Professional Documents
Culture Documents
BY
VENU.T
MBA/8010/10
June 2012
I
DECLARATION
It has not been submitted in part or full for any other diploma or degree of
any other university
(signature)
(Venu.T)
II
CERTIFICATE
ACKNOWLEDGMENT
First of all immensely and wholeheartedly I thank god for giving me this
opportunity for successful completion of my project work and also I thank
management of “ARC International – Middle East” for giving me a chance
for doing this course.
I extend my thanks to our respected Sr. Lecturer “Mr. Soofi Anwar” for
permitting me to take up this project work and guide for project work, for
his continuous and valuable information, rendered to me in completing
my project work with in allotted time period.
Once again, I take this opportunity to thank each and every person, who
direct or indirectly helped me for the successful completion of this project
work.
Venu .T
Table of Contents IV
1 Introduction
1.1 Introduction to Study 1
1.2 Investors Attitude towards Investments 2
1.3 Investors Attitude towards Risk 3
1.4 Non-Resident Indian (NRI) 4
1.4.1 Person of Indian Origin (PIO) 4
1.4.2 Overseas Corporate Body (OCB) 4
1.5 Investment Options Available in India for NRIs 5
2 Research Design
2.1 Title of the Dissertation 6
2.2 Statement Of the Problem 6
2.3 Scope Of the Study 7
2.4 Objective Of the Study 7
2.5 Methodology Of the Study 7
2.5.1 Research Design 7
2.5.2 Sampling Design 8
2.5.3 Collection Of Data 8
2.5.4 Analysis Of Data 8
2.6 Significance Of the Study 9
2.7 Limitations Of the Study 9
3 Literature Review
3.1 What is Investment 10
3.1.1 Financial & Economic Meaning Of Investment 10
3.11.7 Equities 39
3.11.8 Bonds 39
3.11.9 24% and 40% Schemes 40
3.11.10 How can an NRI invest / trade in Indian Stock 40
Markets?
3.11.11 Immovable Property 44
3.12 Different Tax Benefits available to NRIs 48
3.13 Tax Provisions and Concessions for NRIs 49
3.13.1 Income Tax 49
3.13.2 Filing Returns 50
3.13.3 Provisions 51
3.13.4 Investing and Savings
4 Analysis and Interpretation 54
5 Findings, Suggestions & Conclusion
5.1 Findings 97
5.1.1 Investment Portfolio of Investors 98
5.1.2 Inter-relationship between Investment Preferences 98
5.2 Suggestions 99
6 Conclusion 102
Appendices
Appendix A : Questionnaire 103
Bibliography 107
CHAPTER- 1
INTRODUCTION
limit of Rs. 160,000 (around Dhs. 13,000). There are some benefits for
NRI’s which can ease the burden of handing over hard-earned money to
the tax office back home.
CHAPTER- 2
Research Design
CHAPTER- 3
LITERATURE REVIEW
From the point of view of people who invest their funds, they are the
suppliers of ‘Capital’ and in their view, investment is a commitment of a
person’s funds to derive future income in the form of interest, dividends,
rent, premiums, pension benefits or the appreciation of the value of their
principal capital. To the financial investor, it is not important whether
money is invested for a productive use or for the purchase of second hand
instruments such as existing shares and stocks listed on the stock exchanges.
The nature of investment in the financial sense differs from its use in the
economic sense. To the economist, ‘Investment’ means the net additions to
the economy’s capital stock which consists of goods & service that are used
in the production of other goods & services. In this context, the term
investment, therefore, implies the formation of new and productive capital in
the form of new construction, new producer’s durable equipment such as
plant and equipment. Inventories & human capital are included in the
economist’s definition of investment.
The financial & economic meanings of investment are related to each other
because investment is a part of savings of individuals which flow into the
capital market either directly or through institutions, divided in ‘new’ and
secondhand capital financing. Investors as ‘suppliers’ and investor as ‘user’
of long term funds find a meeting place in the market.
be invested in such a way that the principal and income will be adequate for
a greater number of retirement years.
3.2.4 Inflation
Inflation has become a continuous problem since the last decade. In these
years of rising prices, several problems are associated coupled with a falling
standard of living. Before funds are invested erosion of the resources will
have to carefully considered in order to make the right choice of
Investor’s attitude and knowledge towards investment options available in India
With special reference to UAE based NRI’s
Literature Review 13
investments. The investor will try to search an outlet, which will give him a
high rate of return in the form of interest to cover an decrease due to
inflation. He will also have to judge whether the interest or return will be
continuous or there’s a likelihood of irregularity. Coupled with high rates of
interest he will have to find an outlet which will ensure safety of principal.
Besides high rate of interest & safety of principal, an investor also has to
always bear in mind the taxation angel. The interest earned through
investment should not unduly increase his taxation burden.
3.2.5 Income
Another reason why investment decisions have assumed importance is the
general increase in the employment opportunities. The employment
opportunities gave rise to both male and female working force. More
incomes and more avenues of investment have led to the ability and
willingness of working people to save and invest their funds.
3.3.1 Return
Investors may buy and sell financial assets in order to earn returns on them.
The returns, better known as reward from investments, include both current
income and capital gains or losses which arise by the increase or decrease of
the security prices. The capital gains or the income earned are then treated as
a percentage of the beginning investment. Returns, therefore, may be
expressed as the total annual income and capital gain as a percentage if
investment. Satisfactory returns are different for different people. Two
rational investors may be satisfied by different levels of anticipated return
and estimated risk. Rational investors like returns but are risk averse. They
try to maximize their utility by buying, holding, or adjusting their portfolio to
achieve “maximum utility”.
3.3.2 Risk
Risk and uncertainty are an integral part of an investment decision. Risk is
composed of the demands that bring in variations in return of income. The
main forces contributing to risk are price and interest. Risk is also influenced
by external and internal considerations. External risks are uncontrollable and
broadly affect investments. These external risks are called systematic risk.
Risk due to internal environment of a firm or those affecting a particular
industry are referred to as unsystematic risk.
3.3.4 Time
Time is an important factor in investments. Time offers several different
courses of action. It may involve from trading to buying and selling at major
turning points in the market. It may also consider the time period of
investment such as long term, intermediate or short term. Time period
depends on the attitude of the investor. As investments are examined over
the time period, expected risk and return are measured. The investor usually
selects a time period and return that meet expectations of return and risk.
time period with a fixed rate of interest. The rate of interest for Bank Fixed
Deposits depends on the maturity period. It is higher in case of longer
maturity period. There is great flexibility in maturity period and it ranges
from 15days to 5 years. The interest can be compounded quarterly, half-
yearly or annually and varies from bank to bank. Minimum deposit amount
is Rs 1000/- and there is no upper limit. Loan / overdraft facility is available
against bank fixed deposits. Premature withdrawal is permissible but it
involves loss of interest.
person to another. But the investor can nominate any person who can avail
of this scheme in the event of the death of the investor.
Post- Office Scheme has been prepared carefully with the view that the
small investor will take advantage of easy accessibility due to the fact that
Post-Office exists in every locality. Moreover it was also to encourage the
savings habits of the uneducated class and small savers. These resources of
the small savers help in mobilization of savings of the economy.
Stocks and Shares are the two sides of the same coin. Basically, they both
mean the same thing. The difference between the two lies in the technical
definition of the two. When an investor holds the ownership certificates of a
Investor’s attitude and knowledge towards investment options available in India
With special reference to UAE based NRI’s
Literature Review 20
Basically, Stocks and Shares signify the same thing where one is used in
general term and the other in specific term.
Stocks generally are of 3 types:-
from the company's earnings to rights of voting. Stock is nothing but a Stock
Certificate which is the proof of ownership of a company.
3.4.4d Bonds
The bond market in India is not well developed but the bonds issued by
public sector financial institutions are becoming quite popular with the
public. Since 1985, public sector institutions have been encouraged to
borrow directly from the public. This had led to the issuer of bonds by
mutual funds and financial institutions. In the recent years, the bonds issued
by IDBI have received overwhelming support of the public and have been
oversubscribed.
3.4.4e Debentures
In India, Debentures derived importance only since 1970. There are various
kinds of debentures in the market. There are:
Registered
Bearer
Redeemable
Perpetual
Convertible and
Right
Mutual funds serve important function for those investors who do not want
to follow the day to day research and evaluation comes from investing in
individual stocks. Mutual funds hire professional teams and leaders to
evaluate and buy and sell issues based on market conditions. The mutual
fund investor in turn, owns shares in a mutual fund and profits from the
expertise of the professionals. Mutual funds can be considered low risk
investments to very high risk investments. It depends on which mutual fund
you choose in which industry sector you want to commit your resources to.
You can invest in green mutual funds or tech funds anything in between.
property rights. In India the investors have the dual advantage of free
enterprise and government control. Freedom, efficiency and growth are
ensured from the competitive forces of private enterprises. On the other
hand being a mixed economy, government control exerts discipline and
curtails some element of freedom. A combination of the public sector
controlled by the government and private sector left free to operate, hopes to
achieve the benefits of both socialistic and capitalist forms of government
without their disadvantages. In India, the political culture is conducive to
investment as government control leads stability to the capital market.
3.6.2 Liquidity
Every investor requires a minimum liquidity in his investment to meet
emergencies. Liquidity will be ensured if the investor buys a Proportion of
readily saleable securities out of his total portfolio. He may therefore keep a
small proportion of cash, fixed deposit and units, which can be immediately
made liquid. Investment like stocks, property or real estate cannot ensure
immediate liquidity.
3.6.6 Tangibility
Intangible securities have many times lost their value, due to price level
inflation, confiscatory laws or social collapse. Some investors prefer to keep
a part of their wealth invested in tangible properties like building, ma chinery
and land. It may, however, be considered that tangible property does not
yield an income apart from the direct satisfaction of possession of property.
a) Risk Group
Investors can be classified into different groups depending on their attitude
towards risk. Each investor also has an indifference point at which his own
expectations of returns match with the risk that he can take. A diversified
portfolio carefully chosen from the numerous securities available in the
market will help the investor in achieving his objectives. The investor
should also be able to assess his own behavior pattern before he aims at a
particular goal which he wishes to attain. Broadly, he should be able to
identify whether he is a risk averter, risk neutral or risk taker.
If he identifies himself as risk averter, his normal behavior pattern will show
his preference for investments of low market rate risk and interest rate risk.
He would prefer Government securities, Life insurance Policies, Unit Trust
Certificates that he is sure would give him a continuous return.
Another class of investors is called the risk neutrals. Such investors are
willing to pay for making an investment provided they get a return of an
Investor’s attitude and knowledge towards investment options available in India
With special reference to UAE based NRI’s
Literature Review 30
equal value. Their investment trends show that they try to take some risky
stocks in their total investment program but have a larger number of
securities which give them a firm return.
The risk takers form the third category of investors. They do not mind
paying more than the expected value of an asset for an uncertain future.
They believe in high return for a greater risk. Such investors emerge as
potential gamblers. While investors can be classified in categories of high
risk, no risk or medium risk takers, it can be said that the major group of
investors are those who can absorb medium risk. Most investors are willing
to sacrifice some expected income or return if the income is certain.
b) Income Group
The income group of an investor evokes responses to the available
investment outlets. The higher the income group of an investor, the greater
will be his desire for purchasing assets, which will give him a favorable tax
treatment. The source of income usually has a bearing on deduction of tax.
Certain sources of income are taxed like ordinary income. Other sources of
income may be exempted from income tax. These investment outlets should
be identified. The investments must be geared in a manner that combines the
features of low risk and low taxation to the maximum benefit. Low-income
group investor will not look towards tax benefit. His maximum utility will
be at a point of greater reward.
Table 2.2 Types of Investors (based on Income)
Income Group Return Risk Tax Benefits
Low High Medium Nil
Medium High Medium Some
High High Medium Medium
To encourage this initiation of NRIs to resettle and return back to India, they
are granted the following facilities:
Maintenance of bank accounts in India.
Qualifications
Title of financial advisors depends on their qualifications. Make it a point to
confirm the qualifications of a person who claims to be a certified financial
advisor. Remember to inquire about credentials of a person who passes himself or
Disadvantages of NRO
Interest earned on balances in NRO Accounts is not exempted
from Indian Income tax. Instead income tax is deducted at source
(TDS) i.e. at the time of payment of interest by the bank.
The deposit under FCNR (Banks) scheme is held in foreign currency. The
interest and the repayment of the deposit is also made in the same foreign
currency in which the account is maintained. The depositor may at his own
will, obtain repayment in Indian rupees, converted at the buying rate on the
date of repayment.
Deposits under this scheme are held for the following period: 6 months and
above, but less than 1 yr-1 yr and above but less than 2 yrs-2 yrs and above
but less than 3 yrs-3 yrs only. Premature withdrawal is allowed, but there
will be a penalty.
These accounts are opened for periods ranging from 12 months to 3 years.
This is the only option available for NRIs for keeping their deposits in
foreign currency. This account has a clear advantage that the customer’s
fund is protected from fluctuations in exchange rates. Moreover, the investor
can earn an interest on this deposit in the designated foreign currency.
Interest earned on FCNR deposit is exempt from Income Tax as far as the
depositor is not Resident of India or not Ordinarily Resident in India as per
the Income Tax Act. Deposit exempted from wealth tax.
Note :
Opening of FCNR(B) accounts in the names of NRIs of Bangladesh/
Pakistan nationality/ ownership requires approval of Reserve Bank of
india.
Non repatriation basis denotes that the amount invested and its capital
appreciation will not be allowed to be repatriated. However, the
interest/dividend/income earned may be permitted to be repatriated/ credited
to NRE account of the investor, subject to terms prescribed by RBI.
Investment on repatriation as well as non-repatriation basis is permitted in
the following categories.
Government dated securities (other than bearer securities)
/treasury bills.
Units of domestic mutual funds.
Bonds issued by a public sector undertaking (PSU) in India.
3.11.7 Equities
With sentiments running negative in favor of stock markets and risk
aversion being the flavor of the scene an average investor is wary of
investing in stocks markets. But despite all the negativity surrounding India
at this moment the fact still remains that apart from China India is the only
country in the world that is growing over 7% and has the potential of
growing by 8 – 9 % annually. Even by the estimates of the World bank,
India will grow at 7%. This annual growth coupled with the rupee
appreciation expected in few months coupled with the interest rates
reduction Indian stock markets remains a destination where putting your
money can give you extremely good returns in a medium to long term.
3.11.8 Bonds
With the reserve bank of India showing signs of start of the interest rates
cycle the bond prices are expected to rise in the coning few months and it
would be safe to assume that they would be offering good returns with no or
very less risk. With the rupee depreciation offering currency conversion
benefits these returns also can easily surpass the returns that investors can
earn in the western world
Similarly, the 40% scheme allows for purchase of equity, preference shares
and convertible debentures not exceeding 51% of the face value of each
issue. Repatriation of up to 40% of the new issue is allowed. Under this
scheme, NRIs can invest in new projects or in expansion and diversification
projects of existing companies.
Step 1: Get PAN Number, Open three types of accounts and get
Reserve Bank of India's one time permission.
1. Obtain PAN number from Income Tax Department of India if
you don't have one. Since Jan 1, 2007, it is compulsory to have
PAN if you want to place any trade with a broker in India.
Permanent Account Number (PAN) card is issued to anybody
who pays or will have to pay taxes in due time in India. As per the
new rules and guidelines, even NRI’s are required to have a PAN
card
4. Open an account with a stock broker, there are two major stock
exchanges in India- Bombay Stock Exchange (BSE) and National
Stock Exchange (NSE). Each of them have several hundred
members. So open an account with a stockbroker who is a
member of either of the stock exchange. As NSE has nationwide
coverage and is professionally run, an account with a NSE
member is more desirable over an account with a BSE member.
5. Once these three accounts are in place, see if you have a local
relative/representative in India, who can spare some time for you
if and when needed, be very careful before you proceed without
having a local rep for you. It is strongly recommend that in order
to make your investing in India smoother, please find a relative or
a person who you can trust and who you think has right
2. Clearance from your Bank Contact your bank with the list of
stock you are intending to invest in and your bank will clear you
for trading/investing in those stocks. (As per Indian rules, NRIs
cannot collectively acquire more than 24%, 40% or X % of the
paid up capital of an Indian company. So RBI maintains the
current levels of NRI holding in various companies through the
designated branches. After you give your list to your banker, she
would check her lists and make sure there is room in individual
Investor’s attitude and knowledge towards investment options available in India
With special reference to UAE based NRI’s
Literature Review 43
5. Pay to your Broker for purchases and tell him about our Demat
account Write a check out of your NRE/NRO account to the
stock broker. On the settlement date, your stock broker will send
the stocks to your demat account so you might want to verify with
your depository participant if the stocks are credited in your
account. If your demat account is also with the broker you are
trading with, your life will be a bit simpler- one less institution to
deal with. Also, thanks to the Internet, currently many banks and
demat institutions offer online access to your accounts which
comes handy in managing your investments in India.
withhold some taxes on the gains you had and deposit the rest
amount in your account. (Certain bank branches may require you
to get a certificate about how much to withhold from your
accountant or lawyer.
7. File your Tax Returns every year Most of the time, you might be
able to get refund from the withholdings done by your banker.
Sometimes you might owe additional taxes to Indian government.
Check with your tax consultant in India. (There is only
FEDERAL type of tax in India. There are no STATE or local
taxes levied on individuals.)
Investors can also earn from rentals from the property. With squeeze in
supply over demand and the affordability factor rentals in the major metro
cities is a decent income. You could easily get around 4% returns through
renting your property and with luck favouring or with prime location the
returns can increase to 5%. With the rupee depreciating to the extend it is in
the coming few months or years even if the reversal is half of what the rupee
has depreciated you are still in line of getting at 6 – 7% returns because of
the currency conversion. It would not be an over statement to say that
investment in property can easily give you 30 – 40 returns in 2 – 3 years.
A general power of attorney in favor of the NRI's relatives will enable them
to sell the property and arrange to repatriate the sale proceeds through an
authorised foreign exchange dealer after payment of the taxes due. They can
also rent out the property and credit the proceeds to a NRO account.
Similarly, NRIs can seek home loans through their power of attorney holder
and documents can be signed on their behalf while investing in property.
They can issue the EMI cheques on behalf of their relatives here as the
Reserve Bank of India (RBI) has relaxed the norms of operation of joint
accounts considerably recently.
Investor’s attitude and knowledge towards investment options available in India
With special reference to UAE based NRI’s
Literature Review 46
The RBI also said that any citizen who was earlier residing in a foreign
country can own or transfer property or other assets in that nation if it was
acquired during the time of his residence there. A person resident in India is
free to hold, own, transfer or invest in foreign currency, foreign security or
any property situated outside India if such currency, security or property
was acquired, held or owned when he was resident outside India or inherited
from a person who was resident outside India. Similarly, returning NRIs can
retain and reinvest the income earned on investments made under the
Liberalised Remittance Scheme. There was lack of clarity earlier as to
whether the income earned on assets held abroad by NRIs who have
returned to India for permanent settlement and assets held outside India
through Liberalised Remittance Scheme are required to be realised and
repatriated to India. Now, the RBI has clarified that income and sale
proceeds of assets held abroad need not be repatriated to India and can be
retained and invested outside India.NRIs and PIOs can repatriate sale
proceeds of immovable property acquired in India – (Immovable property
acquired out repatriable foreign funds) to the extent of repatriable funds paid
for acquiring the property, without any lock-in period. In case of residential
property, the repatriation is restricted to two residential properties.
(Immovable property acquired out of rupee funds) to the extent of USD 1
Investor’s attitude and knowledge towards investment options available in India
With special reference to UAE based NRI’s
Literature Review 47
million per calendar year out of balances held in their NRO account, with a
lock-in period of 10 years.
Indian economy has given a feel good factor to the NRIs, especially in the
real estate sector. Many avenues are being created as well as schemes being
fashioned for them to maximize investments from abroad.
All persons residing outside India holding Indian passports and also people
of Indian origin have been granted permission by the Reserve Bank of India
(RBI) to invest in both residential and commercial properties in India.
Markets have stabilized and there is an impressive amount of interest in this
segment. NRIs are quick to invest in properties in India where they see an
opportunity for a good deal.
Apart from India being a safe destination, 10 to 12 per cent returns on the
investments are assured.
NRI’s don’t need to think about income earned outside the country, until and
unless the organization the individual is employed with is Indian. Neither
does the person have to think twice before parking money in a Non-Resident
External (NRE) account. However, interest accrued on a Non-Resident
Ordinary Account (NRO) is taxed at the rate of 30.9%, is deducted by the
bank at source.
The interests gained from these investments are taxed at a flat rate of 20%.
And profit out of the long term capital gains that is, selling a capital asset
such as a property, gold, after holding it for 36 months, attract a flat tax of
Investor’s attitude and knowledge towards investment options available in India
With special reference to UAE based NRI’s
Literature Review 50
10%. Similar gains from equity shares and equity mutual funds are tax
exempt if held for more than 12 months. But if sold before 12 months, there
is a short-term capital gains tax of 10%.
Capital gains are determined at the rate of exchange on the date of sale. But
there is a catch here. The sale of these investments is tax-exempt, if the sale
proceeds are reinvested in similar investments within six months. If the sale
proceeds of these assets are partially re-invested, then the exemption is
proportionate to the amount re-invested.
Tax returns need to be filed only if the individual’s Indian income including
the rent is more than Rs. 160,000. One may also file for tax refunds if the
NRI had his taxes deducted at source and his income was less than the
exemption limit of Rs. 160,000.
There are more ways of saving taxes on long-term capital gains. That is, by
investing in the following products, though it’s important to note that all are
Foreign Exchange Assets, that is, bought with convertible Foreign exchange.
Certain Mutual Funds such as those of UTI ( Unit Trust of India)
Some notified savings certificates for NRI’s, such as, National
Saving Certificate VI and VII issues are notified.
NRI Bonds 1988 and NRI Bonds (second series)
NRI residing in countries with a Double Taxation Avoidance
Agreement with India (UAE is one of them) may also obtain tax
benefits by providing proof of residency form the country of
residence while opening a bank account in India.
3.13.3 Provisions
a) Tax on certain NRI Incomes:
U/S 115 A: Tax on dividends, royalties and fees for technical
services.
U/S 115 AC: Tax on income from bonds or GDR purchased in
foreign currency or capital gains arising from their transfer.
CHAPTER – 4
Analysis is the process of placing the data in the ordered form, combining
them with the existing information and extracting the meaning from them. In
other words, analysis is an answer to the question “what message is con-
veyed by each group of data “. Data, which are otherwise raw facts and are
unable to give a meaningful information. The raw data become information
only when they are analyzed and when put in a meaningful form.
29.00%
30.00%
21.50%
25.00% 18.50%
20.00% 15.00% 16.00%
15.00%
10.00%
5.00%
0.00%
Below 26-35 yrs 36-45 yrs 46-55 yrs Above
25yrs 55yrs
Interpretation:
From the above table it is very evident that majority of the respondents be-
long to the age group of 25 – 35 years. Out of the total number of respond-
ents, 58 of them belong to the age group of 25 -35 years, 43 of the respond-
ents belong to the age group of 35 -45 years and 37 of them belong to the
age group of 45-55 years, but only 32 of them belong to the age group above
55 years and 30 of the respondents is below 25years.
Out of the total number of respondents, 15.0 percent of the respondents be-
long to the age group below 25 and 29.0 percent of the respondents belong
to the age group of 25 – 35 years. 21.5 per cent of the respondents constitute
the age group of 35-45 years, 18.5 per cent of them belong to 45- 55 years
age group and 16 per cent of them belong to the age group of above 55
years.
So it is very clear that the most of the respondents belong to the age group of
25 – 35 years.
Others
12%
Business
13%
Professional
10% Salaried
65%
Interpretation:
Table 3.2 indicates that most of the respondents are from the working or
employed class. The respondents were given four options to choose from:
Salaried, Professional, Business and Others. Others here represent the retired
and the homemakers who are investors.
Out of the 200 respondents, 129 of them form the salaried class, 26 of them
belong to the business class, and 23 of them belong to the group ‘Others’,
which includes retired and house wives. Only 21 of the respondents are from
the professional class.
From the above pie chart, it is very clear that 64.8 per cent of the respond-
ents were salaried, 10.5 per cent of them belong to the professional group,
13.0per cent of the respondents belong to the business class and 11.5 per
cent of them are house makers or retired.
Therefore, from the above table and chart it is very clear that investments
are not very prominent with the house makers but it’s very prominent among
the salaried and the business class.
35.00%
35.00% 25.50%
23.50%
30.00%
25.00% 16.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Below AED AED 1001 - AED 5001 - Above 10000
1000 5000 10000
Interpretation:
The income of the respondents was also analyzed to find out the income lev-
el of the respondents. There were given four options: below AED 1,000, Be-
tween AED 1,000 and AED 5,000, between AED 5,000 and AED 10,000
and above AED 10,000.
Table 3.3 points out that Out of the total number of respondents, 70 of the
respondents belong to the income group of AED 1000 – AED 5000.
51respondents belong to the first group, i.e., below AED 1000, and 47 of the
respondents belong to the third group, i.e., income between AED 5000 –
10000 and only 16 of the respondents belong to the income group above
AED 10,000.
From the above table and chart it is very clear that 25.5 per cent of the re-
spondents were from the income group below AED 1,000 and 35.0 per cent
of the respondents belong to the income group of AED 1000- 5000 but only
23.5 per cent of the respondents were of the income category of AED 5000-
10000 and only 16.0 per cent of the respondents belong to the income group
of above AED 10000.
40% 36%
30%
24%
20% 20%
6%
10%
10%
4%
0%
Interpretation:
The respondents were asked about their savings objectives and they were
given six options to choose from and they were Children’s Education,
Growth Plan, Retirement Plan, Health Care Expenses, Home Purchase and
Others. Here ‘Others’ represents investment made by investors for marriage
purposes or for wealth maximization.
Table 3.4 indicates that Out of the total number of respondents, 72 of the re-
spondents have growth plan as their savings objective, 48 of the respondents
have retirement plan as their savings objective, 40 of them wanted to save to
buy or build a home, 12 of the respondents wanted to save for children’s ed-
ucation and 8 of the respondents had health care expenses of the future as
their objective and 20 of them had different other objectives to save other
than the above mentioned.
From the above figure, it can be clearly concluded that, majority of the re-
spondents wanted to save for future growth prospects. i.e., 36 per cent of the
respondents had growth as their savings objective, 24 per cent of them had
retirement as their savings objective and only 4 per cent of the respondents
save for the purpose of dealing with the health care expenses they have to
bear in future. 20 per cent of the respondents save for the purpose of buying
or building up a home and 10 per cent of them had other savings objectives
other than mentioned. 6 per cent of the respondents wanted to save for their
marriage or as wealth maximization objectives.
39.50%
40.00%
30.00% 23.00%
22.00%
20.00%
15.50%
10.00%
0.00%
Income &
Capital Growth &
Income Long-term
Growth Aggressive
Growth
Interpretation:
The respondents were asked about their investment objectives and they were
given four options, Income and Capital appreciation, Growth and Income,
Long-Term Growth and Aggressive Growth.
Out of the 200 respondents, 23.0 per cent of the respondents have income
and capital appreciation as their investment objective, 22.0 per cent of them
have growth and income as their investment objective and 39.5 per cent of
the respondents had long-term growth as their investment objective. But on-
ly 15.5 per cent of the respondents have aggressive growth as their invest-
ment objective.
It is very clear from the above table and chart that long- term growth of the
respondent is one and the major reason why they choose to invest.
40.0% 35.5%
26.0% 28.0%
30.0%
20.0%
10.5%
10.0%
0.0%
Monthly
Quarterly
Half-Yearly
Annually
Interpretation:
The above table and chart helps to understand the frequency of investment
made by the investors in India. The respondents were given four options and
they were: Monthly, Quarterly, Half-yearly and annually.
From the above chart it is very clear that most of the respondents invest an-
nually, say in the form on fixed deposits, installments to be paid for insur-
ance or real estates. 35.5 per cent of the respondents invest annually, 28 per
cent of them invest half yearly and 26.0 per cent of them invest quarterly
and 10.5 per cent of them invest monthly
No
0.16
Yes
0.85
Interpretation:
The respondents were asked whether they have a financial advisor who
prompted them to invest in the different investment avenues available in In-
dia. Most of the respondents have a financial advisor, who has advised them
to invest in the different investment avenues available for the purpose of
savings and a steady income.
Out of the 200 respondents, 169, i.e., more than Eighty percent of the re-
spondents have taken the advice of their friends, banks, financial institutions
and advertisements. And 31 of the respondents have not taken the advice of
their friends or other financial advice providers, i.e., 15.5 percent of the re-
spondents did not make their investments due to the advice provided by oth-
ers.
40.0%
10.0%
0.0%
Friends/
Relatives Financial
Consultants Investment
Institutions Portfolio Dept.
in Banks
Interpretation:
From the above table, the surveyor wanted to know the actual motivator for
the respondent to invest. The respondents were given five options:
Friends/Relatives, Financial consultants, Investment Institutions, Portfolio
Department in Banks.
From the above figure, it is very evident that majority of the respondents
took advice from Portfolio Departments in Banks which help them to decide
the best investment avenue that would suit their personal investment strate-
gy. Out of the 200 respondents, around 31.3 per cent of the respondents took
advice from the portfolio departments of the banks, 27.8 per cent of them
took advice from the investment institutions especially formed for this pur-
pose. 22 per cent of the respondents take advice from their friends or rela-
tives and only 18.9 per cent of them took investment advice from financial
consultants.
80.0% 69.5%
75.0%
60.0% 71.0%
42.0%
40.0% 36.5% 45.0%
35.0%
20.0%
0.0%
Interpretation:
The respondents were asked to select from the given options to make up
their present investment portfolio. The respondents were given six options:
Bank Deposits, Post Office Savings, Shares, Mutual Funds, Life Insurance,
Real Estate and Gold.
Out of the 200 respondents, 139 of them had invested in Bank as Deposits
and 61 of them did not deposit in bank. That is, around 69.5 per cent of them
had bank deposits included in their investment portfolio.
From the total number of respondents, 127 of them had not invested in
shares but only 73 of them opted for that investment option. i.e., only
36.5per cent of them had invested in Shares.
130 of them had not invested in mutual funds, and only 70 of them, out of
the total number of respondents, invested in mutual funds, which means, on-
ly 35per cent of the respondents had investments in mutual funds.
The interesting fact is that 150 of the respondents had an investment in the
form of Life Insurance and only 50 of them dint have that in their invest-
ment portfolio. 75.0 per cent of the respondents had life insurance included
in their investment portfolio.
Out of the total number of respondents, 110 had not invested in Real estate
and almost the same number of respondents, i.e., around 90 of them had in-
vested in real estate. Thus 45.0 per cent of the respondents had included Re-
al estate as one of their investment options.
142 of the respondents had invested in gold maybe in the form of jewelry.
Only 58 had not invested in this form of investment option available. i.e.,
71per cent of them had invested in gold.
33.5% 51.5%
50.0% 42.0%
20.5% 34.0%
0.0%
Interpretation:
The respondents were then asked a question which would help the surveyor
to determine the awareness level of the NRIs towards the various investment
options available to them in their home country. The respondents were asked
to mark those investments which were familiar or which they were aware of.
The different investment options given were: Bank deposits, Shares/ Con-
vertible Debentures/ Non- Convertible Debentures, Mutual Funds, Bonds-
which is invested out of the NRO/FNCR/ NRE accounts, Immovable proper-
ty, Propitiatory/ Partnership concern in India, deposits in Indian companies
through NRO accounts.
There was no doubt about the awareness level of the bank deposits among
the NRIs. The 200 respondents were aware of the bank deposit schemes
available in India for them,. Only 67 of the respondents of them were aware
of shares/ convertible or non-convertible debentures available for NRIs in
India. But around 103 of the respondents were aware of the Mutual Fund
scheme available in India through the Banks and various other financial in-
stitutions. 84 of the respondents had knowledge about the Bond scheme
which was invested out of the NRO/FNCR/NRE accounts of the NRIs and
41 of the respondents were aware of an investment option available in the
form of being a partner in an Indian company. But majority of the respond-
ents, i.e., 159 of them were not aware of this option. Out of the total number
of respondents, only 68 of them knew that they could deposit their earnings
in an Indian company. But 132 of them were not aware of this option.
Out of the total number of respondents, 100 percent of them were aware of
the bank deposits available in India for NRIs, only 33.5 percent of the re-
spondents were aware of the shares/convertible or non-convertible debenture
option. But 51.5 percent of the respondents were aware of the
Mutual Fund scheme and 97 per cent of them had good knowledge and
awareness about the immovable property, another investment alternative,
available to them. Only 42 per cent of the respondents were aware that they
could invest their hard earned money in Bonds which can be invested out of
their NRO/FNCR/NRE accounts and only 34 per cent of them were aware
that they could deposit their earnings in Indian companies through their
NRO accounts. 20.5 per cent of them were aware that they could invest in
the form of a partnership with an Indian Company.
From the above table and chart, it is very evident that the investors or the
NRIs lack sufficient information about the various investment options avail-
able to them in India. Thus our government, banks and even the private fi-
nancial institutions should take a step in creating awareness and also educat-
ing the investors about the diverse investment portfolios.
Unsatisfied,
20%
Highly
satisfied, 36%
Satisfied, 44%
Interpretation:
The above table shows the respondents reaction when asked about the level
of their satisfaction with their investment they have made. The respondents
were given three options to choose from Highly Satisfied, Satisfied and Un-
satisfied.
From the above table and pie chart it is very clear that majority of the re-
spondents are highly satisfied with the investment made in home country.
That is around 36 per cent of the respondents are highly satisfied with the
investments they have made, 44 per cent of the respondents are satisfied
with the investments and only 20 per cent of them are unsatisfied with the
investments they have made in home country.
So majority of the NRI’s who were the part of this survey were happy with
the investments they made in India in different investment alternatives
available to them, i.e., around 160 of the respondents were happy with the
investments they have made.
35.5%
40.0%
30.0%
30.0%
20.0% 12.5% 22.0%
10.0%
0.0%
Beginner
Moderately
Experienced Knowledgable
Investor Experienced
Investor Investor
Interpretation:
The respondents were asked about their personal experience in investing in
the different investment avenues. The respondents were given four options:
Beginner or no investment experience, moderately experienced investor,
knowledgeable Investor and Experienced Investor.
From the total number of respondents, 12.5 per cent of them classified
themselves as a beginner or a person with no prior experience in investing,
may be like college students or housewives. 35.5 per cent of the investors
have classified themselves into the category of moderately experienced in-
vestor. These investors are those who have experience in investing in Mu-
tual funds and bank deposits. 30.0 per cent of the respondents have graded
themselves as Knowledgeable experienced investor. They are those inves-
tors who have individually bought and sold stocks or bonds of corporate
bodies. Only 22.0 per cent of the respondents graded themselves as experi-
enced investors. They are those who have experience in all the investment
avenues available in the market and also have an experience in buying and
selling of stock, they have exercised stock options or stock warrants and
have also traded stock options.
45% 41%
40% 34%
35%
30%
25%
25%
20%
15%
10%
5%
0%
Low Risk
Medium Risk
High Risk
Interpretation:
The respondents were asked to determine the level of risk they are likely to
undertake through their investments. The respondents were given three op-
tions: Low risk, Medium Risk and High Risk.
So it’s very evident that most of the investors prefer medium level of risk to
be attached to their investments, i.e., 41 per cent of the respondents prefer
medium level of risk whereas 25 per cent of the investors do not mind at-
taching high risk factor to their investments and 34 per cent of the respond-
ents preferred their investments to have a low level of risk.
Low risk investments would be fixed deposits and life insurance policies.
Medium risk would include the real estate, mutual funds, unit trust etc., and
whereas high risk would involve shares.
Strongly
Disagree, Agree, 16.00%
37.50%
Disagree,
46.50%
Interpretation:
The respondents were given a statement, ‘“I’m comfortable with invest-
ments that may frequently experience large declines in value if there is a po-
tential for higher returns.” The surveyor wanted to measure the risk return
attitude of the respondents through these questions. The respondents were
given three options: Agree, Disagree and Strongly Disagree.
From 200 respondents, only 16.0 per cent of them agreed with the statement,
which reflected on their personal attitude towards taking risk. These re-
spondents are willing to take the risk for earning a higher return from their
investment. 46.5 per cent of the respondents disagree with the statement and
37.5 per cent of them strongly disagree with the statement. These respond-
ents are not willing to take risk for a higher return.
60.0% 52.0%
50.0%
40.0%
27.5%
30.0%
20.5%
20.0%
10.0%
0.0%
Interpretation:
The surveyor wanted to know the approximate withdrawal time the investors
are planning to make. The respondents were given three options: three- five
years, six – nine years and ten years or more.
Table 3.15 indicates that Out of the 200 respondents, 104 of them are plan-
ning to withdraw from their investment accounts within three – five years of
investment. 55 of them were planning to withdraw within six- nine years of
their investment and 41 of the respondents planned to withdraw over a peri-
od of ten years or more.
From the above table and chart, the surveyor can come to a conclusion that
the respondents prefer to reap back the profits or withdraw from their in-
vestments within a period of three – five years. 52 per cent of the respond-
ents planned to withdraw within three – five years of investment and 27.5
per cent of the respondents planned to withdraw within six to nine years.
20.5 per cent of the respondents planned to withdraw from their investment
within a period of ten or more years.
CHI-SQUARE ANALYSIS
Risk Profile
Observed Frequency
Age Medi- Total
Low um High
Risk Risk Risk
Below 25 Years 8 15 7 30
26 - 35 years 2 20 14 57
36 – 45 years 13 19 11 43
Above 45 years 24 28 18 70
Total 68 82 50 200
Expected Frequency
Below 25 Years 10 12 8 30
25 - 35 years 20 24 14 58
35 - 45 years 15 18 11 43
Above 45 years 23 28 17 69
Total 68 82 50 200
Interpretation:
Calculated 2 Value is less than the Table Value. So Null Hypothesis (H0)
is accepted. Therefore, there is no significant relationship between Age
group and Risk Profile.
Interpretation:
Calculated 2 Value is greater than the Table Value. So Null Hypothesis (
H0 ) is Rejected. Therefore, there is significant relationship between Income
and Frequency of Investment.
Table 4.18 Relationship between Income & Risk Profile Risk pro-
files
Risk Profile
Observed Frequency
Medium High
Income Low Risk Risk Risk Total
Below AED 1000 24 18 10 51
AED 1000 – AED 5000 20 31 19 69
AED 5000 – AED 10000 15 20 12 47
Above AED 10000 10 14 9 32
Total 68 82 50 200
Expected Frequency
Below AED 1000 17 21 13 51
AED 1000 – AED 5000 24 28 17 69
AED 5000 – AED 10000 16 19 12 47
Above AED 10000 11 13 8 32
Total 68 82 50 200
Interpretation:
Calculated 2 Value is less than the table value @ 5 per cent level greater
than the Table Value @ 5per cent level of significance. So Null Hypothesis
( H0 ) is accepted. There is no relationship between income and risk profile.
Interpretation:
Calculated 2 Value is greater than the Table Value. So Null Hypothesis (
H0 ) is Rejected. Therefore, there is significant relationship between Occu-
pation and Frequency of Investment.
Risk Profile
Observed Frequency
Low Medium
Occupation Risk Risk High Risk Total
Salaried 46 53 31 130
Profession-
al 6 9 6 21
Business 7 12 8 26
Others 9 8 6 23
Total 68 82 50 200
Expected Frequency
Salaried 44 53 32 130
Profession-
al 7 9 5 21
Business 9 11 7 26
Others 8 9 6 23
Total 68 82 50 200
Interpretation:
Calculated 2 Value is less than the Table Value. So Null Hypothesis
( H0 ) is Accepted. Therefore, there is no association between Occupation
and Risk Profile.
CHAPTER – 5
5.1 Findings
After conducting a thorough study on “Investment options available in India
for NRI’s”.
The following findings are:
Among the 200 respondents, 29.0% of them are of the age group
25 – 35 years.
The respondents who belong to the salaried class make more
investments.
35.0% of the respondents are in the income level between 1000 –
5000 dirham’s.
Out of 200 respondents most of them had growth and retirement
plan as their saving objective
Most of the respondents have income and capital appreciation as
their investment objectives.
Most of the respondents make investments on annual basis.
84.5% of the respondents have financial advisors; they take
advices from the portfolio departments in banks
Among the 200 respondents 75.0% of them have selected their
investment portfolios as life insurance.
36% of the respondents are highly satisfied with the investments
made by them.
And 44% of them are satisfied with the investment made. Only
20% of them are not much satisfied.
5.2 Suggestions
1. As most of the respondents who have participated in this survey
are salaried people, i.e., they earn a specific amount of salary
monthly, thus they prefer to invest in risk free investment avenues
available in India. Maybe that is the reason why most of them
preferred to invest in Life Insurance, Gold and Bank Deposits.
Most of the respondents are looking for a steady income and
maximum avoidance of risk from the selected investment
alternative. This is the main reason why there is less number of
people who are willing to invest in Shares/ Bonds or Debentures.
Thus the NRI’s should be introduced to a wider spectrum of
investment avenues available in India, by providing them
information needed through various financial agencies or
consultants or through portfolio departments maintained by
Banks.
6.0 CONCLUSIONS:
The study was conducted on 200 NRI’s based on UAE to find out their
attitude and perception towards the different investment alternatives
available back home.
The various factors identified in the study also helped in providing some
valuable input regarding the investor’s pattern, their preference and
Priorities.
The study reveals that the investor has great preference for safety and this is
proved by their investments in Life Insurance, Gold and Bank Deposits.
The statistical analysis has helped the surveyor to have a deeper insight on
the relationship between income, age and occupation on the risk preferences
of the investors.
The NRI investors are looking for investment alternatives that would help
them to earn a steady income back home and also an investment alternative
that does not have risk of loss attached to them.
The survey also helped to analyze, the investors awareness about the various
investment avenues available to them back home. Through the study it was
evident that the investors are not fully aware of the options available to
them. Thus through creating awareness and educating the NRIs about the
investment alternatives, in which they can invest will help the individual as
well as the country as a whole to develop.
Appendix A:
QUESTIONNAIRE
Dear Respondent, I’m Venu.T, student pursing MBA – Finance from Birla
Institute of Technology. As a part of my curriculum, This questionnaire is
prepared to do my dissertation on the topic, “Investors attitude and Knowledge
towards investment options available in India with special reference to UAE
based NRI’s.”
The data being collected are solely for academic purpose. I request you to kindly
extend your co-operation.
Name:-
Age:-
Gender:-
o Monthly
o Quarterly
o Half- Yearly
o Annually
o Yes [ ]
o No [ ]
7) If Yes, with whose financial advice did you start your investment?
o Friends/Relatives
o Financial consultants
o Investment institutions
o Portfolio Department in Banks
o Bank deposits
o Post Office
o Shares/ Bonds/ Debentures
o Mutual funds
o Life Insurance
o Real Estate
o Gold
o IT sector [ ]
o Textile sector [ ]
o Engineering sector [ ]
o Auto sector [ ]
o FMCG sector [ ]
o Chemical sector [ ]
o Pharmacy sector [ ]
o Banking sector [ ]
o Oil sector [ ]
Appendices 105
o Bank Deposits [ ]
o Post Office [ ]
o Shares [ ]
o Mutual Funds [ ]
o Life Insurance [ ]
o Real Estate [ ]
o Gold [ ]
11) Are you aware of the investment avenues as a NRI, please mark those products
you are aware of.
o Bank Deposits
o Shares/ convertible debentures/ non-convertible debentures
o Mutual Funds
o Bonds- invested out of NRE/FCNR/NRO
o Immovable Property
o Proprietary/ partnership concern in India
o Deposits in Indian Companies through NRO accounts
12) Which of the following options best describes your satisfaction level on the
investment made?
o Highly Satisfactory
o Satisfactory
o Unsatisfactory
14) What would be the extend of risk composition you would like to have in your
investment?
o Low Risk
o Medium Risk
o High Risk
Appendices 106
15) Do you Agree, Disagree, or Strongly Disagree with the following statement
“I’m comfortable with investments that may frequently experience large
declines in value if there is a potential for higher returns.”
o Agree
o Disagree
o Strongly Disagree
16) Rank the below factors which influence your investment decision?
o Safety [ ]
o Liquidity [ ]
o Regular income [ ]
o Capital appreciation [ ]
o High Return [ ]
17) Approximately, when do you plan to make your first withdrawal from your
investment accounts?
Bibliography
Books
Investment Management- Preeti Sing-10th edition – Himalaya publication
2002.
Investment Analysis and Portfolio Management – Prasanna Chandta – 2nd
edition- Tata McGrawhill publishing Company,2005.
Financial Management and Services – Gordon, Natarajan-5th edition –
Himalaya Publishing House,2009.
Websites
www.economywatch.com
http://www.sebi.gov.in/sebiweb/
http://www.rbi.org.in/scripts/BS_EntireSearch.aspx?searchString=nri%20in
vestment
http://www.prlog.org/11884280-rupee-depreciation-is-it-the-right-time-for-
nris-to-invest-in-india.html
http://www.femaonline.com/nricms.php?id=1
http://jayesh.profitfromprices.com/invest_in_india_terms_faq.htm
http://www.mynriclub.com/site/NRI-Account/Foreign-currency-Non-
resident-Account-FCNR
http://www.path2usa.com/nri-bank-accounts-nre-account-nro-account
http://www.nriinvestindia.com/nri-india-mutual-funds.html