Analyzing The Financial Products of HSBC Invest Direct

ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED
A REPORT
ON
By MUKUL GARG 09BSHYD0473
HSBC INVESTDIRECT (INDIA) LIMITED
IBS Hyderabad
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A REPORT ON
By MUKUL GARG 09BSHYD0473 HSBC INVESTDIRECT (INDIA) LIMITED
A report submitted in partial fulfillment of the requirement of MBA Program of IBS Hyderabad
Distribution List: Faculty Guide: Prof. Girdharlal D Rathod Company Guide: Mr. Kapil Nag Date of Submission: 10th, May, 2010
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ACKNOWLEDGEMENT
With great pleasure I take the privilege to acknowledge the people who have been involved in completion of my project at different stages. I acknowledge gratefully my indebtedness to my Company Guide; Mr. Kapil Nag, Area Sales Manager, HSBC InvestDirect (India) Limited, Jaipur, for his patient help, valuable suggestions, encouragement and guidance at every stage of my project. I would like to thank Mr. Amit Jhori, Branch Head, HSBC InvestDirect (India) Limited, Jaipur for providing information and suggestions for this project report. I am also grateful to all the employees of HSBC InvestDirect (India) Limited, Jaipur, for helping me throughout the tenure of this project. I would give the credit of fruition of my project to Prof. Girdharlal D Rathod, my faculty guide for the summer internship project who inspired me by his discussions and showed me the right course to pursue. The successful completion of the project would not have been possible without his constant support. In the end, I express my thanks to all those who were directly or indirectly involved in this project.
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Table of Contents COVER PAGE......................................................................................................................................1 TITLE PAGE.........................................................................................................................................2 Acknowledgement.................................................................................................................................3 Table of Contents...................................................................................................................................4 Description of Project in brief..............................................................................................................5 Methodology...........................................................................................................................................7 List of 7 STEPS......................................................................................................................................8 Step 1: Analysis of the Financial & Investment Industry..................................................................9 Step 2: Listing of the Investment Options available........................................................................11 Step 3: Analysis of the company HSBC InvestDirect Limited........................................................16 Step 4&5: Analysis of the products & services of HSBC InvestDirect Limited............................19 Step 6: Competitive Analysis..............................................................................................................32 Step 7: Questionnaire Data Analysis (SPSS)....................................................................................49 Conclusion and Recommendations....................................................................................................68 Questionnaire.......................................................................................................................................69 References............................................................................................................................................74
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Description of Project in brief: In today's complex financial environment, investors have unique needs which are derived from their risk appetite and financial goals. But regardless of this, every investor seeks to maximize his returns on investments without capital erosion. The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance. These are the basic activities done by the broking firms. HSBC InvestDirect (India) Limited, a financial services company, provides customized financial management solutions to individual and corporate customers in India. The company offers various retail broking service offerings comprising equities, derivatives, mutual funds, and insurance products, as well as NRI, online trading, and branch trading services. It also provides wealth management products and services, including investments; IPO advisory and distribution services; various risk management solutions for corporate and individual customers; and portfolio management services. In addition, the company offers various institutional offerings, such as investment banking services for equity related products and instruments; and institutional equity broking services. Further, HSBC InvestDirect (India) Limited provides various advisory services and investment tools. It was formerly known as IL&FS Investsmart Limited and changed its name to HSBC InvestDirect (India) Limited in August 2009. The company was founded in 1997 and is based in Mumbai, India. HSBC InvestDirect (India) Limited is a subsidiary of HSBC Securities & Capital Markets (India) Private Limited. It is listed in both exchanges, NSE and BSE. The business activities undertaken by HIDL through its subsidiaries include(i) Securities Broking; (ii) Investment Advisory; (iii) Distribution of financial products; (iv) Portfolio Management Services and (v) Securities related financing (NBFC). These options depend on the financial requirements of the investors and constructed according to that only, but with time these requirements changes, so all products need some up gradations. This project will also concentrate on this area. Project will also compare and analyze products of major competitors of HIDL.
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED It will help in making financial products of HSBC InvestDirect Limited more superior and beneficial to customers. Risk appetite of investors will be measured by doing the survey through the questionnaire. This will help in preparing and offering the suitable options to the customers. In any financial market, risk and return are closely associated. All investors want to maximize their return, while minimizing risk. Some investments are certainly more "risky" than others, but no investment is risk free. Risk can never be eliminated, but it can be managed. In the investing world, the definition of risk is the chance that an investment's actual return will be different than expected. Technically, this is measured in statistics by standard deviation. Low levels of uncertainty (low risk) are associated with low potential returns. High levels of uncertainty (high risk) are associated with high potential returns. The risk/return tradeoff is the balance between the desire for the lowest possible risk and the highest possible return. All these things are required for making good investment decisions. This project will discuss them in detail. The investment return and the risk involved in investing in these options will be compared and analyzed with the help of questionnaire.
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Methodology: For the accomplishment of the above mentioned objectives the methodology followed may be summed up as follows: Analyzing the Financial products: Reading about the product was the first step undertaken. This gave not only in depth knowledge about what is been offered by the home organization as well as that of the other players but also proved useful while developing the questionnaire. Developing Survey instruments: The main instruments required for survey was a well-developed questionnaire. The questionnaire development took place in a series of steps as described below Research objectives are being transformed into information objectives The Appropriate data collection methods have been determined The information required by each objective is being determined Specific Questions/Scale Measurement format has been developed. Question/Scale Measurements is being evaluated Research objectives are being transformed into information objectives The number of information needed is being determined The questionnaire and layout is being evaluated Revision of the questionnaire layout if needed The Questionnaire format is being finalized
Customer Survey: Conducting personal interviews of different age-groups, sex, monthly income and occupation through the survey instrument, the Questionnaire. This is very useful in knowing about the requirements of the people. Studying brochures and websites of competitors: To understand the competitors product, brochures and websites of various players were referred and a competitive analogy of all the information is been made. Secondary data is collect about various researches done earlier on this topic. Data are collected from various sites about the investment patterns.
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED SPSS software is used to analyze the data collect from the survey.
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED List of 7-STEPS
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Finance and Investment Industry is a fairly broad ranging group of institutions that provide various financial services. Examples of such institutions include commercial banks, merchant (or investment) banks, insurance companies, brokerage firms, asset managers, and an assortment of other institutions. Services provided range from money management for private individuals, to debt and equity underwriting for corporations to issuance of insurance policies, and many other services. In todays global markets, this industry is the engine of the global economy, enabling corporations and the government to grow and expand.
In 2009-10, the Indian economy is estimated to have grown by 7.2 per cent. According to the latest Central Statistical Organisation (CSO) data, financial services and real estate sector rose by 7.8 per cent in the third quarter of 2009-10. The sectors including banking and insurance and mutual funds are beginning to reap the benefits of a good closure of 2009-2010. Financial services organizations are striving to achieve increasingly ambitious profit and growth targets against a background of heightened risk, regulation and market pressures. Customer needs and expectations are evolving in the face of increasing personal wealth, more private funding of pensions and health care and the desire for ever more accessible and personalized financial products and services. In turn, intense competition has squeezed industry margins and forced organizations to cut costs while still seeking to enhance the quality of client choice and service. The battle for talent is also heating up as companies seek to enhance innovation, customer loyalty and investment returns. The corollary of this market evolution is increasing risk as products become more complex, organizations more diffuse and the business environment ever more uncertain. Regulation is also tightening in the wake of public and government pressure for improved governance, transparency and accountability. In this environment, the winners will be companies that can turn the challenges into opportunities to
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED build stronger and more enduring customer relationships; sharpen process efficiency; unlock talent and creativity; use improved risk management processes to deliver more sustainable returns; and use new regulatory demands as a catalyst for strengthening the business and enhancing market confidence. The government has taken a number of steps to revive the economy, including slashing interest rates, lowering factory levies and more than doubling the limit on foreign investment in corporate bonds. The financial services space is a rapidly growing one in India. The country received US$ 45 billion in foreign currency remittances from non-resident Indians in 2008, the highest in the world. Indias market capitalization (m-cap) has touched US$ 1.04 trillion making it the ninth largest in the world. Indias share in the total world m-cap has risen to 2.79 per cent. The Indian stock market has currently responded to the optimism of reforms by the new stable government and its continuity in policies. Fund raising by India Inc. through initial public offers (IPOs) rose by a whopping 62 per cent since the beginning of 2008 to May 29, 2008 to US$ 4.2 billion, against US$ 2.6 billion during the same period in 2006. Indian companies may raise US$ 4 billion-6 billion from IPOs in the fiscal year ending March 31, 2010. April-May 2009 saw increased inflow in to equity with investors steadily turning positive on equity according to mutual fund analysts. As per the Securities and Exchange Board of India (SEBI), on May 15, net investment of mutual funds in equity was around US$ 83.3 million lowering to US$ 20.5 million on May 21. As against this, net investment of mutual funds in debt has more than tripled from US$ 42.9 million on May 15 to US$ 134.2 million on May 31, 2009. There is optimism in the economy as funds are investing in corporate bonds, making liquidity available to enterprises. The total amount traded in corporate bonds tripled from US$ 17.8 million to US$ 55.7 million during May 15 to May 21, 2009. The Central Board of Direct Taxes (CBDT) has changed the investment pattern for recognized provident funds and superannuation trusts managed by the private sector under the income-tax rules to take a greater exposure in the stock market from April 1, 2009.
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Investments: Investment refers to the concept of deferred consumption, which involves purchasing an asset, giving a loan or keeping funds in a bank account with the aim of generating future returns. Various investment options are available, offering differing risk-reward trade offs. An understanding of the core concepts and a thorough analysis of the options can help an investor create a portfolio that maximizes returns while minimizing risk exposure. Types of financial investments include shares and other equity investments and bonds. Equity investments generally refer to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of stock rises. There are two important decisions one needs to make before investing. These are: How much to invest? Where to invest it?
It is important for one to understand his/her options as well as the risks associated with each of them. Three major types of investments are stocks, bonds and cash equivalent. One can invest in any or all of the three investment types directly or indirectly by buying Mutual Funds. One might also want to consider an individual retirement account (IRA) or annuity, both of which can offer tax-deferred investment savings.
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Types of Investments: Investments can be classified into the following types: Stocks
Broadly, investing in stocks (also known as equities) implies buying a share of ownership in a company and becoming a shareholder. Companies sell shares of stock to raise money for start-up or growth. There are two types of stocks, namely, common stock and preferred stock. Common stockholders have a percentage of ownership in the company and may or may not receive dividends based on company profits while preferred stockholders are entitled to dividends at specified times and in predetermined amounts. Investment returns and risks for both types of stocks vary, depending on factors such as the economy, political scene, the companys performance and the other stock market factors. Stocks are more volatile and riskier than bonds.
Cash-equivalent investments:
These include passbook savings accounts, certificates of deposit (CDs) and treasury bills. These investments generally deliver a more stable rate of return. Though, on the other hand, the rate of return (after taxes are paid) is so low that these dont keep pace with inflation. A passbook savings account, money market fund or CD may give the investor a quick access to his/her cash and may provide more short-term security. However, theyre not designed for long-term investment goals like retirement. Certificate of Deposit (CDs)
It refers to a fixed period, interest-bearing investment with a bank or savings & loan. An FDIC-insured CD is a low-risk investment.
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Passbook Savings

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A bank account that generally provides a low, guaranteed, fixed rate of return.
Debt securities
This form of investment provides returns in the form of fixed periodic payments and possible capital appreciation at maturity. It is a safer and more 'risk-free' investment tool than equities. However, the returns are also generally lower than other securities Derivatives
These are financial contracts the values of which are derived from the value of the underlying assets, such as equities, commodities and bonds, on which they are based. Derivatives can be in the form of futures, options and swaps. Derivatives are used to minimize the risk of loss resulting from fluctuations in the value of the underlying assets (hedging). One of the derivative contracts is Options Options give the buyer the right to buy or sell an underlying asset at a certain price within a specified time period. Selling or buying options involves two parties, namely a buyer and a seller. The strategy of selling options is popular mostly with traders who are capable of managing the element of risk that is inherent in such transactions. Options trading involves understanding market conditions and predicting where the markets are headed. So, when a trader believes that an asset will appreciate in the future, he/she is likely to buy the asset at a premium value.The instrument that gives an options holder this right to buy the underlying asset is called a call option. A put option gives the buyer the right to sell the asset before the predetermined date. Options are particularly used for: o Speculation: Buyers speculate on the extent of price movement in a financial instrument over a specific period. o Hedging: You can use options to hedge your investments or business contracts against a possible downside.
Types of Options:
The various types of options include: Exchange traded options: These options have standard contracts that are settled through clearing houses. Some of the exchange traded options include stock options, bond options and options in futures contracts.
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Over-the-counter options: These options are contracts between two private parties. Some of the OTC options are interest rate options and currency cross rate options.
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Commodities:
The items that are traded on the commodities market are agricultural and industrial commodities. These items need to be standardized and must be in a basic, raw and unprocessed state. The trading of commodities is associated with high risk and high reward. Trading in commodity futures requires specialized knowledge and in-depth analysis. Whoever plans to diversify his/her investment portfolio and earn high returns from price fluctuations should invest in the commodity market. Despite risk factors, commodity trading is preferred by investors who like to take risks so as to earn high returns even when trends are unpredictable. Real estate:
This investment involves a long-term commitment of funds and gains that are generated through rental or lease income as well as capital appreciation. This includes investments into residential or commercial properties. Mutual funds:
A mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.[1] In a mutual fund, the fund manager, who is also known as the portfolio manager, trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. A common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously.
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Types of Mutual Funds: On the basis of their structure and objective, mutual funds can be classified into following major types:

Closed-end Funds Open-end Funds Large cap Funds Mid-cap Funds Equity Funds Balanced Funds Growth Funds No load Funds Exchange Traded Funds Value Funds Money Market Funds International Mutual Funds Regional Mutual Funds Sector Funds Index Funds Fund of Funds
Studies have shown that financial services and brokerage firms in India have seen profits go up by 136% on a sequential quarter basis, i.e. compared to the quarter ended December08. The improved bottom line was largely due to IL&FS Investsmart cutting down on its losses from the previous quarter.
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IL&FS Investsmart is one of India's leading financial services organizations providing varied range of Financial Services for corporates and individuals. Investsmart has a strong presence across wide range of products and operates in the areas of Investment Management and Advisory Services, Broking Services, Merchant Banking, Project Syndication, Equity and Debt Broking, Commodity Broking and Distribution of Financial Products. The company is now held by HSBC, one of the world's largest banking and financial services organizations. IL&FS Investsmart Ltd has an all India presence through its network of branches and franchisees over 126 cities. Following a successful Initial Public Offer IPO), IIL has been listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). IIL is geared towards understanding and achieving the financial goals of all its customers, through its specialists in the aforesaid areas. ORGANISATION STRUCTURE Acquisition of IL&FS Investsmart Limited by HSBC Group: HSBC Group acquired 93.86 per cent of IL&FS Investsmart Limited in the year 2008. The deal was settled for a total consideration of INR 1,311.0 crore (approximately US$296.4 million). Investsmart gives HSBC access to the worlds third-largest investor base, with over 20 million investor base. Under the transaction agreement, HSBC acquired 43.85 per cent of Investsmart from E*TRADE Mauritius Limited, an indirectly wholly-owned subsidiary of E*TRADE Financial Corporation, and 29.36 per cent from Infrastructure Leasing and Financial Services Limited (IL&FS). The decision to acquire a controlling stake in Investsmart triggered an open offer to public shareholders, through which HSBC accepted shares equivalent to 20.65 per cent of Investsmart's capital. E*TRADE Mauritius Limited, IL&FS and those that tendered shares through the open offer received INR200 per share for their Investsmart shares. In addition, IL&FS was paid, as part of a three-year non-compete agreement, INR82.0 crore (approximately US$17.9 million). In accordance with local regulations, HSBC paid interest of INR2.3 per share to the public shareholders who tendered their shares. This amounted to INR3.31 crore approximately US$0.72 million). HSBC was advised on the acquisition by the investment banking division HSBC Global Banking and Markets.
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OWNERSHIP PATTERN Table 2.1 Shareholding Pattern of IL&FS Investsmart Ltd. No. of Equity Shares HSBC Securities and Capital 34,922,751 Markets (India) Pvt. Ltd. HSBC Violet Investments 30,625,692 (Mauritius) Ltd. Others 4,287,830 Total 69,836,273
% of total paid-up capital 50.01 43.85 6.14 100.00
Chart 2.1 A break up of the Equity Shares of IL&FS Investsmart Ltd.
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DIVISIONS OF THE COMPANY The following are the divisions of IL&FS Investsmart Limited: The Investment Advisory and Broking Division Merchant Banking Division The Project Syndication Division Institutional Equity Broking Division Institutional Debt Broking division
THE CHAIN OF COMMAND AND DEPARTMENTS
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PRODUCTS & SERVICES The products and services can be categorized as follows: 1. Retail offerings These can further be categorized as follows: ADVISORY PRODUCTS
Mutual Funds: As a part of IILs Mutual Fund Advisory Services, a team of experts across India helps its customers in selecting the right scheme from over 500 offerings, matching their needs, goals and risks. In addition to this, IIL also helps its customers constantly monitor their MF portfolio, making changes according to their changing needs as per the market scenario, in order to make their money work for them. At IL&FS Investsmart (IIL), the expert teams of relationship managers interact with the customers on a regular basis to discern their changing needs, in tune with the changing environment. Most of us require some assistance in making selections appropriate to our individual needs. We need sound advice from people who have expertise to decipher the financial jargon of investment options available today. The Investment Advisory Team at IIL helps its customers customize and execute plans, based on their individual needs towards wealth maximization.
Portfolio Management: Financial markets today offer enormous growth potential. But managing ones own investments can be an extremely challenging task. Anticipating market trends, assessing the impact of socio-economic changes on ones investments, keeping abreast of latest corporate developments and financial analysis all IIL provides its customers with, in its IIL-PMS, a Discretionary Portfolio Management Service through its team of experts.
About the IIL PMS Options: IL&FS Investsmart offers a choice of two types of PMS schemes since every investor is unique and has unique investment preferences and risk appetites. These schemes are:
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iPreserve- is a discretionary portfolio management scheme, which invests in a mix of various mutual fund schemes. Ideal for investors who wish to invest in maximizing returns from mutual funds but cannot make the right choices.
iGrowth- is a discretionary portfolio management scheme, focused on equities. Sub-schemes are based on investors risk profile. IPO Advisory & Distribution Services IL&FS Investsmart (IIL) is one of India's leading companies engaged in the activity IPO Advisory and Distribution. Its primary markets division does a comprehensive research before recommending issues to clients. IILs pan India reach helps it in mobilising large number of applications across India during public offerings, this has ensured that it constantly figures amongst the top ranking performers in the primary market distribution space.
As a part of the online offering of IIL, customers can invest in IPO's not only through its branches but also through its website, which also provides its customers with regular updates on the IPO scenario, Open IPOs as well as all the forthcoming IPO's at any given point of time. The primary markets distribution division works in conjunction with the retail and wholesale distribution networks, as well as its private client group. Insurance Advisory Services IL&FS Investsmart (IIL) works as a one stop shop for all Insurance & Retirement needs. IIL has also been recognized as Best Retail Financial Advisor by CNBC TV 18 for two years in a row 2006-07 and 2007-08. IIL is a composite insurance broker providing comprehensive risk management solutions, both for corporate as well as individuals. The solutions include identification, measurement and assessment of the risk and handling of the risk, of which insurance is an integral part. We deal into both life insurance and general insurance products for all insurance companies across India. The key service features include the following:IBS Hyderabad Page 22

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Risk management solutions for all Comprehensive research for all policies available on a regular basis Recommendations on a comprehensive insurance cover based on clients needs Maintain proper records of client policies Continuous monitoring of client account TRADING PRODUCTS
Equities & Derivatives As a part of the Investment Advisory and Broking Services for individuals, IIL offers end-to-end solutions to its investors, from capital build-up to wealth generation and retirement planning, starting with value added investment recommendations that suit their investment objectives, then executing these and finally step-by-step monitoring to ensure that they achieve their long term financial goals. IL&FS Investsmart is a full service broking house offering services across both the Cash and F&O segments. IIL is a member with National Stock Exchange (NSE) as well as the Bombay Stock Exchange (BSE). IILs offerings include 3 different trading platforms to suit the individual needs of its customers, depending upon their profile. These are: SmartTRADE: Trading platform for the Active Traders
A view of the platform as it would appear on the screen SmartTrade is an EXE based desktop software designed for active traders who transact frequently to capture favorable short-term price movements. The platform offers active traders the tools they need to make critical decisions with confidence. SmartTrade is designed and built from the ground up to
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED address the needs of active traders. SmartTrade makes the most of state-of the-art technology to deliver power, speed and reliability. Through an easy-to-use interface, users are provided with the same tools and advantages that the professionals enjoy. Its features include:
Fully customizable display The save desktop option allows the traders to save their created trade screen layout, so the next time they access the application the created layout is not lost.
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Dynamic charts with indicators It provides the traders a wealth of charting capabilities and timing indicators, which allow them to go right into the action with real-time daily charts, and intra-day charts. They can watch price movements by minutes, days, or weeks.
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EOD charts SmartTrade puts up to 5 years of in-depth market history at the traders command with the power to instantly back-test any trading strategy they design, before risking one rupee of their trading capital.
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Real-time market data Traders can get real time market data from both the NSE and BSE similar to what their broker gets.
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Advanced alert capabilities Alert Window allows the traders to be free from watching every tick. They can be notified once a security has reached the set parameters. Multiple securities can be monitored using the set parameters. These alerts can be triggered both visually and audibly.
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Live order status Tracking all the orders of the trader is made easy through the order status screen. Further drill down into all details pertaining to an order is available in the order detail sub report.
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Track orders real-time Traders can track their stock order and trades in real time.
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Real-time position updates All the positions of the traders are updated automatically and instantly. There is no need to use refresh button at all.
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Dynamic buying power
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED It reflects the traders credits and debits instantly on every trade execution. There is no need to refresh each statement to know the latest buying limits.
Derivative chain This feature provides the traders with a list of all derivative contracts available for the selected security. To view derivative prices of a security, trader just needs to right click on the symbol and click on derivative chain.
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Lock terminal option If the traders system is unattended this function locks the trading platform for the trader and can be accessed again only on providing the proper login details.
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Message window docking This feature enables the trader to receive trading messages, intra-day trading calls, and messages from both the exchanges flashed real time onto their screen.
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SmartINVEST: Trading platform for the Serious Investors
A view of the platform as it would appear on the screen It is a browser-based system designed for customers who transact occasionally. It is ideal for investors who believe in the Buy and Hold approach towards investment in equities. SmartInvest's
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED capability as a browser-based trading platform gives the investors the benefit of real-time streaming data with the flexibility of trading on any Internet capable system. With access to both the NSE & BSE, the investor is in the driver's seat when routing your order to the best price on either of the exchanges. SmartInvest sophisticated yet easy to use point and click order entry interface allows you to react more quickly to the markets and make better decisions. Its features include:
o Instant loading The browser-based applet system allows the investors instant access to their account with no wait time, unlike other systems that take a few minutes to load. o Works behind a proxy This platform can be accessed on any Internet enabled network. Investors can access it even from their place of work. o Live streaming quotes Investors can keep an eye on the stocks they care about most with streaming, real-time quotes and customizable market data. Color-coded price changes help them to spot trends and react to them quickly. o Multiple watch lists The new watch list option allows the investors to create up to 10 watch lists. Each watch list can be personalized by inserting securities which they would like to view as a group. o NSE & BSE Access It facilitates flexibility of trading on both the NSE & BSE via a single screen. o Single order form for Cash and FnO Single order form offers the investors convenience of transacting in various segments of the market without having to switch between multiple windows. o Point and click order entry Makes order entry quick and simple with a click on the security the same gets inserted into the order form on the investors trade screen. o Hot Key Functions Using a single keystroke (Hot Key) function, investor can achieve important tasks very similar to a broker's terminal. Accessing important reports is also one keystroke away. o Market Depth Window
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED It gives an immediate "at a glance" info about the stock the investor is following. The view provides the best 5 bid and offer quotes and the outstanding order quantities. o Back Office Access View segment wise ledger bills and contract notes, trades, positions, account balance, realized/unrealized profit & loss, and buying power all in real time.
SmartSTART: Trading platform for the Beginners
A view of the platform as it would appear on the screen It is a powerful browser based trading system for those who are relatively new to online investing. A unique integrated account, which integrates the investors banking, broking, and Demat accounts. A comprehensive trading service, which allows one to invest in equities and derivatives. SmartStart trading platform allows the investor the flexibility of trading on any internet capable system, with access to both the NSE and BSE. Its features include:
Trade on NSE and BSE Flexibility of trading on both the NSE & BSE via a single screen. Fully customizable display The save desktop option allows you to save your created trade screen layout, so the next time you access the application the created layout is not lost. Integrated accounts (Bank, Demat & Trading)
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED Integrates your banking, broking and demat accounts. This enables you to trade in shares without going through the hassles of tracking settlement cycles, writing cheques and Transfer Instructions, chasing your broker for cheques or Transfer Instructions etc. Live order status Tracking all your orders is made easy through the order status screen. Further drill down into all details pertaining to an order is available in the order detail sub report. Dynamic buying power Reflects your credits and debits instantly on every trade execution. No need to refresh each statement to know your latest buying limits. Works behind a Proxy This platform can be accessed on any Internet enabled network. You can access it even from your place of work. Back office access View segment wise ledger bills and contract notes, trades, positions, account balance, realized/unrealized profit & loss, and buying power all in real time. One additional feature that applies to all the Trading Platforms is SmartCall, where the investor can enjoy the convenience to trade over the phone. The experienced team of Research Analysts and Advisory Managers guide the investors with appropriate solutions, backed by in-depth research, knowledge and expertise on a regular basis and constantly help them with the strategies for investment in equities, recommendations for trading on futures and options, hedging with Nifty and other product opportunities of risk-less arbitrage in various segments. NRI SERVICES
NRI Products from IL&FS Investsmart: IL&FS Investsmart is committed to creating a differentiated financial services organisation by leveraging technology to deliver the most compelling combination of product, service and price to a value driven consumer. IILs end-to-end investment solutions guide its NRI customers at every step of their Investment in India right from PAN Card Assistance to formulating and executing investment plans based on NRI requirements, robust trading platforms till the assistance on accounting & income tax returns filing in India. NRI Product Offerings: NREquity
Facilitates easy trading in NSE and BSE listed stocks by offering comprehensive trading solutions to the customers through its web and software based trading platforms which is equipped with a host of unique features to cater to their trading needs. IL&FS Investsmart, offers its customers a smooth online trading experience with exceptional trading tools, service and client support enabling them to make quick trading decisions. Its 3-in-1 Trading Platform enables its customers to do online delivery based trading at their convenience. This account links their Banking, Demat and Trading account, thus providing you a seamless platform to trade efficiently and conveniently. Customers can also place their orders through their dedicated Call & Trade Facility or contact their Relationship Manager. NRI Portfolio Management Services- customized solutions to meet the investment needs. Indian markets today offer enormous growth potential. Anticipating the Indian market trends, assessing the impact of countrys socio economic changes on an individuals investments, keeping abreast of latest corporate developments and financial analysis can be extremely challenging task. Therefore, managing ones investments may become nearly a full-time affair that requires considerable time and expertise. IL&FS Investsmart offers solutions that are tailored to meet the investment needs of an NRI. It offers a choice of two types of Portfolio Management Services schemes which are focused on returns from various asset classes. iGrowth Its a discretionary Portfolio Management Scheme, focusing on investments in equities with an objective of growth. It aims at creating long-term wealth through judicious stock selection and asset location. iPreserve This scheme invests in a mix of various mutual fund schemes, ideal for investors who wish to invest in maximizing returns from mutual funds but cannot make the right choices. Additional NRI Product Offerings: Mutual Funds IIL offers an opportunity to spend in a broad spectrum of Mutual Funds with more than 500 schemes to choose from to match individual needs, goals and risk profiles. Customers can constantly monitor their MF portfolio and make changes according to their needs as per the market scenario, in order to make their money work for them. IPO
As a part of wide range of offerings, NRIs can also invest in IPOs in India by applying through any of the branches in India or by calling the customer service desk. Through the company website, one can receive regular updates on the IPO scenario, ongoing IPOs as well the forthcoming IPOs at any given point of time.
Insurance IIL serves as the one stop shop for all the Insurance and Retirement needs. As a composite Insurance Broker, IIL provides comprehensive risk management solutions. IIL offers both life insurance and general insurance products for all insurance companies in India. Other Wealth Management Products IILs basket of Wealth Management products includes Real Estate products, Private Equity Funds and structured products in order to suit varied individual investment needs. Value Added Services to NRIs IL&FS Investsmart through its rich investment solutions and various alliances, endeavours to provide the services and support that NRIs need to manage their investments in India. It helps its customers through the entire investment process, step-by-step with a host of innovative and efficient services. Pan Card Assistance - A doorstep delivery of Pan Card at ones foreign location. Permanent Account Number (PAN) Card being a mandatory requirement for NRIs investing in financial products in India, one has to face an additional task of communicating with PAN processing agencies in India. Being located in a different country with a different times zone makes this task all the more difficult and daunting for NRIs. IIL provides the convenience of applying for the Pan Card at the comfort of the customers home at the time of availing the service itself.
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Accounting and Income Tax Returns filing in India Making tax filing in India easy.
IIL provides assistance and expert guidance in filing of taxation returns to its NRI customers in India, through its exclusive alliances. This helps in better accountability and maintenance of tax records.
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Research and Advisory For sound investment decisions
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED The Investment solutions offered by IIL are backed by in-depth research generated by top-drawer research team. Facilitates news and updates on the basis of daily and monthly market analysis to keep track of the investments of its NRI customers in India. 2. Institutional Offerings
Investment Banking Services: IL&FS Investsmart (IIL) offers an extensive range of Investment Banking Services for equity related products and instruments. Its research team advises the customers on transactions like business structuring and capital raising opportunities based on their corporate needs and state of capital markets. Services they specialize in include the Management of:

Initial Public Offering (IPOs) Follow-on Offerings Qualified Institutional Placements (QIPs) Buyback of Equities Open Offers Mergers & Acquisitions Private Equity Placements ESOPs
They identify, analyse and respond instantly to the customers needs. Since inception, IIL has been structuring and delivering financial solutions geared towards its customers needs. This is implemented through an understanding of investors business needs and their preferences. IILs distribution reach and financial structuring capabilities of the team ensures a winning combination for the client company. Institutional Equity Broking Services: Our efficient execution, quality research, top quality human resources and complete compliance with stock exchange regulations, as well as business standard ethics lend towards our exemplary services to investors, through IPOs, equities, derivatives and mutual funds IIL also focuses on identifying undiscovered value stocks to investors. Through its gamut of services, this division is well-suited to corporate investors, banks, financial institutions, insurance companies and FIIs. IILs Institutional Equity Business (IEB) is well positioned to offer support for a complete range of investment banking service to corporates. It offers a wide array of products and services, specifically aimed at improving market capitalization of forward looking companies. IIL works closely with institutional investors, private equity investors
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED and corporates. The research division has a designated team for each asset class and consists of qualified professionals who evaluate market trends and make unbiased and objective reports. IIL has been hosting round table conferences with leading CIOs / Fund Managers etc. Also, conducts activities like organising of road shows, enabling the senior management to interact with FIIs, regular conference calls for institutional Investors etc. This works as a pre-requisite to investing in stocks. Its expertise in this area also extends to international investors from Singapore, Hong Kong, USA and the UK. Institutional Debt Broking Services: IILs institutional debt broking division includes, secondary market broking, primary market debt placement & distribution and provident fund advisory services. Secondary debt broking is the principle service provided by this division. The clients mainly comprise of institutional debt players, such as banks, primary dealers, mutual funds, large provident funds and in some cases corporate treasuries. The division empanelled with almost all banks, primary dealers and mutual funds, on whose behalf it acts either on the buying or selling side. All types of debt papers are covered, including government securities, treasury bills, public sector bonds, corporate bonds etc. This desk also provides transacting and advisory services to various provident funds and HNI clients. The primary market services cover placement of debt paper issued by corporates, with institutional segments covering banks, mutual funds etc. These services cover following activities :
Advising the clients on the issuance including the instrument, quantum, timing, other instrument specific structuring such as put / call option, conversion option and rating. Assisting in the rating exercise and suggesting various means and options to improve rating if so desired, through Structured Obligations or other mechanisms. Pre marketing the placement / issuance Selling / placing the issuance Assisting in any related documentation for the issuance Assisting in all other steps to complete the issuance for draw down funds
The debt instrument covered by this division cover both short term as well as longer term instruments. Commercial paper and MIBOR Linked Bonds are popular among the short-term instruments. The division uses a proprietary online platform called DebtonNet for online book building of debt issuances. 3. Other Services
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED Besides the above mentioned services, IIL also provides services like: Value Added Products that are customized for the investors ease and include Smart Alert Service that provides daily update of the stock markets through SMS, Smart Alert Calls give convenience to trade through phone, State-of-the-Art Security Platforms etc. Well versed reports on Mutual funds, Market conditions, Share Market etc. on a daily as well as weekly basis Free of cost timely updates on advisory services through SMS on the request of its customers Providing Market Information and Company Information through an extensive research team.
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Why Invest with IL&FS Investsmart Linited? Customisation: Investment plans are formulated on the basis of customer preference and needs, so that the best can be brought out of an individuals or a companys financial profile. Expertise: A huge integrated research team is at work to provide the customers with financial expertise and thorough understanding of financial markets. Trust: Investsmart is spread across the country through more than 300 offices providing unmatched services. HSBC advantage: Acquisition by HSBC provides access to Investsmart to a greater customer base. Apart from that, Investsmarts customers get access to direct money transfer facility to their HSBC accounts. Best performing National Financial Advisory IL&FS Investsmart bagged the Best Performing National Financial Advisory Award from CNBC two years in a row in 2007-2008. One-stop-shop: IL&FS Investsmart is Indias financial multiplex providing a wide range of financial services to individuals as well as corporate.
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Table 6.1 Charges for Opening Online Trading Account Broker Online Trading Opening Charges IL&FS Investsmart (HSBC) Rs. 950 ICICI Direct Rs. 975 HDFC Securities Rs. 750 Standard Chartered - STCI Rs. 499 IDBI Paisabuilder Rs. 499 AXIS Bank Rs. 1050
Account
Chart 6.1 Online Trading A/C Opening Charges of the Corporate Brokers Comment: An online trading account enables the investors to trade in the stock market through online trading platforms. According to table 3.1 and chart 3.1, the charges for opening an online trading a/c are the highest for AXIS Bank and the lowest for Standard Chartered. The charges at IIL are neither too high, nor too low.
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Table 6.2 Brokerage Rates on Delivery (Basic Plan) Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered-STCI IDBI AXIS Bank Brokerage on Delivery 0.50% 0.75% 0.50% 0.50% 0.65% 0.55%
Chart 6.2 Brokerage Rates on Delivery Comment: The brokerage rates for the delivery of shares are the highest for ICICIDirect and the lowest for IIL, HDFC Securities and Standard Chartered.
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Table 6.3 Brokerage Rates on Intraday Trading (Basic Plan) Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered- STCI IDBI Paisabuilder AXIS Bank Brokerage Trading 0.05% 0.05% 0.15% 0.05% 0.055% 0.10% on Intraday
Chart 6.3 Brokerage Rates on Intraday Trading Comments: Intraday trading refers to opening and closing a position in a security in the same trading day. Brokerage rates for the Intraday Trading are the highest for HDFC Securities and the lowest for IIL, ICICIDirect and Standard Chartered.
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Table 6.4 Annual Maintenance Charges for Demat A/C (Basic Plan) Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered -STCI IDBI Paisabuilder AXIS Bank AMC for Demat A/C Rs. 300 Rs. 500 Rs. 500 Rs. 400 Rs. 350 Rs. 500
Chart 6.4 Annual Maintenance Charges for the Demat A/C Comment: A Demat a/c holder needs to pay annual maintenance charges, which on a certain turnover level is refunded by some of the brokers. The charges are the highest for ICICIDirect, HDFC Securities and AXIS Bank while the lowest for only IIL.
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Table 6.5 Brokerage Rates for Futures (Basic Plan) Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered - STCI IDBI Paisabuilder AXIS Bank Brokerage on Futures 0.05% 0.05% 0.05% 0.05% 0.055% 0.05%
Chart 6.5 Brokerage Rates for Futures by different Brokers Comment: The brokerage rates for futures are the highest for IDBI Paisabuilder while all the other brokers charge the equal rates.
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Table 6.6 Minimum Brokerage per Executed Order Value Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered STCI IDBI Paisabuilder AXIS Bank Comment: The plan for minimum brokerage that is chargeable per executed order value varies for different brokers, in a way that Rs. 25 is maximum amount chargeable by IIL and ICICIDirect, Rs. 25 is the minimum amount chargeable by Standard Chartered, Rs. 20 is the minimum amount chargeable by IDBI Paisabuilder and Rs. 20 is the maximum amount chargeable by AXIS Bank. The charges for HDFC Securities are not available. Hence, among the 5 brokers, the highest would be for Standard Chartered and the lowest would be for AXIS Bank. Brokerage Rs. 25 or 2.5% whichever is lower Rs. 25 or 2.5% whichever is lower Not Available Rs. 25 or 2.5% whichever is higher Rs. 20 or 2.5% whichever is higher Rs. 20 or 2.5% whichever is lower
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Table 6.7 SMS Alerts Service Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered- STCI IDBI Paisabuilder AXIS Bank Comment: The brokers provide SMS Alerts Service updating their customers on the share market and giving advice on investments on a regular basis. Some brokers like IIL and HDFC Securities provide this facility free of cost. While the others charge some fee. Charges NIL Chargeable NIL Chargeable Chargeable Chargeable
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Table 6.8 Research Reports Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered STCI IDBI Paisabuilder AXIS Bank Comment: Various brokers avail their customers of research reports on topics like trends in the market, position of mutual funds, IPOs, comparative studies of different companies, investment opportunities in a particular sector etc. IIL, ICICI and HDFC provide these for free, while the others charge a certain amount. Charges Nil Nil Nil Chargeable Chargeable Chargeable
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Table 6.9 Failed Instruction Charges Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered- STCI IDBI Paisabuilder AXIS Bank Charges Rs. 25 Rs. 30 Not Available 25 30 10
Chart 6.6 Failed Instruction Charges Comment: The Charges in this category are the highest for IDBI and ICICI, while lowest for AXIS. For ILL, these charges are neither too high nor too low.
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Table 6.10 Demat Charges Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered- STCI IDBI Paisabuilder AXIS Bank Charges 35 35 Not Available 30 30 50
Chart 6.7 Demat Charges Comment: Demat refers to a dematerialized account. Just as one has to open an account with a bank, if he/she wants to save his/her money, make cheque payments etc., one needs to open a demat account if he/she wants to buy or sell and transact sharesDemat Charges are the highest for AXIS while lowest for Standard Chartered and IDBI. IIL charges are neither too high nor too low.
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Table 6.11 Charges for Remat Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered- STCI IDBI Paisabuilder AXIS Bank Charges 25 20 Not Available 50 20 50
Chart 6.8 Charges for Remat Comment: The electronic holdings can be converted back into certificates if one wishes to get back his/her shares in physical form. This is called Rematerialisation or Remat. Remat Charges are highest for Standard Chartered and AXIS and lowest for ICICI and IDBI. IIL charges are neither too high nor too low.
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Table 6.12 Charges for Pledge Creation Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC Securities Standard Chartered- STCI IDBI Paisabuilder AXIS Bank Charges 25 30 Not Available 50 100 25
Chart 6.9 Charges for Pledge Creation Comment: Pledge is an activity of taking loan against securities by the investor. The investor is called as pledgor and he entity who is giving the loan against the securities is called as pledgee. Charges in this category are the highest for Standard Chartered and AXIS while lowest for IIL and IDBI.
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Table 6.13 Charges for Pledge Closure Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC StanChart IDBI AXIS Bank Charges 25 30 Not Available 50 25 50
Chart 6.10 Charges for Pledge Closure Comment: After the pledgor repays the loan to the pledgee, the pledgor will submit an instruction to its DP to initiate the closure of pledge/hypothecation by indicating the option "close the pledge/hypothecation" in the pledge/hypothecation form. This is known as Pledge Closure. Here, the charges are highest for Standard Chartered and AXIS and lowest for IIL and IDBI.
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Table 6.14 Account Statement Charges Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC StanChart IDBI AXIS Bank Charges 25 20 Not Available 50 20 100
Chart 6.11 Account Statement Charges Comment: Here, the AXIS charges extraordinarily high fee while ICIC and IDBI charge the lowest. IIL, on the other hand, charges just a little above the lowest rates.
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Table 6.15 Pledge Invocation Charges Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC StanChart IDBI AXIS Bank Charges 50 30 Not Available 50 100 50
Chart 6.12 Pledge Invocation Charges Comment: When a pledgee does not repay the loan amount, the shares pledged with the Bank can be transferred in their favor. This is similar to the physical shares being transferred in the name of the lender in the event of a default, who will receive the corporate actions like dividends, bonus etc in Pledged shares. This is pledge invocation. The charges for these are extremely high for IDBI, while lowest for only ICICI. IIL, Standard Chartered and AXIS charge average rates.
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Table 6.16 Turnover on the basis of Deposit Amount Broker IL&FS Investsmart (HSBC) ICICI Direct HDFC StanChart IDBI AXIS Bank Turnover 4 Times 4 Times 3 Times 3 Times 4 Times 3 Times
Chart 6.13 Turnover on the Deposit Account Comment: Turnover on the basis of deposit account is the limit which is given by the broker to the customer for doing intraday trading on his/her deposit amount. The higher it is, the better. The results of the research show that it is the highest for IIL, ICICI and IDBI.
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LIMITATIONS Insufficient data: The data available for the report was inadequate. Most companies are reluctant to providing accurate data. As a result, some parts of the study had to be built on some assumptions as well. Difficulty in Qualitative Comparison: Since the different brokers offer different investment plans, it becomes difficult to compare them accurately on the qualitative grounds for services. For example, in the case of online trading, some brokers charge their brokerage on a turnover basis, while others dont. Primary data of a particular region: The primary data was collected from a sample population of Jaipur city. The responses may differ for different cities. Hence, a valid inference could not be drawn based on the primary data. Sample Size: The sample size for the research was quite small and may not give an accurate picture of the actual scenario.
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INTRODUCTION Most people require good financial planning as they have some basic financial goals that they want to attain for maintaining a stable and healthy life style. Financial planning is the process of meeting ones life goals through the proper management of finances. Life goals can include buying a home, saving for your child's education or planning for retirement. The process involves setting life goals, examining current financial status and coming up with a strategy or plan for how one can meet their goals given the current situation and future plans. To help meet their goals a number of financial instruments and options are available to the public like, insurance plans, savings plans, retirement plans, education plans, tax saving methods, and various other financial instruments like: stocks/equity, mutual funds, bonds, certificates of deposit, savings account and real estate, etc. But this process of individual financial planning is not so easy to carry out, and underlying, are a lot of complexities which combined together, generate an investment behavior that is a bit hard to model and predict. The way people invest involves a lot factors which likely influence their behavior in varying magnitudes. These factors include their age, income level, money going into writing off liabilities, no. of dependents, social standing, risk taking ability, family background, attitude and mental strength, taste and preferences, etc. Needs (personal and family) also change with the passage of time. For example, buying a big-screen television using a credit card may enhance the value of ones belongings, but it may cost the individual more over the long run due to the finance charges. By viewing each financial decision as part of the whole, a rational individual considers its short-term and long-term effects on the life goals. In a way everything around an individual affects his/her behavior in a certain way.
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OBJECTIVE OF THE STUDY The main objective of this study is to understand the rationale behind an individuals investment decision or financial planning, considering whether or not factors like age, no. of dependents, income level, risk appetite, etc. influence his/her investment/financial planning decision. This will help in creating the financial products which are framed according to the investors risk appetite and rationale behind investment. From the observations made, we will categorize individuals according to their age and check if within the age group they show similar risk taking ability or not. (Here it is to be noted that the risk taking ability defines the instruments an individuals invest in). We also aim to link their investment objectives (based on their age/ life-stage/ goals etc) with the age groups classified above. Any generalization (if any) will help us determine the investment avenues an individual with similar risk taking ability and objectives must go for. RESEARCH METHODOLOGY The methodology for the study basically involves collection of primary data (through a questionnaire) from a sample of the required population and thereafter using a statistical tool (SPSS 13.0) to conduct cluster analysis, factor analysis and regression analysis for analyzing the data and drawing inferences. RESEARCH DESIGN The study being conducted is basically descriptive in nature, as its main objective is to understand about the characteristics of the population, and the factors influencing them.
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DATA COLLECTION METHODS 1. Collection of Data The data collection comprises of Primary data through the use of Questionnaire (refer appendix) designed and developed specifically for the study and also a risk test to calculate the risk score of an individual. 2. CODING THE DATA We have coded our data in such a way so that it becomes feasible for us to run various statistical techniques like cluster Analysis, factor analysis, and regression analysis thereby determining the relationship between variables. 1) Various investment instruments are categorized into 5 categories i. High Risk ii. High- Medium iii. Medium iv. Medium Low v. Low Different Proportions are assigned to each category so as to arrive at Risk adjusted investment which will depict an individual risk taking ability. By this, we will be able to classify it as, higher the risk adjusted investment, higher is an individual risk taking ability.
By this, we will be able to arrive at risk adjusted investments.

2) Liabilities are coded in a way so that it could be used to analyze, whether or not a higher percentage of income going into writing off liabilities, effects the investment decision of an individual or not. It is coded as given in print shot. We have also taken into consideration the absolute figures regarding the liabilities of an individual for running multiple regression. For that we have taken, the mean values of the lower and upper limit of an interval for the selected interval.
3) Codes are assigned to a persons marital status, as 1 and 0 so as to make the qualitative
information ready to use.
4)
We have also coded the income and the gender of the person being surveyed. We have categorized a persons income into 3 categories1) High Income 2) Medium Income 3) Low Income
Since people are always apprehensive to give their income details, we have taken income in interval scale as shown above. For taking absolute income, we have converted the selected category into absolute value by taking mean of upper and lower limit of the interval scales.
5) We have used a risk test to determine the risk appetite of an individual. The risk test contains
about 13 questions; each option of each question has a designated score attached to it. Then
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED the final score is calculated accordingly, which will tell about the risk appetite of an individual. Risk Score <21 21<x<36 >36 Codes Assigned 1 2 3
Behavior Aggressive Active Conservative
SAMPLE DESIGN The population under consideration for this study comprises of individuals falling within the age group (22 years-50 years), who earn/secure funds, from different sources like salary, business, agriculture, other sources including funds from parents, etc., and are also involved in some sort of investment or financial planning. For the study a sample size of 72 individuals is being considered. The sample was drawn from the population at random. In general, there will be limitations to the inferences that can be drawn from the purposive samples, since the survey requires voluntary participation of individuals. The quality of the results will crucially depend on their willingness to cooperate and to accurately provide the information. FIELD WORK The fieldwork was done by me by collecting data from clients of HSBC InvestDirect, approaching individuals at random in malls and other public places. Samples were also collected from known individuals (friends and relatives) by approaching them personally, through the internet, and telephone. DATA ANALYSIS For the purpose of data analysis SPSS 13.0 is being used.
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED The data has been analyzed using techniques such as Cluster analysis, Factor Analysis, and Regression analysis.
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RESULTS and DISCUSSION Cluster Analysis The objective of using this analysis is to group cases (respondents) based on the similarity of responses to the several investment objectives put forward to them. The objectives were: 1) 2) 3) 4) 5) 6) 7) Saving for your own education Saving for your childrens education Saving for retirement Minimizing income taxes Providing support for an aging parent/relative Improving investment returns Improving insurance coverage
The respondent was asked to answer in a Yes/No for whichever statement was applicable to him. Having received a dichotomous set of answers, we coded Yes as 1; and No as 0 to the statements. With the help of the SPSS, cluster analysis for 72 respondents was run. First, a hierarchical clustering was used to get an approximate idea of how many clusters must actually be formed. The Wards procedure is used to compute the variance between each object as the objective is to minimize within cluster variance. Then, a K-mean follows to bring in precision is grouping respondents who show similar responses with respect to their investment objectives. The agglomeration schedule shows how the respondents are clustered together at each stage of the cluster analysis. From our data analysis we found that we may form 3 clusters of respondents who show similar characteristics.
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Agglomeration Schedule Stage Cluster Combined Cluster 1 Cluster 2 1 2 3 4 5 6 7 52 59 61 9 36 56 15 72 71 70 69 68 67 66 .000 .000 .000 .000 .000 .000 .000 Coefficients Stage Cluster Appears First Next Stage
Cluster 1 Cluster 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 17 12 11 41 27 13 33
68 69 70 71
2 6 2 1
4 12 6 2
68.885 74.084 94.490 116.736
63 67 68 65
61 60 69 70
70 70 71 0
We now analyze K means option in the classify category of SPSS to further analyze the data.
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ANOVA Cluster Mean Square Ownedu childedu Retire Inctax Parents maxreturns insuranccov 6.243 5.348 4.184 .020 2.479 .753 2.620 df 2 2 2 2 2 2 2 Error Mean Square .014 .104 .100 .249 .173 .239 .184 Df 68 68 68 68 68 68 68 446.890 51.586 41.752 .081 14.320 3.151 14.248 .000 .000 .000 .923 .000 .049 .000 F Sig.
This table can help you understand which variables are most important in your cluster solution. For each variable, you can see the variance in that variable attributable to clusters and the error variance (the variance not attributable to clusters). The F ratio is the ratio of cluster variance to error variance. Large F ratios indicate variables that are important for separating clusters. Small F ratios (near 1.0) indicate variables that are not very useful for identifying cluster membership. The K-means clustering algorithm is designed to minimize within-cluster variability; the F statistics cannot be interpreted as in a traditional ANOVA. So, the significance value reported is not a reliable estimate of the probability associated with the hypothesis of no effect for a particular variable. Thus, from our results we conclude that minimizing the income tax as an investment objective is not very useful in identifying the clusters. Having saved the cluster membership of the respondents, we can define a cluster by relating a cluster membership primarily with age of a respondent. It was observed that respondent of similar age group (say 22 yrs to 28 yrs; with few exceptional observations) fell under cluster 1, which might be characterized by individuals with investment objectives of financing for their own education, or maximizing investment returns largely and other objectives may not be of that great importance to them. Roughly, the 3rd cluster members are seen to belong to the age bracket (40 yrs to 50 yrs) which might be said of having the investment objectives of saving for retirement or providing for insurance coverage significantly and other objectives insignificantly. Lastly, the 2nd cluster members in the age group of 29 to 39 yrs may have priorities like financing for childrens education more than other objectives. This qualitative analysis is just a reinforcement of the studys expectation.
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED Factor Analysis In our research, we are using factor analysis to find out a smaller set of uncorrelated factors to replace the original correlated variables like age, income, investment objectives, risk appetite, marital status, gender, the respondents liabilities, and his income. We have in all 8 independent variables. We are doing principal component analysis to determine the minimum number of factors that will account for maximum variance in the data for use in the subsequent multi variant analysis. Before running factor analysis, the data collected are coded (as described earlier) and then we standardize them in SPSS, to get better results than in what we would have got, had the variables been in different units. The z-scores obtained from the Univariate descriptive option in SPSS is saved. Results and analysis KMO and Bartletts test of sphericity Bartletts test of sphericity is used to test the null hypothesis that the variables are uncorrelated in the population or the population correlation matrix is an identity matrix .The test statistics for sphericity has a base in a Chi square transformation of the determinant of the correlation matrix. A large value of test statistic favors the rejection of null hypothesis and hence will favor factor analysis. Its significance value should be less than 0.05 at 5% level of significance to favor Factor analysis. The KMO statistic measures sampling adequacy .This index compares the magnitudes of the observed correlation coefficients to the magnitudes of partial correlation coefficients. Small values of the KMO statistic indicate that the correlations between the pair of variables cannot be explained by other variables and that factor analysis may not be appropriate. When KMO value is greater than 0.5, it signals the researcher to conduct a factor analysis. A value of 0.2 signals him to get back to the basics- correcting the questionnaire, taking proper data into consideration. KMO and Bartlett's Test Kaiser-Meyer-Olkin Sampling Adequacy. Measure of Chi.608 131.103 28 .000
Bartlett's Test of Approx. Sphericity Square df Sig.
Here in our test the value of KMO statistics is .608 which is sufficient enough to perform Factor analysis. Also, the significance value in Bartletts test of sphericity is 0.000 which indicates that
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED correlation matrix is significantly different from identity matrix. This means that the variables are correlated highly enough to provide a reasonable basis for running factor analysis. Communalities Communalities is the squared multiple correlation for the variable as dependent using the factors as predictors. The communality measures the percent of variance in a given variable explained by all the factors jointly and may be interpreted as the reliability of the indicator. Communality for a variable is computed as the sum of squared factor loadings for that variable (row). Since factors are uncorrelated, the squared loadings may be added to get the total percent explained which is what communality is. For Principal Component Analysis the initial communality will be 1.0 for all variables and all of the variance in the variables will be explained by all of the factors, which will be as many as there are variables. The "extracted" communality is the percent of variance in a given variable explained by the factors which are extracted, which will usually be fewer than all the possible factors, resulting in coefficients less than 1.0. When an indicator variable has a low communality (<=.25), the factor model is not working well for that indicator and possibly it should be removed from the model. Low communalities across the set of variables indicate the variables are little related to each other. However, if the communality exceeds 1.0, there is a spurious solution, which may reflect too small a sample or the researcher has too many or too few factors. Communalities Initial 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Extraction .825 .559 .759 .767 .600 .642 .576 .538
Zscore(riskcategory) Zscore(gender) Zscore(age) Zscore(condimarital) Zscore(noofdep) Zscore(percentwriteoffliab) Zscore(codedinc) Zscore(cluster_mem)
In our analysis, the extracted communalities of each variable are greater than 0.25, and infact greater than 0.5 which means that atleast 50% of variation in the independent variable will be explained by all the factors (which will be extracted) combined. Thus, the obtained factor model works well for our research. Total Variance Explained
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED Here the Eigen values for a factor indicate the total variance attributed to that factor. The percentage of variance shows the percent of variance for each component before and after rotation. Cumulative variance shows the percentage of variance shown by the variables whose Eigen value is greater than 1(we have specified the Eigen value to be greater than 1 while performing the test). Here, the Total Variance Explained table shows how the variance is divided among the 15 possible factors. We found three factors have Eigen values (a measure of explained variance) greater than 1.0 which is a common criterion for a factor to be useful. When the Eigen value is less than 1.0, this means that the factor explains less information than a single item would have explained. Here the first factor shows the highest variance i.e. it explained 33.173 % of the total variance explained. If we sum up all the three factors it basically explained 65.851 % of the total variance. We opted for the best -factor solution by "rotating" four factors. For this we have used a Varimax rotation. This is an orthogonal method of rotation that minimizes the number of variables with high loadings on a factor thereby enhancing the interpretability of the factors. This means that the final factors will be as uncorrelated as possible with each other. As a result, we can assume that the information explained by one factor is independent of the information in the other factors & different items are explained or predicted by different underlying factors, and each factor explains more than one item. Total Variance Explained Extraction Sums Component Initial Eigenvalues Loadings % of Cumulative % of Total Variance % Total Variance 1 2.65 2.65 33.173 33.173 33.173 4 4 2 1.41 1.41 17.662 50.835 17.662 3 3 3 1.20 1.20 15.016 65.851 15.016 1 1 4 .777 9.711 75.562 5 .701 8.767 84.329 6 .627 7.839 92.169 7 .384 4.798 96.967 8 .243 3.033 100.000 of Squared Rotation Sums Loadings Cumulative % of % Total Variance 2.34 33.173 29.341 7 1.59 50.835 19.910 3 1.32 65.851 16.600 8 of Squared Cumulative % 29.341 49.251 65.851
Extraction Method: Principal Component Analysis.
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED Rotated Component Matrix The Rotated Factor Matrix table contains the factor loadings which is a key for understanding the results of the analysis. Here, the software has sorted the 8 variables into 3 factors wherein each factor consists of those variables which have a loading of 0.50 or higher (without considering the sign). Rotated Component Matrix(a) Component 1 .068 .010 .888 .875 .103 .082 .583 .718 2 -.054 .554 .191 -.030 .752 .742 .358 .004 3 .904 .502 -.141 -.013 .153 -.291 .328 .151
Zscore(riskcategory) Zscore(gender) Zscore(age) Zscore(condimarital) Zscore(noofdep) Zscore(percentwriteo ffliab) Zscore(codedinc) Zscore(cluster_mem)
Factoring from the rotated component Matrix Critical Factors Factor 1 Demographics Age Income Marital status Cluster membership wrt the investment objective Factor 2 Family dynamics Gender No. of dependents Percentage written off of liability Factor 3 Risk appetite Risk Category
Factor 1: Demographics
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED The rotated matrix reveals that the respondents perceive this particular factor to be the most important factor, with the highest explained variance of 33.173%. Four out of eight variable load high on this factor (variables that load into the factors significantly is reported in the table above). The factor loadings of these variables in factor 1- demographics, marked in color. We can also interpret that age in factor 1 is the most clearly and heavily loaded variable among all variables and so we substitute this factor with age when we run a multiple regression in our later study for further proving our objective. Factor 2: Family dynamics It has come out with the second most important factor explaining variance of 17.662% out of the total. The variables having high loadings in this factor are Income, gender, and percentage of liability written off, with highest loading of number of dependents among the three others. Since a person might take into consideration his family circumstances as to whether he is the sole bread earner of the family or not; or how much liability he has to pay monthly and accordingly the risk he can afford to take out of the leftover money, so that his dependents are provided with the daily sustenance. Thus, when running a multiple regression (run in the later part of this study), we chose number of dependents as a proxy for this factor. Factor 3: Risk Appetite The next important factor is this taking into account 15.016%. The variables loading high on this is the risk taking ability of an individual as calculated from the risk test. When running the multiple regression, we use the absolute risk scores as an independent variable.
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MULTIPLE REGRESSION The results obtained from factor analysis leaves us three with three factors viz, demographics, family dynamics, risk appetite. We select the most significant variables (age, no. of dependents or gender in a family and risk score) that goes into explaining the factors obtained, and run a multiple regression. Although income level is not heavily loaded into demographics, still we chose it as an independent variable following the convention. The regression is carried out in by way of two models. Model 1: 1) When Regression model-1 is run with the help of SPSS 13.0, following results are obtained. Here the Dependent variable is risk adjusted investment and independent variables are age, income, risk score, & number of dependents in the family of respondents. R R square Durbin Watson 0.842 0.709 2.068
R, i.e. the multiple correlation coefficients, is the correlation between the observed and predicted values of the dependent variable. R=.842, shows a high correlation between the observed and predicted values of risk adjusted investment (henceforth RAI). R squared is the proportion of variation in the dependent variable explained by the regression model. R square= .709 shows that 70.9% variation in the risk adjusted investment can be attributed to age, income, risk score, & number of dependents in the family of respondents, whereas 29.1% variations in RAI is not captured by this model and may be attributed to the variable which have not been accounted for. The "Durbin-Watson test for autocorrelation'' is a statistic that indicates the likelihood that the deviation (error) values for the regression have a first-order autocorrelation component. The regression models assume that the error deviations are uncorrelated. Small values of the Durbin-Watson statistic indicate the presence of autocorrelation. Consulting significance tables from the table for exact interpretations; we find that a value of 2.068 shows no significant autocorrelation in the model. The ANOVA table teats for the significance of the model on the whole, where: H0: 2=0 Against H1: 20
ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED We have:
The output for Regression displays information about the variation accounted for by the model. The output for Residual displays information about the variation that is not accounted for by the model. A model with a large regression sum of squares in comparison to the residual sum of squares indicates that the model accounts for most of variation in the dependent variable (RAI), which is the case in the solution obtained, thus can be said that the model obtained account for most of the variation in the dependent variables. The significance value of the F 4,67 statistic is < 0.05 (for we test the null hypothesis at 5% level of significance, we reject the null hypothesis ), which implies that the independent variables have done a decent job in explaining the variation in the dependent variable. Next, we check for collinearity among the independent variables through Variance Inflation Factor to check if our model suffers from multicollinearity. Next we report for the individual significance of the betas of the independent variables, by testing a zero parameter type null hypothesis at 5% level of significance and 71df. We have the following table:
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED We observe that VIF <10, there is no perfect collinearity among the independent variables. Also, the risk score and age of the respondent significantly explain the investment pattern of an individual (captured by the RAI), whereas, variables like income of an individual and the number of dependents in his family doesnt affect his choice of investment instruments. There is a negative relation between age and RAI, and Number of dependent and RAI. A qualitative analysis for the above conclusion can be put forth in following words: An individual with passing age tends to become risk averse because of reasons like the family responsibility one has to take over, the fear of losing his/her sources of income in a jiffy which would in turn hamper his routine expenses, or the maturity of saving ones money post retirement or for contingencies or other demographic variables like his lifestyle, stage of life, his immediate or long term goals, etc. Income level though expected to affect his investment pattern came out insignificant. When individuals tend to earn more money, they tend to allocate it to avenues that give sure returns and on the other hand, students or newly employed personnel might prefer to invest in riskier investment instruments to make quick money. Number of dependents in ones family doesnt influence his choice of investment instruments till the time a person is ready to take huge amount of risk with less income in order to finance his daily expenditure. Regression Equation
Risk Adjusted Investment= 378.359+47.324(risk Score)-11.439(Age) -
As here the independent variables are measures in different units. The standardized coefficients or betas are an attempt to make the regression coefficients more comparable. Model 2: Another model was built so as to determine the impact of gender, in spite of no. of dependents on the risk adjusted investment of an individual, as it belongs to the same cluster. When Regression model-2 is run with the help of SPSS 13.0, following results are obtained. Here the Dependent variable is risk adjusted investment and independent variables are age, income, risk score, &gender of the respondent. Here, absolute values of the variables obtained are accounted except for gender of the respondent, which is a dummy variable as has been coded accordingly (described in research design) R R square Durbin Watson 0.838 0.702 1.957
R, the multiple correlation coefficients, is the correlation between the observed and predicted values of the dependent variable. R=.838, it signifies a high correlation between the observed and predicted values of risk adjusted investment (henceforth RAI).
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED R squared is the proportion of variation in the dependent variable explained by the regression model. R square= .702 shows that 70.2% variation in the risk adjusted investment can be attributed to age, income, risk score, & gender whereas 29.1% variations in RAI is not captured by this model and may be attributed to the variable which have not been accounted for in the given model. Small values of the Durbin-Watson statistic indicate the presence of autocorrelation. Consulting significance tables from the table for exact interpretations; we find that a value of 1.957 shows no significant autocorrelation in the model. The ANOVA table teats for the significance of the model on the whole, where: H0: 2=0 Against H1: 20 We have: ANOVA (b) Sum of Squares Model 1 df Mean Square F 39.383 Sig. .000(a)
Regression 18071009.075 4 4517752.269 Residual 7685841.294 67 114714.049 Total 25756850.369 71 a Predictors: (Constant), gender, age, riskscore, absolute_inc b Dependent Variable: riskadjinve
The output for Regression displays information about the variation accounted for by the model. The output for Residual displays information about the variation that is not accounted for by the model. A model with a large regression sum of squares in comparison to the residual sum of squares indicates that the model accounts for most of variation in the dependent variable (RAI), which is the case in the solution obtained, thus can be said that the model obtained account for most of the variation in the dependent variables. The significance value of the F 4,67 statistic is < 0.05 (for we test the null hypothesis at 5% level of significance, we reject the null hypothesis ), which implies that the independent variables have done a decent job in explaining the variation in the dependent variable. Next, we check for collinearity among the independent variables through Variance Inflation Factor to check if our model suffers from multicollinearity. Next we report for the individual significance of the betas of the independent variables, by testing a zero parameter type null hypothesis at 5% level of significance and 71df. We have the following table: Coefficients (B)
Model
Unstandardized Standardized t Coefficients Coefficients B Std Beta Error 1 (Constant) 311.741 225.306 1.384 risk score 48.306 4.514 .791 10.701 absolute_inc .000 .000 .060 .772 Age -11.438 5.272 -.159 -2.170 gender 45.642 84.611 .038 .539 a Dependent Variable: riskadjinve b. Independent variable- risk score, absolute income, age, gender
Sig.
Collinearity Statistics VIF Tolerance
.171 .000 .443 .034 .591
.816 .741 .830 .916
1.226 1.349 1.204 1.092
We observe that VIF <10, there is no perfect collinearity among the independent variables. Also, the risk score and age of the respondent significantly explain the investment pattern of an individual (captured by the RAI), whereas, variables like income of an individual and gender of the respondent doesnt affect his choice of investment instruments. There is a negative relation between age and RAI, and Number of dependent and RAI. Regression Equation Given the two models, we chose the first model with a higher R2 and conclude accordingly. A qualitative analysis for the above conclusion can be put forth in following words: An individual with passing age tends to become risk averse. Income level though expected to affect his investment pattern came out insignificant. When individuals tend to earn more money, they tend to allocate it to avenues that give sure returns and on the other hand, students or newly employed personnel might prefer to invest in riskier investment instruments to make quick money. Number of dependents in ones family doesnt influence his choice of investment instruments till the time a person is ready to take huge amount of risk with less income in order to finance his daily expenditure. Also the results shows as the gender of an individual do not have a significant impact on the risk taking ability. Usually it is said that males are more aggressive then females, however her study disagree to the presumption.
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LIMITATIONS The limitations of the study would be the constraints imposed on data collection. I was restricted only to the city of Jaipur, could e-mail the questionnaire to individuals who were tech savvy, and telephonic survey included individuals who had good comprehensive ability. Also, individuals were reluctant to give the actual income figures and so we had to create an interval scale for the same. When doing analysis on income levels, a mean figure of the upper and lower limits of a class was used as an approximation. I had to search for individuals who could actually understand the intricacy of risk tests, and other technical terms associated with the questionnaire. Thus I was curtailed to a small sample of 72 respondents, which is a big limitation to our study.
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CONCLUSION & RECOMADATIONS From the study I got to know that the investment pattern of an individual is largely influenced by its risk taking ability, as evident from the fact that there is a high correlation between the risk adjusted investment and risk scores (calculated through risk test). It was also evident from the empirical information obtained therein, that there is a negative relationship between the age of an individual and the risk taking ability, i.e. with increasing age of an individual, his risk taking ability decreases. It is also determined that income of an individual does not have a significant impact on a persons investment decision, as the outcome of the study pointed to the fact that both college going student, who do not have any income source except from their parents and investment income, tend to invest in the same kind off investment instruments as a high earning individual. Even the no. of dependents and the percentage of liability to be written of each year do not have much impact on an individuals investment decision. From the above analysis we are now aware of the investment pattern of investors which is highly influenced by his age. This research will help in developing financial products according to the choice and need of investors. This Questionnaire Research gives the investment behavior information of the investors of Jaipur which can help to gain competitive edge over its competitors.
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QUSIONNAIRE This survey is being conducted by student of IBS Hyderabad and is intended to provide an understanding of the rationale behind investment behavior. Your co-operation in completing this study by responding to the following questions would be greatly appreciated. Any information you provide will be kept strictly confidential 1. Name2. Gender (Tick to specify) Male Female 4. Marital Status- (Tick to Specify) Single Married 5. Profession-: Salaried Self Employed (Professionals) Politician 3. Age- .
Self Employed Housewife Others ( Please Specify)
Retired Student
6.
Yearly Income: 0-2,49,9999 7,50,000-9,99,999
2,50,0000-4,99,999 10,00,000-12,49,999
5,00,000-7,49,999 12,50,000-14,99,999
7.
Income/ Fund Source Salary Investment Income
Business Inc Others (Please Specify)
Agriculture
8. No. of Dependents (in family) .
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9. Investment Objective Objective Saving for your own education Saving for your childrens education Providing support for an aging parent/relative Improving insurance coverage
(Yes/no)? Objective Saving for retirement Minimizing income taxes Improving investment returns
(Yes/no)?
10. Different types of Financial Instruments- Say if you are given Rs 10000, how will you allocate the money to different sources of investments? (Disclaimer- If you do not know about any mentioned option, then leave it blank and allocate the money to other sources) Investment Types Rupees Invested Investment Types Rupees Invested 1) Bonds/ Debentures 3) Post Office Savings Scheme 5) Mutual Funds 7) Gold 9) Cash in Hand 11) Real Estate 2) Equity 4) Derivatives Instruments 6) Insurance plans 8) Fixed Deposits 10) Cash at Bank 12) Others (Please Specify)
11. How much percentage of your monthly income goes into clearing of loans? <=25% >25% to 50% >50% to 75% >75% to 100%
12. Your Liabilities effect your investment decision? Strongly Agree Agree Doesnt Matter Disagree
Strongly Disagree
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED Risk Test Please write the concerned option in the space provided below. 1. Your investment loses 15% of its value in a market correction a month after you buy it. Assuming that none of the fundamentals have changed, do you: a. Sit tight and wait for it to journey back up. b. Sell it and rid yourself of further sleepless nights if it continues to decline. c. Buy more if it looked good at the original price it looks even better now. 2. A month after you purchase it, the value of your investment suddenly skyrockets by 40%. Assuming that you cannot find any further information, what do you do? a. Sell it b. Hold it on the expectation of further gain. c. Buy more it will probably go higher. 3. Which would you have rather done: a. Invested in an aggressive growth fund that appreciated very little in the last six months. b. Invested in a money-market fund only to see the aggressive growth fund you were thinking about double in value in 6 months. Would you feel better if: a. You doubled your money in an equity investment. b. Your money-market fund investment saved you from losing half your money in a market slide. Which situation would make you feel happiest? a. You win Rs.100,00 in a publishers contest b. You inherit Rs.100,000 from a rich relative. c. You earn Rs.100,000 by risking Rs.2,000 in the options market d. Any of the above
4.
5.
The apartment building where you live is being converted into flat sytem. You can either buy your unit for Rs.80,000 or sell the option for Rs.20,000. The market value of the condo is Rs.120,000. You know if you buy the flat, it might take 6 months to sell, the monthly carrying cost is Rs.1,200 and youd have to borrow the down payment for the mortgage. You dont want to live in the building. What do you do? a. Take the Rs.20,000 b. Buy the unit and then sell it in the open market
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7. You inherit your uncles Rs.100,000 house, free of any mortgage. Although the house is in a fashionable neighborhood and can be expected to appreciate at a rate faster than inflation, it has deteriorated badly. It would net Rs.1,000 monthly if rented as is, it would net Rs.1,500 if renovated. The renovations could be financed by a mortgage on the property. You would: a. Sell the house b. Rent it as is. c. Make the necessary renovations and then rent it 8. You work for a small, but thriving, privately held electronics company. The company is raising money by selling stock to its employees. Management plans to take the company public, but not for four or more years. If you buy the stock, you will not be allowed to sell until shares are traded publicly. In the meantime, the stock will pay no dividends. But when the company goes public, the shares could trade for 10 to 20 times what you paid for them. How much of an investment would you make? a. None at all b. One months salary. c. Three months salary d. Six months salary. 9. Your longtime friend and neighbor, an experienced geologist, is assembling a group of investors (of which he is one) to fund and exploratory oil well which could pay back 50-100 times its investment if successful. If the well is dry, the entire investment is worthless. Your friend estimates the chance of success at only 20%. What would you invest? a. Nothing at all b. One months salary c. 3 months salary d. 6 months salary 10. You learn that several commercial building developers are seriously looking at underdeveloped land at a certain location. You are offered an option to buy a choice parcel of that land. The cost is about 2 months salary and you calculate the gain to be 10 months salary. a. Purchase the option. b. Let it slide; its not for you. 11. You are on a TV game show and can choose one of the following a. Rs.1,000 in cash b. A 50% chance of winning Rs.4,000 c. A 20% chance of winning Rs.10,000 d. A 5% chance of winning Rs.100,000
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ANALYZING THE FINANCIAL PRODUCTS OF HSBC INVESTDIRECT (INDIA) LIMITED 12. Its 1992, and inflation is returning. Hard assets such as precious metals, collectibles, and real estate are expected to keep pace with inflation. Your assets are all now in long term bonds. a. Hold the bonds b. Sell the bonds, and put half the proceeds into money funds and the other half into hard assets. c. Sell the bonds and put the total proceeds into hard assets. d. Sell the bonds, put all the money into hard assets, and borrow additional money to buy more. 13. Youve lost Rs.500 at a table in Casino. How much you are prepared to lose to win the Rs.500 back. a. Nothing-you quit now b. Rs.100 c. Rs.250 d. Rs.500 e. More than Rs.500
********************Thank you for your cooperation***************
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References:

www.hsbcinvestdirect.com www.hsbc.co.in www.nationwide.com www.businessweek.com www.financialexpress.com www.moneybhai.com www.economywatch.com www.investopedia.com www.nseindia.com www.sebi.com
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