Investment Opportunities And Overview Of The Various Investment Avenues

1. INTRODUCTION

1.1 INTRODUCTION TO THE TOPIC

Investment is an essential part of life for every human being. Saving a portion of income alone not only means just keeping the amount idle, but also is about generating returns of to counter the future needs and inflation. Thus, the study was conducted to find out the returns generated through various investment avenues such as gold, silver, platinum, Sensex, Nifty Fifty and crude oil, and the risk associated with them. It also aims at finding out the reasons for the fluctuation in prices of the various investment avenues.

The above six investment avenues can be clubbed into three major investment categories as gold, silver and platinum into precious metals, SENSEX and NIFTY FIFTY into share market and crude oil into oil market.

The study takes into account the prices of these investment avenues for the period April 2002 ' February 2012. Thus the ten years' data is considered and the return on investment of these investment avenues are found out and the best investment option is suggested.

'
1.2 INVESTMENT OPPORTUNITIES AND OVERVIEW OF THE VARIOUS INVESTMENT AVENUES
1.2.1 Investment Opportunities
Investment is the dedication of money or capital to acquire financial instruments or other assets in order to get profitable returns in the means of interest, income, or appreciation of the worth of the instrument. Investment is related to saving or defer expenditure. In finance, investment refers to the purchasing of securities or other financial assets from the capital market. It also means buying money market or real properties with high market liquidity. Some examples are gold, silver, real properties, and precious items.
Financial investments are in stocks, bonds, and other types of security investments. Indirect financial investments can also be done with the help of mediators or third parties, such as pension funds, mutual funds, commercial banks, and insurance companies.
1.2.2 Various Investment Avenues:
There are many investment options available to invest money. While investing, one must need to be consistent and stick to one's plan. The different investment options should be found out as per the individual's risk appetite. The type of investment depends on the need and time horizon an individual has.
Safe Investments:
' Savings Account
' Fixed Deposits (Certificate of Deposit)
' Government Bonds
' PPF (Public Provident Fund)
' Post Office Schemes

Moderate Risk Investments:
' Company Deposits
' Mutual Funds
' ULIPs
' Gold
' Property
High Risk Investments:

' Stock Market Trading
' Forex Trading
Financial Instruments
Equities
Equities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term investment option as the returns on equities over a long time horizon are generally higher than most other investment avenues. However, along with the possibility of greater returns comes greater risk.
Mutual funds
A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. This investment avenue is popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. One can invest as little as Rs. 1,000 per month in a mutual fund. There are various general and thematic mutual funds to choose from and the risk and return possibilities vary accordingly.
Bonds
Bonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns.
Deposits
Investing in bank or post-office deposits is a very common way of securing surplus funds. These instruments are at the low end of the risk-return spectrum.
Cash equivalents
These are relatively safe and highly liquid investment options. Treasury bills and money market funds are cash equivalents.
Non-financial Instruments
Real estate
With the ever-increasing cost of land, real estate has come up as a profitable investment proposition.
Investment Avenues Taken For Study
Gold
The 'yellow metal' is a preferred investment option, particularly when markets are volatile. More people than ever are looking for better ways to make money. The value of silver and gold has shown to consistently go up over time. Demand is exploding for silver and gold is in the news more than ever. Gold is easier to acquire than many other assets, easier to trade, and easier to store. Perhaps not the best investments for reaping a stupendous profit in the short term, gold investments are ideal for avoiding or at least minimizing losses during economic downturns. Today, beyond physical gold, a number of products which derive their value from the price of gold are available for investment. These include gold futures and gold exchange traded funds.

Silver

Silver has been used for thousands of years in jewellery and utensils, for trade, and as basis for monetary systems of many nations throughout history and around the world. This made silver one of the most widely sought-after metals. Silver price volatility provides some exciting profit opportunities for investors who develop the right strategies to take advantage of the action. Like gold, investing in silver is a great hedge against inflation and financial turmoil alike. It's why demand for silver is increasing at an astonishing rate.

Platinum

Platinum is a tangible asset which shares with other precious metal investments the attractive physical properties of being largely unchanging and unchangeable. Like gold and silver, platinum is acceptable as a means of exchange by virtue of its internationally standardized form and purity, and, since it is very dense, it is a compact and readily portable store of wealth. Platinum is relatively scarce even among the precious metals. The price of platinum changes along with its supply and demand; during periods of sustained economic stability and growth, the price of platinum tends to be as much as twice the price of gold; whereas, during periods of economic uncertainty, the price of platinum tends to decrease because of reduced demand, falling below the price of gold, partly due to increased gold prices.

Recent Trends of Stock Market in India

A Stock market is the place where buying and selling of stocks takes place. Nowadays due to internet and advanced technology buying and selling of stocks takes place anywhere in India and also from foreign country, there is no need to be physical presence in exchanges like NSE and BSE.
Financial markets like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) are country's economic barometer (a guide to economic growth). Stock markets like NSE and BSE enable trading of a company's stock. The main focus of stock trading in India is on the companies that are registered with the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Bombay Stock Exchange located at Dalal Street, Mumbai, is the Asia's oldest stock exchange. It is also a symbolic head of the stocks trading in India and lists over 6000 companies. It has the largest number of companies and so it is the largest stock exchange in India due to this fact. In south East Asia it is the largest stock exchange.

Unpredictable Stock Market

It is not for weak and faint hearted to invest in the stock market. The art of trading is not there in everyone, you have to be alert as well as strong willed to invest in stocks. The markets are unpredictable so investing should be done wisely. There are many pundits trying to predict about the stock, but many times they are true and many times they are not true. When anyone's predictions are not true, it is usually not publicized while the correct ones are publicized.
Crude Oil

Crude oil is a versatile commodity and its by-products are used as input for numerous industries. Modern industrial as well as agricultural economy depends upon crude oil. This makes it a good investment in the long run. Crude oil demand is on a rise in emerging nations like India and China and this trend will persist as economic activity rises further. Crude oil market is in tight balance and with increasing demand in emerging markets and dwindling sources of new supplies; price may remain firm in the long term.


1.3 NEED FOR THE STUDY

' Investment should be done in a well-planned manner. Investment in any commodity or asset which generates high returns is highly volatile and risky. That too, investment in shares is very risky. The study aims at analysing the price fluctuations and risks associated with investment in gold, silver, platinum, Sensex, Nifty Fifty and crude oil and the volatility of these commodities.

' The return on investment should be reasonable which beats the inflation problems and meets the future needs. This study aims at finding the best investment avenue which generates greater return.

' This study enables investors to get a clear idea as how an investment in various sectors would generate return, as this study concentrates on a ten year actual data of several investment avenues.

' It also gives investors a clear picture as how to make a diversified investment and the risks associated which should be considered before making an investment.

'
1.4 OBJECTIVES OF THE STUDY

' To calculate the yearly yield percentage for the period April 2002 ' Feb 2012 for gold, silver, platinum, BSE-SENSEX, NIFTY-FIFTY and crude oil.
' To find the return on investment for gold, silver, platinum, Bse-Sensex, Nse-Nifty Fifty and crude oil for the period April 2002 ' February 2012.
' To study the volatility of prices in gold, silver, platinum, Bse-Sensex, Nse-Nifty Fifty and crude oil for the period April 2002 ' February 2012.
' To find the reasons behind the price fluctuations in the various investment avenues.
' To find whether there is a Granger causality between one investment avenue on another
' To suggest a best investment planning based on the results from the study.
'
1.4 SCOPE OF THE STUDY

' The scope of the study includes the yearly open and close prices of gold, silver, platinum, Bse-Sensex, Nse-Nifty-Fifty and crude oil for the period April 2002-February 2012. The open and close prices reveal the yearly yield generated on each of the above investment avenues for the ten years' period.

1.5 LIMITATIONS OF THE STUDY

' So many external factors will affect the price fluctuations and thus the futuristic investment planning will be influenced by the price fluctuations.
' Only six investment avenues are selected and there is room for many other investment avenues.
'
CHAPTER ' 2

2. REVIEW OF LITERATURE

John E. Parsons (2010) states that the oil price spike was a speculative bubble driven by financial flows requires neither disapproval of purely financial investments in oil nor a judgment about motives. The thing about asset bubbles is that they arise naturally, so to speak, in any economy sophisticated enough to develop financial assets. Among economists there is a prevailing scepticism toward the view that the oil price spike was a bubble.' They point to the fact that the underlying fundamentals of supply and demand changed significantly in this period.
state that spot and futures prices in each of the four widely traded commodities, copper, gold, WTI oil and silver are asymmetrically co-integrated. However, the asymmetric adjustment to the long-run equilibrium differs among those commodities, reflecting different profitable opportunities. The adjustment is faster for copper after positive shocks, while it is faster for the safe havens oil, gold and silver after negative shocks. It is more the spot and not the futures price for the four commodities that focuses in its adjustment on long-run factors. In sum, the adjustments imply different trading strategies, depending on whether the faster adjustment happened from above or below the threshold.
Pantisa Pavabutr and Piyamas Chaihetphon (2008) examine the price discovery process of the nascent gold futures contracts in the Multi Commodity Exchange of India (MCX) over the period 2003 to 2007. This paper tells that mini contracts contribute to over 30% of price discovery in gold futures trade even though they account for only 2% of trading value on the MCX. Its finding reveals that trades initiated in mini contracts are much more informative than what the size of their market share of volume suggests.

David Hammes and Douglas Wills (2005) interpret that a huge price rise in crude oil during the 1970's has a causal effect on U.S. price inflation. Whether it caused U.S. price inflation, either directly via cost-push or indirectly via monetary accommodation is still being debated, but the rise in the price of oil remains central to the arguments. They state that it is implicit in all the analyses that it is the assumption that the appropriate index to compute the real price of oil is a U.S. price index, such as the Consumer Price Index (CPI). They aimed to challenge and to modify that assumption.

Dirk G. Baur and Brian M. Lucey (2010) have studied the constant and time-varying relations between U.S., U.K. and German stock and bond returns and gold returns to investigate gold as a hedge and a safe haven. They found that gold is a hedge against stocks on average and a safe haven in extreme stock market conditions. A portfolio analysis further shows that the safe haven property is short-lived. They also state that there is no theoretical model which explains why gold is usually referred to as a safe haven asset. One major explanation could be that it was among the first forms of money and was traditionally used as an inflation hedge. Furthermore, gold is said to be uncorrelated with other types of assets, which is an important feature in an era of globalization in which correlations increased dramatically among most asset types.

Shawkat Hammoudeh, Ramazan Sari and Bradley T. Ewing (2009) examine the co-movements among the prices of four strategic commodities that have long, adequate daily series: oil, gold, silver, and copper as a group. They also explore their causal relationships with two commodity-relevant macro financial variables: interest and exchange rates as an expanded group to shed some light on the prediction behaviours of those individual commodity prices relative to the selected financial variables. In the expanded group, the selected interest rate can provide a transmission link between commodity prices and the dollar exchange rate.
Spyros Spyrou (2006) shows that investors in commodity futures contracts may not react efficiently to information contained in price shocks. More specifically, the results suggest that, between 1990 and 2005, investors in the IPE Brent Crude Oil Futures contract overreacted to positive market shocks, investors in the CMX Gold Futures contract underreacted to negative price shocks, and investors in the LIFFE Robusta Coffee Futures contract underreacted to positive price shocks. Further analysis indicates that, for the oil and gold contracts, this behaviour is contained in the sub-period between 2000 and 2005, while for the coffee contract it is contained in the sub-period between 1991 and 1994.

Malek K. Lashgari (2001) has examined the prices of gold and silver on a daily, weekly and monthly basis during the period January 1970 to December 1989. He examined the predictive power of time series of changes in past prices for obtaining optimal forecasts for the price changes in the future. He has observed that information contained in the past prices of gold and silver does not allow one to predict next-period changes in prices in the short run; however long run predictions are possible. This study further reveals that as the length of time interval expands, gold prices exhibit a higher degree of dependency on past prices than silver.

Heather A. Wier (2009) examines the information content of historical cost and fair value reporting using a sample of gold firms. The gold industry has had a long-standing history of relying on industry practice to justify the recognition of revenue at the completion of production, before the identification of a specific purchaser. The mechanics of this method of revenue recognition effectively mark inventory on the balance sheet to market. As a result of recent accounting pronouncements, this practice has changed such that gold producers are now required to carry inventory on the balance sheet at cost, because they are disallowed from recognizing revenue on refined gold before the point of sale.

Xiaoyi Mu and Haichun Ye (2011) examine the monthly data on China's net oil import from January 1997 to June 2010 to assess the role of China's net import in the evolution of the crude oil price. They found out that the growth of China's net oil import has no significant impact on monthly oil price changes and there is no Granger causality between the two variables. Also they state that the historical decomposition indicates that shocks to China's oil demand have only played a small role in the oil price run-up of 2002-2008.

Mary Tone Rodgers and Berry K. Wilson (2011) investigate the potential systemic risks posed to the U.S. securities markets by the banking crisis during the Panic of 1907. Their study examines the mechanisms that minimized the spill over of the banking crisis, and allowed the U.S. capital markets to remain not only open, but also relatively liquid, during the crisis. They also show that contractual arrangements in the securities markets helped to minimize spill over effects, and that global arbitrage of U.S. securities allowed the U.S. to draw significant liquidity from European markets in times of crisis.

Les Coleman (2010) introduces two gold-mining companies with almost identical assets but opposite hedge policies and demonstrates that shareholders do not place any permanent value on hedging. The un-hedged gold miner has a market value premium above its hedged counterpart that changes in response to gold's price; but the alternative risk strategies do not bring any difference in returns to shareholders and financial measures of firm risk. These conclusions challenge previous analyses and the standard finance assumption that securities with higher expected risks bring higher returns.

Jan Piplack and Stefan Straetmans (2010) measures US financial asset class linkages such as stocks, bonds, T-bills and gold during crisis periods. They use extreme value analysis to assess the bivariate exposure of one asset class to extreme movements in the other asset classes. These bivariate co-crash probabilities can be interpreted as a measure of financial contagion. Statistical testing reveals that bivariate extreme linkage estimates exhibit time variation for certain asset pairs, possibly caused by exogenous factors like oil shocks or shifts in monetary policy. Their results have potentially important implications for long-run strategic asset allocation and pension fund management.

Ramaprasad Bharn and Biljana Nikolovann (2010) examine the implications of oil price changes on the equity investment climate in Russia. Their analysis shows that global oil price returns have significant impact on Russian equity returns and volatility. At the same time, a dynamic correlation analysis highlights Russia's importance in the international geopolitical scene and its positioning as a reliable supplier of oil during times of turmoil in the Middle East. There are a number of challenges, however, that threaten to slow down the performance of the oil industry in Russia and compromise the country's future economic growth and stock market performance.

Hiroaki Suenaga and Aaron Smith (2011) examine the volatility dynamics of three major petroleum commodities traded on the NYMEX: crude oil, unleaded gasoline, and heating oil. The volatility of the three commodity prices exhibits time-to-delivery effects and substantial seasonality, yet their patterns vary systematically by contract delivery month. High price volatility of near-delivery contracts and their low correlation with concurrently traded distant contracts imply high short horizon price risk for an un-hedged position.

Bahattin Buyuksahin and Jeffrey H. Harris (2011) state that oil futures market from 2000-2008 has led to allegations that "speculators" drive crude oil prices. As crude oil futures peaked at $147/ bbl in July 2008, the role of speculators came under heated debate. In this paper, they employ unique data from the U.S. Commodity Futures Trading Commission (CFTC) to test the relation between crude oil prices and the trading positions of various types of traders in the crude oil futures market. They employ Granger Causality tests to analyse lead and lag relations between price and position data at daily and multiple day intervals. They find little evidence that hedge funds and other non-commercial (speculator) position changes Granger-cause price changes; the results instead suggest that price changes precede their position changes.


'
CHAPTER ' 3
3. RESEARCH METHODOLOGY

Research in financial management is by no means new. It means systematic investigation. One may define research as a process of knowing new facts and verifying old ones by the application of scientific method to natural or social phenomena so as to come to uniform explanation of laws governing those phenomena.

Research methodology is a way to systematically solve the research problem. It helps in planning, executing, bringing relevance and in reviving the purpose of the study.

3.1 RESEARCH DESIGN

Research design is the blue print of research project. It gives the procedures necessary for getting the required information which is helpful in solving problems.
Research design of this study follows a 'Descriptive' nature. Descriptive research is a type of conclusive research that describes something as it happens. The study describes price fluctuations of the various investment avenues and the returns generated through each of the various investment avenues.

3.2 DATA COLLECTION

The data used for the study was secondary data. The data collected were the prices of Gold, Silver, Platinum, BSE-SENSEX, NSE-NIFTY FIFTY and Crude oil for the period April 2002 ' February 2012, a ten year period.

3.3 SAMPLING DESIGN

3.3.1 Population: All possible investment avenues is the population taken for this study

3.3.2 Sample Size: To represent the whole of various investment avenues, a sample of six different investment avenues such as investment in gold, silver, platinum, Bse ' Sensex, Nse ' Nifty Fifty and crude oil are taken for analysis.

3.4 SAMPLING METHOD

The sampling technique used in this study is Simple Random Sampling. Simple random sampling merely allows one to draw externally valid conclusions about the entire population based on the sample. Simple random sampling is the simplest of the probability sampling techniques.
3.5 STATISTICAL TOOLS USED
The statistical tools used for analysis of data are as follows:
1. Simple Interest:

S.I = (P*N*R)/100
Where,
P = Principal Amount (Rs.)
N = Number of years
R = Rate of Interest (%)

2. Yield %:

Yield % = (Today's Price ' Yesterday's Price)/Yesterday's Price)*100

3. Return:

Return Amount (Rs.) = Deposit Amount (Rs.) + Interest Amount Earned (Rs.)

4. Granger Causality Test

The Granger causality test is a statistical hypothesis test for determining whether one time series is useful in forecasting another. It is used to find out whether or not one economic variable can help forecast another economic variable. Testing causality, in the Granger sense, involves using F-tests to test whether lagged information on a variable Y provides any statistically significant information about a variable X in the presence of lagged X. If not, then "Y does not Granger-cause X'. It was proposed by Granger (1969) and popularized by Sims (1972).


CHAPTER ' 4
4. ANALYSIS AND INTERPRETATION
4.1 CALCULATION OF YIELD % OF VARIOUS INVESTMENT AVENUES

4.1.1 Investment in Gold

TABLE 4.1: CALCULATION OF YIELD % OF GOLD
Gold Price ($ per ounce) Dollar value in Rupees Gold price (Rupee per ounce) Gold price (Rupee per gram)
Year Open Close Grams Open Close Open Close Open Close Yield %
2002-2003 302.9 335.9 31.1 48.8 43.4 14781.52 14578.06 475.29 468.75 -1.38
2003-2004 332 427.9 31.1 43.4 44.7 14408.80 19127.13 463.31 615.02 32.75
2004-2005 427.63 428.75 31.1 44.47 43.74 19016.71 18753.53 611.47 603.01 -1.38
2005-2006 426.05 583.05 31.1 43.74 44.62 18635.43 26015.69 599.21 836.52 39.60
2006-2007 587.5 663.3 31.1 44.62 43.47 26214.25 28833.65 842.90 927.13 9.99
2007-2008 663.55 916.45 31.1 43.47 40.15 28844.52 36795.47 927.48 1183.13 27.56
2008-2009 883.75 918.2 31.1 40.15 50.73 35482.56 46580.29 1140.92 1497.76 31.28
2009-2010 926.15 1113.6 31.1 50.73 44.91 46983.59 50011.78 1510.73 1608.10 6.45
2010-2011 1126.67 1431.53 31.1 44.91 44.63 50598.75 63889.18 1626.97 2054.31 26.27
2011-2012 1428.12 1781.73 31.1 44.63 49.05 63737.00 87393.86 2049.42 2810.09 37.12

The table represents the prices of Gold from the year 2002 ' 2012. Gold is usually weighed in terms of troy ounce. The open and close price of gold for each year is put up in terms of dollar per troy ounce. It is converted into Indian Rupee denomination. The troy ounce is also converted into grams. One troy ounce is equal to 31.1 grams. Thus the open and close price of gold for each year is found out in terms of Rupee per gram in the last before column of the above table. The last column represents the yearly yield percentage of gold.
Yield % is calculated using the below formula.
Yield % = (Today's Price ' Yesterday's Price)/Yesterday's Price)*100

'
TABLE 4.2: CALCULATION OF RETURN ON INVESTMENT IN GOLD FROM APRIL 2002-FEB 2012

Year Deposit amount on 1st April (Rs.) Yield % Interest amount earned (Rs.) Principal amount on 31st March (Rs.)
2002-2003 100000 -1.38 -1376.45 98623.55
2003-2004 98623.55 32.75 32295.43 130918.99
2004-2005 130918.99 -1.38 -1811.85 129107.14
2005-2006 129107.14 39.60 51130.83 180237.96
2006-2007 180237.96 9.99 18009.88 198247.84
2007-2008 198247.84 27.56 54646.73 252894.57
2008-2009 252894.57 31.28 79096.71 331991.28
2009-2010 331991.28 6.45 21397.50 353388.78
2010-2011 353388.78 26.27 92822.26 446211.04
2011-2012 446211.04 37.12 165617.35 611828.40

Interpretation:

The above table represents the calculation of return on investment in gold for each year for the period 2002 ' 2012. It is assumed that, if Rs.1,00,000 had been deposited on 1st April 2002, based on the yield % calculated in the previous table, the yearly return on investment is calculated, and on 29th February 2012 the return on investment would have been Rs.6,11,828.40.

Iit is clear that, there has been huge volatility in the gold prices, and the yield % is highly fluctuating. Though there had been a negative yield for a couple of years, the return is substantially high. From the above table, it is observed that an investment of Rs.1, 00,000 in gold on 2002, would have yielded a return of Rs.6, 11,828.40, thus making the cumulative yield to be 512%. Though on 31st March 2003 there had been a loss of around Rs.1, 376 the immediate year it had resulted a profit of around Rs.30, 920. And there had been a gradual increase in the return on investment in gold. From 2009 till date, the return surged to great heights thus generating more profits.

CHART 4.1: YIELD % OF GOLD FROM APRIL 2002 ' FEB 2012

'
4.1.2 Investment in Silver:

TABLE 4.3: CALCULATION OF YIELD % OF SILVER

Silver Price ($ per ounce) Dollar value in Rupees Silver Price (Rupee per ounce) Silver Price (Rupee per gram)
Year Open Close Grams Open Close Open Close Open Close Yield %
2002-2003 4.69 4.46 31.1 48.8 43.4 228.87 193.56 7.36 6.22 -15.43
2003-2004 4.43 7.92 31.1 43.4 44.7 192.26 354.02 6.18 11.38 84.14
2004-2005 8.12 7.15 31.1 44.47 43.74 361.10 312.74 11.61 10.06 -13.39
2005-2006 6.97 11.5 31.1 43.74 44.62 304.87 513.13 9.80 16.50 68.31
2006-2007 11.75 13.27 31.1 44.62 43.47 524.29 576.85 16.86 18.55 10.03
2007-2008 13.277 17.21 31.1 43.47 40.15 577.15 690.98 18.56 22.22 19.72
2008-2009 16.86 12.969 31.1 40.15 50.73 676.93 657.92 21.77 21.15 -2.81
2009-2010 13.045 17.485 31.1 50.73 44.91 661.77 785.25 21.28 25.25 18.66
2010-2011 17.921 37.625 31.1 44.91 44.63 804.83 1679.20 25.88 53.99 108.64
2011-2012 37.772 36.832 31.1 44.63 49.05 1685.76 1806.61 54.20 58.09 7.17

The above table represents the prices of Silver from the year 2002 ' 2012. Silver, just like gold is usually weighed in terms of troy ounce. The open and close price of silver for each year is put up in terms of dollar per troy ounce. It is converted into Indian Rupee denomination. The troy ounce is also converted into grams. One troy ounce is equal to 31.1 grams. Thus the open and close price of silver for each year is found out in terms of Rupee per gram in the last before column of the above table. The last column represents the yearly yield percentage of silver.

'
TABLE 4.4: CALCULATION OF RETURN ON INVESTMENT IN SILVER FROM APRIL 2002- FEB 2012

Year Deposit amount on 1st April (Rs.) Yield % Deposit Duration (year) Interest amount earned (Rs.) Principal amount on 31st March (Rs.)
2002-2003 100000 -15.43 1 -15426.96 84573.04
2003-2004 84573.04 84.14 1 71156.57 155729.60
2004-2005 155729.60 -13.39 1 -20854.17 134875.43
2005-2006 134875.43 68.31 1 92136.50 227011.93
2006-2007 227011.93 10.03 1 22758.95 249770.89
2007-2008 249770.89 19.72 1 49261.78 299032.67
2008-2009 299032.67 -2.81 1 -8398.37 290634.30
2009-2010 290634.30 18.66 1 54228.71 344863.01
2010-2011 344863.01 108.64 1 374660.05 719523.06
2011-2012 719523.06 7.17 1 51579.53 771102.59

Interpretation

The above table represents the calculation of return on investment in silver for each year for the period 2002 ' 2012. It is assumed that, if Rs.1,00,000 had been deposited on 1st April 2002, based on the yield % calculated in the previous table, the yearly return on investment is calculated, and on 29th February 2012 the return on investment would have been Rs.7,71,102.59.

It is clear that, there has been huge volatility in the silver prices just like it had happened in gold and the yield % is highly fluctuating. Silver prices usually move along with gold's trend. Though there had been wide fluctuations thus resulting in high risk, the concept of high risk yields high return has been proved over here. From the above table, it is observed that an investment of Rs.1,00,000 in silver on 2002, would have yielded a return of Rs.7,71,102.59, thus making the cumulative yield to be 671%. Though on 31st March 2003 there had been a loss of around Rs.15,427 the immediate year it had resulted a profit of around Rs.55,730. And there had been a gradual increase in the return on investment in silver. In the year 2010 ' 2011, silver climbed new heights and the yield % for that one year had been 109% thus generating a profit of around Rs.3,74,660 for that one year alone.
CHART 4.2: YIELD % OF SILVER FROM APRIL 2002 ' FEB 2012

'
4.1.3 Investment in Platinum

TABLE 4.5: CALCULATION OF YIELD % OF PLATINUM

Platinum Price ($ per ounce) Dollar value in Rupees Platinum Price (Rupee per ounce) Platinum Price (Rupee per gram)
Year Open Close Grams Open Close Open Close Open Close Yield %
2002-2003 533 642 31.1 48.8 43.4 26010.4 27862.8 836.35 895.91 7.12
2003-2004 639 903 31.1 43.4 44.7 27732.6 40364.1 891.72 1297.88 45.55
2004-2005 908 864 31.1 44.47 43.74 40378.76 37791.36 1298.35 1215.16 -6.41
2005-2006 864 1076 31.1 43.74 44.62 37791.36 48011.12 1215.16 1543.77 27.04
2006-2007 1072 1244 31.1 44.62 43.47 47832.64 54076.68 1538.03 1738.80 13.05
2007-2008 1235 2040 31.1 43.47 40.15 53685.45 81906 1726.22 2633.63 52.57
2008-2009 1918 1124 31.1 40.15 50.73 77007.7 57020.52 2476.13 1833.46 -25.95
2009-2010 1128 1645 31.1 50.73 44.91 57223.44 73876.95 1839.98 2375.46 29.10
2010-2011 1660 1773 31.1 44.91 44.63 74550.6 79128.99 2397.13 2544.34 6.14
2011-2012 1773 1712 31.1 44.63 49.05 79128.99 83973.6 2544.34 2700.12 6.12

The above table represents the prices of Platinum from the year 2002 ' 2012. Platinum is also usually weighed in terms of troy ounce. The open and close price of platinum for each year is put up in terms of dollar per troy ounce. It is converted into Indian Rupee denomination. The troy ounce is also converted into grams. One troy ounce is equal to 31.1 grams. Thus the open and close price of platinum for each year is found out in terms of Rupee per gram in the last before column of the above table. The last column represents the yearly yield percentage of platinum.
'
TABLE 4.6: CALCULATION OF RETURN ON INVESTMENT IN PLATINUM FROM APRIL 2002- FEB 2012

Year Deposit amount on 1st April (Rs.) Yield % Deposit Duration (year) Interest amount earned (Rs.) Principal amount on 31st March (Rs.)
2002-2003 100000 7.12 1 7121.77 107121.77
2003-2004 107121.77 45.55 1 48791.26 155913.03
2004-2005 155913.03 -6.41 1 -9990.63 145922.40
2005-2006 145922.40 27.04 1 39461.19 185383.58
2006-2007 185383.58 13.05 1 24199.85 209583.43
2007-2008 209583.43 52.57 1 110170.63 319754.05
2008-2009 319754.05 -25.95 1 -82991.47 236762.59
2009-2010 236762.59 29.10 1 68904.07 305666.66
2010-2011 305666.66 6.14 1 18771.96 324438.63
2011-2012 324438.63 6.12 1 19863.50 344302.13

Interpretation

The above table represents the calculation of return on investment in platinum for each year for the period 2002 ' 2012. It is assumed that, if Rs.1,00,000 had been deposited on 1st April 2002, based on the yield % calculated in the previous table, the yearly return on investment is calculated, and on 29th February 2012 the return on investment would have been Rs.3,44,302.13.

It is observed that, the prices of platinum had been increasing till 2008, thus generating reasonable yield, and in the year 2008-2009 there has been huge dip in the platinum prices and thus resulted in negative yield %. Platinum is also a precious metal which is rare and invaluable. From the above table, it is observed that an investment of Rs.1,00,000 in platinum on 2002, would have yielded a return of Rs.3,44,302.13, thus making the cumulative yield to be 244%. In the year 2007 ' 2008 investment in platinum has resulted in a maximum yield % of 52, and in the immediate year, it dipped to -26% resulting in negative yield. And there had been a gradual increase in the platinum prices in the consecutive years.

CHART 4.3: YIELD % OF PLATINUM FROM APRIL 2002 ' FEB 2012

'
4.1.4 Investment in SENSEX:

TABLE 4.7: CALCULATION OF YIELD % OF SENSEX

SENSEX
Year Open Close Yield %
2002-2003 3482.94 3048.72 -12.47
2003-2004 3037.54 5590.6 84.05
2004-2005 5599.12 6492.82 15.96
2005-2006 6506.6 11279.96 73.36
2006-2007 11342.96 13072.1 15.24
2007-2008 12811.93 15644.44 22.11
2008-2009 15771.72 9708.5 -38.44
2009-2010 9745.77 17527.77 79.85
2010-2011 17555.04 19445.22 10.77
2011-2012 19463.11 17179.64 -11.73

The above table represents the prices of Sensex from the year 2002 ' 2012. The open and close price of Sensex for each year is put up in the table. The last column represents the yearly yield percentage of Sensex.

'
TABLE 4.8: CALCULATION OF RETURN ON INVESTMENT IN SENSEX FROM APRIL 2002- FEB 2012

Year Deposit amount on 1st April (Rs.) Yield % Deposit Duration (year) Interest amount earned (Rs.) Principal amount on 31st March (Rs.)
2002-2003 100000 -12.47 1 -12467.05 87532.95
2003-2004 87532.95 84.05 1 73571.66 161104.61
2004-2005 161104.61 15.96 1 25714.61 186819.22
2005-2006 186819.22 73.36 1 137053.97 323873.19
2006-2007 323873.19 15.24 1 49371.78 373244.97
2007-2008 373244.97 22.11 1 82518.41 455763.38
2008-2009 455763.38 -38.44 1 -175211.94 280551.44
2009-2010 280551.44 79.85 1 224020.40 504571.84
2010-2011 504571.84 10.77 1 54328.08 558899.92
2011-2012 558899.92 -11.73 1 -65571.80 493328.12

Interpretation

The above table represents the calculation of return on investment in Bse ' Sensex for each year for the period 2002 ' 2012. It is assumed that, if Rs.1,00,000 had been deposited on 1st April 2002, based on the yield % calculated in the previous table, the yearly return on investment is calculated, and on 29th February 2012 the return on investment would have been Rs.4,93,328.12.

It is observed that, on 31st March 2003 investment in Sensex brought about a loss of nearly Rs.12,467, but in the immediate year itself the investment almost doubled with a yield % of 84. In the year 2008-2009 there has been huge dip in the Sensex and thus resulted in negative yield %. In the immediate year, the yield % was around 80% thus resulting in a profit of Rs.2,24,021. From the above table, it is observed that an investment of Rs.1,00,000 in Sensex on 2002, would have yielded a return of Rs. 4,93,328.12, thus making the cumulative yield to be 393%.

CHART 4.4: YIELD % OF SENSEX FROM APRIL 2002 ' FEB 2012

'
4.1.5 Investment in NIFTY-FIFTY:

TABLE 4.9: CALCULATION OF YIELD % OF NIFTY-FIFTY

NIFTY-FIFTY
Year Open Close Yield %
2002-2003 1129.85 978.2 -13.42
2003-2004 977.4 1771.9 81.29
2004-2005 1771.45 2035.65 14.91
2005-2006 2035.9 3402.55 67.13
2006-2007 3403.15 3821.55 12.29
2007-2008 3820 4734.5 23.94
2008-2009 4735.65 3020.95 -36.21
2009-2010 3023.85 5249.1 73.59
2010-2011 5249.2 5833.75 11.14
2011-2012 5835 5375.5 -7.87

The above table represents the prices of Nifty-Fifty from the year 2002 ' 2012. The open and close price of Nifty-Fifty for each year is put up in the table. The last column represents the yearly yield percentage of Nifty-Fifty.
'
TABLE 4.10: CALCULATION OF RETURN ON INVESTMENT IN NIFTY-FIFTY FROM APRIL 2002- FEB 2012

Year Deposit amount on 1st April (Rs.) Yield % Deposit Duration (year) Interest amount earned (Rs.) Principal amount on 31st March (Rs.)
2002-2003 100000 -13.42 1 -13422.14 86577.86
2003-2004 86577.86 81.29 1 70376.62 156954.49
2004-2005 156954.49 14.91 1 23408.72 180363.21
2005-2006 180363.21 67.13 1 121073.42 301436.63
2006-2007 301436.63 12.29 1 37060.10 338496.73
2007-2008 338496.73 23.94 1 81035.41 419532.14
2008-2009 419532.14 -36.21 1 -151905.60 267626.54
2009-2010 267626.54 73.59 1 196946.26 464572.80
2010-2011 464572.80 11.14 1 51734.75 516307.55
2011-2012 516307.55 -7.87 1 -40658.67 475648.88

Interpretation

The above table represents the calculation of return on investment in Nse ' Nifty Fifty for each year for the period 2002 ' 2012. It is assumed that, if Rs.1,00,000 had been deposited on 1st April 2002, based on the yield % calculated in the previous table, the yearly return on investment is calculated, and on 29th February 2012 the return on investment would have been Rs.4,75,648.88.

It is observed that, on 31st March 2003 investment in Nifty Fifty brought about a loss of nearly Rs.13,422, but in the immediate year itself the return on investment made a profit of around Rs.56,955 with a yield % of 81. In the year 2008-2009 there has been huge dip in the Nifty Fifty and thus resulted in negative yield % 0f 36. In the immediate year, the yield % was around 74% thus resulting in a profit of Rs.1,96,946. From the above table, it is observed that an investment of Rs.1,00,000 in Sensex on 2002, would have yielded a return of Rs.4,75,648.88, thus making the cumulative yield to be 376%.

'
CHART 4.5: YIELD % OF NIFTY-FIFTY FROM APRIL 2002 ' FEB 2012


'
4.1.6 Investment in Crude Oil:

TABLE 4.11: CALCULATION OF YIELD % OF CRUDE OIL

Crude Oil Price ($ per barrel) Dollar value in Rupees Crude Oil price (Rupee per barrel)
Year Open Close Open Close Open Close Yield %
2002-2003 26.82 31.14 48.8 43.4 1308.82 1351.48 3.26
2003-2004 29.48 35.75 43.4 44.47 1279.43 1589.80 24.26
2004-2005 34.47 55.31 44.47 43.74 1532.88 2419.26 57.82
2005-2006 57.26 66.25 43.74 44.62 2504.55 2956.08 18.03
2006-2007 66.07 65.94 44.62 43.47 2948.04 2866.41 -2.77
2007-2008 66.03 101.54 43.47 40.15 2870.32 4076.83 42.03
2008-2009 100.92 49.64 40.15 50.73 4051.94 2518.24 -37.85
2009-2010 48.46 83.45 50.73 44.91 2458.38 3747.74 52.45
2010-2011 84.53 106.19 44.91 44.63 3796.24 4739.26 24.84
2011-2012 107.55 108.09 44.63 49.05 4799.96 5301.81 10.46

The above table represents the prices of Crude Oil from the year 2002 ' 2012. Crude Oil is weighed in terms of Barrel. The open and close price of Crude Oil for each year is put up in terms of dollar per barrel. It is converted into Indian Rupee denomination. Thus the open and close price of Crude Oil for each year is found out in terms of Rupee per Barrel in the last before column of the above table. The last column represents the yearly yield percentage of Crude Oil.

'
TABLE 4.12: CALCULATION OF RETURN ON INVESTMENT IN CRUDE OIL FROM APRIL 2002- FEB 2012

Year Deposit amount on 1st April (Rs.) Yield % Deposit Duration (year) Interest amount earned (Rs.) Principal amount on 31st March (Rs.)
2002-2003 100000 3.26 1 3259.43 103259.43
2003-2004 103259.43 24.26 1 25049.15 128308.58
2004-2005 128308.58 57.82 1 74193.61 202502.19
2005-2006 202502.19 18.03 1 36507.25 239009.44
2006-2007 239009.44 -2.77 1 -6618.19 232391.25
2007-2008 232391.25 42.03 1 97682.92 330074.17
2008-2009 330074.17 -37.85 1 -124936.52 205137.65
2009-2010 205137.65 52.45 1 107590.16 312727.81
2010-2011 312727.81 24.84 1 77684.13 390411.94
2011-2012 390411.94 10.46 1 40819.40 431231.34

Interpretation

The above table represents the calculation of return on investment in crude oil for each year for the period 2002 ' 2012. It is assumed that, if Rs.1, 00,000 had been deposited on 1st April 2002, based on the yield % calculated in the previous table, the yearly return on investment is calculated, and on 29th February 2012 the return on investment would have been Rs.4,31,231.34.

It is observed that, the prices of crude oil had been increasing till 2008, thus generating reasonable yield, and in the year 2008-2009 there has been huge dip in the crude oil prices and thus resulted in negative yield %. From the above table, it is observed that an investment of Rs.1,00,000 in crude oil on 2002, would have yielded a return of Rs.4,31,231.34, thus making the cumulative yield to be 331%. In the year 2004 ' 2005 investment in crude oil has resulted in a maximum yield % of 58. After the dip in the year 2008 ' 2009, there had been a gradual increase in the crude oil prices in the consecutive years.

CHART 4.6: YIELD % OF CRUDE OIL FROM APRIL 2002 ' FEB 2012


'
4.2 GRANGER CAUSALITY TEST ON VARIOUS INVESTMENT AVENUES

4.2.1 Gold and Silver

Hypothesis

H0: The gold price does not influence the silver price.
H1: The gold price influences the silver price.

TABLE 4.13: GRANGER CAUSALITY TEST FOR GOLD AND SILVER
Granger Causality Test: Y = f(X)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 5.99252008938133 0.0499287104801465

Interpretation

From the above table, it is seemed that since the significant value is 0.049, which is less than 0.05 (5% level of significance), the alternate hypothesis is accepted. Therefore, gold price influences the silver price.

'
Hypothesis

H0: The silver price does not influence the gold price.
H1: The silver price influences the gold price.

TABLE 4.14: GRANGER CAUSALITY TEST FOR SILVER AND GOLD

Granger Causality Test: X = f(Y)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 0.578078810280218 0.475871600931363

Interpretation

From the above table, it is seemed that since the significant value is 0.47, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, silver price does not influence the gold price.
'
CHART 4.7: CROSS CORRELATION OF GOLD AND SILVER

CHART 4.8: AUTO CORRELATION OF GOLD


CHART 4.9: AUTO CORRELATION OF SILVER

'
4.2.2 Gold and Platinum

Hypothesis

H0: The gold price does not influence the platinum price.
H1: The gold price influences the platinum price.

TABLE 4.15: GRANGER CAUSALITY TEST FOR GOLD AND PLATINUM
Granger Causality Test: Y = f(X)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 1.96630146168098 0.210402272231763

Interpretation

From the above table, it is seemed that since the significant value is 0.21, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, gold price does not influence the platinum price.

'
Hypothesis

H0: The platinum price does not influence the gold price.
H1: The platinum price influences the gold price.

TABLE 4.16: GRANGER CAUSALITY TEST FOR PLATINUM AND GOLD
Granger Causality Test: X = f(Y)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 0.018428638908902 0.896457247762376

Interpretation

From the above table, it is seemed that since the significant value is 0.89, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, platinum price does not influence the gold price.

'
CHART 4.10: CROSS CORRELATION OF GOLD AND PLATINUM

CHART 4.11: AUTO CORRELATION OF GOLD

CHART 4.12: AUTO CORRELATION OF PLATINUM

4.2.3 Gold and Sensex

Hypothesis

H0: The gold price does not influence the sensex price.
H1: The gold price influences the sensex price.

TABLE 4.17: GRANGER CAUSALITY TEST FOR GOLD AND SENSEX
Granger Causality Test: Y = f(X)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 1.18464321325028 0.318187846931691

Interpretation

From the above table, it is seemed that since the significant value is 0.31, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, gold price does not influence the sensex price.

'
Hypothesis

H0: The Sensex does not influence the gold price.
H1: The Sensex influences the gold price.

TABLE 4.18: GRANGER CAUSALITY TEST FOR SENSEX AND GOLD
Granger Causality Test: X = f(Y)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 0.353889280186415 0.573654081548259

Interpretation

From the above table, it is seemed that since the significant value is 0.57, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, Sensex does not influence the gold price.

CHART 4.13: CROSS CORRELATION OF GOLD AND SENSEX

CHART 4.14: AUTO CORRELATION OF GOLD

CHART 4.15: AUTO CORRELATION OF SENSEX


'
4.2.4 Sensex and Nifty Fifty

Hypothesis

H0: The Sensex does not influence the nifty fifty prices.
H1: The Sensex influences the nifty fifty prices.

TABLE 4.19: GRANGER CAUSALITY TEST FOR SENSEX AND NIFTY-FIFTY
Granger Causality Test: Y = f(X)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 2.50818561310862 0.1643462761628

Interpretation

From the above table, it is seemed that since the significant value is 0.16, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, Sensex does not influence the nifty fifty prices.

'
Hypothesis

H0: The nifty fifty prices do not influence the Sensex.
H1: The nifty fifty prices influence the Sensex.

TABLE 4.20: GRANGER CAUSALITY TEST FOR NIFTY-FIFTY AND SENSEX
Granger Causality Test: X = f(Y)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 2.51615281609385 0.163780602225455

Interpretation

From the above table, it is seemed that since the significant value is 0.16, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, nifty fifty prices do not influence the Sensex.

'
CHART 4.16: CROSS CORRELATION OF SENSEX AND NIFTY-FIFTY

CHART 4.17: AUTO CORRELATION OF SENSEX

CHART 4.18: AUTO CORRELATION OF NIFTY-FIFTY

'
4.2.5 Crude Oil and Sensex
Hypothesis
H0: The crude oil price does not influence the Sensex.
H1: The crude oil price influences the Sensex.

TABLE 4.21: GRANGER CAUSALITY TEST FOR CRUDE OIL AND SENSEX
Granger Causality Test: Y = f(X)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 0.222494736755146 0.653809884686816

Interpretation

From the above table, it is seemed that since the significant value is 0.65, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, crude oil price does not influence the Sensex price.

'
Hypothesis
H0: The Sensex does not influence the crude oil price.
H1: The Sensex influences the crude oil price.

TABLE 4.22: GRANGER CAUSALITY TEST FOR SENSEX AND CRUDE OIL
Granger Causality Test: X = f(Y)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 0.615299506404797 0.46263493606636

Interpretation

From the above table, it is seemed that since the significant value is 0.46, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, Sensex does not influence the crude oil price.

'
CHART 4.19: CROSS CORRELATION OF CRUDE OIL AND SENSEX

CHART 4.20: AUTO CORRELATION OF CRUDE OIL

CHART 4.21: AUTO CORRELATION OF SENSEX


'
4.2.6 Gold and Crude Oil
Hypothesis
H0: The gold price does not influence the crude oil price.
H1: The gold price influences the crude oil price.

TABLE 4.23: GRANGER CAUSALITY TEST FOR GOLD AND CRUDE OIL
Granger Causality Test: Y = f(X)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 0.645211940130428 0.452467479115915

Interpretation

From the above table, it is seemed that since the significant value is 0.45, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, gold price does not influence crude oil price.

'
Hypothesis
H0: The crude oil price does not influence the gold price.
H1: The crude oil price influences the gold price.

TABLE 4.24: GRANGER CAUSALITY TEST FOR CRUDE OIL AND GOLD

Granger Causality Test: X = f(Y)
Model Res.DF Diff. DF F p-value
Complete model 6
Reduced model 7 -1 0.932310032347722 0.371552279157526

Interpretation

From the above table, it is seemed that since the significant value is 0.37, which is greater than 0.05 (5% level of significance), the alternate hypothesis is rejected. Therefore, crude oil price does not influence the gold price.

'
CHART 4.22: CROSS CORRELATION OF GOLD AND CRUDE OIL

CHART 4.23: AUTO CORRELATION OF GOLD

CHART 4.24: AUTO CORRELATION OF CRUDE OIL

'
CHAPTER - 5
5. FINDINGS AND SUGGESTION
5.1 FINDINGS

TABLE 5.1: RETURN ON INVESTMENT IN THE VARIOUS INVESTMENT AVENUES
Investment Type Return on Investment as on 29-Feb-12 (Rs.)
Gold 611828.40
Silver 771102.59
Platinum 344302.13
BSE-SENSEX 493328.12
NSE-Nifty-Fifty 475648.88
Crude Oil 431231.34

CHART 5.1: RETURN ON INVESTMENT IN THE VARIOUS INVESTMENT AVENUES


' As per the Granger test result, there is no relation between the price fluctuation of precious metals and crude oil, thus stating that neither the movement of precious metals does influence the Crude oil prices nor the movement of crude oil does influence the price of precious metals.
' As per the Granger test result, there is relation between the price fluctuation of gold and silver, thus stating that, the movement of gold influence the silver prices, but the movement of silver does not influence the price of gold.
' As per the Granger test result, there is no relation between the price fluctuation of Shares and crude oil, thus stating that neither the movement of share prices does influence the Crude oil prices nor the movement of crude oil does influence the price of shares.
' As per the Granger test result, there is no relation between the price fluctuation of BSE- Sensex and NSE- Nifty Fifty, thus stating that neither the movement of Sensex does influence the Nifty Fifty prices nor the movement of Nifty Fifty prices does influence the Sensex.
' It is found out that, out of the six investment avenues, investment in gold and silver has given the maximum return of Rs.611828.40 and Rs.771102.59 respectively.
' Investment in Sensex, Nifty Fifty and Crude oil have given more or less similar returns of around Rs.4,75,000.
' Investment in Platinum has given the minimum return of around Rs.3,45,000.
' The past ten years' data reveal that all the six investment avenues studied over here form a volatile market with wide fluctuations.
' All these investment avenues form a high risk profile thus reaping a high return on investment when compared to other normal or low risk investments such as Bank deposits or Post Office Schemes.
' It is found out that gold and silver market movements are almost in the same direction.
' It is also found out that the Sensex and Nifty Fifty market trends are in the same direction.
' During the recession that happened in the year 2008 ' 2009, there was a huge dip in the price of almost all commodities, crude oil and the Sensex also reached its low. But the Gold prices jumped higher during that period, and the silver prices also cropped up a little because of the influence of the gold prices on silver.
' Thus it can be said that, during economic crisis, recession and bad political news, gold prices creep higher because investors increase their portfolio exposure to gold-related assets as it is believed to be an attractive safe haven for investment.
' After 2008 ' 2009, Silver prices started climbing up and surged to its life-time high levels, thus generating the maximum return on investment of Rs.7,71,000, which is higher than the return on any other investment.

Reasons for the volatility in the above various investment avenues:

' Financial crisis in the Eurozone, economic stagnation in the West, and the inflationary effects of central banks printing money to keep credit markets liquid are some of the reasons for the higher volatility in the prices of precious metals and commodities.
' The debt problems in Europe have not been resolved; the threat of a 'double dip' recession in Western economies still looms.

Some of the reasons for the rise in prices of gold
' Despite the worldwide economic slowdown, the huge emerging economies of China and India are consuming ever greater quantities of gold and silver. Consequently, the demand for these precious metals is experiencing explosive growth, which in turn drives up their price. These economies are only in their infancy, promising that this trend will continue into the foreseeable future.
' The value of a gold investment is independent and universal.
' US interest rates are at historic lows, eventually the government will be forced to raise them to counter inflation. As interest rates go up, the cost of money also goes up. The higher cost of money means corporations have less money to invest, driving down the value of stocks and bonds. History shows us that the value of gold always reacts to counter the declining value of stocks and bonds.
Some of the reasons for the rise in prices of crude oil

' Crude oil is a versatile commodity and its by-products are used as input for numerous industries.
' Modern industrial as well as agricultural economy depends upon crude oil. This makes it a good investment in the long run.
' Crude oil demand is on a rise in emerging nations like India and China and this trend will persist as economic activity rises further.
' Crude oil market is in tight balance and with increasing demand in emerging markets and dwindling sources of new supplies, price may remain firm in the long term
' India is world's 4th largest crude oil consumer with consumption at 3.1 million barrels per day. India imports almost 70% of its total consumption.
' The 2011 Arab Spring led to higher oil prices temporarily in 2011.
' Rapid economic development is expected to further increase its consumption.
' Indian and Chinese commodity market is growing and crude oil is the largest traded commodity in the world.
' Crude oil is the backbone of today's global economy.

'
5.2 SUGGESTIONS
Based on the observations and the study made on various investment avenues, some of the suggestions are as follows
' All the six investments avenues studied are of high risk profile; but if the investor has the sufficient time to wait, then in the long run all these six investments will make good and profitable returns beating inflationary costs to the investors.
' A diversified investment is always a best decision to take. Thus, proper diversification should be done according to the individual investor's risk profile.
' Demands for gold remains strong from emerging economies, particularly China and India, which should help underpin the prices of gold. Thus it is advised to consider investing a substantial portion of money in gold and silver in the investor's portfolio.
' At the same time, there are certain risks involved in investing in gold and the investor should make a proper study before investing. Gold and silver are assets priced in dollars, so investors are exposed to fluctuations in the exchange rate. If the dollar strengthens then the American assets will attract plenty of investments which could reduce the demand for gold, particularly from Chinese investors, which may then weaken the price further.
' It is suggested that, when an investor earns a reasonable amount of profit in any investment, then one should book profits, because from the above study it is observed that, one year the yield is on positive high and the immediate year the yield dipped to very low levels. So in order to avoid risk, the investor should book profits if substantiate levels of profit is seen.

'
CHAPTER - 6
6. CONCLUSION
6.1 CONCLUSION

Investment is a must for every human being, to meet the needs of the future. An investment without proper study sometimes might lead to failure. Thus, it is always necessary to analyse properly before investing on any asset.

From this study it is concluded that, all these six investment avenues are highly volatile and risky, but in the long term they give beneficial and fruitful returns. Of the six investments studied and analysed over here, the return on investment in silver is the highest, and next comes the gold. However, it is also found out that the silver price movement has a substantial amount of dependency on the movement of gold prices. Hence this dependency of one Investment Avenue on another should be kept in mind and a proper study has to be made before investing.

It is always a best decision to create a portfolio with diversified investment avenues and segregating them according to their risk patterns, and make a planned investment according to the risk profile of the investor.

6.2 SCOPE FOR FURTHER RESEARCH

This study looks into only six investment avenues, whereas there are still several other categories in which investment could be made, thus enabling this to be a wide area for further study and analysis

Source: Essay UK - http://ntechno.pro/free-essays/finance/investment-opportunities-overview-various-methods.php


Not what you're looking for?

Search:


About this resource

This Finance essay was submitted to us by a student in order to help you with your studies.


Rating:

Rating  
No ratings yet!

  • Order a custom essay
  • Download this page
  • Print this page
  • Search again

Word count:

This page has approximately words.


Share:


Cite:

If you use part of this page in your own work, you need to provide a citation, as follows:

Essay UK, Investment Opportunities And Overview Of The Various Investment Avenues. Available from: <http://ntechno.pro/free-essays/finance/investment-opportunities-overview-various-methods.php> [20-10-17].


More information:

If you are the original author of this content and no longer wish to have it published on our website then please click on the link below to request removal:


Essay and dissertation help

badges