Project 1

A study on investment modes with reference to HDFC LIFE

A project report Submitted to Jawaharlal Nehru Technological

University, Kakinada In partial fulfillment of the Requirements for the

awarding the degree in

MASTER OF BUSINESS ADMINISTRATION

Submitted by

S.Chandrasekhar Reddy

(REGD. NO. 10ME1E0009)

Under the esteemed guidance of

(Mr. B.Vamsi Krishna, B.Com, MBA, (PhD)

(Assistant. professor)

Department Of Management Studies

RAMACHANDRA COLLEGE OFENGINEERING

(Affiliated to JNTU, Kakinada, Approved by AICTE, New Delhi)

NH-5 Bypass Road, Vatluru (Village), Eluru, W.G.Dt- A.P

2010-12

DECLARATION

I, hereby declare that, this project report titled - “A STUDY ON INVESTMENT

MODES ” in HDFC LIFE, is a bonafide work done and submitted to the

JNTU, Kakinada & Department of Management Studies, Ramachandra College

of Engineering is an original work carried out by me and is not submitted to

any other purpose or published any time before. The information & findings of

this report are based upon the information collected by me during the study

period.

Place: ELURU

Date: S.Chandrasekhar Reddy

Roll no: 10ME1E0009

CERTIFICATE

This is to certify that, the Project entitled “A STUDY ON INVESTMENT

MODES” IN HDFC LIFE submitted by S.Chandrasekhar Reddy, as partial

fulfillment of the requirements for awarding a degree in MASTER OF

BUSINESS ADMINISTRATION, from Jawaharlal Nehru Technological

University, Kakinada, under the guidance and supervision of

Sri.B.Vamsikrishna, Asst. Professor, DEPARTMENT OF MANAGEMENT

STUDIES, RAMACHANDRA COLLEGE OF ENGINEERING, VATLURU,

ELURU, for the year 2010-2012.

Project guide HOD

Principal

___________________________________________________________

Ph: 08812-215 150, 152, Fax: 08812-234 128 email: rcee_elr@yahoo website: rcee.ac.in

COMPLEATIONCERTIFICATE

ACKNOWLEDGEMENTS

I take this opportunity to express my regards to Dr. P.Bala Krishna Prasad,

B.Tech (CSE), M.Tech (CSE), Ph.D (CSE), Principal of Ramachandra

College of Engineering, Vatluru, Eluru, for his encouragement during the

period of my MBA programme and permission to do this project work.

I also express my happiness for being a student of the Management

Studies

Department in RCE and co-ordinate under the guidance of Prof. M. Murthy

Bharat, Head of the Department of Management Studies, for his valuable

suggestions and encouragement, guiding me at every stage for successful

completion of this project.

I really appreciate all the support and help extended by my project guide Mr.

B.Vamsi Krishna, Assistant Professor in Ramachandra College of

Engineering. I have enjoyed the course for the project.

I thank Mr. , MD (FINANCE), in HDFC LIFE, for permitting me to do the

project work over there and the support offered to me throughout the project

work.

S.Chandrasekhar Reddy

CONTENTS OF FINAL PROJECT REPORT

Unit - I INTRODUCTION

Brief discussion about the

project

Objectives

Need

Scope

Limitations

Unit – II RESEARCH METHODOLOGY

Methodology of

study

Research

Research

Methodolog

y

Research

Process

Importance

Types of data

Primary

Data

Secondary

Data

Data Collection

Methods

Sampling

Process

Sample

Sampling

Types of

sampling

Unit – III INDUSTRY PROFILE

Origin and

Evolution

Commercializati

on

World context

Indian context

SWOT Analysis

Recent trends

Unit – IV COMPANY PROFILE

History

Vision &

Mission

Objectives &

Motto

Symbol

Slogan

Organizational

Structure

Role of Board

Directors

Role of CEO

Share Holders

Products

Head quarters,

Branches,

Manufacturing

units &

Subsidiaries

Financial

Performance

review

Recruitment

procedure &

Staffing

How employees

are motivated

& their No’s

Social

Responsibility

Achievements

Competitor

Unit – V THEORETICAL FRAME WORK

Meaning of title of study

Description

Definition

Unit – VI ANALYSIS & INTERPRETATIONS

Description

about the most

important

points of

coverage

during research

Analysis

(Question wise)

Question

Tabular

Form

Inference

Chart

Unit – VII FINDINGS & SUGGESTIONS

Unit – VIII CONCLUSION & BIBLIOGRAPHY

Details of Books, Authors, Publishers & Editions

Details of Journals, Magazines, Articles

Details of Websites, Authors, Articles & Dates

ANNEXURE

Questionnaire

Annual Reports

Brochures

It is to inform all the Final MBA Students to note down the contents of the project report to

be maintained for the submission at the end of the MBA program. Students are instructed to

collect & keep the above mentioned things in line as early as possible for the easy

proceedings of the final project. Students who got submitted of the mini project reports

need to get it signed by the HOD and can collect project permission letters from the

department.

CONTENTS

• Title Page

• Declaration

• College Certificate

• Company Certificate

• Acknowledgement

CHAPTER-1

Introduction

CHAPTER-2

Research Methodology

CHAPTER-3

Industry Profile

CHAPTER-4

Company Profile

CHAPTER-5

Theoretical Framework

CHAPTER-6

Analysis and interpretation

CHAPTER-7

Findings and Suggestions

APPENDIX

Bibliography

Financial Statements

UNIT-1

INTRODUCTION

INTRODUCTION

Brief discussion about the project

There are many different definitions of what ‘investment’ and ‘investing’ actually

means. One of the simplest ways of describing it is using your money to try and make

more money. This can happen in many different ways.

All investors are different. The common factor is that you would like to invest money

to aim to make it grow or to receive a regular income from it. We would like to show

you that choosing the most suitable investment for you does not need to be difficult.

All you need is the right help along the way.

The act committing money or capital to an endeavor with the expectation of obtaining

an additional income or profit is known as investment. Investing means putting your

money to work for you.

Savings form an important part of the economy of any nation. With the savings

invested in various options available to the people, the money act as the driver for

growth of the country. Indian financial scene too presents a plethora of avenues to the

investors. Though certainly not the best or deepest of markets in the world, it has

reasonable for an ordinary man to invest his savings.

The money you earn is partly spent and the rest 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.

One needs to invest and earn return on your idle resources and generate sum of money

for a specific goal in life and make a provision for an uncertain future. One of the

important reasons why people need to invest wisely is to meet the cost of inflation.

Inflation is the rate at which the cost of living increases.

The cost of living is simply what it costs to buy the goods and services you need to

live. Inflation causes money to lose value because it will not buy the same amount of

good or service in the future as it does now or did in the past. The sooner one starts

investing the better .by investing early you allow your investments more time to grow,

where by the concept of compounding increases your income ,by accumulating the

principal and the interest or dividend earned on it, year after year. The golden rules

for investors are:

Invest early

Invest regularly

Invest for long term and not for short term

Funding Future Goals through Insurance

A wide range of vehicles are available to fund future financial goals. These could be

low risk-low return instruments like bank deposits and small savings, or higher risk

products such as equity, which can offer potentially higher returns. Insurance scores

over other investment vehicles in the following aspects:

Certainty

Once a goal has been identified and a value for it has been crystallized, an insurance

policy is an excellent vehicle to fund the goal. This is because one can rest assured

that even in the unfortunate event of death or even critical illness, the sum assured

will fund a future goal of the policyholder.

Tax efficient

Maturity benefits of most insurance policies are tax free under Section 10 (10D) and

the premium paid is eligible for deduction under Section 80C of the Income Tax Act,

1961.

Flexibility

Insurance products, especially Unit Linked Plans, provide flexibility in terms of asset

allocation to suit specific risk appetites, policy durations, premium payment terms and

fund switching options.

Wider options

Depending on the time horizon of the goal, the return required and the investor's risk

appetite, a broad spectrum of asset allocations between equity and debt is possible in a

Unit Linked Plan. An investor may tailor his policy to suit his requirement.

Liquidity

Most Insurance products offer good liquidity after the lock-in period to take care of

any emergency requirement of funds. But they do have inherent deterrents in the form

of charges to discourage unnecessary encashment.

Earmarking

Very often an insurance policy is taken for a specific goal. This therefore can become

a deterrent against utilizing these funds for any other purpose and also encourages

continued contributions.

OBJECTIVES OF THE STUDY

To analysis the Investment &tax planning modes of hdfc life.

To Finding direction and meaning in one's financial decisions

To know each individual how much paying income tax average per year.

To know each individual how decisions taking to get tax benefit.

To Understanding how each financial decision affects other areas of finance

NEED OF THE STUDY

The need of the study is to knowing all the relevant information about the company

insurance product and policies and its competitor’s insurance products.

It is use full to know the perception of the people about insurance, what they desire

from it, and if they will work as financial consultant than what they want from the

organization.

SCOPE OF STUDY

This project will help to understand the current market scenario and marketing in stiff

competition.

To find out the competitive edge of the company over the competitors

The study enables to have a better knowledge of investing options available in hdfc

life.

The study highlights some of the most important investing options available with hdfc

life.

It gives an overview of pros and cons of investing in different avenues and also helps

in choosing best from them.

LIMITATIONS

People were not interested in listening to issues like life insurance even if they were

not insured.

Most of the people are of the thought that private life insurance company will not

Assure tax benefit.

After carrying out fieldwork, it was identified that many people do not give their

Correct contact numbers or reference for feedback.

Professionals like Doctors, Engineers, and Chartered Accountants do not see it as

Prestigious profession and perceive it as a marketing job.

Lack of proper database affected the search work.

Due to short time period I cannot reach to each segment of Taxpayer.

Unit-2

RESEARCH METHODOLOGY

RESEARCH DESIGN AND PROCESS

In the most elementary sense, the design1 is the logical sequence that connect the

empirical data in the study’s initial research questions and ultimately, to its

conclusions. The research design is much more a than a work plan.

There are three types of research designs, namely:

a) Exploratory

(b) Descriptive,

Exploratory Research: Exploratory research is conducted when the researcher does

not know how and why a certain phenomenon occurs, for example, how does the

Taxpayer evaluate the quality of a bank, hotel or an airline? While in the case of a

manufactured Tax scheme, quality is assessed on the basis of tangible features,

replacement policy, warranty, and so forth in the case of Tax schemes, there are no

tangibles. To understand this phenomenon, several researchers have conducted focus

group discussions to identify these quality parameters. For example, Zeithaml,

Parsuraman and Berry identified variables which they clubbed under five groups. In

doing so, they used focus groups. Since the prime goal of an exploratory research is to

know the unknown, this research is unstructured. Focus groups, interviewing key

Taxpayer groups, experts and even search for printed or published information are

some common techniques.

Descriptive Research:

Descriptive research is carried out to describe a phenomenon or market characteristic.

For example, a study to understand buyer behavior and describe characteristics of the

target market is a descriptive research. Continuing the above example of Tax

beneficial schemes quality, a research done on how Taxpayers evaluate the quality of

competing Tax beneficial schemes institutions can be considered as an example of

descriptive research. Likewise, research done on media habits and TV viewing habits

is an illustration of descriptive research. Generally, descriptive research is carried out

only when the researcher understands the phenomena or behavioral characteristics.

TYPES OF DATA

Primary data

The primary data was collected by asking the consumers who come to the authorized

hdfc life insurance branches for the Investment modes and also the new Taxpayers of

1

the hdfc life insurance to fill up the questionnaires by me. It is a very important part of

the project as it is only through the properly filled up questionnaires that I can reach to

any conclusion from the data which I got from the questionnaires.

Secondary data-

Secondary data are the information which is attained indirectly. They are the data

collected by someone else and which has already passed through statistical process.

There exist two sources of secondary data. they are Internal sources External sources

This research combines both secondary and primary data to achieve research

objectives.

Research tools used

Personal interview

Direct Invitation to the Office

Questionnaires method

DATA COLLECTING METHODS

Primary data

Questionnaire, Interview.

Secondary data

Directory, Data base from college.

SAMPLING PROCESS

Sample Sampling Issues

“Sampling may be defined as the selection of some part of an aggregate or totality on

the basis of which a judgment or inference about the aggregate or totality is made” It

is the method of obtaining information about a complete population by examining

only a part of it. In this research work, the approach has been made to draw inferences

based on samples taken from the Indian population. Since India is the second largest

populated country in the world so it is next to impossible to take the data from even a

part of its population. Hence it is best to adopt the Sampling method. That is why the

sample data will enable us to estimate the population parameters. Here care has been

taken to select the sample so that it should be truly representative of population

characteristics without any bias as a result that it may outcome in valid and reliable

conclusions

Sampling Selecting a Sampling Procedure

According a researcher should first choose between using a Bayesian procedure and a

traditional sampling procedure.

Types of sampling

Non-probability sampling-

Convenience Sampling-

Non-probability sampling-

According to in probability sampling, the theory of probability allows the researcher

to calculate the nature and extent of any biases in the estimate and to determine what

variation in the estimate is due to the sampling procedure.

Convenience Sampling- To obtain information quickly and inexpensively, a

convenience sample may be employed.

Unit -3

INDUSTRY PROFILE

ORIGIN AND EVOLUTION

HISTORY OF LIFE INSURANCE

The business of insurance is related to the protection of the economic values of assets.

Every asset has a value. The asset would have been created through the efforts of the

owner. The asset is valuable to the owner, because he expects to get some benefit may

be an income or in some other form. It is a benefit because it meets some of his needs.

The benefit may be an income or in some other form. In the case of a factory or a

cow, the product generated by it is sold and income is generated. In the case of a

motor car, it provides comfort and convenience in transportation. There is no direct

income. Both are assets and provide benefits.

Every asset is expected to last for a certain period of time during which it

will period of time during which it will provide the benefits. After that, the

benefit may not be available. There is a life-time for a machine in a factory or

a cow or a motor car. None of them will last forever. The owner is aware of

this and he can so manage his affairs that by the end of that period or life-

time, a substitute is made available. Thus, he makes sure that the benefit is not

lost. However, the asset may get lost earlier. An accident or some other

unfortunate event may destroy it or make it incapable of giving the benefits.

We can classify insurance in these terms:-

Insurance does not protect the asset. It does not prevent its loss due to

the peril. The peril cannot be avoided through insurance. The risk can

sometimes be avoided, through better safety and damage control measures. It

only tries to reduce the impact of the risk on the owner of the asset and those

who depend on that asset. They are the ones who benefit from the asset and

therefore, would lose, when the asset is damaged. Insurance compensates for

the losses- and that too, not fully.

In conclusion we can say that the scope of insurance is very broad and specific

because it reduces the losses and risk of owner of the assets due to perils. It also gives

supports to the person in the period of adverse situation. It insured economic

consequences. When a person saves, the amount of funds available at any time is

equal to the amount of money set aside in past, plus interest. Insurance has no

substitute and one more thing about the insurance is that this is not similar to a hire

purchase scheme. In the event of death, the balance installments are not excused.

They have to be paid by the surviving family. There is a tax benefits, both in income

tax and in capital gains. Marketability and liquidity are better. Life insurance is not

only the best possible way for family protection there is no other way. The term of life

is hard but the terms of insurance are easy.

INDIA -THE NEXT INSURANCE GAINT

Indian economy is the 12th largest in the world, with a GDP of $1.25 trillion

And 3rd largest in terms of purchasing power parity. With factors like a stable 8-9 per

cent annual growth, rising foreign exchange reserves, a booming capital market and a

rapidly expanding FDI inflows, it is on the fulcrum of an ever increasing growth

curve.

Insurance is one major sector which has been on a continuous growth curve since the

revival of Indian economy. Taking into account the huge population and growing per

capita income besides several other driving factors, a huge opportunity is in store for

the insurance companies in India. According to the latest research findings, nearly

80% of Indian population is without life insurance covering while health insurance

and non-life insurance continues to be below international standards. And this part of

the population is also subjected to weak social security and pension systems with

hardly any old age income security. As per our findings, insurance in India is

primarily used as a means to improve personal finances and for income tax planning;

Indians have a tendency to invest in properties and gold followed by bank deposits.

They selectively invest in shares also but the percentage is very small--4-5%. This in

itself is an indicator that growth potential for the insurance sector is immense. It’s a

business growing at the rate of 15-20% per annum and presently is of the order of

$47.9 billion.

India is a vast market for life insurance that is directly proportional to the growth in

premiums and an increase in life density. With the entry of private sector players

backed by foreign expertise, Indian insurance market has become more vibrant.

Competition in this market is increasing with company’s continuous effort to lure the

customers with new product offerings. However, the market share of private

insurance companies remains very low -- in the 10-15% range. Even to this day, Life

Insurance Corporation (LIC) of India dominates Indian insurance sector. The heavy

hand of government still dominates the market, with price controls, limits on

ownership, and other restraints.

Major Driving Factors

=> Growing demand from semi-urban population

=> Entry of private players following the deregulation

=> rising demand for retirement provision in the ageing population

=> The opening of the pension sector and the establishment of the new

Pension regulator

=> Rising per capita incomes among the strong middle class, and spreading

affluence

=> Growing consumer class and increase in spending & saving capacity

=> Public private partnerships infrastructure development

=> Dearth of innovative & buyer-friendly insurance products

=> Success of Auto insurance sector

Emerging Areas

=> Healthcare Insurance & Pension Plans

=> Mutual fund linked insurance products

=> Multiple Distribution Networks .i.e. Banc assurance

The upward growth trend started from 2000 was mainly due to economic policies

adopted by the then Indian government. This year saw initiation of an era of economic

liberalization and globalization in the Indian economy followed by several reforms

and long-term policies that created a perfect roadmap for the success of Indian

financial markets. On the basis of several macroeconomic factors like increase in

literacy rate & per capita income, decrease in death rate and unemployment, better tax

rebates, growing GDP etc., we estimate that the Indian insurance sector will grow by

$28.65 billion and reach $76.54 billion by 2011 with a CAGR of 12.44% and a

growth of 59.82%.

The Indian life insurance market generated total revenues of $41.36 billion in 2007,

thus representing a compound annual growth rate (CAGR) of 11.84% for the period

spanning 2000-2007. Life insurance market had a growth of $22.46 billion within a

period of 7 years with a growth rate of 118.24%. Estimated life premiums rose from

INR 1, 470,800 million ($36.77 billion) in 2006 to INR 1, 301,540 million

($32.54billion) in 2005. We envisage that life premiums in 2011 will be $65.96

billion, a growth larger than they were in 2007. The performance of the market is

forecast to accelerate, with an anticipated CAGR of 9.78% for the four-year period

2007-2011 expected to drive the market to a value of $65.96 billion by the end of

2011. There would be a growth of $24.6 billion i.e. 59.48% in the next 4 years.

Non-life premiums in India were $6.53 billion in 2007. Gross written premium

(GWP) in the Indian non-life insurance market reached a value of $5.75 billion in

2006, this representing an annual growth of 13.55% for the period spanning 2006-

2007. Estimated non-life premiums rose from INR230 billion ($5.75 billion) in 2006

to INR261 billion ($6.53 billion) in 2007. We anticipate that non-life premiums will

grow by a CAGR of 9.40% “between” 2007-2011. We are looking for non-life

premiums to rise by $405 million over the five years to the end of 2011 with a growth

rate of 62.02%.

Insurance companies in India

Insurance is a colossal sector in India that is growing at a speedy rate of 15-20%. The

insurance sector is approximately 450 billion yet 70 percent of the population in India

is not insured. This gives you a peek into the huge growth opportunity that exists for

this segment. The insurance business in India mainly consists of two main players, the

Life Insurance Corporation (LIC) and Life Insurance Corporation (GIC). Almost 100

divisional offices and 2000 branch offices are functional for LIC. As LIC caters to life

insurance, health insurance, property and accident. Insurance it needs an increasing

number of employees. Thus insurance companies in India are growing vertically and

horizontally bringing growth and employment opportunities. The other player GIC

undertakes motor, marine, personal accident and fire insurance. Moreover it has four

subsidiaries a) HDFC Life Insurance, b) United India Insurance, c) New India

Assurance, and d) National Insurance. Insurance companies in India have a deep-

rooted history. It all began in 1818 when HDFC Life Insurance Company in Calcutta

was established. From then on insurance was scattered across the country. It was an

unorganized sector. Then in 1950, the entire insurance segment was nationalized.

After achieving freedom, the insurance sector gained momentum. In 1956 the

government of India consolidated 240 private life insurers and provident societies and

this was how LIC came to life. The justification to the nationalization of the life

insurers was that the government would reap the necessary funds that were required

for industrialization. The Life insurance industry still remained in the hands of the

private sector till 1972 and was then nationalized. LIC adds about 7 percent to the

country's GDP. With IRDA's regulation not less than 15 percent of funds from the

insurance companies are said to fill the coffers of infrastructure and social sectors.

Thus they are

Providing vital funds to the country's growth. Infrastructure of the country bears risks

that are of a long-term character. They include political instability, geological

hindrances, gestation period and illiteracy. The long term funds provided by Life

Insurance of India not only cover these risks but also help securing a brighter future

for the country. Besides infrastructure the insurance companies in India are vital for

one's saving purpose. In the beginning insurance was looked at as a 'tax-benefit'

investment. Slowly, however the mindset of the common man is changing. Life

insurance is now looked on as investment vehicle. With the introduction of private

players in the sector there has been more transparency and flexibility in the sector.

Private players have procured almost 9 percent of the insurance segment even though

the coveted policies like endowment and money back still lay with the government.

Better Investment modes, individual attention and pure transparency have given the

private sector an upper hand. But with a huge unorganized market in India yet to tap

the insurance companies in India have a voluminous market to explore.

BENEFITS FROM LIFE INSURANCE:

I. It is superior to traditional saving vehicles:

As well as providing a secure vehicle to build up saving s etc, its provides peace of

mind to the policyholder. In the event of untimely death, of say the main earner in the

family, the policy will pay out of the guaranteed sum assured, which is likely to be

significant more than the total premiums paid. With more traditional savings vehicles,

such as fixed deposits, the only return would be the amount invested plus any interest

accrued.

ii. It encourages saving and forces thrift:

 Once an insurance contract has been entered into, the insured has an obligation to

continue paying premiums, until the end of the term of the policy, otherwise

the policy will lapse. In other words, it becomes compulsory for the insured to save

regularly and spend wisely. In contrast savings held in a deposit account can be

accessed or stopped easily.

iii. It provides easy settlement and protection against creditors:

Once a person is appointed for receiving the benefits (nomination) or a transfer

of rights is made (assignment), a claim under the life insurance contract can be settled

easily. In addition, creditors have no rights to any monies paid out by the insurer,

where the policy is written under trust. Under the Married Women’s Property

Act(M.W.Act), the money available from the policy forms a kind of trust, which

creditors cannot claim on.

iv. It helps to achieve the purpose of the Life Assured:

If someone receives a large sum of money, it is possible that they may spend the

money unwisely or in a speculative way. To overcome this, the person taking

the policy can instruct the insurer that the claim amount is given in installments.

For example, if the total amount to be received by the dependents is Rs. 2, 00,000

sayRs.50, 000 can be taken out as a lump sum and the balance paid out in

smaller installments, say Rs. 5,000 per month.

v. It can be enchased and facilitates borrowing:

Some contracts may allow the policy can be surrendered for a cash amount, if

a policyholder is not in a position to pay the premium. A loan, against certain policies,

can be taken for a temporary period to tide over the difficulty; some lending

institutions will accept a life insurance policy as collateral for a personal

or commercial loan

vi. Tax Relief:

The policyholders obtain Income Tax rebates by paying the insurance premium. The

specified forms of saving which enjoy a tax rebate, under section 88 of the Income

Tax Act, include Life Insurance Premiums and contributions to a recognized

Provident Fund etc.

ROLE OF LIFE INSURANCE:

Risks and uncertainties are part of life's great adventure -- accident, illness, theft,

natural disaster - they're all built into the working of the Universe, waiting to happen.

Rule 1: Life insurance as "Investment":

Insurance is an attractive option for investment. While most people recognize the risk

hedging and tax saving potential of insurance, many are not aware of its advantages as

an investment option as well. Insurance products yield more compared to regular

investment options, and this is besides the added incentives(read bonuses) offered by

insurers. You cannot compare an insurance product with other investment schemes for

the simple reason that it offers financial protection from risks, something that is

missing in non-insurance products. In fact, the premium you pay for an insurance

policy is an investment against risk. Thus, before comparing with other schemes, you

must accept that a part of the total amount invested in life insurance goes towards

providing for the risk cover, while the rest is used for savings. In life insurance, unlike

non-life products, you get maturity benefits on survival at the end of the term. In

other words, if you take a life insurance policy for 20 years and survive the term, the

amount invested as premium in the policy will come back to you with added returns.

In the unfortunate event of death within the tenure of the policy, the family of the

deceased will receive the sum assured. Now, let us compare insurance as an

investment options. If you invest Rs 10,000 in PPF, your money grows to Rs 10,950

at 9.5 per cent interest over a year. But in this case, the access to your funds will be

limited. One can withdraw 50 per cent of the initial deposit only after 4 years. The

same amount of Rs 10,000 can give you an insurance cover of up to approximately Rs

5-12 laky (depending upon the plan, age and medical condition of the life insured, etc)

and this amount can become immediately available to the nominee of the policyholder

on death. Thus insurance is a unique investment avenue that delivers sound returns in

addition to protection

Rule 2: Life insurance as "Risk cover:

First and foremost, insurance is about risk cover and protection - financial protection,

to be more precise - to help outlast life's unpredictable losses. Designed to safeguard

against losses suffered on account of any unforeseen event, insurance provides you

with that unique sense of security that no other form of investment provides. By

buying life insurance, you buy peace of mind and are prepared to face any financial.

Rule 3: Life insurance as "Tax planning":

Insurance serves as an excellent tax saving mechanism too. The Government of India

has offered tax incentives to life insurance products in order to facilitate the flow of

funds into productive assets. Under Section 88 of Income Tax Act 1961, an individual

is entitled to a rebate of 20 per cent on the annual premium payable on his/her life and

life of his/her children or adult children. The rebate I deductible from tax payable by

the individual or a Hindu Undivided Family. This rebate is can be availed up to a

maximum of Rs 12,000 on payment of yearly premium of Rs 60,000.By paying Rs

60,000 a year, you can buy anything upwards of Rs 10 lakh in sum assured.

(Depending upon the age of the insured and term of the policy) This means that you

get an Rs 12,000 tax benefit. The rebate is deductible from the tax payable by an

individual or a Hindu Undivided Family.

Economic liberalizations in brief refers to the efforts taken by state toward faster

economic development by adopting changes in existing economic policy, rules and

Regulations and bringing flexibility in administrative control and procedures

economic liberalization encourage the use of new technology and improve knowledge

in the production process by global participation and marketing.

NEED FOR GLOBAL INTEGRATION:

Recent economic liberalization started few years ago have started bringing in new

investments from global giants and the government was hard pressed to facilitate

global integration by lowering trade barriers for the free flow of technology,

intellectual and financial capital. Additionally, reforms are essential if the Indian

economy is to achieve and sustain a growth rate of 7 to 8 per cent per

annum .Reaching a faster growth path also implies attracting foreign direct investment

inflows of $ 10 Billion every year, up from the current level of $ 3 to $ 3.5 Billion.

Thus liberalization of insurance creates an environment for the generation of long-

term contractual funds for infrastructural investment.

Report on Infrastructure says that 85% of funds for infrastructure development have

to come from the domestic industry. It further says that India would need $ 100

Billion over the next five years to meet its infrastructure needs. Given the rate of

savings in India, there are much more room to grow and one can expect additional

revenue of about $ 10 Billion a year entering the market to enhance infrastructure.

Insurance is definitely going to be one area that will assist in mobilization of these

funds.

MULTINATIONALS' INTEREST:

Multinational insurers are indeed keenly interested in emerging insurance because

their home markets are saturated while emerging countries have low insurance

penetrations and high growth rates. International insurers often derive significant part

of their business from multinational operations. As early as 1994

Many of the UK’s largest life and general insurers derived 40 per cent to 60 per cent

their total premium from outside their home markets. The figure at Commercial

Union was 76 per cent in that year. While the impact of global operations on their

business may be large, typically foreign insurers take only a small share of an

individual country’s market. In Taiwan for example, foreign companies took only a 3

per cent share even seven years after opening up. In Korea, their share was 1 per cent

after 20 years. In China, a large and complex market like India, private insurers have

not made muchheadway.Yet, new entrants find insurance attractive because even a

small share of a large and growing market can be profitable. The Korean insurance

market for example, was only the 30th largest market in the world by premium

volume in 1971.It moved up to 6th largest in 1996. In any case, in India multinational

insurers will be restricted to a minority shareholding in new companies. The new

entrants will therefore be private Indian companies. The other reason why these large

MNCs are interested in India is the economies of the insurance market. Insurance

companies survive on the principle of spreading of risk. No matter what the size of

each player, an insurer cannot afford to operate in a niche market. Operating in a

particular region would expose them to the economic downtrends in the region and

derail their profits. Insurance companies, being long-term players, also have to avoid

sudden dips in earnings to inspire confidence among investors to invest long-term

funds. This can be achieved by spreading their operations over a wide geographical

area. Moreover, for them, big is not just beautiful, but essential for survival. Which

brings us to the avenues for growth? According to the Sigma report on global

insurance brought out by the world’s second largest reinsurer Swiss Re - the

international market is completely saturated. In the developed world, the growth in

life insurance premium has been a meager 1.5%. As compared to this, LIC despite all

its handicaps has been growing at healthy clip of around 20%

PRIVATIZATION: START UP STRATEGY:

Potential private entrants therefore expect to score in the areas of customer service,

speed and flexibility. They point out that their entry will mean better products and

choice for the consumer. Critics counter that the benefit will be slim, because

new players will concentrate on affluent, urban customers as foreign banks did until

recently .This might seem a logical strategy from the point of view of new players.

Start-up costs-such as those of setting up a conventional distribution network-are

large and high-end niches offer better returns. However, in the long run 'middle-

market' offers the greatest potential as in terms of it is the second largest market in the

world. This may still be an urban market but goes beyond the affluent segment.

Insurance, even more than banking, is a volume game. A very exclusive approach is

unlikely to provide meaningful numbers. Therefore, private insurers would be best

served by a middle-market approach, targeting customer segments that are currently

untapped.

REPOSITIONING BY NATIONALIZED SECTOR:

Floodgates of competition opened up by the privatization of insurance industry did

throw a challenge to the well-protected nationalized sector and it seems they

have picked up the gauntlet. LIC and GIC, both are trying to reposition themselves

behaving re-engineering done on the structure and operations of their respective

organizations. Life Insurance Corporation is at present going through presentations

from top management consultants. These consultants have been asked to narrate

their experiences in countries where the insurance sector has been opened up for

private competition so that the public sector player can draw lessons. Based on these,

Lowell appoint a consultant which can provide them broad terms of reference on what

changes are required to tackle the impending competition

Life insurance not plays an important role in national economy but also in

international economy. Marine cargo insurance provides risk coverage for shippers

and the banks, which finance international trades. This role becomes all the more

important in the context of an active government policy to encourage exports. Indian

life insurer operates in more than 30 countries through agencies, branches, associates

companies. These operations earn foreign exchange. The insurance business is

concerned with North America, Western Europe, Japan and Oceania. Together these

region’s accounts for about 91 % of the world annul premium. By region’s North

America and western Europe are growing moderately while oceanic, Latin America,

eastern Europe and Africa display growth above lone –term trends to a global context

globalization of life insurance helps companies practices underwriting discipline in

one regions globalization of the insurance industry received big boost.

SWOT analysis

Strengths

2nd Largest in insurance sector in India

Initial paid up capital: 150 Cores

Present paid up capital: 8114 Core

No of polices: 1 Million

Premium: 1584 Cores

Weaknesses

Non-government organization -people are having more faith on L.I.C. Not reachable

to the village area still.

Most of the people are of the thought that private life insurance company will not last

for long and hence, they prefer to invest in Government undertaking

Slightly less brand awareness for brand of HDFC Standard life.

Opportunities

Biggest financial organization in India

Over 76% people in India not insuranced

Good infrastructure.

Now days more peoples are conscious about the insurance.

Threats

Now a days competition in this sector is more around 15 private players are in

insurance sector.

Each company is doing heavy marketing.

People are taking more time to take the decision about the insurance

RECENT TRENDS IN INSURANCE SECTOR

The life insurance business has come a long way since independence, and Indian

consumers till recently had been dealing with one life insurance player, i.e., the LIC in

the public sector. After the liberalization of the insurance sector, a dozen companies

have entered the insurance business. The insurance sector had the reforms with the

passing of IRDA bill in December, 1999. The rivatization process commenced by

forming the Insurance Reforms Committee. The 12 private life insurers have already

grabbed 9% of the market in terms of premium income. The insurance premiums of

these 12 players have crossed Rs 1000 crore over the last year. Innovative Tax

schemes, smart marketing and aggressive distribution, that is, the triple whammy

combination has enabled fledgling private insurers to sign up Indian consumers.

While the state owned companies still dominate segments like endowment and money

back policies, the private companies have a virtual monopoly in the unit linked

insurance schemes.

Detariffing

Recently, the IRDA has requested the Life insurance companies to initiate steps to

ensure transition from tariff regime to detariff regime from January, 2007;

accordingly, there is full detariffing of the Life insurance business from April 1, 2008.

Tariff means rigidity. It means that not only rates are fixed, but also the terms and

conditions of policies are to be laid down in tariff. Detariffing makes insurers free to

decide the premium rates based on their own guidelines of pricing.

Bancassurance

The concept bancassurance is French origin. It is an emerging concept in India .Life

assurance companies need immense distribution strength. This distribution will

undergo a vast change when the insurance policies are available from local bank

branch through bancassurance

.In India, the sign of initial success is already there and the success of the scheme

depends on

banks ensuring excellent Taxpayer relationship.

Micro Insurance

LIC launched its first micro insurance Tax scheme, captioned “Jeevan Madhur” in

September, 2006. It launched its second micro insurance Tax scheme, under the

caption “Jeevan Mangal” in September, 2009. The policy is targeted at factory

workers, self help group members, domestic servants, rickshaw pullers and other low

income people. The salient feature is a low minimum premium of Rs15 per week and

the risk cover ranged from Rs 15, 000 to a Maximum of Rs 50, 000.

Unit -4

COMPANY PROFILE

HISTORY

HDFC Life, one of India's leading private life insurance companies, offers a range of

individual and group insurance solutions. It is a joint venture between Housing

Development Finance Corporation Limited (HDFC), India's leading housing finance

institution and Standard Life plc, the leading provider of financial Investment modes

in the United Kingdom.

HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) Ltd. holds 26.00%

of equity in the joint venture, while the rest is held by others.

HDFC Life's Tax scheme portfolio comprises solutions, which meet various

Taxpayer needs such as Tax planning, Pension, Savings, Investment and Health.

Taxpayers have the added advantage of customizing the Investment modes, by adding

optional benefits called riders, at a nominal price. The company currently has 29 retail

and 5 group Tax beneficial schemes in its portfolio, along with five optional rider

benefits catering to the savings, investment, Tax planning and retirement needs of

Taxpayers.

HDFC Life continues to have one of the widest reaches among new insurance

companies with more than 500branches servicing Taxpayer needs in over 700 cities

and towns. The company has a strong base of Financial Consultants.

HDFC Standard Life is a strong, financially secure business supported by two strong

and secure promoters - HDFC Ltd and Standard Life. HDFC Ltd's excellent brand

strength emerges from its unrelenting focus on corporate governance, high standards

of ethics and clarity of vision. Standard Life is a strong, financially secure business

and a market leader in the UK Life & Pensions sector.

Our brand has managed to set a new standard in the Indian life insurance

communication space. We were the first private life insurer to break the ice using the

idea of self-respect instead of 'death' to convey our brand proposition (Sar Utha Ke

Jiyo). Today, we are one of the few brands that Taxpayers recognize, like and prefer

to do business. Moreover, our brand thought, Sar Utha Ke Jiyo, is the most recalled

campaign in its category.

We follow a conservative investment management philosophy to ensure that our

Taxpayer's money is looked after well. The investment policies and actions are

regularly monitored by a formal Investment Committee comprising non-executive

directors and the Principal Officer & Executive Director.

VISION & MISSION

OUR VISION

'The most successful and admired life insurance company, which means that we are

the most trusted company, the easiest to deal with, offer the best value for money, and

set the standards in the industry'.

'The most obvious choice for all'.

OUR VALUES

Values that we observe while we work:

Integrity

Innovation

Taxpayer centric

People Care "One for all and all for one"

Team work

Joy and Simplicity

OBJECTIVES & MOTTO -HDFC Standard Life is a strong, financially secure

business supported by two strong and secure promoters - HDFC Ltd and Standard Life.

HDFC Ltd's excellent brand strength emerges from its unrelenting focus on corporate

governance, high standards of ethics and clarity of vision. Standard Life is a strong,

financially secure business and a market leader in the UK Life & Pensions sector.

SYMBOL

SLOGAN

Sar Utha Ke Jiyo!

ORGANISATION STRUCTURE

TERITORY

CHANNEL

RETAIL

BUSSENISS DEV.MGR

BRANCH MANAGOR

ASST.B.M

BRANCHMANAGER

TERITORY

ALTERNATIVE OPERATION

OPERATION

TEAM MANAGER HR EXECUTIVE

HUMAN

REGINOL

ZONAL

MD

SALES .DEV. MGR

ROLE OF BOARD OF DIRECTORS

Brief profile of the Board of Directors

Mr. Deepak S Parekh is the Chairman of the Company. He is also the Executive

Chairman of Housing Development Finance Corporation Limited (HDFC Limited).

He joined HDFC Limited in a senior management position in 1978. He was inducted

as a whole-time director of HDFC Limited in 1985 and was appointed as its Executive

Chairman in 1993. He is the Chief Executive Officer of HDFC Limited. Mr. Parekh is

a Fellow of the Institute of Chartered Accountants (England & Wales).

Mr. Keki M Mistry joined the Board of Directors of the Company in December,

2000. He is currently the Managing Director of HDFC Limited. He joined HDFC

Limited in 1981 and became an Executive Director in 1993. He was appointed as its

Managing Director in November, 2000. Mr. Mistry is a Fellow of the Institute of

Chartered Accountants of India and a member of the Michigan Association of

Certified Public Accountants.

Mr. Alexander M Crombie joined the Board of Directors of the Company in April,

2002. He has been with the Standard Life Group for 34 years holding various senior

management positions. He was appointed as the Group Chief Executive of the

Standard Life Group in March 2004. Mr. Crombie is a fellow of the Faculty of

Actuaries in Scotland.

Ms. Marcia D Campbell is currently the Group Operations Director in the Standard

Life group and is responsible for Group Operations, Asia Pacific Development,

Strategy & Planning, Corporate Responsibility and Shared Services Centre. Ms.

Campbell joined the Board of Directors in November 2005.

Mr. Keith N Skeoch is currently the Chief Executive in Standard Life Investments

Limited and is responsible for overseeing Investment Process & Chief Executive

Officer Function. Prior to this, Mr. Skeoch was working with M/s. James Capel & Co.

holding the positions of UK Economist, Chief Economist, Executive Director,

Director of Controls and Strategy HSBS Securities and Managing Director

International Equities. He was also responsible for Economic and Investment Strategy

research produced on a worldwide basis. Mr. Skeoch joined the Board of Directors in

November 2005.

Mr. Gautam R Divan is a practising Chartered Accountant and is a Fellow of the

Institute of Chartered Accountants of India. Mr. Divan was the Former Chairman and

Managing Committee Member of Midsnell Group International, an International

Association of Independent Accounting Firms and has authored several papers of

professional interest. Mr. Divan has wide experience in auditing accounts of large

public limited companies and nationalised banks, financial and taxation planning of

individuals and limited companies and also has substantial experience in structuring

overseas investments to and from India.

Mr. Ranjan Pant is a global Management Consultant advising CEO/Boards on

Strategy and Change Management. Mr. Pant, until 2002 was a Partner & Vice-

President at Bain & Company, Inc., Boston, where he led the worldwide Utility

Practice. He was also Director, Corporate Business Development at General Electric

headquarters in Fairfield, USA. Mr. Pant has an MBA from The Wharton School and

BE (Honours) from Birla Institute of Technology and Sciences.

Mr. Ravi Narain is the Managing Director & CEO of National Stock Exchange of

India Limited. Mr. Ravi Narain was a member of the core team to set-up the

Securities & Exchange Board of India (SEBI) and is also associated with various

committees of SEBI and the Reserve Bank of India (RBI).

Mr. Deepak M Satwalekar is the Managing Director and CEO of the Company

since November, 2000. Prior to this, he was the Managing Director of HDFC Limited

since 1993. Mr. Satwalekar obtained a Bachelors Degree in Technology from the

Indian Institute of Technology, Bombay and a Masters Degree in Business

Administration from The American University, Washington DC.

Ms. Renu S. Karnad is the Executive director of HDFC Limited, is a graduate in law

and holds a Master's degree in economics from Delhi University. She has been

employed with HDFC Limited since 1978 and was appointed as the Executive

Director in 2000. She is responsible for overseeing all aspects of lending operations of

HDFC Limited.

As at Dec 2011 as at dec 2010 as at Mar 2011

Number of Shares % of Holding Number of Shares % of Holding Number of Shares % of Holding

Promoters

Indian 1,443,733,842 72.37% 1,437,877,600 72.52% 1,443,733,842 72.37%

Foreign 518,668,824 26.00% 515,191,733 25.99% 518,668,824 26.00%

Others 32,477,430 1.63% 29,564,000 1.49% 32,477,430 1.63%

Total 1,994,880,096 100.00% 1,982,633,333 100.00% 1,994,880,096 100.00%

SHARE HOLDERS

MARKET SHARE

HDFC LIMITED.

HDFC is India’s leading housing finance institution and has helped build more than

23,00,000 houses since its incorporation in 1977.

In Financial Year 2003-04 its assets under management crossed Rs. 36,000 Cr.

As at March 31, 2004, outstanding deposits stood at Rs. 7,840 crores. The depositor

base now stands at around 1 million depositors.

Rated ‘AAA’ by CRISIL and ICRA for the 10th consecutive year

Stable and experienced management

High service standards

Awarded The Economic Times Corporate Citizen of the year Award for its

long-standing commitment to community development.

Presented the ‘Dream Home’ award for the best housing finance provider in 2004 at

the third Annual Outlook Money Awards.

Standard Life Group (Standard Life plc and its subsidiaries)

The Standard Life group has been looking after the financial needs of customers for

over 180 years

It currently has a customer base of around 7 million people who rely on the company

for their insurance, pension, investment, banking and health-care needs

Its investment manager currently administers £125 billion in assets

It is a leading pensions provider in the UK, and is rated by Standard & Poor's as

'strong' with a rating of A+ and as 'good' with a rating of A1 by Moody's

Standard Life was awarded the 'Best Pension Provider' in 2004, 2005 and 2006 at

the Money Marketing Awards, and it was voted a 5 star life and pensions provider at

the Financial Adviser Service Awards for the last 10 years running . The '5 Star'

accolade has also been awarded to Standard Life Investments for the last 10 years,

and to Standard Life Bank since its inception in 1998. Standard Life Bank was

awarded the 'Best Flexible Mortgage Lender' at the Mortgage Magazine Awards in

2006

PRODUCTS

Products of HDFC standard life insurance

Individual

Group

Social

Individual Products

We at HDFC Standard Life realize that not everyone has the same kind of needs.

Keeping this in mind, we have a varied range of Products that you can choose from to

suit all your needs. These will help secure your future as well as the future of your

family.

Protection Plans

You can protect your family against the loss of your income or the burden of a loan in

the event of your unfortunate demise, disability or sickness. These plans offer

valuable peace of mind at a small price.

Our Protection range includes our Term Assurance Plan & Loan Cover Term

Assurance Plan.

Investment Plans

Our Single Premium Whole of Life plan is well suited to meet your long term

investment needs. We provide you with attractive long term returns through regular

bonuses.

Pension Plans

Our Pension Plans help you secure your financial independence even after retirement.

Our Pension range includes our Personal Pension Plan, Unit Linked Pension, and Unit

Linked Pension Plus

Savings Plans

Our Savings Plans offer you flexible options to build savings for your future needs

such as buying a dream home or fulfilling your children immediate and future needs.

Our Savings range includes Endowment Assurance Plan, Unit Linked Endowment,

Unit Linked Endowment Plus, Unit Linked Endowment plus II, Money Back,

Unit Linked Enhanced Life Protection II, Children's Plan, Unit Linked Young Star,

Unit Linked Young Star Plus, Unit Linked Young Star plus II.

Group Products

One-stop shop for employee-benefit solutions

HDFC Standard Life has the most comprehensive list of products for progressive

employers who wish to provide the best and most innovative employee benefit

solutions to their employees. We offer different products for different needs of

employers ranging from term insurance plans for pure protection to voluntary plans

such as superannuation and leave encashment.

We now offer the following group products to our esteemed corporate clients:

Group Term Insurance

Group Variable Term Insurance

Group Unit-Linked Plan

An investment solution that provides funding vehicle to manage corpuses with

Gratuity, Defined Benefit or Defined Contribution Superannuation or Leave

Encashment schemes of your company

Also suitable for other employee benefit schemes such as salary saving schemes and

wealth management schemes

Social Product

Development insurance plan

Development Insurance plan is an insurance plan which provides life cover to

members of a Development Agency for a term of one year. On the death of any

member of the group insured during the year of cover, a lump sum is paid to those

member beneficiaries to help meet some of the immediate financial needs following

their loss.

Eligibility

Members of the development agency and their spouses with:

Minimum age at the start of the policy 18 years last birthday

Maximum age at the start of policy 50 years last birthday

Employees of the Development Agency are not eligible to join the group. The group

to be covered is only eligible if it contains more than 500 members.

Premium Payments

The premium to be paid will be quoted per member in the group and will be the same

for all members of the group.

The premium can only be paid by the Development Agency as a single lump sum that

includes all premiums for the group to be covered. Cover will not start until the

premium and all the member information in our specified format has been received

The premium rate is Rs. 25 per Rs. 10,000 of lump sum, per member.

Benefits

On the death of each member covered by the policy during the year of cover a lump

sum equal to the sum assured will be paid to their beneficiaries or legal heirs. Where

the death is as a result of an accident, an additional lump sum will be paid equal to

half the sum assured. There are no benefits paid at the end of the year of cover and

there is no surrender value available at any time.

The role of the Development Agency

Due to the nature of the groups covered, HDFC Standard Life will be passing certain

administrative tasks onto the Development Agency. By passing on these tasks the

premium charged can be lower. These tasks would include:

Submission of member data in a specified computer format

Collection of premiums from group members

Recording changes in the details of group members

Disbursement of claim payments and the mortality rebate (if any) to group members.

These tasks would be in addition to the usual duties of a policyholder such as:

Payment of premiums

Reporting of claims

Keeping policy holder information up to date

Training and support will be available to give guidance on how to complete the tasks

appropriately.

Since these additional tasks will impose a burden on the Development Agency, the

Development Agency may charge a Rs. 10 administration fee to their members.

Prohibition of rebates

Section 41 of the Insurance Act, 1938 states

No person shall allow or offer to allow, either directly or indirectly, as an inducement

to any person to take out or renew or continue an insurance in respect of any kind of

risk relating to lives or property in India, any rebate of the whole or part of the

commission payable or any rebate of the premium shown on the policy, nor shall any

person taking out or renewing or continuing a policy accept any rebate, except such

rebate as may be allowed in accordance with the published prospectus or tables of the

insurer

If any person fails to comply with sub regulation (previous point) above, he shall be

liable to payment of a fine which may extend to rupees five hundred

HEAD QUARTERS

HDFC LIFE INSURANCE COMPANY LIMITTED.

Regd Office: Trade star, 2nd floor, a wing, adhere (east)

Mumbai-400059,

Helpline-022 67516666

BRANCHES &SUBSIDIARIES

Associate Companies

Areas of operation

Helping Indians experience the joy of home ownership. The road to success is a tough

and challenging journey in the dark where only obstacles light the path. However,

success on a terrain like this is not without a solution. As we found out nearly three

decades ago, in 1977, the solution for success is customer satisfaction. All you need is

the courage to innovate, the skill to understand your clientele and the desire to give

them your best. Today, nearly three million satisfied customers whose dream we

helped realize, stand testimony to our success. Our objective, from the beginning, has

been to enhance residential housing stock and promote home ownership. Now, our

offerings range from hassle-free home loans and deposit products, to property related

services and a training facility. We also offer specialized financial services to our

customer base through partnerships with some of the best financial institutions

worldwide.

The Housing Development Finance Corporation Limited (HDFC) was amongst the

first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set

up a bank in the private sector, as part of the RBI's liberalization of the Indian

Banking Industry in 1994. The bank was incorporated in August 1994 in the name of

'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank

commenced operations as a Scheduled Commercial Bank in January 1995.

HDFC Mutual Fund has been one of the best performing mutual funds in the last few

years. HDFC Asset Management Company Limited (AMC) functions as an Asset

Management company for the HDFC mutual fund.

AMC is a joint venture between housing finance giant HDFC and British investment

firm Standard Life Investments Limited. It conducts the operations of the Mutual

Fund and manages assets of the schemes, including the schemes launched from time

to time. As of Aug 2006, the fund has assets of Rs.25, 892 crores under management.

IN 2003, following a decision by the Zurich Insurance Company (ZIC), the Sponsor

of Zurich India Mutual Fund, to divest its asset management business in India, AMC

had entered into an agreement with ZIC to acquire the asset management business.

Consequently, all the schemes of Zurich Mutual Fund in India had been transferred to

HDFC mutual fund and renamed as HDFC schemes.

Here is a list of mutual funds of HDFC which includes Equity Funds, Balanced Funds

and Debt Funds.

HDFC Securities, a trusted financial service provider promoted by HDFC Bank and

JP Morgan Partners and their associates, is a leading stock broking company in the

country, serving a diverse customer base of institutional and retail investors.

HDFCsec.com provides investors a robust platform to trade in Equities in NSE and

BSE, and derivatives in NSE. Our website will support you with the highest standards

of service, convenience and hassle-free trading tools.

Our research team tracks the economy, industries and companies to provide you the

latest information and analysis. Our content offers financial information, analysis,

investment guidance, news & views, and is designed to meet the requirements of

everyone from a beginner to a savvy and well-informed trader.

HDFC Realty is a wholly owned subsidiary of HDFC. We have assisted individuals in

acquiring homes valued at 5000 million rupees.

HDFC is a pioneer housing finance institution in India and with over 30 years in

operations has provided finance to over a million families in India.

We are a team of real estate professionals facilitating Buying, Selling or Leasing of

Residential / Commercial property.

At HDFC Realty, we provide personalized attention to the individuals and corporate

in their process of identifying properties. From understanding the requirement to

organizing the site visits to completion of transaction, we make every effort to make

the process of acquiring a property, hassle free and convenient.

Other Companies

HDFC Trustee Company Ltd.

GRUH Finance Ltd.

HDFC Developers Ltd.

HDFC Property Ventures Ltd.

HDFC Ventures Trustee Company Ltd.

HDFC Investments Ltd.

HDFC Holdings Ltd.

Credit Information Bureau (India) Ltd

HDFC Securities

HDB Financial Investment modes

FINANCIAL PERFORMANCE REVIEW

 HDFC Standard Life, one of India’s leading private life insurance companies,

declared its annual results for the financial year ending March 31, 2011. The company

generated Total Premium Income of Rs. 5564.69 crores in FY2011registering a year-

on-year growth of 15%. The growth was primarily driven by the company’s

structured Investment modes processes based on Taxpayer needs and their

assessments, wide range of Tax scheme portfolio and diverse distribution network.

Mr. Paresh Parasnis, Principal Officer and Executive Director, said, “The financial

year 2010-11 was a defining year with the unfolding of several unexpected events -

sharp correction in financial markets and a spread of recessionary trends. These

events also had an impact on the Indian life insurance industry. We are happy that our

new policies issued grew by 16% over the last year. However, given the uncertainty in

the overall scenario, Taxpayers have reduced their annual premium commitment on

new policies. At the same time, existing policies continued to be in force reflected in

our renewal premium, which posted a healthy growth of 34%.”

In line with overall market conditions, growth in Effective Premium Income (EPI) in

respect of retail business increased by 5%, growing from Rs. 2,425 crores in 2007-08

to Rs. 2,552 crores in 2010-11. HDFC Standard Life tracks its New Business

Premium on the basis of Effective Premium Income (EPI). EPI is calculated by giving

only a 10% value to a Single Premium policy and is an internationally accepted

indicator of an insurance company’s performance.

HDFC Standard Life maintained its healthy pipeline of Tax beneficial schemes last

year by launching 11 Tax beneficial schemes apart from slashing the premium rates of

its Term Assurance Plan premium rates by about 25% across different age bands.

“Our entry into the health insurance market last year with the launch of two Tax

beneficial schemes– SurgiCare and Critical Care was a significant move in line with

our business objective. The low penetration of health insurance in India gives us a

tremendous opportunity to provide quality health insurance. Our health Tax beneficial

schemes along our complete range of life insurance and pensions portfolio meet

almost every aspect of an individual’s requirements,” Mr. Paresis added.

Highlights of Financial Year 2010-11

-- Total Premium Income is up by 15% at Rs. 5564.69 crores as against Rs. 4858.56

crores in FY2007-08.

-- Renewal premium collected increased to Rs. 2913.58 crores from Rs. 2173.19

crores in the previous year, registering a growth of 34%.

-- Effective Premium Income (EPI) in respect of retail business increased by 5%,

growing from Rs 2,425 crores in 2007-08 to 2,552 crores in 2010-11.

-- Alternate Channels, including bancassurance, contributed about 45% to the

Effective Premium Income (EPI).

-- A well balanced Tax scheme portfolio with pension comprising over 40% children

Investment modes around 25% and the remaining constituting Tax planning and

savings Investment modes,

-- Total assets under management increased to Rs. 10,595 cores, registering a growth

of 24% over FY2007-08.

-- Assets under management for the Group business have increased to Rs. 1075

crores, registering a growth of 12% over FY2007-08.

-- Company Tax beneficial schemes and Investment modes are now available through

a network of 595 offices serving over 700 cities and towns across the country. This is

further complemented by corporate agency relationships with public, private and

cooperative banks.

-- Strength of Financial Consultants reported year-on-year growth of 43% to over 2,

07,000 in FY2010-11 compared to 1, 45,000 last financial years.

-- The sum assured in-force for 2010-11 was Rs. 57,158 crores as compared to Rs.

45,743 crores for the previous year.

Towards improving the quality of training imparted, the company started an in-house

training facility to cater to the mandatory training required to be given as well as for

other Investment modes training requirements. The company has received

accreditation from the Insurance Regulatory and Development Authority (IRDA) for

149 training centers housed in its branches. During the year, HDFC Standard Life also

launched a three-month insurance and management programme in collaboration with

Manipal Education to select, train, and groom talent from across the country and

ensures a ready pool of insurance-trained Investment modes professionals for the

company.

HDFC Standard Life has revamped its corporate website (www.hdfcinsurance.com)

in line with its communication philosophy. The new improved, interactive, and user-

friendly website is in sync with its need-based communication strategy of helping

individuals through their decision of selecting the right life insurance Investment

modes that fit their needs.

To meet the demands arising from the company’s rapid growth, the promoters

contributed an additional Rs. 525 crores of equity to take the paid-up share capital as

on March 2009 to Rs. 1796 crores.

SOCIAL RESPONSIBILITY

We have all noticed in the last years the huge number of changes that took place in

the social, political, economical and technological fields, phenomena that led to

substantial changes including in the management practices of many small, medium

and large companies. In this new trend can also be included the social responsibility

phenomenon of different companies (including the insurance ones). This paper

explains that social responsibility implies the idea that insurance companies, along

with their commercial activities, must be also involved in voluntary actions that do

not generate an immediate benefit in terms of profits or other pecuniary earnings. At

present, there is a real argue between the specialists regarding what really means to be

a social responsible insurance company, if an insurer should be interested only in

obtaining profits or its concerns should also take in consideration activities that

generate global benefits for the entire society. Of course, there are many specialists

that promote the social responsibility attitude and others that are against such

behavior. From a brief analyze of the behaviors of different insurers, the conclusion

that can be drawn is that each insurance company’s attitude toward social

responsibility can be one of the following: the reaction attitude, the defensive attitude,

the adaptation attitude and the pro-active attitude. The present paper also presents, in

the final part, a short study-case regarding the way an insurance company engages in

social responsibility actions. In fact, are presented the most important points from the

social responsibility strategy of AIG (American International Group, Inc.), the

world’s leader in the insurance sector. Social responsibility / attitudes / AIG /

American International Group, Inc. . . .

Definition of the Social Responsibility: Concept Social responsibility represents a

relatively recent concept within the business communities, which promotes the idea of

the companies’ voluntary involvement in activities that are not immediately intended

to make a profit

ACHIEVEMENTS

Awards & Accolades

Best Companies to Work for in India in 2010

HDFC Standard Life has been adjudged one of the Best Companies to Work for in

India in 2010. The company participated in the Great Places to Work® study for the

first time and ranked first in the insurance category. It ranked 34th on the Top 50 Best

Companies to Work for, in India 2010 list. The company was also awarded for its

unique employee initiative - Mission –in-Genius national quiz. The study has

shown that HDFC Standard Life conscientiously develops employee talent

programmers to keep engaging and motivating its employees. The company provides

some unique platforms such as 'Mission in Genius' national quiz. The management is

accessible to all at all times and sincerely seeks feedback from its employees through

programmes such as 'Sparsh', the study said.

The Best Companies to Work in India is a study conducted by the Great Place to

Work® Institute, India in partnership with The Economic Times. The 2010 edition

is the seventh study in India, which received overwhelming response from more than

400 companies, making it the largest such study in India. And only 50 companies

made it to the Best Companies to Work list!

'YoungStar Super' Voted 'Tax scheme of the Year 2010'

HDFC Standard Life’s YoungStar Super has been voted ‘Tax scheme of the

Year 2010’ in the 'Insurance' category by more than 100,000 consumers

nationwide across 36 markets. YoungStar Super is a unit linked Children Plan with

unique benefits such as bumper additions, double and triple benefits, attractive

allocations rates, and seven different funds.

The consumer study on Tax scheme innovation in India was conducted by A C

Nielsen, the leading global research firm. Entries were accepted from Tax beneficial

schemes that demonstrate innovation in their Tax scheme function, design, packaging

or process or any other specified form. Entries were then filtered by a jury of

distinguished industry professionals to ensure that the Tax beneficial schemes meet

the innovation criteria before they were passed on to the consumer votes/survey

round. Tax scheme of the Year is an Internationally Recognised Standard that

celebrates and rewards the best innovations in consumer Tax beneficial schemes and

Investment modes. The Tax scheme of the Year is selected through an independent

consumer survey across the country in 26 countries for the past 20 years.

Received CIO 'the Ingenious 100 2009' Award

HDFC Standard Life has received the CIO 'The Ingenious 100 - 2009 Award,' for

ATLAS (Agency Training Licensing and Servicing System). Additionally, the

company has received the CIO 100 'Security Award 2009' for pioneering LANDesk

Management and Security Suite security implementation and taking its security to a

higher level of technological excellence.

HDFC Standard has received the CIO 100 Award for the third consecutive year. It

had received the 2008 CIO Bold Award for Consultant Corner and CIO Security

Award for our initiatives for a secure computing environment, including Sesame -

Identity and Access Management. In 2007, the company received CIO 100 award for

Wonders and a Special Award in Storage category.

CIO magazine has a long tradition of honoring leading companies for business and

technology leadership and innovations through its flagship award program - CIO 100.

It's a celebration of 100 organizations (and the people within them) that are using IT

in innovative ways to deliver business value, whether by creating competitive

advantage, optimizing business processes, enabling growth or improving relationships

with Taxpayers.

Received Diamond EDGE Award 2009

 

HDFC Standard Life has received the Diamond EDGE Award 2009 for its mobile

workforce portal - Consultant Corner. EDGE - Enterprises Driving Growth and

Excellence (using IT) is an initiative by the ,Network Computing magazine to

identify, recognize, and honor end-user companies in India that have demonstrated the

best use of technology to solve a business problem, improve business

competitiveness, and deliver quantifiable ROI to stakeholders.

Network Computing magazine is part of CMP Technology, which brings more than

100 IT media brands to more than 18 million technology and business decision

makers worldwide.

Hdfc k here to view the report

Sept, 2008

Received 2008 CIO Bold 100 and CIO Security Awards

HDFC Standard Life has received the 2008 CIO Bold 100 Award. This annual award

recognizes organizations that exemplify the highest level of operational and strategic

excellence in information technology. This year's award theme, 'The Bold 100,'

recognized those executives and organizations that embraced great risk for the sake of

great reward.

HDFC Standard Life has also been one of the five recipients of the Special 2008 CIO

Security Award aimed at CIOs, whose pioneering implementations have taken their

enterprise security to the next level. This award category identifies innovative and

groundbreaking deployment of technologies aimed at creating a secure business

infrastructure.

The company received the 2008 CIO Bold Award for its mobile workforce portal and

the CIO Security Award for its initiatives for a secure computing environment,

including identity management.

May, 2008

Received PCQuest Best IT Implementation Award 2008

HDFC Standard Life received the PCQuest Best IT Implementation Award 2008 for

Consultant Corner, the applications for its financial consultants, providing centralized

control over a vast geographical spread for key business units such as inventory,

training, licensing, etc. Read more about the 'Consultant Corner' tool in the '

HDFCSL's in News' Section.

HDFC Standard Life has won the PCQuest Best IT Implementation Award for two

years consequently. Last year, the company received the award for Wonders, its path-

breaking implementation of an enterprise-wide workflow system.

March, 2008

Silver Abby at Goafest 2008

HDFC Standard Life's radio spot for Pension Investment modes won a Silver Abby

in the radio writing craft category at the Goafest 2008 organised by the Advertising

Agencies Association of India (AAAI). The radio commercial 'Pata nahin chala'

touched several changes in life in the blink of an eye through an old man’s

perspective. The objective was drive awareness and ask people to invest in a pension

plan to live life to the fullest even after retirement, without compromising on one's

self-respect

March, 2008

Unit Linked Savings Plan Tops Mint Best TV Ads Survey

The Unit Linked Savings Plan advertisement of HDFC Standard Life, one of the

leading private insurance companies in India, has topped Mint's Top Television

Advertisement survey conducted, for February 2008. HDFC Standard Life's Unit

Linked Savings Plan advertisement was ranked 4th in terms of a combined score of ad

awareness and brand recall and 3rd in terms of ad diagnostic scores (likeability,

enjoyment, believability, and claim). The respondents were between 18 and 40 years.

Mint’s exclusive report, 'New voices in a makeover' outlines the survey in detail.

Hdfc k here to view the report

February, 2008

Deepak M Satwalekar Awarded QIMPRO Gold Standard Award 2007

Mr. Deepak M Satwalekar, Managing Director and CEO, HDFC Standard Life,

received the QIMPRO Gold Standard Award 2007 in the business category at the 18th

annual Qimpro Awards function. The award celebrates excellence in individual

performance and highlights the quality achievements of extraordinary individuals in

an era of global competition and expectations.

January, 2008

Sar Utha Ke Jiyo Among India's 60 Glorious Advertising Moments

HDFC Standard Life's advertising slogan honoured as one of '60 Glorious

Advertising & Marketing Moments' over the last 60 years in India,' by 4Ps Business

and Marketing magazine. The magazine said that HDFC Standard Life is one of the

first private insurers to break the ice using the idea of self respect (Sar Utha Ke Jiyo)

instead of 'death' to convey its brand proposition. This was then, followed by others

including ICCI Prudential, thus giving HDFC Standard Life the credit of bringing up

one such glorious advertising and marketing moment in the last 60 years.

MAJOR COMPETITORS OF HDFC LIFEMAJOR COMPETITORS OF HDFC LIFE

Life Insurance Corporation of India (LIC)

Life Insurance Corporation of India (LIC) was established on 1 September 1956 to

spread the message of life insurance in the country and mobilise people’s savings for

nation-building activities. LIC with its central office in Mumbai and seven zonal

offices at Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Kanpur and Bhopal,

operates through 100 divisional offices in important cities and 2,048 branch offices.

LIC has 5.59 lakh active agents spread over the country.

The Corporation also transacts business abroad and has offices in Fiji, Mauritius and

United Kingdom. LIC is associated with joint ventures abroad in the field of

insurance, namely, Ken-India Assurance Company Limited, Nairobi; United Oriental

Assurance Company Limited, Kuala Lumpur; and Life Insurance Corporation

(International), E.C. Bahrain. It has also entered into an agreement with the Sun Life

(UK) for marketing unit linked life insurance and pension policies in U.K.

In 1995-96, LIC had a total income from premium and investments of $ 5 Billion

while GIC recorded a net premium of $ 1.3 Billion. During the last 15 years, LIC's

income grew at a healthy average of 10 per cent as against the industry's 6.7 per cent

growth in the rest of Asia (3.4 per cent in Europe, 1.4 per cent in the US).

LIC has even provided insurance cover to five million people living below the

poverty line, with 50 per cent subsidy in the premium rates. LIC's claims settlement

ratio at 95 per cent and GIC's at 74 per cent are higher than that of global average of

40 per cent. Compounded annual growth rate for Life insurance business has been

19.22 per cent per annum

General Insurance Corporation of India (GIC)

The general insurance industry in India was nationalized and a government company

known as General Insurance Corporation of India (GIC) was formed by the Central

Government in November 1972. With effect from 1 January 1973 the erstwhile 107

Indian and foreign insurers which were operating in the country prior to

nationalization, were grouped into four operating companies, namely, (i) National

Insurance Company Limited; (ii) New India Assurance Company Limited; (iii)

Oriental Insurance Company Limited; and (iv) United India Insurance Company

Limited.  (However, with effect from Dec'2000, these subsidiaries have been de-

linked from the parent company and made as independent insurance companies). All

the above four subsidiaries of GIC operate all over the country competing with one

another and underwriting various classes of general insurance business except for

aviation insurance of national airlines and crop insurance which is handled by the

GIC.

Besides the domestic market, the industry is presently operating in 17 countries

directly through branches or agencies and in 14 countries through subsidiary and

associate companies.

LIFE INSURANCE COMPANIES

Max New York Life Insurance Co. Ltd.

Max New York Life Insurance Company Limited is a joint venture that brings

together two large forces - Max India Limited, a multi-business corporate, together

with New York Life International, a global expert in life insurance. With their various

Products and Riders, there are more than 400 product combinations to choose from.

They have a national presence with a network of 57 offices in 37 cities across India.

ICICI Prudential Life Insurance Company Ltd.

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a

premier financial powerhouse and prudential plc, a leading international financial

services group headquartered in the United Kingdom. ICICI Prudential was amongst

the first private sector insurance companies to begin operations in December 2000

after receiving approval from Insurance Regulatory Development Authority (IRDA).

The company has a network of about 56,000 advisors; as well as 7 banc assurance and

150 corporate agent tie-ups.

Om Kotak Mahindra Life Insurance Co. Ltd.

Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture between Kotak

Mahindra Bank Ltd. (KMBL), and Old Mutual plc.

Birla Sun Life Insurance Company Ltd.

Birla Sun Life Insurance Company is a joint venture between Aditya Birla Group and

Sun Life financial Services of Canada.

Tata AIG Life Insurance Company Ltd.

SBI Life Insurance Company Limited

ING Vysya Life Insurance Company Private Limited

Allianz Bajaj Life Insurance Company Ltd.

Metlife India Insurance Company Pvt. Ltd.

AMP SANMAR Assurance Company Ltd.

Dabur CGU Life Insurance Company Pvt. Ltd.

GENERAL INSURANCE

1. Royal Sundaram Alliance Insurance Company Limited 

The joint venture bringing together Royal & Sun Alliance Insurance and Sundaram

Finance Limited started its operations from March 2001. The company is Head

Quartered at Chennai, and has two Regional Offices, one at Mumbai and another one

at New Delhi.

2. Bajaj Allianz General Insurance Company Limited

Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj

Auto Limited and Allianz AG of Germany. Both enjoy a reputation of expertise,

stability and strength.

Bajaj Allianz General Insurance received the Insurance Regulatory and Development

Authority (IRDA) certificate of Registration (R3) on May 2nd, 2001 to conduct

General Insurance business (including Health Insurance business) in India. The

Company has an authorized and paid up capital of Rs 110 crores. Bajaj Auto holds

74% and the remaining 26% is held by Allianz, AG, Germany.

3. ICICI Lombard General Insurance Company Limited

ICICI Lombard General Insurance Company Limited is a joint venture between ICICI

Bank Limited and the US-based $ 26 billion Fairfax Financial Holdings Limited.

ICICI Bank is India's second largest bank, while Fairfax Financial Holdings is a

diversified financial corporate engaged in general insurance, reinsurance, insurance

claims management and investment management.

Lombard Canada Ltd, a group company of Fairfax Financial Holdings Limited, is one

of Canada's oldest property and casualty insurers. ICICI Lombard General Insurance

Company received regulatory approvals to commence general insurance business in

August 2001.

4. Cholamandalam General Insurance Company Ltd.

Cholamandalam MS General Insurance Company Limited (Chola-MS) is a joint

venture of the Murugappa Group & Mitsui Sumitomo. 

Chola-MS commenced operations in October 2002 and has issued more than 1.4 lakh

policies in its first calendar year of operations. The company has a pan-Indian

presence with offices in Chennai, Hyderabad, Bangalore, Kochi, Coimbatore,

Mumbai, Pune, Indore, Ahmedabad, Delhi, Chandigarh, Kolkata and Vizag.

5. TATA AIG General Insurance Company Ltd.

Tata AIG General Insurance Company Ltd. is a joint venture company, formed from

the Tata Group and American International Group, Inc. (AIG). Tata AIG combines

the strength and integrity of the Tata Group with AIG's international expertise and

financial strength. The Tata Group holds 74 per cent stake in the two insurance

ventures while AIG holds the balance 26 per cent stake.

Tata AIG General Insurance Company, which started its operations in India on

January 22, 2001, offers the complete range of insurance for automobile, home,

personal accident, travel, energy, marine, property and casualty, as well as several

specialized financial lines.

6. Reliance General Insurance Company Limited.

7. IFFCO Tokyo General Insurance Co. Ltd

8. Export Credit Guarantee Corporation Ltd

UNIT -5

THEORETICAL FRAME WORK

MEANING OF TITLE OF STUDY

There are many different definitions of what ‘investment’ and ‘investing’ actually

means. One of the simplest ways of describing it is using your money to try and make

more money. This can happen in many different ways.

All investors are different. The common factor is that you would like to invest money

to aim to make it grow or to receive a regular income from it. We would like to show

you that choosing the most suitable investment for you does not need to be difficult.

All you need is the right help along the way.

In a competitive marketplace where businesses compete for Taxpayers, Taxpayer

Investment modes is seen as a key differentiator and increasingly has become a key

element of business strategy. There is a substantial body of empirical literature that

establishes the benefits of Taxpayer Investment modes for firms.

Hdfclife -its tax schemes&investment modes Is a measure of how Tax benifitial

schemesand Investment modes supplied by a company meet or surpass Taxpayer

expectation. It is seen as a key performance indicator business and is part of the four

perspectives of a Balanced Scorecard.

Wealth Pyramid

Financial independence brings with itself the responsibility of planning for your

future. The best way to start - is to start from the beginning. If life was a pyramid, we

all start at the bottom of it and move upwards, as our needs and responsibilities rise

along with age.

The key to building a sound financial plan is to start with a solid and secure base.

Insurance can help you ensure a sound and secure foundation by protecting your

family, protecting your assets, protecting your health and most importantly -

protecting your dreams.

With evolution, insurance also offers you solutions to accumulate substantial savings

and invest them for your future needs as wells as for your retirement.

TYPES OF INVESTMENT OPTIONS

A brief preview of different investment options is given below:

Equities: Investment in shares of companies is investing in equities.

Stocks can be brought/sold from the exchanges (secondary market) or via IPO’s –

Initial Public Offerings (primary market). Stocks are the best long-term investment

options wherein the market volatility and the resultant risk of losses, if given enough

time, are mitigated by the general upward momentum of the economy. There are two

streams of revenue generation from this from of investment.

1.Dividend: Periodic payments made out of the company’s profits are termed as

dividends.

2.Growth: The price of the stock appreciates commensurate to the growth posted by

the company resulting in capital appreciation.

On an average an investment in equities in India has a return of 25%. Good portfolio

management, precise timing may ensure a return of 40% or more. Picking the right

stock at the right time would guarantee that your capital gains i.e. growth in market

value of stock possessions, will rise.

Bonds: It is a fixed income (debt) 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 fixed rate of interest on a specified date, called as the maturity

date. Other fixed income instruments include bank deposits, debentures, preference

shares etc.

The average rate of return on bond and securities in India has been around 10-13%

p.a.

Mutual Fund: These are open and close-ended funds operated by an investment

company, which raises money from the public and invests in a group of assets, in

accordance with a stated set of objectives. It is a substitute for those who are unable to

invest directly in equities or debt because of resource, time or knowledge constraints.

Benefits include diversification and professional money management. Shares are

issued and redeemed on demand, based on the funs net asset value, which is

determined at the end of each trading session. The average rate of return as a

combination of all mutual funds put together is not fixed but is generally more than

what earn is fixed deposits. However, each mutual fund will have its own average rate

of return based on several schemes that they have floated. In the recent past, Mutual

Funs have given a return of 18 – 35%.

Real Estate: For the bulk of investors the most important asset in their portfolio is a

residential house. In addition to a residential house, the more affluent investors are

likely to be interested in either agricultural land or may be in semi-urban land and the

commercial property.

Precious Projects: Precious objects are items that are generally small in size but

highly valuable in monetary terms. Some important precious objects are like the gold,

silver, precious stones and also the unique art objects.

Life insurance: In broad sense, life insurance may be reviewed as an investment.

Insurance premiums represent the sacrifice and the assured the sum the benefits. The

important types of insurance policies in India are:

Endowment assurance policy.

Money back policy.

Whole life policy.

Term assurance policy.

Unit-linked insurance plan.

ABOUT EQUITY INVESTMENT

Stocks are investments that represent ownership --- or equity --- in a corporation.

When you buy stocks, you have an ownership share --- however small --- in that

corporation and are entitled to part of that corporation’s earnings and assets. Stock

investors --- called shareholders or stockholders --- make money when the stock

increases in value or when the company the issued the stock pays dividends, or a

portion of its profits, to its shareholders.

Some companies are privately held, which means the shares are available to a limited

number of people, such as the company’s founders, its employees, and investors who

fund its development. Other companies are publicly traded, which means their shares

are available to any investor who wants to buy them.

Growth & IncomeSome stocks are considered growth investments, while others are considered value

investments. From an investing perspective, the best evidence of growth is an

increasing price over time. Stocks of companies that reinvest their earnings rather

than paying them out as dividends are often considered potential growth investments.

So are stocks of young, quickly expanding companies. Value stocks, in contrast, are

the stocks of companies that problems, have been under performing their potential, or

are out of favor with investors. As result, their prices tend to be lower than seems

justified, though they may still be paying dividends. Investors who seek out value

stocks expect them to stage a comeback.

Market CapitalizationOne of the main ways to categorize stocks is by their market capitalization, sometimes

known as market value. Market capitalization (market cap) is calculated by

multiplying a company’s current stock price by the number of its existing shares. For

example, a stock with a current market value of $30 a share and a hundred million

shares of existing stock would have a market cap of $3 billion.

P/E ratio A popular indicator of a stock’s growth potential is its price-to-earnings ratio, or P/E –

or multiple – can help you gauge the price of a stock in relation to its earnings. For

instance, a stock with a P/E of 20 is trading at a price 20 times higher than its

earnings.

A low P/E may be a sign that a company is a poor investment risk and that its

earnings are down. But it may also indicate that the market undervalues a company

because its stock price doesn’t reflect its earnings potential. Similarly, a stock with a

high P/E may live up to investor expectations of continuing growth, or it may be

overvalued.

Investor demandPeople buy a stock when they believe it’s a good investment, driving the stock price

up. But if people think a company’s outlook is poor and either don’t invest or sell

shares they already own, the stock price will fall. In effect, investor expectations

determine the price of a stock.

For example, if lots of investors buy stock A, its price will be driven up. The stock

becomes more valuable because there is demand for it. But the reverse is also true. If

a lot of investors sell stock Z, its price will plummet. The further the stock price falls,

the more investors sell it off, driving the price down even more.

The DividendsThe rising stock price and regular dividends that reward investors and give them

confidence are tied directly to the financial health of the company.

Dividends, like earnings, often have a direct influence on stock prices. When

dividends are increased, the message is that the company is prospering. This in turn

stimulates greater enthusiasm for the stock, encouraging more investors to buy, and

riving the stock’s price upward. When dividends are cut, investors receive the

opposite message and conclude that the company’s future prospects have dimmed.

One typical consequence is an immediate drop in the stock’s price.

VolatilityOne of the risks you’ll need to plan for as a stock investor is volatility. Volatility is

the speed with which an investment gains or loses value. The more volatile an

investment is the more you can potentially make or lose in the short term.

Managing RiskOne thing for certain: Your stock investment will drop in value at some point. That’s

what risk is all about. Knowing how to tolerate risk and avoid selling your stocks off

in a panic is all part of a smart investment strategy.

Setting realistic goals allocating and diversifying your assets appropriately and taking

a long-term view can help offset many of the risks of investing in stocks. Even the

most speculative stock investment with its potential for large gains may play an

important role in a well-diversified portfolio.

ABOUT BONDS INVESTMENT

Have you ever-borrowed money? Of course you have whether we hit our parents up

for a few bucks to buy candy as children or asked the bank for a mortgage most of us

have borrowed money at some point in our lives.

Just as people need money so do companies and governments. A company needs

funds to expand into new markets, while governments need money for everything

from infrastructure to social programs. The problem large organizations run into is

that they typically need far more money than the average bank can provide. The

solution is to raise money by issuing bonds (or other debt instruments) to a public

market. Thousands of investors then each lend a portion of the capital needed. Really

a bond is nothing more than a loan for which you are the lender. The organization that

sells a bond is known as the issuer. Your can think of a bond as an IOU given by a

borrower (the issuer) to a lender (the investor).

Of course, nobody would loan his or her hard-earned money for nothing. The issuer of

a bond must pay the investor something extra for the privilege of using his or her

money. This ‘extra’ comes in the form of interest payments, which are made at a

predetermined rate and schedule. The interest rate is often referred to as the coupon.

The date on which the issuer has to repay the amount borrowed (known as face value)

is called the maturity date. Bonds are known as fixed-income securities because you

know the exact amount of cash you’ll get back if you hold the security until maturity.

For example, say you buy a bond with a face value of $1000 a coupon of 8% and a

maturity of 10 years. This means you’ll receive a total of $80 ($1000*8%) of interest

per year for the next 10 years. Actually because most bonds pay interest semi-

annually you’ll receive two payments of $40 a year for 10 years. When the bond

matures after a decade, you’ll get your $1000 back.

Face Value / Par ValueThe face value (also known as the par value or principal) is the amount of money a

holder will get back once a bond matures. Newly issued bond usually sells at the par

value. Corporate bonds normally have a par value of $1000 but this amount can be

much greater for government bonds. What confuses many people is that the par value

is not the price of the bond. A bond’s price fluctuates throughout its life in response to

a number of variables (more on this later). When a bond trades at a price above the

face value, it is said to be selling a premium. When a bond sells below face value it is

said to be selling at a discount.

Coupon (The Interest Rate)

The coupon is the amount the bondholder will receive as interest payments. It’s called

a ‘coupon’ because sometimes there are physical coupons on the bond that you tear

off and redeem for interest. However this was more common in the past. Nowadays

records are more likely to kept electronically.

As previously mentioned most bonds pay interest every six months but it’s possible

for them to pay monthly, quarterly or annually. The coupon is expressed as a

percentage of the par value. If a bond pays a coupon of 10% and its par value is $1000

then it’ll pay %100 of interest a year. A rate that stays as a fixed percentage of the par

value like this is a fixed-rate bond. Another possibility is an adjustable interest

payment known as a floating-rate bond. In this case the interest rate is tied to market

rates through an index such as the rate on Treasury bills.

You might think investors will pay more for a high coupon than for a low coupon. All

things being equal a lower coupon means that the price of the bond will fluctuate

more.

MaturityThe maturity date is the date in the future on which the investor’s principal will be

repaid. Maturities can range from as little as one day to as long as 20 years (though

terms of 100 years have been issued).

A bond that matures in one year is much more predictable and thus less risky than a

bond that matures in 20 years. Therefore in general the longer the time to maturity the

higher the interest rate. Also all things being equal a longer-term bond will fluctuate

more than a shorter-term bond.

IssuerThe issuer of a bond is a crucial factor to consider, as the issuers stability is your main

assurance of getting paid back. For example, the U.S government is far more secure

than any corporation. Its default risk (the chance of the debt not being paid back) is

extremely small – so small that U.S government securities are known as risk-free

assets. The reason behind this is that a government will always be bale to bring in

future revenue through taxation. A company on the other hand must continue to make

profits, which is far from guaranteed. This added risk means corporate bond must

offer a higher yield in order to entire investors – this is the risk / return tradeoff in

action.

The bond rating system helps investors determine a company’s credit risk. Think of a

bond rating as the report card for a company’s credit rating. Blue-chip firms, which

are safer investments, have a high rating, while risky companies have to low rating.

The chart below illustrates the different bond rating scales from the major rating

agencies in the U.S.

Moody’s Standard and Poors and Fitch Ratings.

Bond Rating Grade RiskMoody’s S&P / Fitch

AaaAAA Investment Highest Quality

Aa AA Investment High Quality

A A Investment Strong

Baa BBB Investment Medium Grade

Ba, B BB, B Junk Speculative

Caa/Ca/C CCC/CC/C Junk Highly Speculative

C D Junk In Default

Notice that if the company falls below a certain credit rating, its grade changes from

investment quality to junk status. Junk bonds are aptly named: they are the debt of

companies in some sort of financial difficulty. Because they are so risky, they have to

offer much higher yields than any other debt. This brings up an important point: not

all bonds are inherently safer than stocks. Certain types of bonds can be just risky, if

not riskier, than stocks.

Different Types of Bonds

Government BondsIn general, fixed-income securities are classified according to the length of time

before maturity. These are the three main categories:

Bill – debt securities maturing in less than one year,

Notes – debt securities maturing in one to 10 years.

Bonds - debt securities maturing in more than 10 years.

Municipal BondsMunicipal bonds, known as “munis”, are the next progression in terms of risk. Cities

don’t go bankrupt that often, but it can happen. The major advantage to munis is that

the returns are free from federal tax. Furthermore, local governments will sometimes

make their debt non-taxable for residents, thus making some municipal bonds

completely tax-free. Because of these tax savings, the yield on a muni a usually lower

than that of a taxable bond. Depending on your personal situation, a muni can be

great investment on an investment on an after-tax basis.

Corporate BondsA company can issued bonds just as it can issue stock. Large corporations have a lot

of flexibility as to how much debt they can issue: the limit is whatever the market will

bear. Generally, a short-term corporate bond is less than five years; intermediate is

five to 12 years, and long term is over 12 years.

Corporate bonds are characterized by higher yi8eld because there is a higher risk of a

company defaulting than a government. The upside is that they can also be the most

rewarding fixed-income investments because of the risk the investor must take on.

The company’s credit quality is very important: the higher the quality, the lower the

interest rate the investor receives.

Other variations on corporate bonds include convertible bonds, which the holder can

convert into stock, and callable bonds, which allow the company to redeem an issue

prior to maturity.

RisksAs with any investment, there are risks inherent in buying even the most highly

related bonds. For example, your bond investment may be called, or redeemed by the

issuer, before the maturity date. Economic downturns and poor management on the

part of the bond issuer can also negatively affect your bond investment. These risks

can be difficult to anticipate, but learning how to better recognize the warning signs

and knowing how to respond will help you succeed as a bond investor.

ABOUT GOLD INVESTMENT

Gold is the oldest precious metal known to man. Therefore, it is a timely subject for

several reasons. It is the opinion of the more objective market experts that the

traditional investment vehicles of stocks and bonds are in the areas of their all-time

highs and may due for a severe correction.

Why gold is “good as old” is an intriguing question. However, we think that the more

pragmatic ancient Egyptians were perhaps more accurate in observing that gold’s

value was a function of its pleasing physical characteristics its scarcity.

WORLD GODL INDUSTRY Gold is primarily monetary asset and partly a commodity.

The Gold market is highly liquid and gold held by central banks, other major

institutions and retail Jeweler keep coming back to the market.

Economic forces that determine the price of gold are different from, and in

many cases opposed to the forces that influence most financial assets.

Indian is the world’s largest gold consumer with an annual demand of 800

tons.

World Gold MarketsPhysical - London, Zurich, Istanbul, Dubai, Singapore, Hong Kong, Mumbai.

Futures – NYMEX in New York, TOCOM in Tokyo.

Indian Gold Market

Gold is valued in India as a savings and investment vehicle and is the second

preferred investment after bank deposits.

India is the world’s largest consumer of gold in jeweler as investment.

In July 1997 the RBI authorized the commercial banks to import gold for sale

or loan to jewelers and exporter. At present, 13 banks are active in the import

of gold.

This reduced the disparity between international and domestic prices of gold

from 57 percent during 1986 to 1991 to 8.5 percent in 2001.

The gold hoarding tendency is well ingrained in Indian society.

Domestic consumption is dictated by monsoon, harvest and marriage season.

Indian jewellery off takes is sensitive to price increase and even more so to

volatility.

In the cities gold is facing competition from the stock market and a wide range

of consumer goods.

Facilities for refining, assaying, making them into standard bars in India, as

compared to the rest of the world, are insignificant, both qualitatively.

How gold stacks up as investment optionGold and silver have been popular in India because historically these acted as a good

hedge against inflation. In that sense these metals have been more attractive than

bank deposits or gilt-edged securities.

Despite recent hiccups, gold is an important and popular investment for many

reasons:

In many countries gold remains an integral part of social and religious

customs, besides being the basic form of saving. Shakespeare called it ‘the

saint-seducing gold’.

Superstition about the healing powers of gold persists. Ayurvedic medicine in

India recommends gold powder and pills for many ailments.

Gold is indestructible. It does not tarnish and is also not corroded by acid-

except by a mixture of nitric and hydrochloric acids.

Gold is so malleable that one ounce of the metal can be beaten into a sheet

covering nearly a hundred square feet.

Gold is so ductile that one ounce of it can be drawn into fifty miles of thin

gold wire.

Gold is an excellent conductor of electricity; a microscopic circuit of liquid

gold ‘printed’ on a ceramic strip saves miles of wiring in a computer.

Gold is so highly valued that a single smuggler can carry gold worth Rs.50

lakh underneath his shirt.

Gold is so dense that all the 90,000 tones estimated to have been mined

through history could be transported by one single modern super tanker.

Finally, gold is scam-free. So far, there have been no Mundra-type or Mehta-

type scams in gold.

Thus the lure of this yellow metal continues.

One the other hand, it is interesting to note that apart from its aesthetic appeal gold

has no intrinsic value. You cannot eat it, drink it, or even smell it. This aspect of gold

compelled Henry Ford, the founder of Ford Motors, to conclude that ‘gold is the most

useless thing in the world.’

Why People Buy Gold(A) Industrial applications take advantage of gold’s high resistance to corrosion,

its malleability, high electrical conductivity and its ability to adhere firmly to

other metals. There is a wide range of industries from electronic components

to porcelain, which use gold. Dentistry is an important user of gold. The

jewellery industry is another.

(B) Acquisition of gold because of its long-proven ability to retain value and to

appreciate in value.

(C) Purchases by the central banks and international monetary organizations like

the International Monetary Fund (IMF).

Investment OptionsThere has been a shift in demand from jewellery (ornamentation) to coins and bars

(investments). Coins cost less when compared to jewellery (which has additional

making charges). Assayed, certified coins and bars are available through authorized

banks. Demand for jewellery remains strong in traditional circles though gold-plated

jewellery is also becoming popular.

Gold futures: Right now, 75% of Indians demand is for jewellery, the rest is for coins

and bars. Investors can also dabble in gold futures; with demat delivery on stock

exchanges. This is low cost and physical delivery is at 0.995 purity. Gold futures

trading clocked a recent turnover of Rs4, 300 crore.

Gold ETFs: More sophisticated investment products will come. One possibility is

exchange traded funds (ETFs) where gold is the underlying asset. Investors can trade

ETF units with real time quotes. Gold ETF is long overdue, says Naveen Kumar,

Head of Financial Initiatives, World Gold Council. Gold ETFs could be launched

soon; it is a awaiting clearance from the Finance Ministry.

Worldwide more than 600 exchange listed structured products based on gold are

available. Street track an ETF owned by the World Gold Council is listed on the

NYSE. Commodity brokers like Kotak are offering capital protected bonds; these are

open for a specific period (usually one year) with gold as the underlying asset. On

appreciation profit is shared and if the price falls the capital is safe.

Gold BankingIndian jewelers offer gold accumulation plan. Money can be deposited on a regular

basis and jeweler converts into gold at prevailing prices. Interest is earned during the

fixed period of tenure of investment. On redemption, the corpus is converted into gold

coins. This is like a forced structure saving scheme.

ABOUT MUTUAL FUND INVESTMENT

A Mutual Fund is an entity that pools the money of many investors—its Unit-Holders

-- to invest in different securities. Investments may be in shares, debt securities,

money market securities or a combination of these. Those securities are professionally

managed on behalf of the Unit-Holder and each investor hold a pro-rata share of the

portfolio i.e. entitled to any profits when the securities are sold but subject to any

losses in value as well.

Mutual Funds and sell stocks, bonds or other securities. A Fund raises money to make

its purchases, known as its underlying investments by selling shares in the fund.

Earnings the fund realizes on its investment portfolio, after the trading costs and

expenses of managing and administering the fund are subtracted are paid out to the

funds shareholders.

Mutual Fund Set UpA Mutual Fund is set up in the form of a trust, which has Sponsor, Trustees, Asset

Management Company (AMC), and custodian. The trust is established by a sponsor

or more than one sponsor who is like promoter of a company. The trustees of the

mutual fund hold its property for the benefit of the unit holders. Asset Management

Company (AMC) approved by SEBI manages the funds by making investments in

various types of securities. Custodian, who is registered with SEBI, holds the

securities of various schemes of the fund in its custody. The trustees are invested with

the general power of superintendence and direction over AMC. They monitor the

performance and compliance of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors of Trustee Company

or board of trustee must be independent. I.e. they should not be associated with the

sponsors. Also 50% of the directors of ANC must be independent. All mutual funds

are required to be registered with SEBI before they launch any scheme. However,

Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).

Types of Funds Stock funds also called equity funds- invest primarily in stocks.

Bond funds invest primarily in corporate or government bonds

Balanced funds invest in both stocks and bonds.

Money market funds make short-term investment and try to keep their share

value fixed at $1 a share.

Every fund in each category has a price known as its net asset value (NAV) and each

NAV differs based on the value of the funds holdings and the number of shares

investors own. The price changes once a day, at a 4 pm EST, when the markets close

for the day. All transactions for the day – buys and sells –are executed at that price.

Schemes According to Maturity PeriodA mutual fund scheme can be classified into open-ended scheme or close-ended

scheme depending on its maturity period.

Open –Ended Fund/SchemeAn open-ended fund or scheme is one that is available for subscription and repurchase

one continuous basis. These schemes do not have a fixed maturity period. Investors

can conveniently buy and sell units at Net Asset Value (NAV) related prices, which

are declared on a daily basis. The key feature of Open-End Schemes is liquidity.

Close-Ended Fund / SchemeA Close-Ended Fund or Scheme has a stipulated maturity period e.g. 5-7 years. The

fund is open for subscription only during a specified period at the time of launch of

the scheme. Investors can invest in the scheme at the time of the initial public issue

and thereafter they can buy or sell the units of the scheme on the stock exchanges

where the units are listed. In order to provide an exit route to the investors, some

close-ended funds give an option of selling back 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 the investor i.e. either repurchase facility or

through listing on stock exchanges. These mutual funds schemes disclose NAV

generally on weekly basis.

Schemes according to Investment ObjectiveA Scheme can also be classified a growth scheme, income scheme or balanced

scheme considering its investment objective. Such schemes may be open-ended or

close-ended schemes as described earlier. Such schemes may be classified mainly as

follows.

Growth / Equity Oriented SchemeThe aim of growth funds is to provide capital appreciation over the medium to long-

term. Such schemes normally invest a major part of their corpus in equities. Such

funds have comparatively high risks. These schemes provide different options to the

investors like dividend option, capital appreciation etc. And the investors may choose

an option depending on their preference. The investors must indicate the option in the

application form. The mutual funds also allow the investors to change the options at a

later date. Growth schemes are good for investors having a long-term outlook seeking

appreciation over a period of time.

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the

Income Tax Act, 1961 as the Government Offers Tax Incentives for investment in

specified avenues. E.g. Equity Linked Savings Schemes (ELSS). Pension schemes

launched by the mutual funds also offer tax benefit. These schemes are growth

oriented and invest pre-dominantly in equities. Their growth opportunities and risks

associated are like any equity-oriented scheme.

The Appeal of Mutual Funds

Mutual Funds simplify what you may find most complicated about investing—

figuring out what to buy and when to sell to meet your particular goals or objectives.

For example, if you are seeking growth by investing in blue chip stocks, there are a

wide variety of funds to chose from that pursuing precisely this strategy.

To chose the fund that will help you meet a specific goal, you can compare its long-

term performance – over 5 or 10 years – to other funds with similar objectives learn

about whom the manager is and how the fund is run and check out its fee structure.

You can use the funds prospectus, information on the fund company’s Web Sites and

professi0onal advice. Mutual funds can help you diversify your portfolio or spread out

the money you have to invest to meet different goals. One way to diversify is to chose

funds with different objectives aligned with your own, or representing different

segments of the market. For example, you might buy a blue-chip fund, a small

company growth fund, an international stock fund and a government fund.

Diversification

Most expert agrees that it’s more effective to invest in a variety of stocks and bonds

than to depend on a strong performance of just one or two securities. But diversifying

can be a challenge because buying a portfolio of individual stocks and bonds can be

expensive. And knowing what to buy – and when – taken time and concentration.

Mutual funds can offer solution. When you put money in to a fund, it’s pooled with

money from other investors to create much greater buying power than you build a

diversified portfolio. Since a fund may own hundreds of different securities, its

success isn’t dependent on how one or two holding do.

Investment objectives

To achieve its investment objective – whether it is long – term growth or capital

preservation or anything in between – the fund’s manager invests in securities he or

she believes will provide the result the fund seeks. To identify those securities, a

fund’s research staff often uses what’s known as a bottom – up style, which involves a

detailed analysis of the individual companies issuing the securities. When the object is

small– company growth or the focus is on emerging markets, the process can be more

difficult because there’s limited information available.

You may choose mutual funds with specific investment objectives to round out your

portfolio of individual holdings. Or you may choose a number of mutual funds with

different objectives creating a diversified portfolio in that way.

Professional management

Another reason investors are attracted to mutual funds is that each fund has a

professional manager who sets its investment buying style and directs the key buy and

sell decisions.

A buying style defines the particular investments or types of investments a fund

makes from the pool that may be appropriate for meeting its objective. For example,

in seeking long-term capital appreciation, some equity fund managers stress value

investments, which mean they buy stocks whose prices are lower than might be

expected. Others stress growth investments; often younger, dynamic companies the

manager believes will become major players in their industry or in the economy as a

whole.

Some experts believe that a fund’s manager has a major role in determining the results

a fund achieves. They advise that you confirm that a successful manager is still with

the fund before you invest and that you consider selling your shares if that manager

leaves.

Reinvestment

Being able to reinvest your distributions to buy additional shares is another advantage

of investing in mutual funds. You can choose that option when you open a new

account, or at any time while you own shares. And of course you also have the option

to receive your distributions if you need the income the fund would provide.

By investing regularly, you build the investment base on which future earnings will be

able to accumulate, a process known as compounding. The more you have invested,

the greater you’re potential for future growth. And because the fund handles the

process, rolling over distributions into new shares as they are paid, you don’t have to

budget for investing or remember to write the check.

Risk

There is always the risk that a mutual fund wont meet its investment objective or

provide the return you are seeking. And some funds are by definition, riskier than

others. For example a fund that invests in small new companies-whether for growth or

value –exposes you to the risk that the companies will not perform as well as the fund

manager expects. And in market downturns, falling prices for a funds underlying

investment may produce a loss rather than a gain for the fund.

Short-Term Gains

Each time a mutual fund sells an investment for more than the fund paid to buy it, the

fund realizes a capital gain. And those gains are passed along to the funds investors in

proportion to the number of shares in the fund that investor owns.

Most actively managed funds don’t wait more than a year before selling investments.

That means that any profit on the sale is a short-term capital gain, which is taxed at

your regular tax rate. And since a fund typically doesn’t withhold taxed on your

behalf, as an employer does, you must come up with the amount your owe from

other sources if you don’t want to sell shares-at a potential additional gain – to raise

the money you owe.

ABOUT REAL ESTAES INVESTMENT

Before the stock market and mutual funds became popular places for people to put

their investment dollars, investing in real estate was extremely popular. We still

maintain that investing in real estate is not just for land barons or the rich and famous.

As a matter of fact, the home we buy and live in is often our biggest investment.

Flying high on the wings of booming real estate, property in India has become a

dream for every potential investor looking forward to dig profits. All are eyeing

Indian property market for a wide variety of reasons It’s ever growing economy,

which is on a continuous rise with 8.1 percent increase witnessed in the last financial

year. The boom in economy increases purchasing power of its people and creates

demand for real estate sector

Once you have made the decision to become a homeowner, it usually means you will

have to borrow the largest amount you have ever borrowed to purchase something.

This realization may make you want to bury your head in the sand and sign on the

dotted line, but you shouldn’t. For most people, this is the largest purchase they will

ever make during their lifetime, and this makes it all the more important to gather as

much knowledge as possible about what they’re getting into.

We give you the information you need, including making the decision on whether,

when and what you should purchase; finding the types of mortgages and financing

available; handling the closing; and knowing what you’ll need when its time to sell

your home. We also explain the income tax consequences and asset protection

advantages of home ownership.

You can also use real estate, whether land or building strictly as investment vehicles,

and depending on your individual situation, you can do it on a grand or smaller scale.

Let’s look at the world of real estate and the investing options available.

Home as an Investment: Owing a home is the most common form of real estate

investing. Let us show you how your home is not just the place you live, but its

also perhaps your largest and safest investment as well.

Investment Real Estate: The in and outs of investing in real estate and whether it’s

the right investment vehicle for you. Whether you are thinking in terms of renting

out your first home when you move on to a bigger one or investing in a building

full of apartments we will explain what you need to know.

Real Estate & Property

Usually, the first thing you look at when you purchase a home is the design and the

layout. But if you look at the house as an investment, it could prove very lucrative

years down the road. For the majority of us, buying a home will be the largest single

investment we make in our lifetime. Real estate investing doesn’t just mean

purchasing a house- it can include vacation homes, commercial prosperities, land

(both developed and undeveloped), condominiums and many other possibilities.

When buying property for the purpose of investing, the most important factor to

consider is the location. Unlike other investments, real estate is dramatically affected

by the condition of the immediate area surrounding the property and other local

factors. Several factors need to be considered when assessing the value of real estate.

This includes the age and condition of the home, improvements that have been made,

recent sales in the neighborhood, changes to zoning regulations etc. You have to look

at the potential income a house can produce and how it compares to others houses in

the area.

Objectives and Risks

Real estate investing allows the investor to target his or her objectives. For example, if

your objective is capital appreciation, then buying a promising piece of property in a

neighborhood with great potential will help you achieve this. On the other hand if

what you seek is income then buying a rental property can help provide regular

income.

There are significant risks involved in holding real estate. Property taxes maintenance

expenses and repair costs are just some of the costs of holding the asset. Furthermore

real estate is considered to be very illiquid – it can sometimes be hard to find a buyer

if you need to sell the property quickly.

How to Buy or Sell it.

Real estate is almost exclusively bought through real estate agents or brokers their

compensation usually is a percentage of the purchase price of the property. Real estate

can also be purchased directly7 from the owner, without the assistance of a third

party. If you find buying property too expensive, then consider investing in real estate

investment trusts (REITs) which are discussed in the next section.

Let’s take a look at the different types of investment real estate you might

contemplate owing.

ABOUT LIFE INSURANCE INVESTMENT

Life Insurance is income protection in the event of your death. The person you name,

as your beneficiary will receive proceeds from an insurance company to offset the

income lost as a result of your death. You can think of life insurance as a morbid

from of gambling: if you lived longer than the insurance company expected you to

then you would “lose” the bet. But if you died early, then you would “win” because

the insurance company would have to pay out your beneficiary.

Insurers (or underwriters) look carefully at decades worth of data to try to predict

exactly how long you will live. Insurance underwriters classify individuals based on

their height, weight, lifestyle (i.e. whether or o not they smoke) and medical history

(i.e. if they have had any serious health complications). All these variables will

determine what rate class category a person fits into. This doesn’t mean that smokers

and people who have had serious health problems can’t be insured, it just means

they’ll pay different premiums.

There are two very common kinds of life insurance term life and permanent life. Term

life insurance is usually for a relatively short period of time, whereas a permanent life

policy is one that you pay into throughout your entire life. These payments are usually

fixed from the time you purchase your policy. Basically, the younger you are when

you sign-up for this type of insurance, the cheaper your monthly payments will be.

Need for life insurance

Risks and uncertainties are part of life’s great adventure – accident, illness, theft

natural disaster – they’re all built into the working of the Universe, waiting to happen.

Insurance then is man’s answer to the vagaries of life. If you cannot beat man-made

and natural calamities, well at least be prepared for them and their aftermath.

Types of life Insurance

Most of the products offered by Indian Life insurers are developed and structured

around these “basic” policies and are usually an extension or a combination of these

policies. So, the different types of insurance policies are

Term Insurance Policy

A term insurance policy is a pure risk cover for a specified period of time.

What this means is that the sum assured is payable only if the policyholder

ides within the policy term. For instance, if a person buys Rs.2 lakh policy for

10-years period? Well, then he is not entitled to any payment; the insurance

company keeps the entire premium paid during the 10-year period.

What if he survives the 10-year period? Well, then he is not entitled to any

payment; the insurance company keeps the entire premium paid during the 10-

year period.

So, there is no element of savings or investment in such a policy. It is a 100

percent risk cover. It simply means that a person pays a certain premium to

protect his family against his sudden death. He forfeits the amount if he

outlives the period of the policy. This explains why the Term Insurance

Policy comes at the lowest cost.

Endowment Policy

Combining risk cover with financial savings, an endowment policy is the most

popular policies in the world of life insurance.

In an Endowment Policy, the sum assured is payable even if the insured

survives the policy term.

If the insured dies during the tenure of the policy, the insurance firm has to

pay the sum assured just as any other pure risk cover.

A pure endowment policy is also a form of financial saving whereby if the

person covered remains alive beyond the tenure of the policy; he gets back the

sum assured with some other investment benefits.

In addition to the basic policy, insurers offer various benefits such as double

endowment and marriage / education endowment plans. The cost of such a policy is

slightly higher but worth its value.

Whole Life Policy

As the name suggests, a Whole Life Policy is an insurance cover against

death, irrespective of when it happens.

Under this plan, the policyholder pays regular premiums until his death,

following which the money is handed over to his family.

This policy, however fails to address the additional needs of the insured during his

post-retirement years. It doesn’t take into account a person’s increasing needs either.

While the insured buys the policy at young age, his requirements increase over time.

By the time he dies, the value of the sum assured is too low to meet his family’s

needs. As a result of these drawbacks, insurance firms now offer either a modified

Whole Life Policy or combine in with another type policy.

Money Back Policy

These policies are structured to provide sums required as anticipated expenses

(marriage, education etc) over a stipulated period of time. With inflation

becoming a big issue, companies have realized that sometimes the money

value of the policy is eroded. That is why with –profit policies are also being

introduced to offset some of the losses incurred on account of inflation.

A portion of the sum assured is payable at regular intervals. On survival the

remainder of the sum assured is payable.

In case of death, the full sum assured is payable to the insured.

The premium is payable for a particular period of time.

UNIT-linked insurance

Bima Plus is a unit-linked endowment plan. The plan is available over a duration of

10 years. Premium can be paid either yearly, half-yearly, or at one shot.

The premium is used to purchase units in a fund of one's choice, after the necessary

deductions.

The value of the units varies with the investment performance of the assets in the

fund.

Investments can be made in one of three types of funds: Secured fund, which invests

predominantly in debt and money market instruments; Risk fund, in which the tilt is

towards equities; and a Balanced Fund, a blend of the two.

Switching between funds is allowed twice during the policy term, subject to the

condition that they are at least two years apart. Charges for switching are 2 per cent of

the fund's cash value.

What the beneficiary receives depends on when the death of the policyholder occurs.

If death occurs within the first six months of the policy, the payout is 30 per

cent of the sum assured plus the cash value of the units.

Between months seven and 12 of the policy, the payout is 60 per cent of the

sum assured plus cash value of units.

After first year, the sum assured and cash value of the units is paid.

During the 10th year, 105 per cent of the sum assured and cash value of units

is paid out.

If death occurs due to an accident, a sum equal to the sum assured, over and

above the benefit mentioned above is paid.

On survival up to maturity, the policyholder will receive 5 per cent of the sum

assured plus the cash value of the units.

As is the case with unit-linked plans, this plan, too, comes with a set of charges. This

includes a level annual mortality charge, the quantum of which is a function of the

policyholder's entry age; accident benefit charge at Rs.0.50 per thousand sum assured;

annual administrative and commission charges; and a fund management charge.

On surrendering the policy, the cash value of the units, subject to certain deductions

that depend on the year surrendered, is paid out to the policyholder.

Annuities and PensionIn annuity, the insurer agrees to pay the insured a stipulated sum of money

periodically. The purpose of an annuity is to protect against risk as well as provide

money in the form of pension at regular intervals.

Over the years, insurers have added various features to basic insurance policies in

order to address specific needs of a cross section of people.

Objectives and RisksNo matter who you are, one benefit of life insurance is the peace of mind it gives you.

If anything happens to you, your beneficiary will receive a check in a matter of days.

Life Insurance can also be used to cover any debts or liabilities you leave behind. The

bank doesn’t just write off your mortgage once you pass away – these payments must

be made or your house may be liquidated. Life Insurance can also create an

inheritance for your heirs or it can be used to leave a legacy if it’s put toward

donations to charitable organizations.

Most life insurance policies carry relatively little risk because insurance companies

are usually stable and heavily regulated by the government. In “cash value” policies

you are allowed to invest you policy in stock, bond or money market funds. In these

types of policies the value of your insurance depends on the performance of those

funds.

How to Buy or Sell it

There are thousands of insurance brokers and banks across North America. Keep in

mind that you will usually have to pay a commission for the salesperson

Strengths Life insurance provides excellent peace of mind – it eases concerns about what

will happen to your loved ones if you die suddenly.

A life insurance policy is a relatively low risk investment

Weaknesses

If you live a long life, your family likely won’t get the full value out of your

policy.

Cash value funds can fluctuate depending on the financial markets.

Three Main Uses

Income Protection

Capital Appreciation

Tax-Deferred Savings.

PERFORMANCE ANALYSIS OF RETURNS

Equity returns at a glance

If we have a look at equity returns of the past 7 years it is like this:

SENSEX

YEAR INDIEX* ABSOLUTE

CHANGE

PERCENTAGE

CHANGE (%)

2000 3972 0 0

2001 3262 -710 -17.88

2002 3377 115 3.52

2003 5838 2461 72.88

2004 6602 764 13.08

2005 9397 2795 42.34

2006 13786 4389 46.70

2007 13908 122 0.88

2008 20323 6415 31.57

2000 2001 2002 2003 2004 2005 2006 2007 20080

5000

10000

15000

20000

25000

BSE100

YEAR INDEX ABSOLUTE

CHANGE

PERCENTAGE

CHANGE (%)

2000 2032 0 0

2001 1559 -477 -23.38

2002 1664 107 6.88

2003 3076 1412 84.74

2004 3580 506 16.46

2005 4953 1373 38.32

2006 6982 2029 40.96

2007 7026 44 0.65

2008 9132 2106 23.06

2000 2001 2002 2003 2004 2005 2006 2007 20080

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

BSE200

YEAR INDEX* ABSOLUTE

CHANGE

PERCENTAGE

CHANGE (%)

2000 437 0 0

2001 340 -95 -21.96

2002 394 53 15.54

2003 766 372 94.41

2004 884 118 15.66

2005 1186 300 33.86

2006 1655 469 39.54

2007 1662 7 0.42

2008 2160 498 23.05

2000 2001 2002 2003 2004 2005 2006 2007 20080

500

1000

1500

2000

2500

BSE500

YEAR INDEX* ABSOLUTE

CHANGE

PERCENTAGE

CHANGE (%)

2000 1304 0 0

2001 1005 -299 -22.93

2002 1176 171 17.01

2003 2368 1192 101.20

2004 2779 413 17.46

2005 3795 1016 36.56

2006 5268 1473 38.86

2007 5295 25 0.47

2008 6883 1588 23.07

2000 2001 2002 2003 2004 2005 2006 2007 20080

1000

2000

3000

4000

5000

6000

7000

INDEX

Bonds returns at a glanceIf we have a look at the average return, which the central government securities have

given over a period of one year, it is 9.11%. Now if we look at the average return,

which the state government securities have given over a period of one year, it is

9.28%.

Gold returns at a glance

“Gold shines when everything else falls apart” goes an old adage. True, the glitter is

back. During the 50s gold appreciated marginally. The next decade, 1960-1970, it

moved from $35 to $40 and between 1970-1980 came the massive rise from $40 to

$614, a whopping 1407%. The trend of gold prices in India in the last few years is

given in the following table.

YEAR PRICE ($)* ABSOLUTE

CHANGE

PERCENTAGE

CHANGE (%)

2000 272 - -

2001 278 6 2.20

2002 346 68 24.46

2003 414 68 19.65

2004 438 24 5.79

2005 517 79 18.03

2006 517 79 18.03

2007 636 119 23.01

2008 995 359 36.08

2000 2001 2002 2003 2004 2005 2006 2007 20080

10

20

30

40

50

60

70

80

90

INDEX

*Price indicates December end prices of that particular year

Mutual Funds return at a glance

EQUITY TAX SAVING NAV 1 YR 2 YR 3 YR

Magnum Tax Gain 47.7 107.70 93.40 112.30

Principal Tax Savings 74.60 91.20 59.30 73.70

HDFC Tax Saver 138.50 104.60 83.60 91.60

NAV 1 YR 2 YR 3 YR0

50

100

150

MAGNUM TAX GAIN PRINCIPAL TAX GAINHDFC TAX SAVER

EQUITY BALANCED NAV 1 YR 2 YR 2 YR

Magnum Balanced32.40 74.60 53.40 63.70

Kotak Balanced 23.80 71.10 49.10 52.80

HDFC Prudential 96.30 61.80 42.90 55.90

NAV 1 YR 2 YR 3 YR0

20

40

60

80

100

MAGNUM BALANCED KOTAK BALANCEDHDFC PRUDENCE

Real Estate Returns

Real Estate industry in India has come of age and competes with other investment

options in the structured markets. Commercial real estate continues to be a desirable

investment option in India. On an average the returns from rental income on an

investment in commercial property in metros is around 10.5%, which is the highest in

the world. In case of other investment opportunities like bank deposits and bonds, the

returns are in the range of 5.5% - 6.5%. Rejuvenated demanded since early 2004 has

led to the firming up of real estate markets across the three sectors – commercial,

residential and retail. The supply just about matches demand in almost all metros

around the country. There has been an upward pressure on the real estate values. From

a technical perspective, robust demand and upward prices are helping revive

investment and speculative interest in real estate and this is being further aided by

excess money supply, stock market gains and policy changes in favor of the real

estate sector.

Investment Yield

Increasing demand from the IT/ITES and BPO sector has led to approximately 20% -

40% increase in capital values for office space in the last 12-18 months across major

metros in India. Grade-A office property net yields have come down from 12% -15%

in 2003 and currently average around 10.5% - 11% p.a. The fall in yields has resulted

from decreasing interest rates and increasing appetite from investors. This has in turn

resulted from abundant liquidity options available coupled with the acceptability of

real estate as a conventional class of asset. Lower interest rates, easy availability of

housing finance, escalating salaries and job prospects have been lending buoyancy to

the residential sector. The net yields (after accounting for all outgoings) on residential

property are currently at 4% - 6% p.a. However, these investments have benefited

from the improving residential capital values. As such, investor can count on potential

capital gains to improve their overall returns. Capital values in the residential sector

have risen by about 25% - 40% p.a. in the last 15 – 18 months. The retail market in

India has been growing due to increasing demand from retailers, higher disposable

incomes and dearth of quality space as on date. Though the net yields on retail

property have registered a fall from 10% - 13% p.a. reported earlier to 9% - 10.5%

p.a. currently, the capital appreciation in this sector is close to 20% 40% p.a.

However, the risks associated with this sector are higher as retailers are prone to

cyclical changes typical of a business cycle. Changing consumer psychographics

combined with increasing disposable incomes will ensure further growth of the retail

sector in India.

Life Insurance returns at a glance

Life Insurance as “Investment”

Insurance is an attractive option for investment. While most people recognize the risk

hedging and tax saving potential of insurance, many are not a aware of its advantages

as an investment option as well. Insurance products yield more compared to regular

investment options and this is besides the added incentives (bonuses) offered by

insurers.

You cannot compare an insurance product with other investment schemes for the

simple reason that it offers financial protection from risks something that is missing in

non-insurance products.

In fact, the premium you pay for an insurance policy is an investment against risk.

Thus, before comparing with other schemes, you must accept that a part of the total

amount invested in life insurance goes towards providing for the risk cover, while the

rest is used for savings.

In life insurance except for term insurance, unlike non-life products you get maturity

benefits on survival at the end of the term. In other words, if you take a life insurance

policy for 20 years and survive and survive the term, the amount invested as premium

in the policy will come back to you with added returns. In the unfortunate event of

death within the tenure of the policy the family of the deceased will receive the sum

assured.

Now let us compare insurance as an investment options. If you invest INR 10000 in

PPF, your money grows to Rs.10950 at 9.5% interest over a year. But in this case, the

access to your funds will be limited. One can withdraw 50% of the initial deposit only

after 4 years.

The same amount of Rs.10000 can give you an insurance cover of up to

approximately Rs.5 – 11 lakh (depending upon the plan, age and medical condition

of the life insured etc) and this amount can become immediately available to the

nominee of the policyholder on death. Thus insurance is a unique investment avenue

that delivers sou8nd returns in addition to protection.

Life Insurance as “Tax Planning”

Insurance serves as an excellent tax saving mechanism too. The Government of India

has offered tax incentives to life insurance products in order to facilitate the flow of

funds into productive assets. Under section 88 of income tax act 1961, an individual is

entitled to a rebate of 20% on the annual premium payable on his/her and life of

his/her children or adult children

UNIT -6

ANALYSIS&INTERPRETATIONS

Description about the most important points of coverage during

research

Analysis (question wise)

DATA ANALYSIS AND INTERPRETATION

1. How much your annual income?

option No. of

Respondents

Percentage

a)<100000 20 20%

b)1-2.5 lacks 38 38%

c) 2.5-5 lacks 22 22%

d)>5 lacks 20 20

Total 100 100%

a)<100000 b)1-2.5 lacks c)2.5-5 lacks d)>5lacks

a)<100000 b)1-2.5 lacks c) 2.5-5 lacks d)>5 lacks0

5

10

15

20

25

30

35

40

No. of Respondents

No. of Respondents

Interpretation- 20% of the respondents having income of <100000,38% are having

1-2.5 lacks,22% are having 2.5-5 lacks and 20% are having more than 5 lacks..

2. Why are you choosing life insurance to invest your money?

a) Risk coverage b) tax benefit c) secured returns d) future needs

Option No. of Respondents Percentage

a) ) Risk coverage 40 40%

b) tax benefit 27 27%

c) secured returns 18 18%

d) future needs 15 15

Total 100 100%

40%

27%

18%

15%

No. of Respondentsa) ) Risk coverage b) tax benefit c) secured returns d) future needs

Interpretation- 40% of the respondants said choosing life insurance for risk

coverage, 27% said choosing life insurance for tax benefit, 18% said choosing life

insurance for secured returns,15% said it is for future needs..

3. Why are you chosen HDFC life insurance?

a) Returns b) security c) tax benefit d) its products

Option No. of Respondents Percentage

a) returns 10 10%

b) security 30 30%

c) tax benefit 40 40%

d)its products 20 20

Total 100 100%

a) returns b) security c) tax benefit d)its products

10

30

40

20

No. of RespondentsNo. of Respondents

Interpretation- 10% of the respondants said choose HDFC LIFE for its returns,

30% of respondents are for security, 40% are said for tax benefits,20% are for its

products.

4. From how many years you join with HDFC life insurance?

a)less than one year b)from 1-3years c)from 3-5 years d)greater

than 5 years

Option No. of Respondents Percentage

a) <1 year 30 30%

b) 1-3 years 27 27%

c) 3-5 years 23 23%

d)>5 years 20 20%

Total 100 100%

a) <1 year b) 1-3 years c) 3-5 years d)>5 years0

5

10

15

20

25

30

35

30

27

23

20

No. of Respondents

Interpretation- 30% of the respondents are from join with HDFC LIFE from

<1year,27% are from 1-3 years,23% are from 3-5 years,20% are from >5 years.

5. How many times are you paid income tax?

a )0times b)less than 5times c)more than 10times

Option No. of Respondents Percentage

a)0 -times 30 30%

b) less than 5-times

40 40%

c) more than 5-times 30 30%

Total 100 100%

a)0 -times b) less than 5-times

30

40

No. of RespondentsNo. of Respondents

Interpretation- 30% of the respondents said 0 times, 40% said less than 5times, 30%

said more than 5times paid income tax.

6) Do you have knowledge that below on 200000 net incomes there is no Tax?

Option No. of Respondents Percentage

a) Yes 66 66%

b) don’t know 34 34%

Total 100 100%

66%

34%

No. of Respondentsa) Yes b) don’t know

Interpretation- 66% of the respondents said Yes rest of them said they don’t have

exact idea.

7. Which type of Life Insurance you are having?

a) Protection plan b) children’s plan c) investment and savings plan d) health

plan

Option No. of Respondents Percentage

a) Protection plan 33 23

b) children’s plan 27 27

c) investment and

savings plan

23 33

d) ) health plan 17 17

Total 100 100

a) Protection plan b) children’s plan c) investment and savings plan d) ) health plan

33

27

23

17

No. of RespondentsNo. of Respondents

Interpretation- 33% of the respondents are having protection plans, 27 % are having

children’s plan, 23% are having investment and savings plan, 17% are having health

plans.

8.How will you rate the Tax beneficial schemes of HDFC Life Insurance?

Option No. of Respondents Percentage

a)Excellent 10 10

b) Very Good 33 33

c) Good 57 57

d) Bad 0 0

Total 100 100

a)Excellent b) Very Good c) Good d) Bad

10

33

57

0

No. of RespondentsNo. of Respondents

Interpretation: 10% of respondents feel that the Tax beneficial schemes provided by

HDFC Life Insurance are Excellent where as 33% thinks that they are very good,

57% respondents think that it is good.

9. What are the responses of the agents to get tax planning decisions?

Option No. of

Respondents

Percentage

a)Excellent 13 13%

b) Very Good 27 27%

c) Good 60 60%

d) Bad 0 0%

Total 100 100%

a)Excellent b) Very Good

c) Good d) Bad02468

101214161820

No of respondents

options

No of re-spondents

Interpretation:- 13% of respondents found that the responses are excellent & 27% of

the respondents found it very good, 60% of the respondents are good. No one is with

the opinion that the Tax beneficial schemes are of bad quality.

10. What do you think regarding the personal attention by the agents of HDFC

Life Insurance towards the Taxpayers?

Option No. of Respondents Percentage

a)Excellent 30 30%

b) Very Good 23 23%

c) Good 47 47%

d) Bad 0 0%

Total 100 100%

a)Excellent b) Very Good c) Good d) Bad0

2

4

6

8

10

12

14

16

No of respondents

options

No of re-spondents

Interpretation: - 30% of respondents found the personal attention by the agents of

HDFC Life Insurance towards Taxpayers are excellent & 23% of the respondents

found it very good, 47% of the respondents found are good.

11.What do you think about the returns of different Investment modes of HDFC

Life Insurance?

Option No. of Respondents Percentage

a)Excellent 37 37%

b) Very Good 37 37%

c) Good 26 26%

d) Bad 0 0%

Total 100 100%

a)Excellent

b) Very Good

c) Good d) Bad0

2

4

6

8

10

12

No. of Respondents

Options

No. of Re-spondents

Interpretation:- 37% of respondents found the returns of different Investment modes

of HDFC Life Insurance are excellent & 37% of the respondents found it very good,

26% of the respondents found that the returns of different Investment modes of

HDFC Life Insurance is good.

12.How will you rate the after investment facilities provided by the HDFC Life

Insurance?

Option No. of Respondents Percentage

a)Excellent 8 26%

b) Very Good 12 40%

c) Good 10 34%

d) Bad 0 0%

Total 100 100%

a)Excellent b) Very Good

c) Good d) Bad0

2

4

6

8

10

12

No. of Respondents

Options

No. of Re-spondents

Interpretation:- 26% of respondents found the rate after investment facilities provided

by the HDFC Life Insurance are excellent & 40% of the respondents found it very

good, 34% of the respondents found the is good.

13. By taking insurance did you get 100% tax benefit?

Option No. of Respondents Percentage

a)Yes 71 71%

b) don’t know 29 29%

Total 100 100%

Yes NO0

5

10

15

20

25

30

Options

No of Re-spondents

Interpretation :71% of respondents said yes, 29% respondents they don’t know this

because their accounts looking after by chartered accounts.

14.Are you satisfied with the different Investment modes of HDFC Life Insurance.

Option No. of Respondents Percentage

a)Yes 97 97%

b) No 3 3%

Total 100 100%

Yes NO0

5

10

15

20

25

30

Options

No of Respondents

Interpretation: - 97% respondents are satisfied with the charges of HDFC Life

Insurance where as 3% are not satisfied.

15. How will you rate the overall Tax beneficial schemes of HDFC Life Insurance?

Option No. of Respondents Percentage

a)Excellent 30 30%

b) Very Good 23 23%

c) Good 47 47%

d) Bad 0 0%

Total 100 100%

Yes NO0

5

10

15

20

25

30

Options

No of Re-spondents

Interpretation:- 30% of respondents found the rate the overall Tax beneficial schemes

of HDFC Life Insurance are excellent & 23% of the respondents found it very good,

47% of the respondents found that the returns of different Investment modes of

HDFC Life Insurance is good.

16.Are you prefer only insurance as tax beneficial tool or do you used to prefer other

investment modes too?

Option No. of Respondents Percentage

a)only insurance 26 26%

b) other modes too 74 74%

Total 100 100%

No. of Respondents Percentage0

20

40

60

80

100

120

a)only insurance

b) other modes too

Total

Interpretation- 26% respondents said only insurance sector rest of respondents said

they prefer other options too.

UNIT -7

FINDINGS&SUGGESTIONS

OBSERVATIONS & FINDINGS

Interpretation: 10% of respondents feel that the Tax beneficial schemes provided by

HDFC Life Insurance are Excellent where as 33% thinks that they are very good,

57% respondents think that it is good.

Interpretation:- 13% of respondents found that the responses are excellent & 27% of

the respondents found it very good, 60% of the respondents are good. No one is with

the opinion that the Tax beneficial schemes are of bad quality.

Interpretation: - 100% of respondents found the personal attention by the agents of

HDFC Life Insurance towards Taxpayers are excellent & 23% of the respondents

found it very good, 47% of the respondents found are good.

Interpretation:- 26% of respondents found the rate after sale facilities provided by the

HDFC Life Insurance are excellent & 40% of the respondents found it very good,

34% of the respondents found the is good.

Interpretation: - 100% respondents are you satisfied with HDFC Life Insurance

agency/dealer.

Interpretation: - 97% respondents are satisfied with the charges of HDFC Life

Insurance where as 3% are not satisfied.

Interpretation: - 100% of respondents found the rate the overall Tax beneficial

schemes of HDFC Life Insurance are excellent & 23% of the respondents found it

very good, 47% of the respondents found that the Tax benefit of different Investment

modes of HDFC Life Insurance is good.

Interpretation: - 97% respondents think that HDFC Life Insurance is preferred

because of its Tax benefit .

SUGGESTIONS

There are several investments to choose from these include equities, debt, real estate

and gold. Each class of assets has its peculiarities. At any instant, some of those

assets will offer good returns, while others will be losers. Most investors in search of

extraordinary investments try hard to find a single asset. Some look for the next

infosys, other buys real estate or gold. Many of them deposit their savings in the

Public Provident Fund (PPF) or post office deposits, others plump for debt mutual

funds. Very few buy across all asset classes or diversify within an asset class.

Therefore it has been widely said that “Don’t put all your eggs in one basket”. The

idea is to create a portfolio that includes multiple investments in order to reduce risk.

Things changed in early may 2006 since then the stock market moved up more than

70%, while many stocks have moved more. Real estate prices are also swinging up,

although it is difficult to map in this fragmented market. Gold and Silver prices have

spurted.

Bonds continue to give reasonable returns but it is no longer leads in the comparative

rankings. Right now equity looks the best bet, with real state coming in second. The

question is how long will this last? If it is a short-term phenomenon, going through

the hassle of switching over from debt may not be worth it. If it’s a long-term

situation, assets should be moved into equity and real estate. This may be long-term

situation. The returns from the market will be good as long as profitability increases.

Since the economy is just getting into recovery mode, that could hold true for several

years. Real estate values, especially in suburban areas or small towns could improve

further. The improvement in road networks will push up the value of far-flung

development. There is also some attempt to amend tenancy laws and lift urban

ceilings, which have stunted the real estate market.

My gut feeling is that a large weightage in equity and in real estate will pay off during

2007-2008. But don’t exit debt or sell off your gold. Try and buy more in the way of

equity and research real estate options in small towns/suburbs.

Regardless of your means of method, keep in mind that there is no generic

diversification model that will meet the needs of every investor. Your personal time

horizon, risk tolerance, investment goals, financial means, and level of investment

experience will play a large role in dictating your investment experience will play a

large role in dictating your investment mix. Start by figuring out the mix of stock,

bonds and cash that will be required to meet your needs. From there determine

exactly which investments to in completing the mix, substituting traditional assets for

alternatives as needed.

UNIT -8

CONCLUSION&BIBLIOGRAPHY

CONCLUSIONS

Taxpayer Investment modes is a measure of how Tax beneficial schemes and Tax

beneficial schemes supplied by a company meet or surpass Taxpayer expectation

In a competitive marketplace where businesses compete for Taxpayers, a Taxpayer

Investment mode are seen as a key differentiator and increasingly has become a key

element of business strategy. For this we have done project on Taxpayer Investment

modes of HDFC Life Insurance. It is found that majority of respondent have use

Savings & Investment modes Tax beneficial schemes from HDFC Life Insurance.

97% respondents think that HDFC Life Insurance is preferred because of its Tax

benefit. So finally both below the hypothesis are proved:

It has been found that majority of respondent have use Savings & Investment modes

Tax beneficial schemes from HDFC Life Insurance. 100% of respondents satisfied

with the Tax beneficial schemes provided by HDFC Life Insurance. 10% of

respondents feel that the Tax beneficial schemes provided by HDFC Life Insurance

are Excellent where as 33% thinks that they are very good, 57% respondents think

that it is good. 13% of respondents found that the responses are excellent & 27% of

the respondents found it very good, 60% of the respondents are good. No one is with

the opinion that the Tax beneficial schemes are of bad quality.

BIBLIOGRAPHY

Text Books

Investment Analysis and Portfolio Management - Prasanna Chandra

Investments - Sharpe & Alexander

Security Analysis and Portfolio Management - Fischer & Jordan

Magazines

Business Today

Websites

www.moneycontrol.com

www.investopedia.com

www.google.com

www.hdfcLife.com

www.wikipedia.com

BALANCE SHEETS

Questionnaire

1. How much your annual income?

a)<100000 b)1-2.5 lacks c)2.5-5 lacks d)>5lacks

2. 2. Why are you choosing life insurance to invest your money?

a) Risk coverage b) tax benefit c) secured returns d) future needs

3. Why are you chosen HDFC life insurance?

a) Returns b) security c) tax benefit d) its products

4. From how many years you join with HDFC life insurance?

a)less than one year b)from 1-3years c)from 3-5 years d)greater

than 5 years

5. How many times are you paid income tax?

a )0times b)less than 5times c)more than 10times

6) Do you have knowledge that below on 200000 net incomes there is no Tax?

a)yes b)don’t know

7. Which type of Life Insurance you are having?

a) Protection plan b) children’s plan c) investment and savings plan d)

health plan

8.How will you rate the Tax beneficial schemes of HDFC Life Insurance?

a)excellent b)very good c)good d)bad

9..What are the responses of the agents to get tax planning decisions?

a)excellent b)very c)good d)bad

10. What do you think regarding the personal attention by the agents of HDFC Life

Insurance towards the Taxpayers?

a)excellent b)very good c)good d)bad

11.What do you think about the returns of different Investment modes of HDFC

Life Insurance?

a) Excellent b)very good c)good d)bad

12.How will you rate the after investment facilities provided by the HDFC Life

Insurance?

a)excellent b)very good c)good d)bad

13.By taking insurance did you get 100% tax benefit?

14.Are you satisfied with the different Investment modes of HDFC Life Insurance.

a)Yes b) No

15. How will you rate the overall Tax beneficial schemes of HDFC Life Insurance?

a)excellent b)very good c)good d)bad

16.. Are you prefer only insurance as tax beneficial tool or do you used to prefer other

investment modes too?

a)only insurance b)other modes too