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In India, the debt or fixed income securities are classified into two major categories:

• Money Market securities
• Bonds

Money market securities are interest bearing instruments that have a maturity profile of less than one year. These instruments are issued at a discount to its face value rather than paying interest. On the maturity date the value of the security is equivalent to the face value and the difference between the initial purchase price and face value tends to be the return earned on investing in these securities.

First to invest in mutual fund scheme, you need to pinpoint your investment objective before investing in them. These objectives could be:

• To earn returns better than bank deposits;
• To take advantage of falling interest rate in the country;
• To take advantage of improving company financials situation;
• To participate in Indian equity market rally;
• To participate in global equity market rally;
• To participate in gold and other commodity rally.

Stock prices are directly proportional to its company’s profitability. The investment participants load up shares of companies whose profitability are likely to rise hence pushing up the stock price which then becomes subject to market’s demand & supply & vice versa.

However a company’s profitability is impacted by three major variables:

1. Volume growth
2. Price realization
3. Cost of goods & funds

India and China are the world’s fastest growing economies. On the other hand these two economies are also the world’s most populated economies. The reason for these two economies growing fast has been their vast population.

The long term economic trend is determined by the level of productivity by a nation.

However, productivity is:

1. Trend in hours worked
2. Output per hour