CHAPTER1.

1.1INTRODUCTION
Definition:
“Division of Banking includes business entities dealing with creation of capital
for other companies. In addition to acting as agent or underwriters for
companies in the process of issuing.

What is Investment Banking ?

Investment banking is a field of banking that aids
companies in acquiring funds. In addition to the acquisition of new funds,
investment banking also offers advice for a wide range of transaction a
company might engage it.

Through investment banking, an institution generates funds in two different

ways. They may draw on public funds through the capital market by selling
stock in their company, and they may also seek out private equity in exchange
for a stake in their company.

An investment banking firm also does a large amount of consulting.

Investment bankers give companies advice on mergers and acquisitions, for
example. They also track in order to give advice on when to make public
offering and how best to manage the business public assets. Some of the
consultative activities investment banking firms engage in overlap with those of
a private brokerage, as they will often give buy & sell to the companies to the
represent

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History

Given ,its, merchant banking is often thought of an European , and especially

British , financial specially British ,financial merchant.

The Dutch East India Company (VOC) became the first company in history to
issue bonds and shares of stock to the general public. In other words, the VOC
was officially the first publicly traded company, because it was the first
company to be ever actually listed on an official stock exchange. It was also the
Dutch who helped lay the foundations for modern practice of investment
banking.[3]

Investment banking has changed over the years, beginning as a partnership form
focused on underwriting security issuance, i.e. initial public offerings (IPOs)
and secondary market offerings, brokerage, and mergers and acquisitions, and
evolving into a "full-service" range including securities research, proprietary
trading, and investment management. In the modern 21st century, the SEC
filings of the major independent investment banks such as Goldman
Sachs and Morgan Stanley reflect three product segments: (1) investment
banking (fees for M&A advisory services and securities underwriting); (2) asset
management (fees for sponsored investment funds), and (3) trading and
principal investments (broker-dealer activities including proprietary trading
("dealer" transactions) and brokerage trading ("broker" transactions))

In the United States, commercial banking and investment banking were

separated by the Glass–Steagall Act, which was repealed in 1999. The repeal
led to more "universal banks" offering an even greater range of services. Many
large commercial banks have therefore developed investment banking divisions
through acquisitions and hiring. Notable large banks with significant investment
banks include JPMorgan Chase, Bank of America, Credit Suisse, Deutsche
Bank, UBS, Barclays, and Wells Fargo. restrictions on proprietary trading

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1.2Who Needs an Investment Bank?

Any firm think about a significant transaction can benefit from the advice of
an investment banking. Although large corporations often have sophisticated
finance and corporate developments, an investment banking provide objectivity,
a valuable contact network ,allows for efficient use of client personnel, and is
vitally interested in seeing the transaction close.

Most small to medium sized companies do not have a large in-house staff,
and in a financial transaction may be at a disadvantage versus larger
competitors. A quality investment banking firm can provide the service required
to initiate and execute a major transaction, thereby empowering small to
medium sized companies with financial and transaction experience without the
addition of permanent overhead.

Concepts
The concept of wealth from the investment banking standpoint is perhaps the
simplest and may therefore be used as starting point. By wealth is meant, any
economic good or service which satisfies a human need, and has, consequently,
the power of commanding other goods or services in exchange. The exchange
value resulting from the fact that a given object or service is desired must,
however, be measured in terms of some unit, and the rate of exchange between
goods is their price.

One such good is money, which marks money a form of wealth devised for the
special purpose of acting as a means of promoting exchange and of measuring
the value of commodities in exchange. We thus include money under the head
of wealth, but of course, cannot regard wealth in any sense as money except that
it is indirectly a means of commanding money.

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Production is the process of ringing wealth into existence- that is to say, of
changing the character or form of goods and services so as to adopt them for
use. Consumption, on the other hand, is the application of these goods and
services to their specific objects. That is, to the satisfaction of human needs or
desires.

Capital comprises forms of wealth especially adopted for further production as

tools and machines, which themselves do not satisfy any consumption desires.
Ordinarily, savings are defined as that part of the periodic production of wealth
which is devoted to the creation of capital.

Investment is the process of applying such savings to the creation of specific

forms of capital. There has been a long controversy about the question whether
savings are or are not, in fact, practically equivalent to investments. The use
made of the term, however, differentiates the two concepts and regards saving
as his mere decision not to consume produce goods, whereas investment is the
actual use of the savings thus made to some specified purpose

IMPORTANCE

 Investment banks serve a number of purposes in the financial and

investment world.
 Underwriting new stock issue.
 Financial advisory role
 Merger and acquisition
For Corporation – raising its capital. It facilities the trading of
securities thereby, increasing the liquidity of the securities.

For Individual – It provides investment opportunities to the individuals

or entities. Most of the corporation gets advisory services from the investment
bank regarding the mergers, acquisitions and divestiture.
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1.3 Evolution of Indian Investment Banking

In India through the existence of this branch of financial service can be

traced to over three decade investment banking was largely confined to
merchant banking service. The forerunners of merchant banking in India were
the foreign banks. Grind lays Banka now merged with Standard Chartered in
India began merchant banking operation in1967banks a license from the RBI
followed by the Citibank in 1970. These two banks were providing service for
syndication of loan and raising of equity apart from other advisory service.

It was in 1972 that the Banking Commission Report asserted the need for
merchant banking service in India by the public sector banks. Based on the
American experience which led to the passage of the glass-seagull Act the
commission recommended a separated structure for merchant banks distinct
from commercial banks and financial institution. Merchant banks were meant to
manage investments and provide advisory service.

Following the above recommendation the SEBI up its merchant banking

division in 1972. Other banks such as the Bank of India. Central Bank of
Baroda, Syndicated banks etc are suited to set up their merchant banks outfits.
ICICI was financial institution to setup a merchant banks in 1973. The later
entrants were IDCI & IDBI with the latter setting up its merchant banking
division in 1992. However by the mid eighties and early nineties most of the
merchant banking division of public sector bank were spun off as separate
subsidiaries. SBI set up SBI capital Market Ltd in1986. Other such as Canara
Bank, BOB ,PNB,ICICI and Indian Bank created separate merchant banking
entities. IDBI created IDBI capital , market much later since ,merchant banking
was since banking was initially formed as a division of IDBI in 1992

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1.4 Evolution of American Investment Banking

 Commercial banks in USA were preparing for an economic recovery &

consequent to the significant demand for corporate finance at the end of
World War I.
 It was expected that American companies would shift their dependence
from commercial banks to stock & bond market at lower cost & for long
time.
 So presence such market in 1920s commercial banks started to acquire
stock broking business in a bid which boom in capital market.
 The first acquisition happened where the National City Bank of New
York Acquired Halsey Stuart & company in 1916. In 1920s investment
banking meant underwriting and distribution of securities.
 In 1920s bank do not want to miss boom opportunity of stock & bond
market. But since they could not underwrite & sell securities directly,
they owned security through holding companies.
 Investment banking affiliate made huge profit as underwriting fees,
special segment called Yankee Bond issues by overseas issues in US
market.
 In the stock market the mainly conducted broking operation through their
subsidiaries and lent margin money to customer. But with the passage of
the McFadden act 1927, bank subsidiaries began underwriting as well.
 The stock market got over heated with investment banks borrowing
money from the parent banks in order to speculated in the banks stock
mostly for short selling.
 Once the general public joined the frenzy the price earnings ratios
reached absurd limit and the bubble eventually burst in October 1929
wiping out millions of dollars of bank depositors funds and brining down
with it banks such as the Bank of United States.

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1.5 Regulation of the Industry

 Banking Act 1933 which was known as Glass-steagall Act passage to

commercial banks that to restricted to engaging in securities underwriting
and position or acting as agent for other securities transaction.

 On the hand investment banks were barred from deposit taking &
corporate lending which were considered the business of commercial
Banks.

 Investment Banks become one of the most heavily regulated industries in

USA in 1935. The securities Act, 1933 provided for first time preparation
of offer document and registration of new securities with federal
government.

 The securities Exchange Act 1938 led to establishment of the securities

Exchange Commission.

 The Investment Companies Act, 1940 brought mutual funds within the
regulatory ambit & Investment Advisor Act 1940 regulated the business
of Investment advices and wealth manager.

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1.5.1 Role of an Investment Bank:

The major work of investment banks includes a lot of consulting. For

instance, they offer advices on mergers and acquisitions to companies. The role
that an investment bank plays sometimes gets overlapped with that of a private
brokerage house. The usual advice of buying and selling is also given by
investment banks.

There is no demarcating line between the investment banking and other

forms of banking in India. This has been observed majorly of late. All banks
nowadays want to provide their customers the best of services and create a
niche for themselves and that is why apart from investment banks, all other
banks too are aiming at making it big.

At the macro level, investment banking is related with the primary

function of assisting the capital market in its function of capital intermediation,
i.e., the movement of financial resources from those who have them (the
investors), to those who need to make use of them for producing GDP (the
issuers). Over the decades, investment banks have always suited the needs of
the finance community and thus become one of the most vibrant and exciting
segment of financial services.

Globally investment banks handle significant fund-based business of their

own in the capital market along with their non-fund service portfolio which is
offered to the clients. All these activities are broadly segmented across three
platforms - equity market activity, debt market activity and merger and
acquisitions (M&A) activity.

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1.6 Functions of Investment Banking

Investment banks have multilateral functions to perform. Some of the most

important functions of investment banking can be jot down as follows:

 Investment banking help public and private corporations in issuing

securities in the primary market, guarantee by standby underwriting or
best efforts selling and foreign exchange management. Other services
include acting as intermediaries in trading for clients.
 Investment banking provides financial advice to investors and serves
them by assisting in purchasing securities, managing financial assets and
trading securities.
 Investment banking differs from commercial banking in the sense that
they don't accept deposits and grant retail loans. However the dividing
line between the two fraternal twins has become flimsy with loans and
securities becoming almost substitutable ways of raising funds.
 Small firms providing services of investment banking are called
boutiques. These mainly specialize in bond trading, advising for mergers
and acquisitions, providing technical analysis or program trading.

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What to Look For In an Investment Bank:

Investment banking is a service business, and the client should expect

top-notch service from the investment banking firm. Generally only large client
firms will get this type of service from the major Wall Street investment banks;
companies with less than about $100 million in revenues are better served by
smaller investment banks. Some criteria to consider include:

 Services Offered:

For all functions except sales and trading, the services should go
well beyond simply making introductions, or "brokering" a transaction. For
example, most projects will include detailed industry and financial analysis,
preparation of relevant documentation such as an offering memorandum or
presentation to the Board of Directors, assistance with due diligence,
negotiating the terms of the transaction, coordinating legal, accounting, and
other advisors, and generally assisting in all phases of the project to ensure
successful completion.

 Experience:

It extremely important to make sure that experienced, senior

members of the investment banking firm will be active in the project on a day-
to-day basis. Depending on the type of transaction, it may be preferable to work
with an investment bank that has some background in your specific industry
segment. The investment bank should have a wide network of relevant contacts,
such as potential investors or companies that could be approached for
acquisition.

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  Record of Success:

Although no reputable investment bank will guarantee success, the

firm must have a demonstrated record of closing transactions.

 Ability to Work Quickly:

Often, investment banking projects have very specific deadlines,

for example when bidding on a company that is for sale. The investment bank
must be willing and able to put the right people on the project and work
diligently to meet critical deadlines.

 Fee Structure:

Generally, an investment bank will charge an initial retainer fee,

which may be one-time or monthly, with the majority of the fee contingent upon
successful completion of the transaction. It is important to utilize a fee structure
that aligns the investment bank's incentive with your own.

 Ongoing Support:

Having worked on a transaction for your company, the investment

bank will be intimately familiar with your business. After the transaction, a
good investment bank should become a trusted business advisor that can be
called upon informally for advice and support on an ongoing basis.

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 Because investment banks are intermediaries, and generally not
providers of capital, some executives elect to execute transactions without an
investment bank in order to avoid the fees. However, an experienced, quality
investment bank adds significant cant value to a transaction and can pay for its
fee many times over.

The investment banker has a vested interest in making sure the

transaction closes, that the project is completed in an efficient time frame, and
with terms that provide maximum value to the client. At the same time, the
client is able to focus on running the business, rather than on the day-to-day
details of the transaction, knowing that the transaction is being handled by
individuals with experience in executing similar projects.

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1.7.1 What are the different types of groups within an
investment bank?

Broadly speaking, there are two types of groups within a typical

investment bank (or investment banking division): product groups and industry
groups (also called sector groups or domains). The three most well known
product groups are mergers and acquisitions (M&A), leveraged finance (Levin)
and restructuring. Bankers in product groups have product knowledge and tend
to execute transactions (respectively, M&A transactions, leveraged buyouts
(LBO’s) and restructuring transactions/bankruptcies).

Bankers in industry groups cover specific industries and tend to do

more marketing activity (pitching). Industry bankers tend also to have more of
the relationships with companies’ senior management than do product bankers
(though some senior product bankers have excellent relationships as well).
Examples of common industry groups include FIG (Financial Institutions
Group), Healthcare, Consumer/Retail, Industrials, Energy and Utilities, Natural
Resources, TMT (Telecom, Media and Technology), Gaming and Lodging and
Real Estate. Often subgroups exist within the broader group. For example, a
Healthcare group may be segregated into biotechnology, medical devices,
managed care, pharma, etc. Though not covering a specific industry, one other
group that falls under the category of “industry” groups is Financial Sponsors.
Bankers in a Financial Sponsors group cover (have relationships with and
market their services to) private equity firms.

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Core Investment Banking Activities:

Front Office:

 Investment banking is the traditional aspect of the investment banks

which also involves helping customers raise funds in the capital markets
and giving advice on M&A's aka mergers and acquisitions. Investment
banking may involve subscribing investors to a security issuance,
coordinating with bidders, or negotiating with a merger target. Another
term for the investment banking division is corporate finance, and its
advisory group is often termed mergers and acquisitions (M&A). The
investment banking division (IBD) is generally divided into industry
coverage and product coverage groups. Industry coverage groups focus
on a specific industry such as healthcare, industrials, or technology, and
maintain relationships with corporations within the industry to bring in
business for a bank.
 Sales and trading: On behalf of the bank and its clients, the primary
function of a large investment bank is buying and selling products. In
market making, traders will buy and sell financial products with the goal
of making an incremental amount of money on each trade. Sales is the
term for the investment banks sales force, whose primary job is to call on
institutional and high-net-worth investors to suggest trading ideas and
take orders. Strategists advise external as well as internal clients on the
strategies that can be adopted in various markets. Ranging from
derivatives to specific industries, strategists place companies and
industries in a quantitative framework with full consideration of the
macroeconomic scene. This strategy often affects the way the firm will
operate in the market, the direction it would like to take in terms of its

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 proprietary and flow positions, the suggestions salespersons give to
clients, as well as the way structures create new products.
 Research is the division which reviews companies and writes reports
about their prospects, often with "buy" or "sell" ratings. While the
research division may or may not generate revenue, its resources are used
to assist traders in trading, the sales force in suggesting ideas to
customers, and investment bankers by covering their clients. Research
also serves outside clients with investment advice in the hopes that these
clients will execute suggested trade ideas through the Sales & Trading
division of the bank, thereby bringing in revenue for the firm. There is a
potential conflict of interest between the investment bank and its analysis
in that published analysis can affect the profits of the bank.

Other businesses that an investment bank may be

involved in:
 Global transaction banking is the division which provides cash
management, custody services, lending, and securities brokerage
services to institutions. Prime brokerage with hedge funds has been
an especially profitable business.
 Investment management is the professional management of various
securities (shares, bonds, etc.) and other assets (e.g. real estate), to
meet specified investment goals for the benefit of the investors.
Investors may be institutions (insurance companies, pension funds,
corporations etc.) or private investors (both directly via investment
contracts and more commonly via collective investment schemes e.g.
mutual funds). The investment management division of an investment
bank is generally divided into separate groups, often known as
Private Wealth Management and Private Client Services.
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  Merchant banking is a private equity activity of investment banks.
 Commercial banking sees article commercial bank.

Middle Office:

 Risk management involves analyzing the market and credit risk that
traders are taking onto the balance sheet in conducting their daily
trades, and setting limits on the amount of capital that they are able to
trade in order to prevent 'bad' trades having a detrimental effect to a
desk overall. Another key Middle Office role is to ensure that the
above mentioned economic risks are captured accurately, correctly
and on time. In recent years the risk of errors has become known as
"operational risk" and the assurance Middle Offices provide now
includes measures to address this risk.
 Corporate treasury is responsible for an investment bank's funding,
capital structure management, and liquidity risk monitoring.
 Financial control tracks and analyzes the capital flows of the firm;
the Finance division is the principal adviser to senior management on
essential areas such as controlling the firm's global risk exposure and
the profitability and structure of the firm's various businesses.
 Corporate strategy, along with risk, treasury, and controllers, often
falls under the finance division as well.
 Compliance areas are responsible for an investment bank's daily
operations' compliance with government regulations and internal
regulations. Often also considered a back-office division.

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Back Office:

 Operations involve data-checking trades that have been conducted,

ensuring that they are not erroneous, and transacting the required
transfers. While some believe that operations provide the greatest job
security and the bleakest career prospects of any division within an
investment bank, many banks have outsourced operations. It is, however,
a critical part of the bank.

 Technology refers to the information technology department. Every

major investment bank has considerable amounts of in-house software,
created by the technology team, who are also responsible for technical
support. Technology has changed considerably in the last few years as
more sales and trading desks are using electronic trading.

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Investment Banks Provide Four Primary Services:

Raising capital, advising in mergers and acquisitions, executing securities

sales and trading, and performing general advisory services. Smaller
investment banks may specialize in two or three of these categories.

1. Raising Capital:

An investment bank can assist a firm in raising funds to achieve a

variety of objectives, such as to acquire another company, reduce its debt load,
expand existing operations, or for specific project financing. Capital can include
some combination of debt, common equity, preferred equity, and hybrid
securities such as convertible debt or debt with warrants. Although many
people associate raising capital with public stock offerings, a great deal of
capital is actually raised through private placements with institutions,
specialized investment funds, and private individuals. The investment bank will
work with the client to structure the transaction to meet specific
objectives while being attractive to investors.

2. Mergers and Acquisitions:

Investment banks often represent firms in mergers, acquisitions, and

divestitures. Example projects include the acquisition of a specific firm, the
sale of a company or a subsidiary of the company, and assistance in
identifying, structuring, and executing a merger or joint venture. In each
case, the investment bank should provide a thorough analysis of the entity
bought or sold, as well as a valuation range and recommended structure.

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 3. Sales and Trading:

These services are primarily relevant only to publicly traded firms, or

firms, which plan to go public in the near future. Specific functions include
making
a market in a stock, placing new offerings, and publishing research reports.

4. General Advisory Services:

Advisory services include assignments such as strategic planning,

business valuations, assisting in financial restructurings, and providing an opinion
as to the fairness of a proposed transaction.

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The Typical Ladder within an Investment Bank?

Just about all investment banks have the same strict hierarchy or
ladder of professionals. From junior to senior, the typical hierarchy is (1)
Analyst, (2) Associate, (3) Vice President, (4) Senior Vice
President/Director and (5) Managing Director. Some banks deviate from
this hierarchy a bit, for example having the Senior Vice President and Director
be separate positions. Other banks, especially non-U.S. banks, have the same
hierarchy but with somewhat different names for each position (Associate
Director for Associate, Director for Vice President and Executive Director for
SVP). One exception for U.S. banks is that Bear Stearns calls the Senior Vice
President/Director position a Managing Director, and calls Managing Directors,
Senior Managing Directors. However, regardless of the names, the general job
functions of each relative position tend to be consistent bank to bank.

Role of the Analyst:

Analysts are typically men and women directly out of undergraduate
institutions who join an investment bank for a two-year program. Top
performing Analysts are often offered the chance to stay for a third year, and the
most successful Analysts can be promoted after three years to the Associate
level.

As Analysts are the bottom rung on the investment banking ladder, they
do the bulk of the work. Broadly speaking there are three types of work that
Analysts do: presentations, analysis and administrative tasks. Presentation
work involves the putting together and writing of various PowerPoint
presentations including marketing documents and documents for live
transactions.

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 The second main task of an analyst is analytical work. Pretty much
anything done in Excel is considered “analytical work.” Examples include
entering historic company data from public documents, analyzing such data for
valuation purposes and projecting a company’s financial statements.
Administrative work, being the third type of task, involves things like
scheduling and setting up conference calls and meetings, making travel
arrangements and keeping a list of deal team members up to date. While on live
transactions, Analysts often refer to themselves as “glorified admins,” given all
of the administrative work for which they are responsible.

Role of the Associate:

Associates are typically either folks directly out of top MBA programs
or Analysts that have been promoted. Typically, bankers will be at the
Associate level for three and a half years before they are promoted to Vice
President. Associates are also categorized into class years. In addition to
overseeing the Analyst’s work, the Associate will often help write the text for
the presentations as well as do much of the modelling work.

Role of the Vice President (VP):

The primary role of the Vice President is to be the “project

manager,” whether for marketing activities or on a transaction. It is the VP that
typically decides the structure of the presentation. On live engagements, the VP
is typically the banker “running the deal.” The VP must manage the client,
manage the senior bankers and manage the Analysts and Associates that are
actually doing the work. It is often at the VP level that bankers begin to form
valuable relationships with clients. Depending on the individual and also the
bank, some VPs will start to play a role in client development and marketing.

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Role of the Director/Senior Vice President (SVP):

Depending on the person (and sometimes the bank), the Director or

SVP may either act more like a Managing Director or more like the VP.
Sometimes, the Director/SVP’s role will depend also on the specific situation
and/or other deal team members. Ultimately, for Director/SVPs to be promoted
to Managing Director, they will have to demonstrate that they can form client
relationships and have the ability to market and to bring in new business.

Role of the Managing Director:

As the senior level banker, the role of the Managing Director (”MD”) is
mostly one of client development. The MD will likely be the one with the
senior level company relationships and is typically responsible for spearheading
marketing efforts. On a live transaction, the MD often plays only a minor role,
getting involved when difficulties arise in the deal and during high level
negotiations.

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Future of investment banking

Claw back provisions

In order to make a volatile market of investment banking more

secured from crashes caused by imprudent individual traders or groups
bank may tighten up the claw-back provisions. This provision required
those who trade cause subsequent losses to pay back all or part of their
bogusness. However this might result in the transition of traders of big
name to less well known boutiques. In order to avoid scrutiny.
Emphasis of Equity Derivatives and currency trading
An equity derivatives is an instrument used by an investor to
hedge the risk associated with taking the position in stock. It consists
underlying asset based on equity securities and limit the losses incurred
by either a short or long position in a company share. In order to derive
more benefit, Investment bank will emphasizing more on currency
trading and corporate restructuring.

Fewer big bank and more small boutiques

As the giant investment bank faced heavy losses, which in turn heavy
affected the government and investor in future there will be fewer big
bank and more boutiques. This will force the big short investment bank
will careful about their position, as will face stiff competition from small
firm. In any case the charm of investment bank is something which will
not decrease in near future
Lesser Dependence on short-term funding

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Considering the negative impact of the aggressive strategies of
investment bank in future there might be lesser dependence on short-
term funding and high leverages. As the Investment bank largely
financed, with short-term funding, a massive asset /liability mismatch is
created which is difficult to manage. It is also probable that more
investment bank will be pushed into the arms of banking acquire with
large and stable bases. This will provide solution to the investment bank
which are generally finances for the good time, not the bad ones.

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 Disadvantages of Investing in Banking Sector

 A problem of Rising NPA’s: The growing problem of increasing NPA’s in

the banking sector is a key concern. If a payment of the loan is overdue during
the last 90 days, then it is termed as a Non-Performing Asset. If the NPA’s are
on the higher side, then it means that the banks will be extremely cautious
when it comes to disbursing the loans. If you are looking to add bank stocks in
your fund portfolio, then ensure that the NPA level is low.

 The rise of Competition in Banking Sector: With the Reserve Bank of India
(RBI) granting new licenses for opening new banks, the competition in the
banking sector has certainly heated up. The opening up of the new bank
branches will no doubt go a long way in improving financial inclusion but will
also limit the performance of the bank shares. This is because the new or old
banks will leave no stone unturned to attract more customers by coming up
with new schemes or funds. This means that the banks will be eating up each
other’s market share. Hence, this may prove to be one of the main reasons for
not investing in the banking sector.

 Availability of Borrowing Alternatives: Many people are more bullish on

the Non-Banking Financial Company (NBFC), which basically does a
financial business without any banking license. One of the prominent reasons
for their growing popularity is that the NPA’s are almost zero and they are
less riskier when compared with the bank stocks. There are chances that some
of the NBFC’s may even get the banking license from the RBI in the future.
So, when the NBFC’s have high growth potential, then why would people
prefer to invest in the banking sector.

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 CHAPTER 2

LITREATURE REVIEW

Behavioural finance is a new emerging science that studies the irrational

behaviour of the people. Avinsha Kumar Singh (2006).The study entitled
"Investment Pattern of people " has been undertaken with the objective, to
analyse the investment Pattern of people in Bangalore city and analysis of the
study was undertaken with the people of survey conducted. After analysis and
interpretation of data it is concluded that Mumbai investors are more aware
about various investment avenue and the risk associated with that. All the age
group give more important to invest in equity & except people those who are
above 50 give important to insurance, fixed deposits and tax saving benefits.
Generally those investors who are invested in equity are personally follow the
stock market frequently i.e. in daily basis. But those who are invested in mutual
fund are watch stock market weekly or fortnight. In Mumbai, Investors are more
aware about various investment avenues and the risk associated with that. But in
Mumbai, investors are more conservative in nature and they prefer to invest in
those avenues where risk is less like bank deposit, saving, post office saving etc.

Sudalaimutu and senthilkumar (2008) Mutual funds is the one of investment

avenues the researcher research in this area about investor perception towards
mutual fund investment has been analysed effectively taking into account the
investor reference towards the mutual fund sector, scheme type, purchase of
mutual fund units, level if risk undertaken by investors, sources of information
about the market value of the unit, investors opinion on factors influenced to
invest in mutual fund, the investor satisfaction level towards various motivating
factors. Source of awareness of mutual fund scheme, types of plan held by the
26
investor awareness of risk category by investors, problem faced by mutual Fund
investors. Running successful mutual funds require complete understanding of
the peculiarities of the Indian stock Market and also the awareness of the small
investors. The study has made an attempt to understand the financial behaviour
of mutual fund investors in connection with the scheme preference and
selection. An important element in the success of a marketing strategy is the
ability to fulfil investors expectation. The result of these through satisfactory on
the investor’s perception about the mutual fund and the factors detraining their
investment decision and preference. The study will be useful to the mutual fund
industry to understand the investor’s perception towards mutual fund
investment and the study would also be informative to the investors.

Sunil Gupta (2008) the investment pattern among different groups in Shimla
had revealed a clear as well as a complex picture. The complex p[picture means
that the people are not aware about the different investment avenues and they
did not respond positively. Probably it was difficult for them to understand the
different avenues. The study showed that the more investors in the city prefer to
deposit their surplus in banks, post offices, fixed deposit, saving accounts and
different. UTI scheme, etc. The attitude of the investors towards the securities
in general was bleak, through service and professional class is going in for
investment in shares, debentures and in difference mutual fund scheme. As far
as the investment are concerned, people put their surplus in banks, past offices
and other government agencies. Most of the horticulturists in shimla city who
belong to apple belt through being rich have a tendency of investing then
surpluses in fixed deposits of banks, provident fund, post office saving, real
estates, etc, for want of safety and suitability of returns.

27
Manish mittal and Vyas (2008) investors have certain cognitive and emotional
weaknesses which come in the way of their investment decisions. Over the past
few years, behavioural finance researchers have scientifically shown that
investors do not always act rationally. They have behavioural biases that lead to
systematic errors in the way they process information for investment decision.
Many researcher have tired to classify the investors on the basis of their relative
risk taking capacity and the type of investment they make. Empirical evidence
also suggests that factors such as age, income education and martial status affect
and individual’s investment decision. This paper classifies Indian investors into
different personality types and explore the relationship between various
demographic factors and the investment personality exhibited by the investors.

Filip Reinholdson Henrik Olsson( 29-6-12) The purpose of this thesis is to

survey the academic literature concerning the separation of commercial and
investment banking, and to serve as a basis for future research. We provide a
review of 75 papers showing that there is no unanimous evidence either for or
against the argument that a separation of commercial and investment banking
would be more beneficial for society overall. We further demonstrate that the
recent financial crisis did not directly stem from the combination of commercial
and investment banking activities within universal banks. The findings do,
however, provide evidence showing that increased diversification within the
financial industry has amplified the systematic risk exposure for banks and
increased the similarity between institutions. Our results suggest that regulators
should focus on limiting the interconnectedness and similarity between financial
institutions, thereby minimizing the risk of systemic crises and market
contagion. Even though this literature review does not determine whether or not
commercial and investment banking activities should be unified, we hope that it
can act as an aid to future research in the area.

28
William D. Chohan 8-10-2010 Two years after the near collapse of capitalism,
we certainly have our fill of financial reforms. The 2,200-page Dodd-Frank Act,
which President Obama signed this summer, creates an Orwellian alphabet soup
of new agencies, oversight boards and offices intended to protect us from
ourselves.

The problem is that since the incentives on Wall Street have not been changed
one iota by the new laws — nor are they likely to be changed by any of the
soon-to-be-written regulations of federal agencies — we’re no better protected
from bankers’ potentially reckless behaviour than we were before the latest
round of reforms.

It’s not that Dodd-Frank ignored Wall Street’s past excesses. The law will
ensure that some, but not all, derivatives will have to be traded on exchanges
and that some, but not all, of the banks’ proprietary trading will be curbed and
that some, but not all, of their private-equity and hedge funds will be shuttered
or spun off. Dodd-Frank is also supposed to curtail Wall Street’s penchant for
creating conflicts of interest, although how the law is going to do that is far
from clear.

“In the end, our financial system only works — our market is only free — when
there are clear rules and basic safeguards that prevent abuse, that check excess,
that ensure that it is more profitable to play by the rules than to game the
system,” President Obama said when he signed the bill into law. That rhetoric is
fine, but unfortunately Dodd-Frank will do nothing to change the rules on Wall
Street.

Nor, frankly, will the expected coming into force, in a couple of years, of the
new Basel III capital rules, which will likely require banks to have common
equity equal to 7 percent of the value of their assets.

29
Bankers and traders still have the same irresponsible, accountability-free
incentives they have had for the past 40 years to generate as much revenue as
they possibly can each year, regardless of the consequences. The change
occurred when Wall Street firms stopped being partnerships, in which every
partner put his full wealth on the line every day, and became corporations,
which put the risks on their shareholders and creditors.

Dodd-Frank and Basel III both missed plum opportunities to change Wall
Street’s incentive structure. Which is a shame, since it would not have been
difficult. Human behaviour is pretty simple actually. We do what we are
rewarded to do. On Wall Street, people are hugely overcompensated for
generating revenue, which they do by selling products (stocks, bonds, advice on
mergers or investing) and by using their vast balance sheets to facilitate trades
for clients and to take the risks others don’t want to take.

What’s made all this possible is the vast amounts of capital that Wall Street
firms have amassed. Fifty years ago, Goldman Sachs had around $10 million of
capital, which came from its partners; today Goldman has upward of $74 billion
of capital, derived mostly from the generosity of its shareholders and the
creditors who have bought Goldman’s public and private securities.

30
 CHAPTER 3

RESEARCH METHODLOGY

INTRODUCTION

Research Methodology is a way to systematically solve the research problem,

the research methodology includes the various methods and techniques for
conducting a research. Research is an art of scientific investigation. In other
words research is a scientific and systematic search for patient information one
specific topic. The logic behind taking research methodology into consideration
is that one can have knowledge about the method and procedure adopted for
achievement of objective of the project.

STATEMENT OF PROBLEM

 Diversification towards capital markets.

 No proper system of investment banking in India.
 Lack of institutional Financing.
 Lack of depth in the secondary Markets, especially in the corporate debt
segment.

31
OBJECTIVE

The main purpose of this study is to evaluate the impact of investment banking.
In order to meet this objective, the following objectives taken up under our
consideration,

 To find out the impact on investment banking.

 To increase an awareness regarding effective strategic planning.
 To get a tax minimization in investment by proper tax investment
strategy.
 To raise capital of companies.
 To Provide advice on mergers, acquisitions, and other financial
transactions
 To Research and develop opinions on securities, markets, and
economies
 To propose useful direction for future research.

RESEARCH DESGIN

Research design is the conceptual structure within research is conducted. It

constitutes the blueprint for collection, measurement and analysis of data was a
descriptive research involves collecting numerical through self report collected,
through questionnaires or interviews (person or phone), through observation.
For present study, the research was descriptive and conclusion oriented.

32
SAMPLING DESGIN

Universe : The universe is most commonly defined as everything that

physically exist.

The entered of space and time, all forms of matter, energy and momentum , and
the physical laws and constants that govern them, all those person who make
investment.

Theoretical Universe : It include investors make investment in all over the

world.

Accessible Universe : It include investors make investment in Indian stock

market.

Sampling Unit : The target population must be defined that has to be sampled.
The sampling unit of research included salaried people residing in Ropar.

Sample Size : This refers to number of respondents to selected from the

universe to constituted sample. The sample size of 100 investors was taken.

Sampling Technique : Convenience sampling was used to select the sample.

Convenient sampling is anon probability sampling technique that attempt to
obtain a sample of convenient elements, in case of convenience sampling, the
selection of sample depend upon the discretion of the interviewer. In this
project, questionnaire method was used for the collecting the data. With the help
of this method of collecting data, a sample survey was conducted .

33
NEED OF THE STUDY

The need of the study was to fill the identified in the previous researches. The
researchers conducted earlier lay emphasis on the customer perception about
securities the importance of this aspect the present study was conducted to know
the pattern of investment of salaried people and the study of behaviour of
investors and determine their awareness level regarding investment avenues
available in the stock market.

DATA SOURCES

The source of project depends on accurate data. That’s why data collection of
appropriate data which differ considerable in context, money, time, cost and
other resources of disposable research.

 Primary Data - Primary data are those which are fresh and collected
for this first time and thus happened to be original in character. The
primary data was collected through direct personal interview (opened
and close ended questionnaire).

 Secondary Data – secondary data were collected with the help of

Google, another secondary data were collected with help of
newspaper, articles, internet, pdf files which is available on the
website.

34
Limitations of Research

o It only covers investment banking.

o It scopes is only limited to its shares and securities.

o It only covers the needs, scopes, importance of only investment

banking

o Low return compared to the stock market.

o If inflation is high, returns may be negative when considered on

purchasing power basis.

o Lock in period leads to a lack of liquidity .

35
 CHAPTER 4

Demographic No. of Respondents Percentage of Respondents

Male 74 74
Female 26 26
Total 100 100

Age No. of Respondents Percentage of Respondents

Less than 20 0 0
20-40 years 35 35
Greater than 40 65 65
Total 100 100

Occupation No. of Respondents Percentage of Respondents

Government employee 38 38
Private employee 62 62
Total 100 100

Income (per month) No. of Respondents Percentage of Respondents

Less than 2000 20 20
20000-40000 55 55
Greater than 40000 25 25
Total 100 100

Interpretation

It was found that the major population of investors was greater than 40 years
and 35% was of 20- 40 years. And 38% investors are government employees
and 62% investors are private employees. And majority of respondents i.e. 55%
earn income between Rs. 20000-40000 per month. It means majority of
investors was greater than 40 years having income in between Rs. 20000-40000.

36
 A. In which sector do you prefer to invest your money ?

Options Total Percentage

Private sector 23 23%

Government sector 57 57%

Public sector 17 17%

Foreign sector 3 3%

Money prefered to investment

Private sector
3%
14% 24% Government
sector
Public sector

Foreign
sector
59%

OBSERVATION:

According to the above pie-chart Money preferred to investment is given more

to Government sector 59% like others than private 24%, Public sector14%,
Foreign sector 3% .

37
 B. What is your investment objectives ?

Options Total Percentage

Income and capital preservation 15 15%

Long term growth 32 32%

Growth and income 43 43%

Short term growth 10 10%

Investmet objectives

Income and Capital

10% 15%

Long term Growth

43% 32% Growth and Income

Short term Growth

OBSERVATION:

According to the above pie-chart the more number of investment objectives is in

growth and income i.e. 43%, while the less number is in short-term growth i.e.
10%

38
 C. What is the purpose behind investment ?

Options Total Percentage

Wealth creations 32 32%

Tax saving 16 16%

Earn returns 30 30%

Future expense 22 22%

Investment purpose

Wealth creation

22%
32% Tax saving

Earn returns

30% Future expense

16%

OBSERVATION:

According to the above pie-chart the more numbers of investments purpose is in

wealth creation i.e. 32%, while the less numbers is tax saving i.e. 16%.

39
 D. Which factor do you consider before investing ?

Options Total Percentage

Safety of principle 31 31%

Low risk 19 19%

High risk 29 29

Maturity period 21 21%

Fcator before investing

Safety of
principle
21%
31%
Low risk

High risk
29%
19%
Maturity period

OBSERVATION:

According to above pie-chart the more numbers of factors before investing is in

safety of principle i.e. 31%, while the less numbers of factors before investing is
in low risk i.e.19%.

40
E. What is your source of investment advice ?

Options Total Percentage

Newspaper 21 21%

News channels 26 26%

Family friends 06 06%

Internet 34 34%

Advisors 13 13%

Magazines 00 00%

Source of investment advice

News paper

24%
News
39% channels

Family and
friends
7% 30%
Internet

OBSERVATION:

According to above pie-chart the more numbers of peoples had sources of

Investment advice in internet i.e. 34%, while the less numbers is of magazines
i.e.0%.

41
F. Do you think the interest rates on deposits is satisfactory?

Particulars No. of Respondent Percentage of

Respondent
Yes 4 2
No 2 -
Maybe 4 8
Total 10 10

14

12

10

8 Series 3
Series 2
6
Series 1

0
Category 1 Category 2 Category 3 Category 4

222 with the interest rates offered by their bank and remaining 80%
customers are not sure about the interest rates are fair or not., 20% customers
says that that they are not satisfied with the interest rates on the deposits and
remaining

42
G. What do you feel about overall service quality of your
bank?

Particulars No. of Respondents Percentage of Respondent

Excellent 1 1

Very Good 8 8

Good 1 1

Average - -

Poor - -

Total 10 10

Service Quality
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

9%
10%

23% 58%

Overall service quality of is Excellent(10%), very good (80%) and Good

(10%). Whereas overall service quality ofBank is good (70%) and excellent,
very good, average is 10 percent respectively.

43
H. Do you feel investments bankers are helpful in making good
investments ?

Options Total Percentage

Yes 86 86%
No 14 14%

Yes

Total
Percentage

OBSERVATION:

According to above pie-chart the more numbers of peoples feel investments

bankers are helpful in making good investments is 86%, while the less numbers
of people does not feel investment bankers are helpful in making good
investments i.e. 14%

44
 I. To known the percentage of income that respondent
invest annually?

Levels No. of Respondents Percentage of Respondents

Up to 10% 14 14
10-15% 22 22
15-20% 40 40
More than 20% 24 24
Total 100 100

No. of Respondents

7%
11% Up to 10%
10-15%
50% 15-20%
20%
More than 20%
Total
12%

OBSERVATION:

From the above table & chart it was found that 40% respondent invest 15-20%
of their annual income. 24% respondents invest more than 20% of their annual
income. 22% respondents invest up to 10-15% of their income and 14%
respondents invest up to 10% of their income in different.

45
 CHAPTER 5

CONCLUSION

We must analysis the situation & understand rather than banks reaching to the
people , there is a need for making people reach to bank when banking sector is
tremendously growing in spite of challenging operation environment and
government want to reach out to the unbanked population, lower no of
application for new banking licence ignites the underlined arguments and
causes. Various critical factors like downgrading of Indian economy by
renowned rating Agency, current account deficit pressuring local currency,
weakening Investment seatmates and stricter banking norms laid by RBI are
prime reason behind less participation.

As our investment bank are different for commercial bank and play a very
crucial role in market transaction on behalf of investor, government and
corporation and for growing economy in India needs a helping hand which can
be provided by financial or the banking Industries.

We can say that Investment bank exist because they maintain an information of
market place that facilitates information sensitive security transaction.

Investment Banking is a particular form of Banking which finance capital

requirement of an enterprise. Investment banking assist as it performs IPOs
private placement and bond offering act as broker and carries through merger
and acquisition.

Thus bank develops an adequate infrastructure including expertise in order to

provide full range of services to corporate sectors. So, it has great scope and as
it is related to Service sector it is very useful for fast growing economy.
46
SUGGESTION

A private limited company that looks after the financial concerns and needs for
its clients is an Investment Bank. The main division that we’ll concern
ourselves with is the advisory division. It is here that you’ll find yourself in the
lucrative but demanding shoes of a financial adviser, equity researcher (ER)
and later move on to other prestigious careers in private equity, venture capital,
and wealth management. Working as an equity researcher, your primary job
would be to analyze your client’s performance ratio, financial concerns, forecast
the financials (using financial modelling) and explore scenarios so as to make
trade related recommendations.

There was a lack of awareness about banking rules and regulations not only in
the private sector and cooperative banks but at many of the small branches even
in case of nationalisation bank also. This may cause the further delay in the
implementation of the transaction and which is ultimate converted into
reduction of productivity the business of banks. To remove this hurdle effective
training programs should be arranged for educating the manager carders or
other employees who are concerned with the banking.

In Indian Public Sector Banks there is no clear cut placement and succession
planning so on in order to raise the productivity a well-defined succession plan
will lead to smooth takeover of important positions and it will result in a higher
productivity.

47
 ANNEXURE

Questionnaire of Customer Satisfaction

1. Name : _________________________________
2. Name of your Bank : _________________________________

3. For the past how many years you have account with this bank?
_____ Years
4. Do you think that your bank satisfies all your banking needs?
(a) Yes (b) No

5. What kind of account do you maintain in this bank?

(a)Current (b)Savings (c)Loan a/c (d)Demat (e)Credit card

6. Which of the following facilities is given more importance in your bank?

(a)Loan facilities (b)Overdraft facilities (c)ATM facilities

7. Do your bank complete your work in time?

(a) Yes (b) No

8. Do you think that the interest rate on deposits are satisfactory?

(a) Yes (b) No (c)Maybe

48
9. Does your bank have core banking facility for the customers?
(a) Yes (b) No

10. Do they charge unnecessarily for not maintain minimum balance in your
account?
(a) Yes (b) No

11. Does your bank offers competitive service charges?

(a) Yes (b) No

12. Do you think your bank offers competitive interest rate?
(a) Yes (b) No

13. Do you use the service of alternative bank?

(a) Yes (b) No

14. What do you feel about overall service quality of your bank?
(a)Excellent (b)very good (c)good (d)average (e)poor

15. Are you satisfied with your bank and its services?

(a) Yes (b) No

49
 CHAPTER 6

BIBLOGRAPHY

 Book Referred
1. Business of Investment Banking
By Prof K Thomas Liaw
2. De Jong, A., and A. Roell (2005) “Financing and Control in the
Netherlands.” In A History of Corporate Governance Around the
World, edited by R. K. Mork, 467– 506. Chicago: University of
Chicago Press
3. Fernihough, A. and K. H. O'Rourke (2014) “Coal and the European
Industrial Revolution,” NBER Working Paper No. 19802
4. Financial market and services
By G Gordan and Dr Natrajan
5. Investment banking
By Pratap G Subramanyam
6. Management Accounting and Financial Analysis
By Ravi M Kishore
Website:
1. Search engines
o Altavista
o Google
o Investopedia
o Wikepedia
o Yahoo

2 .www.investment bank.com

3. www.time of india.com

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