CHAPTER I

INTRODUCTION

INTRODUCTION
1

Preference :Preference (or taste) is a concept, used in the social sciences; it assumes a real or imagined
choice between alternatives and the possibility of rank ordering of these alternatives, based on
happiness, satisfaction, gratification, enjoyment, utility they provide. More generally, it can be
seen as a source of motivation. In cognitive sciences, individual preferences enable choice of
objectives/goals. Also more consumption of a normal good is a generally (but not always)
assumed to be preferred to less consumption.
Preferences of investor:
How do you pick one portfolio out of all the rest as the perfect one for you? This turns out to be
a big challenge, because it requires investors to express their preferences in risk-return space.
Investors choose portfolios for a myriad of reasons, very few of which can be reduced to a twodimensional space.

In fact, investors are used to having the ability the CHANGE their

investment decision if it is not developing as planned.

Investor Preference about Equities:
The well-known tendency of investors to favor cash dividends emerges quite naturally in two
new theories of choice behavior the theory of self-control due to Thaler and Shefrin (1981), and
the version of prospect theory set out by Kahneman and Tversky (1979). Although our treatment
is novel when viewed from the perspective of standard financial theory, it provides explanations
for a phenomenon that has long been described as perplexing.
Investor Preference based on wealth maximization:
As wealth increases, preference of one fixed gamble over another typically changes once or not
at all. A key question is whether certain assumptions on preferences guarantee such behavior.
Bell has addressed this difficult question and characterized the specific functional form of utility
functions, which allow a finite number of switches between two arbitrary gambles over the entire
range of initial wealth. By extending this analyzes , and linking the discussion to more recent
works, the authors characterize conditions under which a large set of utility functions with
respect to their switching characteristics, and discuss the results in the context of the classical
notion of decreasing absolute risk aversion.
2

Investor Preference based on time period:

Estimate a set of ownership models that distinguish between long-and short-term investors and
their largest components and which incorporate both aggregated and disaggregated measures of
corporate social performance (CSP). The results suggest that long-term institutional investment
is positively related to CSP providing further support for earlier studies of Desegregations of
CSP into its constituent components suggests that the pattern of institutional investment is also
related to the form which CSP takes. Investigation of the impact of investment screens on the
selection of stocks suggests that long-term institutional investors select primarily through
exclusion, rejecting those firms which have worst CSP.

LITERATURE
REVIEW

SECURITY ANALYSIS
Investment success is pretty much a matter of careful selection and timing of stock purchases
coupled with perfect matching to an individuals risk tolerance. In order to carry out selection,
timing and matching actions an investor must conduct deep security analysis.
Investors purchase equity shares with two basic objectives;
4

1.

To make capital profits by selling shares at higher prices.

2.

To earn dividend income.

These two factors are affected by a host of factors. An investor has to carefully understand and
analyze all these factors. There are basically two approaches to study security prices and
valuation i.e. fundamental analysis and technical analysis
The value of common stock is determined in large measure by the performance of the firm that
issued the stock. If the company is healthy and can demonstrate strength and growth, the value of
the stock will increase. When values increase then prices follow and returns on an investment
will increase. However, just to keep the savvy investor on their toes, the mix is complicated by
the risk factors involved. Fundamental analysis examines all the dimensions of risk exposure and
the probabilities of return, and merges them with broader economic analysis and greater industry
analysis to formulate the valuation of a stock.
FUNDAMENTAL ANALYSIS
Fundamental analysis is a method of forecasting the future price movements of a financial
instrument based on economic, political, environmental and other relevant factors and statistics
that will affect the basic supply and demand of whatever underlies the financial instrument. It is
the study of economic, industry and company conditions in an effort to determine the value of a
companys stock. Fundamental analysis typically focuses on key statistics in companys financial
statements to determine if the stock price is correctly valued. The term simply refers to the
analysis of the economic well-being of a financial entity as opposed to only its price
movements.Fundamental analysis is the cornerstone of investing. The basic philosophy
underlying the fundamental analysis is that if an investor invests re.1 in buying a share of a
company, how much expected returns from this investment he has.
The fundamental analysis is to appraise the intrinsic value of a security. It insists that no one
should purchase or sell a share on the basis of tips and rumors. The fundamental approach calls
upon the investors to make his buy or sell decision on the basis of a detailed analysis of the
information about the company, about the industry, and the economy. It is also known as topdown approach. This approach attempts to study the economic scenario, industry position and

the company expectations and is also known as economic-industry-company approach (EIC

approach).
Thus the EIC approach involves three steps:
1.

Economic analysis

2.

Industry analysis

3.

Company analysis

1. ECONOMIC ANALYSIS
The level of economic activity has an impact on investment in many ways. If the economy grows
rapidly, the industry can also be expected to show rapid growth and vice versa. When the level of
economic activity is low, stock prices are low, and when the level of economic activity is high,
stock prices are high reflecting the prosperous outlook for sales and profits of the firms. The
analysis of macro economic environment is essential to understand the behavior of the stock
prices.
The commonly analyzed macro economic factors are as follows:
Gross Domestic Product (GDP): GDP indicates the rate of growth of the economy. It represents
the aggregate value of the goods and services produced in the economy. It consists of personal
consumption expenditure, gross private domestic investment and government expenditure on
goods and services and net exports of goods and services. The growth rate of economy points out

the prospects for the industrial sector and the return investors can expect from investment in
shares. The higher growth rate is more favorable to the stock market.
Savings and investment: It is obvious that growth requires investment which in turn requires
substantial amount of domestic savings. Stock market is a channel through which the savings are
made available to the corporate bodies. Savings are distributed over various assets like equity
shares, deposits, mutual funds, real estate and bullion. The savings and investment patterns of the
public affect the stock to a great extent.
Inflation: Along with the growth of GDP, if the inflation rate also increases, then the real growth
would be very little. The effects of inflation on capital markets are numerous. An increase in the
expected rate of inflation is expected to cause a nominal rise in interest rates. Also, it increases
uncertainty of future business and investment decisions. As inflation increases, it results in extra
costs to businesses, thereby squeezing their profit margins and leading to real declines in
profitability.
Interest rates: The interest rate affects the cost of financing to the firms. A decrease in interest
rate implies lower cost of finance for firms and more profitability. More money is available at a
lower interest rate for the brokers who are doing business with borrowed money. Availability of
cheap funds encourages speculation and rise in the price of shares.
Tax structure: Every year in March, the business community eagerly awaits the Governments
announcement regarding the tax policy. Concessions and incentives given to a certain industry
encourage investment in that particular industry. Tax reliefs given to savings encourage savings.
The type of tax exemption has impact on the profitability of the industries. Infrastructure
facilities: Infrastructure facilities are essential for the growth of industrial and agricultural sector.
A wide network of communication system is a must for the growth of the economy. Regular
supply of power without any power cut would
boost the production. Banking and financial sectors also should be sound enough to provide
adequate support to the industry. Good infrastructure facilities affect the stock market favorably.
2. INDUSTRY ANALYSIS

An industry is a group of firms that have similar technological structure of production and
produce similar products and Industry analysis is a type of business research that focuses on the
status of an industry or an industrial sector (a broad industry classification, like
"manufacturing"). Irrespective of specific economic situations, some industries might be
expected to perform better, and share prices in these industries may not decline as much as in
other industries. This identification of economic and industry specific factors influencing share
prices will help investors to identify the shares that fit individual expectations
Industry Life Cycle: The industry life cycle theory is generally attributed to Julius Grodensky.
The life cycle of the industry is separated into four well defined stages.

Pioneering stage: The prospective demand for the product is promising in this stage and
the technology of the product is low. The demand for the product attracts many producers
to produce the particular product. There would be severe competition and only fittest
companies survive this stage. The producers try to develop brand name, differentiate the
product and create a product image. In this situation, it is difficult to select companies for
investment because the survival rate is unknown.

Rapid growth stage: This stage starts with the appearance of surviving firms from the
pioneering stage. The companies that have withstood the competition grow strongly in
market share and financial performance. The technology of the production would have
improved resulting in low cost of production and good quality products. The companies
have stable growth rate in this stage and they declare dividend to the shareholders. It is
advisable to invest in the shares of these companies.

Maturity and stabilization stage: the growth rate tends to moderate and the rate of
growth would be more or less equal to the industrial growth rate or the gross domestic
product growth rate. Symptoms of obsolescence may appear in the technology. To keep
going, technological innovations in the production process and products should be
introduced. The investors have to closely monitor the events that take place in the
maturity stage of the industry.

Decline stage: demand for the particular product and the earnings of the companies in the
industry decline. It is better to avoid investing in the shares of the low growth industry

even in the boom period. Investment in the shares of these types of companies leads to
erosion of capital.
Growth of the industry: The historical performance of the industry in terms of growth and
profitability should be analyzed. The past variability in return and growth in reaction to macro
economic factors provide an insight into the future.
Nature of competition: Nature of competition is an essential factor that determines the demand
for the particular product, its profitability and the price of the concerned company scrips. The
companies' ability to withstand the local as well as the multinational competition counts much. If
too many firms are present in the organized sector, the competition would be severe. The
competition would lead to a decline in the price of the product. The investor before investing in
the scrip of a company should analyze the market share of the particular company's product and
should compare it with the top five companies.
SWOT analysis: SWOT analysis represents the strength, weakness, opportunity and threat for
an industry. Every investor should carry out a SWOT analysis for the chosen industry. Take for
instance, increase in demand for the industrys product becomes its strength, presence of
numerous players in the market, i.e. competition becomes the threat to a particular company. The
progress in R & D in that industry is an opportunity and entry of multinationals in the industry is
a threat. In this way the factors are to be arranged and analyzed.
3. COMPANY ANALYSIS
In the company analysis the investor assimilates the several bits of information related to the
company and evaluates the present and future values of the stock. The risk and return associated
with the purchase of the stock is analyzed to take better investment decisions. The present and
future values are affected by a number of factors.
Competitive edge of the company: Major industries in India are composed of hundreds of
individual companies. Though the number of companies is large, only few companies control the
major market share. The competitiveness of the company can be studied with the help of the
following;

Market share: The market share of the annual sales helps to determine a companys
relative competitive position within the industry. If the market share is high, the company
would be able to meet the competition successfully. The companies in the market should
be compared with like product groups otherwise, the results will be misleading.

Growth of sales: The rapid growth in sales would keep the shareholder in a better
position than one with stagnant growth rate. Investors generally prefer size and growth in
sales because the larger size companies may be able to withstand the business cycle
rather than the company of smaller size.

Stability of sales: If a firm has stable sales revenue, it will have more stable earnings. The
fall in the market share indicates the declining trend of company, even if the sales are
stable. Hence the stability of sales should be compared with its market share and the
competitors market share.

Earnings of the company: Sales alone do not increase the earnings but the costs and expenses
of the company also influence the earnings. Further, earnings do not always increase with
increase in sales. The companys sales might have increased but its earnings per share may
decline due to rise in costs. Hence, the investor should not only depend on the sales, but should
analyze the earnings of the company.
Financial analysis: The best source of financial information about a company is its own
financial statements. This is a primary source of information for evaluating the investment
prospects in the particular companys stock. Financial statement analysis is the study of a
companys financial statement from various viewpoints. The statement gives the historical and
current information about the companys operations. Historical financial statement helps to
predict the future and the current information aids to analyze the present status of the company.
The two main statements used in the analysis are Balance sheet and Profit and Loss Account.
The balance sheet is one of the financial statements that companies prepare every year for their
shareholders. It is like a financial snapshot, the company's financial situation at a moment in
time. It is prepared at the year end, listing the company's current assets and liabilities. It helps to
study the capital structure of the company. It is better for the investor to avoid a company with
excessive debt component in its capital structure. From the balance sheet, liquidity position of
the company can also be assessed with the information on current assets and current liabilities.
10

Ratio analysis: Ratio is a relationship between two figures expressed mathematically. Financial
ratios provide numerical relationship between two relevant financial data. Financial ratios are
calculated from the balance sheet and profit and loss account. The relationship can be either
expressed as a percent or as a quotient. Ratios summarize the data for easy understanding,
comparison and interpretations.
Ratios for investment purposes can be classified into profitability ratios, turnover ratios, and
leverage ratios. Profitability ratios are the most popular ratios since investors prefer to measure
the present profit performance and use this information to forecast the future strength of the
company. The most often used profitability ratios are return on assets, price earnings multiplier,
price to book value, price to cash flow, and price to sales, dividend yield, return on equity,
present value of cash flows, and profit margins.
a) Return on Assets (ROA)
ROA is computed as the product of the net profit margin and the total asset turnover ratios.
ROA = (Net Profit/Total income) x (Total income/Total Assets)
This ratio indicates the firm's strategic success. Companies can have one of two strategies: cost
leadership, or product differentiation. ROA should be rising or keeping pace with the company's
competitors if the company is successfully pursuing either of these strategies, but how ROA rises
will depend on the company's strategy. ROA should rise with a successful cost leadership
strategy because the companys increasing operating efficiency. An example is an increasing,
total asset, turnover ratio as the company expands into new markets, increasing its market share.
The company may achieve leadership by using its assets more efficiently. With a successful
product differentiation strategy, ROA will rise because of a rising profit margin.
b) Return on Investment (ROI)
ROI is the return on capital invested in business, i.e., if an investment Rs 1 crore in men,
machines, land and material is made to generate Rs. 25 lakhs of net profit, then the ROI is 25%.
The computation of return on investment is as follows:
Return on Investment (ROI) = (Net profit/Equity investments) x 100
11

As this ratio reveals how well the resources of a firm are being used, higher the ratio, better are
the results. The return on shareholders investment should be compared with the return of other
similar firms in the same industry. The inert-firm comparison of this ratio determines whether the
investments in the firm are attractive or not as the investors would like to invest only where the
return is higher.
c) Return on Equity
Return on equity measures how much an equity shareholder's investment is actually earning. The
return on equity tells the investor how much the invested rupee is earning from the company. The
higher the number, the better is the performance of the company and suggests the usefulness of
the projects the company has invested in.
The computation of return on equity is as follows:
Return on equity = (Net profit to owners/value of the specific owner's
Contribution to the business) x 100
The ratio is more meaningful to the equity shareholders who are invested to know profits earned
by the company and those profits which can be made available to pay dividend to them.
d) Earnings per Share (EPS) This ratio determines what the company is earning for every
share. For many investors, earnings are the most important tool. EPS is calculated by dividing
the earnings (net profit) by the total number of equity shares.
The computation of EPS is as follows:
Earnings per share = Net profit/Number of shares outstanding
The EPS is a good measure of profitability and when compared with EPS of similar other
companies, it gives a view of the comparative earnings or earnings power of a firm. EPS
calculated for a number of years indicates whether or not earning power of the company has
increased.
e) Dividend per Share (DPS)
12

The extent of payment of dividend to the shareholders is measured in the form of dividend per
share. The dividend per share gives the amount of cash flow from the company to the owners and
is calculated as follows:
Dividend per share = Total dividend payment / Number of shares outstanding
The payment of dividend can have several interpretations to the shareholder. The distribution of
dividend could be thought of as the distribution of excess profits/abnormal profits by the
company. On the other hand, it could also be negatively interpreted as lack of investment
opportunities. In all, dividend payout gives the extent of inflows to the shareholders from the
company.
f) Dividend Payout Ratio
From the profits of each company a cash flow called dividend is distributed among its
shareholders. This is the continuous stream of cash flow to the owners of shares, apart from the
price differentials (capital gains) in the market. The return to the shareholders, in the form of
dividend, out of the company's profit is measured through the payout ratio. The payout ratio is
computed as follows:

Payout Ratio = (Dividend per share / Earnings per share) * 100

The percentage of payout ratio can also be used to compute the percentage of retained earnings.
The profits available for distribution are either paid as dividends or retained internally for
business growth opportunities. Hence, when dividends are not declared, the entire profit is
ploughed back into the business for its future investments.
g) Dividend Yield
Dividend yield is computed by relating the dividend per share to the market price of the share.
The market place provides opportunities for the investor to buy the company's share at any point
of time. The price at which the share has been bought from the market is the actual cost of the
investment to the shareholder. The market price is to be taken as the cum-dividend price.
13

Dividend yield relates the actual cost to the cash flows received from the company. The
computation of dividend yield is as follows
Dividend yield = (Dividend per share / Market price per share) * 100
High dividend yield ratios are usually interpreted as undervalued companies in the market. The
market price is a measure of future discounted values, while the dividend per share is the present
return from the investment. Hence, a high dividend yield implies that the share has been under
priced in the market. On the other hand a low dividend yield need not be interpreted as
overvaluation of shares. A company that does not pay out dividends will not have a dividend
yield and the real measure of the market price will be in terms of earnings per share and not
through the dividend payments.
h) Price/Earnings Ratio (P/E)
The P/E multiplier or the price earnings ratio relates the current market price of the share to the
earnings per share. This is computed as follows:
Price/earnings ratio = Current market price / Earnings per share
This ratio is calculated to make an estimate of appreciation in the value of a share of a company
and is widely used by investors to decide whether or not to buy shares in a particular company.
Many investors prefer to buy the company's shares at a low P/E ratio since the general
interpretation is that the market is undervaluing the share and there will be a correction in the
market price sooner or later. A very high P/E ratio on the other hand implies that the company's
shares are overvalued and the investor can benefit by selling the shares at this high market price.
i) Debt-to-Equity Ratio
Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firms
assets.
Debt-to-equity ratio = Outsiders Funds / Shareholders Funds
The debt-equity ratio is calculated to measure the extent to which debt financing has been used in
a business. It indicates the proportionate claims of owners and the outsiders against the firms
14

assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the
firm.

RESEARCH GAP
The study is undertaken to understand Equity market and to find out the new opportunities to
attract the investors towards the Equities according to their risk preferences. Before investing
money in financial assets, investors should thoroughly know about the Economy, Industry, and
Company. Along with measuring companys financial performance investors should also need to
analyze the stocks price movements in secondary markets.
Investment environment encompasses the kind of marketable securities that exist and where
and how they are bought and sold. Investment process is concerned with how an investor should
proceed in making decisions about what marketable securities to invest in, how extensive the
investments should be and when investments should made.
Investment management once seemed a imply process. Well-heeled investors world have
portfolios composed of stocks and bonds of blue chip industrial companies, treasury bonds, notes
15

and bills. The choices available to less well-off investors were much more limited, confirmed
primarily to passbook savings accounts.

OBJECTIVES OF THE STUDY:

Investors demographics influence choice of investment.

To study the impact of investors risk preferences.

To find out the reasons for investing in equities.

To examine the various investment options which are available in the market?
16

To study and analyze the performance of the company, share price fluctuations and
comparing it with another company from same sector.

Hypothesis
Hypothesis 1
H0 : There is no significant impact of Equity while investor investing in a security,
H1: There is a significant impact of Equity while investor investing in a security,.
Hypothesis 2
H0: The risk and return of the Equity will not have major impact on the investors
H1: The risk and return of the Equity will have major impact on the investors
Hypothesis 3
H0: The sample Equity may not influence the whole industry,
17

H1: The sample Equity will influence the whole industry

Hypothesis 4
H0: The investment performance of Equity are not done by the hedging,
H1: The investment performance of Equity are done by the hedging
Hypothesis 5
H0: The risk and return of the Equity are not considered while investors making decisions on
their investment security,
H1: The risk and return of the Equity are considered while investors making decisions on their
investment

SCOPE OF THE STUDY

The study is conducted to understand the functioning of Equities in India Equity market.
The choice of location for the study is based on the responses given by the investors of
who are operating the stock market in twin cities.
This study will helpful in understanding the behavior and risk preferences of investors.
The study is limited to Equity with special reference in the Indian context and the
National Stock Exchange has been taken as a representative sample for the study.
The study can't be said as totally perfect. Any alteration may come.
The study has only made a humble attempt at evaluation Equity market only in India
context.
The study is not based on the international perspective of Equity markets.
18

PERIOD OF THE STUDY

The duration of the study is 45days

REASEARCH METHODOLOGY
Research methodology is a detailed study of the subject which uses a set of methods to perform
the research methodology is a framework of the methods and procedures carried on for acquiring
information needed. It is a blue print according to which research is conducted
The data is of two types:
1) PRIMARY DATA
2) SECONDARY DATA

PRIMARY DATA:
Primary data has been collected from the people of the organization which is also called first
hand data. The data collected from primary source includes project guides, approaching the
19

financial department heads, the self help groups, the branch manager and few employees of
the company
Officers of accounts sections.
Executives and staff of financial and accounts department.
Meeting with concerned people.
Personal observation.
Primary data that will be the sample size of a 50 investors only.

SECONDARY DATA:
The secondary data was collected from published and unpublished manuals, records,
broachers, files etc., of the organization. The secondary information was collected from the
company manuals and office records pertaining to production, financial position and welfare
Activities of the Company

CHAPTER II
20

INDUSTRY PROFILE
COMPANY PROFILE

INDUSTRY PROFILE
INDIAN FINANCIAL MARKET
Money always flows from surplus sector to deficit sector. That means persons having
excess of money lend it to those who need money to fulfil their requirement. Similarly, in
business sectors the surplus money flows from the investors or lenders to the businessmen for the
purpose of production or sale of goods and services. So, we find two different groups, one who
invest money or lend money and the others, who borrow or use the money.
The financial markets act as a link between these two different groups. It facilitates this
function by acting as an intermediary between the borrowers and lenders of money. So, financial
market may be defined as a transmission mechanism between investors (or lenders) and the
borrowers (or users) through which transfer of funds is facilitated. It consists of individual
investors, financial institutions and other intermediaries who are linked by a formal trading rules
and communication network for trading the various financial assets and credit instruments.
Financial market talks about the primary market, FDIs, alternative investment options,
banking and insurance and the pension sectors, asset management segment as well. India
21

Financial market happens to be one of the oldest across the globe and is the fastest growing and
best among all the financial markets of the emerging economies. The history of Indian capital
markets spans back 200 years, around the end of the 18th century. It was at this time that India
was under the rule of the East India Company. The capital market of India initially developed
around Mumbai; with around 200 to 250 securities brokers participating in active trade during
the second half of the 19th century.
Scope of Indian Financial Market
The financial market in India at present is more advanced than many other sectors as it
became organized as early as the 19th century with the securities exchanges in Mumbai,
Ahmedabad and Kolkata. In the early 1960s, the number of securities exchanges in India became
eight - including Mumbai, Ahmedabad and Kolkata. Apart from these three exchanges, there was
the Madras, Kanpur, Delhi, Bangalore and Pune exchanges as well. Today there are 23 regional
securities exchanges in India.
The Indian stock markets till date have remained stagnant due to the rigid economic
controls. It was only in 1991, after the liberalization process that the India securities market
witnessed a flurry of IPOs serially. The market saw many new companies spanning across
different industry segments and business began to flourish. The launch of the NSE (National
Stock Exchange) and the OTCEI (Over the Counter Exchange of India) in the mid 1990s helped
in regulating a smooth and transparent form of securities trading. The regulatory body for the
Indian capital markets was the SEBI (Securities and Exchange Board of India). The capital
markets in India experienced turbulence after which the SEBI came into prominence. The market
loopholes had to be bridged by taking drastic measures.
Potential of Indian Financial Market
India Financial Market helps in promoting the savings of the economy - helping to adopt
an effective channel to transmit various financial policies. The Indian financial sector is welldeveloped, competitive, efficient and integrated to face all shocks. In the India financial market
there are various types of financial products whose prices are determined by the numerous
buyers and sellers in the market. The other determinant factor of the prices of the financial

22

products is the market forces of demand and supply. The various other types of Indian markets
help in the functioning of the wide India financial sector.
Features of Indian Financial Market

India Financial Indices - BSE 30 Index, various sector indexes, stock quotes, Sensex charts, bond

prices, foreign exchange, Rupee & Dollar Chart

Indian Financial market news
Stock News - Bombay Stock Exchange, BSE Sensex 30 index, S&P CNX-Nifty, company

information, issues on market capitalization, corporate earnings statements

Fixed Income - Corporate Bond Prices, Corporate Debt details, Debt trading activities, Interest
Rates, Money Market, Government Securities, Public Sector Debt, External Debt Service

Foreign Investment - Foreign Debt Database composed by BIS, IMF, OECD,& World Bank,
Investments in India & Abroad

Global Equity Indexes - Dow Jones Global indexes, Morgan Stanley Equity Indexes

Currency Indexes - FX & Gold Chart Plotter, J. P. Morgan Currency Indexes

National and Global Market Relations

Mutual Funds

Insurance

Loans

Forex and Bullion

The main functions of financial market are:

It provides facilities for interaction between the investors and the borrowers.
It provides pricing information resulting from the interaction between buyers and sellers in the

market when they trade the financial assets.

It provides security to dealings in financial assets.
It ensures liquidity by providing a mechanism for an investor to sell the financial assets. It
ensures low cost of transactions and information.
23

Figure 3.1: Classification of financial markets

Source: Investment analysis and portfolio management
Author: Prasanna Chandra
Figure 3.1 shows the classification of financial markets. From this figure we can interpret that
there are different ways of classifying financial market.

One is to classify financial market by the type of financial claim. The debt market is the financial
market foe fixed claims (debt instrument) and the equity market is the financial market for

residual claims (equity instruments)

The second way is to classify financial markets by the maturity of claims. The market for short
term financial claims is referred to as the money market and the market for long term financial

claims is referred to as the capital market.

The third way to classify financial markets is based on whether the claims represent new issues
or outstanding issues. The market where issues sell new claims is referred as primary market and

the market where issues sell outstanding claims is referred as secondary market.
The fourth way to classify financial markets is by the timing of delivery. A cash or spot market is
one where the delivery occurs immediately and forward or futures markets are those markets

where the delivery occurs at a pre determined time in future.

The fifth way to classify financial markets is by the nature of its organizational structure. An
exchange traded market is characterized by a centralized organization with standardized
procedures and an over the counter market is a decentralized market with customized procedures.
These markets are further explained in detail.
MONEY MARKET
The money market is a market for short-term funds, which deals in financial assets whose
period of maturity is up to one year. It should be noted that money market does not deal in cash
or money as such but simply provides a market for credit instruments such as bills of exchange,
promissory notes, commercial paper, treasury bills, etc. These financial instruments are close
substitute of money. These instruments help the business units, other organizations and the
Government to borrow the funds to meet their short-term requirement.
Money market does not imply to any specific market place. Rather it refers to the whole
networks of financial institutions dealing in short-term funds, which provides an outlet to lenders
24

and a source of supply for such funds to borrowers. Most of the money market transactions are
taken place on telephone, fax or Internet. The Indian money market consists of Reserve Bank of
India, Commercial banks, Co-operative banks, and other specialized financial institutions. The
Reserve Bank of India is the leader of the money market in India. Some Non-Banking Financial
Companies (NBFCs) and financial institutions like LIC, GIC, UTI, etc. also operate in the Indian
money market.
CAPITAL MARKET
Capital Market may be defined as a market dealing in medium and long-term funds. It is
an institutional arrangement for borrowing medium and long-term funds and which provides
facilities for marketing and trading of securities. So it constitutes all long-term borrowings from
banks and financial institutions, borrowings from foreign markets and raising of capital by issue
various securities such as shares debentures, bonds, etc.
The market where securities are traded known as Securities market. It consists of two
different segments namely primary and secondary market. The primary market deals with new or
fresh issue of securities and is, therefore, also known as new issue market; whereas the
secondary market provides a place for purchase and sale of existing securities and is often
termed as stock market or stock exchange.
PRIMARY MARKET
The Primary Market consists of arrangements, which facilitate the procurement of longterm funds by companies by making fresh issue of shares and debentures. You know that
companies make fresh issue of shares and/or debentures at their formation stage and, if
necessary, subsequently for the expansion of business. It is usually done through private
placement to friends, relatives and financial institutions or by making public issue. In any case,
the companies have to follow a well-established legal procedure and involve a number of
intermediaries such as underwriters, brokers, etc. who form an integral part of the primary
market. You must have learnt about many initial public offers (IPOs) made recently by a number
of public sector undertakings such as ONGC, GAIL, NTPC and the private sector companies like
Tata Consultancy Services (TCS), Biocon, Jet-Airways and so on.

25

SECONDARY MARKET
The secondary market known as stock market or stock exchange plays an equally
important role in mobilizing long-term funds by providing the necessary liquidity to holdings in
shares and debentures. It provides a place where these securities can be encashed without any
difficulty and delay. It is an organized market where shares and debentures are traded regularly
with high degree of transparency and security. In fact, an active secondary market facilitates the
growth of primary market as the investors in the primary market are assured of a continuous
market for liquidity of their holdings. The major players in the primary market are merchant
bankers, mutual funds, financial institutions, and the individual investors; and in the secondary
market you have all these and the stockbrokers who are members of the stock exchange who
facilitate the trading.
After having a brief idea about the primary market and secondary market let see the difference
between them.
DISTINCTION BETWEEN PRIMARY MARKET AND SECONDARY MARKET
The main points of distinction between the primary market and secondary market are as
follows:
1. Function: While the main function of primary market is to raise long-term funds through
fresh issue of securities, the main function of secondary market is to provide continuous and
ready market for the existing long-term securities.
2. Participants: While the major players in the primary market are financial institutions, mutual
funds, underwriters and individual investors, the major players in secondary market are all of
these and the stockbrokers who are members of the stock exchange.
3. Listing Requirement: While only those securities can be dealt with in the secondary market,
which have been approved for the purpose (listed), there is no such requirement in case of
primary market.
4. Determination of prices: In case of primary market, the prices are determined by the
management with due compliance with SEBI requirement for new issue of securities. But in case
of secondary market, the price of the securities is determined by forces of demand and supply of
the market and keeps on fluctuating.

26

DISTINCTION BETWEEN CAPITAL MARKET AND MONEY MARKET

Capital Market differs from money market in many ways.

While money market is related to short-term funds, the capital market related to long term funds.
While money market deals in securities like treasury bills, commercial paper, trade bills, deposit

certificates, etc., the capital market deals in shares, debentures, bonds and government securities.
While the participants in money market are Reserve Bank of India, commercial banks, nonbanking financial companies, etc., the participants in capital market are stockbrokers,

underwriters, mutual funds, financial institutions, and individual investors.

While the money market is regulated by Reserve Bank of India, the capital market is regulated
by Securities Exchange Board of India (SEBI).
STOCK EXCHANGE
As indicated above, stock exchange is the term commonly used for a secondary market,
which provide a place where different types of existing securities such as shares, debentures and
bonds, government securities can be bought and sold on a regular basis. A stock exchange is
generally organised as an association, a society or a company with a limited number of members.
It is open only to these members who act as brokers for the buyers and sellers. The Securities
Contract (Regulation) Act has defined stock exchange as an association, organisation or body
of individuals, whether incorporated or not, established for the purpose of assisting, regulating
and controlling business of buying, selling and dealing in securities.
The main characteristics of a stock exchange are:

It is an organized market.
It provides a place where existing and approved securities can be bought and sold easily.
In a stock exchange, transactions take place between its members or their authorized agents.
All transactions are regulated by rules and by laws of the concerned stock exchange.
It makes complete information available to public in regard to prices and volume of transactions

taking place every day.

It may be noted that all securities are not permitted to be traded on a recognised stock exchange.
It is allowed only in those securities (called listed securities) that have been duly approved for
the purpose by the stock exchange authorities. The method of trading nowadays is quite simple
on account of the availability of on-line trading facility with the help of computers.

27

It is also quite fast as it takes just a few minutes to strike a deal through the brokers who may be
available close by. Similarly, on account of the system of scrip-less trading and rolling
settlement, the delivery of securities and the payment of amount involved also take very little
time, say, 2 days.
FUNCTIONS OF A STOCK EXCHANGE
The functions of stock exchange can be enumerated as follows:

Provides ready and continuous market: By providing a place where listed securities can be
bought and sold regularly and conveniently, a stock exchange ensures a ready and continuous
market for various shares, debentures, bonds and government securities. This lends a high degree
of liquidity to holdings in these securities as the investor can encash their holdings as and when

they want.
Provides information about prices and sales: A stock exchange maintains complete record of
all transactions taking place in different securities every day and supplies regular information on
their prices and sales volumes to press and other media. In fact, now-a-days, you can get
information about minute to minute movement in prices of selected shares on TV channels like
CNBC, Zee News, NDTV and Headlines Today. This enables the investors in taking quick
decisions on purchase and sale of securities in which they are interested. Not only that, such
information helps them in ascertaining the trend in prices and the worth of their holdings. This

enables them to seek bank loans, if required.

Provides safety to dealings and investment: Transactions on the stock exchange are conducted
only amongst its members with adequate transparency and in strict conformity to its rules and
regulations which include the procedure and timings of delivery and payment to be followed.
This provides a high degree of safety to dealings at the stock exchange. There is little risk of loss

on account of non-payment or no delivery.

Barometer of economic and business conditions: Stock exchanges reflect the changing
conditions of economic health of a country, as the shares prices are highly sensitive to changing
economic, social and political conditions. It is observed that during the periods of economic
prosperity, the share prices tend to rise. Conversely, prices tend to fall when there is economic
stagnation and the business activities slow down as a result of depressions. Thus, the intensity of
trading at stock exchanges and the corresponding rise on fall in the prices of securities reflects
28

the investors assessment of the economic and business conditions in a country, and acts as the

barometer which indicates the general conditions of the atmosphere of business.

Better Allocation of funds: As a result of stock market transactions, funds flow from the less
profitable to more profitable enterprises and they avail of the greater potential for growth.
Financial resources of the economy are thus better allocated.
ADVANTAGES OF STOCK EXCHANGES
Having discussed the functions of stock exchanges, let us look at the advantages which can be
outlined from the point of view of (a) Companies, (b) Investors, and (c) the Society as a whole.
a) To the Companies

The companies whose securities have been listed on a stock exchange enjoy a better goodwill

and credit-standing than other companies because they are supposed to be financially sound.
The market for their securities is enlarged as the investors all over the world become aware of

such securities and have an opportunity to invest

As a result of enhanced goodwill and higher demand, the value of their securities increases and

their bargaining power in collective ventures, mergers, etc. is enhanced.

The companies have the convenience to decide upon the size, price and timing of the issue.
(b) To the Investors:

The investors enjoy the ready availability of facility and convenience of buying and selling the

securities at will and at an opportune time.

Because of the assured safety in dealings at the stock exchange the investors are free from any

anxiety about the delivery and payment problems.

Availability of regular information on prices of securities traded at the stock exchanges helps

them in deciding on the timing of their purchase and sale.

It becomes easier for them to raise loans from banks against their holdings in securities traded at
the stock exchange because banks prefer them as collateral on account of their liquidity and
convenient valuation.
(c) To the Society

The availability of lucrative avenues of investment and the liquidity thereof induces people to

save and invest in long-term securities. This leads to increased capital formation in the country.
The facility for convenient purchase and sale of securities at the stock exchange provides support
to new issue market. This helps in promotion and expansion of industrial activity, which in turn
contributes, to increase in the rate of industrial growth.
29

The Stock exchanges facilitate realisation of financial resources to more profitable and growing
industrial units where investors can easily increase their investment substantially.
Company Profile
INDIABULLS
the trade execution facilities for cash as well as derivatives, on BSE and NSE, depository
services, commodities trading on the MCX(Multi Commodity Exchange of India Ltd) and
NCDEX (National Commodity and Derivative Exc INDIABULLS, Indias leading stock
broker is the retail arm of SSKI, an organization with over eighty years of experience in the
stock market with more than 280 share shops in 120 cities and big towns, and premier online
trading destination www.INDIABULLScom. INDIABULLS offers
the trade execution facilities for cash as well as derivatives, on BSE and NSE, depository
services, commodities trading on the MCX(Multi Commodity Exchange of India Ltd) and
NCDEX (National hange) and most importantly, investment advice tempered by eighty years
of broking experience.
INDIABULLS provides the facility to trade in commodities through INDIABULLS
Commodities Pvt.Ltd-a wholly owned subsidiary of its parent SSKI. INDIABULLS is the
member of two major commodity exchanges MCX and NCDEX.
SSKI
Apart from INDIABULLS, the SSKI group also comprises of institutional broking and
corporate finance. The institutional broking division caters to domestic and foreign
institutional investors, while the corporate finance division focuses on niche areas such as
infrastructure, telecom and media. SSKI owns 56% in INDIABULLS and the balance
ownership is HSBC, First Caryl and Intel Pacific. SSKI has been voted as the top domestic
brokerage house in the research category, twice by Euromoney survey and four times by Asia
money survey.
COMPANY PROFILE

30

India Bulls Financial Services is one of Indias leading and fastest growing financial services
firms. It is a major player in the capital markets dealing with securities broking, margin
lending, depository services, equity research services, and commodities trading. It also
provides credit services like loan against shares, mortgage and consumer finance. It is
constantly tapping new business areas to drive growth.
India Bulls Financial Services Ltd. (IBFSL) established one of the first in-house developed
trading platforms in India. It expanded its service offerings to include Equity, F&O, wholesale
Debt, Mutual fund, IPO distribution and Equity Research. It ventured into Insurance distribution
and commodities trading. It has always focused on brand building and the franchise model for
expanding its business. It came out with its Initial Public Offer (IPO) in September 2004 and it
gradually emerged as a market leader in securities brokerage industry with 43% of online share
trading. In the financial year 2006-07 it was included in the prestigious Morgan Stanley Capital
International Index (MSCI).
India Bulls Financial Services Ltd has given us an opportunity to do an internship project for the
company. The goals of this project have been clearly defined. The various goals are as follows

nt acquisition

Revenue generation

Mapping the Risk Profile of Clients

Coordination with the back office

Client servicing and Retention

Understanding the Media Sector

Studying the patterns of the derivatives market

Change is occurring at an accelerating rate; today is not like yesterday, and tomorrow will be
different from today. For Businesses, change is the only constant. Firms that do not change and
adjust themselves to the market trends will go out of business in no time. Continuing todays
strategy is risky; so is turning to a new strategy. Therefore, tomorrows successful companies
will have to heed three certainties:

31

Global forces will continue to affect everyones business and personal life.

Technology will continue to advance and amaze us.

There will be a continuing push toward deregulation of the economic sector.

These three developmentsglobalization, technological advances, and deregulation spell

endless opportunities. Globalization is characterized by the increases in the flow of goods and
services, capital, technology and information, as well as the mobility of individuals across
borders. In simple terms it is the integration of one country with the rest of the world in all
economic spheres. The process of globalization can be seen in terms of trade in goods and
services, trade in finance and Foreign Direct Investment. Since 1990, Indias financial system has
become more exposed to the global bonding of the financial, IT and telecommunications
industries whose linkages keep widening, deepening and growing. Indias fitful, ambivalent
attempts at privatization and opening to private participation in the provision of infrastructure
services have also contributed to reciprocal intrusions with the global financial system impinging
on Indias capital markets and vice-versa. The dotcom and telecom bubbles have burst, but the
financial connections they created have remained intact. One outcome has been the creeping but
relentless internationalization of Indias financial system, regardless of domestic popular or
political preferences. The choice of a sheltered domestically protected alternative to a globally
connected financial system no longer exists.
India emerges from autarchic isolation into unwitting global prominence, its key systems
political, economic, social, financial, institutional and markets consumer, producer, commodity,
factor and financial are being exposed to the hot influences of globalization some subtle, others
quite
rampantly in-your-face. Being perhaps the most tactile, open and nonphysical, Indias financial
system and market have felt the earliest and greatest pressure to accommodate and adapt to
globalization more quickly than other systems and markets.
INTRODUCTION TO ONLINE TRADING
Project Analysis
32

OUTCRY SYSTEM
The broker has to buy or sell securities for which he has received the orders. For this, the
broker or his authorized representatives goes to the stock exchange. This method is called the
open outcry system. Basically the brokers shout while buying or selling the securities. The floor
of the stock exchange is divided into a number of markets also known as post pit or wing based
on particular securities dealt there.
In the post pit or wing, the broker using open outcry method makes an offer or bid price.
For making the necessary bargain, he quotes his purchase or sale price, also known as offer or
bid price. The dealer, to whom the price is quoted, quotes his own price when the quotation of
the dealer suits the broker, he may loose the bargain. If he is not satisfied with the quote price, he
may turn to some other dealer. On the close of the bargain, the dealer as well as the broker makes
a brief note of the particulars of the deal. Such notes are made on some pad and on it the number
of shares, the price agreed upon, the name of the party, what membership number etc., are noted.
DISADVANTAGES OF OUTCRY SYSTEM

It lacks transparency.

The scope of manipulation, speculation and mal practice is more.

Signal were more important in the outcry system any member who could not interpret the
buy/sell signal correctly often landed himself in disaster situation.

In audibility was another disadvantage of the outcry system.

Due to the above disadvantages of the outcry system the INDIABULLS has shifted from
outcry system to online trading from February 29th 1997.

MANUAL TRADING
Trading procedure before introduction of online trading
Trading on stock exchanges is officially done in the trading ring. In the trading ring the
space is provided for specified and non-specified sections, the members and their authorized
assistants have to wear a badge or carry with them an identity card given by the exchange to
enter the trading ring. They carry a sauda book or confirmation memos, duly authorized by the
33

exchange and carry a pen with them. The stock exchanges operations are floor level are technical
in nature .Non-members are not permitted to enter in to stock market. Hence various stages have
to be completed in executing a transaction at a stock exchange .The steps involved in this method
of trading have given below:
Choice of broker:
The prospective investor who wants to buy shares or the investors, who wants to sell
shares and transact business, have to act through member brokers only. They can also appoint
their bankers for this purpose as per the present regulations.
Placement of order
The next step is the placing order for the purchase or sale of securities with a broker. The
order is usually placed by telegram, telephone, letter, fax etc or in person. To avoid delay, it is
placed generally over the phone. The orders may take any one of the forms such as At Best
Orders, Limit Order, Immediate or Cancel Order, Limited Discretionary Order, and Open Order,
Stop Loss Order.
Execution of order or contract
Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30 P.M on
all working days Monday to Friday, and a special one-hour session on Saturday. The members or
the authorized assistants have to wear a badge given by the exchange to enter into the trading
ring. They carry a sauda Block Book or conformation memos, which are duly authorized by the
exchange when the deal is struck; both broker and jobber make a note in their sauda block books.
From the sauda book, the contract notes are drawn up and posted to the client. A contract note is
written agreement between the broker and his clients for the transaction executed.
Drawing Up and Bills:
Both sale and purchase bills are prepared along with the contract note and it is posted on
the same day or the next day. This in a purchase transaction, once the shares are delivered to the
client effects payment for the purchases and pays the stamp fees for transfer, a bill is made out

34

giving the total cost of purchase, including other expenses incurred by the broker in the price
itself. With this, the process ends.
DEMATERLIZATION
Dematerialization is the process by which physical certificates of an investor are
converted to an equipment number of securities in electronic from and credited in the investor
account with his DP. In order to dematerialize the certificates, an investor has to first open an
account with a DP and then request for the Dematerialization Request Form, which is DP and
submit the same along with the share certificates. The investor has to ensure that he marks
Submitted for Dematerialization on the certificates before the shares are handed over to the DP
for demat. Dematerialization can only be done to those certificates, which are already registered
in your name and belong to the list of securities admitted for Dematerialization at NSDL.
Most of the active scrips in the market including all the scrips of S&P CNX NIFTY and
BSE SENSEX have already joined NSDL. This list is steadily increasing.
Briefly, the process is as follows: after completion of transfer, the investor gets the option
to dematerialize such shares. Investors willing to exercise this option sends a Demat request
along with the option letter sent by the company to his DP. The company or its R&T agent would
confirm the Demat request on its receipt from the DP to reduce risk of loss in transit.
Dematerialized shares do not have any distinctive or certificate numbers. These shares are
fungible-which means that 100 shares of a security are the same as any other 100 shares of the
security. Odd lot shares certificates can also be dematerialized.
Dematerialization normally takes about fifteen to thirty days. To get back dematerialized
securities in the physical form, request DP for Rematerialization of the same is made.
dematerialization is the process of converting electronic shares in to physical shares.
Benefits of Demate

It reduces the risk of bad deliveries, in turn saving the cost and wastage of time
associated with follow up for rectification. This has lead to reduction in brokerage to
the extent of 0.5% by quite a few brokerage firms.
35

In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid the
cost of courier / notarization.

You can receive your bonuses and rights issues into your DA as a direct credit, this
eliminating risk of loss in transit.

You can also expect a lower interest charge for loans taken against Demat shares as
compared to loans against physical shares.

There is no lost in transit, thus the overheads of getting a duplicate copy in such
circumstances is reduced.

RBI has also reduced the minimum margin to 25% for loans against dematerialized
securities as against 50% for loans against physical securities.

ONLINE TRADING
Before getting in to the online trading we should know some things about the internet, ecommerce and etc.
Internet
Internet is a worldwide, self-governed network connecting several other smaller networks
and millions of computers and persons, to mega sources of information. This technology shrinks
vast distances, accelerating the pace of business reforms and revolutionizing the way companies
are managed. It allows direct, ubiquitous links to anyone anywhere and anytime to build up
interactive relationships.
A combination of time and space, called the Internet promises to bring unprecedented
changes in our lives and business. Internet or net is an inter-connection of computer
communication networks spanning the entire globe, crossing all geographical boundaries. It has
re-defined the methods of communication, work study, education, business, leisure, health, trade,
banking, commerce and what not it is virtually changing every thing and we are living in
dot.com age. Net being an interactive two way medium, through various websites, enables
participation by individuals in business to business and business to consumer commerce, visit to
shopping arcades, games, etc. in cyber space even the information can be copied, downloaded
and retransmitted.
36

The use of Internet has grown 2000 percent in last decade and is currently growing at 10
percent per month. In India, growth of Internet is of recent times. It is expected to bring changes
in every functional area of business activity including management and financial services. It
offers stock trading at a lower cost. Internet can change the nature and capacity of stock broking
business in India.
E-commerce
Electronic commerce is associated with buying and selling over computer communication
networks. It helps conduct traditional commerce through new way of transferring and processing
of information. Information is electronically transferred from computer to computer in an
automated way. E-commerce refers to the paperless exchange of business information using
electronic data inter change, electronic technologies. It not only reduces manual processes and
paper transactions but also helps organization move to a fully electronic environment and change
the way they operated.
PCs and networking attempts to introduce banks of the tools and technologies required
for electronic commerce. The computers are either workstations of individual office works or
serves where large databases and information reside. Network connects both categories of
computers; the various operating systems are the most basis program within a computer. It
manages the resources of the computer system in a fair and efficient manner. we can enter in to
the concept known as online trading.
BENFITS IN THE TRADING SYSTEM
1.Trading Members: they are member of NSE. They can trade either on their own account or
on behalf of their clients including participants. The exchange assigns a trading members ID to
each trading member who can have more than one use. But the maximum number of users
allowed for each trading member is notified by the exchange from time to time.
2.Clearing members: They are members of NSCCL and carry out risk management activities
and confirmation\ inquiry of trades through the trading system.
3.Participants: They are clients of trading members like the financial institutions. These clients
may trade through multiple trading members but settle through a single clearing member.
37

Corporate Hierarchy:
In F & I trading software, a trading member has the facility of defining a hierarchy amongst
users of the system.
1) Corporate Manager: The term is assigned to a user placed at the highest level in a trading
firm. Such a user can perform at the functions such as order and trade related activities,
receiving report for all branches of the trading member firm and also dealers of the firm. He
can only define exposure limits for the branches of the firm.
2) Branch Manager: The term is assigned to a user who is placed under the corporate manager.
He can perform and view order and trade related activities for all dealers under that branch.
EVOLUTION OF BROKING IN INDIA:
The evolution of a broking in India can be categorized in three phases

Stockbrokers will offer on their sites features such as live portfolio manager, live
quotes, market research and news, etc. to attract more investors.

Brokers will offer online broking and relationship management by providing and
offering analysis and information to investors during broking and non-broking hours
based on their profile and needs, i.e. customized services.

Brokers (now e-brokers) will offer value management or services like initial public
offering online, on-line asset allocation, portfolio management, financial personally
or telephonically).

In India:
Internet trading started in India on 1st April 2000 with 79 members seeking permission for
online trading. The SEBI committees on internet based securities trading services has allowed
the net to be used as an Order Routing System (ORS) through registered stock brokers on behalf
of their clients for execution of transaction. Under the ORS the client enters his requirements
(security, quantity, price buy/sell) on brokers site.
Objectives:
38

Internet trading is expected to

Increase transparency in the markets,

Enhance market quality through improved liquidity, by increasing quote continuity

and market depth,

Reduce settlement risks due to open trades, by elimination of mismatches,

Provide management information system,

Introduce flexibility in system, so as to handle growing volumes easily and to support

nationwide expansion of market activity.

Besides, through internet trading three fundamental objectives of securities

regulation

can be easily achieved, these are:

Investor protection

Creation of a fair and efficient market, and

Reduction of the systematic risks.

Some of the brokers offering net trading include ICICI direct, kotakstreet, etc.
Requirements for net trading
For investors
1. Installation of a computer with required specification
2. Installation of a modem
3. Telephone connection
4. Registration for on-line trading with broker
5. A bank account
6. Depository account
7. Compliance with SEBI guidelines for net trading
The following should be produced to get a demat account and online trading account
39

As identity proof & address proof any one of the following:

Voter ID card

Driving license

PAN card( in case of to trade more than 50000)

Ration card

Bank pass book

Telephone bill

ther requirements, which are necessary

First page of the bank pass book and last 6 months statement.

Bank managers signature along with banks seal, manager registration code on
photograph.

For stock brokers

1. Permission from stock exchange for net trading
2. Net worth of Rs. 50 lac
3. Adequate back-up system
4. Secured and reliable software system
5. Adequate, experienced and trained staff
6. Communication of order (trade confirmation to investor by e-mail)
7. Use of authentication technologies
8. Issue of contract notes within 24 hours of the trade execution
9. Setting up a website.
The net is used as a medium of trading in internet trading. Orders are communicated to
the stock exchange through website. Internet trading started in India on 1st April 2000 with 79
members seeking permission for online trading. The SEBI committees on internet based
40

securities trading services has allowed the net to be used as an Order Routing System (ORS)
through registered stock brokers on behalf of their clients for execution of transaction.
Under the Order Routing System the client enters his requirements (security, quantity,
price, and buy/sell) in broker's site. They are checked electronically against the clients account
and routed electronically to the appropriate exchange for execution by the broker. The client
receives a confirmation on execution of the order. The customer's portfolio and ledger accounts
get updated to reflect the transaction. The user should have the user id and password to enter into
the electronic ring. He should also have demat account and bank account. The system permits
only a registered client to log in using user id and password. Order can be
Procedure for net trading
Step 1: Those investors, who are interested in doing the trading over internet system i.e.
NEAT-IXS, should approach the brokers and get them self registered with the Stock Broker.
Step 2: After registration, the broker will provide to them a Login name, Password and
personal identification number (PIN).
Step 3: Actual placement of an order. An order can then be placed by using the place order
window as under:
(a) First by entering the symbol and series of stock and other parameters like quantity and
price of the scrip on the place order window.
(b) Second, fill in the symbol, series and the default quantity.
Step 4: It is the process of review. Thus, the investor has to review the order placed by
clicking the review option. He may also re-set to clear the values.
Step 5: After the review has been satisfactory, the order has to be sent by clicking on the
send option.
Step 6: The investor will receive an "Order Confirmation" message along with the order
number and the value of the order.
Step 7: In case the order is rejected by the Broker or the Stock Exchange for certain reasons
41

such as invalid price limit, an appropriate message will appear at the bottom of the screen. At
present, a time lag of about 10 seconds is there in executing the trade.
Step 8: It is regarding charging payment, for which there are different mode. Some brokers
will take some advance payment from the investor and will fix their trading limits. When the
trade is executed, the broker will ask the investor for transfer of funds to his account.
Internet trading provides total transparency between a broker and an investor in the
secondary market. In the open outcry system, only the broker knew the actually transacted
price. Screen based trading provides more transparency. With online trading investors can see
themselves the price at which the deal takes place.
The time gap has narrowed in every stage of operation. Confirmation and execution of trade
reaches the investor within the least possible time, mostly within 30 seconds. Instant
feedback is available about the execution. Some of the websites also offer;

News and research report

BSE and NSE movements

Stock analysis

IPO and mutual fund centers

Step by step procedure in online trading:

Following steps explain the step by step approach to on-line trading:

Log on to the stock broker's website

Register as client/investor

Fill the application form and client broker agreement form on the requisite value stamp
paper

Obtain user ID and pass word

Log on to the broker's site using secure user ID and password

Market watch page will show real time on-line market data

Trade shares directly by entering the symbol or number of the security

42

Brokers server will check your limit in the on-line account and demat account for the
number of shares and execute the trade

Order is executed instantly (10-30 seconds) and confirmation can be obtained.

Confirmation is e-mailed to investor by broker

Contract note is printed and mailed in 24 hours

Settlement will take place automatically on the settlement day

Demat account and the bank account will get debited and credited by electronic means.

ONLINE TRADING HAS LED TO ADDITIONAL FEATURES SUCH AS

Limit / stop orders: orders that can be go unfilled, but there is an extra Charge for this
leeway facility since one need to hold a price.

Market orders: orders can be filled at unexpected prices, but this type is much more
risky, since you have to buy stock at the given price.

Cash account: where funds have to be available prior to placing the order.

Margin account: where orders can be placed against stocks, to increase Purchasing power.

ADVANTAGES OF ONLINE TRADING

Online trading has made it possible for anyone to have easy and efficient access to more
reports and charts than it was previously possible if one went to any brokers' office. Thus
we have access to a lot more information online.

Online trading has let room for smaller organizations to compete with multinational
organizations since it is no longer a leg it issue. Being online does not identify the size of
any particular organization, therefore, this additional power to the underdogs.

Online trading has allowed companies to locate themselves where they want as physical
location is not an issue anymore. Companies can establish themselves according to their
gains and losses, for instance where tax (sales and value added taxes) is best suited to
them.

Online trading gives control to individuals and they can exercise it over accounts thus
comprehend what is going on when they trade. It is like going back to school and reeducating oneself on how to trade online.
43

Individuals benefit by saving comparatively a lot more when trading online as the cost
per trade is less.

Individuals can invest in a variety of products, unlike earlier when people bought bonds,
mutual funds, and stock for long-term basis and sat on them. Now they can invest in
stocks, stock and index options mutual funds,

government, and even insurance.

INVESTORS REASONS TO TRADE ONLINE

They have control over their accounts, can make their own decisions and dont have to
give reasons for their actions. They are independent.

They have a reason to participate in the market and learn about it.

It is interesting, cheap, easy, fast, and convenient.

A lot of information is online so they can keep up-to-date with what is happening in the
trading world.

It will give investors a greater choice and better realization.

The immediate impact will be competition and benefits will accrue to the investors.

It will lead to brokerage commissions going down and brokers striving to increase
business afloat.

Investors will now go to place, which have better trading conditions and also members to
offer them better facilities.

They have access to numerous tools to invest, and can create their own portfolio.

HERE ARE THE POSSIBLE DISADVANTAGES

When network crashes, there will be problems and delays due to a large influx of rapid
online trading criteria.

Individuals are restricted to first-hand financial guidance. This simply means that the
individual is himself / herself alone to.

A tax (sales tax and value added tax) evaluation becomes an issue, especially when you
are trading internationally.
44

One has no idea with whom he is dealing with on the other end.

According to a study conducted by Mary Rowland, careful investor: is online trading bad
for your portfolio, the more one trades the less returns one gets, meaning that an addicted
trader gets, carried away online and begins to trade for too much which causes losses for
him / her.

SETTLEMENT AT INDIABULLS
The NSE first introduced online trading in India. The Online trading system imparted a
greater level of transparency and investors preferred exchanges that offered Online trading
because of the following factors:

The ease of operation from the view of the both members and the investors.

Increase in the confidence of the investors because of higher level of transparency.

Facilities better monitoring of the market by the exchange.

The best price achieved in buying and selling.

All these resulted in ever-increasing volumes on the exchanges offering the online trading.
TRADING PROCEDURE AT INDIABULLS STOCK BROCKING
IndiaBulls deals in buying and selling equity shares and debentures on the National Stock
Exchange (NSE), the Bombay Stock Exchange (BSE) and the Over-The-Counter Exchange of
India (OTCEI). India Bulls is provided with a computer and required software from their
registered stock exchanges. These centers are called Broker Work Stations. These computers
are connected to the server at the stock exchanges through cable.
The member or broker sitting in his office can send the quotations, orders, negotiations,
deals, in-house deals, auction orders etc., through the computer. The Central trading system
(CTS) will accept these orders and send it for match. If there is any mistake in the order, CTS
will reject the orders and send respective error message to the member concern. All these
operations are in built. The main objective of CTS is to monitor the Stock Exchanges operations.
45

Trading timings are from 9:00 A.Mto 3:30 P.M. on all 5 days of the trading period.
Monday to Friday is the trading period in all the stock exchanges. SEBI has stipulated that all the
stock exchanges in India must have same trading period.
BROKER WORK STATION
At the broker workstation the BBOs, the last traded price, the days opening price,
previous days closing price, highest and lowest prices, the weighted average price and total trade
value will be available continuously, as the BBO for each scrip.
Other information will be available on query from the BWS. These include top gainers
/losers of the day. Trader-wise, scrip wise net position, client wise net position, top scrip by the
volume/value, market summary etc.
Brokers are also provided with information relating to the companies in the matter of Book
closure, Dividend declarations, resolutions in board meeting, information about liquidated
companies, company report etc.
ORDERS
Orders can be done one at a time or in a batch mode.
The submitted order will be accepted at the CTS, after validation if it finds any invalid
reason the order is return back to the BWS, with the appropriate error message. If
Accepted at the CTS it will be added to the local pending order book.
The order will then be taken up for matching, if it is a buy order the system tries to find a
sell order, which fits the requirement of the buy order, when such match is found a trade gets
executed. Each trade involves two brokers and respective traders who sent the order. Both these
traders are informed of the trade being executed at their respective BWS.
At the BWS the trade is added to the local trade book.
Orders sent by the brokers are two types:

Good for the day (GFD)

46

Good till cancellation(GTC)

Good for the day

This is also called as market order. For an order if the member selects the deal as good
for the day, the order is treated as market order. If a best bid founds match with best order
then the transaction gets executed. If the match is not found then after trade time the order gets
cancelled that day. Next day he has to place a new order.
For example if a member wants to purchase 1000 shares of satyam info @ 400 each
through Good for Day order. If the correct match is not found, order gets cancelled automatically
and new quotation has to be placed the next day.
Good till cancellation
This order is forwarded to the last trading day of that settlement period. This is also called
as carry forward order like GFD; broker has to select the option of GTC for the order. If the order
finds match with in the trading settlement period, the order is executed. If no match is found, the
order is cancelled on the last day of settlement period. This order is not carried forward to the
next settlement period.
For example, if a member a place purchase order of 500 shares of SBI @ 690 per share
and selects the order as GTC and place an order. If the match is not found on that day it will be
forwarded to the next day until trading settlement period day.
SETTLEMENT OF TRANSACTIONS
Clearing of transaction in the form of shares and cash is called settlement. Buyers will
take the delivery of shares through the depository participants like INDIABULLS and others.
Finally, the settlement is made by means of delivering the share certificates along with the
transfer deeds. The transferor (or the seller) duly signed transfer deed. It bears a stamp of the
selling broker. The buyer then fills up the certificates fills up the particulars in the transfer deed.
Settlement can be done in the following way.

47

Spot settlement: under this method, the delivery of securities and payment for them are affected
on the day of the contract itself.
Rolling settlement: Under this rolling settlement the trading is on T+2,basis i.e. if Monday is
trading day then Wednesday is the paying day . In case on non-delivery, the securities will go for
auction.
DETAILS OF PROCEDURES:
Delivery in : The members who are in pay-out position delivers share certificates in to clearing
house within the settlement period along with the delivery Chelan filled in with the details of
share certificates which has folio numbers or distinctive numbers etc.
Delivery out: The buyer of shares who made pay in position will take delivery of shares from
the clearing house.
Pay-in: The member who is in paying position shall pay for value of shares with in the trading
settlement period (T+2).
Payout: The cheques paid in the clearinghouse will be paid to members who are in paying
position.
All disputes arising between members regarding non-deliveries, non-payments, good and bad
deliveries pertaining to the settlement will be settled by the settlement committee of the
exchange.
The given flow chart clearly explains the process of online trading:

48

L o g in

S e ll t r a n s c a t io n

B u y t r a n s c a t io n

T h e s y s te m w ill c h e c k y o u r
d p ac c o u n t q u an tity

T h e s y s te m w ill c h e c k b u y in g
lim its

O rd e rs ac c e p te d

R e je c t e d o r d e r s w o u ld b e
c o m m u n ic a t e d a lo n g w it h r e a s o n s

o rd e rs ac c e p te d

y o u r o r d e r is t r a n s m it t e d t o e x c h a n g e f o r e x e c u t io n

p e n d in g b u y o r d e r s
w o u ld b e d is p la y e d
o n y o u r s c reen

y o u m a y e d it y o u r
p e n d in g o r d e r

o n e x e c u t io n
o f y o u r o rd e rs

y o u m a y e d it y o u r
p e n d in g o r d e r

y o u m a y d e le t e
y o u r p e n d in g o r d e r

f la s h e d o n y o u r
s c r e e n im m e d ia t e ly
o n e x e c u t io n

c o n f o r m a t io n c o u l
d b e s e n d to y o u r
e - m a il a n d m o b ile

49

p e n d in g s e ll o r d e r s
w o u ld b e d is p la y e d
o n y o u r s c reen

y o u m a y d e le t e y o u r
p e n d in g o r d e r

c o n t r a c t n o t e w o u ld
b e s e n t t o b y m a il
o r h a n d d e liv e r y

CHAPTER III
DATA ANALYSIS
&
INTERPRETATION

DATA ANALYSIS
1. What is your age?
TABLE 1: It shows the age group of respondents and percentage of each group
50

Type of respondents(in years)

No. of respondents

Percentage (%)

Below 25

14

25-35

27

54

35-50

11

22

50 and above

10

DATA ANALYSIS: The above table shows that 27 respondents that means the maximum no. of
investors ages are in between 25 to 35 and 11 respondents of investors age is in between 35 to
50, 7 respondents age is below 25 and 5 respondents age is 50 and above.
Chart I: It shows the age categories of respondents and percentage of each category

INTERPRETATION: From the above graph we can state that there are larger number of
investors are in the age group of 25-30 Years only

2. What is your occupation?

TABLE 2: This table shows the occupation of respondents and percentages of different types of
respondents.
51

Occupation of
respondents

No. of
respondents

Percentage
(%)

Business

23

46

Salaried

27

54

Honorarium
basis

Others

DATA ANALYSIS:

The above table shows that 27 respondents occupation is salaried based

employees and rest of them are doing business no one is there in remaining two types of
respondents
CHART 2: This table shows the type of occupation of respondents and percentages of different
types of respondents

INTERPRETATION: From the above graph we can state that there are large number of investors
occupation is salaried employee only.
3. What are your educational qualifications?
TABLE 3: The table shows the educational qualifications of respondents and its percentages of
different types of respondents.

52

Type of respondents

No. of respondents

Percentage

Inter and below

Degree

16

32

P.G

32

64

PhD

DATA ANALYSIS: The above table shows that 32 investors are post Graduates, 16 investors of
them and 2 investors qualification is inter and below
CHART 3: This table shows the type of educational qualifications of respondents and
percentages of different types of respondents

DATA INTERPRETATION: The number of PG respondents is more than the other respondents
so the percentage is more than the other respondents.
4. What is your monthly income?
TABLE 4:This table shows monthly income of respondents and their percentages of different
types of respondents.
Monthly Income

No. of respondents

Percentage

20000and below

13

26

20

40

30000-40000

14

28

40000and above

20000 to 30000

53

DATA ANALYSIS: The above tables show that 20 of the respondents monthly income is
between 20,000 to 30,000, 14 of them income is between 30,000 to 40,000, 13 of investors
monthly income is 20,000 and below and rest of them income is 40,000.
CHART 4: This chart shows monthly income of respondents and percentages of different types
of respondents.

DATA INTERPRETATION: The percentage of the respondents whose monthly incomes are
moderate, in higher so the percentage of the respondents is higher.
5. Number of dependents?
TABLE 5:The below table shows that number of respondents and different types of investment
avenues.
Type of Investment

No. of respondents

Percentage

3 and below

11

22

12

24

14

28

13

26

5 and above
No dependents

54

DATA ANALYSIS:

The above table shows 14 of respondents having five and above

dependents, 13 of them having no dependents, 12 of them having four dependents and rest of
them having three and below dependents.

CHART 5: This chart shows no. of dependents of respondents and percentages of different types
of respondents.
DATA INTERPRETATION: The number of respondents in the five and above type of investment
is more so their percentage is high compared to others
6.How often do you monitor your investments?
TABLE 6:This table shows how often respondents monitor their investments.
Type of respondents

No. of respondents

Percentage

Daily or weekly

14

28

Monthly

16

32

Yearly

12
55

Occasionally

14

28

DATA ANALYSIS: The above table shows that 16 of them monitor their investment monthly, 14
of the respondents monitor their investments occasionally and 14 of them monitor daily or
weekly and 6 of them monitor their investments yearly.
CHART 6:This table shows how often respondents monitor their investments and their
percentages.

DATA INTERPRETATION: The 32% of them monitor their investments monthly, 28% of the
respondents monitor their investments occasionally and 28% of them monitor daily or weekly
and 12% of them monitor their investments yearly.

7. In which investment avenue have you invested?

TABLE7:The table shows that no. of respondents and different types of investment avenues.
Type of respondents

No. of respondents

Percentage

Equity

22

44

Debt instruments

06

12

Insurances

12

24

others

10

20

56

DATA ANALYSIS: The above chart denoting that investors giving most preference to equity
i.e. 44%, 12% of them debt instruments apart from these 24% of them are preferring insurance,
78% of them prefer others.
CHART 7:This chart shows no. of dependents of respondents and percentages of different types
of respondents.

DATA INTERPRETATION: The above table shows denoting that investors are giving priority to
investment in equity funds 22 followed by insurance, 12 and debt instruments them are
preferring insurance .

8. Which type of stock have you invested in?

TABLE8 :This table shows preferred stock of respondents and percentages of different types of
respondents.
Preferred stock of respondents

No. of respondents

Percentage

Speculative stocks

08

16

Blue chip stocks

14

28

Growth stocks

12

24

Income stocks

10

20

57

DATA ANALYSIS: The above chart reveals that 16% of them preferring speculative
stocks,28% of the investors preferring blue chip stocks , 24% of them preferring growth stocks
and 20% of them preferring income stocks.
CHART 8:This chart shows preferred stock of respondents and percentages of different types of
respondents.

INTERPRETATION: The above table shows that reveals that 08 respondents re preferring
speculative stocks, 14 of the investors preferring blue chip stocks, 12 of them preferring growth
stock and rest them preferring income stock.
9. Which statement best describes you approach as an investor?
a) I am cautious about taking risks and I want to avoid losses.
b) I am somewhat caution about taking risks, and I can handle relatively small losses.
c) I can take some risk that is generally associated with greater account growth potential but I
wish to minimize short term losses in my account.
d) I am open to taking risk for growth potential. I am less concerned about short term losses or
gains; I am more invested in long term growth.

58

TABLE9: This table shows preferred rate of risk of respondents and percentages of different
types of respondents.
Type of preferred rate of

No .of respondents

Percentage

12

13

26

20

40

18

risk

DATA ANALYSIS: The above table revealing that 40%of the investors are taking moderate
risk and they are also not ready to face short term losses and rest of them are expecting either
short term or long term returns.

CHART 9.This chart shows preferred rate of risk of respondents and percentages of different
types of respondents.

59

DATA INTERPRETATION: The above table revealing that 40%of the investors are taking
moderate risk and they are also not ready to face short term losses and rest of them are expecting
either short term or long term returns.

10. When is your next big spending due/ expected?

60

TABLE10: This table shows next big spending expected due of respondents and percentages of
different types of respondents.
Type of respondents

No. of respondents

Percentage

Less than 1 year

23

46

1-3 years

16

32

3-5 years

10

More than 5 years

12

DATA ANALYSIS: The 46% of the respondents are expecting their next big spending
due/expected will be less than one year, 32% of them expecting it will be between 1-3 years ,
10% of them expecting between 3-5 years and 12% of them are expecting more than 5 years
expenditure.
CHART 10:This charts shows next big spending due/ expected of respondents and percentages of
different types of respondents.

INTERPRETAION: The above table shows 23 of the respondents are expecting their next big
spending due/expected will be less than one year, 16 of them expecting it will be between 1-3
years , 05 of them expecting between 2-3 years and 06 of them are expecting more than 5 years
expenditure.
11. Do you have an emergency fund set aside to meet any unexpected requirement?

61

TABLE11:This table shows an emergency fund set of respondents and percentages of different
types of respondents.
Type of respondents

No. of dependents

Percentage

No

1 months expenses

10

20

2-3 months expenses

16

32

More than 6 months

18

36

DATA ANALYSIS: The above chart showing that 36% of the respondents are having emergency
fund to meet above 6 months expenses, 32% of them having emergency fund to meet 3-5 years,
20% of them having 1 months expenses and remaining of them are not having any emergency
fund.
CHART 11:This chart shows an emergency fund set of respondents and percentages of different
types of respondents.

INTERPRETATION: The above table shows that 18 of the respondents are having emergency
fund to meet above six months expenses, 16 of them having emergency fund to meet 2-3 moths
10 expenses of them having one month expenses and remaining of them are not having any
emergency fund.
12. If you receive an unexpected bonus equaling to 3 months salary, will you______________?
TABLE12:This table shows choice of investment of respondents and percentages of different
types of respondents.
62

Type of

No. of respondents

Percentage

Bank deposit

20

40

Instruments

11

22

Shares

10

20

Personal use

18

respondents

DATA ANALYSIS: The chart denoting that 40% of respondents prefer a bank deposit at 5% of
guaranteed return, 22% of them are preferring instruments and 20% of them are interested to
invest in shares.
CHART 12:This chart shows choice of investment of respondents and percentages of different
types of respondents.

INTERPRETATION : The above table denoting that 20 of respondents prefer a bank deposit at
5% of guaranteed returns, 11 of them are preferring instruments and 10 of them are interested to
invest in shares.
13. When you made an investment decision, you____?
TABLE13:This table shows how the respondents made investment decision and percentages of
different types of respondents.
Type of respondents

No. of respondents

Percentage

Decide on gut feel

63

Advice from well wishers

18

Rely on investment advisor

29

58

Analyzes all options thoroughly.

16

DATA ANALYSIS: The above chart showing that 60% of the respondents are taking decision
by analyzing all the options thoroughly, 58% of them are taking the advices from the investment
advisor, 18% of them taking advice from well wishers and 8% of them are taking decision on gut
feel.
CHART 13:This chart shows how the respondents made investment decision and percentages of
different types of respondents.

INTERPRETATION : The above table shows that 08 of the respondents are taking decision by
analyzing all the option thoroughly, 29 of them are taking the advises from the investment
adviser, 9 of them taking advise from well wishers and 4 of them are taking decision on gut feel.

64

14. Investments with higher short term volatility are more likely to have a greater chance are
more likely to have a greater chance of meeting long term goals. Conversely, investments likely
to provide stable returns and minimum short term losses are likely to meet long term investment
goals with this mind, which of the following is most consistent with your investments attitude?
TABLE14: This table shows type of goals of respondents and percentages of different types of
respondents.
Type of respondents
No. of respondents
Percentage
Short term goals
9
18
Both
23
46
Long term goals
12
24
No one
6
12
DATA ANALYSIS: The 18% of respondents are equally concerned about avoiding short term
losses as well as meeting long term goals and rest of them are expecting long term profits by
either avoiding short term losses or bearing losses.
CHART 14:This chart shows type of goals of respondents and percentages of different types of
respondents.

INTERPRETATION: The above table shows that 9 of respondent are equally concerned about
avoiding short term losses as well as meeting long term goals and rest of them are expecting long
term profits by either avoiding short term losses or bearing losses

65

15. The chart below shows possible growth of Rs 100 over a five year period for a series of
different investment strategies which of the five scenarios are you most comfortable with as
investor?
TABLE15:This table shows risk preferences of respondents and percentages of different types of
respondents.
Type of

No. of respondents

Percentage

130 to 160

11

22

110 to 176

18

36

90 to 200

14

28

77 to 250

14

respondents

DATA ANALYSIS: The 36% of the respondents are comfortable with 110 to 176, 28% of them
are comfortable with90 to 200, 22% of them are comfortable with 130 to 160 and rests of them
are comfortable with 77 to 250
CHART 15: This chart shows risk preferences of respondents and percentages of different types
of respondents.

INTERPRETATION: The above table shows that 18 of the respondents are comfortable with
110 to 176, 14 of them are comfortable with 90 to 200, 11 of them are comfortable with 130 to
160 and rest of them comfortable with 77 to 250.
16. What percentage your portfolio is allocated to equity currently?
66

TABLE16:This table shows what percentage of respondents portfolio is allocated to equity and
percentages of different types of respondents.
Type of respondents

No. of respondents

Percentage

No investment in equity

Up to 10%

20

40

Between 10-30%

18

36

Between 30-60%

10

20

DATA ANALYSIS: The chart denoting that 40% of the respondents are allocated up to 10% of
their portfolio to equity, 36% of them are allocated up to 10 to 30% of their portfolio , 20% of
them are allocated to equity between 30 to 60% of their portfolio and rest of them not invested
in equity
CHART 16: This chart shows what percentage of respondents portfolio is allocated to equity
and percentages of different types of respondents.

INTERPRETATION : The above table denoting that 20 of the respondents allocated up to 18 of

them are allocate

67

CHAPTER IV
FINDINGS
SUGGESTIONS

FINDINGS

The 46% of the respondents are expecting their next big spending due/expected will be
less than one year, 32% of them expecting it will be between 1-3 years , 10% of them

68

expecting

between 3-5 years and 12% of them are expecting more than 5 years

expenditure.
The above table revealing that 40%of the investors are taking moderate risk and they are
also not ready to face short term losses and rest of them are expecting either short term or
long term returns.
The above chart reveals that 16% of them preferring speculative stocks,28% of the
investors preferring blue chip stocks , 24% of them preferring growth stocks and 20% of
them preferring income stocks.
16 of them monitor their investment monthly, 14 of the respondents monitor their
investments occasionally and 14 of them monitor daily or weekly and 6 of them monitor
their investments yearly
14 of respondents having five and above dependents, 13 of them having no dependents,
12 of them having four dependents and rest of them having three and below dependents.
20 of the respondents monthly income is between 20,000 to 30,000, 14 of them income is
between 30,000 to 40,000, 13 of investors monthly income is 20,000 and below and rest
of them income is 40,000

32 investors are post Graduates, 16 investors of them and 2 investors qualification is inter
and below
27 respondents occupation is salaried based employees and rest of them are doing
business no one is there in remaining two types of respondents

The 36% of the respondents are having emergency fund to meet above 6 months
expenses, 32% of them having emergency fund to meet 3-5 years, 20% of them having 1
months expenses and remaining of them are not having any emergency fund.
40% of respondents prefer a bank deposit at 5% of guaranteed return, 22% of them are
preferring instruments and 20% of them are interested to invest in shares.
60% of the respondents are taking decision by analyzing all the options thoroughly, 58%
of them are taking the advices from the investment advisor, 18% of them taking advice
from well wishers and 8% of them are taking decision on gut feel.
The 18% of respondents are equally concerned about avoiding short term losses as well
as meeting long term goals and rest of them are expecting long term profits by either
avoiding short term losses or bearing losses

69

 The 36% of the respondents are comfortable with 110 to 176, 28% of them are
comfortable with90 to 200, 22% of them are comfortable with 130 to 160 and rests of
them are comfortable with 77 to 250

The chart denoting that 40% of the respondents are allocated up to 10% of their portfolio
to equity, 36% of them are allocated up to 10 to 30% of their portfolio , 20% of them are
allocated to equity between 30 to 60% of their portfolio and rest of them not invested in
equity

SUGGESTIONS
The study shows that most of the investors lies in moderate risk preferers.
The study shows that investors demographics lies in moderate category.
The highest number of investors who operate stock market preferred to invest in Equities
because of early profits.
70

 Investors utilizing the company brokers report & financial reports as their data source to
invest in Equities.
Investors are investing in booming sectors like I.T.
Investors are investing in real-estate business also.
The more number of investors who operate stock market preferred to invest in equity
because of more risk and simultaneously returns also there.
This is strongly recommended that the investor should have a proper guidance of well
experienced Broker.

The investor also should have the knowledge of analyzing financial position of company
in which he wants to invest.

The SEBI has to provide some tax benefits in order to attract investments in Equities.

CONCLUSION

The study and analysis of the report deals with the different investment decisions made
by different people.

It explains about the investor preference towards Equities and their risk preferences.
71

It explains the trading mode utilized by the people, preferable investment time,
preferable data source and category of investment to invest in different market of the
Equities.

Economic liberalization has accelerated the pace of development in the securities market.
In India, the role of securities market has undergone structural transformation with the
introduction of computerized online trading and interconnected market system.
Investment in securities such as shares, debentures and bonds is profitable, but also
involves greater deal of risks. Even Indian government wants encourage equity
investment.

72

ANNEXURE

QUESTIONNAIRE
NAME:_______________.
1. What is your age?
a) Below 25

b) 25-35 c) 35-50 d) 50 and above

2. What is your occupation?

a) Business

b) salaried c) honourium basis d) others

3. Educational qualifications?
73

a) Inter and below

b) degree c) p.g d) PhD

4. Monthly income ____?

A) 20000 and below

b) 20000-30000

c) 30000-40000 d) above 40000\

5. Number of dependents____?
a) 3 and below

b) 4

c) 5 and above

d) no dependents.

6. In which investment avenue have you invested___?

a) equity shares b) debt instruments c) insurance d) others.
7. Which type of stock have you invested in?
a) Speculative stocks b) Blue chip stocks c) Growth stocks
d) Income stocks
8. Which statement best describes you approach as an investor?
a) I am cautious about taking risks and I want to avoid losses.
b) I am some what caution about taking risks, and I can handle relatively can handle relatively small
losses.
c) I can take some risk that is generally associated with greater account growth potential but I wish to
minimize short term losses in my account.
d) I am open to taking risk for growth potential. I am less concerned about short term (less than one year)
losses or gains; I am more invested in long term growth.
9. When is your next big spending due / expected?
a) Less than 1 year b) between 1-3years c) between 3-5 years
d) More than 5 years.
10. Do you have an emergency fund set aside to meet any unexpected requirement?
a) No, I dont have any money for emergencies
b) I have enough to meet one months expenses.
c) I have enough to meet 2-3 months expenses.
d) I have enough to meet more than 6 months expenses.
11. Your receive an unexpected bonus equilent to 3 months salary, will you__
a) put it in a bank deposit at 5% guaranteed return?
b) Invest in an instrument which gives a return is arrange of 4-7%.
c) Of around 15% p.a with a downside three risk of 10%.
d) Asset for personal use.
12. How often do you monitor your investments?
a) Daily or weekly.
c) Yearly.

b) Monthly.
d) Occasionally.
74

13. When you made an investment decision, you ______?

a) Decide on gut feel.
b) Seek advice from friends and well wishes.
c) Rely on your investment advisor.
d) Analyzes all options thoroughly.
14. Investments with higher short-term volatility are more likely to have a greater chance are more likely
to have a greater chance of meeting long term goals. Conversely , investments likely to provides stable
returns and minimum short term losses are likely to meet long term investment goals with this is mind ,
which of the following is most consistent with your investments attitude.
a) Avoiding short-term losses is more important to me than meeting long term goals.
b) I am equally concerned about avoiding short term losses as well as meeting long term goals.
c) I am willing to bear short term fluctuations to maximize the chance of meeting my long term goals.
d) I am equally concerned about maximizing the short term profits and long term goals.
15. the chart below shows possible growth of Rs 100 over a five yea period for a series of different
investment strategies which of the five scenarios are you most comfortable with as investor?
a) 130 to 160.

b) 110 to 176.

c) 90 to 200.

d) 77 to 250.

16. What percentage your portfolio is allocated to equity currently?

a) No investment in equity.

b) Up to10%.

c) Between 10 to 30%.

d) Between 30 to 60%.

75

BIBLIOGRAPHY

Bibliography

Books referred:
-

Security Analysis and Portfolio Management

J.Jordan.
76

___

Donald E.Fischar and Ronald

Capital Market Institutions & Instruments ____Frank J.Franco M.Gliani

Financial Services____ M.Y.KHAN

Search engines:

www.sagejournal.com
Web sites:

www.sharekhan.com

www.moneypore.com

www.forex.com

www.nsbl.com
Newspapers
Magazines

77