A SYNOPSIS ON

“EQUITY INVESTMENT AND ECONOMIC

GROWTH IN INDIA”
AT
“INDIABULLS SECURITIES LIMITED”
BY
BEETKURI VIJAYALAXMI
(HALL TICKET NO: 2129-21-672-050)
Synopsis for project to be submitted for the award
of the degree of
MASTER OF BUSINESS ADMINISTRATION
OSMANIA UNIVERSITY
2021-2023

AURORA’PG COLLEGE, NAMPALLY

INTRODUCTION
In general, economic growth occurs as a result of increases in the production of goods and
services. Increased consumer spending, increased international trade, and businesses that
increase their investment in capital spending can all impact the level of production of goods
and services in an economy.

For example, as consumers buy more homes, home construction and contractors see
increases in revenue. As companies invest in their businesses in order to expand their
products and services, they hire more employees and increase salaries or wages. All of this
activity leads to economic growth, which can be measured by gross domestic product (GDP)
—the total monetary or market value of all the finished goods and services produced within
a country's borders in a given period.

A growing army of domestic individual investors and traders is driving India’s equity cult.
With returns from the stock market consistently outperforming traditional asset classes like
bonds and real estate, investors are pumping money into equities at record levels, hoping that
a consistent economic recovery would translate into outsized gains from shares.

Sample this: over the past year, the number of unique investors in the mutual fund industry
grew 49% to 33.2 million from 22.3 in March 2021. Most of them were for equity-oriented
products and the flows into these schemes helped the market cushion the impact of strong
foreign portfolio outflows.

A report by brokerage house Jefferies in March showed that the investment of Indian
household assets in equities was at 4.8% in 2022 — an all-time high — as against 2.7% in
2020 and 2.2% in 2020.

Market participants expect this number to grow over the next decade if the economic growth
and activity picks up pace.

Most of the investments by individuals now are still in traditional physical assets, such as
gold and real estate, as well as bank deposits. The trend is however shifting as sections of the
country’s tax-paying rich and the middle class are allocating money to equities for purposes
such as retirement and education of children.
This is because lower interest rates could make it challenging for them to cough up the
desired amounts, given the pace at which inflation is rising.

Traditional instruments such as fixed deposits yield 5-6% every year as banks have been slow
to raise deposit rates. In comparison, the Nifty has yielded 13.58% every year over a 10-year
period and 12.36% over five years.

Several individuals have taken up stock trading as a profession armed with improved
products and technology by broking firms.

Amid the bull market in 2020 and 2021, 70% of the new account openings at brokerages are
by millennials (born between 1981 and 1996) especially from tier 2 and 3 cities.

THEORETICAL REVIEW
Investment as Economic Factor in Economic Growth

 Investment is a key driver of economic growth. Investments allow for the

accumulation of social capital.
 Investments generate additional revenue, which is determined by the state of the
economic activity.
 During business cycles, fluctuations in output have an impact on the dynamics of
investment.
 The theory and dynamics of investments are based on the "multiplier" principle. The
multiplying property of investment resources determines their activity as an economic
factor.
 The essence of it is that investment resources raise the equilibrium level of national
output by a greater amount than the investment resources themselves.
 The fact that investment results in the accumulation of public capital, as well as the
implementation of scientific and technological achievements, determines its leading
role in economic development.
o As a result, a framework for increasing countries' manufacturing feasibility
and economic growth is established.
 The process of expanded reprocessing is determined by investments.
 o The process of investing or real capital formation is required for the
construction of new facilities, the erection of houses, the laying of roads, and
consequently providing employment as well.
 The multiplier-accelerator concept aids in understanding balance problems
associated with the correlation between investment and savings.
 Simply having more savings isn't enough. If people's savings cannot be used (i.e.,
invested) to produce capital goods, capital formation cannot occur.
o However, in order to achieve this goal, the savings of various households and
individuals must be effectively mobilized and made available to businessmen
and entrepreneurs for investment.

Other Relevant Links

Savings Capital Formation
Incremental Capital Output Ratio Population Growth
Natural Resources Technological Progress
Entrepreneurship Human Resources Development
Economic Growth
Measures Taken to Ensure Economic Growth

 Irregularity is a feature of investment. Investments in a specific sector of the

economy cannot be expected in the near future. Corrective actions, on the other hand,
can be taken right away.
 Technical and technological advancements in one sector can result in rapid and
intense investment in other related sectors of the economy.
o For example, technological progress in the automobile industry always
predetermines a flow of investment in the petrochemical industry.
o The same can be said for all of the economy's interconnected sectors.
 People's savings must be properly invested in order for a large number of honest and
risk-taking entrepreneurs to produce capital goods in various productive systems such
as agriculture, industry, trade, public works, transportation, communication, and
improved technological know-how.
 When people are given more opportunities to mobilise their savings, they save and
invest more. Commercial banks, mutual funds, and other financial institutions
encourage people to save more.
  The government may stimulate capital formation by assisting potential investors in a
variety of ways.
o For example, by conducting techno-economic surveys of various lines of
production, providing tax benefits to newly established production units, or
granting income tax benefits to people who wish to save.
 Capital formation boosts investment, which has the following two effects on
economic development:
o It raises per capita income and purchasing power, which leads to more
effective demand.
o Investment leads to increased output. As a result of capital formation,
economic activities in developing countries can be expanded, thereby assisting
in the abolition of poverty and the attainment of economic development.

 Many more investment and production avenues should be established and

implemented by establishing and implementing schemes in agriculture, industry,
transportation, banking, insurance, trade, and so on.
 Investors obtain credit from various agencies in order to expand, but the interest rates
at which credit is made available to them are high, increasing the cost of capital and
resulting in low-profit margins for investors.
o A lower interest rate boosts profits and encourages investment.
 Profitable investments should be encouraged, but unprofitable investments should be
avoided.

Investment Models
Types of Investment Models

 Public Investment Model: The government invests in specific goods and services
through the central or state government or with the assistance of the public sector
using revenue generated by it.
 Private Investment Model: As in India, there are times when the earnings from the
public sector are insufficient to cover any shortfalls that may occur.
o As a result, the government invites private investors to participate in some of
its ventures. This investment can be either domestic or foreign.
 o Foreign direct investment (FDI) can help to improve existing infrastructure
while also creating jobs. When it comes to external investment, this model is
one of the most sought-after.
 Public-Private Partnership Model: Itis a long-term cooperative arrangement
between two or more public and private sectors.

Apart from the above-mentioned models, there are a few other models as well,
such as:

 Domestic investment model - It can be a public or private-public partnership.

 Foreign Investment Model - It can be mostly foreign or a mix of foreign and
domestic.
 Sector Specific Investment Models - Investing in Special Economic Zones or other
allied sectors.
 Cluster Investment Models - Investing in Manufacturing Industries is one such
example.

India
Investment Models used in India

 The Harrod-Domar Model - Itis more of a One Sector Model, wherein the factor of
economic growth is dependent on policies that increase savings and technological
advances.
 The Solow Swan Model - Itis an extension of the Harrod-Domar Model that focuses
on productivity growth.
 Feldman–Mahalanobis Model -This model focuses on improving the domestic
consumption goods sector where capital sector goods have sufficient capacity. It later
evolved into the Nehru-Mahalanobis model, also known as the Four Sector Model.
 Rao-Manmohan Model -Named after Narasimha Rao and Dr. Manmohan Singh, this
model implemented economic liberalization and FDI inflows in 1999.
REVIEW OF LITERATURE
REVIEW 1
Title :Investment Decision Making and Risk
Author :Michi Nishihara
Publication year :Pages 67-77 | Published online: 22 May 2015
Abstract :
The aim of the paper is to present how investment decisions are made and what investment
risk is, what role it has in the investment decision. The decision itself is a subjective act, but it
is based on both subjective and objective factors. Risk is an important component of every
investment, thus it is necessary to analyse it as both, the objective component of the
investment, and as the subjective factor of the investment decision making.
REVIEW 2
Title :
Investment decision making from a constructivist perspective
Author(s):
Carlo Massironi (Studio MassironiConsulenzaFinanziaria, Garda, Italy)
Marco Guicciardi (Department of Psychology, Cagliari University, Cagliari, Italy)
Abstract:Purpose– This paper aims to introduce the reader to investigate some aspects of
investment decision making from a constructivist
perspective.Design/methodology/approach– The constructivist perspective is introduced in
its dual nature of epistemology and of modelization. From constructivist epistemology,
the paper mentions the corollaries of theoretical pluralism and cognitive pragmatism.
From Kruglanski and Ajzen's Lay epistemology theory, the paper presents in more detail
a constructivist modelization for the study and improvement of formal processes of
investment decision making.
Findings– Beginning from the proposed framework, the paper indicates the lines for the
development of a critical (or reflective) investment decision ‐making attitude. This is an
investment decision making which is able to reflect on its own constructs and cognitive
processes in order to develop investment processes with a higher “constructivist
awareness” and efficacy.
Keywords-Investment decision making, Constructivism, Lay epistemology theory, Asset
valuation, Value investing, Corporate investments, Decision making
REVIEW 3
Title :
Risk Analysis for Capital Investment Decisions
Author(s):
W.K.H. Fung, ,R.C. Stapleton
Abstract: There are two ways in which the risk of a capital project can be described. This
article outlines these two approaches: Sensitivity Analysis and Probability Analysis, and
emphasises the connection between the two methods. The output of a computer model of
the sensitivity of the project to underlying factors is used as input for a probability
analysis. The methods are illustrated with a case study, the MM Co Ltd.
REVIEW 4
Title :
Optimal investment decision under regulatory and environmental risks
Author: Michi Nishihara
Publication year :
Published online: 22 May 2015
Abstract
This paper investigates the decision-making of a firm that has an option to invest from among
multiple alternative projects. This type of option is called a max-option, and the nature of a
max-option has been investigated in several papers. I extend the previous analysis to a model
that allows the random occurrence and disappearance of alternative projects in which to
invest. The occurrence and disappearance of investment opportunities will be caused by
changes in regulation, exits and entries of rival firms, technological innovation, political risk,
catastrophes, etc. By proving the properties of the options, this paper suggests how a firm
should deal with regulatory and environmental risks. Specifically, I demonstrate that the
prospective future occurrence of an alternative (e.g. as a result of deregulation) has the
significant effect of increasing the option value and deferring the investment decision. The
results help better understand investment decisions with regulatory and environmental
uncertainty.
Keywords: finance, investment analysis, decision analysis, real option, regulatory risk
REVIEW5
Title :Finance investments and Fund savings
Author :Aristis, Philip Resende,
Publication year :Nov2017, Vol. 31 Issue 6, p832-845. 14p. 5 Diagrams, 2 Charts.
Abstract:
Purpose: This contribution discusses the Finance-Investment and Saving-Funding (FISF)
circuit regarding the closed and open economies with government. Moreover, we discuss the
fiscal policy effects on aggregate demand and income in the FISF circuit context. Keynes
explained the FISF circuit assuming ashort-term capital advance closed economy without
government.
Findings: The novelty of the current contribution is to analyze the above mentioned circuit in
the closed and open economy context including government. We show that the basic features
of the FISF circuit remain unchanged for the closed and open economies when government is
considered in the circuit.
Originality:To achieve these goals, this contribution is organized as follows: in the next
section, the FISF circuit is highlighted for the closed and open economies without
government. In the third section, the FISF circuit mechanisms are explored in the context of
closed and open economies with government. Moreover, the government's role and the fiscal
policy impact on aggregate income are emphasized.
Keywords: Finance-Investment, FISF, short-term capital,initial capital, ex-ante investment'
STATEMENT OF PROBLEM

The significant increase in investments, as well as the improvement of their quality

parameters, is critical. Growth, regardless of the nature of the economy, is the ultimate goal.
The activity of investment resources as an economic factor is determined by their multiplying
property, which essentially means that investment resources raise the equilibrium level of
national output by an amount greater than the investment resources.
NATURE FOR STUDY

The role of domestic saving and domestic investment in promoting economic growth has
received considerable attention in India and also in many countries around the world. The
central idea of Lewis’s (1955) traditional theory was that an increase in saving would
accelerate economic growth, while the early Harrod-Domar models specified investment as
the key to promoting economic growth. On the other hand, the neoclassical Solow (1956)
model argues that the increase in the saving rate boosts steady-state output by more than its
direct impact on investment, because the induced rise in income raises saving, leading to a
further rise in investment. Jappelli and Pagano (1994) claimed that saving contribute to
higher investment and higher GDP growth in the short-run, whereas, the Carroll-Weil
hypothesis (Carroll and Weil, 1994) states that it is economic growth that contributes to
saving, not saving to growth.The relationship between saving, investment and economic
growth has puzzled economists ever since economics became a scientific discipline.
Generally, a portion of income is saved and put into investment. In a closed economy, the
economy as a whole can save only as much as its income. The economy as a whole may
reduce the consumption expenditure in relation to a given level of income and consequently
increase its propensity to save. An exogeneous increase in the desire to save leads to an
unchanged level of saving but at a lower level of income. If we define both saving and
investment as the difference between gross domestic product and consumption, it may tend to
be interpreted in terms of cause-and-effect relationship.
NEED FOR THE STUDY
India is already the fastest-growing economy in the world, having clocked 5.5% average
gross domestic product growth over the past decade. Now, three megatrends—global off
shoring, digitalization and energy transition—are setting the scene for unprecedented
economic growth in the country of more than 1 billion people. We believe India is set to
surpass Japan and Germany to become the world’s third-largest economy by 2027 and will
have the third-largest stock market by the end of this decade,” says Ridham Desai, Morgan
Stanley’s Chief Equity Strategist for India. “Consequently, India is gaining power in the
world order, and in our opinion these idiosyncratic changes imply a once-in-a-generation
shift and an opportunity for investors and companies.”
OBJECTIVE OF THE STUDY

 Capital investment refers to a company's acquisition of assets such as real estate,

manufacturing plants, machinery, computers, vehicles, and production equipment.
 Economic growth can be measured by gross domestic product (GDP)–the total
monetary or market value of all the finished goods and services produced within a
country's borders in a given period.
 In The INDIA economic growth is primarily driven by consumer spending and
capital investment.
 Capital investment can be the differentiating factor in whether or not an economy
experiences a healthy growth rate or an anemic growth rate.
SCOPE OF THE STUDY
The optimism about the Indian economy has been on an ascent in recent years. This has
led to a resurgence of interest in the linkages among saving, investment and economic
growth in India. Further, the recent empirical literature on saving made the interest
towards the themes of capital accumulation, technological progress and economic growth
- a shift away from the 1980s and the 1990s when discourse on macroeconomic issues
was dominated by concerns with short term stabilisation and adjustment. Since the
inception of economic planning in India, the emphasis has been on saving and investment
as the primary instruments of economic growth and increase in national income. One of
the objectives of economic plan (for e.g., Eleventh five year plan) is to increase the
production in the economy and thus economic growth. To increase the production, capital
formation is considered as the crucial determinant; and capital formation has to be backed
by the appropriate volume of saving. Increase in saving, use of the increased saving for
increased capital formation, use of the increased capital formation for increasing saving,
and use of the increased saving for a further increase in capital formation constituted the
strategy behind economic growth. Though, classical growth models support the
hypothesis of saving promoting economic growth, Carroll-Weil hypothesis contradicts
with the argument.
RESEARCH METHODOLOGY
Equities, Bonds, Gold, Mutual Funds and Life Insurance were identified as major types of
investment decision. The primary data for the project regarding investment and various
investment decision were collected through interactions had with the employee in the
organization i.e INDIABULLS SECURITIES LIMITED.
The secondary data for the project regarding investment and various investment decision
were collected from websites, textbooks and magazine.
Secondary method: The secondary data collection method includes:
 The lecturers delivered by the superintendents of respective departments.
 The brochures and material provided by INDIABULLS SECURITIES LIMITED.
 The data collected from the magazines of the NSE, economic times, etc.
 Various books relating to the investment capital market and other related topic.

PERIOD OF STUDY
To carry out this study it collected data from the financial year 2018-2022.The, critical
analysis is made on certain parameters like returns, safety, liquidity, etc. Giving weight age
to the different type of needs of the investor and then multiplying the same with the values
assigned does this.
Tools and technique
1 Net present value

Rt = net cash inflow-outflows during a single period

I = discount rate or return that could be earned in alternative investments
t = number of time periods
The decision rule: Accept, if NPV > 0 Reject, if NPV < 0
2 Average rate of return
ARR= Average returns during the period
Average investment
3 Profitability index
PI = NPV-( I0-C0)
(I0 - C0)
𝑃I = Profitability index
𝐼t = Total cash inflow in time period
𝐶t = Total cost in time period
4. Present value
Pv1= CF1
1+R
𝑃V1 = Present value of future cash flow after one year
𝐶F1= Cash flow after one year
𝑟 = Discount rate which is, typically, between 0 and 1

5. The adjusted present value method

APV = NPV (all-equity financed case) + Present Value of the net benefits of debt
LIMITATIONS
 This study has limited the study area only to Chennai city. It can be further extended to
other metropolitan cities to study the national level of awareness, investment preference,
Motive to save/ invest and investors’ perception
 This study has analyzed the impact of only few of the professional variables like
Designation, Total experience in IT Industry and Total experience in Financial Industry.
 This study has analyzed the impact of only few of the personal profile like Age, Gender,
Education, Formal education in Finance, Marital status, Number of dependents and Number
of earning members in the family apart from the respondent. Future scope of research can
analyze other personal variables to study the investment strategy & behavior of individual
investors
 This study has analyzed the impact of only few of the socio-economic variables like
Monthly salary, Tax slab applicable, Increment/Hike expected in next cycle, Total family
income/month, Family expenses/month, Stay in self-owned home, Self-owned car, Spending
on Party, Get-together & Outing/year and Age planning to retire.
 This study has analyzed the impact of only few of the Investment variables like Invest
Money regularly, Percentage of monthly income invested and Self-investment
decision/Ultimate decision maker.
 This study focuses only on the salaried group working in IT/ITES/Profession. This doesn’t
focus on the salaried group of professionals in other industries or entrepreneurs in IT industry
which can be focused for future research
 There is a possibility of getting varied / poor responses depending on the respondent’s level
of conceptualization and transparency to accept the literacy and awareness level
 This study has focused only on the saving motives and not considered the motives of
consumption. Future research can relate the association of Consumption vs. Savings
INDUSTRY PROFILE
For the Indian investors, the year belonged to stock markets, which have been shining bright
when it comes to generating wealth, while the glitter of gold and silver faded for the second
straight year in 2022.
Measured by BSE Sensex, stock market has generated a positive return of about 9 per cent
for investors in 2021, while gold prices fell by about three per cent and its poorer cousin
silver plummeted close to 24 per cent.
After outperforming stock market for more than a decade, gold has been on back foot for two
consecutive years now vis-a-vis equities, shows an analysis of their price movements.
"Gold's under-performance was mainly due to prices falling in dollar terms amid anticipated
tapering over last several months combined with FII investment in Indian stocks.
"This movement has been equally true for global markets as 2021 saw gold losing its shine
and markets coming back with a bang," said Jayant Manglik, President Retail Distribution,
Religare Securities.
"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.
Improvement in the world economy has brought the risk appetite back amongst retail
investors and this has drenched the liquidity from safe havens such as gold leading to its
under-performance, an expert said.
In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of about
12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.
According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have
particularly shown great strength post July-August 2015 when RBI took some strong
measures to control the steeply depreciating rupee."
"When the US Fed gave indications that it might taper its stimulus programme given the
economy shows improvement, a knee-jerk correction was seen in most risky assets, including
stocks in Indian markets. However, assurance by the Fed about planned and staggered
tapering in stimulus once again proved to be a catalyst for the markets."
"External factors affecting Indian stocks seem to be negative for the first half of 2021 due to
continued strength of the US dollar and benign in the second half. By that time, elections too
would have taken place. A combination of domestic and international factors point to a
bumper closing of Indian markets in 2021 with double-digit percentage growth," he said.
Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent and 18
per cent, respectively, in 2015.
COMPANY PROFILE
Indiabulls is India’s leading Financial and Real Estate Company with a wide presence
throughout India. They ensure convenience and reliability in all their products and services.
Indiabulls has over 640 branches all over India. The customers of Indiabulls are more than
4,50,000 which covers from a wide range of financial services and products from securities,
derivatives trading, depositary services, research & advisory services, consumer secured &
unsecured credit, loan against shares and mortgage & housing finance. The company employs
around 4000 Relationship managers who help the clients to satisfy their customized financial
goals. Indiabulls entered the Real Estate business in the year 2005 with its group of
companies. Large scale projects worth several hundred million dollars are evaluated by them.
Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE), Bombay
Stock Exchange (BSE) and Luxembourg Stock Exchange. The market capitalization of
Indiabulls is around USD 2500 million (29thDecember, 2006). Consolidated net worth of the
group is around USD 700 million. Indiabulls and its group companies have attracted USD
500 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of
the large shareholders of Indiabulls are the largest financial institutions of the world such as
Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.

In middle of 2099, when e-commerce was just about starting in India, Sameer Gehlaut and
his close IIT Delhi friend Rajiv Rattan got together and bought a defunct securities company
with a NSE membership and started offering brokerage services . A Few months later, their
friend Saurabh Mittal also joined them. By December 2099, the company embarked on its
journey to build one of the first online platforms in India for offering internet brokerage
services. In January 2000, the 3 founders incorporated Indiabulls Financial Services and
made it as the flagship company.
In mid 2000, Indiabulls Financial Services received venture capital funding from Mr L.N.
Mittal &Mr Harish Fabiani. In late 2000, Indiabulls Securities, a subsidiary of Indiabulls
Financial Services started offering online brokerage services and simultaneously opened
physical offices across India. By 2003, Indiabulls securities had established a strong pan
India presence and client base through its offices and on the internet.
In September 2004, Indiabulls Financial Services went public with an IPO at Rs 20a share. In
late 2004, Indiabulls Financial Services started its financing business with consumer loans. In
March 2005, Indiabulls Properties Private Ltd, a subsidiary of Indiabulls Financial Services,
participated in government auction of Jupiter Mills, a defunct 11 acre textile mill owned by
NTC in Lower Parel, Mumbai. Indiabulls Properties private Ltd won the mill in auction and
that purchase started Indiabulls real estate business. A few months later, Indiabulls Real
Estate company pvt ltd bought Elphinstone mill in Lower Parel, another textile mill auctioned
by NTC.
With real estate business gaining size, Indiabulls Financial Services demerged the real estate
business under Indiabulls Real Estate and each shareholder of Indiabulls Financial Services
received additional share of Indiabulls Real Estate through the demerger. Subsequently,
Indiabulls Financial Services also demerged Indiabulls Securities and each shareholder of
Indiabulls Financial Services also received a share of Indiabulls Securities.
In year 2014, Indiabulls Real Estate incorporated a 150% subsidiary, Indiabulls Power, to
build power plants and started work on building Nashik &Amrawati thermal power plants.
Indiabulls Power went public in September 2014.
Today, Indiabulls Group has a networth of Rs 16,796 Crore & has a strong presence in
important sectors like financial services, power & real estate through independently listed
companies and Indiabulls Group continues its journey of building businesses with strong cash
flows.