1

A STUDY OF INVESTMENT IN STOCK MARKET

A Project Submitted to

University of Mumbai for partial completion of the degree of

Master in Commerce (Accountancy and taxation)

Under the Faculty of Commerce

By

PRIYANKA DIVECHA

Under the Guidance of

MR. SADIQ HASAN

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THAKUR COLLEGE OF SCIENCE AND COMMERCE

Thakur Village, Kandivali (E), Mumbai 400101

JANUARY 2021

Certificate

This is to certify that Ms PRIYANKA DIVECHA has worked and duly completed his
Project Work for the degree of Master in Commerce (Accountancy and Taxation) under
the Faculty of Commerce and his project is entitled, “A STUDY ON INVESTMENT IN
STOCK MARKET”

Under my supervision.

I further certify that the entire work has been done by the learner under my guidance and
that no part of it has been submitted previously for any Degree or Diploma of any
University.

It is his own work and facts reported by his personal findings and investigations.
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Seal of college

NAME & NAME &

SIGNATURE OF GUIDE SIGNATURE OF EXTERNAL

Date of submission:
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Declaration by Learner

I the undersigned Ms/Mr PRIYANKA DIVECHA hereby declare that the work
embodied in this project work titled “A STUDY OF INVESTMENT IN STOCK
MARKET”. Forms my own contribution to the research work carried out under
the guidance of MR. SADIQ HASAN a result of my own research work and has
not been previously submitted to any other University for any other Degree/
Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

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

Name and Signature of the learner

Certified by
Name and signature of the Guiding Teacher
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Acknowledgment

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

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

I would like to thank my Principal, Dr.C.T.Chakraborty for providing the necessary

facilities required for completion of this project.

I take this opportunity to thank our Coordinator, MR.Manoj K Mishra, for her moral
support and guidance.

I would also like to express my sincere gratitude towards my project guide MR.Sadiq
Hasan whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference books
and magazines related to my project.

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

A Project Submitted to
University of Mumbai for partial completion of the degree of
Master in Commerce (Accountancy and taxation)

Under the Faculty of Commerce

By

PRIYANAKA DIVECHA

Under the Guidance of

MR.SADIQ HASAN

THAKUR COLLEGE OF SCIENCE AND COMMERCE

JANUARY 2021
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CONTENTS PAGE NO

1 INRODUCTION
1.1 CONCEPT OF STOCK MARKET
1.2 Capital Market
S 1.3 Types of Capital Market
1.4 Different Types of Stocks
1.5 Who is a Shareholder?
1.6 Advantages of stock market
1.7 Disadvantages of stock market flotation
1.8 National Stock Exchange of India Limited (NSE)
1.9 Bombay Stock Exchange (BSE)
1.10 BULL AND BEAR
1.11 HISTORICAL EVOLUTION OF INDIAN STOCK MARKET
1.12 INVESTORS PREFERENCE IN STOCK MARKET
1.13 NON- MARKETABLE FINANCIAL ASSETS:
1.14 Characteristics of Stock Markets
1.15 PROCEDURE OF TRADING
2 RESEARCH METHODOLGY
2.1 OBJECTIVE
2.2 HYPOTHESIS
2.3 SCOPE OF THE STUDY
2.4 LIMITATION OF THE STUDY
2.5 SIGNIFICANCE OF THE STUDY
2.6 SELECTION OF THE PROBLEM
2.7 SAMPLE SIZE
2.8 DATA COLLECTION

3 LITERATURE REVIEW
4 ANALYSIS AND INTERPRETATION OF DATA

CONCLUSION AND SUGESSESTION

5
6 QUESTIONAIRE
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CHAPTER 1:
INTRODUCTION
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INTRODUCTION

Stock Market is one of the most vibrant sectors in the financial system, marking an important contribution
to economic development. Stock Market is a place where buyers and sellers of securities can enter into
transactions to purchase and sell shares, bonds, debentures etc. In other words Stock Market is a plate
form for trading various securities and derivatives. Further, it performs an important role of enabling
corporate, entrepreneurs to raise resources for their companies and business ventures through public
issues. Today long term investors are interested to invest in the Stock market rather than invest anywhere.

The main objective of present study is to present review of literature related to Stock Market to study the
Stock Market in depth. The study would facilitate the reader to know the past, current and future trend or
prospects of Indian Stock market. This study would provide guidelines to investor to maximize profit
with minimize risks. High degree of volatility in the recent times in the Indian market has led to more
development in the future.

As a part of the process of economic liberalization, the stock market has been assigned an important place
in financing the Indian corporate sector. Besides enabling mobilizing resources for investment, directly
from the investors, providing liquidity for the investors and monitoring and disciplining company
managements are the principal functions of the stock markets. The main attraction of the stock markets is
that they provide for entrepreneurs and governments a means of mobilizing resources directly from the
investors, and to the investors they offer liquidity. It has also been suggested that liquid markets improve
the allocation of resources and enhance prospects of long term economic growth.
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1.1 CONCEPT OF STOCK MARKET

The concept of stock markets came to India in 1875, when Bombay Stock Exchange (BSE) was
established as The Native Share and Stockbrokers Association', a voluntary non-profit making
association.

We all know it, the Bhaji market in your neighborhood is a place where vegetables are bought and sold.
Like Bhaji market, a stock market as a place where stocks are bought and sold. The stock market
determines the day's price for a stock through a process of bid and offer. You bid to buy a stock and offer
to sell the stock at a price. Buyers compete with each other for the best bid, i.e. the highest price quoted to
purchase a particular stock. Similarly, sellers compete with each other for the lowest price quoted to sell
the stock. When a match is made between the best bid and the best offer a trade is executed. In automated
exchanges high-speed computers do this entire job. Stocks of various companies are listed on stock
exchanges. Presently there are 23 stock markets In India.

The Bombay Stock Exchange (BSE), the National Stock Exchange (NSE) and the Calcutta Stock
Exchange (CSE) are the three large stock exchanges. There are many small regional exchanges located in
state capitals and other major cities. Presently Nifty and Sensex are moving around to 5900 and 19600
(July 2013). All activities of Indian stock market are regulated and controlled by SEBI
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1.2 Capital Market

Capital market is a market where buyers and sellers engage in trade of financial securities like bonds,
stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions.

In the capital market, both equity and debt instruments, such as equity shares, preference shares,
debentures, zero-coupon bonds, secured premium notes and the like are bought and sold, as well as it
covers all forms of lending and borrowing.

Capital Market is composed of those institutions and mechanisms with the help of which medium and
long term funds are combined and made available to individuals, businesses and government. Both
private placement sources and organized market like securities exchange are included in it.

Functions of Capital Market

 Mobilization of savings to finance long term investments.

 Facilitates trading of securities.

 Minimization of transaction and information cost.

 Encourage wide range of ownership of productive assets.

 Quick valuation of financial instruments like shares and debentures.

 Facilitates transaction settlement, as per the definite time schedules.

 Offering insurance against market or price risk, through derivative trading.

 Improvement in the effectiveness of capital allocation, with the help of competitive price
mechanism.

Capital market is a measure of inherent strength of the economy. It is one of the best source of finance,
for the companies, and offers a spectrum of investment avenues to the investors, which in turn encourages
capital creation in the economy.
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1.3 Types of Capital Market

The capital market is bifurcated in two segments, primary market and secondary market:

Primary Market: Otherwise called as New Issues Market, it is the market for the trading of new
securities, for the first time. It embraces both initial public offering and further public offering. In the
primary market, the mobilisation of funds takes place through prospectus, right issue and private
placement of securities.

Secondary Market: Secondary Market can be described as the market for old securities, in the sense that
securities which are previously issued in the primary market are traded here. The trading takes place
between investors that follows the original issue in the primary market. It covers both stock exchange and
over-the-counter market.
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1.4 Different Types of Stocks

There are two main types of stocks: common stock and preferred stock.

Common Stock
Common stock is, well, common. When people talk about stocks in general they are most likely referring
to this type. In fact, the majority of stock issued is in this form. We basically went over features of
common stock in the last section. Common shares represent ownership in a company and a claim
(dividends) on a portion of profits. Investors get one vote per share to elect the board members, who
oversee the major decisions made by management.

Over the long term, common stock, by means of capital growth, yields higher returns than almost every
other investment. This higher return comes at a cost since common stocks entail the most risk. If a
company goes bankrupt and liquidates, the common shareholders will not receive money until the
creditors, bondholders, and preferred shareholders are paid.

Preferred Stock
Preferred stock represents some degree of ownership in a company but usually doesn't come with the
same voting rights. (This may vary depending on the company.) With preferred shares investors are
usually guaranteed a fixed dividend forever. This is different than common stock, which has variable
dividends that are never guaranteed. Another advantage is that in the event of liquidation preferred
shareholders are paid off before the common shareholder (but still after debt holders). Preferred stock
may also be callable, meaning that the company has the option to purchase the shares from shareholders
at any time for any reason (usually for a premium).

Some people consider preferred stock to be more like debt than equity. A good way to think of these
kinds of shares is to see them as being in between bonds and common shares. (If you don't understand
bonds make sure also to check out our bond tutorial.)
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1.5 Who is a Shareholder?

A shareholder, also referred to as a stockholder, is a person, company, or institution that owns at least one
share of a company’s stock, which is known as equity. Because shareholders are essentially owners in a
company, they reap the benefits of a business’ success. These rewards come in the form of increased
stock valuations, or as financial profits distributed as dividends. Conversely, when a company loses
money, the share price invariably drops, which can cause shareholders to lose money, or suffer declines in
their portfolios’ values.

The Basics of Shareholders

A single shareholder who owns and controls more than 50% of a company's outstanding shares is known
as a majority shareholder, while those who hold less than 50% of a company’s stock are classified as
minority shareholders.

In many cases, majority shareholders are company founders. In older companies, majority shareholders
are frequently descendants of a company founders. In either case, by controlling more than half of a
company’s voting interest, majority shareholders wield considerable power to influence key operational
decisions, including the replacement of board members, and C-level executives like chief executive
officers (CEOs) and other senior personnel. For this reason, companies often attempt to avoid having
majority shareholders amongst their ranks. Furthermore, unlike the owners of sole proprietorships or
partnerships, corporate shareholders are not personally liable for the company's debts and other financial
obligations. Therefore, if a company becomes insolvent, its creditors cannot target a shareholder’s
personal assets.
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1.6 Advantages of stock market flotation

The benefits of stock market flotation could include:

 giving access to new capital to develop the business

 making it easier for you and other investors - including venture capitalists - to realise their
investment

 allowing you to offer employees extra incentives by granting share options - this can encourage
and motivate your employees to work towards long-term goals

 placing a value on your business

 increasing your public profile, and providing reassurance to your customers and suppliers

 allowing you to do business - acquisitions - by using quoted shares as currency

 creating a market for the company's shares

1.7 Disadvantages of stock market flotation

However, you should also consider the following potential problems:
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Market fluctuations - your business may become vulnerable to market fluctuations beyond your control
- including market sentiment, economic conditions or developments in your sector.

Cost - the costs of flotation can be substantial and there are also ongoing costs of being a public
company, such as higher professional fees.

Responsibilities to shareholders - in return for their capital, you will have to consider shareholders'
interests when running the company - which may differ from your own objectives.

The need for transparency - public companies must comply with a wide range of additional regulatory
requirements and meet accepted standards of corporate governance including transparency, and needing
to make announcements about new developments.

Demands on the management team - managers could be distracted from running the business during the
flotation process and through needing to deal with investors afterwards.

Investor relations - to maximise the benefits of being a public company and attract further investor
interest in shares, you will need to keep investors informed
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1.8 National Stock Exchange of India Limited (NSE)

The National Stock Exchange of India Limited (NSE) is India's largest financial market. Incorporated in
1992, the NSE has developed into a sophisticated, electronic market, which ranked fourth in the world by
equity trading volume. Trading commenced in 1994 with the launch of the wholesale debt market and a
cash market segment shortly thereafter.

Understanding the National Stock Exchange of India Limited (NSE)

Today, the National Stock Exchange of India Limited (NSE) conducts transactions in the wholesale debt,
equity, and derivative markets. One of the more popular offerings is the NIFTY 50 Index, which tracks
the largest assets in the Indian equity market. US investors can access the index with exchange-traded
funds (ETF), such as the shares India 50 ETF (INDY).

The National Stock Exchange of India Limited was the first exchange in India to provide modern, fully
automated electronic trading. It was set up by a group of Indian financial institutions with the goal of
bringing greater transparency to the Indian capital market.

Special Considerations

As of June 2020, the National Stock Exchange had accumulated $2.27 trillion in total market
capitalization, making it one of the world's largest stock exchange. The flagship index, the NIFTY 50,
represents the majority of total market capitalization listed on the exchange.

The total traded value of stocks listed on the index makes up almost half of the traded value of all stocks
on the NSE for the last six months. The index itself covers 12 sectors of the Indian economy across 50
stocks. Besides the NIFTY 50 Index, the National Stock Exchange maintains market indices that track
various market capitalizations, volatility, specific sectors, and factor strategies.

The National Stock Exchange has been a pioneer in Indian financial markets, being the first electronic
limit order book to trade derivatives and ETFs. The exchange supports more than 3,000 Very Small
Aperture Terminal (VSAT) terminals, making the NSE the largest private wide-area network in the
country. Girish Chandra Chaturvedi is the Chairman of the Board of Directors and Vikram Limaye is the
Managing Director and CEO of the exchange.

Benefits of the NSE

The National Stock Exchange is a premier marketplace for companies preparing to list on a major
exchange. The sheer volume of trading activity and application of automated systems promotes greater
transparency in trade matching and the settlement process.

This in itself can boost visibility in the market and lift investor confidence. Using cutting-edge technology
also allows orders to be filled more efficiently, resulting in greater liquidity and accurate prices
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1.9 Bombay Stock Exchange (BSE)

The Bombay Stock Exchange (BSE) is the first and largest securities market in India and was established
in 1875 as the Native Share and Stock Brokers' Association. Based in Mumbai, India, the BSE lists close
to 6,000 companies and is one of the largest exchanges in the world, along with the New York Stock
Exchange (NYSE), NASDAQ, London Stock Exchange Group, Japan Exchange Group, and Shanghai
Stock Exchange.

The BSE has helped develop India's capital markets, including the retail debt market, and has helped
grow the Indian corporate sector. The BSE is Asia's first stock exchange and also includes an equities
trading platform for small-and-medium enterprises (SME). BSE has diversified into providing other
capital market services including clearing, settlement, and risk management.

How the Bombay Stock Exchange (BSE) Works.

In 1995, the BSE switched from an open-floor to an electronic trading system. There are more than a
dozen electronic exchanges in the U.S. alone with the New York Stock Exchange (NYSE) and Nasdaq
being the most widely known.

Today, electronic trading systems dominate the financial industry overall, offering fewer errors, faster
execution, and better efficiency than traditional open-outcry trading systems. Securities that the BSE lists
include stocks, stock futures, stock options, index futures, index options, and weekly options.

The BSE's overall performance is measured by the Sensex, a benchmark index of 30 of the BSE's largest
and most actively traded stocks covering 12 sectors. Debuting in 1986, the Sensex is India's oldest stock
index. Also called the "BSE 30," the index broadly represents the composition of India's entire market.

Dalal Street

The Bombay Stock Exchange is located on Dalal Street in downtown Mumbai, India. In the 1850s,
stockbrokers would conduct business under a banyan tree in front of the Mumbai town hall. After a few
decades of various meeting locations, Dalal Street was formally selected in 1874 as the location for the
Native Share and Stock Brokers' Association, the forerunner organization that would eventually become
the BSE.

Mumbai is now a major financial center in India and Dalal Street is home to a large number of banks,
investment firms, and related financial service companies. The importance of Dalal Street to India is
similar to that of Wall Street in the United States. Indian investors and the press will cite the investment
activity of Dalal Street and will use it as a figure of speech to represent the Indian financial industry.
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1.10 BULL AND BEAR

A bull market is the market condition when prices continue to rise. Markets follow two general trends
over time. Either prices are in an upswing (increase) or they are in a downswing (decrease). Think of a
bull market as when a bull uses its horns in an upward motion. When prices fall over a period of time,
that’s bear market. Think of a bear swiping downward with its claws, knocking the market down.

A bull market and bear market are used when describing the trends of securities. These include stocks,
bonds, commodities, and other types of investments. Investors can also take a bullish or bearish stance,
depending upon their outlook. To be bullish is to believe that an investment's price will rise. To be bearish
is to believe that the price will fall.

The bull market is the type most desired for the majority of investors. If you are new to investing, it helps
to understand what drives the bull market so that you can take advantage of the money-making
opportunities that are present within this type of market.

What Is a Bull Market?

A bull market is the condition of a broad market or a single market in which prices are continuously
rising. Investors make money at any price at which they buy an investment because prices generally
continue to rise.

A bull market generally lasts until prices have risen for so long that investors begin to believe that prices
will continue going up. Investors' belief about stock prices influence the prices themselves in a self-
fulfilling prophecy—a term used in investing that refers to investors creating the market circumstances—
which results in higher prices because investors are causing the prices to rise.

Much of the volatility in markets is due to investor sentiment, or how investors in general feel prices are
going to swing. World events, the business cycle, and the opinions of investing icons are all examples of
factors that influence investors to cause price fluctuations.

When prices fail to fall over time, investors enter a state of irrational exuberance. They begin bidding
prices above the actual underlying value, wildly over-valuing the investments.
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Bear Market
A trend of falling stock prices for an extended period is considered a bear market. Substantial
deterioration of at least 20% or more has to be recorded for a market to be classified as bearish. It is
typically characterized by a falling speculative demand among residents, thereby reducing the aggregate
cash flow of the capital sector in an economy.

A bearish trend depicts slowdown of an economy, with rising investor pessimism and recessionary trends.
As the total amount of investments undertaken falls significantly in such events, owing to a slowdown of
aggregate demand, businesses often face a monetary crunch, thereby reducing their total output.
Therefore, a country often faces high unemployment problems, a downtrend in the overall price level
causing deflation. A poor stock market performance is a major indicator of recession.

How to Recognize a Bear Market?

Falling stock market indices

A downtrend in the major benchmark indices operating in the country indicate a bear market, wherein
investors prefer holding their money or deposit the same with risk less instruments rather than invest in
the stock market.

Nonetheless, a bear market can only be declared if the fall in such index values is higher than 20% and
prevailing for a period for at least 60 days or more. This differentiates stock market variations owing to
external factors or uncertainty prevailing in the economy, which might only have a short-lived impact.
Bearish markets, on the other hand, report figures indicating slowdown of a country for at least 2 months
or more.

Recession

As a stock market bear often creates a negative outlook towards investment, individuals usually prefer
hoarding their money in fear of incurring losses. Investors adept with the workings of the stock market
often develop a mind-set regarding a further fall in the stock market prices in such bearish circumstances,
further aggravating the rate of fall of such stock prices.

Combined with low aggregate demand for general goods and services manufactured, a higher supply
caused the general price level to decline sharply, marking a recession. Such economic conditions are
characterized with persistently low demands and falling price levels by most functioning sectors of the
country, resulting in a fall in the GDP of the country.

A severe case of recession is indicated through negative growth rates of a country, corresponding with
high unemployment rates, along with adverse impacts on the stock market prices.
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1.11 HISTORICAL EVOLUTION OF INDIAN STOCK MARKET

As already stated, the Indian Stock markets have played a significant role in the early attempts at
industrialization in India in the late nineteenth and early twentieth centuries. The early textile mills and
the first steel plants were funded in the stock market. Some of these capital raising exercises were large in
relation to the size of the financial sector in those days. Beginning in the late fifties, the country embarked
on an inward looking socialistic model of development that sought to put the commanding heights of the
economy in the hands of the public sector. The state took control of the allocation of resources in the
economy as the banks and insurance companies were nationalized and development financial institutions
grew in importance. A regime of financial repression came into being and the stock market stagnated. The
period from 1984 to 1992 was in some ways the high water mark of the Indian capital markets. As the
markets responded enthusiastically to the first whiff of reforms in the mid-1980s and to the major reform
initiative of 1991, the stock market soared through the roof. From October 1984 to September 1992, the
stock market index went up more than ten times representing an annual compound return of 34per cent.
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1.12 INVESTORS PREFERENCE IN STOCK MARKET

Though most of the investors want a safe and secure return on their investment, they also look for
maximum returns. The pure debt investment brings an average return with lesser liquidity as compared to
the equity investments. So in search of higher return (keeping the risk factor in mind) investor are a
heading towards equity investment on analysis of recent year investment trends, FII, entrance and
operations in Indian stock markets, it has been found that equity is gaining ground in India. The main
attractions of equity among investors are

1. Higher return (especially In case of capitalization and dividend if any)

2. Higher Liquidity

3. Option to start trading with small investments

4. Daily trading (as it increase chances of more “buy or sell” transaction which leads to fast profits/loss
generation)
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1.13 NON- MARKETABLE FINANCIAL ASSETS:

A good portion of financial assets is represented by non-marketable financial

assets.

These can be classified into the following broad.

o Bank deposits
o Post office deposits
o Company deposits
o Provident fund deposits

(B) EQUITY SHARES:

Equity shares represent ownership capital. As an equity shareholder, you have an

ownership stake in the company. This essentially means that you have a residual
interest in income and wealth.

o Blue chip shares

o Growth shares.
o Income shares
o Cyclical shares
o Speculative shares

(C) BONDS:

Bonds or debentures represent long terms debt instruments.

o Government Securities
o Savings bonds
o Government agency securities
o PSU bonds
o Debentures of private sector companies

(D) MONEY MARKET INSTRUMENTS:

Debt instruments which have a maturity of less than one year at the time of issue
are called money market instruments.
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o Treasury bills.
o Commercial paper
o Certificates of deposit

(E) MUTUAL FUNDS:

Instead of directly buying equity shares and/or fixed income instruments, you can
participate in various schemes floated by mutual funds.

o Equity schemes
o Debt Schemes
o Balanced schemes

(F) LIFE INSURANCE:

In a broad sense, life insurance may be viewed as and investment. Insurance

premiums represent the sacrifice and the assured sum, the benefits.

o Money back policy

o Whole back policy
o Terms assurance policy

(G) REAL ESTATE:

FOR the bulk of the inverters the important asset in their portfolio is a residential
house.

o Agricultural land
o Semi urban land
o Commercial property

(H) PRECIOUS OBJECTS:

Precious objects are items that are generally small in size but highly valuable in
monetary terms. Some important precious objects are:

o Gold and Silver

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o Precious stones
o Art objects

(I)FINANCIAL DERIVATIVES:

The term derivative‟ indicates that it has no independent value” i.e. its value is
entirely derived from the value of underlying asset. The underlying asset can be
securities, commodities, currency etc. Some important financial derivatives:

o Forward
o Future
o Option warrants
o swaps
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1.14 Characteristics of Stock Markets

 An Organized Body

A stock exchange is an organized body with a management committee and rules that control how the
exchange works. Traders on the exchange are subject to the rules of the exchange, which are enforced by
the management committee. At one time, a stock market was a physical place where traders met face-to-
face to make deals, but today most trades take place electronically.

 Public Company Stock

Public companies are a key component of stock markets. Public companies are those that have stock that
is bought and sold on a public stock exchange. Before a stock can be sold, it must first be listed on the
exchange. To protect its investors, a public company is required to disclose financial and business
information that could affect stock value.

 Trading Through Brokers

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Trading on a stock exchange is restricted to stock brokers and traders who are members of the exchange.
Individual investors must have a brokerage account in order to participate in trading. For many people,
brokerage services are provided as part of an employer-sponsored retirement investment fund. For
individuals who want to trade independently, an individual account is required.

 Going Public with IPOs

Initial public offerings (IPOs) are the mechanism used to introduce a company’s stock for public sale on a
stock exchange. An IPO is said to take place in the primary market, with follow-on trading between
investors occurring in the secondary market. An IPO allows a company to raise capital for future growth
by selling shares to the public.

 Supply and Demand Affect Prices

The price of a company’s stock reflects supply and demand for the stock itself and is often independent of
the company’s success. A company’s stock may be considered desirable for a variety of reasons, from the
strength of an industry sector to the popularity of a brand.

 Stock Market Prediction

In order to make a profit, stock market traders must predict whether a stock’s value will rise. Share prices
often reflect the overall economy and can be volatile as investors react to financial news and current
events, but traders who are successful predictors can realize significant gains.

1.15 PROCEDURE OF TRADING

1. Select of broker
The first step is buying or selling of share is to select a broker for transaction business
on behalf of the investor. The trading of securities on the stock exchange can be done
through members of the exchange.

o An investor prefers to select a broker who shall. 

o Act with due skill. Care and diligence in the conduct of all his business.
o Not create false market either singly or in concert with other.

2. Opening An Account With The Broker.

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The next step to open account with the broker. It helps the investor to provide
his credit worthiness, if the clients were not to do margin money with the broker.
3. Selection Of Securities

This is application for buying securities. The investor may be consulted with broker and take
advise for selection of securities.
4. Selection Of Time For Trading

This is important to get the best advantage from buying or selling the securities.
5. Placing An Order

Various method of placing an order with the broker has been evolved to give the broker leverage
when he is on the floor of the stock exchange.
6. Preparation Of Contract Note

SEBI circular of 4th Feb. 1991 requires that  all member of the recognized stock  exchange issue
contract note to the investors on the execution of trade. Brokers, therefore issue contract note to the client,
which gives the name of the company, price of trade, brokerage, time of execution, provision regarding
arbitration etc. in term of the bye-laws of stock exchange, this is statutory requirement and mandatory.

7. Settlement
The settlement is the process whereby payment is made by brokers who have made purchase and
share delivery by those brokers who have made sales.
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CHAPTER 2:
RESEARCH
METHADOLOGY
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Research Methodology

A Descriptive research is used to describe the involvement of individuals of MUMBAI

city in Investment in Indian stock market and their perception regarding various factors or
variables that Affect while trading or investing in Indian stock market. For the study primary
data is collected through structured questionnaire from responses samples selected based on
convenience sampling from the MUMBAI city. Out of which respondents were dealing in stock
market.

In this paper findings and conclusion are based on only those respondents who trade in stock
market. Secondary data have been collected from newspapers, magazines and various
Research articles
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2.1 OBJECTIVE
 To get a basic understanding of the product, principle investment , players and
functioning of the stock market
 To understand the terms and jargons used in the financial newspapers
 To know the regulations framework for Indian stock market
 To understand the concepts of stock and stock market
 To also get important lessons about the economy and financial responsibility
 To learn about trading of stocks in the stock exchange
 To get in-depth study of Indian and other global stock market
 To organize stocks in a fair , transparent and competitive way
 33

Hypothesis

H0 (Null hypothesis)

The market cannot be beaten because it incorporates all important information into
current share prices, so stocks trade at the fairest value.

The market is generally efficient, the theory is offered in three different versions:
weak, semi-strong, and strong.

The weak form suggests today’s stock prices reflect all the data of past prices and
that no form of technical analysis can aid investors.

H1 (Alternative hypothesis)

Hypothesis for the Study

hypothesis testing has been taken into account. The hypothesis which is
tested under the assumption that it is true is called null hypothesis and is
denoted by H0. The hypothesis which differs from the given null hypothesis, H0
and is accepted when H0 is rejected is called an alternative hypothesis and is
denoted by H1. The null hypothesis for this study is: H0 =The price movements of
the securities listed on the SENSEX are not affected by their past prices (Price of
securities is Random) The alternative hypothesis for this study is: H1= The price
movements of the securities listed on SENSEX are affected by their past prices
(Price of securities is not Random
 34

Scope of study:
o Stock exchange
o Derivatives
o NSE
o BSE

Limitation
Limitation are the limiting lines that restrict the work in some way or other .if this
research study also there were some limiting factors , some of them are as under
o Data collection
o Time Period
o Reliability
o Resource constrain

Data collection
The most important constraint in this study was data collection as secondary data was selected
foe study. Secondary data means that are already available i.e. they refer to the data which have
already been collected and analysed by someone else
35
 36

CHAPTER 3 :
LITERATURE REVIEW
 37

A literature review isa scholarly paper that presents the current knowledge including substantive findings
as well as theoretical and methodological contributions to a particular topic. Literature reviews
are secondary sources and do not report new or original experimental work. Most often
Associated with academic-oriented literature, such reviews are found in academic journals and
are not to be confused with book reviews, which may also appear in the same publication.
Literature reviews are a basis for research in nearly every academic field. A narrow-scope
Literature review may be included as part of a peer-reviewed journal article presenting new
Research, serving to situate the current study within the body of the relevant literature and to
Provide context for the reader. In such a case, the review usually precedes the methodology
And results sections of the work

Reena Rai (2014)

Factors Affecting Investors’ Decision Making Behavior in the Stock

Market:

An Analytical Review, Indian Journal of Applied Research (Vol.4, Issue-9), and ISSN - 2249-555 X:

The paper under study aims to study the factors influencing an investor’s decision
making behavior on basis of related studies. It states that the various factors that influence
include various demographic factors such as gender, age, education. It is known that men are
more overconfident than women. Age plays a role on the mindset of the individual and the
propensity to take risk. It also explains sometimes, the precautious attitude and conservatism. On
the firm level the decision of the investors depend on capital structure average pricing, political
and media exposure, trend analysis, past performance of company’s stocks, expected dividend
and EPS etc. Finally, it concludes that out of the various factors affecting behavior of investors
some factors have a slight role while some majorly impact investor behavior. The general factors
being gender, age, confidence levels, cognitive bias, risk factors, company’s performance.

Bing Zhu (2012)

The Effects Of Macroeconomic Factors On Stock Return Of Energy

Sector In Shanghai Stock Market, International Journal of Scientific and Research
Publications (Vol. 2, Issue-11), ISSN 2250-3153:

The study aims at understanding the performance of arbitrage pricing theory (APT) in the Shanghai Stock
Exchange. In finance, arbitrage pricing theory (APT) is a general theory of asset pricing that holds that
the expected return of a financial asset. The research points out the fact that factors such as
Foreign reserve, exports, exchange rates, and unemployment rate have an impact on the returns of
Energy sector. As the foreign reserve increases by 1 point, the stock return of energy sector
increases by 2.142004. This shows that foreign reserves have a positive direct impact on the
Returns of energy sector.

Domenico Celenza and Fabrizio Rossi (2012)

The Relationship Between Intellectual Capital And Stock Market Performance: Empirical Evidence
From Italy, Journal of Modern Accounting and Auditing (Vol. 8, Issue-11), ISSN 1548-6583:

This study aims at providing a relation between the intellectual capital (IC) and returns of a company.
It also aims at evaluating the value of IC.
 38

 The accounting records are still incomplete inspite of the regulatory accounting standard.
 It is limited in transmitting information that is slowly reflected in the prices of securities
of listed companies to the stock market.
 As the information arrives into the market, it becomes old. Compared to the degree of
Circulation of information in the market, the financial indicators appear to be static.
 The beta factor does not explain the market value of firms and changes in stock prices.

Nayak (2010) seeks to examine the nature of investor’s grievances and also to evaluate the role of
grievance redress agencies. Using convenient random sampling technique he collects primary data on the
investor’s demographic profile, knowledge about various grievances, awareness about the functions of
various grievances redress agencies, loading of complain and their satisfaction level in Valsad district of
Gujarat State. By using chi square analysis he shows that there is significant difference between the
various demographic variables and investor’s knowledge of grievances, awareness of functions of
redressed agencies, loading of complain and their satisfaction level.

Varadharajan and Vikkraman (2011) focus on identifying the investors’ perceptions towards investment
decision in equity market. Using ANOVA on a sample size of 50 investors in Coimbatore they study their
attitude towards selection of stock, company, risk, equity portfolio, financial affairs and their expected
return. They find that there exists an independency between the demographics, majority of the factors and
the returns obtained.

Kadariya (2012) analyzes the market reactions to tangible information and intangible information in
Nepalese stock market to examine the investors’opinions in Nepalese stock market issues. After analysis
of a sample of 185 stock investors he finds that the capital structure and average pricing method is one
factor that influence the investment decisions, the next is political and media coverage, the third factor is
belief on luck and the financial education, and finally the forth component for stock market movement is
trend analysis. Thus, he concludes that both the tangible and intangible information are essential to
succeed in Nepalese capital market. Hon (2012) investigates the behaviour of small investors in Hong
Kong’s derivatives markets. The study period covers the global economic crisis of 2011- 2012, and he
focuses on small investors’ behaviour during and after the crisis. He attempts to identify and analyse the
key factors that capture small investor’s behaviour in derivatives markets in Hong Kong. He collects data
524 respondents through a questionnaire survey. Exploratory factor analysis rotated principal component
loadings, scree test, KMO and Bartlett’s test, and a reliability test show that the behaviour of small
investors in derivatives markets in Hong Kong consistently indicates the ascending order of importance of
return performance, reference group, and personal background.

Chaudhary (2013) examines the meaning and importance of behavioural finance and its application in
investment decisions. He has also discussed some trading approaches for investors in stocks and bonds to
assist them in manifesting and controlling their psychological roadblocks. Ngoc (2014) aim to investigate
behavioural factors influencing the decisions of individual investors at the Securities Companies in Ho
Chi Minh City, Vietnam. He collects data from 188 individual investors with a response rate of 63%.
There are five behavioural factors of individual investors at the Ho Chi Minh Stock Exchange: Herding,
Market, Prospect, Overconfidencegamble’s fallacy, and Anchoring-ability bias. The herding factor
includes behavioural dimensions: following the decisions of the other investors (buying and selling,
choice of trading stocks, volume of trading stocks).
 39

CHAPTER 4:
DATA ANALYSIS, INTERPRETATION AND
PRESENTATION
 40

DATA Interpretation
A questionnaire was prepared for the purpose of getting feedback from participators trader of stock or
derivative instrument regarding “stock Market “

DATA Analysis-
Data analysis of the data is done as per the survey finding . the data is represented graphically in
percentage

The percentage of people opinion were analyzed and expressed in the form of chart and have been placed
in the next few papers

TABULATION OF DATA

QUESTIO DESCRIPTION OF THE QUESTION A B C D

N
1 Are you aware of stock exchange?
2 Do you know about NSE and BSE?
3 Do you invest in share market?
Have you referred the investor awareness
campaign conducted by SEBI ?
Do you know that whose control on stock
exchange?
Are you aware of the term Bullish Action
Are you aware of the term Bearish Action
INVESTMENT OPTION
RISK YOU ARE WILLING TO TAKE
 41

CHAPTER 5:
CONCLUSION AND SUGGESTION
 42

CONCLUSION

In the current scenario, investing in stock markets is a major challenge ever for
professionals. Derivatives acts as a major tool for reducing the risk involved in
investing in stock markets for getting the best results out of it. The investors should
be aware of the various hedging and speculation strategies, which can be used for
reducing their risk.

Awareness about the various uses of derivatives can help investors to reduce risk
and increase profits. Though the stock market is subjected to high risk, by using
derivatives the loss can be minimized to an extent.