Religare project report

Institute of Management Studies

Indore (D.A.V.V)

SUMMER TRAINING PROJECTJuly 2009

“Perception of people towards investment and various investment

avenues”

ASHISH KUMRAWAT

MBA (FT)

IMS, DAVV

DECLARATION

I, ASHISH KUMRAWAT, student of MBA (FT) from

INSTITUTE OF MANAGEMENT STUDIES, D.A.VV hereby

declare that I have completed this project on " Perception

of people towards investment and various

investment avenues ” in the academic year 2008-09. The

information submitted is true and original to the best of

knowledge.

Signature of student

ACKNOWLEDGEMENTACKNOWLEDGEMENT

The most pleasant part of any project is to expressThe most pleasant part of any project is to express gratitude and bestow honor towards all those who directly orgratitude and bestow honor towards all those who directly or indirectly contributed to the smooth flow of the project workindirectly contributed to the smooth flow of the project work and this being the good opportunity; I don’t want to miss it.and this being the good opportunity; I don’t want to miss it.

Sincere acknowledgement is due foremost to the Sincere acknowledgement is due foremost to the MR.MR. AKLANK JAIN, ASM-RELIGARE SECURITIES LTDAKLANK JAIN, ASM-RELIGARE SECURITIES LTD.. WhoWho endowed me with the valuable opportunity to explore soendowed me with the valuable opportunity to explore so interesting and a critical topic as is the subject of the presentinteresting and a critical topic as is the subject of the present report.report.

I thank my mentor I thank my mentor Mr. O.P GuptaMr. O.P Gupta for his valuable for his valuable inputs in the research and spending so much of valuableinputs in the research and spending so much of valuable time and effort in helping with my topic.time and effort in helping with my topic.

I also wish to express sincere gratitude to all theI also wish to express sincere gratitude to all the respondents of the project without the kind of co-operationrespondents of the project without the kind of co-operation of whom this work would not have been possible.of whom this work would not have been possible.

Ashis

h Kumrawat

CONTENTS

Introduction

Investment

Investment need of an investor

Investment options in India

Research Methodology

Data Analysis and Interpretation

Suggestions and Recommendations

Conclusion

Bibliography

Appendix: Questionnaire

INTRODUCTION

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

the savings invested in various options available to the people, the money

acts 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 options for an

ordinary man to invest his savings.

Investment benefits both economy and the society. It is an outgrowth of

economic development and the maturation of modern capitalism. For the

economy as a whole, aggregate investment sanctioned in the current period

is a major factor in determining aggregate demand and, hence, the level of

employment. In the long term, current investment determines the

economy’s future productive capacity and, ultimately, a growth in the

standard of living. By increasing personal wealth, investing can contribute

to higher overall economic growth and prosperity. The process of investing

helps to create financial markets where companies can raise capital. This

too, contributes to greater economic growth and prosperity. Specific types

of investments provide other benefits to society as well.

INVESTMENTS

The dictionary meaning of investment is to commit money in order to earn

a financial return or to make use of the money for future benefits or

advantages. People commit money to investments with an expectation to

increase their future wealth by investing money to spend in future years.

For example, if you invest Rs. 1000 today and earn 10 %over the next year,

you will have Rs.1100 one year from today.

An investment can be described as perfect if it satisfies all the needs of all

investors. So, the starting point in searching for the perfect investment

would be to examine investor needs. If all those needs are met by the

investment, then that investment can be termed the perfect investment.

Most investors and advisors spend a great deal of time understanding the

merits of the thousands of investments available in India. Little time,

however, is spent understanding the needs of the investor and ensuring that

the most appropriate investments are selected for him.

The Investment Needs of an Investor

By and large, most investors have eight common needs from their

investments:

1. Security of Original Capital;

2. Wealth Accumulation;

3. Comfort Factor;

4. Tax Efficiency;

5. Life Cover;

6. Income;

7. Simplicity;

8. Ease of Withdrawal;

9. Communication.

Security of original capital: The chance of losing some capital has been a

primary need. This is perhaps the strongest need among investors in India,

who have suffered regularly due to failures of the financial system.

Wealth accumulation: This is largely a factor of investment performance,

including both short-term performance of an investment and long-term

performance of a portfolio. Wealth accumulation is the ultimate measure of

the success of an investment decision.

Comfort factor: This refers to the peace of mind associated with an

investment. Avoiding discomfort is probably a greater need than receiving

comfort. Reputation plays an important part in delivering the comfort

factor.

Tax efficiency: Legitimate reduction in the amount of tax payable is an

important part of the Indian psyche. Every rupee saved in taxes goes

towards wealth accumulation.

Life Cover: Many investors look for investments that offer good return

with adequate life cover to manage the situations in case of any

eventualities.

Income: This refers to money distributed at intervals by an investment,

which are usually used by the investor for meeting regular expenses.

Income needs tend to be fairly constant because they are related to lifestyle

and are well understood by investors.

Simplicity: Investment instruments are complex, but investors need to

understand what is being done with their money. A planner should also

deliver simplicity to investors.

Ease of withdrawal: This refers to the ability to invest long term but

withdraw funds when desired. This is strongly linked to a sense of

ownership. It is normally triggered by a need to spend capital, change

investments or cater to changes in other needs. Access to a long-term

investment at short notice can only be had at a substantial cost.

Communication: This refers to informing and educating investors about

the purpose and progress of their investments. The need to communicate

increases when investments are threatened.

Security of original capital is more important when performance

falls.

Performance is more important when investments are performing

well.

Failures engender a desire for an increase in the comfort factor.

Perfect investment would have been achieved if all the above-mentioned

needs had been met to satisfaction. But there is always a trade-off involved

in making investments. As long as the investment strategy matches the

needs of investor according to the priority assigned to them, he should be

happy.

The Ideal Investment strategy should be a customized one for each investor

depending on his risk-return profile, his satisfaction level, his income, and

his expectations. Accurate planning gives accurate results. And for that

there must be an efficient and trustworthy roadmap to achieve the ultimate

goal of wealth maximization.

Choosing the Right Investment Options

After understanding the concept of investment, the investors would like to

know how to go about the task of investment, how much to invest at any

moment and when to buy or sell the securities, This depends on investment

process as investment policy, investment analysis, valuation of securities,

portfolio construction and portfolio evaluation and revision. Every investor

tries to derive maximum economic advantage from his investment activity.

For evaluating an investment avenues are based upon the rate of return, risk

and uncertainty, capital appreciation, marketability, tax advantage and

convenience of investment. The following Table should give the clear

picture relating to the investors’ investment decisions in various financial

market instruments. The choice of the best investment options will depend

on personal circumstances as well as general market conditions. For

example, a good investment for a long-term retirement plan may not be a

good investment for higher education expenses. In most cases, the right

investment is a balance of three things: Liquidity, Safety and Return.

Source- Delhi Business Review X Vol. 8, No. 1 (January - June 2007)

Investment Options in India

Source-Delhi Business Review X Vol. 8, No. 1 (January - June 2007)

Fixed Deposits – They cover the fixed deposits of varied tenors offered by

the commercial banks and other non-banking financial institutions. These

are generally a low risk prepositions as the commercial banks are believed to

return the amount due without default. By and large these FDs are the

preferred choice of risk-averse Indian investors who rate safety of capital &

ease of investment above all parameters. Largely, these investments earn a

marginal rate of return of 6-8% per annum.

Government Bonds – The Central and State Governments raise money

from the market through a variety of Small Saving Schemes like national

saving certificates, Kisan Vikas Patra, Post Office Deposits, Provident

Funds, etc. These schemes are risk free as the government does not default

in payments. But the interest rates offered by them are in the range of 7% -

9%.

Money-back insurance - Insurance in India is mostly sold and bought as

investment products. They are preferred because of their add-on benefits like

financial life-cover, tax-savings and satisfactory returns. Even if one does

not manage to save money and invest regularly in financial instruments, with

insurance, the policyholder has no choice. If he does not pay his premiums

on time, his insurance cover will lapse. Money-back Insurance schemes are

used as investment avenues as they offer partial cash-back at certain

intervals. This money can be utilized for children’s education, marriage, etc.

Endowment Insurance – These policies are term policies. Investors have to

pay the premiums for a particular term, and at maturity the accrued bonus

and other benefits are returned to the policyholder if he survives at maturity.

Bullion Market – Precious metals like gold and silver had been a safe

heaven for Indian investors since ages. Besides jewellery these metals are

used for investment purposes also. Since last 1 year, both Gold and Silver

have highly appreciated in value both in the domestic as well as the

international markets. In addition to its attributes as a store of value, the case

for investing in gold revolves around the role it can play as a portfolio

diversifier.

Stock Market – Indian stock markets particularly the BSE and the NSE, had

been a preferred destination not only for the Indian investors but also for the

Foreign investors. Although Indian Markets had been through tough times

due to various scams, but history shows that they recovered very fast. Many

types of scrip had been value creators for the investors. People have earned

fortunes from the stock markets, but there are people who have lost

everything due to incorrect timings or selection of fundamentally weak

companies.

Real Estate- Returns are almost guaranteed because property values are

always on the rise due to a growing world population. Residential real estate

is more than just an investment. There are more ways than ever before to

profit from real estate investment.

Mutual Funds - There is a collection of investors in Mutual funds that have

professional fund managers that invest in the stock market collectively on

behalf of investors. Mutual funds offer a better route to investing in equities

for lay investors. A mutual fund acts like a professional fund manager,

investing the money and passing the returns to its investors. All it deducts is

a management fee and its expenses, which are declared in its offer

document.

Unit Linked Insurance Plans - ULIPs are remarkably alike to mutual funds

in terms of their structure and functioning; premium payments made are

converted into units and a net asset value (NAV) is declared for the same. In

traditional insurance products, the sum assured is the corner stone; in ULIPs

premium payments is the key component.

Need for the study:

To study the perception of the people about investment of their savings.

To understand basic requirement of the common man and their view

towards investment.

REVIEW OF LITERATURE

Psychology of Investments and Investor’s Preferences

Every individual investor must follow three principles of investing: using a

long-term investing approach, following the right strategy to maximize the

return on investment and proper allocation of investible funds. While

applying these three principles, an individual investor has to confront his/her

demographics, lifestyle and investment psychology. Whether the investor's

age or occupation or family income has a role of play in making choice of

investment avenues? Is the investor choice affected by his overconfidence,

reference group and framing of the available alternatives? The knowledge of

all these aspects is imperative for all progressive investors, researchers,

financial consultants, academicians, students and the marketer of the

financial products.

Author:

Dr. (Mrs.) Sushant Nagpal

Basics Of investment-By Dr.A.P.Dash, Sr.Faculty, PMI

In this paper he discusses the basic of investment and need for investment.

Investment benefits both economy and the society. It is an outgrowth of

economic development and the maturation of modern capitalism. For the

economy as a whole, aggregate investment sanctioned in the current period

is a major factor in determining aggregate demand and, hence, the level of

employment. In the long term, current investment determines the

economy’s future productive capacity and, ultimately, a growth in the

standard of living. By increasing personal wealth, investing can contribute

to higher overall economic growth and prosperity.

An Investors’ requirements in Indian securities marketBy-K.Balanaga Gurunathan Published in Delhi Business review.

A report on financial planners in the growing economy like IndiaBy- Indian Institute of Planning and Management-2006

OBJECTIVES OF THE STUDY:

PRIMARY OBJECTIVE

To Study the various investment avenues and the investors risk preference

towards it.

SECONDARY OBJECTIVES

To find out the general demographic factors of the investors dealing in

capital market.

To find out the preference level of investors on various Capital Market

instruments.

To find out the type of risk which are considered by the investors?

To find out the ways through which the investors minimizes their risk.

RESEARCH METHODOLOGY

Research Design

A Research design is purely and simply the framework of plan for a

study that guides the collection and analysis of data. The study is intended

to find the investors preference towards various investment avenues. The

study design is descriptive in nature.

TYPE OF RESEARCH- DESCRIPTIVE RESEARCH

Descriptive study is a fact-finding investigation with adequate

interpretation. It is the simplest type of research and is more specific.

Mainly designed to gather descriptive information and provides

information for formulating more sophisticated studies.

Sampling Design

Selection of study area: The study area is in Indore.

Selection of the sample size: 100

Sampling Methods

Convenience method of sampling is used to collect the data from the

respondents. Researchers or field workers have the freedom to choose

whomever they find, thus the name “convenience”. About 100 samples

were collected from Indore city and most of the respondents were

customers coming in to financial hubs and commercial complexes.

Formulation of the questionnaire

Data collection

Primary data – collected through Structured Questionnaire.

Secondary data – Earlier records from journals, magazines and other

sources.

Tools used for analysis

Percentage analysis

Chi-square test

Kendall test

ANOVA

Correlation Analysis

Multiple Response Table

Data Analysis and interpretatrion:-

Age of the respondent :-

Table5.1Age % Of respondent20-30 2531-40 3641-50 2750 and above 12Total 100

Fig- 5.3

Income Group of the Respondent

Table5.2: Income Group of the RespondentIncome group % of Respondent

Bellow 1 lac 32

1-5 lac 61

5-10 lac 7

10 lac and above -

Fig-5.4

Fig-5.4

According to survey most of the Respondent income group is above 1 lacks to 5 lacs.

Qualification of the respondents:-

Table5.3 QualificationQualification Investor (%)

High School 3

Graduate 48

Post Graduate 14

Professional 26

Others 9

Fig-5.5

Different Investment Avenues:- Table 5.4- Individual preference in the investment avenuesCategories Highly Preferred (%)

Share market 8

Mutual fund 17

Insurance 29

Bank 28

Property 18

Total 100

Fig-5.6

8%

17%

29%

28%

18%

Share market mutual fund Insurance bank Property

Analysis:-The survey result shows that individual does not chose equity as highly preferred investment tool. Only 8% people have preference on other investment tool.

Investment Horizon

Table 5.5: Type of investment preferredTerm Investment (%)

SHORT TERM 31

LONG TERM 40

BOTH 29

Total 100

Fig- 5.7

Analysis: The survey result shows that most of the people invest in the market for long term horizon.

Respondent who have invested in equity market

Table5.6: invested in the equity marketYes No19 81

Analysis:- According to survey largely population is untouched with equity investment only 19% respondent has invested in the equity market.

Respondent first source of awareness

Table5.7: Percentage of Respondent first source of awarenessMedium/ channel Investor (%)

Investor friends and relative 37

Advertisement and hoardings

26

Brokerage firm 16

Banks 21

Analysis:- According to survey most of the people aware about equity

market through the investor friends and relative.

Income invested in equity

Table 5.8 Percentage of income invest in equity sharesPercentage of income Percentage of investorBelow 5% 225 to 10% 4410 to 20% 2720 to 30% 6

22

44

27

6

0

5

10

15

20

25

30

35

40

45

50

Below 5% 5 to 10% 10 to 20% 20 to 30%

Percentage of investor

Fig-5.8

Analysis :- The survey result shows that most of the people invest in the equity market 5-10% of income.

Awareness about Religare securities

Table 5.9 Respondent who aware about Religare

Yes No

73% 27%

Know about Religare

73

27

Yes

No

Fig- 5.9

Analysis:-According to the findings Most of the people (73%) know about the Religare securities.

Preference for selecting broking firm

Table5.10: investor preference while selecting broking firm

Analysis : according to survey while selecting the broker firm people gives first preference to brokerage charge (42%) then other services.

Category Rank 1Brokerage 42services 30Research calls 16Others 12

SUMMARY OF FINDINGS:

From Correlation test, it is found there exist a positive correlation

between the income percentage on investment and the participation

in cash market.

From One Way ANOVA it is found that there is significant

difference between the annual income and the income percentage

towards investment.

From the Multiple Response test, it is found that the investors who

invest around 5-10% of their investment mostly considers the market

risk(18%) as the major risk which prevails in the market.

From the Multiple Response test, it is found that the investors whose

investment is around 10% of their income, consider that the

affordable margin amount for investment in Derivatives is up to

Rs10000/-.

Most of the aggressive investors are in 21-40 yr. age group. They

should be concentrated as prospective clients.

LIMITATIONS OF THE STUDY

This is a two months study only.

Data available was not sufficient, there was lack of availability

of data as most of it was confidential for the companies.

Sample size is two small.

Language is one of the construe during questioner filling

Portfolio requires the churning of proportion of investment in

each sector as well as company from time to time to give

better returns.

CONCLUSION

In the current scenario, investing is very important and investing in stock

markets is a major challenge ever for professionals.

The young people should start investing earlier so that they can reap the

benefits of investing in future.

People should keep their eye open and keep updating themselves about

various investment avenues so that they can get safe returns.

References:

Marketing Research by G C Beri- third edition – © 2000, Tata McGraw-

Hill Publishing Company Ltd.

Investment Management- V.K. Bhalla.

www.nseindia.com

www.stockedge.com

www.religareonline.com

Questionnaire

Name:

1. Age

(a) 20-30 [ ] (b) 31-40 [ ] (c) 41-50 [ ] (d) 51 & above [ ]

2. Gender

(a) Male [ ] (b) Female [ ]

3. Educational qualification

(a) High School [ ] (b) Graduate [ ] (c) Post Graduate [ ]

(d) Professional [ ] (e) Others [ ]

4. Annual income

(a) Below 1, 00,000 [ ] (b) 1, 00,000-5, 00,000 [ ]

(c) 5, 00,000-10, 00,000 [ ] (d) Above 10, 00,000 [ ]

5. How did you come to know about equity related investment?

(a) Brokerage firms (b) investor friends & relatives

(c) Advertising & hoardings (d) banks

6. Which factor do you consider most important while choosing an investment option?

(a) How quickly will I be able to increase wealth?

(b) The opportunity for steady growth

(c) The amount of monthly income the investment will generate

(d) The safety of investment principal

7. What is the investment horizon you prefer?

(a) Short term investment

(b) Long term investment

(c) Both

9. Please indicate your preference on the following investment avenues

Categories Highly

Favorable

Favorable Neutral Unfavorable Highly

Unfavorable

(a) Share Market

(b)Mutual Funds

(c) Insurance

(d)Bank Deposits

(e) Property

10. Do you want to invest in share market?

(a) Yes (b) No

IF YES THEN PLEASE ANSWER………………………………………………………………………..

11. What is your percentage of your income do you invest in equity shares

a) Below 5%

b) 5 – 10 %

c) 10 – 20%

d) Above 20%

12. Have you heard about Religare Securities Ltd.?

(a) Yes (b) No

13. You are associated with which broking firm?

………………………………………………………………………..

14. Please indicate your preference for selecting broking firm….

Categories Rank-1 2 3 4 5

(a) Brokerage

(b) Services

(c)Research (Calls)

(d)Additional Features

THANK YOU