Research Report
On
INVESTORS ATTITUDE TOWARDS CAPITAL MARKET
SUBMITED By:
ANKUSH SHARMA
MBA
UNIVERSITY SCHOOL OF
MANAGEMENT
KURUKSHETRA UNIVERSITY,
KURUKSHETRA 136119
PREFACE
Simple language has been used throughout the report. Report is illustrated with figures, charts
and diagrams, as and when required.
DECLARATION
I, Ankush Sharma a student of MBA, in theder class Roll No.01213020 , 4 th semester for the
session 2013-15 hereby, declare that theresearch project entitled Investors Attitude Towards
2
Capital Markethas been completed by me. The work reported in the training is the result of my
own efforts.
(ANKUSH SHARMA
ACKNOWLEDGEMENT
At this stage of my long educational journey, I look back and find
that though mine is a fairly sail, it has been memorizing
3
MUKUL BABBAR
CERTIFICATE
This is to certify that Mr. MUKUL BABBAR has worked under my guidance on the topic
Investors Attitude towards Capital Market. The Project is original work to the best of my
knowledge & belief. This work has not been submitted for any other degree/diploma exam
elsewhere. The Project work is upto the standard expected from an MBA student and I
recommend this for evaluation.
Executive Summary
introduction
of
the
stock
exchanges.
Bombay
stock
CONTENTS
S. NO.
CHAPTER 1.
CONTENTS
CAPITAL MARKET
ROLE AND IMPORTANCE OF CAPITAL MARKET
CAPITAL MARKET INSTRUMENT
TYPES OF CAPITAL MARKET
PAGE
NO.
9
10
14
17
23
CHAPTER 2.
CHAPTER 3.
CHAPTER 4.
CHAPTER 5.
CHAPTER 6.
CHAPTER 7.
STOCK EXCHANGE
BOMBAY STOCK EXCHANGE
NATIONAL STOCK MARKET
LITERATURE REVIEW
RESEARCH METHODOLOGY
RESEARCH DESIGN
SAMPLIING SIZE AND DESIGN
DATA COLLECTION
AREA OF STUDY
OBJECTIVES OF STUDY
ANALYSIS AND INTERPRETATION
FINDINGS AND CONCUSION
BIBLIOGRAPHY
ANNEXURE
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31
33
37
38
38
38
38
39
41
58
63
65
CHAPTER 1.
CAPITAL MARKET
Introduction: The capital market is a market which deals in long-term loans. It supplies
industry with fixed and working capital and finances medium-term and long-term borrowings of
the central, state and local governments. The capital market deals in ordinary stock are shares
and debentures of corporations, and bonds and securities of governments.
The funds which flow into the capital market come from individuals who have savings to invest,
the merchant banks, the commercial banks and non-bank financial intermediaries, such as
insurance companies, finance houses, unit trusts, investment trusts, venture capital, leasing
finance, mutual funds, building societies, etc.
Further, there are the issuing houses which do not provide capital but underwrite the shares and
debentures of companies and help in selling their new issues of shares and debentures. The
demand for funds comes from joint stock companies for working and fixed capital assets and
inventories and from local, state and central governments, improvement trusts, port trusts, etc. to
finance a variety of expenditures and assets.
The capital market functions through the stock exchange market. A stock exchange is a market
which facilitates buying and selling of shares, stocks, bonds, securities and debentures. It is not
only a market for old securities and shares but also for new issues shares and securities. In fact,
the capital market is related to the supply and demand for new capital, and the stock exchange
facilitates such transactions.
Thus the capital market comprises the complex of institutions and mechanisms through which
medium-term funds and long-term funds are pooled and made available to individuals, business
and governments. It also encompasses the process by which securities already outstanding are
transferred.
9
market
has
crucial
significance
to
capital
formation.
For
speedy
7. Revival of Sick UnitsThe Commercial and Financial Institutions provide timely financial
assistance to viable sick units to overcome their industrial sickness. To help the weak
units to overcome their financial industrial sickness banks and FIs may write off a part of
their loan. The stock exchange is a central market through which resources are transferred
to the industrial sector of the economy. The existence of such an institution encourages
people to invest in productive channels. Thus it stimulates industrial growth and
economic development of the country by mobilising funds for investment in the corporate
securities.
8. Reliable Guide to PerformanceThe capital market serves as a reliable guide to the
performance and financial position ofcorporates, and thereby promotes efficiency.
9. Proper Channelization of Funds The prevailing market price of a security and relative
yield are the guiding factors for the people to channelize their funds in a particular
company. This ensures effective utilisation of funds in the public interest.
10. Provision of Variety of Services The financial institutions functioning in the capital
market provide a variety of services such as grant of long term and medium term loans to
entrepreneurs, provision of underwriting facilities, assistance in promotion of companies,
participation in equity capital, giving expert advice etc.
11. Development of Backward Areas Capital Markets provide funds for projects in
backward areas. This facilitates economic development of backward areas. Long term
funds are also provided for development projects in backward and rural areas.
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which find it difficult to raise funds from primary markets and by way of loans from FIs
and banks.
8. Growth of Multinationals (MNCs) The MNCs require medium and long term funds for
setting up new projects or for expansion and modernization. For this purpose, MNCs
raise funds through loans from banks and FIs. Due to the presence of MNCs, the capital
market gets a boost.
9. Growth of Underwriting Business The growing underwriting business has contributed
significantly to the development of capital market.
10. Growth of Merchant Banking The credit for initiating merchant banking services in
India goes to Grindlays Bank in 1967,followed by Citibank in 1970. Apart from capital
issue management, merchant banking divisions provide a number of other services
including provision of consultancy services relating to promotion of projects, corporate
restructuring etc.
11. Growth of EntrepreneursSince 1980s, there has been a remarkable growth in the
number of entrepreneurs. This created more demand for short term and long term funds.
FIs, banks and stock markets enable the entrepreneurs to raise the required funds. This
has led to the growth of capital market in India.
12. Legislative Measures The government passed the companies Act in 1956. The Act gave
powers to government to control and direct the development of the corporate enterprises
in the country. The capital Issues (control) Act was passed in 1947 to regulate investment
in different enterprises, prevent diversion of funds to non-essential activities and to
protect the interest of investors. The Act was replaced in 1992.
2. Debentures/ Bonds: The term Debenture is derived from the Latin word debere which
means to owe a debt. A debenture is an acknowledgment of debt, taken either from the
public or a particular source. A debenture may be viewed as a loan, represented as
marketable security. The word bond may be used interchangeably with debentures.
Debt instruments with maturity more than 5 years are called bonds.
3. Preference shares: Preference shares are different from ordinary equity shares.
Preference shareholders have the following preferential rights
The right to get a fixed rate of dividend before the payment of dividend to the equity
holders.
The right to get back their capital before the equity holders in case of winding up of the
company.
4. Derivatives: A derivative picks a risk or volatility in a financial asset, transaction, market
rate, or contingency, and creates a product the value of which will change as per changes
in the underlying risk or volatility. The idea is that someone may either try to safeguard
against such risk (hedging), or someone may take the risk, or may engage in a trade on
the derivative, based on the view that they want to execute. The risk that a derivative
intends to trade is called underlying. A derivative is a financial instrument, whose value
depends on the values of basicunderlying variable. In the sense, derivatives is a financial
instrument that offers return based on the return of some other underlying asset, i.e the
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return is derived from another instrument.The best way will be take examples of
uncertainties and the derivatives that can be structured around the same.
Stock prices are uncertain - Lot of forwards, options or futures contracts are based
on movements in prices of individual stocks or groups of stocks.
Prices of commodities are uncertain - There are forwards, futures and options on
commodities.
Interest rates are uncertain - There are interest rate swaps and futures.
Foreign exchange rates are uncertain - There are exchange rate derivatives.
Weather is uncertain - There are weather derivatives, and so on.
Major Types of Derivatives:
a) FORWARDS :A forward contract is an agreement to buy or sell an asset on a specified
date for a specified price. One of the parties to the contract assumes a long position and
agrees to buy the underlying asset on a certain specified future date for a certain specified
price. The other party assumes a short position and agrees to sell the asset on the same
date forthe same price, other contract details like delivery date, price and quantity are
negotiated bilaterally by the parties to the contract. The forward contracts are normally
traded outside the exchange.
b) FUTURES: Futures contract is a standardized transaction taking place on the
futuresexchange. Futures market was designed to solve the problems that exist in forward
market. A futures contract is an agreement between two parties, to buy or sell an asset at a
certain time in the future at a certain price, but unlike forward contracts, the futures
contracts are standardized and exchange traded To facilitate liquidity in the futures
contracts, the exchange specifies certain standard quantity and quality of the underlying
instrument that can be delivered, and a standard time for such a settlement. Futures
exchange has a division or subsidiary called a clearing house that performs the specific
responsibilities of paying and collecting daily gains and losses as well as guaranteeing
performance of one party to other. A futures' contract can be offset prior to maturity by
entering into an equal and opposite transaction. The standardized items in a futures
contract are:
Quantity of the underlying
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c) OPTIONS: An option is a contract, or a provision of a contract, that gives one party (the
option holder) the right, but not the obligation, to perform a specified transaction with
another party (the option issuer or option writer) according to the specified terms. The
owner of a property might sell another party an option to purchase the property any time
during the next three months at a specified price. For every buyer of an option there must
be a seller. The seller is often referred to as the writer. As with futures, options are
brought into existence by being traded, if none is traded, none exists; conversely, there is
no limit to the number of option contracts that can be in existence at any time. As with
futures, the process of closing out options positions will cause contracts to cease to exist,
diminishing the total number. Thus an option is the right to buy or sell a specified amount
of a financial instrument at a pre-arranged price on or before a particular date. There are
two options which can be exercised:
Call option, the right to buy is referred to as a call option.
Put option, the right to sell is referred as a put option.
Types of Capital Market: There are two types of capital market. These are as follows
1. Primary Market
2. Secondary Market
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Primary Market
New Issues Market is that part of capital market where dealing exchanges takes the boundaries
de-marketing the financial services are fast eroding. Thanks to the innovations in the financial
services, the movement towards made by existing companies are known as further issues.
The primary market is that part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding through the
sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers.
The process of selling new issues to investors is called underwriting. In the case of a new stock
issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the
price of the security offering, though it can be found in the prospectus.
This is the market for new long term equity capital. The primary market is the market
where the securities are sold for the first time. Therefore it is also called the new issue
market (NIM).
In a primary issue, the securities are issued by the company directly to investors.
The company receives the money and issues new security certificates to the investors.
17
Primary issues are used by companies for the purpose of setting up new business or for
expanding or modernizing the existing business.
The primary market performs the crucial function of facilitating capital formation in the
economy.
The new issue market does not include certain other sources of new long term external
finance, such as loans from financial institutions. Borrowers in the new issue market may
be raising capital for converting private capital into public capital; this is known as
"going public."
The financial assets sold can only be redeemed by the original holder.
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3. Private Placement:Under this method the securities are sold by the company to an
intermediary at a fixed price and in second step intermediaries sell these securities not to general
public but to selected clients at higher price. The issuing company issues prospectus to give
details about its objectives, future prospects so that reputed clients prefer to buy the security from
intermediary. Under this method the intermediaries issue securities to selected clients such as
UTI, LIC, General Insurance, etc.
The private placement method is a cost saving method as company is saved from the expenses of
underwriter fees, manager fees, agents commission, listing of companys name in stock
exchange etc. Small and new companies prefer private placement as they cannot afford to raise
from public issue.
4. Right Issue (For Existing Companies):This is the issue of new shares to existing
shareholders. It is called right issue because it is the pre-emptive right of shareholders that
company must offer them the new issue before subscribing to outsiders. Each shareholder has the
right to subscribe to the new shares in the proportion of shares he already holds. A right issue is
mandatory for companies under Companies Act 1956.
The stock exchange does not allow the existing companies to go for new issue without giving
pre-emptive rights to existing shareholders because if new issue is directly issued to new
subscribers then the existing equity shareholders may lose their share in capital and control of
company i.e., it would water their equity. To stop this the pre-emptive or right issue is
compulsory for existing company.
5. e-IPOs, (electronic Initial Public Offer):It is the new method of issuing securities through on
line system of stock exchange. In this company has to appoint registered brokers for the purpose
of accepting applications and placing orders. The company issuing security has to apply for
listing of its securities on any exchange other than the exchange it has offered its securities
earlier. The manager coordinates the activities through various intermediaries connected with the
issue.
6. BOOK BUILDING THROUGH ON-LINE IPO SYSTEM: Book building is basically a
process used in IPO for efficient price discovery, wherein during the period for which the IPO is
19
open, bids are collected from investors at various prices, which are above or equal to the floor
price. The offer price is determined after the bid closing date. In its strive to continuously
improve Indian Securities Market; NSE offers its infrastructure for conducting online IPOs
through book building. It helps to discover price as well as demand for a security to be issued
through a process of bidding by investors. The advantages of this new system are:
Secondary Market
In the secondary market the investors buy / sell securities through stock exchanges. Trading of
securities on stock exchange results in exchange of money and securities between the investors.
Secondary market provides liquidity to the securities on the exchange(s) and this activity
commences subsequent to the original issue. For example, having subscribed to the securities of
a company, if one wishes to sell the same, it can be done through the secondary market. Similarly
one can also buy the securities of a company from the secondary market. A stock exchange is the
single most important institution in the secondary market for providing a platform to the
investors for buying and selling of securities through its members. In other words, the stock
exchange is the place where already issued securities of companies are bought and sold by
investors. Thus, secondary market activity is different from the primary market in which the
issuers issue securities directly to the investors. Traditionally, a stock exchange has been an
association of its members or stock brokers, formed for the purpose of facilitating the buying and
selling of securities by the public and institutions at large and regulating its day to day
operations. Of late however, stock exchanges in India now operate with due recognition from
Securities and Exchange Board of India (SEBI) / the Government of India under the Securities
Contracts (Regulation) Act, 1956. The stock exchanges are either association of persons or are
20
formed as companies. There are 24 recognized stock exchanges in India out of which one has not
commenced its operations.
Out of the 23 remaining stock exchanges, currently only on four stock exchanges, the trading
volumes are recorded. Most of regional stock exchanges have formed subsidiary companies and
obtained membership of Bombay Stock Exchange, (BSE) or National Stock Exchange (NSE) or
both. Members of these stock exchanges are now working as sub-brokers of BSE / NSE brokers.
6. Providing Scope for Speculation: To ensure liquidity and demand of supply of securities the
stock exchange permits healthy speculation of securities.
7. Liquidity: The main function of stock market is to provide ready market for sale and purchase
of securities. The presence of stock exchange market gives assurance to investors that their
investment can be converted into cash whenever they want. The investors can invest in long term
investment projects without any hesitation, as because of stock exchange they can convert long
term investment into short term and medium term.
8. Better Allocation of Capital: The shares of profit making companies are quoted at higher
prices and are actively traded so such companies can easily raise fresh capital from stock market.
The general public hesitates to invest in securities of loss making companies. So stock exchange
facilitates allocation of investors fund to profitable channels.
9. Promotes the Habits of Savings and Investment: The stock market offers attractive
opportunities of investment in various securities. These attractive opportunities encourage people
to save more and invest in securities of corporate sector rather than investing in unproductive
assets such as gold, silver, etc.
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The capital market is affected by a range of factors . Some of the factors which influence capital
market are as follows:A) Performance of domestic companies:-The performance of the companies or rather
corporate earnings is one of the factors which has direct impact or effect on capital market in a
country. Weak corporate earnings indicate that the demand for goods and services in the
economy is less due to slow growth in per capita income of people . Because of slow growth in
demand there is slow growth in employment which means slow growth in demand in the near
future. Thus weak corporate earnings indicate average or not so good prospects for the economy
as a whole in the near term. In such a scenario the investors ( both domestic as well as foreign )
would be wary to invest in the capital market and thus there is bear market like situation. The
opposite case of it would be robust corporate earnings and its positive impact on the capital
market.
B) Environmental Factors :-Environmental Factor in Indias context primarily meansMonsoon . In India around 60 % of agricultural production is dependent on monsoon. Thus there
is heavy dependence on monsoon. The major chunk of agricultural production comes from the
states of Punjab , Haryana & Uttar Pradesh. Thus deficient or delayed monsoon in this part of the
country would directly affect the agricultural output in the country. Apart from monsoon other
natural calamities like Floods, drought, earthquake, etc. also have an impact on the capital
market of a country. The Indian Met Department (IMD) on 24th June stated that India would
receive only 93 % rainfall of Long Period Average (LPA). This piece of news directly had an
impact on Indian capital market with BSE Sensex falling by 0.5 % on the 25th June . The major
losers were
auto marketers and consumer goods firms since the below normal monsoon forecast triggered
concerns that demand in the crucial rural heartland would take a hit. This is because a deficient
monsoon could seriously squeeze rural incomes, reduce the demand for everything from
motorbikes to soaps and worsen a slowing economy.
C) Macro Economic Numbers :-The macroeconomic numbers also influence the capital
market. It includes Index of Industrial Production (IIP) which is released every month, annual
Inflation number indicated by Wholesale Price Index (WPI) which is released every week,
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Export Import numbers which are declared every month, Core Industries growth rate (It
includes Six Core infrastructure industries Coal, Crude oil, refining, power, cement and
finished steel) which comes out every month, etc. This macro economic indicators indicate the
state of the economy and the direction in which the economy is headed and therefore impacts the
capital market in India. A case in the point was declaration of core industries growth figure.
D) Global Cues :-In this world of globalization various economies are interdependent and
interconnected. An event in one part of the world is bound to affect other parts of the world ,
however the magnitude and intensity of impact would vary. Thus capital market in India is also
affected by developments in other parts of the world i.e. U.S. , Europe, Japan , etc.
Global cues includes corporate earnings of MNCs, consumer confidence index in developed
countries, jobless claims in developed countries, global growth outlook given by various
agencies like IMF, economic growth of major economies, price of crude oil, credit rating of
various economies given by Moodys, S & P, etc.
E) Political stability and government policies:-For any economy to achieve and sustain growth
it has to have political stability and pro- growth government policies. This is because when there
is political stability there is stability and consistency in governments attitude which is
communicated through various government policies. The vice- versa is the case when there is no
political stability .So capital market also reacts to the nature of government, attitude of
government, and various policies of the
Government.
F) Growth prospectus of an economy:-When the national income of the country increases and
per capita income of people increases it is said that the economy is growing. Higher income also
means higher expenditure and higher savings. This augurs well for the economy as higher
expenditure means higher demand and higher savings means higher investment. Thus when an
economy is growing at a good pace capital market of the country attracts more money from
investors, both from within and outside the country and vice -versa. So we can say that growth
prospects of an economy do have an impact on capital markets.
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G) Investor Sentiment and risk Appetite :-Another factor which influences capital market is
investor sentiment and their risk appetite .Even if the investors have the money to invest but if
they are not confident about the returns from their investment , they may stay away from
investment for some time.At the same time the investors have low risk appetite , which they were
having in global and Indian capital market some four to five months back due to global financial
meltdown and recessionary situation in U.S. & some parts of Europe , they may stay away from
investment and wait for the right time to come.
STOCK EXCHANGE
Stock Exchange (also called Stock Market or Share Market) is one important constituent of
capital market. Stock Exchange is an organized market for the purchase and sale of industrial and
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Market for securities : Stock exchange is a market, where securities of corporate bodies,
government and semi-government bodies are bought and sold.
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2.
Deals in second hand securities : It deals with shares, debentures bonds and such
securities already issued by the companies. In short it deals with existing or second hand
securities and hence it is called secondary market.
3.
Regulates trade in securities : Stock exchange does not buy or sell any securities on its
own account. It merely provides the necessary infrastructure and facilities for trade in
securities to its members and brokers who trade in securities. It regulates the trade activities so
as to ensure free and fair trade
4.
Allows dealings only in listed securities : In fact, stock exchanges maintain an official
list of securities that could be purchased and sold on its floor. Securities which do not figure in
the official list of stock exchange are called unlisted securities. Such unlisted securities cannot
be traded in the stock exchange.
5.
Transactions effected only through members : All the transactions in securities at the
stock exchange are effected only through its authorised brokers and members. Outsiders or
direct investors are not allowed to enter in the trading circles of the stock exchange. Investors
have to buy or sell the securities at the stock exchange through the authorised brokers only.
6.
7.
8.
Working as per rules : Buying and selling transactions in securities at the stock
exchange are governed by the rules and regulations of stock exchange as well as SEBI
Guidelines. No deviation from the rules and guidelines is allowed in any case.
9.
Specific location : Stock exchange is a particular market place where authorised brokers
come together daily (i.e. on working days) on the floor of market called trading circles and
conduct trading activities. The prices of different securities traded are shown on electronic
27
boards. After the working hours market is closed. All the working of stock exchanges is
conducted and controlled through computers and electronic system.
10.
Financial Barometers : Stock exchanges are the financial barometers and development
indicators of national economy of the country. Industrial growth and stability is reflected in
the index of stock exchange.
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Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly
known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the
first stock exchange in the country to obtain permanent recognition in 1956 from the Government of
India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role
in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked
worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualized and
corporatized entity incorporated under the provisions of the Companies Act, 1956, pursuant to the
BSE(Corporatization and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board
of India (SEBI).
With demutualization, the trading rights and ownership rights have been de-linked effectively addressing
concerns regarding perceived and real conflicts of interest. The Exchange is professionally managed
under the overall direction of the Board of Directors.The Board comprises eminent professionals,
representatives of Trading Members and the Managing Director of the Exchange. The Board is inclusive
and is designed to benefit from theparticipation of market intermediaries.
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In terms of organization structure, the Board formulates larger policy issues and exercises over-all
control. The committees constituted by the Board are broad-based.The day-to-dayoperations of the
Exchange are managed by the Managing Director and a management team of professionals.
The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and
processes of the Exchange are designed to safeguard market integrity and enhance transparency in
operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth.
The Exchange provides an efficient and transparent market for trading in equity, debt instruments and
derivatives. The BSE's On Line Trading System (BOLT) is a proprietory system of the Exchange and is
BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO
9001:2000 certified.
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31
CHAPTER 2.
32
REVIEW OF LITERATURE
The Indian capital market has changed dramatically over the last few years, especially since
1990. Changes have also been taking place in government regulations and technology. The
expectations of the investors are also changing. The only inherent feature of the capital market,
which has not changed is the 'risk' involved in investing in corporate securities. Managing the
risk is emerging as an important function of both large scale and small-scale investors. Risk
management of investing in corporate securities is under active and extensive discussion among
academicians and capital market operators. Surveys and research analyses have been conducted
by institutions and academicians on risk management. The mutual fund companies in India have
conducted specific studies on the 'risk element' of investing in corporate securities.
Grewal S.S and NavjotGrewall (1984) revealed some basic investment rules and rules for selling
shares. They warned the investors not to buy unlisted shares, as Stock Exchanges do not permit
trading in unlisted shares. Another rule that they specify is not to buy inactive shares, ie, shares
in which transactions take place rarely. The main reason why shares are inactive is because there
are no buyers for them. They are mostly shares of companies, which are not doing well. A third
rule according to them is not to buy shares in closely-held companies because these shares tend
to be less active than those of widely held ones since they have a fewer number of shareholders.
33
They caution not to hold the shares for a long period, expecting a high price, but to sell whenever
one earns a reasonable reward.
Jack Clark Francis2 (1986) revealed the importance of the rate of return in investments and
reviewed the possibility of default and bankruptcy risk. He opined that in an uncertain world,
investors cannot predict exactly what rate of return an investment will yield. However he
suggested that the investors can formulate a probability distribution of the possible rates of
return. He also opined that an investor who purchases corporate securities must face the
possibility of default and bankruptcy by the issuer. Financial analysts can foresee bankruptcy. He
disclosed some easily observable warnings of a firm's failure, which could be noticed by the
investors to avoid such a risk.
PreethiSingh3(1986) disclosed the basic rules for selecting the company to invest in. She opined
that understanding and measuring return md risk is fundamental to the investment process.
According to her, most investors are 'risk averse'. To have a higher return the investor has to face
greater risks. all securities simultaneously and it cannot be reduced through diversification.
Nabhi Kumar Jain6 (1992) specified certain tips for buying shares for holding and also for
selling shares. He advised the investors to buy shares of a growing company of a growing
industry. Buy shares by diversifying in a number of growth companies operating in a different
but equally fast growing sector of the economy. He suggested selling the shares the moment
company has or almost reached the peak of its growth. Also, sell the shares the moment you
realise you have made a mistake in the initial selection of the shares. The only option to decide
when to buy and sell high priced shares is to identify the individual merit or demerit of each of
the shares in the portfolio and arrive at a decision.
Carter Randal7 (1992) offered to investors the underlying principles of winning on the stock
market. He emphasised on long term vision and a plan to reach the goals. He advised the
investors thatto be successful, they should never be pessimists. He revealed thatthough there has
been a major economic crisis almost every year, it remains true that patient investors have
consistently made money in the equities market. He concluded that investing in the stock market
34
should be an un-emotional endeavour and suggested that investors should own a stock if they
believe it would perform well. L.C.Gupta8 (1992) revealed the findings of his study that there is
existence of wild speculation in the Indian stock market. The over speculative character of the
Indian stock market is reflected in extremely high concentration of the market activity in a
handful of shares to the neglect of the remaining shares and absolutely high trading velocities of
the speculative counters. He opined that, short- term speculation, if excessive, could lead to
"artificial price". An artificial price is one which is not justified by prospective earnings,
dividends, financial strength and assets or which is brought about by speculators through
rumours, manipulations, etc. He concluded that such artificial prices are bound to crash
sometime or other as history has repeated and proved.
35
CHAPTER 3.
36
Research Methodology
Research design: -In this study descriptive research design is used. As descriptive research
design is the description of state of affairs, as it exists at present. In this type of research the
researcher has no control over the variables; he can only report what has happened or what is
happening. Since the major emphasis was on the discovery of ideas and insights into the facts,
the research design most appropriate must be flexible enough to permit the consideration of
many different aspects of a phenomenon.
Sources of data collection :Data collection is intact, the most important aspect of a survey.
While collecting data utmost care must be exercised because data constitute the foundation on
which the superstructure of statistical analysis is built. If the data are inaccurate and inadequate
the entire analysis may be faulty and the decision taken would be misleading. In the research we
used the primary as well as secondary data. The primary data for the project regarding customer
preference toward investment alternatives were collected through questionnaire. The secondary
37
date for the project regarding customer preference toward investment alternatives were collected
from websites, textbooks and magazines. Datawere collected using structured questionnaires.
The sample size of area is analyzed by toolsselected for this study was one hundred were
randomly selected from the town. Data were analyzed using descriptive statistics .The research
consisted of two stages. In the first stage, a survey was conducted to collect the data about the
people. The second stage involved analysis of the data collected in the first stage.
Sampling Technique:
Simple random
Sample Size:
150 Respondents
Area of Study:
Gurgaon
38
Significance of the study Savings form an important part of the economy of any nation.
With the savings invested in various options available to the people, the money acts as the driver
for growth of the country. So before investing the funds people must know about the various
investment alternatives and also know about the various aspects like risk, return, maturity etc. so
this study helps the investors to know about the various investment alternatives. In this research
study we tried to evaluate that which is the most favorable option in which people like to invest
their savings.
Justification of study This study is helpful for the investors to know the various investment
alternatives which are available in the market. This study also analyzes the preference of
customer toward investment alternatives and why they invest in any particular alternatives. This
study also shows the various objectives for investment .To study the attitude of the respondents
towards different investment choices. This study cannot be clearly explained with the help of
books so it required practically work to explain it effectively.
OBJECTIVE OF REAEARCH
The main objective of the study or research is to know about Investors Attitude
Towards capital Market.
1. To identify the main reasons for investing in stock market.
2. To identify which type of securities and sector is preferred most by the
investors.
3. To study the awareness about the capital market.
39
CHAPTER 4.
40
No. Of respondents
18-30
30-45
49
45-55
48
Above 55
14
TABLE 1
41
45-55; 40%
30-45; 41%
Analysis: the above diagram shows that out of 120 respondent 9 respondents were from 18 to 30
age group, 49 respondents were from 30 to 45 age group, 48 respondents were 45 to 55 age
group and 14 respondents were from above 55 age group.
No. Of respondents
Businessman
50
Serviceman
16
Professional
47
Any other
7
TABLE 2
42
Occupation
60
50
50
47
40
No. Of respondents
30
20
10
16
7
Any other
Analysis the above diagram shows that out of 120 respondent 50 are businessman, 16 are
serviceman, 47 are professional and 7 belong to other category.
No. Of respondents
50000-100000
17
100000-300000
30
Above 300000
73
TABLE 3
43
Annual Income
80
70
73
60
50
No. Of respondents
40
30
30
20
10
0
17
50000-100000
100000-300000
Above 300000
Analysis the above diagram shows out of 120 respondents that 73 respondent belongs to above
300000 annual income . 30 belongs to 100000-300000 and other belongs to 50000-100000
No. Of respondents
Primary
70
Secondary
30
Both
20
TABLE 4
44
Type of Market
Both; 17%
Secondary; 25%
Primary; 58%
Analysis:the above diagram depicts that 100 respondents said that they invest in primary market,
30 respondents said that they invest in secondary market and 20 respondents said that they invest
in both markets i.e. Primary as well as secondary.
No. of Respondent
39
51
9
17
4
TABLE 5
45
Securities Prefered
60
50
40
51
39
no.of respondent
30
20
17
10
0
9
equity
4
other
ANALYSIS :the above chart depicts that investors [refer to invest in mutual funds followed by
equity shares. Among the 120 respondent 51 have choose mutual fund and 39 prefer to invest in
equityshares, 17 prefer debentures , 9 prefer derivativesand 4 other kind of securities.
No. Of respondents
News
16
Broker
89
Tv
Internet
Any other
46
Sources of Information
100
90
80
70
60
50
40
30
20
10
0
89
No. of Respondents
16
News
Broker
6
TV
2
Internet
7
Any Other
Table 6
Analysis:the above diagram shows that 89 respondents i.e. Maximum from total 120 respondents
said that they got the knowledge from their brokers, 16 respondents said that they got knowledge
about primary market from news/newspaper, 6 respondents got information through tv, 2 from
internet and 7 respondents said any other sources for information.
Q7)In which of the following you would like to invest your money?
Like to invest
No. Of respondents
Private co.
43
Govt. Co.
18
Semi govt.
37
Any other
22
TABLE 7
47
Prefered Companies
50
45
40
43
35
37
30
No. of Respondents
25
20
22
18
15
10
5
0
Private Co.
Govt. Co.
Semi Govt.
Any Other
Analysis:the above diagram depicts that 43 respondents said that they like to invest in private
companies, 18 respondents said govt. Companies, 37 respondents said they like to invest in semigovt. Companies and 22 respondents said they like to invest in any other companies
No. Of respondents
Insurance
14
Infrastructure
40
Telecom
33
It sector
23
Any other
10
TABLE 8
48
Preferred Sectors
45
40
40
35
33
30
No. Of respondents
25
23
20
15
10
14
10
5
0
It sector
Any other
Analysis:the above diagram shows that 14 respondents said that they invest in insurance sector,
40 respondents said they invest in infrastructure sector, 33 respondents said that they invest in
telecom sector, 23 respondents said that they invest in it sector and 10 respondents said that they
invest in any other sectors.
No.of respondents
0-20%
49
20-35%
32
35-50%
29
Above 50%
10
TABLE 9
49
% of Income Invested
Above 50%; 8%
35-50%; 24%
0-20%; 41%
20-35%; 27%
Analysis:the above diagram shows that 49 respondents said that they invest upto 20% of their
income in primary market, 32 respondents said that they invest upto 20% to 35% of their income,
29 respondents said they like to invest in 35% to 50% of their income, and 10 respondents said
that they invest above 50% of their income in primary market.
50
No.of respondents
Rs.10000 to 50000
41
Rs.50000 to 1 lac
58
21
TABLE 10
Portfolio limit
Analysis: the above diagram shows that 41 respondents said that their yearly portfolio has been
between Rs.10000 to 50000, 58 respondents said that their yearly portfolio has been between
Rs.50000 to 100000 and 21 respondents said that their yearly portfolio has been above Rs.
100000.
51
No. Of respondents
Short term
96
Long term
24
TABLE 11
Invetment period
120
100
96
80
No. Of respondents
60
40
20
0
24
Short term
Long term
Analysis:the above diagram shows that 96 respondents said that they invest for short time and 24
respondents said that they invest for long term.
52
Q12) How much return has been earned from Capital Market?
%age of return
No. Of respondents
10-50%
63
50-100%
31
100-150%
18
150-200%
8
TABLE 12
70
63
60
50
40
31
30
18
20
10
0
10-50%
50-100%
100-150%
150-200%
No. Of respondents
Analysis:the above diagram shows that 63 respondents said that they earn 10-50% return from
their primary market investments, 31 respondents earn 50-100% return, 18 respondents earn 100
to 150% return and 8 respondents said that they earn between 150 to 200% return from primary
market.
No. Of respondents
Past experience
20
Company results
58
Any other
32
TABLE 13
No. Of respondents
70
60
58
50
No. Of respondents
40
30
20
32
20
10
0
Past experience
Company results
Any other
Analysis: the above diagram shows that 22 respondents said that they use their past experience
for new investment into primary market, 58 respondents said they watch current results of
companies in which they want to invest and 32 respondents said they watch other things
whenever they go for investment in primary market.
54
No.of respondent
42
48
27
3
Table 14
No.of respondent
60
50
40
48
42
30
20
27
No.of respondent
10
0
Analysis the above diagram shows that maximum of the respondent invest in the capital market
for capital appreciation. Out of 120 respondent 42 invest for profit, 48 for capital appreciation,27
for tax benefit and 3 for others.
55
No of respondent
30
44
21
9
16
Table 15
No of respondent
50
45
44
40
35
30
25
30
20
15
No of respondent
21
16
10
5
Analysis the above diagram represents that 44 respondent get agreement facility from their
broker, 30 get consultancy, 21 get margin trading, 9 margin landing, and 16 get all facilities from
their brokers.
56
Q)16 what will be the other option for investment, if you will not invest in
capital market?
Sector
No of respondent
Insurance
27
Bank deposit
57
Property
29
Other
7
Table 16
Investment Alternatives
60
57
50
40
No of respondent
30
29
27
20
10
7
0
Insurance
Bank deposit
Property
Other
Analysis the above diagram shows that 57 respondent prefer to invest in bank deposites, 29 in
property, 27 in insurance and 7 in other.
57
CHAPTER 5.
58
FINDINGS
Most of respondents said that they are invested in the stock market and few of them said
that they did not invest in the stock market.
Maximum respondents said that they got the knowledge from their brokers, & some of
them said that they got knowledge about primary market from news/newspaper & very
few respondents got information through tv from internet and any other sources for
information.
retail investor divert their fund from the banking system to the primary market. As the
interest rate of saving account deposit decreased very much.
most of respondents said that they invest less portion of their income in primary market.
Very few investors like to invest major portion of their income in primary market.
Respondents view is that primary market investment is risky. So there is a fear in the
mind of respondents about to invest in primary market.
The study shows that maximum respondents among the sample respondents are getting
information related to the different services from the agents. It implies that most powerful
source of information about services is an agent.
There is a need to bring awareness among the general public about primary market.
59
SUGGESTIONS
On the basis of the market survey conducted has put very interesting findings in the market. The
very first suggestion to the investor is that the best thing for the investors to do to ensure that
they are not cheated in this boom, is to study the prospectus themselves, read various comments
and take their own decision. Investors have to beware as all those who are keen to grab a piece of
the cake of the impending securities boom, are doing so at their cost. Keep in mind three ps
before investing in any securities& three ps are
Promoter
Performance
Price
The next best suggestion to the investor is that they should be steer clear of
securitiess from lesser known industry and focus on offerings by well known
industry leader with quality management and strong financials.
The investor should not follow the securities boom blindly as they can get cheated
as they during nineties securities fiasco.
The companies should make regular contact with his customer through his
marketing executives. This would not only help in strengthening the business
relation but would also help in taking proper feedback of their products.
The majority of customers are price conscious so they should improve or decrease
their price/commission rate.
The companies should concentrate more on the sale promotion activities through
different media.
The market is not well aware of the product line of the companies, so companies
should give full information of there product line to the investors.
60
61
CONCLUSION
This project is based on the study of INVESTORS ATTITUDE TOWARDS CAPITAL
MARKET MARKET. In the today scenario its very important to study the customers
psychological behaviour regarding the various services provided by them.
In the end, i conclude that investor should not invest their hard earned money blindly in the
securities but they should invest their money by taking different safeguards like understand the
company business, who its promoter are, how is its management, its risk factor and pricing of the
issue etc.
Although there is SEBI to protect the investor but the company which follow the legal binding of
the SEBI is not fool proof that the company is a good one.
It has been concluded that on the one hand the customers are somewhat satisfied but on the other
hand, still some improvements are required. So, the broking companies segment is flooded with
the new schemes from new & existing players and moreover, lot many schemes are waiting to hit
the ramp in the coming years.
The main reason behind people not wanting to have investing of a particular company is the
lack of proper information. Moreover, people dont want to come out of cocoon of their
seemingly uncomplicated life. They seem satisfied with their old ways and are wary of
modern, new age products.
The most important factor that attracts the people towards investment in primary market is
the communication factor. This is the most important reason and for this, people feel
persuaded to buy it.
62
63
CHAPTER
6.
BIBLIOGRAPHY
WWW.INVESTOPEDIA.COM
64
2.
WWW.BSEINDIA.COM
3.
WWW.NSEINDIA.COM
4.
WWW.INDIATIMES.COM
CHAPTER 7.
65
QUESTIONNAIRE
PERSONAL DETAILS
NAME -----------------------------------------------------------------------------------------------EMAIL -----------------------------------------------------------------------------------------------ADDRESS--------------------------------------------------------------------------------------------Q1.) Which age groupdo you belong?
18-30
30-45
45-55 above 55
Q3.)
Businessman
Serviceman
Professional
Any other
Q4)
Q5)
Q6.)
Q7)
No
Secondary MarketBoth
mutual fund
Debentures
other
derivatives
Broker
TV
Q8)
Q9)
Govt. Co.
Semi Govt.
Any other
Infrastructure
Telecom
IT
Sector
Any Other
67
Q10)
Q11)
Rs.50000 1 Lac
Above 1 Lac
Q13)
Q12)
20-35%
50%-100%
100%-150%
150% - 200%
capital appreciation
Tax benefit
other
Margin Trading
Agreement
All
Q16) If you did not invest in capital market what will be the other option ?
68
Insurance
bank deposits
Property
Other
Q.17) What are the factors that affects you to invest in capital market ?
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69