investment project part 1

8/2/2019 Investment Project Part 1

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OBJECTIVES OF THE PROJECT

To study the various investment avenues and investors risk preferencetowards it.

To study the saving habits of the different customers and the amount theyinvest in various financial instruments.

To study in which type of financial instrument people like to invest. To know the rate of return expected by the people on investment. To find out the general demographic factors of the people dealing in

capital market.


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METHODOLOGY

The study was based on both primary data and secondary data derived through

customer survey using pretested structured instruments (questionnaires) and the

secondary data derived through information from the company, websites journal

and magazines. Study was based on finding the perception of people towards

investments with reference to Karvy.The said company chosen because it is

leading stock broking company which provides the financial services to

clients.corporates or the people. The instruments pertaining to various

investment avenues available. It is very essential to know the accuracy of the

findings which depends on how systematically the study has been carried out so

that it can make sense

SAMPLING TECHNIQUES:-

Initially, a rough draft was prepared keeping in mind the objective of the

research. respondents are taken. Convenience sampling technique was used for

collecting the data from the people who are investing in various investmentavenues.

SAMPLING SIZE AND UNITS:

The sample size is of 100 people which comprised of people of service class

and business class.

DATA COLLECTION:-

Based on the questionnaires prepared data are collected by survey method. Thisquestionnaire was primarily aimed to respondents who belong to business classand service class.With respect to primary and secondary data, the informationis collected. Primary data tells us present scenario of financial market.Secondary data means that to get the data from the internet, companymagazines, talking with people and convince.


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DATA ANALYSIS

For the purpose of analysing, the raw primary data that was collected by way ofa Structured questionnaire was analysed question by question. The analysis ofsurvey has been done on percentage method.pie chart, bar graph is prepared toanalyse the data. The data is analysed after the personal interaction by thepeople who are investing in capital market. All the views and data areinterpreted clearly and come on with some findings.


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LIMITATIONS OF THE STUDY

Total number of financial instrument in the market is so large that it needs alot of resources to analyze them all.

There are various companies providing these financial instruments to thepublic.

Handling and analyzing such a varied and diversified data needs a lot oftime and resources.

As the project is based on secondary data, possibility of unauthorizedinformation cannot be avoided. Due to time constraints, a small sample size was taken to conduct the

research.


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EXECUTIVE SUMMARY

Indias economy is highly developing. The development is taken place due to

the growth in the financial system. This financial system provides the

background to various investors regarding varied options to invest. Thus,

development of the economy depends on how these investors invest for the well

being in long run.

As financial markets become more sophisticated and complex, investors need a

financial intermediary who provides the required knowledge and professional

expertise on successful investing. Mutual Funds represent perhaps the most

appropriate investment opportunity for investors. No wonder the concept of

Mutual Fund was initially developed in the U.S. market, but the entry of the

concept in the Indian Financial Market was in the year 1964 with the

formulation Of the UTI, at the initiative of the RBI and Govt. of India.

For most people, money is a delicate matter and when it comes to investing they

are wary. Simply because there are many investment options out there, each outpromising the other. An important question facing many investors is whether to

Invest in Banks, National Savings, Post office, Non-banking finance companies,

Fixed deposits, Shares etc. or to invest distinctively in Mutual Funds.

I have observed that approximately 40% of the people are unaware of Trading

but most of them are interested to know about trading and ready to attend

Seminar arranged by KARVY. They are also interested to work with KARVY if

sufficient information is provided to them about Trading and KARVY.

People from service class prefers safety of income plus the regular income as

well as tax benefits while on the other hand Professional and Businessman focus

on high return with some risk.

For growth and development of the Stock Market Industry, the misconception

regarding Share Market should be removed & the awareness for the same

should be made.


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INTRODUCTION TO INVESTMENT

Investment is putting money into something with the expectation of profit. Morespecifically, investment is the commitment ofmoney or capital to the purchaseof financial instruments or other assets so as to gain profitable returns in theform of interest, dividends, or appreciation of the value of the instrument(capital gains). It is related to saving or deferring consumption. Investment isinvolved in many areas of the economy, such as business management andfinance no matter for households, firms, or governments. An investmentinvolves the choice by an individual or an organization, such as a pension fund,after some analysis or thought, to place or lend money in a vehicle, instrument

or asset, such as property, commodity, stock, bond, financial derivatives (e.g.futures or options), or the foreign asset denominated in foreign currency, thathas certain level of risk and provides the possibility of generating returns over aperiod of time. Investment comes with the risk of the loss of the principal sum.The investment that has not been thoroughly analyzed can be highly risky withrespect to the investment owner because the possibility of losing money is notwithin the owner's control. The difference between speculation and investmentcan be subtle. It depends on the investment owner's mind whether the purpose isfor lending the resource to someone else for economic purpose or not.

Savings form an important part of the economy of any nation. With the savingsinvested in various options available to the people, the money acts as the driverfor growth of the country. Indian financial scene too presents a plethora ofavenues to the investors. Though certainly not the best or deepest of markets inthe world, it has reasonable options for an ordinary man to invest his savings.The money you earn is partly spent and the rest saved for meeting futureexpenses. Instead of keeping the savings idle you may like to use savings inorder to get return on it in the future. This is called Investment. One needs toinvest to and earn return on your idle resources and generate a specified sum of

money for a specific goal in life and make a provision for an uncertain futureOne of the important reasons why one needs to invest wisely is to meet the costof Inflation. Inflation is the rate at which the cost of living increases. The cost ofliving is simply what it costs to buy the goods and services you need to live.Inflation causes money to lose value because it will not buy the same amount ofa good or service in the future as it does now or did in the past. The sooner onestarts investing the better. By investing early you allow your investments moretime to grow, whereby the concept of compounding increases your income, byaccumulating the principal and the interest or dividend earned on it, year after

year. The three golden rules for all investors are:
http://g/wiki/Moneyhttp://g/wiki/Interesthttp://g/wiki/Dividendshttp://g/wiki/Capital_gainshttp://g/wiki/Saving_(money)http://g/wiki/Consumption_(economics)http://g/wiki/Economyhttp://g/wiki/Business_managementhttp://g/wiki/Financehttp://g/wiki/Real_estatehttp://g/wiki/Commodityhttp://g/wiki/Stockhttp://g/wiki/Bond_(finance)http://g/wiki/Financial_derivativeshttp://g/wiki/Futures_contracthttp://g/wiki/Option_(finance)http://en.wiktionary.org/wiki/principal#Nounhttp://g/wiki/Speculationhttp://g/wiki/Speculationhttp://en.wiktionary.org/wiki/principal#Nounhttp://g/wiki/Option_(finance)http://g/wiki/Futures_contracthttp://g/wiki/Financial_derivativeshttp://g/wiki/Bond_(finance)http://g/wiki/Stockhttp://g/wiki/Commodityhttp://g/wiki/Real_estatehttp://g/wiki/Financehttp://g/wiki/Business_managementhttp://g/wiki/Economyhttp://g/wiki/Consumption_(economics)http://g/wiki/Saving_(money)http://g/wiki/Capital_gainshttp://g/wiki/Dividendshttp://g/wiki/Interesthttp://g/wiki/Money


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Invest early

Invest regularly

Invest for long term and not short term

Investment comes with the risk of the loss of the principal sum. The investmentthat has not been thoroughly analyzed can be highly risky with respect to theinvestment owner because the possibility of losing money is not within theowner's control. The difference between speculation and investment can besubtle. It depends on the investment owner's mind whether the purpose is forlending the resource to someone else for economic purpose or not.

In the case of investment, rather than store the good produced or its money

equivalent, the investor chooses to use that good either to create a durableconsumer or producer good, or to lend the original saved good to another inexchange for either interest or a share of the profits. In the first case, theindividual creates durable consumer goods, hoping the services from the goodwill make his life better. In the second, the individual becomes an entrepreneurusing the resource to produce goods and services for others in the hope of aprofitable sale. The third case describes a lender, and the fourth describes aninvestor in a share of the business. In each case, the consumer obtains a durableasset or investment, and accounts for that asset by recording an equivalent

liability. As time passes, and both prices and interest rates change, the value ofthe asset and liability also change.

An asset is usually purchased, or equivalently a deposit is made in a bank, inhopes of getting a future return or interest from it. The word originates in theLatin "vestis", meaning garment, and refers to the act of putting things (moneyor other claims to resources) into others' pockets.[4] The basic meaning of theterm being an asset held to have some recurring or capital gains. It is an assetthat is expected to give returns without any work on the asset per se. The term

"investment" is used differently in economics and in finance. Economists referto a real investment (such as a machine or a house), while financial economistsrefer to a financial asset, such as money that is put into a bank or the market,which may then be used to buy a real asset.
http://en.wiktionary.org/wiki/principal#Nounhttp://g/wiki/Speculationhttp://g/wiki/Assethttp://g/wiki/Return_(finance)http://g/Investment.htm%23cite_note-3http://g/Investment.htm%23cite_note-3http://g/Investment.htm%23cite_note-3http://g/Investment.htm%23cite_note-3http://g/wiki/Return_(finance)http://g/wiki/Assethttp://g/wiki/Speculationhttp://en.wiktionary.org/wiki/principal#Noun


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VARIOUS INVESTMENT AVENUES:-

Mutual fund Equity shares Real estates Bond Commodities Deposits Cash equivalents

KARVY AS AN ORGANIZATION

KARVY, is a premier integrated financial services provider, and ranked amongthe top five in the country in all its business segments, services over 16 millionindividual investors in various capacities, and provides investor services to over300 corporate, comprising the who is who of Corporate India. KARVY coversthe entire spectrum of financial services such as Stock broking, DepositoryParticipants, Distribution of financial products - mutual funds, bonds, fixeddeposit, equities, Insurance Broking, Commodities Broking, Personal FinanceAdvisory Services, Merchant Banking & Corporate Finance, placement ofequity, IPOs, among others. Karvy has a professional management team and

ranks among the best in technology, operations and research of variousindustrial segments.

The birth of Karvy was on a modest scale in 1981. It began with the vision andenterprise of a small group of practicing Chartered Accountants who foundedthe flagship company. Karvy Consultants Limited. Started with consulting andfinancial accounting automation, and carved in roads into the field of registryand share accounting by 1985. Since then, Karvy used its experience andsuperlative expertise to go from strength to strength, to better services, to

provide new ones, to innovate, diversify and in the process, evolved Karvy asone of Indias premier integrated financial service enterprise.

Thus over the last 20 years Karvy has travelled the success route, towardsbuilding a reputation as an integrated financial services provider, offering awide spectrum of services. And have made this journey by taking the route ofquality service, path breaking innovations in service, versatility in service andfinally totality in service.

KARVY highly qualified manpower, cutting-edge technology, comprehensiveinfrastructure and total customer-focus has secured for the position of an


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emerging financial services giant enjoying the confidence and support of anenviable clientele across diverse fields in the financial world. Values and visionof attaining total competence in servicing has served as the building block forcreating a great financial enterprise, which stands solid on our fortresses of

financial strength - various companies.

With the experience of years of holistic financial servicing and years ofcomplete expertise in the industry to look forward to, Karvy now emerged as apremier integrated financial services provider.

As the flagship company of the Karvy Group, Karvy Consultants Limited hasalways remained at the helm of organizational affairs, pioneering businesspolicies, work ethic and channels of progress.

MILESTONE OF KARVY

INCEPTION 1979 Corporate Registry services 1985 Stock Broking & ISCs 1990 Financial Product Distribution 1993 Corporate Finance 1995 Depository Services 1997 ITES & BPO Services 2000 Personal Finance Advisory Services 2001 Secondary Debt & WDM Services 2003 Joint Venture with Computer Share 2004 Comtrade 2004


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MAJOR AREAS OF OPERATION

Karvy Stock Broking Limited Karvy Investors Service Limited Karvy Computershare Pvt. Limited Karvy Consultant Limited Karvy Global Services Limited Karvy Comtrade Limited Karvy Insurance Broking Private Limited

KARVY STOCK BROKING LIMITED

Member - National Stock Exchange (NSE), The Bombay Stock Exchange(BSE), and The Hyderabad Stock Exchange (HSE).Karvy Stock BrokingLimited, one of the cornerstones of the Karvy edifice, flows freely towardsattaining diverse goals of the customer through varied services. Creating aplethora of opportunities for the customer by opening up investment vistasbacked by research based advisory services. Here, growth knows no limits andsuccess recognizes no boundaries. Helping the customer create waves in hisportfolio and empowering the investor completely is the ultimate goal.

STOCK BROKING SERVICES:-Karvy offer services that are beyond just a medium for buying and sellingstocks and shares. Instead we provide services which are multi dimensional andmulti-focused in their scope. There are several advantages in utilizing our StockBroking services, which are the reasons why it is one of the best in the country.

It offers trading on a vast platform National Stock Exchange, Bombay StockExchange and Hyderabad Stock Exchange. More importantly, they make


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trading safe to the maximum possible extent, by accounting for several riskfactors and planning accordingly. Assisted in this task by in-depth research,constant feedback and sound advisory facilities. Highly skilled research team,comprising of technical analysts as well as fundamental specialists, secure

result-oriented information on market trends, market analysis and marketpredictions. This crucial information is given as a constant feedback tocustomers, through daily reports delivered thrice daily; The Pre-session Report,where market scenario for the day is predicted, The Mid-session Report, timedto arrive during lunch break, where the market forecast for the rest of the day isgiven and The Post-session Report, the final report for the day, where themarket and the report itself is reviewed. Karvy also offer special portfolioanalysis packages that provide daily technical advice on scrips for successfulportfolio management and provide customized advisory services to help youmake the right financial moves that are specifically suited to customer portfolio.Karvy Stock Broking services are widely networked across India, with thenumber of trading terminals providing retail stock broking facilities, serviceshave increasingly offered customer oriented convenience, which provide to aspectrum of investors, high-net worth or otherwise, with equal dedication andcompetence. To empower the investor further we have made serious efforts toensure that research calls are disseminated systematically to all our stockbroking clients through various delivery channels like email, chat, SMS, phonecalls etc.

DEPOSITORY PARTICIPANTS:-The onset of the technology revolution in financial services Industry saw theemergence of Karvy as an electronic custodian registered with NationalSecurities Depository Ltd (NSDL) and Central Securities Depository Ltd(CSDL) in 1998. Karvy set standards enabling further comfort to the investor by

promoting paperless trading across the country and emerged as the top 3Depository Participants in the country in terms of customer serviced. Offering awide trading platform with a dual membership at both NSDL and CDSL, apowerful medium for trading and settlement of dematerialized shares. A 1600team of highly qualified and dedicated professionals drawn from the best ofacademic and professional backgrounds are committed to maintaining highlevels of client service delivery. This has propelled us to a position among thetop distributors for equity and debt issues with an estimated market share of15% in terms of applications mobilized, besides being established as the leadingprocurer in all public issues.


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KARVYTHEFINAPOLISTo further tap the immense growth potential in the capital markets we enhanced

the scope of our retail brand, Karvythe Finapolis, thereby providing planningand advisory services to the mass affluent. Here understanding the customerneeds and lifestyle in the context of present earnings and provide adequateadvisory services that will necessarily help in creating wealth. Judiciousplanning that is customized to meet the future needs of the customer deliver aservice that is exemplary. The market-savvy and the ignorant investors, bothfind this service very satisfactory. The edge that has over competition isportfolio of offerings and professional expertise. The investment planning foreach customer is done with an unbiased attitude so that the service is truly

customized. Monthly magazine, Finapolis, provides up-dated marketinformation on market trends, investment options, opinions etc. Thusempowering the investor to base every financial move on rational thought andprudent analysis and embark on the path to wealth creation.

ADVISORY SERVICES:-Under retail brand Karvy the Finapolis', delivers advisory services to a cross-section of customers. The service is backed by a team of dedicated and expertprofessionals with varied experience and background in handling investmentportfolios. They are continually engaged in designing the right investmentportfolio for each customer according to individual needs and budgetconsiderations with a comprehensive support system that focuses on tradingcustomers' portfolios and providing valuable inputs, monitoring and managingthe portfolio through varied technological initiatives. This is made possible bythe expertise that has gained in the business over the years.


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KARVY INVESTOR SEVICE LIMITED

MERCHANT BANKING:-

Recognized as a leading merchant banker in the country, registered with SEBIas category one merchant banker. This reputation was built by capitalizing onopportunities in corporate consolidations, mergers and acquisitions andcorporate restructuring, which have earned the reputation of a merchant banker.Raising resources for corporate or Government Undertaking successfully overthe past two decades have given us the confidence to renew focus in this sector.Quality professional team and work-oriented dedication have propelled to offervalue-added corporate financial services and act as a professional navigator for

long term growth of our clients, who include leading corporate, StateGovernments, foreign institutional investors, public and private sectorcompanies and banks, in Indian and global markets. Karvy also emerged as atrailblazer in the arena of relationships, both at the customer and trade levelsbecause of unshakable integrity, seamless service and innovative solutions thatare tuned to meet varied needs. Team of committed industry specialists, havingextensive experience in capital markets, further nurtures this relationship.Financial advice and assistance in restructuring, divestitures, acquisitions, de-mergers, spin-offs, joint ventures, privatization and takeover defence

mechanisms have elevated relationship with the client to one based onunshakable trust and confidence.

KARVY COMPUTERSHARE PRIVATE LIMITED

Karvy has traversed wide spaces to tie up with the worlds largest transferagent, the leading Australian company, Computershare Limited. The company

that services more than 75 million shareholders across 7000 corporate clientsand makes its presence felt in over 12 countries across 5continents has enteredinto a 50-50 joint venture with us. With management team completelytransferred to this new entity, we will aim to enrich the financial servicesindustry than before. The future holds new arenas of client servicing andcontemporary and relevant technologies as we are geared to deliver better valueand foster bigger investments in the business. The worldwide network ofComputershare will hold in good stead as expect to adopt internationalstandards in addition to leveraging the best of technologies from around the

world. Excellence has to be the order of the day when two companies with suchsimilar ideologies of growth, vision and competence, get together.


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KARVY CONSULTANT LTD.

Having emerged as a leader in the registry business, the first of the businessesthat ventured into, Karvy transferred this business into a joint venture withComputershare Limited of Australia, the worlds largest registrar. With theadvent of depositories in the Indian capital market and the relationships thathave created in the registry business, believing they were best positioned toventure into this activity as a Depository Participant. Karvy is the early entrantsregistered as Depository Participant with NSDL (National Securities DepositoryLimited), the first Depository in the country and then with CDSL (CentralDepository Services limited). Today, service over 6 lakh customer accounts inthis business spread across over 250 cities/towns in India and are ranked

amongst the largest Depository Participants in the country. With a growingsecondary market presence, we have transferred this business to Karvy StockBroking Limited (KSBL), associate and a member of NSE, BSE and HSE.

IT ENABLED SERVICES:-

Technology Services division forms the ideal platform to unleash technologyinitiatives and make our presence felt on the Internet. Past achievements includemany quality websites designed, developed and deployed by it. Karvy alsopossess own web hosting facilities with dedicated bandwidth and a state-of-the-art server farm (data center) with services functioning on a variety of operatingplatforms such as Windows, Solaris, Linux and Unix. The corporate website ofthe company,www.karvy.com, gives access to in-depth information onfinancial matters including Mutual Funds, IPOs, Fixed Income Schemes,Insurance, Stock Market and much more. A link called Resource Center,

devoted solely to research conducted by our team of experts on various financialaspects like SectorResearch, deals exclusively with in-depth analysis of thekey sectors of the Indian economy. Besides, a host of other links like MyPortfolio which acts as a personalized and customized financial measure,makes

this site extremely informative about investment options, market trends, news asalso about our company and each of the services offered here.


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KARVY GLOBAL SERVICE LIMITED

The specialist Business Process Outsourcing unit of the Karvy Group. Thelegacy of expertise and experience in financial services of the Karvy Groupserves well as enter the global arena with the confidence of being able to deliverand deliver well. Here it offers several delivery models on the understandingthat business needs are unique and therefore only a customized service couldpossibly fit the bill. Service matrix has permutations and combinations thatcreate several options to choose from. Be it in re-engineering and managingprocesses or delivering new efficiencies, service meets up to the most stringentof international standards , outsourcing models are designed for the globalcustomer and are backed by sound corporate and operations philosophies, anddomain expertise. Providing productivity improvements, operational costcontrol, cost savings, improved accountability and a whole gamut of otheradvantages. Karvy operate in the core market segments that have emergingrequirements for specialized services, wide vertical market coverage includesBanking, Financial and Insurance Services (BFIS), Retail and Merchandising,Leisure and Entertainment, Energy and Utility and Healthcare. Karvy horizontalofferings do justice to our stance as a comprehensive BPO unit and include avariety of services in Finance and Accounting Outsourcing Operations, HumanResource Outsourcing Operations, Research and Analytics outsourcing

Operations and Insurance Back Office Outsourcing Operations.

KARVY COMTRADE LIMITED

At Karvy Commodities, focused on taking commodities trading to newdimensions of reliability and profitability. Karvy have made commoditiestrading, an essentially age-old practice, into a sophisticated and scientificinvestment option .Here it enable trade in all goods and products of agriculturaland mineral origin that include lucrative commodities like gold and silver andpopular items like oil, pulses and cotton through a well systematized tradingplatform, technological and infrastructural strengths and especially street-smartskills make an ideal broker. Service matrix is holistic with a gamut ofadvantages, the first and foremost being legacy of human resources, technologyand infrastructure that comes from being part of the Karvy Group. Karvy widenational network, spanning the length and breadth of India, further supportsthese advantages. Regular trading workshops and seminars are conducted tohone trading strategies to perfection. Every move made is a calculated one,

based on reliable research that is converted into valuable information throughdaily, weekly and monthly newsletters, calls and intraday alerts. Further,


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ACHIVEMENTS:-

Among the top 5 stock brokers in India (4% of NSE volumes) India's No. 1 Registrar & Securities Transfer Agents Among the top 3 Depository Participants Largest Network of Branches & Business Associates ISO 9002 certified operations by DNV Among top 10 Investment bankers Largest Distributor of Financial Products Adjudged as one of the top 50 IT uses in India by MIS Asia Full Fledged IT driven operations

QUALITY POLICY OF KARVY

To achieve and retain leadership, Karvy shall aim for complete customersatisfaction, by combining its human and technological resources, to providesuperior quality financial services. In the process, Karvy will strive to exceedCustomer's expectations.

QUALITY OBJECTIVESAs per the Quality Policy, Karvy will:

Build in-house processes that will ensure transparent and harmoniousrelationships with its clients and investors to provide high quality ofservices.

Establish a partner relationship with its investor service agents and vendorsthat will help in keeping up its commitments to the customers.


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Provide high quality of work life for all its employees and equip them withadequate knowledge & skills so as to respond to customer's needs.

Continue to uphold the values of honesty & integrity and strive to establishunparalleled standards in business ethics.

Use state-of-the art information technology in developing new andinnovative financial products and services to meet the changing needs ofinvestors and clients.

Strive to be a reliable source of value-added financial products andServices and constantly guide the individuals and institutions in making aJudicious choice of same.

Strive to keep all stake-holders(shareholders, clients, investors, employees,suppliers and regulatory authorities) proud and satisfied.

BOARD OF DIRECTORS:-

KEY EXECUTIVES FOR KARVY STOCKBROKING LIMITED:

NAME BOARD

RELATIONSIP

TITLE AGE

Hemindra Hazari No relationship Head of research ---

M.S.Ramakrishna 13 relationship Whole time director 56

Y.Sailaja No relationship Company secretary ---
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KARVY STOCK BROKING LIMITED BOARDMEMBERS:

NAME BOARD

RELATIONSIP

PRIMARY

COMPANY

AGE

C. Parthasarathy 27 relationship Karvy ConsultantsLimited

55

M.S.Ramakrishna 13relationsip KARVY Stock Broking

Limited

56

Meka Yugandhar 15 relationship Karvy ConsultantsLimited

59

Sudhir Variyar 4 relationship Multiples Alternate AssetManagement

---

Jimmy LoachmandasMahtani

14 relationship Bhushan Power and SteelLimited

---

KARVY CONSULTANTS LIMITED:- Parthasarathy CYugandhar MRamakrishna M SPrasad V Potluri Robert Gibson Sanjay Kumar Dhir R Shyamsunder
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KARVY INVESTOR SERVICES LIMITED:-Parthasarathy C Yugandhar M Ramakrishna M S

KARVY SECURITIES LIMITED:-Parthasarathy C Yugandhar M Ramakrishna M S Ajay Kumar K William SamuelNicholas Tully

BRANCHES:-

STATES TOTAL BRANCHES

Andhra Pradesh 37Assam 8

Bihar 10

Chandigarh 1

Chhattisgarh 7

Goa 2

Gujarat 26

Haryana 15

Himachal Pradesh 3

Jammu & Kashmir 1Jharkhand 7

Karnataka 48

Kerala 24

Madhya Pradesh 19

Maharashtra 27

Manipur 1

Meghalaya 1

New Delhi 11

Orissa 13


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Punjab 11

Rajasthan 10

Sikkim 1

Tamil Nadu 57

Tripura 1Union territory 1

Uttar Pradesh 38

Uttaranchal 5

West Bengal 26

BUSINESS ASSOCIATES:-

STATES BUSINESS ASSOCIATES

Andhra Pradesh 53

Bihar 2

Delhi 7

Gujarat 17Haryana 7

Himachal Pradesh 1

Jharkhand 1

Karnataka 15

Kerala 29

Madhya Pradesh 6

Maharashtra 21

Orissa 3

Punjab ( UT) 11Rajasthan 4

Tamil Nadu 8

Tripura 3

Uttar Pradesh 19

West Bengal 5


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VARIOUS INVESTMENT AVENUES

MUTUAL FUNDS:-Mutual fund is a pool of money collected from investors and is investedaccording to stated investment objectives Mutual fund investors are likeshareholders and they own the fund. Mutual fund investors are not lenders ordeposit holders in a mutual fund. Everybody else associated with a mutual fundis a service provider, who earns a fee. The money in the mutual fund belongs tothe investors and nobody else. Mutual funds invest in marketable securities

according to the investment objective. The value of the investments can go upor down, changing the value of the investors holdings.NAV of a mutu al fundfluctuates with market price movements. The market value of the investors

funds is also called as net assets. Investors hold a proportionate share of thefund in the mutual fund. New investors come in and old investors can exit, atprices related to net asset value per unit.

HISTORY OF MUTUAL FUNDS:-In the second half of 19th century, investor in UK considered the stock marketis good for the investment. But for small investor it is not possible to operate inthe market effectively. This led to establishment of an investment companywhich led to the small investor to invest in equity market. The first investmentcompany was the Scottish-American Investment Company, set up in London in1860.

BENEFITS OF INVESTING IN MUTUAL FUNDS

PROFESSIONAL MANAGEMENT: -Mutual Funds provide the services of experienced and skilled professionals,backed by a dedicated investment research team that analyses the performanceand prospects of companies and selects suitable investments to achieve theobjectives of the scheme.


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DIVERSIFICATION: -Mutual Funds invest in a number of companies across a broad cross-section ofindustries and sectors. This diversification reduces the risk because seldom do

all stocks decline at the same time and in the same proportion. You achieve thisdiversification through a Mutual Fund with far less money than you can do onyour own.

CONVENIENT ADMINISTRATION: -Investing in a Mutual Fund reduces paperwork and helps you avoid many

problems such as bad deliveries, delayed payments and follow up with brokersand companies. Mutual Funds save your time and make investing easy andconvenient.

RETURN POTENTIAL: -Over a medium to long-term, Mutual Funds have the potential to provide ahigher return as they invest in a diversified basket of selected securities.

LOW COSTS: -Mutual Funds are a relatively less expensive way to invest compared to directlyinvesting in the capital markets because the benefits of scale in brokerage,custodial and other fees translate into lower costs for investors.

LIQUIDITY: -In open-end schemes, the investor gets the money back promptly at net assetvalue related prices from the Mutual Fund. In closed-end schemes, the units canbe sold on a stock exchange at the prevailing market price or the investor canavail of the facility of direct repurchase at NAV related prices by the Mutual

Fund.


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TRANSPARENCY: -You get regular information on the value of your investment in addition todisclosure on the specific investments made by your scheme, the proportioninvested in each class of assets and the fund manager's investment strategy andoutlook.

FLEXIBILITY: -Through features such as regular investment plans, regular withdrawal plansand dividend reinvestment plans, you can systematically invest or withdraw

funds according to your needs and convenience.

AFFORDABILITY: -Investors individually may lack sufficient funds to invest in high-grade stocks.A mutual fund because of its large corpus allows even a small investor to takethe benefit of its investment strategy.

CHOICE OF SCHEMES: -Mutual Funds offer a family of schemes to suit your varying needs over alifetime.

WELL REGULATED:-All Mutual Funds are registered with SEBI and they function within theprovisions of strict regulations designed to protect the interests of investors. Theoperations of Mutual Funds are regularly monitored by SEBI.


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DISADVANTAGES OF INVESTING MUTUAL

FUNDS:-

PROFESSIONAL MANAGEMENT: -Some funds doesnt perform in neither the market, as their management is notdynamic enough to explore the available opportunity in the market, thus manyinvestors debate over whether or not the so called professionals are any betterthan mutual fund or investor himself, for picking up stocks.

COSTS:The biggest source of AMC income is generally from the entry & exit loadwhich they charge from investors, at the time of purchase. The mutual fundindustries are thus charging extra cost under layers of jargon.

DILUTION:Because funds have small holdings across different companies, high returnsfrom a few investments often don't make much difference on the overall return.Dilution is also the result of a successful fund getting too big. When moneypours into funds that have had strong success, the manager often has troublefinding a good investment for all the new money.

TAXES: -When making decisions about your money, fund managers don't consider yourpersonal tax situation. For example, when a fund manager sells a security, acapital-gain tax is triggered, which affects how profitable the individual is fromthe sale. It might have been more advantageous for the individual to defer thecapital gains liability.


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TYPES OF MUTUAL FUNDS

Mutual fund schemes may be classified on the basis of its structure and its

objective:-

BY STRUCTURE:-

OPEN-ENDED FUNDS:-An open-end fund is one that is available for subscription all through the year.These do not have a fixed maturity. Investors can conveniently buy and sellunits at Net Asset Value ("NAV") related prices. The key feature of open-endschemes is liquidity.

CLOSED-ENDED FUNDS:-A closed-end fund has a stipulated maturity period which generally rangingfrom 3 to 15 years. The fund is open for subscription only during a specifiedperiod. Investors can invest in the scheme at the time of the initial public issueand thereafter they can buy or sell the units of the scheme on the stockexchanges where they are listed. In order to provide an exit route to theinvestors, some close ended funds give an option of selling back the units to theMutual Fund through periodic repurchase at NAV related prices. SEBIRegulations stipulate that at least one of the two exit routes is provided to theinvestor.

INTERVAL FUNDS:-Interval funds combine the features of open-ended and close-ended schemes.They are open for sale or redemption during pre-determined intervals at NAVrelated prices.


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MONEY MARKET FUNDS:-

The aim of money market funds is to provide easy liquidity, preservation ofcapital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paperand inter-bank call money. Returns on these schemes may fluctuate dependingupon the interest rates prevailing in the market. These are ideal for Corporateand individual investors as a means to park their surplus funds for short periods.

LOAD FUNDS:-A Load Fund is one that charges a commission for entry or exit. That is, eachtime you buy or sell units in the fund, a commission will be payable. Typicallyentry and exit loads range from 1% to 2%. It could be worth paying the load, ifthe fund has a good performance history.

NO-LOAD FUNDS:-A No-Load Fund is one that does not charge a commission for entry or exit.That is, no commission is payable on purchase or sale of units in the fund. Theadvantage of a no load fund is that the entire corpus is put to work.

TAX SAVING SCHEMES:-

These schemes offer tax rebates to the investors under specific provisions of theIndian Income Tax laws as the Government offers tax incentives for investmentin specified avenues. Investments made in Equity Linked Savings Schemes(ELSS) and Pension Schemes are allowed as deduction u/s 88 of the IncomeTax Act, 1961. The Act also provides opportunities to investors to save capitalgains u/s 54EA and 54EB by investing in Mutual Funds, provided the capitalasset has been sold prior to April 1, 2000 and the amount is invested beforeSeptember 30, 2000.


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EQUITY SHARESAt the most basic level, stock (often referred to as shares) is ownership, or

equity, in a company. Investors buy stock in the form of shares, which representa portion of a company's assets (capital) and earnings (dividends).As ashareholder, the extent of your ownership (your stake) in a company depends onthe number of shares you own in relation to the total number of shares availableFor example, if you buy 1000 shares of stock in a company that has issued atotal of 100,000 shares, you own one per cent of the company.

While one per cent seems like a small holding, very few private investors areable to accumulate a shareholding of that size in publicly quoted companies,

many of which have a market value running into billions of pounds. Your stakemay authorize you to vote at the company's annual general meeting, whereshareholders usually receive one vote per share.

In theory, every stockholder, no matter how small their stake, can exercise someinfluence over company management at the annual general meeting. In reality,however, most private investors' stakes are insignificant. Management policy isfar more likely to be influenced by the votes of large institutional investors suchas pension funds.

STOCKS SYMBOLS:-A stock symbol, or 'Epic' symbol, is the standard abbreviation of a stock's name.You can find stock symbols wherever stock performance information ispublished - for example, newspaper stock listings and investment websites.Company names also have abbreviations called ticker symbols. However, it'sworth remembering that these may vary at the different exchanges where thecompany is quoted.

PERFORMANCE INDICATORS:- CLOSING PRICE: - last price at which stock was sold or bought. HIGH AND LOW:-the highest and lowest price of stock from the

previous trading day.


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52 WEEK RANGE: - The highest and lowest price over the previous 52week.

VOLUME: - The amount of shares traded during the previous tradingday High and low.

NET CHANGE:- The difference between the closing price on the lasttrading day and the closing price on the trading day prior to the last

THE STOCK EXCHANGES:-

A marketplace in which to buy or sell something makes life a lot easier. The

same applies to stocks. A stock exchange is an organization that provides amarketplace in which investors and borrowers trade stocks. Firstly, the stockexchange is a market for issuers who want to raise equity capital by sellingshares to investors in an Initial Public Offering (IPO). The stock exchange isalso a market for investors who can buy and sell shares at any time.

TRADING SHARES ON THE STOCK EXCHANGE:

As an investor in the INDIA, you can't buy or sell shares on a stock exchangeyourself. You need to place your order with a stock exchange member firm (astockbroker) who will then execute the order on your behalf. The NSE ANDBSE are the leading stock exchange in the INDIA. Trading is done throughcomputerized systems.

THE TRADING PROCESS:-If you decide to buy or sell your shares, you need to contact a stockbroker whowill buy or sell the shares on your behalf. After receiving your order, thestockbroker will input the order on the SETS or SEAQ system to match yourorder with that of another buyer or seller. Details of the trade are transmittedelectronically to the stockbroker who is responsible for settling the trade. Youwill then receive confirmation of the deal.


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TYPES OF SHARES AVAILABLE ON THE STOCKEXCHANGE:-

You cannot trade all stocks on the stock exchange. To be listed on a stock

exchange, a stock must meet the listing requirements laid down by thatexchange in its approval process. Each exchange has its own listingrequirements, and some exchanges are more particular than others. It is possiblefor a stock to be listed on more than one exchange. This is known as a duallisting.

INSURANCEPeople need insurance in the first place. An insurance policy is primarily meantto protect the income of the familys bread earners. The idea is if any one orboth die their dependents continue to live comfortably. The circle of life beginsat birth follower by education, marriage and eventually after a lifetime of workwe look forward to life of retirement. Our finances too tend to change as we gothrough the various phases of life. In the first twenty of our life, we arefinancially and emotionally dependents on our parents and there are no financial

commitments to be met. In the next twenty years we gain financialindependence and provide financial independence to our families. This is alsothe stage when our income may be unable to meet the growing expenses of ayoung household. In the next twenty as we see our investments grow after ourchildren grow and become financially independent. Insurance is a provision forthe distribution of risks that is to say it is a financial provision against loss fromunavoidable disasters. The protection which it affords takes form of a guaranteeto indemnify the insured if certain specified losses occur. The principle ofinsurance so far as the undertaking of the obligation is concerned is that for the

payment of a certain sum the guarantee will be given to reimburse the insured.The insurer in accepting the risks so distributes them that the total of all theamounts is paid for this insurance protection will be sufficient to meet the lossesthat occur. Insurance then provide divided responsibility. This principle isintroduced in most stores where a division is made between the sales clerk andthe cashiers department the arrangement dividing the risks of loss. Theinsurance principle is similarly applied in any other cases of dividedresponsibility. As a business however insurance is usually recognized as someform of securing a promise of indemnity by the payment of premium and the

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GOVERNMENT SECURITIESGovernment securities (G-secs) are sovereign securities which are issued by the

Reserve Bank of India on behalf of Government of India, in lieu of the CentralGovernment's market borrowing programme. The term Government Securitiesincludes:

Central Government Securities. State Government Securities treasury bills

The Central Government borrows funds to finance its 'fiscal deficit'.The market

borrowing of the Central Government is raised through the issue of datedsecurities and 364 days treasury bills either by auction or by floatation of loans.In addition to the above, treasury bills of 91 days are issued for managing thetemporary cash mismatches of the Government. These do not form part of theborrowing programme of the Central Government

TYPES OF GOVERNMENT SECURITIES

Government Securities are of the following types:-

DATED SECURITIES :Dated securities are generally fixed maturity and fixed coupon securities

usually carrying semi annual coupon. These are called dated securities becausethese are identified by their date of maturity and the coupon, e.g., 11.03% GOI

2012 is a Central Government security maturing in 2012, which carries acoupon of 11.03% payable half yearly. The key features of these securities are:

They are issued at face value. Coupon or interest rate is fixed at the time of issuance, and remains

constant till redemption of the security. The tenor of the security is also fixed. Interest /Coupon payment is made on a half yearly basis on its face value. The security is redeemed at par (face value) on its maturity date.


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ZERO COUPON BONDS:Zero coupon bondsare bonds issued at discount to face value and redeemed atpar. These were issued first on January 19, 1994 and were followed by two

subsequent issues in 1994-95 and 1995-96 respectively. The key features ofthese securities are: They are issued at a discount to the face value. The tenor of the security is fixed. The securities do not carry any coupon or interest rate. The difference

between the issue price (discounted price) and face value is the return onthis security.

The security is redeemed at par (face value) on its maturity date.

PARTLY PAID STOCK:Partly paid stock is stock where payment of principal amount is made ininstalments over a given time frame. It meets the needs of investors withregular flow of funds and the need of Government when it does not needfunds immediately. The first issue of such stock of eight year maturity wasmade on November 15, 1994 for Rs. 2000 crore. Such stocks have beenissued a few more times thereafter. The key features of these securities are:

They are issued at face value, but this amount is paid in instalments overa specified period.

Coupon or interest rate is fixed at the time of issuance, and remainsconstant till redemption of the security.

The tenor of the security is also fixed.

Interest /Coupon payment is made on a half yearly basis on its face value.

The security is redeemed at par (face value) on its maturity date.

FLOATING RATE BONDSFloating rate bondsare bonds with variable interest rate with a fixed percentageover a benchmark rate. There may be a cap and a floor rate attached thereby

fixing a maximum and minimum interest rate payable on it. Floating rate bonds


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of four year maturity were first issued on September 29, 1995, followed byanother issue on December 5, 1995.

Recently RBI issued a floating rate bond, the coupon of which is benchmarked

against average yield on 364 Days Treasury Bills for last six months. Thecoupon is reset every six months. The key features of these securities are:

They are issued at face valueCoupon or interest rate is fixed as a percentage over a predefined

benchmark rate at the time of issuance. The benchmark rate may beTreasury bill rate, bank rate etc.

Though the benchmark does not change, the rate of interest may varyaccording to the change in the benchmark rate till redemption of thesecurity.

The tenor of the security is also fixed. Interest /Coupon payment is made on a half yearly basis on its face value. The security is redeemed at par (face value) on its maturity date.

BONDS WITH CALL/PUT OPTION:

First time in the history of Government Securities market RBI issued a bondwith call and put option this year. This bond is due for redemption in 2012 andcarries a coupon of 6.72%. However the bond has call and put option after fiveyears i.e. in year 2007. In other words it means that holder of bond can sell back(put option) bond to Government in 2007 or Government can buy back (calloption) bond from holder in 2007. This bond has been priced in line with 5 yearbonds.

CAPITAL INDEXED BONDS:

Capital index bonds are bonds where interest rate is a fixed percentage over thewholesale price index. These provide investors with an effective hedge againstinflation. These bonds were floated on December 29, 1997 on tap basis. They


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were of five year maturity with a coupon rate of 6 per cent over the wholesaleprice index. The principal redemption is linked to the Wholesale Price Index.The key features of these securities are:

They are issued at face value. Coupon or interest rate is fixed as a percentage over the wholesale price

index at the time of issuance. Therefore the actual amount of interest paidvaries according to the change in the Wholesale Price Index.

The tenor of the security is fixed. Interest /Coupon payment is made on a half yearly basis on its face value. The principal redemption is linked to the Wholesale Price Index.

FEATURES OF GOVERNMENT SECURITIES

NOMENCLATUREThe coupon rate and year of maturity identifies the government security.Example: 12.25% GOI 2008 indicates the following:12.25% is the coupon rate,GOI denotes Government of India, which is the borrower, 2008 is the year ofmaturity.

ELIGIBILITYAll entities registered in India like banks, financial institutions, PrimaryDealers, firms, companies, corporate bodies, partnership firms, institutions,mutual funds, Foreign Institutional Investors, State Governments, ProvidentFunds, trusts, research organisations, Nepal Rashtra bank and even individualsare eligible to purchase Government Securities.

AVAILABILITYGovernment securities are highly liquid instruments available both in theprimary and secondary market. They can be purchased from Primary Dealers.


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PNB Gilts Ltd., is a leading Primary Dealer in the government securitiesmarket, and is actively involved in the trading of government securities.

FORMS OF ISSUANCE OF GOVERNMENTSECURITIES

Banks, Primary Dealers and Financial Institutions have been allowed tohold these securities with the Public Debt Office of Reserve Bank ofIndia in dematerialized form in accounts known as Subsidiary GeneralLedger (SGL) Accounts.

Entities having a Gilt Account with Banks or Primary Dealers can holdthese securities with them in dematerialized form.

In addition government securities can also be held in dematerializedform in demat accounts maintained with the Depository Participants ofNSDL.

MINIMUM AMOUNTIn terms of RBI regulations, government dated securities can be purchased for aminimum amount of Rs.10, 000/-only. Treasury bills can be purchased for aminimum amount of Rs 25000/- only and in multiples thereof. StateGovernment Securities can be purchased for a minimum amount of Rs 1,000/-only.

REPAYMENTGovernment securities are repaid at par on the expiry of their tenor. Thedifferent repayment methods are as follows:

For SGL account holders, the maturity proceeds would be credited totheir current accounts with the Reserve Bank of India.

For Gilt Account Holders, the Bank/Primary Dealers would receive thematurity proceeds and they would pay the Gilt Account Holders.


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The basic features of the auctions are given below:

METHOD OF AUCTION: There are two methods of auction whichare followed-

1.Uniform price Based or Dutch Auction procedure is used in auctionsof dated government securities. The bids are accepted at the sameprices as decided in the cut off.

2.Multiple/variable Price Based or French Auctionprocedure is used inauctions of Government dated securities and treasury bills. Bids areaccepted at different prices / yields quoted in the individual bids.

BIDS: Bids are to be submitted in terms of yields to maturity/prices asannounced at the time of auction.

CUT OFF YIELD: It is the rate at which bids are accepted. Bids atyields higher than the cut-off yield is rejected and those lower than the cut-off are accepted. The cut-off yield is set as the coupon rate for the security.Bidders who have bid at lower than the cut-off yield pay a premium on thesecurity, since the auction is a multiple price auction.

CUT OFF PRICE: It is the minimum price accepted for the security.Bids at prices lower than the cut-off are rejected and at higher than the cut-off are accepted. Coupon rate for the security remains unchanged. Bidderswho have bid at higher than the cut-off price pay a premium on the security,thereby getting a lower yield. Price based auctions lead to finer pricediscovery than yield based auctions.

NOTIFIED AMOUNT: The amount of security to be issued isnotified prior to the auction date, for information of the public. TheReserve Bank of India (RBI) may participate as a non-competitor in theauctions. The unsubscribed portion devolves on RBI or on the PrimaryDealers if the auction has been underwritten by PDs. The devolvement is atthe cut-off price/yield.


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UNDERWRITING IN AUCTIONS For the purpose of auctions, bids are invited from the Primary Dealers

one day before the auction wherein they indicate the amount to be

underwritten by them and the underwriting fee expected by them.

The auction committee of Reserve Bank of India examines the bids andbased on the market conditions, takes a decision in respect of the amountto be underwritten and the fee to be paid to the underwriters.

Underwriting fee is paid at the rates bid by PDs, for the underwritingwhich has been accepted.

In case of the auction being fully subscribed, the underwriters do not haveto subscribe to the issue necessarily unless they have bid for it.

If there is a devolvement, the successful bids put in by the Primary Dealers areset-off against the amount underwritten by them while deciding the amount ofdevolvement.

ON-TAP ISSUEThis is a reissue of existing Government securities having pre-determinedyields/prices by Reserve Bank of India. After the initial primary auction of asecurity, the issue remains open to further subscription by the investors as andwhen considered appropriate by RBI. The period for which the issue is keptopen may be time specific or volume specific. The coupon rate, the interestdates and the date of maturity remain the same as determined in the initialprimary auction. Reserve Bank of India may sell government securities throughon tap issue at lower or higher prices than the prevailing market prices. Such an

action on the part of the Reserve Bank of India leads to a realignment of themarket prices of government securities. Tap stock provides an opportunity tounsuccessful bidders in auctions to acquire the security at the marketdetermined rate.

FIXED COUPON ISSUEGovernment Securities may also be issued for a notified amount at a fixedcoupon. Most State Development Loans or State Government Securities areissued on this basis.


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PRIVATE PLACEMENTThe Central Government may also privately place government securities with

Reserve Bank of India. This is usually done when the Ways and MeansAdvance (WMA) is near the sanctioned limit and the market conditions are notconducive to an issue. The issue is priced at market related yields. ReserveBank of India may later offload these securities to the market through OpenMarket Operations (OMO). After having auctioned a loan whereby the couponrate has been arrived at and if still the government feels the need for funds forsimilar tenure, it may privately place an amount with the Reserve Bank of India.RBI in turn may decide upon further selling of the security so purchased underthe Open Market Operations window albeit at a different yield.

OPEN MARKET OPERATIONS (OMO)Government securities that are privately placed with the Reserve Bank of Indiaare sold in the market through open market operations of the Reserve Bank ofIndia. The yield at which these securities are sold may differ from the yield atwhich they were privately placed with Reserve Bank of India. Open marketoperations are used by the Reserve Bank of India to infuse or suck liquidityfrom the system. Whenever the Reserve Bank of India wishes to infuse the

liquidity in the system, it purchases government securities from the market, andwhenever it wishes to suck out the liquidity from the system, it sells governmentsecurities in the market.

NATIONAL SAVINGS CERTIFICATENational Savings Certificate, popularly known as NSC, is a time-tested taxsaving instrument that combines adequate returns with high safety. NSCs are an

instrument for facilitating long-term savings. A large chunk of middle classfamilies use NSCs for saving on their tax, getting double benefits. They notonly save tax on their hard-earned income but also make an investment which issure to give good and safe returns.

HOW TO INVESTNational Savings Certificates are available at all post-offices. The application

can be made either in person or through an agent. Post office agents are activein nooks and corners of the country. Following types of NSC are issued:


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SINGLE HOLDER TYPE CERTIFICATE: This can be issuedto:

(a)An adult for himself or on behalf of a minor(b)A Trust.

JOINT 'A' TYPE CERTIFICATE: Issued jointly to two adultspayable to both holders jointly or to the survivor.

JOINT 'B' TYPE CERTIFICATE: Issued jointly to two adultspayable to either of the holders or to the survivor.

WHO CAN INVEST An adult in his own name or on behalf of a minor A trust Two adults jointly

DENOMINATIONS AND LIMITNational Savings Certificates are available in the denominations of Rs. 100 Rs500, Rs. 1000, Rs. 5000, & Rs. 10,000. There is no maximum limit on thepurchase of the certificates. So it is for you todecide how much you want to putin the NSCs. This is of course a huge benefit for you can decide as much asyour budget allows.

MATURITYPeriod of maturity of a certificate is six years. Presently interest paid is 8 % perannum half yearly compounded. Maturity value of a certificate of any otherdenomination is at proportionate rate. Premature encashment of the certificate isnot permissible except at a discount in the case of death of the holder(s),forfeiture by a pledge and when ordered by a court of law.


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TAX BENEFITSInterest accrued on the certificates every year is liable to income tax but deemedto have been reinvested. Income Tax rebate is available on the amount investedand interest accruing under Section 88 of Income Tax Act, as amended fromtime to time. Income tax relief is also available on the interest earned as perlimits fixed vide section 80L of Income Tax, as amended from time to time.

BONDSA bondis a debt security, in which the authorized issuer owes the holders a debtand, depending on the terms of the bond, is obliged to pay interest (the coupon)and/or to repay the principal at a later date, termed maturity. It is a formalcontract to repay borrowed money with interest at fixed intervals.

Thus a bond is like a loan: the issuer is the borrower, the bond holder is thelender, and the coupon is the interest. Bonds provide the borrower with externalfunds to finance long-term investments, or, in the case of government bonds, tofinance current expenditure. Certificates of deposit (CDs) or commercial paperare considered to be money market instruments and not bonds. Bonds must be

repaid at fixed intervals over a period of time.

Bonds are issued by public authorities, credit institutions, companies andsupranational institutions in the primary markets. The most common process ofissuing bonds is through underwriting. In underwriting, one or more securitiesfirms or banks, forming a syndicate, buy an entire issue of bonds from an issuerand re-sell them to investors. The security firm takes the risk of being unable tosell on the issue to end investors. However government bonds are insteadtypically auction. The most important features of a bond are:

Nominal, principal or face amount the amount on which the issuer paysinterest, and which has to be repaid at the end.

ISSUE PRICE The price at which investors buy the bonds whenthey are first issued, which will typically be approximately equal to thenominal amount. The net proceeds that the issuer receives are thus the issueprice, less issuance fees.


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M ATURITY DATEThe date on which the issuer has to repaythe nominal amount. As long as all payments have been made, the issuer hasno more obligations to the bond holders after the maturity date. The lengthof time until the maturity date is often referred to as the term or tenor or

maturity of a bond. The maturity can be any length of time, although debtsecurities with a term of less than one year are generally designated moneymarket instruments rather than bonds. Most bonds have a term of up tothirty years. Some bonds have been issued with maturities of up to onehundred years, and some even do not mature at all. In early 2005, a marketdeveloped in Eurosfor bonds with a maturity of fifty years. In the marketfor U.S. Treasury securities, there are three groups of bond maturities:

Short term (bills): maturities up to one year; Medium term (notes): maturities between one and ten years; Long term (bonds): maturities greater than ten years.

COUPONThe interest rate that the issuer pays to the bond holders.Usually this rate is fixed throughout the life of the bond. It can also varywith a money market index, such as LIBOR, or it can be even more exotic.

The name coupon originates from the fact that in the past, physical bondswere issued which coupons had attached to them. On coupon dates the bondholder would give the coupon to a bank in exchange for the interestpayment. The quality of the issue, which influences the probability that thebondholders will receive the amounts promised, at the due dates. This willdepend on a whole range of factors.

INDENTURES AND COVENANTSAn indenture is a formal debt agreement that establishes the terms of a bondissue, while covenants are the clauses of such an agreement. Covenants specifythe rights of bond holders and the duties of issuers, such as actions that theissuer is obligated to perform or is prohibited from performing. In the U.S.,federal and state securities and commercial laws apply to the enforcement ofthese agreements, which are construed by courts as contracts between issuersand bond holders. The terms may be changed only with great difficulty whilethe bonds are outstanding, with amendments to the governing document


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generally requiring approval by a majority (or super-majority) vote of thebondholders.

HIGH YIELD BONDSHigh yield bonds are bonds that are rated below investment grade by thecredit rating agencies. As these bonds are more risky than investment gradebonds, investors expect to earn a higher yield. These bonds are also called

junk bonds.

COUPON DATES: the dates on which the issuer pays the coupon tothe bond holders. In the U.S. and also in the U.K. and Europe, most bonds

are semi-annual, which means that they pay a coupon every six months.

OPTIONALITY: Occasionally a bond may contain an embeddedoption; that is, it grants option-like features to the holder or the issuer:

CALLABILITY: Some bonds give the issuer the right to repay thebond before the maturity date on the call dates; see call option. Thesebonds are referred to as callable bonds. Most callable bonds allow theissuer to repay the bond at par. With some bonds, the issuer has to pay a

premium, the so called call premium. This is mainly the case for high-yieldbonds. These have very strict covenants, restricting the issuer in itsoperations. To be free from these covenants, the issuer can repay the bondsearly, but only at a high cost.

PUTABILITY: Some bonds give the holder the right to force the issuerto repay the bond before the maturity date on the put dates; see put option.(Note: "Putable" denotes an embedded put option;"Puttable" denotes that itmay be putted.)

CALL DATES AND PUT DATES: the dates on which callable andputable bonds can be redeemed early. There are four main categories.

a. A Bermudan callable has several call dates, usually coinciding withcoupon dates.

b. A European callable has only one call date. This is a special case of aBermudan callable.

c. An American callable can be called at any time until the maturity date.


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d. A death put is an optional redemption feature on a debt instrumentallowing the beneficiary of the estate of the deceased to put (sell) thebond (back to the issuer) in the event of the beneficiary's death or legal

incapacitation. Also known as a "survivor's option".

Sinking fund provision of the corporate bond indenture requires a certainportion of the issue to be retired periodically. The entire bond issue can beliquidated by the maturity date. If that is not the case, then the remainder iscalled balloon maturity. Issuers may either pay to trustees, which in turn callrandomly selected bonds in the issue, or, alternatively, purchase bonds in openmarket, then return them to trustees.

CONVERTIBLE BONDLets a bondholder exchange a bond to a number of shares of the issuer'scommon stock.

EXCHANGEABLE BONDExchangeable bonds allows for exchange to shares of a corporation other

than the issuer.

FIXED RATE BONDSFixed rate bonds have a coupon that remains constant throughout the life ofthe bond.

FLOATING RATE NOTES(FRNs) have a coupon that is linked to an index. Common indices include:-

a. Money market indices, such as LIBOR or Euribor, and CPI (theConsumer Price Index). Coupon examples: three month USD LIBOR +0.20%, or twelve month CPI + 1.50%. FRN coupons reset periodically,typically every one or three months. In theory, any Index could be usedas the basis for the coupon of an FRN, so long as the issuer and the buyercan agree to terms.


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ZERO-COUPON BONDSZero coupon bonds don't pay any interest. They are issued at a substantialdiscount to par value. The bond holder receives the full principal amount on

the redemption date. An example of zero coupon bonds is Series E savingsbonds issued by the U.S. government. Zero-coupon bonds may be createdfrom fixed rate bonds by a financial institutions separating "stripping off"the coupons from the principal. In other words, the separated coupons andthe final principal payment of the bond are allowed to trade independently.See IO (Interest Only) and PO (Principal Only).

INFLATION LINKED BONDSInflation linked bonds are those in which the principal amount and theinterest payments are indexed to inflation. The interest rate is normallylower than for fixed rate bonds with a comparable maturity (this positionbriefly reversed itself for short-term UK bonds in December 2008).However, as the principal amount grows, the payments increase withinflation. The government of the United Kingdom was the first to issueinflation linked Gilts in the 1980s. Treasury Inflation-Protected Securities(TIPS) and I-bonds are examples of inflation linked bonds issued by the

U.S. government.

Other indexed bonds, for example equity-linked notes and bonds indexed ona business indicator (income, added value) or on a country's GDP

ASSET-BACKED SECURITIES:Asset backed securities are bonds whose interest and principal payments are

backed by underlying cash flows from other assets. Examples of asset-backed securities are mortgage-backed securities (MBS's), collateralizedmortgage obligations (CMOs) and collateralized debt obligations (CDOs).

SUBORDINATED BONDSSubordinate bonds are those that have a lower priority than other bonds ofthe issuer in case of liquidation. In case of bankruptcy, there is a hierarchy

of creditors. First the liquidator is paid, then government taxes, etc. The first


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bond holders in line to be paid are those holding what is called senior bonds.After they have been paid, the subordinated bond holders are paid. As aresult, the risk is higher. Therefore, subordinated bonds usually have a lowercredit rating than senior bonds. The main examples of subordinated bonds

can be found in bonds issued by banks, and asset-backed securities. Thelatter are often issued in tranches. The senior tranches get paid back first, thesubordinated tranches later.

PERPETUAL BONDSPerpetual bonds are also often called perpetuities. They have no maturitydate. The most famous of these are the UK Consols, which are also known

as Treasury Annuities or Undated Treasuries. Some of these were issuedback in 1888 and still trade today, although the amounts are nowinsignificant. Some ultra long-term bonds (sometimes a bond can lastcenturies: West Shore Railroad issued a bond which matures in 2361 (i.e.24th century)) are virtually perpetuities from a financial point of view, withthe current value of principal near zero.

BEARER BONDBearer bonds are an official certificate issued without a named holder. Inother words, the person who has the paper certificate can claim the value ofthe bond. Often they are registered by a number to prevent counterfeiting,but may be traded like cash. Bearer bonds are very risky because they canbe lost or stolen. Especially after federal income tax began in the UnitedStates, bearer bonds were seen as an opportunity to conceal income orassets. U.S. corporations stopped issuing bearer bonds in the 1960s, the U.S.Treasury stopped in 1982, and state and local tax-exempt bearer bonds were

prohibited in 1983.Registered bond is a bond whose ownership (and anysubsequent purchaser) is recorded by the issuer, or by a transfer agent. It isthe alternative to a Bearer bond. Interest payments, and the principal uponmaturity, are sent to the registered owner.

MUNICIPAL BONDMunicipal bond is a bond issued by a state, U.S. Territory, city, localgovernment, or their agencies. Interest income received by holders of

municipal bonds is often exempt from the federal income tax and from theincome tax of the state in which they are issued, although municipal bonds


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issued for certain purposes may not be tax exempt. Book-entry bond is abond that does not have a paper certificate. As physically processing paperbond and interest coupons became more expensive, issuers (and banks thatused to collect coupon interest for depositors) have tried to discourage their

use. Some book-entry bond issues do not offer the option of a papercertificate, even to investors who prefer them.

LOTTERY BONDLottery bond is a bond issued by a state, usually a European state. Interest ispaid like a traditional fixed rate bond, but the issuer will redeem randomlyselected individual bonds within the issue according to a schedule. Some ofthese redemptions will be for a higher value than the face value of the bond.

WAR BONDWar bond is a bond issued by a country to fund a war.

SERIAL BONDSerial bond is a bond that matures in instalments over a period of time. Ineffect, a $100,000, 5-year serial bond would mature in a $20,000 annuity

over a 5-year interval.

REVENUE BONDRevenue bond is a special type of municipal bond distinguished by itsguarantee of repayment solely from revenues generated by a specifiedrevenue-generating entity associated with the purpose of the bonds. Revenuebonds are typically "non-recourse," meaning that in the event of default, thebond holder has no recourse to other governmental assets or revenues.

INVESTING IN BONDS

Bonds are bought and traded mostly by institutions like pension funds,insurance companies and banks. Most individuals who want to own bonds do sothrough bond funds. Still, in the U.S., nearly 10% of all bonds outstanding areheld directly by households.


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Sometimes, bond markets rise (while yields fall) when stock markets fall. Morerelevantly, the volatility of bonds (especially short and medium dated bonds) islower than that of shares. Thus bonds are generally viewed as safer investmentsthan stocks, but this perception is only partially correct. Bonds do suffer from

less day-to-day volatility than stocks, and bonds' interest payments are oftenhigher than the general level of dividend payments. Bonds are liquid it isfairly easy to sell one's bond investments, though not nearly as easy as it is tosell stocksand the comparative certainty of a fixed interest payment twice peryear is attractive. Bondholders also enjoy a measure of legal protection: underthe law of most countries, if a company goes bankrupt, its bondholders willoften receive some money back (the recovery amount), whereas the company'sstock often ends up valueless. However, bonds can also be risky.

Fixed rate bonds are subject to interest rate risk, meaning that their marketprices will decrease in value when the generally prevailing interest rates rise.Since the payments are fixed, a decrease in the market price of the bond meansan increase in its yield. When the market interest rate rises, the market price ofbonds will fall, reflecting investors' ability to get a higher interest rate on theirmoney elsewhere perhaps by purchasing a newly issued bond that alreadyfeatures the newly higher interest rate. Note that this drop in the bond's marketprice does not affect the interest payments to the bondholder at all, so long terminvestors who want a specific amount at the maturity date need not worry aboutprice swings in their bonds and do not suffer from interest rate risk.

Price changes in a bond will also immediately affect mutual funds that holdthese bonds. If the value of the bonds held in a trading portfolio has fallen overthe day, the value of the portfolio will also have fallen. This can be damagingfor professional investors such as banks, insurance companies, pension fundsand asset managers (irrespective of whether the value is immediately "markedto market" or not). If there is any chance a holder of individual bonds may needto sell his bonds and "cash out", interest rate risk could become a real problem.(Conversely, bonds' market prices would increase if the prevailing interest rate

were to drop, as it did from 2001 through 2003.) One way to quantify theinterest rate risk on a bond is in terms of its duration. Efforts to control this riskare called immunization or hedging.

Bond prices can become volatile depending on the credit rating of the issuer -for instance if the credit rating agencies like Standard & Poor's and Moody'supgrade or downgrade the credit rating of the issuer. A downgrade will causethe market price of the bond to fall. As with interest rate risk, this risk does notaffect the bond's interest payments (provided the issuer does not actually

default), but puts at risk the market price, which affects mutual funds holdingthese bonds, and holders of individual bonds who may have to sell them.


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A company's bond holders may lose much or all their money if the companygoes bankrupt. Under the laws of many countries (including the United Statesand Canada), bondholders are in line to receive the proceeds of the sale of the

assets of a liquidated company ahead of some other creditors. Bank lenders,deposit holders (in the case of a deposit taking institution such as a bank) andtrade creditors may take precedence.

There is no guarantee of how much money will remain to repay bondholders.As an example, after an accounting scandal and a Chapter 11 bankruptcy at thegiant telecommunications company World com, in 2004 its bondholders endedup being paid 35.7 cents on the dollar. In a bankruptcy involving reorganizationor recapitalization, as opposed to liquidation, bondholders may end up havingthe value of their bonds reduced, often through an exchange for a smallernumber of newly issued bonds.

Some bonds are callable, meaning that even though the company has agreed tomake payments plus interest towards the debt for a certain period of time, thecompany can choose to pay off the bond early. This creates reinvestment risk,meaning the investor is forced to find a new place for his money, and theinvestor might not be able to find as good a deal, especially because this usuallyhappens when interest rates are falling.

COMMODITIESA commodity is a normal physical product used by everyday people during thecourse of their lives, or metals that are used in production or as a traditionalstore of wealth and a hedge against inflation. For example, these commoditiesinclude grains such as wheat, corn and rice or metals such as copper, gold andsilver. The full list of commodity markets is numerous and too detailed. The

best way to trade the commodity markets is by buying and selling futurescontracts on local and international exchanges. Trading futures is easy, and canbe accessed by using the services of any full or on-line futures brokerageservice.

Traditionally, there is an expectation when trading commodity futures ofachieving higher returns compared to shares or real estate, so successfulinvestors can expect much higher returns compared to more conventionalinvestment products. The process of trading commodities, as mentioned above,

must be facilitated by the use of trading liquid, exchangeable, and standardizedfutures contracts, as it is not practical to trade the physical commodities. Futures


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contracts give the investor ease of use and the ability to buy or sell withoutdelay. A futures contract is used to buy or sell a fixed quantity and quality of anunderlying commodity, at a fixed date and price in the future. Futures contractscan be broken by simply offsetting the transaction For example, if you buy one

futures contract to open then you sell one futures contract to close that marketposition.

The execution method of trading futures contracts is similar to trading physicalshares, but futures contracts have an expiry date and are deliverable.Futurescontracts have an expiry date and need to be occasionally rolled over from thecurrent contract month to the following contract month.

The reason is because the biggest advantage to trading commodity futures, forthe private investor is the opportunity to legally short-sell these markets. Short-selling is the ability to sell commodity futures creating an open position in theexpectation to buy-back at a later time to profit from a fall in the market. If youwish to trade the up-side of commodity futures, then it will simply be a buy-to-open and sell-to close set of transactions similar to share trading.

The commodity markets will always produce rising of falling trends, and withthe abundance of information and trading opportunities available there is noreason for any investor to exclusively trade the share market when there ispotential profits from trading commodity futures.

The increased use of commodity trading vehicles in investment managementhas led practitioners to create investable commodity indices and products thatoffer unique performance opportunities for investors in physical commodities.As is true for stock and bond performance, as well as investment in managedfutures and hedge fund products, commodity-based products have a variety ofuses. Besides being a source of information on cash commodity and futurescommodity market trends, they are used as performance benchmarks forevaluation of commodity trading advisors and provide a historical track record

useful in developing asset allocation strategies. However, the investor benefitsof commodity or commodity-based products lie primarily in their ability to offerrisk and return trade-offs that cannot be easily replicated through otherinvestment alternatives. Previous research that direct stock and bond investmentoffers little evidence of providing returns consistent with direct commodityinvestment. Commodity-based firms may not be exposed to the risk ofcommodity price movement. Thus for investors, direct commodity investmentmay be the principal means by which one can obtain exposure to commodityprice movements. The commodities that are traded in the market


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GoldCopperSilverSugarWheatZeeraGuar

FIXED DEPOSITSThe most popular and widely known type of investment. They are offered by

banks / corporate / financial institutions. Returns on such instruments are

assured and the risk is very low. Fixed deposits invested for more than 5 yearscan be claimed for tax deduction.Investing in bank or post-office deposits is a

very common way of securing surplus funds.


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ANALYSIS OF DATA

1. Awareness of Financial InstrumentFinancial

instruments

Mutual

funds

Equity

shares

Fixed

deposits

gold Others

yes no yes no yes no yes no yes no

No. Of

person

85 15 90 10 65 35 95 5 60 40

INFERENCES

Table

investment project part 1

Documents