Report On

INVESTMENT BEHAVIOUR
OF INVESTOR’S IN
LUDHIANA’S

Directorate of Distance Education

Submitted to Lovely Professional University
In partial fulfillment of the requirements for the award of degree of
MASTER OF BUSINESS ADMINISTRATION

Submitted by: Supervisor:

Bhupinder Sharma Name of the Project Guide
Regd. No. 20900002 Designation

Directorate of Distance Education

LOVELY PROFESSIONAL UNIVERSITY
PHAGWARA

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 (2009-2011)

TO WHOMSOEVER IT MAY CONCERN

This is to certify that the project report titled “Investment Behaviour of Investor’s in
Ludhiana’s” carried out by Mr. Bhupinder Sharma, S/o Bhagat Ram Sharma has been
accomplished under my guidance & supervision as a duly registered MBA student of the
Lovely Professional University, Phagwara. This project is being submitted by him/her in
the partial fulfillment of the requirements for the award of the Master of Business
Administration from Lovely Professional University.

His/ her dissertation represents his/ her original work and is worthy of consideration for
the award of the degree of Master of Business Administration.

___________________________________
(Name & Signature of the Project Guide)
Designation:
Date:

ii
 DECLARATION

I, " Bhupinder Sharma”, hereby declare that the work presented herein is genuine work
done originally by me and has not been published or submitted elsewhere for the
requirement of a degree programme. Any literature, data or works done by others and
cited within this dissertation has been given due acknowledgement and listed in the
reference section.

______________________
(Student's name & Signature)

_______________________
(Registration No.)

Date:__________________

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 Contents

Chapter Pages

Introduction of the project

(What is share, about the BSE,NSE And LSE also about the equity ) 5-9
Review of literature 10-13

Objective, Need & Characteristics of Study 14

Scope of Study 15

Research methodology 16

References 17

Sample of questionnaire 18-19

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Introduction:-

1.1 What is share?

Companies raise capital money for running and expanding their businesses from the
public and other institutions. They allot shares of the company to them in return. The
shares have certain monetary value. Depending on the performance of the company, the
share price goes up or down.

1.2 What are the Sensex & the Nifty?

The Sensex is an "index. It gives you a general idea about whether most of the stocks
have gone up or most of the stocks have gone down. The Sensex is an indicator of all the
major companies of the BSE.
The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it
means that the prices of the stocks of most of the major companies on the BSE have gone
up. If the Sensex goes down, this tells you that the stock price of most of the major stocks
on the BSE have gone down.

1.3 Introduction of B S E

Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage of over
133 years of existence. What is now popularly known as BSE was established as "The
Native Share & Stock Brokers' Association" in 1875.BSE is the first stock exchange in
the country which obtained permanent recognition (in 1956) from the Government of
India under the Securities Contracts (Regulation) Act (SCRA) 1956. BSE's pivotal and
pre-eminent role in the development of the Indian capital market is widely recognised. It
migrated from the open out-cry system to an online screen-based order driven trading
system in 1995. Earlier an Association Of Persons (AOP), BSE is now a corporatised and
demutualised entity incorporated under the provisions of the Companies Act, 1956,
pursuant to the BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the

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Securities and Exchange Board of India (SEBI). With demutualisation, BSE has two of
world's prominent exchanges, Deutsche Börse and Singapore Exchange, as its strategic
partners. Over the past 133 years, BSE has facilitated the growth of the Indian corporate
sector by providing it with cost and time efficient access to resources. There is perhaps no
major corporate in India which has not sourced BSE's services in raising resources from
the capital market. Today, BSE is the world's number 1 exchange in terms of the number
of listed companies and the world's 5th in handling of transactions through its electronic
trading system. The companies listed on BSE command a total market capitalization of
USD Trillion 1.06 as of July, 2009. BSE reaches to over 400 cities and town nation-wide
and has around 4,937 listed companies, with over 7745 scrips being traded as on 31st July
09.
The BSE Index, SENSEX, is India's first and most popular stock market benchmark
index. SENSEX is tracked worldwide. It constitutes 30 stocks representing 12 major
sectors. The SENSEX is constructed on a 'free-float' methodology, and is sensitive to
market movements and market realities. Apart from the SENSEX, BSE offers 23 indices,
including 13 sectoral indices. BSE is the first exchange in India and the second in the
world to obtain an ISO 9001:2000 certifications. It is also the first exchange in the
country and second in the world to receive Information Security Management System
Standard BS 7799-2-2002 certification for its BSE On-line Trading System (BOLT).

1.3.1 Investor Services: The Department of Investor Services redresses grievances of

investors. BSE was the first exchange in the country to provide an amount of Rs.1 million
towards the investor protection fund; it is an amount higher than that of any exchange in
the country. BSE launched a nationwide investor awareness programme- 'Safe Investing
in the Stock Market' under which 264 programmes were held in more than 200 cities.

1.4 National Stock Exchange

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

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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. NSE has played a catalytic role in reforming the
Indian securities market in terms of microstructure, market practices and trading
volumes. The market today uses state-of-art information technology to provide an
efficient and transparent trading, clearing and settlement mechanism, and has witnessed
several innovations in products & services viz. demutualisation of stock exchange
governance, screen based trading, compression of settlement cycles, dematerialisation
and electronic transfer of securities, securities lending and borrowing, professionalization
of trading members, fine-tuned risk management systems, emergence of clearing
corporations to assume counterparty risks, market of debt and derivative instruments and
intensive use of information technology.

1.5 Equities

NSE started trading in the equities segment (Capital Market segment) on November 3,
1994 and within a short span of 1 year became the largest exchange in India in terms of
volumes transacted. Trading volumes in the equity segment have grown rapidly with
average daily turnover increasing from Rs.17 crores during 1994-95 to Rs.14,148 crores
during FY 2007-08. During the year 2007-08, NSE reported a turnover of Rs.3,551,038
crores in the equities segment. The Equities section provides you with an insight into the
equities segment of NSE and also provides real-time quotes and statistics of the equities
market. In-depth information regarding listing of securities, trading systems & processes,
clearing and settlement, risk management, trading statistics etc are available here

1.6 Corporate Bonds

Corporate bonds are debt securities issued by private and public corporations. Companies
issue corporate bonds to raise money for a variety of purposes, such as building a new
plant, purchasing equipment, or growing the business. When one buys a corporate bond,
one lends money to the "issuer," the company that issued the bond. In exchange, the
company promises to return the money, also known as "principal," on a specified

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maturity date. Until that date, the company usually pays you a stated rate of interest,
generally semiannually. While a corporate bond gives an IOU from the company, it does
not have an ownership interest in the issuing company, unlike when one purchases the
company's equity stock.

1.6.1 Need for Corporate Bonds

One of the announcements in the Budget 2005-06 was to appoint a high level expert
committee on corporate bonds and securitization to look into the legal, regulatory, tax
and market design issues in the development of corporate bond market. A committee was
formed under the Chairmanship of Dr. R.H. Patil to look into the factors inhibiting the
development of an active debt market and recommend policy actions necessary to
develop an appropriate market infrastructure for the growth of an active corporate bond
market.

1.6.2 Valuation of Corporate Bonds

Corporate bonds tend to rise in value when interest rates fall, and they fall in value when
interest rates rise. Usually, the longer the maturity, the greater is the degree of price
volatility. By holding a bond until maturity, one may be less concerned about these price
fluctuations (which are known as interest-rate risk, or market risk), because one will
receive the par, or face, value of the bond at maturity. The inverse relationship between
bonds and interest rates—that is, the fact that bonds are worth less when interest rates rise
and vice versa can be explained as follows :-

• When interest rates rise, new issues come to market with higher yields than older
securities, making those older ones worth less. Hence, their prices go down.

• When interest rates decline, new bond issues come to market with lower yields
than older securities, making those older, higher-yielding ones worth more.
Hence, their prices go up.

• As a result, if one sells a bond before maturity, it may be worth more or less than
it was paid for.

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1.8 Ludhiana Stock Exchange

The Ludhiana Stock Exchange Limited was established in 1981, by Sh. S.P. Oswal of
Vardhman Group and Sh. B.M. Munjal of Hero Group, leading industrial luminaries, to
fulfil a vital need of having a Stock Exchange in the region of Punjab, Himachal Pradesh,
Jammu & Kashmir and Union Territory of Chandigarh. Since its inception, the Stock
Exchange has grown phenomenally. The Stock Exchange has played an important role in
channelizing savings into capital for the various industrial and commercial units of the
State of Punjab and other parts of the country. The Exchange has facilitated the
mobilization of funds by entrepreneurs from the public and thereby contributed in the
overall, economic, industrial and social development of the States under its jurisdiction.

Ludhiana Stock Exchange is one of the leading Regional Stock Exchange and has been in
the forefront of other Stock Exchange in every spheres, whether it is formation of
subsidiary for providing the platform of trading to investors, for brokers etc. in the era of
Screen based trading introduced by National Stock Exchange and Bombay Stock
Exchange, entering into the field of Commodities trading or imparting education to the
Public at large by way of starting Certification Programmes in Capital Market.

Further, the Exchange has 295 members out of which 162 are registered with National
Stock Exchange as Sub-brokers and 121 with Bombay Stock Exchange as sub-brokers
through our subsidiary.
Objectives to the research
 To find out the investment preferences of Ludhiana residents among equity,
preference, debenture, mutual funds.

 To find out which class of people invest more or to what extent.

 To find out the preference of period of investment among Ludhiana

investors.

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  To find out what factors which affect the choice of stocks among Ludhiana
Investors.

Review of Literature

Tripathi (2008) said that paper examines the perceptions, preferences and various
investment strategies in Indian stock market on the basis of a survey among 93
investment analysts, fund managers and active equity investors based at Delhi and
Mumbai during May-October 2007. Survey findings reveal that investors use both
fundamental as well as technical analysis while investing in Indian stock market. Most of
the respondents strongly agree that various company fundamentals (such as size, book to
market equity, price earnings ratio, leverage etc.) significantly influence stock prices and
hence addition of these factors in asset pricing model can better explain cross sectional
variations in equity returns in India. Five most widely used investment strategies in
Indian equity market are size based strategies, momentum strategies, following FIIs
investment behaviour, buying stocks on the basis of 30 days moving average and buying
stocks on the basis of relative strength index. There has been substantial change in
investment strategies used by active investors in Indian stock market over the past five
years. In a nutshell there has been a shift from purely technical analysis based strategies
to the one which involves both fundamental and technical analysis. Moreover the
investment horizon of investors has also reduced due to higher volatility.

Chandra (2009) said that Calendar effect connotes the changes in security prices in stock
market following certain trends based on seasonal effects. Such trends or consistent
patterns occur at a regular interval or at a specific time in a calendar year. Presence of
such anomalies in any stock market is the biggest threat to the concept of market
efficiency as these anomalies may enable stock market participants beat the market by
observing these patterns. This notion again violates the basic assumption of efficient
market hypothesis (EMH) that no one can beat the market and earn the profit in excess of
market. Daily stock returns are also different from each other at different points of time
during a month. This study tried to test this difference by dividing a month into segments

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and then analyzing the returns for these segments separately in order to find out that in
which segment daily stock returns are highest. This study has been conducted to find out
whether turn of the Month Effect and Time of the Month Effect in BSE-SENSEX. Data
pertaining to daily stock index of SENSEX, the capital weighted index of Bombay Stock
Exchange (BSE) for the period April 1998 to March 2008 has been used in this study.
This study has been conducted to test the market efficiency in Indian stock market by
examining calendar effect present in Bombay Stock Exchange, the largest stock exchange
in India. In order to test the evidence of calendar anomalies, BSE’s leading index BSE 30
SENSEX has been selected as a sample for this study.

Bernard (2009) said that the benefits of productive investment projects are difficult to
ascertain due to the long-term nature of these investments. The risk-taking approaches of
these investors are often ignored. This research examines the individual and combined
effect of risk aversion and uncertainty on productive investment decisions. A theoretical
approach to understanding uncertainty and risk aversion is presented within the literature
review, and based on the previous research, five hypotheses are proposed. The
qualitative data for this study were provided by the Banque de France database of
economic and financial behaviour of small- and medium-sized enterprises (SMEs).The
data were collected via a computer-assisted questionnaire regarding factors including
management style and strategic positioning. The variables of the study and the data
analysis are described. The results of the study indicate 1) a negative, significant
correlation exists between uncertainty, risk aversion, and productive investment, and 2) a
positive correlation exists between the level of productive investment and the lack of
manager participation in the firm's capital. The research also highlights the risky and
non-risky factors that influence the strategic decision-making process. The limitations of
this study are discussed, including the use of secondary data that was not specifically
designed to assess the variables focused on in this study.(AKP)

Van der Vlist (2009) said that the effects of perceived expectations and uncertainty on
firm investment decisions are analyzed. After a review of the literature on the
relationship between investment and uncertainty, data from a 1998 survey of135 plants

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in the Netherlands are used to estimate a model of the impact of perceived expectations
and uncertainty on firm investment in general and investment in energy-saving
technologies. Analysis of the model reveals that perceived expectations and uncertainty
have a substantial effect on investment spending. The specific effect depends on firm
size and type of investment. Uncertainty appears to have a greater influence on decision
making in small firms than in large firms. However, differences between the two size
classes are related to the specific source of uncertainty. In small firms, input and output
uncertainty have a differential impact on both aggregate and energy-saving investments.
Moreover, increased uncertainty about wages shifts attention away from investment in
energy-saving technologies. Therefore, the adoption of energy-saving technologies in
small firms may be enhanced by a more stable environment. (SAA)

Tanin (2010) says that Inward FDI to the middle-income countries has the evidence as a
major stimulus to the economic growth; conventionally at export-oriented manufacturing
sector. In point of fact, basic macro fundamentals like as growth of gross domestic
capital formation, foreign reserve, infrastructure etc. accelerates the FDI inflows. This
study reviews the long-run trend on the time scale of FDI to Bangladesh over the period
1975-2006 and major factors determining foreign companies' decisions to invest, in
associated with economic growth. Contents of the paper describe the theoretical
development and extensive literature review to find out the appropriate variables to deter
the foreign direct investment from time series data. On the basis of intricate link between
foreign direct investment and growth, all explained determinants enhance the
facilitation, turnover, and return in FDI concentrated sectors that promote long-term
sustainable growth with specific shortcomings, directly or indirectly, in our labour-
intensive economic activity. Reduced government’s ineffectiveness along with
supporting policy framework makes Bangladesh as an attractive destination of FDI, that
has a positive spill over and significant impacts affect over time through dynamic effects
on economic growth.

Musto (2010) said that several recent papers find a convex relation between past returns
and fund flows of open-end mutual funds. We show this pattern to be consistent with

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fund incentives, in that funds will discard exactly those strategies which underperform.
Past returns contain less information about the future performance of funds which
change strategies, so fund flows are less sensitive to past returns when past returns are
lower. Evidence from the performance persistence literature supports this view, though
the behaviour of investors in the very worst funds remains anomalous. We test two
implications of our story using a new data set of daily mutual fund returns from Micro
pal and manager-change dates from the CRSP mutual fund data set. The first implication
is that strategy changes occur only after bad fund performance. The other is that poor
performers who change strategy enjoy a larger performance improvement than poor
performers who do not. Using change in risk loadings from a four factor model and a
manager-change variable as proxies for change in strategy, we find empirical support for
both these implications

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 Objective of Study

1. To study the investment pattern of People.

2. To study the investment decision of different social class people (in term of
age group, education, income level etc.)

3. To analyze the investment pattern of people who reside is an economically

developed area.

4. To study technique and principle useful in systematic and rational

investment management.

5. To study the popularity of various products offered for investment is the

market.

6. And to study the role of brokerage firm as an intermediaries.

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 Needs of Study

1. Earn return on our idle resource.

2. Generate specified sum of money for a specific goal in life.

3. Make a provision for an uncertain future.

4. To meet the cost of inflation.

Characteristics of Investment

1. Interest (return)

2. Risk

3. Safety

4. Liquidity

Scope of Study
Investment Avenues:

Investment avenues can broadly categories under the following heads.

1. Corporate Securities

a) Equity Share

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 b) Preference Share

c) Debenture/ Bonds

d) Warrants

e) Derivatives

2. Deposit in Bank and Non Banking Companies

3. Life Insurance Policies

4. Provident fund scheme

5. Mutual fund scheme

6. Government Securities

7. Real Estate

8. Post Office Deposits

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 Research Methodology

This research methodology of the study of the study should contain the following
descriptions:

Scope of the study:

The researcher was conducting a survey of brokers in “Ludhiana Stock
Exchange”. The survey was conducting only to the brokers, individuals opinion not to be
considered as an information. This is survey of brokers who are very expert in their field
and information was collected only from them.
Population of the study:
The survey was conducted of brokers in Ludhiana Stock Exchange ( L S E ) and
some oral information will also be collected. The sample was drawn from the brokers in
exchange and information was collected through the questionnaire.
Sample Design And Size:
The sample design will be according to the project and the size will according to
the analysis. The design was cover the whole activity of stock market like which class of
people invested in which stream eighter in shares or funds etc. All these things are
considered in design.
A convenient sample of 15 brokers was taken for the study that was available in the stock
exchange on the day of the visit of the researcher.
Tools of data analysis:
The hole data will be analysed through the statistical techniques according to data
requirement. Researcher will apply ANOVA test (two way ANOVAs). The researcher
applying percentage method etc. All the techniques are the statistical techniques which
are commonly used to analyse the data.
Data collection:

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 All the data is the primary data means was collected by survey of different
brokers , and some information was collected from experts. Survey will be conducted of
15 Brokers in Ludhiana stock exchange. They will give their valuable opinion on the
share and share holders.

REFERENCES

1. www.bankofsingapore.com
2. www.bseindia.com
3. www.nseindia.com
4. http://122.181.15.74:8080/collect/thesisdi/index/assoc

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 Data Collection vehicle
Structure questionnaire as used for the data collection
Q : 1 Where your clients will mostly prefer to invest ?
Equity share ( ) Debenture ( )
Preference share ( ) Mutual funds ( )
Q : 2 Which class of people mostly invest in various options? Pl tick the code 1,2,3,4 for
the respective classes. [Equity share (1) Debentures (2) Preference share (3) Mutual funds
Government employees
1 2 3 4

Business class
1 2 3 4

Professionals 1 2 3 4

Private sector employees

1 2 3 4

Q : 3 In which class of people they will invest more among all the options?
Govt. service class ( ) Employees in private sector ( )
Business class ( ) Professionals ( )
Q : 4 Which class of people contact the brokers for investment regularly? (Rate)
[Government employees (1) Business class (2) Professionals (3) Private sector
employees]
Equity share
1 2 3 4
Debenture
1 2 3 4
Preference share
1 2 3 4
Mutual funds
1 2 3 4

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Q: 5 How much amount will be invested by the investors ? [Large amount ( 1 ) Medium
size ( 2 ) Small amount ( 3 ) Not fixed(4)
Govt service class 1 2 3 4
Employee in private sectors 1 2 3 4
Business class
1 2 3 4
Regular persons
1 2 3 4

Q: 6 To what period they will invested? Long period (1) Medium period ( 2 ) Short
period (3) Not fixed ( 4 )
Govt service class 1 2 3 4
Employee in private sectors 1 2 3 4
Business class
1 2 3 4
Regular persons
1 2 3 4

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