A

Summer Training Report

On

“Study on Investor Behavior in Capital Market”

(LUDHIANA STOCK EXCHANGE)

Submitted to

PUNJAB TECHNICAL UNIVERSITY

JALANDHAR

In partial fulfillment of the requirement for the

award of degree of

Master of Business Administration (MBA)

Submitted by Project Guide

Zinnia Dhody Mrs. Pooja Kohli

104052246701 Executive Director

(Officiating)

Session (2010-2012)

APEEJAY INSTITUTE OF MANAGEMENT JALANDHAR

i

CERTIFICATE

Certified that Miss Zinnia Dhody, an MBA student, Apeejay Institute of

Management, Jalandhar, was placed in this organization: Ludhiana Stock

Exchange, for summer training for a period of six weeks during June-July,

2011, in partial fulfillment of the requirement of a MBA degree of the

university. She has been assigned the project entitled: Study of Investor

behavior in capital market. In our opinion her work has been satisfactory. The

data sources have been duly acknowledged. It may be considered for the

evaluation in partial fulfillment of the requirement for the award of degree of

Master of Business Administration.

Signature

Training Coordinator

Mr. Sadhu Ram

i

PREFACE

The successful completion of this project was a unique experience for me because by visiting

many place and interacting various person, I achieved a better knowledge about this system.

The experience which I gained by doing this project was essential at this turning point of my

carrier this project is being submitted which contain detailed analysis of the research under

taken by me.

The research provides an opportunity to the student to devote his/her skills, knowledge and

competencies required during the technical session. The research is on the topic “Study on

Investor Behavior in Capital Market.”

ii

ACKNOWLEDGEMENT

“Every venture is made successful by active cooperation and guidance of the people

concerned with it, which was forthcoming in full during this study”.

At the very outset, I bow my head before the sovereign of the sovereigns (Almighty) Say:

Infinite thanks are due to those who endowed with the power of mind & open not only to me,

my leaned supervisor but are also the soul creator of this mortal universe.

I would like to express my appreciation and gratitude to various people who have shared

their valuable time and made possible this project through their direct and indirect

cooperation. I wish to thank the training coordinator, Mr. Sadhu Ram, for going through the

contents of my project thoroughly. Also I would like to thank Mrs Pooja Kohli, for allowing

me to work on this project and provide necessary help. I thank Mr. Kanwal Gurleen and

Mrs. Anu Sahi, dear friend & colleagues, who helped me in every possible way, supported

me and encouraged me to explore new dimensions.

Zinnia Dhody

MBA 3rd Semester

iii

TABLE OF CONTENTS

Certificate i

Preface ii

Acknowledgement iii

CHAPTER

NO.

CHAPTER NAME PAGE NO.

1. Introduction 1

2. Review of literature 26

3. Need, Scope and Objectives of the Study 30

4. Research Methodology 32

5. Data Analysis and Interpretation 36

6. Findings of the Study 49

7. Conclusion 51

References 53

Annexure

A. Questionnaire 55

iv

LIST OF TABLES

TABLE NO. TABLE TITLE PAGE NO.

1.1 List of board of directors 4

1.2 Relationship between

lenders and borrowers

8

1.3 Issues in primary market 12

1.4 Number of listed

companies and market

capitalization

13

5.1 Demographic Profile of respondents

37

5.2 Awareness of respondents about the concept of capital market

39

5.3 Factors inducing respondents to invest in a particular stock

40

5.4 Factors which induce to stay in a particular stock

41

5.5 Percentage of savings invested

42

5.6 Factors leading Indian Stock market to rise

43

5.7 Pattern of investing 44

5.8 Kind of stocks in which investment is made

45

5.9 Risk appetite preferred 46

v

5.10 Factors influencing the capital market

47

5.11 Investment in IPO 48

vi

LIST OF FIGURES

TABLE NO. TABLE TITLE PAGE NO.

5.1 Awareness of respondents about the concept of capital market

39

5.2

Factors inducing respondents to invest in a particular stock

40

5.3 Factors which induce to stay in a particular stock

41

5.4 Percentage of savings invested

42

5.5 Factors leading Indian Stock market to rise

43

5.6 Pattern of investing

44

5.7 Kind of stocks in which investment is made

45

5.8 Risk appetite preferred

46

5.9 Investment in IPO 48

vii

CHAPTER-1

INTRODUCTION

1

1.1 Stock Exchange

There are 22 stock exchanges in India, the first being the Bombay Stock Exchange (BSE),

which began formal trading in 1875, making it one of the oldest in Asia. Over the last few

years, there has been a rapid change in the Indian securities market, especially in the

secondary market. Advanced technology and online-based transactions have modernized the

stock exchanges. In terms of the number of companies listed and total market capitalization,

the Indian equity market is considered large relative to the country’s stage of economic

development. The number of listed companies increased from 5,968 in March 1990 to about

10,000 by May 1998 and market capitalization has grown almost 11 times during the same

period.

1.2 About the organisation

Ludhiana Stock Exchange Limited popularly known as LSE is a public limited company

which is dealing in securities as a regional stock exchange under the name Ludhiana Stock

Association Limited to fulfill the vital need of the stock exchange in its regional area or

jurisdiction i.e. Punjab, J&K, and HP. It has its own subsidiary i.e. LSE Securities Limited

and further LSE Securities Limited has its subsidiary namely LSE Commodity Trading

Limited.

Sh. S.P. Oswal of Vardhman Group and Sh. B.M. Munjal of Hero group established the

Ludhiana Stock Association Limited (LSE) in the year 1981, to fulfill a vital need of having

Stock exchange in the region. Since its inception, the stock exchange has grown

phenomenally. By 1999-2000, the exchange had a total of 284 brokers, out of which 79 were

corporate bropkers; it was further classified as 212-proprietor broker, 2-partnership broker

and 70-corporate broker. Then there were only 23 sub-brokers registered.

The stock exchange has played an important role in channelizing savings into capital for the

various industrial and commercial units of the states of Punjab and other parts of the country.

LSE become the second bourse in India to introduce modified carried forward system after

BSE on April 6, 1998. LSE also introduced a settlement guarantee fund (SGF). The SGF

2

guarantees settlement of transactions and the carry forward facility provides liquidity to the

market. LSE become the first in India to start LSE Securities Ltd., a 100% owned subsidiary

of the exchange . The LSE Securities got the ticket as sub-broker of the NSE. In 1998, the

exchange also got permission to start derivative trading. LSE Securities Ltd. in the year 2000.

For the settlement of dematerialized securities, the stock exchange has also been linked up

with National Securities Depository Ltd. (NSDL) and, Central Depository Ltd. (CDSL).

THE VISION AND MISSION OF STOCK EXCHANGE IS:

“Reaching small investors by providing services relating to capital Market including Trading.

Depository Operations etc and creating Mass Awareness by way of education and training in

the field of Capital Market.

To created educated investors and fulfilling the gap of skilled work force in the domain in

Capital Market.”

Further, the Exchange has around

324 listed companies (211 are regional and 113 are non-regional)

295 members out of which 140 are active and 93 deals in F&O

GOVERNING BOARD OF LUDHIANA STOCK EXCHANGE

LTD.

The LSE governing boad constitutes of 13 directors. Among them

6- Share Holder Directors

3- Trading Member Directors

3- Public Interest Directors

1- Executive Director

3

Table 1.1

LIST OF BOARD OF DIRECTORS

S. NO NAME DESIGNATION

1. Prof. Padam Parkash Kansal Chairman

2. Sh. Joginder Kumar Vice Chairman

3. Sh. Jaspal Singh Trading Member Director

4. Sh. Sanjay Anand Trading Member Director

5. Sh. Sunil Gupta Trading Member Director

6. Sh. Satish Nagpal Share Holding Director

7. Sh. Vikas patra Share Holding Director

8. Sh. Varun Chabbra Share Holding Director

9. Sh. Rajinder Mohan Singla Share Holding Director

10. Sh. Ashwani Kumar Public Interest Director

11. Sh.Ved Parkash Gaur Public Interest Director

12. Dr. Raj Singh (Registrar Of Companies) Public Interest Director

13. Ms. Pooja M. Kohli Executive Director (Officiating)

Note: - Chairman and Vice Chairman are also Share Holding Directors

4

THEIR SUBSIDIARY i.e. LSE SECURITIES LTD.

Due to Nationwide reach of bigger Stock Exchanges, the trading volumes at Ludhiana Stock

Exchange declined and ultimately, the trading stopped in February, 2002, but the stock

Exchange converted the threat of bigger Exchange into opportunities and acquired the

corporate membership of these exchanges through its subsidiary company i.e. LSE Securities

Limited.

The company has now been providing Trading Platforms of Bigger Stock Exchanges to the

Investors of the region. The vast network of Brokers of the Exchange is servicing millions of

Investors. The allied services like PAN services Centre, Investor Service Centers are also

being provided at major locations of the region.

The turnover of subsidiary is highest amongst all the subsidiaries of Regional Stock

Exchanges. The growth of subsidiary is swift and it has been provided a range of services to

the public at large such as Trading, Depository, IPO bidding collection Centre.

The Company in its continuous endeavor to provide qualitative services to its valued clients

has stared e-broking trading services for its clients, IPO thereby increasing the geographical

reach of the company.

LISTING OF SECURITIES AT LSE

At present, Ludhiana Stock Exchange has 324 listed companies, out of which 211 are

regional and 113 are Non-regional. The stock Exchange is covering the vast investor base

through the listing of above said companies, which are situated in the region comprising of

Punjab, Himachal Pradesh, Jammu & Kashmir, Chandigarh. Despite the fact, the

implementation of SEBI (Delisting of equity shares) Regulation, 2003 has resulted into the

Delisting of companies listed at Exchange, however still there are leading Companies listed

with our Exchange, notable among them are Trident Infotech Ltd., Vardhman acrylics

Limited, SMC global securities limited, Himachal , etc.

5

Ludhiana Stock Exchange has facilitated the capital the generation for agro based industries

as Punjab is a agricultural led economy. It will continue to do so, once it gets approval for a

tie up with bigger Exchange for commencing trading operations.

1.3 Financial Market

In economics, a financial market is a mechanism that allows people to buy and sell (trade)

financial securities (such as stocks and bonds), commodities (such as precious metals or

agricultural goods), and other fungible items of value at low transaction costs and at prices

that reflect the efficient-market hypothesis.

Both general markets (where many commodities are traded) and specialized markets (where

only one commodity is traded) exist. Markets work by placing many interested buyers and

sellers in one "place", thus making it easier for them to find each other. An economy which

relies primarily on interactions between buyers and sellers to allocate resources is known as a

market economy in contrast either to a command economy or to a non-market economy such

as a gift economy.

In finance, financial markets facilitate:

The raising of capital (in the capital markets)

The transfer of risk (in the derivatives markets)

The transfer of liquidity (in the money markets)

International trade (in the currency markets)

and are used to match those who want capital to those who have it.

Typically a borrower issues a receipt to the lender promising to pay back the capital. These

receipts are securities which may be freely bought or sold. In return for lending money to the

borrower, the lender will expect some compensation in the form of interest or dividends.

In mathematical finance, the concept of a financial market is defined in terms of a

continuous-time Brownian motion stochastic process.

6

1.3.1 Definition

In economics, typically, the term market means the aggregate of possible buyers and sellers

of a certain good or service and the transactions between them.

The term "market" is sometimes used for what are more strictly exchanges, organizations that

facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This

may be a physical location (like the NYSE) or an electronic system (like NASDAQ). Much

trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are

outside an exchange, while any two companies or people, for whatever reason, may agree to

sell stock from the one to the other without using an exchange.

Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on

a stock exchange, and people are building electronic systems for these as well, similar to

stock exchanges.

Financial markets can be domestic or they can be international.

1.3.2 Types of Financial Markets

The financial markets can be divided into different subtypes:

Capital markets which consist of:

o Stock markets, which provide financing through the issuance of shares or

common stock, and enable the subsequent trading thereof.

o Bond markets, which provide financing through the issuance of bonds, and

enable the subsequent trading thereof.

Commodity markets, which facilitate the trading of commodities.

Money markets, which provide short term debt financing and investment.

Derivatives markets, which provide instruments for the management of financial risk.

7

Futures markets, which provide standardized forward contracts for trading products at

some future date; see also forward market.

Insurance markets, which facilitate the redistribution of various risks.

Foreign exchange markets, which facilitate the trading of foreign exchange.

The capital markets consist of primary markets and secondary markets. Newly formed

(issued) securities are bought or sold in primary markets. Secondary markets allow investors

to sell securities that they hold or buy existing securities.The transaction in primary market

exist between investors and public while secondary market its between investors

1.3.3 Raising the Capital

To understand financial markets, let us look at what they are used for, i.e. what where firms

make the capital to invest

Without financial markets, borrowers would have difficulty finding lenders themselves.

Intermediaries such as banks help in this process. Banks take deposits from those who have

money to save. They can then lend money from this pool of deposited money to those who

seek to borrow. Banks popularly lend money in the form of loans and mortgages.

More complex transactions than a simple bank deposit require markets where lenders and

their agents can meet borrowers and their agents, and where existing borrowing or lending

commitments can be sold on to other parties. A good example of a financial market is a stock

exchange. A company can raise money by selling shares to investors and its existing shares

can be bought or sold.

The following table illustrates where financial markets fit in the relationship between lenders

and borrowers:

Table 1.2

Relationship between lenders and borrowers

8

Lenders Financial Intermediaries Financial Markets Borrowers

Individuals

Companies

Banks

Insurance Companies

Pension Funds

Mutual Funds

Interbank

Stock Exchange

Money Market

Bond Market

Foreign Exchange

Individuals

Companies

Central Government

Municipalities

Public Corporations

Lenders

Who have enough money to Lend or to give someone money from own pocket at the

condition of getting back the principal amount or with some interest or charge, is the Lender.

Individuals & Doubles

Many individuals are not aware that they are lenders, but almost everybody does lend money

in many ways. A person lends money when he or she:

puts money in a savings account at a bank;

contributes to a pension plan;

pays premiums to an insurance company;

invests in government bonds; or

invests in company shares.

Companies

Companies tend to be borrowers of capital. When companies have surplus cash that is not

needed for a short period of time, they may seek to make money from their cash surplus by

lending it via short term markets called money markets.

9

There are a few companies that have very strong cash flows. These companies tend to be

lenders rather than borrowers. Such companies may decide to return cash to lenders (e.g. via

a share buyback.) Alternatively, they may seek to make more money on their cash by lending

it (e.g. investing in bonds and stocks.)

Borrowers

Individuals borrow money via bankers' loans for short term needs or longer term mortgages

to help finance a house purchase.

Companies borrow money to aid short term or long term cash flows. They also borrow to

fund modernisation or future business expansion.

Governments often find their spending requirements exceed their tax revenues. To make up

this difference, they need to borrow. Governments also borrow on behalf of nationalised

industries, municipalities, local authorities and other public sector bodies. In the UK, the total

borrowing requirement is often referred to as the Public sector net cash requirement

(PSNCR).

Governments borrow by issuing bonds. In the UK, the government also borrows from

individuals by offering bank accounts and Premium Bonds. Government debt seems to be

permanent. Indeed the debt seemingly expands rather than being paid off. One strategy used

by governments to reduce the value of the debt is to influence inflation.

Municipalities and local authorities may borrow in their own name as well as receiving

funding from national governments. In the UK, this would cover an authority like Hampshire

County Council.

Public Corporations typically include nationalised industries. These may include the postal

services, railway companies and utility companies.

Many borrowers have difficulty raising money locally. They need to borrow internationally

with the aid of Foreign exchange markets.

10

Borrower's having same need can form them into a group of borrowers. It can also take an

organizational form. just like Mutual Fund. They can provide mortgaze on weight basis. The

main advantage is that it lowers their cost of borrowings.

Derivative products

During the 1980s and 1990s, a major growth sector in financial markets is the trade in so

called derivative products, or derivatives for short.

In the financial markets, stock prices, bond prices, currency rates, interest rates and dividends

go up and down, creating risk. Derivative products are financial products which are used to

control risk or paradoxically exploit risk. It is also called financial economics.

Derivative products or instruments help the issuers to gain an unusual profit from issuing the

instruments. For using the help of these products a contract have to be made. Derivative

contracts are mainly 3 types: 1. Future Contracts 2. Forward Contracts 3. Option Contracts.

Currency markets

Seemingly, the most obvious buyers and sellers of currency are importers and exporters of

goods. While this may have been true in the distant past, when international trade created the

demand for currency markets, importers and exporters now represent only 1/32 of foreign

exchange dealing, according to the Bank for International Settlements.[1]

The picture of foreign currency transactions today shows:

Banks/Institutions

Speculators

Government spending (for example, military bases abroad)

Importers/Exporters

Tourists

11

1.3.4 Analysis of Financial Markets

Much effort has gone into the study of financial markets and how prices vary with time.

Charles Dow, one of the founders of Dow Jones & Company and The Wall Street Journal,

enunciated a set of ideas on the subject which are now called Dow Theory. This is the basis

of the so-called technical analysis method of attempting to predict future changes. One of the

tenets of "technical analysis" is that market trends give an indication of the future, at least in

the short term. The claims of the technical analysts are disputed by many academics, who

claim that the evidence points rather to the random walk hypothesis, which states that the

next change is not correlated to the last change.

The scale of changes in price over some unit of time is called the volatility. It was discovered

by Benoît Mandelbrot that changes in prices do not follow a Gaussian distribution, but are

rather modeled better by Lévy stable distributions. The scale of change, or volatility, depends

on the length of the time unit to a power a bit more than 1/2. Large changes up or down are

more likely than what one would calculate using a Gaussian distribution with an estimated

standard deviation.

A new area of concern is the proper analysis of international market effects. As connected as

today's global financial markets are, it is important to realize that there are both benefits and

consequences to a global financial network. As new opportunities appear due to integration,

so do the possibilities of contagion. This presents unique issues when attempting to analyze

markets, as a problem can ripple through the entire connected global network very quickly.

For example, a bank failure in one country can spread quickly to others, which makes proper

analysis more difficult.

1.4 Stock Market

Since 1991/92, the primary market has grown fast as a result of the removal of investment

restrictions in the overall economy and a repeal of the restrictions imposed by the Capital

Issues Control Act. In 1991/92, Rs62.15 billion was raised in the primary market. This figure

rose to Rs276.21 billion in 1994/ 95. Since 1995/1996, however, smaller amounts have been

12

raised due to the overall downtrend in the market and tighter entry barriers introduced by

SEBI for investor protection

Table 1.3

Issues in the primary market

Total market capitalization as of 1997/98 was Rs5,898 billion (Table 2), equivalent to about

half of India’s annual gross domestic product (GDP) for the same fiscal year. India compares

favorably with other emerging markets in this respect. The market capitalization- GDP ratio

at end-1995 was 22.4 percent for Brazil; 12.6 percent for Hong Kong, China; 40 percent for

Indonesia; 41 percent for Korea; and 37.1 percent for Mexico.1 It was higher however, in

Malaysia (281.9 percent), Philippines (81.3), Singapore (233 percent), and Thailand (152.9

percent).

Table 1.4

13

1.5 Capital Market

Capital Market is one of the significant aspect of every financial market. Hence it is

necessary to study its correct meaning. Broadly speaking the capital market is a market for

financial assets which have a long or indefinite maturity. Unlike money market instruments

the capital market intruments become mature for the period above one year. It is an

institutional arrangement to borrow and lend money for a longer period of time. It consists of

financial institutions like IDBI, ICICI, UTI, LIC, etc. These institutions play the role of

lenders in the capital market. Business units and corporate are the borrowers in the capital

market. Capital market involves various instruments which can be used for financial

transactions. Capital market provides long term debt and equity finance for the government

and the corporate sector. Capital market can be classified into primary and secondary

markets. The primary market is a market for new shares, where as in the secondary market

the existing securities are traded. Capital market institutions provide rupee loans, foreign

exchange loans, consultancy services and underwriting.

1.5.1 Significance, Role or Functions of Capital Market

Like the money market capital market is also very important. It plays a significant role in the

national economy. A developed, dynamic and vibrant capital market can immensely

contribute for speedy economic growth and development.

The important functions and role of the capital market:

1. Mobilization of Savings : Capital market is an important source for mobilizing idle

savings from the economy. It mobilizes funds from people for further investments in

the productive channels of an economy. In that sense it activate the ideal monetary

resources and puts them in proper investments.

2. Capital Formation : Capital market helps in capital formation. Capital formation is

net addition to the existing stock of capital in the economy. Through mobilization of

ideal resources it generates savings; the mobilized savings are made available to

14

various segments such as agriculture, industry, etc. This helps in increasing capital

formation.

3. Provision of Investment Avenue : Capital market raises resources for longer periods

of time. Thus it provides an investment avenue for people who wish to invest

resources for a long period of time. It provides suitable interest rate returns also to

investors. Instruments such as bonds, equities, units of mutual funds, insurance

policies, etc. definitely provides diverse investment avenue for the public.

4. Speed up Economic Growth and Development : Capital market enhances

production and productivity in the national economy. As it makes funds available for

long period of time, the financial requirements of business houses are met by the

capital market. It helps in research and development. This helps in, increasing

production and productivity in economy by generation of employment and

development of infrastructure.

5. Proper Regulation of Funds : Capital markets not only helps in fund mobilization,

but it also helps in proper allocation of these resources. It can have regulation over the

resources so that it can direct funds in a qualitative manner.

6. Service Provision : As an important financial set up capital market provides various

types of services. It includes long term and medium term loans to industry,

underwriting services, consultancy services, export finance, etc. These services help

the manufacturing sector in a large spectrum.

7. Continuous Availability of Funds : Capital market is place where the investment

avenue is continuously available for long term investment. This is a liquid market as

it makes fund available on continues basis. Both buyers and seller can easily buy and

sell securities as they are continuously available. Basically capital market transactions

are related to the stock exchanges. Thus marketability in the capital market becomes

easy.

1.5.2 Capital Market Instruments

15

The capital market is characterized by a large variety of financial instruments: equity and

preference shares, fully convertible debentures (FCDs), non-convertible debentures (NCDs)

and partly convertible debentures (PCDs) currently dominate the capital market, however

new instruments are being introduced such as debentures bundled with warrants,

participating preference shares, zero-coupon bonds, secured premium notes, etc.

1) SECURED PREMIUM NOTES

SPN is a secured debenture redeemable at premium issued along with a detachable warrant,

redeemable after a notice period, say four to seven years. The warrants attached to SPN gives

the holder the right to apply and get allotted equity shares; provided the SPN is fully paid.

There is a lock-in period for SPN during which no interest will be paid for an invested

amount. The SPN holder has an option to sell back the SPN to the company at par value after

the lock in period. If the holder exercises this option, no interest/ premium will be paid on

redemption. In case the SPN holder holds it further, the holder will be repaid the principal

amount along with the additional amount of interest/ premium on redemption in installments

as decided by the company. The conversion of detachable warrants into equity shares will

have to be done within the time limit notified by the company.

Ex-TISCO issued warrants for the first time in India in the year 1992 to raise 1212 crore.

2. DEEP DISCOUNT BONDS

A bond that sells at a significant discount from par value and has no coupon rate or lower

coupon rate than the prevailing rates of fixed-income securities with a similar risk profile.

They are designed to meet the long term funds requirements of the issuer and investors who

are not looking for immediate return and can be sold with a long maturity of 25-30 years at a

deep discount on the face value of debentures.

Ex-IDBI deep discount bonds for Rs 1 lac repayable after 25 years were sold at a discount

price of Rs. 2,700.

3. EQUITY SHARES WITH DETACHABLE WARRANTS

16

A warrant is a security issued by company entitling the holder to buy a given number of

shares of stock at a stipulated price during a specified period. These warrants are separately

registered with the stock exchanges and traded separately. Warrants are frequently attached

to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or

dividends.

Ex-Essar Gujarat, Ranbaxy, Reliance issue this type of instrument.

4. FULLY CONVERTIBLE DEBENTURES WITH INTEREST

This is a debt instrument that is fully converted over a specified period into equity shares.

The conversion can be in one or several phases. When the instrument is a pure debt

instrument, interest is paid to the investor. After conversion, interest payments cease on the

portion that is converted. If project finance is raised through an FCD issue, the investor can

earn interest even when the project is under implementation. Once the project is operational,

the investor can participate in the profits through share price appreciation and dividend

payments.

5. EQUIPREF

They are fully convertible cumulative preference shares. This instrument is divided into 2

parts namely Part A & Part B. Part A is convertible into equity shares automatically

/compulsorily on date of allotment without any application by the allottee. Part B is

redeemed at par or converted into equity after a lock in period at the option of the investor, at

a price 30% lower than the average market price.

6. SWEAT EQUITY SHARES

The phrase `sweat equity' refers to equity shares given to the company's employees on

favorable terms, in recognition of their work. Sweat equity usually takes the form of giving

options to employees to buy shares of the company, so they become part owners and

participate in the profits, apart from earning salary. This gives a boost to the sentiments of

employees and motivates them to work harder towards the goals of the company.

17

The Companies Act defines `sweat equity shares' as equity shares issued by the company to

employees or directors at a discount or for consideration other than cash for providing

knowhow or making available rights in the nature of intellectual property rights or value

additions, by whatever name called.

7. TRACKING STOCKS

A tracking stock is a security issued by a parent company to track the results of one of its

subsidiaries or lines of business; without having claim on the assets of the division or the

parent company. It is also known as "designer stock". When a parent company issues a

tracking stock, all revenues and expenses of the applicable division are separated from the

parent company's financial statements and bound to the tracking stock. Oftentimes, this is

done to separate a subsidiary's high-growth division from a larger parent company that is

presenting losses. The parent company and its shareholders, however, still control the

operations of the subsidiary.

Ex- QQQQ, which is an exchange-traded fund that mirrors the returns of the Nasdaq 100

Index

8. DISASTER BONDS

Also known as Catastrophe or CAT Bonds, Disaster Bond is a high-yield debt instrument

that is usually insurance linked and meant to raise money in case of a catastrophe. It has a

special condition that states that if the issuer (insurance or Reinsurance Company) suffers a

loss from a particular pre-defined catastrophe, then the issuer's obligation to pay interest

and/or repay the principal is either deferred or completely forgiven.

Ex- Mexico sold $290 million in catastrophe bonds, becoming the first country to use a

World Bank program that passes the cost of natural disasters to investors. Goldman Sachs

Group Inc. and Swiss Reinsurance Co. managed the bond sale, which will pay investors

unless an earthquake or hurricane triggers a transfer of the funds to the Mexican government.

9. MORTGAGE BACKED SECURITIES(MBS)

18

MBS is a type of asset-backed security, basically a debt obligation that represents a claim on

the cash flows from mortgage loans, most commonly on residential property.

Mortgagebacked securities represent claims and derive their ultimate values from the

principal and payments on the loans in the pool. These payments can be further broken down

into different classes of securities, depending on the riskiness of different mortgages as they

are classified under the MBS.

◦ Mortgage originators to refill their investments

◦ New instruments to collect funds from the market, very economic and more effective

◦ Conversion of assets into funds

▪ Financial companies save on the costs of maintenance of the assets and other costs related

to assets, reducing overheads and increasing profit ratio.

▪ Kinds of Mortgage Backed Securities:

◦ Commercial mortgage backed securities: backed by mortgages on commercial property.

Collateralized mortgage obligation: a more complex MBS in which the mortgages are

ordered into tranches by some quality (such as repayment time), with each tranche sold as a

separate security Stripped mortgage backed securities: Each mortgage payment is partly used

to pay down the loan's principal and partly used to pay the interest on it

◦ Residential mortgage backed securities: backed by mortgages on residential property

10. GLOBAL DEPOSITORY RECEIPTS/ AMERICAN DEPOSITORY RECEIPTS

A negotiable certificate held in the bank of one country (depository) representing a specific

number of shares of a stock traded on an exchange of another country. GDR facilitate trade

of shares, and are commonly used to invest in companies from developing or emerging

markets. GDR prices are often close to values of related shares, but they are traded and

settled independently of the underlying share. Listing on a foreign stock exchange requires

compliance with the policies of those stock exchanges. Many times, the policies of the

foreign exchanges are much more stringent than the policies of domestic stock exchange.

However a company may get listed on these stock exchanges indirectly – using ADRs and

19

GDRs. If the depository receipt is traded in the United States of America (USA), it is called

an American Depository Receipt, or an ADR. If the depository receipt is traded in a country

other than USA, it is called a Global Depository Receipt, or a GDR. But the ADRs and

GDRs are an excellent means of investment for NRIs and foreign nationals wanting to invest

in India. By buying these, they can invest directly in Indian companies without going through

the hassle of understanding the rules and working of the Indian financial market – since

ADRs and GDRs are traded like any other stock, NRIs and foreigners can buy these using

their regular equity trading accounts!

Ex- HDFC Bank, ICICI Bank, Infosys have issued both ADR and GDR

11. FOREIGN CURRENCY CONVERTIBLE BONDS(FCCBs)

A convertible bond is a mix between a debt and equity instrument. It is a bond having regular

coupon and principal payments, but these bonds also give the bondholder the option to

convert the bond into stock. FCCB is issued in a currency different than the issuer's domestic

currency.

The investors receive the safety of guaranteed payments on the bond and are also able to take

advantage of any large price appreciation in the company's stock. Due to the equity side of

the bond, which adds value, the coupon payments on the bond are lower for the company,

thereby reducing its debt-financing costs.

Advantages

· Some companies, banks, governments, and other sovereign entities may decide toissue

bonds in foreign currencies because, as it may appear to be more stable andpredictable than

their domestic currency

· Gives issuers the ability to access investment capital available in foreign markets

· Companies can use the process to break into foreign markets

· The bond acts like both a debt and equity instrument. Like bonds it makes regular coupon

and principal payments, but these bonds also give the bondholder the option to convert the

bond into stock

20

· It is a low cost debt as the interest rates given to FCC Bonds are normally 30-50 percent

lower than the market rate because of its equity component

· Conversion of bonds into stocks takes place at a premium price to market price. Conversion

price is fixed when the bond is issued. So, lower dilution of the company stocks

Advantages to investors

· Safety of guaranteed payments on the bond

· Can take advantage of any large price appreciation in the company’s stock

· Redeemable at maturity if not converted

· Easily marketable as investors enjoys option of conversion in to equity if resulting to capital

appreciation

Disadvantages

· Exchange risk is more in FCCBs as interest on bond would be payable in foreign currency.

Thus companies with low debt equity ratios, large forex earnings potential only opted for

FCCBs

· FCCBs means creation of more debt and a FOREX outgo in terms of interest which is in

foreign exchange

· In case of convertible bond the interest rate is low (around 3 to 4%) but there is exchange

risk on interest as well as principal if the bonds are not converted in to equity

· If the stock price plummets, investors will not go for conversion but redemption. So,

companies have to refinance to fulfill the redemption promise which can hit earnings

· It remains a debt in the balance sheet until conversion.

13. DERIVATIVES

A derivative is a financial instrument whose characteristics and value depend upon the

characteristics and value of some underlying asset typically commodity, bond, equity,

21

currency, index, event etc. Advanced investors sometimes purchase or sell derivatives to

manage the risk associated with the underlying security, to protect against fluctuations in

value, or to profit from periods of inactivity or decline. Derivatives are often leveraged, such

that a small movement in the underlying value can cause a large difference in the value of the

derivative.

Derivatives are usually broadly categorised by:

· The relationship between the underlying and the derivative (e.g. forward, option, swap)

· The type of underlying (e.g. equity derivatives, foreign exchange derivatives and credit

derivatives)

· The market in which they trade (e.g., exchange traded or over-the-counter)

Futures

A financial contract obligating the buyer to purchase an asset, (or the seller to sell an asset),

such as a physical commodity or a financial instrument, at a predetermined future date and

price. Futures contracts detail the quality and quantity of the underlying asset; they are

standardized to facilitate trading on a futures exchange. Some futures contracts may call for

physical delivery of the asset, while others are settled in cash. The futures markets are

characterized by the ability to use very high leverage relative to stock markets. Some of the

most popular assets on which futures contracts are available are equity stocks, indices,

commodities and currency.

Options

A financial derivative that represents a contract sold by one party (option writer) to another

party (option holder). The contract offers the buyer the right, but not the obligation, to buy

(call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price)

during a certain period of time or on a specific date (excercise date). A call option gives the

buyer, the right to buy the asset at a given price. This 'given price' is called 'strike price'. It

should be noted that while the holder of the call option has a right to demand sale of asset

from the seller, the seller has only the obligation and not the right. For eg: if the buyer wants

22

to buy the asset, the seller has to sell it. He does not have a right. Similarly a 'put' option

gives the buyer a right to sell the asset at the 'strike price' to the buyer. Here the buyer has the

right to sell and the seller has the obligation to buy. So in any options contract, the right to

exercise the option is vested with the buyer of the contract. The seller of the contract has only

the obligation and no right. As the seller of the contract bears the obligation, he is paid a

price called as 'premium'. Therefore the price that is paid for buying an option contract is

called as premium. The primary difference between options and futures is that options give

the holder the right to buy or sell the underlying asset at expiration, while the holder of a

futures contract is obligated to fulfill the terms of his/her contract.

14. PARTICIPATORY NOTES

Also referred to as "P-Notes" Financial instruments used by investors or hedge funds that are

not registered with the Securities and Exchange Board of India to invest in Indian securities.

Indian-based brokerages buy India-based securities and then issue participatory notes to

foreign investors. Any dividends or capital gains collected from the underlying securities go

back to the investors. These are issued by FIIs to entities that want to invest in the Indian

stock market but do not want to register themselves with the SEBI. RBI, which had sought a

ban on PNs, believes that it is tough to establish the beneficial ownership or the identity of

ultimate investors.

15. HEDGE FUND

A hedge fund is an investment fund open to a limited range of investors that undertakes a

wider range of investment and trading activities in both domestic and international markets,

and that, in general, pays a performance fee to its investment manager. Every hedge fund has

its own investment strategy that determines the type of investments and the methods of

investment it undertakes. Hedge funds, as a class, invest in a broad range of investments

including shares, debt and commodities. As the name implies, hedge funds often seek to

hedge some of the risks inherent in their investments using a variety of methods, with a goal

to generate high returns through aggressive investment strategies, most notably short selling,

leverage, program trading, swaps, arbitrage and derivatives. Legally, hedge funds are most

often set up as private investment partnerships that are open to a limited number of investors

23

and require a very large initial minimum investment. Investments in hedge funds are illiquid

as they often require investors keep their money in the fund for at least one year.

16. FUND OF FUNDS

A "fund of funds" (FoF) is an investment strategy of holding a portfolio of other investment

funds rather than investing directly in shares, bonds or other securities. This type of investing

is often referred to as multi-manager investment. A fund of funds allows investors to achieve

a broad diversification and an appropriate asset allocation with investments in a variety of

fund categories that are all wrapped up into one fund.

17. EXCHANGE TRADED FUNDS

An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much

like stocks. An ETF holds assets such as stocks or bonds and trades at approximately the

same price as the net asset value of its underlying assets over the course of the trading day.

Most ETFs track an index, such as the S&P 500 or MSCI EAFE. ETFs may be attractive as

investments because of their low costs, tax efficiency, and stock-like features, and single

security can track the performance of a growing number of different index funds (currently

the NSE Nifty).

18. GOLD ETF

A gold Exchange Traded Fund (ETF) is a financial instrument like a mutual fund whose

value depends on the price of gold. In most cases, the price of one unit of a gold ETF

approximately reflects the price of 1 gram of gold. As the price of gold rises, the price of the

ETF is also expected to rise by the same amount. Gold exchange-traded funds are traded on

the major stock exchanges including Zurich, Mumbai, London, Paris and New York There

are also closed-end funds (CEF's) and exchange-traded notes (ETN's) that aim to track the

gold price.

1.6 Investors

24

An investor is a party that makes an investment into one or more categories of assets ---

equity, debt securities, real estate, currency, commodity, derivatives such as put and call

options, etc. --- with the objective of making a profit.

1.6.1 Types of Investors

The following classes of investors are not mutually exclusive:

Individual investors (including trusts on behalf of individuals, and umbrella

companies formed by two or more to pool investment funds)

Collectors of art, antiques, and other things of value

Angel investors (individuals and groups)

Sweat equity investor

Venture capital funds, which serve as investment collectives on behalf of individuals,

companies, pension plans, insurance reserves, or other funds.

Investment banks

Businesses that make investments, either directly or via a captive fund

Investment trusts, including real estate investment trusts

Mutual funds, hedge funds, and other funds, ownership of which may or may not be

publicly traded (these funds typically pool money raised from their owner-subscribers

to invest in securities)

Sovereign wealth funds

Also, investors might be classified according to their styles. In this respect, an important

distinctive investor psychology trait is risk attitude.

25

CHAPTER-2

26

REVIEW OF

LITERATURE

2. REVIEW OF LITERATURE

Lintner (1998) defines “behavioural” finance as being `the study of how humans interpret

and act on information to make informed investment decisions. He defines “behavioural”

finance as `simply open-minded finance' claiming that `sometimes in order to find the

solution to an [financial] empirical puzzle it is necessary to entertain the possibility that some

of the agents in the economy behave less than fully rationally some of the time'. He asserts

that “behavioural” finance does not try to define `rational' “behaviour” or label decision

27

making as biased or faulty; it seeks to understand and predict systematic financial market

implications of psychological decision processes.

Love Inness (2003) this study has identified and characterized segments of individual

investors based on their shared investing attitudes and behavior. A behavioral finance

literature review reveals five main constructs that drive investor behavior: investment

horizon, confidence, control, risk attitude, and personalization of loss. Ninety individual

investors were surveyed via questionnaire on these constructs. A cluster segmentation

analysis identified four main segments of individual investors: 1) risk-intolerant traders; 2)

confident traders; 3) loss-averse young traders; conservative long-term investors. Each

segment purchased different types of stocks, used different information sources, and had

different levels of trading behavior.

Hassan (2004) aimed at identifying the most and the least influencing factors on the UAE

investor behavior. It developed a modified questionnaire. The questionnaire included thirty-

four items that belonged to five categories. The main findings: (i) accounting information or

the classical wealth–maximization criteria is the most influencing group on the UAE investor

behavior; (ii) neutral information is the least influencing group on the UAE investor

behavior; (iii) two factors unexpectedly had the least influence on the behavior of the UAE

investors’ behavior, namely religious reasons and the factor of family member opinions.

Economics and Finance (2005) the objective of this paper was to identify significant

personal and environmental factors that influence investment behavior and to specify the

investment decision-making process, particularly with respect to female investors. It was

expected that the results presented here will help readers to consider new approaches to

investment education. Specifically, this chapter aims to: (a) explore differences between men

and women in a variety of financial behaviors, investment decision-making process; (b)

identify patterns of investment involvement and learning preferences; and (c) determine

socioeconomic and behavior factors that explain gender differences in specific investment

behavior (portfolio diversification).

Anna (2009) has examined the simultaneous trading behavior for eighteen investor classes in

target and bidder firm shares around a takeover proposal. These eighteen investor classes

28

constitute all of the investors in the trading environment. Using a buy-sell imbalance

indicator and a buy-to-sell ratio for the analysis, it was expected that observable behavioral

differences would manifest themselves on the basis of informedness, and in turn the informed

investor class under a takeover event identified. The empirical results find that fourteen

investor classes do not trade however in the target and bidder firm shares. For the remaining

investor classes which do trade; these comprise the domestic domiciled investor categories

(1) nominees, (2) superannuation funds, (3) incorporated companies, and (4) individuals. It

was found that with the exception of the nominee investor class, the investors demonstrate

trading behavior which is consistent with their being uninformed; the trading behavior was

found to reflect a general buying activity which was unrelated to the takeover event. The

nominee investor class on the other hand, trade in a manner which closely resembles the

takeover firm share price movements. This trading behavior by the nominees in light of a

profit maximizing motivation, leads this paper to conclude that it is this investor class who

for a takeover event, were the informed.

Sahu et al (2009) to studied the buying behavior of the consumer towards the life insurance

policies in India. Before the opening of Indian market for Multinational Insurance

Companies, Life Insurance Corporation (LIC) was the only company which dealt in Life

Insurance and after opening of this sector to other private companies, all the world leaders of

life insurance have started their operation in india. With their world market experience and

network, these companies have offered many good schemes to lure all type of Indian

consumers but unfortunately failed to get the major share of market. Z-test was applied to

find out the significant differences between male and female investors in context to life

insurance. The result concluded that the perception of the male and female investors were

same.

29

30

CHAPTER-3

NEED, SCOPE AND

OBJECTIVES OF THE

STUDY

3.1 NEED OF THE STUDY

The studies that were conducted earlier, were related with the efficiency of capital market

and did not state the investment avenues that the investor prefers. The studies did not

mention the risk factor that is accepted by the investor. So here the need arises to conduct the

study.

3.2 SCOPE OF THE STUDY

31

The scope of the study is limited to Ludhiana City only. 

3.3 OBJECTIVES OF THE STUDY

The objectives of this study are as follows:

1) To study the awareness among the respondents regarding capital market.

2) To study the factors that influence the capital market operations.

3) To study the perception of investors regarding Indian stock market.

32

CHAPTER-4

RESEARCH

METHODOLOGY

4. RESEARCH METHODOLOGY

33

Research refers to search for knowledge. It can also be defined as a scientific and systematic

search for pertinent knowledge on specific topic. It consists of enunciation the problem,

formulating hypothesis, collecting the facts and reaching certain conclusion.

”. D. Slesinger and M.Stephenson in the encylopedia of Social Sciences define Research as

“the manipulation of things, concepts or symbols for the purpose of generalizing to extend,

correct or verify knowledge, whether that knowledge aids in construction of theory or in the

practice of an art”.

4.1 RESEARCH DESIGN

Conclusion Oriented Research:-Research designed to assist the decision maker in the

situation. In other words it was a research where various views about the research had

been given.

Descriptive Research:-A type of conclusive research which had as its major objective

the description of something-usually market characteristics or functions. In this study

discriptive research was used.

4.2 SAMPLE DESIGN

A sample design means a defined plan for obtaining a sample from a given population. While

developing the sample the sampling design following aspects were covered:

4.2.1 Universe of the study:

Theoretical population: In the current research, the theoretical universe consisted of all the

investors in stock market.

Accessible population: In the current research, the accessible universe consisted of all the

respondents who invest in Ludhiana City.

4.2.2 Sample Unit: In the current research, the sample unit consisted of the

following investors. It consisted of following:

Govt. employees

34

Professionals

Private employees

Business people

4.2.3 Sample Size: In the research, 150 respondents were covered.

4.2.4 Sample Technique: In the research, non-probability technique was used.

4.2.5 Sampling frame: It consists of various sources from which the information about the

respondents is extracted. Mainly personal links were used for getting the information about

the respondents.

4.3 DATA COLLECTION AND ANALYSIS:

4.3.1 Data source: This refers to the sources that are used for collecting the data. It consisted

of two sources:

a. Secondary sources: Secondary data were those which have already been collected by

someone else which already had been passed through the statistical process .Out of various

secondary sources mainly websites were used for collecting the data for research.

b. Primary sources: Primary data collected was fresh and for the first time and thus happen

to be original in character. The surveys was conducted through questionnaire consisted of

closed ended as well as open ended questions.

4.3.2 Tools for Presentation: For presenting the data, tables and figures have used.

4.3.3 Tools for data Analysis: For current research data was analyzed by using following

tools:

o Summated Score

o Percentages

4.4 LIMITATIONS OF THE STUDY

35

1. Time: The main problem that was faced in research was the shortage of time.

2. Scope: The scope of the study was limited to Ludhiana only, due to certain constraints, so

it is also acted as limitation of the study.

3. Hard Enough to Fetch Information: People were not always open and forthcoming with

their views, even agitated and not disclosing.

4. Existence of Biases: Though every care has been taken to eliminate such biases, but

considering the human factor the possibility of small bias having come up cannot be ruled

out altogether.

5. Consumer Behavior: Consumer behavior is dynamic in nature and thus over the time,

finding of today may become invalid tomorrow.

36

CHAPTER-5

DATA ANALYSIS AND

INTERPRETATION

5. DATA ANALYSIS AND INTERPRETATION

37

The data has been processed and analyzed by tabulation interpretation so that findings can be

communicated and can easily understood. The findings are presented in the best possible

way. Tables and graphs has been used for illustrations of findings of the research.

Table 5.1:

Demographic profile of respondents

Demographic factors No. of respondents Percentage of respondents

Age

25 – 35 44 29.3

35 – 45 62 41.3

45 – 55 31 20.7

55 and above 13 8.7

Total 150 100

Gender

Male 111 74

Female 39 26

Total 150 100

Education

10+2 35 23.3

Graduate 51 34

Post Graduate 50 33.3

Professional 14 9.4

Total 150 100

Monthly Income

Less than 10000 4 2.7

38

10000 – 20000 43 28.7

20000 – 30000 67 44.6

Above 30000 36 24

Total 150 100

Occupation

Govt employee 58 38.7

Private Employee 36 24

Business 22 14.7

Professional 32 21.3

Other 2 1.3

Total 150 100

INTERPRETATION: It was found that majority of respondents i.e. 41.3% were between

age group 25-35 years, majority of the persons i.e. 74% respondents were male and majority

of respondents i.e. 33.3% were post graduate.

Statement 5.1: Are you aware about the concept of capital market?

39

Table 5.2:

Awareness of respondents about the Concept of capital market

Options No. of respondents Percentage of respondents

Yes 150 100

No 0 0

Total 150 100

Figure 5.1:

Awareness of respondents about the concept of capital market

Yes100%

No0%

INTERPRETATION: It has been found that respondents are 100% aware about the concept

of capital market.

Statement 5.2: What induces you to invest in a particular stock?

40

Table 5.3:

Factors inducing respondents to invest in a particular stock

Options No. of respondents Percentage of respondents

Tips 33 22

News 47 31.3

Research Report 11 7.3

Broker’s advice 41 27.4

Past experience 18 12

Total 150 100

Figure 5.2:

Factors inducing respondents to invest in a particular stock

INTERPRETATION: By analyzing the data given in the above table and figure it is found

that highest number of respondents i.e. 31.3 % were induced by the news to invest in a

particular stock.

Statement 5.3: What induces you to stay invested in a particular stock?

41

Table 5.4:

Factors which induce to stay in a particular stock

Options No. of respondents Percentage of respondents

Dividend paying 47 31.3

Organic growth 31 20.7

Inorganic growth 23 15.3

Future prospects 49 32.7

Total 150 100

Figure 5.3:

Factors which induce to stay in a particular stock

INTERPRETATION: After analyzing the above table and figure we interpret that 31.3% of

the respondents were induced by dividend paying as a factor to stay invested in a particular

stock..

Statement 5.4: What percentage of your income do you invest ?

42

Table 5.5:

Percentage of savings invested

Options No. of respondents Percentage of respondents

0 – 15% 36 24

15 – 30 % 67 44.7

30 – 50 % 47 31.3

Total 150 100

Figure 5.4:

Percentage of savings invested

INTERPRETATION: After analyzing the data it is found that maximum number of

respondents i.e. 44.7 % invest 15 – 30 % of their savings.

Statement 5.5: According to you what are the factors leading Indian stock market to

rise?

43

Table 5.6:

Factors leading Indian Stock market to rise

Options No. of respondents Percentage of respondents

FII 48 32

FDI 31 20.7

Govt. policies 17 11.3

Rise in national income 54 36

Total 150 100

Figure 5.5

Factors leading Indian Stock market to rise

INTERPRETATION: From the above data analysis it was found that according to majority

of the respondents rise in national income lead Indian stock market to rise..

Statement 5.6: What is your pattern of investing?

Table 5.7:

44

Pattern of investing

Options No. of respondents Percentage of respondents

Repeatedly invest in same set of stocks

34 22.7

Invest in variety of stocks 66 44

Depends on other factors 50 33.3

Total 150 100

Figure 5.6:

Pattern of investing

45

INTERPRETATION: After analyzing the data it was found that highest number of

respondents i.e. 44% invest in variety of stocks.

Statement 5.7: In what kind of stocks do you invest in?

Table 5.8:

Kind of stocks in which investment is made

Options No. of respondents Percentage of respondents

Large caps 44 29.3

Mid caps 33 22

Low caps 35 23.3

Depends 38 25.4

Total 150 100

Figure 5.7:

Kind of stocks in which investment is made

46

INTERPRETATION: After analyzing the above table and figure it was found that 29.3% invest in large caps.

Statement 5.8: What kind of risk appetite do you prefer?

Table 5.9:

Risk appetite preferred

Options No. of respondents Percentage of respondents

High 18 12

Medium 48 32

Low 52 34.7

Safe investments 32 21.3

Total 150 100

Figure 5.8

Risk appetite preferred

47

INTERPRETATION: It can be interpreted that 34.7% respondents prefer low risk appetite

Statement 5.9: Give your agreeability on the following factors that influence the capital

market.

SA- Strongly agree; A - Agree; N - Neutral; D - Disagree; SD- Strongly disagree

Table 5.10:

Factors influencing the capital market

Sum.

Score

SA

A

N

D

SD

9.1 Advertisement 412 13 56 51 16 14

9.2 Risk analysis by the investor 404 13 52 57 24 4

9.3 Investor grievances 403 27 42 45 23 13

9.4 Investment pattern 378 26 55 44 15 10

9.5 Changes in the life style 343 32 56 31 20 11

9.6 Stock broker service 350 34 59 37 13 7

9.7 Investment knowledge 354 20 49 49 22 10

9.8 Investment information 418 21 48 37 30 14

9.9 Personal saving 405 15 56 48 21 10

9.10 Size of investment 368 9 61 49 25 6

9.11 Economic condition 601 33 24 46 26 21

9.12 Decreasing level of sensex 438 23 33 40 41 13

48

INTERPRETATION: After analyzing the data we interpret that changes in life style is the most agreed statement as it has got the least summative score.

Statement 5.10: Do you invest in IPO?

Table 5.11:

Investment in IPO

Options No. of respondents Percentage of respondents

Yes 97 64.7

No 53 35.3

Total 150 100

Figure 5.9

Investment in IPO

49

INTERPRETATION: It can be interpreted that the majority of the respondents invest in

IPO.

CHAPTER-6

FINDINGS OF THE

STUDY

50

6. FINDINGS OF THE STUDY

1. By analyzing the data it was found that majority of the respondents were aware about the

concept of capital market.

2. By analyzing the data given in the above table and figure it was found that highest number

of respondents were were induced by the news to invest in a particular stock.

3. After analyzing the above table and figure we interpret that respondents were induced by

dividend paying as a factor to stay invested in a particular stock

4. After analyzing the data it was found that maximum number of respondents were of the

view that maximum number of respondents invest 15 – 30 % of their savings.

5. From the above data analysis it was found that according to majority of the respondents

consider rise in national income lead Indian stock market to rise

6. After analyzing the data it was found that highest number of respondents invest in variety

of stocks

7. After analyzing the above table and figure it was found that majority of the respondents

invest in large caps.

51

CHAPTER-7

CONCLUSION OF THE

STUDY

52

7. CONCLUSION

The Indian capital market witnessed radical changes as a result of liberalization initiative,

characterized by institutional build up, technological advancements, modernization and

transparent trading practices. The change in the capital market is also reflected in the number

of shareholders which has exploded everywhere for the whole country to 125 lakhs with an

increase of 3-4 times between 1983 and 1992. After that it rose to 20 million shareholders.

This is too small when compared to the population of India. In advanced countries, a sizable

percentage of the population invests in capital market and mutual funds. Such investments

culture is to be developed in India also. Inspite of the developments in the capital market,

many investors continue to keep away from the market due the prevalence of unethical acts

of promoters, shares brokers, high volatility in the market, poor investment knowledge of the

ordinary investors and high element of uncertainty and risk added to these problems. This

calls for the attention of the government and policy makers to understand the factors

influencing the capital market operations which enable them to take initiatives to decide the

measures to pull them into the ambit of investors in corporate securities. This ensures

individual development as well as alround development of the country's economy.

53

REFERENCES

54

REFERENCES

· Adam (2009), Identifying the Informed Investor in a Takeover Event: An Australian Study

of Investor Trading Behaviour, Autralian Finance and Banking conference Vol. III, No. 4, pp.

47-53

· Mottaleb (2009) Financial development and dynamic investment behavior : evidence from

panel vector auto regression. . FEEM Working Paper No. 46

· Economics and Finance (2005) The determinants of foreign direct investment into

European transition economies.

· Al-Tamimi (2004), Factors Influencing Individual Investor Behavior: An Empirical s study

of the UAE Financial Markets

· Rain (2004) Analyzing their Behavior towards Developing Countries.

· Inness (2003)Domestic and Foreign Earnings, Stock Return Variability, and the Impact of

Investor Sophistication.

· Wood(2004) Journal of Behavioral Finance September (2004) , “Attitudes and Trading

Behavior of Stock Market Investors.

· Hira (2008) Iowa State University, “Gender Differences in Investment Behavior” by

Springer New York, 253-270.

WEBSITES

· www.rbi.org.in

· www.bse.co.in

55

· http://www.surfindia.com/finance/stock-market.html

· www.nseindia.com

· http://www.investopedia.com/university/stocks/

· http://www.economywatch.com/stock-markets-in-world/history.html

· www.stockmarketinvestinginfo.com/smi_history.html

ANNEXURE

56

QUESTIONNAIRE

I (Zinnia Dhody) have conducted a research on the topic “Study of investor behaviour in capital market”. Kindly fill this questionnaire:

DEMOGRAPHIC PROFILE:

Name:

Contact no: ______________________ City/ State: _____________________

Age: (Please tick one)

25 - 35 years 35- 45 years 45 -55 years 55 and above

57

Gender: Male Female

Education (level completed):

10+2 Graduate Post-graduate Professional

Monthly Income :

Less than Rs.10000

Rs.10000 - Rs.20000

Rs.20000 – Rs.30000

Above Rs.30000

1. Are you aware about the concept of capital market?

o Yes o No

2. What induces you to invest in a particular stock ? (Mark all that applies)

o Tips

o News

o Research report

o Brokers advice

o Past experience

58

3. What induces you to stay invested in a particular Stock?

o Dividend paying

o Organic growth

o Inorganic growth

o Future prospects

4. What percentage of your income do you invest?

o 0 – 15%

o 15 – 30 %

o 30 – 50 %

5. According to you, what are the factors leading Indian Stock Market to rise ?

o FII

o FDI

o Government policies

o Rise in national income

6. What is your pattern of investing? :

o Repeatedly invest or trade in same set of stocks

o Invest or trade in variety of stocks

o Depends on other factors

7. In what kind of stocks do you invest in?

o Large caps

o Mid caps

o Small caps

o Depends

59

8. What kind of risk appetite do you prefer? :

o High

o Medium

o Low

o Safe investments

9. Give your agreeability on the following factors that influence the capital market

operations:

SA- Strongly agree; A - Agree; N - Neutral; D - Disagree; SD- Strongly disagree

SA

A

N

D

SD

9.1 Advertisement

9.2 Risk analysis by the investor

9.3 Investor grievances

9.4 Investment pattern

9.5 Changes in the life style

9.6 Stock broker service

9.7 Investment knowledge

9.8 Investment information

9.9 Personal saving

9.10 Size of investment

9.11 Economic condition

60

9.12 Decreasing level of sensex

10. Do you invest in IPO? :

o Yeso No

11. If yes, then to which all issues have you subscribed?

61