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Submitted By
Kakadiya Rajvi Paresh Bhai (3259)
Submitted to,
D.R. Patel & R.B. Patel Commerce College &
Bhaniben Chhimkabhai Patel BBA College,
Bharthana, Surat
Affiliated to
Veer Narmad South Gujarat University
Surat
Academic Year (2022-23)
College Certificate
DECLARATION
I hereby declare that the project report titled “ A Study of Investors Preference while going
to Invest in different investment avenues during a period of 2018-22 ”, has been done under
the guidance of Professor DR. MITALEE A. PITHAWALA, at D.R. Patel & R.B. Patel
Commerce College & Bhaniben Chhimkabhai Patel BBA College, Bharthana, Surat, is a
presentation of my original research study carried out during current semester and the same
is not submitted anywhere for obtaining any other degree purpose earlier. Wherever
contributions of others are involved, every effort is made to indicate this clearly.
Date:
Place: Surat
I
Acknowledgment
The success of my any project is the result of hard work and support of a number of
individuals and this project is no different. I take immense pleasure in submitting the project
on “A study of Investors Preference while going to invest in different investment avenues
during a period of 2018-22.”
I take this opportunity to express my deep and sincere gratitude to DR. MITALEE A.
PITHAWALA for his valuable guidance, inspiration and encouragement in completing this
project.
I would like to express my gratitude to D.R. Patel & R.B. Patel Commerce College and
Bhaniben Chhimkabhai Patel BBA College, who contribute greatly to the accomplishment
of the project I would like to thank our principal PROF.RAJESH KHALASI.
Finally, I must express my heartiest towards gratitude towards all those who helped me
directly or indirectly in the completion of this project.
II
Executive Summary
The winter research report of B.B.A. program for the year 2022-23 includes the following
chapters.
The First chapter includes the information about Indian Financial Industry of Financial
Market of financial Service and Financial Instrument.
The Second chapter includes the introduction about Company Profile and Theoretical
Framework of SEBI and AMFI to this topic from different researchers, from which base
for this report is made.
The Third chapter of most investment books typically covers the various investment
avenues available to investors.
The Fourth chapter is literature review which displays the past research on Investors
Preference on different Investment Avenues and related to this topic from different
researchers, from which the base for this report is made.
The Five chapter is Research Methodology which states the need for the Research i.e., the
problem for which research is been made, objective of the research, research design,
sources of data, data collection method, sample size and design, data analysis and the
limitation for the study.
The Six chapter is data analysis which shows the analysis for the collected data and its
interpretation through tables and charts. Analysis also helps for the conclusion.
III
Index
IV
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
D.R. PATEL & R.B. PATEL COMMERCE COLLEGE & BHANIBEN CHHIMKABHAI PATEL BBA COLLEGE 1
Chapter - 1
D.R. PATEL & R.B. PATEL COMMERCE COLLEGE & BHANIBEN CHHIMKABHAI PATEL BBA COLLEGE 1
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
Credit regulation: - The RBI regulates the flow of money in the country’s financial
system. It controls inflation in the economy and takes necessary policy decisions from time
to time to address systemic concerns.
Foreign reserves: - The central bank buys and sells foreign currencies to keep the foreign
exchange rates stable. It takes necessary steps as and when required.
Role in development of the country: The RBI performs various functions and takes
necessary decisions to support developmental agenda of the government.
What is RBI?
RBI is an institution of national importance and the pillar of the surging Indian economy.
It is a member of the International Monetary Fund (IMF).
The concept of Reserve Bank of India was based on the strategies formulated by
Dr. Ambedkar in his book named “The Problem of the Rupee – Its origin and its
solution”.
This central banking institution was established based on the suggestions of the
“Royal Commission on Indian Currency & Finance” in 1926. This commission was
also known as Hilton Young Commission.
In 1949, the Reserve Bank of India was nationalized and became a member bank of
the Asian Clearing Union.
RBI regulates the credit and currency system in India.
The chief objectives of the RBI are to sustain the confidence of the public in the
system, protect the interests of the depositors, and offer cost-effective banking
services like cooperative banking and commercial banking to the people.
Reserve Bank of India (RBI):
The RBI is an important tool in the development strategy of the Indian government. UPSC
has asked several questions regarding RBI functions, objectives, monetary regulations, etc.,
especially in UPSC Prelims. One of the things to know about RBI is its timeline which is
provided in the table below:
Year Event
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1949 Got nationalized after independence. The bank was held by private stakeholders before this.
In the year 2016, the original RBI Act of 1934 was amended and that provided the statutory
basis for the implementation of the flexible inflation-targeting framework.
The Preamble of Reserve Bank of India:
Another thing to know about RBI is its Preamble. It describes the basic functions of the
Reserve Bank as:
“…to regulate the issue of Bank Notes and keeping of reserves to secure monetary stability
in India and generally to operate the currency and credit system of the country to its
advantage.
Reserve Bank of India works as: -
Monetary Authority:
Also, read about the Monetary Policy Committee (MPC) and know more about this six-
member committee.
These methods are responsible for the functioning of the country’s banking and financial
system. Methods such as:
License issuing
Liquidity of assets
Bank mergers
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Issuer of currency:
The Reserve Bank of India is responsible for providing the public with a sufficient
supply of currency notes and coins.
The quality of currency notes and coins is also taken care of by the RBI.
Also, the destruction of currency and coins that are not fit for circulation.
Promotional functions that support national objectives are organized by RBI that
encourage rural and agricultural economic development.
The RBI will regularly issue directives to the commercial banks to lend loans to
small-scale industrial units.
Composition of RBI:
Governor
4 Deputy Governors
2 Finance Ministry representatives
4 directors to represent local boards headquartered at Mumbai, Kolkata,
Chennai, and New Delhi
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The First Governor of RBI was Sir Osborne Smith and the First Indian Governor of
RBI was C D Deshmukh.
The only Prime Minister who had been the Governor of RBI was Manmohan Singh.
Zonal Offices:
RBI has four zonal offices: New Delhi for North, Chennai for South, Kolkata for
East, and Mumbai for West.
The Reserve Bank of India has 19 regional offices and 11 sub-offices at present.
There is only one central bank in India called the Reserve Bank of India. It has offices at
31 locations all across the country.
Monetary Authority
Issuer of currency
Developmental role
RBI logo is to remind and symbolize not just its governmental status, its links to the country
– but also its independence and a critical separation of the RBI from the government. The
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consideration, according to the RBI, in selecting the logo was, that “the seal should
emphasize the Governmental status of the Bank, but not too closely” and that “it should
have something Indian in the design”.
The official emblem of the apex bank – a palm tree and a tiger – is in many ways a vestige
of this colonial past and is derived from the East India Company’s original seal and mohur
that showed a lion and a palm tree. The tiger, it was decided, would replace the lion. Tigers,
at the time, were widespread in India and carried a cultural cache like no other species. The
tiger was chosen since it was felt to be more an ‘Indian’ animal than the lion. At the time,
the tiger was widespread through the country, while the lion was virtually extinct.
The RBI also stores a Contingency Fund (CF), which is another provision for tackling
unexpected emergencies. Coming to surplus funds, it is the amount RBI transfers to the
government after meeting its own expenses. This surplus is basically RBI’s income which
it earns through interest on securities it holds.
Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully
owned by the Government of India.
There are four zonal offices of RBI at Mumbai, Kolkata, Delhi and Chennai. RBI has
nineteen regional offices at: Thiruvananthapuram, Patna, Nagpur, Lucknow, Mumbai,
Kochi, Kolkata, Jammu, Kanpur, Chennai, Delhi, Guwahati, Bhubaneshwar, Bhopal,
Hyderabad, Ahmedabad, Chandigarh, Jaipur and Bangalore.
The central bench of directors administers the operation of RBI. They are recruited for four
years by the RBI Act. This board consists of four deputy governors, four directors from
each zonal office, two ministers from the department of finance, and the Governor of RBI
himself. The Governor acts as the executive leader of the Reserve bank of India (RBI).
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The general role of commercial banks is to provide financial services to the general public
and business, ensuring economic and social stability and sustainable growth of the
economy.
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In this respect, credit creation is the most significant function of commercial banks. While
sanctioning a loan to a customer, they do not provide cash to the borrower. Instead, they
open a deposit account from which the borrower can withdraw. In other words, while
sanctioning a loan, they automatically create deposits.
Primary functions:
Commercial banks accept various types of deposits from the public especially from its
clients, including saving account deposits, recurring account deposits, and fixed deposits.
These deposits are returned whenever the customer demands it or after a certain time
period.
Commercial banks provide loans and advances of various forms, Such as [overdraft]
facility, cash credit, bill discounting, money at call, etc. They also give demand and term
loans to all types of clients against proper security. They also act as trustees for wills of
their customers etc.
The function of credit creation is generated on the basis of credit and payment intermediary.
Commercial banks use the deposits they absorb to make loans. On the basis of check
circulation and transfer settlement, the loans are converted into derivative deposits. To a
certain extent, the derivative funds of several times the original deposits are increased,
which greatly improves the driving force of commercial banks to serve the economic
development.
Regulations:
In most countries, commercial banks are heavily regulated and this is typically done by a
country's central bank. They will impose a number of conditions on the banks that they
regulate such as keeping bank reserves and to maintain minimum capital requirements.
Services by product:
Commercial banks generally provide a number of services to its clients; these can be split
into core banking services such as deposits, loans, and other services which are related to
payment systems and other financial services.
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Along with core products and services, commercial banks perform several secondary
functions. The secondary functions of commercial banks can be divided into agency
functions and utility functions.
Private bank: It is a type of commercial banks where private individuals and businesses
own a majority of the share capital. All private banks are recorded as companies with
limited liability. Such as Housing Development Finance Corporation (HDFC) Bank,
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Industrial Credit and Investment Corporation of India (ICICI) Bank, Yes Bank, and more
such banks.
Public bank: It is a type of bank that is nationalised, and the government holds a
significant stake. For example, Bank of Baroda, State Bank of India (SBI), Dena Bank,
Corporation Bank, and Punjab National Bank.
Foreign bank: These banks are established in foreign countries and have branches in other
countries. For instance, American Express Bank, Hong Kong and Shanghai Banking
Corporation (HSBC), Standard & Chartered Bank, Citibank, and more such banks.
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2. The formation of business units: To assist in the formation of business units that require
a substantial sum of money and have a long gestation period.
3. Economic progress: To assist the rapid growth of the economy in general and backward
regions in particular.
5. Assist with new projects: To assist in the identification, appraisal, and implementation
of new initiatives by providing technical and professional management services.
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This was founded in 1955 as a public limited company under the Companies Act of 1956
for the purpose of providing long-term loans to companies for up to 15 years and
subscribing to their shares and debentures for the sole purpose of the creation, expansion,
and modernization of private sector industrial enterprises. The proprietary and partnership
businesses were also eligible for ICICI loans. It has also attracted foreign money to invest
in the nation.
It was founded as a statutory company in July 1948 under the Industrial Finance
Corporation Act of 1948, with the primary goal of providing long- and medium-term
financing to big industrial firms. Its goals include assisting in the establishment of a
balanced regional economy, encouraging new entrepreneurs to enter key industries, and
expanding management education throughout the country. With effect from June 1, 1993,
IFCI has been renamed IFCI Ltd. to ensure more flexibility in meeting the demands of the
developing financial sector.
It was established in 1964 as a subsidiary of the Reserve Bank of India with the goal of
coordinating the activities of other financial institutions, including commercial banks, and
providing financial assistance to all types of industrial enterprises without regard to the type
of finance or the amount of funds available. It also does underwrite of public offerings and
discounts and rediscounts commercial bills of exchange. IDBI has changed its name to
IDBI Ltd. as of October 1, 2004.
Most of our country’s states have established SFCs under the State Financial Corporations
Act of 1951 to give financial support to proprietary and partnership enterprises as well as
corporations. SFCs provide financing in the form of long-term loans or debenture
subscriptions, provide guarantee for loans acquired from other sources, and underwrite
company public stock and debenture offerings. They are, however, unable to subscribe to
the firms’ shares directly.
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LIC was set up in 1956 under the LIC Act, 1956 after nationalising 245 existing insurance
companies. It mobilises the community’s savings in the form of insurance premium and
makes it available to industrial concerns, both public as well as private, in the form of direct
loans and underwriting of and subscription to shares and debentures.
It was set up in 1990 for the promotion, financing and development of small-scale industrial
enterprises. It is an apex institution of all the banks providing credit facility to small-scale
industries in our country and offers refinancing of bills, rediscounting of bills, and several
other support services to Small Scale Industries (SSI).
Financial markets refer to the institutions, mechanisms, and platforms that enable the
buying and selling of financial assets such as stocks, bonds, currencies, commodities, and
derivatives. The main purpose of financial markets is to facilitate the transfer of funds from
savers to borrowers, providing a means for individuals, organizations, and governments to
invest and finance their activities.
The Indian financial market refers to the system of institutions, instruments, and regulations
in the country that are instrumental in facilitating the transfer of funds between different
participants of the market. It includes the following components.
Capital Market: This is the market for long-term investments in different securities like
stocks and bonds. The process of trading in these securities is governed by the Securities
and Exchange Board of India (SEBI).
Money Market: This is the market where investors and traders can trade in short-term
borrowing and lending of funds, such as treasury bills and commercial papers.
Commodities Market: The commodities market refers to the market for buying and selling
commodities, such as gold, silver, and agricultural products, regulated by the Securities and
Exchange Board of India (SEBI).
Foreign Exchange Market: This market is regulated by RBI and is the platform for trading
in the currency of different nations.
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Banking System: The banking system of the country is a network of commercial public
sector and private sector banks, cooperative banks, and regional rural banks. The banking
system is responsible for providing a secure environment that provides various financial
services, including deposits and loans.
Mutual Fund Industry: The mutual fund industry is where investors invest in a fund that
is a pool of money from various investors and the fund invests in different investment
products like stocks, bonds, and other securities.
Insurance Market: The insurance segment is one of the pillars of the financial market of
the country. There are diverse insurance products in India like life insurance, health
insurance, general insurance, etc. and the industry is regulated by the Insurance Regulatory
and Development Authority of India (IRDAI).
Pension Market: Pensions are an important instrument and part of the financial market.
This market and the pension products are regulated by the Pension Fund Regulatory and
Development Authority (PFRDA) in India.
The Indian financial markets have witnessed many changes in recent years and are faced
with everchanging trends that ultimately shape the financial markets. Some of the recent
trends in the Indian financial markets are highlighted below.
There has been an exponential increase in digital finance in India over recent years. This is
further backed by various measures under the ‘Digital India’ vision of the government. This
includes digital payment methods such as UPI, mobile banking, and e-wallets. This growth
is also the result of the increase in internet and smartphone penetration which has taken
digital finance to even the rural parts of the country.
Financial inclusion has been the focus of the Indian government and regulators for many
years now. Many measures for financial inclusion include increasing access to financial
services for under-served populations such as farmers and small businesses.
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Mutual funds have become increasingly popular and a staple among retail investors as a
way to invest in the stock market. The introduction of direct plans has also made them more
accessible and cost-effective for the average investor.
Social consciousness has been increasing greatly among the public at large over the years.
This has therefore resulted in an increase in Environmental, Social, and Governance (ESG)
investing which is gaining prominence as investors increasingly seek to align their
investments with their values.
Emergence of Robo-Advisors:
Financial markets have also seen a rise in Robo-advisors. These are algorithms that provide
investment advice based on AI. Such platforms are becoming quite popular by offering
low-cost and personalized investment solutions to businesses and investors.
These trends are shaping the future of the Indian financial market and are likely to continue
to drive growth and innovation in the years to come.
The financial market plays a crucial role in the functioning of an economy. Some of the
key roles of financial markets are highlighted below.
Allocating Capital: Raising capital is one of the primary functions of the financial markets.
Financial markets provide a platform for investors to allocate their capital to various
financial instruments such as stocks, bonds, and mutual funds. This helps companies and
governments to raise adequate funds for their operations.
Facilitating Investment: Financial markets make it easier for individuals and institutions
to invest their money. This provides them with an opportunity for diversifying their
portfolios and managing their financial assets.
Providing Liquidity: Financial markets ensure adequate liquidity in the market for
investors for easy entry and exit opportunities. This enables them to quickly buy or sell
assets as their financial needs change.
Price Discovery: Financial markets help determine the price of financial instruments by
bringing together buyers and sellers. This provides an opportunity for fair price discovery
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through the basic functions of demand and supply thus providing a fair and transparent
price for each asset.
Promoting Economic Growth: Financial markets facilitate the flow of capital and ensure
that is put to its most productive use. This is crucial for promoting overall economic growth
and the development of the economy.
India’s diverse and comprehensive financial services industry is growing rapidly, owing to
demand drivers (higher disposable incomes, customized financial solutions, etc.) and
supply drivers (new service providers in existing markets, new financial solutions and
products, etc.). The Indian financial services industry comprises several key subsegments.
These include, but are not limited to- mutual funds, pension funds, insurance companies,
stock-brokers, wealth managers, financial advisory companies, and commercial banks-
ranging from small domestic players to large multinational companies. The services are
provided to a diverse client base- including individuals, private businesses and public
organizations.
10 Types of Financial Service:
These financial services are explained below: -
1. Banking:
The banking industry is the backbone of India’s financial services industry. The country
has several public sectors (27), private sector (21), foreign (49), regional rural (56) and
urban/rural cooperative banks. The financial services offered in this segment include:
Individual Banking (checking accounts, savings accounts, debit/credit cards, etc.)
Business Banking (merchant services, checking accounts and savings accounts for
businesses, treasury services, etc.)
Loans (business loans, personal loans, home loans, automobile loans, working-capital
loans, etc.)
The banking sector is regulated by the Reserve Bank of India (RBI), which monitors and
maintains the segment’s liquidity, capitalization, and financial health.
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2. Professional Advisory:
India has a strong presence of professional financial advisory service providers, which offer
individuals and businesses a wide portfolio of services, including investment due diligence,
M&A advisory, valuation, real-estate consulting, risk consulting, taxation consulting.
These offerings are made by a range of providers, including individual domestic consultants
to large multi-national organizations.
3. Wealth Management:
Financial services offered within this segment include managing and investing customers’
wealth across various financial instruments- including debt, equity, mutual funds, insurance
products, derivatives, structured products, commodities, and real estate, based on the
clients’ financial goals, risk profile and time horizons.
4. Mutual Funds:
Mutual fund service providers offer professional investment services across funds that are
composed of different asset classes, primarily debt and equity-linked assets. The buy-in for
mutual fund solutions is generally lower compared to the stock market and debt products.
These products are very popular in India as they generally have lower risks, tax benefits,
stable returns and properties of diversification. The mutual funds segment has witnessed
double-digit growth in assets under management over the last five years, owing to its
popularity as a low-risk wealth multiplier.
5. Insurance:
Financial services offerings in this segment are primarily offered across two categories:
General Insurance (automotive, home, medical, fire, travel, etc.)
Life Insurance (term-life, money-back, unit-linked, pension plans, etc.)
Insurance solutions enable individuals and organizations to safeguard against unforeseen
circumstances and accidents. Pay-outs for these products vary across the nature of the
product, time horizons, customer risk assessment, premiums, and several other key
qualitative and quantitative aspects. In India, there is a strong presence of insurance
providers across life insurance and general insurance categories. The insurance market is
regulated by the Insurance Regulatory and Development Authority of India (IRDAI).
6. Stock Market:
The stock market segment includes investment solutions for customers in Indian stock
markets (National Stock Exchange and Bombay Stock Exchange), across various equity-
linked products. The returns for customers are based on capital appreciation – growth in
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the value of the equity solution and/or dividends and pay-outs made by companies to its
investors.
7. Treasury/Debt Instruments:
Services offered in this segment include investments into government and private
organization bonds. The issuer of the bonds offers fixed payments and principal repayment
to the investor at the end of the investment period. The types of instruments in this segment
include listed bonds, non-convertible debentures, capital-gain bonds, Go savings bonds,
tax-free bonds, etc.
8. Tax/Audit Consulting:
This segment includes a large portfolio of financial services within the tax and auditing
domain. This services domain can be segmented based on individual and business clients.
They include:
Tax – Individual (determining tax liability, filing tax-returns, tax-savings advisory,
etc.)
Tax – Business (determining tax liability, transfer pricing analysis and structuring,
GST registrations, tax compliance advisory, etc.)
In the auditing segment, service providers offer solutions including statutory audits, internal
audits, service tax audits, tax audits, process/transaction audits, risk audits, stock audits,
etc. These services are essential to ensure the smooth operation of business entities from a
qualitative and quantitative perspective, as well as to mitigate risk. You can read more
about taxation in India.
9. Capital Restructuring:
These services are offered primarily to organizations and involve the restructuring of
capital structure to bolster profitability or respond to crises such as bankruptcy, volatile
markets, liquidity crunch or hostile takeovers. The types of financial solutions in this
segment typically include structured transactions, lender negotiations, accelerated M&A
and capital raising.
10. Portfolio Management:
This segment includes a highly specialized and customized range of solutions that enables
clients to reach their financial goals through portfolio managers who analyse and
optimize investments for clients across a wide range of assets (debt, equity, insurance, real
estate, etc.). These services are broadly targeted at HNIs and are discretionary and non-
discretionary.
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Financial instruments are contracts for monetary assets that can be purchased, traded,
created, modified, or settled for. In terms of contracts, there is a contractual obligation
between involved parties during a financial instrument transaction.
For example, if a company were to pay cash for a bond, another party is obligated to deliver
a financial instrument for the transaction to be fully completed. One company is obligated
to provide cash, while the other is obligated to provide the bond.
Basic examples of financial instruments are cheques, bonds, securities.
There are typically three types of financial instruments: cash instruments, derivative
instruments, and foreign exchange instruments.
Types of Financial Instruments:
1. Cash Instruments:
Cash instruments are financial instruments with values directly influenced by the condition
of the markets. Within cash instruments, there are two types; securities and deposits, and
loans.
Securities: A security is a financial instrument that has monetary value and is traded on the
stock market. When purchased or traded, a security represents ownership of a part of a
publicly-traded company on the stock exchange.
Deposits and Loans: Both deposits and loans are considered cash instruments because they
represent monetary assets that have some sort of contractual agreement between parties.
2. Derivative Instruments:
Derivative instruments are financial instruments that have values determined
from underlying assets, such as resources, currency, bonds, stocks, and stock indexes.
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The five most common examples of derivatives instruments are synthetic agreements,
forwards, futures, options, and swaps. This is discussed in more detail below.
Synthetic Agreement for Foreign Exchange (SAFE): A SAFE occurs in the over-the-
counter (OTC) market and is an agreement that guarantees a specified exchange rate during
an agreed period of time.
Forward: A forward is a contract between two parties that involves customizable
derivatives in which the exchange occurs at the end of the contract at a specific price.
Future: A future is a derivative transaction that provides the exchange of derivatives on a
determined future date at a predetermined exchange rate.
Options: An option is an agreement between two parties in which the seller grants the buyer
the right to purchase or sell a certain number of derivatives at a predetermined price for a
specific period of time.
Interest Rate Swap: An interest rate swap is a derivative agreement between two parties
that involves the swapping of interest rates where each party agrees to pay other interest
rates on their loans in different currencies.
3. Foreign Exchange Instruments:
Foreign exchange instruments are financial instruments that are represented on the foreign
market and primarily consist of currency agreements and derivatives.
In terms of currency agreements, they can be broken into three categories.
Spot: A currency agreement in which the actual exchange of currency is no later than the
second working day after the original date of the agreement. It is termed “spot” because the
currency exchange is done “on the spot” (limited timeframe).
Outright Forwards: A currency agreement in which the actual exchange of currency is done
“forwardly” and before the actual date of the agreed requirement. It is beneficial in cases
of fluctuating exchange rates that change often. Currency Swap: A currency swap refers to
the act of simultaneously buying and selling currencies with different specified value dates.
Asset Classes of Financial Instruments:
Beyond the types of financial instruments listed above, financial instruments can also be
categorized into two asset classes. The two asset classes of financial instruments are debt-
based financial instruments and equity-based financial instruments.
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Debt-based financial instruments are categorized as mechanisms that an entity can use to
increase the amount of capital in a business. Examples include bonds, debentures,
mortgages, U.S. treasuries, credit cards, and line of credits (LOC).
They are a critical part of the business environment because they enable corporations to
increase profitability through growth in capital.
2. Equity-Based Financial Instruments:
Equity-based financial instruments are categorized as mechanisms that serve as legal
ownership of an entity. Examples include common stock, convertible debentures, preferred
stock, and transferable subscription rights.
They help businesses grow capital over a longer period of time compared to debt-based but
benefit in the fact that the owner is not responsible for paying back any sort of debt.
A business that owns an equity-based financial instrument can choose to either invest
further in the instrument or sell it whenever they deem necessary.
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Chapter – 2
Company Profile
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Securities and Exchange Board of India (SEBI) was first established in 1988 as a
non-statutory body for regulating the securities market. It became an autonomous
body on 30 January 1992 and was accorded statutory powers with the passing of the
SEBI Act 1992 by the Indian Parliament. SEBI has its headquarters at the business
district of Bandra Kurla Complex in Mumbai and has Northern, Eastern, Southern
and Western Regional Offices at Jaipur and Bangalore and has also opened offices
at Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in Financial Year 2013-
2014.
Controller of Capital Issues was the regulatory authority before SEBI came into
existence; its derived authority from the Capital Issues (Control) Act, 1947.
SEBI Functions:
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To prohibit fraudulent and unfair trade practices within the securities market and
related to it.
To keep the securities market efficient and up to date all the time through proper
research and developmental tactics.
The Preamble of the Securities and Exchange Board of India describes the basic functions
of the Securities and Exchange Board of India as "...to protect the interests of investors in
securities and to promote the development of, and to regulate the securities market and for
matters connected there with or incidental there to".
SEBI has to be responsive to the needs of three groups, which constitute the market:
Issuers of securities
Investors
Market intermediaries
SEBI has three powers 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 appeal process to create
accountability. There is a Securities Appellate Tribunal which is a three-member tribunal
and is currently headed by Justice Tarun Agarwal, former Chief Justice of the Meghalaya
High Court. A second appeal lies directly to the Supreme Court. SEBI has taken a very
proactive role in streamlining disclosure requirements to international standards.
Powers:
For the discharge of its functions efficiently, SEBI has been vested with the following
powers:
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Inspect the books of accounts and call for periodical returns from recognised
Securities exchanges.
Inspect the books of accounts of financial intermediaries.
Compel certain companies to list their shares in one or more Securities exchanges.
Registration of Brokers and sub-brokers.
SEBI Committees:
Discount brokers
Merchant brokers
SEBI has also been instrumental in taking quick and effective steps in light of the global
meltdown and the Satyam fiasco. In October 2011, it increased the extent and quantity of
disclosures to be made by Indian corporate promoters. In light of the global meltdown, it
liberalized the takeover code to facilitate investments by removing regulatory structures. In
one such move, SEBI has increased the application limit for retail investors to ₹ 200,000,
from ₹ 100,000 at present.
On the occasion of World Investor Week 2022, SEBI Executive Director Shri G. P. Garg
launched a book on Financial Literacy. This book is a joint effort between Metropolitan
Stock Exchange of India Limited and CASI New York.
Controversies : Supreme Court of India heard a Public Interest Litigation (PIL) filed
by India Rejuvenation Initiative that had challenged the procedure for key appointments
adopted by Govt of India. The petition alleged that, "The constitution of the search-cum-
selection committee for recommending the name of chairman and every whole-time
members of SEBI for appointment has been altered, which directly impacted its balance
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and could compromise the role of the SEBI as a watchdog." On 21 November 2011, the
court allowed petitioners to withdraw the petition and file a fresh petition pointing out
constitutional issues regarding appointments of regulators and their independence.
The Chief Justice of India refused the finance ministry's request to dismiss the PIL and said
that the court was well aware of what was going on in SEBI. Hearing a similar petition filed
by Bengaluru-based advocate Anil Kumar Agarwal, a two judge Supreme Court bench of
Justice Surinder Singh Najjar and Justice HL Gokhale issued a notice to the Govt of India,
SEBI chief UK Sinha and Omit Paul, Secretary to the President of India.
Further, it came into light that Dr. K. M. Abraham(the then whole time member of SEBI
Board) had written to the Prime Minister about malaise in SEBI. He said, "The regulatory
institution is under duress and under severe attack from powerful corporate interests
operating concertedly to undermine SEBI". He specifically said that Finance Minister's
office, and especially his advisor Omit Paul, were trying to influence many cases before
SEBI, including those relating to Sahara Group, Reliance, Bank of Rajasthan and MCX.
SEBI in its circular dated May 30, 2012 gave exit – guidelines for Securities exchanges.
This was mainly due to illiquid nature of trade on many of 20+ regional Securities
exchanges. It had asked many of these exchanges to either meet the required criteria or take
a graceful exit. SEBI's new norms for Securities exchanges mandates that it should have
minimum net-worth of ₹ 1 billion and an annual trading of ₹ 10 billion. The Indian
Securities market regulator SEBI had given the recognized Securities exchanges two years
to comply or exit the business.
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SEBI shall proceed with compulsory de-recognition and exit of such Securities
exchanges, in terms of the conditions as may be specified by SEBI.
4. Securities Exchanges which are already de-recognised as on date, shall make an
application for exit within two months from the date of this circular. Upon failure
to do so, the de-recognised exchange shall be subject to compulsory exit process.
SEBI Departments:
SEBI regulates Indian financial market through its 20 departments: -
Commodity Derivatives Market Regulation Department (CDMRD)
Corporation Finance Department (CFD)
Department of Economic and Policy Analysis (DEPA)
Department of Debt and Hybrid Securities (DDHS)
Enforcement Department – 1 (EFD1)
Enforcement Department – 2 (EFD2)
Enquiries and Adjudication Department (EAD)
General Services Department (GSD)
Human Resources Department (HRD)
Information Technology Department (ITD)
Integrated Surveillance Department (ISD)
Investigations Department (IVD)
Investment Management Department (IMD)
Legal Affairs Department (LAD)
Market Intermediaries Regulation and Supervision Department (MIRSD)
Market Regulation Department (MRD)
Office of International Affairs (OIA)
Office of Investor Assistance and Education (OIAE)
Office of the chairman (OCH)
Regional offices (ROs)
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Quasi-Judicial: SEBI has the authority to deliver judgements related to fraud and
other unethical practices in terms of the securities market. This helps to ensure
fairness, transparency, and accountability in the securities market.
Quasi-Executive: SEBI is empowered to implement the regulations and
judgements made and to take legal action against the violators. It is also
authorised to inspect Books of accounts and other documents if it comes across
any violation of the regulations.
Quasi-Legislative: SEBI reserves the right to frame rules and regulations to
protect the interests of the investors. Some of its regulations consist of insider
trading regulations, listing obligations, and disclosure requirements. These have
been formulated to keep malpractices at bay. Despite the powers, the results of
SEBI’s functions still have to go through the Securities Appellate Tribunal and
the Supreme Court of India.
Some of the regulations for mutual funds laid down by SEBI are: -
A sponsor of a mutual fund, an associate or a group company, which includes the asset
management company of a fund, through the schemes of the mutual fund in any form
cannot hold: (a)10% or more of the shareholding and voting rights in the asset management
company or any other mutual fund. (b) An asset management company cannot have
representation on a board of any other mutual fund.
A shareholder cannot hold 10% or more of the shareholding directly or indirectly in the
asset management company of a mutual fund.
No single stock can have more than 35% weight in the index for a sectoral or thematic
index; the cap is 25% for other indices.
The cumulative weight of the top three constituents of the index cannot exceed 65%.
An individual constituent of the index should have a trading frequency of a minimum of
80%.
AMCs must evaluate and ensure compliance to the norms at the end of every calendar
quarter. The constituents of the indices must be made public by publishing them on their
website.
New funds must submit their compliance status to SEBI before being launched.
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All liquid schemes must hold a minimum of 20% in liquid assets such as government
securities, repo on G-Secs, cash, and treasury bills.
A debt mutual fund can invest up to only 20% of its assets in one sector; previously the cap
was 25%. The additional exposure to housing finance companies (HFCs) is updated to 15%
from 10% and a 5% exposure on securitized debt based on retail housing loan and
affordable housing loan portfolios.
As per SEBI’s recommendation, amortization is not the only method for evaluating debt
and money market instruments. The mark-to-market methodology is also used.
An exit penalty will be levied on investors of liquid schemes who exit the scheme within a
period of seven days.
Mutual funds schemes must invest only in the listed non-convertible debentures (NCD).
Any fresh investment in commercial papers (CPs) and equity shares are allowed in listed
securities as per the guidelines issued by the regulator.
Liquid and overnight schemes are no longer allowed to invest in short-term deposits, debt,
and money market instruments that have structured obligations or credit enhancements.
When investing in debt securities having credit enhancements, a minimum of four times
security cover is mandatory for investing in mutual funds schemes. A prudential limit of
10% is prescribed on total investment by such schemes in debt and money market
instruments.
Mutual funds are managed by Asset Management Companies (AMC), which need to be
approved by SEBI. A Custodian who is registered with SEBI holds the securities of various
schemes of the fund. The trustees of the AMC monitor the performance of the mutual fund
and ensure that it works in compliance with SEBI Regulations.
The firm must be established as a separate AMC to offer mutual funds. The net worth of
such a parent firm or AMC must be at least Rs 50,000,000. Mutual funds dealing
exclusively with money markets must register with the Reserve Bank of India (RBI); all
other mutual funds must register with SEBI.
Recently, a self-regulation agency for mutual funds has been set up called the Association
of Mutual Funds of India (AMFI). AMFI focuses on developing the Indian mutual fund
industry in a professional and ethical manner.
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AMFI aims to enhance the operational standards in all areas with a view to protect and
promote mutual funds and their stakeholders. To date, there are 44 Asset Management
Companies that are registered with SEBI and are members of AMFI.
Some of them are Aditya Birla Sun Life AMC Limited, BNP Paribas Asset Management
India Private Limited, Edelweiss Asset Management Limited, and Quant Money Managers
Limited. A sponsor of a mutual fund scheme, a group of the company or an associate, which
involves AMC of the fund, cannot hold the following in any form:
10% or above of the voting rights and shareholding in the AMC or any other mutual
fund scheme.
An AMC cannot have representation on the board of any other mutual fund.
Shareholders can’t hold more than 10% of the shares both directly and indirectly in
AMC of the mutual fund.
SEBI Guidelines on Mutual Funds Reclassification:
Funds must be named based on the core intent of the fund and asset mix. It should specify
the risk associated clearly.
SEBI has suggested 16 classifications for debt funds, ten classifications for equity funds,
six classifications for hybrid, two for solution funds, and two for index funds.
SEBI has reclassified large-cap, mid-cap, and small-cap based on market cap relative
rankings rather than absolute market cap cut-offs.
The debt fund classification is prescribed based on the duration of the fund and the asset
quality mix.
All categories except index funds can only have one fund per classification, i.e. an AMC
can have a maximum of 34 funds other than index funds.
The capital market regulator, SEBI, has ordered stockbrokers, mutual fund distributors,
investment advisors, and other entities involved in mutual fund transactions on clients’
behalf to halt the pooling of mutual fund units from 01 April 2022. However, as mutual
fund houses struggled to comply with this rule, SEBI extended the deadline to 01 July 2022.
Stock Market entities such as online platforms, mutual fund distributors, stockbrokers etc.,
pool investors’ money in their bank accounts. The money is subsequently transferred to
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AMCs to purchase mutual fund scheme units on the investor’s behalf. SEBI wants to stop
this approach immediately to prevent the misuse of investors’ money. Moreover, defaults
by these entities mean losses for investors.
The ban on the pooling of units by mutual fund entities impacts mutual fund inflows.
Moreover, AMFI has requested SEBI to give mutual funds more time to implement the
new rules. After the pooling is discontinued, mutual fund investors’ money will go directly
from their accounts to the NSE or BSE Clearing Corporation and not to the bank account
of the stockbroker or mutual fund distributor.
SEBI circular on two-factor authentication for mutual fund redemptions:
The SEBI two-factor authentication rule makes sure that an additional OTP (One Time
Password) is sent during mutual fund redemptions. It cuts down the risk of fraud, and
verifying the source account stops money laundering in mutual funds.
The SEBI two-factor authentication offers an additional security layer, protecting your
account against unauthorized access. SEBI has extended the deadline for mutual fund
entities to comply with its two-factor authentication to 01 July 2022.
Moreover, AMCs, stockbrokers, mutual fund distributors etc., must ensure that the required
processes are in place to comply with the SEBI two-factor authentication circular.
SEBI timelines for rebalancing mutual fund portfolios:
A SEBI circular clearly defines rules governing portfolio rebalancing of schemes launched
by mutual funds. All schemes except overnight funds have a mandated 30-day rebalancing
period in case of deviation from the required asset allocation mentioned in the SID (Scheme
Information Document) on account of passive breaches.
Moreover, passive breaches are instances not arising due to the actions of mutual fund
managers. It may happen due to the movement of asset prices held by the mutual fund. For
example, aggressive hybrid funds must invest a minimum of 65% of their assets in stocks.
However, this allocation could fall below 65% if the price of stocks held in the scheme’s
portfolio falls. In such cases, fund managers must act within 30 days of the date of deviation
and reinstate the allocation as mentioned in the SID.
If the fund manager doesn’t comply, justification must be provided in writing explaining
efforts taken towards portfolio rebalancing before an investment committee. Moreover, the
AMCs investment committee could extend the portfolio rebalancing period for up to 60
business days from the completion date of the mandated rebalancing period.
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SEBI clearly states that if the AMC fails to rebalance the scheme portfolio, it cannot launch
new mutual fund schemes. Moreover, it cannot charge an exit load on mutual fund
redemptions. Mutual Fund Houses must keep the trustee informed on deviations from the
requisite asset allocation of the portfolio.
If deviations exceed 10% of the Assets Under Management (AUM) of the scheme’s main
portfolio, mutual fund houses must inform investors immediately. Moreover, the fund
house must specify the details of the portfolios that are not balanced. It must notify investors
after the rebalancing of the portfolio. Investors must be informed of the portfolio’s
mandated asset allocation deviations along with portfolio disclosures. However, these rules
apply only to main portfolios and not segregated portfolios.
2.3 AMFI:
The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian
Mutual Fund Industry on professional, healthy and ethical lines and to enhance and
maintain standards in all areas with a view to protecting and promoting the interests of
mutual funds and their unit holders.
AMFI, the association of all the Asset Management Companies of SEBI registered mutual
funds in India, was incorporated on August 22, 1995, as a non-profit organization. As of
now, 42 Asset Management Companies that are registered with SEBI, are its members.
AMFI Objectives:
To define and maintain high professional and ethical standards in all areas of operation
of mutual fund industry.
To recommend and promote best business practices and code of conduct to be followed
by members and others engaged in the activities of mutual fund and asset management
including agencies connected or involved in the field of capital markets and financial
services.
To interact with the Securities and Exchange Board of India (SEBI) and to represent to
SEBI on all matters concerning the mutual fund industry.
To represent to the Government, Reserve Bank of India and other bodies on all matters
relating to the Mutual Fund Industry.
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Intermediaries play a pivotal and valuable role in promoting sale of Mutual Funds. It is
therefore vital that those engaged in selling Mutual Funds have the highest standards of
knowledge attitude and ethics. Their well-being, quality orientation and ways of doing
business will have a significant impact on how the Mutual Fund Industry develops in the
future.
AMFI introduced the process to register the intermediaries who have passed the
certification test as AMFI Registered Mutual Fund Distributor (ARMFD), thus laying the
foundation for an organized industry and allotting a unique code-AMFI Registration
Number (ARN)along with an identity card. SEBI recognizing the importance of this
initiative taken by AMFI had made Registration with AMFI after passing AMFI
Certification Test compulsory for intermediaries. SEBI has clarified that after obtaining
certification from NISM as per changed mandate, the requirement of registration with
AMFI, in terms of its circular dated November28, 2002 would continue.
As such, all NISM Certified Intermediaries engaged in marketing and selling of Mutual
Fund schemes are required to be registered with AMFI after passing NISM Certification
Test. Minimum age for obtaining ARN is 18 years. The Mutual Funds will not be able to
deal with intermediaries who are not registered with AMFI and obtained ARN.
In terms of SEBI Circular dated September 13, 2012, "AMFI shall create a unique identity
number of the employee/ relationship manager/ sales person of the distributor interacting
with the investor for the sale of mutual fund products, in addition to the AMFI Registration
Number (ARN) of the distributor. The application form for mutual fund schemes shall have
provision for disclosing the unique identity number of such sales personnel along with the
ARN of the distributor."
AMFI Registration Number (ARN):
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Salient Features: - The AMFI Registration Number (ARN) has been introduced as
the unique code, which identifies the intermediary as ARMFD.
Minimum age for obtaining ARN is 18 years.
ARN is a unique number allotted to:
Individual agents, brokers, and other intermediaries engaged in selling Mutual
Funds, having passed the NISM Certification Test and senior citizens having
attended Continuing Professional Education (CPE) and agreeing to abide by the
code of conduct and other undertakings as mentioned in the application form.
Corporates engaged in the business of selling Mutual Funds, which apply to AMFI
and agree to abide by the code of conduct and other undertakings as mentioned in
the application form.
A photo identity card bearing unique ARN, address, his/ her name, photo and the
validity period of ARN, would be issued to individual applicants and senior citizens
whereas Letter of Registration bearing unique ARN, name of the corporate and the
validity period of ARN would be issued to Corporate applicants.
Employees would be issued EUIN card with their EUIN, his/ her name, photo and
validity period of EUIN.
The application for registration of corporate bodies should compulsorily be
accompanied by the application for registration of corporate employee.
Passing certificate issued by National Institute of Securities Market (NISM) in
respect of 'NISM - Series V-A: Mutual Fund Distribution Examination' has validity
period of three years. Also, the CPE certificate issued by NISM is valid for three
years.
Accordingly, ARN issued to individual, senior citizens and EUIN issued to
employees against such certificates shall have validity period from the date of
submission of ARN registration application up to the validity date mentioned on the
passing certificate/ CPE certificate, if the application is in order.
In case of corporate entities, validity period for Letter of Registration issued is 3
years.
No distributor shall hold more than one ARN card/ Letter of Registration
After obtaining ARN, the intermediaries should approach the AMCs for
empanelment and they can canvass Mutual Fund business of the respective AMCs
only after empanelling with them.
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In order to promote best practices and ethical standards in the business of sale of Mutual
Fund schemes, AMFI has formulated broad guidelines and norms including a code of
conduct for the intermediaries, which will be applicable to ARMFD.
AMFI believes that a sincere endeavor to adhere to the guidelines and the code would help
promote best and healthy practices in the area of sales and marketing which would
ultimately benefit all concerned - the investor, the intermediary and the industry as a whole.
Central Distributor Services:
AMFI introduced KYD for distributors in September 2010. As part of this process AMFI
collects proof of address, proof of bank mandate, etc. and hence the distributor data is
verified with supporting document and are reliable.
At present, Distributor data is being maintained by each AMC as well and therefore,
distributors submit requests for change of address, bank mandate, telephone no etc, to each
of the AMCs, which has empaneled them. If a distributor is empaneled with 15 AMCs, the
distributor is submitting 15 such requests. The present process puts a burden on Distributors
and AMCs. To make the life simpler for Distributors and AMCs, 'Central Distributor
Services' is being introduced by AMFI, which is explained below:
AMFI has appointed CAMS to provide ARN services to AMFI since inception. It is decided
that all AMCs would make use of this Central distributor database of AMFI to populate
static distributor details like address, contact person, contact details, etc. Post launch of
these services, the distributors need to submit the documents like Annual Self Certification,
only once to AMFI.
CAMS has sent the letters to all KYD complied distributors (about 50,000 +) along with
the existing information available with them. The distributors were advised to verify this
information and furnish the information in the specified format , if there are any changes,
latest by December 31, 2012.
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CAMS will update all the information received in the central database and "Central
Distributor Services" shall become operational with effect from January 15, 2013.
The important points to be noted as regards "Central Distributors Services”:
1. After the above specified date i.e. January 15, 2013, this central database will be
shared with all R & TAs and the AMCs. The centralized database will contain the
static data of the distributors and all the Mutual Funds and Registrars and Transfer
Agents of Mutual Funds will have to consume this database for all the purposes,
except for payment of commission.
2. Thereafter, any changes in any of these data must be submitted to AMFI unit of
CAMS or the CAMS Service Centre in the specified format and not to individual
AMCs / R&TAs. After this central database goes live, individual AMCs/ R&TAs
will not accept any change request from any distributor.
3. Bank details may be required to be updated separately with each AMC for payment
of commission.
What is AMFI?
The most important role of AMFI in Mutual Fund is to help protect the interest of Indian
investors, as well as that of the asset management companies. It also aids in making
investments transparent and more accessible to attract more people to it.
Therefore, in a bid to make Mutual Fund investments more accessible, fund houses,
trustees, advisors, intermediaries and other concerned individuals should register under
AMFI through its website. As of now, it has 44 registered members, including 42 Asset
Management Companies registered under SEBI.
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To promote transparency regarding the Mutual Fund market, even the advertisements put
forth by AMFI inform investors about the risks associated with them.
There are several objectives of the all India Mutual Fund association. Some of them are as
follows: -
Help set uniform and professional ethical standards for all Mutual Fund related
operation.
Ensure that investors and member companies adhere to the regulations and
maintain ethics in due course of business.
Assist distributors, advisories, agents, asset management companies, and other
bodies (those involved in financial service fields or capital markets) to comply
with the set guidelines.
Work closely with SEBI and comply with the Mutual Fund regulations set by it.
Informs investors across the country about the different risks associated with
investing in Mutual Funds.
AMFI is a representative of the RBI, SEBI, finance ministry and other bodies
related to money market investments.
An important role of AMFI in Mutual Funds is to distribute information about
these investments and also conduct various workshops about different funds.
Ensure that code of conduct is maintained by everyone involved and also take
disciplinary action on the event of breach.
To safeguard the interest of investors, the All India Mutual Fund association has
also introduced a facility through which individuals can put forth grievances or
register complaints against fund managers or any asset management company.
Inversely, it also helps to safeguard the interest of asset management companies.
Committees under AMFI.
Over the years, AMFI Mutual Fund has steadily worked towards formulating
programmes to raise investor awareness about Mutual Funds in India. To make sure
that it delivers on each of its objectives, the AMFI has also formed several
committees. Some of them include.
Committee on operations and compliance.
Committee on Valuation.
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The AMFI registration number or ARN is a unique number that is allotted to every broker,
distributor, Mutual Fund agent, etc. who are registered under AMFI. However, only those
who clear the certification under National Institute of Securities Market or NISM can are
allotted with an ARN. NISM is a public trust under SEBI which offers various training,
academic and skill-building programmed regarding the securities market.
Senior citizens, on the other hand, have to clear the Continuing Professional Education or
CPE to obtain the ARN. Without this number, no individual or firm can sell or even
recommend Mutual Funds to investors.
One of the other important services of AMFI Mutual Funds is that they update the daily
Net Asset Value of Mutual Funds on their website. Thus, investors looking to know the
current NAV of funds they have invested or are interested in can do so by directly referring
to the AMFI website. In addition to this, investors can also avail the NAV history of their
investments through this website.
NAV offers the per-share market value of a fund less its liabilities. Thus, learning about it
can inform investors about the performance of assets they are about to invest into.
Additionally, AMFI has also streamlined the search for Mutual Fund distributors in India.
For individuals looking to invest in Mutual Funds, they can do so easily by providing their
city, PIN Code, location and a few other pertinent details. Thus, potential investors can
easily find crucial Mutual Fund related information from the AMFI website.
Role of AMFI.
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AMFI keeps an eye on the transactions to guard against investors being taken advantage of
when they redeem their profits. It also helps increase awareness so investors can choose
their investments more wisely. In order to maintain integrity, transparency, and investor
interest throughout the entire mutual fund selling process, it also manages ARN
registrations for private individuals.
Committees of AMFI.
To ensure that AMFI fulfils all its objectives, it has formed several committees to delegate
responsibilities. Some of these committees include
The market concerning mutual funds is swamped with brokers, agents, etc. So, to ensure
that individual agents, brokers, and other intermediaries conduct mutual fund selling with
ethics and transparency, the AMFI ARN (AMFI registration number) registration is
required in India. The ARN certification is valid for three years and can be renewed by
giving essential documents. You should know that you can obtain ARN through both online
and offline modes.
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Chapter -3
Theoretical Framework
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Mutual funds are available in various flavors and help diversify a portfolio across
sectors and industries.
Mutual funds enable regular investors, who do not have much knowledge about the
markets, to access sophisticated and professional expertise of fund managers at low
costs.
Active mutual funds that take large positions in stocks can make a significant difference
to the performance of that equity and generate profits for investors who hold shares in
that fund.
Mutual funds are a liquid market, meaning it is relatively easy to trade and find a buyer
for them. The same cannot be said for several assets.
The drawbacks of mutual funds are as follows: -
Mutual funds do not offer ownership of shares. Therefore, it is not possible for investors
to select or pick the composition of a fund to align with their values.
Mutual fund fees can add up over time. According to 2016 research by the Investment
Company Institute (ICI), the after-fee return for $1,000 annual investment averaging
7% return over 30 years for mutual funds is $86,000. Index funds offer $99,000 over
the same timeframe due to lower management fees.
While they are a type of mutual fund, index funds have become more popular in recent
times as compared to regular index funds. This is because they are cheaper and less
risky. Unlike mutual funds, whose constituents are selected with rigorous analysis,
index funds stick to a tried-and-tested formula and track indices.
For those who hold very few units of mutual funds, returns can be negligible or very
low, especially when they are compared to similar equity investments.
Mutual Fund FAQs:
What is a Mutual Fund?
A mutual fund is an investment vehicle in which a pool of investors collectively put
forward funds to an investment manager to make investments on their behalf. The fund
is regulated by the Securities Exchange Commission, or SEC. When involved with a
mutual fund, each investor benefits proportionally to the amount of money they
invested.
What are the types of Mutual Funds?
The four types of mutual funds are: equity mutual funds, money market mutual funds,
bond funds, and balanced funds.
What are the pros and cons of investing in Mutual Funds?
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The advantages of mutual funds are the ability to diversify a portfolio across industries,
low fees, and availability of professional expertise in the guise of fund managers. The
disadvantages of mutual funds are that they do not provide ownership of underlying
holdings to investors; hence, investors do not have much say on the composition and
constituents of mutual funds. Mutual funds are also more expensive and riskier as
compared to index funds.
What are the tax implications of investing in Mutual Funds?
If mutual funds are traded from inside a retirement account, then capital gains accruing
from the sale are deferred. If, however, the trades occur outside a retirement account,
then the investor is responsible for paying the prevailing capital gains tax.
Does Mutual Fund ownership give you voting rights?
Buying shares of a mutual fund does not give investors voting rights in a company;
instead the fund manager votes on their behalf.
3.2 Debenture of Definition:
A debenture is a debt vehicle that is backed solely by the credit worthiness of the issuer.
They are a type of bond that is supported by the issuer's reputation and credit history
rather than any type of collateral.
Debentures are issued by both corporations and governments to raise capital. They offer
regular interest payments, called coupon payments, until their date of maturity.
Purpose of Debenture:
The purpose of a debenture is to raise capital through a slightly different debt structure
than that of a traditional corporate bond. Debentures offer several advantages for
corporations. For example, debentures:
Can be used as long-term loans
Can be issued with lower interest rates
Have a longer repayment date
Do not risk assets
Advantages of Debenture:
Debentures also offer advantages to investors, such as: -
Payment priority over common stockholders (but not over secured bondholders)
Regular, long-term interest payments
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A debenture may also be convertible, meaning that it may be converted into equity shares
after a certain date if the investor desires. Convertible debentures are appealing to investors
if they believe that the company's stock will rise in the long term.
Convertible debentures often carry a lower interest rate than their non-convertible
counterparts, however, due to the added safety of convertibility.
Disadvantages of Debenture:
Debentures have some disadvantages as well. Since they are unsecured, in the event of
bankruptcy, debenture holders have no guarantee of reimbursement. Furthermore,
debentures usually offer lower interest payments than traditional bonds, and payments
to debenture holders are prioritized below payments to regular bondholders.
Debenture FAQs:
What is a Debenture?
A debenture is a debt vehicle that is backed solely by the credit worthiness of the issuer.
What is the purpose of a Debenture?
The purpose of a debenture is to raise capital through a slightly different debt structure
than that of a traditional corporate bond.
What advantages do Debentures offer to investors?
Debentures offer advantages such as payment priority over common stockholders and
regular, long-term interest payments.
What is a disadvantage of Debentures?
Debentures have some disadvantages as well. Since they are unsecured, in the event of
bankruptcy, debenture holders have no guarantee of reimbursement.
In what circumstances would an investor buy Debentures?
Convertible debentures are appealing to investors if they believe that the company’s
stock will rise in the long term.
3.3 Equity:
In the context of stock market investments, equity refers to the shares in a company’s
ownership.
Types of Equity:
Equities are market-linked investments that do not come with an assurance of bearing fixed
returns. Returns on equity thus depend on the underlying asset’s performance.
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Shares:
The units of partial ownership in a company are commonly known as shares. They are
traded via designated stock exchanges like the Bombay Stock Exchange or National Stock
Exchange (provided that they are BSE or NSE equity shares of a listed company).
The potential returns from investing in shares can be quite substantial, with their risks being
equally high.
Equity mutual funds are those options whereby at least 60% of the total assets are invested
in the equity shares of different companies.
Based on their market capitalization, equity mutual funds can be divided into the following
categories.
These are investment instruments where the investors have an obligation of purchasing or
selling the underlying assets at a predetermined price and a predetermined rate.
Equity futures generally come with an expiry period of three months and the settlement day
is usually the last Thursday of the 3rd month.
Equity Options:
Equity options are akin to futures where parties involved are not legally obliged to follow
up on their agreement.
Arbitrage Schemes:
Arbitrage, with regard to the stock market, refers to the process of buying and selling
securities in different exchanges simultaneously to profit from the difference in market
price.
Individuals can invest in arbitrage funds which are equity-oriented funds with primary
investments in equities, debt or money market instruments, and equity derivatives.
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Individuals can choose to invest in equity instruments through alternative funds, which
comprise different pools of investment funds that primarily invest in hedge funds, venture
capital, managed future, private equity, etc.
Features of Equity:
Features Description
Maturity Period The equity shares can provide capital to the company, which cannot be regained for
as long as the company is functional.
Individuals who have invested in the company’s shares can only redeem their capital
at the time of the company’s liquidation after all other claims have been fulfilled.
Shareholders’ When an individual purchase the equity shares of a company, he/she becomes a real
Voting Rights stakeholder in the organization.
The power to participate in the company’s meetings is bestowed upon such
participants, and they have the right to voice their opinions on a company’s
executive decisions.
Income from When an individual invests in a company’s shares, he/she acquires the right to claim
Equity Shares a company’s income.
If a company has insufficient profits, equity shareholders might not earn any gains
from their shares, but they also stand a chance of earning higher dividends through
capital appreciation.
Claim on Every individual who has invested in a company’s equity shares gains an ownership
Company’s Asset claim on the company’s assets.
Limited Liability Even though shareholders are a company’s real owners, they enjoy the advantage of
limited liability. It means that their liabilities are limited only to the value of the
shares they have invested in.
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Investing in equity shares is popular among individuals because they are high-return
investment options.
While investing in a company’s stocks, one can earn profit via capital gains or stock
price appreciation.
Further, investing in a company’s shares also bestows an individual with a right to vote
in matters pertaining to the Board of Directors.
Despite their potential to bear high returns, they also have a certain degree of risk. For this
reason, it is pertinent for individuals to gauge their risk appetite before deciding to invest
in equity stock.
To calculate a firm's equity, apply the following formula, and the calculation derived from
the accounting equation is-
This information can be accessed on the balance sheet, where the following four actions
must be taken-
Find the total assets of the company on the balance sheet for the period.
Locate total liabilities, which should be stated on the balance sheet individually.
It should be noted that total assets will equal the sum of entire liabilities and entire equity.
This strategy, on the other hand, is less common. Though both techniques produce the same
exact statistic, total assets and liabilities are more indicative of a company's financial health.
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There are several benefits of equity investment that an individual can enjoy by investing in
equity shares. Some of them are enumerated below.
High Returns: Investing in equity shares provides high returns to investors, not just
through dividend earnings but also through capital appreciation.
Provides a Cushion Against Inflation: When an individual invests in equity shares,
he/she has the potential to earn high returns. The rate of returns earned is often higher
than the rate of wearing down of the investor’s purchasing power due to inflation.
Thus, investing in equity shares acts as a hedge against inflation.
Ease of Investment: Investing in shares is simple. Investors can avail of the services
of a stockbroker or financial planner to invest through various stock exchanges (NSE,
BSE equity) in a country.
If an individual has set up a Demit account, he/she can buy the stocks in a few minutes.
Diversification of Investment Portfolio: Investors mostly choose to stick to debt
instruments since they are low-risk investment options owing to lower volatility.
However, debt instruments may not always generate high returns, which is why
individuals can diversify their investment portfolio by investing in equities for higher
returns.
Disadvantages of Investing in Equities.
Even though equity investments have their fair share of advantages, they also bear a few
disadvantages.
High Market Risk: Investing in equity shares can yield returns but also exposes
investors to high risk as compared to other investment options like debt instruments.
An investor can risk losing his/her entire investment corpus by investing in equity
shares.
Performance-related Risks: Equity investments are market-related instruments and,
as a result, might not perform according to an investor’s expectations. This is known as
performance-related risk and can affect individual stocks as well as stocks across a
sector or sectors.
Risk of Inflation: A company’s worth can get diluted due to rising inflation and
subsequently, its shares might not generate potential returns.
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Liquidity Risk: Due to liquidity risk, investors might have to sell their shares at a much
lower price than their fair market value. Liquidity risk arises when a company is unable
to meet its debt obligations in the short term.
Risks Arising out of Social and Political Changes: On-going social and political
issues in a country can hamper the growth of a business. For example, if a government
decides to promote indigenous businesses, it might restrict the entry of foreign
businesses into the country. If an investor has invested in home-grown businesses,
he/she, in this scenario, will profit from better performance of his/her investments.
Equities are more suitable for investors who are willing to take a risk with their investments.
Those who are constrained by the limitations in time or experience in the money market
can also lean towards equity mutual fund investments for moderate to high returns.
How Is Equity Calculated?
Equity can be applied to a single asset, such as real estate property, or to a corporation by
subtracting liabilities from assets. For example, if a person owns a ₹4,00,000 home and
owes ₹3,00,000 on the mortgage, the owner has ₹1,00,000 in equity.
The corporation retains its equity share capital. It is only returned when the company is
closed.
Equity Shareholders have voting rights and help to choose the company's management.
The dividend rate on equity capital is determined by the availability of surplus capital .
How does equity share work?
Shareholders of a company's stock have the possibility for financial gains and dividends.
Shareholders will be able to vote if they own equity.
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You could invest in stocks in two ways: directly through equities or indirectly through
mutual funds.
Bank FDs are considered as one of the safest investment options in India as there are hardly
any instances of a bank defaulting on FD. Bank FDs offer a much higher rate of interest
than a regular savings bank account. Investments in 5-year tax-saving FDs are covered
under Section 80C of the Income Tax Act, 1961, and investors can deduct up to Rs 1,50,000
a year by investing in this. FDs offer a slightly higher rate of interest for senior citizens.
The rate of interest varies across the investment tenure, amount, residential status (NRI or
not), and bank. FDs come with a lock-in period. If you wish to withdraw within the lock-
in period, then the bank would levy penalties in the form of deducting interest accrued on
the investment. Apart from banks, other financial institutes also offer FDs.
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April-June 2019 8%
January-March 2019 8%
October-December 2018 8%
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2018 ₹ 31,438
2019 ₹ 35,220
2020 ₹ 48,651
2021 ₹ 50,045
2022 ₹ 52,950
Main features of gold:
Investing in gold provides a means to hedge against inflation
As the gold price is inversely related to stock markets, investing in gold acts as
a hedge against stock market fall
The price level of gold does not fall significantly over time, giving you the
benefit of capital protection
7.75% Gol Savings Bond:
G-Sec bonds replaced the erstwhile 8% savings bond. These bonds were launched in
2018. As the name suggests, investors get annual interest at the rate of 7.75%. You can
invest a sum as low as Rs 1,000 in these bonds.
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NSC is a government backed fixed income investment scheme which can be purchased at
banks and post offices. The minimum investment should be of INR 1,000 and then in
multiples of 100 in 12 installments or entire deposit at once. The interest is paid at the end
of the maturity period as decided by the Ministry of Finance. NSC has a lock-in period of
5 years and the investments up to INR 1,50,000 are eligible for tax deduction under section
80C.
This scheme is popular with domestic households who are looking to earn passive income.
The Indian postal service offers various types of accounts for single, joint, guardian or
parent of a minor/person of unsound mind, etc. The minimum investment required is of
INR 1,000 and a maximum balance of INR 4.5 lakhs and 9 lakhs is permitted for single and
joint accounts respectively.
Post Office RD rates are decided by the Government every quarter. The historic interest
rates of Post Office RD are:
The Government sets the interest rate of Post Office RD, and they are announced every
quarter. The interest in PORD is compounded every quarter. The investor will receive the
interest amount directly at the time of maturity along with the lump sum investment
amount. The interest earned is not subject to TDS. However, the interest earned on PORD
is taxable in the hands of the investors at their respective tax slabs.
Quarter Interest Rate
July 2020 – Till Date 5.8%
Quarter 1 – April 2020 to June 2020 5.8%
Quarter 4 – Jan 2020 to Mar 2020 7.2%
Quarter 3 – Oct 2019 to Dec 2019 7.2%
Quarter 2 – Jul 2019 to Sep 2019 7.2%
Quarter 1 – Apr 2019 to Jun 2019 7.3%
Quarter 4 – Jan 2019 to Mar 2019 7.3%
Quarter 3 – Oct 2018 to Dec 2018 7.3%
Quarter 2 – Jul 2018 to Sep 2018 6.9%
Quarter 1 – Apr 2018 to Jun 2018 6.9%
Quarter 4 – Jan 2018 to Mar 2018 6.9%
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3.8 Insurance:
People obtain insurance not only to reduce risks posed by unforeseen occurrences but also
to assist with common expenses, such as annual medical checkups and dentist
appointments.
Moreover, insurance firms negotiate discounts with healthcare providers, and their clients
pay the discounted rates.
The most challenging aspect of insurance is paying for something you hope you never need.
Nobody wants anything unpleasant to happen to them. However, if you experience a loss
without insurance, you may be in a precarious financial situation.
Importance of Insurance:
Spreads Large Risks: The insured's risk of loss is transferred to the insurer through
insurance. The underlying premise of insurance is to distribute risk among many
individuals.
The majority of the population purchases insurance and pays premiums to the insurer.
Whenever a loss happens, it is reimbursed by funds collected from millions of
policyholders.
Provides Financial Safety and Security: When an unforeseen event, such as death,
disability, critical illness, or property damage, insurance provides the financial safety and
security needed to cope with the situation. Insurance gives policyholder’s peace of mind
and protection from catastrophic losses.
Generates Long-Term Wealth: Insurance policies are long-term contracts. The premiums
paid today to create a financial asset that will be there when policyholders need it in the
future.
Insurance companies invest the premiums in a variety of assets, such as stocks, bonds, and
real estate, which generate additional income that can be used to pay claims.
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Some insurance policies may guarantee a reliable income source after retirement. The
importance of insurance in post-retirement life will depend on your current investment
strategy.
Builds Economic Development: The insurance industry produces revenue from premiums
paid by millions of policyholders. These funds are used to build long-lasting national
infrastructure because of their long-term nature. Large investments leading to the
development of capital in the economy boost employment chances. Additionally, insurance
facilitates loss reduction, financial stability, and the promotion of trade and commerce
activities, all of which contribute to sustained economic growth and development.
In the case of a medical emergency, insurance pays for hospitalization, surgical procedures,
diagnostic tests, and other treatments. Insurance also covers pre-existing conditions and
preventive care.
Components of Insurance:
Insurance has three components: premium, policy limit, and deductible. Understanding
them will help you choose the right policy.
Premium: A policy's premium is the amount you pay your insurer regularly to maintain
coverage. You may be able to pay your premiums monthly, quarterly, semiannually, or
annually depending on your insurance provider and coverage.
You will no longer be covered if your insurance premium is not paid during the grace
period. Nevertheless, depending on your insurer's reinstatement policies, your insurance
may be reinstated.
An insurance company determines the premium for an insurance plan based on various
factors. The objective is to assess whether or not an insured individual is eligible for the
sort of insurance plan they wish to acquire.
Policy Limit: The policy limit is defined as the maximum obligation of an insurance
company for damages covered by the policy. It is determined based on the insurance period,
loss or damage, and other equivalent factors.
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In general, the higher the policy limit, the higher the premium. The face value of a general
life insurance policy refers to the highest amount the insurer will pay upon the insured's
death.
Deductible: A deductible is the amount or proportion of a claim the insured agrees to pay
out of pocket before the insurer begins to pay. The insurance company is solely responsible
for paying the claim amount if it exceeds the deductible.
Deductibles are defined by the terms of a specific policy type and apply per policy or claim.
Due to the higher out-of-pocket expense, insurance policies with high deductibles are often
less expensive because fewer claims are filed.
It can be a fixed cash payment or a percentage of the entire insurance coverage provided
by a policy. On the declarations page of typical homeowners, renters, and vehicle insurance
policies, you can find the terms of your coverage, which determine the amount.
Types of Insurance:
There are many different types of insurance, each with its specific coverage. The most
common types of insurance are:
This benefit comes in exchange for the policyholder's premium payments. Life insurance
safeguards the future of your loved ones by paying a lump payment, known as a death
benefit, in the case of an unfortunate incident.
Health Insurance: Health insurance is a type of insurance that pays for the policyholder's
medical and surgical costs. It is designed to cover health care costs, including
hospitalization, doctor visits, prescription drugs, and more.
Most health insurance plans also provide coverage for preventive care, such as vaccinations
and screenings. Depending on the individual's health insurance coverage, the insured pays
out-of-pocket and is reimbursed, or the insurer pays the provider directly.
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Auto Insurance: Auto insurance is a specific kind of policy that offers financial
compensation for the repercussions that arise if your vehicle is involved in an accident.
Car insurance rating tiers are a relatively new concept that allows drivers to obtain various
prices based on many pieces of personal information. It is crucial to note that each insurer
has its unique tier structure and calculation, so do your homework before accepting the
coverage.
There are various tiers of coverage available in addition to the minimum liability coverage
mandated by most states. These tiers give additional coverage for a wide variety of potential
damages.
The potential consequences range from minor inconveniences, such as missing a flight
connection or having luggage delivered late, to significantly more serious problems, such
as acute illness or injury.
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Exclusions convey to the insured what is not covered by the insurance policy. The three
main types of exclusions include:
Excluded perils or causes of loss: These are typically characterized as harm caused by
floods, earthquakes, or nuclear radiation.
Excluded losses: Normal wear and tear is an example of an excluded loss in an auto policy.
Excluded property: - Many homeowner's insurance policies exclude personal items such as
a pet.
This section also emphasizes the insurance contract's limitations and conditions.
Limitations refer to the policy limits, such as the highest amount an insurer will pay for a
specific loss.
Conditions are the obligations of the insured, such as timely payment of premiums and
notification of losses. If the insured does not meet these standards, the insurance provider
maintains the right to deny the claim.
Riders: Riders are modifications to the coverage. The modification of a health insurance
policy's level of benefits is an example of a rider. When a policy is renewed, an insurer may
alter the language or coverage of the policy.
Changes to an insurance policy are typically communicated to the insured party by the
insurance company.
Definitions: The definitions clause clarifies all of the terminology used in the policy to
ensure that there is no room for ambiguity and that the insured is aware of all aspects of the
coverage. It could be an independent section or a subsection.
Insurance Companies vs Banks:
Banks and insurance businesses contribute to economic progress and savings promotion.
Still, they do it very differently and offer their respective customer bases different promises.
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Final Thoughts:
The insured is the individual or entity who purchases the insurance policy. The insurer
agrees to pay the insured for certain covered losses as specified in the insurance policy.
Many different types of insurance exist, including health, life, auto, homeowner's, and
travel insurance.
Comparing prices, coverage options, deductible amounts, and guaranteed savings are
important when choosing an insurance policy.
Insurance policies are often complex and may contain exceptions and limitations. It is
important to understand a policy's terms and conditions before buying it.
An insurance broker can provide you with a more personalized approach to meet your
financial goals.
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Chapter – 4
Review OF Literature
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"Investor Preferences and Financial Market Anomalies" by Kent Daniel, David Hirsh
Leifer, and Avanidhar Subrahmanyam (2018) - This paper provides a comprehensive
overview of investor preferences and how they affect financial market anomalies. The
authors explore various factors that influence investor preferences, such as risk aversion,
time horizon, and information processing abilities.
“Investor Preferences for Corporate Social Responsibility" by Sudheer Chavan and Vikram
Nanda (2015) - This study examines the relationship between investor preferences and
corporate social responsibility (CSR). The authors find that investors are more likely to
invest in firms that have a strong CSR record and that there is a positive correlation between
CSR and financial performance.
"Investor Preferences and Real Estate Risk and Return" by David Gentler and Craig
Watkins (2018) - This paper examines how investor preferences influence real estate risk
and return. The authors argue that investors' risk aversion, time horizon, and other factors
affect their perception of risk and return in real estate investment opportunities.
"Investor Preferences and Mutual Fund Choice" by Gjergji Cici, Scott Gibson, and Clemens
Sialm (2017) - This study investigates the relationship between investor preferences and
mutual fund choice. The authors find that investors are more likely to invest in funds that
have lower fees, higher past performance, and higher manager ownership.
"Investor Preferences for Dividend Policy: Evidence from the Korean Stock Market" by
Bong-Soo Lee and Yong-Cheol Kim (2018) - This paper examines investor preferences for
dividend policy in the Korean stock market. The authors find that investors prefer firms
that pay higher dividends and have a stable dividend policy.
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“A. Lalitha and M. Surekha, (2008) concluded in their study that investors are more stay
with the traditional investment avenues than latest options like LIC and bank/ post office
deposits. Investors believe that traditional options are more secure and free from risks as
compared to the modern investment options. They also observed in their study that the retail
investors don’t have proper investment awareness and knowledge.”
“Dhiraj Jain & Parul Jain, (2012) analyzed that demographic factors play an important role
& have a great impact on the investment decisions of the investors. Income level, age,
marital status, education level, occupation etc. affects the decision & market knowledge of
the investors in Rajasthan. It is concluded from study that most of the teachers are saving
for their children education, marriage and their family future needs.”
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 61
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
“Varsha Virani, (2014) analyzed the various avenues of investment & concluded during the
study that teachers have been saving for the future in spite of them having a low level of
income. They save and make investment in most profit options in which low risk is
involved. Most of the respondents prefer to invest in bank deposits as it involves low risk
and provide regular return. High rate of return & tax benefit has influenced the investment
decision of the respondents.’’
“P. Bhanu Sireesha and Sree Laxmi, (2013) studied that investors were more interested in
the safety of their investment than other benefits arising from the investments. Most of the
investors prefer those investment options which had medium risk factor.”
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 62
Chapter – 5
Research Methodology
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 63
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 64
Chapter – 6
Data Analysis
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
less than 10% 10%-25% 25%-50% above 50%
Interpretation:
Researcher finds that out of 100 ,43%rate find less than 10% of income invest and out of
100, 35% rate find 10%-25% of income invest and out of 100, 14%of income invests 25%-
50% and out of 100 ,8% respondent response above 50%.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 65
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
45
40
35
30
25
20
15
10
5
0
Interpretation:
Researcher finds that out 100, 12% rate find income & capital preservation of investment
objective and out of 100, 21% rate find short-term growth investment objective and out of
100, 41% of investment long term growth and out of 100, 7% respondent Generate regular
income to meet current requirements and out of 100, 7% responded Balanced current
income & long-term growth.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 66
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
35
30
25
20
15
10
0
Weath creation Tax saving Future expenses Safety Returns earning Other
Interpretation:
Research find that out of 100, 91% response are wealth creation and out of 100, 17%
response are tax saving and out of 100, 29% response are future expenses and out of 100,
15% are response safety and of 100, 15% people are said returns earning.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 67
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
25
20
15
10
Interpretation:
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 68
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
Research find that investment avenues of out of 100, 20% response are mutual funds, equity
shares and out of 100, 21% response bank deposit and out of 100, 2% response are
government securities and other.
6.5 From where do you seek advice for your Investment Decision?
Sr. no. Option No. of response Rate of response
1 Magazines/Newspaper 12 12%
2 Family/Friends 37 37%
3 Personal analysis 17 17%
4 Bank 14 14%
5 Internet/Apps 10 10%
6 Financial advisor 5 5%
7 Other 5 5%
Total 100 100%
Table 6.5 Investment Decision
40
35
30
25
20
15
10
Interpretation:
Research find that investment decision of out of 100, 37% family / Friends and out of 100,
17% response personal analysis and out of 100 out 100, 5% response financial advisor,
others.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 69
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
40
35
30
25
20
15
10
0
Daily Weekly Monthly Quarterly Half-yearly Yearly Occasionally
Interpretation:
Research find that invest of out of 100, 17% weekly and out of 100, 36% Monthly invest
and out of 100, 10% people daily, yearly, occasionally invest and out of 100, 6% Quarterly
and out of 100, 11% Half-yearly.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 70
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
60
50
40
30
20
10
0
Less than 1 year 1 year-3 year 3 year-7 year More than 7 year
Interpretation:
Research find that out of 100, 50% people 1 year – 3-year Horizon Investment and out of
100, 20% people 3 year – 7-year Horizon Investment and more than 7-year 7% response
Horizon Investment.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 71
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
60
50
40
30
20
10
Interpretation:
Research find that Most Important Factors out of 100, 56% Maturity to highest and 13%
Expense to lowest. Important Factors out of 100, highest risk 45% and lowest of 19% Tax
Benefit. Neutral Factors out of 100, highest Charges 29% and lowest of 12% Maturity. Less
Important Factor out of 100, highest liquidity of 20% and lowest 3% of Maturity. Not
Important Factors out of 100, highest 24% Expense and 3% lowest of Maturity.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 72
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
6.9 What is the approx. Return that you expect from your investment?
40
35
30
25
20
15
10
0
Less than 10% 10%-20% 20%-30% More than 30%
Interpretation:
Research find that Return of Expect Investment of out of 100, 12% response less than 10%
and 36% respondent 10% to 20% and out of 100, 32% respondent are 20% to 30% and out
of 100, 20% are more than 30%.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 73
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
35
30
25
20
15
10
0
Children's education Children's marriage Health care Other
Interpretation:
Research find that Saving Objectives of out of 100, 24% Children’s education and out of
100, 23% Children’s marriage, Health care and out of 100, 30% Other.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 74
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
50
45
40
35
30
25
20
15
10
0
Public sector Private sector Both
Interpretation:
Research find that public sector out of 100, 24% and Private sector out of 33% and out of
100, Both 43% response.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 75
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
25
20
15
10
0
Life Insurance State Bank of India Post Union Bank of Punjab National Other
Corporation India India Bank
Interpretation:
Research find that Public sector company out of 100, 22% Life Insurance Corporation and
out of 100, 23 %State Bank of India and out of 100, 18% Indian Post and out of 100, 16%
Union Bank of India and out of 100, 10% Punjab Nation Bank and out of 100, 11% Other.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 76
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
30
25
20
15
10
0
HDFC Bank Angel Broking Grow App ICIC Bank Kotak Mahindra Other
App Bank
Interpretation:
Research find that Privat Sector Company out of 100, 25% HDFC Bank and out of 100,
18% Angel Broking App and out of 100, 15% Grow App and out of 100, 22% ICIC Bank
and out of 100, 8% Kotak Mahindra Bank and out of 100, 12% Other.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 77
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
6.14 Age:
AGE
36 to 45 Above 45
26 to 35 2% 1%
13%
18 to 25
84%
Interpretation:
The chart clearly shows that 84% of the respondent of investors preference are in the age
group of 18 to 25 years and 13% of the respondent are in age group of 26 to 35 years.
Therefore, it can be said that investors preference is more respondent by the age group of
18 to 25 years people.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 78
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
6.15 Gender:
GENDER
Female
41%
Male
59%
Interpretation:
This chart clearly shows that out of the total respondents, 41% respondent are Female and
59% respondents are Female. Thus, it can be conducted that Investment Preference is more
perforce by Male.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 79
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
6.16 Occupation:
OCCUPATION
Salaried person Retired
4%
Home maker 4%
5%
Business owner
12%
Student
75%
Interpretation:
This chart clearly show Investment Preference is most preferred by the student and 12%
Business owner and 4% Salaries Person and Retired 4%.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 80
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
INCOME
Above Rs.55,000
17%
Rs.40,000-
Rs.55,000
5%
Less than Rs.10,000
44%
Rs.25,000-
Rs.40,000
13%
Rs.10,000-
Rs.25,000
21%
Interpretation:
Research finds that out of 100 ,44%rate find less than Rs.10,000 of income and out of 100,
21% income Level find Rs.10,000 – Rs.25,000 and out of 100, 13%of income Level
Rs.25,000 – Rs.40,000 and out of 100 ,5% of income level Rs.40,000 – Rs.55,000 and out
of 100, 17% of income level of Above Rs.55,000.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 81
Chapter – 7
Conclusion
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
Conclusion
Based on the responses obtained from the study of investors' preferences in different
investment avenues during the period of 2018-2022, the following conclusions can be
drawn: -
Equity is the most preferred investment option among investors. This is due to its potential
for higher returns compared to other investment options. The study revealed that investors'
primary objective while investing is to achieve financial goals such as long-term wealth
creation, retirement planning, and children's education. The share market and commodity
market are popular investment avenues, but they are considered riskier than other
investment options. However, investors are willing to invest in these markets for higher
returns. The most trending investment options are equity mutual funds and systematic
investment plans. These investment options offer benefits such as diversification,
professional management, and lower risks. The study identified several factors that
influence investors' selection of investment avenues. These factors include risk tolerance,
investment horizon, financial goals, past investment experience, and current
market conditions.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 82
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
Findings
The majority of investors invest less than 10% of their income.
The most common investment objectives is long-term growth.
The purpose behind investment is mainly to earn higher returns and create wealth.
Mutual funds and equity shares and bank deposit are the most popular investment
avenues among investors.
Investors seek advice from financial advisors, family and friends.
Most investors invest on a regular basis, with a majority investing monthly.
Investors generally 1 year – 3 year the time horizon for their investments.
The factors that are most important to investors in their investment decisions are risk,
return, maturity and liquidity.
Investors expect an approximate return of 10-20% from their investments.
The primary saving objectives for investors are children’s education, children’s
marriage health care, and other.
Investors prefer to invest in sectors such as public sector and private sector.
Investors prefer to invest in public sector companies such as State Bank of India and
LIC.
Investors prefer to invest in private sector companies such as ICICI Bank and HDFC
Bank.
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 83
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
Bibliography
Books:
Chordia, T., Roll, R., & Subrahmanyam, A. (2019). Investor Behaviour and Mutual
Fund Flows: Evidence from a Natural Experiment. National Bureau of Economic
Research. Working Paper No. 25623.
Agrawal, A., & Kumar, A. (2019). Investor Preferences and Financial Advice:
Evidence from India. Journal of Banking & Finance, 98, 93-105.
Reserve Bank of India. (2020). Household Financial Savings in India: Trends and
Determinants.
Gomber, P., Clapham, B., & Haferkorn, M. (2018). Retail Investor Preferences and
Behaviour: Evidence from a Large-Scale Survey in Germany. Journal of Banking &
Finance, 97, 308-327.
Chavan, Sudheer, and Nanda, Vikram. (2015). Investor Preferences for Corporate
Social Responsibility. Journal of Finance, 70(4), 1081-1131.
Cici, Gjergji, Gibson, Scott, and Sialm, Clemens. (2017). Investor Preferences and
Mutual Fund Choice. Review of Financial Studies, 30(7), 2229-2276.
Lee, Bong-Soo, and Kim, Yong-Cheol. (2018). Investor Preferences for Dividend
Policy: Evidence from the Korean Stock Market. Journal of Financial Markets, 40, 40-
55.
Reference:
http://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=55
https://www.amfiindia.com/distributor-corner/circulars-and-announcements
https://en.wikipedia.org/wiki/reserve-bank-of-India
https://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India
https://en.wikipedia.org/wiki/State_Bank_of_India
https://groww.in/p/association-of-mutual-funds-india
https://www.ibef.org/industry/financial-services-india
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 84
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
Annexure
Questionnaire
I student of D.R. Patel & R.B. Patel commerce college and Bhaniben Chhimkabhai Patel
BBA college is conducting a survey on “A study of investors Preference while going to
invest in different investment avenues during a period of 2018-22.” Kindly provide me
with necessary information by filling up this questionnaire. Information provided by you
will be strictly used for academic purpose.
Thank you
Rajvi Kakadiya
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 85
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
o Bank deposit
o Public provident fund (PPF)
o Real estate (Property)
o FOREX
o Insurance
o Gold / Silver
o Post office savings
o Pension & Provident fund
o Government securities
o Other
5. From where do you seek advice for your Investment Decision?
o Magazines / Newspaper
o Family / Friends
o Personal analysis
o Bank
o Internet / Apps
o Financial advisor
o Other
6. How frequently do you invest?
o Daily
o Weekly
o Monthly
o Quarterly
o Half – yearly
o Yearly
o Occasionally
7. What is the time Horizon of your investment?
o Less than 1 year
o 1 year – 3 year
o 3 year – 7 year
o More than 7 years
8. How important are these factors your investment?
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 86
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
9. What is the approx. return that you expect from your investment?
o Less than 10%
o 10% - 20%
o 20% - 30%
o More than 30%
10. What are your saving objectives?
o Children’s education
o Children’s marriage
o Health care
o Other
11. In which sector do you prefer to invest?
o Public sector
o Private sector
o Both
12. Through which public sector company do you prefer to invest?
o Life Insurance Corporation (LIC)
o State Bank of India (SBI)
o India Post (Post office)
o Union Bank of India
o Punjab National Bank
o Other
13. Through which private sector company do you prefer to invest?
o HDFC Bank
o Angel Broking App
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 87
“A Study of Investors Preference While Going to Invest in Different Investment Avenues During A Period Of 2018-22. ”
o Grow App
o ICICI Bank
o Kotak Mahindra Bank
o Other
General Information: -
1. Name:
_____________________________________
2. Mobile No.:
____________________________________
3. E-mail Address:
___________________________________
4. Age:
o 18 to 25
o 26 to 35
o 36 to 45
o Above 45
5. Gender:
o Female
o Male
6. Occupation:
o Student
o Business owner
o Home maker
o Salaried person
o Retired
o Others
7. Income Level:
o Less than Rs.10,000
o Rs.10,000 – Rs.25,000
o Rs.25,000 – Rs.40,000
o Rs.40,000 – Rs.55,000
o Above Rs.55,000
D.R. Patel & R.B. Patel Commerce College & Bhaniben Chhimkabhai Patel BBA College 88
Response Sheet
No. Name Email id
1 Vidhi Kanani vidhikanani8@gmail.com
2 Bansi Gopani Bansigopani23@gmail.com
3 Bansi Kakadiya Bansikakadiya26@gmail.com
4 Chandni Chodvadiya chodvadiyachandani@gmail.com
5 Dripana Lathiya dripanalathiya@gmail.com
6 Shreya Wadekar Shreyawadekar019@gmail.com
7 Arya Patel aryapatel@gmail.com
8 Yashika Patel yashikapatel@gmail.com
9 Priyanshi Varma Priyanshivarma1412@gmail.com
10 Vanshika Gajera Vanshikagajera09@gmail.com
11 Sneha Shrivastav Shrivastavsneha12@gmail.com
12 Divyani Sukdeo Bagale divyanisukdeobagale@gmail.com
13 Jyoti Prajapati jyotiprajapati0606@gmail.com
14 Tishi Managukiya Tishimanagukiya76@gmail.com
15 Kenil Khunt Kenilkhunt013@gmail.com
16 Krishna Sheta Krishnasheta042@gmail.com
17 Udaya Singh udayasingh@gmail.com
18 Bhargesh Lakhani Bhargeshlakhani001@gmail.com
19 Om Patel ompatel@gmail.com
20 Vaishnav Nitin Vaishnavnitin363@gmail.com
21 Aryan Gupata aryangupata@gmail.com
22 Vivek Pundiya Vivekpundiya8734@gmail.com
23 Bhumit Gohil bhumitgohil@gmail.com
24 Yash Chodvadiya yashchodvadiya@gmail.com
25 Jay Bhalala Jaybhalala9902@gmail.com
26 Maulik Zankhrowala maulikzankhrowala@gmail.com
27 Tushar Patel Tusharpatel9737@gmail.com
28 Harsh Vala Harshvala07@gmail.com
29 Vaibhav Hirpara Vaibhavhirpara002@gmail.com
30 Manav Gadhiya Manavgadhiya15@gmail.com
`
31 Arjunsinh Chauhan Arjunsinhchauhan9485187@gmail.com
32 Om Dhameliya Omdhameliya116@gmail.com
33 Kishan Vekariya Kishanvekariya06@gmail.com
34 Manishaben Kukadiya Manishabenkukadiya001@gmail.com
35 Manali Patel Manalipatel105@gmail.com
36 Jiya Mangukiya Jiyamangukiya@gmail.com
37 Rishi Khunt rishikhunt@gmail.com
38 Feni Panshuliya fenipanshuliya@gmail.com
39 Liza Gojariya Lizagojariya58@gmail.com
40 Dhruvisha Chetani Dhruvishachetani05@gmail.com
41 Anju Chauhan Anjuchauhan216@gmail.com
42 Dax Patel Daxpatel5@gmail.com
43 Yash Balar Yashbalar000@gmail.com
44 Yash Paladiya Yashpaladiya09@gmail.com
45 Raj Balar Rajbalar32@gmail.com
46 Zuli Raval Zuliraval35@gmail.com
47 Khushi Managukiya Khushimanagukiya06@gmail.com
48 Hemanshi Bhalani hemanshibhalani@gmail.com
49 Krishna Sonani Krishnasonani005@gmail.com
50 Maitri Jariwala Maitrijariwala13@gmail.com
51 Sneha Malaviya Snehamalaviya127@gmail.com
52 Sahil Thummar Shahilthummar002@gmail.com
53 Harsh Nariya Harshnariya13@gmail.com
54 Brinda Thummar Brindathummar1508@gmail.com
55 Keval Patel Kevalpatel13@gmail.com
56 Ridhhi Ramotiya Ridhhiramotiya002@gmail.com
57 Suhani Jiyani Suhanijiyani1712@gmail.com
58 Manshi Hirpara Manshihirpara002@gmail.com
59 Parth Sheta parthsheta@gmail.com
60 Rohan Jain rohanjain@gmail.com
61 Yash Gami Yashgami58@gmail.com
62 Arth Bharwad Arthbharwad055@gmail.com
`
63 Tanvi Patel tanvipatel@gmail.com
64 Dhruv Modi Dhruvmodi0781@gmail.com
65 Bhumi Jodhani Bhumijodhani147@gmail.com
66 Dhruvit Gangani Dhruvitgangani99@gmail.com
67 Siddharth Kumawat Siddharthkumawat04@gmail.com
68 Ravi Vanani Ravivanani1314@gmail.com
69 Yash Bansal yashbansal@gmail.com
70 Chetan Nakarani Chetannakarani1347@gmail.com
71 Bhavy Reycha bhavyreycha@gmail.com
72 Jiyana Shah jiyanashah@gmail.com
73 Dhruvil Patel Dhruvilpatel3657@gmail.com
74 Bharat Lakhnotra Bharatlakhnotra19@gmail.com
75 Poojan Gautami Poojangautami005@gmail.com
76 Raj Kakadiya Rajkakadiya050@gmail.com
77 Shashi Singh shashisingh@gmail.com
78 Sakshi Jariwala Sakshijariwala97871@gmail.com
79 Dhruvil Doshi Dhruvildoshi1083@gmail.com
80 Disha Kriplani Dishakriplani3744@gmail.com
81 Jahanvi Gupta Jahanvigupta7122@gmail.com
82 Vandan Gadhiya vandangadhiya@gmail.com
83 Jay Kankotiya jaykankotiya@gmail.com
84 Yash Akbari Yashakbari01@gmail.com
85 Meet Jadav meetjadav@gmail.com
86 Harsh Ahir Harshahir2488@gmail.com
87 Rahul Sagar Rahulsagar2846@gmail.com
88 Manav Gajera manavgajera@gmail.com
89 Jenil Sojitra jenilsojitra@gmail.com
90 Sahil Dabhi Sahildabhi80@gmail.com
91 Manav Khunt Manavkhunt9728@gmail.com
92 Akshar Italiya aksharitaliya@gmail.com
93 Dhruv Paghdal Dhruvpaghdal16@gmail.com
94 Saraswati Upadhyay Saraswatiupadhyay02@gmail.com
`
95 Sarita Bajendrasahu Saritabajendrasahu2005@gmail.com
96 Hinal Prajapati hinalprajapati@gmail.com
97 Krima Patel krimapatel@gmail.com
98 Urvish Gandhi urvishgandhi@gmail.com
99 Pooja Chaurasiya Poojachaurasiya2812@gmail.com
100 Khushi Jain Khushijain040@gmail.com