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I would take this opportunity to express my sincere gratitude to Mr. Sachindra Nath

Tyagi, my project guide, under whose competent guidance I was able to complete my

thesis successfully.

I would also like to thank Mr. D.K. Gupta, Director KIIT, who has nurtured an

educational environment, conducive to theoretical excellence and practical competence. I

am thankful to my faculty members for their able guidance.

I am thankful to my family members for their moral support.

(Daneesh Sharma)

The consolidate of corporate India has seen business groups get leaner and meaner. The

Tatas, the Birlas, the Ambanis are all looking at greater efficiencies in their businesses,

squeezing out the last rupee from restructuring their operations, finances, divisions, profit

centres. Almost all the companies have seen smart growth in sales and profits. The

Sensex is up 60 percent since January 2003, many stocks are up many times over-not

merely because of ‘ sentiment’ but because the markets are finally recognizing the power

of performance, the untapped potential of Indian enterprise, the ability of Indian

businesses of adapt.


Fixed Rates on small savings will need to come down in line with the

Income benchmark sovereign yield curve. Also, given the asset-liability

mismatch, schemes like PPF may need to be wound up.

Mutual In place of debt fund, one should look at MIPs in these times as the

Funds downside for equities looks negligible.

Insurance In a diminishing-returns environment, unit linked plans offer

policyholder an opportunity to make big gains on their investments.

Gold Despite lower returns, it is prudent to allocate 5 percent of your

investments to gold, as it isn’t volatile like stocks and provides a

hedge against uncertainties.

Stocks We expect equities as an asset class to provide attractive returns over

the next five years. While the ride may be bumpy in the near erm,

the long-term growth will be good.

Real The general sentiments on Indian real estate are extremely positive

Estate and I believe that the real estate market will continue to be buoyant

for some times.

How do you decide where to invest your money? Is it on the basis of “where an

investor is getting the highest returns?

Here some timeless mantras we chant in Outlook Money that should help you home in

on your unique investment plans:

• Spend less than earn. Invest the surplus.

• Asses how much risk you are comfortable taking. Can you live to see your money

grow by 70 percent in one year and lose half its value in the next? If not, don’t

invest in equalities, gold or real estate.

• Set financial goals-so much for the Bose music system, so much for the house

down payment, so much fro the children’s education, so much for retirement.

• Allocate the money. Money set aside to finance long-term goals like retirement

and children’s education can be committed to higher-return instruments, even if it

is at higher risk.

The main objective of the project is to get information regarding the

various types of investment and what is the right time to invest in

different option available in market.


1. Stock

2. Bonds

3. Mutual Fund

4. Forex Market

5. Money saving and invests

6. Other investment.

How do investor begin investing into a stock market?

 When is the best time to invest in stocks?

 Why should one invest in stocks?


How do investor begin investing into a stock market?

Primary Market

 The stock can be bought in the primary or secondary market. When the company

issues the stock for the first time, also called public issue, any one can subscribe to

this issue. There may be some restrictions regarding the number, the mode of

payment and place where the applications can be submitted.

 The company issues a prospectus a detailed document giving complete

information regarding the company including the time frame for the project,

utilization of the funds, future prospects, and risks perceived by the management


 The prospective applicants are advised to study this document carefully. The

public issue is kept open for a few days for enabling the persons to apply.

 After receiving all the applications the shares are issued within the stipulated time.

 The company may also invite applications in case of substantial expansion. But

such public issues are few and far between.

Secondary Market

 The other market is the secondary market. Huge transactions take place in this

market every working day.

 Here the existing shareholders sell their shares to buyers. To purchase or sell

shares in this market a person has to register himself with a broker or a broker

house authorized to operate in this market the shares are quoted in a stock

exchange and this information is widely available. *The intimation to purchase or

sell (quantity and price) has to be confirmed to the broker. Some brokerage has to

be paid.

 After the necessary formalities, which may take at best a few days, the transaction

is completed.

 The shares are kept in a depository and the details are given to the account holder


 The advantage of the secondary market is that the past performance of the

company is available for study.

 While investing in stocks it is necessary to remember that liquidity is low. Only

funds not likely to be needed urgently should be invested.

 It is absolutely essential to study the background and the past performance of the

company. The performance should be compared with the performance of the

competitors. To minimize the risks, it is advisable to have diversified stocks. One

must devote time to study the trends and the market movement of stocks.

 Stock markets these days follow a global trend. Watch not only NYSE &

NASDAQ but also FTSE, NIKKEI, HANG SENG as well as DAX and CAC.

Stock market is the place to make tons of money. Even of you do not, you will

never forget the experience.

When is the best time to invest in stocks?

 It used to be believed that the best time to invest in a company is when it goes

public. i.e. issues stock for the first time called initial public offer or I.P.O.

 The value is analyzed, the information is totally presented and there is a basis for

the issue price. But there is only one snag. The performance hand if you have

some stocks in the Parma group it may not face any risks at all. In fact due to the

possibility of biological warfare, it may do better.

 So if you invest in a diversified market your risks would be certainly less. But you

must understand the meaning of RISK,

 The definition of risk is chance or possibility of a danger, loss or injury? We can

reword this for investment purpose as, chance that the actual outcome from an

investment will differ from the expected outcome? Hence an investment in terms

of risk can turn out to be bad or very good too! So when you buy stocks in several

markets you reduce the risk. But you also sacrifice the chance of getting higher


 Hence the decision to buy stocks in several different markets also called

diversification – will naturally depend on your ability to take risks.

 If you are young, have good income and less liability you can afford to buy stock

in only a few markets. If you are lucky you can win a lot of money. You can lose

a lot too! But if you are retired and dependent on the income from the stock for

your livelihood you cannot take the risk, you must invest in several markets. This

will call for judgment. When the economy of a country is affected, all markets

will be affected but not equally badly.

 In times of recession the first industry affected is capital goods industry. The last

probably is drugs & pharmaceuticals. So depending on the guess of the future and

your limited ability to take risks you must choose a judicial mix of stock in

different markets.
 If you were to buy all the stock in the market in the right proportion the returns

will match the market index. In such a situation you will perform as well or as

badly as the market. But the purpose of the investment in stocks of your choice is

to earn a better return than the market.

 Secondly it will not be possible for anyone to buy all the stock in the right

proportion all the time. Hence with the limited funds and limited information

available regarding the future movement of price of various stocks you will take a

decision to buy stock in different markets to match the degree of risk you can

afford to take.

Why should one invest in stocks?

 The returns generated buy stocks in most countries are not exceptional. The

picture is similar around the word. The US common stocks on an average rose 4.2

times during 1989-99. In the U.K. the rise ending the 25 year period during 1999

was 36 fold. In Japan share values, ended 1999 are languishing over 50% below

the peak in 1989. but they are still 5 times higher than what they were in 1974.

 A study conducted by an investment bank has shown that the average return on

gilt edged security (Bonds) for 1974-94 (after adjusting for inflation and assuming

no tax) was 5.7%. In contrast, the corresponding figure for equities (stock) was

13.5%? Equities represent the risk capital that is invested in projects to produce

the best returns. Such capital can be, and is, reinvested elsewhere when there are

better opportunities. This mobility may not be free. But risk capital will always be

limited and the demand for it will always carry it to where returns are better.
 But there are certain limitations when you invest in stocks. Apart from risks there

is also the issue of liquidity. If you want the funds badly can you sell the stock

easily, safely and without loss? This problem of liquidity is the issue.

 Since the stock market is volatile, the price could be very low at the precise time

that you need the money. You have little option but to sell at a loss to get the

money that you want. Such volatility may not exist in securities and Bond market

because the interest payable is fixed and time period is also fixed. So it is said that

the liquidity is good.

 Some persons get a lot of thrill and excitement by the decision to invest in stocks,

watching the movement of prices, making money by selling stock when the gains

are handsome and feeling a sense of achievement now and then. But along with

investment in stocks goes a responsibility. It becomes necessary to watch not only

movements of prices on national stock exchange but important exchanges world


 The stock markets these days are global; it becomes also imperative to watch the

economy and performance of industries. Fortunately data are available but these

must be analyzed understood and acted upon. The performance of individual

management is important as even when an industry faces problems, some unit can

show superlative performance and outstanding results.


What is Bond ?

 How do investor begin investing into a Bond?

 When is the best time to invest in Bonds?

 What are the differences between the different Bonds (5 yr., 10 yr.,


 Why should investor invest in Bonds?


What is Bond?

 A bond is defined as a long-term promissory note with stipulated interest

supported by a consideration or under seal secured by a mortgage.

 A bond has the promise of stipulated interest on a long-term basis. There is a

guarantee for the performance.

 Bonds issued by the Governments are also terms as securities. The issuing

Government or Federal / Central Government in case of issue by State

Government or Local Authority guarantees the payment. Companies issue


 These may be secured by a charge on specific assets of the company. To ensure

proper compliance of the regulations and proper upkeep & maintenance of the

assets, a trust is formed or trusties are appointed. Even debt instruments issued by

companies are covered under the broad term BOND for the purpose of


 It is compulsory for such companies to get a ‘rating from the recognized Rating

Agencies. This helps in estimating the repaying capacity of the company. Triple a

i.e. AAA is the highest rating.

 The interest on a bond can be fixed for the entire period, or it can be floating. The

floating rate will be linked to either the bank rate or some other independently

determined rate such as LIBOR. In general, the safety of the investment and the

regular income from the interest are assured.

 The market price of the bonds does not fluctuate widely only on the market. This

ensures liquidity.
 A bond-holder is a secured creditor. He has legal rights to sue the company in case

of default. Bonds maintain a balance of safety, yield and liquidity.

 The returns in investments from bonds over a period of time are likely to be less

than returns from stock market.

How do investor begin investing into a Bond?

 Basically bonds are debt instruments. They are stable forms of investments. The

period of issue is generally 10 to 15 years. In some countries there are restrictions

on investment in Government Securities by individuals.

 Sometimes minimum amounts to be invested are prescribed. In many countries

individuals can invest in Government Securities in the same manner as stocks.

These are quoted on the stock exchange and can be purchased in the same manner

as stocks through brokers.

 The investment in bonds can be through the primary market when they are first

issued. The application has to be submitted as per the terms stipulated by the

issuing authority. In case of companies debentures are now in the same category

as stocks. The depositories keep the individuals accounts.

 In many countries the prime lending rats or bank rates are being reduced over a

period of time. This is a big opportunity for the bond market. The fluctuations in

the bond market depend on these interest rates. Hence the volume of transactions

on the bond market is very small compared to the stock market.

 Transactions through the broker are possible on the PC. There are e-brokerage

faculties available. You need to have a specified bank account and a specific

depository account. The facility provider registers these. The transactions then can

be carried out on your PC. The instructions are given on your PC to purchase or

sell. The facility provider verifies your bank balance as well as your depository

stock balance. As soon as the transaction is completed, your bank balance is

debited in case of purchase or credited in case of sale. Simultaneously your

depository balance is credited in case of purchase or debited in case of sale. This

is not only quick but also safe.

 Primarily investors are buying bonds / debentures to balance your portfolio. At

least part of your investment is safe.

 Bonds may have some special tax benefits as decided by Government.

When is the best time to invest in Bonds?

 Bond market in general is not volatile. It is a liquid investment, which means that

you can buy and sell bonds without appreciable loss.

 You can invest in bonds whenever you have the necessary funds available.

 Bonds pay a fixed and unchanging income with the expectation that their price

will not be subject to wide fluctuation.

 The interesting point to note is that historically the interest rates moved from 4.5%

in 1960 to near 10% in late 1980s. But the trend in the first few years of the

twenty first century has been for the interest rates to fall.

 In US it is only 2% (Nov. 2001). This raises several interesting issues. If the

expectation (today? is that the interest rates will go down in the next say 10 to 15
years, Bonds which give the guaranteed (today’s) interest for the next 10 to 15

years (depending on the maturity period) is a very good investment indeed.

 You are assured the higher rate of (today’s interest) over the next 10 to 15 years

when the interest rates may go down. This will increase the value of the Bond

over the period depending on the fall in interest rate. But one can argue that these

low rates can continue only for a limited period and as soon as the economy

revives, the interest rates may be revised up wards. Under such a situation, the

long term Bond may result in some losses. So even in case of Bonds the future

course of events is important.

What are the differences between the different Bonds (5 yr., 10 yr.,


 Investors have a fascination with potential rewards associated with investing in

stocks or equities.

 There is consequently, a lack of interest in understanding Bonds, which are, fixed

income securities. But several factors now contribute towards a renewed


 First is the downward trend in interest rates.

 Second has been the slide in price of information technology stocks. Third is the

effect of disasters such as terrorist attacks in the US. This has shifted the relative

odds in the stock and bond market.

 Governments, corporations and individuals issue debt instruments. They call for

fixed periodic payments called interest and eventual repayment of the amount

borrowed, called the principal.

 Bonds issued by federal, state and local governments differ in quality, yield and

maturity. These are among the safest and most liquid securities available.

 Short-term government securities have maturity of one year or less. Treasury bills

are offered weekly at a discount, with maturity of 10 to 30 years.

 Corporations engaged in industry or business offer private debt instruments. They

range from high quality to defaulted securities.

 The subclasses mainly represent. Modifications of the two basic promises which

are interest and repayment of principal.

 Convertible bonds provide the holder with an option to exchange the bond for a

predetermined number of stocks at any time prior to maturity. Secured or

mortgage bonds are secured by a specific lien against assets. During liquidation

the creditors receive proceeds from the sale of those assets up to a limit of debt.

 It is also obligatory in many countries for the debt instruments to be rated by a

rating agency. The rating agency, after study of the finances of the company, gives

a rating, which signifies the ability of the corporation to repay. These ratings are

also revised from time to time depending on the change in the finances of the


 The types and variations of bonds are substantial. You have to study the bond

contract, which spells out all the details behind the issue.

 In general yield from the safest bonds i.e. Govt. bonds will be less than yield

private bonds. It is necessary to strike a proper balance depending on your specific

Why should investor invest in Bonds?

 Diversification is said to reduce risk. Govt. bonds-gilts in UK and treasury bonds

in the United States are definitive risk free assets because the likelihood that the

government will default on its obligations is effectively zero.

 Bonds or debentures and other securities in this category all have some assurance

from the issuer to repay the capital and interest. Some assets may be specifically

be mortgaged for the security. Independent rating agencies may have given a

rating for the bond debentures after fully analyzing the financial position of the


 Bonds have a long term and well-defined terms of interest payment and repayment

of capital. This makes bonds less volatile. There is very little risk and good


 Bonds can be traded in the market at relatively stable prices. This means that you

can get the money by selling bonds whenever you need some money.

 You do not have to sell at a distress. Unlike stock, a legal liability has been

created in your favor at the time of issuing the bonds. You have a legal remedy in

case of default.

 The consideration, therefore, for investment in bonds is liquidity.

 It is necessary for you to study your future needs in terms of cash. When you are

likely to need? How much you are likely to need? What are the different ways in

which you can get the amount?

 Each case is different, the needs the different and the resultant mix of investments

will also be different.

 Investors can spread the risks by not putting all their eggs in one basket. They can

invest in different categories of investment including bonds to reduce losses due to

future uncertainties.

 The future is going to be always unpredictable and different. Bonds help in

containing these risks.


What is a Mutual Fund?

 How do investors begin investing into the Mutual Fund Market?

 When should an investor invest in Mutual Funds?

 How do an investor choose a Mutual Fund?

 Why do investor invest in Mutual Funds?


What is a Mutual Fund?

 An individual investor who desires to invest in stock has limited money. On the

order hand the different stocks being traded in the stock market are quite large.

When an opportunity arises to purchase some stock, he may not have the liquid

cash. He may not be able to study the trends in stock market. He may not be able

to analyze the movement of prices in the stock market.

 It may be difficult for him to visualize the future prospects of different categories

of industries; He may not be able to analyze the performance of individual

companies and the changes in their management.

 In short very few persons can have the time, knowledge and skills to take the best

advantage of opportunities that arise in the stock market.

 Mutual funds are basically investment companies, which continuously sell and

buy stock.

 Any one can participate in its activities by investing in the mutual fund. The

investment company usually a trust manages the total capital available to a mutual


 All the stock owned, by this company valued at the market price is the net asset

value or NAV. This amount divided by the total No. of unites issues will be the

NAV per unit.

 The Mutual Fund Company continuously sells the units and repurchases its units

on a daily basis by announcing NAV daily.

 The Mutual Fund Company will buy the units from the investor at his option at

any time at the NAV. For managing the fund, the company will charge some

commission called “load? This can be charged either at the time of selling or at

the time of repurchase.

 It can be seen that by investing in mutual fund one can get the advantage of large

market and the expertise of the professional management. The fund manager of

AMC is watching the stock market all the time and trying to get the best yield for

the investors.

 Mutual funds state specific investment objectives in their prospectus. The main

type or objectives are growth, balanced income, and industry specific funds.

 Growth funds possess diversified portfolios of common stocks in the hope a

portfolio of stocks, and bonds. This achieves both capital gains and dividend along

with interest income. Income funds concentrate heavily on high interest and high

dividend yielding securities.

 Industry specific funds invest in portfolios of selected industries. This appeal to

investors who are extremely optimistic about the prospects for these few


 One should be willing to assume the risks associated with such a concentration of

investment. As it happened in information technology a bad performance can

virtually result in huge losses. Sometimes the same company may have a family of
mutual funds. The investors may be allowed to shift from a fund with one

objective to a fund with a different objective for a fee.

How do investors begin investing into the Mutual Fund Market?

 There are a number of mutual fund companies. Each company has a family of

mutual funds with different objectives such as growth, income, industry specific


 Investor is tempted to invest in a mutual fund because of the professional services

and expertise associated with the management of a mutual fund. To being

investing you can approach any of the mutual fund and by a very simple

application, purchase the shares at the NAV. The NAV is available on a daily


 The mutual fund will let you know the “load? i.e. additional amount you have to

pay when you buy and when you sell. In case of entire commission added to NAV

at the time of purchase by the investor the process is called entry (front-end

loading). In case of entire commission being charged at the time of sale by the

investor the process is called exit (backend) loading.

 The mutual fund keeps on selling and purchasing stock in the market. Depending

on the price of the stock the NAV will be changing. This will be quoted on a daily

basis so that the investor can decide whether to buy more units or sell the total or

some part of it.

 The mutual fund will also declare the pay dividend from time to time depending

on the dividend income. The dividends declared on the stocks owned by the
mutual fund will be the income of the mutual fund. The mutual fund will declare

dividend and pay the same to the investors depending on its income.

 Each Asset Management Company (Mutual Fund House) will have a family of

mutual funds Schemes with different objectives.

 Before investing, the prospectus of the mutual fund that specifies the condition

should be studied. The past performance of the mutual fund can be examined. The

comparison can be made with the stock market index.

 Over a period of time the mutual fund should do better than the index. (The index

gives a measure of how the overall stocks have moved either up or down.) Such a

study should include dividends declared by the mutual fund over a period of time.

 After investing, the performance of the mutual fund will be communicated to the


 A comparison with performance of other mutual funds with the same objectives

will help in understanding the subject.

 There is no secondary market in the units of a mutual fund. Investment in mutual

fund is by buying new units in the fund. Mutual funds pay no taxes on the income

they receive as they have been constituted as a Trust in accordance with the

provisions of the Indian Trusts Act, 1882 by the Sponsor. In order to qualify for

the tax exempt status, funds must distribute most of the income they get (90% in

U.S. and 100% after costs in U.K.) They must hold a diversified portfolio. In U.S.

no more than 25% can be in a single investment. For half of the portfolio no more
than 5% can be securities of a single issuer. These aspects severely limit the


When should an investor invest in Mutual Funds?

 Mutual funds are a means to invest in a portfolio of stocks. Such an investment in

different stocks may not be possible for an individual investor.

 Hence the best time to invest is when the NAV of the mutual fund is at the lowest.

 Not only in relation to the past but also future. Actually it is only the future that is

important. If one were confident or sure of future of any individual stock then it

would be best to invest in that stock. The risk would be there but so would be the

possibility of rewards. But many a time the future is not clear.

 The economic situation does not indicate any clear picture regarding the future. At

such a juncture it would be advisable to invest in mutual fund.

 Mutual fund reduces risk because the investment is in a number of different


 Secondly it is also possible to select a mutual fund with an objective suited to your


How do an investor choose a Mutual Fund?

 Choosing a mutual fund is the most crucial aspect of investment in a mutual fund.

In case of a stock it is easy to look at the past performance such as sales, profits,

price on the stock market, dividends record etc. It is also possible to compare the

performance with the other competitors.

 In case of mutual fund,

 firstly there are different families of Mutual Funds being managed by different


 Secondly there are mutual funds with different objectives.

 Thirdly the past performance of a mutual fund may not be a good guide to future

performance. One has to be very careful in evaluation.

 First aspect has to be trust. Is the management of the fund trustworthy? Are there

any adverse or doubtful reports in the market? This is important because many a

time a good performance could be a matter of chance.

 Secondly mutual funds are with different objectives. It is necessary to decide

which objective is important for you. If one can take risks, growth objective may

give better returns over a period of time. One should have the patience to wait for

the long term, which may be necessary. Income funds may not give appreciation

in capital but may assure income. If the need is regular income, then one has to

invest in income fund.

 On the other hand there will a number of industry specific funds. Information

technology, Parma sector, hotel & hospitality industry, processed food, fast

moving, consumer goods, capital goods, automobiles, white goods, etc….etc….

All the industries cannot do better at the same time.

 The future of an industry will depend on many factors. An expert who can analyze

these factors and make a good guess can certainly get good rewards.

 There are many methods of evaluating the performance of the selected mutual

fund. The purpose is to find if the management of a fund has done better through

its selective buying and selling. One way is to compare the yield of a mutual fund
with the market or a random portfolio. Even if the mutual fund has done better,

the cost should be also taken into account. It should be ensured that the excess

return is sufficient to cover the added expenses incurred for the purchase of

mutual fund. Lastly even after choosing a fund and investing, the performance

must be watched.

Why do investor invest in Mutual Funds?

 Frequently, investors feel insecure in managing their own investment. They

consider themselves inadequate to perform this task successfully. The investor

feels that he lacks the education, background, time, foresight, resources and

temperament to handle the portfolio. In such a case the choice is mutual fund.

Managers trained in the ways of security analysis devote full time to the objective

of the fund. This permits a constant monitoring.

 Secondly the mutual fund has large amounts of money entrusted to it. This makes

it possible to diversify investments. The diversification will be as per the

objectives. An average investor cannot achieve this.

 The mutual fund being a large institution, it may be able to obtain lower brokerage


 Mutual funds pay no taxes on the income they receive. They do not pay taxes on

the capital gains they realize. Investment in mutual fund mode is very simple.

 There is no secondary market in the shares of a mutual fund. Investment is by

buying new shares in the fund. Investors can sell shares back to the fund. These

transactions take place at the per share value of the fund.

 This is feasible because mutual funds mostly hold marketable securities. These

trades on the recognized stock exchange. This gives mutual fund an important

edge. The success of mutual funds in attracting capital to manage has been


 It should be remembered that historically there is very little statistical evidence to

show that mutual funds have performed better. An analysis done in U.K. has

found that very few funds have been able o beat the all share index or FTSE.

 The Securities and Exchange Commission in U.S. found some evidence that

mutual funds outperformed the market by very small amounts.

 The same study found that there was no consistency with respect to which funds

provided the investor with superior performance. What has to be remembered is

that would an individual investor be able to do better. The confidence of investors

in mutual funds and its growth seems to indicate otherwise.

 So if an investor think along the lines of the majority, he can choose mutual fund.

What is a Mutual Fund?

 How do you trade in the Forex Market?

 When should investor buy currencies?

 What markets are involved in Forex trading?

 Why do people invest in the Forex Market?


What are Forex investments?

 Each country has its own currency. Whenever one currency is exchanged with

another it is a foreign exchange or Forex transaction.

 The foreign exchange market has experienced many changes since its inception.

For many years the United States and its allies participated in a system under the

Bretton woods Agreement.

 The foreign exchange rates were tied to the amount of gold reserves belonging to

the nation.

 However in the summer of 1971, President Nixon took the United States off the

gold standard. After this many countries followed and there was no relation

between the gold reserves and the exchange rates. Floating exchange rates


 Today supply and demand for a particular currency or its relative value is the

driving factor in determining exchange rates. The fall of communism and the

dramatic growth of the Asian and Latin American economies have decreased

obstacles and increased opportunities for investors in foreign exchange. Increasing

trade and foreign investment have made the economies of all nations more and

more interrelated. Economic figures are regularly reported around the world.

 Inflation, unemployment levels, unexpected news, such as natural disasters or

political instability, alters the desirability of holding a particular currency. This

influences the international supply and demand for that currency. The U.S. dollar,

therefore, fluctuates constantly against currencies of the rest of the world.

 Forex investments are investments in a currency other than that of your own

country. If you have U.S. dollars your investment is in dollars. If you have British

Pounds your investment is in Pounds.

 You desire to visit a foreign country. You know the approximate amount of

money you will spend. You have the option of either taking your own currency to

that country or exchanging the same when you visit that country.

 You also have the option of exchanging the currency in your own country and

keeping the currency of the foreign country with you well before you visit that

country. e.g. You are to visit Japan but you are at present in New York. You can

change the U.S. dollars into Japanese Yen before you leave. This is a foreign

exchange investment.

 You would do it if you think the Yen is going to become stronger. i.e. In future

you will get less yen for dollars.

 Forex investments are trading in future by options.

 An option gives you the right, but not an obligation, to buy or sell a specific

amount or foreign exchange at a specified price within a specified period.

 Options are either call or put, Calls give the holder the right to buy the foreign

currency or Forex at a specified price. Puts give the right to sell Forex at a

specified price.

 Depending on the actual market price when you exercise the option you will gain /

lose the difference between the specified price and the market price.
How do you trade in the Forex Market?

 Trading in the Forex market is through the brokerage houses that deal in foreign

exchange. You can trade by options in Forex market.

 The Forex market may be expected to go up or go down. If you expect the Forex

market to go up you will go in for calls. e.g. The value of 1 us dollar today is 48

Indian Rupees.

 You are expecting that the Forex market will result in 1 us dollar equal to 55

Indian Rupees after say four months. You can go in for call option agreeing to buy

10 U.S. dollar at the rate of 50 Indian Rupees / dollar at any time during the next

six months.

 Whenever the actual market price is above 50 you can exercise the option. You

can actually buy 10 U.S. dollar by paying only 50 Rs. Per dollar i.e. by paying

only Rs. 500. But the actual value being 540 Rs. The gain to you is Rs. 40.

Similarly if you think the market is going to be Rs. 40 per dollar, you can go in for

put option. Here you will be able to sell the dollars in Forex market at the agreed

price i.e. Rs. 48./dollar though the actual market price is less i.e. Only 40


 The gain an investor make will depend on the actual difference in the market

price and the options price.

 There would be some fee/commission required to be paid. This would be the cost

of transaction and result in reduction of the gain to some extent. The foreign

exchange market is the largest financial market in the world; Traditionally the
foreign exchange market has only been available to banks, money managers, and

large financial institutions. Over the years, these institution, including the U.S.

Federal Reserve Bank, have realized large gains via currency trading.

 This growing market is now linked to a worldwide network of currency dealers,

including banks, central banks, brokers, and customers such as importers and


 Today the foreign exchange market offers opportunities for profit not only to

banks and institutions, but to individual investors as well.

When should investor buy currencies?

 Holding currencies is no longer a practical proposition. Currency does not have an

intrinsic value. It is just a paper, which is no longer linked to gold standard.

 Mostly you will enter into a contract, which will give you an option to buy the

foreign exchange (i.e. foreign currency) at a rate, which is a agreed now.

 For example you know that you are likely to need a certain amount of foreign

exchange at a future date. It may be to pay for imports or paying of commission or

costs proposed to be incurred in foreign country.

 If you expect the price of that currency to go up you can enter into a future

contract to purchase the foreign exchange at the rate available for future trading.

 In some case even if you do not except any change in foreign exchange rate you

enter into a contract to save you from incurring higher costs in case the price goes

up in future.

 So you can enter into foreign exchange contracts if you anticipate high volatility

in the foreign exchange rates. Here you are only hoping to gain from such
contracts; The time to enter into such contracts would be as soon as you become

aware of any such future possibility of change in foreign exchange rate.

 An intelligent investor employs both fundamental and technical analysis prior to

entering any trade.

 Fundamentals include watching the world news, and particularly studying

variables that may cause the market price of a currency to fluctuate. Monetary and

fiscal policy, political conditions, trade patterns, economic indicators, interest

rates, inflation and unemployment figures are to be observed. Faith in a

government’s ability to stand behind its currency also impacts currency price.

What markets are involved in Forex trading?

 In today’s world there are a large number of currency markets. Trading in one

currency vs. another is a market. Since there are many currencies, there are a large

number of possible markets. But only some of these markets are active. i.e. There

are large volumes of trading and the frequency of the trades is also high.

 These are the active markets. Most investors prefer a volatile market. Profits

depend on changes in the market. Higher the changes, higher are the chances of

large profits. In an actively traded market a large number of investors are


 When you desire to trade, you need another trade who will buy when you sell and

who will sell when you buy. This is easily possible in an actively traded market.

 The Forex market is cash inter bank or inter dealer market. Forex market is not a

market in a traditional sense.

 There is no centralized location for trading activity.

 Trading occurs over the telephone and through computer terminal at thousands of

locations worldwide.

 The most often traded currencies, the major currencies are those of countries with

stable governments and respected banks that target low inflation.

 Currencies that often trade with the U.S. dollar include Japanese Yen, British

Pound, the Swiss franc and now the new European currency? Euro. These are the

most liquid Countries suffering political instability or economic turmoil have

currencies which are often tightly regulated and simply too illiguid.

 Forex is a continuous global market, providing participants with 24-hour market

access. The only breaks in trading occur during a brief period over the weekend.

 The major dealer centers are that of Sydney, Tokyo, London and New York. Even

though a 24-hour market the time of the daycan have a direct impact on the

liquidity available for trading a particular currency. The time zones therefore

become important.

 Technical analysis has grown dramatically in popularity in the foreign exchange

market since the 1980s. Buying and selling opportunities are identified and

tracked by computer charting, using trend lines, support and resistance levels,

reversals and numerous patterns and analysis to study the behavior patterns of

market crowds.

 Over long historical periods, currencies have displayed identifiable trends and

patterns, which provide investors with profitable opportunities.

Why do people invest in the Forex Market?

 People invest in Forex markets because of the large opportunities they offer. They

are very large markets involving trading of 1,500 billion $ every day.

 An individual investor can realize huge profit potential by buying or selling a

particular currency against the U.S. dollar or any other major currency.

 Investor can generate profits whether a currency is rising or falling. Buying one

currency (which is expected to rise) against another currency can do this. Or you

may sell one currency (which is expected to fall) against another currency.

 Taking a long position means buying a currency at one price and aiming to sell it

later at a higher price. A short position is one in which the investor sells a

currency that he hopes will fall and aims to buy it back later at a lower price.

 Buying or selling currencies can also be in response to the economic or political

events, which occur. These are called reactive responses.

 Buying or selling currencies on anticipation or rise or fall is a speculative


 Market participants anticipating the direction of currency prices generate the bulk

of currency activity. In general, the value of currency vs. other currency (i.e.

Exchange rate or foreign exchange rate) is a reflection of the condition of that

country’s economy with respect to the other major economies. George Soros took

a massive position against British Pound in 1992 and virtually forced the U.K.

government out of the semi fixed exchange rate mechanism with its EU partners.

He made a fortune out of this transaction. You can lose money also. The quantum

fund set up by George Soros produced remarkable annual compound returns of

30% between 1969 and 1987.

 Depending on the risks that an investor is prepared to take the gains can be quite

high. The style of George Soros was to take big, often interlinked speculative

position using lots of leverage. It was possible to produce a 10% gain in the net

worth of the fund that he was managing by means of only 1% favorable move in

the YEN.


What types of saving accounts provide investment?

 When should investor invest in savings accounts?

 Why invest in term deposit accounts?

 How do investor choose the right savings accounts for investment?


What types of saving accounts provide investment?

 The idea of savings is somewhat similar to “Piggybank? A child does not know

when and how much it can save? Each saving amounts to almost no value. A

nickel or a dime cannot buy anything. But nickels & diems saved now and then

over a period of long time can accumulate to dollars, which have some value.

Typically a householder or a salaried person does not know how much he can save

regularly. The demands can be quite irregular in terns of sickness, education or

special obligations. But if the small amount saved are keep in the form of cash,

you may spend them. Secondly it cannot earn any interest.

 Rich people in any society or countries are limited. But there are a large number

of middle income and even large number of lower income groups. The idea of

savings account was to have an account where small sums of money saved from

time to time are deposited. Whenever you needed you can withdraw the amounts

also. But you will earn a small interest on the balance in your account. A large

number of such accounts enable the bank to get funds at its disposal, which it can


 Normally at any one time only the bank keeps in terms of cash to meet wills such

demand. The bank knows such demand from its experience. So though each

savings account may have small balance, a large number of such accounts are able

to provide funds to the bank.

 Savings account provides the facility of security of the money. Some interest

though small is paid. Whenever you have some amount you find extra the same

can be deposited in the savings account.

 Thus savings account is an investment because you are able to get returns in the

form of interest. There can be several types of savings accounts. e.g. Joint

accounts in the name of husband & wife or a savings account in the name of a

minor child who can deposit but not withdraw,

 Special savings account with certain facilities etc. It can be easily understood that

savings account induces a person to save small amounts of money when possible.

 The investment generated as a result of such savings is available in times of need.

 But savings are investments only if the currency is stable and inflation is within

limits. If the inflation is very high savings depreciate very rapidly. The purchasing

power reduces and hence the savings do not remain good investments.

 It is also possible that persons in the middle-income group can have large balances

in the savings accounts. The banks can then shift part of these investments to

higher interest bearing deposits. Alternatively if the person having savings

account does not have enough balance in his account but wishes to withdraw

money for his use, the bank can allow this.

 The bank merely transfers the funds from higher interest investment to the savings

account. Many facilities have become possible and simple with the computers and

inter connection. Withdrawing money from savings bank account through ATMs

has become very convenient. These ATMs are open for 24-hors. It is also possible

to withdraw money from a different city to the one in which you have the account.

The savings bank account has therefore provided not only the means of savings

but also the security of money deposited as well as availability of the same at any

time in any city.

 Sometimes these deposits up to a certain value are also insured against any

eventuality including collapse of the bank.

When should investor invest in savings accounts?

 Saving bank accounts generally pay smaller interest. But you can get the amount

back at any time without any advance notice or loss of interest. Secondly other

higher yielding investments require higher quantum of money.

 Hence when the amounts are small and you do not know how many time sand

how much you will save, it is best to put the money in the savings bank account.

Many other investments carry the cost of commission, documentation or fee.

 In case of savings account the process is very simple. Similarly when you cannot

anticipate when you will need the funds, savings account is a good option. The

supposition is that the total amounts are small and you may need this in a hurry.
 Investment in savings bank account has two risks.

 One is the reliability of the bank. It has happened in quite a few countries. The

bans have collapsed. Even in such a case the small investor is protected by some

kind of insurance. You must make sure that the insurance cover is adequate for

your balance.

 The other is inflation level in the country. If the inflation level is in twenties or

thirties it is eating away into the value of your savings. Hence you have to think of

other alternatives.

Why invest in term deposit accounts?

 Term deposit accounts are essentially investment of your savings for a specified

period. The term deposit is like investment in a bond. The bank agrees to give you

a fixed rate of interest (or a floating rate which is very rare) one the term deposit

for an agreed period of years.

 This rate is generally higher than the rate of interest in case of savings account. It

is also higher for a longer period.

 The bank will pay higher interest if your term of deposit is 5 years instead of 2

years. The reason for this is that the banks can safely lend this money to a

businessman for this long period. Theoretically you cannot ask for the return of

this money before the term.

 In actual practice subject to some penalty, you can withdraw the term deposit

before maturity in many cases. Hence if the amounts are large and you are fairly

sure of not needing this for a long period, it makes sense to invest in term
deposits. The term should be chosen with care so that you get the highest rate of

interest possible and get the amount when you are likely to need it. So if you can

spare the amount for a longer period it makes sense to invest the money in term


How do investor choose the right savings accounts for investment?

 Savings bank accounts were quite simple. You could deposit the money any

number of times.

 Depending on the rules the interest was paid on the minimum balance in the

account. The interest was credited once in a year. But of late there is competition

in the banking sector too.

 Secondly computerization in banking has made accounting faster. It is also now

possible to give standing instructions to the bank regarding the operation of the

savings account.

 This can help you in making some regular payments. Similarly ATMs have made

withdrawal of money quite simple and possible at anytime? So when choosing a

savings account and the bank, you can look at the facilities being provided. A

bank having total computerization can permit you to withdraw money from any

city in the country. it is also helpful if the bank has branches in more cities and

readily accessible from where you reside or work.

 The rate of interest will be generally the same but this should be verified. Some

savings accounts may have the facility of automatic transfer of funds to a higher

interest bearing term deposits, if the balance increased beyond a certain limit.

 In another case the funds in the higher interest bearing term deposits can be

transferred to the savings bank, if you have issued cheques exceeding the balance.
 Some banks will accept instructions for regular payments for insurance,

telephones, electricity bills etc. from the savings bank account. Similarly many

banks will credit the dividends, annuity and such other payments directly to the

savings account electronically.

 Hence to choose the right savings account the different facilities being offered by

the banks and the convenience it will offer to you should be studied. In some cases

even facilities proposed in near future should be taken into account while

choosing the right savings account.



Private Ventures

 Private Funds


 Real Estate

Private Ventures

 Private companies have stocks, which are not widely held. Basically these

companies are having stock, which is held either by a few individuals or their

friends, relations or individuals who are known to the promoters.

 Public companies have to invite subscription to stock by means of the issue of a

prospectus. It has to give complete information in respect of their prospective

activities, risks, anticipated sales, expected profits etc.

 The stock is permitted to quote on stock exchange. Since the stock is quoted on

the stock exchange, the management is required to make available all-important

information, which may affect the price of the stock on the market. They are

required to publish the quarterly results in the newspapers. The basic idea is that

since public at large is investing in public companies no one should be able to take

advantage of any inside information which is not available to the subject to such

discipline. They cannot invite subscription from general public. This severely

limits availability of large funds from public.

 Hence generally only those who know the management of the company or their

promoters and can put their faith in them will want to invest in such companies.

 Stock in a private company cannot be sold in the stock exchange through a broker.

The prices ar not quoted. There may be conditions attached to the sale.

 The present promoters or management may have the first? Right to buy the share.

If they do not buy the same can be sold to someone else. But this is possible only

of the present management agrees. They are thus investments with high risk.
 Secondly they may not be readily available. They are not traded. Hence it may be

quite difficult to know the value of the stock.

 The liquidity is also limited. You may not be able to sell if you do not find a buyer

who agrees to the conditions of the management.

 The person who invests in private companies must be able to know what is

happening in the company by his own diligence. The management of a private

company has a lot of freedom since they are not subject to the discipline of a

public company. This may help then in achieving better results. The investor will

share the rewards.

 Over a period of time the present promoters may want to buy out the stock held by

small investors. They may be willing to pay quite a high price for this. Not many

companies are now private and those who have stock in such successful

companies may not want to sell.

 Hence the opportunities for investing in a private company are not always

available. The trustworthiness and track record of the management, requires

proper scrutiny.

Private Funds

 Venture capital industry is a relatively small but growing sector of the investable

capital market.

 Basically venture capital has emerged by wealthy persons who can pool their

resources and create a large amount of private capital. Venture capital investments

possess unique characteristics.

 First of all here the philosophy is long-term investment. In case of a start up

company i.e. a company, which is just staring, the investor must have the patience

to wait till the seed become a mature fruit. It does take time to build and develop a

new company.

 The investor must also realize that where a company will finally end up may turn

out to be quite different from the end proposed. Companies frequently need to

change products or at least modify the prototype if the product does not meet with

the expectations,? The selection of the venture has to be proper.

 The idea should be right and outside conditions suitable. All the homework must

be done thoroughly including time frame for each stage from concept to sales. The

team, which will implement the project, should be cohesive and committed to the

project. It should not depend on one individual. There should be enough cushions

in the financial calculations so that a slight change does not sink the project.

 In spite of all the precautions, all projects will not succeed. But a few that will

succeed will do so well that the venture capital industry will still make above

average returns. This is the force that is driving the venture capital industry.

 The venture capitalists can either manage the fund themselves or more often hire

professional who can manage the fund and day-to-day decisions. Only the venture

capitalists or private fund owners will decide the policies.

 Either way success will depend on their ability to analyze economic trends for

potential market opportunities. Careful screening and selection of teams who are

capable of exploiting new opportunities is vital.

 The exist strategy represents a plan for recouping the investment.

 Generally there are two main avenues. One is merely selling the company or

selling the investment to other investors when the company is very successful.

The other alternative is to go public i.e. make an IPO (initial public offer) and sell

the shares in the company to a wide range of investors. Efficient financial

markets, which seek out and fund important new technologies, are necessary

today. Without this, innovations and products would not have emerged with a

speed, which could not have been imagined a few decades ago.

 The progress of a country may well depend on the availability of venture capital

and its efficient use.

 Diversifying into a member of different companies and regional diversification

can minimize risk.

 Another important diversification is investment in firms at various stages of



An annuity is a fixed sum paid in perpetuity. It can be linked to an index but

generally it is a fixed sum.

 When you are in employment, either you or your employer or both can invest in

an annuity. A small amount is paid to the annuity provider till the age of


 This amount, accumulated over the years, enables the annuity provider to pay a

fixed sum (monthly, quarterly or yearly as agreed) to you till you live. This is a

good retirement benefit. Annuity can also be purchased at any time by a single

payment also. Depending on the single payment and terms of the annuity, the
annuity provider will continue to pay the annuity till you live. In a way it is like

pension. The annuity payments are calculated taking into account the interest

rates, life cycles, inflation etc.

 Interest rates during the later part of 2001 are going down all over the world. But

in most countries inflation is very much under control. Under such a situation a

retired person with limited liability desires to have fixed income till are lives.

 He can then manage his affairs well. In other forms of investment there is some

uncertainty as to how much income he can get. Even in case of 15 years bonds,

the interest that he will get after the 15-year period is over cannot be known in

advance. If after 15 years the bank rate is low, he may get lower interest in new

investment in bonds.

 In case of stock market the uncertainty is considerably more.

 In case of annuity, once he has made his purchase of annuity, his annuity

payments will ensure the fixed income contracted for till he lives. He can live for

another 5 years or another 30 years he will continue to get the payments. So for

certain category of persons annuity payments are good investments.

 Some employees are allowed to invest some portion of the salary (agreed by him)

in a portfolio. Here the annuity payments after retirement will depend on the

success of the portfolio.

 These are also therefore called variable annuity. There are certain tax benefits to

the employees in such schemes.

Real Estate

 Real estate has received attention in recent years as a compliment to stocks and


 Real estate is either land and / or building and is fixed in location. Each piece of

real estate is unique because of the location. No two real estates are identical, The

value of real estate also depends on how nearby properties are and the way they

are utilized.

 The value also depends on local and economic conditions. A real estate cannot be

moved. Hence location in an area of demand becomes very important.

 Real estates are durable good shaving long economic life. Use of the property in

future has to be thought of. Properties usually involve large funds and are not

divisible. Due to this the market for real estate is less efficient. For many large

properties there are only a few buyers.

 Since the trading is not very often, the market price is difficult to establish.

Information on price is not readily available as in case of stocks and bonds. It

takes a long time to conclude a deal in real estate.

 Ownership of a real estate requires management of the property. Institutional

investors would normally prefer a local partner to ensure expertise familiar with

the local market. Real estate ownership also involves complicated legal


 Hence transaction costs are quite high, compared to other investments.

 One of the most important reasons for investing in real estate is hedge against


 Real estate is a very good investment in an inflationary climate, including real

estate in a portfolio import diversification. It enhances the risk return

characteristics. Investment in real estate results in tax benefits.

 The cost of real estate (less land) can be depreciated for the tax purpose oat a rate,

higher than the actual decline involve of property. Taxable investors can use this

to shelter other income.

 There are many ways in which you can invest in real estate. Major types sought by

investors are office building, industrial building, shopping centers, apartments

buildings, hotels, motels and some specialty real estate such as restaurants. With

direct investment the investor can obtain all or part of the real estate asset.

 The investor can manage the asset himself or delegate this to others for a fee.

Indirectly the investment can be through an intermediary. They include REIT,

Public Ltd. Companies or syndicates.

 There are also debt investments in real estate. You can provide a part of debt

capital in return for a claim on a part of income from the property . such a claim

would be secured by alien an the property known as mortgage. This is the security

for the investment. It can be seen that there are many ways in which you can make

investments in real estate. You have to anlayse your own requirements and needs

and take an appropriate decisions.




 No two investors are ever the same, and one person’s attitude to risk may be very

different from another’s

 For instance, if investor is young, single and have no plans for children, investor is

in a position where you can probably accept a relatively high degree of risk for the

ultimate benefits that may accrue from his savings and investment programs.

 On the other hand, if investor is in fifties with dependents (or even without them)

he should probably consider a more cautious approach.

 When formulating a portfolio to recommend to a client- whether for a lump-sum

investment or a savings plan-my first consideration is always his or her individual

risk profile.

 Recommending an aggressive mix of funds to a cautiously conservative client

would be inappropriate, since the client would constantly fret about the inevitable

volatility of such a portfolio.

 On the other hand, recommending a cautious portfolio to an aggressively

adventurous client would likely result in the client being disappointed in the

relatively low returns such a portfolio could achieve. It’s a matter of choosing

horses for courses.

 Nonetheless, some investors may be overly aggressive in light of their resource or

circumstances, while others may be unduly cautious. The “greedy” ones may meet

some fear injected into them, while the “fearful” ones may need a bit of greed

dangled under their nosed, in order to have a realistic chane of achieving their

investment objectives.

 The old players can avail the opportunities even at height risk because they are as

usual to the stock market, so they are much aware about the fluctuation of the

shares. The new player are basically the new jobholders they wan t to initiate with

the small investments in some reputed company to keep the principal, safe. The

risk-bearing tendency is very low in the behavior of new investors.

 Most of the big players are ready to take a risk but they want to look over the

dividend policy of the company.

 We found that the investors who had been in this business for the long time risk

and dividend both and speculations were not the important factor for them. They

might think that the high dividend can reduce the risk in the particular share.

 The people of limited income group invest in the companies who have a good

repudiation like TATA,RIL,BIRLA, etc where they believes that there principle is

safe and the risk factor is minimum.

 People agree that the info Tech shares are more risky but they are deviating

towards the Info Tech shares more because the market position of these

companies is considered good and the business of these companies is booming.


Research Methodology

Research Design

This project is based on exploratory research by means of extensive study

of Secondary data.


As the project is not based on primary data , so there was no sample


Data Collection

Research was conducted on the Secondary data & data have been collected

through various magazines, newspapers & websites.


News Papers

1.The Times of India

2.Hindustan Times

3.Economic Times


1.Outlook Money

2. Business world

3. Security Analysis & Port Folio Management

Institutions Visited

1. D.S.E. Liberary – New Delhi




1) Stock, mutual funds, saving and investment, bonds and forex market is a wide

area of study so its needs a long duration to get the reliable results.

2) Services provide by different investment companies may vary company to

company so it is very difficult to choose right option.

3) Investment decision depends upon personal thinking which is differ from person

to person.

1) Introduction

2) Objective of the research

3) Research methodology

• Research Design

• Sample

• Data Collection

4) Data Analysis

• Stock

• Bonds

• Mutual fund

• Forex market

• Savings & Interest

5) Interpretation & suggestions

6) Limitations

7) Bibliography