Jalaj Jain Project Report

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RANKING INVESTMENT AVENUES BASED ON THEIR RISK

AND RETURN PROFILE USING ANALYTICAL HIERARCHY
PROCESS (AHP)
Project Report
Submitted for the Fulfilment of the Degree of

Bachelor of Business Administration (BBA)
Galgotias University
2019 -20
Submitted to: Submitted by:

Dr. Ravikant Sharma Jalaj Jain
RANKING INVESTMENT OPPORTUNITIES BASED ON THEIR RISK AND RETURN PROFILE|2016
CERTIFICATE OF APPROVAL
The following Internship Project Report titled “RANKING INVESTMENT AVENUES BASED ON
THEIR RISK AND RETURN PROFILE USING ANALYTICAL HIERARCHY PROCESS (AHP)" is hereby
approved as a certified study in management carried out and presented in a manner satisfactory
to warrant its acceptance as a prerequisite for the award of Bachelor of Business
Administration for which it has been submitted. It is understood that by this approval the
undersigned do not necessarily endorse or approve any statement made, opinion expressed or
conclusion drawn therein but approve the Internship Project Report only for the purpose it is
submitted to the Internship Project Report Examination Committee for evaluation of Internship
Project Report
Name Signature
1. Faculty Mentor Dr. Ravikant Sharma
1
ACKNOWLEDGEMENT
I consider myself fortunate enough for getting the opportunity to conduct the training approval
and project assignment under the guidance of “RANKING INVESTMENT AVENUES BASED ON
THEIR RISK AND RETURN PROFILE USING ANALYTICAL HIERARCHY PROCESS (AHP)”. I got a
golden chance to explore the actual working environment and it extremely helped me in
achieving a clearer and more practical approach to the theoretical concepts of “The core of
finance and working in a firm”.
I have gone through various sites, Research Books, Business Magazines and Newspapers to get
the accurate information for analysis and tried to find the best conclusion.
2
Contents
INTRODUCTION .............................................................................................................................................
2
FINANCIAL ENVIRONMENT IN INDIA: ...................................................................................................... 2
INVESTMENT OPPORTUNITIES AVAILABLE TO INVESTORS: ................................................................... 3
FACTORS TO BE KEPT IN MIND WHILE IDENTIFYING A BEST INVESTMENT AVENUE: ........................... 3
RISK AND RETURN PROFILE OF VARIOUS INVESTMENTS: ...................................................................... 4
REVIEW OF LITERATURE ................................................................................................................................
6
Need of the study .........................................................................................................................................
8
Objectives of the Study .................................................................................................................................
8
Research Methodology .................................................................................................................................
9
Features of Investment Programme ...........................................................................................................
10
Data Analysis and Interpretation ................................................................................................................
12
Analytical Hierarchy Process .......................................................................................................................
30
FINDINGS .....................................................................................................................................................
37
Limitation ....................................................................................................................................................
38
QUESTIONNAIRE .........................................................................................................................................
39
References ..................................................................................................................................................
42 Bibliography
................................................................................................................................................ 43
3
INTRODUCTION
An investment is defined as an asset or item that is purchased with the hope that it will
generate income or will appreciate in its value over time in the future. In terms of
economics, investment is the purchase of goods that are not being consumed today but
are used to create wealth in future. In finance, an investment is a monetary asset
purchased with the idea that the asset will provide income in the future or appreciate and
be sold at a higher price.
FINANCIAL ENVIRONMENT IN INDIA:

In India the probability distribution governing inflation, bond returns and equity returns
is not known. This generates alternatively a higher quality of uncertainty.
Every financial or real sector investor faces bigger difficulties owing to this lack of
knowledge. Many investments don't get made, many financial strategies are not
undertaken owing to the inability to peer into the future and figure out what will happen.
The phrases `ambiguity' or `Knightian uncertainty' are used when describing an
environment where we don't know the probability distribution of the shocks that we face.
India is an equity market dominated financial system. The failures of public policy have
hampered the working of the bond market and the banking system. in mid cap stocks,
that foreign institutional investors do much worse in security selection when compared
with domestic institutional investors. This evidence suggests that foreign investors should
sub-contract to domestic money managers or buy index funds.
As per the Financial Stability Report 2015, Strong macroeconomic fundamentals offer
India a “reasonable degree of resilience” to fight uncertainties, but poor asset quality of
banks and managing expectations are key challenges for regulators and the government.
A relatively stronger macro-economic fundamental in terms of growth, inflation, and
current account and fiscal deficits provide a reasonable degree of resilience to our
financial system, as per the report.
4
INVESTMENT OPPORTUNITIES AVAILABLE TO INVESTORS:
1. Equity: the investment in equity should preferably done for a long period (anything
above 5 years), through buying shares directly on NSE/BSE, investing in ULIP’s, etc.
2. Debt: Debt investments can be done for short as well as for the long term, in the
form of fixed deposits, debt mutual funds, etc.
3. Real Estate: it has high risk and low liquidity factor and the investment is done a
long period of time.
4. Commodities: For small investors, exposure to gold is the right step to invest into
commodities. The risk is moderate/high in this class of investment and it is highly
volatile as well.
5. Miscellaneous: the miscellaneous form of investment includes investment in Art.
FACTORS TO BE KEPT IN MIND WHILE IDENTIFYING A BEST INVESTMENT AVENUE:

While deciding for making an investment in any of the avenues available the following
factors need to be considered by the investor:
1. Return: This is not always the case that the avenue giving the maximum return is
always the best option to invest in. This is because return has two components
which are (i) Current Income and (ii) Capital Appreciation
I. Current Income: it is the regular cash flow the investors get from an
investment avenue like interest from a bank deposit, dividend from mutual
funds, etc.
II. Capital Appreciation: It is the growth in the value of the investment itself.
For instance, the land bought by a person appreciates in its value itself over
a period of time.
2. Risk: It is the deviation of the actual return from the expectation. One of the
measures of risk for an investment is its variation in returns from time to time
(volatility). If the variation is high, the investment is said to be risky. The other risk
associated with an investment is the slowness of its growth. Hence there is no
investment which can termed as RISK FREE.
3. Liquidity: this is referred to as the speed with which the investment can be
converted to cash quickly. Gold has the highest liquidity as it can quickly be pledged
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for cash. Selling gold though may not be as easy. Shares have the next highest
liquidity (2 days to cash in bank). Mutual funds come next (1 to 3 days for liquid or
equity funds).
4. Tax Treatment: A very important aspect to be considered when investing is the tax
treatment. Some investments today in India still enjoy Exempt-Exempt Exempt.
This is basically getting favourable tax treatment at the time of investment, at the
time there is income and also at the time of maturity.
5. Convenience: This is the final measure for comparing investment. Convenience is

a broad heading under which the ease of understanding the investment; ease for
investment in quantum of money, frequency of payments; specialist support to
manage the investment; ease of maintenance; etc., come up.
RISK AND RETURN PROFILE OF VARIOUS INVESTMENTS:

The main goal of managing the assets and investing in various alternatives is to maximize
the returns and minimize the risks.
As each asset class has varying levels of return and risk, investors should consider their
risk tolerance, investment objectives, time horizon and available capital as the basis for
their asset composition. Investors with a long time horizon and larger sums to invest may
feel more comfortable with high risk, high return options. Contrastingly, investors with
smaller sums and shorter time spans may feel more comfortable with low risk, low return
allocations.
6
There are many types of risk involved in financial decisions:

Capital Risk: the risk of incurring a capital loss due to downward changes in the market
price of a security is defined as the capital risk of a security. Investment in most of the
equity shares has this type of risk running with them.
Income risk: this is the risk of variation in return available from the security. This risk is
almost nil in bonds, debentures and preference shares
Default risk: the risk involved in default in payment of interest or repayment of principal
amount by the company is called default risk. This risk is nil in government bonds.
In general, the investor profiles which are called the “risk profiles” can be divided into
three major categories:
a. Conservative (low risk): Capital growth is not a priority and cautious investors seek
stable investments that will gradually grow in value and are not prone to high
volatility.
b. Balanced (medium risk): With a somewhat more volatile portfolio, you can expect
good if not necessarily exceptional capital growth over the long term.
c. Dynamic (high risk): Dynamic investors are prepared to expose their portfolio to
greater risk and accept higher volatility in order to maximize capital growth. An
investor’s attitude towards risk is central to the investment decisions made by him
or her.
7
Review of Literature
Luhar & Luhar (2011) in their paper on “Risk, Return and Portfolio Decisions in
Alternative Investment” tries to focus on the analysis and appraisal of risk, return
and portfolio decisions in different classes of alternative investments and their
impact on capital market of India considering the period of 2007-2010. Analysis is
carried in collecting various types of risks and returns taken by the fund managers
in performing and investing in the alternative investment. Further, analysis is also
carried for preference of investors in selecting or continuing with the fund
managers.
Raghunathan (2006) in his paper titled “A Study of Fund Selection Behaviour of

Individual Investors towards Mutual Funds: With Reference to Mumbai City”
published in ICFAI Journal of Behavioural Finance, 2006, noted that financial
markets are affected by the financial behaviour of investors. She observed that
consumer behaviour from the marketing world and financial economics had
brought together a need to study an exciting area of ‘behavioural finance’. This
study was an attempt to examine the related aspects of the fund selection
behaviour of individual investors towards mutual funds in the city of Mumbai.
Ravichandran (2008) in his study “A study on investor’s perception towards various

investment avenues in Capital Market with special reference to Derivatives” tends
to explain that a lot of investors especially young investors invest in derivatives in
spite of not having adequate knowledge about it. 100 samples were collected from
Chennai city regarding the awareness about derivatives through a structured
questionnaire and the findings regarding risk preferences were elaborated.
Kumar (April 2013) in his paper titled “A study of Customers’ preference towards
investment in Equity Shares and Mutual Funds” tries to find out the investors’
preference towards various investment alternatives and to find out the most
important attribute for investment consideration. He used z test, chi square test,
percentage analysis and ranking method for the purpose of evaluation of the
hypothesis framed. The conclusion was that the most important attribute for the
6
10
investment consideration was return followed by liquidity. The other finding was that
investors preferred investing in mutual funds as compared to equity shares.
Patil and Nandawar (Sep-Oct 2014) in their paper “A study on preferred

Investment avenues among salaried class people with reference to Pune, India”
identified various objectives of investment like profit, security, appreciation and
income stability. The study was based on the primary source of data collected with
the help of questionnaire and the data was analysed with the help of percentage,
chi square test and Pearson Coefficient of Correlation using a statistical software.
It was concluded that salaried class employees considered the safety as well as
good return on investment on regular basis.
Dr. Vechalekar (2013) in his paper titled “Perception of Indian Investor towards
investment in Mutual Funds with special reference to MIP Funds” tries to find out
the investment pattern of Indian investor and awareness level of them regarding
various investment opportunities. Also to find out the impact of various factors on
investment decision making. It was concluded that people had sufficient
knowledge about various investment opportunities and that diversification of
portfolio and tax benefits are the main factors affecting the investment pattern.
Joseph and Prakash (April- Sep 2014) in their paper titled “A study on Preferred
Investment Avenue among the People and the factors Considered for Investment”
focused on the various investment avenues available to the investors and factors
considered by them for investing. It was found out that many people are not willing
to take risk for their funds, so many prefer to invest in bank deposits, insurance,
post office saving etc. Many of the people are not aware about how to make an
investment in share market, equity etc. “No pain no gain” it is the golden principle
of investment management.
7
Need of the study
In present scenario, the trends in financial markets too have changed. Investments from the
public are essential for the growth and development of various sectors in the economy. With the
changing time there are various alternative investment avenues being introduced for promoting
the investments from the investors.
It becomes essential to study the way investors identify various avenues of investment available
for them. To do this it is essential to measure the performance of investment avenues kin terms
of risk and return.
So, the need of the study is to analyse the risk and return associated with various alternative
investment avenues and to study the investment behaviour of people in Agra. Also to find out
the most preferred investment opportunity among investors.
12
Objectives of the Study
1. To study the impact of demographic profile of the investors in Agra on their risk perception
towards various alternative opportunities.
2. To rank investment avenues based on their risk and return profile.
Research Methodology
Data Collection:
Data will be collected with the help of both primary and secondary sources of data
For primary data questionnaire and interview from investors will be used. For the purpose of
secondary data collection newspaper, investment guiding websites, financial websites, etc.
would be referred.
Sample Size:
A sample of 60 investors will be taken into consideration for the fulfilment of the purpose of the
study. The study will be limited to the investors in Agra City.
Sampling Unit:
In the context of market research, a sampling unit is an individual person. The
term sampling unit refers to a singular value within a sample database. For example, if
you were conducting research using a sample of university students, a single university
student would be a sampling unit.
Sampling frame:
A list of the items or people forming a population from which a sample is taken.
Sampling Technique:
Convenient Sampling technique will be used for the purpose of selecting the investors to be
questioned.
Statistical Tools:
 Tools for Data Analysis:

SWOT Analysis, chi- square test and AHP Analysis will be used for finding out the
impact of the demographic profile of the investors on the investment patter with
the help of hypothesis testing and for finding out the most preferred investment
alternative among the investors.
 Tools for Data Presentation:

Pie Chart, Bar Diagram, Line Graph, and other suitable methods shall be used to
present the data.
14
Demographics:
Demographics is the study of a population based on factors such as age, race
and sex. Governments, corporations and nongovernment organizations use
demographics to learn more about a population's characteristics for many
purposes, including policy development and economic market research. For
example, a company that sells high-end RVs wants to know roughly how many
people are at or nearing retirement age and what percentage are able to afford
the product.
Duration of the study:

The study will be conducted for the financial year 2014-2015.
15
Features of Investment Programme
In choosing specific investments investors will need definite ideas regarding features which their
investment avenue should possess. These features should be consistent with the investor’s
general objectives and in addition should afford them all the incidental advantages and
conveniences which are possible under the circumstances. The features include:
1. Safety of Principal: In order to have safety of principal the investor should carefully
review the economic and industry trends before choosing the type of investment. For
safety of principal the investors should consider the diversification of assets. Adequate
diversification involves mixing investment commitments by industry, geographically, by
management, by financial type and maturities.
2. Liquidity: Liquidity is required in investments to meet emergencies. Liquidity can be

ensured if the investors buy a proportion of readily saleable securities of his total
portfolio. He may therefore keep a small proportion of cash, fixed deposits and units
which can immediately be made liquid as compared to stocks and property or real estate
which do not ensure immediate liquidity.
3. Income stability: regularity of income at a consistent rate is necessary in any

investment pattern. Along with stability it is also important to see that the income is
adequate after taxes.
4. Appreciation and purchasing power stability: the portfolios of the investors

should be balanced to fight against any purchasing power stability. Investors should judge
price level inflation, explore their possibilities of gain and loss in the investments available
to them and the limitations of personal and family considerations. They should try to
forecast which securities will appreciate.
5. Legality: all the investments should be approved by law. Laws relating to minor, estate,
trust, shares and insurance be studied well before it brings out any problem for the
investor.
16
6. Tangibility: intangible securities many times lose their values due to price level inflation,
confiscatory laws or social collapse. Therefore, investors should invest a certain amount
of money in tangible assets like building, machinery and land.
Data Analysis and Interpretation

A hypothesis is a proposed explanation for a phenomenon. For a hypothesis to
be a scientific hypothesis, the scientific method requires that one can test it.
Scientists generally base scientific hypotheses on previous observations that
cannot satisfactorily be explained with the available scientific theories.
There are basically two types, namely, null hypothesis and
alternative hypothesis. A research generally starts with a problem. Next,
these hypotheses provide the researcher with some specific restatements and
clarifications of the research problem
17
To study whether the demographic profile of the investors affect their level of risk perception following
hypothesis were tested:
A. To study if the gender of the investor affects the risk taking capacity of investor or not H0- There
is no difference between the gender and the risk and return profile of the investor
Ha- There is a difference between the gender and the risk and return profile of the investor
Risk Gender
taking Male female total
capacity
low 28 4 32
moderate 12 10 22
high 4 2 6
very high 0 0 0
total 44 16 60
observed expected o-e o-e^2 o-e^2/e

28 23.46667 4.533333 20.55111 0.875758
12 16.13333 -4.13333 17.08444 1.058953
4 4.4 -0.4 0.16 0.036364
0 0 0 0 0
4 8.533 -4.533 20.54809 2.408073
10 5.86 4.14 17.1396 2.924846
2 1.6 0.4 0.16 0.1
0 0 0 0 0
∑(o-e^2/e)=7.403994
The calculated value from the data is 7.403 whereas the table value at
Level of significance 0.05 and degree of freedom 3 is 7.815
Since the calculated value is less than the table value we fail to reject the null hypothesis that is there is
no impact of gender on the risk taking capacity of the investors.
18
very high 0
high 4 2
moderate 12 10
low 28 4
0 5 10 15 20 25 30 35
Gender
male female
B. To study whether the age of the investors have an impact on the risk taking capacity of the
investors
H0- There is no difference between the age and the risk taking capacity of the investor Ha-
There is a difference between the age and the risk taking capacity of the investor
Risk Age(in years)
taking <=25 25-35 35-45 45-55 >55 Total
capacity
Low 2 19 4 3 4 32
moderate 0 8 6 4 4 22
High 0 1 2 1 2 6
very high 0 0 0 0 0 0
Total 2 28 12 8 10 60
observed expected o-e o-e^2 o-e^2/e

2 1.07 0.93 0.8649 0.808318
19 14.93 4.07 16.5649 1.109504
4 6.4 -2.4 5.76 0.9
3 4.3 -1.3 1.69 0.393023
4 5.3 -1.3 1.69 0.318868
0 0.73 -0.73 0.5329 0.73
8 10.26 -2.26 5.1076 0.497817
6 4.4 1.6 2.56 0.581818
4 2.93 1.07 1.1449 0.390751
19
4 3.66 0.34 0.1156 0.031585

0 0.2 -0.2 0.04 0.2
1 2.8 -1.8 3.24 1.157143
2 1.2 0.8 0.64 0.533333
1 0.8 0.2 0.04 0.05
2 1 1 1 1
0 0 0 0 ND
0 0 0 0 ND
0 0 0 0 ND
0 0 0 0 ND
0 0 0 0 ND
∑(o-e^2/e)=8.70216
Degree of Freedom 12
Level of significance 0.05
chi square table value 21.026
Since the calculated value is less than the table value of chi square test hence we fail to reject the null
hypothesis that is the age of the investor does not affect their risk taking capacity.
low moderate high very high

>55 4 4 2 0
45 - 55 3 4 10
35 - 45 4 6 2 0
25 - 35 19 8 10
<=25 2 0
RISK TAKING CAPACITY
Thus form the graph also it can be concluded that most of the investors prefer to remain in the bracket
of low and moderate risk taking capacity.
20
C. To study whether marital status of the investors affect their risk taking capacity
How- There is no difference between the marital status and the risk taking capacity of the
investor Ha- There is a difference between the marital status and the risk taking capacity of the
investor
single married total
Low 2 30 32
moderate 0 22 22
High 0 6 6
very high 0 0 0
Total 2 58 60
observed expected o-e (o-e)^2 (o-e)^2/e

2 1.066667 0.933333 0.871111 0.816667
0 0.733333 -0.73333 0.537778 0.733333
0 0.2 -0.2 0.04 0.2
0 0 0 0 0
30 30.93333 -0.93333 0.871111 0.028161
22 21.26667 0.733333 0.537778 0.025287
6 5.8 0.2 0.04 0.006897
0 0 0 0 0
∑(o-e^2/e)=1.810345
Degree of Freedom 3
Level of Significance 0.05
chi square table value 7.815
Since the calculated value is less than the table value that is 7.815 we fail to reject the null hypothesis
and hence conclude that there is no relationship between the marital status and the risk taking capacity
of the investors in Agra.
21
single married
VERY HIGH 0
HIGH 0 6
MODERATE 0 22
LOW 2 30
FREQUENCE
Thus it can be interpreted from the graph that maximum of the married people prefers to take low risk
due to their family’s safety and security while only two investors who are single being the student prefer
to be in low risk taking capacity bracket.
D. To study whether there is an impact of education qualification on the risk taking capacity of the
investors.
H0- there is no difference between the education qualification and the risk profile of an investor
Ha -there is a difference between the education qualification and the risk profile of an investor
non undergrad postgrad other total
graduate
Low 17 8 3 4 32
moderate 10 6 5 1 22
High 3 1 2 0 6
very high 0 0 0 0 0
Total 30 15 10 5 60
22
Observed expected o-e o-e^2 o-e^2/e

17 16 1 1 0.0625
8 8 0 0 0
3 5.33 -2.33 5.4289 1.018555
4 2.67 1.33 1.7689 0.662509
10 11 -1 1 0.090909
6 5.5 0.5 0.25 0.045455
5 3.67 1.33 1.7689 0.481989
1 1.83 -0.83 0.6889 0.376448
3 3 0 0 0
1 1.5 -0.5 0.25 0.166667
2 1 1 1 1
0 0.5 -0.5 0.25 0.5
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
∑(o-e^2/e)=4.405
Degree of Freedom 9
chi square value 16.919
Since the table value is greater than the calculated value of chi square we fail to reject the null
hypothesis and conclude that there is no relationship between education qualification of the investors
and their risk taking capacity.
23
OTHER 4 10
POST - GRAD 3 5 20
UNDER - GRAD 8 6 10
NON GRADUATE 17 10 3 0
RISK TAKING CAPACITY
Thus it can be interpreted from the graph that most of the non-graduate people prefer low risk whereas
post-graduates are to some extent ready to take high risk.
E. To study whether the occupation of the investor affects the risk taking capacity of the investors
H0- There is no difference between the occupation of the investor and his risk taking capacity
Ha- There is a difference between the occupation of the investor and his risk taking capacity
service professional student business Other Total
low 3 12 2 15 0 32
moderate 1 8 0 13 0 22
high 2 0 0 2 2 6
very high 0 0 0 0 0 0
total 6 20 2 30 2 60
24
O e o-e o-e^2 o-e^2/e

3 3.2 -0.2 0.04 0.0125
12 10.67 1.33 1.7689 0.165783
2 1.06 0.94 0.8836 0.833585
15 16 -1 1 0.0625
0 1.06 -1.06 1.1236 1.06
1 2.2 -1.2 1.44 0.654545
8 7.33 0.67 0.4489 0.061241
0 0.73 -0.73 0.5329 0.73
13 11 2 4 0.363636
0 0.73 -0.73 0.5329 0.73
2 0.6 1.4 1.96 3.266667
0 2 -2 4 2
0 0.2 -0.2 0.04 0.2
2 3 -1 1 0.333333
2 0.2 1.8 3.24 16.2
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
∑(o-e^2/e) =
26.67379
Since the calculated value here is greater than the table value we fail to accept the null hypothesis
whereas the alternative hypothesis is accepted that is there is an impact of the occupation of an
investor on their risk taking capacity.
25
OTHER 020
BUSINESS 15 13 20
STUDENT 20
PROFESSIONAL 12 8 0
SERVICE 3 1 20
FREQUENCY
Hence from the graph it can be concluded that most of the people investing belong to the business class
and maximum of the investors prefer low to moderate degree of risk.
F. To study whether the level of income has an impact on the risk taking capacity of the investors
H0- There is no difference between the income level and the risk taking capacity of the investor
Ha- There is a difference between the income level and the risk taking capacity of the investor
<1,50,000 1,50,000- 3,00,000- 4,50,000- >6,00,000

3,00,000, 4,50,000 6,00,000
low 3 20 8 1 0
moderate 1 14 5 2 0
high 0 2 2 1 1
very high 0 0 0 0 0
26
O e o-e o-e^2 o-e^2/e

3 2.13 0.87 0.7569 0.355352
20 19.2 0.8 0.64 0.033333
8 8 0 0 0
1 2.13 -1.13 1.2769 0.599484
0 0.53 -0.53 0.2809 0.53
1 1.47 -0.47 0.2209 0.150272
14 13.2 0.8 0.64 0.048485
5 5.5 -0.5 0.25 0.045455
2 1.47 0.53 0.2809 0.191088
0 0.37 -0.37 0.1369 0.37
0 0.4 -0.4 0.16 0.4
2 3.6 -1.6 2.56 0.711111
2 1.5 0.5 0.25 0.166667
1 0.4 0.6 0.36 0.9
1 0.1 0.9 0.81 8.1
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
∑(o-e^2/e)=
12.60125
level of significance 0.05

Since the calculated value here is less than the table value of the chi square we can say that we fail to
reject the null hypothesis and hence the level of income of an investor does not affect their risk taking
capacity.
27
>6 , 00,000 010
4 , 50,000 - 6 , 00,000 1 2 10
3 , 00,000 - 4 , 50,000 8 5 20
1 , 50,000 - 3 ,00,000, 20 14 20
<1 , 50,000 3 10
FREQUENCY
28
Part B-Analysis
1. Do you invest in various investment avenues?
response frequency
yes 60
no 0
Hence from the responses from the respondents it can be concluded that all the respondents do
invest in some or the other investment avenue i.e., 100% respondents are investing.
2. In what avenues do you invest?
investment avenues frequency

Equity 50
Debt Instruments 60
Fixed deposits 35
NSC,PFF 16
Real Estate 12
Mutual Funds 8
4%
7% Equity
9% 28% Debt Instruments
Fixed deposits
NSC,PFF
19%
Real Estate
33% Mutual Funds
29
Hence it can be concluded that the most of the respondents are investing in multiple
avenues. The most preferred investment avenues can be said to be debt instruments,
equity and fixed deposits.
3. How frequently do you invest?
investment responses
frequency
monthly 24
quarterly 8
bi annually 18
annually 10
17%
monthly
40%
quarterly
bi annually
30% annually
13%
Hence it can be interpreted from the graph that most of the investors are investing on
monthly basis a small amount of their income into various investment avenues available
and held by them.
30
4. Why do you invest?

reasons for investments responses
future security 30
principal stability 60
income growth 42
capital appreciation 6
tax saving 20
others 0
others tax saving
capital appreciation
income growth
principal stability
future security
0 10 20 30 40 5060
frequency 70
31
Hence it can be interpreted from the graph that most of the investors are investing for multiple
reasons but the most prominent reasons for investment are principal stability and growth of
income.
5. What percentage of your income do you invest?
percent invested responses
<20% 40
20-40% 16
40-60% 3
>60% 1
5%
1%
<20%
27%
20-40%
40-60%
67% >60%
Hence the graph reveals that most of the investors that is 60% of the investors are investing less
than 20% of their income on investing this can be due to the low level of income prevailing in
Agra.
6. Do you consult any specialist or fund manager before investment?
consultation responses
yes 26
no 34
32
no
yes
0 5 10 15 20 25 30 35 40
Hence it can be interpreted from the graph that most of the investors do not consult
specialist like brokers for making investments and taking investment decisions.
7. What factors do you look at before investing in any investment avenue?
factors considered while investing responses

return associated 60
risk 43
sectorial performance 2
past performance 56
recommendations from family and 52
friends
33
recommendations from family and friend'

past performance
sectorial performance
risk
return associated
0
10
20
30
40
50
60 70
It can be interpreted from the graph that apart from the sectorial performance all the
other factors are considered almost by all investors before investing the most
prominent of them being the return associated and the past performance of the
investment avenue.
8. What level of risk do you prefer?
level of risk responses

low 32
moderate 22
high 6
very high 0
34
0%
10%
low
moderate
53% high
37%
very high
It can be interpreted from the graph that 53% of the investors prefer taking low risk whereas
37% of the respondents prefer moderate risk. Hence we can say that the investors in Agra are
risk averse.
35
Analytical Hierarchy Process

The analytic hierarchy process (AHP) is a structured technique for organizing and
analysing complex decisions, based on mathematics and psychology. It was developed by
Thomas L. Saaty in the 1970s and has been extensively studied and refined since then.
It has particular application in group decision making, and is used around the world in a
wide variety of decision situations, in fields such as government, business, industry,
healthcare, shipbuilding and education.
Rather than prescribing a "correct" decision, the AHP helps decision makers find one that
best suits their goal and their understanding of the problem. It provides a comprehensive
and rational framework for structuring a decision problem, for representing and
quantifying its elements, for relating those elements to overall goals, and for evaluating
alternative solutions.
In this process the problem is first decomposed into hierarchy for the purpose of decision
making.
Once the hierarchy is built, the decision makers systematically evaluate its various
elements by comparing them to each other two at a time, with respect to their impact on
an element above them in the hierarchy. In making the comparisons, the decision makers
can use concrete data about the elements, but they typically use their judgments about
the elements' relative meaning and importance. It is the essence of the AHP that human
judgments, and not just the underlying information, can be used in performing the
evaluations
Decision situations to which the AHP can be applied include:
 Choice – The selection of one alternative from a given set of alternatives, usually
where there are multiple decision criteria involved.
 Ranking – Putting a set of alternatives in order from most to least desirable.
 Prioritization – Determining the relative merit of members of a set of alternatives,
as opposed to selecting a single one or merely ranking them.
 Resource allocation – Apportioning resources among a set of alternatives.
 Benchmarking – Comparing the processes in one's own organization with those of
other best-of-breed organizations.
 Quality management – Dealing with the multidimensional aspects of quality and
quality improvement.
36
 Conflict resolution – Settling disputes between parties with apparently

incompatible goals or positions.
For the purpose of the study the raking was done in two steps:
 First the ranking of the various risk and return profiles was done to find out the
most preferred risk return profile among the investors as well as to rank these
profiles
 Secondly the various alternative avenues for investments were compared to rank
them in the order of preference given to them by the investors and to come up
with the most preferred investment avenue for the most preferred risk and return
profile.
RANKING OF VARIOUS RISK AND RETURN PROFILES:

The criteria’s given to the investors to compare and choose among for the various risk and
return profile were:
Objective: to rank the various risk and return profile of the investors and to find the most
preferred risk and return profile
Criteria’s
 Low risk and low return

 Low risk and medium return
 Low risk and high return
 Medium risk and medium return
 Medium risk and high return
 High risk and medium return
 High risk and high return
37
The ranks are given on the following scale in AHP
Ranks Interpretation
1 1-Equal Importance -Two activities
2 contribute equally to the objective 2 -
3 Weak or slight importance of an over B
3 -Moderate Importance-Experience
and judgement slightly favour one
activity over another
4 4- Moderate importance
5 5- Strong Importance
6 6- strong importance
7 7- very strong importance
8 8- very very important
9 9- extreme importance
Reciprocal values If activity A has one of the above non-zero
numbers assigned to it when compared
with activity B, then B has the reciprocal
value when compared with A
Ranking on the basis of Pair wise comparison of the criteria’s

low risk low risk low risk medium medium high high
low medium high risk risk high risk risk
return return return medium return medium high
return return return
low risk low return 1 1 2 3 2 5 2
low risk medium return 1 1 1 2 3 6 7
low risk high return 0.5 1 1 5 5 6 2
medium risk medium return 0.333333 0.5 0.2 1 2 6 2
medium risk high return 0.5 0.333333 0.2 0.5 1 6 2
high risk medium return 0.2 0.166667 0.166667 0.166667 0.166667 1 1
high risk high return 0.5 0.142857 0.5 0.5 0.5 1 1
sum 4.033333 4.142857 5.066667 12.16667 13.66667 31 17
38
Calculating the Normalized Value and the Weights

Normalized value = Corresponding cell value (ranks) / the column sum
weights % weights
low risk low 0.2479 0.2413 0.3947 0.2465 0.1463 0.1612 0.1176 0.2222 22.227
return
low risk 0.2479 0.2413 0.1973 0.1643 0.2195 0.1935 0.4117 0.2394 23.941
medium
return
low risk high 0.1239 0.2413 0.1973 0.4109 0.3658 0.1935 0.1176 0.2358 23.581
return
medium risk 0.0826 0.1206 0.0394 0.0821 0.1463 0.1935 0.1176 0.1117 11.179
medium
return
medium risk 0.1239 0.0804 0.0394 0.0410 0.0731 0.1935 0.1176 0.0956 9.5623
high return
high risk 0.0495 0.0402 0.0328 0.0136 0.0121 0.0322 0.0588 0.0342 3.4240
medium
return
high risk 0.1239 0.0344 0.0986 0.0410 0.0365 0.0322 0.0588 0.0608 6.0842
high return
sum 1 1 1 1 1 1 1
Interpretation:
Therefore, on the basis of the weight we can say that the most preferred risk and
return profile is that of low risk and medium return also the ranking of the various
profiles would be as follows:
1- Low risk and medium return

2- Low risk and high return
3- Low risk and low return
4- Medium risk and medium return
5- Medium risk and high return
6- High risk and high return
7- High risk and medium return
1 being the highest rank
39
Checking the consistency

The consistency of the ranking is checked on the basis of the vector of weights and
with the help of an online AHP calculator software:
Calculating the vector of weights
Ws Ws*1/W
0.2222 0.2222 0.4445 0.6668 0.4445 1.11136 0.4445 3.5563 16
0.2394 0.2394 0.2394 0.4788 0.7182 1.4364 1.675 5.0276 21
0.1179 0.2358 0.2358 1.1790 1.1790 1.4149 0.4716 4.8342 20.5
0.0372 0.0558 0.0223 0.1117 0.2235 0.6707 0.2235 1.3452 12.033
0.0478 0.0318 0.0195 0.0478 0.0956 0.5737 0.1912 1.0072 10.533
0.0068 0.0057 0.0057 0.0057 0.0057 0.0342 0.0342 0.0981 2.866
0.0304 0.0086 0.0301 0.0304 0.0304 0.0608 0.0608 0.2520 4.142
Avg=12.43
The Consistency Index using the calculator was 0.09 which is acceptable
The Random Index (a predefined value in AHP) for the 7*7 matrix is 1.32
Consistency Ratio= CI/RI is 0.06
A CI and CR of less the 0.1 is acceptable hence the ranking given by the investors is
consistent.
RANKING OF THE VARIOUS INVESTMENT AVENUES

The goal was to rank the investment avenue based on the preferred risk and return
profile.
The criteria’s given for decision making were:
 Equity shares
 Debt instruments
 Fixed Deposits
40
 NSC, KVP
 Real Estate
 Mutual Funds
RANKINGS GIVEN BY THE INVESTORS

equity debt Fixed NSC,KVP real mutual
instruments Deposit estate funds
equity 1 1 3 3 6 6
debt instruments 1 1 6 7 6 6
fixed deposit 0.3333 0.166667 1 1 2 2
NSC,KVP 0.3333 0.1428 1 1 2 2
real estate 0.1666 0.1666 0.5 0.5 1 3
mutual funds 0.1666 0.1666 0.5 0.5 0.3333 1
sum 3 2.6428 12 13 17.333 20
CALCULATING THE NORMALIZED VALUE

Weights
in %
equity 0.3333 0.3783 0.25 0.2307 0.3461 0.3 30.64
debt instruments 0.3333 0.3783 0.5 0.5384 0.3461 0.3 39.93
fixed deposit 0.1111 0.0630 0.0833 0.0769 0.1153 0.1 9.16
NSC,KVP 0.1111 0.0540 0.0833 0.0769 0.1153 0.1 9.01
real estate 0.0555 0.0630 0.0416 0.0384 0.0576 0.15 6.77
mutual funds 0.0555 0.0630 0.0416 0.0384 0.0192 0.05 4.46
sum 1 1 1 1 1 1
Interpretation
On the basis of the weights we can say that for the preferred risk and return
profile the most preferred investment avenue is debt instruments. The ranks as
per the judgement and ranking given by the investors of the various investment
alternatives is as follows:
1- Debt instruments
2- Equity shares
3- Fixed Deposit
41
4- NSC, KVP
5- Real Estate
6- Mutual Funds
1 being the highest rank
Checking for the consistency of the ranks
Ws Ws*1/W
0.3064 0.3064 0.9193 0.9193 1.8386 1.8386 6.1287 20
0.3993 0.3993 2.3963 2.7957 2.3963 2.3963 10.783 27
0.0305 0.0152 0.0916 0.0916 0.1832 0.1832 0.5956 6.5
0.0300 0.0128 0.0901 0.0901 0.1802 0.1802 0.5837 6.47
0.011 0.011 0.033 0.033 0.067 0.203 0.3612 5.33
0.0074 0.0074 0.0223 0.0223 0.0148 0.0446 0.1191 2.66
Avg=11.32
The CI is 0.03 calculated with the help of online AHP Calculator

The RI for a 6*6 Matrix is 1.24
The CR = CI/RI is 0.02
Since both the CI and CR are less than 0.1 the ranking given by the investors is
consistent
FINDINGS
1. There is no impact of the demographic profile of the investor on the risk

taking capacity like the risk taking capacity increases with age as the
experience in investment of the investor increases.
2. Most of the investors in Agra like to take low to moderate degree of risk.
3. 33% of the investors invest in debt instruments.
42
4. 40% of the investors invest on monthly basis investing a limited amount of

money.
5. Most of the investors invest with the aim of having principal stability.
6. The low risk preference is due to low level of income and lack of proper
guidance to the investors as to in which security or instrument they should
invest.
7. The frequency of investment is low as the people invest a small part of their
income only that is only less than 20% in maximum cases.
8. Proper training and guidance should be given to the investors for the purpose
of investment.
9. The most preferred risk and return profile among the investors in Agra is low
risk and medium return as concluded using the AHP Process based on the
ranking of the profiles.
10.The most preferred investment avenue among investors in Agra is debt
instrument as concluded with the help of AHP Process.
43
Limitation
 The scope of the study is limited to the city of Agra itself.

 Few number of investors in the city.
 The investors are hesitant in sharing information related to their income and
the amount of money they are investing.
 It becomes difficult to gather people for a group decision process due to time
constraints and the reluctant behaviour of the respondents.
 The AHP process is a lengthy process as the respondents are called up again
and again till the time the ranking given by them becomes consistent.
44
QUESTIONNAIRE
This questionnaire is to gauge the perception of investors towards the risk and return profile of various
investment avenues on the basis of their demographic profile. This information will strictly be used for
academic purpose.
PART A:
Demographic profile:
1. Name
2. Gender: Male Female
3. Age
a. Below 25 years
b. 25-35 years
c. 35-45 years
d. 45-55 years
e. 55 years and above
4. Marital Status
a. Single
b. Married
5. Educational Qualification
a. Non-Graduate
b. Under-Graduate
c. Post graduate
d. Other
6. Occupation
a. Service
b. Professional
c. Student
d. Business
e. Other
7. Average income (per annum)

a. Below 1,50,000
b. Rs 1,50,000- Rs3,00,000
45
c. Rs 3,00,000- Rs 4,50,000
d. Rs 4,50,000-Rs 6,00,000
e. Rs 6,00,000 and above
PART B
1. Do you invest in various investment avenues available?

a. Yes
b. No
2. In what avenues do you invest?
a. Equity
b. Debt instruments
c. Fixed deposits
d. NSC, PPF
e. Real Estate
f. Mutual Funds
g. Other (please specify) …………………… 3. How frequently do you invest?
a. Monthly
b. Quarterly
c. Bi-annually
d. Annually
4. Why do you invest?
a. Future security
b. Principal Stability
c. Growth of Income
d. Capital Appreciation
e. Tax Saving
f. Other (specify)………………………
5. What percentage of your income do you invest?
a. Below 20%
b. 20-40%
c. 40-60%
d. Above 60%
6. Do you consult any specialist or fund manager before investment?
a. Yes
b. No
7. What factors do you look at before investing in any investment avenue?
a. Return associated
b. Risk involved
c. Sectoral preference
46
d. Past performance
e. Recommendations form friends, family and relatives
8. What level of risk do you prefer?

a. Low
b. Moderate
c. High
d. Very high
47
References
1. Luhar, Arvind Luhar, Hiresh (2011) “Risk, Return and Portfolio Decisions in Alternative
Investments” national monthly referred journal of research in commerce & management,
Volume No. 1 Issue No. 5, ISSN 2277-1166.
2. Raghunathan, K (2006) “A Study of Fund Selection Behaviour of Individual Investors towards

Mutual Funds: With Reference to Mumbai City”
3. Ravichandran, k (July-Sep 2008) “A study on investor’s perception towards various

investment avenues in Capital Market with special reference to Derivatives” Journal of
Contemporary Research in Management.
4. Kumar, Manoj (April 2013) “A study of Customers’ preference towards investment in Equity
Shares and Mutual Funds” International Journal of Education and Psychological Research,
Volume 2 Issue 2.
5. Patil, Sonali and Dr. Anadawar, Kalpana (2015) “A study on preferred Investment avenues
among salaried class people with reference to Pune, India” ZENITH International Journal of
Business Economics & Management Research, volume 5.
6. Vechalekar, N.M (2013) “Perception of Indian Investor towards investment in Mutual Funds
with special reference to MIP Funds” IOSR journal of Economics and Finance, ISSN: 23215933.
7. Joseph, Ashly Lynn and Dr. Prakash M (April-Sep 2014), “A Study on Preferred Investment
Avenue Among the People and Factors Considered for Investment” International Journal of
Management and Commerce Innovation, Volume 2, Issue 1.
48
Conclusion
At present we selected the objective of preserving the capital keeping in mind the
bear market and the recession period. Thus if the market is bullish its more
interesting to work with the objective of maximizing the return or beating the
market. Thus keep in mind the market condition, whether it is bullish or bearish.
49
Bibliography
 www.wikipedia.com
 www.colorado.edu
 www.sciencedirect.com
 http://bpmsg.com/online-ahp-calculator
 Ambler, C.A., and T.L. Mesenbourgh 1992 EDI-Reporting Standard for
the Future. Washington, D.C.: U.S. Department of Commerce.
 Angeloni, C., C. Cottarelli, and A. Levy 1992 Cross-border Deposits and
Monetary Aggregates in the Transition. (March) Temi di Discussione No. 163,
Banca d'Italia.
 Bank for International Settlements 1986 Recent Innovations in

International Banking. Basle, Switzerland: Bank for International Settlements.
 1988 Guide to the BIS Statistics on International Banking. Basle,
Switzerland: Bank for International Settlements.
 1989 International Interest Linkages and Monetary Policy. Basle,
 1992a International Banking and Financial Market Developments. Basle,
Switzerland : Bank for International Settlements.
 1992b Recent Developments in International Interbank Relations. Basle,
 1994a International Banking and Financial Market Developments. Basle,
 1994b Macroeconomic and Monetary Policy Issues Raised by the Growth
of Derivatives Markets. Basle, Switzerland: Bank for International Settlements.
 1994c Public Disclosure of Market and Credit Risks by Financial
Intermediaries . Basle, Switzerland: Bank for International Settlements.
50

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a straaa

RANKING INVESTMENT AVENUES BASED ON THEIR RISK

Submitted for the Fulfilment of the Degree of

Submitted to: Submitted by:

1. Faculty Mentor Dr. Ravikant Sharma

FINANCIAL ENVIRONMENT IN INDIA:

INVESTMENT OPPORTUNITIES AVAILABLE TO INVESTORS:

5. Miscellaneous: the miscellaneous form of investment includes investment in Art.

FACTORS TO BE KEPT IN MIND WHILE IDENTIFYING A BEST INVESTMENT AVENUE:

5. Convenience: This is the final measure for comparing investment. Convenience is

RISK AND RETURN PROFILE OF VARIOUS INVESTMENTS:

There are many types of risk involved in financial decisions:

Raghunathan (2006) in his paper titled “A Study of Fund Selection Behaviour of

Ravichandran (2008) in his study “A study on investor’s perception towards various

Patil and Nandawar (Sep-Oct 2014) in their paper “A study on preferred

Need of the study

 Tools for Data Analysis:

 Tools for Data Presentation:

Duration of the study:

Features of Investment Programme

2. Liquidity: Liquidity is required in investments to meet emergencies. Liquidity can be

3. Income stability: regularity of income at a consistent rate is necessary in any

4. Appreciation and purchasing power stability: the portfolios of the investors

Data Analysis and Interpretation

observed expected o-e o-e^2 o-e^2/e

Level of significance 0.05 and degree of freedom 3 is 7.815

observed expected o-e o-e^2 o-e^2/e

4 3.66 0.34 0.1156 0.031585

low moderate high very high

RISK TAKING CAPACITY

observed expected o-e (o-e)^2 (o-e)^2/e

Observed expected o-e o-e^2 o-e^2/e

low moderate high very high

RISK TAKING CAPACITY

O e o-e o-e^2 o-e^2/e

low moderate high very high

<1,50,000 1,50,000- 3,00,000- 4,50,000- >6,00,000

O e o-e o-e^2 o-e^2/e

level of significance 0.05

low moderate high very high

>6 , 00,000 010

2. In what avenues do you invest?

investment avenues frequency

33% Mutual Funds

3. How frequently do you invest?

4. Why do you invest?

others tax saving

5. What percentage of your income do you invest?

percent invested responses

6. Do you consult any specialist or fund manager before investment?

7. What factors do you look at before investing in any investment avenue?

factors considered while investing responses

recommendations from family and friend'

8. What level of risk do you prefer?

level of risk responses

Analytical Hierarchy Process

Decision situations to which the AHP can be applied include:

 Conflict resolution – Settling disputes between parties with apparently

RANKING OF VARIOUS RISK AND RETURN PROFILES: