CHAPTER 1

INTRODUCTION

INTRODUCTION TO INVESTMENTS

There are many different definitions of what investment and investing actually means. One
of the simplest ways to describing it is using your money to try and make money. This can
happen in many different ways.
All investors are different. The common factor is that you could like to invest money to aim
to make it grow or to receive income from it. We would like to show you that choosing the
most suitable investment for you does not need to be difficult. All you need is the right help
along the way.
The act committing money or capital to an endeavour with the expectation of obtaining an
additional income or profit is known as investment. Investing means putting your money to
work for you.

Investment has different meanings in finance and economics. Finance investment is putting
money into something with the expectation of gain, that upon through analysis, has a high
degree of security for the principal amount, as well as security return, within an expected
period of time. In contrast putting money into something with an expectation of gain without
thorough analysis, without security of principal, and without security of return is speculation
or gambling. As such, those shareholders who fail to thoroughly analyze their stock
purchases, such as owners of mutual funds, could well be called speculators. Indeed, given
the different market hypothesis, which implies that a thorough analysis of stock data is
irrational, all rational shareholders are, by definition, not investors, but speculators.
Investment is related to saving or deferring consumption. Investment is involved in many
areas of the economy, such as business management and finance whether fir households,
firms, or governments.

To avoid speculation, an investment must be either directly backed by the pledge of sufficient
collateral or insured by sufficient assets pledged by a third party. A thoroughly analyzed loan
of money backed by collateral with greater immediate value than the loan amount may be
considered an investment. A financial instrument that is insured by the pledge of assets from a
third party, such as a deposit in a financial institution insured by a government agency may be
considered an investment. Examples of these agencies include, in the United States, the
Securities Investor Protection Corporation, Federal Deposit Insurance Corporation, or
National Credit Union Administration, or in Canada, the Canada Deposit Insurance
Corporation.
Promoters and news sources reports on speculative financial transactions such as stocks,
mutual funds, oil and gas leases, commodities and futures often inaccurately or misleadingly
describe speculative schemes as investment.

NEED AND INPROTANCE OF STUDY

Essentially, Investment Planning involves identifying your financial goals throughout your
life, and prioritizing them. For example, if you want to invest for funding your vacation next
year, dont choose an investment that has a three-year lock-in. Similarly, if you want to invest
for your daughters marriage after 10 years, dont invest in 1 year bonds for the next 10 years.
Instead, choose an option that matches your investment horizon.
Investing Planning is important because it helps you to derive the maximum benefit from
your investments. Your success as an investor depends upon your ability to choose the right
investment option. This, in turn, depends on your requirements, needs and goals. The choice
of the best investment option for you will depend on your personal circumstances as well as
general market conditions. For example, a good investment for a long-term retirement plans
may not be a good investment for higher education expenses.

SCOPE OF THE STUDY

You can take investment decision only after analyzing entire process of investment
that starts with funds contribution and ends with getting expectations fulfilled.

The investment decision rules allow you to formalize the process and specify what
condition or conditions need to be met to accept the project

You will take decision only after ensuring that the required expectations in terms of
returns are ensured at any cost.

The study is conducted to understand the functioning of Equities in India Equity

market.

The choice of location for the study is based on the responses given by the investors
who are operating the stock market in twin cities.

This study will help in understanding the behaviour and risk preferences of investors.

OBJECTIVE OF THE STUDY

The primary objective of the project is to make an analysis of various investment decisions.
The aim is to compare the returns given by various investment decisions. To cater the
different needs of investors, these options are also compared on the basis of various
parameters like safety, liquidity, risk, entry/exit barriers etc.
The project work was undertaken in order to have a reasonable understanding about the
investment industry. The project work includes knowing about the investment DECISIONS
like equity, bond, gold and mutual fund. All investment DECISIONS are discussed with their
types, workings and returns.

METHODOLOGY
Equities, Bonds, Gold, Mutual Funds and life Insurance were identified as major types of
investment decisions.
The primary data for the project regarding investment and various investment DECISIONS
were collected through interactions had with the employees in the organization i.e. ICICI.
The secondary data for the project regarding investment and various investment DECISIONS
were collected from websites, textbooks and magazines.
Primary method: This method includes the data collected from the personal
interaction with authorized members of ICICI BANK Ltd.
Secondary method: The secondary data collection includes:
o The lecturers delivered by the superintendents of respective departments.
o The brochures and material provided by ICICI BANK Ltd.
o The data collected from the magazines of the NSE, economic times, etc.
o Various books relating to the investments, capital market and other related topics.

The averages of returns over a period of 11 years are considered for the purpose of
comparison of investment options. Then, critical analysis is made on certain parameters like
returns, safety, liquidity, etc. Giving weight-age to the different type of needs of the investors
and then multiplying the same with the values assigned.

LIMITATIONS OF THE STUDY

The study was limited to only five investment options.

Most of the information collected is secondary data.

The data is compared and analyzed on the basis of performance of the investment
options over the past five years.

While considering the returns from mutual funds only top performing schemes were
analyzed.

It was very difficult to obtain the data regarding the returns yielded by others and
hence averages were taken.

CHAPTER II
INDUSTRY PROFILE
&
COMPANY PROFILE

INDUSTRY PROFILE

A bank is a financial institution that accepts deposits and channels those deposits into lending
activities. Banks primarily provide financial services to customers while enriching investors.
Government restrictions on financial activities by banks vary over time and location. Banks
are important players in financial market and offer services such as investment funds and
loans. In some countries such as Germany, banks have historically owned major stakes in
industrial corporations. While in other countries such as the United States, banks are
prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a
cross-share holding entity known as the keiretsu.
The level of government regulation of the banking industry varies widely, with countries such
as Iceland, having relatively light regulation in the banking sector, and countries such as
China, having a wide variety of regulations.
The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy,
which has been operating continuously since 1472.

History
Origin of the word
The name bank derives from the Italian word banco desk/bench, used during the
Renaissance by Jewish Florentine bankers, who used to make their transactions above the
desk covered by a green tablecloth. However, there are traces of banking activity even in
ancient times, which indicates that the word bank might not necessarily come from the word
banco.
In fact, the word traces its origin back to the Ancient Roman Empire, where moneylenders
would set up their stalls in the middle of enclosed courtyards called macella on a long bench
called a bancu, from which the words banco and bank are derived. As a moneychanger, the

merchant at the bancu did not so much invest money as merely convert the foreign currency
into the only legal tender in Rome that of the Imperial Mint.
The earliest evidence of money-changing activity is depicted on a silver drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350 325 BC,
presented in the British Museum in London. The coin shows a bankers table (trapeze) laden
with coins, a pun on the name of the city.
In fact, even today in Modern Greek the word Trapeza means both a table and a bank.

Traditional banking activities

Banks act as payment agents by conducting checking of current accounts for customers,
paying checks drawn by customers on the bank, and collecting cheques deposited to
customers current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS and ATM.
Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by
making advances to customers on current accounts, by making instalment loans, and by
investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable
by most businesses, individuals and governments. Non-banks that provide payment services
such as remittance companies are not normally considered an adequate substitute for having a
bank account.
Banks borrow most funds from households and non-financial businesses, and lend most funds
to households and non-financial businesses, but non-bank provide a significant and in many
cases adequate substitute for bank loans, and money market funds, cash management trusts
and other non-bank financial institutions in many cases provide an adequate substitute to
banks for lending savings to.

Entry regulations
Currently in most jurisdictions commercial banks are regulated by government entities and
require a special bank license to operate.
Usually the definition of the business of banking for the purposes of regulation is extended to
include acceptance of deposits, even if they are not repayable to the customers orderalthough money lending, by itself is generally not included in the definition.
Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central bank also typically has a monopoly
on the business of issuing banknotes. However, in some countries this is not the case. In U.K,
for example, the financial services Authority Licenses banks and some commercial banks
(such as the Bank of Scotland) issue their own banknotes in addition to those issued by the
Bank of England, the U.K governments central bank.

Definition
The definition of a bank varies from country to country.
Under English common law, a banker is defined as a person who carries on the business of
banking, which is specified as:

conducting current accounts for his customers

paying cheques drawn on him, and

collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that codifies the
law in relation to negotiable instruments, including cheques, and this Act contains a statutory
definition of the term banker: banker includes a body of persons, whether incorporated or not,
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who carry on the business of banking. Although this definition seems circular, it is actually
functional, because it ensures that the legal basis for the bank transactions such as cheques do
not depend on how the bank is organised or regulated.
The business of banking is in many English common law countries not defined by statue but
by common law, the definition above. In other English common law jurisdictions there are
statutory definitions of the business of banking or banking business. When looking at these
definitions it is important to keep in mind, that they are defining the business of banking for
the purposes of the legislation and not necessarily in general. In particular, most of the
definitions are from legislation that has the purposes of entry regulating and supervising
banks rather than regulating the actual business of banking. However, in many cases the
statutory definition closely mirrors the common law. Examples of statutory definitions:

banking business means the business of receiving money on current or deposit

account, and collecting cheques drawn by or paid in by customers, the making of
advances to customers, and includes such other business as the Authority may
prescribe for the purposes of this Act.

banking business means the business of either or both of the following:

1. Receiving from the general public money on current, deposit, saving or other similar
account repayable on demand or within less than [3 months] or with a period of call or
notice of less than that period.
2. Paying or collecting cheques drawn by or paid in by customers.

Since the advent of EFTPOS (Electronic Funds Transfer at Point of Sale), direct credit, direct
debit and internet banking, the cheque has lost its primary importance in most banking
systems as a payment instrument. This has led legal theorists to suggest that the cheque based
definition should be broadened to include financial institutions that conduct current accounts
for customers and enable customers to pay and be paid by third parties, even if they do not
pay and collect cheques.
Accounting for bank accounts

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Bank statements are accounting records produced by banks under the various accounting
standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and
credit. Credit accounts are Revenue, Equity and Liabilities. Debit accounts are Assets and
Expenses.
This means you credit a credit account to increase its balance, and you debit a debit account
to decrease its balance.
This is also means you debit your savings account every time you deposit money into it (and
the account is normally in deficit), while you credit your credit card account every time you
spend money from it (and the account is normally in credit).
However, if you read your bank statement, it will say the opposite that you credit your
account when you deposit money, and debit it when you withdraw funds. If you have cash in
your account, you have a positive (or credit) balance; if you are overdrawn, you have a
negative (or deficit) balance.
The reason for this is that the bank, and not you, has produced the bank statement. Your
savings might be your assets, but the banks liability, so they are credit accounts (which
should have a positive balance). Conversely, your loans are your liabilities but the banks
assets, so they are debit accounts (which should also have a positive balance).
Where bank transactions, balances, credits and debits are discussed below, they are done so
from the viewpoint of the account holder which is traditionally what most people are used
to seeing.
Economic functions
1. Issue of money, in the form of banknotes and current accounts subject to cheque or
payment at the customers order. These claims on banks can act as money because
they are negotiable and/or repayable on demand, and hence valued at par. They are
effectively transferable by mere delivery, in the case of banknotes, or by drawing a
cheque that the payee may bank or cash.
2. Netting and settlement of payments banks act as both collection and paying agents
for customers, participating in interbank clearing and settlement systems to collect,
present, be presented with, and pay payment instruments. This enables banks to
economise on reserves held for settlement of payments, since inward and outward
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payments offset each other. It also enables the offsetting of payment flows between
geographical areas, reducing the cost of settlement between them.
3. Credit intermediation banks borrow and lend back-to-back on their own account as
middle men.
4. Credit quality improvement banks lend money to ordinary commercial and personal
borrowers (ordinary credit quality), but also high quality borrowers. The improvement
comes from diversification of the banks assets and capital which provides a buffer to
absorb losses without defaulting on its obligations. However, banknotes and deposits
are generally unsecured; if the bank gets into difficulty and pledges assets as security,
to raise the funding it needs to continue to operate, this puts the note holders and
depositors in an economically subordinated position.
5. Maturity transformation banks borrow more on demand debt and short term debt,
but provide more long term loans. In other words, they borrow short and lend long.
With a stronger credit quality than most other borrowers, bank can do this by
aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions
(e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash,
investing in marketable securities that can be readily converted to cash if needed, and
raising replacement funding as needed from various sources (e.g. wholesale cash
markets and securities markets).
Law of banking
Banking law is based on a contractual analysis of the relationship between the bank (defined
above) and the customer- defined as any entity for which the bank agrees to conduct an
account.
The law implies rights and obligations into its relationship as follows:
1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the customer;
when the account is overdrawn, the customer owes the balance to the bank.
2. The bank agrees to pay the customers cheque up to the amount standing to the credit
of the customers account, plus any agreed overdraft limit.

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3. The bank may not pay from the customers account without a mandate from the
customer, e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customers account
as the customers agent, and to credit the proceeds to the customers account.
5. The bank has a right to combine the customers account, since each account is just an
aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customers account, to the extent that
the customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customers account
unless the customer consents, there is a public duty to disclose, the banks interests
require it, or the law demands it.
8. The bank must not close a customers account without reasonable notice, since
cheques are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular jurisdiction
may also modify the above terms and/or create new rights, obligations or limitations relevant
to the bank-customer relationship.
Some types of financial institution, such as building societies and credit unions, may be partly
or wholly exempt from bank license requirements, and therefore regulated under separate
rules.
The requirements for the issue of a bank license vary between jurisdictions but typically
include:
1. Minimum capital
2. Minimum capital ratio
3. Fit and Proper requirements for the banks controllers, owners, directors, and/or so
senior officers
4. Approval of the banks business plan as being sufficiently prudent and plausible.

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Types of banks
Banks activities can be divided into retail banking dealing directly with individuals and
small business; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; private banking, providing wealth management
services to high net worth individuals and families; and investment banking, relating to
activities on the financial markets. Most banks are profit-making, private enterprises.
However, some are owned by government or are non-profit organizations.
Central banks are normally government-owned and charged with quasi-regulatory
responsibilities, such as supervising commercial banks, or controlling the cash interest rates.
They generally provide liquidity to the banking system and act as the lender of last resort in
event of a crisis.
Types of retail banks

Commercial Banks: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that banks
only engage in banking activities, whereas investment banks were limited to capital
market activities. Since the two banks no longer have to be under same ownership,
some use the term commercial bank to refer to a bank or a division of a bank that
mostly deals with deposits and loans from corporations or large businesses.

Community Banks: locally operated financial institutions that empower employees to

make local decisions to serve their customers and the partners.

Community Development Banks: regulated banks that provide financial services and
credit-served markets or populations.

Postal savings Banks: savings banks associated with national postal systems.

Private Banks: banks that manage the assets of high net worth individuals.

Offshore Banks: banks located in jurisdictions with low taxation and regulation. Many
offshore banks are essentially private banks.

Savings Banks: in Europe, savings banks take their roots in the 19th or sometimes
even 18th Century. Their original objective was to provide easily accessible savings
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products to all strata of the population. In some countries, savings banks were created
on public initiative; in others, socially committed individuals created foundations to
put in place the necessary infrastructure. Nowadays, European savings banks have
kept their focus on retail banking: payments, savings products, credits and insurances
for individuals or small and medium-sized enterprises. Apart from this retail focus,
they also differ from commercial banks by their broadly decentralised network,
providing local and regional outreach and by their socially responsible approach to
business and society.

Building societies and lands Banks: institutions that conduct retail banking.

Ethical Banks: banks that prioritize the transparency of all operations and make only
what they consider to be socially-responsible investments.

Islamic Banks: banks that transact according to Islamic principles.

Types of investment banks

Investment banks underwrite (guarantee the sale of) stock and bond issues, trade for
their own accounts, make markets, and advise corporations on capital market
activities such as mergers and acquisitions.

Merchant banks are traditional banks which are engaged in trade finance. The modern
definition, however, refers to banks which provide capital to firms in the form of
shares rather than loans. Unlike venture capital firms, they tend not to invest in new
companies.

Both combined

Universal banks, more commonly known as financial services companies, engage in

several of these activities. These big banks are very diversified groups that, among
other services, also distribute insurance hence the term bancassurance, a
portmanteau word combining banque or bank and assurance, signifying that both
banking and insurance are provided by the same corporate entity.

Other types of banks

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Islamic banks adhere to the concepts of Islamic law. This form of banking revolves
around several well-established principles based on Islamic canons. All banking
activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank
earns profit (markup) and fees on the financing facilities that it extended to customers.

COMPANY PROFILE
ICICI

Bank is

an

Indian

multinational banking and financial

services company

headquartered in Vadodara, Gujarat, India. As of 2014 it is the second largest bank in

India in terms of assets and market capitalization.
It offers a wide range of banking products and financial services for corporate and retail
customers through a variety of delivery channels and specialized subsidiaries in the areas
of investment banking, life, non-life insurance, venture capital and asset management.
The bank currently subsidiaries in the United Kingdom, Russia and Canada, branches in
United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International
Finance Centre and representative offices in United Arab Emirates, China, South Africa,
Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established
branches in Belgium and Germany.
ICICI Banks equity shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depository Receipts (ADRs)
are listed on the New York Stock Exchange (NYSE).
Corporate Profile
ICICI Bank is Indias second-largest bank with total assets of Rs. 5,946.42 billion (US$
99 billion) at March 31, 2014 and profit after tax Rs. 98.14 billion (US$ 1,637 million)
for the year ended March 31, 2014. The bank has a network of 4,050 branches and 12,517
ATMs in India, and has a presence in 19 countries, including India.
Board Members
Mr. K. V. Kamath, Chairman
Mr. Sridar Iyengar
17

Mr. Homi R. Khusrokhan

Mr. Lakshmi N. Mittal
Mr. Narendra Murkumbi
Dr. Anup K. Pujari
Mr. Anupam Puri
Mr. M.S. Ramachandran
Mr. M.K. Sharma
Mr. V. Sridar
Prof. Marti G. Subrahmanyam
Mr. V. Prem Watsa
Ms. Chanda D. Kochhar, Managing Director & CEO
Mr. Sandeep Bakhshi, Deputy Managing Director
Mr. N.S. Kannan, Executive Director & CFO

Awards

ICICI Bank has been adjudged the Best Retail Bank in India by The Asian Banker.
It has also emerged winners in the categories of Best Internet Banking Initiative and
Best Customer Risk Management Initiative awards given by The Asian Banker.

ICICI Bank was awarded the Certificate of Recognition as one of the Top 5
Companies in Corporate Governance in the 14th ICSI (The Institute of Company
Secretaries

of

India)

National

Awards

for

Corporate

Governance.

ICICI Bank won the award for the Best Bank - Global Business Development (Private
Sector) in the Dun & Bradstreet - Polaris Financial Technology Banking Awards
2014.

ICICI Bank has won The Corporate Treasurer Awards 2013 in the categories of 'Best
Cash Management Bank in India' & 'Best Trade Finance Bank in India'.

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IDRBT (Institute for Development and Research in Banking Technology) has given
awards to ICICI Bank in the categories of Social Media and Mobile Banking and
Business Intelligence Initiatives.

ICICI Bank ranks 10th in Fortune India's list of 50 most admired companies in India.

ICICI Bank was awarded a "Special IT Innovation Award" by Lenovo - NASSCOM

and CNBC-TV18.

ICICI Bank received the "Gram Samvad" service for Low cost/Small budget
marketing initiative Award by Rural Marketing Association of India (RMAI).

ICICI Bank Canada received the prestigious Canadian Helen Keller Award at the
Canadian Helen Keller Centres fifth Annual Luncheon in Toronto. The award was
given to ICICI Bank for its long-standing support towards unique centre for people
who are deaf-blind.

ICICI Bank has been honoured as The Best Service Provider - Risk Management,
India at The Asset Triple A Transaction Banking, Treasury, Trade and Risk
Management Awards 2014.

ICICI Foundation for Inclusive Growth (ICICI Foundation) was founded by the ICICI Group
in early 2008 to give focus to its efforts to promote inclusive growth amongst low-income
Indian households.
We believe our fundamental challenge is to create just society one where everyone has
equal opportunity to develop and grow. Towards this end, ICICI Foundation is committed to
making Indias economic growth more inclusive, allowing every individual to participate in
and benefit from the growth process.

19

We hold a set of core beliefs and value that defines our pathway towards inclusive growth
and guides our five strategic partnerships.

Vision
Our vision is a world free of poverty in which every individual has the freedom and power to
create and sustain a just society in which to live.
Mission
Our mission is to create and support strong independent organizations which work towards
empowering the poor to participate in and benefit from the Indian growth process.
As a key partner in Indias economic growth for more than five decades, the ICICI Group
endeavours to promote growth in all sectors of the nations economy. To give focus to its
efforts, to promote inclusive growth amongst low-income Indian households, the ICICI
Group founded ICICI Foundation for inclusive Growth in January 2008.
The foundation of ICICI Groups approach towards human and social development was
established with the Social Initiative Group (SIG), a non-profit resource group within ICICI
Bank, in 2000.

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