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major research project

On

Analysis of different Investment Avenue Available forGovernment employee

Submitted in partial fulfillment of the requirements of the courseMASTER IN BUSINESS ADMINISTRATION

(Session: 2009-2011)

Project Guide Submitted ByProf. Amit patil sir Manju Gupta

Faculty VITS, Indore MBA III Semester

VINDHYA INSTITUTE OF TECHNOLOGY & SCIENCEINDORE (M.P.)

Submitted ToDEVI AHILYA VISHWAVIDYALAYA, INDORE2011


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DECLARATION

This is to certify that Miss Manju Gupta student of MBA III Semester program has herewith proposing to choose the Major Research Project titled as Analysis of differentinvest avenue available for Govt. Employee and prepared this Synopsis reportunder my guidance and supervision.

Guided BySubmitted By

Prof. Amit Patil sirFaculty VITS Indore Manju Gupta

MBA III Semester


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INDEXS.NO. CHAPTERS

1. Title Page.2. Certificate from Guide.3. Acknowledgement.4. Declaration (From Student)5. Table ofContent.6. Abstract / Executive Summary (Only one page strictly)

(This point include briefobjectives,findings,conclusion andrecommendations)7. Introduction

y Conceptual Framework

y Rationale of Study

y Objective of Study(This point includes discussthescenario & main andsub objective ofthestudy)

8. Literature Review.9. Methodology

y The Design.(Hypothesis and Questionnaire)

y The Sampling.

y Data CollectionMethods.

y The Tools (Usedfordata analysis andinterpretation)10.Result

y Findings and Discussion

y Summary ofResult11.Conclusion and Suggestion

y Conclusion

y Suggestion12.Future Implications of the Study13.Limitation (Discussthedegreeto whichlimitationcaneffecttheresults)14.Bibliography.15.Webblography.16.A ppendices. (Questionnaire, Sample, Statistical tables, and any other additional

relevant material)


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INVESTMENT

1.1 INTRODUCTION

Investment in various tpes of assets is an interesting activity that attracts people from all walks of

life irrespective of their occupation, economic status ,education and family background. When a

person has more money than he requires for current consumption,he would be cloined as a

potential investor.the investor who is having extra cash could invest it in securities or in any

other assets like gold or real estate or simply deposit it in his bank account. The companies that

have extra income may like to invest their money in the extension of the existing firm or

undertake new venture. All of these activity in a broader seanse mean investment.

The money eone earns is partly spent and the rest saved for meeting future expenses. Instead of

keeping the saving idle one may like to use saving in order to get return on it in the future. This

is called investment.

Investment is the employment of funds on assets with the aim of earning income or capital

appreciation. investment has two attributes namely time and risk. Present consumption is

sacrificed to get return in the future. The sacrifice that has to be borne is certain but the return in

the future ma be uncertain. This attributes of investment indicate the risk factor. The risk is

undertake with a view to reap some return from the investment.For a layman,investment means some monetary commitment. A persons commitment to buy a

flat or a house for his personal use ma be an investment from his point of view. This cannot be

considered as an it involves sacrifice but does not yield any financial return.

To the economist, investment is the net addition made to the nations capital stock that consists

of goods and services that are used in the production process. A net addition to the capital stock

means an increase in the buildings, equipment or inventories. These capital stocks are used to

produce other goods and services.

Investing is not about putting all your money into the "Next big thing," hoping to make a killing.

Investing isn't gambling or speculation; it's about taking reasonable risks to reap steady rewards.

Financial investment is the allocation of money to assets that are expected to yield returns and

experience capital growth over the years.


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The financial and economic meaning are related to each other because the savings of the

individual flow into the capital market as financial investments, to be used in economic

investment. Even though they are related to each other ,we are concerned only about the

financial investment made on securities. There are a lot of investment avenues available today in

the financial market for an investor with an investable surplus. He can invest in BankDeposits,

Corporate Debentures, and Bonds where there is low risk but low return. He may invest in Stock

of companies where the risk is high and the returns are also proportionately high. The recent

trends in the StockMarket have shown that an average retail investor always lost with periodic

bearish tends. People began opting for portfolio managers with expertise in stock markets who

would invest on their behalf. Thus we had wealth management services provided by many

institutions. However they proved too costly for a small investor. These investors have found a

good shelter with the mutual funds. Mutual fund industry has seen a lot of changes in past few

years with multinational companies coming into the country, bringing in their professional

expertise in managing funds worldwide. In the past few months there has been a consolidation

phase going on in the mutual fund industry in India. Now investors have a wide range of

Schemes to choose from depending on their individual profiles. My study gives an overview of

mutual funds definition, types, benefits, risks, limitations, history of mutual funds in India,

latest trends, global scenarios. I have analyzed a few prominent mutual funds schemes and have

given my findings

NEED FORTHE STUDY

The main purpose of doing this project was to know about mutual fund and its functioning. This

helps to know in details about mutual fund industry right from its inception stage, growth and

future prospects.

It also helps in understanding different schemes of mutual funds. Because my study depends

upon prominent funds in India and their schemes like equity, income, balance as well as the

returns associated with those schemes. The project study was done to ascertain the asset

allocation, entry load, exit load, associated with the mutual funds. Ultimately this would help in

understanding the benefits of mutual funds to investors.


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Whyshouldyouinvest?

Simply put, you should invest so that your money grows and shields you against rising inflation. The rate

of return on investments should be greater than the rate of inflation, leaving you with a nice surplus over a

period of time. Whether your money is invested in stocks, bonds, mutual funds or certificates of deposit

(CD), the end result is to create wealth for retirement, marriage, college fees, vacations, better standard of

living or to just pass on the money to the next generation or maybe have some fun in your life and do

things you had always dreamed of doing with a little extra cash in your pocket. Also, it's exciting to

review your investment returns and to see how they are accumulating at a faster rate than your salary.

. For example, if there was a 6% inflation rate for the next 20 years, a Rs. 100 purchase today

cost Rs. 321 in 20 years. This is why it is important to consider inflation as a factor in any

long-term investment strategy. Remember to look at an investment's 'real' rate of return, which is

the return after inflation. The aim of investments should be to provide are turn 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.

If the after-tax return on your investment is less than the inflation rate, then your assets have

actually decreased in value; that is, they won't buy as much today as they did last year.

Whento Invest?

The sooner one start investing the better.B

y investing into the market right away you allow yourinvestments more time to grow, whereby the concept of compounding interest swells your

income by accumulating your earnings and dividends. Considering the unpredictability of the

markets, research and history indicates these three golden rules for all investors

1. Invest early

2. Invest regularly


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3. Invest for long term and not short term

Whatcareshould onetake whileinvesting?

Before making any investment, one must ensure to:

1 .obtain written documents explaining the investment

2. read and understand such documents

3. verify the legitimacy of the investment

4. find out the costs and benefits associated with the investment

5. assess the risk-return profile of the investment

6. know the liquidity and safety aspects of the investment

7. ascertain if it is appropriate for your specific goals

8. compare these details with other investment opportunities available

9. examine if it fits in with other investments you are considering or you

have already made

10. deal only through an authorized intermediary

11. seek all clarifications about the intermediary and the investment

12. explore the options available to you if something were to go wrong,

and then, if satisfied, make the investment.

These are called the Twelve Important Stepsto Investing.

What arevarious options availableforinvestment?

One may invest in:

Physical assetslike real estate, gold/jewellery, commodities etc.

Financial assetssuch as fixed deposits with banks, small saving

Instruments with post offices, insurance/provident/pension fund etc.

or securities market related instruments like shares, bonds,

debentures etc.


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What arevarious Short-term financial options availablefor

Investment?

Broadly speaking, savings bank account, money market/liquid funds and fixed deposits with

banks may be considered as short-term financial investment options:

Savings Bank Accountis often the first banking product people use, which offers low interest

(4%-5% p.a.), making them only marginally better than fixed deposits.

Money Market or Liquid Fundsare a specialized form of mutual funds that invest in extremely

short-term fixed income instruments and thereby provide easy liquidity. Unlike most mutual

funds, money market funds are primarily oriented towards protecting your capital and then, aim

to maximise returns. Money market funds usually yield better returns than savings accounts, but

lower than bank fixeddeposits.

Fixed Deposits with Banksare also referred to as term deposits and minimum investment

period for bank FDs is 30 days. Fixed Deposits with banks are for investors with low risk

appetite, and may be considered for 6-12 months investment period as normal interest on less

than 6 months bank FDs is likely to be lower than money market fund returns.

What arevarious Long-term financial options availableforinvestment?

Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds and

Debentures, Mutual Funds etc.

Post Office Savings:Post Office Monthly Income Scheme is a low risk saving instrument,

which can be availed through any post office. It provides an interest rate of 8% per annum,

which is paid monthly.Minimum amount, which can be invested, is Rs. 1,000/- and


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additional investment in multiples of 1,000/-. Maximum amount is Rs. 3,00,000/- (if Single) or

Rs. 6,00,000/- (if held Jointly) during a year. It has a maturity period of 6 years. Premature

withdrawal is permitted if deposit is more than one year old. A deduction of 5% is levied from

the principal amount if withdrawn prematurely.

Public Provident Fund:A long term savings instrument with a maturity of 15 years and interest

payable at 8% per annum compounded annually. A PPF account can be opened through a

nationalized bank at anytime during the year and is open all through the year for depositing

money. Tax benefits can be availed for the amount invested and interest accrued is tax-free. A

withdrawal is permissible every year from the seventh financial year of the date of opening of the

account and the amount of withdrawal will be limited to 50% of the balance at credit at the end

of the 4th year immediately preceding the year in which the amount is withdrawn or at the end of

the preceding year whichever is lower the amount of loan if any.

Company Fixed Deposits:These are short-term (six months) to medium-term (three to five

years) borrowings by companies at a fixed rate of interest which is payable monthly, quarterly,

semiannually or annually. They can also be cumulative fixed deposits

1.1Scope ofStudy:

To understand the various financial services and products offered by the ABM to the

individual customers and to find out the gaps in the services being offered and the customer

expectations. A study was also conducted of non-existing customers to study their

investment pattern.In my project the scope is limited to some prominent mutual funds in the

mutual fund industry. I analyzed the funds depending on their schemes like equity, income,


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balance. But there is so many other schemes in mutual fund industry like specialized

(banking, infrastructure, pharmacy) funds, index funds etc.

My study is mainly concentrated on equity schemes, the returns, in income schemes the

rating of CRISIL, ICRA and other credit rating agencies.

1.2 Objectives ofstudy:

y To study the competitive analysis of products and services ofAditya Birla Money.

y To identify the preference towards various investment avenues ofABM and non

existing clients

y To find out factors playing major role in decision making regarding investment.

y To study the satisfaction level towards various facilities and services offered by ABM

To give a brief idea about the benefits available from Mutual Fund investment

To give an idea of the types of schemes available.

To discuss about the market trends of Mutual Fund investment.

To study some of the mutual fund schemes and analyse them

Observethe fund management process of mutual funds

Explore the recent developments in the mutual funds in India

To give an idea about the regulations of mutual funds

1.3Rationale ofthestudy:

pects the price to fall, he will sell it. These simple statements are the cause of a major challenge

in forecasting security prices, because they refer to human expectations. As we all know

firsthand, humans expectations are neither easily quantifiable nor predictable.

If prices are based on investor expectations, then knowing what a security should sell for i.e.,

fundamental analysis) becomes less important than knowing what other investors expect it to sell

for. That's not to say that knowing what a security should sell for isn't important--it is. But there

is usually a fairly strong consensus of a stock's future earnings that the average investor cannot

disprove


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Fundamental analysis and technical analysis can co-exist in peace and complement each other.

Since all the investors in the stock market want to make the maximum profits possible, they just

cannot afford to ignore either fundamental or technical analysis.

METHODOLOGY

To achieve the objective of studying the stock market data has been collected.

Research methodology carried for this study can be two types

1.Primary

2.Secondary

PRIMARY:

The data, which has being collected for the first time and it is the original data.

In this project the primary data has been taken from HSE staff and guide of the project.

SECONDARY:

The secondary information is mostly taken from websites, books, journals, etc.

1.3 Research Design:

y The research is descriptive research.


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1.4 Data Source:

1. Primary Data: Data collected from existing customers ofAditya Birla Money and non-

existing customers.

2. Secondary Data: Reports of the company, Internet.

1.5 Data Collection Instruments:

y Questionnaire:

a) Questionnaire for existing customers ofAditya Birla Money

b) Questionnaire for non-existing customers.

1.6 Sampling Plan:

1.6.1Population: All the residents ofAhmedabad city.

1.6.2 Sample Unit: A retail investor who invests in various financial instruments residing in

Ahmedabad city.

1.6.3 Sample Size: 300 people for both questionnaires.

a) 100 questionnaires for existing customers ofAditya Birla Money.

b) 200 questionnaires for non-existing customers.

1.6.4 Sampling Procedure: Non probability convenience.

1.6.5 Geographical Scope: Ahmedabad City.

1.7Limitation:

The time constraint was one of the major problems.

The study is limited to the different schemes available under the mutual funds selected.

The study is limited to selected mutual fund schemes.

The lack of information sources for the analysis part.


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In survey some people do not want to disclose their decision regarding investment.

TYPES OF INVESTMENT AVENUES AVAILABLE

Financial Instruments

Equities

Mutualfunds

Debt instruments

Bonds:

Debentures:

Deposits

Non-financial Instruments

Realestate

Gold

National Saving Certificate (NSC)

Stock Market

Other Commodities.


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adequte time knowledge experience and resources for directly accessing the capital market, they have to

rely on an intermidiary which undertakes informed investment decisions and provides the consequential

benefits of professional expertise.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. You can invest as little as Rs. 1,000 per month in a mutual fund. There are various

mutual funds to choose from and the risk and return possibilities vary accordingly.

AMutual Fund is a body corporate registered with SEBI that pools money from a number of

individuals/corporate investors and is used by the fund manager to invests in a variety of

different financial instruments or securities such as equity shares, Government securities, Bonds,

debentures etc according to the objective of the scheme. By this method, you can achieve a much

wider spread of investments than if you were investing directly in the underlying investments. It

is widely accepted that by spreading your investment you are spreading your risk, therefore

investing in mutual funds is considered to be of lower risk than direct investment.

When you invest in mutual funds, you do not own the underlying investments but have a claim to

a number of units in the fund representing the size of your investment. The value of each unit of

the mutual fund scheme, calculated based on the market value of the underlying investments

after deducting expenses and liabilities, is referred to as the Net Asset Value. The working of a

mutual fund can be understood from the chart.

*source: www.apnamba.com (figure 2.2)


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History ofMutual Funds:-

The Evolution:

The formation of Unit Trust ofIndia marked the evolution of the Indian mutual fund industry in

the year 1963. The primary objective at that time was to attract the small investors and it was

made possible through the collective efforts of the Government ofIndia and the Reserve Bank of

India. The history of mutual fund industry in India can be better understood divided into

following phases:

Phase 1. Establishment andGrowth ofUnit Trust ofIndia-1964-87

Unit Trust ofIndia enjoyed complete monopoly when it was established in the year 1963 by an

act of Parliament. UTI was set up by the Reserve Bank ofIndia and it continued to operate under

the regulatory control of the RBI until the two were de-linked in 1978 and the entire control was

tranferred in the hands ofIndustrial Development Bank ofIndia (IDBI). UTI launched its first

scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of

investors in any single investment scheme over the years.

UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors.

It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift Growth Fund and

India Fund (India's first offshore fund) in 1986, Mastershare (Inida's first equity diversified


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scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the

end of 1987, UTI's assets under management grew ten times to Rs 6700 crores.

Phase II Entry ofpublicsectorfunds- 1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering the market

in the year 1987. In November 1987, SBIMutual Fund from the State Bank ofIndia became the

first non-UTI mutual fund in India. SBIMutual Fund was later followed by CanbankMutual

Fund, LICMutual Fund, Indian BankMutual Fund, Bank ofIndia Mutual Fund, GICMutual

Fund and PNBMutual Fund. By 1993, the assets under management of the industry increased

seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80%

market share.

Phase III. Emergence ofPrivate Sector Funds- 1993-96

The permission given to private sector funds including foreign fund management companies

(most of them entering through joint ventures with Indian promoters) to enter the mutual fund

industry in 1993, provided a wide range of choice to investors and more competition in the

industry. Private funds introduced innovative products, investment techniques and investor-servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation- 1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after the

year 1996. The mobilization of funds and the number of players operating in the industry reached

new heights as investors started showing more interest in mutual funds.

Investors' interests were safeguarded by SEBI and the Government offered tax benefits to the

investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by

SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999

exempted all dividend incomes in the hands of investors from income tax. Various Investor


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Awareness Programmes were launched during this phase, both by SEBI and AMFI, with an

objective to educate investors and make them informed about the mutual fund industry.

Phase V. Growth and Consolidation-2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which are

acquisition of schemes ofAlliance Mutual Fund by Birla Sun Life, Sun F&CMutual Fund and

PNBMutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund

players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29

funds as at the end ofMarch 2006. This is a continuing phase of growth of the industry through

consolidation and entry of new international and private sector players.

Types ofMutual Funds:-

There are thousands of different mutual funds offered in the market. They range from funds that

include a broad variety of investments to funds that invest exclusively in single securities or

narrow sectors of the market. We have classified them according to their objective.

By Structure

y Open Ended schemes

y Close Ended schemes

y Interval schemes

By Investment Objective

y Growth schemes

y Income schemes

y Balanced schemes

y Money market schemes


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Otherschemes

y Tax saving schemes

y Index schemes

y

Special schemesy Sector specific schemes

2.3 Insurance:-

Insurance in its basic form is defined as A contract between two parties whereby one party

called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party

called insured a fixed amount of money on the happening of a certain event."

In simple terms it is a contract between the person who buys insurance and an Insurance

company who sold the Policy. By entering into contract the Insurance Company agrees to pay

the Policy holder or his family members a predetermined sum of money in case of any

unfortunate event for a predetermined fixed sum payable which is in normal term called

Insurance Premiums.

Insurance is basically a protection against a financial loss which can arise on the happening of an

unexpected event. Insurance companies collect premiums to provide for this protection. By

paying a very small sum of money a person can safeguard himself and his family financially

from an unfortunate event.

History ofInsurance:-

Insurance has a long history in India. Life Insurance in its current form was introduced in 1818

when Oriental Life Insurance Company began its operations in India. General Insurance was

however a comparatively late entrant in 1850 when Triton Insurance company set up its base in

Kolkata. History of Insurance in India can be broadly bifurcated into three eras: a) Pre

Nationalization b) Nationalization and c) Post Nationalization. Life Insurance was the first to be

nationalized in 1956. Life Insurance Corporation of India was formed by consolidating the


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operations of various insurance companies. General Insurance followed suit and was nationalized

in 1973. General Insurance Corporation ofIndia was set up as the controlling body with New

India, United India, National and Oriental as its subsidiaries. The process of opening up the

insurance sector was initiated against the background of Economic Reform process which

commenced from 1991. For this purpose Malhotra Committee was formed during this year who

submitted their report in 1994 and Insurance Regulatory Development Act (IRDA) was passed in

1999. Resultantly Indian Insurance was opened for private companies and Private Insurance

Company effectively started operations from 2001.

Currentscenario in Insurance:-

India with about 200 million middle class household shows a huge untapped potential for

players in the insurance industry. Saturation of markets in many developed economies has made

the Indian market even more attractive for global insurance majors. The insurance sector in India

has come to a position of very high potential and competitiveness in the market. Indians, have

always seen life insurance as a tax saving device, are now suddenly turning to the private sector

that are providing them new products and variety for their choice.

Consumers remain the most important centre of the insurance sector. After the entry of

the foreign players the industry is seeing a lot of competition and thus improvement of the

customer service in the industry. Computerization of operations and updating of technology has

become imperative in the current scenario. Foreign players are bringing in international best

practices in service through use of latest technologies

The insurance agents still remain the main source through which insurance products are sold.

The concept is very well established in the country like India but still the increasing use of other

sources is imperative. At present the distribution channels that are available in the market are

listed below.

y Direct selling

y Corporate agents

y Group selling


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y Brokers and cooperative societies

y Banc assurance

Customers have tremendous choice from a large variety of products from pure term (risk)

insurance to unit-linked investment products. Customers are offered unbundled products with a

variety of benefits as riders from which they can choose. More customers are buying products

and services based on their true needs and not just traditional money back policies, which is not

considered very appropriate for long-term protection and savings. There is lots of saving and

investment plans in the market. However, there are still some key new products yet to be

introduced - e.g. health products.

The rural consumer is now exhibiting an increasing propensity for insurance products. A

research conducted exhibited that the rural consumers are willing to dole out anything between

Rs 3,500 and Rs 2,900 as premium each year. In the insurance the awareness level for life

insurance is the highest in rural India, but the consumers are also aware about motor, accidents

and cattle insurance. In a study conducted by MART the results showed that nearly one third said

that they had purchased some kind of insurance with the maximum penetration skewed in favor

of life insurance. The study also pointed out the private companies have huge task to play in

creating awareness and credibility among the rural populace. The perceived benefits of buying a

life policy range from security of income bulk return in future, daughter's marriage, children'seducation and good return on savings, in that order, the study adds.

Types ofInsurance:-

A) LIFE INSURANCE:

y Term Life Insurancey Permanent Life Insurance

(B) GENERALINSURANCE

y Fire Insurancey Marine Insurance

y Accident Insurance

(A)Life Insurance


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Life Insurance is a contract providing for payment of a sum of money to the person assured or,

following him to the person entitled to receive the same, on the happening of a certain event. It

is a good method to protect your family financially, in case of death, by providing funds for the

loss of income.

A1. TERM LIFE INSURANCE: Under a Term Life contract, the insurance company pays a

specific lump sum to the designated beneficiary in case of the death of the insured. These

policies are usually for 5, 10, 15, 20 or 30 years.

Term life insurance are the most popular in advance countries but were not so popular in India.

However, after the entry of the private operators and aggressive marketing by few players this

kind of policies are becoming popular. The premium on such type of policies is comparatively

quite low when compared with other types of life insurance policies, mainly due to the fact that

these policies do not carry cash value.

A2. PERMANENT LIFE INSURANCE:

In a Permanent Life contract, a portion of the money paid as premiums is invested in a fund

that earns interest on a tax-deferred basis. Thus, over a period of time, this policy will

accumulate certain "cash value" which you will be able to get back either during the period of the

policy or at the end of the policy.

Your need for life insurance can change over a lifetime. At any age, you should consider your

individual circumstances and the standard of living you wish to maintain for your dependents. In

most cases, you need life insurance only if someone depends on you for support. Your life

insurance premium is based on the type of insurance you buy, the amount you buy and your

chance of death while the policy is in effect. This type of policy not only provides protection for

your dependents by paying a death benefit to your designated beneficiary upon your death, but it

also allows you to use some part of the money while you are alive or at the end of the policy.

Some examples of such policies are: - Whole Life, Universal Life and Variable-Universal Life.


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ENDOWMENT POLICIES

These policies provide for period payment of premiums and a lump sum amount either in the

event of death of the insured or on the date of expiry of the policy, whichever occurs earlier.

MONEY BACK POLICIES

These policies provide for periodic payments of partial survival benefits during the term of the

policy itself. A unique feature associated with this type of policies is that in the event of death

of the insured during the policy term, the designated beneficiary will get the full sum assured

without deducting any of the survival benefit amounts, which have already been paid as money-

back components. Moreover, the bonus on such policies is also calculated on the full sum

assured.

ANNUITY / PENSION POLICIES / FUNDS

This policies / funds require the insured to pay the premium as a single lump sum or through

installments paid over a certain number of years. The insured in return will receive back a

specific sum periodically from a specified date onwards (the returns can be monthly, half yearly

or annually), either for life or for a fixed number of years. In case of the death of the insured, or

after the fixed annuity period expires for annuity payments, the invested annuity fund is

refunded, usually with some additional amounts as per the terms of the policy. Annuities /

Pension funds are different from all other forms of life insurance as an annuity policy /

fund does not provide any life insurance cover but merely offers a guaranteed income either for

life or a certain period. Therefore, this type of insurance is taken so as to get income after the

retirement.

Stock Market:-

History ofStock Market:-

The origin of the stock market in India goes back to the end of the eighteenth century

when long-term negotiable securities were first issued. However, for all practical purposes, the

real beginning occurred in the middle of the nineteenth century after the enactment of the


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companies Act in 1850, which introduced the features of limited liability and generated investor

interest in corporate securities.

An important early event in the development of the stock market in India was the

formation of the native share and stockbrokers 'Association at Bombay in 1875, the precursor

of the present day Bombay Stock Exchange. This was followed by the formation of

associations/exchanges in Ahmedabad (1894), Calcutta (1908), and Madras (1937). In addition, a

large number of ephemeral exchanges emerged mainly in buoyant periods to recede into oblivion

during depressing times subsequently.

Stock exchanges are intricacy inter-woven in the fabric of a nation's economic life.

Without a stock exchange, the saving of the community- the sinews of economic progress and

productive efficiency- would remain underutilized. The task of mobilization and allocation of

savings could be attempted in the old days by a much less specialized institution than the stock

exchanges. But as business and industry expanded and the economy assumed more complex

nature, the need for 'permanent finance' arose. Entrepreneurs needed money for long term

whereas investors demanded liquidity the facility to convert their investment into cash at any

given time. The answer was a ready market for investments and this was how the stock exchange

came into being.

Real Estate:-

Characteristics ofthe Real Estate Marketin India:-

1. Growing Market Demand:-

y Realization of large commercial projects

y IPOs by developers

y Gradual organization of the markets in the TierI cities

2. Greater availability of information:-

y Emergence of transparency and liquidity

y Entry of international real estate consultancies


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y Governing legal framework relaxed

y Competitive pricing

Current Scenario in Real Estatein India:-

Real estate sector is in boom in India. In the last fifteen years, post liberalization of the

economy, Indian real estate business has taken an upturn and is expected to grow from the

current USD 14 billion to a USD 102 billion in the next 10 years. This growth can be attributed

to favorable demographics, increasing purchasing power, existence of customer friendly banks &

housing finance companies, professionalism in real estate and favorable reforms initiated by the

government to attract global investors.

Driving Forces

Stated below are the reasons that have led to the real estate boom in the country

Booming economy; accelerated GDP to 8% p.a.

Indias emergence as an attractive off shoring destination and availability of pool of highly

skilled technicians and engineers ; Development of large captive units of major players include

GE, Prudential, HSBC, Bank ofAmerica, Standard Chartered and American Express

Rise in disposable income and growing middle class, increasing the demand for quality

residential real estate and real estate as an investment option.

Entry of professional players equipped with expertise in real estate development;

Relaxation of legal rulings and processes by the governing bodies encouraging investments in

real estate

Improvement in infrastructure facilities.

Fixed Deposit:- Theycoverthefixeddeposits ofvariedtenors offeredbythecommercialbanks and

othernon-bankingfinancialinstitutions. These aregenerally a low riskprepositions,

as the commercial banks arebelieved to return the amountdue withoutdefault.

Mostlythese Fixed Deposits arethepreferredchoice ofrisk-averse Indianinvestors


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who ratesafety ofcapital & ease ofinvestment above allparameters. Largely,these

investmentsearn a marginalrate ofreturn of6-8%per annum. Deposits

Investing in bank or post-office deposits is a very common way of securing surplus funds. These

instruments are at the low end of the risk-return spectrum

Bonds:-

Bonds refer to debt instruments bearing interest on maturity. In simple terms,

organizations mayborrow fundsbyissuingdebtsecuritiesnamedbonds,having a fixed

maturity period (more than one year) and pay a specified rate of interest on the

principal amountto theholders. A bond isgenerally a promiseto repaytheprincipal

along with a fixedrate ofinterest on a specifieddate. Thecentral orstategovernment,

corporations and similar institution issue bonds. Few of the government bonds are

nationalsavingcertificates, Kisan Vikas Patra, Post Office Deposits, Provident Funds,

etc. These schemes are risk free, as the government does not default in payments.

However,the interestrates offeredbythem are intherange of7%-9%. Bonds:Bonds

are fixed income instruments which are issued for the purpose of raising capital. The Central or State

government and public sector organizations sell bonds. The bond is generally a promise to repay the

principal amount with a fixed rate of interest on a specified date, called the maturity period.

Commodities:-A commodity is a basic good representing a monetary value. Commodities are

mostly used as inputs in the production of other goods or services. With the advent of new online

exchange, commodities can now be traded in futures markets. The following are some of the

commodities that are traded in the commodity market.

Precious Metals : Gold and Silver

Base Metals :Copper, Zinc, Steel and Aluminum

Energy :Crude Oil, Brent Crude and Natural Gas

Pulses :Chana, Urad and Tur

Spices :Black Pepper, Jeera, Turmeric and Red Chili

Others : GuarComplex, Soya Complex, Wheat and Sugar.


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Majorplayersininsurancecompanies:-

Life Insurance Corporation:-

Life

Insurance

Corporation (

LIC) came into existence on 1st September 1956 through the

amalgamation of 154 Indian insurance companies, 16 non-Indian companies and 75 provident.

The amalgamation was achieved with the help ofLife Insurance Act passed by the Parliament in

the same year. The LIC was created with the goal of reaching all the insurable people in the

country and providing them financial coverage at a reasonable price. In the year 1956, LIC had 5

zonal offices, 33 divisional offices and 212 branch offices. With time there was a need for a

branch office at every district headquarter and many branches were opened, which raised the

pace of the organization.LIC now has 2048 fully computerized branch offices, 100 divisional

offices, 7 zonal offices and the corporate office. At present, online premium collection facility is

being offered in selected cities as LIC has tied up with some banks and service providers. For

providing customer satisfaction the organization has introduced various schemes such as ECS,

ATM premium payment facility, IVRS, Info centers which are set up in various cities including

Mumbai, Bangalore, Chennai, Kolkata, New Delhi, Pune and many more. It has also come up

with SATELLITE SAMPARK offices providing easy access to policyholders. LIC has crossed

many milestones and set standards for itself fostering unmatched performance.

Bajaj AllianzGeneral Insurance Company Limited:

Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Auto Limited

and Allianz AG of Germany.

ajaj Allianz General Insurance came into existence on 2nd May 2001, when it got certification of

Registration from the Insurance and Regulatory Development Authority. Bajaj Auto has a share

of 74%, whereas Allianz has the remaining 26%. In the very first year, the company made a

strong position for itself in the industry and was reckoned amongst the top private insurers. The

premium income of the company as on 31st March 2006 was Rs. 1285 crores, whereas the profit

after tax made was Rs. 52 crores. Bajaj Allianz has a Pan India network covering over 100 towns

from Jammu to Thiruvananthapuram and aims to spread its operations in many other cities.

ICICI Prudential Life Insurance Company:

ICICI Prudential is a joint venture between ICICI bank and Prudential plc, both having strong

operations in their respective countries. ICICI bank is one of the leading banks in India providing


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quality financial services and Prudential is an international financial service provider

headquartered at United Kingdom. ICICI and Prudential have respective shares of 74% and 26%.

The Company started operating in December 2000. Currently, total capital with the company is

Rs. 18.15 billion.

Birla Sun Life Insurance Company Limited

Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between Aditya Birla

Group and Sun Life Financial Inc. BSLI started functioning in March 2001 after getting the

certificate of registration from IRDA.

Birla Sun Life Insurance Company Limited introduced unit Linked Life Insurance Solutions in

India. Within a short span of time it was able to establish itself as a leading player in the Private

Life Insurance Industry. It has been innovative and come up with customer-centric products to

provide safety and services. The company has web-enabled IT systems for better customer

services and a strong distribution channel which is easily approachable. The company shows

corporate governance and a high degree of transparency in all business practices. It has

professional knowledge and global expertise ofAditya Birla Group.

TATA AIGGeneral Insurance

Tata AIG General Insurance Company Ltd. is a joint venture between Tata Sons and American

International Group, Inc. (AIG). The Tata Group is holding 74 per cent stake and the rest 26

percent is held by AIG. The company has got the expertise, knowledge and strength of both the

organizations.

Tata AIG General Insurance Company was founded on January 22, 2001. It offers general

insurance in various categories, such as automobile, home, personal accident, travel, energy,

marine, property and casualty and specialized financial solutions.


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Five Forces Analysis:-

Five Forces Analysis helps the marketer to contrast a competitive environment. It has

similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on

the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or

range of products. For example, Dell would analyze the market forBusiness Computers i.e. one

of its SBUs.


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The Threat ofentry:-

y Economies of scale e.g. the benefits associated with bulk purchasing.

y The high or low cost of entry e.g. how much wills it cost for the latest technology?

y Ease of access to distribution channels e.g. Do our competitors have the distribution

channels sewn up?

y Cost advantages not related to the size of the company e.g. personal contacts or

knowledge that larger companies do not own or learning curve effects.

y Will competitors retaliate?

y Government action e.g. will new laws be introduced that will weaken our competitive

position?

y How important is differentiation? e.g. The Champagne brand cannot be copied. This

desensitises the influence of the environment.

Thepower ofbuyers:-

y This is high where there a few, large players in a market e.g. the large grocery chains.

y If there are a large number of undifferentiated, small suppliers e.g. small farming

businesses supplying the large grocery chains.

y The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to

another.

Thepower ofsuppliers:-

The power of suppliers tends to be a reversal of the power of buyers.

y Where the switching costs are high e.g. switching from one software supplier to another.

y Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft.

y There is a possibility of the supplier integrating forward e.g. Brewers buying bars.

y Customers are fragmented (not in clusters) so that they have little bargaining power e.g.

Gas/Petrol stations in remote places.


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Thethreat ofsubstitutes:-

y Where there is product-for-product substitution e.g. email for fax where there is

substitution of need e.g. better toothpaste reduces the need for dentists.

y Where there is generic substitution (competing for the currency in your pocket) e.g.

Video suppliers compete with travel companies.

y We could always do without e.g. cigarettes.

Competitive Rivalry:-

y This is most likely to be high where entry is likely; there is the threat of substitute

products, and suppliers and buyers in the market attempt to control. This is why it is

always seen in the center of the diagram.

Non-financial Instruments

Realestate

With the ever-increasing cost of land, real estate has come up as a profitable investment proposition.

Gold

The 'yellow metal' is a preferred investment option, particularly when markets are volatile. Today, beyond

physical gold, a number of products which derive their value from the price of gold are available for

investment. These include gold futures and gold exchange traded funds.

Bank Fixed Deposits (FD)

Fixed DepositorFD isthe mostpreferredinvestmentoptiontoday. Ityields upto 8.5%annualreturndependsonthe Bankandperiod. Minimum periodis 15daysand maximum is5yearsandabove. Senior citizens getspecialinterestratesforFixed Deposits. Thisis

consideredtobeasafeinvestmentbecauseallbanksoperated underthe guidelinesof

Reserve Bankof India.


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National Saving Certificate (NSC)

NSC isbackedby Govt.of Indiasoitisasafeinvestment method. Lockinperiodis 6 years.

Minimum amountis Rs100 andno upperlimit. You get 8%interest calculatedtwiceayear.NSC comes under Section 80C soyou will getanincometaxdeduction upto Rs 1,00,000.From FY 2005-'06 onwards interest accrued on NSC is taxable.

Stock Market

Investing inshare marketisanotherinvestmentoptionto get morereturns. Butshare

marketinvestmentisvolatileto market conditions. Beforeinvesting you shouldhaveathoroughknowledgeaboutitsoperation.

Other Commodities

Other than gold other commodities are also traded. Some of them are silver, crude oil, agricultural

commodities and other base metals .


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Reference

www.icicidirect.com

www.nseindia.com

www.bseindia.com

www.scribed.com

www.mcx.com

www.equity.com

www.mutualfundsindia.com


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QuestionnaireName :

Occupation :Contact No :

Email id :

1. Do you know about the following Financial Instrument? Mutual Fun Yes No Bond YesNo Insurance Yes No

Equity Shares Yes No

Fixed Deposits Yes No Govt. Securities Yes No

Real Estate Yes No IPO Yes No

Gold Yes No

If any other please specify...

2. How do you get information regarding these Financial Instrument? AdvertisementCompany Sales force

Friends / RelativesMagazines /Newspaper

If any other please specify

3. Please rate the Financial Instruments as per your Preference. More preferred Moderate Lesspreferred Mutual fund Insurance

Equity SharesBonds

Fixed Deposits Govt.securities Real estate IPOs Gold4. Whatis your age? 15-20 21-40 41-50 51-60 60 above

5. What are the factors which you consider while investing in any Financial Instrument?Return (capital appreciation)

Tax SavingLiquidityRegular income flow

SafetyRisk

If any other please specify.

6. On what basis you will invest in any particular Financial Instrument? Past Performance

PortfolioFund Manager

Fundamental/Technical AnalysisMarket Sentiment


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If any other please specify7. How will you invest your money in any Financial Instrument? Yourself

Through any stock broking company. Please specify name..Sub broker/ Agents

Through Banks

If any other please specify..

8. In what type of Financial Instrument you like to invest? Equity based

Debt basedBalanced Fund

Hybrid FundELSS(equity linked saving scheme)

If any other please specify9. What is your annualincome?

1lac to 3 lac3lac to 5lac

5lac to 10lacmore than 10 lacs

10. How much of your money you invest in any Financial Instrument? 10% to 20%20% to 30%

30% to 50%More than 50%


11. How long you prefer to keep your money in any Financial Instrument? Less than 6 months6 months to 1 year

1 year to 3 yearMore than 3 years

If any other please specify

12.How much return you expect from any Financial Instrument? 10% to 20%20% to 30%

30% to 50%More than 50%


13. Will you invest your money for saving the Tax in any Financial Instrument? Yes No14. Are you satisfied with your investment decision, Please rate? Highly satisfied

SatisfiedLess satisfied

No satisfaction15. Any other comments.


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