June INTERNSHIP PROGRAM

SUMMER
2010
“ANALYSIS OF VARIOUS FINANCIAL
PRODUCTS”
 A
PROJECT REPORT
ON

“ANALYSIS OF VARIOUS FINANCIAL

PRODUCTS IN INVESTMENT.”

SUBMITTED BY
PRAVEEN P KASHYAP
MBA 4TH SEM
SCHOOL OF COMMERCE & MANAGEMENT
SCIENCES, NANDED

SUBMITTED TO
REGIONAL DISTRIBUTION
HEAD OF KARVY
MR. RAVI GAIKWAD
Acknowledgement:
It Is indeed a matter of immense pleasure to work as a summer
trainee in an organization “KARVY STOCK BROCKING
LIMITED” & completing this project with them and submitting
this final project report is a learning experience itself.

The last two month’s with “KARVY STOCK BROCKING LIMITED”

had been full of learning and sense of contribution towards the
organization. I would like to thank Mr. Ravi Gaikwad REGIONAL
HEAD OF DISTRIBUTION at KARVY STOCK BROCKING LIMITED for
giving me opportunity for learning and contributing to their
organization through this project.

During the actual project work Mr.Pramod Bode has been a

source of inspiration through this constant guidance, personal
interest, Encouragement and Help. I convey my sincere thanks to
him. In spite of his busy schedule he always found time to guide
me through the project. I am also grateful to him for giving me
the freedom to work on my project. As a student of SCHOOL OF
COMERCE & MANAGEMENT SCIENCES, I would like to express
my gratitude towards my Faculty Guide , Dr.
(PROF.)V.N.LATURKAR for her valuable guidance , keen
interest, inspiration and of course moral support throughout my
project.

At last I would like to thank one and all who directly and
indirectly helped me out during the making of this project.
 P
raveen P Kashyap

ROLL NO.07

M.B.A.4th sem

Executive Summary:

The Project was carried out for study and analyzing the
investment in various financial products to special reference of
KARVY STOCK BROCKING LTD. IN PUNE.

In this Project report I have made an analysis that what is the

Investment Pattern, What is the Prospect and How various
financial products have emerged a better Investment option in
India Recent Years giving the Investor Higher returns, Liquidity,
Safety against Traditional Investment avenues like Bank-FD, Post
office Saving, Investment in Volatile Stock Market Etc.

But at the same time its being having a great learning for me due
to slowdown in the market due to the effect of U.S market.

With the Growth of The Indian economy Due to various economic

Factors Including Industrialization, Growth of Infrastructure and
service industries, increased Foreign direct investment and
foreign Institutional Investment, the Indian Companies have
grown to become Global business Giant.

So, the Market Capitalization of the Indian companies has grown

which has resulting in a building of a strong capital market.
People are also now more willing to invest and are ready to take
risk. All this Development has proved to be a good atmosphere for
investments in India.

Now a day’s Investment is saving has assumed great importance.

The Investment offers a Wide array of Schemes to suit the
Customers Different Investment Objective as per their Financial
Position, Risk Taking Capabilities, their income and many other
factors.

So the whole report is made on the study of various assumptions

of the present Global market.

Objective Of Report :
Theoretical Knowledge without Practical Experience is like a Body
without Soul. So without Practical implementations, theory
remains no use. Hence we need to gain the Practical Experience.
And what better would be, then a Project work for the same.Also
as a part of our MBA curriculum, we need to undergo the training
Programmed for minimum of 60 days, in a company.I selected to
study the various investment options in India , which pools the
funds & Reduces risk by investing in different diversified assets.I
studied as to how this industry proves to an option for the
investors, by studying the Performance of market for few months
considering their past values.

Hence this is a project work on a “ANLYSIS OF VARIOUS

FINANCIAL PRODUCTS”.

The following is the main objective of project:

 • The project helps to establish an understanding which allows
the investor to balance risk and reward according to the
individual’s goals, risk tolerance and investment horizon.

• A thorough understanding of the various investment options

available in the market and a comparative analysis of the
same in accordance with the investor’s needs.

• The other objective is to study the present scenario of the

market both capital and money market in Indian context.

• Building contact with the prospective clients and designing a

portfolio which will provide a balance between risk and
return.

Company’s Profile:
Overview:

KARVY, is a premier integrated financial services provider, and

ranked among the top five in the country in all its business
segments, services over 16 million individual investors in various
capacities, and provides investor services to over 300 corporate,
comprising the who is who of Corporate India.

KARVY covers the entire spectrum of financial services such as

Stock broking, Depository Participants, Distribution of financial
products - mutual funds, bonds, fixed deposit, equities, Insurance
Broking, Commodities Broking, Personal Finance Advisory
Services, Merchant Banking & Corporate Finance, placement of
equity, IPO’s, among others.
Karvy has a professional management team and ranks among the
best in technology, operations and research of various industrial
segments.The Investment policies in India have come a long way,
especially after the introduction of the section 80(c) by the UPA
Government, which gives an average investor to save first one
lakhs rupees of their annual income as rebate.

This new amendment provides the investors to invest more in tax

saving schemes as per decided by the norms of this acts. The tax
savings areas where an investor can invest are Personal Provident
Fund (PPF), Tax Saving Bonds, National Saving Certificate, Equity
Link Saving Schemes (ELSS), Unit Link Insurance Policy Schemes
(ULIPS) etc.

Now-a –days ELSS and ULIPs gives high returns, investors are
more keen to invest in these schemes and more over the new
ULIPs schemes provider are now giving capital guarantee also i.e.
they give this assurance that if the market crashes the investor
will at least receive their invested capital.

Early Days:-
In 1982, a group of Hyderabad-based practicing Chartered Accountants started
Karvy Consultants Limited with a capital of Rs.1, 50,000 offering auditing and
taxation services initially. Later, it forayed into the Registrar and Share Transfer
activities and subsequently into financial services. All along, Karvy's strong work
ethic, professional background leveraged with Information Technology enabled it
to deliver quality to the individual.
A decade of commitment, professional integrity and vision helped Karvy achieve a
leadership position in its field when it handled the largest number of issues ever
handled in the history of the Indian stock market in a year. Thereafter, Karvy made
inroads into a host of capital-market services, - corporate and retail - which proved
to be a sound business synergy.
Today, Karvy has access to millions of Indian shareholders, besides companies,
banks, financial institutions and regulatory agencies. Over the past one and half
decades, Karvy has evolved as a veritable link between industry, finance and
people. In January 1998, Karvy became the first Depository Participant in Andhra
Pradesh. An ISO 9002 company, Karvy's commitment to quality and retail reach
has made it an integrated financial services company.
Karvy Stock Broking Ltd is a member of National Stock Exchange (NSE),
Bombay Stock Exchange (BSE) and The Hyderabad Stock Exchange.
Karvy is one of the premier integrated financial intermediaries in the country,
which is into businesses such as Merchant Banking, Stock Broking, Depository
Participant Services, Financial Products Distribution, Mutual Fund Servicing, and
Registrar and Transfer Agents.
Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows
freely towards attaining diverse goals of the customer through varied services.
Creating a Plethora of opportunities for the customer by opening up investment
vistas backed by research-based advisory services. Here, growth knows no limits
and success recognizes no boundaries. Helping the customer create waves in his
portfolio and empowering the investor completely is the ultimate goal.It is an
undisputed fact that the stock market is unpredictable and yet enjoys a high success
rate as a wealth management and wealth accumulation option. The difference
between unpredictability and a safety anchor in the market is provided by in-depth
knowledge of market functioning and changing trends, planning with foresight and
choosing options with care. This is what Karvy provide in their Stock Broking
services.
Karvy offer trading on a vast platform; National Stock Exchange, Bombay Stock
Exchange and Hyderabad Stock Exchange. More importantly, they make trading
safe to the maximum possible extent, by accounting for several risk factors and
planning accordingly. They are assisted in this task by their in-depth research,
constant feedback and sound advisory facilities. Their highly skilled research team,
comprising of Technical
Analysis as well as fundamental specialists secure result-oriented
information on market trends, market analysis and market
predictions.

To empower the investor further they have made serious efforts

to ensure that their research calls are disseminated
systematically to all their stock broking clients through various
delivery channels like email, chat, SMS, phone calls etc.

In the future, their focus will be on the emerging businesses and

to meet this objective, they have enhanced their manpower and
 revitalized their knowledge base with enhances focus on Futures
and Options as well as the Commodities business.

Vision of Karvy:-

To achieve & sustain market leadership, Karvy shall aim for

complete satisfaction, by combining its human & technological
resources, to provide world class quality services. In the process
the company shall strive to meet & exceed customer satisfaction
& set industry standards.

Mission of Karvy:-

Karvy mission is to be a leading, preferred service provider to our

customer, & they aim to achieve this leadership position by
building an innovative, enterprising, & technology driven
organization, which will set the highest standards of service &
business ethics.

Karvy – An overview of the business

Stock Broking Distribution Depository

 Mutual Funds
Karvy Group
IPO’s – Equity, Bonds
Debt products
 NSE and BSE– Housing, Personal,
Loans  Participant with both
membership
Auto NSDL and CDSL
 Equity, Derivatives  640,000+ accounts
and Debt market  Amongst the top DPs in
operations the country
 600+ terminals
 220,000+ accounts
 Around 4.5% market
share (NSE Cash)
Direct
Membership
Insurance
broker
Commodities
Category with
– IRDA
Broking
two
1 Investment Banker registered
Investment
exchanges
registration – NCDEX
received
Banking
in/Jan
with SEBI
2005
MCX
Among top 10 Investment bankers in India
IPOs, Debt placements, corporate
restructuring etc.

Karvy – Achievements:

➢ India’s #1 Registrar& Securities Transfer Agent

➢ Amongst the Top 5 Stock Brokers(4.5% market share)

➢ Among the Top 3 Depository Participants

 ➢ Largest Network of Branches & Business Associates

➢ Largest Independent Distributor for Financial Products

➢ Amongst Top 10 Investment Bankers

➢ Adjudged as one of The Top 50 IT Users In India by MIS

Asia

➢ ISO 9000:2000 Certified operations by DNV

➢ Full fledged IT driven operations

KARVY Group Companies:

KARVY Consultants Limited

KARVY Computershare Private Limited

KARVY Investor Services Limited

KARVY Commodities Broking Private Limited

KARVY Insurance Broking Private Limited

KARVY Global Services Limited

KARVY Realty & Services (India) Limited

KARVY Stock Broking Limited

PROJECT:

“ANALYSIS OF
VARIOUS
FINANCIAL PRODUCTS
 IN
INVESTMENT”

Introduction
Planning of financial products

Marketing of financial product means not only selling but also

providing the financial product to the client at right time, at right
place and according to their requirement.

Marketing of financial products has to be carefully planned and

executed in order to avoid mistakes that can be costly and hard
to recover from. With heavy competition, financial institutions
have to be aware of the current market trends and must keep
informing their clients about their latest service or products to
make sure that their clients use them.

Some Marketing Tips For Financial Products:

 – Direct mailing is tactic that is relatively cheap and can be
used to reach target markets of your choice. The job can be
out-sourced, and your operating costs are well within the
budget. It can also be effective in recruiting potential
customers easily.
– Cold calling is another marketing strategy, but it is not used
much owing to the enormous drain on time and labor as well
as costs and low rate of new customer recruitment.
– Offering items having your brand identity serves to remind
existing customers as well as those you deal with on a
regular basis about your financial services as well as
products. Post-it note pads, pens, coffee mugs, key chains,
pen torches, etc., are items that are generally used as
promotional items.
– Using the media to effectively advertise your products. The
TV, radio, newspaper, magazines, cinemas, etc., are very
good sources for targeting your advertisements. Keep your
advertisements short and make sure they tell people how
they can benefit from using your services or products.
– Getting celebrities to endorse the product or service is
another effective marketing tip.

Types of Financial Products:

➢ Mutual Fund
➢ Insurance
➢ Stock Broking
➢ Commodity
➢ Bonds and Fixed Deposit

Mutual fund
Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The income
earned through these investments and the capital appreciation realized is shared by
its unit holders in proportion to the number of units owned by them. It also, offers
an opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost.

Stock broking

stock broking where you can invest your money in stock market
in two ways:

1. Primary Market
2. Secondary Market

Primary market:

Primary markets bring together buyers and sellers - either directly or through
intermediaries - by providing an arena in which sellers’ investment propositions
can be priced, brought to the marketplace, and sold to buyers. In this context, the
seller is called the issuer and the price of what’s sold is called the issue price.

It is the initial market for any item or service. It also signifies an initial market for
a new stock issue.
Secondary Market:

Secondary Markets are the stock exchanges and the over-the-counter market.
Securities are first issued as a primary offering to the public. When the securities
are traded from that first holder to another, the issues trade in these secondary
markets.

Commodity:
Commodity Futures are contracts to buy specific quality of a particular commodity
at a future date. It is similar to the Index futures and Stock Futures but the
underlying happens to be commodities instead of Stocks and Indices.

Major Commodity Exchanges

• Multi-Commodity Exchange in India Ltd, Mumbai (MCX).

• National Commodity and Derivative Exchange of India, Mumbai (NCDEX).

• National Multi Commodity Exchange, Ahemdabad (NMCE).

Insurance:
A human life is also an income-generating asset. This asset also
can be lost through unexpectedly early death or made non-
functional through sickness & disabilities caused by accidents.
Accidents may or may not happen. Death will happen, but the
timing is uncertain. If it happens around the time of one's
retirement, when it could be expected that the income will cease,
the person concerned could have made some other arrangements
to meet the continuing needs. But if it happens much earlier when
the alternate arrangements are not in place, insurance is
necessary to help the dependents.
Bonds and Fixed Deposit:

Bonds and fixed deposit are most safer financial product to invest
in. Investment in these type of funds means investor is most
concerned about the security of their finance rather than returns,
where it is believed that high risk and high return.Now to market
or sell the above explained financial products, we have existing or
prospective clients to focus, they are mentioned below:

Target Audience

To market these various types of financial product the target

audiences are:

➢ Retail segment clients as well as high net worth clients.

➢ Cooperative Banks
➢ Corporate bodies
Once the financial product are focused to market(sell) the target
audience, the financial consultant set the portfolio goal, that how
the investment is to carried out in the proper effective manner to
minimize the risk and maximize the profit which has been
explained below.

Setting Portfolio Goals:

The liquidity of an investment signifies the ease or ability to

convert investments to cash without a substantial loss in the
principal or original amount invested. The rate of return pertains
to an investment's gain or loss over a specific time period. Return
levels usually parallel risk levels; meaning a high-risk level
investment may yield a higher return. The risk tolerance of a
client will play a major role in portfolio management, as comfort
levels towards potential for loss differ greatly among
investors.After setting the portfolio goal of the client, further
various technique are used to analyze the portfolio in order to
achieve the set goals.

Portfolio Analysis:

Various analytical techniques are utilized by financial firms to

manage a client portfolio. BCG analysis involves plotting
investment products on a graph according to their market share
and market growth rate. The product is then defined by one of
four categories: stars, dogs, question marks, or cash cows. A cash
cow represents a high market share and low growth, while a star
represents high growth and high market value. Cash cow
investments are important diversifying tools as they can generate
revenue to fuel question marks. Another analysis technique
known as Contribution Margin Analysis takes revenues, costs,
competitor reactions and current portfolio investment effects and
calculates which products to add or subtract.

Portfolio management firms should provide analysis that includes

historical trends and potential yields, as well as outline
investment scenarios and prospective earnings. Advisors should
work directly with the client to establish initial goals and
objectives, and be able to explain measures necessary to take in
order to achieve them. Portfolio management advisors will gather
information on current holdings and assets and determine which
investments will yield the appropriate return while remaining
within the client's risk tolerance. At times, the referral from a
friend, family member, or colleague can be the first step in finding
a portfolio management advisor who can best fit an individual's
investment strategy.

Now the question comes which is , once all the

steps are followed till portfolio analysis, what is
the investment objective behind this?

Objective of Investment:
(1) Safety of funds:

The investment should be preserved, not be lost and remain in a returnable position
in cash or kind.

(2) Liquidity:

The portfolio must consist of such securities, which could be encased without any
difficulty or involvement of time to meet urgent need for funds. Marketability
ensures liquidity to the portfolio.

(3) Reasonable return:

The investment should earn a reasonable return to upkeep the declining value of
money and be compatible with opportunity cost of the money in terms of current
income in the form of interest or dividend.

(4) Appreciation in capital:

The money invested in portfolio should grow and result into capital gains

(5) Tax planning:

Efficient portfolio management is concerned with composite tax planning covering

income tax, capital gains tax, wealth tax, and gift tax.

(6) Risk avoidance:

Risk avoidance and minimization of risk are important objectives of portfolio

management. Portfolio managers achieve these objectives by effective investment
planning and periodical review of the market situation and economic environment
affecting the financial market.

Benefits of the study:

The results of the study is crucial to the investors like high
network client, retailers and also to the person keep a track
record of different financial products. It gives a best available
option to client for investment.This is the one of the memorial
days in my life, I have studied many things during this project.

Objectives:
The following would be the objective of my project:
(financial product view point)

➢ To find best possible investment option for customer

according to his/her requirement.
➢ To generate best possible personal financial planning of
clients.
➢ To determine strategic investment technique.
➢ To diversify the risk i.e. minimizing the risk and
maximizing the profit.
➢ To suggest tax evasion technique.

Objective towards corporate tie ups view point:

➢ To provide all type of customized service
➢ To provide all types of financial service under one roof.

Limitations:
➢ Difficult to change the fixed mindset client.
➢ Lesser expose to stock broking and commodity broking.

Methodology
Adopted for individual investor

➢ Gaining the fundamental knowledge of financial

terminology and the financial product to be sold.
➢ Gathering of data base related to the potential client and
contacting them to fix up the meeting.
➢ Briefing the future of financial product available for
promotion considering the personal investment need of
the potential client.
➢ Follow up of the clients in order to finalization of sales of
the financial products.
➢ Communication with company guide in order to get the
feedback about the methodology of convincing the
potential client and asking for the required investments.

MAIN TEXT

My project is all about ‘Analysis of financial products in

investments’. Karvy Stock Broking ltd as a Broking House keeps
the different companies product, which helps the clients to go for
that type of products which cater their needs according to their
requirement.

My focus of study are various financial products which is further

explained in details in the report.

Mutual Fund:
As it is defined above a Mutual Fund is a trust that pools the savings of a number
of investors who share a common financial goal. The money thus collected is then
invested in capital market instruments such as shares, debentures and other
securities. The income earned through these investments and the capital
appreciation realized is shared by its unit holders in proportion to the number of
units owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost. The flow chart below
describes broadly the working of a mutual fun

Advantages of Mutual Funds:

The advantages of investing in a Mutual Funds are:

• Professional Management

• Diversification

• Convenient Administration

• Return Potential

• Low Costs

• Liquidity

• Transparency

• Flexibility

• Choice of schemes

• Tax benefits

• Well regulated

The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT:

The above graph has explained that how the growth of assets has shown the
upward trend while the same has been invested in mutual funds.

Types Of Mutual Fund:

Mutual Funds have specific investment objectives such as growth
of capital, safety of principal current income or tax exempt
income, one can select one fund or any number of different funds
to help one meets ones specific goals. In general terms there are
7 types of mutual fund, that is:-

1. Open-End Funds
2. Close-End funds
3. Large Cap Funds
4. Mid-Cap Funds
5. Equity Funds
6. Balanced Funds
7. Growth Funds

Mutual fund schemes:

Open Ended Schemes:

Open-ended schemes do not have a fixed maturity period.

Investors can buy or sell units at NAV- related prices from and to
the mutual fund on any business day. These schemes have
unlimited capitalization, open-ended schemes do not have a fixed
maturity, there is no cap on the amount you can buy from the
fund and the unit capital keep growing. These funds are not
generally listed on any exchange.Open-ended schemes are
preferred for their liquidity. Such funds can issue and redeem
units any time during the life of schemes. Hence unit capital of
open-ended funds can fluctuate on a daily basis. The advantages
of open ended schemes are: -
 1. Any time exit option.
2. Any time enter option.

Closed ended schemes:

Close-ended schemes have fixed maturity periods. Investors can

buy into these funds during the period when these funds are open
in the initial issue. After that such scheme cannot issue new units
except in case of bonus or right issue. However after the initial
issue you can buy or sell units of the schemes on the stock
exchange where they are listed. The market price of the unit
could vary from the NAV of the schemes due to demand and
supply factor.

How long to keep INVESTMENT to get maximum returns:

Technically open-ended funds you can withdraw your investments

even within a week, but to get desired returns positive time frame
is required are:

Funds Time Period

Equity Funds 3 Years (plus)
Balanced Funds 18 months to 3 Years
MIP’s 1 Year (plus)
Income Funds 6 months to 1 Year
Liquid Funds few days to 6 months

WHAT RETURNS CAN I EXPECT IF I KEEP MY MONEY FOR SUGGESTED

TIME FRAMES:-

Funds Returns

Sector funds 22% to 25% p.a

Balance funds 15% to 18% p.a
MIP’s Pension Plans 12% to 15% p.a
Income Funds 10% to 12% p.a
Liquid Funds 7% to 9% p.a

The above-mentioned returns in the table are indicative and not

assured. All investments in MUTUAL FUNDS are securities and are
subject to market risk and the NAVs of the schemes may go up
and down depending upon the factors and forces affecting the
security market including the fluctuations in the internal rates
.The past performance of the MUTUAL FUNDS is not indicative of
future performance.

THE RISK RETURNS GRAPHS FOR VARIOUS FUNDS:

 RISKS
R Income
Balanced
Sector
Liquid
Equity
Funds
E
T
U
R
N
S

The above Graph shows the Risk and Returns generated by

different Funds. Liquid Funds are less Risky and also generate less
Returns where as Sector Funds are more Risky but generate more
Returns by the example of above two Funds it is clear that Risk
and Returns are directly proportional to each other. Other Funds
like Equity Funds, Balanced Funds and Income Funds are also
gives the same percentage of Returns as the Risk involved.

➢ Comparison between Open ended and close Ended

Schemes

Top 10 Open Ended - Equity: Diversified - Since Launch Return

Return as
NAV (Date) Returns (%) on
Fund

Tata Equity 42.31 (16-

71.04 5/16/2007
Opportunities may)

Sundaram Select 68.39 (16-

63.46 5/16/2007
Midcap may)
50.80 (16-
HSBC Equity 58.33 5/16/2007
may)
Magnum Emerging 21.44 (16-
54.81 5/16/2007
Businesses may)

DSPML Top 100 40.59 (16-

52.54 5/16/2007
Equity may)
Kotak 20.97 (16-
50.59 5/16/2007
Opportunities may)
45.02 (16-
Birla Mid Cap 50.02 5/16/2007
may)
Prudential ICICI 43.83 (16-
49.70 5/16/2007
Dynamic may)
51.31 (16-
Nifty Junior BeES 48.27 5/16/2007
may)

Top 10 Closed Ended - Equity: Tax Planning - Since Launch Return

NAV Return Return

Fund (Date) s (%) as on

29.09 (16- 4/16/200

UTI MEPUS 48.44
April) 6
147.26 (16 4/16/200
Birla Tax plan '98 38.73
-April) 6
Franklin India Tax shield 86.30 (16- 4/16/200
29.99
'98 April) 6

Franklin India Tax shield 90.02 (16- 4/16/200

26.93
'97 April) 6

Franklin India Tax shield 51.26 (16- 4/16/200

25.42
'99 April) 6
 53.04 (16- 4/16/200
Sundaram Taxsaver '98 22.52
April) 6
28.63 (16- 4/16/200
Sundaram Taxsaver '97 21.86
April) 6
32.34 (14- 4/14/200
BoB ELSS '97 15.21
April) 6
37.96 (16- 4/16/200
Morgan Stanley Growth 13.93
April) 6
Standard Chartered 10.02 (15- 4/15/200
0.20
Enterprise Equity April) 6

In above two tables if you compare open ended scheme to close ended schemes
you found that highest return given by Tata Equity Opportunities which is an open
ended scheme is 71.04% compare to highest return given in closed ended is given
by UTI MEPUS which is 48.44%.If you can see there is clear difference of 23%
return between both schemes.

In case of marketing of mutual fund

First comes participants, involved are Mutual Fund Company, client and third
party service provider (i.e. Karvy stock broking ltd.).

Secondly the cycle, which is its working procedure. Basically the company come
up with the different funds offer either it is existing or new fund offer where the
main aim is to sell it off to the target consumer, then the role of third party service
provide comes in the picture. Where the broking house bridge the gap between the
company and the clients in promoting and selling of the different funds.
Thirdly comes the profit that means the benefit which goes to all the three parties
i.e. company, client and as well as broking house. The company is benefited in the
form of profit, what they get after selling of their different Mutual fund products.
Where the client is benefited in different ways.

1. By investing in mutual fund client can save the tax. There are various
companies mutual fund which come under ELSS (Equity Link Saving
Scheme) where investing in such type of mutual fund , investor can avail the
tax exemption.

2. In other words we can say to get a quick money one should go for mutual
fund investment, this is because when the same money is there in the bank
then one should be going to get only nine percent of return out of it but if the
fund is invested in the good Mutual fund scheme then on can expect at least
20% return in the worst case scenario and maximum of return that the
Mutual fund has given is around 65%.

Lastly the broking house gets benefited by getting the brokerage on the number
and the amount of funds and scheme sold.

Fourthly growth prospective of the Mutual Fund companies, it has a wide

future prospective, because always everyone wants to have tax exemption for
which people go for mutual fund investment, because of this mutual fund company
is growing. And apart from what is mention, by looking the brand name of the
company and its goodwill people normally go for Mutual Fund investment . So it
has to be seen that it has the wide future.

Lastly a question arise what is the challenge faced by the mutual fund companies.
The answers which we get are the competition between different companies’
products and fund. This is how different companies come up with the new funds
and scheme which cater the customers requirement, in this case companies try to
provide as much benefit in their plan which tackle the competition with one
companies to another. And Karvy stock broking ltd provides difference product of
different companies to the target audience, and here the role of Karvy becomes
crucial to all organization because it is none other than Karvy who is going to
provide all the product of different companies under one roof and in order to build
its own goodwill in the market Karvy promote and sell that companies product
which are really doing well in the market and has a good past track record of more
than five years.

In this regard we can take the example of SBI Mutual

Fund.

Mutual fund of SBI:

SBI Mutual fund ( A partner for Life)

It is a joint venture between SBI and societe Generale Assets

Management.

Name of the Trustees Company: SBI Mutual Fund Trustee

Company Private Limited.

Dividend Policy: Dividend will be distributed from the available

distributable surplus after the deduction of the income
distribution tax and the applicable surcharge, if any. The Mutual
Fund is not guaranteeing or assuring any dividend.

Applicable NAV: For sale of magnums: in respect of valid

applications received up to 3 p.m. by the mutual fund at any
designated centers along with a local cheque or a demand draft
payable at par at the place where the application is received, the
closing NAV of the day on which application is received, the
closing NAV of the day on which application is received shall be
applicable.

Daily Net Asset Value (NAV) Publication: The NAV will be declared
on all business days and will be published in 2 newspapers. NAV
can also be visited on www.sbimf.com and www.amfiindia.com

Tax treatment for the investors: as per the taxation law is force as
at the date of the document, and as per the provisions contained
in the finance act, 2006. There are certain tax benefits that are
available to the investors and to the mutual fund.

It however noted that the tax benefits described in this document

are as available under the present taxation laws and are available
subject to fulfillment of stipulated conditions. The information
given is included only for general purpose regarding the law and
practice currently in focus I n India and the investors should also
aware that the relevant fiscal rules or their interpretation may
change.

Few scheme of SBI Mutual Fund are:

Scheme name option minimum amnt (Rs.)

1. Magnum Balance Fund. Growth & dividend 1000

2. Magnum Index Fund Growth & dividend 5000

3. Magnum Equity Fund Growth 2000

4. Magnum Global Fund Growth & dividend 5000

5. Magnum Madcap Fund Growth 5000

The strength point of the SBI Mutual Fund is firstly, the Fund
Manager Mr. Sanjay Sinha & Jayesh shroff secondly, consistency
grow rate along with the good will of the company.

The expenses of the scheme are loading structure recurring

expenses.

TOP MUTUAL FUNDS THE INVESTORS ARE INVESTING:

 MUTUAL FUNDS
HDFC
60%
FRANKLIN
% INVESTMENT

50% TEMPLETON
40% SBI

30%
RELIANCE
20%
BIRLA
10%

0% SUNDARAM
1
MF ICICI

From the chart, we can see that most of people invests in SBI

mutual funds as it is giving good returns. Also some people

regularly invest in HDFC & FRANKLIN TEMPLETON due to its

returns and its performance.

CONSIDERATION BEHIND INVESTMENT IN MF:

 HIGHER
RETURNS
14%
DIVIDENDS
HIGHER RETURNS
4%

DIVIDENDS

DIVERSIFICATION OF
RISK
DIVERSIFICATI
ON OF RISK
82%

From the chart, it is very clear that the basic consideration behind

investment in mutual funds is diversification of risk and also for

getting higher returns.

Insurance

A human life is also an income-generating asset. This asset also

can be lost through unexpectedly early death or made non-
functional through sickness & disabilities caused by accidents.
Accidents may or may not happen. Death will happen, but the
timing is uncertain. If it happens around the time of one's
retirement, when it could be expected that the income will cease,
the person concerned could have made some other arrangements
to meet the continuing needs. But if it happens much earlier when
the alternate arrangements are not in place, insurance is
necessary to help the dependents.

In case of a human being, he may have made arrangements for

his needs after his retirement. These would have been made on
the basis of some expectations like he may live for another 15
years, or that his children will look after him. If any of these
expectations do not come true, the original arrangement would
become inadequate and there could be difficulties.

Living too long can be as much a problem as dying too young.

These are risks, which need to be safeguarded against. Insurance
takes care of it.

Need of Insurance
 • To provide cash to meet various routine expenses of the
family on or immediately after the death of the income
earner of the family.
• To prevent the family’s accustomed standard of living even
after the death of the breadwinner.
• To provide continuous flow of funds for the living spouse.
• To allocate income funds for the children’s education
• To provide a retirement income throughout old age.
• To provide a reliable savings plan for the future.
• To supplement income when earning power is reduced or
eroded by illness, accident or any handicap.
• To furnish surplus earnings for the investors should disaster
strike.

Role of Life Insurance:

Life insurance as “Investment”

Insurance is an attractive option for investment. While most
people recognize the risk hedging and tax saving potential of
insurance, many are not aware of its advantages as an
investment option as well. Insurance products yield more
compared to regular investment options, and this is besides the
added incentives offered by insurers.

INSURANCE is a unique investment avenue that delivers sound

returns in addition to protection.
Life insurance as “Risk cover”
First and foremost, insurance is about risk cover and protection –
financial protection, to be more precise – to help outlast life’s
unpredictable losses. Designed to safeguard against losses
suffered on account of any unforeseen event, insurance provides
you with that unique sense of security that no other form of
investment provides. By buying life insurance, you buy peace of
mind and are prepared to face any financial demand that would
hit the family in case of an untimely demise.

Life insurance as “Tax planning”

Insurance serves as an excellent tax saving mechanism too. The
Government of India has offered tax incentives to life insurance
products in order to facilitate the flow of funds into productive
assets. Under Section 88 of Income Tax Act 1961, an individual is
entitled to a rebate of 20 per cent on the annual premium
payable on his/her life and life of his/her children or adult
children. The rebate is deductible from tax payable by the
individual or a Hindu Undivided Family. This rebate is can be
availed up to a maximum of Rs 12,000 on payment of yearly
premium of Rs 60,000. By paying Rs 60,000 a year, you can buy
anything upwards of Rs 10 lakh in sum assured. (Depending upon
the age of the insured and term of the policy) This means that
you get an Rs 12,000 tax benefit. The rebate is deductible from
the tax payable by an individual or a Hindu Undivided Family.
Types of Insurance Plans:

Term Insurance policy:

A term insurance policy is a pure risk cover for a specified period

of time. What this means is that the sum assured is payable only
if the policyholder dies within the policy term. For instance, if a
person buys Rs 2 lakh policy for 15-years, his family is entitled to
the money if he dies within that 15-year period.

What if he survives the 15-year period? Well, then he is not

entitled to any payment; the insurance company keeps the entire
premium paid during the 15-year period. So, there is no element
of savings or investment in such a policy. It is a 100 per cent risk
cover. It simply means that a person pays a certain premium to
protect his family against his sudden death. He forfeits the
amount if he outlives the period of the policy. This explains why
the Term Insurance Policy comes at the lowest cost.

Whole life policy:

As the name suggests, a Whole Life Policy is an insurance cover

against death, irrespective of when it happens.Under this plan,
the policyholder pays regular premiums until his death, following
which the money is handed over to his family.
This policy, however, fails to address the additional needs of the
insured during his post-retirement years. It doesn't take into
account a person's increasing needs either. While the insured
buys the policy at a young age, his requirements increase over
time. By the time he dies, the value of the sum assured is too low
to meet his family's needs. As a result of these drawbacks,
insurance firms now offer either a modified Whole Life Policy or
combine in with another type of policy.

Endowment Policy:
Combining risk cover with financial savings, an endowment policy
is the most popular policies in the world of life insurance. In an
Endowment Policy, the sum assured is payable even if the insured
survives the policy term. If the insured dies during the tenure of
the policy, the insurance firm has to pay the sum assured just as
any other pure risk cover.

A pure endowment policy is also a form of financial saving,

whereby if the person covered remains alive beyond the tenure of
the policy, he gets back the sum assured with some other
investment benefits.
In addition to the basic policy, insurers offer various benefits such
as double endowment and marriage/ education endowment plans.
The cost of such a policy is slightly higher but worth its value.

Money back policy:

These policies are structured to provide sums required as
anticipated expenses (marriage, education, etc) over a stipulated
period of time. With inflation becoming a big issue, companies
have realized that sometimes the money value of the policy is
eroded. That is why with-profit policies are also being introduced
to offset some of the losses incurred on account of inflation.

A portion of the sum assured is payable at regular intervals. On

survival the remainder of the sum assured is payable. In case of
death, the full sum assured is payable to the insured. The
premium is payable for a particular period of time.

Annuities and pension:

In an annuity, the insurer agrees to pay the insured a stipulated
sum of money periodically. The purpose of an annuity is to
protect against risk as well as provide money in the form of
pension at regular intervals.

Over the years, insurers have added various features to basic

insurance policies in order to address specific needs of a cross
section of people.

ULIPs:
ULIP is an acronym for Unit Linked Insurance Plan. ULIPs are
distinct from the more familiar ‘with profits’ policies sold for
decades by the Life Insurance Corporation. ‘With profits’ policies
are called so because investment gains (profits) are distributed to
policyholders in the form of a bonus announced every year. ULIPs
also serve the same function of providing insurance protection
against death and provision of long-term savings, but they are
structured differently.

In ‘with profits’ policies, the insurance company credits the

premium to a common pool called the ‘life fund’ after setting
aside funds for the risk premium on life insurance and
management expenses.

Every year, the insurer calculates how much has to be paid to

settle death and maturity claims. The surplus in the life fund left
after meeting these liabilities is credited to policyholders’
accounts in the form of a bonus. In a ULIP too, the insurer deducts
charges towards life insurance (mortality charges), administration
charges and fund management charges. The rest of the premium
is used to invest in a fund that invests money in stocks or bonds.
They number of units represents the policyholder’s share in the
fund.

The value of the unit is determined by the total value of all the
investments made by the fund divided by the number of units. If
the insurance company offers a range of funds, the insured can
direct the company to invest in the fund of his choice. Insurers
usually offer three choices—an equity (growth) fund, balanced
fund and a fund, which invests in bonds.

In both ‘with profits’ policies as well as unit-linked policies, a large

part of the first year premium goes towards paying the agents’
commissions.

Working of ULIP:

The unit-linked plans work as under:

The premium paid by the client, less any charges to be deducted,

is used to buy units in the fund selected by the client at the day’s
unit price. So, more units are added to the client’s account each
time he pays a premium. If he unit price on that day is relatively
high, the client gets less number of units and if the unit price is
relatively low, then he gets more number of units.

In order to pay the regular monthly costs an equivalent numbers

of units are cancelled and are computed as cost to be deducted
divided by unit price on that day.

The value of the fund depends on the unit price, which in turn is
determined from the market value of the underlying assets as
seen earlier. Thus, Fund Value = Unit Price x Number of units

The ideal time to buy a unit-linked plan is when one can expect
long-term growth ahead. This especially so if one also believes
that current market values (stock valuations) are relatively low.
BSLI has given superior returns on all its investment funds.
Stocks and Shares:

Quite simply, if you own a stock, you own a piece of the company.
You own a share of every bit of what the company owns even the
CEO’s limousine, if you please. What more, even while you are a
part owner you needn’t walk into the company headquarters even
once.
Great? While all this sounds nice, it’s just a notional picture of stocks. Rarely do
stock investors get so much control. Even manage a free ride in the limousine! So
what’s the truth?
If those little valuable pieces of paper called share certificates
T carry your name on them, you can say you have equity in
he the company whose name appears on the top of the
n
certificate. Equity is the part ownership of a company in the
w
ha form of its stocks. The number mentioned on each share
t certificate tells you how many stocks of the company you
ar own.
e
a
co There are two obvious benefits of raising money this way.
m Firstly, it lets an entrepreneur to think of starting a business
pa even if she does not have a. There are two obvious benefits
of ny raising money this way. Firstly, it lets an entrepreneur to
’s think of starting a business even if she does not have all the
st money required secondly, it allows small investors to
oc participate in wealth creation and benefit from an important
ks economic activity.
?
W
orl How can I make money from stocks?
T d
h ov The first, the now-and-thinly source, is through capital
e er, appreciation. A week later if the stock price of the scrip you
pe hold has doubled to Rs 20, by selling it you have earned a
op return of Rs 10 as capital appreciation. You have made
le money by a 100% appreciation in the stock’s price. Through
w this way your fortunes will perpetually keep fluctuating.
ho
sta
rt
a
co
That’s because it depends on the stock’s price, which is always on
the move even if fluctuation are incremental. Chances are:
T
h Dividends can be a good earning, more so because they are
e
non-taxable in your hands since now only companies have to
ot
pay tax on the dividend they disburse. Shareholders sometimes
h
prefer to do away with dividends. This is specially so for small
er
w and fast-growing companies. Investors in such companies feel
a it is better to plough back the earnings for growing the
y business rather than distribute as dividends.
to
m
a
k
e
m
o
n Types of stocks:
e We live in a class-ridden society. Stocks too have their two
y major classes or types: ordinary and preference.
th
ro
uIndividual investors can also acquire preference stocks, just that
gcompanies in India haven’t bothered to offer them so far to the
hgeneral public.
st
oHolding equity (savvy way of saying you own those pricey little
share certificates) entitles you to a share of the earnings and the
ck
sassets of a company. What that means is that if a company
records profits for a year you are entitled to a share of the
is
profits. The share of the profits or earnings the company is
di
decides to give you is called dividend.
vi
d
e
n Ordinary stocks, sometimes also called equity stocks or
d. common stocks, are really for the general public without any
T bar. You, me and just anyone can buy them (and proudly say
h we have a stake in the company).
e
c
o
m
Before we step further, let's clear one thing upfront. By equity we
mean stocks, right? And vice versa? We use equity and stocks
interchangeably. Equity refers to ordinary stocks. And that’s what
concerns us here because only ordinary stocks can be purchased
by people like you and traded on the stock exchanges. Stocks
again refer to equity. Unless we mention preferred
How nice! But did you get the catch when we said on `entitled’
and `decides to give you’?
We live in a class-ridden society. Stocks too have their two major
classes or types: ordinary and preference.
Ordinary stocks, sometimes also called equity stocks or common
stocks, are really for the general public without any bar. You, me
and just anyone can buy them (and proudly say we have a stake
in the company).
Before we step further, let's clear one thing upfront. By equity we
mean stocks, right? And vice versa? We use equity and stocks
interchangeably. Equity refers to ordinary stocks. And that’s what
concerns us here because only ordinary stocks can be purchased
by people like you and traded on the stock exchanges. Stocks
again refer to equity. Unless we mention preferred stock, stock is
always the other type meant for us. OK?
Individual investors can also acquire preference stocks, just that
companies in India haven’t bothered to offer them so far to the
general public.
Holding equity (savvy way of saying you own those pricey little
share certificates) entitles you to a share of the earnings and the
assets of a company. What that means is that if a company
records profits for a year you
Are entitled to a share of the profits. The share of the profits or
earnings the company is decides to give you is called dividend.
How nice! But did you get the catch when we said on `entitled’
and `decides to give you’? Because what happens is that ordinary
shareholders will only get the dividend after everyone else, i.e.
preference shareholders have settled their share of the earnings.
So, if the company chairman says no dividends this year, you
can't kidnap him till he comes out with your dividend unless of
course, you have no other way to earn infamy.
Preference shareholders are privileged guys. They get their share
of the earnings before the ordinary shareholders. In other words,
preference stocks will always have an assured dividend. Whether
those shareholders actually get paid depends on whether the
company has enough resources to pay up. If that was not enough,
those privileged guys also have the "added" advantage. All their
missed dividends keep getting added while for ordinary
shareholders dividends once missed are missed forever! And
when the company does declare windfall profits, it will first pay
the cumulative dividends of the preference shareholders and then
the ordinary shareholders.

Commodities:
Commodity markets are markets where raw or primary products
are exchanged. These raw commodities are traded on regulated
commodities exchanges, in which they are bought and sold in
standardized contracts.
This article focuses on the history and current debates regarding
global commodity markets. It covers physical product (food,
metals, and electricity) markets but not the ways that services,
including those of governments, nor investment, nor debt, can be
seen as a commodity. Articles on reinsurance markets, stock
markets, bond markets and currency markets cover those
concerns separately and in more depth. One focus of this article is
the relationship between simple commodity money and the more
complex instruments offered in the commodity markets.
The modern commodity markets have their roots in the trading of
agricultural products. While wheat and corn, cattle and pigs, were
widely traded using standard instruments in the 19th century in
the United States, other basic foodstuffs such as soybeans were
only added quite recently in most markets. For a commodity
market to be established there must be very broad consensus on
the variations in the product that make it acceptable for one
purpose or another.
The economic impact of the development of commodity markets
is hard to over-estimate. Through the 19th century "the
exchanges became effective spokesmen for, and innovators of,
improvements in transportation, warehousing, and financing,
which paved the way to expanded interstate and international
trade."

Top 10 Commodities are:

Sr.n
o. Commodity
1 Gold
2 Silver
3 Guar Seed
4 Channa Early
5 Urad
6 Crude Oil
7 Tur
8 Soya Oil
9 Mentha Oil
10 Guar Gum
11 Others
Total

History of commodity markets:

Historically, dating from ancient Sumerian use of sheep or goats,
or other peoples using pigs, rare seashells, or other items as
commodity money, people have sought ways to standardize and
trade contracts in the delivery of such items, to render trade itself
more smooth and predictable.
Commodity money and commodity markets in a crude early form
are believed to have originated in summer where small baked
clay tokens in the shape of sheep or goats were used in trade.
Sealed in clay vessels with a certain number of such tokens, with
that number written on the outside, they represented a promise
to deliver that number. This made them a form of commodity
money - more than an "I.O.U." but less than a guarantee by a
nation-state or bank. However, they were also known to contain
promises of time and date of delivery - this made them like a
modern futures contract. Regardless of the details, it was only
possible to verify the number of tokens inside by shaking the
vessel or by breaking it, at which point the number or terms
written on the outside became subject to doubt. Eventually the
tokens disappeared, but the contracts remained on flat tablets.
This represented the first system of commodity accounting.
However, the Commodity status of living things is always subject
to doubt - it was hard to validate the health or existence of sheep
or goats. Excuses for non-delivery were not unknown, and there
are recovered Sumerian letters that complain of sickly goats,
sheep that had already been fleeced, etc.
If a seller's reputation was good, individual "backers" or "bankers"
could decide to take the risk of "clearing" a trade. The
observation that trust is always required between markets
participants later led to credit money. But until relatively modern
times, communication and credit were primitive.
Classical civilizations built complex global markets trading gold or
silver for spices, cloth, wood and weapons, most of which had
standards of quality and timeliness. Considering the many
hazards of climate, piracy, theft and abuse of military fiat by
rulers of kingdoms along the trade routes, it was a major focus of
these civilizations to keep markets open and trading in these
scarce commodities. Reputation and clearing became central
concerns, and the states which could handle them most
effectively became very powerful empires, trusted by many
peoples to manage and mediate trade and commerce.

Spot trading:
Spot trading is any transaction where delivery either takes place
immediately, or if there is a minimum lag, due to technical
constraints, between the trade and delivery. Commodities
constitute the only spot markets which have existed nearly
throughout the history of humankind.
Forward contracts
A forward contract is an agreement between two parties to
exchange at some fixed future date a given quantity of a
commodity for a price defined today.

Futures contracts:
A futures contract has the same general features as a forward
contract but is transacted through a futures exchange.
Commodity and Futures contracts are based on what’s termed
"Forward" Contracts. Early on these "forward" contracts
(agreements to buy now, pay and deliver later) were used as a
way of getting products from producer to the consumer. These
typically were only for food and agricultural Products. Forward
contracts have evolved and have been standardized into what we
know today as futures contracts. Although more complex today,
early “Forward” contracts for example, were used for rice in
seventeenth century Japan. Modern "forward", or futures
agreements, began in Chicago in the 1840s, with the appearance
of the railroads. Chicago, being centrally located, emerged as the
hub between Midwestern farmers and producers and the east
coast consumer population centers.
Hedging:
"Hedging", a common (and sometimes mandatory) practice of
farming cooperatives insures against a poor harvest by
purchasing futures contracts in the same commodity. If the
cooperative has significantly less of its product to sell due to
weather or insects, it makes up for that loss with a profit on the
markets, since the overall supply of the crop is short everywhere
that suffered the same conditions.
Whole developing nations may be especially vulnerable, and even
their currency tends to be tied to the price of those particular
commodity items until it manages to be a fully developed nation.
For example, one could see the nominally fiat money of Cuba as
being tied to sugar prices, since a lack of hard currency paying for
sugar means less foreign goods per peso in Cuba itself. In effect,
Cuba needs a hedge against a drop in sugar prices, if it wishes to
maintain a stable quality of life for its citizens.
Delivery and condition guarantees:
In addition, delivery day, method of settlement and delivery point
must all be specified. Typically, trading must end two (or more)
business days prior to the delivery day, so that the routing of the
shipment can be finalized via ship or rail, and payment can be
settled when the contract arrives at any delivery point.

Regulation of commodity markets:

Cotton, kilowatt-hours of electricity, board feet of wood, long
distance minutes, royalty payments due on artists' works, and
other products and services have been traded on markets of
varying scale, with varying degrees of success. One issue that
presents major difficulty for creators of such instruments is the
liability accruing to the purchaser:
Unless the product or service can be guaranteed or insured to be
free of liability based on where it came from and how it got to
market, e.g. kilowatts must come to market free from legitimate
claims for smog death from coal burning plants, wood must be
free from claims that it comes from protected forests, royalty
payments must be free of claims of plagiarism or piracy, it
becomes impossible for sellers to guarantee a uniform delivery.
Generally, governments must provide a common regulatory or
insurance standard and some release of liability, or at least a
backing of the insurers, before a commodity market can begin
trading. This is a major source of controversy in for instance the
energy market, where desirability of different kinds of power
generation varies drastically. In some markets, e.g. Toronto,
Canada, surveys established that customers would pay 10 energy
that was not from coal or nuclear, but strictly from renewable
sources such as wind.
In the United States, the principal regulator of commodity and
futures markets is the Commodity Futures Trading Commission.

Bonds:
In finance, a bond is a debt security, in which the authorized
issuer owes the holders a debt and is obliged to repay the
principal and interest (the coupon) at a later date, termed
maturity. Other stipulations may also be attached to the bond
issue, such as the obligation for the issuer to provide certain
information to the bond holder, or limitations on the behavior of
the issuer. Bonds are generally issued for a fixed term longer than
ten years. U.S. Treasury securities issue debt with life of ten years
or more, which is a bond. New debt between one year and ten
years is a "note” and new debt less than a year is a "bill".
A bond is simply a loan, but in the form of a security, although
terminology used is rather different. The issuer is equivalent to
the borrower, the bond holder to the lender, and the coupon to
the interest. Bonds enable the issuer to finance long-term
investments with external funds. Note that certificates of deposit
(CDs) or commercial paper are considered to be money market
instruments and not bonds.
In some nations, both terms bonds and notes are used
irrespective of the maturity. Market participants normally use the
terms bonds for large issues offered to a wide public and notes for
smaller issues originally sold to a limited number of investors.
There are no clear demarcations. There are also "bills" which
usually denote fixed income securities with terms of three years
or less, from the issue date, to maturity. Bonds have the highest
risk, notes are the second highest risk, and bills have the least
risk. This is due to a statistical measure called duration, where
lower durations mean less risk and are associated with shorter
term obligations.
Bonds and stocks are both securities, but the major difference
between the two is that stock-holders are the owners of the
company (i.e., they have an equity stake), whereas bond-holders
are lenders to the issuing company. Another difference is that
bonds usually have a defined term, or maturity, after which the
bond is redeemed, whereas stocks may be outstanding
indefinitely. An exception is a consol bond, which is a perpetuity
(i.e., bond with no maturity).
Issuing bonds:
Bonds are issued by public authorities, credit institutions,
companies and supranational institutions in the primary markets.
The most common process of issuing bonds is through
underwriting. In underwriting, one or more securities firms or
banks, forming a syndicate, buy an entire issue of bonds from an
issuer and re-sell them to investors. Government bonds are
typically auctioned.

Types of bonds:
Fixed rate bonds have a coupon that remains constant
throughout the life of the bond.
Floating rate notes (Fern’s) have a coupon that is linked to a
money market index, such as LIBOR or Euribor, for example three
months USD LIBOR + 0.20%. The coupon is then reset
periodically, normally every three months.
High yield bonds are bonds that are rated below investment
grade by the credit rating agencies. As these bonds are relatively
risky, investors expect to earn a higher yield. These bonds are
also called junk bonds.
Zero coupon bonds do not pay any interest. They trade at a
substantial discount from par value. The bond holder receives the
full principal amount as well as value that have accrued on the
redemption date.
Inflation linked bonds, in which the principal amount is indexed
to inflation. The interest rate is lower than for fixed rate bonds
with a comparable maturity. However, as the principal amount
grows, the payments increase with inflation. The government of
the United Kingdom was the first to issue inflation linked Gilts in
the 1980s.
Other indexed bonds, for example equity linked notes and
bonds indexed on a business indicator (income, added value) or
on a country's GDP.
Asset-backed securities are bonds whose interest and principal
payments are backed by underlying cash flows from other assets.
Examples of asset-backed securities are mortgage-backed
securities (MBS's), collateralized mortgage obligations (CMOs) and
collateralized debt obligations (CDOs).
Subordinated bonds are those that have a lower priority than
other bonds of the issuer in case of liquidation. In case of
bankruptcy, there is a hierarchy of creditors. First the liquidator is
paid, then government taxes, etc. The first bond holders in line to
be paid are those holding what is called senior bonds. After they
have been paid, the subordinated bond holders are paid. As a
result, the risk is higher. Therefore, subordinated bonds usually
have a lower credit rating than senior bonds.
Perpetual bonds are also often called perpetuities. They have no
maturity date. The most famous of these are the UK Consoles,
which are also known as Treasury Annuities or Undated
Treasuries. Some of these were issued back in 1888 and still trade
today.
Bearer bond is an official certificate issued without a named
holder. In other words, the person who has the paper certificate
can claim the value of the bond. Often they are registered by a
number to prevent counterfeiting, but may be traded like cash.
Bearer bonds are very risky because they can be lost or stolen.
Registered bond is a bond whose ownership (and any
subsequent purchaser) is recorded by the issuer, or by a transfer
agent. It is the alternative to a Bearer bond. Interest payments,
and the principal upon maturity, are sent to the registered owner.
Municipal bond is a bond issued by a state, U.S. Territory, city,
local government, or their agencies. Interest income received by
holders of municipal bonds is often exempt from the federal
income tax and from the income tax of the state in which they are
issued, although municipal bonds issued for certain purposes may
not be tax exempt.
Book-entry bond is a bond that does not have a paper
certificate. As physically processing paper bonds and interest
coupons became more expensive, issuers (and banks that used to
collect coupon interest for depositors) have tried to discourage
their use. Some book-entry bond issues do not offer the option of
a paper certificate, even to investors who prefer them.[3]
Lottery bond is a bond issued by a state, usually a European
state. Interest is paid like a traditional fixed rate bond, but the
issuer will redeem randomly selected individual bonds within the
issue according to a schedule. Some of these redemptions will be
for a higher value than the face value of the bond.
War bond is a bond issued by a country to fund a war

Investing in bonds:
Bonds are bought and traded mostly by institutions like pension
funds, insurance companies and banks. Most individuals who want
to own bonds do so through bond funds. Still, in the U.S., nearly
ten percent of all bonds outstanding are held directly by
households.
As a rule, bond markets rise (while yields fall) when stock markets
fall. Thus bonds are generally viewed as safer investments than
stocks, but this perception is only partially correct. Bonds do
suffer from less day-to-day volatility than stocks, and bonds'
interest payments are higher than dividend payments that the
same company would generally choose to pay to its stockholders.
Bonds are liquid — it is fairly easy to sell one's bond investments,
though not nearly as easy as it is to sell stocks — and the
certainty of a fixed interest payment twice per year is attractive.
Bondholders also enjoy a measure of legal protection: under the
law of most countries, if a company goes bankrupt, its
bondholders will often receive some money back (the recovery
amount), whereas the company's stock often ends up valueless.
However, bonds can be risky:
Fixed rate bonds are subject to interest rate risk, meaning that
their market prices will decrease in value when the generally
prevailing interest rates rise. Since the payments are fixed, a
decrease in the market price of the bond means an increase in its
yield price changes in a bond immediately affect mutual funds
that hold these bonds. Many institutional investors have to "mark
to market" their trading books at the end of every day. If the
value of the bonds held in a trading portfolio has fallen over the
day, the "mark to market" value of the portfolio may also have
fallen. This can be damaging for professional investors such as
banks, insurance companies, pension funds and asset managers.
Bond prices can become volatile if one of the credit rating
agencies like Standard & Poor's or Moody's upgrades or
downgrades the credit rating of the issuer. A downgrade can
cause the market price of the bond to fall. As with interest rate
risk, this risk does not affect the bond's interest payments, but
puts at risk the market price, which affects mutual funds holding
these bonds, and holders of individual bonds who may have to
sell them.
A company's bondholders may lose much or all their money if the
company goes bankrupt. Under the laws of many countries
(including the United States and Canada), bondholders are in line
to receive the proceeds of the sale of the assets of a liquidated
company ahead of some other creditors. Bank lenders, deposit
holders (in the case of a deposit taking institution such as a bank)
and trade creditors may take precedence.
There is no guarantee of how much money will remain to repay
bondholders. As an example, after an accounting scandal and a
Chapter 11 bankruptcy at the giant telecommunications company
WorldCom, in 2004 its bondholders ended up being paid 35.7
cents on the dollar. In a bankruptcy involving reorganization or
recapitalization, as opposed to liquidation, bondholders may end
up having the value of their bonds reduced, often through an
exchange for a smaller number of newly issued bonds.
Some bonds are callable, meaning that even though the company
has agreed to make payments plus interest towards the debt for a
certain period of time, the company can choose to pay off the
bond early. This creates reinvestment risk, meaning the investor
is forced to find a new place for his money, and the investor might
not be able to finas good a deal, especially because this usually
happens when interest rates are falling.
Behaviour of Clients to Different Investment
Instruments
INVESTMENTS NO. OF PERSENTAGE
CLIENTS
Insurance 10 7.14%
Mutual Fund 70 50%
Stock Broking 30 21.4%
Commodity 10 7.14%
Bond and Fixed 5 3.6%
Deposits
Others 15 10.7%
TOTAL 140 100%
From the above Chart we can identify that there is more
preference of the people to the Mutual fund than second for the
Stock Broking But less demand for other Investments this is so
because the growth rates are high in the mutual Fund and Stock
Broking. In place of above there were some people who prefer in
two or more Investment rather than one.

Comparison of the various investment options

Assets Type of Tax Perio Tax Tax

income on d of on on
during inco holdin prof profit
the me g it if if
period durin requir ass asset
of g the ed to et is is
holding perio make long short
the d of assets ter term
assets holdi m
ng
long
term
Listed Dividend Exem 12 Nil 10 %*
equity pt Month
shares s
Unlisted Dividend Exem 12 20% Norm
equity Month al
 shares pt s rate
**
Equity Income Exem 12 Nil 10 %
oriented distributi pt Month
mutual on s
fund
Other Income Exem 12 20% Norm
mutual distributi pt Month al
fund on s rate
**
Derivatives No NA NA NA NA***
(future) income
Gold/precio No NA 36 20% Norm
us metals income month al
s rate
****
Painting No NA 36 20% Norm
income month al
s rate
*****
Real estate Rent Taxab 36 20% Norm
le month al
s rate
******

Research Methodology:
Research Methodology is a way to systematically solve the
research problem in it we study the various steps that are
generally adopted by a research in studying his research problem
along with the login behind them. The research should not only
know how to develop certain Indices or trusts, how to calculate
Mean, Mode and Median or the standard Deviation or the chi-
Square, how to apply particular research technique, but they also
need to know which of these method are relevant and which are
not.

The purpose of Research Methodology is to describe the research

in solving the financial problems. Effective research involves the
following Major steps:

• Definition of problem and Research objective

• Data collection

• Selecting and sampling scheme and sample size

• Organization field Work

• Analyzing the Data.

The Project Involved Study Compilation Of Three

types of data:
1. Data Requirement:

• Name, age, Address, and Phone number of Individuals

• Present annual Income of the Respective Individual

 • Investment Pattern of Individual

• Awareness about Mutual Fund

1. Primary Data:

The Primary data consists of the real facts and figures with a
choice of main research instrument like:-

• Observation

1. Secondary Data:

Secondary source includes database that already exists. Different

source of Secondary data from where all the information is
collected are:

• Company brochure
• Karvy finapolis
• Employee report
• Director report
• Various Financial Books or magazines
• Experts and Internet
 FINDINGS AND SUGGESTION

During the Project I had found some important facts

which had occurred in the Karvy and out side in the
Investment market.

Findings:
• Most of the people to whom I have met don’t want to
Invest in the Insurance because of the less return
and long maturity period.
• People have prefer to Invest in Mutual funds rather
than other Investment Instruments.
• In this slowdown period Karvy is taking good steps
like campaigning in good areas of pune to get a good
business.
• People’s trust on the company is very low due to
delay of services.
 • The people to whom I have met during cold calling,
most of them were not aware about different kind of
beneficial Investments because of lack of knowledge
and awareness.

Suggestions:

• Karvy should take a suitable step towards awareness

of people to the Insurance and its importance in the
life.
• Karvy should publish a pamphlets about performance
of different Investments at regular time period so
that It can generates the interest of common public
• Karvy should also require to gives attention to the
general public who want to invest in the securities
market.
• Karvy should arrange a seminar in proper time period
for giving basic knowledge to the needed public who
want to Invest.
• Karvy should keep a watch on trainees, for effective
cold calling

BIBLIOGRAPHY

I have referred to the following:

INTERNET:
www.mutualfundindia.com
www.amfiindia.com
www.moneycontrol.com
www.karvy.com
BOOKS:
Magazines & journals.
News paper - Economics Times, Times of India.