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Investing in various types of assets is an interesting activity that attracts people
from all walks of life irrespective of their occupation, economic status, education
and family background. When a person has more money than he requires for
current consumption, he would be coined as a potential investor. The investor
who is having extra cash could invest it in securities or in any other assets like
gold or real estate or could simply deposit it in his bank account. The companies
that have extra income may like to invest their money in the extension of the
existing firm or undertake new venture. All of these activities in a broader sense
mean investment.
INVESTMENT
Investment is the employment of funds on assets with the aim of earning income
or capital appreciation. Investment has two attributes namely time and risk.
Present consumption is sacrificed to get a return in the future. The sacrifice that
has to be borne is certain but the return in the future may be uncertain. This
attribute of investment indicates the risk factor. The risk is undertaken with a view
to reap some return from the investment. For a layman, investment means
monetary commitment. A person’s commitment to buy a flat or house for his
personal use may be an investment from his point of view. This cannot be
considered as an actual investment as it involves sacrifice but does not yield any
financial return.
To the economist, investment is the net addition made to the nation’s capital
stock that consists of goods and services that are used in the production
process. A net addition to the stock means an increase in the buildings,
equipments or inventories. These capital stocks are used to produce other goods
and services.
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Financial investment is the allocation of money to assets that are expected to
yield some gain over a period of time. It is an exchange of financial claims such
as stock and bonds for money. They are expected to yield returns and
experience capital growth over the years.
The financial and economic meanings are related to each other because the
savings of the individual flow into the capital market as financial investments, to
be economic investment. Even though they are related to each other, we are
concerned only about the financial investment made on securities.
INVESTMENT OBJECTIVES
The main investment objectives are increasing the rate of return and reducing the
risk. Other objectives like safety, liquidity and hedge against inflation can be
considered as subsidiary objectives.
Return: Investors always expect a good rate of return from their investments.
Rate of return could be defined as the total income the investor receives during
the holding period stated ass a percentage of the purchasing price at the
beginning of the holding period.
Return = End period value – Beginning period value +Dividend * 100

Beginning period value
Rate of return is stated semi-annually or annually to help comparison among the

different investment alternatives. If it is a stock, the investor gets the dividend as
well as the capital appreciation as returns. Market return of the stock indicates
the price appreciation for the particular stock.
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If a particular share is purchased in 1998 at Rs.60 in 1999 and the dividend yield
is Rs.5, then the return would be calculated as follows.
Return = Capital appreciation &dividend *100

Purchase price
Return = 10 + 5 * 100 = 30%

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Risk: Risk of holding securities is related with the probability of actual return
becoming less than the expected return. The word risk is synonymous with the
phrase variability of return. Investments’ risk is just as important as measuring its
expected rate of return because minimizing risk and maximizing the rate of return
are interrelated objectives in the investment management. An investment whose
rate of return varies widely from period to period is risky than whose return that
does not change much. Every investor likes to reduce the risk of his investment
by proper combination of different securities.
Liquidity: Marketability of the investment provides liquidity to the investment.

The liquidity depends upon the marketing and trading facility. If a portion of the
investment could be converted into cash without much loss of time, it would help
the investor meet the emergencies. Stocks are liquid only if they command good
market by providing adequate return through dividends and capital appreciation.
Hedge against inflation: Since there is inflation in almost all the economy, the
rate of return should ensure a cover against the inflation. The return rate should
be higher than the rate of inflation else the investor will have loss in real terms.
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Growth stocks would appreciate in their values overtime and provide a protection
against inflation. The return thus earned should assure the safety of the principal
amount, regular flow of income and be a hedge against inflation.
Safety: The selected investment avenue should be under the legal and
regulatory frame work. If it is not under the legal frame work, it is difficult to
represent the grievances, if any. Approval of the law itself adds a flavour of
safety. Even though approved by law, the safety of the principal differs from one
mode of investment to another. Investments done with the government assure
more safety than with the private party.
From the safety point of view investments can be ranked as follows: bank
deposits, government bonds, UTI units, non-convertible debentures, convertible
debentures, equity shares, and deposits with the non-banking financial
companies.
THE INVESTMENT PROCESS
There are five main steps in investment management:
1. Setting investment objectives.
2. Establishing investment policy.
3. Selecting the portfolio strategy.
4. Selecting the assets.
5. Measuring and evaluating performance.
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1. Setting Investment Objectives
The first main step in the investment management process is setting investment
objectives. For institutions such as pension funds and life insurance companies,
these objectives may be a cash flow specification to satisfy a liability due at some
future date or a series of liabilities due at different future dates. A guaranteed
investment contract (GIC) sold by a life insurance company is an example of the
former; the projected benefit payout to beneficiaries of a pension plan and an
annuity policy sold by a life insurance company are examples of multiple
liabilities. For institutions such as banks and thrifts, the objective may be to lock-
in a minimum interest rate spread over the cost of their funds. For others, such
as mutual funds and some trust accounts, the investment objective may be to
maximize return.
2. Establishing Investment Policy
The second main step is establishing policy guidelines to satisfy the objectives.
Setting policy begins with asset allocation among the major asset classes-the
products of the capital market. The major asset classes include equities, fixed
income securities, real estate, and foreign securities. Client and regulatory
constraints must be considered in establishing an investment policy. For
example, state regulators of insurance companies (life insurance companies and
property and casualty insurance companies) may restrict the amount of funds
allocated to certain major asset classes. Even the amount allocated within a
major asset class may be restricted based on the characteristics of the particular
asset. So too must tax and financial reporting implications be considered in
adopting investment policies.
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For example, life insurance companies have certain tax advantages that make
investing in tax-exempt municipal securities generally unappealing. Since
pension funds are exempt from taxes, they too would not usually be interested in
tax-exempt municipal securities. Property and casualty insurance companies will
vary their ownership of tax-exempt municipal securities depending on projected
profits from underwriting operations. Commercial banks at one time were major
buyers of municipal securities; however, the 1986 tax act made investing in
municipal bonds somewhat less attractive to commercial banks.
Financial reporting requirements, in particular Statement of Financial Accounting

Board Nos. 87 and 88 and the Omnibus Budget Reconcilation Act of 1987 (a
legislative initiative which reinforces the FASB 87 interpretation of liabilities),
affect the way in which pension funds establish investment policies.
Unfortunately, sometimes financial reporting considerations force institutions to
establish investment policies that may not be in the best interest of the institution
in the long run.
3. Selecting a Portfolio Strategy
Selecting a portfolio strategy that is consistent with the objectives and policy
guidelines of the client or institution is the third step in the investment
management process. Portfolio strategies can be classified as either active
strategies or passive strategies. Essential to all active strategies are expectations
about the factors that are expected to influence the performance of an asset
class. For example, with active equity strategies this may include forecasts of
futures earnings, dividends or price-earnings ratios. With active fixed income
portfolios this may involve forecasts of future interest rates, future interest rate
volatility or future yield spreads. Active portfolio strategies involving foreign secu-
rities will require forecasts of future exchange rates.
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Passive strategies involve minimal expectation input. The most popular type of
passive strategy is indexing. The objective in indexing is to replicate the
performance of a predetermined index. While indexing has been employed
extensively in the management of equity portfolios, the use of indexing for
managing fixed income portfolios is a relatively new practice.
Between these extremes of active and passive strategies have sprung strategies
that have elements of both. For example, the core of a portfolio may be indexed
with the balance managed actively. Or a portfolio may be primarily indexed but
employ low risk strategies to enhance the indexed return. This strategy is
commonly referred to as “enhanced indexing” or “indexing plus.”
In the fixed income area, several strategies classified as structured portfolio

strategies have been commonly used. A structured portfolio strategy is one in
which a portfolio is designed so as to achieve the performance of some
predetermined benchmark. These strategies are frequently used in funding
liabilities. When the predetermined benchmark is to have sufficient funds to
satisfy a single liability regardless of the course of future interest rates, a strategy
known as immunization is used. When the predetermined benchmark is multiple
future liabilities that must be funded regardless of how interest rates change, the
strategy that can be used is immunization or cash flow matching.
Even within the immunization and cash flow matching strategies, low risk active
management strategies can be employed. One immunization strategy, contingent
immunization, allows the portfolio manager to actively manage a portfolio until
certain parameters are realized. If those parameters are realized, the portfolio is
then immunized.
Indexing can be considered a structured portfolio strategy where the benchmark

is to achieve the performance of some predetermined index. Portfolio insurance
strategies, where the objective is to ensure that the value of the portfolio does not
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fall below a predetermined amount is also viewed as a structured portfolio
strategy.
4. Selecting Assets
Once a portfolio is selected, the next main step is the selection of the specific
assets to be included in the portfolio. It is in this phase that financial theory tells
us the investment manager attempts to construct an optimal or efficient portfolio.
An optimal or efficient portfolio is one that provides the greatest expected return
for a given level of risk, or equivalently, the lowest risk for a given expected
return.
5. Measuring and Evaluating Performance
The measurement and evaluation of investment performance is the last step in

the investment management process. (Actually, it is improper to say that it is the
last step since investment management is an ongoing process.) This step
involves measuring the performance and then evaluating that performance
relative to some realistic benchmark.
While the performance of a portfolio manager when compared to some

benchmark may demonstrate superior performance, this does not necessarily
mean that the portfolio satisfied its investment objective. For example, suppose
that a life insurance company establishes as its objective maximization of
portfolio return and allocates 75% of the fund to stocks and the balance to bonds.
Suppose further that the portfolio manager responsible for the equity portfolio of
this pension fund earns a return over a one year horizon that is 4% higher than
the Standard & Poor’s 500 stock index (a benchmark used to evaluate equity
performance). Assuming that the risk of the portfolio was similar to that of the
S&P 500, it would appear that the portfolio manager performed well. However,
suppose in spite of this performance the life insurance company cannot meet its
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liabilities. The failure was in establishing the investment objectives and setting
policy, not with the manager responsible for managing the portfolio.
INVESTMENT AVENUES
1. Life Insurance
Life insurance is a contract for payment of a sum of money to the person assured
(or to the person entitled to receive the same) on the happenings of event
insured against. Usually the contract provides for the payment of an amount on
the date of maturity or at specified dates at periodic intervals or if unfortunate
death occurs. Among other things, the contracts also provide for the payment of
premium periodically to the corporation by the policy holders. Life insurance
eliminates risk. The major advantages of life insurance are given below:
 Protection Saving through life insurance guarantees full protection

against risk of death of the saver. The full assured sum is paid, whereas in
other schemes only the amount saved is paid.
 Easy payments For the salaried people the salary savings’ schemes are
introduced. Further, there is an easy installment facility method of
payment through monthly, quarterly, half yearly or yearly mode.
 Liquidity Loans can be raised on the security of the policy.
 Tax relief Tax relief in Income Tax and Wealth Tax is available for
amounts paid by way of premium for life insurance subject to the tax rates
in force.
2. Mutual Funds
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Investment companies or investment trusts obtain funds from large number of
investors through sale of units. The funds collected from the investors are placed
under professional management for the benefit of the investors. The mutual
funds are broadly classified into open-ended scheme and close-ended scheme.
Open-ended scheme The open-ended scheme offers its units on a continuous

basis and accepts funds from investors continuously. Repurchase is carried out
on a continuing basis thus, helping the investors to withdraw their money at any
time. In other words, there is an uninterrupted entry and exit into the funds. The
open-end scheme has no maturity period and they are not listed in the stock
exchanges. Investor can deal directly with the mutual fund for investment as well
as redemption. The open-ended fund provides liquidity to the investors since the
repurchase facility is available. Repurchase price is fixed on the basis of net
asset value of the unit. In 1998 the open-ended schemes have crossed 80 in
number.
Closed-ended funds The close-ended funds have a fixed maturity period. The
first time investments are made when the close end scheme is kept open for a
limited period. Once closed, the units are listed on a stock exchange. Investors
can buy and sell their units only through stock exchanges. The demand and
supply factors influence the prices of the units. The investor’s expectation also
affects unit prices. The market price may not be the same as the net asset value.
Sometimes mutual funds with the features of close-ended and open-ended

schemes have been launched, known as interval funds. They can be listed in the
stock exchange or may be available for repurchase during specific periods at net
asset value or relative prices.
3. EQUITY SHARES
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Equity shares are commonly referred to common stock or ordinary shares. Even
though the words shares and stocks are interchangeably used, there is
difference between them. Share capital of a company is divided into a no. of
small units of equal value called shares. The term stock is the aggregate of a
member’s fully paid up shares of equal value merged into one fund. It is a set of
shares put together in a bundle. The “stock” is expressed in terms of money and
not as many shares. Stock can be divided into fractions of any amount and such
fractions may be transferred like shares.
Equity shares have the following rights according to section 85(2) of the
companies act 1956.
1. Right to vote at the general body meetings of the company.
2. Right to control the management of the company.
3. Right to share in the profits in the firm of dividends and bonus shares.
4. Right to claim on the residual after repayment of all the claims in the case
of winding of the company.
5. Right of pre-emption in the matter of issue of new capital.
6. Right to apply to court if there is any discrepancy in the rights set aside.
7. Right to receive a copy of the statutory report, copies of annual accounts

along with audited report.
8. Right to apply the central government to call an annual when a company
fails to call such a meeting.
9. Right to apply the Company Law Board for calling an extraordinary
general meeting.
In a limited company the equity shareholders are liable to pay the company’s
debit only to the extent of their share in the paid up capital. The equity shares
have certain advantages. The main advantages are
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 Capital Appreciation
 Limited liability
 Free tradability
 Tax advantages (in certain cases) and
 Hedge against inflation.
4. BONDS
Bond is a long term debt instrument that promises to pay a fixed annual sum as
interest for specified period of time.
The basic features of the bond are given below.

1) Bonds have face value. The face value is called par value. The bonds may
be issued at par value or at discount.
2) The interest rate is fixed some times it may be variable at as in the case of
floating rate bond. Interest is paid semi-annually or annually. The interest
rate is known as coupon rate. The interest rate is specified in the
certificate.
3) The maturity date of the bond is usually specified at the issue time except
in the case of perpetual bonds.
4) The redemption value is also stated in the bonds. The redemption value
may at par value or at premium.
5) Bonds are traded in the stock market. When they are traded the market
value may be at par or at premium or at discount. The market value and
redemption value need not be the same.
The different bonds are:

 Secured bonds and unsecured bonds
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 Perpetual bonds and redeemable bonds
 Fixed interest rate bonds and floating interest bonds
 Zero coupon bonds
 Deep discount bonds
 Capital indexed bonds
5. DEBUNTURES
According to Companies Act 1956 “debenture includes debenture stock, bonds
and any other securities of company, whether constituting a charge on the assets
of the company or not”. Debentures are generally issued by the private sector
companies as a long-term promissory note fro raising loan capital. The company
promises to pay interest and principal as stipulated. Bond is an alternative form
of debenture in India. Public sector companies and financial institutions issue
bonds. Some of the characteristic features of debentures are
Form It is given in the form of certificate of indebtedness by the company

specifying the date of redemption and interest rate.
Interest The rate of interest is fixed at the time of issue itself which is known as
contractual or coupon rate of interest. Interest is paid as a percentage of the par
value of the debenture and may be paid annually, semi annually or quarterly. The
company has the legal binding to pay the interest rate.
Redemption As earlier the redemption date would be specified in the issue itself.
The maturity period may range from 5 years to 10 years in India. They may be
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redeemed in installments. Redemption is done through a creation of sinking fund
by the company. A trustee Incharge of the fund buys the debentures either from
the market or owners. Creation of the sinking fund eliminates the risk of facing
financial difficulty at the time of redemption because redemption requires huge
sum.
Buy back provisions help the company to redeem the debentures at a special
price before the maturity date. Usually the special price is higher than the par
value of the debenture.
Indenture It is a trust deed between the company issuing debenture and the
debenture trustee who represents the debenture holders. The trustee takes the
responsibility of protecting the interest of the debenture holders and ensures that
the company fulfills the contractual obligations. Financial institutions, banks,
insurance companies or firm attorneies act s trustees to the investors. In the
indenture the terms of the agreement, description of debentures, rights if the
debenture holders, rights of the issuing company and the responsibilities of the
company are specified clearly. Debentures are classified on the basis of the
security and convertibility as
1. Secured or unsecured
2. Fully convertible debenture
3. Partly convertible debenture
4. Non-convertible debenture
6. REAL ESTATE
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The real estate market offers a high return to the investors. The word real estate
means land and buildings. There is a normal notion that the price of the real
estate has increased by more than 12 percent over the past ten years. The
population growth and the exodus of people towards the urban cities have made
the prices to increase manifold. Recently, the recession in the economy has
affected the real estate. Prices marked a substantial fall in 1998 from the 1997
prices. Reasons for investing in real estate are given below:
 High capital appreciation compared to gold or silver particularly in the

urban area.
 Availability of loans for the construction of houses. The 1999-2000 budget
provides huge incentives to the middle class to avail of housing loans.
Scheduled banks now have to disburse 3 percent of their incremental
deposits in housing finance.
 Tax rebate is given to the interest paid on the housing loans. Further
Rs.75, 000 tax rebate on a loan upto Rs.5 lakhs which is availed of after
April 1999. If an investor invests in a house for about Rs.6-7lakh, he
provides a seed capital of about Rs.1-2 lakh. The Rs.5 lakh loan, which
draws an interest rate of 15 percent, will work out to be less than 9.6
percent because of the Rs.75,000 exempted from tax annually. In
assessing the wealth tax, the value of the residential home is estimated at
its historical cost and not on its present market value.
 The possession of a house gives an investor a psychologically secure
feeling and a standing among his friends and relatives.
Apart from making investment in the residential houses, the people in the higher
income bracket invest their money in time share plans of the holiday resorts and
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land situated near the city limit with the anticipation of a capital appreciation.
Farm houses and plantations also fall in the line. In spite of the fast capital
appreciation investors generally do not invest in the real estate apart in the real
estate apart from owning one or two houses. The reasons are:
 Requirement of huge capital: To purchase a land or house in the urban
area, the investor needs money in lakhs whereas he can buy equity, gold
or other from of investment by investing thousands of rupees.
 Malpractices: often-gullible investors become cheated in the purchase of
land. The properties already sold are resold to the investors. The investor
has to lose the hard-earned money.
 Restriction of the purchase: The land ceiling Act restricts the purchase
of agriculture land beyond a limit.
 Lack of liquidity: If the investor wants to sell the property, he cannot
immediately realize the money. The waiting period may be months or
years.
The points to be taken care of while purchasing the real estate are:
 The plots should be approved by the local authority because on the un
approved layout construction of a house is not permitted.
 Possibility of capital appreciation. It depends upon the locality and
facilities of the site.
 Originality of title deeds. The site should be free from encumbrance.
Encumbrance certificate for a minimum period of latest 15 years should
be got from the registrars’ office.
 Plinth area should be verified.
Introduction
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Karvy Stockbroking Limited is a financial service company. It provides various
avenues of investments to the corporates and individual investors in India.
The market dynamics is changing very fast with the customers becoming more
demanding. Also the needs of the customers keep changing. Moreover,
emergence of new channels presents both an opportunity and threat to the
players in the market. Under these circumstances, financial services firms face
various challenges starting from understanding customers and their behaviour,
integrating delivery channels s to create a customer - centric culture.
Statement of the Problem
The company intended to find out the current investment trends amongst
individual investors of Bangalore so as to refine or retune their portfolio to match
the investor needs. Keeping this in view, the researcher attempts to make a
study on “Current investment trends amongst individual investors of
Bangalore – A Study”.
Research Objectives
The following are the objectives of the study:
• To conduct a study on the current investment trends amongst individual

investors of Bangalore.
• To ascertain the investor’s views about professional financial advisory
services.
• To ascertain the perceptions about information technology or internet as a
means of investment planning and financial advisory services.
Research Methodology
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Research Methodology is the study of research methods and rules for doing
research work. Research is defined as “A search for facts-answers to question
and solutions to problem”. It is a purposive investigation. It is an “Organised
inquiry”.
(A) Type of Study
The study is a survey based analytical study. The main aim of the study is to
study the current investment trends amongst individual investors of Bangalore.
The study is descriptive in nature. Surveys are best-suited method for descriptive
research. Hence, survey method was used for this study. Also the parameters
were predetermined and the respondents had to answer then accordingly.
Companies usually undertake surveys to learn about people’s knowledge,
beliefs, preferences, satisfaction and attitudes in the population.
A researcher plan prescribes the boundaries of research activities and enables

the researcher to channel his/her energies in the right work. With clear research
objective in view, the researcher can proceed systematically towards their
achievements.
(B) Mode of Research
The study consisted of a survey, based on a structured questionnaire.
(C) Target Respondents
This questionnaire was administered to individual investors and also the potential
individual investors of Bangalore.
(D) Data Sources
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Primary source of data has been utilized for the purpose of this study. Primary
data was collected by means of administering a questionnaire to the investors.
(E) Sampling
Empirical field studies require collection of first hand information or data

pertaining to the units of study from the field. A part of the population is known as
sample. The process of drawing a sample from a larger population is called
sampling.
There are two types of sampling namely Probability sampling and Non-probability
sampling. Probability sampling is based on the concept of random selection,
whereas non-probability sampling is non-random sampling.
Probability sampling is also known as “Random Sampling” or “Chance

Sampling”. Under this sampling design, every item of the universe has an equal
chance of inclusion in the sample. It is, so to say, a lottery method in which
individual units are picked up from the whole group not deliberately but by some
mechanical process.
Non - Probability sampling is that sampling procedure which does not afford any
basis for estimating the probability that each item in the population has of being
included in the sample. In such a design, personal element has a great chance of
entering into the selection of the sample.
For the purpose of the present study, convenience sampling which is a type of
non probability sampling has been selected.
(F) Sample Size
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The research was conducted by considering a sample size of 110. This is an
optimum size which represents the population and results could be drawn to the
best possible accuracy. The researcher had to collect necessary information
(through questionnaire) from 110 investors.
(G) Tools for Data Collection
For collecting primary data, questionnaire method has been selected by the
researcher. The primary data has been gathered from the individual investors of
Bangalore only. Observation method and interview schedules have also been
adopted for this purpose. Wherever personal interview was not possible,
information was gathered through telephonic conversation.
Secondary data has been gathered from published sources such as company
reports, journals, magazines, newspapers and information from internet has also
been acquired wherever necessary.
(H) Duration of the Study
The research was conducted for a period of eight weeks.
(I) Pilot study
The questionnaire was pre tested on a sample of three investors. Addition,

deletion, modification and rectification were undertaken according to the pilot
study.
(J) Administration
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The questionnaire was administered to the investors of Bangalore. Appointments
were fixed in order to administer the questionnaire according to their convenient
time. In all cases, the researcher was present when the questionnaire was filled
and so the clarifications were immediately provided.
(K) Techniques of Analysis
Various statistical techniques were used to conduct the analysis and arrive at the
results. They were as follows:
 Sum Weighted Average method: To convert the investor’s ratings into an
average value.
 Likert Scale: To convert the average scores and arrive at the ranks of
various parameters of consideration.
Limitations of the Study
The following were the limitations of the study:
• As the questionnaire was administered at the work place of the

respondent, some amount of bias would have entered into the study as
the responses were affected by the mood of the respondents.
• The respondents did not reveal certain data as they felt that these data
were confidential and very personal.
• Due to the time constraints, the study was conducted on individual

investors of Bangalore alone. Hence the results cannot be extrapolated to
other locations or cities.
CHAPTER SCHEME
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1. Introduction
This chapter contains the information such as what an investment is and
the investment process. It also contains an explanation of various
investment avenues such as banks, equity, insurance, real estate, etc.
2. Research Design
This chapter explains how the study was carried out for Karvy
Stockbroking Limited. This chapter clearly explains how the data collected
was collected and analyzed.
3. Profiles
This chapter gives an overview of the Indian Financial Sector, the industry
trend, growth and challenges ahead and the profile of the company.
4. Current investment trends amongst individual investors of

Bangalore – An Analysis
This chapter the detailed analysis of the current investment trends
amongst individual investors of Bangalore. Also the investor’s
expectations of financial advisory firms are analyzed. Acceptance of
internet has also been analyzed.
5. Summary Of Findings, Conclusion and Suggestions

This chapter contains the summary of various findings and conclusions
that emerged from the detailed analysis. It also contains the suggestions
put forward to the company so as to design a portfolio to suit the investor’s
needs and preferences.
INDUSTRY PROFILE
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Financial Services Sector – Overview
“Financial stability is crucial for sustained economic growth but this cannot be
achieved without strong financial systems.” [Financial Stability Institute]
The far-reaching changes in the Indian economy since liberalization in the early
1990s have had a deep impact on the Indian financial sector. The financial sector
has gone through a complex and sometimes painful process of restructuring,
capitalizing on new opportunities as well as responding to new challenges.
During the last decade, there has been a broadening and deepening of financial
markets. Several new instruments and products have been introduced. Existing
sectors have been opened to new private players. This has given a strong
impetus to the development and modernization of the financial sector. New
players have adopted international best practices and modern technology to offer
a more sophisticated range of financial services to corporate and retail
customers. This process has clearly improved the range of financial services and
service providers available to Indian customers. The entry of new players has led
to even existing players upgrading their product offerings and distribution
channels. This continued to be witnessed across key sectors like commercial
banking and insurance, where private players achieved significant success.
These changes have taken place against a wider systemic backdrop of easing of
controls on interest rates and their realignment with market rates, gradual
reduction in resource pre-emption by the government, relaxation of stipulations
on concessional lending and removal of access to concessional resources for
financial institutions.
Over the past few years, the sector has also witnessed substantial progress in
regulation and supervision. Financial intermediaries have gradually moved to
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internationally acceptable norms for income recognition, asset classification, and
provisioning and capital adequacy.
This process continued, with RBI announcing guidelines for risk-based

supervision and consolidated supervision. While maintaining its soft interest rate
stance, RBI cautioned banks against taking large interest rate risks, and
advocated a move towards a floating rate interest rate structure.
The past decade was also an eventful one for the Indian capital markets.
Reforms, particularly the establishment and empowerment of securities and
Exchange Board of India (SEBI), market-determined prices and allocation of
resources, screen-based nation-wide trading, dematerialisation and electronic
transfer of securities, rolling settlement and derivatives trading have greatly
improved both the regulatory framework and efficiency of trading and settlement.
On account of the subdued global economic conditions and the impact on the
Indian economy of the drought conditions prevailing in the country, 2002-03 was
a subdued year for equity markets. Despite this, the National Stock Exchange
(NSE) and the Bombay Stock Exchange (BSE) ranked third and sixth
respectively among all exchanges in the world with respect to the number of
transactions. The year also witnessed the grant of approval for setting up of a
multi-commodity exchange for trading of various commodities.
In the midst of these positive developments, a key issue that continues to impact
the Indian financial sector adversely is that of asset quality and consequent
pressure on capital. The liberalisation and globalisation of the Indian economy
led to a process of restructuring and consolidation across several sectors of the
economy. Several units that were set up in a protectionist environment became
unviable in the new paradigm of competition in the global market place. Volatility
in global commodity prices has a major impact on Indian companies. This has led
24
to non-performing loans and provisioning for credit losses becoming a key area
of concern for the Indian financial system. The NPA problem in India, viewed in
the context of comparison with other Asian economies, does not pose an
insoluble systemic problem; at 8% of GDP, the NPA levels are significantly lower
than the levels of 30-40% seen in other Asian economies. The key problems in
India have been the inability of banks to quickly enforce security and access their
collateral, and the capital constraints in recognising large loan losses. Recent
measures taken by the Government have attempted to address both these
problems. The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest (SARFAESI) Act creates a long-overdue
framework for resolving the distressed credit problem in India, by providing legal
support to the resolution process and thereby encourages the flow of capital into
this specialised sector. The proposal for swapping high-yield Government
securities held by banks into lower-yield securities, thereby realising mark-to-
market gains and utilising the same to make additional provisions, would also
strengthen the balance sheets of banks. RBI operationalised the corporate debt
restructuring forum, which has a made significant progress in building lender
consensus on restructuring. The next major initiative would be the
operationalisation of an asset reconstruction company, and the development of a
market for distressed credit similar to those in other countries.
The increasing disintermediation in the corporate credit market, slowdown in

creation of new capital assets as companies focus on improving existing capacity
utilisation and improving working capital efficiency of Indian corporates has led to
lower demand for credit from the corporate sector in the past two years. This has
been replaced by the huge retail finance opportunity. Existing low penetration
levels, increasing affordability of credit and rising income levels have led to a
growing demand for retail credit. This has been strengthened by the tax
incentives for acquiring residential property, leading to a particularly high growth
25
in housing finance. Going forward, the infrastructure, retail and small and
medium enterprise segments would provide large growth opportunities, while the
manufacturing sector is expected to continue its consolidation phase, with
selective additions to capacity. However, success in these segments presents
several challenges. Retail and SME banking requires extremely effective
distribution systems that are capable of offering flexibility and convenience to the
customer, while maintaining cost-efficiency for banks. At the same time, banks
need to put in place high-quality credit modeling and data mining systems. This is
essential to appropriately assess and price risk and allocate capital in a manner
that would optimise risk-adjusted returns. The Indian financial system would also
witness greater activity in the debt markets, as originators of credit increasingly
seek to proactively manage their portfolios by structuring and selling down loan
portfolios to entities that have capital to deploy but lack the origination and
structuring capabilities.
India has made considerable progress in the post-1991 period. The country’s
macroeconomic fundamentals have improved and external vulnerability has been
sharply reduced. Reforms in the financial sector have appropriately addressed
the pre-1991 weaknesses in the sector and improved its competitive strength
domestically as well as globally. Individual players now need to adopt proactive
competitive strategies that will enable them to capture the emerging
opportunities. Exposure to global practices has made the Indian customer more
discerning and demanding. There has been a clear shift towards those entities
that are able to offer products and services in the most innovative and cost
efficient manner. The financial sector will need to adopt a customer-centric
business focus. It will also have to create value for its shareholders as well as its
customers, competing for the capital necessary to fund growth as well as for
customer market share. This indeed will be the challenge in the coming years.
26
Challenges Ahead
The Financial Services industry is undergoing metamorphosis. There is lately an

overwhelming demand for aggregation of services and enhanced customer
service. The business paradigms are changing faster in this industry than
elsewhere. Financial Services firms have to continually expand their service
offerings to satisfy the increasingly demanding and savvy customer.
• Banking
• Insurance
• Capital Markets
Banking
Rapid consolidation, intensifying competition and increased customer awareness

pose significant challenges for banks as products and services are easily and
quickly duplicated across the industry. In this scenario, banks have moved
rapidly from product-centric business models to customer centric business
models.
Insurance
In the last few years the global Insurance industry has been witnessing
significant changes with the arena getting more competitive and complex.
Consolidation and convergence in the financial services sector, overhaul in social
security systems, emergence of alternative distribution channels, and increasing
competition from other investment options are driving sweeping changes in the
insurance industry.
These changes have brought challenges of managing mergers, managing

customer expectations, and rationalizing the systems to support different
products and distribution channels.
27
Capital Markets
Mergers & acquisitions, rising costs of regulatory compliance, business continuity

issues, inherent operational inefficiencies, competitive pressures, unstable stock
markets, and increasing risks are compelling the financial services firms to be
more innovative and agile. The internet 'revolution' has given way to mature and
more sophisticated use of the medium's power, throwing up fresh challenges
along with opportunities. Corporate governance and transparency have suddenly
become hygiene factors. All these issues mandate accurate and timely
information, product innovation, and sleek marketing strategies along with strong
technological support.
COMPANY PROFILE
Background
In 1982, a group of Hyderabad-based practicing Chartered Accountants started
28
Karvy Consultants Limited with a capital of Rs.1, 50,000 offering auditing and
taxation services initially. Later, it forayed into the Registrar and Share Transfer
activities and subsequently into financial services. All along, Karvy's strong work
ethic and professional background leveraged with Information Technology
enabled it to deliver quality to the individual.
A decade of commitment, professional integrity and vision helped Karvy achieve

a leadership position in its field when it handled the largest number of issues ever
handled in the history of the Indian stock market in a year. Thereafter,
Karvy made inroads into a host of capital-market services, - corporate and retail -
which proved to be a sound business synergy.
Today, Karvy has access to millions of Indian shareholders, besides companies,

banks, financial institutions and regulatory agencies. Over the past one and half
decades, Karvy has evolved as a veritable link between industry, finance and
people. In January 1998, Karvy became the first Depository Participant in Andhra
Pradesh. An ISO 9002 company, Karvy's commitment to quality and retail reach
has made it an integrated financial services company.
Quality Policy
To achieve and retain leadership, Karvy shall aim for complete customer
satisfaction, by combining its human and technological resources, to provide
superior quality financial services. In the process, Karvy will strive to
exceed Customer’s expectations.
Quality Objectives
As per the Quality Policy, Karvy will:
29
 Build in-house processes that will ensure transparent and harmonious
relationships with its clients and investors to provide high quality of
services.
 Establish a partner relationship with its investor service agents and
vendors that will help in keeping up its commitments to the customers.
 Provide high quality of work life for all its employees and equip them with
adequate knowledge & skills so as to respond to customer's needs.
 Continue to uphold the values of honesty & integrity and strive to establish
unparalleled standards in business ethics.
 Use state-of-the art information technology in developing new and
innovative financial products and services to meet the changing needs of
investors and clients.
 Strive to be a reliable source of value-added financial products and
services and constantly guide the individuals and institutions in making
a judicious choice of same.
 Strive to keep all stake-holders (shareholders, clients, investors,
employees, suppliers and regulatory authorities) proud and satisfied.
Achievements
 Largest mobiliser of funds as per PRIME DATABASE
 First ISO - 9002 Certified Registrar in India
 A Category- I -Merchant banker.
 A Category- I -Registrar to Public Issues.
 Ranked as “The Most Admired Registrar" by MARG.
 Handled the largest- ever Public Issue - IDBI
 Handled over 500 Public issues as Registrars.
30
 Handling the Reliance Account which accounts for nearly 10 million
account holders
 First Depository Participant from Andhra Pradesh.
Major issues managed as arrangers

 Kerala State Electricity Board.
 Power Finance Corporation
 A.P. Water Resources Development Corporation.
 A.P. Roads Development Corporation.
 A.P. State Electricity Board.
 Haldia Petrochemicals Ltd.
Major issues managed as Co-Managers

 IndusInd Bank Ltd
 ICICI Bonds – March 97
 ICICI Bonds – Dec 97
 ICICI Safety Bonds March 98
 ICICI Safety Bonds – April 98. July 98, Oct 98, Dec 98, Jan 99.
 The Jammu and Kashmir Bank Ltd
Major issue handled as Registrars to Issues

 IDBI Equity
 Morgan Stanley Mutual Fund
 Bank of Baroda
 Bank of Punjab Ltd
 Corporation Bank
 IndusInd Bank Ltd
 Jammu and Kashmir Bank Ltd
31
 Housing and Urban Development Corporation (HUDCO) Ltd
 Madras Refineries Ltd
 Tamil Nadu Newsprint & Paper Ltd
 BPL Ltd
 Birla 3M Ltd
 Essar Shipping Ltd
 Essar Steels Ltd.
 Hindustan Petroleum Corporation Ltd.
 Infosys Technologies Ltd.
 Jindal Vijayanagar Steels Ltd.
 Nagarjuna Fertilizers & Chemicals Ltd.
 Rajshree Polyfil Ltd.
 Karvy Securities Ltd.
 Karvy has secured over Rs. 500 crore in the following debt issues.
 Andhra Pradesh Road Development Corporation Ltd
 ICICI Bonds ( Private Placement)
 ICICI Bonds – 96
 ICICI Bonds – 97- I
 ICICI Bonds – 97 – II
 ICICI Safety Bonds March 98.
 IDBI Bonds 96.
 IDBI Flexi Bonds I
 IDBI Flexi Bonds II
 IDBI Flexi Bonds III
 Kerala State Electricity Board
 Krishna Bhagya Jala Nigam Ltd
 Power Finance Corporation Ltd
32
 Andhra Pradesh Water Resources Development Corporation
 Andhra Pradesh State Electricity Board
Group Companies
Karvy Consultants Limited

Deals in Registrar and Investment Services
Karvy Securities Limited

Deals in distribution of various investment products, viz., equities, mutual funds,
bonds and debentures, fixed deposits, insurance policies for the investor.
Karvy Investor Services Limited

Deals in Issue management, Investment Banking and Merchant Banking.
Karvy Stockbroking Limited

Deals in buying and selling equity shares and debentures on the National Stock
Exchange (NSE), the Hyderabad Stock Exchange (HSE) and the Over-The-
Counter Exchange of India (OTCEI).
Karvy Global Services Limited

Karvy Global Services is the global services arm of the Karvy Group of
Companies engaged in the business of offshore business process outsourcing in
the areas of human resource outsourcing, finance and accounting operations
outsourcing, research and analytics and back office processing operations.
33
The project is an attempt to identify the current investment trends amongst
individual investors of Bangalore and to ascertain the investor perception about
professional financial advisory services. Also an attempt is made to ascertain
investor opinion about information technology / internet as a means of investment
planning and trading.
This study required both Primary and Secondary data. Primary data was
collected through a structured questionnaire and the Secondary data was made
available through company literature and internet.
All the respondents were contacted personally which consisted of individual

investors of Bangalore, both current and potential. The information was collected
by meeting them personally.
In this project investor’s choice of investment avenues, reasons for the choice,
characteristics they expect from financial advisory services and awareness levels
of various online advisory services have been dealt in length and breadth.
The data collected has been analyzed thoroughly through appropriate statistical
methods and presented in the form of tables and graphs in the succeeding
pages.
Respondents were asked to rate certain parameters. Such answers were
analysed using Likert scale to arrive at the ranking of the parameters.
Likert Score = sum weighted average of the responses

Total Sample Size
34
The parameter with the highest Likert score is ranked 1st followed by subsequent
rankings.
Age of an investor plays a vital role in investments. An investor’s needs vary
according to the age. Hence the following table gives the distribution of investors
across various groups.
Table No. 1
Table showing distribution of investors across various age groups
No. of
Age Group Percentage
investors
20-30 yrs. 32 29.10
31-40 yrs. 30 27.20
41-50 yrs. 31 28.30
51 yrs. & above 17 15.40
Total 110 100
35
Percentage of investors
29.1 28.3
30 27.2
25
20
15.4
15
10
0
20-30 yrs. 31-40 yrs. 41-50 yrs. 51 yrs. & above
Inference: It has been observed that majority of investors lie in the age group 20
-50 years, beyond which it has drastically reduced. This may be due to the
investor’s children taking responsibility of the family further. Also, income if any
35
may have been utilized for their daily expenses thus leading to very few or zero
investments in the 51 years and above age group.
Another important parameter of consideration is the investor occupation which
leads to differences in selecting an investment avenue. Hence the following table
provides the information of the investor’s occupation.
Table No. 2
Table showing distribution of investors across various occupations
Occupation No. of investors Percentage

Business 21 19.10
IT 22 20.00
Professional 21 19.10
Doctor 15 13.60
others 31 28.20
Total 110 100
30 28.2
25
19.1 20 19.1
20
15 13.6
10
0
Business IT Professional Doctor others
36
Inference: There has been an even distribution of investors across various
occupations. Other occupations included employees working for public and
private firms, government officials and students pursuing higher studies.
Investor’s qualification has an impact on their investment habits. Awareness
levels vary across different qualification levels. The table below shows
distribution of investors according to their qualification.
Table No. 3
Table showing distribution of investors according to Qualification
No. of
Qualification Percentage
investors
under graduate 26 23.6
graduate 40 36.4
post graduate 44 40
Total 110 100
45
40
40 36.4
35
30
23.6
25
20
15
10
5
0
under graduate graduate post graduate
Inference: It can be observed from the figure that the number of investors in
graduate and post graduate level are even and more compared to under
graduates. This may be due to the low awareness about investments or savings.
37
Also the responsibility of an individual at the under graduate level may be very
minimal so as to think about savings or investments.
Income of an investor also has an impact on his/her investment habits. Savings
are as a result of one’s income. Hence income levels of investor’s are tabulated
below.
Table No. 4
Table showing distribution of investors across various income levels
Income level No. of investors Percentage
below 10,000 33 30.00
10,001-20,000 37 33.60
20,001-30,000 19 17.30
30,001-40,000 12 10.90
above 40,001 09 8.20
Total 110 100
40
33.6
35
Percentage of incestors
30
30
25
20 17.3
15
10.9
10 8.2
5
0
below 10,000 10,001- 20,001- 30,001- above 40,001
20,000 30,000 40,000
38
Inference: From the figure it can be seen that investors are more in the Rs.10,
001 – 20,000 income bracket while it is quite evenly distributed across other
income levels.
It is a known fact that age and investment habits have a strong co-relation
between them. Hence the respondents were asked to find the nature of co-
relation between the two i.e. positive or negative.
Table No. 5
Table showing investment habits of investors according to age groups
51 yrs. &
20-30 yrs. 31-40 yrs. 41-50 yrs. Total
above
93
23 27 29 14
Invest (84.50%)
(20.90%) (24.50%) (26.40%) (12.70%)
17
09 03 02 03
Do not invest (15.50%)
(8.20%) (2.70%) (1.90%) (2.70%)
110
32 30 31 17
Total (100%)
(29.10%) (27.20%) (28.30%) (15.40%)
30
26.4
24.5
25
20.9
Percentage of Investors
20
15 12.7
10 8.2
5 2.7 2.7
1.9
0
Invest Do not invest
39
Inference: A majority of 84.5% of the respondents are in the habit of investing.
The number of non investors is highest in the 20 – 30 yrs. age group. This may
be due to low awareness level about investments and savings.
Since choice of investment avenues greatly depend upon the investor’s monthly
savings, a question on their monthly income revealed the following information.
Table No. 6
Table showing monthly savings of investors across various age groups
51 yrs. &
20-30 yrs. 31-40 yrs. 41-50 yrs. Total
above
15 15 43
less than 2500 08 (7.30%) 05 (4.60%)
(13.60%) (13.60%) (39.10%)
07 08 14 05 34
2501-5000
(6.40%) (7.30%) (12.70%) (4.60%) (31.00%)
05 04 05 02 16
5001-10,000
(4.60%) (3.60%) (4.60%) (1.80%) (14.50%)
02 03 04 05 14
above 10,000
(1.80%) (2.70%) (3.60%) (4.60%) (12.70%)
03 03
nil 00 00 00
(2.70%) (2.70%)
32 30 31 17 110
Total
(29.10%) (27.20%) (28.30%) (15.40%) (100%)
40
16
14
12
10
0
less than 2501-5000 5001-10,000 above nil
2500 10,000
monthly savings in Rs.
Inference: A majority of 39.10% of the investor’s monthly savings were less than
Rs. 2500. About 31% of the investors saved in the range Rs. 2501 to Rs. 5000.
Only 12.7% of the investors could afford to save above Rs. 10,000 per month. A
small 2.7% of the investors in the 20 – 30 yr. age group did not save any money.
Monthly savings of majority of the investors were less due to relatively big size of
41
the family and commitments towards it. So any income would be spent towards
the family thus leading to minimal savings.
Investment horizon varies across investor’s needs and their age. Different age
groups have different needs. This question reveals the investment horizons of
various age groups.
Table No. 7
Table showing details of investment horizon across various age groups
51 yrs. &
20-30 yrs. 31-40 yrs. 41-50 yrs. Total
above
10 09 02 01 22
less than 1year
(9.30%) (8.40%) (1.90%) (0.90%) (20.50%)
03 04 06 01 14
1 - 2 years
(2.70%) (3.70%) (5.60%) (0.90%) (13.10%)
03 05 08 02 18
2 - 3 years
(2.70%) (4.70%) (7.50%) (1.90%) (16.80%)
10 05 07 06 28
3 - 5 years
(9.30%) (4.70%) (6.50%) (5.60%) (26.20%)
03 07 08 07 25
more than 5 yrs.
(2.70%) (6.50%) (7.50%) (6.50%) (23.30%)
29 30 31 17 107
Total
(27.10%) (28.00%) (29.00%) (15.90%) (100%)
42
10
9
8
7
6
5
4
3
2
1
0
less than 1 - 2 years 2 - 3 years 3 - 5 years more than 5
1year years
Inference: A majority of 26.2% of the investors opted for an investment horizon

ranging from 3 – 5 years. About 23.3% of the investors have opted for investment
horizon more than 5 years. Also it can be observed that most of the investors
have opted for either short term or long term investment horizons and not the
medium horizons. It can be interpreted that investment horizon is directly
proportional to the age.
43
The investment purpose may not be the same amongst the investors. Also it
differs across the age groups. The following table reveals this information.
Table No. 8
Table showing investment purpose across various age groups
51 yrs. &
20-30 yrs. 31-40 yrs. 41-50 yrs. Total
above
11 08 07 03 29
Regular Income
(10.30%) (7.50%) (6.50%) (2.70%) (27.10%)
Children Education 03 09 11 06 29
/Marriage (2.70%) (8.40%) (10.30%) (5.60%) (27.10%)
02 03 07 05 17
Retirement Plan
(1.90%) (2.70%) (6.50%) (4.70%) (15.90%)
07 05 03 01 16
Tax Relief
(6.50%) (4.70%) (2.70%) (0.90%) (15.00%)
04 05 03 01 13
Housing
(3.70%) (4.70%) (2.70%) (0.90%) (12.10%)
02 01 03
others 00 00
(1.90%) (0.90%) (02.80%)
29 30 31 17 107
Total
(27.10%) (28.00%) (29.00%) (15.90%) (100%)
44
12
10
8
6
4
2
0
rs
g
n
e
ile
ge
in
la
om
he
re
us
tp
ria
ot
nc
ho
x
en
ar
ta
rI
em
la
n/
gu
tir
io
re
at
Re
uc
Ed
n
re
ild
Ch
Inference: A majority of 27.10% of the investor’s purpose of investment was to

generate regular income and make appropriate savings for their children
education / marriage. This is because Indian investors are family oriented and
affinity towards their family is more. Prime importance is given to their family
members. Only 12.10% of the investors opted for housing as a purpose of
investment. Other investment purposes included long term investments, short
term money, and speculation.
45
With the increase in the investment avenues in the recent past investors enjoy
the option of choosing those that match their needs and age.
Table No. 9
Table showing investor preference of investment avenues across various

age groups
51 yrs. &
20-30 yrs. 31-40 yrs. 41-50 yrs. Total
above
56
18 14 13 11
Banks (19.60%)
(6.30%) (4.90%) (4.50%) (3.80%)
39
Post Office 06 10 09 14
(13.60%)
Deposits (2.10%) (3.50%) (3.10%) (4.90%)
38
06 12 11 09
Mutual Funds (13.30%)
(2.10%) (4.20%) (3.80%) (3.10%)
54
Equity 15 17 14 08
(18.90%)
Investments (5.20%) (5.90%) (4.90%) (2.80%)
44
12 12 12 08
Insurance (15.40%)
(4.20%) (4.20%) (4.20%) (2.80%)
35
09 06 13 07
Real Estate (12.20%)
(3.10%) (2.10%) (4.50%) (2.40%)
19
Government 03 03 04 09
(06.60%)
Bonds (1.00%) (1.00%) (1.40%) (3.10%)
01
01
others 00 00 00 (00.40%)
(0.40%)
46
7
6
5
4
3
2
1
0
s
rs
s
te
ts
nk
ds
nd
nc
s
he
ta
en
sit
Ba
on
Fu
ra
Es
ot
po
su
tB
l
st
al
De
ua
In
en
ve
Re
ut
ce
In
nm
M
ffi
ty
er
O
ui
ov
Eq
st
G
Po
Inference: Banks have been the most preferred investment avenue with 19.20%
of the investors opting for it as these contracts promise specific payments at
predetermined times. The next best avenue is Equity Investments with 18.90% of
them opting for it. Only 6.60% of the investors have preferred Government Bonds
as their investment avenues which is the least amongst all. This may be due to
the relatively low returns on such investments. Other investment avenue included
private lending. Most of the investors between the ages 20-50 preferred equity
investments because of their ability to take comparatively high risk and long term
investment plans.
47
Awareness of investment avenues varies across age, income, occupation and
educational background. Hence a question to check the awareness levels of
various investments based on the qualification revealed the following information.
Table No. 10
Table showing investor preference of investment avenues on the basis of

qualification
under post
graduates Total
graduates graduates
63
16 21 26
Banks (22.40%)
(5.70%) (7.50%) (9.30%)
39
Post Office 11 15 13
(13.90%)
Deposits (3.90%) (5.30%) (4.60%)
37
7 13 17
Mutual Funds (13.20%)
(2.50%) (4.60%) (6.00%)
48
Equity 9 19 20
(17.10%)
Investments (3.20%) (6.80%) (7.10%)
39
10 14 15
Insurance (13.90%)
(3.60%) (5.00%) (5.30%)
35
12 10 13
Real Estate (12.50%)
(4.30%) (3.60%) (4.60%)
19
Government 7 7 5
(6.80%)
Bonds (2.50%) (2.50%) (1.80%)
1
00 00 1
others (0.20%)
(0.20%)
48
10
9
8
7
6
5
4
3
2
1
0
s
e
ds
s
ts
ds
te
nk
ts
r
nc
he
en
ta
un
on
si
Ba
ra
Es
po
ot
lF
tB
su
st
De
ua
al
In
en
ve
Re
ut
e
nm
In
c
M
ffi
ty
er
O
ui
ov
Eq
st
G
Po
under graduate graduate post graduate
Inference: Banks have been the most preferred savings / investment avenue
across all qualifications. This is because banks have laid a strong foundation and
are one of the traditional means of savings. Equity investments have been the
next best avenue due to its increased awareness in the recent past. Government
bonds are the least preferred because of the relatively low returns it offers to the
investors.
49
Income of an investor also has an impact on his/her investment habits. Savings
are as a result of one’s income thus leading to difference in choice of
investments.
Table No. 11
Table showing investor preference of investment avenues on the basis of

income
below 10,001- 20,001- 30,001- above

Total
10,000 20,000 30,000 40,000 40,001
61
12 20 14 8 7
Banks (21.4%)
(4.20%) (7.00%) (4.90%) (2.80%) (2.50%)
30
Post Office 9 9 7 3 2
(10.5%)
Deposits (3.20%) (3.20%) (2.50%) (1.10%) (0.70%)
37
Mutual 7 10 10 5 5
(13%)
Funds (2.50%) (3.50%) (3.50%) (1.80%) (1.80%)
59
Equity 8 18 17 9 7
(20.7%)
Investments (2.80%) (6.30%) (6.00%) (3.20%) (2.50%)
41
11 9 12 4 5
Insurance (14.4%)
(3.90%) (3.20%) (4.20%) (1.40%) (1.80%)
37
5 10 10 7 5
Real Estate (13%)
(1.80%) (3.50%) (3.50%) 2.50%) (1.80%)
19
Government 4 6 6 2 1
(6.70%)
Bonds (1.40%) (2.10%) (2.10%) (0.70%) (0.40%)
1
1
others 0 0 0 0 (0.3%)
(0.30%)
50
8
Percentage of investors 7
6
5
4
3
2
1
0
s
rs
e
ds
ts
ds
te
nk
nc
its
he
en
ta
un
on
Ba
ra
Es
ot
po
m
lF
tB
su
st
De
ua
al
In
en
ve
Re
ut
nm
ce
In
M
fi
ty
er
Of
ui
ov
Eq
st
G
Po
below 10,000 10,001-20,000 20,001-30,000

30,001-40,000 above 40,001
Inference: Majority of the investors across all income levels too opted for banks
followed by equity and insurance.
51
Every investor has a particular reason for choosing an investment avenue. The
following are some of the most common reasons.
Table No. 12
Table showing reasons for preferring the investment avenues
Total Percentage
Capital Gains 35 20%
Safety of Investments 73 41%
Generate Regular Returns 22 12%
Tax Benefits 29 16%
Secure Future 20 11%
Secure Future
Capital Gains
11%
20%
Tax Benefits
16%
Generate
Regular Safety of
Returns Investments
12% 41%
Inference: 41% of the investors have opted for safety of investments as a reason
for investing in the above mentioned avenues. This is because of the
conservative nature of the Indian investors. About 20% of the investors invested
to receive capital gains. 0nly 11% of the investors invested for a secure future
which was the least amongst all.
52
Not all investment avenues are safe. Safety levels differ across investments. This
question was asked to ascertain the safety levels of the following investment
avenues. The more the sum weighted average, more safe is the investment
comparatively.
Table No. 13
Table showing safety levels of the investment avenues
Sum wt. Likert

1 2 3 4 5 Rank
Avg. Score
Banks 00 00 06 63 31 425 3.86 3
Post Office Deposits 00 04 07 21 68 453 4.12 2
Mutual Funds 40 18 15 20 07 236 2.15 5
Equity Investments 50 30 07 13 00 183 1.66 7
Insurance 00 09 16 43 32 398 3.62 4
Real Estate 37 23 22 13 05 226 2.05 6
Government Bonds 01 02 04 26 67 456 4.15 1
3.86 4.12 4.15

4.5 3.62
4
3.5
Likert Score
3 2.15 2.05
2.5 1.66
2
1.5
1
0.5
0
te
ks
ds
ds
its
nc
ta
en
n
un
on
s
Ba
Es
ra
po
m
lF
tB
su
st
De
al
ua
ve
en
In
Re
ut
e
In
nm
ffic
ty
er
tO
ui
ov
Eq
s
G
Po
Inference: Government Bonds have been rated as the safest investment

avenue. Post Office deposits with a score of 453 followed by banks have been
the next best avenues in terms of safety. Equity investments have been
considered as the most unsafe investment avenue with a score of 183.
53
All the investments possess a certain amount of risk. Risk taking ability greatly
depends on the age.
Table No. 14
Table showing risk taking ability of the investors across age groups
51 yrs. &
20-30 yrs. 31-40 yrs. 41-50 yrs. Total
above
03 04 13 12 32
Low Risk
(2.70%) (3.60%) (11.80%) (10.90%) (29.10%)
15 14 11 04 44
Moderate Risk
(13.60%) (12.70%) (10.00%) (3.60%) (40.00%)
14 12 07 01 34
High Risk
(12.70%) (10.90%) (6.40%) (0.90%) (30.90%)
32 30 31 17 110
Total
(29.10%) (27.20%) (28.30%) (15.40%) (100%)
16
13.6
12.7 12.7
14
11.8
12 10.9 10.9
10
10
8 6.4
6
3.6 3.6
4 2.7
2 0.9
0
Low Risk Moderate Risk High Risk
Inference: A majority of 40% of the investors are moderate risk takers. The
number of high risk takers is more in the age group 20 – 30 yrs. This age group
is ready to take high risk in order to get high returns. Also it is observed that the
level of risk taken has decreased gradually with the increase in age.
54
Today’s safest investment avenue may not be the same tomorrow. Better
products with better features may outshine the existing ones. A question to
identify the future prospective investments revealed the following information.
Table No. 15
Table showing prospective investment avenues in future
Total Percentage
Banks 06 02%
Post Office Deposits 14 06%
Mutual Funds 57 23%
Equity Investments 68 27%
Insurance 43 17%
Real Estate 54 21%
Government Bonds 11 04%
4% 2% 6%
21% Banks
23% Post Office Deposits
Mutual Funds
Equity Investments
Insurance
Real Estate
17%
Government Bonds
27%
Inference: 27% of the investors consider equity investments to be the most

prospective investment avenue in the future. This may be due to the increase in
the awareness level of equity in the recent past with more number of companies
coming out with IPO’s. Mutual funds and real estate have been rated as next only
to equity investments with 21% and 21% respectively because real estate
industry is in boom at present and promises to continue for few more years.
Banks, Government bonds and post office deposits are considered as less
prospective investment avenues. The investors have started sensing that these
avenues yield less returns comparatively.
55
An investor before investing makes a study to identify investment avenues to
best suit his needs. For this he may or may not consult others.
Table No. 16
Table depicting investor’s consulting behavior
Total Percentage
Family & Friends 74 45%
Broker 39 24%
Financial Consultant 27 16%
others 01 01%
none 23 14%
14%
1%
Family & Friends
45% Broker
16%
Financial Consultant
any other
none
24%
Inference: A majority of 45% of the investors consult their family and friends
prior to investing. A typical Indian investor believes his immediate family
members and friends more than anyone else. Also the privacy is maintained.
About 24% of the investors approach brokers for investment assistance or
guidance. This may be due to their expertise, first hand information and inside
information available with them. Only 14% of the investors did not approach
anyone for consulting. Others included newspapers as a means of investment
assistant.
56
Every investor has his own perceptions about his or her financial advisory firm.
The reason to approach an advisory firm is described below.
Table No. 17
Table exhibiting investor’s expectations of professional financial advisory

services
Sum Wt. Likert

1 2 3 4 5 Rank
Avg. Score
Market Knowledge 00 00 00 26 74 474 4.31 1
Trustworthiness 00 00 07 41 52 445 2.01 8
Competence 00 11 22 38 29 385 3.50 4
Confidentiality 00 13 23 31 33 384 3.49 5
Track Record of Agency 06 06 18 39 31 383 3.48 6
Attitude towards Investments 06 08 10 41 35 391 3.55 3
Service Charges 14 14 30 36 06 306 2.78 7
Product Expertise 07 00 17 20 56 418 3.80 2
5
4.31
4.5
4 3.55 3.8
3.5 3.49 3.48
Likert Score
3.5
2.78
3
2.5 2.01
2
1.5
1
0.5
0
Trustworthiness
Confidentiality
Investments
Knowledge
Track Record
Competence
Expertise
Charges
Service
Product
of Agency
towards
Attitude
Market
Inference: The key parameters investors expect from financial advisory service
providers are thorough market knowledge, trustworthiness and product expertise.
Relatively less weightage is given to parameters like service charges,
competence and confidentiality.
57
Internet has been the buzz word today. It has been accepted as a means of
communication worldwide. Investor’s acceptance of internet as a tool of
investment planning provided the following information.
Table No. 18
Table showing investor’s acceptance of internet as a means of investment

planning
Total Percentage
Accept 66 60%
Do not accept 37 34%
Cant say 07 6%
Cant say
6%
Do not accept
34%
Accept
60%
Inference: A majority of 60% of the investors accepted to internet as a means of

investment planning and advisory services. Internet is the latest channel that is
available to a service provider to conduct business. A mere 6% of the investors
were in a dilemma / unaware of internet as a tool for investment planning and
consulting.
58
Every investor has his /her own opinion about internet when it comes to safety,
trustworthy and comfort. Table below gives the investor’s preference to various
parameters of internet.
Table No. 19
Table showing investor opinion about internet as a tool for investment
Sum Wt. Likert

1 2 3 4 5 Rank
Avg. Score
Speed 0 5 14 20 61 437 3.97 1
Comfort 0 0 22 48 30 408 3.71 4
Security 0 13 0 25 62 436 3.96 2
Confidentiality 0 0 31 18 51 420 3.82 3
Convenience 3 0 17 61 19 393 3.57 7
Independence 0 6 13 57 24 399 3.63 5
Trustworthy 0 10 22 28 40 398 3.62 6
4 3.97 3.96
3.9
3.82
Likert Score
3.8
3.71
3.7 3.63 3.62
3.6 3.57
3.5
3.4
3.3
y
ce
y
ce
y
th
rt
lit
ed
it
en
fo
en
tia
or
ur
pe
om
nd
tw
ec
ni
en
S
ve
us
e
C
id
ep
on
f
Tr
on
d
C
In
C
Inference: Investors opted for speed, security and confidentiality as the prime
parameters of importance that should be associated with internet as a means of
investment planning. These characteristics of internet put the investor at ease to
operate his investments with least personal interaction. Parameters like comfort,
independence and trustworthy were given secondary importance.
59
Many online financial advisory service providers have cropped up in the recent
past, but not all of them are familiar. Hence the respondents were asked this
question to check their awareness levels about the same.
Table No. 20
Table depicting investor awareness of various online financial advisory
services and investments
Total Percentage
icicidirect.com 82 27%
karvy.com 63 20%
5paisa.com 62 20%
investmartindia.com 14 04%
sharekhan.com 70 22%
others 21 07%
7%
27% icicidirect.com
22%
karvy.com
5paisa.com
investmentindia.com
4% sharekhan.com
20% others
20%
Inference: Investor awareness level about icicidirect.com as an online financial

advisory services and investment is the highest with 27% followed by
sharekhan.com, Karvy.com, and 5paisa.com. This may be due to the firm’s
communication strategies which may have led to increased awareness of
icicidirect.com. Other online financial advisory services included kotak.com,
10paisa.com, geojit.com and myiris.com.
60
With internet being the buzzword, almost all businesses are going online. Also
investors find it convenient to operate their accounts online. Do all investors
prefer to go online? Following table gives the answer.
Table No. 21
Table showing investor preference of internet as a means for investment

planning and financial advisory services
Total Percentage
Online 48 44%
Offline 62 56%
Online
44%
Offline
56%
Inference: A majority of 56% of the investors preferred offline approach as a

means of investment planning. This is the case of a typical Indian investor who
believes in personal approach to online approach. Safety of his investments is
the prime concern of an investor which they believe is lacking in online approach.
Parameters like confidentiality or privacy are still questioned in online approach.
61
SUMMARY OF FINDINGS
Emergence of new channels has opened up new avenues of growth, but at the
same time poses a challenge to financial services marketers. Customers are
becoming used to the enhanced levels of services from other industries and are
expecting the same from the financial services industry. Marketers need to
understand their target customer’s needs, their tastes and preferences and their
relationship with the brand. One such project titled “Current investment trends
amongst individual investors of Bangalore – A Study” has been carried out for
M/s. Karvy Stockbroking Limited, Bangalore so as to enable them to provide the
right offerings to the right investors and device well – targeted marketing
strategies to attract and retain the customers. A survey was conducted to
understand the customer’s needs. A thorough analysis and interpretation led to
the following findings.
 A majority of 84.5% of the respondents are in the habit of investing. The

number of non investors is highest in the 20 – 30 yrs. age group. This may
be due to low awareness level about investments and savings.
 A majority of 39.1% of the investor’s monthly savings were less than Rs.
2500. About 31% of the investors saved in the range Rs. 2501 to Rs.
5000. Only 12.7% of the investors could afford to save above Rs. 10,000
per month. A small 2.7% of the investors in the 20 – 30 yr. age group did
not save any money. Monthly savings of majority of the investors were
less due to relatively big size of the family and commitments towards it. So
any income would be spent towards the family thus leading to minimal
savings.
62
 A majority of 26.2% of the investors opted for an investment horizon
ranging from 3 – 5 years. About 23.3% of the investors opted for
investment horizon more than 5 years. It was observed that most of the
investors opted for either short term or long term investment horizons and
not the medium horizons. It can be interpreted that investment horizon is
directly proportional to the age.
 A majority of 27.10% of the investor’s purpose of investment was to

generate regular income and make appropriate savings for their children
education / marriage. This is because Indian investors are family oriented
and affinity towards their family is more. Prime importance is given to their
family members. Only 12.10% of the investors opted for housing as a
purpose of investment. Other investment purposes included long term
investments, short term money, and speculation.
 Banks have been the most preferred investment avenue with 19.20% of
the investors opting for it as these contracts promise specific payments at
predetermined times. The next best avenue is Equity Investments with
18.90% of them opting for it. Only 6.60% of the investors have preferred
Government Bonds as their investment avenues which is the least
amongst all. This may be due to the relatively low returns on such
investments. Other investment avenue included private lending. Most of
the investors between the ages 20-50 preferred equity investments
because of their ability to take comparatively high risk and long term
investment plans.
63
 Across various qualifications and income levels too, banks have out
scored other investment avenues. This is because banks have laid a
strong foundation and are one of the traditional means of savings. Equity
investments have been the next best avenue due to its increased
awareness in the recent past. Government bonds are the least preferred
because of the relatively low returns it offers to the investors.
 41% of the investors have opted for safety of investments as a reason for
investing in the above mentioned avenues. This is because of the
conservative nature of the Indian investors. About 20% of the investors
invested to receive capital gains. 0nly 11% of the investors invested for a
secure future which was the least amongst all.
 Government Bonds have been rated as the safest investment avenue.

Post Office deposits with a score of 4.12 followed by banks have been the
next best avenues in terms of safety. Equity investments have been
considered as the most unsafe investment avenue with a score of 1.66.
 A majority of 40% of the investors are moderate risk takers. The number
of high risk takers is more in the age group 20 – 30 yrs. This age group is
ready to take high risk in order to get high returns. Also it is observed that
the level of risk taken has decreased gradually with the increase in age.
 27% of the investors consider equity investments to be the most

prospective investment avenue in the future. This may be due to the
increase in the awareness level of equity in the recent past with more
number of companies coming out with IPO’s. Mutual funds and real estate
have been rated as next only to equity investments with 21% and 21%
respectively because real estate industry is in boom at present and
64
promises to continue for few more years. Banks, Government bonds and
post office deposits are considered as less prospective investment
avenues. The investors have started sensing that these avenues yield less
returns comparatively.
 A majority of 45% of the investors consult their family and friends prior to
investing.
 A typical Indian investor believes his immediate family members and

friends more than anyone else. Also the privacy is maintained. About 24%
of the investors approach brokers for investment assistance or guidance.
This may be due to their expertise, first hand information and inside
information available with them. Only 14% of the investors did not
approach anyone for consulting. Others included newspapers as a means
of investment assistant.
 The key parameters investors expect from financial advisory service

providers are thorough market knowledge, trustworthiness and product
expertise. Relatively less weightage is given to parameters like service
charges, competence and confidentiality.
 A majority of 60% of the investors accepted to internet as a means of

investment planning and advisory services. Internet is the latest channel
that is available to a service provider to conduct business. A mere 6% of
the investors were in a dilemma / unaware of internet as a tool for
investment planning and consulting.
 Investors opted for speed, security and confidentiality as the prime

parameters of importance that should be associated with internet as a
65
means of investment planning. These characteristics of internet put the
investor at ease to operate his investments with least personal interaction.
Parameters like comfort, independence and trustworthy were given
secondary importance.
 Investor awareness level about icicidirect.com as an online financial

advisory services and investment is the highest with 27% followed by
sharekhan.com, Karvy.com, and 5paisa.com. This may be due to the
firm’s communication strategies which may have led to increased
awareness of icicidirect.com. Other online financial advisory services
included kotak.com, 10paisa.com, geojit.com and myiris.com.
 A majority of 56% of the investors preferred offline approach as a means

of investment planning. This is the case of a typical Indian investor who
believes in personal approach to online approach. Safety of his
investments is the prime concern of an investor which they believe is
lacking in online approach. Parameters like confidentiality or privacy are
still questioned in online approach.
CONCLUSIONS
From the detailed analysis the following are the conclusions that are drawn
based on the objectives of the study.
66
Objective 1  To conduct a study on the current investment trends amongst
individual investors of Bangalore.
The investors in Bangalore are in the transition stage with more number of them
opting for traditional means of investments / savings i.e. banks irrespective of
age, occupation and income. Equity investments and mutual funds may be
considered as future prospective investment avenues as their awareness levels
are increasing. Investor’s purpose of investment is to generate regular income
and make appropriate savings for their children education / marriage. The
investor’s approached their family / friends for consulting regarding investments.
Objective 2  To ascertain the investor’s views about professional financial

advisory services.
The investor expects a financial advisor to be trustworthy and have a thorough

knowledge of the market. Also they are expected to be a product expertise.
Objective 3  To ascertain the perceptions about information technology or

internet as a means of investment planning and financial advisory services.
Most of the investors are open for internet as a means of investment planning
and trading. They expect online services to be quick or fast enough to operate.
Security and confidentiality are one of their prime concerns or parameters of
importance. Awareness of icicidirect.com is more followed by karvy.com and
5paisa.com. Though many accepted internet only few wanted to implement it.
SUGGESTIONS
67
From the findings of the survey, the following suggestions are made which when
implemented successfully would achieve the company’s goals and objectives.
 An investor’s affinity towards any investment avenue completely depends

on his current and future needs. The firm should understand the customer
needs and align their organisation to fulfill those needs to be best
positioned to attract as well as retain their customers. Also, the firm should
assess its core competencies and choose an appropriate business model
that leverages these competencies and fulfills the customer needs.
 The key success factors are service orientation, customer touch points
alignment and flexible products and services. Also, easy access to the
company, friction - free interaction, fast service and responsiveness and
proactive help shape the customer experience.
 It has been observed that the number of non investors in the age group 20
– 30 years is comparatively less. Majority of this group are young and still
college going, with fewer responsibilities on them. Thus, there might not
arise any reason for them to be aware of investments and savings. Hence,
appropriate awareness programs and investment schemes must be
developed wherein they get involved in investments and savings. Also
appropriate marketing strategies should be adopted by the financial
services firm to create awareness amongst the members of this age
group.
68
 Majority of the investor savings are less than Rs. 2,500 while very few
save more than Rs. 10,000 per month. Hence, investments or savings
schemes must be made attractive enough to encourage investors to save
more at regular intervals.
 The financial services firm must take steps to gain confidence in the minds
of the investor, and prove their product expertise. They should develop
strategies to obtain first hand information about the various investment
avenues and overall market scenario.
 Indian investors are not comfortable with online trading or investment

planning activities at present because not majority are computer literates
or internet savvy. They do not find internet a safe means to operate.
Though they are open for internet, very few would want to operate online.
Hence adequate training and awareness programs must be developed for
the investors to embrace online activities. Also certain incentives in terms
of service charge waiver, discounts, offers, etc. can be considered to
promote online investment activities.
69

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Investing in various types of assets is an interesting activity that attracts people

Return = End period value – Beginning period value +Dividend * 100

Rate of return is stated semi-annually or annually to help comparison among the

Return = Capital appreciation &dividend *100

Return = 10 + 5 * 100 = 30%

Liquidity: Marketability of the investment provides liquidity to the investment.

THE INVESTMENT PROCESS

There are five main steps in investment management:

1. Setting investment objectives.

2. Establishing investment policy.

3. Selecting the portfolio strategy.

4. Selecting the assets.

5. Measuring and evaluating performance.

2. Establishing Investment Policy

Financial reporting requirements, in particular Statement of Financial Accounting

3. Selecting a Portfolio Strategy

In the fixed income area, several strategies classified as structured portfolio

Indexing can be considered a structured portfolio strategy where the benchmark

5. Measuring and Evaluating Performance

The measurement and evaluation of investment performance is the last step in

While the performance of a portfolio manager when compared to some

 Protection Saving through life insurance guarantees full protection

 Liquidity Loans can be raised on the security of the policy.

Open-ended scheme The open-ended scheme offers its units on a continuous

Sometimes mutual funds with the features of close-ended and open-ended

7. Right to receive a copy of the statutory report, copies of annual accounts

The basic features of the bond are given below.

The different bonds are:

Form It is given in the form of certificate of indebtedness by the company

 High capital appreciation compared to gold or silver particularly in the

Statement of the Problem

The following are the objectives of the study:

• To conduct a study on the current investment trends amongst individual

(A) Type of Study

A researcher plan prescribes the boundaries of research activities and enables

(B) Mode of Research

The study consisted of a survey, based on a structured questionnaire.

(C) Target Respondents

(D) Data Sources

Empirical field studies require collection of first hand information or data

Probability sampling is also known as “Random Sampling” or “Chance

(F) Sample Size

(G) Tools for Data Collection

(H) Duration of the Study

The research was conducted for a period of eight weeks.

(I) Pilot study

The questionnaire was pre tested on a sample of three investors. Addition,

(K) Techniques of Analysis

Limitations of the Study

The following were the limitations of the study:

• As the questionnaire was administered at the work place of the

• Due to the time constraints, the study was conducted on individual

4. Current investment trends amongst individual investors of

5. Summary Of Findings, Conclusion and Suggestions

This process continued, with RBI announcing guidelines for risk-based

The increasing disintermediation in the corporate credit market, slowdown in

The Financial Services industry is undergoing metamorphosis. There is lately an

Rapid consolidation, intensifying competition and increased customer awareness

These changes have brought challenges of managing mergers, managing

Mergers & acquisitions, rising costs of regulatory compliance, business continuity

A decade of commitment, professional integrity and vision helped Karvy achieve

Today, Karvy has access to millions of Indian shareholders, besides companies,