It is very important to understand business environment in which the company operates. The project I was working on is an attempt to understand the intricacies of Public Relation and to get the practical exposure to customer service through effective Services. Being the part of the service market it is important to customize the services according to the requirement of the client. At Reliance Money I worked as Operation Trainee. I was into customer services. Customers used to come with their problems regarding financial services. I was dealing with customer’s querries with whole operation team. This report aims to study and analyze the Investor’s behavior towards various investment options offered by Reliance Money Ltd. The project also interprets why and how a customer perceives a particular scheme and the way he selects and interprets the financial product offered by investment and services division of Reliance Money.
TABLE OF CONTENTS
Particulars Acknowledgement Declaration Executive summary Company profile Objective Research Methodology
Demat A/C Mutual fund Customer services Other Topics Questionnaire Findings & Analysis Conclusion Recommendations References
Reliance Money is a part of Reliance capital Ltd. (RCL) and is Under Reliance Anil Dhirubhai Ambani Group. RCL is one of the fastest growing private sector financial services company in India. This Group has the following divisions: Reliance Money Reliance Life Insurance Reliance Mutual Fund Reliance Consumer Finance
In terms of net worth, it is ranked among the top three private sector financial services companies. It has its interests relating it to asset management and mutual funds, life and general insurance, credit cards and other activities in financial services. RCL is registered as a depository participant with National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL) under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996. Reliance Capital Ltd (RCL) reported a gross income of Rs. 400 Crore for FY 2006-07, as against a Rs. 295 Crores income in FY 2005-06. Depreciation stood at Rs. 23 Crore versus Rs. 28 Crores last year. Provisions for taxation during the financial year amounted to Rs. 13 Crore versus Rs. 5.4 Crore last year. Net profit increased to Rs. 538 Crore from Rs. 106 Crore in the last year.
Reliance Money offers a single window platform for all the financial transactions of the consumers. It is offering an investment avenue for a wide range of asset classes like equity, equity and commodities derivatives, mutual funds, IPOs, Life and General Insurance, Offshore Investments, Money transfers, Money Changing and Credit cards. The endeavor of the company is to change the way India transacts in financial market and avails the financial services. Services provided at the Reliance Company:
Demat services. Mutual Funds. Insurance (general and life). Investments (NFO’s, IPO’s, bonds). Equity and Commodity derivatives. Credit Cards. Money Transfers.
Reliance Money is the most cost effective, convenient and secure way to transact in a wide range of financial product, as claimed by the top officials of this company.
OBJECTIVE OF THE REPORT
The objective of this project is not only to develop an understanding about the concepts and origin of broking of finances in India but also to give inputs on how to better the whole process by finding bottlenecks in the present system. The process of a thorough analysis of what the client actually needs, is done and whether the right product is pitched in or not. The main idea behind is to study Investor’s behavior towards investment in various financial products. It includes to deals the various financial products like stock broking, life insurance, general insurance, mutual funds and gets full knowledge about all of them. The objective is to have a better understanding of products offered by other players in India so that suggestions can be made for the betterment of the product line and length. The objective of the project is to make the comparative analysis of financial products, regarding the risk, returns, tax advantages and other features associated. Further the project aims at defining the customer perception towards financial planning, factors influencing their decision of investment and the procedure of helping the customer to choose the right type of financial product. Also, this project helped me in understanding financial products.
Scope of study
As Reliance Money provides financial services, it gives me the practical exposure of client service as well as I got my first hand experience of service Industry. In the process of creating client relationship I got a chance to improve my communication skills and it also provided me with the chance to know about the negotiation with the client. It also helps me in understanding the organizational culture. This project helps me in developing PR skills which are of utmost importance for any professional.
Research is the movement from the known to unknown. Research is the scientific investigation. Research is both art and science. Every research project conducted scientifically has a specified framework for collection and analysis of data in manner that aims at combining relevance to the research purpose with economy in procedure. This framework is called research design. Any research design consists following stages:
Defining the problem and the research objective: The research objective states what information is needed to solve the problem. The objective of the research is to derive the opinion of the investors and the agents of the different de-metallization account & mutual funds to evaluate the performance of the different de-metallization account & mutual funds.
Developing the research plan: Once the problem is identified, the next step is to prepare a plan for getting the information needed for the research. The present study will adopt the exploratory approach wherein there is a need to gather large amount of information before making a conclusion. If required, the descriptive and casual approaches may also be used.
Collection and Sources of data: Market research requires two kinds of data, i.e., primary data and secondary data.
Primary Data Secondary Data.
Primary Data: In this the information is being possessed with first hand information, which is new and fresh. The tools used by us for the primary data are: • Questionnaire • Personal Interview • Observation Secondary data:
The information that is received with the help of Internet, Journals, Magazines, Financial reports, Data from management books and magazines. • Gathered information through internet and from other sources. • Support and knowledge provided by Faculty and Company guide.
Survey of Existing Literature I had done the literature survey (Brochure etc.) of Reliance Money generals and other broking houses. Analyze the collected information: This involves converting raw data into useful information. It involves tabulation of data, using statistical measures on them
For developing frequency distributions and calculating the averages and dispersions.
Report research findings:
This phase will mark the culmination of the research effort. The report with the research findings is a formal written document. The research findings and personal experience will be used to propose recommendations for the improvement of the strategies. Relevance of the Study:
In the contemporary world, many fast mushrooming financial institutions are, offering new products and services to the investors. They entice them to invest their funds by providing incentives and facilities in terms of flexible investment options and withdrawal plan. The broking houses have grown up in leaps and bounds, particularly during the last two decades of the 20th Century. A proper evaluation measure will remove the confusion and help investors to decide the level of investment in various stocks, about their financial performance over a period of time, and the risk associated with their investment, so as to avoid loss and maximize returns. This needs the following steps to be taken with good approach:
STUDY:• It includes detailed analysis of the present investment plans available with the Reliance Money. • Besides this we need to study various investment plans offered by other financial institutions, so that when we advise people to invest in our plan we should compare it with other’s plan. This will develop a comparative advantage. • Study of new fund offers is a must, as new customers are added a lot to the Company database by these new fund offers. • We were also trained for other financial products like Demat, Life Insurance & General Insurance. INTERACTION:• We have to interact with the customers who visit the company office.
• We can meet the existing customers of the company by looking for their contact in the company database. • Some times we have to go to the leads provided by the seniors. • For corporate clients we have to visit the company and make the corporate presentations. DATABASE:•
I have to record the relevant data about the customer with whom we interact. Information like the amount he is interested to invest in, the investment plan he is looking for.
• Number of customers and their details who had finally invested their amount. • This data base could be further utilized by the company to inform the existing customer when the new investment plan is introduced.
Flow chart of Methodology
Defining Research objective & Data collection through various means
Designing a questionnaire
Interaction with customers
Analysis of the data collected on SPSS
For each Reliance account, there has to be one corresponding Demat account, where the settlements of shares are done. Since it is a complete online offerings, for all the purchase transactions, shares will be credited to the linked demat account and for all the sales transactions Shares will be debited from the linked demat account only.
A Product for every need
RELIANCE MONEY-Transacting and investing simplified – Get ready to change the way of transact and invest in financial product and services. Whether you wise to transact in Equity, Equity and commodity Derivatives, IPO’s offshore investment or prefer to investment in mutual fund, Life and General insurance products or avail money Transfer and money changing services, you can do it all through Reliance money. Simply open a reliance money account and enjoy the convenience of handling all your key financial transaction Through this one window.
Benefits of having a Reliance money account • It’s cost –effective You pay comparatively lower transaction fees. As an introductory offer, we invite you to pay flat fee Of just Rs.500/-and transact through reliance money. This fee is valid for two months or a specified transaction value*. See the table on next page for details:-
Limit Cards:VALIDITY ACCESS FEE (in Rs.) TIME VALIDITY NONTURNOVER DELIVERY VALIDITY DELIVERY TURNOVER LIMIT
Rs. 1 Cr.
Rs. 10 Lac
Rs. 3 Cr.
Rs. 30 Lac
Rs. 6 Cr.
It offers single-window Access Through Reliance money’s associates, you can transact in Equity, Equity and commodity Derivatives, IPO’s offshore investment or prefer to investment in mutual fund, Life and General insurance products or avail money Transfer and money changing and credit card, you can do it all through Reliance money.
• It’s convenient – You can access Reliance money’s services through:• • • • The Internet Transaction kiosks The phone call & transact Our all India network of associates
On an associate trade (through the call center or our network of associate) a charge of Rs. 12 per executed trade will be applicable.
• It’s safe Your Account is safeguarded with a unique security key that changes every 32 seconds. This no. works as a dynamic password to keep your account extra safe.
It provides you a Demat Account You get your own demat account with Reliance capital, at an annual fee of just Rs.50/. It provides you a 3-in-1 facility You can access your Banking, Trading and De-mate account through a single window and transfer funds across accounts seamlessly.
• It provides you value-Added services At the website of the company, i.e. at www reliancemoney.com you will get:• Reliable research, including views of external experts with an enviable track record.
• • •
Live news updates from Reuters and Dow jones. CEOs/ Expert views on the economy and financial market. Tools that help you plan your investment, tax, retirement, etc. in the Personal Finance section. Risk analysis for analysis of your risk profile . Asset locations to build an appropriate invest portfolio.
• Reliance money website has been designed addressing specific segments.
• The home page is divided into three segments:Beginner:-For new entrants to the world of investment and trading. Market Basics Middler:-For people who have been in trade. Analyzing tools to learn more and trade better. Experts:-For the “know it all”segment. Advanced technical analysis tools & market information.
Benefits in a nutshell Easy access to all products and services through single screen. Besides trading online one can also invest in Mutual funds, IPOs, Insurance. Do away with writing cheques. One can track its investment portfolio online. Its knowledge section demestifies the complex financial world. Customers have two options for trading:EASY TRADE: Simple order form. Available to all customers. Easy to understand and place a trade. Access BSE,NSE& FONSE scrips. Get price and market depth on same screen.
POWER TRADE:o Same shortcut key functionality to suit the habits of the user. o Multiple exchange on single screen.
o Clients’ database is commonly used for the trades executed through the dealers. o Dealers have to access the margins and the stock positions of the client. o Uses the local database for faster retrieval of information. o Incremental and full download option available. o Expression builders and alerts. o Support more than 45 technical indicators. o Line display of information such as top traded stock by volume, value, gainers, losers, etc. o Comprehensive MIS reporting structure.
Analysis:During this step I got that even with sufficiently high Brand Equity, Reliance Money ranks only 3rd amongst the Demat account providers. This is probably because of the following two reasons:
Lack of promotion. Unfocussed approach towards Product awareness. Non – transparent marketing policies of the company
Hence, the result suggests that the company should crystallize its products and should indulge in aggressive marketing and promotion.
Awareness Of Online Share Trading:-
Analysis:The awareness towards online share trading has increased by leaps and bounds, with the increase in cyber education, This awareness is expected to increase further.
Awareness of Reliance Money:-
This pie chart shows that Reliance Money has a good Brand awareness in terms of a premier Retail stock broking company. The company should further leverage this brand image to increase its market share over its competitors.
Awareness of Reliance Money Services:-
Analysis :Although there is sufficiently high brand equity among the target audience yet, the customers are not aware of the facilities provided by the company meaning. So, the company must concentrate more towards promotional tools and increase its focus on product awareness rather than brand awareness.
Investment in Share Trading:-
Analysis:This shows that people invest only upto 10% of their earnings in the stock market, again reiterating the volatile and non-transparent structure of the Indian stock market. Hence, effective and efficient steps should be undertaken to woo the customers to invest more in the lucrative stock market.
MUTUAL FUNDS – AN INTRODUCTION
“….A Mutual funds is a trust that pools the saving of a number of investors who share a common financial goal. The money collected is then invested in capital market instruments such as shares, debentures and other securities ……” “…A Mutual fund is a trust that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings….”
CLASSIFICATION OF MUTUAL FUNDS There are many ways in which funds can be classified. From the
investors perspective funds are usually classified in terms: Constitution Structure Close – ended Open – ended
Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. People can buy or sell the units of the scheme on the stock exchanges where the units are listed. Mutual funds can also be broadly classified into four distinguishable types:
Collection entry or exit charges Load funds No-Load funds
• Equity funds • Debt or Income funds • Balanced funds • Money Market funds Equity Funds:Equity funds (often described as growth funds) aims to provide capital growth by investing in the shares of individual companies. Depending on the fund’s objective, this could range from large blue-chip organizations to small and new businesses. Any dividends received by the fund can be reinvested by the fund manager to provide further growth or paid to investors. Both risk and returns are high but they could be a good investment if you have a long-term perspective and can stay invested for at least five years.
Debt or Income Funds:The aim of debt or income funds is to make regular payments to its investors, although dividends can be reinvested to buy more units of the fund. To provide you with a steady income, these funds generally invest in fixed income securities such as bonds, corporate debentures, government securities (gilts) and money market instruments. Opportunities for capital appreciation are limited and the downside is that as interest rates fluctuate, the net asset
value or NAV of the fund could follow suit – if interest rates fall, the NAV is likely to increase and vice versa. There is also a risk that a company issuing a bond may default on its payment, if it is not financially healthy. However, if the fund invests in government securities there is little risk of the government defaulting on its payment.
Balanced funds - The best of both the worlds:As the name suggests, these funds aim for balance, so they are made up of a mixture of equities and debt instruments. They match the goals of investors who seek to grow their capital and get regular income, while retaining relatively low risk. The debt or bond element of the fund provides a level of income and acts as the safety net during dynamic periods in the market, while equities provide the potential for capital appreciation. Balanced funds could be suitable for investors who are looking for moderate capital appreciation.
Money market funds:Money market or liquid funds are an appealing
alternative to bank deposits because they aim to provide
stability, liquidity, capital preservation and slightly higher interest rates than bank accounts. When you invest in a money market fund, the fund manager invests in ‘cash’ assets such as treasury bills, certificates of deposit and commercial paper. Returns on these funds fluctuate much less compared to other funds, but they are not guaranteed. They are appropriate for corporate and individual investors who wish to park their surplus money in a fund for a short period.
Depository:A Depository (NSDL & CDSL) is an organisation like a Central Bank where the securities of a shareholder are held in the electronic form at the request of the shareholder through the medium of a Depository Participant. If an investor wants to utilise the services offered by a Depository, the investor has to open an account with the Depository through a Depository Participant.
Depository Participant:Similar to the brokers who trade on your behalf in and outside the Stock Exchange; a Depository Participant (DP) is a representative (agent) in the depository system providing the link between the Company and investor through the Depository. Your Depository Participant will maintain your securities account balances and intimate to you the status of your holding from time to time. According to SEBI guidelines, Financial Institutions like banks, custodians, stockbrokers etc. can become participants in the depository. A DP is one with whom you need to open an account to deal in electronic form. While the Depository can be compared to a Bank, DP is like a branch of your bank with whom you can have an account.
How does the Depository System operate? The Depository System functions very much like the banking system. A bank holds funds in accounts whereas a Depository holds securities in accounts for its clients. A Bank transfers funds between accounts whereas a Depository transfers securities between accounts. In both systems, the transfer of funds or securities happens without the actual handling of funds or securities. Both the Banks and the Depository are accountable for the safe keeping of funds and securities respectively.
What are the benefits of having a demat account? a. Trading in the shares of the Company is now under the compulsory demat segment. With SEBI making demat mandatory on most of the traded scrips, electronic transaction will be the only way everyone will trade. No stamp duty for transfer of securities in the electronic form. In case of transfer of physical shares, stamp duty of 0.5 percent is payable on the market value of shares being transferred. All risks associated with physical certificates such as delays, loss, in transit, theft, mutilation, bad deliveries, etc. eliminated. Your shares can be kept in the “Frozen Mode” by your Depository Participant under your specific instructions. The concept of an “odd lot” in respect of dematerialized shares stands abolished, i.e. in the demat mode, market lot becomes one share. Dematerialised securities are most preferred by banks and other financiers for providing credit facility against securities. Generally, demat securities attract lower margin and lower rates of interest compared to physical securities. Even in the electronic mode of trading, the payment mechanism (usually through a broker) between the buyer and seller continues to be as before. Also the usual brokerage charges would have to be
incurred. However, after the settlement, pay in and pay out are on the same day for scripless trading which means you get your securities as well as cash immediately. g. Shares bought or sold are transferred in your name on the very next day of pay out. In case of physical shares, transfer of ownership takes 30 days or sometimes even more.
No courier / postal charges for sending share certificates / transfer deeds. Facility for freezing / locking of investor accounts, which enables you to make your account non-operational, for instance if you are abroad. Facility to pledge and hypothecate your securities available. As the Depository System becomes popular, brokers will be increasingly reluctant to deal with physical shares. Investors prefer to buy shares which are already in dematerialised form.
Benefits of Depository System
In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. At the outset, this system rids the capital market of the dangers related to handling of paper. NSDL provides numerous direct and indirect benefits like:
Elimination of bad deliveries In the depository environment, once holdings of an investor are dematerialised, the question of bad delivery does not arise i.e. they cannot be held "under objection". In the physical environment, buyer was required to take the risk of transfer and face uncertainty of the quality of assets purchased. In a depository environment good money certainly begets good quality of assets.
Elimination of all risks associated with physical certificatesDealing in physical securities have associated security risks of theft of stocks, mutilation of certificates, loss of certificates during movements through and from the registrars, thus exposing the investor to the cost of obtaining duplicate certificates etc. This problem does not arise in the depository environment.
No stamp duty for transfer of any kind of securities in the depository. This waiver extends to equity shares, debt instruments and units of mutual funds.
Immediate transfer and registration of securities – In the depository environment, once the securities are credited to the investors account on pay out, he becomes the legal owner of the securities. There is no further need to send it to the company's registrar for registration. Having purchased securities in the physical environment, the investor has to send it to the company's registrar so that the change of ownership can be registered. This process usually takes around three to four months and is rarely completed within the statutory framework of two months thus
exposing the investor to opportunity cost of delay in transfer and to risk of loss in transit. To overcome this, the normally accepted practice is to hold the securities in street names i.e. not to register the change of ownership. However, if the investors miss a book closure the securities are not good for delivery and the investor would also stand to loose his corporate entitlements.
Faster settlement cycle – The settlement cycle follow rolling settlement on T+2 basis i.e. the settlement of trades will be on the 2nd working day from the trade day. This will enable faster turnover of stock and more liquidity with the investor.
Faster disbursement of non cash corporate benefits like rights, bonus NSDL provides for direct credit of non cash corporate entitlements to an investors account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit.
Reduction in brokerage by many brokers for trading in dematerialised securities Brokers provide this benefit to investors as dealing in dematerialised securities reduces their back office cost of handling paper and also eliminates the risk of being the introducing broker.
Reduction in handling of huge volumes of paper
Periodic status reports to investors on their holdings and transactions, leading to better controls.
Elimination of problems related to change of address of investor – In case of change of address, investors are saved from undergoing the entire change procedure with each company or registrar. Investors have to only inform their DP with all relevant documents and the required changes are effected in the database of all the companies, where the investor is a registered holder of securities.
Elimination of problems related to transmission of demat shares In case of dematerialised holdings, the process of transmission is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP whereas, in case of physical securities the surviving joint holder(s)/legal heirs/nominee has to correspond independently with each company in which shares are held.
Elimination of problems related to selling securities on behalf of a minor - A natural guardian is not required to take court approval for selling demat securities on behalf of a minor.
Ease in portfolio monitoring since statement of account gives a consolidated position of investments in all instruments.
Various services offered by DPs with respect to these accounts are as follows: Standing Instruction facility:-
DP enters the advise for the transfer of securities to or from a beneficial owner's account only on receipt of instructions from the client. The clients need to give delivery instruction to transfer securities from their account & receipt instruction to get credit into their account. However, for ease of operation, a facility of standing instruction is provided to the clients for receiving securities to the credit of their accounts without any further instruction from them.
Change in Address:The client can change his address by submitting the changes in writing to the DP along with proof of identity, proof of new address with original document of new address for verification and latest transaction statement received from the DP of the client. The changes conveyed to the DP will be automatically communicated to the companies in which he is holding shares in dematerialised form. Bank Account Details :Details of bank account of the client, including the 9-digit code number of the bank and branch appearing on the MICR cheques issued by the bank have to given to the DP at the time of account opening. Companies use this
information for printing them on dividend/interest warrants to prevent its misuse. In case the client wish to change this bank account details, he can do so by submitting the changes in writing to the DP. Nomination:A client can make a nomination of his account in favour of any person by filing the nomination form with his DP. Such nomination is considered to be conclusive evidence of the account holder'(s) disposition in respect of all the securities in the account for which the nomination is made. Transposition cum Demat:This is a facility whereby securities held jointly can be dematerialised in an account of same joint holders but having different sequence of names. e.g. securities held in joint names of X and Y can also be dematerialised in an account opened in the names of Y and X by submitting an additional form called Transposition Form alongwith Dematerialisation Request Form (DRF) to the DP. Consolidation of Accounts:Some clients could have opened multiple accounts to dematerialise their shares held in multiple combinations & sequence of names. However, they may not need so many accounts after they have dematerialised their securities and may want to bring all their shareholdings into one or fewer accounts. Using off-market account transfer instruction such consolidation can be done. Closure of Account:A client can close a depository account by giving an application in the prescribed form. In case there is any balance in the account sought to be closed, the following steps are necessary.
(a) Re-materialisation of all securities standing to the credit of the account at the time of making the application for closure; or (b) Transferring the balance to the credit of another account opened by the same account holder(s) either with the same participant or with a different participant. Freezing of Accounts:Account freezing means suspending any further transaction from the depository account till the account is de-frozen. A depository account maintained with a DP can be frozen if the DP receives a written instruction in prescribed form from the client. A frozen account can be de-frozen or reactivated if the client submits written instruction in prescribed form to the DP.
Dematerialisation:Dematerialisation is the process by which a client can get physical certificates converted into electronic balances. Process:An investor intending to dematerialise its securities needs to have an account with a DP. The client has to deface and surrender the certificates registered in its name to the DP. After intimating NSDL electronically, the DP sends the securities to the concerned Issuer/ R&T agent. NSDL in turn informs the Issuer/ R&T agent electronically, using NSDL Depository system, about the request for dematerialisation. If the Issuer/ R&T agent finds the certificates in order, it registers NSDL as the holder of the securities (the investor will be the beneficial owner) and communicates to NSDL the confirmation of request electronically. On receiving such confirmation, NSDL credits the securities in the depository account of the Investor with the DP.
Rematerialisation:Rematerialisation is the process by which a client can get his electronic holdings converted into physical certificates. The client has to submit the rematerialisation request to the DP with whom he has an account. The DP enters the request in its system which blocks the client's holdings to that extent automatically. The DP releases the request to NSDL and sends the request form to the Issuer/ R&T agent. The Issuer/ R&T agent then prints the certificates, despatches the same to the client and simultaneously electronically confirms the acceptance of the request to NSDL. Thereafter, the client's blocked balances are debited. Features:
• • •
A client can rematerialise his dematerialised holdings at any point of time. The rematerialisation process is completed within 30 days. The securities sent for rematerialisation cannot be traded.
Trading in dematerialised securities is quite similar to trading in physical securities. The major difference is that at the time of settlement, instead of delivery/receipt of securities in the physical form, the same is affected through account transfers. Features: Delivery of securities to or from a clearing member are called "Market Trades" in the depository system. A simple way of determining whether a trade is a market trade is that, either source or target in a transfer instrument is a CM account; such a transfer is a "Market Trade" Procedure in Case of Market Transfer for Retail Investors:
In the diagram, the selling client and clearing member1 have their respective accounts with DP1 and the buying client and clearing member2 have their respective accounts with DP2. DP1, DP2 and the Clearing Corporation/ Clearing House have on line electronic connectivity with NSDL. The following paragraphs, explain the flow of securities to effect settlement of a market trade:
Procedure for Inter Settlement Transfers: In a clearing account, the securities are always kept in a bucket of specific market type and settlement number. Hence, the clearing member may have to move securities from one bucket with a different market type-settlement number combination to another bucket from where pay-in is to be effected. To effect this movement a clearing member can give an instruction to move securities from one settlement to another settlement. For e.g., 100 shares of INE002A01018 (Reliance Limited) can be transferred from Market Type Physical Settlement Number 1999048 to market type Rolling Settlement Number 1999251.
Off - Market Transfers:Trading in dematerialised securities is quite similar to trading in physical securities. The major difference is that at the time of settlement, instead of delivery/receipt of securities in the physical form, the same is affected through account transfers. Procedure in case of an Off-Market Transfer Involving Two Clients:
The selling client will have to give a delivery instruction to his DP to transfer securities from his depository account to the buying client's depository account. To receive securities from the selling client's depository account, the buying client must give a receipt instruction if he has not already given a standing receipt instruction to his DP. The details in the "delivery" and "receipt" instructions must match else the transfer will not take place. The transfer will take place on the "execution date" indicated in the instructions. If the buying client has given a standing receipt instruction, this may be ignored. The payment aspect is handled outside the NSDL environment between the selling and buying clients
Inter-Depository Transfers:Transfer of securities from an account in one depository to an account in another depository is termed as an inter-depository transfer. This facility is quite similar to the account transfers within NSDL.
• • •
It can be done only for securities that are available for dematerialisation on both the depositories. The account in NSDL can be either a clearing account or a beneficiary account. For debiting the clearing account or the beneficial account with NSDL, the form for "Inter-depository delivery instruction" is required to be submitted by the clearing member/beneficial owner to its DP. For crediting the clearing account or the beneficial account, the standing instruction given for automatically crediting the account is applicable. In case the standing instructions are not given, then the form for "InterDepository Receipt Instruction" is required to be submitted by the clearing member/beneficial owner to its DP. As both the depositories are connected to each another, the batches to effect inter - depository transfers are presently exchanged on each working day. Online transfer of inter depository instructions has commenced w.e.f December 14, 2002. In the online inter depository transfer (OLIDT) module,
Inter Depository Transfer instructions for the day will be exchanged online between the two depositories. Thus, the instructions executed by DPs may get settled at shorter intervals. The deadline time for DPs to verify & release Inter Depository Transfer delivery/ receipt instructions is 6 p.m. on weekdays and 2.30 p.m. on Saturdays. The Issuer/Registrar & Transfer Agent is informed about the transfer by both the depositories and it amends its records accordingly. Government securities cannot be transferred from one depository to another using this facility.
Pledge / Hypothecation:Features: Securities held in a depository account can be pledged/hypothecated to avail of loan/credit facility. Pledge of securities in NSDL depository requires that both the borrower (pledgor) and the lender (pledgee) should have account in NSDL depository. The pledge/hypothecation transactions go through the following procedures:
• • •
Equity Equity is a share in the ownership of a company. It represents a claim on the company's assets and earnings. As you acquire more stock, your ownership stake in the company increases. The terms share, equity and stock mean the same thing and can be used interchangeably. Holding a company's stock means that you are one of the many owners (shareholders) of a company, and, as such, you have a claim (to the extent of your holding) to everything the company owns. Yes, this means that technically, you own a portion of every piece of furniture; every trademark; every contract, etc. of the company. As an owner, you are entitled to your share of the company's earnings as well as any voting rights attached to the stock.
Equity - 5 STOCK SELECTION GUIDELINES 1. Know the business Warren Buffett, one of the world’s most successful investors, follows the philosophy of buying stocks of only those businesses that he understands. Select companies in businesses that you already have an idea of and find interesting. One of the businesses that could be of interest to you would be the one, which you are affiliated to because of your employment. For instance, if you are working in a pharma company, you may understand this business well. 2. Assess the past performance
All companies present details of their financial performance in their Annual Reports[ . In case of a company having its Initial Public Offering – IPO (when a company offers its shares to the public for the first time, it is called Initial Public Offering), it is required to publish its past performance in its IPO offer document]. There are also a vast number of research reports published by research and brokerage houses, and company analysis done by the media, which is worth reading, to assess a company’s past performance and future potential. ‘Ratio Analysis’ is widely used to assess a company’s past performance. 3. Know the promoters The promoters and management team of a company are the key people who drive its business. Their integrity dictates whether the business benefits or they benefit personally. Also, their experience and business competence is crucial for business growth. Evaluate the company’s promoters and management on the basis of four Cs: Competence, Credibility, Corporate governance and Concern for shareholders. 4. Assess the future prospects of the company Although a company may have performed well in the past, it is not necessary that it will continue performing well in the future. All companies go through business cycles of ups and downs. It is important that you form a view on the future trends of the business the company is a player in. This can be done by reading views of experts in that business/industry and forming your own view by reading and understanding economic trends and the impact of these trends on the company’s business. 5. Assess the stock price
As mentioned earlier, the share price of all companies continuously fluctuate on the stock markets with investors buying and selling the shares. The price at which an investor is willing to buy or sell a share of a company is the perceived value of the share of the company taking into consideration the company’s present business and future business growth. In addition to this, investor sentiment plays a large role in pricing of stocks. It is important that before you buy a company’s share, you assess whether the price of the share at which it is available for purchase, is adequately valued i.e. it is not over-priced. Similarly, when you sell, you need to make sure that you are not selling too cheap. To help you assess this, you could use a popular stock market ratio called the Price/Earning ratio (P/E ratio). The P/E ratio is based on the following formula: P/E *EPS ratio = Market Earning per share (EPS)* price of Tax the share (PAT)
= Profit After Total number of shares issued by the company
You can obtain information on the EPS, PAT and total number of shares issued by the company from its annual report. Let’s understand how the P/E ratio is used with an example: Company XYZ Ltd. has issued a total of 10 lakh equity shares and has earned a net profit of Rs 10 lakh. The EPS of the company is Re 1. The current market price of the company is Rs 15 per share. The P/E ratio of Company XYZ Ltd will be 15 (Rs 15 / Re 1). The P/E ratio helps judge by how many times the company’s share is traded based on its earnings. In this case, the company’s stock is available at a multiple of 15 times its earnings. The higher the P/E ratio, the higher is the stock’s valuation. Usually market prices of well-established companies with a good past track record and reputed promoters command a high P/E ratio. To use the P/E ratio correctly, keep the following aspects in perspective:
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Compare the P/E ratio of a company with that of other companies in the same business. Compare it with P/E ratios of the benchmark indices such as the P/E ratio of the BSE Sensex, the NSE Nifty, etc. Compare the P/E ratio with the growth potential of the company and the industry it is a part of. There could be a situation that even if the P/E ratio of a company is high, it would be worthwhile to buy the stock if the growth potential is significant.
To conclude, just because a company’s P/E ratio is high, it does not mean that it is over-priced. Consider this ratio along with other factors such as past performance, business potential, promoters, the company’s order book position, etc. What is an IPO? When private companies i.e. companies that are wholly owned by their promoters, invite the public to subscribe to their shares, this issue of shares is called an Initial Public Offering (IPO). The shares issued could be in the form of fresh equity and/or the promoters sell a portion of their equity to the public. These shares are then listed on a stock exchange where they can be bought and sold by investors. IPOs are a very popular way of investing in the stock market as they allow investors a simple entry route to buying stocks.
PERSONEL FINANCE - ABOUT FINANCIAL PLANNING To be able to successfully fulfil your financial aspirations and live a financially secure life, constructing a “Financial Plan” is helpful. This plan analyses your short-term and long-term financial goals and sustenance needs in order to help you decide how much you should save to meet these requirements. It also times cash flows based on when financial aspirations come up for fulfilment. Not only this, the plan addresses managing of personal risks using insurance, and reducing your tax
burden through proper tax planning. Lastly, in order to help you judge the level of risk you are able to cope with where investing is concerned, the plan helps you profile your risk personality and risk-taking capacity. All this may sound extremely complicated on the surface, but financial planning simply boils down to effectively managing your financial resources to meet your desired needs and ambitions in life. A good financial plan serves as a ‘road-map’ for efficient money management. It gives a meaning to the entire gamut of financial actions that you undertake, including earning, spending, saving, investing, paying taxes, etc. So, begin with a financial plan and see how well begun is half done. Need for a Systematic, planned approach to money management Whilst beginning our financial journey, we need to inculcate a meticulous saving habit. “But I do save for the future and also invest my money in various investment avenues, such as NSC, PPF, mutual funds, insurance and equity, along with some tax-saving products,” is what most of us say. And it’s true. However, it’s also a fact that very few of us adopt a systematic and planned approach to managing our finances. This leads to an ad-hoc, casual and haphazard attitude to handling of finances. Such an approach could result in erosion in the amount of capital that is invested and, instead of a wealth buildup, it can lead to a deterioration in financial health. Worse still, an unplanned method of investing could culminate in having to cut back on aspirations leaving some or most dreams unrealised. Derivatives - Financial Derivatives Derivatives, as the name suggests, are financial instruments that derive their value from an underlying security or asset. The underlying could be equity shares or an index, a commodity, a currency or the exchange rate, bonds, etc. Sounds complicated? In a way, it is. But once you are clear about how a derivative product derives its value from an underlying asset and yet has a price and an identity of its own, it will become just another financial product to you. Then again, derivative products have more variants than any other financial products since they have been created to meet a variety of niche needs .
Derivatives - Types of Derivatives Forwards A forward contract or ‘forward’ is an agreement between two parties, wherein one will sell an asset to the other on a certain future date at an agreed price. The quantity and quality specifications of the asset and place of delivery are mutually decided while entering into the agreement In India, forward contracts are regularly used in the foreign exchange markets to hedge currency risk and in the commodities market to hedge price risk.. In India, forward contracts are regularly used in the foreign exchange markets to hedge currency risk and in the commodities market to hedge price risk. Futures Futures contracts or ‘futures’ are an improvement over forward contracts as they are standardized and tradable. A futures contract is a legal agreement between a buyer and a seller and both parties are bound to uphold the agreement. As per the contract, the seller agrees to sell a specific asset to the buyer at an agreed price on a particular date in the future. The contract specifies quantity, quality, delivery time, place and date of delivery. The commodity futures market like the Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX), National MultiCommodity Exchange (NMCE) and the index and stock futures segment of the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are some examples of futures markets. Options An option is a contract where the writer of the option grants the buyer of the option the right to purchase from (call option) or sell to (put option) him a specific asset at a specific price within a specified period. In return the buyer of the option (also called the option holder) pays a price called an option premium to the writer for this right. In common market parlance, the writer of the option is also called the ‘seller’
of the option. The option seller has the obligation to honour the contract, whether he is required to sell or buy the asset, if the buyer chooses to exercise his option to buy or sell. The potential downside or risk for the option seller is unlimited, while his upside or profit is limited to the premium that he receives. On the other hand, the maximum loss that the buyer could face is the option premium that he pays, but his potential profit is unlimited. Warrants A warrant is a call option, which gives you the right (but you are not obliged) to buy a predetermined number of equity shares within a stipulated time frame at an agreed price. Normally, a nominal margin of about 10 per cent of the agreed price, is payable when warrants are subscribed by the investor. The important difference between a normal call option and a warrant is that warrants are for a longer duration (1 to 5 years) as against the duration of a call option which is usually only a few months (normally up to 3 months in the case of stock options on the NSE and BSE). Warrants are normally issued by companies for the benefit of a certain class of shareholders (i.e. promoters or institutional investors) or to raise capital over a period of time or reduce interest cost (by attaching warrants to debt instruments).
Swaps A swap is an agreement between two parties to exchange their cash flow streams, without liquidating the asset that generates those flows. The best example of a swap is applicable to the case of a floating rate housing loan. If you expect interest rates to go up in the near future, you could swap your floating rate loan for a fixed rate, without having to prepay your loan and take a fresh one. Even corporations with floating rate debt could swap their liabilities to a fixed rate obligation, without having to retire and reissue debt.
Forex Forex, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another.. The foreign exchange market is the generic term for the worldwide institutions that exist to exchange or trade the currencies of different countries. The players in the foreign exchange markets are speculators, corporations, commercial banks, currency brokers, and central banks The FOREX market is an over-the-counter market with no centralized exchange. Traders have a choice between firms that offer trade-clearing services. Forex, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another. Traders in the FOREX market wish to purchase or sell one currency for another with the hope of making a profit when the value of the currencies changes in favor of the investor, whether from market news or events that take place in the world. The foreign exchange (FX or FOREX) market is the market where exchange rates are determined. Exchange rates are the mechanisms by which world currencies are tied together in the global marketplace, providing the price of one currency in terms of another.
Commodity The items produced by different producer are considered equivalent if they conform to a predetermined standard. It is this underlying standard or ‘specifications’ that defines the commodity and not any quality inherent in the particular product. Commodities can be agricultural or non-agricultural in nature. In the case of agricultural commodities, the specifications are often more elaborate and include stipulations on origin of the commodity, maximum permissible foreign particles, moisture content, etc.
In the Indian context, commodities can be broadly classified under the following categories:
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Precious Metals: Such as Gold and Silver Base Metals: Such as Steel, Nickel, Tin, Iron, Copper, Zinc Energy Products: Such as Crude Oil, Furnace Oil, Natural Gas Plastics & Petrochemicals: Such as Polypropylene (PP), High Density Polyethylene (HDPE) Agricultural Commodities: These are varied and are classified in sub-groups such as:
1. Cereals - like Wheat, Maize, Rice 2. Pulses - like Chana (Gram), Urad (Black Matpe), Lemon Tur, Masoor, Field Peas, etc. 3. Oil Complex - like Soyabeans, Soy Oil and Soy Meal, Mustard Seed and Oil, Crude Palm Oil, etc 4. Spices - like Turmeric, Chilli, Black Pepper, Cumin, Cardamom 5. Plantation Crops - like Coffee, Cashew, Rubber Fibres - like Cotton, Jute, Mulberry Cocoons, etc. Life Insurance Life insurance helps Provide financial assurance & security for your dependents & loved ones. It is an important part of the financial planning bouquet for all individuals & families. Life insurance products offer comprehensive financial solutions which besides offering financial security also provide opportunity for saving, investment & tax planning. Life insuarance is an agreement between the I nsured and an insurer. Under the term of life insuarance contract,the insurer promises to pay a certain sum to a beneficiary when he die, in exchange for your premium payments.
General Insurance Reliance General Insurance, a Subsidiary of Reliance Captial, is one of the first non-life companies to get the license from the IRDA. RGICL offers an exhaustive range of insurance products that covers most risks including Property, Marine, Casualty and Liability
Net Asset Value (NAV) The market value of one unit of a mutual fund. New Fund Offering Initial offering of units to prospective investors by a new mutual fund scheme Net Worth Total assets minus total liabilities of an individual or company. Permanent Account Number An alphanumeric number assigned by the income tax department to taxpayers. Arbitrage
Buying securities in one market and simultaneously selling in another market to profit from the price differential. Balance Sheet A statement of a company's assets and liabilities on the last day of the year. Bonus Shares New shares issued to existing shareholders of a company, for free, out of the company''s accumulated reserves. Broker A person who is authorized to buy and sell shares on the stock exchange directly. Commercial Papers A short-term debt security issued by a company or bank to finance its short-term funding needs. Asset Allocation Investing one's wealth across different investment options such as equity, debt, mutual funds, gold, real estate, etc. Asset Management Company A company that manages the investment/corpus of a mutual fund. Balanced Fund A mutual fund scheme that invests in both equity and debt, generally in the ratio of up to 60 per cent in equity and the balance in debt. Money Market Fund This is a mutual fund scheme which provides liquidity, preservation of capital and moderate income. It invests in short-term securities such as Treasury bills, Commercial Paper, Inter-bank call money market, etc.
(same as liquid fund). Income Fund A mutual fund scheme that primarily seeks income rather than growth of capital. Liquid Fund This is a mutual fund scheme which provides liquidity, preservation of capital and moderate income. It invests in short-term securities such as Treasury bills, Commercial Paper, Inter-bank call money market, etc. (same as money market fund). Index Fund A mutual fund scheme that tracks a stock market index by investing in the stocks constituting that index in the same proportion as the weightage given to them in the index. ELSS A diversified equity mutual fund scheme (ELSS stands for Equity Linked Saving Scheme) which offers a tax deduction on the investment amount. Gilt Fund A mutual fund scheme that invests primarily in government securities. Entry Load A charge on investors at the time of buying the units of a mutual fund Exit Load A charge levied on an investor on exiting from a mutual fund scheme (redeeming the scheme''s units). Arbitrage funds Arbitrage funds are mutual fund schemes, which make profits through
the differences in prices of stocks in the equity (cash) markets and the derivatives market or between two cash markets. For Eg:- NSE and BSE. Asset allocation funds Asset allocation funds are mutual fund schemes that offer the advantage of investment in both debt and equity securities with the flexibility to move in and out of equities and debt or fully invest in stocks or bonds. Contra Funds ''Contra’ funds are equity-diversified mutual fund schemes, which offer the opportunity to invest in ‘under-valued’, but fundamentally strong stocks, which have the potential to deliver significant gains. Exchange Traded Fund A mutual fund which invests in stocks forming an index such as the BSE Sensex or the NSE Nifty. The scheme is listed and traded on the stock exchange. Floating rate fund A debt mutual fund scheme which invests in debt securities offering floating interest rates i.e. interest rates are benchmarked to a debt market index and change along with change in the benchmark. Fund of Funds A Fund of Funds is a mutual fund scheme that does not directly invest in stocks, bonds and fixed income securities or other securities but invests in units of other mutual fund schemes. Dividend reinvestment option This is offered by mutual funds to their investors. Dividends declared
are reinvested in the scheme on behalf of the investor who is allotted fresh units to the extent of the dividend amount at the prevailing NAV. Dividend yield funds Dividend yield funds provide investors the combination of capital growth and income by investing primarily in a well-diversified portfolio of dividend paying companies that have a relatively high dividend yield (Dividend yield = dividend paid by the company / market price of the company’s share). Diversified equity fund A mutual fund scheme that invests in equity shares of companies across different sectors. Equity diversified fund A mutual fund scheme that invests in equity shares of companies across different sectors. Opportunity / Thematic Fund Opportunity funds are diversified equity, sector or market-cap based mutual fund schemes which focus on making the most of opportunities available in the domestic or international markets by investing in stocks of companies which are expected to benefit from these opportunities. Monthly Income Plan A mutual fund scheme which aims at providing regular income (not necessarily monthly - it can be quarterly or half-yearly, too) to the unitholder, by way of dividend. The scheme invests predominantly in debt securities with a small component of the corpus invested in equity to ensure higher return. Market capitalization based funds These are mutual fund schemes, which invest in stocks based on the
market capitalization of the stocks (market capitalisation = the market price of the stock x the total number of shares issued by the company). Market value The price at which an asset/security is bought/sold. Mark-to-market Relating prices of securities in a portfolio or account to their current market prices to calculate profits and losses. Diversification Practice of investing across a number of asset classes and securities to reduce risk. Dividend Distribution of profits to shareholders. Interim dividend A dividend that is declared and distributed before a company''s annual earnings have been calculated. It is often distributed at the end of half the year or a quarter. Debt-equity ratio A financial ratio which is computed by dividing the debt (borrowing) of the company by the net worth (equity capital + reserves). It indicates how much has been borrowed vis-à-vis ownership funds. Dividend payout ratio A financial ratio that divides dividends paid by company earnings and is multiplied by 100 in order to be expressed as a percentage . Earning per share (EPS) This is a financial ratio where the company’s net profit is divided by the
total number of shares issued by the company in order to compute how much the company has earned on each share issued. Expiration/Expiry Date The date on which a derivative contract expires. Fixed Maturity Plans (FMPs) Fixed Maturity Plans are close-ended mutual fund schemes, which invest in debt securities that match the tenure of the fund. Derivative A risk-management security whose value is derived from the underlying asset. Bear market Period when the market is moving southward and there is high selling pressure. Bull market Period when the stock market is moving northward and there is high buying pressure. Forwards An agreement between two parties to buy/sell an asset on a certain future date at an agreed price. Futures A standardised, tradable contract between a buyer and seller which specifies the quantity, price and date on which an underlying asset will be exchanged. Options Options are derivatives contracts that give the holder the right to buy (call) or sell (put) a specified amount of the underlying security at a
specified time. However, the option holder is not obliged to buy/sell i.e. he may not exercise his option. Historical data Past information about a company, which is used to forecast the company''s future prospects. Insider trading An illegal practice wherein a person who has access to confidential and strategic top-level information about a company, profits from it by trading in the shares of the company. Load Purchase or redemption fee charged by a mutual fund on entry or exit from a scheme Margin buying Purchase of shares that is part-financed by the buyer''s broker. Margin call A call by the broker to his client to fulfil the minimum margin requirement (as specified in the client-broker agreement) by depositing cash or shares. Market capitalization The total number of shares issued by a company multiplied by the market price of the company''s share. Out Of The Money An option contract, wherein the strike price in the contract is higher than the market price of the underlying asset. Premium The price to be paid in order to purchase an option.
Put Option This option gives the holder the right to sell an underlying asset by a certain date for a certain price. However, the option holder is not obliged to sell i.e. he may not exercise his option. Rally A speedy rise in the price of a share or the stock market Ratio analysis Financial analysis of a company''s accounts by interpreting relationships between financial variables. Record date The date on which an individual must own shares/units in order to be eligible for receiving a declared dividend or bonus. Redemption A mutual fund buying back its units from its investors. Registrar & Transfer Agent An agency which handles all paperwork involving investor servicing. Repurchase price The price at which an investor can sell his mutual fund units back to the fund. Retail investor An individual who purchases securities in modest quantities. Rights issue An issue of new equity to existing shareholders at an offer price, which is below the market price of the share Rupee cost averaging An investment strategy where an investor purchases securities worth a
fixed amount regularly, in effect buying fewer securities when the market price is high and more when it is low. Sector fund A mutual fund scheme that invests in a specific industry such as pharma, banking, etc Securities Transaction Tax (STT) Tax levied on your equity mutual fund investment, equity shares and derivatives. Sensex A popular stock market index (short-form for Sensitive Index) created and maintained by the Bombay Stock Exchange. Strike price The price at which an underlying asset could be bought in the future as per a derivative contract. Swap An agreement between two counter parties to exchange their cash flow streams, without liquidating the asset that generates those flows. Systematic Investment Plan (SIP) An investment strategy offered by mutual funds where an investor purchases units worth a fixed amount regularly, in effect buying fewer units when the NAV is high and more when the NAV is low. Systematic Transfer Plan (STP) An investment strategy where an investor invests a lump sum amount in a mutual fund scheme and transfers a fixed amount from this scheme to another scheme periodically. Alternatively, only the appreciation/income earned is transferred
Systematic Withdrawal Plan (SWP) A redemption strategy offered by mutual funds where an investor redeems units worth a fixed amount regularly, in effect redeeming fewer units when the NAV is high and more when the NAV is low. Technical analysis Studying stock price trends using stock price charts (same as charting) Yield The return that is earned on an investment Allotment Issue of equity shares offered in the IPO to successful bidders. Bid An offer made by a prospective investor to subscribe to shares of a company’s IPO at a specific price. Book-building A price discovery mechanism wherein the company only defines a price band and invites investors to submit Cut Off Price In a book built issue, the issuer is required to indicate a price band in the red herring prospectus. The actual discovered issue price can be any price in that band. This issue price is called “Cut off price”. SEBI guidelines permit only retail individual investors to apply at the cut off price.
QUESTIONNAIRE We are conducting a survey on Investor’s behavior towards investment in stock market, please help us:1. If given choose from following Brokege firms,Which one you will prefer? Reliance Money ICICI Religare HDFC Sharekhan Indiabulls Others(pl. mention name) 2. What features you look while opening Demat A/C . Brand name of company Brokerage charges Online fund transfer facility Customer care facility R.M. services Annual maintenance charges Reliability Training facility for customers Others 3. Where you like to invest? IPO’s Equity Derivatives
Mutual Funds Commodities other 4. Does “Debit cum ATM card” facility is available in bank.
5. How do you rate the following. a. Withdrawal facility Highly satisfied ___ ___ ___ ___ ___ Highly dissatisfied b. c. d. e. f. g. 6. Insurance policies Loan schemes Online services Interest Rates Credibility Highly satisfied ___ ___ ___ ___ ___ Highly dissatisfied Highly satisfied ___ ___ ___ ___ ___ Highly dissatisfied Highly satisfied ___ ___ ___ ___ ___ Highly dissatisfied Highly satisfied ___ ___ ___ ___ ___ Highly dissatisfied Highly satisfied ___ ___ ___ ___ ___ Highly dissatisfied
Customer satisfaction Highly satisfied ___ ___ ___ ___ ___ Highly dissatisfied Do you find branches of the bank in rural areas.
Yes No 7. Are you satisfied with the services of the bank. Yes No
Have you taken any insurance policy of the bank. Yes No
11-20 20-30 30-40 40-50 Above 50
FINDINGS AND ANALYSIS
On the basis of the survey done at RELIANCE MONEY, sector 14, Gurgaon, following are the findings along with the analysis. Analysis of Questionnaire 1) Following graph describes the relationship between the age and the kind of investments people make:
(Source: data collected during the study)
1= Insurance 4= P.O. Savings
2= Equity 5= Bank FD
3= Mutual Funds 6= Company Bonds
Analysis:Age group 18 – 24 years: Largely investment is made into equity as this age group has large disposable income and is therefore ready to take the risk. It is also observed that still bank fixed deposits are made by this age group, because they have salary account so FD’s are created. Company bonds are also a preferred option. Age group 25 – 30 years: This age group lay stress on both the returns and tax planning. For tax purpose it is observed that “unit linked investment plans are preferred as they also provide the insurance cover. Their investment into equity related funds is less in comparison to previous age group. Age group 31 - 45 years: Investment pattern of this group is same as that of 25-30 year group. Age group 46 – 55 years: In this age group inclination towards insurance and mutual fund has increased. The reason observed is - in this age group, people start planning for their retirement. Age group above 55 years: Since insurance is difficult to get at this particular age because of health options, so it was observed that people generally invest into higher return funds like mutual funds and also direct investment into equity is avoided.
2) The graph describes the relationship between the occupation of the people and the factors considered for preferring any asset management company:=
O ccup atio ns V S Prefernces
40 30 46 20 10 0 17 38 18 10 35 32 26 23 19 24 12
Se lf Employe d Proffe sional Pre fe re nce T ype 1 2 3 4
Source: data collected during the study) 1= Brand type 3= Fund manager 2= Return record 4= Scheme type
Analysis:Salaried:Under this category different income groups were consulted and it was observed that return factor is most crucial for this segment. So they are also
interested to know about the scheme type (growth, dividend). Brand type is considered by the people who are into the corporate sector; rest government employees are least aware of it.
Self employed:This category includes businessmen; contractors etc. It was observed that they are least concerned about factors like brand type or fund manager. They ask for good returns and scheme type is also considered. It was clear from the survey that this segment needs the awareness about mutual funds as they still prefer to invest into their own business, but if they are convinced, then they can be converted into big potential customers.
Professional: This category involves architects, engineers, doctors, lawyers. They are aware of the various financial instruments so they are concerned about brand type and the returns. They track the NAVs time to time. It is also hard to convince this category. They are also interested in maintaining their portfolios. So the institution which provides them with the facility of portfolio is given preference.
3) Following graph shows the relationship between annual income and the type of investment made:
In c o m e V S ty p e s o f In v e s tm e n t
40 35 30 Percentage of preference(%) 25 20 15 10 5 0 1 2 3 4 T y p e s o f In v e s tm e n t B e lo w 2 L a k hs2 - 4 L a c s 4 - 6 L a c s A b o ve 6 L a c s 15 13 15 38 38 29 34 36 31 33 17 20 20 12 30 19
(Source: data collected during the study) 1= Bank FD/ P.O. Scheme 3= Equity 2= Insurance 4= Mutual Funds
Analysis:Income group below 2 lakhs: This category invest major amount into bank’s FD or post office schemes. They do not go for equity related investments because of fund shortage. Although insurance is given some weight age but it is generally life
insurance without investment options. Now it is observed that this segment has also started investing into mutual funds although it is a small investment. Income group between 2 – 4 lakhs: This category’s major area of investment is in mutual funds and insurance. Since they have enough disposable income so considerable amount is invested into equity related funds. An investment in bank FDs is made automatically since the salary comes in the account otherwise no specific direct investment is made into such options. By increasing the awareness about MF they can be potential customers. Income group between 4 – 6 lakhs: They have enough disposable income so major investment is made into both equity and mutual funds. Insurance is also given due weight age but with the equity related options for better returns. They are updated with the features so thorough knowledge is needed before advising them any fund. Income group above 6 lakhs: They too have enough disposable income so major investment is made into both equity and mutual funds. This category also demands for portfolio facility. They are important customers so specific relationship executives are assigned to them. They are continuously updated about new fund schemes.
Shares and mutual funds play a significant role in economical growth of the country. Hence the support system in terms of providing finance and managing of risks, financial institutions must have optimum focused product and series for customers.
Limitations of Study
Risk of misinformation: I had to continuously judge myself as in case if
there would have been any miscommunication regarding the services it would create a problem for the company under which I was doing my Internship. Such situations can lead to totally a different view to the target customer and the public. This may have an adverse effect on the image and the goodwill of the client.
Rely On Secondary Sources: As I had to get most of the data from sites & magazines, I had to rely on these secondary sources which could have proven adverse for me as well as my company.
For Investors:Start Early:The sooner you invest, the more time your money will have to grow. If you delay, you will almost certainly have to invest much more to achieve a similar result. Keep some cash aside: It is always a good idea to have some money in a deposit account in case of emergencies, which should be enough to cover three months’ living expenses. Ask yourself how much risk you can take: There is absolutely no point having a stock market investment if you are going to lose sleep every time share prices go through a rough patch. It’s vital that you are realistic about your appetite for risk – an Investment Adviser may be helpful to you to decide how much risk you can tolerate. B e a r i n m i n d t h a t i n f l a t i o n w i l l e a t y o u r s a v i n g s : Returns on risk-free cash investments may sound respectable, but when you subtract the current rate of inflation you may not be so impressed. For significant long-term growth you need to make your money work a little harder. “ INFLATION – THE TICKING TIME BOMB” . Think carefully how long you will be investing: Only look at the stock market if you are prepared to put your money away for five to ten years, or perhaps even longer. If you are likely to need your money any sooner, keep it in a lower-risk
investment so that there is less chance of a fall in value just before you make a withdrawal. Never put your all eggs in one basket : It’s rarely a good idea to have all your eggs in one basket. Depending on one’s goals and one’s attitude towards risk, an investor should spread his money across different types of investment – equities, bonds and cash. An investor should also try to diversify within each of these categories. With equities, for example a mutual fund will invest your money in a variety of companies but you may want to ensure you have a range of industry sectors too. Invest Regularly: Investing regularly can be a great way to build up a significant lump sum. The investor can also benefit from what is known as the concept of ‘Rupee cost averaging’. This means that, if an investor is investing in a mutual fund, over the years he will pay the average price for units. If the market goes up, the unit one already own will increase in value. If the market goes down, the next installment to be paid by the investor will fetch him more units. R E V I E W Y O U R I N V E S T M E N T P E R I O D I C A L L Y : A portfolio that is right for you at one point in your life may not be quite so suitable a few years later. Your investments need to adapt to changes in your circumstances, such as getting married, having children or starting a business. It’s also a good idea to check that each of the funds in your portfolio is living up to your expectations. Talking to an investment advisor could help one decide whether you need to switch money between funds.
For Company:We suggest following measures, which Reliance Money could take so as to take on heavy competition from Indiabulls and 5 Paisa.com :
High Promotion:To identify regions where promotions are required. RMoney lacks visibility in Southern region where as it is a well known name in western region. Even then, its promotional campaign focuses on western region where as southern region is still waiting for promotional campaigns.
Reduce cost: Try to reduce cost, so that benefits can be passed on to customers. Senior managers at Reliance Money keep on telling that it is difficult to reduce cost, because of services we provide. But the fact is, India being a price sensitive market; people at times go for monetary benefits rather than for long-term non- monetary benefits.
Customized services: If charges can’t be reduced because of costs involved, make the services customized, so that services are provided to only those customers who are willing to pay the price for services they are getting and let the other customers enjoy costs benefits without getting services.
Concept of margin funding should be introduced, as more and more people are asking for it. Customer Interaction: Reliance Money should contact with their clients regularly for knowing the problems faced by them. This will help in providing best services to customers. This will result in additional customer base by getting further references from satisfied clients.