A

SUMMER PROJECT REPORT ON

“Study on Behavioural Analysis of Financial

Investors”
(A STUDY AT ADITYA BIRLA CAPITAL, KOLKATA)

Submitted in partial fulfillment of award of degree of

‘Master’s in Business Administration’

Submitted to:
Mrs. Moyitree Majumdar, Training Head

Aditya Birla Capital, Kolkata

&

Department of Management studies

National Institute of Technology, Tiruchirappalli

Submitted by:
SIDHARTHA HARICHANDAN
MBA (Trimester-04)
Roll No.: 215118049
Department of Management Studies
National Institute of Technology, Tiruchirappalli
 BONAFIDE CERTIFICATE

This is to certify the project titled as “Study on Behavioral Analysis of Financial Investors” is
the Bonafide record of the work done by

Sidhartha Harichandan

(215118049)

Studying Master of Business Administration in the Department of Management Studies, National

Institute of Technology, Tiruchirappalli, during the year 2018-20.

Dr. V. Lavanya Dr. P. Sridevi

Internal Guide Head of the Department
Department of Management Studies Department of Management Studies
National Institute of Technology, Trichy National Institute of Technology, Trichy

Project viva-voice held on _________________________

Internal Examiner External Examiner

 DECLARATION

I, Sidhartha Harichandan hereby declare that the work incorporated in this report entitled
“Study on Behavioural Analysis of Financial Investors” is the outcome of original study
undertaken by me carried out under the guidance of Mrs. Moyitree Majumdar, Head of
Training & Development, Aditya Birla Capital, Kolkata. I further declare that the matter in this
report has not been submitted by me as a whole or in part at any other University or Institution for
the award of any Degree or Diploma.

Date: 08/07/2019 Sidhartha Harichandan

Place: Kolkata Roll. No.: 215118049
MBA (3rd Trimester)
Department of Business Administration
National Institute of Technology, Trichy

VERIFIED BY: Project Coordinator

Date: 08/07/2019 Mr. Debashish Rout

Place: Kolkata Human Resource & Training Department
Aditya Birla Capital, Kolkata
 ACKNOWLEDGEMENT

I would like to take this opportunity to express my sincere gratitude to the entire HR and Training
team of Aditya Birla Capital, Kolkata for extending their support and sparing their valuable time
in guiding me towards the completion of this Project Report on time.

In particular I am highly obliged to Mrs. Moyitree Majumdar, Training Head, ABC Kolkata
who granted me the unique opportunity of working in the Human Resource department of this
esteemed company.

I would also like to thank all the officers and staffs of Aditya Birla Capital, Kolkata who have very
kindly extended whole-hearted support and guidance to carry out this work.

I must acknowledge my sincere and heartiest gratitude my family members and friends for their
co-operation and constant encouragement.

Last but not the least, I am grateful to all those who directly or indirectly supported me in
completion of this project whether it was moral support, financial or providing appropriate support
during different phases of the project as a result of which we accomplished my project successfully.

Sidhartha Harichandan
 ABSTRACT
Savings form an important part of the economy of any nation. With the savings invested in
various options available to the people, the money acts as the driver for growth of the country.
Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the
best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his
savings.

One needs to invest and earn return on their idle resources and generate a specified sum of
money for a specific goal in life and make a provision for an uncertain future. One of the important
reasons why one needs to invest wisely is to meet the cost of inflation. Inflation is the rate at which
the cost of living increases.

The cost of living is simply what it cost to buy the goods and services you need to live.
Inflation causes money to lose value because it will not buy the same amount of a good or service
in the future as it does now or did in the past. The sooner one starts investing the better. By
investing early, you allow your investments more time to grow, whereby the concept of
compounding increases your income, by accumulating the principal and the interest or dividend
earned on it, year after year.

The three golden rules for all investors are:

❖ Invest early

❖ Invest regularly

❖ Invest for long term and not for short term

 EXECUTIVE SUMMARY
This report was commissioned to examine why the involvement of common people in Capital
market in India is very low compared to other countries.
The research draws attention to the fact that in 2018-19, there is a huge transformation in
Indian capital market regulation which attract FPI but still for domestic consumers there is no
changes shows in the participation of common people. Though the participation in Mutual fund is
increase significantly.
This research was conduct to analyze the investors need & wants & depending upon the
needs, how could we educate them to not just to relay on traditional investment options but invest
on capital market for investments.

Findings:
• Throughout the research it was observed that most of the rural people fear capital market;
• People are trapped by local financial pull investments;
• Some people have some myth about capital market;
• People are happy with their traditional investments;
• People are very much conservatives about their investments;
• Risk tolerance level in rural people is very low;

From that research I have learnt that giving proper education to Investors on investment
products either by campaign or mass target advertisement or through social media platform like
YouTube, Facebook etc. is the way to make them participate in Indian Capital Market.
 Table of contents

Sl. No. CONTENTS Page No.

Declaration by the Student I

Acknowledgement II
Abstract III
Executive Summary IV

1 CHAPTER 1: INTRODUCTION
1.1 Introduction to company 01
1.2 Mission and Values 02
1.3 Timeline 02
1.4 Achievements 03
1.5 CSR Activities 04
1.6 Synopsis of select Products 05

2 CHAPTER 2: LITERATURE REVIEW

2.1 Indian Financial Markets 09

2.2 Different Financial Products

2.2.1 Money market 10
2.2.2 Capital market 10
2.2.3 Fund Based 10
2.2.4 Feed Based 11

2.3 Life Insurance

2.3.1 An overview 11
2.3.2 Concept 11
2.3.3 Importance 12

2.4 Analysis of life Insurance Industry in India 13

2.5 Future & prospect of Life Insurance 15

Sl. No. CONTENTS Page No.

3 CHAPTER 3: RESEARCH METHODOLOGY

3.1 Research problem 17

3.2 Research Objectives 18
3.3.1 Research Design 19
3.3.2 Research method and type 19
3.3.3 Research Sources 19
3.4 Scope of study 19
3.5 Limitation of study 19

4 CHAPTER 4: Data Analysis and Finding

4.1 Analysis of the Survey 20

4.2 Other ccr influencing investors 21

5 CHAPTER 5: Project Analysis, Recommendations

5.1 Findings and Suggestions 38

5.2 Learnings from the Project 38
5.3 Personal Recommendations 41

6 CHAPTER 6: Conclusion 42

7 REFERENCES 43
 LIST OF FIGURES AND TABLES

FIGURE NO. FIGURES & TABLES PAGE NO.

1 Aditya Birla Journey of Transformation 04

2 Demographics of the Sample Investors 20

3 Investors willing to lose principal Amount 22

4 Time Period preferred to Invest 22

5 Frequency of monitoring the Investment 23

6 Family Budget 24

7 Investment Target 24

8 Financial Advisor 25

9 Savings Objective 26

10 Purpose Behind Investment 27

11 Factor Considering Before Investment 28

12 Investment Based on Occupation 33

13 Finding Relationship between age group & 36

Level of risk tolerance

 CHAPTER 1: INTRODUCTION TO PROJECT

1.1 Company Profile

Aditya Birla Finance Limited, an Aditya Birla Capital Company

Aditya Birla Finance Limited (“ABFL”) is among the leading well-diversified financial
services company in India offering end-to-end lending, financing and wealth management
solutions to a diversified range of customers across the country. ABFL is registered with RBI
as a systemically important non-deposit accepting non-banking finance company (“NBFC”)
and ranks among the top five largest private diversified NBFCs in India based on AUM as of
March 31st, 2017 (source: CRISIL).

For the Quarter ended 31st December 2018, ABFL’s loan book has reached Rs. 493 billion.
Along with its growth, ABFL has maintained healthy asset quality with GNPA (Gross NPA)
at 1.17% as of 31st December 2018. This is reflected in its long-term credit rating of AAA
(Stable) by ICRA and AAA (Stable) by India Ratings, Perpetual debt credit rating of AA+
(Stable) by ICRA and AA+ (Stable) by India Ratings (Stable) and short-term credit rating of
A1+ by ICRA & India Ratings.

ABFL caters to the varied needs of diverse set of customers ranging across retail, HNI, ultra
HNI, micro enterprises, SME, mid and large corporates. ABFL offers customized solutions in
areas of personal and business loans, corporate finance, mortgages, capital market-based
lending, project loans, structured finance, wealth management and digital lending, debt capital
markets and syndication.

Aditya Birla Capital Limited (ABCL), is the financial services platform of the Aditya Birla
Group. With a strong presence across the life insurance, asset management, private equity,
corporate lending, structured finance, project finance, general insurance broking, wealth
management, equity, currency and commodity broking, online personal finance management,
housing finance, pension fund management and health insurance business, ABCL is committed
to serving the end-to-end financial services needs of its retail and corporate customers.
Anchored by more than 17,000 employees, ABCL has a nationwide reach and more than
2,00,000 agents / channel partners.

1
 1.2. VISION AND VALUES

"To be a leader and role model in a broad-based and integrated financial services
business."

The 4 pillars of our vision that will help us achieve it are:

• To be a leader – we are committed to being a leader in all facets of our businesses,

rather than being just another participant in this race.
• To be a role model – we will not become leaders by cutting corners or making
compromises. Whatever we do, we will strive to be the best in class. And if we are the
best, then our customer will have no reason to go elsewhere – therefore our leadership
is assured, on pure merit.
• To be a broad-based player – we are committed to meeting all the felt and unfelt needs
of our target customer. And thereby, we can retain him or her across their needs and
life-stages.
• We aim to be an integrated player –we believe that this approach gives us a competitive
edge through sharing of best practices, deriving cross – business synergies & providing
talent pool with world of opportunity to grow.

1.3 TIMELINE

Originally incorporated in October 2007 under the Companies Act 1956, Aditya Birla Financial
Services Private Limited received the certificate of registration from the Reserve Bank of India
in May 2009 to commence the business as non-deposit taking NBFC.

In December 2014, the company was converted from a private limited company to a public
limited company, and was renamed as ‘Aditya Birla Financial Services Limited’.

During past one decade since its incorporation, the Company has come a long way to become
one of the largest financial services players in India. Year 2017 marks a milestone, with the
Company becoming a pure play listed holding company of all the financial services businesses
of the Aditya Birla Group.

To mark this new phase in its journey, and in line with its new unified brand identity, the
Company was rechristened as ‘Aditya Birla Capital Limited’ in June 2017. The synopsis of
its journey over past 12 years from 2007-2019 is as follows:

• From 5 business lines to a well-diversified portfolio of 13 business lines

• Aggregate AUM1 has grown to Rs. 3,000 billion

• Lending book (including Housing Finance) has grown to Rs. 601 billion

• Aggregate2 revenues have grown to Rs. 115 billion

• From Investment phase to aggregate2 earnings before tax of Rs. 12.9 billion.

2
 1.4 ACHIEVEMENTS OF ABC (Aditya Birla Capital)

In pursuit of our leadership vision

• We are among the Top 5 Private Diversified NBFCs in India

• We are one of the largest Private Life Insurance Companies in India
• We are one of the largest Asset Management Companies in India
• We are one of the largest General Insurance Brokers in the country

In pursuit of our desire to be a role model

• We are today, a leading non-bank financial services player with a strong focus on
quality of growth
• We are renowned for risk management, people practices, sales management, investor
education, product innovation & fund management capabilities
• We are among the best 3 financial services players to work for [As per a study by Great
Place to Work Institute, 2016]

We have continued to build a Broad based & Integrated financial services business

• We continue to be one of the few players in the industry with a diversified portfolio that
allows us to meet almost any customer need across the entire spectrum of his / her
lifecycle
• Our integrated play has helped us gain a competitive edge by allowing us to share best
practices, derive cross-business synergies & provide our talent pool an opportunity to
grow their career through cross-functional and cross-sectoral experience
• Our distributors and partners see tremendous value in association with our businesses
• We are successfully expanding the market for our offerings, along with our market
share in each of our businesses

Financial Achievements as of March 31, 2018

• AUM - Rs. 3,053 billion has registered 24% y-o-y growth

• Our Consolidated Lending Book has grown over 32% Y-o-Y to Rs 514 billion

1.5 CSR ACTIVITIES

For us at Aditya Birla Capital, reaching out to underserved communities is part of our DNA.
We believe in the trusteeship concept. This entails transcending business interests and
grappling with the “quality of life” challenges that underserved communities face, and working
towards making a meaningful difference to them.

Our vision is - “To actively contribute to the social and economic development of the
communities in which we operate. In so doing build a better, sustainable way of life for
the weaker and marginalized sections of society and raise the country’s human
development index”- Mrs. Rajashree Birla, Chairperson, Aditya Birla Centre for
Community Initiatives and Rural Development.

3
All projects are identified in consultation with the community in participatory manner, literally
sitting with them and gauging their basic needs. We recourse to the participatory rural appraisal
mapping process. Subsequently, based on a consensus and in discussion with the village
panchayats, and other stakeholders, projects are prioritized.

Arising from this our focus areas that have emerged are Education, Health care, Sustainable
livelihood, Infrastructure development, and espousing social causes. All of our community
projects/programmes are carried out under the aegis of The Aditya Birla Centre for Community
Initiatives and Rural Development. Our activities are in line with Schedule VII of the
companies Act, 2013.

4
1.6 SYNOPSIS OF SELECT PRODUCTS OF ADITYA BIRLA CAPITAL
SAVINGS WITH PROTECTION

1. ABSLI Vision Moneyback Plus Plan: ABSLI Vision Moneyback Plus Plan is suitable for
you, if your key objectives is secured savings, with regular liquidity to meet your financial
objectives while providing your family with comprehensive financial protection.

2. ABSLI Vision Life Income Plan: The ABSLI Vision Life Income Plan, a traditional
participating whole life plan that helps you to not only plan your financial goals but also realise
your dreams by providing you with a steady income and whole life cover. With survival
benefits payable every year from the end of the premium paying term till maturity and a life
insurance benefit, this plan offers a perfect blend of income and financial protection for you
and your family.

3. ABSLI Vision Endowment Plan: With the ABSLI Vision Endowment Plan you can secure
your savings and provide your family with comprehensive financial protection. It offers growth
in your savings with accrued bonuses starting from the first policy year and also secures your
loved ones' future. This plan offers you best of both worlds.

4. ABSLI Savings Plan: The ABSLI Savings Plan. It not only helps you save money regularly
but also enables its steady growth over time. With this plan, you and your loved ones gain
peace of mind and the potential of a secure financial future to meet your financial needs.

5. ABSLI Vision Life Secure Plan: ABSLI Vision Life Secure plan is designed to provide
long-term financial security for you and your family. With the flexibility to decide your policy
term, you can enjoy life protection up to age 100 and steady growth to your savings over time
so that you can relax and enjoy your life with complete peace of mind.

6. ABSLI Income Assured Plan: You diligently chalk out plans and work hard in life to give
your near and dear one's a financially secure future. But uncertainties can always put you on
the back foot. To fulfil the rising needs of life at various stages what you need is a product that
guarantees returns, no matter the situation. So, when you get closer to realising your
dreams/aspirations, an extra stream of income will always be there to help realise those dreams.
ABSLI Income Assured Plan, helps you plan your future better by creating a corpus in the long
run that helps you realise your dreams and various financial goals.

7. ABSLI Vision Regular Returns Plan: ABSLI Vision Regular Returns Plan is a traditional
participating endowment plan. With survival benefits payable every year from 5th policy
anniversary till maturity and life insurance benefit, this plan offers a perfect combination of
liquidity, savings and financial protection of your family.

8. ABSLI Vision Endowment Plus Plan: In life, when we face so much uncertainty around
us, there's nothing more reassuring than knowing that not only is your money safe, but also that
you will receive more than what you have invested. With the return of premium along with
accrued bonuses on maturity and protecting your family's financial security, this plan offers
you the best of both worlds.

5
Hence, by investing in ABSLI Vision Endowment Plus Plan, your investment can go a long
way in building a safe and financially sound future for your family, today as well as in the years
to come.

9. ABSLI Guaranteed Future Plan: Aditya Birla Sun Life Insurance Guaranteed Future Plan
offers the assurance that your dreams will be secured under all circumstances. A unique plan
designed to help you save for the significant events in your life such as your child's education,
marriage, your parents' golden innings, or even the exotic family holidays that you dream of.
This plan ensures that all your dreams are fulfilled and your family maintains the same lifestyle
even when you are not around.

10. ABSLI Secure Plus Plan: ABSLI Secure Plus Plan recognizes the importance of such
needs and helps you fulfil them by offering you a second income which ensures peace of mind.

RETIREMENT

11. ABSLI Empower Pension Plan: Presenting the ABSLI Empower Pension Plan, a plan
designed specially to ensure that you remain in control of your destiny even during the second
innings of life. A unit linked, non-participating pension plan - it is simple, hassle-free and helps
you to focus on your goals and enhance your savings for your future ensuring it is free from
worries.

12. ABSLI Immediate Annuity Plan: After working hard for decades, you have earned the
right to relax peacefully after retirement. But when you stop working, so will your income.
However, your expenses won't. Escalating healthcare costs and inflation will deplete your
savings rapidly, making it essential to have a secured alternate source of income. Here's where
the Aditya Birla Sun Life Insurance Immediate Annuity Plan can work for you. It enables you
to convert your savings or lump sum amounts into an instantly guaranteed lifetime income
source after retirement, which you can avail anytime you choose to.

13. ABSLI Empower Pension – SP Plan: ABSLI Empower Pension – SP Plan this plan will
help you gain financial freedom during your second innings. The plan helps you focus on your
goals and enhances your savings for a future free from worries.

HEALTH AND WELLNESS

14. ABSLI Hospital Plus Plan: ABSLI Hospital Plus Plan which offers a fixed cash amount
in the event of hospitalization, so that you can spend time with your loved ones on the path of
recovery, instead of thinking about hospital bills. ABSLI Hospital Plus Plan, acts as a
supplement to your Health Insurance Policy and helps you financially to mitigate additional
expenses. Now leave all your worries aside and enjoy the best medical care experience
available to you.

15. ABSLI Cancer Shield Plan: The word cancer can strike fear into anybody's mind. Simply
because this life-threatening disease not only adversely impacts the body but also puts one's
financial health under tremendous strain. With rapidly changing lifestyles, the risk of cancer is
growing at an alarming rate in India. And the best way to fight cancer is to prepare for it. Like

6
all the uncertainties in life now you can plan for cancer at every stage with Aditya Birla Sun
Life Cancer Shield Plan. It's a promise that we will always be by your side.

16. ABSLI CritiShield Plan: In today's time Cardiac and Renal illnesses are on rise due to
eating habits, change in life style and everyday stress. Aditya Birla Sun Life Insurance Co. Ltd.
Introduces ABSLI CritiShield Plan that protects your savings and lifestyle against sudden
higher expenses from heart & kidney ailments. These diseases demand more money than
hospital bills, so therefore the lump sum amount from ABSLI CritiShield Plan protects you and
your loved ones from any adversity.

CHILDREN’S FUTURE

17. ABSLI Vision Star Plan: As your child grows up and looks for success in this fast-paced
world, he will always look up to you for support and inspiration. He may want to discover his
true passion and explore unconventional career options. He might want to try new things until
he is sure about his career path. You will need to keep pace with his changing goals, you will
need a plan that gives your child the confidence to pursue and discover his/her real passion.
Presenting, ABSLI Vision Star Plan, so that you can ensure that your child doesn't miss out on
opportunities due to insufficient funds.

WEALTH WITH PROTECTION SOLUTIONS

18. ABSLI Wealth Max Plan: Have you often wondered about an investment vehicle, which
provides financial protection for your family and earns good returns for you? Wouldn't you
want an insurance plan which helps you realize your financial dreams? Introducing the ABSLI
Wealth Max plan - a single premium unit linked insurance plan.

19. ABSLI Wealth Secure Plan: In order to build a better life and realise your dreams, you
always need to plan ahead. That's why you need a savings plan that helps you attain your goals
with your changing life stage and can be customised to match your needs while giving you
peace of mind. Introducing Aditya Birla Sun Life Insurance Wealth Secure Plan that combines
long term savings and whole life coverage specially designed for you to focus on your goals
and maximise savings for your future.

20. ABSLI Wealth Assure Plan: You have worked hard for your money, and you should
always make your money work harder for you, driving its growth in high gear. Introducing,
Aditya Birla Sun Life Insurance Wealth Assure Plan, a protection and savings plan that enables
your wealth to grow steadily over time, giving you and your loved ones peace of mind, and
providing you a secure financial future to meet your needs at different stages of life.

21. ABSLI Fortune Elite Plan: Under ABSLI Fortune Elite Plan, you decide how to invest
your premiums in one of the three investment options - Systematic Transfer Option, Return
Optimiser Option or the Self-Managed Option.

22. ABSLI Wealth Aspire Plan: In the pace that the world is moving today, security of your
loved one's is a big concern. Your hard work is always directed towards accumulating sufficient
wealth for them. Hence, it is important to organize your efforts in a way that works the best for

7
you. Aditya Birla Sun Life Insurance Wealth Aspire Plan ensures that you fulfil your
responsibilities without any trouble by empowering you with a personalized wealth creation
plan. It helps you accumulate substantial financial corpus using its wealth features and allows
you to fulfil your duties by securing the future of your loved ones.

PROTECTION

23. ABSLI Protector Plus Plan: To deal with growing expectations and secure the financial
future of your family, Aditya Birla Sun Life Insurance has come up with the perfect protection
solution for you. Introducing ABSLI Protector Plus Plan. With a higher Sum Assured, it
protects your family's future and ensures that they lead their lives without any financial worries.

24. ABSLI Future Guard Plan: ABSLI Future Guard Plan provides complete financial
freedom even when you're not around, so that your loved ones live comfortably. This plan is
ideal for you if you want an economical way of providing for life insurance cover and would
like to protect your family in the unfortunate event of you not being around, yet receive all your
premiums back on maturity. So, you can enjoy life knowing that your family's future is secured
and guaranteed even in your absence and your premiums are yours on your survival.

25. ABSLI Protect@Ease Plan: Life is filled with unpredictable events and there are so many
responsibilities to be fulfilled. We strive to give our family a financially secure life and hope it
remains that way. Now, ABSLI's traditional term insurance plan Protect@Ease does exactly
the same. It safeguards you from unforeseen events by ensuring maximum benefits and utmost
security for your family. This plan helps you ride the highs of life while overriding the lows.
So, give your family the benefit they deserve with a plan customized by you.

26. ABSLI Income Shield Plan: We all wish for the goodwill of our family and the people
we love. To make sure they are taken care of in the most critical stages of life you need a plan.
Designed for salaried professionals and entrepreneurs alike, Aditya Birla Sun Life Insurance
Income Shield Plan provides the financial support needed to protect your loved ones even in
case of death or other unforeseen circumstances. It ensures that the family continues to earn
the same monthly salary or income necessary to enjoy the same lifestyle as earlier. Give your
family the shield they deserve to protect their dreams.

8
 CHAPTER 2. LITERATURE REVIEW
2.1 Indian Financial Markets

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

Features of the Financial Market in India:

• India Financial Indices - BSE 30 Index, various sector indexes, stock quotes, Sensex
charts, bond prices, foreign exchange, Rupee & Dollar Chart
• Indian Financial market news
• Stock News - Bombay Stock Exchange, BSE Sensex 30 index, S&P CNX-Nifty,
company information, issues on market capitalization, corporate earnings statements
• Fixed Income - Corporate Bond Prices, Corporate Debt details, Debt trading activities,
Interest Rates, Money Market, Government Securities, Public Sector Debt, External
Debt Service
• Foreign Investment - Foreign Debt Database composed by BIS, IMF, OECD, & World
Bank, Investments in India & Abroad
• Global Equity Indexes - Dow Jones Global indexes, Morgan Stanley Equity Indexes
• Currency Indexes - FX & Gold Chart Plotter, J. P. Morgan Currency Indexes
• National and Global Market Relations
• Mutual Funds
• Insurance
• Loans
• Forex and Bullion

9
2.2 Different Financial Products

2.2.1 Money Market

• Treasury Bill: Short term borrowings of the government (14days, 91days, 182days,
364days)
• Commercial Bills: Banks make advances to customers against these documents.
• Inter-bank call money: Source for banks for getting overnight and short term funds
• Commercial paper: Short term unsecured instrument issued by a company via
promissory notes with fixed
• Certificate of Deposit: Issued by commercial banks at discount on face value

2.2.2 Capital Market

• Derivatives: Forwards, futures, options, swaps

• Shares, right, bonus, preference
• Debentures
• Bonds
▪ Euro convertible bonds
▪ Deep discount bonds

2.2.3 Fund Based

▪ Underwriting (shares, debentures, bonds, etc.) of new issue

▪ Equipment leasing
▪ Hire purchase
▪ Bill discounting
▪ Venture capital
▪ Housing finance
▪ Insurance services
▪ Factoring, etc.

2.2.4 Feed Based

▪ Corporate advisory services

▪ Merchant banking

10
 ▪ Issue management
▪ Loan syndication
▪ Credit rating
▪ Stock broking
▪ M&A
▪ Capital restructuring

2.3 Life Insurance

2.3.1 An overview:

Life insurance is a business proposition resting on the combined operation of law of

mortality and interest. We all know that time of our death is uncertain and in case of untimely
death of a person his family could be put into great financial hardship. The science of life
insurance revolves around the principle of providing some financial relief to the loved ones of
a person in case of his sudden death.

The first essential for working of life insurance is calculation of risk to fix the amount
of contribution(premium) to be made by each policy-holder according to his age, medical
history, habits, occupation etc. so that the fund should be adequate to meet the whole claims.18
The probability of death or the law of mortality is used for this purpose.

2.3.2 Concept:

In simple words, it means an agreement in which one party agrees to pay a given sum of money
upon the happening of a particular event contingent upon duration of human life in exchange
of the payment of a consideration. The person who guarantees the payment is called Insurer,
the amount given is called Policy Amount, the person on whose life the payment is guaranteed
is called Insured or Assured. The particular event on which the payment is guaranteed to be
given may be Death or Life. The consideration is called the Premium. The document
evidencing the contract is called Policy.6 There is no statutory definition of life insurance, but
it may be defined as a contract in which the insurer, in consideration of a certain premium,
either in lump sum or in form of any other periodical payments, in return agrees to pay to the
assured, or to the person for whose benefit the policy is taken, a stated sum of money on the
happening of a particular event contingent on the duration of human life.

11
2.3.3 Importance:

There are many things in life that the average household can live without, but life insurance
should not be one of those things. The importance of life insurance increases as the number of
people in a household increase. A single person with few, if any, close relations can get by on
a very little life insurance or perhaps no insurance at all. The same cannot be said for persons
who have family members or other types of responsibilities.

Life insurance is a way to protect your family against possible financial trouble or even ruin,
depending on your circumstances. Life insurance is also a way to relieve some of the anxiety
that family members may feel as they wonder how they will get by should a breadwinner in
the family pass on. Some forms of life insurance can even be used as a means of saving money
over the long term.

It is important for consumers to understand that the term "life insurance" is a very broad term.
There are various types of policies, and often one will be a far better option for a particular
family or person than another might be for that same family or person. Because there are so
many types of policies available, the consumer would do well to get a basic understanding of
each before committing to one over another. The best way, of course, to dothis is through a
reputable life insurance broker or company agent.

A reputable life insurance broker will normally be a state-licensed agent who carries different
types of policies from different companies. There are life insurance agents, as well, who
normally work for a particular insurance company and sell the products of that company. The
main difference between working with a broker and working with a company agent is selection.
A broker can offer many different types of policies at different price points because he or she
carries more options from more sources. A company agent can only offer what his or her
company has to offer. This can limit your choices.

Aside from choosing the correct type of policy, consumers must also decide on the level
of coverage they need. A common mistake that many consumers make is when they, more or
less, pick a number out of the blue. A consumer might say: "I need $10,000 worth of life
insurance" but when asked to justify that amount, they are at a loss to do so. Is that amount too
much; is it too little? Often, they simply do not know.

The amount of coverage needed will vary from one family to another. It can also vary
depending on where in life a person is when he or she takes out the policy. A newly married

12
couple, young in age, will normally need less life insurance coverage than a middle-aged
couple with a home mortgage and student loans that need to be paid off. Then again, a high
earning young couple may need more life insurance than a middle-aged couple if the high
earning couple needs to replace one of the incomes lost through death. As you can see, coverage
is dependent on many issues and aspects, some of which are hard to explore without the aid of
a qualified life insurance agent or broker.

Invest the time and effort needed to speak with a reputable broker or agent, examine
your options, choose your coverage wisely, and your family will be protected if the unforeseen
should happen.

2.4 Analysis of Life Insurance Industry in India

Since inception the Indian life insurance industry has its own origin and history. It has passed
through many hurdles and hindrances in order to attain the present status. However, the income
earning capacity of an individual citizen of a nation and the eagerness and awareness of the
general public are the two key determinants of the growth of any insurance industry. In the
Indian context, the insurance habits among the general public during the independence decade
was rare and in the following decades, it has slowly increased. There was a remarkable
improvement in the Indian insurance industry soon after the economic reform era (1991). After
1991 the Indian life insurance industry has geared up in all respects, as well as it is being forced
to face a lot of healthy competition from many national as well as international private
insurance players.

In this paper we have analysed the performance of LIC over a time period of 1980 to 2009,
attempt has been made to analyse the overall performance of Life Insurance Industry of India
between pre- and post-economic reform era. To measure the current status, volume of
competitions and challenges faced by the Life Insurance Corporation of India and to measure
the effectiveness of investment strategy of LIC over the period 1980 to 2009. Data were
analysed by using Regression, Trend Analysis and Anova. The study reveals that there is a
tremendous growth in the performance of Indian Life Insurance industry and LIC due to the
policy of LPG. Insurance industry also improved a lot due to the emergence of Private sector
and opening up for foreign players. Further there is also a huge change in the investment pattern
of LIC. There is an increasing trend toward the investment in Stock market by LIC from 60%
to 93% from 1980 to 2009 due to the effective regulation of SEBI and increasing transparency
of stock market.

13
Insurance sector reforms:

In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N.
Malhotra was formed to evaluate the Indian insurance industry and recommend its future
direction. The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at "creating a more efficient and
competitive financial system suitable for the requirements of the economy keeping in mind the
structural changes currently underway and recognizing that insurance is an important part of
the overall financial system where it was necessary to address the need for similar reforms.

In 1994, the committee submitted the report and some of the key recommendations included:

1) Structure: Government stake in the insurance Companies to be brought down to 50%.

Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries
can act as independent corporations. All the insurance companies should be given greater
freedom to operate.

2) Competition: Private Companies with a minimum paid up capital of Rs.1bn should be

allowed to enter the industry. No Company should deal in both Life and General Insurance
through a single entity. Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies. Postal Life Insurance should be allowed to operate
in the rural market. Only One State Level Life Insurance Company should be allowed to operate
in each state.

3) Regulatory Body: The Insurance Act should be changed. An Insurance Regulatory body
should be set up. Controller of Insurance (Currently a part from the Finance Ministry) should
be made independent.

4) Investments: Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any
company (There current holdings to be brought down to this level over a period of time).

5) Customer Service: LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked pension plans. Computerisation
of operations and updating of technology to be carried out in the insurance industry The
committee emphasized that in order to improve the customer services and increase the coverage
of the insurance industry should be opened up to competition.

14
2.5 Future & Prospects of Life Insurance in India
Insurance sector in India has become one of the most favoured investment destinations both
for Indians and NRIs. India is the fifth largest insurance market among the globally emerging
insurance economies. Growing interest towards insurance among people, innovative products
and distribution channels are sustaining the growth of the insurance sector. The various
liberalisation policies in the sector have opened the door for various private sector insurance
companies. This increase in number of players has resulted in new products, better packaging,
improved customer service, greater employment opportunities, etc.

2.5.1 Market Structure

There are 49 insurance companies operating in India as of September 2011. Out of which, 24
are in life insurance business, 24 in general insurance business, and remaining ones in re-
insurance business. General Insurance Corporation of India (GIC) is the sole national re-
insurer.

2.5.2 Growth Predictions

The Indian insurance sector is expected to grow at a rapid pace to reach around US$ 400 billion
in premium income by 2020, according to a report released by an industry body and the Boston
Consulting Group (BCG). As per the report, this would make India one of the top three life
insurance and top 15 nonlife insurance markets by 2020.

2.5.3 Career Prospects

There are number of career opportunities available in Indian insurance sector. Insurance
companies have job openings in various fields such as marketing, distribution, actuarial,
underwriting, operations and investing departments. A graduate in the area of finance,
marketing, or sales can easily get the job in the insurance companies. They can earn anything
between Rs. 8000 - 20,000 per month in the starting months. Most of the companies offer a
very good remuneration and heavy incentives to retain the qualified candidates. Candidates can
also take help of various recruitment agencies operating in India for searching the right job.
These job consultancies work on the behalf of companies having job requirements. The job
agencies offer decent job opportunities in various sectors with top most companies and a good
salary package according to candidate’s profile.

15
2.5.4 Recent Initiatives
The Finance Minister has approved a proposal to raise foreign direct investment (FDI) in
insurance and pension sectors to 49 percent from the existing 26 percent to encourage more
investment in the sector. The Securities and Exchange Board of India (SEBI) has relaxed rules
to allow more life insurers to launch public offers. The Government's Financial Sector
Legislative Reforms Commission (FSLRC) is working on new insurance policies' framework
that would end LIC's monopoly, empower IRDA and establish a legal system to handle any
lapses at insurers' end.

2.5.5 Road Ahead

The Indian insurance industry is booming, with several national and international players
competing and increasing operations in the country. The Mckinsey report on the outlook for
insurance sector in 2012 predicts an exponential growth for the insurance industry in 2012 due
to contributing factors such as increasing household incomes, higher premiums, growing
technology, liberal policies, etc. This will result in more investment by normal average earning
Indian households to invest in Financial Sectors.

16
 CHAPTER 3: RESEARCH METHODOLOGY
3.1 Research Problem- Background of Study

1. The pre-liberalized India had a very poor rate of savings and most of the money earned was spent on
consumption rather than accumulation. But in the post-liberalization period, India saw an upsurge in
volume of savings.

2. The investment habit of the small investors particularly has undergone a sea change. So that investment
companies continually introduced new types of funds in an effort to attract investor’s capital and maximize
assets under management.

3. However investment is increasingly considered as a subject falling under behavioural science rather
than finance or economics.

4. It is governed more by trends and group behaviour rather than rationality and cold calculations.
Investors like consumers are also immensely influenced by fashions and what is “in-thing”.

5. Moreover investors are unique and are a highly heterogeneous group at the retail level.

6. It is widely believed that Mutual Funds (MFs) and Life Insurance (LIs) are designed to target small
investors, salaried people and other who are intimidated by the stock market.

7. Various studies observed that with the structure liberalization policies no doubt Indian Economy is
likely to return to a high grow path in few years, at the same time mutual fund organizations are needed to
upgrade their transparency.

Need of the Study

Stock market has been subjected to speculations and inefficiencies, which are beached to the rationality of
the investor. Traditional finance theory is based on the two assumptions. Firstly, investors' make rational
decisions; and secondly investors are unbiased in their predictions about future returns of the stock.
However financial economist has now realized that the long-held assumptions of traditional finance theory
are wrong and found that investors can be irrational and make predictable errors about the return on
investment on their investments.

This analysis on Individual Investors' Behaviour is an attempt to know the profile of the investor and know
the characteristics of the investors to know their preference with respect to their investments. The study
also tries to unravel the influence of demographic factors like age on risk tolerance level of the investor.

17
3.2 Research Objective

• To understand all about different investment avenues available in India.

• To find out how the investors get information about the various financial instrument.

• To find out how the investor wants to invest i.e. on his own or through a broker.

• To find out the saving habits of the different customers and the amount they invest in various financial
instruments.

• In which type of financial instrument, they like to invest.

• How long they prefer to keep their money invested.

• What is the return that they expect from the investment?

• What are the various factors that they consider before investing?

• To find out the risk profile of the investor.

• To give a recommendation to the investors that where they should invest.

• To give a suggestion to the company where its funds lack in the market & how it should be rectified.

• After all, as a management trainee I will try to get some valuable knowledge from my seniors in the
organization as well as from my faculty guide which will help me in the future.

• To evaluate the consumer attitude towards saving and decision-making regarding investments.

18
3.3 Research Design

3.3.1 Sampling Design

• Sampling Area: Kolkata

• Sample Population: Above 150
• Sample Size: 100

3.3.2 Methods

• The method used in the research (survey) is of probability type as we are unaware about the results.
It can be either of the side. It is area of Kolkata city under which we have to conduct the research.
• The research is based on Convenience Methods and the take the sample from to various financial
broking companies.

3.3.3 Research Type and Sources

• Research: Investment Habits

• Data Source: Primary Data
• Research Methods: Survey Method
• Research Technique: Survey Form
• Questionnaire Type: Structured
• Type of Questions: Closed & Open-ended questions

3.4 Scope of Study

• To give a perspective view to Non- Banking Financial Sectors on the investment pattern followed
by Indian Investors
• Areas to develop and scope of improvement required in certain lacking fields of NBFC’s.

3.5 Limitation of Study

• Lack of Un-biased Sample

• Lack of time and financial resources
• The total number of financial instruments in the market is so large that it needs a lot of resources to
analyse them all. There are various companies providing these financial instruments to the public.
Handling and analysing such a varied and diversified data needs a lot of time and resources.
• As the analysis is based on primary as well as secondary data, possibility of unauthorized
information cannot be avoided.
• Reluctance of the people to provide complete information about them can affect the validity of the
responses.
• The lack of knowledge of customers about the financial instruments can be a major limitation.
• The information can be biased due to use of questionnaire.

19
 CHAPTER 4: DATA ANALYSIS AND FINDINGS

4.1 Analysis of the Survey:

TABLE 1: DEMOGRAPHICS OF THE SAMPLE INVESTOR

PARAMETER NO: OF INVESTORS PERCENTAGE

GENDER

MALE 58 58%

FEMALE 42 42%

TOTAL 100 100%

AGE GROUP

BELOW 20 0 0%

BETWEEN 20 -30 35 35%

BETWEEN 30 -40 35 35%

ABOVE 40 30 30%

TOTAL 100 100%

QUALIFICATION

UNDER GRADUATES 7 7%

GRADUATES 46 46%

POST GRADUATES 39 39%

OTHERS 8 8%

TOTAL 100 100%

OCCUPATION

SALARIED 52 52%

BUSINESS 22 22%

PROFESSIONAL 14 14%

HOUSE WIFE 11 11%

RETIRED 1 1%

TOTAL 100 100%

ANNUAL INCOME

20
BELOW Rs. 2,00,000 37 37%

Rs. 2,00,000 - 4,00,000 31 31%

Rs. 4,00,000 - 6,00,000 18 18%

ABOVE Rs, 6,00,000 14 14%

TOTAL 100 100%

INTERPRETATION FROM THE ABOVE DATA:

Table 1 above shows, that 58 (58%) of the investors are men and the rest 42(42%) are females. Generally,
males bear the financial responsibility in Indian society, and therefore they have to make investment (and
other) decisions to fulfil the financial obligations. When it comes to age, it was found that 35% are young
and significant number under the age group of 20 - 30. 35% of them are in the age group of 30 to 40. 30%
of them are above 40 years of age. There are no investors below 20 years of age. Nearly 52% of the investors
belong to the salaried class, 22% were business class, 14% were professionals, 11% were housewives and
the rest were retired.

It was found that irrespective of annual income they earn all the investors interested in investments since
today's inflated cost of living is forcing everyone to save for their future needs and invest those saved
resources efficiently. 39(39%) of the individual investors covered in the study are postgraduates; 46(46%)
investors are graduates and 7(7%) of the investors are under-graduates, and 8(8%) investors are categorized
as others who are either illiterates, had less education than under graduation or who are more qualified than
post graduates. It is interesting to note that most investors (covered in the study) can be said to possess higher
education (Bachelor’s Degree and above), and this factor will increase the reliability of conclusions drawn
about the matters under investigation. 37(37%) of the investors are earning less than 2 lakhs per annum,
31(31%) investors are earning between 2 lakhs and 4 lakhs, 18(18%) investors are earning between 4 lakhs
and 6 Lakhs, 14(14%) investors are earning more than 6 lakhs per annum. Since most of the investors are
below 4 lakhs annual earnings, many of them are non-risk takers.

21
TABLE 2- OTHER CHARACTERISTICS OF SAMPLE INVESTOR
Table 2.1 INVESTORS WILLING TO LOSE PRINCIPAL AMOUNT
PARAMETER NO OF INVESTORS PERCENTAGE
YES 5 5
NO 95 95
TOTAL 100 100

INVESTORS WILLING TO LOSE PRINCIPAL AMOUNT

Yes
5%

No
95%

Interpretation:
Since many of the investors annual earnings are below 2 lakhs and 4 lakhs, many of them do not take the
risk of losing their principal investment amount. 95% of the sample investors are not ready to lose their
principal investment amount. 5% are ready to take risk of losing their principal up to certain extent.

Table 2.2 TIME PERIOD PREFERRED TO INVEST

PARAMETER NO OF INVESTORS PERCENTAGE
SHORT TERM 10 10
MEDIUM TERM 60 60
LONG TERM 30 30
TOTAL 100 100

TIME PERIOD PREFERRED TO INVEST

SHORT TERM
10%
LONG
30%

MEDIUM
60%

Interpretation:

22
It's interesting to know that many of the investors prefer to invest their money for medium term i.e. from 1
- 5 yrs., instead of short term or long term. 10% preferred short term, 60% preferred medium term, and
30% preferred long term.

Interpretation:
Due to the busy life schedule, many of the investors are not able to spend time in monitoring their
Table 2.3 FREQUENCY OF MONITORING THE INVESTMENT
PARAMETER NO OF INVESTORS PERCENTAGE
DAILY 17 17
MONTHLY 35 35
OCCATIONALLY 41 41
OTHER 7 7
TOTAL 100 100

FREQUENCY OF MONITORING THE INVESTMENT

OTHER
7% DAILY
17%

OCCASSIONALLY
41%
MONTHLY
35%

investments, only 17% of the investors are monitoring their investments daily, 35% are monitoring on a
monthly basis, 41%, the majority investors are monitoring their investments occasionally. Many of them
who have invested in safe investment avenues do not bother about their investments, some of them forget
about the investments for many years.

Table 2.4 INVESTMENT IN EQUITY MARKET

PARAMETER NO OF INVESTORS PERCENTAGE

YES 30 30
NO 70 70

TOTAL 100 100

Out of the total sample investors only 70% of the investors invest in equity share market through
their DEMAT A/C, 30% of the investors never invested in equity shares. The investors who invest in equity
23
share market are asked another question, what would they do if the stock market falls immediately after their
investment, many of them replied that they would wait till the market increases instead of selling them at a
loss, very few answered that they would average the investment by buying some more shares.

Table 2.5 FAMILY BUDGET

PARAMETER NO OF INVESTORS PERCENTAGE
YES 73 73
NO 27 27
TOTAL 100 100

FAMILY BUDGET
NO
27%

YES
73%

73% of the sample investors had a monthly family budget for their daily expenditure. 27% of the
investors replied they never thought of having a budget calculation, and few think of having a budget but
never implemented so far. Many people with excess money never cared to make any family budgets.

Table 2.6 INVESTMENT TARGET

PARAMETER NO OF INVESTORS PERCENTAGE
YES 48 48
NO 52 52
TOTAL 100 100

INVESTMENT TARGET

YES

NO

24
 It's interesting to know that almost same proportion of investors have different thoughts, 48% of
the investors have an investment target every year, and 52% of the investors do not go for any targets for
investment. On personal questioning many of the investors who had an investment target every year are
not able to reach their targets due to contingent expenses. Few investors invest regularly but never thought
of having a target every year.

Table 2.7 FINANCIAL ADVISOR

PARAMETER NO OF INVESTORS PERCENTAGE
YES 23 23
NO 77 77
TOTAL 100 100

FINANCIAL ADVISOR
YES

NO

77% of the investors never had a financial advisor, they never approached an advisor for their
financial needs, the reason may be inadequate income and excess expenditure, and there wouldn't be
surplus money to worry about. 23 % of the investors have financial advisors, who manage their
investments.

25
TABLE 3- OBJECTIVES OF INVESTMENT

Table 3.1 SAVINGS OBJECTIVE

PARAMETER VOTES WEIGHTS RANKING
CHILDREN'S EDUCATION 71 29 1
RETIREMENT 47 19 3
HOME PURCHASE 38 15 4
CHILDREN'S MARRIAGE 30 12 5
HEALTHCARE 57 23 2
OTHERS 5 2 6
TOTAL 248 100

SAVINGS OBJECTIVE

OTHERS 5

HEALTHCARE 57

CHILDREN MARRIAGE 30

HOME PURCHASE 38

RETIREMENT 47

CHILDREN EDU 71

0 10 20 30 40 50 60 70 80

Table 3.1 shows the savings objectives of the sample investors, investors are given option to select one or
more savings objectives, since there may be one or more answers, weights are given for each parameter
bases on the votes given by the investors, the maximum weightage represents many investors have that as
main objective. Based on the weights calculated ranks are given in the order of maximum weightage given
by investors. First rank is given to children's education, many investors feel that, investing money for the
future of the Childs education is very important than any other need. Many of the investors are in the age
group of 20 - 30 and 30 - 40 as of now they are thinking of saving for their children's marriage. So children's
marriage is given last rank. After children's education investors are saving for their own health care. There
is a greater need for Indians to save for their health care who are living a mechanical life. Retirement and
home purchase are given subsequent ranks after health care.

26
 Table 3.2 PURPOSE BEHIND INVESTMENT
PARAMETER VOTES WEIGHTS RANKING

WEALTH CREATION 37 22 4
TAX SAVING 43 25 3
EARN RETURNS 45 27 1
FUTURE EXPENDITURE 44 26 2

TOTAL 248 100

PURPOSE BEHIND INVESTMENT

(VOTES)

FUTURE EXPENDITURE

EARN RETURNS

TAX SAVINGS

WEALTH CREATION

0 5 10 15 20 25 30 35 40 45

All the investors have very common purposes for investing, they have more than one purpose for
investing their money. Salaried people invest for tax savings, and for future expenditure, business people
invest for earning returns. Almost all the investors have all the 4 purposes behind investing their money.

Investment believes in a proved principle, "higher the risk higher the returns, lower the risk lower
the returns". Investors need to know about this principle before investing.

27
 Table 3.3. FACTORS CONSIDERING BEFORE INVESTING
PARAMETER VOTES WEIGHTS RANKING

SAFETY OF PRINCIPAL 60 43 1
LOW RISK 35 25 2
HIGH RETURNS 27 19 3
MATURITY PERIOD 16 11 4

TOTAL 138 100

FACTORS CONSIDERING BEFORE

INVESTMENT (VOTES)

MATURITY PERIOD

HIGH RETURNS

LOW RISK

SAFETY OF PRINCIPAL

0 10 20 30 40 50 60

When the investors are asked about the factors considering before investment many of them have voted for
safety of principal and low risk. First rank is given to safety of principal and 2nd to low risk. Here there are
some contradicting results, some investors expect high returns at a very low risk, and this is not possible in
practical Indian investment avenues. Investment believes in a proved principle, "higher the risk higher the
returns, lower the risk lower the returns". Investors need to know about this principle before investing.

Independent Variables and Dependent Variables

There are total four independent variables

1. Age group. 2. Occupation. 3. Qualification. 4. Annual income

There can be many dependent variables like

• Level of risk tolerance

• Percentage of income that can be invested
• Time period that can be taken for investments
• Savings objectives
• Investment preference.

These independent variables can be compared with any dependent variables for finding the relations between
the parameters. In my analysis I have taken occupation category for comparison with dependent variable
investment preference and age group comparing with the dependent variable level of risk tolerance.

28
TABLE 4 : DEMOGRAPHICS BASED ON OCCUPATION

I. SALARIED

PARAMETER NO: OF - SALARIED PERCENTAGE

AGE GROUP

BELOW 20 0 0%

BETWEEN 20 - 30 22 42%

BETWEEN 30 - 40 18 35%

ABOVE 40 12 23%

TOTAL 52 100%

QUALIFICATION

UNDER GRADUATES 0 0%

GRADUATES 21 40%

POST GRADUATES 25 48%

OTHERS 6 12%

TOTAL 52 100%

ANNUAL INCOME

BELOW Rs. 2,00,000 15 29%

Rs. 2,00,000 - 4,00,000 15 29%

Rs. 4,00,000 - 6,00,000 17 33%

ABOVE Rs, 6,00,000 5 10%

TOTAL 52 100%

29
II. BUSINESS

PARAMETER NO: OF - BUSINESS PERCENTAGE

AGE GROUP

BELOW 20 0 0%

BETWEEN 20 - 30 2 9%

BETWEEN 30 - 40 10 45%

ABOVE 40 10 45%

TOTAL 22 100%

QUALIFICATION

UNDER GRADUATES 5 23%

GRADUATES 11 50%

POST GRADUATES 6 27%

OTHERS 0 0%

TOTAL 22 100%

ANNUAL INCOME

BELOW Rs. 2,00,000 11 50%

Rs. 2,00,000 – 4,00,000 5 23%

Rs. 4,00,000 - 6,00,000 1 5%

ABOVE Rs, 6,00,000 5 23%

TOTAL 22 100%

30
III.PROFESSIONAL

PARAMETER NO: OF - PROFESSIONAL PERCENTAGE

AGE GROUP

BELOW 20 0 0%

BETWEEN 20 - 30 8 57%

BETWEEN 30 - 40 2 14%

ABOVE 40 4 29%

TOTAL 14 100%

QUALIFICATION

UNDER GRADUATES 0 0%

GRADUATES 6 43%

POST GRADUATES 6 43%

OTHERS 2 14%

TOTAL 14 100%

ANNUAL INCOME

BELOW RS. 2,00,000 2 14%

RS.2,00,000-4,00,000 8 57%

RS 4,00,000-6,00,000 1 7%

ABOVE RS. 6,00,000 3 21%

TOTAL 14 100%

31
IV.HOUSEWIFE

PARAMETER NO: OF - HOUSEWIFE PERCENTAGE

AGE GROUP

BELOW 20 0 0%

BETWEEN 20 - 30 4 36%

BETWEEN 30 - 40 3 27%

ABOVE 40 4 36%

TOTAL 11 100%

QUALIFICATION

UNDER GRADUATES 1 9%

GRADUATES 6 55%

POST GRADUATES 2 18%

OTHERS 2 18%

TOTAL 11 100%

ASSUMPTION

As a part of the analysis I assumed that preference for investment avenues is dependent on the occupation
of the investor. Hence preferred investment avenue are derived from the demographics of the sample
investor based on occupation.

32
 Table 5: INVESTMENT PREFERENCE BASED ON OCCUPATION

Table 5.1 Preferred investment avenues for salaried

INVESTMENT AVENUES VOTES WEIGHTS RANK

LIFE INSURANCE 35 16 1
GOLD 25 12 2
BANK FIXED DEPOSITS 24 11 3
MUTUAL FUNDS 23 11 4
REAL ESTATE 23 11 5
POST OFFICE SAVINGS 20 9 6
PPF 18 8 7
NSC 17 8 8
EQUITY SHARES 16 7 9
SAVINGS ACCOUNT 14 7 10
TOTAL 215 100

Since the investor has an option to invest in more than one Investment Avenue,
weights are given on the basis of preference to investment avenues. The avenue which
is given maximum weightage by the investors is ranked first. First Ten ranks are given
to the first ten preferred investment avenues. First preference is given to life insurance,
second to investing in gold, third to bank fixed deposits. Tenth preference is given to
bank savings account.

Table 5.2 Preferred investment avenues for business people

INVESTMENT AVENUES VOTES WEIGHTS RANK

BANK FIXED DEPOSITS 13 16 1
INSURANCE 13 16 2
REAL ESTATE 11 14 3
MUTUAL FUNDS 10 12 4
GOLD 8 10 5
EQUITY SHARES 7 9 6
CHIT FUNDS 6 7 7
POST OFFICE SAVINGS 5 6 8
SAVINGS ACCOUNT 4 5 9

33
 NSC 4 5 10

TOTAL 81 100

Thinking of the business people is almost same to that of salaried people, both are
similar in preferring insurance and bank fixed deposits, but given third preference to real
estate. Gold is given 5th place here. Last place is given to national savings certificates.

Table 5.3 Preferred investment avenues for professionals

INVESTMENT AVENUES VOTES WEIGHTS RANK

BANK FIXED DEPOSITS 10 19 1

INSURANCE 10 18 2

GOLD 6 11 3
REAL ESTATE 6 11 4

POST OFFICE SAVINGS 5 9 5

SAVINGS ACCOUNT 4 7 6
MUTUAL FUNDS 4 7 7
PPF 3 6 8
BONDS 3 6 9
GOVT SECURITIES 3 6 10
TOTAL 54 100

There is no much difference in the preferences of professionals when compared to salaried and
business people. Professionals does not prefer mutual funds (7th rank), where salaried and business people
prefer at 4th place. Professionals are more interested in post office savings rather than mutual funds. As
business people professionals also prefer bank fixed deposits in the first place, then life insurance.
Professionals does not prefer national saving certificates at all, eliminated it from the top 10

Table 5.4 Preferred investment avenues for housewives

INVESTMENT AVENUES VOTES WEIGHTS RANK

GOLD 9 18 1
INSURANCE 9 18 2
BANK FIXED DEPOSITS 8 16 3

34
 REAL ESTATE 5 10 4
POST OFFICE SAVINGS 5 10 5
CHIT FUNDS 4 8 6
EQUITY 4 8 7
SAVINGS ACCOUNT 3 6 8
NSC 2 4 9
MUTUAL FUNDS 1 2 10

TOTAL 50 100

Indian housewives love gold as much as themselves. Housewives have given first
rank to gold pushing insurance and bank fixed deposits to second and third place. House
wives gave least preference to mutual funds. They are more attracted to traditional
investment avenues like gold, real estate, post office savings and chit funds.

Table 5.5 Preferred investment avenues – overall

INVESTMENT AVENUES VOTES WEIGHTS RANK

LIFE INSURANCE 67 17 1

BANK FIXED DEPOSITS 55 14 2

GOLD 50 13 3

REAL ESTATE 45 12 4

MUTUAL FUNDS 38 10 5

POST OFFICE SAVINGS 35 9 6

EQUITY SHARES 29 8 7

SAVINGS ACCOUNT 25 6 8

NSC 25 6 9

PPF 22 5 10

TOTAL 391 100

35
HYPOTHESIS - Increase in Age decreases the Risk tolerance level.
• Relation between Age and risk tolerance
• Level of risk tolerance dependent on the age of the investor.
• Risk tolerance of an investor shows a negative relation to the age of that investor
• Lower the age higher the risk capabilities, higher the age lowers the risk capabilities.

LEVEL OF RISK TOLERANCE WITH RESPECT TO AGE GROUP:

For the purpose of analysis investors are placed under three categories.

• Low risk category

• Medium risk
• High risk

Classification is done based on three factors

• Past investments of the investor.

• Investor experience in investing (level of experience).
• Investor preference for investments.

First the total sample of 100 is divided in to 3 age groups.

Investors in each age group are classified in to 3 risk categories based on the above

factors.

Table 6: Finding relationship between age group and level of risk tolerance

Table 6.1 risk tolerance of age group 20 – 30

PARAMETER 20-30 AGE GROUP

LEVEL OF RISK NO. OF INVESTORS PERCENTAGE

LOW RISK 13 37%

MEDIUM RISK 17 49%
HIGH RISK 5 14%

TOTAL 35 100%

Table 6.2 risk tolerance of age group 30 – 40

PARAMETER 30-40 AGE GROUP

LEVEL OF RISK NO. OF INVESTORS PERCENTAGE

LOW RISK 20 57%

MEDIUM RISK 11 32%
HIGH RISK 4 11%
TOTAL 35 100%

36
Table 6.3 risk tolerance of age group above 40

PARAMETER ABOVE 40 AGE GROUP

LEVEL OF RISK NO. OF INVESTORS PERCENTAGE

LOW RISK 21 70%

MEDIUM RISK 6 20%
HIGH RISK 3 10%

TOTAL 35 100%

OBSERVATIONS:

Observations from table 6.1, 6.2, 6.3

From the table 6.1 we find that 49% of Investors between the age group of 20 - 30 came under medium risk
category, whereas the percentage of investors who came under medium risk in the age group of 30 - 40 has
decreased to 32%. It still came down in the case of investors in the age group of 40 above, which is only
20%. We can see a decreasing trend in the behaviour of investors towards medium risk when their age
increased 37% of the investors in the age group of 20 - 30 are in the low risk category, where as Investors
under the age group 30 - 40, 57% came under the low risk category, there is a large increase in the investors
who came under low risk category in this age group. It has further increased, 70% of the investors in the age
group above 40 came under the low risk category. We can see an increasing trend with respect to low risk
category as the age increases.

Same observations are arrived at, when comparing the high-risk category with respect to the age
groups. As the age increases the level of risk tolerance is coming down. 14% came under the high-risk
category under the age group 20 - 30, when it came to age group above 40 above only 10% came under the
high-risk category.

From the above observations we can conclude that there is a strong inverse or negative relationship
between risk tolerance and age group.

Attributes Risk Tolerance Level

Age -0.74

When Karl Pearson's correlation coefficient is calculated, it is found to be - 0.74 by which we can
conclude that there is a strong negative correlation between Age and Risk tolerance. Age accounts for the
major differences in risk taking decisions by the investors. The older an investor, the better seemed his/her
performance in comparison to the younger ones. Over- confidence in their own investment ability among
the youngsters largely accounts for the excessive trading among younger investors leading to lower returns
and this direct to decline in the risk tolerance level.

37
 CHAPTER 5: PROJECT ANALYSIS

5.1 FINDINGS & SUGGESTIONS

• The study reveals that male investors dominate the investment market in India.
• Most of the investors possess higher education like graduation and above.
• Majority of the active and regular Investors belong to accountancy and related employment; non-
financial management and some other occupations are very few.
• Most investors opt for two or more sources of information to make investment decisions.
• Most of the investors discuss with their family and friends before making an investment decision.
• Percentage of income that they invest depend on their annual income, more the income more
percentage of income they invest.
• The investors' decisions are based on their own initiative.
• The investment habit was noted in most of the people who participated in the study.
• Most Investors prefer to park their funds in avenues like Life insurance, FD, Gold and Real Estate.
• Most of the investors get their information related to investment through electronic media (TV)
next to print media (Newspaper/ Business newspaper/ Magazines)
• Most of the investors are financial illiterates.
• Increase in age decrease the risk tolerance level.
• Women are attracted towards investing gold than any other investment avenue.

5.2 Learnings

• During the study to be found that majority of people are aware of life insurance sector.
• During the survey it was observed that major source of information for consumer are television,
newspaper, internet and least preference are given to magazines, agents and friends.
• Attractive schemes and brand image are the most important factor that influences the buying
behaviour of the consumers.
• Majority of respondents will shift to any other insurance company.
• People are not satisfied with the opted insurance.
• It was found that the reason for the dissatisfaction of consumer is high premium, delay in claim
settlement and poor after sales service
• The insurance sector companies have to create more vibrant and competitive industry, with greater
efficiency, choice of products and value for customers.

38
 THE ALTERNATIVE BEHAVIORAL MINDSET OF INDIAN INVESTORS

1)REAL ESTATE AS AN INVESTMENT OPTION

The growth curve of Indian economy is at an all-time high and contributing to the upswing is the
real estate sector in particular. Investments in Indian real estate has been strongly taking up over other
options for domestic as well as foreign investors.

The boom in the sector has been so appealing that real estate has turned out to be a convincing
investment as compared to other investment vehicles such as capital and debt markets and bullion
market. 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.

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. 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.

Real estate industry research has also thrown light on investment opportunities in the
commercial office segment in India. The demand for office space is expected to increase significantly
in the next few years, primarily driven by the IT and ITES industry that requires an projected office
space of more than 367 million sq ft till 2012-13.

2)INVESTMENT IN GOLD

Gold has got lot of emotional value than monetary value in India. India is the largest consumer
of gold in the world. In western countries, you can find most of their gold in their central banks. But in
India, we use gold mainly as jewels. If you look at gold in a business sense, you will understand that
gold is one of the all time best investment tool. My dear readers, today I would like to discuss on
investments in gold and its potential.

Indian Gold Market Current Scenario:

• Size of the Gold Economy: more than Rs. 30,000 crores

• Number of gold jewelry manufacturing units: 1,00,000

39
 • Number of people employed: 5,00,000

• Gems & Jewellery constitute 25% of India s exports about 10% of our import bill constitute
gold import.
• Number of banks allowed importing gold: 15 (While recently this has been liberalized,
detailed notification is awaited)
• Official estimates of the stock of gold in India: 9,000 tons
• Unofficial estimates of the stock of gold in India: 12,000 iV 14,000 tons
• Gold held by the Reserve Bank of India: 358 tons
• Gold production in India: 2 tons per annum.
Demand for gold in the Indian Market:

India has the highest demand for gold in the world and more than 90% of this gold is acquired
in the form of jewellery. Following are the factors influencing the demand for gold. The movement of
gold prices is one of the important variables determining demand for gold. The increase in the irrigation,
technological change in agriculture (through mechanization and high yielding varieties), have generated
large marketable surplus and a highly skewed rural income distribution is another factors contributing
to additional demand for gold.
Supply of Gold: The main economic effects that arise from the changes in the supply of gold can
be seen against the quantum of gold that is already in existence in the economy. The supply of gold is not
up to the requirements as the production of gold is also coming down and demand for gold is going up very
sharply.

Gold as an Investment Option:

Gold as an investment tool always gives good returns, flexibility, safety and liquidity to the
investors. Therefore, as a behavioural research and MBA Scholar my advice would be, kindly allocate a
portion of your portfolio for gold investments. Practice the habit of buying at least one gram of gold every
month.

40
 5.3 Risk tolerance level and Suggestion of Suitable Portfolio to the Investors

The role of uncertainty and the knowledge about the return on Investment Avenue are important components
of any investment. The extent of an investor's ability to tolerate these uncertainties of return is referred as
risk tolerance level of an investor (Schaefer, 1978). Risk tolerance tends to be subjective rather than
objective.

Schaefer described the relation this way: "two persons may very well agree on the riskiness of a set
of gambles, but may nevertheless prefer different gambles, rank ordering them differently according to their
personal tolerance. There are two common methods of estimating investors' tolerance of risk. The first
method is a clear understanding of the investor and his/her history with investment securities. The second
method is to use a questionnaire designed to elicit feelings about risky assets and the comfort level of the
investor given certain changes in the portfolio or certain investment scenarios.

The second method is used to know the risk tolerance level of the investors. Based on the responses
to the questionnaire, the cumulative scale is constructed, and scores are assigned to each investor accordingly
to categorize the respondents in to i.e. Low, Moderate and High-risk tolerance level. The investors are
divided into 3 categories i.e., A, B and C depending on their risk tolerance starting with Low risk tolerance,
Moderate risk tolerance and High-risk tolerance.

Generally, investors with a low risk tolerance act differently with regard to risk than individuals with
a high-risk tolerance. Investor with a high level of risk tolerance would be comfortable with market
volatility, while low risk-tolerance individuals require stability and are averse to uncertainties.
(MacCrimmon & Wehrung, 1986). Individuals with low levels of risk tolerance require lower chances of a
loss, choose not to operate in unfamiliar situations and require more information about the performance of
an investment (MacCrimmon & Wehrung).

41
 CHAPTER 6: CONCLUSION

This report reflects the behaviour of various categories of investors.

Selection of a perfect investment avenue is a difficult task to any investor. An effort is made to
identify the tastes and preferences of a sample of investors selected randomly out of a large population.
Despite of many limitations to the study I was successful in identifying some investment patterns, there is
some commonness in these investors and many of them responded positively to the study.

This report concentrated in identifying the needs of current and future investors, investor's preference
towards various investment avenues are identified based on their occupation. Investors risk in selecting an
avenue is dependent on the age of that investor.

This study confirms the earlier findings with regard to the relationship between Age and risk
tolerance level of individual investors. The Present study has important implications for investment
managers as it has come out with certain interesting facets of an individual investor. The individual investor
still prefers to invest in financial products which give risk free returns. This confirms that Indian investors
even if they are of high income, well educated, salaried, independent are conservative investors prefer to
play safe. The investment product designers can design products which can cater to the investors who are
low risk tolerant and use TV as a marketing media as they seem to spend long time watching TVs.

42