Investor's Preference

1 MANAGEMENT THESIS - II

SYNOPSIS

MANAGEMENT THESIS – II

“An analysis of investors’ behavior for investment preferences during normal time vis-à-vis recessionary period with reference to 50 investors in vadodara city”

Submitted to,

MR. AMOL RANADIVE

Submitted by,

KEYUR A. PRAJAPATI (8NBVD062)

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Introduction Savings form an important part of the economy of any nation. With the savings invested in

various options available to the people, the money acts as the driver for growth of the country.

Indian financial scene too presents a plethora of avenues to the investors. Though certainly not

the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest

his savings.

One needs to invest to and earn return on your idle resources and generate a specified sum of

money for a specific goal in life and make a provision for an uncertain future. One of the

important reasons why one needs to invest wisely is to meet the cost of inflation. Inflation is the

rate at which the cost of living increases.

The cost of living is simply what it cost to buy the goods and services you need to live. Inflation

causes money to lose value because it will not buy the same amount of a good or service in the

future as it does now or did in the past. The sooner one starts investing the better. By investing

early you allow your investments more time to grow, whereby the concept of compounding

increases your income, by accumulating the principal and the interest or dividend earned on it,

year after year. The three golden rules for all investors are:

• Invest early

• Invest regularly

• Invest for long term and not for short term

This project will also help to understand the investors facet before investing in any of the

investment tools and thus to scrutinize the important aspects of the investors before investing that

further helped in analyzing the relation between the features of the products and the investors’

requirements.

Who is investor? An investor is a person or entity that purchases assets with the objective of receiving a financial return. The assets an investor may buy range widely, but include stocks, bonds, real estate, commodities, and collectibles (e.g. art). The portfolio of an investor commonly includes a variety of assets that balance the rewards and risks of each investment. An investor is distinguished from a speculator, who seeks to make quick, large gains from price increases on risky assets. Generally, an investor has a longer time horizon for achieving a return, which may include regular cash payments from the income the asset generates, capital appreciation from the rise in the asset price, or both. A





young investor tends to buy assets with price appreciation potential, because a 25-year-old investor has many years for the asset to appreciate before the funds are needed for retirement. An older, retired investor ordinarily seeks income and thus wants assets that offer regular cash payments. What is recession? Downward trend in the business cycle characterized by a decline in production and employment, which in turn lowers household income and spending. Even though not all households and businesses experience actual declines in income, they become less certain about the future and consequently delay making large purchases or investments. Consumers buy fewer durable household goods, and businesses are less likely to purchase machinery and equipment and more likely to use up existing inventory instead of adding goods to their stock. This drop in demand leads to a corresponding fall in output and thus worsens the economic situation. Whether a recession develops into a severe and prolonged depression depends on a number of circumstances. Among them are the extent and quality of credit extended during the previous period of prosperity, the amount of speculation permitted, the ability of government monetary and fiscal policies to reverse (or minimize) the downward trend, and the amount of excess productive capacity. Compare depression. Investment avenues available in India Ø Investment under automatic route with repatriation benefits.

Ø Investment with government approval.

Ø Investment in domestic mutual funds.

Ø Investment in bonds issued by public sector undertakings.

Ø Purchase of shares of public sector enterprises.

Ø Deposits with companies. (for a minimum period of 3 years)

Ø Investment in government securities and/or shares.

Ø Investment in non convertible debentures.

Ø Money marked mutual funds.

Ø Deposits with companies.

Ø Commercial papers.





OBJECTIVE OF THE STUDY

The purpose of the analysis is to determine the investment behavior of investors and investment

preferences for the same. Investors perception will provide a way to accurately measure how the

investors think about the products and services provided by the company. Today’s trying

economic conditions have forced difficult decisions for companies. Most are making conservative

decisions that reflect a survival mode in the business operations. During these difficult times,

understanding what investors on an ongoing basis is critical for survival. Executives need a 3rd

party understanding on where investor’s loyalties stand. More than ever management needs

ongoing feedback from the investors, partners and employees in order to continue to innovate and

grow. The main objective of the project is to find out the needs of the current and future investors.

For this analysis, customer perception and awareness level will be measured in important areas

such as:

Ø To understand in depth about different investment avenues available in India.

Ø To find out how investors get information about the various financial instruments.

Ø To find out the saving habits of the different investors and the amount they invest in

various financial instruments.

Ø The type of financial instruments, they would prefer to invest.

Ø The duration for which they would prefer to keep their money invested.

Ø The rate of return they would likely to earn from the investment.

Ø What are the factors that they consider before investing.

Ø To find out risk profile of the investors.

Ø To give a recommendations to the investors that where they should invest.

Ø To evaluate the investors attitude towards savings and decision making regarding

investments.

Ø To analyze the impact of constant changing in external environment on their behavior

pattern over a period of time.





VALUE ADDITION

This analysis will help to strengthen investor intimacy. This analysis will also throw light on

various investment avenues available in India that will help in many ways like,

Ø It will help to understand the expectations of the investors about their company from the

perspective of financial performance and corporate social responsibility.

Ø It will provide fresh insights which can help their business continue to flourish.

Ø The expectations of different types of investors regarding particular service requirements

can be identified.

Ø The common problem areas faced by the investors can be understood.

Ø It also enhances new services initiatives.

Ø This study will help in gaining a better understanding of what an investor looks for in an

investment option.

Ø It can be used by the financial sector in designing better financial instrument customized

to suit the needs of the investor.

Ø It will also help the agents and brokers in marketing the existing financial instruments.

Ø It will provide knowledge to the investors about the various financial services provided

by the company to their investors.

Ø It will also help the company to understand what is the requirement and expectations of

different categories of investors.

This analysis will be originated in order to empower the investors with detailed research on

various investments avenues available in India. The impact of different stages of economic cycle

such as depression, recession, recovery and inflation, on the perception and behavior of the

investors. The awareness lever of the investors about the various investment options and what is

the perception of the investors with regard to the investments they want to make.





LIMITATIONS OF THE STUDY

This analysis is based upon investors’ behavior for investment preferences during normal time

vis-à-vis recessionary period. This analysis would be focusing on the information from the

investors about their knowledge, perception and behavior on different financial products. The

various limitations of the study are:

Ø The total number of financial instruments in the market is so large that it needs a lot of

resources to analyze them all. There are various companies providing these financial

instruments to the public. Handling and analyzing such a varied and diversified data

needs a lot of time and resources.

Ø As the analysis is based on primary as well as secondary data, possibility of unauthorized

information can not be avoided.

Ø Reluctance of the people to provide complete information about them can affect the

validity of the responses.

Ø Due to time and cost constraint, study will be conducted in only selected areas of

vadodara.

Ø The lack of knowledge of customers about the financial instruments can be a major

limitation.

Ø The information can be biased due to use of questionnaire.





RESEARCH METHODOLOGY

Sampling technique

Initially, a rough draft will be prepared keeping in mind the objective of the research. A pilot

study will be undertaken in order to know the accuracy of the questionnaire. The final

questionnaire will be arrived at only after certain important changes are incorporated.

Convenience sampling technique will be used for collecting the data from different investors. The

investors are selected by the convenience sampling method. The selection of units from the

population based on their easy availability and accessibility to the researcher is known as

convenience sampling. Convenience sampling is at its best in surveys dealing with an

exploratory purpose for generating ideas and hypothesis.

Sampling unit:

The respondents who will be asked to fill out the questionnaires are the sampling units. These

comprise of employees of MNC’s, government employees, self employed and other investors.

Sampling size:

The sample size will be restricted to only 50, which comprised of mainly people from different

regions of vadodara due to time constraints.

Sampling area:

The area of the research is vadodara.

Sampling design:

Data will be presented with the help of bar graph, pie charts, line graphs etc.




Investor's Preference

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