UNIVERSITY OF MUMBAI

(2020-2021)

A PROJECT REPORT ON
SURVEY OF INVESTOR PERCEPTION TOWARDS STOCK MARKET

SUBMITTED BY:
SANJANA KORI
ROLL NO. 5710

MASTER OF COMMERCE
(BANKING AND FINANCE)
SEMESTER III
(2020-2021)

PROJECT GUIDE
MR. SACHIN DEVARE
______________________________________________________________________
Sadhana Education Society’s
L.S RAHEJA COLLEGE OF ARTS AND COMMERCE
Juhu Road , Santacruz (West),
Mumbai – 400054

1
 Certificate

This is certify that Ms. Sanjana N. Kori worked and duly completed her Project Work for
the degree of Master of Commerce under the Faculty of Commerce in the subject of
Banking and Finance and her project is entitled , Survey of investor perception towards
stock market under my supervision.

I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma of
any University. It is her own work and facts reported by her personal findings and
investigations

Mr. SACHIN DEVARE

(Internal Guide) (External examiner)

Mr. RAJU D. GOLE Dr. DEBAJIT N. SARKAR

(Course Coordinator) (Principal)

Date of Submission:

College Seal

2
 Declaration

I the undersigned Ms. Sanjana Kori hereby declare that the work embodied in this
project work titled Survey of investor perception towards stock market forms my
own contribution to the research work carried out under the guidance of Mr. Sachin
Devare is a result of my own research work and has not been previously submitted
to any other University for any other Degree/ Diploma.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Sanjana Kori
Roll No. - 5710

Certified by:
Mr. Sachin Devare

3
 Acknowledgement

To list who all have helped me is difficult because they are so numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this project.

I would like to thank my Principal, Dr. Debajit Sarkar for providing the necessary facilities required for
completion of this project.

I take this opportunity to thank my Coordinator, Mr. Raju D. Gole for her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Mr. Sachin Devare whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and magazines
related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of
the project especially my Parents and Peers who supported me throughout my project.

4
 ABSTRACT

Stock market has become an attractive investment avenue for most of the investors, and stock market has
enormously grown over the years. But lot of investors fear to invest in stock market due to the volatility
often seen in share market. The risk often undertaken by the investors in share market huge and there exist
fear among the investors of losing their hard-earned income. Even though the return, the investors receive in
stock market is high, the investors need to bear an equal amount of risk as well as moreover the investors
must sure of which investment avenue, they are selecting in order to ensure high returns.

This study was undertaken to understand the different personal factors affecting their investment decision
and the different factors influencing various categories of investment. This was also conducted to know the
source of investor’s awareness regarding stock market. Questionnaire and personal interview of the investors
was conducted to understand the view point, behavior and attitude of the investors as well as their level of
awareness. It was that there are many factors influencing the investor's decision such as risk return, tax
benefits, maturity period, capital appreciation and safety of principal. But majority of the investors believed
returns is the most important factor influencing their decision. The highest number of investors preferred to
invest in stocks, when compared to mutual funds and derivatives.

The study also revealed that majority of the investors took their own decision to invest, whereas some of the
investors were influenced by Workshops, Seminars, Advertisements and newspapers. Thus, study attempted
to learn the behavior of the investors towards stock market. A quantitative strategy continues to be utilized
by ascertaining variables and utilizing statistical methods to recognize the perception of the general public.
The foundation has been supplied for future investigation depending on the important principles of the study.

5
 TABLE OF CONTENTS
Sr. No. Topic Name Page No.
1 INTRODUCTION 06
1.1 Background 06
1.2 Need for the Study 09
1.3 Stock Market – Meaning and Understanding 10

1.4 How the Stock Market Works 11

1.5 Functions of Stock Market 13
1.6 Competition for Stock Market 15
1.7 Regulating the Stock Market 15
1.8 Significance of the Stock Market 16
1.9 Stock Exchange in India 17
1.10 Stock Market Participants 20

2 RESEARCH METHODOLOGY 22
2.1 Objectives 22
2.2 Hypotheses 23
2.3 Scope of the Study 23
2.4 Limitations of the Study 23
2.5 Research Design 24
2.6 Theoretical Development 25

3 LITERATURE REVIEW 45

4 DATA ANALYSIS, INTERPRETATIONS & PRESENTATIONS 54

5 CONCLUSIONS & RECOMMENDATIONS 70

6 BIBLIOGRAPHY 73

7 APPENDIX 74

6
 1. INTRODUCTION

With the ever increasing and expanding economy, Indian economy is considered as a growth engine of the
world’s economy. And stock market of such robust economy is the face of the growing market and
companies in it. India has one of the oldest and the fastest stock market platform i.e. Bombay Stock
Exchange (BSE). Stock market basically is an electronic platform where the share of the companies are
listed and traded. Because of this advanced platform it is possible for companies to raise capital from public
efficiently and effectively. With the economic reforms in the country, stock exchanges have grown
exponentially in terms of foreign institutional investment and transaction turnover. This increase is mainly
due liberalized and supportive along with regulative role of government.

The share prices of the listed companies fluctuate on the basis of various factors which affect and build the
sentiments of markets and investor. In India, we have a very low level of economic literacy and if we
quantify it then in a population of more than 125 Crore, less than 2% of population actually invests in stock
market. Such low participation is because of the above mentioned low level of economic literacy plus huge
fluctuations in the market due to several factors. India is pioneer in Information Technology industry and IT
companies of India are one of the greatest contributors in total export as well as fame for the country. Being
a pioneer industry, shares of IT companies are always remain in the limelight of stock market. Further return
on this is again fluctuative due to industry and market factors. Since so many fluctuations exist in the stock
market, it creates an urge to study about those factors which are responsible for the ups and downs.

For the development of any country capital markets plays a critical and significant role. The developed
capital markets provide various benefits like high economic growth, high employment, infrastructural
development and developed financial sectors. Developed markets not only benefits a country but also offers
ample opportunities to retail investors for wealth generation and maximization. Stock Market is a part of the
capital market which offers a market for the shares as well as loan which stand for the capital when it's been
raised. Stock market is an area in which the securities may be offered as well as bought at an agreed value.
Indian stock market is actually probably the oldest stock market incorporated in 1875. The market
capitalization of all listed companies in India hit a record ₹161 trillion ($2.11 trillion). On a global level,
though, India remains the last among top 10 countries by market cap.

In India the household savings rate is increasing and almost fifty percent of the savings are in physical assets
like gold, real estate and the rest fifty percent is in financial assets. In India the private equity has grown
substantially. The value of private equity investments in the country grew more than 20 times in less than a
decade. The performance of Market has registered a significant upward trend in recent times. Retail
investors who are investing in small stocks to make a quick gain, are changing their approach and now
placing their money in quality stocks.

7
With rising trend of popularity of stock market in general as a place where one can earn good returns in less
time has given a push to a common man to be a part of this market. In academics term an Individual who
commits money to any source of investment with the expectation of financial return is being recognized as
an Investor. The prime concern of an Individual Investor is usually to have more profit with minimum risk.
As oppose to this a speculator is always willing to expect a higher level of risk in the hopes of collecting
higher than average profits. An individual with the various levels of needs and level of risks being taken is
being classified in different categories of Investors. Some categories of Investors are mutually exclusive and
some are not. The classification which not mutually exclusive mainly includes gambling , Angel Investors ,
some equity Investors, Investment Trust, Mutual Funds, Hedge Funds, Sovereign Wealth Fund.

With the growing pace of Investment alternatives availability in the market the awareness and knowledge
level of the Investors have also increased many folds. An Individual usually willing to relocate their surplus
amount of funds with the Government Securities, Banks, and LICs as they were being recognized as safe
mode of keeping the savings and also to earn a decent return on the deployed funds. Gradually the scenario
has taken a shift which leads to the introduction of market linked securities with moderate component of risk
and other investment opportunities with flexible level approach. This gave an opportunity to an individual
investor to diverse his/her portfolio to earn a higher rate of return with calculated amount of risk. Gradually
the shift is being observed in the nature of Investor towards their investment pattern. Over a period it is
being realized that the Stock Market has made its footage as an identity of Market which gives maximum
return but with rich component of risk in a short span of time.

Investors act as major key players in Indian stock market. Since they constitute a greater share of
investments and income, the behavior of individual investor cannot be ignored by the regulators of the stock
market. This study is undertaken to understand and to be aware of the factors that bears an impact on
behavior and attitude of the retail investor. Basic concentration lies on investors‟ quality of decisions and
their viewpoints towards investing in stock market. Maximization of income and minimization of expenses
proves to be main motive of the investors engaged in investment. The rational behavior of the investors
routes them to spare their income between expenditure and savings. Decision-making becomes tough for the
investors in the investment process, when probability of profit and loss is taken into consideration. Well-
framed and structured questionnaire is a technique adopted to know the perspective of investors in
the stock market. The personality traits of investors and their stock preference are a factor that
widely affects the investment decisions so utmost care is taken up to study these psychological traits
of the investors. In this volatile market, the perception and attitude of the investors towards stock market
changes from time to time, taking into consideration of this aspect, this study was undertaken to
understand the behavior of the investors and to know the awareness, taste and preferences of the
investors regarding the various investment avenues.

8
1.2- NEED FOR THE STUDY –

In India, People do invest either in fixed deposit or gold. According to various surveys only 2.5% of the total
population of 1.3 billion which means only people in the metro cities are aware of investment apart from the
traditional fixed deposit or gold. Following study is carried out to know the extent and awareness among
people related to various investment alternatives and also their perception towards stock market investment.

This study will help us to know about how aware an individual is about the various investment avenues
available in India and also about the various factors that affect an individual while investment of their
wealth.

The importance and relevance of this study is that it will give us an idea of how individual invest and save
their money so that they can fetch good returns.

This study will help to know about the Indian Stock Market, How it works, functions, powers and will give
clear and depth understanding of the Indian Stock Exchange.

This study will provide us information on what factors drive an individual while investing. This study would
also focus on individual who have started working for the past 1-2 years and to know what is their
perception towards investment in stock market and level of awareness.

With the help of study, we will know about the mindset of different age groups towards stock market and
why Indians have less participation in stock market and we will come to conclusion what we can do to break
this chain from traditional method of saving to modern methods of saving.

9
1.3 STOCK MARKET (MEANING) –

The stock market refers to the collection of markets and exchanges where regular activities of buying,
selling, and issuance of shares of publicly-held companies take place. Such financial activities are conducted
through institutionalized formal exchanges or over-the-counter (OTC) marketplaces which operate under a
defined set of regulations. There can be multiple stock trading venues in a country or a region which allow
transactions in stocks and other forms of securities.

While both terms - stock market and stock exchange - are used interchangeably, the latter term is generally a
subset of the former. If one says that she trades in the stock market, it means that she buys and sells
shares/equities on one (or more) of the stock exchange(s) that are part of the overall stock market. The
leading stock exchanges in the U.S. include the New York Stock Exchange (NYSE), NASDAQ and the
Chicago Board Options Exchange (CBOE). These leading national exchanges, along with several other
exchanges operating in the country, form the stock market of the U.S.

Though it is called a stock market or equity market and is primarily known for trading stocks/equities, other
financial securities - like exchange traded funds (ETF), corporate bonds and derivatives based on stocks,
commodities, currencies, and bonds - are also traded in the stock markets.

Understanding the Stock Market –

While today it is possible to purchase almost everything online, there is usually a designated market for
every commodity. For instance, people drive to city outskirts and farmlands to purchase Christmas trees,
visit the local timber market to buy wood and other necessary material for home furniture and renovations,
and go to stores like Walmart for their regular grocery supplies.

Such dedicated markets serve as a platform where numerous buyers and sellers meet, interact and transact.
Since the number of market participants is huge, one is assured of a fair price. For example, if there is only
one seller of Christmas trees in the entire city, he will have the liberty to charge any price he pleases as the
buyers won’t have anywhere else to go. If the number of tree sellers is large in a common marketplace, they
will have to compete against each other to attract buyers. The buyers will be spoiled for choice with low- or
optimum-pricing making it a fair market with price transparency. Even while shopping online, buyers
compare prices offered by different sellers on the same shopping portal or across different portals to get the
best deals, forcing the various online sellers to offer the best price.

10
A stock market is a similar designated market for trading various kinds of securities in a controlled, secure
and managed environment. Since the stock market brings together hundreds of thousands of market
participants who wish to buy and sell shares, it ensures fair pricing practices and transparency in
transactions. While earlier stock markets used to issue and deal in paper-based physical share certificates, the
modern day computer-aided stock markets operate electronically.

1.4 HOW THE STOCK MARKET WORKS –

In a nutshell, stock markets provide a secure and regulated environment where market participants can
transact in shares and other eligible financial instruments with confidence with zero- to low-operational risk.
Operating under the defined rules as stated by the regulator, the stock markets act as primary markets and as
secondary markets.

As a primary market, the stock market allows companies to issue and sell their shares to the common public
for the first time through the process of initial public offerings (IPO). This activity helps companies raise
necessary capital from investors. It essentially means that a company divides itself into a number of shares
(say, 20 million shares) and sells a part of those shares (say, 5 million shares) to common public at a price
(say, $10 per share).

To facilitate this process, a company needs a marketplace where these shares can be sold. This marketplace
is provided by the stock market. If everything goes as per the plans, the company will successfully sell the 5
million shares at a price of $10 per share and collect $50 million worth of funds. Investors will get the
company shares which they can expect to hold for their preferred duration, in anticipation of rising in share
price and any potential income in the form of dividend payments. The stock exchange acts as a facilitator for
this capital raising process and receives a fee for its services from the company and its financial partners.

11
Following the first-time share issuance IPO exercise called the listing process, the stock exchange also
serves as the trading platform that facilitates regular buying and selling of the listed shares. This constitutes
the secondary market. The stock exchange earns a fee for every trade that occurs on its platform during the
secondary market activity.

The stock exchange shoulders the responsibility of ensuring price transparency, liquidity, price discovery
and fair dealings in such trading activities. As almost all major stock markets across the globe now operate
electronically, the exchange maintains trading systems that efficiently manage the buy and sell orders from
various market participants. They perform the price matching function to facilitate trade execution at a price
fair to both buyers and sellers.

A listed company may also offer new, additional shares through other offerings at a later stage, like through
rights issue or through follow-on offers. They may even buyback or delist their shares. The stock exchange
facilitates such transactions.

The stock exchange often creates and maintains various market-level and sector-specific indicators, like the
S&P 500 index or Nasdaq 100 index, which provide a measure to track the movement of the overall market.
Other methods include the Stochastic Oscillator and Stochastic Momentum Index.

The stock exchanges also maintain all company news, announcements, and financial reporting, which can be
usually accessed on their official websites. A stock exchange also supports various other corporate-level,
transaction-related activities. For instance, profitable companies may reward investors by paying dividends
which usually comes from a part of the company’s earnings. The exchange maintains all such information
and may support its processing to a certain extent.

12
1.5- FUNCTIONS OF STOCK MARKET –

FAIR DEALING IN SECURITIES TRANSACTIONS-

Depending on the standard rules of demand and supply, the stock exchange needs to ensure that all
interested market participants have instant access to data for all buy and sell orders thereby helping in the
fair and transparent pricing of securities. Additionally, it should also perform efficient matching of
appropriate buy and sell orders.
For example, there may be three buyers who have placed orders for buying Microsoft shares at $100, $105
and $110, and there may be four sellers who are willing to sell Microsoft shares at $110, $112, $115 and
$120. The exchange (through their computer operated automated trading systems) needs to ensure that the
best buy and best sell are matched, which in this case is at $110 for the given quantity of trade.

EFFICIENT PRICE DISCOVERY -

Stock markets need to support an efficient mechanism for price discovery, which refers to the act of deciding
the proper price of a security and is usually performed by assessing market supply and demand and other
factors associated with the transactions.
Say, a U.S.-based software company is trading at a price of $100 and has a market capitalization of $5
billion. A news item comes in that the EU regulator has imposed a fine of $2 billion on the company which
essentially means that 40 percent of the company’s value may be wiped out. While the stock market may
have imposed a trading price range of $90 and $110 on the company’s share price, it should efficiently
change the permissible trading price limit to accommodate for the possible changes in the share price, else
shareholders may struggle to trade at a fair price.

LIQUIDITY MAINTENANCE -
While getting the number of buyers and sellers for a particular financial security are out of control for the
stock market, it needs to ensure that whosoever is qualified and willing to trade gets instant access to place
orders which should get executed at the fair price.

SECURITY AND VALIDITY OF TRANSACTIONS:

While more participants are important for efficient working of a market, the same market needs to ensure
that all participants are verified and remain compliant with the necessary rules and regulations, leaving no
room for default by any of the parties. Additionally, it should ensure that all associated entities operating in
the market must also adhere to the rules, and work within the legal framework given by the regulator.

13
SUPPORT ALL ELIGIBLE TYPES OF PARTICIPANTS -
A marketplace is made by a variety of participants, which include market makers, investors, traders,
speculators, and hedgers. All these participants operate in the stock market with different roles and
functions. For instance, an investor may buy stocks and hold them for long term spanning many years, while
a trader may enter and exit a position within seconds. A market maker provides necessary liquidity in the
market, while a hedger may like to trade in derivatives for mitigating the risk involved in investments. The
stock market should ensure that all such participants are able to operate seamlessly fulfilling their desired
roles to ensure the market continues to operate efficiently.

INVESTOR PROTECTION -
Along with wealthy and institutional investors, a very large number of small investors are also served by the
stock market for their small amount of investments. These investors may have limited financial knowledge,
and may not be fully aware of the pitfalls of investing in stocks and other listed instruments. The stock
exchange must implement necessary measures to offer the necessary protection to such investors to shield
them from financial loss and ensure customer trust.
For instance, a stock exchange may categorize stocks in various segments depending on their risk profiles
and allow limited or no trading by common investors in high-risk stocks. Exchanges often impose
restrictions to prevent individuals with limited income and knowledge from getting into risky bets of
derivatives.

BALANCED REGULATION -
Listed companies are largely regulated and their dealings are monitored by market regulators, like the
Securities and Exchange Commission (SEC) of the U.S. Additionally, exchanges also mandate certain
requirements – like, timely filing of quarterly financial reports and instant reporting of any relevant
developments - to ensure all market participants become aware of corporate happenings. Failure to adhere to
the regulations can lead to suspension of trading by the exchanges and other disciplinary measures.

14
1.6- COMPETITION FOR STOCK MARKET –

While individual stock exchanges compete against each other to get maximum transaction volume, they are
facing threat on two fronts.

DARK POOLS-
Dark pools, which are private exchanges or forums for securities trading and operate within private groups,
are posing a challenge to public stock markets. Though their legal validity is subject to local regulations,
they are gaining popularity as participants save big on transaction fees.

BLOCKCHAIN VENTUTRES-
Amid rising popularity of block chains, many crypto exchanges have emerged. Such exchanges are venues
for trading crypto currencies and derivatives associated with that asset class. Though their popularity
remains limited, they pose a threat to the traditional stock market model by automating a bulk of the work
done by various stock market participants and by offering zero- to low-cost services.

1.7- REGULATING THE STOCK MARKET –

A local financial regulator or competent monetary authority or institute is assigned the task of regulating the
stock market of a country. The Securities and Exchange Commission (SEC) is the regulatory body charged
with overseeing the U.S. stock markets. The SEC is a federal agency that works independently of the
government and political pressure. The mission of the SEC is stated as: "to protect investors, maintain fair,
orderly, and efficient markets, and facilitate capital formation.

15
POWER & FUNCTIONS OF SEBI
 Promoting/ Development/ Regulating Securities Market.
 Regulating the working of Stock Exchange.
 Registering and Regulating Intermediaries.
 Promoting & Regulating Self - Regulatory Organizations.
 Prohibiting Fraudulent and Unfair Trade Practices relating to securities.
 Prohibiting Insider Trading in securities.
 Regulating substantial acquisition of shares and takeover of the companies.

1.8- SIGNIFICANCE OF THE STOCK MARKET –

The stock market is one of the most vital components of a free-market economy.

It allows companies to raise money by offering stock shares and corporate bonds. It lets common investors
participate in the financial achievements of the companies, make profits through capital gains, and earn
money through dividends, although losses are also possible. While institutional investors and professional
money managers do enjoy some privileges owing to their deep pockets, better knowledge and higher risk
taking abilities, the stock market attempts to offer a level playing field to common individuals.

The stock market works as a platform through which savings and investments of individuals are channelized
into the productive investment proposals. In the long term, it helps in capital formation & economic growth
for the country.

16
1.9– STOCK MARKET IN INDIA –

Stock Market plays a vital role in growing industries and commerce of a country which eventually affect the
economy. It is well organized market for purchase and sale of corporate and other securities which facilitates
companies to raise capital by pooling funds from different investors as well as act as an investment
intermediary for investors. Moreover, it ensures that securities should be traded according to some pre-
defined rules and regulations. London Stock Exchange is the oldest stock exchange in the world whereas
Bombay Stock Exchange is the oldest one in India.

In India, there are 7 Stock Exchanges out of which NATIONAL STOCK EXCHANGE and BOMBAY
STOCK EXCHANGE are the two main indices. Most of the trading in Indian Stock Market takes place on
these two stock exchanges. Both the exchanges follow the same trading hours, trading mechanism,
settlement process etc. At the last count, there are about 5,000 listed companies on the BSE, while NSE has
more than 1,600 companies listed on its platform, while there are many common stocks between the two
bourses.

BOMBAY STOCK EXCHANGE –

Established in 1875, BSE (formerly known as Bombay Stock Exchange), is Asia's first & the Fastest Stock
Exchange in world with the speed of 6 micro seconds and one of India's leading exchange groups. Over the
past 143 years, BSE has facilitated the growth of the Indian corporate sector by providing it an efficient
capital-raising platform. Popularly known as BSE, the bourse was established as ‘The Native Share & Stock
Brokers' Association’ in 1875. In 2017 BSE become the 1st listed stock exchange of India. Bombay stock
exchange is the world's 10th largest stock market by market capitalization at US$2.1 trillion on as of March
2019. As of February 2020, the BSE had 5,518 listed firms. The main index of Bombay stock exchange is
Sensex which comprises of 30 stocks. Out of all the listed firms on the BSE, only about 500 firms constitute
more than 90% of its market capitalization; the rest of the crowd consists of highly illiquid shares.

Today BSE provides an efficient and transparent market for trading in equity, currencies, debt instruments,
derivatives, mutual funds. BSE SME is India’s largest SME platform which has listed over 250 companies
and continues to grow at a steady pace. BSE Star MF is India’s largest online mutual fund platform which
process over 27 lakh transactions per month and adds almost 2 lakh new SIPs ever month. BSE Bond, the
transparent and efficient electronic book mechanism process for private placement of debt securities, is the
market leader with more than Rupees 2.09 lakh crore of fund raising from 530 issuances. (F.Y. 2017-2018).
BSE takes an essential role in stock market in the country. It is the first and foremost stock exchange in the
country received lifetime appreciation in 1956.

17
The exchange provides a clear-cut picture about trading securities to their customers, it reviles the
companies and brokers noticeable complaints and mistakes about Derivatives, Debts, and Provisions. It
mainly deals with educating and instructing the investors by guiding awareness programme and
improving essential and knowledgeable information, by this we can say that BSE mainly deals with
directing because without proper direction there is no destination. Top 20 bodies‟ gives proper directions
under the governing board. Which is very essential to frame the terms and policies, and it also selects the
control system. Policies and control system also connected with exchange relationships and affairs of the
retirement. Everyone third of the year retirement process will take place. Which consist of 6 public
representatives, nine nominated directors, executive directors, three SEBI candidates and operating
officer. Chief Operating Officer is answerable for daily activity and operation of the exchange.

BSE's popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock market
benchmark index. It is traded internationally on the EUREX as well as leading exchanges of the BRCS
nations (Brazil, Russia, China and South Africa).

NATIONAL STOCK EXCHANGE –

National Stock Exchange was incorporated in 1992 as a tax paying company and was recognized as a stock
exchange in 1993 under the Securities Contracts (Regulation) Act 1956. (NSE) is the leading stock exchange
in India and the second largest in the world by nos. of trades in equity shares from January to June 2018,
according to World Federation of Exchanges (WFE) report. NSE has a fully-integrated business model
comprising our exchange listings, trading services, clearing and settlement services, indices, market data
feeds, technology solutions and financial education offerings. NSE also oversees compliance by trading and
clearing members and listed companies with the rules and regulations of the exchange.

NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic
trading system which offered easy trading facilities to investors spread across the length and breadth of the
country. As of December 2019, the NSE had 1799 listed firms.

National Stock Exchange has a total market capitalization of more than US$2.27 trillion, making it the
world's 11th-largest stock exchange as of April 2018.NSE's flagship index, the NIFTY 50, a 50 stock index
is used extensively by investors in India and around the world as a barometer of the Indian capital market.
The NIFTY 50 index was launched in 1996 by NSE. However, Vaidya Nathan (2016) estimates that only
about 4% of the Indian economy / GDP is actually derived from the stock exchanges in India.

NSE is a pioneer in technology and ensures the reliability and performance of its systems through a culture
of innovation and investment in technology. NSE believes that the scale and breadth of its products and
services, sustained leadership positions across multiple asset classes in India and globally enable it to be
highly reactive to market demands and changes and deliver innovation in both trading and non-trading
businesses to provide high-quality data and services to market participants and clients.

18
SETTLEMENT & TRADING HOURS –

Equity spot markets follow a T+2 rolling settlement. This means that any trade taking place on Monday gets
settled by Wednesday. All trading on stock exchanges takes place between 9:55 a.m. and 3:30 p.m., Indian
Standard Time (+ 5.5 hours GMT), Monday through Friday. Delivery of shares must be made in
dematerialized form, and each exchange has its own clearing house, which assumes all settlement risk by
serving as a central counterparty

TRADING MECHANISM –

Trading at both the exchanges takes place through an open electronic limit order book in which order
matching is done by the trading computer. There are no market makers and the entire process is order-
driven, which means that market orders placed by investors are automatically matched with the best limit
orders. As a result, buyers and sellers remain anonymous.

The advantage of an order-driven market is that it brings more transparency by displaying all buy and sell
orders in the trading system. However, in the absence of market makers, there is no guarantee that orders
will be executed.

All orders in the trading system need to be placed through brokers, many of which provide an online trading
facility to retail customers. Institutional investors can also take advantage of the direct market access (DMA)
option in which they use trading terminals provided by brokers for placing orders directly into the stock
market trading system.

MARKET INDEXES –

The two prominent Indian market indexes are Sensex and Nifty. Sensex is the oldest market index for
equities; it includes shares of 30 firms listed on the BSE, which represent about 47% of the index's free-float
market capitalization. It was created in 1986 and provides time series data from April 1979, onward.
Another index is the Standard and Poor's CNX Nifty; it includes 50 shares listed on the NSE, which
represent about 46.9% of its free-float market capitalization. It was created in 1996 and provides time series
data from July 1990, onward.

19
1.10- WHO CAN INVEST IN INDIA?

India started permitting outside investments only in the 1990s. Foreign investments are classified into two
categories: foreign direct investment (FDI) and foreign portfolio investment (FPI). All investments in which
an investor takes part in the day-to-day management and operations of the company are treated as FDI,
whereas investments in shares without any control over management and operations are treated as FPI.

For making portfolio investments in India, one should be registered either as a foreign institutional investor
(FII) or as one of the sub-accounts of one of the registered FIIs. Both registrations are granted by the market
regulator, SEBI.

Foreign institutional investors mainly consist of mutual funds, pension funds, endowments, sovereign wealth
funds, insurance companies, banks, and asset management companies. At present, India does not allow
foreign individuals to invest directly in its stock market. However, high-net-worth individuals (those with a
net worth of at least $50 million) can be registered as sub-accounts of an FII.

Foreign institutional investors and their sub-accounts can invest directly into any of the stocks listed on any
of the stock exchanges. Most portfolio investments consist of investment in securities in the primary and
secondary markets, including shares, debentures, and warrants of companies listed or to be listed on a
recognized stock exchange in India. FIIs can also invest in unlisted securities outside stock exchanges,
subject to the approval of the price by the Reserve Bank of India. Finally, they can invest in units of mutual
funds and derivatives traded on any stock exchange.

An FII registered as a debt-only FII can invest 100% of its investment into debt instruments. Other FIIs must
invest a minimum of 70% of their investments in equity. The balance of 30% can be invested in debt. FIIs
must use special non-resident rupee bank accounts in order to move money in and out of India. The balances
held in such an account can be fully repatriated.

STOCK MARKET PARTICIPANTS -

Along with long-term investors and short term traders, there are many different types of players associated
with the stock market. Each has a unique role, but many of the roles are intertwined and depend on each
other to make the market run effectively.

STOCKBROKERS –
Stockbrokers, also known as registered representatives in the U.S., are the licensed professionals who buy
and sell securities on behalf of investors. The brokers act as intermediaries between the stock exchanges and

20
the investors by buying and selling stocks on the investors' behalf. An account with a retail broker is needed
to gain access to the markets.

PORTFOLIO MANAGERS-
Portfolio managers are professionals who invest portfolios, or collections of securities, for clients. These
managers get recommendations from analysts and make the buy or sell decisions for the portfolio. Mutual
fund companies, hedge funds, and pension plans use portfolio managers to make decisions and set the
investment strategies for the money they hold.

INVESTMENT BANKERS-
Investment bankers represent companies in various capacities, such as private companies that want to go
public via an IPO or companies that are involved in pending mergers and acquisitions. They take care of the
listing process in compliance with the regulatory requirements of the stock market.

CUSTODIAN-
Custodian and depot service providers, which are institution holding customers' securities for safekeeping so
as to minimize the risk of their theft or loss, also operate in sync with the exchange to transfer shares to/from
the respective accounts of transacting parties based on trading on the stock market.

MARKET MAKER –
A market maker is a broker-dealer who facilitates the trading of shares by posting bid and ask prices along
with maintaining an inventory of shares. He ensures sufficient liquidity in the market for a particular (set of)
share(s), and profits from the difference between the bid and the ask price he quotes.

21
 2. RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. The Research Methodology
includes the various methods and techniques for conducting a research. Research is an art of scientific
investigation.
In other word research is a scientific and systematic search for pertinent information on a specific topic.
The logic behind taking research methodology into consideration is that one can have knowledge about the
method and procedure adopted for achievement of objective of the project.

2.1 – OBJECTIVES –

The study has been undertaken in order to achieve the following objectives:

 To know investor’s perception regarding investment in stock market.

 To study the investment behavior of investors and the factors that affects their investment decision.

 To know level of awareness of the various investment avenues available in India.

 To identify the reasons why Indians take less participation in the stock market and solution of it.

 To take an overview of the Indian Stock Market and encapsulate the various investment avenues
available.

 To know various options available in the Capital Market to invest.

 To study the problems of investors and the reasons for not investing in financial instruments.

 To know the satisfaction level of investors regarding return of different investment.

22
2.2 HYPOTHESES –
The following null hypotheses were framed and they were tested with the help of statistical tools mentioned
at the end of this chapter.

 There is no association between the age of the investor and their preference of investment.

 There is no association between gender of the investor and their preference of investment.

 There is no association between the occupation of the investor and the percentage of investment.

2.3 SCOPE OF THE STUDY –

Scope of the Study is Mumbai City.

2.4 LIMITATIONS OF THE STUDY –

Certain limitations are likely to be there in the study. Since the study is sample based and undertaken in the
Mumbai.
The findings of the study may have the limitation of generalization for the entire population.

23
2.5 RESEARCH DESIGN –

Research design is the empirical structure within which research is conducted. It constitutes the blueprint for
collection, measurement and analysis of data was a descriptive research. Descriptive research involves
collecting numerical through self-reports collected, through questionnaires or interviews (person or phone),
or through observation. For present study, the research was descriptive and conclusion oriented.

SAMPLING DESIGN:

Universe: The Universe is most commonly defined as everything that physically exists: the entirety of space
and time, all forms of matter, energy and momentum and the physical laws and constants that govern them.
All those persons who make investment.

Theoretical Universe: It included investors make investment in all over world.

Accessible Universe: It included investors make investment in Indian Stock Market.

Sampling unit – The target population must be defined that has to be sampled. The sampling unit of research
included students and professionals residing in Mumbai.

Sample size – This refers to number of respondents to be selected from the universe to constitute a sample.
The sample size of 50 Investors was taken.

SAMPLING TECHNIQUE –
Convenience Sampling was used to select the sample. Convenient sampling is a non-probability sampling
technique that attempts to obtain a sample of convenient elements .In case of Convenience sampling, the
selection of sample depends upon the discretion of the interviewer. In this project, Questionnaire Method
was used for the collecting the data. With the help of this method of collecting data, a sample survey was
conducted.

24
METHODS OF DATA COLLECTION:
The research is based on primary data. A well-structured questionnaire was used for collecting primary data.
For the study both primary and secondary data has been used.

TOOLS USED –
 Statistical tools
 MS excel
 Google form.

2.6 THEORETICAL DEVELOPMENT –

INTRODUCTION TO INVESTMENT –

 An investment is an asset or item that is purchased with the hope that it will generate income or
appreciate in value at some point in the future.
 An investment always concerns the outlay of some asset today (time, money, effort, etc.) in hopes of
a greater payoff in the future than what was originally put in.
 An investment can refer to any mechanism used for generating future income, including bonds,
stocks, real estate property, or a business, among other examples.
 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.

 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 an 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.

25
CHARATERISTICS OF INVESTMENT

The characteristics of investment can be understood in terms of as:-

 Return
 Risk
 Safety
 Liquidity etc.

RETURN:
All investments are characterized by the expectation of a return. In fact, investments are made with the
primary objective of deriving a return. The return may be received in the form of yield plus capital
appreciation. The difference between the sale price & the purchase price is capital appreciation. The
dividend or interest received from the investment is the yield. Different types of investments promise
different rates of return. The return from an investment depends upon the nature of investment, the maturity
period & a host of other factors.

RISK:
Risk is inherent in any investment. The risk may relate to loss of capital, delay in repayment of capital, non-
payment of interest, or variability of returns. While some investments like government securities & bank
deposits are almost risk less, others are more risky. The risk of an investment depends on the following
factors.
The longer the maturity period, the longer is the risk.
The lower the credit worthiness of the borrower, the higher is the risk.
The risk varies with the nature of investment. Investments in ownership securities like equity shares carry
higher risk compared to investments in debt instrument like debentures & bonds.

SAFETY:
The safety of an investment implies the certainty of return of capital without loss of money or time. Safety is
another features which an investors desire for his investments. Every investor expects to get back his capital
on maturity without loss & without delay.

LIQUIDITY:
An investment, which is easily saleable, or marketable without loss of money & without loss of time is said
to possess liquidity. Some investments like company deposits, bank deposits, P.O. deposits, NSC, NSS etc.
26
are not marketable. Some investment instrument like preference shares & debentures are marketable, but
there are no buyers in many cases & hence their liquidity is negligible. Equity shares of companies listed on
stock exchanges are easily marketable through the stock exchanges. An investor generally prefers liquidity
for his investment, safety of his funds, a good return with minimum risk or minimization of risk &
maximization of return.

INVESTMENT OPTIONS FOR INVESTORS -

Most investors want to make investments in such a way that they get sky-high returns as quickly as possible
without the risk of losing principal money. This is the reason why many are always on the lookout for top
investment plans where they can double their money in few months or years with little or no risk.

However, a high-return, low-risk combination in an investment product, unfortunately, does not exist.
Maybe in an ideal world but not at present. In reality, risk and returns are directly related, they go hand-in-
hand, i.e., the higher the returns, higher the risk and vice versa.

While selecting an investment avenue, you have to match your own risk profile with the associated risks of
the product before investing. There are some investments that carry high risk but have the potential to
generate higher inflation-adjusted returns than other asset class in the long term while some investments
come with low-risk and therefore lower returns.

Investment Avenues is in which an investor can place his surplus funds with the objectives of having certain
gains in the future. This organization may be well organized like a bank, financial institution, mutual funds
and company or in an unorganized manner like chit fund organization, Nidhis (a type of non-banking finance
company) or curry (a type of non-banking finance company in southern India).

Different investment avenues have different features; few offer a fixed return and certain others offer stock
market based returns and yet certain others offer a mix of these two. Few of these have an element of safety
and yet others do not have any kind of safety. In certain cases these are in negotiable form and in other cases
these are non-negotiable. Investment avenues of a country are subject to different rules and regulations of
either the government or some apex body like Reserve Bank of India, NABARD, SEBI or Companies Act.
Following are the features of investment avenues.

o A place where one can invest his surplus

o Fixed or floating return
o Security vs. Non-security form
27
 o Investment accepting organization might have an obligation or not
o Negotiable vs. Non-negotiable
o Risk is the inherent part of every avenue
o May be in an organized form or unorganized form
o Regulation
o Market oriented vs. others

Investment avenues can be broadly divided into following types.

o Security form
o Non-security form
o Traditional form
o Other emerging avenues

SECURITY FORMS -

These are the instruments or securities through which a company or issuing authority like government raises
finance. Majority of these are in negotiable form, i.e. these are sellable in the market by the holder of the
securities. Companies/Government issues these in capital market or money market to raise funds directly
from the providers of the funds. Some of these have maturity for a very long period and others have for
either medium term or short term. Security form can further be divided into money market securities and
capital market securities.

MONEY MARKET SECURITIES -

The money market refers to trading in very short-term debt investments. At the wholesale level, it involves
large-volume trades between institutions and traders. At the retail level, it includes money market mutual
funds bought by individual investors and money market accounts opened by bank customers.

In all of these cases, the money market is characterized by a high degree of safety and relatively low rates of
return.
It is the market in which liquid funds as well highly liquid securities are traded in for a very shorter duration.
The main participants in this market are banks and financial institutions. The banks deal in this market to
fulfill their CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) requirements. However, few
corporate houses, insurance companies, mutual funds, provident funds trusts and non-banking finance
companies also play an active role in this market. This market provides liquidity support to banking system.

28
At the same time, the central bank of the country – Reserve bank of India- uses this market to exercise
monetary control in the economy and credit control in the country.

Money market can be divided into two parts, call money market and government securities/gilt-edged
securities market. Call money market in which surplus cash of banks and corporate houses is traded in for a
very short maturity period, generally not exceeding one fortnight. The main transactions are carried on by
banks to fulfill their liquidity, as well as CRR requirements.

The main participants in market are banks, financial institution, mutual funds, corporate houses and other
organizations as allowed by Reserve bank of India from time to time. Banks are allowed to play the role of
both the seller as well as the buyer of funds. A seller of funds is the one who provides it to another party and
the party receiving it is identified as the buyer of the funds. For making funds available, the seller charges
interest, which is decided mutually.

The charges in a call money market are influenced by the demand and supply of money available in this
market. Call rates fluctuate very frequently due to the volatile nature of this market. The provider of funds
can call back his money at a short notice; which is why it is called call money market.

The market for government securities is known as gilt-edged securities market. Government securities are
either issued by the central government or state government or any of the agencies of these governments.
The government guarantees payment of interest and repayment of the principal amount in gilt-edged
securities. Developed banks and financial institutions trade in this market to fulfill their SLR (Statutory
Liquidity Ratio) requirement. The feature of safety and liquidity in these securities is as safe as good as that
of gold; hence, these are called as gilt- edged securities. Following are the main instruments in this market.

29
TREASURY BILLS -

Treasury bills are very useful instruments to deploy short term surplus depending upon the availability and
requirement. Even funds which are kept in current accounts can be deployed in treasury bills to maximize
returns. These treasury bills have a maturity period not exceeding 364 days. These bills do not carry any
interest rate; instead these are issued at a discount to face value, and redeemed at par on the maturity.
Treasury bills have a unique maturity period of 91 days, 182 days, and 364 days.

Recently RBI issued treasure bills for a maturity of 14 days and 28 days too. Banks do not pay any interest
on fixed deposits of less than 15 days, or balances maintained in current accounts, whereas treasury bills can
be purchased for any number of days depending on the requirements. This helps in deployment of idle funds
for very short periods as well.

Further, since every week there is a treasury bills auction, investor can purchase treasury bills of different
maturities as per requirements so as to match with the respective outflow of funds. Treasury bills are of two
types, regular treasure bills issued to the general public, including banks, financial institutions and corporate
houses through a notification by RBI. Ad-hoc treasure bills are issued in the favour of RBI, and these bills
never issued or sold subsequently to anyone in the secondary market. Nowadays RBI issues only regular
treasure bills; ad-hoc

Treasury bills are not issued. At times when the liquidity in the economy is tight, the returns on treasury bills
are much higher as compared to bank deposits even for longer term. Another important advantages of
treasury bills over bank deposit are that the surplus cash can be invested depending upon the staggered
requirements.

Advantage of treasury bills includes; no tax deducted at source, zero default risk being sovereign paper,
highly liquid money market instrument, and better return especially in the short term, transparency,
simplified settlement, high degree of tradability and active secondary market facilitate meeting unplanned
fund requirements. Limitations of treasury bills includes restrictions and penalties associated with redeeming
treasure bonds too early, depending on the type of bond the rate of return may not exceed the average annual
inflation rate of 3 percent thus mitigating the interest gains.

30
CERTIFICATE OF DEPOSITS

Certificate of deposits are offered to investors by banks just like normal deposits. But the difference is
certificate of deposits are short term wholesale deposits and they are tradable. An investor holding the
certificate of deposit can sell it to another investor. Because of liquidity interest rates on certificate of
deposits are normally less than that on „sight‟ deposits, investor can compare certificate of deposits with
treasury bills as they are short term, tradable, discounted bonds. But the difference is treasure bills are issued
by government and certificates of deposits are issued by banks, financial institutions etc. The lender of a
certificate of deposits could be another bank, corporate or financial institution. Certificates of deposits are
rated by approved rating agencies (e.g. CARE, ICRA, CRISIL, and FITCH) which considerably enhance
their tradability in the secondary market, depending upon demand.

The term of certificate of deposit is fixed and it is usually 3 months, 6 months, 1 year or 5 years. In India
certificate of deposits are introduced in July 1989. Maturity period is minimum 7 days and maximum 12
months for certificate of deposits issued by banks. For certificate of deposits issued by financial institutions,
maturity is minimum 1 year and maximum 3 years. Minimum amount to invest in a certificate of deposit is
Rs. 100000 and in the multiples of Rs. 100000 thereafter. Loan against collateral of certificate of deposit is
not permitted but it is possible in „sight fixed deposits. Premature withdrawal is not allowed but can be sold

To other investors. Interest rate can be fixed or floating and they are issued at a discount to face value like
zero coupon bonds.

COMMERCIAL PAPER -

Commercial paper is short-term loan that is issued by a corporation for financing accounts receivable and
inventories. Commercial papers have higher denominations as compared to the treasury bills and the
certificate of deposit. The maturity period of commercial papers is minimum 15 days to maximum of one
year. Commercial papers do not carry any interest rate; instead these are issued at a discount to face value
and redeemed at par on maturity. The difference between issue price and maturity value is the interest
compensation for the buyer of commercial papers. These are negotiable in nature – these can easily and
freely be transferred from one party to another party. They are very safe since the financial situation of the
corporation can be anticipated over a few months.

Commercial paper is a money market security sold by banks and corporations. Commercial paper is a low-
cost alternative to bank loans. It is a very safe investment and can be used for inventory purchases or
working capital. Use of commercial paper can efficiently raise large amounts of funds quickly and without
expensive registration by selling paper, either directly or through independent dealers, to a large and varied

31
pool of institutional buyers. Competitive, market- determined yields in notes, whose maturity and amounts
can be tailored to specific needs, can be earned by investing in commercial paper. The essential quality of
this type of investment is short-term maturity typically three to six months, an automatic or self-liquidating
nature, and non-speculativeness in origin and purpose of use. The two main methods of issuing commercial
paper are selling them directly to an investor, or selling them to a dealer who then sells them in the market.

Commercial paper is issued by large creditworthy borrowers, which means it's typically less risky than some
other investments. Also, the rating provided by credit rating agencies gives an indication to investors about
how risky the investment is, which helps them better gauge the investment. As a tradeoff for the relative
safety of this investment, it yields a lower rate than riskier investments, such as stocks. Another advantage is
that commercial paper issuers usually can't buy back the paper before its due date without a penalty. This
means they can't buy back the paper before its maturity without compensating the investor for the early
purchase. Investors can thus count on a steady yield from commercial paper, unlike in the case of certain
bonds that investors can retire before their maturity.
These funds also charge management fees and expenses, for giving the convenience of investing in market-
rate, short-term, fixed-income securities. Therefore, investor could obtain slightly higher yields on their
money if they invest in commercial paper directly. However this is not a very liquid investment and there is
no active secondary market, this makes it difficult for the investor to sell off the commercial paper before its
scheduled maturity date.

DATED SECURITIES OF GOVERNMENT -

Government securities are issued by the government for raising a public loan or as notified in the official
gazette. They consist of government promissory notes, bearer bonds, stocks or bonds held in bond ledger
account etc. They may be in the form of treasury bills or dated government securities. Government securities
are mostly interest bearing dated securities issued by RBI on behalf of the government of India. Government
of India uses these funds to meet its expenditure commitments. These securities are generally fixed maturity
and fixed coupon securities carrying semi - annual coupon. Since the date of maturity is specified in the
securities, these are known as dated government securities.

The dated government securities market in India has two segments; primary market consists of the issuers of
the securities, viz., central and state government and buyers include commercial banks, primary dealers,
financial institutions, insurance companies & co-operative banks. RBI also has a scheme of non-competitive
bidding for small investors. Secondary market includes commercial banks, financial institutions, insurance
companies, provident funds, trusts, mutual funds, primary dealers and reserve bank of India. Even corporate
and individuals can invest in government securities. The eligibility criteria are specified in the relative
government notification.

32
Following are the main features of government securities.

 Issued at face value.

 No default risk as the securities carry sovereign guarantee.
 Ample liquidity as the investor can sell the security in the secondary market.
 Interest payment on a half yearly basis on face value.
 No tax deducted at source.
 Can be held in dematerialized form
 Rate of interest and tenure of the security is fixed at the time of issuance and is not subject to change.
 Redeemed at face value on maturity
 Maturity ranges from of 2-30 years.

Auctions for government securities are normally multiple-price auctions either yield based or price based. In
yield based type of auction, RBI announces the issue size or notified amount and the tenure of the paper to
be auctioned. The bidders submit bids in term of the yield at which they are ready to buy the security. If the
bid is more than the cut-off yield then its rejected otherwise it is accepted where in price based type of
auction RBI announces the issue size or notified amount and the tenure of the paper to be auctioned, as well
as the coupon rate.

The bidders submit bids in terms of the price. This method of auction is normally used in case of reissue of
existing government Bids at price lower than the cut off price are rejected and bids higher than the cut off
price are accepted. Price based auction leads to a better price discovery then the yield based auction.
Government securities, state development loans & treasury bills are regularly sold by RBI through periodic

Public auctions. It gives investors an opportunity to buy government securities/treasure bills at primary
market auctions of RBI through it’s invest scheme. Investors may also invest in high yielding government
securities through buy and sell facility for selected liquid scripts in the secondary markets.

CAPITAL MARKET SECURITIES -

The capital market is a market for financial assets which have a long or indefinite maturity. Unlike money
market instruments the capital market instruments become mature for the period above one year. It is an
institutional arrangement to borrow and lend money for a longer period of time. It consists of financial
institutions like IDBI, ICICI, UTI, LIC, etc. These institutions play the role of lenders in the capital market.
Business units and corporate are the borrowers in the capital market. Capital market involves various
instruments which can be used for financial transactions. Capital market provides long term debt and equity
finance for the government and the corporate sector. Capital market can be classified into primary and
secondary markets. The primary market is a market for new shares, where as in the secondary market the
existing securities are traded. Capital market institutions provide rupee loans, foreign exchange loans,
consultancy services and underwriting. Capital market securities issued by the companies in the primary
market to raise the finance. Issue of the securities is completely regulated by the provisions of SEBI.
33
A company can issue the following securities in this market.

• Equity shares

• Preference shares

• Debentures

EQUITY SHARES -

Equity is the term commonly used to describe the ordinary share capital of a business. Ordinary shares in the
equity capital of a business entitle the holders to all distributed profits after the holders of debentures and
preference shares have been paid. Ordinary shares are issued to the owners of a company. The ordinary
shares of Indian companies typically have a nominal or 'face' value between rupees 10 to 100. However, it is
important to understand that the market value of a company's shares has little relationship to their nominal or
face value. The market value of a company's shares is determined by the price another investor is prepared to
pay for them. In case of publicly quoted companies, this is reflected in the market value of the ordinary
shares traded on the stock exchange. In case of privately owned companies, where there is unlikely to be
much trading in shares, market value is often determined when the business is sold or when a minority
shareholding is valued for taxation purposes.

"Deferred ordinary shares" are a form of ordinary shares, which are entitled to a dividend only after a certain
date or only if profits rise above a certain amount. Voting rights might also differ from those attached to
other ordinary shares. An equity holder become the owner of the company and enjoys voting rights also.
Besides capital appreciation, he is entitled to get dividend also. Equity shares are listed on stock market and
can easily converted into cash whenever required. But equity investments are the most risky form of
investment where there are chances of going money into 100 percent loss. Besides, investors will get his
money back when all the parties have been paid their dues to company at the time of liquidation.

34
PREFERENCE SHARES -

A preference shares means shares which carries preferential rights in respect of dividend at fixed amount or
at fixed rate before the holders of the equity shares have been paid. It also carries preferential right in regard
to payment of capital on winding up or otherwise. It means the amount paid on preference share must be
paid back to preference shareholders before anything in paid to the equity shareholders. In other words,
preference share capital has priority both in repayment of dividend as well as capital. Following are the main
types of preference shares.

• Non – Cumulative Preference Shares or simple preference shares gives right to fixed percentage dividend
of profit of each year. In case no dividend thereon is declared in any year because of absence of profit, the
holders of preference shares get nothing nor can they claim unpaid dividend in the subsequent year or years
in respect of that year.

• Cumulative preference shares however give the right to the preference shareholders to demand the unpaid
dividend in any year during the subsequent year or years when the profits are available for distribution. In
this case dividends which are not paid in any year are accumulated and are paid out when the profits are
available.

•Redeemable Preference Shares are preference shares which have to be repaid by the company after the term
for which the preference shares have been issued.

•Irredeemable preference shares means preference shares need not to repay by the company except on
winding up of the company.

•Participating Preference Shares are entitled to a preferential dividend at a fixed rate with the right to
participate further in the profits either along with or after payment of certain rate of dividend on
equity shares.

•A non- participating share is one which does not such right to participate in the profits of the company after
the dividend and capital has been paid to the preference shareholders.

•Convertible Preference Shares are the one which have a provision of conversion into the equity shares of
the issuing company; the conversion takes place on pre-specified date. The terms conditions of conversion
are specified at the time of issue of these shares. Holders of these have the benefit of preference shares till
the date of conversion, thereafter these have the benefits of equity shares, and due to this dual nature these
are called hybrid securities.

35
•Non-convertible preference shares are those in which a provision of conversion into the equity shares of the
issuing company is not provided, these might be redeemable or irredeemable, redemption, if any, take place
according to the terms and conditions of the issue of these preference shares. For the investor, preference
shares are less attractive than loan stock because they cannot be secured on the company's assets, the
dividend yield traditionally offered on preference dividends has been too low to provide an attractive
investment compared with the interest yields on loan stock in view of the additional risk involved.

DEBENTURES AND BONDS -

Debentures and bonds are similar except for one difference that bonds are more secure than debentures. In
case of both, investors are paid a guaranteed interest that does not change in value irrespective of the
fortunes of the company. However, bonds are more secure than debentures, but carry a lower interest rate.
The company provides collateral for the loan. Moreover, in case of liquidation, bond holders will be paid
off before debenture holders. In India, the terms, corporate bonds and debentures are interchangeably
used. Though different countries have different interpretations of both the terms corporate bonds and
debentures, our companies act (section 2(12)) identifies both as same. Investor may find a corporate bond
similar to a fixed deposit in a bank or a post office scheme or any such fixed‐return instrument. However,
every type of investment is different in its own way and has its own features, advantages and disadvantages.

In India, both public and private companies can issue corporate bonds. A company incorporated in India, but
part of a multinational group, can also issue corporate bonds. However, a company incorporated outside
India cannot issue corporate bonds in India. A statutory corporation like LIC can also issue corporate bonds.
For investors those who are looking for an investment that generates fixed income periodically, corporate
bonds may be an ideal investment. It normally offers a higher rate of interest as compared to fixed deposits
or postal savings or similar investments. Listed bonds can also sell in the secondary market before its
maturity. While a bond is usually not designed for capital appreciation; a listed bond may also earn capital
appreciation i.e. investor can sell bond at a price higher than cost price in the market.

A corporate bond may offer a fixed or floating rate of interest and accordingly investor may earn a fixed or
varying amount of interest periodically. A fixed rate bond will pay fixed amount periodically as per the
interest rate set out when the bonds were issued. This interest is determined as a percent of the face value of
the bond. Such fixed interest payments are sometimes also called coupon payments. A floating rate bond has
its interest rate pegged to a benchmark rate

i.e. (Benchmark rate) +/‐ (some percent). The benchmark rate may be government bond/MIBOR. As the
benchmark rate changes, the interest rate on the bond will vary accordingly. Hence, a floating rate bond is
considered to be relatively risky since return is dependent on the movement of the benchmark rate. If
investor wish to receive fixed amount periodically, a fixed rate bond is advisable. However, a fixed interest
rate bond may earn less than a floating rate bond due to lesser risk involved. If investor plans to invest in a
floating rate bond, return will depend on the movement of benchmark rate which may move in either
direction substantially.

36
An investor in corporate bonds receives his interest payments periodically. The interest may be received
yearly or half yearly or quarterly or even monthly depending upon the period set at the time of issue. The
interest payment dates are usually specified in the prospectus. On the maturity date, the issuer pays back the
investor face value of the bonds held by him along with the interest accrued on the same.

FIXED DEPOSITS RECEIPTS (FDR) -

Banks offer a low interest on the deposited money in savings bank account and current account, but these
accounts offer the convenience of making partial withdrawal anytime at demand. In contrary to this FDR is a
deposit scheme which offers a higher interest rate with the condition to maintain the deposit for a fixed time
period. It is not like an account wherein any time any amount can be added instead a fixed amount is
deposited by mentioning the time period till which no withdrawal is allowed. If the deposit continues till the
specified maturity period then interest for the full period along with the principal amount is paid. These also
offer the convenience of premature withdrawal, in such case interest is paid at a low rate and few banks
charge a panel interest also.

FDR can be pledged with the issuing bank to obtain a loan against the FDR or it can be pledged to open a
cash credit account. In case a loan is taken against the FDR then bank gives the interest on the amount of
FDR and charges the interest on the loan amount. Fixed deposit is a financial instrument for investors to
deposit money for a fixed duration ranging from 15 days to 10 years. Therefore, the depositors are supposed
to continue such FDR for the duration of time for which the depositor decides to keep the money with the
bank. However, in case of need, the depositor can ask for closing the fixed deposit in advance by paying a
penalty. Soon some banks have even introduced variable interest fixed deposits. The rate of interest in such
deposits will keep on varying with the prevalent market rates i.e. it will go up if market interest rate goes and
it will come down if the market rates fall.

POST OFFICE DEPOSITS/ POST OFFICE SAVINGS CERTIFICATE -

National savings certificate popularly known as NSC, is a time-tested tax saving instrument that combines
adequate returns with high safety. NSCs are an instrument for facilitating long-term savings. A large chunk
of middle class families use NSCs for saving on their tax, getting double benefits. They not only save tax on
their hardearned income but also make an investment which assures good and safe returns.

National savings certificate (NSC) is a fixed interest, long term instrument for investment. NSCs are issued
by the department of post, government of India. Since they are backed by the government of India, NSCs are
a practically risk free avenue of investment. They can be bought from authorized post offices. They offer a
fix rate of return per annum. This interest is calculated every six months, and is merged with the principal.
That is, the interest is reinvested, and is paid along with the principal at the time of maturity. NSCs qualify
for investment under Section 80C of the income tax act. Even the interest earned every year qualifies under
Sec 80C.

37
National savings certificates are available in the denominations of Rs. 100, Rs 500, Rs. 1000, Rs. 5000 & Rs.
10000 throughout the year. There is no maximum limit on the purchase of the certificates. So it is investor to
decide how much amount to invest in the NSCs. This is of course a huge benefit for investor as he can
decide as much as budget allows. There are various investment schemes available in post offices, like KVP
(KisanVikas Patra), Post Office Monthly Income Scheme (MIS), Post Office Time Deposits (TD), Post
Office Recurring Deposits (RD), National Savings Certificates (NSC) and National Saving Schemes (NSS)
etc. All these schemes are completely risk-free and do not need to have large sum of money to start investing
in these schemes. Some schemes offer tax-saving benefits and some gives tax-free returns. So investors need
to find out scheme as per requirements.

PUBLIC PROVIDENT FUND (PPF) -

PPF is a 30 year old constitutional plan of the central government happening with the objective of providing
old age profits security to the unorganized division workers and self-employed persons. Any individual
salaried or non-salaried can open a PPF account. Investor may also pledge on behalf of a minor, HUF, AOP
and BOI. Even NRIs can open PPF account. A person can contain only one PPF account.

Also two adults cannot open a combined PPF account. The collective annual payment by an individual on
account of himself his minor child and HUF/AOP/BOI cannot exceed Rs.70000 or else the excess amount
will be returned without any interest.

The yearly contribution to PPF account ranges minimum Rs.500 to a maximum of Rs.70000 payable in
multiple of Rs.500 either in lump sum or in convenient installments, not exceeding 12 in a year. The account
will happen to obsolete if the required minimum of Rs.500 is not deposited in any year. The account can be
regularized by depositing for each year of default, arrears of Rs.500 along with penalty of Rs.100.

A PPF account can be opened at any branch of State Bank of India or its subsidiaries or in few national
banks or in post offices. On opening of account a pass book will be issued wherein all amounts of deposits,
withdrawals, loans and repayment together with interest due shall be entered.

The account can also be transferred to any bank or post office in India. Deposits in the account earn interest
at the rate notify by the central government from time to time. Interest is designed on the lowest balance
among the fifth day and last day of the calendar month and is attributed to the account on 31st March every
year. So to derive the maximum, the deposits should be made between 1st and 5th day of the month.

38
MUTUAL FUNDS -

A Mutual fund is an investment tool that allows small investors to access a well-diversified portfolio of
equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are
issued and can be redeemed as needed. A mutual funds is a professionally managed firm of collective
investments that pools money from many investors and invests it in stocks, bonds, short-term money market
instruments, and/or other securities. In a mutual funds, the fund manager, who is also known as the portfolio
manager, trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or
interest income. The investment proceeds are then passed to the individual investors. The value of a share of
the mutual funds, known as the net asset value per share (NAV), is calculated daily based on the total value
of the fund divided by the number of shares currently issued and outstanding.

FACTORS AFFECTING INVESTMENT IN STOCK MARKET -

Investment choices vary from investor to investor depending on their goals, risk tolerance and individual
personality. But, there are certain common factors that affect everyone’s investment decisions.
Knowing the factors that affect your investment decision is essential to maximize your portfolio return.
Investment is expenditure on capital goods – for example, new machines, offices, new
technology. Investment is a component of Aggregate Demand (AD) and also influences the capital stock and
productive capacity of the economy (long-run aggregate supply).

Investment levels are influenced by:

1. Interest rates (the cost of borrowing)

2. Economic growth (changes in demand)

3. Confidence/expectations

4. Technological developments (productivity of capital)

5. Availability of finance from banks.

6. Others (depreciation, wage costs, inflation, government policy).

39
Main factors influencing investment by firms

1. Interest rates –

Investment is financed either out of current savings or by borrowing. Therefore investment is strongly
influenced by interest rates. High interest rates make it more expensive to borrow. High interest rates also
give a better rate of return from keeping money in the bank. With higher interest rates, investment has a
higher opportunity cost because you lose out the interest payments.

40
The marginal efficiency of capital states that for investment to be worthwhile, it needs to give a higher rate
of return than the interest rate. If interest rates are 5%, an investment project needs to give a rate of return of
at least 5% or more. As interest rates rise, fewer investment projects will be profitable. If interest rates are
cut, then more investment projects will be worthwhile.\

Evaluation –

 Time lags. If a firm has started an investment project, a rise in interest rates will be unlikely to
change the decision. The firm will continue to finish the investment. However, it will make them
think twice about future investment projects. Therefore changes in interest rates can take time to have
an effect.

 Other factors. Interest rates can be outweighed by economic conditions. For example, in 2009,
interest rates were cut from 5% to 0.5% – but investment fell because of the deep recession and the
unwillingness of the banks to lend. It was cheap to borrow, but in these circumstances, this wasn’t
enough to encourage investment.

2. ECONOMIC GROWTH -

Firms invest to meet future demand. If demand is falling, then firms will cut back on investment. If
economic prospects improve, then firms will increase investment as they expect future demand to rise. There
is strong empirical evidence that investment is cyclical. In a recession, investment falls, and recover with
economic growth.

41
Accelerator theory:- The accelerator theory states that investment depends on the rate of change of
economic growth. In other words, if the rate of economic growth increases from 1.5% a year to 2.5% a year,
then this increase in the growth rate will cause an increase in investment spending as the economy is on an
up-turn. The accelerator theory states that investment is highly dependent on the economic cycle.

3. Confidence –

Investment is riskier than saving. Firms will only invest if they are confident about future costs, demand and
economic prospects. Keynes referred to the ‘animal spirits’ of businessmen as a key determinant of
investment. Keynes noted that confidence wasn’t always rational. Confidence will be affected by economic
growth and interest rates, but also the general economic and political climate. If there is uncertainty (e.g.
political turmoil) then firms may cut back on investment decisions as they wait to see how event unfold.

 Evaluation – Confidence is often driven by economic growth and changes in the rate of economic
growth. It is another factor that makes investment cyclical in nature.

4. Inflation –

In the long-term, inflation rates can have an influence on investment. High and variable inflation tends to
create more uncertainty and confusion, with uncertainties over the future cost of investment. If inflation is
high and volatile, firms will be uncertain at the final cost of the investment, they may also fear high inflation
could lead to economic uncertainty and future downturn. Countries with a prolonged period of low and
stable inflation have often experienced higher rates of investment.

 Evaluation – if low inflation is caused by a fall in demand and economic growth – then this low
inflation will not, of itself, be sufficient to boost investment. The ideal is low inflationary and
sustainable growth.
42
 5. Productivity of capital –

Long-term changes in technology can influence the attractiveness of investment. In the late nineteenth
century, new technology such as Bessemer steel and improved steam engines meant firms had a strong
incentive to invest in this new technology because it was much more efficient than previous technology. If
there is a slowdown in the rate of technological progress, firms will cut back investment as there are lower
returns on the investment.

6. Availability of finance –

In the credit crunch of 2008, many banks were short of liquidity so had to cut back lending. Banks were very
reluctant to lend to firms for investment. Therefore despite record low-interest rates, firms were unable to
borrow for investment – despite firms wishing to do that.

Another factor that can influence investment in the long-term is the level of savings. A high level of savings
enables more resources to be used for investment. With high deposits – banks are able to lend more out. If
the level of savings in the economy falls, then it limits the amounts of funds that can be channelled into
investment.

43
 7. Wage costs

If wage costs are rising rapidly, it may create an incentive for a firm to try and boost labour productivity,
through investing in capital stock. In a period of low wage growth, firms may be more inclined to use more
labour-intensive production methods.

8. Depreciation

Not all investment is driven by the economic cycle. Some investment is necessary to replace worn out or
outdated equipment. Also, investment may be required for the standard growth of a firm. In a recession,
investment will fall sharply, but not completely – firms may continue with projects already started, and after
a time, they may have to invest in less ambitious projects. Also, even in recessions, some firms may wish to
invest or start up.

9. Public sector investment

The majority of investment is driven by the private sector. But, investment also includes public sector
investment – government spending on infrastructure, schools, hospitals and transport.

10. Government policies

Some government regulations can make investment more difficult. For example, strict planning legislation
can discourage investment. On the other hand, government subsidies/tax breaks can encourage investment.
In China and Korea, the government has often implicitly guaranteed – supported the cost of investment. This
has led to greater investment – though it can also affect the quality of investment as there is less incentive to
make sure the investment has a strong rate of return.
44
 3. LITERATURE REVIEW

The research dimension of the related literature and the relevant information begins from an explanatory
perspective, approaching towards specific studies which are related to judging the imitations and
informational gaps in data from the secondary sources. This analysis may reveal conclusions from past
studies to realize the reliability of the secondary sources and their creditability. This in turn enables one to
rely on a comprehensive review for the study.

A few studies had been made which were indirectly helpful to this investigation.
Reviews of such studies are presented below:

Vijay. S, Dr. Ch. Balanageswara Rao (2018) –

The globalization of financial markets has been raising the dimensions of the town of list investors' over the
past 2 years by giving a multitude of market as well as investment choices. Hence, it will make the
investment choices of their process more complicated. The elements influencing investor's perception are
actually returned on risk, market trend, or investment, short term profitability, cost of the share, dividend
policy, past economic performance, company reputation, and standing of the board, present earnings of the
business as well as expert opinion. This particular analysis concentrates the primary factors influencing
investor's perception.

Dr. M.Malathy, Saranya.J (2017) –

The globalization of financial markets has been raising the dimensions of the town of list investors' over the
past 2 years by giving a multitude of market as well as investment choices. Hence, it will make the
investment choices of theirs process more complicated. The elements influencing investor's perception are
actually returning on risk, market trend, or investment, short term profitability, cost of the share, dividend
policy, past economic performance, company reputation, and standing of the board, present earnings of the
business as well as expert opinion. This particular analysis concentrates the primary factors influencing
investor's perception.

C. Kavitha (2015) –
The researcher was influenced by the continual lack of hometown investors participating on the National
Stock Exchange (NSE), the large spread ignorance regarding financial assets as well as the constant
purchase of stocks without any info known about them by majority of individuals of the nation in addition to
the large gap between the rich that invest in stocks as well as the poor that continually make losses in the

45
Actual investment industry. The study was guided by goals with an objective of tracking investor's
perceptions and perceptions towards stock market investments A sample of 125 respondents was utilized as
well as the findings analyzed utilizing SPSS. The study used a cross-sectional survey style with the
application of qualitative and quantitative details. The study might also make use of descriptive and
correlation techniques to set the interactions amongst the analysis variables. The study made a few
suggestions among which to boost investor awareness as a means of encouraging community investors to list
on the stock exchange. The regulatory authorities should get better on the effectiveness of theirs to boost the
confidence of the nearby investor. Moreover, they need to bring in investor rewards to enhance the volumes
traded on the exchange with an evaluation of The stock market laws with a view to make them stronger plus
more appealing to hometown investors.

Hvidkjaer S (2008) –
The researcher analyzed the relationship between retail investor trading behavior and the cross section of
future stock returns. The result suggests that stocks favored by retail investors subsequently experience
prolonged underperformance relative to stock out of favor with them. This results link the systematic
component of retail investor behavior to future returns, i.e., informed investors might begin selling stocks
that they believe to be overvalued. The overvaluation that these investors perceived could be driven by
changes in firms fundamental values.

Szyska Adam (2008) –

He analyzed how investors’ psychology changes the vision of financial markets and discussed the
consequences of the new view of finance by capital market practitioners-investors, corporate policy makers
and concluded with some thoughts on the future development of the capital market theory.

Heena Kothari (2012) –

The study analyses the investment behavior towards investment avenues in Indore city. The study is
consisting of private and public banking employees as they have regular income, retirement benefits, safety
and security of income. Analyses of data states that Younger people invest more than Middle age people.

Verma.P. (2012) –
He found that awareness of various equity oriented securities among Indian investors is increasing due to
various investor education programs conducted by Securities and Exchange Board of India (SEBI) and
Association of Mutual Funds in India (AMFI). He stated that, due to the increased awareness about equity
oriented securities, the number of new investors is growing at a healthy rate in India. He further stated that,
increased awareness is also motivating the equity investors to acquire knowledge on various investment
strategies and risk minimization techniques.

46
Hon (2012) –
He investigates the behavior of small investors in Hong Kong’s derivatives markets. The study period covers
the global economic crisis of 2011- 2012, and he focuses on small investors’ behavior during and after the
crisis. He attempts to identify and analyze the key factors that capture small investor’s behavior in
derivatives markets in Hong Kong. He collects data 524 respondents through a questionnaire survey.
Exploratory factor analysis rotated principal component loadings, scree test, KMO and Bartlett’s test, and a
reliability test show that the behavior of small investors in derivatives markets in Hong Kong consistently
indicates the ascending order of importance of return performance, reference group, and personal
background.

Jasim Y Al-Ajmi (2014) –

In “Risk tolerance of Individual Investors in an Emerging Market” explores the relationship between risk
tolerance and the demographic characteristics of the investors. The study was conducted to investigate the
effect of gender, education, age and wealth of the investors on their risk tolerance level.

Major findings of the study are as follows:

a. Men are less risk averse than women.
b. Less educated investors are less likely to take risk.
c. The effect of age on risk tolerance is complex.
d. Wealthy investors are more risk tolerant than the less-wealthy investors.

Selvam M (2014) –
In their study entitled, “Equity Culture in Indian Capital Market’, examined the need for promoting equity
culture, which deserves special attention for the development of economic growth. The study discussed in
detail the current trend of equity culture, its implications and its revival and remedial 46 measures. The study
suggested intervention by government, SEBI and RBI and evaluation of suitable credit policy for projects in
order to assure safety and assured returns to the investors, in order to restore investor confidence.

Muraleedhran (2014) –
“Pattern of Household Income, Savings and Investment” analyzed the pattern of investment preference
among the different income groups in physical and financial assets. The relevant findings of the study are as
follows:

47
a. The composition of savings reveals that savings in financial asset (63.47%) is higher than savings in
physical assets.

b. Among the savings in financial assets savings in chit funds is the highest (44.58%).
c. In physical assets, consumer durables are the highest (28.33%).
d. For around 23.62% of the households, the saving motive is the educational and marriage purposes of their
children.
e. The average propensity to save shows that the level of savings is related to the level of income.

Panda K, Tapan N.P and Tripathi, (2014) –

In their study entitled, “Recent Trends in Marketing of Public Issues: An Empirical Study of Investors
Perception”, attempted to identify the investors’ awareness and attitude towards public issues. One hundred
and twenty five investors covering the salaried and business class, from the city of Bhuvaneshwar were
selected at random. The data was collected by administering a questionnaire and was analyzed using simple
percentage and weighted average analysis. The study revealed that majority of the investors relied on
newspapers as the source of information. Financial journals and business magazines were ranked next to
newspapers. A large number of investors were of the opinion that they were not in a position to get the
required information from the company in time. A sizable number of investors were found to face problems
while selling securities. ‘Safety and Regular Return’ stood first and second with regard to the factors
associated with investment activities. Equity shares were preferred for their higher rate of return by the
investors.

Security Exchange Board of India (SEBI) along with National Council of Applied Economic Research
(NCAER), conducted a comprehensive survey of the Indian investor households entitled, “Survey of Indian
Investors”, in order to study the impact of the growth of the securities market on the households and to
analyze the quality of its growth. 25,000 investors were drawn from places all over India and the data was
collected by administering questionnaire and through personal interviews. The survey was carried out with
the major objective of drawing a profile of the households and investors and to describe the demographics,
economic, financial and equity ownership characteristics. The study also focused to understand the
investor’s investment preference for equity as well as other savings instruments, their perception about
market risk, their expectations, nature of their grievances, and difficulties, to estimate the number of
household which had refrained from investing in the equity market and the reasons for their reluctance. The
survey 72 revealed that age, education, occupation and income were found to influence the attitude of an
investor towards investment. The urban investor households had higher proportion of investment in equity
shares, debenture and mutual funds as compared to the rural households. Income levels and investment of
the households in capital market were found to be associated.
Majority of the equity investors had long term motive of investment. Investors revealed that they had a
number of broker related problems than the issuer related problems.

48
Security Exchange Board of India (SEBI) along with National Council of Applied Economic Research
(NCAER), conducted a comprehensive survey of the Indian investor households entitled, “Survey of Indian
Investors”, in order to study the impact of the growth of the securities market on the households and to
analyze the quality of its growth. 25,000 investors were drawn from places all over India and the data was
collected by administering questionnaire and through personal interviews. The survey was carried out with
the major objective of drawing a profile of the households and investors and to describe the demographics,
economic, financial and equity ownership characteristics. The study also focused to understand the
investor’s investment preference for equity as well as other savings instruments, their perception about
market risk, their expectations, nature of their grievances, and difficulties, to estimate the number of
household which had refrained from investing in the equity market and the reasons for their reluctance. The
survey 72 revealed that age, education, occupation and income were found to influence the attitude of an
investor towards investment. The urban investor households had higher proportion of investment in equity
shares, debenture and mutual funds as compared to the rural households. Income levels and investment of
the households in capital market were found to be associated. Majority of the equity investors had long term
motive of investment. Investors revealed that they had a number of broker related problems than the issuer
related problems.

Bandgar P.K75, (2014), in his study entitled, “A Study of Middleclass Investor’s Preferences for Financial
Instruments in Greater Bombay”, studied the existing pattern of financial instruments in India and the
performance of middle class investors, their behavior and problems. Questionnaire was administered to
collect data. Average, skewness, chi-square test and Fisher Irving test were used to analyze the data. The
study revealed that only 16% of the investors were facing difficulties in buying and selling securities.
Middle-class investors were highly educated but they were lacking skill and knowledge to invest. Female
investors preferred to invest in risky securities as compared to male investors. The study also revealed that
there was a moderate and continuing shift from bank deposits to shares and debentures, and a massive shift
towards traditional financial instruments namely, life insurance policies and government securities.

Manjunatha T and Gopi K.(2014), found that every investor had his own investment objectives, risk
acceptance level, inflows and outflows of money and other constraints. Their study showed that the decision
of retail investors in primary market were influenced by issue price, information availability, broker advice,
recommendations of the analysts, secondary market situation, disclosure by market participation and other
factor. The study suggested that wealth maximisation criteria was important to retail investors while
investing in the primary market, the recommendation of brokerage house analysts, issue price, IPOs grading,
promoters’ reputations and other factors go largely were considered in the primary market.

James E. Corter (2014) had concluded that risk tolerance and uncertainty tolerance can be distinguished not
only theoretically but empirically and that both types of attitudes affected investing behaviour. While higher
levels of risk tolerance led to riskier portfolios and thus to higher exposure to losses, it seemed that
investors’ emotional reactions to losses were not mitigated by higher level of risk tolerance. It suggested that
a high level of risk tolerance insulated a client from neither the actual nor the emotional consequence of
market losses.

Sohan Patidar (2014), found that as per the age-wise classification, the investors in the age group of below
35 years were actively participating in the speculation trade and the age group of above 55 hesitated to take
49
risks. Professional people were not interested in the share market and investors falling under the income
group below Rs 20, 000 showed more interest in investing their earnings in the share market.

Varadharajan and Vikkraman (2014) focus on identifying the investors’ perceptions towards investment
decision in equity market. Using ANOVA on a sample size of 50 investors in Coimbatore they study their
attitude towards selection of stock, company, risk, equity portfolio, financial affairs and their expected
return. They find that there exists an independency between the demographics, majority of the factors and
the returns obtained.

Kadariya (2014) analyzes the market reactions to tangible information and intangible information in
Nepalese stock market to examine the investors ‘opinions in Nepalese stock market issues. After analysis of
a sample of 185 stock investors he finds that the capital structure and average pricing method is one factor
that influence the investment decisions, the next is political and media coverage, the third factor is belief on
luck and the financial education, and finally the forth component for stock market movement is trend
analysis. Thus, he concludes that both the tangible and intangible information are essential to succeed in
Nepalese capital market.

Chaudhary (2014) examines the meaning and importance of behavioral finance and its application in
investment decisions. He has also discussed some trading approaches for investors in stocks and bonds to
assist them in manifesting and controlling their psychological roadblocks.

Gaurav Chhabra, Ankesh Mundra (2014) the study state various invest options available with the
investors. In earlier time because of non-availability of banking system investors use to keep hard cash, gold
and silver ornament, precious stones etc. as savings. Now investment are made through bank, insurance
policies, mutual funds, pension funds, collective investment schemes, and investment clubs.

T. N. Murty, P. V. S. H Sastry (2014) Investor’s choice with the objective of return optimization is
investment in the stock market instruments or securities. Stock market securities are affected by various
internal and external factors. Study examines the perception of small investment investors towards returns on
investment.

A. N. Paunikar (2014) Equity Linked Saving Schemes are similar to equity diversification schemes with tax
saving benefit under section 80C. The study aims at understanding scheme- wise benefits under Equity
Linked Saving Schemes for tax saving. Data analysis shows that Equity Linked Saving Schemes has better
returns on investments.

Avinsah N (2014) the study analyses the investment behavior by examining various invest avenues. Data
analyses reveals that Most of the respondents have selected bank deposit as their first option for investment

50
followed by real estate. Below 30 years respondents invest more in real estate whereas above 60 years
preferred LIC policies. Full time salaried people are more aware about different investment avenues.

Nidhi Walia and Ravi Kiran (2014) studied that to satisfy the needs of investors‟ mutual funds are
designing more lucrative and innovative tools considering the appetite for risk taking of individual investors.
A successful investor is one who strives to achieve not less than rate of return consistent with risk assumed.
They also argued as per observation by survey responses of the individual investor’s fact is clear that overall
among other investment avenues capital market instruments are at the priority of investors but level of
preference varies with different category/ level of income, and an association exists between income status
of investors and their preference for capital market instrument with return as objective.

Ashok Kumar (2014), suggested that majority of investors preferred to invest in Fixed deposit with banks
followed by gold, units of UTI, fixed deposit of non- government companies, mutual funds, equity shares
and debenture for safety and liquidity. The above literature shows the important contribution on investors
perception towards’ various investment avenues. It is also evident from the above literature that majority of
the investors prefer fist safety and security for the investment and secondly they interested to get maximum
benefits for their investments. In light of above literature, the present study attempts to identify the problems
on the perception of investors towards investment avenues in Vellore city, Tamil Nadu.

Vinayakam and Charumathi (2014) in their study observed that equity cult had spread to different parts of
the country and millions of Indian investors invested their savings in the booming stock markets. What was
once considered as the exclusive game of the rich and privileged class is now becoming a matter of day
interest for millions of middle and low income groups of investing public in India.
In spite of such widespread interest of Indian investors in shares, investment knowledge is very much
lacking in them. This is evident from the fact that most of them usually get attracted towards the stock
exchanges like moths to a candle in periods of boom and rising prices in a bid to become rich quickly. When
the boom bursts and a depression sets in, most of such new entrants prove a menace to themselves and to the
general public ultimately.

Elke U. Weber Richard A. Milliman (2014), had stated that commuters changed their preferences for
trains with risky arrival times when the alternative involved gains with changes in the perception of the
riskiness of the choice of alternatives. This had left the perceived risk attitudes of majority of commuters
unchanged. Similarly, they had investigated changes in risk perception, information acquisition and stock
selection as a function of outcome viz., returns. Investors’ stock selection and their perception of the risk of
the same stock were different in series of decisions in which they lost money than in series in which they
made money.

Santi Swarup (2014) had indicated that the investors gave importance to their own analysis as compared to
brokers’ advice. They also considered market price as a better indicator than analyst’s recommendations.
The study also identified factors that were affecting primary market situation in India. Issue price,
information availability, market price after listing and liquidity had emerged as importance factors in the
51
study. The study suggested that investors need to be assured of some return and the level of risk associated
with investment in the market was very high. They have bad experience in terms of lower market price after
listing and high issue price. A number of measures in terms of regulatory price level and market oriented
reforms were suggested to improve the investor confidence in equity primary markets. However, this study
did not highlight the measures for improving investors’ confidence in the secondary market.

Manoj Kumar Dashl (2014) Factors Influencing Investment Decision of Generations in India: An
Econometric Study This study aims to gain knowledge about key factors that influence investment behavior
and ways these factors impact investment risk tolerance and decision making process among men and
women and among different age groups. The individuals may be equal in all aspects, may even be living
next door, but their financial planning needs are very different. It is by using different age groups along with
Gender that synergism between investors can be generated. In this context, demographics alone no longer
suffice as the basis of segmentation of individual investors. Hence keeping this in mind, the present study is
an attempt to find out Factors which affects individual investment decision and Differences in the perception

of Investors in the decision of investing on basis of Age and on the basis of Gender. The study concludes
that investors’ age and gender predominantly decides the risk taking capacity of investors.

Abhijeet Chandra (2015). In this literature, the author has analyzed the impact of competence of individual
investors on their trading behavior in the stock market. Individual investors take trading decisions based on
their self-perceived competence that is influenced by several factors. The study examined the factors that
determine the competence level of individual investors. Age, education, and income were found to be the
most influencing factors of the individual investors' competence in the stock market activities and trading
behavior. The results of the study reveal that a person invests as per his/her own judgments once he/she
perceives himself/herself more knowledgeable about investing. It finds that investors having high, high to
moderate income and professional qualification are supposed to be more confident about their competence
when it comes to trading in stock markets. Thus, it can be said that competence effect rules the trading
behavior of individual investors.

Kaushal Bhatt (2015) Utilization of resources in order to increase income or production output in future is
kwon as investment. Data analyses states that Graduates are more intended to save money and they are
aware about various investment avenues. Business man tend to invest more as compared to salaried man.
Respondent want more safety and securities to their money.

Ravi Vyas (2015) this study finds the form of investments preferred by investors. Mutual fund investment is
a secured investment with good returns on investments. Data analyses shows that maximum respondent
invest in Gold followed by bank deposits and Insurance schemes. Mutual fund investments are very limited.
For Safety, Liquidity, Reliability, Tax benefits and high returns Mutual fund has average score among
investors.

52
Priyanka Jain (2015) the study analyses the various investment avenues available for the investors. It state
Equity shares has low return but high capital appreciation, risk liquidity, Marketability, tax benefit,
Debentures has high return but low risk liquidity and marketability. Bank deposits have moderate returns but
low capital appreciation and risk liquidity.

Nayak (2015) seeks to examine the nature of investor’s grievances and also to evaluate the role of grievance
redressed agencies. Using convenient random sampling technique he collects primary data on the investor’s
demographic profile, knowledge about various grievances, awareness about the functions of various
grievances redress agencies, loading of complain and their satisfaction level in Valsad district of Gujarat
State. By using chi square analysis he shows that there is significant difference between the various
demographic variables and investor’s knowledge of grievances, awareness of functions of redressed
agencies, loading of complain and their satisfaction level.

Kannadasan (2014) in his “ Risk appetite and Attitudes of Retail Investors with Special reference to Capital
Market” analyzed the behavioral pattern of the Retail Investors, based on various dependent variables viz.,
Gender, age, marital status, 71 educational level, income level, awareness, preference and risk bearing
capacity. The following are the major findings of the study:

 Only 25 per cent of the sample respondents were aware of all the investment avenues available in the
capital market. However, all of them are aware of at least one avenue.
 90 per cent of the retail investors are not aware of the measures taken by the Government to protect
the interest of the investors.
 79 per cent of the retail investors are interested to invest in Shares and Debentures as well.
 The risk bearing capacity of the retail investors was not influenced by their age. The retail investors’
age is not a criterion to decide their investment behavior and investment option.
 The investment strategy of the investors is influenced by their income level. The retail investors’
income level is playing a predominant role to decide their investment behavior and investment
strategy as well.
 The major attributes of risk in investment are dividend, redemption period and Value appreciation.
Value appreciation is an important factor among the three.

53
 DATA ANALYSIS INTERPRETATION AND PRESENTATION

DATA COLLECTION AND ANALYSIS:

Information has been collected from both Primary and Secondary Data.

Primary sources- Primary data are those which are fresh and are collected for the first time, and thus
happen to be original in character. The primary data was collected through direct personal interviews (open
ended and close ended questionnaires).

Secondary sources- Secondary data are those which have already been collected by someone else and
which already had been passed through the statistical process. The secondary data was collected through
web sites, books and magazines.

DATA ANALYSIS:-
The collected data is sorted out and analyzed to prepare the final report. The tools and techniques used in the
analysis are.

54
Analysis on the Age of Respondents –

Age No. of respondents

Less than 20 years 5

31
20-40 years

Greater than 40 years 64

Analysis and Interpretation -

As shown in chart,
 Majority of the respondents constitute 64 per cent of the total sample belong to the age group above 40 years.
 31 per cent of the sample are aged between 20-40 years.
 The remaining 5 per cent individual are below 20 years.
This indicates that majority of the sample belong to the working class and thus would involve in investment.

55
Analysis on the Gender of Respondents –

Gender No. of respondents

Male 58

Female 42

Analysis and Interpretation -

As shown in chart,
 Majority of the respondents constitute 58 Percent of the total sample belong to the Male.

 Remaining 42 Percent Belongs to female

56
Analysis on the Qualification of Respondents –

Occupation No. of respondents

Matric 7

Under Graduate 11

Diploma 13

Graduate 44

Post Graduate 25

Analysis and Interpretation -

As shown in chart,

 Majority of the respondents are graduate which equal to 44 Percent.

 Post graduate is the 2nd highest response with 25 Percent.

 Diploma and under graduate are 13 Percent and 11 Percent respectively.

 The least of all is matric that total to 7 Percent.

57
Analysis on the Income of Respondents –

Income (Per Month) No. of respondents

Less than 20000 16

20000-40000 29

Greater than 40000 55

Analysis and Interpretation –

As shown in chart,

 Majority of the respondents had income above 40000 that constituted 55 per cent of the responses.

 29 per cent responses were between the ranges of 20000-40000.

 The remaining can be assumed as students and Retired ones who accounted to 18 per cent of the
responses.

58
Analysis on the Occupation of Respondents –

No. of respondents
Occupation

Service 42

Profession 23

Business 17

11
Student

Others 7

Analysis and Interpretation –

As shown in chart,

 Majority of the respondents are service constituting 42 percent.

 Respondents with profession and business as occupation equated to 23 and 17 per cent respectively.

 11 per cent of the respondents were students.

 The remaining 7 per cent consisted of others.

59
Analysis to know about Investing in Stock Market.

Investment Decision No. of respondents

Yes 66

No 34

Analysis and Interpretation –

As shown in chart,

 66 Percent of the respondents invest in stock market.

 34 Percent of the respondents do not invest in stock market.

60
Analysis to know awareness of investment options among respondents-

Types of investment No. of respondents

instruments
Shares 82
Mutual Funds 88
Debentures 42
Bonds 52
Derivatives 25
Others 19

Analysis and Interpretation –

As shown in chart,

 88 per cent and 82 per cent of the respondents are aware of mutual funds and shares as an investment
alternative.

 42 and 52 percent individuals are aware of debentures and bonds.

 Derivatives constituted to 25 per cent of the responses.

 The option others which included investments in fixed deposits, Public provident funds, National
pension scheme, Gold constituted to 19 per cent.
61
Analysis to know the type of investment option the respondents are investing.

Investment alternatives No. of respondents

Shares 61
Mutual Funds 79
Debentures 12
Bonds 14
Derivatives 7
Others 25

Analysis and Interpretation –

As shown in chart,
 79 Percent invest in mutual funds.

 61 Percent invest in shares.

 12 Percent invest in debentures.

 14 Percent invest in bonds.

 07 Percent invest in derivatives.

 25 Percent invest in fixed deposits, Public provident funds, National pension scheme, Gold.

Thus, it can be stated that maximum people invest in Mutual Funds whereas shares are having 2nd
importance.

62
Analysis to know about the frequency of the investment.

Frequency of Investment No. of respondents

Daily 2
Weekly 2
Monthly 69
Yearly 27

Analysis and Interpretation –

As shown in chart,

 69 respondents invest monthly.

 29 invest yearly.

 There were 2 respondents who invest daily.

 2 respondents who invest yearly.

Thus, it can be stated that majority of the investors invest monthly.

63
Analysis to know about the rate at which the investment grows.

Investment Growth Rate No. of respondents

Steadily 15

At an average rate 79

At fast rate 6

Analysis and Interpretation –

As shown in chart,

 79 Percent of respondents have return at an average rate.

 15 Percent respondents conclude that their investment grow at steady.

 6 Percent respondents conclude that their investment grow at fast rate.

64
Analysis to know about the percentage of income the respondents invest monthly.

Monthly Income Invested No. of respondents.

Upto 10% 31
10-15% 34
15-20% 22
Above 20% 10
No investment 3

Analysis and Interpretation –

As shown in chart,

 34 respondents invest 10- 15% of their monthly income.

 31 respondents invest 10% of their annual income.

 22 respondents invest up to 15-20% of their income.

 10 respondents invest up above 20% of their income in different investment avenues.

 3 respondents do not make any monthly investment.

Thus, it can be concluded that majority of investors invest 10% to 20% of their monthly income.
65
Analysis to know about the about the factors that are considered while investing.

Investment Factors No. of respondents

Return on investment 77
Tax benefits 57
Capital appreciation 52
Maturity period 31
Risk 42
Safety of principal 45
Liquidity 39

Analysis and Interpretation –

As shown in chart,

 57% respondents considered return on investment was most important factor.

 52% respondents considered tax benefits and capital appreciation as an important factor respectively.

 42% respondents considered risk as an important factor.

 45% and 39% considered safety of principal and liquidity as an important factor respectively.

It can be stated that majority of investors were consider return as an important factor while investing
66
Analysis to know about the respondent’s influence on investment decision.

Sources No. of respondents

Self 75
Friends & Relatives 41
Service providers & consultants 30
Newspapers & Advertisments 27
Agents 33
Workshop & Seminars 9
Tax Rebate` 1
None 1

Analysis and Interpretation –

As shown in chart,
Multiple aspects for investing influenced respondents.

 75% respondents take investment decision on the basis of their personal evaluation.

 41% respondents invest because of influence of friends & relatives. The agent influences 33%
respondents.

 The consultants influences 30% respondents.

 The advertisement influences 27% respondents.

It can be stated that majority of the persons are influenced by their own while opting for investments.
67
Analysis to know about the respondent finds capital market risky.

Decision No. of respondents

Yes 88
No 12

Analysis and Interpretation –

As shown in chart,

 Majority of the respondents’ i.e. 88 Percent feel that capital market is risky.

 12 Percent agree that capital market is not risky.

68
Analysis to know about the respondent’s action in case of stock market drop.

Preference in case of losses No. of respondents

Cut losses & transfer funds into secure 12

investment
Wait to see if investment improves 62

Invest more funds 20

Withdraw funds & stop investing 6

Analysis and Interpretation –

As shown in chart,

 Maximum respondents i.e. 62% would wait to see if their investment improves and start generating
funds.

 20% respondents would invest more funds.

 12% respondents would transfer funds into secure investment.

 12% 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.
69
 CONCLUSIONS & SUGGESTIONS

FINDINGS & CONCLUSIONS –

 Mostly investors are above the age of 40.

 58% of respondents are males.

 44% of respondents are graduates while 25% are post graduates, 42% are into service whereas 23%
are professionals.

 Most of the respondents have income above 40000 monthly.

 Maximum investors are aware of all the investment options.

 Maximum investors feel their investment grow at an average rate.

 The investment decision of investors is influenced majorly by their own decision and through friends
& relatives after that Service Providers & Consultants.

 Different factors considered by investors while investing are return on investment, tax benefits,
capital appreciation and the most prominent factor is the return on any investment avenue.

 The most important factor is Return which influenced the decision regarding investment after that
Tax Benefits, Capital Appreciation, Safety of Principal, Risk, Liquidity and Maturity Period
respectively. .

 Majority of investors invest 10-20% of their monthly income.

 Maximum investors invest on monthly basis.

 The investors find that capital market is risky for investment.

 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. Indian Stock Exchanges are the
pillars of economy.

 There are various options available in the Money Market and Capital Market for investment.

 If the Market Falls down Most of the people will wait to see if market get improves and will not sell
their security immediately.

 Money Market is for Short term and Capital Market is for Long term.

70
 Almost 35% of individuals do not invest in Stock Market.

 There are less women participant in stock market as there is risk factor involved.

 Individuals mostly do invest in Mutual Funds and Shares, very less number of individuals invest in
Debentures, Bonds and Derivatives.

RECOMMENDATIONS -

 Investors should have the complete knowledge of stock market how it works, what are the options
available, about regulating authority in case of Fraudulent practices, authorities like Bombay Stock
Exchange, National Stock Exchange and Security Exchange Board of India must conduct awareness
programs, seminars and workshop to educate citizen.

 The various investment tools which were mostly preferred by the investors was mutual funds, It is
because of heavy advertising people started investing in it and after that in shares, but people are not
majorly investing in Bonds, Debentures, Derivatives and Government Securities which are less risky
and provided with mortgage and Principal safety, So there should be various other means to create
awareness regarding the potential of other instruments and the tools which can be more beneficial to
the investors.

 The satisfaction levels of various investors are different due to different investment alternatives they
opt for. If they will be aware of each type of alternatives and the worth of the alternatives then
investing as per that there satisfaction level will also be high.

 It can be seen that mostly females are not investing in stock market because of risk, they do prefer to
invest in Gold, Silver and Fixed Deposits. Majority of women are working it is important to educate
them about the less risky options available and to educate them and create awareness that their
money can be secure in Stock Market too.

 Most important factor while investing is seen by respondent is Rate of Return, Most of the people are
unaware with the factors Tax Benefits, Capital Appreciation and others. The Agents & Consultants
should make them aware about it and make them consider all the factors while investing.

 People with higher salaries invest more in stock market. There is scope for the limited salaried people
to invest in Stock Market like SIP in Mutual Funds starts from 500 Rupees Per month. People must
be aware about these things and start investing in such kind of funds.

71
 Individual above 40 age mostly invest in Stock Market, there should be employment scheme in
organizations where it should be compulsion to invest 5% to 10% of salary in the stock market. SEBI
should come up with more plans of investing for younger generation to excite them to invest in stock
market.

 As today Scenario, everything is online, there should be more advertisement on Social Media
Platforms about Stock Market and more encouragement should be given to online trading.

72
 BIBLIOGRAPHY/REFERENCE

Mayank (2009). Performance Corporate Governance as a Determinant of External Finance in

Transition Economies: A Case Study of India .The Icfai University Journal of Applied Economics,
8(1): 31- 44. Available at http://papers.ssrn.com/sol3/results.cfm

Johnson (2008). The Value of Quality: Stock Market Returns to Published Quality Reviews. The
Icfai Journal of Applied Economics, 7(3):7- 22. Available at http://papers.ssrn.com/sol3/results.cfm

Dijk (2007). Economic Policy, The Size Effect in Equity Returns. Empirical Research Findings.
Journal of Financial Management and Analysis, 21(1). Available at
http://papers.ssrn.com/sol3/results.cfm

Charles (1999). Economic Policy, Astonishing growth in Americans' stock portfolios. The Icfai
Journal of Stock Market, 6 (3): 43-60. Available at http://papers.ssrn.com/sol3/results.cfm
Debt Market (M.com Part 3) by Vipul Prakashan

https://en.wikipedia.org/wiki/Indian_stock_exchange

http://finance.mapsofworld.com/investment/types/

http://www.banknetindia.com/

https://www.investopedia.com/articles/stocks/09/indian-stock-market.asp

https://www.indiainfoline.com/article/general-blog/

https://www.ijtsrd.com/

https://www.sebi.gov.in/

https://www.bseindia.com/

https://www.investopedia.com/articles/stocks/09/indian-stock-market.asp

http://shodh.inflibnet.ac.in

http://www.traderji.com/

https://www.livemint.com/

73
 APPENDIX/ ANNEXURE

QUESTIONNAIRE:

Dear Respondents,
This survey is aimed to know the perception of people towards investment in stock market in form of
investment and to find the level of awareness of stock market among Student/Professional/Retired in
Mumbai city.

PERSONAL PROFILE

1. Age:

 Less than 20 years

 20-40 years
 Above 40 years

2. Gender:
 Male
 Female

3. Qualification:
 Matric
 Graduate
 Post Graduate
 Diploma

4. Occupation:
 Service
 Profession
 Business
 Student
 Others

74
5. Income (Per month):
 Less than 20000
 20000-40000
 Greater than 40000

INVESTMENT QUESTIONS

6. Do you invest in stock market?

 Yes
 No

7. What investment alternatives are you aware of?*

Shares
Mutual Funds
Debentures
Bonds
Derivatives
Others:

8. What type of investment options are you investing in?*

 Shares
 Mutual Funds
 Debentures
 Bonds
 Derivatives
 Others

9. What are the rates at which the investments grow?

 Steadily
 At an average rate
 At a fast rate

75
10. Frequency of investment?
 Daily
 Weekly
 Monthly
 Yearly

11. What is the percentage of income you invest monthly?

 Up to 10%
 10-15%
 15-20%
 Above 20%
 No investment

12. What influences your investment decision?*

 Self
 Friends & Relatives
 Service providers & consultants
 Agents
 Workshop & seminars
 Others

13. What are the factors considered while investing?*

 Return on investment
 Tax benefits
 Capital appreciation
 Maturity period
 Risk
 Safety of principal
 Liquidity
 Others:

14. What is your action if there is a drop in stock market?

 Cut your losses & transfer into safe investment

 Wait to see if investment improves
 Invest more funds
 Withdraw funds & stop investing

76
15. According to you is capital market risky?
 Yes
 No

*Questions with check-box answer.

It can be concluded that the investors preferential choices on investment avenues are same across their
gender and the decision making process on various investment avenues are same on the investment aspects
like gold. The preferential choices across the age group of the investors is same towards the avenues like
Real estate and Insurance sectors and they differ in the aspects like stock markets, gold, bank savings and
post office savings.

The present study further concludes that the perception of order of investments among the investors is
different towards post office savings among the various income group levels of the investors. Finally, the
study concludes that investments by the investors towards various investment avenues were done with the
expectation of capital appreciation and earnings comprising both short term and long term periods.

Suggestions Based on the findings of the study it is proposed to suggest that investment of surplus amount
can be invested in the safety investment avenues like insurance sector, bank savings and post office savings
schemes and more over the retired investors and self-employed investors should be cautious on investing in
risky avenues like stock markets, gold and real estate as their markets are highly volatile in nature. In the
present day’s investment market, the avenues like gold market and share market are highly uncertain and
unpredictable.

Most of these studies concentrated either on overall development, growth, development and performance of
Capital market in India or on the recent trends of change after liberalization. Most of the studies reviewed
above have mainly covered the aspects at macro level, like the ownership patterns in the capital market,
occupation-wise break up of paid up value of share holdings of individuals, ownership pattern of
shares/debentures, geographical distribution of share ownership in India.

Though there are some specific studies on the investment pattern of individual, they mainly focused their
attention on individual investors’ problems and need for their protection. There are no specific studies
exclusively on investment culture focusing on investors’ awareness, his evaluation process of investment, his
investment pattern, risk perception and risk preference. It is needless to emphasize that the behavior of the
small and household is a very crucial area in the formulation of policies and procedures for the orderly
growth and development of securities markets in any nation.

77
There are only a few studies covering the issue of investor perception and behavior at micro/regional level.
Especially in the context of decline in the participation of small and household investors in the primary
market operations, withdrawal of investors from the capital market, diversion of household savings into safer
investment avenues like bank deposits, real estate and unproductive assets like gold and silver, it becomes all
the more important to study and analyze the investor awareness, perceptions and preferences of various
investment avenues available to them in the securities markets.

This may help the policy makers in evolving the suitable strategies to get small and household investors once
again in large numbers into the capital market operations. Hence, the present investigation is an attempt in
that direction. The issues investigated in the present study include awareness of investment avenues,
investment pattern, the most preferred objectives of investors, and investment evaluation. Moreover, this
study is mainly undertaken in Coastal Andhra, a very prominent region of Andhra Pradesh, with the hope
that the observations and conclusions of the study are of immense use.

FINDINGS-

Some of the findings of the study are:

• Major portion of the respondents are aware of the share broking agencies.

• 40% of the respondents are not familiar with the derivative trading, i.e. they are not at all aware of the
futures and option schemes in security trading.

• A good sum of respondents are not at all aware of the day trading activities and about the guidelines, rules
and regulations laid down by SEBI, but a satisfactory portion of the respondents are aware of the activities of
stock exchange and its role played in the economic development of the nation.

• Though most of the respondents know about stock exchanges, its activities, role of share broking agencies,
yet many of them are very much afraid to get into share investment for fear of risk.

• A large group of respondents invested their savings in equity shares when compared to people invested in
preference shares as because of the fear in return and most of the respondents buy or sell securities instantly
when they feel that the market tends to move in an unfavorable position.

• Age and investment are very much correlated as because, people of the age group of 31- 40 are more prone
to invest in shares than people of other ages and not only that that gender of the respondents is dependent
with the preference in investing in Shares. Here mostly male respondents invest in shares.

78
• The income level of the respondents and Gender of respondents have some correlation with the investment
in securities, i.e. more the income more the tendency to invest in securities and males are predominant in
investing funds in securities. • Occupation and investment in securities are independent. Share investment is
done by all the sections more or less equally. Only the investment by farmers is comparatively less and the
level of education and the investment in securities are dependent.

• It is found that age and the attitude of taking risk are very much dependent.ie, about 70% of the investors
comes under the category of below 40 yrs. of age. • Educational qualification has a strong bearing upon the
attitude of investors to face risk, especially with regard to investment in securities. Here about 70% of the
investors are of the categories belonging to post graduates and graduates.

• The attitude of investors in taking risk has greater influence upon the decision taken regarding the type of
investment.

• Lack of awareness on share broking agencies, derivative trading, day trading activities, SEBI guidelines
and regulations are a major reason behind the fear of investors in taking risk as well as the stand taken by
them when the market shows a slight unfavorable trend.

• The primary investment objective of most of the respondents is capital appreciation.

• Most of the respondents commented that Lack of awareness and fear of risk as the major problems they
face while Investing in shares.

• Complicated procedures, fluctuation in prices, and fear of getting returns are also been pointed by the
respondents as problems faced while investment.

• A minute portion of the respondents resort to the practice of derivative trading such as through option,
futures and some use speculative trading, while a satisfactory share of people sometimes avail day trading
facility to transact on their investments.

CONCLUSION -
It is no doubt that an individual’s financial security depends strongly on how far he has saved. Therefore
savings form an undisputed aspect in the financial planning of one’s life. Our economy is offering enormous
investment avenues, such as investment in various Banks, Financial Enterprises, Insurance companies, real
estates, stock market, gold etc. Selection of suitable investment project depends on one’s ability to track out
the best one which suits him most. India’s development widely depends upon the development of rural
sector. Majority of the Indian population resides and employs in rural sector. Our policy makers and
financial system clearly demands for a vital need of flow of savings from rural sector to corporate sector.
From the present study on the perception of investors on share investment, it can be concluded though the

79
ruralizes of Alappuzha have transformed their mind set towards security investment substantially when
compared to older times, still many of them approach it with fear and uncertainty. The reasons they cite for
this fear, uncertainty and inapproachability are varied ignoring the fact that the share investment is one of the
most promising and challenging avenue of investment which they can look upon for investing their savings.
The major reason for resistance from rural population is due to factors such as lack of knowledge about
share investments, share broking agencies, derivative trading, and above all guidelines and regulations
issued by SEBI, fear of risk, Complicated procedures, volatile nature of our capital market etc. . All these
factors tempt people to make aloof from security investment, especially in share investment. It is to be
understood that this is not restricted to a single district, but to other rural areas of our country which face the
same problem among the rural masses. Through proper education, frequent awareness programs, inspiration,
proper guidance can do a lot in the transformation of the present attitude of these investors towards share
investment to a more positive outlook.

REFERENCES: WEB:
1. http://www.investing.com/rates-bonds/india-10-year-bond-yield- advanced-chart
2. http://economictimes.indiatimes.com/markets/stocks/stock-quotes
3. https://in.finance.yahoo.com/q/hp?s=TECHM.NS&a=02&b=31&c=2010&d=02&e=31&f=2014&g=d
4. Stern Stewart and Company, "Why EVA works", http://eva.com/
5. www.investopedia.com/terms/c/cva.asp
6. www.valuebasedmanagement.net/methods_cva.html

7. www.ripublication.com/gjfm-spl/gjfmv6n2_16.pdf

8. www.iosrjournals.org/iosr-jef/papers/icsc/volume-1/8.pdf

9.http://www.acmeintellects.org/images/AIIJRMSST/Jan2015/10-1-15.pdf

10. https://www.ici.org/pdf/rpt_risk.pdf.

80