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Investment Alternatives: Investment Is Putting Money Into Something With The Expectation of Profit. More

The document discusses investment alternatives in India. It outlines 10 main investment options: 1) bank fixed deposits, 2) insurance policies, 3) national savings certificates, 4) public provident fund, 5) stock market, 6) mutual funds, 7) gold deposit schemes, 8) real estate, 9) equity, and 10) non-resident ordinary funds. Each investment option is described in 1-2 sentences regarding how it works and expected returns. The document also reviews past literature on capital market development and the relationship between stock markets, financial intermediaries, and economic growth. Finally, it outlines the objectives of the study as identifying investment behavior and motives of rural and urban investors and their preferences and involvement in the stock market

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Pankaj Nehra
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64 views

Investment Alternatives: Investment Is Putting Money Into Something With The Expectation of Profit. More

The document discusses investment alternatives in India. It outlines 10 main investment options: 1) bank fixed deposits, 2) insurance policies, 3) national savings certificates, 4) public provident fund, 5) stock market, 6) mutual funds, 7) gold deposit schemes, 8) real estate, 9) equity, and 10) non-resident ordinary funds. Each investment option is described in 1-2 sentences regarding how it works and expected returns. The document also reviews past literature on capital market development and the relationship between stock markets, financial intermediaries, and economic growth. Finally, it outlines the objectives of the study as identifying investment behavior and motives of rural and urban investors and their preferences and involvement in the stock market

Uploaded by

Pankaj Nehra
Copyright
© Attribution Non-Commercial (BY-NC)
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Download as DOC, PDF, TXT or read online on Scribd
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INTRODUCTION

Investment is putting money into something with the expectation of profit. More
specifically, investment is the commitment of money or capital to the purchase of
financial instruments or other assets so as to gain profitable returns in the form of interest,
income (dividends), or appreciation (capital gains) of the value of the instrument.

Saving and Investment are the key functions which affect the pace of growth of
economy. The investment function depends upon the Income level, Saving rate,
Awareness about the investment options and the risk taking ability of the investors.

There has been a continuous change in the economic and business environment, leading
to the emergence of new opportunities to the new entrants and to those already in the
field. Investors give different preferences to identical investment alternatives and under
the similar situation.

INVESTMENT ALTERNATIVES

1. Investments in Bank Fixed Deposits (FD)


Fixed Deposit or FD is accrues 8.5% of yearly profits, depending on the bank's
tenure and guidelines, which makes it's widely sought after and safe investment
alternative. The minimum tenure of FD is 15 days and maximum tenure is 5 years
and above. Senior citizens are entitled for exclusive rate of interest on Fixed
Deposits.

2. Investments in Insurance policies


Insurance features among the best investment alternative as it offers services to
indemnify your life, assets and money besides providing satisfactory and risk free
profits. Indian Insurance Market offers various investment options with
reasonably priced premium. Some of the popular Insurance policies in India are
Home Insurance policies, Life Insurance policies, Health Insurance policies and
Car Insurance policies.

Some top Insurance firm in India under whom you can buy insurance scheme are
LIC, SBI Life, ICICI Prudential, Bajaj Allianz, Birla Sunlife, HDFC Standard
Life, Reliance Life, Max NewYork Life, Metlife, Tata AIG, Kotak Mahindra
Life, ING Life Insurance, etc.
3. Investments in National Saving Certificate (NSC)
National Saving Certificate (NSC) is subsidized and supported by government of
India as is a secure investment technique with a lock in tenure of 6 years. There is
no utmost limit in this investment option while the highest amount is estimated as
Rs 100. The investor is entitled for the calculated interest of 8% which is forfeited
two times in a year. National Saving Certificate falls under Section 80C of IT Act
and the profit accrued by the investor stands valid for tax deduction up to Rs 1,
00,000.

4. Investments in Public Provident Fund (PPF)


Like NSC, Public Provident Fund (PPF) is also supported by the Indian
government. An investment of minimum Rs 500 and maximum Rs 70, 000 is
required to be deposited in a fiscal year. The prospective investor can create it
PPF account in a GPO or head post office or in any sub-divisions of the
centralized bank.

PPF also falls under Section 80C of IT Act so investors could gain income tax
deduction of up to Rs 1, 00,000. The rate of interest of PPF is evaluated yearly
with a lock in tenure of maximum 15 years. The basic rate of interest in PPF is
8%.

5. Investments in Stock Market


Investing in share market yields higher profits. Influenced by unanticipated turn
of market events, stock market to some extent cannot be considered as the safest
investment options. However, to accrue higher gains, an investor must update
himself on the recent stock market news and events.

6. Investments in Mutual Funds


Mutual Fund firms accumulate cash from willing investors and invest it in share
market. Like stock market, mutual fund investment are also entitled for various
market risks but with a fair share of profits.

7. Investments in Gold Deposit Scheme


Controlled by SBI, Gold Deposit Scheme was instigated in the year 1999.
Investments in this scheme are open for trusts, firms and HUFs with no specific
upper limit. The investor can deposit invest minimum of 200 gm in exchange for
gold bonds holding a tariff free rate of interest of 3% - 4% on the basis of the
period of the bond varying with a lock in period of 3 to 7 years.

Moreover, Gold bonds are not entitled of capital gains tax and wealth tariff. The
sum insured can be accrued back in cash or gold, as per the investor's preference.

8. Investments in Real Estate


Indian real estate industry has huge prospects in sectors like commercial, housing,
hospitality, retail, manufacturing, healthcare etc. Calculated realty demand for
IT/ITES industry in 2010 is estimated at 150mn sq.ft. around the chief Indian
cities. Termed as the "money making industry", realty sector of India promises
annual profits of 30% to 100% through real estate investments.

9. Investments in Equity
Private Equity is expanding at a fast pace. India acquired US $13.5 billion in 2008
under equity shares and featured among the top 7 nations in the world. In 2010,
the total equity investment is predicted to increase upto USD 20 billion. Indian
equities promise satisfactory returns and have more than 365 equity investments
firms functioning under it.

10. Investments in Non Resident Ordinary (NRO) funds


Investing in domestic (NRO) is one of the best investment alternatives for NRIs
who wish to deposit their income accrued abroad and maintain it in Indian rupees.
The deposited amount along with the interest is completely repatriable.
Investment can be done in Indian financial institutions including the Non Banking
Finance Companies which are listed with RBI. The interest returns accrued on in
this account is entitled under IT Act and is subject to 30% tax reduction at source
including the appropriate surcharge and education cess. The NRI investor can
repatriate upto USD 1 million every year, for genuine reasons, by forfeiting valid
tariffs.
REVIW OF EXISTING LITERATURE
The review of previous studies provides an insight into the research dimensions.
The comprehensive analysis and understanding of the financial system, and its
component parts, has focused on the globalization of financial institutions and
capital markets.

The development of new theories, ideas, concepts and approaches in the


contemporary world of financial market has made it a necessity for stakeholders,
investors , and policy makers to cope with the emerging situation for which a
continuous assessment of existing performance and a careful prediction of future
scenario of the market is must.

The study of Agarwal (1996) on “ CAPITAL MARKET DEVELOPMENT,


CORPORATE FINANCING PATTERN And Economic Growth in India”, sought
to investigate the relationships between stock markets and financial intermediaries.
The study also sought to ascertain the relationship between the stock market
development and the economic growth.
OBJECTIVES OF THE STUDY
The basic objective is to identify the investment behaviour of rural and urban
investors.

1. To identify the motives of buying or selling particular financial assets by the


investors.
2. To ascertain the preference of investors toward different securities available
in the market.
3. to ascertain the size of investment and nature of investors involved in the
stock market activities.

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