investor perception on investment avenues

7/24/2019 investor perception on investment avenues

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A REPORT ON

RESEARCH PROJECH ON INVESTORS PERCEPTION ON

INVESTMENT AVENUES

SUBMITTED BY

V.VENKATRAO

Reg. no: 2011130020

SUBMITTED TO

Dr. T. VASUDHA

Project co-coordinator

CENTER FOR MANAGEENT AND TECHNOLOGY

Visakhapatnam


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DECLARATION

I hereby declare that this research project entitled INVESTORS PERCEPTION

ON INVESTMENT AVENUES has been done by me during the year 2013 in

partial fulfillment of requirement for the Post GraduationDiploma in Management

awarded by AICTE.

I also declare that this project is a result of my own efforts and that it has not been

submitted to any other University for the award of a Degree or Diploma before or

published.

Place: Visakhapatnam

Date: 28-05-2013 (V.venkatrao)


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CONTENTS

1. INTRODUCTION

1.1 Introduction to investment

1.2 Types of an investment avenues

1.3 Non marketable financial assets

1.4 Bonds

1.5 Mutual funds

1.6 Real estate

1.7 Equity shares1.8 Money market instruments

1.9 Life insurance polices

1.10 Bullion market

1.11 Financial derivatives

2. RESEARCH METHODOLOGY

2.1 Statement of the problem

2.2 Review of literature

2.3 Need for study

2.4 Objectives of the study

2.5 Hypothesis

2.6 Research design

2.7 Tools of data collection

2.8 Method of analysis

2.9 Limitations of the study


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3. INDUSTRY ANALYSIS

3.1 Indian financial market

3.2 Classification of financial markets

3.3 Money market

3.4 Money market

3.4.1Primary Market

3.4.2Secondary market

4. ANALYSIS AND INTERPRETATION

5. FINDINGS AND SUGGESTIONS

6. CONCLUSION

7. BIBLOGRAPHY

8. ANNEXURE


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CHAPTER-1

INTRODUCTION


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1.1INTRODUCTION TO INVESTMENT

The money one earns partly spent and the rest is saved to meeting future

expenses, instead of keeping savings idle one may like to use savings in order to

get returns on it in the future, this is called as investment. In an economic sense,

an investment is the purpose of goods that are not consumed today but are used

in the future to create wealth. In finance, an investment is a monitory asset

purchased with the idea that the asset will provide income in the future or

appreciate and be sold at a higher price. Here earnings will not help one to secure

the future, so it becomes important to invest.

One of the important reasons why one needs to invest wisely is to meet the

cost of inflation. Inflation is the rate at which the cost of living increases. The cost

of living simply what it costs to buy goods and services you need to live. Inflation

causes money to lose value because it will not buy the same amount of a good or

service in the future as it does now or did in the past. The sooner one starts

investing the better. By investing early one allows ones investments more time to

accumulating the principal and the interest or dividend earned on it. Year after

year.

The dictionary meaning of investment is to commit money in order to earn a

financial return or to make use of money for future benefits or advantages. People

commit money to investments with expectations 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.


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1.2. TYPES OF AN INVESTMENT AVENUE

Figure 1.1: Various Investment Alternatives

Figure 1.1 shows various investment alternatives which are explained

below. One can invest money in different types of instruments. These instruments

can be financial or non financial in nature. They are many factors that affect one`s

choice of investment. Millions of Indians buy Fixed Deposits, post office savings

certificates, stocks, bonds or mutual funds, purchase gold, silver, or make similar

Investments. They all have a reason for investing their Money. Let us first

understand the basics of some of some of the popular investment avenues.


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1.3Non marketable financial assets: A good portion of financial assets is

represented by non marketable financial assets. These can be classified into the

following broad categories.

Bank deposits: The simplest of investment avenues, by opening a bank account

and depositing money in it one can make a bank deposit. There are various kinds

of bank accounts: current accounts, savings account and fixed deposit account.

The interest rate on fixed deposits various with the term of the deposit, in general

it is lower for fixed deposits for shorter term and higher for fixed deposits of longer

term. Bank deposits enjoy exceptionally high liquidity.

Post office savings account: A post office savings account is similar to a

savings bank account. The interest rate is percent for annum.

Post office time deposits (POTD`S): similar to fixed deposits of commercial

banks, POTD can be made In multiplies of 50 without any limit. The interest rates

on POTD`S are, in general, slightly higher than those on bank deposits. The

interest rate is calculated half-yearly and paid annually.

Monthly income scheme of the post office (MISPO): A popular scheme of the

post office, the MISPO is meant to provide regular monthly income to the

depositors. The term of the scheme is 6 years. The minimum amount of

investment is 1,000. The maximum investment can be 3, 00,000 in a singleaccount or 6, 00,000 in a joint account. The interest rate is 8.0 percent for annum,

payable monthly. A bonus of 10 percent is payable on maturity.

Kisan vikas patra (KVP): A scheme of the post office, for which the minimum

amount of investment is 1,000. There is no maximum limit. The investment

doubles in 8 years and 7 months. Hence the compound interest rate works out to

8.4 percent there is a withdrawal facility after 2 years 6 months.


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National savings certificate: Issued at the post offices, national savings

certificate comes in denominations of 100, 500, 1000, 5000 and 10000. It has a

term of 6 years. Over his period Rs 100 becomes Rs. 160.1. Hence the

compound rate of return works out to 8.16 percent.

Company deposits: many companies large and small solicit fixed deposits from

the public. Fixed deposits mobilized by manufacturing companies are regulated by

the company law board and fixed deposits mobilized by finance company are

regulated by the reserve bank of India. The interest rates on company deposits

are higher than those on bank deposits, but so is risk.

Employee provided fund scheme: A major vehicle of savings for salaried

employees, where each employee has a separate provident fund account in which

both the employer and employee are required to contribute a certain minimumamount on a monthly basis.

Public Provident Fund Scheme: One of the most attractive investment avenues

available in India. Individuals and HUFs can participate in this scheme. A PPF

account may be opened at any branch of State Bank of India or its subsidiaries or

at specified branches of the other public sector banks. The subscriber to a PPF

account is required to make a minimum deposit of 100 per year. The maximum

permissible deposit per year is 70,000. PPF deposits currently earn a compound

interest rate of 8.0 percent per annum, which is totally exempt from taxes.

1.4 Bonds: Bonds are fixed income instruments which are issued for the purpose

of raising capital. Both private entities, such as companies, financial institutions,

and the central or state government and other government institutions use this

instrument as a means of garnering funds. Bonds issued by the Government carry

the lowest level of risk but could deliver fair returns. Many people invest in bonds

with an objective of earning certain amount of interest on their deposits and/or to

save tax. Bonds are considered to be a less risky investment option and are

generally preferred by risk-averse investors. Bond prices are also subject to

market risk. Bonds may be classified into the following categories:


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Government securities: Debt securities issued by the central government state

government and quasi government agencies are referred as gilt edge securities. It

has maturities ranging from 3-20 years and carry interest rate that usually vary

between 7 to 10 percent.

Debentures of private sector companies: Debentures are viewed as a mixture

of having a shareholding and a fixed interest loan. Debenture holders are normally

entitled to a return equivalent to a fixed percentage of their initial investment. The

security inherent in debentures makes them a safer investment than shares.

Preference shares: Investing in shares is safer and dividends are assured every

yearn Savings bonds.

1.5 Mutual funds: A mutual fund allows a group of people to pool their money

together and have it professionally managed, in keeping with a predetermined

investment objective. This investment avenue is popular because of its cost-

efficiency, risk-diversification, professional management and sound regulation. There

are three broad types of mutual fund schemes classified on basis of investment

objective:

Equity schemes: The aim of growth funds is to provide capital appreciation over

the medium to long- term. Such schemes normally invest a major part of their

corpus in equities. Such funds have comparatively high risks. These schemes

provide different options to the investors like dividend option, capital appreciation,

etc. and the investors may choose an option depending on their preferences.

Growth schemes are good for investors having a long-term outlook seeking

appreciation over a period of time. Debt schemes: The aim of income funds is to provide regular and steady income

to investors. Such schemes generally invest in fixed income securities such as

bonds, corporate debentures, Government securities and money market

instruments. Such funds are less risky compared to equity schemes. These funds

are not affected because of fluctuations in equity markets. However, opportunities


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Of capital appreciation are also limited in such funds. The NAVs of such funds are

affected because of change in interest rates in the country. If the Interest rates

fall, NAVs of such funds are likely to increase in the short run and vice versa.

However, long term investors may not bother about these fluctuations.

Balanced schemes: The aim of balanced funds is to provide both growth and

regular income as such schemes invest both in equities and fixed income

securities in the proportion indicated in their offer documents. These are

appropriate for investors looking for moderate growth. They generally invest 40-

60% in equity and debt instruments. These funds are also affected because of

fluctuations in share prices in the stock markets. However, NAVs of such funds

are likely to be less volatile compared to pure equity funds.

1.6 Real Estate: Residential real estate is more than just an investment. There are

more ways than ever before to profit from real estate investment. Real estate is a

great investment option. It can generate an ongoing income source. It can also rise

in value overtime and prove a good investment in the cash value of the home or

land. Many advisors warn against borrowing money to purchase investments. The

best way to do this is to save up and pay cash for the home. One should be able to

afford the payments on the property when the property is vacant, otherwise the

property may end up being a burden instead of helping to build wealth.

1.7 Equity Shares: Equities are a type of security that represents the ownership in a

company. Equities are traded (bought and sold) in stock markets. Alternatively, they

can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the

company. Investing in equities is a good long-term investment option as the returns

on equities over a long time horizon are generally higher than most other investment

avenues. However, along with the possibility of greater returns comes greater risk.

1.8 Money market instruments: The money market is the market in which short

term funds are borrowed and lent. These instruments can be broadly classified as:


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Treasury Bills: These are the lowest risk category instruments for the short

term. RBI issues treasury bills [T-bills] at a prefixed day and for a fixed

amount. There are 4 types of treasury bills: 14-day T-bill, 91-day T-bill, 182-

day T-bill and 364-day T-bill.

Certificates of Deposits: After treasury bills, the next lowest risk category

investment option is certificate of deposit (CD) issued by banks and financial

Institution (Fl). A CD is a negotiable promissory note, secure and short term,

of up to a year, in nature. Although RBI allows CDs up to one-year maturity,

the maturity most quoted in the market is for 90 days.

Commercial Papers: Commercial papers are negotiable short-term

unsecured promissory notes with fixed maturities, issued by well-rated

organizations. These are generally sold on discount basis. Organizations

can issue CPs either directly or through banks or merchant banks. These

instruments are normally issued for 30/45/60/90/120/180/270/364 days.

Commercial Bills: Bills of exchange are negotiable instruments drawn by

the seller or drawer of the goods on the buyer or drawee of the good for the

value of the goods delivered. These are called as trade bills and when they

are accepted by commercial banks they are called as commercial bills. If the

bill is payable at a future date and the seller needs money during the

currency of the bill then the seller may approach the bank for discountingthe bill.

1.9 Life insurance policies: Insurance is a form of risk management that is

primarily used to hedge the risk of a contingent loss. Insurance is defined as

the equitable transfer of the risk of a loss, from one entity to another, in

exchange for a premium. An insurer is a company that sells insurance;

insured or the policyholder is a person or entity buying the insurance. Theinsurance rate is a factor that is used to determine the amount which is to

be charged for a certain amount of insurance coverage, and is called the

premium. It can be classified as:


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Money-back Insurance: 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 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.

1.10 Bullion Market: Precious metals like gold and silver had been a safe haven for

Indian investors since ages. Besides jeweler 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.

1.11 Financial Derivatives: Derivatives are contracts and can be used as an

underlying asset. Various types of Derivatives are:

Forwards:A forward contract is a customized contract between two entities, where

settlement takes place on a specific date in the future at today's pre-agreed price.

Futures:A futures contract is an agreement between two parties to buy or sell an

asset at a certain time in the future at a certain price. Futures contracts are special

types of forward contracts in the sense that the former are standardized exchange

Traded contracts

Options: Options are of two types - calls and puts. Calls give the buyer the right but

not the obligation to buy a given quantity of the underlying asset, at a given price on

or before a given future date. Puts give the buyer the right, but not the obligation to

sell a given quantity of the underlying asset at a given price on or before a given

date.

Swaps: Swaps are private agreements between two parties to exchange cash flows

in the future according to a prearranged formula. They can be regarded as portfolios

of forward contracts. E.g. Currency swaps, interest swaps.


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CHAPTER 2

RESEARCH

METHODOLOGY


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2.1 STATEMENT OF THE PROBLEM

This study on investor's behavior is an attempt to know the perception and the

characteristics of the investors so as to understand their preference with respect

to their investments. The main focus of the study is to discover the influence of

Demographic factors like gender and age on risk tolerance level of the investor.

The study mainly concentrates on the factors that influence an individual

investor before making an investment. It also studies the various patterns in

which investors like to invest their money based on their risk tolerance level and

other demographic factors like income level, occupation etc.

2.2 REVIEW OF LITERATURE

The literature review section examines the importance of research

studies, company data or industry reports that serve as a foundation for the

setup of study. The research dimension of the related literature and the relevant

information begins from an explanatory perspective, approaching towards

specific studies which do related to judge the limitations and informational gaps

in data from the secondary sources. This analysis may reveal conclusions from

past studies to realize the reliability of the secondary sources and their

credibility. This in turn enables one to rely on a comprehensive review for the

study.

2.3 NEED FOR STUDY

Investing money is a crucial and deciding the avenues where to invest needs a

lot of planning. In India people are more conservative and hence prefer

investments that are less risky. Similarly there are other demographic factors

like age, income level, gender which affect their decision. As the availability of

financial products increase, perception of investors towards such avenues

changes over a period of time. It becomes important for a marketer to

understand the perception of investors towards investment avenues to


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Successfully pitch the product. If the marketer is able to understand the mindset

of investor towards a product then he/she will be in a position to market the

product. This report attempts to study the behavior of Indian investors while

making an investment. Hence the need for this study arises to understand what

exactly an Indian investor thinks before investing his/her money and how much

risk he/she is willing to take.

2.4 OBJECTIVES OF THE STUDY

1 Primary Objective

To study the investors perception on investments

To study the objectives of investment plan of an investors

To study the demographic information of investors

2 Secondary Objectives

To know the preferred investment avenues of investors

To identify the preferred sources of information influencing investment

decisions

To understand the risk tolerance level of the investors and suggest a

suitable portfolio

To study the dependence/independences of the demographic factors

(Gender, Age, income level) of the investor and his/her risk tolerancelevel.

2.5 HYPOTHESIS

A hypothesis describes the relationship between or among variables. A

good hypothesis is one that can explain what it claims to explain, is testable

and has greater range, probability and simplicity than its rivals. There are two

approach of hypothesis testing:


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1) Classical or sampling theory statistics and 2) The Bayesian approach

In the present dissertation chi square test has been used to find out the

dependence/independence of various factors that influence investment

decision. Hypothesis has been found between following factors:

Gender and risk tolerance of respondents

Age and preferred investment avenues by the respondents

Income and investment avenues preferred by the respondents

Age of respondents and time horizon for investment

Age and risk tolerance of the respondents

2.6 RESEARCH DESIGN

Sample description

The sample was drawn from the population of the potential investors from

Visakhapatnam. A survey was conducted to understand the investor's behavior

with the help of questionnaire. It was carried out with a sample size of 100

investors.

2.7 TOOLS OF DATA COLLECTION

Primary data: The data has been collected directly from respondent with the

help of structured questionnaires.

Secondary data: The secondary data has been collected from various

magazines, journals, newspapers, text books and related websites


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2.8 METHOD OF ANALYSIS

Statistical techniques like, simple percentage method are used to analyze

and interpret raw data. Hypothesis was used to show the

dependency/independency of various factors.

After collecting the data its variable having defined character, it was

tabulated and analyzed with the help of charts and graphs in Microsoft Excel.

2.9 LIMITATIONS OF STUDY

Sample size is small because of the time constraint

Respondent may be hesitant to provide their investment details

Behavior of investors doesn't remain same for long time

Time for the study is limited


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CHAPTER3

INDUSTRY PROFILE


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3.1 INDIAN FINANCIAL MARKET

Money always flows from surplus sector to deficit sector. That means

persons having excess of money lend it to those who need money to fulfil their

requirement. Similarly, in business sectors the surplus money flows from the

investors or lenders to the businessmen for the purpose of production or sale ofgoods and services. So, we find two different groups, one who invest money or

lend money and the others, who borrow or use the money.

The financial markets act as a link between these two different groups. It

facilitates this function by acting as an intermediary between the borrowers and

lenders of money. So, financial market may be defined as 'a transmission

mechanism between investors (or lenders) and the borrowers (or users)

through which transfer of funds is facilitated'. It consists of individual investors,

financial institutions and other intermediaries who are linked by a formal trading

rules and communication network for trading the various financial assets and

credit instruments.

Financial market talks about the primary market, FDIs, alternative

investment options, banking and insurance and the pension sectors, asset

management segment as well. India Financial market happens to be one of the

oldest across the globe and is the fastest growing and best among all the

financial markets of the emerging economies. The history of Indian capital

markets spans back 200 years, around the end of the 18th century. It was at

this time that India was under the rule of the East India Company. The capital

market of India initially developed around Mumbai; with around 200 to 250

securities brokers participating in active trade during the second half of the 19th

century.


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3.2 CLASSIFICATION OF FINANCIAL MARKETS


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Figure 3.1: Classification of financial markets

Figure 3.1 shows the classification of f inancial markets. From thisfigure we

caninterpret that there are different ways of classifying financial market.

One is to classify financial market by the type of financial claim. The debt

Market is the financial market foe fixed claims (debtinstrument) and the

Equity market is the financial market for residual claims (equity

instruments)

The second way is to classify financial markets by the maturity of claims.

The market for short term financial claims is referred to as the money

market and the market for long term financial claims is referred to as the

capital market.

The third way to classify financial markets is based on whether the claims

represent new issues or outstanding issues. The market where issues sell

new claims is referred as primary market and the market where issues sell

outstanding claims is referred as secondary market.

The fourth way to classify financial markets is by the timing of delivery. A

cash or spot market is one where the delivery occurs immediately and

forward or futures markets are those markets where the delivery occurs at a

pre determined time in future.

The fifth way to classify financial markets is by the nature of its

organizational structure. An exchange traded market is characterized by a

centralized organization with standardized procedures and an over the

counter market is a decentralized market with customized procedures.

These markets are further explained in detail.


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3.3 MONEY MARKET

The money market is a market for short-term funds, which deals in

financial assets whose period of maturity is up to one year. It should be noted

that money market does not deal in cash or money as such but simply provides

a market for credit instruments such as bills of exchange, promissory notes,

commercial paper, treasury bills, etc. These financial instruments are close

substitute of money. These instruments help the business units, other

organizations and the Government to borrow the funds to meet their short-term

requirement.

Money market does not imply to any specific market place. Rather it

refers to the whole networks of financial institutions dealing in short-term funds,

which provides an outlet to lenders and a source of supply for such funds to

borrowers. Most of the money market transactions are taken place on

telephone, fax or Internet. The Indian money market consists of Reserve Bank

of India,Commercial banks, Co-operative banks, and other specialized financial

institutions. The Reserve Bank of India is the leader of the money market in

India. Some Non-Banking Financial Companies (NBFCs) and financial

institutions like LIC, GIC, UTI, etc. also operate in the Indian money market.

3.4 CAPITAL MARKET

Capital Market may be defined as a market dealing in medium and long-

term funds. It is an institutional arrangement for borrowing medium and long-

term funds and which provides facilities for marketing and trading of securities.

So it constitutes all long-term borrowings from banks and financial institutions,

borrowings from foreign markets and raising of capital by issue various

securities such as shares debentures, bonds, etc.

The market where securities are traded known as Securities market. It

consists of two different segments namely primary and secondary market. The

primary market deals with new or fresh issue of securities and is, therefore,

also known as new issue market; whereas the secondary market provides a

place for purchase and sale of existing securities and is often termed as stock

market or stock exchange.


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3.4.1 PRIMARY MARKET

The Primary Market consists of arrangements, which facilitate the procurement

of long-term funds by companies by making fresh issue of shares and

debentures. You know that companies make fresh issue of shares and/or

debentures at their formation stage and, if necessary, subsequently for the

expansion of business. It is usually done through private placement to friends,

relatives and financial institutions or by making public issue. In any case, the

companies have to follow a well-established legal procedure and involve a

number of intermediaries such as underwriters, brokers, etc. who form an

integral part of the primary market. You must have learnt about many initial

public offers (IPOs) made recently by a number of public sector undertakings

such as ONGC, GAIL, NTPC and the private sector companies like Tata

Consultancy Services (TCS), Biocon, Jet-Airways and so on.

3.4.2 SECONDARY MARKET

The secondary market known as stock market or stock exchange plays

an equally important role in mobilizing long-term funds by providing the

necessary liquidity to holdings in shares and debentures. It provides a place

where these securities can be encased without any difficulty and delay. It is an

organized market where shares and debentures are traded regularly with high

degree of transparency and security. In fact, an active secondary market

facilitates the growth of primary market as the investors in the primary market

are assured of a continuous market for liquidity of their holdings. The major

players in the primary market are merchant bankers, mutual funds, financial

institutions, and the individual investors; and in the secondary market you have

all these and the stockbrokers who are members of the stock exchange who

facilitate the trading.


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CHAPTER 4

ANALYSIS

AND

INTERPRETATION


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Data analysis and interpretation

Table 4.1: Gender wise classification of Respondents

Gender Number of

Respondents

Percentage (%)

Male 83 83

Female 17 17

Total 100 100

Interpretation:

Table 4.1 shows the Gender wise classification of Respondents. It was found

that 83% of the Respondents are men and the rest are females. Generally

males bear the financial responsibility in Indian society, and therefore they have

to make investment decisions to fulfill the financial obligations.

On the other hand females are not involved in such activities as majority of

them are busy with their household activities. Also there are very less houses

which depend on a female income most of them are male dominated

households. Hence investment activities are more seen in males than females.

83%

17%

Clasification of respondendts on basis

of gendermale female


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Table 4.2:Age wise classification of Respondents

Age( in years) Number of

Respondents

Percentage (%)

Below 25years 12 12

25-35years 20 20

35-45years 44 44

above 45years 24 24

Total 100 100

Interpretation: Table 4.2 shows the Age wise classification of Respondents. When it comes

to

age, it was found that 12% are young i.e. of age group below 35 years and 20%

of them are in the age group of 25 to 35. Other than these 44% of them belong

to age group of 35 to 45 and rest them belongs to age group above 45. This

shows that age group of 35 years an above are more interested in investments

while people below 25 years make less investments and above age of 45 and

would start planning for retirement.

23%

50%

27%

Clasification of respondents on the

basis of age

25-35 years 35-45 years Above 45 years


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Table 4.3: Classification of Respondents on the basis of their Marital Status

Marital

status

Number of

Respondents

Percentage (%)

Single 22 22

Married 78 78

Total 100 100

Interpretation:

Table 4.3 shows classification of Respondents on the basis of their Marital

Status. It was found that marital status of 78% of the Respondents was found to

be married and the rest 22% are unmarried. This is because a married

individual is considered to have dependents so they are involved in making

financial investments. Whereas Respondents who are unmarried mostly invest

to generate wealth but they do not have any financial responsibility.

22%

78%

clasification of respondendts onthe

basis of marital status

Single Married


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Table 4.4: Classification of Respondents on basis of Occupation

OCCUPATION NUBBER OF RESPONDENDTS

Business 13

government employee 30

home maker 3

private sector 38

self employee 15

student 1

Grand Total 100

Interpretation:

Table 4.4 shows classification of Respondents on basis of Occupation. From

the above graph indicates that 38% of the Respondents are from the private

sector, 30% of them are government employees, 15% of them are self

employees and rest is working in other sectors. Respondents who are

employed in government and private sectors they are investing more.

13

30

3

38

15

1

0

10

20

30

40

Total

Clasification of respondendts on basis of

occupation

business

government employee

home maker

private sector

sely employee

student


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Table 4.5: Classification of Respondents on basis of Annual Income

Annual Income Number of

Respondents

Percentage (%)

Below 2 Lakhs 10 14

2 Lakhs - 5 Lakhs 53 53

5 Lakhs - 7 Lakhs 21 21

7 Lakhs10 Lakhs 6 6

above 10 Lakhs 6 6

Total 100 100

Interpretation:

Table 4.5 shows the classification of Respondents on basis of Annual

Income. It was found that 53% of Respondents with annual earningsbetween 2to5 Lakhs are interested in investments because their savings are

more which they invest to generate wealth, 10% of them are earning below

2Lakhs annually, the other 21% are earning between 5 to 7 Lakhs in a year,

6% of them earn 7 to 10 Lakhs in an year but there were 6% of respondents

with annual income above 10 Lakhs per year.

10%

53%

21%

6% 6%

Below 2 lakhs 2 lakhs to 5

lakhs

5 lakhs to 7

lakhs

7 lakhs to 10

lakhs

Above 10 lakhs

Clasification of respondendts on thebasis of income level

Series1


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Table 4.6: Classification of Respondents on basis of Education Level.

Education level Number of

Respondents

Percentage (%)

10thclass 2 2

Intermediate 2 2

Graduate 41 41

PG 29 29And above 26 26

Total 100 100

Interpretation:

Table 4.6 shows the classification of Respondents on basis of Education Level. It

indicates that 41% of the Respondents covered in the study are graduates;29% Respondents are post graduates and 26% of the Respondents are above

qualification. Investors with graduate degree would be more exposed to market

situation which make them more interested in investments. Also post graduates

would have fair knowledge about investments. Whereas Respondents who are

undergraduates mostly do not invest due to unfamiliarity to investment avenues

or unavailability if information about investments.

2% 2%

41%

29%26%

0%

5%10%15%20%25%30%35%40%45%

Clasification of respondendts on the

basis of education level

Series1


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Table 4.7: Classification of Respondents on basis of Preferred Investment

Avenues (combination of investments)

Investment avenues Number of

Respondents

Percentage (%)

Fd`s 67 24.18

Ulip`s 19 6.85

Stock market 28 10.10Derivatives 3 1.08

Real estate 6 2.16

Gold 45 16.24

Ppf 29 10.46

Mutual funds 70 25.27

Post office MIS 8 2.88

bonds 2 0.72

Total 100

Interpretation: Table 4.7 shows classification of Respondents on basis of Preferred

Investment

Avenues. It can be concluded that the Respondents prefer Mutual

Funds`/FD`S/GOLDs avenues than PPF schemes next to stock market, Ulips

and derivatives. It was interesting to know that Indian individual investors still

prefer to invest their surplus amount in risk free investment avenues next to

Fdsschemes. It confirms that Indian investors are conservative investors.

24%

7%

10%

1%2%

16%11%

25%

3% 1%

Clasification of respondendts on basis of

prefered investment

Fd`s Ulip`s Stock market Derivatives Real estate

Gold Ppf Mutual funds Post office MIS Bonds


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Page 33

Table 4.8: Classification of Respondents investing of top 3 investments

Investment avenues Number of

Respondents

Percentage (%)

Fd`s 79 39.11

Gold 62 30.19Mutual funds 61 30.20

Total 100 100

Interpretation: table4.8 shows that classification of respondents investing of top 3

investments. It can be concluded that investors preferring mostly these three

investments as a source of income or profits for their future. Fd`s are most preferred

investment in all the time.

40%

30%

30%


of top 3 investments

Fd`s Gold Mutual funds


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Table 4.9: Classification of Respondents on the basis of Factors Influencing an

Investment Decision

Factors influencing an

investment decision

Number of

Respondents

Percentage (%)

Returns 39 39

Minimum amount 16 16

Risk 29 29

Locking period 0 0

Liquidity 14 14

Other factors 2 2

total 100 100

Interpretation: Table 4.9 shows the classification of Respondents on the basis of Factors

considered before making an Investment. Out of all majorities of the Respondents i.e.

39% prefer to invest where there is high return. 29% of the Respondents look for risk

involved in the investment, 16% of the Respondents invest in those avenues wherein

they will get minimum amount. 14% of Respondents look for liquidity and the rest look

for ease with which the investment can be made.

39%

16%29%

0%14% 2%

Clasification of respondendts on basi

of factors influence on investment

options

Returns Minimum amount Risk

Locking period Liquidity Other factors


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Table 4.10: Classification of Respondents on the basis of Demate a/c Holders

Demate a/c holders Number of

Respondents

Percentage (%)

Yes 79 79

No 21 21

Total 100 100

Interpretation: classification of respondents on the basis of demates a/c

holders. It says that 79% of the people are having demate a/c`s, 21% of the

people are not having the demate a/c`s, it tells that most of the people are

investing their money in the mutual funds and stock market.

79%

21%


of Demate a/c`s

Yes No


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Table 4.11: Classification of Respondents on basis of managing of their investments.

Managing of their

investments

Number of

Respondents

Percentage (%)

Individual 25 25

Agent, mediator 59 59

Financial planner 16 16others 0 0

Total 100 100

Interpretation:

Table 4.11 shows classification of Respondents on basis Influence on InvestmentDecision. It was found that Respondents are mostly depending upon expert advice and

help while making investment decisions. However, the majority of the Respondents i.e.

59% make investment decisions with the help and advice from experts; only 25%

investors are making their investments alone. 16% of the investors taking the help of

financial planner.

25%

59%

16%

0%


of managing of their investments

Individual Agent, Mediater Financial planner Others


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Table 4.12: Classification of Respondents on the basis of Time Horizon for

Investment

Investment time horizon Number of

Respondents

Percentage (%)

Below 1year 2 21 to 3years 23 23

3 to 5 years 57 57

5 to 10 years 14 14

Above 10 years 4 4

Total 100 100

Interpretation: Table 4.12 shows the classification of Respondents on the basis of Time

Horizon

For Investment. From the above table we can interpret that majority of the

Respondents i.e. 57% of the total sample invest for 3 to 5 year, 23% of them

invest for time period of 1 to 3 years, 14% of them invest for period of 5 to 10

years and the 4% of them invest for period of above 10 years 2% of them invest

for less than 1 year. It is found that most of the Respondents want to make

money quickly hence they invest for 3to5 years period.

.

0%

10%

20%30%

40%

50%

60%

Below 1

year

1 to 3

years

3 to 5

years

5 to 10

years

Above 10

years

2%

23%

57%

14%

4%

Clasification of respondedts on basis

of Investment time Horizon

Series1


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Figure 4.13: Classification of Respondents on basis of Risk Tolerance Level

Risk taking capacity Number of

Respondents

Percentage (%)

High 7 7Medium 78 78

Low 13 13

No risk safe 2 2

Total 100 100

Interpretation: Table 4.13 shows the classification of Respondents on basis of Risk

Tolerance

Level. From the table 4.13 we can conclude that 78% of Respondents are

preferring portfolio with medium risk, 7% of them prefer highly risky portfolio

with high returns and the 13% of them prefer portfolio with low risk. Indian

investors are still conservative in nature and avoid taking huge risk while

investing their funds.

7%

78%

13%

2%


of risk tolerance level

High Mediam Low No risk& Safe


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Figure 4.14: Classification of Respondents on basis of investing in mutual funds.

Mutual funds options Number of

Respondents

Percentage (%)

Debt funds 20 20Growth funds 45 45

Balanced funds 35 35

Total 100 100

Interpretation: classification of respondents on basis of investing in mutual

funds. It can be concluded that 45% most of the investors are investing their

money in growth funds, 35% of the people are investing in the balanced funds,

20% of the investors are investing in the debt funds.

20%

45%

35%

0%

10%

20%

30%

40%

50%

Debt funds Growth funds Balanced funds


of mutual funds options

Series1


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Figure 4.15: Classification of Respondents on basis of source of investment

information.

Sources of Investment

Information

Number of

Respondents

Percentage (%)

News Paper/ Magazines 2 2

Electronic Media (T.V) 4 4

Peer group/ Friends 3 3

Broker/ Financial Advisor 58 58

Internet 33 33

Total 100 100

Interpretation: Table 4.15 shows the classification of Respondents on basis of

Sources of Investment Information. Most of the Respondents get their

information related to investment through broker/financial advisor next to

internet This could be because internet is easy and readily accessible

investment information when compared to the other sources of investment

information whereas broker/financial advisor provide the useful information

about investment.

59

4

32

1 4

010203040506070


of investment information

Total


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Figure 4.16: Classification of Respondents on basis of most attractive investment in

today.

Most attractive

investment

Number of

Respondents

Percentage (%)

Fd`s 19 19

Ulip`s 13 13

Stock market 5 5

Real estate 1 1

Gold 26 26

Mutual funds 36 36

total 100 100

Interpretation: classification of respondents on basis of most attractive

investment in today. It concluded that mutual funds are the most attractive

investment in today and the gold, FDs, Ulips also getting more attractive.

19%

13%

5%

1%26%

36%


of most attractive investment todayFd`s Ulip`s Stock market Real eatate Gold Mutual funds


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Hypothesis

The relationship between important factors has been analyzed with the

help of chi-square test. The following pairs have been analyzed.

A. Gender and risk tolerance: Gender and risk tolerance level of an

investor are two independent attributes. The relationship between the

gender and risk tolerance of investors can be presented with thefollowing table and diagram.

Figure 4.17: relationship between gender and risk tolerance of

respondents.

RISK APPEITE&

GENDER

High low medium No risk safe

Grand

TotalF 3 13 1 17

M 7 11 64 1 83

Grand Total 7 14 77 2 100

Interpretation: Table 4.17 shows the relationship between gender and risk

tolerance of respondents.

HI: Is not equal values

HO: is an equal value

Hypothesis-I: Both are showing interest take H&M risk

This data shows that this hypothesis can be accepted. By the research both

variables are showing difference. HI Is accepted

84.52

14.450

50

100

H & M L & NR

M

Series1 76.5

23.520

50

100

f H & M L & NR

F

Series1


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The relationship between Age and time horizon of investments

b) Age and time horizon:the relationship between age and time horizon of

investment can be presented with the following table and diagram.

Figure 4.18: Relationship between age and time horizon of investments

TIME HORIZON

FOR

INVESTMENTS&

AGE 1to3years 3to5years 5to10years above10 below1year Grand Total

25to35 5 12 2 1 20

35to45 8 29 6 1 44

above45 14 6 3 1 24

below25 10 2 12Grand Total 23 57 14 4 2 100

Interpretation: Table 4.18 shows the relationship between age of respondents

and time horizon for investment.


HO: Is equal values

Hypothesis- 1: Two age group people are preferred to invest their money

below 5years time period. HI Is accepted

87.5

23.540

50

100

below5ye above5ye

Below 35Age

Series193.75

6.250

50

100

below5ye above5ye

Above 35Age

Series1


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The relationship between age and risk tolerance level of investors

a) Age and risk tolerance: The relationship between age and risk tolerance of

the investors can be presented with help of following table and diagram.

Figure4.19: Relationship between age and risk tolerance of the

respondents.

Count of RISK

APPEITE Column Labels

Row Labels high low medium

no

risk&safe

Grand

Total

25to35 1 5 14 20

35to45 2 5 35 2 44above45 4 3 17 24

below25 1 11 12

Grand Total 7 14 77 2 100

Table 4.19 shows the relationship between age and risk tolerance of the

respondents.


HO: Is equal values

Hypothesis- 1: two age group people are preferred to take H&M risk. HI Is

accepted

81.25

18.750

50

100

H&M L&NR

Below35Age

Series185.29

14.710

50

100

H&M L&NR

Above35Age

Series1


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CHAPTER 5

FINDING`S &

SUGGESTION


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5.1 FINDINGS

In the present project, an attempt is made to study the investment

characteristics of Indian investors. Based on the data collected and analyzed

about perception on investment preferences of the investors, the following

findings are given.

It is found that most of the investors belong to the age group of 35 years and 35

to 45 years indicating youngsters and the middle aged people are predominant

in the financial investment sector.

Most of the investors possess higher education qualification like post

graduation and above.

Majority of respondents are investing who are government employed and

private sector people.

As per the general perception, it is found respondents with combination of

middle and higher income groups like income above 5 Lakhs were found to

invest more because of their large portions of savings.

The investor's taking the decisions through broke/mediator.

Investors usually invest their funds so as to earn wealth.

Investors prefer to invest their funds in avenues like Mutual Funds /FD`s/Gold

next to insurance and Ppf.

With reference to the objective of investment, most of the respondents

preferred returns, followed by risk, minimum amount, and liquidity.

Most of the investors get their information related to investment through

broker/mediator while others prefer to get information from internet and

electronic media.

Most of the investors prefer to invest in to medium risky investments. Very less

proportion of respondents preferred risky portfolios.

Through hypothesis research found that gender and risk tolerance level of

investors have some difference, it tells that male and female investors are

referred medium and high risk investments.


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Page 47

Hypothesis for Age and time horizon of investors found that two are groups

are preferred the investment time horizon of 5years.

Hypothesis for age and risk tolerance of investors found that two age groups

of below35 and above35 are preferred to take medium, high risk

5.2 SUGGESTIONS

It is suggested that investors are to be educated about various investment

avenues, selection of schemes based on their objectives, their risk

tolerance, importance of diversification.

It is suggested that the schemes can be designed based on matching the

objectives of the investment.

The primary objective of most of the respondents is maximizing return.

Most of the respondents are interested to invest their money through online

mode.

All the investors prefer to maximize their returns and minimize the risk.

Even now fixed deposits and insurance schemes are more famous among

Indian investors. It is suggested that the investors have carefully construct

their portfolios after doing fundamental analysis and through proper

diversification.

It always better that the investors follow a systematic investment process to

invest their money. Investment avenues are to be chosen based on their

objectives and risk preferences.


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CHAPTER 6CONCLUSION


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The conclusion of the project is that it is found that investors are preferred to

invest their money in medium risk investments and the behavior, perception of

investors is changing based on time and the type of avenues offered by

investment companies.

This project can be useful to the investors to understand the various

investments and risks involved in those investments and which investment is

give more returns and which is more attractive investment likewise many other

benefits are their for investors to the investors.


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CHAPTER7

BIBLOGRAPHY


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BIBLIOGRAPHY

Books

C K Kothari, Research Methodo logy, Wishwa Prakashan Publishing, 1996,

Second Edition

Herbert B. Mayo, Investments, Chennai Micro Print pvt. Ltd Chennai, 2006

Punithavathi Pandyan, Securi ty An alysis and Portfol io Management, Tata

Mc Graw-Hill Publishing Company Ltd , New Delhi,2008 Third Edition

Prasanna Chandra, Investment Analysis A nd Port Fol io Management, Tata

Mc Graw-Hill Publishing Company Ltd , New Delhi,2008

Prasanna Chandra, Financi al Management, Tata Mc Graw -Hill Publishing

Company Ltd , New Delhi2007

Websites Reference

www.indiafinance&investmentguide.com

www.wikipedia.org

www.nseindia.com

www.capitalmarkets.com

www.bseindia.com

www.financeindia.org/article
http://investmentguide.com/http://www.wikipedia.org/http://www.nseindia.com/http://www.capitalmarkets.com/http://www.bseindia.com/http://www.financeindia.org/articlehttp://www.financeindia.org/articlehttp://www.financeindia.org/articlehttp://www.bseindia.com/http://www.capitalmarkets.com/http://www.nseindia.com/http://www.wikipedia.org/http://investmentguide.com/


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CHAPTER8

ANNEXURE


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ANNEXURE

I am V.Venkatrao student of PGDM from Center for management and

technology, Visakhapatnam, conducting survey on investors perception and

selection behavior on investment avenues asa part of my study.

RESEARCH PROJECT ON INVESTMENT OPTIONS

PART-A

1. Name : 2. Gender : Male Female

3. Age : Below 25 25 to 35 35 to 45 above 45

4. Marital status: Single Married 5. Family size : Children :

Education:

6. Occupation : Government Employee Self employee Student Private

Sector

Businessman Others (specify)..

7. Your annual income : Below 2lakhs 2 to 5 5 to 7 7 to 10

above10

8. Education level : Xth class intermediate graduate pg and

above

PART-B

1. Which of the following have you invested in?

FD`s ULIP`s Stock Market Derivatives Real Estate

Gold PPF Mutual Funds Post office MIS Bonds


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2. Are you aware of the following investment options available in market? Mark top 3

options?

FD`s ULIP`S Stock Market Derivatives Real Estate

Gold PPF Mutual Funds Post office MIS Bonds

3. Which factors influence your investment option?

Returns Minimum Investment Amount Risk Locking period

Liquidity Other Factors Specify

Rank 1,,,,,.5

4. Do you have a Demate Account?

Yes No

5. Please mention the list of companies you have invested in?MF`s Shares Insurance FD`s

a) .... . .

b) . .. .

c) . .. .

d) . .. .

6. How do you manage your investments?

Individual Agent or Mediator Financial Planner

Any others specify.

.7. What is your time horizon of most of your investments?

Below 1year 1to 3years 3 to 5years 5 to10years

above 10

8. According to you what is the risk involved in these investments?

ULIP`s 1..,,,,5

Share Market 1..,,,,.5

Mutual Funds 1..,.,,,5

Real estate 1,,,.,..5

9. If you want to invest in mutual funds, which option do you prefer? Which option did

you invested in?

Debt Fund`s Growth Fund`s Balanced Funds

10.Which source do you prefer to get investment information?

News Papers/Magazines Electronic Media (TV) Peer`s/Friend`s

Broker/Financial Advisor Internet


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11.Which of the risk factors influence the returns on investments in general?

12.Have you invested in fixed deposit`s? Why?

13.What is your risk appetite?

High Medium Low No risk/Safe Investment

14.Which of the investment avenue is attractive to you now-a-days?

Documents

investor perception on investment avenues