A PROJECT ON CAPITAL MARKET

Submitted To:
Punjab Technical University, Jalandhar.
In partial fullfilment of the degree in aster of !usiness "dministration
#!"$.
Project submitted to: Submitted !y:
Pooja . %ohli Shelly jumba
&'ecutive director !" (
rd
semester
)udhiana stoc* e'change +oll no,-.(/00(1233
)se code no: ",-0
(Session 2009-2010)
CT institute of mn!ement n" te#$no%o!&' J%n"$(
)*I+E CERTI,ICATE
It is hereby certified that the project report on 4CAPITAL MARKET5, being submitted by
Shelly jumba student of the degree of aster of !usiness "dministration #(
rd
Sem$ of 6T
Institute of anagement and Information Technology, Jalandhar 7hich affiliated to Punjab
Technical University, Jalandhar is an original 7or* carried out successfully under my guidance
and supervision and that no part of this project has been submitted for any other degree8
diploma. The sincerely efforts put in during the course of investigation is hereby
ac*no7ledged.
Project guide
iss Shivani jagneja
)ect. 6TI9 IT
+ECLARATION
This project entitled &mpirical Study on 46"PIT") "+%&T5 is submitted in partial
fulfilment of the re:uirement for the a7ard of degree of master of business administration of
Punjab technical university, Jalandhar.
This research 7or* is done by S;&))< JU!", .This research 7or* has been done only for
!" only and none of this research 7or* has been submitted for any other degree.
The assistance and help during the e'ecution of the project has been fully ac*no7ledged.
S-ELL. J*M/A
M/A 0
("
SEM
ROLL NO-91022203411

ACKNO5LE+)EMENT
=e ta*e this opportunity to e'press my deep sense of gratitude to all our friends and seniors 7ho
helped and guide me to complete this project successfully. I am highly grateful and indebted to
our project guide )ect. iss Shivani jagneja, Mr. %uber *ansal #guide 9 co,ordinator$ and
r "tul chi*ersal #guide 9 co,ordinator$ for their e'cellent and e'pert guidance in helping us in
completion of project report.


Shelly jumba
PRE,ACE
The successful completion of this project 7as a uni:ue e'perience for us because by
visiting many place and interacting various person, I achieved a better *no7ledge about
this project. The e'perience 7hich I gained by doing this project 7as essential at this
turning point of my carrier this project is being submitted 7hich content detailed analysis
of the research under ta*en by me.
The research provides an opportunity to the student to devote her s*ills *no7ledge and
competencies re:uired during the technical session.
The research is on the topic 46apital mar*et5.
Index
Serial
No.
Particulars Page
No.
1 Capital market
2 Role of capital market in India
3 Factors affecting capital market in India
4 India stock exchange overview
Capital market efficienc!
" M#t#al f#nds as a part of capital market
$ Concepts of m#t#al f#nds
% Categories of m#t#al f#nds
& Investment strategies for m#t#al f#nds
1' Research methodolog!
11 (ata anal!sis and interpretation
CAPITAL MARKET
)he capital market is the market for sec#rities* where
Companies and governments can raise long+term f#nds. It is a market in
which mone! is lent for periods longer than a !ear. , nation-s capital market
incl#des s#ch financial instit#tions as .anks* ins#rance companies* and stock
exchanges that channel long+term investment f#nds to commercial and
ind#strial .orrowers. /nlike the mone! market* on which lending is ordinaril!
short term* the capital market t!picall! finances fixed investments like those
in .#ildings and machiner!.
0at#re and Constit#ents1
)he capital market consists of n#m.er of individ#als and instit#tions
2incl#ding the government3 that canali4e the s#ppl! and demand for long+
term capital and claims on capital. )he stock exchange* commercial .anks*
co+operative .anks* saving .anks* development .anks* ins#rance companies*
investment tr#st or companies* etc.* are important constit#ents of the capital
markets.
)he capital market* like the mone! market* has three important
Components* namel! the s#ppliers of loana.le f#nds* the .orrowers and the
Intermediaries who deal with the leaders on the one hand and the
5orrowers on the other.
)he demand for capital comes mostl! from agric#lt#re* ind#str!* trade
)he government. )he predominant form of ind#strial organi4ation developed
Capital Market .ecomes a necessar! infrastr#ct#re for fast ind#striali4ation.
Capital market not concerned solel! with the iss#e of new claims on capital*
5#t also with dealing in existing claims.
+e6t o( /on" m(7et

The bond mar*et #also *no7n as the debt, credit, or fi'ed income mar*et$ is a financial mar*et
7here participants buy and sell debt securities, usually in the form of bonds. "s of 0>>-, the si?e
of the 7orld7ide bond mar*et #total debt outstanding$ is an estimated @A0.0 trillion
B3C
, of 7hich
the si?e of the outstanding U.S. bond mar*et debt 7as @(3.0 trillion according to !IS #or
alternatively @(..( trillion according to SID"$.
Eearly all of the @A00 billion average daily trading volume in the U.S. bond mar*et ta*es place
bet7een bro*er,dealers and large institutions in a decentrali?ed, over,the,counter #FT6$ mar*et.
;o7ever, a small number of bonds, primarily corporate, are listed on e'changes.
+eferences to the Gbond mar*etG usually refer to the government bond mar*et, because of its
si?e, li:uidity, lac* of credit ris* and, therefore, sensitivity to interest rates. !ecause of the
inverse relationship bet7een bond valuation and interest rates, the bond mar*et is often used to
indicate changes in interest rates or the shape of the yield curve.
Contents
3 ar*et structure
0 Types of bond mar*ets
( !ond mar*et participants
. !ond mar*et si?e
2 !ond mar*et volatility
1 !ond mar*et influence
/ !ond investments
A !ond indices
M(7et st(u#tu(e
!ond mar*ets in most countries remain decentrali?ed and lac* common e'changes li*e stoc*,
future and commodity mar*ets. This has occurred, in part, because no t7o bond issues are
e'actly ali*e, and the variety of bond securities outstanding greatly e'ceeds that of stoc*s.
;o7ever, the Ee7 <or* Stoc* &'change #E<S&$ is the largest centrali?ed bond mar*et,
representing mostly corporate bonds. The E<S& migrated from the "utomated !ond System
#"!S$ to the E<S& !onds trading system in "pril 0>>/ and e'pects the number of traded issues
to increase from 3>>> to 1>>>.
!esides other causes, the decentrali?ed mar*et structure of the corporate and municipal bond
mar*ets, as distinguished from the stoc* mar*et structure, results in higher transaction costs and
less li:uidity. " study performed by Profs ;arris and Pi7o7ar in 0>>., Secondary Trading 6osts
in the unicipal !ond ar*et, reached the follo7ing conclusions: #3$ Gunicipal bond trades
are also substantially more e'pensive than similar si?ed e:uity trades. =e attribute these results
to the lac* of price transparency in the bond mar*ets. "dditional cross,sectional analyses sho7
that bond trading costs decrease 7ith credit :uality and increase 7ith instrument comple'ity,
time to maturity, and time since issuance.G #0$ GFur results sho7 that municipal bond trades are
significantly more e'pensive than e:uivalent si?ed e:uity trades. &ffective spreads in municipal
bonds average about t7o percent of price for retail si?e trades of 0>,>>> dollars and about one
percent for institutional trade si?e trades of 0>>,>>> dollars.G
T&8es of 6on" m(7ets
The Securities Industry and Dinancial ar*ets "ssociation #SID"$ classifies the broader bond
mar*et into five specific bond mar*ets.
6orporate
Hovernment 9 agency
unicipal
ortgage bac*ed, asset bac*ed, and collaterali?ed debt obligation
Dunding
/on" m(7et 8(ti#i8nts
!ond mar*et participants are similar to participants in most financial mar*ets and are essentially
either buyers #debt issuer$ of funds or sellers #institution$ of funds and often both.
P(ti#i8nts in#%u"e9
Institutional investors
Hovernments
Traders
Individuals
!ecause of the specificity of individual bond issues, and the lac* of li:uidity in many smaller
issues, the majority of outstanding bonds are held by institutions li*e pension funds, ban*s and
mutual funds. In the United States, appro'imately 3>I of the mar*et is currently held by private
individuals.
/on" m(7et si:e
"mounts outstanding on the global bond mar*et increased 3>I in 0>>- to a record @-3 trillion.
Jomestic bonds accounted for />I of the total and international bonds for the remainder. The
US 7as the largest mar*et 7ith (-I of the total follo7ed by Japan #3AI$. ortgage,bac*ed
bonds accounted for around a :uarter of outstanding bonds in the US in 0>>- or some @-.0
trillion. The sub,prime portion of this mar*et is variously estimated at bet7een @2>>bn and @3..
trillion. Treasury bonds and corporate bonds each accounted for a fifth of US domestic bonds. In
&urope, public sector debt is substantial in Italy #-(I of HJP$, !elgium #1(I$ and Drance
#1(I$. 6oncerns about the ability of some countries to continue to finance their debt came to the
forefront in late 0>>-. This 7as partly a result of large debt ta*en on by some governments to
reverse the economic do7nturn and finance ban* bailouts. The outstanding value of international
bonds increased by 3(I in 0>>- to @0/ trillion. The @0.( trillion issued during the year 7as
do7n .I on the 0>>A total, 7ith activity declining in the second half of the year.
/on" m(7et ;o%ti%it&
Dor mar*et participants 7ho o7n a bond, collect the coupon and hold it to maturity, mar*et
volatility is irrelevantK principal and interest are received according to a pre,determined schedule.
!ut participants 7ho buy and sell bonds before maturity are e'posed to many ris*s, most
importantly changes in interest rates. =hen interest rates increase, the value of e'isting bonds
fall, since ne7 issues pay a higher yield. )i*e7ise, 7hen interest rates decrease, the value of
e'isting bonds rise, since ne7 issues pay a lo7er yield. This is the fundamental concept of bond
mar*et volatility: changes in bond prices are inverse to changes in interest rates. Dluctuating
interest rates are part of a countryLs monetary policy and bond mar*et volatility is a response to
e'pected monetary policy and economic changes.
&conomistsL vie7s of economic indicators versus actual released data contribute to mar*et
volatility. " tight consensus is generally reflected in bond prices and there is little price
movement in the mar*et after the release of Gin,lineG data. If the economic release differs from
the consensus vie7 the mar*et usually undergoes rapid price movement as participants interpret
the data. Uncertainty #as measured by a 7ide consensus$ generally brings more volatility before
and after an economic release. &conomic releases vary in importance and impact depending on
7here the economy is in the business cycle.
/on" m(7et inf%uen#e
!ond mar*ets determine the price in terms of yield that a borro7er must pay in able to receive
funding. In one notable instance, 7hen President 6linton attempted to increase the US budget
deficit in the 3-->s, it led to such a sell,off #decreasing pricesK increasing yields$ that he 7as
forced to abandon the strategy and instead balance the budget.
4 I used to thin* that if there 7as reincarnation, I 7anted to come bac* as the president or
the pope or as a ..>> baseball hitter. !ut no7 I 7ould li*e to come bac* as the bond
mar*et. <ou can intimidate everybody. 5
M James 6arville, political advisor to President 6linton, !loomberg
B1C
/on" in;estments
Investment companies allo7 individual investors the ability to participate in the bond mar*ets
through bond funds, closed,end funds and unit,investment trusts. In 0>>1 total bond fund net
inflo7s increased -/I from @(>.A billion in 0>>2 to @1>.A billion in 0>>1.&'change,traded
funds #&TDs$ are another alternative to trading or investing directly in a bond issue. These
securities allo7 individual investors the ability to overcome large initial and incremental trading
si?es.
/on" in"i#es
ain article: !ond mar*et inde'
" number of bond indices e'ist for the purposes of managing portfolios and measuring
performance, similar to the S9P 2>> or +ussell Inde'es for stoc*s. The most common "merican
benchmar*s are the !arclays "ggregate, 6itigroup !IH and errill )ynch Jomestic aster.
ost indices are parts of families of broader indices that can be used to measure global bond
portfolios, or may be further subdivided by maturity and8or sector for managing speciali?ed
portfolios.
STOCK OR E<*IT. MARKET
" sto#7 m(7et or e=uit& m(7et is a public mar*et #a loose net7or* of economic transactions,
not a physical facility or discrete entity$ for the trading of company stoc* and derivatives at an
agreed priceK these are securities listed on a stoc* e'change as 7ell as those only traded
privately.
The si?e of the 7orld stoc* mar*et 7as estimated at about @(1.1 trillion US at the beginning of
Fctober 0>>A. The total 7orld derivatives mar*et has been estimated at about @/-3 trillion face
or nominal value, 33 times the si?e of the entire 7orld economy. The value of the derivatives
mar*et, because it is stated in terms of notional values, cannot be directly compared to a stoc* or
a fi'ed income security, 7hich traditionally refers to an actual value. oreover, the vast majority
of derivatives LcancelL each other out #i.e., a derivative LbetL on an event occurring is offset by a
comparable derivative LbetL on the event not occurring$. any such relatively illi:uid securities
are valued as mar*ed to model, rather than an actual mar*et price.
The stoc*s are listed and traded on stoc* e'changes 7hich are entities of a corporation or mutual
organi?ation speciali?ed in the business of bringing buyers and sellers of the organi?ations to a
listing of stoc*s and securities together. The largest stoc* mar*et in the United States, by mar*et
cap is the Ee7 <or* Stoc* &'change, E<S&, 7hile in 6anada, it is the Toronto Stoc* &'change.
ajor &uropean e'amples of stoc* e'changes include the )ondon Stoc* &'change, Paris !ourse,
and the Jeutsche !Nrse. "sian e'amples include the To*yo Stoc* &'change, the ;ong %ong
Stoc* &'change, the Shanghai Stoc* &'change, and the !ombay Stoc* &'change. In )atin
"merica, there are such e'changes as the !9D !ovespa and the !O.
Contents
3 Trading
0 ar*et participants
( ;istory
. Importance of stoc* mar*et
o ..3 Dunction and purpose
o ..0 +elation of the stoc* mar*et to the modern financial system
o ..( The stoc* mar*et, individual investors, and financial ris*
T("in!
Participants in the stoc* mar*et range from small individual stoc* investors to large hedge fund
traders, 7ho can be based any7here. Their orders usually end up 7ith a professional at a stoc*
e'change, 7ho e'ecutes the order.
Some e'changes are physical locations 7here transactions are carried out on a trading floor, by a
method *no7n as open outcry. This type of auction is used in stoc* e'changes and commodity
e'changes 7here traders may enter GverbalG bids and offers simultaneously. The other type of
stoc* e'change is a virtual *ind, composed of a net7or* of computers 7here trades are made
electronically via traders.
"ctual trades are based on an auction mar*et model 7here a potential buyer bids a specific price
for a stoc* and a potential seller asks a specific price for the stoc*. #!uying or selling at market
means you 7ill accept any as* price or bid price for the stoc*, respectively.$ =hen the bid and
as* prices match, a sale ta*es place, on a first,come,first,served basis if there are multiple
bidders or as*ers at a given price.
The purpose of a stoc* e'change is to facilitate the e'change of securities bet7een buyers and
sellers, thus providing a mar*etplace #virtual or real$. The e'changes provide real,time trading
information on the listed securities, facilitating price discovery.
The Ee7 <or* Stoc* &'change is a physical e'change, also referred to as a listed e'change M
only stoc*s listed 7ith the e'change may be traded. Frders enter by 7ay of e'change members
and flo7 do7n to a floor bro*er, 7ho goes to the floor trading post specialist for that stoc* to
trade the order. The specialistLs job is to match buy and sell orders using open outcry. If a spread
e'ists, no trade immediately ta*es place,,in this case the specialist should use his8her o7n
resources #money or stoc*$ to close the difference after his8her judged time. Fnce a trade has
been made the details are reported on the GtapeG and sent bac* to the bro*erage firm, 7hich then
notifies the investor 7ho placed the order. "lthough there is a significant amount of human
contact in this process, computers play an important role, especially for so,called Gprogram
tradingG.
The E"SJ"P is a virtual listed e'change, 7here all of the trading is done over a computer
net7or*. The process is similar to the Ee7 <or* Stoc* &'change. ;o7ever, buyers and sellers
are electronically matched. Fne or more E"SJ"P mar*et ma*ers 7ill al7ays provide a bid and
as* price at 7hich they 7ill al7ays purchase or sell LtheirL stoc*.
The Paris !ourse, no7 part of &urone't, is an order,driven, electronic stoc* e'change. It 7as
automated in the late 3-A>s. Prior to the 3-A>s, it consisted of an open outcry e'change.
Stoc*bro*ers met on the trading floor or the Palais !rongniart. In 3-A1, the 6"TS trading
system 7as introduced, and the order matching process 7as fully automated.
Drom time to time, active trading #especially in large bloc*s of securities$ have moved a7ay
from the LactiveL e'changes. Securities firms, led by U!S "H, Holdman Sachs Hroup Inc. and
6redit Suisse Hroup, already steer 30 percent of U.S. security trades a7ay from the e'changes to
their internal systems. That share probably 7ill increase to 3A percent by 0>3> as more
investment ban*s bypass the E<S& and E"SJ"P and pair buyers and sellers of securities
themselves, according to data compiled by !oston,based "ite Hroup ))6, a bro*erage,industry
consultant.
Eo7 that computers have eliminated the need for trading floors li*e the !ig !oardLs, the balance
of po7er in e:uity mar*ets is shifting. !y bringing more orders in,house, 7here clients can move
big bloc*s of stoc* anonymously, bro*ers pay the e'changes less in fees and capture a bigger
share of the @33 billion a year that institutional investors pay in trading commissions as 7ell as
the surplus of the century had ta*en place.
M(7et 8(ti#i8nts
" fe7 decades ago, 7orld7ide, buyers and sellers 7ere individual investors, such as 7ealthy
businessmen, 7ith long family histories #and emotional ties$ to particular corporations. Fver
time, mar*ets have become more Ginstitutionali?edGK buyers and sellers are largely institutions
#e.g., pension funds, insurance companies, mutual funds, inde' funds, e'change,traded funds,
hedge funds, investor groups, ban*s and various other financial institutions$. The rise of the
institutional investor has brought 7ith it some improvements in mar*et operations. Thus, the
government 7as responsible for Gfi'edG #and e'orbitant$ fees being mar*edly reduced for the
LsmallL investor, but only after the large institutions had managed to brea* the bro*ersL solid front
on fees. #They then 7ent to LnegotiatedL fees, but only for large institutions.
;o7ever, corporate governance #at least in the =est$ has been very much adversely affected by
the rise of #largely LabsenteeL$ institutional Lo7nersL.
-isto(&
&stablished in 3A/2, the !ombay Stoc* &'change is "siaLs first stoc* e'change.
In 30th century Drance the courratiers de change 7ere concerned 7ith managing and regulating
the debts of agricultural communities on behalf of the ban*s. !ecause these men also traded 7ith
debts, they could be called the first bro*ers. " common misbelief is that in late 3(th century
!ruges commodity traders gathered inside the house of a man called Van der Beurze, and in
3(>- they became the G!rugse !eurseG, institutionali?ing 7hat had been, until then, an informal
meeting, but actually, the family Oan der !eur?e had a building in "nt7erp 7here those
gatherings occurredK the Oan der !eur?e had "nt7erp, as most of the merchants of that period,
as their primary place for trading. The idea :uic*ly spread around Dlanders and neighboring
counties and G!eur?enG soon opened in Hhent and "msterdam.
In the middle of the 3(th century, Oenetian ban*ers began to trade in government securities. In
3(23 the Oenetian government outla7ed spreading rumors intended to lo7er the price of
government funds. !an*ers in Pisa, Oerona, Henoa and Dlorence also began trading in
government securities during the 3.th century. This 7as only possible because these 7ere
independent city states not ruled by a du*e but a council of influential citi?ens. The Jutch later
started joint stoc* companies, 7hich let shareholders invest in business ventures and get a share
of their profits , or losses. In 31>0, the Jutch &ast India 6ompany issued the first share on the
"msterdam Stoc* &'change. It 7as the first company to issue stoc*s and bonds.
The "msterdam Stoc* &'change #or "msterdam !eurs$ is also said to have been the first stoc*
e'change to introduce continuous trade in the early 3/th century. The Jutch Gpioneered short
selling, option trading, debt,e:uity s7aps, merchant ban*ing, unit trusts and other speculative
instruments, much as 7e *no7 themG There are no7 stoc* mar*ets in virtually every developed
and most developing economies, 7ith the 7orldLs biggest mar*ets being in the United States,
United %ingdom, Japan, India, 6hina, 6anada, Hermany, Drance, South %orea and the
Eetherlands.
IMPORTANCE O, STOCK MARKET
,un#tion n" 8u(8ose
The main trading room of the To*yo Stoc* &'change, 7here trading is currently completed
through computers.
The sto#7 m(7et is one of the most important sources for companies to raise money. This
allo7s businesses to be publicly traded, or raise additional capital for e'pansion by selling shares
of o7nership of the company in a public mar*et. The li:uidity that an e'change provides affords
investors the ability to :uic*ly and easily sell securities. This is an attractive feature of investing
in stoc*s, compared to other less li:uid investments such as real estate.
;istory has sho7n that the price of shares and other assets is an important part of the dynamics
of economic activity, and can influence or be an indicator of social mood. "n economy 7here
the stoc* mar*et is on the rise is considered to be an up,and,coming economy. In fact, the stoc*
mar*et is often considered the primary indicator of a countryLs economic strength and
development. +ising share prices, for instance, tend to be associated 7ith increased business
investment and vice versa. Share prices also affect the 7ealth of households and their
consumption. Therefore, central ban*s tend to *eep an eye on the control and behavior of the
stoc* mar*et and, in general, on the smooth operation of financial system functions. Dinancial
stability is the raison dLQtre of central ban*s.
&'changes also act as the clearinghouse for each transaction, meaning that they collect and
deliver the shares, and guarantee payment to the seller of a security. This eliminates the ris* to an
individual buyer or seller that the counterparty could default on the transaction.
The smooth functioning of all these activities facilitates economic gro7th in that lo7er costs and
enterprise ris*s promote the production of goods and services as 7ell as employment. In this 7ay
the financial system contributes to increased prosperity. "n important aspect of modern financial
mar*ets, ho7ever, including the stoc* mar*ets, is absolute discretion. Dor e'ample, "merican
stoc* mar*ets see more unrestrained acceptance of any firm than in smaller mar*ets. Dor
e'ample, 6hinese firms that possess little or no perceived value to "merican society profit
"merican ban*ers on =all Street, as they reap large commissions from the placement, as 7ell as
the 6hinese company 7hich yields funds to invest in 6hina. ;o7ever, these companies accrue
no intrinsic value to the long,term stability of the "merican economy, but rather only short,term
profits to "merican business men and the 6hineseK although, 7hen the foreign company has a
presence in the ne7 mar*et, this can benefit the mar*etLs citi?ens. 6onversely, there are very fe7
large foreign corporations listed on the Toronto Stoc* &'change TSR, 6anadaLs largest stoc*
e'change. This discretion has insulated 6anada to some degree to 7orld7ide financial
conditions. In order for the stoc* mar*ets to truly facilitate economic gro7th via lo7er costs and
better employment, great attention must be given to the foreign participants being allo7ed in.
Re%tion of t$e sto#7 m(7et to t$e mo"e(n finn#i% s&stem
The financial systems in most 7estern countries has undergone a remar*able transformation.
Fne feature of this development is disintermediation. " portion of the funds involved in saving
and financing, flo7s directly to the financial mar*ets instead of being routed via the traditional
ban* lending and deposit operations. The general publicLs heightened interest in investing in the
stoc* mar*et, either directly or through mutual funds, has been an important component of this
process.
Statistics sho7 that in recent decades shares have made up an increasingly large proportion of
householdsL financial assets in many countries. In the 3-/>s, in S7eden, deposit accounts and
other very li:uid assets 7ith little ris* made up almost 1> percent of householdsL financial
7ealth, compared to less than 0> percent in the 0>>>s. The major part of this adjustment in
financial portfolios has gone directly to shares but a good deal no7 ta*es the form of various
*inds of institutional investment for groups of individuals, e.g., pension funds, mutual funds,
hedge funds, insurance investment of premiums, etc.
The trend to7ards forms of saving 7ith a higher ris* has been accentuated by ne7 rules for most
funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to
be found in other industriali?ed countries. In all developed economic systems, such as the
&uropean Union, the United States, Japan and other developed nations, the trend has been the
same: saving has moved a7ay from traditional #government insured$ ban* deposits to more ris*y
securities of one sort or another.
T$e sto#7 m(7et' in"i;i"u% in;esto(s' n" finn#i% (is7
+is*ier long,term saving re:uires that an individual possess the ability to manage the associated
increased ris*s. Stoc* prices fluctuate 7idely, in mar*ed contrast to the stability of #government
insured$ ban* deposits or bonds. This is something that could affect not only the individual
investor or household, but also the economy on a large scale. The follo7ing deals 7ith some of
the ris*s of the financial sector in general and the stoc* mar*et in particular. This is certainly
more important no7 that so many ne7comers have entered the stoc* mar*et, or have ac:uired
other Lris*yL investments #such as LinvestmentL property, i.e., real estate and collectables$.
With each passing year, the noise level in the stock market rises. Television commentators,
financial writers, analysts, and market strategists are all overtaking each other to get investors'
attention. t the same time, individual investors, immersed in chat rooms and message boards,
are e!changing "uestionable and often misleading tips. #et, despite all this available
information, investors find it increasingly difficult to profit. $tock prices skyrocket with little
reason, then plummet %ust as "uickly, and people who have turned to investing for their
children's education and their own retirement become frightened. $ometimes there appears to be
no rhyme or reason to the market, only folly.
This is a :uote from the preface to a published biography about the long,term value,oriented
stoc* investor =arren !uffett.
B-C
!uffett began his career 7ith @3>>, and @3>>,>>> from seven
limited partners consisting of !uffettLs family and friends. Fver the years he has built himself a
multi,billion,dollar fortune. The :uote illustrates some of 7hat has been happening in the stoc*
mar*et during the end of the 0>th century and the beginning of the 03st century.
P(im(& M(7et
, also called the ne7 issue mar*et, is the mar*et for issuing ne7 securities. any companies,
especially small and medium scale, enter the primary mar*et to raise money from the public to
e'pand their businesses. They sell their securities to the public through an initial public offering.
The securities can be directly bought from the shareholders, 7hich is not the case for the
secondary mar*et. The primary mar*et is a mar*et for ne7 capitals that 7ill be traded over a
longer period.
In the primary mar*et, securities are issued on an e'change basis. The under7riters, that is, the
investment ban*s, play an important role in this mar*et: they set the initial price range for a
particular share and then supervise the selling of that share.
Investors can obtain ne7s of upcoming shares only on the primary mar*et. The issuing firm
collects money, 7hich is then used to finance its operations or e'pand business, by selling its
shares. !efore selling a security on the primary mar*et, the firm must fulfill all the re:uirements
regarding the e'change.
"fter trading in the primary mar*et the security 7ill then enter the secondary mar*et, 7here
numerous trades happen every day. The primary mar*et accelerates the process of capital
formation in a countryLs economy.
The primary mar*et categorically e'cludes several other ne7 long,term finance sources, such as
loans from financial institutions. any companies have entered the primary mar*et to earn profit
by converting its capital, 7hich is basically a private capital, into a public one, releasing
securities to the public. This phenomena is *no7n as Gpublic issueG or Ggoing public.G
There are three methods though 7hich securities can be issued on the primary mar*et: rights
issue, Initial Public Fffer #IPF$, and preferential issue. " companyLs ne7 offering is placed on
the primary mar*et through an initial public offer.
,un#tionin! of P(im(& M(7et

P(im(& Mo(t!!e M(7et
P(im(& T(!et M(7et
T(ns#tion Costs In P(im(&
M(7et
PL in P(im(& M(7et
Re;i;% Of In"in P(im(&
M(7et
8(im(& Se#u(ities M(7et
P(o6%ems Of In"in P(im(&
M(7et
In;estment In P(im(& M(7et
P(im(& Mone& m(7et
Inte(ntion% P(im(& M(7et
Asso#ition
IPO P(im(& M(7et
P(im(& C8it% M(7et
Se#on"(& M(7et
is the mar*et 7here, unli*e the primary mar*et, an investor can buy a security directly from
another investor in lieu of the issuer. It is also referred as Gafter mar*etG. The securities initially
are issued in the primary mar*et, and then they enter into the secondary mar*et.
"ll the securities are first created in the primary mar*et and then, they enter into the secondary
mar*et. In the Ee7 <or* Stoc* &'change, all the stoc*s belong to the secondary mar*et.
In other 7ords, secondary mar*et
is a place 7here any type of used goods is available. In the secondary mar*et shares are
maneuvered from one investor to other, that is, one investor buys an asset from another investor
instead of an issuing corporation. So, the secondary mar*et should be li:uid.
E>m8%e of Se#on"(& m(7et9
In the Ee7 <or* Stoc* &'change, in the United States of "merica, all the securities belong to
the secondary mar*et
.
Im8o(tn#e of Se#on"(& M(7et9
Se#on"(& M(7et has an important role to play behind the developments of an efficient capital
mar*et. Secondary mar*et connects investorsL favoritism for li:uidity 7ith the capital usersL 7ish
of using their capital for a longer period. Dor e'ample, in a traditional partnership, a partner can
not access the other partnerLs investment but only his or her investment in that partnership, even
on an emergency basis. Then if he or she may brea*s the o7nership of e:uity into parts and sell
his or her respective proportion to another investor. This *ind of trading is facilitated only by the
secondary mar*et
ROLE
O,
CAPITAL
MARKET
The primary role of the capital mar*et is to raise long,term funds for governments, ban*s, and
corporations 7hile providing a platform for the trading of securities.
This fundraising is regulated by the performance of the stoc* and bond mar*ets 7ithin the
capital mar*et. The member organi?ations of the capital mar*et may issue stoc*s and bonds in
order to raise funds. Investors can then invest in the capital mar*et by purchasing those stoc*s
and bonds.
The capital mar*et, ho7ever, is not 7ithout ris*. It is important for investors to understand
mar*et trends before fully investing in the capital mar*et. To that end, there are various mar*et
indices available to investors that reflect the present performance of the mar*et.
Re!u%tion of t$e C8it% M(7et
&very capital mar*et in the 7orld is monitored by financial regulators and their respective
governance organi?ation. The purpose of such regulation is to protect investors from fraud and
deception. Dinancial regulatory bodies are also charged 7ith minimi?ing financial losses, issuing
licenses to financial service providers, and enforcing applicable la7s.
T$e C8it% M(7et?s Inf%uen#e on Inte(ntion% T("e
6apital mar*et investment is no longer confined to the boundaries of a single nation. TodaySs
corporations and individuals are able, under some regulation, to invest in the capital mar*et of
any country in the 7orld. Investment in foreign capital mar*ets has caused substantial
enhancement to the business of international trade.
T$e P(im(& n" Se#on"(& M(7ets
The capital mar*et is also dependent on t7o sub,mar*ets T the primary mar*et and the secondary
mar*et. The primary mar*et deals 7ith ne7ly issued securities and is responsible for generating
ne7 long,term capital. The secondary mar*et handles the trading of previously,issued securities,
and must remain highly li:uid in nature because most of the securities are sold by investors. "
capital mar*et 7ith high li:uidity and high transparency is predicated upon a secondary mar*et
7ith the same :ualities.
ROLE O, CAPITAL MARKET IN IN+IA:
IndiaSs gro7th story has important implications for the capital mar*et, 7hich has gro7n sharply
7ith respect to several parameters M amounts raised number of stoc* e'changes and other
intermediaries, listed stoc*s, mar*et capitali?ation, trading volumes and turnover, mar*et
instruments, investor population, issuer and intermediary profiles.
The capital mar*et consists primarily of the debt and e:uity mar*ets. ;istorically, it contributed
significantly to mobili?ing funds to meet public and private companiesS financing re:uirements.
The introduction of e'change,traded derivative instruments such as options and futures has
enabled investors to better hedge their positions and reduce ris*s.
IndiaSs debt and e:uity mar*ets rose from /2 per cent in 3--2 to 3(> per cent of HJP in 0>>2.
!ut the gro7th relative to the US, alaysia and South %orea remains lo7 and largely s*e7ed,
indicating immense latent potential. IndiaSs debt mar*ets comprise government bonds and the
corporate bond mar*et #comprising PSUs, corporates, financial institutions and ban*s$.
India compares 7ell 7ith other emerging economies in terms of sophisticated mar*et design of
e:uity spot and derivatives mar*et, 7idespread retail participation and resilient li:uidity.
S&!ISs measures such as submission of :uarterly compliance reports, and company valuation on
the lines of the Sarbanes,F'ley "ct have enhanced corporate governance. !ut enforcement
continues to be a problem because of limited trained staff and companies not being subjected to
substantial fines or legal sanctions.
Hiven the booming economy, large s*illed labour force, reliable business community, continued
reforms and greater global integration vindicated by the investment,grade ratings of oodySs
and Ditch, the net cumulative portfolio flo7s from 0>>(,>1 #bonds and e:uities$ amounted to @(2
billion.
The number of foreign institutional investors registered 7ith S&!I rose from none in 3--0,-( to
20A in 0>>>,>3, to about 3,>>> in 0>>1,>/.
IndiaSs stoc* mar*et rose five,fold since mid,0>>( and outperformed 7orld indices 7ith returns
far outstripping other emerging mar*ets, such as e'ico #20 per cent$, !ra?il #.( per cent$ or
H66 economies such as %u7ait #01 per cent$ in D<,>1.
In 0>>1, Indian companies raised more than @1 billion on the !S&, ES& and other regional stoc*
e'changes. !uoyed by internal economic factors and foreign capital flo7s, Indian mar*ets are
globally competitive, even in terms of pricing, efficiency and li:uidity.
*S su6 8(ime #(isis:
The financial crisis facing the =all Street is the 7orst since the Hreat Jepression and 7ill have a
major impact on the US and global economy. The ongoing global financial crisis 7ill have a
UdominoS effect and spill over all aspects of the economy. Jue to the =estern 7orldSs messianic
faith in the mar*et forces and deregulation, the mar*et friendly governments have no choice but
to step in.
The top five investment ban*s in the US have ceased to e'ist in their previous forms. !ears
Stearns 7as ta*en over some time ago. Dannie ae and Dreddie ac are nationalised to prevent
their collapse. Dannie and Dreddie together under7rite half of the home loans in the United
States, and the sum involved is of @ ( trillionMabout double the entire annual output of the
!ritish economy. This is the biggest rescue operation since the credit crunch began. )ehman
!rothers, an investment ban* 7ith a 32A year,old history, 7as declared ban*ruptK errill )ynch,
another =all Street icon, chose to pre,empt a similar fate by deciding to sell to the !an* of
"mericaK and Holdman Sachs and organ Stanley have decided to transform themselves into
ordinary deposit ban*s. "IH, the 7orldSs largest insurance company, has survived through the
injection of funds 7orth @ A2 billion from the US Hovernment.
T$e =uestion (ises9 @$& $s t$is $88ene"A
!esides the cyclical crisis of capitalism, there are some recent factors 7hich have contributed
to7ards this crisis. Under the so,called 4innovative5 approach, financial institutions
systematically underestimated ris*s during the boom in property prices, 7hich ma*es such boom
more prolonged. This relates to the shortsightedness of speculators and their unrestrained greed,
and they, during the asset price boom, believed that it 7ould stay forever. This resulted in
*eeping the ris* aspects at a minimum and thus resorting to more and more ris* ta*ing financial
activities. )oans 7ere made on the basis of collateral 7hose value 7as inflated by a bubble. "nd
the collateral is no7 7orth less than the loan. 6redit 7as available up to full value of the
property 7hich 7as assessed at inflated mar*et prices. 6redits 7ere given in anticipation that
rising property prices 7ill continue. Under looming recession and uncertainty, to pay bac* their
mortgage many of those 7ho engaged in such an e'ercise are forced to sell their houses, at a
time 7hen the ban*s are reluctant to lend and buyers 7ould li*e to 7ait in the hope that property
prices 7ill further come do7n. "ll these factors 7ould lead to a further decline in property
prices.
Effe#t of t$e su68(ime #(isis on In"i9
Hlobali?ation has ensured that the Indian economy and financial mar*ets cannot stay insulated
from the present financial crisis in the developed economies.
In the light of the fact that the Indian economy is lin*ed to global mar*ets through a full float in
current account #trade and services$ and partial float in capital account #debt and e:uity$, 7e
need to analy?e the impact based on three critical factors: "vailability of global li:uidityK
demand for India investment and cost thereof and decreased consumer demand affecting Indian
e'ports.
The concerted intervention by central ban*s of developed countries in injecting li:uidity is
e'pected to reduce the un7inding of India investments held by foreign entities, but fresh
investment flo7s into India are in doubt.
The impact of this 7ill be three,fold: The element of HJP gro7th driven by off,shore flo7s
#along 7ith s*ills and technology$ 7ill be dilutedK correction in the asset prices 7hich 7ere
hitherto pushed by foreign investors and demand for domestic li:uidity putting pressure on
interest rates
.
=hile the global financial system ta*es time to 4nurse its 7ounds5 leading to lo7 demand for
investments in emerging mar*ets, the impact 7ill be on the cost and related ris* premium. The
impact 7ill be felt both in the trade and capital account.
Indian companies 7hich had access to cheap foreign currency funds for financing their import
and e'port 7ill be the 7orst hit. "lso, foreign funds #through debt and e:uity$ 7ill be available
at huge premium and 7ould be limited to blue,chip companies.
The impact of 7hich, again, 7ill be three,fold: +educed capacity e'pansion leading to supply
side pressureK increased interest e'penses to affect corporate profitability and increased demand
for domestic li:uidity putting pressure on the interest rates.
6onsumer demand in developed economies is certain to be hurt by the present crisis, leading to
lo7er demand for Indian goods and services, thus affecting the Indian e'ports.
The impact of 7hich, once again, 7ill be three,fold: &'port,oriented units 7ill be the 7orst hit
impacting employmentK reduced e'ports 7ill further 7iden the trade gap to put pressure on rupee
e'change rate and intervention leading to suc*ing out li:uidity and pressure on interest rates.
T$e im8#t on t$e finn#i% m(7ets @i%% 6e t$e fo%%o@in!: &:uity mar*et 7ill continue to
remain in bearish mood 7ith reduced off,shore flo7s, limited domestic appetite due to li:uidity
pressure and pressure on corporate earningsK 7hile the inflation 7ould stay under control,
increased demand for domestic li:uidity 7ill push interest rates higher and 7e are li*ely to
7itness gradual rupee depreciation and depleted currency reserves. Fverall, 7hile +!I 7ould
inject li:uidity through 6++8S)+ cuts, maintaining gro7th beyond /I 7ill be a struggle.
The ban*ing sector 7ill have the least impact as high interest rates, increased demand for rupee
loans and reduced statutory reserves 7ill lead to improved EI 7hile, on the other hand, other
income from cross,border business flo7s and distribution of investment products 7ill ta*e a hit.
!an*s 7ith capabilities to generate lo7 cost 6"S" and ?ero cost float funds 7ill gain the most
as revenues from financial intermediation 7ill drive the ban*sS profitability.
Hiven the dependence on foreign funds and off,shore consumer demand for the India gro7th
story, India cannot 7ish a7ay from the negative impact of the present global financial crisis but
should :uic*ly focus on alternative remedial measures to limit damage and loo* in,7ards to
sustain gro7thV
Ro%e of #8it% m(7et "u(in! t$e 8(esent #(isis9
In addition to resource allocation, capital mar*ets also provided a medium for ris* management
by allo7ing the diversification of ris* in the economy. The 7ell,functioning capital mar*et
improved information :uality as it played a major role in encouraging the adoption of stronger
corporate governance principles, thus supporting a trading environment, 7hich is founded on
integrity.
li:uid mar*ets ma*e it possible to obtain financing for capital,intensive projects 7ith long
gestation periods..
Dor a long time, the Indian mar*et 7as considered too small to 7arrant much attention. ;o7ever,
this vie7 has changed rapidly as vast amounts of international investment have poured into our
mar*ets over the last decade. The Indian mar*et is no longer vie7ed as a static universe but as a
constantly evolving mar*et providing attractive opportunities to the global investing community.
Eo7 during the present financial crisis, 7e sa7 ho7 capital mar*et stood still as the symbol of
better ris* management practices adopted by the Indians. Though 7e observed a huge fall in the
sense' and other stoc* mar*et indicators but that 7as all due to lo7 confidence among the
investors. !ecause balance sheet of most of the Indian companies listed in the sense' 7ere
reflecting profit even then people *ept on 7ithdra7ing money.
=hile there 7as a panic in the capital mar*et due to 7ithdra7al by the DIIs, 7e sa7 Indian
institutional investors li*e insurance and mutual funds coming for the rescue under S&!I
guidelines so that the confidence of the investors doesnSt go lo7.
S&!I also came up 7ith various norms including more liberal policies regarding participatory
notes, restricting the e'it from close ended mutual funds etc. to boost the investment.
=hile tal*ing about currency crisis, the rupee *ept on depreciating against the dollar mainly due
to the 7ithdra7als by DIIs. So , the capital mar*et tried to attract DIIs once again. S&!I came up
7ith many revolutionary reforms to attract the foreign investors so that the depreciation of rupee
could be put to hault.
,ACTORS
A,,ECTIN)
CAPITAL MARKET
IN IN+IA
The capital mar*et is affected by a range of factors . Some of the factors 7hich influence capital
mar*et are as follo7s:,
A)Pe(fo(mn#e of "omesti# #om8nies9-
The performance of the companies or rather corporate earnings is one of the factors
7hich has direct impact or effect on capital mar*et in a country. =ea* corporate earnings
indicate that the demand for goods and services in the economy is less due to slo7 gro7th in
per capita income of people . !ecause of slo7 gro7th in demand there is slo7 gro7th in
employment 7hich means slo7 gro7th in demand in the near future. Thus 7ea* corporate
earnings indicate average or not so good prospects for the economy as a 7hole in the near term.
In such a scenario the investors # both domestic as 7ell as foreign $ 7ould be 7ary to invest in
the capital mar*et and thus there is bear mar*et li*e situation. The opposite case of it 7ould be
robust corporate earnings and itSs positive impact on the capital mar*et.
The corporate earnings for the "pril T June :uarter for the current fiscal has been good.
The companies li*e T6S, Infosys,aruti Su?u*i, !harti "irtel, "66, IT6, =ipro,;JD6,!inani
cement, IJ&", arico 6anara !an*, Piramal ;ealth, India cements , Ultra Tech, )9T, 6oca,
6ola, <es !an*, Jr. +eddySs )aboratories, Friental !an* of 6ommerce, +anba'y, Dortis, Shree
6ement ,etc have registered gro7th in net profit compared to the corresponding :uarter a year
ago. Thus 7e see companies from Infrastructure sector, Dinancial Services, Pharmaceutical
sector, IT Sector, "utomobile sector, etc. doing 7ell . This across the sector gro7th indicates that
the Indian economy is on the path of recovery 7hich has been positively reflected in the stoc*
mar*et# rise in sense' 9 nifty$ in the last t7o 7ee*s. #July 3(,July 0.$.
/) En;i(onment% ,#to(s 9-
&nvironmental Dactor in IndiaSs conte't primarily means, onsoon . In India around 1> I of
agricultural production is dependent on monsoon. Thus there is heavy dependence on monsoon.
The major chun* of agricultural production comes from the states of Punjab , ;aryana 9 Uttar
Pradesh. Thus deficient or delayed monsoon in this part of the country 7ould directly affect the
agricultural output in the country. "part from monsoon other natural calamities li*e Dloods,
tsunami, drought, earth:ua*e, etc. also have an impact on the capital mar*et of a country.
The Indian et Jepartment #IJ$ on 0.
th
June stated that India 7ould receive only -( I
rainfall of )ong Period "verage #)P"$. This piece of ne7s directly had an impact on Indian
capital mar*et 7ith !S& Sense' falling by >.2 I on the 02
th
June . The major losers 7ere
automa*ers and consumer goods firms since the belo7 normal monsoon forecast triggered
concerns that demand in the crucial rural heartland 7ould ta*e a hit. This is because a
deficient monsoon could seriously s:uee?e rural incomes, reduce the demand for everything
from motorbi*es to soaps and 7orsen a slo7ing economy.
C) M#(o E#onomi# Num6e(s 9-
The macro economic numbers also influence the capital mar*et. It includes Inde' of Industrial
Production #IIP$ 7hich is released every month, annual Inflation number indicated by =holesale
Price Inde' #=PI$ 7hich is released every 7ee*, &'port T Import numbers 7hich are declared
every month, 6ore Industries gro7th rate # It includes Si' 6ore infrastructure industries T 6oal,
6rude oil, refining, po7er, cement and finished steel$ 7hich comes out every month, etc. This
macro Teconomic indicators indicate the state of the economy and the direction in 7hich the
economy is headed and therefore impacts the capital mar*et in India.
" case in the point 7as declaration of core industries gro7th figure. The si' 6ore Infrastructure
Industries T 6oal, 6rude oil, refining, finished steel, po7er 9 cement Tgre7 1.2I in June , the
figure came on the 0( rd of July and had a positive impact on the capital mar*et 7ith the
Sense' and nifty rising by (AA points 9 302 points respectively.
+) )%o6% Cues 9-
In this 7orld of globali?ation various economies are interdependent and interconnected. "n
event in one part of the 7orld is bound to affect other parts of the 7orld , ho7ever the
magnitude and intensity of impact 7ould vary.
Thus capital mar*et in India is also affected by developments in other parts of the 7orld i.e.
U.S. , &urope, Japan , etc.
Hlobal cues includes corporate earnings of E6Ss, consumer confidence inde' in developed
countries, jobless claims in developed countries, global gro7th outloo* given by various
agencies li*e ID, economic gro7th of major economies, price of crude Toil, credit rating of
various economies given by oodySs, S 9 P, etc.
"n obvious e'ample at this point in time 7ould be that of subprime crisis 9 recession.
+ecession started in U.S. and some parts of the &urope in early 0>>A .Since then it has impacted
all the countries of the 7orld, developed, developing, less, developed and even emerging
economies.
E) Po%iti#% st6i%it& n" !o;e(nment 8o%i#ies9-
Dor any economy to achieve and sustain gro7th it has to have political stability and pro, gro7th
government policies. This is because 7hen there is political stability there is stability and
consistency in governmentSs attitude 7hich is communicated through various government
policies. The vice, versa is the case 7hen there is no political stability .So capital mar*et also
reacts to the nature of government, attitude of government, and various policies of the
government.
The above statement can be substantiated by the fact the 7hen the mandate came in UP"
governmentSs favor # =ithout the baggage of left party$ on ay 31 0>>-, the stoc* mar*ets on
onday , 3A
th
ay had a bullish rally 7ith Sense' closing A>> point higher over the previous
daySs close. The reason 7as political stability. "lso 7ithout the baggage of left party government
can go ahead 7ith reforms.
,) )(o@t$ 8(os8e#tus of n e#onom&9-
=hen the national income of the country increases and per capita income of people increases it
is said that the economy is gro7ing. ;igher income also means higher e'penditure and higher
savings. This augurs 7ell for the economy as higher e'penditure means higher demand and
higher savings means higher investment. Thus 7hen an economy is gro7ing at a good pace
capital mar*et of the country attracts more money from investors, both from 7ithin and outside
the country and vice ,versa. So 7e can say that gro7th prospects of an economy do have an
impact on capital mar*ets.
)) In;esto( Sentiment n" (is7 88etite 9-
"nother factor 7hich influences capital mar*et is investor sentiment and their ris* appetite
.&ven if the investors have the money to invest but if they are not confident about the returns
from their investment , they may stay a7ay from investment for some time."t the same time if
the investors have lo7 ris* appetite , 7hich they 7ere having in global and Indian capital
mar*et some four to five months bac* due to global financial meltdo7n and recessionary
situation in U.S. 9 some parts of &urope , they may stay a7ay from investment and 7ait for the
right time to come.
IN+IAN STOCK MARKET AN OBERBIE5
E;o%ution
Indian Stoc* ar*ets are one of the oldest in "sia. Its history dates bac* to nearly 0>> years ago.
The earliest records of security dealings in India are meagre and obscure. The &ast India
6ompany 7as the dominant institution in those days and business in its loan securities used to be
transacted to7ards the close of the eighteenth century.
!y 3A(>Ls business on corporate stoc*s and shares in !an* and 6otton presses too* place in
!ombay. Though the trading list 7as broader in 3A(-, there 7ere only half a do?en bro*ers
recogni?ed by ban*s and merchants during 3A.> and 3A2>.
The 3A2>Ls 7itnessed a rapid development of commercial enterprise and bro*erage business
attracted many men into the field and by 3A1> the number of bro*ers increased into 1>.
In 3A1>,13 the "merican 6ivil =ar bro*e out and cotton supply from United States of &urope
7as stoppedK thus, the LShare aniaL in India begun. The number of bro*ers increased to about
0>> to 02>. ;o7ever, at the end of the "merican 6ivil =ar, in 3A12, a disastrous slump began
#for e'ample, !an* of !ombay Share 7hich had touched +s 0A2> could only be sold at +s. A/$.
"t the end of the "merican 6ivil =ar, the bro*ers 7ho thrived out of 6ivil =ar in 3A/., found a
place in a street #no7 appropriately called as Jalal Street$ 7here they 7ould conveniently
assemble and transact business. In 3AA/, they formally established in !ombay, the GEative Share
and Stoc* !ro*ersL "ssociationG #7hich is alternatively *no7n as G The Stoc* &'change G$. In
3A-2, the Stoc* &'change ac:uired a premise in the same street and it 7as inaugurated in 3A--.
Thus, the Stoc* &'change at !ombay 7as consolidated.
Ot$e( %e"in! #ities in sto#7 m(7et o8e(tions
"hmedabad gained importance ne't to !ombay 7ith respect to cotton te'tile industry. "fter
3AA>, many mills originated from "hmedabad and rapidly forged ahead. "s ne7 mills 7ere
floated, the need for a Stoc* &'change at "hmedabad 7as reali?ed and in 3A-. the bro*ers
formed GThe "hmedabad Share and Stoc* !ro*ersL "ssociationG.
=hat the cotton te'tile industry 7as to !ombay and "hmedabad, the jute industry 7as to
6alcutta. "lso tea and coal industries 7ere the other major industrial groups in 6alcutta. "fter
the Share ania in 3A13,12, in the 3A/>Ls there 7as a sharp boom in jute shares, 7hich 7as
follo7ed by a boom in tea shares in the 3AA>Ls and 3A->LsK and a coal boom bet7een 3->. and
3->A. Fn June 3->A, some leading bro*ers formed GThe 6alcutta Stoc* &'change "ssociationG.
In the beginning of the t7entieth century, the industrial revolution 7as on the 7ay in India 7ith
the S7adeshi ovementK and 7ith the inauguration of the Tata Iron and Steel 6ompany )imited
in 3->/, an important stage in industrial advancement under Indian enterprise 7as reached.
Indian cotton and jute te'tiles, steel, sugar, paper and flour mills and all companies generally
enjoyed phenomenal prosperity, due to the Dirst =orld =ar.
In 3-0>, the then demure city of adras had the maiden thrill of a stoc* e'change functioning in
its midst, under the name and style of GThe adras Stoc* &'changeG 7ith 3>> members.
;o7ever, 7hen boom faded, the number of members stood reduced from 3>> to (, by 3-0(, and
so it 7ent out of e'istence.
In 3-(2, the stoc* mar*et activity improved, especially in South India 7here there 7as a rapid
increase in the number of te'tile mills and many plantation companies 7ere floated. In 3-(/, a
stoc* e'change 7as once again organi?ed in adras , adras Stoc* &'change "ssociation #Pvt$
)imited. #In 3-2/ the name 7as changed to adras Stoc* &'change )imited$.
)ahore Stoc* &'change 7as formed in 3-(. and it had a brief life. It 7as merged 7ith the
Punjab Stoc* &'change )imited, 7hich 7as incorporated in 3-(1.
In"in Sto#7 E>#$n!es - An *m6(e%% )(o@t$
The Second =orld =ar bro*e out in 3-(-. It gave a sharp boom 7hich 7as follo7ed by a slump.
!ut, in 3-.(, the situation changed radically, 7hen India 7as fully mobili?ed as a supply base.
Fn account of the restrictive controls on cotton, bullion, seeds and other commodities, those
dealing in them found in the stoc* mar*et as the only outlet for their activities. They 7ere
an'ious to join the trade and their number 7as s7elled by numerous others. any ne7
associations 7ere constituted for the purpose and Stoc* &'changes in all parts of the country
7ere floated.
The Uttar Pradesh Stoc* &'change )imited #3-.>$, Eagpur Stoc* &'change )imited #3-.>$ and
;yderabad Stoc* &'change )imited #3-..$ 7ere incorporated.
In Jelhi t7o stoc* e'changes , Jelhi Stoc* and Share !ro*ersL "ssociation )imited and the
Jelhi Stoc*s and Shares &'change )imited , 7ere floated and later in June 3-./, amalgamated
into the Jelhi Stoc* &'change "ssociation )imited.
Post-in"e8en"en#e S#en(io
ost of the e'changes suffered almost a total eclipse during depression. )ahore &'change 7as
closed during partition of the country and later migrated to Jelhi and merged 7ith Jelhi Stoc*
&'change.
!angalore Stoc* &'change )imited 7as registered in 3-2/ and recogni?ed in 3-1(.
ost of the other e'changes languished till 3-2/ 7hen they applied to the 6entral Hovernment
for recognition under the Securities 6ontracts #+egulation$ "ct, 3-21. Fnly !ombay, 6alcutta,
adras, "hmedabad, Jelhi, ;yderabad and Indore, the 7ell,established e'changes, 7ere
recogni?ed under the "ct. Some of the members of the other "ssociations 7ere re:uired to be
admitted by the recogni?ed stoc* e'changes on a concessional basis, but acting on the principle
of unitary control, all these pseudo stoc* e'changes 7ere refused recognition by the Hovernment
of India and they thereupon ceased to function.
Thus, during early si'ties there 7ere eight recogni?ed stoc* e'changes in India #mentioned
above$. The number virtually remained unchanged, for nearly t7o decades. Juring eighties,
ho7ever, many stoc* e'changes 7ere established: 6ochin Stoc* &'change #3-A>$, Uttar Pradesh
Stoc* &'change "ssociation )imited #at %anpur, 3-A0$, and Pune Stoc* &'change )imited
#3-A0$, )udhiana Stoc* &'change "ssociation )imited #3-A($, Hauhati Stoc* &'change )imited
#3-A.$, %anara Stoc* &'change )imited #at angalore, 3-A2$, agadh Stoc* &'change
"ssociation #at Patna, 3-A1$, Jaipur Stoc* &'change )imited #3-A-$, !hubanes7ar Stoc*
&'change "ssociation )imited #3-A-$, Saurashtra %utch Stoc* &'change )imited #at +aj*ot,
3-A-$, Oadodara Stoc* &'change )imited #at !aroda, 3-->$ and recently established e'changes ,
6oimbatore and eerut. Thus, at present, there are totally t7enty one recogni?ed stoc*
e'changes in India e'cluding the Fver The 6ounter &'change of India )imited #FT6&I$ and the
Eational Stoc* &'change of India )imited #ES&I)$.
The Table given belo7 portrays the overall gro7th pattern of Indian stoc* mar*ets since
independence. It is :uite evident from the Table that Indian stoc* mar*ets have not only gro7n
just in number of e'changes, but also in number of listed companies and in capital of listed
companies. The remar*able gro7th after 3-A2 can be clearly seen from the Table, and this 7as
due to the favoring government policies to7ards security mar*et industry.
)(o@t$ Ptte(n of t$e In"in Sto#7 M(7et
Sl.Eo.
"s on (3st
Jecember
3-.1 3-13 3-/3 3-/2 3-A> 3-A2 3--3 3--2
3
Eo. of
Stoc* &'changes
/ / A A - 3. 0> 00
0
Eo. of
)isted 6os.
3302 30>( 32-- 3220 0012 .(.. 100- A2-(
(
Eo. of Stoc*
Issues of
)isted 6os.
32>1 0333 0A(A (0(> (1-/ 13/. A-1/ 33/A.
.
6apital of )isted
6os. #6r. +s.$
0/> /2( 3A30 013. (-/( -/0( (0>.3 2-2A(
2
ar*et value of
6apital of )isted
6os. #6r. +s.$
-/3 30-0 01/2 (0/( 1/2> 02(>0 33>0/- ./A303
1
6apital per
)isted 6os. #.80$
#)a*h +s.$
0. 1( 33( 31A 3/2 00. 23. 1-(
/
ar*et Oalue of
6apital per )isted
6os. #)a*h +s.$
#280$
A1 3>/ 31/ 033 0-A 2A0 3//> 221.
A
"ppreciated value
of 6apital per
)isted 6os. #)a* +s.$
(2A 3/> 3.A 301 3/> 01> (.. A>(
T("in! Ptte(n of t$e In"in Sto#7 M(7et
Trading in Indian stoc* e'changes are limited to listed securities of public limited companies.
They are broadly divided into t7o categories, namely, specified securities #for7ard list$ and non,
specified securities #cash list$. &:uity shares of dividend paying, gro7th,oriented companies
7ith a paid,up capital of at least +s.2> million and a mar*et capitali?ation of at least +s.3>>
million and having more than 0>,>>> shareholders are, normally, put in the specified group and
the balance in non,specified group.
T7o types of transactions can be carried out on the Indian stoc* e'changes: #a$ spot delivery
transactions Gfor delivery and payment 7ithin the time or on the date stipulated 7hen entering
into the contract 7hich shall not be more than 3. days follo7ing the date of the contractG : and
#b$ for7ard transactions Gdelivery and payment can be e'tended by further period of 3. days
each so that the overall period does not e'ceed -> days from the date of the contractG. The latter
is permitted only in the case of specified shares. The bro*ers 7ho carry over the outstanding pay
carry over charges #cantango or bac*7ardation$ 7hich are usually determined by the rates of
interest prevailing.
" member bro*er in an Indian stoc* e'change can act as an agent, buy and sell securities for his
clients on a commission basis and also can act as a trader or dealer as a principal, buy and sell
securities on his o7n account and ris*, in contrast 7ith the practice prevailing on Ee7 <or* and
)ondon Stoc* &'changes, 7here a member can act as a jobber or a bro*er only.
The nature of trading on Indian Stoc* &'changes are that of age old conventional style of face,
to,face trading 7ith bids and offers being made by open outcry. ;o7ever, there is a great amount
of effort to moderni?e the Indian stoc* e'changes in the very recent times.
O;e( T$e Counte( E>#$n!e of In"i (OTCEI)
The traditional trading mechanism prevailed in the Indian stoc* mar*ets gave 7ay to many
functional inefficiencies, such as, absence of li:uidity, lac* of transparency, unduly long
settlement periods and benami transactions, 7hich affected the small investors to a great e'tent.
To provide improved services to investors, the countryLs first ringless, scripless, electronic stoc*
e'change , FT6&I , 7as created in 3--0 by countryLs premier financial institutions , Unit Trust
of India, Industrial 6redit and Investment 6orporation of India, Industrial Jevelopment !an* of
India, S!I 6apital ar*ets, Industrial Dinance 6orporation of India, Heneral Insurance
6orporation and its subsidiaries and 6an!an* Dinancial Services.
Trading at FT6&I is done over the centers spread across the country. Securities traded on the
FT6&I are classified into:
)isted Securities , The shares and debentures of the companies listed on the FT6 can be
bought or sold at any FT6 counter all over the country and they should not be listed
any7here else
Permitted Securities , 6ertain shares and debentures listed on other e'changes and units
of mutual funds are allo7ed to be traded
Initiated debentures , "ny e:uity holding at least one la*h debentures of a particular scrip
can offer them for trading on the FT6.
FT6 has a uni:ue feature of trading compared to other traditional e'changes. That is, certificates
of listed securities and initiated debentures are not traded at FT6. The original certificate 7ill be
safely 7ith the custodian. !ut, a counter receipt is generated out at the counter 7hich substitutes
the share certificate and is used for all transactions.
In the case of permitted securities, the system is similar to a traditional stoc* e'change. The
difference is that the delivery and payment procedure 7ill be completed 7ithin 3. days.
6ompared to the traditional &'changes, FT6 &'change net7or* has the follo7ing advantages:
FT6&I has 7idely dispersed trading mechanism across the country 7hich provides
greater li:uidity and lesser ris* of intermediary charges.
Hreater transparency and accuracy of prices is obtained due to the screen,based scripless
trading.
Since the e'act price of the transaction is sho7n on the computer screen, the investor gets
to *no7 the e'act price at 7hich s8he is trading.
Daster settlement and transfer process compared to other e'changes.
In the case of an FT6 issue #ne7 issue$, the allotment procedure is completed in a month
and trading commences after a month of the issue closure, 7hereas it ta*es a longer
period for the same 7ith respect to other e'changes.
Thus, 7ith the superior trading mechanism coupled 7ith information transparency investors are
gradually becoming a7are of the manifold advantages of the FT6&I.
Ntion% Sto#7 E>#$n!e (NSE)
=ith the liberali?ation of the Indian economy, it 7as found inevitable to lift the Indian stoc*
mar*et trading system on par 7ith the international standards. Fn the basis of the
recommendations of high po7ered Pher7ani 6ommittee, the Eational Stoc* &'change 7as
incorporated in 3--0 by Industrial Jevelopment !an* of India, Industrial 6redit and Investment
6orporation of India, Industrial Dinance 6orporation of India, all Insurance 6orporations,
selected commercial ban*s and others.
Trading at ES& can be classified under t7o broad categories:
#a$ =holesale debt mar*et and
#b$ 6apital mar*et.
=holesale debt mar*et operations are similar to money mar*et operations , institutions and
corporate bodies enter into high value transactions in financial instruments such as government
securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc.
There are t7o *inds of players in ES&:
#a$ trading members and
#b$ participants.
+ecogni?ed members of ES& are called trading members 7ho trade on behalf of themselves and
their clients. Participants include trading members and large players li*e ban*s 7ho ta*e direct
settlement responsibility.
Trading at ES& ta*es place through a fully automated screen,based trading mechanism 7hich
adopts the principle of an order,driven mar*et. Trading members can stay at their offices and
e'ecute the trading, since they are lin*ed through a communication net7or*. The prices at 7hich
the buyer and seller are 7illing to transact 7ill appear on the screen. =hen the prices match the
transaction 7ill be completed and a confirmation slip 7ill be printed at the office of the trading
member.
ES& has several advantages over the traditional trading e'changes. They are as follo7s:
ES& brings an integrated stoc* mar*et trading net7or* across the nation.
Investors can trade at the same price from any7here in the country since inter,mar*et
operations are streamlined coupled 7ith the country7ide access to the securities.
Jelays in communication, late payments and the malpracticeSs prevailing in the
traditional trading mechanism can be done a7ay 7ith greater operational efficiency and
informational transparency in the stoc* mar*et operations, 7ith the support of total
computeri?ed net7or*.
Unless stoc* mar*ets provide professionali?ed service, small investors and foreign investors 7ill
not be interested in capital mar*et operations. "nd capital mar*et being one of the major source
of long,term finance for industrial projects, India cannot afford to damage the capital mar*et
path. In this regard ES& gains vital importance in the Indian capital mar*et system.
CAPITAL MARKET
E,,ICIENC.
"n effi#ient #8it% m(7et is a mar*et 7here the share prices reflect ne7 information
accurately and in real time.
6apital mar*et efficiency is judged by its success in incorporating and inducting information,
generally about the basic value of securities, into the price of securities. This basic or
fundamental value of securities is the present value of the cash flo7s e'pected in the future by
the person o7ning the securities.
The fluctuation in the value of stoc*s encourage traders to trade in a competitive manner 7ith the
objective of ma'imum profit. This results in price movements to7ards the current value of the
cash flo7s in the future. The information is very easily available at cheap rates because of the
presence of organi?ed mar*ets and various technological innovations. "n efficient capital mar*et
incorporates information :uic*ly and accurately into the prices of securities.
In the 7ea*,form efficient capital mar*et, information about the history of previous returns and
prices are reflected fully in the security pricesK the returns from stoc*s in this type of mar*et are
unpredictable.
In the semi strong,form efficient mar*et, the public information is completely reflected in
security pricesK in this mar*et, those traders 7ho have non,public information access can earn
e'cess profits.
In the strong,form efficient mar*et, under no circumstances can investors earn e'cess profits
because all of the information is incorporated into the security prices.
The funds that are flo7ing in capital mar*ets, from savers to the firms 7ith the aim of financing
projects, must flo7 into the best and top valued projects and, therefore, informational efficiency
is of supreme importance. Stoc*s must be efficiently priced, because if the securities are priced
accurately, then those investors 7ho do not have time for mar*et analysis 7ould feel confident
about ma*ing investments in the capital mar*et.
&ugene Dama 7as one of the earliest to theori?e capital mar*et efficiency, but empirical tests of
capital mar*et efficiency had begun even before that.
Effi#ient-m(7et $&8ot$esis
In finance, the effi#ient-m(7et $&8ot$esis #EM-$ asserts that financial mar*ets are
Ginformationally efficientG. That is, one cannot consistently achieve returns in e'cess of average
mar*et returns on a ris*,adjusted basis, given the information publicly available at the time the
investment is made.
There are three major versions of the hypothesis: G7ea*G, Gsemi,strongG, and GstrongG. =ea*
&; claims that prices on traded assets #e.g., stoc*s, bonds, or property$ already reflect all past
publicly available information. Semi,strong &; claims both that prices reflect all publicly
available information and that prices instantly change to reflect ne7 public information. Strong
&; additionally claims that prices instantly reflect even hidden or GinsiderG information. There
is evidence for and against the 7ea* and semi,strong &;s, 7hile there is po7erful evidence
against strong &;.
The validity of the hypothesis has been :uestioned by critics 7ho blame the belief in rational
mar*ets for much of the financial crisis of 0>>/T0>3>. Jefenders of the &; caution that
conflating mar*et stability 7ith the &; is un7arrantedK 7hen publicly available information is
unstable, the mar*et can be just as unstable
.
-isto(i#% 6#7!(oun"
The efficient,mar*et hypothesis 7as first e'pressed by )ouis !achelier, a Drench mathematician,
in his 3->> dissertation, GThe Theory of SpeculationG. ;is 7or* 7as largely ignored until the
3-2>sK ho7ever beginning in the (>s scattered, independent 7or* corroborated his thesis. "
small number of studies indicated that US stoc* prices and related financial series follo7ed a
random 7al* model.
B2C
+esearch by "lfred 6o7les in the S(>s and S.>s suggested that
professional investors 7ere in general unable to outperform the mar*et.
The efficient,mar*et hypothesis 7as developed by Professor &ugene Dama at the University of
6hicago !ooth School of !usiness as an academic concept of study through his published Ph.J.
thesis in the early 3-1>s at the same school. It 7as 7idely accepted up until the 3-->s, 7hen
behavioral finance economists, 7ho 7ere a fringe element, became mainstream. &mpirical
analyses have consistently found problems 7ith the efficient,mar*et hypothesis, the most
consistent being that stoc*s 7ith lo7 price to earnings #and similarly, lo7 price to cash,flo7 or
boo* value$ outperform other stoc*s. "lternative theories have proposed that cognitive biases
cause these inefficiencies, leading investors to purchase overpriced gro7th stoc*s rather than
value stoc*s. "lthough the efficient,mar*et hypothesis has become controversial because
substantial and lasting inefficiencies are observed, !eechey et al. #0>>>$ consider that it remains
a 7orth7hile starting point.
The efficient,mar*et hypothesis emerged as a prominent theory in the mid,3-1>s. Paul
Samuelson had begun to circulate !achelierLs 7or* among economists. In 3-1. !achelierLs
dissertation along 7ith the empirical studies mentioned above 7ere published in an anthology
edited by Paul 6ootner. In 3-12 &ugene Dama published his dissertation arguing for the random
7al* hypothesis, and Samuelson published a proof for a version of the efficient,mar*et
hypothesis. In 3-/> Dama published a revie7 of both the theory and the evidence for the
hypothesis. The paper e'tended and refined the theory, included the definitions for three forms of
financial mar*et efficiency: 7ea*, semi,strong and strong #see belo7$.
Durther to this evidence that the U% stoc* mar*et is 7ea*,form efficient, other studies of capital
mar*ets have pointed to7ard their being semi,strong,form efficient. " study by %han of the
grain futures mar*et indicated semi,strong form efficiency follo7ing the release of large trader
position information #%han, 3-A1$. Studies by Dirth #3-/1, 3-/-, and 3-A>$ in the United
%ingdom have compared the share prices e'isting after a ta*eover announcement 7ith the bid
offer. Dirth found that the share prices 7ere fully and instantaneously adjusted to their correct
levels, thus concluding that the U% stoc* mar*et 7as semi,strong,form efficient. ;o7ever, the
mar*etLs ability to efficiently respond to a short term, 7idely publici?ed event such as a ta*eover
announcement does not necessarily prove mar*et efficiency related to other more long term,
amorphous factors. Javid Jreman has critici?ed the evidence provided by this instant GefficientG
response, pointing out that an immediate response is not necessarily efficient, and that the long,
term performance of the stoc* in response to certain movements is better indications. " study on
stoc*s response to dividend cuts or increases over three years found that after an announcement
of a dividend cut, stoc*s underperformed the mar*et by 32.(I for the three,year period, 7hile
stoc*s outperformed 0..AI for the three years after7ard after a dividend increase announcement.
T$eo(eti#% 6#7!(oun"
!eyond the normal utility ma'imi?ing agents, the efficient,mar*et hypothesis re:uires that
agents have rational e'pectationsK that on average the population is correct #even if no one
person is$ and 7henever ne7 relevant information appears, the agents update their e'pectations
appropriately. Eote that it is not re:uired that the agents be rational. &; allo7s that 7hen
faced 7ith ne7 information, some investors may overreact and some may underreact. "ll that is
re:uired by the &; is that investorsL reactions be random and follo7 a normal distribution
pattern so that the net effect on mar*et prices cannot be reliably e'ploited to ma*e an abnormal
profit, especially 7hen considering transaction costs #including commissions and spreads$. Thus,
any one person can be 7rong about the mar*etMindeed, everyone can beMbut the mar*et as a
7hole is al7ays right. There are three common forms in 7hich the efficient,mar*et hypothesis is
commonly statedM@e7-fo(m effi#ien#&, semi-st(on!-fo(m effi#ien#& and st(on!-fo(m
effi#ien#&, each of 7hich has different implications for ho7 mar*ets 7or*.
In @e7-fo(m effi#ien#&, future prices cannot be predicted by analy?ing price from the past.
&'cess returns cannot be earned in the long run by using investment strategies based on
historical share prices or other historical data. Technical analysis techni:ues 7ill not be able to
consistently produce e'cess returns, though some forms of fundamental analysis may still
provide e'cess returns. Share prices e'hibit no serial dependencies, meaning that there are no
GpatternsG to asset prices. This implies that future price movements are determined entirely by
information not contained in the price series. ;ence, prices must follo7 a random 7al*. This
LsoftL &; does not re:uire that prices remain at or near e:uilibrium, but only that mar*et
participants not be able to systematically profit from mar*et LinefficienciesL. ;o7ever, 7hile
&; predicts that all price movement #in the absence of change in fundamental information$ is
random #i.e., non,trending$, many studies have sho7n a mar*ed tendency for the stoc* mar*ets
to trend over time periods of 7ee*s or longer and that, moreover, there is a positive correlation
bet7een degree of trending and length of time period studied #but note that over long time
periods, the trending is sinusoidal in appearance$. Oarious e'planations for such large and
apparently non,random price movements have been promulgated. !ut the best e'planation seems
to be that the distribution of stoc* mar*et prices is non,Haussian #in 7hich case &;, in any of
its current forms, 7ould not be strictly applicable$.
The problem of algorithmically constructing prices 7hich reflect all available information has
been studied e'tensively in the field of computer science. Dor e'ample, the comple'ity of finding
the arbitrage opportunities in pair betting mar*ets has been sho7n to be EP,hard.
In semi-st(on!-fo(m effi#ien#&, it is implied that share prices adjust to publicly available ne7
information very rapidly and in an unbiased fashion, such that no e'cess returns can be earned by
trading on that information. Semi,strong,form efficiency implies that neither fundamental
analysis nor technical analysis techni:ues 7ill be able to reliably produce e'cess returns. To test
for semi,strong,form efficiency, the adjustments to previously un*no7n ne7s must be of a
reasonable si?e and must be instantaneous. To test for this, consistent up7ard or do7n7ard
adjustments after the initial change must be loo*ed for. If there are any such adjustments it
7ould suggest that investors had interpreted the information in a biased fashion and hence in an
inefficient manner.
In st(on!-fo(m effi#ien#&, share prices reflect all information, public and private, and no one
can earn e'cess returns. If there are legal barriers to private information becoming public, as 7ith
insider trading la7s, strong,form efficiency is impossible, e'cept in the case 7here the la7s are
universally ignored. To test for strong,form efficiency, a mar*et needs to e'ist 7here investors
cannot consistently earn e'cess returns over a long period of time. &ven if some money
managers are consistently observed to beat the mar*et, no refutation even of strong,form
efficiency follo7s: 7ith hundreds of thousands of fund managers 7orld7ide, even a normal
distribution of returns #as efficiency predicts$ should be e'pected to produce a fe7 do?en GstarG
performers.
M*T*AL ,*N+S AS
A PART O,
CAPITAL MARKET
INTRO+*CTION TO M*T*AL ,*N+ AN+ ITS BARIO*S ASPECTS
utual fund is a trust that pools the savings of a number of investors 7ho share a common
financial goal. This pool of money is invested in accordance 7ith a stated objective. The joint
o7nership of the fund is thus 4utual5, i.e. the fund belongs to all investors. The money thus
collected is then invested in capital mar*et instruments such as shares, debentures and other
securities. The income earned through these investments and the capital appreciations reali?ed
are shared by its unit holders in proportion the number of units o7ned by them. Thus a utual
Dund is the most suitable investment for the common man as it offers an opportunity to invest in
a diversified, professionally managed bas*et of securities at a relatively lo7 cost. " utual Dund
is an investment tool that allo7s small investors access to a 7ell,diversified portfolio of e:uities,
bonds and other securities. &ach shareholder participates in the gain or loss of the fund. Units are
issued and can be redeemed as needed. The fundSs Eet "sset value #E"O$ is determined each
day.
Investments in securities are spread across a 7ide cross,section of industries and sectors and
thus the ris* is reduced. Jiversification reduces the ris* because all stoc*s may not move in the
same direction in the same proportion at the same time. utual fund issues units to the investors
in accordance 7ith :uantum of money invested by them. Investors of mutual funds are *no7n as
unit holders.
=hen an investor subscribes for the units of a mutual fund, he becomes part
o7ner of the assets of the fund in the same proportion as his contribution amount
put up 7ith the corpus #the total amount of the fund$. utual Dund investor is also
*no7n as a mutual fund shareholder or a unit holder.
"ny change in the value of the investments made into capital mar*et instruments
#such as shares, debentures etc$ is reflected in the Eet "sset Oalue #E"O$ of the
scheme. E"O is defined as the mar*et value of the utual Dund schemeLs assets
net of its liabilities. E"O of a scheme is calculated by dividing the mar*et value
of schemeLs assets by the total number of units issued to the investors.
A+BANTA)ES O, M*T*AL ,*N+
Portfolio Jiversification
Professional management
+eduction 8 Jiversification of +is*
)i:uidity
Dle'ibility 9 6onvenience
+eduction in Transaction cost
Safety of regulated environment
6hoice of schemes
Transparency
+ISA+BANTA)E O, M*T*AL ,*N+
Eo control over 6ost in the ;ands of an Investor
Eo tailor,made Portfolios
anaging a Portfolio Dunds
Jifficulty in selecting a Suitable Dund Scheme
-ISTOR. O, T-E IN+IAN M*T*AL ,*N+ IN+*STR.
The mutual fund industry in India started in 3-1( 7ith the formation of Unit Trust
of India, at the initiative of the Hovernment of India and +eserve !an*. Though
the gro7th 7as slo7, but it accelerated from the year 3-A/ 7hen non,UTI players
entered the Industry.
In the past decade, Indian mutual fund industry had seen a dramatic improvement,
both :ualities 7ise as 7ell as :uantity 7ise. !efore, the monopoly of the mar*et
had seen an ending phaseK the "ssets Under anagement #"U$ 7as +s1/
billion. The private sector entry to the fund family raised the "um to +s. ./>
billion in arch 3--( and till "pril 0>>.K it reached the height if +s. 32.> billion.
The utual Dund Industry is obviously gro7ing at a tremendous space 7ith the
mutual fund industry can be broadly put into four phases according to the
development of the sector. &ach phase is briefly described as under.
,i(st P$se C 1931-D2
Unit Trust of India #UTI$ 7as established on 3-1( by an "ct of Parliament by the
+eserve !an* of India and functioned under the +egulatory and administrative
control of the +eserve !an* of India. In 3-/A UTI 7as de,lin*ed from the +!I
and the Industrial Jevelopment !an* of India #IJ!I$ too* over the regulatory and
administrative control in place of +!I. The first scheme launched by UTI 7as
Unit Scheme 3-1.. "t the end of 3-AA UTI had +s.1,/>> crores of assets under
management.
Se#on" P$se C 19D2-1990 (Ent(& of Pu6%i# Se#to( ,un"s)
3-A/ mar*ed the entry of non, UTI, public sector mutual funds set up by public
sector ban*s and )ife Insurance 6orporation of India #)I6$ and Heneral Insurance
6orporation of India #HI6$. S!I utual Dund 7as the first non, UTI utual Dund
established in June 3-A/ follo7ed by 6anban* utual Dund #Jec A/$, Punjab
Eational !an* utual Dund #"ug A-$, Indian !an* utual Dund #Eov A-$, !an*
of India #Jun ->$, !an* of !aroda utual Dund #Fct -0$. )I6 established its
mutual fund in June 3-A- 7hile HI6 had set up its mutual fund in Jecember
3-->."t the end of 3--(, the mutual fund industry had assets under management
of +s../,>>. crores.
T$i(" P$se C 1990-2000 (Ent(& of P(i;te Se#to( ,un"s)
3--( 7as the year in 7hich the first utual Dund +egulations came into being,
under 7hich all mutual funds, e'cept UTI 7ere to be registered and governed. The
erst7hile %othari Pioneer #no7 merged 7ith Dran*lin Templeton$ 7as the first
private sector mutual fund registered in July 3--(.
The 3--( S&!I #utual Dund$ +egulations 7ere substituted by a more
comprehensive and revised utual Dund +egulations in 3--1. The industry no7
functions under the S&!I #utual Dund$ +egulations 3--1. "s at the end of
January 0>>(, there 7ere (( mutual funds 7ith total assets of +s. 3,03,A>2 crores.
,ou(t$ P$se C sin#e ,e6(u(& 2000
In Debruary 0>>(, follo7ing the repeal of the Unit Trust of India "ct 3-1( UTI
7as bifurcated into t7o separate entities. Fne is the Specified Underta*ing of the
Unit Trust of India 7ith assets under management of +s.0-,A(2 crores as at the
end of January 0>>(, representing broadly, the assets of US 1. scheme, assured
return and certain other schemes
The second is the UTI utual Dund )td, sponsored by S!I, PE!, !F! and )I6.
It is registered 7ith S&!I and functions under the utual Dund +egulations.
consolidation and gro7th. "s at the end of September, 0>>., there 7ere 0- funds,
7hich manage assets of +s.32(3>A crores under .03 schemes.
CATE)ORIES O, M*T*AL ,*N+9

utual funds can be classified as follo7 :
/se" on t$ei( st(u#tu(e9
Fpen,ended funds: Investors can buy and sell the units from the fund, at
any point of time.
6lose,ended funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments can not be made into the fund. If the
fund is listed on a stoc*s e'change the units can be traded li*e stoc*s #&.g., organ
Stanley Hro7th Dund$. +ecently, most of the Ee7 Dund Fffers of close,ended funds
provided li:uidity 7indo7 on a periodic basis such as monthly or 7ee*ly. +edemption of
units can be made during specified intervals. Therefore, such funds have relatively lo7
li:uidity.
/se" on t$ei( in;estment o6Ee#ti;e9
E=uit& fun"s: These funds invest in e:uities and e:uity related instruments.
=ith fluctuating share prices, such funds sho7 volatile performance, even losses.
;o7ever, short term fluctuations in the mar*et, generally smoothens out in the
long term, thereby offering higher returns at relatively lo7er volatility. "t the
same time, such funds can yield great capital appreciation as, historically, e:uities
have outperformed all asset classes in the long term. ;ence, investment in e:uity
funds should be considered for a period of at least (,2 years. It can be further
classified as:
i) In"e> fun"s, In this case a *ey stoc* mar*et inde', li*e !S& Sense' or Eifty
is trac*ed. Their portfolio mirrors the benchmar* inde' both in terms of
composition and individual stoc* 7eightages.
ii) E=uit& "i;e(sifie" fun"s- 3>>I of the capital is invested in e:uities spreading
across different sectors and stoc*s.
iiiF) +i;i"en" &ie%" fun"s- it is similar to the e:uity diversified funds e'cept that
they invest in companies offering high dividend yields.
i;) T$emti# fun"s- Invest 3>>I of the assets in sectors 7hich are related
through some theme.
e.g. ,"n infrastructure fund invests in po7er, construction, cements sectors etc.
;) Se#to( fun"s- Invest 3>>I of the capital in a specific sector. e.g. , " ban*ing
sector fund 7ill invest in ban*ing stoc*s.
;i) ELSS, &:uity )in*ed Saving Scheme provides ta' benefit to the investors.
/%n#e" fun"9 Their investment portfolio includes both debt and e:uity. "s a result,
on the ris*,return ladder, they fall bet7een e:uity and debt funds. !alanced funds are the
ideal mutual funds vehicle for investors 7ho prefer spreading their ris* across various
instruments. Dollo7ing are balanced funds classes:
i) +e6t-o(iente" fun"s -Investment belo7 12I in e:uities.
ii) E=uit&-o(iente" fun"s -Invest at least 12I in e:uities, remaining in debt.
+e6t fun"9 They invest only in debt instruments, and are a good option for
investors averse to idea of ta*ing ris* associated 7ith e:uities. Therefore, they
invest e'clusively in fi'ed,income instruments li*e bonds, debentures,
Hovernment of India securitiesK and money mar*et instruments such as
certificates of deposit #6J$, commercial paper #6P$ and call money. Put your
money into any of these debt funds depending on your investment hori?on and
needs.
i) Li=ui" fun"s- These funds invest 3>>I in money mar*et instruments, a large
portion being invested in call money mar*et.
ii) )i%t fun"s ST- They invest 3>>I of their portfolio in government securities of
and T,bills.
iii) ,%otin! (te fun"s - Invest in short,term debt papers. Dloaters invest in debt
instruments 7hich have variable coupon rate.
i;) A(6it(!e fun"- They generate income through arbitrage opportunities due to
mis,pricing bet7een cash mar*et and derivatives mar*et. Dunds are allocated to
e:uities, derivatives and money mar*ets. ;igher proportion #around /2I$ is put in
money mar*ets, in the absence of arbitrage opportunities.
;) )i%t fun"s LT- They invest 3>>I of their portfolio in long,term government
securities.
;i) In#ome fun"s LT- Typically, such funds invest a major portion of the
portfolio in long,term debt papers.
;ii) MIPs- onthly Income Plans have an e'posure of />I,->I to debt and an
e'posure of 3>I,(>I to e:uities.
;iii) ,MPs- fi'ed monthly plans invest in debt papers 7hose maturity is in line
7ith that of the fund.
INBESTMENT STRATE)IES
1G S&stemti# In;estment P%n9 under this a fi'ed sum is invested each month on
a fi'ed date of a month. Payment is made through post dated che:ues or direct
debit facilities. The investor gets fe7er units 7hen the E"O is high and more
units 7hen the E"O is lo7. This is called as the benefit of +upee 6ost "veraging
#+6"$
2G S&stemti# T(nsfe( P%n9 under this an investor invest in debt oriented fund
and give instructions to transfer a fi'ed sum, at a fi'ed interval, to an e:uity
scheme of the same mutual fund.
0G S&stemti# 5it$"(@% P%n9 if someone 7ishes to 7ithdra7 from a mutual
fund then he can 7ithdra7 a fi'ed amount each month.
RISK BHSG RET*RN9
RESEARC-
MET-O+OLO).
+esearch ethodology
This report is based on primary as 7ell secondary data, ho7ever primary data collection
7as given more importance since it is overhearing factor in attitude studies. Fne of the
most important users of research methodology is that it helps in identifying the problem,
collecting, analy?ing the re:uired information data and providing an alternative solution to
the problem .It also helps in collecting the vital information that is re:uired by the top
management to assist them for the better decision ma*ing both day to day decision and
critical ones.
+t sou(#es9
+esearch is totally based on primary data. Secondary data can be used only for the
reference. +esearch has been done by primary data collection, and primary data
has been collected by interacting 7ith various people. The secondary data has
been collected through various journals and 7ebsites.
+u(tion of Stu"&9
The study 7as carried out for a period of t7o months, from 3
st
July to 3(
th
July
0>3>.
Sm8%in!9
Sm8%in! 8(o#e"u(e9
The sample 7as selected of them 7ho are the customers8visitors of State !an* if
India, !oring 6anal +oad !ranch, irrespective of them being investors or not or
availing the services or not. It 7as also collected through personal visits to
persons, by formal and informal tal*s and through filling up the :uestionnaire
prepared. The data has been analy?ed by using mathematical8Statistical tool.
Sm8%e si:e9
The sample si?e of my project is limited to 0>> people only. Fut of 7hich only
30> people had invested in utual Dund. Fther 1> people did not have invested in
utual Dund.
Sm8%e "esi!n9
Jata has been presented 7ith the help of bar graph, pie charts, line graphs etc.
Limittion9

Some of the persons 7ere not so responsive.
Possibility of error in data collection because many of investors may have
not given actual ans7ers of my :uestionnaire
Sample si?e is limited to 0>> visitors of reliance mutual funds
!ranch, )udhiana out of these only 30> had invested in utual Dund. The
sample.
Si?e may not ade:uately represent the 7hole mar*et.
Some respondents 7ere reluctant to divulge personal information 7hich can
affect the validity of all responses.
The research is confined to a certain part of )udhiana.
J"T" "E")<SIS
9
IET&+P+&T"TIFE
ANAL.SIS I INTERPRETATION O, T-E +ATA
1G (A) A!e "ist(i6ution of t$e In;esto(s of Lu"$inG
"ge Hroup WX (> (3,(2 (1,.> .3,.2 .1,2> Y2>
Eo. of
Investors
30 3A (> 0. 0> 31
Inte(8(ettion9
"ccording to this chart out of 30> utual Dund investors of )udhiana the most
are in the age group of (1,.> yrs. i.e. 02I, the second most investors are in the
age group of .3,.2yrs i.e. 0>I and the least investors are in the age group of
belo7 (> yrs.
(6)G E"u#tion% <u%ifi#tion of in;esto(s of Lu"$inG
E"u#tion% <u%ifi#tion Num6e( of In;esto(s
Hraduate8 Post Hraduate AA
12
18
30
24
20
16
0
5
10
15
20
25
30
35
<=30 31-35 36-40 41-45 46-50 >50
Investors invested in Mutual
Fund
Age grou o! t"e Investors
Under Hraduate 02
Fthers /
Total 30>

Inte(8(ettion9Fut of 30> utual Dund investors /3I of the investors
in )udhiana are Hraduate8Post Hraduate, 0(I are Under Hraduate and 1I
are others #under ;S6$.
#)G O##u8tion of t$e in;esto(s of Lu"$inG
.

O##u8tion NoG of In;esto(s
Hovt. Service (>
Pvt. Service .2
!usiness (2
"griculture .
Fthers 1
Inte(8(ettion9
In Fccupation group out of 30> investors, (AI are Pvt. &mployees, 02I
are !usinessman, 0-I are Hovt. &mployees, (I are in "griculture and
2I are in others.
(")G Mont$%& ,mi%& In#ome of t$e In;esto(s of Lu"$inG
In#ome )(ou8 NoG of In;esto(s
WX3>,>>> 2
3>,>>3,32,>>>
30
32,>>3,0>,>>>
0A
0>,>>3,(>,>>>
.(
Y(>,>>>
(0
Inte(8(ettion9
In the Income Hroup of the investors of )udhiana, out of 30> investors,
(1I investors that is the ma'imum investors are in the monthly income
group +s. 0>,>>3 to +s. (>,>>>, Second one i.e. 0/I investors are in the
monthly income group of more than +s. (>,>>> and the minimum
investors i.e. .I are in the monthly income group of belo7 +s. 3>,>>>
(2) In;esto(s in;este" in "iffe(ent 7in" of in;estmentsG
%ind of Investments Eo. of +espondents
Saving "86
3-2
Di'ed deposits 3.A
Insurance 320
utual Dund 30>
Post office #ES6$ /2
Shares8Jebentures 2>
Hold8Silver (>
+eal &state 12
Inte(8(ettion9 Drom the above graph it can be inferred that out of 0>> people,
-/.2I people have invested in Saving "8c, /1I in Insurance, /.I in Di'ed
Jeposits, 1>I in utual Dund, (/.2I in Post Fffice, 02I in Shares or
Jebentures, 32I in Hold8Silver and (0.2I in +eal &state.
0G P(efe(en#e of f#to(s @$i%e in;estin!
Dactors #a$ )i:uidity #b$ )o7 +is* #c$ ;igh +eturn #d$ Trust
Eo. of
+espondents
.> 1> 1. (1

Inte(8(ettion9
Fut of 0>> People, (0I People prefer to invest 7here there is ;igh +eturn, (>I
prefer to invest 7here there is )o7 +is*, 0>I prefer easy )i:uidity and 3AI
prefer Trust
1G A@(eness 6out Mutu% ,un" n" its O8e(tions


Inte(8(ettion9
+esponse <es Eo
Eo. of +espondents 3(2 12
Drom the above chart it is inferred that 1/I People are a7are of utual Dund and
its operations and ((I are not a7are of utual Dund and its operations.
4G Sou(#e of info(mtion fo( #ustome(s 6out Mutu% ,un"
Sou(#e of info(mtion NoG of Res8on"ents
"dvertisement 3A
Peer Hroup 02
!an* (>
Dinancial "dvisors 10
Inte(8(ettion9
Drom the above chart it can be inferred that the Dinancial "dvisor is the most
important source of information about utual Dund. Fut of 3(2 +espondents,
.1I *no7 about utual fund Through Dinancial "dvisor, 00I through !an*,
3-I through Peer Hroup and 3(I through "dvertisement.
1. In;esto(s in;este" in Mutu% ,un"
Res8onse NoG of Res8on"ents
<&S 30>
EF A>
Total 0>>
Inte(8(ettion9
Fut of 0>> People, 1>I have invested in utual Dund and .>I do not have
invested in utual Dund.
2G Reson fo( not in;este" in Mutu% ,un"
Reson NoG of Res8on"ents
Eot "7are
34
;igher +is*
4
Eot any Specific +eason
10
Inte(8(ettion9
Fut of A> people, 7ho have not invested in utual Dund, A3I are not a7are of
utual Dund, 3(I said there is li*ely to be higher ris* and 1I do not have any
specific reason.
DG In;esto(s in;este" in "iffe(ent Assets Mn!ement CoG (AMC)
Nme of AMC NoG of In;esto(s
S!ID
22
UTI
/2
;JD6
(>
+eliance
/2
I6I6I Prudential
21
%ota*
.2
Fthers
/>

Inte(8(ettion9
In )udhiana most of the Investors preferred UTI and +eliance utual Dund. Fut
of 30> Investors 10.2I have invested in each of them, only .1I have invested in
S!ID, ./I in I6I6I Prudential, (/.2I in %ota* and 02I in ;JD6.
9G P(efe(en#e of In;esto(s fo( futu(e in;estment in Mutu% ,un"
Nme of AMC NoG of In;esto(s
S!ID
/1
UTI
.2
;JD6
(2
+eliance
A0
I6I6I Prudential
A>
%ota*
1>
Fthers
/2

Inte(8(ettion9 Fut of 30> investors, 1AI prefer to invest in +eliance, 1/I in
I6I6I Prudential, 1(I in S!ID, 10.2I in Fthers, 2>I in %ota*, (/.2I in UTI
and 0-I in ;JD6 utual Dund.
10G C$nne% P(efe((e" 6& t$e In;esto(s fo( Mutu% ,un"
In;estment
6hannel Dinancial "dvisor !an* "6
Eo. of +espondents /0 3A (>
Inte(8(ettion9
Fut of 30> Investors 1>I preferred to invest through Dinancial "dvisors, 02I
through "6 and 32I through !an*.
11G Mo"e of In;estment P(efe((e" 6& t$e In;esto(s
ode of Investment Fne time Investment Systematic Investment Plan #SIP$
Eo. of +espondents /A .0
Inte(8(ettion9
Fut of 30> Investors 12I preferred Fne time Investment and (2 I Preferred
through Systematic Investment Plan.
12G P(efe((e" Po(tfo%ios 6& t$e In;esto(s
Po(tfo%io NoG of In;esto(s
&:uity 21
Jebt 0>
!alanced ..
Inte(8(ettion9
Drom the above graph .1I preferred &:uity Portfolio, (/I preferred !alance and
3/I preferred Jebt portfolio
10G O8tion fo( !ettin! Retu(n P(efe((e" 6& t$e In;esto(s
Fption Jividend Payout Jividend
+einvestment
Hro7th
Eo. of +espondents 02 3> A2
Inte(8(ettion9
Drom the above graph /3I preferred Hro7th Fption, 03I preferred Jividend
Payout and AI preferred Jividend +einvestment Fption.
11G P(efe(en#e of In;esto(s @$et$e( to in;est in Se#to(i% ,un"s
Res8onse NoG of Res8on"ents
.es 24
No 94
Inte(8(ettion9
Fut of 30> investors, /-I investors do not prefer to invest in Sectorial Dund
because there is ma'imum ris* and 03I prefer to invest in Sectorial Dund.
Findings
In 6#dhiana in the ,ge 7ro#p of 3"+4' !ears were more
in n#m.ers. )he second most Investors were in the age gro#p
of 41+4 !ears and the least were in the age gro#p of .elow
3' !ears.
In 6#dhiana most of the Investors were 7rad#ate or 8ost
7rad#ate and .elow 9:C there were ver! few in n#m.ers.
In ;cc#pation gro#p most of the Investors were 7ovt.
emplo!ees* the second most Investors were 8rivate
emplo!ees and the least were associated with ,gric#lt#re.
In famil! Income gro#p* .etween Rs. 2'*''1+ 3'*'''
were more in n#m.ers* the second most were in the Income
gro#p of more than Rs.3'*''' and the least were in the gro#p
of .elow Rs. 1'*'''.
,.o#t all the Respondents had a :aving ,<c in 5ank*
$"= Invested in Fixed (eposits* ;nl! "'= Respondents
invested in M#t#al f#nd.
Mostl! Respondents preferred 9igh Ret#rn while
investment* the second most preferred 6ow Risk then li>#idit!
and the least preferred )r#st.
;nl! "$= Respondents were aware a.o#t M#t#al f#nd
and its operations and 33= were not.
,mong 2'' Respondents onl! "'= had invested in
M#t#al F#nd and 4'= did not have invested in M#t#al f#nd.
;#t of %' Respondents %1= were not aware of M#t#al
F#nd* 13= told there is not an! specific reason for not
invested in M#t#al F#nd and "= told there is likel! to .e
higher risk in M#t#al F#nd.
"'= Investors preferred to Invest thro#gh Financial
,dvisors* 2= thro#gh ,MC 2means (irect Investment3 and
1= thro#gh 5ank.
)he most preferred 8ortfolio was ?>#it!* the second
most was 5alance 2mixt#re of .oth e>#it! and de.t3* and the
least preferred 8ortfolio was (e.t portfolio.
Most of the Investors did not want to invest in :ectoral
F#nd* onl! 21= wanted to invest in :ectoral F#nd.
Con#%usion
+unning a successful utual Dund re:uires complete understanding of the
peculiarities of the Indian Stoc* ar*et and also the psyche of the small investors. This
study has made an attempt to understand the financial behavior of utual Dund investors
in connection 7ith the preferences of !rand #"6$, Products, 6hannels etc. I observed
that many of people have fear of utual Dund. They thin* their money 7ill not be secure
in utual Dund. They need the *no7ledge of utual Dund and its related terms. any of
people do not have invested in mutual fund due to lac* of a7areness although they have
money to invest. "s the a7areness and income is gro7ing the number of mutual fund
investors are also gro7ing.
4!rand5 plays important role for the investment. People invest in those 6ompanies
7here they have faith or they are 7ell *no7n 7ith them. There are many "6s in Punjab
but only some are performing 7ell due to !rand a7areness. Some "6s are not
performing 7ell although some of the schemes of them are giving good return because of
not a7areness about !rand.
Jistribution channels are also important for the investment in mutual fund.
Dinancial "dvisors are the most preferred channel for the investment in mutual fund. They
can change investorsS mind from one investment option to others. any of investors
directly invest their money through "6 because they do not have to pay entry load. Fnly
those people invest directly 7ho *no7 7ell about mutual fund and its operations and those
have time.
Su!!estions n" Re#ommen"tions
The most vital problem spotted is of ignorance. Investors should be made a7are of
the benefits. Eobody 7ill invest until and unless he is fully convinced. Investors should be
made to reali?e that ignorance is no longer bliss and 7hat they are losing by not investing.
utual funds offer a lot of benefit 7hich no other single option could offer. !ut
most of the people are not even a7are of 7hat actually a mutual fund isZ They only see it
as just another investment option. So the advisors should try to change their mindsets. The
advisors should target for more and more young investors. <oung investors as 7ell as
persons at the height of their career 7ould li*e to go for advisors due to lac* of e'pertise
and time.
utual Dund 6ompany needs to give the training of the Individual Dinancial
"dvisors about the Dund8Scheme and its objective, because they are the main source to
influence the investors.
!efore ma*ing any investment Dinancial "dvisors should first en:uire about
the ris* tolerance of the investors8customers, their need and time #ho7 long they 7ant to
invest$. !y considering these three things they can ta*e the customers into consideration.
<ounger people aged under (2 7ill be a *ey ne7 customer group into the future,
so ma*ing greater efforts 7ith younger customers 7ho sho7 some interest in investing
should pay off.
6ustomers 7ith graduate level education are easier to sell to and there is a large
untapped mar*et there. To succeed ho7ever, advisors must provide sound advice and high
:uality.
Systematic Investment Plan #SIP$ is one the innovative products launched by
"ssets anagement companies very recently in the industry. SIP is easy for monthly
salaried person as it provides the facility of do the investment in &I. Though most of the
prospects and potential investors are not a7are about the SIP. There is a large scope for the
companies to tap the salaried persons.
/I/LIO)RAP-.
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<*ESTIONNAIRE
A stu"& of 8(efe(en#es of t$e in;esto(s fo( in;estment in mutu% fun"sG
1G Pe(son% +eti%s9
#a$. Eame:,
#b$. "dd: , Phone:,
#c$. "ge:,
#d$. Pualification:,

Hraduation8PH Under Hraduate Fthers
#e$. Fccupation. Pl tic* #[$
Hovt. Ser Pvt. Ser !usiness "griculture Fthers

#g$. =hat is your monthly family income appro'imatelyZ Pl tic* #[$.
Up to
+s.3>,>>>
+s. 3>,>>3 to
32>>>
+s. 32,>>3 to
0>,>>>
+s. 0>,>>3 to
(>,>>>
+s. (>,>>3
and above

2G =hat *ind of investments you have made so farZ Pl tic* #[$. "ll applicable.
a. Saving account b. Di'ed deposits c. Insurance d. utual Dund
e. Post Fffice,ES6,
etc
f.
Shares8Jebentures
g. Hold8 Silver h. +eal &state

0G =hile investing your money, 7hich factor 7ill you preferZ
#a$ )i:uidity #b$ )o7 +is* #c$ ;igh +eturn #d$ Trust

1G "re you a7are about utual Dunds and their operationsZ Pl tic* #[$. <es Eo

4G If yes, ho7 did you *no7 about utual DundZ
a. "dvertisement b. Peer Hroup c. !an*s d. Dinancial "dvisors

3G ;ave you ever invested in utual DundZ Pl tic* #[$. <es Eo

2G If not invested in utual Dund then 7hyZ
#a$ Eot a7are of D #b$ ;igher ris* #c$ Eot any specific reason
D. If yes' in 7hich utual Dund you have investedZ Pl. tic* #[$. "ll applicable.
a. S!ID b. UTI c.
;JD6
d. +eliance e. %ota* f. Fther. specify

9. =hen you plan to invest your money in asset management co. 7hich "6 7ill you preferZ
"ssets anagement 6o.
a. S!ID
b. UTI
c. +eliance
d. ;JD6
e. %ota*
f. I6I6I
10. =hich 6hannel 7ill you prefer 7hile investing in utual DundA
#a$ Dinancial "dvisor #b$ !an* #c$ "6
11G =hen you invest in utual Dunds 7hich mode of investment 7ill you preferZ Pl. tic* #[$.
a. Fne Time Investment b. Systematic Investment Plan #SIP$

12G =hen you 7ant to invest 7hich type of funds 7ould you chooseZ
a. ;aving only debt
portfolio
b. ;aving debt 9 e:uity
portfolio.
c. Fnly e:uity portfolio.

10G ;o7 7ould you li*e to receive the returns every yearZ Pl. tic* #[$.
a. Jividend payout b. Jividend re, c. Hro7th in E"O
investment
11G Instead of general utual Dunds, 7ould you li*e to invest in sectorial fundsZ
Please tic* #[$. <es Eo


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