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Summer Training Project Report
On
Market research on investor attitude towards secondary market
Submitted for the partial fulfillment of the requirement for the award of Master of Business Administration (MBA) degree
from Uttar Pradesh Technical University (UPTU), Lucknow.
Submitted By:
PRAVEEN KUMAR SINGHMBA III Semester
1302970068
Under the guidance of
Swasti Panchal
2013-2014
KIET School of Management
Krishna Institute of Engineering and Technology
13 KM Stone, Ghaziabad - Meerut Road, Ghaziabad201206 (U.P.)
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MandatoryCertificates .
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CERTIFICATE OF THE HoD
To whom it may concern
This is to certify that Mr./Ms Praveen kumar Singh., Roll no1302970068., is the
student of MBA III semester and has successfully completed his/her project on Market
research on investor attitude toward secondary market
Date. HOD
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CERTIFICATE FROM THE COMPANY
Company Logo
To whom it may concern
This is to certify that Mr. /Ms Praveen kumar Singh.., Roll no 1302970068., is
the student of MBA III semester. He/she has worked on the project titled
Market research on investor towards secondary market. under my supervisionand guidance. This is an original and authenticated work done by him/her.
I wish him/her the very best in all his/her future endeavors.
Date.
Guide
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Declaration
I Praveen kumar Singh, Roll no 1302970068., student of MBA III Semester of
KIET, School of Management Ghaziabad hereby declare that the project report on Market research on investor toward secondary market.., is an original and
authenticated work done by me. I further declare that it has not been submitted else
where by any other person in any of the university for the award of any degree or
diploma.
Date
Name of student
Faculty Guide
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Acknowledgement (Sample)
It is really a great pleasure to have this opportunity to describe the feeling ofgratitude from the core of my heart who have given their immense contribution
while preparing this project report. I convey my sincere gratitude to_P. Divadi for
giving me the opportunity to prepare my project work on Market research on
investor toward secondary market___I am thankful to __Swasti Panchal__ for
her/his guidance during my project work and sparing her/his valuable time for the
same. I express my sincere obligation and thanks to all the Faculties of KIET
School of Management for their valuable advice in guiding me at every stage inbringing out this report.
I am also thankful to my family for their kind co-operation which made my take
easy.
Name:PRAVEEN KUMAR SINGH
Roll No:1302970068
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Table of contants Page noAbstract
CERTIFICATE OF GUIDE
DECLERATION
ACKNOWLEDGEMENT .
Chapter IIntroduction 8 to 13
Importance of study 14
Literature review 15 to 17
Objectives / Hypothesis .18 to 19
Chapter II
Brief Introduction about reliance leap or security & its product 20 to 30
Research design/ methodology 37 to 51
Chapter III
Data Analysis 31 to 45
Result discussion 46 to 52
Chapter IV
Conclusion and recommendations 53 to 54
Suggestions for future research 55
Limitations of the study 56 to 57.
Appendix
Bibliography 58 to 59
Table and Chart 60 to 69
Questionnaire 70 to 72
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Project on
Market research on investor
toward secondary market
PRESENTED BY:PRAVEEN KUMAR SINGH
MBAROLL NO:1302970068
8
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Secondary Market Equity
Investments
ABSTRACT: This research explores some of the
unanswered
important questions about stock markets that can be
examineand investigated by an emerging field, behavioral
finance. It also
explains the factors responsible for the unusual
movements in
the stock markets, which could not be fully explained by
the
theories of traditional finance.9
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This study shall examine three important attitudes
displayed by the investors. They are: Expectations
those investors have about the future performance of
the stock market in India; Confidence that investors
have regarding their investments; and Herd Instincts
so investors tend to herd together. Present study shall
also analyze the Investors preference towards
traditional trading and online trading.
Keywords: Behavioral Finance, gross domestic
product (GDP).
10
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INTRODUCTION:
The economic development of a nation is reflected by theprogress of the various economic units, broadly classified
into
corporate sector, government and household sector. While
performing their activities, these units are in a surplus/deficit/
balanced budgetary situations. There are areas or people
with
surplus funds or with a deficit. A financial system or
financialsector functions as an intermediary and facilitates the flow
of
funds from the areas of surplus to the area of deficit.11
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12
about money, credit and finance. Money refers to the current medium of exchange of
exchange or means of payment. Credit or loan is a sum of money to be return- ed,
normally with interest. Finance is monetary resources comprising debt and ownership
funds of the state, company or person [4].Economic growth implies a long-term rise in per
capital national output. The basic conditions determining the
rate of growth are three- Effort', 'Capital and Knowledge. In the post Second World Warthere has been an upsurge in the desire for economic growth following
rapid political and other developments and increasing impatience in the countries of Asia,
Africa and South America with their existing economic conditions. The keen desire for
development has tended to minimize the significance of factors
associated with Efforts. As regards Knowledge it is suggested that there already
exists a vast amount of knowledge in developed countries. This reasoning has led
to emphasis being placed on increasing capital formation as the most crucial fact- or in
economic growth of the underdeveloped countries.
The rate of capital formation in the underdeveloped countries has for a long time
been with the rate of growth of national output at par with the rate of population growth.
While the developed countries have, with an average rate of population growth of 1.9
percent, been investing 15 % to 18% (gross/net) of their national income, the gross/netrate of investment in underdeveloped countries has been
only 6% or 7% in the face of population growth at the rate of 2.9 % per annum [8].
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13
Financial institutions, also called financial intermediaries, provide means and mec- hakims
of transferring command over resources from those who have an excess of income over
expenditure to those who can make use of the same for adding to the
volume of productive capital. They, on the one hand, create claims in the form of
their shares, debentures, deposits, etc., against themselves which they induce the
savers to accept in exchange for their savings (claims on society for goods and services inthe future). On the other hand, they acquire claims against the investors by investing in
their shares and debentures and by granting direct loans to them. It is here that role of
financial institutions can be traced. They provide a convenient and effective link between
savings and investment. Financial institutions channel
the funds mobilized by them to those who require more funds than they have, such as
business firms.
Important of study
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Important of study
For conducting this research following objectives were set:
1.To evaluate investors' attitude towards stock market operationsincash and derivative segments.
2. To analyze the investors preference towards traditional trading
and online trading in cash and derivative segment
3. To study the problems (both actually faced and anticipated) of
inve
ster.
4.To suggest appropriate strategies to investors for taking right
inv-14
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Literature of review
There is lot work has been done so far in this regard. Now we have
overview some of researcher works in this section of the paper as review
literature. With the reference of research topic, some of studies are beingdone in which all the variables includes Risk attitude factors i.e; Risk
Aversion, Risk Tolerance, Risk are taken into consideration to define the
impact of those variables on stock market.
Levin , Synder and chapman (1975) were concerned with the differencesbetween men and women in accepting the risks of financial investments,
they focused on a group of 110 students using a questionnaire regarding
lotteries to check the more risk aversive according to gender differentiation.
the results indicating that women are more risk aversive than men .
15
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16
Powell and Ansic (1997) questioned a small group regarding property
insurance and the exchange market and again found that women are more
aversive than men (this study was among the first which analyzed individual
aversion towards speculative and pure risks); using information regarding the
weight of the funds invested in risky asset.
Jaimie Sung and Hannna (1996) analyzed the risk tolerance crosspo- nding to
four ethnic groups: Caucasian, Hispanic, Black and others. Given the
substantial differences among risk tolerance capacities of these groups (the
Caucasians have the highest risk tolerance and the
Blacks the lowest) we may assert that this factor has a direct impact on the wayinvestors accept and perceive risk attached to financial investments. Education also has
a direct influence on risk tolerance, as several studies prove a direct link between
higher education and the acceptance of higher risk related investments. The analysis
was conducted on four education levels: primary school, high school, college and
postgraduate studies. The results demonstrate an intense and direct impact on
accepting financial risk: the higher the subjects education, the higher his tolerance to
risk.
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17
Sitkin and Pablo (1992) developed a model of determinants of risk behavior. In this
model, personal risk preferences and past experiences form an important risk factor in
which to frame the problem, and social influence also affects the individuals perception.
Sitkin and Weingart (1995) extend the Sitkin-Pablo model leading to the definition that
risk perception and propensity are the mediators in risk behaviors of uncertainty decision-
making
All these studies proved the complexity of risk aversion and its subjective dimension, as
the estimates are difficult to obtain accurately. Investors have ultimately a unique
behavior which results in un balanced price, no matter how
adverse they are to risk. Understanding risk aversion offers another perspective for
constructing and optimizing risky financial portfolios.
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Hypothesis
The following Null Hypotheses were set up for the
present study:
1. Retail Investors are not aware about functioning of
capital market.
2. Retail Investors do not prefer online trading.
3. Investors with speculative attitude are not influencedby
technical factor.
4. Heuristic driven biases have no relationship with spec-
ulative attitude among investors.5. Investors level of awareness has no association with
heuristic driven biases.
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19
.6.Heuristic driven biases do not influence speculative attitude as much as
technical analysis do.
CHAPTER II
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CHAPTER II
ABOUT RELIANCE LEAP
Reliance Money as a brand is primarily associated with
provi-
ding comprehensive financial solutions to customers.
20
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Reliance Capital is one of India's leading and fastest
growing
non banking finance companies, and ranks among the
largestprivate sector financial services in terms of net worth
Reliance Money endeavors to change the way
investors
transact in financial markets and avails of financialservices.
Customers are provided with a plethora of services in
Equities, Commodities, Derivatives, Wealth
Management,
Investment Banking, Distribution of Financial Products,Insurance Broking, Money Transfer Services, Gold Coin
distribution and New Pension scheme through different
associate companies. 21
The LEAP is an initiati e b Reliance Mone Infrastr ct re
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The LEAP is an initiative by Reliance Money Infrastructure
Limited, a Reliance Capital Company that is engaged in the
distribution business to offers all financial products through a
single window approach to retails as well as corporate
clients.
Service and Products:
EQUITY FINANCIAL SERVICES
(A). DELIVERY CASH:Long-term investments are always
beneficial, as they do not respond to daily volatility inthe Stock Market and keep the investor safe.
22
As an Investor one can avail of delivery based buying /
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As an Investor, one can avail of delivery based buying /
selling based on the stock fundamentals.
(B).AFTER MARKET ORDERS (AMO): Do not be
restricted with market times and invest round theclock by placing After Market Orders (AMO).
A facility that gives usan option to place orders
even after or before the trading hours, using
our online trading platforms.Wecan place AMO on both NSE and BSE under
Equity and.
(C). TRADING INTRADAY:Active traders can take
advantage of market movements by levearging with
23
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our unique products. In addition, italso provide intraday
live market calls that help the customer trade efficiently.
All intraday positions need to be squared off before the
market closes.
MUTUAL FUNDS
We believe that mutual funds are the best investmentinstruments for your long term wealth creation. A Mutual
Fund is a trust that pools the savings of a number of
investors who share a common financial goal. A Mutual Fund
is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.
24
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Reason to investment Mutual fund:
(1). Reduces your Risks: Mutual Funds diversify your port-
folio by investing in various securities & thus minimizes
the risk.
(2). Liquidity: Mutual Funds can be bought and sold on any
dealing day as the issuer is bound by their agreement to
buy it back from you at the day's prevailing price no
matter how large the number of units you hold.
25
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(3). Affordability- The minimum investment in mutual
funds starts from Rs 1,000 or Rs.500/-. A Mutual Fund
allows even a small investor to take the benefit of its
investment strategy.
(4). Low Costs - Mutual Funds are a relatively less expensi
ve way to invest because the benefits of scale, the
brokerage, custodial and other fees translate into lowercosts for investors.
ONLINE TRADING PLATFORM:
(1). Both browser based and desktop based trading platfor
26
based on our requirements
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based on ourrequirements.
(2). Integrated market watch for NSE / BSE and Derivatives
(NSE).
(3). Real time streaming quotes and Charting facility with
host of indicators.
(4). Live market research recommendations to takeinformed
decisions.
(5). Apply in IPO and Mutual Funds investments in just aclick of a button.
27
DERIVATIVES:
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DERIVATIVES:
The derivative segment is a market that gives you an
opportunity to earn greater profits by paying a nominal
amount of margin. Over past fewyears, Popularity andDealings in Future & Options segment has grown incredibly.
Future contracts are available on Equities, Indices,
Currency and commodities.
Wcan trade in Futures and Options under NSE.
Products enabled are MIS and NRML:
(1). MIS provides intraday leveraging
(2). NRML for taking carry forward positions
28
POTTFOLIO MANAGEMENT
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POTTFOLIO MANAGEMENT
SERVICE:
PMS is a premium service offered to select customers
where investments are monitored by expert managers to
meet
the customer's financial goals depending on the risk s/he
iswilling to bear and the timeframe of the investment.
Why Invest using PMS?
(1).Access to a diverse range of products that would notbe available in other products like
29
mutual funds.
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mutual funds.
(2). Opportunity to invest in a customised bouquet of
products to match your investment goals.
(3). Greater flexibility that gives you the option of
buying
financial instruments depending on theopportunities
present.
(4). Regular reports and updates to give you a singleand
unified view of your investments and their status.
30
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Research design and Methodology
Research is an organized and systematic way of findinganswers to questions. Redmen and Mory define research as a
systematized effort to gain new knowledge (L.V. Redmen and
A.V.H. Mory, The Romance of Research, 1923, p10). It is a
careful and systematic study in the field of knowledge,
undertaken to establish facts of principles (Grinnel, 1997).
Applied research aims at finding a solution for an immediate
problem facing a society or an industrial / business
organization, whereas fundamental research is mainlyconcerned with
generalization and with the formulation of a theory.
31
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The aim of this study was to find out factors affecting
investors
attitude towards secondary market equity investment
hence applied research was carried out as it was designedto apply its findings to a particular situation. Questions might
be designed to gather either qualitative or quantitative data.
By their very nature, quantitative questions are more exact
than qualitative. For example, the word "easy" and difficultcan mean radically different things to different people. So,
the approach used was quantitative and based on collecting,
interpreting, summarizing and analyzing numerical data.
Positivist paradigm is the philosophy on which the currentstudy was based and the overall methodology used was
32
deductive. Within deductive methodology there are vario-
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us types of methods like descriptive survey and analytical
survey. "Descriptive survey is concerned with identifying
and counting the frequency of a specific population, either
at one point in time or at various times for comparison"(Bell, 1997). The descriptive research approach was
considered best for the current research because this study
intended to accomplish the aims by using descriptive
statistics.
The descriptive research approach gives a variety of meth-
ods and the one that was considered suitable for this study
was the survey method. Survey method was chosen
because of the need to get details from a large number ofres- pendants and as it is not limited to seven or eight
respondent as in the case of focus33
Th h i t t d f th t d
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groups. The research instruments used for the study
were
questionnaires.
Statistics is indispensable in research work. Most of the
advence- ment in knowledge has taken place because of
experiment cond- ucted with the help of statistical methods.
In fact, there is hardly any research work today that can find
complete without statistical data and statistical methods.
Depending upon the source, statistical data are classified
under two categories-
1. Primary data2. Secondary data
34
f
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The Primary data are those which are collected afresh and
for the first time, and thus happen to be original in chara-
cter. The secondary data, on the other hand, are those
which have already been collected by someone else andwhich have already been passed through the statistical
process.
In this research study, both the primary and secondary datawas used to get adequate information for the achievement
of the research objectives. Many methods and procedures
have been developed to help in acquiring data. The basic
methods and tools for data collection for research include
observation, questionnaire, interview and projectivetechnique.
35
A Sampling method
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A. Sampling method
"Sampling is one of the major tools of marketing research,
which is concerned with collecting, analyzing, and
interpreting market data. It involves the study, in
considerable detail, of relatively small numbers of
informants taken from a larger groupSampling is simply
the process of learning about the population on the basis ofa sample drawn from it. Thus, in the sampling technique
instead of every unit of the universe only a part of the
universe is studied and the conclusions are drawn on that
basis for theentire universe (Research Methodology, ICFAI April 2004).
The process of sampling involves 4 stages:36
. e n ng e popu a on.2. Identify a suitable sampling frame based on the
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y p g
research
objective.
3. Decide on a suitable sample size.
4. Select the most appropriate sampling technique and
obtain the sample.The various methods of sampling can
be
grouped under two broad heads1. Probability Sampling (Random Sampling).
2. Non-Probability Sampling (Non-random Sampling).
Probability methods are those in which every item in the
universe has a known chance, or probability, of being
chosen37
for the sample. This implies that the selection of sample
it i i d d t f th ki th t d N
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items is independent of the person making the study. Non-
Probability sampling methods are those which do not
provide every item in the universe with a known chance of
being included in the sample [15]. The current study shallbe using non-probability sampling. With in non-probability
sampling, convenience sampling would be used. In
convenience sampling, members of the population are
chosen based on their relative ease of access.
B. Sampling Size
The size of the sample depends on the type of
informationfrom the survey, and the cost involved.
38
s means ca cu a ng e ore an e egree o accuracyrequired in the results of the survey. Some attributes may
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q y y
be more critical than others, and the degree of precision
over these should be known. Careful thought should be
given to time constraint. Cost and accuracy are
closely linked with the time taken to complete the survey,
and to some extent there is bound to be conflict.
Considering all these factors, the sample size included was
494.
C. Scale
The study used a variety of questions to find out
complete
information about the under research. The
questionnaire
for the study was drawn from a study connected by Dr.39
by Dr Harsh Purohit (2002) on the theme Invest ors
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by Dr. Harsh Purohit (2002) on the theme Invest- ors
Attitude towards Stock Market Investment with special
reference to Bhopal and Jaipur Cities. The study was the
first of its kind after Nobel Prize award in behavioral financeto Prof. Kahnemen and experimental economist Vernon
Smith is seen by many as a vindication of the field of the
behavior finance.
Apart from dichotomous and multiple-choice questions, the
questionnaire also included statements which the
respondents were required to rate on the basis of different
scales like the Likert scale and rating scale.
40
D. Secondary data collection
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D. Secondary data collectionInitially it had been assumed that the secondary data would
be
readily available. The secondary data was collected fromthe journals, books, magazines, published reports and web
portals. Secondary data on the history of stock market was
collected from site.
These days many companies are trying to increase their
client-investors in Indore and Ujjain cities so the brochures
and pamphlets are easily available and used to understand
the online trading concept, intraday trading and procedure
for share trading through brokers.
41
Many books journals related to behavior finance News
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Many books, journals related to behavior finance, News
channels like CNBC & Awaaz were followed to know the
various share market terminology, Sensex calculation,
investment in mutual funds and derivatives. Some reportslike RBI bulletin, SEBI guidelines regarding share market
investments, CMIE reports, norms for stock exchanges in
Indian budget etc. were also used as a secondary data. The
collection of data from secondary sources was not just
limited to the initial stages but continued while primary
research was in proress.
E. Primary data collectionPrimary information was collected by the administration
42
of structured questionnaires to find out investors attitude
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of structured questionnaires to find out investors attitude
towards share market investments. Present study was also
an attempt conducted to find out the trend of online trading
in Indian stocks. For conducting this study, first step was tocollect random sample.
As this study was mainly based on primary data, so for
conducting it investors responses were collected through
pre-determined set of questions in the form of well designed
questionnaire. The questionnaire had multiple-choice
questions. Considering all the factors and constraints, the
sample size chosen for the current study was 494. The data
was collected from retail investors which were categorizedon the basis of income level, gender, age, and awareness
43
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level. In the second stage total sample was further
bifurc- ated in two categories-First category included
those inve- stors who deal in internet trading (Net
Traders) and seco- nd category included those
investors who purchase/sell securities only through
brokers (Traditional traders).
44
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45
Classification of Retail on
investor
Income level[Rs]
Age[inyears]
Gender Aweareness leavel
[1]. Up to 200000
[2]. 200001-4000
00
[3]. 400001-6000
00
[1]. Up to 25
[2]. 25-40
[3]. 40-45
[4]. 45-above
[1]. Male
[2]. Female
[1]. Low
[2]. Medium[3]. High
CHAPTER III
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Data analysis And
Discussion
Understand the Company
My first task in analyzing a stock is to understand the
company behind it. What are its main products or service
Who are its customers? What advantage does the
company
have over its competitors? The better you understand acompany, the better youll be able to make sound
investment
decisions and stick through normal market correction. 46
Growth investors will want to pay particular attention to what
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Growth investors will want to pay particular attention to what
is new about a companys story. Large stock moves are
almost always driven by a compelling new product or service,
or by new management that brings new ideas, or by newindustry conditions that affect an entire industry group in a
positive way. In our study of the greatest stock
market winners from 1995 through 2001, we found more
than 95% met at least one of those criteria.
A good place to begin your search for this kind
information is the News section of the Related information
panel in Market Smith. Youll want to review the latest
headlines offered in the panel by Market Watch If yousubscribe to Investors Business Daily,
47
I can access IBD articles on the stock being viewedthrough this panel as well. Pay particular attention to any
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g p y p y
IBD New America articles that have been written on that
company. These articles offer a useful overview of a
companys operations.
Fundamental of data
Youll next want to take a closer look at the fundamental
data offered in the Market Smith Data Boxes on the daily
and week chart views. An overarching concept to keep in
mind is that thebiggest winners in the stock market tend to
be the number one companies in their fields.
48
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49
parame ers o use o ana yzestocks:
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(1). Earnings per share in the latest
quarter should show a major
percentage increase versus the
same quarter a year ago. At
least
18% or 20% and preferably
muchmore.
(2). Earnings growth should be
accel-erating in recent quarters
compa-
red with earlier rates of50
inrecent quarters will exceed that
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of
previous quarters.
(3). Annual earnings for the last
three
years should be increasing at a
rate
of 25% per year or even more. If
I
am looking at a younger
company
that recently had its IPO, youmight
accept the last five or six
quarters 51
more in one or more
recent
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recent
quarters, or at least
accelerat-
ing in their percentage
chang
e for the last three
quarters.
Finally, I should analyze
how
efficient the company is at
gene- rating returns given
the
amount of capital it 52
CHAPTER IV
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CONCLUSION
This study brings out the significance of investing in equity
market through the factors that influence the decision
making of an active participant in this sector. This sector hasthe great ebbs and flows and can be synonymously coded
as the marketplace with stock volatility sticking to it.
People with more experience are not the only profit makers
as the prevalent market conditions are in such a manner.This goes in with the fact that adequate experience is not
the only need to deal with high risk environments.
53
Every other person in the equity market is in need of profits.
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When there is a profit maker, there is also a loser. So taking
decisions by relying completely on others opini- on may
result in negative returns. This may also comply with thefact of risk appetite in taking decisions. The resp-
ondents could be self monitoring people if they have a good
decision making in purchasing a stock. This aspect could be
high or low in them to obtain different percentage of returns.
The tactics on every single aspect to deal with a stock,
lengthened continuous monitoring of a
particular equity and tracking of the market is necessary. It
is also evident that investment strategies of people keep
changing as well as the factors that influence the decisionmaking keeps changing.
54
(1) One should invest in secured and risk free investment
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(1). One should invest in secured and risk-free investment
rather than high-risk, highly profitable investment.
(2). Tracking the market environment better with sound
knowledge about a particular stock would result tter
return.
(3). Since many of the entities in this study are independentof each other, there is need to analyze on a buying
decision
specifically for respective stocks.
(4). People with less experience can also be high profit
maker
when decision are based on intricate fundamental and55
Limitation of study
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y
(1). The study area of this research is confined to Indoreand Ujjain cities only and may not give similar results
when generalized to other regions. Investors included
here are only literate males & females and not house-
wives.
(2). People have many reasons to invest their money in
different investment alternatives. It should be noted
that social, cultural, economic, political, demographic
factors may strikingly differentiate the behavior ofinvestor when investing in the stock market.
56
(3). The current research only covers factors affectinginvestors
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attitude towards secondary market equity investment in
parti-
cular and primary market & risk free securities in general,thus results may not be general and applicable to
investor to
investors attitude towards primary market investment.
(4). One more limitation is that convenient sampling
technique
is used and the sample size is too small to come to any
conclusion.
57
Angelbroking.com
Investopedia com
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Investopedia.com
Brad M. Barber and Terrance Oean (2004) All
thatGlitters: The Effect of Attention and News on the
Buying Behavior of Individual and Institutional
Investors Review of Financial Studies, Volume
21,Issue 2, pp 785-818.
David Trading Responses to Past Returns and
the
Disposition Effect.E Boehmer, EK Kelley (2009) Institutional
Investors58
nanc a u es o ume , ssue p. - .
JA Frankel and K Froot (1990) Exchange Rate
forecasting
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g
Techniques, Survey Data, and Implications for the
foreign
Exchange Market.Melanie Cao and Jason Wei (2005) Stock market
returns:
A note on temperature anomaly Journal of banking
& Finance Volume 29, Issue 6, Pages 15591573.Ning Zhu (2002) The local Bias of Individual invester
Yale
ICF Working Paper No. 02-30.
Richard W. Sias and David A. Whidbey (2008) Insider
Trades and Demand by Institutional and Individual
Investors Review of Financial Studies, Volume 23,
Issue 4 Pp. 1544-1595.59
TABLE AND CHAT
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TABLE AND CHAT
II. INVESTMENT VERSUSSPECULATION
While it is difficult to draw the line of distinction betweeninvestment and speculation, it is possible to broadly
distinguish the characteristics of an investor from those of a
speculator as follows
Table 1. Distinguish between Investor and Speculator
60
on the basis of Characteristics.
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Characteristics Investor Speculator
Planning horizon An investor has A speculator has a verya relatively longer short planning horizon.
planning horizon.
Risk disposition An investor is normally A speculator is ordinary
not willing to assume willing to assume highmore than moderate risk.
risk.
Return expectation An investor usually A speculator looks for
seeks a modest rate a high rate of returnrate of return which in exchange for the
is commensurate. High risk.
61
Markets exist to facilitate the purchase and sale of goods and
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Markets exist to facilitate the purchase and sale of goods and
services. The financial market exists to facilitate sale and
purchase of financial instruments and comprises of two major
markets, namely the money market and the capital market.
Comparing the movement of the Nifty, Sensex and
NASDAQ over 2008-09 (all indices rebased for 1 April 2008),
as depicted in chart, it is seen that NASDAQ performed betterthan the Indian indices during most part of the year. The
returns on the NASDAQ were negative 33% during 2008-09,
while that on Nifty 50 and BSE Sensex were negative 36%
and 38% respectively, over the same period. About 09-10,
latest happening.
62
Chart 1. Movement of Nifty 50.
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Source: Indian Securities Market- A Review, NSE, Volume X,
2009
63
Table 2. Savings of Household Sector in Financial
Assets (%).
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Assets (%).
Financial asset 2004-05 2005-06 2006-07 2007-08 2008-09
Currency 8.5 8.7 10.2 11.4 12.5Fixed Income 85.4 83.9 80.6 78.2 89.5
investment
Deposits 37 47.2 49.19 52.2 58.5
Insurance 28.9 24.2 28.80 27.9 29.6
Small Savings 19.5 12.3 2.7 -1.9 1.4
Securities market 6 7.2 6.9 10.1 -1.9
Mutual Funds .4 3.6 5.20 7.7 -1.8
Govt Securities 4.9 2.4 .3 -2.1 -4.5
Other Securities .7 1.2 3.70 4.5 4.4
TOTAL 100 100 100 100 100
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According to the RBI data, the household sector
accounteed for 84 8 % of gross domestic savings in
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accounteed for 84.8 % of gross domestic savings in
fixed income investment instruments during 2006-07;
which has increased in comparison to 83.9% in 2005-06 (Table 1 & 2). In fiscal 2006-07, the household
sector has invested 55.7 % of financial savings in
deposits, 24.2 % in insurance / provident funds, 4.9 %
in small savings, and 6.5 % in securities marketincluding government securities , units of mutual funds
and other securities (out of which the invest- ment in
Gilts has been 0.2 %) Thus, the fixed income bearing
instruments are the most preferred assets of thehousehold sector.
65
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Chart 2. Savings of Household Sector in
Financial
Assets.
66
A new area of financial research, Behavioral Finance is
receiving a lot of attention from individual and institution al
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receiving a lot of attention from individual and institution- al
investors. Behavioral finance draws inputs from the field of
psychology and finance in an attempt to understand andexplain irrational stock market and investor behavior.
At the end of March 2010 a total number of 363 members
were permitted to allow investors web based access to NSEs
trading system. The members of the exchange in turn hadregistered 51,43,705 for web based access as on March 31,
2010. On the capital market segment, the trading volume of
Rs. 9,21,380 crore during the year 2009-10 constituting 11.13
of total trading volume was routed and executed through theinternet.
67
Table 3. Growth of Internet Trading.
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Source: NSE-Fact Book 2010
68
Year EnabledMembers*
Registered
Clients*
Internet
Trading
Volume (Rs.
crore)
% of total
Trading
volume
2006-07 242 22,79098 3,37,554 17.35
2007-08 305 4405,134 668,399 18.82
2008-09 349 5,627,789 692,789 25.17
2009-10 363 5,143,705 921,380 11.13
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Chart 3. Growth of Internet Trading: NSE-Fact
Book 2010.
69
QUESTIONNIRE
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(1). Name:_____________________________________
(2).Age______
(3). Gender:
(a). Male
(b). Female
(4). Occupation:
(a). Government Employee (b). Private Employee
70
. ncome er nnum(a). Less than 2 Lakhs
(b). Between 2-4 Lakhs
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( )
(c). Between 4-6 Lakhs d) Above 6 Lakhs
(6). Experience in Investment?
(a). Less than 1 Year
(b). Between 1-3 Years
(c). Between 3-5 Years
(7). Which of the following consist your portfolio?
(Rank
the following 1- least important, 5moreimportant)
(a). Commodities/Gold71
(b). Saving bank
(c). Mutual Funds
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( )
(d). Stock Market
(8). What kind of Investment do u prefer?
(a). Intraday
(b). Short Term Investment
(c). Medium Term investment
(d). Long Term Investment
(9). The Large Cap stocks are less risky than small & Mid-
cap stock.
(a). I strongly agree(b). I agree
72
(c). Neutral
(d) I disagree
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(d). I disagree
(10). How do you make your investment decisions?(Rank
the following 1- least important, 6more
important.
(a). Market condition(b). Brokers advise
(c). Self analysis
(d). Professional advisors recommendation
(e). Friends advise
73
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