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A STUDY ON THE IMPACT OF STOCK MARKET FLUCTUTATIONS ON INVESTORS

By

AMMU ASHOK
(REG. NO. 21007631007) Of

PANIMALAR ENGINEERING COLLEGE


A PROJECT REPORT Submitted to the

FACULTY OF MANAGEMENT STUDIES


In partial fulfillment of the requirements For the award of the degree Of

MASTER OF BUSINESS ADMINISTRATION June 2009 Anna University Chennai: 600025

PANIMALAR ENGINEERING COLLEGE


(A CHRISTIAN MINORITY INSTITUTION) JAISAKTHI EDUCATIONAL TRUST BANGALORE TRUNK ROAD VARADARAJAPURAM, NASARATHPETTAI, POONAMALLEE, CHENNAI - 602 102.

DEPARTMENT OF MANAGEMENT STUDIES

CERTIFICATE
This is to certify that, this project report titled A STUDY ON THE IMPACT OF STOCK MARKET FLUCTUTATIONS ON INVESTORS is bonafide work of the Miss.AMMU ASHOK, who carried out the research under my

supervision. Certified further, that to the best of my knowledge the work reported here in does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on earlier occasion on this or any other candidate.

Internal Guide

Head of the Department

ACKNOWLEDGEMENT
My sincere thanks to Our Honourable Founder & Chairman Dr. JEPPIAAR, M.A., Ph.D, for his sincere endeavor in educating me in his premier institution. I would like to express my deep gratitude to Our Beloved Secretary and Correspondent Dr. P. CHINNADURAI, M.A.,M.Phill, Ph.D, for his kind words and enthusiastic motivation which inspired me a lot in completing this project and I express my sincere thanks to Our Directors Mrs. C. VIJAYA RAJESWARI and Mr. SAKTHI KUMAR, M.E., for providing me with the necessary facilities for completion of the project I also express my gratitude to Our Principal Dr. R. RAMAKRISHNAN, M.E, Ph.D, who helped me in completing the project. I would like to express my gratitude to our Head Of The Department Mrs.Dr.V.MAHALAKSHMI M.L.,MBA.,Ph.D for her valuable guidance, ideas and encouragement for the successful completion of the project. I would like to render my deep gratitude to my guide Mr.C.Dhasarathan M.A.,M.Phil.,M.Ed.,MBA.,Ph.D.,Assistant would never have seen the light of the day. I take this opportunity to acknowledge the help, guidance and co operation I received from the top management of SHAREKHAN LTD. My special thanks to RSM: Mr.Sreenivasan, CSM Mr.Thulasiraman, HR: Mr.Vivekanandan Mr. Arun, Mr.Senthil Kumar and Mr.Selvakumar. Last but not the least my sincere thanks to my family members and friends for their timely help during the project work Professor Department of Business Administration, without whose assistance proper orientation and guidance, this project

Chapter No

Title Abstract List of Tables List of Charts

Page No

Chap 1 1.1 1.2 1.3 Chap 2 2.1 2.2 2.3 2.4 2.5 Chap 3 3.1 3.2 3.3 3.4 3.5 Introduction Industry Profile Company Profile

INTRODUCTION
1 2 8

DEVELOPMANT OF MAIN THEME


Need of the Study Objective of the Study Scope of the Study Limitations of the Study Review of Literature
15 16 17 18 19

ANALYSIS, INTERPRETATION AND CONCLUSION


Research Methodology Analysis and Interpretation Findings Suggestion Conclusion
23 31 80 83 84

APPENDIX
Questionnaire Bibliography

S.NO 3.2.1 3.2.2 3.2.3

LIST OF TABLES TABLE SHOWING THE RESPONDENTS OCCUPATION TABLE SHOWING THE RESPONDENTS ANNUAL INCOME TABLE SHOWING THE RESPONDENTS INVESTMENT IN STOCK MARKET FOR THE NEXT ONE YEAR TABLE SHOWING THE RESPONDENTS STOCK EXCHANGE PREFERENCE TABLE SHOWING THE RESPONDENTS TRADING PERIOD IN STOCK MARKET TABLE SHOWING THE RESPONDENTS PORTFOLIO SIZE TABLE SHOWING THE CORRELATIONAL ANALYSIS BETWEEN THE TIME DURATION AND THE INVESTORS PORTFOLIO SIZE TABLE SHOWING THE RESPONDENTS AIM WHILE INVESTING IN STOCK MARKET TABLE SHOWING THE RESPONDENTS SECTOR PREFERENCE TOWARDS INVESTMENT TABLE SHOWING INVESTMENT THE

PAGE NO. 31 33 35

3.2.4 3.2.5 3.2.6 3.2.7 3.2.8 3.2.9 3.2.10 3.2.11

38 40 42 44 45 47

RESPONDENTS 50

3.2.12 3.2.13

TABLE SHOWING THE CORRELATIONAL 52 ANALYSIS BETWEEN PERFOMANCE OF DIFFERENT SECTORS AND THE FREQUENCY OF INVESTMENT TABLE SHOWING THE RESPONDENTS SOURCE OF 53 INFORMATION TO INVEST IN THE STOCK MARKET TABLE SHOWING THE RESPONDENTS 55 INVESTMENT DECISION DURING RECESSION PERIOD TABLE SHOWING HOW FAR THE INVESTMENT DECISION HAS CHANGED DURRING RECESSION PERIOD TABLE SHOWING THE IMPACT OF CURRENT SITUATION ON THE STOCK MARKET TABLE SHOWING THE PREFERANCE OF THE INVESTORS TO CHOOSE STOCK MARKET TABLE SHOWING HOW FAR DO THE INVESTORS 57

3.2.14

3.2.15 3.2.16 3.2.17

58 60 62

S.NO 3.2.1

LIST OF CHARTS CHART SHOWING THE RESPONDENTS OCCUPATION CHART SHOWING THE RESPONDENTS ANNUAL INCOME CHART SHOWING THE RESPONDENTS INVESTMENT IN STOCK MARKET FOR THE NEXT ONE YEAR CHART SHOWING THE RESPONDENTS STOCK EXCHANGE PREFERENCE CHART SHOWING THE RESPONDENTS TRADING PERIOD IN STOCK MARKET

PAGE NO 31

3.2.2 3.2.3

33 35

3.2.4 3.2.5 3.2.6

38 40

CHART SHOWING THE RESPONDENTS PORTFOLIO 42 SIZE CHART SHOWING THE RESPONDENTS AIM WHILE INVESTING IN STOCK MARKET CHART SHOWING THE RESPONDENTS SECTOR PREFERENCE TOWARDS INVESTMENT CHART SHOWING THE RESPONDENTS INVESTMENT 45 47 50

3.2.7 3.2.8 3.2.9 3.2.10

CHART SHOWING THE RESPONDENTS SOURCE OF INFORMATION TO INVEST IN THE 53 STOCK MARKET CHART SHOWING THE RESPONDENTS INVESTMENT DECISION DURING RECESSION PERIOD 55

3.2.11

3.2.12

CHART SHOWING THE IMPACT OF CURRENT 58 SITUATION ON THE STOCK MARKET

3.2.13

CHART SHOWING THE PREFERANCE OF THE 60 INVESTORS TO CHOOSE STOCK MARKET CHART SHOWING THE RESPONDENTS RISK FACTOR DURING STOCK MARKET FLUCTUATIONS CHART SHOWING THE RESPONDENTS INVESTMENT IN TERMS OF RETURNS 63

3.2.14

3.2.15

68

ABSTRACT
The study was made at Share Khan Ltd on the topic The Impact of Stock Market fluctuation on the Investors. Indian economy is growing rapidly; therefore there is a very good atmosphere for the investment activities. India stands 23rd place in the world in case of capitalization of Investible funds. Although we have growing economy, the impact of global market recession makes the share market fluctuates. This has motivated the necessity to take up this study on the Impact of Stock Market Fluctuations on Investor.

The whole survey is conducted in Share Khan Ltd.The investors who invest in different Investment avenues are the major respondents in my study. Investment is not a normal man business because it includes disciplines like Mathematics ,Statistics ,Accounts ,Economics and Behavioral science .In India the growth of Stock Market is realized in greater parts these days and Investment is one alternative to make money.

The research design followed was Descriptive with Questionnaire model with Sample size of 150 Investors. Graph were used to exhibit the opinion of Investors in a defined way and Statistical tools like Interval Estimation, Percentage Analysis, Pearsons correlation test, Chi-square test, One-Way ANOVA and Rank Correlation were used for effective analysis.

The findings, suggestions and conclusion are given based on Investors perception through the values obtained from the calculation.

1.1 INTRODUCTION
The main approach of this project is to study the Impact of Stock market fluctuation on the Investors.

Investment is both an Art and science. One makes Investment for a higher return than what he can get by keeping the money in the Commercial or Co-Operative bank. In the finance field it is a common knowledge that money or finance is scarce and that the investors try to maximize their return if the risk is also higher. Risk and Return go together and they have a trade-off. All Investments are risky to some degree or others. The art of Investment is to see that the return is maximized with the minimum of risk, which is inherent in the Investment. For making proper Investment, involving risk and return, the investor has to make a study of the alternative investment avenues of Investment, their risk and return characteristics and make proper projections or expectations, of the risk and the return of the alternative investment under consideration. He has to tune the expectations of his/her preference of the risk and return for making a proper Investment decision. The investor has various alternative avenues for investment for his Savings to flow in accordance with his/her preference. Savings flow into investment for a higher return, but savings kept as cash are barren and do not earn anything. Savings are invested in assets depending on their risk and return characteristics. But a minimum amount of cash is always kept in hand for transitions and contingencies. The research design followed here was descriptive with the Questionnaire model .The organization after getting the feedback from the Investors through the questionnaire may be able to improve their service level provided by them in all aspects such as giving tips to the customers, provide proper assistance to them etc. 1

1.2 INDUSTRY PROFILE


Stock exchanges to some extent play an important role as indicators, reflecting the performance of the country's economic state of health. Stock market is a place where

securities are bought and sold. It is exposed to a high degree of volatility; prices fluctuate within minutes and are determined by the demand and supply of stocks at a given time. Stockbrokers are the ones who buy and sell securities on behalf of individuals and institutions for some commission. The Securities and Exchange Board of India (SEBI) is the authorized body, which regulates the operations of stock exchanges, banks and other financial institutions.. With the view to improve, discipline and bring greater transparency in this sector, constant efforts are being made and to a certain extent improvements have been made. As the condition of capital markets are constantly improving, it has started drawing attention of lot more people than before. On the career related aspects, professionals have opportunities to choose from for a wide range of jobs available in a number of organizations in this sector and one can expect to have good times ahead of him.

INDIAN CAPITAL MARKET OVERVIEW Evolution


Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. Thus, at present, there are totally twenty-one recognized stock exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). 2

Trading Pattern of the Indian Stock Market


Trading in Indian stock exchanges is limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities

(forward list) and non-specified securities (cash list).. Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery transactions "for delivery and payment within the time or on the date stipulated when entering into the contract which shall not be more than 14 days following the date of the contract: and (b) forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. The brokers who carry over the outstanding pay carry over charges (cantango or backwardation), which are usually determined by the rates of interest prevailing. A member broker in an Indian stock exchange can act as an agent, buy and sell securities for his clients on a commission basis and also can act as a trader or dealer as a principal, buy and sell securities on his own account and risk, in contrast with the practice prevailing on New York and London Stock Exchanges, where a member can act as a jobber or a broker only. The nature of trading on Indian Stock Exchanges are that of age old conventional style of face-to-face trading with bids and offers being made by open outcry. However, there is a great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI)


The traditional trading mechanism prevailed in the Indian stock markets gave way to many functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long settlement periods and benami transactions, which affected the small investors to a great extent. 3 To provide improved services to investors, the country's first ring less, scrip less, electronic stock exchange - OTCEI - was created in 1992 by country's premier financial institutions Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India,

General Insurance Corporation and its subsidiaries and Can Bank Financial Services. Trading at OTCEI is done over the centers spread across the country. Securities traded on the OTCEI are classified into: _ Listed Securities _ Permitted Securities _ Initiated debentures OTC has a unique feature of trading compared to other traditional exchanges. That is, certificates of listed securities and initiated debentures are not traded at OTC. The original certificate will be safely with the custodian. But, a counter receipt is generated out at the counter, which substitutes the share certificate and is used for all transactions. In the case of permitted securities, the system is similar to a traditional stock exchange. The difference is that the delivery and payment procedure will be completed within 14 days. Compared to the traditional Exchanges, OTC Exchange network has the following advantages: _ OTCEI has widely dispersed trading mechanism across the country, which provides greater liquidity and lesser risk of intermediary charges. _ Greater transparency and accuracy of prices is obtained due to the screen based scrip less trading. _ since the exact price of the transaction is shown on the computer screen; the investor gets to know the exact price at which s/he is trading. _ Faster settlement and transfer process compared to other exchanges. Thus, with the superior trading mechanism coupled wibecoming aware of the manifold advantages of the OTCEI. 4

National Stock Exchange (NSE)


With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high-powered Pherwani Committee, Industrial Development Bank

of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others incorporated the National Stock Exchange in 1992. Trading at NSE can be classified under two broad categories: (a) Wholesale debt market and (b) Capital market Wholesale debt market operations are similar to money market operations - institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. There are two kinds of players in NSE: (a) Trading members and (b) Participants. Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility. Trading at NSE takes place through a fully automated screen-based trading mechanism, which adopts the principle of an order-driven market. Trading members can stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. 5

When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member. NSE has several advantages over the traditional trading exchanges. They are as follows:

_ NSE brings an integrated stock market trading network across the nation. Investors can trade at the same price from anywhere in the country. _ Delays in communication, late payments and the malpractices prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network.Unless stock markets provide professionals service, small investors and foreign investors will not be interested in capital market operations. And capital market being one of the major sources of long-term finance for industrial projects, India cannot afford to damage the capital market path. In this regard NSE gains vital importance in the Indian capital market system.

Bombay Stock Exchange (BSE) Sensex


For the premier Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called "The Stock Exchange, Mumbai" by paying a princely amount of Re1. Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. 6

SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30

constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Freefloat Market Capitalization" methodology of index construction is regarded as an industry best practice globally. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX.

1.3 CORPORATE PROFILE


EIGHT DECADES OF BROKERAGE EXCELLENCE

Share khan is one of India's leading financial services companies. Share khan provides a complete life-cycle of investment solution in Equities, Derivatives, Commodities, IPO, Mutual Funds, Depository Services, Portfolio Management Services and Insurance. Share khan traces its lineage to SSKI, an organization with more than eight decades of trust & credibility in the stock mark decades of trust & credibility in the stock market.

Share khan Ltd is Indias leading online retail broking house with its presence through 1288Share Shops in 325 cities and serving more than 8,00,000 customers across the nation. Launched on Feb 8th 2000 as an online trading portal, Share khan offers its clients trade execution facilities for cash as well as derivatives, on BSE and NSE, depository services, mutual funds, initial public offerings (IPOs), and commodities trading facilities on MCX and NCDEX. Besides high quality investment advice from an experienced research team Share khan provides market related news, stock quotes fundamental and statistical information across equity, mutual funds, IPOs and much more. Share khan has set category leadership through pioneering initiatives like Speed Trade, a net based executable application that emulates a broker terminal besides providing information relevant to Day traders. Their second initiative, First Step is targeted at empowering first time investors.

Share khan has also set their global footprints through the India First initiative, a series of seminars conducted by Share khan to help NRIs participate and benefit from the huge investment opportunities in India. The company has a full-fledged research division involved in Macro Economic studies, Sectorial research and Company Specific Equity Research combined with a strong

and well networked sales force which helps deliver current and up to date market information and news. Share khan is an equities focused organization tracing its lineage to SSKI, a veteran equities solutions company with over five decades of experience in Indian stock markets.

SERVICES OFFERED TO CLIENTS Its operations include stock broking and distribution of various financial productsincluding private and secondary placement of debt, equity and mutual funds. Currently it is one of the largest broking houses in India with wide geographical coverage. The company has four main areas of business:1)Institutional Equities, (2) Retail (equities and other financial products), (3) Portfolio Management and (4) Depository Services. 1. Institutional Business This division primarily covers secondary market broking and caters to the needs of foreign and Indian Institutional Investors in Indian Equities (both local shares and GDRs). The division also incorporates a comprehensive research cell with sectoral analysts who cover all the major areas of the Indian economy.

2. Client Money Management This division provides professional portfolio management services to high net worth individuals and corporate. Its expertise in research and stock broking gives the company the right perspective from which to provide its clients with investment advisory services.

3. Retail Distribution of financial products Share khan has a comprehensive retail distribution network, comprising approximately 1120 franchisees168 branches 325 cities across India. This network is used for the distribution and placement of a range of financial products that includes company fixed deposits, mutual funds, Initial Public Offerings, secondary debt and equity and small savings schemes. 4. Depository Services It is a depository participant with the National Securities Depository Limited and Central Depository Services (India) Limited for trading and settlement of dematerialized shares. Since it is also in the broking business, investors who use its depository services get a dual benefit. They are able to use its brokerage services to execute transactions and its depository services to settle. 5. Technology Superior trading platform with an intensive Multi- Channel access for customers. Real time delivery of quality service and resource. 6. Human Capital It has under its roof 3000 employees with Performance driven work ethic.

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Services of Share Khan

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SPREADING ITS WINGS OVERSEAS

Online trading platform for NRIs for Equities and Mutual Funds Our first representative office in Dubai Dedicated Relationship Manager for advisory services and Operational issues Simplified transactions statement Customized research reports Daily Market updates Access to research newsletters/ reports

BENEFITS OF SHAREKHAN: 1. Online trading is very user friendly and one doesn't need any software to access. 2. They provides good quality of services like daily SMS alerts, mail alerts, stock recommendations etc. 3. Share Khan has ability to transfer funds from most banks. Unlike ICICI Direct, HDFC Sec, etc., so investor not really needs to open an account with a particular bank as it can establish link with most modern banks. http://www.fractalink.com/case_studies_sharekhan.htm

12 PRODUCTS OF SHAREKHAN A .Share Khan Classic account

Allow investor to buy and sell stocks online along with the following features like multiple watch lists, Integrated Banking, Demat and digital contracts, Real-time portfolio tracking with price alerts and Instant credit & transfer. a. Online trading account for investing in Equities and Derivatives b. Free trading through Phone (Dial-n-Trade) Two dedicated numbers for placing your orders with your cell phone or Automatic funds transfer with phone banking (for Citibank and HDFC Simple and Secure Interactive Voice Respon Get the trusted, After hours order placement facility between 8.00 am and 9.30 am landline. bank customers) professional advice of our Tele brokers c. Integration of: Online trading + Bank + Demat account d. Instant cash transfer facility against purchase & sale of shares e. IPO investments B. Share Khan Trade Tigers account This accounts for active traders who trade frequently during the day's trading sessions.following are few features of Trade Tigers account.

Single screen interface for cash and derivatives

Customize market watches by scrips or sectors and view them on a single screen. Real-time streaming quotes with Instant orders, alerts and orders Hot keys similar to a traditional broker terminal

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VISION To empower the investor with quality advice and superior service to help him take better investment decisions. We believe that our growth depends on client satisfaction. MISSION To provide the best customer service and product innovation diverse needs of clientele Continuous up-gradation with changing technology. Respond to progressive globalization and achieving international standard.
Efficiency and effectiveness built on ethical practices.

tuned to

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2.1 NEED OF THE STUDY

Today, BSE is the worlds number 1 exchange in terms of the number of listed companies and the worlds 5th in transaction number. Of the 23 stock exchanges in the India, Bombay Stock Exchange is the largest, with over 6,000 stocks listed. SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, the SENSEX has over the years become one of the most prominent brands in the country. The main approach of this project is to Study the Impact of Stock Market Fluctuation on the Investors. As an Individual Investor by analyzing the various factors which give rise to Stock Market fluctuation one can be able to predict up to some extent and can adjust their Investment decisions based on the market situations. A Questionnaire is prepared to find out the perception of the Investor while Investing in the Stock Market at times of fluctuation and the impact of several factors is also analyzed. Based on the interpretations from the Questionnaire suggestions are given to the Company for introducing new schemes for encouraging the Investors to invest in the current scenario.

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2.2 OBJECTIVES OF THE STUDY


Primary Objective To study the Impact of Stock Market fluctuation on Investors.

Secondary Objectives To study and to analyze the extent to which the Return factor has changed while investing in different Sectors. To analyze the Investors Risk while investing in various Investment avenues. To study the frequency of Investment made by the investors in the Stock Market.

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2.3 SCOPE OF THE STUDY


The analysis of the fluctuation in the stock market is very essential at this point of time since it gives answers to some of the questions created in the minds of the individual investors. The main purpose of conducting this study is to know the investors perception of various Investment avenues in the market. There are various Investment avenues like Stock Market, Fixed Deposits, Insurance, Bonds, Mutual Funds and Post Office. The study explains on various preferences that investors like to Invest based on some of the factors like Risk factor, Return on Investment, Liquidity, Tax benefits and others. All those investing in the various Investment avenues do not know what it is. They are just here for high returns and future benefits. This project gives out a brief explanation to the individual investor about how to invest and how to maintain their Portfolio of Investment in order to reduce the Risk and to maintain a Return at times of fluctuation.

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2.4 LIMITATIONS OF THE STUDY

Limitations on data The data provided was very limited and considered to be confidential hence sharing such rich resources has its own constraints.

Limitation on time Since the project was for only about three months the researcher could not focus on many aspects as to getting Questionnaire from other units of groups.

Limitation on Sampling The result obtained from the responses fit to this particular unit alone and cannot be extended or fit to the universe.

Limitation on responsiveness of Investors

The results obtained are based on the views shared by the investor .Some questions are answered in a biased manner.

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2.5 REVIEW OF LITERATURE

Studies examining the casual relationship between stock prices and real economic activity have found that fluctuations in stock prices can be explained by economic fundamentals. Fama (1981) and Fisher and Merton (1984) found that movements in the US stock market have a positive correlation with real GNP, but some studies have found contrary evidence. Binswanger's (2000) study indicated that stock fluctuations no longer reflected underlying US fundamentals since the most recent stock market boom that began in the early 1980.

Along with the rapid development of the stock market in Australia, some relevant studies have been undertaken that are of particular relevance to this paper. Narayan (2005) detected that during the periods January 1960-April 2003 and January 1967-April 2003 stock prices in Australia and New Zealand were non-linear with a unit root. On this basis, he concluded that the stock prices were unpredictable in both countries, thereby validating the 'efficient market hypothesis'. Narayan and Smyth (2005a) supported the viewpoint of Fernandez-Serrano and Sosvilla-Rivero (2001, 2003) that the possibility of structural breaks should be taken into account in modeling co-integration between stock prices. They found a long-run relationship between the New Zealand and the US stock markets, but no co in-tegeration between the New Zealand and the Australian stock markets or between the New Zealand market and the markets of the other G7 economies.

19 AUTHORS VIEW: On the fluctuations in consumption and market returns in the presence of labor and human capital: an equilibrium analysis A continuous-time general equilibrium model has been devised and used in studying the impact of human capital on consumption, stock market and other fluctuations. It has been observed that the stock market and total wealth volatilities are no longer equal when human capital exists. This finding is also true for the dividend and consumption volatilities. Human capital volatility has been shown to reduce to conditions on the co movements of aggregate consumption and labor supply in the special case of log utility.

Critical comparison of several order-book models for stock-market fluctuations Far-from-equilibrium models of interacting particles in one dimension are used as a basis for modelling the stock-market fluctuations. Particle types and their positions are interpreted as buy and sell orders placed on a price axis in the order book. Known models, starting with the Bak-Paczuski-Shubik model. We look at the four decades old Stigler model and investigate its variants. One of them is the simplified version of the Genoa artificial market. The list of studied models is completed by the models of Maslov and Daniels et al. generically; in all cases we compare the return distribution, absolute return autocorrelation and the value of the Hurst exponent. It turns out that none of the models reproduces satisfactorily all the empirical data, but the most promising candidates for further development are the Genoa artificial market and the Maslov model with moderate order evaporation. 20 Stock Market volatility and Corporate Investment Despite concerns are often voiced on the so called "excess volatility" of the stock market, little is known about the implications of market volatility for the real economy. This paper examines whether the stock market volatility affects real fixed investment. The empirical evidence some from the US data shows that market volatility has independent effects on investment over and above that of stock returns. Volatility and its changes are negatively related to investment growth. To the extent volatility depresses fixed capital formation and hence future income growth; the results suggest the desirability of reducing stock market volatility. Stock Market Fluctuations and the Term Structure

This paper uses the term structure of interest rates to explain the variations of stock prices and stock returns. It shows that interest rates have an important impact on stock returns, especially at long horizons. The hypothesis that expected stock returns move one-for-one with ex ante interest rates, which has been rejected in other studies using short horizon nominal asset returns, is supported by evidence from real returns and long horizon nominal returns. The paper _nds that long-term interest rates explain a major part of variation in dividendprice ratios and suggest that the high volatility of the stock market is related to the high volatility of long-term bond yields and may be accounted for by changing forecasts of discount rates. The findings of this paper may provide a reasonable economic explanation for the predictability of long-horizon stock returns. Rational Stock-Market Fluctuations This paper introduces a theory illustrating how rational models may help to explain the central features of aggregate stock-market fluctuations: the systematic occurrence of procyclical movements in price-dividend ratios, the countercyclical variation of expected returns and returns volatility, and the positive relation linking expected dividend growth to expected returns. 21 It provides a series of joint restrictions on variables affecting interest rates, dividend growth and risk-premia leading to the previous properties within a fairly general class of dynamic economies. These restrictions shed new light on the key mechanism by which primitive assumptions exert their influence on asset prices, and offer practical guidance on model design. Exploring aggregate asset price fluctuations across countries: measurement, determinants and monetary policy implications Asset prices have undergone major medium-term fluctuations since the early 1980s, sometimes ending in sharp downward corrections. This has been true of equity prices.It has also been true of real estate prices, as sizable movements in residential and commercial

property prices have occurred in many industrialised countries (e.g. BIS (1990) .Such fluctuations are of course not new; the last similar episode took place in the early 1970s. Yet the recent cases have attracted particular attention on the part of economists and policy-makers. One reason is their impact on economic activity and on the soundness of financial institutions. It is widely believed that the boom-bust nature of asset price fluctuations has exacerbated the business cycle, fuelling the upswing, magnifying the downswing and slowing down the current recovery. And the disruption caused to balance sheets of economic agents, notably banks, has threatened or resulted in widespread financial distress: the experience of some Anglo-Saxon and Nordic countries as well as Japan is prominent examples (BIS (1991), (1992) and (1993)). )). A second reason is that the prolonged upswing, in contrast to that in the early 1970s, occurred against the backdrop of generally moderate and declining inflation and typically positive inflation-adjusted interest rates, often higher than output growth rate.. Questions about the determinants of such asset price fluctuations and about the extent to which monetary authorities should pay attention to them in the formulation of policy have thus come to the forefront of debate.

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3.1 RESEARCH METHODOLOGY


Research methodology is a way to systematically solve the research problem. It is a science of studying how research is done scientifically. The research cannot be preceded abruptly. The researchers also need to understand the assumptions underlying various technique and they need to know the criteria by which they can decide that certain techniques and procedures will be applicable to certain problems and others will not.

The research methodology adopted for the present study has been systematic and was done in accordance to the objectives set, which pages. RESEARCH DESIGN: The research design taken for the study is Descriptive study, which is concerned with describing the characteristics of a particular individual or of a group. DESCRIPTIVE RESEARCH: Descriptive research includes surveys and fact-finding enquiries of different kinds. The major purpose of descriptive research is description of the state of affairs as it exists at present .The main characteristics of this method is that researcher has no control over the variables; he can only report what has happened or what is happening. The methods of research utilized in Descriptive research are survey method of all kinds, including comparative and correlation methods. has been discussed in the earlier

SOURCES OF DATA: Data refers to information or facts. The main sources of data for the present study are Primary data. 23 . PRIMARY DATA: Primary data consist of original information collected for specific purpose. This project relied on the response of the Investors. Structured undisguised questionnaire was used to collect the Primary data. SAMPLING PLAN: Population-

Population or Universe can be defined as the complete set of items, which are of interest in any particular situation .In case of population data is collected from each and every unit. Sampling UnitThis answers who is to be surveyed. The researcher must define target population that will be sampled; once this is determined a sampling frame is developed so that everyone in the target population has an equal chance of being selected. SampleSample denotes the entire part of the universe, which is studied and conclusions are drawn on this basis for the entire universe.

Sample sizeSize of the sample means the number of sampling units selected from the population for investigation. It answers how many people should be surveyed. Here the sample size is fixed as 150 by using the formula as given below...

24

DETERMINATION OF SAMPLE SIZE N=z2*p*q E2

Are you planning to Invest in the Stock market for the next One year ( yes , no )

P= No of yes = 23/25 Q=No of no = 2/25

E=1.96 Applying the above formula the sample size arrived is 113. Approximately it is taken to 150. Data collection procedure: Primary data was collected using the Questionnaire A survey was done by the researcher by meeting the respondents in their respective places. The respondents response to each question was carefully noted in the Questionnaire. Their responses and suggestions were carefully observed and registered. Tools used for Data Collection The main tool used for the purpose of study has been a well-constructed Questionnaire .Questionnaire is Short and Simple, Personal and intimate questions are showed at the end. The forms of questions contained in this questionnaire are as follows:

25

Multiple choice questions i.e. alternative answers presented.

Example-Investment Alternatives reduce Risk-How far you agree with the statement? a) Strongly agree c) Disagree e) Neither agrees nor disagrees Open-ended i.e. inviting free responses. b) Agree d) strongly disagree

ExampleSuggestions if any, ____________________________ ___________________________________________

Ranking based on questions High risk Moderate risk Low risk

Investment avenues Stock market Fixed deposits Insurance Bonds Mutual funds Post-office METHODOLOGY Research design Sample Size Sampling procedure

: Descriptive : 150 : Convenient sampling 26

Tools used for Data Analysis


For doing the analysis, arrange the data in a logical sequence from the raw data collected. After the tabulation of data the tools provide a scientific and mathematical solution to a complex problem. The Statistical tools used for Data analysis are: -Charts -Weighted Average Method -Chi-square -One-Way ANOVA - Percentage Analysis - Pearsons Correlation Test - Rank Correlation - Interval Estimation

CHART Mostly Bar Charts and Pie Charts are used for analysis to get a idea about the tabulated data. PERCENTAGE ANALYSIS Percentage Analysis shows the entire Population on terms of percentages. It reveals the number of belonging in a particular category or the number of people preferring a particular thing in terms of percentage. In this study, the number of people who responded in a particular manner is interpreted in forms of percentages. Each table has been calculated on the basis of percentage. Noofrespondents * 100 Totalrespondents

Percentage =

27

WEIGHTED AVERAGE METHOD In the case of data involving Rating scale ranking scale, the Weighted Average Ranking method is used. In this method, the net score for each attributes are calculated and analysis can be done, as the basis for the net score in percentage obtained the formula is given Weightedforcolumn * No.ofrespondents Totalweight

Net score =

CHI-SQUARE TEST OF INDEPENDENCE

The Chi-Square test a fairly, simple and definitely the most popular of all the other tools, the Chi-Square test is most widely used non-parametric test in Statistical work. It makes no assumption about being sampled, The Chi-Square describe the magnitude of discrepancy between theory and observation.

2 =
i =1

( Oi Ei ) 2
Ei

PEARSONS CORRELATION TEST The concept of correlation which is one of the methods of studying the relationship between variables. Two variables may have a Positive Correlation, a Negative Correlation, or they may be Uncorrelated. The correlation between two variables is called a Simple correlation. R= n x 2 ( x ) n xy ( x )( y )
2

n y 2 ( y )

28

INTERVAL ESTIMATION An estimation of population parameter given by two numbers between which the parameter may be considered to lie is called as Interval Estimation of the parameter. Interval Estimates indicate the precision or accuracy of an estimate and are therefore, preferable to point estimate. P Z ( std .error )
2

Interval Estimate= [ ANALYSIS OF VARIACE:

ANOVA is specially designed to test whether the means of more than two quantitative populations are equal. It consists of classifying and cross classifying statistical result and test whether the means of a specified classification differ significantly. Object of f-test is to find out whether the two independent estimates of population variance differ significantly. Steps followed while using the statistical tool one way ANOVA: Step I: Correction factor (C.F) = T2 / N Step II: Total sum of square (TSS) =( x12 + . . . . . . . +xn2 C.F) Step III: Sum of square of column (SSC) =

x
n1

2 1

+......+

x
ni

2 n

-C.F

29

Step IV: Sum of square of error (SSE) = TSS SSC Step V: Construct ANOVA table and find the calculated value of F with their respective degrees of freedom. If calculated F < Table Value F then We accept null hypothesis. If calculated F > Table Value F then We reject null hypothesis.

RANK CORRELATION Rank correlation is the measure of correlation that exist between two sets of ranks i.e. the measure of degree of association between two ranked variables. In short Rank correlation is used to find out the co variability or the lack of co variability between two variables.

R = 1

N N 2 1

6 d 2

30

3.2 DATA ANALYSIS AND INTERPRETATION TABLE NO.3.2.1 TABLE SHOWING THE RESPONDENTS OCCUPATION
PARTICULARS Business Pvt Employee Professional Government employee Total RESPONDENTS 52 40 44 14 150 PERCENT 35 27 29 9 100

Findings
From the above statistical analysis it is found out that 35% o f the respondents are doing Business, 29% of the respondents are professionals, 27% of the respondents are pvt employee and only 9%of the respondents are government employees.

Inference
From the above analysis it is inferred that majority of the Investors are the ones who are in the Business field followed by Professionals and Pvt Employees.

31

CHART NO.3.2.1 CHART SHOWING THE RESPONDENTS OCCUPATION

14, 9%

52, 35% B us ines s 44, 29% pvt E m ploy ee P rofes s ional G overnm ent em ploy ee

40, 27%

32

TABLE NO.3.2.2 TABLE SHOWING THE RESPONDENTS ANNUAL INCOME


Attributes 0-50000 50001-100000 100001-300000 300001-500000 500001 and above Respondents 20 35 45 30 20 Percentage 13 23 30 20 14

Total

150

100

Findings
From the above analysis it is inferred that 30% of the respondents income level is between 1 lack to 3 lacks, 23% of the respondents income level lies between 50000 to 1 lack, 20% of the respondents income level is between 3 lacks to 5 lacks, 14% of the respondents income level is above 500001 and13% of the respondents belong to the income level of less than 50000.

Inference
By applying the above statistical tool it is inferred that majority of the Investors who invest in the Stock Market hold an annual income between 50000-300000 to invest in different Investment avenues.

33

CHART NO.3.2.2 CHART SHOWING THE RESPONDENTS ANNUAL INCOME

35 30 PERCENTAGE 25 20 15 10 5 0
050 00 0 50 00 110 00 00 10 00 01 -3 00 00 0 30 00 01 -5 00 00 0 50 00 01 &a bo ve

Series 2

CATEGORY

34

TABLE NO.3.2.3 TABLE SHOWING THE RESPONDENTS INVESTMENT IN STOCK MARKET FOR THE NEXT ONE YEAR

Options Yes No Total

Respondents 128 22 150

Percentage 85 15 100

Findings
From the above table 3.2.3 it is analyzed that 85% of the respondents are willing to invest in the Stock Market for the next One year and the remaining 15% are not ready to Invest because of the fluctuation happening in the market.

Inference
It is inferred that out of 150 Investors majority of the Investors are planning to invest in the Stock Market despite of the Stock Market fluctuation.

35

CHART NO.3.2.3 CHART SHOWING THE RESPONDENTS INVESTMENT IN STOCK MARKET FOR THE NEXT ONE YEAR

90 80 70 60 50 40 30 20 10 0 Y es No S e rie s 2

36

Interval Estimation

Sample size = 150 P=

no.ofyes Samplesize

= 128/150 = 0.85

Q = 1- P = 1- 0.85 = 0.15

Z /2 = 1.96 at 95% confidence level

Standard Error =

p q = n

0.85 * o.15 = 0.020 150

Interval estimation

( ) [ P Z std .error ] = [0.85 1.96 (0.029)] 2


= [81.08 %, 88.92%] Conclusion
At 95% confidence level, the interval estimate lies between 81.08 % to88.92percent.

37

TABLE NO.3.2.4 TABLE SHOWING THE RESPONDENTS STOCK EXCHANGE PREFERENCE


Options BSE Respondents 31 Percentage 21

NSE Both Total

35 84 150

23 56 100

Findings
56% of the Investors prefer to trade in both NSE and BSE while the remaining 23% and 21% of Investors prefer NSE and BSE respectively.

Inference
From the analysis done it is inferred that majority of the Investors prefer both NSE and BSE to trade.

38

CHART NO.3.2.4 CHART SHOWING THE RESPONDENTS STOCK EXCHANGE PREFERENCE

60 50 40 30 20 10 0 BSE NSE BOTH

Series2

39

TABLE NO.3.2.5 TABLE SHOWING THE RESPONDENTS TRADING PERIOD IN STOCK MARKET

PARTICULARS Less than 6 months 6 months to 1 year 1 year to 3 years 3 years and above Total

RESPODENTS 26 50 53 21 150

PERCENT 17 33 36 14 100

Findings
36% of the Investors have been trading in the Stock Market for the time period of 1-3 years followed by 6 months -1 year (33%), less than 6 months (17%) and 3 years and above (14%).

Inference
From the analysis done it is inferred that majority of the Investors have been in Stock Market for the time period of 1-3 years.

40

CHART NO.3.2.5 CHART SHOWING THE RESPONDENTS TRADING PERIOD IN STOCK MARKET

21, 14%

26, 17% Les s than 6 m onths 6 m onths to 1 y ear 1 y ear to 3 y ears 3 y ears and above

53, 36%

50, 33%

41

TABLE NO.3.2.6 TABLE SHOWING THE RESPONDENTS PORTFOLIO SIZE

PARTICULARS Below 100000 100001 500000 500001 1000000 Above 1000001 Total

RESPODENTS 35 53 42 20 150

PERCENT 23 36 28 13 100

Findings
From the above table no 3.2.6 it is found that the Portfolio size of majority (36%) of the Investors ranges between 1 lakh-3 lakhs followed by 5 lakh-10 lakhs (28%),less than 1 lakh (23%) and 10 lakhs and above (13%).

Inference
It is inferred that the Portfolio size of majority of the Investors ranges between 1lakh 5 lakhs.

42

CHART NO.3.2.6 CHART SHOWING THE RESPONDENTS PORTFOLIO SIZE

40 35 30 25 20 15 10 5 0 Below 100000 100001 500000 500001 1000000 Above 1000001 Ser ies2

43

TABLE NO 3.2.7 TABLE SHOWING THE CORRELATION ANALYSIS BETWEEN THE TIME DURATION THAT THE INVESTORS HAVE BEEN TRADING IN STOCK MARKET AND THEIR PORTFOLIO SIZE X=Time duration
X 26 50 53 21 150 Y 35 53 42 20 150 X2 676 2500 2809 441 6426 n xy ( x )( y )
2

Y=Portfolio size
Y2 1225 2809 1764 400 6198 XY 910 2650 2226 420 6206

R=

n x 2 ( x )

n y 2 ( y )

=0.85 (Positive correlation) Findings


From the above analysis it is found that both the factors move in the same direction.

Inference
By applying the above Statistical tool it is inferred that as the time duration increases their portfolio size too increases. The more experienced the investor get in investing the amount being invested too increases.

44

TABLE NO.3.2.8 TABLE SHOWING THE RESPONDENTS AIM WHILE INVESTING IN STOCK MARKET
PARTICULARS Long term profit Short term gains Both a & b Not particular Total RESPODENTS 21 40 56 33 150 PERCENT 14 26 38 22 100

Findings
From the above statistical analysis it is inferred that 56% of the respondents are aiming at long term profit and short term gain, 24% of the respondents aims in Short term profit, only 14% of the respondents aims in Long term profit and the remaining 22%are not particular about for what they are investing.

Inference
It is inferred from that most of the Investors are aiming for both Long-term profit and Short-term gain while investing.

45

CHART NO.3.2.7 CHART SHOWING THE RESPONDENTS AIM WHILE INVESTING IN STOCK MARKET

22

14

L ong t er m pr of it S hor t t erm gains 26 B ot h a & b N ot part ic ular

38

46

TABLE NO.3.2.9 TABLE SHOWING THE RESPONDENTS SECTOR PREFERENCE TOWARDS INVESTMENT
PARTICULARS Automobile Insurance Banking Pharmaceuticals FMGC TOTAL RESPODENTS 40 48 32 64 16 200 PERCENT 20 24 16 32 8 100

Findings
From the above table it is inferred that 38% of the respondents prefer to invest in the Banking sector, 24% of the respondents prefer to invest in pharmaceuticals, and 15% of the respondents are in IT sector, 13% in FMCG and only 10% in Automobiles.

Inference
It is inferred that majority of the Investors in the current scenario are willing to invest in the Banking sector followed by pharmaceutical sector.

47

CHART NO.3.2.8 CHART SHOWING THE RESPONDENTS SECTOR PREFERENCE TOWARDS INVESTMENT

FM GC P h a r m a c e u t ic a ls B a n k in g In s u r a n c e A u t o m o b ile 0 5 10 15 20 25 30 35 S e r ie s 2

48

APPLYING CHI-SQUARE Attributes Automobile IT Banking Pharma FMCG Oi 15 22 57 36 20 Ei 30 30 30 30 30 (Oi-Ei)2 225 64 729 36 100 (Oi-Ei)2/Ei 7.5 2.133 24.3 1.2 3.333

H0 : In the current situation the Investors are not willing to Invest in different sectors. H1 : In the current situation the Investors are willing to invest in different sectors.

Calculated value ( 2 ) = 38.49 Level of significance = 5% Degrees of freedom =(5-1)=4 Tabulated value Reject H0.Accept H1 =9.49 Calculated value > table value

Inference
From the above findings it is inferred that the Investors are willing to invest in different sectors at this current situation.

49

TABLE NO.3.2.10 TABLE SHOWING THE RESPONDENTS INVESTMENT


PARTICULARS Daily Twice in a week Monthly Once in a year Others Total RESPODENTS 17 26 35 45 27 150 PERCENT 11 17 23 30 18 100

Findings
From the above statistical analysis it is analyzed that 31% of the respondents invest once in a year, 23% of the respondents are willing to invest monthly once, followed by others.

Inference
It is inferred that majority of the Investors make their Investment Once in a year.

50

CHART NO.3.2.9 CHART SHOWING THE RESPONDENTS INVESTMENT

30 25 20 15 10 5 0 D a ily T w ic e in o n th lyO n c e inO th e r s M a w eek a year S e r ie s 2

51

TABLE NO 3.2.11 TABLE SHOWING THE CORRELATION ANALYSIS BETWEEN THE PERFORMANCE OF DIFFERENT SECTORS AND THE RELATED FREQUENCY OF INVESTMENT MADE BY THE INVESTORS. X= Different Sectors
X 15 22 57 36 20 150 Y 17 26 35 45 27 150 X2 225 484 3249 1296 400 5654 n xy ( x )( y )
2

Y= Time period of Investment


Y2 289 676 1225 2025 729 4944 XY 255 572 1995 1620 540 4982

R=

n x 2 ( x )

n y 2 ( y )

=0.673 (Positive Correlation) Findings


From the above analysis it is found out that both the factors moves in the same direction.

Inference
From the above analysis it is inferred that based on the performance of the sectors the frequency of Investment made by the investors too varies. 52

TABLE NO.3.2.12 TABLE SHOWING THE RESPONDENTS SOURCE OF INFORMATION TO INVEST IN THE STOCK MARKET
PARTICULARS Media Internet peers Advisors Brokers Total RESPODENTS 29 24 34 26 37 150 PERCENT 19 16 22 17 26 100

Findings
It is analyzed that 26% of the respondents receive the information from the Brokers, 22% of the respondents from Peers, 19% from Media, 17% from the Advisors, and the remaining 16%from the Internet.

Inference

Majority of the Investors prefer Brokers comments as the main source of Information while trading.

53

CHART NO.3.2.10 CHART SHOWING THE RESPONDENTS SOURCE OF INFORMATION TO INVEST IN THE STOCK MARKET

30

25

20

1 5

Series2

1 0

0 Media Internet peers Advisors Brokers

54

TABLE NO.3.2.13 TABLE SHOWING THE RESPONDENTS INVESTMENT DECISION DURING RECESSION PERIOD
PARTICULARS To great extent To some extent Neutral To a less extent Unchanged Total RESPODENTS 41 40 33 27 9 150 PERCENT 27 27 22 18 6 100

Findings

It is analyzed that nearly 54% of the respondents have changed their investment decision to some extent during recession period, 33% belongs to the neutral category, 18% of the respondents Investment decision has changed only to less extent and the remaining 8% Investment decision remains unchanged.

Inference
It is inferred from the above table that the Investment decision of the investors has changed while investing during the period of Recession.

55

CHART NO.3.2.11 CHART SHOWING THE RESPONDENTS INVESTMENT DECISION DURING RECESSION PERIOD

Unchanged T o a le s s e x t e n t N e u tr a l T o s o m e e x te n t T o g r e a t e x te n t 0 5 10 15 20 25 30 S e r ie s 2

56

TABLE NO 3.2.14 TABLE SHOWING HOW FAR THE INVESTMENT DECISION HAS CHANGED DURING THE RECESSION PERIOD
Options To great extent To some extent Neutral To a less extent Oi 41 33 40 27 Ei 30 30 30 30 (Oi-Ei)2 121 9 100 9 (Oi-Ei)2/Ei 40.33 0.3 3.33 0.3

unchanged

30

441

14.7

H0 : The Investment decision does not change during recession period. H1 : The Investment decision change during recession period. Calculated value ( 2 ) = 58.96 Level of significance = 5% Degrees of freedom = (5-1) =4 Tabulated value Reject H0.Accept H1 =9.49 Calculated value > table value

Inference:
From the above analysis it is inferred that the Investment decision has changed during recession period.

57

TABLE NO 3.2.15 TABLE SHOWING THE IMPACT OF CURRENT SITUATION ON THE STOCK MARKET
PARTICULARS Reduction in disposable income Fall in Stock price Impact on Global Market Reduction on ROI Total RESPODENTS 32 53 27 38 150 PERCENT 21 36 18 25 100

Findings
It is found out that 36% of the respondent believes that the recession has caused fall in Stock prices, 25% indicates a reduction on ROI, 21% narrates reduction in disposable income and 18% of the respondents give preference for the option Impact on Global market.

Inference
From the above given table and chart it is inferred that the impact of current situation on the Stock Market has caused a fall in the Stock prices.

58

CHART NO 3.2.12 CHART SHOWING THE IMPACT OF CURRENT SITUATION ON THE STOCK MARKET

40 35 30 25 20 15 10 5 0 Reduc tion in f all in Stoc k Impac t on reduc tion on dis pos able pric e Global ROI inc ome Market Series 2

59

TABLE NO.3.2.16 TABLE SHOWING THE PREFERANCE OF THE INVESTORS TO CHOOSE STOCK MARKET

PARTICULARS Return Liquidity Safety Tax benefits Capital appreciation Total

RESPODENTS 54 22 43 19 12 150

PERCENT 36 15 29 12 8 100

Findings
It is analyzed that 36% of the investors choose Stock Market because of Return factor, remaining 29%,15%,12% and 8% choose Stock Market because of the factors like Safety, Liquidity, Tax benefits and Capital appreciation respectfully.

Inference
It is inferred that it is the return factor which has made the Investors to choose the Stock Market.

60

CHART NO.3.2.13 CHART SHOWING THE PREFERANCE OF THE INVESTORS TO CHOOSE STOCK MARKET

12

8 36

R e tu rn L i q u id i t y S a fe t y T a x b e n e fit s

29

15

C a p i t a l a p p r e c ia t io n

61

TABLE NO. 3.2.17 TABLE SHOWING HOW FAR THE INVESTORS AGREE WITH THE FOLLOWING STATEMENT-INVESTMENT ALTERNATIVES REDUCE RISK
Options Strongly agree Agree Disagree Strongly disagree Neither agree nor disagree Oi 30 55 19 13 33 30 30 30 30 30 Ei (Oi-Ei)2 0 625 121 289 9 (Oi-Ei)2/Ei 0 20.83 4.03 9.63 0.3

H0: Investment alternatives does not reduce risk H1 : Investment alternatives reduce risk Calculated value ( 2 )= 34.79 Level of significance = 5% Degrees of freedom = (5-1) =4 Tabulated value = 9.49 Calculated value > table value Reject H0.Accept H1

Inference
Investors agree with the statement that Investment alternatives reduce risk.

62

TABLE NO.3.2.18 TABLE SHOWING THE RESPONDENTS RISK FACTOR DURING STOCK MARKET FLUCTUATION
PARTICULARS Below 5% 5 - 10% 10 - 15% 15 - 20% Above 20% Total RESPODENTS 14 47 50 29 10 150 PERCENT 9 31 34 19 7 100

Findings
It is inferred from the above table that 34% of the respondents feel that 10% 15% of the risk has been increased during stock market fluctuation, 31% of the respondents feel that risk has been increased to 5% 10%, 19% of the respondents feel that the risk has increased at 15%-20% ,9% of the respondents feel that the risk has changed only to less than 5% and the remaining respondents feels that the risk factor would change to an extent of 20% and above when the stock market is in fluctuation.

Inference
It is inferred that the risk factor would change to an extent of 5%-15% when the Stock market is in fluctuations .

63

CHART NO.3.2.14 CHART SHOWING THE RESPONDENTS RISK FACTOR DURING STOCK MARKET FLUCTUATIONS

7% 19%

9% B e lo w 5 % 31% 5 - 10% 10 - 15% 15 - 20% A b o ve 2 0 %

34%

64

TABLE NO.3.2.19 (Applying Chi-Square) TABLE SHOWING HOW THE RISK FACTOR HAS CHANGED WHEN THE STOCK MARKET IS IN FLUCTUATION.
Options Below 5% 5 - 10% 10 - 15% 15 - 20% Above 20% Oi 14 47 50 29 10 30 30 30 30 30 Ei 256 289 400 1 400 (Oi-Ei)2 (Oi-Ei)2/Ei 8.53 9.63 13.33 0.033 13.33

H0 : The risk factor does not change when the Stock market is in fluctuation. H1 : The risk factor change when the Stock market is in fluctuation. Calculated value ( 2 ) = 44.853 Level of significance = 5% Degrees of freedom = (5-1)=4 Tabulated value Reject H0.Accept H1 =9.49 Calculated value > table value

Inference
From the above analysis it is inferred that the risk factor change when the Stock market is in fluctuation.

65

TABLE NO 3.2.20 Table showing the ranking of the preference of the Investment avenues based on the Risk factor
Attributes 1 2 3 Stock market 82 59 9 Fixed deposits Insurance 62 31 75 53 13 66 Bonds Mutual fund 76 60 50 78 24 12 Post-office 10 28 112

.
Ranks weights 1 3 2 2 3 1

Applying Weighted Average Method

Attributes 1 2 3

Stock market 246 118 9

Fixed deposits Insurance 186 93 150 106 13 66

Bonds Mutual fund 228 180 100 156 24 12

Post-office 30 56 112

Total Weights rank

373 62 I

349 58.4 IV

265 44 V

352 59 II

348 58 III

198 33 VI

66

Findings

From the above analysis it is noticed that most of the respondents have ranked for the stock market. The next considerable proportion of the respondents has ranked

for the Bonds and next proportion of respondents has ranked for the Mutual funds, fixed deposits, Insurance and Post-office.

Inference
Stock market as the number one Investment avenue as far as Risk factor is concerned

67

TABLE NO.3.2.21 TABLE SHOWING THE RESPONDENTS INVESTMENT IN TERMS OF RETURN

PARTICULARS High return Low return Moderate return Annually Total

RESPONDENTS 17 34 56 43 150

PERCENT 11 23 37 29 100

Findings
It is inferred that 37% of the respondents feels that they incur moderate rate of return during the stock market fluctuations, 29% feels like earning annual returns, 23% of the respondents feels that they incur low returns and the remaining 11% feels they get High returns even at the time of Stock market fluctuation.

Inference
It is inferred that in the current situation while investing the Investors are getting moderate returns only.

68

CHART NO.3.2.15 CHART SHOWING THE RESPONDENTS INVESTMENT IN TERMS OF RETURNS

40 35 30 25 20 15 10 5 0 Hig h r e tu r n L o w r e tu r n Mo d e r a te r e tu r n A n n u a lly S e r ie s 2

69

TABLE NO 3.2.22 TABLE SHOWING HOW THE RESPONDENTS RETURN HAS FAIRED DURING THE LAST 12 MONTHS IN THE FOLLOWING SECTOR

Attributes 1 2 3 4 5

Automobiles 44 70 22 12 2

Banking 58 50 35 6 1

IT 11 25 44 35 35

Pharma 43 50 42 12 3

FMCG 23 43 58 17 9

Ranks Weight

1 5

2 4

3 3

4 2

5 1

Applying Weighted Average Method


Attributes 1 2 3 4 5 Total Weight Rank Automobiles 220 280 66 24 2 592 39.47 II Banking 290 200 105 12 1 608 40.53 I IT 55 100 132 70 35 392 26.13 V Pharma 215 200 126 24 3 568 37.87 III FMCG 115 172 174 34 9 504 33.6 IV

70

Findings
It is found that it is from the Banking sector the Return is high for Investors

Inference
It is inferred that Banking as the number one sector as far as Return is concerned for the last 12 months followed by Automobiles, Pharmaceuticals, FMCG and IT.

71

TABLE NO 3.2.23 TABLE SHOWING THE RANKING OF THE INVESTMENT AVENUES ACCORDING TO THE INVESTORS PREFERENCE.
Attributes 1 2 3 Stock market 60 41 22 Fixed deposits 5 18 25 Insurance 49 40 28 Bonds 12 20 15 Mutual fund 15 17 27 Post-office 30 10 34

4 5 6

8 13 6

31 40 30

14 10 9

32 36 35

40 26 25

26 21 29

R1 6 5 4 2 3 1

R2 1 2 3 5 6 4

R3 6 5 4 3 2 1

R4 1 3 2 4 6 5

R5 1 2 5 6 4 3

R6 5 1 6 3 2 4

72

(R1-R2) D2 25 9 1 9 9 9 62

(R2-R3) D2 25 9 1 4 16 9 64

(R3-R4) D2 25 4 4 1 16 16 66

(R4-R5) D2 0 1 9 4 4 4 22

(R5-R6) D2 16 1 1 9 4 1 32

(R6-R1) D2 1 16 4 1 1 9 32

Applying Rank Correlation

R = 1

N ( N 2 1)

6d 2

R12=-0.77 R45=-0.371 Findings

R23=-0.828 R56=0.086

R34=-0.886 R61=0.086

From the above analysis it is inferred that from the following Investment avenues Investors give high preference for Bonds and Mutual funds.

Inference
Bonds and Mutual fund ranks first as far as Investment avenues of Investors are concerned followed by Mutual funds and Post-office, Stock market and Post-office. 73

TABLE NO 3.2.24 TABLE SHOWING WHETHER THE INVESTORS ARE SATISFIED OR NOT SATISFIED WITH THE RETURNS OF THE LAST 12 MONTHS
Attributes 1 2 3 4 5 Automobiles 44 70 22 12 2 Banking 58 50 35 6 1 IT 11 25 44 35 35 Pharma 43 50 42 12 3 FMCG 23 43 58 17 9

FACTORS AUTOMOBILES BANKING IT PHARMA FMCG TOTAL SQUARE

X1 X2 X3 X4 X5 TOTAL AVERAGE RANK 220 232 33 86 23 594 39.6 IV 350 200 75 100 43 768 51.2 V 110 140 132 84 58 524 34.9 III 60 24 105 24 17 290 19.3 II 10 4 105 6 9 134 8.9 I 750 600 450 300 150 2310 562500 360000 202500 90000 22500 1237500

Applying One way ANOVA Ho: The Investors are satisfied with the returns of the past 12 months. H1: The Investors are not satisfied with the returns of the past 12 months.

74

Step 1: T=2310 Correction factor (C.F)= T2/N=(2310)2/25 = 213444 Step 2: Total Sum of Square (TSS) TSS =X1+X2+X3+X4+x5-CF =1024056 Step 3: Sum of Square of Columns SSC=X12+X22+X32+X42+X52 - CF =34056 Step 4: Sum of Square of Errors SSE=TSS-SSC =990000 Source of variation SSC SSE Sum of square 34056 990000 Degrees of freedom (5-1)=1 (25-5)=20 Mean of Square 8514 49500 F-test

0.172

F tabulated value = 4.43 with(5-1,25-5) df F calculated value< F table value Accept H0.

Inference
From the above analysis it is inferred that the Investors are satisfied with the returns of the past 12 months.

75

TABLE NO 3.2.26 TABLE SHOWING THE FACTORS WHICH GIVE RISE TO STOCK MARKET FLUCTUATIONS
FACTORS POLITICAL 1 2 3 4 FACTORS 20 38 37 55 R1 1 3 2 4 TECHNOLOGICAL FACTORS 14 62 44 30 R2 1 4 3 2 NATURAL FACTORS 13 31 36 70 R3 1 2 3 4 ECONOMIC FACTORS 98 18 20 14 R4 4 2 3 1

(R1-R2) D2 0 1 1 4 6

(R2-R3) D2 0 4 0 4 8

(R3-R4) D2 9 0 0 9 18

(R4-R1) D2 9 1 1 9 20

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Applying Rank Correlation


R=

N ( N 2 1)

6 d 2

R12=0.4 R34=-0.8 Finding

R23=0.2 R45=-1

From the above analysis it is inferred that Political factors and Technological factors are the main factors that give rise to Stock market fluctuation.

Inference

It is inferred from the above analysis that both the Political factors and the Technological factors ranks first followed by Economic factors.

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TABLE NO.3.2.26 TABLE SHOWING THE RESPONDENTS SATISFACTION LEVL IN SHARE KHAN LIMITED

PARTICULARS Highly satisfied Satisfied Dissatisfied Highly dissatisfied Neither satisfied nor dissatisfied Total

RESPODENTS 25 61 13 11 40 150

PERCENT 17 41 9 6 27 100

CHART NO.3.2.16 CHART SHOWING THE RESPONDENTS SATISFACTION LEVL IN SHARE KHAN LIMITED

27

17 H ighly s atis fied S atis fied D is s atis fied H ighly d is s atis fied N eithe r s atis fied no r d is s atis fied

6 9 41

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Findings
From the above table it is found out that 59% of the Investors are satisfied with the services provided by the Share Khan while only 17% are dissatisfied

Applying Chi-Square
Options Highly satisfied Satisfied Dissatisfied Highly dissatisfied Neither satisfied nor dissatisfied Oi 25 61 13 11 40 Ei 30 30 30 30 30 (Oi-Ei)2 25 961 289 361 100 (Oi-Ei)2/Ei 0.833 32.033 9.633 12.033 3.333

H0 : The Investors are not satisfied while investing in Share Khan. H1 ; The Investors are satisfied while investing in Share Khan Calculated value( 2 ) = 57.865 Level of significance = 5% Degrees of freedom=(5-1)=4 Tabulated value=9.49 Calculated value> table value Reject H0.Accept H1 Inference: From the above analysis it is inferred that the Investors are satisfied while investing in Share Khan. 79

3.3. FINDINGS
From the above statistical analysis it is found out that 35% of the respondents are doing Business, 29% of the respondents are professionals, 27% of the respondents are pvt employee and the remaining 9%of the respondents are government employees. 30% of the respondents income level is between 1 lack to 3 lacks, 23% of the respondents income level lies between 50000 to 1 lack, 20% of the respondents income level is between 3 lacks to 5 lacks, 14% of the respondents income level is above 500001 and13% of the respondents belong to the income level of less than 50000. 85% of the respondents are willing to invest in the Stock Market for the next One year and the remaining 15% are not ready to Invest because of the fluctuation happening in the market. 56% of the Investors prefer to trade in both NSE and BSE while the remaining 23% and 21% of Investors prefer NSE and BSE respectively. 36% of the Investors have been trading in the Stock Market for the time period of 1-3 years followed by 6 months -1 year (33%), less than 6 months (17%) and 3 years and above (14%). It is found that the Portfolio size of majority (36%) of the Investors ranges between 1 lakh-3 lakhs followed by 5 lakh-10 lakhs (28%),less than 1 lakh (23%) and 10 lakhs and above (13%). 31% of the respondents invest once in a year, 23% of the respondents are willing to invest monthly once, followed by others. 56% of the respondents are aiming at long term profit and short term gain, 24% of the respondents aims in Short term profit, only 14% of the respondents aims in Long term profit and the remaining 22%are not particular about for what they are investing.

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From the above statistical analysis it is inferred that 26% of the respondents receive the information from the Brokers, 22% of the respondents from Peers, 19% from Media, 17% from the Advisors, and the remaining 16%from the Internet. 38% of the respondents prefer to invest in the Banking sector, 24% of the respondents prefer to invest in pharmaceuticals, and 15% of the respondents are in IT sector, 13% in FMCG and only 10% in Automobiles. It is analyzed that nearly 54% of the respondents have changed their investment decision to some extent during recession period, 33% belongs to the neutral category, 18% of the respondents Investment decision has changed only to less extent and the remaining 8% Investment decision remains unchanged. It is found out that 36% of the respondent believes that the recession has caused fall in Stock prices, 25% indicates a reduction on ROI, 21% narrates reduction in disposable income and 18% of the respondents give preference for the option Impact on Global market. It is analyzed that 36% of the investors choose Stock Market because of Return factor, remaining 29%,15%,12% and 8% choose Stock Market because of the factors like Safety, Liquidity, Tax benefits and Capital appreciation respectfully. Investors agree with the statement that Investment alternatives reduce risk. It is inferred that 34% of the respondents feel that 10% 15% of the risk has been increased during stock market fluctuation, 31% of the respondents feel that risk has been increased to 5% 10%, 19% of the respondents feel that the risk has increased at 15%-20% ,9% of the respondents feel that the risk has changed only to less than 5% and the remaining respondents feels that the risk factor would change to an extent of 20% and above when the stock market is in fluctuation. 59% of the Investors are satisfied with the services provided by the Share Khan while only 17% are dissatisfied.

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It is inferred that 37% of the respondents feels that they incur moderate rate of return during the stock market fluctuations, 29% feels like earning annual returns, 23% of the respondents feels that they incur low returns and the remaining 11% feels they get High returns even at the time of Stock market fluctuation. It is inferred that the Investment decision has changed during recession period. Bonds and Mutual fund ranks first as far as Investment avenues of Investors are concerned followed by Mutual funds and Post-office,Stock market and Post-office. From the above analysis it is inferred that Economic factors and Technological factors are the main factors that give rise to Stock market fluctuation followed by Political factors , Natural factors. From the above findings it is inferred that the Investors are willing to invest in different sectors at this current situation. The risk factor change when the Stock market is in fluctuation. Investors are satisfied while investing in Share Khan. It is inferred that Banking as the number one sector as fas as Return is concerned for the last 12 months followed by Automobiles, Pharmaceuticals, FMCG and IT. At 95% confidence level, the interval estimate lies between 81.08 % to88.92percent. It is inferred that as the time duration increases their portfolio size too increases. The more experienced the investor get in investing the amount being invested too increases. From the above analysis it is inferred that based on the performance of the sectors the frequency of Investment made by the investors too varies.

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3.4 SUGGESTIONS

The topic A study on the Impact of Stock Market fluctuation on the Investors is very essential at this point of time since it gives answers to some of the questions created in the minds of Individual Investors.

It is inferred from the above analysis that it is better for the Corporate to insist their Investors to Invest in the Banking Sector ,because the returns has faired during the last 12 months in the Banking sector followed by Pharmaceuticals sector and so on.

As far as the Investment avenues are concerned investing in the stock market seems to be better for the investor because it earns a moderate return and moreover it is suggested that the investor should change their investment decision during the Recession period at least to some extent in order to reduce the losses.

As the market is fluctuating it is better for the investor to give importance for the Risk factor, because there seems to be a trade off between the risk and the Return factor.

In short, the project helps the investor to make better Investment in the Current scenario.

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3.5 CONCLUSION
This project is entitled as A study on Impact of stock market fluctuations on Investors. The study is based on the collection of primary data which was done through a well structured questionnaire. The collected data was analyzed using statistical tools like chi square, percentage analysis, Pearsons correlation, Interval estimation, One-way ANOVA, Weighted Average Method and Rank correlation. It is found that majority of the

respondents has suggested that the Stock market fluctuation has occurred due to Economic factor and it also has an impact of global economy and fall in Stock prices. The study has summarized the major findings as given below.

1. During the recession period, the investors investment decision has changed to a greater extent. 2. Respondents feel that stock market fluctuations have occurred due to the Economic factors. 3. They feel that the risk during the period of stock market fluctuation has been increased drastically. 4. During the period of stock market fluctuation the return also decreased. 5. Most of the respondents prefer to invest in stock market during the period of fluctuation because of long term gains. They feel that once again market reaches the hike of 21000 points in future. 6. Investors preferred to invest in banking sector followed by pharmaceuticals and believe that banking sector had a faired return even at times of fluctuation.

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QUESTIONNAIRE
A Study on the Impact of Stock Market Fluctuations on Investors Personal Details
Name Occupation : :

a) Business c) Professional Annual Income: a) 0-50000 c) 100001-300000 e) 500001&above

b) Employee d) Govt.employee b) 50001-100000 d) 300001-500000

1. Are you planning to invest in Stock Market in the next one year? a) Yes b) No

2. Which Stock Exchange do you prefer to trade? a) BSE b) NSE c) Both

3. How long you have been trading in Stock market? a) Less than 6 months c) 1year-3years b) 6months-1year d) 3years &above.

4. What are your Investment avenues .Rank them according to your preference? a) Stock market [ ] c) Insurance [ ] e) Mutual funds [ ] 5. What is your Portfolio size? a) 0-100000 c) 500001-1000000 6. While investing you are aiming at... a) Long-term profit c) Both a & b b) short-term gain d) not particular b) 100001-500000 d) 1000001 &above b) Fixed Deposits [ ] d) Bonds e) Post office [ ] [ ]

7. In which sector do you prefer to invest in the current scenario? a) Automobile b) IT

c) Banking e) FMCG

d) Pharmaceuticals

8. How often you make your Investment? a) Daily c) Monthly e) Others______ (please specify) 9 .What is the source of information to invest in Stock market a) Media c) Peers e) Brokers 10. Rank the factors which give rise to Stock market fluctuations. a) Political factor [ ] c) Natural factor [ ] b) Technological factor [ ] d) Economic factor [ ] b) Internet d) Advisors b) Twice in a week d) Once in a year

11. During Recession period, how have your Investment decision changed? a) To great extent c) Neutral e) Unchanged b) To some extent d) To a less extent

12. What according to you has the impact of the current situation on Stock market? a) Reduction in disposable income c) Impact on global market b) Fall in Stock price d) Reduction on ROI

13. What made you to choose Stock market? a) Return c) Safety e) Capital appreciation b) Liquidity d) Tax benefits

14.Investment alternatives reduce risk-How far you agree with the statement? a) Strongly agree c) Disagree e) Neither agrees nor disagrees 15. To what extent you feel that Risk factor would change when the Stock Market is in fluctuation? a) 0-5% b) 5%-10% c) 10%-15% d) 15%-20% e) 20% &above b) Agree d) strongly disagree

16. Rank the Investment avenues based on the Risk factor? Investment avenues Stock market Fixed deposits Insurance Bonds Mutual funds Post-office High Risk Moderate Risk Low Risk

17. How will you rate your present Investment in terms of Return? a) High return c) Moderate return b) Low return d) annually

18. How do you think your returns faired during the last 12 months in the following sectors? Sectors Automobile Banking IT Pharmaceuticals FMCG Excellent Good Fair poor Very Poor

19. Indicate your satisfaction level while investing in Share Khan? a) Highly Satisfied c) Dissatisfied b) Satisfied d) highly dissatisfied

e) Neither Satisfied nor dissatisfied 20. Suggestions if any, _________________________________________________ __________________________________________________________________ __________________________________________________________________

BIBLIOGRAPHY
Research Methodology By Kothari

Statistical Tools and Techniques By S.P.Guptha

Search engines:

1. www.yahoo.com

2. www.google.com 3. www.investopedia.com 4. www.nseindia.com 5. www.bse.com 6. www.sharekhan.com

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