Research Extract

There are myriad choices available to the investor of today. Investment avenues are galore. There are different investment vehicles such as stocks and bonds mutual fund, Iinsurance, gold and jewellary. We however need to invest carefully, and work out various investment options and decide on how to make best of our investment in terms of monetary benefits. The document provides the details of study titled Analysis and study on understanding the risk return relation of an individual with respect to their Age in Bangalore city Among the competitive and complex market scenario in India it is difficult to analyze the changing attitudes like where to invest, how much to invest, the field is vary competitive. An attempt is made here to assess the risk return relation of a individual with respect to their Age in Bangalore city On the outset itself the problem was identified and defined with the help of convince sampling. The researcher carried out this survey keeping in mind the need and importance of the proposed study. This has enabled the researcher to easily determine the scope and the objective of this study. A descriptive approach was considered ideal for the study as it entailed the ever-changing opinion of investor

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An appropriate research methodology for the systematic design of report, collection, analysis and reporting of data and findings relevant to the specific marketing situation facing the organization was employed. Primary data is collected by interviewing persons chosen for this study with the help of a structural, open and close-ended questionnaire.
Secondary data is collected from various journals, reports and websites.

Analysis of data is done by tabulating the data and pictorially representing the same in the form of bar charts besides precise interpretation is also provided. Simple random sampling technique is used for this study and the sample size is of 100 peoples from Bangalore city. The respondent response was presented with a well-structured

questionnaire as a part of the survey method. The opinions of the respondents were rated on a scale to arrive at the the conclusions The analysis of the data led to a wide pool of findings about various aspects related to the investing decisions. These findings were taken up for logical conclusions. Some interesting findings were made during the course of the study.

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Design of study

0.

STATEMENT OF THE PROBLEM HYPOTHESIS SETTING

SETTING OBJECTIVES

POPULATION SELECTION AND SELECTING SAMPLE

PREPARING QUESTIONNAIRE

DATA COLLECTION

ANALYSIS OF FINDING AND TESTING OF HYPOTHESIS

FINDING, RECOMMENDATON & CONCLUSION

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Introduction
There are myriad choices available to the investor of today. Investment avenues are galore. There are different investment vehicles such as stocks and bonds. We however need to invest carefully, and work out various investment options and decide on how to make best of our investment in terms of monetary benefits. INTRODUCTION TO SECURITIES MARKET The issue of securities by corporate units in India is as old as the introduction of joint stock enterprises by British government. The 18th and 19th centuries saw the emergence of cotton and jute textiles and tea plantation industries in India. Many companies were setup as joint stock with liability limited by shares. A vast number of businessmen in major cities purchased these shares and trading started in them early in the 19th century. The corporate securities came to have a market first. So far as the Government is concerned, the British India Government borrowed mostly in London by issue of sterling consoles. Only later in the 19th century did the Government Issue Treasury bills in the Government securities in rupees. This led to the emergence of government securities market also in India.

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MEANING OF SECURITIES

Which are all claim on money? These instruments may be of various categories Investment in capital market is in various financial instruments, with different characteristics. These are all called securities in the market parlance. In a legal sense also, the Securities Contract Act 1956 has defined securities as inclusive of shares, scripts, stocks, bonds, debentures, stock or any other marketable securities of a like nature in or of any debenture of a company or body corporate, the government and semi-government body etc. In strict sense of word, a security is an instrument of Promissory note or a method of borrowing or lending or a source of contributing to the funds needed by the corporate body or noncorporate body. The securities contract (regulation) act, 1956(the SCR ACT) is the basis for the regulation of securities contract and stock Exchange in India. It was enacted in 1956 and came into force on February 20, 1957. It regulates the business of trading on stock Exchange and options trading and provides for recognition of stock exchange and related matter like listing of securities, transfer of securities, etc. the rules and by laws of the Stock exchange also govern the regulation of trading.

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SECURITIES MARKET It is a broad term embracing a number of markets in which securities are bought and sold or the market, in which the securities are dealt, which is called the securities market. There are number of sub market in the wide sense of securities market, like debt market, equity market etc. These markets help the issuers of securities, investors, intermediaries and the national economy as a whole who are all involved in the operation. Firstly the issuer will benefit as they can raise fund through this method for financing their operations. Secondly, for investor the markets provide an avenue for channeling their savings and liquidity is imparted tom them for their operation of investment and disinvestments. The financial intermediaries like bankers, brokers, etc., provide a host of services, to both investor and issuers and bring them together and enable savings and investment to meet on a common ground. The nation and the economy as a whole will benefit as these markets promote savings and capital formation in the country leading to industrial growth and economic development with a multiplier effect on income, employment and output. One way in which securities market may be classified is by the types of securities bought and sold there. The broadest classification is based upon whether the securities are new issues are already outstanding and owned by investors. New issues are made available in the primary market; securities that are already outstanding and
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owned by investor are usually bought and sold through the secondary markets. Another classification is by maturities, securities with maturities of one year or less normally trade in the money market; those with maturities of more than one year bought and sold in the capital market need less to say classification system has many variations.

CAPITAL MARKET IN INDIA

A Transformation The capital market was a marginal institution in the Indian financial system for almost 3 decades after India's independence. During this period, not many companies accessed the capital market and the quantum of funds mobilized through the capital market was emerging. Investors, in general, were not familiar or interested in corporate securities and the investor population is small, trading volumes were small and price earnings multiples modest, and equity investors, in general, were under compensated for the risk borne by them. The classification of markets, are most interested in is the one, that differentiates between new and old securities- the primary and secondary market.

PRIMARY MARKETS
Securities available for the first are offered through the primary securities market i.e., a market for new issues of shares, debentures and bonds here investor supply directly to the issuer for allotment and pay

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application money to the issuer's account. The issuer may be brand-new company or one that has been in business for many and many years. The securities offered might be a new type for the issuer or additional amounts of a security used frequently in the post. The key is that these securities absorb new funds for the offers or issuers whereas in secondary markets, existing securities are simply being transferred between parties and the issuer is not receiving new funds. After their purchase in the primary market, securities are traded subsequently in the secondary market.

SECONDARY MARKET
It is place where securities already issued are traded. It is different from the primary market where in the issuer sells securities directly to the investors. The stock exchange is an organized market place where securities are traded. The Government, Semi-government bodies, public sector undertakings and companies for borrowing funds and raising resources, issues these securities. Securities are defined as any monetary claims (promissory notes or I.O.U) and include stock, shares, debentures, bonds, etc. Under the securities contract act of 1956, the central government regulates security trading and such trading can take place only in stock exchange recognized by government under this act. There at present 21 such exchanges in India. Of these major stock exchanges, like Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Bangalore, etc., are permanently recognized while a few are temporarily recognized. The above act has laid down that trading in approved contracts should be done through registered members of the exchange. As per the rules made under the above act, trading in securities permitted to be trade would be in normal trading

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hours (10 a.m. to 4 p.m. working days- vary from exchange to exchange) in the trading ring, as specified for trading purpose.
INNOVATION IN FINANCIAL INSTRUMENTS

Till 1992, corporate had limited freedom in designing and pricing financial instruments with the enunciation of new guidelines on capital issues by SEBI in 1992, corporate, were given considerable latitude in the design of financial instrument. Thanks to this freedom, a number of new instruments like deep discount bonds, potable-cum-callable bonds, floating rate bonds, and index bonds have been introduced.
EMERGENCE OF NUMEROUS CAPITAL MARKET INTERMEDIARIES

Many new capital market intermediaries have emerged; while there was only one mutual fund (UTI) in existence till 1986, a number of new mutual funds have come into being since then.

ESTABLISHMENT OF NEW STOCK EXCHANGE AND GROWTH IN TRADING

Stock exchanges are the pivot of the capital market. They serve as the channels through which primary issues are offered to the investing public and they provide the mechanism through which outstanding securities are traded. While there were only 9 recognized stock exchanges in 1980, the number has gone up to 22 by the end of 1997. The most important event, of course, those been establishment of NSE in November

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1994. With in a short period, it has emerged as the principal stock exchange in the country

INTRODUCTION TO DERIVATIVES
In the present state of the economy, there is an imperative need for the corporate clients to protect their operating profits by shifting some of the uncontrollable financial risks to those who are able to bear and manage them. Thus, risk management becomes a must for survival since there is a high volatility in the present financial markets. In the present state of the economy, there is an important place as a risk reducing machinery. Derivatives are useful to reduce many of the risks discussed above. In fact, the financial service companies can play a very dynamic role in dealing with such risks. They can ensure that the above risks are hedged by using derivatives like forwards, futures, options, swaps etc. Derivatives, thus, enable the clients to transfer their financial risks to the financial service companies. This really protects the clients from unforeseen risks and helps them to get their due operating profits or to keep the project well within the budgeted costs. To hedge the various risks that one faces in the financial market today, derivatives are absolutely essential. Stock Market Derivatives Despite of many institutional setups, financial securities are always exposed to price risk for, they are written on future cash flows that are embedded with uncertainty. It is this eagerness of the risk adverse investors to protect them against such price risk that has led to the development of the derivative market. A derivative, such as future or option is an

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instrument whose value is derived from the value of one or more underlying assets, which can be a commodity currency, stocks, stock indices etc. These are basically hedging tools that facilitate an investor who is long on stock to protect from its down side, if any, by taking an offsetting position in the derivatives market. What are derivatives? In a broad sense, many commonly used instruments can be called derivatives since they derive their value from an underlying asset. For instance, equity share itself is a derivative, since it derives its value from the firms underlying assets. Similarly, one takes an insurance against his/her house covering all risks. This insurance is also a derivative instrument on the house. In a strict sense, derivatives are based upon all those major financial instruments, which are explicitly traded like equities, debt instruments, forex instruments and commodity based contracts. Thus, when we talk about derivatives, we usually mean only financial derivatives, namely, forwards, futures, options, swaps etc. The peculiar features of these instruments are that: (i) They can be designed in such a way so as to cater to the varied requirements of the users either by simply using any one of the instruments or by using a combination of two or more such instruments. (ii) They can be designed and traded on the basis of the expectations regarding the future price movements of underlying assets.

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(iii) (iv)

They are all off-balance sheet instruments and They are used as a device for reducing the risks of fluctuations in asset values. A derivative is a financial instrument that derives its value from an

underlying asset. This underlying asset can be stocks, bonds, currency, commodities, metals and even intangible, pseudo assets like stock indices. In other word, derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate) in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. For example, wheat farmers may wish to sell their harvest at a future date to eliminate the risk of a change in prices by that date. Such a transaction is an example of a derivative. What exactly is meant by derives its value from an asset? What the phrase means is that the derivative on its own does not have any value. It is considered important because of the importance of the underlying. When we say an Infosys future or an Infosys option, these carry a value only because of the value of Infosys. In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R) A) defines derivative to include

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1. A security derived from a debt instrument, share, and loan whether secured or unsecured, risk instrument or contract for differences or any other form or security. 2. A contract, which derives its value from the prices, or index of price, of underlying securities. Derivatives are securities under the SC(R) A and hence the trading of derivatives is governed by the regulatory framework under the SC(R) A. Derivatives can be of different types like futures, options, swaps, caps, floor, collars etc. The most popular derivative instruments are futures and options. Equity derivative markets in India were launched in April 2000. Within the span of one and a half years thereafter, the entire range of exchange traded equity derivatives products, from index futures: index options, stock options and single stock futures contracts have been successfully launched. The equity derivative markets in India have been structured after studying practices in equity derivative markets globally, and keeping in mind the unique culture and ethos of the Indian market. The processes of trading and settlement of equity derivatives contracts are consistent with the international standards prescribed by BIS-IOSCO and EACH (European Association of Central Counter Party Clearinghouses).

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PRODUCTS, PARTICIPANTS AND FUNCTIONS Derivative contracts have several variants. The most common variants are forwards, futures, options and swaps. The following three broad categories of participants Hedgers, Speculators, and arbitrageurs trade in the derivatives market. Hedgers are the people who buy or sell to minimize their losses. For example, an importer has to pay US $ to buy goods and rupee is expected to fall to Rs.50/$ from Rs.48/$, then the importer can minimize his losses by buying a currency future at Rs.49/$. Speculators are the people who buy or sell in the market to make profits. For example, if you know that the stock price of Reliance is expected to go upto Rs.450 in 1 month, one can buy a 1-month future of Reliance at Rs. 400 and make profits. Arbitrageurs are the people who buy or sell to make money on price differentials in different market. For example, a futures price is simply the current price plus the interest cost. If there is any change in the interest, it presents an arbitrage opportunity.

TYPES OF DERIVATIVES
The following are the popular and important derivatives:

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(i) (ii) (iii) (iv)

Forwards Futures Options and Swaps

(i) FORWARDS

A forward contract is one to one bi-partite contract, to be performed in the future, at the terms decided today. (E.g. forward currency market in India).

Forward contracts offer tremendous flexibility to the parties to design the contract in terms of the price, quantity, quality (in case of commodities), delivery time and place.

Forward contracts suffer from poor liquidity and default risk.

Forwards are the oldest of all the derivatives. A forward contract refers to an agreement between two parties to exchange an agreed quantity of an asset for cash at a certain date in future at a predetermined price in that agreement. instrument etc. In a forward contract, a user (holder) who promises to buy the specified asset at an agreed price at a fixed future date is said to be in the Long position. On the other hand, the user (holder) who promises to sell at an agreed price at a future date is said to be in Short position. Thus, The promised asset may be currency, commodity,

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Long position and Short position take the form of buy and sell in a forward contract. Features of forward contracts 1. Traded in Over the Counter (OTC) markets. 2. No down payment required. 3. Settlement is done on the date of maturity. 4. Linearity: symmetrical gains or losses due to the price fluctuation of underlying asset. 5. No secondary market is available. 6. Necessity of third party is required.

(ii) FUTURES
A future contract is very similar to a forward contract in all respects excepting the fact that it is completely a standardized one. Hence, it is rightly said that a futures contract is nothing but a standardized forward contract. It is legally enforceable and it is always traded on an organized exchange. A future is a contract to buy or sell an asset at a specified future date at a specified price. These contracts are traded on the stock exchanges and it can change many hands before final settlement is made. Features of future contracts 1. Highly standardized in nature.
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2. No down payment is required at the time of agreement. 3. Settlement: futures instruments are marked to the market and the exchange records profit and loss on them on daily basis though held till maturity. 4. Hedging of price risk is most common in futures. 5. Non-linearity. 6. Non-delivery of asset: In future contracts generally parties simply exchange the difference between the future and spot prices.

The advantage of a future is that it eliminates counterparty risk. Since there is an exchange involved in between, and the exchange guarantees each trace, the buyer or seller does not get affected with the opposite party defaulting.

Commodity futures A commodity future is a futures contract in commodities like agriculture products, metals and minerals etc. In organized commodity future markets, contracts are standardized with standard quantities. Of course, this standard varies from commodity to commodity. They also fixed delivery dates in each month or a few months in a year. In India commodity futures in agricultural products are popular. Financial futures Financial futures refer to a futures contract in foreign exchange or financial instruments like Treasury bill, commercial paper, and stock

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market index or interest rate.

It is an area where financial service

companies can play a very dynamic role. Financial futures are very popular in Western countries as hedging instruments to protect against exchange rate/interest rate fluctuations and for ensuring future interest rates on loans. The Stock Index Futures contract is a futures contract on major stock market indices. This type of contract is very much useful for speculators, investors and especially portfolio managers. They can hedge against future decline or increase in prices of portfolios depending upon the situation. Generally the asset will not be delivered on the maturity of the contract. The parties simply exchange the difference between the future and spot prices on the date of maturity. But, these kinds of financial futures are relatively new in India.

(iii) OPTIONS
In the volatile environment, risk of heavy fluctuations in the prices of assets is very heavy. Option is yet another tool to manage such risks. Options are one better than futures. In option, as the name indicates, gives one party the option to take or make delivery. But this option is given to only one party in the transaction while the other party has an obligation to take or make delivery. The asset can be a stock, bond, index, currency or a commodity.

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But since the other party has an obligation and a risk associated with making good the obligation, he receives a payment for that. This payment is called as premium. The party that had the option or the right to buy/sell enjoys low risk. The cost or this low risk is the premium amount that is paid to the other party. The buyer of the right is called the option holder. The seller of the right (and buyer of the obligation) is called the option writer. The cost of this transaction is the premium. In an options contract, the seller is usually referred to as a writer since he is said to write the contract. It is similar to the seller who is said to be in Short position in a forward contract. However, in a put option, the writer is in a different position. He is obliged to buy shares. In an option contract, the buyer has to pay a certain amount at the time of writing the contract for enjoying the right to buy or sell. American Option Vs European Option In an option contract, if the option can be exercised at any time between the writing of the contract and its expiration, it is called as an American option. On other hand, if it can be exercised only the time of maturity, it is termed as European option. Types of options Options may fall under any one of the following main categories: 1. Call Option

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2. Put Option 3. Double Option

1) CALL OPTION A call option is one, which gives the option holder the right to buy an underlying asset (commodities, foreign exchange, stocks, shares etc.) at a predetermined price called exercise price or strike price on or before a specified date in future. In such a case, the writer of a call option is under an obligation to sell the asset at the specified price, in case the buyer exercises his option to buy. Thus, the obligation to sell arises only when the option is exercised. 2) PUT OPTION A put option is one, which gives the option holder the right to sell an underlying asset at a predetermined price on or before a specified date in future. It means that the writer of a put option is under an obligation to buy the asset at the exercise price provided the option holder exercises his option to sell.

3) DOUBLE OPTION A double option is one, which gives the option holder both the rights either to buy or to sell an underlying asset at a predetermined price on or before a specified date in future.

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Option Premium In an option contract, the option writer agrees to buy or sell an underlying asset at a future date for an agreed price from/to the option buyer/seller at his option. This contract, like any other contract must be supported by consideration. The consideration for this contract is a sum of money called premium. The premium is nothing but the price, which is required to be paid for the purchase of right to buy or sell. The premium, one pays is the maximum amount to which he is exposed in the market, since, in any case he cannot lose more than that amount. Thus, his risk is limited to that extent only. However, his gain potential is unlimited. In the case of a double option, this premium money is also double.

Options Market Options market refers to the market where option contracts are brought and sold. Once an option contract is written, it can be bought or sold on the options market. The first option market namely the Chicago Board of Options Exchange was set up in 1973. Thereafter, several options markets have been established.

Features of Option Market

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1. Highly Flexible. 2. Down Payment. 3. Settlement. 4. Non-Linearity. 5. No Obligation to Buy or Sell.

iv) SWAPS
Swap is yet another exciting trading instrument. Infact, it is a combination of forward by two counterparties. It is arranged to reap the benefits arising from the fluctuations in the market either currency market or interest rate market or any other market for that matter. Features of Swaps 1. Basically a forward. 2. Double coincidence of wants. 3. Necessity of an intermediary. 4. Settlement Long-term agreement. Kinds of Swap A swap can be arranged for the exchange of currencies, interest rates etc. A swap in which two currencies are exchanged are exchanged is called cross-currency swap. A swap in which a fixed rate of interest is exchanged for a floating rate is called interest rate swap. This interest rate swap can

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also be arranged in multi-currencies. A swap in which on stream of floating interest rate is exchanged for another stream of floating interest is called Basis swap. Thus, swap can be arranged according to the requirements of the parties concerned and may innovative swap instruments can be evolved like this. 1. Borrowing at Lower Cost. 2. Access to New Financial Markets. 3. Hedging of Risk. MUTUAL FUND Mutual Fund investments are Collective Investment Schemes, which collect Contribution from the subscribers and invest them in a variety of transferable assets such as ordinary shares and bonds. These Trusts are run by experienced Investment Managers who use their knowledge and expertise to select individual securities, which are classified to form portfolios that meet predetermined objectives and criteria. These portfolios are then sold to the public. They offer the investors the following Main services: 1. Easy and convenient Portfolio Management, in the form of specialist

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Investment knowledge, while at the same time taking care of administrative Issues. 2. Portfolio Diversification 3. Marketability: A new financial asset is created that may be more easily Marketable than the underlying securities in the portfolio. DEFINITION Mutual funds are financial intermediaries, which collect the savings of investors and invest them in a large and welldiversified portfolio of securities such as money market instruments, corporate and government bonds and equity shares of joint stock companies. Mutual funds have been conceived as institutions for providing small investors with avenues of investments in the capital market, since the size of investments is sometimes a deterrent for them. Moreover, it is difficult to appropriately hedge risks in the Capital markets when the money outlay is small Since small investors generally do not have adequate time, knowledge, experience and resources for directly accessing the capital market, they have to rely on an intermediary, which undertakes informed investment decisions and provides consequential benefits of professional expertise.

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Mutual funds bring down the transaction costs for the investors, and provide them With the following advantages: Expert professional management Reduction in risk Liquidity of investment Diversified portfolios Tax benefits The interests of the investors are protected by the SEBI, which acts as a watchdog. Mutual funds are governed by the SEBI (Mutual Funds) Regulations, 1996. THE CLASSIFICATION The most efficient method of starting a classification or categorization of all schemes that are offered in the Mutual Fund Investments Market would be to group these into two broad classifications: Portfolio Classification and Operational Classification.

A. Operational Classification Operational classification highlights the two main types of schemes, i.e., open-ended and close-ended which are offered by the mutual funds. (a) Open Ended Schemes: As the name implies the size of the scheme (Fund) is

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Open, and not specified or pre-determined. Entry to the fund is always open to the investor who can subscribe at any time. Such fund stands ready to buy or sell its securities at any time. The units are normally not traded on the stock Exchange but are repurchased by the fund at announced rates. Open-ended Schemes have comparatively better liquidity despite the fact that these are not listed. No minute-to-minute fluctuations in rates haunt the investors. (b) Close Ended Schemes: Such schemes have a definite period after which their shares/ units are redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e., their corpus normally does not change throughout its life period. Their price is determined on the basis of demand and supply in the market. A premium may exist only on account B. Portfolio Classification of Funds: The portfolio classification of funds can be divided into five kinds. (a) Return based classification: The investors of the mutual fund schemes are Made to enjoy a good return in form of regular dividends or capital Appreciation or a combination of these both.

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1. Income Funds: Income funds are floated for the interest of investors Who want to maximize current income? These funds distribute Periodically the income earned by them, in the form of either a Constant income at relatively low risk or in the form of maximum Income possible with higher risk by the use of leverage. 2. Growth Funds: These Schemes have the objective to achieve an Increase in the value of the underlying investments through capital Appreciation and they invest in growth-oriented securities. 4. Conservative Funds: These funds offer a blend of good average returns And reasonable capital appreciation. These funds are very popular and Are ideal for the investors who want both growth and income from Their investment. (b) Investment Based Classification: Mutual funds may also be classified on the Basis of the kind of securities that they invest in.

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1. Equity Funds: These funds invest most of their investible shares in Equity shares of companies and undertake the risk associated with the Investment in equity shares. In a developed market, Equity funds can Be of different categories. For example, blue chip, FMCG, PSUs, etc. 2. Bond Funds: These Funds have their portfolio comprising of bonds And debentures (Debt Instruments). These funds are considered to be Very secure with a steady income. 3. Balanced Fund: These funds have their portfolio consisting of a balanced mix of equity and bonds. The composition of these funds May vary depending upon the outlook of the market. (c) Sector Based Funds: There are funds that invest in a specified sector of Economy and they specialize in the said sector. However, they run the risk of Not being able to diversify. Sector based funds are aggressive growth funds Which make investments on the basis of assessed bright future for a particular Sector. As an offshoot of the above classification, another categorization that is more

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Used to assess the performance of the different kinds of Mutual funds in the Market has been developed, and this categorization is as follows: 1. Equity Diversified 2. Equity Sector 3. Equity ELSS 4. Balanced Funds 5. Debt Funds 6. Liquid funds 7. Gilt Funds CONSTITUENTS OF MUTUAL FUNDS All mutual funds comprise of four constituents: Sponsors: The sponsor is the entity, which initiate the idea to set up a Mutual Fund. They are equivalent of a Founder of a Company. A Sponsor may be a registered company, scheduled bank or financial institution. There are certain conditions and criteria that have been set for an institution to be become a sponsor. A sponsor has to satisfy rigorous conditions such as capital, duration of operations (at least five years operation in financial services), default free dealings record and general reputation of fairness and a

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good faith. The sponsors appoint the Trustee, AMC and Custodian, Which are the other constituents of the Mutual Funds framework? After the formation of the Asset Management Company, the sponsor is just a stakeholder. Trust/ Board of Trustees: Trustees hold a fiduciary responsibility (A relationship of utmost good faith) towards unit holders by working for protection of their interests. Trustees float and market schemes, and secure necessary approvals. They check if the AMCs investments are within well-defined limits, whether the funds assets are protected, and also ensure that unit holders get their due returns. They also review any due diligence by the AMC, as required by the law and other statutory bodies. For major decisions concerning the fund, they have to take the unit holders consent. They submit reports every six months to the Securities Exchange Board of India (SEBI), of which the investors get a report (The Annual Report). Trustees are paid on an annual basis out Of the assets of the fund. This payment is currently set at 0.5% of the weekly net asset value (NAV). Asset Management Company or Fund Managers: Fund Managers are the people who manage the money of the investors. An AMC takes decisions and manage the portfolios of the investors. They compensate the investor through dividends, maintain proper accounting and

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information for pricing of units and are, calculate the NAV, and provide to the investors, information on listed schemes The Asset Management Company also exercises due diligence on he investments and submits quarterly reports to the trustees. Thus they have a reporting Function too A funds AMC can neither act for any other fund nor undertake any Business other than asset management. This is provided for so that there is no clash of interests. The net worth of the AMC should not fall below INR 100 million. Also, the fee of the AMC should not exceed 1.25% if collections are below INR 1000 million and 1%f collections are above Rs. 1000 million. SEBI has been vested with powers to question and regulate an AMC if it deviates from its prescribed role.

Custodian: The Custodian is often an independent organization and takes the custody of Securities and other assets of the Mutual Fund. Its responsibilities include receipt and delivery of securities, collecting income-distributing dividends, safekeeping of the units and segregating assets and settlements between schemes. Their charges range from 0.15% to 0.2% of the

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net value of the holding. Custodians can service more than one fund.

How mutual funds work

Gold may be the best investment option today

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High oil prices and a dodgy economic outlook point to gold as the

traditional

safe haven for savings. And if you find the physical asset a bit heavy and a security risk then blue-chip gold shares are the logical alternative

Real estate as in investment option

Real estate is one of the fastest growing investment options in developing countries like India. Real estate is growing at a rate of more then 20% every year. Its vary fast growing sector in India. Bangalore is fastest growing city in terms of real estate in India

Introduction

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Statement of problem The statement of problem in his project is Investors risk taking ability with reference to their Age group this is selected because of many reason Hypothesis Ho= Investors in the age group of (18 40) are high risk takers takers

H1= Investors in the age group of (18 40) are not are high risk takers Objectives of study To understand the risk return relationship of investor with respect to Age Group To understand the risk return relationship of investor with respect to annual income To understand general trend of market in the sensex boom period To come out with suitable recommendations based on findings

Limitations of study:
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The limitations of study are: The sample size was restricted to 100 respondents only the information does not represent itself as a whole. The study was confined to small type of respondents. Since the duration of the project is short, vast information was difficult to collect.
The study is restricted to Bangalore only

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Review of literature Purpose of study:

The purpose of the study mainly was to know the investors risk return relationship with reference their age group. While conducting the study the researcher visited stock brokers office, various libraries, and R.V.Institute of Management library to know whether any of the researcher had conducted study. The investors risk return relationship with reference their age group.). Review of literature was also made to know whether any project or research has been done on the investors risk return relationship with reference their age group.

Methodology:
Methodology based on review of literature was made to find out any research had been done and to know what type of research the researcher had adopted while conducting the study, but know study was found to know what type of research was adopted. But this study is conducted based on descriptive study and the sampling technique here used is convenient sampling. The sample size is 100 selected from the population of Bangalore city. The data is collected with the help of structured questionnaire that includes close-ended questions.

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Methodology
Methodology refers to the methods used to collect required data for research work. Let us see what research means, it is defined as a scientific and systematic search for pertinent information on a specific topic. This study involves the following factors to complete research.

Types of research
This study is done on a descriptive research that includes surveys and factfindings enquiries of different kinds, This type of research is adopted to collect primary information from the investors using different scales as required and the secondary data was taken from different websites and books available in the library.

Sampling techniques:
The study is followed based on the non-probability sampling techniques, which is also very convenient to follow or to calculate. Simple random techniques are used to select the respondent from the available database. The research is carried on the basis of structured questionnaire that includes closeended questions.

Sample size:
The population being huge and unlimited the survey is carried out among 100 respondents who prefer commodity futures and they are considered adequate to represent the characteristics of entire population.

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Sample description:
The sample of the survey mainly consists of investors who prefer commodity futures and them possessing commodity futures.

Instrumentation techniques:
Questionnaires are most common instruments of data collection. It asks for and obtains all the information required for achieving the research objectives. The researcher has used a structured questionnaire for the purpose of data gathering by using appropriate scales.

Actual data collection:

In study is done by using the two main sources of collection of data, they are primary and secondary. Primary data are those data that are collected fresh and for the first time, and thus happen to be original in character. In this study the primary data is collected from investors and other common people with the help of simple structured questionnaire. Secondary data are those data which have already been collected by the someone else and which have already been passed through the statistical process. In this study the secondary data is collected from various published materials and website.

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Tools used for testing hypothesis:

Hypothesis generally means a proposition or a set of propositions set forth as an explanation for the occurrence of some specified phenomena either asserted merely as a provisional conjecture to guide some investigation or accepted as highly probable in the light of established facts. In this study hypothesis testing used is the Chi Square test, which is to test the relationship between the two attributes. Here the attributes of testing hypothesis are possessing of commodity futures.

Other software used for data analysis:

The other software used for data analysis is the SPSS Package, which is mainly used to calculate Chi Square.

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Hypothesis testing
Null Hypothesis (H0): - Investors at young age (18-40) years are high-

risk takers.
Alternate Hypothesis (H1): - Investors at young age (18-40) years are

not high-risk takers. No: of respondents

High 18-30 44 30-40 04 TOTA L 48

Moderate 22 03 25

Low 08 02 10

Zero 06 01 07

TOTAL 80 10 90

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Significance: - 5% Degree of Freedom (DOF) = (R-1)*(C-1) = (2-1)*(4-1) =3 Z tab =7.815 Test of statistics: Z = (O-E)2/E

O 44 22 8 6 4 3 2 1 Total

E 44.66 22.22 8.88 6.22 5.33 2.77 1.11 .77

(O-E)2/E .042 .002 .087 .007 .331 .018 .713 .140 1.34

Z cal = 1.34 Z tab = 7.815

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Conclusion

Since Z cal < Z tab the alternate hypothesis is rejected and the null hypothesis is automatically accepted. Hence it can be inferred from the test that the Investors at young age (1840) years are high-risk takers.

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GRAPH SHOWING GENDER OF RESPONDENTS 90 80 70 60 50 40 30 20 10 0 84

NO. OF RESPONDENTS

MALE FEMALE 16

1 GENDER

Male 84

Female 16

Analysis
It is clear from the table that about 84 % of respondents are mail and 16% of the respondents are female. Interpretation: About 84 % of male respondents prefer to invest their money and about 16% of female respondents prefer to invest their money.

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SL NO 1 2 3 4

AGE (in years) 18-30 30-40 40-50 ABOVE 50

NO. OF RESPONDENTS 80 10 6 4

% PERCENTAGE 80% 10% 6% 4%

Analysis
About 80% of the respondents are in the age group of 18-30 years. About 10 % of the respondents are in the age group 30-40 years. And 6% of the respondents are in the 40-50 years. And 4% of the respondents are in the age group of 50 plus Interpretation: The majority of the respondents come under the age group 18-30 years. Who take risk and invest their money in various investment options. About 10 % of respondents are in the age group of 30-40. The table also indicates that people in the young age tend to invest and get returns

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GRAPH SHOWING AGE GROUP OF RESPONDENTS 90 80 70 60 50 40 30 20 10 0 80

NO. OF RESPONDENTS

18-30 years 30-40 years 40-50years Above 50 years 10 6 1 AGE GROUP 4

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SL NO 1 2 3 4 5

PARTICULARS BUSINESS PROFESSIONALS SERVICES RETIRED OTHERS

NO. OF RESPONDENTS 20 60 10 5 5

% PERCENTAGE 20% 60% 10% 5% 5%

Analysis
From the table it is clear that about 60% of the respondents are professionals. About 20 % of the respondents are doing business.10 % of respondents are into services rest 10% constitute retired and other professionals Interpretation: From the above table we can see that professional people are very much interested in investing their money in various investment options they constitute about 60% of the respondents. The table also shows that business people also

tend to invest money in in various investment options

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PIE CHART SHOWING OCCUATION OF THE RESPONDENTS

10

20

BUSINESS PROFESSIONAL SERVICES RETIRED OTHERS

60

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SL NO 1 2 3 4 5

ANNUAL INCOME 0-1 LAKH 1-2 LAKH 2-3 LAKH 3-5 LAKH ABOVE 5 LAKH

NO. OF RESPONDENTS 03 22 30 37 08

% PERCENTAGE 03% 22% 30% 37% 24%

Analysis
From the table it is clear that about 37% of the respondents earn in between 3 - 5 lakhs per annum. About 30 % of respondents earn 2-3 lakhs per annum. 22% of the respondents earn 1 - 2 lakhs per annum. 8% of the respondents earn above 5 lakhs per annum. Interpretation: Majority of the respondents have a annual income of 3 - 5 lakhs so they have sufficient money to invest the table also shows that 8% of respondents have annual income above 5 lakhs this group will also invest more

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GRAPH SHOWING ANNUAL INCOME OF THE RESPONDENTS 40 NO. OF RESPONDENTS 35 30 25 20 15 10 5 0 1 ANNUAL INCOME 3 8 22 30 37 0-1 LAKH 1-2 LAKHS 2-3 LAKHS 3-5 LAKHS ABOVE 5 LAKHS

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SL NO 1 2 3 4

NO. OF DEPENDENTS LESS THAN 2 3 4 ABOVE 4

NO. OF RESPONDENTS 56 30 10 4

% PERCENTAGE 56% 30% 10% 4%

Analysis
From the table it is clear that about 56% of the respondents have less then or equal to 2 dependents in their family. About 30 % of respondents have 3 dependents in their family. 10% of the respondents have 4 dependents. 4% of the respondents have more then 4 dependents in their family.

Interpretation: It is clear that majority of the respondents have less then 2 dependents in their family which allows them to spend little and invest more

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GRAPH SHOWING NO. OF DEPENDENTS IN THE FAMILY OF RESPONDENTS NO. OF RESPONDENTS 60 50 40 30 20 10 0 1 NO. OF DEPENDENTS <=2 30 3 4 10 ABOVE 4 4 56

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SL NO 1 2 3 4 5

PARTICULARS <= 50000 50000-1 LAKH 1-2 LAKH 2-3 LAKH ABOVE 3 LAKH

NO. OF RESPONDENTS 43 30 15 7 5

% PERCENTAGE 43% 30% 15% 7% 5%

Analysis
From the table it is clear that about 43% of the respondents invest less then 50000 Per annum. About 30 % of respondents invest 50000 1 lakh per annum. 15% of the respondents invest 1-2 lakhs per annum.. 7% of the respondents invest 2-3 lakhs per annum. About 5 % of the respondents invest more then 5 lakhs per annum

Interpretation:
From the table researcher may conclude that people with an annual investment less then 50000 thousand per annum are more in number as compare to other people who more money

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50 45 40 35 30 25 20 15 10 5 0

43 30

15 7 5

1 < 50000 2 LAKHS - 3 LAKHS 50000-1 LAKH ABOVE 3 LAKHS 1 LAKH - 2 LAKHS

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SL NO 1 2 3 4

PARTICULARS DERIVATIVES STOCKS MUTUAL FUNDS BANK DEPOSITS

NO. OF RESPONDENTS 19 46 31 4

% PERCENTAGE 19% 46% 31% 4%

Analysis
From the analysis it is clear that about 46% of the respondents like to invest in stocks. . About 19 % of respondents invest in derivatives. 31% of the respondents like to invest in mutual funds.. 4% of the respondents like to invest in bank deposits Interpretation: From the table researcher may conclude that about 46% of the respondents are keen in taking high risk and they invest in stocks. 19 % of the respondents take the highest risk and invest in derivatives to earn highest returns about 31 % of respondents are low risk takers comparatively and they invest in mutual funds.4% of the respondents are zero risk takers and they deposit in bank

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PIE CHART SHOWING RESPONDENTS PREFERENCE TO INVEST

4 31

19

46

DERIVATIVES

STOCKS

MUTUAL FUNDS

BANK DEPOSITS

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SL NO 1 2 3 4

PARTICULARS < 1 YEAR 1-2 YEAR 2-3 YEAR ABOVE 3 YEAR

NO. OF RESPONDENTS 40 22 18 20

% PERCENTAGE 40% 23% 9% 18%

Analysis
From the analysis it is clear that about 40% of the respondents are investing since 1 year. . About 22 % of respondents are investing since 1-2 years.18 % of the respondents are investing since 2-3years .20% of the respondents are investing above 3 years

Interpretation: It can be interpreted as that majority of the investors have started investing since less then a year this implies that majority of respondents have entered the market in sensex boom period

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GRAPH SHOWING NO. OF YEARS REPSONDENTS BEEN INVESTING 50 40 30 20 10 0 1 NO. OF YEARS 40 < 1 YEAR 22 18 20 1-2 YEAR 2-3 YEAR ABOVE 3 YEARS

NO. OF RESPONDENTS

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SL NO 1 2 3 4

PARTICULARS HIGH RISK TAKER MODERATE RISK TAKER LOW RISK TAKER ZERO RISK TAKER

NO. OF RESPONDENTS 54 32 10 4

% PERCENTAGE 54% 32% 10% 4%

Analysis
From the analysis it is clear that about 54% of the respondents are high-risk takers. About 32 % of respondents are moderate risk taker. .10% of the respondents are low risk takers. About 4 % are zero risk takers .

Interpretation: The above data indicate that majority of the respondents are high-risk takers they invest in derivatives and stocks to get high returns for their high risk taking ability.10 % are low risk takers and they invest in

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GRAPH SHOWING TYPE OF RISK TAKING ABILITY AMONG RESPONDENT NO. OF RESPONDENT 60 40 20 0 1 TYPE OF RISK TAKER HIGH RISK TAKER LOW RISK TAKER MODERATE RISK TAKER ZERO RISK TAKER 54 32 10 4

SL NO

PARTICULARS

NO. OF

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RESPONDENTS 1 2 3 4 5 0-10% 10-15% 10-20% 20-25% ABOVE 25% 14 25 11 30 20

PERCENTAGE 14% 25% 11% 30% 20%

Analysis
From the table it is clear that about 30% of the respondents expect a return of 2025%. About 25 % of respondents expect a return of 10-15% per annum. About 20 % of the respondents expect returns more then 25%. Per annum return .14% of the respondents expect unto 10 % returns on their investments per annum. . About 11% of the respondents expect a return of 10-20 % on their investments per annum

Interpretation: As the majority of the respondents are high risk takers majority of the people are expecting a vary high returns on they expect a returns of about 20-25% per annum. And people who invest in derivatives are also expecting a vary high returns of more then 25% per annum

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GRAPH SHOWING % OF RETURN EXPECTED BY INVESTING RESPONDENTS NO. OF RESPONDENTS 35 30 25 20 15 10 5 0 1 RETURNS EXPECTED 14 25 20 11

30 0-10 % 10-15 % 10-20 % 20-25 % ABOVE 25 %

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SL NO 1 2

PARTICULARS YES NO

NO. OF RESPONDENTS 53 47

% PERCENTAGE 53% 47%

Analysis
About 53 % of the respondents are happy with their returns and about 47 % of the respondents are not happy with their returns

Interpretation:
Majority of the respondents are happy with their returns what they are getting now and about 47% of the respondents are expecting more returns then what they are getting now

PIE GRAPH SHOWING SATISFACTION TOWARDS EXPECTED RETURNS

NO, 47 YES, 53

YES

NO

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SL NO 1 2 3 4 5

PARTICULARS CONSULTANT STOCK BROKER SELF ANALYSIS MEMBERS OF FAMILY FRIENDS

NO. OF RESPONDENTS 21 30 35 5 9

% PERCENTAGE 21% 30% 35% 5% 9%

Analysis
From the analysis it is clear that about 35% of the respondents do self-analysis before investing. . About 30 % of respondents consultant stock brokers before investing. About 21% of the respondents consultant. Investment consultant before investing.. 5% consultant family members before investing

Interpretation:
Majority of the people do self analysis before investing and they are vary careful about their investments. Investors also take advice from investment consultant and stockbroker

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GRAPH SHOWING WHOM DO RESPONDENTS CONSULT BEFORE INVESTING 40 35 30 25 20 15 10 5 0 1 5 9 21 Q Q Q SELF MEMBERS O FRIENDS 30 35

QT Qd Qy

d t

IN CO STOC

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SL NO 1 2 3 4

PARTICULARS RETURNS SAFETY TAX BENEFITS OTHERS

NO. OF RESPONDENTS 51 35 10 4

% PERCENTAGE 51% 35% 10% 4%

Analysis
From the analysis it is clear that about 51% consider about returns on their investments. About 35 % consider safety of their investment. 10% of the respondents consider. Tax benefits associated with the investment.. 4% consider other then these factors for their investments Interpretation: From the data it is clear that majority of the respondents consider returns as their main objectives on their investments. They are more concerned about returns then safety, tax benefits etc. so returns is the major criteria any investor. It also shows that about 35% are also concerned about their safety

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GRAPH SHOWING FACTORS CONSIDERED BEFORE INVESTING NO. OF RESPONDENTS 60 50 40 30 20 10 0 1 FACTORS 10 35

51  q    4 TAX

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SL NO 1 2 3

PARTICULARS REAL ESTATE GOLD INSURANCE

NO. OF RESPONDENTS 26 51 23

% PERCENTAGE 26% 51% 23%

Analysis
From the analysis it is clear that about 51% consider gold as the alternative investment option. About 23 % consider insurance as an alternative investment option. 26% of the respondents consider real estate as the alternative investment option other then derivatives, stock, mutual funds, bank deposits Interpretation: Investors (about 51%) consider gold as an alternative investment option due to growing gold prices its vary good alternative investments

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PIE GRAPH SHOWING WHERE PEOPLE INVEST OTHER THAN DERIVATIVES, STOCK MUTUA,L FUNDS & DEPOSIT

23

26

51

REAL

&qI

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SL NO 1 2

PARTICULARS YES NO

NO. OF RESPONDENTS 90 10

% PERCENTAGE 90% 10%

Analysis
The table shows that about 90% of the respondents own a vehicle already and 10% of the respondents do not own vehicle

Interpretation:
From the data it is clear 90% of the respondents own a vehicle already so they will invest the excess amount available the rest 10% will first try to own a vehicle and then go for more investments

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PIE CHART SHOWING PERCENTAGE OF RESPONDENTS HAVING VEHIVLE

10

90

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SL NO 1 2 3 4

PARTICULARS DERIVATIVESTOCK GOLD-STOCK REAL ESTATESTOCK BANK DEPOSIRSTOCK

NO. OF RESPONDENTS 21 23 9 18

% PERCENTAGE 21% 23% 9% 18%

Analysis
From the analysis it is clear that about 61% of the respondents consider to switch from bank deposits to stock About 23 % of respondents consider to switch from gold to stock. 14% of the respondents consider real estate to stock. And 2% of the respondents consider switching from derivatives to stock

Interpretation:
From the data it is clear that majority of the respondents want to switch from bank deposits to stock to make huge profits in this sensex boom period

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GRAPH SHOWING CHANGE IN PREFERENCE OF INVESTOR 70 60 50 40 30 20 10 0 1 2 23 14

61 OT Oy O O O d - | DERIVATIVES GOLD REAL ESTAT BANK

Finding and suggestions

Investors in the age group take more risk and get more returns

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 People prefer to invest in shares mutual funds rather then bank deposit Other then these alternatives many people invest in gold High risk taking people invest in derivatives and shares to get maximum returns About 61% of the investors want to switch from bank deposits to stocks About 90% of the people who have invested already own a vehicle About 51% of the people are concerned about their returns then safety About 35% of the people are concerned about their safety of investments then returns Majority of the people do self analysis before investing others consult either investment consultant or stock broker About 53% of the people who have invested money are happy with returns About 37% of the respondents have an annual income in between 3-5 lakhs

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 Majority of the investors expect their returns to be much more then 20% 56% of respondents have less then 2 dependents in their family Majority of investors have entered the market in last 1 year in sensex boom period Professionals invest more money risk to get maximum return as compared to others they take more

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Conclusion

The research was conducted to know the risk return relationship of the investors with reference to their age. The results clearly indicates that young investors in the age group of 18-40 are the more risk takers and they expect a vary high returns. Majority of the investor have entered the market in last one year in the sensex boom period. People with higher income tend to take more risks and invest in stocks, derivatives etc, old age investors are the zero risk taker and they usually invest in bank deposits . Majority of the investors invest in stocks .Derivatives and stocks are considered to be high risk investments,

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Bibliography:Reference books Financial management by Prassana Chandra Financial management by I .M .Panday

Magazines
Business world India today

Search engines
www.google.com yahoo search

websites
www.nsc.com www.financial-express.net.in

Newspapers
The Economic times Business line The Hindu

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Questionnaire
Note: This questionnaire will be used for academic purpose only and kept confidential.

1. Name: 2. Age 18 - 30 yrs 50 years 3. Gender

Male Female

30 - 40 yrs

40 - 50 yrs

>

4. Occupation Business Retired Others Professional Services

5. Are you a Government employee ?

Yes

No

6. Income per annum < 1,00,000 bib3,00,000 3,00,000 5,00,000 7. Number of dependents in family 1,00,000 2,00,000 > 5,00,000 2,00,000

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>4

8. Average amount invested per annum < 50,000 50,000 - 1,00,000 > 3,00,000 1,00,000 2,00,000

2,00,000 3,00,000 9. Where do you prefer to invest ? Derivatives Bank deposits

Stocks

Mutual funds

10. Since how long are you investing ? < 1yr > 3 yrs 11. You are, High risk taker Moderate risk taker 1yr - 2yrs 2 yrs -3 yrs

Low risk taker

Not a risk taker

12. How much returns do you expect from your investments in % 0 - 10 20 - 25 10 - 15 > 25 15 - 20

13. Are you happy with your current returns ? Yes No

14. Who do you consult before investing ?

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Investment consultant Self analysis Members of family

Stock broker
Friends or Peers

15. Factors that you considers before investing Returns Others Safety Tax benefits

16. Other than derivatives, stock, mutual funds and deposits, in which of the following would you like to invest ? Real estate 17. Do you own any vehicle ? Yes If yes, Two wheeler four wheeler No Gold Insurance

18. Do you opt any change in preference from

Derivatives -> Stock Gold -> Stock Real estate ->

Stock
Bank deposit -> Stock

Thank you for your time

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