Final Mrp2-As On 28-11-10

The Study On Awareness Of People On Indian Stock Market
CHAPTER-1
INTRODUCTION
BM College Of Management & Research 1
Chapter-1 THE STUDY ON AWARENESS OF PEOPLE ON INDIAN STOCK MARKET (WITH SPECIAL REFERENCE TO INDORE CITY)
INTRODUCTION
Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces. In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors dont have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet. History of the Indian Stock Market The Origin One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history. 18th Century 1830's 1840's 1850's 1860's 186061 186263 1865 East India Company was the dominant institution and by end of the century, business in its loan securities gained full momentum Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business attracting more people into the business The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)
Pre-Independence Scenario - Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal "The Calcutta Stock Exchange Association" was formed Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. When recession followed, number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahore Stock Exchange with the Punjab Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"
1875 1880's 1894 1880 90's 1908 1920 1923 1934 1936 1937
1940 1944 1947
Post Independence Scenario The depression witnessed after the Independence led to closure of a lot of exchanges in the country. Lahore Stock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under
Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were:
1. 2. 3. 4. 5. 6. 7. 8.
Bombay Calcutta Madras Ahmedabad Delhi Hyderabad Bangalore Indore
Many more stock exchanges were established during 1980's, namely: Cochin Stock Exchange (1980) Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) Pune Stock Exchange Limited (1982) Ludhiana Stock Exchange Association Limited (1983) Gauhati Stock Exchange Limited (1984) Kanara Stock Exchange Limited (at Mangalore, 1985) Magadh Stock Exchange Association (at Patna, 1986) Jaipur Stock Exchange Limited (1989) Bhubaneswar Stock Exchange Association Limited (1989) Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) Vadodara Stock Exchange Limited (at Baroda, 1990) Coimbatore Stock Exchange Meerut Stock Exchange
The Study On Awareness Of People On Indian Stock Market Indian stock exchange allows a member broker to perform following activities: Act as an agent, Buy and sell securities for his clients and charge commission for the same, Act as a trader or dealer as a principal, Buy and sell securities on his own account and risk.
India Stock Exchanges are a structured marketplace for the proper conduct of trading in company stocks and other securities. There are 23 recognized stock exchanges in India, including the Over the Counter Exchange of India for providing trading access to small and new companies. The main services of the India Stock Exchanges all over the country are to provide nation-wide services to investors and to facilitate the issue and redemption of securities and other financial instruments. The introduction of the concept of the stock exchanges in India came with the breaking of the American Civil War and the idea materialized first in 1874 with the foundation of the Bombay Stock Exchange at the Dalal Street in Mumbai. Currently, in all the India Stock Exchanges the trading system is computerized for more efficient and transparent trading. There has been a significant boom in the degree of development and volume of trading in the stock exchanges. The two most important exchange houses of the Indian stock market are the Bombay Stock Exchange and the National Stock Exchange. Many of the regional stock exchanges have obtained the membership of these two stock exchanges in India. The index of the Bombay Stock Exchange, BSE Sensex is a value-weighted index composed of 30 companies. Indian Stock Markets is one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War broke out and cotton supply from United States to Europe was stopped; thus, the 'Share Mania' in India began. The number of brokers increased to about 200 to 250. BM College Of Management & Research 5
The Study On Awareness Of People On Indian Stock Market At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association, which is alternatively known as The Stock Exchange". In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated. The Indian stock market has been assigned an important place in financing the Indian corporate sector. The principal functions of the stock markets are: Enabling mobilizing resources for investment directly from the investors Providing liquidity for the investors and monitoring. Disciplining company management.
1.1 THE TWO MAJOR STOCK EXCHANGES IN INDIA

National Stock Exchange (NSE) Bombay Stock Exchange (BSE). National stock exchange:-
The National Stock Exchange of India Limited is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of around Rs 47, 01,923 crore (7 August 2009) and is expected to become the biggest stock exchange in India in terms of market capitalization by 2009 end. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization. NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euro next and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock BM College Of Management & Research 7
The Study On Awareness Of People On Indian Stock Market Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%. With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of there commendations of high powered Pherwani Committee. The National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures. Trading at NSE can be classified under two broad categories:-
Wholesale debt market Capital market Wholesale debt market operations are similar to money market operations institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. Capital market: A market where debt or equity securities are traded. There are two kinds of players in NSE: Trading members Participants Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility. Trading at NSE takes place through a fully automated screen-based trading mechanism which adopts the principle of an order-driven market. Trading members can
The Study On Awareness Of People On Indian Stock Market stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member. NSE has several advantages over the traditional trading exchanges. They are as follows: NSE brings an integrated stock market trading network across the nation. Investors can trade at the same price from anywhere in the country since inter-market operations are streamlined coupled with the countrywide access to the securities. Delays in communication, late payments and the malpractices prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network. NSE Nifty S&P CNX Nifty is a well-diversified 50 stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. NSE came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product. IISL have a consulting and licensing agreement with Standard &Poor's (S&P), who are world leaders in index services. CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e. and CRISIL. Thus, 'C' Stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The S&P prefix belongs to the US-based Standard & Poor's Financial Information Services.
Bombay stock exchange:-
The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia and has the greatest number of listed companies in the world, with 4700 listed as of August 2007. It is located at Dalal Street, Mumbai, India. On 31 December 2007, the equity market capitalization of the companies listed on the BSE was US$ 1.79 trillion, making it the largest stock exchange in South Asia and the 12th largest in the world. With over 4700 Indian companies listed & over 7700 scripts on the stock exchange, it has a significant trading volume. The BSE SENSEX (SENSitive indEX), also called the "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and the National Stock Exchange of India account for most of the trading in shares in India.
The Bombay Stock Exchange is one of the oldest stock exchanges in Asia. It was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956. The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide.
SENSEX The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time. Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX. The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100 stocks listed at five major stock exchanges. The values of all BSE indices are updated every 15 seconds during the market hours and displayed through the BOLT system, BSE website and news wire agencies. All BSE-indices are reviewed periodically by the index committee of the exchange.
1.2 OVERVIEW OF THE REGULATORY FRAMEWORK OF THE CAPITAL MARKET IN INDIA

India has a financial system that is regulated by independent regulators in the sectors of banking, insurance, capital markets and various service sectors. The Indian Financial system is regulated by two governing agencies under the Ministry of Finance. They are 1. Reserve Bank of India The RBI was set up in 1935 and is the central bank of India. It regulates the financial and banking system. It formulates monetary policies and prescribes exchange control norms. 2. The Securities Exchange Board of India The Government of India constituted SEBI on April 12, 1988, as a non-statutory body to promote orderly and healthy development of the securities market and to provide investor protection. The capital markets division of the Department of Economic Affairs regulates capital markets and securities transactions. The capital markets division has been entrusted with the responsibility of assisting the Government in framing suitable policies for the orderly growth and development of the securities markets with the SEBI, RBI and other agencies. It is also responsible for the functioning of the Unit Trust of India (UTI) and Securities and Exchange Board of India (SEBI).
The principal aspects that are dealt with the capital market division are: Policy matters relating to the securities market. Policy matters relating to the regulation and development and investor of the securities market and the debt market. Organizational and operational matters relating to SEBI. The Capital Market is governed by: Securities Contract (Regulation) Act, 1956 Securities Contract (Regulation) Rules, 1957 SEBI Act, 1992 Companies Act 1956 SEBI (Stock Brokers and Sub Brokers) Rules, 1992 Exchange Bye-Laws Rules & Regulations BM College Of Management & Research 12
protection
Self-regulating Role of the Exchange The exchange functions as a Self Regulatory Organization with the parameters laid down by the SCRA, SEBI Act, SEBI Guidelines and Rules, Bye-laws and Regulations of the Exchange. The Governing Board discharges these functions. The Executive Director has all the powers of the governing board except discharging a member indefinitely or declaring him a defaulter or expelling him. The Executive Director takes decisions in the areas like surveillance, inspection, investigation, etc. in an objective manner as per the parameters laid down by the governing board or the statutory committees like the Disciplinary Action Committee.
1.3 TRADING WITH STOCK MARKET

This section will introduce us about the process and instruments used to help a customer or a client to trade with arcadia securities. This process is almost similar to any other trading firm but there will be some difference in the cost of brokerage commission. Trading: It is a process by which a customer is given facility to buy and sell share this buying and selling can only be done through some broker and this is where Arcadia helps its customer. A customer willing to trade with any brokerage house need to have a demat account, trading account and saving account with a brokerage firm. Any one having following document can open all the above mentioned account and can start trading. Document Required 3 photographs ( signed across) Photo Identification Proof - any of the following - Voter ID/Driving License/Passport. Address Proof any of the following - Voter ID/Driving License/ Passport/ Bank statement or pass book sealed and attestation by bank official/ BSNL landline bill. A crossed Cheque favouring Broking company. Of the required amount. The amount for Demat as well as trading will be Rs. 900/-(free Demat +900 Trading Account) the minimum amount being Rs. 900 a cheque can be given for a larger amount. Copy of PAN Card is mandatory. Registration Kit CDSL Demat Kit Bank and address proof declaration. PAN name discrepancy form. These documents may not be consumer friendly but it is to avoid illegal transaction and to prevent black money this ensures that money invested is accounted. Techniques for Trading The various techniques that are available in the hands of a client are:1. Delivery 2. Intraday 3. Future 4. Forwards 5. Options 6. Swaps Basic Requirement for doing Trading Trading requires Opening a Demat account. Demat refers to a dematerialized account. BM College Of Management & Research 14
The Study On Awareness Of People On Indian Stock Market You need to open a Demat account if you want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares. We need to approach the Depository Participants (DP, they are like bank branches), to open Demat account. A depository is a place where the stocks of investors are held in electronic form. The depository has agents who are called depository participants (DPs). Think of it like a bank. The head office where all the technology rests and details of all accounts held is like the depository. And the DPs are the branches that cater to individuals. There are only two depositories in India The National Securities Depository Ltd (NSDL) and the Central Depository Services Ltd (CDSL). Capital Market Participants Banks Exchanges Clearing Corporations Brokers Custodians Depositories Investors Merchant Bankers
Types of Investors Institutional Investors- MFs / FI / FIIs / Banks Retail Investors Arbitrageurs / Speculators Hedgers Day traders/Jobbers
Combination of Futures and Option Hedging means, minimizing the risk, i.e., minimizing the losses. Under index futures and index options investor can minimize his losses. Hedging does not remove losses but removes unwanted exposure, i.e. unnecessary risk. One should not enter into a hedging strategy hoping to make excess profits; all it can do is reduce the risk.
1.4 Basic Stock Market Terms

To make the most out of your stock market investing you need to know the basic terminology. You are going to be having these words thrown at you so you had better get up to speed when it comes to their meanings. Here are some of the most basic stock market terms that you will need to know in order to be a success: Assets:If the company has something that can be exchanged for money, or that have some value they have assets. Common stock:When you own common stock you own a part of a company and as such will be entitled to dividends. These can be paid out as stocks, money or property. Oftentimes additional shares are given to shareholders and all cash dividends are taxable in that tax year. If property dividends are being paid out then this will have to come from the assets of the company.
Preferred stock:These stockholders will own a chunk of a corporation and the dividends are always paid in the form of cash. They are also always for the exact same amount of money each time. This amount is a set amount that will not change unless the stock is retired or called back in the future.
StockanalystAn analyst is certified to evaluate financial investments. They perform their own research in order to be able to make recommendations. Basic terms:These stock market terms reflect common ideas and descriptions that are used every day. Such stock market terms portray types of people and general stock market basics.
Ask This is the lowest price that a seller will accept when selling a stock. Bear This refers to an investor who believes the stock market or a particular stock is
declining. This is the opposite of a Bull.
Bid This is the highest price that a buyer is willing to pay for a stock. Broker A person that buys or sells stocks, bonds, commodities and such in
exchange for a fee which is called a commission.
Bull An investor who believes the whole market or one individual stock is going to
increase in price. This is the opposite of a Bear.
Dow Jones Industrial Average This is a compilation of the 30 most traded blue chip
stocks. This list is the most widely used for analyzing stock market indexes.
NASDAQ This is a stock exchange consisting primarily of technology companies. Stock This is the smallest measurable unit of ownership in a company. Shares fall
into either the common or preferred categories; companies issue shares of stock in order to raise capital without borrowing money. Investing terms These words and phrases reflect stock market terms for various stock market strategies. These stock market terms are used to describe specific conditions or analysis. Blue Chip This term describes a company with a history of strong earning, traditionally increasing dividends and an outstanding balance sheet. Blue Chip stocks include Exxon-Mobile, Coca-Cola and Wal-Mart. Book Value - This is the value of a company if assets and common stock equity are added together and all liabilities are subtracted. There is little correlation between the book value and the market value. Book value is used in such fundamental analysis measurements as Price to Book ratio. Dividend This is the portion of a companys profit that is given back to the investors. Such payments are made on either an annual or quarterly basis. Market Capitalization A company's market capitalization, also known as its market cap, is calculated by taking the number of outstanding shares of stock multiplied by the current price per share. P/E Ratio This widely used analysis tool of Price to Earnings ratio measures now you pay for each dollar of corporate earnings. For example, if you have $30 stocks that report a profit of $2 per share, your P/E ratio is 15; $30 per share divided by $2 earnings per share equals 15. In this ratio the lower the P/E ratio, the better. Spread: This stock market term reflects the difference between the Ask and the Bid. Yield This is the percentage of a dividend paid against the stock price. For example, if you receive a $3 dividend on a $30 per share stock, your yield is 10%.
1.5 INSTRUMENTS & PLAYERS OF STOCK MARKET

Products available in the Secondary and Primary Market New issue market instruments:The term initial public offering (IPO) slipped into everyday speech during the tech bull market of the late 1990s. Back then, it seemed you couldn't go a day without hearing about a dozen new dotcom millionaires in Silicon Valley who were cashing in on their latest IPO. The phenomenon spawned the term siliconaire, which described the dotcom entrepreneurs in their early 20s and 30s who suddenly found themselves living large on the proceeds from their internet companies' IPOs. Selling Stock An initial public offering, or IPO, is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, it's known as an IPO. Companies fall into two broad categories: private and public. A privately held company has fewer shareholders and its owners don't have to disclose much information about the company. Anybody can go out and incorporate a company: just put in some money, file the right legal documents and follow the reporting rules of your jurisdiction. Most small businesses are privately held. But large companies can be private too. Did you know that IKEA, Domino's Pizza and Hallmark Cards are all privately held? It usually isn't possible to buy shares in a private company. You can approach the owners about investing, but they're not obligated to sell you anything. Public companies, on the other hand, have sold at least a portion of themselves to the public and trade on a stock exchange. This is why doing an IPO is also referred to as "going public." Public companies have thousands of shareholders and are subject to strict rules and regulations. They must have a board of directors and they must report financial information every quarter. In the United States, public companies report to the Securities and Exchange Commission (SEC). In other countries, public companies are overseen by governing bodies similar to the SEC. From an investor's standpoint, the most exciting thing about a public company is that the stock is traded in the open market, like any other commodity. If you have the cash, you can invest. The CEO could hate your guts, but there's nothing he or she could do to stop you from buying stock. Going public raises cash, and usually a lot of it. Being publicly traded also opens many financial doors: Because of the increased scrutiny, public companies can usually get better rates when they issue debt. BM College Of Management & Research 18
The Study On Awareness Of People On Indian Stock Market As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal. Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent. Being on a major stock exchange carries a considerable amount of prestige. In the past, only private companies with strong fundamentals could qualify for an IPO and it wasn't easy to get listed. The internet boom changed all this. Firms no longer needed strong financials and a solid history to go public. Instead, IPOs were done by smaller startups seeking to expand their businesses. There's nothing wrong with wanting to expand, but most of these firms had never made a profit and didn't plan on being profitable any time soon. Founded on venture capital funding, they spent like Texans trying to generate enough excitement to make it to the market before burning through all their cash. In cases like this, companies might be suspected of doing an IPO just to make the founders rich. This is known as an exit strategy, implying that there's no desire to stick around and create value for shareholders. The IPO then becomes the end of the road rather than the beginning. The Underwriting Process Getting a piece of a hot IPO is very difficult, if not impossible. To understand why, we need to know how an IPO is done, a process known as underwriting. When a company wants to go public, the first thing it does is hire an investment bank. A company could theoretically sell its shares on its own, but realistically, an investment bank is required - it's just the way Wall Street works. Underwriting is the process of raising money by either debt or equity (in this case we are referring to equity). You can think of underwriters as middlemen between companies and the investing public. The biggest underwriters are Goldman Sachs, Merrill Lynch, Credit Suisse First Boston, Lehman Brothers and Morgan Stanley. The company and the investment bank will first meet to negotiate the deal. Items usually discussed include the amount of money a company will raise, the type of securities to be issued and all the details in the underwriting agreement. The deal can be structured in a variety of ways. For example, in a firm commitment, the underwriter guarantees that a certain amount will be raised by buying the entire offer and then reselling to the public. In a best efforts agreement, however, the underwriter sells securities for the company but doesn't BM College Of Management & Research 19
The Study On Awareness Of People On Indian Stock Market guarantee the amount raised. Also, investment banks are hesitant to shoulder all the risk of an offering. Instead, they form a syndicate of underwriters. One underwriter leads the syndicate and the others sell a part of the issue. Once all sides agree to a deal, the investment bank puts together a registration statement to be filed with the SEC. This document contains information about the offering as well as company info such as financial statements, management background, any legal problems, where the money is to be used and insider holdings. The SEC then requires a cooling off period, in which they investigate and make sure all material information has been disclosed. Once the SEC approves the offering, a date (the effective date) is set when the stock will be offered to the public. During the cooling off period the underwriter puts together what is known as the red herring. This is an initial prospectus containing all the information about the company except for the offer price and the effective date, which aren't known at that time. With the red herring in hand, the underwriter and company attempt to hype and build up interest for the issue. They go on a road show - also known as the "dog and pony show" - where the big institutional investors are courted. As the effective date approaches, the underwriter and company sit down and decide on the price. This isn't an easy decision: it depends on the company, the success of the road show and, most importantly, current market conditions. Of course, it's in both parties' interest to get as much as possible. Finally, the securities are sold on the stock market and the money is collected from investors. An initial public offering (IPO) is the first sale of stock by a company to the public. Broadly speaking, companies are either private or public. Going public means a company is switching from private ownership to public ownership. Going public raises cash and provides many benefits for a company. The dotcom boom lowered the bar for companies to do an IPO. Many startups went public without any profits and little more than a business plan. Getting in on a hot IPO is very difficult, if not impossible. The process of underwriting involves raising money from investors by issuing new securities.
The Study On Awareness Of People On Indian Stock Market Companies hire investment banks to underwrite an IPO. The road to an IPO consists mainly of putting together the formal documents for the Securities and Exchange Commission (SEC) and selling the issue to institutional clients. The only way for you to get shares in an IPO is to have a frequently traded account with one of the investment banks in the underwriting syndicate. An IPO company is difficult to analyze because there isn't a lot of historical info. Lock-up periods prevent insiders from selling their shares for a certain period of time. The end of the lockup period can put strong downward pressure on a stock. Flipping may get you blacklisted from future offerings. Road shows and red herrings are marketing events meant to get as much attention as possible. Don't get sucked in by the hype. A tracking stock is created when a company spins off one of its divisions into a separate entity through an IPO. Don't consider tracking stocks to be the same as a normal IPO, as you are essentially a second-class shareholder.
Following are the main financial products/instruments dealt in the secondary market: Equity: - The ownership interest in a company of holders of its common and preferred stock. The various kinds of equity shares are as follows Equity Shares:An equity share, commonly referred to as ordinary share also represents the form of fractional ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture. The holders of such shares are members of the company and have voting rights. A company may issue such shares with differential rights as to voting, payment of dividend, etc. Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a ratio to those already held. Bonus Shares: Shares issued by the companies to their shareholders free of cost by capitalization of accumulated reserves from the profits earned in the earlier years. Preferred Stock/ Preference shares: Owners of these kind of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in respect of equity share. They also enjoy priority over the BM College Of Management & Research 21
The Study On Awareness Of People On Indian Stock Market equity shareholders in payment of surplus. But in the event of liquidation, their claims rank below the claims of the companys creditors, bondholders / debenture holders. Cumulative Preference Shares. A type of preference shares on which dividend accumulates if remains unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares. Cumulative Convertible Preference Shares: A type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company. Participating Preference Share: The right of certain preference shareholders to participate in profits after a specified fixed dividend contracted for is paid. Participation right is linked with the quantum of dividend paid on the equity shares over and above a particular specified level. Security Receipts: Security receipt means a receipt or other security, issued by a securitization company or reconstruction company to any qualified institutional buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of an undivided right, title or interest in the financial asset involved in securitization. Government securities (G-Secs): These are sovereign (credit risk-free) coupon bearing instruments which are issued by the Reserve Bank of India on behalf of Government of India, in lieu of the Central Government's market borrowing programme. These securities have a fixed coupon that is paid on specific dates on half-yearly basis. These securities are available in wide range of maturity dates, from short dated (less than one year) to long dated (upto twenty years). Debentures: Bonds issued by a company bearing a fixed rate of interest usually payable half yearly on specific dates and principal amount repayable on particular date on redemption of the debentures. Debentures are normally secured/ charged against the asset of the company in favour of debenture holder. Bond: A negotiable certificate evidencing indebtedness. It is normally unsecured. A debt security is generally issued by a company, municipality or government agency. A bond investor lends money to the issuer and in exchange, the issuer promises to repay the loan amount on a specified maturity date. The issuer usually pays the bond holder periodic interest payments over the life of the loan. The various types of Bonds are as follows Zero Coupon Bond: Bond issued at a discount and repaid at a face value. No periodic interest is paid. The difference between the issue price and redemption price represents the return to the holder. The buyer of these bonds receives only one payment, at the maturity of the bond.
The Study On Awareness Of People On Indian Stock Market Convertible Bond: A bond giving the investor the option to convert the bond into equity at a fixed conversion price. Commercial Paper: A short term promise to repay a fixed amount that is placed on the market either directly or through a specialized intermediary. It is usually issued by companies with a high credit standing in the form of a promissory note redeemable at par to the holder on maturity and therefore, doesnt require any guarantee. Commercial paper is a money market instrument issued normally for a tenure of 90 days. Treasury Bills: Short-term (up to 91 days) bearer discount security issued by the Government as a means of financing its cash requirements. DEBT INSTRUMENTS To meet the long term and short term needs of finance, firms issue various kinds of Securities to the public. Securities represent claims on a stream of income and /or particular assets. Debentures are debt securities, and there is a wide range of them. Market loans are raised by the government and public sector institutions through debt securities. Equity shares issued by cooperates are ownership securities. Preference shares are a hybrid security. It is a mixture of an ownership security and debt security. DEBENTURES A debenture is a document which either creates a debt or acknowledges it. Debenture issued by a company is in the form of a certificate acknowledging indebtedness. The debentures are issued under the Company's Common Seal. Debentures are one of a series issued to a number of lenders. The date of repayment is specified in the debentures. Debentures are issued against a charge on the assets of the Company. Debentures holders have no right to vote at the meetings of the companies. KINDS OF DEBENTURES (a)Bearer Debentures: They are registered and are payable to the bearer. They are negotiable instruments and are transferable by delivery. (b) Registered Debentures: They are payable to the registered holder whose name appears both on the debentures and in the Register of Debenture Holders maintained by the company. Registered Debentures can be transferred but have to be registered again. Registered Debentures are not negotiable instruments. A registered debenture contains a commitment to pay the principal sum and interest. It also has a description of the charge and a statement that it is Issued subject to the conditions endorsed therein.
(c) Secured Debentures: Debentures which create a change on the assets of the company which may be fixed or floating are known as secured Debentures. The term "bonds" and "debentures"(secured) are used interchangeably in common parlance. In USA, BOND is a long term contract which is secured, whereas a debenture is an unsecured one. (d) Unsecured or Naked Debentures: Debentures which are issued without any charge on assets are insecured or naked debentures. The holders are like unsecured creditors and may see the company for the recovery of debt. (e) Redeemable Debentures: Normally debentures are issued on the condition that they shall be redeemed after a certain period. They can however, be reissued after redemption. (f) Perpetual Debentures: When debentures are irredeemable they are called perpetual. Perpetual Debentures cannot be issued in India at present. (g) Convertible Debentures: If an option is given to convert debentures into equity shares at the stated rate of exchange after a specified period, they are called convertible debentures. Convertible Debentures have become very popular in India. On conversion the holders cease to be lenders and become owners. Debentures are usually issued in a series with a pari passu (at the same rate) clause which entitles them to be discharged rate ably though issued at different times. New series of debentures cannot rank pari passu with the old series unless the old series provides so. New debt instruments issued by public limited companies are participating debentures, convertible debentures with options, third party convertible debentures convertible debentures redeemable at premiums, debt equity swaps and zero coupon convertible notes. These are discussed below: (h) Participating Debentures: They are unsecured corporate debt securities which participate in the profits of the company. They might find investors if issued by existing dividend paying companies. (i) Convertible Debentures with options: They are a derivative of convertible debentures with an embedded option, providing flexibility to the issuer as well as the investor to exit from the terms of the issue. The coupon rate is specified at the time of issue.
(j) Third Party Convertible Debentures: They are debt with a warrant allowing the investor to subscribe to the equity of third firm at a preferential price visa vis the market price. Interest rate on third party convertible debentures is lower than pure debt on account of the conversion option. (k) Convertible-Debentures Redeemable at a Premium: Convertible Debentures are issued at face value with 'a put option entitling investors to sell the bond to the issuer at a premium. They are basically similar to convertible debentures but embody less risk. (I) Debt-Equity Swaps: Debt-Equity Swaps are an offer from an issuer of debt to swap it for equity. The instrument is quite risky for the investor because the anticipated capital appreciation may not materialize. (m) Deep discount Bonds: They are designed to meet the long term funds requirements of the issuer and investors who are not looking for immediate return and can be sold with a long maturity of 25-30 years at a deep discount on the face value of debentures. IDBI deep discount bonds for Rs 1 lakh repayable after 25 years were sold at a discount price of Rs. 2,700. (n) Zero-Coupon Convertible Note: A zero-coupon convertible note can be converted into shares. If choice is exercised investors forego all accrued and unpaid interest. The zero-coupon convertible notes are quite sensitive to changes in interest rates. (o) Secured Premium Notes (SPN) with Detachable Warrants: SPN which is issued along with a detachable warrant, is redeemable after a notice period, say four to seven years. The warrants attached to it ensure the holder the right to apply and get allotted equity shares; provided the SPN is fully paid. There is a lock-in period for SPN during which no interest will be paid for an invested amount. The SPN holder has an option to sell back the SPN to the company at par value after the lock in period. If the holder exercises this option, no interest/ premium will be paid on redemption. In case the SPN holder holds its further, the holder will be repaid the principal amount along with the additional amount of interest/ premium on redemption in installments as decided by the company. The conversion of detachable warrants into equity shares will have to be done within the time limit notified by the company. (p) Floating Rate Bonds: The rate on the floating Rate Bond is linked to a benchmark interest rate like the prime rate in USA or LIBOR in Eurocurrency market. The State Bank of India's floating rate BM College Of Management & Research 25
The Study On Awareness Of People On Indian Stock Market bond was linked to maximum interest on term deposits which was 10 percent. Floating rate is quoted in terms of a margin above or below the bench mark rate. The-floor rate in the State Bank of India case was 12 per cent. Interest rates linked to the bench mark ensure that neither the borrower nor the lender suffer from the changes in interest rates. When rates are fixed, they are likely to be inequitable to the borrower when interest rates fall subsequently, and the same bonds are likely to be inequitable to the lender when interest rates rise subsequently. Warrants A warrant is a security issued by a company granting the holder of the warrant the right to purchase a specified number of, shares at a specified price any time prior to an expirable date. Warrants may be issued with debentures or equity shares. The specific rights are set out in the warrant. The main features-of a warrant are number of shares entitled, expiry date and state price exercise price. Expiry date of warrants, generally in USA, is 5 to 10 years from the original issue date. The exercise price is 10 to 30 percent above the prevailing market price. The Warrants have a secondary market. The minimum value of a warrant represents the exchange value between the current price of the share and the shares purchased at the exercise price. Warrants have no flotation costs and when they are exercised the firm receives additional funds at a price lower than the current market, yet about those prevailing at issue time. New or growing firms and venture capitalists issue warrants. They are also issued in mergers and acquisitions. Warrants are called sweeteners and have been issued in the recent past by several companies in India. Debentures issued with warrants, like convertible debentures, carry lower coupon rates. Non-Convertible Debentures (NCDS) With Detachable Equity Warrants The holder of NCDs with detachable equity warrants is given an option to buy a specific number of shares from the company at a predetermined price within a definite timeframe. The warrants attached to NCDs will be issued subject to full payment of NCD is a value. There is a specific lock-in period after which there detachable option to apply for equities. If the option to apply for equities is not exercised, the unapplied portion of shares would be disposed off by the company at its liberty. Zero-Interest Fully Convertible Debentures (FCDS) The investors in zero-interest fully convertible debentures will not be paid any interest. However, there is a notified period after which fully paid FCDs will be automatically and compulsorily converted into shares. There is a lock-in period up to which no interest will be paid. Conversion is allowed only for fully paid FCDs. In the event of the company going for rights issue prior to the allotment of equity resulting from the conversion of equity shares into FCDs, FCD holders shall be offered securities as may be determined by the company. BM College Of Management & Research 26
Secured Zero-Interest Partly Convertible Debentures (PCDS) With Detachable And Separately Tradable Warrants: This instrument has two parts; A and B. Part A is convertible into equity shares at a fixed amount on the date of allotment. Part B is non-convertible, to be redeemed at par at the end of a specific period from the date of allotment. Part B will carry a detachable and separately tradable warrant which will provide an option to the warrant holder to receive equity shares for every warrant held at a price as worked out by the company.
Fully Convertible Debentures (FCDS) With Interest (Optional) This instrument does not yield interest in the initial period of say, 6 months. After this period option is given to the holder of FCDs to apply for equity at a "premium" for which no additional amour it needs to be paid. The option has to be indicated in the application form itself. However, interest on FCDs is payable at a determined rate from the date of first conversion to the second /final conversion and in lieu of it, equity shares are issued. OTHER DEBT SECURITIES IN VOGUE ABROAD Income Bonds: Here interest is paid only when cash flows are adequate. Income Bonds are like cumulative preference shares on which the fixed dividend is not paid if there is no profit in a year, but is carried forward and paid in the following year. On Income Bonds, there is no default if interest is not paid. Unlike dividend on cumulative preference shares, interest on income bond is tax deductible. Income Bonds are issued abroad by companies in reorganization or by firms whose financial situation does not make it feasible to issue bonds with a fixed interest payment Asset-Backed Securities: Assets-backed securities are a category of marketable securities that are collateralized by financial assets such as installment loan contracts. Asset-backed financing involves a process called securitization. Securitization is a disintermediation process in which credit from financial intermediaries is replaced by marketable debentures that can be issued at lower cost. Financial assets are pooled so that debentures can be sold to third parties to finance the pool. Repos are the oldest asset-backed security in our country. In USA, securitization has been undertaken for insured mortgages (Ginnie Mae, 1970), mortgage backed loans, student loans (Sallie Mae 1973), trade credit receivable backed bonds (1982), equipment leasing backed bonds (1984), certificates of automobile receivable securities (1985) and small business administration loans. More recently, credit card receivables have been securitized. The decade of the eighties witnessed large expansion of asset backed security financing.
Junk Bonds: Junk Bond is a high risk, high yield bond to finance either a leveraged buyout (LBO), a merger of a company in financial distress. Coupon rates range from 16 to 25 per cent. Old line established companies which were inefficient and. financed conservatively were objects of take over and restructuring. To finance such take-over, high yield bonds were sold. Attractive deals were put together establishing their feasibility in terms of adequacy of cash flows to meet interest payments. Michael Milken (the JUNK BOND KING) of Drexel Buraham Lambert was the real developer of the market. The junk bond market was tarnished by the fines ($ 650 million) levied in 1989 on the investment banking firm Drexel Burnham Lambert for various Securities Law violations and thus was forced into bankruptcy in 1990 and the indictment of Milken in 1990 on charges of fraud $ 600 million fines and penalties. Mutual Funds and Segregated Funds Mutual funds or other forms of pooled investment measures are equities held by private individuals but managed and governed by prominent management firms. These types of financial holdings allow individual investors to diversify their holdings and avoid potential loss. Segregated funds, on the other hand, are used by large private investors who wish to hold their shares directly rather than in a mutual fund. The prime advantage in investing in a pooled fund is that it gives the individual access to professional advice through the fund manager. The major disadvantages involved are that the investors must pay a fee to the fund managers and that the diversification of the fund may not be appropriate for all investors. In those cases, the investors may over-diversify by holding several funds, thus reducing the risk. Mutual funds are supposed to be the best mode of investment in the capital market since they are very cost beneficial and simple, and do not require an investor to figure out which securities to invest into. A mutual fund could simply be described as a financial medium used by a group of investors to increase their money with a predetermined investment. The responsibility for investing the pooled money into specific investment channels lies with the fund manager of said mutual fund. Therefore investment in a mutual fund means that the investor has bought the shares of the mutual fund and has become a shareholder of that fund. Diversification of investment Investors are able to purchase securities with much lower trading costs by pooling money together in a mutual fund rather than try to do it on their own. However the biggest advantage that mutual funds offer is diversification which allows the investor to spread out his money across a wide spectrum of investments. Therefore when one investment is not doing well, another may be doing taking off, thereby balancing the risk to profit ratio and considerably covering the overall investment. BM College Of Management & Research 28
The Study On Awareness Of People On Indian Stock Market The best form of diversification is to invest in multiple securities rather than in just one security. Mutual funds are set up with the precise objective of investing in multiple securities that can run into hundreds. It could take weeks for an investor to investigate on this kind of scale, but with investment in mutual funds all this could be done in a matter of hours. Types of Mutual Funds (Mode of Investment) Mutual Fund Types American Mutual Funds BMO Mutual Funds Canadian Mutual Funds Fidelity Mutual Funds Hartford Mutual Funds Investing in Mutual Funds Investment Funds Top Mutual Funds Dynamic Mutual Fund Janus Mutual Funds Vanguard Mutual Funds Mutual Funds Performance Intra-Day Low: This is the minimum price at which the share traded in the day.
1.6 CLEARING AND SETTLEMENT
Decision to trade Funds/securiti es Transaction cycle Placing order
Settlement of trades
Trade execution
Clearing of trade Model-1.1-Transaction Cycle
Settlement Process While NSE provides a platform for trading to its trading members, the National Securities Clearing Corporation Ltd. (NSCCL) determines the funds/securities obligations of the trading members and ensures that trading members meet their obligations. NSCCL becomes the legal counterparty to the net settlement obligations of every member. This principle is called ``novation'' and NSCCL is obligated to meet all settlement obligations, regardless of member defaults, without any discretion. Once a member fails on any obligations, NSCCL immediately cuts off trading and initiates recovery. The clearing banks and depositories provide the necessary interface between the custodians/clearing members (who clear for the trading members or their own transactions) for settlement of funds/securities obligations of trading members. The core processes involved in the settlement process are: (a) Determination of Obligation: NSCCL determines what counter-parties owe, and what counter-parties are due to receive on the settlement date. The NSCCL interposes itself as a central counterparty between the counterparties to trades and nets the positions so that a member has security wise net obligation to receive or deliver a security and has to either pay or receive funds.
The Study On Awareness Of People On Indian Stock Market (b) Pay-in of Funds and Securities: The members bring in their funds/securities to the NSCCL. They make available required securities in designated accounts with the depositories by the prescribed pay-in time. The depositories move the securities available in the accounts of members to the account of the NSCCL. Likewise members with funds obligations make available required funds in the designated accounts with clearing banks by the prescribed pay-in time. The NSCCL sends electronic instructions to the clearing banks to debit members accounts to the extent of payment obligations. The banks process these instructions, debit accounts of members and credit accounts of the NSCCL. (c) Pay-out of Funds and Securities: After processing for shortages of funds/securities and arranging for movement of funds from surplus banks to deficit banks through RBI clearing, the NSCCL sends electronic instructions to the depositories/clearing banks to release pay-out of securities/funds. The depositories and clearing banks debit accounts of NSCCL and credit settlement accounts of members. Settlement is complete upon release of pay-out of funds and securities to custodians/members. The settlement process for transactions in securities in the CM segment of NSE is presented in the Figure (d) Risk Management: A sound risk management system is integral to an efficient settlement system. NSCCL has put in place a comprehensive risk management system, which is constantly monitored and upgraded to pre-empt market failures. It monitors the track record and performance of members and their net worth; undertakes on-line monitoring of members positions and exposure in the market collects margins from members and automatically disables members if the limits are breached. Settlement Agencies The NSCCL, with the help of clearing members, custodians, clearing banks and depositories settles the trades executed on exchanges. The roles of each of these entities are explained below: (a) NSCCL: The NSCCL is responsible for post-trade activities of a stock exchange. Clearing and settlement of trades and risk management are its central functions. It clears all trades, determines obligations of members, arranges for pay-in of funds/securities, receives funds/securities, processes for shortages in funds/securities, arranges for pay-out of funds/securities to members, guarantees settlement, and collects and maintains margins/collateral/base capital/other funds. (b) Clearing Members: They are responsible for settling their obligations as determined by the NSCCL. They have to make available funds and/or securities in the designated accounts with clearing bank/depository participant, as the case may be, to meet their obligations on the settlement day. In the capital market segment, all trading members of the Exchange are required to become the Clearing Member of the Clearing Corporation. (c) Custodians: A custodian is a person who holds for safekeeping the documentary evidence of the title to property belonging like share certificates, etc. The title to the custodians property remains vested with the original holder, or in their nominee(s), or BM College Of Management & Research 31
The Study On Awareness Of People On Indian Stock Market custodian trustee, as the case may be. In NSCCL, custodian is a clearing member but not a trading member. He settles trades assigned to him by trading members. He is required to confirm whether he is going to settle a particular trade or not. If it is confirmed, the NSCCL assigns that obligation to that custodian and the custodian is required to settle it on the settlement day. If the custodian rejects the trade, the obligation is assigned back to the trading /clearing member.
Settlement Process in CM segment of NSE
NSE
1 8 9
DEPOSITORIES
6
NSCCL
7 2 3
CLEARING BANKS
5 10
CUSTODIANS/CM
11
Model-1.2 -Settlement Process in CM segment of NSE Explanations: (1) Trade details from Exchange to NSCCL (real-time and end of day trade file). (2) NSCCL notifies the consummated trade details to CMs/custodians who affirm back. Based on the affirmation, NSCCL applies multilateral netting and determines obligations. (3) Download of obligation and pay-in advice of funds/securities. (4) Instructions to clearing banks to make funds available by pay-in time. (5) Instructions to depositories to make securities available by pay-in-time. (6)Pay-in of securities (NSCCL advises depository to debit pool account of custodians/CMs and credit its account and depository does it). (7) Pay-in of funds (NSCCL advises Clearing Banks to debit account of custodians/CMs and credit its account and clearing bank does it). (8) Pay-out of securities (NSCCL advises depository to credit pool account of custodians/CMs and debit its account and depository does it). BM College Of Management & Research 32
The Study On Awareness Of People On Indian Stock Market (9) Pay-out of funds (NSCCL advises Clearing Banks to credit account of custodians/CMs and debit its account and clearing bank does it). (10) Depository informs custodians/CMs through DPs. (11) Clearing Banks inform custodians/CMs.
CHAPTER-2
OBJECTIVE
Chapter2 THE STUDY ON AWARENESS OF PEOPLE ON INDIAN STOCK MARKET (WITH SPECIAL REFERENCE TO INDORE CITY)
The present study emphasized the awareness of people on Indian stock market (with special reference to Indore), hence the study has been undertaken in order to achieve the following objectives: OBJECTIVES
1. To study investors perception regarding investment in stock market. 2. To examine awareness of people about Indian stock exchange. 3. To evaluate the investment behavior of investors and the factors that affects their investment.
CHAPTER-3
RESEARCH METHODOLOGY
Chapter-3
THE STUDY ON AWARENESS OF PEOPLE ON INDIAN STOCK MARKET (WITH SPECIAL REFERENCE TO INDORE CITY)
3.1 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. The Research Methodology includes the various methods and techniques for conducting a research. Research is an art of scientific investigation. In other word research is a scientific and systematic search for pertinent information on a specific topic. The logic behind taking research methodology into consideration is that one can have knowledge about the method and procedure adopted for achievement of objective of the project. RESEARCH DESIGN:Research design is the conceptual structure within which research is conducted. It constitutes the blueprint for collection, measurement and analysis of data was a descriptive research. Descriptive research involves collecting numerical through selfreports collected, through questionnaires or interviews (person or phone), or through observation. For present study, the research was descriptive and conclusion oriented. SAMPLING DESIGN:Universe: The Universe is most commonly defined as everything that physically exists: the entirety of space and time, all forms of matter, energy and momentum, and the physical laws and constants that govern them. All those persons who make investment. Theoretical Universe: It included investors make investment in all over world. Accessible Universe: It included investors make investment in Indian Stock Market. Sampling unit The target population must be defined that has to be sampled. The sampling unit of research included students and professionals residing in Indore city. . Sample size This refers to number of respondents to be selected from the universe to constitute a sample. The sample size of 50 Investors was taken. Sampling Technique Convenience Sampling was used to select the sample. Convenient sampling is a non probability sampling technique that attempts to obtain a sample of convenient elements .In case of convenience sampling, the selection of sample depends upon the discretion of the interviewer. In this project, Questionnaire Method was used for the collecting the data. BM College Of Management & Research 37
The Study On Awareness Of People On Indian Stock Market With the help of this method of collecting data, a sample survey was conducted. DATA COLLECTION Information has been collected from both Primary and Secondary Data. Secondary sources- Secondary data are those which have already been collected by someone else and which already had been passed through the statistical process. The secondary data was collected through web sites, books and magazines. Primary sources- Primary data are those which are fresh and are collected for the first time, and thus happen to be original in character. The primary data was collected through direct personal interviews (open ended and close ended questionnaires) Tools of Presentation & Analysis: To analyze the data obtained with the help of questionnaire, following tools were used: 1. Likert scale: These consist of a number of statements which express either a favorable or unfavorable attitude towards the given object to which the respondents are asked to react. The respondent responds to in terms of several degrees of satisfaction or dissatisfaction. 2. Percentage, Bar Graphs and Pie Charts: These tools were used for analysis of data.
3.2 NEED AND SCOPE OF STUDY Need of the study The need of the study was to fill the gap that was identified in the previous researches. The researchers conducted earlier lay emphasis on the working of Indian Stock Market. Considering the ample importance of this aspect, the present study was conducted to know the Indian Stock Market & various options available in the Stock Market to invest & study the behavior of investors and determine their awareness level regarding various investment avenues available in stock market.
Scope of the study The scope of the study was limited to Indore city.
3.3 REVIEW OF LITERATURE Various studies on An Study on Awareness of People on Indian Stock Market had been conducted in Indian context. Depending on the various issues of investment, the review has been discussed in brief as follows: Rajeshwari and Moorthy (2010) has conducted the study and analyzed that Mutual Fund is a retail product designed to target small investors, salaried people and others who are intimidated by the mysteries of stock market but, nevertheless, like to reap the benefits of stock market investing. At the retail level, investors are unique and are a highly heterogeneous group. Hence, their fund/scheme selection also widely differs. Investors demand inter-temporal wealth shifting as he or she progresses through the life cycle. This necessitates the Asset Management Companies (AMCs) to understand the fund/scheme selection/switching behavior of the investors to design suitable products to meet the changing financial needs of the investors. With this background a survey was conducted among 350 Mutual Fund Investors in 10 Urban and Semi Urban centers to study the factors influencing the fund/scheme selection behavior of Retail Investors. This paper discusses the survey findings. It is hoped that it will have some useful managerial implication for the AMCs in their product designing and marketing. Bhatnagar (2009) has analyzed of Corporate Governance and external finance in transition economies like India. The problem in the Indian corporate sector is that of disciplining the dominant shareholder and protecting the minority shareholders. Clearly, the problem of corporate governance abuses by the dominant shareholder can be solved only by forces outside the company itself particularly that of multilateral financial institutions in the economic development. India has relied heavily on external finance as their domestic saving rates have been much lower than their investment rates. The less promising prospects for the global supply of external finance the need for an increase in the multilateral financial institutions. India being a transition economy is changing from a centrally planned economy to a free market. It is undergoing economic liberalization, macroeconomic stabilization where immediate high inflation is brought under control, and restructuring and privatization in order to create a financial sector and move from public to private ownership of resources. These changes often may lead to increased inequality of incomes and wealth, dramatic inflation and a fall of GDP. Mayank (2009) has analyzed the role of two important forces - the regulator and the capital market as determinant of external finance in transition economies analyses the changing pattern and future prospectus of external finance to India and reviews the role of external finance. Under this framework, the study evaluates current Indian corporate governance practices in light of external finance. Patnaik and shah (2008) has analyzed on the preferences of foreign and domestic institutional investors in Indian stock markets. Foreign and domestic institutional investors both prefer larger, widely dispersed firms and do not chase returns. However, we and evidence of strong differences in the behavior of foreign and domestic institutional investors. BM College Of Management & Research 40
The Study On Awareness Of People On Indian Stock Market Vasudev (2007) analyzed the developments in the capital markets and corporate governance in India since the early 1990s when the government of India adopted the economic liberalization programmed. The legislative changes significantly altered the theme of Indian Companies Act 1956, which is based on the Companies Act 1948 (UK). The amendments, such as the permission for nonvoting shares and buybacks, carried the statute away from the earlier business model and towards the 'financial model' of the Delaware variety. Simultaneously, the government established the Securities Exchange Board of India (SEBI), patterned on the Securities and Exchange Commission of US. Through a number of other policy measures, the government steered greater investments in the stock market and promoted the stock market as a central institution in the society. The article points out that the reform effort was inspired, at least in part, by the governments reliance on foreign portfolio inflows into the Indian stock market to fund the countrys trade and current account deficits. Shrotriya (2003) conducted a survey on investor preferences in which he depicted the linkage of investment with the factor so considered while making investment. He says There are various factors and their linkage also. These factors help us how to ensure safety, liquidity, capital appreciation and tax benefits along with returns. Bhardwaj (2003) has stated the literature on globalization He found the pervasiveness of the wests perception of the world affect on Indian investors that affects the trends in investors choice. They are hugely affected by the wests views and so changes in Indian trends occur. Ranganathan (2003) has stated the investor behavior from the marketing world and financial economics has brought together to the surface an exciting area for study and research: behavioral finance. The realization that this is a serious subject is, however, barely dawning. Analysts seem to treat financial markets as an aggregate of statistical observations, technical and fundamental analysis. A rich view of research waits this sophisticated understanding of how financial markets are also affected by the financial behavior of investors. With the reforms of industrial policy, public sector, financial sector and the many developments in the Indian money market and capital market, mutual funds that has become an important portal for the small investors, is also influenced by their financial behavior. Hence, this study has made an attempt to examine the related aspects of the fund selection behavior of individual investors towards Mutual funds, in the city of Mumbai. From the researchers and academicians point of view, such a study will help in developing and expanding knowledge in this field. From the above reviews it can be concluded that many researches had been conducted before relating to the investment patterns and the few researchers studied the literature only on the basis of returns. Analysts treated financial markets as an aggregate of statistical observations, technical and fundamental analysis but no researches had been conducted on Impact of global factors on Indian Economy. This gap had been identified so that in this respect present study had been conducted and the investors are guided towards the positive direction.
CHAPTER-4
DATA ANALYSIS AND INTERPREATATION
Chapter-4 THE STUDY ON AWARENESS OF PEOPLE ON INDIAN STOCK MARKET (WITH SPECIAL REFERENCE TO INDORE CITY) DATA ANALYSIS AND INTERPREATATION
Statement 4.1 To Know Demographic Profile Of Investors. Table 4.1: Result: Demographic Profile of investors Demographics No. of respondents Percentage of respondents (%)
Age Less than 20 years 20-40 Greater than 40 Qualification Metric Under Graduate Post Graduate Occupation Service Profession Business Student Income (per month) Less than Rs.20000 Rs.20000-40000 Greater than 40000
0 20 30 Total 50 0 25 25 Total 50 19 6 15 10 Total 50 10 25 15 Total 50
0 40 60 Total 50 0 50 50 Total 100 38 12 30 20 Total 100 20 50 30 Total 100
Analysis & Interpretation: It was found that the major population of investors was greater than 40yrs and 60% was of 20-40 yrs. And 50% respondents were under graduate and 50% were post graduate. 35% of respondents were doing service. And majority of respondents i.e. 50% earn income between Rs.20000-40000 per month. It means majority of investors was greater than 40 years having income in between Rs 20000-40000. Statement 4.2 To know whether respondents know about stock market. BM College Of Management & Research 43
The Study On Awareness Of People On Indian Stock Market Table no 4.2 Result: To know whether respondents know about stock market. Knowledge decision No. of Respondents Percentage of Respondents (%) 100 0 100
Yes No Total
50 0 50
Figure no 4.1 To know whether respondents know about stock market.
Yes
no
Analysis & Interpretation: From the survey it was found that 100% respondents know about the stock market and 0% who were unknown. Because share market consists of good instruments of money investment. Statement 4.3 To know whether respondents invest. Table No. 4.3 Result: To know whether respondents invest. Investment Decision Yes No Total No. of Respondents 45 5 50 90 10 100 Percentage of Respondents(%)
The Study On Awareness Of People On Indian Stock Market Figure No. 4.2 To know whether respondents invest.
Analysis & Interpretation: From the survey it was found that 90% respondents invest in the stock market and 10% who were non-investors. Because of its feature of high return in investment. Statement 4.4 Awareness regarding types of Investment Instruments. Table No. 4.4 Result: Type of investment option the person is aware of Types of Investment Instruments Shares Mutual Funds Debentures Bonds Derivatives Total No. of Respondents 15 15 10 5 5 50 Percentage of Respondents (%) 30 30 20 10 10 100
The Study On Awareness Of People On Indian Stock Market Figure No.4.3 Type of investment option the person has been investing
Analysis & Interpretation: From the survey it was found that 30% respondents invest in Mutual funds, 25% invest in Shares and 20% invest in Debentures. Thus, it can be stated that maximum people invest in Mutual Funds whereas shares are having 2nd importance because of the low risk and good return in mutual funds. Statement 4.5 To know the rates at which the investment grow. Table No. 4.5 Result: The rates at which the investment grow Investment Growth Rate No. of Respondents Percentage of Respondents (%) 0 10 90 100
Steadily At an average rate At fast rate Total
0 5 45 50
The Study On Awareness Of People On Indian Stock Market Figure No. 4.4 The rates at which the investment grow
Analysis & Interpretation: From the survey it was found that 90% respondents wants their investment grow at fast rate whereas only 10% respondents were in the favour of investment growth at average rate. Statement 4.6 To know the frequency of investment by the Respondents. Table No. 4.6 Result: Frequency of investment Frequency of Investment No. of Respondents Percentage of Respondents (%) 0 20 32 48 100
Daily Weekly Monthly Yearly Total
0 10 16 24 50
The Study On Awareness Of People On Indian Stock Market Figure No.4.5 Frequency of Investment
Analysis & Interpretation: From the above table & chart it was found that 45 respondents invest monthly, 35 invest yearly and there were 20 respondents who invest daily. Thus, it can be stated that majority of the investors invest monthly in stock market.
Statement 4.7 To know the percentage of income that respondent invest annually Table No. 4.7 Result: The percentage of income that respondent invest annually Annual Income Invested No. of Respondents Percentage of Respondents(%) 14 22 40 24 100
Up to 10% 10-15% 15-20% More than 20% Total
7 11 20 12 50
The Study On Awareness Of People On Indian Stock Market Figure No. 4.6 The percentage of income that respondent invest annually
Analysis & Interpretation: From the above table & chart, it was found that 40 respondents invest 15-20% of their annual income, 24 respondents invest more than 20% of their annual income, 22 respondents invest up to 10-15% of their income and 14 respondents invest up to 10% of their income in different investment avenues. Thus, it can be concluded that majority of investors invest 10% to 20% of their monthly income. Statement 4.8 To know the respondents influence on Investment decision. Table No. 4.8 Result: The respondents influence on Investment decision Sources Self Friends & Relatives Service providers & consultants Newspapers & Advertisement Agents Workshops & Seminars Total 24 10 6 5 3 2 50 No. of Respondents Percentage of Respondents (%) 48 20 12 10 6 4 100
The Study On Awareness Of People On Indian Stock Market Figure No.4.7 The respondents influence on Investment decision
Analysis & Interpretation: From the above table & chart, it was found that multiple aspects for investing influenced respondents.48% respondents take investment decision on the basis of their personal evaluation where as 20% respondents invest because of influence of friends & relatives, the consultants influences 12% respondent and the advertisement influences 10% respondents. It can be stated that majority of the persons are influenced by their own while opting for investment tool. Statement 4.9 To Know The Factors That Were Considered While Investing. Table No. 4.9 Result: The Factors That Were Considered While Investing Investment Factors Return on investment Tax benefits Capital appreciation Maturity period Risk Safety of principal Liquidity Total 15 9 7 3 6 3 7 50 No. of Respondents 30 18 14 6 12 6 14 100 Percentage of Respondents
The Study On Awareness Of People On Indian Stock Market Figure No. 4.8 The Factors That Were Considered While Investing
Analysis & Interpretation: From the survey it was found that the maximum respondents considered return on investment was most important factor, 18% respondents considered tax benefits as an important factor and 14% respondents considered capital appreciation as an important factor. It can be stated that majority of investors were consider return as an important factor while investing. Statement 4.10 To Know Investors Action In Case Of Stock Market drop. Table No. 4.10 Result: The Investors Action In Case Of Stock Market drop Investors preference in case of losses Transfer funds into secure Investment No. of Respondents Percentage of Respondents
15
30
Wait to see if investment 20 improves Invest more funds 13 Withdraw funds & stop 2 investing Total 50
40 26 4 100
The Study On Awareness Of People On Indian Stock Market Figure No. 4.9 The Investors Action In Case Of Stock Market Drop
Analysis & Interpretation: From the survey it was found that maximum respondents would wait to see if their investment improves and start generating funds, 30% respondents would invest more funds, 25% respondents would transfer funds into secure investment and 5% respondents would stop investing. It can be stated that majority of investors would like to wait to see whether investment improves or they can invest more funds.
Statement 4.11 To Know the Decision Regarding Other Investment Policy Table no. 4.11 Result: The Other Investment Policy Investment Decision No. of Respondents Percentage of Respondents (%) 98 2 100
Yes No Total
49 1 50
The Study On Awareness Of People On Indian Stock Market Figure 4.10 The Other Investment Policy
Analysis & Interpretation: From the survey it was found that 98% respondents have the other investment policy where as 2% respondents do not have the other investment policy. Statement 4.12 To Know the Satisfaction Level Of Respondents With Their Investment Option Table no. 4.12 Result: Important Factors for Choosing the Investment Option
Particulars
Highly Dissatisfied 10 12 20 15 30
Dissatisfied
Neutral
Satisfied
Highly Satisfied 40 18 8 20 10
Summated Score 384 322 277 340 280
Shares Mutual funds Bonds Debentures Derivatives
6 15 18 10 10
14 20 35 15 20
30 35 19 40 30
Range: Max. Score=100*5=500 (Highly Satisfied) Avg. Score=100*3=300 (Neutral) Min. Score=100*1=100 (Highly Dissatisfied) Analysis & Interpretation: Most of the respondents have given the highest summated score to shares. And the second most important investment option is debentures which influenced the decision regarding investment. Other important factor is mutual fund coverage which has the 332 summated score. Return on derivatives get the 280 summated score. Statement 4.13 Important Factors That Was Considered While Investing. Table No. 4.13 Result: Important Factors That Was Considered While Investing. Particulars Return on Investment Tax benefits Capital Appreciation Maturity Period Risk Safety of Principal Liquidity Highly Dissatisfied 0 0 0 Dissatisfied 0 0 0 Neutral Satisfied 4 18 20 30 48 40 Highly Summated Satisfied Core 66 462 34 40 416 420
5 5 10 15
5 10 20 15
40 20 40 20
30 35 20 30
20 30 10 20
355 375 300 325
Range: Max. Score=100*5=500 (Highly Satisfied) Avg. Score=100*3=300 (Neutral) Min. Score=100*1=100 (Highly Dissatisfied) Analysis & Interpretation: Most of the respondents have given the highest summated score to Return on investment. And the second most important factor is Capital appreciation which influenced the decision regarding investment. Other important factor is Tax benefit which has the 416 summated score.
CHAPTER-5
LIMITATIONS AND SUGGESTIONS
Chapter-5 THE STUDY ON AWARENESS OF PEOPLE ON INDIAN STOCK MARKET (WITH SPECIAL REFERENCE TO INDORE CITY) 5.1 LIMITATIONS OF STUDY
It is said, What is worth doing is worth doing best. In other words a person should aim at perfection. However in real life this is not always possible. Human have to work within the limitation set by the nature and society. That is to say even though every possible effort has been made to make this project report authentic and comprehensive however many constraints were also at play. The major limitations of the study are: Due to paucity of time and resources a countrywide survey was not possible. Hence only Indore city has been taken for the study. Since a smaller sample was chosen so it may not be a true representative of the population under study. The possibility of the respondents responses being biased cannot be ruled out. Most of the study was restricted to Internet and published data because of the non availability of primary data. The information given by the respondents might be biased because some of them might not be interested to given correct information. Some of the respondents could not answer the questions due to lack of knowledge. Some of the respondents of the survey were unwilling to share information.
5.2 SUGGESTIONS
Following were the suggestions of the study: The various investment tools which were mostly preferred by the investors were shares, mutual funds etc. So there should be various other means to create awareness regarding the potential of other instruments and the tools which can be more beneficial to the investors. The investors consider various factors while making investment like risk, return, liquidity etc. There should be rational thinking so that the investor is able to know that at what point of time they need capital appreciation instead of reducing the risk and when they need return instead of liquidity. The preferred time span of investment by the investors depends upon the need of the investor that whether they wants to have early and high returns or wants to have stable returns, most probably the long time span is suitable because the returns are high and safety is also there. The satisfaction levels of various investors are different due to different investment alternatives they opt for. If they will be aware of each type of alternatives and the worth of the alternatives then investing as per that there satisfaction level will also be high. Investors should have the complete knowledge of stock market.
CHAPTER-6
RESULT AND CONCLUSION
Chapter-6 THE STUDY ON AWARENESS OF PEOPLE ON INDIAN STOCK MARKET (WITH SPECIAL REFERENCE TO INDORE CITY)
6.1 RESULTS
Following results were generated from the study: Maximum investors are aware of all the stock market and its investment options. Investors do not invest in a single avenue. They prefer different avenues and maximum investors prefer to invest in shares, mutual funds & debentures. Maximum investors wants their investment grow at fast rate. The investment decision of investors is influenced by their own decision and through friends & relatives. Different factors considered by investors while investing are return, risk, tax benefits, capital appreciation and the most prominent factor is the return on any investment avenue. Majority of investors invest 15-20% of their annual income. Maximum investors invest on monthly basis. The investors investing in different avenues are highly satisfied with the return generated by their investment option. Maximum investors have other investment policies. The most important factor is Return which influenced the decision regarding investment.
6.2 CONCLUSION
Indian Stock Markets is one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. The nature of investment differs from individual to individual and is unique to each one because it depends on various parameters like future financial goals, the present & the future income model, capacity to bear the risk, the present requirements and lot more. As an investor progresses on his/her life stage and as his/her financial goals change, so does the unique investor profile. Maximum investors are aware of stock market. Investors do not invest in a single avenue. They prefer different avenues and maximum investors prefer to invest in shares, mutual funds & debentures. The investment decision of investors is influenced by their own decision and through friends & relatives. Majority of investors invest 15-20% of their annual income. The most important factor is Return which influenced the decision regarding investment.
REFERENCES
Mayank (2009). Performance Corporate Governance as a Determinant of External Finance in Transition Economies: A Case Study of India .The Icfai University Journal of Applied Economics, 8(1): 31- 44. Available at htttp://papers.ssrn.com/sol3/results.cfm Agarwal, RR(2000) :financial integration and capital markets in developing countries: a study of growth, volatility and efficiency in the Indian capital market Dijk (2007). Economic Policy, The Size Effect in Equity Returns. Empirical Research Findings. Journal of Financial Management and Analysis, 21(1).Available at http://papers.ssrn.com/sol3/results.cfm Charles (1999). Economic Policy, Astonishing growth in Americans' stock portfolios. The Icfai Journal of Stock Market, 6 (3). Introduction on Indian Stock Market available at http://www.banknetindia.com Indian Securities Market: A Review - NSEIL publication NSE & BSE Newsletters.
BIBLIOGRAPHY
Masih, A. M. M. & Masih, R.(1997). A comparative analysis of the propagation of stock market fluctuations in alternative models of dynamic casual linkages. Applied financial economics. Kothari C.R.(2009), Research Methodology: Method and Techniques, New Delhi Vishwa Prakashan. Ajay Shah (Author) (2009):India's Financial Markets; An Insider's Guide to How the Markets Work O. P. Gupta (2010):Indian Stock Market, S.chand publications, New Delhi G S Batra A K Sharma(2010): Indian Stock Market; Regulation, Performance And Policy Perspective Saloni Gupta(2010): Efficiency Of Indian Stock Market , Tata McGraw Hill Education
Private Limited
WEBLIOGRAPHY
1. www.nse-india.com 2. www.bseindia.com 3. www.wikipedia.com 4. www.banknetindia.com 5. www.finance.mapsofworld.com 6. www.traderji.com 7. www.scribd.com 8. www.investopedia.com 9. www.managementparadise.com
APPENDIXES
APPENDIX-A
QUESTIONNAIRE
Dear respondent, I am a student of MBA, BM College of management & research, Indore, is conducting a research on The study on awareness of people on Indian stock market (With special reference to Indore city). I would be extremely thankful if you spare some time to answer the following questions. All the facts disclosed by you will be used for academic purpose only. PERSONAL PROFILE (A) Name: (B) Age: Less than 20 years 20 40 years Greater than 40 years (C) Gender: a) Male b) Female (D) Occupation: a) Service b) Profession c) Business d) Student (E) Income: Less than Rs 20000 (per month) Rs 20000 Rs 40000 Greater than Rs 40000 (F) Qualification: a) Matric b) Under Graduate c) Post Graduate Q1. Do you know about share market? a) Yes b) No
The Study On Awareness Of People On Indian Stock Market Q2. Do you invest in share market? a) Yes b) No Q3. Out of the following, which type of instrument are you aware of? a) Shares b) Mutual Funds c) Debentures d) Bonds e) Derivatives Q4. Where have you been investing? a) Shares b) Mutual Funds c) Debentures d) Bonds e) Derivatives Q5. How frequently do you invest? a) Daily b) Weekly c) Monthly d) Yearly Q6. What percentage of your annual income do you invest in share market? a) Up to 10% b) 10-15% c) 15-20% d) More than 20% Q7. By which source of information you came to know about stock market? a) Self b) Friends and Relatives c) Service providers and Consultants d) Newspapers, Magazines and Advertisements e) Agents f) Workshops & Seminars Q8.Which factor do you consider before investing in share market? a) Capital Appreciation b) Maturity Period c) Safety of Principal d) Risk e) Return on investment f) Tax benefits g) Liquidity
The Study On Awareness Of People On Indian Stock Market Q9. In your opinion, what would be the optimum strategy if stock market drops immediately after you invest in it? a) Cut your losses and transfer funds into secure investments b) Wait to see if investment improves c) Invest more funds to lower your losses expecting future growth d) Withdraw your funds and stop investing Q10. Do you have any other investment policy? a) Yes b) No
Q11. Did you know the procedure how to invest in stock market? a) Yes b)No
Q11. Rate the satisfaction with the return generated by your investment option? Highly Satisfied Neutral Dissatisfied Highly Satisfied Dissatisfied (5) (4) (3) (2) (1) a) Shares ______ ______ ______ _______ _________ b) Mutual funds ______ ______ ______ _______ _________ c) Bonds ______ ______ ______ _______ _________ d) Debentures ______ ______ ______ _______ _________ e) Derivatives ______ ______ ______ _______ _________
Q12. Rate the satisfaction with the factors that was considered while investing? Highly Satisfied Neutral Dissatisfied Highly Satisfied Dissatisfied (5) (4) (3) (2) (1) a) Return on Investment ______ ______ ______ _______ _________ b) Tax Benefits ______ ______ ______ _______ _________ c) Capital Appreciation ______ ______ ______ _______ _________ d) Maturity Period ______ ______ ______ _______ _________ e) Risk ______ ______ ______ _______ _________ f) Safety of principal______ ______ ______ _______ _________ g) Liquidity ______ ______ ______ _______ _________
THANKS FOR YOUR CO-OPERATION. BM College Of Management & Research 65
APPENDIX-B RESPONSE SHEET
R1 R2 R3 R4 R5 R6 R7 R8 R9 R10 R11 R12 R13 R14 R15 R16 R17 R18 R19 R20 R21 R22 R23 R24 R25 R26 R27 R28 R29 R30 R31 R32 R33 R34 R35 R36 R37 R38
Q1 A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A
Q2 a a a a a a a a b a a a b a a a a a a a a b b a a a a a a a a a a b a a a a
Q3 a a e c a a b c c b d e b d a a b b b b c a a c b b a e a d b e a d b b c c
Q4 A A E C A A B C C B E E B D A A B B B B C A A C B B A E A D B E A D B B C C
Q5 D C D C C B D C D C C B D D D C D B D C B D D D C D C C D C D D B D B D B B
Q6 a a c b d c a d b c a d c a c d d c b c c d b a c b c c d b c c b a b c d d
Q7 a c a c a b b d a e b a d b a c c a f a b b a a b b b a a a c a c a d a b a
Q8 b a c c b a a d b b c e a c g e d a a b g a c g b g c a e a e b d a a a f e
Q9 b b d a b b b a a d c b a c b b c a b d b b c a a a c b b b c a c b d a a c
Q10 b a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a
R39 R40 R41 R42 R43 R44 R45 R46 R47 R48 R49 R50
A A A A A A A A A A A A
a a a a a a a a a a a a
a c b a c e a d b a c b
A C B A C E A D B A C B
D B C C C D B D C D D D
c b c d c b c d c b c c
d a d a a e a e f a a a
g b b g e f a g f a c a
b b c a a c b b c a a b
a a a a a a a a a a a a
Where R1-R50 are the respondents and Q1-Q10 are the questions. APPENDIX-C
PERCENTAGE ANALYSIS
S. No.
YES
NO
Q. 1 Q. 2 Q. 10 Q. 11
50 45 49 45
0 5 1 5
APPENDIX-D
Synopsis The study on awareness of people on Indian stock market (With special reference to Indore city)
A synopsis for Master of Business Administration
Submitted to
Devi Ahilya Vishwavidyalaya, Indore
Research Supervisor: Dr. Shailesh Tripathi Faculty guide
Researcher:Akshay panwar Batch 2008-2010
Research Center BM College of Management & Research Indore

The study on awareness of people on Indian stock market (With special reference to Indore city) CONTENTS 1. Introduction 2. Objective 3. Research Methodology 4. Analysis 5. Result 6. Conclusion 7. Suggestions 8. Reference 9. Webliography
Introduction:Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock). In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors dont have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet.
History of the Indian Stock Market - The Origin One of the oldest stock markets in Asia, the Indian Stock Markets has a 200 years old history. 18th Century 1830's 1840's 1850's 1860's 1860-61 East India Company was the dominant institution and by end of the century, business in its loan securities gained full momentum Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business attracting more people into the business The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)
1862-63 1865
Pre-Independence Scenario - Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal "The Calcutta Stock Exchange Association" was formed Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. When recession followed, number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"
1875 1880's 1894 1880 90's 1908 1920 1923 1934 1936 1937
1940 1944 1947
Post Independence Scenario
The depression witnessed after the Independence led to closure of a lot of exchanges in the country. Lahore Estock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in
a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were: 1. 2. 3. 4. 5. 6. 7. 8. Bombay Calcutta Madras Ahmedabad Delhi Hyderabad Bangalore Indore
Many more stock exchanges were established during 1980's, namely:
Cochin Stock Exchange (1980) Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982) Pune Stock Exchange Limited (1982) Ludhiana Stock Exchange Association Limited (1983) Gauhati Stock Exchange Limited (1984) Kanara Stock Exchange Limited (at Mangalore, 1985) Magadh Stock Exchange Association (at Patna, 1986) Jaipur Stock Exchange Limited (1989) Bhubaneswar Stock Exchange Association Limited (1989) Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989) Vadodara Stock Exchange Limited (at Baroda, 1990) Coimbatore Stock Exchange Meerut Stock Exchange
The Study On Awareness Of People On Indian Stock Market Indian stock exchange allows a member broker to perform following activities:
Act as an agent, Buy and sell securities for his clients and charge commission for the same, Act as a trader or dealer as a principal, Buy and sell securities on his own account and risk.
India Stock Exchanges are a structured marketplace for the proper conduct of trading in company stocks and other securities. There are 23 recognized stock exchanges in India, including the Over the Counter Exchange of India for providing trading access to small and new companies. The main services of the India Stock Exchanges all over the country are to provide nation-wide services to investors and to facilitate the issue and redemption of securities and other financial instruments. The introduction of the concept of the stock exchanges in India came with the breaking of the American Civil War and the idea materialized first in 1874 with the foundation of the Bombay Stock Exchange at the Dalal Street in Mumbai. Currently, in all the India Stock Exchanges the trading system is computerized for more efficient and transparent trading. There has been a significant boom in the degree of development and volume of trading in the stock exchanges. The two most important exchange houses of the Indian stock market are the Bombay Stock Exchange and the National Stock Exchange. Many of the regional stock exchanges have obtained the membership of these two stock exchanges in India. The index of the Bombay Stock Exchange, BSE Sensex is a value-weighted index composed of 30 companies. National Stock Exchange of India:The National Stock Exchange of India Limited is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of around Rs47, 01,923 crore (7 August 2009) and is expected to become the biggest stock exchange in India in terms of market capitalization by 2009 end. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization. BM College Of Management & Research 73
The Study On Awareness Of People On Indian Stock Market NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%. Bombay Stock Exchange of India:The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia and has the greatest number of listed companies in the world, with 4700 listed as of August 2007. It is located at Dalal Street, Mumbai, India. On 31 December 2007, the equity market capitalization of the companies listed on the BSE was US$ 1.79 trillion, making it the largest stock exchange in South Asia and the 12th largest in the world. With over 4700 Indian companies listed & over 7700 scripts on the stock exchange, it has a significant trading volume. The BSE SENSEX (SENSitive indEX), also called the "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and the National Stock Exchange of India account for most of the trading in shares in India. Stock Market Terms:To make the most out of your stock market investing you need to know the basic terminology. You are going to be having these words thrown at you so you had better get up to speed when it comes to their meanings. Here are some of the most basic stock market terms that you will need to know in order to be a success: Assets If the company has something that can be exchanged for money, or that have some value they have assets. Common stock When you own common stock you own a part of a company and as such will be entitled to dividends. These can be paid out as stocks, money or property. Oftentimes additional shares are given to shareholders and all cash dividends are taxable in that tax year. If property dividends are being paid out then this will have to come from the assets of the company itself. BM College Of Management & Research 74
Preferred stock These stockholders will own a chunk of a corporation and the dividends are always paid in the form of cash. They are also always for the exact same amount of money each time. This amount is a set amount that will not change unless the stock is retired or called back in the future. Stock analyst An analyst is certified to evaluate financial investments. They perform their own research in order to be able to make recommendations. Basic terms:These stock market terms reflect common ideas and descriptions that are used every day. Such stock market terms portray types of people and general stock market basics.
y y
Ask This is the lowest price that a seller will accept when selling a stock. Bear This refers to an investor who believes the stock market or a particular stock is declining. This is the opposite of a Bull. Bid This is the highest price that a buyer is willing to pay for a stock. Broker A person that buys or sells stocks, bonds, commodities and such in exchange for a fee which is called a commission. Bull An investor who believes the whole market or one individual stock is going to increase in price. This is the opposite of a Bear. Dow Jones Industrial Average This is a compilation of the 30 most traded blue chip stocks. This list is the most widely used for analyzing stock market indexes. NASDAQ This is a stock exchange consisting primarily of technology companies. Stock This is the smallest measurable unit of ownership in a company. Shares fall into either the common or preferred categories; companies issue shares of stock in order to raise capital without borrowing money.
y y
Investing terms These words and phrases reflect stock market terms for various stock market strategies. These stock market terms are used to describe specific conditions or analysis.
The Study On Awareness Of People On Indian Stock Market Blue Chip This term describes a company with a history of strong earning, traditionally increasing dividends and an outstanding balance sheet. Blue Chip stocks include Exxon-Mobile, Coca-Cola and Wal-Mart. Book Value - This is the value of a company if assets and common stock equity are added together and all liabilities are subtracted. There is little correlation between the book value and the market value. Book value is used in such fundamental analysis measurements as Price to Book ratio. Dividend This is the portion of a companys profit that is given back to the investors. Such payments are made on either an annual or quarterly basis. Market Capitalization A company's market capitalization, also known as its market cap, is calculated by taking the number of outstanding shares of stock multiplied by the current price per share. P/E Ratio This widely used analysis tool of Price to Earnings ratio measures now you pay for each dollar of corporate earnings. For example, if you have $30 stocks that report a profit of $2 per share, your P/E ratio is 15; $30 per share divided by $2 earnings per share equals 15. In this ratio the lower the P/E ratio, the better. Spread: This stock market term reflects the difference between the Ask and the Bid. Yield This is the percentage of a dividend paid against the stock price. For example, if you receive a $3 dividend on a $30 per share stock, your yield is 10%.
The present study emphasized the awareness of people on Indian stock market (with special reference to Indore),hence The study has been undertaken in order to achieve the following objectives: Objectives:-
1. To study investors perception regarding investment in stock market. 2. To examine awareness of people about Indian stock exchange. 3. To evaluate the investment behavior of investors and the factors that affects their investment.
Research Methodology:Research methodology is a scientific and systematic approach to obtain the objective of the investigation and to carry out research accordingly. a. Primary data collection method: In primary data collection, you collect the data yourself using methods such as interviews and questionnaires. The key point here is that the data you collect is unique to you and your research and, until you publish, no one else has access to it. There are many methods of collecting primary data and the main methods include:
y y y y
questionnaires interviews focus group interviews observation
b. Secondary data collection method: Secondary datas are in the form of finished products as they have already been treated statically in some form or other. The secondary data mainly consists of data and information collected from records, company website and also discussion with the management of the organization. Secondary data was also collected from journals, magazines and books. Main sources of data collection:
y
paper-based sources books, journals, periodicals, abstracts, indexes, directories, research reports, conference papers, market reports, annual reports, internal records of organisations, newspapers and magazines electronic sources CD-ROMs, on-line databases, Internet, videos . Statistical tools:
y y
The methods which are applied for analysis are: By percentage (%) , Average and Graphical methods. Application of Z-test (sample size 100) if necessary.
Analysis:-
Result:-
Conclusion:-
Suggestions:-
References:-Masih, A. M. M. & Masih, R.(1997). A comparative analysis of the propagation of stock market fluctuations in alternative models of dynamic casual linkages. Applied financial economics -Agarwal, RR(2000) : financial integration and capital markets in developing countries: a study of growth, volatility and efficiency in the Indian capital market -Kothari C.R.(2009), Research Methodology: Method and Techniques, New delhi vishwa prakashan.
Webliography:www.nse-india.com www.bseindia.com www.scribd.com www.wikipedia.com
QUESTIONNAIRE Dear respondent, I am a student of MBA, BM College of management & research, indore, is conducting a research on The study on awareness of people on Indian stock market (With special reference to Indore city). I would be extremely thankful if you spare some time to answer the following questions. All the facts disclosed by you will be used for academic purpose only. PERSONAL PROFILE (A) Name: (B) Age: Less than 20 years 20 40 years Greater than 40 years (C) Gender: a) Male b) Female (D) Occupation: a) Service b) Profession c) Business d) Student (E) Income: Less than Rs 20000 (per month) Rs 20000 Rs 40000 Greater than Rs 40000 (F) Qualification: a) Matric b) Under Graduate c) Post Graduate Q1. Do you know about share market? a) Yes b) No Q2. Do you invest in share market? a) Yes b) No Q3. Out of the following, which type of instrument are you aware of? a) Shares b) Mutual Funds BM College Of Management & Research 79
The Study On Awareness Of People On Indian Stock Market c) Debentures d) Bonds e) Derivatives Q4. Where have you been investing? a) Shares b) Mutual Funds c) Debentures d) Bonds e) Derivatives Q5. How frequently do you invest? a) Daily b) Weekly c) Monthly d) Yearly Q6. What percentage of your annual income do you invest in share market? a) Up to 10% b) 10-15% c) 15-20% d) More than 20% Q7. By which source of information you came to know about stock market? a) Self b) Friends and Relatives c) Service providers and Consultants d) Newspapers, Magazines and Advertisements e) Agents f) Workshops & Seminars Q8.Which factor do you consider before investing in share market? a) Capital Appreciation b) Maturity Period c) Safety of Principal d) Risk e) Return on investment f) Tax benefits g) Liquidity Q9. In your opinion, what would be the optimum strategy if stock market drops immediately after you invest in it? a) Cut your losses and transfer funds into secure investments b) Wait to see if investment improves c) Invest more funds to lower your losses expecting future growth d) Withdraw your funds and stop investing BM College Of Management & Research 80
The Study On Awareness Of People On Indian Stock Market Q10. Do you have any other investment policy? a) Yes b) No
Q11. Did you know the procedure how to invest in stock market? b) Yes b)No
Q11. Rate the satisfaction with the return generated by your investment option? Highly Satisfied Neutral Dissatisfied Highly Satisfied Dissatisfied (5) (4) (3) (2) (1) a) Shares ______ ______ ______ _______ _________ b) Mutual funds ______ ______ ______ _______ _________ c) Bonds ______ ______ ______ _______ _________ d) Debentures ______ ______ ______ _______ _________ e) Derivatives ______ ______ ______ _______ _________
Q12. Rate the satisfaction with the factors that was considered while investing? Highly Satisfied Neutral Dissatisfied Highly Satisfied Dissatisfied (5) (4) (3) (2) (1) a) Return on Investment ______ ______ ______ _______ _________ b) Tax Benefits ______ ______ ______ _______ _________ c) Capital Appreciation ______ ______ ______ _______ _________ d) Maturity Period ______ ______ ______ _______ _________ e) Risk ______ ______ ______ _______ _________ f) Safety of principal______ ______ ______ _______ _________ g) Liquidity ______ ______ ______ _______ _________
THANKS FOR YOUR CO-OPERATION.

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The Study On Awareness Of People On Indian Stock Market

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The Study On Awareness Of People On Indian Stock Market

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The Study On Awareness Of People On Indian Stock Market

1940 1944 1947

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Bombay Calcutta Madras Ahmedabad Delhi Hyderabad Bangalore Indore

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The Study On Awareness Of People On Indian Stock Market

1.1 THE TWO MAJOR STOCK EXCHANGES IN INDIA

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Bombay stock exchange:-

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1.2 OVERVIEW OF THE REGULATORY FRAMEWORK OF THE CAPITAL MARKET IN INDIA

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1.3 TRADING WITH STOCK MARKET

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1.4 Basic Stock Market Terms

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1.5 INSTRUMENTS & PLAYERS OF STOCK MARKET

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1.6 CLEARING AND SETTLEMENT

Decision to trade Funds/securiti es Transaction cycle Placing order

Clearing of trade Model-1.1-Transaction Cycle

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Settlement Process in CM segment of NSE

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3.1 RESEARCH METHODOLOGY

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