INDEX

Sr.No. CHAPTERS TITLE PAGE

No.
1 Chp.1 Rationale Of Study
2 Chp.2 Objective Of Study
2.1 Title Of The Project
2.2 Objective Of The Project
2.3 Scope Of The Project
3 Chp.3 Profile Of The Industry
3.1 Introduction
3.2 Meaning Of Investment
3.3 Financial & economic Meaning Of Investment
3.4 Characteristics Of Investment
3.5 Objective Of Investment
3.6 Investment Process
4 Chp.4 Theoretical Perspective (Investment Avenues)
4.1 Introduction
4.2 Stock Market
4.3 Bank Deposits
4.4 Real Estate
4.5 Metals
4.6 Mutual Funds
4.7 Commodities
4.8 Insurance
4.9 Tax Savings Schemes
4.10 National saving certificates
5 Chp.5 Research Methodology
5.1 Problem Statement
5.2 Introduction To Research
5.3 Research Design
5.4 Sampling Techniques
5.5 Source Of Data
5.6 Method Of Analysis
6 Chp.6 Data Analysis & Interpretations
7 Chp.7 Findings
8 Chp.8 Limitations

APPENDIX
---- COPY OF QUESTIONNAIRE
---- BIBLIOGRAPHY
CHAPTER – 1

RATIONALE FOR STUDY

Investment is the commitment of a person’s funds to derive future income in the form of
interest, dividend, premiums, pension, pension benefits or appreciation in the value of
their capital purchasing of shares, debenture, post office savings certificate, insurance
policies are all investments in the financial sense. Such investments generate financial
assets.

In the economic sense, investment means the net additions to the economy’s capital stock
which consists of goods and services that are used in the production of other goods and
services. Investment in this sense implies the formation of new and productive capital in
the form of new constructions, plant and machinery, inventories, etc. such investments
generate physical assets.

The two types of investments are, however, related and dependent. The money invested
in financial investments are ultimately converted into physical assets. Thus, all
investments are ultimately converted into physical assets. Thus, all investments result in
the acquisition of some assets either financial or physical.

CHAPTER – 2

OBJECTIVE OF THE STUDY

TITLE OF THE PROJECT: INVESTMENT PATTERN OF THE

INVESTOR.

Research objective:-

Every project is started with keeping in mind specific objective. Without any objective
researcher are not able to reach his goal & result. The following points reflect the core of
the objectives which also directly focuses on the scope of the project work undertaken.

• The primary objective is to study the investment pattern of the investor.

 • To find priority for investment like Returns, Risk, Safety, liquidity, maturity of
investment.
• To compare different investment avenues available for investor
• To help investor selecting the appropriate investment avenue for asset allocation
according to needs.
• To find the strength and weakness of different avenues.
• To analyses Investment pattern through data interpretation.

2.3 Scope of the study:-

o This study is limited to Mumbai city only.

o This study not includes other avenues such as diamond, retail textile &
agricultural business.
o The scope of the study is limited to different selecting investment avenues.
o This study is limited to comparison of different investment avenues
available to middle class & lower class family.

CHAPTER – 3

PROFILE OF THE INDUSTRY

1.1 ) INTRODUCTION

The income that a person receives may be used for purchasing goods and services that he
currently requires or it may be saved for purchasing goods and services that he may
require in the future. In other words, income can be what is spent for current consumption
abstains from present consumption for a future use. The person saving a part of his
income tries to find a temporary repository for his savings until they are required to
finance his future expenditure. This results in investment.

1.2 ) MEANING OF INVESTMENT

Investment is an activity that is engaged in by people who have saving, i.e. investments
are made from saving, or in other words, people invest their savings. But all savers are
not investors. Investment is an activity which is different from saving. Let us see what is
meant by investment.

It may mean things to many persons. If one person has advanced some money to another,
he may consider his loan as an investment. He expects to get back the money, long with
interest at a future date. Another person may have purchase one kilogram of gold for the
purpose of price appreciation and may consider it as an investment. Yet another person
may purchase an insurance plan for the various benefits it promises in future. That is his
investment.

In all these cases it can be seen that investment involves employment of funds with the
aim of achieving additional income or growth in values. The essential quality of an
investment is that it involves waiting for a reward. Investment involves the commitment
of resources which have been saved in the hope that some benefits will accrue in future.

Thus, investment may be defined as “a commitment of funds made in the expectation of

some positive rate of return”. Expectation of return is an essential element of investment.
Since the return is expected to be realized in future, there is a possibility that the return
actually realized is lower than the return expected to be realized. This possibility of
variation in the actual return is known as investment risk. Thus, every investment
involves return and risk.

1.3) FINANCIAL AND ECONOMIC MEANING OF INVESTMENT

In the financial sense, investment is the commitment of a person’s funds to derive future
income in the form of interest, dividend, premiums, pension, pension benefits or
appreciation in the value of their capital purchasing of shares, debenture, post office
savings certificate, insurance policies are all investments in the financial sense. Such
investments generate financial assets.

In the economic sense, investment means the net additions to the economy’s capital stock
which consists of goods and services that are used in the production of other goods and
services. Investment in this sense implies the formation of new and productive capital in
the form of new constructions, plant and machinery, inventories, etc. such investments
generate physical assets.

The two types of investments are, however, related and dependent. The money invested
in financial investments are ultimately converted into physical assets. Thus, all
investments are ultimately converted into physical assets. Thus, all investments result in
the acquisition of some assets either financial or physical.

1.4) CHARACTERISTICS OF INVESTMENT

All investments are characterized by certain features. Let us analyze these characteristic
features of investments.

Return

All investments are characterized by the expectation of a return. Infact, investments are
made with primary objective of deriving a return. The return may be received in the form
of yield plus capital appreciation. The return may be received in the form of yield plus
capital appreciation. The dividend or interest received from the investment is the yield.
Different types of investments promise different rates of return. The return from a
investment depends upon the nature of the investment, the maturity period and a host of
other factors.

Risk

Risk is inherent in any investment. The risk may relate to loss of capital, delay in
repayment of capital, non-payment of interest, or variability of returns. The risk of an
investment depends on the following factors.

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

2. The lower the credit worthiness of the borrower, the higher is the risk.
3. The risk varies with the nature of investment. Investments in ownership securities
 like equity share carry higher risk compared to investments in debt instruments
like debentures and bonds.

Safety

The safety of an investments implies the certainty of capital without loss of money.

Liquidity

An investment which easily saleable or marketable without loss of money and without
loss of time is said to possess liquidity.

1.5) OBJECTIVES OF INVESTMENT

An investor has various alternative avenues of investment for his savings to flow to.
Savings kept as cash are barren and do not earn anything. Hence, savings are invested in
assets depending on their risk and return characteristics. The objective of the investor is
to minimize the risk involved in investment and max the return from the investment.

Thus, the objective of investment can be stated as: Maximization of return, minimization
of risk & hedge against inflation.

1.6) INVESTMENT PROCESS

The investment process is generally described in four stages. These stages are investment
policy, investment analysis, valuation of securities, and portfolio construction.

I. Investment policy: Determination of ingestible wealth determination of portfolio

objectives. Identification potential investment assets consideration of attributes of
investment assets allocation of wealth to asset categories.

II Investment Valuation: Valuation of stocks, debentures, other assets and bonds.

III. Investment Analysis:

Equity stock analysis

Screenings of industries

Analysis of industries

Quantitative analysis of stocks

Analysis of the economy

Debentures and bond analysis

Qualitative analysis of debentures

Other assets analysis

IV. Portfolio Construction: Determination of diversification level consideration of

investment assets evaluation of portfolio for feedback

CHAPTER – 4
THEORETICAL PERSPECTIVE

INVESTMENT AVENUES

INTRODUCTION

There are Various investment avenues available to investor now a day. With the opening
up of the economy the number of investments have also increased and the quality of the
investments have improved due to the use of the professional activity of players involved
in this segment. Today investment is no longer a process of trial and error and it become
a systematized process, which involves the use of the professional investment solution
provider to player greater role in the investment process.
Different investors have different objectives of investment and they have different risk
capacities. The below lists down some of the Investment avenues on the basis of risk
involved. Investments in Government bonds or bank deposits carry lesser risk whereas
investment in equities has comparatively higher risk. From the following list we can also
see that higher the risk higher the return. Thus every person would invest according to his
requirements and risk tolerance.

STOCK MARKET
3.1) Stock Market:

The Bombay stock Exchange (BSE) AND National stock Exchange (NSE) are the two
Primary Exchange in India. In addition there are 22 regional stock exchanges.
However the BSE and NSE have established themselves as the two leading exchange
and accounts for about 90% of the equity volume trade in India.

The primary index of BSE is BSE Sensex comprising 30 stocks. NSE has the S&P NSE
50 index (nifty) which consists of 50 stocks. The BSE Sensex is the older and more
widely followed index. Both the exchanges have switched over from the open outcry
trading system to a fully automed computerized mode of trading known as BOLT
( BSE on line trading) and NEAT ( national exchange automated trading) system. It
facilities more efficient processing, automatic order matching, faster execution of
trader and transparency.

A) Equity share:

Ordinary shares are also known as equity shares and they are the most common form of
share in the UK. An ordinary share gives the right to its owner to share in the profits of
the company (dividends) and to vote at general meetings of the company. Since the
profits of companies can vary wildly from year to year, so can the dividends paid to
ordinary shareholders. In bad years, dividends may be nothing whereas in good years
they may be substantial. Ordinary shareholders can vote on all of the issues raised at a
general meeting of the company.
The nominal value of a share is the issue value of the share - it is the value written on the
share certificate that all shareholders will be given by the company in which they own
shares. The market value of a share is the amount at which a share is being sold on the
stock exchange and may be radically different from the nominal value.

3.1.1) Types of stock:

1. Common Stock:

Common stock also referred to as common or ordinary shares, are, as the name implies,
the most usual and commonly held form of stock in a company.

2. Preferred Stock:

Preferred stock sometime called preferred shares, have priority over common stock in
the distribution of dividends and assets.

3. Treasury stock:

Treasury stock are shares that have been bought back from public. Treasury stock is
considered issued, but not outstanding.

4. Dual class stock:

Dual class stock is shares issued for a single company with varying classes indicating
different rights on voting and dividend payments. each kind of shares has its own class of
shareholders entitling different rights.

3.1.2) Advantages of Equity Financing:

• You can use your cash and that of your investors when you start up your business
for all the start-up costs, instead of making large loan payments to banks or other
organizations or individuals. You can get underway without the burden of debt on
your back.
• If you have prepared a prospectus for your investors and explained to them that
their money is at risk in your brand new start-up business, they will understand
that if your business fails, they will not get their money back.
• Depending on who your investors are, they may offer valuable business assistance
that you may not have. This can be important, especially in the early days of a
new firm. You may want to consider angel investors or venture capital funding.
Choose your investors wisely!

3.1.3) Disadvantages of Equity Financing:

 • Remember that your investors will actually own a piece of your business; how
large that piece is depends on how much money they invest. You probably will
not want to give up control of your business, so you have to be aware of that when
you agree to take on investors. Investors do expect a share of the profits where, if
you obtain debt financing, banks or individuals only expect their loans repaid. If
you do not make a profit during the first years of your business, then investors
don’t expect to be paid and you don’t have the monkey on your back of paying
back loans.

• Since your investors own a piece of your business, you are expected to act in their
best interests as well as your own, or you could open yourself up to a lawsuit. In
some cases, if you make your firm’s securities available to just a few investors,
you may not have to get into a lot of paperwork, but if you open yourself up to
wide public trading, the paperwork may overwhelm you. You will need to check
with the Securities and Exchange Commission to see the requirements before you
make decisions on how widely you want to open up your business for investment.

B) Preference Shares

Preference shares offer their owners preferences over ordinary shareholders. There are
two major differences between ordinary and preference shares:

 Preference shareholders are often entitled to a fixed dividend even when ordinary
shareholders are not.
 Preference shareholders cannot normally vote at general meetings.

The preference dividend is fixed in the sense that preference shares are often issued with
the rate of dividend fixed at the time of issue and you might see something like this:4%
preference dividend $ 0.25

Note, that if by any chance a company cannot pay its preference share dividend then it
cannot pay any ordinary share dividend since the preference shareholders have the right
to receive their dividend before the ordinary shareholders under all circumstances - hence
the term 'preference'.

3.1.4) Types of preference shares:

1. Cumulative preference shares:

Preference shares are usually cumulative and this means that if this year's dividend
wasn't paid, then it will be carried forward to next year.
2. Non-Cumulative preference shares:

Some preference shares are non-cumulative, if the company can’t pay the dividend for
one particular year, the dividend for that year lapses.

3. Redeemable preference shares:

A preference share may be redeemable which means that at some time in the future, the
company will effectively buy if back.

4. Irredeemable preference shares:

A preference share may be irredeemable which means that at some time in the future, the
company will not effectively buy it back.

5. Convertible Preference Share

Preference shares may be issued with the right of conversion into ordinary shares. These
are called Convertible Preference Share.

6. Non Convertible Preference shares:

Preference shares may be issued without the right of conversion into ordinary shares.
These are called Convertible Preference Share.

7. Participating Preference Share

If a preference share is a participating preference share then the owner of such a share has
the right to participate in, or receive, additional dividends over and above the fixed
percentage dividend.

3.1.5) Advantages of preference shares:

1. You are assured of a dividend:

If you own ordinary shares, you are not automatically entitled to a dividend every year.
The dividend will be paid only if the company makes a profit and declares a dividend.
This is not the case with preference shares. A preference shareholder is entitled to a
dividend every year. What happens if the company doesn't have the money to pay
dividends on preference shares in a particular year?

The dividend is then added to the next year's dividend. If the company can't pay it the
next year as well, the dividend keeps getting added until the company can pay.
2. They get priority over ordinary shares:

Ordinary shareholders get a dividend only after the cumulative preference shareholders
get theirs. Preference shareholders are given a preference over the rest. That's why it is
called a preference share.

3. Preference shares are safer:

In case the company is wound up and its assets (land, buildings, offices, machinery,
furniture, etc) are being sold, the money that comes from this sale is given to the
shareholders. After all, shareholders invest in a business and own a portion of it.

Preference shareholders' get the money first. Their accounts are settled before that of the
ordinary shareholders, who are the last to get paid.

3.1.6) Disadvantages of preference shares:

 They are not easily available

 They are not traded on the stock exchange

BANK DEPOSITS
A) Fixed Deposit:

When you deposit a certain sum in a bank with a fixed rate of interest and specified time
period, it is called a bank fixed deposit (FD). At maturity, you are entitled to receive
the principal amount as well as the interest earned at the pre-specified rate during
that period. The rate of interest varies between 4 and 6 per cent, depending on the
maturity period of the FD and the amount invested.

3.2.1) How to apply in fixed deposit?

One can get a bank FD at any bank, be it nationalized, private, or foreign. You have to
open a FD account with the bank, and make the deposit. However, some banks insist that
you maintain a savings account with them to operate a FD. When a depositor opens an
FD account with a bank, a deposit receipt or an account statement is issued to him, which
can be updated from time to time, depending on the duration of the FD and the frequency
of the interest calculation. Check deposit receipts carefully to see that all particulars have
been properly and accurately filled in.

3.2.2) Features of bank deposit:

1. Safety

Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of
India (RBI) with regard to several policy and operational parameters. The banks are free
to offer varying interests in fixed deposits of different maturities. Interest is compounded
once a quarter, leading to a somewhat higher effective rate.

2. Minimum deposit

The minimum deposit amount varies with each bank. It can range from as low as Rs. 100
to an unlimited amount with some banks. Deposits can be made in multiples of Rs. 100/.

3. Deposit period fixed

Before opening a FD account, try to check the rates of interest for different banks for
different periods. It is advisable to keep the amount in five or ten small deposits instead
of making one big deposit. In case of any premature withdrawal of partial amount, then
only one or two deposit need be prematurely encashed. The loss sustained in interest will,
thus, be less than if one big deposit were to be encashed. Check deposit receipts carefully
to see that all particulars have been properly and accurately filled in. The thing to
consider before investing in an FD is the rate of interest and the inflation rate. A high
inflation rate can simply chip away your real returns.

3.2.3) Returns from Fixed bank deposit:

The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent, depending
on the maturity period (duration) of the FD and the amount invested. Interest rate also
varies between each bank. A Bank FD does not provide regular interest income, but a
lump-sum amount on its maturity. Some banks have facility to pay interest every quarter
or every month, but the interest paid may be at a discounted rate in case of monthly
interest. The Interest payable on Fixed Deposit can also be transferred to Savings Bank
or Current Account of the customer. The deposit period can vary from 15, 30 or 45 days
to 3, 6 months, 1 year, 1.5 years to 10 years. Example of bank deposit:

Duration Interest rate (%) per annum

15-30 days 4 -5 %
30-45 days 4.25-5 %
46-90 days 4.75--5.5 %
91-180 days 5.5-6.5 %
181-365 days 5.75-6.5 %
1-2 years 6-8 %
2-3 years 6.25-8 %
3-5 years 6.75-8
3.2.4) Advantages of fixed bank deposit:

1. Safest investment

Bank deposits are the safest investment after Post office savings because all bank
deposits are insured under the Deposit Insurance & Credit Guarantee Scheme of India. It
is possible to get a loans up to75- 90% of the deposit amount.

2. Any Where in India

One can get a bank FD at any bank, be it nationalized, private, or foreign. You have to
open a FD account with the bank, and make the deposit. However, some banks insist that
you maintain a savings account with them to operate a FD. When a depositor opens an
FD account with a bank, a deposit receipt or an account statement is issued to him, which
can be updated from time to time, depending on the duration of the FD and the frequency
of the interest calculation. Check deposit receipts carefully to see that all particulars have
been properly and accurately filled in.

B) Time deposit

3.2.5) How to start a Time Deposit?

A Time Deposit account can be opened at any post-office in the country. Account may be
opened by an individual, i.e., Single, Joint A/B (not more than two adults) Trust,
Regimental Fund and Welfare Fund. On opening a Time Deposit, you will receive an
account statement stating the amount deposited and the duration of the account. The
account can be closed after 6 months of opening the account. On such closure the amount
invested is returned with/without interest depending on the time the deposit was
maintained.

3.2.6) Features of Time Deposit

Time Deposits can be made for the periods of 1 year, 2 years, 3 years and 5 years. The
minimum investment in a post-office Time deposit is Rs 200 and then its multiples and
there is no prescribed upper limit on your investment. Account may be opened by an
individual, Trust, Regimental Fund and Welfare Fund.

The account can be closed after 6 months but before one year of opening the account. On
such closure the amount invested is returned without interest. 2 year, three year and five
year accounts can be closed after one year at a discount. They involve a loss in the
interest accrued for the time the account has been in operation. Interest is payable
annually but is calculated on a quarterly basis at the prescribed rates. One can take a loan
against a time deposit with the balance in your account pledged as security for the loan.
3.2.7) Returns of Time Deposit

This investment option pays annual interest rates between 6.25 and 7.5 per cent,
compounded quarterly. Example of return : Time deposit for 1 year offers a coupon rate
of 6.25%, 2-year deposit offers an interest of 6.5%, 3 years is 7.25% while a 5-year Time
Deposit offers 7.5% return.

Duration of Account Quarterly Compound Interest

1year 6.25%
2years 6.5%
3years 7.25%
5 years 7.5%

3.2.8) Advantages of Time Deposit

In this scheme your investment grows at a pre- determined rate with no risk involved.
With a Government of India-backing, your principal as well as the interest accrued is
assured under the scheme. The rate of interest is relatively high compared to the 4.5%
annual interest rates provided by banks.

REAL ESTATE
3.3) Real Estate:
Introduction:

The growth curve of Indian economy is at an all time high and contributing to
the upswing is the real estate sector in particular. Investments in Indian real estate
have been strongly taking The growth curve of Indian economy up over other
options for domestic as well as foreign investors.

The boom in the sector has been so appealing that real estate has turned out
to be a convincing investment as compared to other investment vehicles such as capital
and debt markets and bullion market. It is attracting investors by offering a possibility of
stable income yields, moderate capital appreciations, tax structuring benefits and
higher security in comparison to other investment options.

A survey by the Federation of Indian Chambers of Commerce and Industry

(FICCI) and Ernst & Young has predicted that Indian real estate industry is poised to
emerge as one of the most preferred investment destinations for global realty and
investment firms in the next few years.

The potential of India’s property market has a revolutionizing effect on the over all
economy of India as it transforms the skyline of the Indian cities mobilizing
investments segments ranging from commercial, residential, retail, industrial,
hospitality, healthcare etc. But maximum growth is attributed to its growth from the
booming IT sector, since an estimated 70 per cent of the new construction is for
the IT sector.

3.3.1) Factors Favoring Investments:

Tremendous growth has been taking place in both residential as well as commercial
segments that is attracting huge investments phenomenal price escalation (more than
100% in several places) in last couple of years.

Lower interest rates, easy availability of housing finance, burgeoning income and better
job prospects, increase of nuclear families have given a boost to the demand for
residential properties in India. The net yields (after accounting for all outgoings) on
residential property are currently at 4-6% p.a. However, these investments have benefited
from the improving residential capital values. As such, investors can count on potential
capital gains to improve their overall returns. Capital values in the residential sector have
risen by about 25-40% p.a. in the last 2 years.

The retail market in India has been growing due to increasing demand from retailers,
higher disposable incomes and opening up of FDI in Retail. The capital
appreciation in this sector is close to 20-35% p.a. However, the risks associated with
this sector are higher as retailers are prone to cyclical changes typical of a business
cycle. Changing consumer behavior combined with increasing disposable incomes
will ensure further growth of the retail sector in India.

In the present day scenario, it there is and powerful investment tool that
brings burgeoning financial returns, it is INDIAN REAL ESTATE!!! Investors
should consider the parameters minutely and meticulously to find out why
investing in Indian real estate now is the best viable option.

1. High Demand for Commercial Real Estate:

The commercial property market has been growing at an annual rate of

approximately 30% over the past eight years across major locations in India.
Moreover, there is an up shooting demand for 200 million sq. ft over the next five
years.

Real estate industry research has also thrown light on investment opportunities
in the commercial office segment in India. The demand for office space is
expected to increase significantly in the next few years, primarily driven by
the IT and ITES industry that requires an projected office space of more than 367
million sq ft till 2012-13.

2. Retail Sector Facilitating Real Estate Growth:

Apart from the IT and ITES industry influencing the Indian real estate sector, India is
also getting into the knowledge based manufacturing industry on a large scale. Retail, one

of India's largest industries, has presently emerged as one of the most dynamic
and fast paced industries of our times with several players entering the market.

The contemporary retail sector in India which is reflected in sprawling shopping centers
and multiplex- malls is also contributing to large scale investments in the real
estate sector with major national and global players investing in developing the
infrastructure and construction of the retailing business.

3. SEZs -The Emerging Investment Option:

Moreover, as real estate sector expands beyond the city limits with government
promoting industrial belts, real estate developers are eyeing special economic zones
(SEZs) as an extension of their business. Several upcoming special economic zones are
also expected to provide the momentum to the commercial office space development in
related area where the land comes cheaper; and a SEZ developer is entitled
for tax exemptions like a I0-year corporate tax holiday.

4. FDI - Inviting Real Estate Investments:

Not surprisingly, most foreign investors have aimed India in a big way, largely
through joint ventures. Along with curtailing the risk factor, it provides
the participating companies an exit route. Since 2005, when FDI in
Indian real estate sector was permitted, US $7-8 billion have been parked in.

The Government of India's liberalization and economic reforms programmed

encourages industrial policy reforms that have reduced the industrial licensing
requirements, removed restrictions on investment and expansion, and facilitated
easy access to foreign technology and FDI. Increased inflow of investments
arising out of flexible FDI policies is sure to have a direct and positive impact on
the real restate scenario of India.

3.3.2) Why Invest in Real Estate in India?

The Indian economy and the real estate sector in particular are high on its
ride to prosperity. As India's economic growth curve rises, real estate India has
emerged as one of the most appealing investment areas for domestic as well as foreign
investors. Indian real estate has huge potential demand in almost every sector, but
especially commercial, residential, retail, industrial, hospitality, healthcare
etc. But maximum growth is attributed to its growth from the booming IT
sector, since an estimated 70 per cent of the new construction is for the IT sector.

Key Facts

1. Sellingand buying Indian property is now considered as the most profitable

and attractive business opportunity in the present real estate scenario in India. New
demands have added to strength of real estate markets across the commercial, residential
and retail sectors in India. Not surprisingly, demand for Indian property has been
increasing steadily for the past few years and it has exceeded supply.

2. There has also been an upward swing on the real estate price values in the recent
years. Due to the huge demand and rising prices, investment and speculative interest
in real estate is growing while excess money supply, stock market gains and policy
changes are adding to the trend in favor of the real estate sector.

3. In the last one year, the capital values of the commercial office spaces has
increased by up to 40% owing to the increase in the demand from IT / ITES and BPO
sector across major metros in India.

4. India has a distinct regulatory and financing management in place.

5. Real estate boom in India is supported by its own flourishing economy on a

sustainable basis. Here, growth of the property market is not a result of renovation
and overhauling; but rapid development that witness for India riding the high growth
wave.

MUTUAL
FUNDS
3.4) Mutual Funds in India

Mutual Fund is an instrument of investing money. A mutual fund is a group of investors

operating through a fund manager to purchase a diverse portfolio of stocks or bonds.
Mutual funds are highly cost efficient and very easy to invest in. By pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower
trading costs than if they tried to do it on their own. Also, one doesn't have to figure
out which stocks or bonds to buy. But the biggest advantage of mutual funds is
diversification.

Diversification means spreading out money across many different types of

investments. When one investment is down another might be up. Diversification of
investment holdings reduces the risk tremendously.

3.4.1) On the basis of their structure and objective, mutual funds can be classified
into following major types:

1. Open-ended funds

An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end schemes is liquidity

2. Closed-ended funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can
invest in the scheme at the time of the initial public issue and thereafter they can buy or
sell the units of the scheme on the stock exchanges where they are listed. In order to
provide an exit route to the investors, some close-ended funds give an option of selling
back the units to the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is provided to the
investor.

3. Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during pre-determined intervals at NAV related prices.

4. Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term.
Such schemes normally invest a majority of their corpus in equities. It has been proved
that returns from stocks, have outperformed most other kind of investments held over the
long term. Growth schemes are ideal for investors having a long term outlook seeking
growth over a period of time. They promise pure capital appreciation with equity shares.
They buy shares in companies with high potential for growth (some of which might not
pay dividends). The NAV of such a fund will tend to be erratic, since these so-called
growth shares experience high price volatility. They also make quick profits by investing
in small cap shares and by investing in initial public offerings of small companies.
However, growth strategy may differ from one fund to another. Not all growth funds
operate similarly.

5. Income Funds

The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate debentures
and Government securities. Income Funds are ideal for capital stability and regular
income. They aim to provide safety of principal and regular (monthly, quarterly or semi
annually) income by investing in bonds, corporate debentures and other fixed income
instruments. The AMC in this case will also be guided by ratings given to the issuer of
debt by credit rating agencies. Wherever a debt instrument is not rated, specific approval
of the board of the AMC is required. Since most corporate debt is illiquid, the fund tries
to provide liquidity by investing in debt of varying maturity.

6. Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market,
the NAV of these schemes may not normally keep pace, or fall equally when the market
falls. The investors looking for a combination of income and moderate growth. The idea
is to get the best of both the worlds, equity shares and debt. The proportion of the two
asset classes depends on the fund managers' preference for risk against return. But
because the investments are highly diversified, investors reduce their market risk.
Normally about 50 to 65 per cent of a portfolio's assets are invested in equity shares.

7. Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer short-term instruments.
Returns on these schemes may fluctuate depending upon the interest rates prevailing in
the market. These are ideal for Corporate and individual investors as a means to park
their surplus funds for short periods. Also known as Liquid Plans, these funds are a play
on volatility in interest rates. Most of their investment is in fixed-income instruments
with maturity period of less than a year. Since they accept money even for a few days,
they are best used to park short-term money, which otherwise earns a lower return in a
savings bank account.

3.4.2) Advantages Of Mutual Funds:

There are numerous benefits of investing in mutual funds and one of the key reasons for
its phenomenal success in the developed markets like US and UK is the range of
benefits they offer, which are unmatched by most other investment avenues. We have
explained the key benefits in this section. The benefits have been broadly split into
universal benefits, applicable to all schemes and benefits applicable specifically to
open-ended schemes.

Professional Management –

The primary advantage of funds (at least theoretically) is the professional management
of the money. Investors purchase funds because they do not have the time or the
expertise to manage their own portfolios. A mutual fund is a relatively inexpensive way
for a small investor to get a full-time manager to make and monitor investments. Mutual
Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.

Diversification –

Mutual Funds invest in a number of companies across a broad cross-section of

industries and sectors. This diversification reduces the risk because seldom do all stocks
decline at the same time and in the same proportion. Customers can achieve this
diversification through a Mutual Fund with far less money than you can do on your
own. By owning shares in a mutual fund instead of owning individual stocks or bonds,
your risk is spread out. 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

Liquidity –

Just like an individual stock, a mutual fund allows the customers to request that your
shares be converted into cash at any time. In open-end schemes, the investor gets the
money back promptly at net asset value related prices from the Mutual Fund. In closed-
end schemes, the units can be sold on a stock exchange at the prevailing market price or
the investor can avail of the facility of direct repurchase at NAV related prices by the
Mutual Fund.
Flexibility –

Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans, you can systematically invest or withdraw funds according
to your needs and convenience.

Choice of Schemes –

Mutual Funds offer a family of schemes to suit the customers varying needs over a
lifetime. Mutual funds offer a tremendous variety of schemes. This variety is beneficial
in two ways: first, it offers different types of schemes to investors with different needs
and risk appetites; secondly, it offers an opportunity to an investor to invest sums across
a variety of schemes, both debt and equity.

Tax benefits

Any income distributed after March 31, 2002 will be subject to tax in the assessment of
all Unit holders. However, as a measure of concession to Unit holders of open-ended
equity-oriented funds, income distributions for the year ending March 31, 2003, will be
taxed at a concessional rate of 10.5%.

In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from
the Total Income will be admissible in respect of income from investments specified in
Section 80L, including income from Units of the Mutual Fund. Units of the schemes are
not subject to Wealth-Tax and Gift-Tax

3.4.3) Limitations of Mutual funds

• No Control over Costs

• Investor has to pay investment management fees as long as he remains in the
fund.
• Investors who invest on their own can build their own portfolios of shares, bonds
and other securities Investing through funds means he delegates this decision to
fund managers
• Managing Portfolio of Funds
• Availability of large number of funds can actually mean too much of choice for
the investor. He may again need advice on how to select a fund to achieve his
objectives
• No Guarantee - When the entire stock market goes down, the Mutual Fund
shares will also go down even if the portfolio is balanced though the risk is low
• Administrative fees or sales commissions is charged by all the funds to
compensate brokers and financial planners
METALS
A) Gold

3.5.1) Introduction

Gold has long been considered one of the most precious metals, and its value has been
used as the standard for many currencies as civilisations and empires have risen and
declined. Due to its rarity and durability gold has historically been used as a method of
payment because of its unique properties.

Recent years have seen gold return to grace: against a backdrop of declining equity
markets, geopolitical tension, and inflationary fears, the dollar price of gold has soared
and with it we have witnessed renewed interest in the yellow metal as an investment.
Gold, traditionally seen as a safe haven against uncertainty, has proved very attractive to
investors.

Gold has been highly valued for thousands of years and is as popular now as it has ever
been; as jewellery, as a financial asset and as an industrial product. However, the social
value that the gold industry adds to societies around the world, especially in poorer
countries, is less understood.

Gold mining is vital to the fragile economies of many developing countries, which
account for over 70% of global gold production. In addition to generating export revenue
in these countries, gold production provides royalty and tax income to their governments,
technology transfer, worker training and the creation of a skilled workforce.

Gold mining can also bring substantial improvements in physical, social, legal and
financial infrastructure. In many of these countries, gold mining is a foundation industry
that often provides the critical mass for the development of electricity, water, road and
rail transport in a region, factors that are the essential foundations of an economy. This
characteristic of the industry is particularly important in Africa where lack of
infrastructure has been identified as one of the major hindrances to economic
development.

The majority of the jewellery purchased in the Middle East and Asia is used as a means
of saving in addition to its function as an adornment. The use of jewellery as savings is
often important in rural areas where access to a reliable and appropriate banking system
is difficult or impossible. Gold also offers protection against a weak currency or high
domestic inflation levels, which are prevalent and presistant problems in the developing
world.

3.5.2) Investment in gold - why?

The real value of gold is not that it provides a quick, speculative fix, but that it can
provide a sure and steady means of protecting wealth and enhance the consistency of
returns.

With gold's role as a portfolio diversifier, a hedge against inflation and exposure to the
dollar, there are several compelling arguments for investing a portion of one's portfolio in
the yellow metal.

1. Portfolio Diversification:

Most investment portfolios are invested primarily in traditional financial assets such as
stocks and bonds. The reason for holding diverse investments is to protect the portfolio
against fluctuations in the value of any single asset class. Portfolios that contain gold are
generally more robust and better able to cope with market uncertainties than those that
don't.

Adding gold to a portfolio introduces an entirely different class of asset. Gold is unusual
because it is both a commodity and a monetary asset and is an effective diversifier
because its performance tends to move independently of other investments.

2. Dollar hedge:

Gold is often cited as being an effective hedge against fluctuations in the US dollar, the
world's main trading currency. If the dollar appreciates, the dollar gold price falls and
similarly a fall in the dollar relative to the other main currencies produces a rise in the
gold price.

Like all physical commodities, gold is an asset that bears no credit risk. Holding assets in
the yellow metal involves no counterparty and is no one's liability. In addition to that, the
physical properties of the metal make it an excellent alternative to money.

3. Durable:

Gold is durable. Unlike many of the other commodities examined, other things remaining
equal (i.e. assuming no changes in price), there is no depreciation in the value of gold,
other than any storage costs that might apply. Gold is fungible. It is, at least in theory,
infinitely divisible with virtually no losses (other than any operational costs the process
might incur).

Furthermore, gold has a high value to volume ratio, which makes it easily transferable,
with low transport and storage costs. Moreover, gold is one of the deepest commodity
markets with the highest levels of liquidity, second only to oil.

4. Inflation:
The purchasing power of gold has not diminished since Biblical times. According to the
Old Testament, during the reign of King Nebuchadnezzar, an ounce of gold bought 350
loaves of bread. Today, an ounce of gold still buys 350 loaves. The value of gold
therefore, in terms of real goods and services that it can buy, has remained remarkably
stable.

In contrast, the purchasing power of many currencies has generally declined. There is a
growing body of research to bolster gold's reputation as a protector of wealth against the
ravages of inflation. Market cycles come and go, but gold has maintained its long term
value.

5. Safe haven:

In volatile and uncertain times, we often witness a ‘flight to quality', as investors seek to
protect their capital by moving it into assets considered to be safer stores of value.

Gold is among only a handful of financial assets that is not matched by a liability. It can
provide insurance against extreme movements on the value of traditional asset classes
that can happen in unsettled times.

6. Liquidity

Gold's liquidity is one of its critical investment attributes. Gold can be traded around the
clock in larger size, at narrower spreads and more rapidly than many competing
diversifiers or mainstream investments.

B) Silver

3.5.3) Introduction

Silver is a white colored shiny element that is highly ductile and malleable and is used in
making jewelry, coins and tableware. It is also used in chemical experiments as it
provides a high electrical and thermal conductivity. It is found in the metallic state and
also in a large amount of minerals mainly in argentite. That is why it is called argentum
in Latin

Silver is a metal that is associated with metals like gold, lead, zinc and copper, though it’s
unusual properties makes it very different from them. It is used in making various kinds
of jewelry, as it is considered as a precious metal second to gold but its contribution in
the various industrial sectors as a raw material makes it unmatchable. No other metal can
replace silver as it has an endless number of uses.

Silver is produced throughout the world but an interesting fact remains that the primary
source of silver is not the silver mines but the other sources of silver. Silver mines
produce a small amount of silver that is 25% of the world’s total production and the rest
of it is derived as a by-product from gold mines (15%), copper mines (24%), lead and
zinc mines (34%) and other sources. The total production of silver in the world figures to
be around 615 million ounces and Mexico is the leading silver producing country. The
total demand of silver in the world amounts to be around 29 thousand tons. About 95% of
this demand is contributed largely by three industrial sectors namely photography,
jewelry and silverware sectors. The idea of silver as a holding asset and as a source of
coinage is losing popularity to the idea of silver as an industrial commodity. The demand
of silver in 2002 from these sectors was: -

• Photography sector – 342 million ounces

• Jewelry sector – 205 million ounces
• Silverware sector – 259 million ounces

The countries that are the major consumers of silver are: - United states, Canada, Mexico,
United Kingdom, France, Germany, Italy, Japan and India.

3.5.4) Production of silver in India

India hardly produces any silver and is basically a silver importing country. It holds the
20th place in the list of silver producing countries and the total production of silver in
India in 2004 was around 2.1 million ounces. The three major silver producing states in
India are: - Rajasthan, Gujarat, Jharkhand.

Rajasthan is the leading silver producing state in India with a production of around 32
thousand tons. Gujarat follows on the second place with a production of around 20
thousand tons.

3.5.5) Indian Silver Market:

As mentioned above, India is primarily a silver importing country, as the production of

India is not sufficient to satisfy the ever-growing domestic demand. The production of
silver in India stands out at the figure of around 2.1 million ounces placing it at the 20th
position in the list of major silver producing countries. The import of silver in India
hovers over 110 million ounces that shows the huge size of Indian domestic demand.
However, this import level fell sharply as a result of the decline in demand due to rise in
silver prices and inconsistent monsoon on which the income of the rural sector depends.
India stands third after United States and Japan among the leading consumers of silver in
the world.

3.5.6) Major trading centers of Silver:

• London
• Zurich
• New York (COMEX)
• Chicago (CBOT)
• Hong Kong
• Tokyo Commodity Exchange (TOCOM)
In India, silver is traded at the following places 1) Delhi 2) Indore 3) Rajasthan 4)
Madhya Pradesh 5) Mathura (Uttar Pradesh) 6) Rajkot (Gujarat). Also, silver is traded
in the Indian commodity exchanges like National Commodity & Derivatives Exchange
ltd, Multi Commodity Exchange of India ltd. and National Multi Commodity
Exchange of India ltd.
COMMODITY
3.6) Introduction

A physical substance, such as food, grains, and metals, which is interchangeable with
another product of the same type, and which investors buy or sell, usually through futures
contracts. The price of the commodity is subject to supply and demand. Risk is actually
the reason exchange trading of the basic agricultural products began. For example, a
farmer risks the cost of producing a product ready for market at sometime in the future
because he doesn't know what the selling price will be.

3.6.1) Definition

Commodity is defined as any bulk good traded on an exchange or in the cash market.

One of the first forms of trade between individuals began by what is called
the barter system wherein goods were traded for goods. Lack of a medium for
exchange was the sole initiator of this system. People sold what they had in
excess and bought what they lacked. Animals were the first few commodities to
be exchanged. Some examples of commodities include grain, oats, gold, oil, beef,
silver, and natural gas.

3.6.2) Commodities exchanges in India:-

In India, there are 26 registered commodities exchanges. Out of them only 3 commodities
exchanges offer online screen based trading system. They are

1. National Multi Commodities Exchange of India Limited (NMCE)

2. National Commodities and Derivatives Exchange of India Limited (NCDEX)

3. Multi Commodities Exchange of India Limited (MCX)

INSURANCE
3.7.1) Defination:

• The insurance that covers loss of an interest in a property due to legal

defects and that is required if the property has a mortgage.
• Title insurance is a police issued by title insurance company, assuring that
the title is a clear in the name of title owner. That means if owner wish to sale
the property, that time he don't have any problem to sell that. If any problem
creates after selling the property to the new owner that time title insurance
company will pay the damage for that or take action to solve that problem.

3.7.2) Origin and growth of Insurance Sector in India

Insurance sector in India is one of the booming sectors of the economy and is growing at
the rate of 15-20 per cent annum. Together with banking services, it contributes to about
7 per cent to the country's GDP. Insurance is a federal subject in India and Insurance
industry in India is governed by Insurance Act, 1938, the Life Insurance Corporation Act,
1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory
and Development Authority (IRDA) Act, 1999 and other related Acts.

The origin of life insurance in India can be traced back to 1818 with the establishment of
the Oriental Life Insurance Company in Calcutta. It was conceived as a means to provide
for English Widows. In those days a higher premium was charged for Indian lives than
the non-Indian lives as Indian lives were considered riskier for coverage. The Bombay
Mutual Life Insurance Society that started its business in 1870 was the first company to
charge same premium for both Indian and non-Indian lives. In 1912, insurance regulation
formally began with the passing of Life Insurance Companies Act and the Provident
Fund Act.

By 1938, there were 176 insurance companies in India. But a number of frauds during
1920s and 1930s tainted the image of insurance industry in India. In 1938, the first
comprehensive legislation regarding insurance was introduced with the passing of
Insurance Act of 1938 that provided strict State Control over insurance business.

Insurance sector in India grew at a faster pace after independence. In 1956, Government
of India brought together 245 Indian and foreign insurers and provident societies under
one nationalised monopoly corporation and formed Life Insurance Corporation (LIC) by
an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore.

The (non-life) insurance business/general insurance remained with the private sector till
1972. There were 107 private companies involved in the business of general operations
and their operations were restricted to organised trade and industry in large cities. The
General Insurance Business (Nationalisation) Act, 1972 nationalised the general
insurance business in India with effect from January 1, 1973. The 107 private insurance
companies were amalgamated and grouped into four companies: National Insurance
Company, New India Assurance Company, Oriental Insurance Company and United
India Insurance Company. These were subsidiaries of the General Insurance Company
(GIC).

3.7.3) Insurance as Investment

Agreed, insurance may not be the best place to invest your hard-earned money. But there
are sufficient reasons for one to believe that it can be a highly lucrative avenue to
facilitate savings. People often talk about yield on investment and tend to compare their
values with those available on various insurance schemes. This is particularly typical
within the Indian sub-continent where one conveniently forgets the element of risk
covered by life insurance.

It is extremely unfair to compare the performance of insurance against other investments

without considering the core features of insurance. The very essence of insurance is to
protect your family from the uncertainty of your life. Hence it proves very logical to
evaluate the costs involved towards this feature. Ask yourself this question

When you pay insurance premium for your car, do you get anything if fortunately no
mishap happens? This means that you spent the amount to secure a valuable property.

Hence you must accept that out of the total amount paid by you for your life insurance, a
certain amount is used for providing the risk cover and only the balance can be utilised as
savings.

In other words, the total premium you pay minus the amount evaluated as the cost of
insurance must be considered as the amount invested to get the maturity amount. If you
calculate the yield from returns, you will be in for a surprise.

3.7.4) Indian Insurance Industry:

Insurance may be described as a social device to reduce or eliminate risk of life and
property. Under the plan of insurance, a large number of people associate themselves by
sharing risk, attached to individual. The risk, which can be insured against include fire,
the peril of sea, death, incident, & burglary. Any risk contingent upon these may be
insured against at a premium commensurate with the risk involved.

Insurance is actually a contract between 2 parties whereby one party called insurer
undertakes in exchange for a fixed sum called premium to pay the other party happening
of a certain event. Insurance is a contract whereby, in return for the payment of premium
by the insured, the insurers pay the financial losses suffered by the insured as a result of
the occurrence of unforeseen events.

With the help of Insurance, large number of people exposed to a similar risk make
contributions to a common fund out of which the losses suffered by the unfortunate few,
due to accidental events, are made good.
 TAX SAVING SCHEME

A) Public Provident Fund (PPF ):

3.8.1) Introduction:
Under this scheme, there is a return at the -interest rate of 8% p.a. The minimum
investment limit is Rs. 500/- and maximum limitation is Rs. 70,000/-. It can be
opened any time throughout the year. It can be operated either single or jointly.
In case of minor, with parent/guardian. There is also a facility of nomination in
this scheme.

3.8.2) Highlights:

 The Public Provident Fund Scheme is a statutory scheme of the

Central Government of India.
 The Scheme is for 15 years.
 The rate of interest is 8% compounded annually.
 The minimum deposit is 500/- and maximum is Rs. 70,000/- in a financial year.
 One deposit with a minimum amount of Rs.500/- is mandatory in each financial
year. Public
 The deposit can be in lump sum or in convenient installments, not more than 12
Installments in a year or two installments in a month subject to total deposit of
Rs.70,000/-.
 It is not necessary to make a deposit in every month of the year. The amount of
deposit can be varied to suit the convenience of the account holders.
 The account in which deposits are not made for any reasons is treated as
discontinued account and such account can not be closed before maturity.
 The discontinued account can be activated by payment of minimum deposit of
Rs.500/- with default fee of Rs.50/- for each defaulted year.
 Account can be opened by an individual or a minor through the guardian.
 The deposits shall be in multiple of Rs.5/- subject to minimum
amount of Rs.500/-.

 The deposit in a minor account is clubbed with the deposit of the

account of the Guardian for the limit of Rs.70, 000/-.
 The PPF scheme is operated through Post Office and Nationalized banks.
 Deposits in PPF qualify for rebate under section 80-C of Income Tax Act.
 Deposits are exempt from wealth tax.
 Nomination facility available. Best for long term investment.

3.8.3) Why You Should Invest in a Public Provident Fund Account?

Your money in the PPF account is perfectly safe, earns 8% (at the moment), qualifies for

Section 80C of the Income Tax Act, and at the moment is EEE (Exempt Exempt
Exempt - the money you invest, the interest earned, and the final withdraw able amount
are all tax exempt).

You can invest a low of 500 rupees and a high of 70,000 rupees a year (over a maximum
of twelve installments per year). You are allowed to withdraw money or take a loan;
there's a weird formula to compute the same, but 1 advise against doing so ever.

 If you invest 10.000 rupees a year your final balance stands at 293,243
rupees;
 If you invest 35,000 rupees a year the final balance becomes 1,026,350 rupees;
 At 70,000 rupees a year, the final balance is a whopping 2,052,700 rupees. At the
end of 15 years,

You can extend your subscription in blocks of 5 years or else close the account and reap

the benefits. The RPF is a great way to set aside money for say your child's higher

education. You can open a PPF account at State Bank of India (SBI) or any of its

subsidiaries or at the local post office. An individual is allowed to have only one PPF

account.
National Saving
Certificate
B) National Savings Certificate:
3.8.4) What is National Savings Certificate?

National Savings Certificates (NSC) is certificates issued. by Department of post,

Government of India and is available at all post office counters in the country. It
is a long term safe savings option for the investor. The scheme combines
growth in money with reductions in tax liability as per the provisions of the
Income Tax Act, 1961. The duration of a NSC scheme is 6 years.

National Savings Certificate, popularly known as NSC, is a time-tested tax

saving instrument that combines adequate returns with high safety.

National Savings Certificate can be purchased by the following:

 An adult in his own name or on behalf of a minor.

 A minor,
 A trust
 Two adults jointly,
 Hindu Undivided Family

National Savings Certificates are available in the denominations of Rs. 100, Rs 500,

Rs. 1000, Rs. 5,000 & Rs.10,000. There is no maximum limit on the purchase of the
certificates.

Period of maturity of a certificate is six years. Presently, maturity value of a

certificate of Rs. 100 denomination is Rs. 160.10. Maturity value of a certificate of any
other denomination is at proportionate rate. Premature encashment of the certificate
is not permissible except at a discount in the case of death of the holder(s), forfeiture
by a Pledge and when ordered by a court of law.

Interest accrued on the certificates every year is liable to income tax but deemed to
have been reinvested. Income Tax rebate is available on the amount invested and
interest accruing under Section 88 of Income Tax Act, as amended from time to time.
Income tax relief is also available on the interest earned as per limits fixed vide section
80L of Income Tax, as amended from time to time.

3.8.5) Highlights :
  Minimum investment Rs. 500/- No maximum limit.
 Rate of interest 8% compounded half yearly. Rs. 1000/- grow to Rs.
1601/- in six years.
 Companies, Trusts, Societies and any other Institutions not eligible to
purchase.
 Non-resident Indian/MF can not purchase. No pre-mature encashment.
 Annual interest earned is deemed to be reinvested and qualifies for tax rebate for

first 5 years under section 80 C of Income Tax Act.

 Maturity proceeds not drawn are eligible to Post Office Savings account
interest for a maximum period of two years.
 Facility of reinvestment on maturity, encashment of certificates through banks,

purchase/ payment to the holder of Power of attorney and Nomination.

 Certificate can be pledged as security against a loan to banks/ Govt. Institutions.
 Certificates are transferable from one Post office to any Post office. Certificates
are transferable from one person to another person before maturity.
 Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or
de faced certificate.
 Tax Saving instrument - Rebate admissible under section 80 C of Income
tax Act.
 Interest income is taxable but no TDS.
 Deposits are exempt from Wealth tax.

3.8.6) Advantages of NSC:

1. Tax Benefits are available on amounts invested in NSC under section 88 and
Exemption can be claimed under section 80L.

2. For interest accrued on the NSC. Interest accrued for any year can be treated as fresh
investment in NSC for that year and tax benefits can be claimed under section 88.

3. NSCs can be transferred from one person to another through the post office on
the payment of a prescribed fee.

4. They can also be transferred from one post office to another.

 Others Investment includes

3.9.1) Post Office Saving Scheme :

It is one of the best Income Tax Saving Scheme. It can be operated by either
single or jointly. In case of minor, with parent/guardian. It is available throughout the
year. There are several types of post office schemes depending upon the type of
investment and maturity period. Post office schemes can be divided into following
categories:

 Monthly Deposit
 Saving Deposit
 Time Deposit
 Recurring Deposit

Postal Services in India

India possesses the largest postal network in the world with 1, 55,000 post offices
spread all over the country as on March 31, 2001, of which 89 per cent are in the rural
sector. Post offices in India play a vital role in the rural areas. They connect these rural
areas with the rest of the country and also provide banking facilities in the absence of
banks in the rural areas.

Post Offices also offer various saving and tax saving instruments such as, National saving
certificate, Public Provident Fund , and Kisan Vikas Patra

Highlight:

 Minimum amount Rs20/- in case of non- cheque account, Rs.5001- in case of

cheque account.
 Minimum balance of Rs.500/- is to be maintained for a cheque account.
 Account is opened with cash only.
 Maximum balance permissible Rs. 1,00,000/- in a single account and 2,00,000/-
in Joint account.
 A Minor having 10 years of age can also open an account directly.
 One individual account and one joint account can only be opened at a post
office.
CHAPTER – 5
RESEARCH METHODOLOGY

This section indicates what is to be researched and also shows which method is to be
adopted for the research methodology.

2.1 Problem statement:-

“To study the investment pattern and selecting the best avenue according to the need of
investment”.

Introduction to Research:-

The following methodology will be used to state and justify the reason for using the
different methods selected for the research of the project. In order to achieve the aims and
objectives of the study, it is very important that researcher should use sound research
tools and techniques and know how best to analyze the results. Here, the combination of
research methods has been utilized in gaining an insight to a complex and changing area.

As in the research, the theory is already created which is the concept of Investment
Avenue for investor easily available minimizing risk and maximizing return as one of the
part of Investment pattern hence the researcher needs to find the Preference of investor
invest in different avenues or alternative by survey.
Research Design:-

This section carry out the topics such as research sector, research population and
Instrument used for the research.

• Research Sector:-
Researcher is going to carry out the research on Investment Avenue available to investor
because the aim of the research is to study Investment pattern of the Investor.

• Research Population:-
Research population comprises of the survey are Salaried, Professional, Business owner,
Student, Housewife, Retired & Pensioner, trader, share broker, NRI and others. This
survey will be analyzed in terms of factors like Safety, Liquidity, Diversification,
Simplicity, Tax saving and Affordability.

• Research instrument:-
The questionnaire is been carefully prepared by using all experience and skills of the
knowledgeable person of the company to get the most of the required information from
the financial advisors & Investor.
A research design is simply the framework or plan for a study used as a guide in
collecting & analyzing data. It is the blue print that is followed in completing the study.
Research would be conducted in the context of this project report. I have utilize
descriptive research design.

2.4 Sampling Techniques:-

In random sampling each population has an equal chance of being selected into the
sample. This method is very easy method of sampling technique. But it requires a listing
of population. In this study samples have been taken as randomly on the basis of group,
income level, no of dependents, risk taking capacity etc. sample size of the study is 100.
2.5 Source of data:-

After research design, next step is to determine data source, which are mainly of two
types:-

1. Primary data
2. Secondary data

Primary data is the one which is collected at first hand either by research survey or by
someone else for purpose of some study. Primary sources are original works of research
or raw data without interpretation or pronouncements that represent an official opinion or
position. Included among the primary sources are memos, letters, complete interviews,
court decision and questionnaire. Primary sources are always the most authoritative
because the information has been filtered or interpreted by a second party.

Eg. By observation method

By interview method
By questionnaire method

Secondary date is any data gathered earlier for some other purpose & available hand in
carrying out project.

Eg By websites.
By public researches.
By newspapers
By libraries
By magazines etc.

Thereby, here in the survey primary data is collected by using Questionnaire method
to get the main theme of project and the primary data is obtained from library study,
company booklets, manuals & internet websites as well as relevant newspapers.
2.6Method of analysis:-

The raw data is jot fruitful if it is not analyze properly. There are various tools available
is statistical field. Some statistical tools use for this study is as follow:-

 Graphical & tabulation method

CHAPTER – 6

DATA ANALYSIS AND INTERPRETATION

Q5 Age Group:

Age Group % of Investor

Less than 26 yrs 13
26 - 45 yrs 44
46 - 65 yrs 38
More than 65 yrs 05
Total 100
% of Investor

50 44
38
40
30
20 13
10 5
0
Less than 26 - 45 yrs 46 - 65 yrs More than
26 yrs 65 yrs
Age Group (yrs)

Interpretation:

• From the above graph, it is clear that 13% of the respondents belong to >26 years
age group, 44% belong to 26-45 years age group, 38% belong to 46-65 years age
group and only 5% belong to more than 65 years age group.
• So we can say 26-45 year age group investor are active age group while only 5%
investor belong to senior citizen age group.
Q6 Martial Status :

Martial Status % of investor

Married 84
Unmarried 11
Widow(er) 03
Divorced 02
Total 100

Martial Status
2%
3%
11%

Married
Unmarried
Widow(er)
Divorced

84%

Interpretation:

• Above Status graph, we can see that 84% investors are married, 11% are
unmarried, 3% are widow(er) and 2% are divorced.

• So we can say Majority of the investor are married while Minority of the investor
are Divorced .
Q7 Education :

Education % of Investor
Post Grad. & above 29
Graduate\ Diploma 46
HSC\SC 20
Below 10 th 05
Total 100

Education(% of Investors)

Post Grad. &

above
5%
20% 29% Graduate\
Diploma
HSC\SC
46%
Below 10 th

Interpretation:

• From the above graph, it is clear that 29% of the respondents are Post Graduate &
above, 46% of the respondents are Graduate \ Diploma, 20% of the respondents
are HSC\SC and only 5% of the respondents are below 10th .
• So we can say 26-45 year age group investor are active age group while only 5%
investor belong to senior citizen age group.
Q8 Qualification :

Qualification % of Investor
MBA 07
CA 04
ICWA\CFA\CS 03
DR 04
Engineer 08
LLB 07
Others 67
Total 100

67
% Of Investor

80
60
40
20 7 4 3 4 8 7
0
DR

Engineer
MBA

CA

ICWA\CFA\

Others
LLB
CS

Qualification

Interpretation:

• The graph describe that majority of the respondents are having qualification other
than the given. Here, 7% investor are MBA, 4% are CA, 3% are having
professional 2 year course like ICWA \ CFA \ CS, 4% DR with specialized
course OF Phd., 8% are Engineer into different fields, 7% are LLB and remaining
are qualified into different fields like DMFF, BSC (Chemistry), LLM, Home
Science, MSC, M.A etc.
Q9 You Are :

You Are % of Investor

Salaried 31
Professional 13
Business Owner 40
Student 03
Housewife 06
Retired\pensioner 07
Others 00
Total 100

You are
% of Investors

50 40
40 31
30
20 13
3 6 7
10 0
0
Retired\pensi
Professional

Housewife
Business
Salaried

Student

Others
Owner

oner

Occupation

Interpretation:

• The Occupation status show 31% of investor are Salaried, 13% of investor are
Professional, 40% Majority of investor are Business Owner or Business Man, 3%
investor are student, 6% are housewife, 7% Retired people \ Pensioner and the
others category is nil.
Q10 No Of Family Member :

Family Member % of Member

2 13
3 26
4 30
More than 4 31
Total 100

Family Member

13%
31%

26%
30%

2 3 4 More than 4

Interpretation:

• Pie chart above show the no of family member depend on the income of the
investor. We can see that 13% investor has a 2 member family, 26% has a 3 member
family, 30% has a 4 member family and 31% investor has a more than 4 member in
family.
Q11 Annual Income :

Annual Income % of Investor

Less than 1,00,000 13
1,00,001 - 3,00,000 48
3,00,001 - 5,00,000 21
More than 5,00,001 18
Total 100

48
50
40
30 21
% o f I n v e sto r 18
20 13
10
0
L e s s t h a 1n ,0 0 , 0 0 1 3-,0 0 , 0 0 1 M- o re th a n
1,00,0003,00,0005,00,000 5,00,001
A n n u a l in co m e

Interpretation:

• With the help of above graph, we can say that 13% investors have an annual
income less then 1,00,000 , 48% investors have an annual income between
1,00,001-3,00,000 , 21% investors have an annual income between 3,00,001-
5,00,001 and 18% investors have an annual income more than 5,00,001.
• So we can say majority of investors belong to middle class category and only few
% say 21% investors belong to upper middle class, 18% investor belong to higher
class category and minority of investor belong to lower class category.
• We can clearly see that highly unequal income distribution in Mumbai city.
Q12 Do You Save : 1. Yes 100% 2. No 0%
Saving(%ofInvestor)
Ye
s N
o

0%

100
%

If Yes, what amount of your total annual income

% of Annual % of Annual
SAVING Income SAVING Income
Less than 1,00,001 41 3,00,001 - 5,00,000 13
1,00,001 - 3,00,000 41 More than 5,00,001 5
Total 82 Total 18

50
41 41
40
Less than1,00,001
30 1,00,001 - 3,00,000
Saving
20 13 3,00,001 - 5,00,000
10 5 More than5,00,001
0
% of Annual Income

Interpretation:

• With the help of above given first graph, we can say that 100% investor are
saving their money from annual income.
• With the help of above given second graph, we can see equal % of investor are
saving in the category upto 3,00,000. 13% of investor are saving between 3,00,000-
5,00,00 and 5% of investor are saving more than 5,00,001.
 • In short, we can say investor of Mumbai city have good habit of saving money
from annual income.

Q13 Do You Invest:

1. Yes 100% 2. No 0%

Investment(%of Investor)

0%

Yes
No

100%

If Yes, In which Avenues (Give Rank).

Sr. No INVESTMENT AVENUES RESPONSE RANK

1 Stock Market 13 3
2 Bank Deposit 23 2
3 Real Estate 8 5
4 Mutual Fund 12 4
5 Metals 8 5
6 Commodity 0 8
7 Insurance 27 1
8 Tax Saving Scheme 6 6
9 Others 4 7

Interpretation: According to Rank

• According to first chart, 100% citizens are investing in various investment

avenues.
• According to second given chart through rank one, Insurance got first rank; bank
deposit got second; stock market got third; mutual fund got fourth rank; real
 estate and metals get equal priority as fifth rank; at sixth rank comes tax saving
scheme; further others got seventh rank and finally commodity got eight rank.
• Thus it can be concluded that insurance is the first choice of the investor were as
commodity as last choice. Life insurance is the first choice of the investor. That
is insurance is the present need of the investor.

30 27
Rank No.

23
25
20 13
15 12
8 8 6
10 4
5 0
Commodity

Tax Saving
0

Insurance
Mutual
Market

Deposit

Metals

Others
Estate

Scheme
Stock

Fund
Real
Bank

1 2 3 4 5 6 7 8 9
Rank wise Investment Avenue (Response)

Interpretation: According to Rank

• According to chart, 27 respondents are investing in Insurance, while 23

respondent are investing in bank deposit, 13 respondents are investing in stock
market, 12 respondents investing in mutual funds, 8 respondent equally invest in
both real estate and metals, 6 respondent invest in tax saving scheme, 4
respondent either invest in business or other category and finally no one like to
invest commodity as first preference.
• So it can be said that either people like to invest in insurance, gold and bank that
provide regular or fixed income.
Q14 Factor taken into consideration while selecting above mention
avenues (Give Rank).

Factor Rank
Safety 1
Tax Saving 2
Simplicity 5
Liquidity 3
Diversification 6
Affordability 4

Affordability 8
Diversification 3
Factors

Liquidity 11
Simplicity 6
Tax Saving 24
Safety 50

0 10 20 30 40 50 60
Rank No

Interpretation: According to Rank 1

• Above graph show that safety got first rank, Tax saving got second rank,
Liquidity got third rank, Affordability got fourth rank, Simplicity got fifth rank
and last sixth one got by affordability.
• Safety got highest rank so we can say now a day investor more focus on safety,
investor also want tax saving scheme, through tax saving scheme investor can
 reduce risk level and can improve the safety level. Investor also focusing on tax
planning factor which is more important now a days.

Q15 Objective of Investment :

Objective Responses %
Future Security 45
Tax Savings 20
Short term/Long term gain 14
Children Carrier 12
Speculation 7
Others (Not specific) 2
Total 100

Objective

Future Security

7% 2% Tax Savings
12%
45% Short term/Long
14% term gain
Children Carrier
20%
Speculation

Others

Interpretation:

• According to above mention pie chart majority of % say 45% investors Objective
is Future security and then comes tax planning, 20% investors have this objective,
third comes to short term / long term gain say 14% investor have this objective.
 • According to above mention pie chart 12% have children career as objective
similarly very near say 7% investor have speculation objective and only 2% have
other objective say expansion of present business while investing money in others
investment avenues. Finally, we can say that majority of investor are saving their
future through long term objective.

Q16 Mention the return expected on total amount of Investment :

Expected Return % of Investor

Less than 11 % 15
11 - 20 % 48
21 - 30 % 21
More than 30 % 16
Total 100

48
50
40
30
% Of Investor 21
20 15 16
10
0
Less than 11 - 20 % 21 - 30 % More than
11 % 30 %
Return

Interpretation:

• Mention graph clearly show that 40% investor expect 11-20% return on annual
basis, 21% investor expect 21-30%, 16% expect more than 30% and 15% investor
expect less than 115 return on annual basis.
 • Finally, we clearly say majority of investor expect 11-20% return on annual basis
on an average on different alternatives of investment.

Q17 Mention the affordable risk on your investment :

RISK % of Investor
Less than 11 % 27
11 - 20 % 44
21 - 30 % 18
More than 30 % 11
Total 100

50 44
40
Investor

30 27
% of

20 18
11
10
0
Less 11 - 20 %21 - 30 % More
than 11 than 31
% %
Risk

Interpretation:

• Mention graph clearly show that 44% investor expect 11-20% risk on annual
basis, 27% investor expect less than11%, 18% investor expect 21-30%and 11%
investor expect more than risk on annual basis.
 • Finally, we clearly say majority of investor expect 11-20% risk on annual basis on
an average on different alternatives of investment.

Q18 Mention your preferred investment period :

INVESTMENT PERIOD % of Investor

Less than 1 yrs 11
1 - 5 yrs 49
5 - 10 yrs 27
More than 10 yrs 13
Total 100

50 49
40
% Of 30 27
Investor 20 13
11
10
0
Less 1 - 5 5 - 10 More
than 1 yrs yrs than
yrs 10 yrs
Investment Period

Interpretation:
 • According to graph we clearly see that majority of investor say 49% invest for 1-
5 years, 27% investor invest for 5-10 years, 13% investor invest for more than 10
years and 11% investor invest for less than 1 years.
• So we can say investor generally want to invest for 1 to 5 years period.

Q19 Preferred interval of investment level :

INTERVAL OF INVESTMENT % of Investor

Monthly 15
Quarterly 31
Half Yearly 15
Yearly 39
Total 100

Interval Of Investment

15%

39%
Monthly
Quarterly
31% Half Yearly
Yearly

15%

Interpretation:
 • The interval of investment basically remain annually for every investment
options. Here also 39% investor invest on yearly basis, 31% investor invest
quarterly, and remaining 15% equally investor invest monthly and half yearly.
• Hence we conclude that investor invest on yearly basis.

Q20 Minimum investment level :

INVESTMENT LEVEL % of Investor

Less than Rs 5000 13
Rs 5,000 - 10,000 30
Rs 10,00 - 20,000 20
More than Rs 20,000 37
Total 100
Investment Level

More than Rs 20,000 37

Rs 10,00 - 20,000 20

Rs 5,000 - 10,000 30

Less than Rs 5000 13

0 10 20 30 40
%Of Investor

Interpretation:
 • According to above mention chart very few % say 13% investor have minimum
investment is less than Rs 5000, 30% investor have Rs 5,000-10,000 , 20%
investor have Rs 10,000-20,000 and majority investor have minimum investment
level more than Rs 20,000.
• We clearly see majority of investor have good capacity of minimum investment.

Q21 Do you make Research before investment : 1. Yes 84% 2. No 16%

Research
Yes
No

No, 16

Yes, 84

If Yes, kindly mention types of research

Types Of Research ( % of Investor )

21% 25%

16%
6% 32%

Studying Annual Reports of Co.

Monitoring share markets
Getting information through broker
All
Others
Interpretation:

• According to above mention first graph we can see 84% investor doing Research
work and 16% investor are not doing research work.
• In second graph, we also can see 6% studying annual reports of Company, 16%
investor monitoring share markets, 21% investor getting information through
broker while the majority category does all the above research before investment
• The highest % category of investor does research work like reading newspaper,
magazine etc before investment.

Q22 Do You reinvest : 1. Yes 72% 2. No 28%

72

80

60 28
%Of
40
Investor
20

0
Yes No
Reinvest

Interpretation:

• Above mention chart show that 72% people reinvest and 28% investor withdraw
100% profit from the market.

Q23 Advise to invest in investment avenue other than riskless securities:

1. Yes 21% 2. No 79%
 No

Advise

79
Yes

21
0 20 40 60 80 100
%Of Investor

Interpretation:

• 21% investor advise to invest in different alternative like present business (like
ploughing back of profit), Bonds of mutual funds, RBI bonds, Nationalized banks,
while some advise that the return provided by such securities is higher than
riskless securities.
• 79% investor do not advise about the same.

CHAPTER – 7

FINDINGS

The null hypotheses is rejected and it is proved that (accept) there is no significant
influence of socio-economic profile on Saving, objective, Return, Risk, Preferred
Investment period, Interval of investment, Minimum Investment Level, Research &
Type of research for investment, reinvest and advise.

According to rank wise analyses we can say Insurance is the first preference for
investment, Insurance is the present need of the investors. Second Preference of Investor
is Bank deposit and third preference is the Stock Market.

As today Insurance is getting very good response as an investment avenues, it is opening

wide door for the investors as well as for the agents and subagents who can offer various
investment avenues with their concern avenues to their clients.

Further, people are very much concern about Savings, Tax saving and Liquidity. So these
factors give them freedom of thinking and option to invest in more than one avenue. It
help investor selecting the appropriate investment avenue for asset allocation according
to needs. Investor can diversify its portfolio according to risk and return on investment.

At last the survey concludes with more requirement of financial advisor who provides
more knowledge to the investors regarding various avenues.

CHAPTER – 8

LIMITATIONS

Limitation of the study:-

 As every study has some benefits, limitation is not exemption to a study. The
limitations here are;
 The first & foremost is time limitation. As there were only three months for the
study.

The study includes information & concept of different investment avenues but not every
concept of Investment Avenues
APPENDIX

A survey on investment pattern of investors

Assurance:

A. The information will be used to study the investment pattern of investors.

B. The information will be strictly kept confidential.

Personal Information:

1. Name: ________________________________________________________

2. Resident of: ____________________________________________________

3. Phone No: __________________ 4. Email: _________________________

5. Age group: Less than ≤ 25 yrs 25 - 45 yrs 45 - 65 yrs More than 65 yrs

6. Marital status: Married Unmarried Widow(er) Divorced

7. Education: Post Grad.& above Graduate\Diploma HSC\SC Below 10th
8. Qualification: MBA CA ICWA/CFA/CS Dr.
Engineer LLB Others______________

9. You are: Salaried Professional Business Owner student

Housewife Retired/ Pensioner Other___________

10. No of family members: 2 3 4 More than 4

11. Annual income: Less than ≤ Rs1,00,000 Rs 1,00,000 - 3,00,000
Rs 3,00,000 - 5,00,000 More than Rs 5,00,000

12. Do you save: Yes No (If yes, what amount of your total annual income)
Less than ≤ 1,00,000 1,00,000 - 3,00,000
3,00,000 - 5,00,000 More than 5,00,000

13. Do you invest : Yes No .If yes, Avenues (write preference)

A Stock Market F Commodity

a. Equity a. Agriculture
b. Preference b. Crude (Oil)
c. Others
B Bank Deposit G Insurance
a. Fixed Deposit a. Medical
b. Time Deposit b. Life
c. Others c. Retirement
C Real Estate H Tax Saving Scheme
a. Land a. Public Provident Fund
b. Building b. National Saving
Certificate
D Mutual fund I Debt Market
a. ELSS a. Debenture
b. Systematic b. Bonds
Investment Plan
E Metals J Others
a. Gold
b. Silver

14. Which factor you consider while selecting above mention avenues. (write preference)
 A Safety D Liquidity

B Tax saving E Diversification

C Simplicity F Affordability

15. Objective of investment:

Future security Tax savings Short term\Long term gain
Children carrier Speculation Others

16. Kindly mention the return you expect on your total amount of investment (In %):
Less than ≤ 10 % 10 % - 20 % 20 % - 30 % More than 30 %

17. Kindly mention the affordable risk on your investment (In %):
Less than ≤ 10 % 10 % - 20 % 20 % - 30 % More than 30 %

18. Kindly mention your preferred investment period:

Less than 1 yrs 1 – 5 yrs 5 – 10 yrs More than 10 yrs

19. Preferred interval of investment:

Monthly Quarterly Half yearly yearly

20. Minimum investment level:

Less than Rs 5000 Rs. 5000 - Rs 10000 Rs 10000 - Rs 20000
Rs 20000 or More

21. Do you make market Research before investment: Yes No (If Yes, kindly Mention)
Studying Annual Reports of Co. Monitoring Share Markets
Getting information through Broker All Others ______________

22. Do you Reinvest: Yes No

23. Would you advise someone to invest in investment avenue other than riskless
securities:
Yes No (If Yes)

specify______________________________________________________________
____

________________________________________________________________
__
Thanks for your Co-operation.