Faculty of Management StudiesHaridwar

SUMMER TRAINING PROJECTJuly 2010

“Perception of people towards investment and various investment avenues”

Girish Chandra

MBA (Finance)

FMS, GKUV

DECLARATION

I, GIRISH CHANDRA, student of MBA (FINANCE) from FACULTY OF

MANAGEMENT STUDIES, G.K.U.V. hereby declare that I have

completed this project on " Perception of people towards

investment and various investment avenues ” in the academic

year 2009-11. The information submitted is true and original to the

best of knowledge.

Signature of student

ACKNOWLEDGEMENTACKNOWLEDGEMENT

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

Sincere acknowledgement is due foremost to the Sincere acknowledgement is due foremost to the MR. PRITPALMR. PRITPAL SAHOTA, ASM-RELIGARE SECURITIES LTDSAHOTA, ASM-RELIGARE SECURITIES LTD.. Who endowed me withWho endowed me with the valuable opportunity to explore so interesting and a critical topicthe valuable opportunity to explore so interesting and a critical topic as is the subject of the present report.as is the subject of the present report.

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

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

GIRISH

CHANDRA

CONTENTS

Introduction

Investment

Investment need of an investor

Investment options in India

Research Methodology

Data Analysis and Interpretation

Suggestions and Recommendations

Conclusion

Bibliography

Appendix: Questionnaire

INTRODUCTION

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

invested in various options available to the people, the money acts as the driver for

growth of the country. Indian financial scene too presents a plethora of avenues to the

investors. Though certainly not the best or deepest of markets in the world, it has

reasonable options for an ordinary man to invest his savings.

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

development and the maturation of modern capitalism. For the economy as a whole,

aggregate investment sanctioned in the current period is a major factor in determining

aggregate demand and, hence, the level of employment. In the long term, current

investment determines the economy’s future productive capacity and, ultimately, a

growth in the standard of living. By increasing personal wealth, investing can

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

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

contributes to greater economic growth and prosperity. Specific types of investments

provide other benefits to society as well.

INVESTMENTS

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

return or to make use of the money for future benefits or advantages. People commit

money to investments with an expectation to increase their future wealth by investing

money to spend in future years. For example, if you invest Rs. 1000 today and earn 10

%over the next year, you will have Rs.1100 one year from today.

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

So, the starting point in searching for the perfect investment would be to examine

investor needs. If all those needs are met by the investment, then that investment can

be termed the perfect investment. Most investors and advisors spend a great deal of

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

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

most appropriate investments are selected for him.

The Investment Needs of an Investor

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

1. Security of Original Capital;

2. Wealth Accumulation;

3. Comfort Factor;

4. Tax Efficiency;

5. Life Cover;

6. Income;

7. Simplicity;

8. Ease of Withdrawal;

9. Communication.

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

need. This is perhaps the strongest need among investors in India, who have suffered

regularly due to failures of the financial system.

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

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

portfolio. Wealth accumulation is the ultimate measure of the success of an investment

decision.

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

Avoiding discomfort is probably a greater need than receiving comfort. Reputation

plays an important part in delivering the comfort factor.

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

of the Indian psyche. Every rupee saved in taxes goes towards wealth accumulation.

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

life cover to manage the situations in case of any eventualities.

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

usually used by the investor for meeting regular expenses. Income needs tend to be

fairly constant because they are related to lifestyle and are well understood by

investors.

Simplicity: Investment instruments are complex, but investors need to understand

what is being done with their money. A planner should also deliver simplicity to

investors.

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

when desired. This is strongly linked to a sense of ownership. It is normally triggered

by a need to spend capital, change investments or cater to changes in other needs.

Access to a long-term investment at short notice can only be had at a substantial cost.

Communication: This refers to informing and educating investors about the purpose

and progress of their investments. The need to communicate increases when

investments are threatened.

Security of original capital is more important when performance falls.

Performance is more important when investments are performing well.

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

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

been met to satisfaction. But there is always a trade-off involved in making

investments. As long as the investment strategy matches the needs of investor

according to the priority assigned to them, he should be happy.

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

on his risk-return profile, his satisfaction level, his income, and his expectations.

Accurate planning gives accurate results. And for that there must be an efficient and

trustworthy roadmap to achieve the ultimate goal of wealth maximization.

Choosing the Right Investment Options

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

to go about the task of investment, how much to invest at any moment and when to

buy or sell the securities, This depends on investment process as investment policy,

investment analysis, valuation of securities, portfolio construction and portfolio

evaluation and revision. Every investor tries to derive maximum economic advantage

from his investment activity.

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

uncertainty, capital appreciation, marketability, tax advantage and convenience of

investment. The following Table should give the clear picture relating to the investors’

investment decisions in various financial market instruments. The choice of the best

investment options will depend on personal circumstances as well as general market

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

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

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

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

Investment Options in India

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

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

commercial banks and other non-banking financial institutions. These are generally a

low risk prepositions as the commercial banks are believed to return the amount due

without default. By and large these FDs are the preferred choice of risk-averse Indian

investors who rate safety of capital & ease of investment above all parameters. Largely,

these investments earn a marginal rate of return of 6-8% per annum.

Government Bonds – The Central and State Governments raise money from

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

certificates, Kisan Vikas Patra, Post Office Deposits, Provident Funds, etc.

These schemes are risk free as the government does not default in payments.

But the interest rates offered by them are in the range of 7% - 9%.

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

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

financial life-cover, tax-savings and satisfactory returns. Even if one does not

manage to save money and invest regularly in financial instruments, with

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

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

as investment avenues as they offer partial cash-back at certain intervals. This

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

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

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

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

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

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

investment purposes also. Since last 1 year, both Gold and Silver have highly

appreciated in value both in the domestic as well as the international markets. In

addition to its attributes as a store of value, the case for investing in gold

revolves around the role it can play as a portfolio diversifier.

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

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

Foreign investors. Although Indian Markets had been through tough times due

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

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

from the stock markets, but there are people who have lost everything due to

incorrect timings or selection of fundamentally weak companies.

Real Estate- Returns are almost guaranteed because property values are

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

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

from real estate investment.

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

professional fund managers that invest in the stock market collectively on behalf

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

investors. A mutual fund acts like a professional fund manager, investing the

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

fee and its expenses, which are declared in its offer document.

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

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

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

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

payments is the key component.

Need for the study:

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

To understand basic requirement of the common man and their view towards

investment.

REVIEW OF LITERATURE

Psychology of Investments and Investor’s Preferences

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

investing approach, following the right strategy to maximize the return on investment

and proper allocation of investible funds. While applying these three principles, an

individual investor has to confront his/her demographics, lifestyle and investment

psychology. Whether the investor's age or occupation or family income has a role of

play in making choice of investment avenues? Is the investor choice affected by his

overconfidence, reference group and framing of the available alternatives? The

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

financial consultants, academicians, students and the marketer of the financial

products.

Author:

Dr. (Mrs.) Sushant Nagpal

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

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

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

and the maturation of modern capitalism. For the economy as a whole, aggregate

investment sanctioned in the current period is a major factor in determining aggregate

demand and, hence, the level of employment. In the long term, current investment

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

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

overall economic growth and prosperity.

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

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

OBJECTIVES OF THE STUDY:

PRIMARY OBJECTIVE

To Study the various investment avenues and the investors risk preference towards it.

SECONDARY OBJECTIVES

To find out the general demographic factors of the investors dealing in capital market.

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

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

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

RESEARCH METHODOLOGY

Research Design

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

guides the collection and analysis of data. The study is intended to find the investors

preference towards various investment avenues. The study design is descriptive in

nature.

TYPE OF RESEARCH- DESCRIPTIVE RESEARCH

Descriptive study is a fact-finding investigation with adequate interpretation. It

is the simplest type of research and is more specific. Mainly designed to gather

descriptive information and provides information for formulating more sophisticated

studies.

Sampling Design

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

Selection of the sample size: 100

Sampling Methods

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

respondents. Researchers or field workers have the freedom to choose whomever they

find, thus the name “convenience”. About 100 samples were collected from Indore

city and most of the respondents were customers coming in to financial hubs and

commercial complexes.

Formulation of the questionnaire

Data collection

Primary data – collected through Structured Questionnaire.

Secondary data – Earlier records from journals, magazines and other sources.

Tools used for analysis

Percentage analysis

Chi-square test

Kendall test

ANOVA

Correlation Analysis

Multiple Response Table

Data Analysis and interpretatrion:-

Age of the respondent :-

Table5.1Age

% Of respondent20-30 25

31-40 36

41-50 27

50 and above12

Total 100

Fig- 5.3

Income Group of the Respondent

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

Bellow 1 lac 32

1-5 lac 61

5-10 lac 7

10 lac and above -

Fig-5.4

Fig-5.4

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

Qualification of the respondents:-

Table5.3 QualificationQualification Investor (%)

High School 3

Graduate 48

Post Graduate 14

Professional 26

Others 9

Fig-5.5

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

Share market 8

Mutual fund 17

Insurance 29

Bank 28

Property 18

Total 100

Fig-5.6

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

8%

17%

29%

28%

18%

Share market mutual fund Insurance bank Property

Investment Horizon

Table 5.5: Type of investment preferredTerm Investment (%)

SHORT TERM 31

LONG TERM 40

BOTH 29

Total 100

Fig- 5.7

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

Respondent who have invested in equity market

Table5.6: invested in the equity marketYes No

19 81

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

Respondent first source of awareness

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

Investor friends and relative 37

Advertisement and hoardings

26

Brokerage firm 16

Banks 21

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

the investor friends and relative.

Income invested in equity

Table 5.8 Percentage of income invest in equity sharesPercentage of income Percentage of investor

Below 5% 22

5 to 10% 44

10 to 20% 27

20 to 30% 6

22

44

27

6

0

5

10

15

20

25

30

35

40

45

50

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

Percentage of investor

Fig-5.8

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

Awareness about Religare securities

Table 5.9 Respondent who aware about Religare

Yes No

73% 27%

Know about Religare

73

27

Yes

No

Fig- 5.9

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

Preference for selecting broking firm

Table5.10: investor preference while selecting broking firm

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

SUMMARY OF FINDINGS:

Category Rank 1

Brokerage 42

services 30

Research calls 16

Others 12

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

income percentage on investment and the participation in cash market.

From One Way ANOVA it is found that there is significant difference between

the annual income and the income percentage towards investment.

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

5-10% of their investment mostly considers the market risk(18%) as the major

risk which prevails in the market.

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

is around 10% of their income, consider that the affordable margin amount for

investment in Derivatives is up to Rs10000/-.

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

concentrated as prospective clients.

LIMITATIONS OF THE STUDY

This is a two months study only.

Data available was not sufficient, there was lack of availability of data as

most of it was confidential for the companies.

Sample size is two small.

Language is one of the construe during questioner filling

Portfolio requires the churning of proportion of investment in each sector

as well as company from time to time to give better returns.

CONCLUSION

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

major challenge ever for professionals.

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

investing in future.

People should keep their eye open and keep updating themselves about various

investment avenues so that they can get safe returns.

References:

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

Publishing Company Ltd.

Investment Management- V.K. Bhalla.

www.nseindia.com

www.stockedge.com

www.religareonline.com

Questionnaire

Name:

1. Age

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

2. Gender

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

3. Educational qualification

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

Professional [ ] (e) Others [ ]

4. Annual income

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

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

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

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

(c) Advertising & hoardings (d) banks

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

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

(b) The opportunity for steady growth

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

(d) The safety of investment principal

7. What is the investment horizon you prefer?

(a) Short term investment

(b) Long term investment

(c) Both

9. Please indicate your preference on the following investment avenues

Categories Highly

Favorable

Favorable Neutral Unfavorable Highly

Unfavorable

(a) Share Market

(b)Mutual Funds

(c) Insurance

(d)Bank Deposits

(e) Property

10. Do you want to invest in share market?

(a) Yes (b) No

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

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

a) Below 5%

b) 5 – 10 %

c) 10 – 20%

d) Above 20%

12. Have you heard about Religare Securities Ltd.?

(a) Yes (b) No

13. You are associated with which broking firm?

………………………………………………………………………..

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

Categories Rank-1 2 3 4 5

(a) Brokerage

(b) Services

(c)Research (Calls)

(d)Additional Features

THANK YOU