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Final Project Report

TO STUDY THE PERSONALFINANCIAL PLANNING AND INVESTORS

PERCEPTION

Submitted in the partial fulfillment of therequirement of

2 years full time Masters of Business AdministrationofMAHRISHI MARKANDESHWAR UNIVESITY, MULLANA-

AMBALASession 2007 - 2009

Submitted To: SubmittedBy: MANMEET SINGH ROLL NO: 1207848

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TABLE OF CONTENT

Chapter TitleNo.

AcknowledgementDeclarationPreface

1. Introduction

-Karvy as an organization

-Milestone of Karvy-Project description

-Objective

2. Review of Literature

-Personal Financial Planning-Investment Proposals In India-Mutual Funds- Life Insurance

3. Research Methodology

4. Observations & Analysis

5. Limitations of the study

6. Conclusion

7. Suggestions

8. Bibliography

9. Appendices (Questionnaire)

Glossary

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ACKNOWLEDGEMENT

The project TO STUDY THE PERSONAL FINANCIAL PLANNING ANDINVESTORS PERCEPTIONis an outcome of my research. For the

completion of this project I get an opportunity to express my deep gratitude to

all those who helped me in making this report.

First of all I would like to thank The Almighty for his blessing for completing

this project successfully.

I would like to extend my sincere thanks toMr. Aman mehta (branch head of

karvy stock broking) andMr. gaurav khanna (investment manager ) forproviding me articulate guidance and ceaseless encouragement throughout mytraining.

I also appreciate the staff of Karvy for their constant support throughout mystay in Karvy Stock Broking Ltd.

Last but not the least, I also express my grateful thanks to respondents for

giving their valuable time to make this project to success.

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PREFACE

After studing this reort, you will be able to understand how

the selection of different type of investment modes iscarried out. We have put in our best efforts in this project.The main aim of this report is to highlight the features as:

1. To show the project is developed, i.e. the steps

involved in developing the project.2. The report contains a summary of the analysis of the

investment modes, their drawbacks, as well as the

details and advantages of investment modes.3. The report guides investors how to manage their

portfolio.

4. The project report contain the investors perceptiontowards different investment modes.

5. Importance of financial planning.

In the conclusion this report is a guide to understanding

the portfolio management and investment in differentareas with investors preference i.e. return, time,investment, risk cover etc.

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INTRODUCTION

With India emerging as a strong market, the investments avenues have also

increased, to advice our customers the right avenue according to their suitability."To cater to the unique needs and requirements of the mass affluent by providing

complete financial solutions and thereby enabling them to transform their dreams

into reality." that is what financial planning has been the one of the important part

in investments decisions .

In the old days, investment options were limited. The limitation was a result of the

predominant role and responsibility assumed by the government in presiding over

our financial future. In present time, all that is changing, and changing rapidly. Not

only are investment options increasing, the complexity is increasing as market forces

come into fuller play. The market is bound to become more complex and investment

advice for financial planning (saving) will emerge as a professional activity.Intelligent investor has already emerged as a major instrument of rendering and

receiving advice in this respect. The income level of urban and middle class people is

increasing and these people are saving part of their income to invest in profitable

and safe avenues.

Investment is the employment of funds with the aim of achieving additional income

or growth in value. The essential quality of an investment is that it involves

waiting for a reward. It involves the commitment of resources that have been

saved or put away from current consumption in the hope that some benefits will

accrue in future.

In this study the efforts were made to analyze the personal financial planning,

investment avenues available to the customers and to know the factors that they

keep in mind while investing. The perception of the customers is to be found from

the various investment avenues.

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Objectives

Every study has certain objectives and the study is carried out to fulfill those

objectives. The objectives of this project To study the Personal Financial Planning

and Investors Perception is as follows:

1. To find out the investment proposals available.2. Find out avenues which best suit persons income for investment

3. To identify factors influencing investment preferences

4. To determine investors perception regarding investment decisions anddetermine the most preferred proposal5. Focus on mutual funds & Insurance ULIP schemes

6. To determine the satisfaction level of customers from their investmentportfolio.

To determine the safe and secured return investment proposal for customer to

recommend

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METHODOLOGY

Every project requires genuine research. Successes of any project and getting

genuine results from that, depends upon the research method used by the

researcher.

Research Methodology is a way to systematically solve the research problems. Itmay be understood as a science of studying how research is done scientifically. In

this various steps that are generally adopted by a researcher in studying the

research problem along with the logic behind them is studied.

Data Collection:

Both Primary and Secondary data has been used for the purpose of datacollection. Primary data has been collected by conducting personal interviews of the

respondents and administering a self designed questionnaire.

Secondary data has been collected by using secondary sources of information

like Company Boucher, Journals, Magazines and Websites.

Comparative analysis:

The data collected is further thoroughly studied and comparative analysisbeing carried upon

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KARVY AS AN ORGANIZATION

KARVY, is a premier integrated financial services provider, and ranked among the topfive in the country in all its business segments, services over 16 million individualinvestors in various capacities, and provides investor services to over 300 corporates,

comprising the who is who of Corporate India.

KARVY covers the entire spectrum of financial services such as Stock broking,Depository Participants, Distribution of financial products - mutual funds, bonds, fixeddeposit, equities, Insurance Broking, Commodities Broking, Personal Finance AdvisoryServices, Merchant Banking & Corporate Finance, placement of equity, IPOs, amongothers. Karvy has a professional management team and ranks among the best intechnology, operations and research of various industrial segments.

Karvy Early Days

The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise of a small groupof practicing Chartered Accountants who founded the flagship company

Karvy Consultants Limited. Started with consulting and financial accounting automation, and carvedinroads into the field of registry and share accounting by 1985. Since then, Karvy used its experience andsuperlative expertise to go from strength to strengthto better services, to provide new ones, to innovate,diversify and in the process, evolved Karvy as one of Indias premier integrated financial service enterprise.

Thus over the last 20 years Karvy has traveled the success route, towards building a reputation as anintegrated financial services provider, offering a wide spectrum of services. And have made this journey bytaking the route of quality service, path breaking innovations in service, versatility in service and finally

totality in service.

KARVY highly qualified manpower, cutting-edge technology, comprehensive infrastructure and totalcustomer-focus has secured for the position of an emerging financial services giant enjoying the confidenceand support of an enviable clientele across diverse fields in the financial world.Values and vision ofattaining total competence in servicing has served as the building block for creating a great financialenterprise, which stands solid on our fortresses of financial strength - various companies.

With the experience of years of holistic financial servicing and years of complete expertise in the industryto look forward to, Karvy now emerged as a premier integrated financial services provider. .

As the flagship company of the Karvy Group, Karvy Consultants Limited has always remained at the helm

of organizational affairs, pioneering business policies, work ethic and channels of progress.

Milestone of Karvy

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INCEPTION1979

Corporate Registry services 1985

Stock Broking & ISCs1990

Financial Product Distribution1993

Corporate Finance 1995

Depository Services1997

ITES & BPO Services 2000

Personal Finance Advisory Services2001

Secondary Debt & WDM Services 2003

Joint Venture with Computer Share 2004

Comtrade2004

Part of issue management team in large offerings Averaging around 5% of NSE cash volume Ranked No.1 in IPO distribution More than 500 Branches across country 5 Overseas Branches Entered Commodity trading Equity Derivatives broking commenced Expanding Institutional segment clientele. Setting up of the Research desk and

Private Client Group (PCG) at Mumbai

Their value and vision of attaining total competence in their servicing has served as thebuilding block for creating a great financial enterprise, which stands solid on theirfortresses of financial strength.

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With the experience of years of holistic financial servicing behind them and years ofcomplete expertise in the industry to look forward, they have now emerged as a premierintegrated financial services provider.

KARVY is a premier integrated financial services provider and ranked among the topfive in the country in its entire business segment, services over sixteen million individualinvestors in various capacities, and provides investor services to over three hundredcorporate. KARVY covers the entire spectrum of financial services such as StockBroking, Depository Participants, Distribution of financial products Mutual funds,Bonds, Fixed Deposits, Equities, Insurance Broking, Commodity Broking, PersonalFinance Advisory Services, Merchant Banking and Corporate Finance, Placement ofEquity, IPOs, among others. KARVY has a professional management team and rankamong the best in technology, operation and research of various industrial segments.

And today, they look with pride at the fruits of their mastery and experience comprehensive financial services that are competently segregated to service and managea diverse range of customer requirements.

In study, the efforts have been making to determine the factor that have the savingbehaviour of customer and to know the factors that they keep in mind while investing.The satisfaction level of the customers from their current portfolio of investment has been

finding out. The financial instruments i.e. Mutual Funds, Shares, Bonds, Post OfficeScheme, Insurance Scheme have been mentioned in the study. These instruments werementioned to know which of the above mentioned financial instruments have been usingby customer for investment of funds.

Advisory Services:

Their monthly magazine, Finapolis, provides up-dated market information on market

trends, investment options etc. thus empowering the investor to base every financialmove on rational thought and prudent analysis and embark on the path to wealth creation.Finapolis covers the latest market news, trends, investment schemes and research-basedopinions from experts in various financial fields.

Under their retail brand Karvy the Finapolis, they deliver advisory services to across-section of customers. The service is backed by a team of dedicated and expertprofessionals with varied experience and background in handling investment portfolios.

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They are continually engaged in designing the right investment portfolio for eachcustomer according to individual needs and budget considerations with a comprehensivesupport system that focuses on trading customers portfolios and providing valuableinputs, monitoring and managing the portfolio through varied technological initiatives.This is made possible by the expertise they have gained in the business over the years.

Board of Directors:

Mr. C.Parthasarathy Chairman

Mr. M.Yugandhar and Mr. M.S.Ramakrishnan Directors

PERSONAL FINANCIAL PLANNING

FUNDAMENTALS OF FINANCIAL PLANNING

Financial planning is an ongoing process for an individual. It is the process of meetingyour life goals through the proper management of your finances. Life goals can includebuying a home, saving for your child's education or planning for retirement. A personmay start it at an early age and carry it forward through his life with changes to suit hischanging goals and needs. Financial planning provides direction and meaning to yourfinancial decisions. It allows you to understand how each financial decision you makeaffects other areas of your finances. Financial Planning can take a "big picture" view ofour financial situation and make financial planning recommendations that are right for us.The financial planning can look at all of our needs including budgeting and saving, taxes,

investments, insurance and retirement planning. Financial Planning is very important toachieve your financial goals which take different faces in ones life. Financial goals canvary from buying a house to buying crockery, buying car to buying seat covers and alsofrom planning for children's expenses to buying their uniform and stationery.

Financial planning is a process that helps a person work out where he or she isnow, what he/she may need in the future and what he/she must do to reach thedefined goals

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The process involves gathering relevant financial information, setting life goals,examining the persons current financial status and coming up with a strategy orplan for how the person can meet his/her goals given the persons currentsituation and future plans.

The objective of financial planning is to ensure that the right amount of money

is available in the right hands at the right point in the future to achieve andindividuals financial goals.

Process of Financial planning:-

Financial Planning is the overall process of advising clients on how to achievetheir financial goals.

Financial Goals and Objectives refer to all goals and needs of a client which

have a monetary aspect to them. These are best defined when mthe amount andthe time frame are both clearly stated.

Asset Allocation: The allocations of a clients investments at a broad level acrossvarious asset classes, which include hard assets (real estate, jewellery, etc.) andfinancial assets.

Risk Allocation: The extent of loss in value that a client can tolerate,psychologically and financially and for how long they can withstand suchdeclines in value.

Financial Plan: A document that details clearly in writing the financial goals,available resources, time frame for investment, asset allocation, specificinvestment, etc.

Portfolio Rebalancing: The process of making changes to the asset allocationand specific investment to ensure that the clients investment strategy staysconsistent and current with changes in their needs, financial situation and marketconditions.

Types of Financial Goals

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After the above discussion, the next most important element in financial planning is tounderstand the various types of financial goals and how to use them in practice.

Long-term goals

Long-term financial goals represent the long-term requirements of an individual. Long-term goals may extend beyond a period of six years. The time period should not be solong that the goals become unrealistic to achieve. It is possible that goals change over aperiod of time and thus need to be revised on a regular basis. The following tabledescribes an individual's long-term goals:

Short-term goals

Short-term goals are for a period of one year or less. They are immediate goals in theform of expenses in the current period, such as education expenses for a child newlyadmitted in nursery school. To attain long-term goals, it is essential to attain current

short-term goals. The short-term goals also provide for the surplus required for savings,which are crucial for long-term goals. The following table provides a description of aperson's short-term goals:

Intermediate goals

Intermediate goals fill up the gap between the short-term and long-term goals. They aregenerally spread over a period of two to five years. The following table describes anindividual's intermediate goals:It is always advisable to prioritize these goals on the basisof the urgency in fulfilling them. By doing so, an individual will be able to identify thegoals that he/she has to concentrate on immediately and which of them can be deferred

for some time.

Importance of Financial Planning

Financial planning is very important for each and every body who earns. When it comesto money the question of managing them efficiently comes along. Financial planning isabout efficiently managing ones finances. Every one has few goals or dreams in theirlives, to fulfill them on time it is very important to manage your finances.

However it is by and large understood that financial planning is the Rich's shoes, but infact it is all the more important for the middle income group. "It's not for the well-to-do;

it's how you become well-to-do."

As India is a growing economy, the problem of understanding the various investmentoption is also growing. Also attached is the problem of understanding the risk return tradeoff is important. On these lines we can discuss these few importance of financial planningfor any investor or for that matter saver.

Financial planning provides direction and meaning to your financial decisions.

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It allows you to understand how each financial decision you make, affects otherareas of your finances. For example, buying a particular investment product mighthelp you pay off your debts faster or it might enhance your goal of buying a carby a year or two.

By viewing each financial decision as part of a whole, you can consider its short

and long-term effects on your life goals. You can also adapt more easily to life changes and feel more secure that your

goals are on track.

How can Financial Planning be done?

Yes you can but if you have the required skills. Financial planning is very technical andconceptual process. Some personal finance software packages, magazines or self-help

books can help you do your own financial planning. However, you may decide to seekhelp from a professional financial planner if:

You need expertise you don't possess in certain areas of your finances. Forexample, a planner can help you evaluate the level of risk in your investmentportfolio or adjust your retirement plan due to changing family circumstances.

You want to get a professional opinion about the financial plan you developed foryourself.

You don't feel you have the time to spare to do your own financial planning. You have an immediate need or unexpected life event such as a birth, inheritance

or major illness.

You feel that a professional adviser could help you improve on how you arecurrently managing your finances.

You know that you need to improve your current financial situation but don'tknow where to start.

Steps in Financial Planning

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However Financial Planning is a very specialized process. It is also governed by lots ofbodies. There fore it follows a standard process as prescribed by the Financial PlanningBoard. The Financial Planning Process consists of the following six steps:

1. Establishing and defining the client-planner relationship.

The financial planner should clearly explain or document the services to be provided toyou and define both his and your responsibilities. The planner should explain fully howhe will be paid and by whom. You and the planner should agree on how long theprofessional relationship should last and on how decisions will be made.

2. Gathering client data, including goals.

The financial planner should ask for information about your financial situation. You and

the planner should mutually define your personal and financial goals, understand yourtime frame for results and discuss, if relevant, how you feel about risk. The financialplanner should gather all the necessary documents before giving you the advice youneed.

3. Analyzing and evaluating your financial status.

The financial planner should analyze your information to assess your current situationand determine what you must do to meet your goals. Depending on what services youhave asked for, this could include analyzing your assets, liabilities and cash flow, current

insurance coverage, investments or tax strategies.

4. Developing and presenting financial planning recommendations and/or

alternatives.

The financial planner should offer financial planning recommendations that address yourgoals, based on the information you provide. The planner should go over therecommendations with you to help you understand them so that you can make informeddecisions. The planner should also listen to your concerns and revise therecommendations as appropriate.

5. Implementing the financial planning recommendations.

You and the planner should agree on how the recommendations will be carried out. Theplanner may carry out the recommendations or serve as your "coach," coordinating the

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whole process with you and other professionals such as attorneys or stockbrokers.

6. Monitoring the financial planning recommendations.

You and the planner should agree on who will monitor your progress towards your goals.If the planner is in charge of the process, she should report to you periodically to reviewyour situation and adjust the recommendations, if needed, as your life changes.

Investment proposals in India

Investment is the employment of funds with the aim of achieving additional incomeor growth in value. The essential quality of an investment is that it involves waiting for

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a reward. It involves the commitment of resources that have been saved or put away fromcurrent consumption in the hope that some benefits will accrue in future.

As a part of investments proposals in India there are several prospects by whish

customer could look for investment criteria which are as follows

Investment management Investment advice Tax planning Tax preparation Retirement planning Planning for life, long term care insurance advice Planning for other financial goals Estate planning

The aspect which customer consider while investing into these proposals are

Safety Return Time Period liquidity

Various Proposals of investment on which study is to be carried out are as follows

Mutual funds

Life insurance Post office schemes Public provident fund National saving certificates Kisan vikas patra Bank Fixed Deposits Deposit Scheme For Retiring Government Employees

MUTUAL FUNDS

History on mutual funds

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The mutual fund industry in India started in 1963 with the formation of Unit Trust ofIndia, at the initiative of the Government of India and Reserve Bank the. The history ofmutual funds in India can be broadly divided into four distinct phases

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the ReserveBank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India.In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took overthe regulatory and administrative control in place of RBI. The first scheme launched by UTI was UnitScheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and LifeInsurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fundwas the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87),Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),

Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set upits mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, givingthe Indian investors a wider choice of fund families. Also, 1993 was the year in which the first MutualFund Regulations came into being, under which all mutual funds, except UTI were to be registered andgoverned. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first privatesector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised MutualFund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds inIndia and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003,there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two

separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under managementof Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme,assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioningunder an administrator and under the rules framed by Government of India and does not come under the

purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBIand functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in

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March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTIMutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking placeamong different private sector funds, the mutual fund industry has entered its current phase ofconsolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets ofRs.153108 crores under 421 schemes.

Mutual Funds in India

Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and aregenerally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option,as in real terms the value of money decreases over a period of time. One of the options is to invest themoney in stock market. But a common investor is not informed and competent enough to understand theintricacies of stock market. This is where mutual funds come to the rescue. A mutual fund is a group ofinvestors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutualfunds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund,investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on theirown. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage ofmutual funds is diversification.Diversification means spreading out money across many different types of investments. When oneinvestment is down another might be up. Diversification of investment holdings reduces the risk

tremendously.

Objectives of Mutual Funds

1. Income. Income funds focus on dividends and interest that provide income to investors. This is arelatively

steady source of money, but the funds NAV can still go up and down.

2. Growth. Growth funds focus on increasing the value of the principal or amount invested through capital

gains and net asset values. Growth funds are usually more risky but offer greater potential return.

3. Stability. Stability funds focus on protecting the amount invested from loss so the funds NAV does notgo

Down. This is the least risky type of fund but may make the least amount of money.

Types of Mutual Fund Schemes

Mutual fund schemes may be classified on the basis of its structure and its investmentobjective.

By Structure

Open-end FundsAn open-end fund is one that is available for subscription all through the year. These do

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not have a fixed maturity. Investors can conveniently buy and sell units at Net AssetValue ("NAV") related prices. The key feature of open-end schemes is liquidity.

Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15years. The fund is open for subscription only during a specified period. Investors caninvest in the scheme at the time of the initial public issue and thereafter they can buy orsell the units of the scheme on the stock exchanges where they are listed. In order toprovide an exit route to the investors, some close-ended funds give an option of sellingback the units to the Mutual Fund through periodic repurchase at NAV related prices.SEBI Regulations stipulate that at least one of the two exit routes is provided to theinvestor.

Interval Funds

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

By Investment Objective

Growth Funds

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 proved

that returns from stocks, have outperformed most other kind of investments held over thelong term. Growth schemes are ideal for investors having a long term outlook seekinggrowth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors. Suchschemes generally invest in fixed income securities such as bonds, corporate debenturesand Government securities. Income Funds are ideal for capital stability and regularincome.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemesperiodically distribute a part of their earning and invest both in equities and fixed incomesecurities 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 marketfalls. These are ideal for investors looking for a combination of income and moderategrowth.

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Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital andmoderate income. These schemes generally invest in safer short-term instruments such astreasury bills, certificates of deposit, commercial paper and inter-bank call money.

Returns on these schemes may fluctuate depending upon the interest rates prevailing inthe market. These are ideal for Corporate and individual investors as a means to parktheir surplus funds for short periods.

Gilt Fund

These funds invest exclusively in government securities. Government securities have nodefault risk. NAVs of these schemes also fluctuate due to change in interest rates andother economic factors as is the case with income or debt oriented schemes.

Index Funds

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index,S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the sameweightage comprising of an index. NAVs of such schemes would rise or fall inaccordance with the rise or fall in the index, though not exactly by the same percentagedue to some factors known as "tracking error" in technical terms. Necessary disclosuresin this regard are made in the offer document of the mutual fund scheme.

There are also exchange traded index funds launched by the mutual funds which are

traded on the stock exchanges.

Other Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the IndianIncome Tax laws as the Government offers tax incentives for investment in specifiedavenues. Investments made in Equity Linked Savings Schemes (ELSS) and PensionSchemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act alsoprovides opportunities to investors to save capital gains u/s 54EC by investing in Mutual

Funds.

Special Schemes

Industry Specific Schemes

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Liquidity

In open-end schemes, the investor gets the money back promptly at net asset valuerelated prices from the Mutual Fund. In closed-end schemes, the units can be sold on astock exchange at the prevailing market price or the investor can avail of the facility of

direct repurchase at NAV related prices by the Mutual Fund.

Transparency

You get regular information on the value of your investment in addition to disclosure onthe specific investments made by your scheme, the proportion invested in each class ofassets and the fund manager's investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and dividendreinvestment plans, you can systematically invest or withdraw funds according to yourneeds and convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutualfund because of its large corpus allows even a small investor to take the benefit of itsinvestment strategy.

ChoiceofSchemes

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

WellRegulated

All Mutual Funds are registered with SEBI and they function within the provisions ofstrict regulations designed to protect the interests of investors. The operations of MutualFunds are regularly monitored by SEBI.

Indian Mutual Fund IndustryChanging Composition

March 1998 March 2002 October 2005

Mutual funds are no longer looked down upon but seen as a healthy investment

option and in April 07 total investment in 33 funds crossed Rs 3.5 lakh crore, an

industry official has said.

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Also, the risk appetite is growing with burgeoning young middle class, making

mutual funds a preferred option compared to small saving schemes that is

considered safe but give low returns.

"Main reason for the growth in assets of mutual funds is awareness which is

increasing day by day and the returns they are giving,"

"MFs are increasingly being recognised by households, in order to maximize

returns," he said.

Total AUM as on April 30 was Rs 3,50,441 crore as compared to Rs 3,26,388 crore a

month ago.

In March 2007, Foreign Institutional Investors (FIIs) were net buyers of

equities with purchases of Rs 14,033 m (as on March 30, 2007). On the

contrary mutual funds were net sellers to the tune of Rs 20,275 m.

These are only some of the statistics that show that the Indian mutualfunds industry is still in its infancy. It is important to study the present

industry scenario to gain a better

Understanding of the impediments to the growth of the industry:

Lack of Investor Awareness: Retail investors had a wrong notion about mutual fundsas an investment avenue. The benefits of risk diversification, professional management

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and ease of administration involved while investing in mutual funds are not clearlyunderstood. Knowledge of financial products is ingrained in school and collegecurriculum in countries like UK, US and France.

Investor Risk Appetite: Equity funds account for 30% of the total AUM in India.

This figure is more than 50% in most developed countries. Frequent stock market scamsand the bust of tech sector specific MFs have contributed to this apprehension. Thegrowth in mutual funds has come through the growth in investments in short terminstrument like Money Market Mutual Funds which account for 40% of AUM.

Higher Returns of Alternative Debt Instruments: Government guaranteed schemesprovide risk free returns at competitive rates of returns. This is why mutual funds have

difficulty competing retail business.

Concentration of Corporate Investors: Mutual funds have become overly attractive tocorporate investors because of higher returns than bank deposits and ability to distributecapital gains tax. Corporate investors account for 57% of the AUM (by value). Thoughthe turnover rates have increased the average fund in management has grown by only25% in the past 4 years.

It is clear that the lack of growth in funds under management in India is because of theabsence of long term investors. Corporate investors take profits frequently resulting in

destruction in the compound growth in funds under management. Distributors are forcedto pass on more commissions to companies, while fund companies are compelled to offerfunds with wafer thin margins. Retail investors lose out in the sense that they continue topay higher expenses.

Distribution: One of the major factors impacting the growth of mutual fund industry isthe absence of any regulation in distribution of mutual funds. Mutual fund investors needdistributors who are able to inform them about the efficacy of distribution product for aparticular risk profile and stage in life cycle. Lack of distributor awareness and theabsence of any disclosures from distributors make mis selling of MF productscommonplace. Also penetration in rural areas is a

problem. Only 3% of rural households own mutual funds. For mutual funds to set up adistribution network in these centers can be very expensive.

Current Scenario

Since private players were allowed in 1993, the Indian Mutual fund industry haswitnessed a sea change in the way it operates, in the regulatory and investor attitude

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towards Mutual fund products. From a single player in 1987 today there are 29 mutualfunds offering as many as 477 schemes. The total assets under management have risen toRs 334563 crores. However, the accolades regarding the growth of the MF industryshould be reserved until this growth is analyzed taking the MF industry in otherdeveloped countries in consideration. Here are certain statistics that reflect that Indian

Mutual fund industry still has a long way to go when compared to global standards:

AUM as a Percentage of GDP: In most of the developed countries the total assetsunder management ranges from 30% -60% of the GDP. Total assets under managementare only 8% of the GDP in case of India.

Penetration of Mutual funds: In India it is estimated that 6.7% of the households holdmutual funds. This figure is close to 50% in case of the US and 17% in case of UK.Mutual funds account for only 0.73% of total financial assets in India (11% of bankdeposits). AUM for Mutual funds had exceeded the bank deposits in US in as early as1998. These are only some of the statistics that show that the Indian mutual funds

industry is still in its infancy. It is important to study the present industry scenario to gaina better understanding of the impediments to the growth of the industry:

Lack of Investor Awareness: Retail investors had a wrong notion about mutual fundsas an investment avenue. The benefits of risk diversification, professional managementand ease of administration involved while investing in mutual funds are not clearlyunderstood. Knowledge of financial products is ingrained in school and college

curriculum in countries like UK, US and France.

Investor Risk Appetite: Equity funds account for 30% of the total AUM in India. Thisfigure is more than 50% in most developed countries. Frequent stock market scams andthe bust of tech sector specific MFs have contributed to this apprehension. The growth inmutual funds has come through the growth in investments in short term instrument likeMoney Market Mutual Funds which account for 40% of AUM.

Higher Returns of Alternative Debt Instruments: Government guaranteed schemesprovide risk free returns at competitive rates of returns. This is why mutual funds havedifficulty competing retail business.

Concentration of Corporate Investors: Mutual funds have become overly attractive tocorporate investors because of higher returns than bank deposits and ability to distributecapital gains tax. Corporate investors account for 57% of the AUM (by value). Thoughthe turnover rates have increased the average fund in management has grown by only25% in the past 4 years. It is clear that the lack of growth in funds under management inIndia is because of the absence of long term investors. Corporate investors take profitsfrequently resulting in destruction in the compound growth in funds under management.

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been levied. Though allegations regarding frauds have surfaced in Indian MF industryalso SEBI has been quick to investigate and restore confidence. However, certain issuesregarding SEBI still exist

Unlike its American counterpart SEBI hasnt been able to formulate regulations to

increase the depth of MFs.

Regulations regarding the privatization of Pension funds took a long time to

come.

SEBI hasnt been able to educate investor on the usage of mutual funds as

investment options.

Risk Management Techniques: A recent survey by PWC revealed that as many as 50percent of the respondent mutual funds are not managing risk properly. 50 percent of therespondents did not even have documented risk procedures or dedicated risk managers.Indian Mutual fund industry does not use statistical techniques of risk management but isusing diversification effectively within the market limitations. As far as use of derivativesis concerned, they are not presently used because of the low volumes, low liquidity andabsence of sufficient hedging

products in the market Risk management in US mutual funds is more prevalent with theuse of statistical software and the use of VaR approach to risk management. Several fund

companies have set up risk control measures internally, but they still have a long way togo in relaying this to clients.

Governance: With the recent late trading and market timing scandals in US mutual fundsthe issue of corporate governance of mutual fund has again gained center stage. Therehave been allegations of late timing in Indian MFs. The structure of Indian mutual fundsis very similar to US mutual fund . SEC (the US MF regulator) requires of the directorsto be independent. This proportion is 2/3 in case of India. However, there remainfundamental doubts whether the current governance structure provides institutionallyappropriate checks and prevents potential conflict of interest and provide effective fundadministration. Currently, a mutual fund is set up in the form of a trust under the Indian

Trust Act, which was enacted in 1882 to essentially govern private trusts and charitableinstitutions. The trust structure has the following difficulties for a mutual fund:

The issue of individual versus collective liability of trustees, which has deterred

experienced persons from serving as trustees of mutual funds

AMC is not subjected to a specific law book and is indirectly regulated by SEBI

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through trustees.

Approval of directors of AMC lies with the trustees and not with SEBI.The study of MFstructures of other countries (UK) reveals that there is a scope for simplification of thecurrent

structure. Eliminating the sponsor and giving the power to propose the creation of the MFto the asset management company (AMC) could be a possible alternative.

Future Expectations from Indian Mutual Fund

Industry

Taking into consideration the above comparison and the current situation prevailing inthe capital markets, the realistic expectations from the Indian Mutual fund Industry could

be:

Increased Penetration: With the proposed opening up of pension funds to the privatesector we can expect the penetration levels of MFs to increase in the next few years.Because of their experience in managing MFs the AMCs will play an important role inthe management of pension funds.

Increased Emphasis on Retail Investors through Supply Chain Innovations:

Retail investments less than Rs 10,000 are unprofitable for AMCs. However, certainsupply chain innovations and investments in retail infrastructure would lead to increased

emphasis on retail investors. Some of the possible innovations can be the use of straight-through processing," an industry buzz phrase for automating mutual fund transactions sothat the entire process-from placing a trade to final settlement-is fast, relatively seamlessand less subject to manipulation. Straightforward concept, straight-through processingrequires substantial integration and cooperation among members of the mutual fundsupply chain. Using IT, members of the mutual fund supply chain can improveefficiency, manage risk and improve regulatory compliance-all critical moves formaintaining investor confidence in mutual funds. As urban markets reach a peak mutualfunds would target second rung cities and smaller towns to increase their investor base.

Diverse Range of Products: In order to make MFs more acceptable to the retailinvestor mutual fund industry has to mature to offering comprehensive life cycle financialplanning and not products alone. These would include products catering to specific lifecycle needs like buying a house, funding college admission etc. With increase in investorawareness many new products would be introduced. Some of them are listed here:derivative based MFs (though a cap on derivative exposure for a sponsor currentlyexists), commodities and real estate MFs

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( appropriate regulation from SEBI in case of real estate pending ), feeder funds, funds offunds, capital protected funds, etc.

Increase in the need for financial advice: As the affluence of Indians increases andthe range of financial products available to meet peoples needs expands mortgages,

deposits, life products, defined contribution pensions, mutual funds, etc the need forfinancial advice will increase. Mutual fund distribution will become geared towardsproviding sound financial advice according to investors risk profile and stage in lifecycle.

TOP 10 I - year returns (%)

Diversified fundsTaurus Discovery Stock 111.32SBI Magnum Global Fund 94 111.21SBI Magnum SectorUmbrella - Contra 98.87Reliance Growth 93.23Taurus Starshare 89.93Sundaram Select Midcap 88.83Alliance Equity Fund 78.79Taurus Bonanza Exclusive Growth Scheme 95 78.78SBI Magnum Multiplier Plus 93 78.59Tata Growth Fund 75.04

Sectoral fundsAlliance Buy India Fund 94.48Prudential ICICI FMCG 93.34UTI Thematic Basic Industries Fund 80.61Kotak MNC Fund 63.67Franklin FMCG Fund 62.51Reliance Diversified Power Fund 61.09Alliance New Millennium 61.03UTI Thematic Banking Sector Fund 59.41Canexpo Plan 58.65Prudential ICICI Technology Fund 58.18

Balanced fundsCantriple + 85.14Canganga 75.73SBI Magnum Balanced Fund 60.06

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Kotak Balance 53.67HDFC Prudence Fund 49.71Tata Balanced Fund 49.57BOB Balance Fund 49.50Escorts Balanced Fund 46.54

Alliance 95 44.05Prudential ICICI Balanced 41.73

Floating rate fundsGrindlays F R F - STP - Plan C - Super I P 5.07JM Floater Fund - S T P 5.04DSP ML Floating Rate Fund 5.02LIC MF Floating Rate Fund - ST 4.98Birla Floating Rate Fund - LTP 4.97UTI Floating Rate Fund - STP 4.93Tata FRF - ST 4.91Templeton Floating Rate Income Fund LT 4.88

Deutsche FRF 4.87

Life Insurance

Life is very fragile and death is a certainty. We cannot control the uncertainties of life.But, we can cover the risks surrounding us. Life insurance, simply put, is the cover forthe risks that we run during our lives. It protects us from the contingencies that couldaffect us. Life insurance is not for the person who passes away, it for those who survive.

It is the responsibility of every bread earner to guard against the events that could affectthe family in the unfortunate circumstance of his / her demise. Thus, having a lifeinsurance policy is very vital. Before going for a life insurance policy it is imperative thatyou know about various types of life insurance policies

Endowment Policy, India

An endowment policy covers risk for a specified period, at the end of which the sumassured is paid back to the policyholder, along with the bonus accumulated during theterm of the policy. An endowment life insurance policy is designed primarily to provide aliving benefit and only secondarily to provide life insurance protection.

Group Insurance, India

Group insurance offers life insurance protection under group policies to various groupssuch as employers-employees, professionals, co-operatives, weaker sections of society,etc. It also provides insurance coverage for people in certain approved occupations at thelowest possible premium cost.Group insurance plans have low premiums. These includeemployer-employee groups, associations of professionals (such as doctors, lawyers,

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chartered accountants etc.), members of cooperative banks, welfare funds, credit societiesand weaker sections of society.

Joint Life Insurance Policy, India

Joint life insurance policies are similar to endowment policies as they too offer maturitybenefits to the policyholders, apart form covering risks like all life insurance policies. Butjoint life policies are categorized separately as they cover two lives simultaneously, thusoffering a unique advantage in some cases, notably, for a married couple or for partnersin a business firm..

Loan Cover Term Assurance Policy, India

Loan cover term assurance policy is an insurance policy, which covers a home loan. Sucha policy covers the individual's home loan amount in case of an eventuality. The cover onsuch a policy keeps reducing with the passage of time as individuals keep paying their

EMIs (equated monthly instalments) regularly, which reduces the loan amount.This planprovides a lumpsum in case of death of the life assured during the term of the plan. Thelumpsum will be a decreasing percentage of the initial sum assured as per the policyschedule. Since this is a non-participating (without profits) pure risk cover plan, nobenefits are payable on survival to the end of the term of the policy.

Money Back Policy, India

Money back policy provides for periodic payments of partial survival benefits during theterm of the policy, as long as the policyholder is alive.They differ from endowmentpolicy in the sense that in endowment policy survival benefits

are payable only at the end of the endowment period.An important feature of money backpolicies is that in the event of death at any time within the policy term, the death claimcomprises full sum assured without deducting any of the

survival benefit amounts, which may have already been paid as money-back components.The bonus is also calculated on the full sum assured

Pension Plan, India

A pension plan or an annuity is an investment that is made either in a single lump sumpayment or through installments paid over a certain number of years, in return for aspecific sum that is received every year, every half-year or every month, either for life orfor a fixed number of years.

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Term Life Insurance Policy, India

Term life insurance policy covers risk only during the selected term period. If thepolicyholder survives the term, the risk cover comes to an end. Term life policies areprimarily designed to meet the needs of those people who are initially unable to pay the

larger premium required for a whole life or an endowment assurance policy.

Benefits of a term assurance plan

The main reason for taking an insurance plan is to provide a suitable financial bufferagainst contingencies. The existence of term assurance pla ns is governed by this utility.

1. Death benefitIn case of unfortunate death of the policyholder these plans providethe payment of the sum

assured to the nominee. Hence, such plans provide financial protection for the family in

case of death of the insured person during the term.

2. Low cost risk cover A term plan is the cheapest product available in the insuranceindustry today. Cost wise, it is the most effective of all insurance plans.

3. Cover against outstanding loansAny term plan can also be used as a coveragainst outstanding loans and liabilities. In case the person has taken a large number ofloans, then the person can take a term assurance plan equal to the amount of the loan sothat in case of his death, the insurance company will clear the outstanding liabilitieshelping the family to become free from the financial

burden. Investors Corner

4 Tax benefits of a term assurance p lan Premiums paid towards a term assurance planare eligible for a deduction under section 80C up to a maximum of Rs.1,00,000. Thedeath benefit that will be received under such a policy will

also be exempt from tax under section 10(10D) of the Income

Tax Act.

Unit Linked Insurance Plans (ULIP)

Unit linked insurance plan (ULIP) is life insurance solution that provides for the benefitsof protection and flexibility in investment. The investment is denoted as units and is

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represented by the value that it has attained called as Net Asset Value (NAV). The policyvalue at any time varies according to the value of the underlying assets at the time.

ULIP provides multiple benefits to the consumer. The benefits include:

o

Life protectionInvestment and Savingso Flexibility

Adjustable Life Covero Investment Options

Transparencyo Options to take additional cover Death due

to accidento Disability Critical

Illnesso Surgeries Liquidity

o Tax planning

Fund Name Objective Equities Debt Instruments Money Market &

Cash

Secure Fund Progressivereturns byinvesting higherelement of assetsin debt withminimumexposure toequities

0% to 20% 60% to 100% 0% to 20%

Balanced Fund Capital growth byavailing ofopportunities indebt and equitymarket andproviding a goodbalance betweenrisk and return

0% to 45% 50% to 90% 0% to 10%

Growth Fund High capitalgrowth byinvesting higherelement of assetsin the equitymarket

30% to 85% 0% to 50% 0% to 20%

Protector Fund Progressivereturns on yourinvestment byinvesting higherelement of assetsin debt securitieswith a minimum

0% to 20% 60% to 100% 0% to 20%

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exposure toequities.

Whole Life Insurance Policy, India

A whole life policy runs as long as the policyholder is alive. As risk is covered for theentire life of the policyholder, therefore, such policies are known as whole life policies. Asimple whole life policy requires the insurer to pay regular premiums throughout the life.In a whole life policy, the insured amount and the bonus is payable only to the nomineeof the beneficiary upon the death of the policyholder. There is no survival benefit as thepolicyholder is not entitled to any money during his / her own lifetime.

A whole life plan which covers the individual throughout his life may be highlyappropriate in the following cases

A young person who is interested in getting a cover for rest of his life

A working executive who wants to take advantage of getting a life long insurance cover

A person who understands the importance of insurance and believes in securing hisfuture against losses

A person who does not believe in taking up a host of insurance products, but believes ina one product which provides a comprehensive risk cover, lasting as long as he lives.

PARAMETERS

Risk cover

The primary objective of taking an insurance policy is to have a risk cover. Hence, it isimportant that the sum assured is commensurate with the changing needs andrequirements of the individual.

Survival benefits

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A whole life plan is said to be an insurance policy which provides a cover for living toolong only because Cash inflows The inflows that the policyholder gets from the policyat regular intervals can be a determining factor while selecting a whole life plan. Anexample that can be quoted is that Tata AIGs Mahalife pays cash every year inperpetuity from the 10th year of the policy.

Cash benefits

The bonuses that are payable on the plan are also another feature that needs to be takeninto account. Some plans have pay guaranteed bonuses while some other plans provid enon-guaranteed bonus payouts after 6 years, while a few others provide such payoutsonly

from the 10th year. Hence, the individual should select that policy which starts the bonuspayouts at the earliest so as to benefit from the power of compounding.

Flexibility

Ultimately, the policy belongs to the individual. Hence, the individual should have theflexibility to select the sum assured, the premium paying term etc. While some plans havethe flexibility, some do not offer such flexibility to the indiv idual.

Simplicity

While flexibility is indeed important, in case too much of options are given to thepolicyholder it makes the product more complex. Hence, it is important to strike a via-media to ensure that the product is flexible and at the same time easy for the policyholderto understand.

Ever dreamt of a life cover till the age of 80 &beyond? Whole life plan provides justthat!

Public Provident Fund,Popularly known as PPF, is a savings cum tax saving instrument. It also serves as a retirement planningtool for many of those who do not have any structured pension plan covering them. Public Provident Fundaccount can be opened at designated post offices throughout the country and at designated branches ofPublic Sector Banks throughout the country. The account can be opened by an individual in his own name,on behalf of a minor of whom he is a guardian, or by a Hindu Undivided Family.The Public Provident Fund Scheme is a statutory scheme of the Central Government of India.

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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 convenient installments, not more than 12 Installments in a

year or two installments in a month subject to total deposit of Rs.70,000/-.. 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/- withdefault fee of Rs.50/- for each defaulted year. .

The deposits shall be in multiple of Rs.5/- subject to minimum amount of Rs.500/-. The deposit in a minor account is clubbed with the deposit of the account of the Guardian for the

limit of Rs.70,000/-.

No age is prescribed for opening a PPF account. Interest is not contractual but rate is notified by Ministry of Finance, Govt. of India, at the end of

each year.

The facility of first withdrawal in the 7th year of the account subject to a limit of 50% of theamount at credit preceding three year balance. Thereafter one Withdrawal in every year ispermissible..

The PPF scheme is operated through Post Office and Nationalized banks. PPF account can be opened either in Post Office or in a Bank. Account is transferable from one Post office to another and from Post office to Bank and from

Bank to Post office. Account is transferable from one Bank to another bank as well as within the bank to any branch. 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.

PUBLIC PROVIDENT FUND (PPF)

Sl.

No.

Name

of the

Scheme

InterestMaturity

Period

Limit of

Deposit

I.T.benefit Place of

Deposit

PPF 8 % 15 years Min:

Rs.500Max:Rs.70000in a year

20% Rebate u/s 88 upto

Rs.70000/- & I.Tconcessions for interestu/s 10(i)I.T. concessionfor entire interestamount.

SBI and

selectedNationalisedBanks

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Post Offices

India possesses the largest postal network in the world with 187000 post offices spread all over the countryas on March 31, 2006, of which 89 per cent are in the rural sector. Post offices in India play a vital role inthe rural areas. They connect these rural areas with the rest of the country and also provide banking

facilities in the absence of banks in the rural areas. Post Offices offer various types of accounts. These are:

Post Office Saving Account

Minimum amount Rs20/- in case of non- cheque account, Rs.500/- in case ofcheque account.

Minimum balance of Rs.500/- is to be maintained for a cheque account. Account is opened with cash only. Maximum balance permissible Rs. 1,00,000/- in a single account and 2,00,000/-

in Joint account. Two/Three adults, individuals, minor through guardian.

A Minor having 10 years of age can also open an account directly. One individual account and one joint account can only be opened at a post office. Income tax relief is available on the amount of interest under the provisions of section 80L of

Income Tax Act.

Post Office Five Year Recurring Deposit Scheme

a) An account can be opened in multiple of Rs.5 & minimum monthly deposit is Rs 10.b) An account can be opened of any post office & can be transferred from one post officeto another anywhere in India.c) One can open more than one account.d) Nomination facility is available.e) Automatic deductions are made at the source by employer on the consent of theemployer through Payroll .M.P.K.B.Y Agent will collect the amount from depositorevery month & deposit it in the post office.f) The account can be opened on behalf of a minor & operated eitherby mother or father.g) One can get rebate rupees one on 6 advance deposits & rupeesfour on 12 advance deposits of an account of R.10/- denomination.

h) An insurance like benefit is available on the Deposits up to denomination of Rs.50/-.i) Account can be continued up to ten years

Post Office Monthly Income Account

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Post Office Monthly Income Account is meant for those investors who want to invest alump sum and earn interest on monthly basis for their livelihood. The scheme is,therefore, a boon for retired persons.

The account can be opened by a single adult or 2-3 adults jointly. Maturity period is 6

years.

Minimum investment amount is Rs.1000/- or in multiple thereof. Maximum amount is Rs. 3 lakhs in a single account and Rs. 6 lakhs in a joint

account. Premature encashment facility after one year. Interest income is taxable, but no TDS. The Only Post Office scheme where monthly interest is payable. Account can be opened by an individual, two/three adults jointly, and a minor

through a guardian. A minor having attained 10 years of age can open an account in his/her own name

directly. Minors have a separate limit of investment of Rs. 3 lakhs and the same is not

clubbed with the limit of guardian. A separate account is opened for each deposit. Facility of premature closure of account after 1 year to 3 years @ 2.00% discount. Deduction of 1% if account is closed prematurely at any time after three years. Facility of reinvestment on maturity of an account. Interest not withdrawn does not carry any interest. Maturity proceeds not drawn are eligible to earn savings account interest rate for a

maximum period of two years.. Nomination facility is available.

Rebate under section 80 C is not admissible. Most suitable scheme for senior citizens and for those who need regular monthly

income.

Post Office Time Deposit Account

Post office time deposit account is just like the bank fixed deposit account. These timedeposits are meant for those investors who want to deposit a lump sum for a fixed period.Time deposit account can be opened at any post office with a minimum deposit of Rs.200. There is no maximum limit for the account.

Interest payable annually but calculated quaterely at following rates:

Period Rate of

Interest

One Year 6.25%

Two Years 6.50%

Three Years 7.25%

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Five Years 7.50%

Minimum amount of deposit is Rs.200/-. No maximum limit. Account can be closed after 6 months but before one year without any interest.

Facility of redeposit on maturity of an account. No interest is payable on undrawn interest amount. Account can be opened by an individual, two adults jointly and minor through

guardian. A Minor who has attained the age of 10 years can open the account in his/her own

name to be operated directly. Non Resident Indian / HUF can not open the account. Any number of accounts can be opened. Two, three and Five years accounts can be closed after one year at a discounted

rate of interest. Deposits not drawn on maturity are eligible to saving account interest rate for a

maximum period of two years. Account can be pledged as security against a loan to banks/ Government

institutions. Accounts are transferable from one Post office to any Post office in India. Rebate under section 80-C is not admissible. Interest income is taxable. Deposits are exempt from wealth tax. No T.D.S. Nomination facility available.

National Savings Certificate

National Savings Certificate, popularly known as NSC, is a time-tested tax savinginstrument that combines adequate returns with high safety.

National Savings Certificate can be purchased by the following:

Rs. 1000/- grows to Rs. 1601/- in six years. Minimum investment Rs. 500/- Maximum no limit. Certificates can be pledged as security against a loan to banks/ Govt. Institutions .

A Tax saving investment under Sec 80C Interest income is taxable, but no TDS. Rate of interest 8% compounded half yearly Two adults, individuals, and minor through guardian can purchase. Companies, Trusts, Societies or any other Institutions are not eligible to purchase.

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Non-resident Indian/HUF cannot purchase. No premature encashment. Annual interest earned is deemed to be reinvested and qualifies for tax rebate for

the first 5 years under section 80 C of the Income Tax Act. Maturity proceeds not drawn are eligible to Post Office Savings Account interest

for a maximum period of two years. Nomination facility is available Facility of purchase/payment to the holder of Power of Attorney. Tax Saving instrument - Rebate admissible under section 80 l of the Income Tax

Act. Deposits are exempt from Wealth Tax.

Kisan Vikas Patra

Kisan Vikas Patra (KVP) is a saving instrument that provides interest income similar tobonds. Amount invested in Kisan Vikas Patra doubles on maturity after 8 years & 7

months.Kisan Vikas Patra can be purchased by the following:

Minimum Investment Rs. 500/- No maximum limit. Rate of interest 8.40% compounded annually. Money doubles in 8 years and 7 months. Two adults, Individuals and minor through guardian can purchase. Companies, Trusts, Societies and any other Institution not eligible to purchase. Non-Resident Indian/HUF are not eligible to purchase. Facility of encashment from 2 years.

Maturity proceeds not drawn are eligible to Post office Savings account interestfor amaximum period of two years.

Facility of reinvestment on maturity. Rebate under section 80 C not admissible. Interest income taxable but no TDS Deposits are exempt from Wealth tax.

Government of India 8% Savings (Taxable) Bonds,

2003

The salient features of the Bond areas follows:Eligibility for Investment

The Bonds may be held by -(i) an individual, not being a Non-Resident Indian (NRI)(a) in his or her individual capacity, or(b) in an individual capacity on joint basis, or(c) in an individual capacity on anyone or survivor basis, or

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(d) on behalf of a minor as father/mother/legal guardian(ii) a Hindu Undivided Family.(iii) (a)'Charitable Institution' to mean a Company registered under Section 25 of theIndian Companies Act 1956 or(b) an institution which has obtained a Certificate of Registration as a charitable

institution in accordance

with a law in force; or(c) any institution which has obtained a certificate from Income Tax Authority for thepurpose of Section 80G of the Income Tax Act, 1961.(iv) "University" means a university established or incorporated by a Central, State orProvincial Act, and includes an institution declared under section 3 of the UniversityGrants Commission Act, 1956 (3 of 1956), to be a university for the purposes of that Act.

Senior Citizens Savings Scheme 2004

One of the most attractive small savings scheme - ideal for VRS takers of the ageof 55 years and above and Sr.citizens of 60 years and above.

Interest @ 9 % per annum payable quarterly. Minimum deposit of Rs 1000 and its multiples and maximum Rs 15 Lakhs Five years scheme

BANKSBank Fixed Deposits

Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit Account, acertain sum of money is deposited in the bank for a specified time period with a fixed rateof interest.

The rate of interest for Bank Fixed Deposits depends on the maturity period. It is higher

in case of longer maturity period. There is great flexibility in maturity period and itranges from 7days to 10 years. The interest is compounded annually and is added to theprincipal amount. Minimum deposit amount is Rs 1000/- and there is no upper limit.

Loan / overdraft facility is available against bank fixed deposits. Premature withdrawal ispermissible but some penalty is levied. Tax Deductible at Source, if the interest paid/payable on deposit exceeds Rs.5000/- per customer, per year, per branch

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DEPOSIT SCHEME FOR RETIRING GOVERNMENT EMPLOYEES

This scheme is open to retired Central and State governments' employees and retiredjudges of Supreme Court and High Courts. The account can be opened at designatedbranches of Public Sector Banks throughout the country.

Minimum deposit limit to open the account is Rs 1000, while the maximum limit equalstotal retirement benefits in multiple of one thousand rupees.

Retirement benefits means:

Balance at the credit of employee in any of the Government Provident Funds Retirement / Superannuation gratuity Commuted value of pension Cash equivalent of leave Savings element of Government insurance scheme payable to the employee on

retirement.

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1 Occupation Details of the people intervened

DETAILS No of

responses

Percentage

Student 8 7.2

Business man 14 12.7

Professional 33 30

Retired 20 18.3

Service 25 22.7

others 10 9.1

Aswith the above table , the respondent who were intervened with respect to theiroccupation details is categorized which from the survey 33 people were professional and10 people who fall in other category like house wife , unemployed etc.

As with the graph the majority of people intervened are professional with 30 % of thetotal and lowest to other with 9.1%.

2 Annual Income of the people intervened

Annual income No of

responses

Percentage

Up to 100000 11 10

100000 - 200000 29 26.3200000 - 500000 57 51.8

Above 500000 13 11.9

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4. Time Horizon of Investment made

Income invested No of responses Percentage

UPTO 1 YEAR 09 8.1

1 TO 3 YEARS 26 24.6

3 TO 5 YEARS 41 37.2

5 YEARS & ABOVE 34 30.1

The above table shows that people tend to invest for particular longer time period whichis sown in table through response. Lesser number of people invest in for shorter timeperiod ranging 1 3 years majority people tend to invest for longer time period.

The trend what is seen through study is that people willing to invest for longer period oftime which through survey more than 3 years & above.37.2% people said they investbetween 3 5 years & 30.1 % said they invest more than 5 years.

5 Investment in Various Products

PRODUCTS No of responses

SHARES / STOCK BROKING 43

MUTUAL FUNDS 32

INSURANCE 89

GOLD 44

POST OFFICE SCHEMES 54

BONDS 12

FIXED DEPOSITS 31

OTHERS 28

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The table here shows the investment of people into various financial products. Peopletoday with the newer trends in financial sector invest largely in insurance, shares, post

office schemes with latest upcoming trend in investment is mutual funds .

The trend what we see through the graph is people tend ti invest more in insuranceschemes with total of 80 respondent agreed on investing in insurance , post officeschemes , shares are also preferred with 54 & 43 respondent respectively

6.REASON FOR INVESTMENT IN DIFFERENTAVENUES

Income invested No of

responses

Percentage

LIQUIDITY 11 10

RETURNS 22 20

TAX BENIFITS 42 39.1

SAFETY 18 16.3

LOW RISK 12 10.09

OTHERS 5 4.51

With above table facts the reason for investing in different investment avenues has beenstudied an majority people invest for purpose of tax benefits with 39.1 % other look forreturns, safety, low risk and liquidity factor.

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The above graph shows that people invest their money with objective of tax assistance

with 39.1% respondent agreed others look for returns which is 29% of response theminimum criteria i.e. 4.51% .

7 Risk Taken to Achieve Higher Returns

RISK PATTERN No of responses Percentage

VERY

LITTLE

40 36.3

MODERATE AMOUNT 49 44.5A LOT 21 19.2

People these days are little bit conscious in terms of taking decision regarding investmentthey prefer to take lesser risk in order to have safe and assured returns. still majority ofpeople invest in various products taking moderate level of risk which is approx. 44.5%respondent agreed to it

As shown in the above graph people take moderate risk in terms of investing in differentproducts which is 44.5% of respondent, 19.2 % respondent said they take lots of riskwhile investing mainly these are who invest in shares/stock etc.

8 Respondent preferences in different financial products

(A) Shares

DETAILS No of

responses

Percentage

Very little

preferred

7 6.3

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Little

preferred

18 16.3

Moderate

preferred

42 37.1

More preferred 21 19.3

Most preferred 22 20

With the above table and graph people who were intervened had their moderate

preferences in investing shares which are willing to take risk in investing which is 37.1%over other financial products since they returns are higher in this so they are moderatelypreferred by the customers.

(B) Insurance

DETAILS No of

responses

Percentage

Very little

preferred

4 3.6

Little

preferred

11 10

Moderate

preferred

29 26.3


Most preferred 27 24.6

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With above graph and tables it is clear that trend is shifting towards security people nowdays prefer to be secure themselves and their family. Insurance is more preferred thesedays as 44.5 % respondent prefer insurance since it provide security and also it givesgood returns for the investor. 24.6% people invest in insurance as this is most preferredinvestment proposal by them.

(C) Post Office Schemes

DETAILS No of

responses

Percentage

Very little

preferred

13 11.8

Little

preferred

12 10.9

Moderate

preferred

26 23.7



The above table and graph shows that as compared to earlier days people now tend toinvest less in post office schemes since with emergence of return oriented financialproducts like mutual funds, Unit Link Insurance Plans (ULIP) as there is lock in period of

only 3 years and higher potential for returns in these instruments .Since they are peoplewho prefer more in investing in post office schemes with 43.6 agreed to invest in this.

(D) Mutual Funds

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DETAILS No of

responses

Percentage

Very little

preferred

12 10.9

Little

preferred

34 30.1

Moderate

preferred

44 40



DETAILS No of

responses

Percentage

Very little

preferred

13 11.8

Little

preferred

48 43.6

Moderate

preferred

26 23.7



The above table and graph clearly indicates that people moderately prefer in mutual fundsthe trend is shifting from other investment avenues towards mutual funds. People nowprefer mutual funds as safest from of investment proposal and risk free in terms ofliquidity. From the above 40 % pf people moderately prefer to invest in mutual fundswith 30 % had little preference over it.

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With increase in awareness and other factors mutual funds are one of the upcomingfinancial instruments which would be most preferred for investment purpose.

(E) BONDS

From the above table and graph the trend which is shown that people have littlepreference investing bonds. 43.6% respondent agreed they had little preference ininvesting bonds while 10 % as most prefer investment option.

(F) Gold

The above table and graph shows that around 65% of people have little & moderatepreference in investing in gold they largely buy gold for non investment purpose likemarriage or gift. Still there are some respondent who buy gold as an investment avenueand prefer it over other investment avenue.

With increase in the international prices of gold people consider it a growth prospect andare now prefer most as it is profitable source of investment.

(G) Fixed Deposit

DETAILS No of

responses

Percentage

Very little

preferred

21 19.3

Little

preferred

32 29.01

Moderate 29 26.3

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preferred



DETAILS No of

responses

Percentage

Very little

preferred

18 16.3

Little

preferred

45 40.9

Moderate

preferred

27 24.6



The above table and graph indicates people have different preferences maximum of29.1% respondent little prefer investing in FD while 26.3% as moderate preferences.With increase in inflation and the lock in period of 7 yrs the actual realized returns tendto be very low so now people are shifting towards other prospect financial instrumentslike Mutual Funds , Insurance(ULIP) ETC.

(H) Government Securities

DETAILS No of

responses

Percentage

Very little

preferred

14 12.4

Little

preferred

25 22.7

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Moderate

preferred

18 16.3



The above table and graph indicates that people do prefer government securities as aninvestment prospect .people invest in government securities in large number in order therisk associated with them is comparatively less and are considered one for the saferinvestment option. As seen in the graph 43.7% people prefer it more times in investingand 11.8% people prefer very little in investing in Govt.Securities.

(I) Others

DETAILS No of

responses

Percentage

Very little

preferred

13 11.8

Little

preferred

12 10.9

Moderate

preferred

26 23.6



The table and graph which include preferences of people who invest in non financialproducts like investing in Real Estate which is the most preferred since the above graphshows only 17.2 % prefer in investing in other but actual if we look as example of realestate most of preference is

in investing in real estate with the change in the rates in urban and rural landrespectively.22.7 % people have little preference in investing in others investment

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options.

9 Investment Objective of the Respondent

The table shown here includes the response of the people with their investment objective.The criteria which they consider while investing in various investment proposals. thecriteria which is being considered is capital preservation, income and income growth .People consider both capital preservation as well as income growth while investing invarious options .some percentage agreed on investing with criteria of moderate growth.

DETAILS No of responses Percentage

Capital Preservation

8 7.2

Income 14 12.4

Growth of Income or CapitalPreservation.

31 28.6

Growth and Income (balanced) 24 21.8

Moderate Growth 23 20.9

Maximum Growth: 10 9.09

As shown in the above graph consideration of the objective while investing in different

investment products 28.6% of respondent have their objective of growth of income orcapital preservation. 21.9% respondent considers growth of income & capitalpreservation with balanced approach. People prefer moderate growth as compared tohave maximum growth in investing.

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10 Mode of investment made

mode No of responses Percentage

Quarterly 21 19.1

Half yearly 47 42.7

Yearly 32 29.1

One time 10 9.1

With the above response we can clearly see people tend to invest in mode of half yearly42.7 % respondent agreed to invest in half yearly mode while 29.1 % said they invest inyearly mode. Since these days with the upcoming trend of mutual funds and ULIP planspeople now look for one time investment mode for particular time period like in mutualfunds (Close Ended ) lock in period of 3 years for one time investment 9.1 % ofrespondent consider investing in this mode.

11 Liquidity of investments within next 5 years

Portion if investment No of responses Percentage

Not to liquidate 32 29.29

O % to 10 % 27 24.5

11% to 20% 29 26.31

21% to 50% 17 15.4

51% or more 5 4.5

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The above table and graph shows that the portions of investment people invest it for thelong term purpose in order to get some good returns. People in large portion invest inschemes which are of long term purpose as 29.29% respondent don want to liquidatetheir investment within 5 year to expect long term returns while another 24.5% said theywant to liquidate their investment between 0 to 10 % , 26.31 wants to liquidate between

11 to 20 %.

Since these days people are now willing to invest for the long term purpose investing inoptions like insurance schemes , post office , bonds etc.

12. Response to finan

Services Availed

No of responses

Yes

Availed

No of responses

No

Future

interest

No of

responses

Yes

Future

interest

No of

responses

No

cial planning services

Services Availed

No of

responses

Yes

Availed

No of

responses

No

Future

interest

No ofrespons

es

Yes

Future

interest

No ofresponse

s

No

Investment management 47 63 79 31

Investment advice 71 39 94 16

Tax preparation 89 21 34 76

Retirement planning 34 76 54 56

Planning for life, long term care insuranceadvice

82 28 85 25

Planning for other financial goals 46 64 32 78

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Estate planning 32 78 47 63

The table shown indicates people response to financial planning services as therespondent has taken largely on matters of tax preparation, insurance and investmentadvice. While there is still less number in respect to services for planning for financialgoals, estate planning a

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