SUBMITTED BY
V.VENKATRAO
Reg. no: 2011130020
SUBMITTED TO
Dr. T. VASUDHA
Project co-coordinator
CENTER FOR MANAGEENT AND TECHNOLOGY
Visakhapatnam
DECLARATION
I hereby declare that this research project entitled INVESTORS PERCEPTION
ON INVESTMENT AVENUES has been done by me during the year 2013 in
partial fulfillment of requirement for the Post Graduation Diploma in Management
awarded by AICTE.
I also declare that this project is a result of my own efforts and that it has not been
submitted to any other University for the award of a Degree or Diploma before or
published.
Place: Visakhapatnam
Date: 28-05-2013
(V.venkatrao)
CONTENTS
1. INTRODUCTION
1.1
Introduction to investment
1.2
1.3
1.4
Bonds
1.5
Mutual funds
1.6
Real estate
1.7
Equity shares
1.8
1.9
2.2
Review of literature
2.3
2.4
2.5
Hypothesis
2.6
Research design
2.7
2.8
Method of analysis
2.9
3. INDUSTRY ANALYSIS
3.1
3.2
3.3
Money market
3.4
Money market
CHAPTER-1
INTRODUCTION
1.1INTRODUCTION TO INVESTMENT
The money one earns partly spent and the rest is saved to meeting future
expenses, instead of keeping savings idle one may like to use savings in order to
get returns on it in the future, this is called as investment. In an economic sense,
an investment is the purpose of goods that are not consumed today but are used
in the future to create wealth. In finance, an investment is a monitory asset
purchased with the idea that the asset will provide income in the future or
appreciate and be sold at a higher price. Here earnings will not help one to secure
the future, so it becomes important to invest.
One of the important reasons why one needs to invest wisely is to meet the
cost of inflation. Inflation is the rate at which the cost of living increases. The cost
of living simply what it costs to buy goods and services you need to live. Inflation
causes money to lose value because it will not buy the same amount of a good or
service in the future as it does now or did in the past. The sooner one starts
investing the better. By investing early one allows ones investments more time to
accumulating the principal and the interest or dividend earned on it. Year after
year.
The dictionary meaning of investment is to commit money in order to earn a
financial return or to make use of money for future benefits or advantages. People
commit money to investments with expectations to increase their future wealth by
investing money to spend in future years. For example, if you invest Rs 1000
today and earn 10% over the next year, you will have Rs.1100 one year from
today.
An investment can be described as perfect if it satisfies all the needs of all
investors. So, the starting point in searching for the perfect investment would be to
examine investor needs. If all those needs are met by the investment, then that
investment can be termed the perfect investment.
Monthly income scheme of the post office (MISPO): A popular scheme of the
post office, the MISPO is meant to provide regular monthly income to the
depositors. The term of the scheme is 6 years. The minimum amount of
investment is 1,000. The maximum investment can be 3, 00,000 in a single
account or 6, 00,000 in a joint account. The interest rate is 8.0 percent for annum,
payable monthly. A bonus of 10 percent is payable on maturity.
Kisan vikas patra (KVP): A scheme of the post office, for which the minimum
amount of investment is 1,000. There is no maximum limit. The investment
doubles in 8 years and 7 months. Hence the compound interest rate works out to
8.4 percent there is a withdrawal facility after 2 years 6 months.
Company deposits: many companies large and small solicit fixed deposits from
the public. Fixed deposits mobilized by manufacturing companies are regulated by
the company law board and fixed deposits mobilized by finance company are
regulated by the reserve bank of India. The interest rates on company deposits
are higher than those on bank deposits, but so is risk.
Public Provident Fund Scheme: One of the most attractive investment avenues
available in India. Individuals and HUFs can participate in this scheme. A PPF
account may be opened at any branch of State Bank of India or its subsidiaries or
at specified branches of the other public sector banks. The subscriber to a PPF
account is required to make a minimum deposit of 100 per year. The maximum
permissible deposit per year is 70,000. PPF deposits currently earn a compound
interest rate of 8.0 percent per annum, which is totally exempt from taxes.
1.4 Bonds: Bonds are fixed income instruments which are issued for the purpose
of raising capital. Both private entities, such as companies, financial institutions,
and the central or state government and other government institutions use this
instrument as a means of garnering funds. Bonds issued by the Government carry
the lowest level of risk but could deliver fair returns. Many people invest in bonds
with an objective of earning certain amount of interest on their deposits and/or to
save tax. Bonds are considered to be a less risky investment option and are
generally preferred by risk-averse investors. Bond prices are also subject to
market risk. Bonds may be classified into the following categories:
Preference shares: Investing in shares is safer and dividends are assured every
yearn Savings bonds.
1.5 Mutual funds: A mutual fund allows a group of people to pool their money
together and have it professionally managed, in keeping with a predetermined
investment objective. This investment avenue is popular because of its costefficiency, risk-diversification, professional management and sound regulation. There
are three broad types of mutual fund schemes classified on basis of investment
objective:
Equity schemes: The aim of growth funds is to provide capital appreciation over
the medium to long- term. Such schemes normally invest a major part of their
corpus in equities. Such funds have comparatively high risks. These schemes
provide different options to the investors like dividend option, capital appreciation,
etc. and the investors may choose an option depending on their preferences.
Growth schemes are good for investors having a long-term outlook seeking
appreciation over a period of time.
Debt schemes: The aim of income funds is to provide regular and steady income
to investors. Such schemes generally invest in fixed income securities such as
bonds, corporate debentures, Government securities and money market
instruments. Such funds are less risky compared to equity schemes. These funds
are not affected because of fluctuations in equity markets. However, opportunities
Of capital appreciation are also limited in such funds. The NAVs of such funds are
affected because of change in interest rates in the country. If the Interest rates
fall, NAVs of such funds are likely to increase in the short run and vice versa.
However, long term investors may not bother about these fluctuations.
Balanced schemes: The aim of balanced funds is to provide both growth and
regular income as such schemes invest both in equities and fixed income
securities in the proportion indicated in their offer documents. These are
appropriate for investors looking for moderate growth. They generally invest 4060% in equity and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAVs of such funds
are likely to be less volatile compared to pure equity funds.
1.6 Real Estate: Residential real estate is more than just an investment. There are
more ways than ever before to profit from real estate investment. Real estate is a
great investment option. It can generate an ongoing income source. It can also rise
in value overtime and prove a good investment in the cash value of the home or
land. Many advisors warn against borrowing money to purchase investments. The
best way to do this is to save up and pay cash for the home. One should be able to
afford the payments on the property when the property is vacant, otherwise the
property may end up being a burden instead of helping to build wealth.
1.7 Equity Shares: Equities are a type of security that represents the ownership in a
company. Equities are traded (bought and sold) in stock markets. Alternatively, they
can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the
company. Investing in equities is a good long-term investment option as the returns
on equities over a long time horizon are generally higher than most other investment
avenues. However, along with the possibility of greater returns comes greater risk.
1.8 Money market instruments: The money market is the market in which short
term funds are borrowed and lent. These instruments can be broadly classified as:
Treasury Bills: These are the lowest risk category instruments for the short
term. RBI issues treasury bills [T-bills] at a prefixed day and for a fixed
amount. There are 4 types of treasury bills: 14-day T-bill, 91-day T-bill, 182day T-bill and 364-day T-bill.
Certificates of Deposits: After treasury bills, the next lowest risk category
investment option is certificate of deposit (CD) issued by banks and financial
Institution (Fl). A CD is a negotiable promissory note, secure and short term,
of up to a year, in nature. Although RBI allows CDs up to one-year maturity,
the maturity most quoted in the market is for 90 days.
.Endowment Insurance: These are term policies. Investors have to pay the
premiums for a particular term, and at maturity the accrued bonus and other
benefits are returned to the policyholder if he survives at maturity.
1.10 Bullion Market: Precious metals like gold and silver had been a safe haven for
Indian investors since ages. Besides jeweler these metals are used for investment
purposes also. Since last 1 year, both Gold and Silver have highly appreciated in
value both in the domestic as well as the international markets. In addition to its
attributes as a store of value, the case for investing in gold revolves around the role
it can play as a portfolio diversifier.
1.11 Financial Derivatives: Derivatives are contracts and can be used as an
underlying asset. Various types of Derivatives are:
Options: Options are of two types - calls and puts. Calls give the buyer the right but
not the obligation to buy a given quantity of the underlying asset, at a given price on
or before a given future date. Puts give the buyer the right, but not the obligation to
sell a given quantity of the underlying asset at a given price on or before a given
date.
Swaps: Swaps are private agreements between two parties to exchange cash flows
in the future according to a prearranged formula. They can be regarded as portfolios
of forward contracts. E.g. Currency swaps, interest swaps.
CHAPTER 2
RESEARCH
METHODOLOGY
Successfully pitch the product. If the marketer is able to understand the mindset
of investor towards a product then he/she will be in a position to market the
product. This report attempts to study the behavior of Indian investors while
making an investment. Hence the need for this study arises to understand what
exactly an Indian investor thinks before investing his/her money and how much
risk he/she is willing to take.
2 Secondary Objectives
2.5 HYPOTHESIS
A hypothesis describes the relationship between or among variables. A
good hypothesis is one that can explain what it claims to explain, is testable
and has greater range, probability and simplicity than its rivals. There are two
approach of hypothesis testing:
Sample description
The sample was drawn from the population of the potential investors from
Visakhapatnam. A survey was conducted to understand the investor's behavior
with the help of questionnaire. It was carried out with a sample size of 100
investors.
Secondary data: The secondary data has been collected from various
magazines, journals, newspapers, text books and related websites
interpret
raw
data.
Hypothesis
was
used
to
show
the
CHAPTER3
INDUSTRY PROFILE
Money always flows from surplus sector to deficit sector. That means
persons having excess of money lend it to those who need money to fulfil their
requirement. Similarly, in business sectors the surplus money flows from the
investors or lenders to the businessmen for the purpose of production or sale of
goods and services. So, we find two different groups, one who invest money or
lend money and the others, who borrow or use the money.
The financial markets act as a link between these two different groups. It
facilitates this function by acting as an intermediary between the borrowers and
lenders of money. So, financial market may be defined as 'a transmission
mechanism between investors (or lenders) and the borrowers (or users)
through which transfer of funds is facilitated'. It consists of individual investors,
financial institutions and other intermediaries who are linked by a formal trading
rules and communication network for trading the various financial assets and
credit instruments.
Financial market talks about the primary market, FDIs, alternative
investment options, banking and insurance and the pension sectors, asset
management segment as well. India Financial market happens to be one of the
oldest across the globe and is the fastest growing and best among all the
financial markets of the emerging economies. The history of Indian capital
markets spans back 200 years, around the end of the 18th century. It was at
this time that India was under the rule of the East India Company. The capital
market of India initially developed around Mumbai; with around 200 to 250
securities brokers participating in active trade during the second half of the 19th
century.
Figure 3.1 shows the classification of financial markets. From this figure we
can interpret that there are different ways of classifying financial market.
One is to classify financial market by the type of financial claim. The debt
Market is the financial market foe fixed claims (debt instrument) and the
Equity market is the financial market for residual claims (equity
instruments)
The third way to classify financial markets is based on whether the claims
represent new issues or outstanding issues. The market where issues sell
new claims is referred as primary market and the market where issues sell
outstanding claims is referred as secondary market.
CHAPTER 4
ANALYSIS
AND
INTERPRETATION
Number of
Percentage (%)
Respondents
Male
Female
Total
83
17
100
83
17
100
Interpretation:
Table 4.1 shows the Gender wise classification of Respondents. It was found
that 83% of the Respondents are men and the rest are females. Generally
males bear the financial responsibility in Indian society, and therefore they have
to make investment decisions to fulfill the financial obligations.
On the other hand females are not involved in such activities as majority of
them are busy with their household activities. Also there are very less houses
which depend on a female income most of them are male dominated
households. Hence investment activities are more seen in males than females.
female
17%
83%
Number of
Percentage (%)
Respondents
12
20
44
24
100
12
20
44
24
100
Interpretation: Table 4.2 shows the Age wise classification of Respondents. When it comes
to
age, it was found that 12% are young i.e. of age group below 35 years and 20%
of them are in the age group of 25 to 35. Other than these 44% of them belong
to age group of 35 to 45 and rest them belongs to age group above 45. This
shows that age group of 35 years an above are more interested in investments
while people below 25 years make less investments and above age of 45 and
would start planning for retirement.
35-45 years
27%
23%
50%
Above 45 years
Marital
Number of
Percentage (%)
status
Single
Married
Total
Respondents
22
78
100
22
78
100
Interpretation:
Table 4.3 shows classification of Respondents on the basis of their Marital
Status. It was found that marital status of 78% of the Respondents was found to
be married and the rest 22% are unmarried. This is because a married
individual is considered to have dependents so they are involved in making
financial investments. Whereas Respondents who are unmarried mostly invest
to generate wealth but they do not have any financial responsibility.
Married
22%
78%
NUBBER OF RESPONDENDTS
13
30
3
38
15
1
Grand Total
100
Interpretation:
Table 4.4 shows classification of Respondents on basis of Occupation. From
the above graph indicates that 38% of the Respondents are from the private
sector, 30% of them are government employees, 15% of them are self
employees and rest is working in other sectors. Respondents who are
employed in government and private sectors they are investing more.
40
business
30
30
20
10
government employee
15
13
home maker
private sector
Total
sely employee
student
Annual Income
Number of
Percentage (%)
Below 2 Lakhs
2 Lakhs - 5 Lakhs
5 Lakhs - 7 Lakhs
7 Lakhs 10 Lakhs
above 10 Lakhs
Total
Respondents
10
53
21
6
6
100
14
53
21
6
6
100
Interpretation:
Table 4.5 shows the classification of Respondents on basis of Annual
Income. It was found that 53% of Respondents with annual earnings
between 2to5 Lakhs are interested in investments because their savings are
more which they invest to generate wealth, 10% of them are earning below
2Lakhs annually, the other 21% are earning between 5 to 7 Lakhs in a year,
6% of them earn 7 to 10 Lakhs in an year but there were 6% of respondents
with annual income above 10 Lakhs per year.
53%
21%
10%
Below 2 lakhs
2 lakhs to 5
lakhs
5 lakhs to 7
lakhs
6%
6%
7 lakhs to 10
lakhs
Above 10 lakhs
10 class
Intermediate
Graduate
PG
And above
Total
Number of
Percentage (%)
Respondents
2
2
41
29
26
100
2
2
41
29
26
100
Interpretation:
Table 4.6 shows the classification of Respondents on basis of Education Level. It
indicates that 41% of the Respondents covered in the study are graduates;
29% Respondents are post graduates and 26% of the Respondents are above
qualification. Investors with graduate degree would be more exposed to market
situation which make them more interested in investments. Also post graduates
would have fair knowledge about investments. Whereas Respondents who are
undergraduates mostly do not invest due to unfamiliarity to investment avenues
or unavailability if information about investments.
41%
29%
2%
2%
26%
Series1
Number of
Percentage (%)
Respondents
Fd`s
Ulip`s
Stock market
67
19
28
24.18
6.85
10.10
Derivatives
Real estate
3
6
1.08
2.16
Gold
Ppf
Mutual funds
Post office MIS
bonds
45
29
70
8
2
16.24
10.46
25.27
2.88
0.72
Total
100
Ulip`s
Stock market
Derivatives
Real estate
Gold
Ppf
Mutual funds
Bonds
3% 1%
24%
25%
7%
11%
10%
16%
2% 1%
Number of
Percentage (%)
Respondents
79
62
61
100
39.11
30.19
30.20
100
Gold
30%
Mutual funds
40%
30%
Page 33
Number of
Percentage (%)
Respondents
39
16
29
0
14
2
100
39
16
29
0
14
2
100
Interpretation: Table 4.9 shows the classification of Respondents on the basis of Factors
considered before making an Investment. Out of all majorities of the Respondents i.e.
39% prefer to invest where there is high return. 29% of the Respondents look for risk
involved in the investment, 16% of the Respondents invest in those avenues wherein
they will get minimum amount. 14% of Respondents look for liquidity and the rest look
for ease with which the investment can be made.
Minimum amount
Risk
Locking period
Liquidity
Other factors
0%
14%
2%
39%
29%
16%
Number of
Percentage (%)
Yes
No
Total
Respondents
79
21
100
79
21
100
No
21%
79%
Managing of their
investments
Individual
Agent, mediator
Financial planner
others
Total
Number of
Percentage (%)
Respondents
25
59
16
0
100
25
59
16
0
100
Interpretation:
Table 4.11 shows classification of Respondents on basis Influence on Investment
Decision. It was found that Respondents are mostly depending upon expert advice and
help while making investment decisions. However, the majority of the Respondents i.e.
59% make investment decisions with the help and advice from experts; only 25%
investors are making their investments alone. 16% of the investors taking the help of
financial planner.
Agent, Mediater
Financial planner
0%
16%
59%
25%
Others
Number of
Percentage (%)
Below 1year
1 to 3years
3 to 5 years
5 to 10 years
Above 10 years
Total
Respondents
2
23
57
14
4
100
2
23
57
14
4
100
Interpretation: Table 4.12 shows the classification of Respondents on the basis of Time
Horizon
For Investment. From the above table we can interpret that majority of the
Respondents i.e. 57% of the total sample invest for 3 to 5 year, 23% of them
invest for time period of 1 to 3 years, 14% of them invest for period of 5 to 10
years and the 4% of them invest for period of above 10 years 2% of them invest
for less than 1 year. It is found that most of the Respondents want to make
money quickly hence they invest for 3to5 years period.
60%
50%
40%
23%
30%
10%
Series1
14%
20%
4%
2%
0%
Below 1
year
1 to 3
years
3 to 5
years
5 to 10
years
Above 10
years
Number of
Percentage (%)
High
Medium
Low
No risk safe
Total
Respondents
7
78
13
2
100
7
78
13
2
100
Mediam
Low
2% 7%
13%
78%
No risk& Safe
Number of
Percentage (%)
Debt funds
Growth funds
Balanced funds
Total
Respondents
20
45
35
100
20
45
35
100
20%
10%
35%
20%
0%
Debt funds
Growth funds
Balanced funds
Series1
Number of
Percentage (%)
Information
News Paper/ Magazines
Electronic Media (T.V)
Peer group/ Friends
Broker/ Financial Advisor
Internet
Total
Respondents
2
4
3
58
33
100
2
4
3
58
33
100
59
32
4
Total
Number of
Percentage (%)
Respondents
Fd`s
Ulip`s
Stock market
19
13
5
19
13
5
Real estate
Gold
Mutual funds
total
26
36
100
26
36
100
Ulip`s
Stock market
Real eatate
19%
36%
13%
26%
5%
1%
Gold
Mutual funds
Hypothesis
The relationship between important factors has been analyzed with the
help of chi-square test. The following pairs have been analyzed.
A. Gender and risk tolerance: Gender and risk tolerance level of an
investor are two independent attributes. The relationship between the
gender and risk tolerance of investors can be presented with the
following table and diagram.
7
7
Grand
Total
17
83
100
Interpretation: Table 4.17 shows the relationship between gender and risk
tolerance of respondents.
100
50
100
50
84.52
14.45
0
H&M
76.5
Series1
L & NR
Series1
23.52
0
f
H & M L & NR
TIME HORIZON
FOR
INVESTMENTS&
AGE
25to35
35to45
above45
below25
Grand Total
1to3years
5
8
10
23
Below 35Age
Above 35Age
100
50
100
50
87.5
23.54
Series1
below5ye above5ye
93.75
Series1
6.25
0
below5ye
above5ye
Figure4.19:
the
respondents.
Count of RISK
APPEITE
Column Labels
Row Labels
25to35
35to45
above45
below25
Grand Total
high
1
2
4
7
no
Grand
low medium risk&safe
Total
5
14
20
5
35
2
44
3
17
24
1
11
12
14
77
2
100
Table 4.19 shows the relationship between age and risk tolerance of the
respondents.
Below35Age
Above35Age
100
50
100
50
81.25
Series1
18.75
0
H&M
L&NR
85.29
Series1
14.71
0
H&M
L&NR
CHAPTER 5
FINDING`S &
SUGGESTION
5.1 FINDINGS
In the present project, an attempt is made to study the investment
characteristics of Indian investors. Based on the data collected and analyzed
about perception on investment preferences of the investors, the following
findings are given.
It is found that most of the investors belong to the age group of 35 years and 35
to 45 years indicating youngsters and the middle aged people are predominant
in the financial investment sector.
Investors prefer to invest their funds in avenues like Mutual Funds /FD`s/Gold
next to insurance and Ppf.
Hypothesis for Age and time horizon of investors found that two are groups
are preferred the investment time horizon of 5years.
Hypothesis for age and risk tolerance of investors found that two age groups
of below35 and above35 are preferred to take medium, high risk
5.2 SUGGESTIONS
It is suggested that investors are to be educated about various investment
avenues, selection of schemes based on their objectives, their risk
tolerance, importance of diversification.
Most of the respondents are interested to invest their money through online
mode.
All the investors prefer to maximize their returns and minimize the risk.
Even now fixed deposits and insurance schemes are more famous among
Indian investors. It is suggested that the investors have carefully construct
their portfolios after doing fundamental analysis and through proper
diversification.
Page 47
CHAPTER 6
CONCLUSION
The conclusion of the project is that it is found that investors are preferred to
invest their money in medium risk investments and the behavior, perception of
investors is changing based on time and
investment companies.
This project can be useful to the investors to understand the various
investments and risks involved in those investments and which investment is
give more returns and which is more attractive investment likewise many other
benefits are their for investors to the investors.
CHAPTER7
BIBLOGRAPHY
BIBLIOGRAPHY
Books
Herbert B. Mayo, Investments, Chennai Micro Print pvt. Ltd Chennai, 2006
Websites Reference
www.indiafinance&investmentguide.com
www.wikipedia.org
www.nseindia.com
www.capitalmarkets.com
www.bseindia.com
www.financeindia.org/article
CHAPTER8
ANNEXURE
ANNEXURE
2. Gender :
Below 25
4. Marital status:
6. Occupation :
Sector
25 to 35
Single
Married
Government Employee
Businessman
35 to 45
Female
above 45
Student
Private
Others (specify)..
Below 2lakhs
Xth class
Male
2 to 5
intermediate
PART-B
1. Which of the following have you invested in?
FD`s
ULIP`s
Stock Market
Gold
PPF
Mutual Funds
5 to 7
graduate
Derivatives
Post office MIS
7 to 10
pg
Real Estate
Bonds
and
2. Are you aware of the following investment options available in market? Mark top 3
options?
FD`s
ULIP`S
Stock Market
Derivatives
Real Estate
Gold
PPF
Mutual Funds
Post office MIS
Bonds
3. Which factors influence your investment option?
Returns
Minimum Investment Amount
Liquidity
Risk
Locking period
Rank 1,,,,,.5
5 to 10years
Growth Fund`s
Balanced Funds
Peer`s/Friend`s
11. Which of the risk factors influence the returns on investments in general?
Low
No risk/Safe Investment