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➢ Executive Summary
➢ Objectives
➢ Introduction
➢ Company Profile :-
• TATA-AIG organizational chart
• SWOT analysis of insurance industry
➢ INVESTMENT OPTIONS
• FIXED DEPOSITS
○ List of banks and their fixed deposit rates
○ Fixed deposits of Post Offices
○ Company fixed deposits
• STOCK MARKET
○ Advantages of shares
• MUTUAL FUNDS
○ Benefits of mutual funds
• Mutual fund risks
○ Recent trends in mutual funds
○ Schemes of mutual funds
• INSURANCE
○ Advantages
○ Products
○ Annuities
➢ DATA ANALYSIS
➢ Conclusion and Recommendation
➢ BIBLIOGRAPHY
Executive Summary
Executive Summary
In Present scenario money market have lot of Investment option like Share,
Mutual Fund, Insurance; fixed deposit etc .In few years Share Market has emerged
as a tool for ensuring one’s financial well being.
Share Markets have not only contributed to the India growth story but
have also helped families tap into the success of Indian Industry. As information
and awareness is rising more and more people are enjoying the benefits of
investing in Share Markets. once people are aware of Share Market investment
opportunities, the number who decide to invest in Share Markets increases to as
many as one in every five people. Second option is Mutual Fund this is systematic
investment which give less risk high return.
This Project gave me a great learning experience and
at the same time it gave me enough scope to implement my
analytical ability. The first part gives an insight about financial
market and its various aspects, the Company Profile, Objective of
the study, Research Methodology. One can have a brief
knowledge about financial market and its basics through the
project.
The second part of the Project consists of financial
market analysis collected from past records and Survey report.
This Project covers the topic of “COMPARATIVE ANALYSIS OF
INVESTMENT OPTIONS AVAILABLE IN THE MARKET” The
data collected has been well organized and presented. I hope the
research findings and conclusion will be of use.
Objective
Objective:-
“There are no tree of money but if you invest it in right place it will
give good return.” This sentence spread a good massage in market .now
financial market is very big market, it have a lot of opportunity not only for
big investor but also small investor. Main object of this research is analyzing
the investment option in Market .
METHODOLOGY:-
• Primary data is collected through internet and personal interview. The
sample group was different age groups and their investment products.
• Secondary data was collected from the websites of various research
agency and also from magazines like Business India, Business world
etc.
• Data Analysis by using Graph and table.
Limitation:-
• Indian market is very big market and by using some sample data we
cannot analyze whole investor.
• Market is volatile and there are no any Scientific method which give
exact result for Future market.
INTRODUCTION
INTRODUCTION
Savings form an important part of the economy of any nation. With savings
are invested in many forms of investment options available, the money acts
as the driver for growth of the country. Indian financial scene too presents a
plethora of avenues to the investors.
We, Indians work hard for our entire life to earn our living. Out of that
we save some part in a hope that it will be used for our future to make it
happy and reliable. These savings are generally invested with a hope to get
good returns from it. So, this invested money earns us profit in a regular
course. These profit margins depend upon the different investment options
available in the market. Below are mentioned some of the basic and most
opted for investment options to suit all financial situations.
Investment options:
We can divide investment options in two categories. They are mainly, real
investments and financial investments. Real investments include
investments made to buy house, car or machinery which are real assets.
Financial investments include investing funds in buying some shares, mutual
funds or bonds which are financial assets.
There are many companies and advisors to guide people regarding the
selection of a particular investment option. They analyze the market
situation and refer a suitable investment option for people. People can take
their help if they want to reduce their risks and increase their profits. There
are even many investment brokers and investment analysts to help people
with the process of investment.
The Tata Group is one of India's largest and most respected business
conglomerates, with revenues in 2006-07 of $28.8 billion (Rs129,994 crore),
the equivalent of about 3.2 per cent of the country's GDP, and a market
capitalization of $72.8 billion as on January 10, 2008. Tata companies
together employ some 289,500 people. The Group's 27 publicly listed
enterprises — among them stand out names such as Tata Steel, Tata
Consultancy Services, Tata Motors and Tata Tea — have a combined market
capitalization that is the highest among Indian business houses in the
private sector, and a shareholder base of over 2.9 million. The Tata Group
has operations in more than 85 countries across six continents, and its
companies export products and services to 80 countries.
The Tata family of companies shares a set of five core values: integrity,
understanding, excellence, unity and responsibility. These values, which
have been part of the Group's beliefs and convictions from its earliest days,
continue to guide and drive the business decisions of Tata companies. The
Group and its enterprises have been steadfast and distinctive in their
adherence to business ethics and their commitment to corporate social
responsibility. This is a legacy that has earned the Group the trust of many
millions of stakeholders in a measure few business houses anywhere in the
world can match.
About American International Group, Inc. (AIG)
Tata AIG Life Insurance Company Limited, which is a joint venture between
Tata Group and American International Group, Inc. (AIG), offers a number of
standard and custom-made life insurance policies. Tata is one of the oldest
and leading business groups of India. Tata Group has had a long association
with India's insurance sector being the largest insurance company in India
prior to the nationalization. American International Group, Inc (AIG) is the
leading U.S. based international insurance and financial services
organization.
Tata AIG General Insurance Company Limited (Tata AIG General) is a joint
venture company, formed by the Tata Group and American International
Group, Inc. (AIG). Tata AIG General combines the Tata Group’s pre-eminent
leadership position in India and AIG’s global presence as the world’s leading
international insurance and financial services organization. The Tata Group
holds 74 per cent stake in the insurance venture with AIG holding the
balance 26 percent. Tata AIG General Insurance Company, which started its
operations in India on January 22, 2001, offers complete range of general
insurance for motor, home, accident & health, travel, energy, marine,
property and casualty, liability as well as several specialized financial lines.
According to The Economic Times, Tatas are more reputed than Google,
Microsoft (published on 11th May, 2009 in The Economic Times). They are at
11th position in the trust factor, way ahead of Disney (21th), Google (23rd),
SBI (29th), Microsoft (30th), INFOSYS (39th), Nokia (45th), L&T (47th), Maruti
Suzuki (49th), Hindustan Unilever (70th), & ITC (96th).
The list is made on the basis of admiration, trust and good feeling that
consumers have towards a company. Other Indian companies that are in the
list of top 200 are Canara Bank, HPCL, Wipro, Reliance, M&M, and Bharti
Airtel, BPCL, Punjab National Bank. The report revealed that corporate trust
is higher in the emerging markets, while companies in industrialized markets
are trusted less.
Tata-AIG Life Insurance Company is a joint venture between the Tata Group
(74% equity stake) and American International Group Inc. (AIG) (26% equity
stake). The company offers a broad range of life insurance products to
individuals and groups. The products offered to individuals are variations of
term life with or without a savings element, e.g., endowment policies and
money back policies. Tata-AIG Life has been in operation since April 2001
(incorporated on Aug 23, 2000). While the company itself is relatively new,
the Tata group is widely known in Indian households.
The Tata Group is one of the oldest and largest industrial conglomerates in
India. Established in 1868, it has interests in engineering, consumer
products, chemicals, financial services, hotels, information technology and
telecommunications. With over 80 companies, and with revenues close to
1.8% of the country’s GDP, the Tata brand is very well respected across the
socioeconomic classes. Most importantly, it manufactures a large variety of
goods that are highly visible to low-income households, like consumer
goods, trucks and automobiles that bear the Tata logo. Having been around
for over a century, the name Tata introduces immediate credibility in its
micro insurance operations. Agents selling micro insurance products are
able to assure potential clients that such a large conglomerate would have
little interest in stealing their miniscule (in relative terms) premiums.
AIG is the one of the world’s largest insurers. Aside from its massive pool of
in-house technical capacity, it has experience working on micro insurance in
Uganda.7 Although Tata is the largest shareholder in Tata-AIG; AIG manages
the company with strategic guidance from AIG’s Hong Kong office. Tata-AIG
was among the few private sector insurance players to have a well-known,
reputable local brand, but it did not have a strategic banking alliance with
domestic banks or branch presence in smaller towns that could enable it to
promote micro insurance sales. As a result, its micro insurance strategy had
to be developed around other partner organizations to enable the insurer to
penetrate rural areas. Rural India comprises of over 650 000 villages with
over half of them having a population of less than 500. Even the state relies
on NGOs to provide services to remote and poorly connected locations. For
Tata-AIG’s rural programme, it was evident that the main partners would
need to be NGOs. Fortunately, Tata has the reputation of having contributed
to community development over the years. Substantial parts of the group’s
profits go into a trust and several social organizations across the country
receive grants and assistance from these trusts. The link with Tata helped to
create a climate in which many NGOs were favorably disposed towards Tata-
AIG.
Core Values:
Integrity: We must always conduct our business with fairness, honesty and
transparency, so that we can at all times stand public scrutiny. We will never
undermine the heritage of trust that comes with the Tata brand.
Entrepreneurship: we would encourage innovative ideas for individual and
organizational development. This thinking would be fostered, encouraged
and recognized for enhancing business. We would take delight in stretching
our goals and each of us would have a sense of ownership and responsibility
for all our business dealings.
Agility: We will encourage an organizational culture and structures that has
capacity for change. Flexibility and adaptability will be critical to our
operations. We will aim for nimble, flexible and customized responses at all
times to all our stakeholders.
Excellence: All our activities must be driven by a passion for excellence.
We must strive, uncompromisingly, to achieve the highest standards in our
daily work and in the quality of the goods and services we offer. We would
endeavor to achieve 'best in class' status in all our processes and results.
Unity: We must work cohesively with our colleagues, customers and
partners around the world, leveraging synergies and building strong
networks based on collaboration and mutual cooperation.
Mission:
To be a competitive value provider in international business for Group
companies and all our partners.
Vision:
Become a globally networked enterprise seizing opportunities worldwide to
generate USD 25 million annual profits by.
• A strong global supply base for world class goods and services
• Effective and responsive systems and processes that will underpin our
business decisions to manage risks
• Become an exciting organization which attracts and retains best talent
worldwide for global competitiveness
Partnerships:
Tata-AIG has NGO partnerships with over 50 NGOs. Over 40% of its 35 000
social sector policies were sold through the partner-agent model. In this
model, the NGO/MFI partner performs the sales and servicing functions,
primarily for its current microfinance clients. The two other models, the
business associate model and the CRIG model, account for the remaining
60% of the new business and are described in more detail below.
TATA-AIG organizational chart:
Source: official website
SWOT analysis of insurance industry:
STRENGT WEAKNES
OPPORTUNITI THREAT
ES S
• Ability to cross sell financial • Increasing cost and need for
services barely being tapped insurance might hit a point where
• Technology is improving to a backlash will occur
that point that paperless • Increasing expenses and lower
transactions are available profit margins can hit smaller
• Client’s increasing need for agencies and insurance
insurance consultant can companies
open new ways to service the
client and generate income
INVESTMENT OPTIONS
INVESTMENT OPTIONS IN MARKET
There are many investment options available for the people in the market,
but there are mainly five investment options, which are considered to be as
most popular and most effective investment options available in the current
market scenario. In general, almost 95-98% people do invest in these, since
the Expected Rate of Return is much higher than any other investment
options, irrespective of the amount of risk is very high in some of the cases.
These investment options are:
This investment option is most popular and safest option available in the
market. With almost every working people invest in fixed deposits; this
investment option leads the chart of four investment options because of its
safety and popularity. Though the amount of return is much lesser than the
other three options, this option heads the table as it has almost no risk of
losing the invested amount. Also, it is the oldest among the other three, so
the trust factor of people is very high.
There are mainly three types of fixed deposits available in the market,
namely, viz.
Considered as the safest of all options, banks have been the roots of the
financial systems in India. Promoted as the means of social development,
banks in India have indeed played an important role in not only urban
areas, but also in rural upliftment. For an ordinary person though, banks
have acted as the safest avenue wherein a person deposits money and
earns interest on it. The two main modes of investment in banks, savings
accounts and fixed deposits have been effectively used by one and all.
On the other hand the Private Sector Banks in India is witnessing immense
progress. They are leaders in Internet banking, mobile banking, phone
banking, ATMs. On the other hand the Public Sector Banks are still facing the
problem of unhappy employees. There has been a decrease of 20 percent in
the employee strength of the private sector in the wake of the Voluntary
Retirement Schemes (VRS).
State Bank of India 2.50 2.50 3.50 3.50 4.75 4.75 5.25 5.25
State Bank of Mysore 3.00 3.00 4.00 4.00 5.00 5.00 6.00 6.00
State Bank of Patiala 3.00 3.00 4.00 4.00 5.25 5.25 6.00 6.00
State Bank of Travancore 3.00 3.00 4.00 4.00 5.25 5.25 6.25 6.25
Syndicate Bank 2.50 2.50 3.50 3.50 4.75 4.75 5.50 5.50
UCO Bank 3.00 3.00 4.00 4.00 5.50 5.50 6.50 6.50
Union Bank of India 3.00 3.00 4.00 4.00 4.25 4.25 5.00 5.50
United Bank of India 2.25 2.50 3.50 3.50 4.75 4.75 5.50 5.50
Vijaya Bank 3.00 3.00 4.00 4.00 5.00 5.00 6.00 6.25
Just like banks, post offices in India have a wide network. Spread across the
nation, they offer financial assistance as well as serving the basic
requirements of communication. Among all saving options, Post office
schemes have been offering the highest rates. Added to it is the fact that
the investments are safe with the department being a Government of India
entity. So the two basic and most sought features, those of return safety and
quantum of returns were being handsomely taken care of.
Though certainly current market position is not the most efficient
systems in terms of service standards and liquidity; these have still
managed to attract the attention of small, retail investors. However with the
government investing its intention of reducing the interest rates in small
savings options, this avenue is expected to lose some of the investors.
Public Provident Funds act as options to save for the post retirement period
for most people and have been considered good option largely due to the
fact that returns were higher than most other options and also helped
people gain from tax benefits under various sections. This option too is likely
to lose some of its sheen on account of reduction in the rates offered.
3. Company fixed deposits:
Another oft-used route to invest has been the fixed deposit schemes floated
by companies. Companies have used fixed deposit schemes as a means of
mobilizing funds for their options and have paid interest on them. The safer
a company is rated, the lesser the return offered has been the thumb rule.
However, there are several potential roadblocks are there.
Firstly, of all the danger of financial positions of the company not being
understood by the investor lurks. The investors rely on intermediaries who
more often than not, don’t reveal the entire truth.
The Indian Stock Market is also the other name for Indian
Equity Market or Indian Share Market. The forces of the market depend on
the monsoons, global funding flowing into equities in the market and the
performance of various companies. The market of equities is transacted on
the basis of two major stock indices, National Stock Exchange of India Ltd.
(NSE) and The Bombay Stock Exchange (BSE), the trading being carried on
in a dematerialized form. The physical stocks are in liquid form and cannot
be sold by the investors in any market.
Indian Equity Market at present is a lucrative field for the investors and
investing in Indian stocks are profitable for not only the long and medium-
term investors, but also the position traders, short-term swing traders and
also very short term intra-day traders. In terms of market capitalization,
there are over 2500 companies in the BSE chart list with the Reliance
Industries Limited at the top. The SENSEX today has rose from 1000 levels to
8000 levels providing a profitable business to all those who had been
investing in the Indian Equity Market. There are about 22 stock exchanges in
India which regulates the market trends of different stocks. Generally the
bigger companies are listed with the NSE and the BSE, but there is the
OTCEI or the Over the Counter Exchange of India, which lists the medium
and small sized companies.
In the Indian market scenario, the large FMCG companies reached the top
line with a double-digit growth, with their shares being attractive for
investing in the Indian stock market. Such companies like the Tata Tea,
Britannia, to name a few, have been providing a bustling business for the
Indian share market. Other leading houses offering equally beneficial stocks
for investing in Indian Equity Market, of the SENSEX chart are the two-
wheeler and three-wheeler maker Bajaj Auto and second largest software
exporter Infosys Technologies.
Now apart from all these, the first question that comes in our mind is,
Simply put, you want to invest in order to create wealth. While investing is
relatively painless, its rewards are plentiful. To understand why you need to
invest, you need to realize that you lose when you just save and do not
invest. That is because the value of the rupee decreases every year due to
inflation. Historically shares have outperformed all the other investment
instruments and given the maximum returns in the long run. In the twenty-
five year period of 1980-2005 while the other instruments have barely
managed to generate returns at a rate higher than the inflation rate
(7.10%), on an average shares have given returns of about 17% in a year
and that does not even take into account the dividend income from them.
Were we to factor in the dividend income as well, the shares would have
given even higher returns during the same period.
[Inflation: general rise in prices and wages caused by an increase in the
money supply and demand for goods, and resulting in a fall in the value of
money. Inflation occurs when most prices rise by some degree across the
economy.]
Investment options Returns per annum
Gold 5.7%
Tax advantages: shares appear as the best investment option if you also
consider the unbeatable tax benefits that they offer. First, the dividend
income is tax-free in the hands of investors. Second, you are required to pay
only a 10% short term capital gains tax on the profits made from
investments in shares, if you book your profits within a year of making the
purchase. Third, you don't need to pay any long-term capital gains tax on
the profits if you sell the shares after holding them for a period of one year.
The capital gains tax rate is much higher for other investment instruments: a
30% short-term capital gains tax (assuming that you fall in the 30% tax
bracket) and a 10% long-term capital gains tax.
Easy liquidity: shares can also be made liquid anytime from anywhere (on
sharekhan.com you can sell a share at the click of a mouse from anywhere
in the world) and the gains can be realized in just two working days.
Considering the high returns, the tax advantages and the highly liquid
nature, shares are the best investment option to create wealth.
How people earn from the investment in shares?
Shares can give us returns in two forms.
A. Appreciation in share prices: You buy shares with the belief that their
price will increase and that when this happens you will be able to sell off
your shares and earn profit. For example, if you bought a share for Rs100
three years ago and it is Rs500 today, then you have earned Rs400 in three
years.
A. Capital gains tax: If you purchase a share and sell it at a price higher
than the purchase price and if this sale is within a year of the purchase, then
a 10% capital gains tax is levied on the profit that you make. For example, if
you bought a share for Rs100 on January 1, 2005 and sold it for Rs150 on
July 1, 2005, then you have to pay a tax of 10% on the Rs50 profit that you
make. If you sell after a year of purchase, there is no tax on the long-term
gains.
B. Securities transaction tax: Securities transaction tax (STT) is levied by
the government on every transaction you do on a stock exchange. You don’t
have to pay this separately; it’s collected by your broker. As per the Union
Budget 2005 the STT will be 0.10% on delivery-based transactions and
0.02% on intra-day transactions.
Set of risks that deals with a company and its sector are referred to as
company specific risk.
Examples of company specific risk: bad management, bad marketing
strategies, sector disturbances that have an impact on industry etc.
External factors (economic, global factors) that affect the market as a whole
are referred to as market risk.
Examples of market risk: political instability, high inflation, rupee
depreciation, rising interest rates, global incidents like wars and disasters
that throttle the nation's economy etc.
How company specific risk can be identified?
With careful scrutiny and proper homework, it might be easy to identify and
be forewarned of the risks a company may be carrying. Specifically check
out for the mergers and acquisitions that do not have a real synergy or are a
nightmare after reconciliation (A O L - Time Warner, Hewlett Packard-
Compaq).
three to five stocks, for around Rs500, 000 have five to seven stocks and
around ten stocks for higher amounts.
9. Be level-headed
Invest wisely, don't get swayed by rumors and allow Sharekhan to be your
guide at all times. Investment success won't happen overnight, so avoid
overreacting to short term market swings.
Mutual Funds in India are financial instruments. These funds are collective
investments which gather money from different investors to invest in stocks,
short-term money market financial instruments, bonds and other securities
and distribute the proceeds as dividends. The Mutual Funds in India are
handled by Fund Managers, also referred as the portfolio managers. The
Securities Exchange Board of India regulates the Mutual Funds In India. The
share value of the Mutual Funds in India is known as net asset value per
share (NAV). The NAV is calculated on the total amount of the Mutual Funds
in India, by dividing it with the number of shares issued and outstanding
shares on daily basis.
Like most developed and developing countries the mutual fund cult has been
catching on in India. The important reasons for this interesting occurrence
are:
• Mutual funds make it easy and less costly for investors to satisfy their
need for capital growth, income and/or income preservation.
• Mutual fund brings the benefits of diversification and money
management to the individual investor, providing an opportunity for
financial success that was once available only to a select few.
Understanding Mutual funds is easy as it's such a straightforward concept. A
mutual fund is a company that pools the money of many investors, its
shareholders to invest in a variety of different securities.
Investments may be in stocks, bonds, money market securities or some
combination of these.
For the individual investor, mutual funds propose the benefit of having
someone else manage your investments and diversify your money over many
different securities that may not be available or affordable to you otherwise.
A mutual fund, by its very nature, is diversified -- its assets are invested in
many different securities. Beyond that, there are many different types of
mutual funds with different objectives and levels of growth potential,
furthering your odds to diversify.
Benefits of mutual
fnds:
One of the primary benefits of mutual funds is that an investor has access to
professional management. A good investment manager is certainly worth the
fees you will pay. Good mutual fund managers with an excellent research
team can do a better job of monitoring the companies they have chosen to
invest in than you can, unless you have time to spend on researching the
companies you select for your portfolio. That is because Mutual funds hire
full-time, high-level investment professionals. Funds can afford to do so as
they manage large pools of money. The managers have real-time access to
crucial market information and are able to execute trades on the largest and
most cost-effective scale. When you buy a mutual fund, the primary asset you
are buying is the manager, who will be controlling which assets are chosen to
meet the funds' stated investment objectives.
Diversification :
Investing in mutual funds has its own convenience. While you own just one
security rather than many, you still enjoy the benefits of a diversified portfolio
and a wide range of services. Fund managers decide what securities to trade
collect the interest payments and see that your dividends on portfolio
securities are received and your rights exercised. It also uses the services of a
high quality custodian and registrar. Another big advantage is that you can
move your funds easily from one fund to another within a mutual fund family.
Liquidity :
In open-ended schemes, you can get your money back promptly at net asset
value related prices.
Transparency :
Regulations for mutual funds have made the industry very transparent. You
can track the investments that have been made on your behalf and the
specific investments made by the mutual fund scheme to see where your
money is going. In addition to this, you get regular information on the value
of your investment.
Variety :
There is no shortage of variety when investing in mutual funds. You can find
a mutual fund that matches just about any investing strategy you select.
There are funds that focus on blue-chip stocks, technology stocks, bonds or a
mix of stocks and bonds. The greatest challenge can be sorting through the
variety and picking the best for you.
Having understood the basics of mutual funds the next step is to build a
successful investment portfolio. Before you can begin to build a portfolio, one
should understand some other elements of mutual fund investing and how
they can affect the potential value of your investments over the years. The
first thing that has to be kept in mind is that when you invest in mutual funds,
there is no guarantee that you will end up with more money when you
withdraw your investment than what you started out with.
That is the potential of loss is always there. Even so, the
opportunity for investment growth that is possible through investments in
mutual funds far exceeds that concern for most investors. Here's why.
At the cornerstone of investing is the basic principal that the greater the risk
you take, the greater the potential reward. Risk then, refers to the volatility --
the up and down activity in the markets and individual issues that occurs
constantly over time. This volatility can be caused by a number of factors --
interest rate changes, inflation or general economic conditions. It is this
variability, uncertainty and potential for loss, that causes investors to worry.
We all fear the possibility that a stock we invest in will fall substantially.
Different types of mutual funds have different levels of volatility or potential
price change, and those with the greater chance of losing value are also the
funds that can produce the greater returns for you over time. You might find
it helpful to remember that all financial investments will fluctuate. There are
very few perfectly safe havens and those simply don't pay enough to beat
inflation over the long run.
The foreign owned companies have deep pockets and have come in here with
the expectation of a long haul. They can be credited with introducing many
new practices such as new product innovation, sharp
Improvement in service standards and disclosure, usage of technology,
broker education and support etc. In fact, they have forced the industry to
upgrade itself and service levels of organizations like UTI have improved
dramatically in the last few years in response to the competition provided by
these.
• Every mutual fund shall along with the offer document of each scheme pay
filing fees.
• The offer document shall contain disclosures which are adequate in order to
enable the investors to make informed investment decision including the
disclosure on maximum investments proposed to be made by the scheme in
the listed securities of the group companies of the sponsor A close-ended
scheme shall be fully redeemed at the end of the maturity period. “Unless a
majority of the unit holders otherwise decide for its rollover by passing a
resolution”.
Restrictions on Investments:
• A mutual fund scheme shall not invest more than 15% of its NAV in debt
instrument issued by a single issuer, which are rated not below investment
grade by a credit rating agency authorized to carry out such activity under
the Act. Such investment limit may be extended to 20% of the NAV of the
scheme with the prior approval of the Board of Trustees and the Board of
Asset Management Company.
• A mutual fund scheme shall not invest more than 10% of its NAV in unrated
debt instruments issued by a single issuer and the total investment in such
instruments shall not exceed 25% of the NAV of the scheme. All such
investments shall be made with the prior approval of the Board of Trustees
and the Board of Asset Management Company.
• No mutual fund under all its schemes should own more than ten percent of
any company’s paid up capital carrying voting rights.
• Such transfers are done at the prevailing market price for quoted
INSURANCE:
instruments on spot basis. The securities so transferred shall be in conformity
with the investment objective of the scheme to which such transfer has been
made.
Introduction to insurance:
Assets are insured, because they are likely to be destroyed or made non-
functional before the expected life time, through accidental occurrences are
called perils. Fire, floods, breakdowns, lightning, and earthquakes such
things are called perils. If such perils can cause damage to the assets, we say
that the asset is exposed to that risk. Perils are the events. Risks are the
consequential losses or damages.
The risk only means that there is a possibility of loss or damage. The damage
may or may not happen, but the word ‘possibility’ implies uncertainty.
Insurance is relevant only if there are uncertainties. If there is no uncertainty
about the occurrence of an event, it can’t be insured against.
Insurance doesn’t protect the asset. It does not prevent its loss due to the
peril. The peril can’t be avoided through the insurance. The risk can
sometimes be avoided, through better safety and damage control measures.
Insurance only tries to reduce the impact of the risk on the owner of the asset
and those who depend on that asset. They are the ones who benefit from the
asset and therefore, would lose, when the asset is damaged. Insurance only
compensates for the losses-and that too, not fully.
Classification of risks:
Risks are classified in various ways. One classification is based on the extent
of the damage likely to be caused. They are,
b) Important risks: may not spell doom, but may upset family or business
finances badly, require a lot of time to recover.
j) Pure risks
k) Speculative risks
In a village, there are 4000 houses, each valued at Rs.20000. Every year, on
an average, 4 houses get burnt, resulting into a total loss of Rs.80000.if all
the 400 owners come together and contribute Rs.200 each, the common
fund would be Rs. 80000. This would be enough to pay Rs.20000 to each of
the 4 owners whose houses got burnt. Thus the loss of Rs.20000 each of 4
owners is shared by 400 house-owners of the village, bearing Rs.200 each.
This works out to 1% of the value of the house, which is the same as the
probability of risk (4 out of 400 houses).
The premium is determined on the same lines, but with further refinements.
In India, insurance business is classified primarily as life and non-life or
general. Life insurance includes all risks related to the lives of human beings
and general insurance covers the rest. General insurance has 3
classifications viz. fire (dealing with all fire related risks), marine (dealing
with all transport related risks and ships) and miscellaneous (dealing with all
others like liability, fidelity, motor, crop, etc). Personal accident and sickness
insurance, which are related to human beings, is classified as ‘non-life’ in
India but is classified as ’life’, in many other countries. What is ‘non-life’ in
India is termed ‘property and casualty’ in some other countries.
In India, the IRDA has, in 2005, issued regulations enabled micro insurance
(broadly meaning insurance for small sums assured, like 5-50 thousands) to
be done by both life and general insurers on the basis of mutual tie-ups. A
policy may be issued by a life insurer covering both life and non-life risks,
but premium on account of the non-life business will be passed on to a
general insurer and the claim amount collected from the latter.
Trustee:
The insurer is in the position of a trustee as it is managing the common fund,
for and on behalf of the community of policyholders. It has to ensure that
nobody is allowed to take undue advantage of the arrangement. That means
that the management of the insurance business requires care to prevent
entry (into the group) of people whose risks are not of the same kind as well
as playing claims on losses that are not accidental. The decision to allow
entry is the process of underwriting of risk. Underwriting includes assessing
the risk, which means, making an evaluation of how much is the exposure to
risk. The premium to be charged depends on this assessment of the risk.
Both underwriting and claim settlements have to be done with great care.
Reinsurance:
Insurance companies are taking risks they have to pay claims as and when
they occur. They cannot be sure when the claim will occur and how big the
claim may be. This is so because of the very nature of the perils. Insurers
normally are financially sound enough to be able to pay claims. But there
are limits. An event like the tsunami or hurricane may generate claims
amounting of crores of rupees, which may put a very heavy strain on the
reserves of the insurer. Insurers protect themselves from such situations,
which may be beyond their capacity, by reinsuring the risk with other
insurers. If there is a claim, the burden is shared by the primary insurer and
the reinsurers.
A comparison with other forms of savings will show that life insurance has
the following advantages:
• In the event of death, the settlement is easy. The heirs can collect the
moneys quicker, because of the facility of nomination and assignment.
The facility of nomination is now available for some bank accounts,
provident fund etc…
• There is a certain amount of compulsion to go through the plan of the
savings. In other forms, if one changes the original plan of savings,
there is no loss. In insurance, there is a loss.
• Creditors can’t claim the life insurance moneys. They can be protected
against the attachments by courts.
• There are tax benefits, both in income tax and in capital gains.
• Marketability and liquidity are better. A life insurance policy is property
and can be transferred or mortgaged. Loans can be raised against the
policy.
• It is possible to protect a life insurance policy from being attached by
debtors. The beneficiaries’ interest will remain secure.
The following tenets help agents to believe in the benefits of the life
insurance. Such faith will enhance their determination to sell and their
perseverance.
• Life insurance is not only the best possible way for family protection.
There is no other way.
• Insurance is the only way to safeguard against the unpredictable risks
of the future. It is unavoidable.
• The terms of life are hard. The term of insurance is easy.
• The value of human life is far greater than the value of any property.
Only life insurance can preserve it.
• Life insurance is not surpassed by any other savings or investment
instrument, in terms of security, marketability, stability of value or
liquidity.
• Insurance, including life insurance, is essential for the conservation of
many businesses, just as it is in the preservation of homes.
• Life insurance enhances the standards of living.
• Life insurance helps people live financially solvent lives.
• Life insurance perpetuates life, life, liberty and the pursuit of
happiness.
• Life insurance is a way of life.
Plans of insurance that provide only death cover are called ‘term
assurance ’plans. Those that provide only survival benefits are called
‘pure endowment’ plans.
All traditional life insurance plans are combinations of these two basic plans.
A term assurance plan with an unspecified period is called a ‘whole life
policy’ under which the sum assured is paid on death, whenever it may
occur.
In recent times, ‘linked’ policies have become popular. These are very
different from the traditional plans of insurance.
Convertible plans:
Convertible plans of assurance are plans, which provide, in its terms and
conditions, that it can be changed to another plan after, or within, a certain
period after commencement. For example, a convertible term assurance
plan can be converted into a whole life policy or an endowment policy,
within a period specified in the original plan.
Children plans:
Insurance can be taken on the lives of children, who are minors. The
proposal will have to make by a parent or guardian.
In these plans, risk on the life of the insured child will begin only when the
child attains a specific age. The time gap between the date of
commencement of the policy and the commencement of the risk is called
the ‘deferment period’.
There is no insurance cover during the deferment period. If the child dies
during the deferment period, the premiums will be returned. Risk will
commence automatically on the deferred date, without any medical
examination. The main advantage of these plans is that the premium
would be relatively low and cover will be obtained irrespective of the state of
health of the child.
These policies have conditions whereby the title will automatically pass on to
the insured child, on his attaining to the age of majority. This process is
called ‘vesting’. The policy anniversary after attaining the age of majority
that is the age of 18, or any later date may be chosen will be the ‘vesting
date’. After vesting, the policy becomes a contract between the insurer and
the insured person.
The vesting date cannot be earlier than 18. This is because there cannot be
a valid contract with a minor. The deferred date however, can be fixed
without such limitation. The vesting date and the deferred date need not be
the same.
Riders:
A rider is a clause or condition that is added on to a basic policy providing an
additional benefit, at the choice of the proposer. For example, a provision
that in the event of death of the life assured by accident, the sum assured
would be double can be a rider of an endowment policy. This rider can be
added on to a policy under any plan.
As per the regulations made by IRDA in April 2002 and amended in October
2002,
Annuities:
Annuities are practically same as the pensions. Pensions provide regular
periodical payments (usually every month) to employees, who have retired.
They are paid as long as the recipient is alive. Sometimes the pension is also
paid to the dependents after the pensioner’s death. Annuities are also
periodical payments, not necessarily monthly, and are not related to
employment.
• During the life time of the annuitant, in which case it ceases on his
death. This is called a ‘life annuity’ or ‘annuity for life’
• During the life time of the annuitant or his spouse, whichever is longer
• For a fixed number of years like 5, 10, 15, 20 or 25 years and
thereafter, as long as the annuitant is alive. This is called an ‘annuity
certain’.
• For a fixed number of years and thereafter till the death of the
annuitant or the annuitant’s spouse
• As long as the annuitant lives and thereafter, at 50% to the spouse as
long as the spouse lives.
• Annuity for life and return of premium on annuitant’s death
• On any of the above terms, but with the annuity increasing every year
by a fixed rate or amount
Group insurance:
Group insurance is a plan of insurance, which provide cover to large number
of individuals under a single policy called the ‘master policy’.
Salient Features:
1. GIS-05 provides a life insurance cover as given in table below to Officers,
Airmen and NCs(E) respectively. Disability insurance cover would be half of
life cover for 100% disability and reduces proportionately up to 20%.
2. With the increased cover, the amount of monthly contribution has also
been increased correspondingly. Thus Officers/Airmen/NCs (E) pay a basic
contribution of Rs. 1365/-, Rs. 700/- and Rs. 250/- per month respectively.
Additional Contribution will be recovered from aircrew as “Flying Extra”.
3. The Survival Benefit under GIS-05 will consists of Saving Element and
Interest.
4. The facility of final withdrawal from Survival Benefit to meet any financial
commitment before their retirement is available provided the individual is a
member of GIS-05 Scheme.
Flying
branch
officers
Death Benefit:
Death benefit includes the cover assured and accumulated balance of
Saving Element of contribution up to the month of death together with
interest and bonus as applicable.
Disability Benefit:
Member who is invalidated out of Indian Air Force by an Invalidating Medical
Board (NOT the Released Medical Board held at the time of
retirement/release) on account of a disability, whether attributable to
service or not, will be eligible for disability benefit at half the life insurance
cover for 100% disability. The disability benefit will be reduced
proportionately depending upon the percentage of disability. In case of
disability of less than 20%, a member will not be eligible for any disability
benefit. Disability benefit is in addition to accumulated balance of saving
element, together with interest and bonus, payable on invalidment from
service.
Members invalidated out of Indian Air Force due to reasons mentioned below
will not be entitled to any disability benefit, irrespective of percentage of
their disability:-
(a) Alcoholism
(b) Drug addiction
(c) Self inflicted injuries.
(d) Disability as a result of attempted suicide.
(e) Any disability arising out of intentional acts resulting in criminal
conviction.
(f) Invalidment within one year of enrolment due to disability, which is not
attributable to service.
Survival Benefit:
Survival Benefit constitutes the saving element of contribution and the
interest earned on it as per the rates declared by the Society every year.
The rate declared at the beginning of each year will be as approved by BoT
of AFGIS based on the likely interest earnings of the Society for the year and
its requisite allocation. The scheme does not cater for the concept of refund
of contribution or the saving element along with interest whichever is higher
as survival benefit.
Bonus:
after requisite allocation to various funds and payment of the interest on
saving element as declared at the beginning of the year, if the society
generates excess income by way of interest earnings during the year the
same will be distributed to members as Bonus for the year. The quantum of
such surplus available will decide the quantum/rate of bonus to be paid to
the members. The bonus will be admissible to all those who were members
of the scheme on the last day of year. Bonus does not earn any interest
since the effort of the society will be to maximize interest on Saving
Element. Separate letter will be issued by AFGIS as and when bonus for a
year is approved by Board of Trustees.
Only members of GIS-05 scheme are eligible for withdrawal facility. Any final
withdrawal from Survival Benefit restricts your quantum of loan from AFGIS.
Individuals applying for Final Withdrawal should not have any AFGIS loan
outstanding.
Re-employed Personnel:
Re-employed personnel who are member of GIS-97 Scheme shall
automatically be made members of the GIS-05 Scheme. Personnel who are
reemployed after introduction of the scheme will have the option to become
member, in which case, they will have to refund the survival Benefit element
paid to them at the time of release from regular employment along with the
contribution due for the period from the date of retirement / cessation of
reemployment to the date of re-employment.
Nomination:
In the event of death of a member, the death benefit will be payable to the
beneficiaries nominated by the member for his/ her Provident Fund.
Nomination by Exception:
Members who avail House Building Advance from specified Financial
Institutions may execute nomination (AFGIS 225) up to 100% of death/
disability/ survival benefit in favor of the organization advancing the loan.
A member can also nominate any person other than beneficiaries nominated
in DSOP/AFPP Fund by executing AFGIS 223 up to 100% of death benefits.
Prescribed beneficiaries who can be nominated are:-
(a) Male Members: Wife, Parent(s), children, minor brother(s), Unmarried
sister(s), deceased son’s widow and children, paternal grandparent (when no
parent of member is alive).
DATA ANALYSIS
Survey report:
I had conducted a survey (online) of sample size 54 and got the following
results:
Age Invest
ment
Options
1 Achala y y y
2 Amit y y Y
3 Bimlesh y y Y
4 Bharat Y y
5 Nitesh y y Y
6 Rakesh y y y
7 Rani y y y
8 Divya y y y y
9 Kamles y y Y
h
10 mukesh Y y y
11 Sayyd y y y
12 Purva y y Y
13 Suman y y
14 Milind y y y
15 Uday Y y y
16 Siddhar y y y
th
17 Minaxhi y y y y
18 Pranali y y y
19 Dipti y y y
20 Nlita y y y
21 Manisha y y
22 manas Y y y y y
23 Anil y y
24 Ravi y y y
25 Nitin y y
26 Azhar y y y
27 Surya y y y
28 Sai nath Y y y
29 Pankaj Y y y
30 Atul y y y
31 Pratixa y y y
32 Himans y y
hu
33 Harnes Y y y
h
34 Kadar y y
35 Pradeep y y y y
36 Aman y y y
37 Mehul Y y
38 Sancho y y
y
39 Ankur y y y
40 Mansi y y y y
Malik
41 Aniket Y y
42 Venka y y y
43 Taresh Y y y
44 Nandini y y y
45 Palash y y y
46 Tilak y y
47 Rahul Y y
48 Prashan y y y
t
49 Supriya y y y
50 Sneha Y y y
51 Richa y y
52 Saloni y y y y y
53 Nokolka y y y
t
54 Naj y y y
So, after decorating the above data age wise and choice of investment
option wise, we get the following table:
age no of investment
people options
18-24 14 7 10 7 3
24-30 12 8 6 4 4
30-40 16 3 13 5 6
40 & 12 8 8 5 5
above
total 54 26 37 21 18
Therefore, we can easily see from the chart that majority of people like to
invest in the stock market, even though market situation is not so good and
there is so much risk available.
Now, let us see which age group is more prone to play safe,
which is, like to invest in fixed deposits.
Now, let us see which age group likes to take the highest
possible risk in the following chart.
So, we can see from the above chart that people of age group 30-40 likes to
take more risk, as they became more financially stable by that age and have
fewer responsibilities.
Now, we will see that which age group likes to take moderate risk in the
following chart.
So, we can see that people of age group 18-24 like to invest in mutual fund,
as it has moderate risk.
Lastly, in the following chart, we will see that which age group likes to take
very less risk and wants higher return in the long term.
So, we can see from the above chart that people of age group 30-40 more
likely to invest in insurance, as by that time they think about the future and
long term return.
Conclusions &
Recommendations
Conclusions & Recommendations:
Bibliography
Bibliography:
• www.tata-aig-life.com
• www.moneycontrol.com
• www.investsmartindia.com
• www.insurancejournal.com
• www.irdaindia.org
• IRDA book
• Various bank’s websites