A PROJECT REPORT ON

STUDY ON VARIOUS INVESTMENT OPTIONS IN INDIA

Project Submitted to

Master in commerce
Subject: Project report

Submitted By
LEENA SATISH NAIK

ISMAIL YUSUF COLLEGE OF ARTS, SCIENCE AND COMMERCE

JOGESHWARI EAST MUMBAI – 400060
College seat no: year 2022-23
Exam seat no: year 2022-23
Under the guidance of
Prof. MOHAMMED NISHAT SARFARAZ AHEMED ANSARI
ISMAIL YUSUF COLLEGE OF ARTS, SCIENCE AND COMMERCE
JOGESHWARI EAST MUMBAI – 400060

1
 A PROJECT REPORT ON
STUDY ON VARIOUS INVESTMENT OPTIONS IN INDIA
Project Submitted

Master in commerce
Subject: Project report
Submitted By
LEENA SATISH NAIK

ISMAIL YUSUF COLLEGE OF ARTS, SCIENCE AND COMMERCE

JOGESHWARI EAST MUMBAI – 400060

College seat no: year 2022-23

Exam seat no: year 2022-23
Under the guidance of
Prof. MOHAMMED NISHAT SARFARAZ AHEMED ANSARI
ISMAIL YUSUF COLLEGE OF ARTS, SCIENCE AND COMMERCE
JOGESHWARI EAST MUMBAI – 400060

2
 CERTIFICATE

This is to certify that MS. LEENA SATISH NAIK has worked and completed her
project work for the degree of MASTER IN COMMERCE in the faculty of
commerce in the subject of ACCOUNTANCONY on title of project work to be
written “STUDY ON VARIOUS INVESTMENT OPTIONS IN INDIA” under
my supervision. It is her own work and facts reported by her personal finding and
investigation.

Name & signature of guide Date of submission

Name & signature of external

Name & signature of professor in charge/H.O.D/principal of the institute.

Stamp of the institute with date

3
 Declaration by student

I the undersigned Ms. LEENA SATISH NAIK hear by, declare that this project
work entitled “STUDY ON VARIOUS INVESTMENT OPTIONS IN INDIA”
is a result of my own research work and has not been previously submitted to any
other university for any other examination. I hear by further declare that all
information of this document has been obtained and presented in accordance with
academic rules and ethical conduct.

College seat no: year 2022-23

Exam seat no: year 2022-23

Date: Name & signature of students

LEENA SATISH NAIK

Place:

Research

Scholar

4
 Acknowledgement

To list who all have helped me in difficult because they are so numerous and the
depth is so enormous. I would like to acknowledge the following as being idealistic
channels and fresh dimensions in the completion of this project. I would like to take
this opportunity to thank all those who have stood by my side, encouraged me and
helped me throughout my study. I owe a lot to everyone who co-operated in making
my project on “STUDY ON VARIOUS INVESTMENT OPTIONS IN
INDIA”has given me extensive practical knowledge related to the course. I would
like to express my gratitude towards my PROF. MOHAMMED NISHAT
SARFARAZ AHMED ANSARI, for giving me an opportunity prepare a project
on “STUDY ON VARIOUS INVESTMENT OPTIONS IN INDIA”. I take
immense pleasure in thanking my thesis PROF. MOHAMMED NISHAT
SARFARAZ AHMED ANSARI. I would like to thank my principal DR. SWATI
WAVHAL for providing the necessary facilities required for the completion of this
project. I take this opportunity to thank the UNIVERSITY OF MUMBAI for
providing for giving me the chance to do this project. I would like to thank my guide
PROF. MOHAMMED NISHAT SARFARAZ AHMED ANSARI for providing
me the necessary guidance in making of this project. I am also thankful to him for
patiently and critically evaluating the content of this project. I would like to take this
opportunity to express my gratitude to all the M.COM STAFF AND STAFF OF
THE LIBRARY for their support. I would like to thank my DAD for this support
and guidance throughout this project. And for always motivating me to take up new
concept and challenges. Last but not the least I, would like to thank my FAMILY
and FRIENDS for their continuous support and help.

DATE:

LEENA SATISH NAIK

5
 It‘s my pleasure to introduce myself, I am LEENA
SATISH NAIK
I am studies in M.COM PART II (Accountancy) at
ISMAIL YUSUF COLLEGE, JOGESHWARI. My
college roll no. is 20SMA39 in Academic year 2020-
2021.

“Role and importance of accounting standards for

smooth running of Indian accounting system and help
to detecting errors and fraud” I worked on this topic.

I explain my project work brief ― In this project I have explain about Various
Investment options available in India , Meaning , Definition , Their importance ,
limitations , advantages and Disadvantages , I also got aware about various
schemes are available to invest our valuable money . I also got to know History ,
And also the Functions, Objectives, Features, Also I conducted a survey on this
topic , the main objective was to learn various Services are their in India in market
that government offered to customers and also their satisfaction regarding the
Various investment schemes

I submitted my project (Black book) & gave viva to my professor. I would like to
express my gratitude towards my PROF. MOHAMMED NISHAT SARFARAZ
AHMED ANSARI.

I would like to thank my guide PROF. MOHAMMED NISHAT SARFARAZ

AHMED
ANSARI for providing me the necessary guidance in making of this project
I would like to take this opportunity to express my gratitude to all the M.COM
STAFF, STAFF OF THE LIBRARY AND MY ALL FRIENDS for their
support to making this project successfully.

NAME & SIGNATURE OF STUDENTS

LEENA SATISH NAIK

6
Chapter - 1

Introduction

7
1.1 Investment

An investment is an asset or item acquired with the goal of generating income or

appreciation. 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 will later be sold at a higher price for a profit. Investing is
putting money to work to start or expand a project - or to purchase an asset or interest
- where those funds are then put to work, with the goal to income and increased value
over time. The term "investment" can refer to any mechanism used for generating
future income.

In the financial sense, this includes the purchase of bonds, stocks or real estate
property among several others. Additionally, a constructed building or other facility
used to produce goods can be seen as an investment. The production of goods
required to produce other goods may also be seen as investing. Taking an action in
the hopes of raising future revenue can also be considered an investment. For
example, when choosing to pursue additional education, the goal is often to increase
knowledge and improve skills in the hopes of ultimately producing more income.
Because investing is oriented toward future growth or income, there is risk
associated with the investment in the case that it does not pan out or falls short. For
instance, investing in a company that ends up going bankrupt or a project that fails.

This is what separates investing from saving - saving is accumulating money for
future use that is not at risk, while investment is putting money to work for future

8
gain and entails some risk. To invest is to allocate money in the expectation of some
benefit in the future. In finance, the benefit from an investment is called a return.
The return may consist of a gain or loss realised from the sale of property or an
investment, unrealised capital appreciation or depreciation , or investment income
such as dividends, interest, rental income etc., or a combination of capital gain and
income.

The return may also include currency gains or losses due to changes in foreign
currency exchange rates. Investors generally expect higher returns from riskier
investments. When a low risk investment is made, the return is also generally low.
Investors, particularly novices, are often advised to adopt a particular investment
strategy and diversify their portfolio. Diversification has the statistical effect of
reducing overall risk. Investments are important because in today’s world, just
earning money is not enough. You work hard for the money you earn. But that may
not be adequate for you to lead a comfortable lifestyle or fulfill your dreams and
goals. To do that, you need

to make your money work hard for you as well. This is why you invest. Money lying
idle in your bank account is an opportunity lost. You should invest that money
smartly to get good returns out of it. In Short Investment Means:-

• The investing of money or capital in order to gain profitable returns,

as interest, income, or appreciation in value.
• a particular instance or mode of Investing
• a thing Investing in, as a business, a quantity of shares of stock, etc.
• something that is invested; sum invested.
• the act or fact of investing or state of being invested, as with a
garment.
• a devoting, using, or giving of time, talent, emotional energy, etc.,
as for a purpose or to achieve something
• Making Smart Investment can help you generate income by putting
your money to work. While you may work hard to earn money, it
may not always be enough to fulfil your dreams and goals. To start
investing, you can consider either growth-oriented or fixed-income
investment instruments. People often get confused between savings
and investments, which play different roles in your personal

9
 financial planning. While both savings and investments are
important, they have different objectives. The intent or purpose of
keeping the money aside is the first differentiating factor. You
usually save money to keep some money aside for emergencies.
However, investing is when you put this money to work for you in
smart investment avenues, with the hope to generate wealth for the
future. Savings and investments vary in the way your wealth is
accumulated. While savings are considered as a passive way of
wealth accumulation, well-planned investment strategies can help in
accumulating more wealth.

1.2 Meaning

Investors choose to hold group of securities rather than single security that offers
the greater expected returns. They believe that a combination of securities held
together will give a beneficial result if they are grouped in a manner to secure higher
returns after taking into consideration the risk element.

Traditional portfolio analysis has been a very subjective nature, but it has proved
success to some investors who have made their investments by making analysis of
individual securities through evaluation of return and risk conditions. The investors
have been able to get the maximum return at the maximum risk. The normal method
of calculating the return

on individual security is to find out the amount of dividends, price earnings ratios,
common holding period and an estimate of the market value of the securities. The
modern portfolio theory believes in maximization of return through a combination
of securities. it deals with the relationship between different securities and inter

10
relationships of risk between them. An investor can achieve a success by making a
choice of investment outlets and combining a security of low risk with another
security of high risk.

The word investment can be defined in many ways according to different theories
and principles. It is a term that can be used in several contexts. However, the
different meanings of “investment” are more alike than dissimilar.

Generally, investment is the application of money or other assets in the hope that in
the future it would appreciate or generate more income. Investment means the
current commitment of funds for a period of time in order to derive a future flow of
funds that will compensate investor for the time the funds are committed, for the
expected rate of inflation and also for uncertainty involved in future flow of funds.”
Investors expect return on his investment which should compensate them for the
risk they take in forgoing current consumption of money for future consumption
and for inflation. “Investment management is the process of managing money,
including investing, budgeting, banking, and taxes also called as money
management”

1.3 Two Concept Of Investment

ECONOMIC
INVESTMENT
CONCEPT OF
INVESTMENT
FINANCIAL
INVESTMENT

11
  Economic Investment

The concept of economical investment means additions to the capital stock of the
society. The capital stock of society is the goods which are used in the production of
other goods. The term investment implies the formation of new and productive
capital in the form of new construction and producers durable instrument such as
Plant & Machinery,

Inventories and human capital are also included in this concept. Thus, an
investment, in economic terms means an increase in building, equipment, inventory.
when a person Invest his fund for acquisition of some physical asset, say a building
or equipment, such type of investments is called economic investment.

 Financial Investment:

This is an allocation of monetary resources to assets that are expected to yield some
gain and return over a given period of investment. It is a general or extended sense
of the term. It means an exchange of financial claims such as shares and bonds, real
estate, etc. Financial investment involves contracts written on pieces of paper such
as shares and debentures. People invest their funds in Shares, Debentures, Fixed
deposits, National Saving certificates, Life Insurance Policies, Provident Funds etc.
In their view, investment is a commitment of funds to derive future income in the
form of interest, dividends, rent, premiums, pension benefits and the appreciation
of the value of their principal capital.

12
1.4 History

The Code of Hammurabi (around 1700 BC) provided a legal framework for
investment, establishing a means for the pledge of collateral by codifying debtor
and creditor rights in regard to pledged land. Punishments for breaking financial
obligations were not as severe as those for crimes involving injury or death. In
the early 1900s, purchasers of stocks, bonds, and other securities were described
in media, academia, and commerce as speculators. Since the Wall Street crash
of 1929, and particularly by the 1950s, the term investment had come to denote
the more conservative end of the securities spectrum, while speculation was
applied by financial brokers and their advertising agencies to higher risk
securities much in vogue at that time. Since the last half of the 20th century, the
terms speculation and speculator have specifically referred to higher risk
ventures. The history of investment banking in India traces back to when
European merchant banks first established trading houses in the region in the
19th century. Since then, foreign banks (non-Indian) have dominated
investment and merchant banking activities in the country. In the 1970’s, the
State bank of India entered the business by creating the Bureau of Merchant
Banking and ICICI Securities became the first Indian financial institution to
offer merchant banking services. By 1980, the number of merchant banks had
risen to more than 30. This growth in the financial services industry included
rapid expansion of commercial bank and other financial institutions.

13
 Deep History

Security trading in India goes back to the 18th century when the East India
Company began trading in loan securities. Corporate shares started being traded
in the 1830s in Bombay (now Mumbai) with the stock of Bank and Cotton
presses. The simple and informal beginnings of stock exchanges in India take
one back to the 1850s when 22 stockbrokers began trading opposite the Town
Hall of Bombay under a banyan tree. The tree still stands in the area which is
now known as Horniman Circle.

The venue then shifted to banyan trees at the Meadows Street junction, which
is now known as Mahatma Gandhi Road, a decade later. The shift continued
taking place as the number of brokers increased, finally settling in 1874 at what
is known as Dalal Street. This yet informal group known as the Native Share
and Stockbrokers Association organized themselves as the Bombay Stock
Exchange (BSE) in 1875. The BSE is the oldest stock exchange in Asia and
was the first to be granted permanent recognition under the Securities Contract
Regulation Act, 1956.The BSE was followed by the Ahmedabad Stock
Exchange in 1894 which focused on trading in shares of textile mills. The
Calcutta Stock Exchange began operations in 1908 and began trading shares of
plantations and jute mills. The Madras Stock Exchange followed, being set up
in 1920.

14
 Modern History

In the post-independence era, the BSE dominated the volume of trading.

However, the low level of transparency and undependable clearing and
settlement systems, apart from other macro factors, increased the need of a
financial market regulator, and the SEBI was born in 1988 as a non-statutory
body. It was made a statutory body in 1992.

After the Harshad Mehta scam in 1992, there was a pressing need for another
stock exchange large enough to compete with the BSE and bring transparency
to the stock market. This gave birth to the National Stock Exchange (NSE). It
was incorporated in 1992, become recognized as a stock exchange in 1993, and
trading began on it in 1994. It was the first stock exchange on which trading
took place electronically. In response to this competition, BSE also introduced
an electronic trading system known as BSE On-line Trading (BOLT) in 1995.

The BSE launched its sensitivity index, the Sensex, now known as the S&P
BSE Sensex, in 1986 with 1978–79 as the base year. This is an index of 30
companies and is a benchmark stock index, measuring the overall performance
of the exchange. The index reached the level of 1,000 in July 1990, 2,000 in
January 1992, 4,000 in March 1992, 5,000 in October 1999, and 6,000 in
February 2000. The exchange introduced equity derivatives in 2000. Index
options were launched in June 2001, stock options in July 2001, and stock
futures in November 2001. India’s first free-float index, BSE Teck, was
launched in July 2001. Its competitor, NSE, launched its benchmark exchange,
the CNX Nifty, now known as Nifty 50, in 1996. It comprises of 50 stocks and
functions as the performance measure of the exchange. In terms of electronic

15
 screen-based trading and derivatives, it beat BSE by launching first of its kind
products and services.

The first organised stock exchange in India was started in 1875 at Bombay and
it is stated to be the oldest in Asia. In 1894 the Ahmedabad Stock Exchange
was started to facilitate dealings in the shares of textile mills there. The Calcutta
stock exchange was started in 1908 to provide a market for shares of plantations
and jute mills. Then the madras stock exchange was started in 1920. At present
there are 24 stock exchanges in the country, 21 of them being regional ones
with allotted areas. Two others set up in the reform era, viz., the National Stock
Exchange (NSE) and Over the Counter Exchange of India (OICEI), have
mandate to have nation-wise trading.

The Stock Exchanges are being administered by their governing boards and
executive chiefs. Policies relating to their regulation and control are laid down by
the Ministry of Finance. Government also Constituted Securities and Exchange
Board of India (SEBI) in April 1988 for orderly development and regulation of
securities industry and stock exchanges.

16
 1.5 SCOPE OF INVESTMENTS

Investment activity includes buying and selling of the financial assets, physical
assets, and marketable assets in primary and secondary markets. Investment
activity involves the use of funds or savings for further creation of assets or
acquisition of existing assets.
Investment activities refer to acquisition of assets like:

 FINANCIAL ASSETS
 PHYSICAL ASSTES
 MARKETABLE ASSETS FROM THE PRIMARY AND SECONDARY
MARKET

Financial assets are

 PFNEW ISSUE STOCK MARKET
 LIC scheme
 Pension scheme
 Post office certificate and deposits Physical assets are
 House, land, building and flat
 Gold, silver and other metals Marketable assets are
 Shares
 Bonds
 Government securities
 Mutual fund

17
Physical assets are
 House, land, building and flat
 Gold, silver and other metals

Marketable assets are

 Shares
 Bonds
 Government securities
 Mutual fund

1.6 Characteristics Of Investment

 Safety of principal

Safety of funds invested is one of the essential ingredients of a good investment

programme. Safety of principal signifies protection against any possible loss
under the changing conditions. Safety of principal can be achieved through a
careful review of economic and industrial trends before choosing the type of
investment. It is clear that no one can make a forecast of future economic
conditions with utmost precision. To safeguard against certain errors that may
creep in while making an investment decision, extensive diversification is
suggested. The main objective of diversification is the reduction of risk in the
loss of capital and income. A diversified portfolio is less risky than holding a
single portfolio.

Diversification refers to an assorted approach to investment commitments.

Diversification may be of two types, namely, i. Vertical diversification; and ii.
Horizontal diversification.
Under vertical diversification, securities of various companies engaged in
different stages of production (from raw material to finished products) are
chosen for investment. On the contrary, horizontal diversification means
making investment in those securities of the companies that are engaged in the
same stage of production. Apart from the above classification, securities may
be classified into Bonds and Shares which may in turn be reclassified according
18
 to their types. Further, securities can also be classified according to due date of
interest, etc. However, the simplest diversification is holding different types of
securities with reasonable concentration in each.

 Liquidity and Collateral value

A liquid investment is one which can be converted into cash immediately

without monetary loss. Liquid investments help investors meet emergencies.
Stocks are easily marketable only when they provide adequate return through
dividends and capital appreciation. Portfolio of liquid investments enables the
investors to raise funds through the sale of liquid securities or borrowing by
offering them as collateral security. The investor invests in high grade and
readily saleable investments in order to ensure their liquidity and collateral
value.

 Stable income

Investors invest their funds in such assets that provide stable income.
Regularity of income is consistent with a good investment programme. The
income should not only be stable but also adequate as well.

 Capital growth

One of the important principles of investment is capital appreciation. A

company flourishes when the industry to which it belongs is sound. So, the
investors, by recognizing the connection between industry growth and capital
appreciation should invest in growth stocks. In short, right issue in the right
industry should be bought at the right time.

 Tax implications

While planning an investment programme, the tax implications related to it

must be seriously considered. In particular, the amount of income an investment
provides and the burden of income tax on that income should be given a serious
thought. Investors in small income brackets intend to maximize the cash returns
on their investments and hence they are hesitant to take excessive risks. On the

19
 contrary, investors who are not particular about cash income do not consider
tax implications seriously.

 Stability of Purchasing Power

Investment is the employment of funds with the objective of earning income or

capital appreciation. In other words, current funds are sacrificed with the aim
of receiving larger amounts of future funds. So, the investor should consider
the purchasing power of future funds. In order to maintain the stability of
purchasing power, the investor should analyze the expected price level inflation
and the possibilities of gains and losses in the investment available to them.

 Legality

The investor should invest only in such assets which are approved by law.
Illegal securities will land the investor in trouble. Apart from being satisfied
with the legality of investment, the investor should be free from management
of securities. In case of investments in Unit Trust of India and mutual funds of
Life Insurance Corporation, the management of funds is left to the care of a
competent body. It will diversify the pooled funds according to the principles
of safety, liquidity and stability.

 Risk Factor

Every investment contains certain portion of risk. It is a key feature of

investment which refers to loss of principal, delay in payment of interest and
capital etc. Most investors prefer to invest in less riskier securities.

 Expectation Of Return

Return expectation is the main objective of investment. Investors expect

regularity of high and consistent income for their capital.

 Safety

Investors expect safety for their capital. They desire certainty of return and
protection of their investment or principal amount.
20
 Liquidity

Liquidity means easily sale or convert the capital or investment into cash
without any loss. So, most investors prefer liquid investments.

 Marketability

It is another feature of investment that they are marketable. It means buying and
selling or transferability of securities in the market.

 Stability Of Income

Investors invest their capital with high expectation of income. So, return on
their investment should be adequate and stable.

1.7 Advantages Of Investment

One of the primary advantages of investment is that a prudent investor can have
their money work for them to earn more money, rather than having to earn that
extra money themselves. This gives them the benefit of enjoying a higher
standard of living for roughly the same amount of work.

 Grow your money

Investing your money can allow you to grow it. Most investment vehicles, such
as stocks, certificates of deposit, or bonds, offer returns on your money over
the long term. This return allows your money to build, creating wealth over
time.

 Save for retirement

As you are working, you should be saving money for retirement. Put your
retirement savings into a portfolio of investments, such as stocks, bonds, mutual
funds, real estate, businesses, or precious metals. Then, at retirement age, you
can live off funds earned from these investments. Based on your personal
tolerance of risk, you may want to consider being riskier at a younger age with
your investments. Greater risk increases your chances of earning greater
wealth. Becoming more conservative with your investments as you grow older
can be wise, especially as you near retirement age.
21
 Earn higher returns

In order to grow your money, you need to put it in a place where it can earn a
high rate of return. The higher the rate of return, the more money you will
earn. Investment vehicles tend to offer the opportunity to earn higher rates of
return than savings accounts. Therefore, if you want the chance to earn a
higher return on your money, you will need to explore investing your money.

 Reach financial goals

Investing can help you reach big financial goals. If your money is earning a
higher rate of return than a savings account, you will be earning more money
both over the long term and within a faster period. This return on your
investments can be used toward major financial goals, such as buying a home,
buying a car, starting your own business , or putting your children through
college.

 Build on pre-tax dollars

Some investment vehicles, like employer-sponsored 401(k)s, allow you to

invest your pre-tax dollars. This option allows you to save more money than if
you could only invest your post-tax dollars.

 Qualify for employer-matching programs

Some employers offer to match the money you invest in your 401(k) plan up to
a certain amount. Of course, the only way you can qualify and earn these
matching funds is if you are actively investing in your 401(k) plan. Thus, many
people invest in their 401(k)s to gain the matching employer funds.

 Start and expand a business

Investing is an important part of business creation and expansion. Many

investors like to support entrepreneurs and contribute to the creation of new
jobs and new products. They enjoy the process of creating and establishing new
businesses and building them into successful entities that can provide them with
a strong return on their investment.

22
 Support others

Many investors like investing in people, whether they are business owners,
artists, or manufacturers. These investors feel good helping others achieve their
goals.

 Reduce taxable income

As an investor, you may be able to reduce your taxable income by investing

pre-tax dollars into a retirement fund, like a 401(k). If you generate a loss from
an investment, you may be able to apply that loss against any gains from other
investments, which lowers the amount of your taxable income.

 Be part of a new venture

New ventures need the backing of money, and they look to investors for that
backing. Some investors may like the excitement of investing in a new, cutting-
edge product or service, or being part of something like a business or film that
introduces them to a glamorous world.

1.8 Disadvantages Of Investment

An investor may bear a risk of loss of some or all of their capital invested.
Investment differs from arbitrage, in which profit is generated without investing
capital or bearing risk. Savings bear the (normally remote) risk that the financial
provider may default. Foreign currency savings also bear foreign exchange risk:
if the currency of a savings account differs from the account holder's home
currency, then there is the risk that the exchange rate between the two
currencies will move unfavourable , so that the value of the savings account
decreases, measured in the account holder's home currency. In contrast with
savings, investments tend to carry more risk, in the form of both a wider variety
of risk factors, and a greater level of uncertainty.

1. High Expense Ratios and Sales Charges

23
If you’re not paying attention to mutual fund expense ratios and sales charges;
they can get out of hand. Be very careful when investing in funds with
expense ratios higher than 1.20%, as they will be considered on the higher
cost end. Be wary of 12b-1 advertising fees and sales charges in general.
There are several good fund companies out there that have no sales charges.
Fees reduce overall investment returns.

2.Management Abuses

Chruning , turnover and window dressing may happen if your manager is

abusing his or her authority. This includes unnecessary trading, excessive
replacement and selling the losers prior to quarter-end to fix the books.

3.Tax Inefficiency

Like it or not, investors do not have any choice when it comes to capital gain
payouts in mutual funds. Due to the turnover, redemptions, gains and losses in
security holdings throughout the year, investors typically receive distributions
from the fund that are an uncontrollable tax event.

4.Poor Trade Execution

If you place your mutual fund trade anytime before the cut-off time for same-
day NAV, you’ll get the same closing price NAV is for buy or sell on the
mutual fund. For investors searching for faster execution times, maybe
because of short investment horizons, day trading, or timing the market,
mutual funds provide a weak execution strategy.

5. Volatile Investments

Investment in BSE is subjected to many risks since the market is volatile. The
shares of a company fluctuate so many times in just a single day. These price
fluctuations are unpredictable most of the times and the investor sometimes
have to face severe loss due to such uncertainty.

24
6.Brokerage Commissions Kill Profit Margin

Every time an investor purchase or sells his shares; he has to pay some
amount as a brokerage commission to the broker, which kills the profit
margin.

7.Time Consuming

Investment in NSE is not as easy as investing in a lottery as you have to

complete many formalities in the process and hence is time consuming..

25
  FACTORS INFLUENCING INVESTMENT DECISION

Investment levels are influenced by:

 Interest rates (the cost of borrowing)

 Economic growth (changes in demand)
 Confidence/expectations
 Technological developments (productivity of capital)
 Availability of finance from banks.
 Others (depreciation, wage costs, inflation, government policy

Factors Affecting
Investment

⦁ Interest rates
Investment is financed either out of current savings or by borrowing. Therefore,
investment is strongly influenced by interest rates. High interest rates make it more
expensive to borrow. High interest rates also give a better rate of return from
keeping money in the bank. With higher interest rates, investment has a higher
opportunity cost because you lose out the interest payments.
The marginal efficiency of capital states that for investment to be worthwhile, it
needs to give a higher rate of return than the interest rate. If interest rates are 5%, an

26
investment project needs to give a rate of return of at least 5% or more. As interest
rates rise, fewer investment projects will be profitable. If interest rates are cut, then
more investment projects will be worthwhile.

⦁ Economic growth

Firms invest to meet future demand. If demand is falling, then firms will cut back
on investment. If economic prospects improve, then firms will increase investment
as they expect future demand to rise. There is strong empirical evidence that
investment is cyclical. In a recession, investment falls, and recover with economic
growth.

⦁ Confidence

Investment is riskier than saving. Firms will only invest if they are
confident about future costs, demand and economic prospects. Keynes
referred to the ‘animal spirits’ of businessmen as a key determinant of
investment. Keynes noted that confidence that wasn’t always rational.
Confidence will be affected by economic growth and interest rates, but
also the general economic and political climate. If there is uncertainty
(e.g. political turmoil) then firms may cut back on investment decisions
as they wait to see how event unfold.

 Inflation

In the long-term, inflation rates can have an influence on investment.

High and variable inflation tends to create more uncertainty and
confusion, with uncertainties over the cost of investment. If inflation is
high and volatile, firms will be uncertain at the final cost of the
investment, they may also fear high inflation could lead to economic
uncertainty and future downturn. Countries with a prolonged period of
low and stable inflation have often experienced higher rates of
investment.

27
 Productivity of capital

Long-term changes in technology can influence the attractiveness of

investment. In the late nineteenth century, new technology such as
Bessemer steel and improved steam engines meant firms had a strong
incentive to invest in this new technology because it was much more
efficient than previous technology. If there is a slowdown in the rate of
technological progress, firms will cut back investment as there are lower
returns on the investment.

 Availability of finance

In the credit crunch of 2008, many banks were short of liquidity so had
to cut back lending. Banks were very reluctant to lend to firms for
investment. Therefore, despite record low-interest rates, firms were
unable to borrow for investment – despite firms wishing to do that.
Another factor that can influence investment in the long-term is the level
of savings. A high level of savings enables more resources to be used for
investment. With high deposits – banks are able to lend more out. If
the level of savings in the economy falls, then it limits the amounts of
funds that can be channeled into investment.
 Wage costs

If wage costs are rising rapidly, it may create an incentive for a

firm to try and boost labour productivity, through investing in
capital stock. In a period of low wage growth, firms may be more
inclined to use more labour-intensive production methods.

 Depreciation

Not all investment is driven by the economic cycle. Some

investment is necessary to replace worn out or outdated
equipment. Also, investment may be required for the standard
growth of a firm. In a recession, investment will fall sharply, but
not completely – firms may continue with projects already started,
and after a time, they may have to invest on less ambitious
projects. Also, even in recessions, some firms may wish to invest
or start-up.

28
 Public sector investment

Most of the investment is driven by the private sector. But,

investment also includes public sector investment – government
spending on infrastructure, schools, hospitals and transport.

 Government policies

Some government regulations can make investment more difficult.

For example, strict planning legislation can discourage
investment. On the other hand, government subsidies/tax breaks
can encourage investment. In China and Korea, the government
has often implicitly guaranteed – supported the cost of investment.
This has led to greater investment – though it can also affect the
quality of investment as there is less incentive to make sure the
investment has a strong rate of return.

29
 CHAPTER 2 :-
RESEARCH
METHODOLOGY

30
3.1 Research Methodology
The project consists of theoretical as well as practical knowledge. Also it
contains ideas and information imparted by the guide. In this research
data is collected by through two sources
Primary Research

Secondary Research

3.1.1 PRIMARY DATA COLLECTION METHOD

In primary data collection method you collect the data yourself using
methods such as interviews and questionnaires. The key point here is that
the data you collect is unique to you and your research and, until you
publish , no one else has access to it . There are many methods to collect
primary data and the main methods include:
Structured Questions:-

Interviews
Data Collection
Observations

The primary data which is generated by the above methods, may be

qualitative in nature (usually in the form of numbers or where you can
make counts of words used)

 PRIMARY DATA

SAMPLE SIZE: 35

SAMPLE UNIT :Google Forms

SAMPLE INSTRUMENT :

31
 • Observation

• Google Forms

3.1.2 SECONDARY DATA COLLECTION METHOD

Secondary data is collected by someone other than the user. Common sources
of secondary data include censuses, survey, organizational record, or data
collected through qualitative methodologies or qualitative research.

SECONDARY DATA:-
 Newspaper
 Internet


Secondary data analysis saves time that would otherwise be spent collecting
data and particularly in the case of quantitative data , provides larger and
higher- quality data base than would be unfeasible for any individual
researcher to collect on their own .In addition to that , analysts of social and
economic change consider secondary data essential, since it is impossible to
conduct a new survey that can adequately capture past change / or
developments.

SAMPLING INSTRUNMENTS

 INTERNET

AREA OF STUDY
 MUMBAI

32
3.2 Objectives Of Study

• To Understand various Avenues Of Investment In India.

• To Know weather people are aware of Stock Exchange.
• To Know the features of Investment Option do people prefer.
• To Know on whose advice do people make Investment decisions.
• To Understand on what basis the decision to invest depends on.
• To study the knowledge of the investor about investment option.
• To analyze the reason for choosing one particular investment.
• To signify the best preferred option amongst the different financial
instruments.
• To study the investors objective towards choosing an option out of so
many.
• To analyze the investment pattern by investors.
• To find out the saving habit of people and the percentage of amount they
invest in various financial instruments.
• To evaluate the attitude of people towards saving and decision making
regarding investments.
• To find out the reason of individual for not investing in financial
instruments.
• To find out what return people expect from the investment.
• To find out what various factors they consider before investing

3.3 Hypothesis

• H0 Most people are Aware of various Investment Avenues.

• H1 Most people are Unaware of various Investment Avenues.
• H0 Most people are Aware about Share Market and also how to Invest in
it.
• H1 Most people are Unaware about Share Market and also how to Invest
in it.
• H0 Decision of Investment depends on Companies Past Performance and
Economic Scenarios.
• H1 Decision of Investment depends on Industry Analysis and Credit
Rating.

33
CHAPTER 3
Review
of literature

34
 The emerging economic environment of competitive markets signifying
individuals’ sovereignty has profound implications for the savings and their
investment in India. The term investment refers to funds invested in various
saving schemes, consisting of deposit in banks, post office, Government and
Semi-Government securities, loans, mutual funds shares and debentures of
companies. The financial and economic meaning of investment is related to each
other, because investment is a part of savings of individuals, which flows into the
capital market either directly or through institutions divided into new and
secondary capital financing. According to F. Amling- ‘Investment may be
defined as the purchase by an individual or institutional investor of a financial or
real assets that produces a return proportional to the risk assumed over some
future investment period.

A review of literature consigns a research study in proper perspective by showing

the quantity of work already carried out in the related area of the study. The
purpose of this part is to understand the results of various studies already
undertaken in the relevant field and to find out the research gap in the present
study.

A large number of studies on the investment behaviour have been performed

during the past few years all over the world. In this modern era, so many types
of investments are available. Each type of investment has its own advantage and
disadvantages. An investor can also choose the type of investment which suits
his needs. The following are the extracts of various articles published by
different authors in several magazines and journals.

2.1 Preference of Various Investment Avenues

Joseph et al (2014) has carried “A Study on Preferred Investment Avenues among

the People and Factors Considered for Investment”. The study has been undertaken
with the objective, to analyze the investment choice of people in few cities in
Bangalore. The study is based on using a structured questionnaire. The study
concludes that all the age groups among the respondents give more importance to
invest in bank deposit and insurance. Income level of a respondent is an important
factor which affects investment portfolio of the respondent. Respondents are more
aware about various investment avenues like insurance, bank deposits, small
savings like post office savings etc. Many people are not willing to take risk for their
funds, so many prefer to invest in bank deposits, insurance, post office saving etc.,
The study suggested to every respondents that, they have to acquire a specific

35
knowledge of various kinds of investment opportunities available in the financial
market and appraisal of investment for avoiding loss.

Pandian et al (2013) carried out a study on “A Study of Investors Preference

towards Various Investments Avenues in Dehradun District”. The study was
conducted to understand the awareness of people towards various investment
avenues and the investors’ preference towards various investment avenues in
Dehradun Districts. The investors are selected by convenient sampling technique.
Accordingly, the researcher has selected 120 investors in the study area. The
investigation shows that, majority of the investors invest their money in equity
shares only and also the majority invest their money for the purpose of capital
appreciation. The study revealed that when comparing the earnings and the loss
incurred by the investors in stock market. It is heartening to note that most of the
investors incurred loss only. The study offered suggestion to the investors that; the
investor has to invest their money in less risky securities like mutual fund and
debenture.

Sireesha et al (2013) has carried out a study on impact of demographics on select

investment avenues: a case study of twin cities of Hyderabad and Secunderabad,
India. The research study seeks to reveal the relationship between the demographic
factors and investment avenues selected by investors. A survey method is adopted
to gather information from 165 respondents through questionnaire in Hyderabad
and Secunderabad and the samples were selected at random from different age
groups, occupations, income levels, and qualifications. Points were allotted to the
preferences specified by the respondents through the questionnaires. The study
finally concludes that income and amount saved has an impact on the purpose of
investment made by the investors. Most of the investors preferred to invest their
money in the bank and post office savings schemes and this reflects the conservative
nature of an investor i.e., the investor wants their money to be safe and they do not
require any higher return and capital appreciation. The study offers a suggestion to
the wealth manager to design a portfolio to their client according to their income
pattern.

Malekar et al (2012) in their article entitled “A study of investor behavior on

investment avenues in Mumbai Fenil” stated that investor‘s perception will provide
a way to accurately measure how the investors think about the products and services
provided by the company. The objective of the study is to find out the need of the
current and future investors and to study on investor behavior. A sample of 100

36
investors was taken for the study. Most of the investors were making conservative
decisions that reflecting a survival mode in the business operation. During these
difficult times, understanding what investors decide on an ongoing basis is critical
for survival. Therefore, the study is identified that people like to invest in stock
market as compared to any other markets, even if they face huge losses.
Giridhari et al (2011) have carried out a study on “Investment Preferences among
Urban Investors in Orissa”. They discuss that people were irrational in their decision
making about investment in securities. They make cognitive or emotional mistakes
in decision making. It happens due to various biases which are being discussed in
the field of behavioral finance. It explains that investment decisions and risk
tolerance of investors depend on age, sex, income, marital status, education, family
background, occupation and also the environment on which people lived. The
investors of urban areas were targeted for this research study. This research study
also cleared that male investors are more risk seeker and more active than compare
to female investors. The types of investors are also discussed in this study. Structured
Questionnaire and statements used for conducting this research and the sample size
was 210. The results of study show that individuals invest to full fill their needs and
also take other benefits like safety, tax benefits, high capital gains, liquidity, secured
future and for future needs.

Thirupath (2011) has conducted a study on “Investment Patterns and Tax Planning
of Salaried Class Investors in Vellore District”. The focus of this study is on the
individual salaried class investors. Keeping in view the potential savings of the
salaried class investors, this study outlines the conceptual background with focus
on investment and tax planning, examines the profile and awareness of the salaried
class investors, analyses the attitude and satisfaction of the salaried class investors
towards investments, evaluates the factors motivating the investors for investments
and expected rate of return on investment, analyses the awareness and attitude of
investors towards tax planning and offers suggestions for increasing investments in
Government sectors and on balanced investment patterns for individual investors.

Barua and Srinivasan (1991) worked on the investment decision making process
of individuals has been explored through experiments. They conclude that the risk
perception of individuals is significantly influenced by the skewness of the return
distribution. This implies that while taking investment decisions, investors are
concerned about the possibility of maximum losses in addition to the variability of
returns. Thus the mean variance framework does not fully explain the investment
decision making process of individuals.

37
The majority 28.3 % of the respondents felt that Kisan Vikas Patra was providing
high return with interest rate of 8.41%, Next preference was Monthly income
scheme (MIS) by 23.3 % of the respondents. MIS with its handsome 8 percent
returns proved to be a major draw. 15 % of the respondents felt that Recurring
deposit was giving more return on investment. 11.1 % of respondents preferred
Postal life insurance scheme, 8.9 % felt that Time deposit was giving high return, 5
% felt that Public provident fund was providing high return on investment, only 2.9
% felt that Post office savings A/c and 4.4% felt National savings certificate
provides high return on their investment respectively. The majority of respondents
preferred reasons for post office investment, 77.9% of respondents felt that there
was 100% safety for their investment. 10.3% had invested in Post office as a small
saving as they do consider the interest rate. 2.9% were availing tax benefits.

2.2 Awareness on Investment

Puneet (2014) has carried out a study to analyse the awareness level and investment
behaviour of salaried individuals towards financial products. All those salaried
individuals of Himachal Pradesh were considered as the population for this study.
A sample of 516 respondents was used for the purpose of this study. Results of the
study suggest that respondents are quite aware about traditional and safe financial
products whereas awareness level of new age financial products among the
population is low. Also majority of the respondents park their money in traditional
and safe investment avenues.

Mane et al (2014) analyzed the “Awareness and Selection of Different Financial

Investment Avenues for the Investor in Pune City”. This study deals with the
behavior of the investor to identify the better investment avenues available in Pune.
The study mainly focused to identify the investors’ preference towards the
investment. The sample size of the study is 784, drawn from Krejcie and Morgan
table. This study confirms the earlier findings with regard to the relationship
between age and income level of the individual investors. It concludes that large
numbers of portfolio is not good for healthy investment and women are the deciding
factor of the family.

Mazumdar (2014) carried out a study on “Individual Investment Behavior with

Respect to Financial Knowledge and Investment Risk Preference”. This study
attempts to understand the relationship between the level of knowledge and
investment behavior. It examines, if individuals with high financial knowledge, tend
to invest more in any particular investment avenue like equity, fixed deposits, gold
38
or real estate. The study also tries to understand if an individual’s financial risk
preference affects investment behavior. It examines if risk averse investors,
moderate risk takers and aggressive investors differ with respect to their investment
behavior. It also gauges the association of financial knowledge and investment risk
preference. It shows that there is no significant relationship between knowledge and
individual investment behavior. No significant relationship is seen between investor
risk preference and individual investment behavior. This finding is contradictory to
the previous studies as seen in literature. Indian investors may tend to be basing
their investment decisions based on cultural upbringing, or may be influenced by
social norms and psychological biases. Role of friends, relatives and financial
advisors may be a major influencing factor. They found that investors with high
financial knowledge tend to invest more in risky avenues. This finding supports
result from previous research studies.

Umamaheswari et al (2014) has carried out a study on “Coimbatore based Salaried

Investors’ Awareness, Attitude, Expectation and Satisfaction over their
investments”. This paper is outlining the relationship between the dominant societal
and demographic factors of the salaried middle class that affects the investment
criteria namely, investment awareness, investment attitude and investment returns.
Precisely, this study pursued on the salaried middle class of Coimbatore District,
Tamilnadu, India is executed with a focus to comprehend the utilities of financial
policies favouring public and the sample group of salaried class investors
comprising 1000 members. A significant percentage of the salaried investors of
Coimbatore know to make good investment decisions, one third of salaried-class of
Coimbatore do not opt for the right financial plan due to lack of investment
awareness and only 50 per cent of the salaried-class of Coimbatore has knowledge
about the percentage of savings they have to opt for future.

Chavare (2013) has undertaken a study to know the investment practices of senior
college teachers in Western Maharashtra. The findings reveal that, the investors
were having high level of knowledge about various investment avenues. Also, most
of the investors have taken the assistance of investment planners during the decision
making of investment. The investors have mostly preferred low risk avenues
comparative to others. They wanted to invest their funds in safer avenues and want
to live comfortable. Researcher has found that, there was a relationship between
39
annual income and terms of investments. But, an age of investors and the amount
of investment is not interrelated. Although a majority of the investors were having
a high level of knowledge, it is suggested that, the investors should have thorough
knowledge before making investment in different avenues

4.1 Types Of Investment

Before you start investing, it is best to understand the different types of
investments. For most investors, investments vary in terms of risk levels – low
risk, medium risk and high risk. Here’s a look at these investment options in
detail:

• Low-risk investments

These are instruments which pay fixed income – irrespective of the changes in
the business or economy. Bonds, debentures and fixed deposits come under this
category. Also, special investment vehicles – PPF, EPF, SCSS, Sukanya
Samriddhi, National Savings Scheme and other small Post Office Schemes
which are created by a government statute for specific purposes are low risk as
they guarantee the returns. The returns are periodic and pre-determined. Low-
risk investments are not linked to the stock market movements and are usually
governed by the interest rate movements of the financiers. However, there is
always the returns are always guaranteed. Government bonds and life insurance
policies provide good returns, however, they have long lockin periods. So, you
will have to wait for a long time to earn substantial returns from these
investment options. Fixed deposit is one of the very few low-risk investments
that offer stable, high returns and immediate liquidity.

• Medium-risk investments
These are investments which might have a certain percentage of risk but these
also pay higher returns to investors willing to invest in them. Debt funds,
balanced mutual funds, and index funds fall in this category. Such instruments
do have an element of debt and stability, but they have their volatility linked to
the markets which can hamper your principal amount. The irregularity in
earnings can make any fixed income from such investment impossible.

40
 • High-risk investments

These are investments where there is no limit to the upside along with the
downside of risk-returns. These are stocks of companies, equity mutual funds,
even stocks, and derivatives. The return on these instruments can give huge
returns as well as chances of losses depending on various external factors to the
company and internal ones.
The quantity and timing of returns on these instruments are not fixed. Hence,
they are at high risk.

4.2 Investment Avenues in India

The Indian investor has a number of investment options to choose from. Some
are traditional investments that have been used across generations, while some
are relatively newer options that have become popular in recent years. Here are
some popular investment options available in India.

• Mutual Funds
• Fixed Deposits
• Bonds
• Stock
• Recurring Deposit
• Public Provident Fund (PPF)
• Gold/Silver
• Equities
• Real Estate (Residential/Commercial Property)
• Precious stones

1. Mutual Funds

Mutual Fund have been around for the past few decades but they have gained
popularity only in the last few years. These are investment vehicles that pool
the money of many investors and invest it in a way to earn optimum returns.
Different types of mutual funds invest in different securities. Equity mutual
funds invest primarily in stocks and equity-related instruments, while debt
mutual funds invest in bonds and papers. There are also hybrid mutual funds
that invest in equity as well as debt. Mutual funds are flexible investment
41
vehicles, in which you can begin and stop investing as per your convenience.
Apart from Tax Saving Mutual Fund, you can redeem investments from mutual
funds any time as well. Mutual funds are financial instruments that are
professionally managed and that invest money on behalf of any investor in
different securities. These mutual funds are classified into various types based
on the type of securities that they invest in. some of the most popular mutual
fund types are balanced funds, stock funds, open-ended funds etc. These funds
are classified based on their percentage allocation in different securities. So an
equity fund invests popular is equity and is a high risk high return product while
a debt fund invests purely in debt and money market instruments and is hence
a low risk low return financial product.

Mutual funds are a popular and easily understood investment vehicle for many
investors. For investors with limited knowledge and time or money. Mutual
funds can provide simplicity and other benefits. To help you decide whether
investing in mutual funds is the right choice for you or not .Mutual funds are
financial instruments that are professionally managed and that invest money on
behalf of any investor in different securities.

These mutual funds are classified into various types based on the type of
securities that they invest in. some of the most popular mutual fund types are
balanced funds, stock funds, open-ended funds etc. These funds are classified
based on their percentage allocation in different securities. So an equity fund
invests popular is equity and is a high risk high return product while a debt fund
invests purely in debt and money market instruments and is hence a low risk
low return financial product.

Mutual funds are a popular and easily understood investment vehicle for many
investors. For investors with limited knowledge and time or money. Mutual
funds can provide simplicity and other benefits. To help you decide whether
investing in mutual funds is the right choice for you or not.

 ADVANTAGES OF INVESTING IN MUTUAL FUNDS:

42
 One of the advantages of a mutual fund is it allows you to capture the
returns of an entire segment of the market without having to buy and sell
individual stocks and bonds. This ability to diversify across many
investments with the purchase of a single fund is one of the main reasons
mutual funds are so popular.

 By purchasing mutual funds, you are provided with the immediate

benefit of instant diversification and asset allocation without the large
amounts of cash needed to create individual portfolios.

 Mutual funds are able to take advantage of their buying and selling
volume to reduce transaction cost for investors. When you buy a mutual
fund, you are able to diversify without the numerous commission
charges. Imagine if you had to buy each of the 10-20 stocks needed for
diversification. The commission charges alone would eat up a good
chunk of your investment. With mutual funds you can make transaction
on much larger scale for lesser money.

 Many investors don't have the exact sums of money to buy round lots of
securities. Investors can purchase mutual funds in smaller
denominations. Smaller denominations of mutual funds give investors
the ability to make periodic investments through monthly purchase plans.
So rather than having to wait until you have enough money to buy higher-
cost investments you can get in right away with mutual funds. This
provides an additional advantage.

 Another advantage of mutual funds is that you can get in and out with
relative ease. In general, you are able to sell your mutual funds in a short
period of time without there being much difference between the sale price
and the most current market valued.

 When you buy a mutual fund, you are also choosing a professional
money manager. This manager will use the money that you invest to buy
and sell stocks that he or she has carefully researched. Therefore rather
than having to thoroughly research every investment before you decide

43
 to buy or sell you have a mutual fund's money manager to handle it for
you.

 Returns:

Mutual funds cannot guarantee returns to investors as they are linked to market
performance. So, if the market is on a bull run and it does exceedingly well, this
is reflected in the value of your fund. However, a poor performance in the
market could negatively impact your investments. Unlike traditional
investments ,mutual funds do not assure capital protection. Hence investors
should do their research and invest in funds that can help you meet your
financial goals.

⦁ Market risk

The risk that you will lose some or all of your principal. As markets fluctuate,
there is always a possibility that the mutual funds you hold might be caught in
a decline.

⦁Inflation risk

The risk of losing purchasing power. If your mutual funds gain 5% in a year
and the cost of living goes up by 2%, you are left with a real return of only 3%.

⦁Interest rate risk

The risk that rising interest rates will cause your mutual funds to decline in
value. When interest rates rise, bond prices decline and bond mutual funds may
also decline as a result.

⦁Currency risk

The risk that a decline in the exchange rate will reduce your gains (or add to
losses). Even if the value of a foreign-currency-denominated fund goes up, a
decline in the foreign currency can reduce your returns when they are
exchanged back into Canadian dollars.

44
⦁ Credit risk

The risk that the issuer of a bond or other security won't have enough money to
make its interest payments or to redeem the bonds for face value when they are
due. Securities with a higher risk of default tend to pay higher returns.

2. Fixed Deposits

Fixed deposits are investment vehicles that are for a specific, predefined
time period. They offer complete capital protection as well as guaranteed
returns. They are ideal for conservative investors who stay away from
risks. Fixed deposits are offered by banks and for different time periods.
Fixed deposit interest rates change as per economic conditions and are
decided by the banks themselves. Fixed deposits are typically locked-in
investments, but investors are often allowed to avail loans or overdraft
facilities against them. There is also a tax-saving variant of fixed deposit,
which comes with a lock-in of 5 years. Fixed deposits are a high-interest
-yielding Term deposit and offered by banks in India.

The most popular form of Term deposits are Fixed Deposits while other
forms of term Deposits are recurring deposit and flexi fixed deposit the
latter is actually a combination of Demand deposit and Fixed deposit. A
fixed deposit is a financial instrument provided by banks or NBFCs
which provides investors a higher rate of interest than a regular saving
account until the given maturity date. It may or may not require the
creation of a separate account. It is known as a term deposit or time
deposit in Canada, Australia, New-Zealand and the United States and as
a bond in the United Kingdom and India. for a fixed deposit is that the
money cannot be withdrawn from the fixed deposit as compared to
recurring deposit or a demand deposit before maturity. Some banks may
offer additional services to fixed deposit holders such as loans against
fixed deposit certificates at competitive interest rates. It's important to
note that banks may offer lesser interest rates under uncertain economic
conditions.

45
The interest rate varies between 4 and 7.25 percent. The tenure of an
fixed deposit can vary from 7-15 or 45 days to 1.5 years and can be as
high as 10 years. These investments are safer than Post Office Schemes
as they are covered by the deposit insurance and credit guarantee
corporation (DICGC). They also offer income tax and wealth benefits.
To compensate for the low liquidity fixed deposits offer higher rates of
interest than saving accounts. The longest permissible term for fixed
deposits is 10 years. Generally the longer the term of deposit, higher is
the rate of interest but a bank may offer lower rate of interest for a longer
period if it expects interest rates, at which the Central Bank of a nation
lends to banks (repo rates) will dip in the future.

Usually in India the interest on fixed deposits is paid every three months
from the date of the deposit. (example: if FD a/c was opened on 15th
Feb., first interest installment would be paid on 15 May). The interest is
credited to the customers' Savings bank account or sent to them by
cheque. This is a simple fixed deposit. The customer may choose to have
the interest reinvested in the fixed deposit account. In this case, the
deposit is called the cumulative fixed deposit or compound interest. For
such deposits, the interest is paid with the invested amount on maturity
of the deposit at the end of the term.

Although banks can refuse to repay fixed deposits before the expiry of
the deposit, they generally don't. This is known as a premature
withdrawal. In such cases, interest is paid at the rate applicable at the
time of withdrawal. For example, a deposit is made for 5 years at 8%,
but is withdrawn after 2 years. If the rate applicable on the date of
deposit for 2 years is 5 per cent, the interest will be paid at 5 per cent.
Banks can charge a penalty for premature withdrawal. Banks issue a
separate receipt for every fixed deposit because each deposit is treated
as a distinct contract. This receipt is known as the fixed deposit receipt
that has to be surrendered to the bank at the time of renewal or
encashment. Many banks offer the facility of automatic renewal of fixed
deposits where the customers do give new instructions for the matured
deposit. On the date of maturity, such deposits are renewed for a similar

46
 term as that of the original deposit at the rate prevailing on the date of
renewal.

Nowadays, banks gives the facility of Flexi or sweep in fixed deposit,

where in you can withdraw your money through ATM, through cheque
or through funds transfer from your fixed deposit account. In such
case, whatever interest is accrued on the amount you have withdrawn
will be credited to your savings account and the balance amount will
automatically be converted in your new fixed deposit. This system
helps you in getting your funds from your fixed deposit account at the
times of emergency without wasting your time.

 BENEFITS OF FIXED DEPOSIT :

 The main advantages of a fixed investment such as a term deposit include

guaranteed interest rate for the agreed period and security so if the market
crashes your funds are safe, unlike the share market. Often higher rates
of interest than other savings accounts and competitive yield.

 The only reason why our parents and many in our generation also have
this single concept of investment is because of its safety features. Also it
is easy to raise a loan against your FD. One can borrow up to 90 per cent
of the FDs amount.

 . The next advantage is the flexible maturity date, it is for this feature that
you can invest for a time frame that is as less as 6 months to as long as
10 years or even more.

 Customers can avail loans against FDs up to 80 to 90 percent of the value

of deposits. The rate of interest on the loan could be 1 to 2 percent over
the rate offered on the deposit.

 Residents of India can open these accounts for a minimum of 3 months.

47
 Investing in a fixed deposit earns you a higher interest rate than
depositing your money in a saving account.

 Risk involved:

 Liquidity risk

A fixed deposit makes the availability of funds easy. However, not all fixed
deposits may be easily liquidated. For example, a tax-saver FD whose tenure
is five years, can’t be liquidated before its term. If you have an FD at a bank
that doesn’t permit online liquidation, you may have to visit a branch and
fill out their paperwork, and it may be a few days before you get your money.

 Return risk:

There are several returns-related risks in FDs. First of all, FDs may offer
you a moderate rate of return between 6-8 per cent in most cases. At the
lower end of this returns spectrum, your interest earning may not be enough
to compete with returns from small savings or Mutual Fund SIPs.

 Default risk:

Bank defaults are very rare. However, theoretically, it’s a possibility. Your
deposits – both principal and interest – at commercial and cooperative banks
are guaranteed up to Rs 1 lakh per bank. Therefore, if a bank were to default
and unable to repay your deposit, the Deposit Insurance & Credit Guarantee
Corporation were to cover you up to Rs 1 lakh. If your losses are bigger than
Rs 1 lakh per bank, you may receive no compensation.

 Tax risk:

Your FD interest earnings may be completely taxable unless you’re over 60,
where up to Rs 50,000 is exempt under Section 80 TTB. Your interest
earnings are combined with your income and taxed as per your slab.
Therefore, if you’re in the 30 per cent tax slab, a 7 per cent FD may
effectively be providing you only 4.9 per cent -- returns further diminished
by rising inflation.
48
  Inflation risk:

Low returns from FDs may not beat even the prevalent rate of inflation. For
example, if your FD provides 6 per cent returns while the inflation rate had
crept up to 7 per cent, your capital has actually eroded. In recent quarters,
the inflation rate has been around 5 per cent. Therefore, as a person in the
30 per cent slab investing in a 7 per cent FD, you’ve effectively earned 4.9
per cent, thus earning less than the rate of inflation.

 Concentration risk :

Some conservative, risk-averse investors prefer to save money only through

FDs. This is also a risk. Having all your money concentrated into one form
of asset means that you do not have diversification in your portfolio.

 Credit risk:

When you invest in corporate fixed deposits, you have to watch for credit risks.
A corporate FD is assigned a credit rating by research agencies – FAAA, FAA,
FA, etc. These signify a high chance of you getting your principal and promised
interest back in time. However, companies with lower credit ratings – FB, FC,
FD etc. – may have greater difficulties in repaying your debt.

3. Bonds

Converged under the general class called ‘settled pay’ securities, the expression
“bond” is ordinarily used to allude to any established on obligation. When you
purchase a security, you are giving credit (loaning) out your cash to an organization
or government. Consequently, they consent to give you enthusiasm on your cash and
in the long run pay you back the sum you loaned out. The primary fascination of
bonds is their wellbeing. On the off chance that you are purchasing bonds from a
consistent government, your investment is for all intents and purposes ensured (or
“chance free” in contributing speech). The security and steadiness, be that as it may,
included some major disadvantages. Since there is little hazard, there is minimal
potential return.

49
Therefore, the rate of profit for securities is by and large lower than different
securities. A bond is a fixed income instrument that represents a loan made by an
investor to a borrower (typically corporate or governmental). A bond could be
thought of asan I.O.U. between the lender and borrower that includes the details of
the loan and its payments. Bonds are used by companies, municipalities, states, and
sovereign governments to finance projects and operations. Owners of bonds are debt
holders, or creditors, of the issuer. Bond details include the end date when the
principal of the loan is due to be paid to the bond owner and usually includes the
terms for variable or fixed interest payments made by the borrower.

Governments (at all levels) and corporations commonly use bonds in order to borrow
money. Governments need to fund roads, schools, dams or other infrastructure. The
sudden expense of war may also demand the need to raise funds.
Similarly, corporations will often borrow to grow their business, to buy property and
equipment, to undertake profitable projects, for research and development or to hire
employees. The problem that large organizations run into is that they typically need
far more money than the average bank can provide. Bonds provide a solution by
allowing many individual investors to assume the role of the lender. Indeed, public
debt markets let thousands of investors each lend a portion of the capital needed.

Moreover, markets allow lenders to sell their bonds to other investors or to buy bonds
from other individuals—long after the original issuing organization raised capital.
Any corporate and government bonds are publicly traded; others are traded only
over- the-counter (OTC) or privately between the borrower and lender.

When companies or other entities need to raise money to finance new projects,
maintain ongoing operations, or refinance existing debts, they may issue bonds
directly to investors. The borrower (issuer) issues a bond that includes the terms
of the loan, interest payments that will be made, and the time at which the
loaned funds (bond principal) must be paid back (maturity date). The interest
payment (the coupon)is part of the return that bondholders earn for loaning their
funds to the issuer. The interest rate that determines the payment is called the
coupon rate. The initial price of most bonds is typically set at par, usually $100
or $1,000 face value per individual bond. The actual market price of a bond
depends on a number of factors: the credit quality of the issuer, the length of
time until expiration, and the coupon rate compared to the general interest rate
environment at the time. The face value of the bond is what will be paid back
to the borrower once the bond matures.

50
Most bonds can be sold by the initial bondholder to other investors after they
have been issued. In other words, a bond investor does not have to hold a bond
all the way through to its maturity date. It is also common for bonds to be
repurchased by the borrower if interest rates decline, or if the borrower’s credit
has improved, and it can reissue new bonds at a lower cost.

 TYPES OF BONDS

 Fixed rate bonds have a coupon that remains constant throughout the life
of the bond a variation are stepped coupon bonds whose coupon
increases the life of the bond.

 Floating rate bonds have a variable coupon that is linked to a reference

rate of interest, such as libor or euribor. For example, the coupon may be
defined as three- month USD Libor + 0.20%. The coupon rate is
recalculated periodically, typically every one or three months.

 Zero coupon bonds pay no regular interest. They are issued at a

substantial discount to par value so that the interest is effectively rolled
up to maturity and usually taxed as such. The bondholder receives the
full principal amount on the redemption date. zero coupon bonds may be
created from fixed rate bonds by a financial institution separating the
coupons from the principal. In other words, the separated coupons and
the final principal payment of the bond may be traded separately. See IO
that is (interest only) and PO (principal only).

 High yield bonds are bonds that are rated below investment grade by the
credit agencies. As these bonds are riskier than investment grade bonds,
investors or common man expect to earn a higher yield.
 Convertible bonds let a bondholder exchange a bond to a number of
shares of the issuer's common stock. These are known as hybrid
securities because they combine equity and debt features.

 Exchangeable bond sallows for exchange to shares of a corporation other

than the issuer.

51
 CHARACTERISTICS OF BONDS:

 Most bonds share some common basic characteristics including: ⦁ Face value is
the money amount the bond will be worth at maturity; it is also the reference
amount the bond issuer uses when calculating interest payments.

 Coupon rate is the rate of interest the bond issuer will pay on the face value of
the bond, expressed as a percentage.

 Coupon dates are the dates on which the bond issuer will make interest payments.
Payments can be made in any interval, but the standard is semi annual payments.

 Maturity date is the date on which the bond will mature and the bond issuer will
pay the bondholder the face value of the bond.

 Issue price is the price at which the bond issuer originally sells the bonds.

 Pricing Bonds

The market prices bonds based on their particular characteristics. A bond's price
changes on a daily basis, just like that of any other publicly-traded security, where
supply and demand in any given moment determine that observed price. But there is
a logic to how bonds are valued. Up to this point, we've talked about bonds as if
every investor holds them to maturity. It's true that if you do this you're guaranteed
to get your principal back plus interest; however, a bond does not have to be held to
maturity. At any time, a bondholder can sell their bonds in the open market, where
the price can fluctuate, sometimes dramatically.

The price of a bond changes in response to changes in interest rates in the economy.
This is due to the fact that for a fixed-rate bond, the issuer has promised to pay a
coupon based on the face value of the bond – so for a $1,000 par, 10% annual coupon
bond, the issuer will pay the bondholder $100 each year. Say that prevailing interest
rates are also 10% at the time that this bond is issued, as determined by the rate on a
short-term government bond. An investor would be indifferent investing in the
corporate bond or the government bond since both would return $100. However,

52
imagine a little while later, that the economy has taken a turn for the worse and
interest rates dropped to 5%.

Now, the investor can only receive$50 from the government bond, but would still
receive $100 from the corporate bond. This difference makes the corporate bond
much more attractive. So, investors in the market will bid up to the price of the bond
until it trades at a premium that equalizes the prevailing interest rate environment—
in this case, the bond will trade at a price of$2,000 so that the $100 coupon represents
5%. Likewise, if interest rates soared to 15%, then an investor could make $150 from
the government bond and would not pay$1,000 to earn just $100. This bond would
be sold until it reached a price that equalized the yields, in this case to a price of
$666.67.

This is why the famous statement that a bond’s price varies inversely with interest
rates works. When interest rates go up, bond prices fall in order to have the effect of
equalizing the interest rate on the bond with prevailing rates, and vice versa.

 Risk Factor:

The most well-known risk in the bond market is interest rate risk – the risk that bond
prices will fall as interest rates rise. By buying a bond, the bondholder has committed
to receiving a fixed rate of return for asset period. Should the market interest rate
rise from the date of the bond's purchase, the bond's price will 19fallaccordingly.
The bond will then be trading at a discount to reflect the lower return that an investor
will make on the bond.

 Interest Rate Risk Factors for Bonds

Market interest rates are a function of several factors, including the demand for and
supply of money in the economy, the inflation rate, the stage that the business cycle
is in, and the government's monetary and fiscal policies.
From a mathematical standpoint, interest-rate risk refers to the inverse relationship
between the price of a bond and market interest rates. To explain, if an investor
purchased a 5% coupon, a 10-year corporate bond that is selling at par value,the
present value of the $1,000 par value bond would be $614. This amount represents
the amount of money that is needed today to be invested at an annual rate of 5% per
year over a 10-year period, in order to have $1,000 when the bond reaches maturity.
Now, if interest rates increase to 6%, the present value of the bond would be $558,
because it would only take $558 invested today at an annual rate of 6% for 10 years
53
to accumulate $1,000. In contrast, if interest rates decreased to 4%, the present value
of the bond would be $676. As you can see from the difference in the present value
of these bond prices, there truly is an inverse relationship between the price of a bond
and market interest rates, at least from a mathematical standpoint.

 Reinvestment Risk for Bond Investors

One risk is that the proceeds from a bond will be reinvested at a lower rate than the
bond originally provided. For example, imagine that an investor bought a $1,000
bond that had an annual coupon of 12%. Each year the investor receives $120 (12%
*$1,000), which can be reinvested back into another bond. But imagine that over
time the market rate falls to 1%. Suddenly, that $120 received from the bond can
only be reinvested at 1%, instead of the 12% rate of the original bond.

 Call Risk for Bond Investors

Another risk is that a bond will be called by its issuer. Callable bonds have call
provisions, which allow the bond issuer to purchase the bond back from the
bondholders and retire the issue. This is usually done when interest rates have fallen
substantially since the issue date. Call provisions allow the issuer to retire the old,
high-rate bonds and sell low-rate bonds in a bid to lower debt costs.

 Default Risk for Bond Investors

This risk refers to an event wherein the bond's issuer is unable to pay the contractual
interest or principal on the bond in a timely manner, or at all. Credit ratingservices
such as Moody's, Standard & Poor's and Fitch give credit ratings to bond issues,
which helps to give investors an idea of how likely it is that a payment default will
occur.

 Inflation Risk for Bond Investors

This risk refers to an event wherein the rate of price increases in the economy
deteriorates the returns associated with the bond. This has the greatest effect on fixed
bonds, which have a set interest rate from inception.

54
4. Stocks

Buying shares of companies is a one time investment plan. It is one of the easiest
ways to invest your money in any business. These are part ownership units of the
company which each investor buys. You can trade these shares in a marketplace
called the Stock market where all trades are done electronically. It is one of the most
lucrative and riskiest investment options to buy.Stocks, also known as company
shares, are probably the most famous investment vehicle in India. When you buy a
company’s stock, you buy ownership in that company that allows you to participate
in the company’s growth. Stocks are offered by companies that are publicly listed
on stock exchanges and can be bought by any investor. Stocks are ideal long-term
investments. But investing in stocks should not be equated to trading in the stock
market, which is a speculative activity. When you purchase stocks (or ‘values’), you
turn out to be somewhat a proprietor of the business.

This gives you a privilege to vote at the shareholder’s meeting and enables you to
get any benefits that the organization assigns to its owners–these benefits are alluded
to as profits. While bonds give a consistent stream of wage, stocks are unstable. That
is, they vacillate in an incentive every day. When you buy a stock, you aren’t ensured
anything. Many stocks don’t pay profits, profiting just by expanding in esteem and
going up in price–which won’t not occur. As contrast with bonds, stocks give
moderately high potential returns. Obviously, there is a cost for this potential: you
should accept the danger of losing a few or the greater part of your investment.

5.Recurring Deposits

A recurring deposit (RD) is another fixed tenure investment that allows investors to
put in a specific amount every month for a pre-defined period of time. RDs are
offered by banks and post offices. The interest rates are defined by the institution
offering it. An RD allows the investor to invest a small amount every month to build
a corpus over a defined time period. RDs offer capital protection as well as
guaranteed returns.

6. Gold & Silver

Investing money silver and gold as commodity is simple and profitable. Anyone can
learn the easy ways of buying silver and gold as a physical wealth. Since the value
of gold and silver considerably high the precious metal constitutes to be great
55
investment option for common people. Investing in gold and silver has more
advantages as compared to any form of currency. Silver is one of the things which
is considered a good investment by many people. Even though silver has a small
market, there are many compelling reasons why silver must be under your
investment list From an investment point of view the precious metals have been a
much-coveted commodity for ages. Silver and gold are highly sought after not only
because of their lustrous beauty, but also because they are a lucrative investment
option. Hence investing in silver can be a wise choice. Gold is one of the oldest
investment solutions that have been preferred by all the investors. Investors from all
around the globe have a theory in their mind that there is no better way of keeping
their money safe than buying gold

 ADVANTAGES OF INVESTING IN GOLD AND SILVER:

⦁ Price is less as compared to other assets:

There is more than one reason why people prefer to go with gold as compare to
other investment solutions. The gold market has the record of staying high for a
long period of time. Be it any country of the world, the gold markets touches the
peak and continues to stay there for a long period of time which is why people
consider it to be the best way of preserving their wealth.

⦁ Globally accepted:

Gold is acceptable all over the world. Moreover there is certainly no different type
of gold in different parts of the world which mean you can trade it regardless of
your locations. You can simply keep the gold with you and sell it whenever you get
perfect rates for it.

⦁ It is a hard asset:

All the investments you own are not hard assets. More precisely they are not
tangible. You may invest in paper profits, shares, digital trading and a multitude of
similar things. Physical silver is something that you can carry in person all the time
if you want to though it is not recommendable.
It is cheap Silver is not cheap but it is cheaper in relative terms than other
investments. It is 1/70th of the price of gold which can even protect you against
financial crisis. It is much affordable for an average investor. This metal is yet

56
considered one of the most precious investment a person can make. It is not
necessary to invest into a full ounce of gold. Rather, silver can be more reasonable
in this terms.

⦁ World demand is growing:

Global demand for silver is at its peak and is continually growing at a dramatic
pace. Major governments have seen record level of sales in recent years and most
are even operating at their peak production right now.

⦁ More practical for regular purchase:

Silver is obviously not that cheaper to buy but can be practical when it comes to
selling. Someday you may face the need to sell your ounce of gold and meet your
financial demands. It is recommendable to do it along with silver. It comes in
smaller denominations that gold which makes it easier for you to sell. It gives you
more flexibility with the sale and allows you to sell only what you want at that time.

⦁ Growth in use:

Almost all products nowadays use silver. From machines to coins and batteries to
solar panels, each and everything uses some quantity of silver. There are certain
characteristics in silver like electrical conductivity and its reflectivity which makes
it a suitable metal for usage in many purposes. Due toits character, the industries
are continually utilizing this metal for their advantage. This makes silver high in
demand. We can reasonably expect the source of demand to remain sturdy.

57
 DISADVANTAGES OF INVESTING IN GOLD:

⦁ Not regular profit: People usually with lack of knowledge and invest in gold but
sooner or later they realize that investing in gold isn't bringing much advantage to
them. Buying gold and keeping it with you isn't going to bring any benefit at all,
notunless you decide to sell it. There is no interest or income you are getting out of
that gold.

⦁ Commission: Moreover, If you are investing in gold by buying in form of jewels

then you might end up paying a lot of commission to the seller in the name of the
making of the jewellery.

⦁ Not predictable gold market: Moreover, if you check the history of the gold and
its prices, you will realize that despite the fact that the prices of gold stays high for
a long period of time, there are times when the prices out of nowhere starts
dropping which is not at all a good thing for the investor prices out of nowhere
starts dropping which is not at all a good thing for the investor.

7. EQUITY

An equity investment is money invested in a company through the purchase of its

shares. When people speak about equity investment they generally refer to the
buying of shares in the stock of a company traded on a stock exchange. Equity
investors purchase shares in the expectation that they will rise in value in the form
of capital gains and/or generate capital dividends from the company. Should an
equity investment rise in value, the investor receives the monetary difference only
through the sale of the held shares or if the company's assets are liquidated and all
its obligations are met.
The main benefit from equity investments is the possibility to increase the value of
the principal amount invested. This comes in the form of capital gains and
dividends.

An equity fund offers investors a diversified investment option for typically a

minimum initial investment amount. To diversify a portfolio manually to the same
extent that equity funds are diversified would require much more capital
investment. Another potential benefit is to increase investment through rights

58
shares should the company wish to raise additional capital. In the trading world,
equity refers to stock. In the accounting and corporate lending world, equity (or
more commonly, shareholders’ equity) refers to the amount of capital contributed
by the owners or the difference between a company’s total assets and its total
liabilities.

In the real estate world, equity refers to the difference between an asset’s market
value and the debt owed on the asset. The two most common types of equities
traders encounter are common stock and preferred stock. Share certificates
bearing the name of the shareholder, the number of shares, and the name of the
company represent these equities, or shares. The number of shares a corporation
is authorized to issue is outlined in its corporate charter. When a company decides
to sell additional shares to new or existing shareholders, this is sometimes called
raising equity. Although shareholder rights vary by company, one of the most
prominent characteristics of equity is that it entitles the owner to vote on certain
matters and to do so in proportion to the number of shares he or she owns. The
company’s articles of incorporation and bylaws determine the number of votes
each share is entitled to.

Equity holders enjoy voting rights and other privileges that only come with
ownership, because equity represents a claim on a proportionate share of a
company’s assets and earnings. These claims are generally subordinate to lenders’
claims, but only equity holders can truly participate in and benefit from growth in
the value of the enterprise. Some financial instruments have equity characteristics
but are not actually equity. Convertible debt instruments, for example, represent
loans that convert into shares when a company (the borrower) crosses certain
thresholds, thereby turning a lender into an owner in certain events. Stock options
also act like equity in that their value changes with the value of the underlying
shares, but the option holders generally do not have voting rights and are not
eligible to receive the dividends or other distributions made to bona fide equity
holders.

It is important to understand that although balance sheet equity represents the

company’s net worth, the company’s shares are ultimately worth only what buyers
are willing to pay for them. Investment is an type of activity that is engaged in by

59
the people who have to do savings i.e. investments are made from their savings, or
in other words it is the people invest their savings. A variety of different investment
options are available that are bank, Gold, Real estate, post services, mutual funds
& so on much more. Investors are always investing their money with the different
types of purpose and objectives such as profit, security, appreciation, Income
stability. Researcher has here in this paper studied the different types and avenues
of investments as well as the factors that are required while selecting the
investment with the sample size of 60 salaried employees by conducting the survey
through questionnaire in Pune city of, India. Actually, here the present study
identifies about the preferred investment avenues among individual investors
using their own self- assessment test. The researcher has analyzed and found that
that salaried employees consider the safety as well as good return on investment
that is invested on regular basis. Respondents are much more aware about the
different investment avenues available in India except female investors.

 Benefits of investing in equity:

⦁ DIVIDEND

An investor is entitled to receive a dividend from the company. It is one of the two
main sources of return on his investment.

⦁ CAPITAL GAIN

The other source of return on investment apart from dividend is the capital gains.
Gains which arise due to rise in market price of the share.

⦁ LIMITED LIABILITY

Liability of shareholder or investor is limited to the extent of the investment made.

If the company goes into losses, the share of loss over and above the capital
investment would not be borne by the investor.

60
⦁ EXERCISE CONTROL

By investing in the company, the shareholder gets ownership in the company and
thereby he can exercise control. In official terms, he gets voting rights in the
company.

⦁ CLAIM OVER ASSETS AND INCOME

An investor of equity share is the owner of the company and so is the owner of the
assets of that company. He enjoys a share of the incomes of the company. He will
receive some part of that income in cash in the form of dividend and remaining
capital is reinvested in the company.

⦁ RIGHTS SHARES

Whenever companies require further capital for expansion etc, they tend to issue
‘rights shares’. By issuing such shares, ownership and control of existing
shareholders are preserved and the investor receives investment priority over
other general investors. Right Shares are issued at a price lower than current
market price of the equity share. So, existing investor can take that advantage or
otherwise can renounce right in some one’s favour to get value of right.

⦁ BONUS SHARES

At times, companies decide to issue bonus shares to its shareholders. It is also a

type of dividend. Bonus shares are free shares given to existing shareholders and
many times they are given in lieu of dividends.

⦁ LIQUIDITY

The shares of the company which is listed on stock exchanges have the benefit of
any time liquidity. The shares can very easily transfer ownership.

61
⦁ STOCK SPLIT

Stock split means splitting a share into parts. How should an investor be benefited
by this? By splitting of share, the per-share price reduces in the market which
eventually increases the readability of share. At the end, stock split results in higher
volumes with a number of investors leading to high liquidity of the share.

 Risk involved :

⦁ DIVIDEND

The dividend which a shareholder receives is neither fixed nor controllable by

investor. The management of the company decides how much dividend should be
given. If there is a loss, there is no question of dividend. If there is a profit, unless
Board of Directors propose dividend, investors will not receive dividend.

⦁ High risk:

Equity share investment is a risky investment as compared to any other investment

like debts etc. The money is invested based on the faith an investor has in the
company. There is no collateral security attached with it.

⦁ Fluctuation in market price:

The market price of any equity share has a wide variation. It is always very difficult
to book profits from the market. On the contrary, there are equal chances of losses.

⦁Limited control:

An equity investor is a small investor in the company, therefore, it is hardly possible

to impact the decision of the company using the voting rights.

62
⦁ Residual claim:

An equity shareholder has a residual claim over both the assets and the income.
Income which is available to equity shareholders is after the payment of all other
stakeholders’ viz. debenture holders etc.

8. LIFE INSURANCE

Life insurance is a contract between an insurance policy holder and an insurer and
assurer, where the insurer promises to pay a designated beneficiary a sum of
money that is the benefit in exchange for a premium, upon the death of an insured
person. Depending on the contract, other events such as terminal illness or critical
illness can also trigger payment. The policy holder typically pays a premium, either
regularly or as one lump sum. Other expenses, such as funeral expenses, can also
be included in the benefits.

Life policies are legal contracts and the terms of the contract describe the
limitations of the insured events. Specific exclusions are often written into the
contract to limit the liability of the insurer; common examples are claims relating
to suicide, fraud, war, riot, and civil commotion.
Life-based contracts tend to fall into two major categories:

⦁ Protection policies:

This policies are designed to provide a benefit, typically a lump sum payment, in
the event of a specified occurrence. A common form more common in years past
of a protection policy design is term insurance.

⦁ Investment policies: The main objective of these policies is to facilitate the growth
of capital by regular or single premiums.
When it comes to considering life insurance as an investment, you’ve probably
heard the adage, “Buy term and invest the difference.” This advice is based on the
idea that term life insurance is the best choice for most individuals because it is the
least expensive type of life insurance and leaves money free for other investments.
Permanent life insurance, the other major category of life insurance, allows

63
policyholders to accumulate cash value, while term does not, but there are
expensive management fees and agent commissions associated with permanent
policies, and many financial advisors consider these charges a waste of money.

There are many arguments in favour of using permanent life insurance as an

investment. The issue is, these benefits aren’t unique to permanent life insurance.
You often can get them in other ways without paying the high management
expenses and agent commissions that come with permanent life insurance.

 ADVANTAGES OF PERMANENT LIFE INSURANCE:

⦁ You get tax-deferred growth:

This benefit of the cash-value component of a permanent life insurance policy

means you don’t pay taxes on any interest, dividends or capital gain in your life
insurance policy until you withdraw the proceeds. If you’re maxing out your
contributions to these accounts year after year permanent life insurance might
have a place in your portfolio and could provide some tax advantages.

⦁ You can keep most policies up to age 120, as long as you pay the premiums:

A key advertised benefit of permanent life insurance over term life insurance is you
don’t lose your coverage after a set number of years. A term policy ends when you
reach the end of your term, which for many policyholders is at age 65 or 70. But by
the time you’re 120, who will need your death benefit. Most likely, the people you
originally took out a life insurance policy to protect your spouse and children are
either self-sufficient or have also passed away.

⦁ Permanent life insurance can provide accelerated benefits if you become

critically or terminally ill:

You may be able to receive anywhere from 25% to 100% of your permanent life
insurance policy’s death benefit before you die if you develop a specified condition

64
such as heart attack, stroke, invasive cancer or end-stage renal failure. The upside
of accelerated benefits, as they’re called, is you can use them to pay your medical
bills and possibly enjoy a better quality of life in your final months. Arguments in
Favor of Buying Term Insurance and Investing the Differencethat is: When you buy
a term policy, all of your premium go toward securing a death benefit for your
beneficiaries. Term life insurance, unlike permanent life insurance, does not have
any cash value and therefore does not have any investment component. However,
you can think of term life insurance as an investment in the sense that you are
paying relatively little in premiums in exchange for a relatively large death benefit.

Using permanent life insurance as an investment might make sense for some
people in some situations usually high net-worth individuals looking for a way to
minimize estate taxes. For the average person, the odds are poor that permanent
life insurance will be a good investment compared with buying term and investing
the difference.

 Risk:

⦁ High Cost And Fees

If you want to take advantage of the investment opportunity, you have to purchase
a permanent life insurance. Only they offer customers the chance of a cash value
accumulation. Therefore, the premiums are much higher (sometimes ten times
bigger). In addition, there are plenty of fees and charges that you have to pay.
Unfortunately, a big part of the premiums goes to cover fees, for example –
administration costs. Let’s not forget the commission you owe the person who sold
you the policy. If you want to take out a loan from your cash value, you need to pay
a cash surrender fee up to 10% alongside an interest rate.

⦁ Uncertain And Negative Returns

Insurance companies talk customers into buying life policies by promising certain,
and usually high, returns. By accumulating cash value you earn an interest, which
many companies promise to be higher than most savings accounts. Even though

65
often policies go with a guaranteed minimum interest rate, the real return is not as
high as that. Well, it’s very simple. There are many fees and charges imposed on
your account. After they are deducted the return is far less than the guaranteed
interest rate, let alone the promised one. What’s more, these “promised” returns
will happen only if you wait for a certain period of time before taking money out,
say 20 years. One more thing on the downside is that, especially during the first
years of the term, the chances are high that your returns will be negative. This is
because often the fees and charges exceed the interest your cash value can
generate.

⦁ Lack Of Flexibility

Unfortunately, life insurance policies do not offer much flexibility. Life is not static.
Sometimes the more you predict, the fewer things happen the way you expected.
Can you predict an unfortunate event? A disease or an accident. No, but you can
be ready for this. Having an Individual Retirement Account (IRA) or a 401(k) gives
you the freedom to reduce the amount you pay in case you face financial problems.
This will not affect your account and the money in it will still generate interest over
time. So where is the problem. However, life insurance does not offer you that. If
you miss a payment, the money will be taken out of your cash account (if it’s a
permanent life insurance). Of course, this will result in a decrease in your cash
value. If there is not enough money in your account, or you have spent it on paying
premiums, you might lose your policy.

Don’t you have the right to face financial difficulties and delay a payment or freeze
payments for a while? Life insurance will not put up with this if you want your
coverage to remain active until the end of the term.

⦁ Not Really Tax-Deferred

Some life insurances boats with the fact that they are offer tax deferred accounts.
To some extent this is true. For example, whole life insurances, give you the
opportunity to make tax-free “withdrawals” as well as to “grow” a tax-free savings
account. The first thing is that, though the growth of your cash value is exempt from
taxes, the premiums you pay are not. Unlike health insurance premiums, life
insurance ones are considered personal expenses. The Internal Revenue Service

66
(IRS) imposes taxes on personal expenses. What is a little bit tricky is that the
“withdrawals”, for example, are tax-free but they aren’t actual distributions? In
fact, to take money out you have to borrow money from your cash value. You are
the lender and borrower at the same time. But you have to pay an interest rate to
your policyholder. So, the equation is easy: You don’t pay taxes on these amounts
of money but you have to pay an interest rate because you have borrowed the
money. Can you imagine the rate to be higher than the possible taxes you have to
pay on withdrawals? It’s quite possible. Another thing worth mentioning is that if
you take out a lot of money, you might exhaust your cash value. Which, as you
already know, can lapse the policy.

9. DEBENTURES

A debenture is one of the most typical forms of long term loans that a company can
take.It is normally a loan that should be repaid on a specific date, but some
debentures are irredeemable securities (sometimes referred to as perpetual
debentures).
The majority of debentures come with a fixed interest rate. This interest must be
paid before dividends are paid to shareholders. In the US, most debentures are
unsecured, but elsewhere debentures are typically secured through the borrower’s
assets.
Debenture holders
Debenture holders (investors) are not allowed to vote in the company's general
shareholders meetings, but they may have separate meetings or votes, for instance
regarding changes to the rights associated with the debentures. The interest that
is paid to debenture holders is calculated as a charge against profit in the
company's financial statements.
Types of debentures

67
 Debentures come in two types:

 Convertible debentures:

Convertible bonds or bonds that can be converted into equity shares of the issuing
company after a predetermined period of time. To investors, convertible bonds are
more attractive because the bonds can be converted, and to companies they have the
advantage that they normally have lower interest rates than non-convertible
corporate bonds.

 Non-convertible debentures:

Standard debentures that can't be converted into equity shares of the liable
company. Since they can't be converted, they usually have higher interest rates
than convertible debentures.

⦁Benefits

Debentures are mainly beneficial to companies by having a lower interest rate than
other types of loans, e.g. overdrafts. Further, they normally only need to be repaid
by a very remote date. The main benefits of debentures to investors is that they
can usually be sold in stock exchanges quite easily and they come with less risk than
e.g. equities.

 Risk:

⦁ Interest rate risk

The majority of debentures and unsecured notes have a fixed rate of interest and
a fixed repayment of capital amount. In this case, where the securities are held to
maturity, investors will receive the expected amount, irrespective of interest rate
movements. The main risk that fixed-rate debentures and unsecured notes holders
68
are exposed to is the opportunity cost that a better rate of return may be available
elsewhere if interest rates were to increase.

⦁ Credit/default risk

The credit risk is the risk that the investor’s interest and/or capital are not repaid
by the borrower. A good credit rating by an independent and reputable credit
rating agency gives a measure of confidence for investors. Unfortunately, the
majority of debenture issuers and unsecured notes will not have been rated in this
way, which makes it difficult to gauge the financial health of the issuer. Factors that
affect the credit risk include the ranking of the debt in terms of repayment upon
liquidation of the company, purposes the investors’ funds will be used for, and
financial strength of the company.

⦁ Liquidity risk

The majority of debentures and unsecured notes do not offer a readily available
exit mechanism and as such should be considered a relatively illiquid investment.
Issuers may allow the investor to access their original capital investment at their
discretion in

10. SAVINGS

Savings accounts pay interest, it is more beneficial to keep your unneeded funds in
a savings account than in a checking account so your money can grow. In addition,
savings accounts are one of the most liquid investments outside of other demand
accounts and cash. While savings accounts facilitate saving, they also make it very
easy to access your funds. In contrast, it is typically more difficult to cash a bond,
make a withdrawal from a retirement account, or sell stocks or other assets. A
savings account is a long-term, fundamental money management tool that can help
you meet numerous financial needs. It also means you’re placing your money
somewhere that is not under your absolute control, since it is being held by a bank
or credit union.

69
 ADVANTAGES OF SAVING ACCOUNT:

⦁ Savings accounts will usually accrue interest over time: Although interest rates
have been extremely low since 2007, with many savings accounts having an interest
rate below 1%, you will still accrue interest over time with an account. That means
you have more earning potential with your money compared to keeping it in a safe
at home.

⦁ Funds are still readily available: With most banks and credit unions, investor have
online access to your funds 24 hours per day. All you need to have is a data
connection or access to the internet. Many institutions will allow you to link your
savings account to other accounts you may have, like a checking account, which
can help you to avoid costly overdraw fees. This also allows you to quickly transfer
funds from one account to another, even outside of regular banking hours.

⦁ Safety of money: Because your money is being held by a third party, it increases
its personal safety. Not only does storing cash on property make you a target for a
potential robbery, but losses like that are not always covered by a homeowner’s or
renter’s insurance policy. If there was a fire in your home or some other natural
disaster, you could lose your cash as well. Keeping your cash in a savings account
keeps you and your money safer.

⦁ People can open an account with very little money: Many savings accounts can
be started by paying small amount. Some institutions may have an even lower limit,
sometimes allowing an account to be opened for as little as Rs 50. This gives you
an opportunity to begin saving your money, even if you don’t have much to save at
the start.

70
⦁ Savings accounts can provide automated bill payments: Many financial
institutions allow bills to be paid automatically out of a savings account without
being subjected to the withdrawal and transfer laws. This allows you to save time
because you don’t need to manually pay every bill each month and you’re less likely
to experience late fees because you missed or forgot a payment. Of course, you’ll
need to have money in the account to pay the bill, but if you do, you’ll be able to
maintain a better credit score over time.

⦁ Receive security: A savings account gives you the opportunity to put away cash in
case you have an emergency situation. If you lose your job, for example, you’d be
able to draw upon your savings account for your monthly expenses.

 DISADVANTAGES OF SAVING ACCOUNT:

⦁ Interest is often compounded monthly, or even annually, by most financial

institutions: There are online banks that will compound your interest on a daily
basis, but most traditional banks or credit unions will only compound your interest
monthly. This means the full potential of your money isn’t always realized,
especially when compared to other investment opportunities.

⦁ There are withdrawal limits on a savings account: You can easily transfer money
from one account to another with regularity, but in the United States, there are
Federal limits on the number and the types of withdrawals you can make per
statement cycle. This law is called “Regulation D” and limits you to no more than 6
transfers or withdrawals from each savings or money market account during a
calendar month.

⦁ Some financial institutions charge fees for their savings accounts: There may be
monthly fees charged to your savings account for it to be maintained. To avoid this

71
disadvantage, look for fee-free options at local banks or credit unions for the best
results.

11. Public Provident Fund

The Public Provident Fund (PPF) is a long-term tax-saving investment vehicle that
comes with a lock-in period of 15 years. Investments made in PPF can be used to
earn a tax break. The PPF rate is decided by the Government of India every quarter.
The corpus withdrawn at the end of the 15-year period is completely tax-free in the
hands of the investor. PPF also allows loans and partial withdrawals after certain
conditions have been met. Public Provident Fund is one of the most common and
trusted investment plans in India. It pays interest rate annually and requires a
minimum of Rs 500 per annum investment. It has a life of 15 years with partial
withdrawals allowed of the corpus at various points. This option also pays a high
and steady rate of interest as prescribed the government from time to time.

12. Employee Provident Fund

The Employee Provident Fund (EPF) is another retirement-oriented investment

vehicle that earns a tax break under Section 80C. EPF deductions are typically a part
of an earner’s monthly salary and the same amount is matched by the employer as
well. Upon maturity, the withdrawn corpus from EPF is also entirely tax-free. EPF
rates are also decided by the Government of India every quarter.

13. National Pension System

The National Pension System (NPS) is a relatively new tax-saving investment option.
Investors in the NPS stay locked-in till retirement and can earn higher returns than
PPF or EPF since the NPS offers plan options that invest in equities as well. The
maturity corpus from the NPS is not entirely tax-free and a part of it has to be used
to purchase an annuity that will give the investor a regular pension.

72
 Chapter 4
DATA ANALYSIS &
INTERPRETATIONS

73
Indian investment : % of GDP

What will be India’s GDP in 2022-’23? The government and RBI have given three answers
in 11 days
While the economic survey and Budget estimate the growth in the
coming fiscal year to be 8%-8.5% and 6.6% respectively, RBI forecasts
it to be 7.8%.
Indians have enjoyed an ever-expanding array of choices for consumer goods over
the past couple of decades. In this season of cheer and goodwill, they now have the
pleasure of even selecting a version of India’s growth perspectives, depending on
the risks playing out.

Three versions are on offer. Over the past 10 days, the Indian public has been
furnished with separate estimates of India’s expected gross domestic product for
next year, 2022-’23.

First, on January 31, the finance ministry presented the government’s economic
survey for the current year, 2021-’22, which also provided a line of sight to next
year’s GDP. The estimate from the office of the chief economic adviser: 8%-8.5%
real growth, that is growth adjusted for inflation, over 2021-’22.

Next day, February 1, came the government’s Budget for next year, an annual
exercise in estimating how much it will earn through different revenue streams
(through taxes or selling off government-owned companies, like Air India) and
how much it will spend on salaries or roads and bridges. The government’s Budget
pencils in the year’s tax collection projections on the basis of a rough estimate of
how the economy will grow. Finance minister Nirmala Sitharaman, in an unusual
display of conservatism, expects India’s nominal GDP to grow by 11.1% during
2022-’23.

Then on February 10, the Reserve Bank of India presented its last bi-monthly
monetary policy for 2021-’22. The central bank has estimated that India’s real
GDP will grow by 7.8% during 2022-’23, with consumer inflation averaging 4.5%,
yielding a nominal GDP growth of 12.3%.

74
A quick point here. If we juxtapose the survey’s and Budget’s GDP estimates, since
both the exercises were conducted in the finance ministry, it seems the expected
growth rate is 3.1%-2.6% for the forthcoming financial year (Sitharaman’s 11.1%
minus the survey’s 8%-8.5%). But, since RBI has already provided a feel for next
year’s consumer inflation, the Budget’s projection of real GDP works out to 6.6%.

So, there you have it, three different versions of India’s future GDP, all presented
within a span of 11 days: 8%-8.5%, 6.6% and 7.8%. Take your pick, depending on
your personal fancy.

But, if you look closely, these numbers are also telling us something.

Circumspection in air
For one, if we leave aside the Economic Survey forecast, both Sitharaman and RBI
governor Shaktikanta Das seem to be erring on the side of caution. Both have
dialled down their usual penchant for bold and ambitious growth targets.

Last year, around this time, RBI’s Das was slightly more bullish and had forecast a
growth rate of 10.5%. Using his inflation estimates, Sitharaman’s forecast was
9.9%. The first advance estimate shows that the year might end with a 9.2%
growth.

So, why have both Sitharaman and Das back-pedalled on growth? Two things
stand out.

The first is circumspection. All it takes is a virus to upend the well-laid plans and
aspirations of economic planners. The devastating second wave of April 2021-May
2021, made deadlier by sub-optimal vaccination and a severe deficit in healthcare
infrastructure, upset all plans and projections by a mile.

The Delta variant resulted in a large number of deaths and pushed back nascent
recovery by a few weeks. And then, just when things seemed to be getting back on
an even keel, another variant called Omicron threw sand in the wheels of recovery.

Who knows whether another variant will turn spoilsport next year. There is no
telling with this shape-shifting virus. It irrupts and disrupts, and could once again

75
end a recovery party even before it begins. The lessons from last year’s stumbles
seem to have informed the conservative growth approximations.

This is why the RBI’s monetary policy committee also probably feels it is too early
to start normalizing policy. The RBI’s monetary policy has continued with its
accommodative stance and eschewed any rate hikes, which is at odds with bond
market expectations.

This brings us to the second factor. Even if we are willing to forget the virus for a
moment, the RBI’s call has also been informed by the burden of risks weighing
down on the horizon.

The central bank’s policy statement of February 10 spelt out some of its worries:
“The global macroeconomic environment is, however, characterised by a
deceleration in global demand in 2022, with increasing headwinds from financial
market volatility induced by monetary policy normalisation in the systemic
advanced economies and inflationary pressures from persisting supply chain
disruptions. Accordingly, the Monetary Policy Committee judges that the ongoing
domestic recovery is still incomplete and needs continued policy support.”

Das actually provides a more specific matrix by stretching the envelope of risks:
“In a global environment rendered highly volatile and uncertain by diverging
monetary policy stances, geo-political tensions, elevated crude oil prices and
persistent supply bottlenecks, emerging economies are vulnerable to destabilising
global spillovers on an ongoing basis. Thus, policymakers face daunting challenges
even as recovery from the pandemic remains incomplete.”

76
 Where to invest in 2022
Covid-19 made investors shift to riskier assets for higher returns in 2021. Here’s what
to expect from different asset classes in 2022.

The year 2021, hit by the worst of Covid-19, ended unexpectedly well for
financial market investors. One reason was pick-up in GDP growth after the
sharp dip in early part of 2020. While global economic growth is
recovering, India will occupy the title of one of the fastest-growing
economies, says Nilesh Shah, Group President & MD, Kotak Mahindra
AMC. Real GDP growth is expected to be 9.5% in FY2022 due to lower base
and bounce-back by businesses after progressive reopening of the economy.
GDP had shrunk 7.3% in FY2021. Nineteen of the 22 high-frequency
economic indicators such as index of industrial production are in the
positive territory. Taking the cue, Indian stock markets did extremely well
for a major part of 2021. The weight of Indian listed companies that are
part of the MSCI Emerging Market Index rose from 8% in 2020 to 12% in
2021. Such hearty macro and micro indicators and decent capital market
gains are great for investors. So, which asset class will give blockbuster
returns in 2022?
It is tough to choose. Apart from traditional investment options such as
equities, debt, real estate and gold, the digital boom during the pandemic
has amplified retail investors’ interest in asset classes like peer-to-peer
(P2P) lending, cryptocurencies and Real Estate Investment Trusts (REITs).
Here’s how these assets may move in 2022.

The year 2021, hit by the worst of Covid-19, ended unexpectedly well for
financial market investors. One reason was pick-up in GDP growth after the
sharp dip in early part of 2020. While global economic growth is
recovering, India will occupy the title of one of the fastest-growing
economies, says Nilesh Shah, Group President & MD, Kotak Mahindra
AMC. Real GDP growth is expected to be 9.5% in FY2022 due to lower base
and bounce-back by businesses after progressive reopening of the economy.
GDP had shrunk 7.3% in FY2021. Nineteen of the 22 high-frequency
economic indicators such as index of industrial production are in the
positive territory. Taking the cue, Indian stock markets did extremely well
for a major part of 2021. The weight of Indian listed companies that are
part of the MSCI Emerging Market Index rose from 8% in 2020 to 12% in
2021. Such hearty macro and micro indicators and decent capital market

77
gains are great for investors. So, which asset class will give blockbuster
returns in 2022?
It is tough to choose. Apart from traditional investment options such as
equities, debt, real estate and gold, the digital boom during the pandemic
has amplified retail investors’ interest in asset classes like peer-to-peer
(P2P) lending, cryptocurencies and Real Estate Investment Trusts (REITs).
Here’s how these assets may move in 2022.

 Equities: Beating Inflation is Key

Nobel laureate Milton Friedman once said that inflation is a form of

taxation as it eats into purchasing power. If your income rises 10%, but
inflation goes up 15%, you will have to lower consumption by 5% to ensure
that savings remain at earlier levels, says Swarup Mohanty, Director and
CEO, Mirae Asset Investment Managers. “It’s important to beat inflation.
Otherwise, despite decent returns, one can end up becoming poor in the
long run,” he says. Equities have beaten inflation over the long term, he
adds.
Equities have also done far better than other popular assets such as real
estate, gold and fixed income by a wide margin in the last one decade. Nifty
50 rose over 21% in first 11 months of 2021. Small-caps returned nearly
twice as much. NSE Small Cap 100 grew 62% in one year till November 30.
Nifty 50 rose 31% during the period. Nifty Midcap 100 was up 50%.

 Equities: Beating Inflation is Key

Nobel laureate Milton Friedman once said that inflation is a form of taxation as it
eats into purchasing power. If your income rises 10%, but inflation goes up 15%,
you will have to lower consumption by 5% to ensure that savings remain at earlier
levels, says Swarup Mohanty, Director and CEO, Mirae Asset Investment
Managers. “It’s important to beat inflation. Otherwise, despite decent returns, one
can end up becoming poor in the long run,” he says. Equities have beaten inflation
over the long term, he adds.

78
Equities have also done far better than other popular assets such as real estate, gold
and fixed income by a wide margin in the last one decade. Nifty 50 rose over 21%
in first 11 months of 2021. Small-caps returned nearly twice as much. NSE Small
Cap 100 grew 62% in one year till November 30. Nifty 50 rose 31% during the
period. Nifty Midcap 100 was up 50%.

The Budget goals for FY2022-23 aim to further India's aspirations in Amrit Kaal, as
it moves towards its 100th year post independence.
 Focus on growth and all-inclusive welfare
 Promoting technology-enabled development, energy transition and climate
action
 Virtuous cycle starting from private investment, crowded in by public capital
investment

The Union Budget for FY 2022-23 this year aims to strengthen the infrastructure
with its focus on four priorities of:
 PM GatiShakti
 Inclusive Development
 Productivity Enhancement & Investment, Sunrise opportunities, Energy
Transition, and Climate Action
 Financing of investments

The Union Budget website lists the Highlights of the FY 2022-23 Budget. The Press
Information Bureau (PIB) website provides a summary of the Budget. The
Productivity Linked Incentive in 14 sectors for achieving the vision of AtmaNirbhar
Bharat has received excellent response, with potential to create 60 lakh new jobs,
and an additional production of Rs 30 lakh crore during next 5 years.

KEY FEATURES
India's GDP has witnessed robust recovery twice with the past two waves of the
pandemic, a testimony to the nation's economic resilience.

79
 India's GDP
 Providing Greater Fiscal Space to States
 Enhanced outlay for 'Scheme for Financial Assistance to States for Capital
Investment' from Rs.10,000 crore in Budget Estimates to Rs.15,000 crore in
Revised Estimates for current year
 Allocation of Rs.1 lakh crore in 2022-23 to assist the states in catalysing
overall investments in the economy: fifty-year interest free loans, over and
above normal borrowings
 In 2022-23, States will be allowed a fiscal deficit of 4% of GSDP, of which
0.5% will be tied to power sector reforms

 Agriculture and Allied Sectors

 Rs.2.37 lakh crore direct payment to 1.63 crore farmers for procurement of
wheat and paddy
 Chemical free Natural farming to be promoted throughout the county. Initial
focus is on farmer's lands in 5 Km wide corridors along river Ganga
 NABARD to facilitate fund with blended capital to finance startups for
agriculture & rural enterprise
 'Kisan Drones' for crop assessment, digitization of land records, spraying of
insecticides and nutrients

 MSMEs & Industry

 Udyam, e-shram, NCS and ASEEM portals to be interlinked
 130 lakh MSMEs provided additional credit under Emergency Credit
Linked Guarantee Scheme (ECLGS)
 ECLGS to be extended up to March 2023

80
  Guarantee cover under ECLGS to be expanded by Rs.50000 Crore to total
cover of Rs.5 Lakh Crore
 Rs.2 lakh Crore additional credit for Micro and Small Enterprises to be
facilitated under the Credit Guarantee Trust for Micro and Small Enterprises
(CGTMSE)
 Raising and Accelerating MSME performance (RAMP) programme with
outlay of Rs.6000 Crore to be rolled out

 Education
 One class-One TV channel' programme of PM eVIDYA to be expanded to
200 TV channels
 Virtual labs and skilling e-labs to be set up to promote critical thinking skills
and simulated learning environment
 High-quality e-content will be developed for delivery through Digital
Teachers
 Digital University for world-class quality universal education with
personalised learning experience to be established

 Public Capital Investment

 Public investment to continue to pump-prime private investment and
demand in 2022-23
 Outlay for capital expenditure stepped up sharply by 35.4% to Rs.7.50 lakh
crore in 2022-23 from Rs.5.54 lakh crore in the current year
 Outlay in 2022-23 to be 2.9% of GDP
 'Effective Capital Expenditure' of Central Government estimated at Rs.10.68
lakh crore in 2022-23, which is about 4.1% of GDP

 Saksham Anganwadi
 Integrated benefits to women and children through Mission Shakti, Mission
Vatsalya, Saksham Anganwadi and Poshan 2.0
 Two lakh anganwadis to be upgraded to Saksham Anganwadis

 Health
 An open platform for National Digital Health Ecosystem to be rolled out

81
  National Tele Mental Health Programme’ for quality mental health
counselling and care services to be launched
 A network of 23 tele-mental health centres of excellence will be set up, with
NIMHANS being the nodal centre and International Institute of Information
Technology-Bangalore (IIITB) providing technology support

 Energy Transition & Climate Action

 Additional allocation of Rs.19,500 crore for Production Linked Incentive for
manufacture of high efficiency solar modules to meet the goal of 280 GW of
installed solar power by 2030
 Five to seven per cent biomass pellets to be co-fired in thermal power
plants:
 CO2 savings of 38 MMT annually
 Extra income to farmers and job opportunities to locals
 Help avoid stubble burning in agriculture fields
 Four pilot projects to be set up for coal gasification and conversion of coal
into chemicals for the industry
 Financial support to farmers belonging to Scheduled Castes and Scheduled
Tribes, who want to take up agro-forestry

 Sunrise Opportunities
 Government contribution to be provided for R&D in Sunrise Opportunities
like Artificial Intelligence, Geospatial Systems and Drones, Semiconductor
and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green
Energy, and Clean Mobility Systems

 Banking
 100 per cent of 1.5 lakh post offices to come on the core banking system.
 Scheduled Commercial Banks to set up 75 Digital Banking Units (DBUs) in
75 districts

KEY FEATURES
Key documents such as those listed below are tabled in the parliament during the
Budget presentation process.
 Annual Finance Statement (AFS)

82
  Demand for Grants (DG)
 Finance Bill
Explanatory statements such as those listed below are also presented for ready
references.
 Expenditure Budget
 Receipt Budget
 Expenditure Profile
 Budget at a Glance
 Memorandum Explaining the provisions in the Finance Bill
 Output Outcome Monitoring Framework

 India Population in 2022-23

Related Last Previous Unit Reference

Employed Persons 29579.00 28999.00 Thousand Dec 2012

Labor Force 47.50 47.30 percent Mar 2021

Participation Rate

83
 Related Last Previous Unit Reference

Population 1347.12 1332.90 Million Dec 2020

Employment Rate 43.10 42.40 percent Mar 2021

Youth Unemployment 22.90 24.90 percent Mar 2021

Rate

India Population
The population of India represents 17.99 percent of the world´s total population
which arguably means that one person in every 6 people on the planet is a resident
of India.

Actual Previous Highest Lowest Dates Unit Frequency

1347.12 1332.90 1347.12 359.00 1950 - Million Yearly
2020

 Ratio Analysis

 Introduction of ratio analysis:-

Ratio analysis can be defined as the process of ascertaining the financial ratios that
are used for indicating the ongoing financial performance of a company using few
types of ratios such as liquidity, profitability, activity, debt, market, solvency,
efficiency, and coverage ratios and few examples of such ratios are return on equity,
current ratio, quick ratio, dividend payout ratio, debt-equity ratio, and so on.

84
Ratio analysis is a process used for the calculation of financial ratios or in other
words, for the purpose of evaluating the financial wellbeing of a company. The
values used for the calculation of financial ratios of a company are extracted from
the financial statements of that same company.

 Types of Ratio Analysis

1. Liquidity Ratios

This type of ratio helps in measuring the ability of a company to take care
of its short-term debt obligations. A higher liquidity ratio represents that
the company is highly rich in cash.

The types of liquidity ratios are: –

1. Current Ratio:

The current ratio is the ratio between the current assets and current
liabilities of a company. The current ratio is used to indicate the liquidity of

85
an organization in being able to meet its debt obligations in the upcoming
twelve months. A higher current ratio will indicate that the organization is

highly capable of repaying its short-term debt obligations.

2. Quick Ratio: The quick ratio is used to ascertain information pertaining

to the capability of a company in paying off its current liabilities on an
immediate basis.

2. Profitability Ratios

This type of ratio helps in measuring the ability of a company in earning

sufficient profits.

The types of profitability ratios are: –

1. Gross Profit Ratios: Gross profit ratios are calculated in order to

represent the operating profits of an organization after making necessary

adjustments pertaining to the COGS or cost of goods sold.

3. Operating Profit Ratio: Operating profit ratio is used to determine the

soundness of an organization and its financial ability to repay all the short
term and long term debt obligations.

4. Return on Capital Employed (ROCE): Return on capital employed is

used to determine the profitability of an organization with respect to the
capital that is invested in the business.

86
3. Solvency Ratios

Solvency ratios can be defined as a type of ratio that is used to evaluate

whether a company is solvent and well capable of paying off its debt
obligations or not.

1. Debt Equity Ratio: The debt-equity ratio can be defined as a ratio

between total debt and shareholders fund. The debt-equity ratio is used to
calculate the leverage of an organization. An ideal debt-equity ratio for an
organization is 2:1.

2. Interest Coverage Ratio: The interest coverage ratio is used to

determine the solvency of an organization in the nearing time as well as
how many times the profits earned by that very organization were capable
of absorbing its interest-related expenses.

4. Turnover Ratios

Turnover ratios are used to determine how efficiently the financial assets
and liabilities of an organization have been used for the purpose of
generating revenues.

87
 1. Fixed Assets Turnover Ratios: Fixed assets turnover ratio is used to
determine the efficiency of an organization in utilizing its fixed assets
for the purpose of generating revenues.

2. Inventory Turnover Ratio: Inventory turnover ratio is used to

determine the speed of a company in converting its inventories into

sales.

3. Receivable Turnover Ratio: Receivable turnover ratio is used to

determine the efficiency of an organization in collecting or realizing its
account receivables.

5.Earnings Ratios

Earnings ratio is used for the purpose of determining the returns that an
organization generates for its investors.

1. Profit Earnings Ratio: P/E ratio indicates the profit earning capacity of
the company.

2. Earnings per Share (EPS): EPS signifies the earnings of an equity holder

based on each share.

88
 Budget 2022-23: Is public investment-led growth strategy desirable

and credible?

The 2022-23 Budget has reiterated the government's commitment to boosting

economic growth by seeking to increase public investment as a ratio of gross
domestic product. In this context, R Nagaraj examines India’s current policy
orientation and the outcomes of the recent investments in industry and
infrastructure. He contends that the Budget's focus on industry seems to lack
realistic proposals to reverse steeply falling output growth rates.

In 2018-19, India’s domestic output (GDP (gross domestic product)) in current US

dollar terms is 2,701 billion, with a per capita income of US$ 1,997, and a poverty
rate of 21.2 (International Monetary Fund (IMF), 2021). The annual real GDP
growth rate has halved from 8.3% in 2016-17 to 4% in 2019-20, as per the
National Accounts Statistics. Some estimates have also indicated that India's GDP
growth rate became negative in 2019-20 – before the Covid-19 pandemic set in
(Subramanian and Felman 2021). As the dispute concerning the official GDP
estimates continues unabated, critics claim that the growth rates are probably lower
than the official estimates, and the output deceleration perhaps spans most of the
previous decade (Nagaraj 2020).

 India’s output shrinkage

The Budget presented on 1 February forecasts India’s real (net of inflation) annual
GDP to grow at 9.2% in the current year (2021-22) – the highest among the
world’s large economies. However, the Budget fails to mention output contraction

89
in the previous year (2020-21) – the worst among the world's large economies.
Compared to the pre-pandemic year’s (2019-20) output level, the current year’s
GDP will likely be marginally higher by 1.3% (Ministry of Statistics and
Programme Implementation (MOSPI), 2022). If the adverse effect of the ongoing
Omicron wave of Covid-19 is factored in, the forecasted increase may disappear.
Thus, realistically, India has lost two years of output expansion, and per capita
income in 2021-22 is likely to be lower by Rs. 844 (at constant 2011-12 prices), or
by 0.8% than in 2019-20 (MOSPI, 2022).

The output shrinkage during the crisis meant a rise in unemployment, absolute
poverty, and lost livelihoods. The informal or unorganised sector has borne the
brunt of the pandemic and consequent lockdowns. For lack of up-to-date official
data on employment and consumption, the 2021-22 Economic Survey seems to fail
to offer a full and authentic picture of the economic devastation.

Abraham and Basole (2022) show a sharp rise in unemployment and deterioration
in employment quality using the CMIE's (Centre for Monitoring the Indian
Economy) pyramid database. Arguably, there are questions about the integrity of
the database (Pais and Rawal 2021, Drèze and Somanchi 2021). However, the
direction of change in employment reported in the CMIE data may be indisputable.
If the critics' contentions have merit, the severity of the stress in the labour market
is likely more, not less, than what Abraham and Basole (2022) report.

While the informal sector faced the brunt of the exogenous shocks, the 2021-22
Economic Survey shows that corporate profits boomed (Figure 1). India's current
market capitalisation at 116% of GDP – in terms of the widely used measure of
national wealth of equity holding – is higher that its long-term trend of 79% of
GDP, and higher also than its previous peak in 2007 (the year before the Global

90
Financial Crisis). Thus, juxtaposing the employment contraction with booming
corporate profits, it seems reasonable to infer that economic inequality after the
pandemic has widened, and recent research on trends in economic inequality has
also documented this (Azad and Chakraborty 2022).

Figure 1. Net profit to sales ratio of listed manufacturing private

companies

Source: Economic Survey 2021-22 (survey calculations based on data

from the Reserve Bank of India (RBI)).

91
 Current policy orientation

What could explain such an adverse outcome during the pandemic? No

country escaped the devastation, but the variation in the impact of the
shocks across countries suggests that policy response mattered. There are
two reasons for India’s sharp economic contraction. To minimise the threat
of the Virus, shutting down the country at the shortest notice of four hours
caused immense disruption to production and people. It meant that
millions of workers and their families, mostly in the informal sector, lost
their jobs, livelihoods, and rented living spaces. The global index of the
stringency of the lockdown captures well the severity of the ad hoc decision
by placing India at the highest level of the index.

Two, the government’s efforts to mitigate the crisis were measly compared
to most large economies. As per IMF data released in October 2021, fiscal
support in India was lower than the average for the advanced economies
(AEs), as well as for emerging market economies (EMEs) (Figure 2). For
example, additional spending or revenue foregone in India since January
2020 was 4% of GDP, whereas it was close to 12% of GDP in advanced
economies. India's response was greater in offering credit and loan
guarantees (contingency funds), the utilisation of which was modest due to
lack of demand. Moreover, that additional revenue provided for health
during the pandemic was as meagre as 0.5% of GDP (IMF, 2021).

92
Figure 2. Fiscal support during Covid-19 since January 2020, as % of
GDP

Source: IMF. Fiscal Monitor: Database of Country Fiscal Measures in

Response to the COVID-19 Pandemic.

Why was India so stingy? Though the output growth was decelerating
before the pandemic (as noted above), India’s macroeconomic situation was
largely benign with low inflation, modest external imbalance, and tolerable
fiscal deficit. Yet, India opted for supply-side reforms to strengthen long-
term growth prospects – instead of stimulating aggregate demand by
raising public spending in line with professional advice of economists with
diverse analytical persuasions. The 2021-22 Economic Survey bears out the
policy choice:

“…India’s response has been an emphasis on supply-side reforms rather

than a total reliance on demand management. These supply-side reforms
include deregulation of numerous sectors, simplification of processes,
removal of legacy issues like ‘retrospective tax’, privatisation, production-
linked incentives and so on… Even the sharp increase in capital spending by

93
the Government can be seen both as demand and supply enhancing
response as it creates infrastructure capacity for future growth.”

The outcome of the fiscally conservative response is evident (Table 1).

Disaggregation of current GDP by sources of demand shows that private
consumption, accounting for nearly 60% of domestic output, shrunk by
three percentage points of GDP in 2021-22, compared to 2019-20. The
step-up in government consumption mitigated the fall only to the extent of
one percentage point of GDP. The share of fixed capital formation in GDP
went up by one percentage point.

Table 1. Sources of aggregate demand (% of total)

2019-20 (1st revised 2021-22 (advanced

Sources of demand
estimates) estimates)

1. Total consumption 71.1 69.7

1.1 Government
11.2 12.2
consumption

1.2 Private consumption 60.5 57.5

2. Gross fixed capital

28.8 29.6
formation

3. Net exports (-) 2.5 (-) 3.0

4. GDP 100 100

Source: 2021-22 Economic Survey.

94
 The Budget's economic strategy

The Budget – barely referring to the ongoing Covid-19 pandemic and the
suffering it has caused to the people of the country – reiterates the
government's commitment to boosting economic growth by seeking to
increase public investment as a ratio of GDP from 2.2% in the current year
(2021-22) to 2.9%. Prima facie, such a strategy indicates a directional
change in the theoretical underpinning of economic policy. Against the
standard arguments of the ‘crowding-out’ effect of public investment, the
Economic Survey has favoured the Keynesian logic of ‘crowding-in’ effect
when real interest rates are low, and the economy is operating well below
full capacity.

Figure 3 reports trends in fixed investment to GDP ratio and annual GDP
growth rates for the last decade to provide perspective on this. The ratio
declined from about 33% in 2012-13 to about 31% by 2019-20. However,
the fall in the ratio would be far steeper if the data are extended backwards
to 2008-09 when the figure touched 37%-38% of GDP and output was
booming at 8-9% per year (Nagaraj 2020). Never in post-Independence
history had India witnessed such a steep fall in aggregate investment rate
for so long. Hence the changed reasoning underpinning the renewed
emphasis on public investment-led economic revival, in principle, stands to
reason.

95
Figure 3. GDP growth rate and fixed investment ratio

Source: National Account Statistics (2021).

But there lies the rub. Is it the right moment to prioritise investment when
the country faces massive job loss, livelihoods, and a rise in absolute
poverty? The government seems to underplay the gravity of human
suffering by only looking at the broken instruments of official statistics. But
the picture that emerges from credible independent voices seems fairly
unanimous and the evidence appears grave. As private consumption's share
in GDP declined, sensible policy response demands the immediate
restoration of employment and earnings directly through employment
generation or income support programmers – as in many economies such
as the US or Canada. The proposed investment demand will indirectly
create jobs, but it may take a while to materialize, given the roundabout
nature of fixed investment. How much employment these investments
generate will depend on the labour intensity of the investments. Further,
given the high level of industrial import in domestic manufacturing,
employment generation prospects would get dented to that extent.

On the practical side, whether the budgetary arithmetic really supports the
investment agenda seems questionable. First, contrary to the Finance
Minister's claim, the proposed rise in public investment's share in the

96
Budget is similar to what was presented last year. As per my calculations,
the increase in public investment accounted for barely 0.2% of GDP.
Knowledgeable commentators have contended that the proposed 35.4% rise
in public investment expenditure over the last year may be a statistical
mirage.

 Investment in industry and infrastructure

The Budget statement goes at length to describe government initiatives

such as PM Gati Shakti, Make in India, Atmanirbhar Bharat (self-reliant
India), and so on. But it fails to provide quantitative details of achievements
of these initiatives so far and how the proposed investment hopes to reverse
the declining aggregate investment rate described above.

The ‘Make in India’ initiative, for instance, was launched in 2014-15 to raise
the manufacturing sector's share in GDP to 25% and create 100 million
additional jobs in the industry by 2022. Despite the hype, little came out it.
The manufacturing sector's share in GDP continues to languish at around
17% as of 2019-20 (Figure 4). The manufacturing sector annual output
growth rate at constant prices sharply plummeted from 13.1% in 2015-16 to
-7.2% in 2020-21. What could explain such an adverse outcome, and how
does the government hopes to reverse the declining trend through the
proposed public investments? There are few answers.

97
Figure 4. Manufacturing sector performance – share in GDP (left
panel) and growth rate (right panel)

Source: National Accounts Statistics; 2021-22 Economic Survey.

The government frittered away valuable policy space in seeking to improve

India's global rank in the World Bank's Ease of Doing Business (EDB)
index, believing that the improved ranking will raise investment inflows.
Indeed, EDB rank increased impressively, from 142 in 2014 to 63 in 2019-
20. But investments failed to materialise. Why? The EDB index is a
spurious measure with little analytical and predictive value. Embarrassingly
for the government, the World Bank scrapped the index last year as
its methodology came under a cloud for being politically motivated. Yet,
surprisingly, the Budget statement eloquently vouches for pressing ahead
with measures to make business easier by deregulation of industrial laws
without pausing to take stock of what went wrong with the Make in India
campaign.

In 2020, as part of Atmanirbhar Bharat initiative, the government

introduced a 'Production-linked Incentive Scheme’ (PLI) for three
industries. The scheme was extended to 10 more industries with an outlay
of Rs. 1.97 lakh crore in 2021 for five years. The Economic Survey claims
large numbers of investment approvals but offers no information on the
outcome of the effort in terms of investment, output, and exports.

98
A few years before launching the PLI, the government was pursuing a
"phased manufacturing programmer” (PMP); with a conscious effort to
indigenize mobile phones production whose domestic demand was rising
rapidly. The Economic Survey claims the success of the mobile phone-
assembly industry, which reportedly formed the basis for seeding the PLI
scheme. However, this effort has shown modest success, contrary to official
claims (Iyer 2021).

In May 2020, amid scarcity of critical pharmaceutical inputs that were

immediately required for fighting the pandemic, India
launched Atmanirbhar Bharat, to expand domestic production of such
intermediate inputs. India raised tariffs on Chinese imports and imposed
various non-tariff barriers in response. Over a year on, positive outcomes
are hard to come by. On the contrary, India’s trade deficit on China has
gone up – from US$ 39.8 billion in 2020 to US$ 64.5 billion in 2021 by
Indian trade statistics, from US$ 45.8 billion in 2020 to US$ 69.4 billion in
2021 as per China’s trade statistics (Table 2). The deficit would be bigger if
net imports from China included Hong Kong.

Table 2a. India-China trade (as per India’s estimates, in billion US$)

Year India’s exports India’s imports India’s trade deficit

2018 16.5 73.9 57.4

2019 17.1 68.4 51.3

2020 19 58.7 39.7

2021 23 87.5 64.5

99
Source: Dhar (2022); Department of Commerce, India.

Table 2b. India-China trade (as per China’s estimates, in billion US$)

Year China’s exports China’s imports India’s trade deficit

2018 76.7 18.8 57.9

2019 74.8 18 56.8

2020 66.7 20.9 45.8

2021 97.5 28.1 69.4

Source: Dhar (2022); General Administration of Customs, China.

While advocating a public investment-led growth strategy may be welcome

in principle, it needs to be backed it up sectoral and industry-specific
policies and programmers, and supply of long-term credit under the rubric
of an industrial policy. The 2008 Global Financial Crisis and, more
recently, the Covid-19 pandemic, have culminated in the reimagining of
industrial policy across the world amid weakening political commitment to
free trade.

100
 Economic Survey 2022: Strong investment growth of 15% likely in Gross
Fixed Capital Formation in FY22

On investment, the Economic Survey expects that Gross Fixed Capital Formation
(GFCF) will see strong growth of 15 percent in 2021-22. It also expects India to
achieve full recovery of pre-pandemic level.

“(The) government’s policy thrust on quickening virtuous cycle of growth via

Capex and infrastructure spending has increased capital formation in the economy
lifting the investment to GDP ratio to about 29.6 percent in 2021-22, the highest in
seven years,” as per the Survey.

Follow our LIVE coverage of the Economic Survey and Union Budget 2022 here
Finance Minister Nirmala Sitharaman tabled the Economic Survey in the Lok
Sabha today. It projects 8-8.5 percent growth in GDP in 2023, noting that India
“has fiscal space to ramp up capex”.

Further, FY22 GDP growth seen at 9.2 percent; agricultural growth for FY22 is
seen at 3.9 percent and industrial growth at 11.8 percent.

101
 How many people in India invests?

According to data from the National stock exchange (NSE), there are 1.2
crore active investors in India, a country of 138 crore people, as of August
2021. Even though this number is rising and better from the previous data,
investing in stock markets still remains as a stigma for many.

 How many people invest in the stock market in India percentage?

The total number of retail investors increased by an astonishing 14.2 million

in FY21, with 12.25 million new accounts being opened on CDSL 1.9
million in NSDL. The result is that the Indian stock market is now
dominated by retail investors. The NSE alone saw retail investors share
grow from 33% in 2016 to 45% in 2021.

 How many percent of people invest in mutual fund in India?

31% Indians to invest in mutual funds, 10% in equities in 2022: Consumer

spending outlook report.

102
 Top Investors in India – List of Successful Stock Market Investors of 2022

Here is the list of best of the best share market investors –

Rank Top Investors Portfolio Value

1 Premji and Associates 253,000 Cr.
2 Radhakrishnan Damani 202,200 Cr.
3 Rakesh Jhunjhunwala 23,000 Cr.
4 Mukul Agarwal 2,256 Cr.
5 Sunil Singhania 2,248 Cr.
6 Ashish Dhawan 1,971 Cr.
7 Ashish Kacholia 1,549 Cr.
8 Anil Kumar Goel 1,263 Cr.
9 Mohnish Pabrai 1,174 Cr.
10 Akash Bhansali 1,150 Cr.

103
  Top Investment Options in India

Listed below are some of the best investment options in India 2022 that offer
high returns. You can consider including these investment plans in your
financial portfolio while savings for the future.

Investment Period of Who Can Risks Returns

Options Investment (Minimum) Invest Offered

Direct Equity NA An investor High NA

who knows
to balance
risk and
return

Mutual Funds Within a scheme like An investor Low-High Market-

ELSS a lock-in period of 3 who has an Linked
years appetite for
medium to
high risk

National Pension 60 years An investor Low-High Market-

Scheme looking linked ( 8
forward to to 10 per
retirement cent)
plans

Public Provident 15 years Long-term Nil 7.9 per

Fund (PPF) investment cent
goals

Bank Fixed 7 days One who Nil Fixed

Deposits doesn’t Returns,
wish to take different
the risk or

104
 be exposed from bank
to an equity to bank

Senior Citizen 5 years Senior Nil 8.7 per

Savings Scheme Citizens cent
(SCSS)

Real Estate 5 years Anyone Medium 19-15 per

cent

Gold ETF NA Anyone Low - Market-

Medium linked

RBI Bond 7 years Indian Nil 7.75 per

Citizen cent

Pradhan Mantri 10 years Senior Nil 7.4 per

Vaya Vandana Citizens cent
Yojana
(PMVVY)

Unit Linked Less or equals to 45 years An investor High Depending

Insurance Plan keen on on the
(ULIP) wealth investor’s
creation and profile
life cover

Post Office 5 years Indian Nil - Low 7.7 per

Monthly Income Citizen risk cent
Scheme
(POMIS)

Initial Public NA An investor Moderate- NA

Offerings (IPO) should have High
Demat
cum trading
account

105
 Various 8 major Investments scams in India :-

1. HARSHAD MEHTA SCAM

Harshad Mehta scam

Estimated Size: Rs 4,000 crore

Central figure: Harshad Mehta

Discovered: In 1992

Modus Operandi: Used money from banks to make personal gains via
investment.

2. CRB Scam

CRB Scam

EstimatedSize:Rs1,200crore

Central Figure: CR Bhansali

Discovered:1996

Modus Operandi: Raised public money through FDs, MFs and debentures via
nonexistent firms and invested them in stocks for personal gains

3. KETANPAREKH

Ketan Parekh Scam

Estimated Size: Rs800crore

106
 Central Figure: Ketan Parekh

Discovered:2001

Modus Operandi: Circular trading in selected stocks via borrowed money

from banks to manipulate share prices

4. SATYAM SCAM

Satyam Scam

EstimatedSize:Rs14,162crore

CentralFigure:RamalingaRajuDiscovered:2009

Modus Operandi: The top management of the software company cooked

up accounts to show inflated sales, profits and margins from 2003 to 2008

5. SAHARASCAM
zahara Housing Bonds

Estimated Size: Rs24,029crore

Central Figure: Subrata Roy

Discovered:2010

Modus Operandi: Bonds issued to 29.6 million investors without

following SEBI regulations and investor protection measures
mentioned there in.

107
6.SPEAK ASIASCAM

Speak Asia Discovered:2012

Estimated Size: Rs2,200 crore

Central Figure: Ram Sumiran Pal

Modus Operandi: Investors were asked to subscribe to an e-magazine for

a certain sum, after which they became eligible to answer surveys and

got paid for each survey.

7.SARADHASCAM

Saradha Scam

Estimated Size: Rs10,000 crore

Central Figure: Sudipta Sen

Discovered:2013

Modus Operandi: Ran multiple investment schemes collecting money from

nearly 1.4 million investors in West Bengal and Odisha

108
8.NSEL SCAM

NSEL Scam

Estimated Size: Rs 5,600crore

Central Figure: Jignesh Shah

Discovered:2013

Modus Operandi: Investors were wooed by offering fixed returns on paired

contracts with agriculture and industrial commodities as underlying. the
stocks were missing, and money was allegedly siphoned by so-called
borrowers

109
Chapter 5
Conclusion

110
 CONCLUSION

As we now know various investment options are available in India i.e. small savings
schemes, insurance, mutual funds, equity, real estate, precious metals etc., but its
selection depends upon various factors. The analysis and interpretations very
clearly shows that the investors have different views like investment pattern by
market movement, factors influencing their decision, frequency of investment,
alternatives available and investment preferences truly influence their perception
towards different products and services of the company. Thus, the study says that
the Indian investment community has shown much interest in investing in different
financial products available in the market, better performance by the

companies, liberal rules and regulations by the authority like SEBI to protect the
investors’

interest and this process will grow much more quicker in the future. There might
be a chance

that the perceptions of the investors’ of different nature are varied due to diversity
in social

life, living pattern, income level etc. that needs to be studied further The facts with
regard to the several factors such as relationship between age and risk tolerance
level of individual investors etc. It has important implications for investment
managers as it came out with certain interesting facets of an individual investor.

111
The individual investor still prefers to invest in financial products which give risk
free returns. Hence it concludes that Indian investors even if they are of high
income, well educated, salaried, independent are conservative investors & prefer
to play safe.

The investment options available in the share market are various and while
investing one needs to check the various factors such as liquidity , saving pattern ,
risk, etc. Various markets give various opportunities. Before investing, the investor
has to analyses the following factors:

1. Management Outlook.
2. Competitor’s Strategy.
3. Opportunities created by technological change.
4. Market forecast

Therefore Financial investments are made with the future expectation of making
only financial returns in terms of cash flow from the company in which investment
is being carried out. The investor relies to a greater extent on the existing
management themselves, unlike strategic investors. The term “investment” can be
used to refer to any mechanism used for the purpose of generating future income.
In the financial sense, this includes the purchase of bonds, stocks or real estate
property. Additionally, the constructed building or other facility used to produce
goods can be seen as an investment. The production of goods required to produce
other goods may also be seen as investing. There are both pros and cons while

112
investing in financial market but one have to take this risk to invest money in
different forms to secure their future.

Hence ,

I get to know all the investment schemes available in India, various investment
options in India,
And the main important thinks I get to know the risks and scams happened in India.

113
 Chapter 6
Biblography

114
 Bibliography

 https://www.scribd.com/document/362361201/Investment-Options-final-
black-book

 https://en.wikipedia.org/wiki/Investment

 https://www.investopedia.com/terms/i/investment.asp

 https://www.allbusiness.com/top-10-reasons-to-invest-money-93916-

 1.html https://blog.ipleaders.in/advantages-and-disadvantages-of-
financialinvestment/

 https://www.projects4mba.com/questionnaire-for-analyzing-best-
investment-option-available-to-the-investors/403/

 https://www.scribd.com/doc/55437186/PROJECT-Finance-for-Mba

 https://www.scribd.com/doc/13246827/PROJECT-ON-MUTUAL-FUND-
AKHILESH-MISHRA

 https://www.scribd.com/document/451850595/MBA-Project-final-
converted

115
 https://www.scribd.com/document/214903333/MBA-Finance-Project

 https://www.scribd.com/document/102416447/Awareness-of-Commodity-
Market-a-Project-Report-on-Mba-Finance

 https://www.scribd.com/document/120502913/Finance-project-mba

 https://www.india.gov.in/spotlight/union-budget-fy-2022-2023

 https://tradingeconomics.com/india/population

 https://www.educba.com/ratio-analysis-types/

 https://www.ideasforindia.in/topics/macroeconomics/budget-2022-23-is-
public-investment-led-growth-strategy-desirable-and-credible.html

 https://top10stockbroker.com/top-10-stock-market-investors/

 https://www.policybazaar.com/life-insurance/investment-
plans/articles/best-investment-options-in-india/

116
Chapter 7
Appendix

117
  Appendix:-

 Introduction:

The below survey was conducted regarding awareness about various investments
options in India Known among people. The sample size was minimum 50 people.
The responses were fair enough. The data collected below is purely primary data.
The questions of survey are as follows:

118
 1. Do you invest your money ?

Options No. of responses

Yes 40
No 10
Total 50

1.DO YOU INVEST YOUR MONEY ?

Yes No

20%

80%

119
2. For what purpose do you invest your money?
Options No. of responses
Saving 13
Investment 17
Future growth 12
Retirement plans 8
Total 50

2. FOR WHAT PURPOSE DO YOU INVEST YOUR MONEY?

Saving Investment Future growth Retirement plans

16%

26%

24%

34%

120
3. where do you prefer to invest?

Options No. of responses

Share market 14
Post office schemes 2
Gold 20
Mutual funds 4
Banks 10
Total 50

3. WHERE DO YOU PREFER TO INVEST?

Share market Banks Post office Schemes Gold Mutual Funds

8%

28%

40%

20%

4%

121
4. Have you invested your saving so far?
Options No. of responses
Yes 35
No 15
Total 50

4. HAVE YOU INVESTED YOUR SAVING SO FAR?

Yes No

30%

70%

122
5. Are you aware about share market
Options No. of responses
Yes 49
No 1
Total 50

5. ARE YOU AWARE ABOUT SHARE MARKET

Yes No

2%

98%

123
6. Do you invest in share marker?
Options No. of responses
Yes 40
No 10
Total 50

6. DO YOU INVEST IN SHARE MARKER?

Yes No

20%

80%

124
7. Which is the oldest stock exchange In India?

Options No. of responses

Bombay Stock Exchange 35
National Stock Exchange 7
Calcutta Stock Exchange 5
Magadha Stock Exchange 3
Total 50

7. WHICH IS THE OLDEST STOCK EXCHANGE IN INDIA?

Bombay Stock Exchange National Stock Exchange
Calcutta Stock Exchange Magadha Stock Exchange

6%
10%

14%

70%

125
8. Who is the regulatory authority of stock exchange?

Options No. of responses

Securities and exchange board of India 25
Reserve Bank of India 16
Ministry of finance 9
Total 50

8. WHO IS THE REGULATORY AUTHORITY OF STOCK

EXCHANGE?
Securities and Exchange Board of India Reserve Bank of India Ministry of Finance

18%

50%

32%

126
9. In which markets do you/would you like to invest your money?

Options No. of responses

Primary market 20
Secondary market 20
Both 10
Total 50

9. IN WHICH MARKETS DO YOU/WOULD YOU LIKE TO

INVEST YOUR MONEY?
Primary market Secondary market Both

20%

40%

40%

127
10. what investment options are you considering?

Options No. of responses

Equity 15
Debentures 10
Bonds 15
Mutual Funds 6
Derivatives 4
Total 50

10. WHAT INVESTMENT OPTIONS ARE YOU

CONSIDERING?
Equity Debenture Bonds Mutual funds Derivatives

5%
19%

12%
45%

19%

128
11. what do you/would you look before investing in a particular Investment options
?

Options No. of responses

Returns 27
Minimum investment amount 6
Locking period 2
Risk 15
Total 50

11. WHAT DO YOU/WOULD YOU LOOK BEFORE

INVESTING IN A PARTICULAR INVESTMENT OPTIONS ?
Returns Minimum Investment amount Locking period Risk

30%

54%

4%

12%

129
12. What is/would be the time span of your investment?

Options No. of responses

Monthly 10
Quarterly 8
Half Yearly 10
Annually 22
Total 50

12. WHAT IS/WOULD BE THE TIME SPAN OF YOUR

INVESTMENT?
Monthly Quarterly Half yearly Annually

20%

44%

16%

20%

130
13. On whose advice do you seek your investment decision ?

Options No. of responses

Local broker 8
Magazine and Newspaper 2
Charted account 15
Bank 5
Family and Friends 20
Total 50

13. ON WHOSE ADVICE DO YOU SEEK YOUR

INVESTMENT DECISION ?
Local Broker Magazine and Newspapers Charted Accountant Bank Family and Friends

16%

4%
40%

30%

10%

131
14. Your decision to invest depends upon?

Options No. of responses

Past performance 25
Economic scenario 15
Industry analysis 5
Company analysis 5
Total 50

14. YOUR DECISION TO INVEST DEPENDS UPON?

Past performance Economic Scenario Industry analysis Company analysis

10%

10%

50%

30%

132
15. What level of risk are you ready to undertake for your investment a venue?

Options No. of responses

Less risk 40
High risk 3
Moderate risk 7
Total 50

15. WHAT LEVEL OF RISK ARE YOU READY TO

UNDERTAKE FOR YOUR INVESTMENT A VENUE?
Less risk High risk Moderate risk

14%

6%

80%

133
16. What is your occupation?

Options No. of responses

Students 20
Service / Job 20
Business 7
Housewife 3
Total 50

16. WHAT IS YOUR OCCUPATION?

Student Service/Job Business House wife

6%

14%

40%

40%

134
17. what is your annual income?

Options No. of responses

1 to 1.5 lac 40
1.5 to 3 lac 5
3 lac and above 5
Total 50

17. WHAT IS YOUR ANNUAL INCOME?

1 to 1.5 lac 1.5 to 3 lac 3 lac and above

4%
11%

85%

135
18. what pecentage of your annual income do your annual income do you save to
invest?

Options No. of responses

5% to 10% 45
10% to 20% 5
20% and above 5
Total 50

18. WHAT PECENTAGE OF YOUR ANNUAL INCOME DO

YOUR ANNUAL INCOME DO YOU SAVE TO INVEST?
5% to 10 % 10% to 20 % 20% and above

3%
10%

87%

136
19. Do you prefer to invest for?

Options No. of responses

Long term 30
Short term 20
Total 50

19. DO YOU PREFER TO INVEST FOR?

Long term Short Term

40%

60%

137
20. Which investment options you think has less risk?

Options No. of responses

Mutual funds 4
Fixed assets 30
Real estate 10
Other investment options 2
Share market 4
Total 50

20. WHICH INVESTMENT OPTIONS YOU THINK HAS

LESS RISK?
Mutual Funds Fixed Deposit Real Estate Other investment Options Share market

8% 8%
4%

20%

60%

138
21. Which options give you the more returns ?

Options No. of responses

Mutual funds 10
Fixed assets 1
Real estate 5
Other investment options 4
Share market 30
Total 50

21. WHICH OPTIONS GIVE YOU THE MORE RETURNS ?

Mutual Funds Fixed Deposit Real Estate Other investment Options Share market

20%

2%

10%
60%

8%

139
22. What are the goals? You are looking from/for Investment ?

Options No. of responses

Safety 5
Income 6
Growth 10
All the above 29
Total 50

22. WHAT ARE THE GOALS? YOU ARE LOOKING

FROM/FOR INVESTMENT ?
Safety Income Growth All the above

10%

12%

58%
20%

140
23. Do you consider the safety of principal amount while investing ?

Options No. of responses

Yes 40
No 5
May be 5
Total 50

23. DO YOU CONSIDER THE SAFETY OF PRINCIPAL

AMOUNT WHILE INVESTING ?
Yes No May be

10%

10%

80%

141
24. Which income group you belongs to?

Options No. of responses

Economic Weaker Sections (EWS) 8
Lower Income Group 10
Higher Income Group 2
Middle Income Group 30
Total 50

24. WHICH INCOME GROUP YOU BELONGS TO?

Economi Weaker Sections (EWS) Lower Income Group
Higher Income Group Middle Income Group

16%

20%
60%

4%

142
25. Do you know if you invest you will get tax benefits ?

Options No. of responses

Yes 30
No 20
Total 50

25. DO YOU KNOW IF YOU INVEST YOU WILL GET TAX

BENEFITS ?
Yes No

40%

60%

143
26. Do you pay any processing fee while investing ?

Options No. of responses

Yes 45
No 5
Total 50

26. DO YOU PAY ANY PROCESSING FEE WHILE

INVESTING ?
Yes No

10%

90%

144
27. How many years you invested in stock market ?

Options No. of responses

1 to 2 years 46
2 to 5 years 2
5 to 7 years 1
More than 7 years 1
Total 50

27. HOW MANY YEARS YOU INVESTED IN STOCK

MARKET ?
1 to 2 years 2 to 5 years 5 to 7 years More than 7 years

2%
4% 2%

92%

145
28. How you paid any charges while creating your D-mate a/c ?

Options No. of responses

Yes 35
No 15
Total 50

28. HAVE YOU PAID ANY CHARGES WHILE CREATING

YOUR D-MATE A/C ?
Yes No

30%

70%

146
29. Do your family support for investing in variorums investments ?

Options No. of responses

Yes
No
Total 50

29. DO YOUR FAMILY SUPPORT FOR INVESTING IN

VARIORUMS INVESTMENTS ?
Yes No

8%

92%

147
30. Who is the nominee of your D-mate a/c ?

Options No. of responses

Father/Mother 30
Brother/Sister 15
Husband 5
Total 50

30. WHO IS THE NOMINEE OF YOUR D-MATE A/C ?

Father/Mother Brother/Sister Husband

10%

30%

60%

148
31. From where do you get the knowledge of stock market ?

Options No. of responses

Books 10
Newspaper 5
Family member 30
Friends 5
Total 50

SALES
Books Newspaper Family member Friends

10%
20%

10%

60%

149
32. Do you regularly invest in stock market ?

Options No. of responses

Yes 49
No 1
Total 50

32. DO YOU REGULARLY INVEST IN STOCK MARKET ?

Yes No

2%

98%

150
33. Gender ?

Options No. of responses

Male 15
Female 35
Total 50

33. GENDER ?
Male Female

30%

70%

151
34. Education level ?

Options No. of responses

HSC 8
Graduate 10
Post graduate 32
Total 50

34. EDUCATION LEVEL ?

HSC Graduate Post graduate

16%

20%

64%

152
35. How much of your annual income do you spent in investment ?

Options No. of responses

5% to 10% 40
10% to 15% 5
15% to 20% 2
More than 20% 1
Total 50

35. HOW MUCH OF YOUR ANNUAL INCOME DO YOU

SPENT IN INVESTMENT ?
5% to 10% 10% to 15% 15% to 20% More than 20%

4% 2%
11%

83%

153
36. Have you work with a financial planner before ?

Options No. of responses

Yes 20
No 30
Total 50

36. HAVE YOU WORK WITH A FINANCIAL PLANNER

BEFORE ?
Yes No

40%

60%

154
37. Would you refer your friends and family to invest in market ?

Options No. of responses

Yes 45
No 5
Total 50

37. WOULD YOU REFER YOUR FRIENDS AND FAMILY

TO INVEST IN MARKET ?
Yes No

10%

90%

155
38. Are you afraid of losing money while investing ?

Options No. of responses

Yes 48
No 2
Total 50

38. ARE YOU AFRAID OF LOSING MONEY WHILE

INVESTING ?
Yes No

4%

96%

156
39. which of the following option is better for investment ?

Options No. of responses

Shares 20
Debentures 10
SIP 10
Commodity market 10
Total 50

39. WHICH OF THE FOLLOWING OPTION IS BETTER

FOR INVESTMENT ?
Shares Debentures SIP Commodity market

20%

40%

20%

20%

157
40. Do you feel that financial plan would make your life easyer?

Options No. of responses

Yes 20
No 15
May be 15
Total 50

40. DO YOU FEEL THAT FINANCIAL PLAN WOULD

MAKE YOUR LIFE EASYER?
Yes No May be

30%

40%

30%

158
41. Do you help you family and friends while investing ?

Options No. of responses

Yes 49
No 1
Total 50

41. DO YOU HELP YOU FAMILY AND FRIENDS WHILE

INVESTING ?
Yes No

2%

98%

159
42. While investing do you take an advice from financial advisor ?

Options No. of responses

Yes 45
No 5
Total 50

42. WHILE INVESTING DO YOU TAKE AN ADVICE FROM

FINANCIAL ADVISOR ?
Yes No

10%

90%

160
43. Your opinion about investment ?

Options No. of responses

Good 20
Bad 5
Excellent 5
Average 30
Total 50

43. YOUR OPINION ABOUT INVESTMENT ?

Good Bad Excellent Average

34%

50%

8%

8%

161
44. Have you get an expected profit from previous investments ?
Options No. of responses
Yes 35
No 15
Total 50

44. HAVE YOU GET AN EXPECTED PROFIT FROM

PREVIOUS INVESTMENTS ?
Yes No

30%

70%

162
45. Where you have opened your D-mate a/c ?

Options No. of responses

Financial Advisor Company 15
Banks 20
Upstock /Groww /Zerodha 15
Total 50

45. WHERE YOU HAVE OPENED YOUR D-MATE A/C ?

Financial Advisor Company Banks Upstock /Groww /Zerodha

30% 30%

40%

163
46. Do you paid any processing fees while trading in market ?

Options No. of responses

Yes 50
No 0
Total 50

46. DO YOU PAID ANY PROCESSING FEES WHILE

TRADING IN MARKET ?
Yes No

0%

100%

164
47. Are you satisfied with the investments schemes available in India ?

Options No. of responses

Satisfied 10
Dissatisfied 10
Neutral 30
Total 50

47. ARE YOU SATISFIED WITH THE INVESTMENTS

SCHEMES AVAILABLE IN INDIA ?
Satisfied Dissatisfied Neutral

20%

60% 20%

165
48. Have you invested in Blue Chip companies ?

Options No. of responses

Yes 25
No 25
Total 50

48. Have you invested in Blue Chip companies ?

Yes No

166
49. Which Features will you see while investing in companies ?

Options No. of responses

PE ratio 5
Sales ratio 10
Economic analysis 15
Market position 20
Total 50

49. WHICH FEATURES WILL YOU SEE WHILE INVESTING

IN COMPANIES ?
PE ratio Sales ratio Economic analysis Market position

10%

40% 20%

30%

167
50. Age Group ?

Options No. of responses

18 – 35 45
36 – 45 3
46 – above 2
Total 50

50. AGE GROUP ?

18 – 35 36 – 45 46 – above

4%
6%

90%

168
Thankyou

169