CHAPTER 1INTRODUCTION
INTRODUCTIONThe money an individual earn is partly spent and the
rest is saved for meeting future expenses. Instead of keeping the
savings idle he/she may like to use savings in order to get return
on it in the future. This is called Investment. Investment is the
act of committing money or capital to an endeavor with the
expectation of obtaining an additional income or profit.There are
ample Financial Instruments available in the market for investment;
each instrument has its own features. To invest money in financial
instruments is not so easy. It needs depth study where to invest so
that their investment could be safe along with the growth of money.
In present scenario everyone wants to invest his money but having
their own different objectives. It may be growth of capital, tax
minimization, retirement planning, to balance out inflation rate,
safety etc. The investors always mess with these objectives which
creates confusion of where to invest, which tendency they have to
prefer at the time of investment, which factors influence their
investment decisions, how to plan their investment portfolio and to
whom to consult for taking that all decisions. So this study is
based on investors perception regarding their investment. It
includes what they think at the time of investment, what are the
various factors they keep in mind at investment or affects their
decisions regarding investment
1.1 OVERVIEW OF THE INSURANCE INDUSTRYThe insurance sector in
India has come a full circle from being an open competitive market
to nationalization and back to a liberalized market again. Tracing
the developments in the Indian insurance sector reveals the
360-degree turn witnessed over a period of almost two
centuries.
A Brief History of the Insurance SectorThe insurance sector was
opened up for private participation with the enactment of the
Insurance Regulatory and Development Authority Act, 1999. While
permitting foreign participation in the ventures set up by the
private sector, the government restricted participation of the
foreign joint venture partner through the FDI route to 26 per cent
of the paid-up equity of the insurance company. The objective of
the liberalization was to expand the scope and ambit of Insurance
both Life and General in India. Since opening up, the number of
participants in the sector has gone up from six insurers (including
the Life Insurance Corporation of India, four public sector general
insurers and the General Insurance Corporation (GIC) as the
national re-insurer) in the year 2000 to 37 insurers operating in
the life, non-life and re-insurance segments as on December 2007.
26 insurance companies in the private sector have been granted
registration in the country in collaboration with established
foreign insurance companies from across the globe. As per industry
estimates, out of 78 per cent Indian households that are aware
about life insurance, only 24 per cent own a policy. A combined
ICICI Prudential Life Insurance and IMRB survey, conducted in three
metros Delhi, Mumbai and Chennaishows that households with income
of Rs. 35000 on an average have two policies. Further, 79 per cent
people prefer life insurance over other tax saving instruments like
post office savings, Equity-Linked Saving Schemes and fixed
deposits. Since end of 2000 when insurance was privatized, Life
Insurance Company and The distribution network expanded
significantly. Until 2000, the general insurance sector had only
four public sector players. The public enterprises Oriental
Insurance Company of India (OIC), National Insurance Company of
India (NIC), and New India Assurance Company of India (NIA) and
United Insurance Company of India (UII) -- were located in Delhi,
Kolkata, Mumbai and Chennai respectively. They primarily focused on
their immediate regions and there was little competition, leading
to a near monopolistic environment. On the whole, the sector
achieved double-digit growth and this trend is expected to persist
over the medium term. ABOUT IRDA (Insurance Regulatory and
Development Authority Act) - Insurance sector has been opened up
for competition from Indian private insurance companies with the
enactment of Insurance Regulatory and Development Authority Act,
1999 (IRDA Act).Insurance Regulatory and Development Authority
(IRDA) was established on 19th April 2000 to protect the interests
of holder of insurance policy and to regulate, promote and ensure
orderly growth of the insurance industry. IRDA Act 1999 paved the
way for the entry of private players into the insurance market
which was hitherto the exclusive privilege of public sector
insurance companies/ corporations. Under the new dispensation
Indian insurance companies in private sector were permitted to
operate in India with the following conditions: Company is formed
and registered under the Companies Act, 1956; The aggregate
holdings of equity shares by a foreign company, either by itself or
through its subsidiary companies or its nominees, do not exceed
26%, paid up equity capital of such Indian insurance company; The
company's sole purpose is to carry on life insurance business or
general insurance business or reinsurance business. The minimum
paid up equity capital for life or general insurance business is
Rs.100 crores. The minimum paid up equity capital for carrying on
reinsurance business has been prescribed as Rs.200 crores. The
Authority has notified 27 Regulations on various issues which
include Registration of Insurers, Regulation on insurance agents,
Solvency Margin, Re-insurance, Obligation of Insurers to Rural and
Social sector, Investment and Accounting Procedure, Protection of
policy holders' interest etc. Applications were invited by the
Authority with effect from 15th August, 2000 for issue of the
Certificate of Registration to both life and non-life insurers. The
Authority has its Head Quarter at Hyderabad.
1.2 ABOUT THE ORGANISATIONHOUSING DEVELOPMENT FINANCE
CORPORATION: HDFC was started by Hasmukh Bhai Parekh in 1977 with
the formation of Malhotra Committee. HDFC was incorporated with the
primary objective of meeting a social need that of promoting home
ownership by providing long-term finance to households for their
housing needs. HDFC was promoted with an initial share capital of
Rs. 10 crores. HDFC has since emerged as the largest residential
mortgage finance institution in the country. HDFC operates through
75 locations throughout the country with its Corporate Headquarters
in Mumbai, India. HDFC also has an international office in Dubai,
U.A.E., with service associates in Kuwait, Oman and Qatar. HDFCs
main goals are to: a) Develop close relationships with individual
households. b) Maintain its position as the premier housing finance
institution in the country. c) Transform ideas into viable and
creative solutions. d) Provide consistently high returns to
shareholders. e) To grow through diversification by leveraging off
the existing client base.
STANDARD LIFE: The Standard Life Assurance Company ("Standard
Life") was established in 1825 and the first Standard Life
Assurance Company Act was passed by Parliament in 1832. Standard
Life was reincorporated as a mutual assurance company in
1925.Standard Life is Europe's largest mutual life assurance
company. Standard Life, which has been in the life insurance
business for the past 182 years, is a modern company surviving
quite a few changes since selling its first policy in 1825.
Standard Life currently has assets exceeding over 125 billion under
its management and has the distinction of being accorded "AAA"
rating consequently for the past six years by Standard & Poor.
INCORPORATION OF HDFC STANDARD LIFE INSURANCE CO. LTD.: The company
was incorporated on 14th August 2000 under the name of HDFC
Standard Life Insurance Company Limited. Their ambition from the
beginning was to be the first private company to re-enter the life
insurance market in India. On the 23rd of October 2000, this
ambition was realized when HDFC Standard Life was the first life
company to be granted a certificate of registration. HDFC are the
main shareholders in HDFC Standard Life, with 74%, while Standard
Life owns 26%. Given Standard Life's existing investment in the
HDFC Group, this is the maximum investment allowed under current
regulations. HDFC and Standard Life have a long and close
relationship built upon shared values and trust. The ambition of
HDFC Standard Life is to mirror the success of the parent companies
and be the yardstick by which all other insurance companies in
India are measured.HDFC Standard Life Insurance Company Ltd. is one
of Indias leading private life insurance companies, which offers a
range of individual and group insurance solutions. It is a joint
venture between Housing Development Finance Corporation Limited
(HDFC Ltd.), Indias leading housing finance institution and one of
the subsidiaries of Standard Life plc, leading providers of
financial services in the United Kingdom. Both the promoters are
well known for their ethical dealings and financial strength and
are thus committed to being a long-term player in the life
insurance industry.
VISION, MISSION AND VALUESVISION: The most successful and
admired life insurance company, which means that we are the most
trusted company, the easiest to deal with, offer the best value for
money, and set the standards in the industry'. 'The most obvious
choice for all'.
MISSION: To be the top new life insurance company in the market.
This does not just mean being the largest or the most productive
company in the market, rather it is a combination of several things
like Customer service of the highest order. Value for money for
customers Professionalism in carrying out business Innovative
products to cater to different needs of different customers Use of
technology to improve service standards Increasing market
share.VALUES:Values that we observe while we work: Integrity
Innovation Customer centric People Care One for all and all for one
Team work Joy and Simplicity
PRODUCTS OF HDFC STANDARD LIFE INSURANCE:HDFC Standard Life
offers a bouquet of insurance solutions to meet every need. The
products of the company are categorized into various sections which
are as follows:A. INDIVIDUAL PRODUCTSB. GROUP PRODUCTSFor
Individuals, HDFC Standard Life has a range of protection,
investment, pension and savings plans that assist and nurture
dreams apart from providing protection. Customer can choose from a
range of products to suit his life-stage and needs.
For Organizations, HDFC Standard Life has a host of customized
solutions that range from Group Term Insurance, Gratuity, Leave
Encashment and Superannuation Products. These affordable plans
apart from providing long term value to the employees help in
enhancing goodwill of the company.In this project I, as a trainee
was dealing with Individual Products. The various products and
plans under this category are:Individual Products:1. HDFC
Children's Plan,2. HDFC Endowment Assurance Plan, 3. HDFC Loan
Cover Term Assurance Plan,4. HDFC Money Back Plan, 5. HDFC Personal
Pension Plan,6. HDFC Single Premium Whole Of Life Plan, 7. HDFC
Term Assurance Plan,8. HDFC Unit Linked Endowment,9. HDFC Unit
Linked Endowment Plus, 10. HDFC Unit Linked Pension, 11. HDFC Unit
Linked Pension Plus,12. HDFC Unit Linked Young Star,13. HDFC Unit
Linked Young Star Plus1At HDFC Standard Life realize that not
everyone has the same kind of needs. Keeping this in mind, varied
range of products that customer can choose from to suit all needs.
These will help secure customer future as well as the future of
family.
Protection Plans: Customer can protect his family against the
loss of his income or the burden of a loan in the event of his
unfortunate demise, disability or sickness. These plans offer
valuable peace of mind at a small price. HDFC Standard Life
Protection range includes Term Assurance Plan & Loan Cover Term
Assurance Plan.
Investment Plans: HDFC Standard Life Single Premium Whole of
Life plan is well suited to meet long term investment needs. HDFC
Standard Life provides with attractive long term returns through
regular bonuses.
Pension Plans:HDFC Standard Life Pension Plans help secure
financial independence even after retirement. Pension range
includes Personal Pension Plan, Unit Linked Pension, and Unit
Linked Pension Plus Savings Plans.Savings Plans:HDFC Standard Life
Savings Plans offer flexible options to build savings for future
needs such as buying a dream home or fulfilling childrens immediate
and future needs.
Group Products:1. Group Term Insurance, 2. Group Variable Term
Insurance, 3. Group Unit Linked Plan, 4. Gratuity Group Unit Linked
Plan, 5. Superannuation Group Unit Linked Plan , 6. Leave
Encashment
PRODUCT PORTFOLIOHDFC offers products as per the life stages of
the customers and their respective needs.Your insurance need will
change as your life goes, from starting to work to enjoying your
golden years and all the stages in between. Each one of these
stages may pose a different insurance need/cover for you. In this
section, we have drawn up the basic life stages and help you
analyze various insurance needs accordingly.
LIFE STAGES & NEEDS IN THE DIFFERENT STAGESSTAGE 1: YOUNG
& SINGLEAn important stage where one lays down the foundation
of a successful life ahead. Take advantage of the time and power of
compounding to ensure that you build up your dreams. Start saving
early.
NEEDS: Save for Home & Wedding Tax Planning Save for Golden
Years
STAGE 2: JUST MARRIED
Marriage brings about a significant change. New dreams and new
opportunities also bring in additional responsibilities. While both
of you look forward to a happy and secure life, it is equally
important to ensure that eventualities dont come in the way of
shaping your dreams.
NEEDS: Planning for home / securing your home loan liability.
Save for vacation. Save for your first child.
STAGE 3: PROUD PARENTS
Once you have children, your need for life insurance is even
more. You need to protect your family from an untoward incident.
Ensure your protection umbrella takes into account the future cost
of securing your childs dream. You will want life to go on for your
loved ones, and having enough life insurance is a way to help
ensure that.
NEEDS: Provide for children's education Safeguarding family
against loan liabilities Savings for post-retirement
STAGE 4: PLANNING FOR RETIREMENT
While you are busy climbing the ladder of success today, it is
important for you to take time and plan for your life after
retirement. Having an early start for retirement planning can make
a significant difference to your savings. Think about your golden
years even before you have reached them. The key is to think ahead
and plan well using your time and money.
NEEDS Provide for regular income post retirement Immediate Tax
benefits Lead a secure, independent and comfortable life style in
your retirement years.
MILESTONES IN THE HISTORY HDFC is Indias leading housing finance
institution and has helped build more than 23, 00,000 houses since
its incorporation in 1977. In Financial Year 2003-04 its assets
under management crossed Rs.36, 000Cr. As at March 31, 2004,
outstanding deposits stood at Rs. 7,840 crores. The depositor base
now stands at around 1 million depositors. Rated AAA by CRISIL and
ICRA for the 10th consecutive year Awarded The Economic Times
Corporate Citizen of the year Award for its long-standing
commitment to community development. Presented the Dream Home award
for the best housing finance provider in 2004 at the third Annual
Outlook Money Awards HDFC Standard Life Insurance is the first
private life insurance company to be granted a license by IRDA
Rated as the "Best New Insurer - 2003" by Outlook Money magazine,
Indias number 1 personal finance magazine Rated by Business world
as Indias Most Respected Private Life Insurance Company in 2004.
Has the highest brand recall, close to 80% (Source: AC Neilson ORG
MARG, April 2005) Has one of the widest branch networks with
offices in over 100 cities servicing over 440 towns
1.3 COMPETITOR INFORMATIONAs we know that this time insurance
sector is on boom. Reason is that it gives more profit not only to
the company but also to the investor. Today company invest money
not only in government securities and bonds but also in the equity
which gives more return than the government securities and bonds,
and bank deposits. In the market there are lots of insurance
companies which are trying to capture more and more market share.
The information regarding competitors of HDFC Standard Life
Insurance are:-
Life Insurance Corporation of IndiaEvery day the company wake up
to the fact that more than 220 million lives are part of our family
called LIC. We are humbled by the magnitude of the responsibility
we carry and realize that the lives that are associated with us are
very valuable indeed. Although this journey started 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 50 years has been a process called TRUST.
Kotak Mahindra Insurance Company Limited
Kotak Mahindra Insurance Company or Om Kotak Mahindra Life
Insurance is a 74:26 joint venture between Kotak Mahindra Bank
Limited India and Old Mutual PLC- a leading global financial
services provider. Kotak Mahindra Bank Limited (KMBL) is the
flagship venture of Kotak Mahindra Group. The group is a
full-services financial group providing a wide array of services
and products to institutions, banks, corporates and
individuals.
Reliance General Life Insurance CompanyReliance General Life
Insurance Company is a Reliance Capital Ltd. product. Under the
guidance of Anil Dhirubhi Ambani Group, reliance insurance company
has secured the position of the top insurers in India. Reliance
General Insurance is one of the first non-life companies to get the
license from the IRDA. The risks covered under general insurance
include property, marine, casualty and liability. Wide ranges of
products are available at Reliance Standard Insurance for both
group and individual customers.
SBI Life InsuranceSBI Life Insurance offers Personal Insurance
and related services in order to enable us plan our life for
contingencies and unforeseen events. SBI Life Insurance is a
product of the collaboration of the State Bank of India and the
French Insurance company, the Cardiff SA. SBI Life Insurance offers
Insurance Benefits and pension services based on the case and the
portfolio of the clients.
Metlife Insurance Company LimitedMetLife India Insurance Company
Private Limited was incorporated in April 2001 as a joint venture
between MetLife International Holdings, Inc., The Jammu and Kashmir
Bank, M.Pallonji and Co. Private Limited and other private
investors. Metlife India insurance company is a subsidiary of US
based metropolitan life insurance company.
General Insurance Corporation of IndiaGeneral Insurance
Corporation of India or GIC of India was incorporated in 1972 to
supervise and control the general insurance business in India. All
the general insurance companies were merged into four main
subsidiaries of GIC namely: National Insurance Company,New India
Assurance Company Ltd, Oriental Insurance Company Ltd, United India
Insurance Company Ltd. These four companies were renotified
independent business activities inNovember 2000 after the
implementation of IRDA(Insurance Regulatory and development
Authority) Act. In 2002, the General Insurance Corporation of India
ownership was ceased and the holding was vested to the Government
of India.Birla Sun Life InsuranceBirla Sun Life Insurance Co. Ltd
is a 26:74 joint venture between Sun Life Financial Services Canada
and Aditya Birla Group.
Bharti AXA Life Insurance Company Ltd.Bharti AXA Life Insurance
Company Limited is a 74:26 joint venture between Bharti Group - one
of India's leading Multi-business groups and AXA - a world leader
in financial protection and wealth management services. Bharti AXA
was established in end 2006 with head office at Mumbai.
ING Vysya Life Insurance Company LimitedING Vysya Life Insurance
Company Limited established its foothold in the private life
insurance industry in India in September 2001.ING Vysya Life
Insurance Co Ltd is the result of a joint venture between the
world's second largest life insurance company - ING Insurance and
one of the largest private sector banks in India - Vysya Bank.
Another stakeholder in the JV is GMR Group.
Royal Sundaram InsuranceRoyal Sundaram Alliance Insurance
Company Limited is the outcome of a 74:26 joint venture between
Sundaram Finance Ltd India and Royal & Sun Alliance PLC London.
Royal Sundaram Alliance Insurance Co Ltd was the first foreign
joint venture to obtain a license for operating non-life insurance
businesses in India.Royal Sundaram began their official operations
on 12th march'2001 with their head office in Chennai. Today they
have four regional offices in Chennai, Mumbai, Gurgaon and Kolkata
along with 35 branch offices.
AMP Sanmar Life Insurance Company LimitedAMP Sanmar Life
Insurance Company Limited was a 26:74 joint venture between AMP
Australia and Sanmar Group. In 2005, Reliance Life Insurance
Company Limited, a subsidiary of Reliance Capital Limited under
Anil Dhirubhi Ambani acquired AMP Life Assurance Co. Ltd. this made
Reliance Life Insurance the very first private sector life
insurance company to start business in India without any foreign
collaborator.
ICICI Prudential Life Insurance CompanyICICI Insurance has two
faces-ICICI Prudential Life Insurance Company and ICICI Lombard
General Insurance Company Limited. ICICI Prudential Life Insurance
is a 74:26 joint venture between ICICI Bank India Ltd. and
Prudential PLC based in UK. Established in 2000.ICICI Lombard
General Insurance Company Limited is a 74:26 JV between ICICI Bank
India ltd. - the second largest private sector bank in India and
Lombard Canada Ltd. a Fairfax Financial Holdings Ltd group company
that is a 26 billion USD Company. ICICI Lombard started their
general insurance businesses in August 2001. It is India's No. l
private general insurance company. It is also the first general
insurance company to be awarded ISO 9001:2000 certification.These
companies are giving tough competition to each other in acquiring
market share and adopting new marketing strategy for it. The main
competitor of HDFCSL is LIC, Reliance life insurance ltd, and ICICI
Prudential.
Today LIC Insurance product likes "JIVAN ANAND", Reliance life
Insurance product like "Alternate Investment plan and investment
and medic lame plan" and HDFC Standard lifeProduct like "Young Star
Plan and pension Plus Plan" is running in the market and helping to
the industry to capture more market share. In this stuff market
HDFCSL need to adopt new marketing strategy, new innovative policy,
and new idea of policy, and advertisement so that it can get the
potential market share.
1.4 SWOT ANALYSIS
STRENGTHS: 1. Domestic image of HDFC supported by Prudentials
international image is strength of the company . 2. Strong and well
spread network of qualified intermediaries and sales person.3.
Strong capital and reserve base.4. The company provides customer
service of the highest order.5. Huge basket of product range which
are suitable to all age and income groups.6. Large pool of
technically skilled manpower with in depth knowledge and
understanding of the market.7. The company also provides innovative
products to cater to different needs of different customers.
WEAKNESSES: 1. Heavy management expenses and administrative
costs. 2. Low customer confidence on the private players. 3.
Vertical hierarchical reporting structure with many designations
and cadres leading to power politics at all levels without any
exception.4. Poor retention percentage of tied up agents.
OPPORTUNITIES: 1. Insurable population According to IRDA only
10% of the population is insured, which represents around 30% of
the insurable population. This suggests more than 300m people, with
the potential to buy insurance, remain uninsured.2. There will be
inflow of managerial and financial expertise from the worlds
leading insurance markets. Further the burden of educating
consumers will also be shared among many players. 3. International
companies will help in building world class expertise in local
market by introducing the best global practices.
THREATS:1. Other private insurance companies also trying to
capture the same uninsured population.2. Big public sector
insurance companies like Life Insurance Corporation of India (LIC),
National Insurance Company Limited, Oriental Insurance Limited, New
India Assurance Company Limited and United India Insurance Company
Limited. People trust them more.3. Poaching of customer base by
other companies.4. Most of the people dont understand the need or
are not willing to take insurance policies in general.
1.5 About The TopicTypes of Investments / Various Financial
instrumentsThere are many ways to invest money. In order to decide
which investment vehicle is suitable for investor, he/she needs to
know their characteristics and why they may be suitable for a
particular investing objective. Fixed Deposits Public Provident
Fund National Savings Certificate and Government Bonds Mutual Funds
and ELSS Retirement Plans Equity Market Insurance and ULIP
1. Fixed DepositsA Fixed Deposit also known as a Term Deposit is
an account which allows us to deposit money for a fixed time
period. When the deposit period elapses, the depositors get
interest on the amount deposited. The fixed deposit interest rates
can be as high as 9.5%. Money may be placed with a bank, merchant
bank, building, society or credit union for a fixed term at a fixed
rate of interest which remains unchanged during the period of the
deposit. Depositors may have to accept an interest penalty if they
break the deposit, ie ask to take the money out before the agreed
period has expired.
Few points which FD investors must consider at the time of
investment.
1. SafetyFDs have conventionally been the premier choice for
investors with a low risk appetite; assured returns is the key
factor which attracts investors towards deposits. Stick to FDs of
the highest credit rating i.e. those with a AAA rating even if
their rates seem modest vis--vis those offered by company
deposits.2. TenureShort tenured fixed deposits continue to be your
best bet. With interest rates on the ascent, a further hike in
rates offered by fixed deposits cannot be ruled out. Locking your
investments in longer tenured instruments may lead to an
opportunity loss.3. Additional benefitsFixed deposits from reputed
entities offer additional benefits, e.g. they can be used as
collateral against which loans can be raised. Select a fixed
deposit scheme which scores favourably on such parameters.Any
investment portfolio should comprise the right mix of safe,
moderate and risky investments. While mutual funds and stocks are
the favorite contenders for moderate and risky investments, fixed
deposits, government bonds etc. are considered safe investments.
Fixed deposits have been particularly popular among a large section
of investors in India as a safe investment option for a long
period.With fixed deposits or FDs as they are popularly known, a
person can invest an amount for a fixed duration. The banks provide
interest rates depending on this loan amount and the tenure of
deposit. 4.Tax-savingFDsTax-saving is no longer the guarded domain
of Public Provident Fund (PPF) and National Savings Certificate
(NSC). Tax-saving FDs offered by banks are also eligible for
deduction under Section 80C. The deposits are subject to a 5-Yr
lock-in period. Presently, the returns on tax-saving FDs vary
between 7.50%-8.50% per annum. The minimum and maximum investment
amounts (per annum) have been pegged at Rs 100 and Rs 100,000
respectively. Introduction of tax-saving FDs offers risk-averse
investors the opportunity to diversify across instruments while
conducting the tax-planning exercise.
2. Public Provident Fund The Public Provident Fund Scheme is a
statutory scheme of the Central GOI. The Scheme is for 15 years.
The rate of interest is 8% compounded annually. The minimum deposit
is 500/- and maximum is Rs. 70,000/- in a financial year. One
deposit with a minimum amount of Rs.500/- is mandatory in each
financial year. The deposit can be in lump sum or in installments,
not more than 12 Installments in a year or two installments in a
month subject to total deposit of Rs.70,000/-. It is not necessary
to make a deposit in every month of the year. The amount of deposit
can be varied to suit the convenience of the account holders. The
account in which deposits are not made for any reasons is treated
as discontinued account and such account can not be closed before
maturity. The discontinued account can be activated by payment of
minimum deposit of Rs.500/- with default fee of Rs.50/- for each
defaulted year. Account can be opened by an individual or a minor
through the guardian. The grand father/mother cannot open a PPF
behalf of their minor grand son/daughter. The facility of first
withdrawal in the 7th year of the account subject to a limit of 50%
of the amount at credit preceding three year balance. Thereafter
one withdrawal in every year is permissible in such account.
Pre-mature closure of a PPF Account is not permissible except in
case of death. Nominee/legal heir of PPF Account holder on death of
the account holder can not continue the account, but account had to
be closed. The account holder has an option to extend the PPF
account for any period in a block of 5 years on each time. The
account holder can retain the account after maturity for any period
without making any further deposits. The balance in the account
will continue to earn interest at normal rate as admissible on PPF
account till the account is closed. The PPF scheme is operated
through Post Office and Nationalized banks. Deposits in PPF qualify
for rebate under section 80-C of Income Tax Act. The interest on
deposits is totally tax free. Deposits are exempt from wealth tax.
Nomination facility available. Best for long term investment. 3.
National Savings Certificate Minimum investment Rs. 500/- No
maximum limit. Rs. 1000/- grow to Rs. 1601/- in six years. Rate of
interest 8% compounded half yearly. Two adults, Individuals, and
minor through guardian can purchase.Companies, Trusts, Societies
and any other Institutions not eligible to purchase.Non-resident
Indian/HUF can not purchase. No pre-mature encashment. Annual
interest earned is deemed to be reinvested and qualifies for tax
rebate for first 5 years under section 80 C of Income Tax Act.
Maturity proceeds not drawn are eligible to Post Office Savings
account interest for a maximum period of two years. Facility of
reinvestment on maturity. Certificate can be pledged as security
against a loan to banks/ Govt. Institutions. Facility of encashment
of certificates through banks. Certificates are encashable any Post
office in India before maturity by way of transfer to desired post
office. Certificates are transferable from one Post office to any
Post office. Certificates are transferable from one person to
another person before maturity. Duplicate Certificate can be issued
for lost, stolen, destroyed, mutilated or defaced certificate. Tax
Saving instrument - Rebate admissible under section 80 C of Income
Tax Act. Interest income is taxable but no TDS. Deposits are exempt
from Wealth tax.
4. Government BondsA government bond is a bond issued by a
national government denominated in the country's own currency.
Bonds issued by national governments in foreign currencies are
normally referred to as sovereign bonds.Government bonds are
usually referred to as risk-free bonds, because the government can
raise taxes to redeem the bond at maturity. Some counter examples
do exist where a government has defaulted on its domestic currency
debt, such as Russia in 1998, though this is very rare. As an
example, in the US, Treasury securities are denominated in US
dollars. In this instance, the term "risk-free" means free of
credit risk. However, other risks still exist, such as currency
risk for foreign investors. Secondly, there is inflation risk, in
that the principal repaid at maturity will have less purchasing
power than anticipated if the inflation outturn is higher than
expected. Many governments issue inflation-indexed bonds, which
should protect investors against inflation risk.
Bonds are issued by public authorities, credit institutions,
companies and supranational institutions in the primary markets.
The most common process of issuing bonds is through underwriting.
In underwriting, one or more securities firms or banks, forming a
syndicate, buy an entire issue of bonds from an issuer and re-sell
them to investors. The security firm takes the risk of being unable
to sell on the issue to end investors. However government bonds are
instead typically auctioned. A bond is a debt security, in which
the authorized issuer owes the holders a debt and, depending on the
terms of the bond, is obliged to pay interest (the coupon) and/or
to repay the principal at a later date, termed maturity. A bond is
a formal contract to repay borrowed money with interest at fixed
intervals. Thus a bond is like a loan: the issuer is the borrower
(debtor), the holder is the lender (creditor), and the coupon is
the interest. Bonds provide the borrower with external funds to
finance long-term investments, or, in the case of government bonds,
to finance current expenditure. Bonds must be repaid at fixed
intervals over a period of time.
5. Mutual FundsA mutual fund is a body corporate registered with
SEBI that pools money from the Individuals/corporate investors and
invests the same in a variety of different financial Instruments or
securities such as Equity Shares, Government Securities, Bonds,
Debentures, etc. The income earned through these investments and
the capital appreciations 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. Mutual fund
units are issued and redeemed by the Asset Management Company (AMC)
based on the funds net asset value (NAV), which is determined at
the end of each trading session. Mutual funds are considered to be
the best investments as on one hand it provides good returns and on
the other hand it gives us safety in comparison to other
investments avenues.Figure: Below describes broadly the working of
a mutual fund:
Fig No. 16. Equity Linked Saving SchemeEquity linked saving
schemes are a kind of mutual funds like diversified equity funds
with Tax benefits. It is just like other tax saving instruments
like National Savings Certificate and Public Provident Fund. Main
advantage with ELSS is lock-in period is only 3 years while for NSC
it is 6 years and for PPF it is 15 years. At the same time risk
factor is high in ELSS.As per Income Tax Act 80C investment up to
Rs 1,00,000 are eligible for deduction from the gross total income
hence reducing the total taxable income. For example if your total
annual income is Rs 3,00,000 and you invest Rs 1,00,000 in ELSS
then your taxable income will become Rs 2,00,000.Previously there
was an upper limit for investing in tax saving instruments like
ELSS of 5,00,000. Only individuals with less than 5,00,000 annual
income are allowed to invest in tax saving instruments. But last
year financial budget removed this restriction and now any
individual can invest in ELSS irrespective of their income
level.Advantages of ELSS1. Main advantage of ELSS is its short
lock-in period. Maturity period of NSC is 6 years and PPF is 15
years. 2. Since it is an equity linked scheme earning potential is
very high. 3. Investor can opt for dividend option and get some
gains during the lock-in period 4. Investor can opt for Systematic
Investment Plan 5. Some ELSS schemes also offer personal accident
death cover insurance 6. Provides 30 to 40% returns compared to 8%
in NSC and PPF
Disadvantages of ELSS1. Risk factor is high compared to NSC and
PPF 2. Premature withdrawal is not allowed but it is allowed in
other instruments in some specific conditions.
Diversified Equity Schemes and ELSSBoth Equity linked saving
scheme and diversified equity scheme operates in same way. Both are
high return and high risk schemes. But there is a 3 year lock in
period of ELSS and it provides tax benefits too.Systematic
Investment PlanBest way to invest in ELSS is through Systematic
Investment Plan(SIP). With SIP you can invest a small amount every
month for a specific time period. With SIP investor can take
advantage of fluctuations in the stock market. So investor will get
more units when the market is down and get less units when the
market is up. For eg if you are investing Rs 1000 every month and
you will get 100 units for when Net Asset Value (NAV) is 10 and
will get 50 units when NAV is 20. So investing a fixed sum
regularly helps to cover the market fluctuations by rupee costs
averaging. Also most of the Asset Management Companies (AMC)
charges less entry load for SIP compared to normal purchase.7.
Retirement PlansAretirement planis an assurance that you will
continue to earn a satisfying income and enjoy a comfortable
lifestyle, even when you are no longer working. An increasing
number of individuals have already started planning for
theirretirement so that they can live their life happily even after
getting retired.Independence is the new way of life: An increasing
number of young Indian professionals are moving away from the
traditional joint family structure. Since support no longer comes
easily, parents have realized the need to provide for themselves
during their retirement years.Skyrocketing costs throw even a
well-salaried person off balance. With rates rising everyday, you
can imagine how high they will be when you are ready to retire.
Aretirement planprovides you with a steady income every month, to
arm you in the face of rising costs.The key to retirement planning
success is to start early and gain the benefit of the power of
compounding. The person should start planning for retirement at a
very young age because of many reasons:0. Life expectancy: As of
2007 the life expectancy at birth for males is 67 years and 71
years for females. With advancement in technology life expectancy
is likely to increase. Result: You will have to fend for more
number of years post retirement.
2. Medical emergencies: With age come health problems. With
health problems, come medical expenditure which may make a huge
dent in your income post retirement. Failure here could lead you to
liquidate (sell) your assets in order to meet such expenses.
Remember mediclaims do not always suffice. 3. Nuclear families:
Gone are the days when people use to have an entire cricket team
making a family. Today's youth prefer not more than two children.
With westernisation coming in, the culture of joint family is
changing. They prefer independence and stay away from their family.
Hence people have to develop a corpus to last them through their
retirement without any help from family. 4. No government sponsored
pension plan: Unlike the US and UK where they have IRA and state
pension respectively as social security benefit during retirement,
the government of India does not provide such benefits. So again
you are on your own and planning for retirement will play a major
role.5. Job hopping: With youngsters hopping jobs regularly they do
not get benefit of plans like super annuity and gratuity. Both
these require certain number of working years spent in the service
of a particular employer.
8. Equity Equities are often regarded as the best performing
asset class vis--vis its peers over longer time frames. However
equity-oriented investments are also capable of exposing investors
to the highest degree of volatility and risk. There are a number of
factors, which affect the performance of equities ad studying and
understanding all of them on an ongoing basis, can be challenging
for most.Stock markets have always been a draw for investors for
their ability to generate wealth over the long-term. Fear, greed
and a short-term investment approach act as hurdles that frustrate
the investor from achieving his/her investment goals. You need to
keep in mind the risk associated with the stocks. You also need to
diversify your equity portfolio i.e., include more stocks. This
helps you diversify your investment risk, so even if something were
to go wrong with a stock in your portfolio, other stocks/industries
should help you shore up your portfolio.Two important resources
that are critical to investing directly in stock markets are
quality stock research and a reliable and inexpensive stock broker.
The first one research on stocks is the most critical input that
investors need to identify before they begin investing in stock
markets. This is because even while you may have the risk appetite
for equities, you still need credible, stock market related
research that can help you make the right investment decision.
The good thing about the Indian market, riding on the back of an
economy that has grown by over 7% in the last few years, is that
you cant miss being part of growth if you invest in the stock
markets carefully. The bad part is the CHOICE! Of the listed 4,758
stocks on BSE and the NSE, how do you even get close to taking a
call? Here comes the need of a financial advisor who can make your
investment decisions and monitor your funds. Clearly, as Indians
earn more, save more and accumulate more, financial advisors will
play a crucial role in helping individuals create, protect and
manage wealth.
9. Insurance and ULIPLife insurance has traditionally been
looked upon pre-dominantly as an avenue that offers tax benefits
while also doubling up as a saving instrument. The purpose of life
insurance is to indemnify the nominees in case of an eventuality to
the insured. In other words, life insurance is intended to secure
the financial future of the nominees in the absence of the person
insured.The purpose of buying a life insurance is to protect your
dependants from any financial difficulties in your absence. It
helps individuals in providing them with the twin benefits of
insuring themselves while at the same time acting as a compulsory
savings instrument to take care of their future needs. Life
insurance can aid your family on a rainy day, at a time when help
from every quarter is welcome and of course, since some plans also
double up as a savings instrument, they assist you in planning for
such future needs like childrens marriage, purchase of various
household items, gold purchases or as seed capital for starting a
business.Traditionally, buying life insurance has always formed an
integral part of an individuals annual tax planning exercise. While
it is important for individuals to have life cover, it is equally
important that they buy insurance keeping both their long-term
financial goals and their tax planning in mind. This note explains
the role of life insurance in an individuals tax planning exercise
while also evaluating the various options available at ones
disposal.Life is full of dangers, but with insurance, you can at
least ensure that you and your dependents dont suffer. Its easier
to walk the tightrope if you know there is a safety net. You should
try and take cover for all insurable risks. If you are aware of the
major risks and buy the right products, you can cover quite a few
bases. The major insurable risks are as follows: Life Health Income
Professional Hazards Assets Outliving Wealth
ULIPSULIP stands for Unit Linked Insurance Plans. As we know
that insurance is for protecting our life from the any uncertain
events like death or accident. The purpose of the normal insurance
plan is just protecting the life but not ensuring any savings for
the future. Many people wanted plan which gives protection also
gives the returns for their investment. So, insurance companies
come up with the ULIP plan where the premium about is invested in
the share market and returns better income on the maturity
period.ULIPs are a category of goal-based financial solutions that
combine the safety of insurance protection with wealth creation
opportunities. In ULIPs, a part of the investment goes towards
providing you life cover. The residual portion is invested in a
fund which in turn invests in stocks or bonds. The value of
investments alters with the performance of the underlying fund
opted by you.ULIPs are structured such that the protection element
and the savings element can be distinguished and hence managed
according to your specific needs, offering unprecedented
flexibility and transparency.
WORKING OF ULIPSIt is critical that you understand how your
money gets invested once you purchase ULIP.Once you decide the
amount of premium to be paid and the amount of life cover you want,
the insurer deducts some portion of the premium upfront. This
portion is known as the Premium Allocation charge and this varies
from product to product. The rest of the premium is invested in the
fund or mixture of funds chosen by you. Mortality charges and
administration charges are thereafter deducted on a periodic
(mostly monthly) basis whereas the fund management charges are
deducted on a daily basis Since the fund of your choice has an
underlying investment either in equity or debt or a combination of
the two your fund value will reflect the performance of the
underlying asset classes. At the time of maturity of your plan, you
are entitled to receive the fund value as at the time of maturity.
The pie-chart below illustrates the split of your ULIP premium in a
graphical format.
Fig No. 2 In addition to the investment fund ULIPs give you the
benefit of insurance cover as well. The mortality charge mentioned
above goes towards provision of this cover. Over a period of time,
the component of charges as a percentage of the premium paid tends
to decrease. Which is why, you should continue paying your premiums
regularly. That is the best way of making your ULIP deliver on its
dual benefit of protection and wealth creation.WHEN ULIPS WORK
BESTGet the most out of your ULIPWhether you are in the process of
deciding which ULIP to invest in; or whether you already have a
unit linked insurance policy to secure your important financial
goals there are some key principles which should govern any
decision related to ULIPs. Adhering to these key principles will
allow you to make optimum utilization of your ULIP.
Appropriate Life Cover Right Fund Option Long-Term Investment
Know the charges Know the features
WHY BUY ULIPSULIPs are dynamic plans and are flexible by nature
and hence allow for changes and high degree of customization in the
plan as opposed to most of the financial plans which once purchased
cannot be modified. It is because of embedded characteristics of
transparency, flexibility, liquidity & goal based savings that
ULIPs have emerged as preferred investment option today.The
following subsections will not only help you to understand various
attributes of ULIPs but also guide you to use these features to
manage your policy.
FLEXIBILITY Flexibility to change your life cover: ULIPs give
you the flexibility to choose your sum assured (insurance cover) at
the time of policy inception. Moreover, some ULIPs allow you to
increase your sum assured over the term of the plan. This is
crucial as your protection needs keep on changing with time
.Typically, greater the financial liabilities you have such as
repayment of a home loan, greater will be your need for protection.
Flexibility to change premium amount: With ULIPs you can easily
change premium amount as most ULIPs provide you the option to
increase or reduce premiums after a certain period of time to match
your premium paying capability. Another distinguishing feature of
ULIP is Top up which is an additional contribution over & above
regular premium so that if you receive extra money today you can
invest the amount in your policy & maximize your investment
gains. Flexibility to opt for a rider: ULIPs also enable you to
customize the policy with optional riders to enjoy additional
protection. Riders are additional or supplementary benefits that
are bought along with the main insurance policy. Some of the
commonly offered riders by most insurance companies are critical
illness benefit rider, accident & disability benefit rider,
waiver of premium rider etc. For ex. a critical illness rider cover
major critical illnesses like heart attack etc. In case of
contracting any of the above illness, the insurance company pays
the insured amount. Flexibility to choose your fund option: Most of
the ULIPs come with an in - built range of fund options to choose
from ranging from aggressive funds to conservative funds so that
you can decide to invest your money in line with your investment
preferences and needs. Whats more, ULIPs even come with the option
of switching between different fund options so that you are able to
reap maximum benefits from your investments.
TRANSPARENCYOne of the key advantages that ULIPs offer is
complete transparency which makes the working of a ULIP abundantly
clear to the investor. Thus, you are empowered to make informed
decisions on how to best use your ULIP.FREE-LOOK PERIODULIPs also
offer you a distinct feature that no other financial product offers
as of now. It is called Free-look period which is a 15 day window
during which you can close the policy & get paid back the
entire premium less charge borne by company in issuing the policy
in case you are unhappy with the product.NET ASSET VALUEIt is
critical that you monitor the performance of your policy on a
regular basis. This will help you ascertain whether you are on
right financial track or not. To help you do so all life insurance
companies publish the NAV of different fund options on their
website on a daily basis so that you can track the performance of
your policy on a regular basis. This will also help you make
informed decisions when it comes to comparing fund performances.TAX
BENEFITSULIPs are an efficient tax saving instrument too .The tax
benefits that you can avail in case you invest in ULIPs are
described below: Life insurance plans are eligible for deduction
under Sec. 80C Pension plans are eligible for a deduction under
Sec. 80CCC Health insurance plans and critical illness riders are
eligible for deduction under Sec. 80D The maturity proceeds or
withdrawals of life insurance policies are exempt under Sec
10(10D), subject to norms prescribed in that section.
CHAPTER 2RESEARCH METHODOLOGY
MEANINGResearch methodology is a way to systematically solve the
research problem. It may be understood as a science of how research
is done scientifically.
2.1 OBJECTIVES OF THE STUDY To gain an insight into the
Financial Instruments available for investment in the market. To
analyze the impact of investment objectives on investment
decisions. To anatomize the importance of time for the investors.
To extrapolate which is the better investment option which can
generate good returns for the investor and will give the benefit of
Tax Saving.
2.2 SCOPE OF THE STUDY1. This study is helpful in understanding
about the various investment opportunities available in the
market.2. This study helps the investors whom to consult before
making any investment.3. This study is useful to company in
understanding the investors perception to devise the suitable
product/marketing strategies in order to attract them. 4. Financial
planner get advantage to make portfolio according to response given
by respondents/investors, which belong to different occupations,
having different income level, different age level or which
instrument is mostly like by the investors for investment.
2.3 METHODOLOGY In this project the Primary method of data
collection used is 1. Questionnaire MethodIn this Project, a
Questionnaire is prepared, which is given in the annexure section,
and this Questionnaire is filled by investors living in the
Delhi.
In this project the Secondary method of data collection used are
1. Websites 1. Books
2.4 SAMPLE SIZESample size used in this project is 54
respondents of Delhi.
CHAPTER 3DATA ANALYSIS & FINDINGS
Ques1. Do you invest your money in any kind of Financial
Instruments?Yes85%
No15%
Table No. 1
Fig No.3INTERPRETATIONAccording to this graph, it is interpreted
that 85% people invest their money in financial instruments to get
good returns and with the purpose of tax saving too. There are 15%
people who do not invest their money in financial instruments due
to many reasons like they do not believe in saving money for
investment and in some cases, they like to save but their high
expenses and financial commitments do not permit them to
invest.
Ques2. Which one you prefer the most and why? F.D., Govt. Bonds,
PPF23%
Insurance and ULIP30%
Equity Trading26%
Retirement Plans9%
Mutual Funds12%
Table No. 2
Fig No. 4
INTERPRETATIONAccording to this figure, it has been analyzed
that most of the people i.e. 30% prefer ULIP and Insurance as an
investment tool because ULIP combines the benefit of Insurance and
Investment both and Insurance save human life against death and
avail tax benefit too. Secondly,26% of the people prefer to invest
in Equity because they want to earn higher returns.23% of the
people still prefer F.Ds and investments in govt. bonds because
they prefer safety of the principal and tax saving/benefits.Ques3.
What is the main objective of your investment? Protection (Life
Insurance)23%
Returns32%
Safety13%
Retirement Planning9%
To reduce tax liability / tax saving15%
Beating Inflation8%
Table No. 3
Fig No. 5INTERPRETATIONIt is found that growth of
capital/returns is the most important objective which investors
consider while investing. It is also seen that 23% of the investors
prefer to secure their life against death. Safety of their capital
is also considered to be important. Inflation has only been given
8% which reflects that people are still not giving much
consideration to inflation even due to a sharp rise in the
inflation rate. The people who are business man are generally seen
returns/growth and tax benefits at the time of investment.
Serviceman generally gives preference to safety and retirement
benefits.
Ques.4 In which sector do you prefer to invest your money? Fig
No. 6INTERPRETATIONAccording to the above pic chart it it seen that
near about 20% people prefer to invest their surplus income in
public sector, 24% of them prefer government sector, 36% prefer
investment in private sector and 20% prefer or like to invest in
foreign sector to maximize the amount of money invested.
Ques 5. Which Tendency do you prefer the most?
Fig No. 7
INTERPRETATIONIt is found that 39% people like the tendency high
risk high return, as they believe unless and until we would not
take risk how can we earn or get return more. That tendency is
generally prefer by business and servicemen whose income level is
more than 5 lac. The investor with low income level generally
prefer moderate risk or low risk to invest in insurance, Government
bonds, bank savings, Debt etc. The age level also influence the
tendency, the age level between 18 30 likes to take risks but above
45 they prefer low risk low return.
Ques. 6. What percentage of income do you invest?
Fig No. 8
INTERPRETATION
From the above pic chart the level of income people prefer to
invest is seen clearly. Near about 10% people invest below 15% of
their savings, and there are large no. of people who lie between
15-50% as shown above. There are also few people about 17% who are
able to invest more than 50% of their income.
Ques7. For what term do you generally invest?Less
than10years60%
10-15 years35%
More than 15 years5%
Table No. 4
Fig No. 9
INTERPRETATIONBy looking at this graph, it has been analyzed
that most of the people take the time horizon of less than 10 years
which is followed by 35% of the investors investing for 10-15
years. Investors investing for 10-15 years in order to earn better
returns because most of the times long term investment generate
good returns over the investments. ULIPs are the best products for
Long-Term Investors. Investors investing for more than 15 years go
for insurance, retirement plans etc.
Ques8. Why do you save and invest?
To meet day to day expenses56%
To achieve future goals.44%
Table No. 5
Fig No. 10
INTERPRETATIONIt is found that 56% of the investor invest their
money to meet day to day expenses and like to invest for a short
period of time. These investors use to invest mostly in Equity
shares, Mutual Funds (ELSS) etc. There are 44% of the investors who
invest their money to achieve future goals and invest for long
period of time like in ULIP, Retirement Plans, Life Insurance etc.
The investors perception investing to achieve future goals is
different from the investors investing to meet day to day
expenses.
Ques 9. At what time you prefer to invest in the financial
instruments?
At the beginning/middle of the financial year55%
At the end of the financial year45%
Table No. 6
Fig No. 11
INTERPRETATIONIt is found that 55% of the investors go for
investment in financial instruments at the beginning and middle of
the financial year because they want peace of mind and they think
that they will be able to save small amount of money till the end
of year and will not be able to save and invest more. While 45% of
the investors invest at the end of the year in order to save tax or
to take advantage of tax benefits and use to take financial
decisions from CAs /Tax Consultants.
Ques 10. Whom do you consult before going for any kind of tax
saving investment?
Fig No. 12
INTERPRETATIONIt is found that 40% of the respondents take their
financial decisions independently which depicts they are not taking
any advisory services from financial experts and they feel that
they can handle their portfolio on their own and hence make their
own decisions regarding investments. while 35% of the respondents
make investment decisions from Tax Consultants and CAs so that they
can save their huge amount of tax by investing their money and 18%
of the investors take their investment decisions by consulting
financial consultants. This opens up the door for various financial
advisors who can target these investors and can give advisory
services.
Ques.11 What is the purpose behind investment?
Fig No. 13
INTERPRETATIONFrom the above chart we can see the purpose of
investors. There are large number of people who invest for creation
of wealth (31%) , there are 29% who invest to get constant returns
out of their investments. 21% are investing to save tax and others
are investing to meet their future expenses as shown above.
Ques.12 How often do you monitor your investment?
Fig No. 14
INTERPRETATIONFrom the above pie chart we can see that there are
only few people who are constantly monitoring their investments
(16%), some of them are looking on montly basis and we can see most
of the people are not much concerned about their investments, as
per the survey it is seen they monitor their investments
occasionally(45%)
Ques.13 Do you have a formal budget for family expenditure?
Fig No. 15
INTERPRETATIONIt is clearly seen from the above pie chart that
most of the people do not have a formal budget for their family
expenditure. Only 36% people have their budget expenditure rest do
not have a formal budget which affects the investment behavior of
an individual.
FINDINGS
On the basis of Data Analysis of the project titled Study of
various financial instruments as tax saving options. The following
findings have been observed:
85% of the people invest their money in financial instruments
and 15% of the people do not invest their money because they are
not able to save for investment i.e. they spend whatever amount of
money they earn. It has been observed that most of the people i.e.
40% invest their money into insurance with the main objective of
availing Tax Benefits. Most of the respondents i.e. 35% invest
their money with a long term view i.e. 10 15 years. Before choosing
an investment option, most of the respondents i.e. 32% look for how
quickly they will be able to increase their wealth i.e. returns and
a large proportion of respondents look for both the safety of
principal and tax benefits. Most of the respondents i.e. 30% invest
in ULIP because it is a combination of Insurance and Investment.
39% people like the tendency high risk high return because they
prefer to earn higher returns. 56% of the investor invests their
money to meet day to day expenses and like to invest for a short
period of time. 45% of the respondents go for investment in
financial instruments at the end of the financial year to avail tax
benefits and use to take financial decisions from CAs /Tax
Consultants.
CHAPTER - 4LIMITATIONS OF THE STUDY
LIMITATIONS
The project was constrained by time limit of two months. Mindset
of people may vary depending upon their age, gender, income etc.
People mind set about the survey was an obstacle in acquiring
complete information & positive interaction. Respondents were
very busy in their schedule. So it was very time taken in every
Questionnaire response by them. Sometimes due to negativity in
their mind regarding insurance, they never use to take interest in
giving correct information. Limited analytical techniques have been
used due to the nature of data available on the subject.
CHAPTER 5CONCLUSIONS & SUGGESTIONS
CONCLUSIONOn the basis of Data Analysis of the project titled
Study of various financial instruments as tax saving options. It
can be concluded that:
Investment in various financial instruments is affected by the
perception of the people and their tendency towards risk and
return. The age of the investor also affects the investment
decision. The younger investors like to take risk and generally
invest in more in equity than the people who are between 4560.
While investing into ULIPs, Insurance, Retirement plans and PPF
people invests with the main objective of taking the Tax Benefit
the government offers while in Mutual Funds and equity shares
people invests with the main objective of the appreciation of
capital. People generally invest for the period of 1015 years, take
a long term view for investment in order to grow their money. Most
of the people prefer ULIP as an investment option because ULIPs
offer the benefits of both Insurance and Investment.
SUGGESTIONSAfter doing a survey on Study of various financial
instruments as tax saving options.The following suggestions can be
made:
Many of the investors take their investment decisions
independently but they should consult CAs, Tax consultants if they
are investing with the main purpose of tax saving. People are
insured but there is still high uninsured population so the
insurance companies should tap the highly uninsured area in order
to increase their market share. HDFC SLIC being the private player,
must use aggressive marketing strategies to capture the more market
because LIC is a public company and people have more trust on it.
So, HDFC SLIC has to do a lot in order to build a trust in the
customers. Mutual Funds are not so popular because there are lot of
charges deducted every year for example Fund Management charge,
entry load, exit load in case of premature withdrawls etc. So these
entry and exit loads must be abolished by the mutual fund
companies. Somewhere ULIPs are criticized for charging heavy
charges in the initial 2 3 years, for example policy administration
charges, premium allocation charge. So these charges must be
reduced in order to attract more customers. It is suggested that if
the investor is investing in ULIPs then invest for long period of
time to earn high returns. Investors should not put all the eggs
into one basket but should diversify its portfolio to minimize the
risk. Investors who prefer equity investment should also include
debt in their portfolio because share market is totally
unpredictable and can lead to heavy losses in bear situation.
Investors investing with the main purpose of tax saving should
consult their consultants to know where to invest so that
investment leads to higher returns as well as tax saving too.
BIBLIOGRAPHY
BOOKS1. Chandrasekaran.P Introduction to Foreign Trade , Foreign
Exchange & Risk Management , Indian Institute of Bankers,4th
Edition, May-June 20092. Khan M.Y. and Jain P.K (2001), Financial
Management, Tata McGraw Hill. 3. Kothari C.R., Research
Methodology: Methods and Techniques, Edition- 2005, Published by
WISHWA PRAKASHAN 1990. 4. Pandey I.M. (2003), Financial Management,
Tata McGraw Hill.
WEBSITES
1. www.hdfcbank.com2.
http://www.hdfcbank.com/aboutus/default.htm?src=hp_top_nav3.
http://www.hdfcbank.com/personal/products/accounts-and-deposits4.
http://www.hdfcbank.com/personal/products/investments/investment-products5.
http://www.hdfcbank.com/aboutus/cg/Financial_Information.htm6.
http://economictimes.indiatimes.com/hdfc-bank-ltd/infocompanyhistory/companyid-9195.cms7.
http://educaregroup.hpage.co.in/swot-analysis-of-hdfc_54832419.html8.
http://www.researchandmarkets.com/reports/2260067/hdfc_bank_limited_swot_strategy_and_corporate9.
http://www.hdfcbank.com/aboutus/careers/default.htm?src=hp_top_nav10.
http://www.hdfcbank.com/personal/products/insurance/life-insurance11.
http://www.hdfcbank.com/personal/hnw/hnw-detail/imperia-banking/gts8miso12.
http://www.hdfcbank.com/ways-to-bank/bank-online/netbanking13.
http://en.wikipedia.org/wiki/HDFC_Bank14.
http://economictimes.indiatimes.com/hdfc-bank-ltd/infocompanyhistory/companyid-9195.cmsANNEXUREQUESTIONNAIREPersonal
InformationName:
__________________________________________________Telephone No:
__________________________________________________Age Group 18-25
years 25-35 years 35-45 years 45-60 years Above 60 years
Income Group (per annum): 5 lacs
Ques1. Do you invest your money in any kind of Financial
Instruments? Yes NoQues2. Which one you prefer the most and why?
Fixed Deposit, Post Office Savings, Government Bonds Retirement
Plans Equity Trading Insurance and ULIP Bank Savings PPF Mutual
Funds
Ques3. What is the main objective of your investment? Protection
(Life Insurance) Returns Safety Retirement Planning To reduce tax
liability / tax saving Beating Inflation Others (please
specify).
Ques.4 In which sector do you prefer to invest your money?
Private sector Government sector Foreign sector Public Sector
Ques5. Which Tendency do you prefer the most? Low risk, low
return Moderate risk, moderate return High risk, high return
Ques 6. What percentage of income do you invest ? 0-15% 15-30%
30-50% >50%
Ques7. For what term do you generally invest? Less than 10years
10-15 years More than 15 years
Ques8. Why do you save and invest? To meet day to day expenses
To achieve future goals.
Ques9. At what time you prefer to invest in the financial
instruments? At the beginning of the financial year At the end of
the financial year
Ques10. Whom do you consult before going for any kind of tax
saving investment? Independently Tax Consultants/CAs Advice from
friends/Relatives Financial Consultants.
Ques.11 What is the purpose behind investment?
Wealth creation Tax saving Earn returns Future expenses
Ques.12 How often do you monitor your investment? Daily Monthly
Occasionally
Ques.13 Do you have a formal budget for family expenditure? Yes
No----------------------------------------------------------------------------------------------------------------------------
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