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Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago. The earliest records of security dealings in India are meager and obscure.
The East India Company was the dominant institution in those days and business in its
loan securities used to be transacted towards the close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took
place in Bombay. Though the trading list was broader in 1839, there were only half a
dozen brokers recognized by banks and merchants during 1840 and 1850.
In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers
increased to about 200 to 250. However, at the end of the American Civil War, in 1865,
a disastrous slump began (for example, Bank of Bombay Share which had touched Rs
2850 could only be sold at Rs. 87).
At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,
found a place in a street (now appropriately called as Dalal Street) where they would
conveniently assemble and transact business. In 1887, they formally established in
Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively
known as "The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in
the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay
was consolidated.
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Sr. As on 31st
1946 1961 1971 1975 1980 1985 1991 1995
No. December
No. of
1 Stock 7 7 8 8 9 14 20 22
Exchanges
No. of
2 1125 1203 1599 1552 2265 4344 6229 8593
Listed Cos.
No. of Stock
3 Issues of 1506 2111 2838 3230 3697 6174 8967 11784
Listed Cos.
Capital of
Listed
4 270 753 1812 2614 3973 9723 32041 59583
Cos. (Cr.
Rs.)
Market value
of
Capital of
5 971 1292 2675 3273 6750 25302 110279 478121
Listed
Cos. (Cr.
Rs.)
Capital per
Listed Cos.
6 24 63 113 168 175 224 514 693
(4/2)
(Lakh Rs.)
Market Value
of
Capital per
7 Listed 86 107 167 211 298 582 1770 5564
Cos. (Lakh
Rs.)
(5/2)
Appreciated
value
of Capital
8 358 170 148 126 170 260 344 803
per
Listed Cos.
(Lakh Rs.)
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The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Limited
(NSE) are the two primary exchanges in India. In addition, there are 24 Regional Stock
Exchanges. However, the BSE and NSE have established themselves as the two
leading exchanges and account for about 80% of the equity volume traded in India. The
NSE and BSE are equal in size in terms of daily traded volume. The average daily
turnover at the exchanges has increased from Rs851crore in 1997-98 to Rs1284crore in
1998-99 and further to Rs2273crore in 1999-2000. NSE has around 1500 shares listed
with the total market capitalization of around Rs9, 21,500crore.
The BSE has over 6000 stocks listed and has a market capitalization of around Rs9,
68,000crore. Most key stocks are traded on both the exchanges and hence the investor
could buy on either of the exchanges. Both exchanges have a different settlement cycle,
which allows investors to shift their position on the bourses. The primary index of BSE in
BSE Sensex comprises 30 stocks. NSE has the S&P NSE 50 Index (Nifty), which
consists of fifty stocks. The BSE Sensex is the older and most widely followed index.
Both these indices are calculated on the basis of market capitalization and contain the
heavily traded shares from key sectors.
The markets are closed on Saturdays and Sundays. Both the exchanges have switched
over from the open outcry trading system to a fully automated computerized mode of
trading known as BOLT (BSE On Line Trading) and NEAT (National Exchange
Automated Trading) system. It facilitates more efficient processing, automatic order
matching, faster execution of trades and transparency.
The scrip traded on the BSE has been classified into µA¶, µB1¶, µB2¶, µC¶, µF¶, and µZ¶
groups. The µA¶ group shares represent those, which are in the carry forward system
(Badla). The µF¶ group represents the dept market (fixed income securities) segment.
The µZ¶ group scrip is the blacklisted companies. The µC¶ group covers the odd lot
securities in µA¶, µB1¶, & µB2¶ groups and Rights renunciations. The key regulator
governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual
Funds, FIIs and other participants in Indian secondary and primary market is the
Securities and Exchange Board of India (SEBI) Limited.
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FII 1319
Custodians 15
Depositories 2
Bankers to an Issue 50
Underwriters 35
Mutual Funds 40
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Industry Insight
O Majority of the broking firms entered the business post 1990. A majority of
members have memberships in more than one stock exchange and across
equities, equity derivatives and commodities futures in domestic and International
stock exchange.
O On the back of growing equity culture broking activity is spreading in Tier II and
Tier III cities in India.
O Deepening financial system and economic growth has provided growth and
expansion opportunities to broking firms. Access to public equity markets and
growing international investor¶s interest has enabled them to raise resources.
O Although there are more than 9000 brokers registered with SEBI 80% of the
turnover in NSE and BSE is accounted by about 100 brokers.
One of the oldest trading industries that have been around even before the
establishment of BSE is the Indian Broking Industry. Post liberalization there have been
number of changes, despite this the stock broking industry was at its pace and retained
its sustainable growth.
To study the trend in the stock broking industry, if we take the database of over 394
broking firms. All the data for the study was collected through responses received
directly from the broking firms. The insights have been arrived at through an analysis on
various parameters, pertinent to the equity broking industry, such as region, terminal,
market, branches, sub brokers, products and growth areas.
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Some key characteristics of the sample 394 firms are:
O On the basis of geographical concentration, the West region has the maximum
representation of 52%. Around 24% firms are located in the North, 13% in the
South and 10% in the East
O 3% firms started broking operations before 1950, 65% between 1950-1995 and
32% post 1995
O On the basis of terminals, 40% are located at Mumbai, 12% in Delhi, 8% in
Ahmedabad, 7% in Kolkata, 4% in Chennai and 29% are from other cities
O In the cash market, around 34% firms trade at NSE, 14% at BSE and 52% trade
at both exchanges. In the derivative segment, 48% trade at NSE, 7% at BSE and
45% at both, whereas in the debt market, 31% trade at NSE, 26% at BSE and
43% at both exchanges
O Majority of branches are located in the North, i.e. around 40%. West has 31%,
24% are located in South and 5% in East
O In terms of sub-brokers, around 55% are located in the South, 29% in West, 11%
in North and 4% in East
O In terms of various areas of growth, 84% firms have expressed interest in
expanding their institutional clients, 66% firms intend to increase FII clients and
43% are interested in setting up JV in India and abroad
O In terms of IT penetration, 62% firms have provided their website and around 94%
firms have email facility
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The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai;
popularly called The Bombay Stock Exchange, or BSE) is located at Dalal Street,
Mumbai. Established in 1875, it is the oldest stock exchange in Asia. There are around
3,500 Indian companies listed with the stock exchange, and has a significant trading
volume. As of July 2005, the market capitalization of the BSE was about Rs. 20 trillion
(US $ 466 billion). The BSE SENSEX (Sensitive index), also called the BSE 30, is a
widely used market index in India and Asia. As of 2005, it is among the 5 biggest stock
exchanges in the world in terms of transactions volume. Along with the NSE, the
companies listed on the BSE have a combined market capitalization of US$ 125.5
billions.
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The National Stock Exchange (NSE), located in Bombay, is India's first debt market. It
was set up in 1993 to encourage stock exchange reform through system modernization
and competition. It opened for trading in mid-1994. It was recently accorded recognition
as a stock exchange by the Department of Company Affairs. The instruments traded
are, treasury bills, government security and bonds issued by public sector companies.
The Organization: The National Stock Exchange of India Limited has genesis in the
report of the High Powered Study Group on Establishment of New Stock Exchanges,
which recommended promotion of a National Stock Exchange by financial institutions
(FIs) to provide access to investors from all across the country on an equal footing.
Based on the recommendations, NSE was promoted by leading Financial Institutions at
the behest of the Government of India and was incorporated in November 1992 as a
tax-paying company unlike other stock exchanges in the country.
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On its recognition as a stock exchange under the Securities Contracts (Regulation) Act,
1956 The Capital Market (Equities) segment commenced operations in November 1994
and operations in Derivatives segment commenced in June 2000.
When India¶s National Stock Exchange (NSE) was started in 1994, few believed it would
survive. How could a stock exchange run by a team of untested professionals headed
by a former development banker succeed against existing stock exchanges run by third
generation, savvy stockbrokers?
Critics even went to the extent of warning that NSE¶s sophisticated systems would be a
misfit in an Indian capital market dominated by physical deliveries, arbitrary speculative
trade, and lengthy trade settlements.
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Today, with number of trades touching 2.5 million a day and turnover touching turnover
touching Rs 100 billion in value terms, NSE towers over all the other stock exchanges in
the country.
In a ten-year period (NSE completed a decade on June 30, 2004) the National Stock
Exchange has tilted the market system in favor of investors and away from a significant
bias in favor of intermediaries. For a mass of investors across the country, the NSE is
now the focal point for trading in stocks, and futures and options.
The Stock Exchange, (NSE) came out with a stock index that subsequently became
another barometer of the Indian stock market known as NIFTY.
Nifty been the focal point of investors, as it provides trading the shares as well as index
in futures and options. Before Nifty came into existence trading of index concept was
not present it was introduced by Nifty and is present in it only, till date.
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SENSEX is not only scientifically designed but also based on globally accepted
construction and review methodology. First compiled in 1986, SENSEX is a basket of
30 constituent stocks representing a sample of large, liquid and representative
companies. The base year of SENSEX is 1978-79 and the base value is 100. The index
is widely reported in both domestic and international markets through print as well as
electronic media.
The growth of equity markets in India has been phenomenal in the decade gone by.
Right from early nineties the stock market witnessed heightened activity in terms of
various bull and bear runs. The SENSEX captured all these events in the most judicial
manner. One can identify the booms and busts of the Indian stock market through
SENSEX.
Corporate 1203
Firms 835
Individuals 9526
Total 11564
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Depository System: -
Before the NSE was setup, securities (Shares) were in physical form. The transfer was
by physical movement of papers. There had to be a physical delivery of securities a
process fraught with delays and resultant risk. The second aspect of the settlement
relates to transfer of shares in favor of the purchaser by the company. The system of
transfer of ownership was grossly inefficient as every transfer involves physical
movement of paper securities to the issuer for registration, with the change of
ownership being evidenced by an endorsement on the security certificate in many cases
the process of transfer would much longer than the two months stipulated in the
Company Act, and a significance proportion of transaction would end up as bad delivery
due to faulty compliance of paper work, Theft, forgery, mutilation of certificates of a
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security. All this added to cost and delays in settlement, restricted liquidity and made
investors grievance redresser time consuming and, at time, intractable.
To obviate these problems, the Depositories Act, 1996 was passed. It provide for the
establishment of depositories in securities with the objective of ensuring free
transferability of securities with speed, accuracy and security. It does so by
1. Making securities of public limited companies freely transferable, subject to
certain exception.
2. Dematerializing the securities in the depository mode.
3. Providing for maintenance of ownership records in a book entry form.
Two depositories, viz., NSDL and CDSL, have come up to provide instantaneous
electronic transfer of securities.
The NSE introduce screen based trading system (SBTS) where a member can punch in
to the computer the quantities of shares and the prices at which he wants to transact.
The transaction execute as soon as quote punched by a trading member finds a
matching sale or buys quote from counter party. SBTS electronically matches the buyer
and seller in an order driven system or finds the customer the best price available in a
quote driven system, and hence cuts down on time , cost and risk of errors as well as
on the chances of fraud.
Bombay Stock Exchange Limited (BSE) promoted CDSL jointly with leading banks as
State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered
Bank, and Union Bank of India and Centurion Bank CDSL was set up with the objective
of providing convenient, dependable and secure depository services at affordable cost
to all market participants.
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NSDL, the first depository in India, established in August 1996 and promoted by
institutions of national stature responsible for economic development of the country has
since established a national infrastructure of international standard that handles most of
the settlement of securities in dematerialized form in Indian capital market.
With SEBI making trading mandatory or more than 700 scrip¶s, it is imperative that all
investors have a Demat account with a Depository Participant. This is because most
trades get settled electronically at the stock exchange. When you place a buy order, a
settler can deliver the Demat securities, which can only be credited to Demat account.
Trade Transaction: -
An Investor can get in two types of trade transaction i.e.
1. Intraday Trade
2. Delivery Trade
Intraday trade: - In this type of trading an investor can buy any share during the trading
session but he has to sell this share before 3 P.M. otherwise the software of India bulls
will sell it automatically.
Delivery Trade: - In delivery Trade Investor buy any share during the trading session
but he is no more bound sell it on same day. It is basically for investment purpose he
can sell his share whenever he wants.
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The stock market is one of the most important sources for companies to raise money.
This allows businesses to go public, or raise additional capital for expansion. The
liquidity that an exchange provides affords investors the ability to quickly and easily sell
securities. This is an attractive feature of investing in stocks, compared to other less
liquid investments such as real estate.
The term 'the stock market' is a concept for the mechanism that enables the trading of
company stocks (collective shares), other securities, and derivatives. Bonds are still
traditionally traded in an informal, over-the-counter market known as the bond market.
Commodities are traded in commodities markets, and derivatives are traded in a variety
of markets (but, like bonds, mostly 'over-the-counter').
The size of the worldwide 'bond market' is estimated at $45 trillion. The size of the 'stock
market' is estimated as about half that. The world derivatives market has been
estimated at about $300 trillion. The major U.S. Banks alone are said to account for
about $100 trillion. It must be noted though that the derivatives market, because it is
stated in terms of notional outstanding amounts, cannot be directly compared to a stock
or fixed income market, which refers to actual value.
The stocks are listed and traded on stock exchanges which are entities (a corporation or
mutual organization) specialized in the business of bringing buyers and sellers of stocks
and securities together. The stock market in the United States includes the trading of all
securities listed on the NYSE, the NASDAQ, the Amex, as well as on the many regional
exchanges, the OTCBB, and Pink Sheets European examples of stock.
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There is a new sense of confidence among the domestic brokers as the broking industry
is passing through the most exciting times. Those who have survived the earlier bear
phase have made their fortunes as the overall revenues have gone up multifold. Hence,
some of the leading domestic brokers are attracting talents even from the foreign
broking houses as domestic houses are now able to afford the same salary levels and
lure people by offering employee stock ownership plans (Esops).
Even the smaller brokers have changed their way of marketing and advertising that was
never the case earlier. Everyone is focusing on value-added services. Dynamics of
domestic stock broking industry is changing and the best is yet to come!
In coming days, shortage of skilled talent and proper infrastructure will be one of the
major challenges. Going forward, technology will play a key role and the domestic
broking houses have to upgrade it. Depth of multiple products is also a challenge for the
domestic houses.
Also on the regulatory front, domestic institutional investors can not give more than five
per cent business to any single broker. However, FIIs have no such restrictions resulting
in restriction of revenues. As the dynamics of the mutual fund (MF) industry has
changed in India, the current restriction also needs to be reconsidered.
How this direct market access (DMA) facility is will impact smaller brokers?
DMA is mainly for the investors who have large programme trades or arbitrage
business. This move will surely make the proprietary trading/arbitrage type businesses
more competitive and less attractive.
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Will falling volumes in last few months affect the business of small brokers?
Brokers were painful for the last three months due to falling volumes, so their business
will be affected. But for the last two years, most of them have made good money.
Hence, there is headroom for survival. There is also a possibility of consolidation among
the retail brokerages.
Some more regulatory measures are expected, like 100 per cent payment along
with application for IPO. Will it affect IPO market?
Such measures are better for the system. What will happen is that genuine buyers will
apply and the ratio of oversubscription will come down resulting in better allocations to
the long-term investors. Hence, such move is needed for the long-term sustainability of
the IPO market. Good issues at an attractive price will in any case not find any difficulty
to raise funds in the new system too.
Though there is good liquidity globally, markets will be range-bound till monsoon and
based on that the markets will take further direction. Inflation, oil price and elections are
the major challenges for markets to have a strong sustainable rally.
Global issues have not settled down completely, hence, the volatility will continue. One
has to remain cautious. In terms of volumes, this year will not be in any case like last
year, there fore; the return expectations have to be toned down. In such uncertain
environment, the theme for investors is hard assets. Oil and gas, mining, manufacturing
and engineering are some of the sectors that are expected to outperform. One will see
stronger interest when power and real estate corrects as they are good long-term bets.
But they are currently very expensive.
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CHAPTER II
PROFILE OF THE OR ANISATION
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Religare Enterprises ltd (REL), incorporated in 1984 and promoted by RANBAXY (now
by Mr.Malvinder Singh and Mr. Shivinder Singh), is the holding company of 11
subsidiaries. It is among the leading integrated financial services group in the country
today. Religare is a diversified financial services group of India offering a multitude of
investment options. Each of its subsidiaries is engaged in a wide spectrum of financial
products and services targeted at retail, high-net worth individuals, corporate and
institutional clients.
The services offered by the group include Share Broking, Financing loans against
shares, IPO financing, distribution of Mutual funds, Insurance Broking, Commodity
broking, Wealth Management, Advisory Services, Private Equity, merchant banking and
trading in arts and art crafts. The major revenue drivers for the company are its retail
equity broking arm Religare Securities and Religare Finevest, which finances loans
against shares.
Religare has been constantly innovating in terms of product and services and to offer
such incisive services to specific user segments it has also started the NRI, FII, HNI and
Corporate Servicing groups. These groups take all the portfolio investment decisions
depending upon a client¶s risk / return parameter.
Religare has a very credible Research and Analysis division, which not only caters to
the need of our Institutional clientele, but also gives their valuable inputs to investment
dealers.
RSL is a member of the National Stock Exchange of India, Bombay Stock Exchange of
India, Depository Participant with National Securities Depository Limited and Central
Depository Services (I) Limited, and is a SEBI approved Portfolio Manager.
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Name
Religare is a Latin word that translates as 'to bind together'. This name has been
Chosen to reflect the integrated nature of the financial services the company offers. The
name is intended to unite and bring together the phenomenon of money and wealth to
coexist and serve the interest of individuals and institutions, alike.
Symbol
The Religare name is paired with the symbol of a four-leaf clover. The four-leaf
Clover is used to define the rare quality of good fortune that is the aim of every financial
plan. It has traditionally been considered good fortune to find a single four leaf clover
considering that statistically one may need to search through over 10,000 three-leaf
clovers to even find one four leaf clover.
Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.
The first leaf of the clover represents H ope. The aspirations to succeed. The
dream of becoming. Of new possibilities. It is the beginning of every step and the
foundations on which a person reaches for the stars.
The second leaf of the clover represents T rust. The ability to place one¶s own
faith in another. To have a relationship as partners in a team. To accomplish a given
goal with the balance that brings satisfaction to all not in the binding but in the bond
that is built.
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The third leaf of the clover represents C are. The secret ingredient that is the
triumph of diligence in every aspect. From it springs true warmth of service and the
ability to adapt to evolving environments with consideration to all.
The fourth and final leaf of the clover represents ood F ortune. Signifying that
rare ability to meld opportunity and planning with circumstance to generate those often
looked for remunerative moments of success.
H opes, T rust, C are, ood fortune. All elements perfectly combine in the
emblematic and rare, four-leaf clover to visually symbolize the values that bind together
and form the core of the Religare vision.
Company¶s Vision ±
³To build Religare as a globally trusted brand in the financial services domain and
present it as the µInvestment Gateway of India´.
Company¶s Mission ±
³Providing complete financial care driven by the core values of diligence and
transparency´.
Brand Essence ±
³Core brand essence is Diligence and Religare is driven by ethical and dynamic
processes for wealth creation´.
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RELI ARE ROUP:
RELIGARE in recent years has expanded its reach in health care and financial services
wherein it has multiple specialty hospital and labs which provide health care services
and multiple financial services such as secondary market equity services, portfolio
management services, depository services etc.
RSL provides platform to all segments of the investor to leverage the immense
opportunity offered by equity investing in India either on their own or through managed
funds in Portfolio Management.
The ARN No. of the Religare Securities Ltd. is 33764. The ARN No. is required
by to be available with the broker who deals on behalf of investors or sell the mutual
funds of the different companies present in the market.
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(Graph 4)
Religare (³company´) is an integrated financial services institution offering a wide
range of financial products and services to retail investors, high net worth
individuals and corporate and institutional clients including equity and commodity
broking, online trading, wealth advisory services, investment banking and
insurance broking.
Religare has grown rapidly from what was largely an equity trading company into
a diversified financial services company operating through its 11 subsidiaries.
As on June 30, 2008, Religare has operations at 1,575 locations across 465
cities and towns and a large management team leading group of over 9,500
employees
Recently acquired Hichens, Harrison & Co. (³Hichens´), one of the oldest broking
firm in London, for a sum of GBP 55.5 million.
SERVICES :-
Equity
Arts Commodit
Initiative y
Investment Mutual
Banking REL Fund
Wealth
Advisory Insurance
Services
Personal
Credit
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Organization Structure:
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Competititors of Religare:-
There are several financial security companies playing their roles in Indian equity
market. But Religare faces competitions from these few companies.
M ICICI Direct
M Kotak Securities
M India Bulls
M HDFC Securities
M 5paisa.com
M Motilal Oswal
M IL&FS
M Karvy
Religare Finvest
RFL is also planning to initiate personal loan portfolio as fund based activity and mutual
fund distribution as fee based activities Along with this, the company also undertakes
non-fund based advisory operations in the field of Corporate Financing in the nature of
Credit Syndication which includes bills discounting, intercorporate deposit, working
capital loan syndication, placement of private equity and other structured products
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Religare has been taking care of financial services for long but there was a missing link.
Financial planning is incomplete without protective measure i.e. structured products to
take care of event of things that may go wrong consequently; Religare is soon coming
up with Religare Insurance Advisory Services Limited.
As composite insurance broker, we would deal in both insurance and reinsurance,
providing our clients risk transfer solutions on life and non-life sides.
This service will take benefit of Religare¶s vast business empire spread throughout the
country -- providing our valued clients insurance services across India. We aim to have
a wide reach with our services ± literally! That¶s why we are catering the insurance
requirements of both retail and corporate segments with products of all the insurance
companies on life and non-life side Still, there is more in store. We also cater individuals
with a complete suite of insurance solutions, both life and general to mitigate risks to life
and assets through our existing network of over 150 branches ± expected to reach 250
by the end of this year! For corporate clients, we will be offering value based
customized solutions to cover all risks which their business is exposed to. Our clients
will be supported by an operations team equipped with the best of technology support.
Religare Insurance Advisory aims to provide neutral, transparent and professional risk
transfer advice to become the first choice of India
Equity Trading
Trading in Equities with Religare truly empowers you for your investment needs. We
ensure you have superlative trading experience through ±
Further, Religare also has one the largest retail networks, with its presence in more than
1800Ú locations across more than 490Ú cities and towns. This means, you can walk into
any of these branches and connect to our highly skilled and dedicated relationship
managers to get the best services.
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Religare Enterprise Limited, through its subsidiaries, offers a range of integrated
financial products and services to retail inventors, high net worth individuals, and
corporate and institutional clients in India. It operates in three divisions: Retail
Spectrum, Wealth Spectrum, and Institutional Spectrum. The Retail Spectrum division
offers equity brokerage, commodities brokerage, personal financial services, including
insurance brokerage and mutual fund distribution; internet trading; loans against shares;
and personal loans. The Wealth Spectrum division provides portfolio management
services, wealth advisory services, and private client equity services, such as
international equity services. The company was formerly known as Religare Enterprises
Private Limited and changed its name to Religare Enterprises Limited in July 2006. The
company was incorporated in 1984 and is based in New Delhi, India.
Diverse offerings
Dynamic Management Team
State-of-the art technology
Vast Distribution and Reach
Robust Brand Recognition
Synergistic partnerships
Innovative Initiatives
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INVESTMENT
Investment is the activity, which is made with the objective of earning some
sort of positive returns in the future. It is the commitment of the funds to
earn future returns and it involves sacrificing the present investment for the
future return. Every person makes the investment so that the funds he has
increases as keeping cash with himself is not going to help as it will not
generate any returns and also with the passage of time the time value of
the money will come down. As the inflation will rise the purchasing power of
the money will come down and this will result that the investor who does
not invest will become more poor as he will not have any funds whose
value have been increased. Thus every person whether he is a
businessman or a common man will make the investment with the objective
of getting future returns.
An investment can be described as perfect if it satisfies all the needs of all investors.
So, the starting point in searching for the perfect investment would be to examine
investor needs. If all those needs are met by the investment, then that investment can
be termed the perfect investment. Most investors and advisors spend a great deal of
time understanding the merits of the thousands of investments available in India. Little
time, however, is spent understanding the needs of the investor and ensuring that the
most appropriate investments are selected for him.
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Security of original capital: The chance of losing some capital has been a primary
need. This is perhaps the strongest need among investors in India, who have suffered
regularly due to failures of the financial system.
Comfort factor: This refers to the peace of mind associated with an investment.
Avoiding discomfort is probably a greater need than receiving comfort. Reputation
plays an important part in delivering the comfort factor.
Tax efficiency: Legitimate reduction in the amount of tax payable is an important part
of the Indian psyche. Every rupee saved in taxes goes towards wealth accumulation.
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Life Cover: Many investors look for investments that offer good return with adequate
life cover to manage the situations in case of any eventualities.
Ease of withdrawal: This refers to the ability to invest long term but withdraw funds
when desired. This is strongly linked to a sense of ownership. It is normally triggered
by a need to spend capital, change investments or cater to changes in other needs.
Access to a long-term investment at short notice can only be had at a substantial cost.
Perfect investment would have been achieved if all the above-mentioned needs had
been met to satisfaction. But there is always a trade-off involved in making
investments. As long as the investment strategy matches the needs of investor
according to the priority assigned to them, he should be happy.
The Ideal Investment strategy should be a customized one for each investor
depending on his risk-return profile, his satisfaction level, his income, and his
expectations. Accurate planning gives accurate results. And for that there must be an
efficient and trustworthy roadmap to achieve the ultimate goal of wealth maximization.
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TYPES OF INVESTMENT:-
There are basically three types of investments from which the investors can choose.
The three kinds of investment have their own risk and return profile and investor will
decide to invest taking into account his own risk appetite. The main types of
investments are: -
Economic investments:-
These investments refer to the net addition to the capital stock of the society. The
capital stock of the society refers to the investments made in plant, building, land and
machinery which are used for the further production of the goods. This type of
investments are very important for the development of the economy because if the
investment are not made in the plant and machinery the industrial production will come
down and which will bring down the overall growth of the economy.
Financial Investments:-
This type of investments refers to the investments made in the marketable securities
which are of tradable nature. It includes the shares, debentures, bonds and units of the
mutual funds and any other securities which is covered under the ambit of the Securities
Contract Regulations Act definition of the word security. The investments made in the
capital market instruments are of vital important for the country economic growth as the
stock market index is called as the barometer of the economy.
eneral Investments:-
These investments refer to the investments made by the common investor in his own
small assets like the television, car, house, motor cycle. These types of investments are
termed as the household investments. Such types of investment are important for the
domestic economy of the country. When the demand in the domestic economy boost
the over all productions and the manufacturing in the industrial sectors also goes up and
this causes rise in the employment activity and thus boost up the GDP growth rate of
the country. The organizations like the Central Statistical Organization (CSO) regularly
takes the study of the investments made in the household sector which shows that the
level of consumptions in the domestic markets.
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CHARACTERISICS OF INVESTMENT
Certain features characterize all investments. The following are the main characteristic
features if investments: -
1. Return: -
All investments are characterized by the expectation of a return. In fact, investments are
made with the primary objective of deriving a return. The return may be received in the
form of yield plus capital appreciation. The difference between the sale price & the
purchase price is capital appreciation. The dividend or interest received from the
investment is the yield. Different types of investments promise different rates of return.
The return from an investment depends upon the nature of investment, the maturity
period & a host of other factors.
2. Risk: -
Risk is inherent in any investment. The risk may relate to loss of capital, delay in
repayment of capital, nonpayment of interest, or variability of returns. While some
investments like government securities & bank deposits are almost risk less, others are
more risky. The risk of an investment depends on the following factors.
The risk varies with the nature of investment. Investments in ownership securities like
equity share carry higher risk compared to investments in debt instrument like
debentures & bonds.
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3. Safety: -
The safety of an investment implies the certainty of return of capital without loss of
money or time. Safety is another features which an investors desire for his investments.
Every investor expects to get back his capital on maturity without loss & without delay.
4. Liquidity: -
An investment, which is easily saleable, or marketable without loss of money & without
loss of time is said to possess liquidity. Some investments like company deposits, bank
deposits, P.O. deposits, NSC, NSS etc. are not marketable. Some investment
instrument like preference shares & debentures are marketable, but there are no buyers
in many cases & hence their liquidity is negligible. Equity shares of companies listed on
stock exchanges are easily marketable through the stock exchanges.
An investor generally prefers liquidity for his investment, safety of his funds, a good
return with minimum risk or minimization of risk & maximization of return.
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IMPORTANCE OF INVESTMENT
In the current situation, investment is becomes necessary for everyone & it is important
& useful in the following ways:
1. Retirement planning: -
Investment decision has become significant as people retire between the ages of 55 &
60. Also, the trend shows longer life expectancy. The earning from employment should,
therefore, be calculated in such a manner that a portion should be put away as a
savings. Savings by themselves do not increase wealth; these must be invested in such
a way that the principal & income will be adequate for a greater number of retirement
years. Increase in working population, proper planning for life span & longevity have
ensured the need for balanced investments.
Taxation is one of the crucial factors in any country, which introduce an element of
compulsion, in a person¶s saving. In the form investments, there are various forms of
saving outlets in our country, which help in bringing down the tax level by offering
deductions in personal income.
For examples: -
It is also an important aspect for sound investment plan. It varies between investment &
another. This may vary between risky & safe investment, they may also differ due
different benefits schemes offered by the investments. These aspects must be
considered before actually investing. The investor has to include in his portfolio several
kinds of investments stability of interest is as important as receiving high rate of interest.
4. Inflation: -
Since the last decade, now a day¶s inflation becomes a continuous problem. In these
years of rising prices, several problems are associated coupled with a falling standard of
living. Before funds are invested, erosion of the resource will have to be carefully
considered in order to make the right choice of investments. The investor will try &
search outlets, which gives him a high rate of return in form of interest to cover any
decrease due to inflation. He will also have to judge whether the interest or return will be
continuous or there is a likelihood of irregularity. Coupled with high rate of interest, he
will have to find an outlet, which will ensure safety of principal. Beside high rate of
interest & safety of principal an investor also has to always bear in mind the taxation
angle, the interest earned through investment should not unduly increase his taxation
burden otherwise; the benefit derived from interest will be compensated by an increase
in taxation.
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5. Income: -
For example: -
More avenues for investment have led to the ability & willingness of working people to
save & invest their funds.
6. Investment channels: -
The growth & development of country leading to greater economic activity has led to the
introduction of a vast array of investment outlays. Apart from putting aside saving in
savings banks where interest is low, investor have the choice of a variety of
instruments. The question to reason out is which is the most suitable channel? Which
media will give a balanced growth & stability of return? The investor in his choice of
investment will give a balanced growth & stability of return? The investor in his choice of
investment will have try & achieve a proper mix between high rates of return to reap the
benefits of both.
For example: -
INVESTMENTS AVENUES:-
There are various investments avenues provided by a country to its people depending
upon the development of the country itself. The developed countries like the USA and
the Japan provide variety of investments as compared to our country. In India before the
post liberalization era there were limited investments avenues available to the people in
which they could invest. With the opening up of the economy the number of
investments avenues have also increased and the quality of the investments have also
improved due to the use of the professional activity of the players involved in this
segment. Today investment is no longer a process of trial and error and it has become a
systematized process, which involves the use of the professional investment solution
provider to play a greater role in the investment process.
Earlier the investments were made without any analysis as the complexity involved the
investment process were not there and also there was no availability of variety of
instruments. But today as the number of investment options have increased and with
the variety of investments options available the investor has to take decision according
to his own risk and return analysis.
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An investor has a wide array of Investment Avenue. They are as under:
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c EQUITY SHARES: -
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M Ordinary Shares
Ordinary shareholders are the owners of a company, and each share entitles the holder
to ownership privileges such as dividends declared by the company and voting rights at
meetings. Losses as well as profits are shared by the equity shareholders. Without any
guaranteed income or security, equity shares are a risk investment, bringing with them the
potential for capital appreciation in return for the additional risk that the investor undertakes
in comparison to debt instruments with guaranteed income.
M Preference Shares
Unlike equity shares, preference shares entitle the holder to dividends at fixed rates subject
to availability of profits after tax. If preference shares are cumulative, unpaid dividends for
years of inadequate profits are paid in subsequent years. Preference shares do not
entitle the holder to ownership privileges such as voting rights at meetings.
M Equity Warrants
These are long term rights that offer holders the right to purchase equity shares in a
company at a fixed price (usually higher than the current market price) within a specified
period. Warrants are in the nature of options on stocks.
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Market capitalization is equivalent to the current value of a company i.e. current market
price per share times the number of outstanding shares. There are Large Capitalization
companies, Mid-Cap companies and Small-Cap companies. Different schemes of a fund
may define their fund objective as a preference for Large or Mid or Small-Cap
companies' shares. Large Cap shares are more liquid and hence easily tradable. Mid or
Small Cap shares may be thought of as having greater growth potential. The stock
markets generally have different indices available to track these different classes of
shares.
In terms of the anticipated earnings of the companies, shares are generally classified
on the basis of their market price in relation to one of the following measures:
* Price/Earnings Ratio is the price of a share divided by the earnings per share, and
indicates what the investors are willing to pay for the company's earning potential.
Young and/or fast growing companies usually have high P/E ratios. Established
companies in mature industries may have lower P/E ratios. The P/E analysis is
sometimes supplemented with ratios such as Market Price to Book Value and Market
Price to Cash Flow per share.
Dividend Yield for a stock is the ratio of dividend paid per share to current market
price. Low P/E stocks usually have high dividend yields. In India, at least in the past,
investors have indicated a preference for the high dividend paying shares. What matters
to fund managers is the potential dividend yields based on earnings prospects.
O rowth Stocks are shares of companies whose earnings are expected to increase at
rates that exceed normal market levels. They tend to reinvest earnings and usually have
high P/E ratios and low dividend yields. Software or information technology company
shares are an example of this type. Fund managers try to identify the sectors or
companies that have a high growth potential.
O Value Stocks are shares of companies in mature industries and are expected to
yield low growth in earnings. These companies may, however, have assets whose
values have not been recognized by investors in general. Fund managers try to
identify such currently under-valued stocks that in their opinion can yield superior
returns later. A cement company with a lot of real estate and a company with good
brand names are examples of potential value shares.
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Many instruments give regular income. Debt instruments may be secured by the assets of
the borrowers as generally in case of Corporate Debentures, or be unsecured as is the
case with Indian Financial Institution Bonds.
A debt security is issued by a borrower and is often known by the issuer category, thus
giving us Government Securities and Corporate Securities or FI bonds. Debt instruments
are also distinguished by their maturity profile. Thus, instruments issued with short-term
maturities, typically under one year, are classified as Money Market Securities.
Instruments carrying longer than one-year maturities are generally called Debt Securities.
Most debt securities are interest-bearing. However, there are securities that are
discounted securities or zero-coupon bonds that do not pay regular interest at intervals
but are bought at a discount to their face value. A large part of the interest-bearing
securities are generally Fixed Income-paying, while there are also securities that pay
interest on a Floating Rate basis.
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A Review of the Indian Debt Market
The Wholesale Debt Market segment deals in fixed income securities and is fast gaining
ground in an environment that has largely focused on equities.
The Wholesale Debt Market (WDM) segment of the Exchange commenced operations
on June 30, 1994. This provided the first formal screen-based trading facility for the debt
market in the country.
This segment provides trading facilities for a variety of debt instruments including
Government Securities, Treasury Bills and Bonds issued by Public Sector Undertakings/
Corporate/ Banks like Floating Rate Bonds, Zero Coupon Bonds, Commercial Papers,
Certificate of Deposits, Corporate Debentures, State Government loans, SLR and Non-
SLR Bonds issued by Financial Institutions, Units of Mutual Funds and Securitized debt
by banks, financial institutions, corporate bodies, trusts and others.
Large investors and a high average trade value characterize this segment. Till recently,
the market was purely an informal market with most of the trades directly negotiated
and struck between various participants. The commencement of this segment by NSE
has brought about transparency and efficiency to the debt market, along with effective
monitoring and surveillance to the market.
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M Certificate of Deposit
M Commercial Paper
M Corporate Debentures
The debentures are usually issued by manufacturing companies with physical assets, as
secured instruments, in the form of certificates They are assigned a credit rating by rating
agencies. Trading in debentures is generally based on the current yield and market values
are based on yield-to-maturity. All publicly issued debentures are listed on exchanges.
These are short to medium term interest bearing instruments issued by financial
intermediaries and corporate. The typical maturity of these bonds is 3 to 5 years. FRBs
issued by financial institutions are generally unsecured while those from private corporate
are secured. The FRBs are pegged to different reference rates such as T-bills or bank
deposit rates. The FRBs issued by the Government of India are in the form of Stock
Certificates or issued by credit to SGL accounts maintained by the RBI.
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M overnment Securities
These are medium to long term interest-bearing obligations issued through the RBI by the
Government of India and state governments. The RBI decides the cut-off coupon on the
basis of bids received during auctions. There are issues where the rate is pre-specified
and the investor only bids for the quantity. In most cases the coupon is paid semi-
annually with bullet redemption features.
M Treasury Bills
T-bills are short-term obligations issued through the RBI by the Government of India at a
discount. The RBI issues T-bills for different tenures: now 91 -days and 364-days. These
treasury bills are issued through an auction procedure. The yield is determined on the
basis of bids tendered and accepted.
M Bank/FI Bonds
Most of the institutional bonds are in the form of promissory notes transferable by
endorsement and delivery. These are negotiable certificates, issued by the Financial
Institutions such as the IDBI/ICICI/ IFCI or by commercial banks. These instruments
have been issued both as regular income bonds and as discounted long-term
instruments (deep discount bonds).
PSU Bonds are medium and long term obligations issued by public sector companies
in which the government share holding is generally greater than 51%. Some PSU bonds
carry tax exemptions. The minimum maturity is 5 years for taxable bonds and 7 years for
tax-free bonds. PSU bonds are generally not guaranteed by the government and are in the
form of promissory notes transferable by endorsement and delivery. PSU bonds in
electronic form (demat) are eligible for repo transactions.
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LIFE INSURANCE
In a broad sense, life insurance may be viewed as an investment. Insurance premiums
represent the sacrifice & the assured sum the benefit. In India, the important types of
insurance polices are:
Õ Endowment assurance policy
Õ Money back policy
Õ Whole life policy
Õ Premium back term assurance policy
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REAL ESTATE
For the bilk of the investors the most important asset in their portfolio is a residential
house. In addition to a residential house, the more affluent investors are likely to be
interested in the following types of real estate:
Õ Agricultural land
Õ Semi-urban land
PRECIOUS OBJECTS
It is highly valuable in monetary terms but generally they are small in size. The
important precious objects are:
Õ Gold & silver
Õ Precious stones
Õ Art objects
FINANCIAL DERIVATIVES
FINANCIAL DERIVATIVES: -
Every investment is characterized by return & risk. Investors intuitively understand the
concept of risk. A person making an investment expects to get some return from the
investment in the future. But, as future is uncertain, so is the future expected return. It is
this uncertainty associated with the returns from an investment that introduces risk into
an investment. Risk arises where there is a possibility of variation between expectation
and realization with regard to an investment.
Meaning of Risk
Risk & uncertainty are an integrate part of an investment decision. Technically µrisk¶ can
be defined as situation where the possible consequences of the decision that is to be
taken are known. µUncertainty¶ is generally defined to apply to situations where the
probabilities cannot be estimated. However, risk & uncertainty are used
interchangeably.
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Types of risks
1. Systematic risk: -
Systematic risk is non diversifiable & is associated with the securities market as well as
the economic, sociological, political, & legal considerations of prices of all securities in
the economy. The affect of these factors is to put pressure on all securities in such a
way that the prices of all stocks will more in the same direction.
Example: -
During a boom period prices of all securities will rise & indicate that the economy is
moving towards prosperity. Market risk, interest rate risk & purchasing power risk are
grouped under systematic risk.
RISKS
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Õ Market Risk Business Risk
Õ Interest Rate Risk Financial Risk
Õ Purchasing power Risk
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1. Systematic Risk
Market risk is referred to as stock variability due to changes in investor¶s attitudes &
expectations. The investor reaction towards tangible and intangible events is the chief
cause affecting µmarket risk¶.
There are four types of movements in prices of stocks in the markets. These may term
as (1) long term, (2) cyclical (bull and bear markets), (3) intermediate or within the cycle,
and (4) short term. The prices of all securities rise or fall depending on the change in
interest rates. The longer the maturity period of a security the higher the yield on an
investment & lower the fluctuations in prices.
Purchasing power risk is also known as inflation risk. This risk arises out of change in
the prices of goods & services and technically it covers both inflation and deflation
periods. During the last two decades it has been seen that inflationary pressures have
been continuously affecting the Indian economy. Therefore, in India purchasing power
risk is associated with inflation and rising prices in the economy.
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Unsystematic Risk: -
The importance of unsystematic risk arises out of the uncertainty surrounding of
particular firm or industry due to factors like labor strike, consumer preferences and
management policies. These uncertainties directly affect the financing and operating
environment of the firm. Unsystematic risks can owing to these considerations be said
to complement the systematic risk forces.
So, there are so many investment options & the different option have different benefits
& limitations in the sense risk associated with it. So it is difficult for them to chose
option, which give maximum return at minimum risk.
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Portfolio
A combination of securities with different risk & return characteristics will constitute the
portfolio of the investor. Thus, a portfolio is the combination of various assets and/or
instruments of investments. The combination may have different features of risk &
return, separate from those of the components. The portfolio is also built up out of the
wealth or income of the investor over a period of time, with a view to suit his risk and
return preference to that of the portfolio that he holds. The portfolio analysis of the risk
and return characteristics of individual securities in the portfolio and changes that may
take place in combination with other securities due to interaction among themselves and
impact of each one of them on others.
An investor considering investments in securities is faced with the problem of choosing
from among a large number of securities. His choice depends upon the risk and return
characteristics of individual securities. He would attempt to choose the most desirable
securities and like to allocate is funds over this group of securities. Again he is faced
with the problem of deciding which securities to hold and how much to invest in each.
The investor faces an infinite number of possible portfolios or groups of securities. The
risk and return characteristics of portfolio differ from those of individual securities
combining to form a portfolio. The investor tries to choose the optimal portfolio taking in
to consideration the risk return characteristics of all possible portfolios.
As the economy and the financial environment keep changing the risk return
characteristics of individual securities as well as portfolios also change. This calls for
periodical review and revision of investment portfolios of investors. . The return realized
from the portfolio has to be measured and the performance of the portfolio has to be
evaluated.
It is evident that rational investment activity involves creation of an investment portfolio.
Portfolio management comprises all the processes involved in the creation and
maintenance of an investment portfolio. It deals specifically with the security analysis,
portfolio analysis, portfolio selection, portfolio revision and portfolio evaluation. Portfolio
management makes use of analytical techniques of analysis and conceptual theories
regarding rational allocation of funds. Portfolio management is a complex process which
tries to make investment activity more rewarding and less risky.
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PORTFOLIO DESI N
Before designing a portfolio one will have to know the intention of the investor or the
returns that the investor is expecting from his investment. This will help in adjusting the
amount of risk. This becomes an important point from the point of view of the portfolio
designer because if the investor will be ready to take more risk at the same time he will
also get more returns. This can be more appropriately understood from the figure drawn
below.
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From the above figure we can see that when the investor is ready to take risk of M1,
he is likely to get expected return of R1, and if the investor is taking the risk of M2, he
will be getting more returns i.e. R2. So we can conclude that risk and returns are
directly related with each other. As one increases the other will also increase in same
of different proportion and same if one decreases the other will also decreasec
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From the above discussion we can conclude that the investors can be of the
following three types:
1. Investors willing to take minimum risk and at the same time are also expecting
minimum returns.
2. Investors willing to take moderate risk and at the same time are also expecting
moderate returns.
3. Investors willing to take maximum risk and at the same time are also expecting
maximum returns.
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Your age will help you determine what a good mix is / portfolio is
Age Portfolio
These aren't hard and fast allocations, just guidelines to get you thinking about how
your portfolio should look. Your risk profile will give you more equities or more fixed
income depending on your aggressive or conservative bias. However, it's important to
always have some equities in your portfolio (or equity funds) no matter what your age. If
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inflation roars back, this will be the portion of your investments that protects you from
the damage, not your fixed income.
Also, the fixed income of your portfolio should be diversified. If you buy bonds and
debentures directly or if you invest in FDs, then make sure you have at least five
different maturities to spread out the interest rate risk.
Diversifying in equities and bonds means more than buying a number of positions. Each
position needs to be scrutinized as to how it fits into the stocks or bonds that already are
in your portfolio, and how they might be affected by the same event such as higher
interest rates, lower fuel prices, etc. Put your portfolio together like a puzzle, adding a
piece at a time, each one a little different from the other but achieving a uniform whole
once the portfolio is complete.
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INVESTMENT FACTOR
The motive behind our investments is to make money and increase our monetary
wealth. With so many factors involved, investment decision is a complex one. Small
investors often go with their gut feelings when trying to choose among numerous
alternatives to invest. Big investors use various analyzing techniques. Globalization and
the growth of internet have introduced many new opportunities and threats to ponder
upon. When investing, you are committing your assets for sometime, that is why you
need to cover all aspects before making an investment decision.
Expected Return:
The most basic investment decisions revolve around the comparison of expected return
and risk involved. No investor will take on higher risk if there is no chance of equally
higher returns. Investors strive to reach on the best trade-off point between risk and
return which go well with their financial requirements. These expected returns are not
always equal to what an investor actually gets after some time. The possibility that
actual return will not be the same what they expect is called risk.
Risk factor:
There is hardly some form of investment which doesn't involve risk. Government
securities come close to be called risk free; but even they have some risks attached to
them. Risk actually is the balancing factor of the financial markets. Various types of
investment risk exist, such as financial risk, currency risk, inflation risk or capital risk are
the most common one. Different investors react differently to these risks. While majority
of the investors are risk averse, there are some investors who are seeking more risky
ones with expectations of higher yields.
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Investor¶s Hunch:
Every investor will finish off with a different conclusion although the market, economy
and all statistical facts and figures are same for everyone. This difference comes from
the investor's intuition. Some will start from research; by collecting lots of information
and then analyzing to decide, others start from defining their objectives and then going
for opportunities that suit their needs.
lobalization factor:
Age Factor:
Risk
When we talk about investments and consider the age factor, it all boils down to risk.
We¶ve all heard the old clinch? About greater risk bringing greater rewards. On the other
hand, it can also result in greater loss. So as we define which types of investments are
appropriate at each stage of the human life cycle, we do it within the framework of risk
level involved.
Age18-35
Ah, to be young! Early-life investors have one tremendous weapon against the
downside of risk? Time People in this age group can and should invest is speculative
stocks and other high-risk (and possibly high-reward) investment. The reasoning is that
if the high-risk stocks result in loss, the investor has plenty of time in which to make up
for that loss.
Age 36 - 55
As an investor enters the early-midlife stage, he or she must start building a strong
portfolio base. In order to do so, a widely recommended strategy is to start adding more
growth-oriented stocks to your mix of speculative investments. The percentage of
growth stocks to risky stocks will depend greatly on the individuals comfort with risk as
well as his or her investment history and experience.
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Age 56 -65
The later midlife stage naturally produces greater risk intolerance. This age group of
investors should be focused on growth and income investment opportunities more than
high-risk speculative stocks. The strategy here is to protect and grow a solid portfolio.
Investors who have done well in the past and are comfortable with risk may still choose
to engage in speculative opportunities, especially if they have keen instincts.
Age 65 and Up
Investment opportunities that are most appropriate for this age group include income
driven stocks and safe investments that will generate interest that the individual can live
off. Most people spend a lifetime building up a nest egg. Though retirement is seen by
many as the time to finally enjoy the rewards of a lifetime of investment, it is also
important to secure some regular, ongoing income by way of interest and/or dividends.
Diversification
No matter what age group you fall into, you must know that the only way to grow a
portfolio while minimizing risk and volatility is to diversify. Spreading your assets among
various different types of investments will balance your portfolio and minimize downside.
Some of the asset classes you should include are stocks, bonds and short-term
investments. You should also aim to diversify your investments within each asset class.
By doing so, you minimize risk further because you are less likely to take a big hit when
a single investment performs poorly.
Whether you¶re dealing with Trinidad and Tobago money, Jamaica bank, or Bahamas
money, merchant banking operations offers a variety of finance services for both
personal and business purposes.
All your investment and insurance needs changes based on what stage of life you are
in. Say your age is 55 years, it means you are nearing retirement and hopefully you will
have provident funds, and lot of other savings which you did throughout your career,
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which means you have money but possibility of earning more is kind of less. So it will
not be wise for you to invest in high risk areas whereas for a young guy who has just
started his career there is not much to loose and in fact he has lot more years left to
earn so it might make sense for him to invest in relatively high risk / high returns
investments.
Furthermore at the age of 25 your priorities will be like getting married, helping your
parents whereas at 30 it may switch to buying a home, at the age of 35 it maybe your
children education and at around 45 or 50 years priority maybe your children higher
education, or daughter¶s marriage or may be supporting children in their ambitions or
you may want to take time for a world tour which you were never able to! So accordingly
your portfolio should change.
You cannot think of children higher education when your age is 45 and your children
already reached point where they need your support for higher education, it means you
should think/plan/act at least 10 years beforehand.
Also you should know what age is correct for taking life insurance and at what age what
amount sum assured you will need. Let me tell you, when you are young and just
started your career you will need higher amount as sum assured and as you grow older
and kind of well settled you may not need big sum assured amount. This is because if
someone dies in young age most probably the guy may not have much savings it
means the dependents are in trouble and they will need lot of money to survive whereas
if the death happens late we can assume that the person would have made enough
assets and savings and dependents need not worry much at least at the financial side.
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Data Analysis and interpretatrion:-
Age % Of respondent
20-30 25
31-40 36
41-50 27
50 and above 12
Total 100
Bellow 1 lac 32
1-5 lac 61
5-10 lac 7
5-10
7%
0- 1
0- 1
32%
1-5
1-5 5-10
61%
Fig-5.4
Qualification
Qualification Investor (%)
High School 3
Graduate 48
Post Graduate 14
Professional 26
Others 9
High School
Others 3%
9%
High School
Professional Graduate
26% Graduate Post Graduate
48%
Professional
Others
Post
Graduate
14%
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Different Investment Avenues:-
18%c 8%c
17%c
28%c
29%c
Analysis:-The survey result shows that individual does not chose equity as highly
preferred investment tool. Only 8% people have preference on other investment tool.
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Investment Horizon
SHORT TERM 31
LON TERM 40
BOTH 29
Total 100
29 31
SHORT TERM
40
LONG TERM
BOTH
Analysis: The survey result shows that most of the people invest in the market
for long term horizon.
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Brokerage firm 16
Banks 21
Analysis:- According to survey most of the people aware about equity market through
the investor friends and relative.
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Income invested in equity
Percentage of investor
50
5
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5
0
5
0
15
10
5
0
Below 5% 5 to 10% 10 to 0% 0 to 0%
Analysis :- The survey result shows that most of the people invest in the equity
market 5-10% of income.
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7% 2%
16% Only shares
Mutual funds
75% Bonds
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