jaimin panchal

7/31/2019 Jaimin Panchal

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A

COMPARISON

OF

STOCK MARKET WITH OTHER INVESTMENT OPTIONS

AT

INDIABULLS COMMODITY LIMITED

SUBMITTED BY: GUIDED BY:

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PPAARRUULL IINNSSTTIITTUUTTEE OOFF MMAANNAAGGEEMMEENNTT AANNDD RREESSEEAARRCCHH

(( MM BB AA PP RR OO GG RR AA MM MM EE 22 00 11 11 -- 11 33 ))


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DECLARATION

I, JAIMEEN M. PANCHAL, hereby declare that the report on Summer Training entitledA STUDY ON COMPARISON OF STOCK MARKET WITH OTHER INVESTMENT

OPTIONS AT INDIABULLS LIMITED, VADODARA is a result of my own work and

indebtedness to other work publications. Corrections, if any, will be duly acknowledged.

Date:

Place: Vadodara JAIMEEN M. PANCHAL


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Parul Institute of Management & Research

(Formerly Dr.J K Patel Institute of Management)

CERTIFICATE

This is to certify that Jaimeen mukeshbhai Panchal, student(s) of Master of

Business Administration (Batch 2011-13) at Parul Institute of Management &

Research, (formerly Dr.J K Patel Institute of Management) , Waghodia ,Vadodara have undertaken a Project Titled A PROJECT ON COMPARISION

OF STOCK MARKET WITH OTHERS INVESTMENT OPTIONS AT

INDIABULLS COMMODITY LIMITED in partial fulfillment of 2 years full

time MBA program of Gujarat Technological University, Ahmadabad.. The

Summer Internship Project has been undertaken under the guidance of

Prof.MITAL THAKKAR, faculty member of Parul Institute of Management &

Research.(Formerly Dr.J K Patel Institute of Management). This is also to

ascertain that this project has been prepared only for the award of Master of

Business Administration degree and has not been submitted for any other purpose.

Faculty Guide (Dr.P.G.K.Murthy)

Director

Date:

Place: Vadodara


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ACKNOWLEDGMENT

Preservation, inspiration and motivation have always played a key role in the success of any

venture. In the present world of competition and success, training is like a bridge between

theoretical and practical working; willingly I prepared this particular Project. First of all I would

like to thank the supreme power, the almighty god, who is the one who has always guided me towork on the right path of my life. I would like to thank Mr. Nisarg Patel (Associate vice

president) for granting me permission to undertake the training in their esteemed organization.

I also thanks to Mr. Amit Gautam (relationship manager) of indiabulls commodity limited for

their time-to-time guidance and support in completing the project. I also thank the other staff of

indiabulls commodity limited that devoted their valuable time by helping me to complete my

project.

I express my sincere thanks to Prof.Mital Thakkar (Faculty Guide) of M.B.A. department, for the

valuable suggestion and making this project a real successful.

Last but not least, my sincere thanks to My Parents and Friends who directly or indirectly helped

me to bring this project into the final shape.

Date:

JAIMEEN PANCHAL


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TABLE OF CONTENT

Sr.

no

Particular

1 EXECUTIVE SUMMARY

2 INTRODUCTION

3 LITERATURE REVIEW

4 INTRODUCTION TO STUDY

5 OBJECTIVE OF STUDY

6 RESEARCH METHODOLOGY

7 COMPANY PROFILE

8 DATA ANALYSIS & INTERPRETATION

9 FINDING10 RECOMMENDATION & SUGGESTION

11 BIBLIOGRAPHY

12 ANNEXURE


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EXECUTIVE SUMMARY

The purpose of this project was to measure the awareness level of a selected number of investors

about the stock market as an investment options. The factors involved in choosing the investment

options of the investors are studied and the reasons of investors to not to invest in stock market

are studied. Fifty investors randomly picked were interviewed. In this project report, the

introduction of different investment options is provided initially. The different options like fixed

deposits, Stock market, Mutual funds are described. Then the objectives of the project are

presented and the research methodology succeeds after that. Finally the findings of the projectreport stating the lack of awareness of investors about the stock market investment are presented.

The lack of appropriate funds to invest in stock market also contributes to the lack of interest in

stock market.


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INTRODUCTION

Instead of putting your money into cold storage, put it to work for you by investing. Whether you

open a savings account, invest directly in the stock market or make use of some other investmentoption, your "extra" money can make more money for you.

Just how lucrative are your investments? That depends on the plan you choose as well as the

amount of risk you're willing to take. But whether you're a risk-taker or a play-it-safer, there are

options to help your nest egg grow.


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STOCK MARKET

Investing in stocks allows you to own part of a business. One share of stock represents a share of

ownership in a company. Companies make shares available when they want to raise money tofund further growth and development. These shares are often publicly traded on a stock

exchange and can vary widely in price from day to day. Unlike more secure investments,

investing in stocks gives you no guarantee of is turn. Since your profit is linked to the

profitability of the company and the whims of the stock market, you could lose money if the

value of the stock slips below what you originally paid. To buy stocks, you most likely will work

with a broker. Many different servicessuch as research and adviceare offered by pricey full-

serve brokerages, or you can opt for more affordable discount brokerages. And some discount

brokers will offer you the option to trade online. While the average annual percentage return on

stock investments has been lower than in previous years, it is still higher than other types of

investments. There's quite a bit of risk involved with buying stocks, because just as easily asyour stock's value can increase it can decrease, meaning you lose money.

SAVINGS ACCOUNTS

Savings accounts are the safest of investments. Usually insured, your money is available to youwhen you need it. Your bank pays you a fee known as interest for allowing them to use it. You

can withdraw your money at any time with no penalty. Also, there's practically no risk involved.

Interest rates are typically very low around 1.5 percent and sometimes barely keep up with the

rate of inflation.


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CERTIFICATES OF DEPOSIT

Want to get a slightly higher interest rate in exchange for investing your money for a specified

amount of time? These accounts are called Certificates of Deposit (CDs) and range in length upto several years.

CDs are very safe investments because they offer low risk. The longer you agree to keep your

money in the bank or financial institution, the higher your interest rate. There are costly penalties

for withdrawing your money early so doesnt invest money you may need access to. Also, since

your interest rate is locked in, you won't earn more if interest rates later go up.

MONEY MARKET FUND

When you open a money market fund, your bank spreads the money you invest over a number of

CDs and other short-term investments. You retain access to your money, and your investment is

relatively secure with a fixed income rate. These are generally safe investments, and you can

redeem your shares of a money market fund at any time with no penalty. You get about the same

(usually low) return as you would on a CD and sometimes lower than a CD. You may also be

required to keep a minimum balance in your account, and may be charged fees if you slip below

that minimum.

MUTUAL FUNDS

A mutual fund allows you to pool your money with other investors to buy stock in a number of

companies. The mutual fund manager, who oversees investments in the fund, selects the

companies based on the investment philosophy of the fund. Because your money is distributedamong various stocks, the risk is lower even if one stock bomb, you're still OK if the other stocks

increase in value. Many mutual funds require a minimum investment. You may also pay a fee,

called a "load," to have your fund managed by someone else. In addition, there may be a

specified "holding time" during which you won't be able to sell the stocks in your fund. As a

result, mutual funds are a great deal less "liquid" than other investment options meaning you

won't be able to convert your investments back to cash easily if you need the money.


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BONDS

Bonds are like IOUs that large organizations make out to investors. With a bond, your

investment is really a long-term loan. Bonds are referred to as "fixed-income" securities becausethe amount of income the bond earns is set when you buy it. When you purchase a bond, you

receive a document recording the amount lent, the interest rate and how often interest is paid.

The risk can be minimal, depending upon the source of the bond. Bonds don't offer a very high

return on your investment. And in some cases, the bond is not insured, which means you may

have no guarantee that you will make money on your investment. If you purchase a bond from a

company that later goes bankrupt, you'll lose your investment so you need to investigate

carefully before investing in corporate bonds.


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LITERATURE REVIEW

Only buy something that youd be perfectly happy to hold if the market shut down for 10

years - Warren Buffet Investment Guru Prevailing wisdom is that markets are always right, I

assume they are always wrong - George Soros, Chairman, Soros Fund Management According

to Michal Parness, Founder & CEO Investors dont Make Money in the Stock Market. One

reason the institutions make so much money is that they are trading. They make money every

time you buy or sell. They make money whether you win or lose. That means that when youre

investing, youre basically just sitting there. Youre not going anywhere. Youre not making

money as an investor. Trading the Trend: The only way to make money in the market If you

dont know this already, Trend Trading means trading trends based on human emotions. Not

lagging indicators. Not complex statistical analysis and not Ph.D. level mathematical equations.

With trend trading, you look for market movement. That could mean stocks that are going to

move up or down during the course of a day (intraday). Youll play the gaps up and down, often

several days a week. The Trend trading means being aware and taking advantage of trends like

the run-ups that happen around earning sessions. These are trends that have worked time and

time again in the market. They consistently yield results Fundamental and Technical Analysis:

Substitutes or Compliments? Jenni L. Bettman 33

Australian National University Stephen Sault Australian National University - Faculty of

Economics & Commerce March 28, 2006 While the fundamental and technical analysis

literatures invest considerable effort in assessing their respective ability to explain share prices,

they invariably do so without reference to each other. In this context, we propose an equity

valuation model integrating both fundamental and technical analysis and, in doing so, recognize

their potential as complements rather than as substitutes. Testing confirms the complementary

nature of fundamental and technical analysis by showing that, while each performs well in

isolation, models integrating both have superior explanatory power. While our findings relate to

the valuation of shares, they also have implications for other valuation exercises. Keywords:

Equity valuation models, Fundamental information, Technical information JEL Classifications:

G12, G14, M41 although the fundamental and technical analysis literatures invest considerable

effort in assessing their respective ability to explain share prices, they invariably do so without

reference to each other. In this context, we propose an equity valuation model integrating both

fundamental and technical analysis and, in doing so, recognize their potential as complements

rather than as substitutes. Testing confirms the complementary nature of fundamental and

technical analysis by showing that, although each performs well in isolation, models integratingboth have superior explanatory power. While our findings relate to the valuation of shares, they

also have implications for other valuation exercises.

RELEVANCE OF FUNDAMENTAL ANALYSIS ON THE BALTIC EQUITY MARKET Julia

Bistrova, Natalja Lace Riga Technical University, Latvia, The main target of the present research

was to discover the importance of fundamental analysis on the Baltic equity markets. The


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hypothesis that fundamental analysis is not able to generate substantial additional value to the

performance of the portfolio comprised of Baltic enterprises stocks was proved. The relevance

and need of fundamental analysis was checked by analyzing the performances of portfolios,

which were created on the basis of key fundamental ratios: ROE, equity ratio, ROIC, net debt to

assets as well as PE and PB. Naturally, The companies with better than average ratios were

selected to form stock portfolios. The findings of the conducted study demonstrate that neither of

the mentioned ratios helped in the creating portfolio, performance of which would beat markets

performance. The only exception was price to earnings ratio, which proved that cheap companies

seem to be attractive to the investors. It was decided to look closer at the major performers and to

find out whether there are any common patterns among the winners and the losers of the Baltic

equity markets. Basically, equity investors ignored financial situation of the companies

(profitability, stability of balance sheets) and focused mainly on assessing their growth

opportunities and attractiveness of business model. So, investors were mainly forward-looking

when making company selection. As a result, major sufferers performance-wise were the

companies with limited growth potential or total business model erosion. The authors of theresearch have also checked whether the trading volumes of the stock have any impact on the

performance. The study results show that in the phase of the major capital inflows (2001-2006),

indeed, most liquid companies tended to reward investors with higher performances. However,

the shareholders of these companies suffered the most in financial years 2007 and 2008, when

there was a major selling across stock market all over the world.


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OBJECTIVES OF STUDY

1. To find out the investors awareness about the stock market investment in comparison toother investment options.

2. To find out the reasons that discourages the investors to invest in stock market.


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RESEARCH METHODOLOGY

STATEMENT OF PROBLEM

There are number of investment options in front of investors while choosing to invest. Whether

you open a savings account, invest directly in the stock market or make use of some other

investment option, your "extra" money can make more money for you. One of the options is

Stock market but the problem area is lack of knowledge of investment option in stock market.

People think that stock market investment is a risky profile and compared it to the gambling.

Thus sacrificing the advantages they can get after choosing the stock market as an investment

option.

SAMPLING PLAN

The sampling plan includes two decisions:

1. Sampling unit:Sampling unit means, Who is to be surveyed?

2. Sampling size:Sampling size means, How many people should be surveyed?Large samples

give more reliable results than small samples. In my research, the sampling unit consists of

individual investors.

Sample size is 100.

SAMPLING TECHNIQUES USED FOR THE STUDY

Selective random: -

People were randomly selected.

Sampling Area: The research was carried out in indiabullsclients.


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DATA COLLECTION TOOLS

PRIMARY SOURCE

the Questionnaire:

The method used for purpose of collecting data was Questionnaire Method. In

my case I used Structured-questioning method. Questionnaire was made filled by meeting

personally to select the respondents.

. Discussion:

The discussion connects the various aspects of the data analysis-Shows the

commonalities across various respondents, uniqueness, inconsistencies, etc., and identifies the

limits to the study resulting from the design and data analysis.

SECONDARY SOURCE

Secondary source of collecting data is internet. Material present at various websites, which is in

relation to this industry, is helpful in completing the project .Along with this some material was

also provided by company itself, such as vision of company etc. Another secondary source of

collecting data is through various books and journals.

DESCRIPTIVE RESEARCH:

Main tool used under research methodology is Descriptive research which includes surveysand fact-finding enquiries of different kinds. Here major purpose is the description of the state of

affairs, as it exists at present.

STATISTICAL TECHNIQUE USED TO ANALYZE DATA

1. HISTOGRAM ANALYSIS

2. PIE CHART ANALYSIS


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COMPANY PROFILE

Indiabulls is Indias leading Financial Services and Real Estate Company having over 640

branches all over India. Indiabulls serves the financial needs of more than 4,50,000 customers

with its wide range of financial services and products from securities, derivatives trading,

depositary services, research & advisory services, consumer secured & unsecured credit, loan

against shares and mortgage& housing finance. With around 4000 Relationship Managers,

Indiabulls helps its clients to satisfy their customized financial goals. Indiabulls through its group

companies has entered Indian Real Estate business in 2005. It is currently evaluating several

large-scale projects worth several hundred million dollars. Indiabulls Financial Services Ltd is

listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock

Exchange. The market capitalization of Indiabulls is around USD 2,350 million (25th April2007).Consolidated net worth of the group is around USD 510 million (31st March2007).

Indiabulls and its group companies have attracted USD 500 million of equity capital in Foreign

Direct Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the

largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch,

Morgan Stanley and Farallon Capital. Business of the company has grown in leaps and bounds

since its inception. Revenue of the company grew at a CAGR of 159% from FY03 to FY07.

During the same period, profits of the company grew at a CAGR of 184%.Indiabulls became the

first company to bring FDI in Indian Real Estate through a JV with Farallon Capital

Management LLC, a respected US based investment firm. Indiabulls has demonstrated deep

understanding and commitment to Indian Real Estate market by winning competitive bids for

landmark properties in Mumbai and Delhi.


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Growth Story

Indiabulls has emerged as one of the leading and fastest growing financial company in less than

two year, since its initial public offering in September 2004.It has a market capitalization ofaround 2,350 million (25th April 2007) and consolidated net worth of the group is around USD

510 million.

2000-01

Indiabulls Financial Services Ltd. established Indias one of the first trading platforms with the

development of an in house team.

2001-03

Indiabulls expands its service offerings to include Equity, F&O, and Wholesale Debt, Mutualfund, IPO distribution and Equity Research.

2003-04

Indiabulls ventured into Insurance distribution and commodities trading.

Company focused on brand building and franchise model.

2004-05

Indiabulls came out with its initial public offer (IPO) in September 2004.

Indiabulls started its consumer finance business.

Indiabulls entered the Indian Real Estate market and became the first company to bring FDI in

Indian Real Estate.

Indiabulls won bids for landmark properties in Mumbai.

2005-06

Indiabulls has acquired over 115 acres ofland in Sonepat for residential home site development.

Merrill Lynch and Goldman sac, one of the renowned investment banks in the world have

increased their shareholding in Indiabulls.

Indiabulls is a market leader in securities brokerage industry, with around31% share in online

trading.


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Farallon Capital and its affiliates, the worlds largest hedge fund committed Rs. 2000 million

for Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance

Ltd.

Steel Tycoon Mr. LN Mittal promoted LNM India Internet venture Ltd. acquired 8.2% stake in

Indiabulls Credit Services Ltd.

2006-07

Indiabulls entered in a 50/50 joint venture with DLF, Kenneth Builders &Developers (KBD).

KBD has acquired 35.8 acres of land from Delhi Development Authority through a competitive

bidding process for Rs 450 crore to develop residential apartments.

Indiabulls Financial Services Ltd. is included in the prestigious Morgan Stanley Capital

International Index (MSCI).

Farallon Capital has agreed to invest Rs. 6,440 million in Indiabulls Financial Services Ltd.

Indiabulls ventured into commodity brokerage business.

Indiabulls has received an in principle approval from Government ofIndia for development

of multi product SEZ in the state of Maharashtra.

Dev Property Development plc., has subscribed to new shares and has also acquired a minority

shareholding from the Company.

Indiabulls Financial Services Ltd. Board resolves to Amalgamate Indiabulls Credit Services

Limited and demerges Indiabulls Securities Limited.


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Extensive Reports for Real-time Accounting Indiabulls Equity Analysis TM

EQUITY RESEARCH

Equity research forms an integral part of the share trading experience. Equity research decides

the stance one would take in the share trading industry. Forecasting scrip performance requires

much more characteristics and skills than just advance arithmetical ability. It requires split-hair

analysis of the market. To do so one also needs to have excellent understanding of the market.

Supported by valid, fact-based and reliable research inputs and published results, our research

desk picks out stocks, analyzes its future scope and give a timely recommendation.


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COMMODITIES

Indiabulls Group offers a wide array of financial services to its customers. Indiabulls

Commodities Private Limited (ICPL) a 100% subsidiary of Indiabulls Financial Services Limitedoffers commodity brokerage services to its customers. ICPL is a registered Trading-cum-

Clearing member of Multi Commodity Exchange of India Ltd. (MCX) and National Commodity

and Derivatives Exchange Ltd (NCDEX). These two Commodity Exchanges have shown

a phenomenal growth in trading volumes. Significant trading as well as arbitrage opportunities

exists for informed players in the futures market. ICPL is the right partner for you if you are keen

on tapping opportunities being presented by this nascent commodities futures market. We offer a

clearly differentiated product to our clients with a strong focus on research. Our commodities

research team has a rich research experience in the commodities markets. The specialized

services provided by our research team include daily intraday reports, reports on Agri-

commodities & Metals, weekly & medium term market outlook and arbitrage strategies. Ourretail branch network is one of the largest retail branch networks in the private financial services

sector and provides our customers with an unmatched distribution and service capability.

Our flagship INDIABULLS PROFESSIONALTM network spread over more than 640

Indiabulls offices in 113 cities offers real-time prices, detailed data and news, intelligent

analytics and electronic trading capabilities, right at your fingertips.

DEPOSITORY SERVICES

Indiabulls is a depository participant with the National Securities Depository Limited and Central

Depository Services (India) Limited for trading and settlement of dematerialized shares.

Indiabulls performs clearing services for all securities transactions through its accounts. We offer

depository services to create a seamless transaction platformexecute trades through Indiabulls

Securities and settle these transactions through the Indiabulls Depository Services. Indiabulls

Depository Services is part of our value added services for our clients that create multiple

interfaces with the client and provide for a solution that takes care of all your needs.


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CONSUMER FINANCE

Indiabulls being a retail focused organization fulfills the credit need of a large percentage of

population in India. The key aspect of Indiabulls business model is to provide an extremely

unique customer experience. The blend of power of the Internet with personalized services

allows Indiabulls to expand its geographical coverage and capture a greater share in the highlycompetitive retail market. We offer consumer loans, home loans, personal loans, securities

brokerage, and other financial products and services to retail customers from across 640

Indiabulls offices in 127 leading cities of the country.

OVERVIEW OF DIFFERENT INVESTMENT OPTIONS

WHAT IS STOCK MARKET

The term 'the stock market' is a concept for the mechanism that enables the trading of company

stocks (collective shares), other securities, and derivatives. Bonds are still traditionally traded in

an informal, over-the-counter market known as the bond market. Commodities are traded in

commodities markets, and derivatives are traded in a variety of markets (but, like bonds, mostly

'over-the-counter').It must be noted though that the derivatives market, because it is stated in

terms of notional outstanding amounts, cannot be directly compared to a stock or fixed income

market, which refers to actual value. The stocks are listed and traded on stock exchanges which

are entities ( a corporation or mutual organization) specialized in the business of bringing buyers

and sellers of stocks and securities together. The stock market in the India includes the trading of

all securities listed on the BSE, the NSE, as well as on the many regional exchanges.


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TRADING

Participants in the stock market range from small individual stock investor to large hedge fund

traders, who can be based anywhere. Their orders usually end up with a professional at a stock

exchange, who executes the order. Some exchanges are physical locations where transactions are

carried out on at rading floor, by a method known as open outcry. This type of auction is used instock exchanges and commodity exchanges where traders may enter "verbal" bids and offers

simultaneously. The other type of exchange is a virtual kind, composed of a network of

computers where trades are made electronically via traders at computer terminals. Actual trades

are based on an auction market paradigm where a potential buyer bids a specific price for a stock

and a potential seller asks a specific price for the stock. (Buying or selling at market means you

will accept any bid price or ask price for the stock.) When the bid and ask prices match, a sale

takes place on a first come first served basis if there are multiple bidders or askers at a given

price. The purpose of a stock exchange is to facilitate the exchange of securities between buyers

and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time

trading information on the listed securities, facilitating price discovery.

MARKET PARTICIPANTS

Many years ago, worldwide, buyers and sellers were individual investors, such as wealthy

businessmen, with long family histories (and emotional ties) to particular corporations. Over

time, markets have become more "institutionalized"; buyers and sellers are largely institutions

(e.g., pension funds, insurance companies, mutual funds, hedge funds investor groups,

and banks). The rise of the institutional investor has brought with it some improvements inmarket operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being

markedly reduced for the 'small' investor, but only after the large institutions had managed to

break the brokers' solid front on fees (they then went to 'negotiated' fees, but only for large

institutions).However, corporate governance (at least in the West) has been greatly affected by

the rise of institutional 'owners.'


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IMPORTANCE OF STOCK MARKET

Function and purpose the stock market is one of the most important sources for companies to

raise money. This allows businesses to go public, or raise additional capital for expansion. The

liquidity that an exchange provides affords investors the ability to quickly and easily sell

securities. This is an attractive feature of investing in stocks, compared to other less liquidinvestments such as real estate. History has shown that the price of shares and other assets is an

important part of the dynamics of economic activity, and can influence or be an indicator of

social mood. Rising share prices, for instance, tend to be associated with increased business

investment and vice versa. Share prices also affect the wealth of households and their

consumption. Therefore, central banks tend to keep an eye on the control and behavior of the

stock market and, in general, on the smooth operation of financial system functions. Financial

stability is the raison d'tre of central banks. Exchanges also act as the clearinghouse for each

transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller

of a security. This eliminates the risk to an individual buyer or seller that the counterparty could

default on the transaction. The smooth functioning of all these activities facilitates economic

growth in that lower costs and enterprise risks promote the production of goods and services as

well as employment. In this way the financial system contributes to increased prosperity.

Relation of the stock market to the modern financial system

Irrational behavior Sometimes the market tends to react irrationally to economic news, even if

that news has no real effect on the technical value of securities itself. Therefore, the stock market

can be swayed tremendously in either direction by press releases, rumors and mass panic.

Furthermore, the stock market comprises a large amount of speculative analysts, or pencilpushers, who have no substantial money or financial interest in the market, but make market

predictions and suggestions regardless. Over the short-term, stocks and other securities can be

battered or buoyed by any number of fast market-changing events, making the stock market

difficult to predict.


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STOCK MARKET INDEX

The movements of the prices in a market or section of a market are captured in price indicescalled stock market indices, of which there are many, e.g., the S&P, the FTSE and the Euro next

indices. Such indices are usually market capitalization (the total market value of floating capital

of the company) weighted, with the weights reflecting the contribution of the stock to the index.

The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect

the changing business environment.

Leveraged Strategies

Stock that a trader does not actually own may be traded using short selling; margin buying may

be used to purchase stock with borrowed funds; or, derivatives may be used to control large

blocks of stocks for a much smaller amount of money than would be required by outright

purchase or sale.

Short selling

In short selling, the trader borrows stock (usually from his brokerage which hold sits clients'

shares or its own shares on account to lend to short sellers) then sells it on the market, hoping for

the price to fall.

Margin buying

In margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise.

Most industrialized countries have regulations that require that if the borrowing is based on

collateral from other stocks the trader owns outright, it can be a maximum of a certain

percentage of those other stocks' value.

In the United States, the margin requirements have been 50% for many years A margin call is

made if the total value of the investor's account cannot support the loss of the trade. (Upon a

decline in the value of the margined securities additional funds may be required to maintain the

account's equity, and with or without notice the margined security or any others within the

account may be sold by the broker age to protect its loan position.


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FIXED DEPOSITS

DEFINITION

A fixed deposit is meant for those investors who want to deposit a lump sum of money for a

fixed period; say for a minimum period of 15 days to five years and above, thereby earning ahigher rate of interest in return. Investor gets a lump sum (principal + interest) at the maturity of

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

investor. Fixed deposits also give a higher rate of interest than a savings bank account. The

facilities vary from bank to bank. Some of the facilities offered by banks are overdraft (loan)

facility on the amount deposited, premature withdrawal before maturity period (which involves a

loss of interest) etc. Bank deposits are fairly safer because banks are subject to control of the

Reserve Bank of India .A good investment strategy requires choosing the right mix of safe and

risky investments. Among safe investments, fixed deposits, FDs, are the most popular today.

With FDs you deposit a lump sum of money for a fixed period ranging from a few weeks to a

few years and earn a pre-determined rate of interest. FDs are offered by both banks and

companies though putting your money with the latter is generally considered riskier.

FEATURES

Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India

(RBI) with regard to several policy and operational parameters. The banks are free to offer

varying interests in fixed deposits of different maturities. Interest is compounded once a quarter,

leading to a somewhat higher effective rate.

The minimum deposit amount varies with each bank. It can range from as low as Rs.100 to an

unlimited amount with some banks. Deposits can be made in multiples of Rs. 100/-.Before

opening a FD account, try to check the rates of interest for different banks for different periods.

It is advisable to keep the amount in five or ten small deposits instead of making one big deposit.

In case of any premature withdrawal of partial amount, then only one or two deposit need be

prematurely encashed. The loss sustained in interest will, thus, be less than if one big deposit

were to be encashed. Check deposit receipts carefully to see that all particulars have

been properly and accurately filled in. The thing to consider before investing in an FD is the rate

of interest and the inflation rate. A high inflation rate can simply chip away your real returns.


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WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF FDS?

Bank deposits are the safest investment after Post office savings because all bank deposits are

insured under the Deposit Insurance & Credit Guarantee Scheme of India. It is possible to get

loans up to75- 90% of the deposit amount from banks against fixed deposit receipts. The interest

charged will be 2% more than the rate of interest earned by the deposit. With effect from A.Y.1998-99, investment on bank deposits, along with other specified incomes, is exempt from

income tax up to a limit of Rs.12, 000/- under Section 80L. Also, from A.Y. 1993-94,

bank deposits are totally exempt from wealth tax. The 1995 Finance Bill Proposals introduced

tax deduction at source (TDS) on fixed deposits on interest incomes of Rs.5000/- and above per

annum. The main advantage is that FDs from reputed banks are a very safe investment because

such banks are carefully regulated by the Reserve Bank of India, RBI, the banking regulator in

India. Note that company FDs isn't as safe as bank FDs because if the company goes bankrupt

you may lose your money. Make sure you check the credit rating of a company before investing

in its FDs. You should be especially wary of companies which offer interest rates significantly

higher than the average to attract your money. The other advantage of FDs is that you have the

option of receiving regular income through the interest payments that are made every month or

quarter. This option is especially useful for retirees.

On the flip side, a fixed deposit won't give you the same returns that you may get in the stock

markets. For instance a stock-portfolio may raise 20-30 per cent in a good year whereas a fixed

deposit typically earns only 7-10 per cent. A fixed deposit also doesn't offer protection against

inflation. If inflation rises steeply during the maturity of the FD your inflation adjusted return

will fall. Say, for example, the inflation when you deposited the money at a fixed return of 8 per

cent per annum is 3 per cent. Now when your FD matures say after 2 years, the inflation

increases to say 5 per cent. In this case, your inflation adjusted returns is only 3 per cent (8-5).

Had inflation remained at 3 per cent by the time your deposit matured, your real rate of return

would be 5 per cent (8-3).

INTEREST RATES ON FDS

The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent, depending on the

maturity period (duration) of the FD and the amount invested. Interest rate also varies between

each bank. A Bank FD does not provide regular interest income, but a lump-sum amount on its

maturity. Some banks have facility to pay interest every quarter or every month, but the interest

paid may be at a discounted rate in case of monthly interest. The Interest payable on Fixed

Deposit can also be transferred to Savings Bank or Current Account of the customer. The deposit

period can vary from 15, 30 or 45 days to 3, 6 months, 1 year, and 1.5 years to 10 years.


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Duration Interest rate (%) per annum

15-30 days 4 -5 %

30-45 days 4.25-5 %

46-90 days 4.75--5.5 %

91-180 days 5.5-6.5 %

181-365 days 5.75-6.5 %

1-2 years 6-8 %

2-3 years 6.25-8 %

3-5 years 6.75-8%

EFFECTIVE RETURN

Before you invest in FDs you need to understand the concept of effective return which is

higher than the rate of interest on the FD. Effective return is relevant if you choose to reinvest

your interest every year which means that you will bearing compound interest. For example

suppose you invest Rs 1,000 in a fixed deposit with 8 per cent interest which is paid quarterly. In

the first quarter (after 3 months) you will earn an interest of Rs 20 which is re-invested and

continues to earn interest in the remaining three quarters. Similarly the interest you earn in thesecond (after 6months) and third quarter (after 9 months) is also reinvested and earns interest. At

the end of the year because of compound interest you will receive Rs 1,082.4meaning that your

effective return is 8.24 per cent rather than 8 per cent.

WHAT HAPPENS IF YOU BREAK A FIXED DEPOSIT?

Breaking a fixed deposit means withdrawing the money before the maturity expires. This may be

necessary if you urgently require the funds or if there are better investment opportunitieselsewhere. You will have to pay a cost; for instance you may receive an interest rate 1 per cent

lower than the stated interest rate on the FD. An alternative to breaking a fixed deposit is taking a

loan against the FD. Such loans are quite easy to obtain with amounts ranging up to 90 per cent

of the principal and accumulated interest.


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ARE THERE BETTER ALTERNATIVES TO FDS?

Obviously mutual funds and stocks can offer higher returns but the main issue is whether there

are low risk investment products which offer a better return than FDs. Many financial experts

believe that fixed maturity plans (FMP) offer exactly such a superior alternative. Fixed maturity

plans are similar to FDs in that they have a pre-determined tenure (say 3 years like the maturityof an FD) ranging from a few weeks to a few years. Your money is invested in fixed-income

assets like governments bonds and money-market instruments which carry a low risk.

MUTUAL FUNDS

As you probably know, mutual funds have become extremely popular over the last20 years.

What was once just another obscure financial instrument is now a part of our daily lives. More

than 80 million people, or one half of the households in America, invest in mutual funds.Originally, mutual funds were heralded as a way for the little guy to get a piece of the market.

Instead of spending all your free time buried in the financial pages of the Wall Street Journal, all

you had to do was buy a mutual fund and you'd be set on your way to financial freedom. As you

might have guessed, it's not that easy.

THE DEFINITION

A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a

mutual fund as a company that brings together a group of people and invests their money in

stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the

holdings of the fund. You can make money from a mutual fund in two ways:

1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all

of the income it receives over the year to fund owners in the form of a distribution.

2) If the fund sells securities that have increased in price, the fund has a capital gain.


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ADVANTAGES OF MUTUAL FUNDS:

Professional Management - The primary advantage of funds (at least theoretically) isthe professional management of your money. Investors purchase funds because they do not have

the time or the expertise to manage their own portfolios. A mutual fund is a relativelyinexpensive way for a small investor to get a full-time manager to make and monitor

investments.

DiversificationBy owning shares in a mutual fund instead of owning individual stocksor bonds, your risk is spread out. The idea behind diversification is to invest in a large number of

assets so that a loss in any particular investment is minimized by gains in others. In other words,

the more stocks and bonds you own, the less any one of them can hurt you (think about Enron).

Large mutual funds typically own hundreds of different stocks in many different industries. It

wouldn't be possible for an investor to build this kind of a portfolio with a small amount of

money.

Economies of Scale - Because a mutual fund buys and sells large amounts of securities ata time, its transaction costs are lower than what an individual would pay for securities

transactions.

Liquidity - Just like an individual stock, a mutual fund allows you to request that yourshares be converted into cash at any time.

Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of mutualfunds, and the minimum investment is small. Most companies also have automatic purchaseplans whereby as little as $100 can be invested on a monthly basis.

DISADVANTAGES OF MUTUAL FUNDS:

Professional Management - Did you notice how we qualified the advantage ofprofessional management with the word" theoretically"? Many investors debate whether or not

the so-called professionals are any better than you or I at picking stocks. Management is by no

means infallible, and, even if the fund loses money, the manager still takes his/her cut. We'll talk

about this in detail in a later section.

Costs - Mutual funds don't exist solely to make your life easier - all funds are in it for aprofit. The mutual fund industry is masterful at burying costs under layers of jargon. These costs

are so complicated that in this tutorial we have devoted an entire section to the subject.


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Dilution - It's possible to have too much diversification. Because funds have smallholdingsin so many different companies, high returns from a few investments often don't make much

difference on the overall return. Dilution is also the result of a successful fund getting too big.

When money pours into funds that have had strong success, the manager often has trouble

finding a good investment for all the new money.

Taxes - When making decisions about your money, fund managers don't consider yourpersonal tax situation. For example, when a fund manager sells a security, a capital-gains tax is

triggered, which affects how profitable the individual is from the sale. It might have been more

advantageous for the individual to defer the capital gains liability.

MUTUAL FUNDS VS. OTHER INVESTMENTS

Mutual funds offer several advantages over investing in individual stocks. For example, the

transaction costs are divided among all the mutual fund shareholders, who also benefit by having

a third party (professional fund managers) apply their expertise, dedicate their time to manage

and research investment options. However, despite the professional management, mutual funds

are not immune to risks. They share the same risks associated with the investments made. If the

fund invests primarily in stocks, it is usually subject to the same ups and downs and risks as the

stock market.


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DATA ANALYSIS & INTERPRETATION1. Do you know about investment options available?

[1] Yes

[2] No

COMMENT

Only 80% people know the exact meaning of investment. Because of remaining 20% take

his/her residential property as an investment. According to law purpose this is not an

investment because of it is not create any profit for the owner.

80%

20%

Yes

No


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2. What kind of financial instruments do you invest in?

[1] Fixed Deposits

[2] Bonds

[3] Mutual Funds

[4] Equity

COMMENT

Chart above clearly shows that only 26% people of the surveyed investors invest

in stock market, 30% people invest in mutual funds, 34% people invest in Fixed Deposits, and

10% people invest in Bonds.

This clearly shows that majority of the investors still prefer Fixed Deposits compared to other

investment options. 26% investors invest in stock market shows that investors have inclination in

investing in stock market.

34%

30%

26%

10%

FD'S

MUTUAL FUNDS

EQUITY

BONDS


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3. What is the basic purpose of your investment?

[1]Liquidity

[2]Returns

[3]Capital appreciation

[4]Tax benefits

[5]Risk covering

[6]Others

COMMENT:-

75% people are interested in liquidity, returns and tax benefits. And remaining 25% are

interested in capital appreciations, risk covering, and others.

30%

25%10%

20%

5%10%

Liquidity

Returns

Capital appreciation

Tax benefits

Risk covering

Others


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4. What is your total income per annum?

[1] Below 1 lakh

[2] 13 lakh

[3] More than 3 lakh

COMMENT:-

Chart above shows that the surveyed people are a mix of investors having different total income

per annum.

14%

60%

26%

BELOW 1 LAKH

1-3 LAKH

MORE THAN 3 LAKH


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5. How would you rate your risk profile?

[1] High

[2] Medium

[3] Low

Chart above clearly shows that 55% of the surveyed investors rate their risk profile as

medium, 12% people rate as high risk and 30% people thinks that they have a low risk profile

of investment.


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6. What appropriate rate of return you expect from your investment?

[1] 10-20%

[2] 20-30%

[3] 30-50%

COMMENT:-

Chart above clearly shows that only 26% of the surveyed investors expect their rate of return to

be between 30 -50% and the previous chart shows that 26% people have invested in stock market

thus indicating that investors who have invested in the equity are expecting 30-50% return,42%

people expects the rate of return between 10-20%.

42%

32%

26%

10-20%

20-30%

30-50%


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7. How would you rate your knowledge about stock market?

[1] Excellent

[2] Very good

[3] Good

[4] Poor

Chart above clearly shows that 54% of the surveyed investors have poor knowledge of stock

market, 32% people has good knowledge of stock market, 4% &10% people thinks they

have excellent or very good knowledge of stock market. This shows that people generally are

unaware of investment in stock market compared to other investment options like Fixed

deposits.

4%

10%

32%

54%

EXCELLENT

VERY GOOD

GOOD

POOR


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8. Which type of trading are you aware?

[1] Online

[2] Offline

COMMENT:-

Chart above clearly shows that 54% of the surveyed investors AWARE ONLINE TRADING,

46% people ARE NOT AWARE ONLINE TRADING.

54%

46%ONLINE

OFFLINE


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9. What do you think about investing in stock market?

[1] Ideal Investment

[2] Risky Investment

[3] Gambling

COMMENT:-

Chart above clearly shows that 54% of the surveyed investors rate stock market investment a

risky investment, 36% people rates the stock market investment as gambling, only 10 % people

thinks it to be ideal investment. This shows that a large percentage of people associate

investment in stock market with high risk.


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10. How would you rate investing in stock market on the basis of returns?

[1] Excellent

[2] Very good

[3] Poor

[4] Cant say

Chart above clearly shows that 18% of the surveyed investors rate stock market investment

as excellent on the basis of returns, 26% people rate as very good, 32 % people thinks they

do not have any knowledge about the expected returns in the stock market. This shows that

44% people generally thinks stock market investment as a high returns investment and rest

are unaware of the returns in stock market.


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FINDINGS

People prefer to invest in stock market for higher returns.

Investors who are willing to take high risk are willing to invest in stock market.

People in general have less knowledge of stock market.

People are unaware of the online trading in stock market.

People are wary of the up and down performance of stock market investment.

Stock market investments resulted in higher returns as compared to other investment options in

the previous years, but associated with higher risks.

The lack of appropriate funds to invest in stock market also contributes to the lack of interest in

stock market.


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RECOMMENDATIONS & SUGGESTIONS

1. Investors are generally unaware of investment in stock market. The knowledge about thestock market in general and the pros and cons of investing in stock market must be

provided in a large scale.

2. People generally associate stock market investment to high risk even gambling .Suchkind of misbelieves must be tried to remove from the minds of investors by educating

them more on stock market.


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LIMITATIONS OF THE STUDY

1. The time constraint was one of the factors, which lead to a limited sample size.2. Customers of a particular area are only included, which ultimately leads to a limited

opinion.

3. The full efforts were made to convince the respondents, but they were sometimes notcooperative with us due to their busy schedule.

4. Few of the respondents hesitated while giving responses and there might some chances ofbiasedness in the respondents.

5. Relative understanding of customers regarding the questions.6. Sometimes respondents tried to give information of which they were not aware fully,

some guesses were made and sometimes despite a willingness to co-operate, many

respondents were unable to give accurate information.


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BIBLIOGRAPHY

1. Internet/ web sources2. www.google.com3. www.wikipedia.com4. www.indiabulls.com5. www.bseindia.com6. www.nseindia.com


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ANNEXURE

QUESTIONNAIRE

Good (morning, afternoon, night). I am conducting a survey comparing stock market investment

with other investment options. The information you provide will be treated confidentially. We

hope that you will be willing to help us with this study.

1. Do you know about investment options available?

[1] Yes

[2] No

2. What kind of financial instruments do you invest in?

[1] Fixed Deposits

[2] Bonds

[3] Mutual Funds

[4] Equity

3. What is the basic purpose of your investment?

[1]Liquidity

[2]Returns

[3]Capital appreciation

[4]Tax benefits

[5]Risk covering

[6]Others

4. What is your total income per annum?

[1] Below 1 lakh

[2] 13 lakh

[3] More than 3 lakh


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5. How would you rate your risk profile?

[1] High

[2] Medium

[3] Low

6. What appropriate rate of return you expect from your investment?

[1] 10-20%

[2] 20-30%

[3] 30-50%

7. How would you rate your knowledge about stock market?

[1] Excellent

[2] Very good

[3] Good

[4] Poor

8.Which type of trading are you aware?

[1] Online

[2] Offline

9. What do you think about investing in stock market?

[1] Ideal Investment

[2] Risky Investment

[3] Gambling

10. How would you rate investing in stock market on the basis of returns?

[1] Excellent

[2] Very good

[3] Poor

jaimin panchal

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