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(SEMESTER-V) 2011-12




CERTIFICATE To whomsoever it may concern This is to certify that the work entered in this journal is the work of Chavan Ashutosh Arvind of T. Y .B. COM. Financial Markets, 3004 have successfully completed a project report on the Investment Avenues in Indian Financial Markets as per terms of the year 2011 in the college as laid down by the college authority. _____________ Project Professor/Guide (Prof. Mrs. Jennie Prajith) ______________ BFM Coordinator (Prof. Mrs. Jennie Prajith)


Date: __________

External Examiner


I, Chavan Ashutosh Arvind student of T. Y .B. COM. Financial Markets, 3004, MAHATAMA EDUCATION SOCIETYS PILLAIS COLLEGE OF ARTS, COMMERCE & SCIENCE, hereby declare that I have completed the project report on Investment Avenues in Indian Financial Markets in the academic year 2011-12. The information submitted by me is true & original to the best of my knowledge.

_______________ Signature


I am very thankful to MAHATAMA EDUCATION SOCIETYS PILLAIS COLLEGE OF ARTS, COMMERCE & SCIENCE for giving me an opportunity to work on this important Project and also for the support and guidance. This Project INVESTMENT AVENUES IN INDIAN FINANCIAL MARKETS would just not

have been complete without the able support of my Project Guide Prof. Mrs. JENNIE PRAJITH, who provided me valuable advice throughout this Project work. I thank her immensely for her guidance.

It is a pleasure to thank my teachers, friends, librarian and all those who guided and helped me in the completion of this project.

I am also grateful to my Parents who always stood by me to see me complete this project.

I also thank all those people who responded to the Survey and helped in this project.


Sr. No. 1 1.1 1.2 2 2.1 2.2 2.3 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 4 5 6 7

Content Executive summary Introduction Objectives Research methodology Profile of institution Kotak Mahindra bank and securities Life insurance corporation of India Indiabulls Real Estate Conceptual framework Savings and investments Rights & duties of an investor Investment avenues in India Investment in shares and debentures Investment in mutual funds Investment in gold and silver Investment in bank deposits Investment in LIC schemes Investment in real estate GDP, savings and investments Collection and analysis of data Interpretation of data Conclusion Suggestions and recommendations Appendices Bibliography

Page no. 1 2 4 5 6 6 9 12 14 14 17 20 22 29 36 42 49 54 60 63 80 82 84 85 88

Executive summary
According to business management theories, investment refers to tangible assets like machinery and equipments and buildings and intangible assets like copyrights or patents and goodwill. The decision for investment is also known as capital budgeting decision, which is regarded as one of the key decisions. When a person pay his debts then the let out money is saved money is the saved money or savings. Savings are always long term in nature were investments are sporadic in nature. Savings are made out from income and investments are made out from savings.

Savings can only be done by the individuals and investments can be done by individuals as well as corporate. The saved money cannot grow and multiply at its own. It needs to be invested in some investment option. Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income or appreciation of the value of the investment. The characteristic features of different securities are that they carry different risk return profiles. Generally, higher returns carry higher risks. Investment are often made indirectly through intermediaries such as banks, financial institutions, mutual funds, pension funds, agents, insurance companies, brokers, collective investment schemes and investment clubs etc. investment and risk are the two sides of one coin. Investment includes risks such as market risk, political risk, financial risk, purchasing power risk, foreign exchange risk etc. Investment refers to purchasing securities or any other financial assets from the capital market or money market or purchasing real properties with high market liquidity. Investment avenues can be classified into two categories, viz. financial assets and real assets. The financial assets includes shares, debentures, mutual funds, bonds, commodities and insurance policies and non-financial or real assets includes residential house, commercial complex, agricultural land, gold and silver, precious stones and metals etc. Primary and secondary data are included in this project.

1 Introduction
Investment has evolved considerably since 18th and 19th centuries. The issue of securities by companies is as old as the introduction of joint stock companies by the British Government. The 18th and 19th centuries saw the emergence of textiles, tea and plantation industries in India. Companies were setup as joint stock enterprises with limited liability by shares. Business in major cities purchased the shares of the companies. The trading in shares started in 19th century in India. Many companies were financed by the issue of shares to the public. British Government helped the emergence

of securities market in India. The British India government borrowed mostly in London by issue of sterling consoles. Later on the Government Issue treasury bills and government securities in rupees. There are different types of securities conferring different sets of rights of the investors. There are also different sets of conditions under which these rights can be exercised. The various avenues for investment ranging from riskless to high risk investment opportunities consist of loan security and non-security forms of investment. These securities are corporate bonds, debentures, shares, national saving certificate, provident fund, fixed deposits, life insurance policies and mutual funds. The investors have various avenues for investment for their savings to flow in accordance with their preferences. Savings flow into investment for return. Investment is depended on risk and return characteristics. A major factor influencing the pattern of investment is its return. It is the yield plus capital appreciation. The difference between purchase and sale price of a security is capital appreciation. The yield is the interest and the dividend receives on the investment on the security. The return differs from security to security and it is based on maturity period, nature of investment, rate of interest and so many other factors. A business firm carries its operation in an environment which is not within its control. It is exposing to all sort of dangers both on account of internal as well as external factors. Therefore its profit or earnings may not be certain as well as constant. The return from the business is measured on the basis of the profit earned by it. The profit does not have a specific meaning. The profit is the excess of the expenses of a business over a period as determined according to the accounting principles and procedures. The Investment needs of an investor by and large; most investors have eight common needs from their investments: Security of Original Capital, Wealth Accumulation Comfort Factor, Tax Efficiency, Life Cover, Income, Simplicity, and Ease of Withdrawal. In finance, investment refers to purchasing securities or any other financial assets from the capital market or money market or purchasing real properties with high market

liquidity for example, gold, silver, real properties, and precious items. Financial investments are investment in stocks, bonds, and many other types of security investments. Indirect financial investments can also be done with the help of mediators or third parties, such as pension funds, mutual funds, commercial banks, and insurance companies. As the future is unpredictable, so to save money for the future will be a wise job. History confirms the millionaire going beggar and beggar becoming millionaire just in short time span. So it becomes necessary to save in the good times for the bad times, which no one wants but does come without invitation. Investments made at good times may help the person to fulfill his/her financial needs at bad times. The finance need arise when a person wants to educate children, buy them a new vehicle etc.

1.1 Objectives of the study To understand the concept of investment. To understand the concept of savings. To evaluate various investment avenues.

To analyze which is the best investment among investors. To understand rights and duties of investor.

1.2 Research methodology

Research methodology is collection of relevant adequate data which would serve as guidance for use in investigation or analysis and knowledge of Project .With this


objective; inputs were collected on investors behavior pattern and attitude towards Different avenues of Investment. Inputs included both primary data as well as secondary data.

Primary data
Primary data is a term for data collected on source which has not been subjected to processing or any other manipulation, it is known as raw data. Primary data is nothing but the data which is collected for the first time. Primary data is nothing but the data which is collected for the first time. Feedback received from 48 respondents served as primary data for this project.

Secondary data
Secondary data is the data collected by someone other than the user. Secondary data includes newspapers, books, etc. This data is collected by others.

Research methodology

Primary data

Secondary data
Books:- Principles of Investment Regulation of securities markets Internet:-

2 Profile of institutions 2.1 Kotak Mahindra Bank and Securities


Since the inception of the erstwhile Kotak Mahindra Finance Limited in 1985, it has been a steady and confident journey leading to growth and success. Established in 1985, the Kotak Mahindra group has been one of India's most reputed financial conglomerates. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). This approval created banking history since Kotak Mahindra Finance Ltd. is the first nonbanking finance company in India to convert itself in to a bank as Kotak Mahindra Bank Ltd. Today, we are one of the fastest growing bank and among the most admired financial institutions in India. Kotak Mahindra Bank has over 323 branches and a customer account base of over 2.7 million. Spread all over India, not just in the metros but in Tier II cities and rural India as well, we are redefining the reach and power of banking. Savings Accounts Our Savings Accounts are designed to ensure you receive the benefits of quick & convenient banking transactions along with options for your money to earn high returns. The savings account goes beyond the traditional role of savings, to provide you a range of services from funds transfer options to online payments of bills to attractive returns earned through a comprehensive suite of investment options. Pro Savings Account Edge Savings Account Nova Savings Account Classic Savings Account Easy Savings Account


Corporate Salary Account Current Accounts Kotak Mahindra Bank offers you unparalleled advantages with its three Current Account offerings. Whether you have a small/ mid size business or you are an enterprise spread across multiple locations in the country, you would find a Current Account that's just designed for you. With features ranging from Free DDs, Free Cheque Collection, Free At -Par Cheque facility to Free Trading Account & free Demat Account, and more! Neo Current Account Edge Current Account Pro Current Account Elite Current Account Ace Current Account Term Deposits Kotak Mahindra Bank brings you Term Deposit at highly attractive interest rates coupled with special facilities like Overdraft and Re-investment option. Term Deposits Regular Term Deposits Senior Citizen Deposits Ace Deposits Tax Saving Deposits


Investments At Kotak Mahindra Bank, we recognize that financial needs vary, not just amongst individuals, but across the different stages of your life. We have years of experience in helping people put together an investment portfolio that works best for them. Mutual Funds Demat Kotak Gold Eternity New Pension System Insurance ASBA


2.2 Life Insurance Corporation of India

Introduction:Every day we wake up to the fact that more than 250 million lives are part of our family called LIC.We are humbled by the magnitude of the responsibility we carry and realize the lives that are associated with us are very valuable indeed. Though this journey started over five decades ago, we are still conscious of the fact that, while insurance may be a business for us, being part of millions of lives every day for the past 52 years has been a process called TRUST. The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era past few centuries yet its beginnings date back almost 6000 years.


Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was also one of such companies inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage.


Some of the important milestones in the life insurance business in India are:
1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalized.


2.3 Indiabulls real estate

Introduction:Indiabulls Real Estate is one of the largest real estate company in India with development projects spread across high-end office and commercial complexes, premium residential developments, mega townships, retail spaces, hotel and resorts, state of the art special economic zones and infrastructure development. It has 31 ongoing projects totaling 61 million square feet, 2551 acres of SEZ development and additional land bank of 580 acres. Each project bears a stamp of thoughtful solutions and highest quality. The company has partnered with specialists from India and abroad working on various aspects including design, landscaping, engineering and structural strength of each of the developments. It further employs most advanced construction equipments and technologies that guarantees on time delivery like advanced jump start technology, advanced logistics and vertical transportation systems, wind tunnel engineering as also international quality construction grade steel and the highest strength M70 and M80 concrete. The company has more than 90% of its portfolio in Mumbai, Delhi (NCR) and Chennai markets with $ 900 million of land bought through government auctions. The main focus of Indiabulls Real Estate is construction and development of properties, project management, investment advisory and construction services. Indiabulls Real Estate has delivered a record 3.3 million sq ft developed space valued at $ 1.75 billion (within 4 years of inception). This is fastest and largest delivery in value terms by any Indian real estate developer in the same time period. It has partnered with Farallon Capital Management


LLC of USA to bring the first FDI into real estate in the country, is listed on the Mumbai, Luxembourg and Singapore Stock Exchange and has been assigned 'A+' rating.

Residential Projects
Indiabulls Real Estate has a pan-India presence with premium yet affordable housing projects spread across cities of Gurgaon, Ahmedabad, Vizag, Hyderabad and Madurai. Indiabulls Greens in Panvel and Chennai are the Green Living integrated townships initiated by the company.

Commercial Projects
Indiabulls Real Estate commercial development includes high end commercial projects like One Indiabulls Centre and Indiabulls Finance Centre in Mumbai, Indiabulls Mint an integrated commercial and retail complex at Thane and company's flagship retail offering Mega All at Vadodra, Panvel and Jodhpur.

SEZ Projects
Indiabulls Real Estate integrated special economic zone developments have been designed to offer world class amenities and cutting edge infrastructure. Indiabulls Technology Park, Gurgaon is dedicated to IT/ITES businesses while Indiabulls Neocity at Nashik is the multi product SEZ.


3 Conceptual Fremework 3.1 Savings and Investments

What is savings? The dictionary meaning of savings is Anything that is saved. The main ojective of saving is to meet unforeseen events. Savings are made out from income. Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in a bank or pension plan. Saving also includes reducing expenditures, such as recurring costs. In terms of personal finance, saving specifies lowrisk preservation of money, as in a deposit account, versus investment, wherein risk is higher. There is some disagreement about what counts as saving. For example, the part of a person's income that is spent on mortgage loan repayments is not spent on present consumption and is therefore saving by the above definition, even though people do not always think of repaying a loan as saving. However, in the U.S. measurement of the


numbers behind its gross national product, personal interest payments are not treated as "saving" unless the institutions and people who receive them save them. "Saving" differs from "savings." The former refers to an increase in one's assets, an increase in net worth, whereas the latter refers to one part of one's assets, usually deposits in savings accounts, or to all of one's assets. Saving refers to an activity occurring over time, a flow variable, whereas savings refers to something that exists at any one time, a stock variable. Saving is closely related to investment. By not using income to buy consumer goods and services, it is possible for resources to instead be invested by being used to produce fixed capital, such as factories and machinery. Saving can therefore be vital to increase the amount of fixed capital available, which contributes to economic growth. What is investment? The dictionary meaning of investment is the act of process of investing. Accounting standard 13 defines an investment as funds set apart with the objective of growth, security and earnings. The concept of investment has different meanings. Investment is the employment of funds with the aim of getting return on it. Investment has different meanings in finance and economics. In Finance investment is putting money into something with the expectation of gain that upon thorough analysis has a high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling. Investment is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments. To avoid speculation an investment must be either directly backed by the pledge of sufficient collateral or insured by sufficient assets pledged by a third party. A thoroughly


analyzed loan of money backed by collateral with greater immediate value than the loan amount may be considered an investment. A financial instrument that is insured by the pledge of assets from a third party, such as a deposit in a financial institution insured by a government agency may be considered an investment. Investment is commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income of the value of an instrument.

Savings vs. investments

Sr. No. 1 Savings Investments

Savings are always long term in Investments are sporadic in nature, can be nature and savings are made over a either long term or short term. long period of time. Savings are made out income. Savings can be taxable. from Investments made out of savings and borrowing too. Investments are also taxable or non taxable. Investments have more risk. Where as investments can be made by individuals as well as corporates. Investments are great to grow your money, and it can be used in near future.

2 3

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Saving doesnt have any risk. Savings are made by individuals only. Savings should be placed aside for rainy days and for any sum of money that you will need within the next 3-5 years Savings can not lose easily.

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Investments can be lose easily.

Savings are less profitable Investments are more profitable compare compare to investments. to savings.

3.2 Rights and duties of an investor 22

Rights of an investor Rights as a shareholder: To receive the shares on allotment or purchase within the stipulated time. To receive copies of the Annual Report containing Balance Sheet, Profit & Loss Account and Auditors Report. To receive dividends in due time. To receive approved corporate benefits like rights, bonus, etc. To receive offer in case of takeover delisting or buyback. To participate/vote in general meetings. To inspect the statutory registers at the registered office of the company. To inspect the minute books of the general meetings and receive copies. To complain and seek redressal against fraudulent and investor unfriendly companies. To proceed against the company, if in default, by way of civil or criminal proceedings. To receive the residual proceeds in case of winding up. Rights as a debenture holder: To receive interest/redemption in the stipulated time. To receive a copy of the trust deed on Request. To apply before the CLB in case of default in redemption of debentures on the date of maturity. To apply for winding up of the company if the company fails to pay its debt. To approach the Debenture Trustee for Grievances.

Rights as a buyer/seller of securities to get: The best price. Proof of price / brokerage charged. Money/shares on time.


Statement of accounts from the broker depository etc.

Obligations as a buyer/seller of securities: Enter into proper agreements with the broker, depository etc. Possess a valid contract note. To make payment on time. To deliver shares on time.

With rights of redressal against: Fraudulent prices. Unfair brokerage. Delays in receipt of money or shares.

Duties of an investor
To remain informed and vigilant about your investments. To peruse disclosures made by the company on website including:1. Annual reports. 2. Details of the board meetings. 3. Recommendation or declaration of dividend. 4. Particulars of increase / issue / alterations of share capital. 5. Financial results along with details of credit rating, asset cover available, debt equity ratio. 6. Revision of credit rating. 7. Statement of; Shareholding pattern. Details of locked-in shares. Details of shares pledged by promoter group. Details of depository receipts (DR). Variation between the utilization of proceeds and profitability. Compliance report on Corporate Governance.

8. Details of shareholding and acquisition of companys shares by;


Promoters / persons in control of the company, including those acting in concert. Directors and top management including their dependents persons holding more than 5%.

9. Information having bearing on performance / operations of the company and or affecting the interests of security holders. 10. Corporate actions like Mergers, Demergers, Splits and Bonus issue. 11. Scheme / petition proposed to be filed before any court or tribunal. 12. Information on buyback, substantial acquisition or delisting offers. 13. Information on maintenance of 100% asset cover for listed debt securities. 14. Information on default / expected default in payment of interest / redemption of debt securities or failure to create charge on assets. 15. Alterations in the terms regarding redemption / cancellation / retirement of any security. Intimate change in your address and bank account to:1. 2. The company, if you hold shares / debentures in physical form. The Depository Participant, if you hold shares / debentures in demat Form.



3.3 Investment avenues in India

Wide varieties of investment avenues are now available in India. An investor can himself select the best avenue after studying the merits and demerits of different avenues. Even financial advertising, newspaper supplements on financial matters and investment journals offer guidance to investors in the selection of suitable investment avenues. The following figure indicates alternative avenues for investment.


Investment avenues are the outlets of funds. There is variety of investments avenues or alternatives. Investors are free to select any on or more alternative avenues depending upon their needs. All categories of investors are equally interested in safety, liquidity and reasonable return on the funds invested by them. In India investments alternatives are continuously increasing along with new developments in the financial markets. Investment is now possible in corporate securities, public provident fund, mutual fund etc. Thus, wide variety of investment avenues is now available to the investors. However, the investors should be very careful about their hard earned money.


3.4 Investment in shares and debentures

Investment in shares:-

Introduction:Share means a share in the share capital of the company. A company is a business organization. It is registered under companies act 1956. Every company has share capital. The share capital of a company is divided into number of equal parts and each of such part is known as share. A public limited company has to complete three stages. The first is registration, the second is raising capital and the third is commencement of business. A public limited company issues shares to the public for raising capital. The first public issue of the company is known as Initial Public offering (IPO). The shares can be issued at par, premium or discount. Each share has a face value. In order to issue shares a prospectus is prepared and it is got approved SEBI. These shares listed with stock


exchange so that the shareholders can sell these shares in the market. The company has to make an application to the stock exchange for listing of shares. The shares are also called as stock. Now a day, shares are issued in Demat form. It means shares are credited to a separate account of the applicant opened with depository participant. This is also called paperless security because shares are not issued in physical form. Demat account is compulsory when the shares are issued through book building process. Book building is a method of public issue of shares by a company in which the price is determined by the investors subject to a price banned of range of prices given by the company. There are two types of shares, Equity shares and Preference shares. Preference shares are those shares which has first preference for payment of dividend and refund of capital in case of winding up of company. Equity shares are those shares which are not preference shares. Preference shares are not popular in India. Very few companies have issued preference shares. The preference shares may be cumulative -non cumulative, participating - non participating, convertible - non convertible and redeemable - irredeemable. Investment in shares is more risky because the share prices go on changing day by day. Today, the market is more volatile, means more fluctuating. The share prices may go up or go down. If the stock market falls the share prices will go down and the investor will loose money in the investment. However, the return on investment in shares is higher. The return on investment in shares is in the form of regular dividend. There is also liquidity in this kind of investment. The shares can be sold in stock market and money can be collected within 3 to 4 days.


Types of shares:-


Equity shares:- An equity share is the basic unit of investment in a company.

The equity capital of company is divided into shares. Ownership of a share entitles the holder to a proportionate share of the profit distributed by the company in the forms of dividends. The company is not bound to pay any dividends to the equity share holders in any year. The dividends paid by a company in particular year depend on a number of factors. Further, the holder can earn a capital gain on the sale of the shares if the market value of the shares is more than the price paid for the shares. The shares could fully paid or partly paid. When a company shares that are partly paid, the company will make calls for additional amounts from time to time, until the shares are fully paid up. Partly paid ordinary shares enjoy the same voting rights as fully paid ordinary shares. Only the dividend paid on partly paid shares would be lower, to the extent of such part payment. The companies act, 1956 is the applicable legislation for companies. It dose not permit issue of different classes of equity shares. Therefore, all equity shares of a company are similar, except to the extent that dividend payment would be nil made on a pro rata basis on new equity shares issued during the year.



Preference shares: - These shares entitle the shareholder to dividend payments in

preference to equity shareholders. Similarly, in the event of liquidation of the company, preference share holder gets a priority over equity share holders. This preferential treatment accounts for the name of search shares i.e. preference shares. It may, however, denote that the preference shares rank below creditors and debenture holders in priority in case of repayment. Preference dividend is generally paid at a fixed rate made known at the time of their issue- to which extent the earning is similar to the earning from a debt instrument like a debenture. It is also redeemed according to the terms of the issue. If the preference shares are issued as Participating, then the investor not only earns a fixed rate of dividend, but also participates in the profits of the company in case it is issued on such terms and if the shares are issued as non-participating shares, the investor could not get this benefit. If the preference shares are issued as cumulative preference shares, then dividend not paid in any year would be payable in subsequent years out of future profits, before any things paid by way of dividends to equity share holders and if preference shares are issued as non-cumulative preference shares then the investor could not get this benefit. If the shares are issued as convertible preference shares then the share are converted into equity shares by the company and if the shares are issued as nonconvertible the shareholder could not get this benefit. If the shares issued as redeemable preference shares then the shares get redeemed after some time and if the shares are issued as irredeemable preference shares then the shareholder could not get this benefit.


Investment in Debentures:Introduction:A debenture is a document issued by a company as an evidence of a debt. It is a certificate issued by a company under its common seal, acknowledging debt due by it to its holders. The term debenture includes debenture stock, bonds and any other securities issued by a company. The Companies Act provides that a company can raise loans from the public by issue of the debentures. The debenture holder becomes the creditor of the company. The debenture holder gets interest on the debenture which is fixed at the time of issue. The debentures are also issued to the public just like issue of shares. However, there is a need for credit rating before issue of debentures or bonds. Bonds are issued by government companies and the debentures are issued by the private companies. Therefore, bonds may be tax saving but debentures are not tax saving investment. The companies use owned capital as well as borrowed capital in their capital structure as compared to equity shares because debenture holders have no say in the management of the company and interest on debentures is allowed as a business expense for tax purposes. The debentures are considered as secured loans. There is no much risk in the investment in debentures as compared to shares. The return on debentures is also reasonable and stable. The debentures are also listed with the stock exchanges and can be traded in the stock market. However, the prices of debentures are not much volatile. The debenture, being a loan, is redeemable at a certain period of maturity, otherwise it can be irredeemable. The debentures can be convertible or non convertible. If a debenture is convertible into shares at maturity, it is called convertible. Convertible debentures became popular in the last decade. The method of raising long term funds through debentures is not much popular in India. A vary few companies have issued a debentures and very few companies debentures or bonds are traded in the stock market. The debentures were also not popular till recent years. A debenture is an acknowledgement from the company that it has to repay a certain amount of money on a specified date. A debenture may have a guarantor, who is the person who will fill the issuers repayment obligation in case the isuuer is not in a position


to do so. Debentures may also be credit rated. If they are, Then the credit rating would provide an indication of the risk of fault by the issuer on principle or interest. Credit rating is mandatory for public issue of debt. Types of debentures:-

Types of debentures

Registered and Bearer

Convertible and non-convertible

Secured And Unsecured

Redeem and irredeem


Registered debentures :- These are debentures which are payable to the registered holders i.e. person whose names appear in the register of debenture holders. Such debentures are transferable in the same way as shares.

2. Bearer debentures :- These are similar to share warrents. The interest on bearer debentures is paid by means of attached coupons. On maturity the sum is paid to the bearer. 3. Convertible debentures :- A convertible debenture is a bond that can be converted into equity shares of the same enterprise on the maturity. After maturity the


company gives an option to the holder to continue with same or to convert it into equity shares. Convertible debentures may be fully paid or partly paid.


Non-convertible debentures :- Non convertible debentures are those debentures which cannot be converted into equity shares. Non-convertible debentures are not listed on stock exchange.

5. Secured debentures :- These are those debentures which gets security charged on the assets of the company. At the time of winding up of company the secured debentures are paid out from the sale of assets. 6. Unsecured debentures :- These are those debentures which cannot get any security against the issued debentures. They dont have any charge on the assets of the company. 7. Redeemable debentures :- These are issued for a specific time period only. On the expiry of the specified time period the company has a right to buyback the debentures and have its property released from charge. 8. Irredeemable debentures :- A debentures which contains no clause as to the payment is called as irredeemable debenture. These debentures are redeemable only on happening of contingency or on expiration of period, however long.


3.5 Investment in mutual funds

Introduction:Mutual funds are investment companies that use the funds from investors to invest in other companies or investment alternatives. They have the advantage of professional management, diversification, convenience and special services such as Cheque writing and telephone account service. It is generally easy to sell mutual fund shares/units although you run the risk of needing to sell and being forced to take the price offered. Mutual funds come in various types, allowing you to choose those funds with objectives, which most closely match your own personal investment objectives. A load mutual fund is one that has sales charge or commission attached. The fee is a percentage of the initial investment. Generally, mutual funds sold through brokers are load funds while funds sold directly to the public are no-load or low-load. As an investor, you need to decide whether you want to take the time to research prospective mutual funds yourself or pay the commission and have a broker who will do that for you. All funds have annual management fees attached.


What is a Mutual Fund?

A Mutual Fund is a vehicle for investing in stocks and bonds. It is not an alternative investment option to stocks and bonds; rather it pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities. Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the funds gains, losses, income and expenses. 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 are 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. Basics of mutual fund:Net Asset Value or NAV NAV is the total asset value (net of expenses) per unit of the fund and is calculated by the AMC at the end of every business day. How NAV is calculated? The value of all the securities in the portfolio in calculated daily. From this, all expenses are deducted and the resultant value divided by the number of units in the fund is the funds NAV. Managed by an Asset Management Company (AMC) The company that puts together a mutual fund is called an AMC. An AMC may have several mutual fund schemes with similar or varied investment objectives. The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective.


All AMCs Regulated by SEBI, Funds governed by Board of Directors The Securities and Exchange Board of India (SEBI) mutual fund regulations require that the funds objectives are clearly spelt out in the prospectus.In addition; every mutual fund has a board of directors that is supposed to represent the shareholders' interests, rather than the AMCs. Expense Ratio AMCs charge an annual fee, or expense ratio that covers administrative expenses, salaries, advertising expenses, brokerage fee, etc. A 1.5% expense ratio means the AMC charges Rs1.50 for every Rs100 in assets under management. A fund's expense ratio is typically to the size of the funds under management and not to the returns earned. Normally, the costs of running a fund grow slower than the growth in the fund size - so, the more assets in the fund, the lower should be its expense ratio.

Working of a mutual fund:-


Why invest in mutual fund ? Professional Money Management Fund managers are responsible for implementing a consistent investment strategy that reflects the goals of the fund. Fund managers monitor market and economic trends and analyze securities in order to make informed investment decisions. Diversification Diversification is one of the best ways to reduce risk (to understand why, read the need to Diversify). Mutual funds offer investors an opportunity to diversify across assets depending on their investment needs. Liquidity Investors can sell their mutual fund units on any business day and receive the current market value on their investments within a short time period (normally three- to fivedays). Affordability The minimum initial investment for a mutual fund is fairly low for most funds (as low as Rs500 for some schemes). Convenience Most private sector funds provide you the convenience of periodic purchase plans, automatic withdrawal plans and the automatic reinvestment of interest and dividends. Mutual funds also provide you with detailed reports and statements that make recordkeeping simple. You can easily monitor the performance of your mutual funds simply by reviewing the business pages of most newspapers or by using our Mutual Funds section.


Flexibility and variety You can pick from conservative, blue-chip stock funds, sectoral funds, funds that aim to provide income with modest growth or those that take big risks in the search for returns. You can even buy balanced funds, or those that combine stocks and bonds in the same fund. Organization of mutual funds: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


Types of Mutual funds On the basis of structure: Open ended schemes: - An open-ended mutual fund is the one whose units can be freely sold and repurchased by the investors. Such funds are not listed on bourses since the Asset Management Companies (AMCs) provide the facility for buyback of units from unit-holders either at the NAV, or NAV-linked prices. Instant liquidity is the USP of open-ended funds: you can invest in or redeem your units at will in a matter of 2-3 days. In the event of volatile markets, open-ended funds are also suitable for investment appreciation in the short-term. This is how they work: if you expect the interest rates to fall, you park your money in an openended debt fund. Then, when the prices of the underlying securities rise, leading to an appreciation in your funds NAV, you make a killing by selling it off. On the other hand, if you expect the Bombay Stock Exchange Sensitivity Index the Sensex to gain in the short term, you can pick up the right open-ended equity fund whose portfolio has scripts likely to gain from the rally, and sell it off once its NAV goes up.

Closed ended schemes: - Closed-ended mutual funds have a fixed number of units, and a fixed tenure (3, 5, 10, or 15 years), after which their units are redeemed or they are made open-ended. These funds have various objectives: generating steady income by investing in debt instruments, capital appreciation by investing in equities, or both by making an equal allocation of the corpus in debt and equity instruments.

Interval schemes: - Interval funds combine the features of open-ended and closeended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

On the basis of investment objective:-

Growth schemes: - The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their


corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time.

Income schemes: - The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

Balanced schemes: - The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

Money market schemes: - The aim of money market schemes is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

Other schemes:-

Industry specific schemes: - Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

Index Schemes: - Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE Nifty. Sectoral Schemes: - Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group


shares or initial public offerings.

3.6 Investment in gold and silver

Investment in gold and silver is also called as investment in precious objects. Everybody likes gold and hence gold is required. These two precious metals are used for making ornaments and also for investment or surplus funds over a long period of time. In India gold is an obsessions deep rooted in mythology, religious rites and it is very psychological. In every family at least a little quantity of gold and silver is available. Some people buy these metals as an investment. The prices of gold and silver are also increasing continuously. The prices also depend upon demand and supply of gold. The supply has been increasing at low speed. However, the demand has been increasing very fast. Therefore, the prices also go on increasing. Today the price of gold is around 28,000/10gm. and the price for silver is 62,000/1kg. People use gold and silver at the time of marriages and other festivals with the gold and silver, precious stones such as diamonds, rubies and pearls are also appealing for long term investment particularly among rich people.


Gold and silver are useful as a stone of wealth. They act as secrete assets. The investment is highly liquid, which can be sold at any time. The market prices are continuously increasing. Therefore, the return on investment is also increasing. The investment is also safe and secured. There is a high degree of prestige value for gold and silver in the society. The benefit of capital appreciation is also available. The investment in gold and silver is risky due to the chances of theft. It may also cause an injury to the life of the investor. It is a long term investment. Regular income from the investment is not available. This investment is not available for capital formation and economic growth of the country. The traditional attraction for gold and silver is gradually reducing. The import of gold is now free. There is no tax saving on this investment. Why invest? Gold and silver are the foundation asset within any long term savings or investment portfolio. For centuries, particularly during times of financial stress and the resulting 'flight to quality', investors have sought to protect their capital in assets that offer safer stores of value. A potent wealth preserver, their stability remains as compelling as ever for todays investor. As one of the few financial assets that do not rely on an issuer's promise to pay, they offers refuge from widespread default risk. It offers investors insurance against extreme movements in the value of other asset classes. Portfolio diversification Most investment portfolios primarily hold traditional financial assets such as stocks and bonds. Diversifying your portfolio can offer added protection against fluctuations in the value of any single asset or group of assets. Risk factors that may affect the gold and silver prices are quite different in nature from those that affect other assets. Statistically, portfolios containing gold are generally more robust and less volatile than those that do not. Inflation hedge


Market cycles come and go, but over the long term, gold and silver retains its purchasing power. Their value, in terms of the real goods and services that it can buy, has remained remarkably stable for centuries. In contrast, the purchasing power of many currencies has generally declined, due for the most part to the rising price of goods and services. Hence investors often rely on them to counter the effects of inflation and currency fluctuations. Currency hedge Gold and silver are employed as a hedge against fluctuations in currencies, particularly the US dollar. If the worlds main trading currency appreciates, the dollar gold and silver price generally falls. On the other hand, a fall in the dollar relative to the other main currencies produces a rise in gold and silver price. For this reason, gold has consistently proved to be one of the most effective assets in protecting against dollar weakness. Risk management Gold and silver are significantly less volatile than most commodities and many equity indices. It tends to behave more like a currency. Assets with low volatility will help to reduce overall risk in your portfolio, adding a beneficial effect on expected returns. Gold and silver also helps to manage risk more effectively by protecting against infrequent or unlikely but consequential negative events, often referred to as tail risks. Demand and supply The price of gold and silver tracks the shifting balance of supply and demand. Long lead times in gold mining mean production of gold and silver is relatively inelastic, regardless of increases in demand. Thats why the rally in the gold and silver price since 2001 has not engendered a meaningful increase in gold production levels. Demand for gold and silver has shown sustained growth recently, due at least in part to rising income levels in key markets. These supply and demand factors have laid foundations for its most positive outlook in over a quarter of a century.


How to invest? A growing range of methods now allows investors to either buy gold and silver, or simply gain exposure to gold and silver price movements. From gold, silver, online accounts, exchange traded funds and complex financial products, to mining stocks, the most appropriate gold or silver investment will depend upon the investors specific requirements and outlook. Coins and small bars Exchange Traded Funds (ETFs) Futures and options Warrants Gold accounts Gold Accumulation Plans (GAP) Gold Mining stocks Gold Certificates Gold orientated funds Structured products Silver accounts Silver certificates Silver oriented funds

The distinction is not always clear between the purchase of physical gold and other investments that offer an exposure to movements in gold price. This is especially so as it has long been possible to invest in bullion without actually taking physical delivery. If you are considering an investment in gold, it is important to appraise yourself of the best options for your specific needs. The following questions are designed to help you decide on the channel or channels of gold investment that are most appropriate for you.


Global Scenario (gold)

London is the worlds biggest clearing house. Mumbai is under India's liberalized gold regime. New York is the home of gold futures trading. Zurich is a physical turntable. Istanbul, Dubai, Singapore, and Hong Kong are doorways to important consuming regions. Tokyo, where TOCOM sets the mood of Japan.

Indian Scenario (gold)

India is the largest market for gold jewellery in the world. 2010 was a record year for Indian jewellery demand; at 745.7 tones, annual demand was 13% above the previous peak in 1998. In local currency terms, Indian jewellery demand more than doubled in 2010.

A 20% rise in the rupee price of gold combined with a 69% rise in the volume of demand, pushed up the value of gold demand by 101% to compares with 2009 demand of 669 billon. 1,342 billion. This

The rising price of gold, particularly in the latter half of 2010, created a 'virtuous circle' of higher price expectations among Indian consumers, which fuelled purchases, thereby further driving up local prices.

Global Scenario (silver)

Silver is predominantly traded on the London Bullion Market Association (LBMA) and COMEX in New York. LBMA, as the global hub of over-the-counter (OTC) trading in silver, is its main physical market. Comex is a futures and options exchange, where most fund activity is focused.


Silver is invariably quoted in the US dollars per troy ounce.

Indian Scenario (silver)

India's silver demand averages 2500 tonnes per year, whereas the country's production was around 206.95 tonnes in 2010. Nearly 60% of India's silver demand comes from farmers and rural India, who store their savings in silver bangles and coins.


3.7 Investments in Bank deposits

Introduction:Today the common peoples used bank deposits as an investment and it is very popular among the investors. The Investment of surplus money in bank deposits is quite popular among the investors. Banks collect working capital for their business through deposits called bank deposit. The deposits given by customers for the specific period and the bank pay interest on them. In India all types of banks accepts deposits by offering interest. The deposits can be accepted from individuals, institutions, and business enterprises. The business and profitability of bank depends on deposit collection. For depositing money in the bank, an investor or depositor has to open an account in a bank.


Features of bank deposits:1. Any individual can open a bank account by following simple procedure. An account holder is treated as bank customer and all normal banking facilities and services are offered to him. A bank account may be single or joint. Nomination facility is also given to account holders. 2. Deposits in the banks are safe and secured. They can be withdrawn as per the terms and conditions of the bank account. The benefit of deposit insurance scheme is also available to bank depositors. 3. Money can be deposited at any time in the case of current and saving bank accounts. In the case of fixed deposit account, it is deposited only once and money is deposited every month in the case of recurring deposit account. 4. Interest is paid on bank deposits. The interest rate is decided by the RBI from time to time as per the money market situation. The cooperative banks offer nearly 1% higher interest rate as compared to commercial banks. Even senior citizens are offered a little higher interest rate. 5. Interest is paid on Quarterly or six monthly basis. However, if the deposit period is less than 90 days, the interest is paid on maturity. 6. Bank deposits have high liquidity. Banks even give loan on the security of fixed deposit receipts. 7. Loans can be raised against bank deposits. Advantages of bank deposits:1. Investment is reasonably safe and secured with adequate liquidity. 2. Banks offer reasonable return on the investment made and that too in a regular manner. 3. Banks offer loan facility against the investments made. 4. Procedures and formalities involved in bank investment are limited, simplr and quick.


5. Banks offer various services and facilities to their customers. Limitation of bank deposits:1. The rate of return in the case of bank investment is low as compared to other avenues of investment. 2. The return on investment is not adequate even to give protection against the present inflation rate in the country. 3. Capital appreciation is not possible in bank investment. Different types of deposit accounts are; 1. Saving account. 2. Fixed deposit account. 3. Current account. 4. Recurring deposit account. This indicates the use of bank deposit as an avenue of investment by Indian investors.


Saving 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 regard to several policy and operational parameters. Bank also pays you a minimal interest for keeping your money with them. Features: The minimum amount to open an account in a nationalized bank is Rs 100. If Cheque books are also issued, the minimum balance of Rs 500 has to be maintained. However in some private or foreign bank the minimum balance is Rs 500 or more and can be up Rs. 10,000. One Cheque book is issued to a customer at a time. A 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 2.5% and 4%. 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 a detail of the account, withdrawn along with the dates and the balance, is recorded in a passbook. 2. Fixed deposit account: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. 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 per cent, 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 years. Duration 15 - 45 days 30 - 45 days 46 - 90 days 91 - 110 days 181 - 270 days 1 - 2 years 2 - 10 years 1111 Days *Interest rate (%) per annum 4-5% 4.25 - 5 % 4.75 - 6 % 6 - 7.50 % 7.5 - 8.25 % 8.25 - 9.25 % 8.75 % 9.25 %


3. Current account:Current Account is one of the most basic and flexible deposit options for all the business needs. These Cheque operated account is primarily meant for businessmen, firms, companies, and public enterprises etc that need banking facility more frequently. Unlike savings bank account, no limits are fixed by banks on the number of transactions permitted in the Account. Most of the banks usually insist for a higher minimum balance as compared to savings account to be maintained in Current account. Now Current accounts are available with debit card and online banking facilities which make the transactions easier. Certain service charges are also imposed for operating current account. However this account cannot be considered as a saving account since the banks are not allowed to pay any interest to current account balance. Incase of death of the account holder his legal heirs are paid interest at the rates applicable to Savings bank deposit from the date of death till the date of settlement Features Overdraft facility is available Speedy fund transactions can be done by this account. Unlimited depositing and withdrawing facility Nomination facility is available under this current account. Third party Cheque will be collected by the depositor if they are endorsed. Return There are no returns on current account. The bank does not pay any interest on current account. 4. Recurring deposit account:-


The Recurring deposit in Bank is meant for someone who want to invest a specific sum of money on a monthly basis for a fixed rate of return. At the end, you will get the principal sum as well as the interest earned during that period. The scheme, a systematic way for long term savings, is one of the best investment option for the low income groups. Features The minimum investment of Recurring Deposit varies from bank to bank but usually it begins from Rs 100/-. There is no upper limit in investing. The rate of interest varies between 7 and 11 percent depending on the maturity period and amount invested. The interest is calculated quarterly or as specified by the bank. The period of maturity ranging from 6 months to 10 years. The deposit shall be paid as monthly installments and each subsequent monthly installment shall be made before the end of the calendar month and shall be equal to the first deposit. In case of default in payment, a default fee is chargeable for delayed deposit at the rate of Rs. 1.50/- for every Rs. 100/- per month for deposits up to 5 years and Rs. 2/- per Rs. 100/- in case of longer maturities. Since a recurring deposit offers a fixed rate of return, it cannot guard against inflation if it is more than the rate of return offered by the bank. Worse, lower the gap between the interest rate on a recurring deposit and inflation, lower your real rate of return. Premature withdrawal is also possible but it demands a loss of interest. Returns The rate of interest varies between 7 and 11 percent depending on the maturity period and amount invested. The interest is calculated quarterly or as specified by the bank. Amount invested per month Rs. 100 Rs. 500 Rs. 750 Rs. 1000 Maturity after 2 years (5% interest) Rs. 2626 Rs. 13,132 Rs. 19,698 Rs. 26,262


3.8 Investment in LIC schemes

Introduction:Insurance is a means of protection of the economic value of assets. It is a method of spreading over a large number of persons, a possible financial loss, which cannot be born by an individual. The occurrences which cause any damage to the assets are called perils. The damage that these perils may cause to assets is called risk that the asset is exposed to. The concept of risk is integral to the concept of insurance. The risk means that there is a probability of loss to an asset. Whether the loss will actually occur is not certain. It is the uncertainty that gives rise to the risk. If there is no risk, there is no need for insurance. Life insurance exist because there uncertainty regarding the timing and manner of death, though it is certain. The insurance contract provides a valuable feature in the relief from the burden of uncertainty. Even if the loss is not incurred during the term of the policy, the insured receives something for the premium in the form of freedom from the worry of any financial loss. Therefore, one must appreciate the fact that the operation of insurance principle is based on the contributions of the many paying the losses of the unfortunate few. If the premiums are return to the many who did not have losses, there would be no funds available to pay for the losses of the few who have suffered losses. Thus, the


insurance meets social commitments to every member of the society by providing relief to those who need it. Life insurance:Life insurance in India can be traced back to VEDAS. For instance, Yogakshema, the name of Life Insurance Corporation of Indias corporate head quarter is derived from Rigveda. The term suggest that a firm of community insurance was prevalent around 1000 BC and practiced by Aryans. Schemes of life insurance:-


Endowment products: - These are the products that can be taken for a specific

term and at the end of the term, the sum assured is paid to the policy holder along with returns in the form of bonus. This is a popular plan from the beginning, which provides the maturity proceeds to the life assured on its survival at a desired age and to the nominee on his yearly death i.e., death before maturity. Premiums are usually payable for selected term or until death of the life assured, if it occurs within this period. Endowment assurance policy bonus is paid at the time of maturity or death. The claim under this policy may arise either by death or by the maturity. Loans are also available on these policies. The Endowment plus and Endowment assurance policy are the examples of Endowment products.


Whole life insurance:- Under this plan the premium paying age is 35 years or till

80 years whichever is more. The sum assured becomes payable only on death of life assured. The plan provides maximum death cover to dependents for the premium paid. This is the cheapest plan of insurance. Whole life insurance guarantees a death benefit cover throughout the course of life, as against the term assurance that covers only for a certain terms of years. Whole life policies are paid out on death of the assured, whenever it occurs. Premiums are to be paid throughout the life or till death, or lesser limited period, though the policy is for whole life, premiums are to be paid for limited period only. The policy continuous for whole life. There are two types of policies i.e. with profits and limited payment with profits policy.



Term assurance: - These policies provide insurance cover for a specific term.

They are useful, when one has to take a loan and has a future liability for repayment. Term assurance products are low premium and risk products. Term assurance pays a death benefit to the legal heirs if the person insured dies during the term of the policy. Such a policy provides cover of risk for a specified period only. Term assurance plans offer pure risk cover without any element of saving. Therefore, these plans are more expensive. The sum assured is payable only if the insured person dies during the period of the term. In case the insured thus not die, during the tenure of insurance, nothing is payable. The term assurance plans can be of the following types: Convertible term assurance Renewable term assurance Level term assurance Increasing term insurance Decreasing term insurance


Money back policies:- The aim of money back policies is to provide cash flows of regular intervals. This is useful to those who are looking for periodic inflow of income. Normally the sum assured is paid in installments. If death of the policy holder occurs during the term of the plan, the beneficiaries/ nominees will receive the entire sum assured with accumulated bonus, irrespective of the cash pay out made till date. The premiums are comparatively higher in these plans. This is very popular form of fixed term policy. It is specially suitable for businessman, because certain amount of money is received back during the term of the policy with continuation of the risk for full sum assured. In case of death of the policy holder during the term of the policy, the nominee will receive full sum assured along with accrued bonus till that period. On survival of life assured, during the term, he will receive the survival benefits. These policies are eligible for loan.


Jeevan sathi(Joint life policy):- This policy is suitable for husband and wife, who want joint life risk cover under a single policy. This policy is issued to the working couple or wife should be an income tax assessee. If the sum assured is Rs. 1,00,000 or less, wife need not be a earning person. But this is also considered no allowed to


a pregnant women. Wifes income is also considered to grant insurance cover on husbands life subject to certain restrictions. Wife should belond to category I or II and she should be a proposer and husband should have been fully insured based on his own income. This plan is not allowed to female use who have undegrown three or more cesarean operations. Maximum sum assured allowed under these plan to household and self employed female lives category III, is Rs, 1,00,000 with standard age proof for housewives, graduates having medical policy, or credit card or driving license or passport, the maximum sum assured is Rs.10,00,000 with the age proof. If both husband and wife are alive up to maturity, sum assured plus bonus is paid to them. On the death of either husband or wife, the survivor gets sum assured immediately and future premiums are waived. If the survivor survives till maturity, he/she get sum assured again with full bonus. If the survivor also dies before maturity, sum assured plus bonus till that time are paid to the nominee.


Komal jeevan:- It is a money back plan for children with Guaranteed

addition @ Rs. 75 per 1000 sum assured. It is a legal gift for the child for higher education. Father or mother can propose and even guardian can also propose, if parents are not alive. Minimum age at entry is zero years and maximum 10 years. Maturity age is 26 years. Minimum premium paying term is 8 years and maximum 18 years. Minimum sum assured is Rs. 1,00,000 and maximum Rs. 25,00,000. All the modes of premium are allowed. Rebate for large sum assured is given as usual. Risk cover starts from the policy anniversary after completion of seventh year of the child are 2 years from the commencement of the policy whichever is later. No medical examination is required for the child. If the policy holder dies after commencement of the risk , full sum assured together with guaranteed addition is given to the nominee without deducting earlier installments paid. If the child dies before the policy risk commences, the policy gets cancelled and premiums paid till then are refunded.


Jeevan Adhar:- This plan may be offered to a person who has a handicapped dependant satisfying conditions as specified in Section 80DDA of Income Tax Act,


1961. The plan provides life insurance cover throughout the lifetime of the purchaser. The benefits under the plan are for the handicapped dependant who is partly in lump sum and partly in the form of an annuity. The premiums paid under this plan are eligible for Income Tax relief under Section 80DDA of Income Tax Act. Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deductions, as opted by you, within the selected premium paying terms of 10, 15, 20, 25, 30 or 35 years or till the earlier death. Alternatively, the premiums may be paid in one lump sum (Single Premium). The policy provides for the Guaranteed Additions at the rate of Rs.100 per thousand Sum Assured for each completed policy year. The Guaranteed Additions will accrue up to age 65 of the life assured or till his/her death, if earlier. This is a with-profits plan and participates in the profits of the Corporations life insurance business. It gets a share of the profits in the form of Terminal Additions. The policy will be entitled for Terminal Additions if at least 10 years premiums have been paid. The Terminal additions would depend on the future experience of the Corporation.


Unit linked plan:- Unit linked plan is also an investment priented product. As compared to other investment plans, the investment portion of the unit linked plan functions like a mutual fund. It is invested in a portfolio of debt and equity instrements in conformity with announced investment policy. Hence, it grows or erodes in line with the performance of that portfolio. Ofcourse, throughout the period of investment, the policy holders enjoys an insurance cover as stipulated.


3.9 Investment in Real Estate

Introduction:Investment in real estate includes properties like building, industrial land, plants, farm houses, agricultural land near cities and flats or houses. Such properties attract the attention of fluent investors. It is an attractive, as well as profitable investment avenue today. A residential building represents the most attractive real estate property for majority of investors the prices of real estate go on increasing day by day. The land is limited on the earth but the population been increasing. As the demand increases but the supply of land is limited, the prices trend to increase. Therefore, it is attractive investment which generates higher return during a short period of time. Ownership of a residential house provides on accommodation to the family and gives satisfaction to the family members. It acts as one useful family asset with sellable value. It is a long term investment. The government provides tax incentives to the individuals who buy the residential house. The interest paid on borrowings for purchase of house is a exempted from income tax. The principle amount repayment during the year is also


exempted from income tax up to an amount of Rs.1,00,000. Thus, the investment in residential house is also treated as tax savings investment. Investment in real estate provides capital appreciation of residential buildings, urban land and flats. It gives reasonable returns on investment. There is a low risk but there is no liquidity. There are chances of capital appreciation also. The property can also be used as security for rising loans. There is a tax saving in case of residential house. It is a long term investment. There is a quick appreciation in the value of assets. There is a low liquidity in case of investment in real estate. The risk in the investment is also more compared to investment in banks and mutual funds. The government rules and regulation regarding buying and selling of the property are troubles in case of real estate. Stamp duty, registration and legal formalities are complicated and there is a chance of cheating at the time of buying or selling. The amount of investment is huge and therefore the benefits of diversification of investments are not available. In real estate profitability is available at the cost of liquidity and the liquidity is low.


The recent trends in real estates:The real estate sector in India is on a growth path. The development in the real estate market encompasses growth in both commercial and residential spheres. Further, it has been estimated that there would be shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12), which provides a big investment opportunity, according to a report by the Technical Group on Estimation of Housing Shortage. The popularity of the Indian real estate sector is also highlighted by a report Emerging trends in Real Estate in Asia Pacific 2011 published by Price Waterhouse Coopers and Urban Land Institute. The report focuses on various places where developers are building commercial and residential developments. These places include Mumbai, Jodhpur, Agra, Punjab, Uttar Pradesh, Haryana, Madhya Pradesh, and Rajasthan among others. During 2010-11, the Indian real estate and housing sectors received US$ 1.12 billion in foreign direct investment (FDI), according to the Department of Industrial Policy and Promotion India (DIPP). Further, the industry also witnessed growth in private equity (PE) investments as well. Around 20 deals worth US$ 1.32 billion took place during January-May 2011, as compared to 22 deals worth US$ 483 million during the same period last year, according to Venture Intelligence, a research service focused on PE and mergers and acquisitions (M&A). Some of the major deals that were undertaken during the first five month of the current calendar year include investment of US$ 320 million by Jeff Morgan Capital in Compact Disc Indias film city project, investment of US$ 318 million by Warburg Pincus in Oceanus Real Estate and Ascends Indias investment of US$ 190 million in Phoenix Infocity. Further, US$ 86 million was invested by Tata Realty in Peepul Tree Properties.


There Are Many Different Categories of Real Estate Investment:

Residential real estate investments are properties such as houses, apartment buildings, townhouses, and vacation houses where a person or family pays you to live in the property. The length of their stay is based upon the rental agreement, or lease agreement.

Commercial real estate investments consist mostly of office buildings. If you were to take some of your savings and construct a small building with individual offices, you could lease them out to companies and small business owners, who would pay you, rent to use the property.

Industrial real estate investments consist of storage units, car washes and other special purpose real estate that generates sales from customers who temporarily use the facility. Industrial real estate investments often have significant "fee" and "service" revenue streams, such as adding coin-operated vacuum cleaners at a car wash, to increase the return on investment for the owner.

Retail real estate investments consist of shopping malls, strip malls, and other retail storefronts. In some cases, the landlord also receives a percentage of sales generated by the tenant store in addition to a base rent to incentives them to keep the property in top-notch condition.

Mixed-use real estate investments are those that combine any of the above categories into a single project. I know of an investor in California who recently took several million dollars in savings and found a mid-size town in the Midwest. He approached a bank for financing and built a mixed-use three-story office building surrounded by retail shops. The bank, which lent him the money, took out a lease on the ground floor, generating significant rental income for the owner. The other floors were leased to a health insurance company and other businesses. The surrounding shops were quickly leased by Panera Bread, a membership gym, a Quiznos, an upscale retail shop, a virtual golf range, and a hair salon. Mixed-use real estate investments are popular for those with significant assets because they have a degree of built-in diversification, which is important for controlling risk.


Indian Real Estate: Government Initiatives The Government has undertaken various initiatives to help the sector grow in the recent past. Some of the major government initiatives include:

Allowing 100 per cent FDI in townships, housing, built-up infrastructure and construction development projects through the automatic route, subject to guidelines as prescribed by DIPP

Allowing 100 per cent FDI under the automatic route in development of Special Economic Zones (SEZ), subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce In the Union Budget 2011-12, Mr. Pranab Mukherjee, Union Finance Minister

presented various initiatives for the real estate sector, especially focusing on affordable housing. Some of these initiatives include:

Raising the limit on housing loans eligible for a 1 per cent subsidy in interest rates Widening the scope for housing under "priority-sector lending" for banks, making interest rates cheaper on them Earmarking substantial amount to the Urban Development Ministry for spending on extension of Metro networks in Delhi, Bangalore and Chennai Allocating US$ 20.03 million for the urban infrastructure development project. The Urban Development Ministry received US$ 1.5 billion, an increase of US$ 68.53 million from the last fiscal 2010-11.

Increasing allocation for Bharat Nirman to US$ 12.89 billion. Bharat Nirman consists of 6 flagship programs, the Pradhan Mantri Gram Sandak Yojana (PMGSY), Accelerated Irrigation Benefit Program, Rajiv Gandhi Grameen Vidyutikaran Yojana, Indira Awas Yojana, National Rural Drinking Water Program and Rural telephony.


Indian Real Estate: Road Ahead The affordable housing segment is expected to play an important role in the growth of the real estate sector in India in 2011, on the back of increasing demand for such housing, according to the Confederation of Real Estate Developers' Associations of India (CREDAI). "Affordable housing will be a key factor in driving the sector and we have already started working on progressive solutions in this area for effective and customized implementation of such projects," CREDAI Chairman Kumar Gera said. Further, growth in the infrastructure sector is also expected to accelerate real estate activities, in commercial as well as residential segments, during this year.


3.10 GDP, Savings and investments

The increasing trend in gross domestic savings as a proportion of GDP observed since 2001-02 has continued with the savings ratio rising from 26.4 per cent in 2002-03 to 29.7 per cent in 2003-04, 31.1 per cent in 2004-05 and 32.4 per cent in 2005-06. As much as 0.7 percentage point of the 1.3 percentage points increase in gross domestic savings rate between 2004-05 and 2005-06 has come from the household sector. Two forces have been acting simultaneously on the portfolio behavior of Indian households a construction boom with residential buildings financed from housing loans from banks and the progressive maturing of the domestic financial markets. While the former has tended to increase household savings in physical form and depress financial savings, the latter has provided incentives for higher financial savings. There was a perceptible shift in the household portfolio in the three years ending in 2005-06. Physical savings as a proportion of GDP has declined steadily from a high of 12.4 per cent in 2003-04 to 10.7 per cent in 2005-06. Financial savings, on the other hand, after declining from 11.3 per cent to 10.2 per cent between 2003-04 and 2004-05, more than recovered to 11.7 per cent in 2005-06. The increase in savings rate is what is to be expected with higher growth rate of the economy and a declining dependency ratio. With the proportion of population in the working age group of 15-64 years increasing steadily from 62.9 per cent in 2006 to 68.4 per cent in 2026, the demographic dividend in the form of high savings rate is likely to continue. As the savings rate has gone up, private final consumption expenditure (PFCE), at current prices as a proportion of GDP, has shown a declining trend particularly from 2001-02. PFCE as a proportion of GDP declined from 63.1 per cent in 2002-03 to 62.1 per cent in 2003-04, 60.0 per cent in 2004-05, and further to 58.7 per cent in 2005-06. This decline has also been accompanied by substantial changes in the consumption basket in terms of the shares of different commodity groups. In PFCE, the share of food, beverages and tobacco came down from 43.3 per cent in 2002-03 to 39.4 per cent in 2005-06. The other major item of importance, namely, transport and communication, as a proportion of PFCE, rose from 15.8 per cent in 2002-03 to 19.1 per cent in 2004-05.


As a proportion of GDP at current prices, Government final consumption expenditure (GFCE), after declining from 11.9 per cent in 2002-03 to 11.0 per cent in 2004-05, increased to 11.5 per cent of GDP in 2005-06. In tandem with the rise in the rate of gross domestic savings between 2003-04 and 2004-05, there was a step up in the rate of gross domestic capital formation (GDCF) or investment from 28 per cent of GDP to 31.5 per cent of GDP leading to a savings investment gap or a current account deficit of 0.4 percent of GDP in 2004-05. From the demand-side perspective, unlike countries of East Asia during their high-growth phase or China in more recent times, GDP growth in India in the post-reform period was driven mostly by private final consumption expenditure or PFCE growth. PFCE contributed more than one half of the growth every year until 200102. After falling below one half in 2002-03, it had again dominated GDP growth in 200304. But this pattern appears to have undergone a virtuous transformation with investment rather than private consumption being the main source of GDP growth in the latest two years of 2004-05 and 2005-06. Data on investment in the national accounts available until 2004-05 show that the 6.8 percentage point contribution of investment to 13.1 per cent growth in GDP at current market prices in 2004-05 exceeded the corresponding contribution of private final consumption expenditure at 6.1 percentage point for the first time in recent years. In terms of contribution to growth of GDP at current market prices, from the demand side, investment continued to provide the lead during 2004-05 and 2005-06. The percentage point contribution of investment in the growth of GDP at current market prices of 13.1 per cent and 14.1 per cent in 2004-05 and 2005-06, respectively, were 7.6 per cent and 7.0 per cent, respectively. With imports growing faster than exports, the external balance continued to have a negative contribution to GDP growth in recent years.


Savings and investment (Base: 1999-2000) Year Gross Domestic Savings a) Public b) Private I) Household II) Private Corporate Gross Domestic Investment a) Public b) Private Valuables Gross fixed capital formation Change in stocks Valuables Saving investment gap Public Private 1999-00 24.8 -0.8 25.6 10.6 4.5 2000-01 23.4 -1.9 25.3 10.2 4.3 2001-02 23.5 -2.0 25.5 10.8 3.7 2002-03 26.4 -0.6 27.0 10.3 4.2 2003-04 29.7 1.2 28.5 11.3 4.7 2004-05 31.1 2.4 28.7 10.2 7.1 2005-06 32.4 2.0 30.4 11.7 8.1

25.9 7.4 17.9 0.8 23.4

24.0 6.9 16.5 0.7 22.8

22.9 6.9 16.3 0.6 23.0

25.2 6.1 18.4 0.6 23.8

28.0 6.3 19.4 0.9 24.8

31.5 7.1 21.3 1.3 26.3

33.8 7.4 23.6 1.2 28.1

1.9 0.8 -1.1 -8.2 7.7

0.6 0.7 -0.6 -8.8 8.8

0.2 0.6 0.6 -8.9 9.2

0.7 0.6 1.2 -6.6 8.6

0.8 0.9 1.6 -5.2 9.2

2.0 1.3 -07.4.4 -4.7 7.4

2.9 1.2 -1.3 -5.4 6.9

(*Source: Central Statistical Organization.)


4 Collection and Analysis of data

The collection and analysis of the data is based on survey. In this survey 48 respondents give their view towards investment. Analysis of data

1. What does investment mean to you?

From the 48 respondents, the meaning of the investment for 37.50% respondents is to channelize savings, 27.08% wants to generate savings, 25% wants a way to their financial goal and 10.42% wants to support dependence.


2. What is your purpose of investment?

From the 48 respondents, 16.66% respondents investmet purpose is to serve with financial support, 20.83% wants to gemerate their current income, 39.58% wants to generate long term income, while 22.91% says that they want safety against unanticipated.


3. What is the most important reason for you to make investments?

From the 48 respondents, the most important reason for investment for 10.42% is security after retirement, 27.08% wants to serve the money required in emergency, 25% wants investment for the purpose of education and 37.05% makes the investment to meet their daily expences.


4. Which according to you is the most important goal in investment making?

From the 48 respondents, 35.42% respondents are saying that the most important goal for making investment is mainting liquidity, 22.91% wants to make investment for increasing wealth and 35.42% wants to make investment for saving tax.


5. Have you invested in financial market?

From the 48 respondents, 68.58% respondents are saying yes that they have investments in financial markets and 35.42% are saying no.


6. Which investment you will prefer?

From the 48 respondents, 37.50% respondents will prefer short term investment and 62.50% respondents will prefer long term investment.


7. From the following which one type of investment you will choose for long term?

From the 48 respondents, 22.91% respondents would like to invest their money for long term in shares and debentures, 20.83% will choose gold and silver, 10.42% will choose


bank deposits, 12.05% will choose mutual funds, 14.59% will choose LIC schemes and 18.74% will choose real estate for long term investment.


From the following which one type of investment you will choose for short term?

From the 48 respondents, 31.28% will choose Treasury bills for short term investment, 18.72% will choose commercial paper, 31.28% will choose certificate of deposit and 18.72% will choose bells of exchange for short term investment.


9. From the following which one type of investment you will choose for tax saving?

From the 48 respondents, 20.83% respondents will choose real asset as an investment for tax saving, 31.72% will choose LIC schemes, 22.91% will choose shares and 25% will choose tax saving bonds as an investment for tax saving.


10. From the following which one type of investment you will choose for future expenses?

From the 48 respondents, 14.59% respondents will choose saving deposit as an investment to meet their future expences, 62.05% will choose fixed deposit and 22.91% will choose future investment plans as an investment to meet their future expences.


11. From the following which LIC policy you will choose as an investment for your future?


From the 48 respondents, 31.28% will choose Jeevan aanand, 22.91% will choose Jeevan mitra, 25% will choose Jeevan saral and 20.83% will choose Endowment plan as an investment for their future.

12. What % of your savings you invest?


From the 48 respondents, 6.25% will invest 10% of their savings, 16.66% will invest 15% of their savings, 22.91% will invest 20% of their savings, 20.83% will invest 30% of their savings, 16.66% will invest 40% of their savings and 16.66% will invest 50% of their savings.


13. Do you design your investment portfolio with any portfolio manager?

From the 48 respondents, 22.91% respondents saying yes that they design their portfolio with a portfolio manager, 41.67% saying no that they dont design any portfolio with any portfolio manager and 35.42% saying that they design their own portfolio.


14. Have you opened any Demat account?

From the 48 respondents, 70.48% says that yes they have demat account and 29.16% says no they dont have Demat account.


15. Have you received any advice from any financial service provider?


From the 48 respondents, 62.05% says yes, they have received financial advice and 37.50% says no, they dont received any financial advice.

16. What is the time period in which you want to achieve your financial goals from your investments?


From the 48 respondents, 12.05% wants less than one year to achieve their financial goals, 10.41% wants one year, 18.75% wants three years, 25% wants five years and 33.39% wants more than five years to achieve their financial goals.


17. Do you reinvest the return that you receive from your investment?

From the 48 respondents, 41.22% says yes, they reinvest their returns, 26.89% says sometimes they reinvest their returns and 31.89% says no, they dont reinvest their returns.


5 Interpretation of data
In this survey the most of the respondents says that investment means to channelize the savings, few of them are saying investments are done for supporting dependence and average of them are saying that the investment is a way to their financial goal. Most of the respondents says that their purpose of investment is to generate long term income, average of them are saying that they want safety against unanticipated and few of them are saying that they want to generate their current income. The respondents are saying that the most important reason for making investment is to meet daily expences were, average of them are saying that their purpose for investment is to requirement of money in emergency and few of them are saying that their purpose is to getting security after retirement. According to respondents the most important goal fo makinf investment is to saving tax, were average are saying that they want to maintain liquidity andfew of them are saying that they want to increase their wealth. According to survey the most of the respondents are invested in financial markets and few of the have not invested in financial market. The most of the respondents are preferring long term income and few of them are preffering short term income. For long term investment the most of the investors will choose the shares and debentures as well as gold and silver, average investors will choose real estae and LIC shemes and few of them will select the mutual fund and bank deposits. For short term investment the most of the investors will choose certificate of deposit and treasury bills and few of them are selecting the commercial paper and bills of exchange. For the purpose of tax saving the most of the investors will choose the investment like Lic schemes and tax saving bonds and few of them will select real estate and shares for tax saving. To meet the future expences the investors will choose the investment in fixed deposit because it gives higher returns with no risk involved and few of them will choose the future investment plans. To secure the future the most of the investors will choose


LIC schemes like Jeevan Aanand and Jeevan Saral and few of them will choose endowment plan. Most of the investor would invest 20-30% of their savings, average of them would invest 20-40% of their savings and few of them would invest 10-50% of their savings. The most of the investors are saying that they do not design their portfolio with any portfolio manager, average of them are saying that they design their own portfolio and few of them said yes they designed their portfolio with a portfolio manager. The most of the respondents are saying that they have Demat account and few of the are saying that they dont have Demat account, it shows that the investors are adopting the technology. Many of them received the financial advice from their financial service provider and few of them not yet received any financial advice. The most of the investor are saying that they want more than five years to achieve their financial goals from investment, average of them are saying that they want three to five years and few of them are saying that they want one year. Many from the investor reinvest their returns and few of them sometimes only reinvest their returns. According to survey the investment in shares and debentures is the best investment among the investors because, it gives higher and stable returns, it is tax saving, it is long term as well as short term investment.


6. Conclusion
The strategies and characteristics of investors have led to financial institutions innovating and expanding their product range to meet the growing demands of such investors. Net worth and goals need to be matched and assets need to be planned tax effectively. Educating the client on various and different types of investment avenues that will suit him the best will prove very beneficial for the financial advisor. Studies indicate that more and more investors are aware of the emerging investment opportunities and use sophisticated investment strategies such as: Leveraging on the professional advisors' capability to analyze market trends and make appropriate investments Searching for innovative products to enhance value Diversifying across various types of assets Investing across emerging geographies Consolidating financial information and assets

Further, despite number of investment avenues, there exists a lot many opportunities for investor to invest in insurance policy both as an investment as well as tax rebate. Regulators must formulate strong, fair and transparent guidelines and make sure that old and new players are subject to the same standards. This would enhance investors' trust in the sector and would ultimately increase the investment in the field. The rising yields in debt markets have resulted in FMPs (fixed maturity plans) emerging as attractive investment options for investors. However, it should be understood that FMPs are not the risk-free avenues they are made out to be. For instance, the


possibility of the actual return varying from the indicated return cannot be ruled out. Market conditions, inappropriate investments (say a credit default in any of the underlying investments) or even a poor investment style (a mismatch between the maturity profile of the FMP and that of its underlying investments) can be responsible for the same. In conclusion, while FMPs would qualify as low risk investment avenues, they are certainly not the risk-free avenues they are made out to be.


7 Suggestions and recommendations Suggestions:

1. It is favorable to consider investment in Consumer driven sectors as strong growth is indicated over the next few year. 2. Banks, automobile companies are the kind of stocks required selective buying. 3. If a business house has created value and weathered the storms in the post, it shall continue to do so in future. Investors seeking stedy growth without having to worry about safety of capital can follow this strategy. 4. The real estate market has witnessed a stable pricing scenario. HDIL would be a better avenue for investment considering its well diversified portfolio, lower debt, and consistent growth momentum. 5. Pharmacy major workhardt is a value buy despite lingering debt woes. 6. Midcap, though rewarding, is a relatively risky category.

1.The government has to remove bottlenecks to infrastructure development and growth. 2.The government has to take initiative to attract long-term investment. 3.The government has to encourage small scale investors to invest in postal schemes.


Appendices Questionnaire
NAME: - __________________________________________________________ AGE: - ___________ PROFESSION:- _______________________________ 1) What does investment mean to you? [ [ [ [ ] To channelize savings ] To generate savings ] A way to your financial goal ] To support dependence

2) What is your purpose of investment? [ [ [ [ ] Serve you with financial support ] Generate current income ] Generate long term income ] Safety against unanticipated

3) What is the most important reason for you to make investments? [ [ ] Security after getting retired ] Money required for emergency purpose


[ [

] For the purpose of education ] To meet daily expenses

4) Which according to you is the most important goal in investment making? [ [ [ ] Maintaining liquidity ] Increasing wealth ] Saving tax

5) Have you invested in financial market? [ [ ] Yes ] No

6) Which investment you will prefer? [ [ ] Short term ] Long term

7) From the following which one type of investment you will choose for long term? [ [ [ [ [ [ ] Shares and Debentures ] Gold and Silver ] Bank deposits ] Mutual funds ] LIC schemes ] Real estate


8) From the following which one type of investment you will choose for short term? [ [ [ [ ] Treasury bills ] Commercial paper ] Certificate of deposit ] Bills of exchange

9) From the following which one type of investment you will choose for tax saving? [ [ [ [ ] Real estate ] LIC schemes ] Shares ] Tax Saving Bonds

10) From the following which one type of investment you will choose for future expenses? [ [ [ ] Saving deposit ] Fixed deposit ] Future investment plans

11) From the following which LIC policy you will choose as an investment for your future? [ [ [ [ ] Jeevan aanand ] Jeevan Mitra ] Jeevan saral ] Endowment plan


12) What % of your savings you invest? [ [ [ [ [ [ ] 10% ] 15% ] 20% ] 30% ] 40% ] 50%

13) Do you design your investment portfolio with any portfolio manager? [ [ [ ] Yes ] No ] Self designed

14) Have you opened any Demat account? [ [ ] Yes ] No

15) Have you received any advice from any financial service provider? [ [ ] Yes ] No

16) What is the time period in which you want to achieve your financial goals from your investments? [ [ [ [ ] Less than one year ] One year ] Three years ] Five years


[ [ [ ] Yes

] More than five years

17) Do you reinvest the return that you receive from your investment?

] Sometimes ] No Sign.


Books:Book name Principles of investment Regulation of securities markets Portfolio management Author P. K. Bandgar Ramanath Iyer P. K. Bandgar Publisher Vipul Prakashan Vipul Prakashan Vipul Prakashan


Environment of financial system Investment analysis and portfolio management

P. K. Bandgar Prasanna Chandra

Vipul Prakashan TATA McGraw hill Publications