UNIVERSITY OF MUMBAI

TYBBI
( V SEMESTER )
A PROJECT ON
STOCK MARKET
ACADEMIC YEAR
2015-2016
BY
HRISHA CHANDRASHEKHAR BHATT
ROLL NO : 102

PROJECT GUIDE
PROF. SAURABH SHAH
MALINI KISHORE SANGHVI COLLEGE OF
COMMERCE & ECONOMICS
VILE PARLE (W) MUMBAI

DECLARATION
I Ms Hrisha Bhatt, Student of Malini Kishore Sanghvi College Of Commerce &
Economics studying in T.Y.Bcom (Banking and Insurance) Semester V hereby
declare that I have completed the project on STOCK MARKET in the academic
year 2015-2016. The information submitted herein is true and original to the best
of my knowledge.

__________________
Date Of Submission

__________________
Signature of Student
(Ms Hrisha Bhatt)

CERTIFICATE
This is to certify that Ms Hrisha Bhatt of T.Y.Bcom (Banking & Insurance
Semester V ) of Malini Kishore Sanghvi College Of Commerce & Economics has
successfully completed the project on STOCK MARKET for academic year
2015-2016. The information submitted is true and original to the best of my
knowledge.

__________________
Signature of Principal
Guide

_________________
Signature Of Project
Guide

(Dr Krushna Gandhi)

(Prof. Saurabh Shah)

_____________________
Signature Of Co-ordinator
(Prof. Shweta Pandey)

________________
College Seal
Examiner

_________________
Signature Of External
Guide

AKNOWLEDGEMENT

I would like to thank Malini Kishore Sanghvi College Of Commerce & Economics & the faculty
members of BBI for giving me an opportunity to prepare a project on STOCK MARKET . It
has truly been an invaluable learning experience. Completing a task is never one mans efforts, it
is often the result of invaluable contribution of a number of individuals in direct or indirect way
of shaping success and achieving it.

I would like to thank principal of the college Dr (Mrs) Krushna Gandhi and
Co-ordinator Prof. Shweta Pandey for granting permission for this project. I would like to extend
my sincere gratitude and appreciation to Prof. Saurabh Shah who guided me in the study of this
project. It has indeed been a great learning experience and working under him during the course
of the project.

I would like to thank the librarian of the college for helping me in finding out the relevant
material for my project. I would also like to appreciate all my colleagues and family members
who gave me support and backing and always came forward whenever a helping hand was
needed. I would like to express my gratitude to all those who gave me the possibility to complete
this thesis.

Content

1.)
2.)
3.)
4.)
5.)

What Is Stock Exchange? . 6

History Of Stock Exchanges ... 7
Online Stock Exchange 8
How Does A Stock Exchange Work .9
What Are The Different Types Of Stock Available In The Market?

. 11
6.) The Importance Of Stock Exchange ...13
7.) The Role Of Stock Exchange .. 15
8.) Barometer To The Economy.17
9.) Indian Stock Exchange . ..18
10.) National Stock Exchange ................20
11.) Bombay Stock Exchange .23
12.) Overview Of The Regulatory Framework Of The Capital Market In India
13.)
14.)
15.)
16.)
17.)
18.)
19.)
20.)
21.)
22.)
23.)
24.)
25.)

.. ..25
Trading With Stock Market . 27
Capital Market Participants .29
Investment ..31
Essentials Of Investments 32
Principles Of Investments 34
Investment Types 37
Equity Investment . ...42
Types Of Mutual Fund .44
Debentures ...45
-Types Of Debentures
-Debt Investments
Data Analysis & Interpretation ... 51
Findings Of The Study ... .71
Conclusion.72
References.. ..73

WHAT IS STOCK EXCHANGE?

A stock exchange, share market or bourse is a corporation or mutual organization which

provides "trading" facilities for stock brokers and traders, to trade stocks and other securities.
Stock exchanges also provide facilities for the issue and redemption of securities as well as other
financial instruments and capital events including the payment of income and dividends. The
securities traded on a stock exchange include: shares issued by companies, unit trusts and other
pooled investment products and bonds. To be able to trade a security on a certain stock exchange,
it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is
less and less linked to such a physical place, as modern markets are electronic networks, which
gives them advantages of speed and cost of transactions. Trade on an exchange is by members
only. The initial offering of stocks and bonds to investors is by definition done in the primary
market and subsequent trading is done in the secondary market. A stock exchange is often the
most important component of a stock market. Supply and demand in stock markets are driven by
various factors which, as in all free markets, affect the price of stocks (see stock valuation).
There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be
subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter.
This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global
market for securities.
A stock exchange is simply a market that is designed for the sale and purchase of securities of
corporations and municipalities. A stock exchange sells and buys stocks, shares, and other such
securities. In addition, the stock exchange sometimes buys and sells certificates representing
commodities of trade. This article discusses:
6

What is the principle behind the operation of stock exchanges?

What are the functions and processes involved in stock exchanges?

Know in detail about major stock exchanges

Understanding what a stock exchange is and how an online stock exchange works, can help you
make the right decisions when it comes to your investment. Being able to follow the NY stock
exchange and being able to understand the NASDAQ stock exchange numbers that appear on
your news every evening can help you become a better investor and can help you profit more
from the stock market.

History of Stock Exchanges:

In 11th century France the courtiers de change was concerned with managing and regulating the
debts of agricultural communities on behalf of the banks. As these men also traded in debts, they
could be called the first brokers.

Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a
bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the
front of the house where merchants met.

However, it is more likely that in the late 13th century commodity traders in Bruges gathered
inside the house of a man called Vander Burse, and in 1309 they institutionalized this until now

informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and
neigh boring counties and "Bourses" soon opened in Ghent and Amsterdam.

The house of the Beurze family on Vlaamingstraat Bruges was the site of the world first stock
Exchange, circa 1415. The term Bourse is believed to have derived from the family name
Beurze.

In the middle of the 13th century, Venetian bankers began to trade in government securities. In
1351, the Venetian Government outlawed spreading rumors intended to lower the price of
government funds. There were people in Pisa, Verona, Genoa and Florence who also began
trading in government securities during the 14th century. This was only possible because these
were independent city states ruled by a council of influential citizens, not by a duke.

Online Stock Exchange:

A stock exchange is simply a market that is designed for the sale and purchase of securities of
corporations and municipalities. A stock exchange sells and buys stocks, shares, and other such
securities. In addition, the stock exchange sometimes buys and sells certificates representing
commodities of trade. This article discusses:

What is the principle behind the operation of stock exchanges?

What are the functions and processes involved in stock exchanges?

Know in detail about major stock exchanges

Understanding what a stock exchange is and how an online stock exchange works, can help you
make the right decisions when it comes to your investment. Being able to follow the NY stock
exchange and being able to understand the NASDAQ stock exchange numbers that appear on
your news every evening can help you become a better investor and can help you profit more
from the stock market.

How Does A Stock Exchange Work?

Buying and selling of stocks at the exchange is done on an area which is called the floor. All over
the floor are positions which are called posts. Each post has the names of the stocks traded at that
9

specific post. If a broker wants to buy shares of a specific company they will go to the section of
the post that has that stock. If the broker sees at the price of the stock is not the quite what the
broker is authorized to pay, a professional called the specialist may receive an order. The
specialist will often act as a go-between between the seller and buyer. What the specialist does is
to enter the information from the broker into a book. If the stock reaches the required price, the
specialist will sell or buy the stock according to the orders given to them by the broker. The
transaction is then reported to the investor.

If a broker approaches a post and sees that the price of the stock is what they are authorized to
pay, the broker can complete the transaction themselves. As soon as a transaction occurs, the
broker makes a memorandum and reports it to the brokerage office by telephone instantly. At the
post, an exchange employee jots down on a special card the details of the transaction including
the stock symbol, the number of shares, and the price of the stocks. The employee then puts the
card into an optical reader. The reader puts this information into a computer and transmits the
information of the buy or sell of the stock to the market. This means that information about the
transaction is added to the stock market and the transaction is counted on the many stock market
tickers and information display devices that investors rely on all over the world. Today, markets
are instantly linked by the Internet, allowing for faster exchange.

How does a stock exchange operate and how a transaction is made there?
Most stocks are traded on exchanges, which are places where buyers and sellers meet and decide
on a price. Some exchanges are physical locations where transactions are carried out on a trading

10

floor. You've probably seen pictures of a trading floor, in which traders are wildly throwing their
arms up, waving, yelling, and signal to each other. The other type of exchange is virtual,
composed of a network of computers where trades are made electronically.

The purpose of a stock market is to facilitate the exchange of securities between buyers and
sellers, reducing the risks of investing. Just imagine how difficult it would be to sell shares if you
had to call around the neighbourhood trying to find a buyer. Really, a stock market is nothing
more than a super-sophisticated farmers' market linking buyers and sellers.

What are the different types of stocks available in the market?

There are different types of stocks to choose in the stock market. While you do not necessarily
have to be an expert on all the types of stocks available in stock market content, being able to
differentiate and choose stocks is crucial to stock market investing. This article helps you to
know more on:

What re the various types of stocks available?

11

What are the features of preferred stocks?

What are the characteristics of blue chip stocks?

There are different types of stocks to choose in the stock market. While you do not necessarily
have to be an expert on all the types of stocks available in stock market content, being able to
differentiate and choose stocks is crucial to stock market investing. Depending on your goals and
your investment, you may simply find that some stocks are better suited to your needs than
others. At the very least, being able to tell the difference between preferred and common stocks
can help you get started in investing.

Preferred Stocks and Common Stocks

All stocks are generally designated as preferred or common. Common stocks are stocks that offer
you a bit of ownership of a company. Each common stock you have offers you a specific amount
of ownership, entitles you to some dividends and allows you one vote for each share you own in
electing directors or making key business decisions. Common stocks in this sense are different
from debentures or bonds, which are money given to a company as a loan in return for the
promise

of

specific

interest.

Preferred stock offers you preferential treatment when it comes to paying out of dividends. If the
company goes bankrupt, stocks holders holding preferred equities get faster access to any assets
not used towards paying debts. If you have preferred cumulative stock, your position is secure.
This type of stock allows unpaid dividends to be accrued. If a company cannot pay dividends one

12

year, your dividends accrue until the company can pay. During such period all the money owed
over the previous years will be paid. Those holding preferred types of stock usually have no
voting ability and these stocks only get their pre-determined dividend and not more than that.
This is to offset the other advantages of preferred status.
: Growth of Stocks
Growth stocks are stocks of companies that are experiencing rapid growth and are expected to
continue growing in the future. A company with growth stocks is generally a stable company that
is experiencing larger sales as well as incurring reasonable expenses. Such a company invests
money in new products. These stocks are attractive to investors since they allow investors to
make money from a growing and prospering company. However, these stocks can also be a risk.
These stocks are often expensive, and of course there is no guarantee that a company will
continue to grow and prosper as projected

What Are Dividend Stocks?

Dividend stocks are those stocks that pay a yearly dividend or cash amount in addition to having
an inherent buying and selling value. Having high dividend stocks means that you make money
each year that a company profits. This article takes you through:
Dividend stocks are those stocks that pay a yearly dividend or cash amount in addition to having
an inherent buying and selling value. Having high dividend

13

stocks means that you make money each year that a company profits. The best dividend stocks
are used by wealthy people in order to create a passive income. Thanks to the Internet, almost
any investor can start investing in these stocks. It is easy to find a list of dividend paying stocks
and even get newsletters that feature monthly dividend stocks right in your mailbox or email
inbox. If you want to make money regularly from your investments, as well as make money
when buying and selling your securities, dividend yielding stocks may be the solution.

The Importance of the Stock Exchange:

Stock exchanges perform important roles in national economies. Most importantly, they
encourage investment by providing places for buyers and sellers to trade securities. This
investment, in turn, enables corporations to obtain funds to expand their businesses.
Corporations issue new securities in what is known as the primary market, usually with the help
of investment bankers (see Investment Banking). The investment bank acquires the initial issue
of the new securities from the corporation at a negotiated price and then makes the securities
available for its clients and other investors in an initial public offering (IPO). In this primary
market, corporations receive the proceeds of security sales. After this initial offering the

14

securities are bought and sold in the secondary market. The corporation is not usually involved in
the trading of its stock in the secondary market.

Stock exchanges essentially function as secondary markets. By providing investors the

opportunity to trade financial instruments, the stock exchanges support the performance of the
primary markets. This arrangement makes it easier for corporations to raise the funds that they
need to build and expand their businesses.

Although corporations do not directly benefit from secondary market transactions, the managers
of a corporation closely monitor the price of the corporation's stock in secondary markets. One
reason for this concern involves the cost of raising new funds for further business expansion. The
price of a company's stock in the secondary market influences the amount of funds that can be
raised by issuing additional stock in the primary market.

Corporate managers also pay attention to the price of the company's stock in secondary markets
because it affects the financial wealth of the corporation's ownersthe stockholders. If the price
of the stock rises, then the stockholders become wealthier. This is likely to make them happy
with the company's management. Typically, managers own only small amounts of a corporation's
outstanding shares. If the price of the stock declines, the shareholders become less wealthy and
are likely to be unhappy with management. If enough shareholders become unhappy, they may
move to replace the corporation's managers. Most corporate managers also receive options to buy
company stock at a selected price, so they are motivated to increase the value of the stock in the
secondary market.

15

Stock exchanges encourage investment by providing this secondary market. Stock exchanges
also encourage investment in other ways.

They protect investors by upholding rules and regulations that ensure buyers will be treated fairly
and receive exactly what they pay for. Exchanges also support state-of-the-art technology and the
business of brokering. This support helps traders buy and sell securities quickly and efficiently.
Of course, being able to sell a security in the secondary market increases the relative safety of
investing because investors can unload a stock that may be on the decline or that faces an
uncertain future.

16

The Role of Stock Exchanges:

Stock exchanges have multiple roles in the economy, this may include the following:
Raising capital for businesses:
The Stock Exchange provides companies with the facility to raise capital for expansion through
selling shares to the investing public.
Mobilizing savings for investment:
When people draw their savings and invest in shares, it leads to a more rational allocation of
resources because funds, which could have been consumed, or kept in idle deposits with banks,
are mobilized and redirected to promote business activity with benefits for several economic
sectors such as agriculture, commerce and industry, resulting in a stronger economic growth and
higher productivity levels and firms.
Facilitating company growth:
Companies view acquisitions as an opportunity to expand product lines, increase distribution
channels, hedge against volatility, increase its market share, or acquire other necessary business
assets. A takeover bid or a merger agreement through the stock market is one of the simplest and
most common ways for a company to grow by acquisition or fusion.
Redistribution of wealth:
Stocks exchanges do not exist to redistribute wealth. However, both casual and professional
stock investors, through dividends and stock price increases that may result in capital gains, will
share in the wealth of profitable businesses.

17

Corporate governance:
By having a wide and varied scope of owners, companies generally tend to improve on their
management standards and efficiency in order to satisfy the demands of these shareholders and
the more stringent rules for public corporations imposed by public stock exchanges and the
government. Consequently, it is alleged that public companies (companies that are owned by
shareholders who are members of the general public and trade shares on public exchanges) tend
to have better management records than privately-held companies (those companies where
shares are not publicly traded, often owned by the company founders and/or their families and
heirs, or otherwise by a small group of investors). However, some well-documented cases are
known where it is alleged that there has been considerable slippage in corporate governance on
the part of some public companies (Pets.com (2000), Enron Corporation (2001), One.Tel (2001),
Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002), or Parmalat (2003),
are among the most widely scrutinized by the media).
Creating investment opportunities for small investors:
As opposed to other businesses that require huge capital outlay, investing in shares is open to
both the large and small stock investors because a person buys the number of shares they can
afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares
of the same companies as large investors.
Government capital-raising for development projects:
Governments at various levels may decide to borrow money in order to finance infrastructure
projects such as sewage and water treatment works or housing estates by selling another category
of securities known as bonds. These bonds can be raised through the Stock Exchange whereby
18

members of the public buy them, thus loaning money to the government. The issuance of such
bonds can obviate the need to directly tax the citizens in order to finance development, although
by securing such bonds with the full faith and credit of the government instead of with collateral,
the result is that the government must tax the citizens or otherwise raise additional funds to make
any regular coupon payments and refund the principal when the bonds mature.

Barometer to the Economy

At the stock exchange, share prices rise and fall depending, largely, on market forces. Share
prices tend to rise or remain stable when companies and the economy in general show signs of
stability and growth. An economic recession, depression, or financial crisis could eventually lead
to a stock market crash. Therefore the movement of share prices and in general of the stock
indexes can be an indicator of the general trend in the economy.
Listing Requirements:
Listing requirements are the set of conditions imposed by a given stock exchange upon
companies that want to be listed on that exchange. Such conditions sometimes include minimum
number of shares outstanding, minimum market capitalization, and minimum annual income.
19

20

Indian Stock Market

Indian Stock Markets is 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.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in
Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers
recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid
development of commercial enterprise and brokerage business attracted many men into the
field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War
broke out and cotton supply from United States to Europe was stopped; thus, the 'Share
Mania' in India began. The number of brokers increased to about 200 to 250.
At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found
a place in a street (now appropriately called as Dalal Street) where they would conveniently
assemble and transact business. In 1887, they formally established in Bombay, the "Native

21

Share and Stock Brokers' Association, which is alternatively known as The Stock
Exchange". In 1895, the Stock Exchange acquired a premise in the same street and it was
inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.
The Indian stock market has been assigned an important place in financing the Indian
corporate sector. The principal functions of the stock markets are:
enabling mobilizing resources for investment directly from the investors

providing liquidity for the investors and monitoring.

Disciplining company management.

The two major stock exchanges in India are: National Stock Exchange (NSE)
Bombay Stock Exchange (BSE)

22

National Stock Exchange

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.
The National Stock Exchange was incorporated in 1992 by 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.

23

The National Stock Exchange (NSE) is India's leading stock exchange covering various cities
and towns across the country. NSE was set up by leading institutions to provide a modern, fully
automated screen-based trading system with national reach. The Exchange has brought about
unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities
that serve as a model for the securities industry in terms of systems, practices and procedures.
Trading at NSE can be classified under two broad categories:
Wholesale debt market

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.
Capital market: A market where debt or equity securities are traded.
There are two kinds of players in NSE:
Trading members

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.
24

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. 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 since inter-market
operations are streamlined coupled with the countrywide access to the securities.
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.
NSE Nifty
S&P CNX Nifty is a well-diversified 50 stock index accounting for 22 sectors of the
economy. It is used for a variety of purposes such as benchmarking fund portfolios, index
based derivatives and index funds.
NSE came to be owned and managed by India Index Services and Products Ltd. (IISL), which is
a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon
the index as a core product. IISL have a consulting and licensing agreement with Standard &
25

Poor's (S&P), who are world leaders in index services. CNX stands for CRISIL NSE Indices.
CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e.
NSE and CRISIL. Thus, 'C' Stands for CRISIL, 'N' stands for NSE and X stands for Exchange or
Index. The S&P prefix belongs to the US-based Standard & Poor's Financial Information
Services.

Bombay Stock Exchange

The Bombay Stock Exchange is one of the oldest stock exchanges in Asia. It was established
as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange
in the country to obtain permanent recognition in 1956 from the Government of India under
the Securities Contracts (Regulation) Act, 1956. The Exchange's pivotal and pre-eminent role
in the development of the Indian capital market is widely recognized and its index, SENSEX,
is tracked worldwide.

26

SENSEX
The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently
became the barometer of the Indian stock market.
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.
Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse
of the Indian stock market. As the oldest index in the country, it provides the time series data
over a fairly long period of time. Small wonder, the SENSEX has over the years become one
of the most prominent brands in the country.
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.
The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE
National Index (Base: 1983-84 = 100). It comprised of 100 stocks listed at five major stock
exchanges.
The values of all BSE indices are updated every 15 seconds during the market hours and
displayed through the BOLT system, BSE website and news wire agencies.
All BSE-indices are reviewed periodically by the index committee of the exchange.

27

Overview Of The Regulatory Framework Of The Capital Market In India

India has a financial system that is regulated by independent regulators in the sectors of
banking, insurance, capital markets and various service sectors. The Indian Financial system
is regulated by two governing agencies under the Ministry of Finance. They are
1

Reserve Bank of India

The RBI was set up in 1935 and is the central bank of India. It regulates the financial
and banking system. It formulates monetary policies and prescribes exchange control
norms.

28

The Securities Exchange Board of India

The Government of India constituted SEBI on April 12, 1988, as a non-statutory body
to promote orderly and healthy development of the securities market and to provide
investor protection.

Department Economic Affairs

The capital markets division of the Department of Economic Affairs regulates capital markets
and securities transactions.
The capital markets division has been entrusted with the responsibility of assisting the
Government in framing suitable policies for the orderly growth and development of the
securities markets with the SEBI, RBI and other agencies. It is also responsible for the
functioning of the Unit Trust of India (UTI) and Securities and Exchange Board of India
(SEBI).
The principal aspects that are dealt with the capital market division are:
Policy matters relating to the securities market

Policy matters relating to the regulation and development and investor protection of the
securities market and the debt market.
Organizational and operational matters relating to SEBI

The Capital Market is governed by:

29

 Securities Contract (Regulation) Act, 1956

Securities Contract (Regulation) Rules, 1957

SEBI Act, 1992

Companies Act 1956

SEBI (Stock Brokers and Sub Brokers) Rules, 1992

Exchange Bye-Laws Rules & Regulations

Self-regulating Role of the Exchange

The exchange functions as a Self Regulatory Organization with the parameters laid down by
the SCRA, SEBI Act, SEBI Guidelines and Rules, Bye-laws and Regulations of the Exchange.
The Governing Board discharges these functions. The Executive Director has all the powers of
the governing board except discharging a member indefinitely or declaring him a defaulter or
expelling him. The Executive Director takes decisions in the areas like surveillance,
inspection, investigation, etc. in an objective manner as per the parameters laid down by the
governing board or the statutory committees like the Disciplinary Action Committee.
Trading With Stock Market
This section will introduce us about the process and instruments used to help a customer or a
client to trade with arcadia securities. This process is almost similar to any other trading firm
but there will be some difference in the cost of brokerage commission.

30

Trading: It is a process by which a customer is given facility to buy and sell share this buying
and selling can only be done through some broker and this is where Arcadia helps its customer.
A customer willing to trade with any brokerage house need to have a demat account, trading
account and saving account with a brokerage firm. Any one having following document can
open all the above mentioned account and can start trading.

Document Required
3 photographs ( signed across)

Photo Identification Proof - any of the following - Voter

ID/Driving License/Passport.

Address Proof any of the following - Voter ID/Driving License/ Passport/ Bank statement or
pass book sealed and attestation by bank official/ BSNL landline bill.
A crossed Cheque favouring Karvy Stock Broking. Of the required amount. The amount
for Demat as well as trading will be Rs. 900/-(free Demat +900 Trading Account) the
minimum amount being Rs. 900 a cheque can be given for a larger amount.
Copy of PAN Card is mandatory.

Registration Kit

CDSL Demat Kit

Bank and address proof declaration.

31

 PAN name discrepancy form.

These documents may not be consumer friendly but it is to avoid illegal transaction and to
prevent black money this ensures that money invested is accounted.
3.1 Techniques and Instruments for Trading
The various techniques that are available in the hands of a client are:1

Delivery

Intraday

Future

Forwards

Options

Swaps

Basic Requirement for doing Trading

Trading requires Opening a Demat account. Demat refers to a dematerialized account.
You need to open a Demat account if you want to buy or sell stocks. So it is just like a bank
account where actual money is replaced by shares. We need to approach the Depository
Participants (DP, they are like bank branches), to open Demat account.

32

A depository is a place where the stocks of investors are held in electronic form. The
depository has agents who are called depository participants (DPs).
Think of it like a bank. The head office where all the technology rests and details of all
accounts held is like the depository. And the DPs are the branches that cater to individuals.
There are only two depositories in India
The National Securities Depository Ltd (NSDL) and the

Central Depository Services Ltd (CDSL).

Capital Market Participants

Banks

Exchanges

Clearing Corporations

Brokers

Custodians

Depositories

Investors

33

 Merchant Bankers

Types of Investors
Institutional Investors- MFs / FI / FIIs / Banks

Retail Investors

Arbitrageurs / Speculators

Hedgers

Day traders/Jobbers

Combination of Futures and Option

Hedging means, minimizing the risk, i.e., minimizing the losses. Under index futures and
index options investor can minimize his losses. Hedging does not remove losses but removes
unwanted exposure, i.e. unnecessary risk. One should not enter into a hedging strategy hoping
to make excess profits; all it can do is reduce the risk.
55
Parameters Of Investment
The nature of investment differs from individual to individual and is unique to each one because
it depends on various parameters like future financial goals, the present & the future income
34

model, capacity to bear the risk, the present requirements and lot more. As an investor progresses
on his/her life stage and as his/her financial goals change, so does the unique investor profile.
Economic development of a country depends upon its investment. The emerging economic
environment of competitive markets signifying customers sovereignty has profound
implications for their savings and investment. Investment means persons commitments towards
his future.

INVESTMENT

The word "investment" can be defined in many ways according to different theories and
principles. It is a term that can be used in a number of contexts. However, the different meanings
of "investment" are more alike than dissimilar.
Generally, investment is the application of money for earning more money. Investment also
means savings or savings made through delayed consumption.
According to economics, investment is the utilization of resources in order to increase income or
production output in the future.
An amount deposited into a bank or machinery that is purchased in anticipation of earning
income in the long run are both examples of investments. Although there is a general broad
definition to the term investment, it carries slightly different meanings to different industrial
sectors.
According to economists, investment refers to any physical or tangible asset, for example, a
building or machinery and equipment.

35

On the other hand, finance professionals define an investment as money utilized for buying
financial assets, for example stocks, bonds, bullion, real properties, and precious items.

According to finance, the practice of investment refers to the buying of a financial product or any
valued item with anticipation that positive returns will be received in the future.
The most important feature of financial investments is that they carry high market liquidity. The
method used for evaluating the value of a financial investment is known as valuation.
According to business theories, investment is that activity in which a manufacturer buys a
physical asset, for example, stock or production equipment, in expectation that this will help the
business to prosper in the long run.

Characteristics of an investment decision:

1. It involves the commitment of funds available with you or that you would be getting in
the future.
2. The investment leads to acquisition of a plot, house, or shares and debentures.
3. The physical or financial assets you have acquired are expected to give certain benefits in
the future periods. The benefits may be in the form of regular revenue over a period of
time like interest or dividend or sales or appreciation after some point of time as normally
happens in the case of investment in land or precious metals.
Essentials of Investment
Essentials of investment refer to why investment, or the need for investment, is required. The
investment strategy is a plan, which is created to guide an investor to choose the most
36

appropriate investment portfolio that will help him achieve his financial goals within a particular
period of time.
An investment strategy usually involves a set of methods, rules, and regulations, and is designed
according to the exchange or compromise of the investor's risks and returns.
A number of investors like to increase their earnings through high-risk investments, whilst others
prefer investing in assets with minimum risk involved. However, the majority of investors
choose an investment strategy that lies in the middle.

Investment strategies can be broadly categorized into the following types:

Active strategies: One of the principal active strategies is market timing (an investor
is able to move into the market when it is on the low and sell the stocks when the
market is on the high), which is applied for maximizing yields.

Passive strategies: Frequently implemented for reducing transaction costs.

One of the most popular strategies is the buy and hold, which is basically a long term investment
plan.
The idea behind this is that stock markets yield a commendable rate of return in spite of stages
of fluctuation or downfall. Indexing is a strictly passive variable of the buy and hold strategy
and, in this case, an investor purchases a limited number of every share existing in the stock
market index, for example the Standard and Poor 500 Index, or more probably in an index fund,
which is a form of a mutual fund.
37

Additionally, as the market timing strategy is not applicable for small-scale investors, it is
advisable to apply the buy and hold strategy. In case of real estate investment the retail and
small-scale investors apply the buy and hold strategy, because the holding period is normally
equal to the total span of the mortgage loan.

Principles Of Investment
Five basic principles serve as the foundation for the investment approach. They are as follows:

Focus on the long term

There is substantive empirical evidence to suggest that equities provide the maximum risk
adjusted returns over the long term. In an attempt to take full advantage of this phenomenon,
investments would be made with a long term perspective.

Investments confer proportionate ownership

The approach to valuing a company is similar to making an investment in a business.

Therefore, there is a need to have a comprehensive understanding of how the business
operates.

Maintain a margin of safety

The benchmark for determining relative attractiveness of stocks would be the intrinsic value
of the business. The Investment Manager would endeavor to purchase stocks that represent a
discount to this value, in an effort to preserve capital and generate superior growth.

38

Maintain a balanced outlook on the market

The investment portfolio would be regularly monitored to understand the impact of changes
in business and economic trend as well as investor sentiment. While short-term market
volatility would affect valuations of the portfolio, this is not expected to influence the
decision to own fundamentally strong companies.

Disciplined approach to selling

The decision to sell a holding would be based on either the anticipated price appreciation
being achieved or being no longer possible due to a change in fundamental factors affecting
the company or the market in which it competes, or due to the availability of an alternative
that, in the view of the Investment Manager, offers superior returns.
In order to implement the investment approach effectively, it would be important to
periodically meet the management face to face. This would provide an understanding of their
broad vision and commitment to the long-term business objectives. These meetings would also
be useful in assessing key determinants of management quality such as orientation to minority
shareholders, ability to cope with adversity and approach to allocating surplus cash flows.

39

Investment Process

Figure no. 5.3. Investment Process

Framing of
investment policy

Investment Analysis

Valuation

Portfolio construction

Portfolio evaluation

40

Investment Types
A particular investor normally determines the investment types after having formulated the
investment decision, which is termed as capital budgeting in financial lexicon. With the
proliferation of financial markets there are more options for investment types.

According to the financial terminology investment means the following:

Purchasing Securities in Money or Capital Markets

Buying Monetary or Paper Financial Assets in Money or Capital Markets

41

Investing in Liquid Assets like Gold, Real Estate and Collectibles

nvestors assume that these forms of investment would furnish them with some revenue

by way of positive cash flow.

These assets can also affect the particular investor positively or negatively depending on the
alterations in their respective values.

Investments are often made through the intermediaries who use money taken from individuals to
invest. Consequently the individuals are regarded as having claims on the particular
intermediary.

It is common practice for the particular intermediaries to have separate legal procedures of their
own. Following are some intermediaries:

Banks

Mutual Funds

Pension Funds

Insurance Companies
42

Collective Investment Schemes

Investment Clubs

Investment in the domain of personal finance signifies funds employed in the purchasing of
shares, investing in collective investment plans or even purchasing an asset with an element of
capital risk. In the field of real estate, investments imply buying of property with the sole
purpose of generating income.
Investment in residential real estate could be made in the form of buying housing property, while
investments in commercial real estate is made by owning commercial property for corporate
purposes that are geared to generate some amount of revenue.

Investment
The money you earn is partly spent and the rest saved for meeting future expenses. Instead of
keeping the savings idle you may like to use savings in order to get return on it in the future. This
is called Investment.

Why should one invest?

One needs to invest to:

earn return on your idle resources

generate a specified sum of money for a specific goal in life

make a provision for an uncertain future

43

Various Options Available For Investment

One may invest in:

Physical assets like real estate, gold/jewellery, commodities etc. or

Financial assets such as fixed deposits with banks, small saving instruments with post
offices, insurance/ provident/

Pension fund etc. or securities market related instruments like shares, bonds, debentures
etc.

Various Short-term financial options available for investment

Broadly speaking, savings bank account, money market/liquid funds and fixed deposits with
banks may be considered as short-term financial investment options.
Savings Bank Account is often the first banking product people use, which offers low interest
(4%-5% p.a.), making them only marginally better than fixed deposits.

Fixed Deposits with Banks are also referred to as term deposits and minimum investment
period for bank FDs is 30 days. Fixed Deposits with banks are for investors with low risk
appetite, and may be considered for 6-12 months investment period as normally interest on less
than 6 months bank FDs is likely to be lower than money market fund returns.

44

Various Long-term financial options available for investment

Post Office Savings: Post Office Monthly Income Scheme is a low risk saving instrument,
which can be availed through any post office. It provides an interest rate of 8% per annum, which
is paid monthly.
Minimum amount, which can be invested, is Rs. 1,000/- and additional investment in multiples
of 1,000/-. Maximum amount is Rs. 3, 00,000/- (if Single) or Rs. 6, 00,000/- (if held jointly)
during a year. It has a maturity period of 6 years.
A bonus of 10% is paid at the time of maturity. Premature withdrawal is permitted if deposit is
more than one year old. A deduction of 5% is levied from the principal amount if withdrawn
prematurely; the 10% bonus is also denied.

Public Provident Fund: A long term savings instrument with a maturity of 15 years and interest
payable at 8% per annum compounded annually. A PPF account can be opened through a
nationalized bank at anytime during the year and is open all through the year for depositing
money. Tax benefits can be availed for the amount invested and interest accrued is tax-free. A
withdrawal is permissible every year from the seventh financial year of the date of opening of the
account and the amount of withdrawal will be limited to 50% of the balance at credit at the end
of the 4th year immediately preceding the year in which the amount is withdrawn or at the end of
the preceding year whichever is lower the amount of loan if any.

Company Fixed Deposits: These are short-term (six months) to medium-term (three to five
years) borrowings by companies at a fixed rate of interest which is payable monthly, quarterly,
semi-annually or annually.

45

They can also be cumulative fixed deposits where the entire principal along with the interest is
paid at the end of the loan period. The rate of interest varies between 6-9% per annum for
company FDs. The interest received is after deduction of taxes

Bonds: It is a fixed income (debt) instrument issued for a period of more than one year with the
purpose of raising capital.
The central or state government, corporations and similar institutions sell bonds. A bond is
generally a promise to repay the principal along with a fixed rate of interest on a specified date,
called the Maturity Date.

Mutual Funds: These are funds operated by an investment company which raises money from
the public and invests in a group of assets (shares, debentures etc.), in accordance with a stated
set of objectives. It is a substitute for those who are unable to invest directly in equities or debt
because of resource, time or knowledge constraints. Benefits include professional money
management, buying in small amounts and diversification. Mutual fund units are issued and
redeemed by the Fund Management Company based on the fund's net asset value (NAV),
which is determined at the end of each trading session. NAV is calculated as the value of all the
shares held by the fund, minus expenses, divided by the number of units issued.

46

Equity Investment
Equity investment refers to the trading of stocks and bonds in the share market. It is also
referred to as the acquisition of equity or ownership participation in the company.
An equity investment is typically an ownership investment, where the investor owns an asset of
the company. In this kind of investment there is always a risk of the investor not earning a
specific amount of money. Equity investment can also be termed as payment to a firm in return
for partial ownership of that firm. An equity investor, in some cases, may assume some
management control of the firm and may also share in future profits.
In order to understand equity investment properly, it is necessary to see the technical and
fundamental analysis. The technical analysis of equity investment is primarily the study of price
history of the shares and stock market. A fundamental analysis of equity investment involves the
study of all available information that is relevant to the share market in order to predict the future
trends of the stock market. The annual reports, industry data and study of the economic and
financial environment are also included in the fundamental information of equity investment.

Mutual Funds and Segregated Funds

Mutual funds or other forms of pooled investment measures are equities held by private
individuals but managed and governed by prominent management firms. These types of financial
holdings allow individual investors to diversify their holdings and avoid potential loss.
Segregated funds, on the other hand, are used by large private investors who wish to hold their
shares directly rather than in a mutual fund.
47

The prime advantage in investing in a pooled fund is that it gives the individual access to
professional advice through the fund manager. The major disadvantages involved are that the
investors must pay a fee to the fund managers and that the diversification of the fund may not be
appropriate for all investors. In those cases, the investors may over-diversify by holding several
funds, thus reducing the risk.
Mutual funds are supposed to be the best mode of investment in the capital market since they
are very cost beneficial and simple, and do not require an investor to figure out
which securities to invest into. A mutual fund could simply be described as a financial medium
used by a group of investors to increase their money with a predetermined investment
The responsibility for investing the pooled money into specific investment channels lies with the
fund manager of said mutual fund.
Therefore investment in a mutual fund means that the investor has bought the shares of the
mutual fund and has become a shareholder of that fund. Diversification of investment Investors
are able to purchase securities with much lower trading costs by pooling money together in a
mutual fund rather than try to do it on their own. However the biggest advantage that mutual
funds offer is diversification which allows the investor to spread out his money across a wide
spectrum of investments. Therefore when one investment is not doing well, another may be
doing taking off, thereby balancing the risk to profit ratio and considerably covering the overall
investment. The best form of diversification is to invest in multiple securities rather than in just
one security. Mutual funds are set up with the precise objective of investing in multiple securities
that can run into hundreds. It could take weeks for an investor to investigate on this kind of scale,
but with investment in mutual funds all this could be done in a matter of hours.

48

Mutual Fund Types

Investment Funds

American Mutual Funds

Top Mutual Funds

BMO Mutual Funds

Dynamic Mutual Fund

Canadian Mutual Funds

Janus Mutual Funds

Fidelity Mutual Funds

Vanguard Mutual Funds

Hartford Mutual Funds

Mutual Funds Performance

Investing in Mutual Funds

Types of Mutual Funds (Mode of Investment)

Debentures
49

In financial context, Debentures are Debt Instruments issued for a long term by governments
and big institutions for rising funds. The Debenture has some resemblances to bonds but the
securitization terms and conditions are different for Debentures compared to a bond.
A Debenture is commonly considered as insecure because there is no pledge or lien on particular
assets. Nevertheless, a Debenture is secured by all the assets which are otherwise not pledged.
If there is a bankruptcy, Debenture holders will be counted as general creditors.
The benefit that the issuer enjoys from issuing a debenture is that they keep particular assets free
of encumbrances so the option is open to issue them for future financing.
Usually, Debentures are freely negotiable debt instruments. The Debenture holder works as a
lender to the Debenture issuer.
In return, the Debenture issuer pays interest to the Debenture holders as it is paid in case of a
loan. In practical application, the difference between a Bond and a Debenture is not always kept.
In some instances, Debentures are also referred to as Bonds and vice-versa.

Types Of Debentures

Convertible Debenture
Non-Convertible Debenture
Participative Debenture
Non- Participative Debenture
50

Redeemable Debenture
Irredeemable Debenture

BOND MARKET
The bond market is a financial market that acts as a platform for the buying and selling of debt
securities. The bond market is a part of the capital market serving platform to collect fund for the
public sector companies, governments, and corporations. There are a number of bond indices that
reflect the performance of a bond market.
The bond market can also called the debt market, credit market, or fixed income market. The size
of the current international bond market is estimated to be $45 trillion. The major bond market
participants are: governments, institutional investors, traders, and individual investors. According
to the specifications given by the Bond Market Association, there are five types of bond markets.
They are:

Corporate Bond Market

Municipal Bond Market

Government and Agency Bond Market

Funding Bond Market

Mortgage Backed and Collateralized Debt Obligation Bond Market

Share Market Investment

Shares are purchased and sold on the primary and secondary share markets. To invest in the
share market, investors acquire a call option, which is the right to buy a share, or a put option,
51

which is the right to sell a share. In general, investors buy put options if they expect prices to
rise, and call options if they expect prices to fall.. The value of a derivative depends on the value
of the underlying asset. The various classifications of derivatives relevant to share market
investment are:

Swap

Futures Contract

Forward Contract

Option Contract

A forward contract is agreements between two parties purchase or sell a product in the future,
at a price determined now. This mutual agreement satisfies the profit motive of both the
buyer and seller, and the uncertainties and risks of price fluctuations in the future are aborted.
A future contract is different from a forward contract in the sense that the former requires the
presence of a third party and the commitment for trade is simply notional.

Before a share is chosen for investment, a technical analysis of the share is performed. The
price and volume of a share over a period of time are tracked and then a business plan is
constructed. A fundamental analysis involves a close study of the company associated with
the share, and its performance over time. The fundamental analysis is important for the share
market

investor.

52

The price levels of a traded share are as follows:

Opening Price: This is the price at which the market opens. In other words, it is the price
of the first transaction.

Closing Price: This is the price at the time of closing of the market or the price of the last
trade.

Intra-Day High: This denotes the maximum price at which the share was traded in the
day.

Intra-Day Low: This is the minimum price at which the share traded in the day.

Debt Investments:
Debt securities (in the form of non-convertible debentures, bonds, secured premium notes, zero
interest bonds, deep discount bonds, floating rate bond / notes, securitised debt, pass through
certificates, asset backed securities, mortgage backed securities and any other domestic fixed
income securities including structured obligations etc.) include, but are not limited to :

Debt obligations of the Government of India, State and local Governments,

Government Agencies and statutory bodies (which may or may not carry a state /
central government guarantee),

Securities that have been guaranteed by Government of India and State

Governments,

53

Securities issued by Corporate Entities (Public / Private sector undertakings),

Securities issued by Public / Private sector banks and development financial

institutions.

Money Market Instruments Include

Commercial Papers

Commercial bills

Treasury bills

Government securities having an unexpired maturity upto one year

Call or notice money

Certificate of deposit

Usance bills

Permitted securities under a repo / reverse repo agreement

Any other like instruments as may be permitted by RBI / SEBI from time to time
Investments will be made through secondary market purchases, initial public
offers, other public offers, placements and right offers (including renunciation)
and negotiated deals. The securities could be listed, unlisted, privately placed,
secured / unsecured, rated / unrated of any maturity.

54

The AMC retains the flexibility to invest across all the securities / instruments in debt and money
market.
Investment in debt securities will usually be in instruments which have been assessed as "high
investment grade" by at least one credit rating agency authorised to carry out such activity under
the applicable regulations. In case a debt instrument is not rated, prior approval of the Board of
Directors of Trustee and AMC will be obtained for such an investment. Investment in debt
instruments shall generally have a low risk profile and those in money market instruments shall
have an even lower risk profile. The maturity profile of debt instruments will be selected in
accordance with the AMC's view regarding current market conditions, interest rate outlook.

Pursuant to the SEBI Regulations, the Scheme shall not make any investment in:

any unlisted security of an associate or group company of the Sponsor; or

any security issued by way of private placement by an associate or group company of the
Sponsor; or

the listed securities of group companies of the Sponsor which is in excess of 25% of the
net assets.

The Scheme may invest in other schemes managed by the AMC or in the schemes of any other
mutual funds, provided it is in conformity with the investment objectives of the Scheme and in
terms of the prevailing SEBI Regulations. As per the SEBI Regulations, no investment
management fees will be charged for such investments and the aggregate inter Scheme

55

investment made by all the schemes of HDFC Mutual Fund or in the schemes of other mutual
funds shall not exceed 5% of the net asset value of the HDFC Mutual Fund.

Data Analysis And Interpretation

6.0 Demographic Profile of investors

Table 6.0: Demographic Profile of investors

Demographics
Age
Less than 20 years
20-40
Greater than 40

No. of respondents

0
20
30
Total 50

Qualification
Matric
Under Graduate
Post Graduate

Percentage of respondents

0
40
60
Total 50

0
25
25

0
50
50

Total 50

Total 100

19

38

Occupation
Service
56

Profession
Business
Student

6
15
10

12
30
20

Total 50

Total 100

10
25

20
50

15
Total 100

30
Total 100

Income (per month)

Less than Rs.20000
Rs.20000-40000
Greater than 40000

Analysis & Interpretation: It was found that the major population of investors was greater than
40yrs and 60% was of 20-40 yrs. And 50% respondents were under graduate and 50% were post
graduate. 35% of respondents were doing service. And majority of respondents i.e. 50% earn
income between Rs.20000-40000 per month. It means majority of investors was greater than 40
years having income in between Rs 20000-40000.

57

Statement 1. To know whether respondents invest.

Table No. 6.1 To know whether respondents invest.
Investment Decision
Yes
No
Total

No. of Respondents

Percentage of Respondents

45
5
50

90
10
100

Figure No. 6.1 To know whether respondents invest.

58

Yes

No

10%

90%

Analysis & Interpretation:

From the survey it was found that 90% respondents invest in the stock market and 10% who
were non-investors,

Statement 2. Awareness regarding types of Investment Instruments

Table No. 6.2 Type of investment option the person is aware of
Types

of

Instruments
Shares
Mutual Funds
Debentures
Bonds
Derivatives
Total

Investment

No. of Respondents

Percentage of Respondents

15
23
5
5
2
50

30%
46%
10%
10%
4%
100%

59

Figure No.6.2 Type of investment option the person is aware of

Shares
Bonds

Mutual Funds
Derivatives

10%

Debentures

4%
30%

10%

46%

60

Analysis & Interpretation Above pie-chart shows that 45% investors were aware of the mutual
fund, 25% investors were aware of shares, 15% investors were aware of debentures, 10%
investors were bonds. It means majority of persons aware about mutual fund whereas shares and
debentures were of second importance.
Statement 3 .To know the type of investment option the person has been investing
Table No.6.3 Type of investment option the person has been investing

Investment alternative

No. of Respondents

Percentage of Respondents

15
15
10
5
5
50

30%
30%
20%
10%
10%
100%

Shares
Mutual Funds
Debentures
Bonds
Derivatives
Total

Figure No.6.3 Type of investment option the person has been investing
Shares
Bonds

Mutual Funds
Derivatives

Debentures

10%
10%

30%

20%
30%

Analysis & Interpretation:

61

From the survey it was found that 30% respondents invest in Mutual funds, 25% invest in Shares
and 20% invest in Debentures. Thus, it can be stated that maximum people invest in Mutual
Funds whereas shares are having 2nd importance.
Statement 4 .To know the rates at which the investment grow
Table No.6.4 The rates at which the investment grow

Investment Growth Rate

No. of Respondents

Percentage of Respondents

0
5
45
50

0%
10%
90%
100%

Steadily
At an average rate
At fast rate
Total

Steadily

At an average rate

10%

90%

Analysis & Interpretation:

62

At fast rate

From the survey it was found that 90% respondents wants their investment grow at fast rate
whereas only 10% respondents were in the favour of investment growth at average rate.

Statement 5. To know the frequency of investment by the Respondents.

Table No. 6.5 Frequency of investment
Frequency of Investment
Daily
Weekly
Monthly
Yearly
Total

No. of Respondents

Percentage of Respondents

0
10
24
16
50

0%
20%
48%
32%
100%

Figure No.6.5 Frequency of Investment

Daily

Weekly

Monthly

20%
32%

48%

Analysis & Interpretation:

63

Yearly

From the above table & chart it was found that 45 respondents invest monthly, 35 invest yearly
and there were 20 respondents who invest daily. Thus, it can be stated that majority of the
investors invest monthly in stock market

Statement 6 .To know the percentage of income that respondent invest annually
Table No. 6.6 The percentage of income that respondent invest annually
Annual Income

No. of Respondents

Percentage of Respondents

Invested
Up to 10%
10-15%
15-20%
More than 20%
Total

7
11
20
12
50

14%
22%
40%
24%
100%

Figure No. 6.6 The percentage of income that respondent invest annually

64

Up to 10%
15-20%

10-15%
More than 20%

14%

24%

22%

40%

Analysis & Interpretation:

From the above table & chart, it was found that 40 respondents invest 15-20% of their annual
income, 24 respondents invest more than 20% of their annual income, 22 respondents invest up
to 10-15% of their income and 14 respondents invest up to 10% of their income in different
investment avenues. Thus, it can be concluded that majority of investors invest 10% to 20% of
their monthly income.

65

Statement 7. To know the respondents influence on Investment decision.

Table No.6.7 The respondents influence on Investment decision

Sources
Self
Friends & Relatives
Service providers & consultants

No. of Respondents
24
10
6
66

Percentage of Respondents
48%
20%
12%

Newspapers & Advertisement

Agents
Workshops & Seminars
Total

5
3
2
50

10%
6%
4%
100%

Figure No.6.7 The respondents influence on Investment decision

Self

10%

6% 4%

Friends & Relatives

48%

12%
Service providers & consultants

Newspapers & Advertisement

20%

Agents

Workshops & Seminars

Analysis & Interpretation:

From the above table & chart, it was found that multiple aspects for investing influenced
respondents.48% respondents take investment decision on the basis of their personal evaluation
where as 20% respondents invest because of influence of friends & relatives, the consultants

67

influences 12% respondent and the advertisement influences 10% respondents. It can be stated
that majority of the persons are influenced by their own while opting for investment tool.

Statement 8. To Know The Factors That Were Considered While Investing.

68

Table No. 6.8 The Factors That Were Considered While Investing

Investment Factors
Return on investment
Tax benefits
Capital appreciation
Maturity period
Risk
Safety of principal
Liquidity
Total

No. of Respondents
15
9
7
3
6
3
7
50

Percentage of Respondents
30%
18%
15%
6%
12%
6%
14%
100%

Figure No. 6.8 The Factors That Were Considered While Investing

Return on investment

Tax benefits

Capital appreciation

14%
30%

6%
12%
Maturity period

Risk

6%
14%

Liquidity

69

Safety of principal

18%

Analysis & Interpretation:

From the survey it was found that the maximum respondents considered return on investment
was most important factor, 18% respondents considered tax benefits as an important factor and
14% respondents considered capital appreciation as an important factor. It can be stated that
majority of investors were consider return as an important factor while investing.

70

Statement 9. To Know Investors Action In Case Of Stock Market drop.

Table No. 6.9 The Investors Action In Case Of Stock Market drop
Investors preference in case

No. of Respondents

Percentage of Respondents

secure

15

25%

investment
Wait to see if investment

20

40%

improves
Invest more funds
Withdraw funds

13
2

30%
5%

50

100%

of losses
Transfer funds

investing
Total

into

&

stop

71

Figure No. 6.9 The Investors Action In Case Of Stock Market Drop

4%
Transfer funds into secure investment

26%

Wait to see if investment

improves
30%

40%
Withdraw funds & stop investing

72

Invest more funds

Analysis & Interpretation:

From the survey it was found that maximum respondents would wait to see if their investment
improves and start generating funds, 30% respondents would invest more funds, 25%
respondents would transfer funds into secure investment and 5% respondents would stop
investing. It can be stated that majority of investors would like to wait to see whether investment
improves or they can invest more funds.

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Statement 10. To Know The Decision Regarding Other Investment Policy

Table no. 6.11 The Other Investment Policy

Investment Decision

Yes
No
Total

No. of Respondents

Percentage of Respondents

49
1
50
Figure 6.10 The Other Investment Policy

74

98%
2%
100%

Yes

No

2%

98%

Analysis & Interpretation:

From the survey it was found that 98% respondents have the other investment policy where as
2% respondents do not have the other investment policy.

Statement 11. To Know the Satisfaction Level Of Respondents With Their Investment
Option
Table no. 6.11 Important Factors for Choosing The Investment Option

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Particulars

Shares
Mutual funds
Bonds
Debentures
Derivatives

Highly

Dissatisfie

Dissatisfied
(1)

10
12
20
15
30

Neutral

Satisfied

Highly

Summated

(3)

(4)

Satisfied
(5)

Score

(2)
6
15
18
10
10

14
20
35
15
20

30
35
19
40
30

40
18
8
20
10

384
332
277
340
280

Range
Max. Score=100*5=500

(Highly Satisfied)

Avg. Score=100*3=300

(Neutral)

Min. Score=100*1=100

(Highly Dissatisfied)

Analysis & Interpretation:

Most of the respondents have given the highest summated score to shares. And the second most
important investment option is debentures which influenced the decision regarding investment.
Other important factor is mutual fund coverage which has the 332 summated score. Return on
derivatives get the 280 summated score.

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Statement 12. Important Factors That Was Considered While Investing

Table No. 6.12 Important Factors That Was Considered While Investing

Particulars

Highly

Dissatisfied

Neutral

Satisfied

Highly

Summated

Dissatisfied
(1)

(2)

(3)

Satisfied
(5)

Score

(4)

Return on

30

66

462

investment
Tax benefits
Capital

0
0

0
0

18
20

48
40

34
40

416
420

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appreciation
Maturity

40

30

20

355

period
Risk
Safety of

5
10

10
20

20
40

35
20

30
10

375
300

principal
Liquidity

15

15

20

30

20

325

Range:

Max. Score=100*5=500

(Highly Satisfied)

Avg. Score=100*3=300

(Neutral)

Min. Score=100*1=100

(Highly Dissatisfied)

Analysis & Interpretation:

Most of the respondents have given the highest summated score to Return on investment. And
the second most important factor is Capital appreciation which influenced the decision
regarding investment. Other important factor is Tax benefit which has the 416 summated score.

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Findings Of The Study

Following findings were generated from the study:-

1. Maximum investors are aware of all the investment options.

2. Investors do not invest in a single avenue. They prefer different avenues and maximum
investors prefer to invest in shares, mutual funds & debentures.
3. Maximum investors wants their investment grow at fast rate.
4. The investment decision of investors is influenced by their own decision and through
friends & relatives.

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5. Different factors considered by investors while investing are return, risk, tax benefits,
capital appreciation and the most prominent factor is the return on any investment
avenue.
6. Majority of investors invest 15-20% of their annual income.
7. Maximum investors invest on monthly basis.
8. The investors investing in different avenues are highly satisfied with the return generated
by their investment option.
9. Maximum investors have other investment policies.
10. The most important factor is Return which influenced the decision regarding investment.

Conclusion
Indian Stock Markets is 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. The nature of investment differs from
individual to individual and is unique to each one because it depends on various parameters like
future financial goals, the present & the future income model, capacity to bear the risk, the

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present requirements and lot more. As an investor progresses on his/her life stage and as his/her
financial goals change, so does the unique investor profile. Maximum investors are aware of all
the investment options. Investors do not invest in a single avenue. They prefer different avenues
and maximum investors prefer to invest in shares, mutual funds & debentures. The investment
decision of investors is influenced by their own decision and through friends & relatives.
Majority of investors invest 15-20% of their annual income.. The most important factor is Return
which influenced the decision regarding investment.

References

Economic

Policy,

The

Size

Effect

in

Equity

Returns.

http://papers.ssrn.com/sol3/results.cfm

The Value of Quality: Stock Market Returns to Published Quality Reviews :

http://papers.ssrn.com/sol3/results.cfm

81

Performance Corporate Governance as a Determinant of External Finance in Transition

Economies: http://papers.ssrn.com/sol3/results.cfm

Introduction on Indian Stock Market : http://www.banknetindia.com/

Introduction on Online Investors & Traders :

http://www.traderji.com/

Introduction on Types of investment : http://finance.mapsofworld.com/investment/types/

Misc. Findings : www.wikipedia.org

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