Smc Project

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SCHOOL OF MANAGEMENTSRM UNIVERSITY

COMPRHENSIVE ANALYSIS OF INVESTMENT AVENUES

STOCK MARKET & INSURANCE IN INDIA

FOR

SMC GLOBAL SECURITIES LTD.

A SUMMER PROJECT REPORTSubmitted

To


in partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

By

Under the Supervision and Guidance

of

Mr. YAASEEN MASVOOD

FACULTY OF SRM SCHOOL OF MANAGEMENT

SRM SCHOOL OF MANAGEMENT

FACULTY OF ENGINEERING & TECHNOLOGY

SRM UNIVERSITY

KATTANKULATHUR 603203.

August, 2009

SRM SCHOOL OF MANAGEMENT

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SRM UNIVERSITY

kattankulathur Campus

CERTIFICATE

This is to certify that the Summer Training Report entitled COMPRHENSIVE ANALYSIS OFINVESTMENT AVENUES STOCK MARKET & INSURANCE IN INDIA, in partialfulfillment of the requirements for the award of the Degree of Master of BusinessAdministration is a record of original training undergone by during the year2008-10 of his study SRM School Of Management, SRM University, kattankulathur Campusunder my supervision and the report has not formed the basis for the award of any

Degree/Fellowship or other similar title to any candidate of any University.

Place: Chennai Signature of Guide

Date: 14.08.09 YAASEEN MASVOOD

(B. E., M.B.A.) Senior LecturerSRM School Of ManagementSRM UniversityKattankulathur CampusChennai 603203

DECLARATION

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I, Radha Motani, hereby declare that the Summer Training Report, entitledCOMPRHENSIVE ANALYSIS OF INVESTMENT AVENUES STOCK MARKET &INSURANCE IN INDIA, submitted to the SRM University in partial fulfillment of therequirements for the award of the Degree of Master of Business Administration is a record oforiginal training undergone by me during the period June-July 2009 under the supervision andguidance of YASEEN MASOOD (B.E., M.B.A.) Senior Lecturer, SRM SCHOOL OFMANAGEMENT, SRM University, Kattankulathur Campus and it has not formed the basis for theaward of any Degree/Fellowship or other similar title to any candidate of any University.

Signature of the Student

Place: Chennai - 603203

Date: 14.08.09

ACKNOWLEDGEMENT

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In preparation of this report by me, I feel great pleasure because it gives me

extensive practical knowledge in my career. I got an idea about share market and

insurance industries by this project.

I would like to express my deepest gratitude and thanks to Dr. JayaShree

Suresh, Head of the Department for her valuable support in doing my project. She has

been a source of encouragement and guidance in all my endeavors.

I express profound thanks to yaseen masood project guide, for consistent

encouragement and valuable suggestion in completing this project, without his, the

completion of this project would be practically impossible.

I express my deep sense of gratitude to My Company Guide Mr. Vishwas

kumar (Sales manager) & Mr. Pradeep kumar (Regional sales manager) for his

valuable guidance during my project work. I also like to thanks all staff of SMC

Global Securities Ltd. who guided me in project work.

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ABSTRACT

This report begins with an overview of the investment avenues, which highlights the phenomenal growth experienced recently, in line with the country's improving economic

fundamentals.This study analysis the investment portfolio of the individual and the various Risks and

Returns calculation are made for the various avenues in order to suggest the suitable portfolio for theindividual based on the risk appetite of the person.

The methodology used is descriptive and exploratory research. The data were collected from200 respondents using questionnaires. Most of the respondents were qualified and income group

people. It is shown from the analysis that the majority of the respondents feels that the risk and thereturn are more important factor in the investment and also in the insurance plan they prefer,accumulation plan.

Statistical test shows that the occupation of the respondents have directly influence. There is

significant relationship between the income of the individual and the choice of investment Avenues.The ANOVA proves the risk and return are most important factor and the rank co-relation show thatthe investment Porto folio doesnt suit the scientific portfolio.

Finally it has been suggested that insurance should be viewed as a risk cover not aninvestment avenues, 50 % should be in guaranteed addition, 30 % in mutual fund and 20% in stocks.

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CONTENTS

CHAPTER

NO.

PARTICULARS PAGE

NO.1. INTRODUCTION:

1.1 Definition Of Investment 8

1.2 Objectives Of Investment Avenues 9-11

1.3 Type Of Investment Avenues 12-13

1.4 Various Risk Involve While Investing 14

1.5 Study Of Equity Market1.5.1 Overview

1.5.2 Equity Market1.5.3 Parameters Reflecting On Index Or Stock Movement1.5.4 The Growth Path Of Share Markets1.5.5 Reasons For The Present Slowdown1.5.6 Different Ways To Play In Stock Market

15

1617

18

19

20

1.6 Study Of Insurance In India1.6.1. What Is Life Insurance?1.6.2. Can Insurance Be An Investment Avenue?1.6.3. Insurance In India

1.6.4. History Of Insurance In India

1.6.5. Types Of Insurance Policies

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22

23

23-24

25-28

2 COMPANY PROFILE

2.1. SMC- At Glance2.2. Vision & Approach

2.3. SMC Achievements2.4. SMC Partners2.5. Products & services2.6. SMC Growth2.7. SMC- Network

29-30

31

32

33

34-35

36

37

3 RESEARCH METHODOLOGY

3.1. Statement Of Problem3.2. Objective Of Study3.3. Scope Of Study3.4. Review Of Literature3.5. Sampling Design3.6. Research Design3.7. Source Of Data3.8. Tools & Technique Used For Analysis3.9. Limitation Of Study

3838

39

39

39

40

40

41

42

4 ANALYSIS AND INTERPRETATION 42-58

5 FINDINGS, SUGGESTIONS AND CONCLUSION

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5.1 Findings 59

5.2 Suggestions 60

5.3 Conclusion 61

BIBLIOGRAPHY 64

LIST OF TABLES

TABLE NO TITLE PAGE NO4.1 Age of the Respondents 424.2 Educational Qualification 43

4.3 Salary of the Respondent 44

4.4 Investment Factors 45

4.5 Perception About Insurance Plan 46

4.6 Accumulation Products Opted inInsurance Plan 47

4.7 Knowledge Level Of Investors In MutualFunds

48

4.8 Risk and return avenues 49

4.2.1 Cross Tabulation Between Income Of TheIndividual And Choice Of Investment Avenue

50-51

4.2.2 One-Way Anova 52-53

4.2.3 Rank Corelation 54

4.3.1 Risk Return Analysis 55

4.3.2 Stocks Index :( 2008-2009) 56

4.3.3 Nifty INDEX :( 2008-2009) 57

LIST OF CHARTS

TABLE NO TITLE PAGE NO4.1 Age of the Respondents 424.2 Educational Qualification 43

4.3 Salary of the Respondent 44

4.4 Investment Factors 45

4.5 Perception About Insurance Plan 464.6 Accumulation Products Opted in

Insurance Plan47

4.7 Knowledge Level Of Investors In MutualFunds

48

4.8 Risk and return avenues 49

4.2.1 Cross Tabulation Between Income Of TheIndividual And Choice Of Investment Avenue

50-51

4.2.2 One-Way Anova 52-53

4.2.3 Rank Corelation 54

4.3.1 Risk Return Analysis 55

4.3.2 Stocks Index :( 2008-2009) 56

4.3.3 Nifty INDEX :( 2008-2009) 57

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CHAPTER 1

INTRODUCTION

One of the most significant factors in our life is the state of our personal finances, we rarelyspend time on managing them since unlike businesses. The reason being, we are not accountable toany one for our personal financial goals and results. As a result we tend to get careless in ourfinancial matters. I know we all understand the importance of savings but let us not get confused

between savings and investment. Mere savings (putting aside a portion of earnings) do not insure orguarantee achievement of future financial goals.

It is important to save but more important is to invest your money. By merely stashing awaymoney into that neighborhood bank's savings account, you are neither making any more money, nor

preserving its value. The inflation rate at around 4-5 per cent p.a. in excess of your bank savingsaccount rate at 3.5 per cent p.a. mercilessly erodes your wealth to that extent. Thepurchasing powerof rupee keeps depreciating. So, to fight against such depreciation one has to invest the money savedin assets that will help it work for you and earn more than the erosion in value through inflation overa period of time. That's just one of the primary reasons why each individual should invest. Anothermore definitive reason is the 'Power of Compounding'. Put simply, it means that "Interest on Interestis Interesting".

One can select the services according to their requirements, be it personal or professional.

1.1. DEFINITION OF INVESTMENT:

1.1.1.Overview

The money you earn is partly spent and the rest is saved for meeting future expenses.

Instead of keeping the savings idle you may like to use savings in order to get return on it in

the future. This is called Investment.

In other words, Investment is the act of committing money or capital to an endeavor with theexpectation of obtaining an additional income or profit.

It's actually pretty simple: investing means putting your money to work for you. Essentially,it's a different way to think about how to make money. There are many different ways you can goabout making an investment. This includes putting money into stocks, bonds, mutual funds, or

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real estate (among many other things), or starting your own business. Sometimes people refer tothese options as "investment vehicles," which is just another way of saying "a way to invest."Each of these vehicles has positives and negatives, which will be discussed later in the thesis.The point is that it doesn't matter which method you choose for investing your money, the goal isalways to put your money to work so it earns you an additional profit. Even though this is a

simple idea, it's the most important concept in the current scenario to understand.

1.2. OBJECTIVES OF INVESTMENT AVENUES

1.2.1. BASIC INVESTMENT OBJECTIVES

Investing is a conscious decision to set money aside for a long enough period in an avenuethat suits your risk profile. The options for investing our savings are continually increasing, yetevery single investment vehicle can be easily categorized according to three fundamentalcharacteristics - Safety, Income and Growth - which also correspond to types of investorobjectives. While it is possible for an investor to have more than one of these objectives, thesuccess of one must come at the expense of others. Here we examine these three types ofobjectives, the investments that are used to achieve them and the ways in which investors canincorporate them in devising a strategy.

1.2.1.1. Safety:

Perhaps there is truth to the axiom that there is no such thing as a completely safe andsecure investment. Yet we can get close to ultimate safety for our investment funds throughthe purchase of government-issued securities in stable economic systems, or through the

purchase of the highest quality corporate bonds issued by the economy's top companies. Suchsecurities are arguably the best means of preserving principal while receiving a specified rateof return.

1.2.1.2. Income:

However, the safest investments are also the ones that are likely to have the lowestrate of income return, or yield. Investors must inevitably sacrifice a degree of safety if they

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want to increase their yields. This is the inverse relationship between safety and yield:

as yield increases, safety generally goes down,and vice versa. Most investors, even the most conservative-minded ones, want some level ofincome generation in their portfolios, even if it's just to keep up with the economy's rate ofinflation. But maximizing income return can be an overarching principle for a portfolio,especially for individuals who require a fixed sum from their portfolio every month.

1.2.1.3. Growth Of Capital

Growth of capital is most closely associated with the purchase of common stock, particularly growth securities, which offer low yields but considerable opportunity forincrease in value. Blue-chip stocks, by contrast, can potentially offer the best of all worlds by

possessing reasonable safety, modest income and potential for growth in capital generated bylong-term increases in corporate revenues and earnings as the company mature.

1.2.2. SECONDARY OBJECTIVES

1.2.2.1. Cost Of Inflation

One needs to invest wisely to meet the cost of Inflation. Inflation causes money tolose value because it will not buy the same amount of a good or a service in the future asit does now or did in the past. For example, if there was a 6% inflation rate for the ext 20years, a Rs.100 purchase today would cost Rs.321 in 20 years. Remember to look at aninvestments real rate of return, which is the return after inflation. The aim ofinvestments should be to provide a return above the inflation rate to ensure that theinvestment does not decrease in value. For example, if the annual inflation rate is 6%,then the investment will need to earn more than 6% to ensure it increases in value.

1.2.2.2. Tax Minimization

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

burden. Making contributions to an IRA or other tax-sheltered retirement plan can be aneffective tax minimization strategy. By far, tax-saving is the most compelling reason forinvestors to set aside money for the long term.

1.2.2.3. Marketability / Liquidity

Common stock is often considered the most liquid of investments, since it can usuallybe sold within a day or two of the decision to sell. Bonds can also be fairly marketable,

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but some bonds are highly illiquid, or non-tradable, possessing a fixed term. Similarly,money market instruments may only be redeemable at the precise date at which the fixedterm ends.

1.2.2.4. Retirement

Anyone who will retire needs to plan for it. There is more than one reason to save forretirement. The all important reason is the rising cost of living. Its called inflation. If youstart planning for retirement early on, you can bridge the gap between what you have inyour hand today and what you would like to have when you retire. If you begin saving forretirement early on in your life, you can set aside smaller amounts. You can also take onmore risk by investing larger amounts in equities i.e., stocks and equity funds

TRADE OFF: As we have seen from each of the objectives discussed above, the advantages

of one often come at the expense of the benefits of another. If an investor desires growth, for

instance, he or she must often sacrifice some income and safety. Therefore, most portfolios

will be guided by one pre-eminent objective, with all other potential objectives occupyingless significant weight in the overall scheme. Choosing a single strategic objective andassigning weightings to all other possible objectives is a process that depends on such

factors as the investor's temperament, his or her stage of life, marital status, family situation,

and so forth. You need only be concerned with spending the appropriate amount of time andeffort in finding, studying and deciding on the opportunities that match your objectives.

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1.3. TYPES OF INVESTMENTS

1.3.1. Overview

An investment is a sacrifice of current money or other resources for future benefits. Asacrifice takes place now and it is certain but the benefits are expected in the future and tend to beuncertain. In the investment the risk elements and the time elements places major roleInvestment avenues are classified as show in the chart:

Almost everyone has a portfolio of investments; the portfolio is likely to comprise financial assetsand real assets. This project will be mainly focused on the financial assets such as insurance andstock among investment avenues. There are many ways to invest your money. Of course, to decidewhich investment vehicles are suitable for you, you need to know their characteristics and why theymay be suitable for a particular investing objective.

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Investments Avenues

Non-MarketableFinancial Assets

Equity Shares

Money MarketInstruments

Bonds

Life Insurance PoliciesMutual Funds

Real Estates Precious Objects

Financial Derivatives


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TABLE 1.3.2: CHARACTERISTIC OF ALL TYPES OF INVESTMENT AVENUES

Return Safety Volatility Liquidity Convenience

Equity High Low High High ModerateBonds Moderate High Moderate Moderate High

Co. Debentures Moderate Moderate Moderate Low Low

Co. FDs Moderate Low Low Low Moderate

Bank Deposits Low High Low High High

PPF Moderate High Low Moderate High

Life Insurance Low High Low Low Moderate

Gold Moderate High Moderate Moderate Gold

Real Estate High Moderate High Low Low

Mutual Funds High High Moderate High High

1.3.3. How to Make Investments

Having appreciated the need, objectives and types of investment, it is now time to shift

focus to the actual process of investing.

1 Set investment objectives1. Access risk-profile2. Get the right asset allocation3. Select an investment advisor

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1.4. VARIOUS RISK INVOLVED WHILE INVESTING:

THE RISK-RETURN TRADE-OFF:

Hence it is up to the investor to decide how much risk does he is willing to take- up. In order to takean in investment decision one should be aware about the various risk involved in it.

1.4.1. MARKET RISK:

Sometimes prices and yields of all securities rise and fall. Broad outside influences affectingthe market in general lead to this. This is true, may it be big corporations or smaller mid-sizedcompanies. This is known as Market Risk. A Systematic Investment Plan-SIP that works on theconcept of Rupee Cost Averaging might help mitigates this risk.

1.4.2. CREDIT RISK:

The debt servicing ability (may it be interest payments or repayment of principal) of acompany through its cash flows determines the Credit Risk faced by you. This credit risk ismeasured by independent rating agencies like CRISIL who rate companies and their paper. A AAArating is considered the safest whereas a D rating is considered poor credit quality. A welldiversified portfolio may help to mitigate this risk.

1.4.3. INFLATION RISK:

The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of timespeople make conservative investment decisions to protect their capital but end up with a sum ofmoney that can buy less than what the principal could at the time of the investment. This happenswhen inflation grows faster than the return on your investment. A well-diversified portfolio withsome investment in equities might help mitigate this risk.

1.4.4. INTEREST RATE RISK:

In a free market economy interest rates are difficult if not impossible to predict. Changes ininterest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bondsfall and vice versa. Equity might be negatively affected as well in a rising interest rate environment.A well-diversified portfolio might help mitigate this risk.

1.4.5. POLITICAL/GOVERNMENT POLICY RISK:

Changes in government policy and political decision can change the investmentenvironment. They can create a favorable environment for investment or vice versa.

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RISK

RET

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1.5. Equity

1.5.1. Overview:

Equities are often regarded as the best performing asset class vis--vis its peers over

longer time frames. However equity-oriented investments are also capable of exposinginvestors to the highest degree of volatility and risk. There are a number of factors, whichaffect the performance of equities ad studying and understanding all of them on an ongoing

basis, can be challenging for most.Stock markets have always been a draw for investors for their ability to generate

wealth over the long-term. Fear, greed and a short-term investment approach act as hurdlesthat frustrate the investor from achieving his/her investment goals. You need to keep in mindthe risk associated with the stocks. You also need to diversify your equity portfolio i.e.,include more stocks and sectors. This helps you diversify your investment risk, so even ifsomething were to go wrong with a stock/industry in your portfolio, other stocks/industries

should help you shore up your portfolio.Two important resources that are critical to investing directly in stock markets are:

Quality stock research and

Reliable and inexpensive stock broker.

The first one is research on stocks is the most critical input that investors need toidentify before they begin investing in stock markets. This is because even while youmay have the risk appetite for equities, you still need credible, stock market relatedresearch that can help you make the right investment decision.

The second one is important service provider for you is the stockbroker; he is the onewho helps you execute the transaction over the stock exchange.

1.5.2. EQUITY MARKET:

When we look the security market as an avenue we have these alternatives:

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Equity Market

Money Market

Corporate Debt

MarketGovernment

SecuritiesMarket

Options

Market

DerivativesMarket

Futures Market

Debt Market

SecuritiesMarket


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EQUITY SHARES

Equity Share represents ownership capital. As a Equity share holder, you have a ownershipstake in the company. This essentially means that you have a residual interest in income and wealth.

The Share movements are reflected in the various index points.o Bombay Stock Exchanges Sensitive Indexo S&P Nifty Index

BOMBAY STOCK EXCHANGES SENSITIVE INDEX:Perhaps most widely followed stock market index in India, Bombay Stock Exchange Index,

Popularly called sensex reflects the movements of 30 sensitive shares from specified and nonspecified groups.

S&P Nifty Index:

Arguably the most rigorously constructed stock market index in India, the nifty index reflects

the price movements of 50 stocks selected on the bases of market capitalization and liquidity.

THE 4,962 STOCKS LISTEDON BSE AND THE NSEOVERALL.

TEN ACTIVE SECURITIES DURING 2008-2009

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Rank Name of the SecurityTurnover

(Rs. crore)% Share in Total

Turnover

Market Capitalisationas on 31.3.2008

(Rs. crore)

% Share inTotal Market

Capitalisation

1 RELIANCE INDUSTRIES LTD 198439.98 7.21 239964.86 8.29

2 ICICI BANK LTD. 118914.86 4.32 37034.37 1.28

3 RELIANCE CAPITAL LTD 99307.76 3.61 8681.89 0.30

4 BHARTI AIRTEL LIMITED 74259.53 2.70 118782.36 4.10

5 STATE BANK OF INDIA 72639.18 2.64 67748.07 2.34

6 LARSEN & TOUBRO LTD. 71991.35 2.62 39315.66 1.36

7 INFOSYS TECHNOLOGIES LTD 68397.40 2.49 75836.97 2.62

8 RELIANCE INFRASTRUCTU LTD 67355.00 2.45 11742.70 0.41

9 HDFC LTD 62913.80 2.29 40170.59 1.39

10 DLF LIMITED 62492.90 2.27 28394.67 0.98


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1.5.3. PARAMETERS REFLECTING ON INDEX OR STOCK

MOVEMENT

1. Financial performance of Company.

2. Daily volumes (Transactions of particular stock).

3. Exchange rate movement.

4. GDP growth rate.

5. Interest rate movements.

6. FII inflows and outflows.

7. Volatility.

8. Inflation.

9. Dividends, Bonus shares, right issue, and IPOs.

Analyzing the impact of the above macro-economic variables on sectorperformance.

Clustering of Shares based on their annualized returns and determination of cause ofinter-relationship between shares within each groups and explanation of inter and intra groupeffects.

Analyzing the impact of spot price on Futures and Option price.

Determination of inter-relationship between theoretical Call and Put price (using Black-Schools pricing model) with actual market price of Call and Put.

Call Option and Put Option are influenced by the following 5 factors (Black- Schloespricing model). Analyzing how much each of the factor is actually reflected in the Option Price.

1. Spot price.

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2. Exercise price.3. Volatility.

4. Time to expiry.5. Interest rate.

1.5.4. THE GROWTH PATH OF SHARE MARKET:

We saw how the market rewarded the undervalued shares and how the overvalued shares felldown to demonstrate the saying everything which rise more than expected, has to fall. SENSEXcrossed the twenty thousand mark cheering thousands of investors in the recent Bull Run. Sensextook a little over 20 years to reach the first 10,000 mark, but just a little over 20 months to doublethat score. The rise in global market and expectations of increased foreign portfolio investment hasdriven traders interest in the market. It is a broad based movement and the major gainers are frontline stocks.Institutional investors and FIIs have provided a perfect support to the rising equityvalues. Today, Indian stock market is largely dominated by group of FIIs that are able to move themarkets by large interventions.

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1.5.5.REASONS FOR THE PRESENT SLOWDOWN:

1. Historic crude oil prices, high inflation rates, weak industrial production data, RBI policies,political uncertainties and obviously the sentiments of domestic as well as FIIs influenced on thesensex volatility.

2. The key benchmark indices ended lower as investors resorted to profit booking due to lack ofpositive triggers in the market. A study found that the mature markets are less volatile and providehigher returns over a longer period of time

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3. Central banks across the globe warned that interest rates may have to rise as they look to keepinflation under control, despite the fact that economic growth is slowing in key nations such as theUS and UK.

4. Investors dumped financials on concerns about the fallout from worsening global credit turmoil.

5. The global financial sector turmoil impacts sentiment in the local market and raises worries ofmore withdrawals by foreign funds.

6. Presently, we can see market plunging after the RBI announced further hikes in Repo rate as wellas CRR both increased to 9%. Also, the serial blasts at Ahmadabad and Bangalore adding to theworries and enhancing the negative sentiments. And above all we can't see any positive trigger thatcan dilute the flow of negative news.

POLICY SUGGESTIONS:

1. Government should set a minimum limit as well as maximum limit, within which FII invest inIndia, in order to avoid volatility in Indian stock market.2. Generate new opportunities to allow more players from.

Market TIME: 9:56 TO 3:30

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INTRADAY

Can Buy Single Share At A Time

Make Profit Without Having Shares In Your Demat

Square Off Time

Settlement Takes Place At The Same Day

Company Gives Exposure 6-20 Times

Settlement Takes Place On The Same Exchange

DELIVERY

Can Not Make Profit Without Having Shares

No Square Off Time

Settlement Takes Place Generally After Two Days, (T+2 Days.)

Company Gives Exposure 4-6 Times

Settlement Can Takes Place Any Of The Two Exchange

FUTURES

Behaves Like Intraday

Have To Buy Minimum One Lot

Expiry Date- Last Thusday Of Every Month- 1m, 2m, 3m

Settlement Of Profit And Loss Takes Place On Daily Basis

OPTIONS Behaves Like Futures

Only Have To Give Premium

Profit Increases Only When Your Premium Amount Increases

With Respect To The Strike Price

1.6. INSURANCE

1.6.1. WHAT IS LIFE INSURANCE?

Life insurance is a contract that pledges payment of an amount to the person assured (or his

nominee) on the happening of the event insured against.

The contract is valid for payment of the insured amount during:

The date of maturity, or Specified dates at periodic intervals, or

Unfortunate death, if it occurs earlier.

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Among other things, the contract also provides for the payment of premium periodically to theCorporation by the policyholder. Life insurance is universally acknowledged to be an institution,which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of thefamily in the unfortunate event of death of the breadwinner.

By and large, life insurance is civilizations partial solution to the problems caused by death.

Life insurance, in short, is concerned with two hazards that stand across the life-path of every person:

That of dying prematurely leaves a dependent family to fend for itself.

That of living till old age without visible means of support.

Traditionally, buying life insurance has always formed an integral part of anindividuals annual tax planning exercise also. While it is important for individuals to havelife cover, it is equally important that they buy insurance keeping both their long-termfinancial goals and their tax planning in mind. This note explains the role of life insurance inan individuals tax planning exercise while also evaluating the various options available atones disposal.

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Life is full of dangers, but with insurance, you can at least ensure that you and yourdependents dont suffer. Its easier to walk the tightrope if you know there is a safety net.You should try and take cover for all insurable risks. If you are aware of the major risks and

buy the right products, you can cover quite a few bases. The major insurable risks are asfollows:

Life Health Income Professional Hazards Assets Outliving Wealth Debt Repayment

1.6.2. CAN INSURANCE BE AN INVESTMENT AVENUE?

Life is uncertain. But the perils faced by human life are certain. Death may take away a

individual but disability is the worst. The scientific principles upon which life insurance is basedupon are as follows:

1. Shared Risk2. Law of Large Numbers3. Predictable Mortality4. Invested Assets5.Fair and accurate Risk selection.

The concept of Life Insurance has evolved over a period of time to meet the different needs of thecustomers. The two basic needs that are common for any individual are(a) Risk Coverage and(b) Future savings. Risk here means Death.

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INSURANCE IN INDIA

Insurance is a federal subject in India and has history dating back till 1818. Life and general

insurance in India is still a nascent sector with huge potential for various global players with the

life insurance premiums accounting to 2.5% of the country's GDP while general insurance

premiums to 0.65% of India's GDP.. The Insurance sector in India has gone through a number of

phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up

the insurance sector by allowing private companies to solicit insurance and also allowing FDI.

Ever since, the Indian insurance sector is considered as a booming market with every other

global insurance company wanting to have a lion's share. Currently, the largest life insurance

company in India is still owned by the government.

Life Insurance in India was nationalized by incorporating Life Insurance Corporation (LIC)

in 1956. All private life insurance companies at that time were taken over by LIC.

A legislation was passed in the year 2000, legislation amending the Insurance Act of 1938 and

legislating the Insurance Regulatory and Development Authority Act of 2000. The same year that the

newly appointed insurance regulator - Insurance Regulatory and Development Authority IRDA --

started issuing licenses to private life insurers.

1.6.3. HISTORY OF INSURANCE IN INDIA

YEAR DETAILS

1818 Europeans started the Oriental Life Insurance Co in Calcutta

1870 The first Indian Insurance Company Bombay Mutual Life Insurance

1870 The British Govt. enacted The Insurance Act

1912 First Indian Insurance Act was passed with an Enactment in 1938.

1912 The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance

business1928 The Indian Insurance Companies Act enacted to enable the government to collect statistical

information about both life and non-life insurance business

1938 Earlier legislation consolidated and amended to by the insurance act with the objective of protectingthe interests of the insuring people

1956 245 Indian and Foreign insurers and provident societies taken over by the central government andnationalized. LIC formed by an act of parliament.

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List of Life Insurers (as of July, 2009)

Apart from Life Insurance Corporation, the public sector life insurer, there are 21 other

private sector life insurers, most of them joint ventures between Indian groups and global insurance

giants.

Life Insurer in Public Sector :

1. Life Insurance Corporation of India

Life Insurers in Private Sector :

1. Bajaj Allianz Life

2. ICICI Prudential Life Insurance

3. HDFC Standard Life

4. Birla Sun life

5. SBI Life Insurance

6. Kotak Mahindra Old Mutual Life Insurance

7. Aviva Life Insurance

8. Reliance Life Insurance Company Limited - Formarly known as AMP Sanmar LIC

9. Tata AIG Life

10. MetLife India Life Insurance

11. ING Vysya Life Insurance

12. Max Newyork Life Insurance

13. Sahara Life Insurance - Now they are not into business

14. Shriram Life Insurance

15. Bharti AXA Life Insurance Co Ltd.

16. IDBI forti life insurance company ltd.

17. Canara HSBC oriental bank of commerce life insurance

18. Aegon religare life insurance company ltd

19. DLF pramerica life insurance company ltd

All life insurance companies have to comply with the strict regulations laid out by IRDA.Therefore there is risk in going in for private insurance players.

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Even if Life Insurance Corporation of India (LIC), the state owned behemoth is the largest

player in the market, the private companies are coming out with better products which are more

beneficial to the customer. Among such products are the ULIPs or the Unit Linked Investment Plans

which offer both life cover as well as scope for savings or investment options as the customer

desires. Further, these types of plans are subject to a minimum lock-in period of three years to

prevent misuse of the significant tax benefits offered to such plans under the Income Tax Act. Hence,

comparison of such products with mutual funds would be erroneous.

The Insurance Act, 1938

The Insurance Act, 1938 was the first legislation governing all forms of insurance to provide strict

state control over insurance business.

Life Insurance Corporation Act, 1956

Even though the first legislation was enacted in 1938, it was only in 19 January 1956, that life

insurance in India was completely nationalized, through the Life Insurance Corporation Act, 1956.

There were 245 insurance companies of both Indian and foreign origin in 1956. Nationalization was

accomplished by the govt. acquisition of the management of the companies. The Life Insurance

Corporation of India was created on 1st September, 1956, as a result and has grown to be the largest

insurance company in India as of 2009.

Insurance Regulatory and DevelopmentAuthority (IRDA) Act, 1999

Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt. of

India, then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-

regulating the insurance sector and allowing private companies into the insurance. Further, foreign

investment was also allowed and capped at 26% holding in the Indian insurance companies.

26

74%

26%

Market Sh are of the InsuranCompany

LIC Private Insurance Compa


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1.6.5. TYPES OF INSURANCE POLICIES:

a) Term Plans :

A term plan is the most basic type of life insurance plan. It is the most cost-effective lifeinsurance product, unlike other plans that come with an investment or savings component. Termplans are products that cover only your life. This means your dependents or nominees get the sumassured on your death. A term plan offers life cover at a very nominal cost. This is due to the factthat term plan premiums include only mortality charges and sales and administration expenses. Thereis no savings element.

b)Money Back Plan :

A money back plan aims to give you a certain sum of money at regular intervals; simultaneouslyit also provides you with life cover. Money back plans are especially useful in case you need moneyat regular intervals for your childs education, marriage, etc.

c) Unit Linked Insurance Plans (ULIPs) :

ULIPs basically work like a mutual fund with a life cover thrown in. They invest thepremium in market-linked instruments like stocks, corporate bonds and government securities.

The basic difference between ULIPs and traditional insurance plans:

While traditional plans invest mostly in bonds and govt. securities,

ULIPs mandate is to invest a major portion of their corpus in stocks. However,investments in ULIP should be in tune with the individuals risk appetite.

ULIPs offer flexibility to the policy holder the policy holder can shift his moneybetween equity and debt in varying proportions.

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d)Pension / Retirement Plans: Planning for retirement is an important exercisefor any individual. A retirement plan from a life insurance company helps an individualinsure his life for a specific sum assured. At the same time, it helps him in accumulating acorpus, which he receives at the time of retirement.

e)Endowment Plans:

Individuals with a low risk appetite, who want an insurance cover, which will alsogive them returns on maturity could consider buying traditional endowment plans. Such

plans invest most of their money in specified debt instruments like corporate bonds,government securities and the money market.

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CHAPTER II

COMPANY PROFILE

"SUCCESS HINGES ON A PASSION FOR EXCELLENCE"

2.1. SMC: AT A GLANCE

Incorporated in 1994 by Mr. S.C. Aggarwal, FCA & Mr. Mahesh C. Gupta, FCA

Member of Equity Exchanges: NSE & BSE, Commodity Exchanges: MCX & NCDEX

Member of Dubai Gold & Commodities Exchange (DGCX), Dubai Gold Receipt (DGR), DubaiCommodity Receipt (DCR)

Depository Participant with CDSL & NSDL

Clearing Member for NSE (F&O, Currency); BSE (F&O, Currency), MCX (Commodities,Currency) & DGCX

Association with London based ICON Capital, registered under FSA & NSA (London)

Highly dedicated workforce of 3000+ employees and 7500+ financial advisors.

1350 offices spread across 350+cities headquartered in Delhi with Regional offices at Mumbai,Kolkata, Chennai, Hyderabad, Cochin and Ahmadabad & Overseas Office at Dubai.

4400 trading terminals

More than 5, 50,000+ satisfied investors

Clearing member for 82 Trading Members MCX/DGCX/NSE/BSE

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Dedicated Proprietary Arbitrage Desk with 350+ Arbitragers

Handles 3, 50,000 + trades/day, achieved US$ 200+ Bn volume for the FY 2007-08

IPO & MF Mobilization Amount (FY 2007-08): Rs. 12592 crores (i.e. US$ 3.07 Bn)

In-house Weekly Research magazine Wise Money

Enterprise valued at Rs. 3500 crores ( i.e. US$ 875 mn appx.) under Private Treaty Deal withBCCL

We are ISO 9001:2000 certified DP for shares and commodities.

SMC is promoted by Mr. Subhash

Chand Aggarwal (Chairman and Managing Director) and Mr.

Mahesh Chand Gupta (Vice Chairman & Managing Director)of SMC Global Securities Ltd. both Chartered Accountants

having rich experience of more than 20 years of financial markets.

30

SMC PROMOTERS AND FOUNDERS


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OUR VISION

To be a global major in providing complete investment solutions, with relentless focus on investorcare, through superior efficiency and complete transparency.

OUR APPROACH & CORE VALUES

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2.3. SMC ACHIEVEMENTS:

4th largest broking house of India in terms of trading terminals (Source: Dun and Bradstreet, 2008)

5th largest sub-broker network in the country (Source: Dun and Bradstreet, 2007)

5th largest distributors of IPO in Retail. (Source: Prime Data Rankings)

Awarded the Fastest Growing Retail Distribution Network in Financial Services (Source: BusinessSphere, 2008)

Received Major Volume Driver by BSE for 3 years consecutively.

Nominated among the top 3, in the CNBC Optimum Financial Services Award 2008 under the"National Level Retail Category".

One of the first financial firms in India to expand operations in the lucrative gulf market, byacquiring license for broking and clearing member with Dubai Gold and Commodities exchange(DGCX)

One of the largest proprietary desk for doing risk-free arbitrage in equities and commodities

Executed the First trade on DGCX for Silver Rebar , Crude Oil and Rupee-Dollar contract.

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2.4. SMC PARTNERS

SANLAM INVESTMENT

Sanlam Investments, the investment arm of South African financial services giant, Sanlam Ltd. Theagreement between the parties will see the setting up of two new businesses in India a wealthmanagement company and an asset management company. The deal was made possible through an acquisition into the SMC group of companies, includingwarrants; which will ultimately create a 5% equity stake for Sanlam Investments in SMC The total financial outlay by Sanlam Investments on this joint venture with SMC is in the region ofRs 215 Cr .

SMC Partners

PUNJAB NATIONAL BANK

Punjab National Bank is serving over 35 million customers through 4,540 Offices including 421extension counters - largest amongst Nationalized Banks. SMC Group has signed a Memorandum of Understanding (MoU) with Punjab National Bank(PNB), to offer State of art online trading facilities , This alliance is providing

Three in one product (Saving- Demat- Trading)

Seamless funds and securities transfer

No extra blockage of funds in the trading accounts after the trading hours

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SMC SERVICES

Stock

34

OtherFinancial ServicesBrokerage

(Online/Offline Trading Platforms)

Description: Providing trading platformsto clients supported with research services

Stock Commodities

Arbitrage

Description:

Engaged inArbitrageoperations

employing bothproprietary& client funds,formonetizing themarketmis-pricings

SMC Group

Insurance

Distribution

Description:Distribution ofLife, Non-lifeInsurance

products

Investment

Banking

Description:FundRaisingThroughIPO,Debt & PERoutes

IPO & MF

Distribution

Description:

Distribution ofIPO & MF

products

Asset

Management

Description:

In-house

mutual fund

In JV

with Sanlam

Wealth

Management

Description:

WealthManagementServices& Advisory inJV with Sanlam

NRI &

InstitutionalDivision

Description:NRI Trading& InstitutionalAdvisoryServices

Research

Services

(Equity &Commodity)

Description:

Fundamental&TechnicalResearch


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PRODUCTS:

Equity Exclusive Commodity Equity Currency Commodity Equity Diet Privilege Commodity Diet Equity Currency Diet Commodity

Annual AMC account Sub-broker One Time AMC account BDR Life time free AMC account Business Associate

Wealth Management PMS

d) Portfolio Management Services

The main idea behind Portfolio Management Services is to manage our clients wealth moreefficiently, reduce risk by diversifying across assets, sectors and funds, and maximizing returns.Expert Portfolio Managers find best of avenues to achieve optimum returns at managed levels ofrisk.This service could also be called as transparent collective investments. You get an upper hand inmany ways.

Advantage of Portfolio Management Services

Constant monitoring of portfolios asset mix to ensure effectively position to meetlong-term objectives.

Performance linked fees, constant disclosure of the portfolio on daily and monthlybasis. It defines the customized risk and return. Great flexibility of deploying and exposing the initial investment in the market. High water mark level for profit sharing. No transaction and custodian charges. Diversification across asset classes and investment styles.

35

Offline Products Online Products

Depository products Networkin Products

Premium Services


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36


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.

CHAPTER III

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3.1 STATEMENT OF PROBLEM

Based on the definition of problem, it is clearly understandable that a problem doesnot necessarily mean that something is seriously wrong with a current situation that needs to be

rectified immediately. But a Problem could simply indicate an interest in an issue where findingsthe right answers might help to improve an existing situation.

In this scenario the investment portfolio should be mainly focused on availability of rightamount of money at the right time to the right person can be called as an efficient portfolio.Here the problem of the study is mainly focused on finding out efficient portfolio of the individuals

based on the risk appetite of the person

3.2 OBJECTIVE OF STUDY

PRIMARY OBJECTIVE:

Finding the acceptance level of share market & insurance among investment avenues in

India.

To find out the various parameters that an investor look from an investment.

To find out what a investor look from an insurance plan.

To Find out the investors level of knowledge in Mutual Fund and the various factors that

they look from the Mutual Funds.

To find out which Investment Avenue gives high return from the investor point of view.

To Find out which Investment avenue gains more Risks from the investor point of view

SECONDARY OBJECTIVE:

To calculate the Risk and Return for Insurance plan, Mutual Funds Schemes and Stocks.

To correlate the ranks and suggest the Portfolio.

To the organization it is to get to know that which avenue attacks more number of investors

in the type of portfolio they follow.

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3.3 REVIEW OF LITERATURE

Security and constant search for security have been the unending endeavors of human racesince the beginning of the civilization. Right from the stone-age man to the modern IT personality,

this search for security has brought out innovative ideas.

3.4 SCOPE OF THE STUDY

The Scope of the study is to probe among the investor of Bangalore. The study wasconducted for the period of two months carrying various places in Bangalore. Primary data wascollected from the investors and Secondary data was collected from the Journals, Magazines andWeb Site.

3.5. SAMPLING DESIGN:

While Developing a Sampling Design. The Researcher must pay attention to the followingpoints.

Sampling units

Sampling Frame

Type of Sampling

Size of Sample

SAMPLING UNITS:

The Samples are derived from the list of Clients of SMC Global Securities Ltd.

SAMPLING FRAME:

Sampling Frame is Representation of elements of target population that consist of a list or

set of direction for identifying the target population. This study done under the consideration ofSMC Global Securities Ltd. clients. These lists of Clients are taken to the sampling frame.

TYPE OF SAMPLING:

PROBABILITY SAMPLING:

Under this Sampling procedure, every item of the universe has an equal chance of inclusionin the sample. The Suitable method for this study is probability sampling, In probability samplingtechnique, Simple Random Technique has been followed for this Study.

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3.6. RESEARCH DESIGN

The research design chosen for the project has been descriptive in nature.

DESCRIPTIVE RESEARCH:

Descriptive research includes surveys and fact-finding enquiries of different kinds. The major

purpose of descriptive research is description of the state of affairs as it exists at present. The

questionnaires are used for collecting responses from the respondents.

3.7. SOURCES OF DATA:

There are two different methods for collection of data to conduct this Descriptive ResearchStudy:

1. Primary Data Collection Method2. Secondary Data Collection Method

PRIMARY DATA COLLECTION:

Primary data are those which are collected a fresh and for the first time and thus happen to beoriginal in character.

Primary data collection is nothing but the data that is directly collected from the people by theresearcher himself. Primary data may pertain to demographic / socio economic characteristics or thecustomers, altitudes and opinions of people, their awareness and knowledge and other similaraspects.

In this study Primary Data collection method has helped the researcher to a great extent inarriving at the results.

METHODS OF PRIMARY DATA COLLECTION:

The method used for collecting Primary data is: Survey

SURVEY METHOD:

Survey method is the systematic gathering of data from the respondents survey is the mostcommonly used method of primary data. This is widely used because of its

Extreme Flexibility

Reliability

Easy Understand ability

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The main purpose of survey is facilitate understanding or enable prediction of some aspectsof the population being surveyed.SURVEY TECHNIQUE:

The technique used for conducting the survey is called Survey Technique. There are three

techniques to conduct the survey Viz. Personal Interview

Telephone Interview

Mail Survey

DATA COLLECTION METHOD:

The instrument used to collect data for the study was the structured and non-disguised

questionnaire through open ended and close ended questions.

3.8. TOOLS AND TECHNIQUES USED FOR ANALYSIS:

The statistical tools used for the study are as follows,

Rank Correlation

Risk & return Calculation

One Way ANOVA Table

Chi-Square

CHI SQUARE TEST:

The chi square test is an important test amongst the several test of significance developedby statisticians. Chi square (Pronounced as chi-square), is a statistical measure used in the contextof sampling analysis for comparing a variance to a theoretical variance. As a non-parametric test, it

can be used to determine if categorical data shows dependency or the two classifications areindependent. Thus, the chi square test is applicable in large number of problems.

The formula used for chi square is,

2 = (O E) 2/ EWhere,O Observed frequency,E Expected frequency,

ANALYSIS OF VARIANCE (ANOVA):

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Analysis of variance (abbreviated as ANOVA) is an extremely useful when multiple samplecases are involved. Using this technique, one can draw inferences about whether the samples have

been drawn from populations having the same mean. Variance is an important statistical measure andis described as the mean of the squares of deviations taken from the mean of the given series of data.It is frequently used measure of variation.

RANK CORRELATION:

Correlation studies the joint variation of two or more variables for determining the amountof correlation between two or more variables.

FORMULA:

6(d)

R s = 1 n (n 1)

3.9 LIMITATIONS OF STUDY:

This study mainly depends on the current market perception, But the market perception is

changing time to time so the recommendation and suggestions are subject to revises based

on the market changes.

This study required more data for knowledge about the market. The data collection, Data

recording and data analysis are very difficult to work in this study.

Short Time Period was Inadequate for conducting detailed Study among the investors.

The study was Limited to the Capabilities and willingness of the respondents to

appropriately and filling the questions.

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CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

DATA ANALYSIS

TABLE 4.1.

AGE OF THE RESPONDENTS

AGE NO. OF RESPONDENTS PERCENTAGE

20 - 30 years 32 16

30 - 40 years 74 3740 - 50 years 60 30

50 - 60 years 20 10

Above 60 years 14 7

Total 200 100

(Source: Primary Data)

INFERENCE:

From the above table it can be inferred that 37% of the respondents belongs to age between30-40 years of age. Very few belong to the age group of above 60 years.

CHART 4.1.

AGE OF THE RESPONDENTS

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TABLE 4.2.

EDUCATIONAL QUALIFICATION OF THE RESPONDENTS

QUALIFICATION NO. OF RESPONDENTS PERCENTAGE

UG 76 38

PG 54 27

Professional 48 24

Others 22 11Total 200 100


INFERENCE:

From the above table it can infer that 38% of the respondents possess UG qualifications. 11%are however others.

CHART 4.2.

EDUCATIONAL QUALIFICATION OF THE RESPONDENTS

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TABLE 4.3.

SALARY OF RESPONDENTS

SALARY SLAB NO. OFRESPONDENT

PERCENTAGE

150000 - 250000 22 11

250000 350000 40 20

350000 450000 72 36

450000 & above 66 33

Total 200 100


INFERENCE:

From the above table it can be inferred that 36% of the respondents belongs to 350,000-450000 Salary Slab. Very few (i.e.) 11 % belong to the Salary Slab 150000 250000.

CHART 4.3.

SALARY OF RESPONDENTS

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TABLE: 4.4.

INVESTMENT FACTORS (As per Investors choice):

FACTORS HIGHLY IMPORTAN

T

IMPORTANT

NEITHERIMPORTAN

T

OR NOTIMPORTAN

T

NOTIMPORTAN

T

HIGHLYNOT

IMPORTAN

T

RETURN 86 72 13 29 NilLOW RISK 91 74 27 8 NilSAFETY 19 18 80 58 25

SAVINGS 2 13 60 45 80TAX

BENEFITS2 13 30 60 95

INFERENCE:

From the above table that the risk and the return are considered to be the most importantfactor for an investment about 43% have said that returns are important and around 45% says thatlow risk in investment places a major role. Safety, Savings and Tax benefits are also taken intoconsideration for making an investment decision.

CHART : 4.4.

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INVESTMENT FACTORS (As per Investors choice):

TABLE : 4.5.

PERCEPTION ABOUT INSURANCE PLAN

FACTORS NO. OF RESPONDENT PERCENTAGETAX BENEFITS 32 16PROTECTION 48 24

ACCUMULATION 120 60Total 200 100

INFERENCE

From the above table it can be inferred that 60% of the respondents look for Accumulation,24% and 16% look for protection and Tax benefits from insurance.

CHART : 4.5.

PERCEPTION ABOUT INSURANCE

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TABLE : 4.6.

ACCUMULATION PRODUCTS IN INSURANCE PLAN:

AVENUES BUDGET 08-09

ENDOWMENT 28

MONEY BACK 17

ULIP 22

WHOLE LIFE 15

RERTIRMENT 18

INFERENCE:

From the above table it can be seen that there is a more importance given to ULIP andEndowment policies in the case of Accumulation.

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CHART : 4.6.

INVESTOR PREFERENCE IN INSURANCE POLICY

TABLE : 4.7.

KNOWLEDGE LEVEL OF RESPONDENTS IN SHARE MARKET AND INSURANCE

KNOWLEDGE SHARE

MARKET

INSURANCE

SOMEKNOWLEDGE 85 115

SUFFICENT KNOWLEDGE 100 75MORE KNOWLEDGE 15 10

(SOURCE: PRIMARY DATA)

INFERENCE:

From the above chart it is clearly stated that the knowledge level of the investor inShare market and insurance is considerably low, since it is a recent avenue.

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CHART : 4.7.

KNOWLEDGE LEVEL OF RESPONDENTS IN SHARE MARKET AND INSURANCE

TABLE 4.8.

RISK AND RETURN IN AVENUES


INFERENCE:

50

RANKS OF

RESPONDENT

RANKS OF

RESPONDENT

AVENUES RISK RETURN

STOCK 1 1

MUTAL FUND 2 2

INSURANCE 3 3

FIXED DEPOSIT 5 4

GOVT.SECURITES 4 5


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From the above table it can be seen that the risk and return for the stocks are ranked same bythe investors. The ranking factors of the individuals have been critically verified by the ANOVA.

CHART : 4.8.

RISK AND RETURN IN AVENUES

(As per Investors choice)

STATISTICAL ANALYSIS

4.2.1 CHI-SQUARE TEST:

PURPOSE:

It is to know whether the choices of the investments are made according to theincome of the individual.

CROSS TABULATION BETWEEN INCOME OF THE INDIVIDUALAND CHOICE OF INVESTMENT AVENUE

TABLE 4.2.1

AVENUES SALARY SLAB

150000 - 250000 250000 -350000 350000-450000 450000 & above Total

STOCKS 0 6 12 25 43

MUTUALFUNDS

8 6 18 13 45

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INSURANCE 3 8 13 20 44

GOVT. BONDS 2 15 12 0 29

FIXEDDEPOSITS

9 5 17 8 39

Total 22 40 72 66 200

HYPOTHESIS:

Ho: There is no significant relationship between the Income of the Individual and the choice ofInvestment Avenues.

H1: There is significant relationship between the Income of the Individual and the choice of

Investment Avenues.

APPLYING CHI-SQUARE TEST:

Oi Ei (Oj Eij)2 (Oj Ej )2/ Ej

0 4.73 22.3729 4.73

6 8.6 6.76 0.786

12 15.48 12.1104 0.78

25 14.19 116.8561 8.23

8 4.95 9.3025 1.886 9 9 1

18 16.2 3.24 0.2

13 14.85 3.4225 0.23

3 4.84 3.3856 0.7

8 8.8 .64 0.073

13 15.84 8.0656 0.51

20 14.52 5.48 0.377

2 3.19 1.4161 0.44

15 5.8 84.64 14.59

12 10.44 2.4336 0.233

0 9.57 91.5849 9.579 4.29 22.1841 5.17

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5 7.8 7.84 1.005

17 14.04 8.7616 0.624

8 12.87 23.72 1.84

TOTAL 52.968

Degree of freedom = (r 1) (c 1)

= (5 1) (4 1)

= 12

(Table value at 5% level of significance is 23.3, whereas the calculated value is 52.968)Since the calculated value is greater than the table value, the null hypothesis is rejected.

INFERENCE:

There is significant relationship between the income of the individual and the choice ofinvestment Avenues.

4.2.2 ONE-WAY ANOVA:

PURPOSE:

It is in order to find whether the ranks given by the respondent with respect to Risk for theinvestment have any significant difference or not.

HYPOTHISES:

Ho: There is no significant difference between the ranks of the Respondent regarding theRisk for the investment.

H1: There is significant difference between the ranks of the Respondent regarding the Risk for theinvestment.

TABLE 4.2.2

RANKS

AVENUES

1 2 3 4 5

SHARE 82 78 40 0 0

MUTUAL FUND 78 82 40 0 0

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INSURANCE 40 22 57 20 61

GOVT.SECURITIES

0 18 42 100 40

FIXEDDEPOSITS

0 0 21 80 99


N (Total No of Responses) = 25

We Shift the origin to 100

RANKS

AVENUES

1 2 3 4 5

SHARE -18 -22 -60 0 0

MUTUAL FUND -22 -18 -60 0 0

INSURANCE -60 -78 -43 -80 -39

GOVT.SECURITIES

0 -82 -58 0 -60

FIXEDDEPOSITS

0 0 -79 -20 -1

SUB-TOTAL -100 -200 -300 -100 -100

TOTAL -800

T (Total of All Observations) = -800

C.F. (Correction Factor) = T / N

= (-800) / 25 = 25600

SST (Sum of Square of Table) = [{(-18) + (-22) + (-60) + (-1)} - C.F.]

= 48600 25600

= 23000

SSC (Sum of Square of Column) = [{(-100) + (-200) + (-300) + (-100) + (-100) } / 5 C.F.]

= 32000 25600

= 6400

SSE (Sum of Square of Errors) = 23000 6400

= 16600

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SOURCE OF

VARIATION

SUM OF

SQUARE

DEGREE OF

FREEDOM

MEAN SUM

OF SQUARE

RATIO (F

TEST)

Between theRanks

6400 4 6400 / 4=1600

= 1600 / 830

= 1.9277Within the

Ranks16600 20 16600 / 20

= 830

Total 24

From the table at 0.01 for (4, 20) of the critical value is 3.26

Calculated value of F is less than Critical value of F,

We Cannot Reject the Null Hypothesis.

INFERENCE:

There is no significant difference between the ranks of the individuals with respect to Riskfor Investment.

4.2.3. RANK CORELATION:

PURPOSE:

It is to find whether the Rank based on findings and rank based on survery is correlate eachother.

AVENUES

(i)

RANK BASED

ON

FINDINGS (ii)

RANK BASED

ON SURVEY

(iii)

d

(ii-iii)

d *d

STOCK 5 3 -2 4

MUTUALFINDS

4 1 3 9

INSURANCE 1 2 -1 1

FIXED

DEPOSITS

2.5 4 -1.5 2.25

GOVT 2.5 5 -2.5 6.25

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SECURITIES &OTHERS

TOTAL 22.5

(R s Rank correlation)

FORMULA:

Rs = 1 - 6(di) / n (n2 1)

HYPOTHESIS:

H o: There is no correlation between the ranks of the portfolio

H 1: There is correlation between the ranks of the portfolio

Rs = 1 6 * 22.5 / 5 (52 1)

= - 0.125

INFERENCE:

Since n = less than 30 we use Spearman Rank correlation value table. Forn = 5, = 0.05 the critical values are + or 0.9. Since Rs = - 0.125. Here it liesin the acceptance region. We accept H o (There is no correlation in the rank

data of the portfolio)

4.3. RISK AND RETURN ANALYSIS

RISK:

Risk refers to the possibility that the actual outcome of an investment will differ from theexpected outcome, to put differently risk refers to the variability or dispersion if an assets return hasno variability, it is risk less.

Suppose you are analyzing the total return of an equity stock over a period of time. Apartfrom knowing the mean return, you would also like to know about the variability in returns.

The most commonly used measure of risk in finance is variance or its square root that isStandard deviation.

RETURN:

Investment decisions are influenced by various motives; Mostly investors are largely guidedby the pecuniary motive of earning a return on their investment.

INSURANCE RETURNS CALCULATION (IRR):

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TABLE 4.3.1

PLANS RETURNSENDOWMENT 12%

MONEY BACK 8%ULIP 10%

RETIREMENT 10%

CHART 4.3.1

INFERENCE:

From the above table we can able to see that all Insurance Products generates an averagereturn of ranging from 8 % 12%, When the Tax Benefits are taken in to account it may extend to14%.RISK:

Since the Insurance products are not based on speculation, the risk attached towards is normalrisk which are explained above.

4.3. STOCKS INDEX :( 2008-2009)

TABLE 4.3.2.

57

MONTHS INDEXSep. 2008 13,102.18Oct 2008 8701.07Nov.2008 9483Dec. 2008 9647.31Jan. 2009 8,779.17Feb 2009 8,954.86Mar 2009 10,048.49

April 2009 11023.09

May 2009 13,589.23June 2009 14764.64

July 2009 15670.31August 2009 15411.63


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CHART 4.3.2.

INFERENCE:

From the above table it is clear that the index has increased by 2309.45 points

NIFTY MOVEMENTS :( 2008-2009)

TABLE 4.3.2

58

MONTHS INDEXSep. 2008 3,921.20Oct 2008 2,885.60Nov.2008 2,755.10Dec. 2008 2,959.15Jan. 2009 2,874.80Feb 2009 2,763.65Mar 2009 3,020.95

April 2009 3,473.95May 2009

4,448.95June 2009 4,291.10July 2009 4,636.45Aug 2009 4580.05


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CHART 4.3.2.

INFERENCE:

From the above table it is clear that the index has decreased by 658.85 points.

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CHAPTER V

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

5.1. FINDINGS

From the above calculation we can able to inference that:

Most of the respondent belongs to the age of 30 and 40 and very few belong to the age

group of above 60 years. (Table- 4.1)

Many of the respondents possess UG qualification and very few are belong to Professional

qualification. (Table- 4.2)

The Salary of the respondent are between 350,000 450,000 and very few are above

15,0,000-250000. ( Table- 4.3)

To first and fore most findings is that the investor is looking Risk and Return as foremost

factors in investment(Table-4.4)

In Insurance Accumulation is considered to be the most important factor(Table- 4.5)

It is found out that the investment pattern is followed by the income of the individual(Table-

4.2.1)

From the ANOVA table we can infer that Stock and Mutual fund ranks first both on Risk

and Return(Table-4.2.2)

The Rank co relation shows that portfolio of the individual is based on their own risk appetite

(Table-4.2.3)

The insurance sector gives around 15% of returns where all the tax benefits are taken to

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consideration, when we consider the inflation factor, which is accelerating at 6%, makes the

returns to be much lower. But the risk concern for the insurance avenue is nil. Since there

are lot of guarantee products and also investment patterns for life insurance companies are

guide by IRDA.

When we take stock market into consideration, the knowledge plays a vital role. The stock

markets give around 30% to 50% of returns where the risk attached is also vary from 30% to

40%. But when we take inflation factor into account this avenue will generate more return

than any other avenue.

The bank F.D. and government securities will consistently give 3% to 6.5% and the risk

attached is nil, (expect interest rate risk which is external)

5.2. SUGGESTIONS

For the investors

IDEAL PORTOFOLIO FOR INVESTMENTS

For constructing an efficient portfolio the investor should have adequate amount of insurance cover.

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Adequate insurance cover = (monthly expenses *36 times +current liabilities + future liabilities) *inflation factor.

The investment should start from investing in those products which give guaranteed additionssuch as government bonds and fixed deposits.

The third step is to invest in products which generates more returns, here the investor mustbe ready to take risk and look for capital appreciation (mutual funds)

The next step is to invest in stock markets where the investor will gain some knowledge bydealing with mutual funds. We can invest in those scripts, which is performing well.

It is necessary to concentrate on these products, which the investor likes to invest more such asmutual funds and stocks.

5.3. CONCLUSION

There are various investment avenues, which highlights the phenomenal growth experiencedrecently, in line with the country's improving economic fundamentals.

The study analysis the investment portfolio of the individual and the various Risks andReturns calculation are made for the various avenues in order to suggest the suitable portfolio for theindividual based on the risk appetite of the person.

Finally it has been suggested that insurance should be viewed as a risk cover not aninvestment avenues, 50 % should be in guaranteed addition, 30 % in mutual fund and 20% in stocks.

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QUESTIONNAIRE

1. Name:

2. Age :25-35 36-45 46 55 Above 55

3. Educational Qualification: Graduate Post Graduate Others

4. Designation:

5. Your Gross Annual Income Will Be? (p.a)

150000 250,000 250,000 350,000350000 450000 450,000 & Above

6.What do you expect from an Investment?

FACTORS HIGHLYIMPORTANT

IMPORTANT

NEITHERIMPORTANTOR NOTIMPORTANT

NOTIMPORTANT

HIGHLYNOTIMPORTANT

RETURNSAFETYSAVINGS

TAXTAXBENEFITS

7. Till now, Your Investment made in?

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8. How do you see an insurance plan ?

ESSENTIAL NON-ESSENTIAL

Protection:

Accumulation:

Tax Benefits:

9. Incase if you invest in Insurance, Which would you opt for Accumulation? Endowment

Money Back ULIPWhole Life Plan Retirement Plan

10. Do you have the Knowledge about theMutual Fund Market?

Some Knowledge Sufficient Knowledge More Knowledge

12. Do you think Stock Market Knowledge is necessary for Trading? Essential Not essential Brokers Knowledge is

enough

13.Convey your idea about nature of Return in the following investment Avenues(Rank 1 = High Returns)

14. Convey your idea about nature of Risk in the following investment Avenues(Rank 1 = High Risk)

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AVENUES INVESTMENT IN

Fixed Deposit

Mutual Funds-

Stocks -Insurance-

Others -

RANK

Stock

Mutual Fund

Insurance

Fixed Deposits

GovernmentSecurities


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15. Where would you advice to your friend to invest?

BIBLIOGRAPHY:

Equity marketwww.nseindia.com

www.moneymarket.com

www.yahoofinance.com

Insurance detailwww.irdaindia.com

Company profilewww.smcindia.com

For Calculation of Risk and

Return in STOCKS:INVESTMENT MANAGEMENT

SM Maheshwari

For Statistical Analysis:STATISTICAL METHOD S.P.GuptaSTATISTICS FOR MANAGEMENT T. N. Srivastava &

Shailaja Rego

For Research Design:

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RANK

StockMutual Fund

Insurance

Fixed Deposits

GovernmentSecurities
http://www.nseindia.com/http://www.moneymarket.com/http://www.irdaindia.com/http://www.nseindia.com/http://www.moneymarket.com/http://www.irdaindia.com/


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RESEARCH METHODOLOGYC.R.Kothari

Smc Project

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