Mba Finance Project A STUDY ON INVESTORS ATTITUDE AND KNOWLEDGE TOWARDS INVESTMENT OPTIONS AVAILABEL IN INDIA WITH SPECIAL REFERENCE TO UAE BASED N

I
“A STUDY ON INVESTORS ATTITUDE

AND KNOWLEDGE TOWARDS
INVESTMENT OPTIONS AVAILABEL
IN INDIA – WITH SPECIAL
REFERENCE TO UAE BASED NRIs”
PROJECT REPORT SUBMITTED

TO THE
BIRLA INSTITUTE OF TECHNOLOGY, RANCHI
FOR THE PARTIAL FULFILLMENT OF DEGREE OF
MASTER OF BUSINESS ADMINSTRATION
BY
VENU.T
MBA/8010/10
Under the Supervision of

Mr. Soofi Anwar
BIRLA INSTITUTE OF TECHNOLOGY,

INTERNATIONAL CENTER
RAK, UAE
June 2012
I
DECLARATION
This is to certify that the present report on “INVESTORS ATTITUDE

AND KNOWLEDGE TOWARDS INVESTMENT OPTIONS
AVAILABEL IN INDIA – WITH SPECIAL REFERENCE TO UAE
BASED NRIs” is based on my original work and data collected and
indebtedness to other works/publications has been duly acknowledged at the
relevant places.
It has not been submitted in part or full for any other diploma or degree of
any other university
(signature)
(Venu.T)
II
CERTIFICATE
This is to certify that the project entitled “A Study on Investors Attitude

and Knowledge Towards Investment Options Available In India - With
Special reference to UAE based NRIs” is the project work carried out by
Venu.T, MBA/8010/10 of MASTER OF BUSINESS ADMINISTRATION,
Department of Management, Birla Institute of Technology, International
Center, Ras Al Khaimah, during the academic period (2010-2012), in partial
fulfillment of the requirements, as per subject code MBA 4004 for the award
of degree of MASTER OF BUSINESS ADMINISTRATION.
Signature of the Guide Signature of the H.O.D

III
ACKNOWLEDGMENT
First of all immensely and wholeheartedly I thank god for giving me this
opportunity for successful completion of my project work and also I thank
management of “ARC International – Middle East” for giving me a chance
for doing this course.
I extend my thanks to our respected Sr. Lecturer “Mr. Soofi Anwar” for
permitting me to take up this project work and guide for project work, for
his continuous and valuable information, rendered to me in completing
my project work with in allotted time period.
I wish to express my sincere thanks to “Dr. Durga Prasad”, for his

patience, valuable inputs and instincts support without which the project
work would not have completed.
I am extremely indebted “Mr.Venu Madhav” – Area Manager (AIME) for

his invaluable support and motivation and also I thank my “family
members” for their wishes and blessings for successful completion of this
project work.
Once again, I take this opportunity to thank each and every person, who
direct or indirectly helped me for the successful completion of this project
work.
Venu .T
Table of Contents IV
Table of Contents Page
List of Figures viii

List of Tables ix
1 Introduction
1.1 Introduction to Study 1
1.2 Investors Attitude towards Investments 2
1.3 Investors Attitude towards Risk 3
1.4 Non-Resident Indian (NRI) 4
1.4.1 Person of Indian Origin (PIO) 4
1.4.2 Overseas Corporate Body (OCB) 4
1.5 Investment Options Available in India for NRIs 5
2 Research Design
2.1 Title of the Dissertation 6
2.2 Statement Of the Problem 6
2.3 Scope Of the Study 7
2.4 Objective Of the Study 7
2.5 Methodology Of the Study 7
2.5.1 Research Design 7
2.5.2 Sampling Design 8
2.5.3 Collection Of Data 8
2.5.4 Analysis Of Data 8
2.6 Significance Of the Study 9
2.7 Limitations Of the Study 9
3 Literature Review
3.1 What is Investment 10
3.1.1 Financial & Economic Meaning Of Investment 10
Investor’s attitude and knowledge towards investment options available in India

With special reference to UAE based NRI’s
Table of Contents V
3.2 Why Investments are Important 11

3.2.1 Longer Life Expectancy or Planning for 11
Retirement
3.2.2 Increasing Rates Of Taxation 12
3.2.3 Interest Rates 12
3.2.4 Inflation 12
3.2.5 Income 13
3.2.6 Investment Channels 13
3.3 Elements Of Investment 13
3.3.1 Return 14
3.3.2 Risk 14
3.3.3 Relationship Of Risk & Return 15
3.3.4 Time 15
3.4 Types Of Investments 16
3.4.1 Bank Deposits 16
3.4.1a Current Deposits/Accounts 16
3.4.1b Saving Deposits / Accounts 16
3.4.1c Recurring Deposits / Accounts 17
3.4.1d Fixed Deposits Accounts / Term Deposit 17
Accounts
3.4.2 Fixed Deposit Schemes In Companies 18
3.4.3 Post-office Schemes 18
3.4.4 Stocks / Shares 19
3.4.4a Common Stock 20
3.4.4b Preferred Stock 20
3.4.4c Convertible Preferential Stock 20
3.4.4d Bonds 21
3.4.4e Debentures 22
3.4.4f Mutual Funds 22
3.4.5 Life Insurance 23

Table of Contents VI
3.4.6 Real Estate 24

3.4.6 a Real Estate Investment Trusts (REITs) 24
3.4.7 Gold Investment 25
3.5 Factors favorable for Investment in India 25
3.5.1 Legal Safeguards 25
3.5.2 Well organized Monitory System 26
3.5.3 Existence of Financial Institutions to 27
encourage Savings
3.6 Features Of an Investment Program 27
3.6.1 Safety of Principal 27
3.6.2 Liquidity 27
3.6.3 Income stability 27
3.6.4 Appreciation and purchasing power stability 28
3.6.5 Legality and freedom from care 28
3.6.6 Tangibility 28
3.7 Classification of Investors 29
3.8 Non-Resident Indian (NRI) 31
3.9 Financial Advisors 32
3.10 Investment Opportunities for NRIs 33
3.11 Investment Options in India for NRIs 34
3.11.1 Ordinary Non-Resident Account in Rupees 34
(NRO)
3.11.2 Non-Resident (External) Account (NRE) 34
3.11.3 Foreign Currency Non-Resident Account 36
(FCNR)
3.11.4 Term Deposit Accounts 37
3.11.5 Portfolio Investment Schedule (PIS) 37
3.11.6 Unit Deposit 38

Table of Contents VII
3.11.7 Equities 39
3.11.8 Bonds 39
3.11.9 24% and 40% Schemes 40
3.11.10 How can an NRI invest / trade in Indian Stock 40
Markets?
3.11.11 Immovable Property 44
3.12 Different Tax Benefits available to NRIs 48
3.13 Tax Provisions and Concessions for NRIs 49
3.13.1 Income Tax 49
3.13.2 Filing Returns 50
3.13.3 Provisions 51
3.13.4 Investing and Savings
4 Analysis and Interpretation 54
5 Findings, Suggestions & Conclusion
5.1 Findings 97
5.1.1 Investment Portfolio of Investors 98
5.1.2 Inter-relationship between Investment Preferences 98
5.2 Suggestions 99
6 Conclusion 102
Appendices
Appendix A : Questionnaire 103
Bibliography 107

List of Tables IX
List of Tables Page
Table 2.1 Types of Investors (Based on Risk) 30

Table 2.2 Types of Investors (Based on Income) 31
Table 4.1 Age of Respondents 55
Table 4.2 Employment Status 57
Table 4.3 Income wise Classification 59
Table 4.4 Saving Objective 61
Table 4.5 Investment Objective 63
Table 4.6 Frequency of Investment in India 65
Table 4.7 Financial Advisor 67
Table 4.8 Who has been the Financial Advisors 69
Table 4.9 Investment Portfolio of the Respondents 71
Table 4.10 NRIs Awareness level towards the various 74
investments in India
Table 4.11 Level of Satisfaction with the Investment Made 78
Table 4.12 Investment Experience 79
Table 4.13 Risk wise Classification 81
Table 4.14 Options on the Comfort ability Level in the Decline 83
Value of Investments for Higher Returns
Table 4.15 Withdrawals from the Investment Account 86
Table 4.16 Relationship between Age Group & Risk Profile 87
Table 4.17 Relationship between Income & Frequency of 89
Investment
Table 4.18 Relationship between Income &risk profiles 91
Table 4.19 Relation between Occupation & frequency of 93
investment.
Table 4.20 Relation between Occupation & Risk Profile 95

List of Figures VIII
List of Figures Page
Figure 4.1 Age of Respondents 55
Figure 4.2 Employment Status 57
Figure 4.3 Income wise Classification 59
Figure 4.4 Saving Objective 61
Figure 4.5 Investment Objective 63
Figure 4.6 Frequency of Investment in India 65
Figure 4.7 Financial Advisor 67
Figure 4.8 Who has been the Financial Advisors 69
Figure 4.9 Investment Portfolio of the Respondents 71
Figure 4.10 NRIs Awareness level towards the various 75

investments in India
Figure 4.11 Level of Satisfaction with the Investment Made 77
Figure 4.12 Investment Experience 79
Figure 4.13 Risk wise Classification 81
Figure 4.14 Options on the Comfort ability Level in the Decline 83

Figure 4.15 Withdrawals from the Investment Account 85

Introduction 1
CHAPTER- 1
INTRODUCTION
1.1 Introduction to the Study
Source: http://www.oifc.in (overseas Indian Facilitation Centre)

Volatile global markets, risk aversion, Euro zone sovereignty issues,
Greek debt, rupee depreciation; these are terms that the investors all over
the globe have become accustomed to these days. With equities markets
giving negative returns all over the globe and the rupee depreciating by
over 12% to the USD, 6% against the Euro and over 15% against the
AED, the major question crossing minds of all NRI’s, PIO’s and OCI’s
is “Is this the best time to invest in India?”
The Indian stock markets because of several reasons have
underperformed the global markets as well as the emerging markets to a
certain extend because of which investors are seeing negative returns, but
if an investor has medium to long term view then this is the best time to
invest in India. The Reserve bank of India has already given signs that
interest rates in India have already peaked and if the inflation rate
stabilize and start to reduce a bit the Reserve bank of India will start
reducing rates which in turn will push the bond prices up. Looking at
these scenarios NRI’s have lot of investment opportunities depending on
their budget and the time frame they can remain invested for.
Savings form an important part of the economy of any nation. With the
savings invested in various options available to the people, the money
acts as the driver for growth of the country. Indian financial scene too
Introduction 2
presents a plethora of avenues to the investors. Though certainly not the

best or deepest of the markets in the world, it has reasonable options for
an ordinary man to invest his savings.
One needs to invest to and earn return on your idle resources and
generate a specified sum of money for a specific goal in life and make a
provision for an uncertain future. One of the important reasons why one
needs to invest wisely is to meet the cost of inflation. Inflation is the rate
at which the cost of living increases. The cost of living is simply what it
cost to buy the goods and services you need to live. Inflation causes
money to loss value because it will not buy the same amount of a good or
service in the future as it does now or did in the past. The sooner one
starts investing, the better. By investing early you allow your
investments more time to grow, where by the concept of compounding
increases your income, by accumulating the principle and the interest or
dividend earned on it, year after year.
The three golden rules for all investors are:
 Invest early
 Invest regularly
 Invest for long-term and not for short-term
This survey will also help to understand the investors facets before
investing in any of the investment tools and thus to scrutinize the
important aspects of the investors before investing that further helped in
analyzing the relation between the features of the products and the
investors requirements.
1.2 Investors Attitude towards Investments

Investment and savings attitudes and behavior are influenced by the
structure, complexity, transparency and perceived past and future
performance of different kinds of investment options; the general lack of
Introduction 3
independent financial advice; the recent superior performance of

property investment; perceptions and personal tolerance of risk; the often
low level of financial literacy about products other than property; the
nature of the information people use when making financial decisions;
the personal or family experience people have with investment; a general
wish to have personal control over the investment and trust in the advice
of friends and family over unknown professional advisors.
Consumer decisions on saving are likely to be influenced by new or
proposed changes in the investment environment. The application of
lower taxes to earnings in managed funds, and forthcoming regulatory
changes aimed at improving disclosure and prudential arrangements
applying to financial products, providers and advisors are also likely to
have an impact.
1.3 Investors Attitude towards Risk

There general consensus among NRI investors is that most of them are
unwilling to take much risk with their money. This is the case even over
the long term (five years or more).
The most common reasons cited for being averse to taking risks included
the responsibility of raising a family and taking on large financial
commitments such as a mortgage. However, some of the investors were
willing to take higher risks with their money to give themselves the
chance of making higher returns. These participants tended to be young
and single or higher earners.
When it came to considering risk as a factor in financial decision-making,
views are mixed. Some investors would not consider taking out anything
more risky than a savings account; their sole focus, therefore, would be on
the level of return available from savings accounts. Other class of

Introduction 4
investors felt it was important to consider the potential returns whatever

the product.
1.4 Non-Resident Indian (NRI)

An Indian abroad, popularly known as an NRI. NRI definitions under
FEMA (Foreign Exchange Management Act, 1999):
“A person resident outside India who is either a citizen of India or a
person of Indian Origin”
Recently RBI has clarified that students studying abroad also be treated as
NRIs under FEMA and accordingly be eligible for foreign investments
and NRE/FCNR accounts.
1.4.1 Person of Indian Origin (PIO)

Includes a person being a citizen of any country other than Pakistan and
Bangladesh who:
a. Held an Indian passport at any time or
b. Himself or either of his parents or any of his grandparents were
citizens of India, or
c. Is a spouse of an Indian Citizen.
1.4.2 Overseas Corporate Body (OCB)

Means a Company, partnership Firm, Society etc… wherein 60% or more
ownership lies with NRIs or a trust wherein 60% or more financial
interest is irrevocably held by NRIs..
The tax free environs of the UAE are one of the major driving forces for
Indians to settle down in the country. But Non- Resident Indians (NRI’s)
need to keep in mind that they are still liable for taxes on certain
investments back home. This applies to investments in shares, property,
debentures and deposits, if the overall amount exceeds the exemption
Introduction 5
limit of Rs. 160,000 (around Dhs. 13,000). There are some benefits for
NRI’s which can ease the burden of handing over hard-earned money to
the tax office back home.
1.5 Investment options available for NRIs

NRIs can invest in:
 Bank Deposits
 Secondary markets through Portfolio investment in equity
shares/convertible debentures.
 New issues (shares/convertible debentures).
 Non-convertible debentures .
 Mutual funds provided that amount is invested out of
RE/FCNR/NRO account or by inward remittance.
 Domestic (NRO) funds through deposits in Indian companies
(including Non-Banking Finance Companies if they are registered
with Reserve Bank of India) on non-repatriation basis up to 3 years
subject to certain formalities to be completed by the concerned
company.
 Bonds provided that amount is invested out of NRE/FCNR/NRO
account or by inward remittance.
 Proprietary or partnership concern in India.
 Immovable property provided that the amount is not invested for the
purchase of agricultural land, plantation property or farm house and
investments are made from fresh inward remittance or existing non-
resident account.

Research Design 6
CHAPTER- 2
Research Design
2.1 Title of the Dissertation

The title of the Dissertation is “investor’s Attitude and Knowledge towards
Investment Options available in India – With Special reference to UAE
based NRIs”
2.2 Statement of the Problem

The particular topic is mainly selected to analyze “Investor’s attitude and
knowledge towards investment options available in India - with special
reference to UAE based NRI’s”. The comprehensive statement of the
problem can thus be stated as “Investor’s options in India- a study about the
attitudes of the NRI’s of UAE and investment options in India”.
This analysis was carried out to give more knowledge and broader view to
the NRI's about the available investment options back home. As the NRIs
visit their home country only for a short period of time and mostly once in a
year, so they are not familiar and are also not well educated about the
various options in which they can invest in. Their attitudes towards
investments are guided by so many external factors and once they decide to
invest, the major problem starts with the lack of proper agency (financial
advisor/ consultant) to guide the investors according to their preference. If at
all the NRIs decide to invest, they take a risk of losing their hard earned
money.
Hence it is very important that the NRIs knowledge about the investment
options available in India are broadened and thus gaining a positive attitude
towards the investment alternatives.

Research Design 7
2.3 Scope of the Study

The scope of the study was limited to the U.A.E based NRI’s who have
invested in India. The study was conducted on 200 respondents.
2.4 Objectives of the Study

1. To study the awareness level of the investors about the various
investment affairs in India.
2. To analyze the attitude of the investors towards various
investment alternatives.
3. To study the factors which influence the investment decisions of
investors.
4. To examine the regularity of investment of the investor in UAE.
5. To analyze the risk-return preference of investors in investment.
6. To identify the problems faced by NRI’s in selecting suitable
investments options.
2.5 Methodology of the Study

2.5.1 Research Design
Research design stands for advance planning of the methods to be adopted
for collecting the relevant data and the techniques to be used in analysis,
keeping in view the objectives of the research and availability of time.
Descriptive research includes surveys and fact-finding enquiries of different

kinds. The major purpose of this research is description of state of affairs as
it exists at present.
In this survey the design used is descriptive in nature. The information is

collected from the individuals and analyzed with the help of different
statistical tools, for describing the relationship between various types of
Research Design 8
variables, pertaining to different investment options. Moreover Cross table

Analysis has been done for processing the data and information is derived to
meet the objectives of the study.
2.5.2 Sampling Design

The study was based on primary as well as secondary data. The primary data
for this study was collected from 200 NRI’s from UAE. The study was
conducted in the month of April 2012 to May 2012.
2.5.3 Collection of Data

A pretested schedule was used to collect data from respondents. Data such
as awareness about investment options in India, attitudes towards
investment, risk return preferences, factors which influence the investment
decisions etc. were collected from respondents in UAE through
questionnaires.
The secondary data for this study were collected from magazines journals
research reports publishing by various agencies, investment etc.
2.5.4 Analysis of Data

The collected data were analyzed with the help of scientific statistical tools
such as
Percentages
Chi-Square Test and
Graphs
Excel Spread Sheets.

Research Design 9
2.6 Significance of the Study

The study was carried out to find the attitude of investors towards the
investment options available to NRIs in India. The study also tries to
determine the risk-return preferences of the investors.
The aim of the research was to educate the NRIs to give detailed knowledge
about the various investments, the features of these investments and the risk
attached to them.
2.7 Limitations of the Study

 The area of the study is limited to the NRI’s based in UAE only.
Hence the results may not be true for other geographical locations.
 Validity and Reliability of the data depends on the truthfulness of

the responses from the public. Chances of bias were more since
the sample size of the study was just on 200 respondents.
 Time at the disposal of the researcher is limited.
 The size of the sample compared to the population is very small

and hence it may not represent the whole population.
 A structured questionnaire was the basis for collecting the data, so

it has the usual deficiencies attached to this technique of data
collection.

Literature Review 10
CHAPTER- 3
LITERATURE REVIEW
3.1 What is INVESTMENT??

Investment is the employment of funds with the aim of achieving additional
income or growth in value. The essential quality of an investment is that it
involves ‘waiting’ for a reward. It involves the commitment of resources,
which have been saved or put away from current consumption in the hope
that some benefits will accrue in future. The term investment does not
appear to be as simple as it has been defined. Investment has been further
categorized by financial experts and economists. It has also often been
confused with the term Speculation.
3.1.1 Financial & Economic Meaning of Investment

Investment is the allocation of monetary resources to assets that are expected
to yield some gain or positive return over a given period of time. These
assets range from safe investments to risky investments. Investments in this
form are also called “Financial Investments”.
From the point of view of people who invest their funds, they are the
suppliers of ‘Capital’ and in their view, investment is a commitment of a
person’s funds to derive future income in the form of interest, dividends,
rent, premiums, pension benefits or the appreciation of the value of their
principal capital. To the financial investor, it is not important whether
money is invested for a productive use or for the purchase of second hand
instruments such as existing shares and stocks listed on the stock exchanges.

Most investments are considered transfers of financial assets from one

person to another.
The nature of investment in the financial sense differs from its use in the
economic sense. To the economist, ‘Investment’ means the net additions to
the economy’s capital stock which consists of goods & service that are used
in the production of other goods & services. In this context, the term
investment, therefore, implies the formation of new and productive capital in
the form of new construction, new producer’s durable equipment such as
plant and equipment. Inventories & human capital are included in the
economist’s definition of investment.
The financial & economic meanings of investment are related to each other
because investment is a part of savings of individuals which flow into the
capital market either directly or through institutions, divided in ‘new’ and
secondhand capital financing. Investors as ‘suppliers’ and investor as ‘user’
of long term funds find a meeting place in the market.
3.2 Why investments are important?

Investments are both important and useful in the context of present-day
conditions. Some factors that have made investment decisions increasingly
important are:
3.2.1 Longer life expectancy or planning for retirement

Investment decisions have become significant as people retire between the
age of 55 and 60. Also, the trend shows longer life expectancy. The earnings
should, therefore be calculated in such a manner that a portion should be put
away as savings. Savings by themselves do not increase wealth; these must

be invested in such a way that the principal and income will be adequate for
a greater number of retirement years.
The importance of investments decisions is further enhanced by the fact that

there is increasing number of women working in organizations. These
women will be responsible for planning their own investments during their
working life so that after retirement they are able to have a stable income.
3.2.2 Increasing Rates of Taxation

Taxation is one of crucial factors in any country, which introduces an
element of compulsion in a person’s savings. There are various forms of
savings outlets in our country in the form of investments which help in
bringing down the tax level by offering deductions in personal income.
3.2.3 Interest Rates

Another aspect which is necessary for a sound investment plan is the level of
interest rates. Interest rates vary between one investment and another. These
may vary between risky and safe investments; they may also differ due to
different benefit schemes offered by the investments. These aspects must be
considered before actually allocating any amount. A high rate of interest
may not be the only factor favoring the outlet for investment. The investor
has to include in his portfolio several kinds of investments. Stability of
interest is as important as receiving a high rate of interest.
3.2.4 Inflation
Inflation has become a continuous problem since the last decade. In these
years of rising prices, several problems are associated coupled with a falling
standard of living. Before funds are invested erosion of the resources will
have to carefully considered in order to make the right choice of
investments. The investor will try to search an outlet, which will give him a
high rate of return in the form of interest to cover an decrease due to
inflation. He will also have to judge whether the interest or return will be
continuous or there’s a likelihood of irregularity. Coupled with high rates of
interest he will have to find an outlet which will ensure safety of principal.
Besides high rate of interest & safety of principal, an investor also has to
always bear in mind the taxation angel. The interest earned through
investment should not unduly increase his taxation burden.
3.2.5 Income
Another reason why investment decisions have assumed importance is the
general increase in the employment opportunities. The employment
opportunities gave rise to both male and female working force. More
incomes and more avenues of investment have led to the ability and
willingness of working people to save and invest their funds.
3.2.6 Investment Channels

The investor in his choice of investment will have to try to achieve a proper
mix between high rate of return and stability of return to reap the benefits of
both. Some of the instruments available are Corporate Stock, Provident
Fund, Life Insurance, Fixed Deposits in the Corporate Sector, Unit Trust
Schemes and so on.
3.3 Elements of Investment

The study of investments is concerned with the purchase and sale of
financial assets and the attempt of the investor to make logical decisions
about the various alternatives in order to earn returns of them. The returns
are further dependent on the varying degrees of risk.

A functional definition as defined by Amling is, “Investment maybe defined

as the purchase by an individual or institutional investor of a financial or real
asset that produces a return proportional to the risk assumed over some
future investment period.
These definitions of investments bring froth three elements of investment,
categorized as:
a. Return
b. Risk
c. Relationship of risk & return
d. Time factor
3.3.1 Return
Investors may buy and sell financial assets in order to earn returns on them.
The returns, better known as reward from investments, include both current
income and capital gains or losses which arise by the increase or decrease of
the security prices. The capital gains or the income earned are then treated as
a percentage of the beginning investment. Returns, therefore, may be
expressed as the total annual income and capital gain as a percentage if
investment. Satisfactory returns are different for different people. Two
rational investors may be satisfied by different levels of anticipated return
and estimated risk. Rational investors like returns but are risk averse. They
try to maximize their utility by buying, holding, or adjusting their portfolio to
achieve “maximum utility”.
3.3.2 Risk
Risk and uncertainty are an integral part of an investment decision. Risk is
composed of the demands that bring in variations in return of income. The
main forces contributing to risk are price and interest. Risk is also influenced
by external and internal considerations. External risks are uncontrollable and

broadly affect investments. These external risks are called systematic risk.
Risk due to internal environment of a firm or those affecting a particular
industry are referred to as unsystematic risk.
3.3.3 Relationship of Risk & Return

Risk and return are inseparable. To ignore risk and only expect return is an
outdated approach to investments. The investment process must be
considered in terms of both aspects – risk and return. Return is a precise
statistical term; it is not a simple expectation of investor’s return but is
measurable also. Risk is not a precise statistical term but we use statistical
terms to quantify it. The investor should keep the risk associated with the
return proportional as risk is directly correlated with return. It is generally
believed that higher the risk, the greater the reward but seeking excessive
risk does not ensure excessive return. At a given level of return, each
security has a different degree of risk. The entire process of estimating
return and risk for individual securities is called security analysis.
3.3.4 Time
Time is an important factor in investments. Time offers several different
courses of action. It may involve from trading to buying and selling at major
turning points in the market. It may also consider the time period of
investment such as long term, intermediate or short term. Time period
depends on the attitude of the investor. As investments are examined over
the time period, expected risk and return are measured. The investor usually
selects a time period and return that meet expectations of return and risk.

3.4 Types of Investments

3.4.1 Bank Deposits
Traditionally banks in India have four types of deposit accounts, namely
Current Accounts, Saving Banking Accounts, Recurring Deposits, Fixed
Deposits. However, in recent years, due to ever increasing competition,
some banks have introduced new products, which combine the features of
above two or more deposits. These are known by different names in
different banks, e.g. 2-in-1 deposits, Smart Deposits, Power Saving
Deposits, and Automatic Sweep Deposits etc.
3.4.1a Current Deposits / Accounts

These accounts are used mainly by businessmen and are not generally used
for the purpose of investment. These deposits are the most liquid deposits
and there are no limits for number of transactions or the amount of
transactions in a day. Most of the current account are firm / company
accounts. Cheque book facility is provided and the account holder can
deposit all types of the cheques and drafts in their name or endorsed in their
favor by third parties. No interest is paid by banks on these accounts. On
the other hand, banks charge service charges, on such accounts.
3.4.1b Saving Deposits / Accounts

These deposits / accounts are one of the most popular deposits for individual
accounts. These accounts not only provide cheque facility but also have lot
of flexibility for deposits and withdrawal of funds from the account. Most
of the banks have rules for the maximum number of withdrawals in a period
and the maximum amount of withdrawal, but hardly any bank enforces
these. However, banks have every right to enforce such restrictions if it is
felt that the account is being misused as a current account. The interest on

these accounts at present is regulated by Reserve Bank of India. Banks in

India at present offer 3.50% p.a. interest rate on such deposits.
3.4.1c Recurring Deposits / Accounts

These kind of deposits are most suitable for people who do not have lump
sum amount of savings, but are ready to save a small amount every month.
Normally, such deposits earn interest on the amount already deposited
(through monthly installments) at the same rates as are applicable for Fixed
Deposits / Term Deposits. These are best if you wish to create a fund for
your child's education or marriage of your daughter or buy a car without
loans.
Under these types of deposits, the person has to usually deposit a

fixed amount of money every month (usually a minimum of Rs, 100/-
p.m.). Any default in payment within the month attracts a small penalty.
However, some Banks besides offering a fixed installment RD, have also
introduced a flexible / variable RD. Under these flexible RDs the person is
allowed to deposit even higher amount of installments, with an upper limit
fixed for the same e.g. 10 times of the minimum amount agreed upon. Such
accounts are normally allowed for maturities ranging from 6 months to 120
months. A Pass book issued where the person can get the entries for all the
deposits made by him / her and the interest earned. Premature withdrawal
of accumulated amount permitted is usually allowed (however, penalty may
be imposed for early withdrawals). These accounts can be opened in single
or joint names. Nomination facility is also available.
3.4.1 d Fixed Deposit Accounts / Term Deposits

Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit
Account, a certain sum of money is deposited in the bank for a specified
time period with a fixed rate of interest. The rate of interest for Bank Fixed
Deposits depends on the maturity period. It is higher in case of longer
maturity period. There is great flexibility in maturity period and it ranges
from 15days to 5 years. The interest can be compounded quarterly, half-
yearly or annually and varies from bank to bank. Minimum deposit amount
is Rs 1000/- and there is no upper limit. Loan / overdraft facility is available
against bank fixed deposits. Premature withdrawal is permissible but it
involves loss of interest.
3.4.2 Fixed Deposit Schemes In Companies

Another type of investment is the fixed deposit investment schemes offered
by various companies. These schemes are generally offered by public
limited companies in the private sector. Deposits may be cumulative or non-
cumulative. These fixed deposit schemes are offered through newspaper
advertisements and are subject to the provision of the Companies Rules of
1975. There are offered to the public as well as existing shareholders and
employees. The advantages of fixed deposit scheme of companies are that
they are deposits for short-term and offer a higher interest than the
commercial banks. Retired people find fixed deposits a good investment.
3.4.3 Post-Office Schemes

Post- office schemes are generally like the commercial bank schemes. They
have a saving account, a recurring account, a ten-year Cumulative Time
Deposit (CTD) account which are also recurring in nature. The savings
account operates in the same way as commercial banks through cheques and
there is no restriction on withdrawals. Post- Offices also sell Indira Vikas
Patra and are also popularizing Kisan Vikas Patra. This investment doubles
in seven years. These instruments cannot be transferred easily from one

person to another. But the investor can nominate any person who can avail
of this scheme in the event of the death of the investor.
Post- Office Scheme has been prepared carefully with the view that the
small investor will take advantage of easy accessibility due to the fact that
Post-Office exists in every locality. Moreover it was also to encourage the
savings habits of the uneducated class and small savers. These resources of
the small savers help in mobilization of savings of the economy.
3.4.4 Stocks / Shares

Stocks are essentially investments in a specific publicly traded corporation,
such as Coca-Cola, or Google. Publicly traded companies issue shares of
their stock to the general public. Each share represents a fractional
percentage of ownership in a company. Buying and selling individual stocks
is accomplished through stock market exchanges throughout the world.
Trading stocks successfully requires a working knowledge of how the stock
market works and what affects stock market prices. The stock market is not
gambling; however there are people that use the stock market as the
gambling platform. Stock prices rise and fall on company news, on earnings,
and a number of other reasons. Potential stock investors should learn how to
research individual stock issues and make decisions based on the
fundamental operation of the company. That being the case, there are
investors who trade individual stocks on news and hype. This is generally
considered a high risk-investing model, but can be very rewarding
financially.
Stocks and Shares are the two sides of the same coin. Basically, they both
mean the same thing. The difference between the two lies in the technical
definition of the two. When an investor holds the ownership certificates of a
particular company then it is known as Shares. Stock is a general term for

Shares. Stock is the ownership of certificate (either in physical or
dematerialized form) of any company. Hence we can say that Stock is the
share of any company. Thus, Stock ownership means holding of ownership
certificates of one or more than one company. Shares are certificates which
represent ownership rights of the holder in a specific company.
Basically, Stocks and Shares signify the same thing where one is used in
general term and the other in specific term.
Stocks generally are of 3 types:-
3.4.4a Common Stock

It gives an ownership right to the holders of the stock and hence the share
holders are entitled to the earnings of the company according to their stake.
Holders also get dividends on those stocks as and when given by the
company.
3.4.4b Preferred Stock

These stocks also give ownership right to its holders.
Its holders enjoy the privilege of receiving dividends from the company in
preference to any other common shareholders.
3.4.4c Convertible Preferential Stock

There is also another type of Stock called Convertible Preferential Stocks
where the holders of these stocks have the option of converting them to
common stocks of the issuing company. Holder of a Stock is that person
who buys the ownership certificate(s) of any company. This person becomes
the part owner of the company in accordance to the number of stock he
owns. The holder is entitled to claim anything attached to the stock right
from the company's earnings to rights of voting. Stock is nothing but a Stock
Certificate which is the proof of ownership of a company.
3.4.4d Bonds
The bond market in India is not well developed but the bonds issued by
public sector financial institutions are becoming quite popular with the
public. Since 1985, public sector institutions have been encouraged to
borrow directly from the public. This had led to the issuer of bonds by
mutual funds and financial institutions. In the recent years, the bonds issued
by IDBI have received overwhelming support of the public and have been
oversubscribed.
Investing in bonds is essentially were loans are made to corporations and

governments by investors. The corporation or government then makes fixed
interest payments to the bond investor or a set period of time, called the
term. At the end of the term, the investor gets back the original investment
amount, called the principle. Investing in bonds is generally considered a
more moderate form of investing. Bonds investing are not a investing
vehicle they generally will produce the kinds of results that investing in
individual stocks can. Still for many people investing in bonds offers a
security of a nearly guaranteed return. Bonds are evaluated by third-party
resources, and investors can make informed decisions based on the
credibility of the government or corporation issuing the bond. While most
government bonds offer a measure of security other investment vehicles
cannot, investing in corporate bonds carries with it a degree of risk that
should be considered. Evaluating which bonds might be the best investment,
would depend largely on the history of the company issuing the bonds. If a
corporation has a high credit rating, chances are your money is not at high

risk. However, if the corporation has experienced credit difficulty in the

past, the risk of losing your principle rises accordingly.
3.4.4e Debentures
In India, Debentures derived importance only since 1970. There are various
kinds of debentures in the market. There are:
Registered
Bearer
Redeemable
Perpetual
Convertible and
Right
In India, the convertible debentures have become significant. These

debentures cab be converted into ordinary shares at the option of the
shareholders after a certain number of years. Right debentures are also being
issued but generally financial institutions and trust purchases these
debentures.
3.4.4 f Mutual Funds

Mutual funds are investments that pool money from many investors and
invest it in a specific set of stocks and bonds. There are different types of
mutual funds and literally an investor can find a mutual fund that specializes
in any industry specific stocks and bonds they choose. One of the more
popular types of mutual funds today is an index fund. Index funds attempt to
mimic the performance of a specific market index such as, the S&P 500, or
the Russell 2000.

Mutual funds serve important function for those investors who do not want
to follow the day to day research and evaluation comes from investing in
individual stocks. Mutual funds hire professional teams and leaders to
evaluate and buy and sell issues based on market conditions. The mutual
fund investor in turn, owns shares in a mutual fund and profits from the
expertise of the professionals. Mutual funds can be considered low risk
investments to very high risk investments. It depends on which mutual fund
you choose in which industry sector you want to commit your resources to.
You can invest in green mutual funds or tech funds anything in between.
3.4.5 Life Insurance

Life Insurance is a contract between a person and an insurance company for
a number of years covering either the life time period or a fixed number of
years. In India, life is protected by a monolithic institution called the Life
Insurance Corporation of India. Life insurance is called an investment
because of number of reasons:
1. It provides protection against risk of early death.
2. It can be used as collateral for taking loans from banks.
3. Life of key men in an association can be protected.
4. It provides tax advantages.
5. It is a measure of protection at the time of death because it gives
provision for estate duty
6. It is a sum of money received at the end of a particular number of
years, i.e., “the termination period of the contract.” Life insurance
is therefore, called an investment with an element of protection
and an element of investment.

3.4.6 Real Estate

Real estate investment involves the commitment of funds to property with
an aim to generate income through rental or lease and to achieve capital
appreciation. Real estate refers to immovable property, such as land, and
everything else that is permanently attached to it, such as buildings. When a
person acquires real estate, s/he also acquires a set of rights, including
possession, control and transfer rights.
Understanding real estate investment is crucial because it usually involves a

substantial investment and a long-term one. Moreover, the real estate market
can be unpredictable. This is particularly important when one goes beyond
buying a home to actually 'investing' in real estate. There are a number of
ways in which an investor can participate in the real estate market.
3.4.6 a Real Estate Investment Trusts (REITs)

A real estate investment trust (REIT) is a corporation that invests in real
estate. REITs trade on major exchanges. A REIT uses investors' money to
acquire and operate properties. The benefits of REITs are:
REITs provide fairly regular income.
Investors gain exposure to non-residential investments (like malls
and office buildings).
REITs are highly liquid.
REITs are required by law to distribute 90% of their taxable
income in the form of dividends to shareholders.
Before making a choice regarding the kind of real estate
participation, an investor must evaluate his/her investment capacity and risk
appetite.

3.4.7 Gold Investment

Gold investing involves the buying and selling of gold mainly for the
purpose of hedging against any economic, political, social or currency
related crisis. Such crises may include a stock market crash, high inflation,
war or any social unrest. Moreover, since gold is the most popular precious
metal, gold investments are made for financial gains when the market is
bullish.
How is Gold Investing Done?

The two main methods of gold investing are:
Direct investment: One can directly invest in gold by owning bullion or
coins.
Indirect investment: This method of gold investing includes gold
certificates, spread betting, accounts and derivatives. Gold exchange traded
funds (ETFs) and shares of companies that are engaged in the mining of
gold are some of the other gold investment options.
3.5 Factors Favorable for Invest in India

The investment market should have a favorable environment to be able to
function effectively. In India where all business activities are marked by
social, economic and political considerations. It is important that the
political and economic institutions are favorable. Generally, there are four
basic considerations which foster growth and bring opportunities for
investment. There are:
3.5.1 Legal safeguards

A stable government which frames adequate legal safeguards encourages
accumulation of savings and investments. Investors will be willing to invest
their funds if they have the assurance of protection of their contractual and

property rights. In India the investors have the dual advantage of free
enterprise and government control. Freedom, efficiency and growth are
ensured from the competitive forces of private enterprises. On the other
hand being a mixed economy, government control exerts discipline and
curtails some element of freedom. A combination of the public sector
controlled by the government and private sector left free to operate, hopes to
achieve the benefits of both socialistic and capitalist forms of government
without their disadvantages. In India, the political culture is conducive to
investment as government control leads stability to the capital market.
3.5.2 Well Organized Monitory System

A well-organized monetary system with definite planning and proper
policies is a necessary prerequisite to an investment market. Most of the
investments such as bank deposits, life insurance and shares are payable in a
fixed amount of the currency of the country. A proper monetary policy
should neither promote acute inflationary pressures nor prepare for a
deflation model. Neither condition is satisfactory. Price inflation destroys
power of investments. Inflation occurs generally in unstable conditions like
war or floods bus into the last decade, it also discernible in peace conditions
epically in developing countries because of huge government deficit
financed by bank credit.
A reasonable stable price level which is produced by wise monetary and

fiscal management contributes towards proper control, good government,
economic well-being and a well-disciplined growth oriented investment
market and protection to the investor.

3.5.3 Existence of Financial Institutions to encourage Savings

The presence of financial institutions, which encourage savings and direct
those to productive uses, helps the investment market to grow. The financial
institutions generally in existence in most countries are commercial banks,
life insurance companies and investment companies.
3.5.4 Features of an Investment Program

3.6.1 Safety of Principal
The investor to be certain of safety of principal should carefully review the
economic and industry trends before choosing the types of investment.
Adequate diversification, mixing investment commitments by industry,
geographically, by management, by financial type and by maturities, proper
combination of these factors would reduce losses. Diversification helps to a
great extent in proper investment programming. But it must be reasonably
accomplished and should not be carried out to extremes.
3.6.2 Liquidity
Every investor requires a minimum liquidity in his investment to meet
emergencies. Liquidity will be ensured if the investor buys a Proportion of
readily saleable securities out of his total portfolio. He may therefore keep a
small proportion of cash, fixed deposit and units, which can be immediately
made liquid. Investment like stocks, property or real estate cannot ensure
immediate liquidity.
3.6.3 Income stability

Regularity of income at a consistent rate is necessary in any investment
pattern. Not only stability, it is also important to see that the income is
adequate after taxes. It is possible to find out some good securities, which
pay practically all their earnings in dividends.
3.6.4 Appreciation and purchasing power stability:

Investor should balance their portfolio to fight against any purchasing power
instability. Investors should judge price level inflation; explore the
possibility of gain and loss in the investment available to them, limitations
of personal; and family considerations. The investors should also try and
forecast which securities will possibly appreciate. Purchase of property at
the right time will lead to appreciation in time. Growth stock will also
appreciate over time. These, however, should be done thoughtfully and not
in a manner of speculation or gamble.
3.6.5 Legality and freedom from care:

Law should approve all investment. Law relating to minors, estates, trusts,
shares and insurance should be studied. Illegal securities will bring out many
problems for the investor. One way of being free from care is to invest in
securities like Unit Trust of India or Life Insurance Corporation or Savings
Certificates. The management of securities is then left to the care of the trust
that diversifies the investment according to safety, Stability and liquidity
with the consideration of their investment policy. The identity of legal
securities and investment in such securities will also help the investor in
avoiding many problems.
3.6.6 Tangibility
Intangible securities have many times lost their value, due to price level
inflation, confiscatory laws or social collapse. Some investors prefer to keep
a part of their wealth invested in tangible properties like building, ma chinery
and land. It may, however, be considered that tangible property does not
yield an income apart from the direct satisfaction of possession of property.

3.7 Classification of Investors

Investors can be classified into different groups depending on their attitude
towards risk, expectation etc., Each investor also has an indifference point at
which his own expectation of return matches with the risk that he can take.
The investor should also be able to assess his own behavior pattern before he
aims at a particular goal, which he wishes to attain. In some cases, most of
the investors are willing to sacrifice some expected income or return if the
income is certain. The higher the income group of an investor the greater
will be his desire for purchasing assets which will give him a favorable tax
treatment.
The Investor is classified into:
a) Risk Group
Investors can be classified into different groups depending on their attitude
towards risk. Each investor also has an indifference point at which his own
expectations of returns match with the risk that he can take. A diversified
portfolio carefully chosen from the numerous securities available in the
market will help the investor in achieving his objectives. The investor
should also be able to assess his own behavior pattern before he aims at a
particular goal which he wishes to attain. Broadly, he should be able to
identify whether he is a risk averter, risk neutral or risk taker.
If he identifies himself as risk averter, his normal behavior pattern will show
his preference for investments of low market rate risk and interest rate risk.
He would prefer Government securities, Life insurance Policies, Unit Trust
Certificates that he is sure would give him a continuous return.
Another class of investors is called the risk neutrals. Such investors are
willing to pay for making an investment provided they get a return of an
equal value. Their investment trends show that they try to take some risky
stocks in their total investment program but have a larger number of
securities which give them a firm return.
The risk takers form the third category of investors. They do not mind
paying more than the expected value of an asset for an uncertain future.
They believe in high return for a greater risk. Such investors emerge as
potential gamblers. While investors can be classified in categories of high
risk, no risk or medium risk takers, it can be said that the major group of
investors are those who can absorb medium risk. Most investors are willing
to sacrifice some expected income or return if the income is certain.
Table 2.1 Types of Investors (based on risk)
b) Income Group
The income group of an investor evokes responses to the available
investment outlets. The higher the income group of an investor, the greater
will be his desire for purchasing assets, which will give him a favorable tax
treatment. The source of income usually has a bearing on deduction of tax.

Certain sources of income are taxed like ordinary income. Other sources of
income may be exempted from income tax. These investment outlets should
be identified. The investments must be geared in a manner that combines the
features of low risk and low taxation to the maximum benefit. Low-income
group investor will not look towards tax benefit. His maximum utility will
be at a point of greater reward.
Table 2.2 Types of Investors (based on Income)
Income Group Return Risk Tax Benefits
Low High Medium Nil
Medium High Medium Some
High High Medium Medium
3.8 Non-Resident Indian (NRI)

Non-Resident Indian or NRI refers to a person of Indian origin staying in a
different global location for employment/carrying on business or vocation.
They are spread across the world with an estimated population of 50 to 150
million. Most of the NRI populate have migrated to alien countries for better
job prospect and future but with the advent of global MNCs (Multinational
companies) and implementation of revised foreign policies in India, the
NRIs are driven to become a part of this fastest emerging economy. NRIs
can make investments in all the investments options, which are available to
Resident Indians. However, Persons of Indian Origin can only make
investments in non-agricultural businesses in the country.
To encourage this initiation of NRIs to resettle and return back to India, they
are granted the following facilities:
Maintenance of bank accounts in India.

Investments in securities/shares of, and deposits with Indian

firms/companies.
Investments in immovable properties in India.
Transferring of money to India is no longer a tedious procedure for the NRIs

as the availability of efficient Money Exchange Service Providers helps
them to send money directly into any bank account within no time. Most of
these service providers offer PayPal transfers and 24x7 Customer Support
for the expediency of NRIs.
To appreciate the interest of NRIs in India’s immovable properties, the

government of India has come up with beneficial investment policies for the
NRIs. The Reserve Bank of India allows them to acquire, hold, transfer or
dispose of land by way of sale or inheritance. Such properties are meant for
the purchaser's bonafide residential use and they are purchased through
normal banking channels/home loans or NRE and FCNR (Foreign Currency
Non- Resident Account)
3.9 Financial Advisors

Financial advisors play an important role in helping you to make the right
investment decisions. Depending on the type of financial advisors that you
choose, they can make your life easy or difficult. It is critical for you to learn
about different types of financial advisors, so that you may understand
which of them suit your requirements.
Qualifications
Title of financial advisors depends on their qualifications. Make it a point to
confirm the qualifications of a person who claims to be a certified financial
advisor. Remember to inquire about credentials of a person who passes himself or

herself off as a “financial planner” or financial consultant” The different types of

financial advisors strutting around with fancy titles may only end up confusing and
misleading you. Only a certified financial advisor can assist you to arrive at
intelligent investment decisions.
3.10 Investment Opportunities for NRIs

To attract foreign investment in India, Government is offering several
facilities to Non Resident Indians (NRIs), Persons of Indian Origin (PIO)
and Overseas Corporate Bodies (OCBs). While NRI refers to an Indian
citizen who is residing outside India, PIO refers to an individual who at any
time held an Indian passport or whose father or grandfather was a citizen of
India. According to the laws, NRIs/PIOs/OCBs/ are permitted to open bank
accounts in India out of funds remitted from abroad. The foreign exchange
brought in from abroad or out of funds is legitimately due to them in India,
with authorized dealer.
The Reserve Bank of India (RBI) has granted general permission to

NRIs/PIOs, for undertaking direct investments in Indian companies, under
the Automatic Route purchase of shares under
Portfolio Investment Scheme

Investment in Companies
Proprietorship / Partnership Concerns on non-repatriation basis.
NRIs/PIOs do not have to seek specific permission for approved activities

under these schemes.

3.11 Investment Options in India for NRIs

3.11.1 Ordinary Non-Resident Accounts in Rupees [NRO]
As the name suggests, it's an Ordinary Non-Resident Accounts in Rupees,
also known as NRO account. The existing accounts of any Indian National
can be designated as Ordinary Non-Resident Accounts, upon your NRI
status, or these accounts can also be opened with initial deposits paid into
any bank or post office (saving a/c) authorized to open Non-Resident
accounts. NRO account can be of any type: saving, current or Fixed
Deposit. Interest payable on NRO accounts is the same as on resident
accounts. They vary from bank to bank as they have been freed from RBI
regulation. You can also have a joint account with residents in India. NRO
accounts may be re-designated as resident accounts when the account holder
becomes a resident in India.
Disadvantages of NRO
Interest earned on balances in NRO Accounts is not exempted
from Indian Income tax. Instead income tax is deducted at source
(TDS) i.e. at the time of payment of interest by the bank.
Balance held in NRO account can neither be repatriated. No

remittance in foreign currency is allowed without prior approval
of Reserve Bank as well. So overall, the money stays 'as is' in
India.
3.11.2 NRE Accounts (Non-Resident (External) Account)

The rates of interest on term deposit kept under NR(E) are generally higher
than the rates of interest on NRO deposits. The following highlights some of
the key features of NRE accounts.
No income Tax.
No joint account with an Indian residence.

Non-Resident account holders can grant a power of attorney or
such other authority to any residents in India for operating their
NR(E) Accounts in India. Such authority is however, restricted to
withdrawals for local payments. The attorney holder cannot
repatriate funds held in accounts outside India under any
circumstances or make payment of gifts on behalf of the account
holder.
The rates of interest payable on NR(E) accounts are subject to
change from time to time as per directions issued from Reserve
Bank of India.
An eligible Non-Resident Indian can open an account with any
RBI approved authorized bank
Disadvantages of NR(E) Accounts

NR(E) Accounts are opened in Indian rupees, and all foreign exchange
remittances received for credit of that account are first converted to Indian
rupees at the buying rates by the banks. The bank will permit any
withdrawal in foreign currency, by converting Indian rupees in the account
to foreign currency at the selling rate. All balances in the account are held in
Indian rupees and are thus exposed to exchange fluctuation risk
Note:
The NRO account can't be converted into NRE. Also funds can't
be transferred from NRO to NRE account without a special
permission from RBI and proof of all existing funds required,
which is a complex procedure than opening a new NRE account.

The entire credit balance (inclusive of interest earned thereon) can

be repatriated outside India at any time without any reference to
Reserve Bank of India.
Once you go back to India for good and become an Indian
resident, NRE account can be converted into your normal
Resident Rupee Account.
3.11.3 FCNR Accounts

Foreign Currency Non Resident (B) Account [FCNR (B)] are governed by
the provisions of [Foreign Exchange Management (Deposit) Regulations,
2000.].FCNR is maintained in foreign Currency viz. US Dollar (USD),
Pounds Sterling (GBP), Euro Currency (EUR) and Japanese Yen (JPY), but
only as fixed deposits. The principal and interest earned thereon are
repatriable.
The deposit under FCNR (Banks) scheme is held in foreign currency. The
interest and the repayment of the deposit is also made in the same foreign
currency in which the account is maintained. The depositor may at his own
will, obtain repayment in Indian rupees, converted at the buying rate on the
date of repayment.
Deposits under this scheme are held for the following period: 6 months and
above, but less than 1 yr-1 yr and above but less than 2 yrs-2 yrs and above
but less than 3 yrs-3 yrs only. Premature withdrawal is allowed, but there
will be a penalty.
Non-Resident Account holders can grant power of attorney (for a specimen

click here) or such other authority to residents in India for operating their
FCNR(B) accounts in India. Interest rates are subject to the RBI guidelines.

These accounts are opened for periods ranging from 12 months to 3 years.
This is the only option available for NRIs for keeping their deposits in
foreign currency. This account has a clear advantage that the customer’s
fund is protected from fluctuations in exchange rates. Moreover, the investor
can earn an interest on this deposit in the designated foreign currency.
Interest earned on FCNR deposit is exempt from Income Tax as far as the
depositor is not Resident of India or not Ordinarily Resident in India as per
the Income Tax Act. Deposit exempted from wealth tax.
Note :
Opening of FCNR(B) accounts in the names of NRIs of Bangladesh/
Pakistan nationality/ ownership requires approval of Reserve Bank of
india.
3.11.4 Term Deposit Accounts

Term deposits can be opened by remittances from abroad or by transfer of
funds from existing NRE/FCNR/NRO/NRSR accounts of the same person
with other banks in India or from other branches of the bank or by tendering
foreign currency notes/ travelers cheques brought by NRI's during their visit
to India.
3.11.5 Portfolio Investment Schedule (PIS)

This is similar to the NRE/NRO savings a/c. The NRI can trade in the
secondary stock market with Repatriation (from NRE PIS a/c) and on non-
repartiation basis (from NRO PIS a/c). Demat a/c’s can be opened with
signatures of power of attorney (POA)

3.11.6 Unit Deposit

It is a fixed deposit scheme wherein you can withdraw your deposit to the
extent of your need and leave the remaining amount undisturbed to earn you
interest at the contracted rate.
Apart from these, NRIs are permitted to make direct investments in
proprietary/partnership concerns in India as also in shares/debentures of
Indian companies. They are also permitted to make portfolio investments i.e.
purchase of shares/debentures of Indian companies through stock exchanges
in India. These facilities are granted both on repatriation and non
repatriation basis.
Investment by NRIs in India can be broadly classified as investment on

repatriation basis and on non-repatriation basis. Repatriation basis means the
income/dividend/ interest earned from the investment and the sale/maturity
proceeds of investment can be repatriated outside India at any time or can be
credited to NRE account of the investor subject to deduction/payment of
Income Tax.
Non repatriation basis denotes that the amount invested and its capital
appreciation will not be allowed to be repatriated. However, the
interest/dividend/income earned may be permitted to be repatriated/ credited
to NRE account of the investor, subject to terms prescribed by RBI.
Investment on repatriation as well as non-repatriation basis is permitted in
the following categories.
Government dated securities (other than bearer securities)
/treasury bills.
Units of domestic mutual funds.
Bonds issued by a public sector undertaking (PSU) in India.

Shares in Public Sector Enterprises being dis-invested by the

Government of India, provided the purchase is in accordance with
the terms and conditions stipulated in the notice inviting bids.
Shares and convertible debentures of Indian companies under FDI
scheme (including automatic route & FIPB).
Shares and convertible debentures of Indian companies through
stock exchange under Portfolio Investment Scheme.
3.11.7 Equities
With sentiments running negative in favor of stock markets and risk
aversion being the flavor of the scene an average investor is wary of
investing in stocks markets. But despite all the negativity surrounding India
at this moment the fact still remains that apart from China India is the only
country in the world that is growing over 7% and has the potential of
growing by 8 – 9 % annually. Even by the estimates of the World bank,
India will grow at 7%. This annual growth coupled with the rupee
appreciation expected in few months coupled with the interest rates
reduction Indian stock markets remains a destination where putting your
money can give you extremely good returns in a medium to long term.
3.11.8 Bonds
With the reserve bank of India showing signs of start of the interest rates
cycle the bond prices are expected to rise in the coning few months and it
would be safe to assume that they would be offering good returns with no or
very less risk. With the rupee depreciation offering currency conversion
benefits these returns also can easily surpass the returns that investors can
earn in the western world

3.11.9 24% and 40% Schemes

The 24% Scheme allows Indian companies, except those engaged in
agricultural activities, to issue up to 24% of their shares and debentures to
NRIs with repatriation benefits.
Similarly, the 40% scheme allows for purchase of equity, preference shares
and convertible debentures not exceeding 51% of the face value of each
issue. Repatriation of up to 40% of the new issue is allowed. Under this
scheme, NRIs can invest in new projects or in expansion and diversification
projects of existing companies.
3.11.10 How can an NRI invest / trade in Indian Stock Markets?
Step 1: Get PAN Number, Open three types of accounts and get
Reserve Bank of India's one time permission.
1. Obtain PAN number from Income Tax Department of India if
you don't have one. Since Jan 1, 2007, it is compulsory to have
PAN if you want to place any trade with a broker in India.
Permanent Account Number (PAN) card is issued to anybody
who pays or will have to pay taxes in due time in India. As per the
new rules and guidelines, even NRI’s are required to have a PAN
card
2. Open two bank accounts with RBI (Reserve Bank of India)

approved Designated Bank Branch- NRE Account and NRO
Account. A designated branch is a bank branch which is
selected/approved by Reserve Bank of India to open NRE
accounts that are intended to be used for buying and selling stocks
on stock exchanges. Such branches also have the expertise and

infrastructure to handle NRI's trading under RBI's Portfolio

Investment Scheme.
3. Open a Demat Account, this depository account maintains your

stock balances so you get stock splits, dividends, Meeting notices
and Annual reports etc. The depository concept is similar to the
Banking system with the exception that banks handle funds
whereas a depository handles securities of the investors. A
depository can therefore be conceived of as a "Bank" for
securities. An investor wishing to utilize the services offered by a
depository has to open an account with the depository through the
Depository Participant. This is very similar to opening an account
with any of the branches of a bank in order to utilize the services
of that bank.
4. Open an account with a stock broker, there are two major stock
exchanges in India- Bombay Stock Exchange (BSE) and National
Stock Exchange (NSE). Each of them have several hundred
members. So open an account with a stockbroker who is a
member of either of the stock exchange. As NSE has nationwide
coverage and is professionally run, an account with a NSE
member is more desirable over an account with a BSE member.
5. Once these three accounts are in place, see if you have a local
relative/representative in India, who can spare some time for you
if and when needed, be very careful before you proceed without
having a local rep for you. It is strongly recommend that in order
to make your investing in India smoother, please find a relative or
a person who you can trust and who you think has right

motivation to take care of your stuff. Give a Power of Attorney to

such a person.
6. Get Reserve Bank of India's approval The application is to be

submitted to Reserve Bank through a designated branch of a bank
in India in one of the prescribed forms, i.e. NRC/NRI/RPC/RPI.
Reserve Bank issues general permission for a period of 5 years
which can be renewed further by authorized dealer concerned for
a period of 5 years at a time. The approval you get is general
approval and you don't need to get any other approval from RBI
over the next 5 or so years. The purpose of such approvals is not
to reject your application but to keep records/traces of your
investments in the country so most of NRIs would get this
approval within around 2 weeks.
Step 2: Now you are ready to invest/trade in Indian stocks.

Routine things that an investor (NRI) need to do are:
1. Stock Selection as always, you will need to do research before
you take a plunge. So do your research and select the stocks you
want to invest in.
2. Clearance from your Bank Contact your bank with the list of
stock you are intending to invest in and your bank will clear you
for trading/investing in those stocks. (As per Indian rules, NRIs
cannot collectively acquire more than 24%, 40% or X % of the
paid up capital of an Indian company. So RBI maintains the
current levels of NRI holding in various companies through the
designated branches. After you give your list to your banker, she
would check her lists and make sure there is room in individual
companies for NRIs to invest. If the limit is exceeded, you might

not be able to invest in those stocks. So make sure you get prior
clearance about your investments from your banker.
3. Place Trades through Stock Broker Place your order(s) with

your stock broker. With many stock brokers, you an place now
online orders. Thanks to Internet, this step is much easier now.
4. Forward Copy of Trade confirmation to your Bank After you

order is confirmed, forward a copy of the Trace Confirmation to
your bank.
5. Pay to your Broker for purchases and tell him about our Demat
account Write a check out of your NRE/NRO account to the
stock broker. On the settlement date, your stock broker will send
the stocks to your demat account so you might want to verify with
your depository participant if the stocks are credited in your
account. If your demat account is also with the broker you are
trading with, your life will be a bit simpler- one less institution to
deal with. Also, thanks to the Internet, currently many banks and
demat institutions offer online access to your accounts which
comes handy in managing your investments in India.
6. Closing/Settling your Investment Fortunately, repeat step 3 and 4

above. Place a SELL order with your broker. When your order is
confirmed, transfer shares to your broker's clearing account from
your demat account. After settlement, your broker will give you a
check. Take that check and a copy of broker's bill showing the
SELL transaction to your bank account for deposit. The bank will
withhold some taxes on the gains you had and deposit the rest
amount in your account. (Certain bank branches may require you
to get a certificate about how much to withhold from your
accountant or lawyer.
7. File your Tax Returns every year Most of the time, you might be
able to get refund from the withholdings done by your banker.
Sometimes you might owe additional taxes to Indian government.
Check with your tax consultant in India. (There is only
FEDERAL type of tax in India. There are no STATE or local
taxes levied on individuals.)
3.11.11 Immovable Property

NRIs and PIO can acquire immovable property in India other than
agricultural/plantation property or a farmhouse. Whether it is a residential or
commercial property investment, Indian real estate prices have been on the
rise and investors have even had 100% returns in certain metro cities in the
last few years. Even the great 2008 recession was not able to stop this rally
for a long time. With rupee depreciating NRI’s have more purchasing power
in their hands. Investors can earn three folds from investing in properties in
India. After gold property is considered to be a hedge against inflation and
property prices in India have more or less given 10% returns on an annual
basis. These returns are much more than an average investor in the western
world can hope of if they invest in their markets.
Investors can also earn from rentals from the property. With squeeze in
supply over demand and the affordability factor rentals in the major metro
cities is a decent income. You could easily get around 4% returns through
renting your property and with luck favouring or with prime location the

returns can increase to 5%. With the rupee depreciating to the extend it is in
the coming few months or years even if the reversal is half of what the rupee
has depreciated you are still in line of getting at 6 – 7% returns because of
the currency conversion. It would not be an over statement to say that
investment in property can easily give you 30 – 40 returns in 2 – 3 years.
NRIs can invest through their representatives in India by giving a power of

attorney to act on their behalf. A copy of the power of attorney should be
notarised with the Indian consulate in the respective country which will
provide authenticity on their behalf for an investment in property in India.
The property can be registered in the name of the NRI, and the power of
attorney holder can sign on their behalf by producing a copy of the power of
attorney to the appropriate authorities. If a NRI decides to acquire a house
through a power of attorney , he can still proceed abroad. This is because,
for the purposes of income tax and wealth tax, the power of attorney holder
accompanied by the actual possession of the property through the agreement
to sell is deemed to be the owner of the property for the purposes of Section
27 of the Income Tax Act.
A general power of attorney in favor of the NRI's relatives will enable them
to sell the property and arrange to repatriate the sale proceeds through an
authorised foreign exchange dealer after payment of the taxes due. They can
also rent out the property and credit the proceeds to a NRO account.
Similarly, NRIs can seek home loans through their power of attorney holder
and documents can be signed on their behalf while investing in property.
They can issue the EMI cheques on behalf of their relatives here as the
Reserve Bank of India (RBI) has relaxed the norms of operation of joint
accounts considerably recently.
A significant development is the proliferation of housing finance companies

and banks in countries abroad. In the Gulf, Dubai boasts of many housing
finance companies and banks having arrangements with exchange houses.
Home loans can be processed through overseas representative offices for
NRIs. As a result, the power of attorney enables their relatives to interact
directly with developers in India. A number of nationalised banks have
remittance arrangements with the exchange houses.
The RBI also said that any citizen who was earlier residing in a foreign
country can own or transfer property or other assets in that nation if it was
acquired during the time of his residence there. A person resident in India is
free to hold, own, transfer or invest in foreign currency, foreign security or
any property situated outside India if such currency, security or property
was acquired, held or owned when he was resident outside India or inherited
from a person who was resident outside India. Similarly, returning NRIs can
retain and reinvest the income earned on investments made under the
Liberalised Remittance Scheme. There was lack of clarity earlier as to
whether the income earned on assets held abroad by NRIs who have
returned to India for permanent settlement and assets held outside India
through Liberalised Remittance Scheme are required to be realised and
repatriated to India. Now, the RBI has clarified that income and sale
proceeds of assets held abroad need not be repatriated to India and can be
retained and invested outside India.NRIs and PIOs can repatriate sale
proceeds of immovable property acquired in India – (Immovable property
acquired out repatriable foreign funds) to the extent of repatriable funds paid
for acquiring the property, without any lock-in period. In case of residential
property, the repatriation is restricted to two residential properties.
(Immovable property acquired out of rupee funds) to the extent of USD 1
million per calendar year out of balances held in their NRO account, with a
lock-in period of 10 years.
Indian economy has given a feel good factor to the NRIs, especially in the
real estate sector. Many avenues are being created as well as schemes being
fashioned for them to maximize investments from abroad.
All persons residing outside India holding Indian passports and also people
of Indian origin have been granted permission by the Reserve Bank of India
(RBI) to invest in both residential and commercial properties in India.
Markets have stabilized and there is an impressive amount of interest in this
segment. NRIs are quick to invest in properties in India where they see an
opportunity for a good deal.
On the anvil is a single-window investment promotion council planned by

the government, which will undertake investment promotional activity. This
will involve making extensive contacts with potential investors, lobbying
and interacting with individual companies so that the overseas Indian finds a
suitable investment environment.To an NRI, a base in the homeland also
brings with it a sense of security. The number of NRIs who are investing in
property for sentimental reasons and for better investment returns is quickly
multiplying.
The government including RBI and Foreign Exchange Management Act

(FEMA) has liberalized the rules and regulations for the NRIs to make
investment in real estate. Liberalization along with the added advantage of
repatriation of the capital invested and even the rental proceeds under the
circumstances prescribed by RBI have also encouraged NRI investments in
real estate. Capital gains can be taken back after paying capital gains tax.

Apart from India being a safe destination, 10 to 12 per cent returns on the
investments are assured.
3.12 DIFFERENT TAX BENEFITS AVILABLE TO NRIs

Bank Deposits investment in shares, units of Mutual Funds etc.
are exempt from wealth tax in India.
Interest earned on NRE and FCNR accounts is completely tax-
free.
In 1997, gift tax was abolished. So both the donor as well as the
recipient did not have to pay any tax on the gifts received.
Consequently people started misusing the vacuum left behind by
scrapping of gift tax. There was a widespread transfer of insincere
gifts from the non-relatives. In order to fill up this void, Section
56 (2)(v) of Income Tax Act was passed in 2004.As per Section
56 (2)(v) of the Income Tax Act , any amount exceeding Rs
25,000 obtained by a person or a Hindu Undivided Family (HUF)
without any consideration from non-relative would be taxed. The
only cases exempted were the gifts given during marriage,
inheritance left behind in a will or if the payer has died.
3.13 TAX PORVISIONS AND CONCESSIONS FOR NRIs

Residents in Dubai and the UAE do not have to pay income tax. There’s an
all round good feeling about this that attracts people from all over. When it
comes to NRI, the feeling is doubly good. They don’t have to pay tax back
home for income earned abroad. But those earning an income from
investments made in India have to be attentive to taxes that accrue on them.
What attract tax are the non-resident’s investments in shares, debentures,
deposits and properties in India. The exemption limit is Rs. 160,000.

3.13.1 Income Tax

Under the Income Tax Act, an NRI is a person who has stayed outside India
for 182 days or more in a financial year (from April 1 to March 31). If a
person have come back after being an NRI for nine consecutive years, then
he is an R-NOR (Resident but Not Ordinarily Resident), and can still obtain
some of the benefits for two consecutive financial years. An individual can
also obtain NRI benefits if he has been in India for not more than 729 days
during the preceding seven financial years.
NRI’s don’t need to think about income earned outside the country, until and
unless the organization the individual is employed with is Indian. Neither
does the person have to think twice before parking money in a Non-Resident
External (NRE) account. However, interest accrued on a Non-Resident
Ordinary Account (NRO) is taxed at the rate of 30.9%, is deducted by the
bank at source.
Also once income is earned on money (convertible foreign exchange)

invested in India, the question of tax arises. These are called the Foreign
Exchange Assets (FEA) and the categories are:
a) Shares in Indian Company.
b) Debentures issued by a Public Limited Company
c) Deposits in a Public Limited Company
d) Securities of the Central (federal) Government.
e) Any other notified asset
The interests gained from these investments are taxed at a flat rate of 20%.
And profit out of the long term capital gains that is, selling a capital asset
such as a property, gold, after holding it for 36 months, attract a flat tax of
10%. Similar gains from equity shares and equity mutual funds are tax
exempt if held for more than 12 months. But if sold before 12 months, there
is a short-term capital gains tax of 10%.
Capital gains are determined at the rate of exchange on the date of sale. But
there is a catch here. The sale of these investments is tax-exempt, if the sale
proceeds are reinvested in similar investments within six months. If the sale
proceeds of these assets are partially re-invested, then the exemption is
proportionate to the amount re-invested.
3.13.2 Filing Returns

But, if the income from foreign exchange assets and long-term capital gains
is the only income of an NRI, then there is no need to file a return. In
calculating the total income on any foreign exchange asset, no deduction is
allowed in respect of any expenditure or allowance under any provision of
the Act.
Tax returns need to be filed only if the individual’s Indian income including
the rent is more than Rs. 160,000. One may also file for tax refunds if the
NRI had his taxes deducted at source and his income was less than the
exemption limit of Rs. 160,000.
Moreover, as Rajesh Singla, a New-Delhi based Chartered Accountant

specializing on tax issues, says: “A Non- Resident Indian may also elect by
these provisions for any assessment year by furnishing to the assessing
officer the return of income for that assessment year and declaring therein
that these provisions shall not apply to him for that assessment year. If he
does so, then his total income and tax will be computed in accordance with
the normal provisions of the Act”.
In other words, an NRI may choose to be assessed as either an NRI or as an

Ordinary Indian Resident. This is particularly beneficial for low-income
group NRI’s who will pay less tax for the chosen assessment year, if he
chooses to be taxed as an ordinary Indian. In such a case, the Non-Resident
has to file a declaration with his return of income, that these provisions
would not be applicable to him. The normal provisions of the Income Tax
Act would be applicable with respect to the mentioned investment incomes.
There are more ways of saving taxes on long-term capital gains. That is, by
investing in the following products, though it’s important to note that all are
Foreign Exchange Assets, that is, bought with convertible Foreign exchange.
Certain Mutual Funds such as those of UTI ( Unit Trust of India)
 Some notified savings certificates for NRI’s, such as, National
Saving Certificate VI and VII issues are notified.
NRI Bonds 1988 and NRI Bonds (second series)
NRI residing in countries with a Double Taxation Avoidance
Agreement with India (UAE is one of them) may also obtain tax
benefits by providing proof of residency form the country of
residence while opening a bank account in India.
3.13.3 Provisions
a) Tax on certain NRI Incomes:
U/S 115 A: Tax on dividends, royalties and fees for technical
services.
U/S 115 AC: Tax on income from bonds or GDR purchased in
foreign currency or capital gains arising from their transfer.

U/S 115 AD: Tax on income from securities or capital gains

arising from their transfer.
U/S 115 BBA: Tax on sportsmen.
b) Special Provisions for Certain NRI incomes:

U/S 115E: Tax on investment income at the rate of 20 percent and
long term capital gain at the rate of 10 percent.
U/S 115F: Capital gains on transfer of Foreign Exchange Assets
not to be charged in certain cases.
U/S 115 I: Provisions of Chapter not to apply if NRI so chooses.
3.13.4 Investing and Savings

a) Investments:
 Invest in a residential house by taking out a housing loan. There is
a deduction of interest up to Rs. 150,000 (Dhs. 11,800) if the
house is self occupied and full interest if it’s let out.
Invest in Shares/Mutual Funds: dividends and long-term capital
gains are exempt.
b) Presumptive Tax Concessions:

U/S 44 B: Profit from shipping business taxable at the rate of 7.5
percent of income of India.
U/S 44 BBA: profit from business of aircraft at the rate of 5
percent of income in India.
U/S 44 C: Head office expenditure subject to conditions.
U/S 44 DA: Special provisions for computing income by way of
royalty and fee for technical services.

Data Analysis and Interpretation 54
CHAPTER – 4
ANALYSIS AND INTERPRETATION
Analysis is the process of placing the data in the ordered form, combining
them with the existing information and extracting the meaning from them. In
other words, analysis is an answer to the question “what message is con-
veyed by each group of data “. Data, which are otherwise raw facts and are
unable to give a meaningful information. The raw data become information
only when they are analyzed and when put in a meaningful form.
Interpretation is the process of relating various bits of information to other

existing information. Interpretation attempts to answer “what relationship
exists between the findings to the research objectives and hypothesis framed
for the study in the beginning”.

Table 4.1 Age of Respondents

Age Group No. of Respondents Per cent
Below 25 30 15.0
26-35 58 29.0
36-45 43 21.5
46-55 37 18.5
Above 55 32 16.0
Total 200 100
(Source: Field survey)
Figure 4.1 Age of Respondents
29.00%
30.00%
21.50%
25.00% 18.50%
20.00% 15.00% 16.00%
15.00%
10.00%
5.00%
0.00%
Below 26-35 yrs 36-45 yrs 46-55 yrs Above
25yrs 55yrs

Interpretation:
From the above table it is very evident that majority of the respondents be-
long to the age group of 25 – 35 years. Out of the total number of respond-
ents, 58 of them belong to the age group of 25 -35 years, 43 of the respond-
ents belong to the age group of 35 -45 years and 37 of them belong to the
age group of 45-55 years, but only 32 of them belong to the age group above
55 years and 30 of the respondents is below 25years.
Out of the total number of respondents, 15.0 percent of the respondents be-
long to the age group below 25 and 29.0 percent of the respondents belong
to the age group of 25 – 35 years. 21.5 per cent of the respondents constitute
the age group of 35-45 years, 18.5 per cent of them belong to 45- 55 years
age group and 16 per cent of them belong to the age group of above 55
years.
So it is very clear that the most of the respondents belong to the age group of
25 – 35 years.

Table 4.2 Employment Status

No. of Re-
Category Per cent
spondents
Salaried 129 64.8
Professional 21 10.5
Business 26 13.0
Others 23 11.5
Total 200 100
Figure 4.2 Employment Status
Others
12%
Business
13%
Professional
10% Salaried
65%

Interpretation:
Table 3.2 indicates that most of the respondents are from the working or
employed class. The respondents were given four options to choose from:
Salaried, Professional, Business and Others. Others here represent the retired
and the homemakers who are investors.
Out of the 200 respondents, 129 of them form the salaried class, 26 of them
belong to the business class, and 23 of them belong to the group ‘Others’,
which includes retired and house wives. Only 21 of the respondents are from
the professional class.
From the above pie chart, it is very clear that 64.8 per cent of the respond-
ents were salaried, 10.5 per cent of them belong to the professional group,
13.0per cent of the respondents belong to the business class and 11.5 per
cent of them are house makers or retired.
Therefore, from the above table and chart it is very clear that investments
are not very prominent with the house makers but it’s very prominent among
the salaried and the business class.

Table 4.3 Income wise Classification

Per
Range of Income No. of Respondents
cent
Below AED 1,000 51 25.5
AED 1,001 – AED 5,000 70 35.0
AED 5,001 – AED 10,000 47 23.5
Above AED 10,000 32 16.0
Total 200 100
Figure 4.3 Income wise Classification:
35.00%
35.00% 25.50%
23.50%
30.00%
25.00% 16.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Below AED AED 1001 - AED 5001 - Above 10000
1000 5000 10000

Interpretation:
The income of the respondents was also analyzed to find out the income lev-
el of the respondents. There were given four options: below AED 1,000, Be-
tween AED 1,000 and AED 5,000, between AED 5,000 and AED 10,000
and above AED 10,000.
Table 3.3 points out that Out of the total number of respondents, 70 of the
respondents belong to the income group of AED 1000 – AED 5000.
51respondents belong to the first group, i.e., below AED 1000, and 47 of the
respondents belong to the third group, i.e., income between AED 5000 –
10000 and only 16 of the respondents belong to the income group above
AED 10,000.
From the above table and chart it is very clear that 25.5 per cent of the re-
spondents were from the income group below AED 1,000 and 35.0 per cent
of the respondents belong to the income group of AED 1000- 5000 but only
23.5 per cent of the respondents were of the income category of AED 5000-
10000 and only 16.0 per cent of the respondents belong to the income group
of above AED 10000.

Table 4.4 Saving Objective:

Occupation No. of Respondents Per cent
Children’s Education 12 6
Growth Plan 72 36
Retirement Plan 48 24
Health Care Expenses 8 4
Home Purchases 40 20
Others 20 10
TOTAL 200 100
Figure 4.4 Saving Objective:
40% 36%
30%
24%
20% 20%
6%
10%
10%
4%
0%

Interpretation:
The respondents were asked about their savings objectives and they were
given six options to choose from and they were Children’s Education,
Growth Plan, Retirement Plan, Health Care Expenses, Home Purchase and
Others. Here ‘Others’ represents investment made by investors for marriage
purposes or for wealth maximization.
Table 3.4 indicates that Out of the total number of respondents, 72 of the re-
spondents have growth plan as their savings objective, 48 of the respondents
have retirement plan as their savings objective, 40 of them wanted to save to
buy or build a home, 12 of the respondents wanted to save for children’s ed-
ucation and 8 of the respondents had health care expenses of the future as
their objective and 20 of them had different other objectives to save other
than the above mentioned.
From the above figure, it can be clearly concluded that, majority of the re-
spondents wanted to save for future growth prospects. i.e., 36 per cent of the
respondents had growth as their savings objective, 24 per cent of them had
retirement as their savings objective and only 4 per cent of the respondents
save for the purpose of dealing with the health care expenses they have to
bear in future. 20 per cent of the respondents save for the purpose of buying
or building up a home and 10 per cent of them had other savings objectives
other than mentioned. 6 per cent of the respondents wanted to save for their
marriage or as wealth maximization objectives.

Table 4.5 Investment Objectives:

No. of Respond-
Investment Objectives Per cent
ents
Income & Capital appre- 46 23.0
ciation
Growth & Income 44 22.0
Long-term growth 79 39.5
Aggressive Growth 31 15.5
TOTAL 200 100
Figure 4.5 Investment Objectives:
39.50%
40.00%
30.00% 23.00%
22.00%
20.00%
15.50%
10.00%
0.00%
Income &
Capital Growth &
Income Long-term
Growth Aggressive
Growth

Interpretation:
The respondents were asked about their investment objectives and they were
given four options, Income and Capital appreciation, Growth and Income,
Long-Term Growth and Aggressive Growth.
Out of the total number of respondents,79 of the respondents had long-term

growth as their investment objective, 46 of the respondents had income and
capital preservation as their investment objective. 44 of the respondents in-
vest for their growth and income and 31 of them had aggressive growth as
their investment objective.
Out of the 200 respondents, 23.0 per cent of the respondents have income
and capital appreciation as their investment objective, 22.0 per cent of them
have growth and income as their investment objective and 39.5 per cent of
the respondents had long-term growth as their investment objective. But on-
ly 15.5 per cent of the respondents have aggressive growth as their invest-
ment objective.
It is very clear from the above table and chart that long- term growth of the
respondent is one and the major reason why they choose to invest.

Table 4.6 Frequency of Investment in India:

Frequency No. of Respondents Per cent
Monthly 21 10.5
Quarterly 52 26.0
Half yearly 56 28.0
Annually 71 35.5
Total 200 100
Figure 4.6 Frequency of Investment in India:
40.0% 35.5%
26.0% 28.0%
30.0%
20.0%
10.5%
10.0%
0.0%
Monthly
Quarterly
Half-Yearly
Annually

Interpretation:
The above table and chart helps to understand the frequency of investment
made by the investors in India. The respondents were given four options and
they were: Monthly, Quarterly, Half-yearly and annually.
Out of 200 respondents, 71 of the respondents make an investment annually,

56 of them invests half yearly and 52 of the respondents invest quarterly but
only 21 of the respondents invest monthly.
From the above chart it is very clear that most of the respondents invest an-
nually, say in the form on fixed deposits, installments to be paid for insur-
ance or real estates. 35.5 per cent of the respondents invest annually, 28 per
cent of them invest half yearly and 26.0 per cent of them invest quarterly
and 10.5 per cent of them invest monthly

Table 4.7 Financial Advisor

Frequency No. of Respondents Per cent
Yes 169 84.5
No 31 15.5
TOTAL 200 100
Figure 4.7 Financial Advisor:
No
0.16
Yes
0.85

Interpretation:
The respondents were asked whether they have a financial advisor who
prompted them to invest in the different investment avenues available in In-
dia. Most of the respondents have a financial advisor, who has advised them
to invest in the different investment avenues available for the purpose of
savings and a steady income.
Out of the 200 respondents, 169, i.e., more than Eighty percent of the re-
spondents have taken the advice of their friends, banks, financial institutions
and advertisements. And 31 of the respondents have not taken the advice of
their friends or other financial advice providers, i.e., 15.5 percent of the re-
spondents did not make their investments due to the advice provided by oth-
ers.

Table 4.8 Who has been the Financial Advisors

No. of Respond-
Advisor Per cent
ents
Friends/ Relatives 37 22
Financial Consultants 32 18.9
Investment Institutions 47 27.8
Portfolio Departments in 53 31.3
Banks
Total 169 100
Figure 4.8 Who has been the Financial Advisor
40.0%
30.0% 27.8% 31.3%

22.0%
18.9%
20.0%
10.0%
0.0%
Friends/
Relatives Financial
Consultants Investment
Institutions Portfolio Dept.
in Banks

Interpretation:
From the above table, the surveyor wanted to know the actual motivator for
the respondent to invest. The respondents were given five options:
Friends/Relatives, Financial consultants, Investment Institutions, Portfolio
Department in Banks.
Out of the total number of respondents, 53 of them made investments by

taking the advice from the Portfolio Departments of Banks, 37 of them of
them took the advice from their friends or relatives and 32 of respondents
took the advice from financial consultants to invest in the various investment
avenues available in India and 47 of them took advice from investment insti-
tutions.
From the above figure, it is very evident that majority of the respondents
took advice from Portfolio Departments in Banks which help them to decide
the best investment avenue that would suit their personal investment strate-
gy. Out of the 200 respondents, around 31.3 per cent of the respondents took
advice from the portfolio departments of the banks, 27.8 per cent of them
took advice from the investment institutions especially formed for this pur-
pose. 22 per cent of the respondents take advice from their friends or rela-
tives and only 18.9 per cent of them took investment advice from financial
consultants.

Table 4.9 Investment Portfolio of the Respondents

Investment Not In- % of Invested
Invested
Portfolio vested People
Bank Deposits 139 61 69.5
Post Office
84 116 42.0
Savings
Shares/Bonds/
73 127 36.5
Debentures
Mutual Funds 70 130 35.0
Life Insurance 150 50 75.0
Real Estate 90 110 45.0
Gold 142 58 71.0
Figure 4.9 Investment Portfolio of the Respondents
80.0% 69.5%
75.0%
60.0% 71.0%
42.0%
40.0% 36.5% 45.0%
35.0%
20.0%
0.0%

Interpretation:
The respondents were asked to select from the given options to make up
their present investment portfolio. The respondents were given six options:
Bank Deposits, Post Office Savings, Shares, Mutual Funds, Life Insurance,
Real Estate and Gold.
Out of the 200 respondents, 139 of them had invested in Bank as Deposits
and 61 of them did not deposit in bank. That is, around 69.5 per cent of them
had bank deposits included in their investment portfolio.
84 of the respondents had investments as Post Office Savings, mainly wom-

en, and 116 of them did not include this option in their respective portfolios.
So, from the above table it is very clear that only 42per cent of them have
investments in post office savings.
From the total number of respondents, 127 of them had not invested in
shares but only 73 of them opted for that investment option. i.e., only
36.5per cent of them had invested in Shares.
130 of them had not invested in mutual funds, and only 70 of them, out of
the total number of respondents, invested in mutual funds, which means, on-
ly 35per cent of the respondents had investments in mutual funds.
The interesting fact is that 150 of the respondents had an investment in the
form of Life Insurance and only 50 of them dint have that in their invest-
ment portfolio. 75.0 per cent of the respondents had life insurance included
in their investment portfolio.

Out of the total number of respondents, 110 had not invested in Real estate
and almost the same number of respondents, i.e., around 90 of them had in-
vested in real estate. Thus 45.0 per cent of the respondents had included Re-
al estate as one of their investment options.
142 of the respondents had invested in gold maybe in the form of jewelry.
Only 58 had not invested in this form of investment option available. i.e.,
71per cent of them had invested in gold.

Table 4.10 NRIs Awareness level towards the various investments

in India
Options No of respond- No of respond- Per cent

ents Aware of ents not aware
the investment of the invest-
alternatives ment alterna-
tives
Bank Deposits 200 Nil 100
Shares/ Con- 67 133 33.5
vertible Deben-
tures/ Non-
Convertible
Debentures
Mutual Funds 103 97 51.5
Bonds- invested 84 116 42.0
out of NRO/
FNCR/NRE
Immovable 194 6 97.0
Property
Partnership 41 159 20.5
concern in India
Deposits in In- 68 132 34.0
dian Companies
through NRO
accounts

Figure 4.10 NRIs Awareness level towards the various investments

in India
100.0%
100.0% 97.0%
33.5% 51.5%
50.0% 42.0%
20.5% 34.0%
0.0%
Interpretation:
The respondents were then asked a question which would help the surveyor
to determine the awareness level of the NRIs towards the various investment
options available to them in their home country. The respondents were asked
to mark those investments which were familiar or which they were aware of.
The different investment options given were: Bank deposits, Shares/ Con-
vertible Debentures/ Non- Convertible Debentures, Mutual Funds, Bonds-
which is invested out of the NRO/FNCR/ NRE accounts, Immovable proper-
ty, Propitiatory/ Partnership concern in India, deposits in Indian companies
through NRO accounts.
There was no doubt about the awareness level of the bank deposits among
the NRIs. The 200 respondents were aware of the bank deposit schemes
available in India for them,. Only 67 of the respondents of them were aware
of shares/ convertible or non-convertible debentures available for NRIs in
India. But around 103 of the respondents were aware of the Mutual Fund

scheme available in India through the Banks and various other financial in-
stitutions. 84 of the respondents had knowledge about the Bond scheme
which was invested out of the NRO/FNCR/NRE accounts of the NRIs and
41 of the respondents were aware of an investment option available in the
form of being a partner in an Indian company. But majority of the respond-
ents, i.e., 159 of them were not aware of this option. Out of the total number
of respondents, only 68 of them knew that they could deposit their earnings
in an Indian company. But 132 of them were not aware of this option.
Out of the total number of respondents, 100 percent of them were aware of
the bank deposits available in India for NRIs, only 33.5 percent of the re-
spondents were aware of the shares/convertible or non-convertible debenture
option. But 51.5 percent of the respondents were aware of the
Mutual Fund scheme and 97 per cent of them had good knowledge and
awareness about the immovable property, another investment alternative,
available to them. Only 42 per cent of the respondents were aware that they
could invest their hard earned money in Bonds which can be invested out of
their NRO/FNCR/NRE accounts and only 34 per cent of them were aware
that they could deposit their earnings in Indian companies through their
NRO accounts. 20.5 per cent of them were aware that they could invest in
the form of a partnership with an Indian Company.
From the above table and chart, it is very evident that the investors or the
NRIs lack sufficient information about the various investment options avail-
able to them in India. Thus our government, banks and even the private fi-
nancial institutions should take a step in creating awareness and also educat-
ing the investors about the diverse investment portfolios.

Table 4.11 Level Of Satisfaction With the Investment Made

Level of Satisfaction No. of Re- Per cent
spondents
Highly Satisfied 72 36
Satisfied 88 44
Unsatisfied 40 20
TOTAL 200 100
Figure 4.11 Level Of Satisfaction With the Investment Made
Unsatisfied,
20%
Highly
satisfied, 36%
Satisfied, 44%

Interpretation:
The above table shows the respondents reaction when asked about the level
of their satisfaction with their investment they have made. The respondents
were given three options to choose from Highly Satisfied, Satisfied and Un-
satisfied.
Out of the total number of respondents, 72 of them were highly satisfied

with the investments they had made in India. 88 of them were satisfied with
the investment they have made and 40 of them were unsatisfied with the in-
vestment they have made.
From the above table and pie chart it is very clear that majority of the re-
spondents are highly satisfied with the investment made in home country.
That is around 36 per cent of the respondents are highly satisfied with the
investments they have made, 44 per cent of the respondents are satisfied
with the investments and only 20 per cent of them are unsatisfied with the
investments they have made in home country.
So majority of the NRI’s who were the part of this survey were happy with
the investments they made in India in different investment alternatives
available to them, i.e., around 160 of the respondents were happy with the
investments they have made.

Table 4.12 Investment Experience:

Investment experi- No. of Respond- Per cent
ence ents
Beginner (no invest- 25 12.5
ment experience)
Moderately Experi- 71 35.5
enced Investors
Knowledgeable Inves- 60 30.0
tors
Experienced Investor 44 22.0
TOTAL 200 100
Figure 4.12 Investment Experience:
35.5%
40.0%
30.0%
30.0%
20.0% 12.5% 22.0%
10.0%
0.0%
Beginner
Moderately
Experienced Knowledgable
Investor Experienced
Investor Investor

Interpretation:
The respondents were asked about their personal experience in investing in
the different investment avenues. The respondents were given four options:
Beginner or no investment experience, moderately experienced investor,
knowledgeable Investor and Experienced Investor.
Out of the total number of respondents, 60 of the respondents classified

themselves as knowledgeable investors, 71 of them have classified them-
selves into the group of moderately experienced investor. Only 44 of the
respondents have graded themselves as experienced investor and 25 of
them classified themselves as a beginner or no investment experience.
From the total number of respondents, 12.5 per cent of them classified
themselves as a beginner or a person with no prior experience in investing,
may be like college students or housewives. 35.5 per cent of the investors
have classified themselves into the category of moderately experienced in-
vestor. These investors are those who have experience in investing in Mu-
tual funds and bank deposits. 30.0 per cent of the respondents have graded
themselves as Knowledgeable experienced investor. They are those inves-
tors who have individually bought and sold stocks or bonds of corporate
bodies. Only 22.0 per cent of the respondents graded themselves as experi-
enced investors. They are those who have experience in all the investment
avenues available in the market and also have an experience in buying and
selling of stock, they have exercised stock options or stock warrants and
have also traded stock options.

Table 4.13 Risk wise Classification

No. of Respond-
Risk Preference Per cent
ents
Low Risk 68 34
Medium Risk 82 41
High Risk 50 25
Total 200 100
Figure 4.13 Risk wise Classification
45% 41%
40% 34%
35%
30%
25%
25%
20%
15%
10%
5%
0%
Low Risk
Medium Risk
High Risk

Interpretation:
The respondents were asked to determine the level of risk they are likely to
undertake through their investments. The respondents were given three op-
tions: Low risk, Medium Risk and High Risk.
Out of the total number of respondents, 82 of the respondents prefer medium

risk attached to their investments 68 of the respondents prefer low risk at-
tached to their investments and only 50 of the respondents preferred high
risk.
So it’s very evident that most of the investors prefer medium level of risk to
be attached to their investments, i.e., 41 per cent of the respondents prefer
medium level of risk whereas 25 per cent of the investors do not mind at-
taching high risk factor to their investments and 34 per cent of the respond-
ents preferred their investments to have a low level of risk.
Low risk investments would be fixed deposits and life insurance policies.
Medium risk would include the real estate, mutual funds, unit trust etc., and
whereas high risk would involve shares.

Table 4.14 Options on the Comfort ability Level in the Decline

Options No. of Respond- Per cent
ents
Agree 32 16.0
Disagree 93 46.5
Strongly Disagree 75 37.5
TOTAL 200 100
Figure 4.14 Options on the Comfort ability Level in the Decline

Value of investments for Higher Returns
Strongly
Disagree, Agree, 16.00%
37.50%
Disagree,
46.50%

Interpretation:
The respondents were given a statement, ‘“I’m comfortable with invest-
ments that may frequently experience large declines in value if there is a po-
tential for higher returns.” The surveyor wanted to measure the risk return
attitude of the respondents through these questions. The respondents were
given three options: Agree, Disagree and Strongly Disagree.
Out of the total number of respondents, 75 of them strongly disagreed with

the statement, i.e., they would never opt for an investment avenue which
would earn higher return but there might be a decline in the value. 93 of the
respondents totally disagree with the statement, i.e., it is very clear that they
wouldn’t opt for such risky investment avenues. But 32 of the respondents
agreed to the statement and were willing to opt for an investment avenue
which would face a decline in the value but for a higher return.
From 200 respondents, only 16.0 per cent of them agreed with the statement,
which reflected on their personal attitude towards taking risk. These re-
spondents are willing to take the risk for earning a higher return from their
investment. 46.5 per cent of the respondents disagree with the statement and
37.5 per cent of them strongly disagree with the statement. These respond-
ents are not willing to take risk for a higher return.

Table 4.15 Withdrawal From the Investment Account

Period of With- No. of Respond- Per cent
drawal ents
Less than Five years 104 52
Six – Nine years 55 27.5
Ten years & above 41 20.5
TOTAL 200 100
Figure 4.15 Withdrawals from the Investment Account
60.0% 52.0%
50.0%
40.0%
27.5%
30.0%
20.5%
20.0%
10.0%
0.0%

Interpretation:
The surveyor wanted to know the approximate withdrawal time the investors
are planning to make. The respondents were given three options: three- five
years, six – nine years and ten years or more.
Table 3.15 indicates that Out of the 200 respondents, 104 of them are plan-
ning to withdraw from their investment accounts within three – five years of
investment. 55 of them were planning to withdraw within six- nine years of
their investment and 41 of the respondents planned to withdraw over a peri-
od of ten years or more.
From the above table and chart, the surveyor can come to a conclusion that
the respondents prefer to reap back the profits or withdraw from their in-
vestments within a period of three – five years. 52 per cent of the respond-
ents planned to withdraw within three – five years of investment and 27.5
per cent of the respondents planned to withdraw within six to nine years.
20.5 per cent of the respondents planned to withdraw from their investment
within a period of ten or more years.

CHI-SQUARE ANALYSIS
1. Age & Risk Profile

Null Hypothe- : There is no significant relationship be-
sis tween Age and Risk profile
( H0 )
Alternate Hy- : There is significant relationship between
pothesis Age and risk profile.
( H1 )
Table 4.16 Relationship between Age Group & Risk Profile
Risk Profile
Observed Frequency
Age Medi- Total
Low um High
Risk Risk Risk
Below 25 Years 8 15 7 30
26 - 35 years 2 20 14 57
36 – 45 years 13 19 11 43
Above 45 years 24 28 18 70
Total 68 82 50 200
Expected Frequency
Below 25 Years 10 12 8 30
25 - 35 years 20 24 14 58
35 - 45 years 15 18 11 43
Above 45 years 23 28 17 69
Total 68 82 50 200

Chi- Square (2) Value = 2.82

Level Of Significance = 0.05
Degrees Of Freedom = 6
Table Value = 12.6
Interpretation:
Calculated 2 Value is less than the Table Value. So Null Hypothesis (H0)
is accepted. Therefore, there is no significant relationship between Age
group and Risk Profile.

2. Income and Frequency of Investment.

Null Hypothesis : There is no significant association be-
( H0 ) tween Income and Frequency Of In-
vestment
Alternate Hy- : There is significant association between
pothesis ( H1 ) Income and Frequency Of Investment.
Table 4.17 Relationship between Income & Frequency of Investment

Frequency Of Investment
Observed Frequency
Income Monthly Quarterly Annually Total
Below AED 1000 11 12 28 51
AED 1000 – AED
5000 22 19 28 69
AED 5000 – AED
10000 23 10 15 47
Above AED
10000 15 11 6 32
Total 70 52 78 200
Expected Frequency
Below AED 1000 18 13 20 51
AED 1000 – AED
5000 24 18 27 69
AED 5000 – AED
10000 16 12 18 47
Above AED
10000 11 8 13 32
Total 70 52 78 200


Table Value = 12.6
Interpretation:
Calculated 2 Value is greater than the Table Value. So Null Hypothesis (
H0 ) is Rejected. Therefore, there is significant relationship between Income
and Frequency of Investment.

3 Income & Risk Profile
Null Hypothesis : There is no relationship between Income

( H0 ) and Risk;
Alternate Hy- : There is a relationship between Income
pothesis ( H1 ) and Risk
Table 4.18 Relationship between Income & Risk Profile Risk pro-
files
Risk Profile
Observed Frequency
Medium High
Income Low Risk Risk Risk Total
Below AED 1000 24 18 10 51
AED 1000 – AED 5000 20 31 19 69
AED 5000 – AED 10000 15 20 12 47
Above AED 10000 10 14 9 32
Total 68 82 50 200
Expected Frequency
Below AED 1000 17 21 13 51
AED 1000 – AED 5000 24 28 17 69
AED 5000 – AED 10000 16 19 12 47
Above AED 10000 11 13 8 32
Total 68 82 50 200


Table Value @ 5per cent = 12.6
Interpretation:
Calculated 2 Value is less than the table value @ 5 per cent level greater
than the Table Value @ 5per cent level of significance. So Null Hypothesis
( H0 ) is accepted. There is no relationship between income and risk profile.

4 Occupation & Frequency of Investment
Null Hypothesis : There is no significant relationship be-

( H0 ) tween occupation & frequency of In-
vestment
Alternate Hy- : There is a relationship between occupa-
pothesis ( H1 ) tion & frequency of Investment
Table 4.19 Relationship between Occupation & frequency of In-

vestment.
Frequency of Investment
Observed Frequency
Quarter-
Occupation Monthly ly Annually Total
Salaried 50 31 48 130
Professional 3 8 10 21
Business 7 8 11 26
Others 10 4 8 23
Total 70 52 77 200
Expected Frequency
Salaried 46 34 50 130
Professional 7 6 8 21
Business 9 7 10 26
Others 8 6 9 23
Total 70 52 77 200


Table Value = 12.6
Interpretation:
Calculated 2 Value is greater than the Table Value. So Null Hypothesis (
H0 ) is Rejected. Therefore, there is significant relationship between Occu-
pation and Frequency of Investment.

5 Occupation & Risk Profile
Null Hypothesis : There is no significant relationship be-

( H0 ) tween occupation & Risk Profile
Alternate Hypoth- : There is a relationship between occupation
esis ( H1 ) & Risk Profile.
Table 4.20 Relation Between Occupation & Risk Profile
Risk Profile
Observed Frequency
Low Medium
Occupation Risk Risk High Risk Total
Salaried 46 53 31 130
Profession-
al 6 9 6 21
Business 7 12 8 26
Others 9 8 6 23
Total 68 82 50 200
Expected Frequency
Salaried 44 53 32 130
Profession-
al 7 9 5 21
Business 9 11 7 26
Others 8 9 6 23
Total 68 82 50 200


Table Value = 12.6
Interpretation:
Calculated 2 Value is less than the Table Value. So Null Hypothesis
( H0 ) is Accepted. Therefore, there is no association between Occupation
and Risk Profile.

Findings and Suggestions 97
CHAPTER – 5
FINDINGS AND SUGGESTIONS
5.1 Findings
After conducting a thorough study on “Investment options available in India
for NRI’s”.
The following findings are:
 Among the 200 respondents, 29.0% of them are of the age group
25 – 35 years.
 The respondents who belong to the salaried class make more
investments.
 35.0% of the respondents are in the income level between 1000 –
5000 dirham’s.
 Out of 200 respondents most of them had growth and retirement
plan as their saving objective
 Most of the respondents have income and capital appreciation as
their investment objectives.
 Most of the respondents make investments on annual basis.
 84.5% of the respondents have financial advisors; they take
advices from the portfolio departments in banks
 Among the 200 respondents 75.0% of them have selected their
investment portfolios as life insurance.
 36% of the respondents are highly satisfied with the investments
made by them.
 And 44% of them are satisfied with the investment made. Only
20% of them are not much satisfied.

 46.5% of the respondents disagree with the investments that may

frequently experience large declines in value if there is a potential
for higher returns.
 Among the 200 respondents, 41% of them are medium risk takers;
they need medium risk with medium return.
 Out of 200 respondents 52% of them withdraw their investments
before five years.
5.1.1 Investment Portfolio of Investors

 About 75.0% of the respondents have invested in Insurance.
 About 71% of the respondents have invested in Gold.
 69.5% of the respondents have invested in Bank Deposits.
 45.0% of the respondents have invested in Real Estate.
 42% of the respondents have invested in Post Office Savings.
 36.5% of the respondents have invested in Shares.
 Only 35% of the respondents have invested in Mutual Funds.
5.1.2 Inter-relationship between Investor profile and Investment

Preferences
From the chi-square analysis, It is found that there is no
relationship between
 Income and Frequency of Investment
 Occupation and risk profile.
It is found that there is significant relationship between
 Age and Risk Profile.
 Income and Risk Profile.
 Occupation and Frequency of Investment.

 Age and Safety in Investment.

 Those who have invested in shares and mutual funds.
5.2 Suggestions
1. As most of the respondents who have participated in this survey
are salaried people, i.e., they earn a specific amount of salary
monthly, thus they prefer to invest in risk free investment avenues
available in India. Maybe that is the reason why most of them
preferred to invest in Life Insurance, Gold and Bank Deposits.
Most of the respondents are looking for a steady income and
maximum avoidance of risk from the selected investment
alternative. This is the main reason why there is less number of
people who are willing to invest in Shares/ Bonds or Debentures.
Thus the NRI’s should be introduced to a wider spectrum of
investment avenues available in India, by providing them
information needed through various financial agencies or
consultants or through portfolio departments maintained by
Banks.
2. Most of the respondents who have participated in the survey are

aware about some of the investment alternatives available in India
for the NRI’s. Most of the investors are aware of bank deposits
and real estate avenues open to them but they are not aware of the
investment options like deposits in Indian companies, partnership
with an Indian concern etc. thus the government, public and
private companies should provide more detailed information
about the investment alternatives. As the NRIs are not frequent
visitors to their home country, they are not aware of the actual

economic, political and social trends existing in the economy.

They can also educate the NRIs through publishing journals and
magazines exclusively for this purpose. Then conducting
seminars specially designed for the specially designed for the
NRIs. These would help the government to create awareness and
also develop and motivate the NRIs to invest in their home
country, rather than in the country in which they stay.
3. The frequency of investment adopted by the NRIs is annually.

The major reason being the lack of awareness they have about the
different investment alternatives. They are reluctant to invest
their hard earned money in those investments which they do not
have sufficient information. Thus by conducting seminars,
publishing journals, investors could be made more aware. Once
sufficient information is available with the investors, they will
have the confidence to invest and thus could be motivated to
invest more frequently, maybe in shares/ bonds/ debentures or
maybe in real estate sector. By providing awareness, the investors
would be willing to take up a high level of risk also.
4. There are many factors which influence an investor while taking

an investment decision. According to the analysis done on the
response of the investors, it can be ascertained that most of them
invest for their long term growth.
5. According to the analysis done, it has been proved that income;

age and occupation of the respondents do not have any significant
relationship with risk. But occupation of the respondent has a

significant relationship with the frequency in which the investors

invest in the different investment avenues available in our home
country. Since the above mentioned parameters do not have a
significant relationship with risk, housewives and college going
students should be encouraged to invest in profitable investment
opportunities (like post office schemes, shares etc).
.

Conclusion 102
6.0 CONCLUSIONS:
The study was conducted on 200 NRI’s based on UAE to find out their
attitude and perception towards the different investment alternatives
available back home.
The various factors identified in the study also helped in providing some
valuable input regarding the investor’s pattern, their preference and
Priorities.
The study reveals that the investor has great preference for safety and this is
proved by their investments in Life Insurance, Gold and Bank Deposits.
The statistical analysis has helped the surveyor to have a deeper insight on
the relationship between income, age and occupation on the risk preferences
of the investors.
The NRI investors are looking for investment alternatives that would help
them to earn a steady income back home and also an investment alternative
that does not have risk of loss attached to them.
The survey also helped to analyze, the investors awareness about the various
investment avenues available to them back home. Through the study it was
evident that the investors are not fully aware of the options available to
them. Thus through creating awareness and educating the NRIs about the
investment alternatives, in which they can invest will help the individual as
well as the country as a whole to develop.

Appendices 103
Appendix A:
QUESTIONNAIRE
Dear Respondent, I’m Venu.T, student pursing MBA – Finance from Birla
Institute of Technology. As a part of my curriculum, This questionnaire is
prepared to do my dissertation on the topic, “Investors attitude and Knowledge
towards investment options available in India with special reference to UAE
based NRI’s.”
The data being collected are solely for academic purpose. I request you to kindly
extend your co-operation.
Name:-
Age:-
Gender:-
1) What is your employment status?

o Salaried
o Professional
o Business
o Others
2) What is your estimated monthly income?

o Below AED 1,000
o AED 1,000 – AED 5,000
o AED 5,000 – AED 10,000
o Above AED 10,000
3) What is your purpose for savings?

o Children’s Education
o Growth Plan
o Retirement Plan
o Health care Expenses
o Home purchase
o Others
4) What are your investment portfolio objectives?
o Income and capital preservation

o Growth and Income
o Long-term growth
o Aggressive growth
Appendices 104
5) How frequently do you invest in India?
o Monthly
o Quarterly
o Half- Yearly
o Annually
6) Do you consult a Financial Advisor?
o Yes [ ]
o No [ ]
7) If Yes, with whose financial advice did you start your investment?
o Friends/Relatives
o Financial consultants
o Investment institutions
o Portfolio Department in Banks
8) Which of the following assets do you currently have, in your investment

portfolio?
o Bank deposits
o Post Office
o Shares/ Bonds/ Debentures
o Mutual funds
o Life Insurance
o Real Estate
o Gold
9) If you have invested in Shares, which of the below sectors of investment

avenues would be your preference?
o IT sector [ ]
o Textile sector [ ]
o Engineering sector [ ]
o Auto sector [ ]
o FMCG sector [ ]
o Chemical sector [ ]
o Pharmacy sector [ ]
o Banking sector [ ]
o Oil sector [ ]
Appendices 105
10) Rank the below investments according to your priority.
o Bank Deposits [ ]
o Post Office [ ]
o Shares [ ]
o Mutual Funds [ ]
o Life Insurance [ ]
o Real Estate [ ]
o Gold [ ]
11) Are you aware of the investment avenues as a NRI, please mark those products
you are aware of.
o Bank Deposits
o Shares/ convertible debentures/ non-convertible debentures
o Mutual Funds
o Bonds- invested out of NRE/FCNR/NRO
o Immovable Property
o Proprietary/ partnership concern in India
o Deposits in Indian Companies through NRO accounts
12) Which of the following options best describes your satisfaction level on the
investment made?
o Highly Satisfactory
o Satisfactory
o Unsatisfactory
13) What best describes your investment experience?
o Beginner (no investment experience)

o Moderately experienced investor (mutual funds and bank deposits)
o Knowledgeable investor (has bought or sold individual shares of stock
or bonds)
o Experienced investor (has traded stock options, exercised stock rights
or stock warrants)
14) What would be the extend of risk composition you would like to have in your
investment?
o Low Risk
o Medium Risk
o High Risk
Appendices 106
15) Do you Agree, Disagree, or Strongly Disagree with the following statement
“I’m comfortable with investments that may frequently experience large
declines in value if there is a potential for higher returns.”
o Agree
o Disagree
o Strongly Disagree
16) Rank the below factors which influence your investment decision?
o Safety [ ]
o Liquidity [ ]
o Regular income [ ]
o Capital appreciation [ ]
o High Return [ ]
17) Approximately, when do you plan to make your first withdrawal from your
investment accounts?
o Three – five years

o Six – nine years
o Ten years or more
Bibliography 107
Bibliography
Books
Investment Management- Preeti Sing-10th edition – Himalaya publication
2002.
Investment Analysis and Portfolio Management – Prasanna Chandta – 2nd
edition- Tata McGrawhill publishing Company,2005.
Financial Management and Services – Gordon, Natarajan-5th edition –
Himalaya Publishing House,2009.
Websites
www.economywatch.com
http://www.sebi.gov.in/sebiweb/
http://www.rbi.org.in/scripts/BS_EntireSearch.aspx?searchString=nri%20in
vestment
http://www.prlog.org/11884280-rupee-depreciation-is-it-the-right-time-for-
nris-to-invest-in-india.html
http://www.femaonline.com/nricms.php?id=1
http://jayesh.profitfromprices.com/invest_in_india_terms_faq.htm
http://www.mynriclub.com/site/NRI-Account/Foreign-currency-Non-
resident-Account-FCNR
http://www.path2usa.com/nri-bank-accounts-nre-account-nro-account
http://www.nriinvestindia.com/nri-india-mutual-funds.html


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I

“A STUDY ON INVESTORS ATTITUDE

PROJECT REPORT SUBMITTED

Under the Supervision of

BIRLA INSTITUTE OF TECHNOLOGY,

This is to certify that the present report on “INVESTORS ATTITUDE

This is to certify that the project entitled “A Study on Investors Attitude

Signature of the Guide Signature of the H.O.D

I wish to express my sincere thanks to “Dr. Durga Prasad”, for his

I am extremely indebted “Mr.Venu Madhav” – Area Manager (AIME) for

Table of Contents Page

List of Figures viii

Investor’s attitude and knowledge towards investment options available in India

3.2 Why Investments are Important 11

Investor’s attitude and knowledge towards investment options available in India

3.4.6 Real Estate 24

Investor’s attitude and knowledge towards investment options available in India

Investor’s attitude and knowledge towards investment options available in India

List of Tables Page

Table 2.1 Types of Investors (Based on Risk) 30

Investor’s attitude and knowledge towards investment options available in India

List of Figures Page

Figure 4.1 Age of Respondents 55

Figure 4.2 Employment Status 57

Figure 4.3 Income wise Classification 59

Figure 4.4 Saving Objective 61

Figure 4.5 Investment Objective 63

Figure 4.6 Frequency of Investment in India 65

Figure 4.7 Financial Advisor 67

Figure 4.8 Who has been the Financial Advisors 69

Figure 4.9 Investment Portfolio of the Respondents 71

Figure 4.10 NRIs Awareness level towards the various 75

Figure 4.12 Investment Experience 79

Figure 4.13 Risk wise Classification 81

Figure 4.14 Options on the Comfort ability Level in the Decline 83

Investor’s attitude and knowledge towards investment options available in India

1.1 Introduction to the Study

Source: http://www.oifc.in (overseas Indian Facilitation Centre)

presents a plethora of avenues to the investors. Though certainly not the

1.2 Investors Attitude towards Investments

independent financial advice; the recent superior performance of

1.3 Investors Attitude towards Risk

Investor’s attitude and knowledge towards investment options available in India

investors felt it was important to consider the potential returns whatever

1.4 Non-Resident Indian (NRI)

1.4.1 Person of Indian Origin (PIO)

1.4.2 Overseas Corporate Body (OCB)

1.5 Investment options available for NRIs

Investor’s attitude and knowledge towards investment options available in India

2.1 Title of the Dissertation

2.2 Statement of the Problem

Investor’s attitude and knowledge towards investment options available in India

2.3 Scope of the Study

2.4 Objectives of the Study

2.5 Methodology of the Study

Descriptive research includes surveys and fact-finding enquiries of different

In this survey the design used is descriptive in nature. The information is

variables, pertaining to different investment options. Moreover Cross table

2.5.2 Sampling Design

2.5.3 Collection of Data

2.5.4 Analysis of Data

Investor’s attitude and knowledge towards investment options available in India