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    CHAPTER-1

    1.1-INTRODUCTION

    INVESTMENT:

    Investment is the use of money to earn income or profit. The term also refers to

    the expenditure of funds for capital goods - such as factories farm, equipment, livestock

    and machinery. Capital goods are used to produce other goods or services. Many people

    invest part of their income for future financial gain. Others make investments to protectthe purchasing power of their savings against rising prices. Investment promotes

    economic growth and contributes to a nations wealth.

    INVESTMENT ALTERNATIVES

    INVESTMENT ALTERNATIVES means the various investment options available to

    investors to invest their surplus funds. The investors can invest their funds in thesevarious investment alternatives and get a return on their funds invested by them. There

    are various investment alternatives available for the investors.

    An investor chooses between the various investment alternatives based on three major

    criteria, they are RISK, RETURN and LIQUIDITY. An investor chooses between the

    various investment alternative based on these three major criteria.

    An investor looks up for the different investment alternatives available and invests in that

    alternative suitable for him.

    The various investment alternatives available for investors are as follows:

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    1. SHARES:

    In financial markets, a share is a unit of account for various financial instruments

    including stocks, mutual funds, limited partnerships, and REIT's. The income

    received from shares is called a dividend, and a person owning shares is called a

    shareholder.

    A share is one of a finite number of equal portions in the capital of a company,

    entitling the owner to a proportion of distributed, non-reinvested profits known as

    dividends, and to a portion of the value of the company in case of liquidation. Shares

    can be voting or non-voting, meaning they either do or do not carry the right to vote

    on the board of directors and corporate policy. Whether this right exists often affects

    the value of the share. Voting and non-voting shares are also known as Class A and B

    shares respectively

    Shares are traded in the primary market and the secondary market. The shares ofthe companies are listed in stock exchange for trading.

    2. MUTAL FUNDS:

    A mutual fund is simply a financial intermediary that allows a group of investors to

    pool their money together with a predetermined investment objective. The mutual fund

    will have a fund manager who is responsible for investing the pooled money into

    specific securities. When you invest in a mutual fund, you are buying shares of the

    mutual fund and become a shareholder of the fund.

    Mutual funds are ofopen-ended, close-ended, hedge funds, equity funds, bondfunds and exchange funds.

    3. INSURANCE:

    Insurance, in law and economics, is a form ofrisk management primarily

    used to hedge against the riskof a contingent loss. Insurance is defined as the equitable

    transfer of the risk of a loss, from one entity to another, in exchange for a premium.

    Insurer is the company that sells the insurance. Insurance rate is a factor used to

    determine the amount, called the premium, to be charged for a certain amount of

    insurance coverage.

    Insurance are oflife insurance, health, vehicle and medical insurance.

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    4. DERIVATIVES:

    Derivatives are financial instruments whose value changes in response to the

    changes in underlying variables. The main use of derivatives is to reduce riskfor oneparty.

    The main types of derivatives are futures, forwards, options, and swaps.

    5. BONDS:

    In finance, a bond is a debtsecurity, in which the authorized issuer owes theholders a debt and is obliged to repay the principal and interest (the coupon) at a later

    date, termed maturity. Other stipulations may also be attached to the bond issue, such asthe obligation for the issuer to provide certain information to the bond holder, orlimitations on the behavior of the issuer.

    Bonds are ofgovernment, municipal, corporate and long term bonds.

    6. COMMODITIES:

    A commodity is anything for which there is supply, but which is demanded

    without qualitative differentiation across a foreign market.

    Characteristic of commodities is that their prices are determined as a function of

    their market as a whole. Well-established physical commodities have actively traded

    spot and derivative markets. Generally, these are basic resources and agricultural

    products such as iron ore,crude oil,coal, ethanol, sugar, soybeans, aluminum,rice,

    wheat, gold and silver.

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    7. MONEY MARKET:

    The money market is the global financial market for short-term borrowing and

    lending. It provides short-term liquid funding for the system. The money market consistsof financial institutions and dealers in money or credit who wish to either borrow or lend.

    Participants borrow and lend for short periods of time, typically up to thirteen months.Money market trades in short term financial instruments commonly called "paper". This

    contrasts with the capital market for longer-term funding, which is supplied by bonds andequity.

    Money market instruments are Treasury bills, commercial paper and bankers'

    acceptances

    8. REAL ESTATES:

    Real estate is a legal term that encompasses land along with anything permanently

    affixed to the land, such as buildings, specifically property that is stationary, or fixed in

    location. Real estate is often considered synonymous with real property , in contrast withpersonal property . However, in some situations the term "real estate" refers to the land

    and fixtures together, as distinguished from "real property," referring to ownership rights

    of the land itself.

    9. FIXED DEPOSITS:

    Fixed deposits are investing in bank. The bank provides interest for these deposits

    based on the period of investment and the amount of investment. Fixed deposit is

    considered to be a much secured form of investment. The investor gets the return on hisinvestment on the maturity of the time period for which the fixed deposit was accepted.

    Fixed deposits are ofSavings account, post office saving scheme and kisan vikaspatra.

    10. PROVIDENT FUND:

    This includes statutory provident fund, recognized provident fund, unrecognizedprovident fund and public provident fund.

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    1.2-SCOPE OF THE STUDY

    The scope of the study is to find out the various investment options available to the

    investors and to find out the investor preference and their awareness on the investment.

    It also studies about the preference of intermediaries to the investment. The study is

    also extended to study the various risk and returns of the various investment

    alternatives.

    1.3-PROBLEM DEFINITION

    The overall market of interest on government securities, bank deposits and other fixed

    deposit has been decreasing year after steadily due to various factors which affect the

    interest of the investors and the rate of interest of the investors. But on the other hand

    the investors interest is gradually shifted towards mutual funds, shares and other

    company securities. When compare to bank deposits the return from mutual funds is

    high. Likewise, when compare to mutual funds the return from equity market is very

    high. But of course risk is also high in these securities. Hence it is important to know

    the various investment alternatives which are available to the investors and the risk andreturn of the investments and it is also necessary to know the investor preference

    towards these alternatives. It is also necessary to know how an investor chooses

    between these investments alternatives. Since an intermediary is necessary for proper

    management of the investors funds it is also necessary to know the functioning of the

    intermediaries.

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    1.4-0BJECTIVES

    PRIMARY OBJECTIVES:

    To study the various investment alternative available and the investor preference

    towards the investment alternatives.

    SECONDARY OBJECTIVES:

    To study the risk and return of the investment alternatives.

    To study the investor awareness of the various investment alternatives.

    To analyze how an investor choose between the various investments.

    To analyze the preference of intermediaries in investments.

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    1.5-RESEARCH METHODOLOGY

    RESEARCH DESIGN:

    This project analyses the various investment alternatives available and the investors

    preference on the various investment alternatives available. The project also studies the

    investors preference towards the intermediaries. For this purpose descriptive research

    design is use in order to cover the field of the study.

    DATA SOURCES:

    1) PRIMARY DATA:

    Primary data required for the research study was collected by conducting research

    study where in various investors were given questionnaires and the require data

    was collected.

    2) SECONDARY DATA:

    Secondary data were collected from the various periodicals, journals,

    records, books, web pages and the like.

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    SAMPLING DESIGHS:

    Samples of 150 investors were selected on the basis of non-probability sampling

    technique. The information relating to investor preference towards investment and

    the preference of intermediaries were collected with the help of preparing

    questionnaire.

    TOOLS USED:

    For the present study percentage analysis, chi-square test and weighted average method

    is used in order to analyze the given data.

    TIME PERIOD COVERED:

    The primary data was collected with the help of questionnaire for the time

    period from January to march 2008

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    1.5-LIMITATIONS OF THE STUDY

    The study had to be completed within a short period of time.

    The sample size of 150 is a small when compare to large number of

    investors.

    The study is confined with the investors in India infoline.

    Time was the main constrain in data collection.

    Very little co-operation was received from some of the respondents.

    Some of the questions were not answered as per the requirement in spite

    of detailed and accurate instructions.

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    1.6-CHAPTERITATION

    The project was carried out to study the various investment alternatives

    available and the investor preference towards these investment alternatives.

    Chapter 1

    The first chapter deals with the introduction about the various investment

    alternatives and its related terms, scope, problem definition, objectives, research

    methodology, limitations of the study, review of literature, company profile and the

    industry profile.

    Chapter 2

    The second chapter includes Data Analysis and Interpretations.

    Chapter 3

    The third chapter contains Findings, Suggestions and conclusions.

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    1.2-LITERATURE REVIEW

    1.2.1- COMPANY PROFILE

    KEY MILESTONES:

    Incorporated on October 18, 1995 as probity research & services.

    Launched internet portal www.indiainfoline.com in may 1999.

    Commenced distribution of personal financial products like mutual funds

    and RBI bonds in April 2000.

    Launched online trading in shares and securities branded as

    www.5paisa.com in july2000.

    Started life insurance agency business in December 2000 as a corporate

    agent of ICICI prudential life insurance.

    Became a depository participant of NSDL in September 2001.

    Launched stock messaging services in may2003.

    Acquired commodities broking license in march2004.

    Launched portfolio management services in August 2004.

    Listed in NSE and BSE on May 17, 2005.

    Acquired NBFC license in May 2005.

    Acquired 100% equity of March Mont capital advisors pvt ltd in December

    2005 through which we have ventured into merchant banking.

    Bennett Coleman & co ltd invested Rs.20 crores in India infoline by way of

    preferential allotment in December 2005.

    Became a depository participant of CDSL in June 2006.

    IRDA license of insurance broking in April 2007.

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    MANAGEMENT TEAM:

    Mr. Nirmal Jain

    Nirmal Jain, MBA (IIM, Ahmedabad) and a Chartered and Cost Accountant, founded

    Indias leading financial services company India Infoline Ltd. in 1995, providing globally

    acclaimed financial services in equities and commodities broking, life insurance and

    mutual funds distribution, among others. Mr. Jain began his career in 1989 with

    Hindustan Levers commodity export business, contributing tremendously to its growth.

    He was also associated with Inquire-Indian Equity Research, which he co-founded in

    1994 to set new standards in equity research in India.

    Mr. R Venkataraman

    R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a B. Tech

    (Electronics and Electrical Communications Engineering, IIT Kharagpur) and an MBA

    (IIM Bangalore). He joined the India Infoline board in July 1999. He previously held

    senior managerial positions in ICICI Limited, including ICICI Securities Limited, their

    investment banking joint venture with J P Morgan of USA and with BZW and Tabb

    Capital Corporation Limited. He was also Assistant Vice President with G E Capital

    Services India Limited in their private equity division, possessing a varied experience of

    more than 16 years in the financial services sector.

    The Board of Directors:

    Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India

    Infoline comprises:

    Mr. Sat Pal Khattar (Non Executive Director)

    Mr. Sat Pal Khattar, - Board member since April 2001 - Presidential Council of Minority

    Rights member, Chairman of the Board of Trustee of Singapore Business Federation, is

    also a life trustee of SINDA, a nonprofit body, helping the under-privileged Indians inSingapore. He joined the India Infoline board in April 2001. Mr. Khattar is a Director of

    public and private companies in Singapore, India and Hong Kong; Chairman of

    Guocoland Limited listed in Singapore and its parent Guoco Group Ltd listed in Hong

    Kong, a leading property company.

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    Mr. Nilesh Vikamsey (Independent Director)

    Mr. Vikamsey, Board member since February 2005 - a practicing Chartered Accountant

    and partner (Khimji Kunverji & Co., Chartered Accountants), a member firm of HLB

    International, headed the audit department till 1990 and thereafter also handles financial

    services, consultancy, investigations, mergers and acquisitions, valuations etc; an ICAI

    study group member for Proposed Accounting Standard 30 on Financial Instruments

    Recognition and Management, Finance Committee of The Chamber of Tax

    Consultants (CTC), Law Review, Reforms and Rationalization Committee and

    Infotainment and Media Committee of Indian Merchants Chamber (IMC) and Insurance

    Committee and Legal Affairs Committee of Bombay Chamber of Commerce and

    Industry (BCCI).

    Mr. Kranti Sinha (Independent Director)

    Mr. Kranti Sinha Board member since January 2005 completed his masters fromthe Agra University and started his career as a Class I officer with Life InsuranceCorporation of India. He served as the Director and Chief Executive of LIC Housing

    Finance Limited from August 1998 to December 2002 and concurrently as the Managing

    Director of LICHFL Care Homes (a wholly owned subsidiary of LIC Housing FinanceLimited). He retired from the permanent cadre of the Executive Director of LIC; served

    as the Deputy President of the Governing Council of Insurance Institute of India and as a

    member of the Governing Council of National Insurance Academy, Pune apart from

    various other such bodies.

    VISION:

    Our vision is to become the most respected financial service company in India.

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    CULTURE AND CORE VALUES:

    OWNER MINDSET:

    Owner mindset is one of the key principles that drive life at India infoline. Every

    member of team India infoline behaves thinks and acts as owners not as employees.

    ENERGY:

    The single most important attribute we look for when we hire people is energy.

    Nobody can drive a business of his own or feel like an owner unless he is gifted with

    unbounded energy.

    EXECUTION:

    It is the difference between dreaming and making things happen. At India

    infoline, all activities are assessed on the basis of 0 and where 0 signifies work not done

    and 1 signifies work completed fully and on time. Excuses/ reasons for non completion of

    tasks are not acceptable.

    EFFORT:

    Those who work for the sake of working and endure the time they spend at work instead

    of enjoying it, eventually get de-motivated and leave their jobs for something that does

    interest them.

    From the organizations perspective, its not the number of hours you spend at work that

    matter, but the quality of work that you put into those hours.

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    ETHICS:

    Ethics pertain to the character of a person. Ethics is something on which there can

    never be any compromise in India infoline. We have elaborated on our vision to become

    the most respected company in the financial services space in India and no one can

    respect an unethical organization.

    EXCELLENCE:

    Excellence is all about the quality of work. We strive for delivery that is 100%

    error free and yet at lightning speed. Excellence deals with the quality of work. We have

    seen that there are people who get things done right in the very first time , thereby

    making the first time right.

    APPLICATION OF MIND:

    Application of mind is the magic formula to solve all problems. You should

    always apply your mind on how your efforts and goals are aligned to that of the company

    and how they contribute to the final business goal. We have a very open culture when in

    doubt always ask questions to seek clarity. Remember, to succeed at India infoline

    always apply your mind like an owner and come up with out-of-box solutions.

    OM AND AOM WITH SYSTEM AND PROCESS:

    Understand that being owners does not mean that we do not have to follow any

    rules. In fact given our path of growth, system and processes assume even greater

    importance since they are important for success and more so for growth. But we do have

    the option to modify the rules if needed.

    Our systems and processes are designed keeping in mind the need for faster decision-

    making with least turnaround time.

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    1.2.2- INDUSTRY PROFILE

    1. STOCK EXCHANGE: The stock exchange contribute to the economy development through providing

    listing of stocks and their trading listed stocks cover about 90 percent of the joint stock

    sectors in which the public companies are at work in India. The functions of the stock

    markets consist in mobilizing savings of public and channel them either directly into new

    issues of capital or indirectly through acquisition of existing capital stocks thereby

    accelerating the economic development of the country.

    The recognised stock exchanges have played an important role by participating in

    preliminary distribution of new securities. In respect of new issues offer through a

    prospectus or through for sale of existing securities the members of the recognized stock

    exchange have been the principal agents for canvassing subscriptions from investors

    spread all over the country.

    The recognized stock exchanges have served as the principal market for purchase

    of securities after they are issued as they pass through many successive hands from the

    original subscriber to the never ending stream of buyers. The recognized stock exchanges

    have, thus performed the vital function of acting as an organized capital market for

    stocks, shares and government securities. The market mechanism is being automated and

    improved in response to the growing demands. The mobilization of the savings of small

    man for investment in joint stock enterprise and broader spread of share ownership are

    factors, which in the course of time are likely to except a significant influence on the

    stock market in India. The stock exchanges provide an orderly market and price of

    securities and facilitate investment in India.

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    HISTORY OF STOCK EXCHANGE:

    The only stock exchanges operating in the 19 th century were those of Mumbai set

    up in 1875 and Ahmedabad set up in 1894. These were organized as voluntary non profit making associations of brokers to regulate and protect their interests. Before the

    control on securities trading became a central subject under the constitution in 1950, it

    was a state subject and the Mumbai securities contracts act of 1925 used to regulatetrading in securities. Under this act, the Mumbai stock exchange was recognised in 1927

    and Ahmedabad in 1937. Soon after it became a central subject, the securities contracts

    act became law in 1956.

    At present there are 21 stock exchanges recognised under the securities contracts

    act 1956. They are located at Mumbai, Calcutta, Chennai, Delhi, Ahmedabad,

    Hyderabad, Indore, Bhuwaneshwar, Mangalore, Patna, Bangalore, Rajkot, Guwahati,Jaipur, Kanpur, Ludhiana, Baroda, Cochin and Pune.

    METHOD OF TRADING:

    In order to purchase or sell of the securities or a stock exchange, the following

    procedure has to be followed.

    A. Selection of Broker

    A non member is not allowed to transact business on the floor of stock exchange.He may transact only through a member of stock exchange. Therefore, the first step in

    trading procedure on a stock exchange is to choose broker through whom the transaction

    will be made.

    B. Placing the Order

    After selection of broker, the client will place an order to him for the purchase orsale of a particular security. The order may be placed in any form.

    C. Making the Contact

    After receiving the order, the broker will then contact other broker or member or

    the stock exchange.

    D. Preparing the Contract Note

    A contract note will be prepared after the order of the days business. The note

    can be prepared by the broker himself or his clerk. The contract note mainly includes

    number and price of securities purchase or sold, names of the parties, brokerage charged

    and total amount payable by the or to the client. The contract note is signed by the brokerand copy of the note also sent to the client.

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    E. Settlement

    The last step of trading procedure is settlement. Its mode depends upon the natureof the contract. The contracts modes at a stock exchange are of two types they are:

    F. Ready Delivery Contracts

    It requires the delivery of securities by the seller and actual payment of the value

    of security by the buyers in cash. Generally a ready delivery contractors settled on thesame day of whether the time fixed by the stock exchange authorities. In case of cleared

    securities settlement are made through clearing house and contracts in non clearing

    house and contracts non cleared securities are settled through hand delivery by the

    brokers.

    G. Forward Delivery Contract

    Such contracts are made without the intention of taking or giving delivery of the

    securities. The intention of the trader who entered into forward delivery contract is in

    making profits by taking advantage of price movement in future. Forward deliverytransactions are settled on the day fixed by the stock exchange authorities.

    BENEFITS TO INVESTORS:

    Stock exchange provides liquidity of investment through ready marketability of

    securities

    Long term investments in shares will provide significant capital gains throughincrease in share price.

    Companies pay much of their post-tax profits to their shareholders in the form ofdividends.

    Compared to other investments like property, shares are very portable. They can

    be bought and sold quickly.

    Unlike selling a property, you can sell part of your share parcels.

    When compared to other forms of investment the brokerage charged for investingin shares is very low.

    In shares we have an option of investing in diversified scripts to minimize risk.

    The returns provided by shares are very high when compared to other forms of

    investment.

    Shares held for more than 12 months qualify for a 50% discount on any capital

    gains tax payable

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    2. MUTUAL FUNDS:

    The mutual fund industry in India started in 1963 with the formation of Unit Trust

    of India. The history of mutual funds in India can be broadly divided into four distinct

    phases:-

    First phase-1964-87

    An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by

    the Reserve Bank of India and functioned under the Regulatory and administrativecontrol of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the

    industrial Development Bank of India (IDBI) took over the regulatory and administrative

    control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At theend of 1988 UTI had Rs.6, 700crores of assets under management.

    Second phase-187-1993 (Entry of Public Sector Funds)

    1987 marked the entry of non-UTI, public sector mutual funds set up by public sector

    banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation

    of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June

    1987 followed by could bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank ofBaroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC

    had set up its mutual fund in December 1990..

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

    With the entry of private sector funds in 1993, a new era started in the Indian mutual

    fund industry, giving the India investors a wider choice of fund families. Also, 1993 wasthe year in which the first Mutual Fund was to be registered and governed. The erstwhile

    Kothari Pioneer (now merged with Franklin Templeton) was the first private sector

    mutual fund registered in July 1993.

    The 1993 SEBI (mutual Fund) Regulation were substituted by a more comprehensive

    and revised Mutual Fund Regulations in 1996. The industry now functions under the

    SEBI (Mutual Fund) Regulation 1996.

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    Fourth Phase-Since February 2003

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

    bifurcated into two separate entities. One is the Specified

    Undertaking of the Unit Trust of India with assets under management of Rs.29835croresas at the end of January 2003, representing broadly, the assets of US 64 scheme, assured

    return and certain other schemes. The Specified Undertaking of Unit Trust of India,functioning under an administrator and under the rules framed by Government of India

    and does not come under the purview of the Mutual Fund Regulations.

    Mutual Fund Operation Flow Chart:

    TYPES OF MUTUAL FUNDS:

    Open-end fund:

    An open-end(ed) fund is a collective investment which can issue and redeem shares at

    any time. An investor can purchase shares in such funds directly from the mutual fund

    company, or through a brokerage house.

    Exchange-traded funds:

    An Exchange-Traded Fund (or ETF) is an investment vehicle traded on primary

    exchanges, much like major stocks or bonds. An ETF represents a collection or 'basket' of

    assets such as stocks, bonds, or futures.

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    Equity funds:

    Equity funds, which consist mainly of stock investments, are the most common type of

    mutual fund. Equity funds hold 50 percent of all amounts invested in mutual funds in the

    United States.

    Bond funds:

    A bond fund is a collective investment scheme that invests in bonds and other debt

    securities. Bond funds yield monthly dividends that include interest payments on the

    fund's underlying securities plus any capital appreciation in the prices of the portfolio's

    bonds.

    Money market funds:

    Money market funds have relatively low risks compared to other mutual funds and pay

    dividends that generally reflect short-term interest rates. Money market funds typically

    invest in government securities, certificates of deposits, commercial paper of companies,

    and other highly liquid and low-risk securities.

    Fund of funds:

    A "fund of funds" (FoF) is an investment fund that uses an investment strategy of holding

    a portfolio of other investment funds rather than investing directly in shares, bonds or

    other securities. This type of investing is often referred to as multi-manager investment.

    Hedge fund:

    A hedge fund is a private investment fund that charges a performance fee and is typically

    open to only a limited range of qualified investors. Hedge funds are most often set up as

    private investment partnerships that are open to a limited number of investors and require

    a very large initial minimum investment.

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    MAJOR MUTUAL FUND COMPANIES IN INDIA:

    ABN AMRO Mutual Fund

    BIRLA SUN LIFE Mutual Fund

    BANK OF BARODA Mutual Fund

    HDFC Mutual Fund

    HSBC Mutual Fund

    ING Vysya Mutual Fund

    Prudential ICICI Mutual Fund

    Sahara Mutual Fund

    State Bank of India Mutual Fund

    Tata Mutual Fund

    Kotak Mahindra Mutual Fund

    Unit Trust of India Mutual Fund

    Reliance Mutual Fund

    Standard Chartered Mutual Fund

    Franklin Templeton India Mutual Fund

    Morgan Stanley Mutual Fund India

    Canbank Mutual Fund

    Chola Mutual Fund

    LIC Mutual Fund

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    BENEFITS TO INVESTORS:

    Mutual Funds invest their corpus in diversified portfolios which reduces the riskcontained in the investment.

    These mutual funds perform an extensive research of the company before making

    an investment decision giving you the benefit of expert advice.

    These funds are managed by professionals who have the required expertise inbuying and selling stocks.

    As purchases and sales are done in bigger quantities, the funds also get the

    advantages of lesser brokerage and other reduced transaction costs.

    In India these funds become even more attractive because of the tax advantages,

    like indexation benefits, long term capital gains tax, tax free dividends and much

    more.

    Possibility of investing in small amounts as and when the investor has funds to

    invest.

    Most mutual funds have relatively low investment minimums, making them

    accessible even to small investors.

    Mutual funds provide greater amount of liquidity to its investors.

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    3. INSURANCE:

    Insurance, in law and economics, is a form ofrisk management primarily

    used to hedge against the riskof a contingent loss. Insurance is defined as the equitable

    transfer of the risk of a loss, from one entity to another, in exchange for a premium.

    Insurer is the company that sells the insurance. Insurance rate is a factor used to

    determine the amount, called the premium, to be charged for a certain amount of

    insurance coverage.

    HISTORY:

    The business of life insurance in India in its existing form started in India in the

    year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

    Some of the important milestones in the life insurance business in

    India are:

    1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate

    the life insurance business.

    1928: The Indian Insurance Companies Act enacted to enable the government to collect

    statistical information about both life and non-life insurance businesses.

    1938: Earlier legislation consolidated and amended to by the Insurance Act with the

    objective of protecting the interests of the insuring public.

    1956: 245 Indian and foreign insurers and provident societies taken over by the central

    government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act,1956,

    with a capital contribution of Rs. 5 crores from the Government of India.

    1972: The General Insurance Business (Nationalisation) Act, 1972 was enacted to

    nationalize the 100 odd general insurance companies and subsequently merging them intofour companies. All the companies were amalgamated into National Insurance, New

    India Assurance, Oriental Insurance, and United India Insurance which were

    headquartered in each of the four metropolitan cities.

    1999: Till 1999, there were not any private insurance companies in Indian insurancesector. The Govt. of India, then introduced the Insurance Regulatory and Development

    Authority Act in 1999, thereby de-regulating the insurance sector and allowing private

    companies into the insurance. Further, foreign investment was also allowed and capped at26% holding in the Indian insurance companies

    24

    http://en.wikipedia.org/wiki/Lawhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Lawhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Risk
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    INSURANCE COMPANIES IN INDIA

    Aviva

    Bajaj Allianz

    Birla Sun Life

    HDFC Standard Life

    ICICI Pru

    ING Vysya

    Life Insurance Corporation

    Max New York Life

    Metlife India

    Om Kotak Mahindra

    Reliance Life Insurance

    SBI Life Insurance

    Tata AIG

    TYPES OF INSURANCE:

    Health

    Disability

    Casualty

    Life insurance

    Property

    Liability

    Credit

    Insurance financing vehicles

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    RISKS INVOLVED:

    The insurance company may not pay the premium amount in right time.

    The agents may provide false information about the policies.

    In the case of accidents in railway tracks the insurer is not eligible for

    compensations.

    Private insurance companies may get closed due to continuous losses.

    The liquidity provided by insurance is very low.

    The investors cannot withdraw his funds for a fixed amount of period.

    BENEFITS TO INVESTORS:

    Insurance will give cover for future unforeseen happenings.

    Insurance companies are now engaging in investing in securities. This will

    provide better returns for investor funds.

    Pension schemes in insurance will help in old age.

    Medical insurance will provide cover against hazardous diseases.

    It minimizes the risk of life.

    The investor can ensure continuous return on his investments.

    The brokerage charged by agents is very low when compared to other investment

    alternatives.

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    4. DERIVATIVES:

    Derivatives are financial instruments whose value changes in response to the changes in

    underlying variables. The main types of derivatives are futures, forwards, options, andswaps.

    The main use of derivatives is to reduce riskfor one party. The diverse range of potential

    underlying assets and pay-off alternatives leads to a huge range of derivatives contracts

    available to be traded in the market. Derivatives can be based on different types of assetssuch as commodities, equities (stocks),bonds, interest rates, exchange rates, or indexes

    (such as a stock market index, consumer price index (CPI) see inflation derivatives

    or even an index of weather conditions, or other derivatives). Their performance candetermine both the amount and the timing of the pay-offs.

    HISTORY:

    The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan

    around 1650. These were evidently standardised contracts, which made them much like

    today's futures.

    The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, wasestablished in 1848 where forward contracts on various commodities were standardised

    around 1865. From then on, futures contracts have remained more or less in the same

    form, as we know them today.

    Derivatives have had a long presence in India. The commodity derivative market hasbeen functioning in India since the nineteenth century with organized trading in cotton

    through the establishment of Cotton Trade Association in 1875. Since then contracts on

    various other commodities have been introduced as well.

    Exchange traded financial derivatives were introduced in India in June 2000 at the twomajor stock exchanges, NSE and BSE. There are various contracts currently traded on

    these exchanges.

    National Commodity & Derivatives Exchange Limited (NCDEX) started its operations in

    December 2003, to provide a platform for commodities trading.

    The derivatives market in India has grown exponentially, especially at NSE. Stock Futures are the

    most highly traded contracts on NSE accounting for around 55% of the total turnover of

    derivatives at NSE, as on April 13, 2005.

    27

    http://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Swap_(finance)http://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Equitieshttp://en.wikipedia.org/wiki/Stockshttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Exchange_ratehttp://en.wikipedia.org/wiki/Stock_market_indexhttp://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Swap_(finance)http://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Equitieshttp://en.wikipedia.org/wiki/Stockshttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Exchange_ratehttp://en.wikipedia.org/wiki/Stock_market_index
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    TYPES OF DERIVATIVES:

    There are four major types of derivatives. They are as follows

    FUTURES:

    A futures contract is a standardized contract, traded on a futures exchange, to buy

    or sell a certain underlying instrument at a certain date in the future, at a specified price.

    The future date is called the delivery date or final settlement date. The pre-set price is

    called the futures price. The price of the underlying asset on the delivery date is called thesettlement price

    FORWARDS:

    A forward contract is an agreement between two parties to buy or sell an asset at

    a pre-agreed future point in time. Therefore, the trade date and delivery date are

    separated. One party agrees to sell, the other to buy, for a forward price agreed in

    advance. In a forward transaction, no actual cash changes hands. If the transaction iscollateralized, exchange of margin will take place according to a pre-agreed rule or

    schedule.

    OPTIONS:

    Options are financial instruments that convey the right, but not the obligation, toengage in a future transaction on some underlying security, or in a futures contract. For

    example, buying a call option provides the right to buy a specified quantity of a security

    at a set strike price at some time on or before expiration, while buying a put optionprovides the right to sell. Upon the option holder's choice to exercise the option, the party

    who sold, or wrote, the option must fulfill the terms of the contract.

    SWAPS:

    A swap is a derivative in which two counterparties agree to exchange one stream

    of cash flows against another stream. These streams are called the legs of the swap.

    The cash flows are calculated over a notional principal amount, which is usually not

    exchanged between counterparties. Consequently, swaps can be used to create unfunded

    exposures to an underlying asset, since counterparties can earn the profit or loss frommovements in price without having to post the notional amount in cash or collateral

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    BENEFITS TO INVESTORS:

    One of the key benefits of trading in the futures markets is that it offers the trader

    financial leverage.

    Another key benefit of futures trading is liquidity. Liquid markets easily match a

    buyer with a seller, enabling traders to quickly transact their business at a fair

    price

    Many futures markets are considered to be transparent because the order flow is

    open and fair.

    Everyone has an equal opportunity for the trade.

    Futures markets give this confidence through a clearing service provider system

    that guarantees the integrity of the trades.

    One use of derivatives is as a tool to transfer risk by taking the opposite positionin the futures market against the underlying commodity.

    Speculators may trade with other speculators as well as with hedgers.

    The amount of brokerage charged is very low.

    The investor can easily clear his position in the time of losses.

    RISKS INVOLVED:

    Volatility in the market will result in the losses for the investors.

    Since a huge investment is needed to buy a script it not affordable for small and

    medium investors.

    It is difficult to judge the movement of market indices.

    Expert advice is needed for better investment results.

    It s necessary to have a continuous check over the market in order to avoid losses.

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    CHAPTER-2

    DATA ANALYSIS AND INTERPRETATION

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    2.1- PERCENTAGE ANALYSIS

    TABLE-2.1.1

    Classification of Respondents on the basis of Age

    Age(in Years) Number of respondent Percentage

    Less than 30 34 22.67

    31-40 78 52.00

    41-50 23 15.33

    Above 50 15 10.00

    Total 150 100.00

    Source: Primary Data

    CHART-2.1.1

    0

    10

    2030

    40

    50

    60

    70

    80

    90

    Less

    than

    30

    31-40

    41-50

    Above50

    Number of Respondents

    Percentage

    INFERENCE:

    It is clear from Table 2.1.1 that out of the total 150 respondents, 34 (22.64%) of the

    respondents are in the age group of below 30 years and 78 (52%) are in the age group of

    31 40 years. 23 (15.33%) of the respondents are in the age group of 41 50 years andthe remaining 15 (10%) are in the age group of above 50 years. Therefore, it is concluded

    that the most dominating age group of the respondents are in the age group of 31 40

    years.

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    TABLE- 2.1.2

    Classification of Respondents on the basis of Sex

    Source: Primary Data

    Chart-2.1.2

    0

    20

    40

    60

    80

    100

    120

    140

    160

    Male Female Total

    Number of Respondents

    Percentage

    INFERENCE:

    It is found from Table 2.1.2 that out of 150 respondents, 105 (70%) are male and 45 (30

    %) are female. Hence, it is found that males are more in numbers than the female in thefield of investment.

    32

    Sex Number of Respondents Percentage

    Male 105 70

    Female 45 30

    Total 150 100

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    TABLE- 2.1.3

    Classification of Respondents on the basis of Educational Qualification

    Source: Primary Data

    Chart-2.1.3

    0

    20

    40

    6080

    100

    120

    140

    160

    Upto

    scho

    ollev

    el

    Grad

    uate

    Post

    Grad

    uate

    Prof

    essio

    nalD

    egree

    Total

    Number of Respondents

    Percentage

    INFERENCE:

    It is seen from Table 2.1.3 that out of 150 respondents 15 (10%) of the respondents have

    studied up to school level, 33 (22%) of the respondents have studied graduation and 66

    (44%) of them have studied post graduation. The remaining 36 (24%) of the respondent

    have studied professional degree. Hence, it is observed that the respondents belonging topost graduates are more than other categories.

    TABLE-2.1.4

    33

    Educational Qualification Number of Respondents Percentage

    Up to school level 15 10

    Graduate 33 22

    Post Graduate 66 44

    Professional Degree 36 24

    Total 150 100

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    Classification of Respondents on the basis of Occupation

    Source: Primary Data

    CHART-2.1.4

    34

    Occupation Number of Respondents Percentage

    Business 14 9.33

    Professional 32 21.33

    Government

    Employee

    19 12.67

    Private Employee 85 56.67

    Total 150 100.00

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    0102030405060708090

    Busin

    ess

    Professio

    nal

    Gov

    ernm

    entE

    mploy

    ee

    PrivateEm

    ploy

    ee

    Number of Respondents

    Nil

    Percentage Nil

    INFERENCE:

    It is observed from Table 2.1.4 that, out of 150 respondents, 14 (9.33%) respondents are

    businessmen, 32 (21.33%) respondents are professionals and 19 (12.67%) respondents

    are government employees. The remaining 85 (56.67%) respondents are private

    employees. It is inferred from that, the private employees are very interested in

    investments.

    TABLE-2.1.5

    Classification of Respondents on the basis of Income

    Source: Primary Data

    35

    Monthly Income Number of Respondents Percentage

    Below Rs. 5000 Nil Nil

    Rs. 5000 - 10000

    101 67.33

    Rs. 10000 - 15000

    31 20.67

    Above Rs. 15000

    18 12.00

    Total 150 100.00

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    CHART-2.1.5

    0

    20

    40

    60

    80

    100

    120

    Rs.

    500

    0-100

    00

    Rs.

    100

    00-15

    000

    Abo

    veRs.

    150

    0

    Number of Respondents

    Percentage

    INFERENCE:It is found from Table 2.1.5 that out of 150 respondents, 101 (67.33%) responders come

    under the category of Rs 5001 Rs 10,000, 31 respondents earn in the range of Rs 10,001

    Rs 15,000 and the remaining 18 respondents have a monthly income of above Rs

    15,000. Therefore, it is concluded that high income group are interested in investments

    than low income group.

    TABLE.2.1.6

    Classification of Respondents on the basis of Marital Status

    Source: Primary Data

    CHART-2.1.6

    36

    Marital Status Number of Respondents Percentage

    Married 60 40

    Unmarried 90 60

    Total 150 100.00

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    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    Number of Respondents Percentage

    Married

    Unmarried

    INFERENCE:

    It is observed from Table 2.1.6 that, out of 150 respondents, 60 (40%) respondents aremarried and the remaining 90 (60%) respondents are unmarried. It is evident that the

    respondent belonging to the married category are more than the respondents belonging tothe unmarried category.

    TABLE-2.1.7

    Classification of Respondents on the basis of Savings

    Source: Primary Data

    37

    Monthly Savings Number of Respondents Percentage

    Less than Rs 2,000 62 41.33

    Rs 2,001 Rs 3,000 27 18.00

    Rs 3,001 Rs 4,000 48 32.00

    Above Rs 4,000 13 8.67

    Total 150 100.00

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    CHART-2.1.7

    0

    10

    20

    30

    40

    50

    60

    70

    Less than

    Rs 2,000

    Rs 2,001

    Rs 3,000

    Rs 3,001

    Rs 4,000

    Above Rs

    4,000

    Number of Respondents

    Percentage

    INFERENCE:

    It is clear from Table 2.1.7 that, out of 150 respondents, 62 (41.33%) respondents save

    less than Rs 2000 every month. But 27 (18%) respondents save Rs 2001 Rs 3000 every

    month and 48 (32%) respondents save Rs 3001 Rs 4000 every month. The remaining13 (8.67%) respondents save Rs 4000 per month. Therefore, it is observed that most of

    the respondents save only Rs 2000

    II. INVESTOR PREFERANCES TOWARDS INVESTMENT

    TABLE-2.1.8

    Investors Most Preferred Investment Outlet.Source: Primary Data

    38

    Securities Number of

    Res ondents

    Percentage

    Mutual Funds 47 31.33

    Equity 64 42.67

    Insurance 24 16.00

    Derivatives 15 10.00

    Total 150 100

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    CHART-2.1.8

    0

    10

    20

    30

    40

    50

    60

    70

    Mutual

    Funds

    Equity Insurance Derivatives

    Number of Respondents

    Percentage

    INFERENCE:

    It is clear from Table 2.1.8 that, out of 150 respondents, 64(42.67%) respondents preferinvesting in shares and 47 (31.33%) respondents invest in mutual fund 24 (16%)

    respondents invests in insurance. The remaining 15(10%) respondents invest in

    derivatives. Therefore, it is observed that most of the respondents prefer equity.

    TABLE-2.1.9

    Why investor prefer the particular investment outlet:

    Source: Primary Data

    CHART-2.1.9

    39

    Returns Number of

    res ondents

    percentage

    High risk, High return 79 52.67

    Low risk, High return 52 34.67

    Low risk, Low return 19 12.66

    Total 150 100

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    0

    10

    2030

    40

    50

    60

    70

    80

    90

    High risk, High return Low risk, High return Low risk, Low return

    Number of respondents

    percentage

    INFERENCE:

    It is clear from Table 2.1.9 that, out of 150 respondents, 79(52.67%) respondents preferhigh risk and high return and 52(34.67%) respondents prefer low risk and high return and

    19(12.66%) respondents prefer low risk and low return. Therefore, it is observed that

    most of the respondents prefer high risk and high return.

    TABLE-2.1.10

    Important determinants in selecting Investment outlet

    Determinants

    Level of importance

    High Moderate Low

    Total

    Safety 131 11 8 150

    Return 56 83 11 150

    Liquidity 98 38 14 150

    Source: Primary Data

    CHART-2.1.10

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    0

    20

    40

    60

    80

    100

    120

    140

    160

    Total

    High Moderate Low

    Level of importance

    Safety

    Return

    Liquidity

    INFERENCE:

    Table 2.1.10 clearly shows that the investors consider safety, return and liquidity as

    important factor in section of investment outlet. Among the three factors safety is the first

    and foremost determinant factor. The next factor considered by the investor is liquidity.

    The last factor is return. The investor needs only regular and moderate return on their

    investment.

    TABLE-2.1.11

    Satisfaction level with return on investment

    Opinion Number of Respondents Percentage

    Fully satisfied 12 8

    Satisfied 78 52

    No opinion 37 24.66

    Dis-satisfied 23 15.33

    Fully dissatisfied 0 0

    Total 150 100.00

    CHART-2.1.11

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    010

    2030405060708090

    Fully

    satisfie

    Satisfied

    Noopinion

    Dis-satisfie

    Fully

    dissatisfie

    Number of

    Respondents

    Percentage

    INFERENCE:

    It is found from Table 2.1.11, out of 150 respondents 12 (8%) respondents are fully satisfied with

    the return on investment and 78(52%) respondents are satisfied with the return on investment.

    37(24.66%) respondents are neither satisfied nor dissatisfied with the return on investment and

    23(15.33%) are dis satisfied with the return on investment. Thus it can be concluded that more

    than half of the respondents are satisfied with the return on investment.

    TABLE-2.1.12

    Allocation of Income for investment

    Portion of income

    available for investment

    Number of Respondents Percentage

    Upto 10% 54 36

    11% - 20% 66 44

    21% - 40%18 12

    Above 40%

    12 8

    Total 150 100.00

    Source: Primary Data

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    CHART-2.1.12

    0

    20

    40

    60

    80

    100

    120

    140

    160

    Upto

    10%

    11%

    -20

    %

    21%

    -40

    %

    Abov

    e40

    %To

    tal

    Number of Respondents

    Percentage

    INFERENCE:It is observed from Table 2.1.12, out of 150 respondents, 54 (36%) respondents invest

    upto 10% of their monthly income 66 (44%) respondents invest 11% - 20% of their

    monthly income in the financial asset. The remaining 18 (12%) and 12 (8%) respondents

    invest 21% - 40% and above 40% of their monthly income in various securities

    TABLE-2.1.13

    Purpose of Investment

    Source: Primary Data

    CHART-2.1.13

    43

    Purpose Mean score Rank

    Risk covered 61.23 I

    Tax Rebate 31.63 IV

    Return on investment 54.81 II

    liquidity 38.94 III

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    Mean score

    0

    10

    2030

    40

    50

    60

    70

    Risk

    covered

    Tax Rebate Return on

    investment

    liquidity

    Mean score

    INFERENCE:

    Table 2.1.13 shows that among the purpose, risk covered ranks first with a mean score

    of 61.23 followed by return on investment, liquidity, tax rebate are ranked II, III and

    IV with a mean score of 54.81,38.94 and 31.63 respectively

    TABLE-2.1.14

    Opinion on the risk in investment

    Opinion Number of Respondents Percentage

    Very High 65 43.33

    High 52 34.67

    Moderate 33 22

    Low - -

    Very low - -

    Total 150 100.00

    Source: Primary Data

    CHART-2.1.14

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    0

    1020

    30

    40

    50

    60

    70

    Opinion

    VeryHigh

    High

    Moderate

    Low

    Very

    low

    Number of

    Respondents

    Percentage

    INFERENCE:

    It is found from Table 2.1.14 that, out of 150 respondents, 65 (43.33%) respondents feelthat the risk on investment are very high and 52 (34.67%) and 33 (22%) respondents feel

    that the risk on investment are high and moderate respectively. Hence, it can be

    concluded that more than three fourth of the respondents feel that the risk on

    investment are high.

    TABLE-2.1.15

    Return Expected from shares

    Source: Primary Data

    CHART-2.1.15

    45

    Return expected Number of Respondents Percentage

    Less than 10% - -

    11%-20% 17 11.33

    21%-30% 91 60.67

    Above 30% 42 28.00

    Total 150 100

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    0

    10

    20

    3040

    50

    60

    70

    80

    90

    100

    11%-20% 21%-30% Above 30%

    Number of

    Respondents -

    Percentage -

    INFERENCE:

    It is found from Table 2.1.15 that 11.33 percent of the respondents expect 11% - 20%

    return on shares, 60.67 percent of the respondents expects 21% - 30% and 28 percent of

    the respondents expect more than 30% return on shares. Since the risk in shares is high

    the return expected is also very high.

    TABLE-2.1.16

    Return Expected from mutual funds

    Source: Primary Data

    CHART-2.1.16

    46

    Return expected Number of Respondents Percentage

    Less than 10% - -

    11%-20% 76 50.67

    21%-30%61

    40.67

    Above 30% 13 8.66

    Total 150 100

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    0

    10

    20

    30

    40

    50

    60

    70

    80

    11%-20% 21%-30%

    Number of

    Respondents

    Percentage

    INFERENCE:

    It is found from Table 2.1.16 that out of 150 respondents 76(11.33) of the respondents

    expect 11% - 20% return on mutual funds, 61(44.53) of the respondents expects 21% -

    30% and 13(8.66) of the respondents expect above 30%. Since the risk is low the return

    expected is not very high.

    TABLE-2.1.17

    Return Expected from insurance

    Source: Primary Data

    CHART-2.1.17

    47

    Return expected Number of Respondents Percentage

    Less than 10% 49 32.67

    11%-20% 55 36.66

    21%-30% 46 30.67

    Above 30% - -

    Total 150 100

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    0

    10

    20

    30

    40

    50

    60

    Less than 10% 11%-20% 21%-30%

    Number of

    Respondents

    Percentage

    INFERENCE:

    It is found from Table 2.1.17 that out of 150 respondents 49(32.67) of the respondents

    expect less than 10% and 55(36.66) of the respondents expect 11% - 20% return on

    insurance, 46(30.67) of the respondents expects 21% - 30%. Thus investor expects 11%-

    20% from their investment in insurance.

    TABLE-2.1.18

    Return Expected from derivatives

    Source: Primary Data

    CHART-2.1.18

    48

    Return expected Number of Respondents Percentage

    Less than 10% - -

    11%-20% 86 57.33

    21%-30%49

    32.67

    Above 30% 15 10.00

    Total 150 100

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    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    11%-

    20%

    21%-

    30%

    Above

    30%

    Number of

    Respondents -

    Percentage -

    INFERENCE:

    It is found from Table 2.1.18 that out of 150 respondents 86(57.33) of the respondents

    expect 11% - 20% return on derivatives, 49(32.67) of the respondents expects 21% - 30%

    and 15(10.00) of the respondents expect above 30%. Since the risk is high the return

    expected is also very high.

    TABLE-2.1.19

    Source of awareness to investors

    Source Number of Respondents Percentage

    Advertisement 60 40

    Company executives Nil Nil

    Friends and relatives 75 50

    Professional advisors 15 10

    Total 150 100.00

    Source: Primary Data

    CHART-2.1.19

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    0

    10

    2030

    40

    50

    60

    70

    80

    Advertisement Friends and

    relatives

    Professional

    advisors

    Number of

    Respondents

    Percentage

    INFERENCE:

    Table 2.1.19 shows that most of the respondents get aware of the investment through

    friends and relatives (50%) and advertisement (40%) and only 10 per cent of the

    respondents get aware through professional advisors and none of the respondents through

    company executives. Therefore, it is inferred that most of the respondents get awarethrough friends and relatives.

    TABLE-2.1.20

    Mode of Investment

    Mode of investment Number of Respondents Percentage

    Direct41 27.33

    Through Agent 109 72.67

    Total 150 100

    Source: Primary Data

    CHART-2.1.20

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    0

    20

    4060

    80

    100

    120

    140

    160

    Direct Through

    Agent

    Total

    Number of

    Respondents

    Percentage

    INFERENCE:

    It is clear from Table 2.1.20, out of 150 respondents, 109 respondents are investing their

    surplus funds through agent and the remaining 41 respondents are investing their surplus

    funds directly. Hence, it shows that most of the respondents are investing their funds

    through agents.

    111. INVESTOR PREFERANCE TOWARDS INTERMEDIARIES

    TABLE-2.1.21 Opinion on the Services Rendered by the Intermediaries

    Opinion Number of Respondents Percentage

    Fully satisfied 32 21.33

    Satisfied 76 50.67

    No opinion 39 26.00

    Dis-satisfied - -

    Fully dissatisfied 3 2.00

    Total 150 100.00

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    Source: Primary Data

    CHART-2.1.21

    0

    10

    20

    30

    40

    50

    6070

    80

    Fully

    satisfie

    Satisfied

    Noopinion

    Fully

    dissatisfie

    Number of

    Respondents

    Percentage

    INFERENCE:It is clear form Table 2.1.21 that out of 150 respondents 32 (21.33%) respondents arefully satisfied with the services rendered by the intermediaries. 76 (50.67%) respondents

    are satisfied with the service rendered by the intermediaries. 39 (26%) respondents and 3

    (2%) respondents are not satisfied with the service provided by the intermediaries. Thus,it can be concluded that most of the respondents are satisfied with the services rendered

    by the intermediaries.

    TABLE-2.1.22

    Source of Awareness about the Intermediaries

    Source Number of Respondents Percentage

    Electronic media - -

    Sign board 19 12.67

    News papers and47 31.33

    Friends and relatives 84 56.00

    Total 150 100.00

    Source: Primary Data

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    CHART-2.1.22

    0102030405060708090

    Sign

    boar

    News

    papersan

    Magazines

    Friendsandrelativ

    Number of

    Respondents

    Percentage

    INFERENCE:It is found from Table 2.1.22 that out of 150 respondents, 19 (12.67%) respondents have

    come to know about the intermediaries through sign board. 47 (31.33%) respondents

    have come to know about the intermediaries through news papers and magazines and theremaining 84 (56%) respondents have come to know about the intermediaries through

    friends and relatives

    TABLE-2.1.23

    Opinion about the Brokerage Charges

    Opinion Number of Respondents Percentage

    Very High 73 48.67

    High 46 30.67

    Moderate 31 20.66

    Low - -

    Very low - -

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    Total 150 100.00

    Source: Primary Data

    CHART-2.1.23

    0

    10

    20

    30

    40

    50

    60

    70

    80

    Very High High Moderate

    Number of

    Respondents

    Percentage

    INFERENCE:It is found from Table 2.1.23 that, out of 150 respondents, 73 (48.67%) respondents feel

    that the brokerage charged by the intermediaries are very high and 46 (30.67%) and 31

    (20.66%) respondents feel that the brokerage charged by the intermediaries are high and

    moderate respectively. Hence, it can be concluded that more than three fourth of therespondents feel that the brokerage charged by the intermediaries are high .

    TABLE-2.1.24

    Opinion on the Information Rendered by the Intermediaries

    Source: Primary Data

    54

    Opinion Number of Respondents Percentage

    Excellent 23 15.33

    Good 64 42.67

    Average 45 30.00

    Below average 13 8.67

    Poor 5 3.33

    Total 150 100.00

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    0

    10

    20

    30

    40

    50

    60

    70

    Forselling

    Forboth

    buyingand

    Advice

    regarding

    buying

    andselling

    Number of

    Respondents

    Percentage

    INFERENCE:

    It is found from Table 2.1.25 that, 23(15.33%) of the respondents are using the service ofthe intermediaries for the purpose of selling the securities. 26(17.33%) of the respondents

    are using the services of intermediaries for the purpose of purchasing the securities and

    38(25.34%) of the respondents are using the services of intermediaries for the purpose of

    purchasing and selling the securities and the remaining 63(42 %) of the respondents areusing the service of intermediaries for the purpose of advice regarding buy and selling.

    Thus investors prefer the advice provided by intermediaries.

    TABLE-2.1.26 Frequency of Using Services of Intermediaries

    Frequency Number of Respondents Percentage

    Daily 42 28.00

    Weekly 25 16.67

    Fortnightly 30 20.00

    Monthly 53 35.33

    Total 150 100.00

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    CHART-2.1.26

    0

    10

    20

    30

    40

    50

    60

    Daily Weekly Fortnightly Monthly

    Number ofRespondents

    Percentage

    INFERENCE:It is seen from Table 2.1.26 that out of 150 respondents, 42 (28%) respondents use the

    services daily. 25 (16.67%) respondents use the services weekly and 30 (20%)

    respondents use the services fortnightly. The remaining 53 (35.33%) respondents use the

    services once in a month. Therefore, it is concluded that most of the respondents use the

    services daily.

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    STATISTICAL TOOLS

    2.2- CHI-SQUARE TEST

    Education and Source of Awareness

    Education is an important factor which has significant relationship with the investment

    awareness in financial asset. In order to find out whether there is any relationship

    between education and awareness, a two way table has been prepared.

    Source of

    Awarenes

    s

    Age of the

    Number of Respondents

    TotalAdvertisemen

    t

    Friends

    and

    relatives

    Profession

    al advisors

    Up to school level 3 11 1 15

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    Graduate 16 16 1 33

    Post Graduate 26 33 7 66

    Professional Degree 15 15 6 36

    Total 60 75 15 150

    H0: There is no significant relationship between education and source of awareness.

    H1: There is significant relationship between education and source of awareness.

    In order to find out whether there is significant relationship between educational level

    and source, of awareness chi square test has been applied.

    Table 2.2.1 shows the calculations to test the significant between educational level and

    source of awareness.

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    TABLE-2.2.1

    Chi square Test for Education and Source of awareness

    Cell O E (O E) (O E)2

    (O E)2

    __________

    E

    R1C1 3 6.0 -3.0 9.00 1.500

    R2C1 16 13.2 2.5 6.25 0.473

    R3C1 26 26.4 -0.4 0.16 0.006

    R4C1 15 14.4 0.6 0.36 0.025

    R1C2 11 7.5 3.5 12.25 1.633

    R2C2 16 16.5 -0.5 0.25 0.015

    R3C2 33 33.0 - - -

    R4C2 15 18.0 -3 9.00 0.500

    R1C3 1 15.0 -14 196.00 13.000

    R2C3 1 3.3 -2.3 5.29 1.603

    R3C3 7 6.6 0.4 0.16 0.023

    R4C3 6 3.6 2.4 5.76 1.600

    Total 20.378

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    Degrees of Freedom = (row 1) * (column 1)

    = (4 1) * (3 1)

    = 3 X 2 = 6

    Degrees of Freedom : 6

    Calculated Value : 20.378

    Table Value at 5% level: 12.592

    INFERENCE:

    Since the calculated value is more than the Table value at 5% level, the

    hypotheses that educational level is not a criterion to determine the different source of

    awareness is rejected. Therefore, there is significant relationship between educational

    level of the investors and their source of awareness.

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    Income and Source of Awareness

    Income is an important factor which has significant relationship with the investment

    awareness in financial asset.

    In order to find out whether there is any relationship between income and awareness, atwo way Table has been prepared.

    Monthly income of the investors and their source of awareness

    H0: There is no significant relationship between education and source of awareness.

    H1: There is significant relationship between education and source of awareness.

    In order to find out whether there is significant relationship between educational level

    and source, of awareness chi square test has been applied.

    Table 2.2.2 shows the calculations to test the significant between educational level and

    source of awareness

    62

    Source of

    Awareness

    Monthly

    Income Statusof the Respondents

    Number of

    Respondents

    TotalAdvertisement

    Friendsand

    relatives

    Professional

    advisors

    Below Rs 5,000 - - - -

    Rs 5,001 Rs10,000 41 48 12 101

    Rs 10,001Rs15,000 14 15 2 31

    Above Rs 15,000 5 12 1 18

    Total 60 75 15 150

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    TABLE-2.2.2

    Chi square Test for Income and Source of awareness

    Cell O E (O E) (O E)2

    (O E)2

    __________

    E

    R1C1 41 40.4 0.6 0.36 0.009

    R2C1 14 12.4 1.6 2.56 0.207

    R3C1 5 7.2 -2.2 4.84 0.672

    R1C2 48 50.5 -2.5 6.25 0.124

    R2C2 15 15.5 -0.5 0.25 0.017

    R3C2 12 9.0 3.0 9.00 1.000

    R1C3 12 10.1 1.9 3.61 0.357

    R2C3 2 3.1 1.1 1.21 0.39

    R3C3 1 1.8 -0.8 0.64 0.356

    Total 3.132

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    Degrees of Freedom = (row 1) * (column 1)

    = (3 1) * (3 1)

    = 2 X 2 = 4

    Degrees of Freedom : 4

    Calculated Value : 3.132

    Table Value at 5% level: 9.488

    INFERENCE:

    Since the calculated value is less than the Table value at 5% level, thehypotheses that income is not a criterion to determine the different source of awareness is

    accepted. Therefore, there is no significant relationship between income of the investors

    and their source of awareness

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    2.3-WEIGHTED AVERAGE METHOD

    Satisfaction level of investors with return on investment

    Opinion Number of Respondents Percentage

    Fully satisfied 12 8

    Satisfied 78 52

    No opinion 37 24.66

    Dis-satisfied 23 15.33

    Fully dissatisfied 0 0

    Total 150 100.00

    In order to find out the satisfaction level of investors with regarding to the return on

    investment weighted average method is used in order to find out the satisfaction level of

    most of the investors.

    In order to calculate the weighted average the satisfaction level is ranked in the order of5,4,3,2 and 1.

    Table 2.3.1 shows the calculations of weighted average method.

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    TABLE-2.3.1

    Weighted average on return on investment

    Rank Number of

    Respondents

    Percentage Total score

    Fully satisfied(5) 12 8 60

    Satisfied(4) 78 52 312

    No opinion(3) 37 24.66 111

    Dis-satisfied(2) 23 15.33 46

    Fully dissatisfied(1) 0 0 0

    Total 150 100.00 529

    Mean score = 529/150

    = 3.52

    INFERENCE:

    From the above table 2.3.1 it is clear that most of the respondents are satisfied

    with the return on their investments.

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    Opinion on the of risk in investments

    Opinion Number of Respondents Percentage

    Very High 65 43.33

    High 52 34.67

    Moderate 33 22

    Low - -

    Very low - -

    Total 150 100.00

    In order to find out the amount of risk involved in the investment weighted average

    method is used in order to find out the level of risk prevailing in the investment.

    In order to calculate the weighted average the risk level is ranked in the order of 5,4,3,2

    and 1.

    Table 2.3.2 shows the calculations of weighted average method.

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    TABLE-2.3.2

    Weighted Average on Risk in Investment

    Rank Number of

    Respondents

    Percentage Total score

    Very High(5) 65 43.33325

    High(4) 52 34.67208

    Moderate(3) 33 2299

    Low(2) - - -

    Very low(1) - --

    Total 150 100.00632

    Mean score = 632/150

    = 4.2

    INFERENCE:

    From the above table 2.3.2 it is clear that most of the respondents feel that the

    amount of risk prevailing in investment is HIGH.

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    Opinion on the Services Rendered by the Intermediaries

    Opinion Number of Respondents Percentage

    Fully satisfied32 21.33

    Satisfied76 50.67

    No opinion 39 26.00

    Dis-satisfied- -

    Fully dissatisfied3 2.00

    Total 150 100.00

    In order to find out the satisfaction level of investors with regarding to the service

    rendered by intermediaries weighted average method is used in order to find out the

    satisfaction level of most of the investors.

    In order to calculate the weighted average the satisfaction level is ranked in the order of

    5,4,3,2 and 1.

    Table 2.3.3 shows the calculations of weighted average method.

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    TABLE-2.3.3

    Weighted Average on Services Rendered by the Intermediaries

    Rank Number of

    Respondents

    Percentage Total score

    Fully satisfied(5)32 21.33

    160

    Satisfied(4)76 50.67

    304

    No opinion(3)39 26.00

    117

    Dis-satisfied(2)- -

    -

    Fully dissatisfied(1)3 2.00

    3

    Total 150 100.00 584

    Mean score = 584/150

    = 3.89

    = 4

    INFERENCE:

    From the above table 2.3.3 it is clear that most of the respondents are satisfied

    with the services rendered by intermediaries.

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    Opinion about the Brokerage Charges

    Opinion Number of Respondents Percentage

    Very High 73 48.67

    High 46 30.67

    Moderate 31 20.66

    Low - -

    Very low - -

    Total 150 100.00

    In order to find out the satisfaction level of investors with regarding to the brokerage

    charges by intermediaries weighted average method is used in order to find out the level

    of brokerage charged.

    In order to calculate the weighted average the brokerage level is ranked in the order of

    5,4,3,2 and 1.

    Table 2.3.4 shows the calculations of weighted average method.

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    TABLE-2.3.4

    Weighted Average on Brokerage Charges

    Rank Number of

    Respondents

    Percentage Total score

    Very High(5) 73 48.67365

    High(4) 46 30.67184

    Moderate(3) 31 20.6693

    Low(2) - - -

    Very low(1) - --

    Total 150 100.00642

    Mean score = 642/150

    = 4.28

    = 4

    INFERENCE:

    From the above table 2.3.4 it is clear that most of the respondents feel the

    brokerage charged by intermediaries is HIGH.

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    TABLE-2.3.5

    Weighted Average on Information Rendered By Intermediaries

    Mean score = 537/150

    = 3.58

    = 4

    INFERENCE:

    From the above table 2.3.5 it is clear that most of the respondents feel that the

    information rendered by intermediaries to investors regarding their investment is GOOD.

    74

    Rank Number of

    Respondents

    Percentage Total score

    Excellent(5) 23 15.33115

    Good(4) 64 42.67 256

    Average(3) 45 30.00135

    Below average(2) 13 8.6726

    Poor(1) 5 3.335

    Total 150 100.00 537

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    CHAPTER-3

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    3.1-FINDINGS OF THE STUDY

    It is absorbed that out of the total 150 respondents, 34 (22.64%) of the

    respondents are in the age group of below 30 years and 78 (52%) are in the age

    group of 31 40 years. 23 (15.33%) of the respondents are in the age group of 41 50 years and the remaining 15 (10%) are in the age group of above 50 years.

    Therefore, it is concluded that the most dominating age group of the respondents

    are in the age group of 31 40 years.

    Out of 150 respondents, 105 (70%) are male and 45 (30 %) are female. Hence, it

    is found that males are more in numbers than the female in the field of

    investment.

    Out of 150 respondents 15 (10%) of the respondents have studied up to school

    level, 33 (22%) of the respondents have studied graduation and 66 (44%) of themhave studied post graduation. The remaining 36 (24%) of the respondent have

    studied professional degree. Hence, it is observed that the respondents belonging

    to post graduates are more than other categories.

    Out of 150 respondents, 14 (9.33%) respondents are businessmen, 32 (21.33%)

    respondents are professionals and 19 (12.67%) respondents are government

    employees. The remaining 85 (56.67%) respondents are private employees. It is

    inferred from that, the private employees are very interested in investments.

    Out of 150 respondents, 101 (67.33%) responders come under the category of Rs

    5001 Rs 10,000, 31 respondents earn in the range of Rs 10,001 Rs 15,000 and

    the remaining 18 respondents have a monthly income of above Rs 15,000.

    Therefore, it is concluded that high income group are interested in investments

    than low income group.

    Out of 150 respondents, 60 (40%) respondents are married and the remaining 90

    (60%) respondents are unmarried. It is evident that the respondent belonging tothe married category are more than the respondents belonging to the unmarried

    category.

    Out of 150 respondents, 62 (41.33%) respondents save less than Rs 2000 everymonth. But 27 (18%) respondents save Rs 2001 Rs 3000 every month and 48

    (32%) respondents save Rs 3001 Rs 4000 every month. The remaining 13

    (8.67%) respondents save Rs 4000 per month. Therefore, it is observed that mostof the respondents save only Rs 2000

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    Out of 150 respondents, 64(42.67%) respondents prefer investing in shares and 47

    (31.33%) respondents invest in mutual fund 24 (16%) respondents invests in

    insurance. The remaining 15(10%) respondents invest in derivatives. Therefore, it

    is observed that most of the respondents prefer equity.

    Out of 150 respondents, 79(52.67%) respondents prefer high risk and high returnand 52(34.67%) respondents prefer low risk and high return and 19(12.66%)respondents prefer low risk and low return. Therefore, it is observed that most of

    the respondents prefer high risk and high return.

    The investors consider safety, return and liquidity as important factor in section of

    investment outlet. Among the three factors safety is the first and foremost

    determinant factor. The next factor considered by the investor is liquidity. The last

    factor is return. The investor needs only regular and moderate return on their

    investment.

    Out of 150 respondents 12 (8%) respondents are fully satisfied with the return oninvestment and 78(52%) respondents are satisfied with the return on investment.

    37(24.66%) respondents are neither satisfied nor dissatisfied with the return on

    investment and 23(15.33%) are dis satisfied with the return on investment. Thus it can be

    concluded that more than half of the respondents are satisfied with the return on

    investment.

    Out of 150 respondents, 54 (36%) respondents invest up to 10% of their monthly

    income 66 (44%) respondents invest 11% - 20% of their monthly income in the

    financial asset. The remaining 18 (12%) and 12 (8%) respondents invest 21% -

    40% and above 40% of their monthly income in various securities.

    Among the purpose of investment, risk covered ranks first with a mean score of61.23 followed by return on investment, liquidity, tax rebate are ranked II, III

    and IV with a mean score of 54.81,38.94 and 31.63 respectively.

    Out of 150 respondents, 65 (43.33%) respondents feel that the risk on investment

    are very high and 52 (34.67%) and 33 (22%) respondents feel that the risk on

    investment are high and moderate respectively. Hence, it can be concluded thatmore than three fourth of the respondents feel that the risk on investment are

    high.

    It is found that 11.33 percent of the respondents expect 11% - 20% return on

    shares, 60.67 percent of the respondents expects 21% - 30% and 28 percent of therespondents expect more than 30% return on shares. Since the risk in shares is

    high the return expected is also very high.

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    Out of 150 respondents 76(11.33) of the respondents expect 11% - 20% return on

    mutual funds, 61(44.53) of the respondents expects 21% - 30% and 13(8.66) of

    the respondents expect above 30%. Since the risk is low the return expected is not

    very high.

    Out of 150 respondents 49(32.67) of the respondents expect less than 10% and55(36.66) of the respondents expect 11% - 20% return on insurance, 46(30.67) of

    the respondents expects 21% - 30%. Thus investor expects 11%-20% from their

    investment in insurance.

    Out of 150 respondents 86(57.33) of the respondents expect 11% - 20% return on

    derivatives, 49(32.67) of the respondents expects 21% - 30% and 15(10.00) of the

    respondents expect above 30%. Since the risk is high the return expected is also

    very high.

    Most of the respondents get aware of the investment through friends and relatives(50%) and advertisement (40%) and only 10 per cent of the respondents get aware

    through professional advisors and none of the respondents through company

    executives. Therefore, it is inferred that most of the respondents get aware

    through friends and relatives.

    Out of 150 respondents, 109 respondents are investing their surplus funds through

    agent and the remaining 41 respondents are investing their surplus funds directly.

    Hence, it shows that most of the respondents are investing their funds through

    agents.

    Out of 150 respondents 32 (21.33%) respondents are fully satisfied with theservices rendered by the intermediaries. 76 (50.67%) respondents are satisfied

    with the service rendered by the intermediaries. 39 (26%) respondents and 3 (2%)

    respon