INVESTOR’S PERCEPTION TOWARDS INVESTING

IN EQUITY MARKET AND MUTUAL FUNDS

A PROJECT SUBMITTED TO

University of Mumbai for partial completion of the degree

of Bachelor in Management Studies

BY NIYATI MAKDIA

TYBMS - B (SEM VI)

ROLL NO. - 6704

UNDER THE GUIDANCE OF

DR. VIMAL KUMAR MISTRY

THALUR COLLEGE OF SCIENCE AND COMMERCE

THAKLUR VILLAGE, KANDIVALI EAST, MUMBAI

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 CERTIFICATE

This is to certify that Miss. Niyati Makadia has worked and duly completed her project work for the
Degree of Bachelor in Management Studies and her project is entitled, ‘Investor’s Perception Towards
Investing in Equity Market and Mutual Fund’ under my guidance and as per his/her declaration no part of
it has been submitted previously for any Degree or Diploma of any University and it is his/her own work
and facts are reported by his/herpersonal findings and investigations.

Dr. Vimal Kumar Mistry

Principal Project Guide

Date of submission: External Examiner

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 DECLARATION BY LEARNER

I, the undersigned, Miss. Niyati Makadia hereby declare that the work embodied in this project work
titled ‘Investor’s Perception Towards Investing in Equity Market and Mutual Fund’ forms my own
contribution to the research work carried out under the guidance of Dr. Vimal Kumar Mistry and is a
result of my own research work. It has not been previously submitted to this or any other University for
any other Degree/Diploma. Whenever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography. I, hereby further declare that all information of
this document has been obtained and presented in accordance with academic rules and ethical conduct.

Niyati Makadia
Name of the student

Guided by

Dr. Vimal Kumar Mistry

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 ACKNOWLEDGEMENTS

To list who all have helped me is difficult because they are so numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this project.

I would like to thank my Principal, Dr(Mrs.) C.T Chakraborty for providing the necessary facilities
required for completion of this project.

I take this opportunity to thank our Coordinator, Dr. Rupal Shah, for her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide Dr. Vimal Kumar Mistry
whose guidance and care made the project successful.

Lastly, I would like thank each and every person who directly or indirectly helped me in the completion
of the project especially my Parents and Peers who supported me throughout myproject.

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 Abstract

The stock market occurs from the interaction of a group of buyers (investors) and sellers of shares
(companies), who represent ownership of the business. This includes a security listed on a public stock
exchange under government supervision. Shares or stock market can be classified according to the
country where the company is domiciled, for example Gudang Garam (company in Indonesia) which is
domiciled in Indonesia and traded on the Indonesia Stock Exchange. The stock market has become an
attractive and profitable investment today for investors and the stock market has grown rapidly over the
years and is getting more and more attention because it deals with the future of money. However, a lot of
investors are still worried to invest in stock market today, even investing in stock market results a huge
profit.

This reason be the volatility in stock market. Therefore, this study focused on the investors’ perceptions
towards stock market in different areas. The data collected through online interview and distributing
questionnaires to respondents in order to understand their behaviours, attitudes, desires, perspectives and
level of awareness towards the stock market. The results showed that investors’ perceptions on buying
shares in Asia are represented by several indicators, such as neutral information, accounting information,
and social relevance, in which these three indicators generate impressions of the company’s activities
based on profits and fundamental thinking patterns. Therefore, this will have an influence on investors in
making decisions on the shares which will be chosen by them in the future.

In this paper attempt is made to know the preferences towards securities market and to analyze the
importance of demographic factors that influence the decision of investor towards making investments.
This study attempts to find out the significance of demographic factors of population such as gender, age,
education, occupation, income over investment decisions. The hypotheses have been developed
considering its relevancy to the research objectives.

Investment decision making behavior has been taken as dependent variable and demographic factors (age,
gender and education) are considered as independent variables. The study proves that there is a
significant difference between male and female investors on awareness of equity market investment; there
is a significant difference among the age, educational and occupational groups with respect to awareness;
there is also a significant difference among the investors of different age and occupational groups, in
respect of awareness.

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 INDEX
SR. NO PARTICULARS
Chapter 1
1.1 Introduction

Chapter 2
2.1 Objectives of the study
2.2 Methodology used to collect data
2.3 Scope of the study
2.4 Limitations of the study
Chapter 3
3.1 Review Literature
3.2 Research Methodology
3.3 Findings Related To Parameters Of Investment
Behavior
Chapter 4
4.1 Investments In Securities Market- An Overview

Chapter 5
5.1 Perception Of Investors On Pre- Investment Pattern In
Securities Market

Chapter 6
6.1 Perception Of Investors On Post- Investment Behavior
In Securities Market

Chapter 7
7.1 Data Interpretation
Chapter 8
8.1 Conclusion
8.2 Recommendations
8.3 Suggestions
Chapter 9
9.1 Bibliography
9.2 Annexure

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 Chapter 1

INTRODUCTION

“Happiness is not in the mere possession of money; it lies in the joy of

achievement, in the thrill of creative effort”.
-Franklin D. Roosevelt

Wealth creation is an art. People aspire for buying a home, explore for better educational opportunities for
their children and accord a comfortable retirement for themselves for which money is required. Money
does not grow on trees, it can only grow when people save and invest wisely. Saving money is one of the
human practices which people must adopt to increase happiness and contentment. In order to overcome
the financial problems in future, everyone has to save money. Saving money at earlier ages enables one to
avoid regrets in later life. Knowing how to secure financial well-being is one of the most important things
needed in life. Savings is a portion of income, not spent on current expenditures because a person does
not know what will happen in the future. Money should be saved for financial security and safety to meet
unplanned financial events. Therefore, savings helps an individual or family financially secure. Money
can also be saved to purchase expensive items that are too costly to buy with the monthly income. Buying
a new smart phone, purchasing a bike or paying for a vacation can all be accomplished by saving a
portion of income. Savings becomes the cushion for the future’s intercourse of the unforeseen and
upcoming as well as the uncertain circumstances of life. To be considered financially secure, an
individual or household should save at least six months’ worth of expenses.

Investment means putting the saved money in various products in order to earn returns and increase the
wealth. Investment improves the financial well-being by making the money to work for the investor.
Investment is the commitment of funds which have been saved from current consumption with the hope
that some benefits will be received in future. Thus, it is a reward for waiting. Investment of hard- earned
money is a crucial activity of every human being. Savings of the people are invested in assets, depending
on their risk and return demands. Wise investment paves path for wealth creation.

Keeping a close watch on the performance of the employee i.e. money makes one a boss, for which the
boss must be empowered with financial knowledge. An investor has to keep in mind the factors safety,
returns, liquidity, gestation period and periodic income generation before going for investment. For the
higher economic growth of the country, marginal propensity to save should be higher as it paves path for
multiple process. The determinants and patterns of saving differ from rural to urban region. In rural areas,
the marginal propensity to consume is more rather than the marginal propensity to save which seems to be
vice-versa in urban areas where the marginal propensity to save is more than that of the marginal
propensity to consume. For short periods of time and for small amounts of money, the piggy bank method
may work, but long-term savers should use a profitable method assuring handful returns with easy
liquidity. The current research is a maiden attempt to understand the investment pattern of individual
investors in securities market which in turn fulfils the objectives of easy liquidity and profitability.

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Investment Avenues

“Investment is the employment of funds with the aim of earning income or capital appreciation.”5
Savings and investment are viewed differently. Savings means keeping aside a part of the income.
Investment means putting the saved money in financial products to earn returns and grow wealth. Savings
are usually used to meet the short term needs. People save in order to deal with emergency situations and
to meet unexpected expenses. Investment generally entails a longer horizon of six months or more. It is
designed to provide returns and grow money over a period of time. Another difference between savings
and investment is the risk they bear and returns they offer. While savings stored in a safety vault are very
safe, they will not generate any returns over the years. Even if money is kept in a savings account, it will
provide a negligible rate of return. On the other hand, money invested in various products like stocks,
mutual funds, gold, etc. is subject to more risks but has the potential to grow over time. If invested wisely,
money can grow manifold over years. When it comes to liquidity, savings are the most liquid assets
which can be accessed at any time, but this is not the case with investments. Investors consider a number
of factors before deciding to invest their funds in various securities involving varying degrees of risk and
return.

Financial investment is the allocation of money to assets that are expected to yield some gain and
experience capital growth over a period of time. The various investment avenues thrown open to the
people are as follows:

Bank Deposits

Bank deposits are flexible, liquid and offer good interest rates today. The two-in-one savings accounts
that banks offer (surplus over a specified sum is transferred to a deposit), the depositor is able to get a
higher return on the money accumulated in savings account. In the recent Budget, the benefit of Section
80C was also extended to bank deposits, which are kept with scheduled banks for a minimum period of
five years. Investments in Bank Fixed Deposit or FD accrue only 8.25 % of annual returns for non-senior
citizen, depending on the bank's tenure and guidelines, which makes it widely sought after and safe
investment alternative. The minimum tenure of FD is 15 days and maximum tenure is 5 years and above.

Mutual Funds

A mutual fund is a body corporate registered with SEBI that pools money from the Individuals /
Corporate investors and invests the same in a variety of different financial instruments or securities such
as Equity Shares, Government Securities, Bonds, Debentures, etc. The income earned through these
investments and the capital appreciations realized are shared by its unit holders in proportion to the
number of units owned by them. Thus a Mutual Fund, is the most suitable investment for a common man
as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost. Mutual fund units are issued and redeemed by an Asset Management Company
(AMC) based on the fund’s Net Asset Value (NAV), which is determined at the end of each trading
session.

Gold

In India, gold has traditionally played a multi being used for adornment purpose, it has also served as an
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asset of the last resort and a hedge against inflation and currency depreciation. India has more than 13,000
tones of hoarded gold, which translates to around is an asset class that’s associated with safety. yellow
metal has seen, has made it look similar to other market investment assets. This is due to an
unprecedented since the last couple of years. Controlled by SBI, Gold Deposit Scheme was instigated in
the year 1999. Investments in this scheme are open for trusts and firms with no specific upper limit. The
investor can deposit minimum of 200 gm in exchange for gold bonds holding a tariff free rate of interest
of 3% bond varying with a lock in period of 3 to 7 years. entitled to capital gains tax and back in cash or
gold, as per the investor's preference

Shares (Equity)

Equities are often regarded as the best performing asset class vis peers over longer time frames. capable
of exposing investors are a number of micro and macro factors that affect the performance of equities and
understanding all of them can be challenging for most. positioned for a long industries. Before investing
in stock market, one should be prepared to assume risk equivalent to sum invested in the market.
Investing in securities market yields higher profits but influenced by unanticipated turn of mark securities
market to some extent cannot be considered as the safest investment options. However, to accrue higher
gains, an investor must update himself on the recent stock market news and events.
Equities are often regarded as the best performing asset class vis peers over longer time frames. However,
equity-oriented investments are also capable of exposing investors to the highest degree of volatility and
risk. are a number of micro and macro factors that affect the performance of equities and understanding
all of them can be challenging for most. A smart portfolio positioned for a long-term growth includes
strong stocks from different Before investing in stock market, one should be prepared to assume risk
equivalent to sum invested in the market. Investing in securities market yields higher profits but
influenced by unanticipated turn of market events, securities market to some extent cannot be considered
as the safest investment options.

However, to accrue higher gains, an investor must update himself on the recent stock market news and
events. In India, gold has traditionally played a multi-faceted role. Apart from being used for adornment
purpose, it has also served as an asset of the last resort and a hedge against inflation and currency
depreciation. India has more than gold, which translates to around 6, 50,000 crores. is an asset class that’s
associated with safety. However, the volatility has made it look similar to other market investment assets.
This is due to an unprecedented demand, for gold has been an investment avenue since the last couple of
years. Controlled by SBI, Gold Deposit Scheme was instigated in the year 1999. Investments in this
scheme are open for trusts and firms with no specific upper an deposit minimum of 200 gm in exchange
for gold bonds holding a tariff free rate of interest of 3% - 4% on the basis of the period of the bond
varying with a lock in period of 3 to 7 years. Moreover, Gold bonds are not capital gains tax and wealth
tariff. The sum insured can be accrued back in cash or gold, as per the investor's preference.

Real Estate

Real estate is a great investment option as it gives capital appreciation and rental income. It is an
investment option since it fights inflation. The fundamentals for investing in property markets remain
strong in India due to low interest rates, strong capital flows, high employment growth, abundant
liquidity, attractive demographics and increase in affordability. The price paid for a property should
reflect the future rent/income. Indian real estate industry has huge prospects in sectors like commercial,
housing, hospitality, retail, manufacturing, healthcare etc. and termed as the "money making industry".
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Realty sector of India promises annual profits of 30% to 100% through real estate

Insurance

Insurance is a means of protection against money loss from many kinds of hazards. Insurance is transfer
of risk and a vehicle which provides security and protection against financial loss up to some limit. In the
emerging Indian economy, Life Insurance Company is the largest life insurance company and the
country’s largest investor which is regulated by the government. Insurance features among the best
investment alternative as it offers services to indemnify one’s life, assets and money besides providing
satisfactory and risk free profits. Indian Insurance Market offers various investment options with
reasonably priced premium. Some of the popular Insurance policies in India are Home Insurance policies,
Life Insurance policies, Health Insurance policies and Car Insurance policies. Some top Insurance firm in
India under whom investors can buy insurance scheme are LIC, SBI Life, ICICI Prudential, Bajaj Allianz,
Birla Sunlife, HDFC Standard Life, Reliance Life, Max New York Life, MetLife, AIG, Kotak Mahindra
Life, ING Life Insurance, etc.

Equity Market: An equity investment is money that is invested in a company by purchasing shares of that
company in the stock market. These shares are typically traded on a stock exchange. Equity investors
purchase shares of a company with the expectation that they’ll rise in value in the form of capital gains,
and/or generate capital dividends. If an equity investment rises in value, the investor would receive the
monetary difference if they sold their shares, or if the company's assets are liquidated and all its
obligations are met. Equities can strengthen a portfolio’s asset allocation by adding diversification. The
potential benefits of equity investments are:

The main benefit from an equity investment is the possibility to increase the value of the principal
amount invested. This comes in the form of capital gains and dividends. An equity fund offers investors a
diversified investment option typically for a minimum initial investment amount. If an investor wanted to
achieve the same level of diversification as an equity fund, it would require much more – and much more
manual – capital investment.

Investors may also be able to increase investment through rights shares, should a company wish to
raise additional capital in equity markets.

The equity market (often referred to as the stock market) is the market for trading equity instruments.
Stocks are securities that are a claim on the earnings and assets of a corporation (Mishkin 1998). An
example of an equity instrument would be common stock shares, such as those traded on the National
Stock Exchange (NSE), Bombay Stock Exchange (BSE), New York Stock Exchange (NYSE).

Equity market is looked at from different perspectives by different stakeholders. Broadly, there are two
major angles of looking at it – Company and Investor Angle. So, any statement aboutequity capital would
have a different meaning for a company and an investor. We will look at the investor angle of equity share
investment.

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ADVANTAGES

Dividend
An investor is entitled to receive a dividend from the company. It is one of the two main sourcesof return on
his investment.

Capital Gain
The other source of return on investm ent apart from dividend is the capital gains. Gains which arise
due to rise in market price of the share.

Limited liability
Liability of shareholder or investor is limited to the extent of the investment made. If the company goes
into losses, the share of loss over and above the capital investment would not beborne by the investor.

Exercise control
By investing in the company, the shareholder gets ownership in the company and thereby he can exercise
control. In official terms, he gets voting rights in the company.

Claim over Assets and Income

An investor of equity share is the owner of the company and so is the owner of the assets of that
company. He enjoys a share of the incomes of the company. He will receive some part of that income in
cash in the form of dividend and remaining capital is reinvested in the company.

Rights Shares
Whenever companies require further capital for expansion etc, they tend to issue ‘rights shares’. By issuing
such shares, ownership and control of existing shareholder are preserved and the investor receives
investment priority over other general investors. Right Shares are issued at a price lower than current
market price of the equity share. So, existing investor can take that advantage or otherwise can renounce
right in some one’s favor to get value of right.

Bonus Shares
At times, companies decide to issue bonus shares to its shareholders. It is also a type of dividend. Bonus
shares are free shares given to existing shareholders and many times they aregiven in lieu of dividends.

Liquidity
The shares of the company which is listed on stock exchanges have the benefit of any time liquidity. The
shares can very easily transfer ownership.

Stock Split
Stock-split means splitting a share into parts. How should an investor be benefited by this? By splitting
of share, the per-share price reduces in the market which eventually increases the readability of share. At
the end, stock split results in higher volumes with a number of investors leading to high liquidity of the
share.

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DISADVANTAGES

Dividend
The dividend which a shareholder receives is neither fixed nor controllable by investor. The management
of the company decides how much dividend should be given. If there is a loss, there is no question of
dividend. If there is a profit, unless Board of Directors propose dividend, investors will not receive
dividend.

High Risk
Equity share investment is a risky investment as compared to any other investment like debts etc. The
money is invested based on the faith an investor has in the company. There is no collateral security
attached with it.

Fluctuation in Market Price

The market price of any equity share has a wide variation. It is always very difficult to book profits from
the market. On the contrary, there are equal chances of losses.

Limited Control
An equity investor is a small investor in the company, therefore, it is hardly possible to impactthe decision
of the company using the voting rights.

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 Chapter 2

OBJECTIVES OF THE STUDY

The objectives of studying investor’s perception towards investing in equity market and mutualfunds are:

 To study investor’s perception towards investing in mutual funds and equity market.
 To know the factors influencing investors decision while investing in mutual funds and equity
market.
 To study the investors responsiveness and liking in mutual funds and equity market.
 To study various scopes of investors perception towards investing in mutual funds equity
market.
 To study the limitations of investor’s perception towards investing in equity market and mutual
funds.
 To analyze people’s view towards investing in mutual funds and equity market.

METHODOLOGY USED TO COLLECT DATA

To achieve the objective of studying the people’s perception towards equity market and mutual fund data
has been collected. Research methodology carried for this study can be two types

Primary - The data, which has being collected for the first time and it is the originaldata.

Secondary - The secondary information is mostly taken from websites, books, journals, etc. The study is
mainly based on primary data which is collected through a structured questionnaire. A sample of 100
respondents were taken on the basis of convenience. Whether demographic factors influence significantly
the decision on investment in mutual fund and equity market.

SCOPE OF THE STUDY

Mutual fund has been focused as an investment avenue in past few years only. The financial growth and
stability of an economy plays a vital role in this area. Mutual fund industries are gaining importance
because the salaried class people and the middle income people prefer their investment preferable avenue
for their investment destination. Gradually educated citizens are gaining the knowledge of saving and
investment cycle and its effects in an economy. The study found that the demographic variables viz., age,
gender, education and occupation have been influencing the awareness of investors towards investment in
equity market significantly. Further research can be conducted by extending the scope of the study to
cover other related variables and concentrating on the investors in other regions also. The present study
concentrated the investors' who had invested their money in equity market therefore, further studies can
also be made on identifying the awareness level of investors about other investment avenues besides equity
market investment.

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 LIMITATIONS OF THE STUDY

The present study aims to understand people’s perception towards investment in equity market and mutual
funds. The following are some of the limitations to the study:

 The respondents contacted belonged to Mumbai only, which may not represent thewhole India.
 The sample size is limited to 100 respondents only.
 The study is limited to selected investment options.
 The conclusions drawn cannot be stated as universally acceptable.
 Time duration will also be a major limitation.

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 Chapter 3

REVIEW OF LITERARTUE

Review of literature is an important part of any research. Literature on performance evaluation of mutual
fund is enormous. Some of the research studies that substantially influenced the preparation of this study
are discussed in this section.

 Priyanka Sharma and Payal Agrawal (2015) in their study made an attempt to understand the
effect of demographic factors in mutual fund investment decisions. The study reveals that the
investors‟ perception is dependent on their demographic profile. Investor’s age, marital status and
occupation has a direct impact on investors‟ choice of investment. The study furtherreveals that the
female segment is not fully tapped. The research also reveals that the liquidityand transparency are
some factors which have a high impact on investment decisions.

 Pariah B B S, Sharma R and Parihar D.S (2009) also studied that respondent’s age, gender and
income are significantly associated with their attitude.

 Design G, Lalaiselvi S and Anusuya L (2006) conducted a study on women investors‟ perception
towards investment and found that women investors generally hesitate in investingin mutual funds
due to lack of their knowledge and awareness.

 D. Rajasekar (2013) The study was conducted with a sample size of 150 respondent by using the
statistical tools like percentage analysis, chi square, weighted average, with an objective to know
about the investor’s perception on their profile, income, savings pattern, investment patterns and
their personality criteria. The study was concluded by taking into consideration various parameters
involved in investors decision making keeping in mind investors perception towards mutual fund
investment.

 Vipin Kumar & Preeti Bansal (2014) this research paper has focused attention on various
parameters that highlights investor’s perception on mutual funds. It was studied that the scheme of
mutual fund investment were not known to many of the investors as still the investors rely upon
the traditional pattern of investments like investment in banks and investment in postal savings.
As most of the mutual fund investors used to invest in mutual fund for not more than three years
and used to quit from the fund as they were not giving desired result as stated in theobjective during
inception of mutual fund scheme. It was also found from the research that maximum number of
mutual fund investor’s has to depend upon their brokers and agent to invest in mutual fund.

 Subramanya PR (2015) The research has been studied on socio economic factors like age, gender,
education income and savings of investor’s perception towards mutual fund is not encouraging but
the age of investor’s and saving habit of the respondent is closely correlated.

 Mukesh. H. V. (2015) had studied investor’s perception on mutual fund for return, tax benefit and
capital appreciation, but most of the investors lack awareness about mutual funds and their various
schemes like, SIP (Systematic Investment Plan). Hence, it becomes necessary to create awareness
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 among the investors through conducting seminars, workshops on financial market and published
data like newspaper, magazines and journals.

 Preeti Khitoliya (2014) examined through her research that majority of the respondents in theage of
35-44 wish to invest in mutual fund having moderate risk which ensures wealth maximization
followed by balanced fund and income funds.

 D. Senthil and Dr. M. Syed Zefar (2005) had published an Article “Mutual Fund Investors
Perceptions and realities”. The main aim of the study is to find out the investors perception and
realities in the current scenario and measure extend of satisfaction derived by customer towards the
performance of mutual fund and willingness to invest in future despite the current prevailing
condition of the market. The main purpose of the study is to identify the factors which make them
invest and to retain in mutual fund. The study says that investors prefer mutual fund than share
because high risk is associated with shares.

 Sanjay.J.Bhayani and Vishal.G.Patidar (2006) during the period Mutual Fund can increase in
domestic saving and improve the deployment of investment through market. The main scope of the
study is performed top five schemes are balanced fund scheme, Gilt fund scheme, Liquid Money
Market fund scheme, Income fund scheme, Equity diversified fund scheme, Tax planning fund
scheme.

 Madhumita Chakra Borty, P K Jain and Vinay Kallianpur (2007) evaluated the performance of
mutual fund on the basis of rate of return as well as risk adjusted methods. Theperformances of the
mutual funds are compared with the risk-free returns as well as the benchmark index (BSE 100).
The result have to be interpreted from the view that the study has been conducted for the period
2005-2007 when the economy was growing at a rapid rate (8% GDP growth).The finding of the
study was monthly reruns have been computed for all 40 mutual funds in the sample, for BSE 100
index and for 364 day T-bills. The study concludes regarding the capability of mutual fund
manager is still elusive.

 Logeshwari. K and Ramadevi V.(2009) have studied the preferences of investors towards various
investment avenues in relation to commodity market. The sample of 150 is taken by them from the
regular investors in Coimbatore city. They have advocated that a commodities market provides a
platform for the investors as well as hedgers to protect their economic interests as well as increase
their inventible wealth. The findings have revealed that the majority of the investors are within the
age group of 26-35 years, so the company can provide their customers some additional assistance
like daily trading tips, daily positions, and general news.

 Chinnathambi.S (2009) has studied the investment preference and awareness of the investors in
Sivakasi and found that out of 120 respondents 35.60 per cent of the investors prefer to invest
their money in Bank deposits because they want only safety to their investment. 71 respondents
are aware of the investment avenues. Investment decision in secondary market is influenced by
friends and only 18 respondents are interested to invest their money in equity market. The
Majority of the investors have lost an amount between 10,000 to 15,000 through stock market.
Earnings made through stock market are very low.3

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 Amaresh Das (2010) in his article has measured the empirical relevance by the volatility of stock
market return on aggregate investment for a set of countries in Asia. The results strongly suggest
that there is difference between the impact of low and high levels of uncertainty on the aggregate
investment levels.31.

 Anjali Choksi (2010) has revealed that the awareness of derivatives among new investors and
those investors having no knowledge about derivatives depend mostly on broker and take advice
of friends in order to make an investment and the investors most focus is on risk element and
uncertainty. Attraction towards cash market is due to low risk and high return whereas in
derivatives there are no long term capital gains.

 Gaurav Kabra .et.al (2010) from their study have concluded that modern investor is a mature and
adequately groomed person. In spite of the phenomenal growth in the security market and quality
Initial Public Offerings (IPOs) in the market, the individual investors prefer investments according
to their risk preference. Though they are in the trap of some kind of cognitive illusions such as
overconfidence and narrow farming, they consider multiple factors and seek diversified
information before executing some kind of investment transaction.

 Rajarajen Vanjeko (2010) collected information from over thousand individual investors of 11
different cities in India and revealed the investors’ investment strategy that nearly two fifths of the
investors sell the shares as soon as the price reaches their target. Only negligible per cent of
investors were long term investors. It was found that there exist significant differences among the
investors in their investment strategies on the basis of their age, income and city of living.

 Syed Tabassum Sultana (2010) has pointed that the individual investor still prefers to invest in
financial products which give risk free returns. Indian investors are reluctant to take risk. Indian
investors even if they are of high income, well-educated, salaried, independent are conservative
investors who prefer to play safe.

 Saravana Kumar (2010) has emerged with the conclusion that most of the investors are aware of
high risks involved in the derivatives market. To reduce the risk in the market, the investor should
follow the stop loss method. Most of the investors prefer cash market where the script can be held
for long term and the risk is less and it is transferable to others with the minimal time period. The
investors are highly satisfied with equity shares because of liquidity, low investment and capital
approximation.

 Vanitha .S (2011) have focused their study on four stock markets of emerging countries, namely
the Brazil, Russia, India and China collectively called BRIC with that of developed countries
namely U.S, U.K, Japan and Germany and have revealed that the returns of the BRIC countries
are higher during the period, which gives better place for investment by consistent returns. BRIC
countries move along with the developed markets and there is co-integration with developed
markets and found that it is better to invest long term in the BRIC countries stock market.

 Puwanenthiren Pratheepkanth (2011) has concluded that the dividend announcement has
significant influence on the stock price of Milanka companies, Srilanka at the time of actual
announcement day even though lot of internal and external variables affect the share price of the

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 firms. Present and future investors should consider the dividend announcement when they invest
in the Colombo Stock Exchange.

 Trivedi, Swain and Dash (2017) conducted a research on a study of investor’s perception towards
a mutual fund decision: an Indian perspective and focused on the relationship between investment
decision and factors like liquidity, financial awareness, and demography. It was found low risk
funds and liquidity of fund scheme is having impact on the investor’s perceptionfor investing in the
mutual fund. It was an analytical and descriptive research; primary source of data collection is
used for present study with the sample size of 200 respondents.

 Kumar and Rajkumar (2014) conducted a research on awareness and knowledge of mutual fund
among the investors with special reference to Chennai to evaluate the knowledge, general and
variable effects about the investors’ perception and performance of investment avenues. A survey
was conducted among 250 mutual fund Investors in Chennai as per simple random sampling and
found out that many respondents have clear knowledge about the potential advantages of investing
in mutual funds.

 Saini, Anjum and R.Saini (2016) conducted a research on investors’ awareness and perception
about mutual funds with an objective to analyze the investors’ awareness and perception regarding
investing in mutual funds. Data for the study is collected from a sample of 200 investors in
Chandigarh by using stratified sampling and it was found out that mostly the investors have
positive approach towards investing in mutual funds, in order to maintain their confidence in
mutual funds they should be provided with timely information relating to different trends in the
mutual fund industry.

 Goel and Khatik (2017) conducted a study on investors' awareness and preference towards mutual
funds as an investment option with an objective to know the Investors' awareness and preference
towards Mutual Funds as an Investment option. Primary data using judgment sampling through
questionnaire method as well as secondary data from wide range of literature from various journal
publications had been utilized. It was found out that majority of investors have heard about mutual
funds but still a important fraction of them have not initiated to investment because of having
lacking in full knowledge of mutual funds.

 Sharma (2012) conducted a research on Indian investor’s perception towards mutual funds with an
attempt to investigate the reasons responsible for lesser recognition of mutual fund as a prime
investment option. The study is primarily based upon primary data collected from a structured
survey through questionnaire and was administered on 100 plus respondents online as well as in
person. It was found out that three factors named as fund/scheme related attributes, monetary
benefits and sponsors’ related attributes may be offered to investors for securing theirpatronage.

 Rakesh H.M (2014), A Study On Individual Investors Behavior In Stock Markets Of India, IJMSS
(Vol.02, Issue-02), ISSN:2321-1784: The paper proposes to study the behavior of individual
investors in the stock markets and the factors that influence their investment decisions, which
include awareness level, investment duration etc. The research was based on the primary data
collected from the city of Mysore of 150 respondents, being stock market investors. The research
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 paper observes that only 10 % of the respondents intended to stay invested into the stock market
for a period of more than 5 years. In other words, the research paper observed that people do not
want to stay committed for longer period of time into the stock market despite it giving better
returns. The paper analyses that annual income and annual savings are given importance by
investors, but the level of savings are decided by their level of income. He states that “investors
are fully aware about the stock market and they feel that market movements also affect the
investment pattern of investors in the stock market.” The paper however remains silent on its
observation about the uneducated investors who are not aware of the market conditions, with
market trends and the stock price movements. It focuses on the factors influencing savings and
sources of information for decision making. The income level of an individual, also decide the
investment pattern of the investor. The investor’s income level does determine the type of
investment avenues the investor prefers.

 Reena Rai (2014), Factors Affecting Investors’ Decision Making Behavior In The Stock Market:
An Analytical Review, Indian Journal of Applied Research (Vol.4, Issue-9), ISSN - 2249-555X:
The paper under study aims to study the factors influencing an investors decision making behavior
on basis of related studies. It states that the various factors that influence include various
demographic factors such as gender, age, education. It is known that men are more overconfident
than women. Age plays a role on the mindset of the individual andthe propensity to take risk. It also
explains sometimes, the precautious attitude and conservatism. On the firm level the decision of
the investors depend on capital structure average pricing, political and media exposure, trend
analysis, past performance of company’s stocks, expected dividend and EPS etc. Finally, it
concludes that out of the various factors affecting behavior of investors some factors have a slight
role while some majorly impact investor behavior. The general factors being gender, age,
confidence levels, cognitive bias, riskfactors, company’s performance.

 Bing Zhu (2012), The Effects Of Macroeconomic Factors On Stock Return Of Energy Sector In
Shanghai Stock Market, International Journal of Scientific and Research Publications (Vol. 2,
Issue-11), ISSN 2250-3153: The study aims at understanding the performance of arbitrage pricing
theory (APT) in the Shanghai Stock Exchange. In finance, arbitrage pricing theory (APT) is a
general theory of asset pricing that holds that the expected return of a financial asset. The research
points out the fact that factors such as foreign reserve, exports, exchange rates, and unemployment
rate have an impact on the returns of energy sector. As the foreign reserve increases by 1 point, the
stock return of energy sector increases by 2.142004. This shows that foreign reserves have a
positive direct impact on the returns of energy sector.

 Domenico Celenza and Fabrizio Rossi (2012), The Relationship Between Intellectual Capital And
Stock Market Performance: Empirical Evidence From Italy, Journal of Modern Accounting and
Auditing (Vol. 8, Issue-11), ISSN 1548-6583:.This study aims at providing a relation between the
intellectual capital (IC) and returns of a company. It also aims at evaluating the value of IC.  The
accounting records are still incomplete in spite of the regulatory accounting standard. It is limited
in transmitting information that is slowly reflected in the prices of securities of listed companies to
the stock market.  As the information arrives into the market, it becomes old. Compared to the
degree of circulation of information in the market, the financial indicators appear to be static.  The
beta factor does not explain the market value of firms and changes in stock prices. The conclusions
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 stand true as, the financial statements, made at the end of the year; fail to inform the value of the
firm. The speculation in the market also affects the investor’s sentiment. The beta index indicates
the systematic risks associated with the stocks and fails to elaborate the reason for changes in
stock prices and market value of firms.

 Kaushal A. Bhatt (2013), Investment and Trading Pattern of Individuals Dealing in Stock Market,
The SIJ Transactions on Industrial, Financial & Business Management (IFBM) (Vol.1, Issue-02),
ISSN: 2321 – 242X: The paper aims at studying the literacy and awareness of capital markets
among investors regarding various investment avenues. To find and identify segments preferred
more by the people and the influencing force behind the decision making, while investing in
currently available options including stock markets. It concludes that investors are moving to new
investment avenues such as equity market, mutualfunds, bonds, and others like gold, land etc. This
is due to the decreasing trend of bank rates. This also increases the scope of business for the
investment companies. The investors are also risk sensitive. They want more safety and security.
The stock markets have become very popular due to high rate of return but due to uncertainty and
risk many people do not invest in equity markets. This stands true due to the lack of stability in the
current market scenarios. Therisk related to investment also defines the amount invested by people
in the particular stock. The factors like age, occupation and income level are key factors in
investment decision making of people. The other major factors being considered were market
scenario, risk involved and other investment opportunities.

 Geetika Batra (2013), Study Of Investment Advice To Retirement Plan Partakers In India, Journal
of Business Management & Social Sciences Research (JBM&SSR) (Vol.2, Issue- 08), ISSN No:
2319-5614: Investor need to think apart from public institution to private sector players. As they
don’t have any other source of income so if the investment plans fails, it would be disastrous on
the savings front and logically, on the financial planning front. However, if one starts investment
early, then the risk to reward ratio would be very high. Hence one should remain substantially
committed to stock during this earning period.

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 RESEARCH METHODOLOGY

Research methodology is the specific procedures or techniques used to identify, select, process, and analyze
information about a topic. In a research paper, the methodology section allows the reader to critically
evaluate a study’s overall validity and reliability. The methodology section answers two main questions:
How was the data collected or generated? How was it analyzed? It is a way to systematically solve the
research problem. It may be understood as a science of studying how research is done systematically. In
fact, research is art of scientific investigation. In that various steps, those are generally adopted by
researcher in studying his problem along with the logic behind them. “The procedures by which
researchers go about their work of describing, explaining and predicting phenomenon are called
methodolody.”

General Classification of Types of Research Methods

Types of research methods can be broadly divided into two quantitative and qualitative categories.

Quantitative research “describes, infers, and resolves problems using numbers. Emphasis is placed on
the collection of numerical data, the summary of those data and the drawing of inferences from the data.”

Qualitative research, on the other hand, is based on words, feelings, emotions, sounds and other non-
numerical and unquantifiable elements. It has been noted that “information is considered qualitative in
nature if it cannot be analyzed by means of mathematical techniques. This characteristic may also mean
that an incident does not take place often enough to allow reliabledata to be collected.”

Types of Research Methods According to Nature of the Study

Types of the research methods according to the nature of research can be divided into two groups:
descriptive and analytical. Descriptive research usually involves surveys and studies that aim to identify
the facts. In other words, descriptive research mainly deals with the “description of the state of affairs as
it is at present”, and there is no control over variables in descriptive research. Analytical research, on the
other hand, is fundamentally different in a way that “the researcher has to use facts or information already
available and analyze these in order to make a critical evaluation of the material”.

Types of Research Methods According to the Purpose of the Study

According to the purpose of the study, types of research methods can be divided into two categories:
applied research and fundamental research. Applied research is also referred to as an action research, and
the fundamental research is sometimes called basic or pure research. The table below summarizes the
main differences between applied research and fundamental research. Similarities between applied and
fundamental (basic) research relate to the adoption of a systematic and scientific procedure to conduct the
study.

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 Applied Research Fundamental Research

 Tries to eliminate the theory by  Aims to solve a problem by adding to the field
adding to the basics of a discipline ofapplication of a discipline
 Problems are analyzed from the point  Often several disciplines work together for
of one discipline solving the problem
 Generalizations are preferred  Often researches individual cases without the
aim to generalize
 Forecasting approach is implemented  Aims to say how things can be changed

 Assumes that other variables do not  Acknowledges that other variables are constant
change by changing

 Reports are compiled in a language of  Reports are compiled in a common language

technical language of discipline

Findings Related To Demographics Of The Investors

Age

Majority (47.58%) of the investors under study fall in the category of 25-40 years. This indicates that
Generation Y or Millennial investors are highly active in the stock markets. The reason could be due to
their current steady income source which they would like to grow. Their basic aim would be to grow their
investments in order to meet their future money requirements.

Gender

It has been observed that 76.08% of the investors who buy and sell shares are males and only 23.92% of
the investors are female. This indicates that mostly males are active in the stock markets in India. This
could be attributed to the fact that in our country mostly money matters pertain to the males of the house.
The males in the families are the ones who are mostly involved when it comes to planning the financial
matters of the house, working with the incomes and expenditures and making provisioning for the future
requirements.

Marital Status

57.76% of the investors are married who indulge in buying and selling of shares in the stock markets. As
seen earlier, since most the investors fall in the age of 27-40, the people are usually married at this age.
Moreover the married investors have a family to rare and require more funds to meet their expenses.
Educational Background It has been found that 72.52% of the total investors under study have attained
their Post Graduate degrees of Professional degrees. It has been seen that most of the investors are
educated and very few have less than secondary school education. This shows that the educated investors
have more interest in stock markets. This could be the fact that Educated investors can get the knowledge
about the company fundamentals, can evaluate the stocks and shares, find out which is the more suitable
in terms of ROI. Also they have a better understanding of risk and reward scenario. Also the educated
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investors can take decisions by comparing the various options of investment schemes which are available
to them for growing their capital and earning fair and reasonable returns.

Occupational Status

It is found that of 55.47% of the respondents are salaried people out of the investors under inspection.
This shows that the people with a regular source of income are more involved in stock markets. The
salaried people do not require funds for sponsoring their business. They have reasonable amount of
savings after meeting the household expenses. So mostly these salaried people invest in equity markets
trying to grow their money and looking for fair returns which could be used in future. On the other hand
only 30.03% of the entrepreneurs invest in equity markets which could be due to their requirement for
money for funding their own business and ventures. So their contribution to the stock market becomes
limited.

Employment Sector

It has been observed that 65.39% of the investors employed in private sector are involved in purchasing
and selling shares and stocks. This depicts the contribution of the the private sector in mobilizing funds in
the economy. Since liberalization it has been seen that the contribution of the private sector in
employment and income generation, has drastically increased. It has been a driving factor creating growth
in the Indian continent. The funds generated in the private sector are invested in stock markets which
again results into further growth and income creation.

Family Size

The researcher has found that 53.44% of the investors have a family size of 4 to 6 people. This shows that
the investors have a family to support and run the household, to bear their expenses. With the limited
sources of income and few earning members in the family, the investors have to provide for meeting
family expenditure and future contingencies. The investors with more requirement of money due to large
family sizes prefer to invest in equity for earning more returns and growing their funds.

Number of earning members in the family

It is found that out of 786 investors, 49.11% of the investors have 2 members who earn in the family. This
shows the incomes are limited. Moreover as seen earlier most of the investors have a family size of 4 to 6
members, only two hands earning may not suffice in meeting the expenses. So the investors in order to
earn more returns and meet the family requirements invest in equity markets.

Current Monthly Income of the family

It has been noted that out of the total investors surveyed, 61.58% of the population fall in the income
category of 100001 and above. This indicates that with such levels of income, most of the investors have
a considerable scope for savings and investments. Higher incomes will definitely lead to increased
savings and investments. This shows that there are better chances of more involvement in equity markets
with the rising levels of income.

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Monthly Income Invested

The thesis finds that 38.42 % of the investors invest between 11-20% of their monthly income. This
indicates that a good proportion of funds is parked in various investment avenues in order to increase their
capital. Also most of the investors invest 11-20% of their investments in different financial products, this
shows that the investors are greatly aware of them as well as they are quite proactive about their financial
planning also. These investors are ready to part with certain amount of their incomes to reap future gains
and enjoy them.

Preferred Investment Avenue

It has been seen that 73.3% of the total investors prefer Equity stocks as the most preferred investment
avenue. The reason could be due to the strong returns which the investors reap by investing in equity
markets. Moreover, the returns from equity markets enable the investors to beat the inflation and bear the
household expenses and provide for upcoming and unexpected situations. This if followed by 63.6% of
the total investors who prefer mutual funds. Again this could be due to high involvement of professionals
who have good idea about the markets and less day to day involvement by the investor himself.

Percentage of Investible Amount in Investment Avenue

It has been observed that 19.6% of the total investors invest around 11-20% of their investible amount
into equity and 18.8% of the investor’s park around 30 or more percentage in equity markets. This
indicates that quite a good chunk of fund is parked in equity by the active investors. 32.3% of the
investors park around 1-10% in fixed income securities which indicates that they want some secured
investment in order to meet the upheavals in life. 58.3% of the total investors do not park any funds in
Real estate which depicts that real estate is not looked as an attractive investment source because of the
illiquidity of the asset as compared to stocks and mutual funds. 44.3% of the investors invest around 1-
10% in insurance policies to find a safe bet in case of emergencies. Gold and silver investment of 1-10%
is done by 40.2% of the investors which indicate that in the country people still like to keep some part of
their investment in these precious metals.

Level of Risk Taking Capacity of the Investors

It has been found out that majority of the investors have a medium risk bearing capacity in the equity
markets. 42.49% of the investors inspected reverted stating that they are neutral when it comes to taking
risk while investing. This could be due to the reason that since most of them belong to the millennial
generation with having a family of four to six people to support and limited earning members in the
family, they have a neutral approach towards risk while making investments. 34.61% of the investors who
have a high risk bearing capacity are the ones who majorly choose equity and mutual funds over other
options of financial investments to seek high returns. In totality, most of the investors in the age bracket
of 29-40 years will have a medium to high risk appetite when it comes to financial investments.

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Findings Related To Parameters Of Investment Behavior

Years of Investment in Capital Markets

It has been observed that 44.27% of the investors have been investing since less than 3 years. They are
new investors who must have now realized the need to earn higher returns in order to sustain their
expenses. With the growing education and income level and the ease of trading and investing in capital
markets, more and more people are attracted and are now getting actively involved. 32.06% of the total
investors surveyed, have been investing for 10 and more than 10 years. They are the experienced and
seasoned investors who have been investing for a long period of time. They have more exposure to the
capital markets and have seen different phases of the capital markets. This exposure definitely affects
their investment patterns and styles.

Mode of Trade

It has been found that 60.05% of the total investors under study prefer direct online trading mode whereas
22.39% of the investors use the services of Traditional Brokers. Most of the investors are in the age group
of 29-40 who invest in stock markets , are well educated with many of them having post graduate degrees
and having good knowledge about the technology especially the internet and various software. Moreover
with the rising culture of the online trading portals provided by various Stock Broking companies and
financial firms to the retail investors have resulted in preference for direct online trading mode. This has
reduced the brokerage expense of the investors and have increased the convenience of buying and selling
shares just at the click of the button. Also with the latest trend of discount brokers young investors who
are new to the investment venture but are technologically very strong prefer these online portals mainly
for the comfort and reduced brokerage charges.

Platform of Investment

The thesis has found that 61.32% of the investors prefer to invest through both the platforms i.e. primary
markets and secondary markets. The primary markets are the platform where the corporates raise funds
from the investors through the IPOs. The secondary market is the buying and selling shares and stocks of
the listed companies through stock exchanges. Most of the investors operate through both so that they can
take the benefits of listing gains from IPOs and trading and investing in scripts which are already listed
earlier in order to gain from the price changes.

Type of Investor

The thesis have observed that 51.40% of the investors are both short and long term investors. 39.19% of
the investors are long term investors. This shows that in India mostly retail investors keep the stocks for a
reasonable period of time. This creates depth in the equity markets. Long term investors hold the shares
for a period of one year, which shows that they stay invested for a longer duration and to take benefits of
capital appreciation. Short term investors hold shares for a period of less than 1 year and try to take
benefits of the quick gains in the stock markets.

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Average Holding Period of a Stock

It has been seen that 50.64% of the investors hold stocks for a period of 1 year and above. This shows that
they do not daily buy and sell shares. They purchase the share and hold it for a period of at least one year
in order to reap the benefits of long term investment where the charges such as STT are not applicable.

Number of Scripts Invested in

The finding is that 27.23% investors invest in around 5 to 9 scripts whereas 26.97% of the investors
invest in more than 15 scripts. This shows their investment strategy. 26.97% of the investors like to
diversify by buying more number of scripts and mitigating the risk pertaining to particular stock or
industry. 25.45% hold less than 5 scripts which shows that they would like to invest in few known stocks
where probably the risk is less or are safe bets following the concentrated approach.

Type of Stock Preferred

The research has found out that 78.4% of the investors prefer buying growth stocks which enable the
investors to appreciate their capital over a period of time. The prices of these Growth stocks rise because
of the sound performance of these stocks and attractive industry growth story. The second most preferred
type of stock is the Blue chip stocks with 59.8% of the investors preferring them. These Blue chip
companies are the top companies listed on NSE and BSE and have lot of weightage on the indices.
Through their sound present and future financial performance and brand image these stocks generate
good returns. Even after tumbling down during market falls these stocks pick up quickly and increase the
wealth of the investor. Only 14% of the investors prefer speculative stocks which fit into the category of
high risk and high return stock. These move to great heights when the markets are positive but tumble
down when the markets start falling. This is so because they are not backed by sound financial growth
and management.

Preferred Sector of Investment

It has been observed that out of the investors under study, 78.60% of the investors prefer buying banking
sector stocks. Banks are the driving channels of an economy. They are the bodies through which the
money inflow and outflow takes place into the system. The banking business seems to be the lifeline of
the economy, which ultimately results into better financial performance and stock price appreciation. The
banking stocks have a banking index which serves as the benchmark of the performances of the banks.
The next preferred are the Information and Technology stocks which have seen a drastic price rise over
the decade. This is mainly due to computerization of almost everything, which leads to a great demand for
IT products. The international demand for IT services form the domestic companies have resulted into
tremendous profits which ultimately have benefitted the investors.

Amount of Investment at a time

The 58.02% of the investors invest less than 1 lakh at a time which may be due to the reason that most of
the investors are young millennial who have just started earning and have limited funds for investment.
Apart from this as seen earlier, the risk appetite is low for majority of the investors, which indicates that
the investors like to play safe by investing small amount of funds in the equity markets. Investors
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investing more than two lakh rupees at a time comprise of 21.37% of the total investors. These are
seasoned investors who have had a lot of experience in the stock markets and probably are ready to take
higher risk because of their investment experience in the capital markets.

Source of Funding

The thesis finds that 92.62% of the investors inspected employ their own funds to invest in stock markets.
This is mainly due to the reason that the young investors do not want to leverage their positions by
investing through borrowing money. This creates a risk and pressure of repaying the borrowed funds
along with the payment of interest. Moreover, it has been observed that when people invest out of their
own funds, they take limited positions in the market mainly due to the limited amount of resources. This
also saves them from overexposure in the markets which mitigates their risk and losses.

Indices Referred frequently by the Investors

The thesis observes that is 50.64% of the total investors relate to NIFTY as the benchmark index while
buying and selling shares. 42.24% of the investors refer to SENSEX as the benchmark index. The two
indices in the Indian capital markets have shown a drastic rise, which has definitely increase the wealth of
the investors in India. Moreover, these two indices have earned a great reputation in the international
markets among the stock markets indices of developing economies.

Investment Objectives of the Investors

 51.9% of the investors agreed to invest for the purpose of Retirement benefits.

 77.9% of the investors invest for the purpose of appreciating their capital.

 49.6% of the total investors surveyed invest for earning dividends which show that they are
interested in earning a regular income.

 37.9% of the investors invest for earning fast money. This indicates that less people invest for the
purpose of quick gains and are more fundamentally attached to the stock markets.

 43.5% of the investors invest for taking tax benefits

 53.2 % of the investors invest in equity markets for creating liquid assets so that they can meet the
contingencies.

 45.8% of the investors invest for providing for the education of children.

 49.6 % of the investors agree that they invest in equity as a tool for hedging against inflation

This depicts that maximum of the investors have the objective of capital appreciation. This indicates that
investors buy and sell shares mainly in order to increase their wealth.

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 Chapter 4

INVESTMENTS IN SECURITIES MARKET- AN OVERVIEW

‘‘Investing is most intelligent when it is most businesslike.’’

- Benjamin Graham

SECURITIES MARKET

Securities Market plays a dominant role in mobilizing the people’s savings. Securities markets provide
channels for reallocation of savings to investments and entrepreneurship. The individual investors
numbering millions contribute the backbone of Indian Securities market. Shares provide exciting
opportunities for making big money. This is the reason why securities market has become immensely
popular with the investing public as a form of investments.

The Securities market is a medium through which small and scattered saving of investors are directed into
productive activities of corporate enterprises. Securities market instruments are diversified with shares,
debentures and material funds which are offered to investors. They can select the suitable mode according
to their desired level of risk, return and liquidity. There are several parameters that an investor will think
before investing like return, flexibility and so on.

Investment in securities market can be made through primary or secondary market. In the primary market
corporate entities offer new securities directly to the investors and mobilize the funds needed for their
continuous liquidity to the securities by trading them. But the secondary market provides continuous
liquidity to the securities by trading them in the stock exchanges. The investors can buy or sell the
existing securities at the prevailing market prices in the stock exchange through stock brokers.

Role of Securities Market in the Economy

 Raising Capital for Business -The Stock Exchange provides companies with the facility to raise
capital for expansion through selling shares to the investing public.

 Mobilizing savings for investment - When people draw their savings and invest in shares, it leads
to a more rational allocation of resources because funds which could have been consumed or kept
in idle deposits with banks are mobilized and redirected to promote business activity with benefits
for several economic sectors such as agriculture, commerce and industry, resulting in stronger
economic growth and higher productivity levels and firms.

 Facilitating Company Growth -Companies view acquisition as an opportunity to expand product

lines, increase distribution channels hedge against volatility increase its market share or acquire
other necessary business assets. A take over bid or a merger agreement through the stock market is
one of the simplest and most common ways for a company to grow by acquisition or fusion.
 Redistribution of wealth - Stock Exchanges do not exist to redistribute wealth. However, both
casual and professional stock investors, through dividends and stock price increases that may
result in capital gains, will share in the wealth of profitable business.

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  Corporate Governance - By having a wide and varied scope of owners, companies generally tend
to improve on their management standards and efficiency in order to satisfy the demands of these
share holders and the more stringent rule for public corporation imposed by public exchange and
the government cooperators.

 Creating investment opportunities for small investors - As opposed to other business that requires
huge capital outlay, investing in shares is open to both the large and small stock investors because
a person buys the number of shares they can afford. Therefore the stock exchange provides the
opportunity for small investors to own shares of the same companies as large investors.

Investors

Talking about investments, the most prominent role is played by the people who invest by lending their
money out in various schemes as mentioned earlier. These people are largely called as Investors. The
investors are the people who willingly park their funds in various investment schemes and keep the
money flowing in the economy. This keeps the financial system alive and dynamic. If the investors hoard
the extra funds and do no lend money out in the system, the economic development of a nation will come
to a standstill. This will result into stagnant growth and ultimately the debacle of the economy. In this
thesis, the researcher has identified three types of investor segment, one is the individual investor, second
is the corporate investor and third is the institutional investor.

All the three have been explained below. Individual Investor is a person who parks his funds in various
investment schemes as per his main aim of financial investment. This individual investor can be any
common man who wants to lay his surplus money for multiplication for future requirements. Individual
investors buy or sell investments in their names. They basically belong to the retail class of clients which
can range from small scale investors to large scale investors. Their investments may range from some
thousands of rupees to lakhs and cores of rupees. Many individual investors are High Net worth investors
who buy and sell assets, but the difference is that they have a larger kitty of funds to be parked. The
individual investors are the sole decision makers of their investment choices, though they make seek the
guidance of some of the financial advisors or may be family and friends. The individual investors have
limited risk bearing capacity as they have limited source of income.

Corporate Investors are basically private and public limited companies which apart from their main
business activities are also involved in diversifying their funds in various investment schemes. Since these
companies have huge corpuses their investments are also much higher in volume and value as compared
to the individual investors. The corporate investors have high risk taking appetite so they tend to earn
better ratio of profit and loss. The smaller corporate investors usually the owners and directors of such
companies themselves look into the investment decisions. But the larger or giant corporate investors
usually have a specific division which comprises of a team of professionals to look into the investment
process and strategies. This division is generally known as the treasury division in the corporates.
Institutional Investors are professionally managed group of people who invest money collected from retail
as well as HNI class of investors and on their behalf. The corpus is collected under one kitty and the
company buys and sells various asset classes with this kitty of funds.

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These institutional investors are expected to use their knowledge and experience of investment and earn
better returns for their clients who have pooled in the money. These institutional investors comprise of
mutual funds, insurance companies, NBFC’S, sovereign funds (like SUTTI- Specified Undertaking of
Unit Trust of India), treasury department of banks, etc. These institutional investors basically buy large
chunks of assets as they have huge corpuses to dispense. Since they are involved in high volume
investments they are also the movers and shakers of the industry. This is so because their positions of buy
and sell is reflected in the prices of the assets. They have great resources for finding out the best
investment options available not only in the country but across the globe. The institutional investors are
segmented into two categories namely the Domestic Institutional investors (DII’s) and the Foreign
Institutional investors (FII’s).

Domestic Institutional investors are basically allowed to invest the corpus of funds within the domestic
territory of the country like the domestic banks, domestic mutual funds company, domestic insurance
companies, domestic pension funds etc. The Foreign Institutional investors can unlike domestic ones
invest in the various investment assets outside the country i.e. in foreign nations. The FII’s are
organizations like hedge funds, mutual funds, investment banks etc. The FII’s bring in huge money in to
the system of the nation especially the growing ones which are attractive investment avenues as they give
high returns on the capital invested. Over the years India has become one of the favorite economies where
FII’s have invested huge capital and have earned great returns. In this thesis, the researcher has focused
more on the investment perceptions and attitude of Individual investors.

The investments involve a series of steps which are performed by the investors so that their money
thrives. These steps are generally followed by the investor with utmost precaution as lot of money is
involved, also the investor wants to earn reasonable rate of returns by applying his knowledge and some
luck factor. The investment steps begins with Deciding the objective behind the investment The investors
need to chalk out the objectives behind their investment. This will enable them to get a plan of action
related to their time horizon for investments, funds requirement, risk appetite etc. The more clarity an
investor has regarding his or her financial goals the more easy it becomes to chalk out his investment
plan. This will enable the investor or may his financial advisor if any to determine a customized portfolio
which would include the combinations of various assets which would satisfy his objectives. Constructing
the Investment portfolio This step of the investment process involves the investor in deciding into which
asset class should he invest.

Here he needs to decide the ratio of how much money to be invested in debt instruments, equity,
government securities and even physical assets. Once the fund allocation is done in various asset classes
as per his objectives he now needs to decide on the various scripts or the bonds or the property available
in the markets for investment. If the investor has decided to invest in equity he needs to identify the
scripts, if he has wants to invest in debt instruments he needs to choose among various government and
corporate bonds available and if the investor wants to buy real estate he needs to choose among the
various options available like a land, building, office premise, or an apartment. Execution Once the
investor has selected his choice of assets and the options available within each asset class, he now has to
execute his plan. This execution in the investment procedure involves buying and selling the shares and
securities, bonds, real estate which he has finalized for his portfolio. This leads to the creation of his final
Investment Portfolio.

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Maintaining and Reviewing the Portfolio the investors’ job does not get over only by buying and selling
the various assets. In order to have an effective investment plan it’s very important that the investor keeps

a check on his portfolio from time to time. Definitely with passage of time, the objectives of the investor
can change, his risk appetite can change and even the need for funds can also change. This will result into
his shuffling of certain instruments on the basis of his new requirements. He also constantly needs to
monitor whether his investment are performing as per his expectation or no. If it’s not, certain changes
should be made by the investor and the deviations should be studied.

FACTORS AFFECTING INVESTMENT STEPS OF INVESTORS

While deciding on the investment and performing the various steps mentioned above, the investors
always are influenced by certain aspects which affect their choices and selection. These aspects which
constantly affects the entire procedure are explained below.

Time basically determines the period for which the investor wants to stay invested. This time period will
determine his need for money at the end of a specific period. During the life span of an individual, he
would require funds at different stages for different purpose like education, marriage or retirement. These
requirements will determine the period for which he would like to invest and will accordingly select the
investment options available.

Risk determines the risk taking appetite of an individual. Basically every individual will have a different
risk appetite which depends upon the circumstances surrounding him like the responsibility of the family,
income source, financial constraints and also his basic nature. High risk takers would select risky asset
class where the rewards are also higher whereas Low risk takers would select asset class with lower
rewards.

Returns or Rewards these talk about what and how much an investor expects when he invests in terms of
monetary gains. People who look for high returns probably may choose equity stocks whereas people
who are satisfied for moderate to low returns while assuring safety of capital may select debt instruments.

Amount for Investment the investor needs to be very clear about how much percentage of his income can
he invest after meeting for his basic necessities and other expenses for a living. This surplus of funds will
not be available to him for present use and he will have to wait for the benefits to reap.

NEED FOR INVESTMENTS

The investors invest for a reason. They have some kind of goal behind forgoing their current surplus
funds for some benefits which they may reap in the future. Apart from this every investor has a specific
purpose why he parks in money in various investment schemes. The various objectives behind
investments are explained below.

Capital Appreciation Every individual would like that his wealth grows and multiplies. This is so because
the resources of every individuals are limited but his needs and desires are unlimited. The more wealth
increases the better his lifestyle gets. With the increasing standard of living, the need for better financial
returns is must. Thus growth in personal financial position is one of the major reason behind investments.
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Earn regular incomes Certain investment tools provide a regular flow of income like investments in real
estate results into rental income, investment in equity shares results into dividend incomes, investment in
bonds results into interest income etc. These extra flow of income is welcomed by investors as it
increases their consumption patterns. Also apart from the routine salary or profits, these extra regular
incomes help in meeting contingencies.

Planning for Education and Retirement Every individual requires money at different walks of life. Firstly
needs money for fulfilling his duties towards his family like the education of his children, marriage of his
children. He also needs funds for the period when he will no more be a bread earner and will retire. At
this point in life he would need finances for daily household expenses and medical expenses.

To gain Tax Benefits Many investment schemes come with tax benefits. To save tax investors look in for
various alternatives. For eg. Public Provident Fund investment is exempted from tax under 80C clause of
taxation.

Hedging against Inflation With the rise in prices of goods and services resulting into higher cost of living,
the current income of the individuals are not sufficient to meet their daily expenses. In many cases it has
been observed that the incomes do not rise at the same rate as that of the inflation. Hence the investors
have to look at other alternatives of investment where the returns are comparatively higher to combat
inflation.

STRATEGIES AND TECHNIQUES OF INVESTMENT

The investors on the basis of their thought process, knowledge and personal goals follow certain kinds of
strategies and tactics for buying and selling investment assets. Different investors choose different
strategies. There is no best strategy and technique as such, the investors apply the one which suits them
the best. In this thesis the researcher has tried to explain the various ways in which the investors get
involved for investment process.

Fundamental Study of Investment options It basically does the SWOT analysis of the investment
alternative. Different qualitative and quantitative parameters are studied and reviewed in order to estimate
the financial position of the investment scheme and ultimately try to find out its actual worth. For
example in doing fundamentals analysis in equity markets, the investors try to evaluate the companies on
the basis of the financial details, company’s growth prospects, industry growth prospects etc. mentioned
in the financial statements of the company. By using various tools like ratio analysis the investors try to
predict the value of a particular script and make investments on that basis.

Technical Study of Investment options Investors over the past decade have started recognizing Technical
analysis as an important tool for evaluating the value of investments especially in the equity and
commodity markets. Traders and Speculators basically try to analyze the movements of the prices of
stocks and commodities over a period of time with the help of various technical charts. They try to find
patterns and garner signals about the movements in the prices of stocks and commodities. This helps them
to forecast the future prices which helps them to take investment decisions.

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Active Investment strategy In this kind of strategy the investors are personally very active and completely
involved in buying and selling investments. They are very well updated about day to day movements of
the investments e.g. equity prices. They personally study about the investment pros and cons and then
take investment decisions.

Passive Investment Strategy

In this kind of strategy, the investors are not actively involved in the investment markets. This may be
because of lack of time or knowledge about the various investment alternatives. So the investors basically
appoint financial advisors for investing on their behalf. They are professionals who practice in the
investment markets and try to fetch reasonable and fair returns or the investors eg. Fund managers.

Concentrated Strategy

In this kind of strategy the investors instead of putting money in various investment alternatives, they
focus and invest in fewer options. For example, in equity markets, the investors instead of buying many
number of shares of various sectors, buy only few high quality stocks. This helps them to increase their
wealth though the risk involved is high. But since the investors choose only few stocks they are very well
informed about the upsides of such stocks and usually the chances of downside is avoided.

Diversification Strategy

In this kind of strategy, the investor prefers to invest in various investment alternatives in order to reduce
the risk. Diversification definitely reduces risk as if one investment option underperforms, the other will
definitely outperform. This makes the portfolio balanced in growth. The returns may not be high when the
markets move in one direction but the risk reward ratio is quite favorable and stable during the
downtrend.

Market Segments

The Securities market has two interdependent and inseparable segments, namely, the new issues
(primary) market and the stock (secondary) market. The primary market provides the channel for the
creation and sale of new securities, while the secondary market deals in the securities that are issued
previously. The securities issued in the primary market are issued by public limited companies or by
government agencies. The resources in this kind of market are mobilized either through a public issue or
through a private placement route. If anybody can subscribe for the issue, it is a public issue, if the issue
is made available only to a select group of people, it is known as private placement. There are two major
types of issuers of securities—corporate entities, who issue mainly debt and equity instruments, and the
government (central as well as state), which issues debt securities (dated securities and treasury bills).

The secondary market enables participants who hold securities to adjust their holdings in response to
changes in their assessment of risks and returns. Once new securities are issued in the primary market,
they are traded in the stock (secondary) market. The secondary market operates through two mediums,
namely, the over-the-counter (OTC) market and the exchange-traded market. The OTC markets are
informal markets where trades are negotiated. Most of the trades in government securities take place in
the OTC market. All the spot trades, where securities are traded for immediate delivery and payment,
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occur in the OTC market. The other option is to trade using the infrastructure provided by the stock
exchanges. The exchanges in India follow a systematic settlement period. All the trades taking place over
a trading cycle (day = T) are settled together after a certain time (T + 2 day). The trades executed on
exchanges are cleared and settled by a clearing corporation. The clearing corporation acts as a
counterparty and guarantees settlement. A variant of the secondary market is the forward market, where
securities are traded for future delivery and payment. A variant of the forward market is the Futures and
Options market. Presently, only two exchanges in India—the National Stock Exchange of India Ltd.
(NSE) and the Bombay Stock Exchange (BSE)—provide trading in Futures and Options2.

NSE and BSE have widened the investment horizon, enabling traders for easy access to Stock market by
providing options such as Dial and Trade, Online Trading Software and Broker house. Moreover with the
introduction of Commodity trading, Gold ETF's that is investment on gold are various products available
for the investors. The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the
leading stock exchanges in India. While BSE has the distinction of being the oldest stock exchange in
Asia, NSE is the largest in the country.

Recent Scenario (2020-2021)

Indian Stock markets have seen a tremendous growth with respect to the growing number of listed
companies on the exchanges, market capitalization, volumes in trading, the increasing number of
investors in equity markets etc. Indian stock markets is currently the seventh largest stock markets in the
world. It has surpassed the stock markets of Germany, Canada and Saudi Arabia in the year 2021. The
total market capitalization of the Indian stock Markets is around dollar 2.7 trillion in the year 2021 as per
the reports published by a leading business newspaper. This is so because the indices have reached all-
time high in spite of the great ongoing pandemic which have affected the world economies to a great
extent. The lockdown across the country in March 2020, resulted into tumbling down of the India equity
markets to an all-time low. Such a huge debacle and in such a short period of time, was observed only
after the 2008 Lehman Brother Crisis. But global liquidity infusion by the foreign investors, extremely
good results ind December quarter, and the positive sentiment around the covid vaccine resulted into a
great jump in the Indian Stock Markets. This led to the SENSEX crossing 50,000 basis point and Nifty50
crossing 15000 basis point, both reaching an all-time high level.

In India out of the total population of 1.36 billion, around 3.7 percent people invest in equities market.
The number of people investing in equities is around 18 million and approximately 2 crore people invest
in mutual fund in India. This is very less as compared to China where approximately 12 percent people
invest in equities and United States of America where around 55 percent are involved in equity markets as
well as mutual funds. At present there are around 10.4 million active investors in the India who trade
majorly on the two exchanges – The BSE and NSE In terms of capital infusion, The Indian stock markets
are highly preferred avenues because of the strong and growing economy. Indian stock markets over the
years have given substantial returns to the investors across the globe. This has made the global investor’s
perspective towards Indian stock markets very positive and lucrative. In terms of regulations, the current
markets are highly governed by the norms of SEBI. Compliance procedure are made more stringent in
order to reduce any kind of malpractices in the stock markets.

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Indian Stock Exchanges

The Indian stock Exchanges provide a great platform through which the savings from households can be
channelized to the large scale industries. At Present there are two main exchanges The Bombay Stock
Exchange and the National Stock Exchange. Both the stock exchanges have seen a drastic evolution since
their inception. From the time of independence to the year 2000, there were approximately 24 regional
stock exchanges in India. But due to the gradual fading of volumes on these exchanges, they all had a
natural death.

Bombay Stock Exchange

Bombay Stock Exchange (BSE LTD) The Bombay Stock exchange was established before the
independence of India as The Native Stock and Shares Brokers’ Association in the year 1875 by a small
body of stock brokers. It is one of the oldest and earliest stock exchanges in India as well as the world
around 145 years old. It provides a great platform for efficient and transparent trading of various financial
instruments. There are around 5000 Indian companies listed on the BSE. BSE SENSEX is the main index
which has top 30 listed companies. Over the years it has seen a great evolution from the traditional floor
trading to the present computer based trading. With the
advancement in technology, BSE India has launched its mobile
application which facilitates the investors to trade in stocks on
their mobile phones. All the necessary information regarding the
stock prices, value of index, market updates etc. are all
available through these applications.

National Stock Exchange

National Stock Exchange (NSE LTD) The National Stock Exchange was established in the year 1992 but
formally became operational in the year 1993. NSE was an exchange which had modern trading facilities
like the demat electronic trading. National Stock exchange came into existence many years later after
Bombay Stock exchange, still it became one of the largest stock exchange. There are around 2000
companies listed on NSE. NSE has taken over BSE in terms of daily volumes. NSE has NIFTY as its
benchmark index which is composed of top 50 companies from different sectors. National Stock
Exchange has also introduced mobile application which enables investors to trade easily from anywhere
and any place on their mobiles.

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Institutions in Equity Markets

A stock market is a platform which runs with the help of various intermediaries performing different roles
for the smooth functioning of the trading activities. These intermediaries are institutional bodies like the
regulators, stock brokers, depositories and the clearing corporations. Securities and Exchange Board of
India (SEBI) It is the stock market regulator in our country which basically sets rules and regulations for
trading in capital markets. SEBI was recognized in the year 1992, under the SEBI’s Act. Its main aim is
to safeguard the interest of common retail investors across the country. Over the years the finance
ministry has allocated more powers to SEBI to catch hold and punish the manipulators and wrong doers
in the securities market. This has led to the implementation of stringent norms to protect the common
investors.

Depositories

It is like an account wherein the securities are parked in the dematerialized form. There are two
depositories in India namely CDSL and NSDL. CDSL is Central Depository Services Limited and NSDL
is National Securities Depository Limited. CDSL is promoted by BSE and NSDL is promoted by NSE.
CDSL is a listed entity on NSE. As of the current period, NSDL is not a listed entity. These depositories
act like a custodian to the securities held by the investors. The clients open a demat account with the
depository participants where in all the shares that are bought and sold are kept. Depository Participant
the Depository Participants can be any organization like a stock broker, a bank , a private limited
company, professional custodians like IFLS etc . They register themselves under CDSL and NSDL and
take their membership.

Once the membership is approved they open the demat accounts of investors where they keep a track of
all the shares bought and sold. Stock broker A stock Broker is a middleman who buys and sells securities
on behalf of the investors. A stock Broker is a registered member of the stock exchanges and with SEBI.
His main source of income is the commission or the brokerage which he charges from his investor clients

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who buy and sell securities through him. A Stock Broker can be an individual or a private company. The
Stock Broker industry has also seen a transition from Traditional Brokers to the Full Service Brokers and
to the Modern day Discount Brokers. The traditional brokers active from the days of open outcry system
have seen and dealt with lot of developments in the trading mechanism. They very well adopted with
electronic and computer trading. Along with this the traditional Brokers also started providing advisory
services.

Various giant corporates ICICI BANK, HDFC BANK, KOTAK BANK, SBI Capital Markets, IDBI
Bank, also entered the Brokerage industry in India. They formed the new category of Brokers which are
known as the Full Service Brokers. They apart from providing basic trading facilities also provide
services of online trading facility, demat account, Equity research, NBFC funding etc. This resulted into
the winding up of various small proprietary brokers who could not sustain the competition. The concept
Of Discount Brokers is the new dimension in this Industry where the online portals are given to investors
for buying and selling of shares with zero brokerage facility. Companies like Zerodha, 5 paise.com are the
upcoming Discount brokers who have recently captured a large market share in the broking industry.
They do not provide any services like human assistance, research facilities, and advisory services. They
charge minimal brokerage for the execution of trades which has resulted into catering to high number of
retail clients.

Sub Brokers

They are basically individuals or private companies who are the agents of the main brokers registered
with BSE and NSE. They help the main brokers in expanding the business by increasing the client base.
They work on the model of commission sharing business with the main broker. They provide the same
services as that of the main broker. Apart from the above explained institutions in equity market markets
there are many other intermediaries existing and providing various type of services. They are
underwriters, custodians, registrars, bankers etc.

STOCK MARKET INDICES

A stock market index acts as an indicator of and represents the particular stock exchange. A stock market
index basically represents the value of certain corporates and firms listed on the stock exchange and
included in that particular index. In India there are broadly two significant indices namely the SENSEX
and NIFTY.

BSE SENSEX

This is the standard index of Bombay Stock Exchange which is currently also known as the S&P BSE
SENSEX. The BSE has tied up with Standard and Poor which is a global rating agency. This helps BSE
in rating its indices and the companies in the indices as per global rating standards. The SENSEX stands
for sensitivity index. The SENSEX comprises of top 30 companies listed on BSE. The SENSEX is used
as a great point of reference while picking up stocks. This helps in comparing how the stock is performing
as compared to the benchmark point.
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NIFTY

This is the benchmark index of National Stock Exchange. NIFTY means National Stock exchange Fifty.
There are 50 top companies listed on NIFTY. The movement in NIFTY basically indicates how the whole
markets are performing. The ups and down in the NIFTY basically helps investors to identify patterns in
the market movements and pick up stocks. Also the investor sentiment also changes with the changes in
NIFTY.

Apart from the above two major indices in India, there are other indices also which reflect the movements
of various categories of stocks, sector specific stocks, stocks of companies of different sizes etc. BSE 100
comprises of top 100 companies listed on BSE. BSE MID CAP and BSE SMALL CAP reflect the pool of
companies which are medium sized and small sized on the basis of their market capitalization. There are
certain sectoral indices like CNX IT which is a tie up between CRISIL and NSE. It’s a sectoral index for
IT companies. Other sectoral indices are NIFTY Auto Index, NIFTY Bank index, NIFTY healthcare
index, NIFTY FMCG index etc. All these indices reflect the performance of the companies of specific
sectors which are listed on respective indices. Stock market indices are very significant as it gives
direction to the investors for investments and trade.

PLATFORM FOR EQUITY INVESTMENT

There are two broad platforms by which an investor can invest in the Equity Markets. They are Primary
Markets and Secondary markets. Both the markets are guided and regulated by SEBI. Both have been
explained below in this thesis.

Primary Markets

In primary markets the new companies issue their shares and securities. Basically the companies who
want to raise funds for running of their mammoth businesses access the primary markets. They issue fresh
new shares to the public in return for the money they get from the public. This is done through the
medium of primary markets. That is why primary markets are also known as the markets of New Issue.
The new equity shares are issued and listed for the first time. These new issue of shares and securities is
called IPO – Initial Public Offering. Basically the primary markets are a great platform for mobilizing
funds from investors to the corporates. The corporates can use these funds for starting new projects and
business, for expansion and modernization of operations etc. There are various ways by which the
companies can issue new securities like right issue, offer through red hearing prospectus, offer for sale,
private placements etc. Over the past few years India has seen an exponential increase in the IPO markets.

Secondary Markets

The secondary markets involves buying and selling of shares which are issued in the primary markets.
The secondary markets are nothing but the stock market or the stock exchanges. In secondary markets
only the ownership of the stocks gets transferred from one investor to another. The Company who had
issued shares earlier in the primary market does not have any role to play in the trading of these stocks.
The prices of the stocks in the secondary markets are determined by the supply and demand of these
stocks. The investors who could not get shares and stocks in the primary market can buy and sell stocks
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easily in the secondary market. Majority of the economies funds are mobilized through the stock markets,
which results into economic growth.

MARKET PARTICIPANTS IN EQUITY MARKETS

There are various categories of the market participants in the Equity markets. The have different aims of
investments and nature of investment. They are explained in this thesis as follows.

Long Term Investors

As per the guidelines of government of India, long term investors are those investors who buy shares and
hold them for at least more than 365 days. These investors enjoy certain tax benefits on their long term
investments. They are required to pay ten percent tax on their capital gains. They are exempted from
paying income tax.

Short Term Investors

The guidelines of government of India states that any investor who buys shares and holds them for more
than three months and less than on year are called short term investors. The short term investors are
required to pay fifteen percent tax on the capital gains. They are also exempted from income tax.

Day Traders

They are those market participants in the equity markets who buy and sell shares on daily basis i.e. buy
and sell shares on the same day. These traders do not take delivery of shares. They square of their buy and
sell position at the end of the trading day. Day traders work on the concept of get quick money. They
encounter high risks and sometimes even land up making huge losses.

Speculators

These market participants are generally large investors or ultra HNI investors who have great amount of
liquidity to be infused in to the markets. They can also be termed as the movers and shakers in the equity
markets. Since they accumulate large quantity of stocks on the basis of some undisclosed information or
news, they have the ability to drive the prices at unprecedented levels. They sell these stocks at higher
prices and make huge profits. The strategies that the speculators apply creates bubbles in the stock
markets, which sometimes results into huge crashes in the markets

Arbitrage Traders

These market participants hunt for spread between the cash and the derivative segment. Due to such
spread i.e. difference in the prices, they buy on one platform for eg on cash basis and sell n other platform
i.e. derivative segment. They look for returns in percentage terms because of the differential pricing of the
same stock on different platforms. The arbitrage traders are involved in a very low risk activity.

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Investors Behavior

The investor’s attitude and perception towards the various investments tools is one of the burning issues
in the field of Finance. Over the year’s lot of researchers have investigated into this stream to study about
the investment behavior of the investors. The investors buy and sell stock on the basis of various factors
which may appear to be logical as well as illogical. The researchers have tried to gage this complicated
process of how they invest and what leads them in taking a particular decision. Two broad theories of
Finance drives the field of investor behavior, they are the Classical Finance theory and the Behavioral
Finance theory.

Both the theories work on certain assumptions and have derived a model on which the investment
decisions are based. The researchers in the past have probed into each which have formed the base for
both the theories in the financial markets. In this thesis, the researcher has tried to explain both the
contrasting theories and have tried to analyze that which of these theories have more impact on their
investment conduct especially among the Indian Investors.

Classical Finance Theory

The classical finance theory is built on the pillar of Irrationality. The theory assumes that every investor
behaves in a logical manner and invests only after calculating the risk and reward associated with each
investment avenue. This results into better gains in fact maximum gains and mitigates risk involved in the
investments. The CAPM – capital asset pricing model is one such concept based on logic and rationality
which was given by famous financial economist William Sharpe.

The CAPM model aids investors to measure the risk involved in investment of various stocks and what
should be the ideal return which they can earn. The CAPM proposes the idea of a well-diversified
portfolio of stocks that will help investors to reduce the company or the stock specific risk and will help
in earning fair returns due to taking up of market related risks. The concept of Efficient market hypothesis
is another notion based on rational behavior of an individual and was devised by Eugene Fama. This
concept states that all the investors think rationally and logically, all the relevant information is easily
accessible in the markets and the prices of shares and stocks reflects the information available and are
fairly priced. Hence it becomes difficult for investors to earn extraordinary profits. The investors can earn
high returns only when they purchase shares on dips or risky shares.

Behavioral Finance

The new theoretical framework of Behavioral Finance was pioneered by Daniel Kahneman and Amos
Tversky. For many years together the traditional theories of finance were applied for dealing in stocks by
the investors which was based on the presupposition of rational behavior. But in spite of this, the markets
did not move in the desired manner. Investors did not maximize profits and landed up making losses in
spite of the relevant information not being ignored. The researchers then realized that apart from the idea
of efficient markets, there was something more which affected the investor decision.

The investor’s mood, emotions, anxiety, fear, materialism etc. also led them to behave in a certain manner
while buying and selling shares. The researchers then incorporated the science of psychology in the
theories of finance and economics which gave birth to a new stream in the field of Finance known as the
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Behavioral Finance.

The main aim of Behavioral Finance is to build a better model in finance by integrating psychology with
the traditional finance theories. The theories of Behavioral finance explained the reason for the difference
between the actual market movements and the desired markets movements. The behavioral finance
propagates that the investors are prone to certain psychological biases which affect the decisions of
investors.

This depicts that the investors do not always behave in a logical and rational manner and are susceptible
to certain kind of mood swings, rage and anxiety, avarice etc. This is why the anomalies are observed in
the markets and they couldn’t be explained by traditional theories. Behavioral finance has evolved as a
topic of great research over the years. Many researchers have tried to investigate into this filed by giving
various angles. Behavioral finance have probed into the mindset of the individuals while buying and
selling stocks. It basically tries to analyze what and how the investors experience in a particular scenario
and what leads them into taking a particular decision. Behavioral finance talks about certain cognitive
biases which affects the investor’s decision making.

They are broadly classified under two heads namely the HEURISTICS and the PROSPECT THEORY.

Heuristics

Daniel Kahneman, Slovic and Amos Tversky propagated that when an individual faces a complex and
uncertain situation and he has to make a decision in that situation he resorts to certain kind of heuristics
which makes this herculean task of decision making simple and easy. Heuristics are basically the set rules
or the thumb rules which individuals use to make judgments when they are faced with risk and
uncertainty. The individuals cling to these collection of rules which they have made from their
experiences in the past. The individuals not only reduce their complexity and confusion but also reduce
their decision making time when they utilize these shortcuts. Though these heuristics reduce the mental
pressure of making decisions in intrigued situations but they can also lead to investors landing up in
making investment errors. The researcher have explained different types of heuristics which investors use
while making investments decisions.

 Representativeness It is that heuristics where investors take a decision on the basis of stereotypes.
They find out a similar comparable situation and take decisions on the basis of that situation. They
basically rely on how the things have been in the past ignoring any kind of recent information.
They may tend to buy a stock which has performed fairly well in the past thinking that it will
again outweigh in the future. Representativeness is the idea that the investors form some notions
on the basis of some similar incidence, item and consider a small part of a data set to [predict
future of a larger picture or incidence.

 Availability Bias As per the concept of availability bias, the investors make investment decisions
on the information that they are able to recall easily or that is easily available in the market and
latest. The investors do not rely on any kind of historical data or past information for buying and
selling of shares. They trade on the basis of the current news or recent information which clings to
their minds. Though they are quickly able to take decisions, but these decisions sometime turn out
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 to be erratic as they are irrational. For eg an investor may invest in a script which just announced a
dividend and will not consider the past performance of that script or the past percentage returns
which the script yielded.

 Anchoring As per the concept of anchoring the investor buys and sells shares on the basis of some
benchmark point or reference point. For e.g. if an investor is looking for buying a particular script
he will look at the 52 week low price of the script. This basically gives him something to cling to
and make a decision. But this results into illogical behavior as the investor ignores any kind of
latest or important information which is available to him.

 Overconfidence The concept of overconfidence talks about an investor’s overestimation of his

knowledge, skill set and capabilities. An investor is said to be overconfidence when he feels that
he has the best ability to pick the right stock at the right price and at the right time. The
overconfidence bias makes an investor ignore the relevant and significant information about the
stock as he has too much conviction about his own information and expertise. The investor’s
excessive boasting about his skills can sometimes lead to overtrading and risky investment
decisions and ultimately huge losses.

 Ambiguity aversion The concept of ambiguity aversion depicts that the investors avoid taking
decisions where there is no clarity or they are doubtful about a particular script. The investors
avoid investing in those stocks where they do not have sufficient and relevant information. They
prefer to invest in those companies whose businesses are known to them and they have good
knowledge about that industry. They cling to the concept of familiarity at the time of choosing
stocks for investment.

Prospect Theory

Daniel Kahneman and Amos Tversky formulated the concept of Prospect theory in the study of
Behavioral finance. They propounded the Prospect theory by engulfing the principles of psychology and
embracing them with finance, economics and mathematics. The theory is based on the notion that
individuals do not behave in a logical and rational manner as elicited by the traditional theories. The
prospect theory was developed in order to understand the deviances in the market movements in spite of
the investors acting sensible. This theory basically is devised for making decisions when the situations are

risky and uncertain. Kahneman and Tversky propagated that the investors do not like to bear risk and they
are more concerned towards losing money than earning money. The investors also dislike loss and prefer
to avoid loss than earning gains. The prospect theory also states that individuals behave in a different way
even though the situations are similar, it is just they are presented in different ways like a win situation or
a lose situation. The investors calculate loss and gains in reference to a certain benchmark but do not
consider the final value of wealth. The major attributes of prospect theory are Loss aversion, Risk
aversion and mental accounting.

Loss Aversion

This concept emphasizes that Individuals are more concerned about the losses than profits. Many
investors are twice more bothered by a loss than be happy and rejoice from an equivalent profit. The
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investors are more susceptible to risk and are determined not to incur any kind of loss while buying and
selling of stocks. Investors try to book loss in the hope that the markets and particularly the stock will
perform better in the future and ultimately land up incurring huge capital loss. The concept of disposition
effect in Behavioral finance evolves from the loss aversion. The investors keep waiting for the right
opportunity and in the mean while land up selling the profitable stocks early and sit with the loss making
stocks for long period of time.

Regret Aversion

Regret is the feeling which people experience after they make mistakes. In Behavioral finance theories
the concept of regret aversion states that the investors feel sorry and repent for their incorrect investment
choices when their values erode. The investor keeps sitting with the losing positions with a hope of rise in
future and sells the winning position in the market with the fear of a fall in future in order to shy away
from the feeling of regret.

Mental Accounting

The concept of mental accounting helps investors evaluate their financial transactions and treat them as
per their mental state of mind. They try to organize and plan their portfolios in separate mental accounts.
The investors consider their money in different accounts separately on the criteria of holder of account,
the main objective behind the money in that account, or the source from which the money in that account
comes from. Investors take more risk with the money earned outside their regular income sources. For
example an investor would invest the money received as a bonus in a risky asset rather than his regular
salary.

Herding

The investor behavior is highly vulnerable to the concept of herding. Herding means following people or
imitating people. This is one of the psychological biases which affects the decisions of the investors. The
investors buy and sell shares when their friends, family colleagues do the same thing. The investors do
not study the stock , neither does he evaluates the information available , but instead just blindly follows
other people and invests. This sometimes results into wrong selection of stocks and huge losses. Market
Factors These are the elements which are external to the investor but make a deep impact when they
invest. The environment which surrounds the investor have several variables which affect the individual’s
selection, strategy and behavior when he buys and sells shares and stocks. These factors can be the
economic factors surrounding him or the company specific factors which affect his selection of shares.
The economic factors can be the inflation, the GDP, the interest rates etc. in the country. The company
specific factors can be the company’s reputation, the goodwill of the company’s management, the
financial stability of the company, the company’s future growth potential. This thesis has try to study that
the company specific factors have an impact on the investors share selection and trading activity or not.

Problem On Hand

The development of any nation is possible when it attains economic prosperity. This economic prosperity
is possible when there is growth and demand in the economy. For this growth and demand it is mandatory
that the citizens’ income and revenues are deployed in such a way that they multiply and create additional
revenues for utilization. This deployment of incomes and revenues is possible only through investments
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which is will determine the consumption and ultimately the growth. The best way of investments in any
nation is to park funds in the financial markets of a country. The financial markets if are systematic and
burgeoning gives good returns to the investors which ultimately raises their consumption patterns. India is
a growing nation with lot of consumption demand.

The prosperity of India’s economy is dependent on the way the money is channelized into various
alternatives which ends up on to the big picture of economic development and growth. Though the
financial markets in India have shown a tremendous growth, still they lag behind various developed
nations. This is so because in spite of the increased developments in the financial markets and specifically
equity markets, the participation in the Indian continent is very low. India is one of the highly populated
country with a population of over 1.3 billion and has one of the highest savings percentage in the
household income of around thirty percent. In spite of this the number of people involved in equity
markets is quite low. As per the latest data available, only 3.7 percent of the Indian population is involved
in equities market. India is way behind when it comes to equity markets investments as compared to its
counterparts like China and Singapore.

For the expansion of India’s economy, it is very necessary that more and more people participate in the
equity markets which is an excellent source of deploying savings in the most productive manner. The
earlier studies have shown that people shy away from investing in equities in India because of varied
reasons particularly they are skeptical about the movements in the markets. They are dubious about their
financial goals meeting with the movements in the share markets as the markets do not always move as
per the expectation. Over the years the investors have seen that their investment strategy by incorporating
all the relevant information about the markets and stocks have not met their calculations. So the
researcher has felt that the field of Behavioral finance is a must to identify the movements in the markets.
In this thesis, the researcher has tried to identify the behavioral biases which have been laid down earlier
and are active and persistently affecting the investor’s strategy and choice of investment. This is very
important in order to increase the number of market participants in the country. This is only possible if we
try to study the investors mind set behind their investments.

This will give them a broader and clearer picture of what the investor feels and thinks while making
investments. This is so because the financial advisors, Brokers, fund managers and various other financial
bodies can recommend and suggest products which suits their state of mind, their beliefs, goals and
overall personal profile. This will give an impetus to the investments in India which mainly will make
India run on the track of multifold progress and success both economically and socially. In totality, the
main problem in hand is to increase the participation rate in the Indian equities market by trying to study
the mindset of investors which affects their investment conduct, strategies and decisions.

HYPOTHESIS INTRODUCTION

Hypothesis is the principal component in statistical analysis. Inferential statistics is done in behavioral
researches so that the researcher can study the samples and make conclusions about the population on the
whole. This method in which we choose samples to analyze more about the features of a population is
known as hypothesis testing.

Meaning

A hypothesis is an assumption, a statement, a speculation or a generalization which we make about the

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topic of interest which we want to analyze. It is basically a predictive statement which we would like to
validate. The researcher tries to draft or formulate a proposition which needs to be tested empirically. The
research hypothesis is an introductory statement, logical reasoning, logical predictions, and predictable
learning about the relationship between two or more variants that we expect to occur in our study. The
hypothesis which is a formalized statement about our research objectives and research questions should
clearly elucidate what would be done during our study. The hypothesis need not be always true or correct.
While the hypothesis estimates what researchers wish to see, the purpose of the study is to determine if
this hypothesis is valid or invalid. In their experiment, researchers can explore a variety of other factors to
determine which may contribute to the outcome.

List Of Important Points To Be Considered While Drafting Hypothesis

The researcher should formulate clear and accurate hypothesis  The hypothesis drafted should be such
that it is possible to empirically test it.  The relationship between the variables under study should be
clearly stated by the hypothesis.  The researcher should use simple words to draft the hypothesis so that
it can be clearly understood.  The researcher should draft the hypothesis keeping some objective in
mind.

Types Of Hypothesis

There are basically 2 categories of hypothesis Research Hypothesis The research hypothesis is the
solution to the problem is being investigated. It is a vision that motivates a researcher to achieve it future
action plan. In research, the researcher decides whether it is theirs or not reasoning can be supported by
scientific research. Statistical Hypothesis It is a hypothesis which is claimed about and population and
would like to validate it by studying the sample drawn. They are formulated in such a manner that
statistical tools and techniques can be used to test their validation.

Types Of Stastitical Hypothesis

The statistical hypothesis can be categorized as Null Hypothesis and Alternate Hypothesis. Null
Hypothesis: The Null hypothesis is denoted by HO. The null hypothesis is the hypothesis which is
mentions that there is no difference between the population parameter and the sample statistics. It also
states that there is no difference between two populations. The null hypothesis is tested and validated. We
accept and reject the null hypothesis. Alternate Hypothesis: The Alternate hypothesis is denoted by H1.

The Alternate hypothesis mentions that the population parameters are significantly different from that
sample statistics. It is the opposite of Null hypothesis. When the null hypothesis holds true, the alternate
is rejected and when the null hypothesis is false the alternate is accepted. Example of Null and alternate
hypothesis Null Hypothesis: the defendant is innocent Alternate Hypothesis: the defendant is guilty

Testing The Hypothesis

The following steps are involved in testing the hypothesis  The researcher first states the hypothesis and
decides whether it is a one tail or a two tailed test. He also decides a suitable level of significance.  The
next step is to decide which test is more suitable like the t or z test to determine the critical values for the
chosen significance level.  Compute the standard error of the sample statistic and then calculate the

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standardized value.  Then the researcher compares the standardized value to the critical value to test the
hypothesis and the results are then interpreted.

Level Of Significance

The level of significance is a very crucial concept in the hypothesis testing. It represents that area in the
normal curve where the population parameter and sample statistics are significantly different from each
other. The level of significance can be 5%, 10% etc. depending upon the suitability of study. The level of
significance is denoted by alpha (α).

Hypothesis For The Study

In order to test the objectives, the following four hypothesis are formulated:

 Ho: ‘The components of investment decisions’ and the behavioral biases of Investors are
independent of each other.
 H1:‘The components of investment decisions’ and the behavioral biases of Investors are not
independent.

 Ho: Use of technology have no significant effect on investment decisions of investors in equity
markets. H1: Use of technology have a significant effect on investment decisions of investors in
equity markets.

 Ho: There is no significant difference between the means of all behavioral biases of the Investors
while Investing in Equity Markets.
 H1: There is a significant difference between the means of all behavioral biases of the Investors
while Investing in Equity Markets.

 Ho: Impact of Unexpected events and the investment behavior of the investors are independent of
each other.
 H1: Impact of Unexpected events and the investment behavior of the investors are not
independent of each other

Chapter 5

PERCEPTION OF INVESTORS ON PRE- INVESTMENT PATTERN IN

SECURITIES MARKET

Findings Pertaining To The Underlying Factors About The Company That Are Important To The
Investors While Investing.

Investors look for various factors about a company while parking funds through its equity. The thesis has
conducted a factor analysis to identify the most important attributes which the investors or shareholders
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consider while investing in equity stocks. The factor analysis was conducted using 20 initial variables
identified from the literature review of the various articles read. The method used for extraction of factors
was principal component analysis method and the technique used for rotation was Varimax method. The
method of extracting components was based on the concept of Eigen values, where only those factors
which had an Eigen value of 1 or more were finally extracted. The findings of the results are as under The
following 4 factors have been extracted using the factor analysis.

Factor 1 :

Future Growth Prospects I invest on the basis of future projections, I invest on the basis of the growth of
the industry of the company, I invest on the basis of policies of the government about the company’s
industry The above list of variables included in the first factor indicates the most important group of
variables which explain about 42.549% of the variance are related to Future growth Prospects factor. The
above factor indicates that the bright future and brighter growth of the company are mainly considered by
the investors while they buy or sell a particular script.

Factor 2 :

Strong Financial Performance I invest on the basis of profits of the company I invest on the basis of
dividend rate of the company The above set of variables indicate that investors and shareholders look for
the financial performance of the company before they invest in it. Financial soundness depicts that the
investors will benefit might be in terms of capital appreciation through stock price moving upwards or
may be from getting dividends which proves to be an additional source of income. A company who is
performing well and has sound monetary position can only declare dividends and walk on the path of

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profits which ultimately will be honored by the market participants.

Factor 3 :

Recommendation by the Market Participants I invest on the basis of recommendation by a financial

advisor, research analyst or a stock broker. I invest on the basis of recommendation by my family, friend
or colleague. The above list of variables indicates that many a times the investors buy and sell shares
when it is prescribed by market participants. These markets participants can be friends, family, or
professional advisors or stock brokers who are actively involved in the markets. The investor feels that
since these market participants are active, regular and knowledgeable investors, he tends to invest when
they recommend a particular stock. This has been highly observed in the Indian Equity Markets.

Factor 4 :

Company Information I invest on the basis of information provided in the prospectus of the company The
above variable indicates that the investors prefer those stocks whose complete information is available
from the company’s end. The details about the company’s business, the financial information, the future
growth plans all are very well penned in the prospectus of the company. Thus the investor invests as he
feels that he knows most of the things about the company and there is no ambiguity about it.

Findings Pertaining To The Influence Of Unexpected Events On The Investment Behavior Of The
Investors.

Equity markets have always reacted to the sudden and unexpected events which have occurred over the
years. Dramatic ups and downs have been witnessed in the equity markets because of such unanticipated
occurrences which have definitely affected the investor behavior. Over the past 5 years two major events
demonetization in the Indian subcontinent and the worldwide Covid-19 pandemic has hit the markets. The
study also aimed to understand the impact of these unforeseen events on the investment behavior of
Indian Investors. For this Chi-square test was conducted and the findings are as follows:

 Impact of Demonetization and the choice of equity as an investment option are associated. This
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 means that investors who felt that demonetization had a low impact on their investments choices,
preferred investing in Equity.

 Impact of Demonetization and the percentage of investible amount in equity are associated. This
indicates that people’s perception about lower and higher impact of demonetization affected their
amount of money they put into equity markets.

 Impact of Demonetization and the risk taking capacity of the investors are not associated. In spite
of their perception of low moderate and high impact of demonetization their risk capacity was
neutral to high. It was observed that people who perceived low impact of demonetization did not
tend to take higher risk or vice versa.

 Impact of Demonetization and the Type of investor or their frequency of investments are also
associated. Investors who felt low impact due to demonetization remained invested in equity
markets and held their long term investments.

 Impact of Demonetization and the average period of holding stocks or duration of investments are
independent of each other. This is mainly because as seen earlier most of the investors held stocks
for more than 1 year. Also majority of the investors felt that the impact of demonetization was low
and may be took it as a positive steps so they continued holding their stocks as they did earlier.
They did not land up selling or buying shares frequently due to demonetization.

 Impact of Demonetization and the number of scripts or the investment strategy of the investor are
also not associated with each other. This shows that the investors diversify or concentrate
irrespective of the impact of demonetization.

 Impact of Demonetization and the expected rate of return form equity investments are also not
associated. This indicates, that the outlook towards different impact of demonetization has neither
increased nor decreased the expectation of return from equity stock markets.

 Impact of Covid-19 and the choice of equity as an investment option are independent of each
other. This shows whether the impact of the pandemic is low, moderate or high, the investors do
not change their preference for equity as an investment option. As seen earlier most of the
investors prefer Equity stocks, this is also gets affirmed that sudden and unforeseen events do not
change the preference.

 Impact of Covid-19 and the percentage of investible amount in equity are associated. This means
that the pandemic had a significant impact on the money invested in the stock markets.

 Impact of Covid-19 and the Risk taking capacity of the investors are dependent on each other. The
risk appetite of the investors was deeply affected by the Covid-19 pandemic. The markets
drastically fell and investors stepped out of the markets trying to reduce their exposure to risk in
equities.

 Impact of Covid-19 and the type of investor or the frequency of investment are also dependent on
each other. This indicates that the pandemic led investors to rethink about their style of investing

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 with reference to their frequency. Short term traders went long and Long term traders went short
looking at the impact of the pandemic.

 Impact of Covid-19 and the duration of investment or the average period of holding a stock are
also dependent on each other. Due to the panic created by the pandemic, the markets tumbled and
many investors sold of their shares. Their average period of investment has changed because of
the impact of the world wide pandemic.

 Impact of Covid-19 and the number of scripts invested or the investment strategy are dependent
on each other. This depicts that looking at the market sentiments during the pandemic investors
had a significant impact on their investment strategy. Investors who concentrated on certain
specific stocks or sectors gave a thought to their choices. Also investors who were highly
diversified tried to consolidate their portfolios.

 Impact of Covid-19 and the expected rate of return from equity are related to each other. Because
of the negative sentiments created by the ongoing pandemic in the year 2020, people have
changed their expectations from the markets. But as the people’s perception towards impact of
Covid-19 became low, the market sentiments improved, the pandemic event has factored in and
the markets have reached all-time record highs generating greater returns for the shareholders.

Awareness Of Investors About Securities Market

In order to achieve the investment objectives, investors develop a variety of investment strategies. The
development of a strategy includes the study of financial, economic, political and social conditions and
aims to forecast future prices at a certain time-horizon. The responses made by the respondents of the

study area and their level of awareness regarding the various factors that influence the market volatility is
tested by the researcher. The awareness of investors towards security analysis are measured by using
Likert’s five point scale, namely Very high, high , medium, low and very low.

Awareness about Stock

There are a large number of investment products available for the investors. Some of them are marketable
and liquid, while the others are non marketable. Some of them are also highly risky while others are
almost riskless. The people have to choose proper avenues among them. A common perception is that the
stock market is the best game in the town. Lack of awareness among the people makes them feel the stock
market as gambling but the respondents might have open discussion with their friends regarding their
financial planning and the friends won’t hesitate to give ideas and advice in financial planning. It is the
human mentality to share the right or wrong with the friends first. Media news paper and journals may
make them updated with the current scenario. For every investor of the financial market, information
about the Securities market products is an important factor to decide about the selection of the investment
vehicle. The researcher has analyzed from whom and how the respondents have gained awareness about
the stocks of the Securities market and is given in the below table 4.1.

From the table 4.1, it is found that the sense of awareness about the stocks in the Securities market is
mainly created by the friends and it is agreed with a mean score of 3.83 and the family failed to boost the
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awareness with a mean score of 3.23. There is no highest variation among the Intermediaries and through
Friends, as the mean score of intermediaries/brokerage firms have gained a mean score of 3.81. The
highest variation is felt from the statement ‘Through Media ‘with a standard deviation 1.310 and the
lowest variation is through friends with the standard deviation of 1.022. Depending upon their specific
needs, risk preference and return expected, the respondents who prefer the Securities market have gained
awareness through friends, brokers, media, peers and family respectively.

Awareness about Sector Affairs

After formulating the investment policy, the securities to be bought have to be scrutinized through the
market, industry and company affairs which are known as sector affairs. Investor who plans for
investment or trade must basically have an idea about the stock market, industry or company which is
preferred by the investor to be bucketed. The table 4.2 depicts the level of awareness in sector wise affairs
by the respondents and for this purpose of analysis the weighted average score and standard deviation are
calculated.

Table 4.2 reveals that the level of awareness about Market affairs was high among the investors since its
weighted average score is 3.95, which is very high compared to the Industry affairs (3.86) that ranks
second, closely followed by the Company affairs which has secured third rank based on the weighted
average score of 3.85. Market affairs ranks first and this may be due to the fact the changing indices
named SENSEX and Nifty needs to be noticed first before stepping into the securities market.

Awareness about Economic Affairs

The stock market mirrors the general economic scenario. The growth in gross domestic product and
inflation are reflected in the stock prices. The recession in the economy results in a bear market. The

stock prices may be fluctuating in the short run but in the long run they move either upwards or
downwards. Budget, tax structure and interest rates of RBI also impact the Securities market in the short
term. The investors must be aware of the economic factors and can fix the correct entry and exit points.
By fixing a target for the stock in the portfolio investor can practice a descent investing process and
prevent any loss. Hence the awareness level of the respondents regarding the economic affairs is depicted
in table 4.3.

Table 4.3 vividly describes that with regard to Economic affairs, respondents are aware of the
Government budget which ranks first with the mean score of 3.88,the variable GDP of the country ranks
second (3.59) followed by Inflation (3.44) Interest rates (3.37) and Tax structure (3.16) respectively.
Normally it is human perception to follow the country‘s budget. Investors concentrate on GDP growth of
the country as it is a main concept that attracts FII investments which automatically paves path for bull
market.

Inflation rate ranks third. When inflation is at a low rate, the stock market responds with a surge in
selling. High inflation causes the investors to think that companies may hold back on spending; this
causes an across the board decrease in revenue and the higher cost of goods coupled with the drop in
revenue causes the stock market to drop.

Interest rates as established by the Reserve Bank of India and the individual banks can have an effect on
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the stock market. Interest rates play a major role in determining stock market trends. Bull markets are
usually associated with low interest rates and high Capital Gains, and bear markets with high interest rates
and low Capital gains. Interest rates are determined by the demand for capital – pushes them up and
normally indicates that the economy is thriving and that shares are probably expensive. Low interest
indicates low demand for capital, thus liquidity builds up on the economy, driving share price down.
Other interest rates like that of on Deposits and Borrowings also have impact on share prices.

Awareness about Industrial Affairs

The industries that contribute to the output of the major segments of the economy vary in their growth
rates and their overall contribution to economic activity. Some industries grow faster than the GDP and
are expected to continue in their growth. For example the information technology industry has
experienced higher growth rate than the GDP in 1998. The economic significance and the growth
potential of the industry have to be analyzed by the investors. Industrial affairs include the study of the
nature of the product, its competitors, Government policy and the allotment of funds towards Research
and development. Table 4.4 clearly pictures the awareness level regarding industrial affairs.

Table 4.4 depicts the awareness on industrial affairs wherein the “Product nature” ranks first with a mean
score of 4.05. It is human nature to study the product produced in the industry, whether it is consumable
or non consumable, luxurious or of service product and moreover, in the Securities market there is sector
wise movement. For example: Banks, Infrastructure, pharmacy, IT, FMCG sectors etc may be pullers or
draggers of the Nifty and SENSEX. Competition for the industry ranks second with the mean score of
3.81. Government policy (3.56) and Research and Development (3.33) rank third and fourth respectively.

Awareness about Company Affairs

The purpose of knowing company affairs is to help the investors to make better decisions. The company’s
earnings, profitability, operating efficiency, capital structure and management have to be screened. These
factors have direct bearing on the stock prices and the return of the investors. Based on the performance
of the company, the stock value appreciates in the securities market. Company with high market share is
able to create wealth to the investors in the form of capital appreciation. Hence, the awareness level
regarding company analysis made by the respondents is taken into consideration and the results are
tabulated in table 4.5

Table 4.5 gives a clear picture about the awareness level of the respondents with regard to company
affairs. Profitability ranks first with a mean score of 4.01 followed by the Capital structure of the
company with the mean score of 3.63. Changes in sales /changes in cost ranks third, with a mean score of
3.52 followed by wages and salary given in the company with a mean score of 3.25 ranks fourth.
Depletion of resources ranks fifth with a mean score of 3.28 followed by taxes with a mean score of 3.18

Awareness about Political and Environmental Affairs

Political affairs, inflation, global market affairs, national and international affairs play a dominant role in
influencing the securities market. It is essential that the investors who plan for investment, must be aware
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of political risk, inflation risk, global market impact and other current affairs. For example the Prime
Minister, Narendra Modi is the indisputable champion of the election and his government in the first
parliamentary majority by a single party since 1984. Formation of stable Government propelled the Indian
Securities market to a new high. If the American DOWJONES closes positively, then the Indian stock
market opens positively and such global cues affect the market and the investors who plans for
investment or trade in Securities market must be aware of current global scenario and react accordingly.
Table 4.6 displays the level of awareness of investors about the political and the environmental affairs.

Table 4.6 unfolds the following fact that National affairs is highly noted by the respondents as the policy
framing for the nation is mainly in the hands of the political party that rules the nation. Hence it is clear
that the National affairs ranks first with a mean score of 3.97 followed by International affairs.
International affairs need to be analyzed because any war breaks out or riots in foreign will be reflected in
the Indian market. SENSEX and Nifty will be dragged down, so the investors must be aware of the
international affairs and quit in the mean time to avoid financial loss. Global market affairs ranks third
with the mean score of 3.88, as the positive or negative opening of American, European, Asian markets
has its impact on Indian markets. Political affairs ranks fourth with a mean score of 3.84 as political
stability is essential for a country’s economical growth. Any communal riots or terrorism can be
suppressed with iron hands only if the political party that leads the nation must be strong.

Awareness about Fundamental and Technical Affairs

Many indicators about a particular stock analysis are available in the market through which the investors
can decide whether the stock is overvalued or undervalued. Fundamental indicators are related to the
basic intrinsic value, also referred to as fundamental value of a stock, Earnings per share, stock P/E ratio
and technical indicators are related to the stock market ratings, face value of the share and past
performance of the share. Traders depend mainly on the technical indicators. Fundamental approach is

valid and can produce superior returns to investors who are committing funds in Cash Market shares in
Indian stock market on a long term perspective.

Investors should assess the relative performance of the economy, the state of the industry and also the
financial health of the companies before choosing a particular share as the medium for their financial
investment. The growth of the individual firm is worth to consider for assessing the actual worth of a
stock. Size effect is visible and investment in medium/small segments delivers better returns than the
returns by large cap stocks. PE ratio could be effectively used as a tool for locating mispriced stocks in
Indian stock market.

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 Chapter 6

PERCEPTION OF INVESTORS ON POST- INVESTMENT BEHAVIOUR IN SECURITIES

MARKET

When the investors are investing in the Securities market it is said that, they are emotional rather than
rational in most of the occasions. The dynamics of the investment process, culture, and investment
analysis can significantly improve the decision-making process, resulting in better investment
performance and satisfaction. To gauge the impact of the change and growth of the investments of
individual investor, it is essential to analyze the quality of its growth, investment pattern and the post
investor’s behavior. The chapter is structured in such a way to study the perception towards post-
investment behavior by analyzing the factors influencing the investment decision in portfolio construction
the relationship between demographic profile and investment profile of the investors and the factors
influencing investment decision, investors reaction towards capital market information, investors’
perception on services of brokers and investors attitude towards profit booking and change in life style so
as to find whether the respondents are successful investors.

Factors Influencing Portfolio Construction

As Securities market is a nonstop national video game wherein every minute counts and the investment
decision making process is a multi-faceted process subject to change over a period of time. In the present
chapter an attempt has been made to identify the perceptual factors which influence the investors to invest
in securities market. There are a number of investment opportunities available to an investor. Each of
these investments has its own risk and return features. The proverb “never put the eggs in the same
basket” guides the investor to diversify the risk. Diversification refers to the process whereby an investor
invests his funds in more than one investment opportunity. Investors in the stock market want to explore
the art of stock picking and selecting, based on a certain set of criteria, with the aim of achieving a rate of
return that is greater than the market’s over the return. In this process they perceive certain factors having
impact on the stock market performance.

These factors may be company related, industry specific or economy oriented. With the increased
awareness of investors, the macroeconomic factors are watched carefully today for assessing the stock
market performance. An investor must learn to analyze and measure the risk and return of the portfolio.
The investors may not be in a position to undertake fundamental and technical analysis before they decide
about their investment options. The study tried to explore various statements that have been mainly
concentrated by the investors while bucketing the stocks or in other words portfolio construction. For the
purpose, 23 factors were identified and sought on a five point Likert Scale (Strongly Agree, Agree,
Neutral, Disagree, and highly disagree). For the purpose of analysis, each item is related on a one-to-five
response scale where, the response values tweeted are strongly agree = 5; Agree = 4; Neutral = 3;
Disagree = 2 and highly disagree = 1. The mean and standard deviation of each parameter is shown in
Table 5.1

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The statement with the lowest mean is identified as the least important factor and the highest mean is
identified as the most important factor highly considered in portfolio construction by the investors. The
table 5.1 reflects the fact that the highest agreement is observed for the statement “Past experience” with a
mean score of 4.15 and standard deviation of 1.154 followed by “Familiarity with the products and
services” with a mean score of 4.12 and standard deviation of 1.110. The lowest agreement is observed
for the statement ‘Expected stock split’ with a mean score of 3.24 and the standard deviation is 1.107.

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Decision Making Analysis

The next important post- investment behavior of investors based on Eigen values is named as “Decision
making analysis”. The various variables in Decision making analysis were ‘Fundamental analysis’,
‘Technical analysis’, ‘Own ideas’ and ‘Recommendation of peers’. The Eigen value for Factor 2 was 184
2.676 and the percentage variance was 11.151. The factor loading of ‘Fundamental analysis’ was 0.727,
followed by ‘Technical analysis’ was 0.719, ‘Own ideas’ was 0.645 and ‘Recommendation of peers’ was
0.728 as shown in table.

From table 5.6, it could be seen that the Factor 2 has got significant loading on four dimensions. They are
positive loadings. The factor is named as “Decision making analysis”. It is understood that the significant
post -investment pattern of investors are ‘Fundamental analysis’ (0.727) and ‘Technical analysis’ (0.719).

Corporate Governance Analysis

The details of the corporate which issues the stock is analyzed by the respondents before adding it to their
portfolio and the variables such as ownership, brand name, size of the company and turn over are
considered. The Eigen value for Factor 3 was 2.615 and the percentage variance was 10.896 and these
variables are christened as “Corporate governance analysis” and tabulated in table 5.7.

From table 5.7, it could be seen that the Factor 3 has got significant loading on four dimensions. They are
positive loadings. The factor is named as “Corporate Governance analysis”. It is understood that the
significant factors that the respondents analyze are the ‘Ownership of the company’ (0.791) followed by
the ‘Brand popularity’ (0.775) and concentrate on ‘Size of the company’ (0.763) and ‘Turnover of the
company’ (0.576 ) too.

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Support Services Analysis

The analysis of stocks at the time of buying and selling is made by the investors only with the support of
analyst, financial advisors, brokers or through some training programs and here these four variables has
been named as “Support services analysis”. The Eigen value for Factor 4 was 2.499 and the percentage
variance was 10.414.

From table 5.8, it could be seen that the Factor 4 has got significant loading on four dimensions. They are
positive loadings. The factor is named as “Support services analysis”. It is understood that the significant
post- investment behavior of investors are ‘recommendation of analyst’ (0.768) followed by the
‘recommendations of financial advisors’ (0.751) and ‘recommendations of brokers’ (0.613) and ‘training
Program’ (0.571).

Market positioning analysis

Investors while bucketing their stocks will consider the Face value of the share, Geographical location of
the company and Stock split. Any positive news about these three variables will drag the price of the
shares to a new high. The Eigen value for Factor 5 was 2.407 and the percentage variance was 10.030.
These three variables based on factor loadings are tabulated and named as “Market positioning analysis”.

From table 5.9, it could be seen that the Factor 5 has got significant loading on three dimensions. They
are positive loadings. The factor is named as “Market Positioning analysis”. It is understood that the
significant postinvestment pattern of investors are ‘Stock split’ (0.878) followed by the ‘Geographical
location’ (0.761) and ‘Face value of share’ (0.757). Stock split and Face value of the share plays a
dominant role while bucketing the stocks.

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 Chapter 7

DATA INTERPRETATION

Gender

Gender Percentage
Male 47%
Female 53%
Total 100%

From the above pie chart it is interpreted that 57% of respondents were female and the remaining
43% were male.

Age

Age Percentage
18 yrs to 25 yrs 43%
25 yrs to 35 yrs 18%
35 yrs to 45 yrs 17%
45 yrs to 55 yrs 14%
55 yrs and above 8%

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The above diagram shows that 43% of investors are in the age group of 18 to 25 years, 18% of them are
in the age group of 25 to 35 years, 17% of them are in the age group of 35 to 45 years, 14% of them are in
the age group of 45 to 55 years, 8% of them are in the age group of55 years and above.

Academic qualification

Academic qualification Percentage

12th pass 10%
Pursuing graduation 24%
Graduate 40%
Post graduate 12%

The following pie chart shows that the 40% of investors were graduate, 24% were pursuing graduation,
14% were professional, 12% were post graduate and the remaining 10% were 12 thpass.

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Occupation

Occupation Percentage
Self employed 34%
Employed in government 10%
Employed in private 37%
Student 10%
Other 9%

The above diagram shows that 37% of respondents are employed in private, 34% of respondents are self-
employed, 10% of respondents are employed in government, 10% of respondents are students and 9% of
respondents are something else like retired, housewives,etc.

Annual income

Annual income Percentage

Below 2 lakhs 32%
2 lakhs to 4 lakhs 35%
4 lakhs to 6 lakhs 18%
6 lakhs and above 15%

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The above chart shows that 35% of respondents earn rs.2 lakhs to rs.4 lakhs, 32% of respondents earn
below rs.2 lakhs, 18% of respondents earn rs.4 lakhs to rs.6 lakhs and 15% of respondents earn above rs.6
lakhs.

Amount invested annually

Amount invested annually Percentage

Below 25000 47%
25000 – 50000 35%
50000 – 100000 8%

The above pie chart shows that 47% respondents invest below rs.25000 annually, 35% invest from
rs.25000 to rs.50000 annually, 8% invest from rs.50000 to rs.100000 annually, 10% invest more than
rs.100000 annually.

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Which of the following influences your investment decisions:

Factors that influencedecisions Percentage

Television 14%
Internet 35%
Family and friends 66%
Newspapers and magazines 23%
Books 26%

The above diagram shows that most of the investors are influenced by friends and family whilevery few are
influenced by television. Many people are also influenced by professional advisorsor sales representatives.

Which of the following factors do you consider while investing:

Factors considered Percentage

High return 62%
Risk 40%
Liquidity 36%
Company reputation 46%

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The above diagram shows that high returns is one of the major factors that investors consider while
investing. Fewer people consider liquidity while many people also consider risk and company reputation.

Which of the following is the safest investment option according to you:

Investment option Percentage

Mutual funds 44%
Equity markets 22%
Bank deposits 34%

The above pie chart shows that 44% people think that mutual fund is the safest investment option while
34% think bank deposits are the safest and the remaining 22% think equity marketis the safest.

Have you ever invested in equity market:

Yes 59%
No 41%

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The above diagram shows that 59% of respondents have invested in equity market while the remaining
41% have not invested in equity market.

If yes, how long do you invest:

Time Percentage
Less than 1 year 34.2%
1 year to 2 years 26%
2 years to 3 years 6.9%
More than 3 years 32.9%

The above chart shows that the most respondents either invest in equity for less than a year ormore than 3
years. Only a few of them invest for 2 years to 3 years.

Why do you invest in equity market:

For quick short term gain 44.3%

For long high term gain 55.7%

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The above diagram shows that 56% of respondents invest in equity for long high terms gain while the
remaining 44% invest for quick short term gain.

What attracts you towards equity market:

High return 72.8%

Dividend 24.7%
Speculation 28.4%
Liquidity of investors fund 24.7%

The above diagram shows that high returns attracts most people to invest in equity market, only a few
people are attracted by dividend, speculation and liquidity of investors fund.

Which sector do you invest in:

Sectors Percentage
IT 46.4%
Power and telecom 44%
Pharmacy 59.5%
Agriculture and chemical 25%
Banking and NBFC 47.6%
FMCG 48.8%
Other 2.4%

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The above diagram shows that most respondents are investing in pharmacy sector, FMCG sector, IT
sector, banking and NBFC sector while very few invest in agriculture, chemical, power and telecom
sectors.

Have you ever invested in mutual fund:

Yes 71%
No 29%

The above pie chart interprets that 71% of the respondents have invested in mutual funds while the
remaining 29% have not invested in mutual funds.

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If yes, for how long do you hold your investment:

Time Percentage
1 yr to 3 yrs 39.7%
4 yrs to 6 yrs 35.9%
7 yrs to 10 yrs 15.4%
More than 10 yrs 9%

The above pie chart shows that the 37.9% respondents who invest in mutual funds hold their investment
for 1 to 3 years, 35.9% of them hold it for 4 to 6 years, 15.4% of them hold it for 7 to 10 years and 9% of
them hold it for more than 10 years.

Which mutual plan do you consider best:

Plan Percentage
Balanced plan 39%
Equity plan 39%
Income plan 20.7%
Other 1.3%

The above graph shows that 39% respondents consider balanced and equity plan the best respectively,
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20.7% consider income plan the best and only 1.3% does not know much.

Principles considered while selecting mutual fund:

Principles Percentage
Enquiring about the fund manager 38.6%
Finding about its past performance 66.3%
Identifying your own objectives 45.8%
Portfolio 1.2%

The above diagram shows that most respondents consider finding about its past performance, while few
consider enquiring about the fund manager and identifying their own objectives.

Which end-scheme do you feel is good:

End-scheme Percentage
Open-end scheme 70.2%
Close-end scheme 29.8%

The pie chart shows that 70.2% respondents feel open-end scheme is good and remaining 29.8% feel
close-end scheme is good.

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Which risk usually affects mutual funds:

Risk Percentage
Systematic risk 36.6%
Unsystematic risk 63.4%

The above pie diagram interprets that 63.4% respondents think that systematic risk usually affects
mutual funds and the remaining 36.6% think that unsystematic risk affects mutual funds.

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 Chapter 8

CONCLUSION

After researching the topic of people’s perception towards investing in equity market and mutual funds, I
have come to some conclusion. The objective of every investor is to get high return on investment
where the investor must bear high risk. Their attitude towards equity market and mutual funds help them
to achieve a good return on the investment and their good decision-making skill would enable them to be
a successful investor. This study contains understanding the retail investor’s behavior, level of awareness
and their investment decision in the equity market and mutual funds. And study includes discussion with
the investors, survey through questionnaire method in order to collect more information from investors.
The views and perception relating to investment often differ from person to person.

The various factors that can influencean individual to invest in equity market or mutual funds is the ability
to bear risk, the present and future financial goals, return expected, the requirements and needs of the
investors etc. The study revealed that majority of the investors considers return as the motivating factor
that influences their investment decision. Most of the investors decisions were influenced by their family
and friends and decided to invest and few of them were influenced by newspapers, books, television, etc.
Majority of the investors preferred investing in mutual funds rather thanequity and derivatives. Thus, it can
be concluded that, investors who expect high return will be ready to undertake high risk though few of
them avoid investing in stock market dueto fear of losing their hard-earned money.

In a Indian market where financial instruments are capturing almost every unit of society, equity market
and mutual fund industry has a great scope if given more and proper attention to some factors which will
ultimately lead to the satisfaction of the investors which will help mutual fund industry and the equity
market to boom up. The organization to boost the equity market and mutual-fund investment-company
shall educate the public to the benefits of investing in equity market and mutual funds through the
advertisement, publicity campaigns having stall exhibition.

To Summarize, the current thesis has tried to evaluate the influence on nine behavioral biases in the
investors attitude and perception towards equity investments. It has been observed that the concepts of
Traditional Finance were not completely applicable as the markets did not move according to these
concepts. There were lot of differences seen as from the regular course of action. So the earlier
philosophers realized that there was something more which acted as a stimulator in the investment
business. The new concept of Behavioral finance was developed wherein various behavior biases and
their impact on the investor style and conduct was studied. But since not much investigation is done on
this line with regards to Indian investors, the thesis has tried to bridge the gap. The thesis has studied the
various investment options available to the investors in India, the various reasons why the investors
invest, and their varied styles and strategies of investment. The thesis also talks about the concepts of
Heuristics and Prospect theory and their elements in detail.

Moreover the many steps involved in the process of decision making while making investments, thesis
has thrown great light on the Historical perspective of the Indian Equity Markets along with the recent
developments and the recent scenario in the Indian Equity markets. Along with this the thesis has talked
about the various platforms in the Indian equity markets, the types of market participants in the Indian
equity markets. Thus the thesis gives a complete and clear picture about the India Equity Market. The
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thesis has made an attempt to study the cascading effect of the growth of technology on the Investment
behavior of Indian Investors in the recent era. For this the data was collected and tests were run to see the
impact on the elements of investment decisions of investors.

The Thesis has captured the unexplored area of unexpected events like Demonetization and the ongoing
pandemic and its impact on the investor behavior of Indian investors. This area has not be covered till
now a throws a fresh light in to the existing literature on Investment behavior in India. For all of the
objectives defines, the data was collected and statistical analysis was performed and the findings have
been revealed. The main goal of the adding a fresh outlook to the already existing information on investor
behavior has been met in the thesis.

To Conclude, The thesis has found out the relationship between the varied elements of investor behavior
namely the Heuristics and Prospect theory and the components of Investment decisions. It has been
observed that out of the nine biases under study most of the Behavioral biases have their association with
the most of the elements of investments decisions. Biases like Loss Aversion and Mental accounting have
seen to be having a significant impact on all the aspects of an investor’s decision like his frequency of
investment, his duration, the amount he invests, his risk appetite, his investment strategy etc. Also the
thesis concludes that the millennial generation is the most active generation when it comes to equity
investments. This is mainly due to more awareness created by higher level of education and steady and
stable income levels. The thesis also have come to a conclusion that Technology has a major role to play
when it comes to equity investments by the Indian Investors. With the rising level of education in the
country the hold on technology has also become strong. It has changed the way how investors look for
information or do a normal trade.

Moreover since more and more young blood taking up investments in the country and they being having
strong hands-on on technology, there has been a dramatic change on the conduct, pattern and style of
equity investment in India. The thesis also would like to conclude most of the behavioral biases vary
among investors with difference age, sex, marital state, and level of education, occupation, the family size
of the investor and the monthly income of the investors. This depicts the are prone to biases but they have
the differences in their levels. Some investors may exhibit low Representative bias and some exhibit
High, which varies due to their demographic features. However it has been noticed that Loss Aversion
and Herding are the two biases which do not differ with personal characteristics. This indicates that
whatever age group or gender or income levels an investor falls into, all of them exhibit the same level of
dislike towards loss and are exposed to following the crowd.

The thesis also concludes that out of the two unexpected events namely Demonetization and Covid-19
pandemic also have shown association with investment decision of the Indian investor. In case of
Demonetization, it has just impacted their decision of whether to invest in equity or no and the percentage
of investible amount to be invested in equity and the frequency of investment. This depicts that
Demonetization was not of major impact. On the contrary, the Impact of Covid-19 is tremendous on the
elements of investment decisions. It has shown an association with almost all the parameters of
investment decisions.

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 RECOMMENDATIONS

The recommendations are based on the findings of the research work conducted. In order to increase the
number of active investors in India and increase the market capitalization of the Indian stock markets, the
following set of recommendations have been suggested by the thesis.

Recommendations for Investors

On the basis of the findings, it is recommended that the investors themselves realize that they are prone to
certain kind of behavioral biases. This will enable them to overcome them and think more logically and
make right decisions. Behavioral biases like Availability bias, Ambiguity aversion, Loss Aversion, Regret
Aversion, Mental Accounting are ones to which the investors are prone to a great extent. The investors
should avoid these in order to make better and profitable decisions. For example the investors should not
stay invested in loss making stocks thinking about the price rise in future. Rather they should square off
their positions and look for other opportunities where they can invest and make good for the loss incurred.
The generation X investors who just constitute around 17% of the total investors in the study should get
more involved in the stock markets. In spite of having neutral risk capacity, these category of investors
can invest in specific type of stocks like dividend paying stock or a defensive stock or blue chip
companies where the chances of drastic fall and wiping out of capital is very low. It is also recommended
that more and more female investors should participate in the stock markets. This will increase the
percentage of active investors in the country, share the burden of financial planning with the males and
also bring a new outlook towards equity investing. More and more entrepreneurs should also bring in
their capital to the stock markets so that it can be channelized into the economy. Also it has been
observed that not many investors diversify their portfolio. It’s highly recommended that they put their
money in a variety of stocks so that they can overcome the risk of downfall in few concentrated stocks.
Moreover, the thesis recommends that investors should upgrade themselves with technological
developments in the equity markets. This will basically enable them to take benefits like easy and quick
access to information, trading and investing at the click of a button and the reduced transaction cost. Also
the thesis suggests the investors formulate their strategies in such a way that they can overcome the
uncertainty created by the unexpected events like demonetization and covid-19.

Recommendations for Financial organizations and Intermediaries.

The financial institutions and organizations which comprise of the financial advisors, portfolio managers,
the stock brokers etc. should first try to understand the perception and attitude of the investors. They
should first try to gaze in to the requirements of the investors and then suggest stocks and carve financial
plans for them. This will ensure they will feel safe and have a sense of security when their funds are
parked in a balanced manner. If the financial bodies are well updated with the investor behavior and
objectives, they can suggest better stocks and other equity related products. The financial organizations
should try to analyze their risk appetite and suggest strategies which will safeguard their capital. As far as
the financial intermediaries are concerned they should make the investment procedure very smooth and
hassle free for the investors. They should set the regulations in such a way that it induces the investor to
invest and not shy away because of the complicated or hidden procedural hindrances. Since the thesis is
of the opinion that technology as an impact on investor behavior and finally on their decisions, the
financial bodies like stock brokers should provide them with tech-upgraded platforms for investment
which will not only increase their frequency of trade but also increase their percentage of investment.
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Recommendations for Finance Ministry, SEBI and other Government bodies.

The thesis suggest that in order to increase the number of active investors in India and to take Indian
equity markets in the top performing markets of the world, certain policy framework should be worked on
and changed as per the changing environment in Equity markets. The above bodies like the finance
ministry, the SEBI and other government authorities play a major role in the policy formulation of the
equity and capital markets. The Thesis suggests that the compliances of the listed companies should be
more transparent and real time basis. This will enable confidence among the investors, who look for
genuine companies for investments, whose accurate information is easily available and where their capital
is safeguarded. Strict actions by these regulators should be taken against stock brokers or financial
institutions for their malpractices in order to protect the vested interests of the common investors. This
will create a sense of security and a stronger platform, where more and more investors would be attracted.
Disclosures of insider trading should be made mandatory on regular basis by the financial institutions.
The concerned authoritative bodies should also keep a check on the news about the equity markets on the
electronic media which affects the investor behavior and sentiments to a great extent. This will create
stability in the investing environment and ultimately increase the number of active investors in the
country.

Future Scope

In spite of covering various aspects of Investment behavior and bridging gaps among the exiting
literature, this area has the following future scope:  Apart from the nine behavioral biases of Behavioral
Finance studied, there are thirty biases which have been identified by the philosophers. Since only nine
biases are covered in this thesis, there is a future scope for studying the remaining biases in the Indian
context.  Since the study is conducted on investors residing in Mumbai, the thesis had a limited reach.
This carves the way for future research in the area of Behavioral finance covering investors pan India. 
In future, the researchers can study the upcoming generation of investors i.e. the Generation Z. The elder
generation Z people will eventually complete their education and start earning a revenue for themselves.

They would be a new genre of investors who will be entering the investment field with a fresh mindset
and attitude. The researchers can focus on this genre of investors and try to associate the behavioral biases
with their perception and investment pattern. In future the researchers can also try to analyze whether the
institutional investors and mutual fund investors also exhibit the same biases or no. Also the researcher
can try to evaluate whether the retail investor, institutional investor and mutual fund investor are also
prone to the same biases of the same level. In future, the researchers can also try to perform a comparative
study on the level of behavioral biases which affect the salaried class of investors and the self employed
or the business class of investors.

Moreover, the researchers can in future try to evaluate the influence of international news and triggers and
domestic news and triggers on the investment behavior of the investors. A new angle can be given to the
research work by only concentrating on the experienced and successful players in the markets and
studying their investment attitude and perception in connection with the biases. This may lead to finding
out fantastic strategies and patterns and styles which the younger generation may want to adopt and try to
avoid mistakes which they have made.

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 Suggestions

Securities market is known for tax-free returns, an effortless, easy entry into the stock market, higher
returns, any time liquidity and to deliver higher real returns than any other investments. Based on the
findings, following suggestions are given to investors, brokers and SEBI to overcome the problems faced
by them.

 Indian securities market is a promising one as the market indicators SENSEX and Nifty are in
uptrend. Market participants can pump in large sum to reap huge profit in the year 2016 as the
Bull run in Stock market cycle is assured at an interval of 8 years and thereby in the year 2016,
Indian securities market expects a boom.

 Investors actively participated in the market from the year 2000 to 2008 only and many quitted
after 2008. After the global financial meltdown many hesitate to participate in securities market.
As Indian markets are emerging and promising markets, the words of Warren Buffet needs to be
followed, “Buy when everyone is selling and sell when everyone buys, Buy when markets are in
the grip of panic”.

 Paper trading involves the use of stock market simulator system with hypothetical account balance
to trade. The trade is just on papers and involves no real money. It is a chance to observe the
market behavior with no cost and no risk involved. Look and learn before you leap must be the
mantra for the maiden investors.

 If an individual wants to take a risk in the volatile market, he has to invest only the surplus money
which he can afford to lose in the market which will not disturb his daily living.

 Investor adopting Systematic Investment Plan is able to average the price fluctuation of the stock.
Discipline and patience in monitoring their portfolio enables them to generate great returns. Hence
it is prudent to have a disciplined investment plans.

 Investors step in to the market with the investment objective of quick returns. Securities market
will give fruitful returns only if the investors are patient. Making huge investments in a single
stock is not advisable and buying in a single stroke or selling in a single stroke is not advisable. It
is suggested to buy or sell at periodic intervals based on the market volatility.

 The prices start falling at much faster rate than they have risen, in such situations holding the
stocks is better option, the prices may raise back soon. Investors are not going to lose money on
the purchased stocks until they are selling them off. Often investors do the mistake of selling the
stocks as soon as the price starts falling.

 Investors and traders mostly stick on to blue chip stock and it is advisable to buy fundamentally
strong stocks and suggested not to chase a stock or marry a stock based on the past performance of
the stock and past experience of the investor. Many prefer blue chip stocks but it is suggested to
invest in companies with proven management.
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  Technical analysis involves the study of various parameters like averages, trend lines, oscillator,
patterns etc. Traders who learn technical analysis can boost their financial status and be more
confident about their decisions. Technical analysis is a skill that can be enabled with more and
more practice on forecasting and having patience to get the results.

 An investor can minimize the risk associated with the stock trading by holding diversified stocks
in their portfolio. One can diversify their portfolio in many ways like holding stocks of companies
operating in different sectors so that even if one industry is down performing, other sector stocks
in the portfolio will pull it to profit.

 The investment strategy must be well decided for share trading and to transform the trades to
profit. It will help to take the right trading decisions at the right time. Following the strategy
diligently will enable the traders to overcome the losses. Patience and discipline is must when the
market is going through bad times.

Suggestions to Brokers

 Youthful demography dominates the stock market, retired persons hesitate to step in to the market
and their active participation can be assured if the brokers often discuss with them and guide them
regarding the market run.

 Youth are tech savvy and are aware of the changing scenario but even the importance of market
alerts can be brought to the notice of the market participants by the brokers by arranging group
discussions with successful investors.

 Brokers can retain their clients only if they are efficient in guiding the investors in the right path.
Brokers must insist on the benefits of decent and disciplined trading.

 Brokers can create an investors group in WhatsApp and spread awareness about the benefits of
SIP to their clients and furnish current details regarding the market.

 Women are reluctant to enter into the stock market and it must be insisted that it is well suited for
home makers. Women market participants can be motivated by emphasizing that it is a path to
women empowerment. Awareness programs can be organized to home makers by the brokers
stressing that instead of wasting time by watching serials in T.V they can be motivated to invest in
stock market.

Suggestions to Policy Makers and SEBI

 Financial literacy must be imparted in the minds of young Indians and boost them to save and
invest from their earlier age. Hence policy makers can draw the attention of young investors by
opening demat accounts free of cost, issue PAN cards free of cost, train them in paper trading.

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  Securities market is an opportunity to ride on the back of the firms that make huge profit, so it is
advisable to include Securities market as a part of the curriculum.

 Awareness programs for the rural market participants must be convened periodically stock market
CNBC, NDTV Profit, ET-Now are the channels telecasting market news around the clock in
English. SEBI can make arrangements to telecast market news in regional languages also.

Conclusion

Wealth creation is an art and Securities Market is best game in the town to create wealth within the four
walls of the home only if the portfolio is regularly monitored and diversified. Putting all the eggs in a
single basket is not advisable hence monitoring of stocks is essential to be conducted in combination with
all the other processes of portfolio management. Monitoring implies periodic reconsideration of the
various phases. Investors must monitor their needs and the market conditions, and evaluate the portfolio
performance from time to time, compare it to expectations, and modify the policy statement and/or the
investment strategy if they think it is necessary. Monitoring includes thus, performance analysis, and
assimilation of new information. Instead of adopting the herd behavior it is advisable to do lot of paper
work or prefer mutual fund which is steered by experts and fund managers.

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 Chapter 9

BIBLOGRPHY

www.indiastudychannel.com

www.investopedia.com

www.indianfoline.com

www.managementpedia.com

www.edelweiss.in

www.quora.in

www. shodhganga.inflibnet.ac.in

www.utiicm.com/cmc/PDFs/2001/

www.deccanherald.com/content/103895/return-ipo-rush.html

www.diffen.com/

www.mutualfundindia.com/Error/Trouble?aspxerrorpath=/Assets%20_under%20_Management.a

www.researchgate.net

www.wikipedia.com

www.shildeshare.com

www.blackrock.com

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 ANNEXURE (BLANK QUESTIONNAIRE)

*Required

Name:*
Gender:*
Male
Female
Other:

1. Age:*
 18 yrs to 25yrs
 25 yrs to 35 yrs
 35 yrs to 45 yrs
 45 yrs to 55 yrs
 55 yrs and above

2. Academic Qualification:*
 Pursuing graduation
 Graduate
 Post graduate
 Professional
 12th passed

3. Occupation:*
 Self employed
 Employed in government
 Employed in private
 Retired
 Other:

4. Annual income:*
 Below 2 lakhs
 2 lakhs to 4 lakhs
 4 lakhs to 6 lakhs
 6 lakhs and above

5. Amount invested annually:*

 Below Rs.25000
 Rs.25000 to Rs.50000
 Rs.50000 to Rs.100000
 More than Rs.100000

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6. Which of the following influences your investment decisions:*
 Television
 Internet
 Family and friends
 Newspapers and magazines
 Books
 Professional advisors or sales representatives

7. Which of the following factors do you consider while investing:* o High return
 Risk
 Liquidity
 Company reputation

8. Which of the following is the safest investment option according to you:*

 Mutual funds
 Equity markets
 Bank deposits

9. Have you ever invested in equity market?*

 Yes
 No

10. If yes, for how long do you invest?

 Less than 1 yr
 1 yr to 2 yrs
 2 yrs to 3 yrs
 More than 3 yrs

11. Why do you invest in equity market?

 For quick short term gain
 For high long term gain

12. What attracts you towards equity market? o High return

 Dividend
 Speculation
 Liquidity of investors fund

13. Which of the following sectors do you invest in:

 IT
 Power and telecom
 Pharmacy
 Agriculture and chemical
 Banking and NBFC

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  FMCG
 Other:

14. Have you ever invested in mutual funds?*

 Yes
 No

15. If yes, for how long do you hold your investments?

 1 yr to 3 yrs
 4 yrs to 6 yrs
 7 yrs to 10 yrs
 More than 10 yrs

16. Which mutual fund plan do you consider the best? o Balanced plan
 Equity plan
 Income plan
 Other

17. Which among the following principles do you consider while selecting a mutual fund?
 Enquiring about the fund manager
 Finding about its past performance
 Identifying your own objectives
 Other:

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