STUDY OF INVESTORS BEHAVIOUR IN THE LIGHT
OF FINANCIAL / INVESTMENT PRODUCTS
Master of Business Administration
Submitted in partial fulfillment of the requirements for award of
Master of business Administration of Tilak Maharashtra
Arun R Nair
Institute of Business Studies & research, Navi Mumbai
Tilak Maharshtra University
Gultekdi , Pune 411037
With regard to my Project with study of investors’ behavior in the light of financial /investment products I would like to thank each and every one who offered help, guideline and support whenever required.
First and foremost I would like to express gratitude to Madhukar Krishna sir and other staffs for their support and guidance in the Project work. I am extremely grateful to my Professor Shukla Sir for his valuable guidance and timely suggestions. I would like to thank everyone for the valuable guidance& support.
I also thankful to all my professors who helped me for my project work, and last but not the least to my friends who have helped me during the project.
Arun R Nair
TABLE OF CONTENTS
Chapter No. Index Page No
* 1 RATIONALE FOR THE STUDY 4 – 6
* 2 OBJECTIVE OF THE STUDY 7 – 10
a) Title of the project
b) Objective of the study
c) Scope of the study
* 3 PROFILE OF THE COMPANY 11 – 22
* 4 REVIEW OF LITERATURE 23 – 34
* 5 RESEARCH METHODOLOGY 35 – 38
a) Research Design
b) Data Collection Methods / Sources
* 6 DATA ANALYSIS AND INTERPRETATION 39 – 46
* 7 OBSERVATION AND FINDINGS 47 – 48
* 8 LIMITATIONS 49
* 9 RECOMMENDATIONS AND SUGGESTIONS 50 – 51
APPENDIX 54 – 58
a) Copies of questionnaire
b) Copies of forms
RATIONALE FOR STUDY
Rationale for the Study
This Research Project has been undertaken as a part of internship at NIVESHAK FINANCIAL ADVISORY PROGRAMME with the project title “STUDY OF INVESTORS BEHAVIOUR IN THE LIGHT OF FINANCIAL / INVESTMENT PRODUCTS”. My Main idea behind this Research project was that as everyone knows that Consumers/ Investors are one of the most important aspects for any Organization. Organizations strive on fulfilling the requirements of consumers / Investors as they are the most mercurial of all the factors of Production.
In Today’s information – oriented society, information research has become an important activity for business companies, institutions and organizations, who want to know about the consumer market.
In the financial sector, nowadays one can observe a tendency that consumers / Investors are generally confused with selection aspects as they are spoilt for choices and they are particularly conscious about investing in financial products as there are more experts than financial products.
The financial product can be regarded from a double point of view. On one hand the product is destined to customers and is defined according to this.
At present, on the financial market any person has the quality of a consumer. The consumers are divided into two categories – individuals and companies, categories aimed by the institutions that offer financial products and services. This segmentation has background different documents requested by each of these categories when they want to buy a financial product or service.
Any decision of a consumer / Investors on the financial market must have at the base the definition of at least 5 aspects, namely:
a) Establishing the profitability objectives (with this indicator one can
compare different opportunities of investment and according to the
established level as a target, one can set the structure of the investment
b) Establishing the time horizon for the investment (that is establishing the period
of time in which the profitability objectives should be achieved).
c) Establishing the investor’s risk profile that is tightly connected to the aimed
objective of profitability, the risk of an investment being directly proportional
with its rated capacity. From the risk’s profile point of view, investors are
divided into three categories: investors with risk aversion, neutral ones but
with preferences for risk as well.
d) Establishing an amount of money that will be invested. There is a principle
According to which it is good to invest as much as the investor affords to lose
Omitting this recommendation that views more the investor’s psychic
comfort, the invested amount depends on a lot of factors among which we can
mention: the investor’s liquidities, the incomes that he obtains on a constant
base, his risk profile, the proposed level of profitability and the future usage of
the amounts gained from investment.
e) Establishing the structure of the investment portfolio, that depends mainly on
the investor’s risk profile, as well as on the associated risk of different financial
instruments (quantified by different companies of specialized rating).
OBJECTIVE OF STUDY
OBJECTIVE OF THE STUDY
2.1. Title Of The Project
“STUDY OF INVESTORS BEHAVIOUR IN THE LIGHT OF FINANCIAL / INVESTMENT PRODUCTS”
2.2. Objective of the study
The Objective of the Study was directly related to the experience I had while working with Niveshak Financial Advisory Program. I worked on the project which was directly related to the core purpose of NFAP i.e. to offer quality & practical training & education in field of investment, financial planning, insurance and tax advisory.
2.2.1 The Main Objective of the study
* To create awareness about the latest development in financial products.
* To give a brief idea about the sophistication of financial markets and various options available while investing in financial markets.
* To create awareness about the various risks associated with various financial products like mutual funds, ULIP’s, Pension Products etc.
* To make investors well adverse with the current happenings in financial markets.
* To make an average family decide how to balance its budget, fund the children’s education and ensure a sufficient income for a retired person.
* To measure whether the core purpose of the program has achieved its aims, such as increased consumer awareness or changed behavior.
* To find out the reasons why the investors are still petrified of investing in financial markets.
* To find the behavior of investors with regards to various demographics like salary, age, etc
* To clear certain misconceptions about equity market.
* To make investors aware about the growing trend of financial markets.
* To expand my horizon by observing behavior of various investors.
* To further promote financial products like SIP, ULIP’s, and various other mutual funds schemes.
* To meet various segments of investors and understanding their needs.
* Promotion of Niveshak Financial Advisory Program.
2.3. Scope of the Project
Financial Products can be defined as the product and services offered by institutions like banks of various kinds for the facilitation of various financial transactions and other related activities in the world of finance like loans, insurance, credit cards, investment opportunities and money management as well as providing information on the stock market and other issues like market trends.
2.3.1. Distributors ‘dump’ MFs for financial products giving better fees(Economic
This was the news that appeared in Economic times on May 19, 2010
Lower commissions from their bread-and-butter business are forcing mutual fund (MF) distributors to switch loyalties to other financial products that offer a better fee.
There was another article that there is a public spat between the capital markets regulator, the Securities and Exchange Board of India (SEBI) and the insurance regulator, Insurance Development and Regulatory Authority, (IRDA) over the control of ULIP’S
This were some of the news that helped me understand the needs of financial products in current scenario because in 2008 – 09 there were as many as 7.03 crore ULIPs sold for a staggering Rs 90, 645 crore (close to 1.3% of the country’s GDP!) while during the last financial year alone (April- February) another 16.7 lakh ULIP’s were sold even while carrying out my primary research the scenario were almost same as many investors were interested in ULIP’S(United linked Insurance plan) SIP’s (Systematic Investment Products).
In Niveshak I came to know that these financial products are as important as our basic necessities. Many Investors were keen in investing in SIP’S and were keen to know more about ULIP’S.
Let me explain more about ULIP’S. The ULIP’S are policies which provides for insurance where the policy value at any time varies according to the value of the underlying assets at the time.
Now, let me discuss briefly about the scope of the project. As mentioned earlier during my primary data collection I came across many investors who were ambiguous about their investment and savings.
Especially during my interaction with many lower middle class investors I came to know that many of them have little idea about equity market and they were afraid of taking risks and was not sure about returns.
It also came as a pleasant surprise that some high profile people like advocates, C.A’s, doctors were not interested in stock market even though they were having sufficient knowledge about stock markets, Insurance, mutual funds and returns associated with it.
My understanding was that many of them were misguided and some of them were afraid of taking risks. Through Niveshak, to some extend I was able clear this misconception. I came to the conclusion that it’s important to be knowledgeable and one should take initiative before giving financial advice to investors.
3.1. Niveshak Financial Advisory Program (NFAP)
It is believed that the financial and capital market would generate the largest number of employment opportunities in the next 2 decades. Yet the talented people with the skills sets required to fill most of the positions are glaringly missing in the country. A successful sales & marketing career in the financial market requires a thorough grooming at the grass-root level, and that is where this program commands immense value.
NML believes that large scale employment opportunities exist in this field for graduates and fresh MBAs, if empowered properly. Niveshak, therefore, offers quality & practical education in field of investment, financial planning, insurance and tax advisory. As part of this initiative Niveshak has chosen to offer a comprehensive internship program titled “Niveshak Interaction Program” for a total duration of two months. This Internship not only offers a strong opportunity to learn for a budding student; but also shapes up the professional in the student as a result of mentoring from an experienced Mentor. This paves the way for a strong and rewarding career. The entire program is designed such that student will also be made to acquire the AMFI & IRDA licenses. In addition, the internship also enables a student to earn sizeable money.
Niveshak is a Company incorporated under the Indian Companies Act 1956. Niveshak is created solely with a view to provide a platform for the Investors to enable them to take informed decision for investing their hard earned money, in seeking this goal, Niveshak also endeavors to develop a qualified and well-informed cadre of Financial Advisors and Distributors by empowering the practicing Financial Advisors/Distributors with better/relevant knowledge/skills and by training the young college and B-School graduates with adequate knowledge/skills.
A unique Investor Education Program has been devised for helping the investor understand the intricacies of the savings and investments. The program also encompasses in it sufficient provision to draw sufficient learning from the feedback received from the investors as to what is the significance of learning and knowledge on the investment decisions of the common investors. Niveshak Associates would help the investors in understanding their risk profile so that they can understand what type of savings/investment options or securities and mutual funds they should invest within their overall risk profile.
Niveshak is an initiative of SPA Capital Services Ltd. and Acsys Software (India) Pvt. Ltd.
3.1.2. SPA Capital Service Ltd
SPA Group promoted in 1995, by a team of financial professionals, provides value added financial services like corporate finance and wealth management services to Indian companies and HNIs. SPA Group has established itself as one of India’s leading financial advisory house, offering various financial services like securities broking, insurance broking, corporate finance, merchant banking, financial advisory, risk management and wealth management.
SPA Capital Services Ltd. is a flagship company of SPA Group, engaged in advisory and distribution services of mutual funds & insurance and is ranked amongst the top 5 financial intermediaries of the country. The company has a distribution network of over 200 sub-brokers across India being serviced by its 58 branches. The company has mobilized over Rs. 5 lac crores for various mutual funds during the last 10 years and is currently having AUM over Rs.20,000 crores with hundreds of satisfied customers.
3.1.3. Acsys Software India Pvt. Ltd
is a leading Technology and Software Solution Provider in the niche vertical of the Mutual Fund Industry both in India and abroad. Its Software products and services covering many application areas are termed “Best of Brand” services within the Indian Fund Industry. Acsys designs software solutions and products to keep pace with today’s changing market place. Its software applications and products, support all participants in the fund industry, be it the Fund House, the Distributor and/or Investor.
In addition, Acsys has a large pool of in-house expertise to continually develop appropriate and advanced technology requirements to the financial services market in general and Fund Industry in particular.
Acsys Software (India) Pvt. Ltd., incorporated in 1996, was originally the software division of Computer Age Management Services (P) Ltd., (CAMS). It was hived off as a joint venture in association with Alliance Capital LLP of the USA. Currently, Acsys Software is fully owned by the original Indian promoters and is an affiliate Company to CAMS.
CAMS is India’s largest Transfer Agency for Open Ended Funds dominating more than 60% of the market. CAMS offer Outsourced Transaction Processing, Customer Care, and Fund Accounting and related Transfer Agency Services.
Acsys Software products for Asset Management Companies, Distributors and related entities come with the following advantages:
* Substantial knowledge of business and domain of the Mutual Fund Industry. It understands the needs easily and is able to harness the software solutions for new products and services faster.
* Its Software Products and services are put through extreme process conditions through its stake-holder’s businesses.
* It operates in a dynamic environment dictated by enormous growth in the Indian Mutual Fund Industry in a very short span.
* Demonstrated capabilities overseas, through offshore development, which resulted in an entity migrating from a multiple database and legacy systems environment to a “state of the art” open architecture software solution – See Case Study.
* Members of NICSA and ALFI, leading Fund Forums in US and Europe. Thereby continually tracking trends in the overseas Investment Industry.
* Multi-currency functionality to include Euro compliancy.
Acsys has a library of core products, which meets the software requirements of Mutual Fund Asset Management Companies, Fund Distributors and other intermediaries. All its products are designed and customized using Client Server Architecture for Oracle Databases with Power Builder and other Internet enabled front ends, using JAVA, XML and other revolutionary tools for 24/7 web delivery. Acsys Software has production facilities at Chennai, India and provides client service from Luxembourg for Europe.
3.2. Board Members
3.2.1.Mr. Kamal Somani
He is a senior finance professional with over 30 years of experience in investment banking, securities broking and corporate finance. His vast experience and vision has enabled the Group to establish itself as a respected financial services provider in the country. He looks after the overall group strategies and leads securities broking, investment advisory and investment banking activities of the Group.
3.2.2. Mr. Sandeep Parwal
He has over 20 years of experience in various aspects of financial services. He handles investment advisory, insurance broking and merchant banking activities of the Group. His expertise in providing customized innovative solutions with unmatched speed provides a distinctive edge to the Group’s capability.
3.2.3. Mr. V. Shankar
He is an alumnus of Indian Institute of Management Calcutta and Indian Institute of Technology Madras, is the Managing Director of Computer Age Management Services (CAMS), the largest RTA in India. Computer Age Management Services Pvt. Ltd. (CAMS), offers a comprehensive package of Transaction Processing and Customer Care services to the Mutual Fund industry, and has been constantly raising the bar in customer service since 1995. CAMS today has the most appropriate and advanced technology employed, with the best network for service delivery through its network of Service Centers in all major cities in India. Currently CAMS provides this comprehensive package of services to 18 Indian Mutual Fund families as services provider. Of every 100 Mutual Fund transactions processed in India, CAMS processes 50 or more. CAMS is clearly the #1 choice for Mutual Funds in India.
Mr. Shanks is also a Director at Acsys Software., which is a leading Technology and Software Solution Provider in the niche vertical of the Mutual Fund Industry both in India and abroad.
Today the Indian Capital market requires the inclusion of a wide base of retail investors to counter the volatility caused by the inflow & outflow of foreign money on which we have excessive dependence. Indian middle class savers largely share the capital market (only amount 2% of the salary savers participate). Only through a process of personalized education can they be attracted to join the capital market via Mutual Funds, Insurance etc. To ensure the delivery of” Investor Education @home” and facilitate investments, India needs to grow a new cadre of financial advisors who are not merely “Salesmen” but rather “Advisors” – properly trained to educate and assist the saver, logistically and with knowledge. NML proposes to achieve this goal through this unique Internship Program in addition to the soon to be launched regular 6 month diploma program.
This program seeks to develop a vocational skill by providing knowledge required to obtain licenses to advise investors, and then provide the environment through an experimental learning proven to avoid the temptation of merely hard selling financial products but rather to deliver financial education. This program provides opportunity to sharpen the communication and presentation skills. The field work helps student in understanding the nitty-gritty of the financial advisory.
This program also fulfils the need of the Interns/Students to complete the internship which their regular degree program expects them to do.
Niveshak Mpowered Pvt. Ltd has been created to meet regulatory and corporate requirements for providing the requisite Course Material & forum for various regulatory licenses necessary for selling the MF & Insurance products, Supervision by Expert Mentors for augmenting critical skills and information Technology Environment. The entire design is such that it also offers the most favorable brokerage for the students (only available to corporate national distributors & not individuals) and sufficient remuneration for lead generation.
3.4. Unique Characteristics of Niveshak Interaction Program
The practical training is based on the application or use of the acquired knowledge in Financial Planning. The unique feature of the program is that 6 weeks out of the total duration of 8 weeks, the students will be acquiring practical experience.
The unique characteristics of NIP program are as under:
3.4.1. Learning & Skill Acquisition through Field Work
Students will deliver an elementary financial literacy workshop to the potential clients at their respective homes (financial_literacy@home). This will give them a clear idea about the basics of Financial Planning Advisory. Students will be helped to groom themselves in such a manner that without the fear of meeting the strangers they would be able to give an effective and impressive presentation to the potential clients. Students will also assist the client in procuring the KYC and PAN codes – the pre-requisites for investing in MF or equity market.
3.4.2 .Regular Mentoring
Experts (to be designated as ‘Mentor’) in the field of the financial and capital market will assist the Students in identifying potential clients and meeting them. The Mentor for each student will be identified right from the beginning of the program who would hand-hold them in all aspects of financial planning advisory. Students will be assisted by the mentor in identifying and meeting the potential clients.
3.4.3.Training to be a true Financial Advisor
The emphasis of the program is to help students hone their skills as advisor, therefore, there would be no expectation from the students to generate sales from the client. They would be truly acting as Advisor to their clients. In case the investor wants to invest, Mentor will help in enabling the Investor to select right product and close the transaction so that the Investor gets 360 degree service.
3.4.4. Unique blend of Learning with Opportunity of Earning
when the investor chooses to invest through the student then the student will in return be rewarded from the Niveshak Mpowered Private Limited purely in accordance with the governing regime/prevailing regulations. This performance based incentive will become revenue for the Students and the target of this course is so designed that if the student is successful, he/she could earn significant money by way of advisory fee/commission. This would be a significant differentiating factor from other Internship Programs and will provide every student an equal opportunity to earn with his own efforts.
3.4.5. Technological skills enhancement and support
The entire program has a strong technological base. This will help the student in acquiring the most modern techniques to advise the clients and improve his/her efficiency. Student Section allows the student to get all feedback about him/her to gauge the progress of work. The Prospecting Module helps in developing list of quality prospectus and taking them to logical end. The Transaction module will allow a student to monitor the investments made by the client.
3.4.6. Regular Review & Feedback
system through the technology platform will allow students to access feedback of his faculty and mentor online and also to receive feedback where does he stands vis-à-vis his peers and also against scheduled pace of the Program.
3.5. Niveshak Financial Advisors Program plus – Objectives
Today the Indian Capital market requires the inclusion of a wide base of retail investors to counter the volatility caused by the inflow & outflow of foreign money on which we have excessive dependence. Indian middle class savers largely share the capital market (only amount 2% of the salary savers participate). Only through a process of personalized education can they be attracted to join the capital market via Mutual Funds, Insurance etc. To ensure the delivery of “Investor.Education@home” and facilitate investments, India needs to grow a new cadre of financial advisors who are not merely “Salesmen” but rather “Advisors” – properly trained to educate and assist the saver, logistically and with knowledge. A discerning student willing to make a career in highly remunerative, challenging and interesting field of financial selling will find this program to be the true bridge to his/her destination of career.
This program seeks to develop a vocational skill by providing
* Maturity through an experimental learning proven to avoid the temptation of merely hard selling financial products but rather to deliver financial education
* Ability to acquire licenses to advise investor
* Sharpen the communication and presentation skills.
* The field work helps student in understanding the nitty-gritty of the financial advisory.
* Opportunity to earn.
3.6. Career Opportunities
3.6.1.Potential Employment Sector
Niveshak also provided us with various employment opportunities like after my interns they also invited me to be a part of sub brokership where once after presentation we need to close in the deal by selling a particular financial product. For that they are also conducting AMFI exams i.e Association of Mutual funds of India where we get license to be sell a mutual funds with proper authorization. So Niveshak has provided opportunities for employment as financial advisors
o Life Insurance Companies
o General Insurance Companies
o Marketing Research Firm
o Regulatory Organizations like SEBI,IRDA
o Multi product Financial Service Organization like ICICI Direct,
Reliance Money, Religare Finves
o Mutual Fund Distributors
o Self Employed Financial Advisor
o Insurance Broking Organisations
o Corporate Agents
o Knowledge Process Outsourcing Firms
o Business Process Outsourcing Firm
o Tax Practitioners & CAs
To Conclude, I can safely say that it is a very good initiative taken by Nfap to promote financial products and in the process creating awareness about it. Looking at the current financial scenario it is very essential as currently stock market is on a rise and its very important to create awareness so as to differentiate between traditional mode of investment and latest trend in financial markets. As the rate of inflation keeps on fluctuating it’s very important to think keeping in mind the long term objectives of a investment portfolio. So Niveshak as a distribution house for financial products is an ideal platform to fulfill this long term objectives.
REVIEW OF LITERATURE
REVIEW OF LITERATURE
In Niveshak Financial Advisory Program, It is believed that the financial & Capital
Market would be largest employment generating sector in the next 2 decades. Yet the talented people with the skills sets required to fill most of the positions are glaringly missing in the industry. A successful marketing and finance career in the financial market requires a thorough grooming at the grass – root level, and that is where n- fap commands immense value.
Niveshak Financial acts as a distribution office to financial products, where it provides ample opportunities for large scale employment in the field of graduates and MBA’s, if empowered properly. Therefore it also provides opportunities for investment, financial planning, insurance and tax advisory.
It also helps in imparting the much needed advisory skills in the young aspirants on the threshold of entering the job market to lay foundation for a rewarding & successful career; and to evaluate whether investor education changes investor behavior in the areas of
* Decision for investing in Mutual funds; Insurance and other instruments.
* Systematic Investing.
* Developing Risk Profile & Building Financial Plan.
* Willingness to pay for financial advisory
This training helped also gave opportunity to apply the acquired Financial Planning Knowledge.
I did my Summer Interns in Niveshak Financial advisory Program as a trainee plus a financial advisor and in the Process I went through various books, websites, various company’ websites, journals, magazines which helped me in getting more data, improve my presentation skills and also improve my knowledge about financial products like mutual funds, insurance etc.
As part of my research I went through websites like money control.com, mutual fundsindia.com.
For Financial products like ULIPs I went through Kotak group Company’s profile which is one of the top financial product services in India. It is one of India’s leading financial Conglomerates, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates.
It Comprises of following sub units which combines to form a vast company and group of people.
1. Kotak Securities.
2. Kotak Insurance.
3. Kotak Mahindra bank.
4. Kotak Mutual funds.
5. Kotak Private equity.
6. Kotak Investment banking
7. Kotak Reality funds.
4.1.POLICIES OF KOTAK DIRECT
There are basically 3 policies dealt in KOTAK DIRECT
4.1.1.KOTAK SAFE INVESTMENT PLAN (KSIP)
4.1.2. KOTAK SMART ADVANTAGE PLAN (KSAP)
4.1.1.KOTAK SAFE INVESTMENT PLAN (KSIP)
Kotak Safe Investment Plan is a Unit Linked Insurance Plan that combines the
benefits of insurance and capital market returns into one. This plan from the stable of Kotak Life Insurance is a true reflection of the company’s essence: innovation that will benefit the investor.
What makes investing in Kotak Life Insurance truly unique is that an investor can enjoy Guaranteed Maturity Value with varying degrees of equity exposure depending on your risk appetite. So if the market value of your units is higher, you reap the benefits with the peace of mind that whilst in a bear market your investment is under-pinned by the Guaranteed Maturity Value. And there is more, the returns are totally Tax free.
4.1.2. KOTAK SMART ADVANTAGE (KSAP)
* Guaranteed returns of unto 275% of your first year premium at maturity
* Assured bonus additions at regular intervals during he policy term to enhance your fund value
* 100% allocation of the premium from 2nd year onwards
* Unique fund offering maximum opportunity for growth and choice for your
In order to understand the behavior of consumers towards ULIPs and to determine the various factors which a consumer actually takes into account while buying a ULIP, Kotak Group conducted a survey.
They prepared a questionnaire consisting of 13 factors which plays an important role in choosing a ULIP and asked the respondents to rate these factors on a scale of 1 to 5(1 being least important & 5 being most important). This questionnaire was not specific to any particular company and aimed at determining the most important factors from the consumer point of view. With the help of data thus obtained, a complete analysis was done and results were obtained.
Sr. No FACTOR AVER-
AGE MEDIAN MODE STANDARD
DEVIATION VARIANCE 1 Return On
Investment 4.74 5 5 0.59662 0.356 2 Financial Health
(Company) 4.51 5 5 0.745 0.555 3 Comparison with
Financial Products 4..34 4 5 0.69 0.48 4 Tax Saving 4.25 5 5 0.98 0.977 5 Policy Features 4.15 4 4 0.796 0.633
4.2.CONCLUSIONS FROM SURVEY
* Returns on Investment & Financial Health of the company are the 2 most
important factors while buying an insurance plan
* Return on Investment gets an average of 4.74 (on a scale of 5) with both median & mode being 5. S.D & Variance are 0.56 & 0.36 respectively which are quite less & shows high degree of similarity in the views of the people surveyed, on the importance of this factor.
* Financial Health of the company gets an average of 4.51 (on a scale of 5) with both mean & median being 5. S.D & Variance are 0.75 & 0.56 respectively which also show quite a high degree of similarity in the views but comparatively lesser than return on investment Factor.
* Comparison with Financial Products,Tax Saving & Policy Features are also very important factors & plays a very important role in the purchase of an Insurance Policy.
* The above 5 factors are the most important ones which affect the purchase of an Insurance Policy.
* An Insurance company needs to pay a lot of attention on these factors before developing a policy as they play utmost importance in the purchase of an Insurance Policy.
To Get further understanding of financial Products I also went through the research work undertaken by SBI mutual fund
SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the
country with an investor base of over 4.6 million and over 20 years of rich
experience in fund management consistently delivering value to its investors.
SBI Funds Management Pvt. Ltd. is a joint venture between ‘The State Bank of
India’ one of India’s largest banking enterprises, and Societe Generale Asset
Management (France), one of the world’s leading fund management companies
that manages over US$ 500 Billion worldwide.
4.3.PRODUCTS OF SBI MUTUAL FUND
4.3.1. Equity schemes
The investments of these schemes will predominantly be in the stock markets
and endeavor will be to provide investors the opportunity to benefit from the
higher returns which stock markets can provide. However they are also exposed
to the volatility and attendant risks of stock markets and hence should be
chosen only by such investors who have high risk taking capacities and are
willing to think long term. Equity Funds include diversified Equity Funds,
Sectoral Funds and Index Funds. Diversified Equity Funds invest in various
stocks across different sectors while sectoral funds which are specialized Equity
Funds restrict their investments only to shares of a particular sector and hence,
are riskier than Diversified Equity Funds. Index Funds invest passively only in
the stocks of a particular index and the performance of such funds move with
the movements of the index.
* Magnum COMMA Fund
* Magnum Equity Fund
* Magnum Global Fund
* Magnum Index Fund
* Magnum Midcap Fund
* Magnum Multicap Fund
* Magnum Multiplier plus 1993
* Magnum Sectoral Funds Umbrella
* MSFU- Emerging Business Fund
* MSFU- IT Fund
* MSFU- Pharma Fund
* MSFU- Contra Fund
* MSFU- FMCG Fund
* SBI Arbitrage Opportunities Fund
* SBI Blue chip Fund
* SBI Infrastructure Fund – Series I
* SBI Magnum Taxgain Scheme 1993
* SBI ONE India Fund
* SBI TAX ADVANTAGE FUND – SERIES
This Research was undertaken in Noida region where consumers behavior towards mutual funds were carried out depending upon various demographics like age, income, preferences etc…
(a) Age distribution of the Investors of Noida
Age Group <= 30 31-35 36-40 41-45 46-50 >50 No. of Investors 12 18 30 24 20 16
According to this chart out of 120 Mutual Fund investors of Noida the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.
(b) Occupation of the investors of Noida
Occupation No. of Investors Govt. Service 35 Pvt. Service 45 Business 35 Agriculture 4 Others 6
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.
(c) Monthly Family Income of the Investors of Noida
Income Group No. of Investors <=10,000 5 10,001-15,000 12 15,001-20,000 28 20,001-30,000 43 >30,000 32 Interpretation:
In the Income Group of the investors of Noida, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000
(d) Awareness about Mutual Fund and its Operations
Response Yes No No. of Respondents 135 65
From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations.
This were some of the interpretations found out by SBI mutual funds and there were many more.
This study helped SBI to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, and Channels etc. They observed that many people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing.
This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important use of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones.
5.1. Data sources:
Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites.
5.2.Duration of Study:
The study was carried out for a period of two months, from 28th May to 28th July 2010.
As Part of my interns I did my research work in Navi Mumbai and various other parts of Mumbai Region;
Nerul, Vashi, Thane, Mulund, Ghatkopar Kalyan,Badlapur,Bhandup
* Residential Areas
* Commercial Areas
* Friends & Relatives
5.4. PRIMARY DATA:
Primary Data is in which the researcher uses as a base for framing the Questionnaires, which then highlighted all the important aspects for consideration.
Primary data was collected in the form of questionnaires which was given by Niveshak Mpowered to find out the investors interest, to determine their risk taking ability, financial goal, to determine their interest for particular product like for e.g SIP’s and also to create investors profile.
5.5. SECONDARY DATA
Secondary Data normally comes after Primary data, it is data collected by someone other than user. For this research I went through websites for few financial products like mutual funds. For mutual funds I went through value research website which gives daily up gradation of mutual funds and its ratings this helped me because there were few investors who were immediate investors wants some information about performance of various mutual funds. For weekly performance of mutual funds and stock market I went through business standard magazine. It also helped me during data compilation stage where after analyzing data, for authentication I went through economic times website which helped me in updating the current and past happenings in financial market.
5.6. INSTUMENTS FOR DATA COLLECTION:
Questionnaires & References
Questionnaires were the main instrument for primary data collection.
A copy of questionnaires has been enclosed in the annexure.
In addition to the questionnaire method, data was collected through references given by investors. In the process respondent’s interest towards particular financial product, body language, knowledge of financial products were also taken into consideration. Their overall assessment was done through this method and this was the base that I carried through out while doing this research in every area.
DATA ANALYSIS & INTERPRETATION
DATA ANALYSIS AND INTERPRETATION
In the data analysis, I collected some relevant data which helped me in further interpretation of my research project. Each analysis is based on the result of the data from the data collection method which I used while calculating it with the help of response from the questionnaire which I got from the company.
For interpretation part Data has been presented with the help of bar graph, pie charts, line graphs etc.
ANALYSIS & INTERPRETATION OF THE DATA
(a) Age distribution of the Investors
Age Group <= 30 31-35 36-40 41-45 46-50 >50 No. of Investors 7 9 14 12 10 8
According to this chart out of 60 investors most are in the age group of 36-40 yrs. i.e. 23%, the second most investors are in the age group of 41-45 yrs i.e. 20% and the least investors are in the age group of below 30 yrs.
(b).Yearly income of investors:-
Income Group <=2,00,000 2lac – 4lac 4lac – 6lac 6lac – 10lac >10lac No. of Investors 16 18 12 9 5
According to this chart out of 60 investors 30% investors that is the maximum investors are in the annual income group of between 2lacs and 4lacs ,Second one i.e. 27% investors are in the annual income group of below 2lacs the minimum investors i.e. 8% are in the monthly income group of below 10lacs
(c) Occupation of the investors:
Occupation No. of Investors Govt. Employee 02 Corporate Employee 26 Practicing Professional 16 Entrepreneur 10 Retired 6
In Occupation group out of 60 investors, 43% are Corporate. Employees, 27% are Practicing Professional, 03% are Govt. Employees, 17% are Entrepreneur and 10 % are retired.
(d) Investors investment in different kind of investments.
Kind of Investments No. of Respondents Saving A/C 17 Fixed deposits 12 Insurance 14 Mutual Fund 5 Post office (NSC) 6 Shares/Debentures 5 Gold/Silver 1
According to this Pie chart out of 60 investors Almost 28% investors that is the maximum investors invest in Savings a/c Second one i.e. 23% investors have taken insurance cover and the lowest is investment is for gold i.e. almost 1 %. One can also say that as currently gold investment is picking up most of the middle class families are more inclined towards investing in gold, whereas those with slightly higher income prefer to invest in mutual funds as many of them believe in wealth creation and with lot more awareness about mutual funds, subscriptions will also pick up.
(e) Investors preference and perceptions about investment
Asset Allocation No of Respondents Debt 80%, Cash 20%, Equity 0% 09 Debt 75%, Cash 10%, Equity 15% 11 Debt 50%, Cash 10%, Equity 40% 19 Debt 35%, Cash 10%, Equity 55% 14 Debt 25%, Cash 10%, Equity 65% 07 Interpretation:
According to this chart out of 60 investors Almost 32% investors prefer to have investment portfolio of moderate portfolio i.e. moderate risk taking ability whereas hardly 12% prefer to have investment portfolio of high growth i.e. high risk taking ability and with almost 65% investments in equity market. It is assumed that still consumers are afraid of equity market and most of them would prefer a moderate portfolio with 50% in debt and 40% in equity market.
(f) Investors immediate interest would be:
Immediate interest No of Respondents Complete Financial Planning 12 A Particular Product 12 Goal Achievement Planning 09 Investments (Lump sum / SIP) 27
According to this chart one can clearly see that investors immediate is for Investments in SIP’ s which covers almost 50% of investors interest and rest of them almost evens out with almost equal proportion in Complete financial planning and Particular product which is mostly mutual funds and ULIP’ s. It can be interpreted that investor’s interest in Sip’s is mainly because the initial investment is very low as it can be started with minimum of Rs 1000 every month and irrespective of the market 75% of times they are assured of returns so mutual funds Sip’s are the safest bet as compared to other financial products.
(g) Investors reasonable annual rate of return for portfolio
investment would be:-
Annual Rate of Return No of Respondents 6% – 8% 14 9% – 11% 22 12% – 15% 17 More than 15% 07
This chart shows that out of 60 respondents 37% investors prefer annual rate of return between 9% – 11%, and the second most preferred investment portfolio is 28% i.e between 12% – 15% and lowest is 11% i.e rate of return of more than 15%. It can be interpreted that there are investors who still would prefer an annual rate of return giving modest return that is because investors are still conservative in creating their own portfolio and would wait and watch at least for 2 years. It can also be said that even now investors don’t have sufficient rolling capacity i.e. high disposable income which is essential in creating higher portfolio and in return getting a higher rate of return.
OBSERVATIONS & FINDINGS
* The Maximum numbers of investors were in the age group of 36 – 40 years. The second most number of investor was in the age group of 41 – 45 years and the least were in the age group of below 30.
* Most of the investors were in the income group of between 2lacs – 4lacs and the least were in the income group of above 10lacs.
* In Occupation group most of the investors were corporate employees, the second most investors were practicing professionals and the least encompasses of retired professionals and Government employees.
* Out of the 60 respondents almost half of them have invested in fixed deposits and only 16% of them have invested in stock market i.e. shares, debentures and mutual funds.
* Most respondents preferred investing in returns having moderate return i.e. portfolio encompassing of debt – 50%, cash – 10%, and equity – 40% and the least were investors who prefer investing in high portfolio i.e portfolio encompassing of debt – 25%, cash – 10%, equity – 65%.
* Almost 50% of the investor’s i.e 27% of them have immediate interest in investing in Sip’s and rest of them evens out with 40% comprising of complete financial planning and a particular product and rest 15% of them are interested in goal achievement planning.
* Another deciding factor for investment was investors income it was found out that those between income group of 2lacs – 4lacs were conservative investors and prefer to have their investment portfolio giving moderate returns i.e 25% in equity market and 50% in debt whereas those whose between income group of around 6 to 10lacs are bold in their investment portfolio and prefer to have a very high return which comprises 65% in equity market and 25% in debt.
* Almost 30 – 35% of investors are scared of stock market and are very conservative in investment decisions like many of them still believes that investing in bank F.D’ s or R.D are much safer proportion as compared to investing in equity market. They are of the opinion that at least they are assured of fixed returns in long run.
* There were close to 90 – 100 respondents who don’t have proper knowledge about financial products and were ambiguous about recent happenings in financial market.
* There were many respondents who don’t have the income to support their investment plans and were not sure about their long terms plans.
* Around 20% of the investors were not sure about direct tax code that is going to be implemented and because of that they were not sure about investing in pension plans and ULIP’ s and some of them had recently taken ULIP’ s plans and were not sure about the tax procedure for these plans.
* Around 30% of the investors were confident about current financial scenario and were optimistic that as compared to other countries our financial sector is in much better shape.
* More than 50% of the respondents were not willing to give their Personal details as it was required, to create their own portfolio because some of them were misguided while most of them had a torrid time giving this information in the past.
* Around 2 – 3% of them were interested in taking SIP plans for their children’s as it helps in long run e.g. there were few respondents who were tensed about their children’s education and their marriage and looking at the current inflation and current market rate Sip’s would be an ideal investment proposition taken into consideration the goal achievement planning associated with it.
* There were about 1 – 2% who have invested in gold and most of them were in the income group of between 2lacs – 4lacs and most of them were lower middle class investors who were of the opinion that a gold coin will assure a much better return and some of them were investing in them as an hobby
CHAPTER – 8
* Some of the respondents were not very co – operative.
* Due to recent recessions respondents were not confident about investing in financial products.
* Maximum respondents were having limited knowledge about financial products.
* Some respondents were reluctant to divulge personal information which can
affect the validity of all responses.
* The questions were long and too much, so most of them found it very tedious to go through it.
* Most of them were not interested in the entire presentation due to lack of time and many of them were busy with their own work.
* Possibility of error in data collection because few of investors may not have given actual answers of questioners.
* Investor’s mindset about current market scenario and pessimistic outlook towards it.
* Certain investors related this internship as marketing of the company i.e Nfap which acted as a hindrance to my training.
* Lack of knowledge about financial products and in process developing certain misconceptions about financial products.
* Lack of references were also a major problem, as many investors were not interested in giving references so sometimes research process was confined to limited areas.
CHAPTER – 9
RECOMMENTDATIONS AND SUGGETIONS
* The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.
* Financial products like mutual funds offer a lot of benefit which no other single option could offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time.
* Before making any investment Financial Advisors should first enquire about the risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration.
* Younger generation especially aged fewer than 35 will be a key new consumer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off.
* Investors having some knowledge of financial products as well as interests towards financial products are easier to advice to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality in service.
* Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons and this is being proved because there was news that about 22.5 lacs Sip’s were subscribed in 2010 as against 7lacs in 2003
* Mouth of Word also plays a huge role in promoting financial products as even if half of the investors invest after getting sound financial advice a platform should be created where these investors can help in promoting these financial products.
* There should be more of seminars and sessions with financial experts so that it helps in creating in more awareness towards financial products.
* Experience in financial sector also plays a huge role in creating awareness towards financial products. E.g. those investors who have invested for long term and those who have gained higher returns after investing in these products should try to bridge the gap between those who are scared of investing in these products.
* After the launch of new pension scheme last year it has come as a major relief for many private sector employees so efforts should be made to create awareness and benefits associated with it as still there are many who are not aware about it.
I did my internship at Niveshak financial advisory program for 2months and it was a great learning experience for me. It created a platform which helped me in getting a strong foothold in financial sector. During my interns I even shared some of my knowledge to some of my friends and relatives and even they were interested in financial planning.
I met close to 90 – 100 respondents and their observation and feedback helped the company in getting a fair idea about financial market. I observed that many people are still feared of some financial products like Mutual Fund and ULIP’s they think that their money will not be secured in Mutual Funds They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing day by day. Brand name, income, influences, security in investment plays an important role for investment.
People invest in those schemes or brands where they have faith or they are well known with them. For e.g. investors in the age group of 25 – 30 who have just started earning would definitely be influenced by parents or relatives with their investment related decisions because I did find that some of them didn’t invested because their parents have already invested in government schemes, kisan vikas patra, savings a/c, fixed deposits etc.. and they are of the opinion that they are much more safe and secure as compared to private companies schemes and are assured of returns irrespective of the market conditions Then in such situation I explained that funds are kept idle in banks F.d.’s or government schemes but there is wealth creation if invested systematically in financial products.
Like every company Nfap is also trying to create a strong foothold as distribution house for financial products but has its share of problems like lack of awarness about the company, consumers knowledge about financial products, rivalries between various private companies launching similar products due to this rivalries consumers have a certain perceived notion towards this products so making investors understand about pros and cons in itself is a huge challenge. Irrespective of all its strengths and weaknesses it also has ample opportunities to grow.
? COPIES OF QUESTIONNAIRE
COPY OF THE QUESTIONNAIRES
Investors Profile Questionnaire
Q.Q1) Personal Details
Name of the investor:-
Address for correspondence:-
* Govt. Employee
* Corporate Employee
* Practicing Professional
Q.3) Your Annual Income:-
* Upto Rs.2lacs p.a.
* More than Rs.2lac but less than Rs.4lacs p.a.
* More than Rs 4lacs but less than Rs.6lacs p.a.
* More than Rs.6lacs but less than Rs 10lacs p.a.
* More than Rs. 10lacs p.a.
Q.4) Where does your monthly expenditure household expenditure fall:-
* Less than Rs.15000p.m
* Above Rs15000 but less than Rs 25000p.m
* Above Rs.25000 but less than Rs.40000p.m
* Above Rs.40000 but less than Rs.50000
* Above Rs.50000p.m
Q.5) Do you have some savings that you can use in emergency?:-
* No. I do not have any emergency savings
* Yes, I have, but it is small and would like to have more
* Yes, I have some emergency savings
* I have sufficient emergency savings, but can consider more
Q.6) I think a reasonable rate of return for my portfolio investment would be:-
* 6% – 8%
* 9% – 11%
* 12% – 15%
* More than 15%
Q.7) My most important investment goal is to:-
* Preserve my original investment
* Receive some growth and provide income
* Grow faster than inflation and also provide some income
* Grow as fast as possible even if there is no income today
Q.8) In the Past, which of the following products or instruments have you invested in:-
* Fixed Deposits and/or Money market funds
* Government / Securities & Corporate Bonds
* Mutual funds
* Shares or Equity or Derivates
Q.9) Tell us about investment preferences and perceptions
Asset Allocation Risk Return Projected Return
(maximum / minimum) Portfolio Type Debt 80%; Cash 20%;Equity 0% Very Low 7% 7% Cash & Income A Debt 75%; Cash 10%;Equity 15% Low 8% 6% Income B Debt 50%; Cash 10%;Equity 40% Moderate 12% 7% Balanced C Debt 35%; Cash 10%;Equity 55% Above Average 18% 5% Growth D Debt 25%; Cash 10%;Equity 65% High 25% 3% High Growth E Q.10) My Immediate interest is for:-
* Complete Financial Planning
* A Particular Product
* Goal Achievement Planning
* Investments(lump / SIP)
* Newspapers (Economic times and Times of India)
* Business Standard
* Mutual fund fact sheet and statement
* Research Methodology – J K Sachdeva
* Bottom of the Pyramid – C.K. Prahalad