Professional Documents
Culture Documents
Awareness and impact level among people about equity and mutual fund
SUBMITTED TO
Miss Saakshi Kaushal ( Lect. In management)
SUBMITTED BY
Rahul Rai
DESH BHAGAT INSTITUTE OF MANAGEMENT OF MANAGEMENT AND COMPUTER SCIENCES, MANDI GOBINDGARH
PREFACE
Private sector is one of the fastest growing sectors in the country. After the Liberalization the Private industry still holds vast opportunities for young and experienced professionals. On the life insurance side public sector life insurance Corporation of India is, of course, the largest player with a history of over 50 years. After Privatization, the PSU has been making efforts to improve efficiency and customer services. Among the private life insurance player Reliance life insurance is the key player. Reliance money Anil Dhirubhai Ambani Group offers most dynamic web based trading environment to its customers .The Reliance Money stock trading websites uses special security features 'Security Token', which makes you online trading experience more secure without complexity. Reliance ADG provide the vast opportunities to the new aspirants of the business administration. The financial Sector is full of competition even if there are a lot of opportunities to the job in Reliance Money and It is the platform to go on the highest peak in the life of any coming one. Reliance Money is a single window that provides the multi system facilities of the financial Products. There are many companies in the market which are providing the financial product like insurance, demat account services, mutual funds, general insurance, Portfolio management services(PMS), wealth management, gold coins, Money changing , Money Transfer, and the others. Hence Reliance Money provides many financial products on the single window. Reliance money deals with the product and Investment options are available in...
Equity (Stock) Trading Derivatives Trading Special feature is available first time to track your positions online, in real time. Forex Trading Commodity Trading IPO's Mutual Funds Insurance
AKNOWLADGEMENT
Sometimes words fall short to show gratitude, the same happened with me during this project. The immense help and support received from Reliance Money Limited overwhelmed me during the project. It is a great opportunity for me to work with Reliance money, pioneers in the field of stock trading, a part of Reliance Capital Ltd. I am extremely grateful to the entire team of Reliance Money at Ambala who have shared their expertise and knowledge with me and without whom the completion of this project would have been virtually impossible. My sincere gratitude to Mr. Arpan Sethi (equity advisor) for providing me with an opportunity to work with Reliance Money Limited. In this context, I would first of all like to express my thank fullness to Mrs. Shalini Gupta for assigning me such a worthwhile title (Targeting and Positioning strategies of Financial Products/Services offered by Reliance Money)to work upon in Reliance Money . I am also thankful to miss saakshi kaushal who give me courage to complete the project.
ABSTRACT
This project has been a great learning experience for me; at the same time it gave me enough scope to implement my analytical ability. This project as a whole can be divided into two parts: The first part gives an insight about the mutual funds and its various aspects. It is purely based on whatever I learned at Reliance Money. One can have a brief knowledge about Mutual funds and all its basics through the project. Other than that the real servings come when one moves ahead. Some of the most interesting questions regarding mutual funds have been covered. Apart from Mutual Funds a light has also been through on equity. All the topics have been covered in a very systematic way. The language has been kept simple so that even a layman could understand. All the datas have been well analyzed with the help of charts and graphs. The second part consists of data and their analysis, collected through a survey done on 200 people. It covers the topic Awareness and Impact level among people about Equity and Mutual fund. The data collected has been well organized and presented. Hope the research findings and conclusions will be of use. It has also covered why people dont want to go in invest? The advisors can take further steps to approach more and more people and indulge them for taking their advices.
The scope of the study refers to the job that to know about the activities of the organization. The study means that the analysis of the products of the company on which he/she has to focus. During the training days the volunteer need to find out the corporate strategies of the running company and the mile stone which the company has covered during its journey. In the summer training, it is necessary for the student that he /she involve with the experience guys to get the knowledge about the company. That is how the company has got the success, Or if it is going in the loss, why. During this training period I have found that the reliance group is the biggest group in Indian companies. I felt that I can learn the more in the Reliance Money and Reliance Mutual Fund. Reliance Money and Reliance Mutual fund is the part of the Reliance Capital Limited which is a growing company in the financial products. Reliance Anil Dhirubhai Ambani group is also deals in communication, energy, natural resources, media, and entertainment, healthcare and infrastructure.
COMPANY PROFILE
Reliance Capital is a constituent of S&P CNX Nifty and MSCI India and also features in the Forbes list of Worlds largest 2000 public companies.
Chairman's Profile
Regarded as one of the foremost corporate leaders of contemporary India, Shri Anil D Ambani, 50, is the chairman of all listed companies of the Reliance ADA Group, namely, Reliance Communications, Reliance Capital, Reliance Energy, Reliance Natural Resources and Reliance Power.
He is also Chairman of the Board of Governors of Dhirubhai Ambani Institute of Information and Communication Technology, Gandhi Nagar, Gujarat. Till recently, he also held the post of Vice Chairman and Managing Director in Reliance Industries Limited (RIL), India's largest private sector enterprise. Anil D Ambani joined Reliance in 1983 as Co-Chief Executive Officer, and was centrally involved in every aspect of the company's management over the next 22 years. He is credited with having pioneered a number of path-breaking financial innovations in the Indian capital markets. He spearheaded the country's first forays into the overseas capital markets with international public offerings of global depositary receipts, convertibles and bonds. Starting in 1991, he directed Reliance Industries in its efforts to raise over US$ 2 billion. He also steered the 100-year Yankee bond issue for the company in January 1997.
He is a member of:
Wharton Board of Overseers, The Wharton School, USA Central Advisory Committee, Central Electricity Regulatory Commission Board of Governors, Indian Institute of Management, Ahmedabad Board of Governors Indian Institute of Technology, Kanpur In June 2004, he was elected for a six-year term as an independent member of the Rajya Sabha, Upper House of Indias Parliament a position he chose to resign voluntarily on March 25, 2006.
Shri Amitabhabh Jhunjhunwala, 51, is a Fellow Chartered Accountant. He has vast experience in the areas of financial services and capital markets. Shri Jhunjhunwala was appointed to the Board on March 7, 2003 and was appointed Vice Chairman on March 20, 2006. He is a Director on the Board of Harmony Art Foundation and Reliance Anil Dhirubhai Ambani Group Pvt. Ltd.
10
Reliance money
Is a part of the reliance Anil Dhirubhai Ambani Group and is promoted by Reliance capital, the fastest growing private sector financial services company in India, ranked amongst the top 3 private sector financial companies in terms of net worth. Reliance money is a comprehensive financial solution provider that enables you to carry out trading and investment activities in a secure, cost-effective and convenient manner. Through reliance money, you can invest in a wide range of asset classes from Equity, Equity and commodity Derivatives, Mutual Funds, insurance products, IPOs to availing services of Money Transfer & Money changing. Reliance Money offers the convenience of on-line and offline transactions through a variety of means, including its Portal, Call & Transact, Transaction Kiosks and at its network of affiliates. Some key steps of the company that are as.. Reliance Capital Reliance Life Insurance Reliance General Insurance Reliance Money Reliance Consumer Finance Reliance Mutual fund
Reliance Money
11
Reliance Money is a group company of Reliance Capital; one of India's leading and fastest growing private sector financial services companies, ranking among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital is a part of the Reliance Anil Dhirubhai Ambani Group. Reliance Money is a comprehensive electronic transaction platform offering a wide range of asset classes. Its Endeavour is to change the way India transacts in financial markets and avails financial services. Reliance Money is a single window, enabling you to access, amongst others in Equities, Equity & Commodities Derivatives, Mutual Funds, IPOs, Life & General Insurance products, Offshore Investments, Money Transfer, Money Changing and Credit Card About Us Reliance Capital Ltd is a part of the Reliance - Anil Dhirubhai Ambani Group, and is ranked among the 25 most valuable private companies in India. Reliance Capital is one of India's leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking groups, in terms of net worth. Reliance Capital has interests in asset management and mutual funds, life and general insurance, private equity and proprietary investments, stock
12
broking, depository services, distribution of financial products, consumer finance and other activities in financial services. The Reliance Anil Dhirubhai Ambani Group is one of India's top 2 business houses, and has a market capitalization of over Rs.2,90,000 crore (US$ 75 billion), net worth in excess of Rs.55,000 crore (US$ 14 billion), cash flows of Rs. 11,000 crore (US$ 2.8 billion) and net profit of Rs. 7,700 crore (US$ 1.9 billion)
Reliance Capital's stock brokerage arm, Reliance Money brings trading closer to customers by bringing internet trading services through web enabled retail kiosks. It is India's first company to provide share trading through web enabled retail kiosks providing users an transaction portal through anytime-anywhere access through which they can invest in various financial instruments in a secure environment. These kiosks will be like ATMs, and will also act as the groups financial services portal, where they can buy a whole host of financial products. This will essentially help investors have access to the trading terminal even if they are away from their desktops and laptops. Introducing one of the most secured way of online share trading where users will not only. By having their personalized
13
username and password but will be provided with each individual electronic gadget called token to generate a second level password in terms of digits. The password provided by the token will be valid for only 20 seconds or else a fresh token has to be generated. Any token assigned to one user for their account can be accessed only by that particular/single user and will not generate any login if used by any other user. Reliance Money is the only player to have introduced such high ended technology first time in India for a share trading platform. It also provides an unique platform wherein any user can invest in various financial instruments like Mutual Funds, Commodities, Derivatives, IPO's, Forex and Insurance. It also provides an unmatched lowest brokerage in the country.
Trust, Integrity, Dedication, Commitment, Enterprise, Hard work, Home work, Team work play, Learning and Innovation, Empathy and Humility and last but not the least its the Network .
These are the values that bind success with Reliance Money.
Mission statement
Our mission is to be a leading and preferred service provider to our customers, and we aim to achieve this leadership position by building an innovative, enterprising , and technology driven organization which will set the highest standards of service and business ethics.
15
Largest Indian brokerage with Million customers & largest distribution Network 8,512 outlets in over 4,250 locations 713,636 broking accounts Daily average volume of Rs. 20 billion Revenue for FY08 Rs. 2.4 billion Break even in first year of operations
PARTNERS OF COMPANY
16
Equity
17
Reliance Money offers its clients competitively priced Equity broking, PMS and Portfolio Advisory Services. Trading execution assistance provided to clients. In addition Reliance Money provides independent and unbiased view on markets along with trading strategies and entry / exit points for taking an informed decision.
Mutual Funds
A mutual fund is a professionally managed fund of collective investments that collects money from many investors and puts it in stocks, bonds, shortterm money market instruments, and/or other securities. Reliance Money offers dedicated research & expert advice on Mutual Funds. Mutual funds are considered to have low risk factors owing to diversification of assets into various sectors and scripts or instruments within.
Insurance
Life-Insurance
Reliance Money assists its clients in choosing a customized plan which will secure the familys future and their expenses post-retirement. Clients can choose from different plans of almost all Insurance Companies where they can invest their money. Clients can choose from products and services that channelise their savings and protect their needs while guaranteeing security and returns for life. A team of experts will suggest the best Insurance scheme which suits the clients requirement.
General Insurance:
General Insurance is all about protecting against all kind of insurable risks. Reliance Money assists you in areas of Health insurance, Travel insurance, Home insurance and Motor insurance.
18
Commodities
A single platform to trade on both the major commodity exchanges i.e. NCDEX and MCX. In addition In-house research desk shall provide research reports on all major commodities which shall enable in getting views for trading and diversify clients holdings. Trade Execution assistance is also provided to clients.
Tax planning
With a view to provide complete wealth management solutions, Reliance Moneys wealth management offerings include tax related services like: Tax Planning & advisory Filing Tax returns for individuals
Offshore Investments
Reliance Money provides a unique opportunity to invest in international financial markets through the online platform which includes different product ranges.
19
Like most developed and developing countries the mutual fund cult has been catching on in India. There are various reasons for this. Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation. And in addition to this a mutual fund brings the benefits of diversification and money management to the individual investor, providing an opportunity for financial success that was once available only to a select few. Understanding Mutual funds is easy as it's such a simple concept: a mutual fund is a company that pools the money of many investors -- its shareholders -- to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are professionally managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio -- entitled to any profits when the securities are sold, but subject to any losses in value as well. For the individual investor, mutual funds provide the benefit of having someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. A mutual fund, by its very nature, is diversified -- its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify.
20
Mutual funds enable investors to pool their money and place it under professional investment management. The portfolio manager trades the fund's underlying securities, realizing a gain or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund. Comparison between Mutual Funds and Stocks Diversification Mutual fund companies invest in a variety of stocks, bonds, and moneymarket investments, so mutual funds carry much lower risk than stocks. Professional Management By purchasing mutual funds, you are essentially hiring a professional manager at an especially inexpensive price. These managers have been around the industry for a long time and have the academic credentials to back it up. Greater Upside Potential Individual stocks have a greater upside potential than most mutual funds. Fluctuation in stocks is greater than mutual funds, so you have greater chance to earn more return. Risk and Return In general, Risk and return depend each other, the greater the risk, the higher the potential return; the lower the risk, the lower the expected return. Mutual funds try to reduce their risk by investing in a diversified group of individual stocks, bonds, or other securities.
Efficiency
21
Mutual funds have large sums of money to invest and often they trade commission-free and have personal contacts at the brokerage firms. Conclusion By investing in stocks you can get more return than mutual funds but, by investing in mutual funds your risk is lower. Mutual funds are great for funding retirement plans and investors that don't have the time or energy to consider individual stocks. It is noticeable that most expert traders in stock market invest in mutual funds too. I recommend investing in both of mutual funds and stocks but, if you have experience, time and energy you can invest most of your money in individual stocks.
22
Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry. The main reason of its poor growth is that the mutual fund industry in India is new in the country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund companies, to market the product correctly abreast of selling. The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.
23
Yes. They Can However, no change in the nature or terms of the scheme, known as fundamental attributes of the Mutual Fund e.g. structure, investment pattern, etc. can be carried out unless a written communication is sent to each unit holder and an advertisement is given in one English daily having nationwide circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unit holders have the right to exit the Mutual Fund at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme form close-ended to open-ended scheme and in case of change in sponsor. The mutual funds are required to inform any material changes to their unit holders. Apart from it, many mutual funds send quarterly newsletters to their investors. At present, offer documents are required to be revised and updated at least once in two years. In the meantime, new investors are informed about the material changes by way of addendum to the offer document till the time offer document is revised and reprinted.
A scheme cannot promise returns unless such returns are fully guaranteed by the sponsor or AMC and this is required to be disclosed in the offer document. Investors should carefully read the offer document whether return is assured for the entire period of the scheme or only for a certain period. Some schemes assure returns one year at a time and they review and change it at the beginning of the next year.
25
The Term Net Asset Value (NAV) is used by investment companies to measure net assets. It is calculated by subtracting liabilities from the value of a fund's securities and other items of value and dividing this by the number of outstanding shares. Net asset value is popularly used in newspaper mutual fund tables to designate the price per share for the fund. The value of a collective investment fund based on the market price of securities held in its portfolio. Units in open ended funds are valued using this measure. Closed ended investment trusts have a net asset value but have a separate market value. NAV per share is calculated by dividing this figure by the number of ordinary shares. Investments trusts can trade at net asset value or their price can be at a premium or discount to NAV. Value or purchase price of a share of stock in a mutual fund. NAV is calculated each day by taking the closing market value of all securities owned plus all other assets such as cash, subtracting all liabilities, then dividing the result (total net assets) by the total number of shares outstanding. Calculating NAVs - Calculating mutual fund net asset values is easy. Simply take the current market value of the fund's net assets (securities held by the fund minus any liabilities) and divide by the number of shares outstanding. So if a fund had net assets of Rs.50 lakh and there are one lakh shares of the fund, then the price per share (or NAV) is Rs.50.00.
PHASES:
First Phase - 1964-87:
26
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
27
This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29, 835 crores (as on January 2003). The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of AUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.
28
Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of
29
India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.
The succeeding decade showed a new horizon in Indian mutual fund industry. By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started penetrating the fund families. In the same year the first Mutual Fund Regulations came into existence with reregistering all mutual funds except UTI. The regulations were further given a revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India which has now merged with Franklin Templeton. Just after ten years with private sector players penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India.
30
ABN AMRO M F AIG Global Investment Group M F Alliance Capital M F Baroda pioneer Benchmark Bharti Axa Birla sunlife Canara Robeco DBS Chola 10) Deutsche 11) DSP Blackhorse 12) EDELWEISS 13) ESCORTS 14) FIDELITY 15) FORTIS 16) FRANKLIN 17) GIC 18) GOLDMAN 19) HDFC 20) HSBC 21) ICICI PRUDENTIAL 22) IDFC 23) IL&F 24) ING 25) JM FINACIAL 26) JP MORGAN 27) KOTAK MAHINDRA 28) LIC 29) MIRAE ASSET 30) MORGAN STANLEY 31) PNB 32) PRINCIPAL 33) QUANTUM 34) RELIANCE 35) RELIGARE 36) RELIGARE AEGON 37) SAHARA 38) SBI 39) SHINSEI
1) 2) 3) 4) 5) 6) 7) 8) 9) 31
STANDERD CHARTED SUN F&C SUNDARAM BNP PARIBAS TATA TAURUS UTI ZURICH INDIA
32
HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing Development Finance Corporation Limited and Standard Life Investments Limited.
33
34
36
constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882
4-Dec
15672 16225 51 79 18 3
Mutual Fund AUMs Growth Month Mar- Mar- Mar- Mar- Mar- Mar/Year 98 00 01 02 03 04 MF 68984 93717 83131 94017 75306 13762 AUM' 6 s Change 26 13 12 25 45 9 in %
38
AMFI
100% growth in the last 6 years. Number of foreign AMCs is in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. We have approximately 46s mutual funds which is much less than US having more than 800. There is a big scope for expansion. 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. Trying to curb the late trading practices. Introduction of Financial Planners who can provide need based advice.
39
40
the month of June 2008, and an investor base of over 6.7 million. Reliance Mutual Fund offers investors a well rounded portfolio of products to meet varying investor requirements. Reliance Mutual Fund has a presence in 300 cities across the country and constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Ltd., a wholly owned subsidiary of Reliance Capital Ltd.
42
12. Reliance Long Term Equity Fund 13. Reliance Regular Saving Fund
1.) Lump sum: In Lump sum the investment is only one times that
is of Rs. 5,000. And if the investment is monthly then the investment will be 6,000/-. 2.) Systematic Investment Plan (SIP): We have already mentioned about Sips in brief in the previous pages but now going into details, we will see how the power of compounding could benefit us. In such case, every small amounts invested regularly can grow substantially. SIP gives a clear picture of how an early and regular investment can help the investor in wealth creation. Due to its unlimited advantages SIP could be redefined as a methodology of fund investing regularly to benefit regularly from the stock market volatility. In the later sections we will see how returns generated from some of the Sips have outperformed their benchmark. But before moving on to that lets have a look at some of the top performing Sips and their return for 1 year:
44
In the above chart, we can see how if we start investing Rs.1000 per month then what return well get for the total investment of Rs. 12000. There is reliance diversified power sector retail giving the maximum returns of Rs. 2524.07 per year which comes to 21% roughly. Next we can see if anybody would have undertaken the SIP in Principal would have got returns of app. 18%. We can see reliance regular savings equity, DWS investment opportunities and BOB growth fund giving returns of 13.20%, 14.92%, and 14.74% respectively which is greater than any other monthly investment options. Thus we can easily make out how SIP is beneficial for us. Its hassle free, it forces the investors to save and get them into the habit of saving. Also paying a small amount of Rs. 1000 is easy and convenient for them, thus putting no pressure on their pockets. Now we will analyze some of the equity fund SIP s of Birla Sun life with BSE 200 and bank fixed deposits In a tabular format as well as graphical.
45
46
Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value. Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell. Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud. Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash. Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet.
Low cost: Mutual fund expenses are often no more than 1.5 percent
of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index.
Mutual funds have their drawbacks and may not be for everyone:
No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money. Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund. Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.
Share exchanges became an important way for companies to raise capital for investment, while also offering investors the opportunity to share in company profits. The early days of the stock exchange experienced many scandals and share crashes, as there was little to no regulation and almost anyone was allowed to participate in the exchange. Today, stock exchanges operate around the world, and they have become highly regulated institutions. Investors wanting to buy and sell shares must do so through a share broker, who pays to own a seat on the exchange. Companies with shares traded on an exchange are said to be 'listed' and they must meet specific criteria, which varies across exchanges. Most stock exchanges began as floor exchanges, where traders made deals face-to-face. The largest stock exchange in the world, the New York Stock Exchange, continues to operate this way, but most of the world's exchanges have now become fully electronic. If any of the information stated here or in any of the exchange descriptions is believed to be incorrect, please email ADVFN and any necessary corrections will be made. ROLE OF STOCK EXCHANAGES
1. Raising capital for businesses The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public.
49
2. Mobilizing savings for investment When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in a stronger economic growth and higher productivity levels. 3. Facilitating company growth Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion. 4. Redistribution of wealth By giving a wide spectrum of people a chance to buy shares and therefore become part-owners (shareholders) of profitable enterprises, the stock market may help to reduce large income inequalities. However, capital losses may also happen. Both casual and professional stock investors through stock price increases and dividends get a chance to share in the profits of promising business that were set up by other people. 5. Corporate governance By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more
50
stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately-held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies (e.g. Enron Corporation, MCI WorldCom, Pets.com, Webvan, or Parmalat). 6. Creating investment opportunities for small investors As opposed to other
businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors, and to enjoy similar rates of return. 7. Government capital-raising for development projects Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such
51
municipal bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature. 8. Barometer of the economy At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.
52
April 1993. Today, these global stock exchanges have become premier institutions and are highly efficient, computerized organizations that have fostered the growth of an open, global securities market. Stock Exchanges are an organised marketplace, either corporation or mutual organisation, where members of the organisation gather to trade company stocks and other securities. The members may act either as agents for their customers, or as principals for their own accounts. Stock exchanges also facilitates for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerised. The trade on an exchange is only by members and stock broker do have a seat on the exchange. The total number of Stock Exchanges in India is 22.
Ahmedabad Stock Exchange Bangalore Stock Exchange Bhubaneswar Stock Exchange (BhSE) Bombay Stock Exchange (BSE) Calcutta Stock Exchange Cochin Stock Exchange Coimbatore Stock Exchange Delhi Stock Exchange Association Gauhati Stock Exchange Hyderabad Stock Exchange
53
Inter-connected Stock Exchange of India Jaipur Stock Exchange Ludhiana Stock Exchange Association Madhya Pradesh Stock Exchange Madras Stock Exchange Mangalore Stock Exchange National Stock Exchange of India (NSE) OTC Exchange of India (OTCEI) Pune Stock Exchange Saurashtra-Kutch Stock Exchange Uttar Pradesh Stock Association Vadodara Stock Exchange
associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'tre of central banks. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.
Capital market reforms in India and the launch of the Securities and Exchange Board of India (SEBI) accelerated the incorporation of the second Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock exchange in India.
55
Three segments of the NSE trading platform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world. In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different economy sectors. The Indices are owned and managed by India Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard & Poor's. In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999). About the National Stock Exchange of India: In the fast growing Indian financial market, there are 22 stock exchanges trading securities. The National Stock Exchange of India (NSE) situated in Mumbai - is the largest and most advanced exchange with 1016 companies listed and 726 trading members. The NSE is owned by the group of leading financial institutions such as Indian Bank or Life Insurance Corporation of India. However, in the totally de-modularized Exchange, the ownership as well as the management does
56
not have a right to trade on the Exchange. Only qualified traders can be involved in the securities trading. The NSE is one of the few exchanges in the world trading all types of securities on a single platform, which is divided into three segments: Wholesale Debt Market (WDM), Capital Market (CM), and Futures & Options (F&O) Market. Each segment has experienced a significant growth throughout a few years of their launch. While the WDM segment has accumulated the annual growth of over 36% since its opening in 1994, the CM segment has increased by even 61% during the same period. The National Stock Exchange of India has stringent requirements and criteria for the companies listed on the Exchange. Minimum capital requirements, project appraisal, and company's track record are just a few of the criteria. In addition, listed companies pay variable listing fees based on their corporate capital size. The National Stock Exchange of India Ltd. provides its clients with a single, fully electronic trading platform that is operated through a VSAT network. Unlike most world exchanges, the NSE uses the satellite communication system that connects traders from 345 Indian cities. The advanced technologies enable up to 6 million trades to be operated daily on the NSE trading platform.
57
The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It is located at Dalal Street, Mumbai, India. The Bombay Stock Exchange was established in 1875. There are around 3,500 Indian companies listed with the stock exchange, and has a significant trading volume. At October 2006, the market capitalization of the BSE was about Rs. 33.4 trillion (US $ 730 billion). The BSE SENSEX (SENSitive indEX), also called the "BSE 30", is a widely used market index in India and Asia. As of 2005, it is among the five biggest stock exchanges in the world in terms of transactions volume. The oldest exchange in Asia and the first exchange in the country to be granted permanent recognition under the Securities Contract Regulation Act, 1956, Bombay Stock Exchange Limited (BSE) has had an interesting rise to prominence over the past 130 years. While the BSE is now synonymous with Dalal Street, it wasnt always so. In fact the first venues of the earliest stock broker meetings in the 1850s were amidst rather natural environs - under banyan trees - in front of the Town Hall, where Horniman Circle is now situated. A decade later, the brokers moved their venue to another set of foliage, this time under banyan trees at the junction of Meadows Street and Mahatma Gandhi Road. As the number of brokers increased, they had to shift from place to place, and wherever they went, through sheer habit, they overflowed in to the streets. At last, in
58
1874, found a permanent place, and one that they could, quite literally, call their own. The new place was, aptly, called Dalal Street. The journey of BSE is as eventful and interesting as the history of Indias securities markets. Indias biggest bourse, in terms of listed companies and market capitalisation, BSE has played a pioneering role in the Indian Securities Market - one of the oldest in the world. Much before actual legislations were enacted, BSE had formulated comprehensive set of Rules and Regulations for the Indian Capital Markets. It also laid down best practices adopted by the Indian Capital Markets after India gained its Independence. Perhaps, there would not be any leading corporate in India, which has not sourced BSEs services in resource mobilization. BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is the benchmark equity index that reflects the robustness of the economy and finance. At par with international standards, BSE has been a pioneer in several areas. It has several firsts to its credit even in an intensely competitive environment. First in India to introduce Equity Derivatives First in India to launch a Free Float Index First in India to launch US$ version of BSE Sensex First in India to launch Exchange Enabled Internet Trading Platform First in India to obtain ISO certification for Surveillance, Clearing & Settlement 'BSE On-Line Trading System (BOLT) has been awarded the globally recognised the Information Security Management System standard BS7799-2:2002.
59
First to have an exclusive facility for financial training Moved from Open Outcry to Electronic Trading within just 50 days An equally important accomplishment of BSE is the launch of a nationwide investor awareness campaign - Safe Investing in the Stock Market - under which nationwide awareness campaigns and dissemination of information through print and electronic medium was undertaken. BSE also actively promoted the securities market awareness campaign of the Securities and Exchange Board of India. In 2002, the name The Stock Exchange, Mumbai, was changed to BSE. BSE, which had introduced securities trading in India, replaced its open outcry system of trading in 1995, when the totally automated trading through the BSE Online trading (BOLT) system was put into practice. The BOLT network was expanded, nationwide, in 1997. It was at the BSE's International Convention Hall that Indias 1st Bell ringing ceremony in the history Capital Markets was held on February 18th, 2002. It was the listing ceremony of Bharti Tele ventures Ltd. BSE with its long history of capital market development is fully geared to continue its contributions to further the growth of the securities markets of the country, thus helping India increase its sphere of influence in international financial markets.
60
What drives bull and bear markets? How to predict bull and bear markets? What do you about the conditions in bull and bear markets?
The media as well as investors often use terms such as bull market and bear market. They give a general impression of how the market is doing. A bull market is one where prices are rising, whereas a bear market is one where prices are falling. The two terms are also used to describe types of investors. A stock market bull is someone who has a very optimistic view of the market; they may be stock-holders or maybe investors who aggressively buy and sell stocks quickly. A bear investor, on the other hand, is pessimistic about the market and may make more conservative stock choices. Sometimes, the terms are used to refer to specific funds or stocks. Bear market funds, for example, are those that are falling and faring poorly. Investors sometimes refer to bull stocks to describe securities that are aggressively rising and making their investors money. Knowing what is meant by the bear and bull market can help you understand whether the market is currently rising or falling. There is no need to get frightened by a bear market indicator; however, as experts agree that the market is cyclical. When prices start falling, they will eventually recoup.
61
What is SENSEX?
The SENSEX, short form of the BSE-Sensitive Index, is a "Market Capitalization-Weighted" index of 30 stocks representing a sample of large, well-established and financially sound companies. It is the oldest index in India and has acquired a unique place in the collective consciousness of investors. The index is widely used to measure the performance of the Indian stock markets. SENSEX is considered to be the pulse of the Indian stock markets as it represents the underlying universe of listed stocks at The Stock Exchange, Mumbai. Further, as the oldest index of the Indian Stock market, it provides time series data over a fairly long period of time (since 1978-79). What are the objectives of SENSEX? The SENSEX is the benchmark index of the Indian Capital Markets with wide acceptance among individual investors, institutional investors, foreign investors and fund managers. The objectives of the index are: To measure market movements given its long history and its wide acceptance, no other index matches the SENSEX in reflecting market movements and sentiments. SENSEX is widely used to describe the mood in the Indian Stock markets.
Benchmark for funds performance The inclusion of blue chip companies and the wide and balanced industry representation in the SENSEX makes it the ideal benchmark for fund managers to compare the performance of their funds. For index based derivative products Institutional investors, money managers and small investors all refer to the SENSEX for their specific purposes The SENSEX is in effect the proxy for the Indian stock markets. The country's first derivative product i.e. IndexFutures was launched on SENSEX.
62
will move, you can cash in on this view by using derivative. 2.) It allows you to hedge: derivatives are very effective risk management instruments. You can use derivatives to cap your potential losses in the underlying asset. 3.) It allows you to undertake arbitrage activity: you can derivatives to take advantage of the differences in prices of the derivative product and the underlying asset. 4.) It allows you to buy on margin: when you purchase a derivative product a derivative product, you simply have to pay a fraction of the price of the traded value. In order words, you dont have to pay u the full value of the at the time of the transaction.
63
There are two types of actively traded equity derivative instrument: 1.) Options 2.) Futures Both options and futures are traded on the stock exchanges and can be bought and sold through a registered stockbroker. The value of both instruments depends on the spot price (current market price) of the underlying asset. Both these derivative instruments can have a validity of 1 month, 2 months or three months. In order words, if you buy a one month derivative instrument, it will expire after the completion of the specified one month tenure.
About options:
An option is a type of derivative contract that gives the buyer the right(but not the obligation or the liability), to buy or sell a specified quantity of the underlying asset(in this case, stocks or an index) at an agreed price(strike/exercise price) on or before the specified future date(expiration date). You can purchase an option for a price called premium. : What is an option? An option contract gives the buyer the right, but not the obligation to buy/sell an underlying asset at a pre-determined price on or before a specified time. The option buyer acquires a right, while the option seller takes on an obligation. It is the buyers prerogative to exercise the acquired right. If and when the right is exercised, the seller has to honour it. The underlying asset for option contracts may be stocks, indices, commodity futures, currency or interest rates
64
Types of options:
1.) Index and stock options. 2.) American and European options. 3.) Call and put options. 4.) Covered and naked options.
65
American options: it can be exercised by the holder on or before the expiration date, i.e. any time between the day of purchase of the option and the day of its expiry. European options: it can be exercised by the holder on the expiration day only and not any time before that. In India, stock options of the American type, while index options re of the European type.
66
67
An Example to Put Things into Perspective Say ABC stock trades for $75 and its one-month $70 puts trade for $3. A put writer would sell the $70 puts into the market and collect the $300 [$3 x 100] premium. Such a trader expects the price of ABC to trade above $67 in the coming month, as represented below:
Thus, we see that the trader is exposed to increasing losses as the price of the stock falls below $67. For example, at a share price of $65, the put seller is still obligated to buy shares of ABC at the strike price of $70. He or she therefore would face a loss of $200, which is calculated as the following: $6500 (market value) - $7000 (price paid) + $300 (premium collected). Case Closed To close out the outstanding put prior to expiry, the put seller would purchase back the put contract in the open market. If the price of the stock has remained constant or risen, the put seller will generally earn a profit on his or her position. If, however, the price of ABC has fallen dramatically, the put seller will be either forced to buy the put option at a much higher price or forced to purchase the shares at above-market prices. In the case of ABC stock trading at $65, the put seller would be either forced to pay $500 to repurchase the put at expiry or forced to have the shares "put" to him or her
68
at $70, which will require $7,000 in cash or margin. Note, that in either scenario the put seller realizes a loss of $200 at expiry. Conclusion Selling puts can be a rewarding strategy in a stagnant or rising stock since an investor is able to collect put premiums without incurring significant losses. In the case of a falling stock, however, a put seller is exposed to significant risk - even though the put seller's risk is not unlimited. In theory, any stock can fall to a value of 0. Thus, in the case of our example, the worst-case scenario would involve a loss of $6700. As in any option trade, always make sure that you are informed about what can go wrong. Due to the risks involved, put writing is rarely used alone. Investors typically use puts in combination with other options contracts.
69
Finding the Proper Put Options to Buy: You must first decide on your objective and then find the best option to buy. Things to consider when buying put options include:
Duration of time you plan on being in the trade. Amount you can allocate to buying a put option. Length of a move you expect from the market.
Most commodities and futures have a wide range of options in different expiration months and different strike prices that allow you pick an option that meets your objectives.
Duration of Time You Plan on Being in the Trade: This will help you determine how much time you need on a put option. If you are expecting a commodity to complete its move lower within two weeks, you will want to buy a commodity with at least two weeks of time remaining on it. Typically, you dont want to buy an option with 6-9 months remaining if you only plan on being in the trade for a couple weeks, since the options will be more expensive and you will lose some leverage. One thing to be aware of is that the time premium of options decay more rapidly in the last 30 days. Therefore, you could be right on a trade, but the option loses too much time value and you end up with a loss. I suggest that you always buy an option with 30 more days than you expect to be in the trade. Amount You Can Allocate to Buying a Put Option: Depending on your account size and risk tolerances, some options may be too expensive for you to buy or they might not be the right options all together. In the money put options will be more expensive than out of the money options. Also, the more time remaining on the put options there is, the more they will cost.
70
Unlike futures contracts, there is no margin when you buy futures options. You have to pay the whole option premium upfront. Therefore, options on volatile markets like crude oil can cost several thousand dollars. That may not be suitable for all option traders. And you dont want to make the mistake of buying deep out of the money options just because they are in your price range. Most deep out of the money options will expire worthless and they are considered long shots.
Length of a Move You Expect From the Market: To maximize your leverage and control your risk, you should have an idea of what type of move you expect from the commodity or futures market. The more conservative approach is usually to buy in the money options. A more aggressive approach is to buy multiple contracts of out of the money options. Your returns will increase with multiple contracts of out of the money options if the market makes a large move lower. It is also more risky as you have a greater chance of losing the entire option premium if the market doesnt move.
Your losses on buying a put option are limited to the premium you paid for the option plus commissions and any fees. With a futures contract, you have virtually unlimited loss potential. Put options also do not move as quickly as futures contracts unless they are deep in the money. This allows a commodity trader to ride out many of the ups and downs in the markets that might force a trader to close a futures contract in order to limit risk.
71
One of the major drawbacks to buying options is the fact that options lose time value everyday. Options are a wasting asset theoretically, they are worth less each day that passes. You not only have to be correct on the direction of the market, but also on the timing of the move. Break Even Point: Strike Price + Option Premium Paid This formula is used at option expiration considering there is no time value left on the put options. You can obviously sell the options anytime before expiration, where there will be time premium, unless the options are deep in the money or far out of the money.
Call options:
An option contract that gives the holder the right to buy a certain quantity (usually 100 shares) of an underlying security from the writer of the option, at a specified price (the strike price) up to a specified date (the expiration date). also called call option.
72
Most traders buy call options because they believe a commodity market is going to move higher and they want to profit from that move. You can also exit the option before it expires during market hours, of course. All options have a limited life. They are defined by a specific expiration date by the futures exchange where it trades. You can visit each futures exchanges website for specific expiration dates of each commodities market. Finding the Proper Call Options to Buy: You must first decide on your objectives and then find the best option to buy. Things to consider when buying call options include:
Duration of time you plan on being in the trade. Amount you can allocate to buying a call option. Length of a move you expect from the market.
Most commodities and futures have a wide range of options in different expiration months and different strike prices that allow you pick an option that meets your objectives.
Duration of Time You Plan on Being in the Call Option Trade: This will help you determine how much time you need on a call option. If you are expecting a commodity to complete its move higher within two weeks, you will want to buy a commodity with at least two weeks of time remaining on it. Typically, you dont want to buy an option with 6-9 months remaining if you only plan on being in the trade for a couple weeks, since the options will be more expensive and you will lose some leverage. One thing to be aware of is that the time premium of options decay more rapidly in the last 30 days. Therefore, you could be right on a trade, but the option loses too much time value and you end up with a loss. I suggest that you always buy an option with 30 more days than you expect to be in the trade.
73
Amount You Can Allocate to Buying a Call Option: Depending on your account size and risk tolerances, some options may be too expensive for you to buy or they might not be the right options all together. In the money call options will be more expensive than out of the money options. Also, the more time remaining on the call options there is, the more they will cost. Unlike futures contracts, there is no margin when you buy futures options. You have to pay the whole option premium upfront. Therefore, options on volatile markets like crude oil can cost several thousand dollars. That may not be suitable for all option traders. And you dont want to make the mistake of buying deep out of the money options just because they are in your price range. Most deep out of the money options will expire worthless and they are considered long shots. Length of a Move You Expect From the Market To maximize your leverage and control your risk, you should have an idea of what type of move you expect from the commodity or futures market. The more conservative approach is usually to buy in the money options. A more aggressive approach is to buy multiple contracts of out of the money options. Your returns will increase with multiple contracts of out of the money options if the market makes a large move higher. It is also more risky as you have a greater chance of losing the entire option premium if the market doesnt move.
74
Your losses on buying a call option are limited to the premium you paid for the option plus commissions and any fees. With a futures contract, you have virtually unlimited loss potential. Call options also do not move as quickly as futures contracts unless they are deep in the money. This allows a commodity trader to ride out many of the ups and downs in the markets that might force a trader to close a futures contract in order to limit risk. One of the major drawbacks to buying options is the fact that options lose time value everyday. Options are a wasting asset. You not only have to be correct on the direction of the market, but also on the timing of the move.
Break Even Point on Buying Call Options Strike Price + Option Premium Paid This formula is used at option expiration considering there is no time value left on the call options. You can obviously sell the options anytime before expiration and there will be time premium remaining, unless the options are deep in the money or far out of the money.
75
Selling a call option without owning the underlying asset - An investor would choose to sell a call option if his outlook on a specific asset was that it was going to fall. The purchaser of a call option pays a premium to the writer for the right to buy the underlying at an agreed upon price in the event that the price of the asset is above the strike price. In this case, the option seller would get to keep the premium if the price closed below the strike price.
76
What do you understand by the term option premium? Option premium is the consideration paid upfront by the option holder (buyer of the option) to the option writer (seller of the option). The option holder gets the right to buy / sell the underlying. What is the strike price or the exercise price of the option? The right or obligation to buy or sell the underlying asset is always at a predecided price known as the strike price or exercise price, which is linked to the prevailing price of the underlying asset in the cash market. Usually, option contracts are available on the underlying asset on various strike prices (generally, five or more)-divided equally on either side of its spot price. How does an American option differ from a European option? In European options, a buyer can exercise his option only on the expiration date, that is, the last day of the contract tenure. Whereas in American options, a buyer can exercise his option any day on or before the expiration date. In the Indian equity market context, index options are European style, while stock options are usually American in nature. How do options differ from futures? In futures, both the buyer and the seller are obligated to buy and sell, respectively, the underlying asset-the quid pro quo relationship. In case of options, however, the buyer has the right, but is not obliged to exercise it. Effectively, while buyers and sellers face a linear payoff profile in futures, its not so in the case of options. An option buyer's upside potential is unlimited, while his losses are limited to the premium paid. For the option seller, on the other hand, his maximum profits are limited to the premium received, while his loss potential is unlimited.
77
Data sources:
Research is based on primary data and 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 and some special publications of R-MONEY.
78
Questionnaire
Name: Age: Income per annum: Gender: Occupation: Contact No:
Have you invested /are you interested to invest in mutual funds or to invest in stock market? No [ ] (plz. attempt the next question)
Yes [ ]
What is the most important reason for not investing in equity and in mutual fund?
Lack of knowledge about mutual fund/equity Enjoys investing in other options Its benefits are not enough to drive you for investment No trust over the fund manager
Totally ignorant [ ] Partial knowledge [ ] Aware only of any specific scheme in which you invested [ ] Fully aware [ ]
Where
79
Which feature of the mutual funds allure you most? Diversification [ ] Professional management [ ] Reduction in risk and transaction cost [ ] Helps in achieving long term goals [ ]
According to you which are the most suitable stage to invest in mutual funds/ invest in share market?
Young unmarried stage [ ] Young Married with children stage [ ] Married with older children stage [ ] Pre-retirement stage [ ] Why equity is better then mutual funds investment? .
80
Bibliography
Market Research (ARPAN SETHI) - EQUITY ADVISOR Websites: www.reliancemoney.com www.mutualfundsindia.com www.valueresearchonline.com www.moneycontrol.com www.955am.com www.capitalmarket.com www.nseindia.com www.bseindia.com www.sockmarketupdates.com www.amfiindia.com www.google.com www.reliancemoney.co.in
81
Index
S.NO 1 2 3 4 5 6 7 8 9 10 11 12 PREFACE AKNOWLADGEMENT ABSTRACT SCOPE OF THE STUDY COMPANY PROFILE Chairmans profile PRODUCT AND SERVICES MUTUAL FUNDS STOCK MARKET DERIVATIVES Questionnaire Bibliography PARTICULARS
82
Have you invested /are you interested to invest in mutual funds or to invest in stock market?
no 18%
yes no
yes 82%
What is the most important reason for not investing in equity and in mutual fund?
15% Lack of knowledge about mutual fund/equity Enjoys investing in other options 47% Its benefits are not enough to drive you for investment No trust over the fund manager 28%
10%
83
5% 27% Totally ignorant Partial knowledge Aware only of any specific scheme in which you invested Fully aware
33%
35%
Where
17%
3%
80%
84
7% Diversification 37% 31% Professional management Reduction in risk and transaction cost Helps in achieving long term goals 25%
According to you which are the most suitable stage to invest in mutual funds/ invest in share market?
4%
37%
Young Married with children stage Married with older children stage Pre-retirement stage 41%
85
FINDINGS
Mostly investors are ignorant about equity and mutual finds. Ignorant is the major issue for not investing in these investment options. Most of the respondents purchase mutual funds and shares from sub-brokers. The features of diversification and sound management of mutual fund attracts respondents to invest in it. Investors preferred to invest at young married with children stage.
86