Faculty of Management Studies

Haridwar

SUMMER TRAINING PROJECT

July 2010

“Perception of people towards investment

and various investment avenues”

Girish Chandra
MBA (Finance)
FMS, GKUV

DECLARATION
 I, GIRISH CHANDRA, student of MBA (FINANCE) from FACULTY OF

MANAGEMENT STUDIES, G.K.U.V. hereby declare that I have

completed this project on " Perception of people towards

investment and various investment avenues” in the academic

year 2009-11. The information submitted is true and original to the

best of knowledge.

Signature of student
 ACKNOWLEDGEMENT

The most pleasant part of any project is to express gratitude and

bestow honor towards all those who directly or indirectly contributed
to the smooth flow of the project work and this being the good
opportunity; I don’t want to miss it.

Sincere acknowledgement is due foremost to the MR. PRITPAL

SAHOTA, ASM-RELIGARE SECURITIES LTD. Who endowed me with
the valuable opportunity to explore so interesting and a critical topic
as is the subject of the present report.

I thank my mentor Mr. O.P Gupta for his valuable inputs in the
research and spending so much of valuable time and effort in helping
with my topic.

I also wish to express sincere gratitude to all the respondents of

the project without the kind of co-operation of whom this work would
not have been possible.

GIRISH
CHANDRA
 CONTENTS

• Introduction

• Investment

• Investment need of an investor

• Investment options in India

• Research Methodology

• Data Analysis and Interpretation

• Suggestions and Recommendations

• Conclusion

• Bibliography

Appendix: Questionnaire

INTRODUCTION
 Savings form an important part of the economy of any nation. With the savings
invested in various options available to the people, the money acts as the driver for
growth of the country. Indian financial scene too presents a plethora of avenues to the
investors. Though certainly not the best or deepest of markets in the world, it has
reasonable options for an ordinary man to invest his savings.
Investment benefits both economy and the society. It is an outgrowth of economic
development and the maturation of modern capitalism. For the economy as a whole,
aggregate investment sanctioned in the current period is a major factor in determining
aggregate demand and, hence, the level of employment. In the long term, current
investment determines the economy’s future productive capacity and, ultimately, a
growth in the standard of living. By increasing personal wealth, investing can
contribute to higher overall economic growth and prosperity. The process of investing
helps to create financial markets where companies can raise capital. This too,
contributes to greater economic growth and prosperity. Specific types of investments
provide other benefits to society as well.

INVESTMENTS
The dictionary meaning of investment is to commit money in order to earn a financial
return or to make use of the money for future benefits or advantages. People commit
money to investments with an expectation to increase their future wealth by investing
money to spend in future years. For example, if you invest Rs. 1000 today and earn 10
%over the next year, you will have Rs.1100 one year from today.

An investment can be described as perfect if it satisfies all the needs of all investors.
So, the starting point in searching for the perfect investment would be to examine
investor needs. If all those needs are met by the investment, then that investment can
be termed the perfect investment. Most investors and advisors spend a great deal of
time understanding the merits of the thousands of investments available in India. Little
time, however, is spent understanding the needs of the investor and ensuring that the
most appropriate investments are selected for him.

The Investment Needs of an Investor

By and large, most investors have eight common needs from their investments:
1. Security of Original Capital;
2. Wealth Accumulation;
3. Comfort Factor;
4. Tax Efficiency;
5. Life Cover;
6. Income;
7. Simplicity;
8. Ease of Withdrawal;
9. Communication.

Security of original capital: The chance of losing some capital has been a primary
need. This is perhaps the strongest need among investors in India, who have suffered
regularly due to failures of the financial system.
Wealth accumulation: This is largely a factor of investment performance, including
both short-term performance of an investment and long-term performance of a
portfolio. Wealth accumulation is the ultimate measure of the success of an investment
decision.

Comfort factor: This refers to the peace of mind associated with an investment.
Avoiding discomfort is probably a greater need than receiving comfort. Reputation
plays an important part in delivering the comfort factor.

Tax efficiency: Legitimate reduction in the amount of tax payable is an important part
of the Indian psyche. Every rupee saved in taxes goes towards wealth accumulation.

Life Cover: Many investors look for investments that offer good return with adequate
life cover to manage the situations in case of any eventualities.

Income: This refers to money distributed at intervals by an investment, which are

usually used by the investor for meeting regular expenses. Income needs tend to be
fairly constant because they are related to lifestyle and are well understood by
investors.

Simplicity: Investment instruments are complex, but investors need to understand

what is being done with their money. A planner should also deliver simplicity to
investors.

Ease of withdrawal: This refers to the ability to invest long term but withdraw funds
when desired. This is strongly linked to a sense of ownership. It is normally triggered
by a need to spend capital, change investments or cater to changes in other needs.
Access to a long-term investment at short notice can only be had at a substantial cost.
Communication: This refers to informing and educating investors about the purpose
and progress of their investments. The need to communicate increases when
investments are threatened.

• Security of original capital is more important when performance falls.

• Performance is more important when investments are performing well.
• Failures engender a desire for an increase in the comfort factor.

Perfect investment would have been achieved if all the above-mentioned needs had
been met to satisfaction. But there is always a trade-off involved in making
investments. As long as the investment strategy matches the needs of investor
according to the priority assigned to them, he should be happy.
The Ideal Investment strategy should be a customized one for each investor depending
on his risk-return profile, his satisfaction level, his income, and his expectations.
Accurate planning gives accurate results. And for that there must be an efficient and
trustworthy roadmap to achieve the ultimate goal of wealth maximization.

Choosing the Right Investment Options

After understanding the concept of investment, the investors would like to know how
to go about the task of investment, how much to invest at any moment and when to
buy or sell the securities, This depends on investment process as investment policy,
investment analysis, valuation of securities, portfolio construction and portfolio
evaluation and revision. Every investor tries to derive maximum economic advantage
from his investment activity.
For evaluating an investment avenues are based upon the rate of return, risk and
uncertainty, capital appreciation, marketability, tax advantage and convenience of
investment. The following Table should give the clear picture relating to the investors’
investment decisions in various financial market instruments. The choice of the best
investment options will depend on personal circumstances as well as general market
conditions. For example, a good investment for a long-term retirement plan may not be
a good investment for higher education expenses. In most cases, the right investment is
a balance of three things: Liquidity, Safety and Return.

Source- Delhi Business Review X Vol. 8, No. 1 (January - June 2007)

Investment Options in India

Source-Delhi Business Review X Vol. 8, No. 1 (January - June 2007)

Fixed Deposits – They cover the fixed deposits of varied tenors offered by the
commercial banks and other non-banking financial institutions. These are generally a
low risk prepositions as the commercial banks are believed to return the amount due
without default. By and large these FDs are the preferred choice of risk-averse Indian
investors who rate safety of capital & ease of investment above all parameters. Largely,
these investments earn a marginal rate of return of 6-8% per annum.

Government Bonds – The Central and State Governments raise money from
the market through a variety of Small Saving Schemes like national saving
certificates, Kisan Vikas Patra, Post Office Deposits, Provident Funds, etc.
These schemes are risk free as the government does not default in payments.
But the interest rates offered by them are in the range of 7% - 9%.

Money-back insurance - Insurance in India is mostly sold and bought as

investment products. They are preferred because of their add-on benefits like
financial life-cover, tax-savings and satisfactory returns. Even if one does not
manage to save money and invest regularly in financial instruments, with
insurance, the policyholder has no choice. If he does not pay his premiums on
time, his insurance cover will lapse. Money-back Insurance schemes are used
as investment avenues as they offer partial cash-back at certain intervals. This
money can be utilized for children’s education, marriage, etc.

Endowment Insurance – These policies are term policies. Investors have to

pay the premiums for a particular term, and at maturity the accrued bonus and
other benefits are returned to the policyholder if he survives at maturity.

Bullion Market – Precious metals like gold and silver had been a safe heaven
for Indian investors since ages. Besides jewellery these metals are used for
investment purposes also. Since last 1 year, both Gold and Silver have highly
appreciated in value both in the domestic as well as the international markets. In
addition to its attributes as a store of value, the case for investing in gold
revolves around the role it can play as a portfolio diversifier.

Stock Market – Indian stock markets particularly the BSE and the NSE, had
been a preferred destination not only for the Indian investors but also for the
Foreign investors. Although Indian Markets had been through tough times due
to various scams, but history shows that they recovered very fast. Many types of
scrip had been value creators for the investors. People have earned fortunes
from the stock markets, but there are people who have lost everything due to
incorrect timings or selection of fundamentally weak companies.

Real Estate- Returns are almost guaranteed because property values are
always on the rise due to a growing world population. Residential real estate is
more than just an investment. There are more ways than ever before to profit
from real estate investment.

Mutual Funds - There is a collection of investors in Mutual funds that have

professional fund managers that invest in the stock market collectively on behalf
of investors. Mutual funds offer a better route to investing in equities for lay
investors. A mutual fund acts like a professional fund manager, investing the
money and passing the returns to its investors. All it deducts is a management
fee and its expenses, which are declared in its offer document.

Unit Linked Insurance Plans - ULIPs are remarkably alike to mutual funds in
terms of their structure and functioning; premium payments made are converted
into units and a net asset value (NAV) is declared for the same. In traditional
insurance products, the sum assured is the corner stone; in ULIPs premium
payments is the key component.
Need for the study:
To study the perception of the people about investment of their savings.
To understand basic requirement of the common man and their view towards
investment.
REVIEW OF LITERATURE

Psychology of Investments and Investor’s Preferences

Every individual investor must follow three principles of investing: using a long-term
investing approach, following the right strategy to maximize the return on investment
and proper allocation of investible funds. While applying these three principles, an
individual investor has to confront his/her demographics, lifestyle and investment
psychology. Whether the investor's age or occupation or family income has a role of
play in making choice of investment avenues? Is the investor choice affected by his
overconfidence, reference group and framing of the available alternatives? The
knowledge of all these aspects is imperative for all progressive investors, researchers,
financial consultants, academicians, students and the marketer of the financial
products.
Author:
Dr. (Mrs.) Sushant Nagpal

Basics Of investment-By Dr.A.P.Dash, Sr.Faculty, PMI

In this paper he discusses the basic of investment and need for investment. Investment
benefits both economy and the society. It is an outgrowth of economic development
and the maturation of modern capitalism. For the economy as a whole, aggregate
investment sanctioned in the current period is a major factor in determining aggregate
demand and, hence, the level of employment. In the long term, current investment
determines the economy’s future productive capacity and, ultimately, a growth in the
standard of living. By increasing personal wealth, investing can contribute to higher
overall economic growth and prosperity.

An Investors’ requirements in Indian securities market

By-K.Balanaga Gurunathan Published in Delhi Business review.

A report on financial planners in the growing economy like India

By- Indian Institute of Planning and Management-2006
OBJECTIVES OF THE STUDY:

PRIMARY OBJECTIVE
To Study the various investment avenues and the investors risk preference towards it.

SECONDARY OBJECTIVES
To find out the general demographic factors of the investors dealing in capital market.
To find out the preference level of investors on various Capital Market instruments.
To find out the type of risk which are considered by the investors?
To find out the ways through which the investors minimizes their risk.
RESEARCH METHODOLOGY
Research Design
A Research design is purely and simply the framework of plan for a study that
guides the collection and analysis of data. The study is intended to find the investors
preference towards various investment avenues. The study design is descriptive in
nature.
TYPE OF RESEARCH- DESCRIPTIVE RESEARCH
Descriptive study is a fact-finding investigation with adequate interpretation. It
is the simplest type of research and is more specific. Mainly designed to gather
descriptive information and provides information for formulating more sophisticated
studies.
Sampling Design
Selection of study area: The study area is in Indore.
Selection of the sample size: 100
Sampling Methods
 Convenience method of sampling is used to collect the data from the
respondents. Researchers or field workers have the freedom to choose whomever they
find, thus the name “convenience”. About 100 samples were collected from Indore
city and most of the respondents were customers coming in to financial hubs and
commercial complexes.
Formulation of the questionnaire

Data collection

Primary data – collected through Structured Questionnaire.

Secondary data – Earlier records from journals, magazines and other sources.

Tools used for analysis

Percentage analysis
Chi-square test
Kendall test
ANOVA
Correlation Analysis
Multiple Response Table
Data Analysis and interpretatrion:-

Age of the respondent :-

Table5.1
Age
% Of respondent
20-30 25
31-40 36
41-50 27
12
50 and above
100
Total

% Of respondent

50 and
above
20-30
12% 25% 20-30
41-50 31-40
27% 41-50
50 and above
31-40
36%
 Fig- 5.3

Income Group of the Respondent

Table5.2: Income Group of the Respondent

Income group % of Respondent
Bellow 1 lac 32
1-5 lac 61
5-10 lac 7
10 lac and above -

5-10
7%
0- 1
32%
0- 1
1-5
5-10

1-5
61%

Fig-5.4
Fig-5.4
According to survey most of the Respondent income group is above 1 lacks to 5
lacs.

Qualification of the respondents:-

Table5.3 Qualification
Qualification Investor (%)

High School 3

Graduate 48

Post Graduate 14

Professional 26

Others 9

High School
Others 3%
9%
High School
Professional Graduate
26% Graduate Post Graduate
48% Professional
Others
Post
Graduate
14%

Fig-5.5
Different Investment Avenues:-

Table 5.4- Individual preference in the investment avenues

Categories Highly Preferred (%)
Share market 8
Mutual fund 17
Insurance 29
Bank 28
Property 18
Total 100

18% 8%
17%

28%
29%

Share market mutual fund Insurance bank Property

Fig-5.6

Analysis:-The survey result shows that individual does not chose equity as highly
preferred investment tool. Only 8% people have preference on other investment tool.
Investment Horizon

Table 5.5: Type of investment preferred

Term Investment (%)
SHORT TERM 31
LONG TERM 40
BOTH 29
Total 100

45
40
40
35 31
29
30
25
Series1
20
15
10
5
0
SHORT TERM LONG TERM BOTH

Fig- 5.7

Analysis: The survey result shows that most of the people invest in the market
for long term horizon.
Respondent who have invested in equity market

Table5.6: invested in the equity market

Yes No
19 81

Analysis:- According to survey largely population is untouched with equity

investment only 19% respondent has invested in the equity market.

Respondent first source of awareness

Table5.7: Percentage of Respondent first source of awareness

Medium/ channel Investor (%)

Investor friends and relative 37

Advertisement and 26
hoardings
Brokerage firm 16

Banks 21

Analysis:- According to survey most of the people aware about equity market through
the investor friends and relative.
Income invested in equity

Table 5.8 Percentage of income invest in equity shares

Percentage of income Percentage of investor
Below 5% 22
5 to 10% 44
10 to 20% 27
20 to 30% 6

Percentage of investor

50
44
45
40
35
30 27
25 22
20
15
10 6
5
0
Below 5% 5 to 10% 10 to 20% 20 to 30%

Fig-5.8

Analysis :- The survey result shows that most of the people invest in the equity
market 5-10% of income.

Awareness about Religare securities

Table 5.9 Respondent who aware about Religare

 Yes No

73% 27%

Know about Religare

27

Yes
No

73

Fig- 5.9

Analysis:-
According to the findings Most of the people (73%) know about the Religare
securities.

Preference for selecting broking firm

Table5.10: investor preference while selecting broking firm

Category Rank 1
Brokerage 42
services 30
Research calls 16
Others 12

Analysis : according to survey while selecting the broker firm people gives first
preference to brokerage charge (42%) then other services.

SUMMARY OF FINDINGS:
• From Correlation test, it is found there exist a positive correlation between the
income percentage on investment and the participation in cash market.
• From One Way ANOVA it is found that there is significant difference between
the annual income and the income percentage towards investment.

• From the Multiple Response test, it is found that the investors who invest around
5-10% of their investment mostly considers the market risk(18%) as the major risk
which prevails in the market.

• From the Multiple Response test, it is found that the investors whose investment
is around 10% of their income, consider that the affordable margin amount for
investment in Derivatives is up to Rs10000/-.

• Most of the aggressive investors are in 21-40 yr. age group. They should be
concentrated as prospective clients.

LIMITATIONS OF THE STUDY

 This is a two months study only.

 Data available was not sufficient, there was lack of availability of data as
most of it was confidential for the companies.
  Sample size is two small.

 Language is one of the construe during questioner filling

 Portfolio requires the churning of proportion of investment in each sector

as well as company from time to time to give better returns.

CONCLUSION
In the current scenario, investing is very important and investing in stock markets is a
major challenge ever for professionals.
The young people should start investing earlier so that they can reap the benefits of
investing in future.
People should keep their eye open and keep updating themselves about various
investment avenues so that they can get safe returns.
References:
Marketing Research by G C Beri- third edition – © 2000, Tata McGraw-Hill
Publishing Company Ltd.
Investment Management- V.K. Bhalla.
www.nseindia.com
www.stockedge.com
www.religareonline.com
Questionnaire
Name:
1. Age
(a) 20-30 [ ] (b) 31-40 [ ] (c) 41-50 [ ] (d) 51 & above [ ]

2. Gender
(a) Male [ ] (b) Female [ ]

3. Educational qualification
(a) High School [ ] (b) Graduate [ ] (c) Post Graduate [] (d)
Professional [ ] (e) Others [ ]

4. Annual income
(a) Below 1, 00,000 [ ] (b) 1, 00,000-5, 00,000 [ ]
 (c) 5, 00,000-10, 00,000 [ ] (d) Above 10, 00,000 [ ]

5. How did you come to know about equity related investment?

(a) Brokerage firms (b) investor friends & relatives
(c) Advertising & hoardings (d) banks

6. Which factor do you consider most important while choosing an investment option?
(a) How quickly will I be able to increase wealth?
(b) The opportunity for steady growth
(c) The amount of monthly income the investment will generate
(d) The safety of investment principal

7. What is the investment horizon you prefer?

(a) Short term investment
(b) Long term investment
(c) Both

9. Please indicate your preference on the following investment avenues

Categories Highly Favorable Neutral Unfavorable Highly

Favorable Unfavorable
(a) Share Market
(b)Mutual Funds
(c) Insurance
(d)Bank Deposits
(e) Property

10. Do you want to invest in share market?

(a) Yes (b) No

IF YES THEN PLEASE ANSWER………………………………………………………………………..

11. What is your percentage of your income do you invest in equity shares
a) Below 5%
 b) 5 – 10 %
c) 10 – 20%
d) Above 20%

12. Have you heard about Religare Securities Ltd.?

(a) Yes (b) No

13. You are associated with which broking firm?

………………………………………………………………………..

14. Please indicate your preference for selecting broking firm….

Categories Rank-1 2 3 4 5
(a) Brokerage
(b) Services
(c)Research (Calls)
(d)Additional Features

THANK YOU