Microsoft Word - Financial Instruments project report

1

SIGNIFICANCE OF THE STUDY

The present financial market is flooded with a lot investment instruments, viz., Shares,

Bonds, Mutual funds, Insurance plans, Fixed Deposits, other money and capital market

instruments and also various options of investment in Real Estate and Commodity Market

etc. Sometimes people refer to these options as "investment vehicles," which is just another

way of saying "a way to invest." Each of these vehicles has its own positives and negatives

and ultimate decision of investment is influenced by the individual investor’s perception

regarding the risk and return of concerned investment opportunity available in the market.

Further, the investment decisions is full of complexity because of volatility of market

conditions, Inflation rate fluctuations, impact of Global environment, Cash reserve ratio, and

Repo rates. Therefore, it is imperative to analyze these factors while taking an investment

decision.

Keeping above in mind, the study has been done to see the perception of investors which

provides understanding to readers about the various factors which should be keep in mind at

the time of investment. The study is useful to company in providing the understanding about

the investors’ perception to devise the suitable product/marketing strategies, which would

helps it in making their policies or strategies in order to attract them. Further. financial

planner get advent to make portfolio according to response given by respondents, which

belong to different occupations, having different income level, different age level or which

instrument is mostly like by the investors for investment.

The study would further helpful for readers in understanding about the various investment

opportunities available in the market.

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CONCEPTUALIZATION

The money you earn is partly spent and the rest is saved for meeting future expenses.

Instead of keeping the savings idle you may like to use savings in order to get return on

it in the future. This is called Investment. Investment is ‘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 which influence their investment

decisions, how to plan their investment portfolio and to whom to prefer for taking that

all decisions.

So that study is based on investor’s 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. The investment decision is

very typical to take, as it needs proper planning. So the concept of financial planning

has to be taken in this study.

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FOCUS OF THE PROBLEM

The present financial environment provides ample opportunities of investment to the

investors. The decision to invest in right instrument is too complex which can meet

their expectations perfectly. So a study has been done which explain about the

perception of respondents what they exactly see at the time of investment which

includes their tendency, preference and factors through which an investor influenced.

The study also focuses on analyzing the investment patterns of the investment.

4

OBJECTIVES OF STUDY

The various objectives of the study are

1) To study the various financial opportunities available for investment.

2) To study about the investors perception regarding various investment

opportunities available in the market

3) To analyze the investment patterns of the investment.

4) To examine the investors changing behavior regarding various investment

opportunities.

5

LIMITATIONS OF THE STUDY

1) The study is restricted to Delhi, Gurgaon and Bahadurgarh.

2) The sample size comprised of 100 respondents from different fields and income group,

and their responses are presumed to represent the wealth management market

3) The time period of the study in June-July 2008.

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CHAPTER 2

7

RESEARCH METHODOLOGY

Nature of Research:

The study is descriptive and analytical in nature. It is descriptive as it describes the existing

financial instruments available in the market. It is analytical as it analyses the perception of

the investors.,

Universe and Sample Size

NCR region have been taken as universe of the study. Convenient sampling technique is

used and a sample of 100 investors has been taken for the purpose of the study.

Data Collection and Sources

The study is based on both primary and secondary data. Following are the sources of

secondary data:

Research Instruments:

Interview and questionnaire have been used to conduct the study. A structured questionnaire

consisting close-ended questions have been made, which is filled by the trainee during

direct interaction with the respondents.

Interviews have been taken of Relationship managers of different NBFC's and BANKS to

seek the investor’s behavior towards investment.

ANALYSIS PATTERN:

Critical examinations of various investment instruments have been done and a comparison

is made, based on their merits and demerits.

8

The data collected form questionnaire is edited, tabulated and analyzed. Various graphical

techniques have been used to present the data in more meaningful way.

9

REVIEW OF EXISITING LITERATURE

Various studies have been done to know Investors perception regarding various financial

opportunities available in market for investment. The different studies tell the perception

of investors i.e. where they want to invest and what they see at the time of investment.

Large costs associated with evaluating market conditions. Even Individual savers may

not have the ability to collect process and produce information on possible investments.

High information cost may prevent capital to flow to its highest value use. So Financial

intermediaries undertake the costly process of researching investment possibilities for

others. Savers do not like risk; but high-return projects are riskier; Financial systems that

ease risk diversification induce a portfolio shift towards higher return project.

- Banks, mutual funds, securities markets provide vehicles for trading, pooling and

diversifying risk

- Risk diversification —> savings rate —> resource allocation —> economic growth

The various studies done by various researchers which tells about the tendency which is

followed by investors at the time of investment are as follows:

- Gurley and shaw (1955)

- Greenwood and Jovanovic (1990)

- Saint- Paul (1992)

- Patrick (1966)

• Greenwood and Jovanovic (1990):

This study points out the effective information processing (entrepreneurs / projects)

induces higher growth. It Captures the link between risk-sharing, capital accumulation

and growth that how more risk increases capital accumulation and growth. It points out

effective information processing and Captures the dynamic interaction between finance

and growth. Intermediaries plays crucial role in improving resource allocation and foster

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growth.

- Growth —> more individuals can afford to join intermediaries —> improves efficiency of

intermediaries.

• Acemoglu and Zilibotti (1997): This study points out to Captures the interaction

between risk-diversification, capital accumulation and growth, it tells risk diversification

like to invest in different instruments accumulate growth in capital. It emphasizes

endogenous risk generation in the growth process. It also points out financial systems

allow agents to hold a diversified portfolio of risk like to invest in various instruments.

According to that

- more investments in high-return projects;

- higher growth

• Allen and Gale (1997):

Long-lived intermediaries can facilitate intergenerational risk sharing: invest

with a long-run perspective; according to this study which instruments offer returns that

are relatively low in boom times and high in slack times

• Diamond and Dybvig (1983):

According to this study, the investors or savers choose between an illiquid, high-return

project and a liquid, low-return project.A fraction of savers receive shocks, access their

savings before illiquid project produces. Prohibitive information (verification) cost creates

incentives for financial markets to emerge.

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CHAPTER 3

12

INDUSTRY PROFILE:

An investment industry is on the gloomy side. As now a day’s maximum people are

interested in investment in various instruments.

Behavior of Household Savings in India

Household savings in general and savings in the form of financial assets in particular

exhibited remarkable growth since late eighties. The aggregate household savings as share

to GDP, which was only 1.5 per cent during 1970-71, went up to 4.9 per cent in 1980-81. It

went up sharply to 14.2 per cent in 1990-91 and further to 19.7 per cent in 1994-95 before

coming down marginally to 18.5 per cent in 1998-99. The growth of household savings

during the decade of eighties has been facilitated by a simultaneous increase in physical as

well as financial assets. While household savings in physical assets increased from 3 per

cent of GDP in 1980-81 to 7.8 per cent in 1990-91, savings in the form of financial assets

increased from 2 per cent to 6.4 per cent for the corresponding period. Financial savings

during first half of the nineties registered remarkable growth from 6.4 per cent of GDP in

1990-91 to 11.9 per cent in 1994-95. However, the share of financial savings to GDP

fluctuated since 1995-96.

The Indian financial sector is on a roll. Driven by a strong investor interest and an

expanding market, the industry is also becoming more vibrant, with new types of products

and services being offered to meet the needs of the booming economy.

The buoyancy in the economy is estimated to lead to a four-fold increase in India's

investable wealth from US$ 250 billion in 2007 to US$ 1 trillion by 2012. Simultaneously,

according to a report by Celent, an international consultancy firm, India's wealth

management segment will rise to an estimated 42 million households by 2012 from about 13

million households in 2007.

Clearly, there is huge potential in this segment. Significantly, wealth management revenues

are expected to account for 32-37 per cent of the total full-service financial institutions by

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2012. The market is also expected to undergo a structural transformation with organised

players increasing their market share. The attractiveness of India in the global financial

market is also reflected in the Indian cities - Mumbai, New Delhi and Bangalore - finding a

place of pride in the list of the world's top 75 commercial centres, as per the 2008

'Mastercard Worldwide Centres of Commerce Index'

There are many companies which includes banks and nbfc’s which helps in investment. The

top ten companies or major players in market including banks and nbfc’s are:

1) Religare

2) Karvy Investors Services Limited

3) Citi Bank

4) HSBC

5) UTI Bank

3.1) Karvy An Introduction :- KARVY, is a premier integrated financial services

provider, and ranked among the top five in the country in all its business segments, services

over 16 million individual investors in various capacities, and provides investor services to

over 300 corporate, comprising the who is who of Corporate India. Karvy has a professional

management team and ranks among the best in technology, operations and research of

various industrial segments.

History of Karvy :-The birth of Karvy was on a modest scale in 1981. It began with the

vision and enterprise of a small group of practicing Chartered Accountants who founded the

flagship company …Karvy Consultants Limited. We started with consulting and financial

accounting automation, and carved inroads into the field of registry and share accounting by

1985. Since then, we have utilized our experience and superlative expertise to go from

strength to strength…to better our services, to provide new ones, to innovate, diversify and

in the process, evolved Karvy as one of India’s premier integrated financial service

enterprise.

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PRODUCT AND SERVICES OF KARVY GROUP

1. Karvy comtrade.

2. Karvy consultant ltd.

3. Karvy merchant banking.

4. Karvy global services ltd.

3.2. CITIBANK

3.2.1. Introduction

Citigroup in India Citigroup is the single largest foreign direct investor in the financial

services industry in India. Committed to India for over 100 years, Citigroup considers

itself a local bank with an international perspective backed by the largest global

network. With a staff strength of over 15,000, Citigroup has consolidated its position as the

most innovative and comprehensive financial products and services provider in the country,

and today has a customer base of over 1,000 large corporate, over 22,000 small and

medium enterprises and over 5.5 million retail customers.

A pioneer in consumer banking, Citibank was the first to introduce credit cards, focused

consumer lending programs and electronic banking in India. Today, the Citibank

network comprises of 39 bank branches across 27 cities and over 400 CitiCard Banking

centers-which combine ATMs and self-service phone and Internet banking—offering

CitiGold wealth management, credit cards, mortgage services, Auto Loans, Personal

Loans, Suvidha and NRI Services. Through CitiFinancial, Citigroup offers consumer

finance services in the country.

3.2.2. Services

Citibank has a well-organized system of Wealth Management services in India that give you

unparalleled advantage and opens up the opportunity to maximize your wealth.The

Citigold Wealth Management is an innovative feature to complement Citibank and their

range of banking services in India. The Citigold Wealth Management process assures

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that Citibank's banking services in India are comprehensive and have been designed

keeping the long-term benefits and convenience of the customer in mind.

a) Mutual Funds

At CitiGold you can choose from a range of pre-selected Mutual Funds managed by some

of the biggest names in fund management such as Alliance Capital, Franklin Templeton

India, Birla SunLife, Zurich India, DSP Merril Lynch, HDFC, IDBI Principal and

Prudential - ICICI. The funds on offer are from a rigorously compiled list that ensures only

the best reaches you.

b) Tax Advisory Services

CitiGold has tied up with the leading tax advisory firm - Deloitte, Haskins & Sells to help

the clients with their tax management. Deloitte, Haskins & Sells, a member firm of Deloitte

Touche Tohmatsu (DTT), is amongst the leading global taxation-consulting firms. DTT

operates from 130 countries, has more than 6,000 partners and over 90,000 professionals

around the globe.

c) Real Estate Advisory Services

In today's market, real estate presents an attractive real estate investment option. To assist

the clients with advice on various real estate investments, or to help them in leasing,

buying or selling properties, CitiGold has tied up with a world-class real estate consulting

firm - Chesterton Meghraj Property Consultants.

d) Art Advisory Services

In today's market, art presents an attractive investment option. To assist the clients with

advice on various art investments, or to help them in buying or selling art, CitiGold has

tied up with a reputed art gallery, Apparao Galleries.

e) Insurance Services

In today's market, insurance presents an attractive investment option. To assist the clients

with advice on various insurance policies, or to help them in purchasing insurance, CitiGold

has tied up with Birla.

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3.3) AXIS BANK LTD

3.3.1. Introduction

Axis Bank was the first of the new private banks to have begun operations in 1994, after the

Government of India allowed new private banks to be established. The Bank was promoted

jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life

Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and

other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India

Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance

Company Ltd.

The Bank today is capitalized to the extent of Rs. 358.56 crores with the public holding (other

than promoters) at 57.57%.

The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai.

Presently, the Bank has a very wide network of more than 713 branch offices and Extension

Counters. The Bank has a network of over 2904 ATMs providing 24 hrs a day banking

convenience to its customers. This is one of the largest ATM networks in the country.

3.3.2. Services

AXIS outsources its wealth management services from Capital Market because the content is

AXIS web site's life line. In such matters no one likes to cut corners, take chances. They choose

www.capitalmarket.com, because of its:

• Brand Equity: Capital Market has been supplying offline electronic database

content for the last 15 years to more than 800 clients, comprising FIs, FIIs, Banks,

Brokers and Corporate. It is in the business of online content supply to websites put

up by leading financial institutions / brokers / portals for the last three years.

• Reliability: The significance of data accuracy can never be over-emphasized. All

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data collected by us undergoes strict audit checks.

• Fast Updations: Speed is the essence of the web. Our record in speedy updation of

annual reports / corporate results and news has earned us a vast clientele on the web.

• One-stop shopping convenience: Would you like one vendor for Stock Prices,

another for Corporate Profiles, third for Market News and a fourth for data on

Mutual Funds? Well, our specialty is, we supply everything under one roof.

3.3.3. Service Offerings by Capital Market

a) Equity Market Content

Capital Market is pioneer in offer equity related content for AXIS Bank's portal which

includes:

• Equity Market Commentary

• Stock Price Data

• Charting Facility

• Financial Data

• IPO Data

• Portfolio Tracker

b) Mutual Funds Content

Indian Mutual Fund industry has picked up, It is fastest growing industry, with number of

growing investor, today, there are 36 Mutual Funds and over 200 schemes with total assets of

approximately Rs. 81,000 crores. So it has become essential for you to keep updated

information on your portal. Capital Market offers you range of content solution as follows:

• Mutual Fund NAV

• Fund Profile Sheet

• Dividend & Mobilization Details

• Mutual Fund - News

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• Mutual Fund - NFO

• Mutual Fund - Tools

c) Commodity Market

Commodities Market is growing in India and Capital Market offers following screens

pertaining to Commodity Market:

3.4. HSBC Bank

3.4.1. Introduction

The antecedents of the HSBC Group in India can be traced back to October 1853 when the

Mercantile Bank of India, London and China was founded in Bombay (now Mumbai).

The acquisition in 1959 by The HongKong and Shanghai Banking Corporation

Limited of the Mercantile Bank was a decisive factor in laying the foundation for today's

HSBC Group.

HSBC in India is proud to have retained the Group's pioneering streak by being an active

partner in the development of the Indian banking industry - even giving India its first ATM

way back in 1987. The organization's adaptability, resilience and commitment to

its customers have further enabled it to survive through turbulent times and prosper through

good times over the past 150 years

3.4.3. Service Offerings

a) Financial Planning Services

Inflation, falling interest rates and fluctuating market conditions require you to plan your

finances carefully. Celebrate important occasions in the future by managing your wealth

well now.

b) Mutual Funds

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Use the proven expertise and insights of the world's local bank for your investments. We offer

you investment options in funds that meet our selection criteria and fit your requirements,

helping you create and increase your wealth potential in the long-term scenario.

c) Insurance: You have probably planned your life with great care, working slowly and

steadily towards fulfilling your dreams and ambitions. Unfortunately you have no control

over certain natural and man-made events that may overturn your plans.

3.5) Religare Enterprises Limited

3.5.1. Introduction

Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare

Securities Limited, Religare Finvest Limited, Religare Commodities Limited and

Religare Insurance Broking Limited provides integrated financial solutions to its

corporate, retail and wealth management clients. Today, we provide various financial

services which include Investment Banking, Corporate Finance, Portfolio Management

Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, there's a lot more

to come your way.

Religare is proud of being a truly professional financial service provider managed by a highly

skilled team, who have proven track record in their respective domains. Religare operations

are managed by more than 2000 highly skilled professionals who subscribe to Religare

philosophy and are spread across its country wide branches.

Today, we have a growing network of more than 150 branches and more than 300 business

partners spread across more than 180 cities in India and a fully operational international

office at London. However, our target is to have 350 branches and 1000 business partners in

300 cities of India and more than 7 International offices by the end of 2006.

3.5.2. Service Offerings

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a) Equity & Derivative:

Religare is one of the heavyweight equity players in India with membership of National

Stock Exchange of India and Bombay Stock Exchange - both major exchanges of India. We

believe in innovative services that could cater a range of customers according to their

requirements.

b) Commodities: Religare Commodities Limited is a member of both the exchanges

(MCX & NCDEX) that allows you to trade in all the commodities traded at both the

exchanges. At present, trading in commodities is restricted to futures contracts only. Religare is

currently offering special services to our esteemed investors in commodities:. Portfolio

Advisory Services (COMPASS) - This allows investors to get the benefit of our in-depth

research services and generate better returns with

minimal risk.

c) Depository Services:

Religare is among the few major Depository Participants holding securities worth more than

Rs.6000 crore under its management. RSL provides depository services to investors as a

Depository Participant with NSDL and CDSL.

d) Portfolio Management Services

The main idea behind Portfolio Management Services is to manage our client's wealth more

efficiently, reduce risk by diversifying across assets, sectors and funds, and maximizing

returns.

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COMPANY PROFILE

Introduction

� INDIABULLS FINANCIAL SERVICES LTD is listed on the National Stock Exchange,

Bombay Stock exchange, Luxembourg stock exchange and London stock exchange. The

market capitalization of Indiabulls is around USD 5910 crore (10th July, 2008), and the

consolidation net worth of the company is around USD 950 million (30th September

2007).

� Indiabulls and its group companies have attracted USD 800 million of equity capital in

foreign direct investment (FDI) since march 2000 .some of the large shareholders of

Indiabulls are the largest financial institutions of the world such as Fidelity Funds,

Capital International, Goldman Sachs,Merrill Lynch, George and Farallon Capital.

India Bulls is India’s leading retail financial services company with over 640 locations

in more than 110 cities. At India Bulls, it offers clients a full suite of financial services, namely

Equities, Commodities, Mutual Funds, Insurance & Loans etc. Its over 4,400 client

relationship managers are dedicated to serving customers unique management team that has

invested crores of rupees into a world class infrastructure that provides our clients with real time

service & 24/7 access to all information & products.

Its flagship India Bulls Professional Network offers real time prices, detailed data & news,

intelligent analytical & electronic trading capabilities, right at customer’s finger-tips. This

powerful technology is complemented by its knowledgeable & customer focused Relationship

Managers. India Bulls is creating a world of smart investor.

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HISTORY& EVOLUTION OF ORGANISATION

History

Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal started Indiabulls Group by acquiring a minor

brokerage company, Orbis Securities, in 1999. The group started it business as a stock-brokerage

firm and pioneered online brokerage business in India before diversifying into other financial

services areas such as consumer credit (2004) and mortgages (2005). The group partnered with

Farallon Capital to purchase land-mark Bombay land assets and is currently building one of the

largest integrated commercial real estate projects in India (valued at more than $2 billion). The

group recently entered the Power generation business and aims to have more than 5000 MW of

power generation under construction before 2008 end. The three founders today control the

Indiabulls Group.

Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s Orbis

InfoTech Private Limited at New Delhi under the Companies Act, 1956 with Registration No. 55

– 103183. The name of our Company was changed to M/s. Indiabulls Financial Services Private

Limited on March 16, 2001 due to change in the main objects of our Company from InfoTech

business to Investment & Financial Services business. It became a Public Limited Company on

February 27, 2004 and the name of our Company was changed to M/s. Indiabulls Financial

Services Limited. Our Company was promoted by three engineers from IIT Delhi, and has

attracted more than Rs.700 million as investments from venture capital, private equity and

institutional investors such as LNM India Internet Ventures Ltd., Transatlantic Corporation Ltd.,

Farallon Capital Partners, L.P., R R Capital Partners L.P., and Infinity Technology Trustee Pvt.

Ltd. and has developed significant relationships with large commercial banks such as Citibank,

HDFC Bank, Union Bank, ICICI Bank, ABNAmro Bank, Standard Chartered Bank, Lord

Krishna Bank and IL&FS. Our Company and our subsidiaries have facilities from the above

mentioned banks and financial institutions aggregating to Rs. 1760 million.

23

Previous Name New Name Date of Change Reason for change

Orbis InfoTech

Private Limited

Indiabulls

Financial

Services Private

Limited

March 16, 2001

Due to change in the main

objects of our Company

from InfoTech business to

Investment & Financial

Services.

Indiabulls Financial

Services Private

Limited

Indiabulls

Financial

Services Limited

February 27, 2004

Conversion from Private

Limited to Public Limited

Company.

ISSUE PROGRAMME

BID / ISSUE OPENS ON September 6, 2004 BID / ISSUE CLOSES ON September 10, 2004

LISTING

The Equity Shares issued through this Red Herring Prospectus are proposed to be listed on The

Stock Exchange, Mumbai and the National Stock Exchange of India Limited. Indiabulls have

received in-principle approval from these Stock Exchanges for the listing of our Equity Shares

pursuant to letters dated May 14, 2004 and May 31, 2004 respectively. The Stock Exchange,

Mumbai is proposed to be the Designated Stock Exchange

24

ORGANISATIONAL STRUCTURE OF INDIABULLS

M/S Orbis

InfoTech Ltd. Indiabulls

Indiabulls

financial

services ltd.

Indiabulls

Securities

ltd.

Indiabulls

Insurance

Advisors ltd

Indiabulls

Credit

Services ltd.

Indiabulls

Real Estate

ltd.

25

COMPANY PEOPLE

An overview of company people

Sameer Gehlaut Chairman & CEO

Rajiv Rattan President & CFO

Gagan

Banga Head- Online Sales & Insurance

Divyesh B. Shah [Head-

Offline

T.S. Miglani Chief Techn-ology Officer

Ashok

Sharma Finance

Cont-

roller

Suresh

Jain Vice

Presiden

t

Aneeta

Nagpal

Head – Human Resource

Amit Jain Company Secretary

26

INDIABULLS FINANCIAL SERICES LTD.

INDIABULLS SECURITIES LIMITED:-Indiabulls Securities Limited was incorporated as

GPF Securities Private Limited on June 9, 1995. The name of the company was changed to Orbis

Securities Private Limited on December 15, 1995 to change the profile of the company and

subsequently due to the conversion of the company into a public limited company; the name was

further changed to Orbis Securities Limited on January 5, 2004. The name of the company was

again changed to Indiabulls Securities Limited on February 16, 2004 so as to capitalise on the

brand image of the term “Indiabulls” in the company name. ISL is a corporate member of capital

market & derivative segment of The National Stock Exchange of India Ltd. At present, ISL

accounts for approximately 3% of the total daily turnover of the Exchange with 32,359 client

relationships and 70 branches spread across the country as of April 30, 2004.

27

INDIABULLS CREDIT SERVICES LIMITED:-

Indiabulls Credit Services has been valued at Rs263 crore with the Rs87.6-crore infusion.

Indiabulls Credit Services Ltd, the recently formed subsidiary of broking firm, Indiabulls

Financial Services Ltd. Faralon Capital, a San Francisco-based private equity fund, and its

affiliates have acquired 33.3 per cent stake for Rs87.6crore. Indiabulls Credit Services Ltd grants

loan against shares kept as security i.e. shares are pledged by the owner (borrower) in favor of

IBFSL from his existing demat account. Securities acceptable are the current A category list.

Loan disbursed via Cheque issued in the name of the borrower. Borrower does not need to open

a demat account with ISL. Margin call is given to the client in case margin drops from 33% to

30% i.e. if the amount disbursed/ value of stocks > 70%, the client has to immediately put in

more money or else part of his shares are sold off by IBFSL.

INDIABULLS REAL ESTATE:-

Indiabulls through its group companies has entered Indian Real Estate business in 2005. It is

currently evaluating several large-scale projects worth several hundred million dollars. Indiabulls

became the first company to bring FDI in Indian Real Estate through a JV with Farallon Capital

Management LLC, a respected US based investment firm. Indiabulls has demonstrated deep

understanding and commitment to Indian Real Estate market by winning competitive bids for

landmark properties in Mumbai and Delhi. In April 2006, Indiabulls announced demerger of its

real estate division to a separate entity.

INDIABULLS INSURANCE ADVISORS PVT. LTD:

-Indiabulls Insurance Advisors Pvt. Ltd. was incorporated as Orbis Technologies Private Limited

on February 18, 2002 and the name of the company was changed to Indiabulls Insurance

Advisors Pvt. Ltd. on February 9, 2004 due to the change in the main objects of the comp-any.

Indiabulls Insurance Advisors Pvt. Ltd. is a corporate agent for life insurance with Birla Sun life

Insurance Company Ltd. Our Company and our subsidiaries have a wide network of branches,

sales force and client relationships.

28

PRODUCT AND SERVICES

Equity & Debt Stock Broking Insurance Commodity trading

Depository Services Product Distribution

Derivatives Broking Services

Equity Research Services

Mutual Fund Distribution

IPO Distribution

Indiabulls Securities

Limited Indiabulls Insurance

Advisors Pvt. Limited Indiabulls Commodities

Pvt. Limited

Indiabulls financial securities ltd

29

CHAPTER 4

30

ANALYSIS OF INSTRUMENTS

Types of Investments / various instruments

Overview

There are many ways to invest your money. Of course, to decide which investment vehicles are

suitable for you, you need to know their characteristics and why they may be suitable for a

particular investing objective.

• Debt Market

• Public Provident Fund

• Fixed Deposits

• Bonds

• Mutual Funds

• Banks Deposits

• Equity Market

• Initial Public Offer

• Insurance

• Forex

• Cash

• Gold

• Real Estate

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FEATURES OF DIFFERENT TYPES OF INVESTMENTS:

Returns Safety Volatility Liquidity Convenience

Equity High Low High High Moderate

Bonds Low High Moderate Moderate High

Co. Debentures Moderate Moderate Moderate Low Low

FDs Moderate Low Low Low Moderate

Bank Deposits Low High Low High High

PPF Moderate High Low Moderate High

Life Insurance Low High Low Low Moderate

Gold Moderate High Moderate Moderate Moderate

Real Estate High Moderate High Low Low

Mutual Funds High Moderate Moderate High High

Forex Moderate Moderate Moderate High Moderate

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1. DEBT INSTRUMENTS Debt

instruments protect your capital, therefore the importance of a solid debt portfolio. This not only

gives stability, but also offers you optimal returns, liquidity and tax benefits. Debt products,

besides safeguarding your capital, can be used to meet short, medium and long-term financial

needs.

1.1) SHORT TERM INVESTMENT

They are good for short term goals, you can look at liquid funds, floating rate funds and short-

term bank deposits as options for this category of investments. Liquid funds have retuned around

5% post-tax returns as compared to 5.6% post-tax that your one-year 8% bank fixed deposit

gives you. So, if you have funds for investment for over a period of one year, it is better to go in

for bank deposits. However, liquid funds are better, if your time horizon is less than one-year,

say around six months. This is because the bank deposit rates decrease proportionately with

lower periods, while liquid funds will yield the same annualized returns for any period of time.

Short-term floating rate funds can be considered at par to liquid funds for short term investments.

a) Fixed Maturity Plan (FMP):

If you know exactly for how much time you need to invest your surplus, a smarter option is to

invest in FMPs. They are shorter-tenured debt schemes that buy and hold securities till maturity,

thereby eliminating the interest rate risk. Try and opt for FMPs that offer a double indexation

benefit. Fund houses usually launch double-indexation FMP’s during the end of the financial

year so that they cover two financial year closings.

1.2. Medium & Long-Term Options:

These options typically offer low or virtually no liquidity. They are, however, largely useful

as income accumulation tools because of the assured interest rates they offer. These instruments

(small savings schemes) should find place in your long-term debt portfolio.

33

Table 4.4.1: Small Savings Schemes

Senior

Citizens

Savings

Scheme

Regular

Income

9% pa

payable

quarterly

5

years

Min: Rs.1, 000

Max: Rs.15Lac

Yes Nil

Schemes Type Interest

Rate

Term Min-Max

Investment

Premature

Withdrawal

Tax

Benefit

Public Provident

Fund

Recurring 8% pa 15

years

Min: Rs.500

Max:Rs.70,000

Yes U/S

80C

National Savings

Certificate

Growth 8%

compounded

half yearly

6 years Min: Rs.100

Max:No upper

limit

No U/S

80C

Kisan Vikas Patra Growth Amount

doubles in 8

years & 7

months

8 years

& 7

months

Min: Rs.100

Max:No upper

limit

Yes Nil

Post Office Time &

Recurring Deposit

Fixed

Deposit

6.25% -

7.50% pa

1-5

years

Min: Rs.200

Max: No upper

limit

Yes Nil

Post Office Monthly

Income Scheme

Regular

Income

8% pa

payable

monthly

6 years Min: Rs.1, 000

Max: Rs.3Lac

(Single)

Rs.6Lac

(Jointly)

Yes Nil

34

2. BONDS

2.1. Overview

It is a fixed income instrument issued for a period of more than one year with the purpose of

raising capital. The central or state government, corporations and similar institutions sell bonds.

A bond is generally a promise to repay the principal along with a fixed rate of interest on a

specified date, called the Maturity Date. The main attraction of bonds is their relative safety. If

you are buying bonds from a stable government, your investment is virtually guaranteed, or risk-

free. The safety and stability, however, come at a cost. Because there is little risk, there is little

potential return. As a result, the rate of return on bonds is generally lower than other securities.

2.2. Tax Saving Bonds

These are those bonds that have a special provision that allows the investor to save on tax.

Examples of such bonds are:

a) Infrastructure Bonds

b) Capital Gains Bonds

a. Rural Electrification Corporation (REC) Bonds

b. National Highway Authority of India (NHAI)

c. National Bank for Agriculture & Rural Development

c) RBI Tax Relief Bonds

35

36

3. MUTUAL FUNDS

3.1. Overview

A 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 fund’s

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:-

37

4. EQUITY

4.1. Overview

Equities are often regarded as the best performing asset class vis-à-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 and

sectors. This helps you diversify your investment risk, so even if something were to go wrong

with a stock/industry 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 two years, is that you can’t 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.

38

5. INSURANCE

5.1. Overview

Life 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 children’s 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 individual’s 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 individual’s tax planning

exercise while also evaluating the various options available at one’s disposal.

Life is full of dangers, but with insurance, you can at least ensure that you and your dependents

don’t suffer. It’s 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

39

• Outliving Wealth

• Debt Repayment.

6. GOLD

6.1. Overview

In India, gold has traditionally played a multi-faceted role. Apart from being used for adornment

purpose, it has also served as an asset of the last resort and a hedge against inflation and currency

depreciation. India has more than 13,000 tones of hoarded gold, which translates to around Rs.6,

50,000 crores. Gold is an asset class that’s associated with safety.

However, the ups and down that the yellow metal has seen over the last few months, has

made it look similar to other market investment assets. This is due to an unprecedented demand

for gold as an investment avenue since the last couple of years.

Gold has attracted a high level of attention in last couple of years, with an image shift from a

non-volatile asset to a hot investment avenue. The future outlook for the metal looks positive

given its proven linear relationship with the crude oil and non-linear with the US dollar. The

much-awaited gold exchange-traded funds would provide a very good vehicle to the investors

and a sensible alternative to the current forms available for investment

7. REAL ESTATE

7.1. Overview

Real estate is a great investment option, as it gives you capital appreciation and rental

income. It’s an investment option since it fights inflation. The fundamentals for investing in

property markets remain strong in India - relatively low interest rates, strong capital flows, high

employment growth, abundant liquidity, attractive demographics (young population and

migration from West), increase in affordability, and a large supply of stock to keep up with

demand and focus on quality. The price you pay for a property should reflect the future

rent/income at which you let it. As in the stock market, the prices in real estate are also driven by

sentiments. All that is required to reverse a price movement is a change in sentiment.

Start saving for a home the moment you begin your career. Early acquisition helps you to

40

repay your home loan well within your working life. Also, the EMI as a percentage of your

salary decreases as your pay increases making the outflows more affordable. If you lock into the

interest rate for the loan, the interest outflow will be less than the compounding effect of

inflation.

You should be very clear about why you want to invest in real estate. It is a very good tool for

wealth creation but like all other assets, has its share of risks. Careful planning, however, can

minimize the risks.

8) FOREX

8.1 Overview

If you read about investing, you've seen the word forex trading. But because forex doesn't get

much publicity in the major publications and websites, many investors don't know that forex is

just short for "foreign exchange". So trading the forex market is simply trading foreign

currencies.

As recently as ten years ago, currency trading had high barriers to entry, so only large banking

and institutional firms had access to the tools and systems required to play in the forex trading

game. Recently, however, technology has developed to the point that any individual investor can

hop right in and trade with one of the many online platforms.

When buying and selling in the forex currency trading system market, you'll see that there are

four "currency pairs" that dominate the percentage of trades. Those four are the Euro vs U.S.

Dollar, US Dollar vs Japanese Yen, US Dollar vs Swiss Franc, and US Dollar vs British Pound.

The goal when investing in currency is to be holding a currency that appreciates in value in

relation to the other currencies. To use an overly simplistic example, if you bought 50 British

Pounds for 100 US Dollars, held the Pounds for 1 week, and in that period the value of Pounds

increased in relation to US Dollars, you could then convert those Pounds back into dollars for,

say, $120.

41

Unlike the domestic stock markets, the forex currency trading is open for trades 24 hours a day.

Much like the phrase "it's always noon somewhere," it's always business hours at some region of

the globe. Since every country trades on the FX market, and it's open all day, the daily volume is

roughly $1.2 trillion, which dwarfs that of the NYSE. Another comparison to make in order to

truly realize the magnitude of the forex market is with the currency futures market (which has

around 1% of the daily volume).

9) FIXED DEPOSITS

The same as a term or time deposit. 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. Safety

FDs 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-à-vis those

offered by company deposits.

2. Tenure

Short 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. Liquidity

Find out how FD fares on the pre-mature encashment front i.e. how easily can your investment

be liquidated. Also enquire about the penalty clauses, e.g. do you suffer a loss of interest and/or

principal amount. Compare how various FDs rank on this parameter and pick the best deal;

thereby try to minimise the impact of illiquidity which is typically associated with FDs.

42

4. Additional benefits

Fixed 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. Here are the benefits, drawbacks of fixed deposits and precautions one should take while

making such investments.

4.5) various factors which affects investment decision

1) CRR: Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with

RBI. If RBI decides to increase the percent of this, the available amount with the banks comes

down. RBI is using this method (increase of CRR rate), to drain out the excessive money from

the banks.

How It Affects :

a) From a stock market perspective

Rising interest rates have several implications including -

* slowing down the overall growth in the economy; this effectively means that demand for

goods and services, and investment activity, gets adversely impacted

* apart from the fact that overall growth is impacted, companies take a hit on account of

higher interest costs that they have to bear on their outstanding loans (to the extent their

cost of funds is not locked in)

43

* since some investors tend to leverage and invest in the stock markets, higher interest rates

increase expectation of returns from the stock markets; this has the impact of lowering

current stock prices

* an overall decline in stock prices has a cascading effect as leveraged positions are

unwound (on account of meeting margin requirements), leading to still lower stock prices

b) From a debt market perspective

If you are contemplating on investing monies in the debt market, you will benefit

from higher interest rates on offer. However, existing investors in debt oriented funds

may take a one time hit; but at the same time, since overall interest rates are higher,

from here on, such funds will yield higher return

c) From the perspective of borrower:

As a prospective borrower, you are the worst hit. The cost of money i.e. interest rates will

rise post the CRR hike. You will probably need to settle in for a lower loan amount given

the EMI.

If you are an existing borrower, as long as the rate of interest on your loan is fixed, you

are immune to any rise in interest rates. However, if you have a floating rate loan, then

expect either the tenure of the loan or the EMI to jump soon

2) Inflation:

Inflation is defined as an increase in the price of bunch of Goods and services that

projects the Indian economy. An increase in inflation figures occurs when there is an

increase in the average level of prices in Goods and services. Inflation happens when

there are less Goods and more buyers, this will result in increase in the price of Goods,

since there is more demand and less supply of the goods.

How it affects:

The investors have less money to invest if there is increase in prices of goods or

increase in inflation rate. So it restrict investor to invest in order to fulfill other needs.

3) Global factors: If there is any change in global environment then it also affects the

investors decision of investment, as present scenario there is change in crude price which

is very high due to that it affects Indian economy as increase in rates of each product

44

which results in high inflation rate. Due to that investors have less amount for investment.

Also these factors change the investors mind of investment. Still if they want to invest

they look to that instruments which are constant in prices like gold. If they have

handsome amount for investment then they look for real estate sector.

So due to these factors their investment decision goes affected and it changes their

behavior pattern towards investment.

45

ANALYSIS

AND

INTERPRETATION

46

Sample Details

100 people belonging to different fields, who do investment, were asked to fill the questionnaire,

on the basis of which an attempt is made to study the prospects of Financial Planning in the

market. The sample unit consists of those people who are trading in secondary markets, mutual

funds, initial public offer, insurance, debt instruments as they can give the accurate information

about financial planning. A sampling frame has been developed so that everyone in the target

population has an equal chance of being sampled.

Personal Information:

Sex Ratio:

From the total 100 respondents 17 were females and 83 were males.

Geographical Distribution:

Majority of the respondents were from Delhi followed by Bahadurgarh and Gurgaon. The

percentage is 72% from Delhi, 13% from Gurgaon and 15%from Bahadurgarh.

Occupational Structure:

Samples include responses from Businessmen and a good number of service class which includes

Chartered Accountant, Engineer, Banker, CEO, Software Professionals, etc so as to include their

perception and awareness Regarding financial planners. The percentage of businessman is 40%

and servicemen are 60%.

Income Levels: Income levels were classified into 3 levels, namely below less than 5 lac, 5-

10 lac , more than 10 lac

47

Figure 5.1.4: Classification of Income Levels of the Sample

5.1.5) Age of Investor:

The survey includes the people having different age levels from 18 to above 60. The age between

35 – 45 includes 38 investors, which is followed by 45 – 60 which includes 30 investors. The

different age levels show their perception about investment. The younger investor which is

between 18 – 35 are likely to take risk and generally invest in more in equity than the people who

are between 45 – 60. The service man in age between 25 –35 also plan their future planning by

invests in P.P.F, insurance and gold.

48

Analysis of the Response

Given below are the graphical representations of the responses received on questions asked

through the questionnaire. The interpretation derived and the model adopted will be explained in

detail in the later part of the report. On asking the following questions, the replies were received

accordingly:

49

6.1. What is your objective behind investments?

Investing is a conscious decision to set money aside for a long enough periods in an avenue

that suits your risk profile. The questionnaire asked the respondents to reveal their objective

behind investments, majority of the respondents disclosed growth of capital/ returns as their

prime objective while safety of capital stands secondary. This response reflects the investor

willingness to take calculated risks for growth of their capital as also highlighted in Figure 6.1

Interpretation:

The research has highlighted that growth of capital is the most important factor which they

consider while investing as evident by the response where in 76% of the respondents voted for

the same. However, it can also be seen that 68% of the investors prefer safety of their capital as

their secondary objective which depicts that investors give greater emphasis to the returns and

willing to adjust with safety of capital. Liquidity is the least important factor as only 15% of the

respondents voted for it which signifies that the financial planner should designed the portfolio

giving more importance to growth and safety of capital as per individual financial goals while

liquidity should have the minimum focus.

In our sample, inflation has only been given 18% of the total sample 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 + TAX BENEFIT

at the time of investment. The 7.5% of business people keeps liquidity and beating inflation in

mind at the time of investment.

Serviceman generally gives preference to SAFETY and RETIREMENT BENFITS. 21.66% and

25% people who are serviceman also keep in mind the liquidity and beating inflation at the time

of investment. 36.67 people invest to get benefit from tax

50

Figure 6.1: Reader’s response towards Objective behind their Investments

51

6.2) Readers response on whether they plan their investment:

Interpretation

This question is asked to all investors to see whether they plan their investment. The Response

from the surveying people shows that 82% people plan or get planned their portfolio of their

investment in order to invest safely and get good returns. Most of the people prefer to invest

through NBFC’s as they think are specialized in their work and provide good suggestions.

The 18% people who do not plan just follow the trends of others investors and invest what their

friends, relatives, office mates and their bankers said to them. But they invest by keep in mind

their future, as they invests in insurance, P.P.F to make their future safe or keep retirement

planning in their mind.

Figure 6.2: Reader’s response on whether they plan their investment:

18%

82%

No

yes

52

6.3. What is your practice on saving money?

To determine the saving habits of the investors, the questionnaire enquired the respondents as

about their practice of savings. The greater the inclination of saving the more will be the funds

available for investment.

Interpretation:

Around 48% of the respondents try to save from their income, while only 30% of the respondents

always make an effort to save some part of their income, as depicted in Figure 6.3 below

No one respondent response that he don’t believe in savings, which substantiate high

Importance of savings in Indian households. However, it was also observed that majority of the

women respondents had high inclination for savings and try to save the maximum out of their

available income.

Figure 6.3 Respondents response practice on their saving:

53

6.4) Type of instrument prefers for investment?

On enquiring from the respondents about which instruments they prefer most for their

investment.

Interpretation:

The surveyed people give priority top to Insurance, which is followed by Mutual funds.

The businessmen people generally give preference to EQUITY + MUTUAL FUNDS +

INSURANCE. 55% businessmen also invest in property as they think investment in real estate

creates more growth/profit. As real estate needs huge amount as investment so only those people

whose income level is more than 10 lac invests in real estate. According to the surveyed people

response the Gold is also a safer and growth investment opportunity as its price is rising fastly.

Both service and business people invests in gold.

54

Figure 6.4) Respondents response about instrument they prefers for investment

55

6.5. What do you feel is considered to be the ‘fundamentally safe’ form of investment?

Interpretation:

On enquiring from the respondent about what are the fundamental secure forms of investments,

35.4% of the respondents feel that investing in property is the safest form of investment followed

by Insurance as depicted in Figure 6.5 below.

The least secured form of investment as revealed by respondents is investment in equity as

secondary market is subject to huge volatility & uncertainty. It can be seen from the response

that people are more willing to put their money in property or real estate in spite of the

economy experiencing a major climb in the property prices. About 14.4% of the respondents

feel that Bank deposits is also the safe form of investments as it gives assured returns on the

sum invested.

Figure 6.5: Reader’s response on fundamentally safe form of investment

56

6.6. How do you take financial decisions?

An individual’s decision has a vital role to play in achieving investment objectives and thereby

making investments in a systematic manner. Decisions can make or break investment avenues as

wrong decisions would merely lead to wrong investments resulting in major loss.

Interpretation:

On enquiring from the respondents about how they take their financial decisions, majority of the

respondents take their financial decisions independently which depicts they are not taking any

advisory services from financial experts. There are majority of respondents who feel that they

can handle their portfolio on their own and hence make their own decisions regarding

investments. On analyzing the response 48% of the respondents take their financial decisions

independently while only 6% of the respondents take investment decisions from financial

advisors, as also disclosed in Figure 6.6. This opens up the door for various financial advisors

who can target these investors and can give advisory services.

Figure 6.6: Reader’s response regarding taking financial decisions

48%

28%

1%

16%

6%

1%

Independently

Friends

Advice From Banks

NBFC's

Financial Advisor/CA

Others

57

6.7) Reader’s response if they take Decisions Independently:

To know how they take financial decisions if independently then what they see at time of

investment.

Interpretation:

Analyzing the response of investors every investor keep in mind the future growth of investment

instrument, is that instrument can give the good growth or returns on their invested money.

Generally they make assumption of future growth on the basis of history of instrument and invest

accordingly. 95% investors also keep Risk Factor at time of investment in their mind, as they

want to invest in safer instrument as they said no one wants to lose their money. They also

accepts investment in equity is more risky but it adds higher returns.

34% investors doesn’t want to take risk of volatility they think of fixed returns by investing in

fixed deposits also they invests in insurance and P.P.F and gold.

Figure 6.7: Reader’s response if they take Decisions Independently

58

6.8) READERS RESPONSE TO WARDS INSURANCE POLICY

Response from investors discloses that they are wants to invest in insurance so this question is

asked from all investors why they want to invest in insurance.

Interpretation:

34% of the investors Response about investment in insurance discloses that they want

safety/security of their family in terms of money if any mishappening happens to him.

Security is followed by means of saving and saving tax. 28% investors invest in insurance to

save tax and keep it as investment. As they think by investment in insurance they can save

themselves by not paying tax. And after maturity period they will get the handsome amount of

money collectively.

Figure 6.8: Reader’s response for buying an insurance policy

59

6.9. Which all areas should be a part of Financial Planning?

It was an open question which was asked to the respondents and it was observed that out of the

total sample, 26.3% of the respondents wanted real estate to be a part of financial planning which

shows high demand for this product in the Indian market.

Interpretation:

Around 20% of the respondent felt that retirement planning should be a part of financial planning

which depicts that investors are no clear about the concept of financial planning as ‘financial

planning’ already takes care of retirement, insurance, mutual funds, IPOs, tax planning which

some respondents are unaware of as depicted in Figure 6.9 below.

Around 14% of the investors want commodity should also form a part of financial planning as it

is now a booming product in the financial market. There were 10% of the respondents who felt

that age factor should also be a part of financial planning so as to know the right age for

planning.

Figure 6.9: Reader’s response on areas to be a part of financial planning

60

6.10) Readers response towards preference of Investment:

Reader’s response about what way they prefer for their investment. Private banks, NBFC’s or

through government banks

Interpretation:

78% respondents prefer NBFC’s for their investment as they think they are specialize in their

work of giving advice, and they knows very well about various investment opportunities

available in market. Respondents who prefer private and public banks are only 22% they think

government bank gives reliable news.

But generally they prefer banks if someone is their known to them or if there is any good

relationship, which is made by giving them services at the time of their current and savings

accounts.

Figure: 6.10 Readers response towards preference of Investment:

61

6.11) Reader’s Response towards Tendency they prefer:

Respondent’s response to wards which tendency they prefer at time of investment shown in fig

6.11

Interpretation:

Respondents response shows 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 10 lac.

The income level of 5 to 10 lac generally prefer moderate risk or low risk to invest in insurance,

mutual fund, gold .

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.

Figure 6.11) Reader’s Response towards Tendency they prefer:

62

6.12) Reader’s response towards Factors consideration at time of investment:

Respondents response about what factors they considered at the time of investment.

Interpretation:

According to respondents response they keep the CRR, Inflation and Global economy at 53%,

42%and 46%. As inflation rate increases the prices of goods and reduces value of money. Global

economy also affects their investment instruments. So according to them they invests in their

mon

Figure 6.12) Reader’s response towards Factors consideration at time of investment:

63

6.13) Investors changing behavior towards various investment instruments:

In present era the behavior of investment is changed as past. Previously, the investor looks for

the safest or very low risk instruments. As there mean to just keep their money along with the

some returns which they thought as the premium what they could not get if they keep it in

homes. So they look for the schemes like fixed deposits, post office schemes, and very nominal

looks towards insurance. But now there behavior is getting changed. Now they want high returns

on their savings which they can get only if they take high or moderate risk, so now they prefer

more investment in equity, mutual funds, real estate, forex, insurance etc. which provides more

returns in comparison to fd’s, and post office schemes.

Reasons for their changing behavior:

1) More awareness: now the investors have more awareness about the benefits of various

instruments like insurance benefits, so investors behavior is changed towards insurance

2) More income level: After globalization the incomes of the people in india has risen, so they

have more money in their hands. To which they want to invest where they can get good

returns and they are ready to take risk for that.

3) Changing mind set: due to more income level their mind set up is changed as they are ready

to take higher risks in order to get returns. Now they invest their money not only to keep,

also they want good returns from that.

64

CONCLUSION

As it could be seen from the above factors that investors are having low saving potential, growth

of capital acts as a primary objective behind investments, investors taking financial decisions

independently, which depicts that there is a need of financial planners to approach these

investors in a proper manner so as to provide value additions to the saving potential and

portfolio.

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CHAPTER 6

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RECOMMENDATIONS AND SUGGESTIONS

On studying the peculiarities of the wealth management industry and analysing the responses of

the investors on their perception, the following points are recommended which a general

financial advisor should consider while approaching the people.

India is seeing as a maturing financial environment. Options to attract savings exist through a

spate of financial products and services that have differing risk/growth and asset accretion

propositions. It is becoming increasingly obvious to people that their money, in real terms, would

fall in value if they were to keep their money in the bank. And hence the keenness to find out the

right avenue that would help grows their savings or assets.

While this is becoming a universally undeniable desire, the fact is that some people don’t have

the knowledge and inclination to understand the financial markets and others don’t have the time

to follow them. This then leads to financial decisions being taken by individuals based on either

relationship hearsay or the sales call of a vendor

Unbiased Advisory

Investment Advisory Services are in this business of managing the assets of individuals and

corporations. However, the distinct model of services should enable the advisors to offer

unbiased advice on the entire spectrum of personal finance, keeping the clients interest foremost

while doing so. The investment strategies developed across perpetuity should outline a detailed

financial plan with frequent reviews of investment decisions made to ensure that portfolios are in

line with what was planned. I’d like to add here that the financial advisory should not only be

unbiased with respect to an asset class but it should also be independent of biases across

manufacturers within an asset class.

Investment in Foreign Markets

A recent pioneering initiative is to facilitate for the clients investment in foreign markets, adding

to the advisory capability that spreads across the widest range of asset classes in the country. One

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needs to be cautious while investing and it is now important to hire a financial planner to plan

your wealth better.

Financial Planning Should Be Encouraged

‘Financial planning’ is the process of charting out the money course of your life. It’s like having

a financial roadmap that guides your every step till you pass on the baton to the next generation.

In other words, it is a process in which an individual sets long-term financial goals through

investments, tax planning, asset allocation, risk management, retirement planning and estate

planning. Most of us approach our financial lives like the disorganized traveller who gets to his

destination eventually and perhaps even enjoys the rough ride. We think we have a clear

roadmap in mind, but our financial lives are marked by ad-hoc decisions and capitulation to the

temptations of the flavors of the financial season.

One of the myths regarding financial planning is that only rich individuals and HNIs can

undertake this. This perception exists because most players in the market target these people, as

they are very profitable customers. However, anyone can use financial planning. In fact,

individuals should use effective financial planning to build their wealth over the years.

Awareness of the Benefits of Planning Early for Retirement

Anyone who will retire needs to plan for it. There is more than one reason to save for retirement.

The all-important reason is the rising cost of living. It’s called inflation. If you start planning for

retirement early on, you can bridge the gap between what you have in your hand today and what

you would like to have when you retire. If you begin saving for retirement early on in your life,

you can set aside smaller amounts. You can also take on more risk by investing larger amounts in

equities i.e., stocks and equity funds. If you delay saving for retirement, you will have to invest

larger sums of money to save for the same amount; also the share of equity investments as a

portion of your retirement savings will have to be lower. The older you are when you start, the

more risk averse you will have to be. Your retirement portfolio will actually be a mix of stocks,

debt securities, index funds and other money market instruments. This mix will change as you

do, moving increasingly toward low-risk guaranteed investments as you age. Unless planned

well, retirement phase will be a downhill ride.

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People should come out of the concept of just keeping their money in banks & should

concentrate on doing financial planning to maximize their returns by taking proper guidance

from financial planner.

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BIBLIOGRAPHY

BOOKS: 1. Khan M.Y. and Jain P.K (2001), Financial Management, Tata McGraw Hill.

2. Kothari, C. R. (1978), Quantitative Technique, Vikas Publishing House Pvt. Limited,

New Delhi. 3. Pandey I.M. (2003), Financial Management, Tata McGraw Hill.

MAGAZINES 1. T S Harihar (2008), KARVY THE FINAPOLIS, June 5 WEBSITES

www.axisbank.com/aboutus/aboutaxisbank/About-Axis-Bank.asp www.citibank.com http://en.wikipedia.org/wiki/Indiabulls http://en.wikipedia.org/wiki/Investment www.hsbc.com www.hsbc.com/1/2/about-hsbc www.ibef.org www.ibef.org/industry/financialservices.aspx www.indiabulls.com www.indiainfoline/INPO/FINA.com www.isid.ac.in/~planning/Slides-ISI-LitReview.pdf www.karvy.com/v2/showPage.asp?page=aboutUs.asp www.online.citibank.co.in/portal/newgen/seo/prod/products-services.htm www.religare.in/about_us.asp

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QUESTIONNARIE Name of the Investor - Education - Contact No. - Q.1 What is the occupation of the investor? a) Service b) Business Q.2 What is the age of the investor? a) 18-25 years b) 25-35 years c) 35-45 years d) 45-60 years e) Above 60 years Q.3 What is the annual income of the investor? a) Less than 5 lac b) 5 – 10 lac c) More than 10 Lac

Q 4. What is your practice on saving money? a) I don’t believe in saving. b) I’d like to save, but my expenses & financial commitments do not permit me. c) I try to save whenever & wherever possible. d) I always save some percentage of my take-home salary without exception.

e) Others Q.5 What is the annual savings of the investor? a) 10 % to 20 % b) 20 % to 30 % c) 30 % to 40 % d) More than 40 % Q.6 Which type of instrument you prefer for your investment? a) Public Provident Fund f) Gold

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b) Fixed Deposits g) Real estate c) Mutual Funds h) Forex d) Equity Shares i) Initial public Offer e) Post Office Schemes j) Insurance k) Government Bonds l) Bank deposits m) Others Q.7 What is the purpose of the investment? a) Safety b) Returns c) Retirement Planning d) Tax Benefits e) Beating Inflation f) Liquidity g) Others Q.8 Where do you prefer for investment? a) Government banks b) Private banks c) NBFC's d) Public sector e) Private sector f) Others Q.9 How do you take Financial Decisions? a) Independently b) Advise from Friends/Relatives c) Advise from banks d) NBFC's advisers e) Financial advisor f) Others Q 10 If independently, then what do you see while investing? a) Risk Factor b) Fixed returns c) History of instrument d) Future growth e) Trend of other investors Q11. Which Tendenacy do you prefer the most? a) Low risk, low return

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b) Moderate risk, moderate return c) High risk, high return Q.12 Which factors do you considered the most at time of investment? a) Global Economy/prices b) Inflation rates c) CRR d) Repo rate e) Others

Q. 13 What are your expectations From? Government ________________________________________________________________________________________________________________________________________________ Financial Advisor ________________________________________________________________________________________________________________________________________________ Investment Company ________________________________________________________________________________________________________________________________________________