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LATE SHRI VISHNU WAMAN THAKUR CHARITABLE TRUST’S

BHASKAR WAMAN THAKUR COLLEGE OF
SCIENCE,
YASHVANT KESHAV PATIL COLLEGE OF
COMMERCE,
VIDHYA DAYANAND PATIL COLLEGE OF ARTS

PERSPECTIVE OF MIDDLE- INCOME GROUP

INVESTORS ON INVESTMENT IN FINANCIAL ASSET

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor of Management Studies
Under the Faculty of Commerce

By

Pandey Prashant Rajesh

TYBMS-FINANCE
ROLL NO: 57

Under the Guidance of

PROF.Padma Chari

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 Shri. Vishnu Waman Thakur Charitable Trust’s
Bhaskar Waman Thakur College of Science,
Yashvant Keshav Patil College of Commerce,
Vidhya Dayanand Patil College of Arts
NAAC ACCREDITED ‘B’ GRADE (CGPA 2.69)
Viva College Road, Virar (West), Pin – 401303.

CERTIFICATE
This is to certify that Ms./Mr. PRASHANT PANDEY has worked
and duly completed her/his project work for the Degree of Bachelor
of Management Studies under the Faculty of Commerce in the
subject of FINANCE his project is entitled, “Perspective of middle-
income group investors on investment in financial asset”
I further certify that no part of the entire work has been submitted
previously for any other Degree or Diploma of University of Mumbai.
It is her/his own work and facts reported by her/him are her/his
personal findings and investigations.

Seal of the Signature of Internal Examiner:

College

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 DECLARATION

I undersigned Mr. PRASHANT PANDEY hereby, declare that the work embodied in
this project work titled “PERSPECTIVE OF MIDDLE-INCOME GROUP
INVESTORS ON INVESTMENT IN FINANCIAL ASSET”, forms my own
contribution to the research work carried out under the guidance of PROF. PADMA
CHARI is a result of my own research work has not been previously submitted to any
other University for any other Degree/ Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.
I, here by further declare that all the information of this document has been obtained
and presented in accordance with academic rules and ethical conduct.

___________________________
PRASHANT PANDEY
ROLL NO 57

Date:

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 ACKNOWLEDGMENT

To list who all have helped me in difficult because they are so numerous and the depth
is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thanks the University of Mumbai for giving me chance to do
this project.

I take this opportunity to thank our Professor. PADMA CHARI for their moral
support and guidance.

I would like to thank my college library, for having provided various reference books
related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my parents and peers who supported me
throughout my project.

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INDEX

Sr. no Particulars Page No.

1 INTRODUCTION 7

2 LITERATURE REVIEW 10

3 TO UNDERSTAND THE 13
PERCEPTIVE OF
INVESTING BY THE
MIDDLE INCOME-
GROUP.

4 TO STUDY THE 22
INVESTING OPTIONS
FOR MIDDLE-INCOME
GROUP.
5 DATA ANALYSI, 55
INTERPRETATION
AND PESENTATION
6 CONCLUSION 73
7 BIBLOGRAPHY 75

8 ANNEXURE 77

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PERSPECTIVE OF MIDDLE-INCOME GROUP INVESTORS ON

INVESTMENT IN FINANCIAL ASSET

INTRODUCTION

Middle-class people do not have any substantial problems with covering the basic
necessities needed for a modest life; which means that at least in most cases they can
also afford a few luxuries. They are however still dependent primarily on their salaries
or wages to support their life and things like divorce or unemployment can fairly
easily plunge them into the lower class.

They basically consist of people with an average income and with a limited saving,
mainly they are found in corporate jobs or people with small businesses. According to
NCAER, India's middle-class population was 267 million in 2016.

The act of committing money or capital to an endeavor with the expectation of

obtaining an additional income or profit is an investment.”

It‘s actually pretty simple: investing means putting your money to work for you. The
money you earn is partly spent and the rest saved for meeting future Expenses. Instead
of keeping the savings idle you may like to use savings in order to get return on it in
the future. This is called Investment.

Investment is a term, which is frequently used in the field of economics, business

management, finance and it means savings or savings made through delayed
consumption. Investment can be divided into different types according to various
theories and principles. In general preview, investment is the application of money for

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earning more money. A particular amount of money is invested in the bank or an asset
is bought in the anticipation that some return will be received from the investment in
the future. There can be a number of definitions of Investment. While dealing with the
various options of investment, the definitional variations of investment need to be kept
in mind.

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INTRODUCTION TO MIDDLE-INCOME GROUP

Definition of Middle Income Person: NCAER‘s definition of middle-class population

is the key element for the economic development of India. Whose income exists
between Rs. 2,00,000 to 5,00,000 per annum. An investment is the current
commitment of money for a specified period in order to derive future payments that
will return the expected rate of inflation, the uncertainty of the future payment, and
time the funds or entrusted.

The exact size of this middle class remains difficult to estimate. There are few
national surveys that collect data on income. The most-cited source, a household
survey conducted by the National Council of Applied Economic Research (NCAER,
2000), contained only one question on total household income and is considered an
approximation at best. Moreover, the proprietary nature of the data does not allow for
independent evaluation.

National Sample Surveys (NSS) offer other sources of data for examining changes in
consumption expenditure over time. While consumption data tend to underestimate
certain types of consumption—such as of alcohol or tobacco—they still provide a
good proxy for changes in consumption over time. results suggest a steady increase in
the households at middle and upper income levels in the past twenty years,
particularly in urban areas.

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 OBJECTIVE

1. TO UNDERSTAND THE PERCEPTIVE OF INVESTING BY

THE MIDDLE INCOME-GROUP.

2. TO STUDY THE INVESTING OPTIONS FOR MIDDLE-

INCOME GROUP.

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 CHAPTER 1 -TO UNDERSTAND THE PERCEPTIVE
OF INVESTING BY THE MIDDLE-INCOME GROUP

Today’s investor has a variety of options to choose from while making his/her
investment decision. Saving and investment behavior has always been an area of
interest to the researcher. The economic cycles of boom, recession, depression, and
recovery not only effect the level of GDP but also the income of the households and
hence the saving ratio and investment behavior. Keeping pace with the changing
times and under the liberalized financial sector regime, financial institutions are also
decorated with innovative instruments to meet the growing demand of modern
investors. But this innovative and diversified financial system could not lost the
appeal of traditional means of investment.

The options for investing our savings are continually increasing, yet every single
investment vehicle can be easily categorized according to three fundamental
characteristics safety, income, and growth - which also correspond to types of investor
objectives. While it is possible for an investor to have more than one of these
objectives, the success of one must come at the expense of others. Generally speaking,
investors have a few factors to consider when looking for the right place to park their
money. Safety of capital, current income and capital appreciation are factors that
should influence an investment decision and will depend on a person‘s age,
stage/position in life and personal circumstances. A 75-year-old widow living off of
her retirement portfolio is far more interested in preserving the value of investments
than a 30-year-old business executive would be. Because the widow needs income
from her investments to survive, she cannot risk losing her investment.

The young executive, on the other hand, has time on his or her side. As investment
income isn‘t currently paying the bills, the executive can afford to be more aggressive
in his or her investing strategies.

An investor‘s financial position will also affect his or her objectives. A

multimillionaire is obviously going to have much different goals than a newly

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married couple just starting out. For example, the millionaire, in an effort to increase
his profit for the year, might have no problem putting down $100,000 in a speculative
real estate investment. To him, a hundred grand is a small percentage of his overall
worth. Meanwhile, the couple is concentrating on saving up for a down payment on a
house and can‘t afford to risk losing their money in a speculative venture. Regardless
of the potential returns of a risky investment, speculation is just not appropriate for
the young couple. As a general rule, the shorter your time horizon, the more
conservative you should be. For instance, if you are investing primarily for retirement
and you are still in your 20s, you still have plenty of time to make up for any losses
you might incur along the way.

At the same time, if you start when you are young, you don‘t have to put huge chunks
of your pay-check away every month because you have the power of compounding on
your side. On the other hand, if you are about to retire, it is very important that you
either safeguard or increase the money you have accumulated. Because you will soon
be accessing your investments, you don‘t want to expose all of your money to
volatility - you don‘t want to risk losing your investment money in a market slump
right before you need to start accessing your assets.

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Personality:-

Peter Lynch, one of the greatest investors of all time, has said that the―key organ
forinvesting is the stomach, not the brain . In other words, you need to know how
much volatility you can stand to see in your investments. Figuring this out for
yourself is far from an exact science; but there is some truth to an old investing
maxim: you‘ve taken on too much risk when you can‘t sleep at night because you are
worrying about your investments.

Another personality trait that will determine your investing path is your desire to
research investments. Some people love nothing more than digging into financial
statements and crunching numbers. To others, the terms balance sheet, income
statement and stock analysis sound as exciting as watching paint dry. Others just
might not have the time to plough through prospectus and financial statements.

The main factor determining what works best for an investor is his or her capacity to
take on RISK.

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Hence, the key to a successful financial plan is to keep apart a larger amount
ofsavings and invest it intelligently, by using a longer period of time. The turnover
rate in investments should exceed the inflation rate and cover taxes as well as allow
you to earn an amount that compensates the risks taken. Savings accounts, money at
low interest rates and market accounts do not contribute significantly to future rate
accumulation. While the highest rates come from stocks, bonds, and other types of
investments in assets such as real estate. Nevertheless, these investments are not
totally safe from risks, so one should try to understand what kind of risks are related to
them before taking action. The lack of understanding as how stocks work makes the
myopic point of view of investing in the stock market ( buying when the tendency to
increase or selling when it tends to decrease) perpetuate. To understand the
characteristics of each one of the different types of investment can or may help you
determine which of them is the right one for your need.

SCOPE OF THIS STUDY

This study is focusing on the preference of Investments by particular income class

(seekers) and it will be helpful to identify the better investment options in the market
for the income group

LIMITATIONS OF THE STUDY

1. The scope of the researcher‘s study is Some states. So the population considered
may not be the actual representative of the population of the nation.
2. The information given by the respondents can be biased.

3. Respondents may not be truthful with their answers and may not want to disclose
their investment pattern
4. When using questionnaires, there is a chance that some questions will be ignored.
And that will lead to inconsistency

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Page | 15
INVESTMENT:

In simple terms investment refers to purchase of financial assets. While investment

goods are those goods, which are used for future production. Investment implies the
production of new capital goods, plants and equipments refers investment as real
investment and not financial investment. The word investment can be defined in many
ways according to different theories and principles. It is a term that can be used in a
number of contexts. However the different meanings of investment are more alike
than dissimilar. Generally, investment is the applications of money for earning more
money. Investment also means savings or savings made through delayed
consumption.

According to economics, investment is the utilization of resource in order to increase

income or production output in the future. An amount deposited in to a bank or
machinery that is purchased in anticipation of earning income in the long run is both
examples of investment. Although there is a general broad definition to the term
investment, it carries slightly different meaning to different industrial sectors.
Investment is a conscious act of an individual or any entity that involves deployment
of money (cash) in securities or assets issued by any financial institutions with a view
to obtain the target returns over a specified period of time. Target returns on an
investment include

1. Increase in the value of the securities or assets, and/or

2. Regular income must be available from the securities or assets

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TYPES OF INVESTMENT PATTERN:

Short term investment: It is an investment made by the investor for very short period
of time i.e for one to three years such as investment in bank, money market, liquid
funds etc.

Long term investment: When investor invests money for more than 3 and 5 years then
it is called long term investment such as investment in Bonds, Mutual Funds, Fixed
Bank Deposit, PPF, Insurance etc.

Investing is not gambling. Gambling is putting money at risk by betting on an

uncertain outcome with the hope that you might win money. Part of the confusion
between investing and gambling, however, may come from the way some people use
investment vehicles. For example, it could be argued that buying a stock based on a
“hot tip” you heard at the water cooler is essentially the same as placing a bet at a
casino.

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WHY SHOULD ONE INVEST?

Obviously, everybody wants more money. It‘s pretty easy to understand that people
invest because they want to increase their personal freedom, sense of security and
ability to afford the things they want in life.

However, investing is becoming more of a necessity. The days when everyone

worked the same job for 30 years and then retired to a nice fat pension are gone. For
average people, investing is not so much a helpful tool as the only way they can retire
and maintain their present lifestyle

Nowadays, investments are the foundation of our future financial level. Bad
investments can bring us negative turnovers and therefore decrease our future
possibilities. You are looking at two options for your money, the first you can spend it
or save it and second, invest it. In short, one needs to invest to:

§ To beat inflation and earn return on your idle resources

§ generate a specified sum of money for a specific goal in life

§ make a provision for an uncertain future / for retirement.

One of the important reasons why one needs to invest wisely is to meet the cost of
Inflation. Inflation is the rate at which the cost of living increases. The cost of living
issimply what it costs to buy the goods and services you need to live. Inflation causes
money to lose value because it will not buy the same amount of a good or a service in
the future as it does now or did in the past. For example, if there was a 6%
inflationrate for the next 20 years, a Rs. 100purchase today would cost Rs. 321 in 20
years. This is why it is important to consider inflation as a factor in any long-term

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investment strategy. Remember to look at an investment‘s‗real 'rate of return, whichis
the return after inflation. The aim of investments should be to provide a return above
the inflation rate to ensure that the investment does not decrease in value Forexample,
if the annual inflation rate is 6%, then the investment will need to earn more than 6%
to ensure it increases in value. If the after-tax return on your investment isless than
the inflation rate, then your assets have actually decreased in value; that is, they won‘t
buy as much today as they did last year.

Investors can learn a lot from the famous Greek maxim inscribed on the Temple of

Apollo‘s Oracle at Delphi: ―Know thyself . In the context of investing, the wise
words of the oracle emphasize that success depends on ensuring that your investment
strategy fits your personal characteristics. Even though all investors are trying to make
money, each one comes from a diverse background and has different needs. It follows
that specific investing vehicles and methods are suitable for certain types of investors.
Although there are many factors that determine which path is optimal for an investor,
we‘ll look at two main categories: investment objectives, and investing personality

WHEN TO START INVESTING?

The sooner one starts investing the better. By investing early you allow your
investments more time to grow, whereby the concept of compounding (as we shall see
later) increases your income, by accumulating the principal and the interest or
dividend earned on it, year after year The three golden rules for all investors are:

• Invest early

• Invest regularly

• Invest for long term and not short term

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WHAT CARE SHOULD ONE TAKE WHILE INVESTING?

Before making any investment, one must ensure to:

1. Obtain written documents explaining the investment.

2. Read and understand such documents.

3. Verify the legitimacy of the investment.

4. Find out the costs and benefits associated with the investment.

5. Assess the risk-return profile of the investment.

6. Know the liquidity and safety aspects of the investment.

7. Ascertain if it is appropriate for your specific goals.

8. Compare these details with other investment opportunities available.

9. Examine if it fits in with other investments you are considering or you have
already made.
10. Deal only through an authorised intermediary.

11. Seek all clarifications about the intermediary and the investment.

12. Explore the options available to you if something were to go wrong, and then, if
satisfied, make the investment.

These are called the Twelve Important Steps to Investing.

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 Chapter-2 TO STUDY THE INVESTING OPTIONS FOR
MIDDLE-INCOME GROUP

One may invest in:

Physical assets like real estate, gold/jewellery, commodities etc. and/or Financial
assets such as fixed deposits with banks, small saving instruments with post offices,
insurance/provident/pension fund etc. or securities market related instruments like
shares, bonds, debentures etc.

True investing doesn‘t happen without some action on your part. A ―real investor
does not simply throw his or her money at any random investment; he or she performs
thorough analysis and commits capital only when there is a reasonable expectation of
profit. Yes, there still is risk, and there are no guarantees, but investing is more
than .simply hoping Lady Luck is on your side.

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BANKS:-

Savings Account:-

● A Saving Bank account (SB account) is meant to promote the habit of saving
among the people. It also facilitates safekeeping of money. In this scheme
fund is allowed to be withdrawn whenever required, without any condition.
Hence a savings account is a safe, convenient and affordable way to save your
money. Bank deposits are fairly safe because banks are subject to control of
the Reserve Bank of India with regar was wd to several policy and operational
parameters. Bank also pays you a minimal interest for keeping your money
with them.

Savings account can be opened either individually or jointly with another individual.
In a joint account only the sign of one account holder is needed to write a cheque. But
at the time of closing an account, the sign of the both the account holders are needed.

Return:

The interest rate of savings bank account in India varies between 5% and 7%. In
Savings Bank account, bank follows the simple interest method. The rate of interest
may change from time to time according to the rules of Reserve Bank of India. One
can withdraw his/her money by submitting a cheque in the bank and details of the
account, i.e. the Money deposited, withdrawn along with the dates and the balance, is
recorded in a passbook.

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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. The
federal Government insures your money. Saving Bank account does not have any
fixed period for deposit. The depositor can take money from his account by writing a
cheque to somebody else or submitting a cheque directly. Now most of the banks offer
various facilities such as ATM card, credit card etc. Through debit/ATM card one can
take money from any of the ATM centres of the particular bank which will be open 24
hours a day. Through credit card one can avail shopping facilities from any shop
which accept the credit card. And many of the banks also give internet banking
facility through with one do the transactions like withdrawals, deposits, statement of
account etc.

Fixed Deposits (FD's) :

A fixed deposit is meant for those investors who want to deposit a lump sum of
money for a fixed period; say for a minimum period of 15 days to five years and
above, thereby earning a higher rate of interest in return. Investor gets a lump sum
(principal + interest) at the maturity of the deposit.

Bank fixed deposits are one of the most common savings scheme open to an average
investor. Fixed deposits also give a higher rate of interest than a savings bank account.
The facilities vary from bank to bank. Some of the facilities offered by banks are
overdraft (loan) facility on the amount deposited, premature withdrawal before
maturity period (which involves a loss of interest) etc. Bank deposits are fairly safer
because banks are subject to control of the Reserve Bank of India.

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Features:-

Bank deposits are fairly safe because banks are subject to control of the Reserve Bank
of India (RBI) with regard to several policy and operational parameters. The banks are
free to offer varying interests in fixed deposits of different maturities. Interest is
compounded once a quarter, leading to a somewhat higher effective rate.

The minimum deposit amount varies with each bank. It can range from as low as
Rs.100 to an unlimited amount with some banks. Deposits can be made in multiples of
Rs.100/-

Before opening a FD account, try to check the rates of interest for different banks for
different periods. It is advisable to keep the amount in five or ten small deposits
instead of making one big deposit. In case of any premature withdrawal of partial
amount, then only one or two deposit need be prematurely encashed. The loss
sustained in interest will, thus, be less than if one big deposit were to be encashed.
Check deposit receipts carefully to see that all particulars have been properly and
accurately filled in. The thing to consider before investing in an FD is the rate of
interest and the inflation rate. A high inflation rate can simply chip away your real
returns.

Returns:

The rate of interest for Bank Fixed Deposits varies between 4 and 11 percent,
depending on the maturity period (duration) of the FD and the amount invested.
Interest rate also varies between each bank. A Bank FD does not provide regular
interest income, but a lump-sum amount on its maturity. Some banks have facility to
pay interest every quarter or every month, but the interest paid may be at a discounted
rate in case of monthly interest. The Interest payable on Fixed Deposit can also be
transferred to Savings Bank or Current Account of the customer. The deposit period
can vary from 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to 10 year

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Advantages: -

Bank deposits are the safest investment after Post office savings because all bank
deposits are insured under the Deposit Insurance & Credit Guarantee Scheme of
India. It is possible to get loans up to 75-90% of the deposit amount from banks
against fixed deposit receipts. The interest charged will be 2% more than the rate of
interest earned by the deposit.

LIQUID FUNDS:-

Liquid funds are used primarily as an alternative to short-term fix deposits. Liquid
funds invest with minimal risk (like money market funds). Most funds have a lock-in
period of a maximum of three days to protect against procedural (primarily banking)
glitches.

Liquid funds score over short-term fix deposits. Banks give a fixed rate in the range
5%-5.5% p.a. for a term of 15-30 days. Returns from deposits are taxable depending
on the tax bracket of the investor, which considerably pulls down the actual return.
Dividends from liquid funds are tax-free in the hands of investors, which is why they
are more attractive than deposits.

NATIONAL SAVINGS CERTIFICATES

What is National Savings Certificate?

National Savings Certificates (NSC) are certificates issued by the Department of post,
Government of India and are available at all post office counters in the country. It is a
long-term safe savings option for the investor. The scheme combines growth in money
with reductions in tax liability as per the provisions of the Income Tax Act, 1961. The
duration of an NSC scheme is 6 years.

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Features:

NSCs are issued in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs

10,000 for a maturity period of 6 years. There is no prescribed upper limit on
investment. Individuals, singly or jointly or on behalf of minors and trust can purchase
an NSC by applying to the Post Office through a representative or an agent. One
person can be nominated for certificates of denomination of Rs. 100- and more than
one person can be nominated for higher denominations. The certificates are easily
transferable from one person to another through the post office. There is a nominal fee
for registering the transfer. They can also be transferred from one post office to
another.

One can take a loan against the NSC by pledging it to the RBI or a scheduled bank or
a co-operative society, a corporation or a government company, a housing finance
company approved by the National Housing Bank etc with the permission of the
concerned post master. Though premature encashment is not possible under normal
course, under sub-rule (1) of rule 16 it is possible after the expiry of three years from
the date of purchase of certificate.

Tax benefits are available on amounts invested in NSC under section 88, and
exemption can be claimed under section 80L for interest accrued on the NSC. Interest
accrued for any year can be treated as fresh investment in NSC for that year and tax
benefits can be claimed under section 88.

Return:

It is having a high interest rate at 8% compounded half yearly. Post maturity interest
will be paid for a maximum period of 24 months at the rate applicable to individual
savings account. A Rs1000 denomination certificate will increase to Rs. 1601 on
completion of 6 years Interest rates for the NSC Certificate of Rs 1000

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 Rate of
Year Interest

1 year Rs 81.60

2 year Rs 88.30

3 year Rs 95.50

4 years Rs103.30

5 years Rs 111.70

6 years Rs 120.80

Advantages:

Tax benefits are available on amounts invested in NSC under section 88, and
exemption can be claimed under section 80L for interest accrued on the NSC. Interest
accrued for any year can be treated as fresh investment in NSC for that year and tax
benefits can be claimed under section 88. NSCs can be transferred from one person to
another through the post office on the payment of a prescribed fee. They can also be
transferred from one post office to another. The scheme has the backing of the
Government of India so there are no risks associated with your investment.

How to start?

Any individual or on behalf of minors and trust can purchase a NSC by applying to
the Post Office through a representative or an agent. Payments can be made in cash,
cheque or DD or by raising a debit in the savings account held by the purchaser in the
Post Office. The issue of certificate will be subject to the realization of the cheque,
pay order, DD. The date of the certificate will be the date of realization or encashment
of the cheque. If a certificate is lost, destroyed, stolen or mutilated, a duplicate can be
issued by the post-office on payment of the prescribed fee.

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POST OFFICE MONTHLY INCOME SCHEME

The post-office monthly income scheme (MIS) provides for monthly payment of
interest income to investors. It is meant for investors who want to invest a sum
amount initially and earn interest monthly for their livelihood. The MIS is not suitable
for an increase in your investment. It is meant to provide a source of regular income
on a long-term basis. The scheme is, therefore, more beneficial for retired persons.

Features:

Only one deposit is available in an account. Only individuals can open the account;
either single or joint. (two or three). Interest rounded off to nearest rupee i.e., 50 paisa
and above will be rounded off to next rupee. The minimum investment in a Post-
Office MIS is Rs 1,500 for both single and joint accounts. The maximum investment
for a single account is Rs 4.5 lakh and Rs 9 lakh for a joint account. The duration of
MIS is six years.

Returns:

The post-office MIS gives a return of 8% interest on maturity. The minimum

investment in a Post-Office MIS is Rs 1,000 for both single and joint accounts.

Monthly
Income Amount On Maturity

10,000 66 10,000

50,000 333 50,000

1,00,000 667 1,00,000

2,00,000 1333 2,00,000

3,00,000 2000 3,00,000

6,00,000 4000 6,00,000

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Advantages:

Premature closure of the account is permitted any time after the expiry of a period of
one year of opening the account. Deduction of an amount equal to 5 percent of the
deposit is to be made when the account is prematurely closed. Investors can withdraw
money before three years, but at a discount of 5%. Closing of account after three years
will not have any deductions. Post maturity Interest at the rate applicable from time to
time (at present 3.5%). Monthly interest can be automatically credited to a savings
account provided both the accounts standing at the same post office. Deposit in
Monthly Income Scheme and invest interest in Recurring Deposit to get 10.5%
(approx) interest. The interest income accruing from a post-office MIS is exempt from
tax under Section 80L of the Income Tax Act, 1961. Moreover, no TDS is deductible
on the interest income. The balance is exempt from Wealth Tax.

PUBLIC PROVIDENT FUNDS

PPF is among the most popular small saving schemes. Currently, this scheme offers a
return of 8 per cent and has a maturity period of 15 years. It provides regular savings
by ensuring that contributions (which can vary from Rs.500 to Rs.70,000 per year) are
made every year. For efficient ―tax saving there is nothing better than PPF! But
forthose who are looking for liquidity, PPF is NOT a good option. Withdrawals are
allowed only after five years from the end of the financial year in which the - first
deposit is made. PPF does not provide any regular income and only provides for
accumulation of interest over a 15-year period, and the lump-sum amount (principal +
interest) is payable on maturity

The lump-sum amount that you receive on maturity (at the end of 15 years) is
completely tax-free!! One can deposit up-to Rs 70,000 per year in the PPF account
and this money will also not be taxed and be removed from your taxable income. If
you are relatively young and have time on your side, then PPF is for you.

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How to invest in PPF?

A PPF account can be opened with a minimum deposit of Rs.100 at any branch of the
State Bank of India (SBI) or branches of its associated banks like the State Bank of
Mysore or Hyderabad. The account can also be opened at the branches of a few
nationalized banks, like the Bank of India, Central Bank of India and Bank of Baroda,
and at any head post office or general post office. After opening an account you get a
passbook, which will be used as a record for all your deposits, interest accruals,
withdrawals and loans. However, be warned: you can have only one PPF account in
your name. If at any point it is detected that you have two accounts, the second
account that you have opened will be closed, and you will be refunded only the
principal, not the interest. Again, two adults cannot open a joint account. The account
will have to be opened in only one person‘s name. Of course, the person who opens an
account is free to appoint nominees.

COMPANY FIXED DEPOSIT

Company Fixed Deposit is the deposit placed by investors with companies for a fixed
term carrying a prescribed rate of interest. Company Fixed Deposit have always
offered interest which is 2-3% higher than Bank Deposit rate, because they have to
pay higher interest to banks for borrowing money. Interest is paid on
monthly/quarterly/half yearly/yearly or on maturity basis and is sent either through
cheque or ECS facility.

TDS is deducted if the interest on fixed deposit exceeds Rs.5000/- in a financial year.
At the end of deposit period principal is returned to the deposit holder.

How to choose a good company deposit scheme?

» Ignore the unrated Company Deposit Schemes. Ignore deposit schemes of little
known manufacturing companies. For NBFC‘s, RBI has made it mandatory to have

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an ‗A‘ rating to be eligible to accept public deposits, one should go further and look
at only AA or AAA schemes.

» Within a given rating grade, choose the company with a better reputation.

» Once you decide on a company, next choose the schemes that have given a better
return. Unless you need income regularly, you should prefer cumulative to regular
income option since the interest earned automatically gets reinvested at the same
coupon rate giving upon better yields. It also gives you a lump-sum amount at one go.

» It is better to make shorter deposit of around 1 year to 3 years. This way you not
only can keep a watch on the company‘s rating and servicing but can also plan to have
your money back in case of emergency.

» Check on the servicing standards of the company. You should not oblige companies
that care little about investor services like promptly sending interest warrants or the
principal cheque. Involve your reputed Financial planner / Investment Advisor like us
for advice in all your transactions. Do not bypass and invest directly just to earn an
extra incentive

» For investors living in outstation city, check whether the company accepts
outstation cheques andake payment through at par cheques.

Which companies can accept Deposit?

Companies registered under Companies Act 1956, such as:

» Manufacturing Companies.

» Non-Banking Finance Companies,

» Housing Finance Companies.

» Financial Institutions.

» Government Companies.

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Up to what limits can a company accept deposit?

A Non-Banking Non-Finance Company (Manufacturing Company) can accept deposit

subject to following limits.

» Up to 10% of aggregate of paid-up share capital and free reserves if the deposits are
from shareholders or guaranteed by directors. 33

» Otherwise up to 25% of aggregate of paid-up share capital and free reserves.

A Non-Banking Finance Company can accept deposits up to following limits:

» Equipment Leasing Company can accept four times of its net owned fund.

»Loan or Investment Company can accept deposit up to one and half time of its net
owned funds.

What is the period of the deposit?

Company Fixed Deposits can be accepted by a Manufacturing Company having

duration from 6 months to 3 years. Non-Banking Finance Company can accept deposit
from 1 year to 5 years period. A Housing Finance Company can accept deposit from 1
year to 7 years.

Where not to Invest?

» Companies which offer interest higher than 15%.

» Companies which are not paying regular dividends to the shareholder.

» Companies whose Balance Sheet shows losses.

» Companies which are below investment grade (A or under) rating. There is an

oldsaying “DON’T PUT All YOUR EGGS IN ONE BASKET”.

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The company deposits should be spread over a large number of companies. This will
help the investor to diversify his risk among various companies/industries. Investors
should not put more than 10% of their total Investible funds in one company.

BONDS AND DEBENTURES

Debt instruments can be further classified into the following categories based on the

different characteristics with which they are floated in the market:

• Debentures

• Bonds

• Debentures

Main characteristics

Σ They are fixed interest debt instruments with varying period of maturity.

Σ Can either be placed privately or offered for subscription.

Σ May or may not be listed on the stock exchange.

Σ If listed on the stock exchanges, they should be rated prior to the listing by any
ofthe credit rating agencies designated by SEBI.

Σ When offered for subscription a debenture redemption reserve has to be maintained.

Σ The period of maturity normally varies from 3 to 10 years and may also be more
forprojects with a high gestation period.

Types of debentures:

There are different kinds of debentures, which can be offered. They are as follows:

Σ Non convertible debentures (NCD)

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Σ Partially convertible debentures (PCD)

Σ Fully convertible debentures (FCD)

The difference in the above instruments is regarding the redeem ability of the

instrument:

Σ In case of NCDs, the total amount of the instrument is redeemed by the issuer,

Σ In case of PCDs, part of the instrument is redeemed and part of it is converted

intoequity,

Σ In case of FCDs, the whole value of the instrument is converted into equity.
Theconversion price is stated when the instrument is issued Debentures might be
either callable or put table:- Callable debenture is a debenture in which the issuing
company has the option of redeeming the security before the specified redemption
date at a pre-determined price. Similarly, a put table security is a security where the
holder of the instrument has the

option of getting it redeemed before maturity.

BONDS

Bonds may be of many types - they may be regular income, infrastructure, tax saving
or deep discount bonds. These are financial instruments with a fixed coupon rate and a
definite period after which these are redeemed. The fundamental difference between
debentures and bonds is that the former is normally secured whereas the latter is not.
Hence in general bonds are issued at a higher interest rate than debentures. This
avenue of financing is mainly availed by highly reputed corporate concerns and
financial institutions.

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The three main kinds of instruments in this category are as follows:

• Fixed rate

• Floating rate

• Discount bonds

Σ The bonds may also be regular income with the coupons being paid at fixed
intervals or cumulative in which the interest is paid on redemption.

Σ Unlike debentures, bonds can be floated with a fixed interest or floating interest
rate. They can also be floated without interest and are called discount bonds as they
are issued at a discount to the face value and an investor is paid the face value on
redemption, and if offered for longer terms are known as deep discount bonds.

Σ The main advantage with interest bearing bonds is the floating interest rate, which
isstipulated based on certain mark-up over stock market index or some such index.

Σ From the point of view of the investor bonds are instruments carrying higher
riskand higher returns as compared to debentures.

Σ This has to be kept in mind while floating bond issues for financing purposes.
Withthe current buoyancy in capital markets for equity instruments the demand for
corporate bonds is low

MUTUAL FUNDS:-

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned
through these investments and the capital appreciation realized is shared by its unit
holders in proportion to the number of units owned by them. Thus a Mutual Fund is
the most suitable investment for the common man as it offers an opportunity to invest
in a diversified, professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a mutual fund:

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Mutual Fund Operation Flow Chart

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ORGANIZATION OF A MUTUAL FUND

There are many entities

involved and the diagram below illustrates the organizational

set up of a mutual fund

ADVANTAGES OF MUTUAL FUNDS:

The advantages of investing in a Mutual Fund are:

• Professional Management

• Diversification

• Convenient Administration

• Return Potential

• Low Costs

• Liquidity

• Transparency

• Flexibility

• Choice of schemes

• Tax benefits

• Well regulated

TYPES OF MUTUAL FUND SCHEMES:

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an overview
into the existing types of schemes in the Industry.

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Page | 38
BY STRUCTURE:

• Open - Ended Schemes

• Close - Ended Schemes

• Interval Schemes

BY INVESTMENT OBJECTIVE:

• Growth Schemes

• Income Schemes

• Balanced Schemes

• Money Market Schemes

OTHER SCHEMES

• Tax Saving Schemes

• Special Schemes

• Index Schemes

• Sector Specific Schemes

FREQUENTLY USED TERMS:

Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its liabilities.
The per unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the Valuation Date.

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Page | 40
Sale Price

Is the price you pay when you invest in a scheme. It‘s also called Offer Price. It may
include a sales load.

Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may include a
back-end load. This is also called Bid Price.

Redemption Price

Is the price at which open-ended schemes repurchase their units and close-ended
schemes redeem their units on maturity. Such prices are NAV related.

Sales Load

Is a charge collected by a scheme when it sells the units. Also called,‗Front -end‘

load. Schemes that do not charge a load are called ‗No Load‘ schemes. Repurchase or
‗Back-end‘ Loads a charge collected by a scheme when it buys back the units From
the unit holders?

INSURANCE

Life insurance in India made its debut well over 100 years ago. In our country, which
is one of the most populated in the world, the prominence of insurance is not as
widely understood, as it ought to be. What follows is an attempt to acquaint readers
with some of the concepts of life insurance, with special reference to LIC. It should,
however, be clearly understood that the following content is by no means an
exhaustive description of the terms and conditions of an LIC policy or its benefits or
privileges. For more details, please contact our branch or divisional office. Any LIC

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Agent will be glad to help you choose the life insurance plan to meet your needs and
render policy servicing.

What Is Life Insurance?

Life insurance is a contract that pledges payment of an amount to the person assured
(or his nominee) on the happening of the event insured against. The contract is valid
for payment of the insured amount during:

The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if

it occurs earlier. Among other things, the contract also provides for the payment of
premium periodically to the Corporation by the policyholder. Life insurance is
universally acknowledged to be an institution, which eliminates‗risk‘, s ubstituting
certainty for uncertainty and comes to the timely aid of the family in the unfortunate
event of death of the breadwinner. By and large, life insurance is civilisation‘s partial
solution to the problems caused by death. Life insurance, in short, is concerned with
two hazards that stand across the life-path of every person. That of dying prematurely
is leaving a dependent family to fend for itself.

Contract Of Insurance:

A contract of insurance is a contract of utmost good faith technically known as

uberrima fides. The doctrine of disclosing all material facts is embodied in this
important principle, which applies to all forms of insurance. At the time of taking a
policy, policyholder should ensure that all questions in the proposal form are correctly
answered. Any misrepresentation, non-disclosure or fraud in any document leading to
the acceptance of the risk would render the insurance contract null and void.

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Protection:

Savings through life insurance guarantee full protection against risk of death of the
saver. Also, in case of demise, life insurance assures payment of the entire amount
assured (with bonuses wherever applicable) whereas in other savings schemes, only
the amount saved (with interest) is payable.

Aid To Thrift:

Life insurance encourages ‗thrift‘. It allows long-term savings since payments can be
made effortlessly because of the‗easy installment‘ facility built into the scheme.
(Premium payment for insurance is either monthly, quarterly, half yearly or yearly).

For example: The Salary Saving Scheme popularly known as SSS, provides a
convenient method of paying premium each month by deduction from one‘s salary. In
this case the employer directly pays the deducted premium to LIC. The Salary Saving
Scheme is ideal for any institution or establishment subject to specified terms and
conditions.

Liquidity:

In case of insurance, it is easy to acquire loans on the sole security of any policy that
has acquired loan value. Besides, a life insurance policy is also generally accepted as
security, even for a commercial loan

Tax Relief:

Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax.
This is available for amounts paid by way of premium for life insurance subject to
income tax rates in force. Assesses can also avail of provisions in the law for tax
relief. In such cases the assured in effect pays a lower premium for insurance than
otherwise.

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Money When You Need It:

A policy that has a suitable insurance plan or a combination of different plans can be
effectively used to meet certain monetary needs that may arise from time-to-time.
Children‘s education, start-in-life or marriage provision or even periodical needs for
cash over a stretch of time can be less stressful with the help of these policies.
Alternatively, policy money can be made available at the time of one‘s retirement
from service and used for any specific purpose, such as, purchase of a house or for
other investments. Also, loans are granted to policyholders for house building or for
purchase of flats (subject to certain conditions).

Who Can Buy A Policy?

Any person who has attained majority and is eligible to enter into a valid contract can
insure himself/herself and those in whom he/she has insurable interest. Policies can
also be taken, subject to certain conditions, on the life of one‘s spouse or children.
While underwriting proposals, certain factors such as the policyholder‘s state of
health, the proponent‘s income and other relevant factors are considered by the
Corporation.

Insurance For Women:

Prior to nationalization (1956), many private insurance companies would offer

insurance to female lives with some extra premium or on restrictive conditions.
However, after nationalization of life insurance, the terms under which life insurance
is granted to female lives have been reviewed from time-to-time. At present, women
who work and earn an income are treated at par with men.

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Medical And Non-Medical Schemes

Life insurance is normally offered after a medical examination of the life to be

assured.

However, to facilitate greater spread of insurance and also to avoid inconvenience,

LIC has been extending insurance cover without any medical examination, subject to
certain conditions

With Profit And Without Profit Plans

An insurance policy can ‗with‘be o r ‗without‘ profit. In the former, bonuses

disclosed, if any, after periodical valuations are allotted to the policy and are payable
along with the contracted amount. In‗without‘ profit plan the contracted amount is
paid without any addition. The premium rate charged for a‗with‘ profit policy is
therefore higher than for a ‗without‘ profit policy.

Keyman Insurance:

Keyman insurance is taken by a business firm on the life of key employee(s) to

protect the firm against financial losses, which may occur due to the premature
demise of the Keyman.

INVESTING IN INDIAN REAL ESTATE

Indian Real Estate: ―Undeniably tremendous! And, that is the undeniable verdict of
aPrice Waterhouse Coopers study conducted on the investment environment in terms
of Indian real estate. Ever since the Government of India gave its stamp of approval to
100% foreign direct investment (FDI) in housing and real estate, NRIs, overseas real
estate developers, hoteliers, and others have been tracking a path to the sub-continent.
Sensing the business potential for developing serviced plots, constructing residential /
commercial complexes, business centers / offices, mini-townships, investments in

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infrastructure facilities e.g. roads, bridges, manufacture of building materials, etc.,
FDI is flooding in to take advantage of the tremendous real estate opportunities.

Indian Real Estate: Growing Potential

The increasing demand for Indian real estate has not only generated employment, it
has also been instrumental in the growth of steel, cement, bricks and other related
industries. Estimated to be in the region of US $12-billion, real estate development in
India is growing by as much as 30% each year. Already, eighty percent of Indian real
estate has been developed for residential space, and 20% comprises of shopping malls,
office space, hospitals and hotels. Fuelled largely due to off-shoring / outsourcing of
BPOs, call centers, high-end technology consulting andsoftware development and
programming firms, real estate growth in India has great investment prospective.
Indian Real Estate: Investment Opportunities Tax reform measures in the last few
years have ensured real estate in India is one of the most productive investment
sectors, with money invested in real estate offering regular returns on investment
including appreciating in value. And, the Government of India by opening up 100%
foreign direct investment, and fiscal reforms like stamp duty and property tax
reductions, setting up real estate mutual funds has turned real estate into a promising
investment option.

Already, it has approved the first Rs. 100-crore FDI project in Gurgaon. With urban
populations expected to grow from 290-million to 600-million by 2021, housing
requirements are expected to top 68-million by 2021, which means India‘s urban
housing sector could do with an investment of US $25-billion over a 5-year period.
Poised for rapid urbanisation, 3 out of 10 of the world‘s largest cities are in India. An
influx of jobs due to off-shoring / outsourcing has resulted in rising disposable
incomes, increased consumerism, factors responsible for changing the face of
residential and commercial real estate in India. Wishing to take advantage of real
estate investment opportunities, banks and housing finance companies are falling over
themselves to tieup with developers or offer project loans at competitive rates.

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SHARE MARKET:-

The Stock Market is a market which deals in stocks of companies belonging to both
the public sector as well as private. The Indian Stock Market is mostly referred to as
the Share Market because it deals primarily with shares of various companies listed in
for trading. The stock market is a viable investment option at hands for investors in
India. Since Indian Stocks market is showing strength and making steady gains over
last few years barring few low ebbs it is wise to prefer stock market as reliable mode
of investment than other investment options.

INVESTING IN STOCKS

Many of us would like to try our luck in the Stock markets. Yes, Why Not?
Tradingstocks is one of the most lucrative methods of making money.

Here‘s Why :

1. You do not need a lot of money to start making money, unlike buying property
and paying a monthly mortgage.
2. It requires very minimal time to trade - unlike building a conventional business.

3. It‘s ‗fast‘ cash and allows for quick liquidation (You can convert it to cash easily,
unlike selling a property or a business).
4. It‘s easy to learn how to profit from the stock market. But You need to have your
basics clear. Unless you do….you will be wasting your time and losing money.
You need to be crystal clear of each and every aspect of Investments, stock
options, Stock Trading, Company, Shares, Dividend & Types of Shares,
Debentures, Securities, Mutual Funds, IPO, Futures & Options, What does the
Share Market consist of? Exchanges, Indices, SEBI , Analysis of Stocks – How to
check on what to buy?, Trading Terms (Limit Order, Stop Loss, Put, Call,
Booking Profit & Loss, Short & Long), Trading Options – Brokerage Houses etc.
Wisely chosen (those are the key words), stocks are a must for any serious
investor. They add that extra zing to your collection of investments. mStudy after
study has revealed that over the long term, stocks outperform all other assets. That
means you can expect to earn more from shares than from bonds, fixed deposits or

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 gold. No doubt the risk is higher with shares. But if you are in for the long haul, so
are the potential returns. But before you take the plunge and invest in the stock
market, get your basics right.

1. Stocks are not only for the brilliant

Stocks are far from being rocket science. The strategies you need to know tomaximize
your wealth and the pitfalls you need to avoid are not beyond comprehension. Even if
you feel that you don‘t have the time, and prefer to entrust your money to a portfolio
manager or mutual fund, the least you need to know is which funds are better, how to
choose your fund manager, and keep a tab on his performance.

2. So what is a share?

Any business has a lot of assets: The machinery, buildings, furniture, stock-in-trade,
cash, etc. It will also have liabilities. This is what the company owes other people.
Bank loans, money owed to people from whom things have been bought on credit, are
examples of liabilities. Take away the liabilities from the total assets, and you are left
with the capital. Capital is the amount that the owner has in the business. As the
business grows and makes profits, it adds to its capital. This capital is subdivided into
shares (or stocks). So if a company’s capital is Rs 10 crore (Rs 100 million), thatcould
be divided into 1 crore (10 million) shares of Rs 10 each. Part of this capital, orsome
of the shares, is held by the people who started the business, called the promoters. The
other shares are held by investors. These investors could be people like you and me or
,mutual funds and other institutional investors.

3. What does this mean for me?

You must have realised by now that owning a share means owning a share in the
business. When you invest in stocks, you do not invest in the market. You invest in
the equity shares in a company. That makes you a shareholder or part owner in the

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company. Since you own part of the assets of the company, you are entitled to the
profits those assets generate. Or bear the loss. So, if you own 100 shares of Gujarat
Ambuja Cement, for example, you own a very small part -- since Gujarat Ambuja has
millions of shares -- of the company. You own a share of its assets, its liabilities, its
profits, its losses, and so on. Owning shares, therefore, means having a share of a

business without the headache of managing it. Your Gujarat Ambuja shares, for
instance, will rise in value if the company makes good profits, or may do badly if
people stop building houses and demand for cement falls.

4. What do mean by rise in value?

If the company has divided its capital into shares of Rs 10 each, then Rs 10 is called
the face value of the share. When the share is traded in the stock market, however, this
value may go up or down depending on supply and demand for the stock. If everyone
wants to buy the shares, the price will go up. If nobody wants to buy them, and many
want to sell the shares, the price will fall. The value of a share in the market at any
point of time is called the price of the share or the market value of a stock. So the
share with a face value of Rs 10, may be quoted at Rs 55 (higher than the face value),
or even Rs (lower than the face value). If the number of shares in a company is
multiplied by its market value, the result is market capitalisation. For instance, a
company having 10 million shares of a face value Rs 10 and a market value of Rs 30
as on November 1, 2004, will have a market capitalisation of Rs 300 million as on
November 1, 2004.

5. So how does one buy shares?

Alright, you have decided you want part of the action. Shares are bought and sold on
the stock exchanges -- the two main ones in India are the National Stock Exchange
(NSE), and the Bombay Stock Exchange (BSE).

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You can use three different routes to buy shares: Through your broker, trade directly
online, or buy shares when a company comes out with a fresh issue of shares. This is
called an initial public offering (IPO). Clear the jargon first!

If a brand new company or a company already in existence, but with no shares listed
on the stock exchange, decides to invite the public to buy shares, it is called an Initial
Public Offering (IPO).

It is the first time that it is approaching the public for money. That is why the
company is also referred to as ‗going public‘. If a company that is already listed (has
its shares for buying and selling on the stock exchange) is coming out with a fresh
tranche of shares, it is called the new issue (like the current Dena Bank issue).

Then, there are the disinvestments -- where the government sells its stakes in public
sector companies in the market. Although these are not technically new issues, they
too create a buzz in the market.

Every company needs money

A company needs money to grow and expand -- to purchase new machinery, land or
even repay its loan. To do that, one of the options it has is to ask the public for money
It comes out with a public or new issue. The company offers shares and the public
buys those shares. These shares are listed on the Stock Exchange. People who invest
in the company get rewarded (as dividends) by the company, or sell the shares as the
share price rises.

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How can I buy these shares?

There are two ways:

• If you want the shares of a company that is already listed, you can buy them
from the Stock Exchange through brokers. This is called buying from the
secondary market.

• Buying from the primary market means that you buy them directly from
companies when they make new issues of shares or come out with IPOs. You
can also get rights issues and bonus shares, but more on that later. Why would
you pick up shares through IPOs, rather than buy them from the market?
Because, often, companies issue their shares cheaply and, later, when these
shares are listed on the Stock Exchange, they list at a premium (higher than the
price at which they were issued). So you could make a lot of money if you sell
those shares.

What if you don‘t want to sell the shares soon?

Sure. It also happens that companies who are going public or listing their shares for
the first time also usually offer their shares cheap, and could go on to become very
successful. IPOs thus offer investors the chance to participate in their prosperity
cheaply. These listing gains are the chief attractions of buying in the primary market.

So what‘s the catch?

The trouble is, there are usually plenty of applicants for good IPOs. And they are
heavily oversubscribed (the demand for the number of shares is more than the number
being offered for sale). And although 25% of the issue has to be reserved mandatorily
for the retail investor (those who apply for shares of a value less than Rs 50,000), even
the retail portion is oversubscribed several times for good issues. In this scenario, lots
are drawn and only a few individuals are allotted shares. Hence, you may not get the
number of shares you asked for. There is also a chance that you may also not get an
allotment at all, in which case your money will be returned to you. If you don‘t get
any shares, your money will be returned to you within 21 days. This is true even if
you get partial allotment (you get only some of the shares you applied

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for), and the extra money you have paid is returned. If you do get an allotment, your
demat account will be credited with the shares. Once the shares are listed, you can sell
them in the market and pocket the gains. Of course, you can also hold your shares for
the long term if you want, but most people opt out if the price on listing is well above
the price at which you were allotted the stocks. Remember, you need to have a demat
account before applying for IPOs. Else your form will be rejected

New Commodity Market – National Spot Exchange

National Spot Exchange Ltd (NSEL) is a state-of-the-art electronic, demutualized

commodity spot market. The Exchange is promoted by Financial Technologies (India)
Ltd (FTIL) and National Agricultural Cooperative Marketing Federation of India
Limited (NAFED). It provides an electronic, transparent, well organized and
centralized trading platform with the facility to access and participate the market
remotely. It facilitates risk free and hassle free purchase and sell of quality and
quantity specified commodities to commodity market participants including farmers,
traders, processors, exporters, importers, arbitrageurs, investors and the retail market
participants. Exchange also offers various other services such as quality certification,
warehousing, warehouse receipt financing, etc. NSEL has been pioneer in offering
commodity based investment instruments with the launch of E series Products

NSEL is recognized by Ministry of Consumer Affairs, Food & Public Distribution,

Government of India. It has obtained licenses from various state governments to
facilitate online delivery based trading in various agrocommodities.

In addition the Exchange, provides delivery based trading in bullions and metals
across the country. NSEL commenced its live operations on15th October 2008. It has
created efficient spot delivery platform, helping the sellers/producers to sell
commodities directly to the end buyers comprises of processors/ exporters. Currently,
NSEL holds a market share of over 98% of the Indian electronic commodity Spot
market, and has more than 495 registered members operating through over 3000

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trader work stations, across India. Government organizations like FCI , HAFED,
MMTC, PEC, NAFED, APMARKFED, RAJFED, and CCI have been actively
utilizing the Exchange platform for selling various commodities. More than 33
commodities are traded on NSEL Platform having delivery locations spread across 14
states. For the first time in India, NSEL has introduced demate delivery based
instrument products called e-Series, in commodities like gold, silver, copper, zinc and
lead. This is a unique market segment, which is functioning just like cash segment in
equities, but offering commodities in demate form in smaller denominations.

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 Research methodology

Research methodology is the specific procedures or techniques used to identify, select,

process, and analyze information about a topic. In a research paper, the methodology
section allows the reader to critically evaluate a study's overall validity and reliability.
The logic behind taking research methodology into consideration is that one can have
knowledge about the method and procedure adopted for achievement of the objectives
of the project undertaken. With the adoption of this others can evaluate the results too.
Its main aim is to keep researchers on the right track.

The methodology adopted for studying the objectives was surveying people from
Mumbai and Palghar. So keeping in view the nature of requirements of the study and
to collect all the relevant information, Direct Personal Interview method and
structured questionnaire method was adopted for the collection of Primary data.
Secondary data has been collected through the help of different websites, newspaper
articles, magazines, books and by surfing over the internet.

1) Primary Data:
Primary data is the data that is collected for the first time through personal
experiences or evidence, particularly for research. It is also described as raw data or
first-hand information. The mode of assembling the information is costly, as the
analysis is done by an agency or an external organization, and needs human resources
and investment. The investigator supervises and controls the data collection process
directly.

The data is mostly collected through observations, physical testing, mailed

questionnaires, surveys, personal interviews, telephonic interviews, case studies, and
focus groups, etc.
I choose the following resources for our research:
Questionnaire: This method of data collection is quite popular, particularly in case of
big enquiries. Here in my research I have set 15 simple questions and requested the
respondents to answer these questions with correct information.

Page | 54
Respondents: A respondent is a person who replies to something such as a survey or
set of questions. Respondents help in creation of more accurate idea about our
research. I personally met the respondents inside and outside the banks.

2)Secondary Data:
Secondary data is the data which is available in readymade form and which is already
used by people for some purpose. It is the data that has already been collected through
primary sources and made readily available for researchers to use for their own
research. There are various sources of secondary data such as newspapers, magazines,
journals, books, reports, documents and other published information.

Internet: I took into consideration the internet facility with which I collected a lot of
latest information.
Bank Annual Reports: banks issue reports to get the people informed with the
profitability and growth of the bank. These annual reports helped me a lot the get the
latest data and other related information for our research. It tells us about the increase
or decrease in profits and other facilities.

Journal and Publications of banks: I also took into consideration the journals and
publications issued by the banks at different times. I came to know about the
branches, ATM locations and other useful info.

Page | 55
Data analysis , Interpretation and Presentation

1. Age?

a) 20-40 years

b) 40-60 years

c) above 60 year

This Pie Chart Shows the distribution of the age group that is used for the analysis , It
shows that 60.6 %. Maximum people belongs to age group from 20-40 years

Page | 56
2. Gender?

a) Male

b) Female

This shows the number of male and female that are used for the above purpose in this
64.8% are male and 35.2 % female.

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3. State?

State

Karnatak

Madhya Pradesh
Respondant

Rajasthan

Maharastra

0 5 10 15 20 25 30 35

This graph show different states from where respondents belong to and maximum that

is 30 of them belongs to Maharashtra.

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4. Occupation / Profession?

a) Salaried

b) Professional

c) Business

d) Other:

This Shows different type of occupation that middle class is involved in and
according to above graph maximum people belong to either business or salaried that
together carries 70.4 % .

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5. Martial Status?

a) Married

b) Unmarried

Above figure shows the number of people that are married and unmarried and
according

to this majority of them are married that is 57.7 % of total

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6. Monthly income?

 Below Rs. 40,000

 Rs. 40,000– Rs. 50,000

 Rs. 50,000 & above

This shows the different earning pattern that middle income group have and
through this we can conclude that majority i.e. 38% earn more than rs.50000.

Page | 61
7. How did you get the idea of investing?

 Family

 Friends

 internet/advertising

 teacher

 portfolio manager

This Shows that how did people get the idea about investing their money and graph
clearly shows that maximum of them get the idea about through family members

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8. Sate the various Investments in your portfolio?

 Shares

 Debentures/Bonds

 Stock Futures and Options

 National Saving Certificate/ Public Provident Fund/Provident Fund

 Fixed Deposits

 Insurance Polices

 Real Estate

 Gold /Silver

 Mutual Funds

 Other:

number of investor
40
20
number of
0 investor
r es ure res und osit ces ate nsc ver
ha nt tu l f p oli st sil
s be fu ua d p l e e /
e k t d e a l d
d oc u xe nc re go
s t m i
f r a
nsu
i
Page | 63
Page | 64
9. Which type of investment has been most profitable?

 Share Market

 Fixed deposit

 Mutual funds

 Real estate

 Other:

This graph shows the results that middle income investors had for their different
investment and according to them mutual funds i.e. 35.2% is the most profitable
followed by Real Estate.

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10. Which type of investment you think is the riskiest?

 Share Market

 Fixed Deposit

 Mutual funds

 Real Estate

 Other:

Middle income investors feels that share market is the riskiest when it comes to
investing as the price keeps on changing and you can be left with nothing in some
cases.

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11. Would category of risk would you prefer?

 High

 Low

 Balanced

This Shows that most people prefer balanced risk as the middle class have limited
saving and want to be on safer side when it comes to investments

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12. Do you think insurance as a profitable investment?

 Yes

 No

Middle income group feels insurance as profitable as it provides protection against

uncertainties and this graph clearly shows 52.1% supports the above statement

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13. Category of investor?

 Long term investor

 Day trader

 Both

This shows the type of investor that middle income people are and majority of
them i.e. 57.7 % are long term investors

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14. Type of market Operated?

 Primary market

 Secondary market

 Both

This shows that middle income class invest more in secondary market as result shows
46.2% invest in it followed by investing in both the market that is 30.8% of the total

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15. Number of companies in which investment is made?

 Less than 10

 10-20

 20 & above

Above figure shows the number of companies middle class has invested this also
shows

there pattern of investing in share market i.e. maximum (61.5%) people invest in less
than 10 companies

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16. State the approximate size of investment in shares as on date?

 Below Rs. 1 Lakh

 Rs. 1 lakh– Rs. 2 lakhs

 Rs. 2 lakhs & above

This graph shows the size of investment that one‘s portfolio has and middle income
class keeping their saving and expenses in mind has made investment in less than 10
companies as shown above.

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17. State the Percentage of your savings invested in shares?

a. Less than 15 %

b.15% - 30 %

c.30% and above

This graph shows the amount of investment that a middle class person invest in share
market out of their savings and for majority of the people i.e. 49.2%it is less than 15%

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CONCLUSION AND SUGGESTION

Findings

1. Bank deposits /post office deposits are first preferences and second desirable
investment avenue due to less risk, satisfactory return and high availability of
liquidity. It provided withdrawal facility whenever depositor required. It is most
suitable for the income class.
2. Share market was the least preferable by the income class due to lack knowledge
and misconception about share market.
3. Real estate was the most desirable investment avenue among the class people due
to high return within less time period and it also provides social security and
status, but most of the investors of the group were not able to make an investment
in it because of high demand for cash in hand at a time for making investment.
4. The risk bearing capacity of the income class investor is low so it affects the
investor decision in great extent. So the income class doesn't want to invest in
share market due to high risk feature, associated with it.

5. The income class investment decision is influenced by their relatives, friend and
family members at a greater extent.
6. The class prefers to make an investment annually rather than prompt investment

Page | 74
Conclusion

Current survey and various reports as (NCAER), a show that Indian economy is
growing at a higher pace and per capita income of low class and middle class is also
increasing. But inflation rate is also increasing at a higher rate than the increasing rate
of per capita income of lower and middle class. So it is very challenging for the
income class to make their investment after managing their huge expenses. The
income class looks for safest or less risky investment avenue because of their small
saving and prefers to make investments according to their risk bearing capacity. Thus,
they preferred fixed deposits with banks and post office, public provident fund and
life insurance policies etc..But they are not enough satisfied with their investment
decision in such avenues due to low return for e.g. 4% interest rate on saving account.
Because of low returns on these investments, they are not able to cope with their
future needs. So government and policy maker should make policies, according their
investment behavior and needs.

Sample Investors have sufficient knowledge about various investment avenues as

bank deposits, bullions ,real estate but they do not aware about stock market, equity,
bond and debenture and they have some misconception about share market as ―share
market me to hamesha loss hota hai so government and policies maker should make
some programs and policies for inculcating a sense of awareness among the investor
of the class and encouraging them to invest in share market. Free consultancy about
investment opportunity and latest happening in the financial market, should be
provided by share market promoters, brokers ,merchants and financial consultants.
Real estate is the most desirable investment avenue for the income class, but they are
not able to invest their money in it due to demand of high liquidity.

So government and policy maker should make schemes for easy housing finance with
low interest rate on home loans. The income class is more interested to buy gold in
form of ornaments rather than in forms of biscuits or coins so gold coins should be
promoted by bank and post office to enhance the people for making investment in
bullions. The research found that tax advantage in any investment take last place in
investors mind then it indicate the tax concessions given by the government on any
investment are less attractive so tax benefits and long term saving need to be increased
for promoting long term investment by the government and policy makers.

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The study also draws an important conclusion from the study that the investors are a
keen to invest in long term and less risk product, much interest to earn the good return
on their investments. Investors are aware about the factor affecting the short term as
well as long term investment plans and they do take advice from the different experts,
self analysis by investors themselves. This intensive study will somehow help
investors in deciding the current investment their savings

Page | 76
BIBLIOGRAPHY

1) Arumugha kani. A Study on Middle Income Persons‟Investment Pattern

inTirunelveli City.

2) Chaturvedi, Meenakshi and Khare, Shruti (2012) ―Study of Saving Pattern and

Investment Preferences of Individual Household in India International Journal of

Research in Commerce and Management, Volume No.3, May 2012,Issue No.5,
ISSN 0976-2183.

3) Hosamane, D. Manjappa and Niranjan, R (2010) ―Determinants of Investment

Pattern In Indian Manufacturing Industries A Panel Data Study Indian Journal Of

Economics & Business, Vol. 9, No. 1, (2010) : 207-218.
4) Indian income-class opportunities (2012), report published by Gyan research and
analytics Pvt. Ltd.
5) Kabra, Gaurav; Kumar, Prashant and Dash, Kumar, Manoj (2010) ―Factors

Influencing Investment Decision of Generation in India: An Econometric Study

Asian Journal of Management Research ISSN2229-3795 2010.
6) Kaur, Mandeep and Vohra, Tina (2012) ―Understanding Individual
Investor'sBehavior: Review of Empirical Evidence Pacific Business Review
International, Volume 5, Issue 6, December2012.

7) Palanivelu,V.R. and Chanrakumar,K. (2013) ―A Study on Preferred Investment

Avenues Among Salaried Peoples with Reference to Namakkal

Taluk,Tamilnadu,,India The 2013 IBEA, International Conference on Business
Economics and Accounting 20-23 March 2013,Bangkok,Thailand.

8) Sharma, Preeti and Rao, D.N. (2014) ―A Study of Risk Orientation of Retail

Page | 77
 Investors in Indian Mutual Fund Industry with Special Reference to Rajasthan,
India Global Journal for Research Analysis, Vol.3 /Issue: 1/Jan 2014, ISSN
22778160.

9) Samudra, Arpana and Burghate, M.A.(2012) ―A Study on Investment Behavior

of Middle Class Households In Nagpur International Journal Of Social Sciences
& Interdisciplinary Research Vol.1No.5,May 2012,ISSN 22773630.

10) Portfolio Management (2005) Published by ICFAI University, Hyderabad.

11) Security Analysis (2005) Published by ICFAI University, Hyderabad.

12) Hoang, Paul. Business & Management. Melton, Vic.: IBID, 2011. Print

Page | 78
ANNEXURE

QUESTIONNAIRE

This questionnaire is designed to study the pattern of investment by middle income

class in Indian economy

1. Name :

2. Age :

 20-40 years

 40-60 years

 above 60 years

3. Gender?

 Male

 Female

4. Martial Status?

 Married

 Unmarried

Page | 79
5. Occupation/Profession?

 Salaried

 Professional

 Business

 Other:

6. Email :

7. Contact Number :

8. State :

9. Monthly Income :

 Below Rs. 40,000

 Rs. 40,000– Rs. 50,000

Page | 80
 Rs. 50,000 & above

10. How did you get the idea of investing?

 Family

 Friends

 internet/advertising

 teacher

 portfolio manager

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 Other:

11. Sate the various Investments in your

portfolio?

 Shares

 Debentures/Bonds

 Stock Futures and Options

 National Saving Certificate/ Public

Provident Fund/Provident Fund

 Fixed Deposits

 Insurance Polices

 Real Estate

 Gold /Silver

 Mutual Funds

 Other:

12. Which type of investment has been most

profitable?

 Share Market

 Fixed deposit

 Mutual funds

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 Real estate

 Other:

Page | 83
13. Which type of investment you think is the riskiest?

 Share Market

 Fixed Deposit

 Mutual fund

 Real Estate

 Other:

14. Would category of risk would you prefer?

 High

 Low

 Balanced

15. Do you think insurance as a profitable investment?

 Yes

 No

16. Category of investor?

 Long terminvestor

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 Day trader

 Both

17. Type of market Operated?

 Primary market

 Secondary market

 Both

18. Number of companies in which investment is made

 Less than 10

 10-20

 20 & above

19. State the approximate size of investment in shares as

on date?

 Below Rs. 1 Lakh

 Rs. 1 lakh– Rs. 2 lakhs

 Rs. 2 lakhs & above

Page | 85
20. State the Percentage of your savings invested in
shares?

 Less than 15 %

 15%- 30 %

 30% and above

Disclaimer : The information collected in the above

questionnaire will be kept confidential and will solely be
kept for the purpose of the college project . No
information will be shared with be shared with any other
person/entity/organization .

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