Investment Analysis Report

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LOVELY PROFESSIONAL UNIVERSITY

DEPARTMENT OF MANAGEMENT

Report on Summer Training

[Title]

Study of investors perception towards various Investment avenues

At

Axis bank

Submittedto Lovely Professional University

In partial fulfillment of the

Requirements for the award of Degree of

Master of Business Administration

Submitted by:

Tanu rani

10904883

DEPARTMENT OF MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY

JALANDHAR NEW DELHI GT ROAD

PHAGWARA

PUNJAB


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ACKNOWLEDGEMENT

I present this project report on STUDY OF INVESTROS PERCEPTION TOWARDS

VARIOUSINVESTMENT AVENUES INAXIS BANK LTD., Kashmiri gate, near hasan

building with a sense of great pleasure and satisfaction. I undersign with pleasure take

this opportunity to thank all those related directly or indirectly in preparation of this

project report.

I started working on this project under the invaluable guidance of Honorable 'Mr.

ROHIT BANSAL SIRfor which I am very much thankful for her valued time given for the

purpose. Without her co-operation our project work would have been difficult to

complete.

I express our sincere thanks to Mr. PARITOSH GUPTA, (Branch Manager) in Axis

Bank Ltd., Wardha and staff in that organization. I am also thankful to Mrs. RASHMI

MITTAL MAAM [Dean of our college] to allow us to carry out this project.

Date:

Place:


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DECLARATION

I hereby declare that this project titled STUDY OF INVESTROS PERCEPTION

TOWARDS VARIOUSINVESTMENT AVENUES INAXIS BANK LTD is a bonafied and

authentic record of work done by me under the supervision ofMr. Rohit bansal during

academic session 2009-2013

The work presented here is not duplicated from any other source and also not submitted

earlier for any other degree to any university.

I understand that any such duplication is liable to be punished in accordance with the

university rules.

(Tanu Rani)


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Executive summarySavings 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.

One needs to invest and earn return on their idle resources and generate a specified sum

of money for a specific goal in life and make a provision for an uncertain future. One of

the important reasons why one needs to invest wisely is to meet the cost of inflation.

Inflation is the rate at which the cost of living increases. The cost of living is simply what

it cost to buy the goods and services you need to live.

Inflation causes money to lose value because it will not buy the same amount of a good or

service in the future as it does now or did in the past. The sooner one starts investing thebetter. By investing early you allow your investments more time to grow, whereby the

concept of compounding increases your income, by accumulating the principal and the

interest or dividend earned on it, year after year. In this report mainly it tells about the

value of investing investors want to invest but they were not known where he will invest

and which investing option is better for him. So in this report introduce the avenues of

axis bank and how it is benefit for us. Every avenue tells the merits and demerits. It is

help to give a recommendation to the investors where they should invest according to the

investors need.

The three golden rules for all investors are: Invest early

Invest regularly

Invest for long term and not for short term


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TABLE OF CONTENTChapter No. Particular Page no.

Chapter 1 Introduction P.g. No. 7-17

Chapter 2 Review of literature P.g. No. 18-23

Chapter 3 Research methodology P.g. No. 24-29

Chapter 4 Analysis of report P.g. No. 30-79

Chapter 5 Finding & recommendation P.g. No. 80-85

Chapter 6 Conclusion P.g. No 86-87

Bibliography P.g. No. 87-88

Questionnaire P.g. No. 89-91


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Content of figureFigure no. Particular Page no.

Fig. no. 1.1 Regarding investment planning p.g. no. 68

Fig. no. 1.2 In which bank you have investment plan P.g. no. 69

Fig. no. 1.3 Premium regarding p.g. no 70

Fig. no. 1.4 Awareness of investment avenues p.g. no. 71

Fig. no. 1.5 According to you which is the best

option

p.g. no 72

Fig. no. 1.6 Sector preference p.g. no. 73

Fig. no. 1.7 Investment decision p.g. no. 74

Fig. no. 1.8 Investment objectives p.g. no. 75

Fig. no. 1.9 Investment services p.g. no. 76

Fig. no. 1.10 Time period for investing p.g. no. 77

Fig. no. 1.11 Regarding the field related to trading ininvestment instrument

p.g. no. 78

Fig. no. 1.12 Comparison of axis bank avenues withother bank

p.g. no.79

Fig. no. 1.13 Source of investment advice p.g. no. 80


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Introduction of Axis bank

Axis Bank is the third largest private sector bank in India. Axis Bank offers the entirespectrum of financial services to customer segments covering Large and Mid-Corporate,

SME, Agriculture and Retail Businesses.

The Bank has a large footprint of 1787 domestic branches (including extension counters)

and 10,363 ATMs spread across 1,139 centres in the country as on 31st December 2012. The

Bank also has 7 overseas branches / offices in Singapore, Hong Kong, Shanghai, Colombo,

Dubai, DIFC - Dubai and Abu Dhabi.

Axis Bank is one of the first new generation private sector banks to have begun operations

in 1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust ofIndia (SUUTI) (then known as Unit Trust of India),Life Insurance Corporation of India

(LIC), General Insurance Corporation of India (GIC), National Insurance Company Ltd.,

The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and

United India Insurance Company Ltd. The shareholding of Unit Trust of India was

subsequently transferred to SUUTI, an entity established in 2003.

With a balance sheet size of Rs.2,85,628 crores as on 31st March 2012, Axis Bank is ranked

9th amongst all Indian scheduled banks. Axis Bank has achieved consistent growth and

stable asset quality with a 5 year CAGR (2007-12) of 31% in Total Assets, 30% in Total

Deposits, 36% in Total Advances and 45% in Net Profit.

Business segment of axis bank RETAIL BANKING BUSINESS BANKING


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CORPORATE CREDIT TREASURY INTERNATIONAL BANKING SMALL AND MEDIUM ENTERPRISES INFORMATION TECHNOLOGY

AGRICULTURE FINANCIAL INCLUSION HUMAN RESOURCES

Retail bankingAxis Bank has developed a strong retail banking franchise over the years. Retail Banking isone of the key drivers of the Banks growth strategy and it encompasses a wide range ofproducts delivered to customers through multiple channels. The Bank offers a completesuite of products across deposits, loans, investment solutions, payments and cards to helpcustomers achieve their financial objectives. The Bank focuses on product differentiationas well as a high level of customer-service to enable it to build its retail business.

The Bank has continued to develop its risk management capabilities in Retail business,both from a credit and operations risk standpoint.The growth areas identified by the Bank are in the areas of residential mortgages andpassenger car loans. Of the total retail loans portfolio, 88.47% is in the form of securedloans (residential mortgages and auto loans).The retail business of the Bank is supported by innovative services and alternatechannels. It include ATM network, internet banking, mobile banking & phone bankingwhich provide convenience of transactions to customers.

Business bankingBusiness Banking leverages the Banks strengths a well distributed network of branches

and a strong technology platform to offer the best in transaction banking services. TheBank offers a range of current account products and cash management solutions acrossall business segments covering corporates, institutions, central and state governmentministries and undertakings as well as small and retail customers.The Bank is one of the top CMS providers in the country. The Bank acts as an agencybank for transacting government business offering services to various CentralGovernment Ministries / Departments and other State Governments and UnionTerritories.Corporate credit

Axis Bank has built a strong corporate banking franchise across corporate, liability andasset businesses. Axis Bank provides customized structuring and financing solutions in a

timely and comprehensive manner to its corporate customers with a focus on building

out a high quality credit portfolio. The Bank is a market leader in Debt Capital Markets

and loan syndication business across segments, sectors and geographies. The Bank also

provides full range of Treasury and Trade Finance solutions to its corporate clients. The


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Bank offers technology enabled transaction banking and cash management services to

customers across Government, financial institutions and corporate segments.

Banks infrastructure business includes project and bid advisory services, project lending,

debt syndication, project structuring and due diligence, securitization and structured

finance.

In October 2010, the Bank launched theAxis Infra Index. The Index, as a composite

measure of investor confidence, comprises four components: flow of equity and debt

funds into infrastructure sectors, project completion and commencement of operations,

output related to infrastructure segments and regulatory and policy developments

relevant for the sector. It is designed to capture the evolving fundamentals of the sector

and is updated and disseminated on a quarterly basis.

Treasury option

The Bank has an integrated Treasury, covering both domestic and global markets, which

manages the Banks funds across geographies. The Banks treasury business has grown

substantially over the years, gaining market share and continuing to be among the top

five banks in terms of forex revenues. The Treasury plays an important role in the

sovereign debt markets and participates in the primary auctions held by RBI. It also

actively participates in the secondary government securities and corporate debt market.

The foreign exchange and money markets desk is an active participant in the inter-bank/

FI space. The Bank has been exploring various cross-border markets to augment

resources and support customer cross-border trade. The Bank has emerged as one of theleading providers of foreign exchange and trade finance services. It provides a gamut of

products for exports and imports as well as retail services. Its cutting edge technology

provides comprehensive and timely customer services.

International banking

The international operations of the Bank form a key enabler in its strategy to partner with

the overseas growth potential of its domestic clientele, who are venturing abroad or

require non-rupee funds for domestic projects. The Bank now has a foreign network of

four branches (Singapore, Hong Kong, DIFC (Dubai) and Colombo (Sri Lanka)) and threerepresentative offices (Shanghai, Dubai and Abu Dhabi) with presence in six countries.

While corporate banking, trade finance, treasury and risk management solutions are the

primary offerings through the branches at Singapore, Hong Kong, DIFC (Dubai) and

Colombo, the Bank also offers retail liability products from its branches at Hong Kong

and Colombo. Further, the Banks Gulf Co-operation Council (GCC) initiatives in the form

of representative offices in Dubai and Abu Dhabi, and alliances with banks and exchange


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houses in the Middle East provide the support for leveraging the business opportunities

emanating from the large NRI Diaspora present in these countries.

Small and medium enterprise

The Small and Medium Enterprises (SME) segment is a thrust area of the Bank. Thebusiness approach towards this segment, which is expected to contribute significantly to

economic growth in future, is to build relationships and nurture the entrepreneurial

talent available. The relationship based approach enables the Bank to deliver value

through the entire life cycle of SMEs. The Bank has segmented its SME business in three

groups: Small Enterprises, Medium Enterprises and Supply Chain Finance. The Bank

extends working capital, project finance as well as trade finance facilities to SMEs. The

Bank has launched Business Gaurav SME Awards in association with Dun & Bradstreet to

recognise and award achievers in the SME space.

Information technology

The Bank continues to focus on introducing innovative banking services through

investments in scalable and robust technology platforms that delivers efficient and

seamless services across multiple channels for customer convenience and cost reduction.

The Bank has also focused on improving the governance process in IT. The Bank has

launched the Business Process Management System, a reusable system, which helps to

build process efficiencies across various areas of operations.

The Bank has undertaken various steps in order to align itself towards RBI guidelines on

security and governance, including setting up of Board and Executive level committees

and working on IT operations and other key areas.

Agriculture

The Bank continues to drive and expand the flow of credit to the agricultural sector. 401

branches of the Bank have dedicated officers for providing farm loans. Products and

solutions are created specifically with simple features and offered at affordable rates to

rural customers. The Bank has also adopted a value-chain approach, wherein end-to-end

solutions are being provided for various stakeholders. It also offers various customizedsolutions to meet the regional requirements.

Financial inclusion

The Bank perceives financial inclusion (FI) not as a corporate social responsibility or a

regulator driven initiative but as a large business opportunity that lies untapped in the

rural and unexplored section of the urban market. Till March 2012, the Bank has opened


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over 4.4 million No-Frills accounts in over 7,607 villages through a network of 15 Business

Correspondents and nearly 6,000 customer service points. The Bank has a strong

presence in the Electronic Benefit Transfer (EBT) space and has covered around 6,800

villages across 19 districts and 9 states till date with over 3.7 million beneficiaries.

The Bank also has a range of other customised products for this customer segment like

different variants of Axis Uday No Frills Savings Accounts, Chhota RD, Chhota FD, and

Chhota SIP. The Bank has been one of the first few banks to have tied-up with telecom

companies to offer remittance led financial inclusion services on the mobile platform.

Human resources

The Bank aims in creating and developing human capital to realise its vision of nurturing

a mutually beneficial relationship with its employees. Employee engagement and

learning, leadership development, enhancing productivity and building multiple

communication platforms thus occupied centre stage in the Banks HR objective. The

Bank continues to maintain a strong employer brand in the financial services sector

especially on the campuses of the premier business schools of the country. In a major

initiative, the Bank launched Axis Academic Interface Program (AAIP) with Institutions

to offer youngsters an understanding about the financial services industry, and creating

Axis Bankers. So far, the Bank has tied up with Manipal University, NIIT, IFBI

andGuwahati University.

Axis Bank has a young workforce with an average age of 29 years. The equal opportunity

employer policy of the Bank contributes strongly to the Axis Bank brand.

Shareholding PatternAs on 31/03/2011

Promoter Shareholding 37.22%

1

Administrator of the Specified Undertaking of the Unit Trust of

India - (SUUTI) 23.68%

2 Life Insurance Corporation of India 9.56%

3 General Insurance Corporation of India 1.85%

4 The New India Assurance Company Limited 0.94%


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5 National Insurance Company Limited 0.58%

6 The Oriental Insurance Company Limited 0.34%

7 United India Insurance Company Limited 0.27%

Domestic Shareholders 15.71%

8 Indian FIs and Banks 1.74%

9 Indian Mutual Funds 3.38%

10 Indian bodies corporate 5.59%

11 Indian residents 5.00%

Foreign Shareholders 47.07%

12 FIIs 37.68%

13 FDI (GDR) 9.19%

14 Foreign Bodies DR 0.04%

15 Foreign Banks/Foreign Nationals 0.00%

16 Non-Resident Indians 0.16%

Total 100%

Board of directors

The members of the board are:


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Dr. Adarsh Kishore Chairman

Smt. Shikha Sharma Managing Director & CEO

Shri S. K. Chakrabarti Deputy Managing Director

Shri J.R. Varma Director

Dr. R.H. Patil Director

Smt. Rama Bijapurkar Director

Shri R.B.L. Vaish Director

Shri M.V. Subbiah Director

Shri K. N. Prithviraj Director

Shri V. R. Kaundinya Director

Shri S. B. Mathur Director

Shri S. K. Roongta Director

Shri Prasad R. Menon Director

Shri R. N. Bhattacharyya Director

Vision 2015

To be the preferred financial solutions provider excelling in customer delivery through

insight, empowered employees and smart use of technology

Core Values

Customer Centricity

Ethics


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Transparency

Teamwork

Ownership

Key milestones

1993 1. Axis Bank (erstwhile UTI Bank) opens its Registered Office inAhmedabad and Corporate Office in Mumbai

1994 1. Banks first branch inaugurated at Ahmedabad by Dr.ManmohanSingh, then Hon'bleFinance Minister, Government of India.

2001 1. Deposits base crosses Rs.10,000 crores

2002 1. Banks 100th branch opens at Tuticorin, Tamil Nadu2. The Bank opens an ATM at the GolDak-Khana, (New Delhi GPO),

the first ATM at any post office in the country3. Bank launches Corporate iConnect - the internet banking facility

for corporate customers2003 1. The Banks debit card base crosses the one million mark

2. The Bank opens its ATM at Thegu near the Nathula Pass inSikkim. This ATM is at the highest altitude in India.

3. First Indian bank to launch the travel currency card4. The Bank opens its 1000th ATM

2005 1. Bank gets listed on London stock exchange2. The Bank and Visa International launch mobile refill facility for all

Visa card holders in India

2006 1. Opens it's first international branch at Singapore

2. The first Indian Bank to successfully issue foreign currency hybridcapital in the international market

3. Opens Representative Office in Shanghai4. Launches credit card business5. Opens the first of it's kind Priority Banking lounge in Pune

2008 1. Launches Platinum Credit Card, India's first EMV chip based card2. Opensits Dubai Representative Office

2010 1. Opens it's 1000th branch at MET Bandra Reclamation, Mumbai

2011 1. Launches India travel card - India's first and only Indian currencyprepaid travel card for foreign nationals

2. The Bank inaugurates Axis House, its new Corporate Office atWorli, Mumbai.

2012 1. Opens the 10,000th ATM - Largest ATM network amongst privatesector banks in India

2. Reached 2 lakh installed EDC machines the highest for any bankin India

3. Becomes the first Bank in the world to reach $2 billion loading onprepaid Travel CurrencyCards


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Management system of axis bankPromoters:Axis Bank Ltd. has been promoted by the largest and the best Financial

Institution of the country, UTI. The Bank was set up with a capital of Rs. 115 crore, withUTI contributing Rs. 100 Crore, LIC - Rs. 7.5 Crore and GIC and its four subsidiaries

contributing Rs. 1.5 Crore each SUUTI - Shareholding 27.02%Erstwhile Unit Trust of India

was set up as a body corporate under the UTI Act, 1963, with a view to encourage savings

and investment. In December 2002, the UTI Act, 1963 was repealed with the passage of

Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 by the Parliament,

paving the way for the bifurcation of UTI into 2 entities, UTI-I and UTI-II with effect from

1st February 2003. In accordance with the Act, the Undertaking specified as UTI I has

been transferred and vested in the Administrator of the Specified Undertaking of the Unit

Trust of India (SUUTI), who manages assured return schemes along with 6.75% US-64Bonds, 6.60% ARS Bonds with a Unit Capital of over Rs. 14167.59 crores. The Government

of India has currently appointed Shri K. N. Prithviraj as the Administrator of the Specified

undertaking of UTI, to look after and administer the schemes under UTI where

Government has continuing obligations and commitments to the investors, which it will

uphold.

Products of Axis bankAccounts

EasyAccess Savings Account Prime Savings account

Salary Savings Account Power salute: A salute to the defence forces

Azaadi Senior Privilege Savings Account

For the woman of today Smart Privilege Savings Account

A complete banking solution for Trusts, Associations, Societies, Government Bodies,

Section 25 companies and NGOs

Pension Savings Bank Account,

Ladies first account Youth account

Deposits

Fixed Deposits


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Recurring Deposits

Encash 24

Tax Saver Fixed Deposit

Loans

Welcome to the wide range of Axis Bank's Loan products. Put an end to your financial

troubles.

Power Homes Power Drive

Personal Power Study Power

Asset Power Two Wheeler Loan

Loan Against Security Consumer Power

Cards

Apart from Gold & Silver credit cards, Axis Bank provides

Axis Bank Meal Card Axis Bank Gift Card LIC co-branded

Annuity Card

Capital Markets

Debt Solutions Equity Solutions

Private Equity, Mergers & Acquisitions Advisory Services

Trusteeship Services Depository Services

Capital Market Funding e-Broking

Credit

Working Capital Finance Term Loans

Trade Services and Trade Finance Structured Finance

Supply Chain Management Overseas Financing and

Transactions

SME Standard Products Power Trac


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Review of literatureMoshe, A. (1996)Most individuals must decide how much, if any, of their wealth should

be annuitized at about the time they retire. For many people a large portion of wealth is

forcefully annuitized. The natural alternative to annuitization is individual strategic assetallocation amongst the various investment classes, such as equity, fixed income and real

estate, together with a fixed periodic consumption from capital, dividends and interest.

Unfortunately, this do it yourself strategy runs the financial risk of under-funding

retirement in the event of long-run inferior investment returns in conjunction with

unexpected human longevity.

Kogan, W. (2000) examine that perhaps the first to study the relationship between risk

tolerance and age. Risky asset fraction of the portfolio to be positively correlated with

income and age and negatively correlated with marital status. Morin and Suarez found

evidence of increasing risk aversion with age although the households appear to becomeless risk averse as their wealth increases. YOO found that the change in the risky asset

holdings were not uniform. He found individuals to increase their investments in risky

assets throughout their working life time, and decrease their risk exposure once they

retire.

Michael, C. (2000) studied that investment rules for various organizational forms that

are distinguished by the characteristics of their residual claims. Different restrictions on

residual claims lead to different decision rules. The analysis indicates that the investment

decisions of open corporations, financial mutual and nonprofits can be modeled by the

value maximization rule. However, the decisions of proprietorships, partnerships, and

closed corporations cannot in general be modeled by the market value rule.

Zuckerman, H. (2001) suggested that one s biological, demographic and socioeconomic

characteristics; together with his/her psychological makeup affects one s risk tolerance

level. Malkiel suggested that an individual s risk tolerance is related to his/her household

situation, lifecycle stage and subjective factors. Mittra discussed factors that were related

to individuals risk tolerance, which included years until retirement, knowledge

sophistication, income and net worth. Guiso, Jappelli and Terlizzese, Bajtelsmit and

VenDerhei, Powell and Ansic, Jianakoplos and Bernasek, Hariharan, Chapman andDomain, Hartog, Ferrer-I-Carbonell and Jonker concluded that males are more risk

tolerant than females.

Lewellen, et.al(2002) studied that while identifying the systematic patterns of

investment behavior exhibited by individuals found age and expressed risk taking

propensities to be inversely related with major shifts taking place at age 55 and beyond.


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confirm the economic importance of accounting for the presence of regimes in asset

returns.

Steenkamp, T.( 2007) studied on the strategic asset allocation for an investor with risky

liabilities which are subject to inflation and real interest rate risk and who invests in

stocks, government bonds, corporate bonds, T-bills, listed real estate, commodities and

hedge funds. Using a vector auto regression for returns, liabilities and macro-economic

state variables the paper explores the inter temporal covariance structure of assets and

liabilities. We find horizon effects in time diversification, risk diversification, inflation

hedge and real interest rate qualities. The covariance structures give insights into which

asset classes have a term structure of risk that is different from that of stocks and bonds.

The alternative assets classes add value for long-term investors. Differences in strategic

portfolios for asset-only and asset-liability investors are due to differences in the global

minimum variance and liability hedge portfolio. We find that the benefits of long-term

investing are larger when there are liabilities.

Makarov, D.( 2008) examines the dynamic portfolio choice implications of strategic

interaction among money managers. The strategic interaction is modeled as managers'

having relative performance concerns in their objectives, either due to money flows or

behavioral considerations. We provide tractable formulations of relative performance

concerns between two risk adverse managers in a continuous-time setting, and solve for

their equilibrium policies in closed-form. Under a formulation with relative performance

concerns smoothly affecting the managers at all levels of wealth, we obtain a unique Nash

equilibrium.

Trevin, W.(2009)studied that explores which asset classes add value to a traditional

portfolio of stocks, bonds and cash. Next, we determine the optimal weights of all asset

classes in the optimal portfolio. This study adds to the literature by distinguishing ten

different investment categories simultaneously in a mean-variance analysis as well as a

market portfolio approach. We also demonstrate how to combine these two methods.

Our results suggest that real estate, commodities and high yield add most value to the

traditional asset mix. A study with such a broad coverage of asset classes has not been

conducted before, not in the context of determining capital market expectations and

performing a mean-variance analysis, neither in assessing the global market portfolio.

Burgues, A.( 2009) examines the advantages of incorporating strategic exposure to

equity volatility into the investment-opportunity set of a long-term equity investor. We

consider two standard volatility investments: implied volatility and volatility risk

premium strategies. To calibrate and assess the risk/return profile of the portfolio, we

present an analytical framework offering pragmatic solutions for long-term investors


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seeking exposure to volatility. The benefit of volatility exposure for a conventional

portfolio is shown through a mean / modified Value-at-Risk portfolio optimization. Pure

volatility investment makes it possible to partially hedge downside equity risk, thus

reducing the risk profile of the portfolio. Investing in the volatility risk premium

substantially increases returns for a given level of risk. A well calibrated combination ofthe two strategies enhances the absolute and risk-adjusted returns of the portfolio.

Skiadopoulos, Z.( 2010) studied thatinvesting is to make diversified investments. This is

the best method to spread the risk across various investments instead of concentrating it

at a single place. Sometimes, losses in a particular investment are offset against the profits

from other investments in a diversified portfolio. Diversification of investments means

investing in different high risk as well as risk free instruments to reduce the inherent risk

in a particular investment. The proportion of investment in different risk bearing

securities depends on the risk tolerance of a person. A young earning individual can put

more in risky instruments while an old age person can keep more amounts in fixedincome securities.

Joost, M. E. (2010) studied on individual investors decision-making often rely on

observable socio-demographic variables to proxy for underlying psychological processes

that drive investment choices. Doing so implicitly ignores the latent heterogeneity

amongst investors in terms of their preferences and beliefs that form the underlying

drivers of their behavior. To gain a better understanding of the relations among

individual investors decision-making, the processes leading to these decisions, and

investment performance, this paper analyzes how systematic differences in investorsinvestment objectives and strategies impact the portfolios they select and the returns they

earn. Based on recent findings from behavioral finance we develop hypotheses which are

tested using a combination of transaction and survey data involving a large sample of

online brokerage clients. Somewhat to our surprise, we find that investors who rely on

fundamental analysis have higher aspirations and turnover, take more risks, are more

overconfident, and outperform investors who rely on technical analysis. Our findings

provide support for the behavioral approach to portfolio theory and shed new light on the

traditional approach to portfolio theory.

Helge, L. (2011) examines a new framework for strategic asset allocation with alternativeinvestments (buyouts, commodities, hedge funds, REITs, and venture capital). Our

approach is not based on a utility function, but on an easily quantifiable risk preference

parameter, . We account for higher moments of the return distributions within our

optimization framework and approximate best-fit distributions. Thus, we replace the

empirical return distributions, which are often skewed and/or exhibit excess kurtosis,


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with two normal distributions. We then use the estimated return distributions in the

strategic asset allocation. Our results show in various out-of-sample analyses that our

framework yields superior results compared to the Markowitz framework. Furthermore,

our framework better manages regime switches, which tend to occur frequently during

crises. To test our results for stability and robustness, we use, among other things time-varying correlation structures in the return distributions and weight restrictions for the

asset classes.

Patrick, J. (2011) studied on India is thought to be the first rate investment. India has a

vast potential for foreign investment and foreign players find it their next investment

destination. There are various opportunities available in India for investing the savings of

the person like mutual funds, fixed deposits etc. 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 and attitude towards

saving depends on the demographic and socio economic factors. In this research paperwe tried to evaluate that which is the most favorable option in which people like to invest

their savings and which factors do generally considered by people while making

investments in available avenues

Allister, M.(2011) study on Derivatives has been an expanding and controversial feature

of the financial markets since the late 1980s. They are used by a wide range of

manufacturers and investors to manage risk. This paper analyses the role and potential of

financial derivatives investment property portfolio management. The limitations and

problems of direct investment in commercial property are briefly discussed and the mainprinciples and types of derivatives are analysed and explained. The potential of financial

derivatives to mitigate many of the problems associated with direct property investment

is examined.

Mansfield, R. (2012) studied on investment theory states that - 'High risk, High returns;

Low risk, low returns'. This gives the possibility of high returns on high risk, not the

guarantee of high returns as there are chances of high potential losses also. Hence, before

investing a person needs have to be certain about his risk bearing capacity and various

investment options to suit his financial condition, risk tolerance, life situation and

financial goals. It is important to balance the risk and return while investing to achieve a

trade off. If a persons investments are giving him too much anxiety, it cannot be termed

as a balanced investment. Risks cannot be totally isolated from investments, but the

amount of risk associated with a particular investment should be acceptable. Acceptable

risk means managing and controlling risk and returns so that the returns are maximized

and risk minimized.


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expectations of different types of investors regarding particular service requirements can

be identified.

The common problem areas faced by the investors can be understood.

It also enhances new services initiatives.

This study will help in gaining a better understanding of what an investor looks for

in an investment option.

It can be used by the financial sector in designing better financial instrument

customized to suit the needs of the investor.

It will also help the agents and brokers in marketing the existing financial

instruments.

It will provide knowledge to the investors about the various financial services

provided by the company to their investors.

It will also help the company to understand what is the requirement and

expectations of different categories of investors.

This analysis will be originated in order to empower the investors with detailed research

on various investments avenues available in India. The awareness lever of the investors

about the various investment options and what is the perception of the investors with

regard to the investments they want to make.

Research methodologySampling techniqueResearch methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. It may be

understood as science of studying how research is done systematically. In fact, research

is an art of the scientific investigation.

The procedure adopted for conducting the research requires a lot of attention as it has

direct bearing on accuracy, reliability and adequacy of results obtained. Research

methodology is a way to systematically study and solve the research problems.

Research Methodology comprise of defining & redefining problems, collecting,

organizing &evaluating data, making deductions &researching to conclusions.

Convenience sampling technique will be used for collecting the data from different

investors. The investors are selected by the convenience sampling method. The selection

of units from the population based on their easy availability and accessibility to the


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researcher is known as convenience sampling. Convenience sampling is at its best in

surveys dealing with an exploratory purpose for generating ideas and hypothesis.

Accordingly, the methodology used in this project is as follows: -

Defining the objectives of the study Framing of questionnaire keeping objectives in mind (considering the objectives)

Feedback from the employees

Analysis of feedback

Conclusion, findings and suggestions.

Scopeo To understand various investment decision rules.

o To know what are the good investments decisions rules.

o To know the category of investment decision rules.

o You can take investment decision only after analyzing entire process of investment

that starts with funds contribution and ends with getting expectations fulfilled.

o The investment decision rules allow you to formalize the process and specify what

condition or conditions need to be met to accept the project.

o You will take decision only after ensuring that the required expectations in terms

of returns are ensured at any cost.

Sampling unit

The respondents who will be asked to fill out the questionnaires are the sampling units.

These comprise of employees of MNC s, government employees, housewives, self

employed, professionals and other investors.

Sample size

A part of population is called sample. In other words, selected or sorted units from the

population are known as sample. In fact, a sample is that part of the population which we

select for the purpose of investigation.

In this research project, the sample size of this study is 50.

Sampling location

Sampling location is Delhi and Panipat


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Sources of information

a) Primary data :-

Questionnaire Method:

o In this study, the method in which information is obtained with the help of

questionnaire is prepared exclusively for the specific purpose. A questionnaire

consists of a number of questionnaires printed in definite order on a form.

Questionnaire and schedule are increasingly used for collection of varied and

diverse data in survey research. The respondents have to answer the questions.

Hence the Primary data is

o Structured Questionnaires.

b) Secondary data :-o The secondary data are those records which have already been collected by bank

and which have already been processed. Secondary data are information which has

previously been collected by respective section/unit/departments of a bank to

satisfy its own need but it is being used by the management under references for

an entirely optimistic reasons.

Sources for Secondary data are:-

Articles in Financial Newspapers (Economic times and Business Standard).

Investment Magazines, Business Magazines, Financial chronicles.

Data available on internet through various websites Website of AXIS Bank

Information provided by bank manager

Website of SSRN

Tools used for analysisGraphical and Tabular analysis

The tools used for the analysis are as follows:-

Tables: Tables are used to represent the response of the respondents in a precise term so

that it become easy to evaluate the data collected.

Graphs:-Graphs are nothing more than a graphical representation of the data collected in

tabular form.


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Chi-square test: - Chi-square test is used when the set of observed frequencies obtained

after experimentation have to be supported by hypothesis or theory. The test is known as

X2- test of goodness of fit and is used to test if the deviation between observation

(experiment) and theory may be attributed to chance (fluctuations of sampling).

Here we have the assumption of H0.

If,

Calculated value < Tabulated value

Then, hypothesis is accepted else its rejected.

(O-E) 2

2= where

E

O = Observed frequencyE = Expected frequency


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Portfolio ManagementThe Portfolio Management is the art and science of making decisions about investment

mix and policy, matching investments to objectives, asset allocation for individuals and

institutions, and balancing risk against performance.

The idea of Portfolio management is to overcome the pace of change in business

landscape and provide investment avenues to stay ahead of the risk return curve and

generate positive returns consistently over a period of time. It is all about strengths,

weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs.

international, growth vs. safety, and many other tradeoffs encountered in the attempt to

maximize return at a given appetite for risk.

Portfolio Management ServicesPortfolio Management Services (PMS) is a sophisticated investment vehicle that offers a

customized investing into stocks, fixed income products, cash, other structured products

and mutual funds units etc. to meet specific investment objectives. Though, PMS is

managed by a professional managers, it has potential to address the personal preferences

tailored into the investment portfolio giving the freedom and flexibility required for

achieving the financial goals.

Financial markets today offer enormous growth potential. But managing ones own

investments can be an extremely challenging task. During times of intense market

volatility, it can be difficult to know what one should do. Staying calm, keeping ones

sense of perspective, taking a rational look at the investments and seeking the advice of a

professional are all smart strategies one can follow.

Axis Bank offers PMS to address varying investment preferences. As a focused service,

PMS pays attention to details, and portfolios are customized to suit the unique

requirements of investors.

Benefits of PMSPMS benefits investor in following ways:

Professional Management PMS is provided by qualified and professional investment

managers with the objective to deliver consistent long term performance while

controlling risk.


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Continuous Monitoring It is important to recognize that portfolios need to be

constantly monitored and periodic changes should be made to optimize the results.

Risk Control The investment manager employs a qualified research team to establish

the investor's investment strategy and providing the information to the investment

manager. This also helps in reducing the investment related risks up to significant extent.

Asset Allocation: PMS helps in allocating savings of a client in terms of stocks,

bonds or equity funds. The plan is tailor made and is designed after the detailed

analysis of client's investment goals, saving pattern, and risk taking capacity.

Hassle Free Operation The investment manager gives the investor a customised

service. He takes care of all the administrative aspects of the investor's portfolio with a

periodic reporting on the overall status of the portfolio and performance. The investment

manager provides various types of reports to his investors on a regular basis. These

reports are related to the transactions made on their behalf, current holdings of the

investment portfolio and realized Profits and Losses to name a few.

Flexibility The Portfolio Manager has fair amount of flexibility in terms of investing

patterns and procedures. He can create a reasonable concentration in the investor

portfolios by investing disproportionate amounts in favour of compelling opportunities.

Transparency PMS provides comprehensive communications and performance

reporting. Investors will get regular statements and updates from the investment

manager. The account statements will give investor a complete picture regarding the

securities held on his behalf. These reports help investor in understanding and measuring

their tax liabilities. All kinds of direct taxes (Income Tax) have to be borne and paid by

the investor.

Customized Advice PMS gives select investors the benefit of tailor made investment

advice designed to achieve their financial objectives.

Personalized Approach In PMS, investor may gain direct personalized access to the

professional investment managers who actively manage his investment portfolio.

Types of PMSPMS is of 3 types- Discretionary, Non-Discretionary and Advisory

Discretionary: This service gives the flexibility and freedom to investment manager to

operate on behalf of the investor fully. The portfolio manager can choose the investment


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avenue and may decide the appropriate time for the transaction. Further, he implements

the investment decisions.

Non-Discretionary: Under this service, the portfolio manager recommends the

investment ideas. Appropriate time to execute the transaction is left up to the investor.

However the execution is done by the portfolio manager.

Advisory: Under this category of services, the portfolio manager only suggests the

investment ideas. The choice as well as the execution of the investment decisions rest

solely with the Investor. In India majority of PMS providers offer Discretionary Services.

Factors

1. Risk taking appetite.

2. Age: At which stage of life an individual is, matters a lot.

3. Returns: returns expected/ required4. Investment Objective.

5. Time Horizon.

Amount of liquidity required.

Inflation

Portfolio designBefore designing a portfolio one will have to know the intention of the investor or thereturns that the investor is expecting from his investment. This will help in adjusting the

amount of risk. This becomes an important point from the point of view of the portfolio

designer because if the investor will be ready to take more risk at the same time he will

also get more returns. This can be more appropriately understood from the figure drawn

below.


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From the above figure we can see that when the investor is ready to take risk of M1, he is

likely to get expected return of R1, and if the investor is taking the risk of M2, he will begetting more returns i.e. R2. So we can conclude that risk and returns are directly related

with each other. As one increases the other will also increase in same of different

proportion and same if one decreases the other will also decrease.

From the above discussion we can conclude that the investors can be of the following

three types:

1. Investors willing to take low risk and at the same time are also anticipating low returns.

2. Investors willing to take moderate risk and at the same time are also anticipating

moderate returns.

3. Investors willing to take high risk and at the same time are also anticipating high

returns.

Age Portfolio

Below 30

80% in stocks or mutual funds

10% in cash

10% in fixed income



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These aren't hard and fast

allocations, just

guidelines to get you

thinking about how your

portfolio should look.

Your risk profile will give

you more equities or

more fixed income

depending on your

aggressive or conservative

bias. However, it's

important to always have some equities in your portfolio (or equity funds) no matter

what your age. If inflation roars back, this will be the portion of your investments that

protects you from the damage, not your fixed income.

Also, the fixed income of your portfolio should be diversified. If you buy bonds and

debentures directly or if you invest in FDs, then make sure you have at least five different

maturities to spread out the interest rate risk.

Impact of Portfolio Management on Indian Trading

Investment in stock markets has become such a huge passion since the past few years. In

India, people want to benefit from the windfall gains which arise in this market. So,

investment banking assures that the investors get some adequate advice.

Apart from that, investment banking services also help companies in gaining cash

through securities. They dont have to spend much on the investment operations. The

companies get help because they are able to raise capital from the market in just the right

way. The growth targets of the companies, which stay unfulfilled due to the lack of the

30 to 40 10% in cash

20% in fixed income

40 to 50


10% in cash

30% in fixed income

50 to 60


10% in cash

40% in fixed income

60 above


10% in cash

50% in fixed income
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capital, get fulfilled with such investment companies. The professionals of such

companies are fully trained in executing a well-planned strategy. So, such companies help

targets in terms of their strategy identification. The companies have a qualified team of

professionals which ensures that the clients dont face any problems in arranging capital.

The capital may be required for various purposes, which include long term capital,

working capital and trade finance. The capital, which is to be used for term loans, Is quite

important so that projects are easily established. A company cant grow when it does not

invest in the investment projects which can yield returns through production. Investment

banking India has expanded because so many companies need moneyfor financing their

goals and even acquisition.

So, companies can now have easy acquisition of capital for financing production. They are

even provided help in the introduction of foreign currency convertible bonds in the trade.

Investment banking firms also have other goals, which include their investment guidance

for NRIs. Such guidance is known as NRI services. Most of the NRIs need help when itcomes to making right investment decisions in the local markets. Although they have the

right quantity of capital, they should know which companies could warrant them

excellent gains in the end.

Now, such NRIS also do not want to exclude themselves from the booming Indian

markets. They need someone who can guide them through the entire investment

procedure. Therefore, they are offered portfolio management services which can guide

them adequately. Such services can assure them constant returns from their portfolios

inspite of the changing market scenario. It is also noteworthy that such returns get themso much security. They have diversified portfolios, which imply that even inspite of a

losing market, they dont suffer much. For example, portfolio management can help an

investor in knowing what are the right sell and buy prices for a specific stock. This is not

the case when he operates without any software. So, when the prices of certain stock, are

expected to fall suddenly after rising, an investor knows when to quit buying. So, get such

guidance and proceed in the stock markets without any hitch. Portfolio investment is the

right way to get constant returns out of the stock market, when the markets are so

volatile. They can get adequate returns in spite of market crashes. Portfolio management

is the basic feature of both online and offline trading companies.

Meaning of investmentInvestment has different meanings in finance and economics.
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In economics, investment is the amount purchased per unit time of goods which are not

consumed but are to be used for future production. Examples include railroad or factory

construction. Investment in human capital includes costs of additional schooling or on-

the-job training. Inventory investment is the accumulation of goods inventories; it can be

positive or negative, and it can be intended or unintended. In measures of nationalincome and output

Investment is related to saving and deferring consumption. Investment is involved in

many areas of the economy, such as business management and finance whether for

households, firms, or governments.

In finance, investment is the purchase of an asset or item with the hope that it will

generate income or appreciate in the future and be sold at the higher price. It generally

does not include deposits with a bank or similar institution. The term investment is

usually used when referring to a long-term outlook. This is the opposite of trading orspeculation, which are short-term practices involving a much higher degree of risk.

Financial assets take many forms and can range from the ultra safe low return

government bonds to much higher risk higher reward international stocks. A good

investment strategy will diversify the portfolio according to the specified needs.

Investments are often made indirectly through intermediaries, such as pension funds,

banks, brokers, and insurance companies. These institutions may pool money received

from a large number of individuals into funds such as investment trusts, unit trusts,

SICAVs etc. to make large scale investments. Each individual investor then has an indirect

or direct claim on the assets purchased, subject to charges levied by the intermediary,

which may be large and varied. It generally does not include deposits with a bank or

similar institution. Investment usually involves diversification of assets in order to avoid

unnecessary and unproductive risk.

Investment is a conscious act of an individual or any entity that involves deployment of

money (cash) in securities or assets issued by any financial institution with a view to

obtain the target returns over a specified period of time.

Target returns on an investment include:

Increase in the value of the securities or asset, and/or

Regular income must be available from the securities or asset.

Types of InvestmentDifferent types or kinds of investment are discussed in the following points..


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1. Autonomous Investment

Investment which does not change with the changes in income level, is called as

Autonomous or Government Investment.

Autonomous Investment remains constant irrespective of income level. Which means

even if the income is low, the autonomous, Investment remains the same. It refers to the

investment made on houses, roads, public buildings and other parts of Infrastructure. The

Government normally makes such a type of investment.

2. Induced Investment

Investment which changes with the changes in the income level, is called as Induced

Investment.

Induced Investment is positively related to the income level. That is, at high levels of

income entrepreneurs are induced to invest more and vice-versa. At a high level of

income, Consumption expenditure increases this leads to an increase in investment of

capital goods, in order to produce more consumer goods.

3. Financial Investment
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Investment made in buying financial instruments such as new shares, bonds, securities,

etc. is considered as a Financial Investment.

However, the money used for purchasing existing financial instruments such as old

bonds, old shares, etc., cannot be considered as financial investment. It is a mere transfer

of a financial asset from one individual to another. In financial investment, money

invested for buying of new shares and bonds as well as debentures have a positive impact

on employment level, production and economic growth.

4. Real Investment

Investment made in new plant and equipment, construction of public utilities like

schools, roads and railways, etc., is considered as Real Investment.

Real investment in new machine tools, plant and equipments purchased, factory

buildings, etc. increases employment, production and economic growth of the nation.Thus real investment has a direct impact on employment generation, economic growth,

etc.

5. Planned Investment

Investment made with a plan in several sectors of the economy with specific objectives is

called as Planned or Intended Investment.

Planned Investment can also be called as Intended Investment because investors while

making investment make a concrete plan of his investment.

6. Unplanned Investment

Investment done without any planning is called as an Unplanned or Unintended

Investment.

In unplanned type of investment, investors make investment randomly without making

any concrete plans. Hence it can also be called as Unintended Investment. Under this

type of investment, the investor may not consider the specific objectives while making an

investment decision.

7. Gross Investment

Gross Investment means the total amount of money spent for creation of new capital

assets like Plant and Machinery, Factory Building, etc.

It is the total expenditure made on new capital assets in a period.


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8. Net Investment

Net Investment is Gross Investment less (minus) Capital Consumption (Depreciation)

during a period of time, usually a year.

It must be noted that a part of the investment is meant for depreciation of the capitalasset or for replacing a worn-out capital asset. Hence it must be deducted to arrive at net

investment.

Importance of Investment

Utilizing Time Value of Money:- Time value of money is the concept that

teaches us that Rs. 100 in hand is better than Rs .100 after 2 years, as the interest on

this Rs.100 can be Earned in 2 years, thereby making it more valuable. Hence,

investing today is important and one should not let money remain idle for long.

Estimating Future Value of Goals: -When an individual is planning for future

goals, it becomes important to Plan for their future value rather than their current

value. Inflation is a very big factor in this. The goal which may be fulfilled today by

Rs. 5 lac may Need Rs. 10 lac after 10 years due to inflation. If we plan for

accumulating Rs. 5 lac, the goal will not be met adequately.

Determining Investment Needs: - Why does one need to invest? To meet a

future need. A person sacrifices Use of money today for a higher gratification at a

later date. Identify the Need/ goal and you can evaluate where the investment

needs to be done.

Lump-sum Investments & Regular Investments:-As and when a person is in

receipt of lump-sum monies, he should ensure he is investing it according to his

requirements. Apart from this, there should be a regular investment being made to

ensure he is disciplined in his saving habits.

Retirement planning: - Investment decision has become significant as people

retire between the ages of 55 & 60. Also, the trend shows longer life expectancy.

The earning from employment should, therefore, be calculated in such a manner

that a portion should be put away as a savings. Savings by themselves do not

increase wealth; these must be invested in such a way that the principal & income

will be adequate for a greater number of retirement years. Increase in working

population, proper planning for life span & longevity have ensured the need for

balanced investments.

Returns:- The return from the investment could be in the form of capital gains,

cash flows, or both. A retired person may be more interested in regular cash

flows to cater for his day to day needs, where as a younger person in accumulation


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phase may be more concerned with growth of his investment for creating a corpus

for his retirement.

Capital Protection:- Protecting your capital is the most important aspect of

investment. By nature majority of us in India are risk averse. We feel investments

are risky and thus leave most of our saved money in instruments earning lowincome, without understanding the effect of inflation, which reduces the value of

our money every day. Risk is part of our lives. Anything and everything we do have

some kind of risk associated with it. Even if we cross a road, there is risk of

meeting with an accident. Risk and reward go hand in hand, higher the risk, more

is the reward expected. Each of the investment assets has its own associated risk

and reward/return, which one must understand before investing his money in any

of the investment vehicles.

Inflation:- By definition, inflation is the rise in general level of prices of goods and

services in an economy over a period of time. When prices rise, each unit ofcurrency buys fewer goods and services, resulting in erosion in the purchasing

power of money. This is a loss in the real value of money. The aim of investment is

to get returns in order to increase the real value of the money. In other words our

investment asset should be able to beat inflation.

Taxation:- Income from our investment assets is liable to taxation, which is

going to reduce our returns. The real return from any investment vehicle would be

the return after taxation and inflation.

Liquidity:- It is the ability to convert an investment into cash quickly, without the

loss of a significant amount of the value of the investment. Any amount which maybe required at a short notice should only be invested in an investment vehicle with

high liquidity.

Divisibility:- This is the ability to convert part of the investment asset into cash,

without liquidating whole of the asset. Divisibility may be an important

consideration for many investors, while choosing an investment vehicleCharacteristics of investment

Return: - All investments are characterized by the expectation of a return. In fact,

investments are made with the primary objective of deriving a return. The return may be

received in the form of yield plus capital appreciation. The difference between the sale

price & the purchase price is capital appreciation. The dividend or interest received from

the investment is the yield. Different types of investments promise different rates of

return. The return from an investment depends upon the nature of investment, the

maturity period & a host of other factors.


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Risk: - Risk is inherent in any investment. The risk may relate to loss of capital, delay in

repayment of capital, nonpayment of interest, or variability of returns. While some

investments like government securities & bank deposits are almost risk less, others are

more risky. The risk of an investment depends on the following factors.

The longer the maturity period, the longer is the risk.

The lower the credit worthiness of the borrower, the higher is the risk.

The risk varies with the nature of investment. Investments in ownership securities like

equity share carry higher risk compared to investments in debt instrument like

debentures & bonds.

Safety: - The safety of an investment implies the certainty of return of capital without

loss of money or time. Safety is another features which an investors desire for his

investments. Every investor expects to get back his capital on maturity without loss &

without delay.

Longer life span and lack of social security:- People live longer now as compared to

the earlier generations. Add to that the fact that most individuals have no retirement

benefit when they retire from work. Few generations ago, someone would start earning by

The time one reached the age of 20 years, work till the age of 58 years and Live till around

65 years. In such a case, one earns for 38 years and lives of the retirement savings for the

next 7 years. Fast forward to recent times, one starts working at 25 years of age after

completing post-graduation Studies. Many are quitting their jobs earlier, but let us

consider a retirement age of 60 years and life span of 80 years. That means, one worksand Earns for 35 years to support post retirement life of 20 years. The scales have really

tilted.

Add to that the fact that earlier, in most jobs (including private sector), pension was a

given thing. Now, in most jobs (including Government jobs), no pension is the norm. If

finances are not planned properly, the retirement years could be Very challenging.

Proliferation of numerous products:- Life Insurance industry was opened to private

players in the late 90s. This led to proliferation of insurance products which are

predominantly investment oriented. Though the Life Insurance Corporation of India(LIC)continues to dominate the life insurance industry business, new players have caught up

considerably with their product innovation, aggressive marketing and new distribution

channels. In the Mutual Fund industry, with over 35 Asset Management Companies

(AMCs), The growth has been moderate to good with product innovations and Increase

in reach to a wide geography and class of investors.


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Complexity of products & services:-An investor today can participate in the equity

markets simply by investing in a mutual fund scheme through a systematic Investment

Plan (SIP), but it is still a challenge for many in understanding how mutual funds actually

work, and how market forces Impact various products differently. An investor today can

have both Insurance and investment in a single product called ULIP (Unit LinkedInsurance Policy), but appreciating his actual need for insurance and a return on

investment as well as analyzing various components and charges of a ULIP product is a

detailed process. Investors need in-Formed guidance on making a finance sense out of

what is being offered to them as investment or insurance, in order to achieve their

financial goals.

Increasing income and savings levels:- Indian Economy has been growing at a 6% - 9%

rate of GDP growth driven mainly by domestic consumption. The educated and urban

middle class has experienced increase in income levels. At the same time unlike our

counterparts in many of the developed countries, Asians, And especially Indians believein saving money. India has a considerable Household savings ratio which is more than

25%.

Increasing level of borrowings:- In todays financial markets there is an easy access to

loans resulting in Increased levels of borrowings by people. If not managed carefully this

leads to a serious mismatch in earnings and repayment leading to problems in cash flow.

Leveraging the low interest rates is a critical aspect which needs to be explained to the

borrowers?

Higher aspirations and goals:- The days of building a house at retirement with

accumulated savings and retirement benefits are over. With access to easy credit at a fair

rate of interest and a capacity to repay that loan, given higher income levels, people want

to buy house at a younger age. The lifestyle and aspirations have gone up significantly.

People want to give the best education to their children, go on regular vacations, buy

apartments in up-market localities and want to be financially independent in their post-

retirement phase.

Nuclear families:-Joint families provided great safety net for most individuals as it

shared the resources and difficulties. Now with growing urbanization leading to Nuclearfamilies, these smaller families have a need to plan belter. They can no longer depend on

the support of the larger family since they might be geographically distant.

Plethora of Information:- Today, thanks to television, internet and press, there is

profusion of public information on various personal finance topics to the investors and

consumers. The media has made a huge impact in the availability of financial information


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and analysis on real time basis to consumers. Although this has helped many investors to

take measured investment decisions, others are exposed to many new concepts and terms

leaving them more confused than before. Also there is a dearth of availability of relevant

in-formation to the investor enabling him to take the right investment decisions. Since

many of this information are disseminated in smaller bits the consumers/investors needexpert financial planner who can put it all together and give need based advice.

Various Investment Asset ClassesThere are two major asset classes: physical and financial. Physical assets are Tangible

which one can touch and feel and see. Financial assets are paper Assets

Recommending Investment StrategyUnderstanding Various Asset Classes:- As seen earlier, there are various investment

options having different features. A financial advisors role is to suggest the appropriate

investments based on the needs of the investor. After analyzing the needs of the investor

as outlined in the previous paragraph, the advisor then recommends an investment

strategy. For example, if the investor needs to grow the value of investments over Long

period of time and to beat inflation, the advisor is likely to suggest Investing a good


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amount in equity related avenues. If the investor needs to withdraw money from the

investments within a very short period, liquid investment option is the ideal choice. The

investment plan recommends how much money should be invested in which options and

how such Allocation should be changed over a period of time. Such a strategy is

commonly known as asset allocation.

Asset Allocation

Asset Allocation decision is the most important decision while designing the portfolio. In

fact folios long term return characteristics and risk level are determined by the asset

allocation. The asset Allocation depends on a lot of factors specific to an individual such

as his age and risk profile, nature of goal short-term or long-term, sensitivity of goal to

be achieved, as well as certain external factors like stock market and interest rate scenario

in the Period to achieve a particular goal, etc. The other factors like scheme selection,

etc. contribute, but to a much lesser effect.

Asset Allocation is also important because it is not possible to be invested in the best

asset class at all times. Whereas the occasional rewards could be huge, the cost of a

mistake could be very large.

All assets in your portfolio will not be impacted to a similar extent by the same factor. So,

if the portfolio has a mix of unrelated assets, fluctuation in the value of one asset class

tends to cancel that in another, thus reducing overall fluctuation in the portfolios value.

Advisors also insist on consistently stocking to the asset allocation, which requires

periodic rebalancing. This means, if the value of one part of the portfolio rises faster thanthe other, the advisor recommends that the money be shifted to restore the original asset

allocation.

Asset Allocation Strategies

Strategic Asset Allocation:- This is a portfolio strategy that involves stocking to long-

term asset allocation.

Tactical Asset Allocation:-An active portfolio management strategy that rebalances

the percentage of assets held in various categories in order to take advantage of marketPricing anomalies or strong market sectors.

The major difference between the two is that strategic asset Allocation Ignores the

anomalies in the stock or bond or other markets and focuses Only on the investors

needs. The assumption here is that asset Allocation Ensures the plan would perform in a


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more predictable manner helping the investor reaches the financial goals comfortably.

Proponents of tactical

Asset Allocation believe that the various markets keep offering opportunity than can be

exploited to enhance the portfolio returns. It is for an advisor to decide which one to

follow based on ones beliefs and abilities. If the advisor believes that there are

inefficiencies in the market and also believes that one has to ability to exploit those, one

may resort to tactical asset allocation. However, the believers of efficient markets usually

stock to strategic asset allocation.

Avenues for Saved Money / Investment Vehicles at axis bankVarious places where one can park his saved money can be broadly classified into:

1. Financial Assets

2. Non-Financial Assets

Financial Assets

Financial Assets can further be classified into:

1. Cash instruments

2. Debt instruments


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3. Equity instruments

Non financial assets

1. Commodities

2. Real estate

Cash instrument

It is the most liquid asset, which include currency, deposit accounts and negotiable

instrument.

Money in cash form is most useful in emergencies because of easy access; however it

tends to lose its value because of inflation. Over a period of time purchasing power of

cash money would considerably reduce. Some of the future requirements cannot be

anticipated like sudden health problem, accidents, natural calamities etc. These

emergencies require sudden unexpected cash out flow, for which we must prepare

ourselves. Thus it is very essential to have some of our saved money in cash form to cater

for these emergencies.

Various cash instruments could be:

i) Cash in Hand

ii) Cash in Bank

Demerits of cash instrument

Limited Market: One of the major disadvantages of a cash and carry business is

that in utilizing this business model you may eliminate more than half of your

potential customers. Carrying cash is not nearly as common today as it was in the

past. Many people use credit cards and debit cards

Fraud:- Business owners who rely solely upon cash can also open themselves up to

fraud more easily since there is no checks and balances system for approving or

denying cash funds, aside from the ability of the cashier to recognize counterfeit

money. Theft:- The motto "cash is king" still rings true in many sectors, especially the

criminal one. If a large number of people know that you only accept cash payments

for products, this may indicate that you keep a large amount of cash on hand. This

could open your business up to robbery for those who want to get some easy

money without having to work for it. Also, for an employee thinking about

embezzling, a cash and carry business is easier to manipulate.


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Online Stores:- Online vendors cannot accept cash. If you use "the green stuff,"

you can't utilize the thousands of online stores available and are limited to stores

you can physically visit.

Merits of cash instrument

Pay Your Expenses:- The first advantage of cash instrument is that you have

money on hand to pay your expenses.

Expand Your Business:- The second benefit of cash instrument is being able to

grow your business, an advantage that your cash-strapped competitors

Get a Business Loan:- Another advantage of having positive cash flow is the

ability to borrow money. Tax returns and other personal financial information,

companies must use cash flow management histories to prove to banks they can

repay loans.

Paying wages 'cash-in-hand' Skimming some or all of the cash takings

Running a part of their normal business activities 'off-the-books'

Not reporting the value of goods and services provided in exchange for other

goods and services

Operating underground - that is, avoiding their tax and superannuation

obligations by not registering their business or lodging returns.

Debt InstrumentsInvesting in debt instruments is like lending your money to a third party, who utilizes this

money to earn more money. Generally, periodically part of this money is passed on to you

as interest. The capital is returned after the stipulated time period. These instruments

beat inflation to some extent;

However taxation may be a concern in many of these instruments. The lock in period

could be short, medium or long term depending on the type of debt instrument chosen.

Capital is relatively safe; returns are lower than equity but higher than cash instruments.

Various debt instruments used are:

1. Small Saving Schemes

2. Government and Corporate Debt Securities

3. Bank deposits


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Small Saving Schemes

Various schemes which fall under this category are:

Public Provident Fund

National Savings Certificates Post office Monthly Income Scheme

Senior Citizen Saving Scheme

Post Office term deposit

Post office savings Accounts

Post office recurring deposit

Kisan Vikas Patra

Marketable Fixed Income Instruments

The Government Securities and corporate securities market form two main segments in

Indian debt markets and play an important role in capital formation process. These

securities form an important source of funds for corporate and Government.

The market for government securities is the most dominant part of the debt market in

terms of outstanding securities, market capitalization, trading volume and number of

participants. It sets benchmark for the rest of the market. Major investors in Debt Market

are shown in table.

The Central Government mobilizes funds mainly by issue of dated securities and T-bills.

Dated Govt. Securities are long term investment instruments, where as T-bills are short

term investment instruments. The major investors in sovereign papers are banks,

insurance companies and financial institutions, which generally do so to meet statutory

requirements.

Participants and Products in Debt Market

Issuer Instruments Maturity * InvestorCentralGovernment

Dated securities 2-30 years RBI, Banks,InsuranceCompanies,ProvidentFunds, MutualFunds,Individuals,FIIs,trusts,Pension Funds


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CentralGovernment

T- bill 91/364 days RBI, Banks,InsuranceCompaniesProvidentFunds, Mutual

Funds,Individuals,FIIs,trusts,societies, PensionFunds

StateGovernment

State developmentloan

5-10 year Banks,Insurancecom-panies,ProvidentFunds,Individuals,insurance

companies, mutualfunds, trusts,societies, PensionFunds

PSUs Bonds, StructuredObligations

5-10 years Banks, Companies,ProvidentFunds,Mutualfunds Individuals,Cor-porate, FIIs,insurance

companies,trusts,societies,PensionFunds

Corporate Debentures, Bonds 1-12 years Banks, MutualFunds,CorporateIndividuals,FIIs, insurancecompa-nies, Pension Funds

Corporate Commercial papers 15 days -1 year Banks, Mutualfunds,FinancialInstitutions,Corporate,ndividuals,FIIs, insurancecompa-


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nies, Pension FundsBank Certificate of

deposits3 months -1 year Banks,Corporate,

Individuals,FIIs,insurancecompanies, mutual

funds,Pension Funds

Bank deposits

Deposits at axis bank

Fixed depositAxis Bank offers multitudes of fixed deposit schemes for various durations. It offerssimple reinvestment Fixed Deposits (at very competitive interest rates), which can be

opened with a minimum investment of Rs 10,000. You can make additions to your deposit

in multiples of Re 1 thereafter. The tenure of your fixed term deposit must be a minimum

of 6 months.

Bank 1-2 yrs 2-3 yrs 3-5 yrs

AXIS 9% 8.50% 8.50%

ICICI 8.25%-9.25% 8.5%-9.25% 8.75%

PNB 9%-9.05% 9%-9.15% 8.5%-9.25%

SBI 8.25%-9.25% 8.75%-9.25% 8.25%

HDFC 8.25%-8.5% 8.5%-9.25% 8.25%

Fixed Deposit Schemes

Reinvestment Deposits:

In a reinvestment fixed deposit scheme, the interest accrued on your deposit at the end ofeach quarter is invested along with the principal. The tenure of your deposit must be a

minimum of 6 months. At the end of the quarter, the interest and the principal are both

rolled over, and the interest is calculated on the total sum. Income tax is deducted at

source.

Automatic Rollover:


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As a Fixed Deposit holder, you can avail of the facility for automatic rollovers on maturity

(for both the principal and interest). You can select this option in the Account Opening

Document (AOD). The options available are:

Rollover only Principal:

Only the principal amount of your fixed deposit will be rolled over. The interest will be

either credited to your designated account or paid out.

Rollover Principal and Interest accrued in Reinvestment Deposit scheme:

These will rollover both the deposit and the interest accrued for the same tenure at the

Interest Rates applicable on the maturity date.

On or before the maturity date, you can make the following changes in the rollover

instructions of the deposit:

Change in tenure

Change in maturity instructions

Change in payment instructions

Change in principal (only reduced amount)

Change rollover of Principal to rollover of Principal + Interest, or vice versa.

Withdrawals of Fixed Deposits

All encashment or withdrawals of Fixed Deposits can only be made at the branch where

the deposit was booked.

Method of calculation o

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