deemed an investment. Saving within personal finance refers to money put aside, normally on a regular basis. This distinction is important, as investment risk can cause a capital loss when an investment is realized, unlike saving(s) where the more limited risk is cash devaluing due to inflation. In many instances the terms saving and investment are used interchangeably, which confuses this distinction. For example many deposit accounts are labeled as investment accounts by banks for marketing purposes. Whether an asset is a saving(s) or an investment depends on where the money is invested: if it is cash then it is savings, if its value can fluctuate then it is investment. 1.3.5 Real estate In real estate, investment is money used to purchase property for the sole purpose of holding or leasing for income and where there is an element of capital risk. Unlike other economic or financial investment, real estate is purchased. The seller is also called a Vendor and normally the purchaser is called a Buyer. 1.3.5.1 Residential Real Estate The most common form of real estate investment as it includes the property purchased as peoples houses. The investment in residential real estate is the least risky. 1.3.5.2 Commercial Real Estate Commercial real estate is the owning of a small building or large warehouse a company rents from so that it can conduct its business. Due to the higher risk of Commercial real estate, lending rates of banks and other lenders are lower and often fall in the range of 50-70%.

Chapter 2

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Portfolio Management

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2. WHAT IS A PORTFOLIO? In finance, a portfolio is a collection of investments held by an institution or a private individual. In building up an investment portfolio a financial institution will typically conduct its own investment analysis, whilst a private individual may make use of the services of a financial advisor or a financial institution which offers portfolio management services. Holding a portfolio is part of an investment and risk-limiting strategy called diversification. By owning several assets, certain types of risk (in particular specific risk) can be reduced. The assets in the portfolio could include stocks, bonds, options, warrants, gold certificates, real estate, futures contracts, production facilities, or any other item that is expected to retain its value. 2.1 Portfolio Management Process: Investment management is a complex activity which may be broken down into the following steps: 2.1.1. Specification of Investment Objectives and Constraints: the typical objectives sought by investors are current income, capital appreciation, and safety of principal. The relative importance of these objectives should be specified. Further, the constraints arising from liquidity, time horizon, tax, and special circumstances must be identified. 2.1.2 Choice of the Asset Mix: the most important decision in portfolio management is the asset mix decision. Very broadly, this is concerned with the proportions of stocks and bonds in the portfolio. The appropriate stock-bond mix depends mainly on the risk tolerance and investment horizon of the investor. 2.1.3 Formulation of Portfolio Strategy: once a certain asset mix is chosen, an appropriate portfolio strategy has to be hammered out. Two broad choices are available; an active portfolio strategy or a passive portfolio strategy. An active portfolio strategy strives to earn superior risk-adjusted returns by resorting to market timing, or sector rotation, or security selection, or some combination of these. A passive portfolio strategy, on the other hand, involves holding a broadly diversified portfolio and maintaining a predetermined level of risk exposure. Selection of Securities: Generally, investors pursue an active stance with respect to security selection. For stock selection, investors commonly go by fundamental analysis and /or technical analysis. The factors that are considered in selecting bonds are yield to maturity, credit rating, term to maturity, tax shelter, and liquidity. Portfolio Execution: this is the phase of portfolio management which is concerned with implementing the portfolio plan by buying and / selling specified securities in given amount. Though often glossed over in portfolio management discussions, this is an important practical step that has a bearing on investment results. Portfolio Revision: the value of a portfolio as well as its composition- the relative proportions of stock and bond components- may change as stocks and bonds fluctuate. Of course, the fluctuation in stocks is often the dominant factor underlying this change. In response to such changes, periodic rebalancing of the portfolio is required. This primarily involves a shift from stocks to bonds or vice versa. In addition, it may call for sector rotation as well as security switches. Performance Evaluation: The performance of a portfolio should be evaluated periodically. The key dimensions of portfolio performance evaluation are risk and return and the key issue is whether the portfolio return is commensurate with its risk exposure.

2.1.4

2.1.5

2.1.6

2.1.7

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Such a review may provide useful feed back to improve the quality of the portfolio management process on a continuing basis. 2.2 Modern portfolio theory (MPT)

Proposes how rational investors will use diversification to optimize their portfolios, and how a risky asset should be priced. The basic concepts of the theory are Markowitz diversification, the efficient frontier, capital asset pricing model, the alpha and beta coefficients, the Capital Market Line and the Securities Market Line. MPT models an asset's return as a random variable, and models a portfolio as a weighted combination of assets; the return of a portfolio is thus the weighted combination of the assets' returns. Moreover, a portfolio's return is a random variable, and consequently has an expected value and a variance. Risk, in this model, is the standard deviation of the portfolio's return Objectives 1. Return requirements 2. Risk tolerance

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Constraints and preferences

1. Liquidity 2. Investment horizon 3. Taxes 4. Regulations 5. Unique circumstances

Objectives The commonly stated investment goals are: Income: To provide a steady stream of income through regular interest/ dividend payment. Growth: To increase the value of the principal amount through capital appreciation. Stability: To protect the principal amount invested from the risk of loss. Since income and growth represent two ways by which return is generated and stability implies containment or even elimination of risk, investment objectives may be expressed more succinctly in terms of return and risk. As an investor, you would primarily be interested in a higher return and a lower level of risk. However, return and risk typically go hand in hand. So you have to ordinarily bear a higher level of risk in order to earn a higher return. How much risk you would be willing to bear to seek a higher return, depends on your risk disposition. Your investment objects should state your preference for return relative to your distasted for risk. You can specify your investment objectives in one of the following ways: Maximize the expected rate of return, subject to the risk exposure being held within a certain limit. Minimize the risk exposure, without sacrificing a certain expected rate of return . Which of these two should you adopt? My recommendation is for you to start by defining how much risk you can bear or how much you can afford to lose, rather than specifying how much money you want to make. The risk you can bear depends on two key factors: a) Your financial situation, and b) Your temperament. To assess your financial situation, answer the following questions: what is the position of your wealth? What major expenses can be anticipated in the near future? What is your earning capacity? How much money can you lose without seriously hurting your standard of living? A careful and realistic appraisal of your assets, expenses, and earnings is basic to defining your risk tolerance. After appraising your financial situation, assess your temperamental tolerance for risk. Even though your financial situation may permit you to absorb losses easily, you may become extremely upset over small losses. On the other hand, despite a not-so- strong financial position, you may not be easily ruffled by losses. Understand your financial temperament as objectively as you can. Your risk tolerance level is set by either your financial situation or your financial temperament, whichever is lower. Of course, you must realize that your risk tolerance cannot be or should not be defined too precisely and rigorously. For practical purposes, it suffices if you define it as low, medium, or high. Once you have articulated your risk tolerance realistically in this fashion, it will sere as a valuable guide in your investment selection. It will provide you with a useful perspective and prevent you from being a victim of the waves and manias that tend to sweep the market from time to time.

2.3.1 PORTFOLIO MANAGEMENT FRAMEWORK Investment management, also referred to as portfolio management, is a complex process or activity that may be divided into seven broad phases: Specification of investment objectives and constraints Choice of asset mix Formulation of portfolio strategy Selection of securities Portfolio execution Portfolio rebalancing Performance evaluation Here we discus the process of portfolio management in terms of these phases. For pedagogic convenience, they are treated sequentially. However, it must be emphasized that they are interrelated as shown in exhibit.

2.4. Interrelationship among Various Phases of Portfolio Management

2.5 SPECIFICATION OF INVESTMENT OBJECTIVES AND CONSTRAINTS The first step in the portfolio management process is to specify the investment policy which summarises the objectives, constraints, and preferences of the investor. The investment policy may be expressed as follows

RISK ASSESSMENT Financial advisers, mutual funds, and brokerage firms have developed risk questionnaires to help investors determine whether they are conservatives, moderate, or aggressive. Typically, such risk questionnaires have 7 to 10 questions to guage a persons tendency to make risky or conservative choices in certain hypothetical situations. While these risk questionnaires are not precise, they are helpful inn getting a rough idea of an investors risk tolerance. 2.6 CONSTRAINTS In pursuing your investment objective, which is specified in terms of return requirement and risk tolerance, you should bear in mind the constraints arising out of or relating to the following factors: 2.6.1 Liquidity: Liquidity refers to the speed with which an asset can be sold, without suffering any discount to its fair market price. For example, money market instruments are the most liquid assets, whereas antiques are among the least liquid. Taking into account your cash requirements in the foreseeable future, you must establish the minimum level of cash you want in your investment portfolio. Investment Horizon: The investment horizon is the time when the investment or part thereof is planned to be liquidated to meet a specific need. For example, the investment horizon may be ten years to fund a childs college education or thirty years to meet retirement needs. The investment horizon has an important bearing on the choice of assets. Taxes: What matters finally is the post-tax return from an investment. Tax considerations therefore have an important bearing on investment decisions. So, carefully review the tax shelters available to you and incorporate the same in your investment decisions. Regulations: While individual investors are generally not constrained much by law, institutional investors have to conform to various regulations. For example, mutual funds in India are not allowed to hold more than 10 percent of the equity shares of a public company. Unique Circumstances: Almost every investor faces unique circumstances. For example, an individual may have the responsibility of looking after ageing parents. Or, an endowment fund may be precluded from investing in the securities of companies making alcoholic products and tobacco products. 2.7 SELECTION OF ASSET MIX Based on your objectives and constraints, you have to specify your asset allocation, that is, you have to decide how much of our portfolio has to be invested in each of the following asset categories: Cash Bonds Stocks Real estate Precious metals

2.6.2

2.6.3

2.6.4

2.6.5

The thrust of our discussion will be on determining the appropriate mix of bonds and stocks in the portfolio. Before we examine this issue, note the following: The first important investment decision for most individuals is concerned with their education meant to build their human capital. The most significant asset that people generally have during their early working years is their earning power that stems from their human capital. Purchase of life and disability insurance becomes a pressing need to hedge against loss of income on account of death or disability. The first major economic asset that individuals plan to invest in is their own house. Before they are ready to buy the house, their savings are likely to be in the form of bank deposits and money market mutual fund schemes. Referred to broadly as cash, these instruments have appeal because they are safe and liquid. 2.8 FORMULATION OF PORTOLIO STRATEGY After you have chosen a certain asset mix, you have to formulate an appropriate portfolio strategy. Two broad choices are available in this respect, an active portfolio strategy or a passive portfolio strategy. 2.8.1 Active portfolio strategy An active portfolio strategy is followed by most investment professionals and aggressive investors who strive to earn superior returns, after adjustment for risk. The four principal vectors of an active strategy are: Market timing Sector rotation Security selection Use of specialised concept 2.8.2 Passive Strategy The passive strategy, on the other hand, rests on the tenet that the capital market is fairly efficient with respect to the available information. Hence, the search for superior returns through an active strategy is considered futile.Operationally, how is the passive strategy implemented? Basically, it involves adhering to the following two guidelines: 1. Create a well- diversified portfolio at a pre-determined level of risk. 2. Hold the portfolio relatively unchanged over time, unless it becomes inadequately diversified or inconsistent with the investors risk-return preferences.

Chapter 3

EYE VIEW OF BANKING SECTOR

3.1 INTRODUCTION It is a common assumption that the success of an organization depends on the execution of strategy. Empirically it has been proved that an equally, if not more, important factor is that the organization is in the right market or geography at the right time. Changes in the environment in fact play a vital role in the success or failure of an organization. Change is continuous and affects organizations in various ways. Changes usually take the form of trends that affect economic markets substantially. Organizations, therefore, need to understand these trends and how they impact the economies in which they operate. These studies are best analyzed and understood at the industry level. The banking industry in India is no exception. This article looks at the changes in the business environment and the emerging trends discernible as a consequence and study some strategies necessary to succeed in that environment as they relate to the Indian banking industry. The discussion covers the following: Factors that have set in force these trends Changes actually witnessed in the new environment Success strategies needed in banking to cope with these trends 3.2 Four factors Four factors are behind the changes seen in the environment- globalization; liberalization; customers; technology. N.R. Narayana Murthy, Chief Mentor of Infosys Technologies, has said, Globalisation is about producing where it is most cost effectives, sourcing capital from where its cheapest and selling it where it is most profitable. As Mr. Murthy says, globalization forces organizations to accept the best practices in their industry drawn from different parts of the globe. They have to adapt to and embrace global standards, practices, systems and procedures if they are to remain competitive. Today Indian banks are very much part of the global framework. Globalization has impacted even the rural sector and changed the manner in which banks are approaching this segment. Today, improved infrastructure and forward and backward linkages have made rural areas an increasingly attractive market. Technology has brought about new initiatives such as ITCs e-chaupal that provide farmers greater access to information and to markets. Banks have also brought about innovations such as village knowledge centres. The effects of globalization have also been felt in the retail segment. With the entry of MNCs, retailers have come more efficient and stepped up their marketing strategies. They have access to a much wider range of products that can be marketed locally. With retailer even in tier II cities selling products from all parts of the globe, their requirements from the banking system have undergone a change. Growth resulting from globalization can perhaps be seen most in the SME segment. With goods from overseas flooding local markets, this segment had to step up its efficiency in

terms of production and pricing strategies. With MNCs establishing a presence here, the opportunities to supply them with goods and services have shown a quantum jump. It should, however, be noted that the opening up of the economy and the banking sector in particular, has been skillfully handled by the Government as well as the regulator. This brings us to the second factor that has brought about dramatic changes. The reform process as it affected Indian banking can be traced back to the Narasimham committee recommendations. These laid down an entirely new set f rules for banks to adhere to. These impacted the capital structure and areas of business. They have brought about dramatic changes. One major development has been the entry of a variety of institutions into banking. Over the past five years, the distinctions between banking and other financial services have got blurred. Banks have been entering fields such as insurance, sale of mutual fund products, gold bullion, facilitating payment of bills, offering demat accounts and so on. Simultaneously other institutions, not traditionally associated with banking, are offering banking services and products. Non-banking finance companies accept deposits and finance individuals. Mutual funds, post offices and insurance companies offer many services that were traditionally offered only by banks. The entry of these institutions into the banking sector has impacted the way banking is carried out. In addition, the liberalization process opened up the industry to foreign banks as well as the Indian private sector. This ushered in a new generation of practices, systems, methods, tools and banks themselves. While banks themselves had to cope with these changes, the ultimate beneficiaries of the process were the customers. This brings us to the next factor that changed the environment. 3.3 NEW CUSTOMER PROFILE In any environment, multiple choices help in empowering the customer. Indian banking is no exception. The changes in Indian banking have led to a change in the profile of the customer. Following nationalization, a whole new set of customers gained access to banks. The most economically backward person was encouraged to enter the portals of a bank branch. Along with massive branch expansion huge customer mass was encouraged to seek the help of banks. But the most dramatic change was yet to take place. Even ten years ago, banks had strict hours for business. Most bank branches opened at 10 in the morning and closed at 2 in the afternoon. Customers had to call at a branch to transact his business. Today the banker-customer relationship is totally different. Multiple choices have empowered the customer. Today most customers of the bank do not enter the branch premises for their basic transaction needs. Transactions are done through delivery channels such as ATMs, over the internet and even over the mobile. Many banks have introduced extended business hours such as 8 to 8 banking and Sunday banking. More important, changing demographics have changed the customer profile in favour of youth with better education and qualifications. This too has changed the environment in which banks operate. Almost 100 percent of this customer segment is techno-savvy and this brings us to the next factor that has changed the environment.It is estimated that by the year 2011 the below 30 years age group will form a larger segment of the population than it does today. The country stands to benefit from this change.

3.4 TECHNOLOGY EXPANSION The introduction of technology came almost as a natural corollary of liberalization. Liberalization opened the doors to new players who invested in technology from the very beginning. Public sector banks followed suit. This opened up a new world of banking which benefited the banks as well as the customers. The customer was empowered to carry out the bulk of his transactions electronically without visiting the branch. It also brought in the concept of anytime, anywhere banking. As a consequence branches too became flexible in their timings trying ultimately to reach a situation of 24*7 services. Technology enabled and popularized the use of plastic. This added to the freedom of the customer to access banking facilities from multiple points. Technology enabled banks to take the drudgery out of banking transactions, and allowed bank to collect and analyse data on customers and markets that would enable them to design customer centric products. This has created a situation in which the requirements of customers- mostly composed of younger, financially upward mobile persons- are matched by the design and delivery mechanism of banks vis--vis products and services. Most banks are also moving towards the provision of wealth management and similar advisory services. Globalization is a natural corollary to the opening up of borders and countries. The ultimate effect of globalization will be witnessed when people operated in a world without borders. People will have a commercial world with standard practices and procedures that will enable everyone everywhere to source products and services at their most efficient price.

3.5 THE TEN CHALLENGES In the backdrop of the changes experienced in the environment, the banking industry will have to face and address ten challenges: 1. Retail renaissance, 2. Seeking and servicing new markets, 3. The decision to outsource. 4. Financial inclusion, 5. Monitoring credit quality, 6. Achieving comprehensive governance of risk management, 7. Basel II: driving enterprise- wide change, 8. Corporate governance: moving to greater transparency, 9. Grooming the next generation of talent and 10. Consolidation.

3.5.1 RETAIL RENAISSANCE: In the coming years, the booming retail market will be another challenge that banks will have to address. Changing demographics and profiles of customers will throw up greater demands in terms of services and products that banks will have to design and deliver. Banks will also have to enter areas where they have relatively less experience and expertise. Customers will become more demanding in terms of the range of products and services. A major challenge faced by banks is that any product introduced by a bank is likely to be commoditised by being replicated by other banks almost immediately. 3.5.2 NEW MARKETS: The twin forces of globalization and liberalization will result in a challenge as well as an opportunity. Changes in regulations and procedures, coupled with technology enable a variety of products and services to be sourced from anywhere in the globe. New skills are needed as a result of these forces. These result in new markets and customer segments emerging.

A case in point is the BPO industry which is gradually assuming critical mass. In a more mundane sense, banks are now looking to establish a physical presence in other countries so that they can serve segments of expatriates as well as Indian industries establishing a presence abroad, more effectively. 3.5.3 THE OUTSOURCING OPTION: As the habits of the work force change, banks will have to tackle the problem and make use of the opportunities available. Increasingly while collar workers are looking for ways to use their time more effectively. Leisure time and quality of life are a priority for many. They seek flexible working hours. Charles Handy has pointed out that by the year 2015 it will be the norm for most people to have two jobs. The future trend will be to have fewer permanent employees. Banks will have to face the issue of outsourcing most of the activities other than core functions that are done in house at the present time. 3.5.4 FINANCIAL INCLUSION: The traditional ways of disbursing credit will have to be dispensed with in times to come. Bringing the part of the population that has hitherto been denied access to banking services is now an area of focus for the banking industry. It is estimated that out of every 100 only 31 have a bank account. The process of bringing these people into the banking system known as financial inclusion has been made feasible by technology. User friendly ATMs operating on a biometric identification system as well as the use of mobile phones is part of these initiatives. Today it is understood that the rural segment is becoming a market with great potential. The focus is on providing what is known as soft infrastructure or information and communication technology in rural areas. This expands the reach of the banking system, government as well as private and public players.

3.5.5 MONITORING CREDIT QUALITY: As banks operate in a culture of greater efficiency and meet the demands of the market place, the emphasis will shift increasingly to the quality of assets of banks. This will call for improved monitoring of the credit being dispensed. More focused and better analytics will have to be employed to ensure this. Technology can be leveraged by banks to strengthen their information systems so that monitoring becomes more effective. 3.5.6 RISK MANAGEMENT: In the context of the increasingly demanding environment, risk management measures assume vital importance. The aim of risk management measures is to put in place a business model based on controlled growth with proper assessment of all the risk factors involved. Banks will devise an integrated approach to risk management. 3.5.8 BASEL II NORMS: The implications of globalization are felt in the movement towards Basel II capital norms. Developments of new financial products, globalization of institutions are all reflected in the need for risk sensitive capital requirements. This in turn will have implications for systems in banks. Analytics for credit appraisal, information and reporting systems, controls and other measures will have to be geared up to meet the requirements thrown up by the new accord. Though one part of the Basel II is to do with compliance it is also an opportunity for banks to improve their risk management systems and make use of capital more efficient. 3.5.9 CORPORATE GOVERNANCE: Globalization and the goal of banks to operate globally will call for better corporate governance practices. These practices will enable banks to compete with international players. The required changes will take the form of more transparent reporting. Banks will also have to put in place systems by which stakeholders will have better access to information. There will also be oversight by management, by individuals not directly involved with management but are stakeholders, by the regulator as well as traditional checks and balances such as auditors. 3.5.10 GROOMING THE NEXT GENERATION TALENT: With processes, systems, markets and the environment rapidly changing, the banking system will have to prepare itself for grooming the next generation of talent. Systems of recruitment, placement and incentivising talented personnel will be an other challenge. This will take the form of reskilling a rapidly aging work force and providing an environment that can attract and retain specialists and others in the younger generation of workers. Further, the system will have to provide a work culture where leadership skills are nurtured. These skills will go beyond the traditional parameters of professional management and encompass the demands of today for an entrepreneurial outlook and attitude.

3.5.11 CONSOLIDATION: The way forward will call for players who will be able to approach global standards in terms of size. While the present robust growth rates in the banking industry are likely to be maintained in the years to come, if we are to reach a global scale, organic growth alone may not be enough. The industry will have to prepare itself for consolidation. However, consolidation should result in synergies with regard to geographies, organizational cultures, technology and so on. The days ahead for Indian banks will be turbulent but interesting. Only banks that can adapt to change and take proactive steps will survive. Understanding the emerging trends, shaping strategies based on the anticipated changes and executing them effectively will be the key to success. Indias IT industry has demonstrated that we are capable of seizing opportunities and making a positive global impact. The Indian banking industry too will one day be the subject of another global success story.

Chapter 4

Company Profile

HSBC IN INDIA The anecdotes of the HSBC group in India can be traced back to October 1853 when the mercantile bank of India, London, and china was founded in Bombay. Starting with an authorized capital of Rs 5 Million, the Mercantile Bank soon opened offices in London, Chennai, and Colombo, Kandy followed by Kolkata, Singapore, Hong Kong and Shanghai by 1855. The acquisition in 1959 by the Hong Kong and Shanghai Banking Corporation Limited of the Mercantile Bank was a decisive factor in laying the foundation for todays HSBC Group. Founded in 1865 to serve the needs of the Merchants of the China coast and finance the growing trade between China Europe and the United States, HSBC has been an international bank from its earliest days. Through the 1990s, HSBC has vigorously developed its role as one of the leading banking and financial services organizations in the world. Its strategy of managing for value emphasis the groups unique balance of business and earnings between older, mature economies and faster-growing emerging markets. The organizations adaptability, resilience and commitment to its customers have further enabled it to survive through turbulent times and prosper through good times over the past 150 years. HSBC as a Group it is into other fields. In India 2566o employees are working in 89 offices of HSBC Group. HSBC Group entities in India are as follows: HSBC Asset Management (India) Private Limited HSBC Electronic Data Processing (India) Private Limited HSBC Insurance Brokers (India) Private Limited HSBC Operations and Processing Enterprise (India) Private Limited HSBC Software Development (India) Private Limited HSBC Private equity management (Mauritius) Private Limited HSBC Professional services (India) Private Limited HSBC Securities and capital markets (India) Private Limited HSBC The Hong Kong and Shanghai Banking Corporation Limited (HBAP)

HSBC Securities and capital markets (India) Private Limited: HSBC Securities and capital markets (India) Private Limited has two main business lines. Its institutional and proprietary broking business has seats on two of Indias premier stock exchanges, the Bombay Stock Exchange and the National Stock Exchange. It deals in Indian securities for both Indian and international institutions and for select retail clients and is

backed by an extensive research team. The corporate finance and advisory business offers a full range of integrated investment banking services in India and internationally i.e. this group provides both public and private sector with strategic financial advice and execution capability in the areas like Mergers & Acquisitions, Capital Market Transactions, privatizations etc.. HSBC Asset Management (India) Private Limited: HSBC Asset Management (India) Private Limited, a subsidiary of HSBC Securities and capital markets (India) Private Limited, is the investment manager to HSBC Mutual Fund. This commenced Asset management business in November 2002. In India it has 16 offices with an employee base of 151. HSBC Electronic Data Processing (India) Private Limited (HDPI): HSBC Global Resourcing is a fundamental component of HSBC to deliver share holder value and competitive service through efficient, cost effective operations. HSBC Global Resourcing in India employs over 11000 professional across 5 centers in Hyderabad, Vizag, Bangalore and Kolkata who provide customer service to HSBC customers in US, UK, European Union, Middle East and Asia Pacific. The company started its operations in July 2000 at Hyderabad. HSBC Insurance Brokers (India) Private Limited: HSBC Insurance Brokers (India) Private Limited was licensed in August 2003 to provide advice and innovative solutions in very specialist areas of business including claims handling services of international standards to HSBC Banks Corporate, Institutional, commercial, HNWI. It also works with the bank on various initiatives for the SME as well as PFS segments. HSBC Professional services (India) private Limited: HSBC Professional services (India) private Limited provides internal audit services to several of the HSBC Groups internal audit units worldwide, including reviews of the IT, Treasury, asset management, Private Banking and Insurance functions as well as centralized operations such as Group service centers. HSBC Software Development (India) private Limited: HSBC Software Development (India) Private Limited is also known as Global technology Center (GLT) was incorporated in the year 2002 in Pune. The center has been established to develop software solutions for the Groups global operations and to provide ongoing IT maintenance or support services, new application development, functional and technical architectural services with a special focus on Mainframe, AS400 Web, Vision+, Business intelligence etc. HSBC Private Equity Management (Mauritius) private Limited: HSBC Private Equity management ( India) Private Limited is a Private Equity investment advisor and a subsidiary of HSBC Private Equity Management (Mauritius) Limited. It manages the HSBC Private Equity India Fund limited. Apart from the HSBC Group, Shareholders in the fund include investors from the US, Europe, the Middle East and Asia.

HSBC The Hong Kong and Shanghai Banking Corporation Limited (HBAP): HSBC is mainly into three types of activities. They are as follows 1. Branch Banking 2. Wealth Management
3. Acquisition

Branch Banking: Branch Banking includes mass banking. This segment mainly composed of Banking assistants, Platform Services, Teller Supervisors. This serves up to only walk in customers. All Mass Banking transactions takes place here. To attain these services the minimum qualifications is to be required is, the customer should hold a Current/Savings account in HSBC. A minimum of Rs. 25000/- of Qtly balance is to be maintained. Savings account offers an interest of 3.5% and also provides the facility of ATM card to its customers and the important thing here is that unlimited numbers of transactions are allowed through ATM card in a financial year. But cash limit is Rs. 25000/- per day. HSBC provides the privilege to draw money from any VISA ATM at free of cost. Wealth Management: Wealth Management is most Prestigious service that is being offered by HSBC to its customers. If we observe, the disposable income of people in India has increased from last few years because of the IT & its ripple effects. So it made clear that its easy to earn money. But the question is that how to retain that? Discounting principle of economics speaks about importance of investment. But that was made should be wise and add value to the invested money. The days has gone to prefer investments. In fixed deposit or provident fund or in savings account as the returns are very less and cannot meet the financial goals of the investor. The days to invest in stock have come. But risk is directly proportional to the returns. So, though money, Inflation and Stock fluctuations, unknown requirements baffle to reach your financial goals. So keeping all these effects in mind we (HSBC) Came with wealth Management tools that helps you to achieve your financial goals in time and helps you to relieve from all these headaches. In a single sentence the area of our Expertise is Wealth Management. The following are the packages that are offered by us (HSBC) to its customers in the area of Wealth Management. 1. Financial Planning services 2. Power Vantage 3. Premier Financial Planning Services: Financial Planning Services is the tool which helps very much for a corporate employee. Though they knew about stock its not possible for them to closely observe the Dalal Street, so HSBC offers you tailor made financial plans to add value to your Assets. The uniqueness of our Bank is that it is the only PROCESS ORIENTED BANK in India. In this tool Financial Planning Manager who is an expertise in Financial Planning offer you tailor made plan. In

this category independent Advice, A close look at your investments, Monthly Reports to the customers are some of the privileges offered to its customers. All these services offered are absolutely at free of cost, as HSBC views its customer as KING. POWER VANTAGE: Power Vantage is another powerful tool that is offered to its customers. This offers all the privileges offered by Financial Planning Services more-over Power Vantage Relationship Manager who is an expert and experienced helps to plan the Assets. It provides 24/7 service, separate service desk in front office, separate teller counters to Power Vantage customers, the privilege of paying cheque payable at par, no bounce cheque protection, preferential processing fee on home loans and personal loans are the privilege that are provided by the Bank to its customers of Power Vantage and about Rs. 50000/- can be drawn from ATM. To be a Power Vantage customer he has to maintain Average Qtly balance of one lakh or should have relationship like home loan or minimum investment of Five lakh Rupees in Mutual Funds. Key PowerVantage Plus Benefits

Dedicated Relationship Manager - a PowerVantage Plus relationship manager is assigned to assist you in your banking and financial planning needs. E- Financial Planner2 - Online tool that helps you get a basic understanding of the financial planning process. Unlimited Free Transactions (Cash withdrawals and balance enquiries) at 23,500 HSBC and non- HSBC Visa ATMs in India using your PowerVantage debit card. Dedicated Service Desk and Teller Counters to assist you with your banking needs. Free Cheques payable at par (CPP) facility in all cities where HSBC has branches, helping you save on outstation clearing time and costs. Joining Fee Waiver and 50% off on the annual fee of your credit card3 Higher Cash Withdrawal limit of up to Rs. 50,000 across 20,000 HSBC and nonHSBC Visa ATMs in India and over 1 million ATMs overseas4. Free SmartVantage Magazine - A quarterly magazine that helps you keep yourself updated on the market scenario besides bringing you information on lifestyle interests that are relevant to your profile. Use your PowerVantage Plus Debit Card for purchases of up to Rs. 50,000 per day at over 3,20,000 merchant establishments in India and over 14 million such establishments overseas. PREMIER:

HSBC Premier is an individually tailored package of exclusive premier banking services that can be accessed from anywhere you choose to live or work. In this package a minimum Relationship of Rs.25 lakhs is to be maintained. This customer is treated as International customer. Simply one cannot say any financial service that is not provided to these customers. Premier Relationship Manager chalks out financial plan to these customers, these customers enjoy all the facilities provided under FPS, PV and more-over they have power to withdraw an amount up to one lakh per day from ATM. These customers enjoy the facility of HOME BANKING SERVICES which are absolutely free, Routine payments are made on your behalf. Thus the Bank feels that these customers are most important customers to the Bank. Advantages of banking with HSBC Premier include:

Just one call will initiate the process to set up an HSBC Premier account in your new country of residence. Your credit cards, debit cards and cheque books will arrive within 10 working days A local HSBC Premier Relationship Manager will assist you in planning for your financial needs View your HSBC Premier accounts from anywhere in the world with our unique Global View online banking service. ACQUISITION TEAM: The main function of this team is to acquire customers to the Bank this team is generally headed by Sales manager. WHY HSBC ONLY ???????????: Most of the people may say that many of the Banks offer many of these facilities and what makes HSBC to stand out from them. For this there are many specialties that makes us as outstanding. Some of them are as follows

1. HSBC is the one and only Process Oriented Bank in India. 2. Rated as safest bank in India by Business Today-04 3. HSBC is the only Bank that uses the advanced methods such as PERSONAL FINANCIAL REVIEW, FINANCIAL NEED PLAN, WEALTH EXPLORING PLAN to each and every customer and prepares a tailor made plan to individual to reach his Financial goals on time.

Financial Highlights
For the year 2007 Total operating income up 25.0 per cent to US$87,601 million (2006: US$70,070 million). Net operating income up 12.7 per cent to US$61,751 million (2006: US$54,793 million). Group pre-tax profit up 9.6 per cent to US$24,212 million (2006: US$22,086 million). Profit attributable to shareholders of the parent company up 21.2 per cent to US$19,133 million (2006: US$15,789 million). Return on average invested capital of 15.3 per cent (2006: 14.9 per cent). Earnings per ordinary share up 17.9 per cent to US$1.65 (2006: US$1.40). At the year-end Total equity up 17.8 per cent to US$135,416 million (2006: US$114,928 million). Customer accounts and deposits by banks up 23.3 per cent to US$1,228,321 million (2006: US$996,528 million). Risk-weighted assets up 19.7 per cent to US$1,123,782 million (2006: US$938,678 million). Dividends and capital position Total dividends declared in respect of 2007 of US$0.90 per share, an increase of 11.1 per cent over dividends for 2006; fourth interim dividend for 2007 of US$0.39 per share, an increase of 8.3 per cent. Tier 1 capital ratio of 9.3 per cent and total capital ratio of 13.6 per cent.

Chapter 5

Market Survey

5.1 MAJOR FINDINGS OF THE STUDY: 1. Majority of the people are interested in investing in real estates and bank deposits 2. While investing, People are taking into account the investment attributes like rate of return, risk factor, duration, tax, good track record of the company. Majority of the people are seeking to get 50% of the returns from their investments. 3. The people are interested to invest in less risky areas and willing to go for long term Deposits. The number of people, who are looking into the brand name and company refutation before investment stands 80%. 4. The people are more aware of bank deposits and real estates but still there are people who are not aware of bank deposits. So, the banks can cater that market. 5. There are more than 50% of the people are not aware of mutual funds. They are seeking to get awareness. People are aware of mutual funds but they do not know various schemes available. 6. Majority of the people are willing to get information through, T.V Advertisements, agents

5.2 ANALYSIS AND INTERPRETATION: INVESTMENT PATTERN OF INDIVIDUALS Frequency Bank deposits Shares and bonds Real estates Mutual funds Post office deposits Others Total 28 18 30 8 4 12 100 Percent 28.0 18.0 30.0 8.0 4.0 12.0 100.0 Valid Percent 28.0 18.0 30.0 8.0 4.0 12.0 100.0 Cumulative % 28.0 46.0 76.0 84.0 88.0 100.0

others 12.00% post offi ce depo si ts 4.00% bank deposits 28.00% mu tual funds 8.00% bank deposit s shares&bonds real est ates mut ual f unds post of f ice deposits others Pies show counts

real estates 30.00% shares&bonds 18.00%

The above diagram and cross table analysis shows that real estates(30%) is top most preferred one followed bank deposits (28%) shares and bounds 18%and mutual funds(8%). So banks have to concentrate on real estates by giving loans against land. The banks can introduces certain new schemes to capture the business.

5.2 Analysis of Investment Attributes:

Rate of Return Risk factor N 100 0 Mean Median Mode Std. Deviation Variance Skew ness Std. Error Skew ness Kurtosis Std. Error Kurtosis Range Sum Percentiles of of 1.82 2.00 2 .744 .553 .305 .241 -1.129 .478 2 182 25 1.00 50 2.00 75 2.00 100 0 1.48 1.00 1 .674 .454 1.084 .241 -.038 .478 2 148 1.00 1.00 2.00

Liquidity 100 0 2.08 2.00 2 .720 .519 -.121 .241 -1.043 .478 2 208 2.00 2.00 3.00

Tax shield 100 0 2.02 2.00 3 .974 .949 -.041 .241 -1.972 .478 2 202 1.00 2.00 3.00

Duration 100 0 2.18 2.00 3 .796 .634 -.336 .241 -1.342 .478 2 218 2.00 2.00 3.00

Transaction ease 100 0 2.10 2.00 2 .785 .616 -.179 .241 -1.349 .478 2 210 1.00 2.00 3.00

Good Track Record 100 0 2.68 3.00 3 .680 .462 -1.863 .241 1.837 .478 2 268 3.00 3.00 3.00

5.2.1 Correlations between Income Levels with Investment Attributes Control Variables Correlation Significance (2-tailed) Df Correlation Rate of Risk Return Factor 1.000 . 0 .304 .304 .002 97 1.000 Transaction Ease .190 .060 97 -.009 Good track Record .099 .330 97 .056

Liquidity -.102 .317 97 -.020

Tax shield -.012 .906 97 .039

Duration .241 .016 97 .111

Significance Df Correlation Significance Df Correlation Significance Df Correlation Significance Df Correlation Significance Df Correlation Significance Df

.002 97 -.102 .317 97 -.012 .906 97 .241 .016 97 .190 .060 97 .099 .330 97

. 0 -.020 .843 97 .039 .701 97 .111 .273 97 -.009 .933 97 .056 .582 97

.843 97 1.000 . 0 -.175 .083 97 -.047 .648 97 -.117 .249 97 -.051 .615 97

.701 97 -.175 .083 97 1.000 . 0 -.294 .003 97 -.281 .005 97 .013 .897 97

.273 97 -.047 .648 97 -.294 .003 97 1.000 . 0 .479 .000 97 .234 .020 97

.933 97 -.117 .249 97 -.281 .005 97 .479 .000 97 1.000 . 0 .103 .312 97

.582 97 -.051 .615 97 .013 .897 97 .234 .020 97 .103 .312 97 1.000 . 0

1=5000-10000. 2=10000-15000. 3=15000-20000. 4=20000-25000. 5=25000-35000. 6=Above 35000 5.2.2. Rate of Return

Frequency Vali 1%-30% d 30%--65% 65%--100% Total 38 42 20 100

Percent 38.0 42.0 20.0 100.0

F r e q u e n c y

50 40 30 20 10 0

1%-30%

30%--65%

65%--100%

Form the above diagram it is quite clear that most of the Peoples expected rate of return is 30%-65%.very less number of people are aiming to get 100% returns. The38%of the people are willing to invest in those area where they can get short term gains. 5.2.3 Risk factor
Risk Factor
Frequency
60

40

20

Frequency
0

Percent
30%--65% 62.0 65-100

Valid

0%-30 30%--65% 65-100 Total

0%-30 62

28 10 100

28.0 10.0 100.0

People are not willing to under go more risk. If we correlate with the above option, we can easily understand that majority want get, rate of return 50% by taking 25%of risk. The people (62%) are interested to invest in less risky areas.

5.2.4 Liquidity
Liquidity
50

Frequenc y Percent Valid 0%-30% 22 22.0 48.0 30.0 100.0

Frequency

40

30

30%-65% 48 65%100% Total

0%-30% 30%-65% 65%-100%

20

30 100

10

It is very descriptive that most of the people are going for more or most liquidity type of investment.30%of the people wants 100% liquidity. These people are suitable for bank deposits. Whereas 48% of them wants 30%-65% of liquidity. These people are suitable for shares and bonds. The rest of them (22%) can go for real estate where duration is mostly considered. 5.2.5 Tax shield
Tax Shield
F r e q u e n c y
50 40 30 20 10 0 0%-30% 30%-65% 65%-100%

Frequency Valid 0%-30% 46

Percent 46.0 6.0 48.0 100.0

30%-65% 6 65%100% Total 48 100

The figure shows clearly 48% of the people are willing to pay the TAX from their earnings. 46% of the people are not willing to pay tax. So the banks should Prepare new schemes i.e. like Tax fund in mutual funds, concentrate those people youre not willing to pay tax. 5.2.6 Duration

Duration
50 40

Frequency Valid 0%-30 30%-65% 65%-100% 24 34 42 100

Percent 24.0 34.0 42.0 100.0

Frequency

30 20 10

Total

The people are mostly interested in lone term investment i.e. 42%. 34% of the 0 people are willing to go for, medium term 0%-30 30%-65% 65%-100% investments. The banks can seek in to long term deposits and fixed deposit scheme as The people are willing. There is heavy opportunity for the banks to expand in this sector. 5.2.7 Transaction Ease Frequency
Transaction Ease
40 30 20 10 0

Percent 26.0 38.0 36.0 100.0

Valid 0%-30 30%-65% 65%100% Total

26 38 36 100

Frequency

0%-30

30%-65%

65%-100%

We know that as the procedure is more the security also is more. But people are seeking for less procedure transactions (36+38=74). The respondents, who are willing to under go more transactions, are only 26.

5.2.8 Good Track Record Frequency Percent 12.0 8.0 80.0 100.0

80
F r e q u e n c y

0%-30% 30%-65% 65%-100% Total

12 8 80 100

60 40 20 0
0%-30%

30%-65% 65%-100%

Here it is evident from the output that most of the people are looking at brand name and popularity of the company where they are interested in investing. The people who are interested in branded company are 80% which we have to consider most .so the company must try to build good name and fame among the customers.

Analysis using Techniques Chi-Square Analysis: 5.3. Awareness Of investment options 5.3.1 Bank Deposits HO: There is no relationship between bank deposits and people profession (The two variables are independent of each other). Ha: There is relationship between bank deposits and their profession (the two variables are dependent of each other). Bank Deposits 1%-25% Businessmen Employees Others Total 10 2 4 16 25%-50% 6 12 2 20 51%-75% 12 16 8 36 76%-100% 16 12 0 28 Total 1%-100% 44 42 14 100

Form the table it is clear that 64 out of 100 Chi-Square Tests for Bank deposits and awareness among people Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 16.350(a) 20.817 .986 100 df 6 6 1 Asymp. Sig. (2-sided) .012 .002 .321

a.3 cells (25.0%) have expected count less than 5. The minimum expected count is 2.24. The actual significance level (p-value) of 0.012 in the out put implies that the chances of getting a chi-Square value as high as 16.350 when there is no relationship between bank deposits and profession are less than 12 in 1000.in other words the apparent relationship between bank deposits and their profession revealed by the sample data is unlikely to have occurred because of chance. So we safely reject null hypothesis.

5.3.2 Shares and bonds SHARES AND BONDS 0% Businessmen Employees Others Total 10 4 2 16 1%-25% 10 6 2 18 26%-50% 4 10 4 18 51%-75% 8 10 6 24 76%-100% 12 12 0 24 Total 0%-100% 44 42 14 100

The people who invest in shares and bonds are mostly businessman (12) and employees (12).It is Clear from the table that most employees are more awareness of shares and bonds than businessman. Only 24% of the people have full knowledge about shares and bounds. Chi-Square Tests for Shares & Bonds Awareness among people HO: There is no relationship between awareness of shares & bonds and with people profession (the both the variables are independent of each other). Ha: There is relationship between awareness of shares & bonds and their profession (the both variables are dependent of each other). Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 13.561(a) 16.817 .217 100 df 8 8 1 Asymp. Sig. (2-sided) .094 .032 .641

a 5 cells (33.3%) have expected count less than 5. The minimum expected count is 2.24. The actual significance level (p-value) of 0.094 in the out put implies that the chances of getting a chi-Square value as high as 13.561 when there is no relationship between Awareness of shares and bonds and peoples profession are less than 94 in 1000. In other words the apparent relationship between Awareness of shares and bonds and their profession revealed by the sample data is likely to have occurred because of chance. So we safely accept null hypothesis.

5.3.3 Mutual funds MUTUAL FUNDS 0% Businessmen Employees Others Total 4 0 2 6 1%-25% 6 6 6 18 26%-50% 4 10 2 16 51%-75% 6 10 4 20 76%-100% 24 16 0 40 Total 0%-100% 44 42 14 100

The most of the people who invest in mutual funds are mostly businessman (24) then employees (16). The awareness of mutual funds among the employees is more when compared to businessmen. The people who have full knowledge about mutual funds 40 out of 100.but there are people (60) who have no idea about mutual funds. Chi-Square Tests for mutual funds and awareness among people. HO: There is no relationship between awareness mutual funds and with people profession (the both the variables are independent of each other). Ha: There is relationship between awareness of mutual funds and their profession (the both variables are dependent of each other). Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 23.030(a) 29.144 7.299 100 df 8 8 1 Asymp. Sig. (2-sided) .003 .000 .007

a 6 cells (40.0%) have expected count less than 5. The minimum expected count is .84. The actual significance level (p-value) of 0.003 in the out put implies that the chances of getting a chi-Square value as high as 23.030 when there is no relationship between awareness of mutual funds and profession are less than 3 in 1000. In other words the apparent relationship between awareness of mutual funds and their profession revealed by the sample data is unlikely to have occurred because of chance. So we safely reject null hypothesis. Symmetric Measures

Value Interval by Interval Ordinal by Ordinal N of Valid Cases a. Not assuming the null hypothesis. Pearson's R Spearman Correlation -.272 -.277 100

Asymp. Std. Error(a) Approx. T(b) .102 .100 -2.793 -2.858

Approx. Sig. .006(c) .005(c)

b. Using the asymptotic standard error assuming the null hypothesis. c. Based on normal approximation. 5.3.4 Real Estates REAL ESTATES 1%-25% Businessmen Employees Others Total 10 2 4 16 25%-50% 6 12 2 20 51%-75% 12 16 8 36 76%-100% 16 12 0 28 Total 1%-100% 44 42 14 100

The most of the people who invest in mutual funds are mostly businessman (24) then employees (16). The awareness of mutual funds among the employees is more when compared to businessmen. Chi-Square Tests for Real Estates and awareness among people. HO: There is no relationship between awareness of Real Estate and with people profession (the both the variables are independent of each other). Ha: There is relationship between awareness of Real Estate and their profession (the both variables are dependent of each other). Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association 16.350(a) 20.817 .986 df 6 6 1 Asymp. Sig. (2-sided) .012 .002 .321

N of Valid Cases

100

a. 3 cells (25.0%) have expected count less than 5. The minimum expected count is 2.24. The actual significance level (p-value) of 0.012 in the out put implies that the chances of getting a chi-Square value as high as 16.350 when there is no relationship between Real Estate and profession are less than 12 in 1000.in other words the apparent relationship between Real Estate and their profession revealed by the sample data is unlikely to have occurred because of chance. So we safely reject null hypothesis. Symmetric Measures Value Interval by Interval Ordinal by Ordinal N of Valid Cases Pearson's R Spearman Correlation -.100 -.106 100 Asymp. Std. Approx. Error(a) T(b) .102 .102 -.993 -1.052 Approx. Sig. .323(c) .295(c)

a Not assuming the null hypothesis. b Using the asymptotic standard error assuming the null hypothesis. c Based on normal approximation. 5.3.5 Post office deposits POST OFFICE DEPOSITS 0% Businessmen Employees Others Total 8 8 0 16 1%-25% 12 18 8 38 26%-50% 8 6 4 18 51%-75% 6 6 2 14 75%-100% 10 4 0 14 Total 0% 44 42 14 100

Chi-Square Test for post office deposits that with awareness among people. HO: There is no relationship between awareness of Post office deposits and with people profession (the both the variables are independent of each other). Ha: There is relationship between awareness of Post office deposits and their profession (the both variables are dependent of each other). Value df Asymp. Sig. (2-sided)

Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases

11.712(a) 15.431 1.892 100

8 8 1

.165 .051 .169

a 4 cells (26.7%) have expected count less than 5. The minimum expected count is 1.96. The actual significance level (p-value) of 0.165 in the out put implies that the chances of getting a chi-Square value as high as 11.712 when there is no relationship between post office deposits and profession are less than 165 in 1000.in other words the apparent relationship between post office deposits and their profession revealed by the sample data is likely to have occurred because of chance. So we safely accept null hypothesis. Symmetric Measures Value Interval by Interval Ordinal by Ordinal N of Valid Cases. a Not assuming the null hypothesis. b Using the asymptotic standard error assuming the null hypothesis. c Based on normal approximation. Pearson's R Spearman Correlation -.138 -.116 100 Asymp. Std. Approx. Error(a) T(b) .086 .095 -1.382 -1.157 Approx. Sig. .170(c) .250(c)

5.3.6 GOLD GOLD 0% Businessmen Employees Others Total 18 10 4 32 1%-25% 12 18 4 34 26%-50% 8 6 6 20 51%-75% 2 2 0 4 76%-100% 4 6 0 10 Total 0% 44 42 14 100

Chi-Square Test for Investments in Gold that with awareness among people. HO: There is no relationship between awareness of Investment in Gold and with people profession (The both the variables are independent of each other). Ha: There is relationship between awareness of Investment in Gold and their profession (The both variables are dependent of each other). Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 10.976(a) 11.983 .193 100 df 8 8 1 Asymp. Sig. (2-sided) .203 .152 .661

a 9 cells (60.0%) have expected count less than 5. The minimum expected count is .56. The actual significance level (p-value) of 0.203 in the out put implies that the chances of getting a chi-Square value as high as 10.976 when there is no relationship between Investment in Gold and profession are less than 203 in 1000. In other words the apparent relationship between Investment in Gold and their profession revealed by the sample data is likely to have occurred because of chance. So we safely accept null hypothesis.

5.4.0. Current Investments made by the customers.

mu tual funds

others
6 24.00%

10.00% mutual funds real estates bank deposits shares&bonds real estates 30.00% post off ice deposits 6

post office deposits 4.00% shares&bonds 2.00%

bank deposits 30.00%

The above pie diagram vividly shows that peoples current investment are mostly in real estates and bank deposits, i.e.30%. Where as only 10% of the total population are opting for mutual funds .so there is heavy chance for the banks to make investor to invest in mutual funds. It will be clearer from the above CHART. 5.4.1 Cross tabulation for the peoples current investment and their level of satisfaction. 1=notsatisfied.2=1%-25%.3=26%-50%.4=51%-75%.5=76%100% not satisfied Mutual funds Real estates Bank deposits 0 0 2 1%-25% 0 0 4 0 0 4 8 0 18 26%-50% 0 6 10 2 0 8 36 51%-75% 8 12 6 0 2 2 26 76%-100% 2 12 8 0 2 24 100 10 30 30 2 4 Total

Shares &bonds 0 Post office 0 deposits Others Total 10 12

76%-100%

51%-75%

26%-50%

1%-25%

not satisfied

mutual funds bank deposits post office deposits real estates shares&bonds

It is clear from the above that most of the people, who invested in real estates, are mostly satisfied customers. Customers satisfaction in banks stands 2 nd .the other thing is investment in share is not up to the mark. The investments made in post office deposits and mutual funds have given customers satisfaction. No customer felt dissatisfied with their investment in these areas. 5.5.1. ANOVA table shows customer satisfaction with their current investment Model 1 Regression Residual Total Sum of Squares 35.361 129.279 164.640 df 1 98 99 Mean Square 35.361 1.319 F 26.806 Sig. .000(a)

a. Predictors: (Constant), 1=mutual funds.2=real estates.3=bank deposites.4=shares and bonds.5=post office deposits.6=others b. Dependent Variable: 1=not satisfied.2=1%-25%.3=26%-50%.4=51%-75%.5=76%-100% 5.5.2.Coefficients. 1=mutual funds.2=real deposits.6=others estates.3=bank deposites.4=shares and bonds.5=post office

Model

Unstandardized Standardized Coefficients Coefficients t B Std. Error .250 Beta

Sig.

95% Confidence Interval for B Correlations Parti al Part B 5.20 Std. Error

Lower Upper ZeroBound Bound order 18.819 .000 4.215

(Constant)

4.712

-.347 a. 100% b.

.067

-.463

-5.177

.000

-.480

-.21

-.46 -.46 -.463

Dependent Variable: 1=not satisfied.2=1%-25%.3=26%-50%.4=51%-75%.5=76%Residuals Statistics (a) Minimum Predicted Value Residual Std. Predicted Value Std. Residual 2.63 -2.671 -1.556 -2.326 Maximum 4.36 2.370 1.347 2.063 Mean 3.56 .000 .000 .000 Std. Deviation .598 1.143 1.000 .995 N 100 100 100 100

a Dependent Variable: 1=not satisfied.2=1%-25%.3=26%-50%.4=51%-75%.5=76%-100% 5.6. Awareness of Mutual Funds

Aware n ess of M u tu al Fu n ds

NO
46.00%

yes
54.00%

The diagram is very clear that more 54% of then are aware of mutual funds. There are 46% of population still unaware of mutual funds, so there is potential market to be captured. So the bank can encourage the customer to invest in mutual funds. The above diagram well describes that most of the respondents are seeking for more awareness of mutual funds. if we clearly observe the 6 question in comparison with the above one it is very vivid that people who know the mutual funds still they are seeking for more information & awareness. So it strongly recommends mutual fund require more public awareness 5.8. Will you consider your investment in Mutual Funds?

30

Count

20

100.00%

10

16.00%
100%- 75%

18.00%
75% -50%

24.00%
50% -25%

8. 00%
25% -1%

34.00%
NOT SU R E

The above graph is describing that 34% of people who are not interested investing in mutual. Only 32% are willing to invest in mutual funds with out any agitation. There are 32%of them in confusion. 5.9. Will you suggest any of your friends and relatives to Investment options? 1=Very Likely. 2=Somewhat Likely. 3=Not Sure. 4=Somewhat Unlikely.5=Very Unlikely N Valid Missing Mean Median Std. Deviation Variance 100 0 2.04 2.00 1.286 1.655

5.9.1. Suggest any of your Friends and Relatives about known Investment Options Frequency Valid Very Likely Somewhat Likely Not Sure Somewhat Unlikely Very Unlikely 46 28 12 4 10 Percent 46.0 28.0 12.0 4.0 10.0 Valid Percent 46.0 28.0 12.0 4.0 10.0 Cumulative Percent 46.0 74.0 86.0 90.0 100.0

Total

100

100.0

100.0

The people are very keen that, even after knowing that if any thing negatively happens, the blame will be on them. If they know any investment option they are ready to inform to their relatives and friends. It is very descriptive from the above table that 46 of them are very likely to inform their relatives. There are very less number of people who are unwilling to inform their friends or relatives about the known investment options. 5.10. Sample according to Various Professions:
Other s 14.00%

Busi nessmen 44.00%

Employees 42.00% 42.0

Businessmen Em ploy ees Ot hers

The sample is 100, it covers 44 businessmen, 42 employees, and 14 other people. The customers who open bank a/c are mostly businessmen and then employees. So we have taken more samples from businessmen

5.10.1. Statistics 1=5000-10000.2=10000-15000.3=15000-20000.4=20000-25000.5=25000-35000.6=Above 35000 N Valid 100 0 Mean Median Mode Std. Deviation 1.66 1.00 1 .934

5.11.2. Sample Size by Income levels Frequency Valid 5000-10000 10000-15000 15000-20000 20000-25000 Total 60 20 14 6 100 Percent 60.0 20.0 14.0 6.0 100.0 Valid Percent 60.0 20.0 14.0 6.0 100.0 Cumulative Percent 60.0 80.0 94.0 100.0

5.11.3.The various incomes of respondents where the data is collected

Histogram
60

50

Frequency

40

30

20

10

0 0 1 2 3 4 5

1=5000-10000. 4=20000-25000.

2=10000-15000 5=25000-35000

.3=15000-20000 . .6=Above 35000

I have collected data from the above income levels. The most of the data have taken from the income group of 5000 to 10000.

APPENDICES APPENDIX- 1 Questionnaire to Find Out Peoples Perception: Hi !!! I am a student of DAVID MEMORIAL INSTITUTE OF MANAGEMENT doing a market research study on Investment Patterns of Individuals. I would like to assure you that there are no right or wrong answers. The only interest is your valuable opinion and I ensure that all information is only for academic purpose and will be kept confidential. Would it be convenient for you to spend a few minutes? 1) Where would you like to invest your money? Bank Deposits Mutual Funds 2) Shares and Bonds Post Office Deposits Real Estates Others ________________

Please indicate the following investment attributes according to your preference. ATTRIBUTES RATE OF RETURN RISK FACTOR LIQUIDITY TAX SHIELD DURATION TRANSACTION EASE GOOD TRACK RECORD 0%- 30% 30% - 65% 65%- 100%

3)

Please mark the following investment options on awareness scale. INVESTMENT OPTIONS BANK DEPOSITS SHARES AND BONDS MUTUAL FUNDS REAL ESTATES POST OFFICE DEPOSITS GOLD 0% 1%- 25% 26%- 50% 51%- 75% 76%-100%

4)

Please mention your current investment? Mutual Funds Shares and Bonds Real Estate Post Office Deposits Bank Deposits Others_____________

5)

How far you are satisfied with your investments? Not Satisfied 51%-75% 1%- 25% 76%- 100% 26%- 50%

6)

Are you aware of Mutual Funds? Yes No

7)

Please mark the following known Investment schemes in Mutual Funds? Growth Fund Prudence Fund Equity Fund Tax Saver Index Fund Capital Builder Fund Others______________ Balanced Fund

Premier Multi-cap Fund 8)

MF Monthly Income Plan

a) Do you think Mutual Funds require more public awareness? Yes No

b) If Yes, which type of awareness will increase the perception of the people on Mutual Funds? ----------------------------------------------------------------------------------------------------------------------------------------9) What is needed to make Mutual Funds more Investor-friendly? ----------------------------------------------------------------------------------------------------------------------------------------10) Will you consider your investment in Mutual Funds? 100%- 75% 24%- 1% 74%- 50% Not Sure 49%- 25%

11)

Will you suggest any of your friends and relatives to Investment options? Very Likely Somewhat Unlikely Somewhat Likely Very Unlikely Not Sure

Personal Details: Your Name Please: __________________________________ Gender: Male Female Age: ____ Phone Number: ____________________ E-Mail: Occupation: ______________________ Please mention your monthly income: 5,000- 10,000 10,000- 15000 15,000- 20,000 20,000- 25,000 25,000- 35,000 Above 35,000

Thank you for your valuable feedback

BIBLIOGRAPHY

HSBCBank.com

Investopedia.com Security Analysis and portfolio management-Book by prasanna chandra