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Investors perception about IPO Acknowledgement: I would like to take this opportunity to thank the following people who

have directly or indirectly contributed towards the completion of this dissertation and without their help; this in the present form would have not been possible. I would also like to thank everyone who gave me the required data in order to collect. And last but not the least my special thanks to my parents without their support my MBA course would not have been possible. EXECUTIVE SUMMARY: During the past few months, the stock markets have scaled new heights, surpassing the previously insurmountable barriers. Worse is the fact that corrections in the market have time and again shaken the confidence of the retail investors. In order to bring back the investors to the stock markets and regain their confidence, a lot needs to be done by the issuer companies, their merchant bankers, lead managers and book runners. Safety net options are one of the measures taken by them. It is actually a put option given to the investors, which gives the right but not the obligation to the investors to sell the stock to issuer at a particular price before a certain period. The present research study has been undertaken in order to deepen the understanding of the investors' problems and to find how safety nets are perceived by the investors? The study is based on direct interviewing of a sample of 50 investors. A cross sectional descriptive research was conducted to know the perception about safety nets among the investors with the help structured, questionnaire. Those having no voluntary savings for financial investments or no ability to understand investments, like shares and bonds, were excluded. Findings of survey justify that as far as perception about the safety net is concerned investors are not sound in perceiving it as a tool which shows great optimism about the prospects of stock and this is based on facts like, there are as many as 54% of investors who are unaware of this tool and additional 10% don't take it as a tool which helps investors. So these 64% investors, if made aware of the benefits can really prove as potential investors for companies which are yet to come up with their IPO's. OBJECTIVE OF THE STUDY: The present research study has been undertaken in order to deepen the understanding of the investors' problems and needs and their perception while investing money. During the last few

months many new companies have entered the market but worrisome part has been the fact that many of their IPO'S are trading below the issue price and this all has time and again shaken the confidence of the investors. While many companies {such as DLF} have shelved the plan of IPO, Some others have price stabilization mechanism such as safety net attached to their IPO'S. so prime motive of this research was to find how safety nets are perceived by the investors? Sub objectives: 1. To find out the level of awareness about safety net among the investors so that this research would make a substantial contribution to those investors who are unaware about these safety nets. 2. To find out investors confidence level (whether investors feel that they can make money in the stock market?) 3. To find out the investors preference while investing money. INTRODUCTION: Alarm bells always tend to ring loud and clear in primary market circles. Of late, many stocks are logging only a marginal increase in prices immediately and within days of their IPO's getting listed. The recent boom in the stock markets has again motivated many corporates to tap money from the market. During the past few months, the stock markets have scaled new heights, surpassing the previously insurmountable barriers. As the same time, it is to be noted that falls have eroded thousands of crores of investor wealth. For retail investors, especially those who earlier flocked to IPO's of smaller cap stocks, this scenario is unwelcome. Retail investors form an integral part of the stock markets. The markets cannot survive without their participation. So the loss of wealth had put off the retail investors from the market. In order to bring back the investors to the stock markets and regain their confidence, the Securities Exchange Board of India (SEBI) has taken some steps. However, law alone cannot achieve the goal. A lot would also need to be done by the issuer companies, their merchant bankers, lead managers and book runners. Safety net options are one of the measures taken by them. LITERATURE REVIEW: In an IPO, or initial public offering, a company issues its shares to the public for the first time but Equity investments are risky. Ups and downs in the stock markets are an integral part of equity investing. The rising ratio of under-performers need not be a major cause of concern as it is a part and parcel of a very bullish market. Still worse is the fact that it has time and again shaken the confidence of the retail investors. Retail investors form an integral part of the stock markets. The markets cannot survive without their participation. So the loss of wealth put off the retail investors. Following case in newspaper fully justify this fact S Ramachandra lost heavily in IBP's divestment issue. Allotted 300 shares at Rs 620, Ramachandra decided to cut his losses as price of the scrip started to plummet.

He sold his shares at Rs 565, making a loss of about nine per cent. His elder son reacted much slower, and sold his 200 shares at a price of Rs 529, ending up with a loss of over 14 per cent against the allotment price. He had little option but to sell the shares since he had availed of a bank loan in order to subscribe to the issue. Banks today lending against shares charge an interest of about 10-12 per cent. So this all bring in problem like. Where does that leave retail investors? The recent boom in the stock markets has again motivated many corporate to tap money from the market. During the past few months, the stock markets have scaled new heights. As the secondary market has bounced back, the primary market is buzzing with activity once again. As the stock markets turn bullish once again, initial public offerings have become numerous just as little seeds sprout all over during the rainy season. Not all of these grow to become giant trees. Companies with sound business models and good earnings potential would grow regardless of market conditions while the me-too IPO's which hit the market, essentially to capitalize on good weather, are bound to perish When an IPO goes bad, there's never one thing that causes it. it takes bad timing, , bad luck, and the occasional stupid mistakes so Those that survive and prosper, are the ones that have found fertile soil, good sunshine and high resistance levels, which enables them to compete and spread out. There has been confusion among the investors where they have to put their money in, either secondary markets or in primary markets. There has been a general perception that the secondary markets are too risky and primary markets are risk averse to some extent. But it was proved that both seem to be the peers in pushing the investors into the losses. The markets prove that both are equally bad. Leading book managers of IPO's are tagging safety net options to make best use of the motives of such investors and get back scared retail investors to the market. A `safety net' implies a commitment to buy shares from the original investors during a stipulated period at a price determined at the time of issue, irrespective of the prevailing market price. But most merchant bankers do not offer this option for public issues. In a circular the central bank said these schemes were often offered without any request from the company. There is also no income for the banks to correspond with the risk of loss built into these schemes, as the investor will take recourse to the safety net only when the market value of the shares falls below the pre-determined price. "Banks/their subsidiaries have, therefore, been advised that they should refrain from offering such `Safety Net' facilities by whatever name they are called. A large number of investors look at IPO's as a vehicle for quick gains, for which market sentiment does matter .So better for an investor is to consider Growth visibility and do valuation of the company before investing. problem is: If we ever involved in an IPO, have to close eyes, grit teeth, and prepare to be blindsided?

What these investors should do if such securities fall below issue price? v Safety net can help. But how many investors are aware of these safety nets and how they actually perceive it? So this research was being conducted to find out how many investors are really aware of these safety nets and how they see these options. So that this research could eventually help those, who are unaware about the benefits of safety net. VARIOUS INVESTMENT OPTIONS FOR INVESTORS Investment options for an investor broadly can be categorized as: TRADITIONAL PRODUCTS 1. GOLD: Gold has much advantage besides being an investment product. Gold score high in terms of liquidity, safety but at times falls behind the benchmark of returns. 2. CHIT FUNDS: Chit funds are savings of small groups of people, which are circulated but as investment options they are ranked poorly in term of safety, return and liquidity and high default rate. 3. REAL ESTATE: Real estate has much advantage of being an investment option and is rated high in term of safety. SAFETY PRODUCTS 1. SMALL SAVING: INCLUDES: 1. Post office savings:- saving deposits, recurring deposit, time deposits, monthly income accounts 2. National savings:- public provident funds, national saving certificates, small saving backed by govt. assurance offer convenience, safety, tax advantages and good returns. 2. BANK DEPOSIT: Banks were the first investment houses to successfully help the common man to shift his investments. Banks offer safety liquidity, convenience and decent returns. RBI's policy of interest rate deregulation further triggered competition among bands and they are moving from offering traditional services to market friendly options and services. 3. BONDS: Bonds are debt instruments issued at fixed price, bearing fixed interest and having a fixed term of life. Govt. and corporate sectors are main issuers of bonds. Bonds as investment option offers a decent returns but carry several risk of default. 4. COMPANY DEPOSITS: An investor can also invest his money in a company for a fixed period of time after the maturity period he receive handsome prefixed rate of interest. Company deposits are simple but there market is not well regulated so investors have to be watchful. CONVENIENCT PRODUCT: MUTUAL FUNDS:

They are the most convenience products and are usually safe than stocks. The mutual funds are managed by investment professionals and other service providers. While ownership of fund is in the hands of the investors. The pool of fund is invested in portfolio of marketable investments. The value of portfolio updated everyday RISKY PRODUCTS: STOCKS/ SHARES: In terms of risk and return stocks deliver more than other investment option, in stocks there is probability of losing the principal. Investment in stocks requires great analytical skills and deep pockets to absorb the risks through systematic diversification. Stocks need constant attention to update one self with development in companies and market regulations. DIFFERENT KINDS OF ISSUES Primarily, issues can be classified as a Public, Rights or preferential issues (also known as private placements). The classification of issues is as follows. Rights Issue Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements. Private placements A private placement is an issue of shares by a company to a select group of persons under Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. A private placement of shares or of convertible securities by a listed company is generally known by name of preferential allotment. A Qualified Institutions Placement is a private placement of equity shares or securities convertible in to equity shares by a listed company to Qualified Institutions Buyers only in terms of provisions of SEBI guidelines. Public issue Public issues can be classified into Initial Public offerings and further public offerings. In a public offering, the issuer makes an offer for new investors to enter its shareholding family. INITIAL PUBLIC OFFER An initial public offering (IPO) is the first sale of a corporation's common shares to public investors. The main purpose of an IPO is to raise capital for the corporation. While IPOs are effective at raising capital, they also impose heavy regulatory compliance and reporting requirements. The term only refers to the first public issuance of a company's shares; any later public issuance of shares is referred to as a Secondary Market Offering There are several reasons for which a private company may wish to become a public company. THE TWO BIGGEST REASONS ARE: To raise capital

To allow the original investors or entrepreneurs who started the company to realize profits on their investment and time. A private company is one in which investment or ownership is limited to select individuals or organizations. A public company is one in which anyone can invest and obtain ownership by purchasing shares on a publicly traded exchange. UNDERTAKING AN IPO It is a large and exciting event for a new company. A well received IPO means that the company will have cash to further its development and growth. It also usually means that the people who started the company realize some significant profits for their efforts. An IPO requires a great deal of work, from filing the necessary paperwork with the regulatory bodies and writing a prospectus for potential investors to devising and implementing a sales campaign for the sale of the initial shares. Since the company also needs to continue to function and complete its normal activities, a financial firm is usually hired to do this work. This firm is referred to as the underwriting firm for the IPO IPOs generally involve one or more investment banks as "underwriters." The company offering its shares, called the "issuer," enters a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares. The underwriters keep a commission based on a percentage of the value of the shares sold.

ELIGIBILITY NORMS FOR MAKING AN IPO SEBI has laid down eligibility norms for entities planning to enter the primary market through public issues. An unlisted company needs to satisfy following criteria to be eligible for making a public issue: 1. Net tangible assets of at least Rs 3 crores for three full years 2. Distributable profits in at least three years 3. Net worth of at least Rs 1 crore in three years 4. If change in name, at least 50 per cent of revenue for Preceding one year should be from the new activity 5. The issue size should not exceed five times the pre-issue net Worth. SEBI also provides alternate routes to the companies not satisfying any of the above parameters, for accessing the primary market. The alternative conditions are as follows: 1. Issue shall be made through book-building route, with at least 50 per cent to be mandatory allotted to the QIBs. 2. The minimum post-issue face value capital shall be Rs 10 crores or there shall be a compulsory market-making for at least two years. 3. FURTHER PUBLIC OFFERING A Further public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer

for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations. WHAT HAD HAPPENED DURING MAY- JUNE 2006 THIS IS WHAT HAPPEN DURING MAY- JUNE 2006 Many stocks dip below IPO price CRASH COURSE: The disappointed share traders at a stock broking firm in Kolkata just after the BSE Sensex closed with a loss of 461 points, almost a six-month low of 9295.81 points on sustained selling - A Roy Chowdhury Mumbai , June 8 As many as 131 stocks, including the likes of Jet Airways, ING Vyasya Bank, Biocon, Reliance Communication Ventures, Karnataka Bank and Oriental Bank, have hit new lows as stocks fell in a heap on Thursday. The declines have also not spared some of the recent high profile IPOs such as Reliance Petroleum, Sun TV, Punj Lloyd, INOX Leisure and PVR Ltd - all these stocks traded below their issue price on Thursday. Shares of Reliance Petroleum, which generated the biggest ever response from the public for its recent IPO, was traded at Rs 59.10 on the BSE, lower than the issue price of Rs 60. The stock was listed above Rs 100 and touched a high of Rs 101.95 on May 11. Sun TV lost over 45 per cent from its peak of Rs 1,579 on May 11 to trade at Rs 860 on Thursday. Among the recent IPO's, several companies were trading below their issue price on Thursday. This included Punj Lloyd at Rs 690 (issue price at Rs 700), Gitanjali Gems Rs 124.90 (issue price Rs 195), Adhunik Metaliks Rs 27.55 (issue price Rs 37), Emkay Stocks and Shares Rs 59.10 (issue price of Rs 120), Plethico Pharmaceuticals Rs 261 (issue price of Rs 300) and Kewal Kiran's Rs 153.50 (issue price of Rs 260). SAFETY NETS Safety Net: It is actually a put option given to the investors, which gives the right but not the obligation to the investors to sell the stock to issuer at a particular price before a certain period. Any safety net scheme of the shares proposed in any public issue shall be finalized by an issuer company with the lead merchant banker in advance and disclosed in the prospectus. Such buy back or safety net arrangements shall be made available only to all original individual allottee limited up to a maximum of 1000 shares per allottee and the offer is kept open for a period of 6 months from the last date of dispatch of securities. For exp. IPO hits the market with a final price of Rs 50 with safety net option attached to it. The subscribers to IPO can sell the shares to Issuer before 6 month at a price of Rs 50 per share. The investors, thus, have a put option with a strike price of Rs 50 per share with an expiry of six months. As it gives the investors the right to sell the shares at any time before the expiry of six months, the safety net is just like an American option. Such an option makes the instrument attractive to investors. How It Works:

Suppose the above stock falls to Rs 25 three months hence, an investor would lose Rs 25 (Rs 5025) per share on his investment. A safety option, however, enables the investor to sell the stock to issuer at the strike price of Rs 50 per share. Next, suppose the stock moves up to Rs 60, the investor can sell it in the market and pocket the gains. He is under no compulsion to sell the share to issuer which is why the safety net is an option. But there is a difference between the safety net and an option. An option requires investors to pay an upfront premium to the option writer. This premium is compensation to the writer for the risk of having to buy the stock from you at a higher-than-market-price. Safety net does not require investors to pay such a premium which makes it more attractive. The idea of safety net is that, should during this period the secondary market price fall below the offer price, the promoter or the merchant banker would stand guard and buy the shares from them without demur. This arrangement is any day vastly superior to the Green shoe exercise which admittedly has but the trappings of real safety net and, hence, is superficial in offer of protection to individual investors because the exercise may come a cropper should the shares bought with the limited resources at the disposal of the stabilizing agent prove to be inadequate to lift its price to the desired level. GREEN SHOE OPTION The Securities and Exchange Board of India (SEBI) permit exercise of the green shoe option by a company making a public issue. A pre-issue contract is entered into for this purpose with an existing shareholder often one of the promoters with a sizeable shareholding who would be prepared to lend his shares to be used for price stabilization to be carried out by a stabilizing agent on behalf of the company up to a maximum period of 30 days from the date of allotment of shares. The company then goes on to make allotment, including over allotment, to the extent it has exercised the green shoe option, which term incidentally has its origin in the name of a company that for the first time exercised such an option in the US. The proceeds of the public issue to the extent it relates to such over-subscription permitted by the green shoe option is, however, kept in an escrow account to be used in the price stabilization exercise. RESEARCH METHODOLOGY Research methodology stands for the ways and means we adopt for conducting the research. It gives a fair idea about the steps generally followed by researcher in pursuing the research right from defining the problem to the final conclusion and summary. This is how this research is going to be focused towards those steps Problem Stock markets movements are integral part of equity investing. Worse is the fact that Market has time and again shaken the confidence of the investors. Safety net does help investors to sustain their faith in IPO'S at least for some time. But problem is How many investors are aware of these safety nets and how they actually perceive it?

Research Design and Tools A cross sectional descriptive research was conducted to know the perception about safety nets among the investors with the help structured, questionnaire. The questions started with an investor profile, followed by questions that helped to determine the confidence level. Additional questions allow us to ascertain whether investors feel that they can make money in the stock market, and also to find out their perception especially when instruments tends to have some safety mechanism attached to them. Research Approach The investors' problems and needs can be best known from the investors themselves. So for this research surveys were conducted to fulfill the purpose , covering a variety of interrelated aspects, such as the investor's past experiences, types of investments held currently, future investment intentions, the important combination of decisions taken by the investors while investing. Sampling technique and size: Random Sample of 50 investors was drawn from the universe of potential investors Those having no voluntary savings for financial investments or no ability to understand investments, like shares and bonds, were excluded, because they were irrelevant for the purpose of the present survey. And to ensure near-randomness and cross-sectional representation, relevant data was collected by primary sources with the help of questionnaire. Data Analysis and Interpretation To make the project understandable to the readers the various data, information is being edited and tabulated using SPSS and other simple statistical tools ,which is depicted by diagrams such as charts, graphs , pie charts, histograms and percentages so as to make interpretations at a glance. Relevant summary and conclusions is also being drawn from the available data with the use of SPSS. INVESTMENT OBJECTIVE AMONG INVESTORS What is your Investment Objective? This research shows that both regular income and capital appreciation are the primary objectives of investors while investing their money. Around 32% i.e. 16 investors out of the sample agree that they look for regular income in the instruments, they tends to put their money in. Around 42% i.e. 21 investors out of sample give preference to capital appreciation. So it's good news for primary market that they are ample number of investors who look for capital gain in long run. Rest of the sample have other personal motives like future commitments , paying off or reducing debt, acquiring an asset or saving for retirement.etc. Around 10% say they want to save their money for future commitment, only 2% say they are investing with a motive to pay off their existing debt, 8% want to acquire some asset in future and rest 6% wants to accumulate their money to utilize it after their retirement. INVESTMENT GOAL WHILE INVESTING MONEY What is your Investment goal?

This research shows that in spite of boom in the stock market majority of investors wants to put their instrument which not only provide safety to the principal but also fetch interest on it Around 22% investors i.e. 11 out of sample wants their capital safe as they do not require income this time so safety of principal is the goal with which they are investing Around 24% investors wants to have regular income rather than sticking with investment for long so this is also a major reason for speculation going on in share market as investors want quick returns within no time. Appreciation in Principal + Interest on it seems to be the driving goal for investors. Around 42% investors look for instruments which not only provide regular income but also appreciate the principal in long run. So this is good news for industry like mutual fund to utilize these potential investors. Rest 12% wants only capital appreciation in long run so they want to safe their principal in long run and don't want to put it in risky instruments just for the sake of quick returns.

INSTRUMENT IN WHICH INVESTMENT IS MADE Your have Investments in which Instrument? This research shows that regular income and capital appreciation are the primary objectives while investing money and that is justified by the fact that 68% of the sample wants to put their money in instruments like mutual funds and shares. This may be the recent boom of stock market which makes them put money to these risky instruments ahead of saving schemes. Rest 24% wants to put their money in saving schemes. They are the investors who either don't feel secure in stock market or their confidence had been shaken due to past corrections and scams in stock market. Rest of the investors tends to put their money in commodities or other schemes like insurance as investment, but they represent only 8% of population studied. FOR HOW LONG THEY WANT TO INVEST THEIR MONEY What is Your Investment Time Frame? This research show that most of people today do believe in investing for long term but still there are good number of investors who wants to fetch short term gains out of their investments. Above chart clearly justify this fact that 26% of sample was investing for short term i.e. less than a year. PERCENTAGE OF INCOME INVESTED What Percentage of your Annual Income you set aside for Investments? There is no particular trend that how much one invests in. It all depends upon whether he/she wants to be in accumulation phase or distribution phase. Still a lot depends upon the risk assessment and income of the investor. Returns expected and past experience do effect on how much is being invested. HOW MANY INVEST IN STOCK MARKET & HOW COMFORTABLE ARE THEY Have you ever invested in Shares / Stocks?

This is good news for stock market that most of the investors feel comfortable with the risk involved in shares. Around 58% investor in this research feel comfortable when they invest in shares 16% of investors were such that they never invested in stocks/ shares but they are comfortable with risk involved in these risky instruments Rest 20% investors had their investment in stock market but they are either not confident or not comfortable with risk. This might be due to correction being seen during May-June 2006. Only 6% said that they never invested in share market due to the fact that they are not comfortable with risk. Overall this research shows that people like risky investment provided it justify them with suitable returns. INVESTMENTS IN INITIAL PUBLIC OFFER Have you ever invested in Initial Public Offer [IPO]? Around 48% of sample responds positively when they were being asked that whether they had invested in IPO ever during their life. INVESTORS COMFORT LEVEL IN STOCK MARKET AND THEIR INVESTMENT IN IPO'S Have you ever invested in Shares / Stocks * Have you ever invested in Initial Public Offer [IPO]? This research show that out of 24 investors who invest in IPO 20 investors i.e. 83% were those who are comfortable with the risk involved in stock/shares and rest 4 i.e.17% was those who do invest in shares but not comfortable with risk involved. So this shows that this primary market is basically driven by the confidence level of investors. AWARENESS ABOUT IPO FAILURE Are you aware of IPO failure? This research shows that 72% of the sample studied knows that at times IPO fails to pick in the market and their prices fall below the price at which they were issued. AWARENESS ABOUT IPO FAILURE AMONG INVESTORS WHO HAD INVESTED IN IPO'S Have you ever invested in Initial Public Offer [IPO] * Are you aware of IPO failure? Out of total of 36 who were aware of IPO failures, 56% i.e. 21 were those who had invested in IPO in the past .rest 44% constitute those who never invested in IPO but they know about failure. Out of total of 24 who had invested in IPO 3 are such that they were unaware about the IPO failures , this may be due to fact that they might have invested through some brokers and were unaware about what was happening to their investment in short run. So out of total 14 who were unaware about IPO failure 11 i.e. around 79 % were those who never invest in IPO at all. So from here this can be concluded that there is good amount of awareness regarding the IPO failure among investors who had their investments in IPO's AWARENESS ABOUT SAFETY NETS Are you aware about Safety Net Options attached with IPO's? Out of total 50 respondents 46% i.e.23 respondents were aware of safety net options attached with IPO's .So there is still 54% investors which are unaware about these price stabilization mechanisms.

AWARENESS ABOUT SAFETY NETS AMONG INVESTORS WHO HAD INVESTED IN IPO's Have you ever invested in Initial Public Offer [IPO] * Are you aware about Safety Net Options attached with IPO'S? Out of total 24 who had invested in IPO in the past 18 i.e.75% of them were aware of the safety net options. So there is fair amount of awareness among people who invest in IPO's about these safety nets. Rest 25% were unaware about these options in spite of the fact that they had invested in IPO's in the past Out of rest 26 [who never invest in IPO] 5 i.e19% were aware of safety net while majority of them were not aware of these options. INVESTORS AWARENESS ABOUT SAFETY NETS & THEIR INVESTMENT IN IPO's WITH SAFETY NETS Are you aware about Safety Net Options attached with IPO'S * Have you ever Invested with Safety Net Options? Out of 23 investors who were aware of safety nets, only 10 found to have their investments in IPO with safety nets. While majority of them i.e. 13 or 56% never invest their money with safety nets in spite of being aware of these options. So this is a good opportunity for intermediaries to make these investors invest with these options. Remaining 27 i.e.54% were not aware of safety nets so they never invest with it. So this is again an opportunity to make them aware of the benefits involved and eventually invest in primary market with these options on. SAFETY NET ARE SHOWING GOOD OPTIMISM ABOUT THE PROSPECT OF STOCK Do you agree Safety Nets are showing great deal of optimism about the prospects of stock? This question was put forward to gauge the perception level of investors. When being asked that do they agree that safety nets are showing great deal of optimism about the prospects of stock, majority of investor's i.e.64% were having no opinion on this. So this can be concluded that majority of them were not clear about the impact safety nets have on the prices on stock. Only 30% of Investors agrees that yes it shows a great deal of optimism about the prospects of the stock while rest 6% were disagree on this fact. So as far as perception about the safety net is concerned investors were not sound in perceiving it as a tool which shows great optimism about the prospects of stock. PERCEPTION ABOUT SAFETY NET AMONG INVESTORS Are you aware about Safety Net Options attached with IPO'S * Do you agree Safety Nets are showing great deal of optimism about the prospects of stock? Above graph show that out of total sample of 50 investors only 15 i.e.30% agree on the fact that safety nets shows great optimism about prospect of stock. While 32 investors i.e. around 64% of the sample studied were not having any opinion regarding this .this is due to fact that the majority of investors i.e. 26 were actually not aware of safety nets. So they are bound to have no opinion about that. When same question was put forward to those 23 investors who were aware of safety nets, 15 i.e. 65% of them agree that yes it show great optimism about the prospect of the stock while 6 i.e.26% were found to have no opinion and rest 9% do not agree on this fact.

So this can be concluded that majority of investors who are aware of safety nets perceive it as a good tool. But still there are as many as 35% investors who were still not sure how this price stabilization mechanism actually operates to show optimism about the future prices of the stocks. SAFETY NET HELPS INVESTORS WHEN THERE IN DOWNFALL IN PRICES Do you think that Safety Net really help investors when there is downfall in prices? When this question was put forward that do you think safety net helps investors when market price of stock fall below the price for which it was issued within 6 months or it is just a mechanism which companies used to get more and more subscriptions. 27 investors were not unaware of safety nets so their opinion was not considered for this research as it might mislead the purpose of study. Out of 23 who were aware of safety net 18 i.e.78% investors agree on the fact that Yes, safety net helps when price of stock fall below the price for what it was issued and investors can utilize the put option being provided and return the shares back to the merchant banker .while rest 22% i.e. 5 investors perceive it just as a mechanism used by companies to get more and more subscriptions and in their opinion merchant bankers hardly take the shares back in case price fall below for what it was issued within 6 months. So this can be concluded that majority of investors who are aware of safety net perceive this instrument in a positive sense but still there are as many as 54% of investors who are unaware of this tool and additional 10% don't take it as a tool which helps investors. So these 64% investors, if made aware of the benefits can really prove as potential investors for companies which are yet to come up with their IPO's. CONCLUSION Various conclusions can be drawn from the study: One of the motives of this research was to find out investors preference while investing money and from this research it is found that appreciation in Principal + Interest on it seems to be the driving goal for investors. Around 42% investors look for instruments which not only provide regular income but also appreciate the principal in long run. So this is good news for this industry of investment to utilize these potential investors by providing such options with instruments which not only provide some sort of safety to the principal but also fetch regular return on it and maximum the return at lowest possible risk. Regular income and capital appreciation are the primary objectives while investing money and that is justified by the fact that 68% of the sample had their investments in instruments like mutual funds and shares. This may be the recent boom of stock market which makes them put money to these risky instruments ahead of saving schemes. Another good thing is that investors tends to put their money for long term, around 74% investors tends to keep their investments for more than a year. So this research shows that people don't mind keeping their investments for long term and that too in risky instruments provided it justify them with suitable returns. Another motive of this research was to find out the confidence level of investors or it can be said that how comfortable they feel to put their money in an instrument like

stock/share where there is risk of both principal + interest? There is good news for stock market that most of the investors feel comfortable with the risk involved in shares. Around 58% investor in this research feel comfortable when they invest in shares 16% of investors were such that they never invested in stocks/ shares but they are comfortable with risk involved in these risky instruments Another motive of research was to find out the level of awareness among investors so that this research would make a substantial contribution to those investors who are unaware about these safety nets. This research show that still 54% investors which are unaware about these price stabilization mechanisms. So as far as level of awareness is concerned it is still not satisfactory. This low level is due to the facts like:

1. Out of the sample of 50 investors only 39 i.e. 78% investors had their investments in stock / shares in their life. 2. Out of those 39 only 24 had their investment in IPO's. 3. 14 investors that represent 28 % of the sample were not aware of IPO failure, where IPO fails to pick in the market and their prices fall below the price at which they were issued.

Prime motive of this research was to find how safety nets are perceived by the investors. So when being asked that do they agree that safety nets are showing great deal of optimism about the prospects of stock, majority of investor's i.e.64% were having no opinion on this. So this can be concluded that majority of them were not clear about the impact safety nets have on the prices on stock. Only 30% of Investors agree that yes it shows a great deal of optimism about the prospects of the stock while rest 6% were disagree on this fact. F So as far as perception about the safety net is concerned investors were not sound in perceiving it as a tool which shows great optimism about the prospects of stock. Another fact which justify above result is that Out of 23 who were aware of safety net 22% investors perceive it just as a mechanism used by companies to get more and more subscriptions and in their opinion merchant bankers hardly take the shares back in case price fall below for what it was issued within 6 months. So over all this study can be concluded by the facts that still there are as many as 54% of investors who are unaware of this tool and additional 10% don't take it as a tool which helps investors. So these 64% investors, if made aware of the benefits can really prove as potential investors for companies which are yet to come up with their IPO's. RECOMMENDATIONS The Indian primary stock market has witnessed impressive progress in the last decade. However, unless the retail investors are educated enough to understand the instruments and the facilities attached most of them would be unable to benefit from the market's progress and would eventually end up losing the bulk of the money invested due to their own lack of understanding. This was exactly found in this research that primary market is abound with

people who are looking for easy preys, i.e. ignorant investors. Even the safety mechanisms such as safety nets which eventually help them are not perceived in true sense. 1. Launch Investor Awareness Program. How well one manages own investments will depends upon the factor that how much he/she is equipped with knowledge to undertake this task. The affluent people can hire portfolio management services but the ordinary people will find these too costly. So awareness programs can help such investors to made their investments on safer side and have maximum returns at lowest possible risk. 2. A more systematic approach to investor education is needed. Which should give more thought to both the content and the delivery mechanism it should make them aware about the practical implication of the instruments / options such as Safety nets rather than imbibing theoretical knowledge into their brains. This systematic approach is needed because even investors who were aware of safety nets were found to have no opinion about the impact; it has on the prospect of the stock in future. 3. Town Meetings in cities throughout the country should be held to help the people learn how to save and invest wisely and achieve financial security. Companies coming with IPO's should also publish free brochures and other educational materials on these safety mechanisms and launch special promotional schemes to make investors aware about these options. Such perspective will guard the investors against being over-optimistic and will help them in evolving a sound and safe long-term investment strategy. 4. Patience is the key to success in primary market. Generally investors increasingly try to make a quick buck and put their money in a company without checking its fundamentals. . Many companies tend to be shady with no projects and business plans. Better is to make investment in IPO only a small part of portfolio so that one can afford to lose. And stop dreaming that buying shares in a hot IPO at the offering price and then "flip" the shares on first few months for an easy profit. Instead, determine which new companies may actually have a future, then invest in the holding only if it's a good company with good earnings potential. LIMITATIONS Sample size was only 50. This was due to the fact that Those having no voluntary savings for financial investments or no ability to understand investments, like shares and bonds, were excluded Due to incomplete response of some of the investors, some adjustments are being made in order to make it viable. This survey was being conducted in the period when market was on a higher side so this psychological effect on the mindset of the respondents assumed to have an effect on their responses. Specially when asked, whether they are comfortable with their past investments in stock/shares or not? Bibliography http://www1.economictimes.indiatimes.com/articleshow/msid-1993419,curpg-2.cms http://www.businessline.in/cgibin/print.pl?file=2006101104220100.htm&date=2006/10/11/&prd=bl& http://www.rediff.com/money/2004/apr/02perfin1.htm

http://www.blonnet.com/2006/09/04/stories/2006090402360100.htm http://www.financialexpress.com/fe_full_story.php?content_id=143727 http://www.wisegeek.com/what-is-an-ipo.htm http://nseindia.com/content/ipo/ipo_introduction. Fundamentals of investments by Gorden J. Alexander, william F. sharpe ICFAI journal of Applied Finance VOL 11 QUESTIONNAIRE > This study is for academic purpose so no personal information will be supplied to any person or organization. The main objective of this study is to know the preferences while investing money and their perception and awareness about safety nets when it comes to primary market.