Investment Scenario In Indian Market
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    • Investment Scenario in Indian Market

    Harjeet Singh

    Team Leader
    The process of reforms as part of liberalization has resulted in greater investment in Indian market. In today's economy of less income growth and highly increasing cost of living, one has to know how to use his/her savings to generate higher returns. Availability of too many options and no clear idea about these choices is creating a hostile situation for the investor to choose the best among the available alternatives.

    An investor has several investment alternatives (such as stocks, bonds, precious metals, etc.) to choose from, depending on his risk profile and expectation of returns. Different investment substitutes represent a different risk-reward trade off. Low risk investments are those that offer assured, but lower returns, while high risk investments provide the potential to earn greater returns. Hence, an investor can choose the most suitable investment on the basis of his/her risk tolerance.

    Best investment options in India

    Some of the investment alternatives available in the Indian investment market are:

    • Investment in Fixed Deposits- FD is one of the safe investment options with the current annual rate of interest of 10 per cent.
    • Investments in Insurance- Insurance-cum-investment options like unit linked insurance plan (ULIPs) are beneficial for the investors. Insurance offer quality services to cover life, money and assets along with low-risk profits.
    • Investment in Mutual Funds- People may select mutual funds as an investment alternative on the basis of long term performance, short term performance, consistent returns, etc.
    • Investment in Equity- Private equity as an investment substitute is growing fast in India. With a business of US$ 20 billion in 2010-11, the share of equity investments is expected to increase in coming years.
    • Investment in Public Provident Funds- PPF is a government guaranteed fixed income security with a minimum amount of Rs 500 and maximum of Rs 1, 00,000 in a financial year; PPFs are now a popular choice of investment in long run.

    Points to be considered before taking investment decision

    Risk – It is important for the investor to choose the investment option on the basis of his/her risk profile. For e.g. - A low risk investor should not invest into equities. He should look for the safe option for investment. Risky asset class causes a loss of principal.

    Liquidity – Liquidity is also an important criterion for the selection of Investment Avenue. For e.g. - An investor should not invest into public provident fund (PPF), if he needs money in 3- 4 years time frame. PPF has minimum lock in period of five years.

    Time horizon – Investment should be done by considering the specific time horizons. For e.g. - For short term investment, mutual fund or fix deposit could be a good option, where as for long term, real estate and regular investment into equities could be a good option.

    Taxation – Taxation affects the real returns of investment, investor should always look at the tax aspect of any investment before investing into it.

    The scope for business in India is vast. Indian economy has grown as one of the significant economies in the world having immense potential towards long-term growth. The growth has been backed by the various industrial sectors to a great extent. The sectors mainly include technology, manufacturing and service industry.
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