SCHOOL OF MANAGEMENT

SRM UNIVERSITY

COMPRHENSIVE ANALYSIS OF INVESTMENT AVENUES

STOCK MARKET & INSURANCE IN INDIA
FOR
Unicon Investment Solution .
A FINAL PROJECT REPORT
Submitted
To

SCHOOL OF MANAGEMENT
SRM UNIVERSITY
in partial fulfillment of the requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
By
NRIPENDRA KISHOR PANDEY
(REG.NO. 35080371)
Under the Supervision and Guidance
of
Mr. M. SANMUGAM
FACULTY OF SRM SCHOOL OF MANAGEMENT

SRM SCHOOL OF MANAGEMENT

FACULTY OF ENGINEERING & TECHNOLOGY
SRM UNIVERSITY
KATTANKULATHUR 603203.

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

SRM SCHOOL OF MANAGEMENT

SRM UNIVERSITY
kattankulathur Campus

CERTIFICATE

This is to certify that the Final 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 NRIPENDRA KIHOR PANDEY
during the year 2000 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

Signature of Guide

Date: 14.08.09

M. SANMUGAM
(, M.B.A.) Senior Lecturer
SRM School Of Management
SRM University
Kattankulathur Campus
Chennai 603203

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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
5

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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,
6

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

TABLE 1.3.2: CHARACTERISTIC OF ALL TYPES OF INVESTMENT AVENUES

Equity
Bonds
Co. Debentures
Co. FDs
Bank Deposits
PPF
Life Insurance
Gold
Real Estate
Mutual Funds

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

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

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

THE RISK-RETURN TRADE-OFF:

RETURN

1.4. VARIOUS RISK INVOLVED WHILE INVESTING:

Hence it is up to the investor to decide how much riskRISK

does he is willing to take- up. In order to take
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.

10

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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

Government
Securities
Market

Corporate Debt
Market

Debt Market

Money Market
11

Derivatives
Market

Options
Market

Futures Market

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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)

% Share in Total
Turnover

Market Capitalisation
% Share in
as on 31.3.2008
Total Market
(Rs. crore)
Capitalisation

RELIANCE INDUSTRIES LTD

198439.98

7.21

239964.86

8.29

ICICI BANK LTD.

118914.86

4.32

37034.37

1.28

RELIANCE CAPITAL LTD

99307.76

3.61

8681.89

0.30

BHARTI AIRTEL LIMITED

74259.53

2.70

118782.36

4.10

STATE BANK OF INDIA

72639.18

2.64

67748.07

2.34

LARSEN & TOUBRO LTD.

71991.35

2.62

39315.66

1.36

INFOSYS TECHNOLOGIES LTD

68397.40

2.49

75836.97

2.62

RELIANCE INFRASTRUCTU LTD

67355.00

2.45

11742.70

0.41

HDFC LTD

62913.80

2.29

40170.59

1.39

DLF LIMITED

62492.90

2.27

28394.67

0.98

10

12

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.
Analyzing the impact of the above macro-economic variables on sector
performance.
Clustering of Shares based on their annualized returns and determination of cause of interrelationship 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.
2. Exercise price.
3. Volatility.
4. Time to expiry.
5. Interest rate.

13

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

14

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

Market TIME: 8:30 TO 3:30

INTRADAY

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

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

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

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
15

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

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.
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

16

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

1.6.3. 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.

17

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

1.6.4. 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.

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
18

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.
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.
19

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

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,

20

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

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.

21

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

CHAPTER II
COMPANY PROFILE

2.1. UNICON : AT A GLANCE

1.3 COMPANY PROFILE
UNICON SECURITIES PRIVATE LIMITED
UNICON is a financial services company which has emerged as a one-stop investment
solutions provider. It was founded in 2004 by two visionary and flamboyant entrepreneurs, Mr.
Gajendra Nagpal and Mr. Ram M. Gupta, who possess expertise in the field of Finance. The
company is headquartered in New Delhi, and has its corporate office in Mumbai with regional
offices in Kolkata, Chennai, Hyderabad and Noida.
UNICON is a professionally managed company led by a team with outstanding managerial
acumen and cumulative experience of more than 400 man years in the financial markets The
Company is supported by more than 4500 Uniconians and has a team of over 900 business offices in
235 cities across India.

22

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

With a customer base of over 200,000 the Unicon Group has an eye for the intricate financial
needs of its clients and caters to both their short term and long term financial needs through a
comprehensive bouquet of investment services. It has been founded with the aim of providing world
class investing experience to the investing community. These services range from offline & online
trading in equity, commodities and currency derivatives to debt markets to corporate finance and
portfolio management services. The company has a sizable presence in the distribution of 3rd party
financial products like mutual funds, insurance products and property broking. It also provides expert
Advisory on Life Insurance, General Insurance, Mutual Funds and IPOs. The distribution network is
backed by in-house back office support to provide prompt and efficient customer service
The Equity broking arm UNICON Securities Pvt. Ltd offers personalized premium services
on the NSE, BSE & Derivatives market. The Commodity broking arm Unicon Commodities Pvt. Ltd
offers services in Commodity trading on NCDEX and MCX. The UNICON group also has a PCG
division providing investments solutions for High Net Worth Individuals. The Corporate Advisory
Services arm Unicon Capital Services (P) Ltd offers entire gamut of Investment Banking services
to corporates.
UNICON can boast of some of the most respected names in the private equity space like
Sequoia Capitals, Nexus India Capital and Subhkam Ventures as its shareholders.

MISSION :
To crate long term value by empowering individual investors through superior financial services
supported by culture based on highest level of teamwork, efficiency and intergrity

VISION :
To provide the most useful and ethical Investment Solutions - guided by values driven approach to
growth, client service and employee development

23

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

GROUP COMPANIES

FIXED INCOME &

INVESTMENT
BANKING

UNICON
CAPTIAL
SERVICES Pvt.
Ltd.
FINANCE (SHARES
& IPO)

DISTRIBUTION

UNICON
INSURANCE
ADVISORS Pvt.
Ltd.

UNICON
FINCAP Pvt.
Ltd.
UNICON
FINANCIAL
INTERMEDIARIE
S Pvt. Ltd.

COMMODITIES
TRADING

TRADING IN
EQUITIES &
DERIVATIVES

UNICON
SECURITIES
Pvt. Ltd.

UNICON
COMMODITIE
S Pvt. Ltd.
REAL ESTATES

UNICON
REAL
ESTATES Pvt.
Ltd.

24

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

MANAGEMENT TEAM

Mr. GAJENDRA NAGPAL Founder & CEO

Mr. RAM M GUPTA Co-Founder & President
Mr. Y.P. NARANG Head-Fixed Income Group
Mr. SANDEEP ARORA Chief Operating Officer
Mr. VIKAS MALLAN Chief Financial Officer
Mr. SUBHASH NAGPAL Director-Strategic Planning & Implementation
Mr. RAJEV B SHARMA Country Head-Wealth Management
Mr. VIJAY CHOPRA National Head-Business Alliances
Mr. MANMOHAN TIWARI Country Head-Equity Sales
Mr. ANURAG NAYAR Chief Technology Officer
Ms. ANJALI MUKHIJA Chief Compliance Officer

PRODUCT AND SERVICES

Unicon customers have the advantage of trading in all the market segments together in the
same window, as we understand the need of transactions to be executed with high speed and reduced
time. At the same time, they have the advantage of having all Advisory Services for Life Insurance,
General Insurance, Mutual Funds and IPOs also.
Unicon is a customer focused financial services organization providing a range of investment
solutions to our customers. We work with clients to meet their overall investment objectives and
achieve their financial goals. Our clients have the opportunity to get personalized services depending
on their investment profiles. Our personalized approach enables clients to achieve their Total
Investment Objectives.
Our key product offerings are as follows:

Equity
Commodity
Depository
Distribution
NRI Services
Back Office
Fixed Income
Investment Banking

25

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

Currency Derivatives
Portfolio Management

1. EQUITY:
UniconEasy
Browser based trading terminal that can be accessed by a unique ID and password. This facility is
available to all our online customers the moment they get registered with us
UniconSwift
Application based terminal for active traders. It provides better speed, greater analytical features &
priority access to Relationship Managers. Greater exposure for trading on the margin available.

2. COMMODITY:
Unicon offers a unique feature of a single screen trading platform in MCX and NCDEX.Unicon
offers both Offline & Online trading platforms.

Live Market Watch for commodity market (NCDEX, MCX) in one screen.
Add any number of scrips in the Market Watch.
Tick by tick live updation of Intraday chart.
Greater exposure for trading on the margin available
Common window for market watch and order execution.
Key board driven short cuts for punching orders quickly.
Real time updation of exposure and portfolio.
Facility to customize any number of portfolios & watch lists.
Market depth, i.e. Best 5 bids and offers, updated live for all scripts.
Facility to cancel all pending orders with a single click.
Stop loss feature.
3. DEPOSITORY:
Unicon Depository Services offers dematerialization services as a participant in Central Depository
Services Limited (CDSL), through its Depository operations. The company believes in efficient and
cost-effective and integrated service support to its brokerage business. Unicon Securities Private
26

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

Limited, as a depository participant, will offer depository accounts for individual investors as well as
corporates which will enable them to transact in the dematerialized segment, without any hassles.
Depository offer a safe, convenient way to hold securities as compared to holding securities in paper
form. Our service provides an integrated single platform for all our clients ensuring a risk free,
efficient and prompt depository process.

4. DISTRIBUTION:
Unicon is fast emerging as a leader in the Insurance and Mutual Funds distribution space. Unicon
has over 100 branches and a huge number of Business Development Executives who help to
source and service the customers throughout the country. Unicon is fast becoming the preferred
Vendor Independent distribution houses because of providing efficient service like free pick-up of
collection of cheques/DDs, Keeping track of the premiums etc to its customers. Unicon offers the
following distribution products
IPOs
Mutual Funds
Insurance
Properties

5. NRI SERVICES:

India becoming the epicentre of growth the Global Indian feels the need to be
connected to the domestic growth story. Unicon now offers a convenient and hasslefree way of Investing in the Indian Securities Market to the people who are living
outside India and wish to participate in the Indian Growth story.
Procedure for NRI operations in Indian Capital Markets: The NRI can deal with only one bank at any point of time.
He is allowed to invest only 5% of the paid up capital of a company. The
aggregate paid up value of equity of any company purchased by all NRI's and
OCBs cannot exceed 10 percent of the paid up capital of the company and in the
case of convertible debentures, the aggregate paid up value of each series of
debentures purchased by all NRI's and OCBs cannot exceed 10 % of the paid up
value of each series of convertible debentures
He can enter only into delivery based trades, all deliveries must only be routed
through beneficiary accounts and not directly through the broker.
Shares bought by him cannot be sold unless the payout of the same is received
from exchange.
All purchase and sale transactions have to be reported to the RBI by the
designated bank.

27

SCHOOL OF MANAGEMENT
SRM UNIVERSITY
Original brokers contract notes have to be submitted to the designated Bank
branch, within 24 hours of the transaction.
He will be required to make bill to bill payments/ settlements. No adjustments of
purchase against sale consideration should be done.
Shares cannot be bought against the shares sold in the same settlement.
All Purchase and Sales will be dealt separately for payments / receipts.
Sale proceeds of any transaction not reported/approved by the RBI is allowed to
be credited to the NRE/NRO savings/demat account. The transaction will have to
be reversed in the account and losses if any will be borne by the client.
All tax liabilities arising out of buying and selling of securities will be handled by
the designated bank

6. BACK OFFICE:

Unicon through its online back-office aims to increase the transparency and provides
you the link to view the details of your account online anytime and anywhere. Here you
have the advantage of viewing the following reports online
Sauda Details

Financial Ledger
Net position for the day
Net position Detail (for the complete financial year)
E-Contract Note

7. FIXED INCOME:

The Fixed income vertical of UNICON Group deals in Sovereign Paper and Money
Market/Fixed Income Instruments Broadly, it undertakes following:

Dealing in all types of money market instruments viz. Commercial paper (Origination &
Placement), Certificate of Deposit and Treasury Bills both in Primary and Secondary
market.

Dealing in Government securities (including securities of Oil, Fertilizer & Food Bonds)
and other PSU/ Corporate bonds with counterparties like Banks, Primary Dealers, Mutual
Funds, Insurance Companies, Regional Rural Banks, Cooperative Banks, Central & State
PSUs, Housing Finance Companies, NBFCs & Corporates.

Retailing of Central, State Government Securities and Bonds to PF Trusts, Universities

Advisory Services to PF Trusts.

Arrangers for Private placement of Bonds & placing it with Banks, Mutual funds,
28

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

Insurance Companies & Corporates.

Securitization of receivable portfolio of Housing Finance Companies, Banks & NBFCs by

way of Pass through certificates.

8. INVESTMENT BANKING:
The Investment Banking arm of Unicon Capital Services (P) Ltd. caters to the funding requirements
of corporates. Our wide experience and market knowledge as a leading securities firm ensures that
clients requirements are met at optimum cost. By constantly improving our knowledge capital and
remaining focused on client needs, we aim to create significant value for our clients by helping
them execute the right capitalization strategy. We also intend to initiate merchant banking services
(Capital Markets Fundraising) in the short term (Merchant Banking License pending)
Offerings
Private Equity (PE) Syndication
We specialize in the syndication of the private equity for the Indian companies in high-growth
markets on their capitalization/re-capitalization strategies, which helps them to achieve their growth
targets. Our team of professionals ensures complete confidentiality, strong focus on implementation
and quick turnaround time. Access to key decision makers at PE funds gives us an edge in optimal
structuring and efficient closure of transactions. We service our clients through various stages of the
PE deal namely collateral preparation, investor shortlisting, commercial term sheet, due diligence
and final closure.
Mergers & Acquisitions(M&A) Advisory
We provide both buy-side and sell-side advisory services as part of our M&A advisory offering. We
advise clients during the entire transaction process right from target identification to deal closure.
We have an experienced and highly qualified team with more than 40+ man-years of experience
which specializes in identification and short listing of potential targets, strategic planning of an
acquisition and arranging capital for the transaction, if needed.
Debt Syndication
Our offerings include:
Project Finance / Term Loans for Expansion - Arranging Long-term loans for setting up new
projects from Financial Institutions and Banks

External Commercial Borrowings (ECBs) - Arranging LIBOR-linked loans

Foreign Currency Convertible Bonds (FCCB)-Arranging FCCB Loans

29

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

Working Capital Facilities - Arranging fund-based and non-fund based limits for clients
from Banks at competitive rates

Trade Finance - Arrangement of trade finance (Buyer's / Suppliers Credit)

Inter-Corporate Deposits Borrowing and Placement

9. CURRENCY DERIVATIVES:
Currency Futures
Currently in India, US Dollar Indian Rupee (USD INR) currency futures are traded on the NSE
and MCX. Since its introduction in Aug 2008, USD INR futures have seen a 1500% burst in
volume growth. Unicon offers clients the opportunity to trade this product, either in online or
offline mode as per their needs. The product provides ample liquidity to function both as a
speculative tool and as a hedging instrument for exporters and importers. The attractive features
of the product are as follows
Unlike currency forwards offered by banks, currency futures trading does not
have to be backed by an underlying merchant transaction exposure
Tight bid ask spreads; usually 0.25 paisa wide
Margin requirements less than 5% to take exposure on a lot size of $1000
New asset class for diversification for all resident individuals
Commodity traders can hedge against unfavourable movements since gold, crude
etc. are quoted in dollars
For exporters and importers, no credit line required from their Banker as is the
case with forwards
Ideal tool for those with smaller exposures, as in the case of travel needs,
educational payments etc.
Unicon Advantage
Online & Offline trading facility on all the bourses
Exclusive daily commentary and research reports by our Currency analyst team
Regular updates on Dollar INR movement with calls to buy and sell
Special consultancy to Exporters, Importers & Corporate for their Forex transactions
Receive education on the product through seminars/con-calls organized by Unicon
Your Cash Margin with Unicon Securities can be used for either segment Equity,
Commodity or Currency.
Online & Offline trading facility on all the bourses
Exclusive daily commentary and research reports by our Currency analyst team
Regular updates on Dollar INR movement with calls to buy and sell
30

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

Special consultancy to Exporters, Importers & Corporate for their Forex transactions
Receive education on the product through seminars/con-calls organized by Unicon
Your Cash Margin with Unicon Securities can be used for either segment Equity,
Commodity or Currency.

Other awaited products

Euro INR is expected to be introduced anytime now
SEBI has also recommended introduction of Pound Sterling (GBP) and Japanese
Yen (JPY) futures in the near future
Currency options are also expected to be added to the basket of products soon.

PORTFOLIO MANAGEMENT:
Portfolio Management Services
Gone are the days when an investor could directly participate in the capital markets, for they have
not only become far more complex in terms of compliances, methodologies, effects and analysis
but also need a constant tracking mechanism. As is the case globally, the Indian investor has also
realized the advantages of seeking professional advice in order to not only manage but also
augment his portfolio.
We at Unicon in our constant endeavor to bring to our esteemed clients global methodology have
developed a proprietary model that has enabled us to outperform all major indices with a fair
degree of consistency, over the longer term. We continue to be positive of both our approach and
the Indian capital markets in general and especially so after UPAs landslide mandate to guide the
country over the next 5 years. However, we believe that the out-performance is more stockspecific and the major indices only provide a barometer for evaluation. This view is expected to
only be enhanced going forward, with larger players entering the markets with globally fine-tuned
analytical tools.

The Portfolio Management Schemes of the Company offer Discretionary Schemes (Unicon
Optimizer & Unicon Growth) for Individuals, Corporate Bodies, Partnership firms, Proprietors,
Non Resident Indians etc. The Company is registered with SEBI enabling it to undertake Portfolio
Management activities under a specific license.
31

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

The Schemes, duly approved by SEBI, are managed by a highly competent team comprising of
portfolio managers and equity strategists, backed by a team of fundamental, technical and
derivatives analysts. The principle objectives are to identify investment opportunities through
globally recognized analytical methodologies, given pre-defined risk parameters construct
portfolios to incorporate client objectives periodically review of portfolios in order to consistently
deliver returns surpassing the benchmarked index and tailor-make portfolios to incorporate a
judicious mix of equity, quazi-equity, money market instruments and derivate products.
PMS is a very personalized service wherein each portfolio has to be specifically constructed in
order to reflect the objective and risk appetite of a particular client. Our qualified managers are
constantly evolving methodologies and financial models that provide them with a composite
mix of:
1. Medium term comprising of value investing and other fundament tools
2. Short term comprising primarily of technical analysis and tools.
3. Hedging strategies comprising of derivative products.
Along with this water tight investment evaluation strategy we have up in place an equally
foolproof client servicing and feedback methodology. All Investment advisors are hand picked
and trained on a gamut of Wealth product, this ensures that he is in a very good position to
deliver a wholesome wealth experience to the client.
UNICON PMS provides following benefits:
Strong Research Team
Profile based investment solution
Professional Fund Management
Strict Risk Management
Timely performance reporting
Periodic reviews & rebalancing
Dedicated relationship manager

32

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

CHAPTER III
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.

33

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

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
34

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

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.

35

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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
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

36

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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):
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.

37

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

CHAPTER IV
DATA ANALYSIS AND INTERPRETATION
DATA ANALYSIS
TABLE 4.1.
AGE OF THE RESPONDENTS
AGE

NO. OF RESPONDENTS

PERCENTAGE

20 - 30 years

32

16

30 - 40 years
40 - 50 years
50 - 60 years
Above 60 years

74

37

60

30

20

10

14

Total

200

100

(Source: Primary Data)

INFERENCE:
38

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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

TABLE 4.2.
EDUCATIONAL QUALIFICATION OF THE RESPONDENTS
QUALIFICATION

UG
PG
Professional
Others
Total
(Source: Primary Data)

NO. OF RESPONDENTS

PERCENTAGE

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.

39

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

EDUCATIONAL QUALIFICATION OF THE RESPONDENTS

TABLE 4.3.
SALARY OF RESPONDENTS
SALARY SLAB

150000 - 250000
250000 350000
350000 450000
450000 & above
Total
(Source: Primary Data)

NO. OF
RESPONDENT

PERCENTAGE

22
40
72
66
200

11
20
36
33
100

INFERENCE:
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.
40

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

SALARY OF RESPONDENTS

TABLE: 4.4.
INVESTMENT FACTORS (As per Investors choice):
FACTORS

HIGHLY
IMPORTAN
T

IMPORTAN
T

NEITHER
IMPORTANT
OR NOT
IMPORTANT

NOT
IMPORTAN
T

HIGHLY
NOT
IMPORTANT

RETURN
LOW RISK
SAFETY
SAVINGS
TAX
BENEFITS

86
91
19
2
2

72
74
18
13
13

13
27
80
60
30

29
8
58
45
60

Nil
Nil
25
80
95

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.

41

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

CHART : 4.4.
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

42

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

TABLE : 4.6.
ACCUMULATION PRODUCTS IN INSURANCE PLAN:
AVENUES

BUDGET 08-09

ENDOWMENT

28

MONEY BACK

17

ULIP

22

WHOLE LIFE

15

RERTIRMENT

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.

43

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

CHART : 4.6.
INVESTOR PREFERENCE IN INSURANCE POLICY

TABLE : 4.7.
KNOWLEDGE LEVEL OF RESPONDENTS IN SHARE MARKET AND INSURANCE
KNOWLEDGE

SHARE
MARKET

INSURANCE

SOMEKNOWLEDGE

85

115

SUFFICENT KNOWLEDGE

100

75

MORE KNOWLEDGE

15

10

(SOURCE: PRIMARY DATA)

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.

44

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

CHART : 4.7.
KNOWLEDGE LEVEL OF RESPONDENTS IN SHARE MARKET AND INSURANCE

TABLE 4.8.
RISK AND RETURN IN AVENUES
RANKS OF
RESPONDENT

RANKS OF
RESPONDENT

AVENUES

RISK

RETURN

STOCK

MUTAL FUND

INSURANCE

FIXED DEPOSIT

GOVT.SECURITES

(SOURCE: PRIMARY DATA)

INFERENCE:
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.
45

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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

SALARY SLAB
150000 - 250000

250000 -350000

350000-450000

450000 & above

STOCKS

12

25

43

MUTUAL
FUNDS
INSURANCE

18

13

45

13

20

44

46

Total

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

GOVT. BONDS

15

12

29

FIXED
DEPOSITS
Total

17

39

22

40

72

66

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

Ei

(Oj Eij)2

(Oj Ej )2/ Ej

0
6
12
25
8
6
18
13
3
8
13
20
2
15
12
0
9
5

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
7.8

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
7.84

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
1.005

47

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

17
8

14.04
12.87

Degree of freedom =

8.7616
23.72

0.624
1.84

TOTAL

52.968

(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
RANKS

AVENUES
SHARE

82

78

40

MUTUAL FUND

78

82

40

48

SCHOOL OF MANAGEMENT
SRM UNIVERSITY
INSURANCE

40

22

57

20

61

GOVT.
SECURITIES
FIXED
DEPOSITS

18

42

100

40

21

80

99

AVENUES
SHARE

-18

-22

-60

MUTUAL FUND

-22

-18

-60

INSURANCE

-60

-78

-43

-80

-39

GOVT.
SECURITIES
FIXED
DEPOSITS
SUB-TOTAL

-82

-58

-60

-79

-20

-1

-100

-200

-300

-100

-100

(SOURCE: PRIMARY DATA)

N (Total No of Responses) = 25
We Shift the origin to 100

RANKS

TOTAL

-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
49

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

SOURCE OF
VARIATION

SUM OF
SQUARE

Between the
Ranks

6400

Within the
Ranks
Total

16600

DEGREE OF
FREEDOM
4
20

MEAN SUM
OF SQUARE

RATIO (F
TEST)

6400 / 4
=1600

= 1600 / 830

16600 / 20
= 830

= 1.9277

24

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

RANK BASED
ON SURVEY
(iii)

d
(ii-iii)

d *d

(i)

RANK BASED
ON
FINDINGS (ii)

STOCK

-2

MUTUAL
FINDS
INSURANCE

-1

FIXED
DEPOSITS
GOVT

2.5

-1.5

2.25

2.5

-2.5

6.25

50

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

SECURITIES &
OTHERS
TOTAL

22.5

(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:
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):
51

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

TABLE 4.3.1
PLANS

RETURNS

ENDOWMENT
MONEY BACK
ULIP
RETIREMENT

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

INDEX

Sep. 2008
Oct 2008
Nov.2008
Dec. 2008
Jan. 2009
Feb 2009
Mar 2009
April 2009
May 2009
June 2009
July 2009
August 2009

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

52

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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

53

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

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

CHART 4.3.2.

INFERENCE:
From the above table it is clear that the index has decreased by 658.85 points.

54

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

55

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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
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.

56

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.
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.

57

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

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.

58

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

QUESTIONNAIRE
1. Name:
2. Age :
25-35
3. Educational Qualification:
Graduate

36-45

46 55

Post Graduate

Above 55
Others

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

RETURN
SAFETY
SAVINGS
TAX
TAX
BENEFITS

7. Till now, Your Investment made in?

AVENUES

INVESTMENT IN

Fixed Deposit
Mutual FundsStocks InsuranceOthers 8. How do you see an insurance plan ?
ESSENTIAL

NON-ESSENTIAL

Protection:
Accumulation:
Tax Benefits:

59

HIGHLY
NOT
IMPORTANT

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

9. Incase if you invest in Insurance, Which would you opt for Accumulation?
Endowment
Money Back
ULIP
Whole Life Plan
Retirement Plan
10. Do you have the Knowledge about the Mutual Fund Market?
Some Knowledge
Sufficient Knowledge
12. Do you think Stock Market Knowledge is necessary for Trading?
Essential
Not essential
enough

More Knowledge
Brokers Knowledge is

13. Convey your idea about nature of Return in the following investment Avenues
(Rank 1 = High Returns)

RANK

Stock
Mutual Fund
Insurance
Fixed Deposits
Government
Securities
14. Convey
following investment Avenues
(Rank 1 = High Risk)

your idea about nature of Risk in the

RANK

Stock
Mutual Fund
Insurance
Fixed Deposits
Government
Securities
15. Where would you advice to your friend to invest?

60

SCHOOL OF MANAGEMENT
SRM UNIVERSITY

BIBLIOGRAPHY:

Equity market

www.nseindia.com

www.moneymarket.com
www.yahoofinance.com
Insurance detail
www.irdaindia.com
Company profile
www.smcindia.com
For Calculation of Risk and Return in STOCKS:
INVESTMENT MANAGEMENT
Maheshwari
For Statistical Analysis:
STATISTICAL METHOD
STATISTICS FOR MANAGEMENT

SM

S.P.Gupta
T. N. Srivastava &
Shailaja Rego

For Research Design:

RESEARCH METHODOLOGY
C.R.Kothari

61