SMC Project

SCHOOL OF MANAGEMENT SRM UNIVERSITY
COMPRHENSIVE ANALYSIS OF INVESTMENT AVENUES STOCK MARKET & INSURANCE IN INDIA FOR SMC GLOBAL SECURITIES LTD. A SUMMER PROJECT REPORT
Submitted To

in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION By Under the Supervision and Guidance of Mr. YAASEEN MASVOOD FACULTY OF SRM SCHOOL OF MANAGEMENT
SRM SCHOOL OF MANAGEMENT FACULTY OF ENGINEERING & TECHNOLOGY SRM UNIVERSITY KATTANKULATHUR 603203. August, 2009
SRM SCHOOL OF 1
MANAGEMENT
SRM UNIVERSITY kattankulathur Campus
CERTIFICATE
This is to certify that the Summer Training Report entitled COMPRHENSIVE ANALYSIS OF INVESTMENT AVENUES STOCK MARKET & INSURANCE IN INDIA, in partial fulfillment of the requirements for the award of the Degree of Master of Business Administration is a record of original training undergone by during the year 2008-10 of his study SRM School Of Management, SRM University, kattankulathur Campus under my supervision and the report has not formed the basis for the award of any Degree/Fellowship or other similar title to any candidate of any University
Place: Chennai Date: 14.08.09
Signature of Guide YAASEEN MASVOOD (B. E., M.B.A.) Senior Lecturer SRM School Of Management SRM University Kattankulathur Campus Chennai 603203
DECLARATION
2
I, Radha Motani, hereby declare that the Summer Training Report, entitled COMPRHENSIVE ANALYSIS OF INVESTMENT AVENUES STOCK MARKET & INSURANCE IN INDIA, submitted to the SRM University in partial fulfillment of the requirements for the award of the Degree of Master of Business Administration is a record of original training undergone by me during the period June-July 2009 under the supervision and guidance of YASEEN MASOOD (B.E., M.B.A.) Senior Lecturer, SRM SCHOOL OF MANAGEMENT, SRM University, Kattankulathur Campus and it has not formed the basis for the award of any Degree/Fellowship or other similar title to any candidate of any University.
Signature of the Student Place: Chennai - 603203 Date: 14.08.09
ACKNOWLEDGEMENT
In preparation of this report by me, I feel great pleasure because it gives me extensive practical knowledge in my career. I got an idea about share market and insurance industries by this project. I would like to express my deepest gratitude and thanks to Dr. JayaShree Suresh, Head of the Department for her valuable support in doing my project. She has been a source of encouragement and guidance in all my endeavors. I express profound thanks to yaseen masood project guide, for consistent encouragement and valuable suggestion in completing this project, without his, the completion of this project would be practically impossible. I express my deep sense of gratitude to My Company Guide Mr. Vishwas kumar (Sales manager) & Mr. Pradeep kumar (Regional sales manager) for his valuable guidance during my project work. I also like to thanks all staff of SMC Global Securities Ltd. who guided me in project work.
ABSTRACT
This report begins with an overview of the investment avenues, which highlights the phenomenal growth experienced recently, in line with the country's improving economic fundamentals. This study analysis the investment portfolio of the individual and the various Risks and Returns calculation are made for the various avenues in order to suggest the suitable portfolio for the individual based on the risk appetite of the person. The methodology used is descriptive and exploratory research. The data were collected from 200 respondents using questionnaires. Most of the respondents were qualified and income group people. It is shown from the analysis that the majority of the respondents feels that the risk and the return are more important factor in the investment and also in the insurance plan they prefer, accumulation plan. Statistical test shows that the occupation of the respondents have directly influence. There is significant relationship between the income of the individual and the choice of investment Avenues. The ANOVA proves the risk and return are most important factor and the rank co-relation show that the investment Porto folio doesnt suit the scientific portfolio. Finally it has been suggested that insurance should be viewed as a risk cover not an investment avenues, 50 % should be in guaranteed addition, 30 % in mutual fund and 20% in stocks.
CONTENTS
CHAPTER NO.
1.
PARTICULARS
INTRODUCTION: 1.1 Definition Of Investment 1.2 Objectives Of Investment Avenues 1.3 Type Of Investment Avenues 1.4 Various Risk Involve While Investing 1.5 Study Of Equity Market 1.5.1 Overview 1.5.2 Equity Market 1.5.3 Parameters Reflecting On Index Or Stock Movement 1.5.4 The Growth Path Of Share Markets 1.5.5 Reasons For The Present Slowdown 1.5.6 Different Ways To Play In Stock Market 1.6 Study Of Insurance In India 1.6.1. What Is Life Insurance? 1.6.2. Can Insurance Be An Investment Avenue? 1.6.3. Insurance In India 1.6.4. History Of Insurance In India 1.6.5. Types Of Insurance Policies
PAGE NO.
8 9-11 12-13 14 15 16 17 18 19 20
21 22 23 23-24 25-28
COMPANY PROFILE
2.1. SMC- At Glance 2.2. Vision & Approach
2.3. SMC Achievements 2.4. SMC Partners 2.5. Products & services 2.6. SMC Growth 2.7. SMC- Network
3 RESEARCH METHODOLOGY
29-30 31 32 33 34-35 36 37 38 38 39 39 39 40 40 41 42 42-58
3.1. Statement Of Problem 3.2. Objective Of Study 3.3. Scope Of Study 3.4. Review Of Literature 3.5. Sampling Design 3.6. Research Design 3.7. Source Of Data 3.8. Tools & Technique Used For Analysis 3.9. Limitation Of Study
4 5 ANALYSIS AND INTERPRETATION FINDINGS, SUGGESTIONS AND CONCLUSION
SCHOOL OF MANAGEMENT SRM UNIVERSITY 5.1 Findings 5.2 Suggestions 5.3 Conclusion BIBLIOGRAPHY 59 60 61 64
LIST OF TABLES TABLE NO

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.2.1 4.2.2 4.2.3 4.3.1 4.3.2 4.3.3
TITLE
Age of the Respondents Educational Qualification Salary of the Respondent Investment Factors Perception About Insurance Plan Accumulation Products Opted in Insurance Plan Knowledge Level Of Investors In Mutual Funds
PAGE NO 42
43 44 45 46 47 48 49 50-51 52-53 54 55 56 57
Risk and return avenues Cross Tabulation Between Income Of The Individual And Choice Of Investment Avenue One-Way Anova Rank Corelation Risk Return Analysis Stocks Index :( 2008-2009) Nifty INDEX :( 2008-2009)
LIST OF CHARTS TABLE NO

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.2.1 4.2.2 4.2.3 4.3.1 4.3.2 4.3.3
TITLE
Age of the Respondents Educational Qualification Salary of the Respondent Investment Factors Perception About Insurance Plan Accumulation Products Opted in Insurance Plan Knowledge Level Of Investors In Mutual Funds
PAGE NO 42
43 44 45 46 47 48 49 50-51 52-53 54 55 56 57
Risk and return avenues Cross Tabulation Between Income Of The Individual And Choice Of Investment Avenue One-Way Anova Rank Corelation Risk Return Analysis Stocks Index :( 2008-2009) Nifty INDEX :( 2008-2009) 7
CHAPTER 1
INTRODUCTION
One of the most significant factors in our life is the state of our personal finances, we rarely spend time on managing them since unlike businesses. The reason being, we are not accountable to any one for our personal financial goals and results. As a result we tend to get careless in our financial matters. I know we all understand the importance of savings but let us not get confused between savings and investment. Mere savings (putting aside a portion of earnings) do not insure or guarantee achievement of future financial goals. It is important to save but more important is to invest your money. By merely stashing away money into that neighborhood bank's savings account, you are neither making any more money, nor preserving its value. The inflation rate at around 4-5 per cent p.a. in excess of your bank savings account rate at 3.5 per cent p.a. mercilessly erodes your wealth to that extent. The purchasing power of rupee keeps depreciating. So, to fight against such depreciation one has to invest the money saved in assets that will help it work for you and earn more than the erosion in value through inflation over a period of time. That's just one of the primary reasons why each individual should invest. Another more definitive reason is the 'Power of Compounding'. Put simply, it means that "Interest on Interest is Interesting". One can select the services according to their requirements, be it personal or professional.
1.1. DEFINITION OF INVESTMENT:

1.1.1.Overview The money you earn is partly spent and the rest is saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the future. This is called Investment. In other words, Investment is the act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit. It's actually pretty simple: investing means putting your money to work for you. Essentially, it's a different way to think about how to make money. There are many different ways you can go about making an investment. This includes putting money into stocks, bonds, mutual funds, or
real estate (among many other things), or starting your own business. Sometimes people refer to these options as "investment vehicles," which is just another way of saying "a way to invest." Each of these vehicles has positives and negatives, which will be discussed later in the thesis. The point is that it doesn't matter which method you choose for investing your money, the goal is always to put your money to work so it earns you an additional profit. Even though this is a simple idea, it's the most important concept in the current scenario to understand.
1.2. OBJECTIVES OF INVESTMENT AVENUES

1.2.1. BASIC INVESTMENT OBJECTIVES Investing is a conscious decision to set money aside for a long enough period in an avenue that suits your risk profile. The options for investing our savings are continually increasing, yet every single investment vehicle can be easily categorized according to three fundamental characteristics - Safety, Income and Growth - which also correspond to types of investor objectives. While it is possible for an investor to have more than one of these objectives, the success of one must come at the expense of others. Here we examine these three types of objectives, the investments that are used to achieve them and the ways in which investors can incorporate them in devising a strategy.
1.2.1.1. Safety: Perhaps there is truth to the axiom that there is no such thing as a completely safe and secure investment. Yet we can get close to ultimate safety for our investment funds through the purchase of government-issued securities in stable economic systems, or through the purchase of the highest quality corporate bonds issued by the economy's top companies. Such securities are arguably the best means of preserving principal while receiving a specified rate of return. 1.2.1.2. Income: However, the safest investments are also the ones that are likely to have the lowest rate of income return, or yield. Investors must inevitably sacrifice a degree of safety if they 9
want to increase their yields. This is the inverse relationship between safety and yield:
as yield increases, safety generally goes down, and vice versa. Most investors, even the most conservative-minded ones, want some level of income generation in their portfolios, even if it's just to keep up with the economy's rate of inflation. But maximizing income return can be an overarching principle for a portfolio, especially for individuals who require a fixed sum from their portfolio every month. 1.2.1.3. Growth Of Capital Growth of capital is most closely associated with the purchase of common stock, particularly growth securities, which offer low yields but considerable opportunity for increase in value. Blue-chip stocks, by contrast, can potentially offer the best of all worlds by possessing reasonable safety, modest income and potential for growth in capital generated by long-term increases in corporate revenues and earnings as the company mature. 1.2.2. SECONDARY OBJECTIVES 1.2.2.1. Cost Of Inflation One needs to invest wisely to meet the cost of Inflation. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past. For example, if there was a 6% inflation rate for the ext 20 years, a Rs.100 purchase today would cost Rs.321 in 20 years. Remember to look at an investments real rate of return, which is the return after inflation. The aim of investments should be to provide a return above the inflation rate to ensure that the investment does not decrease in value. For example, if the annual inflation rate is 6%, then the investment will need to earn more than 6% to ensure it increases in value. 1.2.2.2. Tax Minimization An investor may pursue certain investments in order to adopt tax minimization as part of his or her investment strategy. A highly-paid executive, for example, may want to seek investments with favorable tax treatment in order to lessen his or her overall income tax burden. Making contributions to an IRA or other tax-sheltered retirement plan can be an effective tax minimization strategy. By far, tax-saving is the most compelling reason for investors to set aside money for the long term. 1.2.2.3. Marketability / Liquidity Common stock is often considered the most liquid of investments, since it can usually be sold within a day or two of the decision to sell. Bonds can also be fairly marketable, 10
but some bonds are highly illiquid, or non-tradable, possessing a fixed term. Similarly, money market instruments may only be redeemable at the precise date at which the fixed term ends. 1.2.2.4. Retirement Anyone who will retire needs to plan for it. There is more than one reason to save for retirement. The all important reason is the rising cost of living. Its called inflation. If you start planning for retirement early on, you can bridge the gap between what you have in your hand today and what you would like to have when you retire. If you begin saving for retirement early on in your life, you can set aside smaller amounts. You can also take on more risk by investing larger amounts in equities i.e., stocks and equity funds TRADE OFF: As we have seen from each of the objectives discussed above, the advantages of one often come at the expense of the benefits of another. If an investor desires growth, for instance, he or she must often sacrifice some income and safety. Therefore, most portfolios will be guided by one pre-eminent objective, with all other potential objectives occupying less significant weight in the overall scheme. Choosing a single strategic objective and assigning weightings to all other possible objectives is a process that depends on such factors as the investor's temperament, his or her stage of life, marital status, family situation, and so forth. You need only be concerned with spending the appropriate amount of time and effort in finding, studying and deciding on the opportunities that match your objectives.
11
1.3. TYPES OF INVESTMENTS 1.3.1. Overview An investment is a sacrifice of current money or other resources for future benefits. A sacrifice takes place now and it is certain but the benefits are expected in the future and tend to be uncertain. In the investment the risk elements and the time elements places major role Investment avenues are classified as show in the chart:
Investments Avenues
Non-Marketable Financial Assets
Equity Shares
Bonds
Money Market Instruments
Mutual Funds
Life Insurance Policies
Real Estates
Precious Objects
Financial Derivatives
Almost everyone has a portfolio of investments; the portfolio is likely to comprise financial assets and real assets. This project will be mainly focused on the financial assets such as insurance and stock among investment avenues. There are many ways to invest your money. Of course, to decide which investment vehicles are suitable for you, you need to know their characteristics and why they may be suitable for a particular investing objective.
12
TABLE 1.3.2: CHARACTERISTIC OF ALL TYPES OF INVESTMENT AVENUES Return High Moderate Moderate Moderate Low Moderate Low Moderate High High Safety Low High Moderate Low High High High High Moderate High Volatility High Moderate Moderate Low Low Low Low Moderate High Moderate Liquidity High Moderate Low Low High Moderate Low Moderate Low High Convenience Moderate High Low Moderate High High Moderate Gold Low High
Equity Bonds Co. Debentures Co. FDs Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds
1.3.3. How to Make Investments Having appreciated the need, objectives and types of investment, it is now time to shift focus to the actual process of investing. 1 Set investment objectives 1. Access risk-profile 2. Get the right asset allocation 3. Select an investment advisor
13
1.4. VARIOUS RISK INVOLVED WHILE INVESTING:

RETURN
14 THE RISK-RETURN TRADE-OFF:
Hence it is up to the investor to decide how much risk does he is willing to take- up. In order to take RISK an in investment decision one should be aware about the various risk involved in it. 1.4.1. MARKET RISK: Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan-SIP that works on the concept of Rupee Cost Averaging might help mitigates this risk. 1.4.2. CREDIT RISK: The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cash flows determines the Credit Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. A AAA rating is considered the safest whereas a D rating is considered poor credit quality. A well diversified portfolio may help to mitigate this risk. 1.4.3. INFLATION RISK: The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A well-diversified portfolio with some investment in equities might help mitigate this risk. 1.4.4. INTEREST RATE RISK: In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk. 1.4.5. POLITICAL/GOVERNMENT POLICY RISK: Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa.
1.5. Equity
1.5.1. Overview: Equities are often regarded as the best performing asset class vis--vis its peers over longer time frames. However equity-oriented investments are also capable of exposing investors to the highest degree of volatility and risk. There are a number of factors, which affect the performance of equities ad studying and understanding all of them on an ongoing basis, can be challenging for most. Stock markets have always been a draw for investors for their ability to generate wealth over the long-term. Fear, greed and a short-term investment approach act as hurdles that frustrate the investor from achieving his/her investment goals. You need to keep in mind the risk associated with the stocks. You also need to diversify your equity portfolio i.e., include more stocks and sectors. This helps you diversify your investment risk, so even if something were to go wrong with a stock/industry in your portfolio, other stocks/industries should help you shore up your portfolio. Two important resources that are critical to investing directly in stock markets are: Quality stock research and Reliable and inexpensive stock broker. The first one is research on stocks is the most critical input that investors need to identify before they begin investing in stock markets. This is because even while you may have the risk appetite for equities, you still need credible, stock market related research that can help you make the right investment decision. The second one is important service provider for you is the stockbroker; he is the one who helps you execute the transaction over the stock exchange.
1.5.2. EQUITY MARKET: When we look the security market as an avenue we have these alternatives:
Securities Market
Equity Market
Debt Market
Derivatives Market
Government Securities Market
Corporate Debt Market
Money Market 15
Options Market
Futures Market
EQUITY SHARES Equity Share represents ownership capital. As a Equity share holder, you have a ownership stake in the company. This essentially means that you have a residual interest in income and wealth. The Share movements are reflected in the various index points. o Bombay Stock Exchanges Sensitive Index o S&P Nifty Index BOMBAY STOCK EXCHANGES SENSITIVE INDEX: Perhaps most widely followed stock market index in India, Bombay Stock Exchange Index, Popularly called sensex reflects the movements of 30 sensitive shares from specified and non specified groups. S&P Nifty Index: Arguably the most rigorously constructed stock market index in India, the nifty index reflects the price movements of 50 stocks selected on the bases of market capitalization and liquidity. THE 4,962 STOCKS LISTED ON BSE AND THE NSE OVERALL. TEN ACTIVE SECURITIES DURING 2008-2009
Rank
Name of the Security
Turnover (Rs. crore) 198439.98 118914.86 99307.76 74259.53 72639.18 71991.35 68397.40 67355.00 62913.80 62492.90
% Share in Total Turnover 7.21 4.32 3.61 2.70 2.64 2.62 2.49 2.45 2.29 2.27
Market Capitalisation % Share in as on 31.3.2008 Total Market (Rs. crore) Capitalisation 239964.86 37034.37 8681.89 118782.36 67748.07 39315.66 75836.97 11742.70 40170.59 28394.67 8.29 1.28 0.30 4.10 2.34 1.36 2.62 0.41 1.39 0.98
1 2 3 4 5 6 7 8 9 10
RELIANCE INDUSTRIES LTD ICICI BANK LTD. RELIANCE CAPITAL LTD BHARTI AIRTEL LIMITED STATE BANK OF INDIA LARSEN & TOUBRO LTD. INFOSYS TECHNOLOGIES LTD RELIANCE INFRASTRUCTU LTD HDFC LTD DLF LIMITED
16
1.5.3. PARAMETERS REFLECTING ON INDEX OR STOCK MOVEMENT

1. Financial performance of Company. 2. Daily volumes (Transactions of particular stock). 3. Exchange rate movement. 4. GDP growth rate. 5. Interest rate movements. 6. FII inflows and outflows. 7. Volatility. 8. Inflation. 9. Dividends, Bonus shares, right issue, and IPOs. nalyzing the impact of the above macro-economic variables on sector A performance. Clustering of Shares based on their annualized returns and determination of cause of inter-relationship between shares within each groups and explanation of inter and intra group effects. Analyzing the impact of spot price on Futures and Option price. Determination of inter-relationship between theoretical Call and Put price (using BlackSchools pricing model) with actual market price of Call and Put. Call Option and Put Option are influenced by the following 5 factors (Black- Schloes pricing model). Analyzing how much each of the factor is actually reflected in the Option Price. 1. Spot price. 17
2. Exercise price. 3. Volatility. 4. Time to expiry. 5. Interest rate.
1.5.4. THE GROWTH PATH OF SHARE MARKET:

We saw how the market rewarded the undervalued shares and how the overvalued shares fell down to demonstrate the saying everything which rise more than expected, has to fall. SENSEX crossed the twenty thousand mark cheering thousands of investors in the recent Bull Run. Sensex took a little over 20 years to reach the first 10,000 mark, but just a little over 20 months to double that score. The rise in global market and expectations of increased foreign portfolio investment has driven traders interest in the market. It is a broad based movement and the major gainers are front line stocks. Institutional investors and FIIs have provided a perfect support to the rising equity values. Today, Indian stock market is largely dominated by group of FIIs that are able to move the markets by large interventions.
18
1.5.5.REASONS FOR THE PRESENT SLOWDOWN: 1. Historic crude oil prices, high inflation rates, weak industrial production data, RBI policies, political uncertainties and obviously the sentiments of domestic as well as FIIs influenced on the sensex volatility. 2. The key benchmark indices ended lower as investors resorted to profit booking due to lack of positive triggers in the market. A study found that the mature markets are less volatile and provide higher returns over a longer period of time
19
3. Central banks across the globe warned that interest rates may have to rise as they look to keep inflation under control, despite the fact that economic growth is slowing in key nations such as the US and UK. 4. Investors dumped financials on concerns about the fallout from worsening global credit turmoil. 5. The global financial sector turmoil impacts sentiment in the local market and raises worries of more withdrawals by foreign funds. 6. Presently, we can see market plunging after the RBI announced further hikes in Repo rate as well as CRR both increased to 9%. Also, the serial blasts at Ahmadabad and Bangalore adding to the worries and enhancing the negative sentiments. And above all we can't see any positive trigger that can dilute the flow of negative news. POLICY SUGGESTIONS: 1. Government should set a minimum limit as well as maximum limit, within which FII invest in India, in order to avoid volatility in Indian stock market. 2. Generate new opportunities to allow more players from.
Market TIME: 9:56 TO 3:30
20
INTRADAY DELIVERY FUTURES OPTIONS Behaves Like Futures Only Have To Give Premium Profit Increases Only When Your Premium Amount Increases With Respect To The Strike Price Behaves Like Intraday Have To Buy Minimum One Lot Expiry Date- Last Thusday Of Every Month- 1m, 2m, 3m Settlement Of Profit And Loss Takes Place On Daily Basis Can Not Make Profit Without Having Shares No Square Off Time Settlement Takes Place Generally After Two Days, (T+2 Days.) Company Gives Exposure 4-6 Times Settlement Can Takes Place Any Of The Two Exchange Can Buy Single Share At A Time Make Profit Without Having Shares In Your Demat Square Off Time Settlement Takes Place At The Same Day Company Gives Exposure 6-20 Times Settlement Takes Place On The Same Exchange
1.6.
INSURANCE
1.6.1. WHAT IS LIFE INSURANCE?

Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. The contract is valid for payment of the insured amount during:

The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if it occurs earlier.
21
Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilizations partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person:
That of dying prematurely leaves a dependent family to fend for itself. That of living till old age without visible means of support.
Traditionally, buying life insurance has always formed an integral part of an individuals annual tax planning exercise also. While it is important for individuals to have life cover, it is equally important that they buy insurance keeping both their long-term financial goals and their tax planning in mind. This note explains the role of life insurance in an individuals tax planning exercise while also evaluating the various options available at ones disposal.
22
Life is full of dangers, but with insurance, you can at least ensure that you and your dependents dont suffer. Its easier to walk the tightrope if you know there is a safety net. You should try and take cover for all insurable risks. If you are aware of the major risks and buy the right products, you can cover quite a few bases. The major insurable risks are as follows: Life Health Income Professional Hazards Assets Outliving Wealth Debt Repayment 1.6.2. CAN INSURANCE BE AN INVESTMENT AVENUE? Life is uncertain. But the perils faced by human life are certain. Death may take away a individual but disability is the worst. The scientific principles upon which life insurance is based upon are as follows: 1. Shared Risk 2. Law of Large Numbers 3. Predictable Mortality 4. Invested Assets 5.Fair and accurate Risk selection. The concept of Life Insurance has evolved over a period of time to meet the different needs of the customers. The two basic needs that are common for any individual are (a) Risk Coverage and (b) Future savings. Risk here means Death.
23
INSURANCE IN INDIA
Insurance is a federal subject in India and has history dating back till 1818. Life and general insurance in India is still a nascent sector with huge potential for various global players with the life insurance premiums accounting to 2.5% of the country's GDP while general insurance premiums to 0.65% of India's GDP.. The Insurance sector in India has gone through a number of phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up the insurance sector by allowing private companies to solicit insurance and also allowing FDI. Ever since, the Indian insurance sector is considered as a booming market with every other global insurance company wanting to have a lion's share. Currently, the largest life insurance company in India is still owned by the government. Life Insurance in India was nationalized by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC. A legislation was passed in the year 2000, legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000. The same year that the newly appointed insurance regulator - Insurance Regulatory and Development Authority IRDA -started issuing licenses to private life insurers.
1.6.3. HISTORY OF INSURANCE IN INDIA

YEAR 1818 1870 1870 1912 1912 1928 1938 1956 DETAILS Europeans started the Oriental Life Insurance Co in Calcutta The first Indian Insurance Company Bombay Mutual Life Insurance The British Govt. enacted The Insurance Act First Indian Insurance Act was passed with an Enactment in 1938. The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance business Earlier legislation consolidated and amended to by the insurance act with the objective of protecting the interests of the insuring people 245 Indian and Foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an act of parliament.
24
List of Life Insurers (as of July, 2009) Apart from Life Insurance Corporation, the public sector life insurer, there are 21 other private sector life insurers, most of them joint ventures between Indian groups and global insurance giants. Life Insurer in Public Sector : 1. Life Insurance Corporation of India Life Insurers in Private Sector : 1. Bajaj Allianz Life 2. ICICI Prudential Life Insurance 3. HDFC Standard Life 4. Birla Sun life 5. SBI Life Insurance 6. Kotak Mahindra Old Mutual Life Insurance 7. Aviva Life Insurance 8. Reliance Life Insurance Company Limited - Formarly known as AMP Sanmar LIC 9. Tata AIG Life 10. MetLife India Life Insurance 11. ING Vysya Life Insurance 12. Max Newyork Life Insurance 13. Sahara Life Insurance - Now they are not into business 14. Shriram Life Insurance 15. Bharti AXA Life Insurance Co Ltd. 16. IDBI forti life insurance company ltd. 17. Canara HSBC oriental bank of commerce life insurance 18. Aegon religare life insurance company ltd 19. DLF pramerica life insurance company ltd All life insurance companies have to comply with the strict regulations laid out by IRDA. Therefore there is risk in going in for private insurance players. 25
Even if Life Insurance Corporation of India (LIC), the state owned behemoth is the largest player in the market, the private companies are coming out with better products which are more beneficial to the customer. Among such products are the ULIPs or the Unit Linked Investment Plans which offer both life cover as well as scope for savings or investment options as the customer desires. Further, these types of plans are subject to a minimum lock-in period of three years to prevent misuse of the significant tax benefits offered to such plans under the Income Tax Act. Hence, comparison of such products with mutual funds would be erroneous. The Insurance Act, 1938 The Insurance Act, 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business. Life Insurance Corporation Act, 1956 Even though the first legislation was enacted in 1938, it was only in 19 January 1956, that life insurance in India was completely nationalized, through the Life Insurance Corporation Act, 1956. There were 245 insurance companies of both Indian and foreign origin in 1956. Nationalization was accomplished by the govt. acquisition of the management of the companies. The Life Insurance Corporation of India was created on 1st September, 1956, as a result and has grown to be the largest insurance company in India as of 2009. Insurance Regulatory and Development Authority (IRDA) Act, 1999 Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt. of India, then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby deregulating the insurance sector and allowing private companies into the insurance. Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies.
M ar ket S hare o f the Insuran ce C om p any
26% 74%
LIC P rivate Insurance Com pany
26
1.6.5. TYPES OF INSURANCE POLICIES: a) Term Plans :

A term plan is the most basic type of life insurance plan. It is the most cost-effective life insurance product, unlike other plans that come with an investment or savings component. Term plans are products that cover only your life. This means your dependents or nominees get the sum assured on your death. A term plan offers life cover at a very nominal cost. This is due to the fact that term plan premiums include only mortality charges and sales and administration expenses. There is no savings element.
b) Money Back Plan :

A money back plan aims to give you a certain sum of money at regular intervals; simultaneously it also provides you with life cover. Money back plans are especially useful in case you need money at regular intervals for your childs education, marriage, etc.
c) Unit Linked Insurance Plans (ULIPs) :

ULIPs basically work like a mutual fund with a life cover thrown in. They invest the premium in market-linked instruments like stocks, corporate bonds and government securities. The basic difference between ULIPs and traditional insurance plans: While traditional plans invest mostly in bonds and govt. securities,
ULIPs mandate is to invest a major portion of their corpus in stocks. However, investments in ULIP should be in tune with the individuals risk appetite. ULIPs offer flexibility to the policy holder the policy holder can shift his money between equity and debt in varying proportions.
27
d) Pension / Retirement Plans:
Planning for retirement is an important exercise for any individual. A retirement plan from a life insurance company helps an individual insure his life for a specific sum assured. At the same time, it helps him in accumulating a corpus, which he receives at the time of retirement.
e) Endowment Plans:
Individuals with a low risk appetite, who want an insurance cover, which will also give them returns on maturity could consider buying traditional endowment plans. Such plans invest most of their money in specified debt instruments like corporate bonds, government securities and the money market.
28
CHAPTER II COMPANY PROFILE
"SUCCESS HINGES ON A PASSION FOR EXCELLENCE"
2.1. SMC: AT A GLANCE

Incorporated in 1994 by Mr. S.C. Aggarwal, FCA & Mr. Mahesh C. Gupta, FCA Member of Equity Exchanges: NSE & BSE, Commodity Exchanges: MCX & NCDEX Member of Dubai Gold & Commodities Exchange (DGCX), Dubai Gold Receipt (DGR), Dubai Commodity Receipt (DCR) Depository Participant with CDSL & NSDL Clearing Member for NSE (F&O, Currency); BSE (F&O, Currency), MCX (Commodities, Currency) & DGCX Association with London based ICON Capital, registered under FSA & NSA (London) Highly dedicated workforce of 3000+ employees and 7500+ financial advisors. 1350 offices spread across 350+cities headquartered in Delhi with Regional offices at Mumbai, Kolkata, Chennai, Hyderabad, Cochin and Ahmadabad & Overseas Office at Dubai. 4400 trading terminals More than 5, 50,000+ satisfied investors Clearing member for 82 Trading Members MCX/DGCX/NSE/BSE
29
Dedicated Proprietary Arbitrage Desk with 350+ Arbitragers Handles 3, 50,000 + trades/day, achieved US$ 200+ Bn volume for the FY 2007-08 IPO & MF Mobilization Amount (FY 2007-08): Rs. 12592 crores (i.e. US$ 3.07 Bn) In-house Weekly Research magazine Wise Money Enterprise valued at Rs. 3500 crores ( i.e. US$ 875 mn appx.) under Private Treaty Deal with BCCL We are ISO 9001:2000 certified DP for shares and commodities.
SMC PROMOTERS AND FOUNDERS
SMC is promoted by Mr. Subhash Chand Aggarwal (Chairman and Managing Director) and Mr. Mahesh Chand Gupta (Vice Chairman & Managing Director) of SMC Global Securities Ltd. both Chartered Accountants having rich experience of more than 20 years of financial markets.
30
OUR VISION To be a global major in providing complete investment solutions, with relentless focus on investor care, through superior efficiency and complete transparency.
OUR APPROACH & CORE VALUES
31
2.3. SMC ACHIEVEMENTS:
4th largest broking house of India in terms of trading terminals (Source: Dun and Bradstreet, 2008) 5th largest sub-broker network in the country (Source: Dun and Bradstreet, 2007) 5th largest distributors of IPO in Retail. (Source: Prime Data Rankings) Awarded the Fastest Growing Retail Distribution Network in Financial Services (Source: Business Sphere, 2008) Received Major Volume Driver by BSE for 3 years consecutively. Nominated among the top 3, in the CNBC Optimum Financial Services Award 2008 under the "National Level Retail Category". One of the first financial firms in India to expand operations in the lucrative gulf market, by acquiring license for broking and clearing member with Dubai Gold and Commodities exchange (DGCX) One of the largest proprietary desk for doing risk-free arbitrage in equities and commodities Executed the First trade on DGCX for Silver Rebar , Crude Oil and Rupee-Dollar contract.
32
2.4. SMC PARTNERS

SANLAM INVESTMENT Sanlam Investments, the investment arm of South African financial services giant, Sanlam Ltd. The agreement between the parties will see the setting up of two new businesses in India a wealth management company and an asset management company. The deal was made possible through an acquisition into the SMC group of companies, including warrants; which will ultimately create a 5% equity stake for Sanlam Investments in SMC The total financial outlay by Sanlam Investments on this joint venture with SMC is in the region of Rs 215 Cr .
SMC Partners
PUNJAB NATIONAL BANK Punjab National Bank is serving over 35 million customers through 4,540 Offices including 421 extension counters - largest amongst Nationalized Banks. SMC Group has signed a Memorandum of Understanding (MoU) with Punjab National Bank (PNB), to offer State of art online trading facilities , This alliance is providing
Three in one product (Saving- Demat- Trading) Seamless funds and securities transfer No extra blockage of funds in the trading accounts after the trading hours
33
SMC SERVICES
SMC Group
Brokerage (Online/Offline Trading Platforms) Description: Providing trading platforms to clients supported with research services
Other Financial Services
Stock Stock
Commodities
Research Services (Equity & Commodity) Description: Fundamental & Technical Research
Investment Banking Description: Fund Raising Through IPO, Debt & PE Routes
Insurance Distribution Description: Distribution of Life, Non-life Insurance products
Asset Management
Description: In-house mutual fund In JV with Sanlam
Arbitrage Description: Engaged in Arbitrage operations employing both proprietary & client funds, for monetizing the market mis-pricings
IPO & MF Distribution Description: Distribution of IPO & MF products
NRI & Institutional Division Description: NRI Trading & Institutional Advisory Services
Wealth Management Description: Wealth Management Services & Advisory in JV with Sanlam
34
PRODUCTS:
Offline Products
Equity Commodity Currency Equity Diet Commodity Diet Currency Diet
Online Products
Exclusive Equity Commodity Privilege Equity Commodity
Depository products
Annual AMC account One Time AMC account Life time free AMC account
Networking Products
Sub-broker BDR Business Associate
Premium Services
Wealth Management PMS d) Portfolio Management Services The main idea behind Portfolio Management Services is to manage our clients wealth more efficiently, reduce risk by diversifying across assets, sectors and funds, and maximizing returns. Expert Portfolio Managers find best of avenues to achieve optimum returns at managed levels of risk. This service could also be called as transparent collective investments. You get an upper hand in many ways. Advantage of Portfolio Management Services Constant monitoring of portfolios asset mix to ensure effectively position to meet long-term objectives. Performance linked fees, constant disclosure of the portfolio on daily and monthly basis. It defines the customized risk and return. Great flexibility of deploying and exposing the initial investment in the market. High water mark level for profit sharing. No transaction and custodian charges. Diversification across asset classes and investment styles.
35
36
CHAPTER III
37
3.1 STATEMENT OF PROBLEM Based on the definition of problem, it is clearly understandable that a problem does not necessarily mean that something is seriously wrong with a current situation that needs to be rectified immediately. But a Problem could simply indicate an interest in an issue where findings the right answers might help to improve an existing situation. In this scenario the investment portfolio should be mainly focused on availability of right amount of money at the right time to the right person can be called as an efficient portfolio. Here the problem of the study is mainly focused on finding out efficient portfolio of the individuals based on the risk appetite of the person
3.2 OBJECTIVE OF STUDY PRIMARY OBJECTIVE: Finding the acceptance level of share market & insurance among investment avenues in India. To find out the various parameters that an investor look from an investment. To find out what a investor look from an insurance plan. To Find out the investors level of knowledge in Mutual Fund and the various factors that they look from the Mutual Funds. To find out which Investment Avenue gives high return from the investor point of view. To Find out which Investment avenue gains more Risks from the investor point of view
SECONDARY OBJECTIVE:
To calculate the Risk and Return for Insurance plan, Mutual Funds Schemes and Stocks. To correlate the ranks and suggest the Portfolio. To the organization it is to get to know that which avenue attacks more number of investors in the type of portfolio they follow.
38
3.3 REVIEW OF LITERATURE

Security and constant search for security have been the unending endeavors of human race since the beginning of the civilization. Right from the stone-age man to the modern IT personality, this search for security has brought out innovative ideas.
3.4 SCOPE OF THE STUDY

The Scope of the study is to probe among the investor of Bangalore. The study was conducted for the period of two months carrying various places in Bangalore. Primary data was collected from the investors and Secondary data was collected from the Journals, Magazines and Web Site.
3.5. SAMPLING DESIGN:

While Developing a Sampling Design. The Researcher must pay attention to the following points. Sampling units Sampling Frame Type of Sampling Size of Sample SAMPLING UNITS: The Samples are derived from the list of Clients of SMC Global Securities Ltd. SAMPLING FRAME: Sampling Frame is Representation of elements of target population that consist of a list or set of direction for identifying the target population. This study done under the consideration of SMC Global Securities Ltd. clients. These lists of Clients are taken to the sampling frame. TYPE OF SAMPLING: PROBABILITY SAMPLING: Under this Sampling procedure, every item of the universe has an equal chance of inclusion in the sample. The Suitable method for this study is probability sampling, In probability sampling technique, Simple Random Technique has been followed for this Study.
39
3.6. RESEARCH DESIGN

The research design chosen for the project has been descriptive in nature. DESCRIPTIVE RESEARCH: Descriptive research includes surveys and fact-finding enquiries of different kinds. The major purpose of descriptive research is description of the state of affairs as it exists at present. The questionnaires are used for collecting responses from the respondents.
3.7. SOURCES OF DATA:

There are two different methods for collection of data to conduct this Descriptive Research Study: 1. Primary Data Collection Method 2. Secondary Data Collection Method PRIMARY DATA COLLECTION: Primary data are those which are collected a fresh and for the first time and thus happen to be original in character. Primary data collection is nothing but the data that is directly collected from the people by the researcher himself. Primary data may pertain to demographic / socio economic characteristics or the customers, altitudes and opinions of people, their awareness and knowledge and other similar aspects. In this study Primary Data collection method has helped the researcher to a great extent in arriving at the results. METHODS OF PRIMARY DATA COLLECTION: The method used for collecting Primary data is:
Survey
SURVEY METHOD: Survey method is the systematic gathering of data from the respondents survey is the most commonly used method of primary data. This is widely used because of its Extreme Flexibility Reliability
Easy Understand ability
40
The main purpose of survey is facilitate understanding or enable prediction of some aspects of the population being surveyed. SURVEY TECHNIQUE: The technique used for conducting the survey is called Survey Technique. There are three techniques to conduct the survey Viz. Personal Interview Telephone Interview Mail Survey DATA COLLECTION METHOD: The instrument used to collect data for the study was the structured and non-disguised questionnaire through open ended and close ended questions.
3.8. TOOLS AND TECHNIQUES USED FOR ANALYSIS:

The statistical tools used for the study are as follows, Rank Correlation Risk & return Calculation One Way ANOVA Table Chi-Square
CHI SQUARE TEST: The chi square test is an important test amongst the several test of significance developed by statisticians. Chi square (Pronounced as chi-square), is a statistical measure used in the context of sampling analysis for comparing a variance to a theoretical variance. As a non-parametric test, it can be used to determine if categorical data shows dependency or the two classifications are independent. Thus, the chi square test is applicable in large number of problems. The formula used for chi square is, 2 = (O E) 2/ E Where, O Observed frequency, E Expected frequency, ANALYSIS OF VARIANCE (ANOVA):
41
Analysis of variance (abbreviated as ANOVA) is an extremely useful when multiple sample cases are involved. Using this technique, one can draw inferences about whether the samples have been drawn from populations having the same mean. Variance is an important statistical measure and is described as the mean of the squares of deviations taken from the mean of the given series of data. It is frequently used measure of variation.
RANK CORRELATION: Correlation studies the joint variation of two or more variables for determining the amount of correlation between two or more variables. FORMULA:
Rs =
6(d) n (n 1)
3.9 LIMITATIONS OF STUDY:

This study mainly depends on the current market perception, But the market perception is
changing time to time so the recommendation and suggestions are subject to revises based on the market changes.
This study required more data for knowledge about the market. The data collection, Data
recording and data analysis are very difficult to work in this study.
Short Time Period was Inadequate for conducting detailed Study among the investors.
The study was Limited to the Capabilities and willingness of the respondents to appropriately and filling the questions.
42
CHAPTER IV DATA ANALYSIS AND INTERPRETATION

DATA ANALYSIS TABLE 4.1. AGE OF THE RESPONDENTS
AGE NO. OF RESPONDENTS 32 74 60 20 14 PERCENTAGE 16 37 30 10 7
20 - 30 years 30 - 40 years 40 - 50 years 50 - 60 years Above 60 years Total (Source: Primary Data) INFERENCE:
200
100
From the above table it can be inferred that 37% of the respondents belongs to age between 30-40 years of age. Very few belong to the age group of above 60 years. CHART 4.1. AGE OF THE RESPONDENTS
43
TABLE 4.2. EDUCATIONAL QUALIFICATION OF THE RESPONDENTS

QUALIFICATION NO. OF RESPONDENTS PERCENTAGE
UG PG Professional Others Total (Source: Primary Data)
76 54 48 22 200
38 27 24 11 100
INFERENCE: From the above table it can infer that 38% of the respondents possess UG qualifications. 11% are however others. CHART 4.2. EDUCATIONAL QUALIFICATION OF THE RESPONDENTS
44
TABLE 4.3. SALARY OF RESPONDENTS

SALARY SLAB NO. OF RESPONDENT PERCENTAGE
150000 - 250000 250000 350000 350000 450000 450000 & above Total (Source: Primary Data) INFERENCE:
22 40 72 66 200
11 20 36 33 100
From the above table it can be inferred that 36% of the respondents belongs to 350,000450000 Salary Slab. Very few (i.e.) 11 % belong to the Salary Slab 150000 250000.
CHART 4.3. SALARY OF RESPONDENTS
45
TABLE: 4.4. INVESTMENT FACTORS (As per Investors choice):

FACTORS HIGHLY IMPORTAN T IMPORTAN T NEITHER IMPORTAN T OR NOT IMPORTAN T 13 27 80 60 30 NOT IMPORTAN T HIGHLY NOT IMPORTAN T Nil Nil 25 80 95
RETURN LOW RISK SAFETY SAVINGS TAX BENEFITS
86 91 19 2 2
72 74 18 13 13
29 8 58 45 60
INFERENCE: From the above table that the risk and the return are considered to be the most important factor for an investment about 43% have said that returns are important and around 45% says that low risk in investment places a major role. Safety, Savings and Tax benefits are also taken into consideration for making an investment decision.
CHART : 4.4.
46
INVESTMENT FACTORS (As per Investors choice):
TABLE : 4.5. PERCEPTION ABOUT INSURANCE PLAN

FACTORS TAX BENEFITS PROTECTION ACCUMULATION Total NO. OF RESPONDENT 32 48 120 200 PERCENTAGE 16 24 60 100
INFERENCE From the above table it can be inferred that 60% of the respondents look for Accumulation, 24% and 16% look for protection and Tax benefits from insurance.
CHART : 4.5. PERCEPTION ABOUT INSURANCE
47
TABLE : 4.6. ACCUMULATION PRODUCTS IN INSURANCE PLAN:

AVENUES ENDOWMENT MONEY BACK ULIP WHOLE LIFE RERTIRMENT BUDGET 08-09 28 17 22 15 18
INFERENCE: From the above table it can be seen that there is a more importance given to ULIP and Endowment policies in the case of Accumulation.
48
CHART : 4.6. INVESTOR PREFERENCE IN INSURANCE POLICY
TABLE : 4.7. KNOWLEDGE LEVEL OF RESPONDENTS IN SHARE MARKET AND INSURANCE KNOWLEDGE SOMEKNOWLEDGE SUFFICENT KNOWLEDGE MORE KNOWLEDGE (SOURCE: PRIMARY DATA) SHARE MARKET 85 100 15 INSURANCE 115 75 10
INFERENCE: From the above chart it is clearly stated that the knowledge level of the investor in Share market and insurance is considerably low, since it is a recent avenue.
49
CHART : 4.7. KNOWLEDGE LEVEL OF RESPONDENTS IN SHARE MARKET AND INSURANCE
TABLE 4.8. RISK AND RETURN IN AVENUES RANKS OF RESPONDENT AVENUES STOCK MUTAL FUND INSURANCE FIXED DEPOSIT GOVT.SECURITES
RISK
RANKS OF RESPONDENT
RETURN
1 2 3 5 4
1 2 3 4 5
(SOURCE: PRIMARY DATA) INFERENCE: 50
From the above table it can be seen that the risk and return for the stocks are ranked same by the investors. The ranking factors of the individuals have been critically verified by the ANOVA. CHART : 4.8. RISK AND RETURN IN AVENUES (As per Investors choice)
STATISTICAL ANALYSIS 4.2.1 CHI-SQUARE TEST: PURPOSE: It is to know whether the choices of the investments are made according to the income of the individual. CROSS TABULATION BETWEEN INCOME OF THE INDIVIDUAL AND CHOICE OF INVESTMENT AVENUE TABLE 4.2.1 AVENUES 150000 - 250000 STOCKS MUTUAL FUNDS 0 8 SALARY SLAB 250000 -350000 6 6 51
350000-450000 12 18 450000 & above 25 13 Total 43 45
INSURANCE GOVT. BONDS FIXED DEPOSITS Total
3 2 9 22
8 15 5 40
13 12 17 72
20 0 8 66
44 29 39 200
HYPOTHESIS: Ho: There is no significant relationship between the Income of the Individual and the choice of Investment Avenues. H1: There is significant relationship between the Income of the Individual and the choice of Investment Avenues.
APPLYING CHI-SQUARE TEST: Oi 0 6 12 25 8 6 18 13 3 8 13 20 2 15 12 0 9 Ei 4.73 8.6 15.48 14.19 4.95 9 16.2 14.85 4.84 8.8 15.84 14.52 3.19 5.8 10.44 9.57 4.29 (Oj Eij)2 22.3729 6.76 12.1104 116.8561 9.3025 9 3.24 3.4225 3.3856 .64 8.0656 5.48 1.4161 84.64 2.4336 91.5849 22.1841 52 (Oj Ej )2/ Ej 4.73 0.786 0.78 8.23 1.88 1 0.2 0.23 0.7 0.073 0.51 0.377 0.44 14.59 0.233 9.57 5.17
5 17 8
7.8 14.04 12.87
7.84 8.7616 23.72

TOTAL
1.005 0.624 1.84

52.968
Degree of freedom =
(r 1) (c 1) = (5 1) (4 1) = 12
(Table value at 5% level of significance is 23.3, whereas the calculated value is 52.968) Since the calculated value is greater than the table value, the null hypothesis is rejected. INFERENCE: There is significant relationship between the income of the individual and the choice of investment Avenues.
4.2.2 ONE-WAY ANOVA: PURPOSE: It is in order to find whether the ranks given by the respondent with respect to Risk for the investment have any significant difference or not. HYPOTHISES: Ho: There is no significant difference between the ranks of the Respondent regarding the Risk for the investment. H1: There is significant difference between the ranks of the Respondent regarding the Risk for the investment. TABLE 4.2.2
RAN KS AVENUES SHARE MUTUAL FUND 1 82 78 2 78 82 3 40 40 4 0 0 5 0 0
53
SCHOOL OF MANAGEMENT SRM UNIVERSITY INSURANCE GOVT. SECURITIES FIXED DEPOSITS 40 0 0 22 18 0 57 42 21 20 100 80 61 40 99
(SOURCE: PRIMARY DATA) N (Total No of Responses) = 25 We Shift the origin to 100

RAN KS AVENUES SHARE MUTUAL FUND INSURANCE GOVT. SECURITIES FIXED DEPOSITS SUB-TOTAL TOTAL 1 -18 -22 -60 0 0 -100 2 -22 -18 -78 -82 0 -200 3 -60 -60 -43 -58 -79 -300 4 0 0 -80 0 -20 -100 5 0 0 -39 -60 -1 -100 -800
T (Total of All Observations) = -800 C.F. (Correction Factor) = T / N = (-800) / 25 = 25600 SST (Sum of Square of Table) = [{(-18) + (-22) + (-60) + (-1)} - C.F.] = 48600 25600 = 23000 SSC (Sum of Square of Column) = [{(-100) + (-200) + (-300) + (-100) + (-100) } / 5 C.F.] = 32000 25600 = 6400 SSE (Sum of Square of Errors) = 23000 6400 = 16600 54
SOURCE OF VARIATION Between the Ranks Within the Ranks Total
SUM OF SQUARE 6400 16600
DEGREE OF FREEDOM 4 20 24
MEAN SUM OF SQUARE 6400 / 4 =1600 16600 / 20 = 830
RATIO (F TEST) = 1600 / 830 = 1.9277
From the table at 0.01 for (4, 20) of the critical value is 3.26 Calculated value of F is less than Critical value of F, We Cannot Reject the Null Hypothesis.
INFERENCE: There is no significant difference between the ranks of the individuals with respect to Risk for Investment.
4.2.3. RANK CORELATION: PURPOSE: It is to find whether the Rank based on findings and rank based on survery is correlate each other. AVENUES (i) STOCK MUTUAL FINDS INSURANCE FIXED DEPOSITS GOVT RANK BASED ON FINDINGS (ii) 5 4 1 2.5 2.5 RANK BASED ON SURVEY (iii) 3 1 2 4 5 55
d (ii-iii) -2 3 -1 -1.5 -2.5
d *d 4 9 1 2.25 6.25
SECURITIES & OTHERS TOTAL (R s Rank correlation) FORMULA: R s = 1 - 6(di) / n (n2 1) HYPOTHESIS: H o: There is no correlation between the ranks of the portfolio H 1: There is correlation between the ranks of the portfolio Rs = 1 6 * 22.5 / 5 (52 1) = - 0.125 INFERENCE:
22.5
Since n = less than 30 we use Spearman Rank correlation value table. For n = 5, = 0.05 the critical values are + or 0.9. Since Rs = - 0.125. Here it lies in the acceptance region. We accept H o (There is no correlation in the rank data of the portfolio)
4.3. RISK AND RETURN ANALYSIS RISK: Risk refers to the possibility that the actual outcome of an investment will differ from the expected outcome, to put differently risk refers to the variability or dispersion if an assets return has no variability, it is risk less. Suppose you are analyzing the total return of an equity stock over a period of time. Apart from knowing the mean return, you would also like to know about the variability in returns. The most commonly used measure of risk in finance is variance or its square root that is Standard deviation. RETURN: Investment decisions are influenced by various motives; Mostly investors are largely guided by the pecuniary motive of earning a return on their investment. INSURANCE RETURNS CALCULATION (IRR): 56
TABLE 4.3.1 PLANS

ENDOWMENT MONEY BACK ULIP RETIREMENT
RETURNS
12% 8% 10% 10%
CHART 4.3.1
INFERENCE: From the above table we can able to see that all Insurance Products generates an average return of ranging from 8 % 12%, When the Tax Benefits are taken in to account it may extend to 14%. RISK: Since the Insurance products are not based on speculation, the risk attached towards is normal risk which are explained above. 4.3. STOCKS INDEX :( 2008-2009) TABLE 4.3.2.
MONTHS
Sep. 2008 Oct 2008 Nov.2008 Dec. 2008 Jan. 2009 Feb 2009 Mar 2009 April 2009 May 2009 June 2009 July 2009 August 2009
INDEX
13,102.18 8701.07
9483
9647.31
8,779.17 8,954.86
10,048.49
11023.09
13,589.23
14764.64
15670.31
15411.63
57
CHART 4.3.2.
INFERENCE: From the above table it is clear that the index has increased by 2309.45 points
NIFTY MOVEMENTS :( 2008-2009) TABLE 4.3.2
MONTHS
Sep. 2008 Oct 2008 Nov.2008 Dec. 2008 Jan. 2009 Feb 2009 Mar 2009 April 2009 May 2009 June 2009 July 2009 Aug 2009
58
INDEX 3,921.20 2,885.60 2,755.10 2,959.15 2,874.80 2,763.65 3,020.95 3,473.95 4,448.95 4,291.10 4,636.45 4580.05
CHART 4.3.2.
INFERENCE: From the above table it is clear that the index has decreased by 658.85 points.
59
60
CHAPTER V SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION 5.1. FINDINGS

From the above calculation we can able to inference that:
Most of the respondent belongs to the age of 30 and 40 and very few belong to the age group of above 60 years. (Table- 4.1)
Many of the respondents possess UG qualification and very few are belong to Professional qualification. (Table- 4.2)
The Salary of the respondent are between 350,000 450,000 and very few are above 15,0,000-250000. ( Table- 4.3)
To first and fore most findings is that the investor is looking Risk and Return as foremost factors in investment(Table-4.4)
In Insurance Accumulation is considered to be the most important factor(Table- 4.5)
It is found out that the investment pattern is followed by the income of the individual(Table4.2.1)
From the ANOVA table we can infer that Stock and Mutual fund ranks first both on Risk and Return(Table-4.2.2)
The Rank co relation shows that portfolio of the individual is based on their own risk appetite
(Table-4.2.3)
The insurance sector gives around 15% of returns where all the tax benefits are taken to
61
consideration, when we consider the inflation factor, which is accelerating at 6%, makes the returns to be much lower. But the risk concern for the insurance avenue is nil. Since there are lot of guarantee products and also investment patterns for life insurance companies are guide by IRDA.
When we take stock market into consideration, the knowledge plays a vital role. The stock markets give around 30% to 50% of returns where the risk attached is also vary from 30% to 40%. But when we take inflation factor into account this avenue will generate more return than any other avenue.
The bank F.D. and government securities will consistently give 3% to 6.5% and the risk attached is nil, (expect interest rate risk which is external)
5.2. SUGGESTIONS
For the investors
IDEAL PORTOFOLIO FOR INVESTMENTS
For constructing an efficient portfolio the investor should have adequate amount of insurance cover.
62
Adequate insurance cover = (monthly expenses *36 times +current liabilities + future liabilities) * inflation factor. The investment should start from investing in those products which give guaranteed additions such as government bonds and fixed deposits. The third step is to invest in products which generates more returns, here the investor must be ready to take risk and look for capital appreciation (mutual funds) The next step is to invest in stock markets where the investor will gain some knowledge by dealing with mutual funds. We can invest in those scripts, which is performing well. It is necessary to concentrate on these products, which the investor likes to invest more such as mutual funds and stocks.
5.3. CONCLUSION
There are various investment avenues, which highlights the phenomenal growth experienced recently, in line with the country's improving economic fundamentals. The study analysis the investment portfolio of the individual and the various Risks and Returns calculation are made for the various avenues in order to suggest the suitable portfolio for the individual based on the risk appetite of the person. Finally it has been suggested that insurance should be viewed as a risk cover not an investment avenues, 50 % should be in guaranteed addition, 30 % in mutual fund and 20% in stocks.
63
QUESTIONNAIRE
1. Name: 2. Age : 25-35 3. Educational Qualification: Graduate 4. Designation: 5. Your Gross Annual Income Will Be? (p.a) 150000 250,000 250,000 350,000 350000 450000 450,000 & Above 6.What do you expect from an Investment?
FACTORS HIGHLY IMPORTAN T IMPORTAN T NEITHER IMPORTANT OR NOT IMPORTANT NOT IMPORTAN T HIGHLY NOT IMPORTANT
36-45
46 55
Above 55 Others
Post Graduate
RETURN SAFETY SAVINGS TAX TAX BENEFITS
7. Till now, Your Investment made in? 64
AVENUES
INVESTMENT IN
Fixed Deposit Mutual FundsStocks InsuranceOthers 8. How do you see an insurance plan ? ESSENTIAL Protection: Accumulation: Tax Benefits: NON-ESSENTIAL
9. Incase if you invest in Insurance, Which would you opt for Accumulation? Endowment Money Back RANK ULIP Stock Whole Life Plan Mutual Fund Retirement Plan Insurance Fixed Deposits 10. Do you have the Knowledge about the Government Mutual Fund Market? Securities Some Knowledge Sufficient Knowledge More Knowledge 12. Do you think Stock Market Knowledge is necessary for Trading? Essential Not essential enough Brokers Knowledge is
13. Convey your idea about nature of Return in the following investment Avenues (Rank 1 = High Returns)
14. Convey your idea about nature of Risk in the following investment Avenues (Rank 1 = High Risk) 65
15. Where would you advice to your friend to invest?
BIBLIOGRAPHY:
Equity market www.nseindia.com www.moneymarket.com www.yahoofinance.com Insurance detail www.irdaindia.com Company profile www.smcindia.com
RANK
Stock Mutual Fund Insurance Fixed Deposits Government Securities STATISTICAL METHOD STATISTICS FOR MANAGEMENT For Research Design:
For Calculation of Risk and Return in STOCKS: INVESTMENT MANAGEMENT S M Maheshwari For Statistical Analysis: S.P.Gupta T. N. Srivastava & Shailaja Rego
66
RESEARCH METHODOLOGY C.R.Kothari
67

SMC Project

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

SMC Project

Uploaded by

Copyright:

Available Formats

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SRM UNIVERSITY kattankulathur Campus

Place: Chennai Date: 14.08.09

SCHOOL OF MANAGEMENT SRM UNIVERSITY

Signature of the Student Place: Chennai - 603203 Date: 14.08.09

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

29-30 31 32 33 34-35 36 37 38 38 39 39 39 40 40 41 42 42-58

LIST OF TABLES TABLE NO

LIST OF CHARTS TABLE NO

SCHOOL OF MANAGEMENT SRM UNIVERSITY

1.1. DEFINITION OF INVESTMENT:

SCHOOL OF MANAGEMENT SRM UNIVERSITY

1.2. OBJECTIVES OF INVESTMENT AVENUES

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

Non-Marketable Financial Assets

Money Market Instruments

Life Insurance Policies

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

1.4. VARIOUS RISK INVOLVED WHILE INVESTING:

SCHOOL OF MANAGEMENT SRM UNIVERSITY

Government Securities Market

Corporate Debt Market

SCHOOL OF MANAGEMENT SRM UNIVERSITY

Name of the Security

SCHOOL OF MANAGEMENT SRM UNIVERSITY

1.5.3. PARAMETERS REFLECTING ON INDEX OR STOCK MOVEMENT

SCHOOL OF MANAGEMENT SRM UNIVERSITY

2. Exercise price. 3. Volatility. 4. Time to expiry. 5. Interest rate.

1.5.4. THE GROWTH PATH OF SHARE MARKET:

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

Market TIME: 9:56 TO 3:30

SCHOOL OF MANAGEMENT SRM UNIVERSITY

1.6.1. WHAT IS LIFE INSURANCE?

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

1.6.3. HISTORY OF INSURANCE IN INDIA

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SCHOOL OF MANAGEMENT SRM UNIVERSITY

M ar ket S hare o f the Insuran ce C om p any

LIC P rivate Insurance Com pany

SCHOOL OF MANAGEMENT SRM UNIVERSITY

1.6.5. TYPES OF INSURANCE POLICIES: a) Term Plans :

b) Money Back Plan :

c) Unit Linked Insurance Plans (ULIPs) :

SCHOOL OF MANAGEMENT SRM UNIVERSITY

d) Pension / Retirement Plans:

SCHOOL OF MANAGEMENT SRM UNIVERSITY

CHAPTER II COMPANY PROFILE

"SUCCESS HINGES ON A PASSION FOR EXCELLENCE"

2.1. SMC: AT A GLANCE

SCHOOL OF MANAGEMENT SRM UNIVERSITY

SMC PROMOTERS AND FOUNDERS

SCHOOL OF MANAGEMENT SRM UNIVERSITY