Sys Interest

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Title of the Research

Impact of Interest Rate on Investors

Rationale of the study

Investment: Different people invest with different strategies

or no-strategies. This article describes in more details

different behavioral patterns of investors of four distinct

types. When trying to make observations of types of investor

behavior, this QuaSyLaTic invariably uses his own investment

philosophy and strategies as reference for making

observations. Hence the set of characteristics and attributeson what constitute a focused and disciplined investor to

create wealth is first described.

Characteristics and Attributes of Focused & Disciplined Investor

Taking investment as a serious study, research and monitoring

work not a casual game with hear-say and hope for the best.

Understand investment is a matter of timing, not blindly trusting

in long term

Invest in market instruments that have potential to bring the best

return, not using diversification to mix up good apples with

bad fruits.

Study risk / reward carefully and prepare to exist if faced with

high uncertainty to protect acquired gain, or preserve capitals

or cut loss.

Make research on future scenarios of investment performance

with monitoring to validate the assumptions and do not deal

with uncertainty or unknown.

Take care of every dollar of investment to ensure its value

creation.

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With the above as criteria, four distinct types of investors are

observed.

TYPE 1: Investors who subscribe to the above stated strategies

or approach but do not have the interest to study and take up the

discipline. Or they do not have any preference for any particular

strategy or approach. They prefer to let consultant cum

investor handle everything and their fund, as long as they are

being kept informed. Most important of all, they understand the

nature of investment risks and blame no one.

TYPE 2: Investors who also let consultant cum investor handle

everything and their fund, but they want to learn the above

described strategies and approach, with the views that one day

they can handle on their own investment. They also understand

the nature of investment risks.

TYPE 3: Investors, who has their own strategies and willing to

put in hard work to monitor and validate their assumptions in

order to grow their wealth. They may have different strategies or

approach from the above. This QuaSyLaTic will network with

these people for networking and exchange of ideas.

TYPE 4: Investors who do not subscribe to the above stated

strategies and approach. Usually they do not do serious research

and monitoring work. They do not show consistency in the

investment decision. They use general investment ideas as

strategies, with hope for the best. They may not have the

stomach for investment losses. They dont cut loss and hope for

the best into the future.

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Small Investors:Traditional economic analysis of markets

with asymmetric information assumes that the uninformed

agents account for the incentives of the informed agents to

distort information. We analyze whether investors in thestock market are able to account for such incentives.

Security analysts provide investors with information about

investment opportunities by issuing buy and sell

recommendations. The recommendations are likely to be

biased upwards, in particular if an analyst is affiliated with an

investment bank that is a recent underwriter of the

recommended firm. Using the trading data from the Stock

Exchange, we find that large (institutional) investors

generate abnormal volumes of buyer-initiated trades after a

positive recommendation only if the analyst is unaffiliated.

Small traders exert abnormal buy pressure after all positive

recommendations, including those of affiliated analysts. The

trading behavior of small analysts implies losses, since

stocks recommended by affiliated analysts perform

significantly worse than those recommended by unaffiliated

analysts. Our results imply that larger investors account for

the distortions of recommendations, but small (individual)

investors do not. Increased competition among analysts does

not remedy the informational distortion or investor reactions.

Objectives

Is the interest rate fluctuation really

dampening the spirit of small investors i.e.

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changes in ration of investment and

consumption.

Research Methodology

I have used both primary data and secondary data for my project.

The secondary data is used to collect information on investment

options for the Indian investors. These included product

brochures of various schemes like post office schemes, RBI

bonds, ICICI bonds, bank deposits, insurance policies etc.

For the collection of primary data a questionnaire is prepared for

studying the mind of general investor. This survey will be done

using stratified random sampling. These findings of the same are

presented in the findings portion of the report. Effect of interest

rate change will be studied based on the following points:

More consumption than saving.

Capital market becoming attractive.

Tax benefits available on investment.

Effect of these changes on senior citizens.

Expected disposable income in the hands of the investors.

Since, list of investment avenues last long, I have restricted my

scope to few most common governmental and non-governmental

investment options

Non-governmental options Governmental optionsICICI infrastructure bonds National saving certificatesRBI relief bonds Provident fundIDBI bonds LIC

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Fixed deposits

This study includes the interest rate changes in above options

and respective change in investment flows to these options.

Reasons in the mind of small investors while deciding the

investment portfolio are also a topic of study.

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Limitation of the Project

At the time of study I may have to face certain

problems re lated to t ime due to the h igh number of

investment policies. For me its very hard tocommunicate with pol icy makers as they are far from

my approach. Thus the source of information for me is

Internet from where is collecting the information about

the project and communicate with many small investors

and pol icy agents. The l im itat ions to the research

design and t ime frame may be another factor l imit ing

the study because key personnel may not f ind t ime to

respond or may not like to disclose their vision

regarding the activities in which they are involved.

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QUESTIONNAIRE

1. Do you invest your money or savings somewhere?

If yes then where

If no then why

.

.

.

2. Which kind of investment option you prefer governmental or

non-governmental? Why?

Govt. Non-Govt.

3. Which investment scheme is best from your point of view

please ranking them? Why?

ICICI infrastructure bonds

National Saving Certificates

RBI Relief Bonds

Tax saving Bonds

IDBI Bonds

Fixed Deposits

LIC

Provident Funds

Others (Name them)

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Why

4. How much you invest every month?

Less than 1000Rs. 1000-5000Rs.

5000-10000Rs. 10000-50000Rs

More than 50000Rs

5. What you think is better save money?

Saving cash

Purchasing Property

Purchasing investment policies/bonds

Investing money in share market

Why?

6. Is investment is more consumption or expenditure

than saving? Comment.

7. Is share market is a good way to do investment?

Comment.

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8. Is there is some tax benefits available on

investment, explain them?

9. Whom do you consult before doing investment?

Financial Reports Investment consultants

Financial Advisors Bank/policy agents

Self

Why you do so? Comment.

10.Conclude the term investment and its benefits in

60 words.

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Sys Interest

Documents

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