GURGAON

A Report On
RISK PERCEPTION AND PORTFOLIO MANAGEMENT OF EQUITY
INVESTORS

BY:-
PRACHI DAS
(20BSP1623)
IBS GURGAON

SHAREKHAN LIMITED
 REPORT
ON
RISK PERCEPTION AND PORTFOLIO MANAGEMENT OF EQUITY INVESTORS

BY:-
PRACHI DAS
(20BSP1623)

SHAREKHAN LIMITED
A Report submitted in partial fulfilment of the requirement of PGPM program of IBS Gurgaon.

SUBMITTED TO

COMPANY GUIDE

AMIT SHARMA
(Territory Manager)

Date of Submission: 27/05/2021

 AUTHORISATION

This report has been submitted as a part of partial fulfilment of the requirements of the PGPM Program (2020-
22) of IBS Gurgaon.

The matter embodied in this document titled: A study of Risk Perceptions and Portfolio Management of Equity
Investors ― is an original work carried out by Ms. Prachi Das, during the duration of 14 weeks i.e., 16th
February, 2021 to 14th May, 2021, under the guidance of Mr. Amit Sharma –Territory Manager –Sharekhan Ltd.
Delhi, along with Mr. Navneet Saxena, Professor, IBS Gurgaon. Sharekhan Ltd. hereby authorizes the
submission of this project report to IBS Gurgaon.

Date of Submission: 27/05/2021

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 ACKNOWLEDGEMENT
I would like to take this opportunity to extend my obligation to all those who have helped me in completion of
my project report and made my working on the project comfortable.

Firstly, I would like to thank IBS Gurgaon for giving me the opportunity to work as an intern with Sharekhan
Ltd., Delhi.

I would also like to extend my thanks to Sharekhan Ltd., that they believed in me and gave me the opportunity to
work so closely with their organization and provided me an experience of the professional world. It gave me a
platform to understand real life situations and implement all those concepts which I had earlier come across only
in textbooks as part of my course.

I express my sincere gratitude to Mr. Amit Sharma– Territory Manager – Sharekhan Ltd., Delhi for his constant
support throughout the internship. I thank him for his valuable guidance which has helped me thoroughly during
the project.

I would also like to convey my deep sense of gratitude and thanks to the Faculty Guide- Prof. Navneet Saxena
for his constant support and feedback throughout the internship.

I extend my warm regards to my parents who have been my pillars of strength during all walks of life.
Lastly, I want to thank my friends who helped me throughout the project by giving their valuable inputs as and
when required.

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 EXECUTIVE SUMMARY

Student Information

Name: Prachi Das Phone Number: 7678633722

Enrolment Number: 20BSP1623 E-mail Id: [email protected]

Organization Description:

Concept: While doing internship at Sharekhan, we were exposed to live market hours, were introduced
with different strategies for intra-day, short- term and medium term trading in different types of markets, and
were later assigned the task to cross-sell D-MAT account to different people in Delhi NCR.

Industry: Financial Services

Name and Address: Sharekhan, 2E/25, Ground Floor, Jhandewalan Extension, New Delhi, Delhi 110055

Title of SIP Report: Risk Perception and Portfolio Management of Equity Investors

Objectives of SIP:

 Understand the perception of stakeholders regarding their risk-taking ability

 Analyze the factors that influence investor’s decision
 Create awareness about the risk-reward associated with investment in financial markets
 Analyze and implement strategies to have and manage the portfolio
 Help clients gain knowledge and experience about risk management system and hedging strategies

Background: Share khan is one of the leading retail brokerage firm which is running successfully since
1922 in the country. It offers broad range of financial products and services to its customers, executives, etc.,
such as securities brokerage, loan against shares, ESOP financing, IPO financing, investment into mutual
fund, and portfolio management. The objective has been to let their customers take informed decisions and
to simplify their process of investing in stocks.

Methodology used: Descriptive Study on secondary data on the basis of Sharekhan website,
moneycontrol website and analysis tools for assessing the risk of investors in the stocks invested.

Findings and Conclusion: The present research that has been conducted to perform an experiential
analysis of investor's perception of risk and returns in the Indian Stock Market depicts an accurate
perception of the stock market which is of paramount importance to understand the perception of the
stakeholder and the prejudices that affect those perceptions. So, the research tends to reveal the association
of investment decision with the demographical factors. This study thereby demonstrates opinion from peer
network, broker’s advice etc., which become the major factors that influence the decision that investors
consider before investing. Furthermore, this study was conducted during stressed market times, which then
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exhibits the investor's opinion of the market in short-run. This study is significant with the fact that the
efficient market hypothesis is a half-truth because of the primary assumption that investors are rational and
this study could help bridge the gap between rational and irrational investors. The study reveals that the
investors in Delhi NCR city are not aware of portfolio which would minimize risk and maximize the return.
Also, it is clear that the investors in Delhi NCR city have moderate level of understanding about risk and the
importance of portfolio management as they are not aware these factors. Hence proper awareness initiatives
should to be taken in order to improve the awareness level in the minds of the investors.
Recommendations:
 It is important for the investors in Delhi NCR to think beyond the traditional avenues of the
investment.
 Since there is lack of awareness among the investors in Delhi NCR, so the regulatory bodies will
have to start campaign to educate people about investment.
 Sensible and right information should be given to the customers by various communication modes so
that they get to know about the latest stocks in trend.
 A regular investor-friendly seminar can be organized to suit the timings of the investing public. For
instance, such seminars can be interactive sessions, arranged at frequent intervals.

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 TABLE OF CONTENTS

S.NO TOPIC PAGE

NO.
1. Authorisation i

2. Acknowledgement ii

3. Executive Summary iii-iv

4. Abstract vi

5. Chapter 1 1-7
1.1 Introduction
1.2 About the Project
1.3 Purpose and Scope
1.4 Objectives
1.5 Limitations
6. Chapter 2 8-10
2.1 Industry Profile
2.2 Company Profile
2.3 Products/Services offered
2.4 SWOT Analysis

7. Chapter 3: Research Methodology 11

3.1 Research Methodology
3.2 Data Source
3.3 Research Problem
3.4 Research Plan
3.5 Development of Questionnaire
3.6 Sampling
8. Chapter 4: Risk Perception and Portfolio Management of Equity 12-13
Investors
4.1 Risk Perception of an Individual
4.2 Risk Appetite and Portfolio Management
4.3 Clients Handled by Sharekhan
4.4 Equity vs. Fixed Deposits and other safe instruments(like postal
deposits)
4.5 PMS vs. Mutual Funds

9. Chapter 5: Analysis and Findings 14-20

10. Chapter 6: Conclusion 21

11. Recommendations 22

12. Annexure 23-25

13. References 26

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 ABSTRACT
Approximately 1.5 percent of India’s domestic savings are exposed to equity, compared with almost 10 percent
in China and 18 percent in the U.S.
An upward trend has been observed in demand for the services of Non-Banking Financial Institutions these days.
This project focuses on financial markets, investors’ perception and their portfolio management . There has also
been emphasis on brokerage industry in general as well as understanding the movement of financial markets at
large.
Our journey in Sharekhan Ltd. starts with overview about the stock market, in online session.
We have done few activities during the SIP in SHAREKHAN. Like, Sharekhan emphasized on the calculation of
the total profit or loss by applying Brokerage, STT (Securities Transaction Tax) , GST and Total Brokerage and
Tax on the share price. We have also learnt some key features of opening of the Trading Account and the D-
MAT Account which is one of the most important learning we have gained and what are the important
documents that are thereby needed to open such D-MAT account and Trading account, as a clear and routine
understanding of this activity shall provide an elementary idea of further dealings with the investors.
We have learnt how to operate website of Sharekhan, and mobile application of Sharekhan. Further, we have
collected all the information about different products of Sharekhan.
On regular basis we have then attended educational session on basics of stock markets relating to introduction to
stock market, about NSE/BSE exchange, and various functions being performed on a trading platform during live
trading hours. Further, we have also done intra-day trading on normal buy and sell; margin trading features of
shares and as well as short –selling of shares.
The study of significant factor of risk perception plays an important role in an investor’s decision to create and
manage a portfolio. This paper will majorly be an attempt to study the risk perception of equity investors and
how it impacts the behaviour of an investor in terms portfolio management. Other factors such as income level
and age also play an important role in an investor’s decision to manage a portfolio. It will be an attempt to
explore individual investor’s preference for the portfolio and also examine the impacts of risk capability and
perception on the investment result.
The major objective of this study is to find out the risk perception of investors in the city of Delhi NCR and to
bring out the importance of Portfolio management of equity investors.
This study will be conducted on the basis of primary data that will be collected through a questionnaire and also
through secondary data.

vi
 Chapter 1
1.1 Introduction
While talking about the risk factor in any investment, it is important to understand that the decision making
behaviour of an individual is often affected by their attitude towards the risk. Investors usually tend to adopt to
risks according to their perception and understanding of the risk.

The present financial system tends to provide lots of investment avenues for the investors to choose from. Some
offer very attractive returns but come with a huge risk and some come with low returns and low risk. An
investment can be called a perfect one only if it fulfils criteria and needs of an investor, which is often never the
case. Therefore, the starting point of finding out a perfect investment must look through the investor needs. If all
those needs are met by a particular investment, then that investment is termed as the perfect investment.

First let us understand the terms associated with our project report, and then we shall discuss further its impact
and get on to right decision in the present scenario to achieve better and safe returns.

1. Equity:
For better liquidity, instant/long-term returns, engaging oneself in risk associated assets, speaks about one of the
most popular form of investment, ‘equity’. Many investors, traders, experts, refer it as shareholder’s funds as
displayed on balance sheets of a particular company in their financial statements and report. It consists of equity
capital, retained earnings, and preference capital.

2. Historical Sensex and Nifty Equity Return:

The BSE SENSEX is a free-float market-weighted securities market index of 30 well-established and
economically sound companies listed on Bombay Stock Exchange. The 30 fundamental companies which are
one of the most important and most actively traded stocks, are representative of varied industrial sectors of the

Historically, Sensex delivered around 16% of

CAGR, since its inception > any of other asset
class such as gold, real estate, other safe
instruments(example, fixed deposits)

Indian economy.

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  Nifty has delivered around approx. 11%
of CAGR in last 20 years(since 1999)
and
 Around 8.9% in the last 10 years(since
2009-10)

The NIFTY 50 is a benchmark used for Indian securities market index that represents the weighted average of 50
biggest Indian companies listed on the National Stock Exchange(NSE). It is one of the two main stock indices
used in India, the other being the BSE SENSEX .

3. Risk-Reward associated with investment

The risk-reward associated with investment signifies the potential reward an investor can earn for each and every
rupee he/she would risk on a selected stock/commodity. Consider the following example: an investment into a
particular stock with a risk-reward of 1:7. This means that an investor is willing to risk of Rs.1, for the prospect
of earning Rs. 7. Alternatively, a risk-reward for a particular stock of suppose 1:3 signals that an investor should
expect to take a position of Rs. 1, for the prospect of earning Rs. 3 on their investment. Traders often use this
tactic to plan which trades to take, and the returns is calculated by dividing the amount a trader stands to lose if
the price of an asset moves in an unpredicted direction (the risk) by the amount of yield the  trader expects to have
made when the position is closed (the reward).

4. Equity Investors
Investors, who are in pursuit of getting instant as well as long-term returns on their investment, tend to follow
their path through direct investment (including co-investment). There are many factors that affect an investment
decision of equity investors such as the demographic, knowledge level, awareness, experience etc. It has been
observed that demographic factors such as gender, income level, age, education, family size have a crucial
impact on investment decision making process, especially in Indian context. Making a profitable investment
requires careful decision making because it relates to allocation of money and diversification in different
portfolios in order to maximize the return.

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 5. Risk
While speaking about the risk factor in any investment, it is important to understand that the decision-making
behaviour of an individual is often impacted by their attitude towards risk. Investors usually take risks according
to their perception and understanding of the risk with respect to market/economy changes.
To acquire a better understanding of the investment avenues, it is crucial to understand the different types of risks
involved.

a) Inflation Risk

Inflation is the general rise in the prices of various commodities, products, and services that we consume.
Inflation corrodes the purchasing power of the money. The following table explains what inflation can do to the

purchasing power of our money.

The above table displays how fast the purchasing power of the money goes down. This risk really hits hard over
long periods. If this is not properly accounted for in the investment plan, one may fall short of target when the
need arises. One may also look at the effect of inflation in another way. If one could buy 100 units of something
with Rs. 10,000 today, presuming inflation of 8 percent p.a., one would be able to buy only 68 units of the same
thing after 5 years, and only 46 units after 10 years. This clearly shows the loss of purchasing power. In this
context, its relevant to take a look at whether the investments are able to protect purchasing power or not.
Market Risk and Price Risk
To better understand the risk, one must go through its types which are—market risk and price risk. For example,
when there is a chance of a country getting into a war-like situation, then there is widespread fear that this might
impact the economy, and the companies within it. Due to such a distress, it is quite possible that the prices of
major stocks in the market might witness a drop. On the other hand, when the sales of a company’s products
drop, due to technological changes, or influx of a better product happens, the company’s share price falls. During
such times, there could be many other companies, whose share prices may rise. This is an illustration of a
company-specific risk. As is evident from the above discussion, the firmness of the company’s business and its
cost-effectiveness plays a major role with respect to company-specific risk factors. Between general, market wide
factors and firm-specific factors, there could be some industry-specific factors, which would impact all the firms
3
within the same industry. For illustration, if the Government policy changes with respect to a particular industry,
all the firms may get impacted. Similarly, if better technology becomes available, all the firms within the same
industry that use the old technology might get impacted. The risk specific to the security can be reduced through
diversification across unrelated securities, but the one that is market-wide cannot be reduced through
diversification.
b) Liquidity Risk
Investments in fixed assets are usually considered less risky than equity. Even within that, government
securities are mostly considered the safest. In order to gain the full benefits of the investments, or to earn the
promised returns, there is a condition involved. The investment must be held till maturity. In case if one requires
liquidity, there could be few expenses or either such an option may not be available at all. Here is an illustration.
Suppose that an investor has invested one’s money into a bank deposit for a goal that is due five years from now.
For such a goal, one may decide to invest in a five year fixed deposit. As is clear, the term of the deposit is five
years, and the promised returns would accumulate to the investor only if the money is kept in the deposit for the
entire period. In case, for some motive the investor needs the money before maturity, there could be some
deduction in the interest, which reduces the investment return. Some other products like PPF (Public Provident
Fund) may offer no liquidity for a certain period, and even after that there may be only partial liquidity. This risk
is also very closely associated with real estate, where liquidity is very low, and often it takes weeks or months to
sell the investment. Some investment options offer instant access to funds, but the value of the investment may
be subject to fluctuations. Equity shares, listed on stock exchanges are an illustration of this.

6. Risk Perception
The concept ‘risk perception’ means the way in which investors view the risk of financial assets, based upon
their apprehensions and experience. Risk perception is the belief, whether rational or irrational, held by an
individual, group, or society about the chance of occurrence of a risk or about the extent, magnitude, and timing
of its effects which becomes a serious success factor that could sponsor effective decision-making in risky
situations.

Each investor has an objective in mind before making any decision with regards to investing. When these
objectives are not clearly expressed, then investors land up with a decision which gives a sub-optimal return. It is
always prudent to set a clear objective in mind before making any decision and accomplish the goal. An investor
may have a short term or a long-term horizon; the short-term effectiveness examined through the event scrutiny
of the irregular return for the recommended stock around the financial announcement or due to market
fluctuations whereas long-term investment horizon examined through the investment value from a passive
portfolio management strategy.
The different avenues of investment areas are as follows:
i. Low-risk avenues: Savings accounts, Bank Fixed Deposits, PPF, Government securities and so on.
ii. Moderate-risk avenues: Mutual funds, Unit Trusts, ETF, Life Insurance, Debentures, Bonds.
iii. High-risk avenues: Equity share market, Commodity.
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 iv. Traditional avenues: Real estate (property), Commodity, Foreign Exchange Market.
v. Emerging avenues: Hedge funds, PMS, Cryptocurrency.

Investors must select an appropriate avenue as mentioned above, depending on their specific need, risk
preference and expected returns.
7. Risk taking capability of Investors
The risk profilers try to explore the risk appetite of the investor so that one does not sell its investment/portfolio
that may carry higher risk than what the investor could have handled. In order to ascertain the risk appetite, the
following must be taken care of:
 The need to take risks
 The ability to take risks, and
 The willingness to take risks
Out of the above, the need to take risk arises when the investor needs higher returns to reach its goals. The ability
to take risk refers to the financial ability, and the investment horizon, whereas the willingness is linked to the
psychological capacity to handle risk. The distributor, thereby, has to assess these three, and strike a balance
between these, whenever wherever there is a conflict. There are various methods for creating the risk profile of
the investor. The distributor is free to choose from these options. Alternately, one can also design its own method
for the same.
8. Risk Management System
For investors, broking firms, mutual fund distributors, and intermediaries have the following actions structured
out to measure and manage the risk:

 Avoid
One may totally avoid certain investment products, if one does not want to take the respective risk. However, this
may also mean giving up the prospect to benefit out of the said investment. Many experts acclaim that one should
avoid the investment avenues that one does not understand at all.
 Take a position to benefit from some event / development
An investor can also take an investment position in anticipation of some development in the market. Let us take
an example here: a bond investor assumes that the interest rates would go down. In such a case, one may sell the
short maturity bonds and invest in long maturity bonds. If the interest rates move down, the investor’s judgment
would be rewarded handsomely. At the same time, if the judgment is wrong, there could be losses, too. This is an
example of managing the interest rate risk. Similarly, some investors tend to manage their investment portfolios
using such strategies across multiple asset categories. In order to take and dynamically modify such spots, the
investor must have superior knowledge than a large number of investors in the market. This is difficult and hence
risky. Due to the amount of skill required, and the risks involved, such strategies are not recommended for a large
number of investors.
 Diversify

5
While the previous tactic is possible when one has superior knowledge, not everyone would possess the same.
Those who do not know everything about everything, a practical approach would be to diversify across various
investment options. This spreads the risk of loss and thus, the probability of losing everything can be
significantly reduced through diversification. Before managing the risks, the risks have to be measured.
9. Portfolio
It is a combination of different asset classes in a well-diversified manner. A good portfolio can be for a moderate
risk taking investor 40% equity, 20% real estate, 20% commodity, 10% in fixed deposit and 10% in cash.
Whereas, for high risk takers, it shall be 60% equity, 20% real estate, 10% commodity, 10% fixed deposit. It thus
focuses on matching investments to objectives, asset allocation for individuals and institutions, and balancing
risk against performance. 

10. Portfolio Management Scheme/Service(PMS)

It is a scheme/service offered by AMC, brokerage houses for HNI with good risk taking capability. Earlier the
minimum token money to avail this service is Rs. 25 lacs , now SEBI revised this token money to Rs. 50lacs .

11. Clients handled by Sharekhan

The client with good equity holding(Rs. 2-5 lacs) with Sharekhan. The relationship manager will look after the
portfolios of certain number of clients allocated to him. He will advise his clients for the balance(hedging) of
their portfolio by either buying stock or selling their earlier holdings.

1.2 About the Project

Sharekhan Ltd. has provided with the project that has been undertaken and carried out to study the significant
factors of risk perception that plays an important role in an investor’s decision to create and manage a portfolio.
This project will majorly be an attempt to examine decisions of equity investors as to where to invest and how it
impacts their behaviour in terms portfolio management. Other factors such as income level, age and occupation
etc. play an important role in an investor’s decision to manage a portfolio. It will be an attempt to explore
individual investor’s preference for the portfolio and also examine the impacts of risk capability and perception
on the investment result.

The major objective of this study is to find out the risk perception of investors in the city of Delhi NCR and to
bring out the importance of Portfolio management of equity investors.

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1.3 Purpose and Scope

 The purpose of the report is analyzing the risk perceptions of current and potential investors and
understanding how the decisions are made based on an individual’s risk tolerance capacity.
 This is done by identifying the needs and goals of customers, understanding their psychology, finding
out their financial problems and then offering them a suitable investment product and create a
profitable portfolio for them during the course of internship.
1.4 Objectives

 The major objective is to find out the risk perception of investors in the city of Delhi NCR and to
bring out the performance of Portfolio Management of equity investors.
 Also, this focusses on
a) risk perception of investors
b) the portfolio selection of investors
c) motivation factors behind the investment
d) and identifying factors that affect people’s investment decisions and hence their portfolio.
1.5 Limitations
 Time period of the project was quite insufficient
 The viability and prospect to work offline
 Unable to analyze the market live due to global pandemic and lockdowns in various cities.

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 CHAPTER 2
2.1 Industry Profile
Brokerages are one of the first financial foundations to embrace the Internet and put their  services online. It’s a
natural evolution as trading preferably requires real-time information and action. With the introduction and
developments in the field of technology, it allowed the introduction of computerized quantitative analytics with
increased digitization and it then became vital to have access to the fastest information. 

In the brokerage industry, its main products are securities lending and the provision of debt financing based on
sophisticated collateral mechanisms. In addition to facilitating trades in stocks, bonds, and convertibles through
lending activities, the industry also focuses on foreign exchange, precious metals, and derivatives as one of prime
brokerage activities.

As per the research, the profitability for the brokerage industry is likely to be sustained by the growing retail
share tied with an increase in interest income through margin funding, provided the credit cost remains under
check despite the pricing pressure and contracting yields.

In recent past, post covid, the total number of D-MAT accounts have increased to 498 lakhs as of December
2020 from 467 lakhs as of September 2020 and 408 lakhs in March 2020. This interprets into net addition of
10.03 lakh accounts per month, in the current fiscal year, more than twice, 4.08 lakh monthly additions in 2019-
20.

As reported by ICRA, NSE data shows that the top 20 brokerage houses together account for about 84% of
overall active client base as of December 2020, up from 75% in March 2020.

8
9
 Company Profile
2.2 About Sharekhan
Vision – To be the best retail broking brand in the retail business of the stock
Mission - To educate and empower the individual investor to make better investment
decisions through quality advisory and superior amenities.

Sharekhan is the largest standalone retail brokerage firm in the country at the third largest in the terms of
customer base after ICICI Direct and HDFC securities. The company proposes online security brokerage and
portfolio management services to institutions, large corporate houses, and individual investors.
BACKGROUND
 Sharekhan was founded by Mumbai-based entrepreneur Shripal Morakhira in 2000. Sharekhan
established as the online retail broking industry and leveraged on the first wave of digitalization, when D-
MAT of securities came into effect and electronic trading was introduced in the stock exchanges.
 The firm’s online trading and investment site - www.sharekhan.com - was launched on Feb 8, 2000.
 Known for its jargon-free, investor friendly language and high-quality research, the site has a registered
base of over 2 lacs+ customers.
 Since, online trading currently accounts for just over 2 per cent of the daily trading in stocks in India,
Share khan alone accounts for 27 per cent of the volumes traded online.

The company has 1.6 million clients and on average, executes more than 4 lakh trades per day. Sharekhan is
now fully owned subsidiary by BNP Paribas, it was rebranded as Sharekhan by BNP Paribas.

2.3 Products/Services Offered

 KEY SERVICE OFFERING
 Online BSE and NSE executions
 Free access to investment advice from Sharekhan’s research team
 Daily research reports and market view
 Depository services
 Market watch
 Derivatives trading ( future and options)
 IPO’s and Mutual fund’s distribution
 Currency trading
 Internet-based online trading : Sharekhan mobile app
 Fund transfer
 PRODUCTS OFFERED BY SHAREKHAN
 Equity trading platform (online/offline)
 Commodities trading platform (online/offline)
 Mutual fund Advisory and distribution
 Active training Cell (ATC)
 Trade Tiger Software
 Sharekhan mobile application

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  REASONS TO CHOOSE SHAREKHAN LIMITED
 Experience
 Technology
 Accessibility
 Knowledge
 Convenience
 Customer Service
 Investment Advice

2.4 SWOT Analysis

STRENGTHS: WEAKNESS:
Strong I.T infrastructure Penetration limited to urban
areas

THREATS:
OPPORTUNITIES:
Earning Urban Youth Entry of foreign finance firms
in Indian Market

11
 Chapter 3
3.1 Research Methodology
 Descriptive Study on secondary data on the basis of Sharekhan website, moneycontrol website and
analysis tools for assessing the risk of investors in the stocks invested.

3.2 Source of Data

 The task of collecting the information initiates when a research problem has been identified and a
specified plan has been drawn out for such study which is collected on the basis of primary and
secondary data.
3.3 Research Problem
 Understanding the risk-taking capabilities of equity investors, management of portfolio of investors
and understanding their need.
3.4 Research Plan
 Data source: Secondary Data
 Research Approach: Survey Method
 Research Instrument: Questionnaire
 Contact Method: Direct-Personal
 Sample Size: 100
 Sampling Technique: Simple Random Sampling
3.5 Development of Questionnaire
 A questionnaire is considered to be the most flexible, organized and efficient way of collecting primary
data as it is cost and time effective. In this survey, a self-administered questionnaire is prepared and used
to gather the data from the respondents.
 The survey is conducted using close-ended questions. In order to understand the various objectives for
which an investor invests, rating scale was used.
 Other Multiple-Choice Questions were also used to understand their demography and financial
knowledge. Open ended questions were asked only during the personal interviews to dive deep into the
psychology of an investor. No open-ended questions were used in the questionnaire.
3.6 Sampling
 Sampling Unit: In order to have an overall understanding of the research perspective of investors, the
data is collected from investors who have an experience in trading, brokers who usually deal with people
who wants to invest, novice investors who are new to investing in risky assets and lastly, people who do
not have experience in financial market but want to invest and have a knowledge of it.
 Sampling Size: It is often said that large samples are much more reliable and hence, an attempt was
made to gather as much data as possible. A sample of 100 respondents has been used to complete the
survey and analysis of this report.

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 Chapter 4
Risk Perception and Portfolio Management of Equity Investors
4.1 Risk Perception of an Individual
Since risk is known to have a huge impact on individual’s decision, an effort is made to figure out factors that
influence the degree of risk an investor can take. Financial risk tolerance can be well-defined as the maximum
quantity of uncertainty that someone is willing to accept while making an important financial decision. Risk
perception represents one person’s attitude towards taking risk. To analyse the risk perception of an investor,
various questions regarding market scenario are put forward.
4.2 Risk Appetite and Portfolio Management
Risk tolerance represents one person’s attitude towards taking risk. It could be either high, low, medium or
anything. This concept is directed as a vital step that has consequences for investors and financial service
providers such as banks, brokers and other asset management firms. No two individuals can have same
psychological level and risk appetite. In terms of different risk perception or risk tolerance level, individual
investors tend to show different reactions based upon their psychological factor and economic situation, which
would lead to mixed portfolio choice for each individual investor. For this purpose, it is crucial to analyse the
factors that are affecting an investor’s risk tolerance and how these investors make their investment choices.
Here, the decision of an investor plays a vital role in this investment process, because investments are subject to
market risk.
In general, each and every investor is associated with risk tolerance, while investing in the stock markets. So, in
order to gather the facts to understand and analyse how people make portfolio decisions based on their risk
appetite, plenty of questions are raised like, (how to invest and where to invest) to the investors towards risk so as
to make a relation between each investor’s risk aversion and portfolio decision.
4.3 Clients Handled by Sharekhan
The client with good equity holding(Rs. 2-5 lacs) with Sharekhan. The relationship manager shall look after the
portfolios of certain number of clients allotted to him. He will advise his clients for the balance(hedging) of their
portfolio by either buying stock or selling the earlier holdings.

4.4 Equity vs. Fixed Deposits and other safe instruments(like postal deposits)
Equity Fixed Deposit Post Office Saving

1. Easy liquidity; no charge on Liquidity is quite longer process. Premature withdrawal is chargeable at
convertibility. 2% penalty.

2. Dividends paid are subject to a Higher investment leads to huge tax Taxable as per investor’s personal
distribution tax of 13.84%. chargeable. income slab.

3. Returns are not guaranteed FD rates are pre-specified and do not Offers guaranteed returns through
because they are exposed to change for the entire tenure. interest rates of up to 8.7%.
market risks.

13
4.5 PMS vs. Mutual Funds

Parameters PMS(Portfolio Management Mutual Funds

Service)
1. Customization Moderate to High Low
2. Engagement High Very Low; Limited to NAV and
Fact sheets
3. Alignment of incentives Highly preferred Not possible, since fee is fixed
4. Asset holdings Investors hold ‘Stocks’ Investor hold ‘Units’
5. Fee structure Negotiable with PMS providers; Non-negotiable with AMC/Mutual
mostly charge 2% annual fee Fund houses; fee is fixed in % terms.
6. Flexibility No restriction to confine investments Pooled-in corpus can only be
to a stated objective invested in asset categories as per
the scheme’s objective
7. Risk-Return It usually has a highly concentrated The risk quotient in Mutual Funds is
portfolio (consisting of about only reduced to a certain extent as the risk
20-30 stocks); However, with higher gets spread across a wide range of
risk comes the possibility of higher stocks
returns

Chapter 5
14
 A) Data Analysis
5.1 Statistical Test for Analysis of Data
The study has used descriptive analysis along with analysis based on responses generated from the questionnaire
to determine the different factors that affect and influence investor’s decision making with respect to portfolio
management and also to understand and evaluate reasons due to which respondents go ahead with one
perspective instead of another.

a) Demographic Profile of the respondents

 As per the present study, such frequency table and bar charts tend to depict the picture wherein majority
of the respondents, i.e., 71% respondents belong to those who fall in the age group of 20-30 years, i.e.,
the youth.
 This corresponds to respondents who are majorly students i.e., either graduated/still completing their
graduation.
 Furthermore, in the present study, respondents tend to have annual income below Rs. 2lacs.
 Such representation signifies the fact that majorly, during the situation of global pandemic caused by
Covid-19, it’s the youth who is more inclined towards the financial market and investing activities. This
is due to youth who have more risk-taking ability, come with fresh mindset, have appropriate know-how,
and understands the macro-economic-environment better.

b) Factors that influence investment decisions

15
 c)

 The above frequency table and bar charts have been drawn out on the basis of different factors that tend
to influence an investor’s decision, such as, business channels, websites/social media, own network such
as peers and family, print media such as newspapers and magazines, and advisor, such as consultants, or
relationship managers, brokers, etc.
 The above representation depicts the fact that youth, which is more inclined towards such market, tend to
get impacted majorly by own network groups and financial advisors, as they are the better ones to guide
about adequate investments and trading strategies to be used, so as to earn safe returns, after taking
adequate risk at right time.
 Since, this market asks time and patience to be invested in the market, therefore, people like Mr. R.K.
Damani(D- Mart Founder), or Mr. Rakesh Jhunjhunwala, etc., are such role models that motivate the
youth, about such platforms, and various books, magazines, websites, have been built up to guide
everyone about the same.

c) Frequency and bar graph distribution on the basis of asset classes

16
 Herein, the respondents have been asked about their preferred investment avenue.
 Among 100 respondents, majority of the respondents prefers Mutual funds and Derivatives i.e., 48% and
13% respectively. This is because, people invest in mutual funds due to flexibility, liquidity and they
don’t track market on daily basis; for derivatives, people who are willing to take more risk and leverage
to generate higher returns, so they opt for derivative products such as futures and options.
 On the other hand, the rest, like those who are professionals, etc., prefer commodity(gold/silver), so they
buy gold/silver in cash market, and hold it for future period.

17
d) Purpose of investment

18
  From the above representation it can be inferred that the foremost reason for making investments in

various investment avenues is capital appreciation(rise in an investment's market price) followed by risk-

reward, regular income, stable dividend, tax benefits and protection against inflation.
 This implies that people here are majorly concerned about returns, and such returns must be at least more
than the rate of inflation in the market, and must rise weekly/monthly.
 For example, in current pandemic situation, when the inflation for FY22 is estimated at 4.8%, so
investors have the perception to earn either 4.8% or > 4.8% , with their investment avenue growing on
average rate. People who are young, have the time and patience to go ahead with such strategy, because
they are more courageous and have the approach of trying new experiments to get better idea of the right
path to go along with.

e) Overall Risk perception on the basis of age group of respondents

19
Notations for Level of Risk: Notations for Age:
o High : 5 o 20-30 years : 1
o Moderate : 4 o 31-40 years : 2
o Low: 3 o 41-50 years : 3
o Not applicable, as my past experience is limited : 2 o 51-60 years : 4
o Other :1 o 60 years and above : 5

 According to the data presented above, it can be said that majority of the respondents(71%) have
moderate level of risk(54%).
 Whereas, for people that fall in the age group 31-40 years(professionals) have not much experience, due
to which, they don’t adopt to high risk, and try to play safe, and thereby tend to go ahead with options
such as mutual funds, gold/silver, to get easy and regular returns and take calculated risk, with sufficient
capital in hand.

20
f) Descriptive statistics on the basis of association among risk perception and factors that influence the
investment decision

 Standard Deviation is based on the distance from the mean.

 Basically, a small standard deviation means that the values in the statistical data set are close to the mean
of the data set, on average.
 Similarly, a large standard deviation means that the values in the data set are farther away from the mean
on average.
 Data from the table suggests that Capital Appreciation has the lowest standard deviation(.696), which
suggest that it is the most important factor while investing into an investment avenue.
 Stable Dividend has standard deviation of .703, it suggests that after the capital appreciation it is the most
important factor while investing into an investment avenue.
 Level of risk have a standard deviation of .949, which suggests that it is the least important factor while
investing into an investment avenue.

21
 B) Findings
 71% respondents belong to those who fall in the age group of 20-30 years, i.e., the youth.
 56% respondents belong to student category, followed by 20% respondents that belong to
professionals category and 11% respondents that belong to technical category.
 49% respondents have annual income below Rs. 2lacs because they belong to student category
followed by professionals with annual income more than 5lacs and technical category with annual
income more than Rs.10lacs.
 57% of the respondents have low influence from business channels.
 49% of the respondents have very high influence from advisors.
 32% of the respondents have high influence from own network.
 In derivatives segment, 34% of the respondents are comfortable and 51% of the respondents are
less comfortable.
 In commodities segment, 59% of the respondents are less comfortable and 34% are more
comfortable.
 In Mutual funds segment, 48% of the respondents are very comfortable and 36% of the
respondents are comfortable and 14% of the respondents are less comfortable.
 60% of the respondents are less comfortable, 30% are comfortable and 10% are very comfortable
when investing in currency segment.
 For 38% of the respondents, regular income is the most important factor, for 44% of the
respondents, it is quite important factor, and for 13% respondents, it is neutral.
 For 22% of the respondents, stable dividend is the most important factor, for 56% it is an
important factor and for 2% it is insignificant.
 For 28% of the respondents, risk-reward is the most important factor, for 41% it is an important
factor, for 25% respondents it is neutral and for 5% it is insignificant.
 For 49% of the respondents, capital appreciation is the most important factor, for 36% it is an
important factor, and for 12% it is neutral.
 For 49% of the respondents, protection against inflation is the most important factor, for 34% it is
an important factor, and for 15% it is neutral.
 For 30% of the respondents, tax benefits are the most important factor, for 38% it is an important
factor, and for 28% it is neutral.
 For 11% respondents, level of risk is high; 54.5% have moderate risk whereas 15.2% respondents
have low risk.
 18.2% of the respondents have limited past experience or not aware about risk.

22
 Chapter 6
Conclusion
From the analysis as well as discussions in the market, it has been observed that most of the investors are
moderate risk-takers and are interested in diversifying their risk or just going with moderate risk-related
asset classes, through which they can earn a reasonable return. People in India still think with the
perspective of savings rather than taking risk and investing in high ended equity markets to earn high profits
currently, due to global pandemic situations, state-wise lockdowns, shortage of vaccine supply, weather
disaster(like Tauktae Cyclone), falling GDP(estimated at 9.2%), high WPI(10.49%). Due to this, people are
interested in investing in the investment option where there is moderate or low risk involved. So, in response
to this, the present study has been conducted to perform an empirical analysis of investor's perception of risk
and returns in the Indian Stock Market. An accurate perception of the stock market is of paramount
importance to comprehend the perception of the investor and the biases that affect those perceptions. The
study also deals with the association of investment decisions to demographical factors. The study
demonstrates that opinions from peer networks, broker’s advice, etc., are major factors that influence the
decision that investors consider before investing. Furthermore, the study was conducted during stressed
market times, which exhibits the investor's opinion of the market in the short run. The paper is significant
with the fact that the efficient market hypothesis is a half-truth because of the primary assumption that
investors are rational and this study could help bridge the gap between rational and irrational investors. The
study reveals that the investors in Delhi NCR city are not aware of the portfolio which would minimize risk
and maximize the return. Also, it's evident that the investors in Delhi NCR city have a moderate level of
understanding about risk and the importance of portfolio management as they are not aware these factors.
Hence proper awareness initiatives should to be taken in order to improve the awareness level in the minds
of the investors.

Glossary:
a) GDP: Gross Domestic Product
b) WPI: Wholesale Price Index
c) NCR: National Capital Region

23
 Recommendations
 Most of the respondents are not aware of Portfolio Management. So, proper guidance
can be given to them. This is to create awareness.
 A regular investor-friendly seminar can be organized to suit the timings of the
investing public. For instance, such seminars can be interactive seminars, webinars,
etc., that must be arranged at frequent intervals.
 The newsletters published help investors. Hence newsletters/bulletins can be published
for guidance.
 Efforts should be taken to popularize Equity through appropriate publicity measures.
 Mutual fund companies, brokers, financial advisors, and financial news channels must
aware the investors about their funds which are fulfilling respective investor’s
investment objective.
 Certain initiatives need to be taken via online courses, advertisements, etc. about the
risk management strategies and hedging opportunities which one can use to better
hands-on experience in the financial markets.

24
 Annexure
Questionnaire on Risk Perception and Portfolio Management
Ques 1. Name
____________________________
Ques 2. Email Address
____________________________
Ques 3. Age
o 20-30 years
o 31-40 years
o 41-50 years
o 51-60 years
o 60 years and above
Ques 4. Occupation
o Student
o Professional
o Technical
o Manager
o Self-Employed
o Retired
o Other

Ques 5. Annual Income

o Below Rs. 2lacs
o Rs. 2lacs- Rs. 5lacs
o Rs. 5lacs- Rs.15 lacs
o Rs. 15 lacs and above

Ques 6. Do you wish to invest shortly?

o Yes
o No
o Maybe

Ques 7. Which of the following best describes your own experience as an investor?
o I have had no experience in investing, apart from using bank accounts
o I have had limited experience in investing
o I have had a reasonable level of investment experience
o I would consider myself an experienced investor
o Other

Ques 8. Please tick the influence of the following in your Financial Decision-Making process.
Very High High Low
Biz Channels
Websites
Own Network

25
 Print Media
Advisor

Ques 9. Which of the following best describes your level of knowledge and understanding of financial markets and
investing?
o Expert
o Intermediate
o Beginner

Ques 10. Thinking about the risk you have taken with your past investment; how would you describe the level of risk?
o High
o Moderate
o Low
o Not applicable, as my past experience is limited
o Other
Ques 11. On a scale of 1 to 3, How would you feel if you would invest a large percentage of your portfolio in the
financial market(apart from the equity market)?

1-Less Comfortable 2-Comfortable 3-Very Comfortable

1.Derivatives(F&O)
2.Commodity(MCX)
3. Mutual
Funds(SIP/Lumpsum)
4. Currency
5.Right Mix of above
6. Other

Ques 12. If you hold a sizeable investment that regularly went up and down in value, which would you be likely to
do?
o Watch its progress daily
o Watch its progress weekly
o Watch its progress monthly
o Only check its progress half-yearly(6months)

Ques 13. If you owned a large number of shares, and the stock market fell by 20%, what would be your reaction?
o To sell all the shares as soon as possible to avoid any further falls
o To sell some of the shares to reduce exposure to future falls
o To hold the shares and wait for a recovery
o To look for ways to buy more shares
o To hedge your portfolio

Ques 14. How important is it for you to protect your investment and lower the prospect of any fall in the value?
o Very important, as it is my main objective
o Important, but I’m comfortable for at least a small part of my portfolio to have little risk
o Somewhat important, but I’m prepared to take on a reasonable amount of risk
o Not particularly important, as I’m comfortable that having exposure to risk is the best way to maximize
returns
26
Ques 15. The investment account that you hold, represents approximately what percentage of your total savings and
investments?
o Less than 10%
o More than 10% but less than 20%
o More than 20% but less than 40%
o Up to 50%

Ques 16. If you are planning a major investment decision(equity, commodity, real estate, mutual funds, currency),
which factors would drive your decision?

1-Most Important 2-Important 3-Neutral 4-Insignificant

Stable Dividend
Regular Income
Risk-Reward of
1:2
Capital
Appreciation
Protection against
Inflation
Tax Benefits

Ques 17. Investments with higher returns typically involve greater risk. The charts below show hypothetical annual
returns (annual gains and losses) for four different investment portfolios over 10 years. Keeping in mind how the
returns fluctuate, which investment portfolio would you be most comfortable holding?
o Portfolio A
o Portfolio B
o Portfolio C
o Portfolio D

Ques 18. Recommendations

27
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