Chapter-1

INTRODUCTION

1
Theoretical Foundation:

This project is based on the topic INVESTMENT PORTFOLIO.Basically Investment

refers to a commitment of funds to one or more assets that will be held over some
future time period. Almost all individuals have wealth of some kind, ranging from the
value of their services in the workplace to tangible assets to monetary assets. Anything
not consumed today and saved for future use can be considered an investment.
Investment will mean a measurable asset retained in order to increase one’s personal
wealth.

Today we invest to improve our future welfare. Funds to be invested come from assets
already owned, borrowed money, and savings or foregone consumption.

By foregoing consumption today and investing the savings, we expect to enhance our
future consumption possibilities. Anticipated future consumption may be by other
family members, such as education funds for children or by ourselves, possibly in
retirement when we are less able to work and produce for our daily needs.

Investment planning is almost impossible without a thorough understanding of Risk

Risk can be defined as a situation where the possible consequences of the decision that
is to be taken are known. It is composed of the demands that bring in variations in
return of income.

A major purpose of investment is to set a return or income on the funds invested. On a

bond an investor expects to receive interest. On a stock, dividends may be anticipated.
The investor may expect capital gain from some investments and rental income from
house property.

2
Returns from investing are crucial to investors; they are what the game of investments is
all about. An assessment of return is the only rational way (after allowing for risk) for
investors to compare alternative investments that differ in what they promise

This project also covers study of Mutual Funds. A Mutual Fund is a body corporate
registered with SEBI (Securities Exchange Board of India) that pools money from
individuals/corporate investors and invests the same in a variety of different financial
instruments or securities such as equity shares, Government securities, Bonds,
debentures etc. to minimize risk and maximize returns for their participants.

Mutual funds can thus be considered as financial intermediaries in the investment

business that collect funds from the public and invest on behalf of the investors. Mutual
funds issue units to the investors.

After studying the various aspects of Mutual Funds next thing which is covered in this
project is Unit linked plans.

Most insurers in the year 2004 have started offering at least a few unit-linked plans.
Unit-linked life insurance products are those where the benefits are expressed in terms
of number of units and unit price. They can be viewed as a combination of insurance
and mutual funds.

The number of units that a customer would get would depend on the unit price when he
pays his premium. The daily unit price is based on the market value of the underlying
assets (equities, bonds, government securities, et cetera) and computed from the net
asset value.

The advantage of unit-linked plans is that they are simple, clear, and easy to
understand. Being transparent the policyholder gets the entire upside on the
performance of his fund. Besides all the advantages they offer to the customers, unit-
linked plans also lead to an efficient utilisation of capital.

3
Then comes shares and debentures.shares represent ownership in a company .To start
any big business (company or industry), a large sum of money is needed and, in general,
it is not possible for an individual to invest such a large amount.

Whereas Debenture is a debt security issued by a company (called the Issuer), which
offers to pay interest in lieu of the money borrowed for a specific period. In essence it
represents a loan taken by the issuer who pays an agreed rate of interest during the
lifetime of the instrument and repays the principal normally, unless otherwise agreed, on
maturity.

This project also covers the topic of BANK DEPOSITS. Bank deposits are one of the
most common savings scheme open to an average investor.

4
 REVIEW OF LITERATURE

Andrew smith(1998)

The purpose of this paper is to analyze the effects of international portfolio

diversification on an investment portfolio. In doing this, alternative investment vehicles
will also be examined. Finally, derivative securities will be discussed, as well as how
they can further enhance a portfolio's performance.
There are several factors to consider when one is trying to evaluate on how to invest
their money. A good starting ground however is to evaluate not just which funds to pick,
but rather what the portfolio should be comprised of. There are three different separate
items that will be evaluated here. First, the effects of international diversification on an
investment portfolio will be analyzed. Next, alternative investment vehicles will be
examined and discussed. Finally, how the use of derivative securities can further enhance
a portfolio's performance will be explained.
Several people have looked at choices outside of investments.

Terry A.Behr,John E .Newman(2002)

This study develops a unique measure referred to as the return gap which serves as a
useful tool to predict future fund performance and identify the best mutual funds. For a
given month, the return gap is measured as the difference between the actual fund return
and the return that would have been earned by following a buy and hold strategy based on
the fund’s most recently disclosed portfolio. The goal of the return gap is to measure the
impact of decisions made by mutual fund managers which are not immediately reported
(or may never be disclosed) to investors.

These unobserved actions fall into several categories. Of greatest importance to fund
investors are the unobserved trades made by managers between portfolio disclosure
periods. If managers are skilled at selecting undervalued securities or are able to
optimally time the purchases and sales of individual stocks, then it is very likely that they

5
will outperform their previously disclosed portfolio and generate a positive return gap
measure. The most important result of the study is that the return gap helps to predict
future fund performance. Funds with the most favorable past return gaps outperform
funds with the least favorable past return gaps in the subsequent months by an average of
3.4% per year. Overall, portfolio strategies based on the return gap are a useful tool for
investors interested in generating above average returns over time.

Damici Gangster John Schaubrec(1993)

Mutual fund is a pool of money collected from investors and is invested according to
certain investment options. A mutual fund is a trust that pools the saving of a no. of
investors who share a common financial goal. A mutual fund is created when investors
put their money together. It is, therefore, a pool of investor's fund. The money thus
collected is then invested in capital market instruments such as shares, debentures and
other securities. The income earned through these investments and the capital
appreciations realized are shared by its unit holders in proportion to the no. of units
The most important characteristics of a fund are that the contributors and the
beneficiaries of the fund are the same class of people namely the investors.
The term mutual fund means the investors contribute to the pool and also benefit from the
pool. The pool of funds held mutually by investors is the mutual fund.
A mutual fund business is to invest the funds thus collected according to the wishes of the
investors who created the pool. Usually the investors appoint professional investment
managers create a product and offer it for investment to the investors. This project
represents a share in the pool and pre status investment objectives.
Thus, a mutual fund is the most suitable investment for a common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at
relatively.
If mutual funds are emerging as the favorite investment vehicle it is because of the many
advantages. They have over other forms and avenues of investing parties for the investors
who has limited resources available in terms of capital and ability to carry out detailed

6
reserves and market monitoring. These are the major advantages offered by mutual fund
to all investors:

Steve M JES

David M Gudanowski (2001)

Pieces of Information needed to make a decision on the investment

1what is the current rate of interest?
2. The rate of the return or the expected return
3.Theinflation rate
Investment Criterion that Investors love to consider
These days 75% of firms and investors always calculate Net Present value, “NPV”, when
deciding on investment projects
1. Net present value rule
NPV of an investment is the difference between the sum of the discounted cash flows
which are expected from the investment and the amount which is initially invested. So
NPV is an amount that expresses how much value an investment will result in.
⊙NPV rule recognizes that a dollar today is worth more than a dollar tomorrow. Any
investment rule that dose not recognize the time value of money cannot be sensible.

7
Chapter-2

8
Company Profile

9
 Introduction:

If there is one word that is synonymous with retail housing finance in India
today, it is the Housing Development Finance Corporation Limited (HDFC). An
institution that introduced an unknown concept in the last 1970’s, HDFC has defined and
spearheaded many of the changes that have given shape to this industry through the years
and has turned the dreams of owning a home into reality for millions across the country.
Moreover, this successful journey has taken place in the midst of phenomenal changes in
the sector, be it the shift from a protected economy, emergence of banks and other
financial institutions as home loan providers or positive legislative changes in the housing
sector in the form of tax incentives for home ownership and the low interest rate for
housing loans.

The creation of high household incomes in the booming Indian economy in the last
decade has given rise to a new credit card generation-independent, self reliant unafaired
of loans-who realized that it was now possible for them to own a home early in life. This
shift in perception and mindset of Indian middle class in tandem with the impact of
economic liberalization, higher affordability of households and increasing urbanization is
what has driven the current demand for housing. HDFC has been there every step of the
way, to support and encourage to over 2.6 millions families so far owning a home of their
own, through home loans.

It all began with a thought that took shape in the mind of HDFC’s founder, H.T.Parekh,
while he was a student at the London School of Economics in the 1930’s. A thought that
a grew to become a vision- of enabling Indian households access housing in their prime
earning days, through institutional finance for homes, it was an idea that met with
sceptism, especially since it was to be introduced in a strong socialistic environment and
in the absence of any legal or fiscal framework. It was believed that a housing finance
company aimed at India’s middle class would fold like house of cards

10
Under the burden of un paid debts. Undaunted by these doubts, H.T.ParekhPursued his
dreams which culminated in the formation of HDFC in 1977, with equity participations
from local financial institutions, the international finance corporation (Washington).

About HDFC Standard Life Insurance Company Ltd

HDFC Standard Life Insurance Co. Ltd was incorporated on 14th august 2000. It is a
joint venture between Housing Development Finance Corporation Limited (HDFC
Ltd.) India and UK based Standard Life Company. Both the joint venture partners
being one of the leaders in their respective areas came together in this 81.4:18.6 joint
venture to form.

The MD and CEO of HDFC Standard Life Mr. Deepak Satwalekar, has given the
company new directions and has helped the company achieve the status it currently
enjoys. HDFC Standard Life brings to you a whole range of insurance solutions be it
group or individual or NAV services for corporations; they can be easily customized
as per specific needs.

HDFC Standard Life Insurance India boasts of covering around 8.7 lakh lives by
March'2007. The gross incomes standing at a whopping Rs. 2, 856 crores, HDFC
Standard Life Insurance Corporation is sure to become one of the leaders

The Bancassurance partners of HDFC Standard Life Insurance Co Ltd are HDFC,
HDFC Bank India Limited, Union Bank of India, Indian Bank, Bank of Baroda,
Saraswat Bank and Bajaj Capital.

Standard Life in the 21st Century

 2000

• 175th anniversary - originally founded as Life Insurance Company of Scotland

11
• Members vote to retain mutual status of Standard Life Assurance Company

• Joint venture company - Standard Life Asia - launched in Hong Kong

 2001

• HDFC Standard Life - joint venture with Housing Development Finance

Corporation - launched in Mumbai, India

 2002

• Hong Kong business - Standard Life Asia - becomes wholly owned subsidiary of
Standard Life

 2003

• Heng An Standard Life - joint venture company with Tianjin Economic

Development Agency - launched in Tianjin, China

 2004

• Strategic review of business undertaken - key outcome was to pursue

demutualisation

• Funds under management exceed £100 billion for first time

• Domestication of Canadian non-participating business to create The Standard Life

Assurance Company of Canada

 2005

• Standard Life confirms intention to demutualise and float on the London Stock
Exchange

• Disposal of Spanish subsidiary - Prosperity s.a. based in Barcelona

12
 • Heng An Standard Life first joint venture life company to open in Qingdao, China

 2006

• New international business - Standard Life International - established in Dublin to

provide tax efficient products

• Acquisition of the private medical insurance business of FirstAssist

• Special General Meeting held with overwhelming backing for the company's
proposal to demutualise and float on the stock exchange

• Standard Life plc floats on the London Stock Exchange and joins the FTSE 100
index
•

 2007

• Winner in the "Arts, Business & Sustainability" category at prestigious Arts and
Business Awards

• Special Achievement awards for gaining the ‘Investment Provider’ and ‘Life &
Pensions’ 5-Star Awards for 12 consecutive years at the annual Financial Adviser
Service Awards

• Increase in stake in HDFC Standard Life Insurance Company in India to 26%

(maximum holding permitted under Indian regulation)

 2008

Launch of new discretionary investment management business - Standard Life Wealth

13
Various Products of HDFC Standard Life Insurance Company Ltd
 Individual Products
 Group Products
 Social Products
 Tax Benefits

14
Chapter 3

15
INVESTMENT

16
 Introduction

Investment refers to a commitment of funds to one or more assets that will be held
over some future time period. Almost all individuals have wealth of some kind,
ranging from the value of their services in the workplace to tangible assets to
monetary assets. Anything not consumed today and saved for future use can be
considered an investment. Investment will mean a measurable asset retained in order
to increase one’s personal wealth.

Features of Investment Programmer

 Safety of principal.
 Liquidity.
 Income Stability.
 Appreciation and purchasing power stability.
 Tangibility.

Objectives of Investment

The options for investing our savings are continually increasing, yet every single
investment vehicle can be easily categorized according to three fundamental
characteristics - safety, income and growth - which also correspond to types of investor
objectives.

1.Safety

17
Perhaps there is truth to the axiom that there is no such thing as a completely safe and
secure investment. Yet we can get close to ultimate safety for our investment funds
through the purchase of government-issued securities in stable economic systems, or
through the purchase of the highest quality corporate bonds issued by the economy's top
company

2.Income

However, the safest investments are also the ones that are likely to have the lowest rate of
income return, or yield. Investors must inevitably sacrifice a degree of safety if they want
to increase their yields. This is the inverse relationship between safety and yield:

3.Growth. .

This discussion has thus far been concerned only with safety and yield as investing
objectives, and has not considered the potential of other assets to provide a rate of return
from an increase in value, often referred to as a capital gain.

SECONDARY OBJECTIVES

1. Tax minimization

An investor may pursue certain investments in order to adopt tax minimization as part
of his or her investment strategy. A highly-paid executive, for example, may want to
seek investments with favorable tax treatment in order to lessen his or her overall
income tax burden.

2. Marketability / Liquidity

18
Many of the investments we have discussed are reasonably illiquid, which means they
cannot be immediately sold and easily converted into cash. Achieving a degree of
liquidity, however, requires the sacrifice of a certain level of income or potential for
capital gains.

Common stock is often considered the most liquid of investments, since it can usually
be sold within a day or two of the decision to sell. Bonds can also be fairly marketable,
but some bonds are highly illiquid, or non-tradable, possessing a fixed term. Similarly,
money market instruments may only be redeemable at the precise date at which the
fixed term ends. If an investor seeks liquidity, money market assets and non-tradable
bonds aren't likely to be held in his or her portfolio.

Risk and Return

What is Risk?

It can be defined as a situation where the possible consequences of the decision that is
to be taken are known. It is composed of the demands that bring in variations in return
of income. The main forces contributing to risk are:-

1. Price,
2. Interest.

• Risk is also influenced by external and internal considerations.

• External risk is uncontrollable and broadly affects investments. These external
risks are called systematic risks.
• Risk due to internal environment of a firm or those affecting a particular
industry is referred as unsystematic risk..

19
1 Systematic Risk:

It is non- diversifiable and is associated with the securities market as well the
economic, sociological, political and legal considerations of the prices of all securities
in the economy.

For e.g. during a boom period, prices of all securities will rise and indicate that the
economy is moving towards prosperity.

2 Unsystematic risk:

It is unique to a firm or industry. It does not affect an average investor. It is caused by

factors like labor strike, irregular disorganized management policies and consumer
preferences. These factors are independent of price mechanism operating in the
securities market.

Examples of high degree of unsystematic risk are:

Industries concerning food stuffs, toys, telephones, other industries supplying basic
necessities to consumers.

Types of Investment Risk

1.Systematic versus Unsystematic Risk :

Modern investment analysis categorizes the traditional sources of risk causing

variability in returns into two general types: those that are pervasive in nature, such as

20
 market risk or interest rate risk, and those that are specific to a particular security
issue, such as business or financial risk. Therefore, we must consider these two
categories of total risk. The following discussion introduces these terms. Dividing
total risk into its two components, a general (market) component and a specific
(issuer) component, we have systematic risk and nonsystematic risk, which are
additive:

Total risk = General risk + Specific risk

= Market risk + Issuer risk
= Systematic risk + Nonsystematic risk

2.Market Risk

The variability in a security’s returns resulting from fluctuations in the aggregate

market is known as market risk. All securities are exposed to market risk including
recessions, wars, structural changes in the economy, tax law changes, even changes in
consumer preferences. Market risk is sometimes used synonymously with systematic
risk.

3) Unsystematic risk.

a) Business Risk

• External business risk may be due to many factors like business cycle,
demographic factors, political policies, monetary policy and economic
environment .

21
 • The risk of doing business in a particular industry or environment is called
business risk. For example, as one of the largest steel producers, U.S. Steel faces
unique problems. Similarly, General Motors faces unique problems as a result of
such developments as the global oil situation and Japanese imports.

• Business risk may be associated with external or internal risk.

b) Financial Risk

This risk in a company is associated with the method through which it plans its
financial structure. If the capital structure of a company tends make earnings unstable,
the company may fail financially. As debt financing provides a low cost source of
funds to a company, at the same time providing financial leverage for the common
stockholders.

4) International Risk

International Risk can include both Country risk and Exchange Rate risk. Exchange Rate
Risk All investors who invest internationally in today's increasingly global investment
arena face the prospect of uncertainty in the returns after they convert the foreign gains
back to their own currency.

22
Measurement tools of Risk

a) Standard Deviation

Investors and analysts should be at least somewhat familiar with the study of probability
distributions. Since the return an investor will earn from investing is not known, it must
be estimated.

b) Volatility

It may be described as the range of movement (or price fluctuation) from the expected
level of return. The more a stock, for example, goes up and down in price, the more
volatile that stock is. Because wide price swings create more uncertainty of an
eventual outcome, increased volatility can be equated with increased risk.

c) Beta

Beta is a measure of the systematic risk of a security that cannot be avoided through
diversification. Beta is a relative measure of risk-the risk of an individual stock relative to
the market portfolio of all stocks. If the security's returns move more (less) than the
market's returns as the latter changes, the security's returns have more (less) volatility
(fluctuations in price) than those of the market.

23
What is Return?

A major purpose of investment is to set a return or income on the funds invested. On a

bond an investor expects to receive interest. On a stock, dividends may be anticipated.
The investor may expect capital gain from some investments and rental income from
house property.

Returns from investing are crucial to investors; they are what the game of investments
is all about. An assessment of return is the only rational way (after allowing for risk) for
investors to compare alternative investments that differ in what they promise. The
measurement of realized (historical) returns is necessary for investors to assess how
well they have done or how well investment managers have done on their behalf.
Furthermore, the historical return plays a large part in estimating future, unknown
returns.

1 Return on a typical investment consists of two components

a)Yield:
The basic component that usually comes to mind when discussing investing returns is
the periodic cash flows (or income) on the investment, either interest or dividends.
The distinguishing feature of these payments is that the issuer makes the payments in
cash to the holder of the asset. Yield measures relate these cash flows to a price for
the security, such as the purchase price or the current market price.

b)Capital gain (loss):

The second component is also important, particularly for common stocks but also for
long-term bonds and other fixed-income securities. This component is the

24
appreciation (or depreciation) in the price of the asset, commonly called the capital
gain (loss).It is the difference between the purchase price and the price at which the
asset can be, or is, sold.

Given the two components of a security's return, we need to add them together
(algebraically) to form the total return, which for any security is defined as

Total return = Yield + Price change where:

the yield component can be 0 or + the price change component can be 0, +, or -

25
 CHAPTER-4
Mutual Fund

26
INTRODUCTION

A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board
of India) that pools money from individuals/corporate investors and invests the same
in a variety of different financial instruments or securities such as equity shares,
Government securities, Bonds, debentures etc. to minimize risk and maximize returns
for their participants.
They have given a major fillip to Capital market.

Mutual funds have been a significant source of investment in both government and
corporate securities. It has been for decades the monopoly of the state with UTI being
the key player, with invested funds exceeding Rs.300 bn. (US$ 10 bn.). The state-
owned insurance companies also hold a portfolio of stocks. Presently, numerous
mutual funds exist, including private and foreign companies. Banks--- mainly state-
owned too have established Mutual Funds (MFs). Foreign participation in mutual
funds and asset management companies is permitted on a case by case basis.

UTI, the largest mutual fund in the country was set up by the government in 1964, to
encourage small investors in the equity market. UTI has an extensive marketing
network of over 35, 000 agents spread over the country. The UTI scrip’s have
performed relatively well in the market, as compared to the Sensex trend. However,
the same cannot be said of all mutual funds.

Mutual funds can thus be considered as financial intermediaries in the investment

business that collect funds from the public and invest on behalf of the investors.
Mutual funds issue units to the investors.

The units of Mutual funds are called tradable securities and their price is determined
by their Net Asset Value (NAV) which is declared periodically. The operations of the

27
 private mutual funds are regulated by SEBI with regard to their registration,
operations, administration and issue as well as trading.
There are various types of mutual funds depending upon whether they are open ended
or close ended and what their end Use of funds is.

An open ended fund provides for easy liquidity and is a perennial fund

• a Close ended fund has a stipulated maturity period, generally 5 years.

• A growth fund has a higher percentage of its corpus invested in equity than in
fixed income securities

The origin of mutual fund industry in India is

with the introduction of the concept of mutual
fund by UTI in the year 1963. Though the
growth was slow, but it accelerated from the
year 1987 when non-UTI players entered the
industry

Flow chart NO.4.1

Mutual Fund Operation Flow Chart

In the past decade, Indian mutual fund industry had seen dramatic improvements,
both quality wise as well as quantity wise. Before, the monopoly of the market had
seen an ending phase; the Assets under Management (AUM) was Rs. 67bn. The
private sector entry to the fund family raised the AUM to Rs. 470 bn. in March 1993
and till April 2004; it reached the height of 1,540 bn.

28
 Five things before invest in mutual fund

1.YOU’RE RISK PORTFLIO

Investors must ascertain their own risk profile. As there are funds that cater to various
risk profiles in the market, ranging from very risky to very conservative, its important
that investors choose the fund that best suits his/her risk profile

2.YOU’RE INVESTMENT HORIZON

The amount of time investors are willing to stay invested in the fund also determines
the kind of fund suited for him. Equity funds are best suited for investors who have a
longer time horizon as equities give the best return amongst all other asset classes
over the long term. But for investors who want to invest for a shorter tenure, debt
funds are the best options.

3. OFFER DOCUMENT

It's just as important to know your fund, as it is to know yourself. The best source of
information on a fund is its offer document. has information on the nature of the
scheme, the kind of instruments the fund aims to invest in, its risk-profile, its
investment strategies, and so on. It also gives you an idea of how other schemes from
the same fund house have performed. It helps to check the potential of the fund and
also the track record of the fund house.

29
 4.HOW good are its disclosures?

A mutual fund may promise you high returns and superior service, but how good are its
disclosure levels? Check if your fund house discloses its portfolios regularly. Although
Sebi rules require fund houses to disclose their portfolios only twice a year,

5.Past performance

If the fund is an existing one, check its past performance. Though past performance is
no guarantee of future returns, but it does give you an indication of how well a fund has
capitalized on upturns and weathered downturns. The fund's record also gives an
indication of the volatility of its returns.

30
HDFC MUTUAL FUND PRODUCTS

1. EQUITY FUNDS

 HDFC GROWTH FUND

 HDFC LONG TERM ADVANTAGE FUND

 HDFC INDEX FUND

 HDFC EQUITY FUND

 HDFC CAPITAL BUILDER FUND

 HDFC TAX SAVER

 HDFC TOP 200 FUND

 HDFC CORE & SATELLITE FUND

 HDFC PREMIER MULTI-CAP FUND

 HDFC LONG TERM EQUITY FUND

2. BALANCED FUNDS

 HDFC CHILDREN'S GIFT FUND INVESTMENT PLAN

31
  HDFC CHILDREN'S GIFT FUND SAVINGS PLAN

 HDFC BALANCED FUND

 HDFC PRUDENCE FUND

3. DEBT FUNDS

 HDFC INCOME FUND

 HDFC LIQUID FUND

 HDFC SHORT TERM PLAN

 HDFC FLOATING RATE INCOME FUND LONG TERM PLAN

 HDFC LIQUID FUND - PREMIUM PLAN

 HDFC LIQUID FUND - PREMIUM PLUS PLAN

 HDFC SHORT TERM PLAN - PREMIUM PLAN

 HDFC INCOME FUND PREMIUM PLAN

 HDFC INCOME FUND PREMIUM PLUS PLAN

 HDFC HIGH INTEREST FUND

 HDFC CASH MANAGEMENT FUND - SAVINGS PLAN

32
 HDFCMF MONTHLY INCOME PLAN - SHORT TERM PLAN

 HDFC CASH MANAGEMENT FUND - SAVINGS PLUS PLAN

 HDFC MULTIPLE YIELD FUND

 HDFC FIXED MATURITY PLAN

33
 CHAPTER -5

UNIT LINKED INSURANCE

PLAN

34
 Introduction

Most insurers in the year 2004 have started offering at least a few unit-linked plans.
Unit-linked life insurance products are those where the benefits are expressed in
terms of number of units and unit price. They can be viewed as a combination of
insurance and mutual funds.

The number of units that a customer would get would depend on the unit price when
he pays his premium. The daily unit price is based on the market value of the
underlying assets (equities, bonds, government securities, et cetera) and computed
from the net asset value.

The advantage of unit-linked plans is that they are simple, clear, and easy to
understand. Being transparent the policyholder gets the entire upside on the
performance of his fund. Besides all the advantages they offer to the customers, unit-
linked plans also lead to an efficient utilisation of capital.

Unit-linked products are exempted from tax and they provide life insurance. Investors
welcome these products as they provide capital appreciation even as the yields on
government securities have fallen below 6 per cent, which has made the insurers slash
payouts.

The ideal time to buy a unit-linked plan is when one can expect long-term growth
ahead. This is especially so if one also believes that current market values (stock
valuations) are relatively low.

So if you are opting for a plan that invests primarily in equity, the buzzing market
could lead to windfall returns. However, should the buzz die down, investors could be
left stung.

35
However, as one approaches retirement the quantum of returns should be
subordinated to capital preservation. At this stage, investing in a plan that has an
equity tilt may not be a good idea.

Considering that unit-linked plans are relatively new launches, their short history
does not permit an assessment of how they will perform in different phases of the
stock market. Even if one views insurance as a long-term commitment, investments
based on performance over such a short time span may not be appropriate.

Factors need to consider

 High returns and sustainability

The high-decibel advertising campaigns may lead investors to believe that the returns
generated over the past few months are sustainable. Nothing could be farther from the
truth. To draw a parallel, similar advertisements were put out by mutual funds during
the heady days of the market in the mid-1990s.

 Suitability of options

Unit-linked insurance plans usually offer three schemes: One oriented towards debt
and money-market instruments, another with a tilt towards equities, and a third that
seeks to achieve a mix of investing in both equities and debt.

If one opts for the plan that invests primarily in equity, the buzzing market could
lead to windfall returns. However, should the buzz die down, investors could be left
stung.

If one invests in a unit-linked pension plan early on, say 25, one can afford to take the
risk associated with equities, at least in the plan's initial stages.

36
 Fund management style

Considering that unit-linked plans are relatively new launches, their short history does
not permit an assessment of how they will perform in different phases of the stock
market. Even if one views insurance as a long-term commitment, investments based
on performance over such a short time span may not be appropriate

 Market timing

To maximise returns even during such bullish phases, it is imperative that investors
time their entry and exit from the markets. As far as stocks go, returns tend to be
compressed over a short timeframe

 Charges aplenty

Various charges are levied on such plans. They either lead to a deduction from the
investment amount that is brought in or are adjusted by liquidation of units. In both
cases, returns are affected. Typically, charges are high in the initial two years before
they taper off and stabilise for the rest of the plan's term.

37
 CHAPTER -6

SHARES AND DEBENTURES

38
 Introduction

Shares
It represents ownership in a company. When an individual buys the shares of company, he becomes
one of owner of business. Shareholders choose who runs a company and are involved in key
decisions like business should be sold or not.

Shares are mostly associated with stock market; majority of small businesses will not go anywhere
near a stock market in their life time as they give out shares in their company in return for a lump
sum investment.

Formal equity finance is available through:-

 Business angel investors.

 Venture capital firms.

o Stock markets.

These investors are willing to put up capital for share in a growth business and shareholders are
entitled to distributed profits of company called Dividends.

How are shares issued?

When we set up a company, whether limited or unlimited, we can decide on the level of share capital
and the division of the share capital into fixed priced shares.

To set this up, draw up a Memorandum of Association.

This sets out:

1. The amount of share capital the company will have - ie the company's authorised capital

• the division of the share capital

39
The founders of the company sign the memorandum and state the number of shares they want and
are then issued upon incorporation. The money paid for the shares - which can be the nominal value
or more - must be retained by the company.

Types of Shares

• Ordinary shares are standard shares with no special rights or restrictions. They have the
potential to give the highest financial gains, but also have the highest risk. Ordinary
shareholders are the last to be paid if the company is wound up.

• Preference shares are typically carry a right that gives the holder preferential treatment
when annual dividends are distributed to shareholders. Shares in this category have a fixed
value, which means that a shareholder would not benefit from an increase in the business'
profits.

• Cumulative preference shares give holders the right that, if a dividend cannot be paid one
year, it will be carried forward to successive years. Dividends on cumulative preferred shares
must be paid, despite the earning levels of the business.

• Redeemable shares come with an agreement that the Company can buy them back at a
future date - this can be at a fixed date or at the choice of the business. A company cannot
issue only redeemable shares. Different types of share may be in different currencies.
However, a public limited company must have at least £50,000 of its issued capital in
sterling, irrespective of what other currency it uses.

DEBENTURE

A Debenture is a debt security issued by a company (called the Issuer), which offers to pay interest
in lieu of the money borrowed for a specific period. In essence it represents a loan taken by the
issuer who pays an agreed rate of interest during the lifetime of the instrument and repays the
principal normally, unless otherwise agreed, on maturity.

40
 These are long-term debt instruments issued by private sector companies. These are issued in
denominations as low as Rs 1000 and have maturity ranging between one and ten years. Long
maturity debentures are rarely issued, as investors are not comfortable with such maturities.

These are issued by companies and regulated under SEBI guidelines of June 11, 1992.

• Debentures enable investors to reap the dual benefits of adequate security and good returns.
Unlike other fixed income instruments such as Fixed Deposits, Bank Deposits they can be
transferred from one party to another by using transfer form.

• Debentures are normally issued in physical form. However, corporates/PSUs have started
issuing debentures in Demat form.

• debentures are less liquid as compared to PSU bonds and their liquidity is inversely
proportional to the residual maturity.

• Debentures can be secured or unsecured.

Debentures are divided into different categories on the basis of:

• Convertibility of the instrument

• Security

Debentures can be classified on the basis of convertibility into:

i. Non-Convertible Debentures (NCD): This type of security retains all the characteristic of a
debt instruments and it cannot be converted into any other form of security (mainly equity).

ii. Partly Convertible Debentures (PCD): A part of this instrument can be converted into
Equity share in the future at the instance of issuer. The issuer decides the ratio of the conversion at
the time of subscription.

41
iii. Fully convertible Debentures (FCD): These instruments are fully convertible into Equity
shares at the issuer's notice. The issuer decides the ratio of conversion. Upon conversion the
investors enjoy the same status as ordinary shareholders of the company.

iv. Optionally Convertible Debentures (OCD): The investor has the option to either convert
these debentures into shares at price decided by the issuer/agreed upon at the time of issue.

On basis of Security, debentures are classified into:

i. Secured Debentures: These instruments are secured by a charge on the fixed assets of the
issuing company. So if the issuer fails on payment of either the principal or interest amount, his
assets can be sold to repay the liability to the investors. Sometimes, the charge can also be a second
charge instead of a first charge.

ii. Unsecured Debentures: These instruments are unsecured in the sense that if the issuer
defaults on payment of the interest or principal amount, the investor has to be along with other
unsecured creditors of the company.

42
 CHAPTER-7

Bank deposits

43
 Introduction

Bank deposits are one of the most common savings scheme open to an average
investor.

• Fixed Deposit

• Recurring Deposit

• Savings Bank Account

Fixed Deposit
A fixed deposit is meant for those investors who want to deposit a lump sum of money
for a fixed period; say for a minimum period of 15 days to five years and above, thereby
earning a higher rate of interest in return. Investor gets a lump sum (principal + interest)
at the maturity of the deposit.

Bank fixed deposits are one of the most common savings scheme open to an average investor.

Returns
The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent, depending on the
maturity period (duration) of the FD and the amount invested. Interest rate also varies between each
bank

Current Account of the customer. The deposit period can vary from 15, 30 or 45 days to
3, 6 months, 1 year, 1.5 years to 10 years.

Duration Interest rate (%) per annum

15-30 days 4 -7 %
30-45 days 5-8 %
46-90 days 6-8 %
91-180 days 6.5-9.5 %

44
 181-365 days 7-9.5 %
1-1.5 years 8.5-10.25 %
1.5-2 years 8.5-10.5 %
2-3 years 9-10.5 %
3-5 years 9.5-10.5 %
5 years 9.5-11 %

Recurring Deposit

The Recurring deposit in Bank is meant for someone who want to invest a specific sum
of money on a monthly basis for a fixed rate of return. At the end, you will get the
principal sum as well as the interest earned during that period. The scheme, a systematic
way for long term savings, is one of the best investment option for the low income
groups.

Returns
The rate of interest varies between 7 and 11 percent depending on the maturity period and
amount invested. The interest is calculated quarterly or as specified by the bank.

Maturity amount in 2 years

Amount invested per month
(5%interest)
Rs 100 Rs 2626
Rs 500 Rs 13,132
Rs 750 Rs 19,698
Rs 3000 Rs 78,792

45
46
 CHAPTER - 8
COMPETITIVE PRODUCTS

How is LIC (Bima plus) different from HDFC Standard Life (lifetime)??????

Features LIC Bima plus Lifetime Advantage Lifetime

Term 18 – 50 years Clients choice As and when the client
requires

47
Payment mode All All -
Automatic premium Not available Available Clear advantage
payment
Investment options Equity Builder
Debt Protector
Liquid Maximiser
Survival benefit Value of fund Value of fund -
Death benefit Sum assured + value Higher the value of
of fund fund or Sum
assured
Withdrawal benefits Can be withdrawn Partial or complete Clear advantage with
after 2nd year but with withdrawal after 3rd Lifetime
certain penalty year
Loan Partial or complete
withdrawal allowed
Surrender charges Surrender penalty No charges after the You can plan for
shall be levied in case 3rd policy year. sudden requirements.
the policy is As such Lifetime has a
surrendered in first clear advantage there.
four year
Initial charges Not disclosed 1st year – 20% Since the return has
2nd year – 7.5% been specified but their
3rd year – 4% charges are not
specified.
Transparency Not specified Specified Clear advantage
Increase/decrease Not available Available With different life
death benefit Stages your
requirement for death
benefit would change.
This plan helps you to
adapt to your changing
needs without
purchasing a new plan
or surrender the old

48
 one.
Top-ups Not available Available Help you reap the
benefit of any short
term upward trend in
the market.
Choice of funds You can choose the Allocation possible Over a 20 years period,
fund in the starting if any proportion equities have given the
amongst the three right return. Wouldn’t
funds is available. you like some short
Options to change term benefits of
allocation anytime. favorable market
moments?

Riders ADBR /MSAR

/CIBR

How is Om Kotak (Capital mutiplier) different from HDFC Standard Life

(lifetime)??????

Features Om Kotak Lifetime Advantage

Capital Multiplier Lifetime
Term 5years-30years Clients choice As and the
Client wants.
Maximum Age 55 years No Max age -
Payment mode All All -
Automatic Available Available (premium -
49
premium Payment Holiday)
Investment No option to Builder Obviously the
Options choose your large no. of
Investment. The options in Life
premium after the Protector time makes sure
deductions is just that your money
funneled into a is invested as per
accumulation your risk aptitude-
Maximiser
account which is investment
invested as per horizon and
the risk aptitude investment
Objective.
Survival benefit Value of Value of units, as a OMKM has a
accumulated a/c Lump sum or partial provision that a
or the SA which Withdrawals. Can person can opt for
is higher, in also be used as a a systematic
lump sum, or as systematic withdrawal plan
systematic Withdrawal plan. where he takes 50%
withdrawal, tax free on maturity as he
Pleases. During this
period of systematic
withdrawal only 10%
Life cover.
Death benefit Sum assured due Higher of value of Still, lifetime scores,
but not paid or Fund or sum assured as demonstrated
value of accumula- in the example below
-tion which is high
Premium holiday Available Available -

Withdrawal 3rd year 3rd year Clear advantage with

Benefits lifetime
Initial charges Not specified 1st year – 20% Since the return on
OMKM is promised

50
 2nd year – 7.5% on the accumulated
amount, you need to
3rd year – 4% know what is the
amount after
deduction of charges
From the principal.
Transparency Not available Available Lifetime disclose
daily value of NAVs
so that customer
knows the exact
amount of his savings
at every point when
He needs. OMKM
declare bonuses only
At end of the year.
Increase/decrease Not available Available With different life
Death benefit stages, your require-
-ment for death
Benefit also change.
This helps you to
adapt to your
changing needs
without purchase of
new plan or
Surrender of old one.
Top-ups Available Available Maximum top-up in
OMKM can’t be
more than 25% of
the SA but in lifetime
It can be any amount.

51
Choice of funds Not available Available Allocation available in
any proportion among
the three funds
available options can
Be changed anytime.
Riders CIBR/ADBR ADBR/MSAR/CIBR -

Chapter-9
52
 RESEARCH METHODOLOGY

Defining Research Problem

Problem definition is the first & foremost part of the research process, without this
research cannot be completed until and unless there is a problem or objective, the
research cannot be initiated. Problem definition refers to the objective on which
research has to be done, so problem definition in my project work is Privatization of
insurance sector, its impact & its scope in India.

Research Objectives:

• To know the awareness of people in various investments.

• To know which institutions people prefer for their investment? Either they go for
Private institutions or Government Institutions?
• To know what are the expectations of people from their investments?

53
 • To know about the peoples satisfaction. Are they satisfied with their investments,
returns they are earning, or they want to change their investment plans?
• To know what type of returns they expect?
• To know the suggestions about the investment plans.

Research Methodology
Research refers to search for knowledge. In other words research is defined as a careful
investigation or inquiry especially through for new facts in any branch of knowledge.

Research Methodology is one of the important aspects of any project. This gives us
clear-cut view of method so used while gathering the information so needed for the
completion of the report.

a) Type of Study: Study is empirical in nature as it’s based upon the facts and
figures.
b) Data Collection: Source of Data:
Two types of data sources will be taken into consideration
 Primary Data
 Secondary Data

Primary Data:

The primary data are those which are collected a fresh and for the first time, and thus
happen to be original in character. Under this project direct collection of data from source
of information & techniques such as personal interviewing and survey through
questionnaire for customers has been considered.

Secondary Data:

54
Secondary data is one which has already been collected by someone else and which has
already been passed through statistical processing. Under this project secondary data is
been collected from journals, magazines, & web sites.

Sample Design:

Sample design refers to number of items tobe included in sample

It refers to the technique or procedure the researcher would adopt

In selecting items from the sample.

 Type of universe: The universe is the entire group of items the researcher wish
to study and about which they plan to generalize. Under this project type of
universe include people residing in Chandigarh and Mohali.
 Sampling Unit: Who is to be surveyed generally large sample Give more
reliable results than small samples. The sample consists of 100 respondents.
 Size of Sample: Number of people surveyed. Generally large Sample more
reliable result than small sample. The sample Consist of 100 respondents.
 Sampling Procedure: Sampling procedure refers to technique Used in selecting
the items for the sample. Under this project selection of respondents is on the
basis of convenience sampling.
 Tools and Techniques: In this study tools and techniques used are tables, graphs
& percentages techniques.

Scope

I have conducted the survey on investment under my topic “Data Collection & Sales”, for
my project report, which had been allotted to me by my trainer “ Mr. Deepak Chawla”
(Sales Manager) from “HDFC Bank Ltd”. Survey which I have conducted is totally based

55
on investment criteria, that where people invest their funds. My area for survey was
Chandigarh and Mohali. I have done survey in Chandigarh and Mohali. My timing for
conducting survey was from morning 9:30am to 5pm. The purpose for my survey was to
know that where people invest their funds? Either they go for Private institutions or
Government institutions for investing their funds?

Sources of Data:

The present study has been carried out on the basis of both the primary and secondary
data . Secondary data is the data which is collected from some already existing sources
like various internet sites, books, magazines etc. and as per requirements the data is taken
from them. The primary data is collected for study through questionnaire method. For
primary data I have to conducted survey in Chandigarh and Mohali area.

56
 Chapter-10

DATA investments Aware Not Aware

ANALYSIS Ulips plan
Mutual fund
44%
47%
56%
53%
Share and 36% 64%
debenture
Bank’s 98% 2%
deposits

Analysis of Questionnaire
Sample Size 100

Q1: Are you aware about these investments? Table no 8.1

Pie chart.8.1.1

ULIPS PLANS

YES
44%
NO
56%

57
 Pie chart.8.1.2 Conclusion: 44% of people aware about
ULIPS plans, big part of population
Where investment Govt. institution Private institution

No. of population 38% 62%

(56%) Are not aware about ULIPS.

About MF 47% people aware and 53%
People are not aware. And about shares
Only 36% people are aware and most of
People (98%) aware about bank’s deposits

MUTUAL FUNDS

Pie chart.8.1.3 Pie chart.8.1.4

YES FIXED DEPOSIT

NO 47%
53%
. NO
2%

YES
98%

Q2: Where you want to invest your money?

Table no8.2

Govt.
inustitute
38%

private
institute
62%
Pie chart

58
Conclusion: Most of populations (62%) want to invest in private institutions
Only 38% people prefer govt. institution.

Q: 3 why do you invest your money?

Table no8.3

Why investment For For For save For future

return safety tax Requi-
rement
90 of population
No. 85 85 72 41 68
80
72
68
70

60 Gr
af 50
no.8.3
41
40

30

20

10

0
Return Safety Save tax Future requrement
59
Conclusion: out of 100 people, 85 people invest their money for good return,
72 people want safety, 41 people invest for saving tax and 68 people invest to
meet the future requirement

Q: 4 Did you invest your money any where?

Pie chat no.8.4.

no
28%

yes
72%

Conclusion: out of 100 people 72% had invested their money and remaining 28%
Not invested any where tills now.

60
 Q: 4.1 If Yes then where you have invested your money?

Table no.8.4
Investment Mutual funds Bank’s ULIPS plans Share and
portfolio deposits debenture
%age of 18 38 32 12
Investment portfolio
population

Mutual fund Pie chart no.8.4.2

18% Bank
30%
Share
12%

ULIP
40%

61
Conclusion: those who had all ready invested, out of them 18% people
Had invested in mutual funds, 38% in bank, 32% in ULIPS
And only 12% invested in shares and debenture

Q:5 Do you want to change your current investment?

, Pie chart no8.5

no
36%

yes
64%

Conclusion: 64% current investor want to change their investment and

Remaining 36% investor does not want to change their current

62
 Investment.

Change Mutual funds Bank’s ULIPS plans Share and

Investment deposits debenture
portfolio
%age of 26 15 46 13
population

Q:6 After changing, where will invest your fund?

Table no.8.5
Investment portfolio

Pie chart no.8.6

Bank
Mutual fund
15%
26%

Share
13% ULIP
46%

63
Expected Blow 15 15 to 20 20 to 25 Above 25
returns
No. of 54 21 10 15
population

Conclusion: according desire of investor who wants to change investment portfolio

become as following.
26 % investor want to invest in mutual funds, 15% in bank, 46% in ULIPS and
Remaining 13% investor wants to invest their money in shares and debentures.

Q:7 what are your expected returns from your investment?

Table no.8.6

Graph no.8.7
60 54
50
40
30
21
20 15
10
10
0 Blow 15 15 to 20 20 to 25 Above 25

Return
64
\Conclusion: out of 100 people 54 want blow 15% return, 21 want 15-20% return,
10 people want 20-25% return and 15 people want above 25% return.

65
 CHAPTER 11

SUGGESTIONS AND RECOMMENDATIONS

1. According to our research study 56% people do not know about ULIPS Plans and 53%
people do not know about MUTUAL Funds, that means a big part of population do not
know about most beneficiary part of investment portfolio. So a good manager of this
sector of investment should make plans (advertisements) in such a way that explains
everything of this part of investment portfolio very clearly and which will be
understandable for customers.

2. A big part of population (98% of my survey) invested in FIXED Deposits so we should

concentrate on this part of investment portfolio with very much care.

3. In the era of quick fast economy there are so many competitors in the market so the
company should recruit able and qualified employees who are able to manage the
investments in such a way that they can make everything easy to customer.

66
4. According to my 2nd question of survey more part of population (62%) prefer private
institutions so HDFC Standard Life Insurance which is a big player of market should
make do better than other competitors to penetrate the market.

5. Company should provide the proper incentives to their employees so that the can work
with full efforts.

6. The company should motivate and increase the morale of the employees.

7.Company should maintain the regular relationship with the customers.

8. After sale services should be also taken in considerations while preparing the strategies
of marketing
Limitations of the Study:
1. Time for the completion of the project was too short to do an in-depth
study.
2. The facts and concepts of Respondents may be biased,imaginary and may
be based entirely on their personal experience .
3. Most of question in the questionnaire was close ended which reduced the
scope for people to give free opinion.
4. The sample size was not enough to reach on any exact conclusion.
Study is based on primary or secondary data that may not be true.

67
 Conclusion
• After study all the investments I reach on the conclusion that:-

• There are many players in the markets who offer many facilities to their
customers.

• If the HDFC want to make a good hold in the market it should must take their
customers in their considerations.

• After analysis my research study I reached the point that customers now a days
has been become more conscious.

• They want more and more returns from their investments.

• But still there are some people who do not aware about the beneficiary part of the
investment portfolio.

68
• The company should make marketing strategies after studying taste and
preferences of the consumers.

• So in the end I want to conclude investment strategies of the company should be

as such which can penetrate the market easily.

69
 Chapter-12
Bibliography

BIBLIOGRAPHY

BOOKS:-
Keller Lane Kevin and Kotler Philip, Marketing Management,
Mumbai
Pearson Publications Pvt. Ltd, Edition 2007
Kothari C.R., Research Methodology,
2nd Edition Vishwas Publications 2001

MAGAZINES:-
Chaudhary, Arindham, 4Ps, IIPM PUBLICATIONS

70
WEBSITES:-
www.wikipedia.com
www.google.com
www.hdfcstandardlifeinsurance.com
www.irdaindia.org

Primary data:-

Through questionnaires

Chapter-13

Annexure

71
 QUESTIONNAIRE

Q1: Do you aware about these investments?

a) ULIP Plan b) Mutual Funds

c) Shares and Debentures d) FD (Fixed Deposits)

Q2: Where do you want to invest your money?

a) Govt. Institute b) Private Institute

Q: 3 why do you invest your money?

a) Return b) Safety
c) Save Tax d) Future Requirement

Q: 4 Did you invest your money any where?

a) Yes b) No

72
Q: 5 If Yes then where you have invested your money?

a) ULIP Plan b) Mutual Funds

c) Shares and Debentures d) Bank

Q:6 Do you want to change your current investment?

a) Yes b) No

Q:7 After changing, where will you invest your fund?

a) ULIP Plan b) Mutual Funds

c) Shares and Debentures d) Bank

Q:8 what are your expected returns from your investment?

a) Below 15% b) 15-20%

c) 20-25 d) Above 25

Q.9 .I am fully confident that my plans will bring results that were promised
a) Yes b) No

Q.10. I will invest only through my known agent?

a) Yes b) No

General Information:

Name:
Address:
Age:
Gender: male female

Marital status: married unmarried

73
Occupation
Service Business Professional

Self-employed Student Others

74