Copy of Project 1

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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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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

25


26/87

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.


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


28/87

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

28


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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.

29


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CHAPTER-2

DATA ANALYSIS AND INTERPRETATION

30


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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.

31


32/87

TABLE- 2.1.2

Classification of Respondents on the basis of Sex


Chart-2.1.2

0

20

40

60

80

100

120

140

160

Male Female Total


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


33/87

TABLE- 2.1.3

Classification of Respondents on the basis of Educational Qualification


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


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


34/87

Classification of Respondents on the basis of Occupation


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


35/87

0102030405060708090

Busin

ess

Professio

nal

Gov

ernm

entE

mploy

ee

PrivateEm

ploy

ee


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


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


36/87

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


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


CHART-2.1.6

36

Marital Status Number of Respondents Percentage

Married 60 40

Unmarried 90 60

Total 150 100.00


37/87

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


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


38/87

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


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


39/87

CHART-2.1.8

0

10

20

30

40

50

60

70

Mutual

Funds

Equity Insurance Derivatives


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:


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


40/87

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


CHART-2.1.10

40


41/87

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

41


42/87

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


42


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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


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


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


44/87

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


Very High 65 43.33

High 52 34.67

Moderate 33 22

Low - -

Very low - -

Total 150 100.00


CHART-2.1.14

44


45/87

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


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


46/87

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


CHART-2.1.16

46


Less than 10% - -

11%-20% 76 50.67

21%-30%61

40.67

Above 30% 13 8.66

Total 150 100


47/87

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


CHART-2.1.17

47


Less than 10% 49 32.67

11%-20% 55 36.66

21%-30% 46 30.67

Above 30% - -

Total 150 100


48/87

0

10

20

30

40

50

60

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

Number of

Respondents

Percentage

INFERENCE:


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


CHART-2.1.18

48


Less than 10% - -

11%-20% 86 57.33

21%-30%49

32.67

Above 30% 15 10.00

Total 150 100


49/87

0

10

20

30

40

50

60

70

80

90

100

11%-

20%

21%-

30%

Above

30%

Number of

Respondents -

Percentage -

INFERENCE:


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


CHART-2.1.19

49


50/87

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


CHART-2.1.20

50


51/87

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


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

51


52/87


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


52


53/87

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


Very High 73 48.67

High 46 30.67

Moderate 31 20.66

Low - -

Very low - -

53


54/87

Total 150 100.00


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


54


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


55/87


56/87

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


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


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


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.


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TABLE-2.3.2

Weighted Average on Risk in Investment

Rank Number of

Respondents


Very High(5) 65 43.33325

High(4) 52 34.67208

Moderate(3) 33 2299

Low(2) - - -

Very low(1) - --

Total 150 100.00632


= 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


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.


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TABLE-2.3.3

Weighted Average on Services Rendered by the Intermediaries

Rank Number of

Respondents


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


= 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


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.


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TABLE-2.3.4

Weighted Average on Brokerage Charges

Rank Number of

Respondents


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


= 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


= 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


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

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