A REPORT ON

STUDY OF INVESTORS IN THE INDIAN CAPITAL MARKET

BY
ASHMITA GARG
ROLL NO : 10204

A REPORT ON
STUDY OF INVESTORS IN THE INDIAN CAPITAL MARKET

1
 BY
ASHMITA GARG
ROLL NO : 10204

A Report submitted in partial fulfillment of the requirements of

Post Graduate Diploma in Management

VIGNANA JYOTHI INSTITUTE OF MANAGEMENT

Contents
ACKNOWLEDGEMENTS.........................................................................................4
LIST OF TABLES....................................................................................................5
LIST OF FIGURES..................................................................................................5
Summary....................................................................................................................6
INTRODUCTION:..........................................................................................................8
OBJECTIVES................................................................................................................9
SCOPE & METHODOLOGY...........................................................................................9
LIMITATIONS...............................................................................................................9
INTRODUCTION TO INVESTMENT:.............................................................................10
DIFFERENCE OF THINKING OF MEN AND WOMEN IN INVESTING...............................13
FINDINGS AND INTERPRETATIONS............................................................................14

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Participation of investors:.................................................................................................18
CONCLUSION............................................................................................................26
APPENDICS:..............................................................................................................28
STUDY OF INVESTORS IN THE INDIAN CAPITAL MARKET.............................................28
SECTION A: PERSONAL DETAILS OF INVESTORS.......................................................28
SECTION B: RISK PROFILE OF INVESTORS.................................................................29
SECTION C: INVESTMENT PROFILE...........................................................................30
SECTION D: INVESTORS EXPERIENCE.......................Error! Bookmark not defined.

BATCH-XVIII
ACKNOWLEDGEMENTS
I hereby convey my deep acknowledgement to all those who made it possible for me to complete
this project, by extending their support and continuous co-operation.
I would like to acknowledge the consistent encouragement extended by Dr. Kamal Ghosh Ray,
Director and Dr. Ch. S. Durga Prasad, Dean-Academic Planning of Vignana Jyothi Institute of
Management.
My sincere gratitude to Mr.M.Ramesh and Mr.Durga Prasad whose constant guidance, efforts,
heartfelt support, suggestions and consideration helped me in the successful completion of this
project.
Finally, I extent my sincere thanks to all respondents who were kind enough to spare time and
provide valuable information.

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4
LIST OF TABLES

Table Title Page no

Table 1.1 Annual Income Group 7
Table 1.2 Average age of investors 13
Table 1.3 Correlation between age and 14
investment
Table 1.4 Participation of investors 15
Table 1.5 Duration of investment 16
Table 1.6 Source of investment 17
Table 1.7 Ranking of instrument based 18
on risk

LIST OF FIGURES
FIGURE PAGE NO
Figure 1.1 13
Figure 1.2 14
Figure 1.3 15
Figure 1.4 16
Figure 1.5 17
Figure 1.6 18
Figure 1.7 19

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Executive Summary

Financial investment can be defined as “the sacrifice of present value for uncertain future
award.” The option of investing our saving is continually increasing. People have an option of
investing in various instruments like shares, bonds, debentures, mutual funds to name a few.
People invest in different instruments depending on their objectives. In this report conclusions
are drawn based on a survey conducted through a questionnaire and a sample of 60 people have
been considered. In this study an attempt have been made to analyze investors profile and
perception of investors while investing in stock market. Factors that drives an investor to make
an investment are considered and also an attempt have been made to analyze the effect of
demographics on investment. Age has a significant impact on investment decision. It is found
through the survey that males invest more than the females. Most of the investors agree with the
statement that higher risk will yield to higher return.

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INTRODUCTION:

“Stock exchange means anybody or individuals whether incorporated or not, constituted for the
purpose of assisting, regulating or controlling the business of buying, selling, or dealing in
securities". It is an association of member broker for the purpose of self regulation &protecting
the interest of its members. The stock exchange provides facilities for listing of shares of
companies' viz. equities, prêt shares, bonds, debentures etc. trading of these listed shares imparts
liquidity to the shares, so that investment is promoted & saving flow into investment.

Financial investment can be defined as "the sacrifice of present value for uncertain future award"
it is the allocation of money to assets that are expected to yield some gain & capital growth over
a period of time. Investment has two attributes namely time & risk. Investing in various types of
assets is an interesting activity that attracts people from every walk of life irrespective of
occupation, economic status, education etc. when a person has more money than he requires for
current consumption, he would be coined as potential investor. investor implies that a party
purchases & holds assets in hopes of achieving capital gains, not as a profession or short term
gains. The objective of the investor is o minimize the risk & maximize the return.

The option of investing the savings are continuously increasing, yet every single investment
vehicle can be easily categorized according to three fundamental characteristics-safety, income,
and growth-which also corresponds to investors objectives. The investors get the income from
the dividend which also leads to capital appreciation. The liquidity& safety of an investment will
depend upon the marketability& credit rating of the borrower, namely, the company or issuer of
securities. These chrematistic varies between securities. An investor is also concerned in having
a tax plan to reduce his tax commitments so as to max.

The nature of investment namely the debt instrument like equity or pref shares, also determines
risk. The risk of variability of returns is more in the case of ownership capital as the returns vary
with the net profit after all the commitments are made. Risk & return has an inverse relationship:
more risk will lead to high return& less risk will yield low returns. Therefore an investor would
in general like to analyze the risk factors and a thorough knowledge of the risk helps him to plan
his portfolio in such a manner so as to minimize risk associated with the investment.

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OBJECTIVES
1. To study the concept of investment and risk.

2. To study the factors that drives a person to make investments.

3. To study the investors profile and perception of investing in stock market.

4. To analyze the investors experience while dealing in the stock market.

SCOPE & METHODOLOGY

The study includes uses of both primary and secondary data.

Primary Source

The study of investors experience is conducted through a questionnaire served to a sample of 60

investors. Information about the demographics, profile, risk, investment experience is collected
and analyzed.

Secondary Source

Secondary data is used to review and understand the concept of investment and investors
perception towards investment. Information is collected from various secondary sources which
include internet and articles.

LIMITATIONS
1. The analysis & interpretations made completely relies on the information given by the
respondents and thus limits the breadth of the study.

2. The sample size of the study was restricted to 60 investors.

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INTRODUCTION TO INVESTMENT:
Investment is the sacrifice of certain present value for the uncertain future reward. It is the
commitment of money or capital to purchase financial instruments or other assets in order to gain
profitable returns in the form of interest, income {dividend}, or appreciation of the value of the
instrument. It is related to saving or deferring consumption. Investment is involved in many
areas of the economy, such as business management and finance no matter for households, firms,
or governments. An investment involves the choice by an individual or an organization, after
some analysis or thought, to place or lend money in a vehicle, instrument or asset, such
as property, commodity, stock, bond , financial derivatives (e.g. futures or options), that has
certain level of risk and provides the possibility of generating returns over a period of time.

Investment comes with the risk of the loss of the principal sum. The investment that has not been
thoroughly analyzed can be highly risky with respect to the investment owner because the
possibility of losing money is not within the owner's control. Investors in securities will, often
from time to time, reappraise and revaluate their various investment commitments in the light of
new information, changing trends, expectations and ends.

INVESTORS:

An investor is any party that makes an investment. An individual who commits money to
investment products with the expectation of financial return. Generally, the primary concern of
an investor is to minimize risk while maximizing the return.

OBJECTIVES OF INVESTORS:

The options for investing our saving are continually increasing, yet every single investment
vehicle can be easily categorized according to the three fundamental characteristics- safety,
income and growth-which also correspond to types of investor objectives. While it is possible for
an investor to have more than one of these objectives, the success of one must come at the
expense of others. Here we examine these three types of objectives, the investments that are used
to achieve them and the ways in which investors can incorporate them in devising a strategy.

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SAFETY:

Perhaps there is truth to the axiom that there is no such thing as a completely safe and secure
investment. yet we can get close to ultimate for our investment funds though the purchase of
government-issued securities in stable economic systems, or through the purchase of the highest
quality corporate bonds issued by the economy’s top companies .such securities are arguably the
best means of preserving principal while receiving a specified rate of return.

The safest investment are usually found in the money market and include such securities as
treasury bills(T-bills),certificates of deposit, commercial paper or bankers acceptance slips; or in
the fixed income (bond)market in the form of municipal and other government bonds ,and in
corporate bonds. The securities listed above are ordered according to the typical spectrum of
increasing risk and, in turn, increasing potential yield. To compensate for their higher risk
corporate bonds return a greater yield than T-bills.

It is important to realize that there’s an enormous range of relative risk within the bond market:
at one end are government and high-grade corporate bonds, which are considered some of the
safest investments around. At the other end junk bonds, which have a lower investments grade,
perhaps possess more risk than some of the more speculative stocks? In other words ,its incorrect
to think that corporate bonds are always safe, but most instruments from the money market can
be considered very safe.

INCOME:

However, the safest investment is also the ones that are likely to have the lowest rate of income
returns, or yield. Investors must inevitably sacrifice a degree of safety if they want to increase
their yields. This is the inverse relationship between safety and yield: as yield increases, safety
generally goes down, and vice versa.

In order to increase their rate of investment return and take above that of money market
instruments or government bonds, investors may choose to purchase corporate bonds or
preferred shares with lower investment ratings.

GROWTH OF CAPITAL:

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This discussion has thus been concerned only with safety and yield as investing objectives, and
has not considered the potential of other assets to provide a rate of return from an increase in
value, often referred to as a capital gain. Capital gains are entirely different from yield in that
they only realized when the security is sold for price that is higher than the price at which it was
originally purchased. (Selling at a lower price is referred to as a capital loss.)Therefore, investors
seeking capital gains portfolio, but rather those who seek the possibility of longer-term growth.
Growth of capital is most closely associated with the purchase of common stock, particularly
growth securities, which offer low wields but considerable opportunity for increase in value. For
this reason, common stock generally ranks among the most speculative of investments as their
return depends on what will happen in an unpredictable future.

SECONDARY OBJECTIVES

Tax minimization:

An investor may pursue certain investments in order to adopt tax minimization as a part of his or
her investment strategy. A highly paid executive, for example, may want to seek investments
with favorable tax treatment in order to lessen his or her overall income tax burden.

Marketability and liquidity:

Not all the investments are liquid, which means they cannot be immediately sold and converted
into cash. Achieving a degree of liquidity, however, requires the sacrifice of a certain level of
income or potential for capital gains.

Common stock is often considered the most liquid of all investments, since it can usually be sold
within a day or two of the decision to sell. Bonds can also be fairly marketable, but some bonds
are highly illiquid, or non-tradable, possessing a fixed term. Similarly, money market
instruments may only be redeemable at the precise date at which the fixed term ends. If an
investor seeks liquidity, money market assets and non-tradable bonds are not likely to be held in
his or her portfolio.

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DIFFERENCE OF THINKING OF MEN AND WOMEN IN
INVESTING
Men and women do not think in the same way. Men mostly focus on one task, while women can
easily multitask. When we talk about investment same thing happens in it. Most men have a
preference to make large, valiant investments with higher risk, despite the fact that most women
favor to expand their holdings and presuppose lower risk. It is their differences in thinking about
money that can be the foundation of a different investment style between men and women.

When it comes to choosing investments, women have a tendency to be more commercially

observant than men are. In spite of lamenting, the superfluous cost of living women take
advantage of their knowledge to make investment preference. When it comes to finding money
to invest then also women are more creative. Women are most proficient at finding bits of money
here and there because women know little bits adds up to a lt. there are now several online
investment companies that will allow for the investment of small amounts of money instead of
requiring large initial deposit. Add on the small amounts of money that can be “found” through
creative shopping and saving, and u will be well on your way to healthy bank account-the
woman’s way.

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14
 ANNUAL INCOME GROUP

PARTICULARS BELOW Rs.3,00,000- ABOVE

Rs.3,00,000(20) Rs.5,00,000(20) Rs.5,00,000(20)

GENDER:
Male 70% 60% 70%
Female 30% 40% 30%
ACADEMIC
QUALIFICATION:
Under graduate
30% - -
Graduate
40% 20% 20%
Post graduate
30% 40% 20%
Professional
- 40% 60%

OCCUPATION:
Student - 10% -
Service 30% 65% 20%
Business - 25% 70%
Retired 30% - -
Homemaker 40% - 10%

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FINDINGS AND INTERPRETATIONS:

Table 1.1

Average age of investors

AGE NO OF INVESTORS

20-25 2

25-30 5

30-35 7

35-40 8

40-45 23

45-50 6

50-55 3

55-60 6

Table 1.2

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INTERPRETATION:

Average age of investors (mean) is found be 39.25 years.

Mode lies in the range of 40-45 years. Thus, the people ageing in between 40-45 years are
maximum age group of investors.

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AGE NUMBER OF INVESTORS

22 2

28 5

32 4

34

3
37

8
41

5
42

8
44

10
46

6
51

3
56

60 2

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The correlation of above data comes to 0.933. Therefore the correlation is positive. Thus, it
indicates that the age of the investors have a significant impact on the investment decision.

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RISK PROFILE OF INVESTORS

The investors of sample are analyzed on factors such as duration of investment in stock market,
the kind of investors and their objective of investment.

Participation of investors:
From the graph it can be inferred that on the whole a majority of investors have entered the
stock market after the year 2000 since more facilities like online trading has been initiated to
promote more investment.

YEAR NO OF PARTICIPANTS

Before 1990 14

1990-2000 10

2000-2010 36

Table 1.4:

Figure 1.1

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DURATION OF INVESTMENT:
It can be inferred from the graph that investors are more of long term nature i.e. around 80%
while there are only 20% of investors investing in short term trading activities.

DURATION OF NO. OF RESPONDENTS

Table 1.5 INVESTMENT

Long term 48

Short term 12

Figure 1.2

INVESTMENT PROFILE
The investors of the sample are analyzed upon factors such as proportion of investors, source of
fund, factors affecting their decision.

PROPORTION OF INVESTMENT IN INSTRUMENT:

Figure 1.3

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It can be inferred from the above graph that shares form a major part of investor’s portfolio i.e.
60% while second preference is given to mutual funds due to its stability of income and less
risky instruments. Debenture form 10% of the portfolio while bonds form 5% since the income
earned is fixed and are fully secured instruments. Therefore, the investors try to diversify the risk
of investment by investing in various instruments.

SOURCE OF INVESTMENT:

People can invest in the capital market through various sources. These sources include own
funds, owed funds or it can be a combination of both.

Table 1.6

SOURCE OF INVESTMENT PERCENTAGE

Own funds 17%

Borrowed funds 13%

Combination of both 70%

Figure1.4

it can be interpreted from the above graph that a major source of funds of investment is
combination of both borrowed and owned funds i.e. 70% which is majority invested by business
men, service investors; while home makers, retired major invest by the way of own funds i.e.
17%, and borrowed funds i.e. 13% are used by professional and businessman.

RISK PROFILE OF INVESTOR:

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The main objective of investors for availing portfolio management service is growth in capital
invested and generation of high amount of regular over long term. The investors are requested to
rank the instrument bearing more risk compared to others dependent upon their preference here 1
is for higher risk. It can be inferred that investors from all the three income group consider equity
shares i.e., the instrument bearing the highest risk followed by preference shares, fixed deposit
and finally debentures.

Table 1.7

Rank 1 (no of Rank 2(no of Rank 3(no of Rank 4(no of

people) people) people) people)

Equity Shares 55 5 - -

Preference shares 5 55 - -

Fixed deposit - - 45 15

Debentures - - 15 45

INVESTORS EXPERIENCE
In this section the investors were analyze based on their experience on stock market, they were
asked to opine about stock market trends, factors influence investment decision, risk factor
involved and returns generated.

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VOLATILITY OF STOCK MARKET
Stock volatility refers to the potential for a given stock to experience a drastic decrease or
increase in value within a predetermined period of time. Investors evaluate the volatility of stock
before making a decision to purchase a new stock offering, buy additional shares of a stock
already in the portfolio, or sell stock currently in the possession of the investor. The idea behind
understanding stock volatility is to arrange investments so that a maximum return with minimal
opportunities for loss is achieved.
Figure 1.5

It can be inferred from the graph that a major portion of investors i.e.63% are of the opine that
the stock market are volatile in comparison to 17% of investors who consider it to be highly
volatile. While 20% consider it to be stable.

INVESTMENT TO REDUCE TAX COMMITMENT

From the graph it can be interpreted that 67% of investors use tax plan to reduce tax commitment
by investing in stock while 33% are of opine investment in stock does not maximize home
income.

Figure 1.6

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INVERSE RELATIONSHIP BETWEEN RISK AND RETURN
It can be inferred from the graph that 90% of investors agree that more risk will lead to high
return and less risk will yield low return. While 10% of the investors disagree with the statement
as they are of opine that portfolio diversification will lead to high return with low risk.

Figure 1.7

CONCLUSION
Financial investment can be defined as “the sacrifice of present value for uncertain future
award.” It is the allocation of money to assets that are expected to yield some gain and capital
growth over a period of time. Investment has two different attributes namely time and risk. When
a person has more money than he requires for current consumption’ he would be coined as
potential investor. Investor implies that a party purchases and holds assets in hope of achieving
capital gains, not as a profession or short term gain. The objective of the investor is to minimize
the risk and maximize the return. Investment vehicle can be easily categorized according to three
fundamental characteristics-safety, income, and growth-which also corresponds to investors
objectives. The objective of this project is to study the investors experience and behaviors in the
risky stock market. It also involves the study of investors experience in the stock market. In
order to obtain information and collect data for setting off the objectives, questionnaire was
supplied to investors where they were asked to answer simple questions with multiple choices
according to their preferences. Secondary data ia also collected from information available on
the internet.

Based on the presentations and analysis the following conclusions have been drawn:

The demographic profile of the investors is undergoing a significant change. Earlier, only
businessmen and retired people used to invest. But these days even students, homemakers and
people in service are also investing in the stock market.

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It was analyzed that investment in the stock market from the past ten years has increased.

On the whole men participate more than women.

To diversify the risk of investment it has been inferred that shares form a major part of investors
portfolio while second preference is given to mutual funds due to its stability of income and less
risky instruments then followed by debentures and government bonds since the income earned is
fixed and are fully secured instruments.

It can be inferred that 90% of investors agree that more risk will lead to high return and low risk
will yield to low return. While 10%disagree with the statement as they are of opine that
portfolio diversification will lead to high return with low risk.

The following are the suggestions:

- Women should be encouraged to participate by giving a special consideration.

- Make use of portfolio management to diversify the risk of investment by investing in different
instruments.

- In order to make successful investment decision you should be well aware of different trends of
the market and their effects on future returns namely price and movement.

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APPENDICS:

STUDY OF INVESTORS IN THE INDIAN CAPITAL MARKET

* Required

Top of Form

SECTION A: PERSONAL DETAILS OF INVESTORS

Age *

Gender

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• Male
• Female

Academic Qualification

• Under-Graduate

• Graduate

• Post-Graduate

• Professional

Occupation

• Student

• Service

• Business

• Retired

• Homemaker

Family Income per Year

• Below Rs.1,00,000

• Rs.3,00,000-Rs.5,00,000

• Above Rs.5,00,000

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 Section B: Risk Profile Of Investors

When did you start investing in the stock market instrument {mention the month and the

year}

The short term trading activities have got their risk implications.what kind of an investor
are you?

• Long-Term

• Short-Term

The following are the three fundamental objectives of investment, you need to rank them
{1 is for most preferred}

1 2 3

Safety

Income

Growth

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 Section C: Investment Profile

In what proportion is your investment distributed in the following instruments? Shares,

debentures, mutual funds,govt bonds {mention in percentages}

Which of the below source of funds do you use for investment

• Own Funds

• Borrowed Funds

• Combination Of Both

According to you which instrument bears more risk compared to other instrument? You
need to rank them { rank 1 is for the most risky instrument}

1 2 3 4

Fixed Deposits

Equity-Shares

Debentures

Preference-Shares

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 1 2 3 4

Section D: Investors experience

What is your opinion about stock market trends?

• Volatile

• Stable

• Highly Volatile

Do you use tax plan to reduce tax commitment by investing in stock so as to maximize
home income?

• Yes

• No

What do you think has influenced your investment decision?

• Availability Of Funds

• Liquidity

• Tax Concessions

• Return On Investment

• Availability Of Investment Opportunities

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• Attitude Towards Risk

Risk and return has an inverse relationship. More risk will lead to high return and less risk
will yield low return. Do you agree with the statement?

• Yes

• No

REFERENCES:
http://www.scribd.com/doc/22742492/A-STUDY-ON-INVESTOR%E2%80%99S-
PERCEPTION-TOWARDS-ONLINE-TRADING

www.wikipedia.com

findarticles.com/p/articles/mi_6771/is_3_4/ai_n31592101

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