Summer Internship Project Report - Arun Thakur (50) & Arjun Vig

A Summer Internship
Project Report
Investment on for an Indian Investor
Avenues
and Security Analysis
Concluded at:
Birla Sun Life Insurance Pvt.

Ghatkopar, Mumbai
Under the guidance of

Mr. Nikesh Ruparal
And
Mr. Jitendra Bafna
Submitted By
Arun Thakur Arjun Vig
KHR2009PGDMF050 KHR2009PGDMF109
Submitted To
Prof. S. Suryanarayan Prof. Priyanka Agarwal
ITM Business School, Kharghar ITM Business School, Kharghar,
For
PARTIAL FULFILLMENT OF
POST GRADUATE DIPLOMA IN MANAGEMENT STUDIES
(2009 – 2011)
AT
Investment Avenues for an Indian Investor and Security Analysis
ACKNOWLEDGEMENT
We would like to extend our thanks to ITM Business School, Navi Mumbai for given us
the platform for corporate interaction through this summer internship project which has helped us to
understand the duties & responsibility that comes with a job.
Moreover, I would like to extend my thanks and appreciation to Birla Sun Life Insurance
Company, Ghatkopar for giving us the opportunity and a platform to work in a healthy and
knowledgeable corporate working environment. Through Birla Sun Life, we got the opportunity to
meet some wonderful and highly intellectual people. We would like to thank Mr. Harsahad Surve,
Branch Manager, for his warm welcome to the organisation and introducing us to the various
phase of the corporate front.
Mr. Nikesh Ruparal, Birla Sun Life - Wealth Management team, made himself available
despite his busy schedule in order to guide, mentor and motivate us in this project. This project
couldn’t have taken its current form without his guidance. Through him we met Mr. Jitender
Bafna, who directed and challenged our intellect intensively. With help of these two great
personalities and there intellect we learned some of the most valuable lessons of our corporate lives.
Finally, we would like to thank Prof. S. Suryanarayan and Prof. Priyanka Agarwal our
project guide for his patience and guidance.
People we would like to thanks and show our appreciation are numerous and we extend our
heartfelt thanks to one and all.

KH2009PGDMF050 KH2009PGDMF109
Institute for Technology and Management Institute for Technology and Management
Kharghar, Navi Mumbai Kharghar, Navi Mumbai
ITM Business School, Kharghar Page 2

LETTER OF TRANSMITTAL
Prof. S. Suryanarayan Dated: 4th July

2010
Institute of Technology and Management, Business School,
Kharghar, Navi Mumbai
Prof Priyanka Agarwal

Institute of Technology and Management, Business School,
Kharghar, Navi Mumbai
Sir/ Madam
This report is a result of our efforts put forward through Birla Sun Life Insurance Company,
Ghatkopar, Mumbai, and submitted as part of the partial fulfillment of ‘Post graduate diploma in
management studies’.
The report entitled “Investment Avenues for an Indian investor and Security analysis – A
Study project report” is a study and analyses based report of the current scenario of the Indian
economy, prominent industries and investment opportunities in the Indian Market for a common
man. The report also includes a research on investor behavior in India.
We would like to thank you and company project guides, Mr. Nikesh Ruparal and Mr.
Jitender Bafna for guidance, mentoring and motivation.
Yours Sincerely,

KH2009PGDMF050 KH2009PGDMF109
Institute for Technology and Management Institute for Technology and Management
Kharghar, Navi Mumbai Kharghar, Navi Mumbai

Executive summary
India’s competitiveness from a natural and human resources standpoint is making it the
destination of choice for investors. India is a fast-growing economy with a dynamic and robust
financial system. Being a democracy ensures a stable policy environment and its independent
institutions guarantee the rule of law.
This highly diversified economy has shown rapid growth and remarkable resilience since
1991, when economic reforms were
initiated with the progressive opening of
the economy to international trade and
investment. Events such as the Asian
currency crisis, the dotcom bust and rising
oil prices have had no significant impact
on India’s growth, with the economy
recording an average annual GDP growth
of over 6.5% in the past decade. Going
forward, the country is targeting an
average GDP growth rate of over 8% per
annum. GDP growth of over 8% p.a. expected.
India is in the global arena for increased foreign investment - both through the Equity markets -
termed Foreign Institutional Investment (FII) and Foreign Direct Investment (FDI). While its size
and growth potential make India attractive as a market, the most compelling reason for investors to
be in India is that it provides a high return on investment. India is a free-market democracy with a
legal and regulatory framework that rewards free enterprise, entrepreneurship and risk taking.
Developing a basic understanding and potential of the Indian market, envisaging and
developing knowledge of offering various investment avenues. Understand investor perception and
investment idea of the equity share market.
Scope of this study project is limited to the Indian listed companies in the equity market. An
Indian investor has few but strong investment options, such as:
Safe/Low Risk Investment Avenues: High Risk Investment Avenues:

• Savings Account • Equity Share Market

• Bank Fixed Deposits • Commodity Market
• Public Provident Fund • FOREX Market
• National Savings
Traditional Investment Avenues:
Certificates
• Post Office Savings • Real Estate (property).
• Government Securities • Gold/Silver
Moderate Risk Investment Avenues:
• Mutual Funds
• Life Insurance • •
• Bonds & Debentures • •
This report understand these avenues and its future in the Indian market. Along with this
security analysis of the Indian stocks.
Security analysis is about valuing the assets, debt, warrants, and equity of companies from
the perspective of outside investors using publicly available information. The security analyst must
have a thorough understanding of financial statements, which are an important source of this
information. As such, the ability to value equity securities requires cross-disciplinary knowledge in
both finance and financial accounting. While there is much overlap between the analytical tools
used in security analysis and those used in corporate finance, security analysis tends to take the
perspective of potential investors, whereas corporate finance tends to take an inside perspective such
as that of a corporate financial manager.
This document also holds a brief on Aditya Birla Group and Birla Sun life Insurance. Along
with a fundamental approach for analyzing the Indian economy and industries in four major sectors,
Automobile, Banking, Software solutions and Telecom, is been done. This is supported by technical
analysis of 8 different companies from the automobile and software sectors with the learned
strategies in the two month duration of summer internship at Birla Sun Life Insurance Company.
This effort was undertaken in order to learn the investment perspective of a common man of
the Indian Equity market and other investment avenues.

Table of Contents
ACKNOWLEDGEMENT......................................................................................................2
LETTER OF TRANSMITTAL................................................................................................3
Executive summary.........................................................................................................4
Table of Contents............................................................................................................ 6
Aditya Birla Group........................................................................................................... 8
Birla Sun Life Insurance Co. Ltd....................................................................................10
Investment Avenues for an Indian Investor and Security Analysis................................13
Introduction ............................................................................................................... 13
Objective & scope...................................................................................................... 14
Avenues of Investment..............................................................................................15
Traditional Investment Avenues.............................................................................15
Safe/Low Risk Investment Avenues........................................................................17
Moderate Risk Investment Avenues........................................................................23
High Risk Investment Avenues...............................................................................39
Indian stock market & regulators...............................................................................42
National Stock Exchange (NSE) of India.................................................................42
Bombay Stock Exchange (BSE) of India..................................................................43

Securities and Exchange Board of India (SEBI).......................................................44
Insurance Regulatory and Development Authority (IRDA)......................................45
Security Analysis........................................................................................................47
Fundamental Analysis.............................................................................................47
Technical Analysis ..................................................................................................76
Company Analysis...................................................................................................85
Research Design of the Study of Indian Investor Perception....................................116
The methodology adopted includes.........................................................................116
Sources of Data........................................................................................................116
Analysis of questionnaire and interpretation...........................................................116
Survey Results...................................................................................................... 116
Findings................................................................................................................... 135
Limitation of the project...........................................................................................136
Bibliography............................................................................................................. 137

.................................................................................................................................... 137
Appendix I................................................................................................................... 138
Investor Behavior Questionnaire...........................................................................138

Aditya Birla Group

A US$ 29 billion corporation, the Aditya Birla Group is in the League of Fortune 500. It is
anchored by an extraordinary force of 130,000 employees, belonging to 30 different nationalities. In
the year 2009, the Group was ranked among the top six great places for leaders in the Asia-Pacific
region, in a study conducted by Hewitt Associates, RBL Group and Fortune magazine. In India, the
Group has been adjudged the best employer in India and among the top 20 in Asia by the Hewitt-
Economic Times and Wall Street Journal Study 2007.
Over 60 per cent of the Group's revenues flow from its overseas operations. The Group
operates in 25 countries – India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg,
Switzerland, Australia, USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, Dubai,
Singapore, Myanmar, Bangladesh, Vietnam, Malaysia and Korea.
Globally, the Aditya Birla Group is:
 A metals powerhouse, among the world's most cost-efficient aluminum and copper
producers. Hindalco-Novelis is the largest aluminum rolling company. It is one of the three
biggest producers of primary aluminum in Asia, with the largest single location copper
smelter.
 No. 1 in viscose staple fiber.
 The fourth-largest producer of insulators
 The fourth-largest producer of carbon black
 The fifth-largest producer of acrylic fibre.
 The tenth-largest cement producer
 Among the best energy-efficient fertiliser plants
In India:
 Largest cement producer

 Largest premium, branded apparel company
 The second-largest producer of viscose filament yarn
 The second-largest in the chlor-alkali sector
 Among the top five cellular operators
 Among top 10 Indian BPO companies by revenue size
 Among the top five asset management and private sector life insurance companies
 Among the top three supermarket chains in the retail business
Beyond business

Transcending business for over 50 years now, the Group has been and continues to be
involved in meaningful welfare-driven initiatives that distinctly impact the quality of life of the
weaker sections of society in India, South-East Asia and Egypt.
In India, the Group's social projects span 2,500 villages. It reaches out to six million people
annually through the Aditya Birla Centre for Community Initiatives and Rural Development,
spearheaded by Mrs. Rajashree Birla. Its focus is healthcare, education, sustainable livelihood,
infrastructure and espousing social causes
.
The Group runs 42 schools, which provide quality education to over 45,000 children in
India's interiors. Of these, 18,000 children receive free education. An additional 8,000 students
receive merit scholarships. Likewise at its 18 hospitals in India, more than 500,000 patients are
given extremely subsidised medical care. The Group transcends the conventional barriers of
business and reaches out to the marginalised because of its conviction of bringing in a more
equitable society.

Birla Sun Life Insurance Co. Ltd.

Company Profile
Established in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a joint venture
between the Aditya Birla Group, a well known and trusted name globally amongst Indian
conglomerates and Sun Life Financial Inc, leading international financial services organization from
Canada. The local knowledge of the Aditya Birla Group combined with the domain expertise of Sun
Life Financial Inc., offers a formidable protection for its customers’ future.
With an experience of over 9 years, BSLI has contributed significantly to the growth and
development of the life insurance industry in India and currently ranks amongst the top 5 private life
insurance companies in the country.
Known for its innovation and creating industry benchmarks, BSLI has several firsts to its
credit. It was the first Indian Insurance Company to introduce “Free Look Period” and the same was
made mandatory by IRDA for all other life insurance companies. Additionally, BSLI pioneered the
launch of Unit Linked Life Insurance plans amongst the private players in India. To establish
credibility and further transparency, BSLI also enjoys the prestige to be the originator of practice to
disclose portfolio on monthly basis. These category development initiatives have helped BSLI be
closer to its policy holders’ expectations, which gets further accentuated by the complete bouquet of
insurance products (viz. pure term plan, life stage products, health plan and retirement plan) that the
company offers.
Add to this, the extensive reach through its network of 600 branches and 1,75,000
empanelled advisors. This impressive combination of domain expertise, product range, reach and
ears on ground, helped BSLI cover more than 2 million lives since it commenced operations and
establish a customer base spread across more than 1500 towns and cities in India. To ensure that our
customers have an impeccable experience, BSLI has ensured that it has lowest outstanding claims
ratio of 0.00% for FY 2008-09. Additionally, BSLI has the best Turn Around Time according to
LOMA on all claims Parameters. Such services are well supported by sound financials that the
Company has. The AUM of BSLI stood at Rs. 8165 crs as on February 28, 2009, while as on
March 31, 2009, the company has a robust capital base of Rs. 2000 crs.
Vision
 To be a leader and role model in a broad based and integrated financial services business.
Mission
 To help people mitigate risks of life, accident, health, and money at all stages and under all
circumstances.
 Enhance the financial future of our customers including enterprises
Values
 Integrity
 Commitment
 Passion
 Seamlessness
 Speed
Aditya Birla Group through Aditya Birla Financial Services Group (ABFSG), has a strong
presence across various financial services verticals that include life insurance, fund management,
distribution & wealth management, security based lending, insurance broking, private equity and
retail broking. The seven companies representing ABFSG are Birla Sun Life Insurance Company,
Birla Sun Life Asset Management Company, Aditya Birla Money, Aditya Birla Finance, Birla
Insurance Advisory & Broking Services, Aditya Birla Capital Advisors and Apollo Sindhoori
Capital Investment. In FY 2008-09, the consolidated revenues of ABFSG from these businesses
crossed Rs. 4763 crores, registering a growth rate of 36%.
Sun Life Financial is a leading international financial services organisation providing a diverse
range of protection and wealth accumulation products and services to individuals and corporate
customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key
markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong,
the Philippines, Japan, Indonesia, India, China and Bermuda. As of December 31, 2008, the Sun
Life Financial group of companies had total assets under management of $381 billion.
Products


Investment Avenues for an Indian Investor

and Security Analysis
Introduction
India’s competitiveness from a natural and human resources standpoint is making it the
destination of choice for investors. India is a fast-growing economy with a dynamic and robust
financial system. Being a democracy ensures a stable policy environment and its independent
institutions guarantee the rule of law.
This highly diversified economy has shown rapid growth and remarkable resilience since
1991, when economic reforms were
initiated with the progressive opening
of the economy to international trade
and investment. Events such as the
Asian currency crisis, the dotcom bust
and rising oil prices have had no
significant impact on India’s growth,
with the economy recording an average
annual GDP growth of over 6.5% in
the past decade. Going forward, the
country is targeting an average GDP
growth rate of over 8% per annum. GDP growth of over 8% p.a. expected.
India is in the global arena for increased foreign investment - both through the Equity
markets - termed Foreign Institutional Investment (FII) and Foreign Direct Investment (FDI). While
its size and growth potential make India attractive as a market, the most compelling reason for
investors to be in India is that it provides a high return on investment. India is a free-market
democracy with a legal and regulatory framework that rewards free enterprise, entrepreneurship and
risk taking. There are several good reasons for investing in India.
• One of the largest economies in the world.
• Strategic location access to the vast domestic and South Asian market.
• A large and rapidly growing consumer market up to 300 million people, constitute the
market for branded consumer goods estimated to be growing at over 8% per annum.
Demand for several consumer products is growing at over 12% per annum.
• Foreign investment is welcome; approval is required but is automatic in sixty categories of
Industries.
• Skilled manpower and professional managers are available at competitive cost.

• One of the largest manufacturing sectors in the world, spanning almost all areas of
manufacturing activities.
• One of the largest pools of scientists, engineers, technicians and managers in the world.
• Rich base of mineral and agricultural resources.
• Long history of market economy infrastructure
• Sophisticated financial sector. Vibrant capital market with over 9,000 listed companies and
market capitalisation of US $600 billion.
• Well developed R&D infrastructure and technical and marketing services.
• Policy environment that provides freedom of entry, investment, location, choice of
technology, production, import and export. Well balanced package of fiscal incentives.
• Free and full repatriation of capital, technical fee, royalty and dividends.
• Foreign brand names are freely used.
• No income tax on profits derived from export of goods.
• Complete exemption from Customs Duty on industrial inputs and Corporate Tax Holiday for
five years for 100 per cent Export Oriented units and units in Export Processing Zones.
• Corporate Tax applicable to the foreign companies of a country with which agreement for
avoidance of Double Taxation exists, can be one which is lower between the rates prevailing
in any one of the two countries and the treaty rate.
• A stable parliamentary democracy.
Objective & scope
Developing a basic understanding and potential of the Indian market, envisaging and
developing knowledge of offering various investment avenues. Understand investor perception and
investment idea of the equity share market.
Scope of this study project is limited to the Indian listed companies in the equity market.

Avenues of Investment
An Indian investor has few but strong investment options
Safe/Low Risk Investment Avenues: High Risk Investment Avenues:
• Savings Account • Equity Share Market
• Bank Fixed Deposits • Commodity Market
• Public Provident Fund • FOREX Market
• National Savings
Traditional Investment Avenues:
Certificates
• Post Office Savings • Real Estate (property).
• Government Securities • Gold/Silver
Moderate Risk Investment Avenues:
• Mutual Funds
• Life Insurance • •
• Bonds & Debentures • •
Traditional Investment Avenues

Real Estate (property)
The potential of India's property market has a revolutionizing effect on the overall economy
of India as it transforms the skyline of the Indian cities mobilizing investments segments ranging
from commercial, residential, retail, industrial, hospitality, healthcare etc. But maximum growth is
attributed to its growth from the booming IT sector, since an estimated 70 per cent of the new
construction is for the IT sector. A survey by the Federation of Indian Chambers of Commerce and
Industry (FICCI) and Ernst & Young has predicted that Indian real estate industry is poised to
emerge as one of the most preferred investment destinations for global realty and investment firms
in the next few years. It is attracting investors by offering a possibility of stable income yields,
moderate capital appreciations, tax structuring benefits and higher security in comparison to other
investment options.
The commercial property market has been growing at an annual rate of approximately 30%
over the past eight years across major locations in India. Moreover, there is an up shooting demand
for 200 million sq. ft over the next five years. Apart from the IT and ITES industry influencing the
Indian real estate sector, India is also getting into the knowledge based manufacturing industry on a
large scale. Retail, one of India's largest industries, has presently emerged as one of the most
dynamic and fast paced industries of our times with several players entering the market.
Another emerging trend in real estate sector in India is investment in the hospitality or hotel
industry. The exceptional boom in inbound tourism and the IT sector has also led to an
unprecedented shortage of rooms, with hotels all over the country witnessing their highest-ever
occupancy rates.

SEZs - the emerging investment option

Moreover, as real estate sector expands beyond the city limits with government promoting
industrial belts, real estate developers are eyeing special economic zones (SEZs) as an extension of
their business. Several upcoming special economic zones are also expected to provide the
momentum to the commercial office space development in related area where the land comes
cheaper; and a SEZ developer is entitled for tax exemptions like a 10-year corporate tax holiday.
On the whole, Indian real estate sector is slated to mark the growth to $40-50 billion in the
next five years. Also, India is witnessing developments of hi tech cities, a trend that has been
embraced by most Indian cities.
FDI - inviting real estate investments

Not surprisingly, most foreign investors have aimed India in a big way, largely through joint
ventures. Along with curtailing the risk factor, it provides the participating companies an exit route.
According to the data released by the Department of Industrial Policy and Promotion (DIPP),
housing and real estate sector including cineplex, multiplex, integrated townships and commercial
complexes etc, attracted a cumulative foreign direct investment (FDI) worth US$ 8.4 billion from
April 2000 to March 2010 wherein the real estate and the housing sector witnessed FDI amounting
US$ 2.8 billion in the fiscal year 2009-10.
Gold and Silver
• Gold is valued in India as a savings and investment vehicle and is the second preferred
investment after bank deposits.
• India is the world's largest consumer of gold in jewellery as investment.
• In July 1997 the RBI authorized the commercial banks to import gold for sale or loan to
jewellers and exporters. At present, 13 banks are active in the import of gold. This reduced
the disparity between international and domestic prices
of gold from 57 percent during 1986 to 1991 to 8.5
percent in 2001.
• The gold hoarding tendency is well ingrained in Indian
society.
• Domestic consumption is dictated by monsoon, harvest
and marriage season. Indian jewellery off take is
sensitive to price increases and even more so to
volatility.
• In the cities gold is facing competition from the stock
market and a wide range of consumer goods.
• Facilities for refining, assaying, making them into
standard bars in India, as compared to the rest of the
world, are insignificant, both qualitatively and
quantitatively.

• Silver imports into India for domestic consumption in 2002 was 3,400 tons down 25 % from
record 4,540 tons in 2001.
• Open General License (OGL) imports are the only significant source of supply to the Indian
market.
• Non-duty paid silver for the export sector rose sharply in 2002, up by close to 200% year-on-
year to 150 tons.
• Around 50% of India's silver requirements last year were met through imports of Chinese
silver and other important sources of supply
being UK, CIS, Australia and Dubai.
• Indian industrial demand in 2002 is estimated at
1375 tons down by 13 % from 1,579 tons in
2001. In spite of this fall, India is still one of the
largest users of silver in the world, ranking
alongside those Industrial giants, Japan and the
United States.
• By contrast with United States and Japan,
Indian industrial offtake for fabrication in
hardcore industrial applications like electronics
and brazing alloys accounts for only 15 % and
the rest being for foils for use in the decorative
covering of food, plating of jewelry and
silverware and jari.
• In India silver price volatility is also an
important determinant of silver demand as it is for gold.
• India is the largest consumer of gold jewellery in the world, Accounts for about 20% of
world consumption
• India is the fastest growing jewellery market in the world
o Branded jewellery likely to be the fastest growing segment in domestic sales
o Expected to grow at 40% p.a. to US$2.2 billion by 2010
o Exports expected to grow from US$17 billion in 2006 to over US$25 billion by 2012
Safe/Low Risk Investment Avenues
Savings Account and Bank Fixed Deposits
As the name denotes, this account is perfect for parking your temporary savings. These
accounts are one of the most popular deposits for individual accounts. These accounts provide
cheque facility and a lot of flexibility for deposits and withdrawal of funds from the account. Most
of the banks have rules for the maximum number of withdrawals in a period and the maximum
amount of withdrawal, but no bank enforces these. However, banks have every right to enforce
such boundaries if it is felt that the account is being misused as a current account. At present the

interest on these accounts is regulated by Reserve Bank of India. Presently Indian banks are offering
3.50% p.a. interest rate on such deposits.
This account gives the customer a nominal rate of interest and he can withdraw money as
and when the need arises. The position of account is depicted in a small book known as 'Pass Book'.
Such accounts should be treated as a temporary parking area because the rate of interest is much less
than Fixed Deposits. As soon as one’s savings accumulate to an amount which he can spare for a
certain period of time, shift this money to Fixed Deposit. The returns on the money kept in Savings
Bank account will be less but the freedom to withdraw is the highest
The term "fixed" in Fixed Deposits denotes the period of maturity or tenor. Fixed Deposit,
therefore, pre plans a length of time for which the depositor decides to keep the money with the
Bank and the rate of interest payable to the depositor is decided by this tenure. Rate of interest
differs from Bank to Bank. Normally, the rate is highest for deposits for 3-5 years. This, however,
does not mean that the depositor loses all his rights over the money for the duration of the tenor
decided. Deposits can be withdrawn before the period is over. However, the amount of interest
payable to the depositor, in such cases goes down.
Every Banks offer fixed deposits schemes with a wide range of tenures for periods from 7
days to 10 years. Therefore, the depositors are supposed to continue such Fixed Deposits for the
duration of time for which the depositor decides to keep the money with the bank. However, in case
of need, the depositor can ask for closing the fixed deposit in advance by paying a penalty. Soon
some banks have even introduced variable interest fixed deposits. The rate of interest in such
deposits will keep on varying with the prevalent market rates i.e. it will go up if market interest rate
goes and it will come down if the market rates fall.
The rate of interest for Fixed Deposits (FD) differs from bank to bank. When the interest
rates were regulated by RBI all banks used to have the same interest rate structure. The present
trends indicate that private sector and foreign banks offer higher rate of interest.
Tax deduction
Banks should deduct tax at source on interest paid in excess of Rs. 5000 per annum to any
depositor. This is not per deposit but per individual. Therefore if an individual has 5 deposits and the
aggregate interest earned on these is Rs. 7000 though in each individual deposit, interest should not
exceed Rs. 2000, tax must be deducted at source.
Operation
While opening a fixed deposit account, the bank must issue a fixed deposit that should state
the following things on its face:
• Date of issue
• Due date
• Amount

• Rate of interest
• Period of deposit
• Amount at maturity
Early withdrawal
Sometimes a customer may want to withdraw his deposit before maturity. In such case, the
customer would have to request the bank to do so. Banks are permitted, at their discretion, to allow
early withdrawal and they can charge a penal interest for early encashment. The Reserve Bank states
that penal interest must not be charged if the deposit is reinvested in a fresh deposit immediately.
The rate of interest that will be paid is the rate for the period the deposit has been with the bank.
Banks may prohibit premature withdrawal of large deposits held by entities other than individuals
and HUFs if such depositors have been so advised at the time the account was opened.
Renewal
Deposits can be renewed on maturity on the request of the depositor. Deposits may be
renewed before maturity in the following cases:
• If the deposit is renewable before the date of maturity
• If the period of renewal is longer than the remaining period of the original deposit.
Interest on renewal
Interest on renewal will be on the original deposit at the rate applicable to the period for
which the deposit has actually run. Interest for the period from the date of renewal will be allowed at
the rate existing on the date of renewal.
Maturity
The deposit matures at the end of the period for which it has been placed. On maturity, the
depositor should instruct the bank to renew the deposit. The bank cannot do so without the
customer’s instruction.
If the depositor does not want to renew the deposit, he can ask for it to be paid to him either
by a cheque/ draft or credited to an account he has. Normally the instruction would be in the account
opening instructions. If the depositor does not renew or claim the deposit on its maturity, the deposit
will be designated as an overdue deposit in the books of the bank. The bank cannot close and repay
the deposit if the depositor does not make a demand. If the deposit matures on a Sunday/ holiday/
any nonworking days, the bank should pay interest at the originally contracted rate on the deposit
amount for the Sunday/ holiday/ non business day. The deposit would be paid back on the
succeeding working day.
Recurring Deposit Account

These kinds of deposits are most suitable for people who don’t have lump sum amount of
savings, but are ready to save a small amount every month. Normally, such deposits earn interest on
the amount deposited through monthly installments at the same rates as of Fixed Deposits / Term
Deposits. These are best if one wish to create a fund for his child's education or marriage of his
daughter or buy a car without loans.
Under these types of deposits, the person has to deposit a fixed amount of money every
month any default in payment within the month attracts a small penalty. However, some Banks
besides offering a fixed installment Recurring deposit, have also introduced a flexible / variable
Recurring deposit. Under these flexible RDs the person is allowed to deposit even higher amount of
installments, with an upper limit fixed for the same.
These accounts are normally allowed for maturities ranging from 6 months to 120 months. A
Pass book issued where the person can get the entries for all the deposits made by him / her and the
interest earned. Early withdrawal of accumulated amount permitted is usually allowed but penalty
may be imposed for early withdrawals. These accounts can be opened in single or joint names.
Nomination facility is also available.
Public Provident Fund, Post Office Savings and National Savings Certificate
Public Provident Fund, popularly known as PPF, is a savings cum tax saving instrument PPF
is a long-term, government-backed small savings scheme of the Central government started with the
aim of providing old age income security to the workers in the unorganized sector and self-
employed individuals. Currently, there are nearly 30 lakh PPF account holders in India across banks
and post offices. Any individual (salaried or non-salaried) can open a PPF account. He/ She may
also subscribe on behalf of a minor, HUF, AOP and BOI. Even NRIs can open PPF account.
An individual can have only one PPF account. Also, two adults cannot open a joint PPF
account. The aggregate annual contribution by an individual on account of himself, his minor child
and HUF/AOP/BOI (of which individual is member) cannot exceed Rs.70,000 otherwise the excess
amount will be returned without any interest.
Currently, the interest rate offered through PPF is around 8 per cent, which is compounded
annually. Interest is calculated on the lowest balance between the fifth day and last day of the
calendar month and is credited to the account on March 31 every year. So to derive the maximum,
the deposits should be made between 1st and 5th day of the month.
People who are interested in liquidity or small-term gains would not be excited about PPF because
the duration for the investment is 15 years. However, the effective period works out to 16 years i.e.,
the year of opening the account and adding 15 years to it. The contribution made in the 16th
financial year will not earn any interest but one can take advantage of the tax rebate.
The account holder has an option to extend the PPF account for any period in a block of five
years after the minimum duration elapses. The account holder can retain the account after maturity
for any period without making any additional deposits. The balance in the account will continue to
earn interest at normal rate as admissible on PPF account till the account is closed.
Government Securities
A Government security is a tradable security issued by the Central Government or the State
Governments, acknowledging the Government’s debt obligation. Such securities can be short term
(usually called Treasury Bills, with original maturities of less than 1 year) or long term (usually
called Government bonds or dated securities with original maturity of one year or more). In India,
the Central Government issues both Treasury Bills and bonds or dated securities while the State
Governments issue only bonds or dated securities, which are called the State Development Loans
(SDLs). Government securities carry practically no risk of default and, hence, are called risk-free
instruments. Government of India also issue savings instruments (Savings Bonds, National Saving
Certificates (NSCs), etc.) or special securities (Oil bonds, FCI bonds, fertilizer bonds, power bonds,
etc.) but they are usually not fully tradable and are not eligible for meeting the SLR requirement.
Features of Government Securities
Principal or face amount

It is the amount on which the issuer pays interest, and which has to be repaid at the end.
Issue price
It is the price at which investors buy the bonds when they are first issued, which will
normally be approximately equal to the principal amount. The net proceeds that the issuer receives
are thus the issue price, less issuance fees.
Maturity date
It is the date on which the issuer has to repay the principal amount. As long as all payments
have been made, the issuer has no more compulsions to the bond holders after the maturity date. The
length of time until the maturity date is called as the term or tenure or maturity of a bond. The
maturity can be any length of time, though debt securities with a term of less than one year are
generally designated money market instruments rather than bonds. Most bonds have a term of up to
30 years. Few bonds have been issued with maturities of up to one hundred years, and some even do
not mature at all. In early 2005, a market developed in Euros for bonds with a maturity of fifty
years. In the market for government securities, there are three groups of bond maturities:
• Short term (bills): maturities up to 1 year;
• Medium term (notes): maturities between 1 and 10 years;
• Long term (bonds): maturities greater than 10 years.
Coupon
Coupon is the interest payment that the issuer pays to the bond holders. Generally coupon
rate is fixed throughout the life of the bond. It can also vary with a money market index, like
LIBOR, or it can be even more exotic. The name coupon originates from the fact that in the past,
physical bonds were issued which coupons had attached to them. On coupon dates the bond holder
would give the coupon to a bank in exchange for the interest payment.
Indentures and Covenants

An indenture is a formal debt agreement that creates the terms of a bond issue, while
covenants are the clauses of such an agreement. Covenants state the rights of bondholders and the
duties of issuers, such as actions that the issuer is obligated to perform or is prohibited from
performing. In the central and state securities and commercial laws apply to the enforcement of
these agreements, which are interpreted by courts as contracts between issuers and bondholders. The
terms may be changed only with great difficulty while the bonds are outstanding, with amendments
to the governing document usually requiring approval by a majority (or super-majority) vote of the
bondholders.
Coupon date
These are the dates on which the issuer pays the coupon to the bond holders. In the India
most bonds are semi-annual, which means that they pay a coupon every six months.
Benefits of Government Securities

 Holders of certain bonds are eligible to claim deduction from their taxable income. A list of
such deposits is mentioned hereunder:
 Interest on Government Securities, National Savings Certificate (issues VI, VII and VIII),
Development Bonds, Development Bonds and 7 year National Rural Development Bonds
 Interest on Post Office Term Deposits, Recurring Deposits Accounts and National Savings
Schemes (as referred to in National Savings Scheme Rules, 1992)
 Dividends received from a co-operative society
 Income from investments in UTI (up to assessment year 1999-2000)
 Interest on deposits with a banking company or a co-operative bank
 Interest on deposits with a co-operative society made by a member of the society
 Interest on deposits with housing boards
 Interest from deposits made under A.E. (C, D.) Act & C.D.S. (I.T.P.) Act
 Interest on notified debentures of any co-operative society, any institution or any public sector
company.
 Interest on deposits with a financial corporation which is engaged in providing long-term
finance for industrial development in India and which is entitled for deduction under Section
36(l)(viii) [up to assessment year 1999-2000, the corporation is approved by Central
Government

 Interest on deposits with a public company formed and registered in India with the major
object of carrying on the business of providing long-term finance for construction or purchase of
houses in India for residential purposes and which is eligible for deduction under Section 36(l)
(viii) [up to assessment year 1999-2000, the company is approved by the Central Government
under Section 36(l)(viii)].
 Interest on deposits with Industrial Development Bank of India.
 Interest on deposits under National Deposit Scheme. Income in respect of units of mutual
fund specified under Section 10(23D).
 Interest on deposits under Post Office (Monthly Income Account) Rules.
 Issued at face value
 No default risk as the securities carry sovereign guarantee.
 Ample liquidity as the investor can sell the security in the secondary market
 Interest payment on a half yearly basis on face value
 No tax deducted at source
 Can be held in D-mat form.
 Rate of interest and tenor of the security is fixed at the time of issuance and is not subject to
change (unless intrinsic to the security like FRBs).
 Redeemed at face value on maturity
 Maturity ranges from of 2-30 years.
 Securities qualify as SLR investments (unless otherwise stated.
Moderate Risk Investment Avenues
Mutual Funds
A mutual fund is a professionally managed type of collective investment scheme that pools
money from many investors and invests it in stocks, bonds, short-term money market instrume nts
and other securities. Mutual funds have a fund manager who invests the money on behalf of the
investors by buying / selling stocks, bonds and debentures. India has around 1000 mutual fund
schemes, but this number has grown exponentially in the last few years. The Total Assets under
Management in India of all Mutual funds put together touched a peak of Rs. 5,44,535 crs. at the end
of August 2008. Buying shares directly from the market is one way of investing. But this requires
spending time to find out the performance of the company whose share is being purchased,

understanding the future business prospects of the company, finding out the track record of the
promoters and the dividend, bonus issue history of the company etc.
An informed investor needs to do research before investing. However, many investors find it
cumbersome and time consuming to pore over so much of information, get access to so much of
details before investing in the shares. Investors therefore prefer the mutual fund route. They invest
in a mutual fund scheme which in turn takes the responsibility of investing in stocks and shares after
due analysis and research. The investor need not bother with researching hundreds of stocks. It
leaves it to the mutual fund and it’s professional fund management team. Another reason why
investors prefer mutual funds is because mutual
funds offer diversification. An investor’s money is
invested by the mutual fund in a variety of shares,
bonds and other securities thus diversifying the
investor’s portfolio across different companies and
sectors. This diversification helps in reducing the
overall risk of the portfolio. It is also less expensive
to invest in a mutual fund since the minimum
investment amount in mutual fund units is fairly
low (Rs. 500 or so). With Rs. 500 an investor may
be able to buy only a few stocks and not get the
Mutual Fund Operation Flow Chart
desired divers ification. These are some of the
reasons why mutual funds have gained in popularity over the years.
Mutual Funds in India follow a 3-tier structure. There is a Sponsor (the First tier), who
thinks of starting a mutual fund. The Sponsor approaches the Securities & Exchange Board of India
(SEBI), which is the market regulator and also the regulator for mutual funds SEBI checks whether
the person is of integrity, whether he has enough experience in the financial sector, his networth etc.
Once SEBI is convinced, the sponsor creates a Public Trust (the Second tier) as per the Indian Trusts
Act, 1882. Trusts have no legal identity in India and cannot enter into contracts, hence the Trustees
are the people authorized to act on behalf of the Trust. Contracts are entered into in the name of the
Trustees. Once the Trust is created, it is registered with SEBI after which this trust is known as the
mutual fund.
It is important to understand the difference between the Sponsor and the Trust. They are two
separate entities. Sponsor is not the Trust; i.e. Sponsor is not the Mutual Fund. It is the Trust which
is the Mutual Fund. The Trustees role is not to manage the money. Their job is only to see,
whether the money is being managed as per stated objectives. Trustees may be seen as the internal
regulators of a mutual fund. Trustees appoint the Asset Management Company (AMC), to manage
investor’s money. The AMC in return charges a fee for the services provided and this fee is borne
by the investors as it is deducted from the money collected from them. The AMC’s Board of
Directors must have at least 50% of Directors who are independent directors. The AMC has to be
approved by SEBI. The AMC functions under the supervision of its Board of Directors, and also

under the direction of the Trustees and SEBI. It is the AMC, which in the name of the Trust, floats
new schemes and manages these schemes by buying and selling securities. In order to do this the
AMC needs to follow all rules and regulations prescribed by SEBI and as per the Investment
Management Agreement it signs with the Trustees.


Types of Mutual Fund

There are a wide variety of Mutual Fund schemes which cater to varying needs, age,
financial position, risk tolerance and return expectations. Classified as follows for the Indian market
scenario:
By Structure
Open-Ended Schemes
These do not have a fixed maturity. You deal with the Mutual Fund for your investments
and redemptions. The key feature is liquidity. You can conveniently buy and sell your units at Net
Asset Value (NAV) related prices, at any point of time.
Close-Ended Schemes
Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called close
ended schemes. You can invest in the scheme at the time of the initial issue and thereafter you can
buy or sell the units of the scheme on the stock exchanges where they are listed. The market price at
the stock exchange could vary from the scheme’s NAV on account of demand and supply situation,
unit holders’ expectations and other market factors. One of the characteristics of the close-ended
schemes is that they are generally traded at a discount to NAV; but closer to maturity, the discount
narrows. Some close-ended schemes give you an additional option of selling your units to the
Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations ensure that at
least one of the two exit routes is provided to the investor under the close ended schemes.
Interval Schemes
These combine the features of open-ended and close-ended schemes. They may be traded on
the stock exchange or may be open for sale or redemption during predetermined intervals at NAV
related prices.
By Investment Objective
Growth Schemes
Aim to provide capital appreciation over the medium to long term. These schemes normally
invest a majority of their funds in equities and are willing to bear short term decline in value for
possible future appreciation. These schemes are not for investors seeking regular income or needing
their money back in the short term. Ideal for: Investors in their prime earning years and seeking
growth over the long term.
Income Schemes
Aim to provide regular and steady income to investors. These schemes generally invest in
fixed income securities such as bonds and corporate debentures. Capital appreciation in such
schemes may be limited. Ideal for: Retired people and others with a need for capital stability and
regular income. Investors who need some income to supplement their earnings
Balanced Schemes
Aim to provide both growth and income by periodically distributing a part of the income and
capital gains they earn. They invest in both shares and fixed income securities in the proportion
indicated in their offer documents. In a rising stock market, the NAV of these schemes may not
normally keep pace or fall equally when the market falls. Ideal for: Investors looking for a
combination of income and moderate growth.
Money Market / Liquid Schemes

Aim to provide easy liquidity, preservation of capital and moderate income. These schemes
generally invest in safer, short term instruments such as treasury bills, certificates of deposit,
commercial paper and interbank call money. Returns on these schemes may fluctuate, depending
upon the interest rates prevailing in the market. Ideal for: Corporate and individual investors as a
means to park their surplus funds for short periods or awaiting a more favorable investment
alternative.
Tax Saving Schemes (Equity Linked Saving Scheme - ELSS)

These schemes offer tax incentives to the investors under tax laws as prescribed from time to
time and promote long term investments in equities through Mutual Funds. Ideal for: Investors
seeking tax incentives.
Special Schemes
This category includes index schemes that attempt to replicate the performance of a
particular index such as the BSE Sensex, the NSE 50 (NIFTY) or sector specific schemes which
invest in specific sectors such as Technology, Infrastructure, Banking, Pharma etc. Besides, there
are also schemes which invest exclusively in certain segments of the capital market, such as Large
Caps, Mid Caps, Small Caps, Micro Caps, 'A' group shares, shares issued through Initial Public
Offerings (IPOs), etc. Index fund schemes are ideal for investors who are satisfied with a return
approximately equal to that of an index. Sectoral fund schemes are ideal for investors who have
already decided to invest in a particular sector or segment.
Fixed Maturity Plans

Fixed Maturity Plans (FMPs) are investment schemes floated by mutual funds and are close
ended with a fixed tenure, the maturity period ranging from one month to three/five years. These
plans are predominantly debt-oriented, while some of them may have a small equity component.
The objective of such a scheme is to generate steady returns over a fixed-maturity period and protect
the investor against market fluctuations. FMPs are typically passively managed fixed income
schemes with the fund manager locking into investments with maturities corresponding with the
maturity of the plan. FMPs are not guaranteed products.
Exchange Traded Funds (ETFs)

Exchange Traded Funds are essentially index funds that are listed and traded on exchanges
like stocks. Globally, ETFs have opened a whole new panorama of investment opportunities to retail
as well as institutional investors. ETFs enable investors to gain broad exposure to entire stock
markets as well as in specific sectors with relative ease, on a real-time basis and at a lower cost than
many other forms of investing. An ETF is a basket of stocks that reflects the composition of an
index, like S&P CNX Nifty, BSE Sensex, CNX Bank Index, CNX PSU Bank Index, etc. The ETF's
trading value is based on the net asset value of the underlying stocks that it represents. It can be
compared to a stock that can be bought or sold on real time basis during the market hours. The first
ETF in India, Benchmark Nifty Bees, opened for subscription on December 12, 2001 and listed on
the NSE on January 8, 2002.
Capital Protection Oriented Schemes

Capital Protection Oriented Schemes are schemes that endeavour to protect the capital as the
primary objective by investing in high quality fixed income securities and generate capital
appreciation by investing in equity / equity related instruments as a secondary objective. The first
Capital Protection Oriented Fund in India, Franklin Templeton Capital Protection Oriented Fund
opened for subscription on October 31, 2006.
Gold Exchange Traded Funds (GETFs)

Gold Exchange Traded Funds offer investors an innovative, cost-efficient and secure way to
access the gold market. Gold ETFs are intended to offer investors a means of participating in the
gold bullion market by buying and selling units on the Stock Exchanges, without taking physical
delivery of gold. The first Gold ETF in India, Benchmark GETF, opened for subscription on
February 15, 2007 and listed on the NSE on April 17, 2007.
Funds Investing Abroad

With the opening up of the Indian economy, Mutual Funds have been permitted to invest in
foreign securities/ American Depository Receipts (ADRs) / Global Depository Receipts (GDRs).
Some of such schemes are dedicated funds for investment abroad while others invest partly in
foreign securities and partly in domestic securities. While most such schemes invest in securities
across the world there are also schemes which are country specific in their investment approach.
Fund of Funds (FOFs)

Fund of Funds are schemes that invest in other mutual fund schemes. The portfolio of these
schemes comprise only of units of other mutual fund schemes and cash / money market securities/
short term deposits pending deployment. The first FOF was launched by Franklin Templeton
Mutual Fund on October 17, 2003. Fund of Funds can be Sector specific e.g. Real Estate FOFs,
Theme specific e.g. Equity FOFs, Objective specific e.g. Life Stages FOFs or Style specific e.g.
Aggressive/ Cautious FOFs etc. Please bear in mind that any one scheme may not meet all your
requirements for all time. You need to place your money judiciously in different schemes to be able
to get the combination of growth, income and stability that is right for you. Remember, as always,
higher the return you seek higher the risk you should be prepared to take.
Advantages of investing in a Mutual Fund
1. Professional Management: You avail of the services of experienced and skilled professionals
who are backed by a dedicated investment research team which analyses the performance and
prospects of companies and selects suitable investments to achieve the objectives of the scheme.
2. Diversification: Mutual Funds invest in a number of companies across a broad cross-section of

industries and sectors. This diversification reduces the risk because seldom do all stocks decline
at the same time and in the same proportion. You achieve this diversification through a Mutual
Fund with far less money than you can do on your own.
3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you
avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with
brokers and companies. Mutual Funds save your time and make investing easy and convenient.
4. Return Potential: Over a medium to long-term, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.
5. Low Costs: Mutual Funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial and other
fees translate into lower costs for investors.
6. Liquidity: In open-ended schemes, you can get your money back promptly at Asset Value Net
(NAV) related prices from the Mutual Fund itself. With close-ended schemes, you can sell your
units on a stock exchange at the prevailing market price or avail of the facility of repurchase
through Mutual Funds at NAV related prices which some close-ended and interval schemes offer
you periodically.
7. Transparency: You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion invested in each
class of assets and the fund manager’s investment strategy and outlook.
8. Flexibility: Through features such as Systematic Investment Plans (SIP), Systematic Withdrawal
Plans (SWP) and dividend reinvestment plans, you can systematically invest or withdraw funds
according to your needs and convenience.
9. Choice of Schemes: Mutual Funds offer a variety of schemes to suit your varying needs over a
lifetime.
10. Well Regulated: All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors. The operations of
Mutual Funds are regularly monitored by SEBI.

Unit Linked Insurance Plan (ULIP)
ULIP provides for life insurance where the policy value at any time varies according to the
value of the underlying assets at the time. ULIP is life insurance solution that provides for the
benefits of protection and flexibility in investment. The investment is denoted as units and is
represented by the value that it has attained called as Net Asset Value (NAV). ULIP came into play
in the 1960s and is popular in many countries in the world. As times progressed the plans were also
successfully mapped along with life insurance need to retirement planning. In today's times, ULIP
provides solutions for insurance planning, financial needs, and many types of financial planning
including children’s marriage planning.
Unit Linked Insurance Plan - is a financial product that offers you life insurance as well as
an investment like a mutual fund. Part of the premium you pay goes towards the sum assured
(amount you get in a life insurance policy) and the balance will be invested in whichever
investments you desire - equity, fixed-return or a mixture of both.
In India investments in ULIP are covered under Section 80C of IT Act. However, the
concept of having an investment and insurance by the same instrument was challenged by the
market regulator SEBI which took up the matter to the Supreme Court of India .The Indian
government brought down curtains on the two-month long tussle between the regulators by ruling
that Unit-linked Insurance Products will be governed by the Insurance Regulatory and Development
Authority (IRDA). Unit linked insurance plan is a life insurance solution that provides the client with the
benefits of protection and flexibility in investment. It is a solution which provides for life insurance where the
policy value at any time varies according to the value of the underlying assets at the time.
The investment is denoted as unit and is represented by the value that it has attained called as
Net Asset Value (NAV). ULIPs are a category of goal-based financial solutions that combine the
safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment
goes towards providing a life cover. The residual portion of the ULIP is invested in a fund which in
turn invests in stocks or bonds; the value of investments alters with the performance of the
underlying fund opted by the customer. Simply put, ULIPs are structured in such that the protection
element and the savings element are distinguishable, and hence managed according to your specific
needs. In this way, the ULIP plan offers unprecedented flexibility and transparency. ULIPs came
into play in 1960s and became very popular in Western Europe and America. The reason that is
attributed to the wide spread popularity of ULIP is because of the transparency and the flexibility
which it offers to the clients.
As time progressed the plans were also successfully mapped along with life insurance needs
to retirement planning .In today’s times ULIP provides solution for all the needs of a client like
insurance planning, financial needs, financial planning for children’s future and retirement planning.

(Source:http://www.scribd.com/doc/7216240/Understand-ULIP-Insurance)
TYPES OF FUNDS UNDER ULIPs
Most insurers offer a wide range of funds to suit one’s investment objectives, risk profile and
time horizons. Different funds have different risk profiles. The potential for returns also varies from
fund to fund. The following are some of the common types of funds available along with an
indication of their risk characteristics.
(Source: www.irdaindia.org)
General description Nature of investments Risk category
Primarily invested in company stocks with the Medium to High
Equity Funds
general aim of capital appreciation.
Income, Fixed Interest Invested in corporate bonds, government securities Medium
and Bond Funds and other fixed income instruments.
Sometimes known as Money Market Funds — Low
Cash Funds invested in cash, bank deposits and money market
instruments
Combining equity investment with fixed interest Medium
Balanced Funds
instruments



ULIPs v/s Mutual Funds
ULIPs Mutual Funds

Determined by the investor Minimum investment amounts are
Investment amounts and can be modified as well determined by the fund house
No upper limits, expenses Upper limits for expenses

Expenses determined by the insurance chargeable to investors have been
company set by the regulator
Not mandatory* Quarterly disclosures are
Portfolio disclosure
mandatory
Generally permitted for free Entry/exit loads have to be borne
Modifying asset allocation
or at a nominal cost by the investor
Section 80C benefits are Section 80C benefits are available
Tax benefits available on all ULIP only on investments in tax-saving
investments funds

Bonds & Debentures

Debt instrument represents a contract whereby one party lends money to another on pre-
determined terms with regards to rate and periodicity of interest, repayment of principal amount by
the borrower to the lender. In Indian securities markets, the term ‘bond’ is used for debt instruments
issued by the Central and State governments and public sector organizations and the term
‘debenture’ is used for instruments issued by private corporate sector. Each debt instrument has
three features: Maturity, coupon and principal.
Maturity
Maturity of a bond refers to the date, on which the bond matures, which is the date on which
the borrower has agreed to repay the principal. Term-to-Maturity refers to the number of years
remaining for the bond to mature. The Term-to-Maturity changes every day, from date of issue of
the bond until its maturity. The term to maturity of a bond can be calculated on any date, as the
distance between such a date and the date of maturity. It is also called the term or the tenure of the
bond.
Coupon
Coupon refers to the periodic interest payments that are made by the borrower (who is also
the issuer of the bond) to the lender (the subscriber of the bond). Coupon rate is the rate at which
interest is paid, and is usually represented as a percentage of the par value of a bond.
Principal
Principal is the amount that has been borrowed, and is also called the par value or face value
of the bond. The coupon is the product of the principal and the coupon rate. There are three main
segments in the debt markets in India, viz.,
(1) Government Securities,
(2) Public Sector Units (PSU) bonds, and
(3) Corporate securities.
The market for Government Securities comprises the Centre, State and State-sponsored
securities. In the recent past, local bodies such as municipalities have also begun to tap the debt
markets for funds. Some of the PSU bonds are tax free, while most bonds including government
securities are not tax-free. Corporate bond markets comprise of commercial paper and bonds. These
bonds typically are structured to suit the requirements of investors and the issuing corporate, and
include a variety of tailor- made features with respect to interest payments and redemption. Most
Bond/Debenture issues are rated by specialised credit rating agencies. Credit rating agencies in India
are CRISIL, CARE, ICRA and Fitch. The yield on a bond varies inversely with its credit (safety)
rating. The safer the instrument, the lower is the rate of interest offered. There are two types of
debentures:
1. Convertible debentures, which are convertible bonds or bonds that can be converted into
equity shares of the issuing company after a predetermined period of time. "Convertibility"

is a feature that corporations may add to the bonds they issue to make them more attractive
to buyers. In other words, it is a special feature that a corporate bond may carry. As a result
of the advantage a buyer gets from the ability to convert; convertible bonds typically have
lower interest rates than non-convertible corporate bonds.
2. Non-convertible debentures, which are simply regular debentures, cannot be converted

into equity shares of the liable company. They are debentures without the convertibility
feature attached to them. As a result, they usually carry higher interest rates than their
convertible counterparts.
Level of Issuers Instruments

Government
Central Government Treasury bills, dated securities,
zero-coupon bonds, floating rate
bonds, inflation indexed bonds
Development finance Bank bonds, infrastructure bonds,
National institutions, commercial banks zero coupon bonds
Public sector companies Taxable and tax-free bonds
Private sector companies Bonds and debentures, zero-
coupon bonds, floating rate bonds
State governments State government loans
State-level public enterprises Government-guaranteed bonds
and financial institutions
State-level special-purpose Bonds, often with revenue
Sub-national vehicles and statutory boards dedication, with or without
government guarantee
Municipal corporations Municipal bonds, with revenue
dedication, with or without
government guarantee

High Risk Investment Avenues
Equity Share Market
The Indian Equity Market is more popularly known as the Indian Stock Market. The Indian
equity market has become the third biggest after China and Hong Kong in the Asian region.
According to the latest report by ADB, it has a market capitalization of nearly $600 billion. As of
March 2009, the market capitalization was around $598.3 billion (Rs 30.13 lakh crore) which is one-
tenth of the combined valuation of the Asia region. The market was slow since early 2007 and
continued till the first quarter of 2009.
An equity share, commonly referred to as ordinary share, represents the form of fractional
ownership in a business venture. When you buy a share of a company you become a shareholder in
that company. Shares are also known as Equities. Equities have the potential to increase in value
over time. It also provides your portfolio with the growth necessary to reach your long term
investment goals. Research studies have proved that the equities have outperformed most other
forms of investments in the long term. Since 1990 till date, Indian stock market has returned about
17% to investors on an average in terms of increase in share prices or capital appreciation annually,
besides that on average stocks have paid 1.5% dividend annually. Dividend is a percentage of the
face value of a share that a company returns to its shareholders from its annual profits. Compared to
most other forms of investments, investing in equity shares offers the highest rate of return, if
invested over a longer duration.
Growth Stocks
In the investment world we come across terms such as Growth stocks & Value stocks.
Companies, whose potential for growth in sales and earnings are excellent, are growing faster than
other companies in the market or other stocks in the same industry are called the Growth Stocks.
These companies usually pay little or no dividends and instead prefer to reinvest their profits in their
business for further expansions.
Value Stocks
The task here is to look for stocks that have been overlooked by other investors and which
may have a ‘hidden value’. These companies may have been beaten down in price because of some
bad event, or may be in an industry that's not fancied by most investors. However, even a company
that has seen its stock price decline still has assets to its name - buildings, real estate, inventories,
subsidiaries, and so on. Many of these assets still have value, yet that value may not be reflected in
the stock's price. Value investors look to buy stocks that are undervalued, and then hold those stocks
until the rest of the market realizes the real value of the company's assets. The value investors tend
to purchase a company's stock usually based on relationships between the current market price of
the company and certain business fundamentals. They like P/E ratio being below a certain absolute

limit; dividend yields above a certain absolute limit; Total sales at a certain level relative to the
company's market capitalization, or market value etc.
Shares are usually valued much higher than the face value and this initial investment in the
company by shareholders represents their paid-in capital in the company. The company then
generates earnings from its operating, investing and other activities. A portion of these earnings are
distributed back to the shareholders as dividend, the rest retained for future investments. The sum
total of the paid-in capital and retained earnings is called the book value of equity of the company.
Commodity Market
FCRA Forward Contracts (Regulation) Act, 1952 defines “goods” as “every kind of movable
property other than actionable claims, money and securities”. Futures’ trading is organized in such
goods or commodities as are permitted by the Central Government. At present, all goods and
products of agricultural (including plantation), mineral and fossil origin are allowed for futures
trading under the auspices of the commodity exchanges recognized under the FCRA. Commodity
derivatives market trade contracts for which the underlying asset is commodity. It can be an
agricultural commodity like wheat, soybeans, rapeseed, cotton, etc or precious metals like gold,
silver, etc. A Commodity Exchange is an association, or a company of any other body corporate
organizing futures trading in commodities. In a wider sense, it is taken to include any organized
market place where trade is routed through one mechanism, allowing effective competition among
buyers and among sellers – this would include auction-type exchanges, but not wholesale markets,
where trade is localized, but effectively takes place through many non-related individual
transactions between different permutations of buyers and sellers.
Having started operations in November 2003, today, MCX holds a market share of over 80%
of the Indian commodity futures market, and has more than 2000 registered members operating
through over 100,000 trader work stations, across India. The Exchange has also emerged as the sixth
largest and amongst the fastest growing commodity futures exchange in the world, in terms of the
number of contracts traded in 2009.
MCX offers more than 40 commodities across various segments such as bullion, ferrous and
non-ferrous metals, and a number of agri-commodities on its platform. The Exchange is the world's
largest exchange in Silver, the second largest in Gold, Copper and Natural Gas and the third largest
in Crude Oil futures, with respect to the number of futures contracts traded. MCX has been certified
to three ISO standards including ISO 9001:2000 Quality Management System standard, ISO
14001:2004 Environmental Management System standard and ISO 27001:2005 Information
Security Management System standard. The Exchange’s platform enables anonymous trades,
leading to efficient price discovery. Moreover, for globally-traded commodities, MCX’s platform
enables domestic participants to trade in Indian currency.

The Exchange strives to be at the forefront of developments in the commodities futures

industry and has forged strategic alliances with various leading International Exchanges, including
Euronext-LIFFE, London Metal Exchange (LME), New York Mercantile Exchange, Shanghai
Futures Exchange (SHFE), Sydney Futures Exchange, The Agricultural Futures Exchange of
Thailand (AFET), among others. For MCX, staying connected to the grassroots is imperative. Its
domestic alliances aid in improving ethical standards and providing services and facilities for
overall improvement of the commodity futures market.
FOREX Market
The foreign exchange market India is growing very rapidly. The annual turnover of the
market is more than $400 billion. This transaction does not include the inter-bank transactions.
According to the record of transactions released by RBI, the average monthly turnover in the
merchant segment was $40.5 billion in 2003-04 and the inter-bank transaction was $134.2 for the
same period. The average total monthly turnover was about $174.7 billion for the same period. The
transactions are made on spot and also on forward basis, which include currency swaps and interest
rate swaps.
The Indian foreign exchange market consists of the buyers, sellers, market intermediaries
and the monetary authority of India. The main center of foreign exchange transactions in India is
Mumbai, the commercial capital of the country. There are several other centers for foreign exchange
transactions in the country including Kolkata, New Delhi, Chennai, Bangalore, Pondicherry and
Cochin. In past, due to lack of communication facilities all these markets were not linked. But with
the development of technologies, all the foreign exchange markets of India are working collectively.
The foreign exchange market India is regulated by the reserve bank of India through the
Exchange Control Department. At the same time, Foreign Exchange Dealers Association (voluntary
association) also provides some help in regulating the market. The Authorized Dealers (Authorized
by the RBI) and the accredited brokers are eligible to participate in the foreign Exchange market in
India. When the foreign exchange trade is going on between Authorized Dealers and RBI or
between the Authorized Dealers and the overseas banks, the brokers have no role to play.
Apart from the Authorized Dealers and brokers, there are some others who are provided with
the restricted rights to accept the foreign currency or travelers cheque. Among these, there are the
authorized money changers, travel agents, certain hotels and government shops. The IDBI and Exim
bank are also permitted conditionally to hold foreign currency.
The whole foreign exchange market in India is regulated by the Foreign Exchange
Management Act, 1999 or FEMA. Before this act was introduced, the market was regulated by the
FERA or Foreign Exchange Regulation Act ,1947. After independence, FERA was introduced as a
temporary measure to regulate the inflow of the foreign capital. But with the economic and
industrial development, the need for conservation of foreign currency was felt and on the

recommendation of the Public Accounts Committee, the Indian government passed the Foreign
Exchange Regulation Act,1973 and gradually, this act became famous as FEMA.
Indian stock market & regulators
Stock Exchanges are structured marketplace where affiliates of the union gather to sell firm's
shares and other securities. India Stock Exchanges can either be a conglomerate/ firm or mutual
group. The affiliates act as intermediaries to their patrons or as key players for their own accounts.
Stock Exchanges in India also assist the issue and release of securities and other monetary
tools incorporating the fortification of revenues and dividends. The book keeping of the trade is
centralized but the buying and selling is associated to a particular place as advanced marketplaces
are mechanized. The buying and selling on an exchange is only open to its affiliates and brokers.
Different Stock Exchanges in India
National Stock Exchange (NSE) of India
Integrated in November 1992, the National Stock Exchange of India (NSE) was initially a tariff
forfeiting association. In 1993, the exchange was certified under Securities Contracts (Regulation)
Act, 1956 and in June 1994 it started its business functioning in the Wholesale Debt Market
(WDM). The Equities division of NSE began its operations in 1994 while in 2000 the corporation
incorporated its Derivatives division.
Some NSE Figures and Facts

• The equities division of NSE covers around 300 Indian cities, while its derivates section
covers 305 cities.

• The number of securities accessible for buying and selling in NSE exchange in its equities
and derivates section are 1,383 and 3,143 respectively.
• The total amount of Settlement warranty fund in NSE equities division and derivates section
are Rs 2,085.25 crores and Rs 6,018.30 crores respectively.
• The daily turnover of NSE equities division is Rs 10,336.52 crores, for derivates segment is
Rs 32,809.96 crores and for Whole sale debt division is Rs 13,911.57 crores.
• NSE uses satellite communication expertise to strengthen contribution from around 400
Indian cities.
• The exchange administers around rs 1 million of buying and selling on daily basis.
• It is one of the biggest VSAT incorporated stock exchange across the world.
• Currently more than 8,500 customers are doing online exchange business on NSE
application.
NSE Corporate Office

National Stock Exchange of India Ltd.
Exchange Plaza
Plot no. C/1, G Block
Bandra-Kurla Complex, Bandra (E)
Mumbai - 400 051, India
E-mail: cc_nse@nse.co.in
Bombay Stock Exchange (BSE) of India
The oldest stock market in Asia, BSE stands for Bombay Stock Exchange and was initially
known as "The Native Share & Stock Brokers Association." Incorporated in the 1875, BSE became
the first exchange in India to be certified by the administration. It attained a permanent authorization
from the Indian government in 1956 under Securities Contracts (Regulation) Act, 1956.
Over the year, the exchange company has played an essential part in the expansion of Indian
investment market. At present the association is functioning as corporatised body integrated under
the stipulations of the Companies Act, 1956.
Some BSE Figures and Facts

• BSE exchange was the first in India to launch Equity Derivatives, Free Float Index, USD
adaptation of BSE Sensex and Exchange facilitated Internet buying and selling policy
• BSE exchange was the first in India to acquire the ISO authorization for supervision,
clearance & Settlement
• BSE exchange was the first in India to have launched private service for economic training
• Its On-Line Trading System has been felicitated by the internationally renowned standard of
Information Security Management System.
BSE Corporate Office

Bombay Stock Exchange Limited
Phiroze jeejeebhoy towers
Dalal Street,
Mumbai- 400001, India
Website: www.bseindia.com
Regional Stock Exchanges (RSE) of India

The Regional Stock Exchanges in India started spreading its business operation from 1894. The
first RSE to start its functioning in India was Ahmedabad Stock Exchange (ASE) followed by
Calcutta Stock Exchange (CSE) in 1908.
The stock exchange in India witnessed a flourishing phase in 1980s with the incorporation of
many exchanges under it. In early 60s, it has only few certifies RSEs under it namely Hyderabad
Stock Exchange, Indore Stock Exchange, Madras Stock Exchange, Calcutta Stock Exchange and
Delhi Stock Exchange. The recent to join the list was Meerut Stock Exchange and Coimbatore Stock
Exchange. Catalog of Regional Stock Exchanges in India
• Ahmedabad Stock Exchange • Madhya Pradesh Stock Exchange

• Bangalore Stock Exchange • Madras Stock Exchange
• Bhubaneshwar Stock Exchange • Magadh Stock Exchange
• Calcutta Stock Exchange • Mangalore Stock Exchange
• Cochin Stock Exchange • Meerut Stock Exchange
• Coimbatore Stock Exchange • OTC Exchange Of India
• Delhi Stock Exchange • Pune Stock Exchange
• Guwahati Stock Exchange • Saurashtra Kutch Stock Exchange
• Hyderabad Stock Exchange • Uttar Pradesh Stock Exchange
• Jaipur Stock Exchange • Vadodara Stock Exchange
• Ludhiana Stock Exchange •
Securities and Exchange Board of India (SEBI)
SEBI is the regulator for the securities market in India. It was formed officially by the
Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired
by C B Bhave, SEBI is headquartered in the popular business district of Bandra-Kurla complex in
Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata,
Chennai and Ahmedabad.
Functions and responsibilities

SEBI has to be responsive to the needs of three groups, which constitute the market:
• the issuers of securities
• the investors
• the market intermediaries.
SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-
executive. It drafts regulations in its legislative capacity, it conducts investigation and enforcement
action in its executive function and it passes rulings and orders in its judicial capacity. Though this
makes it very powerful, there is an appeals process to create accountability. There is a Securities
Appellate Tribunal which is a three-member tribunal and is presently headed by a former Chief
Justice of a High court - Mr. Justice NK Sodhi. A second appeal lies directly to the Supreme Court.
SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively
(e.g. the quick movement towards making the markets electronic and paperless rolling settlement on
T+2 basis). SEBI has been active in setting up the regulations as required under law. SEBI has also
been instrumental in taking quick and effective steps in light of the global meltdown and the Satyam
fiasco.] It had increased the extent and quantity of disclosures to be made by Indian corporate
promoters. More recently, in light of the global meltdown, it liberalised the takeover code to
facilitate investments by removing regulatory strictures.
Insurance Regulatory and Development Authority (IRDA)
The Insurance Regulatory and Development Authority (IRDA) is a national agency of

the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known
as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements.
Mission of IRDA as stated in the act is "to protect the interests of the policyholders, to regulate,
promote and ensure orderly growth of the insurance industry and for matters connected therewith or
incidental thereto."
In 2010, the Government of India ruled that the Unit Linked Insurance Plans (ULIPs) will be
governmed by IRDA, and not the market regulator Securities and Exchange Board of India. IRDA
consists of a Chairman and some permanent as well as part time members. The regulations,
however, are enacted under the guidance of a statutory advisory committee. The advisory committee
consists of following individuals and ex-officio authorities:
• Chiarman: Hari Narayana is the current Chairman of IRDA.

• Full-time Members: Currently, they are Mr K K Srinivasan (Nonlife Member), Sri G
Prabhakara (Life Member), Dr R Kannan(Member, Actuary) and Sri R.K. Nair (Member, F
& I). There is provision for a panel of other members and part time members. IRDA formed
a high powered Insurance Law Reforms Committee known as KPN Committee with
important insurance advisors like Mr N Govardhan and Dr K C Mishra as its members.
There were also a few non-advisory committee members like Mr Liaquat Khan and Mr T
Viswanathan etc.
Full force and utility of various institutions like Advisory Committee and self-regulatory
organizations are not yet realized as the regulator seems to be in a long learning mode. Due to over
delegations, Individual incumbents decide the pace and extent of utilization of prudential and
statutory bodies. Research is limited to opinion seeking through legacy channels. Market waits for
revision of insurance act and establishment meaningfully functioning regulatory organs devoid of
excess delegation and subjective localization of development agencies.
Duties, Powers and Functions of IRDA
Section 14 of IRDA Act, 1999 laysdown the duties,powers and functions of IRDA

1. Subject to the provisions of this Act and any other law for the time being in force, the
Authority shall have the duty to regulate, promote and ensure orderly growth of the
insurance business and re-insurance business.
2. Without prejudice to the generality of the provisions contained in sub-section (1), the powers
and functions of the Authority shall include,
a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend
or cancel such registration;
b) protection of the interests of the policy holders in matters concerning assigning of
policy, nomination by policy holders, insurable interest, settlement of insurance
claim, surrender value of policy and other terms and conditions of contracts of
insurance;
c) specifying requisite qualifications, code of conduct and practical training for
intermediary or insurance intermediaries and agents;
d) specifying the code of conduct for surveyors and loss assessors;
e) promoting efficiency in the conduct of insurance business;
f) promoting and regulating professional organisations connected with the insurance
and re-insurance business;
g) levying fees and other charges for carrying out the purposes of this Act;
h) calling for information from, undertaking inspection of, conducting enquiries and
investigations including audit of the insurers, intermediaries, insurance intermediaries
and other organisations connected with the insurance business;
i) control and regulation of the rates, advantages, terms and conditions that may be
offered by insurers in respect of general insurance business not so controlled and
regulated by the Tariff Advisory Committee under section 64U of the Insurance Act,
1938 (4 of 1938);
j) specifying the form and manner in which books of account shall be maintained and
statement of accounts shall be rendered by insurers and other insurance
intermediaries;
k) regulating investment of funds by insurance companies;
l) regulating maintenance of margin of solvency;
m) adjudication of disputes between insurers and intermediaries or insurance
intermediaries;
n) supervising the functioning of the Tariff Advisory Committee;
o) specifying the percentage of premium income of the insurer to finance schemes for
promoting and regulating professional organisations referred to in clause (f);
p) specifying the percentage of life insurance business and general insurance business to
be undertaken by the insurer in the rural or social sector; and
q) exercising such other powers as may be prescribed

Security Analysis
Security analysis is about valuing the assets, debt, warrants, and equity of companies from
the perspective of outside investors using publicly available information. The security analyst must
have a thorough understanding of financial statements, which are an important source of this
information. As such, the ability to value equity securities requires cross-disciplinary knowledge in
both finance and financial accounting. While there is much overlap between the analytical tools
used in security analysis and those used in corporate finance, security analysis tends to take the
perspective of potential investors, whereas corporate finance tends to take an inside perspective such
as that of a corporate financial manager.
Fundamental Analysis
Fundamental analysis is the examination of the underlying forces that affect the interests of
the economy, industrial sectors and companies. As with most analysis, the goal is to derive a
forecast for the future. At the company level, fundamental analysis may involve examination of
financial data, management, business concept and competition. At the industry level, there might be
an examination of supply and demand forces for the products offered. For the national economy,
fundamental analysis might focus on economic data to assess the present and future growth of the
economy. To forecast future stock prices, fundamental analysis combines economic, industry, and
company analysis to derive a stock's current fair value and forecast future value. If fair value is not
equal to the current stock price, fundamental analysts believe that the stock is either over or under
valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not
heed the advice of the random walkers and believe that markets are weak-form efficient. By
believing that prices do not accurately reflect all available information, fundamental analysts look to
capitalize on perceived price discrepancies.
Economic analysis
It is important to analyse the economic activity in which all the companies operate. The
economic activity affects profits of a company, investor’s attitude as well as expectations and, value
of a security.
Economic Indicators
Global Economy
The top-down analysis of a company starts with global and domestic economy. The
globalization affects a company’s prospects of exports, price competition, and exchange rate.
Domestic Economy

GDP is the measure of the total production of goods and services in an economy. Growing
GDP indicates an expanding economy. An Indian economy is affected by agricultural production as
well as industrial production and services. The good and normal monsoon indicates a good and
normal agricultural production and increasing income of farmers and agricultural labour. Industrial
production statistics reveals the status of industrial activity in the country.
Employment
Unemployment rate is the percentage of the total labour force in the country. The
unemployment rate indicates how the economy operates at full capacity.
Inflation
Inflation is the rate at which the general level of prices is rising. High rate of inflation
indicates economy is operating with full associated with demand for goods and services exceed
production capacity. The government should try to trade-off between inflation rate and
unemployment rate to increase the employment as well as decrease the inflation rate.
Interest Rates
As interest rate determines the present value of cash flows, high interest rate affects demand
for housing and high-value consumer durables. The real interest rate is an important factor for
business activity.
Budget Deficit
The budget deficit is the difference between government spending and revenues. Higher
budget deficit indicates higher government borrowing which pressure up interest rates. The
excessive government borrowing will crowd out private borrowing if the borrowing is unchecked.
Fiscal deficit is budget deficit plus borrowing. Higher fiscal deficit indicates higher government
spending on unproductive spending.
Other Factors
Money supply, Fiscal Policy, Monetary Policy, Manufacturing and trade sales, Labour
productivity, Index of consumer expectations, New acquisition of plants and machinery by
corporates, Stock prices, Personal income, Tax collections by the government, FII investments, FDI
investments, Credit off takes etc.
Indian Economy
 India’s GDP growth released for the last quarter of 2009-10 turned out to be robust, it
showed a record growth of 8.6 percent as compared to the growth of 5.8 percent in the same
quarter of previous year. For the fiscal 2009-10 India's economy grew by 7.4 percent which is an
upward revision from earlier estimates of 7.2 percent due to higher-than-anticipated growth in
agriculture, mining and manufacturing sectors.

 The IIP numbers in April 2010 continue to rise, it grew by 17.6 percent which was higher
than the rate of 13.5 percent increase recorded a month ago. This is mainly led by the notable
growth seen across all sectors. The industrial growth was just 1.1 percent a year ago, i.e. in April
2009.
 In the opening month of 2010-11, growth came from the three sectors, mining,
manufacturing and electricity. As per the use-based classification, growth numbers were also
found to be remarkable; especially, the capital goods sector, this achieved a growth of 72.8
percent indicating a rise in investment sentiments in the economy. The consumer goods sector
appeared to have performed well as it posted growth of 14.4 percent in April 2010. This growth
is mainly fuelled by high growth in consumer durables, registering an increase of 37 percent in
April 2010. Fifteen (15) out of the seventeen (17) industry sectors witnessed positive growth in
the first month of the present fiscal (2010-11) as compared to the growth numbers in the same
month of previous year.
 Growth in six core infrastructure industries accelerated by 5.1 percent in April 2010 as
compared to 3.7 percent in April 2009. This growth is attributed to high performance in the
sectors such as finished steel, crude petroleum, and petroleum refinery.
 The overall inflation averaged for the month of April 2010 stood at 9.6 percent as compared
to the inflation of 1.3 percent seen in the same month of previous year. This rise in price index is
on account of dearer food articles and fuel products.
 The broad money supply increased by 0.8 percent in April 2010 compared to growth of 2.6
percent in the same month of 2009. The growth in bank credit to commercial sector was seen to
decelerate by (-) 0.8 percent.
 The aggregate deposits expanded by 1.6 percent in April 2010, calculated over March 2009
numbers. This expansion in aggregate deposits, was however, marginally higher in the same
month of previous year.
 The rising indices show that strong sentiments among the investors. Investment sentiments in
the Indian stock market BSE Sensex was maintained above 17,000 in April 2010, whereas NSE
index NIFTY rose to stay above 5,000 points.
 There has been a decline by 0.3 percent in the fiscal deficit in the opening month of the
current financial year 2010-11 as the deficit has stepped down from Rs 54,158 crore in April
2009 to Rs. 53,993 crores in April 2010.

 The growth in gross tax revenue was observed to enter the positive quadrant during the
month of April 2010. This is mainly on account of strong revival in the collection of indirect
taxes and partly on account of collection in direct taxes.
 India’s merchandise trade growth numbers show improvement since November 2009. The
role of low base in the high growth cannot be denied, but one cannot also ignore the rise in
demand in the international market. Latest figure available for April 2010 showed growth in
exports by 36.2 percent as against the negative 33.2 percent observed in same month of last year.
 The total foreign investments attracted in 2009-10 amounted to USD 66.5 billion compared
to USD 21.3 billion during 2008-09. However, the numbers were almost same when foreign
direct investment for both the years were being compared.
 Foreign exchange reserves stood at USD 279.6 billion in April 2010 from USD 251.7 billion
April 2009. This increase is subject to the recent surge in the foreign investments inflows.
 The positive sentiments in Indian stock market continued to remain. The directional change
in the movements of large capital inflows towards India due to Euro zone turmoil has added
much impetus to the Sensex figures in both BSE and NIFTY indices. As a result BSE Sensex
was observed to raise up to the level of 17693 points in April 2010 from 16773 points, traded in
the previous month and crossed 18,000 in July 2010. Whereas NSE index NIFTY rose sharply
from 5027 points in March 2010 to 5291 points in April 2010.
 The latest available data on FDI showed an investment of USD 6.5 billion in March 2010.
This was much higher as compared to the investment received in the previous year. Out of these
investments, foreign direct investment (FDI) amounted to USD 1.2 billion in March 2010 which
was slightly lower than the amount of USD 2.0 billion received a year ago. In the portfolio
category, investments inflow was USD 5.3 billion in April this year as compared reversal in
investments by the FIIs.
 World Bank & IMF has forecasted a 9.4 % growth for India in 2010 and over 8% for 2011.
Goldman Sachs predicts a 5.8% for 2010. The Government has raised the GDP growth forecast
to 8.5% for FY11.
Foreign Inflows of India economy –

Indicators Unit Month FY FY
09 10
Net FII (equity) US$ bn Oct -4.1 1.9

Gross FDI US$ bn Aug 2.3 3.3

Gross ECBs US$ bn Sep 2.8 1.3

Industrial analysis
Recessions or expansions in economic activity may translate into falling or rising stock
markets with different relative price changes among industry groups. For the analyst, industry
analysis calls for insight into
1) The key sectors or subdivisions of overall economic activity that influence particular
industries, and
2) The relative strength or weakness of particular industry or other groupings about
economic activity.
Major Classifications
The industry can be classified by product and services in the categories like Basic Industries,
Capital Goods, Consumer Durables, Consumer Non- Durables, Consumer Services, Energy,
Financial Services, Health Care, Public Utilities, Technology, Transportation etc.
Classification based on Business Cycles

Industry can be classified on the basis of its reaction to upswings and downswings of the
economy which is known as business cycles. General classifications of the industry based on the
business cycles are growth industry, cyclical industry, defensive industry, and cyclical-growth
industry.
Growth industry
The major characteristics of a growth industry are higher rate of expansion, growth in
earnings, and independent of the business cycles. Often associated with technological changes or
innovative means of carrying out things. Between 40’s and 60’s, industries like photography, colour
television, computers, pharmaceuticals, office equipments were growth industries. Communication
equipments, Software, genetic engineering, and environmental/waste management are the recent
growth industries.
Cyclical industry
It is most likely to benefit from a period of economic prosperity and suffer from economic
recession. Consumer durables are the major cyclical industry.
Defensive industry
It is likely to get least affected during the periods of economic downswing as consists of
items necessary for existence. The demand for these products is considered to be counter cyclical.
Food processing industry, consumer non-durables fall in the category of defensive industry.
Other Factors

Past Sales and Earnings Performance, Government policy and regulation toward industry,
Labour conditions, Competitive conditions, Industry life cycle, International investing community
attitude, Industry share price etc.
Automobiles
 The Indian automobile segment can be divided into several segments viz. two-wheelers
(motorcycles geared and un-geared scooters and mopeds), three wheelers, commercial vehicles
(light, medium and heavy), passenger cars, utility vehicles (UVs) and tractors.
 Demand is linked to economic growth and rise in income levels. Per capita penetration at seven
cars per thousand people is among the lowest in the world (including other developing
economies like Pakistan in segments like cars).
 While the industry is highly capital intensive in nature in case of four-wheelers, capital intensity
is a lot less for two-wheelers. Though three-wheelers and tractors have low barriers to entry in
terms of technology, four wheelers is technology intensive. Costs involved in branding,
distribution network and spare parts availability increase entry barriers. With the Indian market
moving towards complying with global standards, capital expenditure will rise to take into
account future safety regulations.
 As compared to their global counterparts, both the two-wheeler as well as four wheeler segments
are relatively lesser fragmented. However, things are changing, especially on the passenger cars
front as many foreign majors like Nissan, Volvo, Renault, Audi are going to establish their
manufacturing plants and start production by 2011-12 for the Indian market. As a result, pricing
power is likely to diminish going forward.
 Automobile majors increase profitability by selling more units. As number of units sold
increases, average cost of selling an incremental unit comes down. This is because the industry
has a high fixed cost component. This is the key reason why operating efficiency through
increased localization of components and maximizing output per employee is of significance.
 The Indian automobile industry is the tenth largest in the world with an annual production of
approximately 2 million units. Indian auto industry will become the major automotive industry
in the upcoming years and the industry experts are hopeful that it will touch 10 million units
figure.
 The FDI in Automobile Industry has experienced huge growth in the past few years. The
increase in the demand for cars and other vehicles is powered by the increase in the levels of
disposable income in India. The options have increased with quality products from foreign car
manufacturers. The introduction of tailor made finance schemes, easy repayment schemes has
also helped the growth of the automobile sector.

Key Points
Supply The Indian automobile market has some amount of excess

capacity.
Demand Largely cyclical in nature and dependent upon economic growth
and per capita income. Seasonality is also a vital factor.
Barriers to entry High capital costs, technology, distribution network, and
availability of auto components.
Bargaining power of suppliers Low, due to stiff competition.
Bargaining power of customers Very high, due to availability of options.
Competition High. Expected to increase even further.
Financial Year '09
 A total of 7.4 m two-wheelers were sold in India in FY09, a growth of 2.6% over the previous
year. Motorcycles accounted for 81% of the total two wheelers sold. Although economic growth
remained decent at 7%, lack of financing, especially in the semi urban and rural areas impeded
volume growth. Also, as a result of credit squeeze, motorcycle sales were driven largely by
growth in cash sales. The scooters (geared & ungeared) improved their sales considerably,
largely due to improved performance of the ungeared scooter segment. The 3-wheeler segment
performed poorly as overall volumes (domestic and exports) declined 2% YoY, led by 37% fall
in goods carriers. The passenger segment on the other hand grew by 11%.
 The medium and heavy commercial vehicles (M/HCVs) segment saw its volumes drop by a
huge 37%. This came on the back of 2% drop in volumes in the previous year, the industry’s
first in seven years. High cost of borrowings and economic slowdown affected growth. LCVs on
the other hand, outperformed their HCV peers as volumes declined at a lower rate of 8% but
declined nevertheless. The growth in the segment was largely propelled by low tonnage vehicles
of the likes of ‘Ace’, the sub one tonner from Tata Motors.
 The tractor industry stood fairly resilient in the face of a slowdown. Domestic volumes grew
marginally during the year as opposed to a 2% drop in the previous year. After growing at a
double-digit rate in FY08, sales of passenger vehicles declined by 1% in FY09, primarily due to
unavailability of finance, and high interest rates and high fuel prices. Utility Vehicles suffered
the most, declining by 8.2% as the ad-hoc duty imposed on this segment in July impacted sales.
 According to the Society of Indian Automobile Manufacturers (SIAM), overall vehicle sales
grew 30 per cent in May 2010 to 1,208,851 units, and 8 per cent over the previous month of
April 2010. Two wheeler sales rose 29 per cent, with motorcycle sales increasing 26 per cent to
725,311 units, and scooter sales rising 45 per cent to 157,509 units in May 2010. Commercial
vehicle sales rose 77 per cent in June 2010.
Prospects
 The government spending on infrastructure in roads and airports and higher GDP growth in the
future will benefit the auto sector in general. We expect a slew of launches in the Segment 'B'
and Segment 'C' of passenger cars. Utility vehicle segment is expected to grow at around 8% to
9% in the long-term.
 In the 2-wheeler segment, motorcycles are expected to witness a flurry of new model launches.
Though the market size is expected to grow by 10% to 12%, competitive pressure could keep
prices and margins under control. TVS, Honda and Hero Honda are poised to benefit from
higher demand for ungeared scooters in the urban and rural markets.
 Riding the wave of structural changes taking place in the country, the tractor industry has
registered growth for three consecutive years until FY08. However, while fiscal FY08 saw
volumes drop marginally, the same inched back into positive territory, witnessing a growth of
1%. While good monsoon is a positive for the sector, given the fact that the country has had
erratic rainfall in the past, there is a risk of further fall in demand if rain gods play spoilsport.
But the longer-term picture is impressive in light of poor mechanisation levels in the country’s
farm sector and the thrust of the government on improving the rural infrastructure.
 With an estimated 40% of CVs plying on the roads 10 years old, demand for HCVs is expected
to grow by 7% to 8% over the long term. While the industry is going through cyclical hiccups
currently, we expect this factor to weaken in the future on account of strong structural tailwinds.
The privatisation of select state transport undertakings bodes well for the bus segment.
Exports
During April-January 2010, overall automobile exports registered a growth rate of 13.24
percent. Passenger Vehicles segment, Three Wheelers and Two Wheelers segments grew by 33.92
percent, 4.60 percent and 8.84 percent respectively in this period. Commercial Vehicles recorded
growth of (-) 7.52 percent.
Market Advantage
• Fast paced urbanisation to rise from 28% to 40% by 2020.
• Upward migration of household income levels.
• Middle class expanding by 30-40 million every year.
• Growing working population.

Foreign Direct Investment

• Automatic approval for foreign equity investment upto 100 per cent of manufacture of
automobiles and component is permitted.
• The automobile industry is de-licensed.
• Import of components is freely allowed.
Domestic market share of different type of vehicles in India:

Banking
 Influenced by the global financial turmoil and repercussion of the subprime crisis, the global
banking sector has been witness to some of the largest and best known names succumb to
multi-billion dollar write-offs and face near bankruptcy. However, the Indian banking sector
has been well shielded by the central bank and has managed to sail through most of the crisis
with relative ease. Further with the economic buoyancy the world over showing signs of
cooling off, the investment cycle has also been wavering. Having said that, the latent
demand for credit (both from the food and non food segments) and structural reforms have
paved the way for a change in the dynamics of the sector itself. Besides gearing up for the
compliance with Basel II accord, the sector is also looking forward to consolidation and
investments on the FDI front.
 Public sector banks have been very proactive in their restructuring initiatives be it in
technology implementation or pruning their loss assets. While the likes of SBI have made
already attempts towards consolidation, others are keen to take off in that direction.
Incremental provisioning made for asset slippages have safeguarded the banks from
witnessing a sudden impact on their bottom lines.
 Retail lending (especially mortgage financing) that formed a significant portion of the
portfolio for most banks in the last two years lost some weightage on the banks' portfolios
due to their risk weightage. However, on the liabilities side, with better penetration in the
semi urban and rural areas the banks garnered a higher proportion of low cost deposits
thereby economising on the cost of funds.
 Apart from streamlining their processes through technology initiatives such as ATMs,
telephone banking, online banking and web based products, banks also resorted to cross
selling of financial products such as credit cards, mutual funds and insurance policies to
augment their fee based income.
Key Points
Supply Liquidity is controlled by the Reserve Bank of India (RBI).
India is a growing economy and demand for credit is high
Demand
though it could be cyclical.
Licensing requirement, investment in technology and branch
Barriers to entry
network.
High during periods of tight liquidity. Trade unions in public
Bargaining power of suppliers sector banks can be anti reforms. Depositors may invest
elsewhere if interest rates fall.
For good creditworthy borrowers bargaining power is high due
Bargaining power of customers
to the availability of large number of banks
High- There are public sector banks, private sector and foreign
Competition banks along with non banking finance companies competing in
similar business segments.

Financial Year '09
The liquidity crisis that swept the heavyweights of global financial sector off their feet in
FY09 did affect the entities in Indian banking sector as well, albeit marginally. Other than the
temporary crunch after bankruptcy of Lehman Brothers, the global financial meltdown was
weathered by banks in India with relative ease. The monetary stimuli (reduction in repo rate, cash
reserve ratio (CRR) and statutory liquidity ratio (SLR)) offered to the banks by the RBI made things
easier. Despite the severe liquidity pressure and poor credit appetite at the retail and corporate
levels, Indian banks managed to grow their advances and deposits by 24% YoY and 22% YoY
respectively in FY09. The growth was mainly driven by a sharp expansion in term deposits and
growth in agricultural and large corporate credit. Higher delinquency levels in retail credit and debt
restructuring took its toll on the sector.
Indian Banks: Marginal signs of stress
FY08 FY09 Change
No. of banks (nos.) 79 78 -1.3%
Branches (nos.) 776 825 6.3%
Employees (nos.) 11,588 12,039 3.9%
Networth (Rs m) 39,940 47,080 17.9%
Deposits (Rs m) 420,260 519,700 23.7%
Advances (Rs m) 313,540 383,890 22.4%
NIM (%) 4.1 4.4 7.3%
RoA (%) 1.1 1.1 0.0%
CAR (%) 13.0 14.0 7.7%
Net NPA / advances (%) 1.0 1.1 5.0%
Bus. / employee (Rs m) 63.3 75.0 18.5%
Profit /employee (Rs m) 0.5 0.6 20.0%
Source: Profile of banks FY09
Indian banks also enjoyed higher levels of money supply, credit and deposits as a percentage
of GDP in FY09 as compared to that in FY08 showing improved maturity in the financial
sector. Despite poor pricing power lower cost of funds helped Indian banks grow their net interest
margins in FY09. While few like ICICI Bank chose to reduce their balance sheet size, most entities
chose to reasonably grow their franchise as well as assets. Public sector banks outdid their private
sector counterparts in terms of growth and franchise expansion in the last fiscal. Improved capital
adequacy also helped banks to comfortably comply with Basel II. The higher efficiency levels were
the hallmarks of better performance of Indian banks last year.
Most banks had to

restructure some loans in their
portfolio during FY09 which
deferred their interest income.

Further the PSU banks had also to provide for the loss of interest on the agri-loans waived by the
government.
With lesser avenues of credit disbursal, banks had to park most of the liquidity available with
them with the RBI. At the end of FY09, banks' investment in SLR securities increased to 28.1% of
total deposits from 27.8% in FY08 and higher than the RBI prescribed level of 24%. Feeble credit
offtake coupled with the fear of bad loans going up in the scenario of economic slowdown prompted
banks to park their surplus funds with the RBI.
In FY09, as per the RBI mandate, all foreign banks operating in India and Indian banks
having operational presence outside India migrated to the Basel II norms. All other commercial
banks have been encouraged to migrate to these approaches not later than FY10.
Prospects
 With banks having complied with Basel II and having sufficient capital in their books; it will
be a challenge to deploy the same safely and profitably in the event of persistence of
economic slowdown. Banks are likely to concentrate more on non funded income in this
scenario.
 Banks, especially the private sector ones, are likely to face penetration concerns. The lack of
credit penetration and the geographic concentration of bank credit is evident from the fact
that 5 states having the highest proportion of per capita credit enjoy 55% of the total credit
disbursals in the country.
 RBI's roadmap for the entry of foreign banks and the acquisition of stake by the foreign
entities in Indian private banks has been deferred for the time being. However, the tussle for
higher market share in the already fragmented sector is only set to aggravate.
 The proposal for Cabinet's approval to allow PSU banks to bring down the government's
stake in them below the stipulated 51%, which is yet to be tabled, can help the bank raise
substantial capital without borrowing at high rates and give the entities an opportunity to
enhance their capital adequacy ratios besides competing with their private sector peers.
Software
 IT spending in the US has grown unabated during the last few years. As per IDC (a global
technology research agency) and NASSCOM (India’s industry body for the tech sector),
revenues of the Indian IT industry have grown by 33% to US$ 64 bn in FY08. The IT-BPO
industry has estimated to have grown at a CAGR of 31% since FY04, much faster than the

global IT services industry. The Indian domestic market for technology is also growing as
robustly as the export of IT services from India.
 India’s IT industry can be divided into five main components, viz. software products, IT
services, engineering and R&D services, ITES (IT-enabled services) and hardware. Export
revenues continue to drive growth. Amongst the export revenues, project-based services
accounted for more than 50% of the Indian IT services exports. Multi-year annuity based
outsourcing agreements are expected to increase going forward. However, the majority share of
the project based revenues is going to continue on the back of custom application development
and application management.
 Cost leadership has been the competitive edge of the Indian software sector over the last few
years. However, this seems to be threatened now by MNCs who are replicating the Indian
outsourcing model and setting up bases in the country. Going forward, the advantage of low
employee costs could peter out and the sector could get commoditised. Increased competition
within the segment could lead players to ramp up selling and marketing expenses in order to
acquire new customers and improve the market share, which in turn will lead to further pressure
on margins.
 Increasing competition, pressure on billing rates and increasing commoditisation of lower-end

application development and maintenance (ADM) services are among the key reasons forcing
the Indian software industry to make a fast move up the software value chain. IT companies
have to move up the value chain to provide higher value-added services as consulting, product
development, R&D and end-to-end turnkey solutions.
 The software services segment of the industry continues to grow by leaps and bounds. However,
growth in the domestic market has been relatively staid. Given that India is among the fastest-
growing economies in the world and the burgeoning IT budgets of India Inc., focusing on the
domestic market will definitely be an opportunity to take advantage of.

Key Points
Abundant supply across segments, mainly lower-end, such as ADM.

Supply Lower in higher-end areas like IT/business consulting, but competition
is very tough.
IT is spending expected to grow at 6% CAGR over the next 3-4 years,
and growth is buoyant in fast-growing economies such as India and
China. Europe also shows promise. Demand largely depends upon the
Demand
state of the global economy and willingness of corporations to go in for
new software services and greater discretionary spending rather than
consolidating existing systems.
Low in the ADM segment, which is prone to relatively easy
commoditisation. In high-end services like IT/business consulting,
where domain expertise creates a barrier. The size of a particular
Barriers to entry
company/scalability also creates barriers to entry, as these firms have
built up long-term relationships with major clients and to take business
away from them is not easy.
Low, due to intense competition (oversupply), particularly in the
Bargaining power of
lower-end ADM space. Low differentiating power is also another
suppliers
reason. High, at the higher end of the value chain.
High, mainly due to intense competition among suppliers/vendors.
Bargaining power of
However, it is lower in higher-end services like consulting and package
customers
implementation.
Competition is global in nature and stretches across boundaries and
Competition geographies. It is expected to intensify due to the attempted replication
of the Indian offshoring model by MNC IT majors.
Financial Year '09
 As per NASSCOM ‘Strategic Review 2008’ report, the Indian IT industry is estimated to have
grown by 33% in fiscal 2008 and generate revenues of US$ 64 bn. The domestic market is also
growing as robustly as the export of IT services from India. Indian IT services exports
(excluding revenues earned from the export of software products, engineering and R&D
services, ITES and hardware) are estimated to have grown at a CAGR of 32%, from US$ 13.3
bn in FY04 to US$ 40.8 bn in FY08.
 The ITES-BPO industry continued to grow at a scorching pace, with India retaining its market
leadership position in this space. The movement up the value chain continues in this space as
well, as companies move from voice-based services to non-voice services. As per IDC and

NASSCOM, the global BPO industry is expected to grow from a size of US$ 462 bn in 2007
(29% share of global technology spending) to US$ 677 bn (34% share) in 2011. The BPO
industry in India, which currently employs 700,000 professionals and generates revenues of US$
11 bn, is expected to grow at a CAGR of 38% over the next 5 years.
 The broad trend in the industry globally is that the deal sizes are getting smaller. This has suited
the Indian industry perfectly, as it does not as yet have the capabilities, scale and resources to
execute huge billion dollar deals. On the other side, most Tier-I companies walked away with
the high profile deals and the gap between Tier-I and Tier-II companies widened in FY08. The
cross-movement of work and labour has created a competitive dynamic for cost structure and
knowledge leadership of concept, technology, and process innovation. Indian IT firms
(especially the top notch Indian firms like TCS, Infosys and Wipro) are increasingly competing
against top global players such as IBM, Accenture and EDS for large deals. The top Indian IT
companies are more frequently being invited to bid on large deals that were earlier closed to
them. India's top outsourcers are competing effectively with the top three global service
providers on large deals.
 The overall Indian software and services industry revenue is estimated to have grown from US$
10.2 billion in 2001-02 to reach US$ 58.7 billion in 2008-09—translating to a CAGR of about
26.9 per cent. The industry grew at 12.9 per cent in 2008-09.
 The export intensity (the share of IT-ITeS exports to total IT-ITeS revenue) of Indian software
and services industry has grown from 74.5 per cent in 2001-02 to 78.9 per cent in 2008-09. Total
software and services exports are estimated to have grown from US$ 7.6 billion to US$ 46.3
billion in 2008-09, a CAGR of 28.6 per cent.
 The National Association of Software and Service Companies (NASSCOM) is the apex body for
software services in India.As per its ‘Strategic Review 2010' published in February 2010, the
India IT-BPO industry is estimated to aggregate revenues of US$ 73.1 billion in FY 2010, with
the IT software and services industry accounting for US$ 63.7 billion of revenue.
 At present, there are 60 million Internet users in the country. According to the Manufacturer's
Association of IT (MAIT), the number of active Internet entities rose to 8.6 million by March
2009 from 7.2 million units in March 2008.
 Between October-December 2009, total PC sales including desktops, notebooks and netbooks
were 2 million registering a growth of 42 per cent over the same period in 2008. MAIT estimates
overall PC sales to cross 7.3 million units in 2009-10 registering a growth of 7 per cent over
6.79 million units sold in 2008-09.

Revenues (US$ million) (FY 08) Nos. of

Employees
Domestic Private Companies
Tata Consultancy 5,676 85,582
Services
Wipro Technologies 4,970 67,800
Infosys Technologies 4,144 59,831
Satyam 2,103 40,000
International Private Companies
IBM (CY 07) 98,786 386,558
Accenture (CY 07) 19,696 170,000
Prospects
 Over the next 3-4 years, the total global spending on IT is expected to grow at a CAGR of 6%.
The services spend (IT services and ITES/BPO) is expected to grow faster as compared to the
other segments. In particular, the offshore outsourcing story is expected to continue to play out,
as firms look for quality work done at lower cost.
 The integration of IT-BPO contracts is expected to become more common, as clients look out
for end-to-end service providers. Companies like Infosys, TCS, Wipro, Satyam, HCL
Technologies and MphasiS, all of which are also into BPO, will benefit from this trend.
 IT being a resource-intensive industry, human resources will play a major role in times to come.
Attrition rates will have to be managed by the companies In order to preserve margins, firms
will have to maintain workforce at optimum level, improve utilization rates and control selling,
general and administrative expenses.


 Billing rates are expected to be stable, with the major clients giving no leeway on any possible
increases. The increases are by and large coming from the new clients. Given that new clients
contribute less than 10% to overall revenues for most IT companies, this will not have any major
impact. Higher rates will be a factor of the business mix. As IT companies move higher up the
value chain, they will get better billing rates for services such as consulting.
 Rupee’s volatility against the US dollar and other major currencies is expected to remain a major
concern for Indian IT companies having significant offshore presence. Coupled with this, a
higher employee cost is expected to take a toll on the companies’ profitability levels.
 According to a study by Springboard Research published in February 2010, the Indian

information technology (IT) market is expected to grow at around 15.5 per cent in 2010, on the
back of growing investor confidence and favourable initiatives taken by the government.
 The data centre services market in the country, is forecast to grow at a compound annual growth
rate (CAGR) of 22.7 per cent between 2009 and 2011, to touch close to US$ 2.2 billion by the
end of 2011, according to research firm IDC India's report published in March 2010. The IDC
India report stated that the overall India data centre services market in 2009 was estimated at
US$ 1.39 billion.
 100 percent FDI is permitted under automatic route to the E-Commerce activities in India.
However, a pertinent condition is that, 26 percent of their equity will be spent on welfare

activities for the Indian population in five years. Software Technology Parks (STP) have been a
major initiative in India to drive in Foreign Direct Investment in the computer software industry.
These Software Technology Parks provide highly developed infrastructure and facilities that
attract foreign investors.
India is a preferred destination for companies looking to offshore their IT and back-office functions.
It also retains its low-cost advantage and is a financially attractive location when viewed in
combination with the business environment it offers and the availability of skilled people.
The phenomenal growth rate of India’s software exports, with (ten-year rolling) average
annual growth never dropping below 30%, and overall exports exceeding US$36bn in 2008/09:

The much higher growth rate of Indian IT exports compared to production for the domestic market.
As a result, the share of exports in total IT output has risen from 19% in 1991/92 to 69% in 2008/09:

Telecom
 Although India's teledensity has improved from under 4% in March 2001 to over 36% by the
end of March 2009, we are still way behind other developing nations. Cellular telephony has
emerged as the fastest growing segment in the Indian telecom industry. The mobile subscriber
base (GSM and CDMA combined) has grown from under 2 m at the end of FY00 to touch 391
m at the end of March 2009 (compounded annual growth of nearly 80% during this nine year
period). Tariff reduction and decline in handset costs has helped the segment to gain in scale.
The cellular segment is playing an important role in the industry by making itself available in the
rural and semi urban areas where teledensity is the lowest.
 As far as broadband connections (>=256 kbps) are concerned, India currently has a subscriber
base of 6.4 m, which is higher by 50% as compared to the figure in May 2008. The subscriber
base stood at 2.5 m in May 2007.
Key Points
Intense competition has resulted in prompt service to the

Supply
subscribers.
Demand Given the low penetration levels in the country and continuously
falling tariffs, demand will continue to remain higher in the

foreseeable future across all the segments.
High capital investments, well-established players who have a

Barriers to entry nationwide network, license fee, continuously evolving
technology and falling tariffs.
Improved competitive scenario and commoditisation of telecom

Bargaining power of suppliers services has led to reduced bargaining power for services
providers.
A wide variety of choices available to customers both in fixed as

Bargaining power of customers well as mobile telephony has resulted in increased bargaining
power for the customers.
Competition has intensified with the entry of new cellular players

Competition in select circles. Reducing tariffs will hurt the new entrants as
they will be unable to recover their high capital investments.

Financial Year '09
 FY09 saw the continuance of strong growth for the Indian telecom market, which witnessed a
49% YoY increase in its subscriber base during the 12-month period. At the end of March 2009,
the country’s total telecom subscriber base (fixed plus mobile) stood at about 429 m. The tele-
density level stood at about 36% by the end of the fiscal.
 Growth remained robust in the GSM mobile space, with the same growing its subscriber base by
96 m, thus contributing to about 70% of the total incremental subscriber addition for the entire
Indian telecom market. After a strong 76% YoY increase in subscriptions during FY08, the
GSM industry recorded another good performance during FY08, growing subscriber base by
50% YoY to about 289 m.
 During FY09, India's mobile subscriber base grew by 50% YoY, from 261 m to 391 m, while
the fixed subscriber base declined by about 4%, from 39.4 m to about 37.9 m.
Prospects
 As far as the fixed line business goes, the low penetration levels in the country and the
increasing demand for data based services such as the Internet will act as major catalysts in the
growth of this segment, which had a subscriber base of over 39 m at the end of FY09. The huge
market share of public sector behemoths, MTNL and BSNL is likely to get reduced further as
the penetration by private players spreads. In spite of this, the PSUs will continue to retain their
dominant position. This is on account of high capital investments required in setting up a
nationwide network. As a result, the private sector players will have to rely on key business
centers and pockets of high urbanisation for their growth.
 Increasing choice and one of the lowest tariffs in the world have made the cellular services in
India an attractive proposition for the average consumer. The segment’s subscriber base has
grown by over 50% YoY in FY09. Policy measures like lowering of taxes on the cellular
industry and benefits of enhanced FDI limits shall further the prospects of the cellular industry.
 The industry has set out a target to cross the total subscriber base of 500 m by 2010 and 600 m
the year after. Going by the current pace of subscriber additions, the target does not seem too
farfetched. Cellular subscribers will continue to propel the subscriber growth.
 During the current fiscal, a lot of focus given to new policy initiatives in the industry. The
predominant one is the allocation of spectrum for the 3G and broadband wireless access (BWA)
services. In addition, the telecom regulator TRAI recently unveiled a draft to allow mobile
number portability (MNP) which allows subscribers to switch networks without changing the
number. 3G Auction generated Rs. 70,000 crores for the Indian government in June 2010, has
taken its toll on this sector but promises far better communication network and support to sectors
such as IT, ITES & BPO along with the Telecom sector, in coming future.
 Favourable demographics and socio-economic factors leading to high growth

o Growth of disposable income combined with changes in lifestyle
o Increasing affordability - low tariffs, easy payment plans and low cost handsets
o Increased coverage and availability of mobile services
 Investment opportunity of over US$76 billion across many areas
o Network infrastructure to increase service coverage
o Roll-out of additional network for 2G, 3G, WIMAX etc.
o Applications/software for voice, data and broadcasting services
o Devices like the mobile handset, set top box, modem, gaming console, consumer premise
equipments etc.
o Nokia, Siemens, Alcatel, Lucent, Elcoteq, LG, Ericsson are all investing in India


Strengths of Fundamental Analysis
Long-term Trends
Fundamental analysis is good for long-term investments based on long-term trends, very
long-term. The ability to identify and predict long-term economic, demographic, technological or
consumer trends can benefit patient investors who pick the right industry groups or companies.
Value Spotting
Sound fundamental analysis will help identify companies that represent good value. Some of
the most legendary investors think long-term and value. Graham and Dodd, Warren Buffett and
John Neff are seen as the champions of value investing. Fundamental analysis can help uncover
companies with valuable assets, a strong balance sheet, stable earnings and staying power.
Business Acumen
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such painstaking research and
analysis, an investor will be familiar with the key revenue and profit drivers behind a company.
Earnings and earnings expectations can be potent drivers of equity prices. Even some technicians
will agree to that. A good understanding can help investors avoid companies that are prone to
shortfalls and identify those that continue to deliver. In addition to understanding the business,
fundamental analysis allows investors to develop an understanding of the key value drivers and
companies within an industry. A stock's price is heavily influenced by its industry group. By
studying these groups, investors can better position themselves to identify opportunities that are high
risk (tech), low-risk (utilities), growth oriented (computer), value driven (oil), noncyclical
(consumer staples), cyclical (transportation) or income oriented (high yield).
Knowing Who's Who
Stocks move as a group. By understanding a company's business, investors can better

position themselves to categorize stocks within their relevant industry group. Business can change
rapidly and with it the revenue mix of a company. Some prominent old economy companies are
moving into new economy businesses. Enron, a natural gas transmission company, is now making a
market to buy and sell bandwidth. Some companies that are part of the new economy are really old
economy companies in disguise. This happened to many of the pure internet retailers, which were
not really internet companies, but plain retailers. Knowing a company's business and being able to
place it in a group can make a huge difference in relative valuations.

Weaknesses of Fundamental Analysis
Time Constraints
Fundamental analysis may offer excellent insights, but it can be extraordinarily time
consuming. Time consuming models often produce valuations that are contradictory to the current
price prevailing on Wall Street. When this happens, the analyst basically claims that the whole street
has got it wrong. This is not to say that there are not misunderstood companies out there, but it is
quite brash to imply that the market price, and hence Wall Street, is wrong.
Industry/Company Specific
Valuation techniques vary depending on the industry group and specifics of each company.
For this reason, a different technique and model is required for different industries and different
companies. This can get quite time consuming and limit the amount of research that can be
performed. A subscription-based model may work great for an ISP, but is not likely to be the best
model to value an oil company.
Subjectivity
Fair value is based on assumptions. Any changes to growth or multiplier assumptions can
greatly alter the ultimate valuation. Fundamental analysts are generally aware of this and use
sensitivity analysis to present a base-case valuation, a best-case valuation and a worst-case
valuation. However, even on a worst case, most models are almost always bullish, the only question
is how much so.
Analyst Bias
The majority of the information that goes into the analysis comes from the company itself.
Companies employ investor relations managers specifically to handle the analyst community and
release information. As Mark Twain said, "there are lies, damn lies and statistics". When it comes to
massaging the data or spinning the announcement, CFOs and investor relations managers are
professionals. Only buy-side analysts tend to venture past the company statistics. Buy-side analysts
work for mutual funds and money managers. They read the reports written by the sell-side analysts
who work for the big brokers (CIBC, Merrill Lynch, Robertson Stephens, CS First Boston, Paine
Weber, DLJ to name a few). These brokers are also involved in underwriting and investment
banking for the companies. Even though there are Chinese walls in place to prevent a conflict of
interest, the brokers have an ongoing relationship with the company under analysis. When reading
these reports, it is important to take into consideration any biases a sell-side analyst may have. The
buy-side analyst on the other hand is analyzing the company purely from an investment standpoint

for a portfolio manager. If there is a relationship with the company, it is usually on different terms.
In some cases this may be as a large shareholder.

Technical Analysis
Technical analysis is the examination of past price movements to forecast future price
movements. Technical analysts are sometimes referred to as chartists because they rely almost
exclusively on charts for their analysis. Technical analysis is applicable to stocks, indices,
commodities, futures or any tradable instrument where the price is influenced by the forces of
supply and demand. Price refers to any combination of the open, high, low or close for a given
security over a specific timeframe. The time frame can be based on intraday (tick, 5-minute, 15-
minute or hourly), daily, weekly or monthly price data and last a few hours or many years. In
addition, some technical analysts include volume or open interest figures with their study of price
action.
DOW THEORY
The Dow Theory laid the foundations for what was later to become modern technical
analysis. Dow Theory was not presented as one complete amalgamation, but rather pieced together
from the writings of Charles Dow over several years. Of the many theorems put forth by Dow, three
stand out:
 Price Discounts Everything

 Price Movements are not Totally Random
 What is More Important than Why
Price Discounts Everything

This theorem is similar to the strong and semi-strong forms of market efficiency. Technical
analysts believe that the current price fully reflects all information. Because all information is
already reflected in the price, it represents the fair value and should form the basis for analysis.
After all, the market price reflects the sum knowledge of all participants, including traders,
investors, portfolio managers, buy-side analysts, sell-side analysts, market strategist, technical
analysts, fundamental analysts and many others. It would be folly to disagree with the price set by
such an impressive array of people with impeccable credentials. Technical analysis utilizes the
information captured by the price to interpret what the market is saying with the purpose of forming
a view on the future.
Prices Movements are not Totally Random

Most technicians agree that prices trend. However, most technicians also acknowledge that
there are periods when prices do not trend. If prices were always random, it would be extremely
difficult to make money using technical analysis. In his book, Schwager on Futures: Technical
Analysis, Jack Schwager states:

"One way of viewing it is that markets may witness extended periods of random fluctuation,
interspersed with shorter periods of nonrandom behavior. The goal of the chartist is to identify those
periods (i.e. major trends)."
A technician believes that it is possible to identify a trend, invest or trade based on the trend
and make money as the trend unfolds. Because technical analysis can be applied to many different
timeframes, it is possible to spot both short-term and long-term trends. The IBM chart illustrates
Schwager's view on the nature of the trend. The broad trend is up, but it is also interspersed with
trading ranges. In between the trading ranges are smaller uptrends within the larger uptrend. The
uptrend is renewed when the stock breaks above the trading range. A downtrend begins when the
stock breaks below the low of the previous trading range.
“What is more important than why”!!

In his book, The Psychology of Technical Analysis, Tony Plummer paraphrases Oscar
Wilde by stating, "A technical analyst knows the price of everything, but the value of nothing".
Technicians, as technical analysts are called, are only concerned with two things:
1. What is the current price?
2. What is the history of the price movement?
The price is the end result of the battle between the forces of supply and demand for the
company's stock. The objective of analysis is to forecast the direction of the future price. By
focusing on price and only price, technical analysis represents a direct approach. Fundamentalists
are concerned with why the price is what it is. For technicians, the why portion of the equation is too
broad and many times the fundamental reasons given are highly suspect. Technicians believe it is
best to concentrate on what and never mind why. Why did the price go up? It is simple, more buyers
(demand) than sellers (supply). After all, the value of any asset is only what someone is willing to
pay for it. Who needs to know why?
The Three Stages of Primary Bull Markets and Primary Bear Markets
Hamilton identified three stages to both primary bull markets and primary bear markets.
These stages relate as much to the psychological state of the market as to the movement of prices. A
primary bull market is defined as a long sustained advance marked by improving business
conditions that elicit increased speculation and demand for stocks. A primary bear market is defined
as a long sustained decline marked by deteriorating business conditions and subsequent decrease in
demand for stocks. In both primary bull markets and primary bear markets, there will be secondary
movements that run counter to the major trend.
Primary Bull Market - Stage 1 - Accumulation

Hamilton noted that the first stage of a bull market was largely indistinguishable from the
last reaction rally of a bear market. Pessimism, which was excessive at the end of the bear market,
still reigns at the beginning of a bull market. It is a period when the public is out of stocks, the news
from corporate America is bad and valuations are usually at historical lows. However, it is at this

stage that the so-called "smart money" begins to accumulate stocks. This is the stage of the market
when those with patience see value in owning stocks for the long haul. Stocks are cheap, but nobody
seems to want them. This is the stage where Warren Buffet stated in the summer of 1974 that now
was the time to buy stocks and become rich. Everyone else thought he was crazy.
In the first stage of a bull market, stocks begin to find a bottom and quietly firm up. When
the market starts to rise, there is widespread disbelief that a bull market has begun. After the first leg
peaks and starts to head back down, the bears come out proclaiming that the bear market is not over.
It is at this stage that careful analysis is warranted to determine if the decline is a secondary
movement (a correction of the first leg up). If it is a secondary move, then the low forms above the
previous low, a quiet period will ensue as the market firms and then an advance will begin. When
the previous peak is surpassed, the beginning of the second leg and a primary bull will be
confirmed.
Primary Bull Market - Stage 2 - Big Move

The second stage of a primary bull market is usually the longest, and sees the largest
advance in prices. It is a period marked by improving business conditions and increased valuations
in stocks. Earnings begin to rise again and confidence starts to mend. This is considered the easiest
stage to make money as participation is broad and the trend followers begin to participate.
Primary Bull Market - Stage 3 - Excess

The third stage of a primary bull market is marked by excessive speculation and the
appearance of inflationary pressures. (Dow formed these theorems about 100 years ago, but this
scenario is certainly familiar.) During the third and final stage, the public is fully involved in the
market, valuations are excessive and confidence is extraordinarily high. This is the mirror image to
the first stage of the bull market. A Wall Street axiom: When the taxi cab drivers begin to offer tips,
the top cannot be far off.
Primary Bear Market - Stage 1 - Distribution

Just as accumulation is the hallmark of the first stage of a primary bull market, distribution
marks the beginning of a bear market. As the "smart money" begins to realize that business
conditions are not quite as good as once thought, they start to sell stocks. The public is still involved
in the market at this stage and become willing buyers. There is little in the headlines to indicate a
bear market is at hand and general business conditions remain good. However, stocks begin to lose a
bit of their luster and the decline begins to take hold. While the market declines, there is little belief
that a bear market has started and most forecasters remain bullish. After a moderate decline, there is
a reaction rally (secondary move) that retraces a portion of the decline. Hamilton noted that reaction
rallies during bear markets were quite swift and sharp. As with his analysis of secondary moves in
general, Hamilton noted that a large percentage of the losses would be recouped in a matter of days
or perhaps weeks. This quick and sudden movement would invigorate the bulls to proclaim the bull
market alive and well. However, the reaction high of the secondary move would form and be lower
than the previous high. After making a lower high, a break below the previous low would confirm
that this was the second stage of a bear market.
Primary Bear Market - Stage 2 - Big Move

As with the primary bull market, stage two of a primary bear market provides the largest
move. This is when the trend has been identified as down and business conditions begin to
deteriorate. Earnings estimates are reduced, shortfalls occur, profit margins shrink and revenues fall.
As business conditions worsen, the sell-off continues.
Primary Bear Market - Stage 3 - Despair

At the top of a primary bull market, hope springs eternal and excess is the order of the day.
By the final stage of a bear market, all hope is lost and stocks are frowned upon. Valuations are low,
but the selling continues as participants seek to sell no matter what. The news from corporate
America is bad, the economic outlook bleak and not a buyer is to be found. The market will
continue to decline until all the bad news is fully priced into stocks. Once stocks fully reflect the
worst possible outcome, the cycle begins again.
Criticisms of Dow Theory
The first criticism of the Dow theory is that it is really not a theory. Neither Dow nor
Hamilton wrote proper academic papers outlining the theory and testing the theorems. The ideas of
Dow and Hamilton were put forth through their editorials in the Wall Street Journal. Robert Rhea
stitched the theory together by poring over these writings.
Secondly, the Dow theory is criticized for being too late. The trend does not change from
bearish to bullish until the previous reaction high has been surpassed. Many traders feel that this is
simply too late and misses much of the move. Dow and Hamilton sought to catch the meat of the
move and enter during the second leg. Even though this is where the bulk of the move will take
place, it is also after the first leg and part way into the second leg. And, if one has to wait for
confirmation from the other average, it could even be later in the move.
Thirdly, because it uses the DJIA and DJTA, the Dow theory is criticized as being outdated
and no longer an accurate reflection of the economy. This may be a valid point, but as outlined
earlier, the DJTA is one of the most economically sensitive indices. The stock market has always
been seen as a great predictor of economic growth.
Strength of Technical Analysis
Focus on Price
If the objective is to predict the future price, then it makes sense to focus on price
movements. Price movements usually precede fundamental developments. By focusing on price
action, technicians are automatically focusing on the future. The market is thought of as a leading
indicator and generally leads the economy by 6 to 9 months. To keep pace with the market, it makes
sense to look directly at the price movements. More often than not, change is a subtle beast. Even
though the market is prone to sudden knee-jerk reactions, hints usually develop before significant
moves. A technician will refer to periods of accumulation as evidence of an impending advance and
periods of distribution as evidence of an impending decline.
Supply, Demand, and Price Action

Many technicians use the open, high, low and close when analyzing the price action of a
security. There is information to be gleaned from each bit of information. Separately, these will not
be able to tell much. However, taken together, the open, high, low and close reflect forces of supply
and demand.
The annotated example above shows a stock that opened with a gap up. Before the open, the
number of buy orders exceeded the number of sell orders and the price was raised to attract more
sellers. Demand was brisk from the start. The intraday high reflects the strength of demand (buyers).
The intraday low reflects the availability of supply (sellers). The close represents the final price
agreed upon by the buyers and the sellers. In this case, the close is well below the high and much
closer to the low. This tells us that even though demand (buyers) was strong during the day, supply
(sellers) ultimately prevailed and forced the price back down. Even after this selling pressure, the
close remained above the open. By looking at price action over an extended period of time, we can
see the battle between supply and demand unfold. In its most basic form, higher prices reflect
increased demand and lower prices reflect increased supply.
Support/Resistance
Simple chart analysis can help identify support and resistance levels. These are usually
marked by periods of congestion (trading range) where the prices move within a confined range for
an extended period, telling us that the forces of supply and demand are deadlocked. When prices
move out of the trading range, it signals that either supply or demand has started to get the upper
hand. If prices move above the upper band of the trading range, then demand is winning. If prices
move below the lower band, then supply is winning.
Pictorial Price History

Even if you are a tried and true fundamental analyst, a price chart can offer plenty of
valuable information. The price chart is an easy to read historical account of a security's price
movement over a period of time. Charts are much easier to read than a table of numbers. On most
stock charts, volume bars are displayed at the bottom. With this historical picture, it is easy to
identify the following:
 Reactions prior to and after important events.
 Past and present volatility.
 Historical volume or trading levels.
 Relative strength of a stock versus the overall market.
Assist with Entry Point

Technical analysis can help with timing a proper entry point. Some analysts use fundamental
analysis to decide what to buy and technical analysis to decide when to buy. It is no secret that
timing can play an important role in performance. Technical analysis can help spot demand
(support) and supply (resistance) levels as well as breakouts. Simply waiting for a breakout above
resistance or buying near support levels can improve returns.
It is also important to know a stock's price history. If a stock you thought was great for the
last 2 years has traded flat for those two years, it would appear that Wall Street has a different
opinion. If a stock has already advanced significantly, it may be prudent to wait for a pullback. Or, if
the stock is trending lower, it might pay to wait for buying interest and a trend reversal.
Weaknesses of Technical Analysis
Analyst Bias
Just as with fundamental analysis, technical analysis is subjective and our personal biases
can be reflected in the analysis. It is important to be aware of these biases when analyzing a chart. If
the analyst is a perpetual bull, then a bullish bias will overshadow the analysis. On the other hand, if
the analyst is a disgruntled eternal bear, then the analysis will probably have a bearish tilt.
Open to Interpretation
Furthering the bias argument is the fact that technical analysis is open to interpretation. Even
though there are standards, many times two technicians will look at the same chart and paint two
different scenarios or see different patterns. Both will be able to come up with logical support and
resistance levels as well as key breaks to justify their position. While this can be frustrating, it
should be pointed out that technical analysis is more like an art than a science, somewhat like
economics. Is the cup half-empty or half-full? It is in the eye of the beholder.
Too Late
Technical analysis has been criticized for being too late. By the time the trend is identified, a
substantial portion of the move has already taken place. After such a large move, the reward to risk
ratio is not great. Lateness is a particular criticism of Dow theory.
Always another Level

Even after a new trend has been identified, there is always another "important" level close at
hand. Technicians have been accused of sitting on the fence and never taking an unqualified stance.
Even if they are bullish, there is always some indicator or some level that will qualify their opinion.
Trader's Remorse
Not all technical signals and patterns work. When you begin to study technical analysis, you
will come across an array of patterns and indicators with rules to match. For instance: A sell signal
is given when the neckline of a head and shoulders pattern is broken. Even though this is a rule, it is
not steadfast and can be subject to other factors such as volume and momentum. In that same vein,
what works for one particular stock may not work for another. A 50-day moving average may work

great to identify support and resistance for IBM, but a 70-day moving average may work better for
Yahoo. Even though many principles of technical analysis are universal, each security will have its
own idiosyncrasies.
DU point analysis
Basic formula
ROE = (Profit margin)*(Asset turnover)*(Equity multiplier)

(Net Profit/Equity) =(Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
• Operating efficiency (measured by profit margin)
• Asset use efficiency (measured by asset turnover)
• Financial leverage (measured by equity multiplier)
ROE analysis
The Du Pont identity breaks down Return on Equity (that is, the return to equity that
investors have contributed to the firm) into three distinct elements. This analysis enables the analyst
to understand the source of superior (or inferior) return by comparison with companies in similar
industries (or between industries).
The Du Pont identity, however, is less useful for some industries, such as investment
banking, that do not use certain concepts or for which the concepts are less meaningful. Variations
may be used in certain industries, as long as they also respect the underlying structure of the Du
Pont identity.
Du Pont analysis relies upon the accounting identity, that is, a statement (formula) that is by
definition true.
ROI and ROE ratio
The return on investment (ROI) ratio developed by Du Pont for its own use is now used by
many firms to evaluate how effectively assets are used. It measures the combined effects of profit
margins and asset turnover.
The return on equity (ROE) ratio is a measure of the rate of return to stockholders. [2]
Decomposing the ROE into various factors influencing company performance is often called the Du
Pont system.

Where
• Net profit = net profit after taxes
• Equity = shareholders' equity
• EBIT = Earnings before interest and taxes
• Sales = Net sales
This decomposition presents various ratios used in fundamental analysis.

• The company's tax burden is (Net profit ÷ Pretax profit). This is the proportion of the
company's profits retained after paying income taxes.

• The company's interest burden is (Pretax profit ÷ EBIT). This will be 1.00 for a firm with no
debt or financial leverage.
• The company's operating profit margin or return on sales (ROS) is (EBIT ÷ Sales). This is
the operating profit per dollar of sales.
• The company's asset turnover (ATO) is (Sales ÷ Assets).
• The company's leverage ratio is (Assets ÷ Equity), which is equal to the firm's debt to
equity ratio + 1. This is a measure of financial leverage.
• The company's return on assets (ROA) is (Return on sales x Asset turnover).
• The company's compound leverage factor is (Interest burden x Leverage).
ROE can also be stated as
ROE = Tax burden * Interest burden * Margin * Turnover * Leverage
ROE = Tax burden * ROA * Compound leverage factor
Profit margin is (Net profit ÷ Sales), so the ROE equation can be restated:

Du Pont Analysis
Sales
$ 3,074,000
-
Earnings
Cost of Sales
Available
$ 2,088,000 $ 221,000
Income Statement
-
Operating Net Profit
Expense divided by Margin
$ 568,000 7.2%
-
Interest
Sales
Expense
$ 93,000 $ 3,074,000
-
Tax Expense
$ 94,000
-
Return on
Dividends
Total Assets
paid
multiplied by (ROA)
$ 10,000 6.1%
Sales
$ 3,074,000
Current Total Asset
Assets Turnover
$ 1,223,000 divided by 0.85
+ Return on
Net Fixed Common Equity
Total Assets multiplied by
Assets (PPE) (ROE)
$ 2,374,000 $ 3,597,000
12.6%
Balance Sheet
Current Total
Liabilities Liabilities
$ 620,000 $ 1,643,000
+
Total Liab +
Long Term
SE = Total
Debt
+ Assets
$ 1,023,000 $ 3,597,000
Financial
Stockholder
Leverage
Equity (SE)
divided by multiplier
ITM Business School, Kharghar $ 1,954,000 2.05 Page 84
Common
stock equity
Company Analysis
Ashok Leyland
Fundamental analysis of Ashok Leyland

Ashok Leyland is the second largest manufacturer of medium and heavy commercial
vehicles (M&HCV) in India. It had a 26% market share in the domestic M&HCV segment in FY09
and a marginal presence in the LCV segment (light commercial vehicles). The company is also a
key player in the passenger bus segment. CVs contributed to 81% of revenues in FY09 while
engines and spare parts contributed to the balance. Hinduja Automotive Ltd owns 51% of Ashok
Leyland. In FY09, it entered into an agreement with Nissan manufacturing company for the
manufacture of LCVs, thus taking a big step towards consolidating its presence in the segment.
Market Cap Rs m 93,922.0
Volume '000 1,244.7
EPS(31/03/2010 Rs 3.2
)
India's second largest heavy commercial vehicle maker Ashok Leyland Ltd and Japanese car
maker Nissan Motor Co. Ltd announced the launch of three light commercial vehicles (LCVs) from
2011 through 2013.
Ratio analysis of Ashok Leyland:
Ratio No. of Months 12 12 12
Year Ending 31/03/2008 31/03/2009 31/03/2010
Avg P/E ratio x 11.9 19.6 11.8
Earnings per share Rs 3.5 1.4 3.2
Price / Book Value ratio x 2.6 1.1 1.4
Dividend payout % 42.5 70.1 47.1
Avg Market Cap Rs m 55,874 37,250 49,888
Current ratio x 1.3 1.5 1.4
Inventory Turnover Days 58 81 83
Debtors Turnover Days 18 58 51
Debt to equity ratio x 0.3 0.5 0.6
Return on equity % 22.1 5.5 11.6
Return on capital % 25.2 6.9 11.2
Reserves rs. Crore 1,993.57 1,976.00 2,190.10
 Its reserves are high it means company may be having some expansion plans. So it is good for
long term prospect.
 As companies P/E ratio is around 11-12. It is good for investment. Its dividend payout is around
50%, it is giving good dividend on investments.
 Its profitability ratios are saying its fundamentals are strong enough. And the company has
turnover period in compared to other automobile companies very low. It means company is
managing its financial and debtors very efficiently.
 Ashley’s dividend payout ratios are very high. It is paying consistent amount of dividends and it
is good from investor’s point of view. Since company is expected to grow by 26%. So by this its
PEG ratio will be 0.45 which is very good.

 Ashley is worth investing and undervalued stock also. It’s price to book value ratio is low 1.4.
But Ashok Fundamentals of the company are very strong and it is undervalued so by the ratio
analysis and sectorial analysis we can say that it is a lucrative investment.
Technical analysis of Ashok Leyland
Chart 1: 5 year Trend line Chart for Ashok Leyland
As shown in the chart 1 above in the year 2006 Q3 to 2007 Q1 there is a double top which is
selling indication. And then there is decline in the price. Stock did not crossed the support level and
then raised again in the Q3 and Q4 of 2007. But stock did not maintain that level and fall again. This
is the time when the global market is over pessimistic and sale of all the companies are decreased. In
the year 2009 stock again took the bullish trend and it still continues. And as fundamentals of the
company are strong there might be some consolidations but stock remains bullish.

Chart 2: Bollinger Chart for Ashok Leyland
Chart 2 is the Bollinger band chart (20 days moving Avg, with standard deviation of 2). In
this chart we can analyze that in May and July market was highly volatile. And then as this stock
showing in the July it is showing continuous selling. New buyers should away from this stock and at
the level of 64 it is showing its support. Buy at level of Rs. 66.00.
Chart 3: Exponential Moving Average chart for Ashok Leyland

Exponential moving avg. is again the lagging indicator which confirms the bullishness of the
stock.
Chart 4: Relative Strength Index for Ashok Leyland
RSI is a leading indicator. In the chart we can see that stock is in oversold situation because it is
crossing the level of 70 and at that time riusk is very high people start selling the stock.
Chart 5: Stochastic indicator for Ashok Leyland
Stochastic indicator is confirming the oversold situation. And to remain in the stock at this
time is risky. So better to sale it and when it come to the level of 20 to 30 in the indicator buy back it
because fundaments and growth of the company is strong enough and keeping the stock for a long
run is a good option.

TATA Motors
Fundamental analysis of Ashok Leyland

Tata Motors is India's largest commercial vehicle (M&HCVs and LCVs) manufacturer, with
a domestic market share of 64%. It is also the second largest producer of passenger vehicles in the
country. From a net loss of Rs 5 bn in FY01 to a profit of Rs 20 bn in FY08, the company has come
a long way. In 2008, it acquired Jaguar and Land Rover, two iconic brands from Ford for a price of
US$ 2.3 bn. It also launched 'Nano', touted to be the world's cheapest compact car, in 2009.
Volume '000 260.3
EPS(31/03/2009) Rs -49.7
 Company’s net sales in FY09 were 506421 and in FY10 were 667971. This shows 31.90%
increase in sales figures as compared to previous year.
 Tata Motor’s standalone Net Revenue for FY10 was Rs 355 bn up by 39% Y-o-Y basis.
 Company’s Net Automotive debt stood at Rs 18.8 bn as on March’10 compared to Rs 23.75 bn
as on March’09. Consequently, Company’s debt to equity reduced to 2.05 from 4.0.
 Company posted a profit after tax of Rs. 22.4 bn, compared with Rs 10.01 bn in FY09
 The Board of Directors has recommended a dividend of Rs. 15/- per Ordinary share.
 The passenger vehicle industry registered a substantial volume growth of 24.8% during FY10,
driven mainly by increased consumer confidence, new product launches, availability of finance,
and low interest rates.
 The Commercial Vehicles industry recovered in 2009-10, with sales volume growing at 40.2%.
Growth in IIP, increase in transporters profitability and improved liquidity activity helped the
industry to regain sales volume.
 Tata Motors export volumes increased marginally by 1.7%% y-o-y during FY10.
 Company’s material cost decreased significantly during the year mainly on account of softening
in the commodity prices during the first half of the year. While RM as a % of Net revenues
declined from 72.6% in FY09 to 68.3%in FY10.
 The following table shows the days of sales of inventory and receivables of the company
Mar’0
No. of Days June’09 Sep’09 Dec’09 Mar’10
9
Inventory 28 32 33 34 28
Receivables(excl. vehicle
18 23 21 21 23
financing)
 Tata motors EPS ratios is NEGATIVE its P/E ratio is also very bad. In last 52 weeks it is in the
range of 10% change only. As P/E ratio is negative means companies earnings are negative. So
it is not a good option to invest in this point of time for short term.
 But if we see the figures till previous year. We can say that company faced huge amount of
downturn. And downtrend is because of NANO plant shift, Land rover and Jaguar deal at very
high prices. And in the last quarter (Q1) results company registered 20% growth in revenue. For

the time duration of greater than three years it will give good results. And companie is expecting
growth of nearly 45% this year.
Ratio analysis of TATA motors
Ratios No. of Months 12 12 12
Year Ending 31/03/2008 31/03/2009 31/03/2010

Avg P/E ratio x 14.6 12.8 -8.4
Earnings per share Rs 56.3 56.2 -48.7
Dividend yield (YoY) % 1.8 2.1 1.5
Price / Book Value ratio x 4.1 3.2 4
Dividend payout % 26.6 26.7 -12.3
Avg Market Cap. Rs m 316,581 276,789 209,713
Current ratio x 1.7 1.4 1
Return on equity % 28.1 24.9 -48
Return on capital % 29.6 25.3 -0.7
Reserves Rs m 63,475 73,905 41,637
Technical analysis of TATA Motors
Chart 1: 5 year Trend line Chart for TATA Motors
Tata Motors is showing the bullish trend by the Q1 of 2009. Small consolidations are there
but this is overall in a bullish trend. And as Q1 results are out and in that company recorded
significant amount of profits.
Chart 2: Bollinger Chart for TATA Motor
In the Bollinger chart market is showing less volatility and the chart is showing selling
signal. As the stock price touches the upper standard deviation line.
Chart 3: Exponential Moving Average chart for Tata motors
Exponential moving avg. is again the lagging indicator which confirms the bullishness of the
stock.

Chart 4: Relative Strength Index for TATA Motors
In the stochastic indicator it is showing the overvalued levels and to remain in this stock at
this level is very risky for an individual.
Chart 5: Stochastic indicator for TATA Motors
RSI indicator is also showing its over-bought position, as the company has not shown good
growth in past year. In fact it has been in heavy losses. And it is showing oversold situation. So
remaining or buying this stock is risky.

Bajaj Auto
Fundamental analysis of Bajaj Auto

Bajaj Auto Limited is the second largest player in the two-wheeler industry in India. In
FY09, the sales mix (in volume terms) consisted of 87% motorcycles and 13% three-wheelers.
Though Bajaj Auto has traditionally been a key player in the geared scooter segment, a renewed
focus on motorcycles has seen the company take some rapid strides in the segment in recent times.
Just a perspective, its market share in motorcycles has increased from 23% in FY03 to 28% in
FY09. To enable it to run its operations more smoothly, the company split its business in FY08 into
three distinct entities viz. Bajaj Auto, Bajaj Finserve and Bajaj Holdings. India’s second largest 2-
wheeler maker, Bajaj Auto Ltd. (BAL) has registered a decline in sales for the month of September
2007. Market share for motorcycles in domestic market improved from 21% in H1 / FY10 to 27% in
H2 / FY10.
 The 3-wheeler business reported a 6% YoY decline to 26,288 units when compared to 27,870
units sold a year back.
 3-wheeler sales reflect the general weakness in the commercial vehicle demand.
 On the exports front, the company with 48,048 shipments during the month registered a sharp
growth of 30% YoY (37,088 units).
Sales composition

Motorcycles, Three wheelers: Growth, volume and Market share

Volume '000 19.5
EPS (31/03/2010) Rs 110.4
Ratio analysis Bajaj Auto
Year Ending 31/03/2008 31/03/2009 31/03/2010

Avg P/E ratio x 0 16.9 12
Earnings per share Rs 51.8 37 110.2
Price / Book Value ratio x 0 5.6 7

Avg Mkt Cap Rs m 0 90,570 191,412
Return on capital % 38.1 28.7 57
Reserves Rs m 14,304 15,756 25,156
 P/E ratio is 12. and a growth on EPS is also shown. But P/B ratio is 7 which is very high. And it
shows that company is highly overpriced.
 Bajaj auto’s current ratio is 0.7. Which shows it moderately risky.
 Bajaj auto’s EPS is 110 Much higher than other company in this segment.
 it is expected to grow at a rate of 12%. Hence its PEG ratio will be 1.
 Considering all above factors we can say that Investment in this company is moderately risky.

Technical analysis of Bajaj auto
Chart 1: 5 year Trend line Chart for Bajaj Auto
Fundamentals of Bajaj auto are strong. And it’s positive uptrend in the stock from last 1 year
confirms its bullishness.
Chart 2: Bollinger Chart for Bajaj Auto
Bollinger band is shown here for 20 days and with standard deviation is 2. Price movement
is around its SMA. As company is in bullish trend and it is not in the overbought or oversold levels.
So remain in this stock is a good option.

Chart 3: Relative Strength Index for Bajaj Auto
Chart is of RSI for 14 days. It is showing that stock is around equilibrium level. So remain in
the stock as it will remain in the BULL trend.
Chart 4: Stochastic indicator for Bajaj Auto
Stochastic oscillator confirming that stock is in equilibrium condition and moderately risky.

Hero Honda
Fundamental analysis of Hero Honda

Hero Honda Motors, the largest manufacturer of motorcycles in the world, is a joint venture
promoted by Hero Cycles (P) Limited and Honda Motor Company of Japan. Each partner holds
26% stake in the company. The company has been solely engaged in manufacturing and sale of
motorcycles. The technology agreement with Honda, which expired in 2004, has been extended for
a further period of ten years. The company ended FY09 with close to 50% market share.
Hero Honda Motors is the 8th Indian companies to enter in to the Forbes top 200 list of
“world's most reputed companies”. FY2009 began with a positive yoy growth for the Indian Two-
wheeler Segment, albeit on a low base. In FY2008, the Segment reported a 4.9% yoy fall in the
Sales volume due to high Inflation, rising Interest rates and a contraction in availability of Finance.
Growth started picking up in 1HFY2009, aided by the overall 12.6% yoy growth in Motorcycle
sales. While the tight availability of Finance did impact purchases, cash purchases increased due to
higher agricultural income in the Northern states and the return of customers who had deferred
purchases in FY2008. Nonetheless, inventory buildup hit Two-wheeler volumes in 2HFY2009, and
industry growth for FY2009 stood at a mere 4.5% yoy.
Company is expecting 11-12% growth in next 2 years. Hero Honda reported a 16.60% jump
in its sales in June at 4,26,454 units over 3,65,734 units it sold in the corresponding month last year.
The company declared a final dividend of 1,500% equalling Rs 30 per share on each share of Rs 2.
Volume '000 33.7
EPS (31/03/2009) Rs 64.2
Ratio analysis
Year Ending 31/03/2008 31/03/2009 31/03/2010
Avg P/E ratio x 18.1 13.9 13.5
Earnings per share Rs 43 48.5 64.2
Avg Mkt Cap Rs m 155,059 134,491 172,532
Reserves Rs m 24,301 29,463 37,608
Debt to equity ratio x 0.1 0 0
 Hero Honda’s P/E ratio is consistently 13. But by last year its EPS level is increased
significantly.
 Its current ratio is 0.5 which shows it moderately risky.
 Hero Honda expect its growth by 11-12% in next 2 years. Hence by it its PEG ratio is around 2.

By the fundamentals of the Bajaj Auto and Hero Honda. Bajaj auto will give high returns then
Hero Honda. And EPS of Bajaj Auto is also high as compared to Hero Honda. And it is also less
riskier then than Hero Honda.
Technical Analysis of Hero Honda
Chart 1: 5 year Trend line Chart for Hero Honda
Chart is in positive uptrend Because overall auto sector is in uptrend from Q4 of 2008-09.
Some consolidations are there in the chart but it is confirming BULL trend.
Chart 2: Bollinger Chart for Hero Honda
Here we considered the Bollinger band of 20 days with standard deviation of 2. In it it

showing the oversold level so purchase the stock at this level is profitable

Chart 3: Stochastic indicator for Hero Honda
Chart 4: Relative Strength Index for Hero Honda
Chart 3 and 4 both are showing that stock is less risky to invest. Stock price is near to
equilibrium line. Hence it is having further potential to grow and it is moderately risky.

Infosys Technologies Ltd.
Fundamental analysis of Infosys Technologies

Infosys has come to be the gold standard in the Indian IT industry’s success. From humble
beginnings in 1981, the company today is the second largest exporter of software services from the
country. It is known globally for its world-class management practices and work ethics. It has been
making conscious and constant efforts to move up the software value chain and offers services like
software development, maintenance, and technology consulting, testing and package
implementation. Infosys offers all these services through its highly integrated and widely acclaimed
global delivery model. The company’s revenues and profits have grown at compounded rates of
26% and 27% respectively during the last five years (FY05-FY10).
The company is working on new engagement models (NEMs). In simple terms, NEMs mean
offering high-end solutions to clients without having to deploy additional software engineers. What
Infosys is aiming through its NEMs is to increase the share of high-end solutions like IT products in
its total revenues. Such initiatives will make its overall business more profitable and sustainable.
The company in fact sees its NEM revenues rise from US$ 165 m currently to US$ 500 m in the
near future.
As 2009 passed by, global IT industry bade good riddance to its worst year ever. Research
firms like Gartner and Forrester expect IT spending to grow by 3.3% in 2010. IT services spending
is expected to rebound by a decent 4.5% to reach US$ 816 bn in revenues. Back home, Nasscom
also sees an uptick in IT demand and expects the industry to register a double digit growth in FY11.
IT giants like Infosys are already seeing robust deal pipelines and faster decision making from
clients.
There appears an easing of pricing pressure that kept IT companies under stress during 2009.
The pricing power is expected to return in latter half of FY11. There is a spurt in mergers and
acquisitions round the globe. This has brought a number of business transformation and systems
integration deals to the platter. Though on a conservative basis, Infosys's management expects IT
budgets to remain flat in FY11, this is still good news as compared to a sharp decline of 6% to 8%
being witnessed during the previous year.
Recession has triggered a need for vendor consolidation. Herein, companies aim to source
end-to-end IT services from fewer number of tested vendors. This makes the case stronger for IT
biggies like Infosys that are winning more and more repeat business from their existing clients.
Though we do not claim that Indian IT will achieve the pre-downturn levels of 30% YoY growth in
some time to come, it has a strong chance to grow at an average rate of 15-20% for the next 10
years.
Infosys got a project in December 2009 by Walmart. Walmart selected three IT vendors in
India — Infosys Technologies, Cognizant Technology Solutions and UST Global — for multi-year
contracts worth over US$ 600 million.
Market Cap Rs m 1,582,393.6
Volume '000 96.1
EPS (31/03/2010) Rs 109.2

Revenue and income figures as shown in the chart above and increase in revenue per client
Revenue Growth Quarter by Quarter

Ratio analysis of Infosys Technologies

Year Ending 31/03/2008 31/03/2009 31/03/2010
Avg P/E ratio x 21.1 14.8 19
Avg Mkt Cap Rs m 984,126 886,168 1,187,763
reserves Rs m 134,810 179,620 226,620
 Company recorded P/E ratio of 19 but on other hand company is expected to grow by 20%
yearly for next 10 years regularly. Hence its PEG ratio would be 0.9. hence company is not
risky. Company is not overvalued.
 Company’s current ratio is very high. Company can use this amount for further investment. All
other companies of this segment are not keeping that much current assets to cover short term
obligations. Hence management can invest this amount somewhere else and probably can earn
more return.
 Its profitability ratios [ROE, ROC] are showing good amount of returns.
 As Infosys have strong growth history in the past and company is also performing well and not
overvalued so investment in Infosys is less risky. But high future prospects make this stock
lucrative investment stock.

Technical analysis of Infosys
Chart 1: 5 year Trend line Chart for Infosys
Infosys last 5 year stock chart and trend lines are shown above. During recession time there
is a significant amount of decrease in the stock is recoded. And by last quarter of 2008-09 infosys is
continuously in bullish trend. Support line is shown above in the chart. And company is also
expecting 20 % growth YOY in next 11 years.
Chart 2: Bollinger Chart for Infosys
Bollinger band for next 20 days with standard deviation of 2 is shown here. In it the stock price
is on SMA line which shows that it will grow further and there is low risk of decrease in its price.

Chart 3: Stochastic indicator for Infosysy
Stochastic oscillator is showing low risk level of 20; which is a buy signal.
Chart 4: Relative Strength Index for Infosys
RSI Oscillator is confirming the low risk level or the stock is at equilibrium level. So investing
at this level will give good future returns. And the fundamentals of the company are strong enough.

Tata Consultancy Services
Fundamental analysis of Tata Consultancy Services

TCS is the largest software company in Asia, having a wide range of offerings and catering
to industries like banking and financial services, manufacturing, telecom, and retail. The company
was one of the pioneers of the much-acclaimed global delivery model and has the largest employee
base in the Indian software sector. It has grown revenues and profits from FY05 to FY09 at
compounded rates of 30% and 27% respectively.
Market Cap Rs m 1,619,403.8

Volume '000 159.2
EPS (31/03/2010) Rs 36.2
Tata Consultancy Services (TCS), the country's largest software exporter by revenue, was
awarded a contract in March 2010 to administer the UK's National Employee Savings Trust (NEST)
scheme's administered services under a 10-year deal, worth around US$ 879.5 million. Total income
for the quarter was Rs 8,217 crore, up 6% over the previous quarter (Q4 FY10) while net profit at
Rs 1,906 crore, dipped 5% sequentially. In common currency terms, revenues grew 21% y-o-y to
$1.79 billion and were up 6.4% over the previous quarter.
Growth by service line:
 TCS’s P/E ratio is 15 .hence it is less riskier stock than Infosys .and also its PEG ratio 0.65
which shows excellent growth.
 Company is giving fair amount of dividend every year to its stock holders.
 Current ratio of TCS is 1.9. hence its management is utilizing the funds properly.
 And profitability ratios are also showing growth as compared to previous year. Hence
investment in TCS is better option than Infosys

Ratio analysis of TCS

Year Ending 31/03/2008 31/03/2009 31/03/2010
Avg P/E ratio x 20.1 13.7 15.3
Dividends per share Rs 14 14 20
Debt to equity ratio x 0 0 0
reserves Rs m 120,966 150,252 180,572

Technical analysis of TCS
Chart 1: 5 year Trend line Chart for TCS
Support and resistance lines are shown in the figure. During recession there is sharp decline
in the stock and after that stock is trading in a channel in a particular levels of support and
resistance. So it is an attractive stock to invest in for traders.
Chart 2: Bollinger Chart for TCS
Bollinger band for 20 days and standard deviation of 2 is shown in the chart .chart is
showing overbought signals. Because stock price touches the higher level of standard deviation.

Chart 3: Stochastic indicator for TCS
TCS is showing at level of 70 at RSI. Which is highly risky level. And this stock is showing
continuous volatility. It is good for traders because it is fluctuating in a channel.
Chart 4: Relative Strength Index for TCS
Volatility in the stock market and highly risky level of stock is confirmed by Stochastic
oscillator. As shown above in the chart.
Hence TCS is a good investment opportunity for traders.

Wipro Ltd.
Fundamental analysis of Wipro Technologies Ltd.

Wipro is India's third largest software services exporter and also has interests in the
hardware and consumer care and lighting businesses. The IT Services segment provides research
and development services for hardware and software design to technology and telecommunication
companies and software application development services to corporate enterprises. The BPO
services segment provides services to global corporations. The India and Asia Pacific IT Services
and Products segment focuses on addressing the IT and electronic commerce requirements of
companies in India, Middle-East and Asia-Pacific regions. Over the period FY03 to FY09, Wipro's
consolidated revenues and profits have grown at compounded annual rates of 35% and 30%
respectively. Wipro corporation revenue at Rs.27,124 Crores for 2009-10, 6% YoY growth.

Volume '000 240.8
EPS (31/03/2010) Rs 19.0
As shown in the chart revenue of Wipro technologies is consistently in increasing trend.

Ratio analysis of Wipro

Year Ending 31/03/2008 31/03/2009 31/03/2010
Avg P/E ratio x 21.3 13.4 15.6
Price / Book Value ratio x 6 3.8 4
reserves Rs m 111,294 145,552 181,360
 Company is having P/E ratio of 15.6 which is moderadely increasing but at the same time
company is growing with 20% growth rate which makes its PEG ratio 0.65. which shows
excellent growth for the stock.
 Company’s EPS and profitability ratios are constantly increasing.
 Its current ratio is 2.3. which tells company is having enough amount to pay its liabilities and
company is also managing their funds efficiently. Hence investment in Wipro is a lucrative
option.
Technical analysis of Wipro:
Wipro technologies is a bullish stock after recession. And its support line is shown in the
figure. And it is giving two continuous down doji. Which is a signal of trend reversal. It is having
bullish trend and it is expected that it will take downward trend.

Chart 1: 5 year Trend line Chart for Wipro
Chart 2: Bollinger Chart for Wipro
Bollinger Band in march shown sale signal. And then Wipro was continuously facing large
sale by investors. It is continuously on the negative trend as shown in the chart. Bollinger chart
shown the signal of sale the stock in march. And two continuous low doji confirmed the trend
reversal of the stock.

Chart 3: Stochastic indicator for Wipro
Chart 4: Relative Strength Index for Wipro
In the chart 3 stochastic is showing it highly risky stock and in the chart 4 RSI is showing the
stock is least risky. It is highly volatile stock. And its future cannot be estimated.

Patni Computers
Fundamental analysis of Wipro Technologies Ltd.

Patni Computer Systems (PCS) is a mid-sized IT company, engaged in providing software
solutions and services, domestically and internationally. The company's offerings include
application development and integration, application maintenance, enterprise application systems,
R&D services and business process outsourcing services. PCS has a substantial presence in the
financial services, insurance, telecom, manufacturing, retail and logistics verticals.
Volume '000 31.0
EPS (31/12/2009) Rs 42.2
 Company is having P/E ratio of 6.8.

By it we can say that company is
undervalued. We can confirm this
by PEG ratio. Company is expecting
its growth rate of 8% YOY. So by
this its PEG ratio would be 0.7
hence company is less risky,
undervalued and company is having
loyal clients so company is strong
enough by its fundamentals to
achieve its growth targets.
 Patni’s EPS and profitability ratios
are increasing year by year.
 Current ratio is 1.5 means company is managing its funds efficiently.
 Its P/B ratio is 1.1 which is showing excellent growth in future. Patni computers is expecting 12-
15% growth in FY11.
Ratio analysis of Patni computers
Year Ending 31/03/2008 31/03/2009 31/03/2010
Avg P/E ratio x 12.5 6.6 6.8
Price / Book Value ratio x 2.2 1 1.1
Debt to equity ratio x 0 0 0
Reserves Rs m 27,080 27,597 34,729

Technical analysis of Patni computers
Chart 1: 5 year Trend line Chart for Patni
Patni computers is listed at NSE in 2002. And then it is recorded continuous growth in its
turnover and profits. As shown in the chart there is a positive trend line which is showing the
resistance level of the stock. Fundamentals of the company are strong enough. And it is expected
that company will grow at 12-13% rate.
Chart 2: Bollinger Chart for Patni
In the Bollinger band if distance between lower and upper deviation line is high then
volatility in the stock is high. But in the month of July volatility in the stock is decreased. And stock
price is meeting upper deviation curve line . it is a sale signal.

Fundamentals of the company are very strong. So to keep the stock for long term can give
significant amount of returns.
Chart 3: Stochastic indicator for Patni
Chart 4: Relative Strength Index for Patni
In stochastic oscillator it is at moderate risk and this level is justified by RSI also. Investing
in Patni is moderately risky. And we can expect that company will give good returns in future.

Research Design of the Study of Indian Investor Perception
This report is based on primary as well secondary data, however primary data collection was
given more importance since it is overhearing factor in attitude studies. One of the most important
users of research methodology is that it helps in identifying the problem, collecting, analyzing the
required information data and providing an alternative solution to the problem .It also helps in
collecting the vital information that is required by the top management to assist them for the better
decision making both day to day decision and critical ones. The study consists of analysis about
Investors Perception. For the purpose of the study people were picked up at random and their views
solicited on different parameters.
The methodology adopted includes

 Questionnaire
 Random sample survey of customers
 Discussions with the concerned
Sources of Data
 Primary data: Questionnaire
 Secondary data: Published materials of website, journals, news papers.
Analysis of questionnaire and interpretation
This research is conducted in order to identify Indian investor’s perception of the Indian
share market and understand saving and investment patterns.
Survey Results
Research Variables
Age Group Annual Income Financial Advisor
Investment Experience Investment Sector Savings objectives
Investment Objective Investment Purpose Investment Growth Rate
Factor of Investing Reaction Market Down Investment monitoring
Percentage Income Invested Period of Investment Lose of Principal
Investment Advice
Relation and investment patterns of varying age group
Key assumptions made for this research survey are:
 With increasing age the risk appetite for an investor reduces and investment percentage in
the share market reduces considerably
 Period of investment reduces with increasing age group category.
 Increasing age group focus more towards short term growth or principal safety from
investment.

Age Group * Investment Experience Cross tabulation

% within Age Group
Investment Experience Total
Beginning Moderate Knowledgeable Experienced
Age Below 20 100.0% 100.0%
Group Between 20-30 72.7% 9.1% 18.2% 100.0%
Between 30-40 85.7% 14.3% 100.0%
Between 40-50 33.3% 66.7% 100.0%
Between 50-60 20.0% 40.0% 40.0% 100.0%
Above 60 100.0% 100.0%
Total 27.3% 33.3% 21.2% 18.2% 100.0%
Chi-Square Tests
Value df Asymp. Sig. (2-sided)
Pearson Chi-Square 45.670a 15 .000
Likelihood Ratio 49.083 15 .000
a. 24 cells (100.0%) have expected count less than 5. The minimum expected count is .18.
Age Group * Preferred Investment Sector Cross tabulation % within Age Group
Preferred Investment Sector Total
Private Sector Government Sector Public Sector

Age Below 20 100.0% 100.0%
Group Between 20-30 54.5% 18.2% 27.3% 100.0%
Between 30-40 57.1% 42.9% 100.0%
Between 40-50 100.0% 100.0%
Between 50-60 80.0% 20.0% 100.0%
Above 60 33.3% 66.7% 100.0%
Total 66.7% 9.1% 24.2% 100.0%
Chi-Square Tests
a
Pearson Chi-Square 11.516 10 .319
Age Group * Investment Purpose Cross tabulation % within Age Group

Investment Purpose Total
Wealth Tax Saving Earn Future Other
Creation Returns Expenses/
Retirement
saving
Age Below 20 100.0% 100.0%
Group Between 20-30 9.1% 45.5% 27.3% 9.1% 100.0%
Between 30-40 14.3% 14.3% 71.4% 100.0%
Between 40-50 83.3% 16.7% 100.0%
Between 50-60 40.0% 40.0% 20.0% 100.0%
Above 60 66.7% 33.3% 100.0%
Total 30.3% 18.2% 39.4% 6.1% 3.0% 100.0%
Chi-Square Tests
a

Age Group * Investment Growth Rate Cross tabulation % within Age Group
Investment Growth Rate Total
Steadily At an Average Rate Rapid growth
Age Group Below 20 100.0% 100.0%
Between 20-30 50.0% 37.5% 12.5% 100.0%
Between 30-40 14.3% 57.1% 28.6% 100.0%
Between 40-50 100.0% 100.0%
Between 50-60 40.0% 60.0% 100.0%
Above 60 33.3% 33.3% 33.3% 100.0%
Total 20.0% 36.7% 43.3% 100.0%
Chi-Square Tests
a

Age Group * Factors Considered Before Investing Crosstabulation

Factors Considered Before Investing Total
Safety of Low Risk High Returns Maturity Period
Principal
Age Below 20 100.0% 100.0%
Group Between 20-30 27.3% 18.2% 9.1% 45.5% 100.0%
Between 30-40 14.3% 14.3% 42.9% 28.6% 100.0%
Between 40-50 100.0% 100.0%
Between 50-60 20.0% 80.0% 100.0%
Above 60 33.3% 33.3% 33.3% 100.0%
Total 15.2% 12.1% 45.5% 27.3% 100.0%
Chi-Square Tests
a

Age Group * Reaction to share Market Drop Crosstabulation

Reaction to share Market Drop Total
Withdraw Wait to Invest more
your money increase in it
Age Below 20 100.0% 100.0%
Group Between 20-30 50.0% 50.0% 100.0%
Between 30-40 42.9% 28.6% 28.6% 100.0%
Between 40-50 16.7% 83.3% 100.0%
Between 50-60 75.0% 25.0% 100.0%
Above 60 33.3% 33.3% 33.3% 100.0%
Total 25.9% 40.7% 33.3% 100.0%
Chi-Square Tests
a

Age Group * Percentage of Income Invested Crosstabulation

Percentage of Income Invested Total
0-15% 15-30% 30-50%
Age Below 20 100.0% 100.0%
Group Between 20-30 100.0% 100.0%
Between 30-40 57.1% 42.9% 100.0%
Between 40-50 100.0% 100.0%
Between 50-60 20.0% 60.0% 20.0% 100.0%
Above 60 66.7% 33.3% 100.0%
Total 56.3% 40.6% 3.1% 100.0%
Chi-Square Tests
a
Age Group * Period of Investment Cross tabulation

Period of Investment Total
Short-term Medium- Long-term

(0-1yrs) term (1- (>5yrs)

5yrs)
Age Below 20 100.0% 100.0%
Group Between 20-30 33.3% 44.4% 22.2% 100.0%
Between 30-40 42.9% 28.6% 28.6% 100.0%
Between 40-50 40.0% 60.0% 100.0%
Between 50-60 20.0% 60.0% 20.0% 100.0%
Above 60 33.3% 66.7% 100.0%
Total 33.3% 46.7% 20.0% 100.0%
Chi-Square Tests

Age Group * Source of Investment Advice Crosstabulation

Source of Investment Advice Total
Family Internet News News Advisors Cert Mkt
or papers Channels Professional/
Friends Fin.Planners
Age Below
100.0% 100.0%
Group 20
Between
45.5% 27.3% 18.2% 100.0%
20-30
Between
14.3% 14.3% 42.9% 28.6% 100.0%
30-40
Between
16.7% 33.3% 33.3% 16.7% 100.0%
40-50
Between
20.0% 20.0% 60.0% 100.0%
50-60
Above
66.7% 33.3% 100.0%
60
Total 15.2% 18.2% 18.2% 27.3% 15.2% 3.0% 100.0%
Chi-Square Tests
a

Relation and investment patterns of varying Income Group

Annual Income * Percentage of Income Invested Cross tabulation
% within Annual Income
Percentage of Income Invested Total
0-15% 15-30% 30-50%
Below Rs. 3,00,000 100.0% 100.0%
Rs. 3,00,000- Rs 5,00,000 91.7% 8.3% 100.0%
Annual Income Rs. 5,00,000-Rs 7,00,000 71.4% 28.6% 100.0%
Rs. 7,00,000- Rs. 10,00,000 85.7% 14.3% 100.0%
Above Rs. 10,00,000 100.0% 100.0%
Total 54.8% 41.9% 3.2% 100.0%
Chi-Square Tests
Value df Asymp. Sig.
(2-sided)
a
a. 13 cells (86.7%) have expected count less than 5. The minimum
expected count is .03.
Symmetric Measures
Value Asymp. Approx. Tb
a
Std. Error
Interval by Interval Pearson's R .745 .064 6.015

Ordinal by Ordinal Spearman Correlation .776 .072 6.616

Annual Income * Investment Objective Cross tabulation

Investment Objective Total
Income and Long- Growth short- Others
Capital term and term
Preservation Growth Income Growth
Below Rs. 100.0% 100.0%
3,00,000
Rs. 3,00,000- 9.1% 36.4% 18.2% 36.4% 100.0%
Rs 5,00,000
Annual Rs. 5,00,000- 42.9% 14.3% 28.6% 14.3% 100.0%
Income Rs 7,00,000
Rs. 7,00,000- 14.3% 14.3% 71.4% 100.0%
Rs. 10,00,000
Above Rs. 100.0% 100.0%
10,00,000
Total 16.7% 6.7% 53.3% 10.0% 13.3% 100.0%
Chi-Square Tests

Annual Income * Investment Purpose Crosstabulation

Investment Purpose Total
Wealth Tax Earn Future Expenses/ Other
Creation Saving Returns Retirement saving
Below Rs.
3,00,000 100.0% 100.0%
Rs. 3,00,000-
41.7% 50.0% 8.3% 100.0%
Rs 5,00,000
Annual Rs. 5,00,000-
Income Rs 7,00,000 28.6% 14.3% 42.9% 14.3% 100.0%
Rs. 7,00,000-
71.4% 14.3% 14.3% 100.0%
Rs. 10,00,000
Above Rs.
50.0% 50.0% 100.0%
10,00,000
Total 29.0% 19.4% 41.9% 6.5% 3.2% 100.0%
Chi-Square Tests
a

Annual Income * Investment Growth Rate Cross tabulation

Investment Growth Rate
At an Average Total
Steadily Rapid growth
Rate
Below Rs. 3,00,000 100.0% 100.0%
Rs. 3,00,000- Rs 5,00,000 30.0% 50.0% 20.0% 100.0%
Annual
Rs. 5,00,000-Rs 7,00,000 42.9% 28.6% 28.6% 100.0%
Income
Rs. 7,00,000- Rs. 10,00,000 28.6% 71.4% 100.0%
Above Rs. 10,00,000 100.0% 100.0%
Total 20.7% 34.5% 44.8% 100.0%
Chi-Square Tests
a
Symmetric Measures
Value Asymp. Std. Approx. Tb
Errora
Interval by Interval Pearson's R .527 .107 3.220
Ordinal by Ordinal Spearman Correlation .543 .125 3.360
Annual Income * Factors Considered Before Investing Cross tabulation

Factors Considered Before Investing Total

Safety of Low Risk High Returns Maturity Period

Principal
Below Rs.
100.0% 100.0%
3,00,000
Rs. 3,00,000-
25.0% 8.3% 16.7% 50.0% 100.0%
Rs 5,00,000
Annual Rs. 5,00,000-
14.3% 14.3% 42.9% 28.6% 100.0%
Income Rs 7,00,000
Rs. 7,00,000-
28.6% 71.4% 100.0%
Rs. 10,00,000
Above Rs.
100.0% 100.0%
10,00,000
Total 12.9% 12.9% 48.4% 25.8% 100.0%
Chi-Square Tests
Annual Income * Period of Investment Cross tabulation

Period of Investment Total

Short-term Medium- Long-term

(0-1yrs) term (1- (>5yrs)
5yrs)
Annual Below Rs. 3,00,000 100.0% 100.0%
Income Rs. 3,00,000- Rs 5,00,000 27.3% 63.6% 9.1% 100.0%
Rs. 5,00,000-Rs 7,00,000 42.9% 14.3% 42.9% 100.0%
Rs. 7,00,000- Rs. 10,00,000 50.0% 33.3% 16.7% 100.0%
Above Rs. 10,00,000 25.0% 75.0% 100.0%
Total 34.5% 48.3% 17.2% 100.0%
Chi-Square Tests
a
Annual Income * How often monitor Investment?

How often monitor Investment? Total
Daily Monthly Occasionally
Annual Below Rs. 3,00,000 100.0% 100.0%

Income Rs. 3,00,000- Rs 5,00,000 30.0% 70.0% 100.0%

Rs. 5,00,000-Rs 7,00,000 14.3% 28.6% 57.1% 100.0%
Rs. 7,00,000- Rs. 10,00,000 100.0% 100.0%
Above Rs. 10,00,000 100.0% 100.0%
Total 14.3% 7.1% 78.6% 100.0%
Chi-Square Tests
a
Annual Income * Reaction to share Market Drop Crosstabulation

Reaction to share Market Drop Total
Withdraw Wait to Invest more
your money increase in it

Annual Below Rs. 3,00,000 100.0% 100.0%

Income Rs. 3,00,000- Rs 5,00,000 28.6% 57.1% 14.3% 100.0%
Rs. 5,00,000-Rs 7,00,000 57.1% 14.3% 28.6% 100.0%
Rs. 7,00,000- Rs. 10,00,000 33.3% 66.7% 100.0%
Above Rs. 10,00,000 50.0% 50.0% 100.0%
Total 24.0% 40.0% 36.0% 100.0%
Chi-Square Tests
Annual Income * Preferred Investment Sector Cross tabulation

Prefered Investment Sector Total
Private Government Public

Sector Sector Sector

Annual Below Rs. 3,00,000 100.0% 100.0%
Income Rs. 3,00,000- Rs 5,00,000 41.7% 16.7% 41.7% 100.0%
Rs. 5,00,000-Rs 7,00,000 57.1% 42.9% 100.0%
Rs. 7,00,000- Rs. 10,00,000 85.7% 14.3% 100.0%
Above Rs. 10,00,000 100.0% 100.0%
Total 64.5% 9.7% 25.8% 100.0%
Chi-Square Tests
a
Annual Income * Source of Investment Advice Crosstabulation
Source of Investment Advice Total

Family Internet News News Advisors Cert. Mkt
or papers Channels Prof/Fin.
Friends Planners

Annual Below Rs.

100.0% 100.0%
Income 3,00,000
Rs. 3,00,000-
41.7% 16.7% 25.0% 8.3% 100.0%
Rs 5,00,000
Rs. 5,00,000-
28.6% 42.9% 28.6% 100.0%
Rs 7,00,000
Rs. 7,00,000-
14.3% 42.9% 28.6% 14.3% 100.0%
Rs. 10,00,000
Above Rs.
25.0% 50.0% 25.0% 100.0%
10,00,000
Total 16.1% 16.1% 19.4% 25.8% 16.1% 3.2% 100.0%
Chi-Square Tests
Findings
 60% of the population across all age group considers itself as beginner or moderately
experience in investing in the share.
 Over 65% of the population among various age group as well as income groups, believes the
private sector is more suited for their investment needs and objective. And over 24% believe
in investing within the public sector.

 With increasing age as well as income category, it is observed that investment objective
change from tax saving to earning return and eventually balancing with wealth creation.
Nearly 40% expect returns from the market.
 The same was observed with growth expectations. Higher age group expects higher growth,
hence has a higher risk appetite. Nearly 45.5% aim for higher returns and 27.7% consider the
maturity period before investing.
 Less than 25% population considers withdrawing investment in case of a market drop
irrespective of age groups or income groups. And period consider for staying invested is
between 1-5 years, which tends to increase with higher age groups.
 Population in the age group of 20-30 years relies on Internet for it investment advice while
this shifts toward newspaper and news channels which above 30 years age groups.
 55% of population does not invest more that 15% in the share market. Although higher
income group show up to 30% investment preference.
 Increased income tends to show increased risk appetite. Over 40% expect higher returns
from their investment in higher income category.
Limitation of the project

 Study of financial market is a wide and deep making time a major constraint for this project.
 Moreover, study of investor’s behavior and perception needs more data collection through
other marketing methods such as interview along with survey. This research is only done
with people who actively invest into the market and does not cover people who don’t invest.
 There is no practical training to this study as it is not possible without considerable risk on
the monetary front. Hence the data of this project report is from the experiences and
knowledge of the experts in the field.
 Financial status changes even more rapidly than technology. The estimated figures mention
in order to understand an industry and the Indian economy have reliability and trust of the
issuing agency and cannot be considered for any actually financial decisions of any sort.

Bibliography
 Website of Investment Commission of India, Link: http://www.investmentcommission.in
 Corporate Website of Aditya Birla Group, Link: http://www.adityabirla.com
 Corporate Website of Birla Sun Life Insurance Company, Link:
http://insurance.birlasunlife.com
 Website on Technical analysis and chart creation, Link: http://www.zignals.com
 Official Website of Reserve Bank of India, Link: http://dbie.rbi.org.in
 Website for Fundamental analysis, Link: http://www.equitymaster.com
 Strategies on technical analysis and understanding charts, Link: http://www.stockcharts.com
 Book ‘ Investment Analysis and Portfolio Management’ By P. Chandra
 Book ‘Security Analysis and Portfolio Management’ By Sudhindra Bhat
 Newspaper ‘ Economic Times’

Appendix I
Investor Behavior Questionnaire
1. Are you aware of the following saving/investment avenues? (Tick which ever applicable
in the boxes).
Traditional Investment Avenues: Moderate Risk Investment Avenues:
• Real Estate (property). • Mutual Funds
• Gold/Silver • Life Insurance
Safe/Low Risk Investment Avenues: • Debentures
• Savings Account • Bonds
• Bank Fixed Deposits High Risk Investment Avenues:
• Public Provident Fund • Equity Share Market
• National Savings Certificates • Commodity Market
• Post Office Savings • FOREX Market
• Government Securities
2. What do you think are the best options for investing your money or what you have
mostly invested into? (Choose from the list)(Rank in the order of preference)
• Savings Account • Debentures
• Bank Fixed Deposits • Bonds
• Public Provident Fund • Equity Share Market
• National Savings • Commodity Market
Certificates
• Post Office Savings • FOREX Market
• Government Securities • Real Estate (property).
• Mutual Funds • Gold/Silver
• Life Insurance
3. In which sector do you prefer to invest your money?

• Private Sector
• Government Sector
• Public Sector
• Foreign Sector
4. What are your savings objectives?

• Children’s Education
• Retirement
• Home Purchase
• Children’s Marriage
• Healthcare
• Others________________________
5. Have you set aside funds specifically for the education and marriage of your children?
Education: Marriage
• Yes • No • Yes • No
6. Do you have a formal budget for family expenditure?

• Yes • No
7. Do you have a savings and investment target amount you aim for each year?
• Yes • No
If yes: Approximate Amount range___________________________________
8. What is your investment objective?

• Income and Capital Preservation
• Long-term Growth
• Growth and Income
• short-term Growth
• Others__________________________
9. What is the purpose behind investment?

• Wealth Creation
• Tax Saving
• Earn Returns
• Future Expenses/Retirement saving
• Other____________________________
10. At which rate do you want your investment to grow?

• Steadily
• At an Average Rate
• Rapid growth
11. Which factor do you consider before investing?

• Safety of Principal
• Low Risk
• High Returns
• Maturity Period
12. Do you invest your money in share market? (through a DEMAT A/C, or Broker)
• Yes • No
If yes: Imagine that stock market drops after you invest in it then what will you do?
• Withdraw your money

• Wait to increase
• Invest more in it
13. How often do you monitor your investment?

• Daily
• Monthly
• Occasionally
14. What percentage of your income do you invest?

• 0-15%
• 15-30%
• 30-50%
15. What is the time period you prefer to invest?

• Short-term (0-1yrs)
• Medium-term (1-5yrs)
• Long-term (>5yrs)
16. Can you take the risk of losing your principal investment amount?
• Yes • No
If yes: What percentage ________________________
17. What is your source of investment advice?

• Newspapers
• News Channels
• Family or Friends
• Books
• Internet
• Magazines
• Advisors
• Certified Market Professional/Financial Planners

Personal Details
(Personal details are kept highly confidential; these details will not be revealed to any third party)
Name: ______________________________________________
Designation : _________________________________________
Organization : ________________________________________
Age Group:
• Below 20 • Between 40-50
• Between 20-30 • Between 50-60
• Between 30-40 • Above 60
Qualification:
• Under • Post Graduate
Graduate
• Graduate • Other:
_____________________
Occupation (what category do you come under):

• Salaried • Student
• Business • Housewife • Retired
• Other: ______________________________________________
Annual income:
• Below Rs. 3,00,000
• Rs. 3,00,000- Rs 5,00,000
• Rs. 5,00,000-Rs 7,00,000
• Rs. 7,00,000- Rs. 10,00,000
• Above Rs. 10,00,000
What best describes your investment experience?

• Beginning (no investment experience)
• Moderate (comfortable with fixed deposits, chit funds, post office)
• Knowledgeable (has bought or sold individual shares of stock or bonds)
• Experienced (frequently trade in stocks, commodities, options and futures)
Date:
Signature:

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A Summer Internship

Birla Sun Life Insurance Pvt.

Under the guidance of

Arun Thakur Arjun Vig

ITM Business School, Kharghar Page 2

Prof. S. Suryanarayan Dated: 4th July

Prof Priyanka Agarwal

Arun Thakur Arjun Vig

ITM Business School, Kharghar Page 3

Safe/Low Risk Investment Avenues: High Risk Investment Avenues:

ITM Business School, Kharghar Page 4

• Savings Account • Equity Share Market

ITM Business School, Kharghar Page 5

Bombay Stock Exchange (BSE) of India..................................................................43

ITM Business School, Kharghar Page 6

ITM Business School, Kharghar Page 7

Aditya Birla Group

 Largest cement producer

ITM Business School, Kharghar Page 8

ITM Business School, Kharghar Page 9

Birla Sun Life Insurance Co. Ltd.

ITM Business School, Kharghar Page 11

ITM Business School, Kharghar Page 12

Investment Avenues for an Indian Investor

ITM Business School, Kharghar Page 13

Objective & scope

ITM Business School, Kharghar Page 14

Traditional Investment Avenues

ITM Business School, Kharghar Page 15

SEZs - the emerging investment option

FDI - inviting real estate investments

Gold and Silver

ITM Business School, Kharghar Page 16

Safe/Low Risk Investment Avenues

Savings Account and Bank Fixed Deposits

ITM Business School, Kharghar Page 17

ITM Business School, Kharghar Page 18

Recurring Deposit Account

Features of Government Securities

Principal or face amount

Indentures and Covenants

Benefits of Government Securities

ITM Business School, Kharghar Page 22

Moderate Risk Investment Avenues

ITM Business School, Kharghar Page 23

ITM Business School, Kharghar Page 24

ITM Business School, Kharghar Page 25

ITM Business School, Kharghar Page 26

Types of Mutual Fund

ITM Business School, Kharghar Page 27

Money Market / Liquid Schemes

Tax Saving Schemes (Equity Linked Saving Scheme - ELSS)

Fixed Maturity Plans

Exchange Traded Funds (ETFs)

Capital Protection Oriented Schemes

Gold Exchange Traded Funds (GETFs)

Funds Investing Abroad

Fund of Funds (FOFs)

Advantages of investing in a Mutual Fund

2. Diversification: Mutual Funds invest in a number of companies across a broad cross-section of

ITM Business School, Kharghar Page 31

Unit Linked Insurance Plan (ULIP)