A PROJECT REPORT ON

INVESTMENT OF MIDDLE INCOME GROUPS

SUBMITTED
TO THE UNIVERSITY OF MUMBAI
AS A PARTIAL REQUIREMENT FOR COMPLETING THE DEGREE
OF
BACHELOR OF MANAGEMENT STUDIES (BMS-FINANCE)
SEMESTER 6

SUBMITTED BY
NEEL CHETAN PATEL ROLL NO: 937

UNDER THE GUIDANCE OF

Ms. SAKSHI CHOUGULE

PATKAR VARDE COLLEGE

MARCH 2024

PATKAR VARDE COLLEGE,

Swami Vivekananda Rd, Piramal Nagar,
Goregaon West, Mumbai,
Maharashtra 400061

1
 CERTIFICATE

This is to certify that Mr. Neel Chetan Patel has worked and duly
completed her/his Project Work for the degree of Bachelor of
Management
Studies under the Faculty of Commerce in the subject of Finance
and her/his project is entitled, “INVESTMENT OF MIDDLE
INCOME GROUPS” under my supervision.
I further certify that the entire work has been done by the learner
under my guidance and that no part of it has been submitted
previously for any Degree or Diploma of any University.
It is her/ his own work and facts reported by her/his personal
findings and investigations.

Name and Signature of Guiding Teacher

Date of submission:

2
 DECLARATION

I, NEEL CHETAN PATEL student of B.M.S ( Finance) Semester VI

(Academic Year 2020-21) hereby declare that, I have completed the research project
on INVESTMENT OF MIDDLE INCOME GROUPS.

The information presented in this project is true and original to the best of my
knowledge. This project is previously not submitted to any University for any Degree
or Diploma Course of this or any other University.

_______________________

NEEL CHETAN PATEL

ROLL NO. 937

PLACE: MUMBAI

DATE:

3
 ACKNOWLEDGEMENT

I would like to thank the University of Mumbai, for introducing T.Y.BMS

(Finance) course, thereby giving its students a platform to be abreast with changing
business scenario, with the help of theory as a base and practical as a solution.

I am indebted to our Principal Dr for providing necessary

facilities required for completion of the Project.

I take this opportunity to thank our co-ordinator Ms SONAL

HIPPALGAONKAR or her support and guidance. I would sincerely like to thank her
for all her efforts.

I would like to express my sincere gratitude towards my project guide Ms.

SAKSHI CHOUGULE whose guidance and care made the project successful.

I would like to thank my College library for having provided various reference
books and magazines related to my project.

Last but not the least; I would like to thank my parents for giving the best
education and for their support and contribution without which this project would not
have been possible.

_______________________

NEEL CHETAN PATEL

ROLL NO. 937

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 Executive Summary

‘INVESTMENT’, is not just a project but an information

warehouse where I have tried my best to simplify the content

in such a manner that even a layman can understand it.

This project has truly helped me a lot to gain insights about

various investment instruments. I have tried to cover as

much as possible information, but due to vastness of the

subject, the in-depth study of the subject was not possible.

So, the information is brief and in precise form.

It covers various investment vehicles such as savings a/c,

FD, PPF, insurance, mutual funds, real estate, share market,

and & last Gold or E-gold is a best alternate investment this

part will be applied in the form of project for six semester and

also research. Lastly, I have tried to do a comparative

analysis of all the investment instruments and have tried to

prove that Share Market is the best option for investors (not

speculator) who should have their fundamentals clear before

entering the share market and the better and the best

investment is gold as best alternate invest.

5
CHAPTER -1

Objectives

 Study on Investment

 The Study about various plan of investment

 Understanding various option in investment.

RESEARCH METHODOLOGY

 Target Population: Population of the research is the

consumers through Angel Broking

 Research Design : Descriptive Research

 Sampling unit: Same as the sample element

 Sampling Technique: Convenience sampling in the form of

questioners

 Sample Size : Maximum number questioner were asked

sampling units selected from the Target population

 Contact Method: Researcher have contacted sampling units

personally and with the help of one to one interaction

researcher have conducted survey. Also using face book and

friends in the form questioneer

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  Extent: The location considered by the researcher is

Mumbai city.

Data Sources:

Primary Source: Questionnaire

Secondary Sources: Books like Finance investment Research

Journals,L Websites, Reports

LIMITATIONS OF THE STUDY

 Another limitation is that the scope of the researcher’s study

is Mumbai . So the population considered may not be the

actual representative of the population of the nation.

 The information given by the respondents can be biased.

 Frequency of usage, in the question that ask for highly

investment pattern .

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Chapter 2

Introduction

Gold the Seed of Desire

Welcome to a world! That is so limited that it can be contained in a

web, measuring 24 inches on each side, yet it is so immense that it

enrolls each one of us. A world in which generations of men and

women have fought for died for and slaved for. It is a world of

generations of infinite possibilities of its own.

Gold, the yellow metal, has captured man’s interest everywhere

and at all times. As a symbol of perfection, immortality and

prosperity, gold is the substance that myths and legends are made

of.

Gold is a very ductile and malleable, precious metal that is

resistant to air and water corrosion. It is a precious metal that is

very soft when pure (24 Kt.). Gold is the most malleable (hammer

able) and ductile (able to be made into wire) metal. Gold is alloyed

(mixed with other metals, usually silver and copper) to make it less

expensive and harder. The purity of gold jewelry is measured in

karats.

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Traditionally a major market for gold, India has once again retained

its position as the largest market for the yellow metal. The Geneva

based World Gold Council, the marketing arm of the gold mining

industry, also identifies India as the fastest growing market for this

precious metal. Unlike the Westerners who invest largely in stocks

and other options, Indians believe in gold as an all time safe

investment. For one, gold gives the security against any financial

crisis because of its easy liquidity. Besides the investment angle,

what makes Indians duck the globe trend is the traditional values

attached to the yellow metal. Gold, in Hindu culture is considered

auspicious and is symbolic of Goddess Lakshmi (Goddess of

wealth).

9
CHAPTER – 3

WHAT IS INVESTMENT?

“The act of committing money or capital to an endeavor with

the expectation of obtaining an additional income or profit is

investment.”

It’s actually pretty simple: investing means putting your money to

work for you. The money you earn is partly spent and the rest

saved for meeting future expenses. Instead of keeping the savings

idle you may like to use savings in order to get return on it in the

future. This is called Investment.

Investment is a term, which is frequently used in the field of

economics, business management, finance and it means savings

or savings made through delayed consumption. Investment can be

divided into different types according to various theories and

principles. In general purview, investment is the application of

money for earning more money. A particular amount of money is

invested in the bank or an asset is bought in the anticipation that

some return will be received from the investment in the future.

There can be a number of definitions of Investment. While dealing

10
with the various options of investment, the definitional variations of

investment need to be kept in mind.

What is investment in terms of Economics:

According to economic theories, investment is defined as the “per

unit production of goods, which have not been consumed,

however, will be used for the purpose of future production.”

Examples of this type of investments are tangible goods like

construction of a factory or bridge and intangible goods like 6

months of on-job training. In terms of national production and

income, Gross Domestic Product (GDP) has an essential

constituent, which is called as gross investment.

What is investment in terms of Business Management:

According to business management theories, investment refers to

tangible assets like machinery and equipments and buildings and

intangible assets like copyrights or patents and goodwill. The

decision for investment is also known as capital budgeting

decision, which is regarded as one of the key decisions.

What is investment in terms of Finance:

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In finance, investment refers to purchasing securities or any other

financial assets from the capital market or money market or

purchasing real properties with high market liquidity for example,

gold, silver, real properties, and precious items. These are called

‘investment vehicles’. Financial investments are investment in

stocks, bonds, commodities and many other types of security

investments. Indirect financial investments can also be done with

the help of mediators or third parties, such as pension funds,

mutual funds, commercial banks, and insurance companies.

According to personal finance theories, an investment is the

implementation of money for buying shares or mutual funds or

purchasing an asset with the involvement of the factor of capital

risk.

Here we are going to focus on investment in terms of finance,

only.

WHAT INVESTING IS NOT?

Investing is not gambling. Gambling is putting money at risk by

betting on an uncertain outcome with the hope that you might win

money. Part of the confusion between investing and gambling,

however, may come from the way some people use investment

vehicles. For example, it could be argued that buying a stock

12
based on a “hot tip” you heard at the water cooler is essentially the

same as placing a bet at a casino.

True investing doesn’t happen without some action on your part. A

“real” investor does not simply throw his or her money at any

random investment; he or she performs thorough analysis and

commits capital only when there is a reasonable expectation of

profit. Yes, there still is risk, and there are no guarantees, but

investing is more than simply hoping Lady Luck is on your side.

WHY SHOULD ONE INVEST?

Obviously, everybody wants more money. It’s pretty easy to

understand that people invest because they want to increase their

personal freedom, sense of security and ability to afford the things

they want in life.

However, investing is becoming more of a necessity. The days

when everyone worked the same job for 30 years and then retired

to a nice fat pension are gone. For average people, investing is not

so much a helpful tool as the only way they can retire and maintain

their present lifestyle.

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Nowadays, investments are the foundation of our future financial

level. Bad investments can bring us negative turnovers and

therefore decrease our future possibilities. You are looking at two

options for your money, the first you can spend it or save it and

second, invest it.

In short, one needs to invest to:

§ To beat inflation and earn return on your idle resources

§ generate a specified sum of money for a specific goal in life

§ make a provision for an uncertain future / for retirement.

One of the important reasons why one needs to invest wisely is to

meet the cost of Inflation. Inflation is the rate at which the cost of

living increases. The cost of living is simply what it 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 of a good or a

service in the future as it does now or did in the past. For example,

if there was a 6% inflation rate for the next 20 years, a Rs. 100

purchase today would cost Rs. 321 in 20 years. This is why it is

important to consider inflation as a factor in any long-term

investment strategy. Remember to look at an investment’s ‘real’

rate of return, which is the return after inflation. The aim of

14
investments should be to provide a return above the inflation rate

to ensure that the investment does not decrease in value. For

example, if the annual inflation rate is 6%, then the investment will

need to earn more than 6% to ensure it increases in value.If the

after-tax return on your investment is less than the inflation rate,

then your assets have actually decreased in value; that is, they

won’t buy as much today as they did last year.

Investors can learn a lot from the famous Greek maxim inscribed

on the Temple of Apollo’s Oracle at Delphi: “Know Thyself”. In the

context of investing, the wise words of the oracle emphasize that

success depends on ensuring that your investment strategy fits

your personal characteristics.

Even though all investors are trying to make money, each

one comes from a diverse background and has different needs. It

follows that specific investing vehicles and methods are suitable

for certain types of investors. Although there are many factors that

determine which path is optimal for an investor, we’ll look at two

main categories: investment objectives, and investing personality.

INVESTMENT OBJECTIVES:-

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The options for investing our savings are continually increasing,

yet every single investment vehicle can be easily categorized

according to three fundamental characteristics - safety, income

and growth - which also correspond to types of investor objectives.

While it is possible for an investor to have more than one of these

objectives, the success of one must come at the expense of

others. Generally speaking, investors have a few factors to

consider when looking for the right place to park their

money. Safety of capital, current income and capital

appreciation are factors that should influence an investment

decision and will depend on a person’s age, stage/position in life

and personal circumstances. A 75-year-old widow living off of her

retirement portfolio is far more interested in preserving the value of

investments than a 30-year-old business executive would be.

Because the widow needs income from her investments to survive,

she cannot risk losing her investment. The young executive, on the

other hand, has time on his or her side. As investment income isn’t

currently paying the bills, the executive can afford to be more

aggressive in his or her investing strategies.

An investor’s financial position will also affect his or her objectives.

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A multi-millionaire is obviously going to have much different goals

than a newly married couple just starting out. For example, the

millionaire, in an effort to increase his profit for the year, might

have no problem putting down $100,000 in a speculative real

estate investment. To him, a hundred grand is a small percentage

of his overall worth. Meanwhile, the couple is concentrating on

saving up for a down payment on a house and can’t afford to risk

losing their money in a speculative venture. Regardless of the

potential returns of a risky investment, speculation is just not

appropriate for the young couple.

As a general rule, the shorter your time horizon, the more

conservative you should be. For instance, if you are investing

primarily for retirement and you are still in your 20s, you still have

plenty of time to make up for any losses you might incur along the

way. At the same time, if you start when you are young, you don’t

have to put huge chunks of your pay-check away every month

because you have the power of compounding on your side.

On the other hand, if you are about to retire, it is very important

that you either safeguard or increase the money you have

accumulated. Because you will soon be accessing your

investments, you don’t want to expose all of your money to

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volatility - you don’t want to risk losing your investment money in a

market slump right before you need to start accessing your assets.

Personality:-

Peter Lynch, one of the greatest investors of all time, has said that

the “key organ for investing is the stomach, not the brain”. In other

words, you need to know how much volatility you can stand to see

in your investments. Figuring this out for yourself is far from an

exact science; but there is some truth to an old investing maxim:

you’ve taken on too much risk when you can’t sleep at night

because you are worrying about your investments.

Another personality trait that will determine your investing path is

your desire to research investments. Some people love nothing

more than digging into financial statements and crunching

numbers. To others, the terms balance sheet, income statement

and stock analysis sound as exciting as watching paint dry. Others

just might not have the time to plough through prospectus and

financial statements.

The main factor determining what works best for an investor is his

or her capacity to take on RISK.

Hence, the key to a successful financial plan is to keep apart a

larger amount of savings and invest it intelligently, by using a

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longer period of time. The turnover rate in investments should

exceed the inflation rate and cover taxes as well as allow you to

earn an amount that compensates the risks taken. Savings

accounts, money at low interest rates and market accounts do not

contribute significantly to future rate accumulation. While the

highest rates come from stocks, bonds, and other types of

investments in assets such as real estate. Nevertheless, these

investments are not totally safe from risks, so one should try to

understand what kind of risks are related to them before taking

action. The lack of understanding as how stocks work makes the

myopic point of view of investing in the stock market ( buying when

the tendency to increase or selling when it tends to decrease)

perpetuate. To understand the characteristics of each one of the

different types of investment can or may help you determine which

of them is the right one for your needs.

WHEN TO START INVESTING?

The sooner one starts investing the better. By investing early you

allow your investments more time to grow, whereby the concept of

compounding (as we shall see later) increases your income, by

accumulating the principal and the interest or dividend earned on

it, year after year.

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The three golden rules for all investors are:

 Invest early

 Invest regularly

 Invest for long term and not short term

WHAT CARE SHOULD ONE TAKE WHILE INVESTING?

Before making any investment, one must ensure to:

 1. Obtain written documents explaining the investment.

 2. Read and understand such documents.

 3. Verify the legitimacy of the investment.

 4. Find out the costs and benefits associated with the

investment.

 5. Assess the risk-return profile of the investment.

 6. Know the liquidity and safety aspects of the investment.

 7. Ascertain if it is appropriate for your specific goals.

 8. Compare these details with other investment opportunities

available.

 9. Examine if it fits in with other investments you are

considering or you have already made.

 10. Deal only through an authorised intermediary.

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  11. Seek all clarifications about the intermediary and the

investment.

 12. Explore the options available to you if something were to

go wrong, and then, if satisfied, make the investment.

These are called the Twelve Important Steps to Investing.

WHAT ARE VARIOUS OPTIONS AVAILABLE FOR

INVESTMENT?

One may invest in:

§ Physical assets like real estate, gold/jewellery, commodities

etc. and/or

§ Financial assets such as fixed deposits with banks, small

saving instruments with post offices, insurance/provident/pension

fund etc. or securities market related instruments like shares,

bonds, debentures etc.

What are various Financial options available for investment?

Short-term:- vBriefly speaking, savings bank account, money

market/liquid funds and fixed deposits with banks may be

considered as short-term financial investment options.

Long-term:-

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National Savings Certificate, Post Office Savings Schemes, Public

Provident Fund, Company Fixed Deposits, Bonds and Debentures,

Mutual Funds, Insurance etc., are long term financial investment

options.

Now let’s discuss the short-term and long-term financial options/

investment vehicles in detail:-

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CHAPTER – 4

VARIOUS OPTION OF INVESTMENT

BANKS:-

Savings Account:-

A Saving Bank account (SB account) is meant to promote the habit

of saving among the people. It also facilitates safekeeping of

money. In this scheme fund is allowed to be withdrawn whenever

required, without any condition. Hence a savings account is a safe,

convenient and affordable way to save your money. Bank deposits

are fairly safe because banks are subject to control of the Reserve

Bank of India with regard to several policy and operational

parameters. Bank also pays you a minimal interest for keeping

your money with them.

Savings account can be opened either individually or jointly with

another individual. In a joint account only the sign of one account

holder is needed to write a cheque. But at the time of closing an

account, the sign of the both the account holders are needed.

Return:

The interest rate of savings bank account in India varies between

5% and 7%. In Savings Bank account, bank follows the simple

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interest method. The rate of interest may change from time to time

according to the rules of Reserve Bank of India. One can withdraw

his/her money by submitting a cheque in the bank and details of

the account, i.e. the Money deposited, withdrawn along with the

dates and the balance, is recorded in a passbook.

Advantages:

It’s much safer to keep your money at a bank than to keep a large

amount of cash in your home. Bank deposits are fairly safe

because banks are subject to control of the Reserve Bank of India

with regard to several policy and operational parameters. The

federal Government insures your money. Saving Bank account

does not have any fixed period for deposit. The depositor can take

money from his account by writing a cheque to somebody else or

submitting a cheque directly. Now most of the banks offer various

facilities such as ATM card, credit card etc. Through debit/ATM

card one can take money from any of the ATM centres of the

particular bank which will be open 24 hours a day. Through credit

card one can avail shopping facilities from any shop which accept

the credit card. And many of the banks also give internet banking

facility through with one do the transactions like withdrawals,

deposits, statement of account etc.

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25
Fixed Deposits (FD's):-

A fixed deposit is meant for those investors who want to deposit a

lump sum of money for a fixed period; say for a minimum period of

15 days to five years and above, thereby earning a higher rate of

interest in return. Investor gets a lump sum (principal + interest) at

the maturity of the deposit.

Bank fixed deposits are one of the most common savings scheme

open to an average investor. Fixed deposits also give a higher rate

of interest than a savings bank account. The facilities vary from

bank to bank. Some of the facilities offered by banks are overdraft

(loan) facility on the amount deposited, premature withdrawal

before maturity period (which involves a loss of interest) etc. Bank

deposits are fairly safer because banks are subject to control of

the Reserve Bank of India.

Features:-

Bank deposits are fairly safe because banks are subject to control

of the Reserve Bank of India (RBI) with regard to several policy

and operational parameters. The banks are free to offer varying

interests in fixed deposits of different maturities. Interest is

compounded once a quarter, leading to a somewhat higher

effective rate.
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The minimum deposit amount varies with each bank. It can range

from as low as Rs. 100 to an unlimited amount with some banks.

Deposits can be made in multiples of Rs. 100/-

Before opening a FD account, try to check the rates of interest for

different banks for different periods. It is advisable to keep the

amount in five or ten small deposits instead of making one big

deposit. In case of any premature withdrawal of partial amount,

then only one or two deposit need be prematurely encashed. The

loss sustained in interest will, thus, be less than if one big deposit

were to be encashed. Check deposit receipts carefully to see that

all particulars have been properly and accurately filled in. The thing

to consider before investing in an FD is the rate of interest and the

inflation rate. A high inflation rate can simply chip away your real

returns.

Returns: -

The rate of interest for Bank Fixed Deposits varies between 4 and

11 per cent, depending on the maturity period (duration) of the FD

and the amount invested. Interest rate also varies between each

bank. A Bank FD does not provide regular interest income, but a

lump-sum amount on its maturity. Some banks have facility to pay

interest every quarter or every month, but the interest paid may be
27
at a discounted rate in case of monthly interest. The Interest

payable on Fixed Deposit can also be transferred to Savings Bank

or Current Account of the customer. The deposit period can vary

from 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to 10

years.

Duration

15-30 days

30-45 days

46-90 days

91-180 days

181-365 days

1-2 years

2-3 years

3-5 years

INTREST VARIES FOR THE PERIOD OF INVESTMENT

Advantages: -

Bank deposits are the safest investment after Post office savings

because all bank deposits are insured under the Deposit Insurance
28
& Credit Guarantee Scheme of India. It is possible to get loans up

to75- 90% of the deposit amount from banks against fixed deposit

receipts. The interest charged will be 2% more than the rate of

interest earned by the deposit.

LIQUID FUNDS:-

Liquid funds are used primarily as an alternative to short-term fix

deposits. Liquid funds invest with minimal risk (like money market

funds). Most funds have a lock-in period of a maximum of three

days to protect against procedural (primarily banking) glitches.

Liquid funds score over short term fix deposits. Banks give a fixed

rate in the range 5%-5.5% p.a. for a term of 15-30 days. Returns

from deposits are taxable depending on the tax bracket of the

investor, which considerably pulls down the actual return.

Dividends from liquid funds are tax-free in the hands of investor,

which is why they are more attractive than deposits.

NATIONAL SAVINGS CERTIFICATES

What is National Savings Certificate?

National Savings Certificates (NSC) are certificates issued by

Department of post, Government of India and are available at all

post office counters in the country. It is a long term safe savings

29
option for the investor. The scheme combines growth in money

with reductions in tax liability as per the provisions of the Income

Tax Act, 1961. The duration of a NSC scheme is 6 years.

Features:

NSCs are issued in denominations of Rs 100, Rs 500, Rs 1,000,

Rs 5,000 and Rs 10,000 for a maturity period of 6 years. There is

no prescribed upper limit on investment. Individuals, singly or

jointly or on behalf of minors and trust can purchase a NSC by

applying to the Post Office through a representative or an

agent. One person can be nominated for certificates of

denomination of Rs. 100- and more than one person can be

nominated for higher denominations. The certificates are easily

transferable from one person to another through the post office.

There is a nominal fee for registering the transfer. They can also

be transferred from one post office to another.

One can take a loan against the NSC by pledging it to the RBI or a

scheduled bank or a co-operative society, a corporation or a

government company, a housing finance company approved by

the National Housing Bank etc with the permission of the

concerned post master. Though premature encashment is not

possible under normal course, under sub-rule (1) of rule 16 it is

30
possible after the expiry of three years from the date of purchase

of certificate.

Tax benefits are available on amounts invested in NSC under

section 88, and exemption can be claimed under section 80L for

interest accrued on the NSC. Interest accrued for any year can be

treated as fresh investment in NSC for that year and tax benefits

can be claimed under section 88.

Return:

It is having a high interest rate at 8% compounded half yearly. Post

maturity interest will be paid for a maximum period of 24 months at

the rate applicable to individual savings account. A Rs1000

denomination certificate will increase to Rs. 1601 on completion of

6 years.

Interest rates for the NSC Certificate of Rs 1000

Year Rate of Interest

1 year Rs 81.60

2 year Rs 88.30

3 year Rs 95.50

4 years Rs103.30

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5 years Rs 111.70

6 years Rs 120.80

Advantages:

Tax benefits are available on amounts invested in NSC under

section 88, and exemption can be claimed under section 80L for

interest accrued on the NSC. Interest accrued for any year can be

treated as fresh investment in NSC for that year and tax benefits

can be claimed under section 88. NSCs can be transferred from

one person to another through the post office on the payment of a

prescribed fee. They can also be transferred from one post office

to another. The scheme has the backing of the Government of

India so there are no risks associated with your investment.

How to start?

Any individual or on behalf of minors and trust can purchase a

NSC by applying to the Post Office through a representative or an

agent. Payments can be made in cash, cheque or DD or by raising

a debit in the savings account held by the purchaser in the Post

Office. The issue of certificate will be subject to the realization of

the cheque, pay order, DD. The date of the certificate will be the

32
date of realization or encashment of the cheque. If a certificate is

lost, destroyed, stolen or mutilated, a duplicate can be issued by

the post-office on payment of the prescribed fee.

POST OFFICE MONTHLY INCOME SCHEME

The post-office monthly income scheme (MIS) provides for

monthly payment of interest income to investors. It is meant for

investors who want to invest a sum amount initially and earn

interest on a monthly basis for their livelihood. The MIS is not

suitable for an increase in your investment. It is meant to provide a

source of regular income on a long term basis. The scheme is,

therefore, more beneficial for retired persons.

Features:

Only one deposit is available in an account. Only individuals can

open the account; either single or joint. (two or three). Interest

rounded off to nearest rupee i.e., 50 paise and above will be

rounded off to next rupee. The minimum investment in a Post-

Office MIS is Rs 1,500 for both single and joint accounts. The

maximum investment for a single account is Rs 4.5 lakh and Rs 9

lakh for a joint account. The duration of MIS is six years.

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Returns:

The post-office MIS gives a return of 8% interest on maturity. The

minimum investment in a Post-Office MIS is Rs 1,000 for both

single and joint accounts.

Deposit Rs Monthly Interest Amount returned

on maturity

5,000 33 5,000

10,000 66 10,000

50,000 333 50,000

1,00,000 667 1,00,000

2,00,000 1333 2,00,000

3,00,000 2000 3,00,000

6,00,000 4000 6,00,000

Advantages:

Premature closure of the account is permitted any time after the

expiry of a period of one year of opening the account. Deduction of

an amount equal to 5 per cent of the deposit is to be made when

the account is prematurely closed. Investors can withdraw money

before three years, but a discount of 5%. Closing of account after

34
three years will not have any deductions. Post maturity Interest at

the rate applicable from time to time (at present 3.5%). Monthly

interest can be automatically credited to savings account provided

both the accounts standing at the same post office. Deposit in

Monthly Income Scheme and invest interest in Recurring Deposit

to get 10.5% (approx) interest. The interest income accruing from

a post-office MIS is exempt from tax under Section 80L of the

Income Tax Act, 1961. Moreover, no TDS is deductible on the

interest income. The balance is exempt from Wealth Tax.

PUBLIC PROVIDENT FUNDS

PPF is among the most popular small saving schemes. Currently,

this scheme offers a return of 8 per cent and has a maturity period

of 15 years. It provides regular savings by ensuring that

contributions (which can vary from Rs.500 to Rs.70,000 per year)

are made every year. For efficient “tax saving” there is nothing

better than PPF!

But for those who are looking for liquidity, PPF is NOT a good

option. Withdrawals are allowed only after five years from the end

of the financial year in which the “first deposit” is made. PPF does

not provide any regular income and only provides for accumulation

35
of interest over a 15-year period, and the lump-sum amount

(principal + interest) is payable on maturity.

The lump-sum amount that you receive on maturity (at the end of

15 years) is completely tax-free!! One can deposit up-to Rs 70,000

per year in the PPF account and this money will also not be taxed

and be removed from your taxable income.

If you are relatively young and have time on your side, then PPF is

for you.

How to invest in PPF?

A PPF account can be opened with a minimum deposit of Rs.100

at any branch of the State Bank of India (SBI) or branches of its

associated banks like the State Bank of Mysore or Hyderabad. The

account can also be opened at the branches of a few nationalized

banks, like the Bank of India, Central Bank of India and Bank of

Baroda, and at any head post office or general post office. After

opening an account you get a pass book, which will be used as a

record for all your deposits, interest accruals, withdrawals and

loans.

However, be warned: you can have only one PPF account in your

name. If at any point it is detected that you have two accounts, the

36
second account that you have opened will be closed, and you will

be refunded only the principal, not the interest. Again, two adults

cannot open a joint account. The account will have to be opened in

only one person’s name. Of course, the person who opens an

account is free to appoint nominees.

COMPANY FIXED DEPOSIT

Company Fixed Deposit is the deposit placed by investors with

companies for a fixed term carrying a prescribed rate of interest.

Company Fixed Deposit have always offered interest which is 2-

3% higher than Bank Deposit rate, because they have to pay

higher interest to banks for borrowing money. Interest is paid on

monthly/quarterly/half yearly/yearly or on maturity basis and is sent

either through cheque or ECS facility. TDS is deducted if the

interest on fixed deposit exceeds Rs.5000/- in a financial year. At

the end of deposit period principal is returned to the deposit holder.

How to choose a good company deposit scheme?

» Ignore the unrated Company Deposit Schemes. Ignore deposit

schemes of little known manufacturing companies. For NBFC’s,

RBI has made it mandatory to have an ‘A’ rating to be eligible to

37
accept public deposits, one should go further and look at only AA

or AAA schemes.

» Within a given rating grade, choose the company with a better

reputation.

» Once you decide on a company, next choose the schemes that

have given a better return. Unless you need income regularly, you

should prefer cumulative to regular income option since the

interest earned automatically gets reinvested at the same coupon

rate giving upon better yields. It also gives you a lump-sum amount

at one go.

» It is better to make shorter deposit of around 1 year to 3 years.

This way you not only can keep a watch on the company’s rating

and servicing but can also plan to have your money back in case

of emergency.

» Check on the servicing standards of the company. You should

not oblige companies that care little about investor services like

promptly sending interest warrants or the principal cheque.

» Involve your reputed Financial planner / Investment Advisor like

us for advice in all your transactions. Do not bypass and invest

directly just to earn an extra incentive.

» For investors living in outstation city, check whether the company

38
accepts outstation cheques and make payment through at par

cheques.

Which companies can accept Deposit?

Companies registered under Companies Act 1956, such as:

» Manufacturing Companies.

» Non-Banking Finance Companies,

» Housing Finance Companies.

» Financial Institutions.

» Government Companies.

Upto what limits can a company accept deposit?

A Non-Banking Non-Finance Company (Manufacturing Company)

can accept deposit subject to following limits.

» Upto 10% of aggregate of paid-up share capital and free

reserves if the deposits are from shareholders or guaranteed by

directors.

» Otherwise upto 25% of aggregate of paid-up share capital and

free reserves.

39
A Non-Banking Finance Company can accept deposits upto

following limits:

» Equipment Leasing Company can accept four times of its net

owned fund.

»Loan or Investment Company can accept deposit upto one and

half time of its net owned funds.

What is the period of the deposit?

Company Fixed Deposits can be accepted by a Manufacturing

Company having duration from 6 months to 3 years. Non-Banking

Finance Company can accept deposit from 1 year to 5 years

period. A Housing Finance Company can accept deposit from 1

year to 7 years.

Where not to Invest?

» Companies which offer interest higher than 15%.

» Companies which are not paying regular dividends to the

shareholder.

» Companies whose Balance Sheet shows losses.

» Companies which are below investment grade (A or under)

rating.
40
There is an old saying “DON’T PUT All YOUR EGGS IN ONE

BASKET”.

The company deposits should be spread over a large number of

companies. This will help the investor to diversify his risk among

various companies/industries. Investors should not put more than

10% of their total Investible funds in one company.

41
BONDS AND DEBENTURES

Debt instruments can be further classified into the following

categories based on the different characteristics with which they

are floated in the market:

 Debentures

 Bonds

Debentures

Main characteristics

 They are fixed interest debt instruments with varying period

of maturity.

 Can either be placed privately or offered for subscription.

 May or may not be listed on the stock exchange.

 If listed on the stock exchanges, they should be rated prior to

the listing by any of the credit rating agencies designated by

SEBI.

 When offered for subscription a debenture redemption

reserve has to be maintained.

 The period of maturity normally varies from 3 to 10 years and

may also be more for projects with a high gestation period.

42
Types of debentures:

There are different kinds of debentures, which can be offered.

They are as follows:

 Non convertible debentures (NCD)

 Partially convertible debentures (PCD)

 Fully convertible debentures (FCD)

The difference in the above instruments is regarding the

redeemability of the instrument:

 In case of NCDs, the total amount of the instrument is

redeemed by the issuer,

 In case of PCDs, part of the instrument is redeemed and part

of it is converted into equity,

 In case of FCDs, the whole value of the instrument is

converted into equity. The conversion price is stated when

the instrument is issued.

Debentures might be either callable or puttable:-

Callable debenture is a debenture in which the issuing company

has the option of redeeming the security before the specified

redemption date at a pre-determined price.

43
Similarly, a puttable security is a security where the holder of the

instrument has the option of getting it redeemed before maturity.

BONDS

Bonds may be of many types - they may be regular income,

infrastructure, tax saving or deep discount bonds. These are

financial instruments with a fixed coupon rate and a definite period

after which these are redeemed. The fundamental difference

between debentures and bonds is that the former is normally

secured whereas the latter is not. Hence in general bonds are

issued at a higher interest rate than debentures. This avenue of

financing is mainly availed by highly reputed corporate concerns

and financial institutions.

The three main kinds of instruments in this category are as follows:

 Fixed rate

 Floating rate

 Discount bonds

 The bonds may also be regular income with the coupons

being paid at fixed intervals or cumulative in which the

interest is paid on redemption.

44
  Unlike debentures, bonds can be floated with a fixed interest

or floating interest rate. They can also be floated without

interest and are called discount bonds as they are issued at

a discount to the face value and an investor is paid the face

value on redemption, and if offered for longer terms are

known as deep discount bonds.

 The main advantage with interest bearing bonds is the

floating interest rate, which is stipulated based on certain

mark-up over stock market index or some such index.

 From the point of view of the investor bonds are instruments

carrying higher risk and higher returns as compared to

debentures.

 This has to be kept in mind while floating bond issues for

financing purposes. With the current buoyancy in capital

markets for equity instruments the demand for corporate

bonds is low.

MUTUAL FUNDS:-

A Mutual Fund is a trust that pools the savings of a number of

investors who share a common financial goal. The money thus

collected is then invested in capital market instruments such as

45
shares, debentures and other securities. The income earned

through these investments and the capital appreciation realized is

shared by its unit holders in proportion to the number of units

owned by them. Thus a Mutual Fund is the most suitable

investment for the common man as it offers an opportunity to

invest in a diversified, professionally managed basket of securities

at a relatively low cost. The flow chart below describes broadly the

working of a mutual fund:

Mutual Fund Operation Flow Chart

ORGANIZATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates

the organisational set up of a mutual fund:

46
ADVANTAGES OF MUTUAL FUNDS: The advantages of

investing in a Mutual Fund are:

 Professional Management

 Diversification

 Convenient Administration

 Return Potential

 Low Costs

 Liquidity

 Transparency

 Flexibility

 Choice of schemes

 Tax benefits

 Well regulated

TYPES OF MUTUAL FUND SCHEMES:

47
Wide variety of Mutual Fund Schemes exists to cater to the needs

such as financial position, risk tolerance and return expectations

etc. The table below gives an overview into the existing types of

schemes in the Industry.

BY STRUCTURE:

 Open - Ended Schemes

 Close - Ended Schemes

 Interval Schemes

BY INVESTMENT OBJECTIVE:

 Growth Schemes

 Income Schemes

 Balanced Schemes

 Money Market Schemes

OTHER SCHEMES

 Tax Saving Schemes

 Special Schemes

 Index Schemes

 Sector Specific Schemes

48
FREQUENTLY USED TERMS:

Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme

minus its liabilities. The per unit NAV is the net asset value of the

scheme divided by the number of units outstanding on the

Valuation Date.

Sale Price

Is the price you pay when you invest in a scheme. It’s also called

Offer Price. It may include a sales load.

Repurchase Price

Is the price at which a close-ended scheme repurchases its units

and it may include a back-end load. This is also called Bid Price.

Redemption Price

Is the price at which open-ended schemes repurchase their units

and close-ended schemes redeem their units on maturity. Such

prices are NAV related.

Sales Load

49
Is a charge collected by a scheme when it sells the units. Also

called, ‘Front-end’ load. Schemes that do not charge a load are

called ‘No Load’ schemes.

Repurchase or ‘Back-end’ Load Is a charge collected by a

scheme when it buys back the units from the unit holders?

50
INSURANCE

Life insurance in India made its debut well over 100 years ago.

In our country, which is one of the most populated in the world, the

prominence of insurance is not as widely understood, as it ought to

be. What follows is an attempt to acquaint readers with some of

the concepts of life insurance, with special reference to LIC. It

should, however, be clearly understood that the following content

is by no means an exhaustive description of the terms and

conditions of an LIC policy or its benefits or privileges. For more

details, please contact our branch or divisional office. Any LIC

Agent will be glad to help you choose the life insurance plan to

meet your needs and render policy servicing.

What Is Life Insurance?

Life insurance is a contract that pledges payment of an amount to

the person assured (or his nominee) on the happening of the event

insured against.

The contract is valid for payment of the insured amount during:

The date of maturity, or Specified dates at periodic intervals, or

Unfortunate death, if it occurs earlier. Among other things, the

contract also provides for the payment of premium periodically to

51
the Corporation by the policyholder. Life insurance is universally

acknowledged to be an institution, which eliminates ‘risk’,

substituting certainty for uncertainty and comes to the timely aid of

the family in the unfortunate event of death of the breadwinner. By

and large, life insurance is civilisation’s partial solution to the

problems caused by death. Life insurance, in short, is concerned

with two hazards that stand across the life-path of every person.

That of dying prematurely is leaving a dependent family to fend for

itself. That of living till old age without visible means of support.

Life Insurance Vs. Other Savings

Contract Of Insurance:

A contract of insurance is a contract of utmost good faith

technically known as uberrima fides. The doctrine of disclosing all

material facts is embodied in this important principle, which applies

to all forms of insurance.

At the time of taking a policy, policyholder should ensure that all

questions in the proposal form are correctly answered. Any

misrepresentation, non-disclosure or fraud in any document

leading to the acceptance of the risk would render the insurance

contract null and void.

52
Protection:

Savings through life insurance guarantee full protection against

risk of death of the saver. Also, in case of demise, life insurance

assures payment of the entire amount assured (with bonuses

wherever applicable) whereas in other savings schemes, only the

amount saved (with interest) is payable.

Aid To Thrift:

Life insurance encourages ‘thrift’. It allows long-term savings since

payments can be made effortlessly because of the ‘easy

instalment’ facility built into the scheme. (Premium payment for

insurance is either monthly, quarterly, half yearly or yearly).

For example: The Salary Saving Scheme popularly known as SSS,

provides a convenient method of paying premium each month by

deduction from one’s salary. In this case the employer directly

pays the deducted premium to LIC. The Salary Saving Scheme is

ideal for any institution or establishment subject to specified terms

and conditions.

Liquidity:

In case of insurance, it is easy to acquire loans on the sole security

of any policy that has acquired loan value. Besides, a life

53
insurance policy is also generally accepted as security, even for a

commercial loan.

Tax Relief: Life Insurance is the best way to enjoy tax deductions

on income tax and wealth tax. This is available for amounts paid

by way of premium for life insurance subject to income tax rates in

force. Assessee can also avail of provisions in the law for tax relief.

In such cases the assured in effect pays a lower premium for

insurance than otherwise.

Money When You Need It:

A policy that has a suitable insurance plan or a combination of

different plans can be effectively used to meet certain monetary

needs that may arise from time-to-time. Children’s education, start-

in-life or marriage provision or even periodical needs for cash over

a stretch of time can be less stressful with the help of these

policies.

Alternatively, policy money can be made available at the time of

one’s retirement from service and used for any specific purpose,

such as, purchase of a house or for other investments. Also, loans

are granted to policyholders for house building or for purchase of

flats (subject to certain conditions).

Who Can Buy A Policy?

54
Any person who has attained majority and is eligible to enter into a

valid contract can insure himself/herself and those in whom he/she

has insurable interest.

Policies can also be taken, subject to certain conditions, on the life

of one’s spouse or children. While underwriting proposals, certain

factors such as the policyholder’s state of health, the proponent’s

income and other relevant factors are considered by the

Corporation.

Insurance For Women:

Prior to nationalization (1956), many private insurance companies

would offer insurance to female lives with some extra premium or

on restrictive conditions. However, after nationalization of life

insurance, the terms under which life insurance is granted to

female lives have been reviewed from time-to-time. At present,

women who work and earn an income are treated at par with men.

In other cases, a restrictive clause is imposed, only if the age of

the female is up to 30 years and if she does not have an income

attracting Income Tax.

Medical And Non-Medical Schemes

Life insurance is normally offered after a medical examination of

the life to be assured. However, to facilitate greater spread of

55
insurance and also to avoid inconvenience, LIC has been

extending insurance cover without any medical examination,

subject to certain conditions.

With Profit And Without Profit Plans An insurance policy can be

‘with’ or ‘without’ profit. In the former, bonuses disclosed, if any,

after periodical valuations are allotted to the policy and are payable

along with the contracted amount. In ‘without’ profit plan the

contracted amount is paid without any addition. The premium rate

charged for a ‘with’ profit policy is therefore higher than for a

‘without’ profit policy.

Keyman Insurance:

Keyman insurance is taken by a business firm on the life of key

employee(s) to protect the firm against financial losses, which may

occur due to the premature demise of the Keyman.

INVESTING IN INDIAN REAL ESTATE

Indian Real Estate: “Undeniably tremendous!”

And, that is the undeniable verdict of a Price Waterhouse Coopers

study conducted on the investment environment in terms of Indian

real estate. Ever since the Government of India gave its stamp of

approval to 100% foreign direct investment (FDI) in housing and

56
real estate, NRIs, overseas real estate developers, hoteliers, and

others have been tracking a path to the sub-continent. Sensing the

business potential for developing serviced plots, constructing

residential / commercial complexes, business centres / offices, mini-

townships, investments in infrastructure facilities e.g. roads, bridges,

manufacture of building materials, etc., FDI is flooding in to take

advantage of the tremendous real estate opportunities.

Indian Real Estate: Growing Potential

The increasing demand for Indian real estate has not only

generated employment, it has also been instrumental in the growth

of steel, cement, bricks and other related industries. Estimated to

be in the region of US $12-billion, real estate development in India

is growing by as much as 30% each year. Already, eighty percent

of Indian real estate has been developed for residential space, and

20% comprises of shopping malls, office space, hospitals and

hotels. Fuelled largely due to off-shoring / outsourcing of BPOs,

call centres, high-end technology consulting and software

development and programming firms, real estate growth in India

has great investment prospectives.

Indian Real Estate: Investment Opportunities

57
Tax reform measures in the last few years have ensured real

estate in India is one of the most productive investment sectors,

with money invested in real estate offering regular returns on

investment including appreciating in value. And, the Government

of India by opening up 100% foreign direct investment, and fiscal

reforms like stamp duty and property tax reductions, setting up real

estate mutual funds has turned real estate into a promising

investment option.

Already, it has approved the first Rs. 100-crore FDI project in

Gurgaon. With urban populations expected to grow from 290-

million to 600-million by 2021, housing requirements are expected

to top 68-million by 2021, which means India’s urban housing

sector could do with an investment of US $25-billion over a 5-year

period. Poised for rapid urbanisation, 3 out of 10 of the world’s

largest cities are in India. An influx of jobs due to off-shoring /

outsourcing has resulted in rising disposable incomes, increased

consumerism, factors responsible for changing the face of

residential and commercial real estate in India. Wishing to take

advantage of real estate investment opportunities, banks and

housing finance companies are falling over themselves to tie-up

with developers or offer project loans at competitive rates.

58
SHARE MARKET:-

The Stock Market is a market which deals in stocks of companies

belonging to both the public sector as well as private. The Indian

Stock Market is mostly referred to as the Share Market because it

deals primarily with shares of various companies listed in for

trading. The stock market is a viable investment option at hands

for investors in India. Since Indian Stocks market is showing

strength and making steady gains over last few years barring few

low ebbs it is wise to prefer stock market as reliable mode of

investment than other investment options.

INVESTING IN STOCKS

Many of us would like to try our luck in the Stock markets. Yes, Why

Not ? Trading stocks is one of the most lucrative methods of making

money.

Here’s Why :

1. You do not need a lot of money to start making money, unlike

buying property and paying a monthly mortgage.

2. It requires very minimal time to trade - unlike building a

conventional business.

59
3.. It’s ‘fast’ cash and allows for quick liquidation (You can convert

it to cash easily, unlike selling a property or a business).

4. It’s easy to learn how to profit from the stock market.

But You need to have your basics clear. Unless you do….you will

be wasting your time and loosing money. You need to be crystal

clear of each and every aspect of Investments, stock options,

Stock Trading, Company, Shares, Dividend & Types of Shares,

Debentures, Securities, Mutual Funds, IPO, Futures &

Options, What does the Share Market consist of? Exchanges,

Indices, SEBI , Analysis of Stocks – How to check on what to

buy?, Trading Terms (Limit Order, Stop Loss, Put, Call, Booking

Profit & Loss, Short & Long), Trading Options – Brokerage

Houses etc.

You must have heard stories of the fabulous returns made in the

stock markets in recent months. And you longed wishfully for a

piece of the action. But you could also have heard horror stories of

how a friend lost his shirt in the stock market. And were promptly

thankful that you didn’t lose yours.

Let’s set the record straight.

60
Wisely chosen (those are the key words), stocks are a must for

any serious investor.

They add that extra zing to your collection of investments.

Study after study has revealed that over the long term, stocks

outperform all other assets. That means you can expect to earn

more from shares than from bonds, fixed deposits or gold. No

doubt the risk is higher with shares. But if you are in for the long

haul, so are the potential returns. But before you take the plunge

and invest in the stock market, get your basics right.

1. Stocks are not only for the brilliant

Stocks are far from being rocket science. The strategies you need

to know to maximise your wealth and the pitfalls you need to avoid

are not beyond comprehension. Even if you feel that you don’t

have the time, and prefer to entrust your money to a portfolio

manager or mutual fund, the least you need to know is which funds

are better, how to choose your fund manager, and keep a tab on

his performance.

2. So what is a share?

Any business has a lot of assets: The machinery, buildings,

furniture, stock-in-trade, cash, etc. It will also have liabilities. This

61
is what the company owes other people. Bank loans, money owed

to people from whom things have been bought on credit,

are examples of liabilities. Take away the liabilities from the total

assets, and you are left with the capital. Capital is the amount that

the owner has in the business. As the business grows and makes

profits, it adds to its capital. This capital is subdivided into shares

(or stocks). So if a company’s capital is Rs 10 crore (Rs 100

million), that could be divided into 1 crore (10 million) shares of Rs

10 each. Part of this capital, or some of the shares, is held by the

people who started the business, called the promoters. The other

shares are held by investors. These investors could be people like

you and me or mutual funds and other institutional investors.

3. What does this mean for me?

You must have realised by now that owning a share means owning

a share in the business. When you invest in stocks, you do not

invest in the market. You invest in the equity shares in a company.

That makes you a shareholder or part owner in the company.

Since you own part of the assets of the company, you are entitled

to the profits those assets generate. Or bear the loss. So, if you

own 100 shares of Gujarat Ambuja Cement, for example, you own

a very small part -- since Gujarat Ambuja has millions of shares --

62
of the company. You own a share of its assets, its liabilities, its

profits, its losses, and so on. Owning shares, therefore, means

having a share of a business without the headache of managing it.

Your Gujarat Ambuja shares, for instance, will rise in value if the

company makes good profits, or may do badly if people stop

building houses and demand for cement falls.

4. What do mean by rise in value?

If the company has divided its capital into shares of Rs 10 each,

then Rs 10 is called the face value of the share. When the share is

traded in the stock market, however, this value may go up or down

depending on supply and demand for the stock. If everyone wants

to buy the shares, the price will go up. If nobody wants to buy

them, and many want to sell the shares, the price will fall. The

value of a share in the market at any point of time is called the

price of the share or the market value of a stock. So the share with

a face value of Rs 10, may be quoted at Rs 55 (higher than the

face value), or even Rs 9 (lower than the face value). If the number

of shares in a company is multiplied by its market value, the result

is market capitalisation. For instance, a company having 10

million shares of a face value Rs 10 and a market value of Rs 30

63
as on November 1, 2004, will have a market capitalisation of Rs

300 million as on November 1, 2004.

5. So how does one buy shares?

Alright, you have decided you want part of the action. Shares are

bought and sold on the stock exchanges -- the two main ones in

India are the National Stock Exchange (NSE), and the Bombay

Stock Exchange (BSE).

You can use three different routes to buy shares: Through your

broker, trade directly online, or buy shares when a company

comes out with a fresh issue of shares. This is called an initial

public offering (IPO).

Clear the jargon first!

If a brand new company or a company already in existence, but

with no shares listed on the stock exchange, decides to invite the

public to buy shares, it is called an Initial Public Offering (IPO).

It is the first time that it is approaching the public for money. That

is why the company is also referred to as ‘going public’.

If a company that is already listed (has its shares for buying and

selling on the stock exchange) is coming out with a fresh tranche

64
of shares, it is called the new issue (like the current Dena Bank

issue).

Then, there are the disinvestments -- where the government sells

its stakes in public sector companies in the market. Although these

are not technically new issues, they too create a buzz in the

market.

~ Every company needs money

A company needs money to grow and expand -- to purchase new

machinery, land or even repay its loans.

To do that, one of the options it has is to ask the public for money.

It comes out with a public or new issue. The company offers

shares and the public buys those shares. These shares are listed

on the Stock Exchange.

People who invest in the company get rewarded (as dividends) by

the company, or sell the shares as the share price rises.

~ How can I buy these shares?

There are two ways:

 If you want the shares of a company that is already listed,

you can buy them from the Stock Exchange through brokers.

This is called buying from the secondary market.

65
  Buying from the primary market means that you buy them

directly from companies when they make new issues of

shares or come out with IPOs. You can also get rights issues

and bonus shares, but more on that later.

Why would you pick up shares through IPOs, rather than buy them

from the market?

Because, often, companies issue their shares cheaply and, later,

when these shares are listed on the Stock Exchange, they list at a

premium (higher than the price at which they were issued). So you

could make a lot of money if you sell those shares.

What if you don’t want to sell the shares soon?

Sure. It also happens that companies who are going public or

listing their shares for the first time also usually offer their shares

cheap, and could go on to become very successful. IPOs thus

offer investors the chance to participate in their prosperity cheaply.

These listing gains are the chief attractions of buying in the primary

market.

~ So what’s the catch?

The trouble is, there are usually plenty of applicants for good IPOs.

And they are heavily oversubscribed (the demand for the number

66
of shares is more than the number being offered for sale). And

although 25% of the issue has to be reserved mandatorily for the

retail investor (those who apply for shares of a value less than Rs

50,000), even the retail portion is oversubscribed several times for

good issues. In this scenario, lots are drawn and only a few

individuals are allotted shares. Hence, you may not get the number

of shares you asked for. There is also a chance that you may also

not get an allotment at all, in which case your money will be

returned to you.If you don’t get any shares, your money will be

returned to you within 21 days. This is true even if you get partial

allotment (you get only some of the shares you applied for), and

the extra money you have paid is returned. If you do get an

allotment, your demat account will be credited with the shares.

Once the shares are listed, you can sell them in the market and

pocket the gains. Of course, you can also hold your shares for the

long term if you want, but most people opt out if the price on listing

is well above the price at which you were allotted the stocks.

Remember, you need to have a demat account before applying for

IPOs. Else your form will be rejected.

CHAPTER- 5

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New Commodity Market – National Spot Exchange for small

investor

About National Spot Exchange for middle income group

National Spot Exchange Ltd (NSEL) is a state-of-the-art

electronic, demutualised commodity spot market. The

Exchange is promoted by Financial Technologies (India) Ltd

(FTIL) and National Agricultural Cooperative Marketing

Federation of India Limited (NAFED). It provides an electronic,

transparent, well organized and centralized trading platform

with the facility to access and participate the market remotely. It

facilitates risk free and hassle free purchase and sell of quality

and quantity specified commodities to commodity market

participants including farmers, traders, processors, exporters,

importers, arbitrageurs, investors and the retail market

participants. Exchange also offers various other services such

as quality certification, warehousing, warehouse receipt

financing, etc. NSEL has been pioneer in offering commodity

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based investment instruments with the launch of E series

Products

NSEL is recognized by Ministry of Consumer Affairs, Food &

Public Distribution, Government of India. It has obtained

licenses from various state governments to facilitate online

delivery based trading in various agri-commodities. In addition

the Exchange, provides delivery based trading in bullions and

metals across the country.

NSEL commenced its live operations on15th October 2008. It

has created efficient spot delivery platform, helping the

sellers/producers to sell commodities directly to the end buyers

comprises of processors/ exporters. Currently, NSEL holds a

market share of over 98% of the Indian electronic

commodity Spot market, and has more than 495 registered

members operating through over 3000 trader work stations,

across India. Government organizations like FCI , HAFED,

MMTC, PEC, NAFED, APMARKFED, RAJFED, and CCI have

been actively utilizing the Exchange platform for selling various

commodities. More than 33 commodities are traded on NSEL

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Platform having delivery locations spread across 14 states.

For the first time in India, NSEL has introduced demat delivery

based instrument products called e-Series, in commodities like

gold, silver, copper, zinc and lead. This is a unique market

segment, which is functioning just like cash segment in

equities, but offering commodities in demat form in smaller

denominations.

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CHAPTER 6

Questioneers

PART – A

1) Name:

2) Sex:

Male Female

3) Age:

20-30 Years 30-40 years

40-50 years Above 50 years

4) Education:

Higher secondary Graduation

Post-graduation

5) Occupation:

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 Government employee Self-employee

Commodity futures analyst Private sector

employee

Businessman Others

____________

6) Income: yearly

Below 2 lakh 3,00,000 –

40,00,000

Above 4,00,000

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BIBLIOGRAPHY

Websites

www.rbi.org

www.sebi.com

www.mcx.com

 www.google.com

 www.finance.yahoo.com

 www.wikipedia.org

 www.indianmba.com

 www.indiansharemarket.net

 www.economictimes.com

 www.sharekhan.com

 www.nseindia.com

 www.bseindia.com

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