Professional Documents
Culture Documents
I would take this opportunity to express my sincere gratitude to Mr. Sachindra Nath
Tyagi, my project guide, under whose competent guidance I was able to complete my
thesis successfully.
I would also like to thank Mr. D.K. Gupta, Director KIIT, who has nurtured an
(Daneesh Sharma)
INTRODUCTION
INTRODUCTION
The consolidate of corporate India has seen business groups get leaner and meaner. The
Tatas, the Birlas, the Ambanis are all looking at greater efficiencies in their businesses,
squeezing out the last rupee from restructuring their operations, finances, divisions, profit
centres. Almost all the companies have seen smart growth in sales and profits. The
Sensex is up 60 percent since January 2003, many stocks are up many times over-not
merely because of ‘ sentiment’ but because the markets are finally recognizing the power
businesses of adapt.
INVESTMENT OUTLOOK-2004
AVENUES
Fixed Rates on small savings will need to come down in line with the
the next five years. While the ride may be bumpy in the near erm,
Estate and I believe that the real estate market will continue to be buoyant
How do you decide where to invest your money? Is it on the basis of “where an
Here some timeless mantras we chant in Outlook Money that should help you home in
• Asses how much risk you are comfortable taking. Can you live to see your money
grow by 70 percent in one year and lose half its value in the next? If not, don’t
• Set financial goals-so much for the Bose music system, so much for the house
down payment, so much fro the children’s education, so much for retirement.
• Allocate the money. Money set aside to finance long-term goals like retirement
is at higher risk.
OBJECTIVE
OBJECTIVE
1. Stock
2. Bonds
3. Mutual Fund
4. Forex Market
6. Other investment.
STOCK
Primary Market
The stock can be bought in the primary or secondary market. When the company
issues the stock for the first time, also called public issue, any one can subscribe to
this issue. There may be some restrictions regarding the number, the mode of
information regarding the company including the time frame for the project,
utilization of the funds, future prospects, and risks perceived by the management
etc.
The prospective applicants are advised to study this document carefully. The
public issue is kept open for a few days for enabling the persons to apply.
After receiving all the applications the shares are issued within the stipulated time.
The company may also invite applications in case of substantial expansion. But
Secondary Market
The other market is the secondary market. Huge transactions take place in this
Here the existing shareholders sell their shares to buyers. To purchase or sell
shares in this market a person has to register himself with a broker or a broker
house authorized to operate in this market the shares are quoted in a stock
be paid.
After the necessary formalities, which may take at best a few days, the transaction
is completed.
The shares are kept in a depository and the details are given to the account holder
periodically.
The advantage of the secondary market is that the past performance of the
It is absolutely essential to study the background and the past performance of the
must devote time to study the trends and the market movement of stocks.
Stock markets these days follow a global trend. Watch not only NYSE &
NASDAQ but also FTSE, NIKKEI, HANG SENG as well as DAX and CAC.
Stock market is the place to make tons of money. Even of you do not, you will
It used to be believed that the best time to invest in a company is when it goes
public. i.e. issues stock for the first time called initial public offer or I.P.O.
The value is analyzed, the information is totally presented and there is a basis for
the issue price. But there is only one snag. The performance hand if you have
some stocks in the Parma group it may not face any risks at all. In fact due to the
reword this for investment purpose as, chance that the actual outcome from an
investment will differ from the expected outcome? Hence an investment in terms
of risk can turn out to be bad or very good too! So when you buy stocks in several
markets you reduce the risk. But you also sacrifice the chance of getting higher
returns.
Hence the decision to buy stocks in several different markets also called
If you are young, have good income and less liability you can afford to buy stock
in only a few markets. If you are lucky you can win a lot of money. You can lose
a lot too! But if you are retired and dependent on the income from the stock for
your livelihood you cannot take the risk, you must invest in several markets. This
will call for judgment. When the economy of a country is affected, all markets
In times of recession the first industry affected is capital goods industry. The last
probably is drugs & pharmaceuticals. So depending on the guess of the future and
your limited ability to take risks you must choose a judicial mix of stock in
different markets.
If you were to buy all the stock in the market in the right proportion the returns
will match the market index. In such a situation you will perform as well or as
badly as the market. But the purpose of the investment in stocks of your choice is
Secondly it will not be possible for anyone to buy all the stock in the right
proportion all the time. Hence with the limited funds and limited information
available regarding the future movement of price of various stocks you will take a
decision to buy stock in different markets to match the degree of risk you can
afford to take.
The returns generated buy stocks in most countries are not exceptional. The
picture is similar around the word. The US common stocks on an average rose 4.2
times during 1989-99. In the U.K. the rise ending the 25 year period during 1999
was 36 fold. In Japan share values, ended 1999 are languishing over 50% below
the peak in 1989. but they are still 5 times higher than what they were in 1974.
A study conducted by an investment bank has shown that the average return on
gilt edged security (Bonds) for 1974-94 (after adjusting for inflation and assuming
no tax) was 5.7%. In contrast, the corresponding figure for equities (stock) was
13.5%? Equities represent the risk capital that is invested in projects to produce
the best returns. Such capital can be, and is, reinvested elsewhere when there are
better opportunities. This mobility may not be free. But risk capital will always be
limited and the demand for it will always carry it to where returns are better.
But there are certain limitations when you invest in stocks. Apart from risks there
is also the issue of liquidity. If you want the funds badly can you sell the stock
easily, safely and without loss? This problem of liquidity is the issue.
Since the stock market is volatile, the price could be very low at the precise time
that you need the money. You have little option but to sell at a loss to get the
money that you want. Such volatility may not exist in securities and Bond market
because the interest payable is fixed and time period is also fixed. So it is said that
Some persons get a lot of thrill and excitement by the decision to invest in stocks,
watching the movement of prices, making money by selling stock when the gains
are handsome and feeling a sense of achievement now and then. But along with
over.
The stock markets these days are global; it becomes also imperative to watch the
economy and performance of industries. Fortunately data are available but these
management is important as even when an industry faces problems, some unit can
What is Bond ?
What are the differences between the different Bonds (5 yr., 10 yr.,
etc.)?
What is Bond?
Bonds issued by the Governments are also terms as securities. The issuing
Debentures.
proper compliance of the regulations and proper upkeep & maintenance of the
assets, a trust is formed or trusties are appointed. Even debt instruments issued by
companies are covered under the broad term BOND for the purpose of
investments.
It is compulsory for such companies to get a ‘rating from the recognized Rating
Agencies. This helps in estimating the repaying capacity of the company. Triple a
The interest on a bond can be fixed for the entire period, or it can be floating. The
floating rate will be linked to either the bank rate or some other independently
determined rate such as LIBOR. In general, the safety of the investment and the
The market price of the bonds does not fluctuate widely only on the market. This
ensures liquidity.
A bond-holder is a secured creditor. He has legal rights to sue the company in case
The returns in investments from bonds over a period of time are likely to be less
Basically bonds are debt instruments. They are stable forms of investments. The
These are quoted on the stock exchange and can be purchased in the same manner
The investment in bonds can be through the primary market when they are first
issued. The application has to be submitted as per the terms stipulated by the
issuing authority. In case of companies debentures are now in the same category
In many countries the prime lending rats or bank rates are being reduced over a
period of time. This is a big opportunity for the bond market. The fluctuations in
the bond market depend on these interest rates. Hence the volume of transactions
faculties available. You need to have a specified bank account and a specific
depository account. The facility provider registers these. The transactions then can
be carried out on your PC. The instructions are given on your PC to purchase or
sell. The facility provider verifies your bank balance as well as your depository
Bond market in general is not volatile. It is a liquid investment, which means that
You can invest in bonds whenever you have the necessary funds available.
Bonds pay a fixed and unchanging income with the expectation that their price
The interesting point to note is that historically the interest rates moved from 4.5%
in 1960 to near 10% in late 1980s. But the trend in the first few years of the
twenty first century has been for the interest rates to fall.
expectation (today? is that the interest rates will go down in the next say 10 to 15
years, Bonds which give the guaranteed (today’s) interest for the next 10 to 15
You are assured the higher rate of (today’s interest) over the next 10 to 15 years
when the interest rates may go down. This will increase the value of the Bond
over the period depending on the fall in interest rate. But one can argue that these
low rates can continue only for a limited period and as soon as the economy
revives, the interest rates may be revised up wards. Under such a situation, the
long term Bond may result in some losses. So even in case of Bonds the future
What are the differences between the different Bonds (5 yr., 10 yr.,
etc.)?
stocks or equities.
enthusiasm.
Second has been the slide in price of information technology stocks. Third is the
effect of disasters such as terrorist attacks in the US. This has shifted the relative
Governments, corporations and individuals issue debt instruments. They call for
fixed periodic payments called interest and eventual repayment of the amount
maturity. These are among the safest and most liquid securities available.
Short-term government securities have maturity of one year or less. Treasury bills
The subclasses mainly represent. Modifications of the two basic promises which
Convertible bonds provide the holder with an option to exchange the bond for a
mortgage bonds are secured by a specific lien against assets. During liquidation
the creditors receive proceeds from the sale of those assets up to a limit of debt.
rating agency. The rating agency, after study of the finances of the company, gives
a rating, which signifies the ability of the corporation to repay. These ratings are
also revised from time to time depending on the change in the finances of the
corporation.
The types and variations of bonds are substantial. You have to study the bond
contract, which spells out all the details behind the issue.
In general yield from the safest bonds i.e. Govt. bonds will be less than yield
needs.
Why should investor invest in Bonds?
in the United States are definitive risk free assets because the likelihood that the
Bonds or debentures and other securities in this category all have some assurance
from the issuer to repay the capital and interest. Some assets may be specifically
be mortgaged for the security. Independent rating agencies may have given a
rating for the bond debentures after fully analyzing the financial position of the
issuer.
Bonds have a long term and well-defined terms of interest payment and repayment
of capital. This makes bonds less volatile. There is very little risk and good
liquidity.
Bonds can be traded in the market at relatively stable prices. This means that you
can get the money by selling bonds whenever you need some money.
You do not have to sell at a distress. Unlike stock, a legal liability has been
created in your favor at the time of issuing the bonds. You have a legal remedy in
case of default.
It is necessary for you to study your future needs in terms of cash. When you are
likely to need? How much you are likely to need? What are the different ways in
Investors can spread the risks by not putting all their eggs in one basket. They can
future uncertainties.
An individual investor who desires to invest in stock has limited money. On the
order hand the different stocks being traded in the stock market are quite large.
When an opportunity arises to purchase some stock, he may not have the liquid
cash. He may not be able to study the trends in stock market. He may not be able
It may be difficult for him to visualize the future prospects of different categories
In short very few persons can have the time, knowledge and skills to take the best
Mutual funds are basically investment companies, which continuously sell and
buy stock.
Any one can participate in its activities by investing in the mutual fund. The
investment company usually a trust manages the total capital available to a mutual
fund.
All the stock owned, by this company valued at the market price is the net asset
value or NAV. This amount divided by the total No. of unites issues will be the
The Mutual Fund Company will buy the units from the investor at his option at
any time at the NAV. For managing the fund, the company will charge some
commission called “load? This can be charged either at the time of selling or at
It can be seen that by investing in mutual fund one can get the advantage of large
market and the expertise of the professional management. The fund manager of
AMC is watching the stock market all the time and trying to get the best yield for
the investors.
Mutual funds state specific investment objectives in their prospectus. The main
type or objectives are growth, balanced income, and industry specific funds.
portfolio of stocks, and bonds. This achieves both capital gains and dividend along
with interest income. Income funds concentrate heavily on high interest and high
investors who are extremely optimistic about the prospects for these few
industries.
One should be willing to assume the risks associated with such a concentration of
virtually result in huge losses. Sometimes the same company may have a family of
mutual funds. The investors may be allowed to shift from a fund with one
There are a number of mutual fund companies. Each company has a family of
mutual funds with different objectives such as growth, income, industry specific
etc.
investing you can approach any of the mutual fund and by a very simple
application, purchase the shares at the NAV. The NAV is available on a daily
basis.
The mutual fund will let you know the “load? i.e. additional amount you have to
pay when you buy and when you sell. In case of entire commission added to NAV
at the time of purchase by the investor the process is called entry (front-end
loading). In case of entire commission being charged at the time of sale by the
The mutual fund keeps on selling and purchasing stock in the market. Depending
on the price of the stock the NAV will be changing. This will be quoted on a daily
basis so that the investor can decide whether to buy more units or sell the total or
The mutual fund will also declare the pay dividend from time to time depending
on the dividend income. The dividends declared on the stocks owned by the
mutual fund will be the income of the mutual fund. The mutual fund will declare
dividend and pay the same to the investors depending on its income.
Each Asset Management Company (Mutual Fund House) will have a family of
Before investing, the prospectus of the mutual fund that specifies the condition
should be studied. The past performance of the mutual fund can be examined. The
Over a period of time the mutual fund should do better than the index. (The index
gives a measure of how the overall stocks have moved either up or down.) Such a
study should include dividends declared by the mutual fund over a period of time.
After investing, the performance of the mutual fund will be communicated to the
investor.
A comparison with performance of other mutual funds with the same objectives
fund is by buying new units in the fund. Mutual funds pay no taxes on the income
they receive as they have been constituted as a Trust in accordance with the
provisions of the Indian Trusts Act, 1882 by the Sponsor. In order to qualify for
the tax exempt status, funds must distribute most of the income they get (90% in
U.S. and 100% after costs in U.K.) They must hold a diversified portfolio. In U.S.
no more than 25% can be in a single investment. For half of the portfolio no more
than 5% can be securities of a single issuer. These aspects severely limit the
flexibility.
Hence the best time to invest is when the NAV of the mutual fund is at the lowest.
Not only in relation to the past but also future. Actually it is only the future that is
important. If one were confident or sure of future of any individual stock then it
would be best to invest in that stock. The risk would be there but so would be the
The economic situation does not indicate any clear picture regarding the future. At
stocks.
Secondly it is also possible to select a mutual fund with an objective suited to your
needs.
Choosing a mutual fund is the most crucial aspect of investment in a mutual fund.
In case of a stock it is easy to look at the past performance such as sales, profits,
price on the stock market, dividends record etc. It is also possible to compare the
companies.
Thirdly the past performance of a mutual fund may not be a good guide to future
First aspect has to be trust. Is the management of the fund trustworthy? Are there
any adverse or doubtful reports in the market? This is important because many a
which objective is important for you. If one can take risks, growth objective may
give better returns over a period of time. One should have the patience to wait for
the long term, which may be necessary. Income funds may not give appreciation
in capital but may assure income. If the need is regular income, then one has to
On the other hand there will a number of industry specific funds. Information
technology, Parma sector, hotel & hospitality industry, processed food, fast
The future of an industry will depend on many factors. An expert who can analyze
these factors and make a good guess can certainly get good rewards.
There are many methods of evaluating the performance of the selected mutual
fund. The purpose is to find if the management of a fund has done better through
its selective buying and selling. One way is to compare the yield of a mutual fund
with the market or a random portfolio. Even if the mutual fund has done better,
the cost should be also taken into account. It should be ensured that the excess
return is sufficient to cover the added expenses incurred for the purchase of
mutual fund. Lastly even after choosing a fund and investing, the performance
must be watched.
feels that he lacks the education, background, time, foresight, resources and
temperament to handle the portfolio. In such a case the choice is mutual fund.
Managers trained in the ways of security analysis devote full time to the objective
Secondly the mutual fund has large amounts of money entrusted to it. This makes
The mutual fund being a large institution, it may be able to obtain lower brokerage
commission.
Mutual funds pay no taxes on the income they receive. They do not pay taxes on
the capital gains they realize. Investment in mutual fund mode is very simple.
buying new shares in the fund. Investors can sell shares back to the fund. These
trades on the recognized stock exchange. This gives mutual fund an important
edge. The success of mutual funds in attracting capital to manage has been
notable.
show that mutual funds have performed better. An analysis done in U.K. has
found that very few funds have been able o beat the all share index or FTSE.
The Securities and Exchange Commission in U.S. found some evidence that
The same study found that there was no consistency with respect to which funds
So if an investor think along the lines of the majority, he can choose mutual fund.
FOREX MARKET
Each country has its own currency. Whenever one currency is exchanged with
The foreign exchange market has experienced many changes since its inception.
For many years the United States and its allies participated in a system under the
The foreign exchange rates were tied to the amount of gold reserves belonging to
the nation.
However in the summer of 1971, President Nixon took the United States off the
gold standard. After this many countries followed and there was no relation
between the gold reserves and the exchange rates. Floating exchange rates
materialized.
Today supply and demand for a particular currency or its relative value is the
driving factor in determining exchange rates. The fall of communism and the
dramatic growth of the Asian and Latin American economies have decreased
trade and foreign investment have made the economies of all nations more and
more interrelated. Economic figures are regularly reported around the world.
Forex investments are investments in a currency other than that of your own
country. If you have U.S. dollars your investment is in dollars. If you have British
You desire to visit a foreign country. You know the approximate amount of
money you will spend. You have the option of either taking your own currency to
that country or exchanging the same when you visit that country.
You also have the option of exchanging the currency in your own country and
keeping the currency of the foreign country with you well before you visit that
country. e.g. You are to visit Japan but you are at present in New York. You can
change the U.S. dollars into Japanese Yen before you leave. This is a foreign
exchange investment.
You would do it if you think the Yen is going to become stronger. i.e. In future
An option gives you the right, but not an obligation, to buy or sell a specific
Options are either call or put, Calls give the holder the right to buy the foreign
currency or Forex at a specified price. Puts give the right to sell Forex at a
specified price.
Depending on the actual market price when you exercise the option you will gain /
lose the difference between the specified price and the market price.
How do you trade in the Forex Market?
Trading in the Forex market is through the brokerage houses that deal in foreign
The Forex market may be expected to go up or go down. If you expect the Forex
market to go up you will go in for calls. e.g. The value of 1 us dollar today is 48
Indian Rupees.
You are expecting that the Forex market will result in 1 us dollar equal to 55
Indian Rupees after say four months. You can go in for call option agreeing to buy
10 U.S. dollar at the rate of 50 Indian Rupees / dollar at any time during the next
six months.
Whenever the actual market price is above 50 you can exercise the option. You
can actually buy 10 U.S. dollar by paying only 50 Rs. Per dollar i.e. by paying
only Rs. 500. But the actual value being 540 Rs. The gain to you is Rs. 40.
Similarly if you think the market is going to be Rs. 40 per dollar, you can go in for
put option. Here you will be able to sell the dollars in Forex market at the agreed
price i.e. Rs. 48./dollar though the actual market price is less i.e. Only 40
Rs/dollar.
The gain an investor make will depend on the actual difference in the market
There would be some fee/commission required to be paid. This would be the cost
of transaction and result in reduction of the gain to some extent. The foreign
exchange market is the largest financial market in the world; Traditionally the
foreign exchange market has only been available to banks, money managers, and
large financial institutions. Over the years, these institution, including the U.S.
Federal Reserve Bank, have realized large gains via currency trading.
including banks, central banks, brokers, and customers such as importers and
exporters.
Today the foreign exchange market offers opportunities for profit not only to
Mostly you will enter into a contract, which will give you an option to buy the
For example you know that you are likely to need a certain amount of foreign
If you expect the price of that currency to go up you can enter into a future
contract to purchase the foreign exchange at the rate available for future trading.
In some case even if you do not except any change in foreign exchange rate you
enter into a contract to save you from incurring higher costs in case the price goes
up in future.
So you can enter into foreign exchange contracts if you anticipate high volatility
in the foreign exchange rates. Here you are only hoping to gain from such
contracts; The time to enter into such contracts would be as soon as you become
variables that may cause the market price of a currency to fluctuate. Monetary and
government’s ability to stand behind its currency also impacts currency price.
In today’s world there are a large number of currency markets. Trading in one
currency vs. another is a market. Since there are many currencies, there are a large
number of possible markets. But only some of these markets are active. i.e. There
are large volumes of trading and the frequency of the trades is also high.
These are the active markets. Most investors prefer a volatile market. Profits
depend on changes in the market. Higher the changes, higher are the chances of
operating.
When you desire to trade, you need another trade who will buy when you sell and
who will sell when you buy. This is easily possible in an actively traded market.
The Forex market is cash inter bank or inter dealer market. Forex market is not a
locations worldwide.
The most often traded currencies, the major currencies are those of countries with
Currencies that often trade with the U.S. dollar include Japanese Yen, British
Pound, the Swiss franc and now the new European currency? Euro. These are the
currencies which are often tightly regulated and simply too illiguid.
access. The only breaks in trading occur during a brief period over the weekend.
The major dealer centers are that of Sydney, Tokyo, London and New York. Even
though a 24-hour market the time of the daycan have a direct impact on the
liquidity available for trading a particular currency. The time zones therefore
become important.
market since the 1980s. Buying and selling opportunities are identified and
tracked by computer charting, using trend lines, support and resistance levels,
reversals and numerous patterns and analysis to study the behavior patterns of
market crowds.
Over long historical periods, currencies have displayed identifiable trends and
People invest in Forex markets because of the large opportunities they offer. They
are very large markets involving trading of 1,500 billion $ every day.
particular currency against the U.S. dollar or any other major currency.
Investor can generate profits whether a currency is rising or falling. Buying one
currency (which is expected to rise) against another currency can do this. Or you
may sell one currency (which is expected to fall) against another currency.
Taking a long position means buying a currency at one price and aiming to sell it
later at a higher price. A short position is one in which the investor sells a
currency that he hopes will fall and aims to buy it back later at a lower price.
response.
Market participants anticipating the direction of currency prices generate the bulk
of currency activity. In general, the value of currency vs. other currency (i.e.
country’s economy with respect to the other major economies. George Soros took
a massive position against British Pound in 1992 and virtually forced the U.K.
government out of the semi fixed exchange rate mechanism with its EU partners.
He made a fortune out of this transaction. You can lose money also. The quantum
high. The style of George Soros was to take big, often interlinked speculative
position using lots of leverage. It was possible to produce a 10% gain in the net
worth of the fund that he was managing by means of only 1% favorable move in
the YEN.
SAVINGS &
INTEREST
The idea of savings is somewhat similar to “Piggybank? A child does not know
when and how much it can save? Each saving amounts to almost no value. A
nickel or a dime cannot buy anything. But nickels & diems saved now and then
over a period of long time can accumulate to dollars, which have some value.
Typically a householder or a salaried person does not know how much he can save
special obligations. But if the small amount saved are keep in the form of cash,
Rich people in any society or countries are limited. But there are a large number
of middle income and even large number of lower income groups. The idea of
savings account was to have an account where small sums of money saved from
time to time are deposited. Whenever you needed you can withdraw the amounts
also. But you will earn a small interest on the balance in your account. A large
number of such accounts enable the bank to get funds at its disposal, which it can
lend.
Normally at any one time only the bank keeps in terms of cash to meet wills such
demand. The bank knows such demand from its experience. So though each
savings account may have small balance, a large number of such accounts are able
though small is paid. Whenever you have some amount you find extra the same
Thus savings account is an investment because you are able to get returns in the
form of interest. There can be several types of savings accounts. e.g. Joint
accounts in the name of husband & wife or a savings account in the name of a
Special savings account with certain facilities etc. It can be easily understood that
savings account induces a person to save small amounts of money when possible.
But savings are investments only if the currency is stable and inflation is within
limits. If the inflation is very high savings depreciate very rapidly. The purchasing
power reduces and hence the savings do not remain good investments.
It is also possible that persons in the middle-income group can have large balances
in the savings accounts. The banks can then shift part of these investments to
account does not have enough balance in his account but wishes to withdraw
account. Many facilities have become possible and simple with the computers and
inter connection. Withdrawing money from savings bank account through ATMs
has become very convenient. These ATMs are open for 24-hors. It is also possible
to withdraw money from a different city to the one in which you have the account.
The savings bank account has therefore provided not only the means of savings
but also the security of money deposited as well as availability of the same at any
Sometimes these deposits up to a certain value are also insured against any
Saving bank accounts generally pay smaller interest. But you can get the amount
back at any time without any advance notice or loss of interest. Secondly other
Hence when the amounts are small and you do not know how many time sand
how much you will save, it is best to put the money in the savings bank account.
In case of savings account the process is very simple. Similarly when you cannot
anticipate when you will need the funds, savings account is a good option. The
supposition is that the total amounts are small and you may need this in a hurry.
Investment in savings bank account has two risks.
One is the reliability of the bank. It has happened in quite a few countries. The
bans have collapsed. Even in such a case the small investor is protected by some
kind of insurance. You must make sure that the insurance cover is adequate for
your balance.
The other is inflation level in the country. If the inflation level is in twenties or
thirties it is eating away into the value of your savings. Hence you have to think of
other alternatives.
Term deposit accounts are essentially investment of your savings for a specified
period. The term deposit is like investment in a bond. The bank agrees to give you
a fixed rate of interest (or a floating rate which is very rare) one the term deposit
This rate is generally higher than the rate of interest in case of savings account. It
The bank will pay higher interest if your term of deposit is 5 years instead of 2
years. The reason for this is that the banks can safely lend this money to a
businessman for this long period. Theoretically you cannot ask for the return of
In actual practice subject to some penalty, you can withdraw the term deposit
before maturity in many cases. Hence if the amounts are large and you are fairly
sure of not needing this for a long period, it makes sense to invest in term
deposits. The term should be chosen with care so that you get the highest rate of
interest possible and get the amount when you are likely to need it. So if you can
spare the amount for a longer period it makes sense to invest the money in term
deposits.
Savings bank accounts were quite simple. You could deposit the money any
number of times.
Depending on the rules the interest was paid on the minimum balance in the
account. The interest was credited once in a year. But of late there is competition
possible to give standing instructions to the bank regarding the operation of the
savings account.
This can help you in making some regular payments. Similarly ATMs have made
savings account and the bank, you can look at the facilities being provided. A
bank having total computerization can permit you to withdraw money from any
city in the country. it is also helpful if the bank has branches in more cities and
The rate of interest will be generally the same but this should be verified. Some
savings accounts may have the facility of automatic transfer of funds to a higher
interest bearing term deposits, if the balance increased beyond a certain limit.
In another case the funds in the higher interest bearing term deposits can be
transferred to the savings bank, if you have issued cheques exceeding the balance.
Some banks will accept instructions for regular payments for insurance,
telephones, electricity bills etc. from the savings bank account. Similarly many
banks will credit the dividends, annuity and such other payments directly to the
Hence to choose the right savings account the different facilities being offered by
the banks and the convenience it will offer to you should be studied. In some cases
even facilities proposed in near future should be taken into account while
INVESTMENT
Private Ventures
Private Funds
Annuities
Real Estate
OTHER INVESTMENT
Private Ventures
Private companies have stocks, which are not widely held. Basically these
companies are having stock, which is held either by a few individuals or their
The stock is permitted to quote on stock exchange. Since the stock is quoted on
information, which may affect the price of the stock on the market. They are
required to publish the quarterly results in the newspapers. The basic idea is that
since public at large is investing in public companies no one should be able to take
advantage of any inside information which is not available to the subject to such
discipline. They cannot invite subscription from general public. This severely
Hence generally only those who know the management of the company or their
promoters and can put their faith in them will want to invest in such companies.
Stock in a private company cannot be sold in the stock exchange through a broker.
The prices ar not quoted. There may be conditions attached to the sale.
The present promoters or management may have the first? Right to buy the share.
If they do not buy the same can be sold to someone else. But this is possible only
of the present management agrees. They are thus investments with high risk.
Secondly they may not be readily available. They are not traded. Hence it may be
The liquidity is also limited. You may not be able to sell if you do not find a buyer
The person who invests in private companies must be able to know what is
company has a lot of freedom since they are not subject to the discipline of a
public company. This may help then in achieving better results. The investor will
Over a period of time the present promoters may want to buy out the stock held by
small investors. They may be willing to pay quite a high price for this. Not many
companies are now private and those who have stock in such successful
Hence the opportunities for investing in a private company are not always
proper scrutiny.
Private Funds
Venture capital industry is a relatively small but growing sector of the investable
capital market.
Basically venture capital has emerged by wealthy persons who can pool their
resources and create a large amount of private capital. Venture capital investments
company i.e. a company, which is just staring, the investor must have the patience
to wait till the seed become a mature fruit. It does take time to build and develop a
new company.
The investor must also realize that where a company will finally end up may turn
out to be quite different from the end proposed. Companies frequently need to
change products or at least modify the prototype if the product does not meet with
The idea should be right and outside conditions suitable. All the homework must
be done thoroughly including time frame for each stage from concept to sales. The
team, which will implement the project, should be cohesive and committed to the
project. It should not depend on one individual. There should be enough cushions
in the financial calculations so that a slight change does not sink the project.
In spite of all the precautions, all projects will not succeed. But a few that will
succeed will do so well that the venture capital industry will still make above
average returns. This is the force that is driving the venture capital industry.
The venture capitalists can either manage the fund themselves or more often hire
professional who can manage the fund and day-to-day decisions. Only the venture
Either way success will depend on their ability to analyze economic trends for
potential market opportunities. Careful screening and selection of teams who are
Generally there are two main avenues. One is merely selling the company or
selling the investment to other investors when the company is very successful.
The other alternative is to go public i.e. make an IPO (initial public offer) and sell
markets, which seek out and fund important new technologies, are necessary
today. Without this, innovations and products would not have emerged with a
speed, which could not have been imagined a few decades ago.
The progress of a country may well depend on the availability of venture capital
development.
Annuities
When you are in employment, either you or your employer or both can invest in
an annuity. A small amount is paid to the annuity provider till the age of
retirement.
This amount, accumulated over the years, enables the annuity provider to pay a
fixed sum (monthly, quarterly or yearly as agreed) to you till you live. This is a
good retirement benefit. Annuity can also be purchased at any time by a single
payment also. Depending on the single payment and terms of the annuity, the
annuity provider will continue to pay the annuity till you live. In a way it is like
pension. The annuity payments are calculated taking into account the interest
Interest rates during the later part of 2001 are going down all over the world. But
in most countries inflation is very much under control. Under such a situation a
retired person with limited liability desires to have fixed income till are lives.
He can then manage his affairs well. In other forms of investment there is some
uncertainty as to how much income he can get. Even in case of 15 years bonds,
the interest that he will get after the 15-year period is over cannot be known in
advance. If after 15 years the bank rate is low, he may get lower interest in new
investment in bonds.
In case of annuity, once he has made his purchase of annuity, his annuity
payments will ensure the fixed income contracted for till he lives. He can live for
another 5 years or another 30 years he will continue to get the payments. So for
Some employees are allowed to invest some portion of the salary (agreed by him)
in a portfolio. Here the annuity payments after retirement will depend on the
These are also therefore called variable annuity. There are certain tax benefits to
Real estate has received attention in recent years as a compliment to stocks and
bonds.
Real estate is either land and / or building and is fixed in location. Each piece of
real estate is unique because of the location. No two real estates are identical, The
value of real estate also depends on how nearby properties are and the way they
are utilized.
The value also depends on local and economic conditions. A real estate cannot be
Real estates are durable good shaving long economic life. Use of the property in
future has to be thought of. Properties usually involve large funds and are not
divisible. Due to this the market for real estate is less efficient. For many large
Since the trading is not very often, the market price is difficult to establish.
investors would normally prefer a local partner to ensure expertise familiar with
the local market. Real estate ownership also involves complicated legal
procedures.
inflation.
The cost of real estate (less land) can be depreciated for the tax purpose oat a rate,
higher than the actual decline involve of property. Taxable investors can use this
There are many ways in which you can invest in real estate. Major types sought by
buildings, hotels, motels and some specialty real estate such as restaurants. With
direct investment the investor can obtain all or part of the real estate asset.
The investor can manage the asset himself or delegate this to others for a fee.
There are also debt investments in real estate. You can provide a part of debt
capital in return for a claim on a part of income from the property . such a claim
would be secured by alien an the property known as mortgage. This is the security
for the investment. It can be seen that there are many ways in which you can make
investments in real estate. You have to anlayse your own requirements and needs
N&
SUGGESTIONS
INTERPRETATION & SUGGESTIONS
No two investors are ever the same, and one person’s attitude to risk may be very
For instance, if investor is young, single and have no plans for children, investor is
in a position where you can probably accept a relatively high degree of risk for the
ultimate benefits that may accrue from his savings and investment programs.
On the other hand, if investor is in fifties with dependents (or even without them)
risk profile.
would be inappropriate, since the client would constantly fret about the inevitable
adventurous client would likely result in the client being disappointed in the
relatively low returns such a portfolio could achieve. It’s a matter of choosing
circumstances, while others may be unduly cautious. The “greedy” ones may meet
some fear injected into them, while the “fearful” ones may need a bit of greed
dangled under their nosed, in order to have a realistic chane of achieving their
investment objectives.
The old players can avail the opportunities even at height risk because they are as
usual to the stock market, so they are much aware about the fluctuation of the
shares. The new player are basically the new jobholders they wan t to initiate with
the small investments in some reputed company to keep the principal, safe. The
Most of the big players are ready to take a risk but they want to look over the
We found that the investors who had been in this business for the long time risk
and dividend both and speculations were not the important factor for them. They
might think that the high dividend can reduce the risk in the particular share.
The people of limited income group invest in the companies who have a good
repudiation like TATA,RIL,BIRLA, etc where they believes that there principle is
towards the Info Tech shares more because the market position of these
METHODOLOGY
Research Methodology
Research Design
of Secondary data.
Sample
required.
Data Collection
Research was conducted on the Secondary data & data have been collected
News Papers
2.Hindustan Times
3.Economic Times
Magazines
1.Outlook Money
2. Business world
Institutions Visited
Websites
1. yahoo.com
2. google.com
LIMITATIONS
1) Stock, mutual funds, saving and investment, bonds and forex market is a wide
area of study so its needs a long duration to get the reliable results.
3) Investment decision depends upon personal thinking which is differ from person
to person.
CONTENTS
1) Introduction
3) Research methodology
• Research Design
• Sample
• Data Collection
4) Data Analysis
• Stock
• Bonds
• Mutual fund
• Forex market
6) Limitations
7) Bibliography