1

A financial market is a market in which people and entities can trade financial securities, commodities,
and other fungible items of value at low transaction costs and at prices that reflect supply and demand.
Securities include stocks and bonds, and commodities include precious metals or agricultural goods.

Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are
securities which may be freely bought or sold. In return for lending money to the borrower, the lender
will expect some compensation in the form of interest or dividends. This return on investment is a
necessary part of markets to ensure that funds are supplied to them.

Today there are 21 regional securities exchanges in India in addition to the centralized NSE (National
Stock Exchange) and Bombay Stock exchange.

The regulating authority for capital markets in India is the SEBI (Securities and Exchange Board of India).

Stock exchange conducts its business fairly

Stock brockers, sub brockers and participants do not get involved in unfair practices

Investors owning equity shares of a company are owners of the company and are issued equity shares of
the company, as evidence of ownership. Equity investors are not entitled to any fixed return or
repayment of capital but are entitled to the benefits earned by of the performance of the company. If
the business fails, they may lose the entire investment.

However, the owners’ capital and the borrowings from banks and financial institutions may not be
sufficient for running the business over a long term. So companies invite the public to contribute
towards the equity and issue shares to individual investors. The way to invite share capital from the
public is through a ‘Public Issue’. Once this is done, the company allots shares to the applicants as per
the prescribed rules and regulations laid down by SEBI. The buyers of such shares are investing their
money as direct equity.

More Income: Equity shareholders are the residual claimant of the profits after meeting all the fixed
commitments. The company may add to the profits by trading on equity. Thus equity capital may get
dividend at high in boom period.

Right to participate in the Control and Management: Equity shareholders have voting rights and elect
competent persons as directors to control and manage the affairs of the company.

Tax Advantages: Equity shares also offer tax advantages to the investor. The larger yield on equity
shares results from an increase in principal or capital gains, which are taxed at lower rate than other
incomes in most of the countries

Diversity

Disadvantage
Uncertain and Irregular Income: The dividend on equity shares is subject to availability of profits and
intention of the Board of Directors and hence the income is quite irregular and uncertain. They may get
no dividend even three are sufficient profits

Loss on Liquidation: In case, the company goes into liquidation, equity shareholders are the worst
suffers. They are paid in the last only if any surplus is available after every other claim including the
claim of preference shareholders is settled. It is evident from the advantages and disadvantages of
equity share capital discussed above that the issue of equity share capital is a must for a company, yet it
should not solely depend on it. In order to make its capital structure flexible, it should raise funds from
other sources also

Dividend at the board’s mercy: The rate of dividend is recommended by the board. The shareholders in
the AGM cannot declare a higher rate than what is recommended by the board

Speculation: higher dividends during prosperous periods and low dividend during depression period
shall lead to ample speculation

Larsen and Toubro Limited is one of the best infrastructure sector company in India. But its share price
shows a little bit disappointing for the long term as well as short term investor. Its share price on year
over year is on a sig-sag manner, means up and down. But on unexpectedly on year 2007-08 shows a
return of 245%, its share price is at ₹ 3,052.33 which is of high for the period of 10 years. A
noticing point is that when stock market crash many of the company’s share price where at the lowest
level but Larsen & Toubro is one which shows the highest return at that time.

If an investor has got L&T in his portfolio he cannot face a big down on his portfolio. According to a short
term investor L&T did not give any high return except on 2007-08 period.

Bharat Petroleum Corporation Limited is one of the Petroleum Corporation of India in which majority of
the shares are held by government. BPCL has not performed so well. But in the year of 2009 to 2012 the
shares of BPCL performed well compared to whole 10 year. For a long term concern the BPCL did not
give any good return, but for a short term investor for the year 2009-10 and 2010-11 is of a good time of
earnings.

Overall we can see that the BPCL is good for short term investors

Maruti Suzuki India Limited is one of the largest automobile manufactures in India. As its innovative
technology and reputation has made investors to make trust over it. The company’s share has given
better return as compared to companies in the same sector. It is also one of the company in which, has
not given a negative return for continuous 10 year period. In the year 2009-10 and 2013-14 the
company was given highest return of 250% and 304% respectively. For a short term investor in the
period of 2008-09 and 200910 the company has given 121% return, which is of a good return according
to a short term investor. After that the share has not performed so well for a short investor.
Overall the company had given good support to long term investors than short and medium term
investors.

A mutual fund is a professionally managed type of collective investment scheme that pools money from
many investors and invests it in stocks, bonds, short-term money market instruments and other
securities. Mutual funds have a fund manager who invests the money on behalf of the investors by
buying / selling stocks, bonds etc.

Adv.

Professional Management: Mutual funds offer investors the opportunity to earn an income or build
their wealth through professional management of their investible funds. There are several aspects to
such professional management viz. investing in line with the investment objective, investing based on
adequate research, and ensuring that prudent investment processes are followed.

Affordable Portfolio Diversification: Units of a scheme give investors exposure to a range of securities
held in the investment portfolio of the scheme. Thus, even a small investment of Rs 5,000 in a mutual
fund scheme can give investors a diversified investment portfolio

Tax Deferral: Mutual funds are not liable to pay tax on the income they earn. If the same income were to
be earned by the investor directly, then tax may have to be paid in the same financial year. Mutual funds
offer options, whereby the investor can let the moneys grow in the scheme for several years. By
selecting such options, it is possible for the investor to defer the tax liability. This helps investors to
legally build their wealth faster than would have been the case, if they were to pay tax on the income
each year.

Tax benefits: Specific schemes of mutual funds (Equity Linked Savings Schemes) give investors the
benefit of deduction of the amount invested, from their income that is liable to tax. This reduces their
taxable income, and therefore the tax liability. Further, the dividend that the investor receives from the
scheme, is taxfree in his hands.

Convenient Options: The options offered under a scheme allow investors to structure their investments
in line with their liquidity preference and tax position.

Investment Comfort: Once an investment is made with a mutual fund, they make it convenient for the
investor to make further purchases with very little documentation. This simplifies subsequent
investment activity.

Regulatory Comfort: The regulator, Securities & Exchange Board of India (SEBI) has mandated strict
checks and balances in the structure of mutual funds and their activities. Mutual fund investors benefit
from such protection.

Systematic approach to investments: Mutual funds also offer facilities that help investor invest amounts
regularly through a Systematic Investment Plan (SIP); or withdraw amounts regularly through a
Systematic Withdrawal Plan (SWP); or move moneys between different kinds of schemes through a
Systematic Transfer Plan (STP). Such systematic approaches promote an investment discipline, which is
useful in long term wealth creation and protection.

Disadv.

Lack of portfolio customization: Some securities houses offer Portfolio Management Schemes (PMS) to
large investors. In a PMS, the investor has better control over what securities are bought and sold on his
behalf. On the other hand, a unit-holder is just one of several thousand investors in a scheme. Once a
unitholder has bought into the scheme, investment management is left to the fund manager (within the
broad parameters of the investment objective). Thus, the unitholder cannot influence what securities or
investments the scheme would buy. Large sections of investors lack the time or the knowledge to be
able to make portfolio choices. Therefore, lack of portfolio customization is not a serious limitation in
most cases

No control over costs: All the investor's moneys are pooled together in a scheme. Costs incurred for
managing the scheme are shared by all the Unit holders in proportion to their holding of Units in the
scheme. Therefore, an individual investor has no control over the costs in a scheme. SEBI has however
imposed certain limits on the expenses that can be charged to any scheme. These limits, which vary with
the size of assets and the nature of the scheme.

Birla

Birla Sun Life equity fund is a diversified equity fund, started in 1998. The fund has performed well in its
time horizon, as it gives 306% of return in the tear of 2013-14, which is among highest in the diversified
equity fund. The funds gives a good support to its long term investors. For the short term investors also
the fund is so favourable as it give 78% of return in 2005-06 period. The fund is little bit down for short
term investors in the period 2008-09 and 2011-12.

Overall the fund has mainly focused long and medium term investors than short term investors.

SBI

SBI magnum equity fund is a large cap – oriented fund, started in the year of 1991. Which is one of the
oldest fund of SBI. The fund is a consistent performer mainly supported long term investors. The fund
has given 306% and 339% of return in the period 2012-13 and 2013-14 respectively. The fund is also a
fair supporter for short term investor in the initial and middle phase of the 10 year period. As the NAV is
lower investors can buy more units with lesser money

Concluding the fund is mostly favoured to long term investors.

Reliance

The fund has given well support to long and short term investors as the fund has given 395% and 375%
of return in the 2010-11 and 2013-14 periods respectively. Which is of highest among the funds
compared here. As in the period 2008-09 the fund shown a downward for short and medium investors.
For the last 5 years the fund has given return in 300s, which is of a good period for a long term investor
to take profits.

After all the fund is most with the long term as well as short term investors.
Conclusion

For a start-up investor mutual fund investment method is more favourable and affordable, as risk is low
compared to direct investing.

For an investor with lessor money, he/she should go for mutual fund investing as NAV is lower than the
price of a stock.

If an investor wants to make profits out of speculation then he should choose direct investing in equity
shares.

Investing in direct equities makes an investor to study more about the company, the financial market,
and the economy.

People need a systematic way of investing should go for mutual fund investing.

Investing with a fixed income strategy, should choose mutual fund as an investment choice.

Short term as well as medium term investors should choose direct equity investing as an investment
choice.

Mutual fund investing is termed as a long term horizon of getting a good return, as the fund is going in a
systematic way.

If an investor has got time in making a market study and managing his/her portfolio, should invest in
equity shares directly, otherwise go for mutual fund investing.

If an investor like in buying and selling stocks, managing the stocks in his portfolio should choose direct
investing in equity stocks.