Project (Kotak MB)

7/31/2019 Project (Kotak MB)

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PROJECT REPORT

ON

Comparative Analysis on ULIP verses Other

Investments

Submitted for Partial Fulfillment for the Award

of the Degree of

Master of Business Administration

UNDER THE GUIDANCE OF

(Mr. Rajesh S. Pyngavil)

SUBMITTED BY

Ankita Bajaj

MBA (2nd Sem)

(0041914308)

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

(Affiliated to GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY)

ROHINI, NEW DELHI -110085


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ACKNOWLEDGEMENT

I extend my profound gratitude to Mr. Manish Oberoi, Assistant Branch Manager, Kotak Life

Insurance, for his interest, guidance and suggestions throughout the course of the project. I feel

honored and privileged to work under him. He shared his vast pool of knowledge with me that

helped me steer through all the difficulties with ease. This project file would not have been possible

without his guidance and I would like to thank him for everything he has done for us.

I would also like to thank Mr. Sachin Choudhary, Deputy Manager- Channel Marketing for his

valuable and kind suggestions to me. I express my sincere thanks to all the members of the office

who spent their valuable time for guiding me through the project.

I am extremely thankful to my family members and all my friends whose wishes, encouragement

and help were the force behind the endeavor.

With regards

Ankita Bajaj

(0041914308)


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TABLE OF CONTENTS

1) Chapter 1-Executive Summary

2) Chapter 2-Company Profile

2.1 Kotak Mahindra Group

2.2 Kotaks Mahindra Old Mutual Life Insurance

2.3 Old Mutual Plc

2.4 Organizations Structure

2.5 Companys vision

2.6 Companys mission

3) Chapter 3- Objectives

4) Chapter 4- Introduction

4.1 ULIP(Unit Linked Investment Plan)

4.2 Traditional Plans

4.3 Mutual Funds

4.4 National Saving Certificate

4.5 Public Provident Fund

4.6 Fixed Deposits

5) Chapter 5- Research Methodology

6) Chapter 6- Analysis

6.1 Occupation

6.1.a) Businessmen

6.1.b) Professionals

6.1.c) Housewives

6.1.d) Retired


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7) Chapter 7- Discussion

8) Chapter 8- Conclusion

Annexure: Questionnaire for Consumer Perception in Investment in ULIP

and Other Investments

Glossary

References


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LIST OF TABLES

1) Table 1- Investments

2) Table 2- Interest rates for NSC

3) Table 3- Interest rates for PPF

4) Table 4- Profile and Current Investment Portfolio





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LIST OF DIAGRAMS

1) Diagram 1- Occupations

2) Diagram 2- Plans for Investment

3) Diagram 3- Important Factors

4) Diagram 4- Preferred Investment

5) Diagram 5- Type of Insurance














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CHAPTER-1

EXECUTIVE SUMMARY

The title of my project is COMPARITIVE ANALYSIS OF ULIP VERSES OTHER

INVESTMENTS.

The objective of the project was to comparatively analyze various investment patterns in Delhi and

NCR regions. Total Investment scenario is changing, in past people were not interested in

investment because they were not ready to risk their money and were more interested in keeping it

in a safe. There are many options available for investment like life Insurance, Mutual fund, Public

Provident Fund, Fixed Deposits, NSC, etc.

The project was taken to know about, what are the main aspects of different investment available

and what are the preferences of customers. Also to determine the reason for their preference.A survey was conducted to collect information about the preferences of the customer. The sample

size of the survey was 50.The questionnaire was filled from the people of different age groups and

occupation.

Across different occupation it has been observed that there is reluctance towards other investment

other then Insurance and Fixed Deposits. The primary goal for investment in fixed deposits and

insurance is the opportunity for steady growth and the second reason is the safety of their

investment principal. It has been observed that maximum number of professionals are aware about

ULIP and lesser number of retired people know about ULIP. The most dominating amongst

investment is Fixed Deposit.

The survey shows that mutual funds is the least preferred form of investment due to the high risk

involved and also the lack of guarantee. The most important factor among the customers is

flexibility , high returns, liquidity and transparency.


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CHAPTER-2

COMPANY PROFILE

2.1 Kotak Mahindra Group:

The Kotak Mahindra group is one of Indias leading banking and financial services organizations,

with offerings across personal financial services; commercial banking; corporate and investment

banking and markets; stock broking; asset management and life insurance.

Kotak Mahindra believes in offering its customers a lifetime of value. A commitment that has made

it a leading financial services group which, services around 6.2 million customer accounts and has a

distribution network of branches, franchisees, representative offices and satellite offices across 300

cities and towns in India and offices in New York, London, Dubai, Mauritius and Singapore. The

group has a net worth of over Rs. 6523 crore

2.2 Kotak Mahindra Old Mutual Life Insurance Ltd. :

Kotak Mahindra Old Mutual Life Insurance is a joint venture between Kotak Mahindra Bank Ltd.

along with its affiliates and Old Mutual plc. Kotak Mahindra Old Mutual Life Insurance is one of

the fastest growing insurance companies in India and has shown remarkable growth since its

inception in 2001. Kotak Life Insurance employs around 5,565 people in its various businesses and

has 197 branches across 141 cities.

The Group services around 2.6 million customer accounts. The Kotak Group has over 1,300 offices,

and services around 5.9 million customer accounts across India.

2.3Old Mutual plc:


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Old Mutual plc is an international savings and wealth management company based in the UK.

Originating in South Africa in 1845, it is among the top 100 largest companies in the FTSE100. The

group has a balanced portfolio of businesses offering Asset Management, Life Assurance, Banking

and General Insurance Services in over 40 countries, with a focus on South Africa, Europe and the

United States, and a growing presence in Asia Pacific. Old Mutual plc employs approximately

54,000 employees worldwide with its primary listing on the London, secondary listing on the

Johannesburg stock exchanges as well as in Namibia, Malawi and Zimbabwe.

2.4 Organizations Structure:

Kotak Life Insurance work as a team and have a flat management structure. Our top management

has many years of experience which has helped guide the company into a position of leadership.

2.5 Companys Vision:

Kotak Life Insurance has a deep rooted commitment to improve the quality of life of its customers,

employees and stakeholders. We aim at improving the long term value in our relationship by

continuous innovation and improvements.We do this by our three-prong effort which strives to

make Kotak Life Insurance a corporate with values.

Increase customer value :

Kotak Life Insurance has gone to the heart of its customer's requirements and developed products

which are unique and serve the customer needs perfectly. We built a relationship of mutual trust and

benefit to serve the Indian customer. At Kotak Life Insurance the customer always comes first.

Cohesive Work Environment:

Management forms a long-term partnership with their employees by offering them an invigorating

work experience. They not only demand loyalty, sincerity and values but also give it back in equal

measures. Kotak Life Insurance will like to offer its employees space to grow, innovate and build


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along-term career.

Work with Honour:

Kotak Life Insurance delivers everyday services in the marketplace with the high sense of duty and

commitment. Their employees strive to build the long-term value for all those come in contact with

Kotak Life Insurance. Their consumers, distributors, employees, shareholders and the nation have

their commitment that they will uphold the values of trust, integrity and a Sense of Honour in every

thought, act and deed in order to positively contribute to individual, society and nation growth

2.6 Companys Mission:

They focus on the needs of their customers and create confidence, trust and loyalty by offering a

wide range of innovative insurance solutions.

Strengthened by their commitment to professional management, they ensure the continued growth

and advancement of their employees.


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CHAPTER-3

OBJECTIVE

The study has the following objectives:

1.To identify critical factors that influence the buying behavior of individuals on the basis of the

following: -.

Growth

Safety

Increase in Wealth

2. To compare the buying and involvement pattern of people across different age groups and

different occupations.

3. To find the importance of investment to a common man.

4. To find the preference of consumer regarding various investment options.

5. To know the customer preference for traditional and ULIP products offered by different

insurance companies.


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CHAPTER-4

INTRODUCTION

Insurance is an upcoming sector, in India the year 2000 was a landmark year for life insurance

industry, in this year the life insurance industry was liberalized after more than fifty years.Insurance sector was once a monopoly, with LIC as the only company, a public sector enterprise.

But nowadays the market opened up and there are many private players competing in the market.

There are fifteen private life insurance companies has entered the industry.

After the entry of these private players, the market share of LIC has been considerably reduced. In

the last five years the private players is able to expand the market (growing at 30% per annum) and

also has improved their market share to 18%.

For the past five years private players have launched many innovations in the industry in terms of

products, market channels and advertisement of products, agent training and customer services etc.

4.1 ULIP(Unit Linked Investment Plan):

In earlier days, insurance was bought primarily for life cover and very few people actually bothered

about tax saving or investment as such. LIC was the only player and offered money back policies,

endowment policies and few single premium policies like Bima Nivesh. However as an asset classit wasnt considered as an option.

Now the scenario has completely changed, there are lots of private players and many new options

have come up. One among these new products is ULIPs which are hugely popular and sold as an

attractive asset with insurance/retirement benefit.

Insurers have developed plans that combine the benefits of life insurance as well as giving various

options of participating in the growth of capital market. Such plans are called ULIP.


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Unit Linked Insurance Plan is a life insurance policy which provides a combination of life insurance

protection and investment. ULIP is a most famous and safe way of investment in current scenario.

In the event of the insured persons untimely death, his nominees would normally receive an

amount that is higher of the sum assured (insurance cover) or the value of the units (Investments).

However, there are some schemes in which the policy holder receives the sum assured plus the

value of the investments.

Every insurance company has four to five ULIPs with varying investment options, charges and

conditions for withdrawals and surrender. Moreover, schemes have been tailored to suit different

customer profiles and, in that sense, offer a great deal of choice.

The charges paid in these schemes in terms of entry load, administrative fees, underwriting fees,

buying and selling charges and asset management charges are fairly high and vary from insurer toinsurer in the quantum and also in manner in which they are charged.

Some of the other features offered by insurers along with ULIPs are the following:

The policyholder can pay additional premium for investment at any time.

Partial or total withdrawal is allowed. Sometimes there are conditions attached. Some

insurers, not all, charge a redemption fee in such cases.

These policies will not entitled to any bonus.

There is no annual bonus, but there may be a loyalty bonus paid at the end.

TYPE OF FUNDS:Equity Fund: In this type of fund, sometimes also called Growth Funds, there would be more

investments in equities which are shares/ stocks traded in the stock market.

Debt Fund: In this type of fund, also called bond Funds, the investments are primarily in

government and government guaranteed securities and such safe debts and other high investment

grade corporate bonds.


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Money Market Funds: In this type of fund, sometimes also called Liquid Funds, the investment

may be more in short term money market instruments such as treasury bills, commercial papers, etc.

Balanced Fund: In this type of funds, the investments are in both equity as well as debts.

4.2 TRADITIONAL PLANS:

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 combination of these two basic plans.

A traditional plan of assurance has the following features:

Who can be insured? The various possibilities are (i) individual adults (ii) children (minors)

(iii) two or more persons jointly under one policy.

What can be the Sum Assured (SA)? Some plans stipulate a minimum SA. There can be

maximum limits also for SA as well as certain benefits, like Accident benefits.

In what contingency would the SA be payable? Could be on death or on survival.

When would the SA be payable? On the contingency happening or on some other dates.

How would the SA be payable? Could be in one lump sum or in installments.

What would be the term (duration) of the policy? This determines the period during which

the specified event should occur for the SA to be payable. Some plans provide for benefits

even beyond the term.

Does the SA increase? This can happen because of participation in surpluses and bonus

additions or because of guaranteed increases in SA.

Does the SA reduce? This can also happen, if the plan is to meet reducing liabilities under a

mortgage.

Are there additional benefits? These, also called supplementary benefits and may be

provided by way of riders, in addition to the basic covers.

4.3 MUTUAL FUNDS:


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Mutual fund means indirect investment in share market, mutual fund has following

characteristics

It is a pool of money, collected from investors, invested according to certain investment

objectives.

The ownership of the fund is thus joint or mutual; the fund belongs to all investors.

Mutual Funds are also known as Financial Intermediaries

In India, Mutual Funds are constituted as Trust.

The investors share is denominated by units whose value is called as Net Asset Value

(NAV) which changes every day.

The investment portfolio is created according to the stated investment objectives of the fund.

The ownership is in the hands of the investors who have pooled in their funds.

It is managed by a team of investment professionals and other service providers.

An equity fund will invest in Equity shares, Preference Shares, Warrants etc.

A Debt Fund will invest in Debt Instruments only.

Following are the different products and services Offered by Mutual Fund

Companies

Open ended schemes

Close ended schemes

Growth/Equity oriented Schemes

Income/Debt oriented Schemes

Balanced Funds

Money market or liquid funds


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Gilt Funds

Index Funds

Exchange Traded Funds

Sectoral Funds

Thematic Funds

Commodity Funds

Real Estate Funds

Tax Saving Funds

Hybrid Funds

There are several ways for investment and disinvestments in mutual funds such as :

Systematic Investment Plans (SIPs)

Value Averaging

Systematic Transfer Plans (STPs)

Systematic Withdrawal Plans(SWPs)

Automatic Reinvestment Plans.

Open ended fund:

In an open-ended fund, sale and repurchase of units happen on a continuous basis, at NAV related

prices, from the fund itself.The corpus of open-ended funds, therefore, changes every day.

Close ended fund:

A closed-end fund offers units for sale only in the NFO. It is then listed in the market.

Investors wanting to buy or sell the units have to do so in the stock markets. Usually closed-end

funds sell at a discount to NAV.


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The corpus of a closed-end fund remains unchanged.

Growth fund:

Provide capital appreciation over the medium to long-term

Investor who does not require periodic income distribution can choose the option, where the

incomes earned are retained in the investment portfolio and allowed to grow, rather than being

distributed to investors.

Investors with longer investment horizons and limited requirements for income choose this option.

The return to the investor who chooses a growth option is the rate at which his initial investment has

grown over a period for which he has invested in the fund.

The investor choosing this option will vary the NAV with the value of the investments portfolio ,

while the no. of units held with remains constant.

Income fund

Provide regular and steady income to investor

Balanced fund

Provide both growth and regular income.

Money market fund

Provide easy liquidity, regular income and preserve the income

Tax saving scheme

Offers tax rebates to the under specific provisions of the Indian income tax laws.

Investment made under some schemes are allowed as deduction U/S 88 of the income tax act .

Automatic Reinvestment Plans

Reinvestment of amount of dividend made by fund in the same fund.

In this option, the no. of units held by the investor will change with every reinvestment.


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The value of units will be similar to that under the dividend option

There are four types of plans as follows

Lump sum Investment

It is one time investment..

Investors can invest particular amount one time for fixed time of period.

Systematic Investment Plans( SIP) For regular investment

SIP is investing a fixed sum periodically in a disciplined manner for long term.

It gives benefit of Rupee Cost averaging.

In SIP monthly minimum Rs.500 or Rs.100 are invested.

Compound interest is calculated.

Many SIP gives insurance benefits.

VAP is modified version of SIP. It is Voluntary Accumulation Plan. It allows the investor flexibility

with respect to the amount and frequency of investment.

In VAP, investor has to impose voluntary self discipline.

Systematic Withdrawal Plan ( SWP) For regular income

The lump sum amount is invested for one time and then fixed percent amount is withdraw monthly.

Remaining amount will grow continuously.

This plan is suitable for retired person, because it gives regular income.

Systematic Transfer Plan ( STP)

Transfer on a periodic basis a specified amount from one scheme to another within the same fund

family.It gives option to the investor if the current fund performance in not satisfactory.

Dividend option

Investors will receive dividends from the mutual fund , as an and when dividends are declared.


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Dividends are paid in the form of warrants or are directly credited to the investors bank accounts.

In normal dividend plan , periodicity of dividends is left to the fund managers, the timing of the

dividend payout is decided by fund manager.

Mutual funds provide the option of receiving dividends at pre-determined frequencies, which can

vary from daily, weekly, monthly, quarterly, half-yearly and annually . Investors can choose the

frequency of dividend distribution that suits their requirements.

Investors choosing this option have a fixed number of units invested in the fund and earned incomes

on this investment.

The NAV of this investors holding will vary with changes in the value of portfolio and the impact

of the proportion of income earned by the fund to what is actually distributed as dividend.

4.4 NATIONAL SAVING CERTIFICATE:

The NSC is a post-office savings scheme

Minimum investment Rs. 100/- No maximum limit.

Rate of interest 8% compounded half yearly.

Rs. 1000/- grow to Rs. 1601/- in six years.

Two adults, Individuals, and minor through guardian can purchase.

Companies, Trusts, Societies and any other Institutions not eligible to purchase.

Non-resident Indian/HUF can not purchase.

No pre-mature encashment.

Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5

years under section 80 C of Income Tax Act.

Maturity proceeds not drawn are eligible to Post Office Savings account interest for a

maximum period of two years.

Facility of reinvestment on maturity.

Certificate can be pledged as security against a loan to banks/ Govt. Institutions.

Facility of encashment of certificates through banks.


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Certificates are encashable any Post office in India before maturity by way of transfer to

desired post office.

Certificates are transferable from one Post office to any Post office.

Certificates are transferable from one person to another person before maturity.

Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced

certificate.

Nomination facility available.

Facility of purchase/payment to the holder of Power of attorney.

Tax Saving instrument - Rebate admissible under section 80 C of Income Tax Act.

Interest income is taxable but no TDS .

Deposits are exempt from Wealth tax.

4.5 PUBLIC PROVIDENT FUND:

The Public Provident Fund Scheme is a statutory scheme of the Central

Government of India. It was established in 1968.

The Scheme is for 15 years.

The rate of interest is 8% compounded annually.

The minimum deposit is 500/- and maximum is Rs. 70,000/- in a financial year.

One deposit with a minimum amount of Rs.500/- is mandatory in each financial year.

The deposit can be in lump sum or in convenient installments, not more than 12 Installments

in a year or two installments in a month subject to total deposit of Rs.70,000/-

It is not necessary to make a deposit in every month of the year. The amount of deposit can

be varied to suit the convenience of the account holders.

The account in which deposits are not made for any reasons is treated as discontinued

account and such account can not be closed before maturity.

The discontinued account can be activated by payment of minimum deposit of Rs.500/- with

default fee of Rs.50/- for each defaulted year.


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Account can be opened by an individual or a minor through the guardian.

Joint account is not permissible. Those who are contributing to GPF Fund or EDF account

can also open a PPF account.

A Power of attorney holder can neither open or operate a PPF account.

The grand father/mother cannot open a PPF behalf of their minor

grand son/daughter.

The deposits shall be in multiple of Rs.5/- subject to minimum amount of Rs.500/-.

The deposit in a minor account is clubbed with the deposit of the account of the Guardian

for the limit of Rs.70,000/-.

No age is prescribed for opening a PPF account.

Interest is not contractual but rate is notified by Ministry of Finance, Govt. of India, at the

end of each year.

The facility of first withdrawal in the 7th year of the account subject to a limit of 50% of the

amount at credit preceding three year balance. Thereafter one Withdrawal in every year is

permissible.

Pre-mature closure of a PPF Account is not permissible except in case of death.

Nominee/legal heir of PPF Account holder on death of the account holder can not continue

the account, but account had to be closed.

The account holder has an option to extend the PPF account for any period in a block of 5

years on each time.

The account holder can retain the account after maturity for any period without making any

further deposits. The balance in the account will continue to earn interest at normal rate as

admissible on PPF account till the account is closed.

One withdrawal in each financial year is also admissible in such account.

The PPF scheme is operated through Post Office and Nationalized banks.

PPF account can be opened either in Post Office or in a Bank.

Account is transferable from one Post office to another and from Post office to Bank and

from Bank to Post office.

Account is transferable from one Bank to another bank as well as within the bank to any

branch.


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Deposits in PPF qualify for rebate under section 80-C of Income Tax Act.

The interest on deposits is totally tax free.

Deposits are exempt from wealth tax.

The balance amount in PPF in PPF account is not subject to attachment under any order or

decree of court in respect of any debt or liability.

4.6 Fixed Deposits:

The Department of Posts, Government of India offers a fixed / term deposit through the post offices

in India. It is called Post Office Time Deposit Account.

Time Deposits are of 1 year, 2 year, 3 year and 5 year tenures. The minimum investment

should be Rs 200 and its multiples. The tenure of bank fixed deposits are flexible, with

periods ranging from 15 days to 10 years but the minimum amount is as high as Rs 10,000.

In case of postal time deposits, the account can be closed after 6 months but before one year

of opening the account. On such closure, the amount invested is returned without interest. If

a time deposit of two or three years is withdrawn prematurely, post office will pay interest

only for the completed year or years.

For example, a fixed deposit for two years is withdrawn after 20 months, interest will be

paid only for the one full year completed. The depositor will lose interest for the remaining

8 months.

If a bank FD is closed before completing the original term of the deposit, banks have the

discretion to charge penal interest. If a bank decides to charge penal interest, the depositor

will be paid interest at a lower rate than that was contracted.

A postal time deposit fetches annual interest rates in the range of 6.25 to 7.5per cent.

Tax Benefits: No deduction of income tax at source.

Tax exemption on five years fixed deposit account under 80C of the IT Act.

TABLE:1

INVESTMENTS:


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TABLE:2

Interest rates for NSC Certificate of Rs.1000

Year Rate of Interest

1 year Rs 81.60

2 year Rs 88.30

Type of

Investment

Advantages Disadvantages

ULIP

Provides Flexibility,

Transparency, Freedom ofchoice,

Tax benefit.

Risk involved, NAV of the fund can

be less then the purchase amount

Mutual Funds

Liquidity, Convenience, Low

cost

No guarantees,

taxable profits,

high charges.

Fixed Deposits High interest, no deduction

of income tax.

Lesser rate of interest.

Public Provident

Fund

No tax on interest earned, no

wealth tax, great returns.

PPF cannot be held jointly, lengthy

lock in period, lack of liquidity.

National Saving

Certificate

Tax saving on principle

investment.

Interest accrued on NSC is taxable,

No liquidity.


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3 year Rs 95.50

4 years Rs103.30

5 years Rs 111.70

6 years Rs 120.80

TABLE:3

Interest rates for PPF of Rs. 1000

YearInitial

Balance

Amount

investedInterest Closing Balance

1 0 1000 0 1000

2 1000 1000 80 2080

3 2080 1000 166 3246

4 3246 1000 260 4506

5 4506 1000 360 58676 5867 1000 469 7336

7 7336 1000 587 8923

8 8923 1000 714 10637

9 10637 1000 851 12488

10 12488 1000 999 14487

11 14487 1000 1159 16645

12 16645 1000 1332 18977

13 18977 1000 1518 21495

14 21495 1000 1720 24215

15 24215 1000 1937 27152

16 27152 0 2172 29324

CHAPTER-5

RESEARCH METHODOLOGY

The study, through causal research aims at measuring the customers preference for different type of

investment options available on the basis of various parameters based on customers response in

Delhi and NCR.

Methods adopted for surveys:

Primary Research

Field Survey Method- Random people above 21 years of age were asked to fill the

questionnaire on life insurance

Personal Interview technique- Respondents were asked about their awareness of ULIP and

also the factors, which they look for while investing in an insurance plan.

Secondary Research


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Information on ULIP, Mutual Funds, Fixed Deposits, NSC and PPF were collected from books

like IC-33, Internet, magazines like Outlook Money and newspapers like Economic Times and

Financial Times.

The survey process involved two phases: First phase included identification and selection of the

target audience to be studied and to determine the parameters on which respondents will justify their

preferences. The audience were targeted and analyzed basically on the basis of two important

parameters: Age and Occupations. Demographical information was also taken in order to know the

investment patterns according to the location, age, gender etc. A questionnaire was designed to

collect the needed information from the respondents. (See the annexure)

In the second phase data was collected through questionnaire from 50 respondents within Delhi and

NCR. The responses that were generated during this exercise were converted in the form of

percentages to have a comparative outlook, as the numbers itself cannot explain the true picture.

These percentages were then represented through the simple tools like bar graphs, pie charts.

CHAPTER-6

ANALYSIS

FINDINGS:

6.1 OCCUPATION

To begin with, the nature of occupation was divided broadly into 4 categories:

Businessmen Professional

Housewives

Retired

DIAGRAM:1


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occupation

38%

20%

32%

10%

business housewife professionals retired

The study shows that almost 32% of people are professionals, 38% are into business and 20% are

housewives and around 10% are retired.

DIAGRAM:2

Plans for Investment

0

5

10

1520

25

30

35

40

45

50

no yes

no

yes


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Important Factors

26%

58%

16%

a

b

c

a.)How quickly I will be able to increase my wealth

b.)The opportunity for steady growth

c.)The safety of my investment principal

DIAGRAM:4

Preferred Investment

FD

53%

NSC

16%

Insurance

26%

PPF

5%

FD

NSC

Insurance

PPF

DIAGRAM:5


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Type of Insurance

58%

42%Traditional plans

ULIP

The survey reveals there is some lack of awareness of the products like ULIP amongst people of

this profile as it can be seen that only 42% of people are holding ULIP policy and the remaining are

holding traditional policies. 53% of the people have invested in fixed deposit, 26% are interested in

insurance , 16% in NSC and only 5% in mutual fund. The prime concern of this segment for

investing is opportunity for steady growth. This class (38%) considers steady growth (58%) as the

most important factor while the next major concern for them is quick increase in wealth(26%). It

has also been observed that 57.9% of people are currently involved in the investment of fixed

deposit.

Amongst this class, we find Fixed Deposit to be dominating as 53% of people prefer investing in it

and 26% in insurance. Out of this 26% only 42% are interested to invest in ULIP.


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6.1.b.)Professional

TABLE:5

Profile Current Investment Portfolio

Mutual

Fund

NSC Fixed

deposit(post

office)

Insura

nce

Public

Provid

ent

Fund

Businessmen 0 15.8 57.9 21.05 5.26

Professional 0 0 68.75 25 6.25

Housewives 0 0 90 10 0

Retired 0 0 80 0 20

DIAGRAM:6


0

2

4

6

8

10

12

no yes

no

yes

DIAGRAM:7


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Important Factors

25%

13%

13%

49%

a

b

c

d

a.)How quickly I will be able to increase my wealth.

b.)The opportunity for steady growth.

c.) The amount of monthly income the investment will generate.

d.)The safety of my investment principal.

DIAGRAM:8


FD

68%

NSC

6%

Insurance

13%

PPF

13%

FD

NSC

Insurance

PPF

DIAGRAM:9


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Type of Insurance

38%

62%

Traditional Plans

ULIP

The survey reveals there is lot of awareness of the products like ULIP amongst people of this profile

as it can be seen that only 38% of people are holding traditional plans and the remaining 62% are

holding ULIP policies. 68% of the people have invested in fixed deposit, 13% are interested in

insurance , 13% in mutual fund and only 6% in Ppf . The prime concern of this segment for

investing is safety of the investment principal. This class (32%) considers safety of investment

principal (49%) as the most important factor while the next major concern for them is quick

increase in wealth (25%). It has also been observed that 68.75% of people are currently involved in

the investment of fixed deposit.




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6.1.c.) Housewives:

TABLE:6


Mutual

fund

NSC Fixed

deposit(post

office)

Insura

nce

Public

Provid

ent

Fund

Businessmen 0 15.8 57.9 21.05 5.26


Housewives 0 0 90 10 0

Retired 0 0 80 0 20

DIAGRAM:10


0

1

2

3

4

56

7

8

9

no yes

no

yes

DIAGRAM:11


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Important Factors

20%

30%

10%

40%a

b

c

d




d.)The safety of my investment principal.

DIAGRAM:12

Preffered Investment

FD70%

NSC

10%

Insurance

20%

FD

NSC

Insurance

DIAGRAM:13


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Type of Insurance

50%50%Traditional plans

ULIP

The survey reveals there is equal awareness of the products like ULIP amongst people of this

profile as it can be seen that 50% of people are holding traditional plans and the another 50% are


insurance , and only 10% in Ppf . The prime concern of this segment for investing is safety of the

investment principal. This class (20%) considers of safety of investment principal (40%) as the most

important factor while the next major concern for them is opportunity for steady growth (30%). It

has also been observed that 90% of people are currently involved in the investment of fixed deposit.




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6.1.d.)Retired:

TABLE:7


Mutual

fund

NSC Fixed

deposit(post

office)

Insura

nce

Public

Provid

ent

Fund

Businessmen 0 15.8 57.9 21.05 5.26


Housewife 0 0 90 10 0

Retired 0 0 80 0 20

DIAGRAM:14


0

1

2

3

4

5

6

no yes

Series1

DIAGRAM:15


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Important Factors

20%

40%

20%

20%

a

b

c

d




d.)The safety of my investment principal

DIAGRAM:16


FD

80%

NSC

0%

Insurance

20%

PPF

0%

FD

NSC

InsurancePPF

DIAGRAM:17


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Type of Insurance

80%

20%

Traditional Plans

ULIP

The survey reveals there is lack of awareness of the products like ULIP amongst people of this

profile as it can be seen that 80% of people are holding traditional plans and the remaining 20% are


insurance , 0% in mutual fund and 0% in Ppf . The prime concern of this segment for investing is

opportunity for steady growth. This class (10%) considers safety of investment principal (40%) as

the most important factor and the rest other factors are considered equally important(20%). It has

also been observed that 80% of people are currently involved in the investment of fixed deposit.




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CHAPTER-7

DISCUSSION

Through the survey it has been observed that 64% of people have their current investment in Fixed

Deposits and only 20% in Insurance. The main reason behind selection of FD is

In this scheme your investment grows at a pre- determined rate with no risk involved. With

a Government of India-backing, your principal as well as the interest accrued is assured

under the scheme.

The account can not be closed within 6 months of opening it. Between 6 months to 1 year,

the account can be closed but no interest is paid out in this case.

After one year, the account can be closed in this case, the interest that you receive is 2%

less than the interest fixed at the time of opening the account. (There is a penalty of 2% on

the interest rate).

For example, if you opened a Post Office Time Deposit Account for 3 years, and close it

after 1 year, you would receive interest at the rate of 5.25% instead of 7.25%.

You can pledge your time deposit account as a security for availing a loan.

After Fixed Deposits the second most preferred form of investment is Insurance. Some of the life

insurance advantages are:

If an estate owner has not accumulated enough assets for his family,

Insurance quote helps create an instant estate for the sake of the Familys security.

Life Insurance provides the option to pass equal assets to the children who are not active in

the Family business at the time the family business is passed on.

Life Insurance policies can help secure the future of children for college/educationalpurposes as the amount of life Insurance Policy increases on a minors or parents life.

The growth of a cash-value policy is tax-deferred - you do not pay taxes on the cash value

accumulation until you withdraw funds from the policy.

Life Insurance can be useful in paying estate taxes, along with other estate settlement

amounts. Federal Estate Taxes are due nine months after death.


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If theres a Business Transfer, life insurance can provide ready cash to finance a transaction

between business owners who are ready to buy the deceased owners share from his or her

estate after death.

If theres a home mortgage, one can pass the family residence to their spouse/children to

free them of any mortgage if one has a Life Insurance Policy for the same. It is preferred to

have a decreasing term policy that decreases in face amount as the mortgage balance is paid

down.

Life Insurance helps retain your Business from the loss of a key employee. Untimely death

of a key employee can pose severe financial loss to the business.

The right insurance proceeds can provide liquidity to pay off personal loans or business

loans.

Charitable Remainder Trusts provide tax benefits. Life Insurance helps replace a charitable

gift.

A lot of Insurance products presently provide good returns, which could be a beneficial way

for saving necessary funds for retirement years.

Benefits are available immediately and may be used to help pay expenses such as final

illness and funeral costs, eliminating the need to sell estate assets to cover these costs.

Advantages of investing in National Saving Certificate are :

Tax benefits are available on amounts invested in NSC under section 88, and exemption can

be claimed under section 80L for interest accrued on the NSC. Interest accrued for any year

can be treated as fresh investment in NSC for that year and tax benefits can be claimed

under section 88. NSCs can be transferred from one person to another through the post

office on the payment of a prescribed fee. They can also be transferred from one post office

to another.

The scheme has the backing of the Government of India so there are no risks associated with

your investment.

One can avail of a loan against the certificates by pledging it to the bank. The bank will have

the NSC assigned in its favour and advance a percentage of up to 75% of face value plus the

amount of accrued interest till the date of taking the loan.


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In the category of Retired people the first option chosen is Fixed Deposits and the second

preference of investment is Public Provident Fund. Advantages of Public Provident Fund are:

Lowest risk possible

There is no chance of someone running away with your money. Or later on being told that there

is no way your money can be returned to you. The PPF is a government-backed scheme, so you

can be sure the government will not default. This is the highest security an investmentcan have

and, therefore, the safest.

Tax rebate on money invested

Under Section 88, PPF contributions (along with your subscriptions to other schemes that

qualify for Section 88 benefits), are eligible for a 20% tax rebate. The maximum you can

invest in PPF to avail of the rebate is Rs 70,000 per annum.

Great returns

An investment in PPF will earn you 8% per annum. But because of the tax rebate, your

actual return of 8% works out to be higher.

Moreover, the returns are compounded. That means you not only earn interest in the money

you put in, but you earn interest on the interest earned, too.

Let's say you put in Rs 60,000 in the first year. You will earn Rs 4,800 as interest rate. The

next year, your interest rate will be computed on Rs 64,800 (Rs 60,000 + Rs 4,800) as well

as whatever fresh amounts you deposit.
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No tax on interest earned

The interest earned is totally exempt from tax under Section 10 (11) of the Income Tax Act.

The 8% per annum that you get will not be taxed.

Flexibility of investment

You can invest up to a maximum of Rs 60,000 per annum in the PPF. Some categories of

investors, like authors, can go up to Rs 70,000. The minimum that you must put in every

year is Rs 500.

Besides having such a huge leeway in terms of the amount of money to be invested, you can

invest the money in up to 12 installments. You don't have to put it all in one go. Each

installment can be whatever amount you want it to be. They need not all be identical.

Exempt from all wealth tax:

All the balance that accumulates over time is exempt from wealth tax.

Also, should you default on any loan payments or declare bankruptcy and cannot repay yourloans, the amount in your PPF account cannot be attacked by the courts.

Before maturity, you can make withdrawals from your account starting the sixth financial

year. You may even apply for a loan from the third year on.

Advantages of investing in mutual funds are:

Diversification:

Using mutual funds can help an investor diversify their portfolio with a minimum investment.

When investing in a single fund, an investor is actually investing in numerous securities.

Spreading your investment across a range of securities can help to reduce risk. A stock mutual

fund, for example, invests in many stocks - hundreds or even thousands. This minimizes the risk

attributed to a concentrated position. If a few securities in the mutual fund lose value or become
http://www.traderji.com/http://www.open-ira.com/About_Mutual_Funds/2_Why_invest.htm?#Risk%20is%20associated%20with%20volatility%23Risk%20is%20associated%20with%20volatilityhttp://www.traderji.com/http://www.open-ira.com/About_Mutual_Funds/2_Why_invest.htm?#Risk%20is%20associated%20with%20volatility%23Risk%20is%20associated%20with%20volatility


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worthless, the loss maybe offset by other securities that appreciate in value. Further diversification

can be achieved by investing in multiple funds which invest in different sectors or categories. This

helps to reduce the risk associated with a specific industry or category. Diversification may help to

reduce risk but will never completely eliminate it. It is possible to lose all or part of your

investment.

Professional Management:

Mutual funds are managed and supervised by investment professionals. As per the stated objectives

set forth in the prospectus, along with prevailing market conditions and other factors, the mutual

fund manager will decide when to buy or sell securities. This eliminates the investor of the difficult

task of trying to time the market. Furthermore, mutual funds can eliminate the cost an investor

would incur when proper due diligence is given to researching securities. This cost of managing

numerous securities is dispersed among all the investors according to the amount of shares they own

with a fraction of each dollar invested used to cover the expenses of the fund.

Convenience:

With most mutual funds, buying and selling shares, changing distribution options, and obtaining

information can be accomplished conveniently by telephone, by mail, or online.Although a fund's shareholder is relieved of the day-to-day tasks involved in researching, buying,

and selling securities, an investor will still need to evaluate a mutual fund based on investment goals

and risk tolerance before making a purchase decision. Investors should always read the prospectus

carefully before investing in any mutual fund.

Liquidity:

Mutual fund shares are liquid and orders to buy or sell are placed during market hours. However,orders are not executed until the close of business when the NAV (Net Average Value) of the fund

can be determined. Fees or commissions may or may not be applicable. Fees and commissions are

determined by the specific fund and the institution that executes the order.
http://www.open-ira.com/About_Mutual_Funds/3a_tips_A_B_C_shares.htmhttp://www.open-ira.com/About_Mutual_Funds/3a_tips_A_B_C_shares.htm


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LIMITATIONS:

The limitations of Insurance are:

Though everyone knows that we have to die one day, still the need for an insurance plan is

not fully uncovered. A common man still needs to be told the importance of an insurance

plan to him and his family. A normal plan seems to be a source of returns on maturity to

him. Thus more awareness on the importance of insurance needs to be created amongst our

common population.

They do not know basic concept of ULIP. They do not know how does the share market

function/. What are the benefits of investing money into it and what are the basic differences

between Share Market, Mutual Fund and a ULIP.

Still people think that insurance does not give good return. They are under the perception

that the returns from an insurance plan varies between 5-6 per cent which is not true in case

of ULIPs.

Many customers are thinking that investment in share market is very risky as ULIPs are

linked to share market.

A general preference to LIC over private players.

Given the recent downturn, a lot of people are skeptical about investing in private

companies.

The findings of sample survey cannot be generalized to the entire population, as the sample

is not representative. As there is no set criterion for selecting the sample, there is a scope for

the research being influenced by the bias of the researcher.

The limitations of Public Provident Fund - PPF are:

1. The interest rate keeps changing

It was initially 12% per annum, dropped to 11%, then 9.5% and is now 8%. This rate of interest is

fixed by the government and there is nothing you can do about it.


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How to make this work for you: If the interest rate on PPF declines, interest rates on all other

deposits (company and bank) and bonds also declines. So, frankly, there are no other alternative

fixed-return investments that can compete because, overall, the interest rates are declining.

2. Lengthy lock-in period

Fifteen years to be exact. But, in actuality, it works out to 16 years since the last contribution is

made in the 16th financial year.

Even if you make an investment on the last day of your account (the day it is due to mature), youwill still get a tax rebate. But, of course, you will not earn interest on that amount on the last day.

How to make this work for you: Use this as a retirement planning tool. Money you will never touch.

If you are just 22, you will get the money when you are around 38. You can use it to prepay your

housing loan then.

3. Interest is calculated on the lowest balance

Interest is calculated on the lowest balance between the fifth and the last day of the month of March.

Let's say you have Rs 100,000 in your PPF account and on the 10th, you deposit an additional Rs

10,000. Your interest will be calculated on Rs 100,000 (not Rs 110,000).

How to make this work for you: If making a last minute deposit at the end of the financial year, do

so before March 5.

4. Lack of liquidity

Your money is stuck for years on end. It is not as easy as selling some shares or mutual fund units.
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How to make this work for you: Take a loan from the third year of opening your account to the

sixth year. So if the account is opened during the financial year 1997-98, the first loan can be taken

during financial year 1999-2000 (the financial year is from April 1 to March 31).

The loan amount will be up to a maximum of 25% of the balance in your account at the end of the

first financial year. In this case, it will be March 31, 1998.

If you repay the loan in 36 months, interest will be charged at 12% pa. Otherwise, interest will be

charged on the outstanding sum at 6% per month. You can obtain a second loan before the end of

the sixth financial year if the first one is fully repaid.

You can make a partial withdrawal only after five financial years are completed from the end of the

year in which the initial subscription was made. So, in effect, it works out from the seventh year

onwards.

The amount of withdrawal is limited to 50% of the balance in your account at the end of the fourth

year immediately preceding the year in which the amount is to be withdrawn; or at the end of the

preceding year, whichever is lower.

For example, if the account is opened in 1993-94 and the first withdrawal is made during 1999-

2000, the amount of withdrawal will be limited to 50% of the balance as on March 31, 1996, or

March 31, 1999, whichever is lower.

Limitations of National Saving Certificate are :
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NSCs do not offer any scope of premature withdrawal except on death or forfeiture by

pledge or by court order. However, NSCs can be transferred from one person to another

through the post office on the payment of a prescribed fee.

The returns of NSCs are fully taxable.

Limitations of mutual funds are:

No Guarantees: The value of your mutual fund investment, unlike a bank deposit, could fall

and be worth less than the principle initially invested. And, while a money market fund

seeks a stable share price, its yield fluctuates, unlike a certificate of deposit. In addition,

mutual funds are not insured or guaranteed by an agency of the U.S. government. Bond

funds, unlike purchasing a bond directly, will not re-pay the principle at a set point in time.

Expenses: Because mutual funds are professionally managed investments, there are

management fees and operating expenses associated with investing in a fund. These fees and

expenses charged by the fund are passed onto shareholders and deducted from the fund's

return. These expenses are typically expressed as the expense ratio - the percent of fund

assets spent (annually) on day-to-day operations. Expense ratios can vary widely among

funds. Expense ratios for mutual funds commonly range from 0.2% to 2.0%, depending on

the fund.

CHAPTER-8

CONCLUSION


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Through the survey it has been observed that maximum number of people have opted for

Fixed Deposits because of following reasons:

Liquidity ( financially solvent). If one changes the original plan of savings, there is

no loss.

Tax Benefits: No deduction of income tax at source. Tax exemption on Five Years

Time Deposit Account U/S 80C of the IT Act.

The second highest number is of ULIP. It is because of the following reasons:

Choice of funds- funds for investment can be chosen for maximum opportunity for growth.

Liquidity: Since ULIP investments are NAV-based it is possible to withdraw a portion of

your investments before maturity. Of course, there is an initial lock-in period (3 years) after

which the withdrawal is possible.

Transparency: fund allocation are shown clearly, all the charges are mentioned before the

policy is done.

Flexibility : Having selected an option, you still have the flexibility to switch to another

option. Most insurance companies allow a number of free switches in a year.

Tax benefits: . Premiums in ULIPs as well as traditional endowment plans are eligible for

tax benefits under Section 80C subject to a maximum limit of Rs. 100,000.

Third is Public Provident Fund which is preferred due to following reasons:

This instrument offers twin benefits. While the entire deposit up to Rs. 70,000 would qualify

for full tax deduction under 80 C, the additional gain will be that the interest would be tax

free

In the fourth number is NSC which is preferred since it gives the advantage of fund

mobilization through small savings is its medium to long-term maturity profile.

The least preferred form of investment amongst the people surveyed is Mutual Fund since

the profits are taxable, it has high charges and also high risk is involved.

ANNEXURE


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Questionnaire for Consumer Perception in Investment in ULIP and

Other Investment

Name- .........................................

Age- ........................

Gender- Male Female

Occupation- Business Professional Retired Housewife

Martial Status- Married Unmarried

1. Do you have any plans for investment?

Yes No

2. Current investment portfolio? (rank 1-5)

MF

NSC

Fixed Deposit, Post Office Savings

Insurance(ULIP)

PPF

3. What is your current income (per annum) ?

a. 1-2 lakhb. 2-5 lakh

c. 5-10 lakh

d. 10 lakh and above

4. How long do you plan to invest your money ?


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a. 2-5 yrs

b. 6-10 yrs

c. 11-15 yrs

d. Over 15 yrs

5. What factors would you consider most important before choosing an investment ?

a. How quickly i will be able to increase my wealth.

b. The opportunity for steady growth.

c. The amount of monthly income the investment will generate.

d. The safety of my investment principal.

6. Most preferred form of investment ?

Insurance F.D, P.O NSC MF

PPF

8. If insurance which type of plan would you prefer ?

ULIP Traditional Plans

7. Any other reason (for your above preference) ?

..........................................................................................................................................

..........................................................................................................................................

REFERENCES


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Books and Magazines

1) Balchandran, IRDA, IC-33 LIFE INSURANCE

2) Outlook Money ( Dec 15, 2002)

3) Business Standard (Dec 15, 2005)

4) Outlook Money (Jan 31, 2007)

Websites

1) www.traderji.com

2) http://www.webindia123.com/finance/post/time.htm

3)History and Profile of Kotak Group and Kotak Life Insurance

http://www.kotak.com and http:// www.kotaklifeinsurance.com

4) Life Insurance Industry in India http://www.irda.gov.in

5) http://www.raagvamdatt.com/postofficetime-deposit-account-fixed-term-

deposit/193/htm
http://www.irda.gov.in/http://www.irda.gov.in/

Documents

Project (Kotak MB)