Chapter 1: Introduction

1.1 Introduction of the study:

Investment is the sacrifice of the certain present value for the uncertain future reward.
Investments are always interesting, challenging and rewarding. Generally when there are
high risks, more rate of return is assured. Risk and reward go together. The major features
of an investment are safety of principal amount, liquidity, income stability, appreciation
and easy transferability. A variety of investment avenues are available such as shares, bank,
companies, gold and silver, real estate, life insurance, postal savings and so on. All the
investors invest their surplus money in the above mentioned avenues based on their risk
taking attitude.
There is some disagreement about what counts as savings. For example, the part of
a person’s income that is spent on mortgage loan repayments is not spent on present
consumption and is therefore savings by the above definition, even though people do not
always think of repaying a loan as savings. However, in the U.S. measurement of the
numbers behind is gross national product, personal interest payments are not treated as
“savings” unless the institutions and people who receive them and save them.
In economics, investment is related to saving and deferring consumption. Investment
is involved in many areas of the economy, such as business management finance whether
for households, firms or governments. In finance investment is the application of funds to
hold assets over a longer term in the hope of achieving gains and/ or receiving income from
those assets. Savings is closely related to investment and in many instances the term
savings and investment are used interchangeably. Savings also includes reducing
expenditures, such as recurring costs. In terms of personal finance, savings specifies low-
risk preservation of money, as in a deposit account, versus investment, where in risk is
higher.
In today’s scenario there has been a major change i.e. economic prosperity all over.
The entire world is talking about the robust growth rate in this part of the world. Higher
income levels and booming stock markets have led to more and more numbers of high net
worth investors (HNIS). This means the availability of huge investible surplus. The
investors with higher risk appetite want to experiment and try new and exotic products in
the name of diversification. This has resulted in emergence of new option within the same
or fresh assets classes. There are more product available within each assets class be it
equity, Mutual fund, Gold, Real Estate.
The common perception of investors is to buy when the market supports in uptrend
and not to invest in the falling time. They wait for the stabilization in the market; so in this
research, we would like to draw a clear picture on the trends of traders and investors.
Markets have personalities because investors have emotions. Markets are ultimately driven
by people and stock prices are what individuals make them out to be. People have a
tendency to see their own actions and decisions as totally rational, when the truth is they
may not be.
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 Stock market has been subjected to speculations and inefficiencies, which are
bleached to the rationality of the investor. Traditional finance theory is based on the two
assumptions. Firstly, investors make rational decisions; and secondly investors are
unbiased in their predictions about future returns of the stock. However financial
economists have now realized that these long held assumptions are wrong and found that
investors can irrational and make predictable errors about the return on investment on their
investments.
When it comes to investing, the volume of facts and information can be incredibly
time consuming to wade through and for many individuals it is just too confusing. Yet we
need a good understanding of the financial options available to us to be able to make good
investment decisions. In India, many investment avenues are available where some are
marketable and liquid while others are non-marketable and some of them are highly risky
while others are almost riskless. The investor has to choose proper avenues depending upon
his specific need, risk preference, and returns expected. Different avenues are:
 Safe/Low risk Avenues: savings account, Bank fixed deposits, public
provident fund, government securities, etc.
 Moderate Risk Avenues: Mutual funds, Life insurance, Debentures, Bonds.
 High Risk Avenues: Equity share market, Commodity Market, FROX
Market.
 Traditional Avenues: Real estate (property), Gold/Silver, Chit funds.
There are numerous avenues of investment available today. Investing has been an activity
confined to the rich and business class in the past. This can be attributed to fact that
availability of investable funds is a pre requisite to the deployment of funds. However,
today with the growing income level of the public investment has become a household
word and is popular from all walks of life. Brief descriptions of the investments are given
below. Dr. prasanna Chandra in his book – “Investment game” has rightly classified
various investment avenues into four groups:

a) Financial Securities: Financial securities include equity shares, preference

shares, convertible debentures, non-convertible debentures, public sectors
bonds, savings certificates, etc. Equity shares and public sector bonds are the
most common investment avenues among the financial securities for the
common man.
b) Non-Securitized Financial Investment: unlike a financial security, non-
securitized financial investments not transferable or negotiable. Post office
savings Deposit and fixed deposit like national savings certificates, kisan
vikash patra, etc. Savings bank accounts and fixed deposit in banks, provided
non-Securitized financial investment. The post office savings banks deposits
recurring deposits and fixed deposit are most common and important among
the non-securities financial investment. Deposits in post office and
nationalized commercial banks are regarded as the least risky investment
avenues. However, the rates of return in those investment avenues are
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 Comparatively less. The rate of return in fixed deposit in a bank is as high
as 13% in the year 1991, Which as come down to less than 5% in the year
2008-2009.
c) Mutual funds schemes: Instead of directly buying financial securities, one
can invest, when to invest, how much to invest and when to disinvest so that
the mutual funds scheme would be able to give a profit to its investors.
d) Real Assets: For the bulk of an investors, the most important asset in their
portfolio is a residential house. In addition to a residential house, the more
affluent investors are likely to be interested in the following types of real
estate: Agricultural land, semi-urban land, time-share in a holiday resort.

This analysis on the behavior of individual investors in an attempt to know the

profile and characteristics of investors so as know their preference with respect to their
investment. The study also tries to unravel the influence of demographic factors like age
and risk tolerance level of the investors.

1.2 Review of Literature: Many organizations and individuals conducted several studies
On the various aspect of the capital markets in the past. These studies were mainly related
Various instruments of capital market, shareholding pattern, new issue market and scope,
Market efficiency, risk and return performance and regulation of mutual funds. However,
not much of research was done on investment patterns and investors participations. Hence
an attempt is made to review some of the studies relevant to the topic in order to get into
in depth details of the chosen study.
Rajeswari, T. R. and Moorthy, V. E. R. (2005) said that expectation of the investo-
rs influenced by their perception and generally humans relate perception to action. The
study revealed that the most preferred vehicle is bank deposit with mutual funds and equity
on fourth and sixth respectively. The survey also revealed that the investment decision is
made by investors on their own, and other sources influencing their selection decision are
newspapers, magazine, brokers, television and friends or relatives.
G. N. Bajpai (2009) showed that continuously monitors performance through
Movements of share prices in the market and the threats of takeover improves efficiency
Of resources utilizations and thereby significantly increases return on investment. As a
result, savers and investors are not constrained by their individual abilities, but facilitated
by the economy “scalability to invest and save which inevitably enhances savings and
investment in the economy”. The study concluded the investors and issuers could take
comfort and undertake transactions.
B. Das, Ms. S. Mohanty and N. Chandra Shill (2008) studied the behavior of the
Investors in the selection of investment vehicles. Retail investors face a lot of problem in
the stock market. Empirically they found and concluded which are valuable for both the
investor’s and the companies having such investment opportunities.

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1.3. Need for the Study:
The study in confined to the factors considered by the investors while making their
investment. Their level of awareness about the various aspects of investment avenues
available in the study area is considered. Indian economy is growing significantly. It has
various investment options. The study has been undertaken to analyze whether the
investment avenues have gained important among the people or not. Against this back drop
of the research, the researcher tries to find out the investment preference of the respondents
in the area of Barrackpore, North 24 parganas.

1.4 Objective of the study:

This project work has been carried out which following objectives:
 To understand the awareness of people towards various investment avenues.
 To analyze the investor’s preference towards various investment avenues in the area
of Barrackpore, North 24 parganas.
 To offer suitable suggestion to promote investments.

1.5 Research Methodology:

A research design must contain the clear statement of the research problem, procedu-
res and techniques for gathering information, the population to be studied and the methods
used in processing and analyzing data (Kothari,1999).The research used in this study is
exploratory research. Exploratory research provides insights into and comprehension of an
issue or situation. It should draw definitive conclusion only the extreme caution. Explorato-
ry research is type of research conducted because a problem has not been clearly defined.
Exploratory research helps determine the best research design, data collection method and
selection of subjects. Given is fundamental nature, exploratory research often concludes
that a perceived problem does not actually exist.

The validity of any research is based on the systematic method of data collection and
Analysis of the data collected. The study is based on both the primary and secondary data.
Primary data was collected with the help of questionnaire, which was, distributed and
collected from the 30 respondents of the area of Barrackpore, North 24 parganas from
different age groups, occupations, income levels, and qualifications. The questionnaire has
two sections; the first section relates to demographical profile of respondents and the
second part relates to the investment pattern of investors. The investors were selected by
convenient sampling technique. The secondary data was collected through various journals
books and different websites.

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