30219214 comparative-analysis-of-investment-avenues

1. PROJECT REPORT
ON
COMPARATIVE ANALYSIS OF INVESTMENT
AVENUES
Submitted in Partial fulfillment of two year full time MBA
Programme
(2008-2010)
Under the supervision of
Submitted To: Submitted By:
Kurukshetra University, Name : Kiran Mongia
Kurukshetra Roll No:

2. PREFACE
In this volatile capital market it has become very difficult for the investors that
where they should invest so as to have maximum profit. Since January, 2008
market has crashed from 21000 points to 13000 so investors could not decide
of investment avenues. The broking houses who are in the business of
providing investment opportunities and options to its clients are in trouble that
how to make their portfolio so that clients can gain.
This project takes you through with the great investment avenues available for
the investors, their comparative analysis so as to understand various investment
opportunities and satisfy investors. This project helps understanding the
differences between the different investment options and also guides you to
choose one of them as Investment Avenue.
So, it helps organization to improve their offerings in this volatile market and
take them towards development of their customer base.
All these steps help me to understand how to cope up with different types of
people and there diversified need and satisfaction level.
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3. DECLARATION
I, Kiran Mongia student of, study, Budha College of management, Karnal
(Rambha), hereby declare that the summer training report on “Comparative
Analysis of Investment Avenues” submitted to Kurukshetra University,
Kurukshetra in partial fulfillment of Degree of Master’s of Business
Administration is the original work conducted by me.
The information and findings presented in this report are genuine,
comprehensive and reliable based on the data collected by me. The project was
undertaken as a part of the course curriculum of MBA full time program of 45
days for the fulfillment of the degree.
The matter presented in this report will not be used for any other purpose and
will be strictly confidential.
(KIRAN MONGIA)
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4. ACKNOWLEDGEMENT
Summer training is one of the most vital and active part of the curriculum of
management students. Its basic idea behind this is to strengthen the student’s
concept through practical training and make them acquainted with actual
method and procedures.
A project includes various fields of study which need a proper analysis and
which is not possibly done by an individual, it requires help from various
persons.
I would like to extend my heartfelt gratitude to Mr. Ali Mohd. Choudhary
(A.V.P), Mr. Ganesh Kr. Chaurasia (Business Head), Mr. Pankaj Kumar
(Senior Relationship Manager), for their proper guidance throughout the
project. Without their support and co-operation I would have failed in my
endeavors and targets in the summer training.
I would also thank my faculty of Budha College of Management for providing me
the great platform.
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5. TAbLE OF CONTENTS
• Preface
• Declaration
• Acknowledgement
• Company Profile
• Project Introduction
• Objective of study
• Scope of study
• Research methodology
 Method of data collection
 Questionnaire design
 Sample size
 Sampling technique
• Data Analysis & Interpretation
• Suggestions and recommendations
• Limitation of study
• Bibliography
• Annexure
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6. COMPANY PROFILE
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7. Company
Profile_______________________________
Unicon Investments is a service sector company, providing financial services,
which has now emerged now as a one-stop investment solutions provider. Mr.
Gajendra Nagpal and Mr. Ram M. Gupta, who had great expertise and vision
in the field of finance, founded the company in 2004. The Headquarter of the
company is in New Delhi and its has its Corporate Offices in Mumbai,
Kolkata, Chennai, Hyderabad and Noida.
Unicon, a professionally managed company, is lead by a team with
unparallel managerial acumen and an experience of more than 200 years in the
financial markets. The company boasts of having more than 3500 employees,
100 branches, more than 600 partner locations and 2500 remisers providing it
with a national footprint.
The company has a customer base of more than 200000 customers. It
caters to both- the short term as well as long term financial needs through a
comprehensive diversification of investment services. These services include
offline & online trading in equity, commodities, currency derivatives to debt
markets to corporate finance & portfolio management services. The company
has a humungous presence in the distribution of the 3rd
party financial products
like mutual funds, property broking and insurance products. It also has prolific
expertise on Advising on Life Insurance, General Insurance, Mutual Funds &
IPO. The distribution network is backed by in-house back-office support to
provide prompt and efficient customer services.
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8. MISSION & VISION OF UNICON SECURITIES PVT.LTD.
Mission:
To create long term value by empowering individual investors through
superior financial services supported by culture based on highest level of
teamwork, efficiency and integrity.
Vision:
To provide the most useful and ethical Investment Solutions - guided by values
driven approach to growth, client service and employee development.
MANAGEMENT TEAM __________________________________
Mr. Gajendra Nagpal
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9. 9

10. 10

11. GROUP
COMPANIES_____________________________________
11

12. The company proposes the following to the customers:
1. Personal Relationship Manager
This facility is provided to the customer on opening a trading account
with the company. A Personal Relationship Manager is provided to the
customer who can be reached 24x7 and not only for instructing him in the
trading affair but also get specialized and customized advice and tips about the
market which is their competitive advantage.
2. Competitive Brokerage and DP Charges
The Company offers a brokerage of 0.50% (negotiable) on Delivery and
0.10% (negotiable) on Intraday and F&O transactions plus Service Tax, SST
and Transaction Charges.
• Only one time account opening charges and no annual maintenance
charges.
• Margin Financing @ 18%
• Margin trading of 4 times the cash deposited for delivery based trade.
• Margin trading of 10 times the cash deposited for intra-day based
trade.
• Buy today Sell tomorrow for all securities facility.
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13. • Management of portfolio and advises.
• Electronic transfer of funds can also be provided.
PRODUCTS
OFFERED___________________________________
 Equity
 Commodity
 Depository
 Distribution
 NRI Services
 Back Office
 Fixed Income
 Portfolio Tracker
 Mutual Funds
 General Insurance
 Life Insurance
The snapshots of products of UNICON are:
EQUITY________________________________________________
13

14. UNICON facilitates trading in secondary market in equity trading & derivative
(future & options) trading through its corporate membership of premier
exchange of the country namely National Stock Exchange (NSE), Bombay
Stock Exchange (BSE). Unicon provides equity trading to the clients online as
well as off-line service. Unicon offers the unique feature where the customers get to trade on NSE, BSE
and Derivatives all on one screen.
Products offerings for Trading
I. Unicon Plus
It enables users to get a browser based trading terminal that can be accessed by
a unique ID and password. This facility is available to all the customers of the
company the moment they get registered with it.
II. Unicon Swift
Self directed investors get an application based terminal which is replica of
NEAT terminal for trading actively with more speed, greater analytical
features and priority access to relationship manager to trade over the phone
COMMODITY___________________________________________
GOVERNMENT of INDIA has been given the permission to the multi
commodity trading after approximate thirty years of globalization &
liberalization in world. By inspiring from the N.S.E., & B.S.E. many other
stock exchange LIC, ICICI Bank, NSE, Central Warehousing, Agriculture
Industries etc. had setup the Online Multi-Commodity Exchange. This
14

15. exchange will provide the present rate of the commodity to the on line market
these exchange
will control by the forward market commission which do work under ministry
of consumer affair,food & public distribution ,government of INDIA.
UNICON is the member of the two commodity exchange at present:
I. NCDEX____________________________________________________
National Commodity & Derivatives Exchange Limited (NCDEX) is a
professionally managed online multi commodity exchange incorporated on
April 23, 2003 under the Companies Act, 1956. It obtained its Certificate for
Commencement of Business on May 9, 2003. It has commenced its operations
on December 15, 2003.
NCDEX currently facilitates trading of thirty six commodities -
Cashew, Castor Seed, Chana, Chilli, Coffee, Cotton, Cotton Seed Oilcake,
Crude Palm Oil, Expeller Mustard Oil, Gold, Guar gum, Guar Seeds, Gur,
Jeera, Jute sacking bags, Mild Steel Ingot, Mulberry Green Cocoons, Pepper,
Rapeseed - Mustard Seed ,Raw Jute, RBD Palmolein, Refined Soy Oil, Rice,
Rubber, Sesame Seeds, Silk, Silver, Soy Bean, Sugar, Tur, Turmeric, Urad
(Black Matpe), Wheat, Yellow Peas, Yellow Red Maize & Yellow Soybean
Meal. At subsequent phases trading in more commodities would be facilitated.
II. MCX__________________________________________________________
15

16. MCX an independent and de-mutulised multi commodity exchange has
permanent recognition from Government of India for facilitating online
trading,
clearing and settlement operations for commodity futures markets across the
country. Headquartered in Mumbai, MCX is led by an expert management
team with deep domain knowledge of the commodity futures markets.
Inaugurated in November 2003 by Shri Mukesh Ambani, Chairman &
Managing Director, Reliance Industries Ltd, MCX offers futures trading in the
following commodity categories: Agri Commodities, Bullion, Metals- Ferrous
& Non-ferrous, Pulses, Oils & Oilseeds, Energy, Plantations, Spices and other
soft commodities.
DEPOSITORY_________________________________________________
Depository offer a safe, convenient way to hold securities as compared
to holding securities in paper form. Their
service provides an integrated single platform for all the clients ensuring a
risk free, efficient and prompt depository process.
Facilities Provided by Unicon
 De-materialization: Physical shares can be converted into
electronic form through dematerialization at any of the Unicon
Branch.
 Re-materialization: Electronic shares on request of Re-
materialization enables one to convert Dematerialized shares into
physical form.
16

17.  Transfer: One can transfer shares through inter and intra
depository services.
 IPO: Using the demat account details one can apply for IPO and
on allotment the securities are transferred directly to the demat
account.
 Corporate Actions: In case one is eligible for any bonus and
right issues while holding the stock in Demat Account then
allotment would be transferred to the account.
 Easi: This facility empowers the clients to view, download, print
updated holings with respective valuations over the internet
though Demat Account and avail host of services.
DISTRIBUTION_________________________________________________
Unicon is fast emerging as a leader in the Insurance and Mutual
Funds distribution space. Unicon has over 100 branches
and a huge number of “Business Development Executives” who help to source
and service the customers throughout the country. Unicon is fast becoming the
preferred “Vendor Independent” distribution houses because of providing
efficient service like free pick-up of collection of cheques/DD’s, Keeping track
of the premiums etc to its customers.
MUTUAL
FUNDS________________________________________________
17

18. Mutual fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is invested into a
variety of securities, including stocks, bonds, and money-market instruments.
Mutual funds issue units to the investors, which represent an equitable right in
the assets of the mutual fund. Thus a mutual fund is the most suitable
investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.
INSURANCE___________________________________________________
_
General Insurance
Unicon offers all the products of general Insurance under one umbrella.
Unicon comprises of a team of distinguished professionals from insurance,
finance and other management disciplines who have vast business &
managerial experience. Unicon team evaluates the client's business
environment and studies the risk profile. based on the results of these
evaluations, Unicon team then suggests the most cost effective , integrated
insurance package that is perfectly suited to the client's risk profile.
Life Insurance
Unicon offers you a Peace of Mind by offering various life insurance plans for
your unique & specific needs. For every financial problem, there is a solution
also is the philosophy of Unicon. And is here to give one a complete financial
solutions. One can always have an access to their 83 Branch Offices situated at
prime locations of the city, or can call to their Relationship Manager for guide
to Investments.
Following is the glimpse of Life Insurance Plans:
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19. - Protection Plans
- Child Plans
- Investment Plans
- Saving Plans
- Retirement and Pension Plans
- NIR Plans
- Health Plans
PROPERTY_____________________________________________________
Unicon is a specialized property broking company. It offers a total solution to
the clients inclusive of market research, marketing strategy, interaction with
the professional teams and sales or leasing of the property.
NRI
SERVICES__________________________________________________
Unicon offers a convenient and hassle-free way of Investing in the Indian
Securities Market to the people who are living outside India and wish to
participate in the Indian Growth story.
Procedure for NRI operations in Indian Capital Markets:
 The NRI can deal with only one bank at any point of time.
 He is allowed to invest only 5% of the paid up capital of a company. The
aggregate paid up value of equity of any company purchased by all
NRI's and OCBs cannot exceed 10 percent of the paid up capital of the
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20. company and in the case of convertible debentures, the aggregate paid
up value of each series of debentures purchased by all NRI's and OCBs
cannot exceed 10 % of the paid up value of each series of convertible
debentures.
 He can enter only into delivery based trades, all deliveries must only be
routed through beneficiary accounts and not directly through the broker.
 Shares bought by him cannot be sold unless the payout of the same is
received from exchange.
 All purchase and sale transactions have to be reported to the RBI by the
designated bank.
 Original brokers contract notes have to be submitted to the designated
Bank branch, within 24 hours of the transaction.
 He will be required to make bill to bill payments/ settlements. No
adjustments of purchase against sale consideration should be done.
 Shares cannot be bought against the shares sold in the same settlement.
 All Purchase and Sales will be dealt separately for payments / receipts.
 Sale proceeds of any transaction not reported/approved by the RBI are
allowed to be credited to the NRE/NRO savings/demat account. The
transaction will have to be reversed in the account and losses if any will
be borne by the client.
 All tax liabilities arising out of buying and selling of securities will be
handled by the designated bank.
BACKOFFICE____________________________________________
Unicon through its online back-office aims to increase the transparency
and provides the link to view the details of the
account online anytime and anywhere.
20

21. The following reports can be viewed online:
1 Sauda details
2 Financial Ledger
3 Net Position fot the day
4 Net position Detail
FIXED
INCOME_________________________________________________
The Fixed Income vertical of UNICON Group deals in Sovereign Paper,
Money Market/ Fixed Income Instruments and Merchant Banking Activities.
Broadly, it undertakes the following:
a. Dealing in all types of money market instruments viz.
Commercial paper (Origination & Placement), Certificate of
Deposit and Treasury Bills both in Primary and Secondary
market.
b. Dealing in Government Securities (including securities of Oil,
Fertilizer & Food Bonds) and other PSU/ Corporate Bonds with
counterparties like Banks, Primary Dealers, Mutual Funds,
Insurance Companies, Regional Rural Banks, Co operative Banks,
Central & State PSUs, Housing Finance Companies, NBFC &
Corporates.
c. Retailing of Central, State Government Securities and Bonds to
PF Trusts, Universities & Colleges.
d. Advisory Services to PF Trusts.
e. Arrangers for Private placement of Bonds & placing it with
Banks, Mutual funds, Insurance Companies & Corporates.
21

22. f. Raising of capital by way of Initial Public Offers (IPO) and
Follow-on Public Offerings (FPO)
g. Securitization of receivable portfolio of Housing Finance
Companies, Banks & NBFCs by way of Pass through certificates.
PORTFOLIO TRACKER_________________________________________-
The Portfolio Tracker is a simple yet powerful tool that lets you monitor
the value of your investments and other securities you've got your eye on. To
set up your portfolio, all you need to do is enter the quantities of your
investments
in different things, and the price you made your purchases and sales at.
Portfolio Tracker lets you monitor certain securities, it is not intended to reflect
your actual holdings or account information at any broker/dealer.
COMPETITORS
• India bulls Financial Services Limited
• India Info line
• Karvy Securities
• Fortis Securities ( Religare)
• Share khan ltd
• ICICI Securities ltd
• Motilal Oswal Securities
• Kotak Securities
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23. • HDFC Securities
INVESTMENT AVENUES
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24. 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.
The money you earn is partly spent and the rest saved for meeting future
expenses. Instead of keeping the savings idle you may like to use savings in
order to get return on it in the future, this is called Investment.
One needs to invest and earn return on your idle resoures and generate sum of
money for a specific goal in life and make a provision for an uncertain
future .One of the important reason why people needs to invest wisely is to
meet the cost of inflation. Inflation is the rate at which the cost of living
increases.
24

25. The cost of living is simply what it costs to buy the goods and services you
need to live. Inflation causes money to lose value because it will not buy the
same amountof a good or service in the future as it does now or did in the past.
The sooner one starts investing the better. 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. Tha three golden rules for all investors
are :
• Invest Early
• Invest regularly
• Invest for long term and not for short term
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,
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26. 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.
26

27. 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.
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.
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28. • 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
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29. 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.
Investment Options in India
29

30. Some of the most preferred Investment Avenues
NON-MARKETABLE FINANCIAL ASSETS
A good portion of the financial assets of individual investors is held in the
form of non-marketable financial assets like bank deposits, post office
deposits, company deposits, provident fund deposits. The main feature of these
assets is that they represent personal transactions between the investor and the
issuer. For
Example, when you open a saving bank a/c , you deal with bank personally. In
contrast, When you buy equity shares in the stock market you do not know
who is the seller.
• Bank Deposits
30

31. Bank deposit simply refers to opening a bank a/c & depositing money in it.
There are various kind of bank A/C’s: current A/c, saving a/c, Fixed deposit
a/c. While a deposit in current A/c does not earn any interest, deposits in other
bank a/c earn Interest.
• Company Deposits
Many companies, large and small, solicit fixed deposits from the public.Fixed
deposits mobilized by manufacturing companies are regulated by RBI. Key
feature of co. deposits are as :
1. For a manufacturing co. the term of deposits can be one to three
years, whereas for a non-banking finance co. it can vary between
25 months to 5 years.
2. The interest rate on it are higher than those on bank deposits.
3. Company deposit represent unsecured loans.
4. It offers the facility for premature withdrawal to attract deposits.
• Public provident fund scheme
Individuals & HUFs can participate in this scheme. A PPF a/c may be
opened at any branch of the SBI or its subsidiaries or at specified branches
of other nationalized banks. The subscriber to a PPF a/c is required to make
a min. deposit of rs.100 per year. The max. permissible deposit per year is
rs.70000/-.PPF currently earn a compound interest rate of 8% p.a. which is
totally exempt from taxes.
FIxED INCOME SECURITIES
It includes the following:
• Government Securities
31

32. • Saving Bonds
• Private sector Debentures
• Public sector undertaking bonds
 Government Securities
Debt securities issued by the central government, state government and
quasi-government agencies are referred to as govt. securities or gilt-
edged securities. Govt. securities have maturities ranging from 3-20
years and carry interest rates that usually vary between 8 and 10 %.
 RBI Savings Bonds
Individuals, HUFs, and NRIs can invest in these bonds. The minimum
amount of investment is rs.1000/-. There is no upper limit. The
maturity period is 5 years from the date of issue. The interest rate is 8%
p.a., payable half-yearly. These bonds can be offered as security to
banks for availing loans.
 Private sector debenture
Akin to promissory notes, debentures are instruments meant for raising
Long-term debt. The obligation of a co. towards its debenture holders
is similar to that of a borrower who promises to pay interest and
principal at specified times.
When a debenture issue is sold to the investing public, a trustee is
appointed through deed. The trustee is usually a bank or financial
institution.
 Public Sector Undertaking Bonds
32

33. PSUs issue debentures that are referred to as PSU bonds. There are two
broad varieties of PSU bonds: taxable bonds and tax-free bonds. There
is no deduction of tax at source on the interest paid on these bonds.
They are transferable by mere endorsement and delivery. There is no
stamp duty applicable on transfer. They are traded on stock exchanges.
FIxED DEpOSITS
It same as a term or time deposit. Money may be placed with a bank, merchant
bank, building society or credit union for a fixed term at a fixed rate of interest
which remains unchanged during the period of the deposit. Depositors may
have to accept an interest penalty if they break the deposit, ie, ask to take the
money out before the agreed period has expired.
Few points which FD investors must consider at the time of investment,
1. Safety
FDs have conventionally been the premier choice for investors with a low risk
appetite; assured returns is the key factor which attracts investors towards
deposits. Stick to FDs of the highest credit rating i.e. those with a “AAA”
rating even if their rates seem modest vis-à-vis those offered by company
deposits.
2. Tenure
Short tenured fixed deposits continue to be your best bet. With interest rates on
the ascent, a further hike in rates offered by fixed deposits cannot be ruled out.
33

34. Locking your investments in longer tenured instruments may lead to an
opportunity loss.
3. Liquidity
Find out how FD fares on the pre-mature encashment front i.e. how easily can
your investment be liquidated. Also enquire about the penalty clauses, e.g. do
you suffer a loss of interest and/or principal amount. Compare how various
FDs rank on this parameter and pick the best deal; thereby try to minimise the
impact of illiquidity which is typically associated with FDs.
4. Additional benefits
Fixed deposits from reputed entities offer additional benefits, e.g. they can be
used as collateral against which loans can be raised. Select a fixed deposit
scheme which scores favourably on such parameters-
Any investment portfolio should comprise the right mix of safe, moderate and
risky investments. While mutual funds and stocks are the favorite contenders
for moderate and risky investments,fixed deposits, government bonds etc. are
considered safe investments. Fixed deposits have been particularly popular
among a large section of investors in India as a safe investment option for a
long period.
With fixed deposits or FDs as they are popularly known, a person can invest an
amount for a fixed duration. The banks provide interest rates depending on this
loan amount and the tenure of deposit. Here are the benefits, drawbacks of
fixed deposits and precautions one should take while making such investments.
MUTUAL FUNDS
34

35. A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciation realized
is shared by its unit holders in proportion to the number of units owned by
them. Thus a Mutual Fund is the most suitable investment for the common
man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost. The flow chart below
describes broadly the working of a mutual fund:
Mutual Fund Operation Flow Chart
ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:
35

36. Mutual fund units are Issued and redeemed by the Fund Management
Company based on the fund's net asset value (NAV), which is determined at
the end of each trading session. NAV is calculated as the value of all the shares
held by the fund, minus expenses, divided by the number of units Issued.
Mutual Funds are usually long term investment vehicle though there some
categories of mutual funds, such as money market mutual funds which are
short term instruments.
36

37. A) Equity Funds
Equity funds are considered to be the more risky funds as compared to other
fund types, but they also provide higher returns than other funds. It is advisable
that an investor looking to invest in an equity fund should invest for long term
i.e. for 3 years or more. There are different types of equity funds each falling
into different risk bracket. In the order of decreasing risk level, there are
following
Types of equity funds:-
• Aggressive Growth funds
• Growth Funds
• Equity income /Dividend yield
37

38. • Diversified equity funds
• Equity Index Funds
• Value Funds
B)Money Market/Liquid Funds
Money market / liquid funds invest in short-term (maturing within one year)
interest bearing debt instruments. These securities are highly liquid and
provide safety of investment, thus making money market / liquid funds the
safest investment option when compared with other mutual fund types.
However, even money market / liquid funds are exposed to the interest rate
risk. The typical investment options for liquid funds include Treasury Bills
(issued by governments), Commercial papers (issued by companies) and
Certificates of Deposit (issued by banks).
C) HYBRID FUNDS
As the name suggests, hybrid funds are those funds whose portfolio includes a
blend of equities, debts and money market securities. Hybrid funds have an
equal proportion of debt and equity in their portfolio. There are following types
of hybrid funds in India:
• Balanced Funds
• Growth-and-Income Funds
• Asset Allocation Funds
D)GILT FUNDS
Also known as Government Securities in India, Gilt Funds invest in
government papers (named dated securities) having medium to long term
maturity period. Issued by the Government of India, these investments have
little credit risk (risk of default) and provide safety of principal to the investors.
38

39. However, like all debt funds, gilt funds too are exposed to interest rate risk.
Interest rates and
prices of debt securities are inversely related and any change in the interest
rates results in a change in the NAV of debt/gilt funds in an opposite direction.
Pros & cons of investing in mutual funds:
For investments in mutual fund, one must keep in mind about the Pros and
cons of investments in mutual fund.
Advantages of Investing Mutual Funds:
A. Professional Management - The basic advantage of funds is that, they are
professional managed, by well qualified professional. Investors purchase funds
because they do not have the time or the expertise to manage their own
portfolio. A mutual fund is considered to be relatively less expensive way to
make and monitor their investments.
B. Diversification - Purchasing units in a mutual fund instead of buying
individual stocks or bonds, the investors risk is spread out and minimized up to
certain extent. The idea behind diversification is to invest in a large number of
assets so that a loss in any particular investment is minimized by gains in
others.
C. Economies of Scale - Mutual fund buy and sell large amounts of securities
at a time, thus help to reducing transaction costs, and help to bring down the
average cost of the unit for their investors.
39

40. D. Liquidity - Just like an individual stock, mutual fund also allows investors
to liquidate their holdings as and when they want.
E. Simplicity - Investments in mutual fund is considered to be easy, compare to
other available instruments in the market, and the minimum investment is
small. Most AMC also have automatic purchase plans whereby as little as Rs.
2000, where SIP start with just Rs.50 per month basis.
Disadvantages of Investing Mutual Funds:
A. Professional Management- Some funds doesn’t perform in neither the
market, as their management is not dynamic enough to explore the available
opportunity in the market, thus many investors debate over whether or not the
so-called professionals are any better than mutual fund or investor him self, for
picking up stocks.
B. Costs – The biggest source of AMC income is generally from the entry &
exit load which they charge from investors, at the time of purchase. The mutual
fund industries are thus charging extra cost under layers of jargon.
C. Dilution - Because funds have small holdings across different companies,
high returns from a few investments often don't make much difference on the
overall return. Dilution is also the result of a successful fund getting too big.
When money pours into funds that have had strong success, the manager often
has trouble finding a good investment for all the new money.
D. Taxes - when making decisions about your money, fund managers don't
consider your personal tax situation. For example, when a fund manager sells a
40

41. security, a capital-gain tax is triggered, which affects how profitable the
individual is from the sale. It might have been more advantageous for the
individual to defer the capital gains liability
Equity MarkEt
A stock market is a public market for the trading of company stock and
derivatives at an agreed price; these are securities listed on a stock exchange as
well as those only traded privately.
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.
Equity shares
At the most basic level, stock (often referred to as shares) is ownership, or
equity, in a company. Investors buy stock in the form of shares, which
represent a portion of a company's assets (capital) and earnings(dividends). As
a shareholder, the extent of your ownership (your stake) in a company depends
on the number of shares you own in relation to the total number of shares
available For example, if you buy 1000 shares of stock in a company that has
issued a total of 100,000 shares, you own one per cent of the company.
While one per cent seems like a small holding, very few private investors are
able to accumulate a shareholding of that size in publicly quoted companies,
many of which have a market value running into billions of pounds. Your stake
41

42. may authorize you to vote at the company's annual general meeting, where
shareholders usually receive one vote per share.
In theory, every stockholder, no matter how small their stake, can exercise
some influence over company management at the annual general meeting. In
reality, however, most private investors' stakes are insignificant. Management
policy is far more likely to be influenced by the votes of large institutional
investors such as pension funds.
a) STOCKS SYMBOLS
A stock symbol, or 'Epic' symbol, is the standard abbreviation of a stock's
name. You can find stock symbols wherever stock performance information is
published - for example, newspaper stock listings and investment websites.
Company names also have abbreviations called ticker symbols. However, it's
worth remembering that these may vary at the different exchanges where the
company is quoted.
b) PERFORMANCE INDICATORS
Here is a list of the standard performance indicators
Performance Indicator Definition
Closing price: The last price at which the stock was bought or sold
High and low : The highest and lowest price of the stock from the previous
trading day
52 week range: The highest and lowest price over the previous 52 weeks
Volume: The amount of shares traded during the previous trading day
High and low
42

43. Net change: The difference between the closing price on the last trading
day and the closing price on the trading day prior to the last.
THE STOCK EXCHANGES
A marketplace in which to buy or sell something makes life a lot easier.
The same applies to stocks. A stock exchange is an organization that provides
a marketplace in which investors and borrowers trade stocks. Firstly, the stock
exchange is a market for issuers who want to raise equity capital by selling
shares to investors in an Initial Public Offering (IPO). The stock exchange is
also a market for investors who can buy and sell shares at any time.
a) Trading shares on the stock exchange
As an investor in the INDIA, you can't buy or sell shares on a stock exchange
yourself. You need to place your order with a stock exchange member firm (a
stockbroker) who will then execute the order on your behalf. The NSE AND
BSE are the leading stock exchange in the INDIA. Trading is done through
computerized systems.
b) The trading process
If you decide to buy or sell your shares, you need to contact a stockbroker who
will buy or sell the shares on your behalf. After receiving your order, the
stockbroker will input the order on the SETS or SEAQ system to match your
order with that of another buyer or seller. Details of the trade are transmitted
electronically to the stockbroker who is responsible for settling the trade. You
will then receive confirmation of the deal.
c) Types of shares available on the stock exchange
43

44. You cannot trade all stocks on the stock exchange. To be listed on a stock
exchange, a stock must meet the listing requirements laid down by that
exchange in its approval process. Each exchange has its own listing
requirements, and some exchanges are more particular than others. It is
possible for a stock to be listed on more than one exchange. This is known as a
dual listing.
DErivativE MarkEt
Is a product whose value is derived from the value of one or more basic
variables, called underlying. The underlying asset can be equity, index, foreign
exchange (forex), commodity or any other asset. Derivative products initially
emerged as hedging devices against fluctuations in commodity prices and
commodity-linked derivatives remained the sole form of such products for
almost three hundred years. The financial derivatives came into spotlight in
post-1970 period due to growing instability in the financial markets. However,
since their emergence, these products have become very popular and by 1990s,
they accounted for about two thirds of total transactions in derivative products.
Types of derivatives
The most commonly used derivatives contracts are forwards, futures and
options, which we shall discuss in detail later. Here we take a brief look at
various derivatives contracts that have come to be used.
A. Forwards: A forward contract is a customized contract between two
entities, where settlement takes place on a specific date in the future at today's
pre-agreed price.
44

45. B. Futures: A futures contract is an agreement between two parties to buy or
sell an asset at a certain time in the future at a certain price. Futures contracts
are special types of forward contracts in the sense that the former are
standardized exchange-traded contracts.
C. Options: Options are of two types - calls and puts. Calls give the buyer the
right but not the obligation to buy a given quantity of the underlying asset, at a
given price on or before a given future date. Puts give the buyer the right, but
not the obligation to sell a given quantity of the underlying asset at a given
price on or before a given date.
D. Swaps: Swaps are private agreements between two parties to exchange cash
flows in the future according to a prearranged formula. They can be regarded
as portfolios of forward contracts. The two commonly used swaps are:
• Interest rate swaps: These entail swapping only the interest related
cash flows between the parties in the same currency.
• Currency swaps: These entail swapping both principal and interest
between the parties, with the cash flows in one direction being in
a different currency than those in the opposite direction.
insurancE
People need insurance in the first place. An insurance policy is primarily
meant to protect the income of the family’s bread earners. The idea is if any
one or both die their dependents continue to live comfortably. The circle of
life begins at birth follower by education, marriage and eventually after a
45

46. Life time of work we look forward to life of retirement. Our finances too
tend to change as we go through the various phases of life. In the first
twenty of our life, we are financially and emotionally dependents on our
parents and their are no financial commitments to be met. In the next twenty
years we
gain financial independence and provide financial independence to our
families. This is also the stage when our income may be unable to meet the
growing expenses of a young household. In the next twenty as we see our
Investments grow after our children grow and become financially
independent. Insurance is a provision for the distribution of risks that is to
say it is a financial provision against loss from unavoidable disasters. The
protection which it affords takes form of a guarantee to indemnify the
insured if certain specified losses occur. The principle of insurance so far as
the undertaking of the obligation is concerned is that for the payment of a
certain sum the guarantee will be given to reimburse the insured. The insurer
in accepting the risks so distributes them that the total of all the amounts is
paid for this insurance protection will be sufficient to meet the losses that
occur. Insurance then provide divided responsibility. This principle is
introduced in most stores where a division is made between the sales clerk
and the cashiers department the arrangement dividing the risks of loss. The
insurance principle is similarly applied in any other cases of divided
responsibility. As a business however insurance is usually recognized as
some form of securing a promise of indemnity by the payment of premium
and the fulfilment of certain other stipulations
Types of insurance
A) Term insurance plans
46

47. Term insurance is the cheapest form of life insurance available. Since a term
insurance contract only pays in the event of eventuality the life cover comes at
low premium rates. Term insurance is a useful tool to purchase against risk of
early death and protection of an asset.
B) Endowment plans
Endowment plans are savings and protection plans that provide a dual benefit
of protection as well as savings. Endowment plans pay a death benefit in the
event of an eventuality should the customer survive the benefit period a
maturity benefit is paid to the life insured.
C) Whole of life plans
A whole of life plan provides life insurance cover to an individual up to a
specified age. A whole of life plan is suitable for an individual who is looking
for an extended life insurance cover and /or wants to pay premium over as long
as tenure as possible to reduce the amount of upfront premium payment.
D) Pension plans
Pension plans allow an individual to save in a tax deferred manner. An
individual can either contribute through regular premiums or make single
premium investments. Savings accumulate over the deferment period. Once the
contract reaches the vesting age , the individual has the option of choosing an
annuity plan from a life insurance company. An annuity is paid till the life the
lifetime of the insured or a predetermined period depending upon the annuity
option chosen by the life insured.
E) Unit Linked Insurance Plans
47

48. Unit linked insurance plan (ULIP) is life insurance solution that provides for
the benefits of risk protection and flexibility in investment. The investment is
denoted as units and is represented by the value that it has attained called as
Net Asset Value (NAV). The policy value at any time varies according to the
value of the underlying assets at the time. In a ULIP, the invested amount of
the premiums after deducting for all the charges and premium for risk cover
under
all policies in a particular fund as chosen by the policy holders are pooled
together to form a Unit fund. A Unit is the component of the Fund in a Unit
Linked Insurance Policy. The returns in a ULIP depend upon the performance
of the fund in the capital market. ULIP investors have the option of investing
across various schemes, i.e., diversified equity funds, balanced funds, debt
funds etc. It is important to remember that in a ULIP, the investment risk is
generally borne by the investor.
In a ULIP, investors have the choice of investing in a lump sum (single
premium) or making premium payments on an annual, half-yearly, quarterly or
monthly basis. Investors also have the flexibility to alter the premium amounts
during the policy's tenure. For example, if an individual has surplus funds, he
can enhance the contribution in ULIP. Conversely an individual faced with a
liquidity crunch has the option of paying a lower amount (the difference being
adjusted in the accumulated value of his ULIP). ULIP investors can shift their
investments across various plans/asset classes (diversified equity funds,
balanced funds, debt funds) either at a nominal or no cost.
Expenses Charged in a ULIP
•Premium Allocation Charge
48

49. A percentage of the premium is appropriated towards charges initial and
renewal expenses apart from commission expenses before allocating the units
under the policy.
• Mortality Charges
These are charges for the cost of insurance coverage and depend on number of
factors such as age, amount of coverage, state of health etc.
• Fund Management Fees
Fees levied for management of the fund and are deducted before arriving at the
NAV.
• Administration Charges
This is the charge for administration of the plan and is levied by cancellation of
units.
• Surrender Charges
Deducted for premature partial or full encashment of units.
• Fund Switching Charge
Usually a limited number of fund switches are allowed each year without
charge, with subsequent switches, subject to a charge.
• Service Tax Deductions
Service tax is deducted from the risk portion of the premium.
49

50. cOMParativE anaLysis Of invEstMEnt avEnuEs
Return Safety Volatility Liquidity Convenience
Equity High Low High High Moderate
Bonds Moderate High Moderat
e
Moderate High
Co. Debentures Moderate Moderate Moderat
e
Low Low
Co. FDs Moderate Low Low Low Moderate
Bank Deposits Low High Low High High
PPF Moderate High Low Moderate High
Insurance Low High Low Low Moderate
Mutual Funds High High Moderat
e
High High
50

51. 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.
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.
METHODS OF DATA COLLECTION
Primary data : Telephonic survey, Questionaire
Secondary data : Newspapers, Websites
Sample Size : 100
51

52. Research Area : Ghaziabad, Noida
Sampling Technique
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 Ghaziabad and noida city.
OBJECTIVE OF THE STUDY
• To understand all about different investment avenues available in India.
• To find out how the investors get information about the various financial
instrument
• To find out the saving habits of the different customers and the amount
they invest in various financial instruments.
• In which type of financial instrument they like to invest.
• How long they prefer to keep their money invested.
• What is the return that they expect from the investment.
• What are the various factors that they consider before investing.
• To give a recommendation to the investors that where they should
invest.
SCOPE OF STUDY
The study enables to have a better knowledge of investing option available
in the market. The study highlights some of the most important investing
options available with the Indian investors. It gives an overview of pros
52

53. and cons of investing in different avenues and also help in choosing best
from them.
Data anaLysis & intErPrEtatiOn Of
tHE stuDy
53

54. A. Number of male and females in survey
Gender Respondent
Male 83
Female 17
Total 100
Table 1.1
Figure 1.1
Interpretation
The male respondent are 83 and the females are 17 which shows the majority
of male respondent in survey.
54

55. B. Geographical Distribution
Geographical distribution % of respondent
Noida 28
Ghaziabad 72
Table 1.2
Figure 1.2
Interpretation
As the sampling area is Noida & Ghaziabad. Here, 72% respondent are from
Ghaziabad & 28% from Noida.
55

56. C. Age of the respondent
Age % of Respondent
20-30 25
31-40 36
41-50 27
Above 50 12
Total 100
Table 1.3
Figure: 1.3
Interpretation
The total number of respondent are 100.The % of respondent are : 25 % from
age group 20-30, 36% from age group 31-40, 27% from 41-50 and 12% from
age group above 50.
56

57. D. Occupation of Respondent
Occupation % of Respondent
Student 5
Entrepreneur 25
Working 32
Professional 23
Retired 15
Total 100
Table: 1.4
Figure :1.4
Interpretation
As the sample size is 100, where major responses are from working category
i.e. 32% & the rest are 25% from entrepreneur, 23% from professionals, 15%
from retired & 5% from students.
E. Knowledge about the available investment avenues
Investment Options YES NO
57

58. Mutual fund 55 45
Equity market 75 25
Derivatives 35 65
Fixed Deposit 100 0
Insurance 98 2
Table: 1.5
Figure :1.5
Interpretation
The responses mention in table 1.5 shows that people are more aware about
investment as fixed deposits (100) in bank because it is a common type of
investment since earlier time, followed by Insurance (98). Near about 75
people knows about investment in equity shares & 55 in mutual funds. Only 35
people knows about investment in derivatives because it is common to those
people who are risk taker.
F. Source of Information regarding investment avenues
Sources of information Responses in %
Media 45
58

59. Newspaper 30
Co.’s sales force 15
Advertisement 10
Table 1.6
Figure 1.6
Interpretation
Table 1.5 shows that media is the most powerful source of information
regarding investment avenues, for example: Zee Business, CNBC Aawaz.
After media newspaper is a good source of information. Co.’s sales force &
advertisement are also helpful in providing such information.
G. Rating given to Investment Avenue
More preferred Moderate Less preferred
Mutual Fund 25 22 15
Equity 12 18 22
59

60. Derivatives 7 10 33
Fixed
deposits
80 15 5
Insurance 75 15 10
Table:1.7
Interpretation
H.% of Income As Investment
% Of Income As Investment Responses
Below 5 % 37
5-10 % 28
10-20% 20
Above 20% 15
60

61. Table 1.8
Figure:1.8
Interpretation
I. Basis for making Investment
Basis of Investment Responses in %
Market Sentiments 43
Fundamental & technical Analysis 18
Past performance 39
Table: 1.9
61

62. Figure: 1.9
Interpretation
As per the responses obtained from the survey of 100 people shows that 43%
people takes market sentiments as the basis for making investment, while there
are 39% people, who considers the past performance & only 18% people
makes fundamental & technical analysis for making Investment .
J. Reason for choosing any particular investment option
Reason to invest Responses in %
Maximum Return 45
Tax Saving 12
Safety 18
Regular Income Flow 30
62

63. Table : 1.10
Figure :1.10
Interpretation
As responses obtained from people shows that maximum people makes
investment with the aim to gain max. return &regular income flow.Out of
100 , 43% people Invest to gain Max. return, 29% for regular income
flow,17% for safety & 11% for tax saving.
SUGGESTIONS & RECOMMENDATIONS
 To earn good return with less capital risk, a investor have to
be active while designing his portfolio.
63

64.  Every attributes of investor like his age level, income level,
his expectation level have effect on their portfolio design.
 An investor should go with well diversified portfolio in
compare to stick on only one or two investment avenue.
 Investors should update his knowledge continuously to grab
good opportunities in market.
 Investors should take decision carefully because updation
of portfolio is a costly affair.
LIMITATION OF THE STUDY
The project is based upon various financial instrument that are available in
India and the perception level of the customer about these financial
instruments. For which there will be the need of information from the
64

65. customers about their knowledge of these financial products. The various
limitations of the study are:
 Total number of financial instrument in the market is so large that it
needs a lot of resources to analyze them all.
 Handling and analyzing such a varied and diversified data needs a lot of
time and resources.
 Reluctance of the people to provide complete information about
themselves can affect the validity of responses.
 Due to time and cost constraint study is conducted in only area of
Ghaziabad and Noida.
 The lack of knowledge in customers about the financial instruments can
be a major limitation.
 The Information can be biased due to the use of questionnaire.
BIBLIOGRApHY
65

66.  www,nseindia.com
 www.bseindia.com
 www.uniconindia.in
 www.amfiindia.com
 www.mcx.com
 www.mutualfundsindia.com
 www.scribd.com
ANNExURE
66

67. QUESTIONNAIRE
Name:
Contact No:
67

68. E mail id:
1. What is your age ?
(a) 20-30 [ ] (b) 31-40 [ ] (c) 41-50 [ ] (d) 51 & above [ ]
2. Gender
(a) Male [ ] (b) Female [ ]
3. Occupation
(a) Student [ ] (b) Entrepreneur [ ] (c) Working [ ]
(d) Professional [ ] (e) Retired [ ]
4. Do you know about the following investment options
available in financial market?
Mutual Fund Yes No
Fixed deposits Yes No
Derivatives Yes No
Equity Yes No
Insurance Yes No
5. How do you get information regarding these financial
instruments?
Advertisement [ ] Media [ ] Newspaper [ ]
Co.’s Sales force [ ]
68

69. 6. Please rate the following investment options as per your
preference :
Mutual Fund [ ] Fixed Deposits [ ] Derivatives [ ]
Equity [ ] Insurance [ ]
7. How often you invest in these investment avenues?
Regularly As per mkt. cond. Speculation
9. What is your Annual Income ?
A. 1 to 3 lacs [ ] B. 3-5 lacs [ ]
C. 5-10 lacs [ ] D. More [ ]
10. What % of Income you invest in these financial instrument ?
A. Below 5% [ ] B. 5 – 10 % [ ]
C. 10 – 20% [ ] D. Above 20% [ ]
11. On what basis you invest in any particular investment option :
Past performance Market Sentiments
Fundamental/tech. analysis others
12. What are the factors you consider while investing in any of the
financial instrument?
Max. return Tax saving
Safety Regular income flow
69

70. 13. How long you prefer to keep your money invested in any financial
instrument?
Less than 6 months 6 months to 1 yr.
1 to 3 yrs. More than 3 yrs.
14. How much return you expect from investment?
A. 10 to 20% [ ] B. 20 to 30% [ ]
C. 30 to 50% [ ] D. above 50% [ ]
15. Are you satisfied with your investment decision, please rate :
Highly satisfied Satisfied
Less Satisfied Not satisfied
70

71. 71