Project 1

CHAPTER-1
1.1-INTRODUCTION
INVESTMENT:
Investment is the use of money to earn income or profit. The term also refers to
the expenditure of funds for capital goods - such as factories farm, equipment, livestock
and machinery. Capital goods are used to produce other goods or services. Many people
invest part of their income for future financial gain. Others make investments to protect
the purchasing power of their savings against rising prices. Investment promotes
economic growth and contributes to a nation’s wealth.
INVESTMENT ALTERNATIVES
“INVESTMENT ALTERNATIVES” means the various investment options available to
investors to invest their surplus funds. The investors can invest their funds in these
various investment alternatives and get a return on their funds invested by them. There
are various investment alternatives available for the investors.
An investor chooses between the various investment alternatives based on three major
criteria, they are RISK, RETURN and LIQUIDITY. An investor chooses between the
various investment alternative based on these three major criteria.
An investor looks up for the different investment alternatives available and invests in that
alternative suitable for him.
The various investment alternatives available for investors are as follows:
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1. SHARES:
In financial markets, a share is a unit of account for various financial instruments
including stocks, mutual funds, limited partnerships, and REIT's. The income
received from shares is called a dividend, and a person owning shares is called a
shareholder.
A share is one of a finite number of equal portions in the capital of a company,

entitling the owner to a proportion of distributed, non-reinvested profits known as
dividends, and to a portion of the value of the company in case of liquidation. Shares
can be voting or non-voting, meaning they either do or do not carry the right to vote
on the board of directors and corporate policy. Whether this right exists often affects
the value of the share. Voting and non-voting shares are also known as Class A and B
shares respectively
Shares are traded in the primary market and the secondary market. The shares of
the companies are listed in stock exchange for trading.
2. MUTAL FUNDS:
A mutual fund is simply a financial intermediary that allows a group of investors to
pool their money together with a predetermined investment objective. The mutual fund
will have a fund manager who is responsible for investing the pooled money into
specific securities. When you invest in a mutual fund, you are buying shares of the
mutual fund and become a shareholder of the fund.
Mutual funds are of open-ended, close-ended, hedge funds, equity funds, bond
funds and exchange funds.
3. INSURANCE:
Insurance, in law and economics, is a form of risk management primarily
used to hedge against the risk of a contingent loss. Insurance is defined as the equitable
transfer of the risk of a loss, from one entity to another, in exchange for a premium.
Insurer is the company that sells the insurance. Insurance rate is a factor used to
determine the amount, called the premium, to be charged for a certain amount of
insurance coverage.
Insurance are of life insurance, health, vehicle and medical insurance.
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4. DERIVATIVES:
Derivatives are financial instruments whose value changes in response to the

changes in underlying variables. The main use of derivatives is to reduce risk for one
party.
The main types of derivatives are futures, forwards, options, and swaps.
5. BONDS:
In finance, a bond is a debt security, in which the authorized issuer owes the
holders a debt and is obliged to repay the principal and interest (the coupon) at a later
date, termed maturity. Other stipulations may also be attached to the bond issue, such as
the obligation for the issuer to provide certain information to the bond holder, or
limitations on the behavior of the issuer.
Bonds are of government, municipal, corporate and long term bonds.
6. COMMODITIES:
A commodity is anything for which there is supply, but which is demanded

without qualitative differentiation across a foreign market.
Characteristic of commodities is that their prices are determined as a function of

their market as a whole. Well-established physical commodities have actively traded
spot and derivative markets. Generally, these are basic resources and agricultural
products such as iron ore, crude oil, coal, ethanol, sugar, soybeans, aluminum, rice,
wheat, gold and silver.
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7. MONEY MARKET:
The money market is the global financial market for short-term borrowing and
lending. It provides short-term liquid funding for the system. The money market consists
of financial institutions and dealers in money or credit who wish to either borrow or lend.
Participants borrow and lend for short periods of time, typically up to thirteen months.
Money market trades in short term financial instruments commonly called "paper". This
contrasts with the capital market for longer-term funding, which is supplied by bonds and
equity.
Money market instruments are Treasury bills, commercial paper and bankers'
acceptances
8. REAL ESTATES:
Real estate is a legal term that encompasses land along with anything permanently
affixed to the land, such as buildings, specifically property that is stationary, or fixed in
location. Real estate is often considered synonymous with real property , in contrast with
personal property . However, in some situations the term "real estate" refers to the land
and fixtures together, as distinguished from "real property," referring to ownership rights
of the land itself.
9. FIXED DEPOSITS:
Fixed deposits are investing in bank. The bank provides interest for these deposits
based on the period of investment and the amount of investment. Fixed deposit is
considered to be a much secured form of investment. The investor gets the return on his
investment on the maturity of the time period for which the fixed deposit was accepted.
Fixed deposits are of Savings account, post office saving scheme and kisan vikas
patra.
10. PROVIDENT FUND:

This includes statutory provident fund, recognized provident fund, unrecognized
provident fund and public provident fund.
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1.2-SCOPE OF THE STUDY
The scope of the study is to find out the various investment options available to the
investors and to find out the investor preference and their awareness on the investment.
It also studies about the preference of intermediaries to the investment. The study is
also extended to study the various risk and returns of the various investment
alternatives.
1.3-PROBLEM DEFINITION
The overall market of interest on government securities, bank deposits and other fixed
deposit has been decreasing year after steadily due to various factors which affect the
interest of the investors and the rate of interest of the investors. But on the other hand
the investor’s interest is gradually shifted towards mutual funds, shares and other
company securities. When compare to bank deposits the return from mutual funds is
high. Likewise, when compare to mutual funds the return from equity market is very
high. But of course risk is also high in these securities. Hence it is important to know
the various investment alternatives which are available to the investors and the risk and
return of the investments and it is also necessary to know the investor preference
towards these alternatives. It is also necessary to know how an investor chooses
between these investments alternatives. Since an intermediary is necessary for proper
management of the investors’ funds it is also necessary to know the functioning of the
intermediaries.
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1.4-0BJECTIVES
PRIMARY OBJECTIVES:
• To study the various investment alternative available and the investor preference
towards the investment alternatives.
SECONDARY OBJECTIVES:
• To study the risk and return of the investment alternatives.
• To study the investor awareness of the various investment alternatives.
• To analyze how an investor choose between the various investments.
• To analyze the preference of intermediaries in investments.
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1.5-RESEARCH METHODOLOGY
RESEARCH DESIGN:
This project analyses the various investment alternatives available and the investor’s
preference on the various investment alternatives available. The project also studies the
investor’s preference towards the intermediaries. For this purpose descriptive research
design is use in order to cover the field of the study.
DATA SOURCES:
1) PRIMARY DATA:
Primary data required for the research study was collected by conducting research
study where in various investors were given questionnaires and the require data
was collected.
2) SECONDARY DATA:
Secondary data were collected from the various periodicals, journals,

records, books, web pages and the like.
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SAMPLING DESIGHS:
Samples of 150 investors were selected on the basis of non-probability sampling
technique. The information relating to investor preference towards investment and
the preference of intermediaries were collected with the help of preparing
questionnaire.
TOOLS USED:
For the present study percentage analysis, chi-square test and weighted average method
is used in order to analyze the given data.
TIME PERIOD COVERED:
The primary data was collected with the help of questionnaire for the time
period from January to march 2008
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1.5-LIMITATIONS OF THE STUDY
• The study had to be completed within a short period of time.
• The sample size of 150 is a small when compare to large number of

investors.
• The study is confined with the investors in India infoline.
• Time was the main constrain in data collection.
• Very little co-operation was received from some of the respondents.
• Some of the questions were not answered as per the requirement in spite
of detailed and accurate instructions.
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1.6-CHAPTERITATION
The project was carried out to study the various investment alternatives
available and the investor preference towards these investment alternatives.
Chapter 1
The first chapter deals with the introduction about the various investment
alternatives and its related terms, scope, problem definition, objectives, research
methodology, limitations of the study, review of literature, company profile and the
industry profile.
Chapter 2
The second chapter includes Data Analysis and Interpretations.
Chapter 3
The third chapter contains Findings, Suggestions and conclusions.
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1.2-LITERATURE REVIEW
1.2.1- COMPANY PROFILE
KEY MILESTONES:
• Incorporated on October 18, 1995 as probity research & services.
• Launched internet portal www.indiainfoline.com in may 1999.
• Commenced distribution of personal financial products like mutual funds

and RBI bonds in April 2000.
• Launched online trading in shares and securities branded as

www.5paisa.com in july2000.
• Started life insurance agency business in December 2000 as a corporate

agent of ICICI prudential life insurance.
• Became a depository participant of NSDL in September 2001.
• Launched stock messaging services in may2003.
• Acquired commodities broking license in march2004.
• Launched portfolio management services in August 2004.
• Listed in NSE and BSE on May 17, 2005.
• Acquired NBFC license in May 2005.
• Acquired 100% equity of March Mont capital advisors pvt ltd in December
2005 through which we have ventured into merchant banking.
• Bennett Coleman & co ltd invested Rs.20 crores in India infoline by way of
preferential allotment in December 2005.
• Became a depository participant of CDSL in June 2006.
• IRDA license of insurance broking in April 2007.
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MANAGEMENT TEAM:
Mr. Nirmal Jain

Nirmal Jain, MBA (IIM, Ahmedabad) and a Chartered and Cost Accountant, founded
India’s leading financial services company India Infoline Ltd. in 1995, providing globally
acclaimed financial services in equities and commodities broking, life insurance and
mutual funds distribution, among others. Mr. Jain began his career in 1989 with
Hindustan Lever’s commodity export business, contributing tremendously to its growth.
He was also associated with Inquire-Indian Equity Research, which he co-founded in
1994 to set new standards in equity research in India.
Mr. R Venkataraman
R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a B. Tech
(Electronics and Electrical Communications Engineering, IIT Kharagpur) and an MBA
(IIM Bangalore). He joined the India Infoline board in July 1999. He previously held
senior managerial positions in ICICI Limited, including ICICI Securities Limited, their
investment banking joint venture with J P Morgan of USA and with BZW and Tabb
Capital Corporation Limited. He was also Assistant Vice President with G E Capital
Services India Limited in their private equity division, possessing a varied experience of
more than 16 years in the financial services sector.
The Board of Directors:

Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India
Infoline comprises:
Mr. Sat Pal Khattar (Non Executive Director)

Mr. Sat Pal Khattar, - Board member since April 2001 - Presidential Council of Minority
Rights member, Chairman of the Board of Trustee of Singapore Business Federation, is
also a life trustee of SINDA, a nonprofit body, helping the under-privileged Indians in
Singapore. He joined the India Infoline board in April 2001. Mr. Khattar is a Director of
public and private companies in Singapore, India and Hong Kong; Chairman of
Guocoland Limited listed in Singapore and its parent Guoco Group Ltd listed in Hong
Kong, a leading property company.
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Mr. Nilesh Vikamsey (Independent Director)
Mr. Vikamsey, Board member since February 2005 - a practicing Chartered Accountant
and partner (Khimji Kunverji & Co., Chartered Accountants), a member firm of HLB
International, headed the audit department till 1990 and thereafter also handles financial
services, consultancy, investigations, mergers and acquisitions, valuations etc; an ICAI
study group member for Proposed Accounting Standard — 30 on Financial Instruments
— Recognition and Management, Finance Committee of The Chamber of Tax
Consultants (CTC), Law Review, Reforms and Rationalization Committee and
Infotainment and Media Committee of Indian Merchants’ Chamber (IMC) and Insurance
Committee and Legal Affairs Committee of Bombay Chamber of Commerce and
Industry (BCCI).
Mr. Kranti Sinha (Independent Director)

Mr. Kranti Sinha — Board member since January 2005 — completed his masters from
the Agra University and started his career as a Class I officer with Life Insurance
Corporation of India. He served as the Director and Chief Executive of LIC Housing
Finance Limited from August 1998 to December 2002 and concurrently as the Managing
Director of LICHFL Care Homes (a wholly owned subsidiary of LIC Housing Finance
Limited). He retired from the permanent cadre of the Executive Director of LIC; served
as the Deputy President of the Governing Council of Insurance Institute of India and as a
member of the Governing Council of National Insurance Academy, Pune apart from
various other such bodies.
VISION:
Our vision is to become the most respected financial service company in India.
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CULTURE AND CORE VALUES:
OWNER MINDSET:
Owner mindset is one of the key principles that drive life at India infoline. Every
member of team India infoline behaves thinks and acts as owners not as employees.
ENERGY:
The single most important attribute we look for when we hire people is energy.
Nobody can drive a business of his own or feel like an owner unless he is gifted with
unbounded energy.
EXECUTION:
It is the difference between dreaming and making things happen. At India
infoline, all activities are assessed on the basis of 0 and where 0 signifies work not done
and 1 signifies work completed fully and on time. Excuses/ reasons for non completion of
tasks are not acceptable.
EFFORT:
Those who work for the sake of working and endure the time they spend at work instead
of enjoying it, eventually get de-motivated and leave their jobs for something that does
interest them.
From the organization’s perspective, it’s not the number of hours you spend at work that
matter, but the quality of work that you put into those hours.
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ETHICS:
Ethics pertain to the character of a person. Ethics is something on which there can
never be any compromise in India infoline. We have elaborated on our vision to become
the most respected company in the financial services space in India and no one can
respect an unethical organization.
EXCELLENCE:
Excellence is all about the quality of work. We strive for delivery that is 100%
error free and yet at lightning speed. Excellence deals with the quality of work. We have
seen that there are people who get things done right in the very first time , thereby
making the first time right.
APPLICATION OF MIND:
Application of mind is the magic formula to solve all problems. You should
always apply your mind on how your efforts and goals are aligned to that of the company
and how they contribute to the final business goal. We have a very open culture when in
doubt always ask questions to seek clarity. Remember, to succeed at India infoline
always apply your mind like an owner and come up with out-of-box solutions.
OM AND AOM WITH SYSTEM AND PROCESS:

Understand that being owners does not mean that we do not have to follow any
rules. In fact given our path of growth, system and processes assume even greater
importance since they are important for success and more so for growth. But we do have
the option to modify the rules if needed.
Our systems and processes are designed keeping in mind the need for faster decision-
making with least turnaround time.
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1.2.2- INDUSTRY PROFILE
1. STOCK EXCHANGE:
The stock exchange contribute to the economy development through providing
listing of stocks and their trading listed stocks cover about 90 percent of the joint stock
sectors in which the public companies are at work in India. The functions of the stock
markets consist in mobilizing savings of public and channel them either directly into new
issues of capital or indirectly through acquisition of existing capital stocks thereby
accelerating the economic development of the country.
The recognised stock exchanges have played an important role by participating in

preliminary distribution of new securities. In respect of new issues offer through a
prospectus or through for sale of existing securities the members of the recognized stock
exchange have been the principal agents for canvassing subscriptions from investors
spread all over the country.
The recognized stock exchanges have served as the principal market for purchase
of securities after they are issued as they pass through many successive hands from the
original subscriber to the never ending stream of buyers. The recognized stock exchanges
have, thus performed the vital function of acting as an organized capital market for
stocks, shares and government securities. The market mechanism is being automated and
improved in response to the growing demands. The mobilization of the savings of small
man for investment in joint stock enterprise and broader spread of share ownership are
factors, which in the course of time are likely to except a significant influence on the
stock market in India. The stock exchanges provide an orderly market and price of
securities and facilitate investment in India.
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HISTORY OF STOCK EXCHANGE:
The only stock exchanges operating in the 19th century were those of Mumbai set
up in 1875 and Ahmedabad set up in 1894. These were organized as voluntary non –
profit – making associations of brokers to regulate and protect their interests. Before the
control on securities trading became a central subject under the constitution in 1950, it
was a state subject and the Mumbai securities contracts act of 1925 used to regulate
trading in securities. Under this act, the Mumbai stock exchange was recognised in 1927
and Ahmedabad in 1937. Soon after it became a central subject, the securities contracts
act became law in 1956.
At present there are 21 stock exchanges recognised under the securities contracts
act 1956. They are located at Mumbai, Calcutta, Chennai, Delhi, Ahmedabad,
Hyderabad, Indore, Bhuwaneshwar, Mangalore, Patna, Bangalore, Rajkot, Guwahati,
Jaipur, Kanpur, Ludhiana, Baroda, Cochin and Pune.
METHOD OF TRADING:
In order to purchase or sell of the securities or a stock exchange, the following
procedure has to be followed.
A. Selection of Broker
A non member is not allowed to transact business on the floor of stock exchange.
He may transact only through a member of stock exchange. Therefore, the first step in
trading procedure on a stock exchange is to choose broker through whom the transaction
will be made.
B. Placing the Order
After selection of broker, the client will place an order to him for the purchase or
sale of a particular security. The order may be placed in any form.
C. Making the Contact
After receiving the order, the broker will then contact other broker or member or
the stock exchange.
D. Preparing the Contract Note
A contract note will be prepared after the order of the day’s business. The note
can be prepared by the broker himself or his clerk. The contract note mainly includes
number and price of securities purchase or sold, names of the parties, brokerage charged
and total amount payable by the or to the client. The contract note is signed by the broker
and copy of the note also sent to the client.
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E. Settlement
The last step of trading procedure is settlement. Its mode depends upon the nature
of the contract. The contracts modes at a stock exchange are of two types they are:
F. Ready Delivery Contracts
It requires the delivery of securities by the seller and actual payment of the value
of security by the buyers in cash. Generally a ready delivery contractors settled on the
same day of whether the time fixed by the stock exchange authorities. In case of cleared
securities settlement are made through clearing house and contracts in non – clearing
house and contracts non – cleared securities are settled through hand delivery by the
brokers.
G. Forward Delivery Contract
Such contracts are made without the intention of taking or giving delivery of the
securities. The intention of the trader who entered into forward delivery contract is in
making profits by taking advantage of price movement in future. Forward delivery
transactions are settled on the day fixed by the stock exchange authorities.
BENEFITS TO INVESTORS:
• Stock exchange provides liquidity of investment through ready marketability of
securities
• Long term investments in shares will provide significant capital gains through
increase in share price.
• Companies pay much of their post-tax profits to their shareholders in the form of
dividends.
• Compared to other investments like property, shares are very portable. They can
be bought and sold quickly.
• Unlike selling a property, you can sell part of your share parcels.
• When compared to other forms of investment the brokerage charged for investing
in shares is very low.
• In shares we have an option of investing in diversified scripts to minimize risk.
• The returns provided by shares are very high when compared to other forms of
investment.
• Shares held for more than 12 months qualify for a 50% discount on any capital
gains tax payable
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2. MUTUAL FUNDS:
The mutual fund industry in India started in 1963 with the formation of Unit Trust
of India. The history of mutual funds in India can be broadly divided into four distinct
phases:-
 First phase-1964-87
An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by
the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6, 700crores of assets under management.
 Second phase-187-1993 (Entry of Public Sector Funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June
1987 followed by could bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of
Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC
had set up its mutual fund in December 1990..
 Third Phase-1993-2003(Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual
fund industry, giving the India investors a wider choice of fund families. Also, 1993 was
the year in which the first Mutual Fund was to be registered and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.
The 1993 SEBI (mutual Fund) Regulation were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the
SEBI (Mutual Fund) Regulation 1996.
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 Fourth Phase-Since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of Rs.29835crores
as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured
return and certain other schemes. The Specified Undertaking of Unit Trust of India,
functioning under an administrator and under the rules framed by Government of India
and does not come under the purview of the Mutual Fund Regulations.
Mutual Fund Operation Flow Chart:
TYPES OF MUTUAL FUNDS:
Open-end fund:
An open-end(ed) fund is a collective investment which can issue and redeem shares at
any time. An investor can purchase shares in such funds directly from the mutual fund
company, or through a brokerage house.
Exchange-traded funds:
An Exchange-Traded Fund (or ETF) is an investment vehicle traded on primary

exchanges, much like major stocks or bonds. An ETF represents a collection or 'basket' of
assets such as stocks, bonds, or futures.
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Equity funds:
Equity funds, which consist mainly of stock investments, are the most common type of
mutual fund. Equity funds hold 50 percent of all amounts invested in mutual funds in the
United States.
Bond funds:
A bond fund is a collective investment scheme that invests in bonds and other debt
securities. Bond funds yield monthly dividends that include interest payments on the
fund's underlying securities plus any capital appreciation in the prices of the portfolio's
bonds.
Money market funds:
Money market funds have relatively low risks compared to other mutual funds and pay
dividends that generally reflect short-term interest rates. Money market funds typically
invest in government securities, certificates of deposits, commercial paper of companies,
and other highly liquid and low-risk securities.
Fund of funds:
A "fund of funds" (FoF) is an investment fund that uses an investment strategy of holding
a portfolio of other investment funds rather than investing directly in shares, bonds or
other securities. This type of investing is often referred to as multi-manager investment.
Hedge fund:
A hedge fund is a private investment fund that charges a performance fee and is typically
open to only a limited range of qualified investors. Hedge funds are most often set up as
private investment partnerships that are open to a limited number of investors and require
a very large initial minimum investment.
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MAJOR MUTUAL FUND COMPANIES IN INDIA:
• ABN AMRO Mutual Fund

• BIRLA SUN LIFE Mutual Fund
• BANK OF BARODA Mutual Fund
• HDFC Mutual Fund
• HSBC Mutual Fund
• ING Vysya Mutual Fund
• Prudential ICICI Mutual Fund
• Sahara Mutual Fund
• State Bank of India Mutual Fund
• Tata Mutual Fund
• Kotak Mahindra Mutual Fund
• Unit Trust of India Mutual Fund
• Reliance Mutual Fund
• Standard Chartered Mutual Fund
• Franklin Templeton India Mutual Fund
• Morgan Stanley Mutual Fund India
• Canbank Mutual Fund
• Chola Mutual Fund
• LIC Mutual Fund
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• Mutual Funds invest their corpus in diversified portfolio’s which reduces the risk
contained in the investment.
• These mutual funds perform an extensive research of the company before making
an investment decision giving you the benefit of expert advice.
• These funds are managed by professionals who have the required expertise in
buying and selling stocks.
• As purchases and sales are done in bigger quantities, the funds also get the
advantages of lesser brokerage and other reduced transaction costs.
• In India these funds become even more attractive because of the tax advantages,
like indexation benefits, long term capital gains tax, tax free dividends and much
more.
• Possibility of investing in small amounts as and when the investor has funds to
invest.
• Most mutual funds have relatively low investment minimums, making them
accessible even to small investors.
• Mutual funds provide greater amount of liquidity to its investors.
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3. INSURANCE:
Insurance, in law and economics, is a form of risk management primarily
used to hedge against the risk of a contingent loss. Insurance is defined as the equitable
transfer of the risk of a loss, from one entity to another, in exchange for a premium.
Insurer is the company that sells the insurance. Insurance rate is a factor used to
determine the amount, called the premium, to be charged for a certain amount of
insurance coverage.
HISTORY:
The business of life insurance in India in its existing form started in India in the
year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance business in

India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate
the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the central
government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act,1956,
with a capital contribution of Rs. 5 crores from the Government of India.
1972: The General Insurance Business (Nationalisation) Act, 1972 was enacted to
nationalize the 100 odd general insurance companies and subsequently merging them into
four companies. All the companies were amalgamated into National Insurance, New
India Assurance, Oriental Insurance, and United India Insurance which were
headquartered in each of the four metropolitan cities.
1999: Till 1999, there were not any private insurance companies in Indian insurance
sector. The Govt. of India, then introduced the Insurance Regulatory and Development
Authority Act in 1999, thereby de-regulating the insurance sector and allowing private
companies into the insurance. Further, foreign investment was also allowed and capped at
26% holding in the Indian insurance companies
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INSURANCE COMPANIES IN INDIA
• Aviva
• Bajaj Allianz
• Birla Sun Life
• HDFC Standard Life
• ICICI Pru
• ING Vysya
• Life Insurance Corporation
• Max New York Life
• Metlife India
• Om Kotak Mahindra
• Reliance Life Insurance
• SBI Life Insurance
• Tata AIG
TYPES OF INSURANCE:
• Health
• Disability
• Casualty
• Life insurance
• Property
• Liability
• Credit
• Insurance financing vehicles
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RISKS INVOLVED:
• The insurance company may not pay the premium amount in right time.
• The agents may provide false information about the policies.
• In the case of accidents in railway tracks the insurer is not eligible for
compensations.
• Private insurance companies may get closed due to continuous losses.
• The liquidity provided by insurance is very low.
• The investor‘s cannot withdraw his funds for a fixed amount of period.
• Insurance will give cover for future unforeseen happenings.

• Insurance companies are now engaging in investing in securities. This will
provide better returns for investor funds.
• Pension schemes in insurance will help in old age.
• Medical insurance will provide cover against hazardous diseases.
• It minimizes the risk of life.
• The investor can ensure continuous return on his investments.
• The brokerage charged by agents is very low when compared to other investment
alternatives.
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4. DERIVATIVES:
Derivatives are financial instruments whose value changes in response to the changes in
underlying variables. The main types of derivatives are futures, forwards, options, and
swaps.
The main use of derivatives is to reduce risk for one party. The diverse range of potential
underlying assets and pay-off alternatives leads to a huge range of derivatives contracts
available to be traded in the market. Derivatives can be based on different types of assets
such as commodities, equities (stocks), bonds, interest rates, exchange rates, or indexes
(such as a stock market index, consumer price index (CPI) — see inflation derivatives —
or even an index of weather conditions, or other derivatives). Their performance can
determine both the amount and the timing of the pay-offs.
HISTORY:
The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan
around 1650. These were evidently standardised contracts, which made them much like
today's futures.
The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, was
established in 1848 where forward contracts on various commodities were standardised
around 1865. From then on, futures contracts have remained more or less in the same
form, as we know them today.
Derivatives have had a long presence in India. The commodity derivative market has
been functioning in India since the nineteenth century with organized trading in cotton
through the establishment of Cotton Trade Association in 1875. Since then contracts on
various other commodities have been introduced as well.
Exchange traded financial derivatives were introduced in India in June 2000 at the two
major stock exchanges, NSE and BSE. There are various contracts currently traded on
these exchanges.
National Commodity & Derivatives Exchange Limited (NCDEX) started its operations in
December 2003, to provide a platform for commodities trading.
The derivatives market in India has grown exponentially, especially at NSE. Stock Futures are the
most highly traded contracts on NSE accounting for around 55% of the total turnover of
derivatives at NSE, as on April 13, 2005.
27
TYPES OF DERIVATIVES:
There are four major types of derivatives. They are as follows
FUTURES:
A futures contract is a standardized contract, traded on a futures exchange, to buy

or sell a certain underlying instrument at a certain date in the future, at a specified price.
The future date is called the delivery date or final settlement date. The pre-set price is
called the futures price. The price of the underlying asset on the delivery date is called the
settlement price
FORWARDS:
A forward contract is an agreement between two parties to buy or sell an asset at

a pre-agreed future point in time. Therefore, the trade date and delivery date are
separated. One party agrees to sell, the other to buy, for a forward price agreed in
advance. In a forward transaction, no actual cash changes hands. If the transaction is
collateralized, exchange of margin will take place according to a pre-agreed rule or
schedule.
OPTIONS:
Options are financial instruments that convey the right, but not the obligation, to
engage in a future transaction on some underlying security, or in a futures contract. For
example, buying a call option provides the right to buy a specified quantity of a security
at a set strike price at some time on or before expiration, while buying a put option
provides the right to sell. Upon the option holder's choice to exercise the option, the party
who sold, or wrote, the option must fulfill the terms of the contract.
SWAPS:
A swap is a derivative in which two counterparties agree to exchange one stream

of cash flows against another stream. These streams are called the legs of the swap.
The cash flows are calculated over a notional principal amount, which is usually not
exchanged between counterparties. Consequently, swaps can be used to create unfunded
exposures to an underlying asset, since counterparties can earn the profit or loss from
movements in price without having to post the notional amount in cash or collateral
28
• One of the key benefits of trading in the futures markets is that it offers the trader
financial leverage.
• Another key benefit of futures trading is liquidity. Liquid markets easily match a
buyer with a seller, enabling traders to quickly transact their business at a fair
price
• Many futures markets are considered to be “transparent” because the order flow is
open and fair.
• Everyone has an equal opportunity for the trade.
• Futures markets give this confidence through a clearing service provider system
that guarantees the integrity of the trades.
• One use of derivatives is as a tool to transfer risk by taking the opposite position
in the futures market against the underlying commodity.
• Speculators may trade with other speculators as well as with hedgers.

• The amount of brokerage charged is very low.
• The investor can easily clear his position in the time of losses.
RISKS INVOLVED:
• Volatility in the market will result in the losses for the investors.
• Since a huge investment is needed to buy a script it not affordable for small and
medium investors.
• It is difficult to judge the movement of market indices.
• Expert advice is needed for better investment results.
• It s necessary to have a continuous check over the market in order to avoid losses.
29
CHAPTER-2
DATA ANALYSIS AND INTERPRETATION
30
2.1- PERCENTAGE ANALYSIS
TABLE-2.1.1
Classification of Respondents on the basis of Age

Age(in Years) Number of respondent Percentage
Less than 30 34 22.67
31-40 78 52.00
41-50 23 15.33
Above 50 15 10.00
Total 150 100.00
Source: Primary Data
CHART-2.1.1
90
80
70
60
50 Number of Respondents
40 Percentage
30
20
10
0
50
30
0
-4
-5
ve
an
31
41
bo
th
A
ss
Le
INFERENCE:
It is clear from Table 2.1.1 that out of the total 150 respondents, 34 (22.64%) of the
respondents are in the age group of below 30 years and 78 (52%) are in the age group of
31 – 40 years. 23 (15.33%) of the respondents are in the age group of 41 – 50 years and
the remaining 15 (10%) are in the age group of above 50 years. Therefore, it is concluded
that the most dominating age group of the respondents are in the age group of 31 – 40
years.
31
TABLE- 2.1.2
Classification of Respondents on the basis of Sex
Sex Number of Respondents Percentage

Male 105 70
Female 45 30
Total 150 100
Chart-2.1.2
160
140
120
100
Number of Respondents
80
Percentage
60
40
20
0
Male Female Total
INFERENCE:
It is found from Table 2.1.2 that out of 150 respondents, 105 (70%) are male and 45 (30
%) are female. Hence, it is found that males are more in numbers than the female in the
field of investment.
32
TABLE- 2.1.3
Classification of Respondents on the basis of Educational Qualification
Educational Qualification Number of Respondents Percentage
Up to school level 15 10
Graduate 33 22
Post Graduate 66 44
Professional Degree 36 24
Total 150 100
Chart-2.1.3
160
140
120
80
60 Percentage
40
20
0
e
e
el
te
l
ta
at
re
ev
ua
To
du
eg
ll
d
ra
lD
ra
o
ho
na
sc
st
sio
Po
to
es
Up
of
Pr
INFERENCE:
It is seen from Table 2.1.3 that out of 150 respondents 15 (10%) of the respondents have
studied up to school level, 33 (22%) of the respondents have studied graduation and 66
(44%) of them have studied post graduation. The remaining 36 (24%) of the respondent
have studied professional degree. Hence, it is observed that the respondents belonging to
post graduates are more than other categories.
TABLE-2.1.4
33
Classification of Respondents on the basis of Occupation
Occupation Number of Respondents Percentage
Business 14 9.33
Professional 32 21.33
Government 19 12.67
Employee
Private Employee 85 56.67
Total 150 100.00
CHART-2.1.4
34
90
80
60
50 Nil
40 Percentage Nil
30
20
10
0
ee
ee
l
na
s
es
oy
oy
io
pl
in
pl
ss
m
us
m
fe
tE
E
B
ro
e
en
P
at
nm
riv
P
er
ov
G
INFERENCE:
It is observed from Table 2.1.4 that, out of 150 respondents, 14 (9.33%) respondents are
businessmen, 32 (21.33%) respondents are professionals and 19 (12.67%) respondents
are government employees. The remaining 85 (56.67%) respondents are private
employees. It is inferred from that, the private employees are very interested in
investments.
TABLE-2.1.5
Classification of Respondents on the basis of Income
Monthly Income Number of Respondents Percentage
Below Rs. 5000 Nil Nil
101 67.33
Rs. 5000 - 10000
31 20.67
Rs. 10000 - 15000
18 12.00
Above Rs. 15000
Total 150 100.00
35
CHART-2.1.5
120
100
80
60
Percentage
40
20
0
0
0
0
00
00
0
00
15
15
-1
s.
0
00
R
00
ve
50
10
bo
s.
s.
A
R
INFERENCE:
It is found from Table 2.1.5 that out of 150 respondents, 101 (67.33%) responders come
under the category of Rs 5001 – Rs 10,000, 31 respondents earn in the range of Rs 10,001
– Rs 15,000 and the remaining 18 respondents have a monthly income of above Rs
15,000. Therefore, it is concluded that high income group are interested in investments
than low income group.
TABLE.2.1.6
Classification of Respondents on the basis of Marital Status

Marital Status Number of Respondents Percentage
Married 60 40
Unmarried 90 60
Total 150 100.00
CHART-2.1.6
36
100
90
80
70
60
Married
50
Unmarried
40
30
20
10
0
Number of Respondents Percentage
INFERENCE:
It is observed from Table 2.1.6 that, out of 150 respondents, 60 (40%) respondents are
married and the remaining 90 (60%) respondents are unmarried. It is evident that the
respondent belonging to the married category are more than the respondents belonging to
the unmarried category.
TABLE-2.1.7
Classification of Respondents on the basis of Savings
Monthly Savings Number of Respondents Percentage
Less than Rs 2,000 62 41.33
Rs 2,001 – Rs 3,000 27 18.00
Rs 3,001 – Rs 4,000 48 32.00
Above Rs 4,000 13 8.67
Total 150 100.00

37
CHART-2.1.7
70
60
50
30 Percentage
20
10
0
Less than Rs 2,001 – Rs 3,001 – Above Rs
Rs 2,000 Rs 3,000 Rs 4,000 4,000
INFERENCE:
It is clear from Table 2.1.7 that, out of 150 respondents, 62 (41.33%) respondents save
less than Rs 2000 every month. But 27 (18%) respondents save Rs 2001 – Rs 3000 every
month and 48 (32%) respondents save Rs 3001 – Rs 4000 every month. The remaining
13 (8.67%) respondents save Rs 4000 per month. Therefore, it is observed that most of
the respondents save only Rs 2000
II. INVESTOR PREFERANCES TOWARDS INVESTMENT
TABLE-2.1.8
Investors’ Most Preferred Investment Outlet.

Securities Number of Percentage
Respondents
Mutual Funds 47 31.33
Equity 64 42.67
Insurance 24 16.00
Derivatives 15 10.00
Total 150 100

38
CHART-2.1.8
70
60
50
30 Percentage
20
10
0
Mutual Equity Insurance Derivatives
Funds
INFERENCE:
It is clear from Table 2.1.8 that, out of 150 respondents, 64(42.67%) respondents prefer
investing in shares and 47 (31.33%) respondents invest in mutual fund 24 (16%)
respondents invests in insurance. The remaining 15(10%) respondents invest in
derivatives. Therefore, it is observed that most of the respondents prefer equity.
TABLE-2.1.9
Why investor prefer the particular investment outlet:
Returns Number of percentage

respondents
High risk, High return 79 52.67
Low risk, High return 52 34.67
Low risk, Low return 19 12.66
Total 150 100
CHART-2.1.9
39
90
80
70
60
50 Number of respondents
40 percentage
30
20
10
0
High risk, High return Low risk, High return Low risk, Low return
INFERENCE:
It is clear from Table 2.1.9 that, out of 150 respondents, 79(52.67%) respondents prefer
high risk and high return and 52(34.67%) respondents prefer low risk and high return and
19(12.66%) respondents prefer low risk and low return. Therefore, it is observed that
most of the respondents prefer high risk and high return.
TABLE-2.1.10
Important determinants in selecting Investment outlet
Level of importance
Determinants
High Moderate Low
Total
Safety 131 11 8 150
Return 56 83 11 150
Liquidity 98 38 14 150
CHART-2.1.10
40
160
140
120
100 Safety
80 Return
60 Liquidity
40
20
0
Total
High Moderate Low
Level of importance
INFERENCE:
Table 2.1.10 clearly shows that the investors consider safety, return and liquidity as
important factor in section of investment outlet. Among the three factors safety is the first
and foremost determinant factor. The next factor considered by the investor is liquidity.
The last factor is return. The investor needs only regular and moderate return on their
investment.
TABLE-2.1.11
Satisfaction level with return on investment
Opinion Number of Respondents Percentage
Fully satisfied 12 8
Satisfied 78 52
No opinion 37 24.66
Dis-satisfied 23 15.33
Fully dissatisfied 0 0
Total 150 100.00
CHART-2.1.11
41
90
80
70
60 Number of
50 Respondents
40 Percentage
30
20
10
0
d
d
d
on
d
f ie
fie
fie
fie
ni
t is
is
tis
pi
is
at
sa
sa
at
-s
S
s
o
ly
di
is
N
ul
ly
F
ul
F
INFERENCE:
It is found from Table 2.1.11, out of 150 respondents 12 (8%) respondents are fully satisfied with
the return on investment and 78(52%) respondents are satisfied with the return on investment.
37(24.66%) respondents are neither satisfied nor dissatisfied with the return on investment and
23(15.33%) are dis satisfied with the return on investment. Thus it can be concluded that more
than half of the respondents are satisfied with the return on investment.
TABLE-2.1.12
Allocation of Income for investment
Portion of income Number of Respondents Percentage
available for investment
Upto 10% 54 36
11% - 20% 66 44
21% - 40%
18 12
Above 40%
12 8
Total 150 100.00
42
CHART-2.1.12
160
140
120
100
80
Percentage
60
40
20
0
%
%
al
0%
0%
t
40
10
To
-2
-4
e
to
ov
%
%
Up
Ab
21
11
INFERENCE:
It is observed from Table 2.1.12, out of 150 respondents, 54 (36%) respondents invest
upto 10% of their monthly income 66 (44%) respondents invest 11% - 20% of their
monthly income in the financial asset. The remaining 18 (12%) and 12 (8%) respondents
invest 21% - 40% and above 40% of their monthly income in various securities
TABLE-2.1.13
Purpose of Investment
Purpose Mean score Rank
Risk covered 61.23 I
Tax Rebate 31.63 IV

Return on investment 54.81 II
liquidity 38.94 III
CHART-2.1.13
43
Mean score
70
60
50
40
Mean score
30
20
10
0
Risk Tax Rebate Return on liquidity
covered investment
INFERENCE:
Table 2.1.13 shows that among the purpose, ‘risk covered’ ranks first with a mean score
of 61.23 followed by ‘return on investment’, ‘liquidity’, ‘tax rebate’ are ranked II, III and
IV with a mean score of 54.81,38.94 and 31.63 respectively
TABLE-2.1.14
Opinion on the risk in investment
Very High 65 43.33
High 52 34.67
Moderate 33 22
Low - -
Very low - -
Total 150 100.00
CHART-2.1.14
44
70
60
50
Number of
40 Respondents
30 Percentage
20
10
0
te
h
w
n
w
ig
io
ra
lo
ig
Lo
H
n
y
pi
od
y
er
er
O
V
M
V
INFERENCE:
It is found from Table 2.1.14 that, out of 150 respondents, 65 (43.33%) respondents feel
that the risk on investment are very high and 52 (34.67%) and 33 (22%) respondents feel
that the risk on investment are high and moderate respectively. Hence, it can be
concluded that more than three – fourth of the respondents feel that the risk on
investment are high.
TABLE-2.1.15
Return Expected from shares
Return expected Number of Respondents Percentage
Less than 10% - -
11%-20% 17 11.33
21%-30% 91 60.67
Above 30% 42 28.00
Total 150 100
CHART-2.1.15
45
100
90
80
70
60 Number of
Respondents -
50
Percentage -
40
30
20
10
0
11%-20% 21%-30% Above 30%
INFERENCE:
It is found from Table 2.1.15 that 11.33 percent of the respondents expect 11% - 20%
return on shares, 60.67 percent of the respondents expects 21% - 30% and 28 percent of
the respondents expect more than 30% return on shares. Since the risk in shares is high
the return expected is also very high.
TABLE-2.1.16
Return Expected from mutual funds

Less than 10% - -
11%-20% 76 50.67
61
21%-30% 40.67
Above 30% 13 8.66
Total 150 100
CHART-2.1.16
46
80
70
60
50 Number of
Respondents
40
Percentage
30
20
10
0
11%-20% 21%-30%
INFERENCE:
It is found from Table 2.1.16 that out of 150 respondents 76(11.33) of the respondents
expect 11% - 20% return on mutual funds, 61(44.53) of the respondents expects 21% -
30% and 13(8.66) of the respondents expect above 30%. Since the risk is low the return
expected is not very high.
TABLE-2.1.17
Return Expected from insurance
Less than 10% 49 32.67
11%-20% 55 36.66
21%-30% 46 30.67
Above 30% - -
Total 150 100
CHART-2.1.17
47
60
50
40
Number of
Respondents
30
Percentage
20
10
0
Less than 10% 11%-20% 21%-30%
INFERENCE:
expect less than 10% and 55(36.66) of the respondents expect 11% - 20% return on
insurance, 46(30.67) of the respondents expects 21% - 30%. Thus investor expects 11%-
20% from their investment in insurance.
TABLE-2.1.18
Return Expected from derivatives
Less than 10% - -
11%-20% 86 57.33
49
21%-30% 32.67
Above 30% 15 10.00
Total 150 100
CHART-2.1.18
48
100
90
80
70
Number of
60
Respondents -
50
Percentage -
40
30
20
10
0
11%- 21%- Above
20% 30% 30%
INFERENCE:
expect 11% - 20% return on derivatives, 49(32.67) of the respondents expects 21% - 30%
and 15(10.00) of the respondents expect above 30%. Since the risk is high the return
expected is also very high.
TABLE-2.1.19
Source of awareness to investors
Source Number of Respondents Percentage
Advertisement 60 40
Company executives Nil Nil
Friends and relatives 75 50
Professional advisors 15 10
Total 150 100.00
CHART-2.1.19
49
80
70
60
50 Number of
Respondents
40
Percentage
30
20
10
0
Advertisement Friends and Professional
relatives advisors
INFERENCE:
Table 2.1.19 shows that most of the respondents get aware of the investment through
friends and relatives (50%) and advertisement (40%) and only 10 per cent of the
respondents get aware through professional advisors and none of the respondents through
company executives. Therefore, it is inferred that most of the respondents get aware
through friends and relatives.
TABLE-2.1.20
Mode of Investment
Mode of investment Number of Respondents Percentage
Direct
41 27.33
Through Agent 109 72.67
Total 150 100
CHART-2.1.20
50
160
140
120
100 Number of
Respondents
80
Percentage
60
40
20
0
Direct Through Total
Agent
INFERENCE:
It is clear from Table 2.1.20, out of 150 respondents, 109 respondents are investing their
surplus funds through agent and the remaining 41 respondents are investing their surplus
funds directly. Hence, it shows that most of the respondents are investing their funds
through agents.
111. INVESTOR PREFERANCE TOWARDS INTERMEDIARIES
TABLE-2.1.21 Opinion on the Services Rendered by the Intermediaries
Fully satisfied 32 21.33
Satisfied 76 50.67
No opinion 39 26.00
Dis-satisfied - -
Fully dissatisfied 3 2.00
Total 150 100.00
51
CHART-2.1.21
80
70
60
Number of
50 Respondents
40
30 Percentage
20
10
0
d
d
on
d
f ie
fie
f ie
ni
is
tis
pi
is
at
sa
at
ss
S
o
ly
di
N
ul
ly
F
ul
F
INFERENCE:
It is clear form Table 2.1.21 that out of 150 respondents 32 (21.33%) respondents are
fully satisfied with the services rendered by the intermediaries. 76 (50.67%) respondents
are satisfied with the service rendered by the intermediaries. 39 (26%) respondents and 3
(2%) respondents are not satisfied with the service provided by the intermediaries. Thus,
it can be concluded that most of the respondents are satisfied with the services rendered
by the intermediaries.
TABLE-2.1.22
Source of Awareness about the Intermediaries
Source Number of Respondents Percentage
Electronic media - -
Sign board 19 12.67
News papers and

47 31.33
Magazines 84 56.00
Friends and relatives
Total 150 100.00
52
CHART-2.1.22
90
80
70 Number of
60
50 Respondents
40 Percentage
30
20
10
0
es
d
s
d
an
t iv
ne
ar
la
zi
bo
rs
re
ga
pe
n
d
a
ig
pa
an
M
S
ds
w
e
n
N
rie
F
INFERENCE:
It is found from Table 2.1.22 that out of 150 respondents, 19 (12.67%) respondents have
come to know about the intermediaries through sign board. 47 (31.33%) respondents
have come to know about the intermediaries through news papers and magazines and the
remaining 84 (56%) respondents have come to know about the intermediaries through
friends and relatives
TABLE-2.1.23
Opinion about the Brokerage Charges
Very High 73 48.67
High 46 30.67
Moderate 31 20.66
Low - -
Very low - -
53
Total 150 100.00
CHART-2.1.23
80
70
60
50 Number of
Respondents
40
Percentage
30
20
10
0
Very High High Moderate
INFERENCE:
It is found from Table 2.1.23 that, out of 150 respondents, 73 (48.67%) respondents feel
that the brokerage charged by the intermediaries are very high and 46 (30.67%) and 31
(20.66%) respondents feel that the brokerage charged by the intermediaries are high and
moderate respectively. Hence, it can be concluded that more than three – fourth of the
respondents feel that the brokerage charged by the intermediaries are high.
TABLE-2.1.24
Opinion on the Information Rendered by the Intermediaries
Excellent 23 15.33
Good 64 42.67
Average 45 30.00
Below average 13 8.67
Poor 5 3.33
Total 15054 100.00

CHART-2.1.24
70
60
50
Number of
40 Respondents
30 Percentage
20
10
0
Excellent Good Average Below Poor
average
INFERENCE:
It is clear form Table 2.1.24 that out of 150 respondents 23 (15.33%) respondents
are fully satisfied with the information rendered by the intermediaries. 64(42.67%)
respondents are satisfied with the information rendered by the intermediaries. 45 (30%)
respondents are neither satisfied or not satisfied and 13 (8.67%) respondents feel the
information below average and 5(3.33%) feel its poor. Thus, it can be concluded that
most of the respondents are satisfied with the information rendered by the intermediaries.
TABLE-2.1.25
Purpose of Using the Intermediaries
Purpose Number of Respondents Percentage
For selling 23 15.33
For purchasing 26 17.33
For both buying and 38 25.34

selling
Advice regarding buying 63 42
and selling
Total 150 100.00
CHART-2.1.25
55
70
60
50 Number of
40 Respondents
30 Percentage
20
10
0
For selling
and selling
buying and
regarding
For both
Advice
buying
INFERENCE:
It is found from Table 2.1.25 that, 23(15.33%) of the respondents are using the service of
the intermediaries for the purpose of selling the securities. 26(17.33%) of the respondents
are using the services of intermediaries for the purpose of purchasing the securities and
38(25.34%) of the respondents are using the services of intermediaries for the purpose of
purchasing and selling the securities and the remaining 63(42 %) of the respondents are
using the service of intermediaries for the purpose of advice regarding buy and selling.
Thus investors prefer the advice provided by intermediaries.
TABLE-2.1.26 Frequency of Using Services of Intermediaries
Frequency Number of Respondents Percentage
Daily 42 28.00
Weekly 25 16.67
Fortnightly 30 20.00
Monthly 53 35.33
Total 150 100.00
56
CHART-2.1.26
60
50
40
Number of
Respondents
30
Percentage
20
10
0
Daily Weekly Fortnightly Monthly
INFERENCE:
It is seen from Table 2.1.26 that out of 150 respondents, 42 (28%) respondents use the
services daily. 25 (16.67%) respondents use the services weekly and 30 (20%)
respondents use the services fortnightly. The remaining 53 (35.33%) respondents use the
services once in a month. Therefore, it is concluded that most of the respondents use the
services daily.
57
STATISTICAL TOOLS
2.2- CHI-SQUARE TEST
Education and Source of Awareness

Education is an important factor which has significant relationship with the investment
awareness in financial asset. In order to find out whether there is any relationship
between education and awareness, a two way table has been prepared.
Source of Number of Respondents

Awarenes Friends
s Advertisemen Profession Total
and
Age of the t al advisors
relatives
respondents
Up to school level 3 11 1 15
58
Graduate 16 16 1 33
Post Graduate 26 33 7 66
Professional Degree 15 15 6 36
Total 60 75 15 150
H0: There is no significant relationship between education and source of awareness.
H1: There is significant relationship between education and source of awareness.

In order to find out whether there is significant relationship between educational level
and source, of awareness chi – square test has been applied.
Table 2.2.1 shows the calculations to test the significant between educational level and
source of awareness.
59
TABLE-2.2.1
Chi – square Test for Education and Source of awareness
(O – E)2
Cell O E (O – E) (O – E)2 __________
R1C1 3 6.0 -3.0 9.00 1.500
R2C1 16 13.2 2.5 6.25 0.473
R3C1 26 26.4 -0.4 0.16 0.006
R4C1 15 14.4 0.6 0.36 0.025
R1C2 11 7.5 3.5 12.25 1.633
R2C2 16 16.5 -0.5 0.25 0.015
R3C2 33 33.0 - - -
R4C2 15 18.0 -3 9.00 0.500
R1C3 1 15.0 -14 196.00 13.000
R2C3 1 3.3 -2.3 5.29 1.603
R3C3 7 6.6 0.4 0.16 0.023
R4C3 6 3.6 2.4 5.76 1.600
Total 20.378
60
Degrees of Freedom = (row – 1) * (column – 1)
= (4 – 1) * (3 – 1)
=3X2=6
Degrees of Freedom :6
Calculated Value : 20.378
Table Value at 5% level: 12.592
INFERENCE:
Since the calculated value is more than the Table value at 5% level, the
hypotheses that educational level is not a criterion to determine the different source of
awareness is rejected. Therefore, there is significant relationship between educational
level of the investors and their source of awareness.
61
Income and Source of Awareness
Income is an important factor which has significant relationship with the investment
awareness in financial asset.
In order to find out whether there is any relationship between income and awareness, a
two way Table has been prepared.
Monthly income of the investors and their source of awareness
Number of
Source of Respondents
Awareness
Monthly
Friends Profession Total
Income Status
Advertisement and al
of the Respondents
relatives advisors
Below Rs 5,000 - - - -
Rs 5,001 – Rs10,000 41 48 12 101
Rs 10,001–Rs15,000 14 15 2 31
Above Rs 15,000 5 12 1 18
Total 60 75 15 150
H0: There is no significant relationship between education and source of awareness.
H1: There is significant relationship between education and source of awareness.

In order to find out whether there is significant relationship between educational level
and source, of awareness chi – square test has been applied.
Table 2.2.2 shows the calculations to test the significant between educational level and
source of awareness
62
TABLE-2.2.2
Chi – square Test for Income and Source of awareness
(O – E)2
Cell O E (O – E) (O – E)2 __________
R1C1 41 40.4 0.6 0.36 0.009
R2C1 14 12.4 1.6 2.56 0.207
R3C1 5 7.2 -2.2 4.84 0.672
R1C2 48 50.5 -2.5 6.25 0.124
R2C2 15 15.5 -0.5 0.25 0.017
R3C2 12 9.0 3.0 9.00 1.000
R1C3 12 10.1 1.9 3.61 0.357
R2C3 2 3.1 1.1 1.21 0.39
R3C3 1 1.8 -0.8 0.64 0.356
Total 3.132
63
Degrees of Freedom = (row – 1) * (column – 1)
= (3 – 1) * (3 – 1)
=2X2=4
Degrees of Freedom :4
Calculated Value : 3.132
Table Value at 5% level: 9.488
INFERENCE:
Since the calculated value is less than the Table value at 5% level, the
hypotheses that income is not a criterion to determine the different source of awareness is
accepted. Therefore, there is no significant relationship between income of the investors
and their source of awareness
64
2.3-WEIGHTED AVERAGE METHOD
Satisfaction level of investors with return on investment
Fully satisfied 12 8
Satisfied 78 52
No opinion 37 24.66
Dis-satisfied 23 15.33
Fully dissatisfied 0 0
Total 150 100.00
In order to find out the satisfaction level of investors with regarding to the return on
investment weighted average method is used in order to find out the satisfaction level of
most of the investors.
In order to calculate the weighted average the satisfaction level is ranked in the order of
5,4,3,2 and 1.
Table 2.3.1 shows the calculations of weighted average method.
65
TABLE-2.3.1
Weighted average on return on investment

Rank Number of Percentage Total score
Respondents
Fully satisfied(5) 12 8 60
Satisfied(4) 78 52 312
No opinion(3) 37 24.66 111
Dis-satisfied(2) 23 15.33 46
Fully dissatisfied(1) 0 0 0
Total 150 100.00 529
Mean score = 529/150
= 3.52
INFERENCE:
From the above table 2.3.1 it is clear that most of the respondents are satisfied
with the return on their investments.
66
Opinion on the of risk in investments
Very High 65 43.33
High 52 34.67
Moderate 33 22
Low - -
Very low - -
Total 150 100.00
In order to find out the amount of risk involved in the investment weighted average
method is used in order to find out the level of risk prevailing in the investment.
In order to calculate the weighted average the risk level is ranked in the order of 5,4,3,2
and 1.
67
TABLE-2.3.2
Weighted Average on Risk in Investment

Respondents
Very High(5) 65 43.33 325
High(4) 52 34.67 208
99
Moderate(3) 33 22
-
Low(2) - -
-
Very low(1) - -
632
Total 150 100.00
= 4.2
INFERENCE:
From the above table 2.3.2 it is clear that most of the respondents feel that the
amount of risk prevailing in investment is HIGH.
68
Opinion on the Services Rendered by the Intermediaries
Fully satisfied
32 21.33
Satisfied 76 50.67
No opinion
39 26.00
Dis-satisfied
- -
Fully dissatisfied
3 2.00
Total 150 100.00
In order to find out the satisfaction level of investors with regarding to the service
rendered by intermediaries’ weighted average method is used in order to find out the
satisfaction level of most of the investors.
In order to calculate the weighted average the satisfaction level is ranked in the order of
5,4,3,2 and 1.
69
TABLE-2.3.3
Weighted Average on Services Rendered by the Intermediaries

Respondents
Fully satisfied(5) 32 21.33 160
Satisfied(4) 76 50.67 304
No opinion(3) 117
39 26.00
Dis-satisfied(2) -
- -
Fully dissatisfied(1) 3
3 2.00
Total 150 100.00 584
= 3.89
=4
INFERENCE:
From the above table 2.3.3 it is clear that most of the respondents are satisfied
with the services rendered by intermediaries.
70
Opinion about the Brokerage Charges
Very High 73 48.67
High 46 30.67
Moderate 31 20.66
Low - -
Very low - -
Total 150 100.00
In order to find out the satisfaction level of investors with regarding to the brokerage
charges by intermediaries’ weighted average method is used in order to find out the level
of brokerage charged.
In order to calculate the weighted average the brokerage level is ranked in the order of
5,4,3,2 and 1.
71
TABLE-2.3.4
Weighted Average on Brokerage Charges

Respondents
Very High(5) 73 48.67 365
High(4) 46 30.67 184
93
Moderate(3) 31 20.66
-
Low(2) - -
-
Very low(1) - -
642
Total 150 100.00
= 4.28
=4
INFERENCE:
From the above table 2.3.4 it is clear that most of the respondents feel the
brokerage charged by intermediaries is HIGH.
72
Opinion on the Information Rendered by the Intermediaries
Excellent 23 15.33
Good 64 42.67
Average 45 30.00
Below average 13 8.67
Poor 5 3.33
Total 150 100.00
In order to find out the opinion of the investors with regard to the information rendered
by intermediaries’ weighted average method is used in order to find out the level of
brokerage charged.
In order to calculate the weighted average the opinion level is ranked in the order of
5,4,3,2 and 1.
73
TABLE-2.3.5
Weighted Average on Information Rendered By Intermediaries

Respondents
Excellent(5) 23 15.33 115
Good(4) 64 42.67 256
Average(3) 45 30.00 135
Below average(2) 13 8.67 26
Poor(1) 5 3.33 5
Total 150 100.00 537
= 3.58
=4
INFERENCE:
From the above table 2.3.5 it is clear that most of the respondents feel that the
information rendered by intermediaries to investors regarding their investment is GOOD.
74
CHAPTER-3
75
3.1-FINDINGS OF THE STUDY
• It is absorbed that out of the total 150 respondents, 34 (22.64%) of the

respondents are in the age group of below 30 years and 78 (52%) are in the age
group of 31 – 40 years. 23 (15.33%) of the respondents are in the age group of 41
– 50 years and the remaining 15 (10%) are in the age group of above 50 years.
Therefore, it is concluded that the most dominating age group of the respondents
are in the age group of 31 – 40 years.
• Out of 150 respondents, 105 (70%) are male and 45 (30 %) are female. Hence, it
is found that males are more in numbers than the female in the field of
investment.
• Out of 150 respondents 15 (10%) of the respondents have studied up to school

level, 33 (22%) of the respondents have studied graduation and 66 (44%) of them
have studied post graduation. The remaining 36 (24%) of the respondent have
studied professional degree. Hence, it is observed that the respondents belonging
to post graduates are more than other categories.
• Out of 150 respondents, 14 (9.33%) respondents are businessmen, 32 (21.33%)

respondents are professionals and 19 (12.67%) respondents are government
employees. The remaining 85 (56.67%) respondents are private employees. It is
inferred from that, the private employees are very interested in investments.
• Out of 150 respondents, 101 (67.33%) responders come under the category of Rs
5001 – Rs 10,000, 31 respondents earn in the range of Rs 10,001 – Rs 15,000 and
the remaining 18 respondents have a monthly income of above Rs 15,000.
Therefore, it is concluded that high income group are interested in investments
than low income group.
• Out of 150 respondents, 60 (40%) respondents are married and the remaining 90
(60%) respondents are unmarried. It is evident that the respondent belonging to
the married category are more than the respondents belonging to the unmarried
category.
• Out of 150 respondents, 62 (41.33%) respondents save less than Rs 2000 every
month. But 27 (18%) respondents save Rs 2001 – Rs 3000 every month and 48
(32%) respondents save Rs 3001 – Rs 4000 every month. The remaining 13
(8.67%) respondents save Rs 4000 per month. Therefore, it is observed that most
of the respondents save only Rs 2000
76
• Out of 150 respondents, 64(42.67%) respondents prefer investing in shares and 47
(31.33%) respondents invest in mutual fund 24 (16%) respondents invests in
insurance. The remaining 15(10%) respondents invest in derivatives. Therefore, it
is observed that most of the respondents prefer equity.
• Out of 150 respondents, 79(52.67%) respondents prefer high risk and high return
and 52(34.67%) respondents prefer low risk and high return and 19(12.66%)
respondents prefer low risk and low return. Therefore, it is observed that most of
the respondents prefer high risk and high return.
• The investors consider safety, return and liquidity as important factor in section of
investment outlet. Among the three factors safety is the first and foremost
determinant factor. The next factor considered by the investor is liquidity. The last
factor is return. The investor needs only regular and moderate return on their
investment.
• Out of 150 respondents 12 (8%) respondents are fully satisfied with the return on
investment and 78(52%) respondents are satisfied with the return on investment.
37(24.66%) respondents are neither satisfied nor dissatisfied with the return on
investment and 23(15.33%) are dis satisfied with the return on investment. Thus it can be
concluded that more than half of the respondents are satisfied with the return on
investment.
• Out of 150 respondents, 54 (36%) respondents invest up to 10% of their monthly
income 66 (44%) respondents invest 11% - 20% of their monthly income in the
financial asset. The remaining 18 (12%) and 12 (8%) respondents invest 21% -
40% and above 40% of their monthly income in various securities.
• Among the purpose of investment, ‘risk covered’ ranks first with a mean score of
61.23 followed by ‘return on investment’, ‘liquidity’, ‘tax rebate’ are ranked II, III
and IV with a mean score of 54.81,38.94 and 31.63 respectively.
• Out of 150 respondents, 65 (43.33%) respondents feel that the risk on investment
are very high and 52 (34.67%) and 33 (22%) respondents feel that the risk on
investment are high and moderate respectively. Hence, it can be concluded that
more than three – fourth of the respondents feel that the risk on investment are
high.
• It is found that 11.33 percent of the respondents expect 11% - 20% return on
shares, 60.67 percent of the respondents expects 21% - 30% and 28 percent of the
respondents expect more than 30% return on shares. Since the risk in shares is
high the return expected is also very high.
77
• Out of 150 respondents 76(11.33) of the respondents expect 11% - 20% return on
mutual funds, 61(44.53) of the respondents expects 21% - 30% and 13(8.66) of
the respondents expect above 30%. Since the risk is low the return expected is not
very high.
• Out of 150 respondents 49(32.67) of the respondents expect less than 10% and
55(36.66) of the respondents expect 11% - 20% return on insurance, 46(30.67) of
the respondents expects 21% - 30%. Thus investor expects 11%-20% from their
investment in insurance.
• Out of 150 respondents 86(57.33) of the respondents expect 11% - 20% return on
derivatives, 49(32.67) of the respondents expects 21% - 30% and 15(10.00) of the
respondents expect above 30%. Since the risk is high the return expected is also
very high.
• Most of the respondents get aware of the investment through friends and relatives
(50%) and advertisement (40%) and only 10 per cent of the respondents get aware
through professional advisors and none of the respondents through company
executives. Therefore, it is inferred that most of the respondents get aware
through friends and relatives.
• Out of 150 respondents, 109 respondents are investing their surplus funds through
agent and the remaining 41 respondents are investing their surplus funds directly.
Hence, it shows that most of the respondents are investing their funds through
agents.
• Out of 150 respondents 32 (21.33%) respondents are fully satisfied with the
services rendered by the intermediaries. 76 (50.67%) respondents are satisfied
with the service rendered by the intermediaries. 39 (26%) respondents and 3 (2%)
respondents are not satisfied with the service provided by the intermediaries.
Thus, it can be concluded that most of the respondents are satisfied with the
services rendered by the intermediaries.
• Out of 150 respondents, 19 (12.67%) respondents have come to know about the
intermediaries through sign board. 47 (31.33%) respondents have come to know
about the intermediaries through news papers and magazines and the remaining
84 (56%) respondents have come to know about the intermediaries through
friends and relatives
• Out of 150 respondents, 73 (48.67%) respondents feel that the brokerage charged
by the intermediaries are very high and 46 (30.67%) and 31 (20.66%) respondents
feel that the brokerage charged by the intermediaries are high and moderate
respectively. Hence, it can be concluded that more than three – fourth of the
respondents feel that the brokerage charged by the intermediaries are high.
78
• Out of 150 respondents 23 (15.33%) respondents are fully satisfied with the
information rendered by the intermediaries. 64(42.67%) respondents are satisfied
with the information rendered by the intermediaries. 45 (30%) respondents are
neither satisfied or not satisfied and 13 (8.67%) respondents feel the information
below average and 5(3.33%) feel its poor. Thus, it can be concluded that most of
the respondents are satisfied with the information rendered by the intermediaries.
• Out of 150 respondents, 42 (28%) respondents use the services daily. 25 (16.67%)
respondents use the services weekly and 30 (20%) respondents use the services
fortnightly. The remaining 53 (35.33%) respondents use the services once in a
month. Therefore, it is concluded that most of the respondents use the services
daily.
• It is proved from the chi-square test that there is significant relationship between
education level and the source of awareness. Thus investor with higher education
level is more aware of the investments.
• It is proved from the chi-square test that there is no significant relationship

between income of the investors and their source of awareness. Thus income is
not a criterion in measuring the awareness.
• It is proved using weighed average method that most of the investors are satisfied
with the return on their investment.
• It is proved using weighed average method that most of the investors feel the risk
in investment is high.
• It is proved using weighed average method that most of the investors are satisfied
with the services rendered by intermediaries.
• It is found using weighed average method that most of the investors feel that the
brokerage charged by the intermediaries is high.
• It is proved using weighed average method that most of the investors feel that the
information rendered by intermediaries is good.
79
3.2-SUGGESTIONS OF THE STUDY
• Since the brokerage charged by the intermediaries is considered high by the

investors the intermediaries have to minimize their brokerage charges.
• The intermediaries should provide efficient advices regarding the investor

investments.
• A new investor can invest in mutual fund and insurance in order to minimize risk.
• Investor should be given information’s about the derivative investments. Since

most of the investor are not aware of the alternatives.
• Investors who are ready to take higher risk can invest in shares which provide
high risk and high return.
• Since investor considers safety as more important while selecting an investment

outlet they can go for mutual funds which provide him higher amount of safety.
80
3.3-CONCLUSION
The project studies about the various investment alternatives available in business. This
will help the investor to choose between the various investments alternatives available.
The project also covers the preference of investor’s preferences towards the investment
this will help to know about the investor preference towards the investment.
The project covers the investor’s preference towards the services rendered by
intermediaries, this will help India infoline and all other intermediaries to improve their
services based on the investor taste and preferences.
The study gives an overall view that most of the investors prefer investment alternatives
with higher returns and they mostly go for investing in order to cover the risk of life.
Thus the study gives a clear picture about the investor preference towards the
investments.
81
APPENDICES
82
QUESTIONNAIRE
I Personal Data
1. Name :
2. Age : Below 30 31-40 41-50 Above 50
3. Gender : Male Female
4. Educational Qualification : School Level Graduate PG Professional Degree
5. Occupational Status : Business Professional Government employee

Private employee
6. Income P.M. (in Rs.) : Below 5000 5001 to 10000 10001 to 15000
Above 15000
7. Marital Status : Married Unmarried
8. Approx. monthly savings : Less than Rs.2000 Rs.2001 to Rs.3000

Rs.3001 to Rs.4000 Above Rs.4000
II. INVESTOR PREFERANCES TOWARDS INVESTMENT
1. (A) What is your most preferred Investment Outlet?

Mutual fund Equity Insurance Derivatives
(B) Why do you prefer the Particular investment Alternative?

High risk, High return Low risk, High return Low risk, Low return
2. Please indicate the level of importance considered by you while selecting investment
outlet?
Level of Importance
Determinant
High Moderate Low
i) Safety
ii) Return
iii) Liquidity
83
3. Are you satisfied with the return on your investment?
Fully satisfied Satisfied No opinion Dissatisfied Fully Dissatisfied
4. What portion of your income do you allocate for investment?

Up to 10% 11% - 20% 21% - 40% Above 40%
5. Rank the purpose for which you prefer the investment in different types of investments
Risk covered Tax rebate Return on investment Liquidity
6. What is your opinion on the amount Of risk in investments?

Very high High Moderate Low Very Low
7. Expected return from different type of investment?
Less than
Investment 11% - 20% 21% - 30% Above 30%
10%
Share
Mutual Fund
Insurance
Derivatives
8. How did you come to know about the information of different Investment alternatives?
Advertising Company executive Friends& relatives Professional advisors
9. Which way you invest your Surplus fund? - Direct Through Agent
84
111. INVESTOR PREFERANCE TOWARDS INTERMEDIARIES
1. What do you feel about services rendered by agents in investments? :
Fully satisfied Satisfied No opinion Dissatisfied Fully Dissatisfied
2. How do you come to know about the intermediaries ?

Electronic media Sign board Newspapers & Magazines Friends & relatives
3. How do you feel about the amount of brokerage charged?

Very high High Moderate Low Very low
4. What is your opinion on the communications, information and remainder served by the
intermediaries?
Excellent Good Average Below average Poor
5. Mention the purpose for which you use the service of intermediaries?
For Selling For Purchasing Both Buying & Selling Recommendation
On-Line Trading
85
6. How frequently do you use the service of the intermediaries?
Daily Weekly Fortnightly Monthly
BIBLIOGRARHY
REFERENCES
• Avadhani V.A. (2001) ‘Investment Management ‘- Himalaya Publishing House,

Mumbai.
• Bhallla V.K. (2000) ‘Investment Management - Security Analysis and Portfolio

Management’ - S. Chand & Company Ltd., New Delhi.
• Kothari C.R. (2002) ‘Research Methodology’- Wiley Eastern ltd, New Delhi.
• Preeti Singh (2003) ‘Investment Management ‘- Himalaya Publishing House, Mumbai.
WEBSITES:
• Www. Google.com
• www.india infoline.com
• www.wikipedia.com
86
• www.5paisa.com
• www.investmentnetwork.com
• www.maninvestments.com
87

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CHAPTER-1

The various investment alternatives available for investors are as follows:

A share is one of a finite number of equal portions in the capital of a company,

Insurance are of life insurance, health, vehicle and medical insurance.

Derivatives are financial instruments whose value changes in response to the

Bonds are of government, municipal, corporate and long term bonds.

A commodity is anything for which there is supply, but which is demanded

Characteristic of commodities is that their prices are determined as a function of

10. PROVIDENT FUND:

• To study the risk and return of the investment alternatives.

• To study the investor awareness of the various investment alternatives.

• To analyze how an investor choose between the various investments.

• To analyze the preference of intermediaries in investments.

Secondary data were collected from the various periodicals, journals,

TIME PERIOD COVERED:

• The study had to be completed within a short period of time.

• The sample size of 150 is a small when compare to large number of

• The study is confined with the investors in India infoline.

• Time was the main constrain in data collection.

• Very little co-operation was received from some of the respondents.

The second chapter includes Data Analysis and Interpretations.

The third chapter contains Findings, Suggestions and conclusions.

1.2.1- COMPANY PROFILE

• Launched internet portal www.indiainfoline.com in may 1999.

• Commenced distribution of personal financial products like mutual funds

• Launched online trading in shares and securities branded as

• Started life insurance agency business in December 2000 as a corporate

• Became a depository participant of NSDL in September 2001.

• Launched stock messaging services in may2003.

• Acquired commodities broking license in march2004.

• Launched portfolio management services in August 2004.

• Listed in NSE and BSE on May 17, 2005.

• Acquired NBFC license in May 2005.

• Became a depository participant of CDSL in June 2006.

• IRDA license of insurance broking in April 2007.

Mr. Nirmal Jain

The Board of Directors:

Mr. Sat Pal Khattar (Non Executive Director)

Mr. Kranti Sinha (Independent Director)

OM AND AOM WITH SYSTEM AND PROCESS:

The recognised stock exchanges have played an important role by participating in

• In shares we have an option of investing in diversified scripts to minimize risk.

 Second phase-187-1993 (Entry of Public Sector Funds)

 Third Phase-1993-2003(Entry of Private Sector Funds)

Mutual Fund Operation Flow Chart:

TYPES OF MUTUAL FUNDS:

An Exchange-Traded Fund (or ETF) is an investment vehicle traded on primary

Money market funds:

• ABN AMRO Mutual Fund

• BANK OF BARODA Mutual Fund

• HDFC Mutual Fund

• HSBC Mutual Fund

• ING Vysya Mutual Fund

• Prudential ICICI Mutual Fund

• Sahara Mutual Fund

• State Bank of India Mutual Fund

• Tata Mutual Fund

• Kotak Mahindra Mutual Fund

• Unit Trust of India Mutual Fund

• Reliance Mutual Fund

• Standard Chartered Mutual Fund

• Franklin Templeton India Mutual Fund