Professional Documents
Culture Documents
INVESTORS”
“Dissertation Report” submitted in partial fulfillment of the
requirement for the award of the degree of
Submitted By
Avinash Kumar Singh
(06RWCM6012)
Date:
Certificate from Faculty Guide
__________________
____
(Ms M Priya)
Acknowledgement
2. Research Design
3. Industry Profile
Recommendations.
Bibliography
Annexure
List of Tables
S. No Title
1 Investment preference among varies age groups
3 Types of Investment
4 Frequency of Investment
5 Basis of investment
S. No Title
1 Investment preference among varies age groups
3 Types of Investment
4 Frequency of Investment
5 Basis of investment
11
INTRODUCTION
1. Introduction:
Chapter 1
The money you earn is partly spent and the rest saved for meeting
future expenses. Instead of keeping the savings idle you may like to
use savings in order to get return on it in the future, which is known as
'investment'. There are various investment avenues such as Equity,
Bonds, Insurance, Bank Deposit etc. A Portfolio is a combination of
different investment assets mixed and matched for the purpose of
achieving an investor's goal.
The two key aspects of investment are time and risk. Sacrifice takes
place now and is certain. Benefit is expected in the future and tends to
be uncertain. In some investments (like stock options) risk element is
dominant attribute and in some investment (like govt. bonds) time is
dominant attribute .There are various factors which affects investors'
portfolio such as annual income, government policy, natural
calamities, economical changes etc.
The turnover on all markets taken together has grown nearly 19 times
from US $ 5.5 trillion in 1990 to US $ 48 trillion in 2000 before
depleting to about US $ 42 trillion in 2001.
The stock markets world wide has grown in size as well as depth:
since last one decade. During the decade 1990-2000, the world
market: capitalization/GDP ratio more than doubled from 51% to
120%. Value traded GDP rose from 29% to 103% and turn over ratio
shot up from 48% to 89%. The combined market capitalization of a
select 22 emerging economies increased US $ 339 billion in 1990 to
US $ 2.2 trillion in 2000.
The Indian Capital Market had been dormant in the 70's and 80's - 3S
witnessed unprecedented boom during the recent years. There has
been a shift of household savings from physical assets to financial
assets, particularly:" i.e. risk bearing securities such as shares and
debentures. Capital markets 3tructure has also undergone sea changes
with number of financial services and banking companies, private
limited companies coming in to the scene which lade the competition
in the market stiffer.
The stock markets world wide has grown in size as well as depth over
last one decade. During the decade 1990-2000, the world market
capitalization/GDP ratio more than doubled from 51% to 120%. Value
traded 3DP rose from 29% to 103% and turn over ratio shot up from
48% to 89%. The combined market capitalization of a select 22
emerging economies increased from US $ 339 billion in 1990 to US $
2.2 trillion in 2000.
For India the total capitalization grew from $ 38,567 million at the ed
of 1990 to $ 110,396 million at the end of 2001.
Turn-over of stocks increased from $ 21,198 million in 1990 to $
249,298 million in 2001. Market capitalization as a percentage of
GDP grew from 12.2% in 1999 to 32.4% in 2001 while turnover ratio
went up from 65.9% in 1999 to 191.4% in 2000. The number of listed
companies in India was 5,975 as at end of 2001. There are very few
countries, which have higher turnover ratio than India. Standard and
Poor (SP) ranked India, 25th in terms of market capitalization, 15th in
terms of total value traded in stock-exchanges and 6th in terms of turn-
over ratio.
The past decade in many ways has been remarkable for securities
market in India. It has grown exponentially as measured in terms of
amount raised from the market, number of stock exchanges and other
intermediaries, the number of listed stocks, market capitalization,
trading volumes and turnover on stock exchanges, and investor
population. Along with this growth, the profiles of the investors,
issuers and intermediaries have changed significantly. The market has
witnessed Fundamental institutional changes resulting in drastic
reduction in transaction costs and significant improvements in
efficiency, transparency and safety.
The Society for Capital Market Research and Development carries out
periodical surveys of household investors to estimate the number of
investors. Their first survey carried out in 1990 placed the total
number of share owners at 90-100 lakh. Their second survey
estimated the number of share owners at around 140-150 lakh as of
mid-1993. Their latest survey estimates the number of shareowners at
around 2 crore at 1997 end, after which it remained stagnant up to the
end of 1990s.
Chapter 2
2.3.1 Investment:
The percentage rate may be fixed for the life of the loan or it may be
variable, depending on the terms of the loan.
And also it can be defined when we invest in some asset then,
The factors which govern these interest rates are mostly economy
related and are commonly referred to as macroeconomic factors.
Some of these factors are:
(iii) Safety
Every investor expects to get back the initial capacity on maturity
without loss and without delay. Investment safety is gauged through
the reputation established by the borrower of the fund. A highly
reputed and successful corporate entity assures investors of their
initial capital.
(iv) Liquidity
An investment which is easily saleable or marketable without loss of
money and without loss of time is said to be possess the characteristic
of liquidity. Some investments such as deposit in unknown corporate
entities, bank deposit, post office deposit, national saving certificate,
and so on are not marketable.
An investor tends to be prefer maximization of expected return,
minimization of risk, safety of fund, and liquidity of investment
INVESTER SPECUALTER
• Has a relatively longer • Has very short planning
planning horizon • Assumes high risk
• Assumes moderate risk • Assumes high rate of return
• Assumes modest rate of for high risk
return • Relies more on hearsay
• Gives greater significance technical charts, and market.
to fundamental factors and • Normally borrow from
evaluates the firm others.
• Typically uses his own
funds
~ Financial assets
• fixed deposits with banks
• Small saving instruments with post offices
• Insurance /provident /pension fund etc.
2.3.5 Investor:
Investor is a person or an organization that invest money in various
investment sources for specific objective. Attitude of investment is
different in each alternative. E.g. financial market have different
attitude towards risk and return. Some investors are risk avers, while
some have an affinity of risk. The risk bearing capacity of investor is a
function of personal, economical, environment, and situational factors
such as income, family size, expenditure pattern, and age. A person
with higher income is assumed to have higher risk-bearing capacity.
Thus investor can be classified as risk skiers, risk avoiders, or risk
bearers
Before making any investment, one must ensure to:
> Obtain written documents explaining the investment
> Read and understand such documents
> Verify the legitimacy of the investment
> Find out the costs and benefits associated with the investment
> Assess the risk-return profile of the investment
> Know the liquidity and safety aspects of the investment
> Ascertain if it is appropriate for your specific goals
> Compare these details with other investment opportunities available
> Examine if it fits in with other investments you are considering or you have
already made
> Deal only through an authorized intermediary
> Seek all clarifications about the intermediary and the investment
> Explore the options available to you if something were to go wrong,
and then, if satisfied, make the investment.
Portfolio
Diversification
RETDEBT Market
The RETDEBT market facility on the NEAT system of capital market
segment is used for transactions in Retail Debt Market session.
Trading in Retail Detail Market takes place in the same manner as in
equities (capital market) segment. The main features of this market
are detailed in a separate section (1.15) on RETDEBT market.
Auction Market
In the Auction market, auctions are initiated by the Exchange on
behalf of trading members for settlement related reasons. The main
features of this market are detailed in a separate section (1.13) on
auction.
Face value: The value printed on the share scrip (if share is issued at
face value It is called par value)
Premium: If the share sold at higher than face value. Discount If the
share sold at lower than face value.
Preference shares also get traded in the market and give liquidity to
investor. Investor can opt for this type of investment when their risk
performance is very low. currently preference dividend is tax exempt.
•An investment resembles a co. debenture .It carries the name of the
holder and registered with Public Debt Office.
•A promissory note to the holder, which contain the promise by
President of India (or state govt).
•A bearer security where the interest and other payments are made to
holder.
(ix) Mutual fund
These are funds operated by an investment company which raises
money from the public and invests in a group of assets (shares,
debentures etc.), in accordance with a stated set of objectives. It is a
substitute for those who are unable to invest directly in equities or
debt because of resource, time, risk factor or knowledge constraints.
Benefits include professional money management, buying in small
amounts and diversification.
Till 1986 the Unit Trust Of India was only offering mutual funds. As
mutual fund sector is liberalized, at present there are more than 30
mutual funds offering over 1000 schemes.
Mutual fund units are issued and redeemed by the Fund Management
Company based on the fund's net asset value (NA V), which is
determined at the end of each trading session. NAV is calculated as
the value of all the shares held by the fund, minus expenses,
divided by the number of units issued. Mutual Funds are usually
long term investment vehicle though there some categories of mutual
funds, such as money market mutual funds, which are short term
instruments.
Mutual fund schemes invest in three broad categories of financial
assets like equity ,bond and cash .On the basis of objective we can
categories mutual funds as equity funds/growth funds, diversified
funds, sector funds, index funds, tax saving funds, debt/income
funds, liquid funds/money market funds, gift funds, balanced
funds, mixed funds. And on the basis of flexibility we can categories
them as open-ended funds, close-ended funds and interval funds.
Pros and cons of mutual funds
Pros Cons
Diversification expenses
Professional management lack of thrill
Liquidity
Tax advantages
Comprehensive regulation
Transparency
2.5 METHODOLOGY
Primary Data
A questionnaire schedule was prepared and the primary data was
collected.
Secondary Data
•Company website
•Customer data base
•Company report ' s
•Books and publications
•Related information from various websites
Period of Study:
The study concentrates only on the past 3 years data with the help of
data source available. Period of study and analyzing the primary data
is two months.
Type of research:
This is a descriptive research where survey method is adopted to
collect primary information from the investors using different scales
as required and the required secondary information for the analysis.
Sampling Technique
The sampling technique followed in this study is non-probability
convenient sampling. Simple random techniques are used to select the
respondent from the available database.
The research work will be carried on the basis of structured
questionnaire. The study is restricted to the investors of the Bangalore
and Bhubaneswar city only.
Sample Size
The population being large the survey will be carried among 150
respondents who are the clients (or investors) of Bangalore Stock
Exchange. They will be considered adequate to represent the
characteristics of the entire population.
Tools used for data analysis The analysis of data collection is
completed and presented systematically with the use of Microsoft
Excel.
(iv) Media
Press sources such as financial news papers, financial magazine,
business news channel, websites etc. provide information related to
investment to the public. Besides information on securities, these
sources also provide analysis of information and in certain instance
suggest suitable investment decisions to be made by investor
INDUSTRY PROFILE
INDIAN CAPITAL MARKET Chapter 3
The introduction of NSE & SSE has increased the reach of capital
market manifold which in turn increased the number of investors
participating in the capital market and thus creates the possibility of a
bad delivery. The cost & time spend by the brokers for rectification of
this bad delivery tends to be higher with the geographical spread of
the clients. The increase in trade volumes leads to exponential rise in
the back office operation.
The inconvenience faced by the investors (in area that are far long &
away from the main metros) in the settlement of the trade also limits
the opportunity for such investors in participating in auction trading.
This has made the investors as well as brokers wary of Indian capital
market. The erstwhile settlement system on Indian stock exchanges
was inefficient and increased risk, due to the time that elapsed before
trades was settled. The transfer was by physical movement of papers.
There had to be a physical delivery of securities - a process fraught
with delays and resultant risks.
3.1.2 Depository:
Depository is an organization where the securities of a shareholder are
held in the electronic form at the request of the shareholder through a
medium of a Depository Participant (DP). The principal function of a
Depositories in India
There are two depositories in India, which provide dematerialization
of securities
Depository Participant
The Depository provides its services to investors through its agents
called Depository Participants (DPs). These agents are appointed by
the depository with the approval of SEBI. According to SEBI
regulations, amongst others, three categories of entities, i.e. Banks,
Financial Institutions and SEBI registered trading members can
become DPs. The depository has not prescribed any minimum
balance. Customer can have zero balance in his account.
ISIN
ISIN (International Securities Identification Number) is a unique
identification number for a security.
Custodian
A Custodian is basically an organization, which helps register and
safeguard the securities of its clients. Besides safeguarding securities,
a custodian also keeps track of corporate actions on behalf of its
clients:
Maintaining a client's securities account
Dematerialization of securities
In order to dematerialize physical securities one has to fill a Demat
Request Form (DRF) which is available with the DP and submit the
same along with physical certificates. Separate DRF has to be filled
for each ISIN number. Odd lot share certificates can also be
dematerialized. Dematerialized shares do not have any distinctive
numbers. These shares are fungible, which means that all the holdings
of a particular security will be identical and interchangeable. One can
dematerialize his debt instruments, mutual fund units; government
securities in his single Demat account.
Re-materialization
If one wishes to get back his securities in the physical form one has to
fill in the Remat Request Form (RRF) and request his DP for
rematerialisation of the balances in his securities account.
Legal framework:
The Depositories Act 1956 provides the regulation of depositories in
securities.
• Dematerialization:
One of the primary functions of depository is to eliminate or minimize
the movement of physical securities in the market. This is done
through converting securities held in physical form in to holdings in to
back entry form.
•Account Transfer:
The depository gives effects to all transfer resulting from the
settlement of trade and other transaction between various beneficial
owners by recording entries in the accounts of such beneficial owners.
•Transfer & Registration:
A transfer is a legal change of ownership of a security in the records
of the insurer. Transfer of securities under demat occur merely by
passing book-entries in the records of the depositories, on the
instruction of beneficial owners.
•Pledge and hypothecation:
•Depositories allow the securities with them to be used as collateral to
secure loans and other credits. The securities pledged are transferred
to a segregated or collateral
• Linkage with clearing system:
The clearing system performs the function of ascertainment in the pay
in (sell) or payout (buy) of brokers who leave traded on the stock
exchange. Actually delivery of securities from the clearing system is
from the selling brokers and delivery of securities from the clearing
system to the buying broker is done by depository. To achieve this
depositories and the clearing system are linked electronically.
To handle the securities in electronic form as per the Depositories Act
1996 two depositories are registered with SEBI.
They are
1)NSDL -- National securities depository limited.
CDSL -- Central depository service (India) limited. account through
book-entries in the records of the depository .
3.3 NSDL
India had a vibrant capital market, which is more than a century old,
the paper-based settlement of trades caused substantial problems like
bad delivery and delayed transfer of title till recently. The enactment
of Depositories Act in August 1996 paved the way for establishment
of NSDL, the first depository in India. NSDL promoted by institutions
of national stature responsible for economic development of the
country has since established a national infrastructure of international
standard that handles most of the trading and settlement in
dematerialized form.
Using an innovative and flexible technology system, NSDL works to
support the investors and brokers in the capital market of the country.
NSDL aims at ensuring the safety and soundness of Indian
marketplaces by developing settlement solutions that increase
efficiency and minimizing risk and cost. In the depository system,
securities are held in depository accounts, which is more or less
similar to holding funds in bank accounts. Transfer of ownership of
securities is done through simple account transfer.
This method does away with all the risks and hassles normally
associated with paperwork. Consequently, the cost of transacting in a
depository environment is considerably lower as compared to
transacting in certificate sough simple account transfers.
.3.4 CDSL
Account Opening
Any investor who wishes to avail depository services must first open
an account with a Depository participant of NSDL. The investor can
open an account with any depository participant of NSDL. An
Investor may open an account with several DPs or he may open
several accounts with single DP. After exercising this choice, the
investor has to enter into an agreement with the DP. The form and
contents of this agreement are specified by the business rules of
NSDL.
Dematerialization
One of the methods for preventing all the problems that occur with
physical securities is through dematerialization (Demat). The share
certificates are shredded (i.e., its paper form is destroyed) and a
corresponding credit entry of the number of securities (written on the
certificates) is made in the account opened with the depository
participant (DP). Each security is identified in the depository system
by ISIN and short name.
i) Steps in Dematerialization of shares:
1. Client! Investor submits the DRF (Demat Request Form)
and physical certificates to DP. DP checks whether the
securities are available for Demat or not. Client defaces the
certificate by stamping 'Surrendered for Dematerialization'.
DP punches two holes on the name of the company and
draws two parallel lines across the face of the certificate.
2. DP enters the Demat request in his system to be sent to
NSDL. DP dispatches the physical certificates along with
the DRF to the R& T Agent.
3. NSDL records the details of the electronic request in the
system and forwards the request to the R& T Agent.
4. R& T Agent, on receiving the physical documents and the
electronic request, verifies and checks them. Once the R&T
Agent is satisfied, dematerialization of the concerned
securities is electronically confirmed to NSOL.
5. NSDL credits the dematerialized securities to the beneficiary
account of the investor and intimates the DP electronically.
The DP issues a statement of transaction to the client.
Rematerialisation
Re-Materialization Process:
8. The issuer or its R& T Agent should verify the RRF for
validity, completeness and correctness. It should also match
the details with the intimation received from the depository
against the same RRN.
The broker has to then complete the pay-in before the deadline
prescribed by the stock exchange. The broker removes securities from
his account to CC/CH of the stock exchange concerned, before the
deadline given by the stock exchange.
The CC/CH gives pay-out and securities are transferred to the buying
broker's account. The broker then gives delivery instructions to his DP
to transfer securities to the buyer's account.
Steps:
Steps:
1. Borrower forwards request to his DP.
2. Borrower's DP electronically communicates request to
NSDL.
3. NSDL electronically informs intermediary's DP.
4. Intermediary forwards acceptance request to his DP.
5. Intermediary's DP electronically communicates acceptance
to NSDL.
6. Securities are moved from intermediary's account to
borrower's account
Repayment of securities by Borrower to intermediary
1. Borrower forwards repayment request to his DP.
4.1 Methodology:
Primary Data
A questionnaire schedule was prepared and the primary data was
collected.
Secondary Data
• Company website
• Customer data base
• Company report '
• Books and publications
• Related information from net
Period of Study:
The study concentrates only on the past 3 years data with the help of
data source available. Period of study and analyzing the primary data
is two months.
Type of research:
This is a descriptive research where survey method is adopted to
collect primary information from the investors using different scales
as required and the required secondary information for the analysis.
Sampling Technique
The sampling technique followed in this study is non-probability
convenient sampling. Simple random techniques are used to select the
respondent from the available database. The research work will be
carried on the basis of structured questionnaire. The study is restricted
to the investors of the Bangalore and Bhubaneswar city only.
Sample Size
The population being large the survey will be carried among 150
respondents who are the clients (or investors) of Bangalore Stock
Exchange. They will be considered adequate to represent the
characteristics of the entire population.
Equity 25 24 27 28 15
Debenture / Bonds 11 10 9 15 23
Bank Deposits 18 18 17 16 20
Insurance 20 24 22 21 14
Others 2 4 2 4 4
30
25
Age Group (in
20 Years) < 20
15 Age Group (in
Years) 20 – 30
10
Age Group (in
5 Years) 31 – 40
0 Age Group (in
Years) 41 – 60
s
s
ty
e
its
nd
er
nc
at
ui
th
st
Ba / Bo
ra
Eq
ep
lE
O
su
Years) > 60
D
ea
In
e
ur
nk
R
nt
&
be
d
De
ol
G
Interpretation:
From the above tables we can conclude that, all the age groups are
give more preference on investing in equity, except those who are
more than sixty years. And the second more preferable investment
avenue is insurance. But the age group which is more that sixty yeas
gives more preference to invest in Debenture, Tax saving bonds and
then bank deposits.
2. Investment preference among various income levels:
Equity 16 19 26 26 29
Debenture / Bonds 5 6 7 7 8
Bank Deposits 31 24 21 18 14
Insurance 15 17 18 20 21
Others 16 14 5 6 3
35
30
Annual Income (in Rs.
25
Lakh) < 1
20
Annual Income (in Rs.
15 Lakh) 1 – 2
10 Annual Income (in Rs.
5 Lakh) 2 – 3.5
0 Annual Income (in Rs.
Lakh) 3.5 – 5
e
ds
ts
ty
s
e
at
er
si
nc
ui
on
st
Annual Income (in Rs.
po
th
Eq
ra
lE
/B
O
De
su
ea
Lakh) > 5
e
In
nk
ur
R
t
Ba
&
en
d
eb
ol
G
D
Interpretation:
The above table reveals that higher income levels are giving more
preference to invest in equity where as lower income levels given
more preference to invest in bank deposits. It implies that the higher
income level groups are preferred to take more risk in investment
rather than lower income level. And those who are taken more risk in
investment are preferred to invest in equality rather than any
investment avenues.
3. Types of Investment:’
Type of investment
Interpretation:
Among the total sample size 44 per cent investors are prefer to
investing in long term and 21 percent are prefer to investment in short
term. Where as 35 per cent of investors are preferred to invest in both
long term as well as in short term Investment Avenue
4. Frequency of Investment:
Frequency
40
35
30
25
20 Frequency
15
10
5
0
rly
ly
ly
kly
ly
ar
ar
th
rte
ee
Ye
on
Ye
ua
W
lf
Q
Ha
Interpretation:
This graph reveals that 35 percent of investors are investing monthly,
26 per cent of investors are investing quarterly. 11 per cent of
investors are investing in a yearly basis where as 13 per cent and 15
per cent of investors are investing in weekly and half-yearly basis
respectively.
5. Basis of investment
Basis of Investment
Interpretation:
From this we can come to know most of the investor i.e. 54% basis of
study is self analysis and remaining 46% of investors take advice
from advisers such as broker advice, financial advice, friends or
relatives advice or charted account advice for investment. So it shows
most of the individual investor basis of study is self analysis
6. Investment pattern affected by market movement:
Options Frequency
Yes 53
No 47
Frequency
54
53
52
51
50
49 Frequency
48
47
46
45
44
Yes No
Interpretation:
From this we can come to know that 53 investors investment
pattern will affect if any market movement (SSE index, inflation
rate etc). So majority of the investor's investment pattern will
affect if any changes in the market. Market movement is very
important factor for changing in investment pattern.
7. Factors influence to choice various investment alternatives:
Risk
Other factor involved Risk involved
Future
10% 16%
Return they give
Growth
24% Return they Past performance
Past give Future Growth
performance 30% Other factor
20%
Interpretation:
By seeing this findings we can say 30% of investor investment
decision is depend on return on investment, second important
factor is future growth and past performance of the company. 16%
of investor’s investment is based on risk involved. Choice of factor
is changing from investor to investor.
8. Period of the investment.
70
60
50
40
Series1
30
20
10
0
Short Term Long term
Interpretation:
Most of the investors follow the long term investment to reduce the
risk loss. And few investors invest in the short term, who is having
good knowledge of investment and market
9. Reason behind the choice of investment
Reasons No. of
investors
Self awareness 16
Financial advisors 33
Brokerage firms 25
Friends and relatives 10
Media 16
No. of investors
Interpretation:
The above graph reveals that, the more investors choose the
investment type by the financial advisor suggestions and some people
choose by the help of brokers.
10. Analysis of companies before investing in percentage
Yes No
65 35
70
60
50
40
Series1
30
20
10
0
Yes No
Interpretation:
The above graph reveals that, there are more number of investors
make the analysis of companies before investing in that.
11. The type of analysis used by the investors.
No of investors
45
40
35
30
25
No of investors
20
15
10
5
0
Technical Company New s Follow the
analysis brokers
SUMMARY OF FINDINGS
SUGGESTION
AND
CONCLUSION
Summary findings conclusion and recommendations
FINDINGS
Income level of an investor is an impotent factor which affects
portfolio of the investor.
Lower income level groups are not preferred to take risk and
they choose bank deposits, post office savings and insurance as a
better investment option. They also look for tax saving investment
avenues.
All the age groups give more important to invest in equity & except
people those who are above 50 give important to insurance, fixed
deposits and tax saving benefits.
References & Bibliography:
Article
Books
Websites
• www.shcil.com
• www.icicidirect.com
• www.nseindia.com
• www.economictimes.com
Annexure
QUESTIONNAIRE
1. Name:
2. Educational level
PUC Graduation Post-Graduation
Professional Others (Please Specify) ………………
3. Age
Less than 20 20 – 30 31 – 40 41 – 60
More than 60