16-09-2014, 03:55 PM
INDIA INFO LINE
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INTRODUCTION
What motivates a person or an organization to buy securities, rather than spending their money immediately? The most common answer is savings the desire to pass money from the present into the future. People and organizations anticipate future cash needs, and expect that their earnings in the future will not meet those needs. Another motivation is the desire to increase wealth, i.e. make money grow. So, investment is the employment of funds with the aim of additional income or growth in value. The essential quality of an investment is that it involves waiting for reward. It involves the commitment of resources, which have been saved or put away from current consumption in the hope that some benefits will accrue in future. It entails arriving at numerous decisions such as accessibility, tenor, tax benefit, liquidity, convenience, and transparency.
Mutual funds are the most favored option of the youngsters today. But most of the people are invested in equity. And small portion of the people are invested in commodities.
The falling down of Sensex is attracting many investors to the market. It is always recommended that only serious investors with an in-depth knowledge of the market venture into it.
The unique investment strategy of letting the maturity of the debt investment run down with time and targeting equity investments to capture dividends is targe targeted to deliver positive returns over medium time frame. The investment strategy of the fixed income portfolio is designed to remove the impact of interest rate movements over the medium term. The strategy of targeting dividends in equities over a period is expected to improve the yield of the fund. The above investment strategy expects to minimize capital loss in adverse market condition and deliver moderate returns in stable/positive market conditions.In a nation with a middle class population of 200 million, most of whom dream of a better, financially comfortable tomorrow, the stock market is obviously seen as the perfect place to invest—especially when we consider that stock markets can make us considerably rich in a short span of time, provided we play our cards right.
The last few years of the last century and the first year of the 21st century though have seen a wave of technology enhancements sweeping though the Indian share markets, wiping out archaic conventions. This has seen issues like badla going out, while on the other hand we have seen processes like online trading gradually coming to India.
The National Stock Exchange (NSE) has been the most proactive in bringing about most of these technological innovations, including online trading. It started way back in February 2000 with the Kochi-based Geojit Securities conducting the first Net transaction when 100 shares of Reliance was traded by SEBI chairman D R Mehta for Geojit chairman A P Kurian. Much water has flown under the bridge since then. From a base of about Rs 3 crore in April 2000, volumes for online trading have risen to nearly Rs 1,500 crore per month in January 2001. A Nasscom-BCG study estimates the market will grow to Rs12,000 crore per month by 2005. In spite of these optimistic numbers, online trading in India is at a very nascent stage (about 2 percent of total traded volumes) compared to countries like South Korea (60 percent), US (40 percent) and UK (20 percent).
Financial Services Sector
“Financial stability is crucial for sustained economic growth but this cannot be achieved without strong financial systems”. [Financial Stability Institute].
The far-reaching changes in the Indian economy since liberalization in the early 1990s have had a deep impact on the India Financial Sector. The Financial Sector had gone through a complex and sometimes a painful process of restructuring, capitalizing on new opportunities as well as responding to new challenges.
During the last decade, there has been a broadening and deepening of financial markets. Several new instruments and products have been introduced. Existing sectors had been opened to new private players. This had given a strong impetus to the development and modernization of the financial sector. New players have adopted international best practices ad modern technology to offer a more sophisticated range of financial services to corporate and retail customers. This process has clearly improved the range of financial services and services providers available to Indian customers. The entry of new players has led to even existing players upgrading their product offerings and distritutions channels. This continued to be witnessed in 2002-03 across key sectors like commercial banking andindurance, where private players achieved significant success.
These changes have taken place against a wider systemic backdrop of easing of controls on interest rates and their realignment with market rate, gradual reduction in resource pre-emption by the government, relaxation of stipulations on confessional lending and removal of access to confessional resources for financial institutions. Over the past few years, the sector had also witnessed substantial progress in regulation and supervision. Financial intermediaries have gradually moved on internationally acceptable norms for income recognition, asset classification, and provisioning the capital adequacy. This process continued in 2002-03, with RBI announcing guidelines for risk-based supervision and consolidated supervision. While maintaining its soft interest rate stance, RBI cautioned banks against taking large interest rate risks, and advocated a move towards a flowing rate interest rate structure.
The past decade was also an eventful one for the Indian capital markets. Reforms, particularly the establishment and empowerment of securities and Exchange Board of India (SEBI), market-determined prices and allocation of resources, screen-based nation-wide trading, dematerialization and electronic transfer of securities, rolling settlement and detrivatives trading have greatly improved both the regulatory framework and efficiency of trading and settlement. On account of the subdued global economic conditions and the impact on the India economy of the drought conditions prevailing in the country 2002-03 was subdued year of equity markets. Despite this, the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) ranked third and sixth respectively among all exchanges I the world with respect to the number of transactions. The year also witnessed the grant of approval for setting up of a multi commodity exchange for trading various commodities.
In the midst of these positive developments, a key issue that continues to impact the India financial sector adversely is that of asset quality and consequent pressure on capital. The liberalization and globalization of the Indian economy led to a process of restructuring and consolidation across several sectors of the economy several units that were set up in a protectionist environment became unbiaable in the new paradigm of competition in the global market place. Volatility in global commodity prices has a major impact on Indian companies. This has led to non-performing loans and provisioning for credit system. The NPA problem in India, viewed in the context of comparison with other Asian economies, does not pose an insoluble systemic problem; at 8% GDP, the NPA levels are significantly lower than the levels of 30-40% seen in other Asian economies. The key problem in India has been the inability of banks to quickly enforce security and access their collateral, and the capital constraints in recognizing large loan losess. Recent measures taken by the Government have attempted to address both these problems. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act creates a long-overdue framework for resoling the distressed credit problem in India, by providing legal support to the resolution process and thereby encourages the flow of capital into this specialized sector. The proposal for swapping high-yield Government securities held by banks into lower-yield securities, hereby realizing mark-to market gains and utilizing the same to additional provisions would also strengthen the balanced sheet of banks. During the year the RBI operationalised the corporate debt restructuring forum, which hade significant process building lender consensus on restructuring. The next major initiative would by the operations of an asset reconstruction company, and the development of a market for distressed credit similar to those in other countries.
The increasing disintermediation in the corporate credit market, slowdown in creation of new capital assets as companies focus on improving existing capacity utilization and improving working capital efficiency of Indian corporate has led to lower demand for credit from the corporate sector in the past two years. This has been replaced by the huge retail finance opportunity. Existing low penetration levels, increasing affordability of credit and rising income levels have led to a growing demand for retail credit. This has been strengthened by the tax incentives for acquiring residential property, leading to a particularly high growth in housing finance. Going forward, the infrastructure, retail and small and medium enterprise segment would provide large growth opportunities, while the manufacturing sector is expected to continue its consolidation phase, with selective additions to capacity. However, success in these segments presents several challenges. Retail and SME banking requires extremely effective distribution systems that are capable of offering flexibility and convenience to the customer, while maintaining cost-efficiency for banks. At the same time, banks need to put in place high-quality credit modeling and data mining systems. This is essential to appropriately assess and price risk and allocate capital in a manner that would optimist risk-adjusted returns. The Indian financial system would also witness greater activity in the debt markets, as originators of credit increasingly seek to proactively manage their portfolios by structuring and selling down loan portfolios to entries that have capital to deploy but lack the origination and structuring capabilities.]]
India has made considerable progress in the past-1991 period. The country’s macroeconomic fundamentals have improved and external vulnerability has been sharply reduced. Reforms in the financial sector have appropriately addressed the pre-1991 period. Weaknesses in the sector and improved its competitive strength domestically as well as global=ally. Individual players now need to adopt practice competitive strategies that will enable them to capture the emerging opportunities. Exposure to global practices had made the Indian customer more discerning and demanding. There has been a clear shift towards those entities that are able to offer products and services in the most innovative and cost-efficient manner the financial sector will need to adopt a customer-centric business focus. It will also have to create value for its shareholders as well as its customers, completing for the capital necessary to fund growth as well as for customers market share. This indeed will be the challenge in the coming years.
Conclusion
The Finance sector has a vast potential not only because incomes are increasing and assets are expanding but also because the volatility in the system is increasing. We are living in a more risky world. Trade is becoming increasingly global. Technologies are changing and getting replaced at a faster rate.
“Financial stability is crucial for sustained economic growth but this cannot be achieved without strong financial systems”.
Share market is fluctuating daily and come down drastically investors are afraid of it and drawing their funds from the market and they are suffering from the huge losses. According to the analysis this is the correct time to invest in the market.
From the above data analysis, 70% of the people invested their money in equity. They invested in equity because they are expecting more returns. Analysis of data shows that most of the business class, employees are invested in equity, so we can see that upper middle class and middle class are invested in equity.
And 20% of the people are invested in mutual fund, which are secured and they want to be returns as well as safety they don’t want to be take risk most of the professionals, businessman and employees are invested in mutual funds.10% of the people invested in commodities. Overall 100% of the people are satisfied with the India infoline ltd products and services according to the survey conducted.