Final Project 2

INTRODUCTION
The study on the investments has great importance and significance in the present day
situations. It helps the investors to take right and proper decisions while investing his
money in various investment avenues. It helps the investor to understand and clarify
various modern forms of investments avenues like Sensex, ULIP and mutual funds
because investment is inevitable for capital formation.
The developing countries like India faces the enormous task of finding sufficient
capital in their developments efforts. Most of these countries find it difficult to get out
of the vicious circle of poverty of low income, low savings, low investments, low
employments etc. and with high capital output ratio, India needs very high rates of
investments to make a leap forward in her efforts of attaining the primary instruments
of economic growth and increase in national income. In order to have production as
per target, investment was considered the crucial determinant and capital formation
had to be supported by appropriate volume of saving.
The essential quality of investment is that it involves waiting for a reward. Investment
involves the commitment of resources which have been saved in the hope that some
benefits will accrue in future.
Investment may be defined as “a commitment of funds made in the expectation of
some positive rate of return.”
Investments are made from savings, savers can become investors by investing in
financial assets or marketable assets like shares, bonds, government securities, mutual
funds etc.
Investor is an individual who commits money to investment products with the
expectation of financial return. Generally, the primary concern of an investor is to
minimize risk while maximizing return, as opposed to a speculator, who is willing to
accept a higher level of risk in the hopes of collecting higher-than-average profits.
Within a period of 10 years, the entire scenario has changed tremendously with the
entry of many companies. To overcome the competition between them, the life
insurance companies started to offer the new policies; among those the Unit Linked
Insurance Plan and Mutual Funds has changed entire performance of life insurance
policies and investment policies in a limited period.
Unit-linked insurance plans, ULIPs, are distinct from the more familiar 'with profits'
policies sold for decades by the Life Insurance Corporation.
ULIPs also serve the same function of providing insurance protection against death
and provision of long-term savings, but they are structured differently. In 'with profits'
policies, the insurance company credits the premium to a common pool called the 'life
fund,' after setting aside funds for the risk premium on life insurance and management
expenses. Every year, the insurer calculates how much has to be paid to settle death
and maturity claims. The surplus in the life fund left after meeting these liabilities is
credited to policyholders' accounts in the form of a bonus. In a ULIP too, the insurer
1
deducts charges towards life insurance (mortality charges), administration charges and
fund management charges. The rest of the premium is used to invest in a fund that
invests money in stocks or bonds.
The policyholder's share in the fund is represented by the number of units. The value
of the unit is determined by the total value of all the investments made by the fund
divided by the number of units. Insurers usually offer three choices an equity (growth)
fund, balanced fund and a fund which invests in bonds. In both 'with profits' policies as
well as unit-linked policies, a large part of the first year premium goes towards paying
the agents' commissions.
A mutual fund is a professionally-managed type collective investment scheme that
pools money from many investors. While there is no legal definition of mutual fund,
the term is most commonly applied only to those collective investment schemes that
are regulated, available to the general public and open-ended in nature. Hedge funds
are not considered as a type of mutual fund. The first introduction of a mutual fund in
India occurred in 1963, when the Government of India launched Unit Trust of India
(UTI). Until 1987, UTI enjoyed a monopoly in the Indian mutual fund market. Then a
host of other government-controlled Indian financial companies came up with their
own funds. These included State Bank of India, Canara Bank, and Punjab National
Bank. This market was made open to private players in 1993, as a result of the historic
constitutional amendments brought forward by the then Congress-led government
under the existing regime of Liberalization, Privatization and Globalization (LPG). The
first private sector fund to operate in India was Kothari Pioneer, which later merged
with Franklin Templeton.
Deposit being available in the market less than 10% of Indian households have invested
in mutual funds. A recent report on Mutual Fund Investments in India published by
research and analytics firm, Boston Analytics, suggests investors are holding back from
putting their money into mutual funds due to their perceived high risk and a lack of
information on how mutual funds work.
Sensex, otherwise known as the S&P BSE Sensex index, is the benchmark index of the
Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively-
traded stocks on the BSE, providing an accurate gauge of India's economy. Analysts
and investors use the Sensex to observe the overall growth, development of particular
industries, and booms and busts of the Indian economy.
Share means a share in the share capital of a company. A company is a business
Organization. The shares which are issued by companies are of two types i.e. Equity
shares and Preference shares. It is registered as per Companies Act, 1956. Every
Company has share capital. The share capital of a company is divided into number of
Equal parts and each of such part is known as a 'share'. Investment in shares is more
risky because the share prices go on changing day by day. Today, the market is more
'volatile' means more fluctuating. The share prices may go up or go down. If the stock
market falls the share prices will go down and the investor will lose money in the
investment. However, the return on investment in shares is higher. The shares can be
sold in stock market and money can be collected within 3 to 4 days. Investment in
shares is not a tax saving investment.
2
OBJECTIVE
 Comparative analysis of the performance of ULIP’s, Mutual Funds and Sensex.
 To give a brief idea about ULIP, Mutual Fund and Sensex.
 Finding out the risks factors involved in the investment funds.
 Analyzing the factors determining the performance of the funds.
 Determining a suitable investment option for a person.
NEED OF THE STUDY

The main aim of the study is to provide a clear cut idea about the investment schemes
and to evaluate the performance and to study whether the investment policies are
profitable while comparing with each other. The study also provides an insight about
the factors determining the performance of the funds and also an overview about the
risks involved the funds.
SCOPE OF THE STUDY

The study will be conducted by collecting the return and risk rates of each investments
schemes and comparing it with each other as to know which of the investment is
profitable for a person. The focus of the study was on understanding the
preferences of investors with regard to investment avenues, their educational
qualifications and investment awareness levels. The study survey was conducted
during 2016-17 with the help of a well-structured questionnaire consisting of
relevant questions.
METHODS OF DATA COLLECTION:
3
Primary Source:
 Questionnaire
Secondary Source:
 Internet
 Booklet
 Policy Brochures
TOOLS USED FOR ANALYSIS:

1) Alpha
2) Beta
3) Treynor Ratio
4) Standard Deviation (SD)
5) Sharpe Ratio
6) Jensen Ratio
PERIOD OF THE STUDY:

Period of the study is 3 months ranging from February 2017 to March 2017
LIMITATIONS OF THE STUDY:
 Vast study
 Expensive
REVIEW OF LITERATURE
Sunayna Khurana (2008) analyzed the customer preference in life insurance industry
in India. She had analyzed the customer preference regarding plans and company,
4
their purpose of buying insurance policies, satisfaction level and their future plans for
the new insurance policy. Mr. K B S Kumar edited the book ‘Insurance customer
service’ of ICFAI University press it includes the chapters like ‘Tracking customer
satisfaction’ by Mr. Tom moormam. Jawaharlal and Nikhil Pareek analyzed ‘the
customer service in Life Insurance’ In Insurance Chronical (April 2004) he had analyzed
the different services of Life Insurance players in India. Narayan Krishnamurthy in
Outlook money (Sep 15, 2003) article analyzed the situational need of Insurance at
different situations and steps of life in his article ‘AT every step of Life…’
Navasiyam et al. (2006) analyzed the socioeconomic factors that are responsible for
taking life insurance policies and examined the preferences of the policyholders
towards various types of policies of LIC. From the analysis, it was found that factors
such as age, educational level and sex of the policyholders are insignificant. However,
income level, occupation and family size are significant while deciding on an insurance
policy. From the analysis, it is inferred that respondents belonging to the age group of
31 to 40years are much interested in taking a life insurance policy.
Pandian (2009) studied on Stock Market Volatility in Indian Stock Exchanges. She
collected the data from BSE Sensex and NSE Nifty for calculating return and volatility.
Sensex is a basket of 30 constituent stocks representing a sample of large, liquid and
representative companies. Due to its wide acceptance amongst the Indian investors,
Sensex is regarded the pulse of the Indian stock market. Nifty is a well diversified 50
stock index accounting for 24 sectors of the economy. Hence these two indices were
taken for the study. Data were taken from 1998 to 2008. Bank, corporate and personal
balance sheets are strong. Corporations are experiencing high profits. The stock market
is at a record high. Commodity markets are at their strongest. Lead manufacturing
sectors such as software, textiles and steel have yielded dividends. Spices exports have
reached beyond the targets. SEBI’s clarification on FIIs investment through
Participatory Notes strengthened the market. Rupee value appreciation flourished the
Indian stock market. The bull phases earned decent returns and the bear phases
incurred loss. In the bull phases volatilities were lower than bear
Rao,D.N.and Rao, S. B. (2009) analyzed the performance of the 47 Balanced and 72
Income Funds in terms of Return, Risk, Return per Risk and Sharpe ratio over the
past three years (2006, 2007 and 2008) during which period the Indian Stock Market
had witnessed much volatility. Further, the performance of these funds was compared
with that of the Market and Benchmark Indices. The Null Hypotheses were rejected
leading to the acceptance of Alternate Hypothesis in all the six cases, leading to
conclude that Market outperformed both the Balanced and Income Funds over Bull run
and 3-year periods while both the funds outperformed the Market over Bear run period
which confirms the popular belief of the Investors and Fund Managers in India.
Nair, K.K. (2009), conducted a study on Unit Linked insurance plans (ULIP) based on
secondary data available on its emergence, concepts, parameters, benefit, current
position and future outlook. The study suggested that India has a plethora of
opportunities for insurance companies because three-fourth of the population was
uninsured also majority of the investing population were small and medium investors
5
and majority of the investors lacked the expertise to directly enter the stock market and
earn good returns. The Study emphasized the about facts to be the reasons for
increased importance of ULIP. The study observed that ULIP will continue to be a good
investment option for the investors as it combines the multi aspects of insurance,
investment and tax benefit.
Khurana, A., Goyal, K. (2010) in their study ‘Exploration & Analysis of Structure and
Growth Performance of Selected ULIPs’ have examined and analyzed the Unit Linked
Insurance Plans of selected private life insurers on the basis of policy features, diverse
charges and the performance registered by each ULIP investment scheme. They
mention that every life insurer wants to capture the maximum share in the market and
is offering both Unit Linked Insurance Plans (ULIPs) and traditional plans. ULIPs
provide the customer a life cover as well as investment avenue. Today in 2010, ULIPs
are the stars, accounting for 80 percent of polices sold by life insurers and their rapid
rise has been fuelled to a large extent by the last bull runs in the stock market. There is
an enormous choice of ULIPs available in the insurance market. But such a wide range
of plans puzzle and confuse the buyers.
Barbole, A.N., Niranjan, B.N. (2011) in their paper ‘Retirement Plans: Ways and
Means’ state that once the Direct Tax Code (DTC) is implemented, then the tax benefit
shall be available only to pure term insurance. Tax benefit available to ULIPs, Pension
Plans will no longer be available after implementation of DTC. They have dealt with
finding alternatives for benefits like protection, aids to savings and tax benefits as
insurance, along with accumulating more and more wealth over the period of life
insured. The research is done basically to find the suitable retirement plan, for a 30 year
old person, capable of investing Rs.30000 per annum for this purpose. For this they
have analyzed the ULIPs and pension plans, Term insurance with the SIP in Mutual
funds, and compared these instruments to find the best one. The study is based on
secondary data, and to 25 avoid controversies, HDFC bank retirement plans are taken
into consideration. HDFC offers the following policies: HDFC Standard Life,
Endowment plus (ULIP), HDFC Mutual Fund (ELSS) – SIP, HDFC Pension Plus
(ULIP); and HDFC Term Plan. Returns on retirement plan are calculated for three
financial years for chosen retirement plan based on respective NAVs for ULIP, pension
plan and SIP. The returns, maturity benefit, death benefit, accumulation of wealth after
a specified time of every five years considering a term of 25 years is done. Based on all
these calculations and findings for all plans, the results are drawn. Calculation of
returns based on historical data, future value of money using time value concept and
effective rate of interest are used as tools. The analysis of the study shows the returns
for the retirement plan of the same amount for the for the same policy term. The
maturity benefit is higher in the case of Pension plan as compared to ULIPs and Mutual
fund. The death benefit in case of term insurance and a Mutual fund Systematic
investment plan fetches more than the retirement plan in ULIP or a pension plan for the
same premium paying term. Here the analysis also highlights the benefit in terms of
sum assured or fund value. If the death of assured takes place he will get Sum Assured
or Fund value whichever is higher. If death of person occurs during premium paying
term then the nominee will get more benefit through a retirement plan option of Term
Insurance plus a SIP in mutual fund but maturity benefits are more in ULIP and
6
Pension Plan. A pure term plan will not give any maturity benefit, but the amount
invested along with the term insurance in SIP will fetch more or less equal benefits to
common man. The study suggests that Common man can opt for the option of term
Plan along with a monthly SIP if he/she is interested in long term retirement plan and
ample returns. After maturity period one can withdraw amount by availing option of
SWP (Systematic Withdrawal Plan) which will enable the beneficiary to earn a regular
income from his retirement plan. Insurance companies can think of designing the
product which can insure the benefits combining the features of term plan and a
Monthly SIP.
Mostafa Soleimanzadeh (June 2006) in his article, “Learn how to invest in Mutual
Funds” discussed the risk and return in mutual funds. He stated that the risk and
return depend on each other, the greater the risks, the higher the potential return; the
lower the risk, the lower the expected return. Mutual funds try to reduce their risk by
investing in a diversified group of individual stocks, bonds, or other securities. He
concluded that the investment in stocks can get more return than mutual funds but by
investing in mutual funds, the risk is lower.
Kum Martin (October 2007) in his article, “Basics about Mutual Funds” discussed
about different types of mutual funds .He stated that the equity funds involve just
common stock investments. They are extremely risky but can end up earning a lot of
money. He concluded that the low risk in investment will not earn a lot of returns.
Mutual fund managers have to use various investment styles depending upon
investor’s requirement. 35 Most of the empirical evidences showed that mutual fund
investor’s purchase decision is influenced by past performance.
COMPANY PROFILE
Hedge equities ltd is one of the leading retail stock broking home which is running
successfully in the country. Hedge offers its customers a wide range equity related
services including trade execution on BSE, NSE, derivatives, depository services, online
trading, investment advice etc. The firm has online trading investment site
www.hedgeequities.com. The site gives access to superior content and transaction
facility to retail customers across the country. Known for its jargon-free, investor
friendly language and high quality research, the site has registered base of over
thousands of customers. The content rich and research oriented portal has stood out
among its contemporizes because of its steadfast dedication to offering customers best-
of- breed technology and superior market information. The objective has been let
7
customers make informed decisions and to simplify the process of investing in stocks.
Hedge equities have always believed in investing in technology to build business.
About Hedge Equities
Hedge equities is one of the leading Financial services company in India, specialized in
offering a wide range of financial products, tailor made to suit individual needs. As a
first step to make their presence Global, Hedge equities have initiated operations in
Middle East to carter to the vast Non Resident Indian (NRI) population in region. Ever
since their inception, they have spanned their presence all over India through their
Meticulous Research, High Brand awareness, Intellectual Management and Extensive
Industry Knowledge. Hedge believes in creating a new breed of investors who take
judicious decisions through them.
Mission
To create an ethical and sustainable financial services platform for our customer and
partner them to build business, to provide employees with meaningful work, self-
development and progression and to achieve a consistent and competitive growth in
profit and earnings for our shareholders and staff
Vision
Ever since its inception, Hedge equities have been a household name among the masses
owning our success to timely Professional financial assistance to our clients, this aptly
articulates our vision of ‘Evolving into a financial supermarket which will be a one stop
shop for all financial solutions’.
Promises of Hedge
 To Customers: To exist to serve and meet the customer’s needs. Hedge focus is to
create an ethical and sustainable financial services platform that places customer
unique needs and above everything else.
 To Employees: Hedge will provide our employees with a meaningful and rewarding
career with emphasis on self-development and career progression.
 To Shareholders: Hedge will spare no efforts to achieve a consistent and competitive
growth in earnings and profitability.
Backbone of Hedge
8
Team Hedge is a balanced mix of more than 15 years’ experience cutting across various
industries with a strong backbone in the financial markets. The board comprises of six
power houses in their respective fields – FedEx Securities, Baby Marine Exports,
Thakker Developers, Smart financial, SM Hedge (CFO, Videocon Industries) and
Padmesree MohanLal.
ORGANIZATIONAL STRUCTURE
9
UNDER GM
10
REGIONAL ORGANISATIONAL STRUCTURE
INDUSTRIAL PROFILE
11
FINANCIAL SERVICES IN INDIA
India has a diversified financial sector undergoing rapid expansion, both in terms of
strong growth of existing financial services firms and new entities entering the market.
The sector comprises commercial banks, insurance companies, non-banking financial
companies, co-operatives, pension funds, mutual funds and other smaller financial
entities. The banking regulator has allowed new entities such as payments banks to be
created recently thereby adding to the types of entities operating in the sector.
However, the financial sector in India is predominantly a banking sector with
commercial banks accounting for more than 64 per cent of the total assets held by the
financial system.
The Government of India has introduced several reforms to liberalize, regulate and
enhance this industry. The Government and Reserve Bank of India (RBI) have taken
various measures to facilitate easy access to finance for Micro, Small and Medium
Enterprises (MSMEs). These measures include launching Credit Guarantee Fund
Scheme for Micro and Small Enterprises, issuing guideline to banks regarding collateral
requirements and setting up a Micro Units Development and Refinance Agency
(MUDRA). With a combined push by both government and private sector, India is
undoubtedly one of the world's most vibrant capital markets.
IMORTANCE OF FINANCIAL SERVICES

It is the presence of financial services that enables a country to improve its economic
condition whereby there is more production in all the sectors leading to economic
growth.
The benefit of economic growth is reflected on the people in the form of economic
prosperity wherein the individual enjoys higher standard of living. It is here the
financial services enable an individual to acquire or obtain various consumer products
through hire purchase. In the process, there are a number of financial institutions which
also earn profits. The presences of these financial institutions promote investment,
production, saving etc.
Hence, we can bring out the importance of financial services in the following points:
1. Promoting investment
12
The presence of financial services creates more demand for products and the producer,
in order to meet the demand from the consumer goes for more investment. At this
stage, the financial service comes to the rescue of the investor such as merchant
banker through the new issue market, enabling the producer to raise capital.
The stock market helps in mobilizing more funds by the investor. An investment from
abroad is attracted. Factoring and leasing companies, both domestic and foreign enable
the producer not only to sell the products but also to acquire modern
machinery/technology for further production.
2. Promoting savings
Financial services such as mutual funds provide ample opportunity for different types
of saving. In fact, different types of investment options are made available for the
convenience of pensioners as well as aged people so that they can be assured of a
reasonable return on investment without much risks.
For people interested in the growth of their savings, various reinvestment
opportunities are provided. The laws enacted by the government regulate the working
of various financial services in such a way that the interests of the public who save
through these financial institutions are highly protected.
3. Minimizing the risks
The risks of both financial services as well as producers are minimized by the presence
of insurance companies. Various types of risks are covered which not only offer
protection from the fluctuating business conditions but also from risks caused by
natural calamities.
Insurance is not only a source of finance but also a source of savings, besides
minimizing the risks. Taking this aspect into account, the government has not only
privatized the life insurance but also set up a regulatory authority for the insurance
companies known as IRDA, 1999 (Insurance Regulatory and Development Authority).
4. Maximizing the Returns
The presence of financial services enables businessmen to maximize their returns. This
is possible due to the availability of credit at a reasonable rate. Producers can avail
various types of credit facilities for acquiring assets. In certain cases, they can even go
for leasing of certain assets of very high value.
Factoring companies enable the seller as well as producer to increase their turnover
which also increases the profit. Even under stiff competition, the producers will be in a
position to sell their products at a low margin. With a higher turnover of stocks, they
are able to maximize their return.
5. Ensures greater Yield

As seen already, there is a subtle difference between return and yield. It is the yield
which attracts more producers to enter the market and increase their production to
13
meet the demands of the consumer. The financial services enable the producer to not
only earn more profits but also maximize their wealth.
Financial services enhance their goodwill and induce them to go in for diversification.
The stock market and the different types of derivative market provide ample
opportunities to get a higher yield for the investor.
6. Economic growth
The development of all the sectors is essential for the development of the economy. The
financial services ensure equal distribution of funds to all the three sectors namely,
primary, secondary and tertiary so that activities are spread over in a balanced manner
in all the three sectors. This brings in a balanced growth of the economy as a result of
which employment opportunities are improved.
The tertiary or service sector not only grows and this growth is an important sign of
development of any economy. In a well-developed country, service sector plays a major
role and it contributes more to the economy than the other two sectors.
7. Economic development
Financial services enable the consumers to obtain different types of products and
services by which they can improve their standard of living. Purchase of car, house and
other essential as well as luxurious items is made possible through hire purchase,
leasing and housing finance companies. Thus, the consumer is compelled to save while
he enjoys the benefits of the assets which he has acquired with the help of financial
services.
8. Benefit to Government
The presence of financial services enables the government to raise both short-term and
long-term funds to meet both revenue and capital expenditure. Through the money
market, government raises short term funds by the issue of Treasury Bills. These are
purchased by commercial banks from out of their depositors’ money.
In addition to this, the government is able to raise long-term funds by the sale of
government securities in the securities market which forms apart of financial market.
Even foreign exchange requirements of the government can be met in the foreign
exchange market.
The most important benefit for any government is the raising of finance without
offering any security. In this way, the financial services are a big boon to the
government.
BANKING FINANCIAL SEVICES

1. Digitized operations:
14
We believe that banks that become digitally proficient will be able to enhance customer
engagement, ultimately achieving improved brand loyalty and profitability. As more
banks deliver digital services in the future, we will see a dramatic decline in paper-
based, manual processes. With the widespread use of world-class, online biometric
authentication infrastructure, the need for filling out paper applications or using
physical signatures to access services, could reduce significantly. As banks’ internal
processes become electronic, they can control risks better, deliver on customer requests
much faster and at much lower costs. Customers will be able to gain real- time,
granular visibility into the status of their requests.
2. Mastering payments and analytics on payments data:
Banks must be able to harness the top-quality payment infrastructure in the country to
upgrade the payment experience of their customers. This will be manifested most
starkly in the way customers pay utility bills and make payments at merchant shops.
Both are expected to be on mobile and with a single click. Winning banks will enable
their customers to safely make seamless payments, keep track of their expenses, and
make offers and suggestions to them, based on analysis of their payment transactions.
Winning banks will also master making contextual offers to customers based on the
knowledge of where customers are at the moment and what they are doing.
3. Driving bionic distribution:
Instead of being purely digital, future banks will be hybrid, compelled by customer
demand for such a proposition. They will most likely offer a “bionic model of
distribution” that blends digital with a human touch. Branches in the future could look
like an extension of digital channels, where one can seamlessly continue what one
initiates over digital channels.
4. Going the e-commerce way:
Digital sales are poised to become the cornerstone of future success. Today, banks feel
satisfied if their electronic channels are effectively used for transactions by customers.
However, in the future, banks will increasingly look to drive sales and acquire new
customers over online channels. In that sense, tomorrow’s successful banks could quite
possibly look like e-commerce companies.
5. Corporate transaction banking:
Today, the primary banker to a commercial enterprise is the one that lends it more
money. In the future, this role would go to the bank that provides enterprises with a
technology-based transaction platform for efficient liquidity and risk management.
Transaction banking could then become the centerpiece of commercial banking
relationships
6. Enabling capital markets access:

India will still need large-scale and long-term funding for infrastructure projects, such
as huge steel and power plants. The risks involved in lending to such big-ticket,
uncertain projects will not dissipate overnight. Banks that will be able to help clients
15
access capital markets in a cost-effective manner, instead of taking on the entire risk by
lending their own balance sheets will, in our view, gain a significant competitive
advantage.
7. Implementing next-generation credit methods:
Banks today rely on financial statements of borrowers to make decisions regarding
lending. However, the quality of financial statements, especially of small and medium
enterprises and self-employed individuals, continues to be suboptimal. The future
belongs to banks that will institute robust systems consolidating surrogate data from a
variety of sources so as to ascertain the credit-worthiness of borrowers. Banks will need
the capabilities to analyze transaction data in order to recognize early warning signs
and take proactive action against potentially risky clients.
8. Customer propositions that go beyond banking:
Winners of tomorrow will break free from traditional boundaries and offer non-
banking services and advice to customers. Consider the example of a home loan.
Today, banks enter the scene only when a customer starts looking for a home loan, after
having zeroed in on the property. But in the future, banks may need to engage with
customers much earlier, educating them and influencing their decision-making by
providing vital information. Likewise, banks could, in the future, become customers’
trusted platform for getting information for making key decisions like selecting the
right school for children or choosing a vehicle or a healthcare plan. Banks must think
beyond their conventional offerings to serve as a facilitator, creating marketplaces that
permit buyers and sellers to come together.
FINANCIAL INTERMEDIARIES
Financial Intermediaries are performing various roles in addition to what they used to
do earlier by innovating and upgrading themselves in many ways. Some of the
16
important roles they are expected to perform in the 21st century is to help in the
reduction of Poverty, Restructuring of firms in distress, Markets for firm's Assets and
so on.
The term financial intermediary may refer to an institution, firm or individual who
performs intermediation between two or more parties in a financial context. Typically
the first party is a provider of a product or service and the second party is a consumer
or customer.
Financial intermediaries are banking and non-banking institutions which transfer funds
from economic agents with surplus funds (surplus units) to economic agents (deficit
units) that would like to utilize those funds. FIs are basically two types: Bank Financial
Intermediaries, BFIs (Central banks and Commercial banks) and Non-Bank Financial
Intermediaries, NBFIs (insurance companies, mutual trust funds, investment
companies, pensions funds, discount houses and bureau de change).
Financial intermediaries can be:
1. Banks;
2. Building Societies;
3. Credit Unions;
4. Financial adviser or broker;
5. Insurance Companies;
6. Life Insurance Companies;
7. Mutual Funds; or
8. Pension Funds.
The borrower who borrows money from the Financial Intermediaries/Institutions pays
higher amount of interest than that received by the actual lender and the difference
between the Interest paid and Interest earned is the Financial
Intermediaries/Institutions profit.
Financial Intermediaries are broadly classified into two major categories:

1) Fee-based or Advisory Financial Intermediaries
2) Asset Based Financial Intermediaries.
17
Fee Based/Advisory Financial Intermediaries: These Financial Intermediaries/
Institutions offer advisory financial services and charge a fee accordingly for the
services rendered.
Their services include:
i. Issue Management
ii. Underwriting
iii. Portfolio Management
iv. Corporate Counseling
v. Stock Broking
vi. Syndicated Credit
vii. Arranging Foreign Collaboration Services
viii. Mergers and Acquisitions
ix. Debentive Trusteeship
x. Capital Restructuring
ASSET-BASED Financial Intermediaries: These Financial Intermediaries/Institutions
finance the specific requirements of their clientele. The required infra-structure, in the
form of required asset or finance is provided for rent or interest respectively. Such
companies earn their incomes from the interest spread, namely the difference between
interest paid and interest earned.
FINANCIAL INSTITUTIONS
The financial institutions may be regulated by various regulatory authorities, or may be
required to disclose the qualifications of the person to potential clients. In addition,
regulatory authorities may impose specific standards of conduct requirements on
financial intermediaries when providing services to investors.
Financial Institutions in India are divided in two categories. The first type refers to the
regulatory institutions and the second type refers to the intermediaries. The regulators
are assigned with the job of governing all the divisions of the Indian financial system.
These regulatory institutions are responsible for maintaining the transparency and the
national interest in the operations of the institutions under their supervision.
The regulatory bodies of the financial institutions in India are as follows:

 Reserve Bank of India (RBI)
 Securities and Exchange Board of India (SEBI)
 Central Board of Direct Taxes (CBDT)
18
 Central Board of Excise & Customs
Apart from the Regulatory bodies, there are the Intermediaries that include the banking
and non-banking financial institutions.
 Unit Trust of India (UTI)
 Securities Trading Corporation of India Ltd. (STCI)
 Industrial Development Bank of India (IDBI)
 Industrial Reconstruction Bank of India (IRBI), now (Industrial Investment Bank

of India)
 Export – Import Bank of India (EXIM Bank)
 Small Industries Development Bank of India (SIDBI)
 National Bank for Agriculture and Rural Development (NABARD)
 Life Insurance Corporation of India (LIC)
 General Insurance Corporation of India (GIC)
 Shipping Credit and Investment Company of India Ltd. (SCICI)
 Housing and Urban Development Corporation Ltd. (HUDCO)
 National Housing Bank (NHB)
19
FINANCIAL MARKET IN INDIA
 India Financial Indices - BSE 30 Index, various sector indexes, stock quotes,
Sensex charts, bond prices, foreign exchange, Rupee & Dollar Chart
 Indian Financial market news
 Stock News - Bombay Stock Exchange, BSE Sensex 30 index, S&P CNX-Nifty,
company information, issues on market capitalization, corporate earnings
statements
 Fixed Income - Corporate Bond Prices, Corporate Debt details, Debt trading
activities, Interest Rates, Money Market, Government Securities, Public Sector
Debt, External Debt Service
 Foreign Investment - Foreign Debt Database composed by BIS, IMF, OECD,&
World Bank, Investments in India & Abroad
 Global Equity Indexes - Dow Jones Global indexes, Morgan Stanley Equity
Indexes
 Currency Indexes - FX & Gold Chart Plotter, J. P. Morgan Currency Indexes
 National and Global Market Relations
 Mutual Funds
 Insurance
 Loans
 Forex and Bullion
INDIAN CAPITAL MARKET

The capital market is a vital of the financial system. Capital market provides the
support of capitalism to the country. The wave of economic reforms initiated by the
government has influenced the functioning and governance of the capital market. The
Indian capital market is also undergoing structural transformation since liberalization.
The chief aim of the reforms exercise is to improve market efficiency, make stock
market transactions more transparent, curb unfair trade practices and to bring our
financial markets up to international standards. Further, the consistent reforms in
Indian capital market, especially in the secondary market resulting in modern
technology and online trading have revolutionized the stock exchange.
Capital market concerned with the industrial security market, government securities
markets, and long term loan market. Capital market deals with long term loan market.
It supplies long-term and medium term funds. It deals with shares, stocks debentures
and bonds. Security dealt in capital markets are long-term securities. It provides a
20
market mechanism for those who have saving and to those who have saving and to
those who need funds for productive investments. The capital market aids economic
growth by mobilizing the savings of the economic sector and directing the same
towards channels of productive uses. Companies turn to them to raise funds needed to
finance for the infrastructure facilities and corporate activities.
The capital market is source of income for investors. When stock of other financial
assets rise in value, investors become wealthier, often they spend some of this
additional wealth boost sales and promoting economic growth. Stock value reflects
investor reactions to government policy as well, if the government adopts policies that
investors believe will hurt the economy and company profits, vice-versa.
INDIAN STOCK EXCHANGES

1. Bombay Commodity Exchange (erstwhile the Bombay Oilseeds and Oils
Exchange)
2. Bombay Stock Exchange (BSE)
3. Calcutta Stock Exchange (CSE)
4. Cochin Stock Exchange
5. Inter-Connected Stock Exchange of India (ISE)
6. Multi Commodity Exchange of India (MCX)
7. National Commodity & Derivatives Exchange (NCDEX)
8. National Stock Exchange of India (NCE)
9. OTC Exchange of India (Exchange for Technology and Growth Stocks)
10. Pune Stock Exchange (PSE)
SEBI (SECURITIES AND EXCHANGE BOARD OF INDIA)

Securities Exchange Board of India (SEBI) was set up in 1988 to regulate the functions
of securities market. SEBI promotes orderly and healthy development in the stock
market but initially SEBI was not able to exercise complete control over the stock
market transactions.
It was left as a watch dog to observe the activities but was found ineffective in
regulating and controlling them. As a result in May 1992, SEBI was granted legal status.
SEBI is a body corporate having a separate legal existence and perpetual succession.
21
Objectives of SEBI:
The overall objectives of SEBI are to protect the interest of investors and to promote the
development of stock exchange and to regulate the activities of stock market. The
objectives of SEBI are:
1. To regulate the activities of stock exchange.
2. To protect the rights of investors and ensuring safety to their investment.
3. To prevent fraudulent and malpractices by having balance between self-regulation
of business and its statutory regulations.
4. To regulate and develop a code of conduct for intermediaries such as brokers,
underwriters, etc.
INDEX
From among the stocks listed on the exchange, some similar stocks are selected and
grouped together to form an index. This classification may be on the basis of the
industry the companies belong to, the size of the company, market capitalization or
some other basis. For example, the BSE Sensex is an index consisting of 30 stocks.
Similarly, the BSE 500 is an index consisting of 500 stocks.
The values of the grouped stocks are used to calculate the value of the index. Any
change in the price of the stocks leads to a change in the index value. An index is thus
indicative of the changes in the market.
Some of the important indices in India are:
i. Benchmark indices – BSE Sensex and NSE Nifty
ii. Sectoral indices like BSE Bankex and CNX IT
iii. Market capitalization-based indices like the BSE Small cap and BSE Midcap
iv. Broad-market indices like BSE 100 and BSE 500
CORPORATE ACTIONS
These are initiatives taken up by a corporate entity that bring in a
change to its stock. There are many types of corporate actions that an entity can choose
to initiate. A good understanding of these corporate actions gives a clear picture of the
company’s financial health, and also to determine whether to buy or sell a particular
stock.
A corporate action is initiated by the board of directors, and approved by the
company’s shareholders.
I. Dividend: Dividends are paid by the company to its shareholders. Dividends are
paid to distribute the profits made by the company during the year. Dividends are
paid on a per share basis. For example, during the financial year 2012-13 Infosys
had declared a dividend of Rs.42 per share. The dividend paid is also expressed as a
percentage of the face value. In the above case, the face value of Infosys was Rs.5/-
22
and the dividend paid was Rs.42/- hence the dividend payout is said to be 840%
(42/5).
II. Buyback of shares: A buyback can be seen as a method for company to invest in
itself by buying shares from other investors in the market. Buybacks reduce the
number of shares outstanding in the market, however buyback of shares is an
important method of corporate restructuring. There could be many reasons why
corporate choose to buy back shares. When a company announces a buy back, it
signals the company’s confidence about itself. Hence this is usually a positive for
the share price.
III. Rights Issue: The idea behind a rights issue is to raise fresh capital. However
instead of going public, the company approaches their existing shareholders Think
about the rights issue as a second IPO but for a select group of people (existing
shareholders). The rights issue could be an indication of a promising new
development in the company. The shareholders can subscribe to the rights issue in
the proportion of their shareholding
IV. Stock Split: The word stock split- for the first time sounds weird but this happens
on a regular basis in the market. When a stock split is declared by the company the
number of shares held increases but the investment value/market capitalization
remains the same similar to bonus issue. The stock is split with reference to the face
value. Suppose the stock’s face value is Rs.10, and there is a 1:1 stock split then the
face value will change to Rs.5. If you owned 1 share before split you would now
own 2 shares after the split.
V. Bonus Issue: A bonus issue is a stock dividend, allotted by the company to reward
the shareholders. The bonus shares are issued out of the reserves of the company.
These are free shares that the shareholders receive against shares that they currently
hold. These allotments typically come in a fixed ratio such as, 1:1, 2:1, 3:1 etc.
VI. Money market: The Money market in India correlation for short-term funds with
maturity ranging from overnight to one year in India including financial
instruments that are deemed to be close substitutes of money. Similar to developed
economies the Indian money market is diversified and has evolved through many
stages, from the conventional platform of treasury bills and call money to
commercial paper, certificates of deposit, repos, forward rate agreements and most
recently interest rate swaps
STOCK BROKING FIRMS

23
Some of the broking firms are as follows:
1. Sharekhan Limited: Share Khan is an online trading company of SSKI group. It has
presence in over 170 cities of the country and India’s most trusted brokerage firms.
Head Office: Mumbai, India
Number of Terminals: 2000 to 2500
Number of Sub Brokers: 200 to 300
Number of Branches: 510 offices
Number of Employees: 1000 to 2000
Account Opening Fee: Rs 750/- for Classic Account and Rs 1000/- for Trade Tiger
2. India Bulls: An India bull was founded by Sameer Gehlaut in the year 2000. India
bull has a net worth of Rs 17,000 crore.
Head Office: Gurgaon, Haryana
Number of Branches: 414 to 450
Account Opening Fee: Rs 1200/- (Rs 250/- for equity + Rs 200/- for Demat + Rs 750/-
for software)
3. Angel Broking Limited: Angel is counted among top 3 broking firms in India. It was
founded in the year 1987 and it offers various services like e-broking, commodity
trading and other wealth management services.
Account Opening Fee: Stock Trading Account + Demat Account = Rs 500/-
Commodity Trading = Rs 625/-
5. Reliance Money: Reliance money is India’s number one broking firm. It has over 3.5
million customers with more than 6000 outlets around the country.
24
Head Office: Lower Parel, Mumbai
Account Opening Fee: Trading + Demat = Rs 750/- and for foreign nationals it is Rs
1000/-
5. India info line Limited: India Info line was started in year 1996 and has over 2
million customers.
Head Office: Andheri, Mumbai
Account Opening Fee: Trading + Demat = Rs 750/-
6. Kotak Securities Limited: Kotak Securities was incorporated in 1994 and it is
subsidiary of Kotak Mahindra.
Head Office: Nariman Point, Mumbai
Account Opening Fee: Derivative brokerage Rs 150 per contract and delivery
brokerage is .45%
7. ICICI Direct: ICICI Direct is a stock trading company of ICICI bank.
Head Office: Mumbai, Maharashtra
25
Account Opening Fee: Rs 750/- for share trading account, wise investment, active
trader account
8. Motilal Oswal Securities: Motilal Oswal securities Ltd was founded in 1987 and
considered to be best local brokerage firm.
Head Office: Mumbai, Maharashtra
Account Opening Fee: Rs 600/- with first year Amc and from next year only Rs 400/-
9. HDFC Securities: An HDFC security was established 10 years back. It has over a
million customers.
Account Opening Fee: Minimum Brokerage per order Rs 25/- for resident and NRI.
Subject to ceiling of 2.5% of total traded value
10. Aditya Birla Money: There are seven companies representing Aditya Birla Money
are Birla Sun Life Insurance Company, Birla Sun Life Asset Management Company,
Aditya Birla Money, Birla Sun Life Distribution Company, Aditya Birla Finance, Birla
Insurance Advisory and Broking Services
Account Opening Fee: Account charges are around Rs 750/- for online cum offline
trading and Demat A/C
INVESTMENT
Investment is the employment of funds with the aim of getting return on it. In general
terms, investment means the use of money in the hope of making more money. In
finance, investment means the purchase of a financial product or other item of value
26
with an expectation of favorable future returns. Investment of hard earned money is a
crucial activity of every human being. Investment is the commitment of funds which
have been saved from current consumption with the hope that some benefits will be
received in future. Thus, it is a reward for waiting for money. Savings of the people are
invested in assets depending on their risk and return demands. Investment refers to the
concept of deferred consumption, which involves purchasing an asset, giving a loan or
keeping funds in a bank account with the aim of generating future returns.
MUTUAL FUNDS
Definition: A mutual fund is a professionally-managed investment scheme, usually
run by an asset management company that brings together a group of people and
invests their money in stocks, bonds and other securities.
Meaning: A mutual fund is an investment vehicle made up of a pool of funds collected
from many investors for the purpose of investing in securities such as stocks, bonds,
money market instruments and similar assets. Mutual funds are operated by money
managers, who invest the fund's capital and attempt to produce capital gains and
income for the fund's investors. A mutual fund's portfolio is structured and maintained
to match the investment objectives stated in its prospectus.
Types of mutual funds by structure: Mutual funds can be classified into open ended,
closed ended and interval schemes based on how they accept subscriptions from
investors.
Open ended mutual funds: These are most common funds available. Fund houses buy
and sell units of mutual funds directly from investors at prevailing Net Asset Value
(NAV). These funds provide exit options for investors at NAV, which is actual worth of
unit of mutual funds. Fund houses publish NAV daily.
Close ended Mutual Funds: After closing of New Fund Offer (NFO), investors cannot
buy or sell their units directly with fund house. Units of close ended mutual funds are
listed and traded in stock exchanges like normal shares. They are not liquid as trading
volumes are very less and most of the times, the traded price is less than fair price of
the unit.
Interval Funds: Interval funds are funds with features of both open ended and close
ended funds. They are close funds with an option to transact with funds directly for
certain pre mentioned periods. When they are open for subscription / redemption
during certain intervals (periods), they have open ended fund nature and rest of the
time close ended fund nature.
Types of Mutual Fund by investment objective:

Growth Schemes: Growth schemes have investment objective to generate wealth in
long term for investors. These are most suitable for investors who are looking for
accumulation of wealth for longer period of time. Usually these are suitable for
27
investors who are looking for goal based investment like child education, own house
and so on.
Income Schemes: Income schemes are for people who are looking for regular income
from their accumulated wealth. These are suitable for people who are looking for
regular income for their regular needs. For example, for retired people who wish to
invest certain amount and have a regular income from them? Usually, incomes are paid
by the way of dividends and pay out of dividends are not guaranteed as required by
SEBI.
Balanced Fund Schemes: As the name indicates these funds try to balance the
components of capital appreciation, safety of capital and incomes. To achieve this
balance, these funds invest in a variety of assets to achieve the balance.
Money Market Schemes: Money market schemes are highly liquid funds for
investments as low as a day. These are used by companies and organizations as a tool
of treasury management to manage their liquid funds and earn income on them.
MUTUAL FUNDS BASED ON UNDERLYING ASSETS
Equity Funds:
Equity funds invest predominantly in equities with a small portion in money market
securities. The objective is to generate potentially superior returns by taking on higher
risk. As these funds invest in stocks, returns do fluctuate thereby posing higher risk.
Therefore, these funds are not for risk-averse investors. Equity funds can be further
categorized as:–
Diversified funds:
These funds invest in equity of companies across market capitalizations (the market
value of a company’s shares) and sectors. Equity Linked Savings Schemes (ELSS) and
the Rajiv Gandhi Equity Schemes (RGESS) are variants of these, offering tax benefit on
the investment. However, you need to keep in mind that you need to stay invested for
three years to be eligible for the tax benefit.
Sectorial funds:
These funds invest in companies of a particular sector. For instance, an IT sector fund
will invest in just IT companies while a banking sector fund will invest only in banking
stocks. These funds are relatively of higher risk due to their sector concentration. And
then there are the thematic funds like infrastructure funds which invest in a particular
investment theme.
Index funds:
28
These invest in equities of companies forming part of a stock market index. The fund
invests in these companies in the same proportion as their weightage in the index.
Thus, returns offered by these funds largely match the returns generated by the
underlying index, subject to certain tracking error. For instance, an index fund which is
based on the BSE Sensex will invest in stocks forming part of the Sensex in the same
proportion or ratio as the constituent stocks in the Sensex.
Debt Funds:
These funds invest in fixed income bearing instruments like corporate bonds,
debentures, government securities, commercial paper and other money market
instruments. These funds are relatively low-risk-low-return schemes. The returns from
debt funds include interest receipts and capital gains. If you desire relatively stable
performance, these schemes are right for you. Debt funds can be further categorized
into:-
Money market or liquid income schemes: Liquid or money market funds invest in
highly liquid money market instruments for very short investment periods such as a
few days. These funds are suitable for parking surplus money for a very short period of
time.
Gilt funds: Gilt funds invest in sovereign securities like central and state government
bonds. These carry no credit risk but are subject to interest rate risks. The prices of these
securities fluctuate with interest rate movements. These funds have varying investment
periods to suit investor needs.
Income funds: These funds invest in government securities, corporate bonds and
debentures apart from money market instruments. These funds carry a slightly higher
risk than gilt funds as they are exposed to credit risk. Income funds come with various
investment horizons like ultra-short term, short term, medium term and long term
funds to suit varying investor needs.
Fixed Maturity Plans (FMP): These have a fixed tenure like deposits, though no return
is promised or guaranteed. These funds invest in securities that mature in line with the
fund’s maturity.
Hybrid Funds
These funds invest in equities and debt investments in varying proportions. Balanced
funds invest predominantly (more than 65% of the corpus) in equities with the rest in
debt. These are relatively more stable than pure equity funds.
Monthly Income Plans (MIPs) invest about 75 to 80% of their corpus in debt and the
rest in equities. The objective is to aim for steady returns offered by debt with possible
capital appreciation offered by equity to provide a kicker to the returns.
29
There are also funds called Asset Allocation funds that vary their equity exposure
widely from 0% to 90% based on the market outlook. These funds do not have a fixed
asset allocation.
Other Types of Mutual Funds
Tax Savings Schemes: Tax Savings schemes are popularly known as Equity Linked
Savings Schemes (ELSS). They are closed mutual funds which invest primarily in
equity related instruments to benefit from available tax concession under Section 80C
of income tax act. All ELSS investments with a 3 year lock in period are eligible for tax
exemption up to 1,00,000 rupees per year.
Index Schemes: As the name indicates, these funds invest in index funds by following
passive management. Advantages of index schemes are lesser fund management fees.
They typically provide returns that of index they are bench marked. Usually returns
are little less than index returns (Known as Tracking Error) due to fund fees, necessity
to keep liquid cash which is not invested etc.,
Sector Schemes: Sector Schemes invest in a particular sector. Little variation of sector
funds are theme funds which invest in a related theme rather than in a single sector.
These are high risk funds as every sector has its life cycle with ups and downs. An
example will be infrastructure funds which did not perform since 2008 market collapse.
Fund of Funds: These funds invest in selected mutual funds and have the advantage
of further diversification of different investment styles of different fund managers.
Although direct expenses with funds are less as they do not carry out transactions,
research etc., they need to bear the expenses of other funds in the proportionate ratio of
their investment.
Risks associated with mutual funds
Risks associated with mutual funds are an outcome of the investment in the underlying
asset classes, primarily equity and debt.
Equity mutual funds invest in equities and related instruments, and are exposed to
market, company-specific, macro-economic and the concentration risks.
Market risk – Equity fund investments enable investors to capitalise on reasonable
returns generated by the underlying asset class. On the flip side, value gets eroded
during market volatility or downturn. Often the downside risk is limited owing to
diversification across stocks and sectors, and the fund manager’s tactical calls to churn
the portfolio in response to market movements.
Company-specific risk – Equity funds often invest in companies which are likely
future leaders. Failure of such businesses to take off is a grave risk. This is more evident
among small cap companies that are more vulnerable than large and mid-caps to a
business or economic downturn. Underperformance of the company weakens the
scheme’s NAV.
Macro-economic risk – The equity market’s performance reflects developments in the
economy (interest rate change, inflation and fiscal deficit trend, currency movement,
political stability, central bank policies and tax rates) which, in turn, impacts equity
30
funds. Global factors (economic developments in other countries, policy stance and
geopolitical events), too, impact equity funds. Country-specific factors have a greater
impact on international equity funds.
Liquidity risk – Such type of risk arises in case of lower trading volume of stocks,
which makes it difficult to exit the stock. Liquidity risk is more prevalent in case of
penny stocks (extremely low value).
Concentration risk – Some variants of mutual funds cater to a particular segment of the
market, such as small or mid-cap or particular sector or stocks. For instance, sectoral
funds invest in a particular sector or thematic funds invest in stocks catering to a
selective theme such as infrastructure or commodity. Such an investment approach can
help harness returns if the sectors perform well, but at the same time carries high risk
in case of poor performance of that segment.
Debt mutual funds invest in government securities, corporate bonds, money market
instruments and other debt instruments across tenures. Nevertheless, one should
consider interest rate and credit risks too. Careful evaluation of funds, based on the
individual risk appetite, will help investors select the right funds and minimize losses.
Credit risk – An investor should assess the bond issuer’s creditworthiness and ability
to make timely payments (principal and interest). He/she can refer to credit ratings
issued by external agencies; lower rating denotes higher credit risk and vice versa. A
fall in credit rating drags down the price of the debt instrument and, thus, adversely
impacts its net asset value (NAV). Investors can gauge risks by looking at the credit
profile of the debt portfolio. Large investments in sovereign papers or highly-rated debt
imply lower credit risk exposure. Typically, gilt funds have lower credit risk as they
invest only in government securities vis-à-vis income funds which invest in
government securities and corporate bonds.
Interest rate risk - Price of a debt instrument varies inversely with interest rate/yield.
The net asset value (NAV) of a debt fund replicates prices of the underlying securities.
Hence, when interest rates fall, NAV rises. When rates ease, long-term debt funds
benefit more than short-term ones, as they hold longer-tenor securities.
In contrast, prices of short-term funds drop to a lesser extent, as securities mature faster
and new securities lock into the lower yield. Investors can measure interest rate risk
through modified duration - a measure of a bond’s sensitivity to interest rate
movements. Higher the modified duration, more the price fluctuation.
Liquidity risk – This is typically related to how saleable a security is in the market. A
debt fund may face liquidity risk if the fund manager finds it difficult to sell it, owing
to lack of demand. Funds that have portfolios of low credit quality are more exposed to
such a risk. Liquidity risk is especially evident in India, where institutional participants
dominate the debt market, and retail investors are few.
Reinvestment risk – This risk arises when cash flows are reinvested at a rate that is less
than the coupon rate of the bond. In the falling interest rate scenario, investors may face
higher risk as proceeds will be reinvested at a lower rate, thereby reducing returns.
31
Advantages of Mutual Funds
Professional management: Mutual Fund managers are professionally trained and
experienced, constantly watching and managing their fund. Remember, though: the
guy on the other side is not Warren Buffett. He might come close, but he’s not Warren.
Instant diversification: Since one of the primary rules of investment is to diversify
portfolios, a mutual fund can be a simple and successful way to accomplish this goal.
With one investment, you will own shares of stock in many corporations. A mutual
fund portfolio combines a variety of stocks, bonds, commodities and cash, mutual
funds are, by nature, diversified. If one stock or asset goes down, there will be others
that compensate for it. This just means that the potential for losses is spread out
conservatively.
Liquidity: If you ever want to get out of a mutual fund, all you have to do is instruct
your broker or financial advisor. They can sell it immediately. Normally, the funds take
a day to come back into your account, but that’s not so bad. Comparatively, individual
stocks would take much longer to liquidate.
Match your style: You can find a mutual fund that matches almost exactly what you
are looking for from an investment. This could be related to both your risk tolerance
and your investment horizon.
Disadvantages of Mutual Funds

Management Fees: Mutual fund companies have to pay salaries and marketing
expenses and they always get paid FIRST before the investors/owners get paid!
Management fees are one of the key metrics to watch out for as an investor because
they can quickly and devilishly eat into your profits over time. Do higher management
fees correlate to higher returns and better performance? As it turns out, the answer is
NO. In fact, many studies have been done that show higher fees generally correlate to
lower performance.
Locked in Clause: There are two different mutual fund structures - one allows you to
go in and out at any time. The other one is locked in for 5-7 years. With this one, if you
try to take your money out earlier, you’ll get charged for it. Make sure to ask your
financial advisor which type you are investing in.
Wasted Cash: Because people occasionally want to withdraw their mutual funds, there
must always be funds available - in cash - for payouts. When money’s in cash, it’s not
collecting interest. Since this comes from a portion of the investment funds, it means it
doesn’t collect any interest for you. That amount of cash is better off sitting in your
bank account.
Mutual Fund Charges: Mutual funds charge fees when you redeem your money. There
are also “operating expense” fees. This is a percentage of what it costs to run the fund.
Let’s say you invested Rs10,000, and the operating fees are 2%. This means that you are
effectively paying Rs200 every year in operating charges.
HOW MUTUAL FUNDS WORK
32
A mutual fund is a collection of investments, such as stocks, bonds and other funds
owned by a group of investors and managed by a professional money manager. The
investment objective of the mutual fund determines what types of securities it buys. A
mutual fund can focus on specific types of investments. For example, a fund may invest
mainly in government bonds, stocks from large companies, or stocks from certain
countries. Or, it may invest in a variety of investments.
When you buy a mutual fund, you're pooling your money along with other investors.
You put money into a mutual fund by buying units or shares of the fund. As more
people invest, the fund issues new units or shares.
The investments in a mutual fund are managed by a portfolio manager. They manage
the fund on a day-to-day basis, deciding when to buy and sell investments according to
the investment objectives of the fund.
Future of Mutual Funds in India-Facts on growth
Important aspects related to the future of mutual funds in India are -
 The growth rate was 100 % in 6 previous years.
 The saving rate in India is 23 %.
 There is a huge scope in the future for the expansion of the mutual funds
industry.
 A number of foreign based assets management companies are venturing into
Indian markets.
 The Securities Exchange Board of India has allowed the introduction of
commodity mutual funds.
 The emphasis is being given on the effective corporate governance of Mutual
Funds.
 The Mutual funds in India has the scope of penetrating into the rural and semi
urban areas.
 Financial planners are introduced into the market, which would provide the
people with better financial planning.
33
The Organization of a Mutual Fund contains entities such as
Mutual Fund Shareholders: The Mutual Fund Shareholders, like the other
shareholders have the right to vote. The voting rights include, the right to elect
directors during the directorial elections, voting right to approve the alterations
investment advisory contract pertaining to the fund and provide approval for changing
investment objectives or policies.
Board of directors: The Board of directors supervise the functional activities, which
include approval of the contract Asset Management Company and other various
service providers.
Investment Management Company or Asset Management Company: This body
handles the mutual fund portfolio as per the objectives and policies mentioned in the
prospectus of the mutual funds.
Custodians: The custodians protect the portfolio securities. Mostly qualified bank
custodians are used for mutual funds.
Transfer Agents: The transfer agent for the purpose of maintaining records and similar
functions. The maintenance of the shareholder's accounts, calculation of dividends to
be disbursed, sending information to the shareholders about the account statements,
notices, and income tax information. Some of the transfer agent sends information to
the shareholders about the shareholder transactions and account balances. They also
maintain customer service departments in order to cater the queries of the
shareholders.
SEBI: The primary aim of the Securities Exchange Board of India is to protect the
interest of the mutual fund investors. The SEBI has formulated several policies for
better functioning and controls the mutual funds. In the year 1993, SEBI issued
guidelines pertaining to the mutual funds. All mutual funds, private sector and public
sector are regulated by the guidelines of the SEBI. The Asset Management Company
managing the funds has to be approved by the SEBI.
ADVANTAGES OF STOCK EXCHANGE

Long Term Finance: Banks may not be willing to provide long-term finance, so, the
companies needing such financing turn to the public, inviting people to lend them
money or take a share in the business in exchange for future profits. This they do by
issuing stocks and shares in the business through stock exchanges. By doing so, they
can mobilize the savings of individuals and institutions. Thus, the Stock Exchange
exists to provide a channel through which these savings can reach those who need
finance.
Unlimited Opportunity of investment: Everyone wants to save or invest in one form
or another. The Stock Exchange provides a way in which money can be put to work.
When the saver in shares needs his money back, he does not have to go to the company
with whom he originally placed it. Instead, he sells his shares to some other who is
34
seeking to invest his money through the Stock Exchange. Stock exchanges have, thus,
found different solutions to the problem of providing contiguous and free market
insecurities, with varying degrees of success.
Economic Stability: The economic stability of a country is essential for the growth of
healthy industrial atmosphere and participations of people in productive economic
investments. Capital is the lifeblood for industries. The Government is providing the
major equity for further expansion or to survive in a different economic condition. The
stock Exchange provides assistance to the enterprises by creating avenues for selling
shares and stocks to the public to generate fund. Thus, the Stock exchange is a unique
yardstick to assess the industrial activity and investment opportunities of a country.
Investment opportunities to small savers: The Stock Exchange is a system of
arrangement which, in combination with other institutions, patterns the capital market
of an economy. In a free economy, the stock exchange is the pivot of the money market.
It thus provides investment opportunities to small savers.
Raising of new capital: Companies, however, do not get their shares listed on the stock
exchange automatically and, though the actual listing fees payable to the stock
exchange are not big, the cost to the company of meeting the exchanges may be
considerable. A company willingly accepts these responsibilities because access to the
Stock exchange brings benefits in the form of better marketability for their shares and,
thereby, assists in the raising of new capital.
Easy to participate: The Stock Exchange has no statutory authority, or monopoly, over
anybody and no legal powers other than those which individual companies freely
contract to give. Members of the Stock Exchange agree to abide by its rules as a
condition of membership and companies do so by signing the listing agreement or
general undertaking.
DISADVANTAGES
Unethical practices: Many unethical practices are rampant in Indian stock markets.
Prices of shares are artificially increased before rights issues by circular trading.
Gullible members of public who buy such shares find the prices of such shares
dropping greatly and lose their money.
Misinformation: Funds are raised from investors promising investment in projects
yielding high returns. But some promoters divert the money to speculative activities
and other personal purposes. Investors who invest their money in such companies
ultimately lose their money.
Insider trading: Insider trading is a common occurrence in many stock exchanges.
Insiders who come to know privileged information use it either to buy or sell shares
and make a quick profit at the expense of common shareholders. Though many rules
and regulations have been formulated to curb insider trading, it is a continuing
phenomenon.
35
Excessive Speculation: There is excessive speculation in some shares which artificially
results in increasing or decreasing the prices. Increase or fall in prices do not have any
relationship with the fundamental strengths or weakness of the company. Many small
investors are unaware of this fact. They buy shares based on price movements and
ultimately suffer losses.
Prevalence of Price Rigging: Price rigging is a common evil plaguing the stock markets
in India. Companies which plan to issue securities artificially try to increase the share
prices, to make their issue attractive as well as enable them to price their issue at a high
premium. Promoters enter into a secret agreement with the brokers.
WORKING OF ULIPS
When the policy holder decides the amount of premium to be paid and the amount of
life cover he wants from the ULIP, the insurer deducts some portion of the ULIP
premium upfront. This portion is known as the Premium Allocation charge, and varies
from product to product. The rest of the premium is invested in the fund or mixture of
funds chosen by policy holder. Mortality charges and ULIP administration charges are
thereafter deducted on a periodic (mostly monthly) basis by cancellation of units,
whereas the ULIP fund management charges are adjusted from NAV on a daily basis.
Since the fund of policy holder’s choice has an underlying investment – either in equity
or debt or a combination of the two – the fund value will reflect the performance of the
underlying asset classes. At the time of maturity of the plan, the policy holder entitled
to receive the fund value as at the time of maturity.
TYPES OF ULIPS
One of the big advantages that a ULIP offers is that whatever be your specific financial
objective, chances are that there is a ULIP which is just right for you. The figure below
gives a general guide to the different goals that people have at various age-groups and
thus, various life-stages.
Depending on your specific life-stage and the corresponding goal, there is a ULIP
which can help you plan for it.
ULIPs for retirement planning
Retirement is the end of active employment and brings with it the cessation of regular
income. Today an increasing number of people have stated planning for their
retirement for below mentioned reasons:-
 Almost 96% of the working population has no formal provisions for retirement
 With the growing nuclearisation of family structure, traditional support system
of the younger earning members – is no longer available
 Developments in the healthcare space has lead to an increase in life expectancy
 Cost of living is increasing at an alarming rate
36
 Pension plans from insurance companies ensure that regular, disciplined savings
in such plans can accumulate over a period of time to provide a steady income
post-retirement. Usually all retirement plans have two distinctive phases
 The accumulation phase when you are saving and investing during your
earning years to build up a retirement corpus and
the withdrawal phase when you actually reap the benefits of your investment as your
annuity payouts begin.
In a typical pension plan you have the flexibility to make a lump sum payment or a
regular contribution every year during your earning years. Your money is then
invested in funds of your choice. You can opt to receive the annuity at any time after
vesting age (age at which you become eligible for pension chosen by you at the
inception of the plan).
Most of the Unit linked pension plans also come with a wide range of annuity options
which gives you choice in structuring the post-retirement benefit pay-outs. Also at the
time of vesting you can make a lump sum tax-exempted withdrawal of up to 33 per
cent of the accumulated corpus. In a Retirement plan, the earlier you begin the greater
you gain post retirement due to the power of compounding.
ULIPs for long term wealth creation
ULIPs are the right insurance solutions for you if you are looking for a strong wealth
creation proposition allied to a core insurance benefit. Such plans are ideal for people
who are in their late 20s and early 30s and by investing in such a plan get the flexibility
of using it to fund any of their long-term financial goals such as purchase of a house or
funding their children’s education. The added element of life cover serves to make
these plans a wholesome financial investment option.
Wealth Creation ULIPs can be primarily classified as:
Single premium – Regular premium plans:
Depending upon you needs & premium paying capacity you can either opt for a single
premium plan where you need to pay premium only once during the term of entire
policy or regular premium plans where you can premium at a frequency chosen by you
depending upon your convenience
Guarantee plans – Non guarantee plans:
Today there are wealth creation ULIPS which also offer guaranteed benefit. These plans
are ideal insurance-cum-investment option for customers who want to enjoy the
potentially higher returns (over the long term) of a market linked instrument, but
without taking any market risk. On the other hand non guarantee plans comes with an
in - built range of fund options to choose from –ranging from aggressive funds
(Primarily invested in equities with the general aim of capital appreciation) to
conservative funds (invested in cash, bank deposits and money market instruments
with aim of capital preservation) so that you can decide to invest your money in line
with your market outlook, time horizon and your investment preferences and needs.
37
Life Stage based – Non life Stage based:
Life Stage based ULIPs factor in the fact that your priorities differ at different life stages
& hence distribute your money across equity & debt. Here the initial allocation is
decided as per your age since age is a significant indicator of risk appetite. Such a
strategy ensures that the asset allocation at all times is in sync with your age and
changing financial needs.
ULIPs for child education
One of the most important responsibilities you have as a parent is to ensure that your
child gets the best possible education that can be provided. Apart from conventional
schooling, it becomes important to expose your child to different activities such as
dance, painting and sports training for holistic development. As a parent, you want to
ensure that their development is not hampered either due to rising costs or unforeseen
circumstances.
Today there are ULIPs that offer money at key milestones of your child's education
thus ensuring that your child’s education continues unhampered even if something
unfortunate happens to you. While, the death of a parent is an irreparable emotional
loss, child education plans safeguard the child against the financial ramifications of the
death of a parent.
Apart from above mentioned benefit, child plans also offers below mentioned features.
Flexibility of adding on various riders like Income benefit rider, disability rider etc to
get additional benefits .For e.g. In case of income benefit rider, In the event of the death
of the parent, the child will receive a regular pre-determined amount every year to
meet the educational expenses.
In case of unfortunate incidence of the death of a parent, not only will the child receive
the sum assured immediately but will also continue to receive money at the key
educational milestones.
ULIPs for Health Solutions
When you are young and working you save for various goals like marriage, education,
retirement etc. but saving for health care is never considered or left for later. During
these years we have various sources of income or savings on which we can rely for
health emergencies.
But with increasing cost of healthcare, proportion of this spend is increasing at an
alarming pace. This is forcing families to borrow or sell assets to meet expenses during
medical emergencies. And during old age health care expenses increase due to health
deterioration because of age and higher incidence of chronic illness. Thus it is
important for you to invest in health insurance today so that tomorrow you are fully
prepared to meet rising healthcare expenses, which would be incurred during old age,
with the right health insurance plan.
Health ULIP is a recent innovation from the health insurance industry. In a health ULIP
part of your premiums are allocated for investment designed specifically to build a
health fund to meet future health related expenses. It aims to create a health savings
38
kitty by investing in a long term flexible savings plan with multiple fund options. The
health fund thus created allows you to claim for health related expenses of any kind
and also fund your future health insurance charges. You can also avail of tax benefit on
premium paid u/s 80D.
Advantages of ULIPS
Choose your investment mix
On the basis of your risk appetite, you have the option to choose the mix of market
entities that you invest in. You can opt to invest in debt funds if you are a low risk-
taker, balanced funds if you are moderate risk-taker, and equity funds if you are a high-
risk taker. You also have the option of investing in balanced funds which can range
between debt funds and equity funds. You also have the benefit of switching funds
depending on your market outlook. You have the option of referring to fund ratings of
independent investment research agencies like Morningstar before deciding on the type
of funds and policy to invest in.
Flexibility
ULIPs like Edelweiss Tokio Life – Wealth Accumulation (Accelerated Cover) give you
the option of switching between funds depending on your market outlook. This
flexibility is not available in other investment plans. It provides you with a flexibility of
choosing and switching between debt and equity funds. During an uncertainty you can
invest in debt funds and when the market performs well you can opt for equity funds.
Staying invested for a longer duration i.e. 10 years or so may provide you with
opportunities to reap big benefits with these small, but significant alterations.
Long term investment
For achieving long-term goals like buying a house, buying a new car, opening a start-
up, etc. ULIPs prove to be a good option. With the power of compounding, ULIPs
provide a better return over a longer time horizon. In case you decide to exit the policy
after 5 years what you receive in ULIPs will be far greater than what you would get if
you would have only saved that amount without investing. Your money will grow
faster over a longer time horizon than let's say if you only keep it deposited in savings
accounts or bank fixed deposits.
Tax Benefits
Not all investment options provide tax benefits. Since ULIP is a life insurance product it
provides tax benefits. For premiums paid, you get tax rebates under section 80C and all
payouts received are exempt under section 10D of the Income Tax Act, 1961. So you not
only save money, but also are able to see it grow.
Life cover
As mentioned above, ULIP as a product is offered by Life insurance companies. ULIPs
fulfil your need for both investment and protection. Though the life cover provided by
a ULIP may not be as high as that of a term plan, however, it does provide life cover.
Overall ULIPs can be an ideal investment option for your long-term financial goals. It is
39
recommended that you check the performance of individual funds while investing in
ULIPs.
Disadvantages of ULIPs
Combines investment with insurance:
First disadvantage of ULIP plan is that, the insurance plan and an investment plan both
are merged into single ULIP plan. Any Insurance policy which provides protection to
you and your family from against any uncertain event, i.e. Death, Accident, etc. On the
other hand, in any investment plan, you have to invest by getting an effective rate of
return.
However, in the case of ULIPs, both things are merged with each other and do not
facilitate effective facilities as individual plans. Therefore, when you get an ULIP Plan,
you can acquire only average rate of return and a small insurance cover. As a result, get
ULIP plan is not preferred.
Inflexibility:
One of the most significant disadvantages of ULIP is their inflexibility. ULIP plans are
proven beneficial especially for long term period. However, if you want to terminate
their policy before their termination date, then you lose your entire premiums and you
will be charged a lot, which will reduce your policy amount. Therefore, the best thing is
that, get an individual policy.
More commission and charges:
If we compare the ULIP plans with other insurance policies and investment plans, then
their charges is too high as compared to other policies. In ULIP plans, they charge
approx. 40% in the form of commission, which is too huge. However, if we talk about
the other policies commission rate, then they would earn only 2-5% by commissions.
Therefore, here we can say that, ULIP plans is quite expensive as compared to other
plans.
Complexity:
ULIPs plans are more complex as compared to Mutual Funds and other investment
plans. In ULIPs funds, there are lots of charges included, which are deducted from the
amount of premium. However, in case of Mutual Funds, it does not have quite a
number of charges because it facilitates for only investments in stock market not for
risk cover plans.
Useless for short term period:

ULIP is quite a long term instrument. Therefore, their lock in period is 3 – 15 years.
However, in case of ELSS or mutual funds, their lock in period is limited. This means,
their lock in period is only 3 years, which is less than compared to ULIP. As a result,
ULIPs are not proven beneficial for short term period.
Low returns:
40
Mutual funds and investment plans have more returns as compared to ULIPs during a
period of time. ULIPs provide 8 – 9% returns in 10-15 years of the time period. On the
other hand, other plans can provide 12% returns on the equity funds in a period of 0-15
years. However, other plans returns depend upon the market growth, which means,
the amount of returns is not certain.
Charges of ulips
Administration charges:
A fee is charged for administration of your policy every month. Administration charges
are deducted by cancelling units proportionately from each of the funds you have
chosen.
Fund management charges:
These charges are towards meeting expenses related to managing the fund. This is
charged as a percentage of the fund's value and is deducted before arriving at the net
asset value of the fund.
Switch charges:
You can switch between the funds available to suit your changing needs and goals. In a
policy year, a fixed number of such switches are available free of cost. Subsequent to
this, each switch would attract a certain charge. These charges are deducted by
cancelling units proportionately from each of the funds you have chosen.
Surrender charges:
These charges are levied for premature encashment of units. They are charged as a
percentage of the fund value and depend on the policy year in which the policy has
been surrendered.
Mortality Charges:
Depending upon the age, and the amount of cover, these charges are levied towards
providing a death cover to the insured.
Premium Allocation Charge:
This charge is deducted as a fixed percentage of the premium received, and is usually
charged at a higher rate in the initial years of a policy. This charge varies depending
upon whether the policy is a single premium plan or regular premium policy, the size
of the premium, premium frequency and payment mode.
Partial Withdrawal Charges:
Lump sum withdrawals are allowed from the fund after the lapse of three years of the
policy term and subject to pre- specified conditions. However, such withdrawals attract
charges, as mentioned in the respective policy brochures.
Risk Factors of ULIPS
Market Risk:
41
ULIP are directly affected by the ups and downs in the capital market. Whether it is
volatility in the equity market or an increase or decline in interest rates, the Net Asset
Value of the fund is impacted and may show a rise or fall. Lack of Guaranteed Returns-
ULIP returns is not guaranteed. The investment risk of a portfolio is borne by the policy
holder. The performance of the underlying fund and expertise of the fund manager put
together determine the gains or losses the investment would make. Liquidity Risk-
ULIP being an insurance product comes with a lock-in period of 3 to 4 years. They are
thus low in liquidity and you may loss out a certain percentage of your investment if
you wish to redeem during this lock-in period.
Past performance indicator: Though the past performance of the ULIP may seem to be
attractive, what one should keep in mind is that this may not follow in future. Past
performance of a fund is not an indication of its future performance, as predicting
market behavior and volatility is a near to impossible task.
High cost structure: The charges in a ULIP are quite high. A high fee structure
especially during a decline in the market, affects the returns on a ULIP.
RISK FACTORS OF SENSEX
Inflation Risk
Inflation risk is connected less to the actual returns on stock than to your experience
with those returns. Inflation involves too much money in the system chasing too few
products. During inflationary periods, each rupee is worth less than it was, so the price
of products rises. When inflation hits, your income from investments has less buying
power.
Interest Rate Risk
The prices of both stocks change when the RBI alters interest rates to curb inflation.
When companies must pay more to finance their operations, their earnings decline.
Because stock prices are based on earnings, their stock prices also decline. Conversely,
when interest rates decline, company earnings rise, and so do stock prices. Bond prices
also rise as interest rates decline. This risk primarily affects the price you'd receive for
selling your stocks.
Market Risk
Market risk refers to the functioning of the marketplace. Many factors affect market
function; these include banking holidays, investor anticipation, equipment failures,
shocks in other markets, and anything that limits the efficient functioning of the
marketplace. Market risk can affect the price of your investments, but it also can affect
the ease with which you can trade securities. An example of market risk was the Flash
Crash in 2010, when computer trading programs caused a rapid decline and recovery
of approximately 1,000 points in the Dow Jones Industrial Average.
Credit Risk
When a company's financial strength declines, particularly if that decline is recognized
by a credit rating downgrade, it normally results in a decline in the price of its stocks.
Its stock declines because the outlook for continued good earnings growth is doubtful.
42
Liquidity Risk
Liquidity risk refers to the inability to buy or sell a security at the quoted market price
without a delay, or without the price changing because of scarcity of supply or
demand. When a company has few shares of its common stock outstanding, or if it's
has been ignored by investors, it is considered a thinly traded stock. Traders often
quote according to the last transaction price. But if you place an order to buy, stock
might not be available, and the price must rise to attract a seller. Likewise, when you go
to sell a thinly traded stock, traders are reluctant to take it into position if there are no
bids for it in the marketplace.
Event Risk
Event risk is often confused with market risk. But whereas market risk is system-based,
event risk is external to the system. It comes from things such as terrorist attacks, war,
natural disasters and political events. These events can cause market risk, such as when
the New York Stock Exchange closes because of a hurricane or a terrorist attack. They
can even cause credit risk if the event badly damages a company's ability to do
business.
HOW SENSEX WORKS
The Sensex is regarded as the pulse of the domestic stock markets. Investors follow this
index closely and use it as a barometer to base their investment decisions on. The
Sensex is based on globally accepted construction and review methodology. It was first
compiled in 1986. It is a basket of 30 constituent stocks representing a sample of large,
liquid and representative companies. The base year of the Sensex is 1978-79 and the
base value is 100.
The Sensex is calculated using the 'free float market capitalization' method. According
to this method, the level of index at any point of time reflects the free-float market
value of 30 component stocks relative to a base period.
Initially, the index was calculated based on the 'full market capitalization' method.
However, this was shifted to the free-float method with effect from September 1, 2003.
Globally, the free-float market capitalization method of index construction is regarded
as an industry best practice. All major index providers like S&P, Dow Jones, MSCI,
STOXX, and FTSE use the free-float method.
The market capitalization of a company is determined by multiplying the price of its
stock by the number of shares issued by the company. This market capitalization is
further multiplied by the free-float factor to determine the free-float market
capitalization.
The calculation of the Sensex involves dividing the free-float market capitalization of 30
companies in the index by a number called the index divisor. The divisor keeps the
index comparable over time and is the adjustment point for all index adjustments
arising out of corporate actions, replacement of scrip’s etc.
During market hours, prices of the index scrip’s, at which latest trades are executed, are
used by the trading system to calculate the Sensex every 15 seconds and disseminate in
real time.
The closing figure is computed taking the weighted average of all the trades on the
43
Sensex constituents in the last 15 minutes of the trading session. If a Sensex constituent
has not traded in the last 15 minutes, the last traded price is taken for computation of
the index closure. If a Sensex constituent has not traded at all in a day, then its last
day's closing price is taken for computation of the index closure.
When a company, included in the compilation of the index, issues right shares, the free-
float market capitalization of that company is increased by the number of additional
shares issued based on the theoretical (exright) price. An offsetting or proportionate
adjustment is then made to the base market capitalization. When a company, included
in the compilation of the index, issues bonus shares, the market capitalization of that
company does not undergo any change. Therefore, there is no change in the base
market capitalization, only the 'number of shares' in the formula is updated.
During market hours, prices of the index scrip’s, at which trades are executed, are
automatically used by the trading computer to calculate the Sensex every 15 seconds
and continuously updated on all trading workstations connected to the BSE trading
computers.
In order to maintain continuity with the past, the base year average needs to be
updated. The base year value adjustment ensures that replacement of stocks in the
index, additional issue of capital and other corporate announcements like rights issue
etc do not destroy the historical value of the index. The adjustments for corporate
actions in the index should not per se affect the index values.
The base market capitalization adjustment is required when new shares are issued by
way of conversion of debentures, mergers, spin-offs etc, or when equity is reduced by
way of buyback of shares, corporate restructuring etc.
Regulators of Sensex
Ministry of Finance (MoF) - Government of India

The MoF is the premier policy maker with respect to, inter-alia, taxation, financial
legislation and capital markets. The MoF undertakes various initiatives to facilitate
investment by foreign participants in India. These initiatives broadly include ease and
clarification of taxation norms, composite limit for FII + FDI investments, increasing
foreign investment limits in various sectors among others.
Securities and Exchange Board of India (SEBI):
The Securities and Exchange Board of India (SEBI) is the regulatory authority
established under the SEBI Act, 1992 and is the principal regulator for Capital Markets.
FPIs are required to register with SEBI in order to participate in the Indian securities
markets.
44
Reserve Bank of India (RBI):
The Reserve Bank of India (RBI) is governed by the Reserve Bank of India Act, 1934. It
is responsible for implementing monetary and credit policies, issuing currency notes,
being banker to the government, regulator of the banking system, manager of foreign
exchange and regulator of payment & settlement systems while working towards the
development of Indian financial markets. The RBI regulates financial markets and
systems through different legislations. It regulates foreign exchange markets through
the Foreign Exchange Management Act, 1999.
Income Tax Department, Govt. of India:

The Central Board of Direct Taxes (CBDT) is the apex tax administration body that
functions under the Department of Revenue, Ministry of Finance and administers
direct taxation in India. This department is also responsible for enforcing the Double
Taxation Avoidance Agreements.
MUTUAL FUNDS ANALAYSIS

Birla Sun Life Equity Fund (G) -
Absolute Return
Absolute Return % last 3 year:
Return = NAV at the end – NAV at the beginning
NAV at the beginning
= 548.79 – 296.84 / 296.84
=84.84 %
CAGR last 3 years:

CAGR = [Nth root of (NAV at the end/NAV at the beginning)]-1 x 100
45
= [3rd root of (548.79/296.84)]-1 x 100
= 22.79 %
NAV 605.91
AUM (in Cr) 3770.47
Absolute Return % last 3 year: 84.84 %
CAGR last 3 years: 22.79 %
CAGR last 3 years ( SENSEX ) : 10.23 %

Coefficient of correlation .95
S.D of Sensex 15.47
S.D of Investment 24.03
Beta 1.47
Alpha 7.48
Treynor 12.25
Sharp .75
Jensen 10.72
Index Return X2 BIRLA SUN Y2 XY

(X) LIFE (Y)
18.98 360.24 25.87 669.25 491.01
26.23 688.01 53.62 2875.10 1406.45
-9.61 92.35 -4.72 22.67 45.35
∑X= 35.6 ∑X2=1140.6 ∑Y= 74.77 ∑Y2=3596.62 ∑XY=1942.81
Coefficient of correlation =
46
= = .95
S.D of Sensex =
= = 15.47
= = 24.03
Beta =
= 1.47%
Alpha =
= 24.92 – (1.47 x 11.86)

= 7.48
Treynor Index = (Ti) = (Ri - Rf)/Bi.
= (24.92– 6.9) / 1.47 = 12.25
Sharpe Index = (Si) = (Ri - Rf)/Si
= 24.92– 6.9 / 24.03
= .75
Jensen Ratio = Ri - Rf + Bi (Rm - Rf)
= 24.92 – 6.9 + (1.47) (11.87 – 6.9)
= 10.72
Interpretation:
47
The annualized compound rate of return for the last three years is 22.79 % respectively,
as against the benchmark index (SENSEX) return of 10.23 % respectively. The beta of
the fund is 1.47, which is more than 1.0 denoting high risk and high return nature of the
fund. The alpha of the fund is 7.48, which indicates that the fund has outperformed the
market index with less risk than the index. Thus, this fund will have higher than
average rising gains in the rising market and higher than average falls in the declining
market. The Treynor and Sharpe ratios show the fund is a highly diversified one with a
superior risk –adjusted performance. The positive value of alpha from Jensen measures
indicates that the performance of Birla sun life is superior.
48
ICICI Pru Balanced Advantage Fund
NAV 29.46
AUM (in Cr) 17368.33
Absolute Return % last 3 year: 47.64
CAGR last 3 years: 13.09
S.D of Sensex 15.47
Beta .70
Alpha 7.52
Treynor 12.74
Sharp .81
Jensen 5.42
Index Return X2 ICICI Y2 XY

(X) (Y)
18.98 360.24 20.10 404.01 381.49
26.23 688.01 26.61 708.09 697.98
-9.61 92.35 .75 .56 -7.20
∑X= 35.6 ∑X =1140.6
2
∑Y= 47.46 ∑Y =1112.66
2
∑XY=1072.27
= .99
S.D of Sensex =
= = 15.47
49
= = 10.98
Beta =
= .70 %
Alpha =
= 15.82 – (.70 x 11.86)

= 7..52
= (15.82– 6.9) / .70 = 12.74
= 15.82– 6.9 / 10.98
= .81
= 15.82 – 6.9 + (.70) (11.86 – 6.9)
= 5.45
Interpretation:
the fund is .70, which is less than 1.0 denoting low risk and low return nature of the
market index with less risk than the index. Thus, this fund will have smaller than
average rising gains in the rising market and smaller than average falls in the declining
market. The Treynor and Sharpe ratios show the fund is a less diversified one with a
less risk –adjusted performance. The positive value of alpha from Jensen measures
indicates that the performance of ICICI pru balanced fund is superior.
50
UTI Mid Cap Fund:
NAV 91.463
AUM (in Cr) 3567.48
S.D of Sensex 15.47
Beta 2.11
Alpha 25.8
Treynor 14.40
Sharp .90
Jensen 19.9
Index Return X2 UTI Mid Cap Y2 XY

(X) (Y)
18.98 360.24 41.14 1692.49 780.83
26.23 688.01 76.49 5850.72 2006.33
-9.61 92.35 -5.69 32.37 54.68
∑X= 35.6 ∑X =1140.6
2
∑Y= 111.9 ∑Y =7575.5
2
∑XY=2841.8
= .97
S.D of Sensex =
= = 15.47
51
= = 33.67
Beta =
= 2.11 %
Alpha =
= 37.3 – (2.11 x 11.86)

= 25.8

= (37.3– 6.9) / 2.11 = 14.40
= 37.3– 6.9 / 33.67
= .90

= 37.3– 6.9 + (2.11) (11.86 – 6.9)
= 19.9
Interpretation:
52
high risk –adjusted performance. The positive value of alpha from Jensen measures
indicates that the performance of UTI – Mid Cap fund is superior.
HDFC Balanced Fund
NAV 126.116
AUM (in Cr) 8983.29

S.D of Sensex 15.47
Beta 1.16
Alpha 7.74
Treynor 12.58
Sharp .76
Jensen 8.84
Index Return X2 HDFC Bal Y2 XY

(X) FUND (Y)
18.98 360.24 21.73 472.19 412.43
26.23 688.01 44.69 1997.19 1172.21
-9.61 92.35 -1.92 3.68 18.45
∑X= 35.6 ∑X2=1140.6 ∑Y= 64.5 ∑Y2=2473 ∑XY=1603
= .95
S.D of Sensex =
53
= = 15.47
= = 19.02
Beta =
= 1.16 %
Alpha =
= 21.5– (1.16 x 11.86)

= 7.74

= (21.5– 6.9) / 1.16 = 12.58

= 21.5– 6.9 / 19.02
= .76

= 21.5– 6.9 + (1.16) (11.86 – 6.9)
= 8.84
Interpretation:
54
indicates that the performance of HDFC balanced fund is superior.
DSPBR Micro Cap Fund
NAV 55.23
AUM (in Cr) 4323.27

S.D of Sensex 15.47
Beta 2.26
Alpha 17.54
Treynor 16.57
Sharp .91
Jensen 26.23
Index Return X2 DSP BLACK Y2 XY

(X) ROCK (Y)
18.98 360.24 32.91 1083 624.63
26.23 688.01 99 9801 2596.77
-9.61 92.35 1.21 1.46 -11.62
∑X= 35.6 ∑X =1140.6
2
∑Y= 133.1 ∑Y =10885.4
2
∑XY=3209.7
= ..86
S.D of Sensex =
55
= = 15.47
= = 40.74
Beta =
= 2.26 %
Alpha =
= 44.36– (2.26 x 11.86)

= 17.54
= (44.36– 6.9) /2.26 = 16.57
= 44.36– 6.9 / 40.74
= .91
= 44.36– 6.9 + (2.26) (11.86 – 6.9)
= 26.23
Interpretation:
fund. The alpha of the fund is 17.54, which indicates that the fund has outperformed
the market index with less risk than the index. Thus, this fund will have higher than
56
indicates that the performance of DSP black rock fund is superior.
ULIP:
HDFC life pro-Growth plus – Opportunity fund
Absolute Return
= 19.23– 10.83 / 10.83
=77.56%
CAGR last 3 years:

= [3rd root of (19.23/10.83)]-1 x 100
= 21.09%
NAV 25.068
Absolute Return % last 3 year: 77.56%
CAGR last 3 years: 21.09 %

S.D of Sensex 15.47
Beta 1.27
Alpha 8.83
Treynor 13.38
57
Sharp .68
Jensen 10.69
Index Return X2 HDFC Y2 XY

(X) (Y)
18.98 360.24 13.38 179.02 253.95
26.23 688.01 58.06 3370.96 1522.91
-9.61 92.35 .26 .06 -2.49
∑X= 35.6 ∑X2=1140.6 ∑Y= 71.7 ∑Y2=3550 ∑XY=1774.4
Coefficient of Correlation =
= = .80
S.D of Sensex =
= = 15.47
= = 24.74
Beta =
58
=
= 1.27%
Alpha =
= 23.9 – (1.14 x 11.86)

= 8.83
= (23.9– 6.9) / 1.27 = 13.38
= 23.9– 6.9 / 24.03
= .68
= 23.9 – 6.9 + (1.27) (11.87 – 6.9)
= 10.69
Interpretation:
indicates that the performance of HDFC life pro fund is superior.
59
LIC market plus - I Growth fund
Absolute Return
=17.09– 13.79 / 13.79
=23.9%
CAGR last 3 years:

= [3rd root of (17.09/13.79)]-1 x 100
= 7.41%
NAV 21.68
CAGR last 3 years: 7.41%

S.D of Sensex 15.47
Beta .62
Alpha .90
Treynor 2.17
Sharp .13
Jensen -1.97
60
Index Return X2 LIC Y2 XY
(X) (Y)
18.98 360.24 15.59 243.04 295.89
26.23 688.01 15.01 225.30 393.71
-9.61 92.35 -5.84 34.10 56.12
∑X= 35.6 ∑X =1140.6
2
∑Y= 24.76 ∑Y =502.44
2
∑XY=745.72
= = .97
S.D of Sensex =
= = 15.47
= = 9.96
Beta =
= .62%
Alpha =
61
= 8.25– (.62 x 11.86)
= .90
= (8.25– 6.9) / .62= 2.17
= 8.25– 6.9 / 9.96
= .13
= 8.25– 6.9 + (.67) (11.87 – 6.9)
= -1.97
Interpretation:
the fund is .62, which is less than 1.0 denoting less risk and less return nature of the
fund. The alpha of the fund is .90, which indicates that the fund has underperformed
the market index with less risk than the index. Thus, this fund will have smaller than
superior risk –adjusted performance. The negative value of alpha from Jensen measures
indicates that the performance of LIC market plus – I growth fund is inferior.
62
TATA AIG life invest assure - II
Absolute Return
=45.97– 32.85 / 32.85
=39.93%
CAGR last 3 years:
= [3rd root of (45.97/32.85)]-1 x 100
= 7.41%
NAV 54.29

S.D of Sensex 15.47
Beta 1
Alpha 1.57
Treynor 6.54
Sharp .42
Jensen 1.57
Index Return X2 TATA AIG Y2 XY

(X) LIFE
(Y)
18.98 360.24 19.29 372.10 366.12
26.23 688.01 29.08 845.64 762.76
-9.61 92.35 -8.04 64.64 77.26
∑X= 35.6 ∑X2=1140.6 ∑Y= 40.33 ∑Y2=1282.38 ∑XY=1206.14
63
= = .99
S.D of Sensex =
= = 15.47
= = 15.70
Beta =
= 1%
Alpha =
= 13.44– (1 x 11.86)
= 1.57
= (13.44– 6.9) / 1= 6.54
= 13.44– 6.9 / 15.70
= 0.42
= 13.44– 6.9 + (1) (11.87 – 6.9)
64
= 1.57
Interpretation:
the fund is 1, which is equal to 1.0 denoting medium risk and medium return nature of
the fund. The alpha of the fund is 1.57, which indicates that the fund has outperformed
the market index with medium risk than the index. Thus, this fund will have higher
than average rising gains in the rising market and higher than average falls in the
declining market. The Treynor and Sharpe ratios show the fund is a highly diversified
one with a superior risk –adjusted performance. The positive value of alpha from
Jensen measures indicates that the performance of TATA AIG life fund is superior.
65
PNB MetLife smart platinum
Absolute Return
=16.59– 10.14 / 10.14
=63.60%
CAGR last 3 years:
= [3rd root of (16.59/10.14)]-1 x 100
= 17.83%
Index Return X2 PNB MetLife Y2 XY

(X) (Y)
18.98 360.24 19.03 362.14 361.18
26.23 688.01 44.69 1997.19 1172.21
-9.61 92.35 -4.15 17.22 39.88
∑X= 35.6 ∑X =1140.6
2
∑Y= 59.57 ∑Y =2376.5
2
∑XY=1573.3
NAV 19.37

S.D of Sensex 15.47
Beta 1.19
Alpha 5.73
Treynor 10.88
Sharp .64
Jensen 1.57
66
= = .93
S.D of Sensex =
= = 15.47
= = 19.94
Beta =
= 1.19%
Alpha =
= 19.85– (1.19 x 11.86)

= 5.73
= (19.85– 6.9) / 1.19= 10.88
= 19.85– 6.9 / 15.47
= 0.64
= 19.85– 6.9 + (1.19) (11.87 – 6.9)
67
= 7.04
Interpretation:
the fund is 1.19, which is higher than 1.0 denoting high risk and high return nature of
the fund. The alpha of the fund is 5.73, which indicates that the fund has outperformed
the market index with high risk than the index. Thus, this fund will have higher than
indicates that the performance of PNB met life smart platinum fund is superior.
68
SBI life smart
Absolute Return
=14.79– 11.68 / 11.68
=26.62%
CAGR last 3 years:
= [3rd root of (14.79/11.68)]-1 x 100
= 8.19%
Index Return X2 SBI Life Y2 XY

(X) (Y)
18.98 360.24 3.16 9.98 58.39
26.23 688.01 13.94 194.32 365.64
-9.61 92.35 7.79 60.68 -74.86
∑X= 35.6 ∑X =1140.6
2
∑Y= 24.89 ∑Y =264.98
2
∑XY=349.17
NAV 16.15

S.D of Sensex 15.47
Beta .07
Alpha 7.46
Treynor 19.85
Sharp .31
Jensen 1.09
69
= = .26
S.D of Sensex =
= = 15.47
= = 4.41
Beta =
= .07%
Alpha =
= 8.29– (.07 x 11.86)

= 7.46

= (8.29- 6.9) / .07= 19.85

= 8.29– 6.9 / 15.47
70
= .31
= 8.29– 6.9 + (.07) (11.87 – 6.9)
= 1.09
Interpretation:
the fund is .07, which is less than 1.0 denoting less risk and less return nature of the
market index with lesser risk than the index. Thus, this fund will have smaller than
indicates that the performance of SBI life Smart wealth assure fund is superior.
71
Education Qualification of the Respondents
Education No of respondents Percentage

qualification
Below SSLC 3 6
SSLC 3 6
Plus two 5 10
Degree 10 20
Professional 21 42
Others 8 16
TOTAL 50 100
Interpretation:
The table revels that 42 % of the respondents have professional as qualification and 20
% of the respondents have Degree as qualification. 6% of the respondent as below
SSLC, 10% are plus two qualified. 6% of the respondents are SSLC qualified and 16% of
the respondent have others qualification.
72
Major Source of Income of Respondents
Source of income No of respondents Percentage
Agriculture 3 6
Salary/wages 22 44
House property 2 4
Self employed 8 16
Pension 7 14
Others 8 16
TOTAL 50 100
Interpretation:
From the above table we can interpret that 16 % of the respondents are self-employed.
Most of the respondent i.e. 44% have salary or wages, 6% have from agriculture, 4%
from house property, 14% of the respondents have pension as their source of income,
and 16% are other category.
73
Average Monthly Income of the Respondent
Average monthly No of respondents Percentage

income
Below 5000 6 12
5000-10000 5 10
10000-15000 6 12
15000-20000 11 22
Above 20000 22 44
TOTAL 50 100
Interpretation:
From the above table it is clear that 12% of the respondents have monthly income
below 5000, 10% have monthly income between 5,000-10,000, 12% have monthly
income between 10,000-15,000, 22% have monthly income between 15,000-20,000 and
44% of the respondents have monthly income above 20,000.
74
Investing Media
Investing media No of respondents Percentage
Bank 22 44
Chit 4 8
Post office 5 10
Gold 6 12
Mutual funds 5 10
ULIP 3 6
Shares/debentures 3 10
TOTAL 50 100
Interpretation:
The above table reveals that 44% of the respondents have bank as their investment
media, 10% as mutual funds, 6% as ULIP, 10% as shares/ debentures, 8% as Chit, 10%
as post-office and the rest 12% of the respondents as gold as their investment media.
75
Respondents Invested in Mutual fund, ULIP and Shares.
Investments No of respondents Percentage
Mutual funds 19 38
ULIP 17 34
Shares 14 28
TOTAL 50 100
Interpretation:
The above table shows that 38% of the respondents have invested in mutual funds, 34%
in UILP and 28% have invested in shares.
76
First Preference for Investment
Investment No of respondents Percentage
Mutual funds 19 38
Ulip 15 30
Shares 16 32
TOTAL 50 100
Interpretation:
From the above table it is clear that 38% of the respondents have chosen mutual fund as
their first preference, 30% have chosen ULIP and the rest 32% have chosen
shares/debentures.
Frequency of Investment
77
Frequency of No of respondents Percentage
investment
Weekly 2 4
Quarterly 11 22
yearly 17 34
Monthly 8 16
Half yearly 12 24
TOTAL 50 100
Interpretation:
The above table reveals that 34% of the respondents have yearly saving habits, 24%
have half-yearly and 22% have quarterly saving habits. 16% have monthly and 4%
have weekly saving habits.
Average Monthly Savings
78
Average monthly No of respondents Percentage
savings
Up to3000 8 16
3000-6000 9 18
6000-9000 12 24
9000-12000 9 18
above 12000 12 24
TOTAL 50 100
Interpretation:
This table shows that 16% of the respondents save up to 3000, 18% save in between
3000-6000, 24% of the respondents save between 6000-9000, 18% save between 9000-
12000 and the rest 24% of the respondents save above 12000.
Investments in ULIP
79
Mode of saving No of respondents Percentage
Insurance 9 18
Investment 11 22
TOTAL 20 40
Interpretation:
The above table shows the pattern of investments in ULIP in which 18% of the
respondents have saved in insurance and 22% in investment.
Investment in ULIP Schemes
80
No of
ULIP schemes Percentage
respondents
Long term wealth
4 8
creation
Child education 3 6
ULIPS for wealth
7 14
creation
Retirement planning 5 10
TOTAL 19 38
Interpretation:
The above table interprets that 8% of the respondents have saved in long-term wealth
creation schemes, 6% in child education, 14% in ULIPS for wealth creation scheme and
the rest 10% in retirement planning schemes.
Insurance Products Susceptible to Low Risk
81
Opinions No of respondents Percentage
yes 3 6
no 5 10
don’t know 11 22
TOTAL 19 38
Interpretation:
From the above table it is clear that 6% of the respondents feels that insurance products
are susceptible to lower risk, 10% of the respondents do not feel that insurance
products are susceptible to lower risk and the rest 22% do not know about the risk.
Mutual Fund schemes
82
Mutual fund No of respondents Percentage
schemes
Open ended 2 4
Liquid funds 3 6
Regular funds 1 2
Sector funds 1 2
Closed ended 1 2
Growth fund 5 10
Mid cap fund 3 6
Large cap fund 1 2
TOTAL 17 34
Interpretation:
This table shows that 4% of the respondents have invested in open ended schemes, 6%
in liquid funds, 2% in regular funds, 10% in growth funds, 2% in sector funds, 6% in
mid cap funds, 2% in closed ended and 2% in large cap fund.
Investments with High Returns
83
Mutual fund 19 38
ULIP 10 20
Share/ debentures 21 42
TOTAL 50 100
Interpretation:
The above table reveals that 38% of the respondents expect high return in mutual
funds, 20%in ULIP and 42% of the respondents expect high return from
shares/debentures.
Investments with High Safety
84
Mutual fund 14 28
ULIP 26 52
Share/ debentures 10 20
TOTAL 50 100
Interpretation:
The above table shows the pattern of safety of respondents in mutual funds is 28%, 52%
in ULIP and 20% in shares/debentures.
Motive Behind Investments
85
Motives No of respondents Percentage
Child education 1 2
Child marriage 5 10
Home purchasing 14 28
Healthcare 5 10
Retirement 9 18
Others 16 32
TOTAL 50 100
Interpretation:
From the above table it is clear that 28% of the respondents opted for house purchasing,
10% for child marriage, 18% for retirement, 10% for health care 2% for child education
and the rest 32% opted for other categories.
Investment Objectives
86
No of
Objectives Percentage
respondents
Long- term profit
15 30
seeking
Short- term seeking 4 8
Steady Income 9 18
Tax saving 10 20
Others 12 24
TOTAL 50 100
Interpretation:
The above table revels that 30% of the respondents are long-term profit seekers, 8% are
short-term profit seekers and 18% for steady income. 20% of investors have tax savings
as their aim and rest 24% have other investment aims.
Criteria for Selecting Investments
87
No of
Investment criteria Percentage
respondents
Safety 13 26
Profitability 10 20
Liquidity 7 14
Others 20 40
TOTAL 50 100
Interpretation:
From the above table it is clear that 26% of the respondents select investment on the
criteria of safety, 14% liquidity, 20% consider profitably and 40% have other criteria for
selecting investments.
Investment Attributes
88
No of
Investment attributes Percentage
respondents
Professional help 10 20
Friends advice and
11 22
support
Bullish market 5 10
Own knowledge 12 24
Good luck 12 24
TOTAL 50 100
Interpretation:
The above table shows that 24% of the respondents have invested their money on the
basis of his own knowledge and also 24% in Good luck. 22% believe that they have
earned profit because of friend’s advice and support, 20% in professional help and the
other 10% believe in bullish market.
Media satisfaction
89
No of
Investment media Percentage
respondents
Mutual fund 18 36
Shares / debentures 15 30
ULIP 17 34
TOTAL 50 100
Interpretation:
In the above table 36% of the respondents has mutual funds as their satisfactory
investment media, 30% in shares/debentures and 34% of the respondents show
satisfaction in ULIP.
Changes of Investment Pattern
90
No of
Responds Percentage
respondents
Of course 14 28
May consider 20 40
No not at all 4 8
can’t say 12 24
TOTAL 50 100
Interpretation:
From the above table it is clear that 28% of the respondents are willing to change their
investment pattern if they get proper advice on new investment avenues. 8% will not
consider other schemes even if they get proper advice. 24% says that they can’t say
what they will do and 40% of our respondents may consider new investment avenues if
they get proper advice.
FINDINGS OF THE STUDY
91
After analyzing and interpreting the data following findings are made from that.
 The HDFC life pro-Growth plus fund while compared with Sensex for the last 3
years shows that it is providing more returns than the Sensex. While comparing
with DSP black rock Micro cap fund the HDFC life pro-Growth plus is
providing less return while it can be concluded that investors to choose DSP
black rock fund rather than the HDFC life pro-Growth plus .
 The LIC market plus - I Growth fund plus fund and TATA AIG life invest assure
– II while compared with Sensex for the last 3 years shows that it is providing
less returns than the Sensex. While comparing with ICICI Pru Balanced
Advantage Fund the LIC market plus - I Growth fund plus and TATA AIG life
invest assure - II is providing less return while it can be concluded that
investors to choose ICICI Pru Balanced Advantage Fund rather than the LIC
market plus - I Growth fund plus fund and TATA AIG life invest assure – II.
 The PNB MetLife smart platinum policy while compared with Sensex for the last
3 years shows that it is providing high returns than the Sensex. While comparing
with Birla Sun Life Equity Fund (G) and UTI Mid Cap Fund the PNB MetLife
smart platinum policy is providing less return while it can be concluded that
investors to choose Birla Sun Life Equity Fund (G) and UTI Mid Cap Fund rather
than the PNB MetLife smart platinum policy.
 The SBI life smart policy while compared with Sensex for the last 3 years shows
that it is providing less returns than the Sensex. while comparing with HDFC
Balanced Fund the SBI life smart policy is providing less return while it can be
concluded that investors to choose HDFC Balanced Fund rather than the SBI
life smart policy.
 The HDFC life pro-Growth plus fund is giving higher returns while compared
with other ULIP policies and LIC market plus - I Growth fund plus fund and
TATA AIG life invest assure is giving less returns compared to other ULIP
Policies.
 The DSP black rock Micro cap fund is providing higher returns while comparing
with other Mutual funds and ICICI Pru Balanced Advantage Fund is providing
less returns while comparing with other Mutual funds.
 Most of our respondents possess a good educational background.
 Majority of the respondents have income from salary and wages, 16 % of the
respondents are self-employed, 6% have from agriculture, 4% from house
property, 14% of the respondents have pension and 16% are other category.
 Majority of monthly income earners are above 20,000/- i.e. 44%, 22% have
monthly income between 15,000-20,000, 12% consists between below 5000 and
10000- 15000 and the least is 10% having monthly income between 5,000-10,000.
92
 The 44% of the respondents have bank as their investment media, 10% as mutual
funds, 6% as ULIP, 10% as shares/ debentures, 8% as Chit, 10% as post-office
and the rest 12% of the respondents as gold as their investment media.
 The respondents mainly prefer long term profit rather than short term and they
mainly invest for the tax saving purpose. The respondents mainly look into the
risk factor, profitability and liquidity of the funds.
 As per the survey conducted majority of the respondents have invested in

mutual funds and ULIP, five out of two investors have invested in bank deposits
and in shares. The least percentage of respondents have invested in Gold and
chit.
 Respondents who invest in market mainly prefer ULIP and the next set prefer
mutual funds.
 Majority of the respondents prefer yearly investments in which they prefer bank
deposits and ULIP (mainly insurance). They also tend to switch the funds if they
are backed with proper guidance and advice.
 Under Mutual Funds majority of the investors have opted for open ended funds.
The investors prefer to take risk so most of them have opted for growth wherein
the profitability of the same is high. Whereas in the case of fund most prefer mid
cap rather the large cap and small cap.
93
SUGGESTIONS
The following suggestions can be put forward on the basis of the findings of the study.
 Various awareness programs need to be organized so as to create awareness in

the public about the benefits and the need to invest.
 Investors need to divert there funds to different investment avenues such as

Bank products(FD & RD), ULIP, Mutual funds, Government Bonds so as to
reduce risk and get better profit. Instead putting all eggs in one basket it is better
to put in different baskets.
 Professional guidance need to be made available to all so that they may invest in
better avenues.
 A detailed study of the market and various investment avenues need to be made
before making any investment.
 Investments should be done for long term so as to reduce risk and to get better
profitability.
 Give more care and attention while selecting investment avenues so as to avoid
risks.
 More investment schemes need to be introduced so as to promote women

savings.
94
CONCLUSTION
The purpose of the study is to conduct a comparative analysis of ULIP, mutual fund
and Sensex to analyze the investment behavior among investors. From the analyzes it is
found out that DSP black rock fund has been a outperforming fund comparing to other
mutual fund , ULIP and Sensex.
The investors who are expecting a medium return and are willing to take less risk
HDFC life pro-Growth plus fund is a fund that is recommended to invest.
The investors who are expecting to get higher return and are willing to take medium
risk DSP black rock fund is recommended.
From the analyses done from the questionnaire it is found that investors feels ULIP are
much safer to invest and for getting higher returns Mutual fund are preferred by the
investors. Majority of the investors who invest in market instruments wish to earn
more profit but does not wish to take high risk.
Many investors do not wish to invest in ULIP because of the risk factor instead they
wish to invest in banking products such as Fixed deposits and recurring deposits which
provides less profit margin and which have low risk while compared with ULIP and
other market instruments.
It can be concluded that the Investors need to put there funds to different investment
avenues such as Bank products(FD & RD), ULIP, Mutual funds, Government Bonds so
as to reduce risk and get better profit. Instead putting all eggs in one basket it is better
to put in different baskets.
95

Final Project 2

Diunggah oleh

Informasi Dokumen

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

Final Project 2

Diunggah oleh

Hak Cipta:

Format Tersedia

INTRODUCTION

 Comparative analysis of the performance of ULIP’s, Mutual Funds and Sensex.

 To give a brief idea about ULIP, Mutual Fund and Sensex.

 Finding out the risks factors involved in the investment funds.

 Analyzing the factors determining the performance of the funds.

 Determining a suitable investment option for a person.

NEED OF THE STUDY

SCOPE OF THE STUDY

METHODS OF DATA COLLECTION:

TOOLS USED FOR ANALYSIS:

PERIOD OF THE STUDY:

LIMITATIONS OF THE STUDY:

IMORTANCE OF FINANCIAL SERVICES

5. Ensures greater Yield

BANKING FINANCIAL SEVICES

6. Enabling capital markets access:

Financial Intermediaries are broadly classified into two major categories:

The regulatory bodies of the financial institutions in India are as follows:

 Unit Trust of India (UTI)

 Securities Trading Corporation of India Ltd. (STCI)

 Industrial Development Bank of India (IDBI)

 Industrial Reconstruction Bank of India (IRBI), now (Industrial Investment Bank

 Export – Import Bank of India (EXIM Bank)

 Small Industries Development Bank of India (SIDBI)

 National Bank for Agriculture and Rural Development (NABARD)

 Life Insurance Corporation of India (LIC)

 General Insurance Corporation of India (GIC)

 Shipping Credit and Investment Company of India Ltd. (SCICI)

 Housing and Urban Development Corporation Ltd. (HUDCO)

 National Housing Bank (NHB)

INDIAN CAPITAL MARKET

INDIAN STOCK EXCHANGES

SEBI (SECURITIES AND EXCHANGE BOARD OF INDIA)

STOCK BROKING FIRMS

Types of Mutual Fund by investment objective:

Disadvantages of Mutual Funds

ADVANTAGES OF STOCK EXCHANGE

Useless for short term period:

Ministry of Finance (MoF) - Government of India

Income Tax Department, Govt. of India:

MUTUAL FUNDS ANALAYSIS

CAGR last 3 years:

CAGR last 3 years: 22.79 %

CAGR last 3 years ( SENSEX ) : 10.23 %

Index Return X2 BIRLA SUN Y2 XY

= 24.92 – (1.47 x 11.86)

Index Return X2 ICICI Y2 XY

= 15.82 – (.70 x 11.86)

Index Return X2 UTI Mid Cap Y2 XY

= 37.3 – (2.11 x 11.86)

Treynor Index = (Ti) = (Ri - Rf)/Bi.

Jensen Ratio = Ri - Rf + Bi (Rm - Rf)

Absolute Return % last 3 year: 70.78

Index Return X2 HDFC Bal Y2 XY

= 21.5– (1.16 x 11.86)

Treynor Index = (Ti) = (Ri - Rf)/Bi.

Sharpe Index = (Si) = (Ri - Rf)/Si

Jensen Ratio = Ri - Rf + Bi (Rm - Rf)

AUM (in Cr) 4323.27

Index Return X2 DSP BLACK Y2 XY

= 44.36– (2.26 x 11.86)

CAGR last 3 years:

CAGR last 3 years: 21.09 %

CAGR last 3 years ( SENSEX ) : 10.23 %