Post on 04-Apr-2018
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Title of the Research
Impact of Interest Rate on Investors
Rationale of the study
Investment: Different people invest with different strategies
or no-strategies. This article describes in more details
different behavioral patterns of investors of four distinct
types. When trying to make observations of types of investor
behavior, this QuaSyLaTic invariably uses his own investment
philosophy and strategies as reference for making
observations. Hence the set of characteristics and attributeson what constitute a focused and disciplined investor to
create wealth is first described.
Characteristics and Attributes of Focused & Disciplined Investor
Taking investment as a serious study, research and monitoring
work not a casual game with hear-say and hope for the best.
Understand investment is a matter of timing, not blindly trusting
in long term
Invest in market instruments that have potential to bring the best
return, not using diversification to mix up good apples with
bad fruits.
Study risk / reward carefully and prepare to exist if faced with
high uncertainty to protect acquired gain, or preserve capitals
or cut loss.
Make research on future scenarios of investment performance
with monitoring to validate the assumptions and do not deal
with uncertainty or unknown.
Take care of every dollar of investment to ensure its value
creation.
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With the above as criteria, four distinct types of investors are
observed.
TYPE 1: Investors who subscribe to the above stated strategies
or approach but do not have the interest to study and take up the
discipline. Or they do not have any preference for any particular
strategy or approach. They prefer to let consultant cum
investor handle everything and their fund, as long as they are
being kept informed. Most important of all, they understand the
nature of investment risks and blame no one.
TYPE 2: Investors who also let consultant cum investor handle
everything and their fund, but they want to learn the above
described strategies and approach, with the views that one day
they can handle on their own investment. They also understand
the nature of investment risks.
TYPE 3: Investors, who has their own strategies and willing to
put in hard work to monitor and validate their assumptions in
order to grow their wealth. They may have different strategies or
approach from the above. This QuaSyLaTic will network with
these people for networking and exchange of ideas.
TYPE 4: Investors who do not subscribe to the above stated
strategies and approach. Usually they do not do serious research
and monitoring work. They do not show consistency in the
investment decision. They use general investment ideas as
strategies, with hope for the best. They may not have the
stomach for investment losses. They dont cut loss and hope for
the best into the future.
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Small Investors:Traditional economic analysis of markets
with asymmetric information assumes that the uninformed
agents account for the incentives of the informed agents to
distort information. We analyze whether investors in thestock market are able to account for such incentives.
Security analysts provide investors with information about
investment opportunities by issuing buy and sell
recommendations. The recommendations are likely to be
biased upwards, in particular if an analyst is affiliated with an
investment bank that is a recent underwriter of the
recommended firm. Using the trading data from the Stock
Exchange, we find that large (institutional) investors
generate abnormal volumes of buyer-initiated trades after a
positive recommendation only if the analyst is unaffiliated.
Small traders exert abnormal buy pressure after all positive
recommendations, including those of affiliated analysts. The
trading behavior of small analysts implies losses, since
stocks recommended by affiliated analysts perform
significantly worse than those recommended by unaffiliated
analysts. Our results imply that larger investors account for
the distortions of recommendations, but small (individual)
investors do not. Increased competition among analysts does
not remedy the informational distortion or investor reactions.
Objectives
Is the interest rate fluctuation really
dampening the spirit of small investors i.e.
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changes in ration of investment and
consumption.
Research Methodology
I have used both primary data and secondary data for my project.
The secondary data is used to collect information on investment
options for the Indian investors. These included product
brochures of various schemes like post office schemes, RBI
bonds, ICICI bonds, bank deposits, insurance policies etc.
For the collection of primary data a questionnaire is prepared for
studying the mind of general investor. This survey will be done
using stratified random sampling. These findings of the same are
presented in the findings portion of the report. Effect of interest
rate change will be studied based on the following points:
More consumption than saving.
Capital market becoming attractive.
Tax benefits available on investment.
Effect of these changes on senior citizens.
Expected disposable income in the hands of the investors.
Since, list of investment avenues last long, I have restricted my
scope to few most common governmental and non-governmental
investment options
Non-governmental options Governmental optionsICICI infrastructure bonds National saving certificatesRBI relief bonds Provident fundIDBI bonds LIC
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Fixed deposits
This study includes the interest rate changes in above options
and respective change in investment flows to these options.
Reasons in the mind of small investors while deciding the
investment portfolio are also a topic of study.
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Limitation of the Project
At the time of study I may have to face certain
problems re lated to t ime due to the h igh number of
investment policies. For me its very hard tocommunicate with pol icy makers as they are far from
my approach. Thus the source of information for me is
Internet from where is collecting the information about
the project and communicate with many small investors
and pol icy agents. The l im itat ions to the research
design and t ime frame may be another factor l imit ing
the study because key personnel may not f ind t ime to
respond or may not like to disclose their vision
regarding the activities in which they are involved.
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QUESTIONNAIRE
1. Do you invest your money or savings somewhere?
If yes then where
If no then why
.
.
.
2. Which kind of investment option you prefer governmental or
non-governmental? Why?
Govt. Non-Govt.
3. Which investment scheme is best from your point of view
please ranking them? Why?
ICICI infrastructure bonds
National Saving Certificates
RBI Relief Bonds
Tax saving Bonds
IDBI Bonds
Fixed Deposits
LIC
Provident Funds
Others (Name them)
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Why
4. How much you invest every month?
Less than 1000Rs. 1000-5000Rs.
5000-10000Rs. 10000-50000Rs
More than 50000Rs
5. What you think is better save money?
Saving cash
Purchasing Property
Purchasing investment policies/bonds
Investing money in share market
Why?
6. Is investment is more consumption or expenditure
than saving? Comment.
7. Is share market is a good way to do investment?
Comment.
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8. Is there is some tax benefits available on
investment, explain them?
9. Whom do you consult before doing investment?
Financial Reports Investment consultants
Financial Advisors Bank/policy agents
Self
Why you do so? Comment.
10.Conclude the term investment and its benefits in
60 words.
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