Trading Strategy of Investors in Volatile Stock Market

A

REPORT

ON

TRADING STRATEGY OF INVESTORS IN VOLATILE STOCK

MARKET

IN PARTIAL FULFILLMENT OF SUMMER TRAINING

IN 2 YEAR MBA PROGRAMME OF GUJARAT UNIVERSITY

SUBMITTED TO

GUJARAT TECHNOLOGICAL UNIVERSITY

(YEAR 2011-2013)

SUBMITTED BY

ENROLLMENT NUMBER: (117140592057) (Nirav shah)

(117140592050) (Bhavik parekh)

Guided By: Prof.Amish Soni

1

GLS Institute of Computer Technology (GLSICT – MBA)

Certificate

This is to certify that Mr. Nirav shah and Mr. Bhavik parekh Enrolment No.

107140592057 and 1,7140592050 students of GLS Institute of Computer

Technology (GLSICT-MBA) has successfully completed his Summer internship

Project on “Trading strategies of investors in volatile stock market” in partial

fulfillment of the requirements of MBA programme of Gujarat Technological

University. This is his original work and has not been submitted elsewhere.

Date: _____________________________

Place: _____________________________

3

Prof. Amish Soni.(Assistant Professor

& Project Guide)

Dr. Hitesh Ruparel(Director)

PREFACE

In today’s fast moving economy only theoretical knowledge is not sufficient for an individual to

perform sufficiently. To fill up the gap between theory and practical we must have enough

theoretical as well as practical knowledge regarding business environment. And for this purpose

this Summer Internship Project is carried out, which has helped me to gain both practical as well

as theoretical knowledge.

Practical training is one of the vital aspects of management field. Thus, practical training enables

students in understanding the administration and functions of a corporate entity. Practical

training helps an individual to develop managerial abilities. Thus, training acts as a bridge

between theoretical knowledge and practical implementation of the knowledge. Hence, it helps

an individual to know the actual uses and implications of the theoretical knowledge acquired in

the classroom.

4

ACKNOWLEDGEMENT

Every work in the world is done with the help of some or other. He or she may directly or

indirectly involve in that work. According to a famous saying we should thank the one that have

helped you in our work. So here in this part I am doing the work of thanking all those people

who helped me in making this report.

I am very much grateful to DR.Hitesh ruparelia and Prof. Amish Soni as he guided me for

selecting the project. He provided all the essential information for preparing a good project

report.

I am also thankful to Mr. Sunil Shah (Vice President, Arcadia Shares) and all their staff members

for co-operating with us.

5

EXECUTIVE SUMMARY

This project Report contains the topic in “TRADING STRATEGIES OF INVESTORS IN VOLATILE STOCK MARKET”. This report is taken for the purpose of knowing the different trading strategies of investors in volatile stock market.

These are the following objective of the research,Primary Objectives:

To study the trading strategies of investors in volatile market

To study the factors influencing investors in their investment

To study the behavior of investors in different market situation

We have selected the exploratory as well as descriptive research design with non probability sampling in which convenience sampling was used in the study and the research take 200 respondents for carrying out the study, the research interviewed the respondents with the help of well-structured questionnaires.

From the study it was found that majority investors would prefer both segment cash and

derivatives. In cash segment there are two forms. Delivery form and intraday form. Generally

investors interested to trade in the intraday trading. Investors will book their partial profit if

the trade goes in their favor in cash market. Fundamentals of the company is most

influencing factor in the cash market. Investors mostly trusting CNBC TV-18 in all channels.

In the derivative segment there are mainly two forms, futures and options. Investors prefer

speculations in this segment. Investors will not square up their position in this segment. They

will hold their position in this segment. Investors will do hedging ,arbitrading and

speculation in this segment. So from the study it can be found that in what situation investors

will do trading accordingly.

6

1. Problem Statement

“Trading strategies of investors in volatile stock market” to know the strategies of the investors in volatile stock market.

2. Objectives Of The Study

To study the trading strategies of investors in volatile market

To study the factors influencing investors in their investment

To study the behavior of investors in different market situation

3. Research Design

Exploratory as well as descriptive research design.

We have to study the perception of financial advisors and for studying the perception of

anyone, exploration is necessary.

We will use descriptive research by using secondary data and by describing the insights

related to the mutual fund industry and other financial products.

4. Theoretical Framework

“Trading strategies of investors in volatile stock market”. Here, what are the different stragies of

the investors in different situation in the volatile stock market can be mean.

5. Data Collection Sources

Primary Data:

Questionnaire

Secondary Data: Books, magazines, journals, newspaper, websites.

7

6.Sampling Method

Population: Retail investors in Rajkot city.

Sample size: 200 respondents.

Sampling technique: Probability sampling will be used in which convenience sampling method will be used.

7.Research Approach

We have followed Survey research approach. We conducted survey of investor’s perception about the

different investment products. This survey research will help to know the different perception about the

investment.

8.Research Instrument

For the study we have used questionnaire as a research instrument that contains various types of

questions.

9.Research Plan

We have prepared questionnaire that will be filled up by the respondents and then the data analysis &

interpretation will be done on that.

8

DECLARATION

I undersigned Nirav Shah and Bhavik parekh the student of MBA, Semester 3 hereby declare

that the project presented is my own work and has been carried out under the guidance of Prof.

Amish Soni of GLS, Ahmedabad.

This report has not been previously submitted to any other university or any institution for

examination or any other purpose.

Date:

Place: Rajkot

9

Table of Content

Ch. No TopicPage No

A Preface 4

B Acknowledgement 5

C Executive summary 6

D Declaration 9

1 Research Methodology 11

2 Introduction 20

3 Data analysis and Interpretation 37

4 Hypothesis testing 56

5 Findings 63

6 Conclusion 65

References

Bibliography

Appendix

10

Research Methodology

Literature review

HISTORY OF DERIVATIVES

With the opening of the economy to multinationals and the adoption of the liberalized economic policies, the economy is driven more towards the free market economy. The complex nature of financial structuring itself involves the utilization of multi currency transactions. It exposes the clients, particularly corporate clients to various risks such as exchange rate risk, interest rate risk, economic risk and political risk.

With the integration of the financial markets and free mobility of capital, risks also

multiplied. For instance, when countries adopt floating exchange rates, they have to face

risks due to fluctuations in the exchange rates. Deregulation of interest rate cause interest

risks. Again, securitization has brought with it the risk of default or counter party risk. Apart

from it, every asset—whether commodity or metal or share or currency—is subject to

depreciation in its value. It may be due to certain inherent factors and external factors like the

market condition, Government’s policy, economic and political condition prevailing in the

country and so on.

In the present state of the economy, there is an imperative need of the corporate clients to

protect there operating profits by shifting some of the uncontrollable financial risks to those

who are able to bear and manage them. Thus, risk management becomes a must for survival

since there is a high volatility in the present f inancial markets.

In this context, derivatives occupy an important place as risk reducing machinery.

Derivatives are useful to reduce many of the risks discussed above. In fact, the financial

service companies can play a very dynamic role in dealing with such risks. They can ensure

that the above risks are hedged by using derivatives like forwards, future, options, swaps etc.

Derivatives, thus, enable the clients to transfer their financial risks to he financial service

companies. This really protects the clients from unforeseen risks and helps them to get there

11

due operating profits or to keep the project well within the budget costs. To hedge the various

risks that one faces in the financial market today, derivatives are absolutely essential.

12

DERIVATIVES IN INDIA

In India, all attempts are being made to introduce derivative instruments in the capital

market. The National Stock Exchange has been planning to introduce index-based futures. A

stiff net worth criteria of Rs.7 to 10 corers cover is proposed for members who wish to enroll

for such trading. But, it has not yet received the necessary permission from the securities and

Exchange Board of India.

In the forex market, there are brighter chances of introducing derivatives on a large scale.

Infact, the necessary groundwork for the introduction of derivatives in forex market was

prepared by a high-level expert committee appointed by the RBI. It was headed by Mr. O.P.

Sodhani. Committee’s report was already submitted to the Government in 1995. As it is, a

few derivative products such as interest rate swaps, coupon swaps, currency swaps and fixed

rate agreements are available on a limited scale. It is easier to introduce derivatives in forex

market because most of these products are OTC products (Over-the-counter) and they are

highly flexible. These are always between two parties and one among them is always a

financial intermediary.

However, there should be proper legislations for the effective implementation of derivative

contracts. The utility of derivatives through Hedging can be derived, only when, there is

transparency with honest dealings. The players in the derivative market should have a sound

financial base for dealing in derivative transactions. What is more important for the success

of derivatives is the prescription of proper capital adequacy norms, training of financial

intermediaries and the provision of well-established indices. Brokers must also be trained in

the intricacies of the derivative-transactions.

Now, derivatives have been introduced in the Indian Market in the form of index options and

index futures. Index options and index futures are basically derivate tools based on stock

index. They are really the risk management tools. Since derivates are permitted legally, one

can use them to insulate his equity portfolio against the vagaries of the market.

13

Every investor in the financial area is affected by index fluctuations. Hence, risk

management using index derivatives is of far more importance than risk management using

individual security options. Moreover, Portfolio risk is dominated by the market risk,

regardless of the composition of the portfolio. Hence, investors would be more interested in

using index-based derivative products rather than security based derivative products.

There are no derivatives based on interest rates in India today. However, Indian users of

hedging services are allowed to buy derivatives involving other currencies on foreign

markets. India has a strong dollar- rupee forward market with contracts being traded for one

to six month expiration. Daily trading volume on this forward market is around $500 million

a day. Hence, derivatives available in India in foreign exchange area are also highly

beneficial to the users.

14

RECENT DEVELOPMENTS

At present Derivative Trading has been permitted by the SEBI on derivative segment of the BSE

and the F&0 segment of the NSE. The natures of derivative contracts permitted are:

Ø Index Futures contracts introduced in June, 2000,

Ø Index options introduced in June, 2001,

And

Ø Stock options introduced in July 2001.

The minimum contract size of a derivative contract is Rs.2 lakhs. Besides the minimum contract

size, there is a stipulation for the lot size of a derivative contract. The lot size refers to number of

underlying securities in one contract. The lot size of the underlying individual security should be

in multiples of 100 and tractions, if any should be rounded of to next higher multiple of 100.

Apart from the above, there are market wide limits also. The market wide limit for index

products in NIL. For stock specific products it is of open positions. But, for option and futures

the following wide limits have been fixed.

30 times the average number of shares traded daily, during the previous calendar month in the

cash segment of the exchange.

Or

10% of the number of shares held by non-promoters, i.e., 10% of the free float in terms of

number of shares of a company.

15

Cash market

Definition of 'Cash Market'

The marketplace for immediate settlement of transactions involving commodities and securities.

In a cash market, the exchange of goods and money between the seller and the buyer takes place

in the present, as opposed to the futures market where such an exchange takes place on a

specified future date.

Also known as the spot market, since such transactions are settled "on the spot."

Explains 'Cash Market'

Cash market transactions can take place either on a regulated exchange or over-the-counter

(OTC). In contrast, transactions involving futures are conducted exclusively on exchanges, while

forward transactions, such as currency forwards, are generally executed on the OTC market.

For a specific commodity, the price in the cash market is usually less than its price in the futures

market. This is because there are carrying costs, such as storage and insurance, involved in

holding a commodity until it can be delivered at some point in the future.

On the cash market trading is conducted in two sections, the equities and the debt securities sections.

In the equities section shares and mutual funds can be traded, together with the compensation note as

a special security. The securities traded in the debt securities section include: government debt

securities (treasury bills and government bonds), corporate bonds and mortgage bonds.

A market in which commodities, such as grain, gold, crude oil, or RAM chips, are bought and

sold for cash and delivered immediately. also called spot market.

The cash market is a buying strategy in which the buyer makes an immediate payment that is equal to

the current market price for commodities and other types of securities. Upon the receipt of the

payment, the seller relinquishes all claims to the property and bestows ownership upon the buyer. In a

sense, any type of retail transaction such as the purchase of groceries could be considered

a cash market, as the goods are received by the buyer upon rendering a cash payment for the

products.

One of the characteristics that sets the cash market apart from a futures market is this immediate

satisfaction and transfer of ownership. Futures markets involve a longer period for the transaction to

be considered complete. With a cash market, the investor immediately assumes ownership and is free

to do with the commodity or security as he or she wishes. While both approaches are capable of

16

http://www.wisegeek.com/what-is-a-commodity.htm

http://www.wisegeek.com/what-are-futures.htm

http://www.wisegeek.com/what-is-market-price.htm

helping an investor realize a return on an investment, the cash market approach may offer a level of

speed and excitement that will attract investors who prefer to be constantly on the move with the

investment portfolio.

Risk management in Cash market

It can objectively evaluate and express the acceptability of the inherent risk exposure and can

explicitly state their intent regarding the continued acceptance of, or alterations to, the inherent

risk exposure relative to a commonly understood reference point. It can also immediately

separate the suitability of instruments, positions, strategies, and tactics into some action groups.






2. PROBLEM STATEMENT:

“Trading strategies of investors in

volatile stock market.”

3. Objectives:

- To study the trading strategies of investors in volatile market

- To study the factors influencing investors in their investment

- To study the behavior of investors in different market situation.

17

4. Research Design






5..Theoretical Framework

“Trading strategies of investors in volatile stock market”. Here, what are the different stragies of

the investors in different situation in the volatile stock market can be mean.

6 . Data Collection Sources

Primary Data:

Questionnaire

Secondary Data: Books, magazines, journals, newspaper, websites.

7. Sampling Method

Population: Retail investors in Rajkot city.

Sample size: 200 respondents.

Sampling technique: Probability sampling will be used in which convenience sampling method will be used.

18

8.Research Approach

We have followed Survey research approach. We conducted survey of investor’s perception about the

different investment products. This survey research will help to know the different perception about the

investment.

9.Research Instrument

For the study we have used questionnaire as a research instrument that contains various types of

questions.

10..Research Plan

We have prepared questionnaire that will be filled up by the respondents and then the data analysis &

interpretation will be done on that.

19

INTRODUCTION

ARCADIA SHARES AND STOCK BROKERS PVT LTD.

Arcadia came to life in 1995, right on the wave of a post-liberalization market economy. As

financial services became a major contributor to economic growth, Arcadia has steadily shaped

into a leading financial service provider. In 1995, we were a small company with just 5

employees. Today, we have a market presence across the country, with over 275 branches &

franchisee outlets. We have established a strong retail network not only in metros but also in tier

two and tier three cities.

Traditionally, our operation was concentrated in fast-moving capital market of Western India.

But sensing great potential, we have launched strong expansion plans in the North and the South.

This systematic presence-building and efficient delivery of service has put Arcadia among the

fastest growing retail broking houses in the country, with memberships in:

NATIONAL STOCK EXCHANGE OF INDIA (NSE)

BOMBAY STOCK EXCHANGE (BSE)

MULTI COMMODITY EXCHANGE (MCX)

NATIONAL COMMODITY & DERIVATIVES EXCHANGE (NCDEX) DEPOSITORY

PARTICIPANT OF CDSL.

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI).

Today Arcadia has accumulated acknowledged leadership in execution and clearing services on

exchange-traded derivatives and cash-market products. Working with the leading stock

exchanges and noted financial institutions has drilled in us the importance of real-time

information and use of analytical tools in investment decisions.

20

Practicing this over the years has made us experts in understanding investor requirements.

Arcadia's integrated and innovative use of technology provides clients with the ability to trade

offline & online. Clients also have constant access to their account information via internet.

TOP MANAGEMENT:

1. MR.ANTONY SEQUEIRA.

(FOUNDER AND MANAGING DIRECTOR)

2. NITIN BRAHMBHATT.

(DIRECTOR)

3. MR.SUNIL C.SHAH

(VICE-PRESIDENT)

ADDRESS:

11, PANCHNATH PLOT CORNER,

NR.PANCHNATH MANDIR,

DR.RAJENDRA PRASAD ROAD,

RAJKOT-360001

21

About us

Company information

Name: Arcadia Shares and Stock Brokers Pvt. LTD

Registered Office: 328, Ninad, Building no. 7,

Service road,

Nr Bhavishya Nidhi Bhavan

Bandra (East)

Mumbai – 400051

Head Office: As above

Regional Office: 11, Panchanath plot corner,

Nr. Panchnath mandir,

Dr. Rajendra Prasad road

Rajkot – 360001

Founder: Mr. Antony Sequera

Director: Mr. Nitin Brahmbhatt

Regional Head: Mr. Akhil Shah

Contact no.: +91 22 67739999

Dealing Room: +91 22 26478888

Toll free: 1800 22 1555

Fax: +91 22 26478988

22

E-mail: [email protected]

Website: www.arcadiastock.com

Membership

NSE (Cash and Derivatives) : INB/F_230778238

BSE (Cash) : INB010778232

CDSL DP : IN225

MCX : 10950

NCDEX : 00374

23

http://www.arcadiastock.com/

mailto:[email protected]

Services

1. Equity Investment

Looking for an easy and convenient way to invest in equity and take positions in the

futures and options market using our research and tools. To start trading in Equity, all

you need to do is open an online trading account. You can get help opening the account

and get guidance on how to trade in Equity.

2. Commodity Trading (MCX - NCDEX)

spaced dynamic marketwith excellent liquidity can NOW trade in Commodity Futures

Market. The Commodity Exchange is a Public market forum and anyone can play in

these vital Commodity Markets. ARCADIA COMMODITIES AND TRADING can

certainly be your point of entry to the commodity markets. ARCADIA is registered

trading – cum – clearing member of NCDEX and MCX. Participation is not difficult.All

you need is to open an account with us. We shall offer you advice and research on

investments.

3. Derivatives Trading

Futures and options are derivatives, which use equity as their underlying. Hence their

Equity Advisory Group (EAG), which is highly qualified, will also act as your advisors

and help you take informed decisions while trading in these derivative instruments.

24

4. Internet Trading

Making the right trade at the right time! Welcome tour E-Broking service which brings

you an experience of online buying and selling of shares with just a click.

5. Mutual Fund Advisory

Transact in a wide range of Mutual Funds. Mutual funds are an attractive means of saving

taxes and diversifying your investment portfolio. So if you are looking to invest in mutual

funds, ARCADIA offers you a host of mutual fund choices under one roof; backed by in-

depth information and research to help you invest smartly

6. IPO Distribution

IPO or Initial Public Offer presents good opportunities for netting high returns on your

investments in a relatively short period of time – if you invest early. Get information on

IPO news, forthcoming IPOs and lot more.

7. Demat Services (CDSL)

In the times of T+2 having a Demat account linked to your trading account becomes

more convenient. The no-trading members can also avail of our Depository services. You

receive regular account reports and an efficient service at all times. ARCADIA is a

member of CDSL.

25

DEPARTMENTS

KYC

Risk Management

Admin

Banking

DP

Back-off

Relationship Management

Billing

IT

Sales

Feedback

Compliance & Legal

26

SWOT – ANALYSIS

During my training at Arcadia share and stock, I came to know the strengths, weaknesses,

opportunities and threats for the company. It will be very useful for the company to analyze them

and for that purpose the SWOT analysis of the company is presented here.

STRENGTHS

Well maintained infrastructure

Dedicated, intelligent and loyal staff

Competitive brokerage

The best investment advice through dedicated research and reports.

Wide product range to enable the clients to choose the best alternative

One of the best DPs in India

A positive image in existing clients

WEAKNESSES

Time consuming process for account opening, resolving the problems of the customers,

etc.

Company is present in only one business, i.e. Stock Broking, so there is no scope for

cross-selling

27

OPPORTUNITIES

Slope of stock market towards delivery based transactions

Open interest of the people to enter in stock market for investing

Attract the customer who are dissatisfied with other brokers

An indirect opportunity generated by the stock market due to its current situation

Online trading a/c market has vast potential

Derivatives and Commodities markets are growing so, there is enormous potential for

these market

THREATS

Increasing competition from existing as well as new players

A threat of loosing clients for any kind of weakness of the company

Indirect threat from instable stock market, i.e. low/no profit of Angel’s clients would lead

them to go for other broker

New multinational and national players are coming with competitive products

28

IMPORTANCE OF RESEARCH

In this modern era, for every organization service quality is having great importance.

Therefore every organization it is necessary to study the rate of satisfaction of their clients.

The basic need for studying the satisfaction of the clients is to find out their view about the

services provide by Arcadia Shares and Stock PVT. LTD

The research study on satisfaction provides necessary information to the company. This helps

the company take action to improve the service quality.

Study of “Service Quality” helps the company to maintain a standard and increase

productivity by improving service.

This study tells us how much the employees are capable and their interest at work place.

They will care about the quality of their work.

They will create and deliver superior value to the client.

They are more committed to the organization.

Their works are more productive.

29

OBJECTIVE OF STUDY

The broad objective of this study is to know the satisfaction level of clients for services provide

by Arcadia. The specific purposes of this study are:

RESEARCH OBJECTIVES:

- To study the trading strategies of investors in volatile market

- To study the factors influencing investors in their investment

- To study the behavior of investors in different market situation.

- To study stock market and understand its market segment.

- To know the awareness level regarding cash & derivatives segment in stock market.

- To study the annual investment level of investors in stock market.

- To know investment behavior of people in stock market.

- To study the indicators that investors take into consideration while

trading in cash and derivative market.

30

SCOPE OF THE STUDY

The study has the scope of including the most important organ of the organization that is

the client. The study is to provide information to better understand how client think and

feel as member of the organization.

The study is limited to the 100 investors trading in stock market who are above the age of

20 trading in various brokerage houses of Rajkot.

31

RESEARCH DESIGN

What is Research Design?

Research design can be thought of as the structure of research – it is the “glue” that holds all of

the elements in a research project together. “A research design is the arrangement of conditions

for collection and analysis of data in a manner that aims to combined relevance to the research

purpose with economy in procedure.”

Generally there are mainly four type of research design:

1. Sampling

2. Observation

3. Statistical

4. Operational

As per this research sampling design method is very useful for the survey on the service

quality of the Arcadia.

32

SOURCES OF DATA

As we all know that there are mainly two sources of data i.e.

Primary

Secondary

Primary Data:

The data, which is collected directly from the respondents, is called primary data.

The normal procedure is to interview some people individually to get a sense of how people feel

about the derivatives & commodities segment.

So far as our research is concerned, primary data is the main source of information. We have

collected data through Questionnaire.

Secondary Data:

Data collected for some purpose other than the problem at hand are called as secondary data.

We have used following secondary data sources.

1. Library Research

I have searched many books and materials like Philip kotler to understand the research

methodology.

33

2. Business Magazines

Many business magazines are referred to gather data about various trading strategies.

3. Internet Surfing

There are many search engines which provides us the data for variety of topics such as Google

Search, Yahoo Search etc. we have used both of the search engines for gathering the data. We

have also used various financial portals such as moneycontrol.com, bseindia.com, nseindia.com,

etc. we have also taken the help of arcadiastock.com in order to fulfill our requirement.

34

RESEARCH INSTRUMENT

The research instrument used for primary data collection is questionnaire. The questionnaire has

close ended questions. (Questionnaire is attached as

Annexure) The questionnaire is supposed to be given to an individual to fill up on his own.

Importance and Benefits:

The research would help to understand the trading behavior of people in various market

situation and it would also help to find out the various trading strategies in cash as well as

derivative market segment. This research would also help to find out various indicators that

people take into consideration while trading in different market segments.

Method of Data Collection

Primary data-in order to collect direct information from investors we have designed a

questionnaire. We have approached investors of different broking houses and income groups.

35

LIMITATION OF THE STUDY

The limitations of this study are as follows:

Personal Bias:

People may have personal bias towards particular investment option so they may not give correct

information and due to which conclusion may be derived.

Time Limit:

The time duration of the research is short that’s why the information is not covered fully.

Sample Area:

The area was limited to Rajkot city only.

Sample Size:

The last limitation is Sample size, taken by us is of 100 only; due to which we might not get the

proper results.

36

Trading Segment

8%9%

83%

Cash

Derivative

Both

Data Analysis and Interpretation

Investor’s trading strategy in volatile stock market

(1) Name of Trading Segment

Out of 100 respondents, 83 trades in both segment while 8 respondents

trades in only cash segment and 9 respondents trades in only derivatives

market.

37

(2) Annual Investment in share market

52%

34%

14%

Investment

below 1 lakh100000 - 500000beyond 500000

38

(3) What factors do you consider while investing in cash & Future

market?

55%

5%

12%

20%

7% 1%

Factors

Fundamenta analysisTechnical AnanlysisTipsGlobal MarketsBrokerOthers

Majority of the respondents follow Fundamental Analysis while some of the

respondents also follow the global cues and minor numbers of respondents

follow Tips, Brokers, and Technical Analysis. So we can conclude that people

are still unaware about the Technical analysis which can be termed as new

trend in market.

39

(4) Which T.V. channels do you watch regularly for getting updates

about the stock market?

82%

4%

7%1%

7%

TV Channels

CNBC TV 18Times nowZee BusinessCNN IBNOthers

From the above data we can analyze that majority of the respondents

regularly watch CNBC TV18 as CNBC Awaaz while few of the investors prefer

the other news channels like Zee Business, Times Now, etc.

40

Analysis of Cash Market Segment

(1) What is your motive while trading in cash market?

90%

2%8%

Intra-day

Delivery Based

Depends

From the above data we can analyze that majority of the respondents goes

with market conditions while few respondents trades specifically Intra-day

or Delivery Based.

41

(2) Which of the following trading strategies you generally prefer?

a) Trading with stop loss

b) Trading without stop loss

c) Hedging with target price

d) Trading without target price

e) Hedging in options market

f) Buy at lower price / sell at higher price

Out of 100 respondents, 31 respondents prefer stop loss and target price. 28

respondents follow only target price without any stop loss. 21 respondents

prefer to buy on dips while 9 respondents prefer to sell on hike. 26

respondents prefer trading with target price while 16 respondents doesn’t

follow any fixed target price.

stop lo

ss an

d targe

t pric

e

only tar

get p

rice w

ithout s

top loss

hedgin

g in options m

arket

sell o

n hike

trade o

n targe

t pric

e

don't follo

w any t

arget

price

0

5

10

15

20

25

30

3531

28

21

9

26

16

42

(3) If the trade goes in your favor then which strategy do you prefer?

43%

22%

12%

9%

14%

Book partial profit

Book full profit

Increase overall position

Reverse overall position

Wait and watch

From the above pie chart, 43% of the respondents prefer to book partial

profit if the trade goes in their favor, while 22% of respondents prefer to

book their full profit. While 14% respondents prefer to remain neutral.

While few respondents prefer to Increase/Reverse their overall position.

43

(4) If the trade goes against your favor then which strategy you prefer?

21%

33%

35%

2%9%

Book partial loss

Book full loss

Make an average

Reverse overall position

Wait and watch

Out of the 100 respondents, 35% prefers to make an average when the trade goes

against their favor. So majority of respondents prefer to increase their position.

While 33% of respondent prefer to book full loss and 21% prefer to book partial

loss. Few of respondents like to remain neutral while only 2% wants to reverse

their overall position.

44

(5) What are the indicators you refer while trading in cash market?

(Give ranks)

Volume

Averag

e trad

e pric

e

Fundam

ental

s of C

ompany

Circuit fi

lter

Percen

tage c

hange

in pric

e

Top Gain

ers/lo

sers

Tech

nical le

vels

012345678

6

1

7

2

45

3

Indicators

From 100 respondents, majority of respondents prefer to go with Fundamentals of

company, Volume and percentage change in price as an important indicator in

order to trade in cash market, while they give less importance to other indicators

like Technical Levels, Circuit Filters, Average Trade price. Hence they consider

Fundamental of company and volume as ideal indicator.

45

Analysis of Derivative Market Segment

(1) Name of Trading Segment in Derivative Market

22%

2%

76%

Future Market Segment

Option Market Segment

Both of above

From the above chart we analyze that about 76% of the respondents deals in both

the segment while 22% respondents prefer only Future Market and the rest of

respondents deals in only Option Market Segment. Hence we can conclude that

people are not much aware about Option Market Segment.

46

(2) What is your intention while trading in Derivative Market?

From the above data, we analyze that 48% of respondents prefer Position Trading

that means they are ready to take risk and they also prefer more profit/loss. While

39% of respondent like to have Intra-day trading which shows that they are ready

to carry forward their position and they prefer small gain/loss, while 13%of

respondents are indecisive about their trading strategy.

47

39%

48%

13%

Intra-day trading

Position Trading

Depends

(3) Which of the following applies to you while dealing in derivative market?

89%

9%2%

Speculation]

Hedging

Arbitration

From the above data, we can conclude that most of respondents are speculators

which mean that they are willing to enormous risk. While only 9 % of the

respondents are hedgers who likes to hedge their positions in the option markets

and only 2 % of the respondents are arbitragers. So we can say that most of the

respondents are risk takers in the markets.

49

(4) Which of the following trading strategy you generally prefer?

a) Trading with stop loss

b) Trading without stop loss

c) Trading with target price

d) Trading without target price

e) Hedging n options market

f) Buy at lower price/sell at higher price

g) Others (please specify) _____________________

Out of 100 respondents, 56 respondents prefer to have stop loss and target price

while 62 respondents prefer to trade with out stop loss and without target price

and 49 respondents prefer to trade with stop loss and without target price. 42

respondents prefer to hedge in Option Market while 38 respondents prefer to

buy on dips/sell on hike. So we can conclude that majority of respondents gives

importance to stop loss and target price.

50

(5) If the trade goes in your favor then which strategy do you prefer?

38%

35%

7%

3%

4%

13%Book partial profit

Book full profit

Increase your overallposition

Reverse your overallposition

Hedging your position

Wait and watch

From the above data, we analyze that 38% of respondents book partial profit if the

trade goes in their favor. So they are not ready to take much risk while 35% of

respondents book their full profit in their favorable situation.

So they are considered as safe players. While 13 % of respondents remain neutral

in such situation and 7% of respondents are more risk taker who increases their

overall position in favorable situation. Few respondents are hedging their position

and few respondents reverse their overall position according to market scenario.

51

(6) If the trade goes against your favor which strategy do you prefer?

24%

27%29%

3%2%

15% Book partial loss

Book full loss

Make an average


Hedging your position

Wait and watch

From above data, we can analyze that 29% of respondents makes an average if

trade goes against their favor which indicates that they are ready to take further

risk in the market and they are ready to bear further loss. 27% of respondents book

their full loss which indicates that they are not ready to bear further loss and

square-up their position. While 24% of respondents book partial loss which shows

that they are not ready to take more risk.

15% of respondents remain neutral in such situation while rest of respondents like

to hedge their position or reverse their overall position.

52

(7) What are the indicators you refer while trading in derivative market?

Volume Percentage change in

price

Global Market

Top Gainer/Loser

Open Interest Technical Levels

Other0

1

2

3

4

5

6

7

8

6

4

5

3

7

2

1

Indicators

From the above data, we analyze that people considers open interest, Volume,

Global Markets as the most important indicators while trading in derivative

market. Here Open Interest indicates net outstanding contracts in derivative market

which people consider most important. While people prefer to give less priority to

technical level, top gainer/loser, percentage change in price. Hence we conclude

that global market, open interest, volume are the major indicators which people

prefer.

53

(8) What strategy would you prefer in cash/derivative if the market opens in a

positive zone?

8%

23%

22%

32%

14%1%

Buy at currentmarket price

Short sell at currentmarket price

Buy at lower price

Sell at higher price

Wait and watch

Other

From the above data, we analyze that 32% of respondents prefer to sell at higher

price which means that they assume the market to slightly correct. While 23% of

respondents prefer to short sell at current market price which indicates that they

expect the market to fall sharply from the current level.

22% of respondents prefer to buy on dips which shows that they are hopeful about

the market to remain in a positive zone and 14% of respondents remains neutral

and remaining respondents prefer to buy at current market price which shows that

they are very optimistic about the market.

1% of respondents prefer to book profit at stop loss level and continue their

position.

54

(9) What strategy would you prefer in cash/derivative market if the market

opens in negative zone?

28%

22%23%

15%

11% 1%

Buy at currentmarket price

Short sell at currentmarket price

Buy at further lowerprice

Sell at marketrecovery

Wait and watch

Other

From the above data, we conclude that 28% of respondents prefer to buy at current

market price which shows that they are confident about the market to move up

while 23% of respondents prefer to buy at further lower level which shows that

they expect the market to fall further but in the overall scenario they are very

optimistic about the market. While 22% of respondents prefer to short sell at

current market price and 15% of respondents likes to sell on hike which shows that

they expect the market to fall sharply in the near term. And 11% of respondents

remains neutral.

While 1% of respondents prefer to book loss at stop loss level and continue their

overall position.

55

(10) What will be your trading strategy on the happening of any major events like

Union Budget, Election, Natural Calamities, etc.?

33%

15%11%

39%

2%

Square-up your position

Holding your position


Wait and watch

Other

From the above data, we analyze that 39% of respondents prefer wait and

watch strategy because they expect the market to be very volatile in the

Coming days so they wait for market to stabilize and thus will enter after the

happening of the event. While 33% of respondents prefer to square-up their

position as they does not want to take risk.15 % of respondents prefer to hold

their position and want to take further risk and 11% of respondents like to

reverse up their overall position according to their prediction.

56

(11) What will be your reaction in panic situation in the stock market?

34%

13%17%

36%

Follow rumors

Follow ExpertOpinion

Follow Media

Other (pleasespecify).

From the above data, we analyze that 34% of respondents follow market rumors

which shows that they are very sensitive in their trading while 17% of respondents

follow media such as CNBC TV18, Zee business, etc and takes their decision

accordingly. 13% of respondents follow expert opinions and behave accordingly.

Majority of respondents behaves in different ways like some of them rely on their

own experience, some remains neutral while some of them are ready to take further

risk.

57

Hypothesis:

1. Ho: maximum people are involved in only one trading segment. H1: maximum people are not involved in one trading segment only.

Active in trading segment

Frequency Percent Valid Percent Cumulative Percent

Valid cash market 16 8.0 8.0 8.0

derivative market 18 9.0 9.0 17.0

both markets 166 83.0 83.0 100.0

Total 200 100.0 100.0

H1 accepted: Here, H1 hypothesis is accepted.so maximum people are not involved in one

trading segment only.

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2. H0: There is significant relation between intention and strategy in trading in cash market.H1: There is no significant relation between intention and strategy in trading in cash market.

Chi-Square Testsi

Value df Asymp. Sig. (2-sided) Exact Sig. (2-sided) Exact Sig. (1-sided)

Pearson Chi-Square 42.579a 1 .000

Continuity Correctionb 38.913 1 .000

Likelihood Ratio 43.183 1 .000

Fisher's Exact Test .000 .000

Linear-by-Linear Association 42.366 1 .000

N of Valid Cases 200

a. 1 cells (25.0%) have expected count less than 5. The minimum expected count is 4.64.

b. Computed only for a 2x2 table

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Ho is rejected:

Here, Ho is rejected and H1 is accepted.so, there is no significant relation between intension and strategy in trading in cash market.

Ho is rejected as from the chi-square test the value of Ho is 0.0 which is less than 0.05.so Ho is rejected.

60

3. H0: There is significance relation between intraday trading and trading with target.H1: There is no significance relation between intraday trading and trading with target.

Chi-Square Tests

Value df Asymp. Sig. (2-sided) Exact Sig. (2-sided) Exact Sig. (1-sided)


Continuity Correctionb 38.913 1 .000


Fisher's Exact Test .000 .000



a. 1 cells (25.0%) have expected count less than 5. The minimum expected count is 4.64.

b. Computed only for a 2x2 table

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Ho rejected:

Here, Ho is rejected and H1 is accepted.so, there is no significant relation between intraday trading and trading with target.

Ho is rejected as from the chi-square test, Ho is 0.0 which is Less than 0.05. so Ho is rejected.

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4. Ho: There is significant relation between intension and strategy in future market segment trading in derivative market.H1: There is no significant relation between intension and strategy in future market segment trading in derivative market.

Chi-Square Tests

Value Df Asymp. Sig. (2-sided)





a. 7 cells (38.9%) have expected count less than 5. The minimum expected count is .16.

Ho accepted:Here, there is a significant relation between intension and strategy seems in future

market segment trading in derivative market.

Ho is accepted as from the chi-square test, Ho is 0.515 which is More than 0.05. so Ho is accepted.

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5. Ho :people prefer to stay in if trade goes in their favor in derivative marketH1: people prefer to book their profit in if trade goes in their favor in derivative market

Chi-Square Tests

Value df Asymp. Sig. (2-sided)





a. 10 cells (55.6%) have expected count less than 5. The minimum expected count is .12.

H1 accepted:Here, Ho is rejected and H1 is accepted as people prefer to book their profit if the

trade goes in favor in the derivative market.

Ho is rejected as from the chi-square test it can be found that Ho is 0.00 which is less than

0.05.so it is rejected.

64

FINDINGS

Majority of respondents trades in both cash as well as derivative market segment.

Majority of respondents gives more importance to fundamental analysis and global

market while investing in cash and derivative market segment.

Majority of respondents prefer to watch CNBC TV18 as their market guide.

Majority of respondents like to trade with stop loss and with target price in cash market

segment.

Majority of respondents like to book partial profit if the trade goes in their favor in cash

market segment.

Majority of respondents prefer to make an average if the trade goes against their favor in

cash market segment.

Majority of respondents give more importance to fundamental of company and volume in

cash market segment.

Majority of respondents prefer to trade in both Future and Option Market Segment.

Majority of respondents prefer to have position trading in Derivative Market Segment

with an intention to speculate in the market.

Majority of respondents like to book partial profit if the trade goes in their favor in case

of derivative market segment.

Majority of respondents prefer to make an average if the trade goes against their favor in

case of derivative market segment.

Majority of respondents give more priority to open interest, volume, global market in

order to trade in derivative market segment.

Majority of respondents like to sell on hike if the market opens in a positive zone.

Majority of respondents like to buy at current market price if the market opens in a

negative zone.

Majority of respondents prefer wait and watch strategy on the happening of any major

event.

Majority of respondents follow rumors as well as uses their own experience in case of

any panic situation in stock market.

65

CONCLUSION

In case of Cash Market Segment, we can conclude that people generally trade with stop

loss and with target price. So in case of Cash Market Segment people are not more risk takers.

And they give more priority to the Fundamentals, Volume and Percentage change in price in

cash market segment and there is a mixed pattern of trading between intra-day and delivery

based trading.

In case of Derivative Market Segment, we can conclude that people generally use both

the segment but they generally use the Option Segment for hedging purpose and not for trading

purpose. So we can conclude that people are less aware about the Option Segment as compared

to Future Market Segment. People generally trade with stop loss and uses hedging option in

derivative market segment and they give more priority to Open Interest, Volume and Global

Market for trading purpose.

Generally, in volatile market people tends to make an average or book partial profit/loss

in both the segment.

66

Bibliography

www.bseindia.com

www.moneycontrol.com

www.nseindia.com

www.arcadiastock.com

67

http://www.arcadiastock.com/

APPENDIX

QUESTIONNAIRE

Our purpose for this survey is just to study and analyze trading strategy of

investors in volatile market. Investors are ensured that their filled up questionnaire

will be kept private & confidential.

(1) Name :- _______________________________

(2) Occupation :- ___________________________

(3) Qualification :- __________________________

(4) Annual Income :- ___ < 2 lakhs

___ 2 - 5 lakhs

___ 5 - 10 lakhs

___ > 10 lakhs

(5) Name of Broking House :- _________________

(6) No. of years dealing in share market :- ________

(7) Name of trading segment :- ___ Cash Market

68

___ Derivative Market

___ Both of the above

(8) Annual Investment in share market :- _________

(9) What factors do you consider while investing in cash & Future market?

Fundamental Analysis Technical analysis Tips

Global Markets Broker Others …………………………

(10) Which T.V. Channels do you watch regularly?

___ CNBC TV 18

___ Times Now

___ Zee Business

___CNN IBN

___ Others

Cash Market Segment

(1) What is your intention while trading in cash market ?

___ Intra-day trading

___ Delivery based Investment

___ Depends upon market scenario

(2) Which of the following trading strategies you generally prefer ?

___ Trading with stop loss

___ Trading with out stop loss

69

___ Trading with target price

___ Trading without target price

___ Buy on lower price

___ Sell on higher price

___ Others (please specify)

(3) If the trade goes in your favor then which strategy do you prefer ?

___ Book partial profit

___ Book full profit

___ Increase your overall position

___ Reverse your overall position

___ Wait and watch

(4) If the trade goes against your favor then which strategy do you prefer ?

___ Book partial loss

___ Book full loss

___ Make an average


___ Wait and watch

70

(5) What are the indicators you refer to while trading in cash market ?

(Give ranks 1 to 7)

___ Volume

___ Percentage change in price

___ Average Trade Price

___ Top Gainers / Losers

___ Fundamentals of company

___ Technical Levels

___ Circuit Filter

Derivative Market Segment

(1)Name of trading segment in derivative market :- ___ Future Market Segment

___ Options Market Segment

___ Both of the above

(2)What is your intention while trading in Derivative Market ?

___ Intra-day trading

___ Position trading

___ Depends upon market scenario

(3)Which of the following applies to you while dealing in Derivative Market ?

___ Speculation

___ Hedging

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___ Arbitration

(4)Which of the following trading strategies you generally prefer ?

___ Trading with stop loss

___ Trading with out stop loss

___ Trading with target price

___ Trading without target price

___ Hedging in option market

___ Buy at lower price / sell at higher price

___ Other (please specify) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) If the trade goes in your favor then which strategy do you prefer ?

___ Book partial profit

___ Book full profit

___ Increase your overall position


___ Hedging your position

___ Wait and watch

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(6) If the trade goes against your favor then which strategy do you prefer?

___ Book partial loss

___ Book full loss

___ Make an average


___ Hedging your position

___ Wait and watch

(7) What are the indicators you refer to while trading in derivative market?

(Give ranks 1 to 6)

___ Open Interest

___ Volume

___ Percentage change in price

___ Top Gainers / Losers

___ Technical Levels

___ Global Markets


opens in a

Positive Zone ?

___ Buy at current market price

___ Short sell at current market price

___ Buy at lower price

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___ Sell at higher price

___ Wait and watch

___ Other (please specify) . . . . . . . . . . . . . . . . . . . . . . . .


opens in a

Negative Zone ?

___ Buy at current market price

___ Short sell at current market price

___ Buy at further lower price

___ Sell at market recovery

___ Wait and watch

___ Other (please specify) . . . . . . . . . . . . . . . . . . . . . . .

74

(10) What will be your trading strategy on the happening of any major events like

Union Budget, Election, Natural Calamities, etc. ?

___ Square-up your partial position

___ Square-up your position

___ Holding your position


___ Wait and watch

___ Other (please specify) . . . . . . . . . . . . . . . . . . . . . . . .

(11) What will be your reaction in panic situation in the stock market?

___ Follow rumors ___ Follow Media

___ Follow Expert Opinion ___ Other (please specify). . . . . . . . . .

. . .

75

Trading Strategy of Investors in Volatile Stock Market

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