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Standard Chartered Bank
“Study of different of investment strategy and portfolio
Submitted in partial fulfillment for the Award of degree of Master of Business Administration
Submitted By: NIDHI BANSAL MBA Part __ Designation
supervised by:RAM PRAKASH SAGWA
Submitted to:RAJASTHAN TECHNICAL UNIVERSITY, KOTA JIET SCHOOL OF ENGINEERING AND TECHNOLOGY FOR GIRLS
Certificates of project Report
This is to certify that Ms Nidhi bansal student of MBA IV semester (part II) 2009-2010; has successfully conducted a project study entitled ”Study of different of investment strategy and portfolio management” for the fulfillment of MBA degree. I have examined the project work and impressed with his ideas and suggestions. The work is according to University guidelines.
Mr RAM PRAKASH SAGWA
MBA is a stepping-stone to the management carrier and to develop good manager it is necessary that the theoretical must be supplemented with exposure to the real environment. Theoretical knowledge just provides the base and it’s not sufficient to produce a good manager that’s why practical knowledge is needed. Therefore the research product is an essential requirement for the student of MBA. This research project not only helps the student to utilize his skills properly learn field realities but also provides a chance to the organization to find out talent among the budding managers in the very beginning. In accordance with the requirement of MBA course have project on the topic “study of different of investment
strategy and portfolio management”.
The main objective of the research project was to study the two instruments and make a detailed comparison of the two. For conducting the research project sample size of 50 customers of SBIMF and SBOP was selected. The information regarding the project research was collected through the questionnaire formed by me which was filled by the customers there.
Ram prakash Sagwa. for their help and cooperation throughout our project.I express my sincere thanks to my project guide. support for literature. Mr. I sincerely acknowledge him/her/them for extending their valuable guidance. I would also like to thank the supporting staff ___________________________ Department. (Signature of Student) NIDHI BANSAL Abstract of the Report . Deptt Finance.. for guiding me right form the inception till the successful completion of the project. critical reviews of project and the report and above all the moral support he/she/they had provided to me with all stages of this project.
Annual income and the disposable income also played a major role in the investment strategies in the investor’s mind. like Savings bank A/c. The project continues with the portfolio management of the selected respondent of the field survey. ULIP (Unit Linked Insurance Policy). The result of the survey depicts a clear picture of current investment trend in Indian market. The project extended to find out the instrument in which different investor is now investing evaluating the projecting risk in the instrument. To understand the trend of the investor I have gone through a field survey. based on investment strategy questionnaire. To do the portfolio management study have been done on different investment instrument in details. Stocks. Mutual Funds. Results reveal that most investor’s first priority to invest is the “Tax Savings”. Project focused on findings of risk tolerance of investors and the time horizon they want to remain invested n the market. The analysis shows that the age groups of 18-30 years are more adaptable to the high risk where as the age group of 41-50 are the safe players.This report contains the different investment strategies taken by the investors (mainly small investors) and the trends of investment in different investment instruments. Term Deposits of Standard Chartered Bank and other different .
The portfolio is made on the response of the respondent in the last Contents .private Banks and AMC’s. After the study portfolio is prepared for the selected respondent after revisiting them for the portfolio management discussion.
1.3 Objective of Study 3.4 Type of Research 3.6 Limitation of Study .5 Sample Size and method selecting sample 3. Research Methodology 3.2 Duration of the Project 3. Introduction to the Organization 3. Introduction to the Industry 2.1 Title of the Study 3.
Conclusion 6. Appendix 8. Bibliography Introduction to Banking Industry . SWOT 5.4. Recommendation and Suggestions 7.
Singapore. The reasons are numerous: the economy is growing at a rate of 8%.The Indian banking can be broadly categorized into Nationalized. Philippines etc. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach. The Reserve Bank of India acts a centralized body monitoring any discrepancies and shortcoming in the system. Indian banks are now quoting all higher valuation when compared to banks in other Asian countries (viz.). Private Banks and Specialized banking institutions. Hong Kong. The unleashing of products and services through the internet has galvanized players at all levels of the banking and financial institutions market grid to look a new at their existing portfolio offerings. Bank credit is growing at 30% per annum and there is an ever-expanding middle class of between 250 and .
the real estate market in India is growing at 30% annually and is projected to touch $ 50 billion by 2008.000 crore in 2004-05 and huge SME sector which contributes significantly to India’s GDP. The banking in India is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. Industry estimates indicate that out of 274 commercial banks operating in India.89. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams. compared with 25% in some European markets. The private sector bank grid also includes 24 foreign banks that have .300 million people (larger than the population of the US) in need of financial services. which are unlikely to be matched by the mature banking markets around the world. Some of the high growth potential areas to be looked at are: the market for consumer finance stands at about 2%-3% of GDP.70. the retail credit is expected to cross Rs 5. The Indian banking has come from a long way from being a sleepy business institution to a highly proactive and dynamic entity. Indian markets provide growth opportunities. 223 banks are in the public sector and 51 are in the private sector.000 crore by 2010 from the current level of Rs 1. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive players capable of meeting the multifarious requirements of the large customer base.
They have a combined network of over 53.2% and 6. India has 88 scheduled commercial banks (SCBs) . Currently. 29 private banks (these do not have government stake. the public sector banks hold over 75 percent of total assets of the banking industry.started their operations here. These co-operatives.000 branches and 17. product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. rural development etc. with the private and foreign banks holding 18. a rating agency.000 ATMs. nationalized banks come Under the ambit of the the specialized banking institutions.5% respectively . they may be publicly listed and traded on stock exchanges) and 31 foreign banks. rural banks focus on areas of agriculture. According to a report by ICRA Limited.28 public sector banks (that is with the Government of India holding a stake). Currently banking in India is generally fairly mature in terms of supply.
followed by Hong Kong and Singapore in 1859.Company Profile The Background of standard chartered Bank The Standard Bank of British South Africa founded in 1863 and the Chartered Bank of India. The Chartered Bank • Founded by James Wilson following the grant of a Chartered opened its first branches in Mumbai Royal Charter by Queen Victoria in 1853. • (Bombay). Both companies were keen to capitalize on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods from Europe to the East and to Africa. Australia and China. . Calcutta and Shanghai in 1858. The Standard Chartered Group was formed in 1969 through a merger of these two banks. founded in 1853.
The Standard Bank Founded in the Cape Province of South Africa in 1862 by John Paterson. sugar from Java. Gambia. • Was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885. All was going well until 1986. hemp in Manila and silk from Yokohama • Played a major role in the development of trade with the East which followed the opening of the Suez Canal in 1869 and the extension of the telegraph to China in 1871. indigo and tea from Calcutta. Central and Eastern Africa In 1965.• Traditional business was in cotton from Mumbai (Bombay). it merged with the Bank of West Africa and by 1953 had 600 offices. in January 1863. • In 1957 Chartered Bank bought the Eastern Bank together with the Ionian Bank's Cyprus Branches. when a hostile takeover bid was made for the Group by Lloyds Bank of the United Kingdom. • Expanded in Southern. In 1969. Nigeria and Sierra Leone. the decision was made by Chartered and by Standard to undergo a friendly merger. South Africa. tobacco from Sumatra. Portfolio Management Commenced business in Port Elizabeth. When the bid was defeated. rice in Burma. Standard Chartered entered a period of . • expanding its operations into Cameroon. This established a presence in the Gulf. Ghana.
They are a fundamental part of our culture. Provisions had to be made against third world debt exposure and loans to corporations and entrepreneurs who could not meet their commitments. In the new millennium they acquired Grind lays Bank from the ANZ Group and the Chase Consumer Banking operations in Hong Kong in 2000. Since 2005. Secondly. Standard Chartered has focused on developing its strong franchises in Asia. At the heart of our values lie diversity and inclusion. Principles & Values At Standard Chartered success is built on teamwork. From the early 1990s. it would focus on consumer.change. and constitute a long- . Standard Chartered began a series of divestments notably in the United States and South Africa. corporate and institutional banking and on the provision of treasury services . partnership and the diversity of the people. the Middle East and Africa using its operations in the United Kingdom and North America to provide customers with a bridge between these markets.areas in which the Group had particular strength and expertise. they have achieved several milestones with a number of strategic alliances and acquisitions that will extend our customer or geographic reach and broaden our product range. and also entered into a number of asset sales.
What Standard Chartered Bank Stand for Strategic intent • • The world's best international bank Leading the way in Asia. Today we employ 73. Africa and the Middle East Brand promise • Leading by Example to be The Right partner Value • • • • • Responsive Trustworthy International Creative Courageous .000 people. supporting the development of exciting new products and services for our customers worldwide.term priority in our aim to become the world's best international bank. and you'll find 61 nationalities among our 500 most senior leaders. representing 115 nationalities. We believe this diversity helps to fuel creativity and innovation.
we develop innovative products and services to . deep local knowledge and creativity to outperform our competitors • Management Discipline:.Helping our people to grow. delighting them with the quality of our service • individuals to make a difference and teams to win • making a difference • outstanding performance and superior returns • wherever we are. enabling Communities:. Standard Chartered’s Business Listed on both the London Stock Exchange and the Hong Kong Stock Exchange.A distinctive investment delivering Regulators: . growing markets where we can leverage our relationships and expertise • Competitive positioning:- Combining global capability.Passionate about our customers' Our People:.Approach • Participation:-:focusing on attractive.Continuously improving the way we work. Standard Chartered PLC is consistently ranked in the top 25 FTSE 100 companies by market capitalization.Trusted and caring. By combining our global capabilities with deep local knowledge.Exemplary governance and ethics success. balancing the pursuit of growth with firm control of costs and risks Commitment to stakeholders • Customers:. dedicated to Investors:.
Insurance Enjoy peace of mind with comprehensive protection for you and your family. Africa and the Middle East. corporate and institutional customers in some of the world's most exciting and dynamic markets. Investment Advisory Services Take advantage of expert advice on how to preserve and enhance your wealth. we offer personal financial solutions to meet the needs of more than 14 million customers across Asia. Credit Cards Accepted worldwide.meet the diverse and ever-changing needs of individual. International Banking Our international banking centres provide a confidential banking platform and global investment opportunities. our credit cards are designed to give you greater financial freedom and flexibility. . Personal banking Through our global network of over 1.700 branches and outlets.
Wholesale Banking Headquartered in Singapore and London. Islamic Banking . and cash management. our Wholesale Banking division provides corporate and institutional clients with innovative solutions in trade finance. foreign exchange. through a relationship management approach. and corporate finance. capital rising. foreign exchange and risk management. securities services. with on-theground expertise that spans our global network. Its customer focused product offerings include working capital finance. cash management. trade services.Savings & Banking Services We offer a wide choice of savings accounts and banking services to suit you and your lifestyle Loans & Mortgages Our personal loans and award-winning mortgages are helping people realise their aspirations in countries across the world SME Banking SME Banking provides integrated financial solutions to small and medium businesses.
Standard Chartered Saadiq's dedicated Islamic Banking team provides comprehensive international banking services and a wide range of Shariah compliant financial products that are based on Islamic values. Standard Chartered is pro-active in improving every part of services. with special focus on transactional banking products. Electronic Delivery system has been put in place to ensure that transactions are handled speedily. Supported by state-of-the-art operations. Commercial banking Standard Chartered has maintained a long local presence. since 1858. with particular emphasis on relationship banking. Significant networks have been established with vendors and financial-related organizations to enable it to offer the customers a comprehensive range of flexible financial services. Private Banking Our Private Bank advisors and investment specialists provide customized solutions to meet the unique needs and aspirations of high net worth clients. .
.PRODUCT OFFERED BY STANDARD CHARTERED BANK Different Types of Savings Bank Account Get instant cash at over 20.000 outlets in India and at over 14 million outlets across the world.000 ATMs across India and over 1. FREE Doorstep Banking FREE Demand Drafts/Pay Orders (drawn at SCB locations) FREE Payable at Par Cheque-book Other features available are. And get a globally valid Debit Card that lets you shop at over 326. Unique Feature • FREE Unlimited Visa ATM transactions (Cash withdrawal and balance enquiry) • FREE Standard Chartered Bank branch access across the country.000 ATMs across the world through the Visa network. International Debit Card • • • Phone Banking Net Banking and Extended Banking Hours.000. .
Super Value Account Unique feature • • • • • • Free globally valid Debit-cum-ATM card Free Access to 6500 ATMs in India Free Doorstep Banking Free Bill pay Free Inter Bank Funds Transfer Free Foreign Inward Remittance Certificates Other benefits of the Super Value account: • • • Globally valid debit card Multicity Banking 24-hour branches. • Inter Net banking .access and transact on your accounts through the Internet from any part of the world. 365 day branches available at select locations • Phone banking . .available to you 365 days a year on a 24-hour basis in the metros and everyday of the week at other centers.
Phone Banking. What’s more – you can avail of Anywhere Banking. • Full suite of complimentary banking services including credit cards. 250. by which you can access your account from any branch of Standard Chartered Bank in India.• Free Investment Advisory Services to assist you in investing in a range of mutual funds. 4 free transactions per month at any Standard Chartered Bank channel (Internet banking. ATM card & Debit Card available. • • Access to Phone Banking and Internet Banking. loan products and capital market services No Frills Account You can now open an account with Standard Chartered Bank. • Anywhere banking– Access your account from any branch of Standard Chartered Bank. 250. . with an average quarterly balance of as low as Rs. ATM & Branch). as low as Rs. Free Cheque deposit at any SCB Branch or ATM. Unique Feature • • • Quarterly Average Balance.
• • •
No Minimum Balance requirement Free unlimited access to any SCB branch across the Unlimited Free access to Standard Chartered Bank Up to 4 free cash withdrawal transactions per month
Nominal quarterly fee of Rs. 100 (reversed if the Average
country for Customer-in-person ATM's •
at other domestic VISA ATMs
Balance in the quarter is Rs 10,000 or more).
International Debit Card Phone banking Net Banking Extended banking hours
Locker facility Door-step banking.
INTRODUTION Indian growth
India economy is developing at a fast rate and every sector of India economy is showing a positive growth. The growth development product in India in the year 2006-07 is 9.2%. The rate of robust growth of in industrial development is 10.6%. ‘The Economists’ have also observed high growth in manufacturing sector and telecommunication sectors. The Infrastructure sector is also showing impressive growth in the year 2006-07. The secondary sectors as also shown upward growth, the BSE and NSE sensex has closed at high marks of 21000 and 7000 respectively. In this way all these sectors have contributed to overall growth of Indian economy.
Behind China, India is the second fastest growing economy. According to a survey by Goldman Sachs, India will become the 3rd largest economy by 2035. This is measured in $US. If we use PPP (purchasing power parity) which takes into account local purchasing power, India already has the 3rd largest economy. The economy has been growing at an average growth rate of 8.8 per cent in the last four fiscal years (2003-04 to 2006-
07), with the 2006-07 growth rate of 9.6 per cent being the highest in the last 18 years. Significantly, the industrial and service sectors have been contributing a major part of this growth, suggesting the structural transformation underway in the Indian economy. Within the investment sector the real estate is raising sky high due to
Strong Economic Growth: The world’s fourth largest
economy, growing at over 8% the last two years and forecast to grow at over 7% over the next five; Growth measures supported across the political spectrum; a boom in the services sector with a strong revival of industry; powerful internal consumption and demand.
The Rise of the Middle-Class: 300 million and
growing with higher disposable incomes and even higher
more income and most of all tax savings. capital appreciation. or collectibles. instinct to pick and sheer intellect to make it work for the investor. other equity investment.aspirations. his wants keep changing. So. like buying securities or other monetary or paper (financial) assets in the money markets or capital markets. professional workforce driving urbanization beyond the traditional metro cities Before I start I have to explain what investment is and why people want to invest? It is very important for me to understand how people plan before investing. Human nature is fickle. and may increase or decrease in value giving the investor capital gains or losses. the starting point . It takes more than just a ‘tip’. liquid real assets. The main objective is to save money for future uncertainties. People usually invest when they have good amount of ideal money to spend. such as gold. Types of financial investments include shares. and bonds. educated. These financial assets are then expected to provide income or positive future cash flows. real estate. An investment can be described as perfect if it satisfies all the needs of all investors. These things are discussed below: INVESTMENT Investment = Cost Of Capital. Investing is not guesswork or prediction. it needs training to plan.
is spent understanding the needs of the investor and ensuring that the most appropriate investments are selected for him. Wealth accumulation is the ultimate measure of the success of an investment decision.Many investors look for investments that offer good return with adequate life cover to manage the situations in case of any eventualities. • Wealth generation: . By and large the investors have typical requirement to fill.This is largely a factor of performance. This is perhaps the strongest need among investors in India. who have suffered regularly due to failures of the financial system. Little time. Why people invest? Investors do invest in different instrument to simplify their lifestyle and to make certain goals in future life. • Life Cover:. however.The chance of losing some capital has been a primary need. then that investment can be termed the perfect investment. including both short-term investment performance of an investment and long-term performance of a portfolio. Recent days investors do invest in the endowment policies and ULIPs. Most investors and advisors spend a great deal of time understanding the merits of the thousands of investments available in India. If all those needs are met by the investment.in searching for the perfect investment would be to examine investor needs. and those are:• Capital preservation: . . Most investors invest for the long term to fulfill the inflation and for the capital appreciation.
• Retirement planning: . Mostly daily traders invest for income. People invest in short term for this.most of the service person do invest to get return after the vesting period. Investment Planning Investors need to identify the financial goals throughout life or for the next 10 to 15 years depending upon . • Income: This refers to money distributed at intervals by an investment. change investments or cater to changes in other needs. Every rupee saved in taxes goes towards wealth accumulation. It is normally triggered by a need to spend capital. • Beat inflation: . for that the investment such a manner that the returns comes at the time of retirement. There must be an easy cash withdraw for the contingencies • Ease of withdrawal: This refers to the ability to invest long term but withdraw funds when desired.inflation is a major player in the economy. Investors do in vest to maintain the buying capacity of them. It reduced the valuation of rupee. which are usually used by the investor for meeting regular expenses. This is strongly linked to a sense of ownership.No one has seen the future so every person personally save money for any contingencies. • Future Uncertainty: .• Tax savings: Legitimate reduction in the amount of tax payable is an important part of the Indian psyche.
it is possible to arrive at an optimal mix of risk and returns. Investing even a small amount can produce considerable rewards over the long-term. Besides individual requirement. however. Options before investment Investors choose wisely before investing which solely depends on the present market conditions. depends on the requirements.the time horizon selected by the investor. Success as an investor depends upon his investment in right instrument in right time and for the right period. Investment Planning also helps in striking a balance between risk and returns. Investment Planning also helps to decide upon the right investment strategy. a . investment strategy would also depend upon age. especially if you do it regularly. Done wisely. For most investors. which suits particular needs and requirements. By prudent planning. future prospect of the instrument. needs and goals. it can help you meet financial goals. This. safety and level of return. in turn. and prioritizing them. Investment means putting the ideal money to work to earn more money. For example. But one needs to decide about how much he / she wants to invest and where. the three prime criteria of evaluating any investment option are liquidity. Investment Planning is important because it helps in deriving the maximum benefit from the investments. the return offered by the company and the season to invest in that particular instrument. personal circumstances and risk appetite.
though limited return. Return . but the main thing is to how much investor can cover up and sustain with that. Those that involve more risk offer the opportunity to make .or lose . Risk tolerance .Investments are made for the purpose of generating returns. the right investment is a balance of three things: Liquidity. However. Liquidity – How easily an investment can be converted to cash.good investment for a long-term life insurance plan may not be a good investment for higher education expenses. There are additional risks as well (like decline in economic growth). which could lead to a gradual increase in the cost of living. The Investment Process Investors like to invest through the instinct and want to gain profit from the market by investing.a lot of money. As investors. It is far more interesting to read about how Peter Lynch picks . since part of invested money must be available to coverfinancialemergencies. But the biggest risk of all is not investing at all. In most cases. while financial institutions are undoubtedly a part of the process of investing.The biggest risk is the risk of losing the money that has been invested. Safe investments often promise a specific. and so little on the investment process. Another equally important risk is that investments may not provide enough growth or income to offset the impact of inflation. it is not surprising that we focus so much of our energy and efforts on investment philosophies and strategies. Risk tolerance and Return.
By emphasizing the sequence. By so doing. To get in to the market investors must go through the following process. During the profiling investor . So it is has its own theory to move in particular directions. that are needed for an investment strategy but strategies that look good on paper never work for those STEPS INVOLVED IN INVESTMENT PLANNING Investment is not only prediction it has its own reasons behind every up and down in the market. • Analysis and profiling of the instrument: .The first step is performing a Need Analysis check. as a result the primary step of the investment process is to make a portfolio. Though it does not get sufficient attention. than it is to talk about the steps involved in creating a portfolio or in executing trades. understanding the investment process is critical for every investor for several reasons: 1.stocks and what makes Warren Buffett a valuable investor. Investment planning centrally depends upon the portfolio of the investor. The investment process provides a structure that allows investors to see the source of different investment strategies and philosophies. it provides for an orderly way in which an investor can create his or her own portfolio or a portfolio for someone else. 2. The requirements and expectations of the investor should be met by the instrument. The investment process emphasizes the different components who use them. it allows investors to take the hundreds of strategies that they see described in the common press and in investment newsletters and to trace them to their common roots.
• Analyse the Profile: . The investment instruments are matched with the risk-return profile of the investor.Then according to the risk appetite and return pattern an optimum portfolio is designed for the investor. The products giving a lower rate of return usually are less risky.should consider their age. . • Evaluating the alternatives: .The next step would be analyse the risk-return profile of the investor on to the investment portfolio. The risk-return profile of investment products is evaluated in this step. the risk profile of the investor should be designed. • Preparing an Optimum Portfolio: . The basket of investment instrument selected in the previous step are given due weightageand appropriate amount of money is invested in each of the investment avenue so as to get maximum return with minimum possible risk. Investment products giving a high rate of return are generally risky and volatile.The next step would be revaluating the needs. and their income. Every investment product varies according to its return potential and riskiness. Other investment instruments and options should be analyzed. their profession. the number of dependents. By doing this check. All the investment alternatives that offer expected rate of return are evaluate for consideration.
Analysis and profiling of the Evaluating the alternatives Cons istent Monitoring Investmen t planning Analyse the Profile Preparing an Optimum Portfolio STUDY OF FINANCIAL PRODUCT Investment options in India Savings Bank Account (SB A/c) Saving Bank account (SB account) is meant to promote the habit of saving among the people. For this professional portfolio management is a must. without any condition.• Consistent Monitoring: .Finally a continuous watch on the portfolio is extremely important. Hence . In this scheme fund is allowed to be withdrawn whenever required. It also facilitates safekeeping of money. Fundamental analysis of the investment products done in the previous stages would only help in selecting the right product but the right time of entry or exit from a particular stream is evaluated by doing a technical analysis.
the sign of the both the account holders are needed.000.a savings account is a safe. bank follows the simple . with effect from 1/3/2003. The amount of interest will be calculated for each calendar month on the lowest balance in credit of any account between the close of the tenth day and the last day of each month. the minimum balance of Rs 1000 has to be maintained. In Savings Bank account. Banks generally put some restrictions on the total number of withdrawals permitted during specific time periods. Banks also stipulate certain minimum balance to be maintained in savings accounts. However in some private or foreign bank the minimum balance is Rs 5.5 % p. Return Interest @ 3. Features: The minimum amount to open an account in a nationalized bank is Rs 500. In a joint account only the sign of one account holder is needed to write a cheque.a. 10. convenient and affordable way to save money. Normally a higher minimum balance is stipulated in cheque operated accounts as compared to non-cheque operated accounts. But at the time of closing an account.000 or more and can be up Rs. Certain non-profit welfare organizations are also permitted to open Savings bank accounts with banks. If cheque books are also issued. A Savings account can be opened either individually or jointly with another individual. One cheque book is issued to a customer at a time.
withdrawn along with the dates and the balance. many of the banks also give internet banking facility through with one do the transactions like withdrawals. Advantages It's much safer to keep your money at a bank than to keep a large amount of cash in your home. • Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India with regard to several policy and operational parameters. is recorded in a passbook. i. the Money deposited. statement of account etc. How to open a SB account . deposits. One can withdraw his/her money by submitting a cheque in the bank and details of the account.interest method.e. The rate of interest may change from time to time according to the rules of Reserve Bank of India. some banks also have 24 hours open branches in very few selected cities. • Banks provide Auto-Mated Teller machine(ATM) for 24 hours cash withdrawn.
well known to the bank. which should normally call on the bank and sign in the column specially provided for the purpose of introduction in the account opening form. • • A minor who have completed ten years of age can At the time of opening an account one must submit also open and operate the account. • Most banks also require an introduction for opening an SB account.• Savings Bank Account can be opened in the name of an individual or in joint names of the depositors by filling up the appropriate forms. . the documents like photocopy of passport or Electoral card. Postal identification card as address proof and two passport size photos. The introduction may be obtained either from an existing account holder or from a respectable citizen.
You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks. You can make money from a mutual fund in three ways: 1) Income is earned from dividends on stocks and internet on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution. bonds. which represent a portion of the holdings of the fund. Each investor owns shares. and other securities. .Mutual fund in India A mutual fund is nothing more than a collection of stocks and/or bonds.
Advantages of Mutual Funds: Professional Management . the fund has a capital gain. 3) If fund holdings increase in price but are not sold by the fund manager. Most funds also pass on these gains to investors in a distribution. the fund's shares increase in price. You can then sell your mutual fund shares for a profit. .2) If the fund sells securities that have increased in price.The primary advantage of funds (at least theoretically) is the professional management of your money. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares. Investors purchase funds because they do .
.Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds. its transaction costs are lower than what an individual would pay for securities transactions. Diversification . the less any one of them can hurt you (think about Enron).By owning shares in a mutual fund instead of owning individual stocks or bonds. Economies of Scale. In other words.not have the time or the expertise to manage their own portfolios. your risk is spread out. a mutual fund allows you to request that your shares be converted into cash at any time.Because a mutual fund buys and sells large amounts of securities at a time. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money.Just like an individual stock. Most companies also have automatic purchase plans whereby as little as $100 can be invested on a monthly basis. and the minimum investment is small. Large mutual funds typically own hundreds of different stocks in many different industries. the more stocks and bonds you own. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. Liquidity. Simplicity . A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments.
Dilution - It's possible to have too much diversification. the manager often has trouble finding a good investment for all the new money. We'll talk about this in detail in a later section. Taxes – W hen making decisions about your money. The mutual fund industry is masterful at burying costs under layers of jargon. when a fund manager sells a security. even if the fund loses money.Mutual funds don't exist solely to make your life easier . high returns from a few investments often don't make much difference on the overall return. Management is by no means infallible. Dilution is also the result of a successful fund getting too big.Disadvantages of Mutual Funds: Professional Management . and. • Costs .all funds are in it for a profit. For example. fund managers don't consider your personal tax situation.Did you notice how we qualified the advantage of professional management with the word "theoretically"? Many investors debate whether or not the so-called professionals are any better than you or I at picking stocks. the manager still takes his/her cut. a capital- . These costs are so complicated that in this tutorial we have devoted an entire section to the subject . When money pours into funds that have had strong success. Because funds have small holdings in so many different companies.
equity funds that .gains tax is triggered. while equity funds that invest in fast-growing companies are known as growth funds. No matter what type of investor you are. the higher the risk of loss. regions of investments and investment strategies. there is bound to be a mutual fund that fits your style. Although some funds are less risky than others. the higher the potential return. all funds have some level of risk .000 mutual funds in North America! That means there are more mutual funds than stocks. At the fundamental level. According to the last count there are more than 10. It's important to understand that each mutual fund has different risks and rewards. All mutual funds are variations of these three asset classes. This is a Fact for all investments. there are three varieties of mutual funds: 1) Equity funds (stocks) 2) Fixed income funds (bonds) 3) Money market funds. For example. which affects how profitable the individual is from the sale. In general. Each fund has a predetermined investment objective that tailors the fund's assets.it's never possible to diversify away all risk. It might have been more advantageous for the individual to defer the capital gains liability.
We'll start with the safest and then work through to the more risky. A typical return is twice the amount you would earn in a regular checking/savings account and a little less than the average certificate of deposit (CD). bond funds can vary dramatically depending on ." "bond. the terms "fixed-income. These terms denote funds that invest primarily in government and corporate debt. Let's go over the many different flavors of funds. mostly Treasury bills.invest only in companies of the same sector or region are known as specialty funds. While fund holdings may appreciate in value. This is a safe place to park your money. Money Market Funds: The money market consists of short-term debt instruments. Bond/Income Funds: Income funds are named appropriately: their purpose is to provide current income on a steady basis. As such. When referring to mutual funds. the audience for these funds consists of conservative investors and retirees. but bond funds aren't without risk. You won't get great returns. Because there are many different types of bonds. but you won't have to worry about losing your principal." and "income" are synonymous. the primary objective of these funds is to provide a steady cash flow to investors. Bond funds are likely to pay higher returns than certificates of deposit and money market investments.
A great way to understand the universe of equity funds is to use a style box. the investment objective of this class of funds is long-term capital growth with some income. The weighting might also be restricted to a specified maximum or minimum for each asset class. however. Generally. a fund specializing in highyield junk bonds is much more risky than a fund that invests in government securities. but these kinds of funds typically do not have to hold a specified percentage of any asset class. There are. A typical balanced fund might have a weighting of 60% equity and 40% fixed income. Balanced Funds: The objective of these funds is to provide a balanced mixture of safety. many different types of equity funds because there are many different types of equities. Furthermore. an example of which is below. The strategy of balanced funds is to invest in a combination of fixed income and equities. income and capital appreciation.where they invest. which means that if rates go up the value of the fund goes down. . The portfolio manager is therefore given freedom to switch the ratio of asset classes as the economy moves through the business cycle. Objectives are similar to those of a balanced fund. A similar type of fund is known as an asset allocation fund. Equity Funds: Funds that invest in stocks represent the largest category of mutual funds. nearly all bond funds are subject to interest rate risk. For example.
The opposite of this would be a fund that invests in startup technology companies with excellent growth prospects. For example. These companies are characterized by low P/E and price-to-book ratios and high dividend yields. Such a mutual fund would reside in the bottom right quadrant (small and growth).The idea is to classify funds based on both the size of the companies invested in and the investment style of the manager. . a mutual fund that invests in large-cap companies that are in strong financial shape but have recently seen their share prices fall would be placed in the upper left quadrant of the style box (large and value). which refers to companies that have had (and are expected to continue to have) strong growth in earnings. which simply refers to companies that are neither value nor growth stocks and are classified as being somewhere in the middle. The term value refers to a style of investing that looks for high quality companies that are out of favor with the Market. A compromise between value and growth is blend. sales and cash flow. The opposite of value is growth.
only Brazil). but you have to accept that your sector may tank. Regional funds make it easier to focus on a specific area of the world. Sector funds are targeted at specific sectors of the economy such as financial. health. Just like for sector funds. There is a greater possibility of big gains. This type of mutual fund forgoes broad diversification to concentrate on a certain segment of the economy. on the flip side. Sector funds are extremely volatile. as part of a well-balanced portfolio. An advantage of these funds is that they make it easier to buy stock in foreign countries. they can. you have to accept the . But. Global funds invest anywhere around the world. It's tough to classify these funds as either riskier or safer than domestic investments. Specialty Funds: This classification of mutual funds is more of an allencompassing category that consists of funds that have proved to be popular but don't necessarily belong to the categories we've described so far. which is otherwise difficult and expensive. technology. etc. including your home country. it is likely that another economy somewhere is outperforming the economy of your home country. actually reduce risk by increasing diversification. Although the world's economies are becoming more inter-related. They do tend to be more volatile and have unique country and/or political risks. This may mean focusing on a region (say Latin America) or an individual country (for example.Global/International Funds: An international fund (or foreign fund) invests only outside your home country.
weapons or nuclear power.high risk of loss. Costs are the biggest problem with mutual funds. What's even more disturbing is the way the fund industry hides costs through a layer of financial complexity and jargon. and they are the main reason why the majority of funds end up with sub-par performance. Socially-responsible funds (or ethical funds) invest only in companies that meet the criteria of certain guidelines or beliefs. Index Funds: The last but certainly not the least important are index funds. This type of mutual fund replicates the performance of a Broad market index such as the S&P 500 or Dow Jones Industrial Average (DJIA). which occurs if the region goes into a bad recession. Some critics of the industry say that mutual fund companies get away with the fees they charge only because the average investor does not understand what he/she is paying for. Fees can be broken down into two categories: . The idea is to get a competitive performance while still maintaining a healthy conscience. alcoholic beverages. An index fund merely replicates the market return and benefits investors in the form of low fees. Most socially responsible funds don't invest in industries such as tobacco. These costs eat into your return. An investor in an index fund figures that most managers can't beat the market.
fund managers are definitely not going hungry! It's true that paying managers is a necessary fee. but don't think that a high fee assures superior performance. this cost is between 0. • Administrative costs .2% .5 million . etc. record keeping. this fee ensures that mutual fund managers remain in the country's top echelon of earners. expense ratios range from as low as 0. customer service. On-going yearly fees to keep you invested in the fund.These include necessities such as postage. This is sometimes also referred to as the management expense ratio (MER).1. While it sounds small. cappuccino machines. On the whole. Think about it for a second: 1% of 250 million (a small mutual fund) is $2. Some funds are excellent at minimizing these costs while others (the ones with the cappuccino machines in the office) are not.5% and 1% of assets on average.Also known as the management fee. This expense goes toward paying brokerage commissions and toward advertising and promoting the fund. The expense ratio is composed of the following: • The cost of hiring the fund manager(s) . Transaction fees paid when you buy or sell shares in a fund The Expense Ratio The ongoing expense of a mutual fund is represented by the expense ratio. 2.
Rs. In fact. There is little to no evidence that shows a correlation between load funds and superior performance.5%. A no-load fund sells its shares without a commission or sales charge. According to this argument. your returns will be higher because the professional advice put you into a better fund. and Rs. etc. In the Indian economy Mutual funds have grown faster than any other investment instrument. The average equity mutual fund charges around 1. the average load fund performs worse than a no-load fund.These are the most simple type of load: you pay the fee when you purchase the fund. when you take the fees into account. . • Back-end loads (also known as deferred sales charges) . You'll generally pay more for specialty or international funds. A typical example is a 6% back-end load that decreases to 0% in the seventh year.50 will pay for the sales charge.These are a bit more complicated. • Front-end loads . you don't have to pay the back-end load at all. If you invest Rs.(usually for index funds) to as high as 2%.1. which require more expertise from managers. In such a fund you pay the back-end load if you sell a fund within a certain time frame.3%-1. If you don't sell the mutual fund until the seventh year. The load is 6% if you sell in the first year. 5% in the second year.000 in a mutual fund with a 5% front-end load. 950 will be invested in the fund. Some in the mutual fund industry will tell you that the load is the fee that pays for the service of a broker choosing the correct fund for you.
Mutual funds pay out virtually all of their income and capital gains. However. As a result. Because ETFs and closed-end funds trade like stocks. changes in NAV are not the best gauge of mutual fund performance. investors must wait until the following day to get the trade price.FEW TERMS IN MUTUAL FUNDS NAV: -mutual fund's price per share or exchange-traded fund's (ETF) per-share value. which is best measured by annual total return. The tax law provides special rules for determining how much gain or loss you have. of units= Net asset value In terms of corporate valuations. the value of assets less liabilities equals net asset value (NAV). NAV per share is computed once a day based on the closing market prices of the securities in the fund's portfolio. In both cases. The sell results the loss or gain of the capital. and in what categories. less any liabilities. by the number of fund shares outstanding. the per-share rupee amount of the fund is derived by dividing the total value of all the securities in its portfolio. . SALE PRICE: .when an investor wants to disinvest from the investment he/she sell the unit(s) of the stock of the shares of mutual fund. which can be a dollar value above (trading at a premium) or below (trading at a discount) NAV. or "book value". their shares trade at market value. In the context of mutual funds. (Total asset value –liabilities) /no. All mutual fund’s buy and sell orders are processed at the NAV of the trade date.
FIFO is the "default" method. FIFO tends to generate the biggest tax bill. The Tax Code allows four methods: • • • • First-in. Tax is one of the main concerns during the sell. because the oldest. and Double-category average basis method. The tax gain or loss from mutual fund sales is calculated by comparing your tax basis in the shares sold to the sales proceeds net of any transaction costs. FIFO Method This method assumes that shares you sell come out of the earliest-acquired blocks you own. cheapest shares are considered sold first. Specific ID Method Under this method. one specifies exactly which block (or blocks) of mutual fund shares you intend to sell. you must use FIFO to calculate mutual fund gains and losses. Specific identification (specific ID) method. In general. In other words. the tax-planning objective is to maximize the basis in the shares being sold to minimize the gain.when you sell mutual fund shares. Single-category or "regular" average basis method. FIFO also increases the odds that your gains will be long term and therefore qualify for the 20% maximum rate. or maximize the loss. However. In a rising market. so you can . first-out (FIFO) method.
Each time investor makes a sale. it's generally better to sell short-term shares. Then each time you sell. For holding period purposes. Selling the most expensive shares could mean his/her gains will be short term and therefore taxed at regular income tax rate rather than the long-term capital gains rate of 15%. You can then sell strictly out of one pool or the other. The advantage is you have more flexibility to control the basis of the shares being sold and . if you are selling losers. you calculate the average per-share basis for each pool.minimize gains or maximize losses by selling your highestcost shares first. However. investor is considered to sell the oldest shares first. but not when he/she actually has possession of share certificates. or mix and match as you see fit. Your short-term losses will then offset short-term gains that would otherwise be taxed at your income tax rate. Single-Category Average Basis Method This method is available when one leaves his/her mutual fund shares on deposit in an account with an agent or custodian. and the other consisting of all short-term shares. he simply figures his average presale basis for shares of that fund. Double-Category Average Basis Method Here you separate shares into two pools — one consisting of all long-term shares (held over 12 months).
The table below gives an overview into the existing types of schemes in the Industry. risk tolerance and return expectations etc. TYPES OF MUTUAL FUND SCHEMES1 • o o o By Structure Open .whether the resulting gains will be taxed at 15% or your regular rate.Ended Schemes Close . Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position.Ended Schemes Interval Schemes • By Investment Objective o o o o Growth Schemes Income Schemes Balanced Schemes Money Market Schemes • Other Schemes o o Tax Saving Schemes Special Schemes Index Schemes 1 .
Sector Specific Schemes .
: changes in the Mutual fund industry in India till 2006 What is Life Insurance. insurer pays periodic . It is a contract between insurer and an insurance company in which the company provides the beneficiaries with a certain amount of money upon insurer death.??? Life insurance is a financial resource for one’s family and loved ones in case of his death.. In return.
After that in the year 2001 the sector was finally opened for the private players and foreign private. Due to IRDA the transparency and rules and regulations are still here in the insurance market. and then when LIC was established in the year 1956. gender. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA’s online service for issue and renewal of licenses to agents. age. The real innovation happened in this time only. After making a magnificent entry and becoming the most popular life insured product. when Life insurance companies introduced ULIPs with greater flexibilities. They are allowed to have 26% share in Indian company. 2 . and occupation.payments (premiums) in an amount that depends on medical history. It was after his recommendation that IRDA (Insurance regulatory and development authority) was established in April 2000. Background2 Though the history of insurance dates back to 1818 with the establishment of the Oriental Life Insurance company in Calcutta. For private life insurance sector in particular things started taking shape after the recommendation of Malhotra committee which put forward a proposal for the establishment of the regulatory body and also encouraged to set up unit linked insurance pension plan.
his/her nominees receive the sum assured with accumulated profits/bonus on investments (till the time of his demise). he/she receives the sum assured and accumulated profits/bonus. In the event of the individual’s demise. which not only cover the individual’s life in case of eventuality but also offer a maturity benefit at the end of the term. ULIPs work on the premise that there is a class of investors who regularly invest their savings in products like 3 .Fig: growth of insurance sector in last 10 years ULIP AND ENDOWMENT PLANS3 Endowment plans are life insurance plans. ULIPs attempts to fulfill investment needs of an investor with protection/ insurance needs of an insurance seeker. In case the individual survives the tenure.
Sahara Life. changing consumer behavior and occurrences of natural calamities at regular intervals. So typically both these categories of individuals have a portfolio of investment as well as life insurance. SBI Life. Interestingly.22%. the Indian life insurance market is expected to reach the value of around Rs 1683 Billion in the year 2009. Tata AIG Life. Tata- . pension premium contributed about 22. Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum. Taking into account the changing socio-economic demographics. Key Players This section provides an overview of some of the key players in this industry like Bajaj Allianz. There is another class of individuals who take insurance to provide for their family in case of an eventuality. Kotak Mahindra Old Mutual. the figure in the first nine months to December 2005 was 25. LIC. Aviva Life Insurance. Birla Sunlife. bonds. ING Vysya. debt funds. HDFC Standard. it contributes to about 7 per cent to the country's GDP. Met Life. Max New York Life. ULIP saves as the a product combines both these the products of (investment and life insurance) into single product. ICICI Prudential Life Insurance. diversified equity funds and stocks. The market is expected to grow at a CAGR of more than 200% YOY from the year 2006.fixed deposits.11% to total premium income of insurers. This investor/insurance seeker hassles managing and tracking a portfolio of product. In 2006-07. Together with banking services. rate of GDP growth.
in addition to the investment component. etc. The risk cover can be increased or decreased. growth funds or bonds. 5. They are simple. money market funds. 2. Investments can be made in gilt funds. The maturity benefit is not typically a fixed amount and the maturity period can be advanced or extended. United India Insurance Company Limited and Oriental Insurance Limited. 3. 6. As in all insurance policies. balanced to debt or gilt to equity. 9. HDFC Chubb. balanced funds. ULIP . IFFCO-Tokio. The maturity benefit is the net asset value of the units. 8. The policyholder can switch between schemes. The payment period too can be regular or variable. New India Assurance Company Limited. . The costs in ULIP are higher because there is a life insurance component in it as well. for instance. National Insurance Company Limited. Insurance companies have the discretion to decide on their investment portfolios. and easy to understand.AIG General. regular or variable.KEY FEATURES (IN GENERAL): 1. ICICI- Lombard. the risk charge (mortality rate) varies with age. Premiums paid can be single. Being transparent the policyholder gets the entire episode on the performance of his fund. clear. 4. 10. Reliance General. 7.
investors in ULIPs is allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis. determining the . Provides capital appreciation. ULIPs vs. Mutual Funds Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. i. diversified equity funds. Investor gets an option to choose among debt. In ULIPs.11. Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain. 14. 13. making premium payments on an annual. Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. i. quarterly or monthly basis. ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route. ULIP products are exempted from tax and they provide life insurance. The minimum investment amounts are laid out by the fund house. half-yearly. Lead to an efficient utilization of capital. 12. As is the case with mutual funds.e. balanced and equity funds.e. balanced funds and debt funds to name a few.
premium paid is often the starting point for the investment activity. ULIPs Mutual Funds .
On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually. Upper limits for expenses expenses determined chargeable to investors by the insurance have been set by the company regulator Not mandatory* Quarterly disclosures mandatory are Expenses Portfolio disclosure Modifying asset allocation Generally permitted for free or at a nominal Entry/exit loads have to be cost borne by the investor Section 80C benefits are Section 80C benefits available only on are available on all investments in tax-saving Tax benefits ULIP investments funds MAJOR DIFFERENCES IN ULIPs AND MUTUAL FUNDs If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house. With these comparable there are certain factors where in these two differ. a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches).Investment amounts Determined by the Minimum investment investor and can be amounts are determined by modified as well the fund house No upper limits. Mutual funds are essentially short to . he could have to bear an exit load and/or entry load.
are positioned as long-term products and going ahead. and also help people save for retirement. ULIPs and mutual funds are. It is important for an investor to understand his financial goals and horizon of investment in order to make an informed investment decision. but that is a choice to the customer. the element of protection in each varies. they offer protection against the risk of dying too early. there will be separate playing fields for ULIPS and MFs. the first and foremost purpose of insurance is and will always be 'protection'. ULIPs. . with the product differentiation between them becoming more pronounced. The primary objective of an insurance product is protection. The value that it provides cannot be downplayed or underestimated. In certain plans the level of protection is low and the savings component high. Insurance has to be an integral part of one's wealth management portfolio. While ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and structure. Further. however. not likely to cannibalize each other in the long run.medium term products. insurance provides benefits that no investment can offer. in contrast. Second. The decision to invest in either a mutual fund or a ULIP should depend on the time period of investment. As an instrument of protection. ULIPs do not seek to replace mutual funds. there are various kinds of insurance products. it is still not the primary purpose of the plan. The whole reason why it has evolved as a savings plan in the minds of certain people is because there is a significant savings component attached to it. The liquidity that these products offer is valuable for investors. therefore. exposure of Indian households to capital markets is limited.
Komal Jeevan -. we believe ULIPs have some fundamental positives like enhanced flexibility and merging of investment and insurance in a single entity that have really endeared them to individuals. ULIP vs. Then insurance was thrown open to the private sector. and it’s about time the industry and customer realise it. including the ULIPs. the regulator -. First was the arrival of private insurance companies on the domestic scene. The result was the launch of a wide variety of insurance plans. Today. ENDOWMENT PLANS It wasn't too long back. . ULIPs were one of the most significant innovations introduced by private insurers. when the good old endowment plan was the preferred way to insure oneself against an eventuality and to set aside some savings to meet one's financial objectives. but another factor that has helped their cause is a booming stock market.IRDA (Insurance and Regulatory Development Authority) was instrumental in signaling the end of assured return plans. Of course. While this now appears as one of the primary reasons for their popularity. These were the two factors most instrumental in marking the arrival of ULIPs. Two factors were responsible for the advent of ULIPs on the domestic insurance horizon.that assures return to the policyholder. The other factor that saw investors take to ULIPs was the decline of assured return endowment plans.individual financial goals as well as risk taking appetite. there is just one insurance plan from LIC (Life Insurance Corporation) -.
Then there is ongoing commission in the region of 5%. Unlike endowment plans. The expenses vary with the age. There is a direct relation between the mortality expenses and the abovementioned factors. After the initial years. ULIP expenses are classified into three major categories: 1) Mortality charges Mortality expenses are charged by life insurance companies for providing a life cover to the individual. the sum-at-risk is an important reference point for the insurance company. 2) Sales and administration expenses . Sale of a ULIP fetches a relatively lower commission ranging from as low as 5% to 30% of premium (depending on the insurance company) in the first 1-3 years. sum assured and sum-at-risk for the individual.A. the sum-at-risk is the difference between the sum assured and the investment value the individual's corpus as on a specified date. there are no IRDA regulations on ULIP commissions. it stabilizes at 1-3%. Put simply. EXPENSES ULIPs are considered to be very expensive when compared to traditional endowment plans. This notion is rooted more in perception than reality. In a ULIP. Broadly speaking. Sale of a traditional endowment plan fetches a commission of about 30% (of premium) in the first year and 60% (of premium) over the first five years.
FMCs differ across investment options like aggressive. While most life insurance . similar to what mutual funds incur on their investments. and money market instruments. A portion of ULIP premiums are invested in equities. a) Switching charges Individuals are allowed to switch their ULIP options. the company may charge him a fee for 'switching'. usually a higher equity option translates into higher FMC. Managing these investments incurs a fund management charge. which has say. 3) Fund management charges (FMC) These charges are levied by the insurance company to meet the expenses incurred on managing the ULIP investments. which are primarily 'optional' in nature. bonds. 60% equities and 40% debt.the expenses will be incurred if certain choices that are made available to individuals are exercised. individuals may also have to incur certain expenses. an individual can switch his fund money from 100% equities to a balanced portfolio.Insurance companies incur these expenses for operational purposes on a regular basis. Agent commissions. For example. The expenses are recovered from the premiums that individuals pay towards their insurance policies. Apart from the three expense categories mentioned above. balanced and debt ULIPs. sales and marketing expenses and the overhead costs incurred to run the insurance business on a day-to-day basis are examples of such expenses. However.
one aspect that gives ULIPs an edge over traditional endowment is flexibility. You can select an option that best fits your objectives and risk-taking capacity. These charges are levied as a percentage of the fund value on a particular date. ULIPs offer a host of options to the individual based on his risk profile. . a switch made over and above this number is charged.companies allow a certain number of free switches annually. Most insurance companies allow a number of free 'switches' in a year. A. Having selected an option. There are insurance companies that offer as many as five options within a ULIP with the equity component varying from zero to a maximum of 100%. Top-up amount is paid in addition to the premium amount for a particular year. These charges are usually lower than the regular charges that are deducted from the annual premium. c) Cancellation charges Life insurance companies levy cancellation charges if individuals decide to surrender their policies (usually) before three years. FLEXIBILITY As we mentioned. b) Top-up charges ULIPs allow individuals to invest a top-up amount. you still have the flexibility to switch to another option. Insurance companies deduct a certain percentage from the top-up amount as charges.
You select the only option you have and must remain with it till maturity. You can surrender your policy. If you are clear that you . Traditional endowment has no provision for pre-mature withdrawal. Of course. you can skip the fourth year's premium. but you won't get everything you have earned on your policy in terms of premiums paid and bonuses earned. LIQUIDITY Another flexibility that ULIPs offer the individual is liquidity. With traditional endowment. A top-up is a one-time additional investment in the ULIP over and above the annual premium. there is an initial lock-in period (3 years) after which the withdrawal is possible. For instance. there are no investment options. This feature works well when you have a surplus that you are looking to invest in a market-linked avenue. A. rather than stash away in a savings account or a fixed deposit.Another innovative feature with ULIPs is the 'top-up' facility. There is also no concept of a top-up facility. Since ULIP investments are NAV-based it is possible to withdraw a portion of your investments before maturity. The insurance company will make the necessary adjustments from your investment surplus to ensure the policy does not lapse. Your premium amount cannot be enhanced on a one-time basis and skipped premiums will result in your policy lapsing. if you have paid your premiums religiously over the first three years. ULIPs also have a facility that allows you to skip premiums after regular payment in the initial years.
monies received on maturity on ULIPs and traditional endowments are tax-free under Section 10.000. . B.will need money at regular intervals then it is recommended that you opt for money-back endowment. TAX BENEFITS Taxation is one area where there is common ground between ULIPs and traditional endowment. On the same lines. Premiums in ULIPs as well as traditional endowment plans are eligible for tax benefits under Section 80C subject to a maximum limit of Rs 100.
The average daily turnover NSE has around 1500 shares listed with a total market capitalization of around Rs. 68. which allows investors to sift their positions on the bourses.000 crore. In addition. there are 22 regional stock exchanges. 9. The primary index of BSE is BSE Sensex comprising of 30 stocks. (NSE) are the two primary exchanges in India.Indian Stock Market overview The Bombay Stock Exchange (BSE) and the National stock Exchange India Ltd. 9. Both exchanges have a different settlement cycle. It facilitates . Most key stocks are traded on both the exchanges and hence the investor could buy them on either exchange. The BSE has over 6000 stocks listed and has a market capitalization of around Rs. the BSE and NSE have established themselves as the two leading exchanges and account for about 80% of equity volume traded in India. NSE has the S&P NSE 50 Index (Nifty) which consists of fifty stocks. Both these indices are calculated on the basis of market capitalization and contain the heavily traded shares from key sectors. However. Both exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE online trading) and NEAT (National Exchange Automated Trading) system.500 crore. The BSE Sensex is the older and more widely followed index.21.
’B1’. low-risk investors.’B2’. & ‘B2’ groups and rights renunciations. These are generally short-term with maturities ranging anywhere from a fifteen days to a few years.more efficient processing. When a term deposit is purchased. (Badla). the lender (the customer) understands that the money can only be withdrawn after the term has ended or by giving a predetermined number of days notice. 4 Investopedia. The ‘F’ group represents the debt market (fixed income securities) segment.’C’. The ‘C’ group covers the odd lot securities in ‘A’. Term deposits are an extremely safe investment and are therefore very appealing to conservative. ‘B1’. The ’Z’ groups scripts are the blacklisted companies.com . faster execution of trades and transparency. The scripts traded on the BSE have been classified into ‘A’. By having the money tied up investors will generally get a higher rate with a term deposit compared with a demand deposit. The ‘A’ group shares represent those.’Z’ groups. which are in the carry forward system Term deposits 4 A deposit held at a financial institution that has a fixed term. automatic order matching. ‘F’.
personal load. education load.25% 6.25% .50% 6.75% 9.50% 5. Here is a list of Term deposit rates of different Banks I have studied:- Tenure Standard C hartered 15 days .5% 4% 5.25% 6.25% 8.25% 361 days 8.50% 8% 6%-8% 9.25% 8% 8% HDFC ABN -AmroK otak Mahindra 5.50% 6.75% 6%-8% 8.Investor some time pledge these term deposits to take house loan. these works as the security deposits or asset of the debtor.50% 5.75% IC IC I 4% 4% 6.75% 6% 8.75% 90 days – 360 days 6.25% 6.59 days 5.4 years 6.25% 60 days – 89 days 5.50% 8% 6% 8.50% 2 years .25% 1 year < 2years 6.50% 362 days< 1year 6. etc.50% 4%-5.
But a generally less expensive way is to issue (sell) bonds. buy them back) at some time in the future (the redemption date). The price of a bond is a function of prevailing interest rates. because that particular bond becomes more attractive (i. A bearer bond is a bond with no owner information upon it. because that particular bond becomes less attractive (i. while Government needs money for everything from infrastructure to social programs.. Why do organizations issue bonds? A company needs funds to expand into new market. i. presumably the bearer is the owner. a bond is a debt instrument. pays more interest) when compared to current offerings.e. The organization will agree to pay some interest rate on the bonds and further agree to redeem the bonds (i. the price of the bond goes down.e. As rates go down.Bonds in India..e.e. Bearer bonds included . Other common terms for these debt instruments are notes and debentures. One way is to arrange for banks or others to lend the money. Most bonds pay a fixed rate of interest for a fixed period of time. As rates go up. A bond is just an organization's IOU... In other words. the price of the bond goes up. pays less interest) when compared to current offerings. a large sum of money will be needed to get the job done. a promise to repay a sum of money at a certain interest rate and over a certain period of time. Whatever the need.
Municipal Bonds – Municipal bonds. Treasury notes and Treasury bills. thus making some municipal bonds completely tax free. Bonds . Bills . Different types of bonds5 In general there are few types of bonds available in the market to buy. Notes . This security can be converted into shares of the company that issues the bond if the bondholder chooses.Debt securities maturing in one to ten years.these bonds are issued by the government to raise money from the public. 5 Security analysis and portfolio management by Ritu Ahuja .coupons which were used by the bondholder to receive the interest due on the bond. Because of the tax-savings yield in munis is lower than the taxable bonds. the conversion price is usually chosen so as to make the conversion interesting only if the stock has a pretty good rise. are the next progression in term of risk.Debts securities maturing in less than one year. Another type of bond is a convertible bond. known as “munis”. The major advantage in munis is that the returns are free from State/central tax. Government bonds: . Local government some time makes their debt non-taxable for residents. Of course.Debt securities maturing in more than ten years. Marketable securities from the Indian government– known collectively as Treasuries and are as Treasury bonds. like.
000 par value and 10 years to maturity is trading at Rs.This is a type of bond that make no coupon payments but instead is issued at a considerable discount to par value. For example. 1.600 today that will worth Rs.000 after 10 years. then investor would be paying Rs. The company’s credit quality is most important: the higher the credit quality. Zero coupon Bonds: . bondholders must be paid off in full before stockholders get anything. a zero coupon bond with a Rs. Generally. a short term corporate bond is less than five years. let us say. But if the company gets in financial trouble and needs to dissolve. 1. lower the interest rate the investor receives. 600.Corporate bonds – A company can issue bonds just as it can issue stock. A Portfolio management . intermediate is five to twelve years. Bondholders are not owners of the corporation. Corporate bonds are characterized by higher yields because there is a higher risk of a company defaulting than a government. and long term is over 12 years.
The goal is to obtain the highest return for the client of the managed portfolio. By owning several assets. The manager has to balance the parameters which define a good investment i. The aim of portfolio management is to achieve the maximum return from a portfolio which has been delegated to be managed by an individual manager or financial institution. certain types of risk (in particular specific risk) can be reduced. security. Kolding a portfolio is part of an investment and risk-limiting strategy called Diversification. While doing the portfolio management of customers it is ensured that the portfolio has objectives and achieves a sound balance between the competing objectives. which are:• • • • • • • Safety of investment Stable current return Appreciation in capital value Liquidity Tax planning Minimizing the risk Diversification .A portfolio management is a collection of investments held by an institution or a private individual. and return. liquidity.e.
Relative share of each asset in the portfolio. Symbolically: E (rp) =∑w E (ri) Where. portfolio . E (ri) =expected return from the assets i. there are two determinants of portfolio returns: I. Unlike portfolio expected return. reflect the fraction of total portfolio invested in each asset. The weights. Expected rate of return on each assets and II. Portfolio Risk Total risk is measured in terms of variance or standard deviation of return. Thus.Portfolio Expected Return The expected rate of return is the weighted average of the expected rates of return on assets comprising the portfolio. E (rp) =expected return from the portfolio. which add up to 1. w = proportion invested in the portfolio.
Return is not fixed for any investment instrument it depends upon the market liquidity.variance is not the weighted average of variance of returns on individual assets in the portfolio. For the calculation of the risk & return I have chosen the historic data. I have also showed the risk profile which have been ranging from Low to very high. σ²= Variance of returns of the portfolio (w1)= Fraction of the portfolio invested in asset 1 (w2)= Fraction of the portfolio invested in asset 2 (σ²1)= Variance of asset 1 (σ²2)= Variance of asset 2 (σ12)= Covariance between returns of two assets. List of return expected on the basis of Historical data Types investments of Historical returns Risk profile . interest rate. Symbolically: σ²p= (w1)²(σ1)²+ (w2)²(σ2)²+2(w1) (w2) (σ12) Where. and some other economic situation of that country.
Company Bonds Bond Mutual Funds Equity Mutual Funds Equities Fixed Deposits PPF Post Office Government Securities ELSS
6%-8% 8%-10% 15%-20% 15%-20% 7%-8% 8% 8% 5%-6% 15%-20%
Medium-high Medium High Very high Low Low Low Low Medium-high
Note: higher returns for lower risk (because of Govt.
guarantees there) that PPF and similar A/c appear to have, is misleading. These do not have much liquidity, and since that is an important measure of risk.
Making a portfolio is depends on the risk measurement of the investment and the time horizon he/she prefer to invest. But from the point of view of the portfolio manager, choosing a investment intrument or a fund is more difficult than to measure the risk tolerence and time horizon. For the portfolio managers calculating the risk and return is the main area where they focused. As an investors before investing alwways watch for the risk and return for his/her
investment. So before creating the portfolio, risk and return calculation is manditory. To understand the risk of a specified fund, there are some statistical instruments that helps to measure the volatality in respect to the market, industry, and peers. Measuring volatility and risk depics the fluctuation of return investors receive. For this creation of portfolio I have choose Mutual Funds as investment instrument because, it has a diversified investment options from equity market, money market, to debt instrument. To diversified investment investor can investment as he/she wanted to. Any one can invest in mutual funds as variation in investment instrument is greater than any other investment instrument. METHODOLOGY USED Investing in mutual funds involving an active role of a fund manager is set to be one of the safest investment avenues as regards the high risk/return equity investment. Being assumed safe and the responsibility entrusted to fund managers, it is perceived that investors give a cursory glance at the performance sheet of the fund, gain some money, and carry on with their investments with the fund. However, though they make money from the fund, a detailed examination of the fund's performance in relation to other risk-free investment avenues and the Benchmark index gives telling insights into the fund's performance. A comparison with risk-free investments like government
securities, treasury bills, and also the Benchmark index would determine how safer and more profitable your fund is. Here is an analysis of the ratios that can help investors gauge the performance of your fund as regards investing in less riskier investment avenues.
Standard deviation throws light on a fund's volatility in terms of rise and fall in its returns. Maximum volatility in a security is the riskiest, considering the unevenness it brings about in its performance. Standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return. That is the average return of a fund over a period of time. A fund that has a consistent four-year return of 3%, for example, would have a mean or average of 3%. The standard deviation for this fund would then be zero because the fund's return in any given year does not differ from its four-year mean of 3%. On the other hand, a fund that in each of the last four years returned -5%, 17%, 2% and 30% will have a mean return of 11%. The fund will also exhibit a high standard deviation because each year the return of the fund differs from the mean return. This fund is therefore riskier because it fluctuates widely between negative and positive returns within a short period. To determine how well a fund is maximising its returns received for its volatility, a comparison can be done for similar investment and similar risky mutual funds. The fund with the lower standard deviation would be more optimal
The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk. Remember. However. It is defined as S(x) = (rx-Rf)/Std dev(x) Where 'x' is the investment. who produced the 15% return. Sharpe ratio This ratio describes how much return you are receiving for the extra volatility that you endure for holding a riskier asset. if manager A generates a return of 15% while manager B generates a return of 12%. Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio. you always need to be properly compensated for the additional risk you take for not holding a risk-free asset. . 'rx' is average rate of return of x Rf is the best available rate of return of a risk-free security like government securities Std dev(x) is the standard deviation of rx. For example. it may actually be the case that manager B has a better risk-adjusted return. took much larger risks than manager B. if manager A.because it is maximising the return received for the amount of risk acquired. it would appear that manager A is a better performer.
the fund would be expected to increase 15. or risk. it's divided by the standard deviation of the risky asset to get its Sharpe ratio.05 in relation to the Sensex.the higher the better.25 while manager B's ratio would be 1. Beta Beta determines the volatility. Sharpe ratio is broken down into three components: asset return. If.4. and manager A's portfolio has a standard deviation of 8% (considering high risk/return). manager B was able to generate a higher return on a risk-adjusted basis. risk-free return. Based on these calculations. and standard deviation of return.Say that the risk free-rate is 5%. . After calculating the excess return.75%. The idea of the ratio is to see how much additional return you are receiving for the additional volatility of holding the risky asset over a risk-free asset . The Sharpe ratio for manager A would be 1. and a beta less than 1 indicates less volatility than the benchmark. the fund has been moving 5% more than the index. A beta greater than 1 indicates greater volatility than the overall market. if the Sensex has increased 15%. more than or equal 2 is very good. of a fund in comparison to that of its index or benchmark. which is better than manager A. A ratio of more than or equal to 1 is good. Therefore. for example. while manager B's portfolio has a standard deviation of 5%. A fund with a beta very close to 1 means the fund's performance closely matches the index or benchmark. a fund has a beta of 1. and more than or equal 3 is excellent.
• The highest scorer is the best fund to invest respect to the fund Beta & Sharpe ratio being calculated. For example. the fund would be expected to rise 24%. Then I got the adjusted risk & return. which increase chances of beating the market. type. and. if a fund had a beta of 0. So I have ranked the funds in the respective category. the fund would be expected to lose 24%. Investors can choose funds exhibiting high betas. • These 33 funds are the top funds in respective fund sector. So if the Sensex moved 10%. .4 times more than its corresponding index. the fund would be expected to decline only 3%. the 1st year return and 3 years are calculated. Thus I have got the total average return score of the respective funds. if the Sensex declined 10%. • • • Then adjusted risk is multiplied by the total return score of individual funds. • Then with 60% weightage given to 3 years return and 40% weightage given to 1st year return. a fund with a beta of 2.5 and the Sensex declined 6%. Also if the market is bearish the funds that have betas less than 1 are a good choice because they would be expected to decline less in value than the index. However. Then I calculate adjusted risk by dividing Sharpe ratio by beta.4 would be expected to move 2.On the other hand. you must note that beta by itself is limited and there may be factors other than the market risk affecting your fund's volatility.
7= 350.000 Rs. For the secure life investor must do an insurance that will give only insurance plan. • NFO is the emerging mutual funds that is going to flurish in the future.000 is tax free.• These funds are recommended to the investors depending the risk tolerence.000 Rs Aggressive investment ELSS= 100. Aggressive mutual funds= 200. because ELSS gives on an average return of 25%-30%6.3= 150.000 Rs.000 Rs. 4 . NFO= 50.000x. Portfolio of Investor WITH 70% AGGRESSIVE & 30% DEFENSIVE RISK PROFILE Investable amount = 500.000 Rs Defensive investment= 500. Aggressive investment= 500. This will be a expence of the investor but in the long run ELSS will give more return than a ULIP plan.000x. It is difficult to predict which NFO will be good. There is no need invest in ULIPs or any endowment insurance. because it is time 6 See Annexure no. which means upto investment of Rs 100.000 Explanation : • ELSS is a type of mutual funds where investor can get the Tax shield of 80(C).
Regular high liquid as there is no tenure. I have distributed all investment equally to balanced funds. Government securities. Reliance Growth and Birla Mid Cap minimum tenure is 1 year.I. Fixed deposits. The funds are: Tata Infrastructure. I have recommended top five mutual funds each with amount 40.constrain. Reliance Growth.E.25% for 1 years fixed deposits. it will yield 8%.I. In these funds DSP ML T.000 Government securities= 50.R. So there is no liquidity problem for the investor.Debt funds= 50.E.R. . are the most volatily mutual funds respect to the market. Kotak Mahindra offers 9.000 Rs.000 Explanation: This investor has 30% in defensive investment. Sundaram BNP Paribas Select Midcap Regular. But investor must evaluate the background of the NFO and the fund manager.G. Birla Mid Cap. Defensive investment Balanced funds.000 Fixed deposits=50. • Aggressive mutual funds. Fixed deposits are for 1 years.G. Regular. DSPML T. Government securities for 5 years.
.000= 28.000X15% 50.Return after one years of the above investment INVESTMENT ELSS AGGRESSIVE FUNDS NFO BALANCED FUNDS FIXED DEPOSITS GOVT.000 Rs Defensive investment= 500.SECURITIES TOTAL CALCULATION 100.000X9.25% which good for the investorof very high risk. Portfolio of Investor WITH 60% AGGRESSIVE & 40% DEFENSIVE RISK PROFILE Investable amount = 500.000 Rs Aggressive investment ELSS= 100.000X8% EXPECTED RETURN 35. Aggressive investment= 500. Balance Funds= 50.000 143625 On an average the return =143.625/500.25% 50.000 Rs.000X40% 50.000 Rs.000 Rs.000x.500 4625 4.000 7.4= 200.000x.000 80.000X35% 200.000X 25% 50.500 12.6= 300.
000 Debt oriented Funds=75.000 Balanced Funds are from medium risk and medium return. • The diversified funds are yeilding good returns from the market nearly 30% on an averege.000 Fixed deposits=50. • Debt Funds are the secure mutual funds with risk profile of low and the return is ranging 9%-11%. Return is quite moderate near about Explanation: In the defensive invetment part investor must try to gain more interest rate as the return is secure and liquidity is low.25%.NFO= 50. Kotak Mahindra Bank is offering for One year teneure.000 Diversified equity funds= 100. The top five .000 Explanation: • Here investor has a risk tolerence of 60% aggressive. it ranges risk from low to medium. Defensive investment Debt funds= 75. So I have recommended 33% of the aggressive investment in the Diversified Equity funs where the risk ranges from medium to high. • Fixed deposits rate is maximum 9. • 25%-30%.
Birla Gilt Plus Regular.000X35% 50. Kotak Bond Regular. but rest has one year minimum investment period.000 7.125 Then on an average the return =106.00013% 50. these are the funds that are low risky but return is more than the debt funds NEARLY 13%. DBS Chola.25% which is good for an investor of high risk profile.500 30.25% EXPECTED RETURN 35. .125/500.funds I have recommended: Birla Sun Life Income.000X25% 100. • ICICI Prudential Child-care Study is highly liquid as there is no minimum tenure of investment. Principal MIP Plus1. ICICI Prudential Child-care Study0. Return after one years of the above investment INVESTMENT ELSS BALANCED FUND DIVERSIFIED EQUITY NFO DEBT FUND DEBT ORIENTED FUND FIXED DEPOSIT TOTAL CALCULATION 100. So liquiidity is there in between the funs. • For the liquidity Kotak Bond Regular has no minimum time of investment. • For the debt oriented funds. So investor has liquidity option in his investment. I have recommended: DBS Chola MIP1.000X15% 75. Principal MIP & Principal MIP plus has a minimum tenure of 1 year.000=21. HSBC MIP savings2. and HSBC has 2 years.000X9% 75. ICICI Prudential has 3 years of minimum investment.000X30% 50.000X9. Birla Income Plus. Principal MIP.500 6750 9750 4625 106. ICICI Prudential Gilt Investment.000 12.
For descriptive and diagnostic research study. For pursuing this particular project exploratory study is the best suited keeping in view its objective. Thus exploratory research Design has been briefly explained below: Exploratory research design: This design is also known as formulative research design.RESEARCH DESIGN Definition: “A research design is an arrangement of conditions for collection and analysis of data in a manner that aims to combine the relevancy of the research with economy in procedure”. For hypothesis testing research studies. The major emphasis in such studies is on the discovery of view idea and insight. . The main purpose of such studies is that of formulating a problem for more precise investigation or of developing the working hypothesis from the operational point of view. Different Research design: For exploratory research study.
The source of data collection used in this project is primary data collection source. The primary sources are those which are collected afresh and for the first time. on the other hand. and thus happen to be original in character. The data are collected through Questionnaires & some Interview was made through personal visit & through telephonic interview. There are several methods of collecting primary data. In this method a questionnaire is filled by the concerned person himself.DATA COLLECTION SOURCES There are two types of data primary & secondary. Collection of data through questionnaire: This method of data collection is quite popular. DATA COLLECTION METHODS The data collection methods which are used for this project are explained below. are those which have been collected by someone else and which have already been passed through the statistical process. . particularly in case of big enquiries. The secondary sources. A questionnaire consist of a number of questions printed or typed in a defined order on a form or set of forms.
A questionnaire was designed in consideration that the people filling up the questionnaire should not be uncomfortable with the question. Interview with the help of questionnaire was carried on with individuals. I have prepared a questionnaire keeping in mind the requisites of a good questionnaire. DATA COLLECTION INSTRUMENTS The work of data collection is done by preparing a questionnaire. the characteristics of my questionnaire are: • • Questionnaire is short & simple Questionnaire is dichotomous & full of multiple choices.In the project the main source of collecting data was through questionnaire. 1) The Interview: method of collecting data involves interview presentation of oral-verbal stimuli and reply in terms of oralverbal response. There are two methods of interviewpersonal interview and telephonic interview. Few telephonic interviews were also performed in which the response was average due to time constraints. So. For this purpose questionnaire was designed and filled by individuals. After through study & pilot study of the questionnaire. .
SAMPLING METHEDOLOGY The sampling procedure contains different steps:• • • • • • Define the target population Identify the sampling frame Select a sampling procedure Determine the sample size Select the sample elements Collect the data from the designated elements.• • looking. These persons represent various classes in the society as below. These comprise from the natural market. . SAMPLE SIZE 100 persons were contacted on random basis. Technical terms & vague expression have been avoided to Physical appearance of the questionnaire is attractive the extent possible. SAMPLING TECHINQUE Initially. The final Questionnaire was arrived only after certain important changes were done. a rough draft was prepared keeping in mind the objective of the research. SAMPLING UNITS The respondants who were asked to fill out questionnaires are the sampling units.
Service Business.Student. Basic acceptance of investment instrument towards the . • • Find out the potential customer and their needs. Objective of the Project: The objectives of the project are mainly• Analysis of current investment strategies adopted by the different age group and different income group. Basic trends of investment in the market. • investors.
Small area for field survey. .Limitation of the Study: The limitation or the problem I faced During the project are• • • • • Non co-operation of people during the field survey. Wrong information gives by the respondents. Limited number of respondents. Limited time.
This also shows that the age group of greater than 50 years are very less interested in invetment.ANALYSIS GRAPHICAL PRESENTATION Fig: Distribution of age groups in the sample Explanation :The above pie chart shows that the sample of 153 is predominantly consists of respondents of the age groups of 18-30 years and 31-40 years. This reveals that most of the investors are them who are started their carrer recently or working for 10-15 years. .
Fig:Distribution ofoccupation through out the sample Explanation :This graph shows that the respondents are mostly from the service class (61%) and business person consists of only 37% of respondents.Self employed are very less in numbers. Where as the business class invest large amount in a single time. . Form the Standard Chartered point of view it is quite useful as the service people are regular investors.
50.50.000 to 10.00.000 Rs is dominating.000 tp 5. Most investors are from the income group of 2. The second major income group is the 7.00.Fig : Distribution of sample annual income wise Explanation :In the sample the income group of 2.00. .000 which is enthusiastic for the companies as the potential customers are from the medium investor and the bid investors.000 to 5.000.000 to 10.000 Rsand 7. It reveals that this income group were the major respondent in the survey.00.50.50. Combining the two income group company can have a mixed bag of good investor in the near future.
000 Rs is 1/5th of the sample.000 Rs per month which is good enough money for an investor who is investing regularly for the longer term. The pie shows that the major repondents have a dispposible income of 5.000 to 10. This reveals company got a fair enough data base of high amount investors. more the disposible income for the investors more they invest in the investment instrument.Fig : Distribution of disposible income Explanation :Disposible income is the strong piller of investment. It also depicts that investors who has a disposible income of more then 20. .
but that is for only 1.Fig : First priority of investment inthe sample Explanation :Tax saving is the major concern now in india.5 lakh. It is expeacted that before the investment investors focus would be the main criteria where he wants to invest in. The above pie alsoshow that 40% of people want to invest for the taxsavings. Only 9% people focus on their retirement time and invest for vesting perio . depending up on the reponse I have found out that 18% people invest to secure for Future Uncertainties and 19% fight against inflation and do invest for only Capital Preservation.
The low risk apetite investor instruments. they useally invest in the stocks and mutual fund. where the ris is high and the returns are also high in proportion. 42% investors are in this category.Fig : Risk tolerence ability Explanation :The research showed that the most investors are risk averse and goo for the moderate risk. mostly invested in the fixed return . 7% investors have very high and 29% investors have high risk profile. This is good news for the market that only 22% of insvestors are with low risk apetite.
S.OBSERVATIONS COMPETITIVE ADVANTAGE 6.T ANALYSIS SWOT Matrix Environmental Scan Internal Analysis External Analysis Strength Threats Weaknesses Opportunities Strengths • • • • Strong brand name Customer loyalty Product Quality Good reputation among customers Weaknesses • • Insufficient product promotion Unawareness about the product Opportunity .O.W.
Threat • • • Emergence of substitute products Resistance to change Non.• An unfilled customer need . .response from the target customers .
Teach a man to fish.Conclusion Your child is one of the most important part live and giving them the best is always an important requirement for most parents. As most parents knows that the best investments that can be given to a child is not material gifts but a first class education “Give a man a fish. and you have fed him for a lifet . you have fed him for today.
The main focus should be to reach to the customer. these customers are aware of ULIPs and aware of other product. All my survey findings are corelated and being explain in the above graphs. most of the investors are from the 10.000-15. Mutual Funds can also be offered as they have high risk profile. Income. and the time horizon is perfect 3-5 years. Company should try to reach them and tap the investor. After completing the survey and watching the analysis I come to this conclusiion that the before investment investors do have focus on Tax savings. Company should take initiative to get demat account of these • The age group of 31-40 years. more disposible income. • Recommendation for this category is company must follow up these high potential customers. This ULIP has a 20%-22% return which good enough for investment. According to my view the age group of 18-30 can be a great potential investors for the company as the has high risk profile. They also have a predetermination of the time period of investment. they can be offered ULIPs as there is blocking period of 5 years in NEW SECURE FIRST plan. • customers.000 . Capiatal preservation etc.CONCLUTION AND RECOMMENDATIONS The over all project is depending up on the findings that has been explained previously. investors are with ‘Moderate’ risk profile.
Company can offer them ULIPs. Investor in this group are invested in Insurance sector. Investors have invested in insurance sector but in this age insurance would not be a good option for investor.Rs per month disposible income. ULIPs. Mutual funds can be an option but that must be a debt fund to invest. Depending upon the data I conclude that the srevice class has a time horizon of 3-5 years and risk tolerence ‘Low. • For the age group of above 50 years. • The age group of 41-50 years. Company should try to minimise the risk tolerence by offering Fixed deposits. Company will get a good investor with diluted risk profile. This is also good potential group for the retirement plan in ULIPs.as the term is not more than 3 years.and Fixed Deposits as investment instrument.000 Rs disposible income group. Mutual funds can be a good option for them. Mutual Fund and ULIPs. the risk profile is high-very high. Company should offer Mutual funds with risk profile High to very . Most investor are with negative return acceptability and time horizon is < 3 years. investors are from the 15. Mutual fund can be a lucrative offer if the Fund is any moderate fund or debt fund. They invested in FDs. OCCUPATION If we see the survey data it will seen that respondents are majorly Service peopole and Business Class. and offer FDs. the primary focus of these investors are retirement and time horizon is likely to be 6-9 years. the rish profile would be low moderate.000-20. • For the business class.Moderate’. • Recommendation company shoul tap these class by innovative marketing strategies as they already invested.
10. Emphasis on marketing of the products should be given.high thus investor can get a high return. The case of ULIP is different as people strongly prefer investing in this investment strategy. But this is the segment which can be well targeted and their portfolio should be such that gives them more returns.000- Rs. • Though there is a small percentage of respondents in disposible income bracket above Rs.000-Rs. • Respondents under disposible income bracket Rs. Apart from this company should offer to open demat account with them.000 have mainly invested in insurance and real estate. Thus positioning of these products should be such that people are attracted towards this scheme. Moreover there is mixed preferences for their investments thus proper segmentation of the sample should be done accordingly marketing strategies should be adopted.20. Disposible Income • The disposible income bracket less than Rs.15. . But when survey was done and their preferences was asked these respondents strongly preferred investing in these strategies.000 are the strong contenders for investing their money and these people have invested in real estate.20.000 who least prefer investing in mutual fund. • Disposible Income Bracket of Rs. insurance and fixed deposits.5000 per month are basically safe investors and have not and do not prefer investing in mutual funds and ULIP.5. Thus emphasis for selling ULIP in this income bracket.
TAX CALCULATION & PORT FOLIO MANAGEMENT TAX CALCULATION In the port folio management I have learned how to calculate the Income tax of defined as below: An income tax is a tax levied on the financial income of persons. Various income tax systems exist. or other legal entities. if income exceeds minimum exemption limit. co-operative societies and trusts. corporations. According to the indian Income tax acts Income tax is . or regressive. In addition. Income from Salary All income received as a salary is taxed under this head. Hindu Undivided Families (HUFs). and provide their employees with a Form 16 which shows the tax deductions and net paid income. proportional. Employers must withhold tax compulsorily. Income taxation can be progressive. with varying degrees of tax incidence. Individual income taxes often tax the total income of the individual (with some deductions permitted). The government of India imposes a Progressive Income Tax on taxable income of individuals. as Tax Deducted at Source (TDS). the Form 16 will contain any other deductions provided from salary such as: service person and businessmen. companies (firms).
(Company pays Fringe Benefit Tax on this amount) 2. usually a slabbed amount based on gross income.000 (Rupees One lakh fifty thousand) which can be any combination of the below: . Income from Business or Profession The income referred to in section 28.. No bills are required for this amount. Such taxes paid are deductible from income tax. 150. 3.. 9. Professional taxes: Most states tax employment on a per-professional basis. viz. 15. Medical reimbursement: Up to Rs. The total limit under this section is Rs. the incomes chargeable as "Income from Business or Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D. 800 per month (Rs.600 per year) is tax free if provided as conveyance allowance. i. However.1. Section 44C is a disallowance provision in the case non-residents.e. Section 44AA deals with maintenance of books and section 44AB deals with audit of accounts. there are few more sections under this Chapter. 44AB & 44C). Sections 44 to 44DA (except sections 44AA. Conveyance allowance: Up to Rs. which contain the computation completely within itself.000 per year is tax free if supported by bills. Section 80C Deductions Section 80C of the Income Tax Act  allows certain investments and expenditure to be tax-exempt.
college or university or similar institution. This deduction is additional to Rs. provide deduction up to Rs 15000.• • • • Contribution to Provident Fund or Public Provident Fund Payment of life insurance premium Investment in pension Plans Investment in Equity Linked Savings schemes (ELSS) of Investment in specified government infrastructure bonds Investment in National Savings Certificates (interest of past Payments towards principal repayment of housing loans.1. For senior citizens. 20. the deduction up to Rs. This deduction is available for premium paid on medical insurance for oneself. APPENDIX .000 is allowable. (Only for 2 children) Section 80D: Medical Insurance Premiums Medical insurance. spouse. parents and children. popularly known as Medi-claim Policies.000 savings. 50. Payments towards tuition fees for children to any school or mutual funds • • • • NSCs is reinvested every year and can be added to the Section 80 limit) Also any registration fee or stamp duty paid.
00.50.000-15.00. where 1.000 > 20.000 5.00.000-7.best) Tax Savings .50.000 2.000 5. What is your primary investment focus (please give ranking 1-5.50.QUESTIONNAIRE STRATEGIES Name Age: 18-30 31-40 FOR INVESTMENT 41-50 Business >50 Self employed Occupatio: Service Other Contact no. Q 1.000-10. What is your monthly disposible income? < 5.What is your annual income (approx)? < 2.000 Q 2.000 10.000-10.000 Q 3.000 > 10.000 15.000-20.00.000-5.000 7.50.
What is applicable to you? Never Accept Negative return .Future Uncertainity Income Retirement Capital Preservation Q 4. Where you have invested from the followings?(you can tick more than one) Share Mutual Funds FD/RBI bonds Real Estate Insurance Q 6. When You want to withdraw money from youe investment? Less than 3 years 3-5 years 6-9 years >10 years Q 5.
Insurance Provides life long Benefits? Agree Disagree BIBLIOGRAPHY Sites . Will you prefer the others to invest in the company in which you have invested? Yes No Q8. Q7.Can accept negative return once in 3 years Can accept negative return once in 5 years Can accept negative return once in 7 years Returns can fluctuate in longer term.
com www.google.iciciprulife.com Books .in www.investopedia.india.com www.nseindia.business.www.com www.com www.ampi.myiris.indiamart.com www.finance.com www.com www.com www.valueresearch.standardchartered.
Financial management (Ninth edition) by I M Pandey. Insurance chronicle. Security analysis and Portfolio management by Ritu Ahuja. Insurance in India by S Swami Nathan. Icfai publications & current scenario by jawahar ----------------------------------------------------------- .