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A REPORT ON RESEARCH PROJECH ON INVESTORS PERCEPTION ON INVESTMENT AVENUES SUBMITTED BY V.VENKATRAO Reg. no: 2011130020

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Page 1: Final Project Vvr

A REPORT ON

RESEARCH PROJECH ON INVESTORS PERCEPTION ON

INVESTMENT AVENUES

SUBMITTED BY

V.VENKATRAO

Reg. no: 2011130020

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SUBMITTED TO

Dr. T. VASUDHA

Project co-coordinator

CENTER FOR MANAGEENT AND TECHNOLOGY

Visakhapatnam

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I hereby declare that this research project entitled “INVESTORS PERCEPTION

ON INVESTMENT AVENUES” has been done by me during the year 2013 in partial fulfillment of requirement for the Post Graduation Diploma in Management awarded by AICTE.

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I also declare that this project is a result of my own efforts and that it has not been submitted to any other University for the award of a Degree or Diploma before or published.

Place: Visakhapatnam

Date: 28-05-2013 (V.venkatrao)

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CONTENTS

INTRODUCTION

Introduction to investment

Types of an investment avenues

Non marketable financial assets

Bonds

Mutual funds

Real estate

Equity shares

Money market instruments

Life insurance polices

Bullion market

Financial derivatives

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RESEARCH METHODOLOGY

Statement of the problem

Review of literature

Need for study

Objectives of the study

Hypothesis

Research design

Tools of data collection

Method of analysis

Limitations of the study

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INDUSTRY ANALYSIS

Indian financial market

Classification of financial markets

Money market

Money market

Primary Market

Secondary market

ANALYSIS AND INTERPRETATION

FINDINGS AND SUGGESTIONS

CONCLUSION

BIBLOGRAPHY

ANNEXURE

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CHAPTER-1

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INTRODUCTION

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1.1INTRODUCTION TO INVESTMENT

The money one earns partly spent and the rest is saved to meeting future expenses, instead of keeping savings idle one may like to use savings in order to get returns on it in the future, this is called as investment. In an economic sense, an investment is the purpose of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monitory asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price. Here earnings will not help one to secure the future, so it becomes important to invest.

One of the important reasons why one needs to invest wisely is to meet the cost of inflation. Inflation is the rate at which the cost of living increases. The cost of living simply what it costs to buy goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or service in the future as it does now or did in the past. The sooner one starts investing the better. By investing early one allows ones investments more time to accumulating the principal and the interest or dividend earned on it. Year after year.

The dictionary meaning of investment is to commit money in order to earn a financial return or to make use of money for future benefits or advantages. People commit money to investments with expectations to increase their future wealth by investing money to spend in future years. For example, if you invest Rs 1000 today and earn 10% over the next year, you will have Rs.1100 one year from today.

An investment can be described as perfect if it satisfies all the needs of all investors. So, the starting point in searching for the perfect investment would be to examine investor needs. If all those needs are met by the investment, then that investment can be termed the perfect investment.

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1.2. TYPES OF AN INVESTMENT AVENUE

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Figure 1.1: Various Investment Alternatives

Figure 1.1 shows various investment alternatives which are explained below. One can invest money in different types of instruments. These instruments can be financial or non financial in nature. They are many factors that affect one`s choice of investment. Millions of Indians buy Fixed Deposits, post office savings certificates, stocks, bonds or mutual funds, purchase gold, silver, or make similar Investments. They all have a reason for investing their Money. Let us first understand the basics of some of some of the popular investment avenues.

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1.3Non marketable financial assets: A good portion of financial assets is represented by non marketable financial assets. These can be classified into the following broad categories.

Bank deposits: The simplest of investment avenues, by opening a bank account and depositing money in it one can make a bank deposit. There are various kinds of bank accounts: current accounts, savings account and fixed deposit account. The interest rate on fixed deposits various with the term of the deposit, in general it is lower for fixed deposits for shorter term and higher for fixed deposits of longer term. Bank deposits enjoy exceptionally high liquidity.

Post office savings account: A post office savings account is similar to a

savings bank account. The interest rate is percent for annum.

Post office time deposits (POTD`S): similar to fixed deposits of commercial banks, POTD can be made In multiplies of 50 without any limit. The interest rates on POTD`S are, in general, slightly higher than those on bank deposits. The interest rate is calculated half-yearly and paid annually.

Monthly income scheme of the post office (MISPO): A popular scheme of the post office, the MISPO is meant to provide regular monthly income to the depositors. The term of the scheme is 6 years. The minimum amount of investment is 1,000. The maximum investment can be 3, 00,000 in a single account or 6, 00,000 in a joint account. The interest rate is 8.0 percent for annum, payable monthly. A bonus of 10 percent is payable on maturity.

Kisan vikas patra (KVP): A scheme of the post office, for which the minimum amount of investment is 1,000. There is no maximum limit. The investment doubles in 8 years and 7 months. Hence the compound interest rate works out to 8.4 percent there is a withdrawal facility after 2 years 6 months.

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National savings certificate: Issued at the post offices, national savings certificate comes in denominations of 100, 500, 1000, 5000 and 10000. It has a term of 6 years. Over his period Rs 100 becomes Rs. 160.1. Hence the compound rate of return works out to 8.16 percent.

Company deposits: many companies large and small solicit fixed deposits from the public. Fixed deposits mobilized by manufacturing companies are regulated by the company law board and fixed deposits mobilized by finance company are regulated by the reserve bank of India. The interest rates on company deposits are higher than those on bank deposits, but so is risk.

Employee provided fund scheme: A major vehicle of savings for salaried employees, where each employee has a separate provident fund account in which both the employer and employee are required to contribute a certain minimum amount on a monthly basis.

Public Provident Fund Scheme: One of the most attractive investment avenues available in India. Individuals and HUFs can participate in this scheme. A PPF account may be opened at any branch of State Bank of India or its subsidiaries or at specified branches of the other public sector banks. The subscriber to a PPF account is required to make a minimum deposit of 100 per year. The maximum permissible deposit per year is 70,000. PPF deposits currently earn a compound interest rate of 8.0 percent per annum, which is totally exempt from taxes.

1.4 Bonds: Bonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns. Many people invest in bonds with an objective of earning certain amount of interest on their deposits and/or to save tax. Bonds are considered to be a less risky investment option and are generally preferred by risk-averse investors. Bond prices are also subject to market risk. Bonds may be classified into the following categories:

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Government securities: Debt securities issued by the central government state government and quasi government agencies are referred as gilt edge securities. It has maturities ranging from 3-20 years and carry interest rate that usually vary between 7 to 10 percent.

Debentures of private sector companies: Debentures are viewed as a mixture of having a shareholding and a fixed interest loan. Debenture holders are normally entitled to a return equivalent to a fixed percentage of their initial investment. The security inherent in debentures makes them a safer investment than shares.

Preference shares: Investing in shares is safer and dividends are assured every yearn Savings bonds.

1.5 Mutual funds: A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. This investment avenue is popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. There are three broad types of mutual fund schemes classified on basis of investment objective:

Equity schemes: The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

Debt schemes: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such

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funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities

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Of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the Interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

Balanced schemes: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

Real Estate: Residential real estate is more than just an investment. There are more ways than ever before to profit from real estate investment. Real estate is a great investment option. It can generate an ongoing income source. It can also rise in value overtime and prove a good investment in the cash value of the home or land. Many advisors warn against borrowing money to purchase investments. The best way to do this is to save up and pay cash for the home. One should be able to afford the payments on the property when the property is vacant, otherwise the property may end up being a burden instead of helping to build wealth.

Equity Shares: Equities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term investment option as the returns on equities over a long time horizon are generally higher than most other investment avenues. However, along with the possibility of greater returns comes greater risk.

Money market instruments: The money market is the market in which short term funds are borrowed and lent. These instruments can be broadly classified as:

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Treasury Bills: These are the lowest risk category instruments for the short term. RBI issues treasury bills [T-bills] at a prefixed day and for a fixed amount. There are 4 types of treasury bills: 14-day T-bill, 91-day T-bill, 182-day T-bill and 364-day T-bill.

Certificates of Deposits: After treasury bills, the next lowest risk category investment option is certificate of deposit (CD) issued by banks and financial Institution (Fl). A CD is a negotiable promissory note, secure and short term, of up to a year, in nature. Although RBI allows CDs up to one-year maturity, the maturity most quoted in the market is for 90 days.

Commercial Papers: Commercial papers are negotiable short-term unsecured promissory notes with fixed maturities, issued by well-rated organizations. These are generally sold on discount basis. Organizations can issue CPs either directly or through banks or merchant banks. These instruments are normally issued for 30/45/60/90/120/180/270/364 days.

Commercial Bills: Bills of exchange are negotiable instruments drawn by the seller or drawer of the goods on the buyer or drawee of the good for the value of the goods delivered. These are called as trade bills and when they are accepted by commercial banks they are called as commercial bills. If the bill is payable at a future date and the seller needs money during the currency of the bill then the seller may approach the bank for discounting the bill.

Life insurance policies: Insurance is a form of risk management that is primarily used to hedge the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. An insurer is a company that sells insurance; insured or the policyholder is a person or entity buying the insurance. The insurance rate is a factor that is used to determine the amount which is to be charged for a certain amount of insurance coverage, and is called the premium. It can be classified as:

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Money-back Insurance: Money-back Insurance schemes are used as investment avenues as they offer partial cash-back at certain intervals. This money can be utilized for children's education, marriage, etc.

.Endowment Insurance: These are term policies. Investors have to pay the premiums for a particular term, and at maturity the accrued bonus and other benefits are returned to the policyholder if he survives at maturity.

Bullion Market: Precious metals like gold and silver had been a safe haven for Indian investors since ages. Besides jeweler these metals are used for investment purposes also. Since last 1 year, both Gold and Silver have highly appreciated in value both in the domestic as well as the international markets. In addition to its attributes as a store of value, the case for investing in gold revolves around the role it can play as a portfolio diversifier.

Financial Derivatives: Derivatives are contracts and can be used as an underlying asset. Various types of Derivatives are:

Forwards: A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at today's pre-agreed price.

Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that the former are standardized exchange Traded contracts

Options: Options are of two types - calls and puts. Calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or

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before a given future date. Puts give the buyer the right, but not the obligation to sell a given quantity of the underlying asset at a given price on or before a given date.

Swaps: Swaps are private agreements between two parties to exchange cash flows in the future according to a prearranged formula. They can be regarded as portfolios of forward contracts. E.g. Currency swaps, interest swaps.

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CHAPTER 2

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RESEARCH

METHODOLOGY

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2.1 STATEMENT OF THE PROBLEM

This study on investor's behavior is an attempt to know the perception and the characteristics of the investors so as to understand their preference with respect to their investments. The main focus of the study is to discover the influence of Demographic factors like gender and age on risk tolerance level of the investor.

The study mainly concentrates on the factors that influence an individual investor before making an investment. It also studies the various patterns in which investors like to invest their money based on their risk tolerance level and other demographic factors like income level, occupation etc.

2.2 REVIEW OF LITERATURE

The literature review section examines the importance of research studies, company data or industry reports that serve as a foundation for the setup of study. The research dimension of the related literature and the relevant information begins from an explanatory perspective, approaching towards specific studies which do related to judge the limitations and informational gaps in data from the secondary sources. This analysis may reveal conclusions from past studies to realize the reliability of the secondary sources and their credibility. This in turn enables one to rely on a comprehensive review for the study.

2.3 NEED FOR STUDY

Investing money is a crucial and deciding the avenues where to invest needs a lot of planning. In India people are more conservative and hence prefer investments that are less risky. Similarly there are other demographic factors like age, income level, gender which affect their decision. As the availability of financial products increase, perception of investors towards such avenues

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changes over a period of time. It becomes important for a marketer to understand the perception of investors towards investment avenues to

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Successfully pitch the product. If the marketer is able to understand the mindset of investor towards a product then he/she will be in a position to market the product. This report attempts to study the behavior of Indian investors while making an investment. Hence the need for this study arises to understand what exactly an Indian investor thinks before investing his/her money and how much risk he/she is willing to take.

OBJECTIVES OF THE STUDY

Primary Objective

To study the investors perception on investments

To study the objectives of investment plan of an investors

To study the demographic information of investors

Secondary Objectives

To know the preferred investment avenues of investors

To identify the preferred sources of information influencing investment decisions

To understand the risk tolerance level of the investors and suggest a suitable portfolio

To study the dependence/independences of the demographic factors (Gender, Age, income level) of the investor and his/her risk tolerance level.

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HYPOTHESIS

A hypothesis describes the relationship between or among variables. A good hypothesis is one that can explain what it claims to explain, is testable and has greater range, probability and simplicity than its rivals. There are two approach of hypothesis testing:

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1) Classical or sampling theory statistics and 2) The Bayesian approach

In the present dissertation chi square test has been used to find out the dependence/independence of various factors that influence investment decision. Hypothesis has been found between following factors:

Gender and risk tolerance of respondents

Age and preferred investment avenues by the respondents

Income and investment avenues preferred by the respondents

Age of respondents and time horizon for investment

Age and risk tolerance of the respondents

2.6 RESEARCH DESIGN

Sample description

The sample was drawn from the population of the potential investors from Visakhapatnam. A survey was conducted to understand the investor's behavior with the help of questionnaire. It was carried out with a sample size of 100 investors.

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2.7 TOOLS OF DATA COLLECTION

Primary data: The data has been collected directly from respondent with the help of structured questionnaires.

Secondary data: The secondary data has been collected from various magazines, journals, newspapers, text books and related websites

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2.8 METHOD OF ANALYSIS

Statistical techniques like, simple percentage method are used to analyze and interpret raw data. Hypothesis was used to show the dependency/independency of various factors.

After collecting the data its variable having defined character, it was tabulated and analyzed with the help of charts and graphs in Microsoft Excel.

LIMITATIONS OF STUDY

Sample size is small because of the time constraint

Respondent may be hesitant to provide their investment details

Behavior of investors doesn't remain same for long time

Time for the study is limited

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CHAPTER3

INDUSTRY PROFILE

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3.1 INDIAN FINANCIAL MARKET

Money always flows from surplus sector to deficit sector. That means persons having excess of money lend it to those who need money to fulfil their requirement. Similarly, in business sectors the surplus money flows from the investors or lenders to the businessmen for the purpose of production or sale of goods and services. So, we find two different groups, one who invest money or lend money and the others, who borrow or use the money.

The financial markets act as a link between these two different groups. It facilitates this function by acting as an intermediary between the borrowers and lenders of money. So, financial market may be defined as 'a transmission mechanism between investors (or lenders) and the borrowers (or users) through which transfer of funds is facilitated'. It consists of individual investors, financial institutions and other intermediaries who are linked by a formal trading rules and communication network for trading the various financial assets and credit instruments.

Financial market talks about the primary market, FDIs, alternative investment options, banking and insurance and the pension sectors, asset management segment as well. India Financial market happens to be one of the oldest across the globe and is the fastest growing and best among all the financial markets of the emerging economies. The history of Indian capital markets spans back 200 years, around the end of the 18th century. It was at this time that India was under the rule of the East India Company. The capital market of India initially developed around Mumbai; with around 200 to 250 securities brokers participating in active trade during the second half of the 19th century.

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3.2 CLASSIFICATION OF FINANCIAL MARKETS

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Figure 3.1: Classification of financial markets

Figure 3.1 shows the classification of financial markets. From this figure we can interpret that there are different ways of classifying financial market.

One is to classify financial market by the type of financial claim. The debt Market is the financial market foe fixed claims (debt instrument) and the

Equity market is the financial market for residual claims (equity instruments)

The second way is to classify financial markets by the maturity of claims. The market for short term financial claims is referred to as the money market and the market for long term financial claims is referred to as the capital market.

The third way to classify financial markets is based on whether the claims represent new issues or outstanding issues. The market where issues sell new claims is referred as primary market and the market where issues sell outstanding claims is referred as secondary market.

The fourth way to classify financial markets is by the timing of delivery. A cash or spot market is one where the delivery occurs immediately and forward or futures markets are those markets where the delivery occurs at a pre determined time in future.

The fifth way to classify financial markets is by the nature of its organizational structure. An exchange traded market is characterized by a centralized organization with standardized procedures and an over the counter market is a

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decentralized market with customized procedures. These markets are further explained in detail.

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3.3 MONEY MARKET

The money market is a market for short-term funds, which deals in financial assets whose period of maturity is up to one year. It should be noted that money market does not deal in cash or money as such but simply provides a market for credit instruments such as bills of exchange, promissory notes, commercial paper, treasury bills, etc. These financial instruments are close substitute of money. These instruments help the business units, other organizations and the Government to borrow the funds to meet their short-term requirement.

Money market does not imply to any specific market place. Rather it refers to the whole networks of financial institutions dealing in short-term funds, which provides an outlet to lenders and a source of supply for such funds to borrowers. Most of the money market transactions are taken place on telephone, fax or Internet. The Indian money market consists of Reserve Bank of India, Commercial banks, Co-operative banks, and other specialized financial institutions. The Reserve Bank of India is the leader of the money market in India. Some Non-Banking Financial Companies (NBFCs) and financial institutions like LIC, GIC, UTI, etc. also operate in the Indian money market.

3.4 CAPITAL MARKET

Capital Market may be defined as a market dealing in medium and long-term funds. It is an institutional arrangement for borrowing medium and long-term funds and which provides facilities for marketing and trading of securities. So it constitutes all long-term borrowings from banks and financial institutions, borrowings from foreign markets and raising of capital by issue various securities such as shares debentures, bonds, etc.

The market where securities are traded known as Securities market. It consists of two different segments namely primary and secondary market. The primary market deals with new or fresh issue of securities and is, therefore, also known as new issue market; whereas the secondary market provides a place for purchase and sale of existing securities and is often termed as stock market or stock exchange.

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3.4.1 PRIMARY MARKET

The Primary Market consists of arrangements, which facilitate the procurement of long-term funds by companies by making fresh issue of shares and debentures. You know that companies make fresh issue of shares and/or debentures at their formation stage and, if necessary, subsequently for the expansion of business. It is usually done through private placement to friends, relatives and financial institutions or by making public issue. In any case, the companies have to follow a well-established legal procedure and involve a number of intermediaries such as underwriters, brokers, etc. who form an integral part of the primary market. You must have learnt about many initial public offers (IPOs) made recently by a number of public sector undertakings such as ONGC, GAIL, NTPC and the private sector companies like Tata Consultancy Services (TCS), Biocon, Jet-Airways and so on.

3.4.2 SECONDARY MARKET

The secondary market known as stock market or stock exchange plays an equally important role in mobilizing long-term funds by providing the necessary liquidity to holdings in shares and debentures. It provides a place where these securities can be encased without any difficulty and delay. It is an organized market where shares and debentures are traded regularly with high degree of transparency and security. In fact, an active secondary market facilitates the growth of primary market as the investors in the primary market are assured of a continuous market for liquidity of their holdings. The major players in the primary market are merchant bankers, mutual funds, financial institutions, and the individual investors; and in the secondary market you have all these and the stockbrokers who are members of the stock exchange who facilitate the trading.

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CHAPTER 4

ANALYSIS

AND

INTERPRETATION

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Data analysis and interpretation

Table 4.1: Gender wise classification of Respondents

Gender

Number of

Percentage (%)

Respondents

Male

83

83

Female

17

17

Total

100

100

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Interpretation:

Table 4.1 shows the Gender wise classification of Respondents. It was found that 83% of the Respondents are men and the rest are females. Generally males bear the financial responsibility in Indian society, and therefore they have to make investment decisions to fulfill the financial obligations.

On the other hand females are not involved in such activities as majority of them are busy with their household activities. Also there are very less houses which depend on a female income most of them are male dominated households. Hence investment activities are more seen in males than females.

Clasification of respondendts on basis of gender

male female

17%

83%

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Table 4.2: Age wise classification of Respondents

Age( in years)

Number of

Percentage (%)

Respondents

Below 25years

12

12

25-35years

20

20

35-45years

44

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44

above 45years

24

24

Total

100

100

Interpretation: Table 4.2 shows the Age wise classification of Respondents. When it comes

to

age, it was found that 12% are young i.e. of age group below 35 years and 20% of them are in the age group of 25 to 35. Other than these 44% of them belong to age group of 35 to 45 and rest them belongs to age group above 45. This shows that age group of 35 years an above are more interested in investments while people below 25 years make less investments and above age of 45 and would start planning for retirement.

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Clasification of respondents on the basis of age

25-35 years

35-45 years

Above 45 years

27% 23%

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50%

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Table 4.3: Classification of Respondents on the basis of their Marital Status

Marital

Number of

Percentage (%)

status

Respondents

Single

22

22

Married

78

78

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Total

100

100

Interpretation:

Table 4.3 shows classification of Respondents on the basis of their Marital Status. It was found that marital status of 78% of the Respondents was found to be married and the rest 22% are unmarried. This is because a married individual is considered to have dependents so they are involved in making financial investments. Whereas Respondents who are unmarried mostly invest to generate wealth but they do not have any financial responsibility.

clasification of respondendts onthe basis of marital status

Single

Married

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22%

78%

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Table 4.4: Classification of Respondents on basis of Occupation

OCCUPATION

NUBBER OF RESPONDENDTS

Business

13

government employee

30

home maker

3

private sector

38

self employee

15

student

1

Grand Total

100

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Interpretation:

Table 4.4 shows classification of Respondents on basis of Occupation. From the above graph indicates that 38% of the Respondents are from the private sector, 30% of them are government employees, 15% of them are self employees and rest is working in other sectors. Respondents who are employed in government and private sectors they are investing more.

Clasification of respondendts on basis of occupation

40

38

30

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business

30

government employee

20

13

15

home maker

10

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3

private sector

1

sely employee

0

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student

Total

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Table 4.5: Classification of Respondents on basis of Annual Income

Annual Income

Number of

Percentage (%)

Respondents

Below 2 Lakhs

10

14

2 Lakhs - 5 Lakhs

53

53

5 Lakhs - 7 Lakhs

21

21

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7 Lakhs – 10 Lakhs

6

6

above 10 Lakhs

6

6

Total

100

100

Interpretation:

Table 4.5 shows the classification of Respondents on basis of Annual Income. It was found that 53% of Respondents with annual earnings between 2to5 Lakhs are interested in investments because their savings are more which they invest to generate wealth, 10% of them are earning below 2Lakhs annually, the other 21% are earning between 5 to 7 Lakhs in a year, 6% of them earn 7 to 10 Lakhs in an year but there were 6% of respondents with annual income above 10 Lakhs per year.

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Clasification of respondendts on the basis of income level

Series1

53%

21%

10%

6%

6%

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Below 2 lakhs

2 lakhs to 5

5 lakhs to 7

7 lakhs to 10

Above 10 lakhs

lakhs

lakhs

lakhs

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Table 4.6: Classification of Respondents on basis of Education Level.

Education level

Number of

Percentage (%)

Respondents

10th class

2

2

Intermediate

2

2

Graduate

41

41

PG

29

29

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And above

26

26

Total

100

100

Interpretation:

Table 4.6 shows the classification of Respondents on basis of Education Level. It indicates that 41% of the Respondents covered in the study are graduates; 29% Respondents are post graduates and 26% of the Respondents are above qualification. Investors with graduate degree would be more exposed to market situation which make them more interested in investments. Also post graduates would have fair knowledge about investments. Whereas Respondents who are undergraduates mostly do not invest due to unfamiliarity to investment avenues or unavailability if information about investments.

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45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Clasifi

cation of respondendts on the basis of education level

41%

29%

26%

2%

2%

Series1

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Table 4.7: Classification of Respondents on basis of Preferred Investment Avenues (combination of investments)

Investment avenues

Number of

Percentage (%)

Respondents

Fd`s

67

24.18

Ulip`s

19

6.85

Stock market

28

10.10

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Derivatives

3

1.08

Real estate

6

2.16

Gold

45

16.24

Ppf

29

10.46

Mutual funds

70

25.27

Post office MIS

8

2.88

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bonds

2

0.72

Total

100

Interpretation: Table 4.7 shows classification of Respondents on basis of Preferred

Investment

Avenues. It can be concluded that the Respondents prefer Mutual

Funds`/FD`S/GOLDs avenues than PPF schemes next to stock market, Ulip’s and derivatives. It was interesting to know that Indian individual investors still prefer to invest their surplus amount in risk free investment avenues next to Fd’s schemes. It confirms that Indian investors are conservative investors.

Clasification of respondendts on basis of prefered investment

Fd`s

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Ulip`s

Stock market

Derivatives

Real estate

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Gold

Ppf

Mutual funds

Post office MIS

Bonds

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3% 1%

24%

25%

7%

11%16% 10%

2% 1%

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Table 4.8: Classification of Respondents investing of top 3 investments

Investment avenues

Number of

Percentage (%)

Respondents

Fd`s

79

39.11

Gold

62

30.19

Mutual funds

61

30.20

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Total

100

100

Interpretation: table4.8 shows that classification of respondents investing of top 3 investments. It can be concluded that investors preferring mostly these three investments as a source of income or profits for their future. Fd`s are most preferred investment in all the time.

Clasification of respondendts on basis of top 3 investments

Fd`s

Gold

Mutual funds

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30%

40%

30%

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Page 33

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Table 4.9: Classification of Respondents on the basis of Factors Influencing an Investment Decision

Factors influencing an

Number of

Percentage (%)

investment decision

Respondents

Returns

39

39

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Minimum amount

16

16

Risk

29

29

Locking period

0

0

Liquidity

14

14

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Other factors

2

2

total

100

100

Interpretation: Table 4.9 shows the classification of Respondents on the basis of Factors considered before making an Investment. Out of all majorities of the Respondents i.e. 39% prefer to invest where there is high return. 29% of the Respondents look for risk involved in the investment, 16% of the Respondents invest in those avenues wherein they will get minimum amount. 14% of Respondents look for liquidity and the rest look for ease with which the investment can be made.

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Clasification of respondendts on basi of factors influence on investment options

Returns

Minimum amount

Risk

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Locking period

Liquidity

Other factors

0% 14%

2%

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39%

29%

16%

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Table 4.10: Classification of Respondents on the basis of Demate a/c Holders

Demate a/c holders

Number of

Percentage (%)

Respondents

Yes

79

79

No

21

21

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Total

100

100

Interpretation: classification of respondents on the basis of demates a/c holders. It says that 79% of the people are having demate a/c`s, 21% of the people are not having the demate a/c`s, it tells that most of the people are investing their money in the mutual funds and stock market.

Clasification of respondendts on basis of Demate a/c`s

Yes No

21%

79%

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Table 4.11: Classification of Respondents on basis of managing of their investments.

Managing of their

Number of

Percentage (%)

investments

Respondents

Individual

25

25

Agent, mediator

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59

59

Financial planner

16

16

others

0

0

Total

100

100

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Interpretation:

Table 4.11 shows classification of Respondents on basis Influence on Investment Decision. It was found that Respondents are mostly depending upon expert advice and help while making investment decisions. However, the majority of the Respondents i.e. 59% make investment decisions with the help and advice from experts; only 25% investors are making their investments alone. 16% of the investors taking the help of financial planner.

Clasification of respondendts on basis of managing of their investments

Individual

Agent, Mediater

Financial planner

Others

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0%

16% 25%

59%

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Table 4.12: Classification of Respondents on the basis of Time Horizon for Investment

Investment time horizon

Number of

Percentage (%)

Respondents

Below 1year

2

2

1 to 3years

23

23

3 to 5 years

57

57

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5 to 10 years

14

14

Above 10 years

4

4

Total

100

100

Interpretation: Table 4.12 shows the classification of Respondents on the basis of Time

Horizon

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For Investment. From the above table we can interpret that majority of the Respondents i.e. 57% of the total sample invest for 3 to 5 year, 23% of them invest for time period of 1 to 3 years, 14% of them invest for period of 5 to 10 years and the 4% of them invest for period of above 10 years 2% of them invest for less than 1 year. It is found that most of the Respondents want to make money quickly hence they invest for 3to5 year’s period.

60%

50%

40%

30%

20%

10%

0%

.

Clasification of respondedts on basis of Investment time Horizon

57%

23%

2%

14%

4%

Series1

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Below

1

1 to 3

3 to 5

5 to 10

Above 10

year

years

years

years

years

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Figure 4.13: Classification of Respondents on basis of Risk Tolerance Level

Risk taking capacity

Number of

Percentage (%)

Respondents

High

7

7

Medium

78

78

Low

13

13

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No risk safe

2

2

Total

100

100

Interpretation: Table 4.13 shows the classification of Respondents on basis of Risk

Tolerance

Level. From the table 4.13 we can conclude that 78% of Respondents are preferring portfolio with medium risk, 7% of them prefer highly risky portfolio with high returns and the 13% of them prefer portfolio with low risk. Indian investors are still conservative in nature and avoid taking huge risk while investing their funds.

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Clasification of respondendts on basis of risk tolerance level

High

Mediam

Low

No risk& Safe

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2% 7%

13%

78%

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Figure 4.14: Classification of Respondents on basis of investing in mutual funds.

Mutual funds options

Number of

Percentage (%)

Respondents

Debt funds

20

20

Growth funds

45

45

Balanced funds

35

35

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Total

100

100

Interpretation: classification of respondents on basis of investing in mutual funds. It can be concluded that 45% most of the investors are investing their money in growth funds, 35% of the people are investing in the balanced funds, 20% of the investors are investing in the debt funds.

50%

40%

30%

20%

10%

0%

Clasification of respondendts on basis of mutual funds options

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45%

Series1

35%

20%

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Debt funds

Growth funds

Balanced funds

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Figure 4.15: Classification of Respondents on basis of source of investment information.

Sources of Investment

Number of

Percentage (%)

Information

Respondents

News Paper/ Magazines

2

2

Electronic Media (T.V)

4

4

Peer group/ Friends

3

3

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Broker/ Financial Advisor

58

58

Internet

33

33

Total

100

100

Interpretation: Table 4.15 shows the classification of Respondents on basis of Sources of Investment Information. Most of the Respondents get their information related to investment through broker/financial advisor next to internet This could be because internet is easy and readily accessible investment information when compared to the other sources of investment information whereas broker/financial advisor provide the useful information about investment.

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70

60

50

40

30

20

10

0

Clasification

of respondendts on basis of investment information

59

32

4

1

4

Total

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Figure 4.16: Classification of Respondents on basis of most attractive investment in today.

Most attractive

Number of

Percentage (%)

investment

Respondents

Fd`s

19

19

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Ulip`s

13

13

Stock market

5

5

Real estate

1

1

Gold

26

26

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Mutual funds

36

36

total

100

100

Interpretation: classification of respondents on basis of most attractive investment in today. It concluded that mutual funds are the most attractive investment in today and the gold, FD’s, Ulip’s also getting more attractive.

Clasification of respondendts on basis of most attractive investment today

Fd`s

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Ulip`s

Stock market

Real eatate

Gold

Mutual funds

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19%

36%

13%

26% 5%

1%

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Hypothesis

The relationship between important factors has been analyzed with the help of chi-square test. The following pairs have been analyzed.

Gender and risk tolerance: Gender and risk tolerance level of an investor are two independent attributes. The relationship between the gender and risk tolerance of investors can be presented with the following table and diagram.

Figure 4.17: relationship between gender and risk tolerance of respondents.

RISK APPEITE&

GENDER

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Grand

High

low

medium

No risk safe

Total

F

3

13

1

17

M

7

11

64

1

83

Grand Total

7

14

77

2

100

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Interpretation: Table 4.17 shows the relationship between gender and risk tolerance of respondents.

M

F

100

100

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50

50

84.52

Series1

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76.5

Series1

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0

14.45

0

23.52

H & ML & NR

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fH & M L & NR

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HI: Is not equal values

HO: is an equal value

Hypothesis-I: Both are showing interest take H&M risk

This data shows that this hypothesis can be accepted. By the research both variables are showing difference. HI Is accepted

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The relationship between Age and time horizon of investments

b) Age and time horizon: the relationship between age and time horizon of investment can be presented with the following table and diagram.

Figure 4.18: Relationship between age and time horizon of investments

TIME HORIZON

FOR

INVESTMENTS&

AGE

1to3years

3to5years

5to10years

above10

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below1year

Grand Total

25to35

5

12

2

1

20

35to45

8

29

6

1

44

above45

14

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6

3

1

24

below25

10

2

12

Grand Total

23

57

14

4

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2

100

Interpretation: Table 4.18 shows the relationship between age of respondents and time horizon for investment.

Below 35Age

Above 35Age

100

100

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50

50

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87.5

Series1

93.75

Series1

0

23.54

0

6.25

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below5ye above5ye

below5ye above5ye

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HI: Is not equal values

HO: Is equal values

Hypothesis- 1: Two age group people are preferred to invest their money below 5years time period. HI Is accepted

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The relationship between age and risk tolerance level of investors

Age and risk tolerance: The relationship between age and risk tolerance of the investors can be presented with help of following table and diagram.

Figure4.19: Relationship between age and risk tolerance of the respondents.

Count of RISK

APPEITE

Column Labels

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no

Grand

Row Labels

high

low

medium

risk&safe

Total

25to35

1

5

14

20

35to45

2

5

35

2

44

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above45

4

3

17

24

below25

1

11

12

Grand Total

7

14

77

2

100

Table 4.19 shows the relationship between age and risk tolerance of the respondents.

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Below35Age Above35Age

100

100

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50

50

81.25

18.75

Series1

85.29

14.71

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Series1

0

0

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H&M

L&NR

H&M

L&NR

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HI: Is not equal values

HO: Is equal values

Hypothesis- 1: two age group people are preferred to take H&M risk. HI Is accepted

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CHAPTER 5

FINDING`S &

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SUGGESTION

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5.1 FINDINGS

In the present project, an attempt is made to study the investment characteristics of Indian investors. Based on the data collected and analyzed about perception on investment preferences of the investors, the following findings are given.

It is found that most of the investors belong to the age group of 35 years and 35 to 45 years indicating youngsters and the middle aged people are predominant in the financial investment sector.

Most of the investors possess higher education qualification like post graduation and above.

Majority of respondents are investing who are government employed and private sector people.

As per the general perception, it is found respondents with combination of middle and higher income groups like income above 5 Lakhs were found to invest more because of their large portions of savings.

The investor's taking the decisions through broke/mediator.

Investors usually invest their funds so as to earn wealth.

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Investors prefer to invest their funds in avenues like Mutual Funds /FD`s/Gold next to insurance and Ppf.

With reference to the objective of investment, most of the respondents preferred returns, followed by risk, minimum amount, and liquidity.

Most of the investors get their information related to investment through broker/mediator while others prefer to get information from internet and electronic media.

Most of the investors prefer to invest in to medium risky investments. Very less proportion of respondents preferred risky portfolios.

Through hypothesis research found that gender and risk tolerance level of investors have some difference, it tells that male and female investors are referred medium and high risk investments.

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Hypothesis for Age and time horizon of investors found that two are groups are preferred the investment time horizon of 5years.

Hypothesis for age and risk tolerance of investors found that two age groups of below35 and above35 are preferred to take medium, high risk

SUGGESTIONS

It is suggested that investors are to be educated about various investment avenues, selection of schemes based on their objectives, their risk tolerance, importance of diversification.

It is suggested that the schemes can be designed based on matching the objectives of the investment.

The primary objective of most of the respondents is maximizing return.

Most of the respondents are interested to invest their money through online mode.

All the investors prefer to maximize their returns and minimize the risk. Even now fixed deposits and insurance schemes are more famous among Indian investors. It is suggested that the investors have carefully construct their portfolios after doing fundamental analysis and through proper diversification.

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It always better that the investors follow a systematic investment process to invest their money. Investment avenues are to be chosen based on their objectives and risk preferences.

Page 47

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CHAPTER 6 CONCLUSION

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The conclusion of the project is that it is found that investors are preferred to invest their money in medium risk investments and the behavior, perception of investors is changing based on time and the type of avenues offered by investment companies.

This project can be useful to the investors to understand the various investments and risks involved in those investments and which investment is give more returns and which is more attractive investment likewise many other benefits are their for investors to the investors.

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CHAPTER7

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BIBLOGRAPHY

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B I B L I O G R A P H Y

Books

C K Kothari, Research Methodology, Wishwa Prakashan Publishing, 1996, Second Edition

Herbert B. Mayo, Investments, Chennai Micro Print pvt. Ltd Chennai, 2006

Punithavathi Pandyan, Security Analysis and Portfolio Management, Tata Mc Graw-Hill Publishing Company Ltd , New Delhi,2008 Third Edition

Prasanna Chandra, Investment Analysis And Port Folio Management, Tata Mc Graw-Hill Publishing Company Ltd , New Delhi,2008

Prasanna Chandra, Financial Management, Tata Mc Graw -Hill Publishing Company Ltd , New Delhi2007

Websites Reference

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www.indiafinance&investmentguide.com

www.wikipedia.org

www.nseindia.com

www.capitalmarkets.com

www.bseindia.com

www.financeindia.org/article

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CHAPTER8

ANNEXURE

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ANNEXURE

I am V.Venkatrao student of PGDM from Center for management and technology, Visakhapatnam, conducting survey on “investor’s perception and selection behavior on investment avenues” as a part of my study.

RESEARCH PROJECT ON INVESTMENT OPTIONS

PART-A

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1.

Name :

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2. Gender :

Male

Female

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3.

Age :

Below 25

25 to 35

35 to 45

above 45

4.

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Marital status:

Single

Married

5. Family size : Children :

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Education:

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6.

Occupation :

Government Employee

Self employee

Student

Private

Sector

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Businessman

Others (specify)…………………………..

7.

Your annual income :

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Below 2lakhs

to 5

to 7

7 to 10

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above10

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8.

Education level :

Xth class

intermediate

graduate

pg

and

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above

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PART-B

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1. Which of the following have you invested in?

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FD`s

ULIP`s

Stock Market

Derivatives

Real Estate

Gold

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PPF

Mutual Funds

Post office MIS

Bonds

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2.

Are you aware of the following investment options available in market? Mark top 3

options?

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FD`s

ULIP`S

Stock Market

Derivatives

Real Estate

Gold

PPF

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Mutual Funds

Post office MIS

Bonds

3.

Which factors influence your investment option?

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Returns

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Minimum Investment Amount

Risk

Locking period

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Liquidity

Other Factors Specify

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Rank 1,……………,……………,………………,………………,…………….5

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4.

Do you have a Demate Account?

Yes

No

5.

Please mention the list of companies you have invested in?

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MF`s

Shares

Insurance

FD`s

…………………….... …………………………… ……………………………. ……………………………….

………………………. …………………………… …………………………….. ……………………………….

………………………. …………………………… …………………………….. ……………………………….

………………………. …………………………… …………………………….. ……………………………….

How do you manage your investments?

Individual

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Agent or Mediator

Financial Planner

.

Any others specify………………………….

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7. What is your time horizon of most of your investments?

Below 1year

1 to 3years

3 to 5years

5 to 10years

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above 10

8. According to you what is the risk involved in these investments?

ULIP`s

1…………..,……………,……………,……………,……………5

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Share Market

1…………..,……………,……………,……………,…………….5

Mutual Funds

1…………..,…………….,……………,……………,……………5

Real estate

1……………,……………,……………,…………….,…………..5

If you want to invest in mutual funds, which option do you prefer? Which option did you invested in?

Debt Fund`s

Growth Fund`s

Balanced Funds

10. Which source do you prefer to get investment information?

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News Papers/Magazines

Electronic Media (TV)

Peer`s/Friend`s

Broker/Financial Advisor

Internet

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Which of the risk factors influence the returns on investments in general?

Have you invested in fixed deposit`s? Why?

What is your risk appetite?

High

Medium

Low

No risk/Safe Investment

14. Which of the investment avenue is attractive to you now-a-days?