Consumer Awareness Of The Different Investment Plan
For Sundaram Finance By

submitted In Partial fulfillment for the award of the degree

Batch 2009-2011 To

Punjab Technical University, Jalandhar

New Delhi Institution Of Management

Page 1

F-13, Phase-1,Okhla, New Delhi


Consumer Awareness Of The Different Investment Plan
For Sundaram Finance Under The Guidance Of Prof.R.K.Sharma And Mrs.Sayanti Banerjee

Submitted by:Soumitra Khawas
New Delhi Institution Of Management

Submitted to:Prof.R.K.Sharma
Page 2


I hereby declare that this Project Report entitled “CONSUMER AWARENESS OF DIFFERENT INVESTMENT PLAN” submitted in the partial fulfilment of the requirement of Master of Business Administration (MBA) of NEW DELHI INSTITUTION OF MANAGEMENT, NEW DELHI is based on primary & secondary data found by me in various departments, books, magazines and websites. The information submitted is true & original to the best of my knowledge.

Date of Project Submission:Signature of the student:Faculty Comment:-.................................................................................................. ................................................................................................................................... ..................................................................................................................................... ................................................................................................................................. ....................................................................................................................................

Signature of the faculty guide: – guide:Name: Name:

Signature of research methodology

New Delhi Institution Of Management

Page 3

I take this opportunity to express my gratitude to all of them who in some or the other way to helped me to accomplish this project.The project study cannot be completed without their guidance , assistance, inspiration and kind co-operation. For successfully accomplishment of task apart from hard work the most important requisite is the right direction and guidance for which I would like to express my special thanks to Prof.R.K.Sharma who helped me a lot during this project. I would also like to extend my thanks to my members and friends for their support and lastly, I would like to express my gratefulness to the parent’s for seeing me through it all.

In few years all different investment plan has emerged as a tool for ensuring one’s financial well being. Investment plan have not only contributed to the India growth story but have also helped families tap into the success of Indian Industry. As
New Delhi Institution Of Management Page 4

information and awareness is rising more and more people are enjoying the benefits of investing in all investment plans. The main reason the number of investors remains small is that nine in ten people with incomes in India do not know that investment plan exist. But once people are aware of mutual fund, equity, commodity, life insurance etc investment opportunities, the number who decide to invest in all investment plan increases to as many as one in five people. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to buy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. The analysis and advice presented in this Project Report is based on market research on the saving and investment practices of the investors and preferences of the investors for investment in different investment option. This Report will help to know about the investors Preferences in Mutual Fund means Are they prefer any particular Asset Management Company (AMC)Which type of Product they prefer, Which Option (Growth or Dividend) they prefer or Which Investment Investment Plan or One time Plan). Strategy they follow (Systematic

Chapter - 1 INTRODUCTION..

Chapter - 2 COMPANY PROFILE……………………………….....................8
Page 5

New Delhi Institution Of Management

Chapter -3 Chapter - 4 Chapter - 5 Chapter - 6 Chapter - 7 Chapter - 8 Chapter-9 Chapter-10

INTRODUCTION OF DIFFERENT INVESTMENT TERM.......12 OBJECTIVES AND SCOPE………………………...................41 RESEARCH METHODOLOGY..............................................43 DATA ANALYSIS AND INTERPRETATION.......................46 FINDINGS AND CONCLUSIONS..........................................60 SUGGESTIONS & RECOMMENDATIONS..........................64 BIBLIOGRAPHY.....................................................................67 QUESTIONAIRE……………………………………………….68

Sundaram Finance Ltd incorporated in 1954 has grown today into one of the most trusted financial services groups in India. Today, the activities of the group span savings products like Deposits and Mutual Funds, Car and Commercial Vehicle Finance, Insurance, Home Loans, Software Solutions, Business Process Outsourcing, Tyre Finance, Fleet Cards and Logistics Services. Subsequently, the equity shares of the company have been delisted from Madras Stock Exchange Limited (MSE) with effect from January 27, 2004, in accordance with SEBI (Delisting of Securities) Guidelines, 2003, for voluntary delisting
New Delhi Institution Of Management Page 6

The strength of the Group lies in the quick completion of transactions, long association with transporters for generations and the intimate knowledge of the market and its nuances. The Group has a vast network of over 400 branches to cater to the financing needs of our customers. The company was started with a paid-up capital of Rs.2.00 Lakhs and later went public in 1972.The Company's shares were listed in the Madras Stock Exchange in 1972 and in the National Stock Exchange in January 1998. Sundaram Finance Group is driven by value and culture, where individual initiatives are encouraged. For nearly fifty years, SFians have created an asset of immense value - the Sundaram Finance Group?s reputation for integrity and high standards of business conduct. This reputation, built over many years, is reflected in each business or personal transaction. Integrity in all actions and thought is necessary for every employee or prospective employee of Sundaram Finance Group. Obsession for Excellence, Speed, Openness to new ideas, Aggressive Goals, Accountability & Commitment are some of the virtues that we expect from our employees. The Sundaram Finance Group has been established on a bedrock of honesty, transparency and a reputation for customer service across more than one hundred locations in India.


Website : About the Company Date of Establishment Revenue Market Cap Corporate Address Management Details 1953 215.604 ( USD in Millions ) 24287.303796 ( Rs. in Millions ) 21,Patullos Road,Chennai-600002, Tamil Nadu Chairperson - S Viji MD - T T Srinivasaraghavan Directors - A Rangaswami, Arnoon Raman, Aaron Raman, S Narayanan, S Prasad, S Ravindran, S Venkatesan, S Viji, Sram, Srinivas Acharya, T R
Page 7

New Delhi Institution Of Management

Business Operation Background


Company Secretary Bankers Auditors VV

Seshadri, T T Srinivasaraghavan Finance NBFC Sundaram Finance, a Sundram Group company, was incorporated in 1954, with the object of financing the purchase of commercial vehicles and passenger cars. The company was started with a paid-up capital of Rs.2.00 Lakhs and later went public in 1972. The company's shares were listed in the Madras Stock Exchange in 1972 and in the National Stock Exchange in January 1998. Subsequently, the equity shares Total Income - Rs. 11147.69 Million ( year ending Mar 2009) Net Profit - Rs. 1507.314 Million ( year ending Mar 2009) S Venkatesan Brahmayya & Co

Sundaram Finance, a Sundram Group company, was incorporated in 1954, with the object of financing the purchase of commercial vehicles and passenger cars. The company was started with a paid-up capital of Rs.2.00 Lacks and later went public in 1972. The company's shares were listed in the Madras Stock Exchange in 1972 and in the National Stock Exchange in January 1998. Subsequently, the equity shares of the company have been delisted from Madras Stock Exchange Limited (MSE) with effect from January 27, 2004, in accordance with SEBI (Delisting of Securities) Guidelines, 2003, for voluntary delisting. Sundaram has grown today into one of the most trusted financial services groups in India. Today, the activities of the group span savings products like deposits and mutual funds, car and commercial vehicle finance, insurance, home loans, software solutions, business process outsourcing, tyre finance, fleet cards and logistics services. The strength of the Group lies in the quick completion of transactions, long association with transporters for
New Delhi Institution Of Management Page 8

generations and the intimate knowledge of the market and its nuances. The Group has a vast network of over 400 branches to cater to the financing needs of our customers. Sundaram Finance is one of the oldest and largest providers of finance for the acquisition of commercial vehicles of all makes. The commercial vehicle finance provided by it helps the small operators to acquire vehicles with minimum hassle and documentation. It provides customised financing options to suit the needs. Large fleet operators also find it easy to expand their fleet through the finance provided by the company. It also offers special schemes, supported by the manufacturers, where the rates are highly competitive. The finance schemes are easy to understand and without any hidden costs. The other Group Companies: • Lakshmi General Finance (since merged with SFL on 1/4/2005) • Sundaram BNP Paribas Asset Management • Sundaram BNP Paribas Home Finance • Royal Sundaram Alliance Insurance • Sundaram InfoTech Solutions • Sundaram Business Services • Sundaram Finance Distribution Limited • In freight Logistics Solutions Limited Products / Services Offered Deposits • Car Finance • Commercial Vehicle Finance • Fleet Card • Mutual Fund • Life Insurance • General Insurance • Health Advisory


S.L 1

Name S Viji

Designation Chairman
Page 9

New Delhi Institution Of Management

3 2 4 5 6 7 8 9

T T Srinivasaraghavan S Venkatesan S Narayanan T R Seshadri S Ravindran S Prasad Arnoon Raman Srinivas Acharya

Managing Director Company Secretary Director Director Director Director Director Director

Company Rel. Capital Shri ram Trans. Fin Mah. Finan Sales (Rs.Millio n) Curre Chang P/E nt e (%) Ratio Price -3.94 53.11 -0.24 15.18 -3.73 12.85 Market 52-Week Cap. High/Lo (Rs.Million) w 180282.19 987/611 132536.82 614/282 44050.98 484/210
Page 10

29475.50 733.95 44402.30 587.70 13790.46 454.60

New Delhi Institution Of Management

I Bull Fin Manappuram Gen Fin Sund.Fin Shriram City Union BajAutFin Cholamandala m Invest Future Capital Sigrun Holdings SREI Infra Fin India Securities Seagull Leaf in PNB Gilts Shree Nath Comm&Fin GE Capital Database Finance

14208.09 135.00 1605.33 73.70

-3.30 15.86 -0.41 20.95 -0.90 10.71 2.26 11.86 -0.15 19.41 -1.09 90.65 0.95 68.47 4.99 0.00

41884.54 25086.39

220/93 840/22

10918.18 437.20 9277.41 468.50 5941.33 474.30 10985.33 127.10 1295.64 186.50 0.01 20.00

24287.30 457/250 23044.17 557/322 17357.52 509/135 13969.42 140/49

11857.29 305/140 10704.80 84/12



-1.42 8.32 117.3 7








24.65 755568.82

24.80 25.20

0.00 0.00 -0.79 9.27 3.20 840.9 9

4344.41 3402.19 2388.41

0/0 36/21 411/18

0.67 399.40 1738.10 107.30 44.65 38.25

0.00 0.00 0.00 0.00

2174.30 108/106 2039.99 0/0

New Delhi Institution Of Management

Page 11

Bengal & Assam First Leasing TVS Finance MuthootCapit al

161.53 192.90 1881.40 315.14 52.05 24.60

-1.10 6.94 -0.57 3.40 0.00 40.69 -3.69 13.13

1675.06 1186.25 1018.46 942.18

230/50 70/39 25/24 189/46

170.42 144.95

New Delhi Institution Of Management

Page 12

New Delhi Institution Of Management

Page 13

New Delhi Institution Of Management

Page 14

An asset or item that is purchased with the hope that it will generate income or appreciate in the future.
New Delhi Institution Of Management Page 15

In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

Images for investment:-

 Higher current income  Saving money for major purchases  Planning for the retirement

Shelter for taxes

Is Investment and Speculation same?
Basis Investment Speculation
Page 16

New Delhi Institution Of Management

Time frame Nature of Reward Commonly used instruments for investments Risk involved Analysis/ Information

Long Term Interest or Dividends Stock , Bonds, Mutual Funds Less risk Trading is done after thorough study (fundamental analysis), past performances etc.

Short Term Speculative gains Stock , Bonds, Mutual Funds High risk involved Trading is usually done on Rumors, Hot tips, Inside dopes etc.

➢ Equities ➢ Bonds ➢ Mutual Funds ➢ Real Estate ➢ Gold ETF’s ➢ Commodities, Futures and Options ➢ Insurance

➢ Risk ➢ Market risk
New Delhi Institution Of Management Page 17

➢ Interest Rate risk ➢ Default risk ➢ Purchasing power risk ➢ Foreign Exchange Risk ➢ Political Risk  Marketability and Liquidity  Tax consideration

What is a Bond?

A bond is an instrument in writing which gurentees to repay the principal of the plus the interest to the bondholder.

Advantages of Bonds over Stocks
 Bonds, while a more conservative investment than stocks, can offer certain investors some very attractive features:  Safety  Reliable income  Potential for capital gains  Diversification (especially for an otherwise all-equity portfolio)  Tax advantages

Types of bonds
• Secured and unsecured loans. • Senior and subordinate bonds. • Convertible and non-convertible bonds. • Treasury bonds and corporate bonds
New Delhi Institution Of Management Page 18

• Junk bonds

Bond yield measures
 One Period Rate of Return  Current Yield  Yield to Maturity ( YTM )  Capital Gain ( Loss )  Realized Yield

One-Period Rate of Return
Rate of return over a single holding period =

Price gain or loss during the period + Coupon Interest Purchase period at the begining of holding period

Current Yield
Rate of return earned if the bond is purchased at Current market price and if coupon interest is paid =

Coupon Interest Current Market Price

Capital Gain (Loss )
Market Value at the end of t years = C * PVIFA r, (n –t) + F * PVIF r, (n – t) Where C = Coupon r = Reinvestment Rate
New Delhi Institution Of Management Page 19

n = Term to maturity t = Holding Period F = Redemption Price

Yield to Maturity (YTM)
 Rate of return earned by an investor who holds the bond till maturity .

YTM = KD in the formula YTM equates the present value of cash flows to the current market price. Relationship between YTM & Coupon Rate YTM = Coupon Þ bond is selling at par (P0 = PN) YTM > Coupon Þ bond is at a discount (P0 < PN) YTM < Coupon Þ bond is at a premium (P0 > PN)

Assumptions underlying YTM 1. All coupon and principal payments are made as per the schedule. 2. The bond is held to maturity. 3. The coupon payments are fully and immediately reinvested at precisely the same interest rate as the promised YTM.

New Delhi Institution Of Management

Page 20

➢ It is the rate that equates the future value of the purchase price to the total cash flow realized on the bond. ➢ P * FVIF r, n = Total returns + Purchase price Risks Faced by a Bond Investor  Default risk  Interest rate risk (price risk)  Reinvestment risk  Call risk  Inflation risk  Foreign exchange risk  Liquidity risk Bond investment strategies  Matching strategy  Laddered strategy  Barbell strategy  Interest rate strategy

How to read bond table

New Delhi Institution Of Management

Page 21

Indian Equity Market- More popularly known as the Indian Stock Market
 Market capitalization of nearly $600 billion  Third biggest after China($2,347.4 billion) and Hong Kong($1,293.7 billion) in the Asian region  Supervised by SEBI (Securities Exchange Board of India)  The Indian equity market depends on three factors : 1) Funding into equity from all over the world 2) Corporate houses performance 3) Monsoons major ones  23 stock exchanges – BSE and NSE

New Delhi Institution Of Management

Page 22

New York Stock Exchange

The London Stock Exchange

House Ter Beurze in Bruges, Belgium, was one of the first stock exchanges

Advantages of Investing in Shares
 Capital Appreciation  Bonus shares  Dividend earnings  Portfolio  Long term benefits and return on investment  Simple method  Easily cashable  Liquidity

Disadvantages of Investing in Shares
 No guaranteed return  Last to get paid  Volatility in stock prices  Do not enjoy all the rights

Investment Process 1. Get a Broker 2. Get a Demat Account ○ With banks, financial institutions, broking firms, NBFC, etc
New Delhi Institution Of Management Page 23

3. Get a PAN 4. Check if you need a UIN Exchange Traded Funds
 

ETF is an investment vehicle traded on a stock exchange, much like stocks. ETF are securities that track an index, a commodity or a basket of assets like an Index fund.

 ETF does not have its NAV calculated everyday like a Mutual Fund.  It is attractive coz:  Stock like features  Diversification of index  Low cost  Tax efficiency  Demat form Gold-ETF  Gold backed Exchange Traded Funds (ETFs) are securities designed accurately to track the gold price.  It tracks the performance of Gold Bullion  It provides investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that participation through the trading of a security on stock exchange.  While investing in Gold, few points need to be considered:  Volatility  Entry time matters  Other selection factors Investment Process  Requirements for trading:  Trading account with a stock exchange broker
New Delhi Institution Of Management Page 24

Demat account as Gold ETF can be traded only in Demat form

 Load Structure:

Entry Load: Nil Exit Load: Nil

 Tax treatment:  Is taxed as per non equity mutual fund taxation rules.  Need not pay Wealth tax.

Opportunities-why to invest?  No worry on adulteration  Gold provides diversification to the portfolio  Gold is considered as a Global Asset Class  Gold is used as a Hedge against Inflation  Gold is considered to be less volatile compared to equities  Held in Electronic Form  Store of value  Extremely Liquid

Comparison of Gold ETF with Physical Gold
Parameters Jeweller Bank Gold ETF
Page 25

New Delhi Institution Of Management


Bar or Coin Investor’s concern

Bar or Coin Investor’s concern

Demat form Fund house takes The responsibility Transparent Will be traded at NSE No After 1 year


Neither standard Differs from nor transparent bank to bank. Not standard Yes Only after 3 years Yes Only after 3 years


Conditional and Banks do not Uneconomical buy back High Nil

At secondary Market prices Nil

Advantages • Safety  Brings diversification and stability to a portfolio  Highly liquid and portable  Tool against inflation  Less regulatory intervention Risks Involved  Are subject to market risks.  As with any investment in securities, the NAV of the units issued under the Scheme can go up or down depending on the factors and forces affecting the Bullion Market, Capital Market and Money Market.
New Delhi Institution Of Management Page 26

 The Past Performance of the fund house issuing the ETF should not be construed for the future performance of the fund.  ETFs are a new concept in India compared to other parts of the world.  The sponsor of the mutual fund is not responsible or liable for any loss or shortfall resulting from the operation of the fund beyond the initial contribution made by it of an amount of Rs 1 Lac towards setting up of the Mutual Fund.  Investors are not offered any guaranteed or assured returns Gold ETFs available in India  Benchmark Mutual Fund - Gold Benchmark Exchange Traded Scheme (NSE Symbol: GOLDBEES)

Kodak Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: KOTAKGOLD)

 UTI Mutual Fund - UTI Gold Exchange Traded Fund (NSE Symbol: GOLDSHARE)  Reliance Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: RELGOLD)  Quantum Gold Fund - Exchange Traded Fund (ETF) (NSE Symbol: QGOLDHALF)

COMMODITY MARKETS: • Commodities are any goods that are common and unbranded. • Gold, Silver, Rubber, Pepper, Jute, Wheat, Sugar and cotton are a few popular commodities. • Commodity market represents a formal system for the interplay of demand for and supply of commodities. • These markets are classified into spot market and future market.

Due to erratic weather changes and uncertain economic environment a commodity shortage (or oversupply) in a particular season lead to increase (decrease) in the price of the commodity.

• Farmers and merchant could not predict what the prices would be on a given day or season. • It was in this context, the farmers and food grains merchants in Chicago started negotiating for future supplies of grains in exchange for cash at a mutually agreeable price. • Thus the farmer could lock in his price in advance thereby securing his income.
New Delhi Institution Of Management Page 27

• This effectively started the system of commodity market forward contract which subsequently led to the development of future markets. Sport Market & Future Market Spot Market : Commodities for immediate delivery are traded through the spot market.

The players in the spot market are actual producers and the traders of the commodity

Futures Market : facilitate contracts for future delivery of the underlying commodity either through a physical delivery or a cash settlement ( net profit / net loss from the transaction) ➢ The major players in the future markets are hedgers, speculators, arbitrageurs and investors. Forms of Commodity Derivative Products – Futures and Options.

While a commodity future was reintroduced in India in 2003, commodity options are yet to take off in the Indian markets.

Role of Commodity Futures Market:  It serves as a mechanism for price discovery either for the current price or to determent expected future prices.  Price quoted for a commodity on the futures market is thought to be the best measure of the actual price either current or future.  Commodity futures also help to hedge price risk and provide opportunities for speculators.  Farmers can benefit from its price discovery mechanism to decide which crops to grow.  It also enables businesses to hedge commodity and currency risk and help against earnings volatility.

Concepts of Hedging:

In today’s dynamic environment stakeholders are exposed to price volatility particularly if it involves a future transaction. Hedging plays an important role to mitigate the risks of both parties in the transaction.
Page 28

New Delhi Institution Of Management

 The process involves hedgers taking opposite positions in two different markets. Hedging Process: Examples:

A copper wire manufacturer has 100 tons of copper in his inventory and there may be a threat of inventory revaluation due to decrease in copper prices.

In such a scenario he is better off going short (Sell) on copper futures contracts to protect this against any possible decline in prices. This method is called Short Hedge If a copper wire manufacturer has to sell copper wires to a telecom company at a predetermined price and if the delivery needs to make after four months he can take a long (Buy) position in the futures market to hedge against risk of increase in copper prices. This method is called Long Hedge.

Indian Commodity Exchanges

There were 23 regional commodity future exchanges active in the country prior to 2003 when the Govt. opens the field for nation wise electronic exchanges. The growth of futures trading after that was stupendous and the total turnover crossed Rs.50 lacks cores in 2008.

 The three national commodity exchanges

Of this, Rs.35, 05,137 crore was contributed solely by MCX and NCDEX. The increasing awareness and popularity of commodity futures in India and the slowdown in equity markets have contributed spectacularly to the turnover in the market. The turnover of the MCX and NCDEX reached Rs.63, 62,603 crore for the period January 2008 until March 2009.

Major Exchanges worldwide –




Page 29

New Delhi Institution Of Management

Chicago Board of Trade Chicago Mercantile Exchange New York Metal Exchange


Chicago, US Chicago, US New York, US

Agricultural Agricultural Energy, precious metals, industrial metals

Multi Commodity Exchange



Energy, metals, precious metals, agricultural

National MultiCommodity Exchange of India National Commodity and Derivatives Exchange Tokyo Commodity Exchange



Metals, agricultural



Metals, agricultural


Tokyo, Japan

Energy, precious metals, industrial metals, agricultural

London Metal Exchange


London, UK

Industrial metals, plastics

Recent Developments  The economic survey for 2008-2009 has recommended certain reforms in the commodity markets 1. Bring commodity future regulations under SEBI • Since commodity futures are part of the financial market bringing all financial market regulations under SEBI is better. • At present commodity futures are regulated by FMC


Lift ban on futures trading in rice, tur, urad
Page 30

New Delhi Institution Of Management

Futures trading of rice, tar, urad were banned in early 2007 as trading in these commodities was perceived to be causing pressure on inflation.

➢ Lifting of ban on these commodities will restore price discovery and price risk management.

A future in wheat was also banned but the curve was lifted in May this year.

➢ Sugar has been put on the suspended list till December this year.

FMC had recommended to the Govt. to lift the ban on all commodities as there was no direct evidence to suggest that futures trading caused price spiral.


Recent Developments contd…. ➢ Involve APMCs or State Mandies to expand the scope of electronic trading 1. Two leading future exchanges in India – MCX and NCDEX that has already launched electronic exchanges. 2. There are over 7500 APMCs where trading take place in the physical form.


Removal of the Commodity Transaction Tax (CTT)

4. At present the tax is not enforced.

What is “Insurance”?

Insurance is a contract whereby, in return for the payment of premium by the insured, the insurers pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events.

 Commercial mechanism for transferring risk and spreading loss.

New Delhi Institution Of Management

Page 31

Why do we need insurance?

New Delhi Institution Of Management

Page 32

Types of Insurance  Engineering  Property & Casualty  Accident & Health  Liability


 Individual & Group

Mechanism….  Economic Concept of Insurance: 1. Insurer offers policy to cover specified risks 2. Insurer collects policy premiums from customers 3. Insurer invests premiums 4. Insurer pays money to insured customers in the event of losses covered by policy.

New Delhi Institution Of Management

Page 33

Micro Insurance market in India  Current Insurance landscape  Penetration is abysmally low at less than 3% of insurable population* despite  The presence of an insurance market for a long period and with 16 Life Insurance and 15 General Insurance active today in the market  Existence of products to cover various risks

Globally ranked at 54th position in terms of market penetration and 19th in premium collection
Page 34

New Delhi Institution Of Management

This anomaly persists due to the legacy of life insurance being positioned as a savings and tax-minimization tool rather than as a risk protection tool

 Innovations are needed to overcome barriers for penetration, like:  Innovations to develop low cost distribution models using a combination of process simplifications and application of Info Tech solutions.  Product Simplification to enable simplicity in both underwriting and claims administration  Improving the awareness on the function of insurance products

Real Estate

Real estate is a legal term that encompasses land along with improvements to the land, such as buildings, fences, wells and other site improvements that are fixed in location – immovable According to The Economist, “developed economies’” assets at the end of 2010 were the following:

 Residential property: $108 trillion;  Commercial property: $84 trillion;  Equities: $40 trillion;  Government bonds: $45 trillion;  Corporate bonds: $31 trillion;  Total: $268 trillion. That makes real estate assets 60% and financial assets 40% of total stocks, bonds, and real estate assets. Assets not counted here are bank deposits, insurance “reserve” assets, natural resources, and human assets. It is not clear if all debt and equity investments are counted in the categories equities and bonds.

New Delhi Institution Of Management Page 35

Some kinds of real estate businesses include:
 

Appraisal: Professional valuation services Brokerages: A fee charged by the mediator who facilitates a real estate transaction between the two parties. Development: Improving land for use by adding or replacing buildings Net lease: Sharing leased property amongst tenants Property management: Managing a property for its owner(s) Real estate marketing: Managing the sales side of the property business Real estate investing: Managing the investment of real estate Relocation services: Relocating people or business to a different country Corporate Real Estate: Managing the real estate held by a corporation to support its core business RISKS IN REAL ESTATE: Liquidity Risk: It is the risk that a given security or asset cannot be traded Quickly enough in the market to prevent a loss (or make the required profit) Types of Liquidity Risk: Asset liquidity - An asset cannot be sold due to lack of liquidity in the Market - essentially a sub-set of market risk. This can be accounted for by: Widening bid/offer spread Making explicit liquidity reserves Lengthening holding period for VAR calculations Funding liquidity - Risk that liability: Cannot be met when they fall due Can only be met at an uneconomic price Can be name-specific or systemic MARKET RISK

      

New Delhi Institution Of Management

Page 36

Market risk is the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The associated market risks are:
  

Equity risk: The risk that stock prices and/or the implied volatility will change. Interest rate risk: the risk that interest rates and/or the implied volatility will change. Currency risk: The risk that foreign exchange rates and/or the implied volatility will change. Commodity risk: The risk that commodity prices (e.g. corn, copper, crude oil) and/or implied volatility will change. VOLATILITY AND SETTLEMENT RISK:-

VOLATILITY RISK: In financial markets it is the likelihood of fluctuations in the exchange rate of currencies. Therefore, it is a probability measure of the threat that an exchange rate movement poses to an investor’s portfolio in a foreign currency. The volatility of the exchange rate is measured as standard deviation over a dataset of exchange rate movements. A far more sophisticated extension of this model is the Value at Risk method, which helps to determine the actual risk exposure to a portfolio of several currencies. SETTLEMENT RISK: It is the risk that counterparty does not deliver a security or its value in cash as per agreement when the security was traded after the other counterparty or counterparties have already delivered security or cash value as per the trade agreement. SOVEREIGN RISK Sovereign risk is the risk of a government becoming unwilling or unable to meet its loan obligations, or reneging on loans it guarantees. The existence of sovereign risk means that creditors should take a two-stage decision process when deciding to lend to a firm based in a foreign country. Firstly one should consider the sovereign risk quality of the country and then consider the firm’s credit quality.

Five macroeconomic variables that affect the probability of sovereign debt rescheduling are:

 Debt service ratio
New Delhi Institution Of Management Page 37

 Import ratio  Investment ratio  Variance of export revenue  Domestic money supply growth

OPPORTUNITIES: Three factors have contributed much to global real estate opportunities :  Rapid Economic Growth  Changing Demographics  Phenomenon of off-shoring INVESTMENT PROCESS:  First, the Advisory Board determines the broader framework of the real estate investment strategy and oversees the Investment Committee and Fund Management team with annual reviews of portfolio performance and approval of large transactions that are over a preset amount or percent of total portfolio.  Investment Committee oversees and approves Portfolio Setup framework, as well as Asset and Portfolio Management operations. Within this context the Investment Committee reviews semi-annually asset and portfolio performances, current and projected, for the whole portfolio and by category, such as property type, location, tenant industry etc.; reviews portfolio optimization recommendations and makes decisions regarding changes in portfolio mix in terms of property types and locations in order to maximize portfolio return prospects and minimize risk; sets and reviews risk mitigation processes both at the portfolio and at the asset level. Ideally, portfolio optimization recommendations should be based on the results of advanced portfolio analysis using reliable return and risk projections by property type and location (derived through advanced econometric and forecasting techniques) and modeling frameworks that draw from the modern portfolio theory  The Implementation Committee executes the portfolio setup and structure, as determined by the Advisory Board and the Investment Committee. The acquisition department executes the portfolio build up process by screening properties available in the market to identify those that fit the Fund’s investment strategy, performing preliminary screening to select assets that will go through more detailed market analysis and feasibility study, negotiating transaction terms and financial structuring,
New Delhi Institution Of Management Page 38

preparing project documentation and analysis package to be presented to Investment Committee for final approval.  Return and risk analysis by asset should take into account each asset's cash flow prospects, given current leases, stipulated rental rates, annual rent increases, expiration dates, probabilities of renewing, probabilities and time duration for finding new tenants for non-renewed leases, and projected market rents at which new leases will be signed and renewed leases will rollover. Lease renewal probabilities, time for finding new tenants and rental rate projections should be based on market vacancy rate projections, which provide a very good indicator of market tightness.

Mutual Fund

 A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities

New Delhi Institution Of Management

Page 39

Types of Mutual Funds • Term of Fund • Open - ended • Close - ended • Investment Objective • Growth Funds • Income Funds • Balanced Funds • Specialized Funds etc. • Types of Investor • Pension Funds etc. • Management Style • Managed Funds • Index Funds • Load • Load Funds • No load Funds etc.

New Delhi Institution Of Management Page 40

• • • • • • • • •

Portfolio Diversification Professional management Reduction / Diversification of Risk Liquidity Flexibility & Convenience Reduction in Transaction cost Safety of regulated environment Choice of schemes Transparency

• No control over Cost in the Hands of an Investor • No tailor-made Portfolios • Managing a Portfolio Funds • Difficulty in selecting a Suitable Fund Scheme Risks & Diversification strategies  Risks  Instrument Risk  Market Risk  Portfolio Risk  Business Risk  Financial Risk  Risk in Money Market Funds  Risk in Bond Funds  Risk in Stock Funds  Strategies for risk reduction  Diversification by investment style  Diversification by investment objective Who should invest in Mutual Funds?  Novice uninformed investors  Ordinary small investors  Risk averse investors
New Delhi Institution Of Management Page 41

 Retirees  Investors with time constraint

Investors on the lookout for liquidity

Steps for choosing the right Mutual Fund Scheme  Clarity of objective  Collect information from sources like Funds' prospectus and advisors  Do not be swayed by peripherals  Go through the Investment Mix carefully  Past record is not always reliable  Know your Fund Manager Pointers for Measuring Mutual Fund Performance
 

Standard Deviation allows you to evaluate the volatility of the fund Beta indicates the level of volatility associated with the fund as compared to the benchmark R squared measuring the correlation of a fund's movements to that of an index, Rsquared describes the level of association between the fund's volatility and market risk Alpha is the difference between the returns one would expect from a fund, given its beta, and the return it actually produces. An alpha of -1.0 means the fund produced a return 1% higher than its beta would predict. An alpha of 1.0 means the fund produced a return 1% lower.

Top 10 Funds

Rank 1

Scheme Name Birla Sun Life Commodity Equities Fund - Gbl Pre Metals - Retail Growth AIG World Gold Fund - Growth ICICI Prudential Technology Fund Growth

Date Jun 21 , 2010 Jun 18 , 2010 Jun 21 , 2010

NAV (Rs.) 13.44

Last 1 Week 4.73

Since Inception 20.02

2 3

13.3 15.62

4.2 3.79

15.07 4.42

New Delhi Institution Of Management

Page 42

4 5 6 7 8 9 10

JM Agri & Infra Fund- Growth DSP Blackrock World Gold Fund Institutional Plan - Growth DSP Blackrock World Gold Fund Growth Birla Sun Life Tax Relief 96 Growth JM Equity - Growth SBI Magnum Midcap Fund - Growth Mire Asset China Advantage Fund Regular - Growth

Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010

2.96 10.35 16.54 11.44 36.5 22.26 9.29

3.66 3.66 3.65 3.62 3.61 3.58 3.42

-39.43 2.66 19.92 6.04 8.87 16.52 -11.14

Top 10 fund Rank 1 2 3 Scheme Name DSP Blackrock World Gold Fund Institutional Plan - Growth DSP Blackrock World Gold Fund Growth Birla Sun Life Commodity Equities Fund - Gbl Pre Metals - Retail Growth ICICI Prudential FMCG - Growth Date Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 NAV (Rs.) 10.35 16.54 13.44 Last 1 Month 13.71 13.69 11.74 Since Inception 2.66 19.92 20.02





New Delhi Institution Of Management

Page 43

5 6 7 8 9 10

ICICI Prudential Technology Fund Growth DSP Blackrock World Mining Fund Regular - Growth Franklin FMCG Fund - Growth JM Equity - Growth Taurus Ethical Fund - Growth ICICI Prudential Index Fund

Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010 Jun 21 , 2010

15.62 9.63 59.85 36.5 22.68 49.59

11.25 10.94 10.46 10.45 9.41 9.22

4.42 -7.57 17.27 8.87 96.95 21.22

Chapter - 4

New Delhi Institution Of Management

Page 44

Objectives and scope

1. To find out the Preferences of the investors for Asset Management Company. 2. To know the Preferences for the portfolios. 3. To know why one has invested or not invested in different investment option.

New Delhi Institution Of Management

Page 45

4. To find out the most preferred channel. 5. To find out what should do to boost investment plan Industry.

Scope of the study
A big boom has been witnessed in investment plan Industry in recent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market. The research was carried on in New Delhi. I surveyed on my Project Topic “A study of awareness of the Investors for investment in different investment option” on the visiting customers of the SF Noida Branch. The study will help to know the preferences of the customers, which company, portfolio, mode of investment, option for getting return and so on they prefer. This project report may help the company to make further planning and strategy.

Chapter – 5
New Delhi Institution Of Management Page 46

Research Methodology

This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in

New Delhi Institution Of Management

Page 47

collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones. Data sources: Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites. Sampling:  The Sampling procedure: sample was selected of them who are the

customers/visitors of Sundaram finance in India, Noida branch, irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool.  Sample size:

The sample size of my project is limited to 200 people only. Out of which only 120 people had invested in different-different investment plan. Other 80 people did not have invested in any investment option.

New Delhi Institution Of Management

Page 48

Sample design: Data has been presented with the help of bar graph, pie charts, line graphs etc.


1. some of the persons were not so

2. Possibility of error in data collection because many of investors may have not given actual answers of my

questionnaire. 3. Sample size is limited to 200 visitors of Sundaram finance of India, Noida Branch, and New Delhi out of these only 120 had

invested in Investment option. The sample size may not adequately represent the whole market. 4. Some respondents were reluctant to divulge personal information which can affect the validity of all responses. 5. The research is confined to a certain part of New Delhi


New Delhi Institution Of Management

Page 49

Chapter – 6 Data Analysis & Interpretation

1. (a) Age distribution of the Investors of New Delhi Age Group No. of <= 30 12 31-35 36-40 41-45 46-50 >50





Page 50

New Delhi Institution Of Management


Interpretation: According to this chart out of 120 investors of Delhi the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

(b). Educational Qualification of investors of Delhi

Educational Qualification Graduate/ Post Graduate Under Graduate Others Total

Number of Investors 88 25 7 120


New Delhi Institution Of Management

Page 51

Out of 120 investors 71% of the investors in Delhi are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC). c). Occupation of the investors of Delhi Occupation No. of Investors Govt. Service Pvt. Service Business Agriculture Others

30 45 35 4 6

Interpretation: In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others. (d). Monthly Family Income of the Investors of Delhi. Income Group <=10,000 10,001-15,000 15,001-20,000
New Delhi Institution Of Management

No. of Investors 5 12 28
Page 52

20,001-30,000 >30,000 Interpretation:

43 32

In the Income Group of the investors of Delhi, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000.

(2) Investors invested in different kind of investments. Kind of Investments Saving A/C Fixed deposits Insurance Mutual Fund Post office (NSC) Shares/Debent ures Gold/Silver Real Estate
New Delhi Institution Of Management

No. of Respondents 195 148 152 120 75 50 30 65

Page 53

Interpretation: From the above graph it can be inferred that out of 200 people, 97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate. Most of the people wants secure investment so they are prefer to invest in saving a/c.

3. Preference of factors while investing Factors (a) Liquidity No. of Responden ts 40 (b) Low Risk 60 (c) High Return 64 (d) Trust 36

Interpretation: Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust.

4. Awareness about investment plan and its Operations

New Delhi Institution Of Management

Page 54

Response No. of Respondents

Yes 135

No 65

Interpretation: From the above chart it is inferred that 67% People are aware of investment plan and its operations and 33% are not aware of it and its operations.








investment plan Source of information Advertisement Peer Group Bank Financial Advisors No. of Respondents 18 25 30 62

New Delhi Institution Of Management

Page 55

Interpretation: From the above chart it can be inferred that the Financial Advisor is the most important source of information about investment plan. Out of 135 Respondents, 46% know about it Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement. 7. Reason for not invested in investment plan Reason No. of Respondents Not Aware Higher Risk Not any Specific Reason 65 5 10

Interpretation: Out of 80 people, who have not invested in any plan, 81% are not aware of it, 13% said there is likely to be higher risk and 6% do not have any specific reason.

10. Reason for not invested in SF
New Delhi Institution Of Management Page 56


No. of Respondents

Not Aware Less Return Agent’s Advice

25 18 22

Interpretation: Out of 65 people who have not invested in SF, 38% were not aware with SFMF, 28% do not have invested due to less return and 34% due to Agent’s Advice.

11. Mode of Investment Preferred by the Investors
Mode of Investment One time Investment Systematic Investment Plan (SIP) No. of Respondents 78 42

Interpretation: Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic Investment Plan.
New Delhi Institution Of Management Page 57

14. Preferred Portfolios by the Investors Portfolio
Equity Debt Balanced

No. of Investors
56 20 44

Interpretation: From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred Debt portfolio

15. Option for getting Return Preferred by the Investors Option Dividend Payout Dividend Reinvestme nt No. of Respondents 25 10 8 5 Growt h

New Delhi Institution Of Management Page 58

From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and 8% preferred Dividend

Reinvestment Option.

Chapter – 7
New Delhi Institution Of Management Page 59

Findings and Conclusion


In Delhi in the Age Group of 36-40 years were more in numbers. The second most Investors were in the age group of 41-45 years and the least were in the age group of below 30 years.

In Delhi most of the Investors were Graduate or Post Graduate and below HSC there were very few in numbers.

New Delhi Institution Of Management

Page 60

➢ In Occupation group most of the Investors were Govt. employees, the second most Investors were Private

employees and the least were associated with Agriculture.

In family Income group, between Rs. 20,001- 30,000 were more in numbers, the second most were in the Income group of more than Rs.30, 000 and the least were in the group of below Rs. 10,000.

➢ About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only 60% Respondents

invested in Mutual fund. ➢ Mostly Respondents preferred High Return while

investment, the second most preferred Low Risk then liquidity and the least preferred Trust. ➢ 60% Investors preferred to Invest through Financial

Advisors, 25% through AMC (means Direct Investment) and 15% through Bank.

65% preferred

One Time Investment and 35% preferred

SIP out of both type of Mode of Investment. ➢ The most preferred Portfolio was Equity, the second most was Balance (mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio.

New Delhi Institution Of Management

Page 61

➢ Maximum Number of Investors Preferred Growth Option for returns, the second most preferred Dividend Payout and then Dividend Reinvestment.

Running a successful investment plan requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small oaf all plan investors in connection with the preferences of Brand (AMC), Products, and Channels etc. I observed that many of people have feared of invested in any plan. They think their money will not be secure in investment. They need the knowledge of all plan and its related terms. Many of people do not have invested due to lack of awareness although they have money to invest. As the awareness and income is growing the number of investors are also growing. “Brand” plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs in Delhi but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBI, ICICI Prudential etc. they are well known
New Delhi Institution Of Management Page 62

Brand, they are performing well and their Assets Under Management is larger than others whose Brand name are not well known like Principle, Sundaram, etc. Distribution channels are also important for the investment. Financial Advisors are the most preferred channel for the investment. They can change investors’ mind from one investment option to others. Many of investors directly invest their money through AMC because they do not have to pay entry load. Only those people invest directly who know well about plan and its operations and those have time.

New Delhi Institution Of Management

Page 63

Chapter – 8 Suggestions And Recommendations
Suggestions and Recommendations

The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.

New Delhi Institution Of Management

Page 64

➢ Mutual funds offer a lot of benefit which no other single option could offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time.

Company needs to give the training of the Individual Financial Advisors about the Fund/Scheme and its

objective, because they are the main source to influence the investors. ➢ Before making any investment Financial Advisors should first enquire about the risk tolerance of the

investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration.

Younger people aged fewer than 35 will be a key new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off.

New Delhi Institution Of Management

Page 65

Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.

• News paper(Business Word)
New Delhi Institution Of Management Page 66

• Outlook Money

Television Channel (CNBC AAWAZ)

• Mutual fund hand book • Fact Sheet and Statement

• • • • •


In what type of financial instruments you invest? a) Stock b) Mutual fund
Page 67

New Delhi Institution Of Management

c) Fixed deposits

d) Any other

2. What is the purpose of your investment? a) Increase in the total wealth c) To fill future need b) Tax saving d) All of the above

3. Sources that helps you in making the investment decision? a) Financial journal/business magazines b) Television c) General/business newspaper d) Brokers/agents/professional consultant 4. What factors you keep in mind while investing? a) Risk factor c) Risk & return 5. At what time you invest? a) When the market is rising is falling c) When the market is stagnant 6) What type of portfolio you manage during different market condition (in %)? Equity Dept a) During rising market b) In constant market c) In declining market b) When the market b) Return d) any other

7. Are you aware about BSE, NSE, and SENSEX? a) Yes
New Delhi Institution Of Management

b) No
Page 68

8. Do you invest in equity diversified fund? a) Yes b) No

9. Among which assets management company you would prefer to invest? a) Reliance c) SBI b) Sundram d) HDFC e) Others

10. Are you aware about Sundram’s BNP Paribas? a) Yes b) No

11. Which would you prefer among the following fund type? a) Tax saver Hybrid fund d) Sectorial fund b) Thematic fund e) Equity diversified fund c)

12. Are you able to spot the factors responsible for fluctuation in the stock market? a) Yes b) No

Name:-............................................................................... ................................ Age:-................................................................................ ................................. Occupation:-....................................................................... ................................. Contact no:-............................................................................................ ............. Address:-............................................................................ .................................

New Delhi Institution Of Management

Page 69

Sign up to vote on this title
UsefulNot useful