A STUDY ON FINANCIAL INSTRUMENTS WITH SPECIAL REFERENCE TO TRADITIONAL INSTRUMENTS

8/6/2019 A STUDY ON FINANCIAL INSTRUMENTS WITH SPECIAL REFERENCE TO TRADITIONAL INSTRUMENTS

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APROJECT REPORT ONA STUDY ON FINANCIAL INSTRUMENTS(TRADITIONAL APPROACH)SUBMITTED TOMAHAKAL INSTITUTE OF MANAGEMENT, UJJAINTOWARDS

PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA)OFVIKRAM UNIVERSITY, UJJAIN (M.P.)June-July 2010

DECLARATION

I, the undersigned, Rini Jacob hereby declare that the present, summer project title A Study on Financial instrument (traditional approach) is based on my original work and my indebtedness to other works, publication, has been duly acknowledged at relevant places.

Signature of the Student:Rini Jacob

ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude towards all the persons who helped me through their guidance and cooperation to complete the project successfully. It is great privilege and honor to have an opportunity of doingproject at Karvy stock broking limited Ujjain.First of all I would like to give my sincere thanks to Mr. Bunty Kumar (branch m

anager) for granting me permission to do my training on FINANCIAL INSTRUMENTS (TRADITIONAL APPROACH). I m very grateful to my project guide for his generous guidance and giving full co-operation to me despite their hectic schedule. .


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I express my sincere gratitude to all persons who gave me guidance and help forconducting this study.

CONTENTSA. General training:IntroductionHistory of the organisationMission and vision of KarvyOrganisational structure

Karvy groupServices offered by Karvy groupAchievements of Karvy groupSWOT analysis

B. Special project undertaken:Chapter 1: introductionChapter 2: Research methodology

Introduction to the projecta) The study and objectivesb) Samplec) Tools Data collection

Data analysis

Chapter 3: results and interpretation of resultsChapter 4: suggestion and conclusionAppendicesBibliography

INTRODUCTION

Karvy is a premier integrated financial services provider and ranked among the top five in the country in all its business segments. It services over 16 millionindividual investors in various capacities and provides investor services to over 300 corporate, comprising who is who of Corporate India.It is a member of all three:-

National Stock Exchange (NSE)

Bombay Stock Exchange (BSE)


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Hyderabad Stock Exchange (HSE)

Karvy utilized its experience and superlative expertise to capitalize on its strengths and better its services, innovate and provide new ones. Its diversified inthe process and thus evolved as Indias premier integrated financial services ent

erprise.

Karvy has been a customer centric company since its inception. It offers a single platform servicing multiple financial instruments in its bid to offer completefinancial solution to the varying needs of both corporate and retail investors,where and extensive range of services are provided with great volume- management capability.

Karvy covers the entire spectrum of financial services such as stock broking, depository, participants, distribution of financial product- mutual funds, bonds,fixed deposit, equities, insurance broking, commodities broking, personal finance advisory services, merchant banking & corporate finance, placement of equity,

IPOs, among others.

HISTORY OF ORGANIZATION

Karvy was started by a group of five chartered accountants in 1979. The partnersdecided to offer, other than the audit services, value added services like corporate advisory services to their clients. The first firm in the group, Karvy Consultants Limited was incorporated on 23rd July, 1983. In a very short period, itbecame the largest Registrar and Transfer Agent in India. This business was spun off to form a separate joint venture with Computershare of Australia, in 2005.Karvys foray into stock broking began with marketing IPOs, in 1993. Within a few

years, Karvy began topping the IPO procurement league tables and it has consistently maintained its position among the top 5. Karvy was among the first few members of National Stock Exchange, in 1994 and became a member of The Stock Exchange, Mumbai in 2001. Dematerialization of shares gathered pace in mid-90s and Karvy was in the forefront educating investors on the advantages of dematerializingtheir shares. Today Karvy is among the top 5 Depositary Participant in India.

While the registry business is a 50:50 Joint Venture with Computershare of Australia, we have equity participation by ICICI Ventures Limited and Barings Asia Limited, in Karvy Stock Broking Limited. For a snapshot of our organization structure, please click here.

Karvy has always believed in adding value to services it offers to clients. A top-notch research team based in Mumbai and Hyderabad supports its employees to advise clients on their investment needs. With the information overload today, Karvys team of analysts help investors make the right calls, be it equities, mf, insurance. On a typical working day Karvy:

Has more than 25,000 investors visiting our 575 offices. Publishes / broadcasts at least 50 buy / sell calls Attends to 10,000+ telephone calls Mails 25,000 envelopes, containing Annual Reports, dividend cheques / advises, allotment / refund advises Executes 150,000+ trades on NSE / BSE Executes 50,000 debit / credit in the depositary accounts

MISSION AND VISION OF KARVY


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MISSION STATEMENT OF KARVY:An organization exists to accomplish something or achieve something. The missionstatement indicates what an organization wants to achieve .Karvys mission statement is TO BRING INDUSTRY, FINANCE AND PEOPLE TOGETHERKarvy act as an intermediary between industry and people. It work as an investment advisor and helps people to invest their money ,same way Karvy helps industryin achieving finance from people by issuing shares,debentures,bonds,mutual fund

s, fixed deposits.

VISION OF KARVY:Companys vision is crystal clear and mind frame very directed.To be pioneering financial services company and continue to grow at a healthy pace, year after year,decade after decade. Company foray into IT- enabled services and internet business has provided an opportunity to explore new frontiers and business solution;to build a corporate that sets benchmark for others to follow.

ORGANIZATIONAL STRUCTURE

KARVY GROUP

Karvy has travelled the success route, towards building a reputation as an integrated financial service provider, offering a wide spectrum of services for over20 years.Karvy, a name long committed to service at its best. A fame acquired through therange of corporate and retail services including merchant banking, mutual funds, fixed income, equity investments, insurance, commodities to name a few. Our values and vision of attaining total competence in our servicing has served as abuilding block for creating a large financial enterprise.The Karvy group of companies are:Karvy stock broking ltd.:

A member of National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and Hy


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derabad Stock Exchange (HSE) offers a comprehensive range of services in the stock market through the benefits of in-depth research on crucial market dynamics,done by qualified team of experts. The company offers solutions that encompass awide spectrum of financial services/products.

1. Karvy Comtrade ltd.:

The company provides investment, advisory and brokerage services in Indian Commodities Markets. And most importantly, we offer a wide reach through our branch network of over 530 branches located across390 cities.2. Karvy insurance broking ltd.:

The company provides life and non-life insurance products to retail individuals,high net worth clients and corporate. A major step towards being the most comprehensive personal finance advisor.

3. Karvy investors services ltd.:

Registered with SEBI as a Category I Merchant Banker and ranked among the top 10merchant bankers in the country, the company has built a reputation as a professional advisor in structuring IPOs take over assignments and buy back exercises.

4. Karvy Computershare private ltd:

Karvy Computershare Private Limited is a joint venture between Computershare, Australia and Karvy Consultants Limited - The first securities registry company toreceive ISO 9002 certification in India. Registered with SEBI as Category I Registrar, is Number 1 Registrar in the country. Computershare, Australia, servicesmore than 75 million shareholders across 7000 corporate clients and makes its presence felt in over 12 countries across 5 continents.


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KARVY is working as Capital Market Intermediaries. Stockbrokers are regulated bySEBI [Stock-brokers and Sub-brokers] Regulations, 192. The stockbroker is a mem

ber of the stock exchange. Stockbrokers are the intermediaries who are allowed to trade in securitiesSERVICES OFFERED BY KARVY1) DEMAT Services:

Karvy is a depository participant with the national securities depository limited (NSDL) for trading and settlement of dematerialised shares.Depository participant are described as an agent of depository. They are intermediaries between the depositors and the investors. They can offer these servicesonly after obtaining a certificate of registration from SEBI.

2) Registrar and transfer agent:

In 1985, Karvy entered the registrar and share transfer business. Karvy has beenrated as Indias most admired registrar.

3) Investment product distribution:Karvy is concerned with distribution of investment products like: Fixed deposits Bonds IPO

a) Fixed deposits:Karvy is a dealer of 34 fixed deposit companies which includes companies from public sector, Non banking finance companies, Housing finance companies and Manufac

turing companies.

b) Bonds :Karvy deals with bonds from RBI saving bonds, NHB and REC.

c) IPO:Karvy also provides services related to IPO (Initial public offer).Recently Karvy released the IPO of SKS Microfinance.4) Investment advisory services:

Karvy also provides investment advisory services.i.e, portfolio management services to high net worth individuals and corporate. It guides its investors to invest in right kind of funds for better return to its investors.

5) Merchant banking:

Merchant banking is a financial intermediation that matches entities that need capital and those that have capital. Hence they facilitate the flow of capital inthe market.Karvy enjoys SEBI category I for merchant banking. Karvy offers the full spectrum of merchant banking service beginning from identity the best time for an issueto final stage of marketing.

6) Insurance:

Karvy is also a dealer of many private life insurance companies. At Ujjain branc


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h, it is associated with the dealing of following companies like Tata AIG, Max BUPA and the like.

7) Mutual fund services:

Karvy provides services to nearly 80% of the asset management services (AMC) across an extensive network of service centres with asset under service in excess o

f Rs.10, 000 crores.

8) Income tax enabled services:

Karvy provide income tax enabled services. It works as a TIN Facilitation centreand provides the following services: Distribution of PAN Cards (Permanent account number). Distribution of TAN Cards ()

ACHIEVEMENTS OF KARVY

Largest mobilizer of funds as per PRIME DATABASE. First ISO-9002 certified registrar in India. A category I Merchant banking.


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A category I Registrar to public issues. Ranked as The most admired registrar by MARG. Handled the largest ever public issue- IDBI. Handled over 500 public issues as registrar. Handling the Reliance accounts which accounts for nearly 10 million account holders. First depository participant from Andhra Pradesh.

SWOT ANALYSIS

Strength: No.1 registrar and transfer agent of companies Strong communication network Employees are highly empowered.

Weakness: High employee turnover.

Opportunities Need to explore the rural and semi urban areas.

Threats: Increasing number of local players.

INTRODUCTION

FINANCIAL INSTRUMENTS:In simple terms Financial Instrument is either cash; evidence of an ownership inan entity or a contractual right to receive or deliver, cash or another financial instruments.Financial Instruments are legal documents that embody monetary value. There area number of different types of documents that are properly identified as financial instruments. In today

s financial marketplace, financial instruments can beclassified generally as equity based, representing ownership of the asset, or debt based, representing a loan made by an investor to the owner of the asset. Foreign exchange instruments comprise a third, unique type of instrumentThey are broadly categorized under two heads. They are as follow:


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TYPES OF FINANCIAL INSTRUMENTS

Financial instruments are broadly categorised under two heads they are as follow

: Cash instruments:This type of financial instrument is simply those documents that are recognizedas cash that can be utilized for various transactions.Currency is the most easily identified of all cash instruments, although such documents as checks or funds transfers from bank accounts would also be understoodto be a financial instrument of this type.

Derivative instruments:In broad terms, a derivative instrument is some type of contract that has valuebased on the current status of the underlying assets.

This classification would include such instruments as future options, and swaps.Some analysts also prefer to include stocks, bonds, and currency future withinthis category.

FINANCIAL INSTRUMENTS (TRADITIONAL APPROACH)

We have seen the two categories of financial instruments. Now let us see the approaches of financial instruments. The approaches to financial instruments are:

Traditional approach.

Modern approach.

The traditional approach to financial instruments includes the traditional instruments which have been in the financial market for a long time. The financial instruments taken into account are as follow:

Insurance.

Fixed deposits.

Bonds.

Kisan Vikas Patra.

National saving certificates

INSURANCE


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Insurance, in law and economics, is a form of risk management primarily used tohedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium.Insurer, in economics, is the company that sells the insurance.Insurance rate is a factor used to determine the amount, called the premium, tobe charged for a certain amount of insurance coverage. Risk management, the prac

tice of appraising and controlling risk, has evolved as a discrete field of study and practice.

SUM ASSURED:It is the amount of money an insurance policy guarantees to pay before any bonuses are added.

Factors included in the calculation of sum assured are:

Date of birth.

Gender.

Duration.

Health conditions.

Job profile.

LIFE INSURANCE:

All policies are not the same. Some give coverage for your lifetime and others cover you for a specific number of years.


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Following are the different types of life insurances:

Whole life Term policy Money back Endowment

Pension plan ULIP

GENERAL INSURANCE:

General insurance typically comprises any insurance that is not determined to belife insurance. It is called property and casualty (P&C) insurance in the U.S.General insurance policies, including automobile, accidents and homeowners policies, provide payments depending on the loss from a particular financial event.

INSURANCE PRODUCT WITH WHICH WE DEALT AT KARVY:

MAHA LIFE GOLD (TATA AIG).

MAHA LIFE GOLD (TATA AIG):THE WHOLE LIFE PLAN

ABOUT TATA AIG:

Tata AIG Life Insurance Company Limited and Tata AIG General Insurance Company Limited (collectively

Tata AIG

) are joint ventures of the Tata Group and American International Group, Inc. (AIG). Tata AIG combines the strength and integrityof the Tata Group with AIG

s international expertise and financial strength.

A joint venture between the Tata Group and American International Group Licensed to Sell: Feb 2001 Started Operation: Apr 2001 Head Office: Mumbai Accounting Year: April March performance Year: April March Percentage of Company Holdings = AIG 26


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As Tata AIG Life grew, the logo evolved to represent itsCommitment to customers and its focus on path breaking productsTo meet customer needs.This gave birth to a New Corporate Identity

A new look at life

ABOUT PRODUCT:

TERMS:Term mean the time period of policy and Maha life gold of Tata AIG for year.

1* 5* 6* 10* 11*15*

*= YEARSSUM ASSURED: 1 lack no limit

AGE CRITERIA: 0 to 60


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PREMIUM RATES (Rs.1, 00,000.)FOR INDICATED SUM ASSURED

ISSUEAGE ANNUAL SEMIANNUAL0-35 9150 466736-45 9200 469246-50 9250 471851-55 9300 474356 9428 4808

57 9508 484958 9603 489859 9699 496460 9836 5016

1 2 3 4

1ST YEAR 5TH YEAR =

1ST PREMIUM (for 36-39) = 9,200rsTotal premium in 4year = 9,200*4Total premium in 4 year = 36,8006 7 8 9 106th year - 10th year =

6th year premium = 9,200Total premium in 5 year = 9,200*6Total premium in 5 year = 55,200

After 5 year there is a provision of 3% flexible per annum dividend on sum assured.Calculation:= 1,00,000*3/100.= 3,00,000/100.= 3,000 PER YEA


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TOTAL INTREST IN 6 YEAR=

5TH* 6TH* 7TH* 8TH*9TH* 10th * 15

* = YEAR

TOTAL INTREST IN 5 YEAR= 18,00010th year - 15th year =

11th* 12th* 13th* 14th* 15th*

* = YEAR

7th year premium= 9200Total premium in 5 year = 9200*5Total premium in 5 year = 46,000

ONWARD 15 YEAR TILL POLICY HOLDERS DEATH HE RECEIVE

FLEXIBLE INTRESTED: 10%GURANTEED INTRESTED: 5%

TOTAL: 15%

CALCULATION:

10%

= 1,00,000*10/100= 1,00,00,00/100= 10,000rs per year 5%

= 1,00,000*5/100= 5,00,000/100= 5,000rs per year

TOTAL= 10,000 + 5,000= 15,000 Rs


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Suppose if Mr A person take a policy when he was 35 year old. His premium is completed at 50 year. After 50 year he was died when he was 80 year old then he wasget.TOTAL AMOUNT MR. A RECEIVED

Calculation:

AGETOTALINVESTMENT

TOTALINCOME

35-39 46,000 -40-45 46,000 18,00046-50 46,000 55,00050-80 - 4,50,000

AT THE TIMEOF DEATH 1,00,000

TOTAL1,38,0006,30,000

The benefit of this policy that policy holder only have to pay the premium onlyfor 15 year and he receive benefit for long period of time.

NATIONAL SAVING CERTIFICATE (NSC)

National saving certificates are popularly known as NSC.It is a time tested tax

saving instruments that combines adequate returns with high safety. These certificates are available at all post offices across India. . A large chunk of middleclass families use NSCs for saving on their tax, getting double benefits. Theynot only save tax on their hard-earned income but also make an investment whichis sure to give good and safe returns.

FEATURES OF NATIONAL SAVING CERTIFICATE:

How to invest:One can invest in any head post office/sub post office.

Who can invest: An adult in his own name or on behalf of a minor, A trust, Two adults jointly.

Minimum Purchase Value:The minimum amount of investment under NSC is Rs 100/-

Maturity of National Savings Certificate:Period of maturity of a certificate is six Years.

Nomination / Transferability:

Nomination facility is available. Certificates can be transferred from one post office to any other post office. Transfer from one person to another person permissible in certain conditions.


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Denomination : Certificates are available in denominations (face value) of Rs. 100, Rs.500, Rs.1000, Rs. 5000 & Rs. 10,000.

Interest/maturity value : Interest is available on this scheme @ 8%, compounded half-yearly

Interest accrued on the certificates every year is liable to income tax but deemed to have been reinvested.

Income Tax relief : Income Tax rebate is available on the amount invested and interest accruing everyyear under Section 88 of Income tax Act, as amended from time to time. [under Sec 80C] Income tax relief is also available on the interest earned as per limits fixed vied section 80L of Income Tax, as amended from time to time.

KISAN VIKAS PATRA

Kisan Vikas Patra (KVP) is a saving instrument that provides interest income similar to bonds. Amount invested in Kisan Vikas Patra doubles on maturity after 8years & 7 months. Some people have a misconception that only a farmer can investmoney in Kisan Vikas Patra. However, it is absolutely false. Anyone wishing to

invest money at safe places can go for Kisan Vikas Patra.FEATURES OF KISAN VIKAS PATRA: How to invest:It is an easy way to invest in KVP.One can invest in any head post office/sub post office in cash, demand draft or local cheques.


Denominations:Kisan Vikas Patra is available in the denominations of Rs 100, Rs 500, Rs 1000,Rs 5000, Rs. 10,000 and Rs. 50,000. There is no maximum limit on purchase of KVPs.

Who is not Eligible: Commercial Companies and institutions are not eligible to purchase KVP. NRIs and Hindu Undivided Families cannot purchase Kisan Vikas Patra.

Maturity: Facility of reinvestment on maturity. Maturity proceeds which are not drawn are eligible for Post office Savings account interest for a maximum period of two years. Nomination/transferability:

KVPs are transferable to any Post office in India. KVPs can be transferable from one person to another person before maturity. Nomination Facility is available in case of KVPs


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Income tax relief:No income tax benefits available are under KVPs.

BONDS

Meaning of Bonds:

A Bond is a debt security. When you purchase a bond, you are lending money to agovernment, municipality, corporation, federal agency or other entity known as issuer.

In return for that money ,the issuer provides you with a bond in which it promises to pay a specified rate of interest during the life of the bond and to repaythe face value of the bond (the principal)when it matures or comes due.

Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Certificates of deposit (CDs) or commercial paper are considered to be money market instruments and not bonds. Bonds must be repaid at fixed intervals over a period of time.

Features of Bonds: Nominal, principal or face amount:The principal is the amount at which issuer pays interest and which, most commonly, has to be repaid at the end of the term. Issue price:Issue price is the price at which investors buy the bonds when they are first issued, which will typically be approximately equal to the nominal amount. Maturity date:The date on which the issuer has to repay the nominal amount. As long as all payments have been made, the issuer has no more obligations to the bond holders after the maturity date. Short term (bills): maturities up to one year. Medium term (notes): maturities between one and ten years. Long term (bonds): maturities greater than ten years.

coupon :The interest rate at which the issuer pays to the bond holders. Usually this rate is fixed throughout the life of the bond.

Coupon dates:The dates on which the issuer pays the coupon to the bond holders. In the U.S. a


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nd also in the U.K. and Europe, most bonds are semi-annual, which means that they pay a coupon every six months.

FIXED DEPOSITS

WHAT IS A FIXED DEPOSIT?A fixed deposit is meant for those investors who want to deposit a lump sum of money for a fixed period; say for a minimum period of 15 days to five years and above, thereby earning a higher rate of interest in return. Investor gets a lumpsum (principal + interest) at the maturity of the deposit.

Bank fixed deposits are one of the most common savings scheme open to an averageinvestor. Fixed deposits also give a higher rate of interest than a savings bank account. The facilities vary from bank to bank. Some of the facilities offered by banks are overdraft (loan) facility on the amount deposited, premature withdrawal before maturity period (which involves a loss of interest) etc. Bank depo

sits are fairly safer because banks are subject to control of the Reserve Bank of India.

FEATRURES OF FIXED DEPOSITS: Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India (RBI) with regard to several policy and operational parameters.

The banks are free to offer varying interests in fixed deposits of different maturities. Interest is compounded once a quarter, leading to a somewhat higher effective rate.

Minimum deposits:The minimum deposit amount varies with each bank. It can range from as low as Rs. 100 to an unlimited amount with some banks.

How to apply?One can get a bank FD at any bank, be it nationalised, private, or foreign. Youhave to open a FD account with the bank, and make the deposit. However, some banks insist that you maintain a saving account. Returns:The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent, depending on the maturity period (duration) of the FD and the amount invested

Duration Interest rate (%) per annum15-30 days 4 -5 %30-45 days 4.25-5 %


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46-90 days 4.75--5.5 %91-180 days 5.5-6.5 %181-365 days 5.75-6.5 %1-2 years 6-8 %2-3 years 6.25-8 %3-5 years 6.75-8

INTRODUCTION TO THE PROJECT

A. Study and its objectives:The project undertaken by me for the Karvy stock broking ltd. laid emphasis on financial instruments with a special reference to traditional approach.

This project has been helpful in understanding the perception of investors. As the research which was b conducted helped me to interact with various investors from different backgrounds.The objectives of the study are as follow:

To know the perception of investors towards the traditional financial instruments. Lead generation i.e., to identify potential clients. To find and analyze the market position of Karvy stock broking ltd. and their competitors in the Ujjain region. To find out the level of customer satisfaction of its customers.

B.The Sample:In the project Financial instruments (traditional approach), I have used Pr

obability Sampling. Probability sampling is also known as random sampling.Sample size: 70 respondentsSampling period: June 22, 2010 to august 3, 2010.Sample place: Ujjain city.As keeping in mind the objective of the study the sample size and sampling technique was selected. Under this sampling technique, it was possible to include various groups of investors within the limited span of time. Secondly it gave me ample opportunity to identify the potential customers for the company.C. The tools:

1. For data collectionThe task of data collection begins after a research problem has been defined properly. I have used Survey method to collect the data.

I have used structured questionnaire for gathering information through contactingrespondent personally. Multiple choice questions are asked in the questionnairefor data collection.


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2. Data analysisData analysis is based on the data collected by way of questionnaire.

Name Address Phone NoJAWAHAR SANMUKHANI vinayak traders Ujjain 9406850540 - 0734-2564040RUPCHAND SANDANI GOPAL AGENCY 9425431270/07342553020

RAMESH KUMAR TRIVENI MARKETING 9301625807/07342559967RAMESH JAIN SURESH TRADERS 9407158041/07342554651RAJENDRA AGRWAL SANJAY TREADING 9300613923/07342559870LALCHAND JAIN M.KALURAM TREDARS 9827077123/07342554457PARAS JAIN RUCHIN TREDARS 9827431640/07344014665PRASHANT JAIN VARDHMAN SALES 9425452074/07342558189SHRI RAM JHAMLANI K.K.INTERPRICE 9425985985/07342558035PVITR JAIN DHARMESH TREDARS 9827530998/07342553802RESHABH JAIN RESHABH TREDING 9893012787/07344011474PUKHRAJ JAIN GANDMAL 9425195874/07342550871KAMAL GANWAL SARAVGI TREDING 94250891160/07342554777SATYANARAYAN AREN GURUKRIPA MIL 9425092323/07342561737

LAXMI AGRWAL M/S RAGHUNATH 9827270725/07342553824MAHESH GOYAL AGRWAL TRADING CO. 9827013880/07344014243RADHESYAM BHAVSAR SUPARI CENTER 9827227197SURENDRA AGRWAL KESHAV TREDARS 9425379957/07342558418VIDHYA JAIN M/R LADDU MAL 9993470939/07344010549VINOD CHOPRA SINDICAT TREDARS 9893617040/07342552444MAHENDRA AGRWAL SINGHAL CORPORATIO;N; 9425092362/07342552262SURESH SUNMUKHANI HERANAND SELES 9827078900/07342553207ASHOK JAIN ASHOK TEA CENTER 9425092268/07342550268ARJUN MAHESHWARI YASH INTERPRICE 9827076021/07342554559RADHARAMAN NAGAR RAMCHANDRA AND CO. 9424830303/07342554546AMBALAL NAYAK AMBIKA TRADARS 9098800791/073440870006ANIL AGRWAL M/S ANIL KUMAR 9827588822/07342554961

ABHAY KUMAR JAIN RAJENDRA TREADARS 9425332310/07342553804ASHOK HARINARAYAN M/S MANGILAL 9424877812/07342555835BRIJMOHAN RATHI M/S BALKISHAN RATHI 9425918068/07342556282CHANDRABHAN RAJDEV M/S NANDLAL 9424892074/07342557045ABDUL SATTAR UNITED TRADERS 9300736082/07342550883OMPRAKESH AGRWAL OMPRAKESH & CO. 9425918251/07342550710ARJUNDAS BHIMVANI TULSI TRADERS 990701881/07342550623ASHOK GARG LAXMI BASEN MIL 9827084155/07342552176AJAY VADVANI SHANKAR DAL MIL 9907021821/07342553991AJAY ROHARA A.K.TRADERS 9669999994/07342570179GHANSYAM DAS M/S NARENDRA KUMAR 9827314814/07342560028HARISH SANMUKHANI HARISH BROTHERS 9424891861/07342555721CHAMPAK SIROLIYA CHAMPAK & SANS 9893037770/07344012516CHANDRA KUMAR GURNANI GANESH TREDARES 9827579969/07342555230DEEPAK MEDATWAL NAVDEEP AGENCY 9425092127/07342554506BHAGWAN DAS KUMAR BROTHERS 9425195695/07342551241DHANRAJ MANGAL MANGAL INDUSTRES 9425458986/07342559657GURDEEP SINGH SUNEJA M/S MATHURADAS 9329423320/07342552286HARISH JHAMNANI ROCHA SENG 9926081357/07342552328JAIN KUMAR CHANDRA TRADING 9425091613/07342552838JAY KISHAN VASWANI HARIOM TRADERS 9827277820/07342550793JAY PRAKESH RATHI M/s JAYPRAKESH 9425195934/07342550602HERALAL JEETVANI M/s TEKCHAND 9425431322/07342552149LAXMAN VADWANI SIDHI TRADERS 9770017759/07342563990MANOJ KUMAR TEJWANI MANOJ TRADERS 9893050147/07344060567

SUNIL KUMAR JAIN SHANTI SOBHAGYA 9424014880/07342552299SHANKAR LAL KARMVANI 9826081361/07342550911MAHESH MITAL M/s PRMOD KUMAR & CO. 9827080333/2554436


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NANAK RAM DIMAND MARKETING 9425094045/07344041404RAJENDRA KABRA KABRA BROTHERS 9926478725/07344011549PARAS JAIN KALURAM SUNA 9827082242/07342561040PRAMOD KANKARIYA POONAM TRADERS 9424879271/07342560821RAMCHANDRA AHUJA SHEKAR TRADING C. 9425094586/07344040895SHALENDRA PARMAR BALAJI MARKETING 9827036420/07342551564SANJAY AGRWAL MYUR TREDERS 9827092911/07342557951

SURESH AGRWAL VISHVAS TRADING 9826817017/07344060181STAYANARAYAN GUPTA M/s GUPTA ENTERPRICE 9406831133/07342551038RAMCHANDRA JHAMNANI ANAND TREDERS 9425091288/07342560999MUKESH SONGRA SHREERAM TEA 9425195746/07342551521SHELESEH KALVIDIYA H.C.INTERPRICE 9424747474/07342551310SANJAY AGRWAL SANJAY TRADEING 9826244511/07342552214SHANKAR LAL M/S HERANAND 9424893394/07344040411SANJAY GARG R.R.TREDARS 9425094584/07342552704SUSHIL KAPOOR GURU TRADERS 9407125002/07342555157

RESULTS AND INTERPRETATION

After conducting the research I came to know that Karvy stock broking ltd has amonopoly in the market as the registrar of the companies in the stock exchange.The key finding of the study is summarized in the following points: The perception of an investor depends on his or her financial position. Most of the small businessman is interested in making his or her investments ininsurance sector. While few of them are interested in investing in share market. Most of the service class people were found to be interested in insurance and mu

tual funds. Nearly about 90 % of respondents like to invest in government companies. Only 10% of respondents showed interest in private companies. Only 40% of respondents were having DE-MAT A/c. The motivating factor for an investor, which makes him or her to invest in financial instruments, is profit (return on investment). In Ujjain city, Arihant capital is a stiff competitor of Karvy stock broking ltd. Karvy need to focus on marketing as it was found that 15% of the respondents never heard the name of Karvy.

LIMITATIONS

The sample extent for research is only Ujjain city.

Due to limitation of time and cost constraint a sample size of 70 respondents were chosen.

Some of the respondents denied furnishing any information.


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Q.1.Which investment option you prefer the most?

Data interpretation:

Majority of respondents (43%) prefer insurance as a better option for investment. While 29% prefer share market as their investment option.11% go for fixed depo

sits, 9%bonds, 6% national saving certificates and 3%respodents go for Kisan Vikas Patra.

Q.2.What is the purpose of your investment?


The basic purpose of an investor is saving. About 43% of the respondents agree to this fact. While 29% of respondents go for tax benefits.21% respondents for profit and 7% for risk cover.

Q.3.Do you invest in share market?


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Nearly about 57% of the respondents invest in share market. While 43% of the respondents dont want to invest in share market.

Q.4.Do you have a Demat account?


In Ujjain, 36% of the respondents have a Demat account. 64% of the respondents dont have a Demat account.

Q.5.In which companies you has your Demat account?


50% of the respondents had their Demat account in Karvy stock broking ltd.29% inArihant capital and 14% respondents in indo-Thai securities. While the remaining 7% in share khan.

Q.6.What is your broking charges?


About 43% of the respondents said that they were charged 0.03ps (intraday) and 0.30ps (delivery).while 57% of the respondents were charged 0.05ps (intraday) and0.50ps (delivery).


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Q.7.Do you know about the annual maintenance charges of your broking firm?


It was found that majority of the investors are not aware of the annual maintenance charges (64% of respondents).36% of the respondents are aware of their annual maintenance charges.

Q.8.Are you satisfied by the services of Karvy stock broking ltd.?


79% of the respondents are satisfied by the services rendered by Karvy.21% of the respondents are not satisfied by Karvy.

Q.9.In which sector you prefer to invest your money?


29%of the respondents prefer to invest in private sector or company. Remaining 71% prefer to invest in public sector or company.

Q.10.What is the most important thing that you keep in mind while investing in share market?


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57% of the respondents keep in mind the risk associated with the investment. While 43% respondents keep in mind the returns which they will get after investment.

Q.11.Do you have a medical claim policy?


Only 7% of the respondents have medical claim policy. Majority of the respondents i.e. 93% of the respondents dont have medical claim policy.

Q.12.In which companies you has your insurance?

Data interpretation:In Ujjain 86% of the respondents have LIC insurance plans i.e.LIC is the major player in the insurance sector.9% of the respondents have insurance plans of Bajaj Allianz and 6% respondents have policy of other companies.

Q.13.Do you know about Karvy?



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Q5. In which company you have your de mat account?

Ans.Karvy stock broking ltd.

Indo Thai securities

Arihant

Share khan

Q.6.What is your broking charges?Ans. 0.03-0.30 paisa

0.05-0.50 paisa

Q.7.Do you know about the annual maintenance chargesYour broking firms?Ans.Yes NoQ.8.Are you satisfied by the services of Karvy stock broking ltd?Ans.Yes No

Q.9.In which sector you prefer to invest your money?Ans.Private sector

Public sector

Q.10.What is the most important thing that you keep in mind while investing in share market?Ans.Risk

Return

Q.11.Do you have a medical claim?Ans.Yes No

Q.12.In which companies you has your insurance?Ans. LIC

Baja AllianzOthers

Q.13.Do you know about Karvy?Ans. Yes

No


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BIBLIOGRAPHY

http://www.karvy.com/v2/aboutus.aspx http://www.karvycomputershare.com http://www.karvy.com/v2/websites/kisl/registry http://www.karvy.com/v2/institutional/broking/aspx http://www.thefinapolis.com/v2/bondsFDs/bonds_FDs.asp. http://www.karvyglobal.com http://www.thefinapolis.com/v2/achievement.asp http://en.wikipedia.org/wiki/financial_instrument.

http://www.investopedia.com/terms/f/financialinstrument.asp http://en.wikipedia.org/wiki/insurance http://www.investinginbonds.com/learnmore.asp?catid=46&id=2


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APROJECT REPORT ONA STUDY ON FINANCIAL INSTRUMENTS(TRADITIONAL APPROACH)SUBMITTED TOMAHAKAL INSTITUTE OF MANAGEMENT, UJJAINTOWARDSPARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA)OFVIKRAM UNIVERSITY, UJJAIN (M.P.)

June-July 2010

DECLARATION

I, the undersigned, Rini Jacob hereby declare that the present, summer project title A Study on Financial instrument (traditional approach) is based on my original work and my indebtedness to other works, publication, has been duly acknowledged at relevant places.

Signature of the Student:Rini Jacob

ACKNOWLEDGEMENT


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I take this opportunity to express my deep sense of gratitude towards all the persons who helped me through their guidance and cooperation to complete the project successfully. It is great privilege and honor to have an opportunity of doingproject at Karvy stock broking limited Ujjain.First of all I would like to give my sincere thanks to Mr. Bunty Kumar (branch manager) for granting me permission to do my training on FINANCIAL INSTRUMENTS (TRADITIONAL APPROACH). I m very grateful to my project guide for his generous gui

dance and giving full co-operation to me despite their hectic schedule. .I express my sincere gratitude to all persons who gave me guidance and help forconducting this study.

CONTENTSA. General training:IntroductionHistory of the organisationMission and vision of KarvyOrganisational structureKarvy groupServices offered by Karvy groupAchievements of Karvy groupSWOT analysis

B. Special project undertaken:Chapter 1: introductionChapter 2: Research methodology

Introduction to the projecta) The study and objectivesb) Samplec) Tools Data collection Data analysis

Chapter 3: results and interpretation of resultsChapter 4: suggestion and conclusionAppendicesBibliography

INTRODUCTION

Karvy is a premier integrated financial services provider and ranked among the t

op five in the country in all its business segments. It services over 16 millionindividual investors in various capacities and provides investor services to over 300 corporate, comprising who is who of Corporate India.


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It is a member of all three:-

National Stock Exchange (NSE)

Bombay Stock Exchange (BSE)

Hyderabad Stock Exchange (HSE)

Karvy utilized its experience and superlative expertise to capitalize on its strengths and better its services, innovate and provide new ones. Its diversified inthe process and thus evolved as Indias premier integrated financial services enterprise.

Karvy has been a customer centric company since its inception. It offers a single platform servicing multiple financial instruments in its bid to offer complete

financial solution to the varying needs of both corporate and retail investors,where and extensive range of services are provided with great volume- management capability.

Karvy covers the entire spectrum of financial services such as stock broking, depository, participants, distribution of financial product- mutual funds, bonds,fixed deposit, equities, insurance broking, commodities broking, personal finance advisory services, merchant banking & corporate finance, placement of equity,IPOs, among others.

HISTORY OF ORGANIZATION

Karvy was started by a group of five chartered accountants in 1979. The partnersdecided to offer, other than the audit services, value added services like corporate advisory services to their clients. The first firm in the group, Karvy Consultants Limited was incorporated on 23rd July, 1983. In a very short period, itbecame the largest Registrar and Transfer Agent in India. This business was spun off to form a separate joint venture with Computershare of Australia, in 2005.Karvys foray into stock broking began with marketing IPOs, in 1993. Within a fewyears, Karvy began topping the IPO procurement league tables and it has consistently maintained its position among the top 5. Karvy was among the first few members of National Stock Exchange, in 1994 and became a member of The Stock Exchange, Mumbai in 2001. Dematerialization of shares gathered pace in mid-90s and Karvy was in the forefront educating investors on the advantages of dematerializingtheir shares. Today Karvy is among the top 5 Depositary Participant in India.

While the registry business is a 50:50 Joint Venture with Computershare of Australia, we have equity participation by ICICI Ventures Limited and Barings Asia Limited, in Karvy Stock Broking Limited. For a snapshot of our organization structure, please click here.

Karvy has always believed in adding value to services it offers to clients. A top-notch research team based in Mumbai and Hyderabad supports its employees to advise clients on their investment needs. With the information overload today, Karvys team of analysts help investors make the right calls, be it equities, mf, insurance. On a typical working day Karvy:

Has more than 25,000 investors visiting our 575 offices. Publishes / broadcasts at least 50 buy / sell calls


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Attends to 10,000+ telephone calls Mails 25,000 envelopes, containing Annual Reports, dividend cheques / advises, allotment / refund advises Executes 150,000+ trades on NSE / BSE Executes 50,000 debit / credit in the depositary accounts

MISSION AND VISION OF KARVY

MISSION STATEMENT OF KARVY:An organization exists to accomplish something or achieve something. The missionstatement indicates what an organization wants to achieve .Karvys mission statement is TO BRING INDUSTRY, FINANCE AND PEOPLE TOGETHERKarvy act as an intermediary between industry and people. It work as an investment advisor and helps people to invest their money ,same way Karvy helps industryin achieving finance from people by issuing shares,debentures,bonds,mutual funds, fixed deposits.

VISION OF KARVY:

Companys vision is crystal clear and mind frame very directed.To be pioneering financial services company and continue to grow at a healthy pace, year after year,decade after decade. Company foray into IT- enabled services and internet business has provided an opportunity to explore new frontiers and business solution;to build a corporate that sets benchmark for others to follow.

ORGANIZATIONAL STRUCTURE

KARVY GROUP

Karvy has travelled the success route, towards building a reputation as an integrated financial service provider, offering a wide spectrum of services for over

20 years.Karvy, a name long committed to service at its best. A fame acquired through therange of corporate and retail services including merchant banking, mutual funds


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, fixed income, equity investments, insurance, commodities to name a few. Our values and vision of attaining total competence in our servicing has served as abuilding block for creating a large financial enterprise.The Karvy group of companies are:Karvy stock broking ltd.:

A member of National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and Hyderabad Stock Exchange (HSE) offers a comprehensive range of services in the stock market through the benefits of in-depth research on crucial market dynamics,done by qualified team of experts. The company offers solutions that encompass awide spectrum of financial services/products.

1. Karvy Comtrade ltd.:

The company provides investment, advisory and brokerage services in Indian Commodities Markets. And most importantly, we offer a wide reach through our branch n

etwork of over 530 branches located across390 cities.2. Karvy insurance broking ltd.:

The company provides life and non-life insurance products to retail individuals,high net worth clients and corporate. A major step towards being the most comprehensive personal finance advisor.

3. Karvy investors services ltd.:

Registered with SEBI as a Category I Merchant Banker and ranked among the top 10merchant bankers in the country, the company has built a reputation as a professional advisor in structuring IPOs take over assignments and buy back exercises.

4. Karvy Computershare private ltd:

Karvy Computershare Private Limited is a joint venture between Computershare, Australia and Karvy Consultants Limited - The first securities registry company toreceive ISO 9002 certification in India. Registered with SEBI as Category I Registrar, is Number 1 Registrar in the country. Computershare, Australia, servicesmore than 75 million shareholders across 7000 corporate clients and makes its presence felt in over 12 countries across 5 continents.


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KARVY is working as Capital Market Intermediaries. Stockbrokers are regulated bySEBI [Stock-brokers and Sub-brokers] Regulations, 192. The stockbroker is a member of the stock exchange. Stockbrokers are the intermediaries who are allowed to trade in securitiesSERVICES OFFERED BY KARVY1) DEMAT Services:

Karvy is a depository participant with the national securities depository limited (NSDL) for trading and settlement of dematerialised shares.Depository participant are described as an agent of depository. They are intermediaries between the depositors and the investors. They can offer these servicesonly after obtaining a certificate of registration from SEBI.

2) Registrar and transfer agent:

In 1985, Karvy entered the registrar and share transfer business. Karvy has beenrated as Indias most admired registrar.

3) Investment product distribution:

Karvy is concerned with distribution of investment products like: Fixed deposits Bonds IPO

a) Fixed deposits:Karvy is a dealer of 34 fixed deposit companies which includes companies from public sector, Non banking finance companies, Housing finance companies and Manufacturing companies.

b) Bonds :Karvy deals with bonds from RBI saving bonds, NHB and REC.

c) IPO:Karvy also provides services related to IPO (Initial public offer).Recently Karvy released the IPO of SKS Microfinance.4) Investment advisory services:

Karvy also provides investment advisory services.i.e, portfolio management services to high net worth individuals and corporate. It guides its investors to invest in right kind of funds for better return to its investors.

5) Merchant banking:

Merchant banking is a financial intermediation that matches entities that need capital and those that have capital. Hence they facilitate the flow of capital in


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the market.Karvy enjoys SEBI category I for merchant banking. Karvy offers the full spectrum of merchant banking service beginning from identity the best time for an issueto final stage of marketing.

6) Insurance:

Karvy is also a dealer of many private life insurance companies. At Ujjain branch, it is associated with the dealing of following companies like Tata AIG, Max BUPA and the like.

7) Mutual fund services:

Karvy provides services to nearly 80% of the asset management services (AMC) across an extensive network of service centres with asset under service in excess of Rs.10, 000 crores.

8) Income tax enabled services:

Karvy provide income tax enabled services. It works as a TIN Facilitation centreand provides the following services: Distribution of PAN Cards (Permanent account number). Distribution of TAN Cards ()


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ACHIEVEMENTS OF KARVY

Largest mobilizer of funds as per PRIME DATABASE. First ISO-9002 certified registrar in India.

A category I Merchant banking. A category I Registrar to public issues. Ranked as The most admired registrar by MARG. Handled the largest ever public issue- IDBI. Handled over 500 public issues as registrar. Handling the Reliance accounts which accounts for nearly 10 million account holders. First depository participant from Andhra Pradesh.

SWOT ANALYSIS

Strength: No.1 registrar and transfer agent of companies Strong communication network

Employees are highly empowered.

Weakness: High employee turnover.

Opportunities Need to explore the rural and semi urban areas.

Threats: Increasing number of local players.

INTRODUCTION

FINANCIAL INSTRUMENTS:In simple terms Financial Instrument is either cash; evidence of an ownership inan entity or a contractual right to receive or deliver, cash or another financial instruments.

Financial Instruments are legal documents that embody monetary value. There area number of different types of documents that are properly identified as financial instruments. In today

s financial marketplace, financial instruments can be


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classified generally as equity based, representing ownership of the asset, or debt based, representing a loan made by an investor to the owner of the asset. Foreign exchange instruments comprise a third, unique type of instrumentThey are broadly categorized under two heads. They are as follow:

TYPES OF FINANCIAL INSTRUMENTS

Financial instruments are broadly categorised under two heads they are as follow: Cash instruments:This type of financial instrument is simply those documents that are recognizedas cash that can be utilized for various transactions.

Currency is the most easily identified of all cash instruments, although such documents as checks or funds transfers from bank accounts would also be understoodto be a financial instrument of this type.

Derivative instruments:In broad terms, a derivative instrument is some type of contract that has valuebased on the current status of the underlying assets.

This classification would include such instruments as future options, and swaps.Some analysts also prefer to include stocks, bonds, and currency future withinthis category.

FINANCIAL INSTRUMENTS (TRADITIONAL APPROACH)

We have seen the two categories of financial instruments. Now let us see the approaches of financial instruments. The approaches to financial instruments are:

Traditional approach.

Modern approach.

The traditional approach to financial instruments includes the traditional instruments which have been in the financial market for a long time. The financial instruments taken into account are as follow:

Insurance.

Fixed deposits.

Bonds.

Kisan Vikas Patra.


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National saving certificates

INSURANCE

Insurance, in law and economics, is a form of risk management primarily used tohedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium.Insurer, in economics, is the company that sells the insurance.Insurance rate is a factor used to determine the amount, called the premium, tobe charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

SUM ASSURED:

It is the amount of money an insurance policy guarantees to pay before any bonuses are added.

Factors included in the calculation of sum assured are:

Date of birth.

Gender.

Duration.

Health conditions.

Job profile.


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LIFE INSURANCE:

All policies are not the same. Some give coverage for your lifetime and others cover you for a specific number of years.

Following are the different types of life insurances:

Whole life Term policy Money back Endowment Pension plan ULIP

GENERAL INSURANCE:

General insurance typically comprises any insurance that is not determined to belife insurance. It is called property and casualty (P&C) insurance in the U.S.General insurance policies, including automobile, accidents and homeowners policies, provide payments depending on the loss from a particular financial event.

INSURANCE PRODUCT WITH WHICH WE DEALT AT KARVY:

MAHA LIFE GOLD (TATA AIG).

MAHA LIFE GOLD (TATA AIG):THE WHOLE LIFE PLAN

ABOUT TATA AIG:

Tata AIG Life Insurance Company Limited and Tata AIG General Insurance Company Limited (collectively

Tata AIG

) are joint ventures of the Tata Group and American International Group, Inc. (AIG). Tata AIG combines the strength and integrityof the Tata Group with AIG

s international expertise and financial strength.

A joint venture between the Tata Group and American International Group Licensed to Sell: Feb 2001 Started Operation: Apr 2001 Head Office: Mumbai Accounting Year: April March

performance Year: April March Percentage of Company Holdings = AIG 26


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As Tata AIG Life grew, the logo evolved to represent itsCommitment to customers and its focus on path breaking productsTo meet customer needs.This gave birth to a New Corporate Identity

A new look at life

ABOUT PRODUCT:

TERMS:Term mean the time period of policy and Maha life gold of Tata AIG for year.

1* 5* 6* 10* 11*


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15*

*= YEARSSUM ASSURED: 1 lack no limit

AGE CRITERIA: 0 to 60

PREMIUM RATES (Rs.1, 00,000.)FOR INDICATED SUM ASSURED

ISSUEAGE ANNUAL SEMIANNUAL0-35 9150 466736-45 9200 469246-50 9250 471851-55 9300 474356 9428 480857 9508 484958 9603 489859 9699 496460 9836 5016

1 2 3 4

1ST YEAR 5TH YEAR =

1ST PREMIUM (for 36-39) = 9,200rsTotal premium in 4year = 9,200*4Total premium in 4 year = 36,8006 7 8 9 106th year - 10th year =

6th year premium = 9,200Total premium in 5 year = 9,200*6Total premium in 5 year = 55,200

After 5 year there is a provision of 3% flexible per annum dividend on sum assured.


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Calculation:= 1,00,000*3/100.= 3,00,000/100.= 3,000 PER YEA

TOTAL INTREST IN 6 YEAR=

5TH* 6TH* 7TH* 8TH*9TH* 10th * 15

* = YEAR

TOTAL INTREST IN 5 YEAR= 18,000

10th year - 15th year =

11th* 12th* 13th* 14th* 15th*

* = YEAR

7th year premium= 9200Total premium in 5 year = 9200*5Total premium in 5 year = 46,000

ONWARD 15 YEAR TILL POLICY HOLDERS DEATH HE RECEIVE

FLEXIBLE INTRESTED: 10%GURANTEED INTRESTED: 5%TOTAL: 15%

CALCULATION:

10%

= 1,00,000*10/100= 1,00,00,00/100= 10,000rs per year 5%

= 1,00,000*5/100= 5,00,000/100= 5,000rs per year

TOTAL= 10,000 + 5,000= 15,000 Rs


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Suppose if Mr A person take a policy when he was 35 year old. His premium is completed at 50 year. After 50 year he was died when he was 80 year old then he wasget.TOTAL AMOUNT MR. A RECEIVED

Calculation:

AGETOTALINVESTMENT

TOTALINCOME35-39 46,000 -40-45 46,000 18,00046-50 46,000 55,00050-80 - 4,50,000

AT THE TIMEOF DEATH 1,00,000

TOTAL1,38,0006,30,000

The benefit of this policy that policy holder only have to pay the premium onlyfor 15 year and he receive benefit for long period of time.

NATIONAL SAVING CERTIFICATE (NSC)

National saving certificates are popularly known as NSC.It is a time tested taxsaving instruments that combines adequate returns with high safety. These certificates are available at all post offices across India. . A large chunk of middleclass families use NSCs for saving on their tax, getting double benefits. Theynot only save tax on their hard-earned income but also make an investment whichis sure to give good and safe returns.

FEATURES OF NATIONAL SAVING CERTIFICATE:

How to invest:One can invest in any head post office/sub post office.


Minimum Purchase Value:

The minimum amount of investment under NSC is Rs 100/-


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Maturity of National Savings Certificate:Period of maturity of a certificate is six Years.

Nomination / Transferability: Nomination facility is available. Certificates can be transferred from one post office to any other post office.

Transfer from one person to another person permissible in certain conditions.

Denomination : Certificates are available in denominations (face value) of Rs. 100, Rs.500, Rs.1000, Rs. 5000 & Rs. 10,000.

Interest/maturity value : Interest is available on this scheme @ 8%, compounded half-yearly Interest accrued on the certificates every year is liable to income tax but deemed to have been reinvested.

Income Tax relief :

Income Tax rebate is available on the amount invested and interest accruing everyyear under Section 88 of Income tax Act, as amended from time to time. [under Sec 80C] Income tax relief is also available on the interest earned as per limits fixed vied section 80L of Income Tax, as amended from time to time.

KISAN VIKAS PATRA

Kisan Vikas Patra (KVP) is a saving instrument that provides interest income similar to bonds. Amount invested in Kisan Vikas Patra doubles on maturity after 8years & 7 months. Some people have a misconception that only a farmer can investmoney in Kisan Vikas Patra. However, it is absolutely false. Anyone wishing toinvest money at safe places can go for Kisan Vikas Patra.FEATURES OF KISAN VIKAS PATRA: How to invest:It is an easy way to invest in KVP.One can invest in any head post office/sub post office in cash, demand draft or local cheques.


Denominations:Kisan Vikas Patra is available in the denominations of Rs 100, Rs 500, Rs 1000,Rs 5000, Rs. 10,000 and Rs. 50,000. There is no maximum limit on purchase of KVPs.

Who is not Eligible:

Commercial Companies and institutions are not eligible to purchase KVP. NRIs and Hindu Undivided Families cannot purchase Kisan Vikas Patra.


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Maturity: Facility of reinvestment on maturity. Maturity proceeds which are not drawn are eligible for Post office Savings account interest for a maximum period of two years. Nomination/transferability: KVPs are transferable to any Post office in India. KVPs can be transferable from one person to another person before maturity.

Nomination Facility is available in case of KVPs

Income tax relief:No income tax benefits available are under KVPs.

BONDS

Meaning of Bonds:

A Bond is a debt security. When you purchase a bond, you are lending money to agovernment, municipality, corporation, federal agency or other entity known as issuer.

In return for that money ,the issuer provides you with a bond in which it promises to pay a specified rate of interest during the life of the bond and to repaythe face value of the bond (the principal)when it matures or comes due.

Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Certificates of deposit (CDs) or commercial paper are considered to be money market instruments and not bonds. Bonds must be repaid at fixed intervals over a period of time.

Features of Bonds: Nominal, principal or face amount:The principal is the amount at which issuer pays interest and which, most commonly, has to be repaid at the end of the term. Issue price:Issue price is the price at which investors buy the bonds when they are first issued, which will typically be approximately equal to the nominal amount. Maturity date:The date on which the issuer has to repay the nominal amount. As long as all payments have been made, the issuer has no more obligations to the bond holders aft

er the maturity date. Short term (bills): maturities up to one year. Medium term (notes): maturities between one and ten years.


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Long term (bonds): maturities greater than ten years.

coupon :The interest rate at which the issuer pays to the bond holders. Usually this rate is fixed throughout the life of the bond.

Coupon dates:

The dates on which the issuer pays the coupon to the bond holders. In the U.S. and also in the U.K. and Europe, most bonds are semi-annual, which means that they pay a coupon every six months.

FIXED DEPOSITS

WHAT IS A FIXED DEPOSIT?A fixed deposit is meant for those investors who want to deposit a lump sum of money for a fixed period; say for a minimum period of 15 days to five years and a

bove, thereby earning a higher rate of interest in return. Investor gets a lumpsum (principal + interest) at the maturity of the deposit.

Bank fixed deposits are one of the most common savings scheme open to an averageinvestor. Fixed deposits also give a higher rate of interest than a savings bank account. The facilities vary from bank to bank. Some of the facilities offered by banks are overdraft (loan) facility on the amount deposited, premature withdrawal before maturity period (which involves a loss of interest) etc. Bank deposits are fairly safer because banks are subject to control of the Reserve Bank of India.

FEATRURES OF FIXED DEPOSITS: Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India (RBI) with regard to several policy and operational parameters.

The banks are free to offer varying interests in fixed deposits of different maturities. Interest is compounded once a quarter, leading to a somewhat higher effective rate.

Minimum deposits:The minimum deposit amount varies with each bank. It can range from as low as Rs. 100 to an unlimited amount with some banks.

How to apply?One can get a bank FD at any bank, be it nationalised, private, or foreign. You

have to open a FD account with the bank, and make the deposit. However, some banks insist that you maintain a saving account. Returns:


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The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent, depending on the maturity period (duration) of the FD and the amount invested

Duration Interest rate (%) per annum15-30 days 4 -5 %

30-45 days 4.25-5 %46-90 days 4.75--5.5 %91-180 days 5.5-6.5 %181-365 days 5.75-6.5 %1-2 years 6-8 %2-3 years 6.25-8 %3-5 years 6.75-8

INTRODUCTION TO THE PROJECT

A. Study and its objectives:The project undertaken by me for the Karvy stock broking ltd. laid emphasis on financial instruments with a special reference to traditional approach.This project has been helpful in understanding the perception of investors. As the research which was b conducted helped me to interact with various investors from different backgrounds.The objectives of the study are as follow:

To know the perception of investors towards the traditional financial instruments. Lead generation i.e., to identify potential clients. To find and analyze the market position of Karvy stock broking ltd. and their competitors in the Ujjain region. To find out the level of customer satisfaction of its customers.

B.The Sample:In the project Financial instruments (traditional approach), I have used Pr

obability Sampling. Probability sampling is also known as random sampling.Sample size: 70 respondentsSampling period: June 22, 2010 to august 3, 2010.Sample place: Ujjain city.As keeping in mind the objective of the study the sample size and sampling technique was selected. Under this sampling technique, it was possible to include var

ious groups of investors within the limited span of time. Secondly it gave me ample opportunity to identify the potential customers for the company.


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C. The tools:

1. For data collectionThe task of data collection begins after a research problem has been defined properly. I have used Survey method to collect the data.I have used structured questionnaire for gathering information through contactingrespondent personally. Multiple choice questions are asked in the questionnaire

for data collection.2. Data analysisData analysis is based on the data collected by way of questionnaire.

Name Address Phone NoJAWAHAR SANMUKHANI vinayak traders Ujjain 9406850540 - 0734-2564040RUPCHAND SANDANI GOPAL AGENCY 9425431270/07342553020RAMESH KUMAR TRIVENI MARKETING 9301625807/07342559967RAMESH JAIN SURESH TRADERS 9407158041/07342554651RAJENDRA AGRWAL SANJAY TREADING 9300613923/07342559870LALCHAND JAIN M.KALURAM TREDARS 9827077123/07342554457

PARAS JAIN RUCHIN TREDARS 9827431640/07344014665PRASHANT JAIN VARDHMAN SALES 9425452074/07342558189SHRI RAM JHAMLANI K.K.INTERPRICE 9425985985/07342558035PVITR JAIN DHARMESH TREDARS 9827530998/07342553802RESHABH JAIN RESHABH TREDING 9893012787/07344011474PUKHRAJ JAIN GANDMAL 9425195874/07342550871KAMAL GANWAL SARAVGI TREDING 94250891160/07342554777SATYANARAYAN AREN GURUKRIPA MIL 9425092323/07342561737LAXMI AGRWAL M/S RAGHUNATH 9827270725/07342553824MAHESH GOYAL AGRWAL TRADING CO. 9827013880/07344014243RADHESYAM BHAVSAR SUPARI CENTER 9827227197SURENDRA AGRWAL KESHAV TREDARS 9425379957/07342558418VIDHYA JAIN M/R LADDU MAL 9993470939/07344010549

VINOD CHOPRA SINDICAT TREDARS 9893617040/07342552444MAHENDRA AGRWAL SINGHAL CORPORATIO;N; 9425092362/07342552262SURESH SUNMUKHANI HERANAND SELES 9827078900/07342553207ASHOK JAIN ASHOK TEA CENTER 9425092268/07342550268ARJUN MAHESHWARI YASH INTERPRICE 9827076021/07342554559RADHARAMAN NAGAR RAMCHANDRA AND CO. 9424830303/07342554546AMBALAL NAYAK AMBIKA TRADARS 9098800791/073440870006ANIL AGRWAL M/S ANIL KUMAR 9827588822/07342554961ABHAY KUMAR JAIN RAJENDRA TREADARS 9425332310/07342553804ASHOK HARINARAYAN M/S MANGILAL 9424877812/07342555835BRIJMOHAN RATHI M/S BALKISHAN RATHI 9425918068/07342556282CHANDRABHAN RAJDEV M/S NANDLAL 9424892074/07342557045ABDUL SATTAR UNITED TRADERS 9300736082/07342550883OMPRAKESH AGRWAL OMPRAKESH & CO. 9425918251/07342550710ARJUNDAS BHIMVANI TULSI TRADERS 990701881/07342550623ASHOK GARG LAXMI BASEN MIL 9827084155/07342552176AJAY VADVANI SHANKAR DAL MIL 9907021821/07342553991AJAY ROHARA A.K.TRADERS 9669999994/07342570179GHANSYAM DAS M/S NARENDRA KUMAR 9827314814/07342560028HARISH SANMUKHANI HARISH BROTHERS 9424891861/07342555721CHAMPAK SIROLIYA CHAMPAK & SANS 9893037770/07344012516CHANDRA KUMAR GURNANI GANESH TREDARES 9827579969/07342555230DEEPAK MEDATWAL NAVDEEP AGENCY 9425092127/07342554506BHAGWAN DAS KUMAR BROTHERS 9425195695/07342551241DHANRAJ MANGAL MANGAL INDUSTRES 9425458986/07342559657

GURDEEP SINGH SUNEJA M/S MATHURADAS 9329423320/07342552286HARISH JHAMNANI ROCHA SENG 9926081357/07342552328JAIN KUMAR CHANDRA TRADING 9425091613/07342552838


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JAY KISHAN VASWANI HARIOM TRADERS 9827277820/07342550793JAY PRAKESH RATHI M/s JAYPRAKESH 9425195934/07342550602HERALAL JEETVANI M/s TEKCHAND 9425431322/07342552149LAXMAN VADWANI SIDHI TRADERS 9770017759/07342563990MANOJ KUMAR TEJWANI MANOJ TRADERS 9893050147/07344060567SUNIL KUMAR JAIN SHANTI SOBHAGYA 9424014880/07342552299SHANKAR LAL KARMVANI 9826081361/07342550911

MAHESH MITAL M/s PRMOD KUMAR & CO. 9827080333/2554436NANAK RAM DIMAND MARKETING 9425094045/07344041404RAJENDRA KABRA KABRA BROTHERS 9926478725/07344011549PARAS JAIN KALURAM SUNA 9827082242/07342561040PRAMOD KANKARIYA POONAM TRADERS 9424879271/07342560821RAMCHANDRA AHUJA SHEKAR TRADING C. 9425094586/07344040895SHALENDRA PARMAR BALAJI MARKETING 9827036420/07342551564SANJAY AGRWAL MYUR TREDERS 9827092911/07342557951SURESH AGRWAL VISHVAS TRADING 9826817017/07344060181STAYANARAYAN GUPTA M/s GUPTA ENTERPRICE 9406831133/07342551038RAMCHANDRA JHAMNANI ANAND TREDERS 9425091288/07342560999MUKESH SONGRA SHREERAM TEA 9425195746/07342551521

SHELESEH KALVIDIYA H.C.INTERPRICE 9424747474/07342551310SANJAY AGRWAL SANJAY TRADEING 9826244511/07342552214SHANKAR LAL M/S HERANAND 9424893394/07344040411SANJAY GARG R.R.TREDARS 9425094584/07342552704SUSHIL KAPOOR GURU TRADERS 9407125002/07342555157

RESULTS AND INTERPRETATION

After conducting the research I came to know that Karvy stock broking ltd has amonopoly in the market as the registrar of the companies in the stock exchange.The key finding of the study is summarized in the following points: The perception of an investor depends on his or her financial position. Most of the small businessman is interested in making his or her investments ininsurance sector. While few of them are interested in investing in share market. Most of the service class people were found to be interested in insurance and mutual funds. Nearly about 90 % of respondents like to invest in government companies. Only 10% of respondents showed interest in private companies. Only 40% of respondents were having DE-MAT A/c. The motivating factor for an investor, which makes him or her to invest in financial instruments, is profit (return on investment). In Ujjain city, Arihant capital is a stiff competitor of Karvy stock broking ltd. Karvy need to focus on marketing as it was found that 15% of the respondents never heard the name of Karvy.

LIMITATIONS


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The sample extent for research is only Ujjain city.

Due to limitation of time and cost constraint a sample size of 70 respondents were chosen.

Some of the respondents denied furnishing any information.

Q.1.Which investment option you prefer the most?


Majority of respondents (43%) prefer insurance as a better option for investment. While 29% prefer share market as their investment option.11% go for fixed deposits, 9%bonds, 6% national saving certificates and 3%respodents go for Kisan Vikas Patra.

Q.2.What is the purpose of your investment?


The basic purpose of an investor is saving. About 43% of the respondents agree to this fact. While 29% of respondents go for tax benefits.21% respondents for pr


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ofit and 7% for risk cover.

Q.3.Do you invest in share market?


Nearly about 57% of the respondents invest in share market. While 43% of the respondents dont want to invest in share market.

Q.4.Do you have a Demat account?


In Ujjain, 36% of the respondents have a Demat account. 64% of the respondents d

ont have a Demat account.

Q.5.In which companies you has your Demat account?


50% of the respondents had their Demat account in Karvy stock broking ltd.29% inArihant capital and 14% respondents in indo-Thai securities. While the remaining 7% in share khan.

Q.6.What is your broking charges?


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Data interpretation:About 43% of the respondents said that they were charged 0.03ps (intraday) and 0.30ps (delivery).while 57% of the respondents were charged 0.05ps (intraday) and

0.50ps (delivery).

Q.7.Do you know about the annual maintenance charges of your broking firm?


It was found that majority of the investors are not aware of the annual maintenance charges (64% of respondents).36% of the respondents are aware of their annual maintenance charges.

Q.8.Are you satisfied by the services of Karvy stock broking ltd.?


79% of the respondents are satisfied by the services rendered by Karvy.21% of the respondents are not satisfied by Karvy.

Q.9.In which sector you prefer to invest your money?


29%of the respondents prefer to invest in private sector or company. Remaining 71% prefer to invest in public sector or company.


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Q.10.What is the most important thing that you keep in mind while investing in share market?

Data interpretation:57% of the respondents keep in mind the risk associated with the investment. While 43% respondents keep in mind the returns which they will get after investment.

Q.11.Do you have a medical claim policy?


Only 7% of the respondents have medical claim policy. Majority of the respondents i.e. 93% of the respondents dont have medical claim policy.

Q.12.In which companies you has your insurance?

Data interpretation:In Ujjain 86% of the respondents have LIC insurance plans i.e.LIC is the major player in the insurance sector.9% of the respondents have insurance plans of Bajaj Allianz and 6% respondents have policy of other companies.

Q.13.Do you know about Karvy?


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Data interpretation:About 79% of the respondents know about Karvy.21% of respondents dont know aboutKarvy.

SUGGESTION AND CONCLUSION

There is a high potential market for Karvy stock broking ltd. in Ujjain, but this market needs to be explored as investors (15% of respondents) are unaware of K

arvy stock broking ltd.In Ujjain, investors have inadequate knowledge about financial instruments, so the company needs proper marketing of all their services advertising, distribution of pamphlet, arranging seminars etc.Last but not the least, the point which Karvy should keep in mind is to get involved in aggressive marketing. It has optimum resources and these resources needto be channelized in a more efficient manner.

QUESTIONNAIREName:

Address:

Age:

Contact no.

Q1.Which investment option you prefer?Ans.Insurance Share market

Fixed deposits BondsNational saving certificate Kisan Vikas Patra

Q2.What is the purpose of your investment?

Ans.Saving Tax benefit

Profit Risk cov


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er

Q3. Do you invest in share market?Ans.Yes No

Q4.Do you have a de mat account?

Ans.Yes No

Q5. In which company you have your de mat account?

Ans.Karvy stock broking ltd.

Indo Thai securities

Arihant

Share khan

Q.6.What is your broking charges?Ans. 0.03-0.30 paisa

0.05-0.50 paisa

Q.7.Do you know about the annual maintenance chargesYour broking firms?Ans.Yes NoQ.8.Are you satisfied by the services of Karvy stock broking ltd?Ans.Yes No

Q.9.In which sector you prefer to invest your money?Ans.Private sector

Public sector

Q.10.What is the most important thing that you keep in mind while investing in share market?Ans.Risk

Return

Q.11.Do you have a medical claim?Ans.Yes No

Q.12.In which companies you has your insurance?Ans. LIC

Baja AllianzOthers

Q.13.Do you know about Karvy?Ans. Yes


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No

BIBLIOGRAPHY

http://www.karvy.com/v2/aboutus.aspx http://www.karvycomputershare.com http://www.karvy.com/v2/websites/kisl/registry http://www.karvy.com/v2/institutional/broking/aspx http://www.thefinapolis.com/v2/bondsFDs/bonds_FDs.asp. http://www.karvyglobal.com http://www.thefinapolis.com/v2/achievement.asp http://en.wikipedia.org/wiki/financial_instrument. http://www.investopedia.com/terms/f/financialinstrument.asp http://en.wikipedia.org/wiki/insurance http://www.investinginbonds.com/learnmore.asp?catid=46&id=2


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A STUDY ON FINANCIAL INSTRUMENTS WITH SPECIAL REFERENCE TO TRADITIONAL INSTRUMENTS

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Transcript of A STUDY ON FINANCIAL INSTRUMENTS WITH SPECIAL REFERENCE TO TRADITIONAL INSTRUMENTS