mr report final

8/3/2019 Mr Report Final

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Marketing Research Project ReportTopic: The Changing Trends in Investment Pattern of People in India

In Partial Fulfilment of the Course Marketing Research

Submitted To:Dr Shalini Trivedi, Assistant Professor, Department of

Economics, Amity Business School, Amity University.

Submitted by:Shivani Mehta (E 12)

Nupur Mittal (E 21)Abdul Azeem (E 24)Prateek Saini (E 27)

Jalees Ahmed (E 57)Rashmita Bora (E 61)


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DECLARATION

We hereby declare that all the work presented in the project report entitled The changing

trends in investment patterns of people in India of the subject Marketing Research at

Amity Business School, Amity University, Noida is an authentic record of our own work carried

out under the guidance of Dr. Shalini Trivedi, Assistant Professor, Department of Economics,

Amity Business School, Amity University.


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CERTIFICATE

This is to certify that project report entitled The changing trends in investment patterns of

people in India of the subject Marketing Research, which is submitted by Nupur Mittal,

Rashmita Bora, Shivani Mehta, Prateek Saini, Abdul Azeem and Jalees Ahmed at Amity

Business School, Amity University, Noida is an authentic record of the candidates own work

carried out by them under our guidance. The matter embodied in this thesis is original and hasnot been submitted for the award of any other degree.

Dr. Shalini Trivedi, Assistant Professor, Department of Economics

(Project Guide)


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ACKNOWLEDGEMENT

We express our deep gratitude to Dr. Shalini Trivedi, Assistant Professor, Department of

Economics, Amity Business School, Amity University for her constant support, guidance and

motivation which helped us immensely in completing this project. The project provided us with

an opportunity to understand the fundamentals of research methods in a better manner and apply

them. The insistence on taking up a socially relevant topic the changing trends in investment

patterns of people in India help us to understand the psychology of the people and correlate

the research to human behavioural aspect. We also would like to thank our respondents for

giving us their valuable time and providing us with the information needed to carry out the

research successfully.


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ABSTRACT

This project studies the changing trends in the investment patterns over the years of the people in

India, with a sample size of 50 and the research was conducted in the metropolitan cities. The

problem definition was that to know the behavioural aspect of people in India towards the

investment options. The gap area in the research papers were that none of them has explained

about the changing behavioural aspect of people towards the investment patterns, it just talked

about which is the most favourable investment option among people but no particular reason has

been given for the same that why is that so. This study aims to know if the investment pattern

changes with the change in age, sex or demography. The study was done to analyse if the

investors of present scenario are more risk takers compared to the past. The research was

conducted through surveys like in-home, online and telephonic surveys to know the behavioural

aspect of people towards investments. The research was an exploratory research. The sampling

plan used here was the cluster sampling and the research that we conducted was done by the

questionnaire with around 26 questions. The conclusion came out that the preference of people

has drastically changed towards investments over the period due to age, income, recession,

savings and awareness among people that has increased over the period.


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INDEX

1. Introduction1.1Background of the Study

1.2Statement of the problem

2. Review of Literature

3. Methodology

3.1Objective of Research

3.2Operationalization of the Variables

3.3Model Construction

3.4Research Techniques

3.5Sampling Techniques

3.6Research Instrument

4. Results and Discussions

5. Conclusion

6. Policy Recommendations

7. Limitations and Future Scope of the Research

8. References

9. Appendix


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INTRODUCTION


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1.1 BACKGROUND INFORMATION

The research was about how the Investor's Behaviour has changed and they have left behind the

traditional investment options like the fixed deposits, company deposits, gold etc. Investors nowlook towards equity linked investment options like Mutual Funds, Debt Market, Government

Securities, and Insurance etc. This report has thus tried to study the specific reasons behind

choosing more of equity linked investments. The areas that were covered in the research are

mainly the Metropolitan cities.

The Indian capital market has been growing tremendously with the reforms of the industrial

policy, reforms of public sector and financial sector and new economic policies of liberalization,

deregulation and restructuring. The Indian economy has opened up and many developments have

been taking place in the Indian capital market and money market with the help of financial

system and financial institutions or intermediaries which foster savings and channels them to

their most efficient use. One such financial intermediary who has played a significant role in the

development and growth of capital markets is equity linked investments.

The concept of equity linked investments has been on the financial landscape for long in a

primitive form. The launching of innovative schemes in India has been rather slow due to

prevailing investment psychology and infrastructural inadequacies. Risk adverse investors are

interested in schemes with tolerable capital risk and return over bank deposit, which has

restricted the launching of more risky products in the Indian Capital market. But this objective of

the equity linked investment industry has changed over the decades. For many years funds were

more of a service than a product, the service being professional money management. In the last

15 years investments have evolved to be a product. The term product is used because

investment is not merely to park investors savings but schemes are tailor made to cater to

investors needs, whatever their age, financial position, risk tolerance and return expectations.

This issue of combining service and product will be an important one for the next decade. Equity

based investments have opened new vistas to millions of small investors by virtually taking

investment to their doorstep. In India, a small investor generally goes for bank deposits, which

do not provide hedge against inflation and often have negative real returns. He has limited access


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to price sensitive information and if available, may not be able to comprehend publicly available

information couched in technical and legal jargons. He finds himself to be an odd man out in the

investment game. Equity base investments have come, as a much needed help to these investors.

These are looked upon by individual investors as financial intermediaries/ portfolio managers

who process information, identify investment opportunities, formulate investment strategies,

invest funds and monitor progress at a very low cost. Thus the success of these investments is

essentially the result of the combined efforts of competent fund managers and alert investors. A

competent fund manager should analyze investor behaviour and understand their needs and

expectations, to gear up the performance to meet investor requirements.


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1.2 PROBLEM DEFINITION

In India, though the equity based investment industry has been in existence since 1964, (with the

establishment of UTI); no major study has been done regarding the investor behavioural aspect

with specific reference to these investments, in India. It should be noted that the expectations

of investors play a vital role in the financial markets. They influence the price of the securities,

the volume traded and various other financial operations in actual practice. These expectations

of investors are influenced by their perception and humans generally relate perception to

action. The beliefs and actions of many investors are influenced by the dissonance effect and

endowment effect.

In general, rules for investment, the analysis of investment and discussion of financial behaviour

tend to assume behaviour, which is logical and internally consistent in various ways. Investor

behaviour does not; however, always appear to conform to such expectation norms. Much of

economic and financial theory is based on the notion that individuals act rationally and consider

all available information in the decision making process. However, in the financial literature,

there are no clear models, which explain the influence of perception and beliefs on

expectations and decision making. No doubt, reality is so complex that trying to fitindividual investors behaviour into a model is impossible. Investors behaviour may change

from period to period even if the other variables influencing the behaviour are held constant.

However, to a certain extent, we can borrow concepts from social psychology where behavioural

patterns, rational and irrational are observed and empirically tested. On the same lines we can

develop certain models to identify the financial behaviour, to the extent of the availability of the

explanatory variables. Such models can help to understand the why and how? aspect of

investor behaviour, which can have managerial implications for policy makers.

Hence, with this background, this study has attempted to evaluate the behavioural aspects of fund

selection techniques of individual investors.


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REVIEW OFLITERATURE


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Pirinsky, 2000: This paper had attempted to analyze the contribution of the investment

performance of several major classes of institutional investors.

This research paper investigated the investment performance of the comprehensive group of

financial institutions including banks, insurance companies, mutual funds, independent

investment advisors and corporate and state pension funds based on quarterly disclosure of their

equity portfolio holdings.

The various institutional types do not contribute equally to the superior performance: banks,

independent investment advisors and mutual funds outperform significantly insurance companies

and state pension funds while corporate pension funds do not perform significantly different

from all remaining institutions.

Jain, 2001: Inflation is one of the causes for peoples decision on investment plans. Inflation is a

situation where there is ' too much money chasing too few goods'

This research paper attempted to study how the Investor's Behaviour is changing and they are

now leaving behind the sacred investment options like the fixed deposits, company deposits,

gold etc. Investors are now looking towards equity linked investment options.

According to this research paper many individuals find investments to be fascinating because

they can participate in the decision making process and see the results of their choices. The

individual starts by specifying investment goals. Once these goals are established, the individual

get aware of the mechanics of investing and the environment in which investment decisions are

made.

The strategy of people of targeting dividends in equities over a period is expected to improve the

yield of the fund. From the above investment strategy people expects to minimize capital loss in

adverse market condition and receive moderate returns in stable/positive market conditions.

Sethi, 2003: Investment scenario is changing very rapidly. Emergence of modern instruments of

investment like Mutual Funds, Systematic Investment Plan, RBI Bonds, and Infrastructure Bonds

proves to be a better option for the investors in comparison to the old instruments of investment

such as fixed deposits, savings, recurring deposits etc. This research paper has attempted to do a


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thorough study of these modern instruments in respect of their returns, liquidity, and tenure &

safety aspect etc.

The objective of this research was to assess the trends towards the investment pattern, to study

the traditional instruments of investments at HDFC BANK such as Fixed Deposits, RecurringDeposits, saving account, current account etc., modern instruments of investments such as

Mutual funds, SIP, ULIP etc. at HDFC and Fixed deposits. Vs. RD

It was found that in this new emerging business scenario people still are investing their hard

earned cash in Traditional instruments of investment like FDs rather than in modern instruments

like Mutual Funds. This is very surprising and is due to the unawareness of people regarding the

latest available investment options. Also, people are not satisfied with the low and taxable

returns they are getting after a certain time period by investing in fixed deposits but they have no

other choice because people are unaware about modern techniques of investment. After making

them aware about the existence of these techniques and their features they have shown keen

interest in these.

The limitations were the constraint of time available for carrying out this study is limited; the

findings of the research are limited to a particular area &cannot be applied to all places, as the

human behaviour is not constant so the results collected through, questionnaire may or may not

apply to future period of time and human Bias can also be considered as an important limitation

of the research.

Katie Connors, 2006: This journal attempts to give a brisk idea about SMAs (separately

managed accounts), and changing preference of investors while investing and their increasing

expectations from the broking houses.

This journal has made an attempt to explain the reasons, why people prefer separately managed

accounts these days and the reasons for increasing popularity of SMAs among individual

investors.

This journal has studied that the account holders of SMAs have a very high satisfaction rate i.e.

90%. The idea behind SMAs is giving individual investors what they dont get from mutual

funds and stocks, in SMAs the customer can hold the securities in their own account and hence


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gives you better control of your funds by giving you facilities like transparency, customization of

your portfolio, tax benefit, gives you maximum flexibility and control of your finds.

This journal did not talk about the heavy expenses associated with SMAs and their usability by

low income and middle income group people, and their limited approach among individualinvestors.

Bhandari, 2007: Investment pattern changes with the change in demographic categories of

individuals.

This paper had tried to understand the investment pattern of different demographic categories of

individuals representing the three segments of India, viz. rural, urban & metropolis, PHD

Chamber conducted an All-India survey of more than 1000 people. The census considered

persons from four basic occupations viz. Agriculturists, Businessmen, Professionals, and

Salaried.

People have most preferred choices varied across different segments. Rural India was more

inclined towards investing in fixed deposits, while the Urban India and Metropolitan India

segments chose equity-linked insurance schemes over other investment tools.

Despite the stock market going through a boom period, most of the people opted for a traditional

mode of investment like fixed deposits; even professionals and businessmen have not opted for

stock market, as found during the survey.

Mr. Bhandari needs effective channelization of savings into investments to maintain the capital

formation around 35-40% of GDP and to reduce dependency on foreign capital flows To deepen

the penetration levels, it is believed that, there is a strong need to mobilize households savings

into market linked financial productsstock market, equity linked insurance, and mutual funds.

Cederburg, 2008: Investment pattern of the investors are different in different stage of the

business cycle i.e. in expansion or in recession.


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This research paper aimed to examine whether mutual fund investors exhibit positive fund

selection ability by comparing the performance of positive and negative net cash flow mutual

funds in expansions and recessions.

Expansion investors and recession investors behaved differently. Expansion investors chasedreturns and alpha. There was evidence of a smart money effect whereas recession investors do

not chase mutual fund returns has several implications for mutual fund research.

The research had shown that there was difference in the investment behaviour of mutual fund

investors within the business cycle. It had basically shown opposite buying behaviour in

recession and expansion but it failed to bring out as to why it is so and what happened when

there is neither of these two situations.

Kapoor, 2009: It was observed that people prefer real estate investment to stock market

investment.

This report examined why people go for real estate investment rather than stock markets.

According to this article the most common known areas where people invest money were stocks,

bonds, mutual funds, real estate, and e-commerce. People wanted to invest in real estate because

it is a much safer investment than the stock market and still has the potential to be highly

profitable.

People had to keep great tax records due to the frequent amount of purchases, these plans were a

safe way to get involved in investing and make money over time

Kabra/Dash, 2009: Many individuals found investments to be fascinating because they can

participate in the decision making process and see the results of their choices.

This study aimed to gain knowledge about key factors that influence investment behaviour and

ways these factors have impact on investment risk tolerance and decision making process among

men and women and among different age groups.


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The modern investor was a mature and adequately groomed person. In spite of the phenomenal

growth in the security market and quality Initial Public Offerings (IPOs) in the market, the

individual investors prefer investments according to their risk preference.

This study did not show the whole of India but only a few areas within India.

JoEllen Weatherholt, 2009: According to JoEllen Weatherholt (investment manager, Wells

Fargo Private Client Services) in her article Choosing Investments- Seven Key Principles

Strengthen Portfolios, Seven key principles should be incorporated into every investment plan

for private investors to maximize the chance of reaching their financial goals. By following the

seven key investment principles outlined in her article, one can create a plan that truly addresses

his/her personal needs and helps a person reach their goals.

The Seven key principles were:

1. Know your numbers

2. Your time horizon makes all the difference

3. Discover the mix of investments suitable for your personal circumstance

4. Strive for consistent returns through diversification

5. Risk is far more that volatility

6. Due diligence goes beyond historical returns

7. Ensure your portfolio is adequately monitored and rebalanced

Gearino, 2010: People were going for high-risked investment in stock markets rather than going

for investment in government bonds where risk was negligible.

The research paper attempted to examine whether it was worth taking the risk to go for

investment in stock market.

There was no pattern in which the returns maybe high or low. The risk takers had to invest in

them and hence a better way is to use mutual funds.

The researcher hasnt come up with proper idea as how when to invest in stock markets.


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Scott C. McCartney, 2010: The sluggish business conditions in US have from past 2-3 years had

led to decline in interest rates which has in turn affected the conservative low income investors in

US.

This journal attempted to explain the impact of dividend on investment decision of investors

keeping in mind their time horizon.

Investors felt cheated if they invested in long term investments and the investments that had less

creditability, so if investors go for long term investments like fixed deposits, bonds they want

some security of their funds, or else they would have gone for investments like mutual funds and

stocks to beat the impact of inflation.

Rao & Rao, 2010: Growth of Indian mutual fund investments.

The objective was to study whether different types of institutions have discernible trading

motives in response to portfolio disclosures and studied investment patterns and performance of

foreign investors, individual investors, and five types of institutional investors.

Corporate were the dominant investor group in the Indian Mutual Fund Industry and they

account for almost 48% of the total investment (AUM) in the industry. The second dominant

group in the industry was the Retail investors group which accounts for almost 24% of the total

investment (AUM) in the industry. The third dominant group in the industry was the High Net

worth Individuals group and they account for almost 16% of the total investment (AUM) in the

industry. The fourth dominant group in the industry was the Banks/Financial Institutions and

they account for almost 11% of the total investment (AUM) in the industry.

The study is based on data for one year (2009) and probably this may have led to lack of

statistical evidence. Data over a longer period may overcome this shortcoming. Micro analysis of

the investment patterns of Retail investor group has ample scope for further research.

Rao & Daita, 2010: This research paper attempted to analyze the influence of several

economic, industry and company factors on the performance of mutual funds. This study also

explained several macroeconomic factors that affect the investment decisions.

The objective was to study the impact of different factors on investment like domestic savings,

Forex reserves, GDP growth, per capita income, risk appetite, security of your investments.


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From this research it was learnt that there is a positive correlation between earnings and the fund

size, book value and P/E ratio indicating that earnings increase with increase in the fund size.

The researcher had established that there is some relation between return, fund size, B/V and

P/V. It also brought out relations between different factors affecting mutual funds but fails to

address social factors affecting mutual fund investment i.e. perception, social acceptability. It

might be because in a country like India people are still not ready to accept mutual funds as an

investment instrument.

Santhosh, 2011: This study identified the perceptual factors which influenced the investors to

invest in mutual funds and why some of the investors are not ready to invest in mutual funds.

The authors explained that due to limited knowledge of the individual investors, the individual

investors find it easier to invest in mutual funds. But some investors do not know much about the

mutual fund industry and thus do not ready to invest in it. The study also analyzed the various

motivational factors of mutual fund investors.

Rajeshwari, 2009: The objectives of this research paper were to understand the savings avenue

preference among MF investors, to identify the features the investors look for in Mutual Fund

products, to identify the scheme preference of investors, to identify the factors that influences the

investors fund/scheme selection, to identify the information sources influencing the schemeselection decision and to identify the preferred communication mode.

MF was a retail product designed to target small investors, salaried people and others who were

intimidated by the mysteries of stock market but, nevertheless, like to reap the benefits of stock

market investing. At the retail level, investors were unique and are a highly heterogeneous group.

Hence, their fund/scheme selection also widely differs. Investors demand inter-temporal wealth

shifting as he or she progresses through the life cycle. This necessitated the Asset Management

Companies (AMCs) to understand the fund/scheme selection/switching behaviour of the

investors to design suitable products to meet the changing financial needs of the investors. With

this background a survey was conducted among 350 Mutual Fund Investors in 10 Urban and

Semi Urban centres to study the factors influencing the fund/scheme selection behaviour of


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Retail Investors. This paper discusses the survey findings. It is hoped that it will have some

useful managerial implication for the AMCs in their product designing and marketing.

The limitations were sample size is limited to 350 educated investors in urban and Semi-Urban

cities only. The sample size might not adequately represent the national market. This study had

not been conducted over an extended period of time having both market ups and downs. The

market state had a significant influence on the buying patterns and preferences of investors.

Running a successful MF requires complete understanding of the peculiarities of the Indian

Stock Market and also the psyche of the small investor. This study had made an attempt to

understand the financial behaviour of MF investors in connection with the scheme preference

and selection. The post survey developments were likely to have an influence on the findings.

Behavioural trends usually take time to stabilize and they get disturbed even by a slight change

in any of the influencing variables. Hence, surveys similar to the present one needed to be

conducted at intervals to develop useful models. Nevertheless, it was hoped that the survey

findings will have some useful managerial implication for the AMCs in their product designing

and marketing.

Sultana, 2010: The objectives of the study were to develop a profile of sample Indian individualinvestor in terms of their demographics, to identify the objective of investment plan of an Indian

individual investor, to know the preferred investment avenues of the Indian individual investor,

to know the extent of financial literacy of individual investors and to identify the preferred

sources of information influencing investment decisions.

The learning were that it revealed that male investors dominate the investment market in India,

most of the investors possess higher education like graduation and above, majority of the

Investors belong to accountancy and related employment, non-financial management and some

other occupations are very few, most investors read two or more sources of information to make

investment decisions, the investors decisions are based on their own initiative and the investment

habit was noted in a majority of the people who participated in the study.


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Indian investors today had to endure a sluggish economy, the steep market declines prompted by

deteriorating revenues, alarming reports of scandals ranging from illegal corporate accounting

practices like that of Satyam to insider trading to make investment decisions. Stock markets

performance was not simply the result of intelligible characteristics but also due to the emotions

that are still baffling to the analysts. Despite loads of information bombarding from all

directions, it was not the cold calculations of financial wizards, or companys performance or

widely accepted criterion of stock performance but the investors irrational emotions like

overconfidence, fear, risk aversion, etc., seem to decisively drive and dictate the fortunes of the

market. This paper while discussing the characteristics of the Indian individual investors along

makes an attempt to discover the relationship between a dependent variable i.e., Risk Tolerance

level and independent variables such as Age, Gender of an individual investor on the basis of the

survey.

This study confirmed the earlier findings with regard to the relationship between gender and age,

the risk tolerance level of individual investors. The present study had important implications for

investment managers as it has come out with certain interesting facets of an individual investor.

The individual investor still prefers to invest in financial products which give risk free returns.

This confirms that Indian investors even if they are of high income, well educated, salaried,

independent are conservative investors prefer to play safe. The investment product designers

could design products which can cater to the investors who are low risk tolerant and use TV as a

marketing media as they seem to spend long time watching TVs.

Former President of FICCI, 2011: The objectives were to examine the impact of reforms of the

foreign institutional investors' (FIIs) investment policy and studied the impact of FII portfolio

flows to the Indian stock markets and investment decisions.

This paper examined the impact of reforms of the foreign institutional investors' (FIIs)

investment policy, on FII portfolio flows to the Indian stock markets, an aspect, studies on

determinants of FII flows to India so far have not taken into consideration. FIIs had been allowed

to invest in the domestic financial market since 1992; the decision to open up the Indian financial

market to FII portfolio flows was influenced by several factors such as the disarray in India's


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external finances in 1991 and a disorder in the country's capital market. Aimed primarily at

ensuring non-debt creating capital inflows at a time of an extreme balance of payment crisis and

at developing and disciplining the nascent capital market, foreign investment funds were

welcomed to the country. FII inflow to India grew manifold from US $0.18 million (net,

monthly) in January 1993 to about US $400 million within a year's time. Given the volatile

nature of capital flows to emerging markets seen in the early 1990s and the nature and growth of

such flows to India, FII investment in India, obviously called for special regulatory attention.

Investment by FIIs in India is jointly regulated by Securities and Exchange Board of India

(SEBI) through the SEBI (Foreign Institutional Investors) Regulations, 1995 and by the Reserve

Bank of India through Regulation 5(2) of the Foreign Exchange Management Act (FEMA),

1999.

The results strongly suggested that the liberalization policies that expand the membership of FII

categories and their scope of investment in the Indian market, enhance sectoral and individual

caps, provide for hedging of risks of investing in the Indian stock markets by allowing FIIs to

enter the foreign exchange and derivatives market and policies that bring about procedural

simplifications and fees reduction, seem to have significant expansionary effect on net inflows.

Each of the liberalization policies has either increased the mean level of FII inflows and/or the

sensitivity of these flows to a change in BSE return and/or the inertia of these flows.

Sethi, 2011: There were a lot of investment avenues available in the financial market for an

investor with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and

Bonds where there is low risk but low return. He might invest in Stock of companies where the

risk is high and the returns are also proportionately high. The recent trends in the Stock Market

had shown that an average retail investor always lost with periodic bearish tends. People began

opting for portfolio managers with expertise in stock markets who would invest on their behalf.

Thus we had wealth management services provided by many institutions. However they proved

too costly for a small investor. These investors have found a good shelter with the mutual funds.

The objective was to give a brief idea about the benefits available from Mutual Fund investment,

to give an idea of the types of schemes available, to discuss about the market trends of Mutual


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Fund investment, to study some of the mutual fund schemes and analyze them, observe the fund

management process of mutual funds, explore the recent developments in the mutual funds in

India and to give an idea about the regulations of mutual funds

The learnings were that diversified equity has done very well while sectorial categories havefared poorly in Indian market, index Funds had delivered much less compared to actively

managed Funds and Gilt and Income Funds had performed very well during the last three years.

They perform best in a falling interest environment. Since interest rates are now much lower,

short term Funds were preferable.


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METHODOLOGY


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OBJECTIVES OF RESEARCH

The objective of this research on The Changing trends in the investment pattern of People

in India, were:-

To know the preference of the people with respect to the investments over the period.

To understand the risk perception of Indian investors.

To understand the best option for investment in todays scenario

To study the impact of economic recession of 2008 on the risk perception and investment style

of people.

To understand the impact of age on the investing options adopted by the people (riskier options

as compared to traditional options).

To understand the attitude of people towards Bank deposits, Mutual Funds, Real estate as an

option of investment (favourable or not).


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OPERATIONALISATION OF VARIABLES

What is operationalizing?

Operationalizing a variable means finding a measurable, quantifiable, and valid index for your

variable (independent and dependent variables), and (sometimes) finding a way to manipulate

that variable in such a way as to have two or more levels.

Why operationalize?

Not all variables are easily measured. Factors that are objective, effort independent or

involuntary, and concrete are more easily measured (with appropriate equipment). Factors that

are subjective, effort dependent or abstract are hard to measure.

Generalized Procedure for operationalization by Jean McMillian

1. Identify the concept we hope to measure. For example, height, intelligence, or workload.

2. Determine one or more quantitative measures of the concept. For example, height can

be measured in inches or centimetres; intelligence can be measured by the score on an IQ

test; and workload can be measured by a score on the NASA Task Load Index (TLX)

self-rating scale. There can be multiple measures of the same concept.

3. Determine the method for obtaining this measure. For example, the use of a ruler or tape

measure to obtain a measure of height in inches; the specific paper-and-pencil instrument

used to produce an IQ score (e.g., the Stanford-Binet) and the methods for administering

it properly and producing the numerical IQ score from the results; the NASA TLX self-

report instrument and the instructions for when/how people should fill it out as well as

the methods for summing up the results.


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For the objective of the research various variables were taken into consideration like:-

1) Income disparity (Income Class) of the working population of India. The income

disparity has been measured by dividing the population into three income groups-

i. Below 1,00,000

ii. 1,00,0003,00,000

iii. 3,00,0015,00,000

iv. 5,00,001 - 10,00,000

v. Above 10, 00,000

2) Investment pattern according to the age of the working population of India. The

population was divided into four different age groups like-

i. Below 25

ii. 26 to 35

iii. 36 to 50

iv. Above 50,

3) Income proportion to save. The saving was measure in three categories-

i. Less than 1,00,000

ii. 1,00,001 to 3,00,000

iii. Above 3,00,000

4) Investment preferences of the people. To measure the investment preference the

following options were considered-

i. Life Insurance

ii. Real Estate

iii. Gold ETF

iv. Stock

v. Bank Deposits

vi. Units of UTI and Mutual Funds

vii. Postal Savings

viii. Pension & Provident Fund

ix. Currency

x. Chits


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5) Investment Appetite. To measure the investment appetite the duration of investment

preferred by investors were divided into three parts-

i. Short Term (1-6 months)

ii. Medium Term (6 months-3 years)

iii. Long Term (3 years and above)

6) Investor approach of the investor. To measure the investment approach, the following

kinds of investment and investors preference towards them were studied-

i. Equity

ii. Mutual Funds

iii. Debentures

iv. Govt. Securities

v. Bank Deposits

vi. Real Estate

vii. Gold Estate

viii. Stock etc.

As we all know about the need of the investment and the impact of the financial market for any

economy. We have done our research on the basis of these variables. We come out with many

surprising conclusion that we discussed ahead.


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RESEARCH TECHNIQUES

Using concise, straight forward questionnaire, this research has attempted to analyse a sample

group that represents the target market.

(i) In-home surveys are one-on-one interviews which allow to present people with

samples of products, packaging or advertising and gather immediate feedback.

(ii) Telephone surveys were used to get to the people residing in different parts of India

over the telephone.

(iii) Online surveys were used to get the views of our respondents from different parts of

India.

The hypothesis of the research work was as follows:

The research objective was to study that whether the preference of the people has changed with

respect to the investments over the period, people have become more open to riskier investments

or do they follow the traditional methods of investments.

HYPOTHESIS 1

The preference of the people has not changed with respect to the investments over the period.

HYPOTHESIS 2

H0: People have become open to riskier investments.

H1: people have not become open to riskier investments.

HYPOTHESIS 3

H0: Investments in gold are the most favourite.

H1: Investments in gold are not the most favourite ones.


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HYPOTHESIS 4

The economic recession has changed the attitude of people towards riskier investing options.

HYPOTHESIS 5

Age plays a role in determining the risk perception of Individuals.

HYPOTHESIS 6

Ho: Mutual funds, bank deposits and real estate are a good option for investment.

H1: Mutual funds, Bank deposits and Real estate are not a good option for investment.


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SAMPLING PLAN

In order to do this market research a sample size of 50 people was used to represent the wholetarget market. There were various types of sampling techniques used in this marketing research.

For this market research only people who do investment in various investment policies have

been picked up carefully. Hence cluster sampling technique was used. It is particularly useful in

situations for which no list of the elements within a population is available and therefore cannot

be selected directly. As this form of sampling is conducted by randomly selecting subgroups of

the population, possibly in several stages, it should produce results equivalent to a simple

random sample.


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MODEL CONSTRUCTION

The various variables that were taken into consideration are as follows:

1. The first variable that was taken was the income disparity (Income Class) of the working

population of India.

2. The second variable was theage group of the working population of India.

3. The third variable was the percentage of income people save annually.

4. The other important variable was the objective of the people to invest their savings i.e.

why people invest their savings-

a. To provide for Retirement

b. To meet contingencies

c. Accumulating wealth for another financial goal

d. For children s education

e. For tax reduction

f. Provide income for my current lifestyle

5. The other variable was their investment Appetite?

6. Changes that had come in perception in the mind of the people in comparison to the

past.

7. The preferences of the people in investing i.e., in what kind of investment they invest

their savings.

8. How the recession affects the income as well as the investment decision of the people.

9. What a common investor think about the current scenario of the economy of India today

and what kind of growth will India have in coming 10 years. Are they optimistic or

pessimistic or moderate about Indian economy?

Now talking about the first variable (var1) i.e., income disparity which is an

independent variable and the percentage of income people save annually (var3) is

a dependent variable as it will depend on ones income that how much he/she

saves annually. More the income more will be the savings, less the income lesser

will be the savings.


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Now here again variable1 and var7 have a relationship between them. Income

decides the preferences of the people in the investment options. Higher the

income more will be the probability of investing in risky investments and lesser

the income lesser will be the probability of investing in the risky investments.

Here too income acts as an independent variable and preference in investing acts

as dependent variable.

The second variable2 (var2) i.e., age group has a relationship with the var4. Age

has a lot to do with the objectives people carry while investing. For example old

aged people are having an objective, To provide for Retirement, or For

childrenseducation. But youth mostly invest to fulfil their lifestyle needs.

Var 2 and var5 also have a relationship between them. Age has also a lot to do

with the investment appetite of an individual. Mostly youth have short or very

rarely medium term appetite but aged people mostly have patience and have a

long term appetite.

Talking about the var2 and var7. Var2 is the independent variable and var7 is the

dependent variable. It has been found that age has lot to do with the preference of

the people in the investments. In the old age mostly the people like to play safe

and invest in the bank deposits or gold but youth dont play safe, they love doing

the experiments and invest in riskier options. It has also been found out that women also play safe and dont take much risk.


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RESEARCH INSTRUMENT

For the research a questionnaire was used to know the investors preferences for the different

form of investment plans in India. The survey was done by mall intercept, in-home, e-mail and

telephonic methods with a sample size of 50.

To know the preference of the people with respect to investment over a period of time

three questions were put across them:

1. Where did you prefer investing around 5 years ago?

2. Where would you prefer investing your money in todays scenario?

3. Do you believe your investment preferences have changed over the past few years?

To understand the perception of people on these statements a Liker Scale was used:1. People have become more open to riskier investments.

2. Real Estate is a good option for investing.

3. Fixed Deposits are the best way to invest.

4. People prefer high returns despite the risks attached with it.

To know the most favourite investing options of the people in todays scenario various

questions were put across such as:

1. What is your current preference of Savings Avenue? (Rank from 1 to 10)

[1- First preference, 10- Last preference]

2. What is your current attitude towards the following Investments?

To understand the behaviour of the people towards riskier investing options after

the economic recession of 2008 the questionnaire asked Has the economic recession of

2008 affected your investment style?

To understand the impact of age on the investing options adopted by the people (riskier

options as compared to traditional options) questions were asked about their risk

preference and age.

To understand the attitude of people towards Bank deposits, Life insurance, Real estate as

an option of investment (favourable or not) the researchers asked them their current

attitude towards various investment options.


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RESULT AND DISCUSSION

Objective 1:- To know the preference of the people with respect to the investments over the

period.

The frequency table was obtained to check whether the investment preference have changed overthe period. From this it was concluded that 33 people said that from the past few years their

investment preference changed. From this diagram it was seen that preference of people have

changed over period of time and shifted from fixed income accruing securities to riskier

investments like Mutual Funds, stocks, Real Estate.

66%

24%

10%

Have the investment preferences

changed over the past few years?

Yes

No

May Be

Test Statistics

Have the investment

preferences changed over

the past few years?

Chi-Square 25.480a

df 2

Asymp. Sig. .000

a. 0 cells (.0%) have expected

frequencies less than 5. The minimum

expected cell frequency is 16.7.


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INFERENCE

The purpose was to check whether there is a change in the investment pattern of people over the

period of time. So chi square has been used for this. The calculated value was more than the table

value i.e. 25.48>9.21 so it was concluded that the hypothesis has been rejected which means

there is a significant change in the pattern of investment of people over the years.

Objective 2:- To understand the risk perception of Indian investors.

One-Sample Test

Test Value = 2

T df Sig. (2-tailed) Mean Difference

95% Confidence Interval of theDifference

Lower Upper

People have become more

open to riskier investments

.477 49 .636 .060 -.19 .3

As the degree of freedom was 49 and the confidence level was 95% the t-value was 0.636 which

is greater than 0.05. Therefore the hypothesis was accepted.

INFERENCE

The researchers have tried to understand the risk perception of people, for this they have used

one sample t-test because it was a Likert Scale. As the hypothesis had been accepted, it means

that people now prefer riskier investments despite risk attached with them.

Objective 3:- To understand the best option for investment in todays scenario

One-Sample Test

Test Value = 2

t df Sig. (2-tailed) Mean Difference


Lower Upper

Real Estate -.292 49 .771 -.040 -.32 .24

Real estate was a favourable option for investing among the sample as the calculated value .771

is greater than.05.

As the degrees of freedom was 49 and the confidence level was 95%, the calculated t-value was

.771 which is greater than 0.05 therefore the hypothesis was accepted.


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INFERENCE

To understand the best investment option in todays scenario one sample t-test has been used as

the question was on a Likert scale. As the hypothesis has been accepted, this means that the

investment in real estate is most favourable for investors these days.

Objective 4:- To study the impact of economic recession of 2008 on the risk perception and

investment style of people.

Test Statistics

Did the economic recession of 2008affect the investment style?

Chi-Square 5.560a

Df 2

Asymp. Sig. .062

a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cellfrequency is 16.7.

Since the chi value is less than tabulated value i.e. 5.56


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Objective 5:- To understand the impact of age on the investing options adopted by the people

(riskier options as compared to traditional options).

Chi-Square Tests

Value Df Asymp. Sig. (2-sided)

Pearson Chi-Square 1.752a 6 .941

Likelihood Ratio 2.403 6 .879

Linear-by-Linear Association .218 1 .641

N of Valid Cases 50

In this the calculated value was 1.752 and the tabulated value for degrees of freedom 6 and

confidence level 99% is 16.8. This means that calculated value was less than the tabulated value.

Thus hypothesis was accepted.

INFERENCE

To know the impact of age on investment preference and investment style of people chi-square

test was used. As the hypothesis was accepted it was inferred that age has an impact on

investment attitude and preference of people i.e. in terms of risk assumption.

Objective 6:- To understand the attitude of people towards Bank deposits, Mutual Funds, Real

estate as an option of investment(favourable or not).

1) Real EstateOne-Sample Test

Test Value = 2

T df Sig. (2-tailed) Mean Difference


Lower Upper

Real Estate -.292 49 .771 -.040 -.32 .24

The calculated value .771 is greater than.05. So the hypothesis was accepted at 95% confidence

level.

INFERENCE

To understand the attitude of people towards real estate as an option for investment one sample t-

test was used as the question was asked on a Likert scale. As the hypothesis was accepted, it was

inferred that real estate is one of the good options for investment.


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2) Bank DepositsOne-Sample Test

Test Value = 2

t df Sig. (2-tailed) Mean Difference


Lower UpperBank Deposits 1.613 49 .113 .260 -.06 .58

The calculated value was .113 >.05 at 95% confidence level and at degrees of freedom 49. Thus

the hypothesis was accepted.

INFERENCE

To understand the attitude of people towards bank deposits as an option for investment one

sample t-test was used as the question was asked on a Likert scale. As the hypothesis was

accepted it was inferred that bank deposit is one of the god options for investment.


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CONCLUSION

1) The preference of people has drastically changed towards investments over the period

and now people are more inclined towards equity linked investments like Mutual funds,

shares and real estate rather than the traditional investment patterns like fixed deposits,

bank deposits etc.

2) People now are more inclined to the riskier investment patterns as their saving capacity

has increased over the period.

3) It was also found that the best investment option in the present scenario among investors

is the real estate investment option.

4) The economic recession in 2008 has also greatly affected the investors investment

patterns in the present scenario.

5) Age plays a significant role in investment pattern of people as more the age, less risky

investment options are taken by the people and their appetite would be inclined towards

the long term investment options.


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POLICY RECOMMENDATIONS

This research found out that todays scenario of investing is completely changed in comparison

to the past.

People are now ready to take more risk to earn more returns. Thus, it is recommended that:

1. One should identify the objective of investing i.e., why one is investing, for

contingencies, for current lifestyle etc.

2. One should have knowledge about the current scenario of the economy.

3. One should have knowledge of the performance of the investment i.e., what return is

available in the respective investment plan and the maturity period.

4. One should invest taking into consideration the growth path and the return available

rather than following the perception of other investors.


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LIMITATIONS AND FUTURE SCOPE OF

THE RESEARCH

1) Sample size is limited to 50 educated investors in urban and Semi-Urban cities only. The

sample size may not adequately represent the national market.

2) This study has not been conducted over an extended period of time having both market ups

and downs. The market state has a significant influence on the buying patterns and preferences of

investors.

3) As the human behaviour is not constant so the results collected through Questionnaire may or

may not apply to future period of time.

4) Human Bias can also be considered as an important limitation of the research.

5) The researchers have not come up with proper idea as how when to invest in stock markets.

6) The research fails to address social factors affecting mutual fund investment i.e. perception,

social acceptability.


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REFERENCES

Pirinsky Christo (2002), Are financial institutions better investors?

Jain Vikas (2001), Changing Trends in Investment Patterns.

Sethi Seema (2003), Changes in the Trends of the Investment Pattern.

Connors Kattie (2006), Recent Investment Trends- Separately Managed Accounts/Feb

10, 2006

Bhandari (2007), Investment Still Traditional Across Segments, Stock Market Not the

First Choice

Scott Cederburg (January, 2008), Mutual fund Behaviour across the Business Cycle

Kapoor Meena (2009), Money Investments

Kabra Gaurav, Mishra P.K. and Dash Manoj Kumar (2009), Factors Influencing

Investment Decision of Generations in India.

Weatherholt JoEllen (October, 2009)Alaska Business Monthly.

Gearino G.D. (November, 2010) Taking the Reward out of Risk.

Scott C. McCartney (August, 2010), Consider Dividend Stocks for Dividends

Rao, D.N. & Rao, S.B. (2010), Investment patterns and Its Strategic Implications for

Fund Managers: An Empirical Study of Indian Mutual Funds Industry.

Rao & Daita (2010), Fundamental factors influencing investment in mutual funds

approach- a case study of RCAML

Santhosh (2011), Investors Perception towards Investment in Mutual Funds

Rajeshwari (2009), An Empirical Study on Factors Influencing the Mutual Fund/Scheme

Selection by Retail Investors

Sultana (2010), An Empirical Study of Indian Individual Investors Behaviour

Former President of FICCI (2011),The Impact of FII Regulations in India

Sethi (2011), Study of mutual funds in India.

http://www.ssrn.com EBSCO research papers http://sites.security.com
http://www.ssrn.com/http://sites.security.com/http://sites.security.com/http://www.ssrn.com/


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APPENDIX

The questionnaire that we used to know the investors behaviour towards different investment

plans is as follows:

QUESTIONNAIRE TO THE PRESENT INVESTORS IN INDIA

Dear Sir / Madam,

The investment pattern of the Indians has been changing since a long time. People now investnot only in the fixed interest investments but also in the investments which are riskier and alsowhich have fluctuating returns.

We are currently engaged in a study on Changing Trends in Investment Patterns in India. In

this connection we request you to read the following items carefully and answer them. Theanswers you give will be held confidential and used purely for academic purpose. Please put atick mark in the square corresponding to your choice. I thank you for your time.

1) What is your Annual Income?

Below ` 1, 00, 000 ` 1, 00,0013, 00,000

` 3, 00,0015, 00,000 ` 5,00,001- 10,00,00

Above ` 10, 00,000

2) How much do you save annually? (in ` Approx)

Less than ` 50,000 ` 50,001 to ` 100000 Above ` 1,00,000

3) Your portfolio design relates to your investment experience, which helps to determine yourcurrent investment philosophy. What is the current value of your total investment portfolio?

(in `)

Less than ` 1,00,000 ` 1,00,001 to ` 3,00,000 Above ` 3,00,000

4) What are the objectives of your investments?

To provide for Retirement For tax reduction

To meet contingencies For children s education

For purchase of assets Others

5) Which of the following objectives are most important to you? (Select One)


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Accumulating wealth for another financial goal

Accumulating wealth for my childs education

Accumulating wealth to fund my retirement

Provide income for m current lifestyle

Preservation of current capital

6) What factor would you consider most important before choosing an investment?

How quickly I will be able to increase my wealth.

The opportunity for steady growth.

The amount of monthly income the investment will generate.

The safety of my investment principal.

7) What is your current preference of Savings Avenue? (Rank from 1 to 10)[1- First preference, 10- Last preference]

Currency Bank Deposit Life Insurance

Pension & Provident Fund Shares Real Estate

Postal Savings Chits Gold ETF

Units of UTI and Mutual Funds

8) How much of your income earned from your investment portfolio would you reinvest?

Reinvest 100% Reinvest 80-99%

Reinvest 50-80% Reinvest 20-50%

Reinvest 0-20% Reinvest 0% (Receive all investment earning)

9) What is your investment Appetite?

Short Term (1-6 months)

Medium Term (6 months - 3 years)

Long Term (3 years and above)

10)Which one of the following best describes your investment activities in the past?

I have most of my money in a bank account.

I have money in a bank account and have experience investing in stocks,bonds, and/or unit trusts/mutual funds that hold stocks or bonds.

I have most of my money invested in stocks, bonds, and/or unit

trusts/mutual funds that hold stocks or bonds.

11)You receive an unexpected bonus equivalent to three months' salary and you must invest thismoney. You will:

Put the money in a bank deposit.

Put the money in an investment that will give a return ofaround 20% p.a. or a loss of around 10% p.a.


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Put the money in an investment that will give a return ofaround 40% p.a. or a loss of around 30% p.a.

12)Where did you prefer investing around 5 years ago?

Currency Bank Deposit Life InsurancePension & Provident Fund Shares Real Estate

Postal Savings Chits Gold ETF


13)Where would you prefer investing your money in todays scenario?

Currency Bank Deposit Life Insurance

Pension & Provident Fund Shares Real Estate

Postal Savings Chits Gold


14)Has the economic recession of 2008 affected your investment style?

Yes No May Be

15)Do you believe your investment preferences have changed over the past few years?

Yes No May Be

16)What is your current attitude towards the following Investments?

Investment Highly

Favourable

Favourable Some what

Favourable

Not very

Favourable

Not at all

FavourableEquity

Mutual Funds

Debentures

Govt. Securities

Bank Deposits

Life Insurance

Real Estate

Gold ETF

Currency

Chits

Postal Savings

17)What is your expected rate of return on your investments in a year?

(Answer in percentage terms)

Less than 10% 10-20%

20-50% More than 50%


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18)After how long would you be requiring the amount invested?

Less than 1 year 1-2 years

2-3 years 3-5 years

5-10 years More than 10 years

19)Do you prefer mutual funds over stocks?

Yes No

20)If yes, why do you prefer mutual funds over stocks?

They manage my investment properly

They are much more experienced in investment.

It helps me to diversify my portfolio.

I dont have enough knowledge about the stock market.

21). The value of most investments fluctuates from year to year as well as over the short-term.How would you feel if an investment you had planned to keep for 10 years lost 20% of itsvalue during the first year?

I would be extremely concerned and would sell.

I would be moderately concerned and may consider selling my investment.

I would be somewhat concerned, but I probably would not consider selling theinvestment.

I would not be overly concerned, given my long-term investment philosophy.

22)In general, your feelings about the Indian economy over the next ten yrs are

Pessimistic

Optimistic

Neutral

23)Given your personal situation and with consultation with your investment advisor, howwould you describe your liquidity requirements?

Low Average High

24)Do you agree with the following statements?

Statement Strongly

Agree

Agree Neutral Disagree Strongly

Disagree

People have become more open to riskier


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investments.

Real Estate is a good option for investing.

Fixed Deposits are the best way to invest.

People prefer high returns despite the risksattached with it.

25)What is your investment experience?

Experience level None Moderate Extensive

Stock

Mutual Funds

Options

Bonds

26)When it comes to investing in stocks, bonds, or mutual funds, I would describe myself asa/an.

Very inexperienced investor

Somewhat inexperienced investor

Somewhat experienced investor

Experienced investor

Very experienced investor

27)Since how long have you been investing?

Less than 1 year 1-2 years

2-3 years 3-5 years

5-10 years More than 10 years

28)What kind of investment you prefer?

High Risk - High Return

Medium Risk - Medium Return

Low Risk - Low return

I do not like any risks

29)Personal Information:

Name: _________________________________

Gender: Age:

Male Female Below 25 26-35 36-50 Above 50

No. of Dependents (spouse, children, parents, etc):


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0 1 2 3 More than 3

Academic Qualification:

School Final Graduate PostGraduate Professional Degree

Marital Status:

Married Unmarried Widow Divorced

Occupation:

Professional Business Salaried Retired Student

Phone no. ______________________________________________________

mr report final

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