“Analysis of Investment Options in Indian Financial Markets”

Financial Management

ISSN: 2230-9667 Chronicle of the Neville Wadia Institute of Management Studies & Research 267

“Analysis of Investment Options in Indian Financial Markets”

Author: Dr. B. M. Londhe (Prof. and Head SRES, COE Kopargaon)

Abstract: The paper “ANANLYSIS OF INVESTMENT OPTIONS IN INDIAN FINANCIAL MARKET” gives the brief idea regarding the various investment option that are prevailing in the financial markets in India. With lots of investment options like Stock market, Commodity market, Currency Market, Gold, Fixed Deposits, Mutual Funds, Real Estate the common investor ends up more confused than ever. Each and every investment option has its own merits and demerits. This paper I have discussed about few investment options available in Indian Financial Markets. Any investor before investing should take into consideration risk, safety, liquidity, returns and entry/exit barriers parameters. We need to evaluate each investment options on the above-mentioned basis and then invest money. Today investor faces too much confusion in analyzing the various investment options available and then selecting the best suitable one. In the present project, investment options are compared on the basis of returns as well as on the parameters like risk, safety, liquidity, entry & exit etc. thus assisting the investor as a guide for investment purpose. Introduction: INVESTMENTS: There are many different definitions of what ‘investment’ and ‘investing’ actually means. One of the simplest ways of describing it is using your money to try and make more money. This can happen in many different ways. All investors are different. The common factor is that you would like to invest money to aim to make it grow or to receive a regular income from it. We would like to show you that choosing the most suitable investment for you does not need to be difficult. All you need is the right help along the way The act committing money or capital to an endeavor with the expectation of obtaining an additional income or profit is known as investment. Investing means puttingyour money to work for you. Investment decisions: These days almost everyone is investing in something… even if it’s a savings account at the local bank or a checking account the earns interest or the home they bought to live in. However, many people are overwhelmed when they being to consider the concept of investing, let alone the laundry list of choices for investment vehicles. Even though it may seem the everyone and their brothers knows exactly who, what and when to invest in so they can make killing, please don’t be fooled. Majorities of investor typically jump on the latest investment bandwagon and probably don’t know as much about what’s out there as you think. Before you can confidently choose an investment path that will help you achieve your personal goals and objectives, it’s vitally important that you understand the basics about the types of investments available. Knowledge is your strongest ally when it comes to weeding out bad investment advice and is crucial to successful investing whether you go at it alone or use a professional. The investment options before you are many. Pick the right investment tool based on the risk profile, circumstance, time available etc. if you feel the market volatility is something, which you can live with then buy stocks. If you do not want risk, the volatility and simply desire some income, then you should consider fixed income securities. However, remember that risk and returns are directly proportional to each other. Higher the risk, higher the returns. Objectives: 1) To make an analysis of various investment options. 2) The aim is to compare the returns given by various investment options i.e. Stock market, Commodity

market, Currency Market, Gold, Fixed Deposits, Mutual Funds, Real Estate.



3) To cater the different needs of investor, these options are also compared on the basis of various parameters like,

i. Returns ii. Safety iii. Liquidity iv. Risk v. Entry/exit barriers

Research Methodology: Analytical research is carried out for this paper. Stock market, Commodity market, Currency Market, Gold, Fixed Deposits, Mutual Funds, Real Estate were identified as major types of investment options. I have collected the secondary data for the project regarding investment and various investment options were collected from websites, textbooks and magazines. Secondary data is collected by the following sources :- 1. Internet 2. Books 3. Newspaper 4. Magazines 5. Reports 6. Records 7. Journals Then the averages of returns over a period of 5 years are considered for the purpose of comparison of investment options. Then, critical analysis is made on certain parameters like returns, safety, liquidity, risk etc. Giving weightage to the different type of needs of the investors and then multiplying the same with the values assigned does this. LIMITATIONS OF THE STUDY � The study was limited to only seven investment options. � Most of the information collected is secondary data. � The data is compared and analyzed on the basis of performance of the investment options over the past

five years. � While considering the returns from mutual funds only top performing schemes were analyzed. � It was very difficult to obtain the date regarding the returns yielded by real estate and hence Residex for

4 cities rates were taken. Data Analysis: 1. Stock Market returns at a glance:-

Table No.1 : BSE 30 (SENSEX) Interpretation:- From the above data analysis there is huge variation between percentage change. In the year 2008 there is negative return because the main reason is recession and same position in 2011, but in 2009 there is highest return as comparison to year from 2008 to 2012. Highest positive return in year 2009 i.e. 81.04.& lowest in year 2012

YEAR INDEX ABSOLUTE CHANGE

PERCENTAGE CHANGE (%)

2007 20287 0 0 2008 9647 -10640 -52.45 2009 17465 7818 81.04 2010 20510 3045 17.43 2011 15455 -5055 -24.65 2012 17198 1743 11.28



Table No.2 : NIFTY 50

Interpretation:- From the above data analysis of Nifty 50 there is average variation between percentage returns .The highest return in year 2010 i.e. 15.78 & lowest positive return in year 2011 i.e. 2.12 . In the year 2008 & 2012 there is negative return i.e. -4.32 & -4.61 respectively 2. Commodity Market returns at a glance:- Table No.1: MCX COMMDITY INDEX

Interpretation:- As above data analysis maximum variation of percentage returns between year 2008 to 2012. The highest percentage returns in year 2008 i.e. 34.45 and lowest in year 2012 i.e. 6.57. From the year 2008 to 2012 in year 2009 there is negative percentage return i.e. -18.88.

Table No.2: MCX METAL INDEX Interpretation:- From the above data analysis huge variation between positive and negative percentage returns in the year 2011 & 2009 i.e. 42.49 & -41.7 respectively. In the year 2008 & 2012 approximately same returns i.e. 4.47 & 4.68 respectively.



2007 4529 0 0 2008 4333 -196 -4.32 2009 4636 303 6.99 2010 5368 732 15.78 2011 5482 114 2.12 2012 5229 -253 -4.61



2007 2186 0 0 2008 2939 753 34.45 2009 2384 -555 -18.88 2010 2755 371 15.56 2011 3524 769 21.82 2012 3772 248 6.57



2007 4967 0 0 2008 4745 222 4.47 2009 2766 -1979 -41.70 2010 3330 564 20.39 2011 4745 1415 42.49 2012 4967 222 4.68



3. Currency Market returns at a glance Table No.4: USD/INR

Interpretation:- From the above data analysis of currency market for US dollar & Indian rupees the highest positive return got in the year 2012 i.e. 24.74 & negative percentage return in the year 2010 & 2011 i.e. -2.65 & -5.08 respectively , therefore investor took the risk while investing in currency market. Table No.2: GBP/INR

Interpretation:-From the above data analysis of currency market Great Britain Pound & Indian Rupees the highest percentage positive return in the year 2012 i.e. 11.56 & negative percentage return in the year 2009 & 2010 i.e. -7.76 & -11.23 respectively. It shows the variation between percentage change return. 4. GOLD returns at a glance Table No.1: LAST 5 YEAR GOLD PRICE

Year USDINR Rate

ABSOLUTE CHANGE


2008 43.29

_____________ _____________

2009 47.9455

4.6555 10.75

2010 46.6744

-1.2711 -2.65

2011 44.4148

-2.2596 -5.08

2012 55.4047

10.9899 24.74

Year GBPINR Rate

ABSOLUTE CHANGE


2008 85.88 __________ __________

2009 79.2158 -6.6642 -7.76

2010 70.3172 -8.8986 -11.23

2011 76.93 6.6128 9.40

2012 85.82 8.89 11.56



2007 10800 0 0

2008 12500 1700 15.74

2009 14500 2000 16

2010 18500 4000 27.57

2011 26400 7900 42.70 2012 29910 3510 13.3



Interpretation:-From the above data analysis of last 5 years gold percentage returns continuously increases. Investment in gold is always beneficial for investor . The highest positive percentage return in the year 2011 i.e. 42.7 & lowest positive return in the year 2012 i.e. 13.3 there is no negative returns while investing in gold this is most positive thing while investing in gold . 5. FIXED DEPOSIT returns at a glance Table No.1: Fixed Deposit rates are for 1 to 5 year deposits.

Interpretation:- From the above data analysis of fixed deposits of last 5 years the highest positive percentage return in the year 2011-12 i.e. 8.75 & lowest positive return in the year 2009-10 i.e. 6.5 . There is no negative percentage return while investing in fixed deposit therefore again it is safe to investor while investing in fixed deposits. 6. Mutual Fund returns at a glance Table No.1: Open Ended

Interpretation:-From the above data analysis of mutual fund open ended fund the highest return got from the UTI Gold exchange traded fund i.e. 27.02 from the last 5 years.There is less variation between percentage return while investing open ended mutual fumd. There is no negative return while investing open ended mutual fund.Table No.2: Close Endend

YEAR FD RATES AVERAGE FD RATES

2007-2008 8.25 TO 8.75 8.50

2008-2009 8.00 TO 8.75 8.375

2009-2010 6.00 TO 7.00 6.50

2010-2011 8.25 TO 9.00 8.625

2011-2012 8.00 TO 9.50 8.75

Rank No.

Scheme Name Last 5 year Returns (%)

1 UTI Gold Exchange Traded Fund

27.02

2 Kotak Gold ETF 26.96 3 GS Gold BeES 26.93 4 Realince Pharma

Fund - Growth 21.57

5 ICICI Prudential FMCG - Growth

17.45



Interpretation:-From the above data analysis as comparison to open ended mutual fund less returns got in close ended mutual fund the highest returns got from Tata Tax Advantage Fund- 1 i.e. 9.1 in last five years & lowest positive returns from the reliance equity linked saving fund- series I-growth i.e. 2.21. Close ended fund secured for investor for investing money because there is no negative returns. 7. Real Estate returns at a glance Residex index for 2 Cities (Based Year 2007) Table No.1: Mumbai Residex

Interpretation:- From the above data analysis of Mumbai Residex Rates huge variation between year 2008 to 2012. The highest percentage return in the year 2010 i.e. 27.2, Lowest Positive returns in the year 2012 i.e. 2.15. Table No.2: Delhi Residex

Rank No.

Scheme Name Last 5 year Returns (%)

1 Tata Tax Advantage Fund – 1 9.10 2 IDFC Tax Saver (ELSS) Fund

– Growth 6.55

3 UTI Long Term Advantage Fund – Growth

2.75

4 ING Retire Invest Fund – Series I – Growth

2.38

5 Reliance Equity Linked Saving Fund – Series I –Growth

2.21



2007 100 0 0 2008 114 14 14

2009 125 11 9.65

2010 159 34 27.2

2011 186 27 16.98 2012 190 4 2.15



2007 100 0 0 2008 127 27 27

2009 117 -10 -7.87

2010 114 -3 -2.56

2011 149 35 30.70

2012 168 19 12.75



Interpretation:- From the above data analysis of Delhi Residex Rates the highest percentage return in the year 2011 i.e. 30.7, Negative percentage return in the year 2009 & 2010 i.e. -7.87 & -2.56 respectively, Lowest Positive returns in the year 2012 i.e. 12.75. Findings: 1. This paper consists of the analysis of various investment options like stock exchange , commodity

market , Currency market, gold options , fixed deposits, mutual funds & real estate . 2. The best option for investment according to analysis is gold, because according to last 5 year analysis

for gold it never gave the negative percentage return . 3. In this paper I took the parameter for investment like safety, liquidity , risk & entry exit barriers 4. According to analysis it was found that it is more risky to invest in stock market because there was

large variation between percentage returns but when the investor took the risk percentage of getting the returns increases as well as risk also increases.

5. While investing in Stock moderate security, high liquidity, very high risk, as well as no entry & exit barrier.

6. While investing in a gold it provide the more security liquidity & it has no entry & exit barriers 7. According to analysis while investing in Fixed deposit investor get more security & there is entry &

exit barriers as well as less liquidity & no risk for fixed deposit investment option. 8. Investment in real estate is more safety, average risk & no entry exit barrier according to analysis of

the project while investing in real estate. 9. For investing the money on mutual funds there is less variation between percentage returns more safety,

average percentage return, moderate risk, average liquidity also there was no entry & exit barrier for investor.

Summary Evaluation of Various Investment Options:

Conclusion: There are several investments to choose from these include Stock market, Commodity market, Currency Market, Gold, Fixed Deposits, Mutual Funds, Real Estate. Each class of assets has its peculiarities. At any instant, some of those assets will offer good returns, while others will be losers. Most investors in search of extraordinary investments try hard to find a single asset. Some look for the next Infosys, other buys real estate or gold. Many of them deposit their savings in the Public Provident Fund (PPF) or post office deposits, others plump for debt mutual funds. Very few buy across all asset classes or diversify within an asset class. Therefore it has been widely said that “Don’t put all your eggs in one basket”. The idea is to create a portfolio that includes multiple investments in order to reduce risk. The stock market moved up more than 70%, while many stocks have moved more. Real estate prices are also

Return Safety Risk Liquidity Convenience Capital yield

Capital Appreciation

Stock Market Low High low High Fairly High High Commodity Market

Low High low High Fairly High High

Currency Market

Very Low

Moderate Average Moderate High Average

Gold Nil Moderate High Average High Average Fixed Deposit Moderate Nil Very High Negligible High Vey High Mutual fund Low High High Low Very High High Real Estate Moderate Moderate High Negligible Low Fair



swinging up, although it is difficult to map in this fragmented market. Gold and Silver prices have spurted. Right now equity looks the best bet, with real state coming in second. The question is how long will this last? If it is a short-term phenomenon, going through the hassle of switching over from debt may not be worth it. If it’s a long-term situation, assets should be moved into equity and real estate. This may be long-term situation. The returns from the market will be good as long as profitability increases. Since the economy is just getting into recovery mo, that could hold true for several years. Real estate values, especially in suburban areas or small towns could improve further. The improvement in road networks will push up the value of far-flung development. There is also some attempt to amend tenancy laws and lift urban ceilings, which have stunted the real estate market. Regardless of your means of method, keep in mind that there is no generic diversification model that will meet the needs of every investor. Your personal time horizon, risk tolerance, investment goals, financial means, and level of investment experience will play a large role in dictating your investment experience will play a large role in dictating your investment mix. From there determine exactly which investments to in completing the mix, substituting traditional assets for alternatives as needed. Recommendations: 1. Firstly, the primary requirements have been broadly classified into three i.e. Basic Requirements,

Ancillary Requirements and Portfolio Fit. These have been further classified into

� Primary needs:- Safety returns and Liquidity. � Secondary needs:- tax efficiency, entry barriers and cash flow effectiveness. � Tertiary needs:- long term goals and holdings/liquidation cost.

2. While doing the analysis of various investment options for last 5 year I would give the suggestion that if investor want more security as well as return he should invest in gold.

3. While investing money if investor want more return he should invest the money in stock market like BSE500 but there was more risk for there investment.

4. Gold , fixed deposits investment provide security as well as average returns. 5. Investment in real estate , commodity market as well as currency market provide high return but there

is high risk those investor who want high return they can select these options for there investment. 6. The systematic investment plan, a special feature in mutual funds is the best option to meet your long-

term requirements for the same mutual funds has the highest score in the asset grid.

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“Analysis of Investment Options in Indian Financial Markets”

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