A

FINAL RESEARCH PROJECT

ON
“BEST INVETMENT
COMPARISION BETWEEN GOLD AND EQUITY INVESTMENT”

SUBMITTED IN PARTIAL FULFILLMENT FOR THE REQUIREMENT

FOR AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

(2008-10)

SUBMITTED TO: SUBMITTED BY:

MS. MAMTA SAHARAN CHIRAG AGARWAL
MMIM MBA- FINAL SEM
ROLL NO-1208952

MAHARISHI MARKANDESHWAR UNIVERSITY

MULLANA, AMBALA
 DECLARATION

I CHIRAG AGARWAL, hereby declare that, the project report entitled

"Comparative study of investment in gold and stock: A customer perspective”
submitted by me in the partial fulfillment of the requirement for the degree of
Master of Business Administration to M M INSTITUTE OF
MANAGEMENT, is original work conducted by me and all data & facts
contained in this report are original to the best of my knowledge.

I have not submitted this report to any other institute for award of any degree
or diploma.

CHIRAG AGARWAL
MBA Final
 CERTIFICATE

This is to c er t i f y that Mr. CHIRAG AGARWAL has

p r o c e e d e d u n d er b y s u p e r v i s i o n h i s / h e r r e s e a r c h p r o j e c t r e p or t o n

“ C o m p a r a t i v e A n a l y s i s o n G o l d or E q u i t y I n v e s t m e n t ” i n t h e

specialization area finance.

T h e w o r k e m b o d i e d i n t h i s r e p o r t i s o r i g i n a l a n d i s of t h e

standard expected of an MBA student and has not been submitted

i n p a r t or f u l l t o t h i s o r a n y o t h e r u ni v e r s i t y f o r t h e a w a r d of a n y

degree or diploma. He has completed all requirements of

g u i d e l i n e s f o r r e s e a r c h pr o j e c t r e p or t a n d t h e w o r k i s f i t f or

evaluation.

Date: Name of Research Guide

Place: Ms. MAMTA SAHARAN
Lecturer
 PREFACE

In order to achieve positive and concrete result with theoretical concept the
exposure to real life situation existing in corporate world is very much needed. In
today’s scenario the practical knowledge in education especially in professional
courses is very essential.

Final Project in MBA Course and study content of such as practical knowledge it
makes the student confident and introduce them about their ability.

I was interested in marketing so I have done my final project on the topic -

comparative study on “WHICH INVESTMENT IS BETTER - GOLD OR
STOCK”
 ACKNOWLEDGEMENT

This study is gained to many people who is in a formal review or in formal

conversation. It has made a significant contribution to its development completing
a project like this one takes the effort and co-operation of many others. Although
this report is being brought in my name, it bears an imprint of guidance and
cooperation of many individuals. I am unable express my words for thanking these
people for their contribution in completing of my project.
Firstly, I feel privileged in expressing my deep gratitude and thanks to Ms. Mamta
Saharan faculty of MMIM institute for his valuable guidance, keen interest,
efficient supervision and co-ordination all along the preparation of this report.
In last but not least, I would like to thanks my parents and all my friends for their
active co-operation which was of great help during the course of my project work.
 EXCEUTIVE SUMMARY

This project report is conducted with the objective to study the role of stock
exchange and gold investment and to identify the best option of investment from
stock or the gold in India, after identifying the investment stage of different income
group of the country.

This research has used both data primary and secondary for the purpose of
collection of data. For primary data number of respondents are 100 and they are
from social groups and on the basis of data collected, it is found that:

I found that the gold investment is better than the stock. In India mostly income
groups invested their money in the gold for the long-term investment. Out of all
investment the 10% investment in doing only in the gold. Due to less risk, more
return and the knowledge related to gold the all income groups invested their
investment in the gold. Due to less knowledge of stocks the income groups
invested their money in gold investment for long time period.
CONTENTS
TITLE PAGE
NO.
Declaration

Certificate

Acknowledgement

Preface

Executive summary

1. Introduction 1- 55
 Introduction to Stock 2- 22
 Introduction to Gold 23- 55
2. Literature Review 57- 62
3. Research Methodology 64- 67
 Type of research 65
 Objective of study 65
 Research plan 65
 Sources of data 66
 Methods of data collection 66
 Limitations of study 67
4. Data Analysis and Interpretation 69- 83
5. Findings and Conclusion 85- 87
6. Suggestion 89-90
Annexure 92- 96
Questionnaire 92- 95
Bibliography 96
CHAPTER – 1
INTRODUCTION
 INTRODUCTION

STOCK MARKET

The market for the long-term securities like bond, equity stock and preferred stock
is divided into primary market and secondary market. The primary deals with the
new issue of securities. Outstanding securities are traded in the secondary market,
which is commonly known as stock market or stock exchange. In secondary
market, the investor can sell or buy securities. Stock markets predominantly deal in
the equity shares. Dept instrument like bond and debenture are also traded in the
stock market. The growth of primary market is totally depending on the stock
market. The health of the economy is reflected by the growth of the stock market.

Stock Exchange is the market place where industrial securities like equity shares,
preference shares, debentures and bonds of listed public limited companies and the
Government securities are traded. Under section 2(3) of the securities contract
(Regulation) Act 1956 as “any body of individuals’ whether incorporated or not;
constituted for the purpose of assisting, regulating or controlling the business of
buying, selling or dealing in securities.” The securities which are traded in the
stock market are defined under section 2(b) of the act as:-
 Shares, Scrip’s, Stock, Bonds, Debentures, Debentures stock or other
marketable securities of a like nature in or of any incorporated company
or other body corporate;
 Government securities; and
 Rights or interest in securities.
The main function of the stock exchange is to provide the mechanism for the
exchange of securities, which already existed at price that are “fair and equitable.”

REGULATION OF STOCK EXCHANGE

Stock Exchange is governed by the Securities Contracts (Regulation) Act, 1956.
Only recognized exchanges can operate legally. Stock exchange is give monopoly
in certain areas under section 19 of the Act.

RECOGNITION
The Central Government may grant recognition to stock exchange if it is satisfied
after making necessary enquires and obtained such further information, if any, as it
may require:-
 That the rule and bye-law of stock exchange are in conformity with such
condition as may be prescribed with a view to ensure fair dealing and to
protect investors; the conditions which the government may, inter alia relate
to
1. The qualification for the membership;
2. The manner in which shall be entered into and enforced as between
members;
3. The representation of the Central Government on each of the stock
exchange by such number of person not exceeding three as the Central
Government may nominate in the behalf; and
4. The maintenance of account of members and their audit by chartered
accountants where ever such audit is required by central government
 no rules of the stock exchange to any of these matters shall be
amended except with the approval of the central government
 That the stock exchange is willing to complete with another condition which
the central government after consultation with the governing body of the
stock exchange.
 That is would be in the interest of trades and also in the public interest grand
recognition to stock exchange.
The recognition granted to the stock exchange should be in form B appended
to the rules. The recognition shall be either on permanent basis or for such
period not less than one year as may be prescribed in the recognition. Every
recognized stock exchange shall furnish to the Central government a copy of
the annual report, and such as annual report shall contain such particulars as
may be prescribed. No application for grant of recognition shall be refused
except after giving an opportunity to the stock exchange concerned to be
heard in the matter; the reasons for such refusal shall be communicated to
the stock to the stock exchange in writing.

FUNCTION OF STOCK EXCHANGE

 MAINTAINS ACTIVE TRADING

Share is traded on the stock exchanges, enabling the investors to buy
and sell securities. The prices may vary from transaction to
transaction. A continuous trading increases the liquidity or
marketability of the shares on the stock exchanges.
 FIXATION OF PRICE
 Price is determined by the transactions that flow from investors’
demand and supplier’s preferences. Usually the traded prices are made
known to the public. This helps the investors to make better decision.
 ENSURES SAFE AND FAIR DEALING
The rules, regulation and by-laws of the stock exchange provide a
measure of safety to the investors to get a fair deal.
 AIDS IN FINANCING THE INDUSTRY
A continuous market for shares provides a favorable climate for
raising capital. The negotiability and transferability of the securities
helps the companies to raise long-term funds.
 DISSEMINATION OF INFORMATION
Stock exchange provides information through their various
publications. They publish the share price traded on daily basis along
with the volume traded. Directory of corporate information is useful
for the investor assessment regarding the corporate.
 PERFORMATION INDUCER
The price of stock reflects the performance of the traded companies.
This makes the corporate more concerned with its public image and
tries to maintain good performance.
 LIQUIDITY AND PRICE CONTINUITY
The stock exchange provides a liquid and continuous market where
investors can convert their money into securities and securities into
money quickly with little variation in current market price during the
trading hours by making bids and offers, as it is an open action market
where buyers and sellers compete among each other. The stock
exchange provides liquidity and marketability to only listed stocks.
 Listing of securities means granting permission to a particular security
for trading in the concerned stock exchange.

 SAFETY TO INVESTORS
The transaction in the stock market is susceptible to fraud and
manipulation by the speculators by the speculators and members.
Under the securities contract (regulation) Act, 1956 and securities
contract rules, 1957, the central government has wide powers to
regulate and control the activities of the stock exchange and activities
of the members.
 MOBILISATION OF SAVING
Another importance of the stock exchange is to mobilize the saving of
individual’s institutions and to direct its flows into the most
productive channels so as to serve in the best possible manner the
interest of investors and economy as a whole.
STOCK EXCHANGE IN INDIA MAP
BENEFITS OF STOCK EXCHANGE

Speaking in the Lok Sabha in connection with his motion for reference of the
securities contracts bill to a joint committee of the Parliament in 1955, the then
Finance Minister said: “The economic service, which a well constituted and
efficiently run securities market can render to a country with a large private sector,
operating under the normal incentives and impulses of private enterprise, are
considerable. In the first place, it is the only organized securities market, which can
provide sufficient marketability and price continuity for shares, so necessary for
the need of investors. Secondly, it is only such market that can provide a
reasonable measure of fair dealing in the buying and selling of securities. Thirdly,
through the interplay of demand for supply of securities, a properly organized
stock exchange assists in a reasonably correct evaluation of securities in term of
their real worth. The benefits of stock exchange are follows:-

BENEFITS TO COMMUNITY
1. A stock exchange encourages people to save and invest their shaving in
shares and debentures. The recent boom in shares markets has created
financial awareness among the middle class. The stock market has become a
central factor in household financing planning.
2. By encouraging people to save and invest, the stock exchange change helps
capital formation, which is an essential ingredient for quicker industrial
development.
3. Through capital formation the stock exchange enables companies to
undertake expansion and modernization schemes. Every company talks in
terms of hundreds of cores of rupees of investment in new projects these
days.
 4. Stock exchange encourages several closely held companies to go public.
Encouraged by boom in the recent past more than 70,000 private companies
are going public by offering shares to the public.
5. The stock exchange acts as a mirror through which the general economic
condition is clearly reflected.

BENEFITS TO THE INVESTORS

1. With the help of stock exchange numbers of investors become rich due to
investors their money the shares and debentures.
2. The stock exchange offers ready markets for buying and selling securities.
The share bazaar is the busiest market with cores of rupees being stake.
3. The interest of investors is safeguarded by the strict enforcement of rules
and regulations. Every share market has its own byelaws besides complying
with provision of the securities contract Act, 1956.
4. More important is the fact the stock exchange is a powerful hedge against
inflation.

BENEFITS TO THE COMPANIES

1. Stock exchange offers a wide market for shares and debentures.
2. The image of the company goes up once the shares are listed on a stock
exchange.
3. Quicker response from investors to the listed securities.
4. The market rates of shares and debentures will be higher because of daily
dealing on stock market.

GOLDEN INVESTMENT RULES

As the Indian stock markets move into uncharted waters, and stock prices move
under a cloud of volatility, it is time for small investors to step back and take note
of some of the key rules for safe and defensive investing. In these times, the rules
spelt out by the legendary investor, Benjamin Graham, should come in handy for
'defensive' investors, or those who are risk-averse in their investing habits. A
defensive investor is one who generally places high emphasis on the safety of his
capital through avoiding serious mistakes while making investment decisions.
Also, a defensive investor is one who aims at freedom from effort and the need for
making frequent decisions.

In these volatile times, thus, such an investor should keep some benchmarks for
himself while selecting his portfolio of stocks. Only this would be of help in his
need for making less frequent decisions. These are some of the characteristics that
a defensive investor should look at in a company, or the potential investment
target.

1. ADEQUATE SIZE OF THE ENTERPRISE

This is one of the most important factors while selecting a company for
investment. Investors should note that small companies or those that are in the
nascent stages of their development are more likely to have a volatile future
than bigger corporations. While an aggressive investor would have interests in
such small yet growing companies, this should not be a defensive investor's cup
of tea. He should be content in having large and strong companies in his
portfolio.

2. SUFFICIENTLY STRONG AND STABLE FINANCIAL CONDITION

 A sufficiently strong financial condition of a company should be another top

priority for defensive investors. They should make sure that their investment

target (company) has a strong balance sheet and profit and loss account, and a

very strong cash flow statement. This is because, more than book profits, it is

the strong cash position that is of help for the company in times of pressure and

uncertainty. Also, for a company to be a sound investment target, not only

should it have a history of decent earnings growth, but also stability in the

same. A company with a volatile earnings growth history is more likely to be a

risky proposition.

3. DIVIDEND GROWTH

A consistent dividend payment record is another indicator of the sound financial

position of the company. While there when a growing company is ploughing

back earnings towards future growth rather than paying large dividends,

investors must see that there are no grave inconsistencies in dividend payments.

4. MODERATE P/E RATIO

A moderate price-to-earnings ratio is a very useful indicator for a defensive

investor. This is because a relatively lower P/E would save investors from

paying a very high price that does not justify the value of an investment. Also, a

history of moderate or less-volatile P/E's also helps the investors' cause.

5. MANAGEMENT QUALITY

Apart from these performance parameters, investors should also take note of the
'management quality', its vision and the past track record.

6. DO YOUR HOME WORK

All said and done, while the rules mentioned above are benchmarks that every
defensive investor needs to apply before making any investment decision, the
fact that he should do his homework carefully should not lose relevance. This
means that he should research well about the company's history, its business
model and factors that are likely to affect its future performance.

7. LONG TERM VIEW

Also, the investor should have a long-term (more than 3 years) investment

horizon for this maximizes the chance of garnering adequate return on

investments.

RISK IN STOCKS
Any rational investor, before investing his or her ingestible wealth in the stock,
analyses the risk associated with the particular stock. The actual return he receives
from a stock may vary from his expected return and the risk and the risk is
expressed in the term of variability of return. The down side risk may be caused by
the several factors, either common to all stock or specific to a particular stock.
Investor in general would like to analyze the risk factor and a thorough knowledge
of the risk helps him to plan his portfolio in such a manner so as to minimize the
risk associated with the investment.

RISK DEFINED
The dictionary meaning of the risk is the possibility of loss or injury, the degree or
probability of such loss. In risk, the probable outcomes of all the possible events
are listed. Once the events are listed subjectively, the derived probabilities can be
assigned to the entire possible events.
For example:- The investors can analyze and find out the possible range of the
return from his investment. He can assign some subjective probability to his return,
such as 50% of the time there is a likelihood of getting Rs. 2 per share as a
dividend and 50% of the time the possible dividend may be Rs. 3 per share.
The Risk consists of two components:-
 The systematic risk and
 The unsystematic risk.

THE SYSTEMATIC RISK

The systematic risks affect the entire market. Often we read in the news papers that
the stock market is in the bear hug in bull grip this indicates that the entire market
is moving in a particular direction either downward or upward. The economic
conditions, political situations and the sociological change affect the security
markets. The 1998 recessions experienced by developed and developing countries
have affected the stock market all over the world. The south East Asian crisis has
affected the stock market worldwide. There factors are beyond the control of the
corporate and the investor they cannot be entirely avoided by investors. It drives
home the point that systematic risk is unavoidable.

It is divided into three categories-

  Market Risk
 Interest Rate Risk
 Purchasing Power Risk

MARKET RISK
Jack Clark Francis has defined the market risk as that portion of total variability of
return caused by the alternative forces of bull and bear markets. When security
index moves upward haltingly for a significant period, it is known as bull market.
In the bull market, the index moves from low level to the peak. Bear market is just
a reverse to the bull market; the index declines haltingly from the peak to a market
low point called trough for a significant period. During the bull and bear market
more than 80% of the securities prices rise or fall along with the stock market
indices. The forces that affect the stock market are tangible and intangible events.
The tangible events are real events such as earthquake, war, and political
uncertainty and fall in the value of the currency. The other example that can be
cited is the Pokhran blast on May 13, 1998, and the fall of BSE Sensex by 162
points. Impending sanctions, dampened sentiments and FII selling of stock set a
bear phase. Several examples like fall in the value of rupee and post-budget blue
can be cited for triggering the bear phase. Intangible events are related to market
psychology. The market psychology is affected by the real events. But reactions to
the tangible events become over reactions and they push the market in a particular
direction. The Bull Run in 1994 FII’s investment and liberalization policies gave
buoyancy to the market. The market psychology was positive. Small investors
entered in the market and price of the stock without adequate supportive
fundamental factors soared up. In 1996, the political turmoil and recession in the
economy resulted in the fall of shares prices and the small investors lost faith in the
market. There was a rush to sell the shares and the stock that was floated in the
primary market was not received well. Thus, any untoward political or economic
event would lead to a fall in the price of the securities which would be further
accentuated by overreaction and the herd like behavior of the investors. If some
financial institutions start disposing the stock, the fear grips in and spreads to other
investors.

INTEREST RATE RISK

Interest rate risk is the variation in the single period rate caused by the fluctuations
in the market interest rate. Most commonly interest rates risk affects the price of
bonds, debenture and stocks. The fluctuation in the interest rates is caused by the
changes in the Government monetary policy and the changes that occur in the
interest rates of treasury bills and the government bond. The bond issued by the
government and quasi-government are considered to be risk free. If higher interest
rates are offered, investor would like to switch his investments from private sector
bond to public sector bonds. If the government to tide over the deficit in the budget
floats a few loan/bond of a higher rate of interest, there would be a definite shift in
the funds from low yielding bonds and from stock to bonds.
Likewise, if the stock market were in a depressed condition, investors would like to
shift their money to the bond market, to have an assured rate of the return. The best
example in the 1996, most of the initial public offering of the money companies
remained undersubscribed but IDBI and IFC bonds was oversubscribed. The rise
and the fall in the interest rate affect the cost of the borrowing. When the call
money market rate changes, it affects the badla rate too. Most of the stock traders
in the stock market are with the borrowed funds. The increases in the cost of
margin affect the profitability of the traders. The fall in the demands of the
securities would lead to a fall in the value of the stock index.
Through a series of credit policy announcements, interest rates have been gradually
reduced from 12-13 per cent in 1998 to 7-8 percent today. What does this mean for
you? If the rate cuts are responsible for the risk-averse investor’s pet grouse of
lower interest income from safe avenues, it has also meant that he can today
borrow at far lower rates of interest. This is perhaps the single biggest reason why
there is such a boom in retail housing and consumer spending. Today, your home
loan costs you about 7.5 per cent; seven years ago, you would have paid 16 per
cent. What this also means is low-cost funding for companies, which allows them
to reduce their manufacturing overheads. And that means lower prices of goods.
But, sure, a rate cut cuts both ways–the pain of lower deposit rates on the one hand
and the gain of lower borrowing rates on the other.

PURCHASING POWER RISK

Variation in the return is caused also by the loss of purchasing power of currency.
Inflation is the reason behind the loss of purchasing power. The level of inflation
proceeds faster than the increase in capital value. Purchasing power risk is the
probable loss in purchasing power of the return to be received. The rise in price
penalizes the return to the investor, and every potential rise in price a risk to the
investor. The inflation may be demand-pull and cost-push inflation. In the demand-
pull inflation the demand for goods and service are in excess of their supply. At
full employment level of factors of production, the economy would not be able to
supply more goods in the short run and demand for products pushes the price
upward. The supply cannot be increase unless there is an expansion of labor force
or machinery for production. The cost-push inflation as the name itself indicates
that the inflation or the price is caused by the increase in the cost. The increase in
the cost of raw material, labor and equipment market the cost of production high
and ends in high price level.
The change in the price level is measured by the consumer price index for
industrial workers. This index uses a basket of goods used by the industrial labors
in different parts of India. Wholesale price index is also used to measure the
inflation. The annual rate of inflation in the term of consumer price index of
industrial workers and wholesale price index are give below:

The main inflation indicators

Years WPI
CPI
1997.98 4.4- 6.8
1998-99 5.9- 13.1
1999-00 3.3- 3.4
2000-01 7.2- 3.8
2001-02 3.6- 4.3
2002-03 3.4- 4.0
Sources of data: - RBI Bulletin 2003
The real return of any investment could be calculated by using the following
equation:
Real future value = Nominal future value/10+ Inflation Rate (IR)

UNSYSTEMATIC RISK
As already mentioned, unsystematic risk is unique and peculiar to a firm on a
industry. Unsystematic risk stems from managerial inefficiency, technological
change in the production process, availability of raw material, change in the
consumer preference, and labor problems. The nature and magnitude of the above
mentioned factors differ from industry, and company to company. They have to be
analyzed separately for each industry and firm. The change in the consumer
preference affects the consumer products like T.V. sets, washing machines,
refrigerators etc. more than affect the iron and steel industry. Technological change
affects the information technology industry more than that of consumer product
industry. Thus it differs from industry to industry. Unsystematic risk can be
classified into:
 Business risk
 Financial risk

BUSINESS RISK
Business risk is that portion of the systematic risk caused by the operating
environment of the business. Business risk arises from the inability of the firm to
maintain its competitive edge and the growth or stability of the earning. Variation
that occurs in the operating environment is reflected on the operating income and
expected dividends. The variation in the expected operating income indicates the
business risk.
For example: Take Anu and Vinu companies. In Anu company operating income
could grow as much as 15% and as low as 7%. In Vinu 3
Company operating income can be either 12% or 9%. When both the companies
are compared, Anu Company’s business risk is higher because of its high
variability in operating income compared to Vinu Company. Business risk can be
divided in to the internal and external risk.
A. INTERNAL BUSINESS RISK
Internal business risk is associated with the operational efficiency of the firm. The
operational efficiency differs from company to company. The efficiency of
operation is reflected on the company’s achievement of its pre-set goals and
fulfillment of the promises to its investors.
Fluctuations in the sales. The sales level has to be maintained. It is common in
business to lose customers abruptly because of competition. Loss of customers will
lead to a loss in operational income. The company has to build a wide customer
base through various distribution channels.
Research and development. Sometime the product may go out of style or become
obsolescent. It is management who has to overcome the problem of obsolescence
by concentrating on the in-house research and development program.
Personnel management. The personnel management of the company also
contributes to the operational efficiency of the firm. Frequent strikes and lock outs
result in loss of production and high fixed capital cost. The labor productivity also
would suffer. The risk of the labor management is present in all the firms. It is up
to the company to solve the problems at the table level and provide adequate
incentive to encourage the increase in labor productivity.
Fixed cost. The cost components also generate internal risk if the fixed cost is
higher in the cost component. During the period of recession or low demand for
product the company cannot reduce the fixed cost. At the same time in the boom
period, also the fixed factors cannot vary immediately.
Single product. The internal business risk is higher in the case of firm producing a
single product. The fall in the demand for a single product would be fatal for the
firm

B. EXTERNAL RISK
External risk is the result of operating condition imposed on the firm by
circumstance beyond its control. The external environment in which it operates
exerts some pressure on the firm. The external factors are social and regulatory
factors, monetary and fiscal policies of the government, business cycle and general
economic environment within which a firm or industry operates.
Social and regulatory factors. Harsh regulatory climate and legislation against
the environmental degradation may impair the profitability of the industry. Price
control, volume control, import/export control and environment control reduce the
profitability of the firm. This risk is more in industry related to public utility
sectors such as telecom, banking and transportation.
Political risk. Political risk arises out of the change in the government policy.
With a change in the ruling party, the policy also changes.
Business cycle. The fluctuation of business cycle leads to fluctuation in the earning
of the company. Recession in the economy lead to a drop in the output of many
industries. Steel and white consumer goods industries tend to move in tandem with
the business cycle.

FINANCIAL RISK
It refers to the variability of the income to the equity due to the dept capital.
Financial risk in a company is associated with the capital structure of the company.
Capital structure of the company consists of equity funds and borrowed funds. The
presence of debt and preference capital result in a commitment of paying interest
or pre fixed rate of dividend. The interest payment affects the payment that is due
to equity investor. The debt financing increase the variability of the return to the
common stock holders and affects their expectation regarding the return.

RETURN ON INVESTMENT IN STOCK

A major purpose of investment is to set a return or income on the funds invested.

Since the return on income varies, statistical techniques are used to measure it.
Over the year, many methods were adopted for quantifying return.
METHOD OF MEASUREMENT OF RETURN

Computation of yield to measure a financial assets return is the simplest and oldest
technique of measurement. Yield can be both expected or estimated and actual for
a particular period. The formula used to find yield is:

Estimate yield = Expected cash income/Current price of assets

Actual yield = Cash income/Amount invested

The yield that is calculated is for a particular period to find out the return on the
amount that is invested. The return on the stock is measured by finding out
dividend yield can be estimated on expected yield as well as actual yield:

Estimated yield = Expected cash dividend/Current share price

Actual yield = Dividend received/Price of share in beginning of the period

Te return on the investment in stock exchange is based on the many factors like
political, social, economical, goodwill of that company those stock are issued,
natural factors and many more.
 GOLD

Gold is a natural metal. Gold can now be used in various forms. It is no longer a
tool for hedging and speculation but a bankable asset. It can be bought from banks
in form of gold coins. Investors will soon look at gold-backed exchange traded
funds as tools of investment. While gold can be used a security against personal
loans, banks also provide loans to buy gold. Gone are the days when a future
contract was the only way to involve gold in your investment portfolio. Gold is
primarily a monetary asset and partly a commodity. More than two thirds of gold's
total accumulated holdings relate to 'value for investment' with central bank
reserves, private players and high-carat jewelry. Less than one third of gold's total
accumulated holdings are as a 'commodity' for jewelry in Western markets and
usage in industry. Gold market is liquid and gold held by central banks, other
major institutions and retail jewelry keep coming back to the market. Due to large
stocks of Gold as against its demand, it is argued that the core driver of the real
price of gold is stock equilibrium rather than flow equilibrium. Economic forces
that determine the price of gold are different from, and in many cases opposed to
the forces that influence most financial assets. South Africa is the world's largest
gold producer with 394 tons in 2001, followed by US and Australia. India is the
world's largest gold consumer with an annual demand of 800 tons. Gold is a unique
metal. It is valued not just for its rarity, but also for its range of lovely colors, the
distinctive character of its soft metallic glow, its resistance to tarnish, and its easy
workability. Gold is so soft and malleable that one-ounce can be stretched into a
wire 50 miles long, or hammered into a sheet so thin it covers 100 square feet. In
its pure form, gold is a shiny yellow metal and is relatively inactive chemically

Standard of gold
Legal regulations governing the marking of gold jewelry began in England as early
as the year 1239. In that year, a law was enacted which established a procedure for
authenticating the purity of the gold used in various articles of jewelry. The
procedure involved the use of an official mark, which was stamped on the article at
Goldsmith's Hall in London or at one of several British government assay offices.
These "Hall Marks" started a practice, which has since been duplicated in
practically every civilized country of the world. In the United States, Congress
passed the National Gold and Silver Marking Act to govern standards of purity of
these metals for the jewelry industry. This law also included standards of purity for
gold alloys. This practice required articles such as gold-filled and rolled gold plate
to conform to federally controlled standards.
The most recent amendment to the Gold and Silver Marking Act was passed in
1976. The key provision of this amendment tightened the purity tolerances of the
gold or gold alloys in articles of merchandise, so that "...the actual fineness of such
gold or alloy shall not be less by more than three one-thousandth parts than the
fineness indicated by the mark stamped, branded, en- graved, or printed upon any
part of such article." The amendment also requires the fineness of gold solders to
be not less than seven one-thousandths less than the stipulated purity. The
amendment significantly narrowed the "minus" tolerance of karat gold, which was
previously set at ½ karat for gold articles and a full karat for soldered price.
The Karat System

In the karat system, pure gold is expressed as "24 karats fine" (24K). (Pure gold in
commercial practice is 99.95 to fine, but is nominally considered 100 %.) The gold
content of any gold article depends on the proportion of' pure gold.

Precious Metals: Gold

The collapse of equity markets and the arrival of low interest rates have increased
the investor presence in alternative investments such as gold. In India, gold has
traditionally played a multi-faceted role. Apart from being used for adornment
purpose, it has also served as an asset of the last resort and a hedge against
inflation and currency depreciation. But most importantly, it has most often been
treated as an investment.
Gold supply primarily comes from mine production, official sector sales of global
central banks, old gold scrap and net disinvestments of invested gold. Out of the
total supply of 3870 tons in 2009 last, 66% was from mine production, 20 % from
old gold scrap and 14% from official sector sales. Demand globally emanates from
fabrication (jeweler and other fabrication), Bar hoarding, net producer hedging and
Implied investment.
Gold continues to occupy a prominent part in rural Indian economy and a
significant part of the rural credit market revolves around bullion as security. India
is the largest consumer of gold in the world accounting for more than 23% of the
total world demand annually. According to unofficial estimates, India has more
than 13,000 tones of hoarded gold, which translates to around Rs 6, 50,000 corers.
Gold Imports vs. Demand in India

The Reserve Bank of India (RBI) has made a comprehensive review of the
operational matters relating to management of reserves. Put out in the RBI bulletin
of March, this has been done to bring about transparency of its approach, and
relates to the positions as of September 30, 2003; the central bank will release two
reports every year, vis-à-vis positions at end March and September. Indeed for this
RBI needs to be complimented; the central bank has emerged an important player
in this area. The report, representing a valuable database, is expected to generate
informed debate on such crucial aspects as the level and deployment of reserves,
and the exchange rate, all of which have a vital bearing on the economy. India has
come a long way since the onset of economic reforms triggered by serious
difficulties on the external front. Foreign exchange reserves have grown
significantly since 1991 reaching $100 billion. By all conventional norms - import
cover, ratio to short-term debt, and capital flows - the reserves can be considered
comfortable. These reserves are invested in across currencies, and markets. If
safety and liquidity constitute the key objectives of reserve management in India,
return optimization is an embedded strategy; in 2002-03 (July-June) the return on
foreign currency assets dropped to 2.8 per cent from 4.1 per cent during 2001-02
mainly because of lower international interest rates. The RBI bulletin, while
discussing the various risks arising out of the deployment of reserves and the
measures used employed to manage them. One aspect relates to gold. According to
the RBI Annual Report 1991, in September-November 1991, the RBI pledged the
gold with the Bank of England to raise loans, and redeemed it after repaying the
loans. Earlier, in May 1991, the Government had leased 19.99 tones out of its stock
of confiscated gold to the State Bank of India, which, in turn, sold in the
international market 18.36 tones with a repurchase option. SBI repurchased the
gold in November-December 1991. Subsequently, the Government sold the 18.36
tons of gold to the RBI. The balance of 1.63 tones of gold has since been returned
by the SBI to the Government. The gold involved in both the transactions, adding
up to 65.27 tones, was kept abroad for the time being, as per RBI Annual Report
1991. Three points emerge out of this: First, the 65.27 tones kept abroad out of 350
tones exceed 15 per cent of the RBI's total gold holding. Second, this was supposed
to be a temporary arrangement.

INDIAN GOLD MARKET

Gold is valued in India as a savings and investment vehicle and is the second
preferred investment after bank deposits. India is the world's largest consumer of
gold in jeweler as investment. In July 1997, the RBI authorized the commercial
banks to import gold for sale or loan to jewelers and exporters. At present, 13
banks are active in the import of gold.. Domestic consumption is dictated by
monsoon, harvest and marriage season. Indian jeweler off take is sensitive to price
increases and even more so to volatility. Facilities for refining, assaying, making
them into standard bars in India, as compared to the rest of the world, are
insignificant, both qualitatively and quantitatively.

India in World Gold Industry

India (In World (In

(Rounded Figures) % Share
Tons) Tons)
Total Stocks 13000 145000 9
Central Bank holding 400 28000 1.4
Annual Production 2 2600 0.08
Annual Recycling 100-300 1100-1200 13
Annual Demand 800 3700 22
Annual Imports 600 --- ---
Annual Exports 60 --- ---

Frequency Dist. of Gold London Fixing Volatility from 1995 till date
Percentage Change > 5% 2-5% < 2%
Daily      
Number of times 4 54 2147
Percentage times 0.2 2.4 97.4
Weekly      
Number of times 3 62 376
Percentage times 0.7 14.1 85.3

Bigger price movement since 1995

TIPS FOR BUYING GOLD

 Hallmarking is a system of analyzing or assaying of precious metals like gold

in a laboratory to ascertain their purity or fineness and certifying it. In other
words, hallmarking gives the buyer a guarantee on the purity of gold, issued by
an independent agency other than the jeweler.
 Hallmarked jewelry will have five markings: the BIS logo, the fineness
number, the mark of the hallmarking center, year of marking and the jeweler’s
mark. The assaying of the gold will be done in accordance with the Indian
Standard Specification IS 1418, which prescribes the fire assay test (the most
reliable and scientific). The jewelers are also expected to display a board,
specifying the purity, in carats since consumers are more familiar with it.
 The specified carat purity is an important factor in buying gold jewelry. It
indicates the percentage of real gold in any piece of jewelry. In most cases, the
carat of the piece of jewelry is mentioned on it, apart from the hallmark of the
jeweler. This is genuine proof that it is indeed real gold.
 24-carat gold is pure. It is soft, almost flexible and easy to break. That is why it
is not always used in the making of modern jewellery, which features delicate
designs. Other metals like silver, copper, nickel or zinc are added to gold in
small quantities to make it workable, durable and even colorful.
 In choosing gold jewellery, the primary aim should be to build up a collection
of the first five essential pieces, which are: necklace, bracelets, long earrings,
big round earrings and different pendants. Always remember to choose gold
jeweler for your collection with utmost care; it has to reflect your taste.
 Jeweler, you should be equally certain that the jewellery you choose will look
good on you. If you are buying a new style in gold jewellery for the first time,
 it is advisable to get someone who understands gold jewellery fashions and
trends, to go with you.
 Gold jewellery is available in a variety of carat ranges. The preferences for a
certain range of gold purity are usually based on cultural, regional or
traditional factors. For instance, 22 carat gold is predominantly used in India;
while Arabs prefer 21 carat gold. Most Europeans prefer 18 carat gold. 24-
carat jewel gold, which is considered the purest gold available, is usually used
as a mode of investment or exchange.

GOLD AS INVESTMENT

Demand for gold for the purpose of investment has outpaced the demand for the
yellow metal for jewellery in 2004. Indians purchased 74.0 tons of gold for
investment from January to September 2004, while it was 67.8 tons during the
same period in 2003.There are two schools of thought on this subject. The
recommendations are in the range of a 15% to 20% allocation of the total portfolio.

 15% of the investment portfolio -- European Central Bank decision at the time
of establishment in 1999 based on internal studies.
 20% of the investment portfolio -- Based on a model done by Germmill &
Hillman on 20 years data. Ideally, however, allocation to gold from an
investment perspective should be based on comprehensive financial planning.
It should always be remembered that investment in physical gold must always
be in the form of coins/bars and should be in addition to the jewellery held by
the household. Advantages of gold in a portfolio can be explained through the
following points:

 Gold has a low to negative correlation with most other asset classes.
 An investment portfolio with an allocation to gold improves the consistency of
portfolio performance during both stable and unstable periods.
 The price of gold is not linked to the performance of economy, industry or
companies.
 Gold offers the benefit of diversifying portfolio risks.

Let us consider an example where an investor invests Rs 10,000 each in various

options like equities, fixed deposit, PPF and gold in March 1999. Let us see what
the returns are in each case, taking the deposit period 1999 to 2004 into
consideration. In gold, by March 2004, his investment would have fetched him Rs
15,063, a substantial increase. The money invested in PPF would have grown to Rs
16,025 by March 2004. A fixed deposit of the same amount would have yielded Rs
13,794 by March 2004. (Refer to the data below for varying interest rates)
 By March 2004, his investments in equities for the same amount would have
become Rs 18,916. This is provided the investor had remained invested in the
market throughout the five years, even during periods when the Sensex saw
huge downward movements.
Fixed Deposit Rates
Year Interest Rate Capital (Rs)
1999 7.50% 10,000
2000 7.25% 10,750
2001 7.00% 11,529
2002 6.50% 12,336
2003 5.00% 13,138
2004 4.75% 13,794

PPF Rates
Year Interest Rate Amount (Rs.)
1999 12% 10,000 (Capital)
2000 11% 11,200
2001 9.50% 12,432
2002 9% 13,613
2003 8% 14838
2004 8% 16,025

Gains on Gold
Year Gold YoY Rise/Drop Amount
Price Rise/Drop (%) (Rs.)
(Rs.)
 1999 4,296 123 3 10,000
2000 4,419 (79) (2) 10,286
2001 4,340 733 17 10,104
2002 5,073 674 13 11,810
2003 5,747 727 13 13,379
2004 6,474 426 15,063
2005 6,900 3,315
2006 9,215

Gains on BSE Sensex

Year Sensex YoY Rise/Drop Amount
Rise/Drop (%)
(Rs.)
1999 start 3,065 1,941 63
1999 close 5,006 (1,034) (21) 16,332
2000 3,972 (710) (18) 12,867
2001 3,262 115 4 10,577
2002 3,377 2,462 73 10,947
2003 5,839 575 10 18,916
2004 6,414 1,786 20,769
2005 8,200 3,839
2006 12,039

Cost efficient ways of investment in gold internationally

Owning gold has been possible over the years in the form of mutual funds or
stocks of gold mining companies. However, investors have been awaiting a more
cost effective platform for owning gold. The World Gold council recognized this
fact and launched the following ETF gold products across the world.

INVESTMENT IN GOLD

In January 1980, gold price was over $800 per ounce when the crude oil hit $40 a
barrel. After a quarter of a century, the oil price has increased more than 50%, but
gold price was cut in half. In 2001, gold reached its lowest level around $250.
Since then, gold has nearly doubled - averaged $450 in 2005.

Many people believe that the gold price will continue to rise based on the
following observations:

1. Increasing demand from jewelry consumption in India and China.

2. Decreasing supply from production.
3. More central banks switch their reserves to gold.
4. More investors are interested in gold.

What to invest

 Mining stocks, e.g., Bema Gold (BGO), Vista Gold (VGZ) and Nova Gold
(NG), which have substantial amount of gold reserves.
 Gold ETF, which can be traded like stocks with price tied to the spot gold. The
largest gold ETF is Street Tracks Gold Shares Gold bullions and coins.
 Gold futures (for experienced traders only).
INVESTMENT STRATEGY

For most people, simply buy and hold until almost everyone has bought gold
(probably when gold reaches $1600 an ounce). If you try to catch the short-term
fluctuation, the following information may be useful:

 Daily report from Street Tracks Gold Shares about their Net Asset Value
(scroll down to near the bottom of the linked page). If they are buying, the gold
price tends to rise.
 Weekly report of Commitment of Traders on gold. In the past three years
(2003-2005), increase in the commercial shorts tended to drive downs the gold
price. However, there is no guarantee that this indicator will work in the
future. 
 Collected opinions from the Gold-Eagle forum. I found their opinions quite
useful, especially by Goldilocks. 

IS GOLD A GOLDEN INVESTMENT

1. The Popularity of Gold

Gold and silver have been sought and prized since prehistoric times. They have
also been both a cause of war and a medium of exchange. Gold is the standard by
which the value of anything is assessed; it is universally accepted. Silver does not
lag behind in global trade markets and as an investment. In the code of Manes, an
Egyptian ruler of 3100 BC, it is declared that ‘one unit of gold is equal to two-and-
a-half units of silver in value’. Silver was actually more widely employed as the
standard of value until the nineteenth century. Indians’ faith in God and gold dates
back to the Vedic times; they worshipped both. The historian Pliny complained
that her Indian trade drained ancient Rome’s bullion resources. Indian merchants
always demanded payment in silver during the times of the East India Company;
so much silver was exported from London that East India Company teetered on the
brink of financial disaster. According to the World Gold Council Report, India
stands today as the world’s largest single market for gold consumption. In
developing countries, people have often trusted gold as a better investment than
bonds and stocks. Gold and silver have been popular in India because historically
these acted as a good hedge against inflation. In that sense these metals have been
more attractive than bank deposits or gilt-edged securities. Despite recent hiccups,
gold is an important and popular investment for many reasons:

 In many countries gold remains an integral part of social and religious customs,
besides being the basic form of saving. Shakespeare called it ‘the saint-seducing
gold’.
 Superstition about the healing powers of gold persists. Ayurvedic medicine in
India recommends gold powder and pills for many ailments.
 Gold is indestructible. It does not tarnish and is also not corroded by acid –
except by a mixture of nitric and hydrochloric acids.
 Gold has aesthetic appeal. Its beauty recommends it for ornament making above
all other metals.
 Gold is so malleable that one ounce of the metal can be beaten into a sheet
covering nearly a hundred square feet.
 Gold is so ductile that one ounce of it can be drawn into fifty miles of thin gold
wire.
 Gold is an excellent conductor of electricity; a microscopic circuit of liquid
gold ‘printed’ on a ceramic strip saves miles of wiring in a computer.
 Gold is so highly valued that a single smuggler can carry gold worth Rs. 50
lakh underneath his shirt.
 Gold is so dense that all the 90,000 tones estimated to have been mined through
history could be transported by one single modern super tanker.

Why People Buy Gold

 Industrial applications take advantage of gold’s high resistance to corrosion,

its malleability, ductility, high electrical conductivity and its ability to adhere
firmly to other metals.
 There is a wide range of industries, from electronic components to porcelain,
which use gold. Dentistry is an important user of gold. The jewellery industry
is another.
 Acquisition of gold because of its long-proven ability to retain value, and to
appreciate in value.
 Purchases by the central banks and international monetary organizations like
the International Monetary Fund (IMF).

2. Sources and Price of Gold

South Africa produces 72% of the gold in the free world, whereas India’s
contribution is just around 0.3%. The production of gold by the former USSR was
considerable, but the quantities produced were a state secret. Many experts used to
think that the Soviet State Bank had large reserves of gold. But after the fall of the
communists in 1991, the Soviet State Bank had a hearty laugh; it had no gold
stocks at all. After that experience, Bank of England insisted on physical delivery
of gold by Reserve Bank of India during the foreign exchange crisis in early 1991.
As South Africa depends on gold sales to balance her budget, her balance of
payment position influences the gold market in the world.

The Price of Gold

During the ’50s gold appreciated marginally; from Rs. 99 in 1950 to Rs. 111 in
1960. The next decade, 1960-70, it moved up to Rs. 184. Between 1970 and 1980
came the massive rise from Rs. 184 to Rs. 1,330. During the ’80s, it moved up
another 240%. The trend of gold prices in India in the last few years is given in
Table 1. Table 1 reveals that between 1950 and 2002, gold appreciated 51 times
and silver 49 times; an annual compound rate of return of 7.8% in both the cases.

Bullion Prices in India

March Gold price per Silver price March Gold price per Silver price
end 10 gm per 1 kg End 10 gm per 1 kg
(Rs) (Rs) (Rs) (Rs) (Rs)
1925 18 61 1980 1,330 2,655
1930 18 46 1985 2,130 3,955
1935 30 58 1990 3,200 6,433
1940 36 48 1995 4,658 6,179
1945 62 110 1996 5,713 8,486
1950 99 160 1997 4,750 6,825
1955 79 142 1998 4,050 8,590
1960 111 185 1999 4,220 7,845
1965 71 280 2000 4,395 7,765
1970 184 521 2001 4,410 7,365
1975 540 1,012 2002 5,030 7,870

3. Gold in India

In addition to the 9,000 MT of gold with the people of India, the Government of
India has about 80 MT of confiscated gold. Further, the Reserve Bank of India has
gold reserves as well. These official gold reserves helped India to tide over its
foreign exchange crisis in 1991. India’s stock of gold of about 9000 tones was
valued at Rs. 450,000 Crore, which perhaps is an indication of the extent of black
money in the country. Legal imports of about 500 tons of gold in 1998-99 were
valued at about Rs. 20,000 Corer. In comparison, India’s trade deficit that year was
only around Rs. 15,000 Corer. Today, India imports gold more than any other
commodity. Than half of the annual requirement of gold in India (estimated to be
around 200 MT) was met by smuggled gold. However, the situation changed
totally after 1992. The ban on gold imports was lifted in March 1992. All returning
NRIs can now bring gold up to 10 kg per person. They have to pay a fixed duty.
This measure is expected to reduce, if not eliminate, gold smuggling, bring in
revenue for the government, and reduce the disparity between international and
domestic prices of gold.

4. The Prospects for Gold

In 1963, the Gold Control Order was promulgated under the Defense of India Act
in the light of the India-China war. Under the Gold Control Scheme, the maximum
purity of all ornaments to be made in the country, whether from remolten old
ornaments of higher purity or from gold in any other form, was restricted to 14
carats in place of the earlier 22 carats. Since its inception, the Gold Control Act of
1963 has had to be amended, diluted and whittled down. Eventually in 1990, the
Finance Minister repealed the Gold Control Act. It was very widely welcomed by
one and all, for understandable reasons.

Gold smuggling into India was rampant as the gold price in India has been
historically higher than the international parity price. For example, on 27 April
1990, the price of gold (10 gm) in Bombay was Rs. 3,400, whereas the New York
price was only Rs. 2,065. In other words, the Indian price of gold was nearly 65%
higher.

The central problem of bullion trade in India is the excess of demand over supply.
As there was a total ban on import of gold, the excess demand was met through
large-scale smuggling. According to the Bombay Bullion Many investors have
forgotten that when gold price went up during the late 1970s it was just trying to
catch up with prices of other things, which had already gone up.

In 1970, when the price of gold was $35 an ounce (due to the gold standard then
followed in USA) it was unquestionably undervalued. When gold hit $850 an
ounce in January 1980 it was again, unquestionably, overvalued. If the increase in
gold price had kept the same pace in 1980s and 1990s as it did in 1970s, it would
have become $20,000 an ounce by 2000. With a number of Central Banks selling
off huge chunks of their gold reserves, the international price of gold has come
down in the last few years.

Timothy Green, a well-known gold expert, reminds us of a historical truth: ‘The

great strength of gold throughout history has not been that you make money by
holding it, but rather you do not lose. That ought to remain its best credential’. A
research study on gold established a remarkable consistency in the purchasing
power of gold over four centuries.
WHY INVESTMENT IN GOLD

 Gold is the only universal currency, which does not loose its value across the
Globe.  
 Gold is the only asset, which acts as a risk mitigator for a portfolio in case of
volatility of other asset classes. For ex- in case of any adverse events, asset
classes like Equity, Debt may show downward trend but Gold mostly shows
upward trend. Hence, overall return on investments does not come down as
Gold acts as a shock absorber.  
 By constituting Gold also as one of the options in a mixed portfolio, portfolio's
capacity to take exposure in high-risk high return investments like equities
increases.
 Gold prices are increases day-to-day.
 Its give an higher rate of return to the investors.  

The gold industry consumes a tenth of the world’s energy, spews out 30-50% of
the globe’s toxic emissions and imperils 40% of the frontier forests A single gold
ring generates a staggering 20 tones of waste. John Maynard Keynes, the renowned
British economist who famously advocated digging holes and filling them up
during the Depression in the 1930s, once castigated gold as a “barbarous relic”.
But its peculiar appeal simply refuses to fade. Even in the 21st century, when it has
stopped serving as the reserve for currencies of the world, Fort Knox, the Reserve
Bank in Mumbai and countless other central banks around the globe continue to
hoard vast quantities of it, although the yellow metal does not appreciate in value
or earn interest.

India is the biggest consumer of this metal, some 950 tones of it annually, by some
counts (accurate estimates are impossible to come by, considering that much of it
is smuggled in, though not on the scale previously). Old-timers still recall “the bad
old days” when Morarji Desai, as finance minister, imposed a Gold Control Order.
Everyone had to declare his holdings, much to the chagrin of some householders,
especially industrialists and sundry businessmen who hoard gold as unaccounted-
for wealth.

According to the international lobby group known as the World Gold Council,
“Gold was acquired in India in Roman times as part of the silk and spice trade, and
the first gold ducats struck by the Venice Mint in 1285 went into the Levant (i.e.
the countries bordering the eastern Mediterranean) and on into India. In the 17th
century the Dutch and English East India Companies paid for goods with gold and
silver and during the American Civil War, India received gold from the US in
return for the cotton that it supplied to make up for the lost crops in America.
Estimates vary, but it is believed that at least 13,000 tones of gold rest in India – or
approximately 9% of the worlds cumulative mine production.

India in world gold industry

  India (In Tones) World (In Tones) % Share

Total Stocks 13,000 145,000 9
Central Bank holding 400 28,000 1.4
Annual Production 2 2,600 0.08
Annual Recycling 100-300 1,100-1,200 13
Annual Demand 800 3700 22
       

“The hoarding tendency is well ingrained in Indian society, not least because
inheritance laws in the middle of the 20th century lent a great desirability to
anonymity. Indian people are renowned for saving for the future and the financial
savings ratio is strong, with a ratio of financial assets-to-GDP of 93%. Gold is
valued in India as a savings and investment vehicle and is the second preferred
investment behind bank deposits. India is the world’s largest consumer of gold in
jewellery (much of which is purchased as investment). Gold circulates within the
system and roughly, 30% of gold jewellery fabrication is from recycled pieces.
India is typically also the largest purchaser of coins and bars for investment (over
80 tones per year).” What no one, either in industrial or developing countries, is at
all aware of, is that this is arguably the world’s most polluting industry, in the
conventional sense of causing waste and toxic effluents.

A single gold ring generates a staggering 20 tones of waste! Most people take gold
for granted something that one inherits, acquires on auspicious occasions and tries
to accumulate as much as possible of. It is not for nothing that there is the adage,
“old is gold”. We seldom think about the environmental impact of pandering to our
craze for the yellow metal. The gold industry consumes a tenth of the world’s
energy, spews out 30-50% of the globe’s toxic emissions and imperils 40% of the
frontier forests. The entire process – from mining to jewellery – is highly polluting.
When you dig for gold, you extract far more earth and rock than contains minute
traces of this metal – if you are lucky, to begin with. Open pit mines generate huge
piles of waste rock. Mine waste has polluted groundwater, leaving it thousands of
times more acidic than battery acid. As a recent report from Earthworks and
Oxfam America observes, “Once it’s extracted, the ore is crushed, piled into huge
heaps and sprayed with cyanide, which causes the gold to leach out of the ore.
Some mines use several tones of cyanide daily. A rice-grain sized dose of cyanide
can be fatal. The cyanide contaminated waste ore is usually just abandoned.”

IS OLD INVESTMENT BETTER THAN FDs?

Thought to be one of the first known metals, gold has been coveted throughout
history for its beauty, scarcity, malleability, and uncanny resistance to rust and
corrosion. Centuries ago, gold's unique combination of properties -- its sun-like
color, its soft hardness, and, especially, its imperviousness to decay and corruption
-- imbued it with magical associations in the eyes of many. Because of these
unique properties, gold has traditionally been the currency of choice for much of
the world's population. The value of gold has transcended all national, political,
and cultural borders, making it the ideal currency. Historically gold prices were
determined by a combination of political and economical factors, till a universally
acceptable concept of London and American gold price was institutionalized. An
outcome of such initiatives was the Washington Agreement. However, in the past
few years, the major factors impacting the gold price can be summarized as under:

 Weak US dollar
 Growth in demand for jewellery
 Increase in demand for exchange-traded paper backed products

Weak US dollar

Projections about a declining dollar due to an ever-increasing twin deficit

supported by many investment veterans are met by much denial from politicians as
well as from investors. As long as foreigners are willing to pour in the amount of
$2 billion every working day, the dollar won't crash. But if foreign confidence
were to wane, the US dollar will be heading south. No matter how you look at the
US twin deficits and America's future fiscal liabilities, this problem is huge and
some painful adjustments not only seem to be necessary but unavoidable as well. It
should be obvious that one of these major painful adjustments will be a massive
devaluation of the US dollar. It seems that the idea of dollar devaluation is gaining
support from the Fed when the president of the Dallas Fed, Robert McTeer
recently said: "Over time, there is only one way for the dollar to go -- lower."
Former ECB president Wim Duisenberg, quoted by Spanish Newspaper El Pais,
recently said: "dollar devaluation seems inevitable due to the tremendous US
Current Account deficit." Furthermore he recently said on Dutch television that we
can only hope and pray for a smooth economic transition in the US. Why is this so
important? Simple, the US dollar is the key driver for gold; as the dollar goes, so
will gold; but in the opposite direction.

Growth in demand for jewellery

In spite of the convergence of diamond and palladium, the demand for gold
jewellery has seen a regular growth year-on-year. Countries primarily
responsible for this growth are India, China, Italy, Turkey and the USA. The
demand for consumption of gold in jewellery was 6% higher at 735 tones and
also comprised a new first-quarter record. The US, which accounts for 10% of
world gold demand, is also one of the markets where public taste in gold
jewellery is enjoying a renaissance. The renewed interest in gold also extends to
Japan, a market that showed a 19% increase in demand. The Indian market --
the world's largest for gold demand -- was 23% higher following the marriage
and festival period, which, in turn, has led to restocking by retailers. The
earthquake in India, however, is unlikely to hit demand significantly as it
occurred in an area which comprises only 5% of the total Indian consumption.
There were sharp falls in demand in Turkey and Taiwan -- down 38% and 31%,
respectively. This was due to economic difficulties and continued weakness in
investment demand.
Increase in demand for exchange traded paper backed products
For the first time in history, gold can be purchased like any listed stock at select
stock exchanges of the world like London Stock Exchange, Australian Stock
Exchange (Gold Bullion Securities) and New York Stock Exchange (Street
 Tracks Gold). The World Gold Council initiated Electronic Traded Funds have
displayed very good performance and growth in volumes since launch.

THE GOLD INVESTMENT IS BETTER THAN THE STOCK EXCHANGE IN

THE LONG TERM INVESTMENT
Reasons:
The investment in gold is better than stock in long-term investment is true. There
are so many reasons they define the gold investment is better than stocks. The
India is under developing country and the more than 70% population of India
living in the villages. In India the income group are divided in the three parts like
middle class, low class and higher-class income group. The higher-class income
group of India is invested there income in the both stages like in gold as-well-as
stock. But the other two groups are invested there investment in the gold more then
the stocks because they are living in the villages and due to less knowledge of the
investment in stock exchange they purchases gold jewellery for the long time
period and after some time they sell the gold jewellery and earned more return on
them. The price of stock market investment is up and down day to day but the price
of gold commodity is rises from last 9 and 10 years. The Indian rural area
population is invested there money more in the gold than stock due to their
customs and many interest.
 India's love for gold

Over centuries and millennia, gold has become an inseparable part of the Indian
society and fused into the psyche of the Indian. Having passed through fire in its
process of evolution it is seen as a symbol of purity, the seed of Agni, the God of
fire. Perhaps this is why it is a must at every religious function. Gold has acted as
the common medium of exchange or the store of value across different dynasties in
India spanning thousands of years and countless wars. Thus wealth could be
preserved inspire of wars and political turbulence. For centuries, gold has been a
prime means of saving in rural India. 
In Western countries, gold jewellery is sold at fixed and high prices ranging from
100% to 300% and more above the value of it’s fine gold content. In India, gold
jewellery is sold at fluctuating and low prices related to the prevailing value of its
fine gold content. The declared retail marks up ranges from 5-25%. It acts as a
tradable investment in that it is easy for consumers to sell or exchange their
jewellery at a reasonable price. There are approximately 300,000 “traditional” gold
jewellery outlets, more than 10,000 refiners, more than 1000 coin fabrication units
and about 3 million active goldsmiths and ancillary workers throughout the
country. The 181 million families in India hold an average of 64 grammas of fine
gold of which at least 90% is held as gold jewellery. These statistics give a
measure of the fanatical passion for gold in India.
India is the largest importer of gold with demand hovering around 25% of world
gold demand. It imports about 663 tones of gold annually mainly in the form of
small cast bars weighing 10 tolas (3.75oz), widely known as TT bars or biscuits at
an annual cost of approximately US $7 billion. Since 1990, an estimated 5,246
tones of gold have been imported officially and unofficially. Eight major gold
refiners in Australia, Switzerland, South Africa and United Kingdom produce most
imported TT bars. The official import of gold bullion for the domestic market
occurs through two authorized Government schemes: Open General License
(OGL) scheme since 1997 and the Non resident Indian (NRI) scheme since 1992.
The OGL scheme (20 banks and 4 public sector undertakings are authorized)
accounts for 99% of official imports. 

Today, gold forms 10% of average Indian asset allocation.

 
 Asset class Allocation
Bank deposits 20%
Insurance and small savings 27%
Gold 10%
Shares 2%
Mutual Funds 2%
Others 39%

But, most of this gold is in the form of jewellery – something that is looked upon
as a status symbol to be sold only in distress. Gold is not yet considered as a
serious part of an investment portfolio. Jewellery by itself has a major drawback –
there is a loss of around 30% due to making charges. Then what would be the ideal
way to invest in gold? Sanjeev Aggarwal, Managing Director-Indian Sub
Continent, World Gold Council (WGC) suggests that physical gold can be bought
from banks like ICICI Bank and HDFC Bank. The banks have started to sell 10 gm
denominated gold coins. These coins are of 99.99% purity. If you sell these coins
or bars in the market, you will get the full value of gold without any loss due to
making or melting. Financial planners recommend a systematic investment in gold.
Certified Financial Planner Gaurav Mashruwala and his wife Pranati did exactly
that. They have been buying 100 grams of physical gold every year for the last 10
years. They make their purchase every Diwali. Over the last 10 years, they have
managed a return of 8.5% per annum.

 Gold Future
Gold futures are the traditional way of involving gold in investment schemes and
business transactions. A `Futures’ contract contains an agreement to buy or sell a
specific commodity, asset or security at a pre-decided price. The contract is legally
binding to both parties. The two parties are: the investor, who may want to buy or
sell gold or any other commodity, and the broker who is willing to take an opposite
position. This is how it works. An investor may want to buy gold feels that the
price will rise from say Rs 750 per gram to Rs 800 per gram within three month.
He could lock in to a specific price for delivery after three months. The investor
then enters into a futures contract with a broker. The investor only has to pay up
the margin money of 10-20 per cent, depending on the prevalent interest rates and
the exchange rules. The investor could invest his balance money in other assets for
the period. But, if on the delivery date the price of gold has touched Rs 820, he
needn’t feel stupid. As, he could take delivery by paying the balance amount and
sell the gold in the spot market if he is an investor. This offers him tremendous
leverage. The reverse works when prices fall. With gold prices hovering well over
the Rs 800 per gram and no decline in sight, its seems only logical that investors
should seriously look at various opportunities that the yellow metal offers, before
planning their portfolio. Futures trading in Gold in India was carried out till 1962
mainly via Bombay Bullion Association, but as the Gold Control Act came into
force this trading was debarred for around 41 long years. On 29 August 2003,
National Multi-Commodity Exchange of India Ltd; got the permission to once
again carry out this trend of futures trading in Gold. For centuries, gold has meant
wealth, prestige, and power, and its rarity and natural beauty have made it precious
to men and women alike

 PRICE DIFFERENCE ON BOTH

The price of the gold was increased from last 9 to10 years. The price of gold was
more increased in the year 1996. Due to increases of the price of the gold the
demand of the gold is increases in India in a high rate of return. The gold price is
increasing in India and all over the world because the investor is invested there
investment in gold more then the stock for the long term investment. The gold
investment gives and high rates of the return the stock.
With the help of the data we find that the gold investment is better than the stock
because in current the investors invested their money more in gold for the long
period.

The demand of the gold is much higher than the stock in current as well as in the
last years. The price of the gold is always high than the stock.

PRICE OF GOLD PER 10 GRMS IN LAST 8 YEARS

12000

10000

8000

6000 PRICE
YEAR
4000

2000

0
1 2 3 4 5 6 7 8
The BSE Sensex is also in the increasing rate due to last 8 years. Due to the
investment increases in the FII’S, blue chip companies, software companies, IT
sectors, cement companies and many more companies the stock exchange Sensex
are also increasing. But the investment in the stock exchange is less than
investment in gold.

BSE SENSEX IN LAST 8 YEARS

14000
12000
10000
8000
SENSEX
6000
4000
2000
0

 RISK FACTORS
Risk in case of investment in stocks
There are so many factors affects the investment of the stock. There are two types
of risk in the stock: systematic and unsystematic risk. These both risk are affected
the investment in the stocks. The investment in the stocks is affected by:
 Market risk
 Interest rate risk
 Purchasing power risk
 Business risk
 Financial risk
The political, legal, social and Government rules and regulation also affect the
investment in the stock exchange. India is an under developing country, out of its
70% of population is living in the rural area. Due to less knowledge about the stock
exchange the middle and lower income class of India not invested their money in
the stocks. The risk is higher in the stocks than gold because:
1. Depending upon government policies. The stock exchange is totally depending
on the government policies. The rules and regulations of government are
affected the stock. The government policy is change every year in India. So due
to the price of different companies changed every day, month and every year.
2. Fluctuation in price. The fluctuations in the price of the stock are also affect the
stock market. Due to the bull and bear situation in the stock exchange the
investor faced more risk in the market. The stocks price is affected by many
factors like government policies, political, social and many more. So due to
day-to-day change in the price the risk factor is also increased in the stocks.
3. Natural climates. The natural climates are also affected the dealing in the stock
exchange. Due to the natural climates stock exchange faced a bear situation in
the market it means due to natural climates like flood, earthquake and others the
stock market goes down and the investors faced more risk.
4. Less knowledge. India is a large country and its 70% of population is living in
villages. So due to living in rural areas the maximum population of India not
well know about stock exchange. The middle class and the lower class families
of India is invested there money for buying gold. So due to less knowledge
about the stock exchange they do not want to take risk.
Risk in gold investment
There are so many factor also affected the gold investment. The risk in the golden
investment is less than the stock exchange because the gold investment is not based
on the government policies, legal factors, political factors etc. There are other
factors affects the gold investment like:
1. Gold wants more security then stock.
2. Theft problems.
3. Less Liquidity in gold investment because if an investor has need of money
then at the time they cannot sell gold.
4. The demand of gold is less on the international level. Now the demand of the
white gold is increase in the international level.
 RETURN FACTORS
Return in case stock
The risk and the return both are high in case of stock. But due to more risk the
investors do not want to invest in the stocks because they do not want to take risk
in the long-term investment. Return is also high in the stock exchange because the
liquidity ratio is more in the stock than the gold investment.
Return in the gold investment
The gold investment is much higher than investment in the stock because the price
of the gold is increases day to day and its demand is also high than the stocks. If an
investors invested their money in the gold then in the future they earns more
money. Due to less risk in the gold investment the investors invested their
investment in gold. In the long term investment the gold investment is better than
the stocks. If we buy some amount of gold today then after some years if we want
to purchase is then it gives more return.

PRICE
Gold Stock exchange
 14000
12000 12000
10000 10000
8000 8000
SENSEX
6000
6000 PRICE 4000
4000 YEAR 2000
0
2000
0
1 2 3 4 5 6 7 8

Gold
Year Price
1999 4296
2000 4419
2001 4340
2002 5073
2003 5747
2004 6474
2005 6900
2006 9200

Stock exchange
Year Sensex
1999 3065
2000 3972
2001 3262
2002 3377
2003 5839
2004 6414
2005 8200
2006 12000
CHAPTER -2
LITERATURE REVIEW
LITERATURE REVIEW

1. Stock Market Development and Financial Intermediaries:

Asli Demirgüç-Kunt and Ross Levine (May 1995)

World stock markets are booming. Between 1982 and 1993, stock market
capitalization grew from $2 trillion to $10 trillion, an average 15 percent a year. A
disproportionate amount of this growth was in emerging stock markets, which rose
from 3 percent of world stock market capitalization to 14 percent in the same
period.
He highlights certain important correlations:
In the 41 countries they studied, there are enormous cross-country differences in
the level of stock market development for each indicator. The ratio of market
capitalization to GDP, for example, is greater than 1 in five countries and less than
0.10 in five others.
There are intuitively appealing correlations among indicators. For example, big
markets tend to be less volatile, more liquid, and less concentrated in a few stocks.
Internationally integrated markets tend to be less volatile. And institutionally
developed markets tend to be large and liquid.
The three most developed markets are in Japan, the United Kingdom, and the
United States. The most underdeveloped markets are in Colombia, Nigeria,
Venezuela, and Zimbabwe. Malaysia, the Republic of Korea, and Switzerland
seem to have highly developed stock markets, whereas Argentina, Greece,
Pakistan, and Turkey have underdeveloped markets. Markets tend to be more
developed in richer countries, but many markets commonly labeled "emerging"
(for example, in Korea, Malaysia, and Thailand) are systematically more
developed than markets commonly labeled "developed" (for example, in Australia,
Canada, and many European countries).
Between 1986 and 1993, some markets developed rapidly in size, liquidity, and
international integration. Indonesia, Portugal, Turkey, and Venezuela experienced
explosive development, for example. Case studies on the reasons for (and
economic consequences of) this rapid development could yield valuable insights.
The level of stock market development is highly correlated with the development
of banks, nonbank financial institutions (finance companies, mutual funds, and
brokerage houses), insurance companies, and private pension funds.

2. Stock Market Development and Long-Run Growth:

Ross Levine and Sara Zervos (March 1996)
Levine and Zervos empirically evaluate the relationship between stock market
development and long-term growth. The data suggest that stock market
development is positively associated with economic growth. Moreover,
instrumental variables procedures indicate a strong connection between the
predetermined component of stock market development and economic growth in
the long run. While cross-country regressions imply a strong link between stock
market development and economic growth, the results should be viewed as
suggestive partial correlations that stimulate additional research rather than as
conclusive findings. Much work remains to be done to shed light on the
relationship between stock market development and economic growth. Careful
case studies might help identify causal relationships and further research could be
done on the time-series property of such relationships. Research should also be
done to identify policies that facilitate the development of sound securities
markets.
3. Stock Market

K.S. Chalapati Rao

With the backing of the World Bank group, many developing countries started
giving prominence to stock markets for financing enterprises and allocation of
savings. In India too, the process started in the early ‘eighties. In the wake of
increased pace of economic liberalisation initiated in 1991, the Capital Issues
Control Act, 1947, which till then regulated the issue and pricing of new capital,
was done away with and even greater emphasis was placed on the stock market. As
a part of the measures to develop the stock market and liberalisation of the external
sector, foreign institutional investors were invited to trade directly on the Indian
stock exchanges. The main expectations were that the market would help
corporates raise resources directly from investors, help attract foreign portfolio
capital and facilitate the process of privatisation. The entry of foreign
portfolio/institutional investors (FIIs) was expected to broaden the base of the
market and also help in the market’s development by forcing developing country
governments to follow consistent and market friendly policies. Through their
expert analysis and research, FIIs were expected to help in better price discovery.
Since 1991, a number of measures at improving share trading and delivery
mechanisms and investor protection ranging from more periodic disclosures,
takeover regulations, insider trading rules, corporate governance code, etc. have
been introduced by the Securities and Exchange Board of India (SEBI), the market
regulator.
4. Free-float Sensex is a Better Index

Dr. Pratap Chandra Biswal

Assistant Professor
Institute for Studies in Industrial Development
New Delhi – 110 002

Free float Sensex is a step in the right direction. Its success and transparent practice
is in the hands of company management and regulators. BSE will be transforming
the Sensex into a free-float index from September 1, 2003. Globally, the free-float
methodology of index construction is considered to be industry best practice and
all major index providers like MSCI, FTSE, S & P and STOXX have adopted the
same. Currently in India there are two indices based on the free-float methodology.
BSETECk index -- the country’s first free-float index, was launched in July 2001,
and BANKEX, also by BSE, was introduced in June 2003. After gaining
experience with these two indices and following a series of discussions during the
last couple of years, BSE is shifting the Sensex, its flagship index, regarded widely
as the bellwether of India’s stock market, into a free-float index. Notably, in order
to generate a nationwide debate on the issue of free-float, BSE organized a
‘Roundtable on Free-float index’ in March 2002 chaired by Mr. Mark Makepeace,
president and CEO-FTSE group and the response was overwhelming support from
the investing community for shifting the benchmark indices to the free-float
methodology.
5. The Indian Stock Market In 2005–06

K S Chalapati Rao
K V K Ranganathan
Institute for Studies in Industrial Development

In the last year’s share price increase India may have benefited, along with some
other emerging markets, from FII investment strategies. But the lingering doubts
about quality of FII funds are not entirely baseless as almost half of the funds
entered through the PN route, which masks the antecedents of the investors. FII
investments are being supported on two main counts. One, they reduce the cost of
equity capital to enterprises. The question is to what extent the cost should be
reduced. An associated question is: are there enough safeguards to ensure that the
moneys thus raised are utilized to the optimum and to prevent empire building by
the promoters? On the other hand, in the ensuing volatile environment, can
enterprises and local investors decide about the fair value of a share? What looks
like an under‐priced issue in a rising market may turn out to be a vastly overvalued
one in a falling one. The second is even less convincing as it seeks to provide
support to balance of payments and thus have nothing to do with the financing of
corporates, the main objective. Interestingly, one of the measures suggested to
spread the risks is to enable domestic investors/institutions to invest in other
economies. In the dependence on foreign portfolio investments, not much thought
is being given to the domestic individual investor’s role, position and predicament.
It also needs to be given a thought whether it is better to give foreign portfolio
investors all the concessions and cope with their “irrational exuberance” and suffer
the volatility or to tap the huge potential of NRI professionals whose remittances
have proved to be much more in terms of volume.
CHAPTER – 3
RESEARCH METHODOLOGY
RESEARCH METHODOLOGY

Research is a voyage from known to unknown. Research methodology is s

procedure for conducting a systematic & a planned way to carry out our research
project for the purpose of achieving the objective. A useful research methodology
must be exhaustive, comprehensive in the time and free from bias or uncertainty.
The researcher is therefore compelled to follow certain basic scientific rules or
steps and stipulation is designing, planning and executing the research.

TYPES OF RESEARCH
In this research we used Analytical research because in this project we collected
the secondary data those already available in the market. With the help of this
types of research we analysis the all situation of stock and gold market.
We used facts of information already available, and analyze these to make a
critical evaluation of the material.

OBJECTIVE OF STUDY

 To identify the role of stock exchange and gold investment.

 To identify the best long-term investment.
 To identify the best option of investment from the stock or the gold in
India.
 To identify the investment stage of different-different income group of
the county.
 To study the market potential of the stock exchange and the gold
investment.

RESEARCH DESIGN
A research design is the arrangement of condition and analysis of data in manner
that aims to combine relevance to the research purpose with economy in the
procedure in fact; the research design is the conceptual structure with is research is
conducted. It constitutes the blue prints for the collection, measurement and
analysis. Research has used only secondary data for the purpose of to collect data.
With the help of past and current data are available in the market to identify the
best option of investment in the long-term investment. In this research only used
the secondary data for the purpose to analysis the best one.

DATA SOURCES
These were to type of data sources which were helpful in preparing this project
report.
i. Primary Data
ii. Secondary Data
The research plan can call or gathering secondary data, primary data or both.
Secondary data consist of information that already exists somewhere having been
collected for another purpose.
Primary Data:
This marketing research project involved some primary data collection. The
normal procedure was to contact the respondent and have their personal interviews
together relevant information on the research topic. In this project the data
collected through various respondents in this field is used as primary data.
Secondary Data:
Some of the records available within the internet on the topic acted as a source of
secondary data.

METHOD OF DATA COLLECTION

In this research only used the secondary method for the purpose of to collect the
data. With the help of different-different books, magazines, internet and journals
for collecting data.
LIMITATIONS

 The research is not exhaustive.

 Less time for research.
 Not collected more data related to the research.
 Only used secondary data for research.
 Not availability of market near the place of study.
 More flexibility of prices in both market create problem in analysis of data.
 Cover only selected data.
 Not any practical knowledge related to calculated risk and return in stock
and gold investment.
CHAPTER – 4
DATA ANALYSIS AND INTERPRETATION
DATA ANALYSIS

1. Do you make any investment?

a. Yes b. No
OPTION NO. OF RESPONDENT
YES 80
NO 20

No. of respondent

20%

YES
NO

80%

INTERPRETATION: This figure says that most of the respondent makes

investment. And the era of saving is passed away now people are more aware of
investment.
2. In which area you would like to make your investment?
a. Bank deposit c. Gold
b. Insurance d. Stock
e. Mutual fund f. Others

ASSET CLASS ALLOCATION

BANK DEPOSITS 20%
INSURANCE AND
SMALL SAVINGS 27%
GOLD 10%
SHARES 2%
MUTUAL FUNDS 2%
OTHERS 39%

20%
Banks
39% Insurance
Gold
Shares
27% Mutual
funds
Others
2% 10%
2%

INTERPRETATION: This figure shows that most of the respondent make small
investment and in insurance. And the investment in mutual fund also rises.
3. If you have to invest in gold or stock in which area you will prefer to
invest?
a. Gold b. Stock

ASSET CLASS NO. OF RESPONDENT

GOLD 60
STOCK 40

No. of respondent

40% Gold
stock

60%

INTERPRETATION: This figure says that if respondent have to make investment

either in gold or stock then they will prefer gold. People still have believed in the
gold investment instead of securities.
4. What do you think which investment is more risky?
a. Gold b. Stock
ASSET CLASS NO. OF RESPONDENT
GOLD 45
STOCK 55

No. of respondent

Gold
45% stock

55%

INTERPRETATION: This figure shows that according to respondent investment

in both markets are approx equally risky but still the data shows that the stock
market is more risky.
5. What do you think which investment provides more return?

a. Gold b. Stock
ASSET CLASS NO. OF RESPONDENT
GOLD 40
STOCK 60

No. of respondent

40% Gold
Stock

60%

INTERPRETATION: This figure says that stock gives more return. The dividend
provided by the stock is more than the returns provided by the gold investment.
6. How much amount you invest in these investments?

a. 10000-30000 c. 60000-100000
b. 30000-60000 d. 100000-200000
e. Above 200000

AMOUNT (RS.) NO. OF RESPONDENT

10000-30000 30
30000-60000 20
60000-100000 15
100000-200000 20
ABOVE 200000 15

No. of respondent

15%

30% 10000-30000
30000-60000
60000-100000
20% 100000-200000
Above 200000

20%
15%

INTERPRETATION: This figure shows that most of the respondent does

investment of amount of rs.10000-30000.
7. What do you think in which investment more knowledge is required?
 a. Gold b. Stock

ASSET CLASS NO. OF RESPONDENT

GOLD 35
STOCK 65

No. of respondent

35%
gold
Stock

65%

INTERPRETATION: This figure shows that stock is required more knowledge

than the gold because the portfolio is not easy to make and the formalities attached
with the stock is more.
8. What do you think which investment is more fluctuating?

a. Gold b. Stock
ASSET CLASS NO. OF RESPONDENT
GOLD 20
STOCK 80

No. of respondent

20%

Gold
stock

80%

INTERPRETATION: This figure shows that stock is more fluctuate as compare to

gold. Because the market fluctuation are more in the stock and there are both
upward and downward trend present while in gold mostly the upward trend is
mentioned.
9. What do you think which investment gives faster return?
a. Gold b. Stock
ASSET CLASS NO. OF RESPONDENT
GOLD 25
STOCK 75

No. of respondent

25%

Gold
Stock

75%

INTERPRETATION: This figure shows that stock gives faster return as compare
to gold.
10.What do you think which investment required more funds?

a. Gold b. Stock
ASSET CLASS NO. OF RESPONDENT
GOLD 75
STOCK 25

No. of respondent

25%

Gold
Stock

75%

INTERPRETATION: This figure shows that gold is required more funds as

compare to stock. It is because the investment in stock can be start from some
thousands but the investment in gold needs lakhs.
11.What do you think which investment has more liquidity?

a. Gold b. Stock

ASSET CLASS NO. OF RESPONDENT

GOLD 60
STOCK 40

Liquidity

60

50

40
%
30

20

10

0
Gold Stock

INTERPRETATION: This shows that the liquidity in case of gold investment is

more than the investment in stock.
12.What do you think that which investment is more suitable for all income
group?

a. Gold b. Stock

ASSET CLASS NO. OF RESPONDENT

GOLD 85
STOCK 15

No. of respondent

15%

Gold
stock

85%

INTERPRETATION: This figure shows that gold investment is more suitable for
all income groups.
13.What do you think that which investment by different income groups?

a. High c. Low
b. Middle

CLASS GOLD STOCK

HIGH 55 45
MIDDLE 60 40
LOW 80 20

90
80
70
60
50 Gold
40 Stock
30
20
10
0
High class Middle class Lower class
income income income

INTERPRETATION: This figure shows that whether it is high, middle or low

income group they prefer to invest more in gold.
14.What do you think in which investment area govt. makes more
interference?

a. Gold b. Stock

ASSET CLASS NO. OF RESPONDENT

GOLD 30
STOCK 70

No. of respondent

30%
Gold
Stock

70%

INTERPRETATION: This figure shows that govt. make more interference in

stock. Because the investment is for third party and govt. has to keep control
on it.
CHAPTER – 5
FINDINGS AND
CONCLUSION
FINDINGS
In this research “investment in stock or gold investment, which one option is better
for the long-term investment” we found that the gold investment is better than the
stock in long term investment in India. With the help of many reasons we found
that situation. Reasons are: -

 The risk in case of stock is more than the gold investment.

 The return on the gold investment is more than stock in long-term
investment.
 The knowledge of stock investment is less than gold in India.
 The demand of gold is high in India.
 India is number 1 in the demand of gold per year.
 India is number 1 country in gold consumption.
 The fluctuation in price of stocks is high than in gold.
 The investment in gold is high than the stock in India.
 India love’s most to gold.
 The liquidity in stock is high than the gold investment.
 The fluctuation in price of stocks is more risky in the future.
 The all income group invested their money in the gold.
 The middle and lower income group invested their money for to buy gold for
the long time period.
 The government enter fear is more in the stock exchange than the gold
because the stock exchange is totally depend on the government policies
CONCLUSION

India is an under development country so the development of the country is depend

upon on the many sectors. The stock exchange is one of the major players. In this
research “gold investment or stocks which one option is better for the long term
investment” we found that the gold investment is better than the stock. In India
mostly income groups invested their money in the gold for the long-term
investment. Out of all investment the 10% investment in doing only in the gold.
Due to less risk, more return and the knowledge related to gold the all income
groups invested their investment in the gold. Due to less knowledge of stocks the
income groups invested their money in gold investment for long time period.
CHAPTER – 6
SUGESTIONS
SUGGESTIONS

 Always deal with the market intermediaries registered with SEBI /

Exchanges.

 Before placing an order with the market intermediaries please check

about the credentials of the companies, its management, its fundamentals
and recent announcements made by them and various other disclosures
made under various Regulations.

 Adopt trading / investment strategies commensurate with your Risk

bearing capacity as all investments carry risk, the degree of which varies
according to the investment strategy adopted.

 Don't deal with unregistered brokers / sub-brokers, intermediaries.

 Don't fall prey to promises of guaranteed returns.

 Don't blindly follow media reports on corporate developments, as they

could be misleading.

 The knowledge of stock exchange dealing and investment is less than

other investment.

 Provided all knowledge about stock to the rural areas also.

 Dealing in the gold is better option for the long-term investment so the
investors invested their money in the gold.

 Maintain a communication system with all investor.

 Provided all information related to the market to all areas investors.

 Make a market in which an investor sells there gold in any time.

ANNEXURE
QUESTIONNAIRRE

Dear sir/madam,
I CHIRAG AGARWAL pursuing MBA from
Maharishi Markendeshwar Institute of Management (MMIM), Mullana (Ambala).
I am carrying a final research project on title – "Comparative study of
investment in gold and stock: A customer perspective” , Ambala. I will take
care that personal information would be kept fully confidential.
Name……………..
Age……………….
Education
a. Graduate c. Under Graduate
b. Post Graduate d. Other

Occupation
a. Businessman c. Professional
b. Serviceman d. Ex-serviceman
e. other

1. Do you make any investment?

a.Yes b. No

2. In which area you would like to make your investment?

a. Bank deposit c. Gold
 b. Insurance d. Stock
e. Mutual fund f. Others

3. If you have to invest in gold or stock in which area you will prefer to
invest?

a. Gold b. Stock

4. What do you think which investment is more risky?

a. Gold b. Stock

5. What do you think which investment provides more return?

a. Gold b. Stock

6. How much amount you invest in these investments?

a.10000-30000 b. 60000-100000
c.30000-60000 d. 100000-200000
e. Above 200000

7. What do you think in which investment more knowledge is required?

a.Gold b. Stock
8. What do you think which investment is more fluctuating?

a.Gold b. Stock

9.What do you think which investment gives faster return?

a.Gold b. Stock

10. What do you think which investment required more funds?

a.Gold b. Stock

11.What do you think which investment has more liquidity?

a. Gold b. Stock

12. What do you think that which investment is more suitable for all income
group?

a. Gold b. Stock
13. What do you think that which investment by different income groups?

a.High b. Low

c.Middle

14. What do you think in which investment area govt. makes more
interference?

a. Gold b. Stock
BIBLIOGRAPHY

BOOKS

 Punitharathy Pandian, The security and portfolio management.

 R.G. Gopal, Stock brokers in India.

 C.R. Kothari, Research Methodology.

MAGAZINES

 Business India (December, March and April 2006)

 Business & Economy (7th April to 20th April)

 Portfolio Organized (Feb, 2006)

 The Finapolis (Feb, 2006)

WEBSITES

 www.google.com

 www.yahoosearch.com

 www.gold.org

 www.stock.com

 www.stock.org
  www.stockexchange.com

 www.goldindia.com

NEWS PAPERS

 The Indian Express (April 24, 2009)

The Times of India (April, 2009)