Executive summary

Banking in India
Banking in India was fairly mature in terms of supply, product range and reach- even though reach in rural India and to the poor still remains a challenge. Banking in India in the modern sense originated in the last decades of the 18th century .The first banks were Bank of Hindustan (1770-1829) and The General Bank of India, established 1786 and since defunct. In 1969 the Indian government nationalized all the major banks that it did not already own and these have remained under government ownership. They are run under a structure known as 'profit-making public sector undertaking' (PSU) and are allowed to compete and operate as commercial banks. The Indian banking sector is made up of four types of banks, as well as the PSUs and the state banks; they have been joined since 1990s by new private commercial banks and a number of foreign banks.

History
Post-Independence The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing banking activities for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included: The Reserve Bank of India, India's central banking authority, was established in April 1935, but was nationalized on 1 January 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b). In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India". The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors. Nationalization in the 1960s Despite the provisions, control and regulations of Reserve Bank of India, banks in India except the State Bank of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the nationalization

of the banking industry. Indira Gandhi, the then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued an ordinance ('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969')) and nationalized the 14 largest commercial banks with effect from the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the country. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969. Liberalization in the 1990s In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, UTI Bank (since renamed Axis Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India , which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4– 6–4 method (Borrow at 4%; Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more. Current period By 2012, banking in India was generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connexion with housing, vehicle and personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide. Major players in the banking industry

How does the industry work?

Axis bank
Introduction of axis bank
Axis Bank is the third largest private sector bank in India. Axis Bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporate, SME, Agriculture and Retail Businesses. The Bank has a large footprint of 1787 domestic branches (including extension counters) and 10,363 ATMs spread across 1,139 centres in the country as on 31st December 2012. The Bank also has 7 overseas branches / offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai, DIFC - Dubai and Abu Dhabi. Axis Bank is one of the first new generation private sector banks to have begun operations in 1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust of India (SUUTI) (then known as Unit Trust of India),Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC), National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The shareholding of Unit Trust of India was subsequently transferred to SUUTI, an entity established in 2003. With a balance sheet size of Rs.2,85,628 crores as on 31st March 2012, Axis Bank is ranked 9th amongst all Indian scheduled banks. Axis Bank has achieved consistent growth and stable asset quality with a 5

year CAGR (2007-12) of 31% in Total Assets, 30% in Total Deposits, 36% in Total Advances and 45% in Net Profit.

Business segments of axis bank
RETAIL BANKING BUSINESS BANKING CORPORATE CREDIT TREASURY INTERNATIONAL BANKING SMALL AND MEDIUM ENTERPRISES INFORMATION TECHNOLOGY AGRICULTURE FINANCIAL INCLUSION HUMAN RESOURCES Retail banking Axis Bank has developed a strong retail banking franchise over the years. Retail Banking is one of the key drivers of the Bank’s growth strategy and it encompasses a wide range of products delivered to customers through multiple channels. The Bank offers a complete suite of products across deposits, loans, investment solutions, payments and cards to help customers achieve their financial objectives. The Bank focuses on product differentiation as well as a high level of customer-service to enable it to build its retail business. The Bank has continued to develop its risk management capabilities in Retail business, both from a credit and operations risk standpoint. The growth areas identified by the Bank are in the areas of residential mortgages and passenger car loans. Of the total retail loans portfolio, 88.47% is in the form of secured loans (residential mortgages and auto loans). The retail business of the Bank is supported by innovative services and alternate channels. It include ATM network, internet banking, mobile banking & phone banking which provide convenience of transactions to customers.

Business banking
Business Banking leverages the Bank’s strengths – a well distributed network of branches and a strong technology platform to offer the best in transaction banking services. The Bank offers a range of current account products and cash management solutions across all business segments covering corporates, institutions, central and state government ministries and undertakings as well as small and retail customers. The Bank is one of the top CMS providers in the country. The Bank acts as an agency bank for transacting government business offering services to various Central Government Ministries / Departments and other State Governments and Union Territories.

Corporate credit
Axis Bank has built a strong corporate banking franchise across corporate, liability and asset businesses. Axis Bank provides customized structuring and financing solutions in a timely and comprehensive manner to its corporate customers with a focus on building out a high quality credit portfolio. The Bank is a market leader in Debt Capital Markets and loan syndication business across segments, sectors and geographies. The Bank also provides full range of Treasury and Trade Finance solutions to its corporate

The relationship based approach . Dubai and Abu Dhabi) with presence in six countries. which is expected to contribute significantly to economic growth in future. gaining market share and continuing to be among the top five banks in terms of forex revenues. project completion and commencement of operations. The Bank’s treasury business has grown substantially over the years. and alliances with banks and exchange houses in the Middle East provide the support for leveraging the business opportunities emanating from the large NRI Diaspora present in these countries. Bank’s infrastructure business includes project and bid advisory services. the Bank’s Gulf Co-operation Council (GCC) initiatives in the form of representative offices in Dubai and Abu Dhabi. the Bank launched the Axis Infra Index.clients. debt syndication. The business approach towards this segment. which manages the Bank’s funds across geographies. the Bank also offers retail liability products from its branches at Hong Kong and Colombo. covering both domestic and global markets. It provides a gamut of products for exports and imports as well as retail services. While corporate banking. The Treasury plays an important role in the sovereign debt markets and participates in the primary auctions held by RBI. Hong Kong. The Bank offers technology enabled transaction banking and cash management services to customers across Government. The Bank has emerged as one of the leading providers of foreign exchange and trade finance services. Treasury option The Bank has an integrated Treasury. project lending. DIFC (Dubai) and Colombo. Its cutting edge technology provides comprehensive and timely customer services. trade finance. treasury and risk management solutions are the primary offerings through the branches at Singapore. The Bank now has a foreign network of four branches (Singapore. who are venturing abroad or require non-rupee funds for domestic projects. Small and medium enterprise The Small and Medium Enterprises (SME) segment is a thrust area of the Bank. as a composite measure of investor confidence. is to build relationships and nurture the entrepreneurial talent available. The Index. securitization and structured finance. In October 2010. The Bank has been exploring various cross-border markets to augment resources and support customer cross-border trade. DIFC (Dubai) and Colombo (Sri Lanka)) and three representative offices (Shanghai. International banking The international operations of the Bank form a key enabler in its strategy to partner with the overseas growth potential of its domestic clientele. It is designed to capture the evolving fundamentals of the sector and is updated and disseminated on a quarterly basis. comprises four components: flow of equity and debt funds into infrastructure sectors. It also actively participates in the secondary government securities and corporate debt market. project structuring and due diligence. Hong Kong. output related to infrastructure segments and regulatory and policy developments relevant for the sector. financial institutions and corporate segments. The foreign exchange and money markets desk is an active participant in the inter-bank/ FI space. Further.

The Bank has launched the Business Process Management System. Chhota FD. project finance as well as trade finance facilities to SMEs. Employee engagement and learning. the Bank has opened over 4. and Chhota SIP. The Bank has also adopted a value-chain approach. including setting up of Board and Executive level committees and working on IT operations and other key areas. The Bank has launched ‘Business Gaurav SME Awards’ in association with Dun & Bradstreet to recognise and award achievers in the SME space. wherein end-to-end solutions are being provided for various stakeholders.607 villages through a network of 15 Business Correspondents and nearly 6. The Bank has segmented its SME business in three groups: Small Enterprises. Financial inclusion The Bank perceives financial inclusion (FI) not as a corporate social responsibility or a regulator driven initiative but as a large business opportunity that lies untapped in the rural and unexplored section of the urban market. Agriculture The Bank continues to drive and expand the flow of credit to the agricultural sector. The Bank has a strong presence in the Electronic Benefit Transfer (EBT) space and has covered around 6. leadership development. a reusable system. Products and solutions are created specifically with simple features and offered at affordable rates to rural customers.7 million beneficiaries. The Bank has been one of the first few banks to have tied-up with telecom companies to offer remittance led financial inclusion services on the mobile platform. The Bank has also focused on improving the governance process in IT. The Bank also has a range of other customised products for this customer segment like different variants of Axis Uday No Frills Savings Accounts. enhancing productivity and building multiple communication platforms thus occupied . 401 branches of the Bank have dedicated officers for providing farm loans.enables the Bank to deliver value through the entire life cycle of SMEs. Human resources The Bank aims in creating and developing human capital to realise its vision of nurturing a mutually beneficial relationship with its employees. Information technology The Bank continues to focus on introducing innovative banking services through investments in scalable and robust technology platforms that delivers efficient and seamless services across multiple channels for customer convenience and cost reduction. The Bank extends working capital. It also offers various customized solutions to meet the regional requirements. Medium Enterprises and Supply Chain Finance. The Bank has undertaken various steps in order to align itself towards RBI guidelines on security and governance.000 customer service points. Till March 2012. Chhota RD. which helps to build process efficiencies across various areas of operations.4 million No-Frills accounts in over 7.800 villages across 19 districts and 9 states till date with over 3.

58% 0.00% Foreign Shareholders 47.38% 5.74% 3.85% 0. The equal opportunity employer policy of the Bank contributes strongly to the Axis Bank brand.centre stage in the Bank’s HR objective.27% Domestic Shareholders 8 Indian FIs and Banks 9 Indian Mutual Funds 10 Indian bodies corporate 11 Indian residents 15.56% 1. Axis Bank has a young workforce with an average age of 29 years. and creating ‘Axis Bankers’.07% . Shareholding Pattern As on 31/03/2011 Promoter Shareholding 1 Administrator of the Specified Undertaking of the Unit Trust of India .71% 1. NIIT. IFBI andGuwahati University. So far.22% 23.(SUUTI) 2 Life Insurance Corporation of India 3 General Insurance Corporation of India 4 The New India Assurance Company Limited 5 National Insurance Company Limited 6 The Oriental Insurance Company Limited 7 United India Insurance Company Limited 37.68% 9.94% 0.34% 0. the Bank launched Axis Academic Interface Program (AAIP) with Institutions to offer youngsters an understanding about the financial services industry. In a major initiative. the Bank has tied up with Manipal University.59% 5. The Bank continues to maintain a strong employer brand in the financial services sector especially on the campuses of the premier business schools of the country.

Prithviraj Shri V. Patil Smt.12 FIIs 13 FDI (GDR) 14 Foreign Bodies – DR 15 Foreign Banks/Foreign Nationals 16 Non-Resident Indians 37.V. Shikha Sharma Shri S.00% 0. Kaundinya Chairman Managing Director & CEO Deputy Managing Director Director Director Director Director Director Director Director .19% 0. Chakrabarti Shri J. Subbiah Shri K.B. R. R. K.R.68% 9. N.H. Vaish Shri M.16% Total 100% Board of directors The members of the board are: Dr.L.04% 0. Adarsh Kishore Smt. Rama Bijapurkar Shri R. Varma Dr.

3. First Indian bank to launch the travel currency card 4. Roongta Shri Prasad R.Manmohan Singh. The Bank and Visa International launch mobile refill facility for all Visa card holders in India 1. Mathur Shri S. Menon Director Director Director Shri R. Government of India. The first Indian Bank to successfully issue foreign currency hybrid capital in 2003 2005 2006 . Bank launches Corporate iConnect . K.Shri S. empowered employees and smart use of technology Core Values Customer Centricity Ethics Transparency Teamwork Ownership Key milestones 1993 1994 2001 2002 1.10. the first ATM at any post office in the country 3. Tamil Nadu 2. The Bank opens its 1000th ATM 1. This ATM is at the highest altitude in India. Axis Bank (erstwhile UTI Bank) opens its Registered Office in Ahmedabad and Corporate Office in Mumbai 1. Bank gets listed on London stock exchange 2. Deposits base crosses Rs. The Bank opens an ATM at the GolDak-Khana. N. Opens it's first international branch at Singapore 2. The Bank’s debit card base crosses the one million mark 2. B.the internet banking facility for corporate customers 1. (New Delhi GPO). Bhattacharyya Director Vision 2015 To be the preferred financial solutions provider excelling in customer delivery through insight. Banks’ first branch inaugurated at Ahmedabad by Dr. Banks’ 100th branch opens at Tuticorin.000 crores 1. The Bank opens its ATM at Thegu near the Nathula Pass in Sikkim. 1. then Hon'bleFinance Minister.

100 Crore. UTI.02%Erstwhile Unit Trust of India was set up as a body corporate under the UTI Act. 1. the international market Opens Representative Office in Shanghai Launches credit card business Opens the first of it's kind Priority Banking lounge in Pune Launches Platinum Credit Card.Largest ATM network amongst private sector banks in India Reached 2 lakh installed EDC machines – the highest for any bank in India Becomes the first Bank in the world to reach $2 billion loading on prepaid Travel CurrencyCards Management system of axis bank Promoters: Axis Bank Ltd. to look after and administer the schemes under UTI where Government has continuing obligations and commitments to the investors.India's first and only Indian currency prepaid travel card for foreign nationals The Bank inaugurates Axis House. LIC . 1963. India's first EMV chip based card Opensits Dubai Representative Office Opens it's 1000th branch at MET Bandra Reclamation. Mumbai Launches India travel card . with UTI contributing Rs. 1. In December 2002. The Government of India has currently appointed Shri K. 2002 by the Parliament. Opens the 10. 1963 was repealed with the passage of Unit Trust of India (Transfer of Undertaking and Repeal) Act. N. 4. 3. 6.2008 2010 2011 3.60% ARS Bonds with a Unit Capital of over Rs. who manages assured return schemes along with 6. Mumbai. the Undertaking specified as UTI I has been transferred and vested in the Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI). The Bank was set up with a capital of Rs. with a view to encourage savings and investment.Rs. 2012 1.75% US-64 Bonds.5 Crore each SUUTI .59 crores. 1. 14167. 2. 2. paving the way for the bifurcation of UTI into 2 entities. 1. has been promoted by the largest and the best Financial Institution of the country. the UTI Act. Services offered by axis bank Accounts • EasyAccess Savings Account • Prime Savings account • Salary Savings Account • Power salute: A salute to the defence forces . 115 crore.Shareholding 27. 2. In accordance with the Act. 5.000th ATM . UTI-I and UTI-II with effect from 1st February 2003. Prithviraj as the Administrator of the Specified undertaking of UTI. 7. which it will uphold. its new Corporate Office at Worli.5 Crore and GIC and its four subsidiaries contributing Rs.

• Azaadi • Senior Privilege Savings Account • For the woman of today – Smart Privilege Savings Account • A complete banking solution for Trusts. Government Bodies.   Ladies first account Youth account Deposits •Fixed Deposits •Recurring Deposits •Encash 24 •Tax Saver Fixed Deposit Loans Welcome to the wide range of Axis Bank's Loan products. Axis Bank provides • Axis Bank Meal Card . Put an end to your financial troubles. Associations. • • • • • • • • Power Homes Power Drive Personal Power Study Power Asset Power Two Wheeler Loan Loan Against Security Consumer Power Cards Apart from Gold & Silver credit cards. Societies. Section 25 companies and NGOs • Pension Savings Bank Account.

• • Axis Bank Gift Card LIC co-branded Annuity Card  TCDC Capital Markets • • • • • • • • Debt Solutions Equity Solutions Private Equity. Mergers & Acquisitions Advisory Services Trusteeship Services Depository Services Capital Market Funding e-Broking Credit • • • • • • • • Working Capital Finance Term Loans Trade Services and Trade Finance Structured Finance Supply Chain Management Overseas Financing and Transactions SME Standard Products Power Trac Portfolio Management .

The idea of Portfolio management is to overcome the pace of change in business landscape and provide investment avenues to stay ahead of the risk return curve and generate positive returns consistently over a period of time. PMS is managed by a professional managers. Axis Bank offers PMS to address varying investment preferences. matching investments to objectives. But managing one’s own investments can be an extremely challenging task. It is all about strengths. asset allocation for individuals and institutions. Financial markets today offer enormous growth potential. During times of intense market volatility. it has potential to address the personal preferences tailored into the investment portfolio giving the freedom and flexibility required for achieving the financial goals. it can be difficult to know what one should do. Staying calm. growth vs. keeping ones sense of perspective. . PMS pays attention to details. Portfolio Management Services Portfolio Management Services (PMS) is a sophisticated investment vehicle that offers a customized investing into stocks. equity. opportunities and threats in the choice of debt vs.The Portfolio Management is the art and science of making decisions about investment mix and policy. weaknesses. fixed income products. international. Risk Control – The investment manager employs a qualified research team to establish the investor's investment strategy and providing the information to the investment manager. Though. and portfolios are customized to suit the unique requirements of investors. This also helps in reducing the investment related risks up to significant extent. to meet specific investment objectives. domestic vs. safety. Continuous Monitoring – It is important to recognize that portfolios need to be constantly monitored and periodic changes should be made to optimize the results. As a focused service. cash. and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk. other structured products and mutual funds units etc. Benefits of PMS PMS benefits investor in following ways: Professional Management – PMS is provided by qualified and professional investment managers with the objective to deliver consistent long term performance while controlling risk. and balancing risk against performance. taking a rational look at the investments and seeking the advice of a professional are all smart strategies one can follow.

The account statements will give investor a complete picture regarding the securities held on his behalf. He can create a reasonable concentration in the investor portfolios by investing disproportionate amounts in favour of compelling opportunities.Discretionary. Investors will get regular statements and updates from the investment manager. The investment manager provides various types of reports to his investors on a regular basis. Customized Advice – PMS gives select investors the benefit of tailor made investment advice designed to achieve their financial objectives. All kinds of direct taxes (Income Tax) have to be borne and paid by the investor. Transparency – PMS provides comprehensive communications and performance reporting. investor may gain direct personalized access to the professional investment managers who actively manage his investment portfolio. . Personalized Approach – In PMS. However the execution is done by the portfolio manager. and risk taking capacity. The plan is tailor made and is designed after the detailed analysis of client's investment goals. the portfolio manager recommends the investment ideas. he implements the investment decisions. Non-Discretionary and Advisory Discretionary: This service gives the flexibility and freedom to investment manager to operate on behalf of the investor fully. current holdings of the investment portfolio and realized Profits and Losses to name a few. He takes care of all the administrative aspects of the investor's portfolio with a periodic reporting on the overall status of the portfolio and performance. Appropriate time to execute the transaction is left up to the investor. bonds or equity funds. saving pattern. These reports are related to the transactions made on their behalf. The portfolio manager can choose the investment avenue and may decide the appropriate time for the transaction. Types of PMS PMS is of 3 types. Flexibility – The Portfolio Manager has fair amount of flexibility in terms of investing patterns and procedures. Hassle Free Operation – The investment manager gives the investor a customised service. Non-Discretionary: Under this service. These reports help investor in understanding and measuring their tax liabilities. Further.Asset Allocation: PMS helps in allocating savings of a client in terms of stocks.

Inflation Portfolio design Before designing a portfolio one will have to know the intention of the investor or the returns that the investor is expecting from his investment. Amount of liquidity required. 4. 3. matters a lot. Risk taking appetite. This can be more appropriately understood from the figure drawn below. 5.Advisory: Under this category of services. Returns: returns expected/ required Investment Objective. 2. The choice as well as the execution of the investment decisions rest solely with the Investor. Time Horizon. This becomes an important point from the point of view of the portfolio designer because if the investor will be ready to take more risk at the same time he will also get more returns. . Factors 1. the portfolio manager only suggests the investment ideas. This will help in adjusting the amount of risk. In India majority of PMS providers offer Discretionary Services. Age: At which stage of life an individual is.

From the above figure we can see that when the investor is ready to take risk of M1. Investors willing to take moderate risk and at the same time are also anticipating moderate returns. and if the investor is taking the risk of M2. 3. Investors willing to take high risk and at the same time are also anticipating high returns. From the above discussion we can conclude that the investors can be of the following three types: 1. Investors willing to take low risk and at the same time are also anticipating low returns. he will be getting more returns i. he is likely to get expected return of R1. As one increases the other will also increase in same of different proportion and same if one decreases the other will also decrease.e. So we can conclude that risk and returns are directly related with each other. R2. Age Portfolio 80% in stocks or mutual funds Below 30 10% in cash 10% in fixed income 70% in stocks or mutual funds 30 to 40 10% in cash 20% in fixed income 60% in stocks or mutual funds 40 to 50 10% in cash 30% in fixed income 50% in stocks or mutual funds 50 to 60 10% in cash 40% in fixed income . 2.

not your fixed income. Your risk profile will give you more equities or more fixed income depending on your aggressive or conservative bias. They don’t have to spend much on the investment operations. it's important to always have some equities in your portfolio (or equity funds) no matter what your age. Also. people want to benefit from the windfall gains which arise in this market. then make sure you have at least five different maturities to spread out the interest rate risk. Apart from that. investment banking services also help companies in gaining cash through securities. However. the fixed income of your portfolio should be diversified.40% in stocks or mutual funds 60 above 10% in cash 50% in fixed income These aren't hard and fast allocations. So. If inflation roars back. In India. The companies get . this will be the portion of your investments that protects you from the damage. just guidelines to get you thinking about how your portfolio should look. investment banking assures that the investors get some adequate advice. Impact of Portfolio Management on Indian Trading Investment in stock markets has become such a huge passion since the past few years. If you buy bonds and debentures directly or if you invest in FDs.

companies can now have easy acquisition of capital for financing production. The capital. A company can’t grow when it does not invest in the investment projects which can yield returns through production. which stay unfulfilled due to the lack of the capital. So. They have diversified portfolios. They can get adequate returns in spite of market crashes. Most of the NRIs need help when it comes to making right investment decisions in the local markets. Investment banking India has expanded because so many companies need money for financing their goals and even acquisition. Portfolio investment is the right way to get constant returns out of the stock market. In economics. portfolio management can help an investor in knowing what are the right sell and buy prices for a specific stock. This is not the case when he operates without any software. Now. They need someone who can guide them through the entire investment procedure. For example. an investor knows when to quit buying. Is quite important so that projects are easily established. working capital and trade finance. when the markets are so volatile. The capital may be required for various purposes. are expected to fall suddenly after rising. which imply that even inspite of a losing market. Therefore. So. which include long term capital.help because they are able to raise capital from the market in just the right way. such NRIS also do not want to exclude themselves from the booming Indian markets. Investment banking firms also have other goals. get such guidance and proceed in the stock markets without any hitch. investment is the amount purchased per unit time of goods which are not consumed but are to be used for future production. It is also noteworthy that such returns get them so much security. get fulfilled with such investment companies. such companies help targets in terms of their strategy identification. Although they have the right quantity of capital. The companies have a qualified team of professionals which ensures that the clients don’t face any problems in arranging capital. they should know which companies could warrant them excellent gains in the end. The growth targets of the companies. Portfolio management is the basic feature of both online and offline trading companies. they dont suffer much. which include their investment guidance for NRIs. they are offered portfolio management services which can guide them adequately. They are even provided help in the introduction of foreign currency convertible bonds in the trade. Such guidance is known as NRI services. Examples include railroad or factory . Such services can assure them constant returns from their portfolios inspite of the changing market scenario. So. when the prices of certain stock. The professionals of such companies are fully trained in executing a well-planned strategy. Meaning of investment Investment has different meanings in finance and economics. which is to be used for term loans. So.

Investment is involved in many areas of the economy. to make large scale investments. which may be large and varied. Investments are often made indirectly through intermediaries. Inventory investment is the accumulation of goods inventories. This is the opposite of trading or speculation.. such as business management and finance whether for households. These institutions may pool money received from a large number of individuals into funds such as investment trusts. It generally does not include deposits with a bank or similar institution. Investment in human capital includes costs of additional schooling or on-the-job training. It generally does not include deposits with a bank or similar institution. The term investment is usually used when referring to a long-term outlook. and/or Regular income must be available from the securities or asset. Financial assets take many forms and can range from the ultra safe low return government bonds to much higher risk higher reward international stocks. subject to charges levied by the intermediary. SICAVs etc. In finance. which are short-term practices involving a much higher degree of risk. such as pension funds. . investment is the purchase of an asset or item with the hope that it will generate income or appreciate in the future and be sold at the higher price. Investment usually involves diversification of assets in order to avoid unnecessary and unproductive risk. and insurance companies. or governments. A good investment strategy will diversify the portfolio according to the specified needs. brokers. unit trusts. firms. banks. Investment is a conscious act of an individual or any entity that involves deployment of money (cash) in securities or assets issued by any financial institution with a view to obtain the target returns over a specified period of time. Each individual investor then has an indirect or direct claim on the assets purchased. it can be positive or negative.construction. In measures of national income and output Investment is related to saving and deferring consumption. and it can be intended or unintended. Types of Investment Different types or kinds of investment are discussed in the following points. Target returns on an investment include: Increase in the value of the securities or asset.

in order to produce more consumer goods. at high levels of income entrepreneurs are induced to invest more and vice-versa. roads. Autonomous Investment remains constant irrespective of income level. Induced Investment Investment which changes with the changes in the income level. That is. At a high level of income.1. Autonomous Investment Investment which does not change with the changes in income level. Which means even if the income is low. public buildings and other parts of Infrastructure. Investment remains the same. The Government normally makes such a type of investment. is called as Induced Investment. . the autonomous. It refers to the investment made on houses. is called as Autonomous or Government Investment. Induced Investment is positively related to the income level. Consumption expenditure increases this leads to an increase in investment of capital goods. 2.

construction of public utilities like schools. etc. is considered as Real Investment. 4. old shares. In unplanned type of investment. 7. 5. Planned Investment Investment made with a plan in several sectors of the economy with specific objectives is called as Planned or Intended Investment. roads and railways. Unplanned Investment Investment done without any planning is called as an Unplanned or Unintended Investment. factory buildings..3. Planned Investment can also be called as Intended Investment because investors while making investment make a concrete plan of his investment. Gross Investment Gross Investment means the total amount of money spent for creation of new capital assets like Plant and Machinery. Real Investment Investment made in new plant and equipment. increases employment. Financial Investment Investment made in buying financial instruments such as new shares. production and economic growth. production and economic growth of the nation. Under this type of investment. economic growth. It is the total expenditure made on new capital assets in a period. cannot be considered as financial investment. 6. However. securities. the investor may not consider the specific objectives while making an investment decision. bonds. etc. etc. Factory Building. In financial investment. the money used for purchasing existing financial instruments such as old bonds. investors make investment randomly without making any concrete plans. It is a mere transfer of a financial asset from one individual to another. etc. plant and equipments purchased. etc. Real investment in new machine tools.. is considered as a Financial Investment. money invested for buying of new shares and bonds as well as debentures have a positive impact on employment level. Thus real investment has a direct impact on employment generation. Hence it can also be called as Unintended Investment. etc. .

Hence. 5 lac may Need Rs.100 after 2 years. The earning from employment should. investing today is important and one should not let money remain idle for long. Retirement planning: . The goal which may be fulfilled today by Rs. Increase in working population. the goal will not be met adequately. We feel investments are risky and thus       . Savings by themselves do not increase wealth. Also.Why does one need to invest? To meet a future need. 10 lac after 10 years due to inflation. usually a year. where as a younger person in accumulation phase may be more concerned with growth of his investment for creating a corpus for his retirement. thereby making it more valuable. Net Investment Net Investment is Gross Investment less (minus) Capital Consumption (Depreciation) during a period of time. it becomes important to Plan for their future value rather than their current value. the trend shows longer life expectancy. Apart from this. these must be invested in such a way that the principal & income will be adequate for a greater number of retirement years.Protecting your capital is the most important aspect of investment. If we plan for accumulating Rs. A retired person may be more interested in regular cash flows to cater for his day to day needs. Determining Investment Needs: . Returns:. Inflation is a very big factor in this. Lump-sum Investments & Regular Investments:-As and when a person is in receipt of lump-sum monies.8.The return from the investment could be in the form of capital gains.Time value of money is the concept that teaches us that Rs. 100 in hand is better than Rs . or both.100 can be Earned in 2 years. he should ensure he is investing it according to his requirements. therefore. there should be a regular investment being made to ensure he is disciplined in his saving habits. Estimating Future Value of Goals: . 5 lac. cash flows. be calculated in such a manner that a portion should be put away as a savings. Capital Protection:. Importance of Investment  Utilizing Time Value of Money:. A person sacrifices Use of money today for a higher gratification at a later date. It must be noted that a part of the investment is meant for depreciation of the capital asset or for replacing a worn-out capital asset. Hence it must be deducted to arrive at net investment. as the interest on this Rs. By nature majority of us in India are risk averse. Identify the Need/ goal and you can evaluate where the investment needs to be done.Investment decision has become significant as people retire between the ages of 55 & 60.When an individual is planning for future goals. proper planning for life span & longevity have ensured the need for balanced investments.

For example. rather than investing Rs. which is going to reduce our returns. Different types of investments promise different rates of return. while investing Rs.It is the ability to convert an investment into cash quickly.All investments are characterized by the expectation of a return. without the loss of a significant amount of the value of the investment. higher the risk. Anything and everything we do have some kind of risk associated with it. which reduces the value of our money every day. resulting in erosion in the purchasing power of money. When prices rise. This is a loss in the real value of money. Risk is part of our lives. Even if we cross a road. 15 lacs in senior citizen scheme.15 lacs in one go.This is the ability to convert part of the investment asset into cash. Any amount which may be required at a short notice should only be invested in an investment vehicle with high liquidity. inflation is the rise in general level of prices of goods and services in an economy over a period of time. 73 Before committing your capital to any investment vehicle. Inflation:. The return may be received in the form of yield plus capital appreciation. investments are made with the primary objective of deriving a return. more is the reward expected.    leave most of our saved money in instruments earning low income. 2-3 lacs. the maturity period & a host of other factors. it is preferable to consider your financial needs. Liquidity:. without liquidating whole of the asset. The real return from any investment vehicle would be the return after taxation and inflation. without understanding the effect of inflation. while choosing an investment vehicle. one could increase the divisibility without affecting returns by dividing this investment in ticket size of Rs. Divisibility may be an important consideration for many investors.Income from our investment assets is liable to taxation. In fact. Divisibility:. . goals.By definition. Risk and reward go hand in hand. The dividend or interest received from the investment is the yield. each unit of currency buys fewer goods and services. Taxation:. there is risk of meeting with an accident. The aim of investment is to get returns in order to increase the real value of the money. Each of the investment assets has its own associated risk and reward/return. In other words our investment asset should be able to beat inflation. and aspirations. which one must understand before investing his money in any of the investment vehicles. The return from an investment depends upon the nature of investment. as well as the risk profile Characteristics of investment Return: . The difference between the sale price & the purchase price is capital appreciation.

but there are no buyers in many cases & hence their liquidity is negligible. nonpayment of interest. one starts working at 25 years of age after completing post-graduation Studies. NSC. Add to that the fact that most individuals have no retirement benefit when they retire from work. Safety: . That means.O. a good return with minimum risk or minimization of risk & maximization of return. the higher is the risk. but let us consider a retirement age of 60 years and life span of 80 years. NSS etc. one works and Earns for 35 years to support post retirement life of 20 years. are not marketable. or variability of returns. one earns for 38 years and lives of the retirement savings for the next 7 years. safety of his funds. The risk of an investment depends on the following factors. in most jobs (including Government jobs). Safety is another features which an investors desire for his investments. The lower the credit worthiness of the borrower. Liquidity: . Now. Every investor expects to get back his capital on maturity without loss & without delay. Proliferation of numerous products:. the longer is the risk. bank deposits. work till the age of 58 years and Live till around 65 years.Risk is inherent in any investment. P. The scales have really tilted.An investment. in most jobs (including private sector).Risk: . “no pension” is the norm.People live longer now as compared to the earlier generations. Some investment instrument like preference shares & debentures are marketable. which is easily saleable. Some investments like company deposits. others are more risky. Few generations ago. Equity shares of companies listed on stock exchanges are easily marketable through the stock exchanges. Investments in ownership securities like equity share carry higher risk compared to investments in debt instrument like debentures & bonds. Fast forward to recent times. someone would start earning by The time one reached the age of 20 years. If f inances are not planned properly. Longer life span and lack of social security:. An investor generally prefers liquidity for his investment. Add to that the fact that earlier.Life Insurance industry was opened to private players in the late 90’s.The safety of an investment implies the certainty of return of capital without loss of money or time. the retirement years could be Very challenging. The risk may relate to loss of capital.   The longer the maturity period. This led to proliferation of insurance products which are predominantly . pension was a given thing. In such a case. deposits. While some investments like government securities & bank deposits are almost risk less. Many are quitting their jobs earlier. The risk varies with the nature of investment. delay in repayment of capital. or marketable without loss of money & without loss of time is said to possess liquidity.

Now with growing urbanization leading to Nuclear families. An investor today can participate in the equity markets simply by investing in a mutual fund scheme through a systematic Investment Plan (SIP).In today’s financial markets there is an easy access to loans resulting in Increased levels of borrowings by people. An investor today can have both Insurance and investment in a single product called ULIP (Unit Linked Insurance Policy). At the same time unlike our counterparts in many of the developed countries. these . Complexity of products & services:. The lifestyle and aspirations have gone up significantly. And especially Indians believe in saving money. but appreciating his actual need for insurance and a return on investment as well as analyzing various components and charges of a ULIP product is a detailed process.9% rate of GDP growth driven mainly by domestic consumption. go on regular vacations. aggressive marketing and new distribution channels. Increasing level of borrowings:. With access to easy credit at a fair rate of interest and a capacity to repay that loan.investment oriented. If not managed carefully this leads to a serious mismatch in earnings and repayment leading to problems in cash flow. with over 35 Asset Management Companies (AMCs). buy apartments in up-market localities and want to be financially independent in their post-retirement phase. given higher income levels. new players have caught up considerably with their product innovation. people want to buy house at a younger age. Nuclear families:. The educated and urban middle class has experienced increase in income levels. and how market forces Impact various products differently.Joint families provided great safety net for most individuals as it shared the resources and difficulties. Investors need in-Formed guidance on making a finance sense out of what is being offered to them as investment or insurance. however. The growth has been moderate to good with product innovations and Increase in reach to a wide geography and class of investors. In the financial services industry. Increasing income and savings levels:. People want to give the best education to their children. the innovation has made the products increasingly complex. India has a considerable Household savings ratio which is more than 25%. Though the Life Insurance Corporation of India(LIC) continues to dominate the life insurance industry business.The days of building a house at retirement with accumulated savings and retirement benefits are over.Indian Economy has been growing at a 6% . Leveraging the low interest rates is a critical aspect which needs to be explained to the borrowers? Higher aspirations and goals:. In the Mutual Fund industry. Asians. in order to achieve their financial goals. but it is still a challenge for many in understanding how mutual funds actually work.Innovation can lead to either simplicity or complexity.

thanks to television. Various Investment Asset Classes There are two major asset classes: physical and financial. there is profusion of public information on various personal finance topics to the investors and consumers. others are exposed to many new concepts and terms leaving them more confused than before. They can no longer depend on the support of the larger family since they might be geographically distant. Also there is a dearth of availability of relevant in-formation to the investor enabling him to take the right investment decisions. Since many of this information are disseminated in smaller bits the consumers/investors need expert financial planner who can put it all together and give need based advice. Financial assets are paper Assets . The media has made a huge impact in the availability of financial information and analysis on real time basis to consumers.smaller families have a need to plan belter.Today. Although this has helped many investors to take measured investment decisions. internet and press. Physical assets are Tangible which one can touch and feel and see. Plethora of Information:.

thus reducing overall fluctuation in the portfolio’s value. the advisor recommends that the money be shifted to restore the original asset allocation. The advisor will now recommend that part of equity portfolio may be sold and the proceeds may be used to buy fixed income assets.Recommending Investment Strategy Understanding Various Asset Classes:. After analyzing the needs of the investor as outlined in the previous paragraph. In fact folio’s long term return characteristics and risk level are determined by the asset allocation. nature of goal – short-term or long-term. The investment plan recommends how much money should be invested in which options and how such Allocation should be changed over a period of time. Asset Allocation Asset Allocation decision is the most important decision while designing the portfolio. the advisor is likely to suggest Investing a good amount in equity related avenues.As seen earlier. Asset Allocation is also important because it is not possible to be invested in the best asset class at all times. if the portfolio has a mix of unrelated assets. etc. The other factors like scheme selection. If the investor needs to withdraw money from the investments within a very short period. if the value of one part of the portfolio rises faster than the other. This means. For example. So. Whereas the occasional rewards could be huge. For example. After a year. the advisor then recommends an investment strategy. contribute. A financial advisor’s role is to suggest the appropriate investments based on the needs of the investor. The asset Allocation depends on a lot of factors specific to an individual such as his age and risk profile. liquid investment option is the ideal choice. if the equity prices rose less than debt prices . In such a scenario. In another scenario. there are various investment options having different features. which requires periodic rebalancing. but to a much lesser effect. if the investor needs to grow the value of investments over Long period of time and to beat inflation. Such a strategy is commonly known as asset allocation. the cost of a mistake could be very large. sensitivity of goal to be achieved. let us assume that an investor started with 50% allocation each between equity and debt. etc. while debt moved up by 5%. there is an automatic profit booking when the equity prices rose Very fast. Thus. the balance is tilted in favor of equity. fluctuation in the value of one asset class tends to cancel that in another. All assets in your portfolio will not be impacted to a similar extent by the same factor. Advisors also insist on consistently stocking to the asset allocation. equity market gave 50% appreciation. as well as certain external factors like stock market and interest rate scenario in the Period to achieve a particular goal.

It is for an advisor to decide which one to follow based on one’s beliefs and abilities. However. The major difference between the two is that strategic asset Allocation Ignores the anomalies in the stock or bond or other markets and focuses Only on the investor’s needs.An active portfolio management strategy that rebalances the percentage of assets held in various categories in order to take advantage of market Pricing anomalies or strong market sectors. If the advisor believes that there are inefficiencies in the market and also believes that one has to ability to exploit those. The assumption here is that asset Allocation Ensures the plan would perform in a more predictable manner helping the investor reaches the financial goals comfortably.Asset Allocation Strategies • Strategic Asset Allocation:. the believers of efficient markets usually stock to strategic asset allocation. Proponents of tactical Asset Allocation believe that the various markets keep offering opportunity than can be exploited to enhance the portfolio returns. Financial Assets . one may resort to tactical asset allocation.This is a portfolio strategy that involves stocking to long-term asset allocation. • Tactical Asset Allocation:. Avenues for Saved Money / Investment Vehicles at axis bank Various places where one can park his saved money can be broadly classified into: 1.

Equity instruments Non financial assets 1. however it tends to lose its value because of inflation. Cash instruments 2. Debt instruments 3. Real estate Cash instrument It is the most liquid asset. deposit accounts and negotiable instrument. These emergencies require sudden unexpected cash out flow. Some of the future requirements cannot be anticipated like sudden health problem. Various cash instruments could be: i) Cash in Hand ii) Cash in Bank Demerits of cash instrument  Limited Market: One of the major disadvantages of a cash and carry business is that in utilizing this business model you may eliminate more than half of your potential customers. for which we must prepare ourselves. accidents. natural calamities etc. which include currency. Many people use credit cards and debit cards . Carrying cash is not nearly as common today as it was in the past. Commodities 2. Thus it is very essential to have some of our saved money in cash form to cater for these emergencies.2. Over a period of time purchasing power of cash money would considerably reduce. Money in cash form is most useful in emergencies because of easy access. Non-Financial Assets Financial Assets Financial Assets can further be classified into: 1.

this may indicate that you keep a large amount of cash on hand. Theft:. If a large number of people know that you only accept cash payments for products. This could open your business up to robbery for those who want to get some easy money without having to work for it. Online Stores:. periodically part of this money is passed on to you as interest.The second benefit of cash instrument is being able to grow your business. especially the criminal one.      Debt Instruments Investing in debt instruments is like lending your money to a third party. Generally. The capital is returned after the stipulated time period. These instruments beat inflation to some extent.Business owners who rely solely upon cash can also open themselves up to fraud more easily since there is no checks and balances system for approving or denying cash funds. Merits of cash instrument    Pay Your Expenses:. an advantage that your cash-strapped competitors Get a Business Loan:. avoiding their tax and superannuation obligations by not registering their business or lodging returns.Online vendors cannot accept cash. Paying wages 'cash-in-hand' Skimming some or all of the cash takings Running a part of their normal business activities 'off-the-books' Not reporting the value of goods and services provided in exchange for other goods and services Operating underground ." you can't utilize the thousands of online stores available and are limited to stores you can physically visit. for an employee thinking about embezzling. Also.that is. a cash and carry business is easier to manipulate.The first advantage of cash instrument is that you have money on hand to pay your expenses. Tax returns and other personal financial information. aside from the ability of the cashier to recognize counterfeit money. If you use "the green stuff.The motto "cash is king" still rings true in many sectors.   Fraud:. companies must use cash flow management histories to prove to banks they can repay loans.Another advantage of having positive cash flow is the ability to borrow money. who utilizes this money to earn more money. . Expand Your Business:.

The Central Government mobilizes funds mainly by issue of dated securities and T-bills. returns are lower than equity but higher than cash instruments. The market for government securities is the most dominant part of the debt market in terms of outstanding securities. Small Saving Schemes 2. Major investors in Debt Market are shown in table. Government and Corporate Debt Securities’ 3. trading volume and number of participants. These securities form an important source of funds for corporate and Government. Capital is relatively safe. Securities are long term investment instruments. where as T-bills are short term investment instruments. Bank deposits Small Saving Schemes Various schemes which fall under this category are:         Public Provident Fund National Savings Certificates Post office Monthly Income Scheme Senior Citizen Saving Scheme Post Office term deposit Post office savings Accounts Post office recurring deposit Kisan Vikas Patra Marketable Fixed Income Instruments The Government Securities’ and corporate securities market form two main segments in Indian debt markets and play an important role in capital formation process. The major investors in sovereign papers are banks. It sets benchmark for the rest of the market. market capitalization.However taxation may be a concern in many of these instruments. Various debt instruments used are: 1. Participants and Products in Debt Market Issuer Instruments Maturity * Investor . Dated Govt. medium or long term depending on the type of debt instrument chosen. The lock in period could be short. which generally do so to meet statutory requirements. insurance companies and financial institutions.

Corporate Individuals.FIIs. Pension Funds Banks. insurance companies. trusts. Mutual funds Individuals.Provident Funds.Insurance companies. Individuals.trusts. mutual funds. Pension Funds Banks. FIIs.Central Government Dated securities 2-30 years Central Government T.Corporate. Structured Obligations 5-10 years Corporate Debentures. Mutual funds. Banks. Pension Funds Banks. Mutual Funds.Individuals. Provident Funds.FIIs.FIIs. Corporate. Mutual Funds. trusts. societies. Pension Funds Banks. Insurance Companies. insurance companies. trusts. Corporate. mutual funds. ProvidentFunds. Individuals. societies. Individuals. insurance companies. insurance companies. insurance companies. Pension Funds RBI. Bonds 1-12 years Corporate Commercial papers 15 days -1 year Bank Certificate of deposits 3 months -1 year RBI. Banks. FIIs. Companies. Pension Funds Bank deposits . Mutual Funds.Pension Funds Banks. ndividuals. Insurance Companies Provident Funds.bill 91/364 days State Government State loan development 5-10 year PSUs Bonds. FIIs. Financial Institutions. societies.

5%-9.5%-9.25% 8.25% 3-5 yrs 8.25%-9. It offers simple reinvestment Fixed Deposits (at very competitive interest rates).75% 8.000. The options available are: Rollover only Principal: .5%-9.25%-9. and the interest is calculated on the total sum.50% 8.Deposits at axis bank Fixed deposit Axis Bank offers multitudes of fixed deposit schemes for various durations.75%-9.50% 8.25%-8.5% 2-3 yrs 8. the interest accrued on your deposit at the end of each quarter is invested along with the principal. Income tax is deducted at source.25% 9%-9.15% 8. The tenure of your deposit must be a minimum of 6 months. You can make additions to your deposit in multiples of Re 1 thereafter. which can be opened with a minimum investment of Rs 10.25% 8. You can select this option in the Account Opening Document (AOD). At the end of the quarter. you can avail of the facility for automatic rollovers on maturity (for both the principal and interest).05% 8. Bank AXIS ICICI PNB SBI HDFC 1-2 yrs 9% 8.25% 8.25% Fixed Deposit Schemes Reinvestment Deposits: In a reinvestment fixed deposit scheme. Automatic Rollover: As a Fixed Deposit holder. the interest and the principal are both rolled over.25% 9%-9.25% 8. The tenure of your fixed term deposit must be a minimum of 6 months.

The interest will be either credited to your designated account or paid out. Rollover Principal and Interest accrued in Reinvestment Deposit scheme: These will rollover both the deposit and the interest accrued for the same tenure at the Interest Rates applicable on the maturity date. Please note that the period of Fixed Deposit is considered in number of days. For fixed deposits schemes with tenure of below 6 months. In the event the depositor chooses to receive the periodic interest payments on a quarterly basis.    Advantages  High interest rates for your deposit for the duration of the term. interest is calculated at Simple Interest.Only the principal amount of your fixed deposit will be rolled over. . Tax at source is deducted as per the Income Tax regulations prevalent from time to time. Fixed deposit interest rate on this amount is calculated every quarter. you can make the following changes in the rollover instructions of the deposit:      Change in tenure Change in maturity instructions Change in payment instructions Change in principal (only reduced amount) Change rollover of Principal to rollover of Principal + Interest. On premature withdrawal of the deposit. Method of calculation of interest rates on your fixed deposits    For fixed deposits with tenure of 6 months & above. On or before the maturity date. Withdrawals of Fixed Deposits All encashment or withdrawals of Fixed Deposits can only be made at the branch where the deposit was booked. interest shall be paid only for the period for which the deposit is maintained with the Bank and at the rate applicable for such period. interested is calculated and paid on quarterly rests. or vice versa. interest is calculated on a quarterly basis. Interest earned during the previous quarter is added to the Principal for calculation of interest.

Term deposits provide no tax advantages. who have a PAN number are eligible to open a fixed deposit account. If you really must get your money out (e. Investor can diversify the amount in different companies You can keep FD with "Time base and Money base" schemes. The funds are not at call. they are locked into a contract for a certain term agreed by you and the bank. or In individual capacity on joint basis.    In his or her individual capacity. Term deposit shall be of following types. term deposits are one of the safest types of investments. you have to be very sure that you can afford to have your savings locked away until the maturity date. In fact. You can have the interest paid out by cheque or straight to your bank account.F. you can cancel the term deposit but you'll have to deal with release charges.g. If you're a senior citizen. If you plan to get a term deposit. Disadvantages   If interest rates go up. Term deposits aren't as risky as stocks or property. you may be locked in at a lower rate. whose cost would depend on how much time the term had left. If the term deposit allows early withdrawal (not all do).       You're assured of returns for your investment. namely: - Single holder type deposits: The single holder type deposit receipt shall be issued to an individual for himself or in the capacity of the Karta of the Hindu undivided family. It depends upon the banks. the FD gives you the highest rate of interest. or have the funds reinvested for compounding interest. Any individual who is a Resident Indian and has attained 18 years of age can open a Fixed Deposit account. . you'll have to deal with penalty charges to get your money. Having the money locked away for a set duration lets you save more easily. in the event of an emergency). Deciding on a more frequent interest payment could result in a lower rate.U. Here's the major disadvantage: you can't touch your funds during the term's duration.     Taxation All individual depositors and H.

Recurring deposit account holder can get a loan facility. The bank may also invest such funds in profitable areas. (c) Amount limited to Rs.000 maximum.Fraction of a month will be treated as full month for the purpose of calculating the penalty. upto a maximum of 120 months. (a) Fixed tenure without premature withdrawal. Installment for any calendar month is to be paid on or before the last working day of the month. Where there is delay in payment of installment. 100. The total amount repayable to a depositor. Features     Recurring deposits are accepted in equal monthly installments of minimum Rs 1. Recurring Deposit accounts can be opened for a minimum period of 12 months and in multiples of 12 months thereafter. one can regularize the account by paying the defaulted installment together with a penalty (at present it is @ PLR plus 4 % for the period of delay).000 and above in multiples of Rs 500 thereafter. the deduction from income under section 80C of the Act shall be available only to the first holder of the deposit who should be a PsAN holder. The amount of installment once fixed. (d) Bank will issue a Fixed Deposit Receipt that shall be the basis of claiming tax benefit. 100 minimum and Rs.Joint holder type deposits: The joint holder type deposit receipt may be issued jointly to two adults or jointly to an adult and a minor. inclusive of interest. (e) Term deposit under this scheme cannot be pledged to secure a loan. (b) Year is defined as a financial year. Recurring deposit encourages regular savings habit among the people. cannot be changed. The bank can utilize such funds for lending to businessmen. Recurring deposit Axis Bank's Recurring Deposit scheme will allow you with an opportunity to build up your savings through regular monthly deposits of fixed sum over a fixed period of time. The salient points of the scheme notification are. and payable to either of the holders or to the survivor: Provided that in the case of joint holder type deposit. .  ‘ Merits      There is no TDS (Tax Deductible at Source) applicable on RD(Recurring Deposits). depends on the amount of monthly installments and the period of deposit.

This is achieved by creating a Fixed Deposit linked to your Savings Account providing you the following unique facilities: Maximum Returns: Your money is no longer idle. then go for a recurring deposit. Partial payment is not allowed nor you can pay more than the decided amount. if you do not make deposits for an extended period. banks may close your recurring account. Maximum Liquidity: The money parked in Fixed Deposits as a result of the above mentioned sweep out from your Savings account can be easily accessed by issuing a cheque. in multiples of Rs 5. Here again. Regular savings over a long period at a healthy fixed rate of interest can translate into a significant sum. However interest from RD is not tax free. withdrawing through ATM etc. But note that you need to be disciplined when investing in a recurring deposit. interest rate depends upon the maturity period. As soon as the balance in your Savings Account crosses over Rs 25. the excess. The maturity of fixed or term deposits formed as a result of transfer of money from the Savings Bank account will be for a minimum period 6 months upto a maximum of 5 years. This amount is automatically reverse swept from the most recently formed Fixed Deposit in units of Rs 5. If you do not deposit an installment. Encash 24 requirement Features and benefits The Encash 24 (Flexi Deposit) gives you the liquidity of a Savings Account coupled with high earnings of a Fixed Deposit.000. Taxation Taxation of Recurring Deposit Tax Deducted at Source ( TDS ) is not applicable on RDs. Income tax is to be paid on interest earned from a Recurring Deposit at the rate of tax slab of the RD holder. longer the period greater the interest rate. the bank may charge you a penalty.Demerits  One of the major drawbacks with Recurring Deposits is non-flexibility of the amount-ofdeposit.000 to the Savings account whenever the balance in your Savings account falls below Rs . Further.000 will be transferred automatically to a higher interest earning Fixed Deposit Account. If you do not have sufficient funds at the beginning and can invest only in installments.

also known as the NFO. Through mutual funds one can invest almost in all categories of assets. Close-ended funds accept purchases only during the period of launch of the scheme. mutual funds had an option of offering liquidity through listing on a stock exchange or through a periodic redemption facility. Units of open ended funds can be purchased from and sold to the fund houses on all working days where as the close-ended funds do not allow the investors to redeem units directly from the funds before maturity. Auto Renewal: The tenure for the Encash 24 scheme can be flexible for a minimum period 6 months upto a maximum of 5 years. Listing of units of closed-end fund on one or more recognized stock exchanges is mandatory to provide liquidity to existing investors. The amount broken form your Fixed Deposit will earn interest rates at the applicable rate for the period that the deposit was held with the Bank. or Real Estate. in line with the investment objectives of the scheme. Mutual funds can be open-ended or close-ended. short term income instruments. Each of the Mutual Funds has an objective and terms of scheme stated in their Offer Document/ Key Information Memorandum. Earlier. Types of mutual fund a) Money Market or Cash or liquid Funds b) Debt Funds . Gold or other precious metals. Professional expertise along with diversification becomes available to an investor through Mutual Fund route of investment. in order to check if his own needs and objectives match with the fund’s objectives. to invest in different avenues. which every investor must go through.25. They are a vehicle to mobilize money from investors.750 Mutual Funds Mutual Funds are an important financial intermediary for an investor. Demerits Charge for non-maintenance rs. The remaining amount of Fixed Deposit will continue to earn the contracted rate of interest.000. bonds. Mutual funds could invest in equity. These funds are not allowed to accept purchases after the NFO is over. The units generally trade on the exchanges at discount to the NAV.

These funds invest in fixed income generating debt instruments. However. if the maturity is long. These funds can further be categorized as. Such funds earn large part of returns in form of interest accrual and are less sensitive to interest rate movements. private companies. These funds invest in debt instruments of short term nature like Treasury Bills issued by Government. e) Gilt Funds • Diversified Debt Funds:. financial institutions. also called dated securities. The main objective of these funds is to generate stable income at a low risk for the investor. Commercial papers etc. may face interest rate risk. banks. like. viz. which means as the interest rates rise. generally less than 3 years. the NAV of these funds fall (and vice versa). Since the funds invest largely in the securities issued by Government of India. Post tax the returns from MMMF may be higher than keeping money in savings account in the bank. some funds are mandated to invest in debt securities with short maturity. c) High Yield Debt funds.c) Equity Funds d) Hybrid Funds e) Exchange Traded Funds (ETFs) f) Fund of Funds a) Money Market / Liquid Funds:. Certificates of deposit. capital is safe though returns are low.In order to reduce interest rate risk. • Short Term Debt Funds:. • Gilt Funds:. The NAVs of these funds could be highly volatile.These funds invest in government securities. Though interest rate risk and credit risk are present.The objective of these schemes could be to provide safety of capital and regular income. a) Diversified Debt funds. the credit risk can be assumed to be non-existent. the impact is low as the investment vehicle’s maturities are short and quality of papers is sound. Treasury Bills. and Commercial papers issued by companies. interest rate risk or liquidity risk. Certificate of Deposits issued by Banks. some funds may also have an objective of generating higher returns than traditional debt investments. b) Debt or Income Funds:. these government securities. b) Short Term Debt funds.These Mutual Funds invest the investor’s money in most liquid assets. As compared to the Gilt funds these debt funds have a higher risk of default by their borrowers. . These are considered to be most liquid and least risky investment vehicles. d) Fixed Term Plans. and other entities such as infrastructure companies/utilities. issued by government. credit risk. This objective can be achieved by proper management of certain risks. These instruments in which Money Market Mutual Fund (MMMF) invests can be encashed at a short notice. At the same time. These funds are also known as Government Securities Funds or G-Sec Funds.

. The units of these funds have to be listed on a stock exchange to provide liquidity to the investors. These funds invest in debt securities with lower credit rating. At the same time. d) Large Cap funds.High quality (those having high credit rating) debt securities offer low interest rates and hence some investors are not happy with such low returns. The maturity of the debt securities in which the fund invests. One would be advised to read the scheme objectives and investment style to know more about specific schemes. Hence. popularly known as FMPs (Fixed maturity plans). • High Yield Debt Funds:. These funds have higher risk. These funds have the potential to earn higher than liquid funds but the NAVs of these funds also exhibit some degree of volatility.Fixed term plans. the volatility is likely to be much lower than diversified debt funds. when the scheme matures and money has to be returned to the investors. They are willing to take some risk without getting exposed to the risk of equity. These are close-ended debt funds. 3 years. c) Dividend Yield funds. e) Mid Cap or Small Cap funds. High yield debt funds are ideally suited for such investors. a) Growth funds. Certain equity funds have tax benefit under section 80C of the Income-tax Act. 1961 and have a lock in period of three years. and the maturity of the scheme are almost the same. Since the fund does not have to sell the bonds in the market. have a defined maturity period. etc. c) Equity Funds These funds invest in equities and depending on the type of equities these funds have been further classified as. • Fixed Term Plans:. the fund does not have to sell the bonds in the market.These funds may or may not take liquidity and credit risks. The lower rating ensures the securities offer higher interest rates compensating the investor for the extra risk taken. the fund is not exposed to interest rate risk. but the bonds themselves mature and the fund gets maturity proceeds. 6 months. say 3 months. These funds are ideally suitable for investors who know the time when they will need the money and also do not need money before the maturity of the FMP. 1 year. These are Equity Linked Savings Schemes popularly called as ELSS. b) Value funds. but potential for higher returns.

These funds are preferred by investors who seek the growth through investment in equity but are not very comfortable with the volatility associated with pure equity funds. In popular usage. Such stocks are generally out of favour with most investors in the market and hence the market price is low as compared to the inherent value of the business. the high valuation is justified by the expected high future growth. • Value funds:. It also denotes the price the market is willing to pay to buy the entire company. Fund investing in stocks of large companies are called Large Cap Funds and those investing in stocks of midsized companies are called Small Cap Funds. the size of the companies is measured in terms of its market capitalization.One of the valuation parameters a value style fund manager looks for is high dividend yield. Such stocks being high growth are more visible and also have high investor interest. dividend is believed to be more reliable as it involves cash movement from the company account to the share holder account and hence there is no room for any subjectivity.• Growth funds:. In capital market terms. which is the product of number of outstanding shares and the market price. The value style managers generally hold the stocks for longer time horizon than their growth style counter parts. in order to benefit from the provisions of the prevailing tax laws. • Dividend yield funds:. However.These are mixed equity and debt funds. these funds were supposed to be investing equally between equity and fixed income securities. the stocks may appear to be costly on historical valuation parameters.As the name suggests. value funds buy value stocks as we discussed earlier.These funds invest in the growth stocks. As compared to other parameters of considering value. Depending on the objective these funds can be further classified as a) Balanced funds. the word market capitalization is referred to as “cap”. Larger the market capitalization . • Large cap funds / Mid cap funds / Small cap funds:.Equity mutual funds can be classified based on the size of companies invested in. However.The most popular among the hybrid category. • Balanced funds:. Managers using the growth style select stocks which are normally quite high profile. these funds invest more than 65% of their assets into equity and remaining in fixed income securities. which ie stocks that exhibit and promise above average earnings growth. Due to this. there is a category of funds that consider this one parameter as the most important factor to select stocks. However. larger the company. d) Hybrid Funds:. b) Monthly Income Plans (MIP) and c) Asset allocation funds. .

is asset diversification.One rule of investing. available in India track indices (e. The biggest advantage offered by these funds is that they offer diversification at costs lower than other mutual fund schemes and trade at real time prices. they can also look at readymade solutions available in the form of “Asset Allocation Funds” launched by certain mutual fund companies. fixed income and gold. These funds. 80% of the scheme corpus is invested in fixed income securities and the balance 20% in equity. ETFs are very popular in other countries. the allocation could be different from the above. which would be calculated at the end of the day. Thus these funds can be purchased and sold at real time price rather than at NAV.This category of fund invests predominantly in fixed income securities with marginal exposure to equity.• Monthly Income Plans (MIPs):. e) Exchange Traded Funds (ETFs):. some fund houses have also launched schemes under this category that invest in equity. Fund of Funds provide investors with an added advantage of diversifying into different mutual fund schemes with even a small amount of investment.Fund of Funds maintain a portfolio comprising of units of other mutual fund schemes.Advisors have a choice of either constructing portfolios for their clients through careful selection of components. which further helps in diversification of risks.g. Alternately.These funds combine the best features of open and closed mutual fund schemes. The fixed income component provides stability to the portfolio. Generally. f) Fund of Funds (FOF):. for both large and small investors. each investing in a different type of collective investment scheme. Recently. and trade like a single stock on stock exchange. just like conventional mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non financial assets. whereas equity provides capital appreciation over long periods of time. Advantages of mutual fund Diversification: . These funds are de-signed with certain investor profiles in mind and most of the fund houses also offer tools to match the investor profile with the various options under these funds. Junior Nifty or Sensex) or commodities like Gold (Gold ETFs). Diversification involves the mixing of investments within a portfolio and is used to manage risk. There are different types of ‘fund of funds’. However. Nifty. . active ETFs have also been introduced in Indian market. • Asset allocation funds:. Recently. especially USA.

you are able to sell your mutual funds in a short period of time without there being much difference between the sale price and the most current market value. Disadvantages of mutual fund Costs Control Not in the Hands of an Investor: Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units). One to two hundred dollars is usually not enough to buy a round lot of a stock. rather than having to thoroughly research every investment before you decide to buy or sell.Another advantage of mutual funds is the ability to get in and out with relative ease. Professional Management: .When you buy a mutual fund. Difficulty in Selecting a Suitable Fund Scheme: Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. In general. they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives. Investors have no right to interfere in the decision making process of a fund manager. the more of one product you buy. Mutual funds are able to take advantage of their buying and selling size and thereby reduce transaction costs for investors. For this. you have a mutual fund's money manager to handle it for you. especially after deducting commissions. ranging from $100 to $1. Smaller denominations of mutual funds provide mutual fund investors the ability to make periodic investments through monthly purchase plans while taking advantage of dollar-cost averaging. you are also choosing a professional money manager. Divisibility: .The easiest way to understand economies of scale is by thinking about volume discounts. which some investors find as a constraint in achieving their financial objectives. in many stores. irrespective of the performance of the fund.000 minimums. Liquidity: . the cheaper that product becomes. you are able to diversify without the numerous commission charges. When you buy a mutual fund. No Customized Portfolios: The portfolio of securities in which a fund invests is a decision taken by the fund manager. This manager will use the money that you invest to buy and sell stocks that he or she has carefully researched.Many investors don't have the exact sums of money to buy round lots of securities.Economies of Scale: . Therefore. Taxation of Mutual Funds . Investors can purchase mutual funds in smaller denominations.

Few of the important terms are described below to help understand these aspects: . but with a higher potential of returns. much lower than 10%. However. Dividend Plan: Dividend paid in Dividend Plans is tax free. of 0. again STT is deducted from your redemption price.Equity Schemes Growth Plan: Short term funds (less than 1 year) are taxed at the rate of 10% and long term funds (over a year) are tax free. Equities Investing in equity means either investing one’s funds in a business that is run by self or becoming a shareholder in other businesses. every time we buy or sell equity shares a Securities Transaction Tax. Investments in equities have a higher potential for returns. But. the investor would also lose proportionately. your tax may become much. would help to considerably reduce the risk. In order to know the growth potential of a company/business. however if the business goes in loss. dividends or both. If company/ business does well and makes profit. you will have to pay Capital Gains Tax on your "profits" at the rate at which you pay income tax on your income. STT.25% is paid and further when you redeem your investment. and no distribution tax is deducted. if you stay invested for over a year. the investor is going to benefit as he is part owner of this profit. you can either pay 10% tax on the profits or pay 20% after reducing the rate of inflation (indexation benefit). If you invest for less than 1 year in the growth option of a debt fund. profit and loss statement and cash flow statement of the company and compare it with previous year’s statements and peer company’s statements. Knowledge. it is prudent to analyze the balance sheet. as one must understand risk and reward go hand in hand. expertise in analyzing the equities and longer horizon of investment. Debt Schemes Any fund wherein the average holding in equity is 65% (as per Budget 2006) or below is treated as a debt fund. Returns from equities could be in the form of capital growth. thus taking a higher risk. though with higher risks too. So if you are invested for three or four years.

it indicates the share of the company is available at a discount. the investors select stocks which are priced very low compared to their inherent value.This is net profit minus dividend earned by Preference shares. growth stocks exhibit high price-to-earnings ratio. such stocks are out of favour with most investors and hence the value style managers are sometimes referred to as contrarian investors. Advantages Equity financing doesn't have to be repaid. etc. In other words it indicates the number of times the earning per share. the investors look at parameters like low price-to-earnings ratio. Investors in equity shares employ certain parameters for the selection of stocks in their portfolios. Generally. c) Dividend yield (%):. Plus. Portfolio Management Schemes 3. Various ways of investing in equities for an individual are:1. high price-to-book value ratio and low dividend yields. . you can use the cash flow generated to further grow the company or to diversify into other areas. Since you don't have to make debt payments. Direct Investment in Equities. the market is valuing the share. Generally.a) Earnings per share (EPS):. In order to determine this. e) Book Value: .This is dividend per share divided by face value of share and then multiplied by hundred to get the percentage.This is defined as (Equity capital + net shareholder’s reserve)/ no. Whenever the book value of a company is higher than the market price of the company. and then multiplying by 100 to get the percentage. divided by number of equity shares. d) Price-Earnings Ratio (P/E Ratio):. there are stocks that exhibit very high rate of earnings and business growth.It is market price of share divided by earning per share. Equity Oriented Mutual Funds 2. It is the dividend per share divided by market price of the share. Such stocks are known as growth stocks and are favorite picks for growth style investors. you share the risks and liabilities of company ownership with the new investors. high dividend yield. of equ ity shares.This ratio gives the return in terms of dividend you receive by buying a share in market. On the other hand. low price-tobook value ratio. Under value style. b) Dividend percentage: . Two popular styles used are “growth” and “value”.

A house where one lives is a personal asset. distribution of profits to other owners may exceed what you would have repaid on a loan. Large equity investors often insist on placing representatives on company boards or in executive positions. However.24% service tax you pay on brokerage charges every time you transact business in equity. Disadvantages By taking on equity investment. in turn. Market risks: The risk of market collapse. as these would be the ones giving returns. the STT is 0. There is plenty of scope for the planners to professionalize in this field. The STT rate for delivery-based transactions is 0. you give up partial ownership and. you have to pay Securities Transaction Tax (STT) on sale and purchase transactions of shares. buy and sell shares. you have to share a portion of your earnings with the equity investor. if applicable). Equity investments are subject to short term capital gains (STCG) and long term capital gain (LTCG) also. We could categorize the real estate in following types: . you do have to pay short-term capital gains tax on any capital gains you might make in the short term ('short term defined as any period less than one year) Thus gains from selling equity shares that have been purchased and sold within a year are taxed at 11. Real Estate In India most of us have our major investment in acquiring a house. It is the second house or other forms of real estate which could form the investment vehicle. There is no tax on long-term capital gains. will run at a loss.125% of the transaction value for both buyers and sellers. or that you have invested at the peak of a particular stock.22% (10 per cent tax + 2 per cent education cess + 10 per cent surcharge.e. This is the good news. If your business takes off. Every one dreams of having a house of one’s own. Which means chances are returns on that investment could be minimal at best or worse.Maintaining a low debt-to-equity ratio also puts you in a better position to get a loan in the future when needed.025% of the transaction value. some level of decision-making authority over your business. In addition.. Taxation Dividends received are tax free. i. Over time. For non-delivery based transactions. Dividend received on stock is free from tax for the investor. All this is over and above the 12.

Agricultural land: Agricultural income from agricultural land is not taxable. However this investment requires sufficient outlay and time and effort in managing it. constructing a commercial complex or buying a shop or office in a commercial complex could offer regular rental income and capital appreciation over a time period. f) Time share in a holiday resort. and thus needs to be financed. Semi urban Land: Residential land in suburban areas is usually available at prices lower than those prevailing in the city. c) Industrial real estate d) Agricultural land. Appreciation in agricultural land value along with regular income makes it an attractive investment vehicle. Tax rebates are available on interest paid and principal repayment when the investment is through a loan. Loans for houses are available usually at a concessional rate as compared to other loans. The stay period if not used could be rented and value of time share also increases over a time period. loans could be taken from various financial institutions or from employer. The investment can be passed in a will and can also be sold in future. long term loans at attractive rates make this investment attractive. Time Share in a Holiday Resort: The concept of time share holidays is increasing every day. For house. e) Semi urban land. Commercial property: For an investor. . Residential Property: This investment vehicle provides returns in the form of rent and capital appreciation. The outlay is modest and affordable. Further.a) Residential Property. Real estate investments require a large investment. Further. It could prove especially useful for people who like to enjoy regular vacations. This is usually a converted land in private layouts and has a high potential for capital appreciation as the infrastructure increases and surrounding areas develop. b) Commercial property. agricultural land is exempt from wealth tax too.

The residential house may be constructed within three years after the date of transfer. the property is called a 'long-term capital asset' and profit made out of the transfer of a long-term capital asset is 'long-term capital gain'. The profit from transfer of a short-term capital asset is a 'short-term capital gain' and you will have to pay Capital Gains Tax on the "profits" at the rate at which you pay income tax on your income. You can invest the capital gains in Rural Electrification Certificates (RECs) or National Housing Authority of India (NHAI) bonds to save the tax. Also. it is called a 'short-term capital asset'. You will have to pay “Capital Gain Tax” on the profit at the rat e you pay income tax after deducting rate of inflation (indexation benefit).  . If the period of holding the immovable property is 36 months or less. But remember that there is a three years lock-in period on these bonds. you can save this tax by again investing in any of these:  The residential house should be purchased within one year before or within two years after the date of transfer. the interest income on these bonds is taxable. The house so purchased or constructed should not be transferred again within three years after the purchase or construction.Advantages of Property Investment The advantages of property investment are:  High returns are expected  Tax benefits under section 80C if purchased on a bank loan  Low risk of losing invested capital  Does not require regular monitoring  Not subject to any maintenance cost Disadvantage of Property Investment Low liquidity Taxation of income from Property Investment The incidence of tax on capital gains is related to the period for which the capital asset/immovable property is held by the seller before sale. However. In case the period of holding an immovable property exceeds 36 months.

gold's unique combination of properties -. Centuries ago. malleability. Because of these unique properties. to become a desired asset. its soft hardness and especially its imperviousness to decay -.its sun-like color.Gold Thought to be one of the first known metals.imbued it with magical associations in the eyes of many. political. It in the form of coins and bars has attracted investments across various cultures for centuries.98% in the last 3 years One time investment. which accumulates and gains value throughout its lifetime Not subject to any maintenance cost Investment cum utility commodity Low risk of losing invested capital Does not require regular monitoring Is very liquid. Gold as investment The value of gold has transcended all national. The advantages of investing in gold are:        Investment in Gold has given a average return of 26.valued and traded every where Types of Gold Investment     Gold Funds Gold ETF Gold from Bank Gold from jewelers . and cultural borders. gold has traditionally been the currency of choice for much of the world's population. and uncanny resistance to rust and corrosion. gold has been coveted throughout history for its beauty. scarcity.

Research methodology . it is called as “Short Term Investment”. it is called as “Long Term Investment”. Long term capital gain is taxed 10% without indexation (rate of inflation) or 20% with indexation (rate of inflation).Taxation of Gold Investments Short Term: If the period of holding of “Gold Funds and Gold ETF” is less than 1 year and of “Gold from Bank and from jeweler” is less than 3 years. And the gain from short term investment is termed as “Short term capital Gain”. Short term capital Gain is taxed as per income tax slab of investor. And the gain from short term investment is termed as “Long term capital Gain”. Long Term: If the period of holding of “Gold Funds and Gold ETF” is over 1 year and of “Gold from Bank and from jeweler” is over 3 years.

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