mba-finance project (A STUDY ON INVESTORS ATTITUDE AND KNOWLEDGE TOWARDS INVESTMENT OPTIONS AVAILABEL IN INDIA – WITH SPECIAL REFERENCE TO UAE BASED NRIs)

I

“A STUDY ON INVESTORS ATTITUDEAND KNOWLEDGE TOWARDS

INVESTMENT OPTIONS AVAILABELIN INDIA – WITH SPECIAL

REFERENCE TO UAE BASED NRIs”

PROJECT REPORT SUBMITTED

TO THE

BIRLA INSTITUTE OF TECHNOLOGY, RANCHI

FOR THE PARTIAL FULFILLMENT OF DEGREE OF

MASTER OF BUSINESS ADMINSTRATION

BY

VENU.T

MBA/8010/10

Under the Supervision of

Mr. Soofi Anwar

BIRLA INSTITUTE OF TECHNOLOGY,INTERNATIONAL CENTER

RAK, UAE

June 2012

I

DECLARATION

This is to certify that the present report on “INVESTORS ATTITUDEAND KNOWLEDGE TOWARDS INVESTMENT OPTIONSAVAILABEL IN INDIA – WITH SPECIAL REFERENCE TO UAEBASED NRIs” is based on my original work and data collected andindebtedness to other works/publications has been duly acknowledged at therelevant places.

It has not been submitted in part or full for any other diploma or degree ofany other university

(signature)

(Venu.T)

II

CERTIFICATE

This is to certify that the project entitled “A Study on Investors Attitude

and Knowledge Towards Investment Options Available In India - With

Special reference to UAE based NRIs” is the project work carried out by

Venu.T, MBA/8010/10 of MASTER OF BUSINESS ADMINISTRATION,

Department of Management, Birla Institute of Technology, International

Center, Ras Al Khaimah, during the academic period (2010-2012), in partial

fulfillment of the requirements, as per subject code MBA 4004 for the award

of degree of MASTER OF BUSINESS ADMINISTRATION.

Signature of the Guide Signature of the H.O.D

III

ACKNOWLEDGMENT

First of all immensely and wholeheartedly I thank god for giving me this

opportunity for successful completion of my project work and also I thank

management of “ARC International – Middle East” for giving me a chance

for doing this course.

I extend my thanks to our respected Sr. Lecturer “Mr. Soofi Anwar” for

permitting me to take up this project work and guide for project work, for

his continuous and valuable information, rendered to me in completing

my project work with in allotted time period.

I wish to express my sincere thanks to “Dr. Durga Prasad”, for his

patience, valuable inputs and instincts support without which the project

work would not have completed.

I am extremely indebted “Mr.Venu Madhav” – Area Manager (AIME) for

his invaluable support and motivation and also I thank my “family

members” for their wishes and blessings for successful completion of this

project work.

Once again, I take this opportunity to thank each and every person, who

direct or indirectly helped me for the successful completion of this project

work.

Venu .T

Table of Contents IV

Investor’s attitude and knowledge towards investment options available in IndiaWith special reference to UAE based NRI’s

Table of Contents Page

List of Figures viii

List of Tables ix

1 Introduction1.1 Introduction to Study 1

1.2 Investors Attitude towards Investments 2

1.3 Investors Attitude towards Risk 3

1.4 Non-Resident Indian (NRI) 4

1.4.1 Person of Indian Origin (PIO) 4

1.4.2 Overseas Corporate Body (OCB) 4

1.5 Investment Options Available in India for NRIs 5

2 Research Design2.1 Title of the Dissertation 6

2.2 Statement Of the Problem 6

2.3 Scope Of the Study 7

2.4 Objective Of the Study 7

2.5 Methodology Of the Study 7

2.5.1 Research Design 7

2.5.2 Sampling Design 8

2.5.3 Collection Of Data 8

2.5.4 Analysis Of Data 8

2.6 Significance Of the Study 9

2.7 Limitations Of the Study 9

3 Literature Review3.1 What is Investment 10

3.1.1 Financial & Economic Meaning Of Investment 10

Table of Contents V


3.2 Why Investments are Important 11

3.2.1 Longer Life Expectancy or Planning forRetirement

11

3.2.2 Increasing Rates Of Taxation 12

3.2.3 Interest Rates 12

3.2.4 Inflation 12

3.2.5 Income 13

3.2.6 Investment Channels 13

3.3 Elements Of Investment 13

3.3.1 Return 14

3.3.2 Risk 14

3.3.3 Relationship Of Risk & Return 15

3.3.4 Time 15

3.4 Types Of Investments 16

3.4.1 Bank Deposits 16

3.4.1a Current Deposits/Accounts 16

3.4.1b Saving Deposits / Accounts 16

3.4.1c Recurring Deposits / Accounts 17

3.4.1d Fixed Deposits Accounts / Term DepositAccounts

17

3.4.2 Fixed Deposit Schemes In Companies 18

3.4.3 Post-office Schemes 18

3.4.4 Stocks / Shares 19

3.4.4a Common Stock 20

3.4.4b Preferred Stock 20

3.4.4c Convertible Preferential Stock 20

3.4.4d Bonds 21

3.4.4e Debentures 22

3.4.4f Mutual Funds 22

3.4.5 Life Insurance 23

Table of Contents VI


3.4.6 Real Estate 24

3.4.6a Real Estate Investment Trusts (REITs) 24

3.4.7 Gold Investment 25

3.5 Factors favorable for Investment in India 25

3.5.1 Legal Safeguards 25

3.5.2 Well organized Monitory System 26

3.5.3 Existence of Financial Institutions to

encourage Savings

27

3.6 Features Of an Investment Program 27

3.6.1 Safety of Principal 27

3.6.2 Liquidity 27

3.6.3 Income stability 27

3.6.4 Appreciation and purchasing power stability 28

3.6.5 Legality and freedom from care 28

3.6.6 Tangibility 28

3.7 Classification of Investors 29

3.8 Non-Resident Indian (NRI) 31

3.9 Financial Advisors 32

3.10 Investment Opportunities for NRIs 33

3.11 Investment Options in India for NRIs 34

3.11.1 Ordinary Non-Resident Account in Rupees

(NRO)

34

3.11.2 Non-Resident (External) Account (NRE) 34

3.11.3 Foreign Currency Non-Resident Account

(FCNR)

36

3.11.4 Term Deposit Accounts 37

3.11.5 Portfolio Investment Schedule (PIS) 37

3.11.6 Unit Deposit 38

Table of Contents VII


3.11.7 Equities 39

3.11.8 Bonds 39

3.11.9 24% and 40% Schemes 40

3.11.10 How can an NRI invest / trade in Indian Stock

Markets?

40

3.11.11 Immovable Property 44

3.12 Different Tax Benefits available to NRIs 48

3.13 Tax Provisions and Concessions for NRIs 49

3.13.1 Income Tax 49

3.13.2 Filing Returns 50

3.13.3 Provisions 51

3.13.4 Investing and Savings

4 Analysis and Interpretation 54

5 Findings, Suggestions & Conclusion

5.1 Findings 97

5.1.1 Investment Portfolio of Investors 98

5.1.2 Inter-relationship between Investment Preferences 98

5.2 Suggestions 99

6 Conclusion 102

AppendicesAppendix A : Questionnaire 103

Bibliography 107

List of Tables IX


List of Tables Page

Table 2.1 Types of Investors (Based on Risk) 30

Table 2.2 Types of Investors (Based on Income) 31

Table 4.1 Age of Respondents 55

Table 4.2 Employment Status 57

Table 4.3 Income wise Classification 59

Table 4.4 Saving Objective 61

Table 4.5 Investment Objective 63

Table 4.6 Frequency of Investment in India 65

Table 4.7 Financial Advisor 67

Table 4.8 Who has been the Financial Advisors 69

Table 4.9 Investment Portfolio of the Respondents 71

Table 4.10 NRIs Awareness level towards the variousinvestments in India

74

Table 4.11 Level of Satisfaction with the Investment Made 78

Table 4.12 Investment Experience 79

Table 4.13 Risk wise Classification 81

Table 4.14 Options on the Comfort ability Level in the DeclineValue of Investments for Higher Returns

83

Table 4.15 Withdrawals from the Investment Account 86

Table 4.16 Relationship between Age Group & Risk Profile 87

Table 4.17 Relationship between Income & Frequency ofInvestment

89

Table 4.18 Relationship between Income &risk profiles 91

Table 4.19 Relation between Occupation & frequency ofinvestment.

93

Table 4.20 Relation between Occupation & Risk Profile 95

List of Figures VIII


List of Figures Page

Figure 4.1 Age of Respondents 55

Figure 4.2 Employment Status 57

Figure 4.3 Income wise Classification 59

Figure 4.4 Saving Objective 61

Figure 4.5 Investment Objective 63

Figure 4.6 Frequency of Investment in India 65

Figure 4.7 Financial Advisor 67

Figure 4.8 Who has been the Financial Advisors 69

Figure 4.9 Investment Portfolio of the Respondents 71

Figure 4.10 NRIs Awareness level towards the variousinvestments in India

75

Figure 4.11 Level of Satisfaction with the Investment Made 77

Figure 4.12 Investment Experience 79

Figure 4.13 Risk wise Classification 81

Figure 4.14 Options on the Comfort ability Level in the DeclineValue of Investments for Higher Returns

83

Figure 4.15 Withdrawals from the Investment Account 85

Introduction 1


CHAPTER- 1

INTRODUCTION

1.1 Introduction to the Study

Source: http://www.oifc.in (overseas Indian Facilitation Centre)

Volatile global markets, risk aversion, Euro zone sovereignty issues,

Greek debt, rupee depreciation; these are terms that the investors all over

the globe have become accustomed to these days. With equities markets

giving negative returns all over the globe and the rupee depreciating by

over 12% to the USD, 6% against the Euro and over 15% against the

AED, the major question crossing minds of all NRI’s, PIO’s and OCI’s

is “Is this the best time to invest in India?”

The Indian stock markets because of several reasons have

underperformed the global markets as well as the emerging markets to a

certain extend because of which investors are seeing negative returns, but

if an investor has medium to long term view then this is the best time to

invest in India. The Reserve bank of India has already given signs that

interest rates in India have already peaked and if the inflation rate

stabilize and start to reduce a bit the Reserve bank of India will start

reducing rates which in turn will push the bond prices up. Looking at

these scenarios NRI’s have lot of investment opportunities depending on

their budget and the time frame they can remain invested for.

Savings form an important part of the economy of any nation. With the

savings invested in various options available to the people, the money

acts as the driver for growth of the country. Indian financial scene too

Introduction 2


presents a plethora of avenues to the investors. Though certainly not the

best or deepest of the markets in the world, it has reasonable options for

an ordinary man to invest his savings.

One needs to invest to and earn return on your idle resources and

generate a specified sum of money for a specific goal in life and make a

provision for an uncertain future. 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 is simply what it

cost to buy the goods and services you need to live. Inflation causes

money to loss 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 you allow your

investments more time to grow, where by the concept of compounding

increases your income, by accumulating the principle and the interest or

dividend earned on it, year after year.

The three golden rules for all investors are:

Invest early

Invest regularly

Invest for long-term and not for short-term

This survey will also help to understand the investors facets before

investing in any of the investment tools and thus to scrutinize the

important aspects of the investors before investing that further helped in

analyzing the relation between the features of the products and the

investors requirements.

1.2 Investors Attitude towards Investments

Investment and savings attitudes and behavior are influenced by the

structure, complexity, transparency and perceived past and future

performance of different kinds of investment options; the general lack of

Introduction 3


independent financial advice; the recent superior performance of

property investment; perceptions and personal tolerance of risk; the often

low level of financial literacy about products other than property; the

nature of the information people use when making financial decisions;

the personal or family experience people have with investment; a general

wish to have personal control over the investment and trust in the advice

of friends and family over unknown professional advisors.

Consumer decisions on saving are likely to be influenced by new or

proposed changes in the investment environment. The application of

lower taxes to earnings in managed funds, and forthcoming regulatory

changes aimed at improving disclosure and prudential arrangements

applying to financial products, providers and advisors are also likely to

have an impact.

1.3 Investors Attitude towards Risk

There general consensus among NRI investors is that most of them are

unwilling to take much risk with their money. This is the case even over

the long term (five years or more).

The most common reasons cited for being averse to taking risks included

the responsibility of raising a family and taking on large financial

commitments such as a mortgage. However, some of the investors were

willing to take higher risks with their money to give themselves the

chance of making higher returns. These participants tended to be young

and single or higher earners.

When it came to considering risk as a factor in financial decision-making,

views are mixed. Some investors would not consider taking out anything

more risky than a savings account; their sole focus, therefore, would be on

the level of return available from savings accounts. Other class of

Introduction 4


investors felt it was important to consider the potential returns whatever

the product.

1.4 Non-Resident Indian (NRI)

An Indian abroad, popularly known as an NRI. NRI definitions under

FEMA (Foreign Exchange Management Act, 1999):

“A person resident outside India who is either a citizen of India or a

person of Indian Origin”

Recently RBI has clarified that students studying abroad also be treated as

NRIs under FEMA and accordingly be eligible for foreign investments

and NRE/FCNR accounts.

1.4.1 Person of Indian Origin (PIO)

Includes a person being a citizen of any country other than Pakistan and

Bangladesh who:

a. Held an Indian passport at any time or

b. Himself or either of his parents or any of his grandparents were

citizens of India, or

c. Is a spouse of an Indian Citizen.

1.4.2 Overseas Corporate Body (OCB)

Means a Company, partnership Firm, Society etc… wherein 60% or more

ownership lies with NRIs or a trust wherein 60% or more financial

interest is irrevocably held by NRIs..

The tax free environs of the UAE are one of the major driving forces for

Indians to settle down in the country. But Non- Resident Indians (NRI’s)

need to keep in mind that they are still liable for taxes on certain

investments back home. This applies to investments in shares, property,

debentures and deposits, if the overall amount exceeds the exemption

Introduction 5


limit of Rs. 160,000 (around Dhs. 13,000). There are some benefits for

NRI’s which can ease the burden of handing over hard-earned money to

the tax office back home.

1.5 Investment options available for NRIs

NRIs can invest in:

Bank Deposits

Secondary markets through Portfolio investment in equity

shares/convertible debentures.

New issues (shares/convertible debentures).

Non-convertible debentures .

Mutual funds provided that amount is invested out of

RE/FCNR/NRO account or by inward remittance.

Domestic (NRO) funds through deposits in Indian companies

(including Non-Banking Finance Companies if they are registered

with Reserve Bank of India) on non-repatriation basis up to 3 years

subject to certain formalities to be completed by the concerned

company.

Bonds provided that amount is invested out of NRE/FCNR/NRO

account or by inward remittance.

Proprietary or partnership concern in India.

Immovable property provided that the amount is not invested for the

purchase of agricultural land, plantation property or farm house and

investments are made from fresh inward remittance or existing non-

resident account.

Research Design 6


CHAPTER- 2

Research Design

2.1 Title of the Dissertation

The title of the Dissertation is “investor’s Attitude and Knowledge towardsInvestment Options available in India – With Special reference to UAEbased NRIs”

2.2 Statement of the Problem

The particular topic is mainly selected to analyze “Investor’s attitude and

knowledge towards investment options available in India - with special

reference to UAE based NRI’s”. The comprehensive statement of the

problem can thus be stated as “Investor’s options in India- a study about the

attitudes of the NRI’s of UAE and investment options in India”.

This analysis was carried out to give more knowledge and broader view to

the NRI's about the available investment options back home. As the NRIs

visit their home country only for a short period of time and mostly once in a

year, so they are not familiar and are also not well educated about the

various options in which they can invest in. Their attitudes towards

investments are guided by so many external factors and once they decide to

invest, the major problem starts with the lack of proper agency (financial

advisor/ consultant) to guide the investors according to their preference. If at

all the NRIs decide to invest, they take a risk of losing their hard earned

money.

Hence it is very important that the NRIs knowledge about the investment

options available in India are broadened and thus gaining a positive attitude

towards the investment alternatives.

Research Design 7


2.3 Scope of the Study

The scope of the study was limited to the U.A.E based NRI’s who have

invested in India. The study was conducted on 200 respondents.

2.4 Objectives of the Study

1. To study the awareness level of the investors about the various

investment affairs in India.

2. To analyze the attitude of the investors towards various

investment alternatives.

3. To study the factors which influence the investment decisions of

investors.

4. To examine the regularity of investment of the investor in UAE.

5. To analyze the risk-return preference of investors in investment.

6. To identify the problems faced by NRI’s in selecting suitable

investments options.

2.5 Methodology of the Study

2.5.1 Research Design

Research design stands for advance planning of the methods to be adopted

for collecting the relevant data and the techniques to be used in analysis,

keeping in view the objectives of the research and availability of time.

Descriptive research includes surveys and fact-finding enquiries of different

kinds. The major purpose of this research is description of state of affairs as

it exists at present.

In this survey the design used is descriptive in nature. The information is

collected from the individuals and analyzed with the help of different

statistical tools, for describing the relationship between various types of

Research Design 8


variables, pertaining to different investment options. Moreover Cross table

Analysis has been done for processing the data and information is derived to

meet the objectives of the study.

2.5.2 Sampling Design

The study was based on primary as well as secondary data. The primary data

for this study was collected from 200 NRI’s from UAE. The study was

conducted in the month of April 2012 to May 2012.

2.5.3 Collection of Data

A pretested schedule was used to collect data from respondents. Data such

as awareness about investment options in India, attitudes towards

investment, risk return preferences, factors which influence the investment

decisions etc. were collected from respondents in UAE through

questionnaires.

The secondary data for this study were collected from magazines journals

research reports publishing by various agencies, investment etc.

2.5.4 Analysis of Data

The collected data were analyzed with the help of scientific statistical tools

such as

Percentages

Chi-Square Test and

Graphs

Excel Spread Sheets.

Research Design 9


2.6 Significance of the Study

The study was carried out to find the attitude of investors towards the

investment options available to NRIs in India. The study also tries to

determine the risk-return preferences of the investors.

The aim of the research was to educate the NRIs to give detailed knowledge

about the various investments, the features of these investments and the risk

attached to them.

2.7 Limitations of the Study

The area of the study is limited to the NRI’s based in UAE only.

Hence the results may not be true for other geographical locations.

Validity and Reliability of the data depends on the truthfulness of

the responses from the public. Chances of bias were more since

the sample size of the study was just on 200 respondents.

Time at the disposal of the researcher is limited.

The size of the sample compared to the population is very small

and hence it may not represent the whole population.

A structured questionnaire was the basis for collecting the data, so

it has the usual deficiencies attached to this technique of data

collection.

Literature Review 10


CHAPTER- 3

LITERATURE REVIEW

3.1 What is INVESTMENT??

Investment is the employment of funds with the aim of achieving additional

income or growth in value. The essential quality of an investment is that it

involves ‘waiting’ for a reward. It involves the commitment of resources,

which have been saved or put away from current consumption in the hope

that some benefits will accrue in future. The term investment does not

appear to be as simple as it has been defined. Investment has been further

categorized by financial experts and economists. It has also often been

confused with the term Speculation.

3.1.1 Financial & Economic Meaning of Investment

Investment is the allocation of monetary resources to assets that are expected

to yield some gain or positive return over a given period of time. These

assets range from safe investments to risky investments. Investments in this

form are also called “Financial Investments”.

From the point of view of people who invest their funds, they are the

suppliers of ‘Capital’ and in their view, investment is a commitment of a

person’s funds to derive future income in the form of interest, dividends,

rent, premiums, pension benefits or the appreciation of the value of their

principal capital. To the financial investor, it is not important whether

money is invested for a productive use or for the purchase of second hand

instruments such as existing shares and stocks listed on the stock exchanges.



Most investments are considered transfers of financial assets from one

person to another.

The nature of investment in the financial sense differs from its use in the

economic sense. To the economist, ‘Investment’ means the net additions to

the economy’s capital stock which consists of goods & service that are used

in the production of other goods & services. In this context, the term

investment, therefore, implies the formation of new and productive capital in

the form of new construction, new producer’s durable equipment such as

plant and equipment. Inventories & human capital are included in the

economist’s definition of investment.

The financial & economic meanings of investment are related to each other

because investment is a part of savings of individuals which flow into the

capital market either directly or through institutions, divided in ‘new’ and

secondhand capital financing. Investors as ‘suppliers’ and investor as ‘user’

of long term funds find a meeting place in the market.

3.2 Why investments are important?

Investments are both important and useful in the context of present-day

conditions. Some factors that have made investment decisions increasingly

important are:

3.2.1 Longer life expectancy or planning for retirement

Investment decisions have become significant as people retire between the

age of 55 and 60. Also, the trend shows longer life expectancy. The earnings

should, therefore be calculated in such a manner that a portion should be put

away as savings. Savings by themselves do not increase wealth; these must



be invested in such a way that the principal and income will be adequate for

a greater number of retirement years.

The importance of investments decisions is further enhanced by the fact that

there is increasing number of women working in organizations. These

women will be responsible for planning their own investments during their

working life so that after retirement they are able to have a stable income.

3.2.2 Increasing Rates of Taxation

Taxation is one of crucial factors in any country, which introduces an

element of compulsion in a person’s savings. There are various forms of

savings outlets in our country in the form of investments which help in

bringing down the tax level by offering deductions in personal income.

3.2.3 Interest Rates

Another aspect which is necessary for a sound investment plan is the level of

interest rates. Interest rates vary between one investment and another. These

may vary between risky and safe investments; they may also differ due to

different benefit schemes offered by the investments. These aspects must be

considered before actually allocating any amount. A high rate of interest

may not be the only factor favoring the outlet for investment. The investor

has to include in his portfolio several kinds of investments. Stability of

interest is as important as receiving a high rate of interest.

3.2.4 Inflation

Inflation has become a continuous problem since the last decade. In these

years of rising prices, several problems are associated coupled with a falling

standard of living. Before funds are invested erosion of the resources will

have to carefully considered in order to make the right choice of



investments. The investor will try to search an outlet, which will give him a

high rate of return in the form of interest to cover an decrease due to

inflation. He will also have to judge whether the interest or return will be

continuous or there’s a likelihood of irregularity. Coupled with high rates of

interest he will have to find an outlet which will ensure safety of principal.

Besides high rate of interest & safety of principal, an investor also has to

always bear in mind the taxation angel. The interest earned through

investment should not unduly increase his taxation burden.

3.2.5 Income

Another reason why investment decisions have assumed importance is the

general increase in the employment opportunities. The employment

opportunities gave rise to both male and female working force. More

incomes and more avenues of investment have led to the ability and

willingness of working people to save and invest their funds.

3.2.6 Investment Channels

The investor in his choice of investment will have to try to achieve a proper

mix between high rate of return and stability of return to reap the benefits of

both. Some of the instruments available are Corporate Stock, Provident

Fund, Life Insurance, Fixed Deposits in the Corporate Sector, Unit Trust

Schemes and so on.

3.3 Elements of Investment

The study of investments is concerned with the purchase and sale of

financial assets and the attempt of the investor to make logical decisions

about the various alternatives in order to earn returns of them. The returns

are further dependent on the varying degrees of risk.



A functional definition as defined by Amling is, “Investment maybe defined

as the purchase by an individual or institutional investor of a financial or real

asset that produces a return proportional to the risk assumed over some

future investment period.

These definitions of investments bring froth three elements of investment,

categorized as:

a. Return

b. Risk

c. Relationship of risk & return

d. Time factor

3.3.1 Return

Investors may buy and sell financial assets in order to earn returns on them.

The returns, better known as reward from investments, include both current

income and capital gains or losses which arise by the increase or decrease of

the security prices. The capital gains or the income earned are then treated as

a percentage of the beginning investment. Returns, therefore, may be

expressed as the total annual income and capital gain as a percentage if

investment. Satisfactory returns are different for different people. Two

rational investors may be satisfied by different levels of anticipated return

and estimated risk. Rational investors like returns but are risk averse. They

try to maximize their utility by buying, holding, or adjusting their portfolio to

achieve “maximum utility”.

3.3.2 Risk

Risk and uncertainty are an integral part of an investment decision. Risk is

composed of the demands that bring in variations in return of income. The

main forces contributing to risk are price and interest. Risk is also influenced

by external and internal considerations. External risks are uncontrollable and



broadly affect investments. These external risks are called systematic risk.

Risk due to internal environment of a firm or those affecting a particular

industry are referred to as unsystematic risk.

3.3.3 Relationship of Risk & Return

Risk and return are inseparable. To ignore risk and only expect return is an

outdated approach to investments. The investment process must be

considered in terms of both aspects – risk and return. Return is a precise

statistical term; it is not a simple expectation of investor’s return but is

measurable also. Risk is not a precise statistical term but we use statistical

terms to quantify it. The investor should keep the risk associated with the

return proportional as risk is directly correlated with return. It is generally

believed that higher the risk, the greater the reward but seeking excessive

risk does not ensure excessive return. At a given level of return, each

security has a different degree of risk. The entire process of estimating

return and risk for individual securities is called security analysis.

3.3.4 Time

Time is an important factor in investments. Time offers several different

courses of action. It may involve from trading to buying and selling at major

turning points in the market. It may also consider the time period of

investment such as long term, intermediate or short term. Time period

depends on the attitude of the investor. As investments are examined over

the time period, expected risk and return are measured. The investor usually

selects a time period and return that meet expectations of return and risk.



3.4 Types of Investments

3.4.1 Bank Deposits

Traditionally banks in India have four types of deposit accounts, namely

Current Accounts, Saving Banking Accounts, Recurring Deposits, Fixed

Deposits. However, in recent years, due to ever increasing competition,

some banks have introduced new products, which combine the features of

above two or more deposits. These are known by different names in

different banks, e.g. 2-in-1 deposits, Smart Deposits, Power Saving

Deposits, and Automatic Sweep Deposits etc.

3.4.1a Current Deposits / Accounts

These accounts are used mainly by businessmen and are not generally used

for the purpose of investment. These deposits are the most liquid deposits

and there are no limits for number of transactions or the amount of

transactions in a day. Most of the current account are firm / company

accounts. Cheque book facility is provided and the account holder can

deposit all types of the cheques and drafts in their name or endorsed in their

favor by third parties. No interest is paid by banks on these accounts. On

the other hand, banks charge service charges, on such accounts.

3.4.1b Saving Deposits / Accounts

These deposits / accounts are one of the most popular deposits for individual

accounts. These accounts not only provide cheque facility but also have lot

of flexibility for deposits and withdrawal of funds from the account. Most

of the banks have rules for the maximum number of withdrawals in a period

and the maximum amount of withdrawal, but hardly any bank enforces

these. However, banks have every right to enforce such restrictions if it is

felt that the account is being misused as a current account. The interest on



these accounts at present is regulated by Reserve Bank of India. Banks in

India at present offer 3.50% p.a. interest rate on such deposits.

3.4.1c Recurring Deposits / Accounts

These kind of deposits are most suitable for people who do not have lump

sum amount of savings, but are ready to save a small amount every month.

Normally, such deposits earn interest on the amount already deposited

(through monthly installments) at the same rates as are applicable for Fixed

Deposits / Term Deposits. These are best if you wish to create a fund for

your child's education or marriage of your daughter or buy a car without

loans.

Under these types of deposits, the person has to usually deposit a

fixed amount of money every month (usually a minimum of Rs, 100/-

p.m.). Any default in payment within the month attracts a small penalty.

However, some Banks besides offering a fixed installment RD, have also

introduced a flexible / variable RD. Under these flexible RDs the person is

allowed to deposit even higher amount of installments, with an upper limit

fixed for the same e.g. 10 times of the minimum amount agreed upon. Such

accounts are normally allowed for maturities ranging from 6 months to 120

months. A Pass book issued where the person can get the entries for all the

deposits made by him / her and the interest earned. Premature withdrawal

of accumulated amount permitted is usually allowed (however, penalty may

be imposed for early withdrawals). These accounts can be opened in single

or joint names. Nomination facility is also available.

3.4.1d Fixed Deposit Accounts / Term Deposits

Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit

Account, a certain sum of money is deposited in the bank for a specified



time period with a fixed rate of interest. The rate of interest for Bank Fixed

Deposits depends on the maturity period. It is higher in case of longer

maturity period. There is great flexibility in maturity period and it ranges

from 15days to 5 years. The interest can be compounded quarterly, half-

yearly or annually and varies from bank to bank. Minimum deposit amount

is Rs 1000/- and there is no upper limit. Loan / overdraft facility is available

against bank fixed deposits. Premature withdrawal is permissible but it

involves loss of interest.

3.4.2 Fixed Deposit Schemes In Companies

Another type of investment is the fixed deposit investment schemes offered

by various companies. These schemes are generally offered by public

limited companies in the private sector. Deposits may be cumulative or non-

cumulative. These fixed deposit schemes are offered through newspaper

advertisements and are subject to the provision of the Companies Rules of

1975. There are offered to the public as well as existing shareholders and

employees. The advantages of fixed deposit scheme of companies are that

they are deposits for short-term and offer a higher interest than the

commercial banks. Retired people find fixed deposits a good investment.

3.4.3 Post-Office Schemes

Post- office schemes are generally like the commercial bank schemes. They

have a saving account, a recurring account, a ten-year Cumulative Time

Deposit (CTD) account which are also recurring in nature. The savings

account operates in the same way as commercial banks through cheques and

there is no restriction on withdrawals. Post- Offices also sell Indira Vikas

Patra and are also popularizing Kisan Vikas Patra. This investment doubles

in seven years. These instruments cannot be transferred easily from one



person to another. But the investor can nominate any person who can avail

of this scheme in the event of the death of the investor.

Post- Office Scheme has been prepared carefully with the view that the

small investor will take advantage of easy accessibility due to the fact that

Post-Office exists in every locality. Moreover it was also to encourage the

savings habits of the uneducated class and small savers. These resources of

the small savers help in mobilization of savings of the economy.

3.4.4 Stocks / Shares

Stocks are essentially investments in a specific publicly traded corporation,

such as Coca-Cola, or Google. Publicly traded companies issue shares of

their stock to the general public. Each share represents a fractional

percentage of ownership in a company. Buying and selling individual stocks

is accomplished through stock market exchanges throughout the world.

Trading stocks successfully requires a working knowledge of how the stock

market works and what affects stock market prices. The stock market is not

gambling; however there are people that use the stock market as the

gambling platform. Stock prices rise and fall on company news, on earnings,

and a number of other reasons. Potential stock investors should learn how to

research individual stock issues and make decisions based on the

fundamental operation of the company. That being the case, there are

investors who trade individual stocks on news and hype. This is generally

considered a high risk-investing model, but can be very rewarding

financially.

Stocks and Shares are the two sides of the same coin. Basically, they both

mean the same thing. The difference between the two lies in the technical

definition of the two. When an investor holds the ownership certificates of a



particular company then it is known as Shares. Stock is a general term for

Shares. Stock is the ownership of certificate (either in physical or

dematerialized form) of any company. Hence we can say that Stock is the

share of any company. Thus, Stock ownership means holding of ownership

certificates of one or more than one company. Shares are certificates which

represent ownership rights of the holder in a specific company.

Basically, Stocks and Shares signify the same thing where one is used in

general term and the other in specific term.

Stocks generally are of 3 types:-

3.4.4a Common Stock

It gives an ownership right to the holders of the stock and hence the share

holders are entitled to the earnings of the company according to their stake.

Holders also get dividends on those stocks as and when given by the

company.

3.4.4b Preferred Stock

These stocks also give ownership right to its holders.

Its holders enjoy the privilege of receiving dividends from the company in

preference to any other common shareholders.

3.4.4c Convertible Preferential Stock

There is also another type of Stock called Convertible Preferential Stocks

where the holders of these stocks have the option of converting them to

common stocks of the issuing company. Holder of a Stock is that person

who buys the ownership certificate(s) of any company. This person becomes

the part owner of the company in accordance to the number of stock he

owns. The holder is entitled to claim anything attached to the stock right



from the company's earnings to rights of voting. Stock is nothing but a Stock

Certificate which is the proof of ownership of a company.

3.4.4d Bonds

The bond market in India is not well developed but the bonds issued by

public sector financial institutions are becoming quite popular with the

public. Since 1985, public sector institutions have been encouraged to

borrow directly from the public. This had led to the issuer of bonds by

mutual funds and financial institutions. In the recent years, the bonds issued

by IDBI have received overwhelming support of the public and have been

oversubscribed.

Investing in bonds is essentially were loans are made to corporations and

governments by investors. The corporation or government then makes fixed

interest payments to the bond investor or a set period of time, called the

term. At the end of the term, the investor gets back the original investment

amount, called the principle. Investing in bonds is generally considered a

more moderate form of investing. Bonds investing are not a investing

vehicle they generally will produce the kinds of results that investing in

individual stocks can. Still for many people investing in bonds offers a

security of a nearly guaranteed return. Bonds are evaluated by third-party

resources, and investors can make informed decisions based on the

credibility of the government or corporation issuing the bond. While most

government bonds offer a measure of security other investment vehicles

cannot, investing in corporate bonds carries with it a degree of risk that

should be considered. Evaluating which bonds might be the best investment,

would depend largely on the history of the company issuing the bonds. If a

corporation has a high credit rating, chances are your money is not at high



risk. However, if the corporation has experienced credit difficulty in the

past, the risk of losing your principle rises accordingly.

3.4.4e Debentures

In India, Debentures derived importance only since 1970. There are various

kinds of debentures in the market. There are:

Registered

Bearer

Redeemable

Perpetual

Convertible and

Right

In India, the convertible debentures have become significant. These

debentures cab be converted into ordinary shares at the option of the

shareholders after a certain number of years. Right debentures are also being

issued but generally financial institutions and trust purchases these

debentures.

3.4.4f Mutual Funds

Mutual funds are investments that pool money from many investors and

invest it in a specific set of stocks and bonds. There are different types of

mutual funds and literally an investor can find a mutual fund that specializes

in any industry specific stocks and bonds they choose. One of the more

popular types of mutual funds today is an index fund. Index funds attempt to

mimic the performance of a specific market index such as, the S&P 500, or

the Russell 2000.



Mutual funds serve important function for those investors who do not want

to follow the day to day research and evaluation comes from investing in

individual stocks. Mutual funds hire professional teams and leaders to

evaluate and buy and sell issues based on market conditions. The mutual

fund investor in turn, owns shares in a mutual fund and profits from the

expertise of the professionals. Mutual funds can be considered low risk

investments to very high risk investments. It depends on which mutual fund

you choose in which industry sector you want to commit your resources to.

You can invest in green mutual funds or tech funds anything in between.

3.4.5 Life Insurance

Life Insurance is a contract between a person and an insurance company for

a number of years covering either the life time period or a fixed number of

years. In India, life is protected by a monolithic institution called the Life

Insurance Corporation of India. Life insurance is called an investment

because of number of reasons:

1. It provides protection against risk of early death.

2. It can be used as collateral for taking loans from banks.

3. Life of key men in an association can be protected.

4. It provides tax advantages.

5. It is a measure of protection at the time of death because it gives

provision for estate duty

6. It is a sum of money received at the end of a particular number of

years, i.e., “the termination period of the contract.” Life insurance

is therefore, called an investment with an element of protection

and an element of investment.



3.4.6 Real Estate

Real estate investment involves the commitment of funds to property with

an aim to generate income through rental or lease and to achieve capital

appreciation. Real estate refers to immovable property, such as land, and

everything else that is permanently attached to it, such as buildings. When a

person acquires real estate, s/he also acquires a set of rights, including

possession, control and transfer rights.

Understanding real estate investment is crucial because it usually involves a

substantial investment and a long-term one. Moreover, the real estate market

can be unpredictable. This is particularly important when one goes beyond

buying a home to actually 'investing' in real estate. There are a number of

ways in which an investor can participate in the real estate market.

3.4.6a Real Estate Investment Trusts (REITs)

A real estate investment trust (REIT) is a corporation that invests in real

estate. REITs trade on major exchanges. A REIT uses investors' money to

acquire and operate properties. The benefits of REITs are:

REITs provide fairly regular income.

Investors gain exposure to non-residential investments (like malls

and office buildings).

REITs are highly liquid.

REITs are required by law to distribute 90% of their taxable

income in the form of dividends to shareholders.

Before making a choice regarding the kind of real estate

participation, an investor must evaluate his/her investment capacity and risk

appetite.



3.4.7 Gold Investment

Gold investing involves the buying and selling of gold mainly for the

purpose of hedging against any economic, political, social or currency

related crisis. Such crises may include a stock market crash, high inflation,

war or any social unrest. Moreover, since gold is the most popular precious

metal, gold investments are made for financial gains when the market is

bullish.

How is Gold Investing Done?

The two main methods of gold investing are:

Direct investment: One can directly invest in gold by owning bullion or

coins.

Indirect investment: This method of gold investing includes gold

certificates, spread betting, accounts and derivatives. Gold exchange traded

funds (ETFs) and shares of companies that are engaged in the mining of

gold are some of the other gold investment options.

3.5 Factors Favorable for Invest in India

The investment market should have a favorable environment to be able to

function effectively. In India where all business activities are marked by

social, economic and political considerations. It is important that the

political and economic institutions are favorable. Generally, there are four

basic considerations which foster growth and bring opportunities for

investment. There are:

3.5.1 Legal safeguards

A stable government which frames adequate legal safeguards encourages

accumulation of savings and investments. Investors will be willing to invest

their funds if they have the assurance of protection of their contractual and



property rights. In India the investors have the dual advantage of free

enterprise and government control. Freedom, efficiency and growth are

ensured from the competitive forces of private enterprises. On the other

hand being a mixed economy, government control exerts discipline and

curtails some element of freedom. A combination of the public sector

controlled by the government and private sector left free to operate, hopes to

achieve the benefits of both socialistic and capitalist forms of government

without their disadvantages. In India, the political culture is conducive to

investment as government control leads stability to the capital market.

3.5.2 Well Organized Monitory System

A well-organized monetary system with definite planning and proper

policies is a necessary prerequisite to an investment market. Most of the

investments such as bank deposits, life insurance and shares are payable in a

fixed amount of the currency of the country. A proper monetary policy

should neither promote acute inflationary pressures nor prepare for a

deflation model. Neither condition is satisfactory. Price inflation destroys

power of investments. Inflation occurs generally in unstable conditions like

war or floods bus into the last decade, it also discernible in peace conditions

epically in developing countries because of huge government deficit

financed by bank credit.

A reasonable stable price level which is produced by wise monetary and

fiscal management contributes towards proper control, good government,

economic well-being and a well-disciplined growth oriented investment

market and protection to the investor.



3.5.3 Existence of Financial Institutions to encourage Savings

The presence of financial institutions, which encourage savings and direct

those to productive uses, helps the investment market to grow. The financial

institutions generally in existence in most countries are commercial banks,

life insurance companies and investment companies.

3.5.4 Features of an Investment Program

3.6.1 Safety of Principal

The investor to be certain of safety of principal should carefully review the

economic and industry trends before choosing the types of investment.

Adequate diversification, mixing investment commitments by industry,

geographically, by management, by financial type and by maturities, proper

combination of these factors would reduce losses. Diversification helps to a

great extent in proper investment programming. But it must be reasonably

accomplished and should not be carried out to extremes.

3.6.2 Liquidity

Every investor requires a minimum liquidity in his investment to meet

emergencies. Liquidity will be ensured if the investor buys a Proportion of

readily saleable securities out of his total portfolio. He may therefore keep a

small proportion of cash, fixed deposit and units, which can be immediately

made liquid. Investment like stocks, property or real estate cannot ensure

immediate liquidity.

3.6.3 Income stability

Regularity of income at a consistent rate is necessary in any investment

pattern. Not only stability, it is also important to see that the income is

adequate after taxes. It is possible to find out some good securities, which

pay practically all their earnings in dividends.



3.6.4 Appreciation and purchasing power stability:

Investor should balance their portfolio to fight against any purchasing power

instability. Investors should judge price level inflation; explore the

possibility of gain and loss in the investment available to them, limitations

of personal; and family considerations. The investors should also try and

forecast which securities will possibly appreciate. Purchase of property at

the right time will lead to appreciation in time. Growth stock will also

appreciate over time. These, however, should be done thoughtfully and not

in a manner of speculation or gamble.

3.6.5 Legality and freedom from care:

Law should approve all investment. Law relating to minors, estates, trusts,

shares and insurance should be studied. Illegal securities will bring out many

problems for the investor. One way of being free from care is to invest in

securities like Unit Trust of India or Life Insurance Corporation or Savings

Certificates. The management of securities is then left to the care of the trust

that diversifies the investment according to safety, Stability and liquidity

with the consideration of their investment policy. The identity of legal

securities and investment in such securities will also help the investor in

avoiding many problems.

3.6.6 Tangibility

Intangible securities have many times lost their value, due to price level

inflation, confiscatory laws or social collapse. Some investors prefer to keep

a part of their wealth invested in tangible properties like building, machinery

and land. It may, however, be considered that tangible property does not

yield an income apart from the direct satisfaction of possession of property.



3.7 Classification of Investors

Investors can be classified into different groups depending on their attitude

towards risk, expectation etc., Each investor also has an indifference point at

which his own expectation of return matches with the risk that he can take.

The investor should also be able to assess his own behavior pattern before he

aims at a particular goal, which he wishes to attain. In some cases, most of

the investors are willing to sacrifice some expected income or return if the

income is certain. The higher the income group of an investor the greater

will be his desire for purchasing assets which will give him a favorable tax

treatment.

The Investor is classified into:

a) Risk Group

Investors can be classified into different groups depending on their attitude

towards risk. Each investor also has an indifference point at which his own

expectations of returns match with the risk that he can take. A diversified

portfolio carefully chosen from the numerous securities available in the

market will help the investor in achieving his objectives. The investor

should also be able to assess his own behavior pattern before he aims at a

particular goal which he wishes to attain. Broadly, he should be able to

identify whether he is a risk averter, risk neutral or risk taker.

If he identifies himself as risk averter, his normal behavior pattern will show

his preference for investments of low market rate risk and interest rate risk.

He would prefer Government securities, Life insurance Policies, Unit Trust

Certificates that he is sure would give him a continuous return.

Another class of investors is called the risk neutrals. Such investors are

willing to pay for making an investment provided they get a return of an



equal value. Their investment trends show that they try to take some risky

stocks in their total investment program but have a larger number of

securities which give them a firm return.

The risk takers form the third category of investors. They do not mind

paying more than the expected value of an asset for an uncertain future.

They believe in high return for a greater risk. Such investors emerge as

potential gamblers. While investors can be classified in categories of high

risk, no risk or medium risk takers, it can be said that the major group of

investors are those who can absorb medium risk. Most investors are willing

to sacrifice some expected income or return if the income is certain.

Table 2.1 Types of Investors (based on risk)

b) Income Group

The income group of an investor evokes responses to the available

investment outlets. The higher the income group of an investor, the greater

will be his desire for purchasing assets, which will give him a favorable tax

treatment. The source of income usually has a bearing on deduction of tax.



Certain sources of income are taxed like ordinary income. Other sources of

income may be exempted from income tax. These investment outlets should

be identified. The investments must be geared in a manner that combines the

features of low risk and low taxation to the maximum benefit. Low-income

group investor will not look towards tax benefit. His maximum utility will

be at a point of greater reward.

Table 2.2 Types of Investors (based on Income)

Income Group Return Risk Tax Benefits

Low High Medium Nil

Medium High Medium Some

High High Medium Medium

3.8 Non-Resident Indian (NRI)

Non-Resident Indian or NRI refers to a person of Indian origin staying in a

different global location for employment/carrying on business or vocation.

They are spread across the world with an estimated population of 50 to 150

million. Most of the NRI populate have migrated to alien countries for better

job prospect and future but with the advent of global MNCs (Multinational

companies) and implementation of revised foreign policies in India, the

NRIs are driven to become a part of this fastest emerging economy. NRIs

can make investments in all the investments options, which are available to

Resident Indians. However, Persons of Indian Origin can only make

investments in non-agricultural businesses in the country.

To encourage this initiation of NRIs to resettle and return back to India, they

are granted the following facilities:

Maintenance of bank accounts in India.



Investments in securities/shares of, and deposits with Indian

firms/companies.

Investments in immovable properties in India.

Transferring of money to India is no longer a tedious procedure for the NRIs

as the availability of efficient Money Exchange Service Providers helps

them to send money directly into any bank account within no time. Most of

these service providers offer PayPal transfers and 24x7 Customer Support

for the expediency of NRIs.

To appreciate the interest of NRIs in India’s immovable properties, the

government of India has come up with beneficial investment policies for the

NRIs. The Reserve Bank of India allows them to acquire, hold, transfer or

dispose of land by way of sale or inheritance. Such properties are meant for

the purchaser's bonafide residential use and they are purchased through

normal banking channels/home loans or NRE and FCNR (Foreign Currency

Non- Resident Account)

3.9 Financial Advisors

Financial advisors play an important role in helping you to make the right

investment decisions. Depending on the type of financial advisors that you

choose, they can make your life easy or difficult. It is critical for you to learn

about different types of financial advisors, so that you may understand

which of them suit your requirements.

Qualifications

Title of financial advisors depends on their qualifications. Make it a point to

confirm the qualifications of a person who claims to be a certified financial

advisor. Remember to inquire about credentials of a person who passes himself or



herself off as a “financial planner” or financial consultant” The different types of

financial advisors strutting around with fancy titles may only end up confusing and

misleading you. Only a certified financial advisor can assist you to arrive at

intelligent investment decisions.

3.10 Investment Opportunities for NRIs

To attract foreign investment in India, Government is offering several

facilities to Non Resident Indians (NRIs), Persons of Indian Origin (PIO)

and Overseas Corporate Bodies (OCBs). While NRI refers to an Indian

citizen who is residing outside India, PIO refers to an individual who at any

time held an Indian passport or whose father or grandfather was a citizen of

India. According to the laws, NRIs/PIOs/OCBs/ are permitted to open bank

accounts in India out of funds remitted from abroad. The foreign exchange

brought in from abroad or out of funds is legitimately due to them in India,

with authorized dealer.

The Reserve Bank of India (RBI) has granted general permission to

NRIs/PIOs, for undertaking direct investments in Indian companies, under

the Automatic Route purchase of shares under

Portfolio Investment Scheme

Investment in Companies

Proprietorship / Partnership Concerns on non-repatriation basis.

NRIs/PIOs do not have to seek specific permission for approved activities

under these schemes.



3.11 Investment Options in India for NRIs

3.11.1 Ordinary Non-Resident Accounts in Rupees [NRO]

As the name suggests, it's an Ordinary Non-Resident Accounts in Rupees,

also known as NRO account. The existing accounts of any Indian National

can be designated as Ordinary Non-Resident Accounts, upon your NRI

status, or these accounts can also be opened with initial deposits paid into

any bank or post office (saving a/c) authorized to open Non-Resident

accounts. NRO account can be of any type: saving, current or Fixed

Deposit. Interest payable on NRO accounts is the same as on resident

accounts. They vary from bank to bank as they have been freed from RBI

regulation. You can also have a joint account with residents in India. NRO

accounts may be re-designated as resident accounts when the account holder

becomes a resident in India.

Disadvantages of NRO

Interest earned on balances in NRO Accounts is not exempted

from Indian Income tax. Instead income tax is deducted at source

(TDS) i.e. at the time of payment of interest by the bank.

Balance held in NRO account can neither be repatriated. No

remittance in foreign currency is allowed without prior approval

of Reserve Bank as well. So overall, the money stays 'as is' in

India.

3.11.2 NRE Accounts (Non-Resident (External) Account)

The rates of interest on term deposit kept under NR(E) are generally higher

than the rates of interest on NRO deposits. The following highlights some of

the key features of NRE accounts.

No income Tax.



No joint account with an Indian residence.

Non-Resident account holders can grant a power of attorney or

such other authority to any residents in India for operating their

NR(E) Accounts in India. Such authority is however, restricted to

withdrawals for local payments. The attorney holder cannot

repatriate funds held in accounts outside India under any

circumstances or make payment of gifts on behalf of the account

holder.

The rates of interest payable on NR(E) accounts are subject to

change from time to time as per directions issued from Reserve

Bank of India.

An eligible Non-Resident Indian can open an account with any

RBI approved authorized bank

Disadvantages of NR(E) Accounts

NR(E) Accounts are opened in Indian rupees, and all foreign exchange

remittances received for credit of that account are first converted to Indian

rupees at the buying rates by the banks. The bank will permit any

withdrawal in foreign currency, by converting Indian rupees in the account

to foreign currency at the selling rate. All balances in the account are held in

Indian rupees and are thus exposed to exchange fluctuation risk

Note:

The NRO account can't be converted into NRE. Also funds can't

be transferred from NRO to NRE account without a special

permission from RBI and proof of all existing funds required,

which is a complex procedure than opening a new NRE account.



The entire credit balance (inclusive of interest earned thereon) can

be repatriated outside India at any time without any reference to

Reserve Bank of India.

Once you go back to India for good and become an Indian

resident, NRE account can be converted into your normal

Resident Rupee Account.

3.11.3 FCNR Accounts

Foreign Currency Non Resident (B) Account [FCNR (B)] are governed by

the provisions of [Foreign Exchange Management (Deposit) Regulations,

2000.].FCNR is maintained in foreign Currency viz. US Dollar (USD),

Pounds Sterling (GBP), Euro Currency (EUR) and Japanese Yen (JPY), but

only as fixed deposits. The principal and interest earned thereon are

repatriable.

The deposit under FCNR (Banks) scheme is held in foreign currency. The

interest and the repayment of the deposit is also made in the same foreign

currency in which the account is maintained. The depositor may at his own

will, obtain repayment in Indian rupees, converted at the buying rate on the

date of repayment.

Deposits under this scheme are held for the following period: 6 months and

above, but less than 1 yr-1 yr and above but less than 2 yrs-2 yrs and above

but less than 3 yrs-3 yrs only. Premature withdrawal is allowed, but there

will be a penalty.

Non-Resident Account holders can grant power of attorney (for a specimen

click here) or such other authority to residents in India for operating their

FCNR(B) accounts in India. Interest rates are subject to the RBI guidelines .



These accounts are opened for periods ranging from 12 months to 3 years.

This is the only option available for NRIs for keeping their deposits in

foreign currency. This account has a clear advantage that the customer’s

fund is protected from fluctuations in exchange rates. Moreover, the investor

can earn an interest on this deposit in the designated foreign currency.

Interest earned on FCNR deposit is exempt from Income Tax as far as the

depositor is not Resident of India or not Ordinarily Resident in India as per

the Income Tax Act. Deposit exempted from wealth tax.

Note :

Opening of FCNR(B) accounts in the names of NRIs of Bangladesh/

Pakistan nationality/ ownership requires approval of Reserve Bank of

india.

3.11.4 Term Deposit Accounts

Term deposits can be opened by remittances from abroad or by transfer of

funds from existing NRE/FCNR/NRO/NRSR accounts of the same person

with other banks in India or from other branches of the bank or by tendering

foreign currency notes/ travelers cheques brought by NRI's during their visit

to India.

3.11.5 Portfolio Investment Schedule (PIS)

This is similar to the NRE/NRO savings a/c. The NRI can trade in the

secondary stock market with Repatriation (from NRE PIS a/c) and on non-

repartiation basis (from NRO PIS a/c). Demat a/c’s can be opened with

signatures of power of attorney (POA)



3.11.6 Unit Deposit

It is a fixed deposit scheme wherein you can withdraw your deposit to the

extent of your need and leave the remaining amount undisturbed to earn you

interest at the contracted rate.

Apart from these, NRIs are permitted to make direct investments in

proprietary/partnership concerns in India as also in shares/debentures of

Indian companies. They are also permitted to make portfolio investments i.e.

purchase of shares/debentures of Indian companies through stock exchanges

in India. These facilities are granted both on repatriation and non

repatriation basis.

Investment by NRIs in India can be broadly classified as investment on

repatriation basis and on non-repatriation basis. Repatriation basis means the

income/dividend/ interest earned from the investment and the sale/maturity

proceeds of investment can be repatriated outside India at any time or can be

credited to NRE account of the investor subject to deduction/payment of

Income Tax.

Non repatriation basis denotes that the amount invested and its capital

appreciation will not be allowed to be repatriated. However, the

interest/dividend/income earned may be permitted to be repatriated/ credited

to NRE account of the investor, subject to terms prescribed by RBI.

Investment on repatriation as well as non-repatriation basis is permitted in

the following categories.

Government dated securities (other than bearer securities)

/treasury bills.

Units of domestic mutual funds.

Bonds issued by a public sector undertaking (PSU) in India.



Shares in Public Sector Enterprises being dis-invested by the

Government of India, provided the purchase is in accordance with

the terms and conditions stipulated in the notice inviting bids.

Shares and convertible debentures of Indian companies under FDI

scheme (including automatic route & FIPB).

Shares and convertible debentures of Indian companies through

stock exchange under Portfolio Investment Scheme.

3.11.7 Equities

With sentiments running negative in favor of stock markets and risk

aversion being the flavor of the scene an average investor is wary of

investing in stocks markets. But despite all the negativity surrounding India

at this moment the fact still remains that apart from China India is the only

country in the world that is growing over 7% and has the potential of

growing by 8 – 9 % annually. Even by the estimates of the World bank,

India will grow at 7%. This annual growth coupled with the rupee

appreciation expected in few months coupled with the interest rates

reduction Indian stock markets remains a destination where putting your

money can give you extremely good returns in a medium to long term.

3.11.8 Bonds

With the reserve bank of India showing signs of start of the interest rates

cycle the bond prices are expected to rise in the coning few months and it

would be safe to assume that they would be offering good returns with no or

very less risk. With the rupee depreciation offering currency conversion

benefits these returns also can easily surpass the returns that investors can

earn in the western world



3.11.9 24% and 40% Schemes

The 24% Scheme allows Indian companies, except those engaged in

agricultural activities, to issue up to 24% of their shares and debentures to

NRIs with repatriation benefits.

Similarly, the 40% scheme allows for purchase of equity, preference shares

and convertible debentures not exceeding 51% of the face value of each

issue. Repatriation of up to 40% of the new issue is allowed. Under this

scheme, NRIs can invest in new projects or in expansion and diversification

projects of existing companies.

3.11.10 How can an NRI invest / trade in Indian Stock Markets?

Step 1: Get PAN Number, Open three types of accounts and get

Reserve Bank of India's one time permission.

1. Obtain PAN number from Income Tax Department of India if

you don't have one. Since Jan 1, 2007, it is compulsory to have

PAN if you want to place any trade with a broker in India.

Permanent Account Number (PAN) card is issued to anybody

who pays or will have to pay taxes in due time in India. As per the

new rules and guidelines, even NRI’s are required to have a PAN

card

2. Open two bank accounts with RBI (Reserve Bank of India)

approved Designated Bank Branch- NRE Account and NRO

Account. A designated branch is a bank branch which is

selected/approved by Reserve Bank of India to open NRE

accounts that are intended to be used for buying and selling stocks

on stock exchanges. Such branches also have the expertise and



infrastructure to handle NRI's trading under RBI's Portfolio

Investment Scheme.

3. Open a Demat Account, this depository account maintains your

stock balances so you get stock splits, dividends, Meeting notices

and Annual reports etc. The depository concept is similar to the

Banking system with the exception that banks handle funds

whereas a depository handles securities of the investors. A

depository can therefore be conceived of as a "Bank" for

securities. An investor wishing to utilize the services offered by a

depository has to open an account with the depository through the

Depository Participant. This is very similar to opening an account

with any of the branches of a bank in order to utilize the services

of that bank.

4. Open an account with a stock broker, there are two major stock

exchanges in India- Bombay Stock Exchange (BSE) and National

Stock Exchange (NSE). Each of them have several hundred

members. So open an account with a stockbroker who is a

member of either of the stock exchange. As NSE has nationwide

coverage and is professionally run, an account with a NSE

member is more desirable over an account with a BSE member.

5. Once these three accounts are in place, see if you have a local

relative/representative in India, who can spare some time for you

if and when needed, be very careful before you proceed without

having a local rep for you. It is strongly recommend that in order

to make your investing in India smoother, please find a relative or

a person who you can trust and who you think has right



motivation to take care of your stuff. Give a Power of Attorney to

such a person.

6. Get Reserve Bank of India's approval The application is to be

submitted to Reserve Bank through a designated branch of a bank

in India in one of the prescribed forms, i.e. NRC/NRI/RPC/RPI.

Reserve Bank issues general permission for a period of 5 years

which can be renewed further by authorized dealer concerned for

a period of 5 years at a time. The approval you get is general

approval and you don't need to get any other approval from RBI

over the next 5 or so years. The purpose of such approvals is not

to reject your application but to keep records/traces of your

investments in the country so most of NRIs would get this

approval within around 2 weeks.

Step 2: Now you are ready to invest/trade in Indian stocks.

Routine things that an investor (NRI) need to do are:

1. Stock Selection as always, you will need to do research before

you take a plunge. So do your research and select the stocks you

want to invest in.

2. Clearance from your Bank Contact your bank with the list of

stock you are intending to invest in and your bank will clear you

for trading/investing in those stocks. (As per Indian rules, NRIs

cannot collectively acquire more than 24%, 40% or X % of the

paid up capital of an Indian company. So RBI maintains the

current levels of NRI holding in various companies through the

designated branches. After you give your list to your banker, she

would check her lists and make sure there is room in individual



companies for NRIs to invest. If the limit is exceeded, you might

not be able to invest in those stocks. So make sure you get prior

clearance about your investments from your banker.

3. Place Trades through Stock Broker Place your order(s) with

your stock broker. With many stock brokers, you an place now

online orders. Thanks to Internet, this step is much easier now.

4. Forward Copy of Trade confirmation to your Bank After you

order is confirmed, forward a copy of the Trace Confirmation to

your bank.

5. Pay to your Broker for purchases and tell him about our Demat

account Write a check out of your NRE/NRO account to the

stock broker. On the settlement date, your stock broker will send

the stocks to your demat account so you might want to verify with

your depository participant if the stocks are credited in your

account. If your demat account is also with the broker you are

trading with, your life will be a bit simpler- one less institution to

deal with. Also, thanks to the Internet, currently many banks and

demat institutions offer online access to your accounts which

comes handy in managing your investments in India.

6. Closing/Settling your Investment Fortunately, repeat step 3 and 4

above. Place a SELL order with your broker. When your order is

confirmed, transfer shares to your broker's clearing account from

your demat account. After settlement, your broker will give you a

check. Take that check and a copy of broker's bill showing the

SELL transaction to your bank account for deposit. The bank will



withhold some taxes on the gains you had and deposit the rest

amount in your account. (Certain bank branches may require you

to get a certificate about how much to withhold from your

accountant or lawyer.

7. File your Tax Returns every year Most of the time, you might be

able to get refund from the withholdings done by your banker.

Sometimes you might owe additional taxes to Indian government.

Check with your tax consultant in India. (There is only

FEDERAL type of tax in India. There are no STATE or local

taxes levied on individuals.)

3.11.11 Immovable Property

NRIs and PIO can acquire immovable property in India other than

agricultural/plantation property or a farmhouse. Whether it is a residential or

commercial property investment, Indian real estate prices have been on the

rise and investors have even had 100% returns in certain metro cities in the

last few years. Even the great 2008 recession was not able to stop this rally

for a long time. With rupee depreciating NRI’s have more purchasing power

in their hands. Investors can earn three folds from investing in properties in

India. After gold property is considered to be a hedge against inflation and

property prices in India have more or less given 10% returns on an annual

basis. These returns are much more than an average investor in the western

world can hope of if they invest in their markets.

Investors can also earn from rentals from the property. With squeeze in

supply over demand and the affordability factor rentals in the major metro

cities is a decent income. You could easily get around 4% returns through

renting your property and with luck favouring or with prime location the



returns can increase to 5%. With the rupee depreciating to the extend it is in

the coming few months or years even if the reversal is half of what the rupee

has depreciated you are still in line of getting at 6 – 7% returns because of

the currency conversion. It would not be an over statement to say that

investment in property can easily give you 30 – 40 returns in 2 – 3 years.

NRIs can invest through their representatives in India by giving a power of

attorney to act on their behalf. A copy of the power of attorney should be

notarised with the Indian consulate in the respective country which will

provide authenticity on their behalf for an investment in property in India.

The property can be registered in the name of the NRI, and the power of

attorney holder can sign on their behalf by producing a copy of the power of

attorney to the appropriate authorities. If a NRI decides to acquire a house

through a power of attorney , he can still proceed abroad. This is because,

for the purposes of income tax and wealth tax, the power of attorney holder

accompanied by the actual possession of the property through the agreement

to sell is deemed to be the owner of the property for the purposes of Section

27 of the Income Tax Act.

A general power of attorney in favor of the NRI's relatives will enable them

to sell the property and arrange to repatriate the sale proceeds through an

authorised foreign exchange dealer after payment of the taxes due. They can

also rent out the property and credit the proceeds to a NRO account.

Similarly, NRIs can seek home loans through their power of attorney holder

and documents can be signed on their behalf while investing in property.

They can issue the EMI cheques on behalf of their relatives here as the

Reserve Bank of India (RBI) has relaxed the norms of operation of joint

accounts considerably recently.



A significant development is the proliferation of housing finance companies

and banks in countries abroad. In the Gulf, Dubai boasts of many housing

finance companies and banks having arrangements with exchange houses.

Home loans can be processed through overseas representative offices for

NRIs. As a result, the power of attorney enables their relatives to interact

directly with developers in India. A number of nationalised banks have

remittance arrangements with the exchange houses.

The RBI also said that any citizen who was earlier residing in a foreign

country can own or transfer property or other assets in that nation if it was

acquired during the time of his residence there. A person resident in India is

free to hold, own, transfer or invest in foreign currency, foreign security or

any property situated outside India if such currency, security or property

was acquired, held or owned when he was resident outside India or inherited

from a person who was resident outside India. Similarly, returning NRIs can

retain and reinvest the income earned on investments made under the

Liberalised Remittance Scheme. There was lack of clarity earlier as to

whether the income earned on assets held abroad by NRIs who have

returned to India for permanent settlement and assets held outside India

through Liberalised Remittance Scheme are required to be realised and

repatriated to India. Now, the RBI has clarified that income and sale

proceeds of assets held abroad need not be repatriated to India and can be

retained and invested outside India.NRIs and PIOs can repatriate sale

proceeds of immovable property acquired in India – (Immovable property

acquired out repatriable foreign funds) to the extent of repatriable funds paid

for acquiring the property, without any lock-in period. In case of residential

property, the repatriation is restricted to two residential properties.

(Immovable property acquired out of rupee funds) to the extent of USD 1



million per calendar year out of balances held in their NRO account, with a

lock-in period of 10 years.

Indian economy has given a feel good factor to the NRIs, especially in the

real estate sector. Many avenues are being created as well as schemes being

fashioned for them to maximize investments from abroad.

All persons residing outside India holding Indian passports and also people

of Indian origin have been granted permission by the Reserve Bank of India

(RBI) to invest in both residential and commercial properties in India.

Markets have stabilized and there is an impressive amount of interest in this

segment. NRIs are quick to invest in properties in India where they see an

opportunity for a good deal.

On the anvil is a single-window investment promotion council planned by

the government, which will undertake investment promotional activity. This

will involve making extensive contacts with potential investors, lobbying

and interacting with individual companies so that the overseas Indian finds a

suitable investment environment.To an NRI, a base in the homeland also

brings with it a sense of security. The number of NRIs who are investing in

property for sentimental reasons and for better investment returns is quickly

multiplying.

The government including RBI and Foreign Exchange Management Act

(FEMA) has liberalized the rules and regulations for the NRIs to make

investment in real estate. Liberalization along with the added advantage of

repatriation of the capital invested and even the rental proceeds under the

circumstances prescribed by RBI have also encouraged NRI investments in

real estate. Capital gains can be taken back after paying capital gains tax.



Apart from India being a safe destination, 10 to 12 per cent returns on the

investments are assured.

3.12 DIFFERENT TAX BENEFITS AVILABLE TO NRIs

Bank Deposits investment in shares, units of Mutual Funds etc.

are exempt from wealth tax in India.

Interest earned on NRE and FCNR accounts is completely tax-

free.

In 1997, gift tax was abolished. So both the donor as well as the

recipient did not have to pay any tax on the gifts received.

Consequently people started misusing the vacuum left behind by

scrapping of gift tax. There was a widespread transfer of insincere

gifts from the non-relatives. In order to fill up this void, Section

56 (2)(v) of Income Tax Act was passed in 2004.As per Section

56 (2)(v) of the Income Tax Act , any amount exceeding Rs

25,000 obtained by a person or a Hindu Undivided Family (HUF)

without any consideration from non-relative would be taxed. The

only cases exempted were the gifts given during marriage,

inheritance left behind in a will or if the payer has died.

3.13 TAX PORVISIONS AND CONCESSIONS FOR NRIs

Residents in Dubai and the UAE do not have to pay income tax. There’s an

all round good feeling about this that attracts people from all over. When it

comes to NRI, the feeling is doubly good. They don’t have to pay tax back

home for income earned abroad. But those earning an income from

investments made in India have to be attentive to taxes that accrue on them.

What attract tax are the non-resident’s investments in shares, debentures,

deposits and properties in India. The exemption limit is Rs. 160,000.



3.13.1 Income Tax

Under the Income Tax Act, an NRI is a person who has stayed outside India

for 182 days or more in a financial year (from April 1 to March 31). If a

person have come back after being an NRI for nine consecutive years, then

he is an R-NOR (Resident but Not Ordinarily Resident), and can still obtain

some of the benefits for two consecutive financial years. An individual can

also obtain NRI benefits if he has been in India for not more than 729 days

during the preceding seven financial years.

NRI’s don’t need to think about income earned outside the country, until and

unless the organization the individual is employed with is Indian. Neither

does the person have to think twice before parking money in a Non-Resident

External (NRE) account. However, interest accrued on a Non-Resident

Ordinary Account (NRO) is taxed at the rate of 30.9%, is deducted by the

bank at source.

Also once income is earned on money (convertible foreign exchange)

invested in India, the question of tax arises. These are called the Foreign

Exchange Assets (FEA) and the categories are:

a) Shares in Indian Company.

b) Debentures issued by a Public Limited Company

c) Deposits in a Public Limited Company

d) Securities of the Central (federal) Government.

e) Any other notified asset

The interests gained from these investments are taxed at a flat rate of 20%.

And profit out of the long term capital gains that is, selling a capital asset

such as a property, gold, after holding it for 36 months, attract a flat tax of



10%. Similar gains from equity shares and equity mutual funds are tax

exempt if held for more than 12 months. But if sold before 12 months, there

is a short-term capital gains tax of 10%.

Capital gains are determined at the rate of exchange on the date of sale. But

there is a catch here. The sale of these investments is tax-exempt, if the sale

proceeds are reinvested in similar investments within six months. If the sale

proceeds of these assets are partially re-invested, then the exemption is

proportionate to the amount re-invested.

3.13.2 Filing Returns

But, if the income from foreign exchange assets and long-term capital gains

is the only income of an NRI, then there is no need to file a return. In

calculating the total income on any foreign exchange asset, no deduction is

allowed in respect of any expenditure or allowance under any provision of

the Act.

Tax returns need to be filed only if the individual’s Indian income including

the rent is more than Rs. 160,000. One may also file for tax refunds if the

NRI had his taxes deducted at source and his income was less than the

exemption limit of Rs. 160,000.

Moreover, as Rajesh Singla, a New-Delhi based Chartered Accountant

specializing on tax issues, says: “A Non- Resident Indian may also elect by

these provisions for any assessment year by furnishing to the assessing

officer the return of income for that assessment year and declaring therein

that these provisions shall not apply to him for that assessment year. If he

does so, then his total income and tax will be computed in accordance with

the normal provisions of the Act”.



In other words, an NRI may choose to be assessed as either an NRI or as an

Ordinary Indian Resident. This is particularly beneficial for low-income

group NRI’s who will pay less tax for the chosen assessment year, if he

chooses to be taxed as an ordinary Indian. In such a case, the Non-Resident

has to file a declaration with his return of income, that these provisions

would not be applicable to him. The normal provisions of the Income Tax

Act would be applicable with respect to the mentioned investment incomes.

There are more ways of saving taxes on long-term capital gains. That is, by

investing in the following products, though it’s important to note that all are

Foreign Exchange Assets, that is, bought with convertible Foreign exchange.

Certain Mutual Funds such as those of UTI ( Unit Trust of India)

Some notified savings certificates for NRI’s, such as, National

Saving Certificate VI and VII issues are notified.

NRI Bonds 1988 and NRI Bonds (second series)

NRI residing in countries with a Double Taxation Avoidance

Agreement with India (UAE is one of them) may also obtain tax

benefits by providing proof of residency form the country of

residence while opening a bank account in India.

3.13.3 Provisions

a) Tax on certain NRI Incomes:

U/S 115 A: Tax on dividends, royalties and fees for technical

services.

U/S 115 AC: Tax on income from bonds or GDR purchased in

foreign currency or capital gains arising from their transfer.



U/S 115 AD: Tax on income from securities or capital gains

arising from their transfer.

U/S 115 BBA: Tax on sportsmen.

b) Special Provisions for Certain NRI incomes:

U/S 115E: Tax on investment income at the rate of 20 percent and

long term capital gain at the rate of 10 percent.

U/S 115F: Capital gains on transfer of Foreign Exchange Assets

not to be charged in certain cases.

U/S 115 I: Provisions of Chapter not to apply if NRI so chooses.

3.13.4 Investing and Savings

a) Investments:

Invest in a residential house by taking out a housing loan. There is

a deduction of interest up to Rs. 150,000 (Dhs. 11,800) if the

house is self occupied and full interest if it’s let out.

Invest in Shares/Mutual Funds: dividends and long-term capital

gains are exempt.

b) Presumptive Tax Concessions:

U/S 44 B: Profit from shipping business taxable at the rate of 7.5

percent of income of India.

U/S 44 BBA: profit from business of aircraft at the rate of 5

percent of income in India.

U/S 44 C: Head office expenditure subject to conditions.

U/S 44 DA: Special provisions for computing income by way of

royalty and fee for technical services.

Data Analysis and Interpretation 54


CHAPTER – 4

ANALYSIS AND INTERPRETATION

Analysis is the process of placing the data in the ordered form, combining

them with the existing information and extracting the meaning from them. In

other words, analysis is an answer to the question “what message is con-

veyed by each group of data “. Data, which are otherwise raw facts and are

unable to give a meaningful information. The raw data become information

only when they are analyzed and when put in a meaningful form.

Interpretation is the process of relating various bits of information to other

existing information. Interpretation attempts to answer “what relationship

exists between the findings to the research objectives and hypothesis framed

for the study in the beginning”.



Table 4.1 Age of Respondents

Age Group No. of Respondents Per cent

Below 25 30 15.0

26-35 58 29.0

36-45 43 21.5

46-55 37 18.5

Above 55 32 16.0

Total 200 100

(Source: Field survey)

Figure 4.1 Age of Respondents

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%

Below25yrs

26-35 yrs 36-45 yrs 46-55 yrs Above55yrs

15.00%

29.00%

21.50%18.50%

16.00%



Interpretation:

From the above table it is very evident that majority of the respondents be-

long to the age group of 25 – 35 years. Out of the total number of respond-

ents, 58 of them belong to the age group of 25 -35 years, 43 of the respond-

ents belong to the age group of 35 -45 years and 37 of them belong to the

age group of 45-55 years, but only 32 of them belong to the age group above

55 years and 30 of the respondents is below 25years.

Out of the total number of respondents, 15.0 percent of the respondents be-

long to the age group below 25 and 29.0 percent of the respondents belong

to the age group of 25 – 35 years. 21.5 per cent of the respondents constitute

the age group of 35-45 years, 18.5 per cent of them belong to 45- 55 years

age group and 16 per cent of them belong to the age group of above 55

years.

So it is very clear that the most of the respondents belong to the age group of

25 – 35 years.



Table 4.2 Employment Status

CategoryNo. of Re-

spondentsPer cent

Salaried 129 64.8

Professional 21 10.5

Business 26 13.0

Others 23 11.5

Total 200 100


Figure 4.2 Employment Status

Salaried65%

Professional10%

Business13%

Others12%



Interpretation:

Table 3.2 indicates that most of the respondents are from the working or

employed class. The respondents were given four options to choose from:

Salaried, Professional, Business and Others. Others here represent the retired

and the homemakers who are investors.

Out of the 200 respondents, 129 of them form the salaried class, 26 of them

belong to the business class, and 23 of them belong to the group ‘Others’,

which includes retired and house wives. Only 21 of the respondents are from

the professional class.

From the above pie chart, it is very clear that 64.8 per cent of the respond-

ents were salaried, 10.5 per cent of them belong to the professional group,

13.0per cent of the respondents belong to the business class and 11.5 per

cent of them are house makers or retired.

Therefore, from the above table and chart it is very clear that investments

are not very prominent with the house makers but it’s very prominent among

the salaried and the business class.



Table 4.3 Income wise Classification

Range of Income No. of RespondentsPer

cent

Below AED 1,000 51 25.5

AED 1,001 – AED 5,000 70 35.0

AED 5,001 – AED 10,000 47 23.5

Above AED 10,000 32 16.0

Total 200 100


Figure 4.3 Income wise Classification:

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%

Below AED1000

AED 1001 -5000

AED 5001 -10000

Above 10000

25.50%

35.00%

23.50%

16.00%



Interpretation:

The income of the respondents was also analyzed to find out the income lev-

el of the respondents. There were given four options: below AED 1,000, Be-

tween AED 1,000 and AED 5,000, between AED 5,000 and AED 10,000

and above AED 10,000.

Table 3.3 points out that Out of the total number of respondents, 70 of the

respondents belong to the income group of AED 1000 – AED 5000.

51respondents belong to the first group, i.e., below AED 1000, and 47 of the

respondents belong to the third group, i.e., income between AED 5000 –

10000 and only 16 of the respondents belong to the income group above

AED 10,000.

From the above table and chart it is very clear that 25.5 per cent of the re-

spondents were from the income group below AED 1,000 and 35.0 per cent

of the respondents belong to the income group of AED 1000- 5000 but only

23.5 per cent of the respondents were of the income category of AED 5000-

10000 and only 16.0 per cent of the respondents belong to the income group

of above AED 10000.



Table 4.4 Saving Objective:

Occupation No. of Respondents Per cent

Children’s Education 12 6

Growth Plan 72 36

Retirement Plan 48 24

Health Care Expenses 8 4

Home Purchases 40 20

Others 20 10

TOTAL 200 100


Figure 4.4 Saving Objective:

0%

10%

20%

30%

40%

6%

36%

24%

4%

20%

10%



Interpretation:

The respondents were asked about their savings objectives and they were

given six options to choose from and they were Children’s Education,

Growth Plan, Retirement Plan, Health Care Expenses, Home Purchase and

Others. Here ‘Others’ represents investment made by investors for marriage

purposes or for wealth maximization.

Table 3.4 indicates that Out of the total number of respondents, 72 of the re-

spondents have growth plan as their savings objective, 48 of the respondents

have retirement plan as their savings objective, 40 of them wanted to save to

buy or build a home, 12 of the respondents wanted to save for children’s ed-

ucation and 8 of the respondents had health care expenses of the future as

their objective and 20 of them had different other objectives to save other

than the above mentioned.

From the above figure, it can be clearly concluded that, majority of the re-

spondents wanted to save for future growth prospects. i.e., 36 per cent of the

respondents had growth as their savings objective, 24 per cent of them had

retirement as their savings objective and only 4 per cent of the respondents

save for the purpose of dealing with the health care expenses they have to

bear in future. 20 per cent of the respondents save for the purpose of buying

or building up a home and 10 per cent of them had other savings objectives

other than mentioned. 6 per cent of the respondents wanted to save for their

marriage or as wealth maximization objectives.



Table 4.5 Investment Objectives:

Investment ObjectivesNo. of Respond-

entsPer cent

Income & Capital appre-

ciation

46 23.0

Growth & Income 44 22.0

Long-term growth 79 39.5

Aggressive Growth 31 15.5

TOTAL 200 100


Figure 4.5 Investment Objectives:

0.00%

10.00%

20.00%

30.00%

40.00%

Income &Capital Growth &

Income Long-termGrowth Aggressive

Growth

23.00%22.00%

39.50%

15.50%



Interpretation:

The respondents were asked about their investment objectives and they were

given four options, Income and Capital appreciation, Growth and Income,

Long-Term Growth and Aggressive Growth.

Out of the total number of respondents,79 of the respondents had long-term

growth as their investment objective, 46 of the respondents had income and

capital preservation as their investment objective. 44 of the respondents in-

vest for their growth and income and 31 of them had aggressive growth as

their investment objective.

Out of the 200 respondents, 23.0 per cent of the respondents have income

and capital appreciation as their investment objective, 22.0 per cent of them

have growth and income as their investment objective and 39.5 per cent of

the respondents had long-term growth as their investment objective. But on-

ly 15.5 per cent of the respondents have aggressive growth as their invest-

ment objective.

It is very clear from the above table and chart that long- term growth of the

respondent is one and the major reason why they choose to invest.



Table 4.6 Frequency of Investment in India:

Frequency No. of Respondents Per cent

Monthly 21 10.5

Quarterly 52 26.0

Half yearly 56 28.0

Annually 71 35.5

Total 200 100


Figure 4.6 Frequency of Investment in India:

0.0%

10.0%

20.0%

30.0%

40.0%

MonthlyQuarterly

Half-YearlyAnnually

10.5%

26.0% 28.0%

35.5%



Interpretation:

The above table and chart helps to understand the frequency of investment

made by the investors in India. The respondents were given four options and

they were: Monthly, Quarterly, Half-yearly and annually.

Out of 200 respondents, 71 of the respondents make an investment annually,

56 of them invests half yearly and 52 of the respondents invest quarterly but

only 21 of the respondents invest monthly.

From the above chart it is very clear that most of the respondents invest an-

nually, say in the form on fixed deposits, installments to be paid for insur-

ance or real estates. 35.5 per cent of the respondents invest annually, 28 per

cent of them invest half yearly and 26.0 per cent of them invest quarterly

and 10.5 per cent of them invest monthly



Table 4.7 Financial Advisor

Frequency No. of Respondents Per cent

Yes 169 84.5

No 31 15.5

TOTAL 200 100


Figure 4.7 Financial Advisor:

`

Yes0.85

No0.16



Interpretation:

The respondents were asked whether they have a financial advisor who

prompted them to invest in the different investment avenues available in In-

dia. Most of the respondents have a financial advisor, who has advised them

to invest in the different investment avenues available for the purpose of

savings and a steady income.

Out of the 200 respondents, 169, i.e., more than Eighty percent of the re-

spondents have taken the advice of their friends, banks, financial institutions

and advertisements. And 31 of the respondents have not taken the advice of

their friends or other financial advice providers, i.e., 15.5 percent of the re-

spondents did not make their investments due to the advice provided by oth-

ers.



Table 4.8 Who has been the Financial Advisors

AdvisorNo. of Respond-

entsPer cent

Friends/ Relatives 37 22

Financial Consultants 32 18.9

Investment Institutions 47 27.8

Portfolio Departments in

Banks

53 31.3

Total 169 100


Figure 4.8 Who has been the Financial Advisor

0.0%

10.0%

20.0%

30.0%

40.0%

Friends/Relatives Financial

Consultants InvestmentInstitutions Portfolio Dept.

in Banks

22.0%18.9%

27.8% 31.3%



Interpretation:

From the above table, the surveyor wanted to know the actual motivator for

the respondent to invest. The respondents were given five options:

Friends/Relatives, Financial consultants, Investment Institutions, Portfolio

Department in Banks.

Out of the total number of respondents, 53 of them made investments by

taking the advice from the Portfolio Departments of Banks, 37 of them of

them took the advice from their friends or relatives and 32 of respondents

took the advice from financial consultants to invest in the various investment

avenues available in India and 47 of them took advice from investment insti-

tutions.

From the above figure, it is very evident that majority of the respondents

took advice from Portfolio Departments in Banks which help them to decide

the best investment avenue that would suit their personal investment strate-

gy. Out of the 200 respondents, around 31.3 per cent of the respondents took

advice from the portfolio departments of the banks, 27.8 per cent of them

took advice from the investment institutions especially formed for this pur-

pose. 22 per cent of the respondents take advice from their friends or rela-

tives and only 18.9 per cent of them took investment advice from financial

consultants.



Table 4.9 Investment Portfolio of the Respondents

Investment

PortfolioInvested

Not In-

vested

% of Invested

People

Bank Deposits 139 61 69.5

Post Office

Savings84 116 42.0

Shares/Bonds/

Debentures73 127 36.5

Mutual Funds 70 130 35.0

Life Insurance 150 50 75.0

Real Estate 90 110 45.0

Gold 142 58 71.0


Figure 4.9 Investment Portfolio of the Respondents

0.0%

20.0%

40.0%

60.0%

80.0% 69.5%

42.0%36.5%

35.0%

75.0%

45.0%

71.0%



Interpretation:

The respondents were asked to select from the given options to make up

their present investment portfolio. The respondents were given six options:

Bank Deposits, Post Office Savings, Shares, Mutual Funds, Life Insurance,

Real Estate and Gold.

Out of the 200 respondents, 139 of them had invested in Bank as Deposits

and 61 of them did not deposit in bank. That is, around 69.5 per cent of them

had bank deposits included in their investment portfolio.

84 of the respondents had investments as Post Office Savings, mainly wom-

en, and 116 of them did not include this option in their respective portfolios.

So, from the above table it is very clear that only 42per cent of them have

investments in post office savings.

From the total number of respondents, 127 of them had not invested in

shares but only 73 of them opted for that investment option. i.e., only

36.5per cent of them had invested in Shares.

130 of them had not invested in mutual funds, and only 70 of them, out of

the total number of respondents, invested in mutual funds, which means, on-

ly 35per cent of the respondents had investments in mutual funds.

The interesting fact is that 150 of the respondents had an investment in the

form of Life Insurance and only 50 of them dint have that in their invest-

ment portfolio. 75.0 per cent of the respondents had life insurance included

in their investment portfolio.



Out of the total number of respondents, 110 had not invested in Real estate

and almost the same number of respondents, i.e., around 90 of them had in-

vested in real estate. Thus 45.0 per cent of the respondents had included Re-

al estate as one of their investment options.

142 of the respondents had invested in gold maybe in the form of jewelry.

Only 58 had not invested in this form of investment option available. i.e.,

71per cent of them had invested in gold.



Table 4.10 NRIs Awareness level towards the various investmentsin India


Options No of respond-ents Aware ofthe investmentalternatives

No of respond-ents not awareof the invest-ment alterna-tives

Per cent

Bank Deposits 200 Nil 100

Shares/ Con-

vertible Deben-

tures/ Non-

Convertible

Debentures

67 133 33.5

Mutual Funds 103 97 51.5

Bonds- invested

out of NRO/

FNCR/NRE

84 116 42.0

Immovable

Property

194 6 97.0

Partnership

concern in India

41 159 20.5

Deposits in In-

dian Companies

through NRO

accounts

68 132 34.0



Figure 4.10 NRIs Awareness level towards the various investments

in India

Interpretation:

The respondents were then asked a question which would help the surveyor

to determine the awareness level of the NRIs towards the various investment

options available to them in their home country. The respondents were asked

to mark those investments which were familiar or which they were aware of.

The different investment options given were: Bank deposits, Shares/ Con-

vertible Debentures/ Non- Convertible Debentures, Mutual Funds, Bonds-

which is invested out of the NRO/FNCR/ NRE accounts, Immovable proper-

ty, Propitiatory/ Partnership concern in India, deposits in Indian companies

through NRO accounts.

There was no doubt about the awareness level of the bank deposits among

the NRIs. The 200 respondents were aware of the bank deposit schemes

available in India for them,. Only 67 of the respondents of them were aware

of shares/ convertible or non-convertible debentures available for NRIs in

India. But around 103 of the respondents were aware of the Mutual Fund

0.0%

50.0%

100.0%100.0%

33.5% 51.5%42.0%

97.0%

20.5% 34.0%



scheme available in India through the Banks and various other financial in-

stitutions. 84 of the respondents had knowledge about the Bond scheme

which was invested out of the NRO/FNCR/NRE accounts of the NRIs and

41 of the respondents were aware of an investment option available in the

form of being a partner in an Indian company. But majority of the respond-

ents, i.e., 159 of them were not aware of this option. Out of the total number

of respondents, only 68 of them knew that they could deposit their earnings

in an Indian company. But 132 of them were not aware of this option.

Out of the total number of respondents, 100 percent of them were aware of

the bank deposits available in India for NRIs, only 33.5 percent of the re-

spondents were aware of the shares/convertible or non-convertible debenture

option. But 51.5 percent of the respondents were aware of the

Mutual Fund scheme and 97 per cent of them had good knowledge and

awareness about the immovable property, another investment alternative,

available to them. Only 42 per cent of the respondents were aware that they

could invest their hard earned money in Bonds which can be invested out of

their NRO/FNCR/NRE accounts and only 34 per cent of them were aware

that they could deposit their earnings in Indian companies through their

NRO accounts. 20.5 per cent of them were aware that they could invest in

the form of a partnership with an Indian Company.

From the above table and chart, it is very evident that the investors or the

NRIs lack sufficient information about the various investment options avail-

able to them in India. Thus our government, banks and even the private fi-

nancial institutions should take a step in creating awareness and also educat-

ing the investors about the diverse investment portfolios.



Table 4.11 Level Of Satisfaction With the Investment Made

Level of Satisfaction No. of Re-

spondents

Per cent

Highly Satisfied 72 36

Satisfied 88 44

Unsatisfied 40 20

TOTAL 200 100


Figure 4.11 Level Of Satisfaction With the Investment Made

Highlysatisfied, 36%

Satisfied, 44%

Unsatisfied,20%



Interpretation:

The above table shows the respondents reaction when asked about the level

of their satisfaction with their investment they have made. The respondents

were given three options to choose from Highly Satisfied, Satisfied and Un-

satisfied.

Out of the total number of respondents, 72 of them were highly satisfied

with the investments they had made in India. 88 of them were satisfied with

the investment they have made and 40 of them were unsatisfied with the in-

vestment they have made.

From the above table and pie chart it is very clear that majority of the re-

spondents are highly satisfied with the investment made in home country.

That is around 36 per cent of the respondents are highly satisfied with the

investments they have made, 44 per cent of the respondents are satisfied

with the investments and only 20 per cent of them are unsatisfied with the

investments they have made in home country.

So majority of the NRI’s who were the part of this survey were happy with

the investments they made in India in different investment alternatives

available to them, i.e., around 160 of the respondents were happy with the

investments they have made.



Table 4.12 Investment Experience:

Investment experi-

ence

No. of Respond-

ents

Per cent

Beginner (no invest-

ment experience)

25 12.5

Moderately Experi-

enced Investors

71 35.5

Knowledgeable Inves-

tors

60 30.0

Experienced Investor 44 22.0

TOTAL 200 100


Figure 4.12 Investment Experience:

0.0%

10.0%

20.0%

30.0%

40.0%

BeginnerModeratelyExperienced

Investor

KnowledgableInvestor Experienced

Investor

12.5%

35.5%

30.0%

22.0%



Interpretation:

The respondents were asked about their personal experience in investing in

the different investment avenues. The respondents were given four options:

Beginner or no investment experience, moderately experienced investor,

knowledgeable Investor and Experienced Investor.

Out of the total number of respondents, 60 of the respondents classified

themselves as knowledgeable investors, 71 of them have classified them-

selves into the group of moderately experienced investor. Only 44 of the

respondents have graded themselves as experienced investor and 25 of

them classified themselves as a beginner or no investment experience.

From the total number of respondents, 12.5 per cent of them classified

themselves as a beginner or a person with no prior experience in investing,

may be like college students or housewives. 35.5 per cent of the investors

have classified themselves into the category of moderately experienced in-

vestor. These investors are those who have experience in investing in Mu-

tual funds and bank deposits. 30.0 per cent of the respondents have graded

themselves as Knowledgeable experienced investor. They are those inves-

tors who have individually bought and sold stocks or bonds of corporate

bodies. Only 22.0 per cent of the respondents graded themselves as experi-

enced investors. They are those who have experience in all the investment

avenues available in the market and also have an experience in buying and

selling of stock, they have exercised stock options or stock warrants and

have also traded stock options.



Table 4.13 Risk wise Classification

Risk PreferenceNo. of Respond-

entsPer cent

Low Risk 68 34

Medium Risk 82 41

High Risk 50 25

Total 200 100


Figure 4.13 Risk wise Classification

0%5%

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

Low RiskMedium Risk

High Risk

34%41%

25%



Interpretation:

The respondents were asked to determine the level of risk they are likely to

undertake through their investments. The respondents were given three op-

tions: Low risk, Medium Risk and High Risk.

Out of the total number of respondents, 82 of the respondents prefer medium

risk attached to their investments 68 of the respondents prefer low risk at-

tached to their investments and only 50 of the respondents preferred high

risk.

So it’s very evident that most of the investors prefer medium level of risk to

be attached to their investments, i.e., 41 per cent of the respondents prefer

medium level of risk whereas 25 per cent of the investors do not mind at-

taching high risk factor to their investments and 34 per cent of the respond-

ents preferred their investments to have a low level of risk.

Low risk investments would be fixed deposits and life insurance policies.

Medium risk would include the real estate, mutual funds, unit trust etc., and

whereas high risk would involve shares.



Table 4.14 Options on the Comfort ability Level in the Decline

Value of Investments for Higher Returns

Options No. of Respond-

ents

Per cent

Agree 32 16.0

Disagree 93 46.5

Strongly Disagree 75 37.5

TOTAL 200 100


Figure 4.14 Options on the Comfort ability Level in the Decline

Value of investments for Higher Returns

Agree, 16.00%

Disagree,46.50%

StronglyDisagree,37.50%



Interpretation:

The respondents were given a statement, ‘“I’m comfortable with invest-

ments that may frequently experience large declines in value if there is a po-

tential for higher returns.” The surveyor wanted to measure the risk return

attitude of the respondents through these questions. The respondents were

given three options: Agree, Disagree and Strongly Disagree.

Out of the total number of respondents, 75 of them strongly disagreed with

the statement, i.e., they would never opt for an investment avenue which

would earn higher return but there might be a decline in the value. 93 of the

respondents totally disagree with the statement, i.e., it is very clear that they

wouldn’t opt for such risky investment avenues. But 32 of the respondents

agreed to the statement and were willing to opt for an investment avenue

which would face a decline in the value but for a higher return.

From 200 respondents, only 16.0 per cent of them agreed with the statement,

which reflected on their personal attitude towards taking risk. These re-

spondents are willing to take the risk for earning a higher return from their

investment. 46.5 per cent of the respondents disagree with the statement and

37.5 per cent of them strongly disagree with the statement. These respond-

ents are not willing to take risk for a higher return.



Table 4.15 Withdrawal From the Investment Account

Period of With-

drawal

No. of Respond-

ents

Per cent

Less than Five years 104 52

Six – Nine years 55 27.5

Ten years & above 41 20.5

TOTAL 200 100


Figure 4.15 Withdrawals from the Investment Account

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0% 52.0%

27.5%

20.5%



Interpretation:

The surveyor wanted to know the approximate withdrawal time the investors

are planning to make. The respondents were given three options: three- five

years, six – nine years and ten years or more.

Table 3.15 indicates that Out of the 200 respondents, 104 of them are plan-

ning to withdraw from their investment accounts within three – five years of

investment. 55 of them were planning to withdraw within six- nine years of

their investment and 41 of the respondents planned to withdraw over a peri-

od of ten years or more.

From the above table and chart, the surveyor can come to a conclusion that

the respondents prefer to reap back the profits or withdraw from their in-

vestments within a period of three – five years. 52 per cent of the respond-

ents planned to withdraw within three – five years of investment and 27.5

per cent of the respondents planned to withdraw within six to nine years.

20.5 per cent of the respondents planned to withdraw from their investment

within a period of ten or more years.



CHI-SQUARE ANALYSIS

1. Age & Risk Profile

Null Hypothe-

sis

( H0 )

: There is no significant relationship be-

tween Age and Risk profile

Alternate Hy-

pothesis

( H1 )

: There is significant relationship between

Age and risk profile.

Table 4.16 Relationship between Age Group & Risk Profile

Age

Risk Profile

Total

Observed Frequency

Low

Risk

Medi-

um

Risk

High

Risk

Below 25 Years 8 15 7 30

26 - 35 years 2 20 14 57

36 – 45 years 13 19 11 43

Above 45 years 24 28 18 70

Total 68 82 50 200

Expected Frequency

Below 25 Years 10 12 8 30

25 - 35 years 20 24 14 58

35 - 45 years 15 18 11 43

Above 45 years 23 28 17 69

Total 68 82 50 200



Chi- Square (2) Value = 2.82

Level Of Significance = 0.05

Degrees Of Freedom = 6

Table Value = 12.6

Interpretation:

Calculated 2 Value is less than the Table Value. So Null Hypothesis (H0)

is accepted. Therefore, there is no significant relationship between Age

group and Risk Profile.



2. Income and Frequency of Investment.

Null Hypothesis

( H0 )

: There is no significant association be-

tween Income and Frequency Of In-

vestment

Alternate Hy-

pothesis ( H1 )

: There is significant association between

Income and Frequency Of Investment.

Table 4.17 Relationship between Income & Frequency of Investment

Income

Frequency Of Investment

Total

Observed Frequency

Monthly Quarterly Annually

Below AED 1000 11 12 28 51

AED 1000 – AED

5000 22 19 28 69

AED 5000 – AED

10000 23 10 15 47

Above AED

10000 15 11 6 32

Total 70 52 78 200

Expected Frequency

Below AED 1000 18 13 20 51

AED 1000 – AED

5000 24 18 27 69

AED 5000 – AED

10000 16 12 18 47

Above AED

10000 11 8 13 32

Total 70 52 78 200






Table Value = 12.6

Interpretation:

Calculated 2 Value is greater than the Table Value. So Null Hypothesis (

H0 ) is Rejected. Therefore, there is significant relationship between Income

and Frequency of Investment.



3 Income & Risk Profile

Null Hypothesis

( H0 )

: There is no relationship between Income

and Risk;

Alternate Hy-

pothesis ( H1 )

: There is a relationship between Income

and Risk

Table 4.18 Relationship between Income & Risk Profile Risk pro-

files

Income

Risk Profile

Total

Observed Frequency

Low Risk

Medium

Risk

High

Risk

Below AED 1000 24 18 10 51

AED 1000 – AED 5000 20 31 19 69

AED 5000 – AED 10000 15 20 12 47

Above AED 10000 10 14 9 32

Total 68 82 50 200

Expected Frequency

Below AED 1000 17 21 13 51

AED 1000 – AED 5000 24 28 17 69

AED 5000 – AED 10000 16 19 12 47

Above AED 10000 11 13 8 32

Total 68 82 50 200






Table Value @ 5per cent = 12.6

Interpretation:

Calculated 2 Value is less than the table value @ 5 per cent level greater

than the Table Value @ 5per cent level of significance. So Null Hypothesis

( H0 ) is accepted. There is no relationship between income and risk profile.



4 Occupation & Frequency of Investment

Null Hypothesis

( H0 )


tween occupation & frequency of In-

vestment

Alternate Hy-

pothesis ( H1 )

: There is a relationship between occupa-

tion & frequency of Investment

Table 4.19 Relationship between Occupation & frequency of In-

vestment.

Occupation

Frequency of Investment

Total

Observed Frequency

Monthly

Quarter-

ly Annually

Salaried 50 31 48 130

Professional 3 8 10 21

Business 7 8 11 26

Others 10 4 8 23

Total 70 52 77 200

Expected Frequency

Salaried 46 34 50 130

Professional 7 6 8 21

Business 9 7 10 26

Others 8 6 9 23

Total 70 52 77 200






Table Value = 12.6

Interpretation:

Calculated 2 Value is greater than the Table Value. So Null Hypothesis (

H0 ) is Rejected. Therefore, there is significant relationship between Occu-

pation and Frequency of Investment.



5 Occupation & Risk Profile

Null Hypothesis

( H0 )


tween occupation & Risk Profile

Alternate Hypoth-

esis ( H1 )

: There is a relationship between occupation

& Risk Profile.

Table 4.20 Relation Between Occupation & Risk Profile

Occupation

Risk Profile

Total

Observed Frequency

Low

Risk

Medium

Risk High Risk

Salaried 46 53 31 130

Profession-

al 6 9 6 21

Business 7 12 8 26

Others 9 8 6 23

Total 68 82 50 200

Expected Frequency

Salaried 44 53 32 130

Profession-

al 7 9 5 21

Business 9 11 7 26

Others 8 9 6 23

Total 68 82 50 200






Table Value = 12.6

Interpretation:

Calculated 2 Value is less than the Table Value. So Null Hypothesis

( H0 ) is Accepted. Therefore, there is no association between Occupation

and Risk Profile.

Findings and Suggestions 97


CHAPTER – 5

FINDINGS AND SUGGESTIONS

5.1 Findings

After conducting a thorough study on “Investment options available in India

for NRI’s”.

The following findings are:

Among the 200 respondents, 29.0% of them are of the age group

25 – 35 years.

The respondents who belong to the salaried class make more

investments.

35.0% of the respondents are in the income level between 1000 –

5000 dirham’s.

Out of 200 respondents most of them had growth and retirement

plan as their saving objective

Most of the respondents have income and capital appreciation as

their investment objectives.

Most of the respondents make investments on annual basis.

84.5% of the respondents have financial advisors; they take

advices from the portfolio departments in banks

Among the 200 respondents 75.0% of them have selected their

investment portfolios as life insurance.

36% of the respondents are highly satisfied with the investments

made by them.

And 44% of them are satisfied with the investment made. Only

20% of them are not much satisfied.



46.5% of the respondents disagree with the investments that may

frequently experience large declines in value if there is a potential

for higher returns.

Among the 200 respondents, 41% of them are medium risk takers;

they need medium risk with medium return.

Out of 200 respondents 52% of them withdraw their investments

before five years.

5.1.1 Investment Portfolio of Investors

About 75.0% of the respondents have invested in Insurance.

About 71% of the respondents have invested in Gold.

69.5% of the respondents have invested in Bank Deposits.

45.0% of the respondents have invested in Real Estate.

42% of the respondents have invested in Post Office Savings.

36.5% of the respondents have invested in Shares.

Only 35% of the respondents have invested in Mutual Funds.

5.1.2 Inter-relationship between Investor profile and Investment

Preferences

From the chi-square analysis, It is found that there is no

relationship between

Income and Frequency of Investment

Occupation and risk profile.

It is found that there is significant relationship between

Age and Risk Profile.

Income and Risk Profile.

Occupation and Frequency of Investment.



Age and Safety in Investment.

Those who have invested in shares and mutual funds.

5.2 Suggestions

1. As most of the respondents who have participated in this survey

are salaried people, i.e., they earn a specific amount of salary

monthly, thus they prefer to invest in risk free investment avenues

available in India. Maybe that is the reason why most of them

preferred to invest in Life Insurance, Gold and Bank Deposits.

Most of the respondents are looking for a steady income and

maximum avoidance of risk from the selected investment

alternative. This is the main reason why there is less number of

people who are willing to invest in Shares/ Bonds or Debentures.

Thus the NRI’s should be introduced to a wider spectrum of

investment avenues available in India, by providing them

information needed through various financial agencies or

consultants or through portfolio departments maintained by

Banks.

2. Most of the respondents who have participated in the survey are

aware about some of the investment alternatives available in India

for the NRI’s. Most of the investors are aware of bank deposits

and real estate avenues open to them but they are not aware of the

investment options like deposits in Indian companies, partnership

with an Indian concern etc. thus the government, public and

private companies should provide more detailed information

about the investment alternatives. As the NRIs are not frequent

visitors to their home country, they are not aware of the actual



economic, political and social trends existing in the economy.

They can also educate the NRIs through publishing journals and

magazines exclusively for this purpose. Then conducting

seminars specially designed for the specially designed for the

NRIs. These would help the government to create awareness and

also develop and motivate the NRIs to invest in their home

country, rather than in the country in which they stay.

3. The frequency of investment adopted by the NRIs is annually.

The major reason being the lack of awareness they have about the

different investment alternatives. They are reluctant to invest

their hard earned money in those investments which they do not

have sufficient information. Thus by conducting seminars,

publishing journals, investors could be made more aware. Once

sufficient information is available with the investors, they will

have the confidence to invest and thus could be motivated to

invest more frequently, maybe in shares/ bonds/ debentures or

maybe in real estate sector. By providing awareness, the investors

would be willing to take up a high level of risk also.

4. There are many factors which influence an investor while taking

an investment decision. According to the analysis done on the

response of the investors, it can be ascertained that most of them

invest for their long term growth.

5. According to the analysis done, it has been proved that income;

age and occupation of the respondents do not have any significant

relationship with risk. But occupation of the respondent has a



significant relationship with the frequency in which the investors

invest in the different investment avenues available in our home

country. Since the above mentioned parameters do not have a

significant relationship with risk, housewives and college going

students should be encouraged to invest in profitable investment

opportunities (like post office schemes, shares etc).

.

Conclusion 102


6.0 CONCLUSIONS:

The study was conducted on 200 NRI’s based on UAE to find out their

attitude and perception towards the different investment alternatives

available back home.

The various factors identified in the study also helped in providing some

valuable input regarding the investor’s pattern, their preference and

Priorities.

The study reveals that the investor has great preference for safety and this is

proved by their investments in Life Insurance, Gold and Bank Deposits.

The statistical analysis has helped the surveyor to have a deeper insight on

the relationship between income, age and occupation on the risk preferences

of the investors.

The NRI investors are looking for investment alternatives that would help

them to earn a steady income back home and also an investment alternative

that does not have risk of loss attached to them.

The survey also helped to analyze, the investors awareness about the various

investment avenues available to them back home. Through the study it was

evident that the investors are not fully aware of the options available to

them. Thus through creating awareness and educating the NRIs about the

investment alternatives, in which they can invest will help the individual as

well as the country as a whole to develop.

Appendices 103

Appendix A:

QUESTIONNAIRE

Dear Respondent, I’m Venu.T, student pursing MBA – Finance from BirlaInstitute of Technology. As a part of my curriculum, This questionnaire isprepared to do my dissertation on the topic, “Investors attitude and Knowledgetowards investment options available in India with special reference to UAEbased NRI’s.”

The data being collected are solely for academic purpose. I request you to kindly

extend your co-operation.

Name:-

Age:-

Gender:-

1) What is your employment status?o Salariedo Professionalo Businesso Others

2) What is your estimated monthly income?o Below AED 1,000o AED 1,000 – AED 5,000o AED 5,000 – AED 10,000o Above AED 10,000

3) What is your purpose for savings?o Children’s Educationo Growth Plano Retirement Plano Health care Expenseso Home purchaseo Others

4) What are your investment portfolio objectives?

o Income and capital preservationo Growth and Incomeo Long-term growtho Aggressive growth

Appendices 104

5) How frequently do you invest in India?

o Monthlyo Quarterlyo Half- Yearlyo Annually

6) Do you consult a Financial Advisor?

o Yes [ ]o No [ ]

7) If Yes, with whose financial advice did you start your investment?

o Friends/Relativeso Financial consultantso Investment institutionso Portfolio Department in Banks

8) Which of the following assets do you currently have, in your investmentportfolio?

o Bank depositso Post Officeo Shares/ Bonds/ Debentureso Mutual fundso Life Insuranceo Real Estateo Gold

9) If you have invested in Shares, which of the below sectors of investmentavenues would be your preference?

o IT sector [ ]o Textile sector [ ]o Engineering sector [ ]o Auto sector [ ]o FMCG sector [ ]o Chemical sector [ ]o Pharmacy sector [ ]o Banking sector [ ]o Oil sector [ ]

Appendices 105

10) Rank the below investments according to your priority.

o Bank Deposits [ ]o Post Office [ ]o Shares [ ]o Mutual Funds [ ]o Life Insurance [ ]o Real Estate [ ]o Gold [ ]

11) Are you aware of the investment avenues as a NRI, please mark those productsyou are aware of.

o Bank Depositso Shares/ convertible debentures/ non-convertible debentureso Mutual Fundso Bonds- invested out of NRE/FCNR/NROo Immovable Propertyo Proprietary/ partnership concern in Indiao Deposits in Indian Companies through NRO accounts

12) Which of the following options best describes your satisfaction level on theinvestment made?

o Highly Satisfactoryo Satisfactoryo Unsatisfactory

13) What best describes your investment experience?

o Beginner (no investment experience)o Moderately experienced investor (mutual funds and bank deposits)o Knowledgeable investor (has bought or sold individual shares of stock

or bonds)o Experienced investor (has traded stock options, exercised stock rights

or stock warrants)

14) What would be the extend of risk composition you would like to have in yourinvestment?

o Low Risko Medium Risko High Risk

Appendices 106

15) Do you Agree, Disagree, or Strongly Disagree with the following statement“I’m comfortable with investments that may frequently experience largedeclines in value if there is a potential for higher returns.”

o Agreeo Disagreeo Strongly Disagree

16) Rank the below factors which influence your investment decision?

o Safety [ ]o Liquidity [ ]o Regular income [ ]o Capital appreciation [ ]o High Return [ ]

17) Approximately, when do you plan to make your first withdrawal from yourinvestment accounts?

o Three – five yearso Six – nine yearso Ten years or more

Bibliography 107


Bibliography

Books

Investment Management- Preeti Sing-10th edition – Himalaya publication

2002.

Investment Analysis and Portfolio Management – Prasanna Chandta – 2nd

edition- Tata McGrawhill publishing Company,2005.

Financial Management and Services – Gordon, Natarajan-5th edition –

Himalaya Publishing House,2009.

Websites

www.economywatch.com

http://www.sebi.gov.in/sebiweb/

http://www.rbi.org.in/scripts/BS_EntireSearch.aspx?searchString=nri%20in

vestment

http://www.prlog.org/11884280-rupee-depreciation-is-it-the-right-time-for-nris-to-invest-in-india.html

http://www.femaonline.com/nricms.php?id=1

http://jayesh.profitfromprices.com/invest_in_india_terms_faq.htm

http://www.mynriclub.com/site/NRI-Account/Foreign-currency-Non-resident-Account-FCNR

http://www.path2usa.com/nri-bank-accounts-nre-account-nro-account

http://www.nriinvestindia.com/nri-india-mutual-funds.html

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Documents

mba-finance project (A STUDY ON INVESTORS ATTITUDE AND KNOWLEDGE TOWARDS INVESTMENT OPTIONS AVAILABEL IN INDIA – WITH SPECIAL REFERENCE TO UAE BASED NRIs)