Affiliated to

University of Mumbai

Revised Syllabus for

Programme:
B.Com
(ACCOUNTING AND FINANCE)
Semester VI
Under Choice Based Credit System
Academic Year 2021-2022

INVESTORS BEHAVIOUR IN INDIA

I
 PROJECT REPORT
ON
INVESTORS BEHAVIOUR IN INDIA

SUBMITTED BY
TYBCOM (ACCOUNTING AND FINANCE)
(SEMESTER VI)

UNDER THE GUIDANCE OF

MR. SUBHASH KUMBHAR

ACADEMIC YEAR
2021 - 2022

II
 DECLARATION

I, MUSKAN KAMLESH BOHRA the student of

T.Y.BCOM (ACCOUNTING AND FINANCE) (2021
- 2022) hereby declare that I have completed the Project
on INVESTORS BEHAVIOUR IN INDIA.
I also declare that this report which is the partial
fulfilment of the requirement for the degree of
T.Y.BCOM (ACCOUNTING AND FINANCE) of
KES SHROFF COLLEGE OF ARTS AND
COMMERCE, is the result of my own efforts with the
help of experts.
.

III
 CERTIFICATE

This is to certify that Ms MUSKAN KAMLESH BOHRA of

Third Year B.Com (ACCOUNTING AND FINANCE) Semester
VI (2021 - 2022) has successfully completed the Project / Internship
on INVESTORS BEHAVIOUR IN INDIA as per the guidelines
of KES’ Shroff College of Arts and Commerce, Kandivali (W),
Mumbai-400067.

Coordinator Guide Principal

Dr.Vaibhav .R.Ashar Mr. Subhash Kumbhar Dr.Lily. Bhushan

IV
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
and fresh dimensions in the completion of this internship.
I take this opportunity to thank the KES SHROFF COLLEGE OF
ARTS AND COMMERCE (AUTONOMOUS) for giving me chance
to present this report.
I am thankful to KES SHROFF COLLEGE OF ARTS AND
COMMERCE (AUTONOMOUS) for providing me opportunity to
work on the project with their company and gaining work experience.
I would like to thank my Principal, Dr. Lily Bhushan for providing the
support required for the internship.
I take this opportunity to thank our Guide Mr. Subhash Kumbhar, for
his moral support and guidance.
Lastly, I would like to thank each and every person who directly or
indirectly helped me specially my parents and peers who supported me
throughout my project.

V
INDEX

CH NO. SR NO. PARTICULARS PAGE NO.

1 1 Introduction 1-2

1.1 Types of Investors

2 Research Methodology 3-5

2.1 Statement of research

2.2 Determination of the sampling plan

2.3 Data sources

2.4 Data collection

2.5 Data analysis

2.6 Preparation of research project

3 Industry Profile 6-36

4 Emerging Investment Avenues 37-39

5 Factors Influencing Investors Behaviour 40-46

6 Literature Review 47-53

6.1 Book review

6.2 Journal review

7 Analysis of data 54-67

8 Conclusion 68-69

9 Recommendation 70-71

BIBLOGRAPHY

ANNEXURE

VI
 1.INTRODUCTION

Savings form an important part of the economy of any nation. With the savings invested in
various options available to the people, the money acts as the driver for growth of the country.
Indian financial scene too presents a plethora of avenues to the investors. Though certainly not
the best or deepest of markets in the world, it has reasonable options for an ordinary man to
invest his savings. One needs to invest and earn return on their idle resources and generate a
specified sum of money for a specific goal in life and make a provision for an uncertain future.

One of the important reasons why one needs to invest wisely is to meet the cost of inflation.
Inflation is the rate at which the cost of living increases. The cost of living is simply what it
cost to buy the goods and services you need to live. Inflation causes money to lose value
because it will not buy the same amount of a good or service in the future as it does now or did
in the past. The sooner one starts investing the better. By investing early you allow your
investments more time to grow, whereby the concept of compounding increases your income,
by accumulating the principal and the interest or dividend earned on it, year after year.

The three golden rules for all investors are:

• Invest early

• Invest regularly

• Invest for long term and not for short term

The purpose of the analysis is to determine the investment behavior of investors and investment
preferences for the same.

1
TYPES OF INVESTORS

Because the markets behavior is impacted and determined by how individuals perceive that
behavior, investor psychology and sentiment are fundamental to whether the market will rise
or fall. Stock market performance and investor psychology are mutually dependent.

• Bull Investor

• Bear Investor

• Savers

• Speculators

• Specialist

Bull Investor: An investor who expects prices to rise and so buys now for resale later. It is a
prolonged period where the investment prices rise faster than their historical average.

Bear Investor: An investor who expects prices to fall and so sells now in order to buy later at
a lower price. The chances of losses are greater here as the prices are continuously falling and
the end is not in sight.

Savers: Savers are those people who spend the majority of their life slowly growing theirnest
egg in order to ensure a comfortable retirement. Their primary investing strategy is to hedge
each of their investments with other non - correlated investments, and ultimately generate a
consistent annual return in the range of 3-8%.

Speculators: Unlike savers, speculators chose to take control of their investments, and rely
solely on Time. Speculators are happy to forgo the relatively low returns of a diversified
portfolio in order to try to achieve the much higher returns of targeted investments

Specialists: Specialists believes that the key to successful investing isn’t luck but its education
and experience. Some Specialists deal in paper assets, some deal in real estate, and some start
business.

2
 2.RESEARCH METHODOLOGY

1. Statement of the research

Interpret the Data and Analysis on the Investors behavior in India.

2. Formulating the research problem

A) Unit of analysis: Investors

B) Characteristics of interest: Investors behavior in different types of investment.

C) Time and space boundary: 6 Months

D) Environment conditions: Difference in investor behavior

3. Objectives of the research

The purpose of the analysis is,

• To determine the behavior of investors and investment preferences for the same.

• To understand Investors perception on various options available.

• To difficulties faced by investors.

• To find out the needs of the current and future investors.

4. Research design

There are two types of research

This is a conclusive type of research.

The objective of conclusive research is to test hypothesis and examine specific relationship

Conclusive research is more formal and structured than exploratory research.

The findings from this research are considered to be conclusive.

Conclusive research we further divided in two.

3
 A) Every project requires a conceptual structure within which the research would be
conducted. The findings from this research are considered to be conclusive. Further it
becomes a descriptive research as it studies the Investors behavior in different types of
investments. This research us formal and structured and the data analysis is quantitative.

5. Determination of the sampling plan

Finding aid - questionnaire.

Sampling area - Mumbai

Sample size - 100

Sample type - Random sampling

6. Data sources

Data were collected from two sources, namely primary and secondary data

• Primary data are those that are collected for the first time and of an original nature. Primary
data is collected through observations, interviews and surveys.

4
A combination of questionnaire techniques and discussion with respondents was used to collect
the required primary data. The questionnaire and the personal interview are the main data of this
research.

• Secondary data are those that are already collected by someone for a certain purpose and that
are available for this study. Secondary data is collected from books, journals, articles, websites,
magazines and other similar sources. In this project, information from the Internet is an
important part of the secondary data.

7. Data collection

• Questionnaire: this is one of the survey methods in which 50 investors were interviewed for
research.

8. Data analysis

• Once the important task of data collection has been completed, it is necessary that the data be
systematically analyzed in all aspects. Data should be analyzed by tabulating and drawing
statistical inferences. This makes the information collected appropriate and easy to understand.

9. Preparation of the research project

• After collecting and analyzing data in all aspects, a final report was prepared

10. Project limits

• The sample size was 100 investors, which is much less. The accuracy of the data was therefore
slightly compromised. The larger the sample size, the more accurate the result. But as time is
less available, only 100 samples were chosen.

• The limits of this study are the selection of existing studies. Due to limitations, I only looked
for a few journals. This may leave out other important empirical studies

5
 3.INDUSTRY PROFILE

The Indian financial industry is considered one of the strongest financial sectors in the world
markets. Many industry experts can give a variety of reasons for this reputation in India's
financial sector, but there is only one answer that no one can deny: the effective control and
governance of the country's supreme monetary authority, the RESERVE BANK OFINDIA
(RBI).

The financial sector in India has known a better environment to develop with the presence of
increased competition. The Indian financial system is regulated by independent regulators in
the fields of banking, insurance, mortgages and capital markets.

The Indian government plays an important role in controlling the Indian financial market.
Ministry of Finance, the Indian government controls the Indian financial sector. Each year, the
Ministry of Finance presents the annual budget on February 28. The Reserve Bank of India is
an apex institution in control of the country's banking system. Its monetary policy acts as a
major weapon on the Indian financial market.

Various governing bodies of the financial sector:

1. RBI - Reserve Bank of India is the supreme authority and regulator for all monetary
transactions in India. RBI is the regulator of various

Banking and non-banking financial institutions in In

2. SEBI - Securities and Exchange Board of India is one of the regulators of the Indian capital
market.

3. IRDA - The insurance regulatory and development authority in India regulates all insurance
companies in India.

4. AMFI - The Association of Mutual Funds in India regulates all mutual fund companies in
India.

5. FIPB - The Office for the Promotion of Foreign Investments regulates all foreign direct
investments made in India.

The Ministry of Housing plans to create a real estate regulatory and governance body by the
end of the 2010-11 fiscal year.

6
Investments in gold are regulated by the World Gold Council, in India, we have no regulatory
authority for investments in gold. Ministry of Finance, the government of India controls all
financial organizations in India. Public securities, the public provident fund (PPF), the national
savings certificate (NSC), and postal savings are all under the control of the centralgovernment.

Investments are normally classified according to the risk they involve, the risk depends
on various factors such as past performance, its governing body, government
participation, etc., in this scenario, and Indian investments are classified into 3 categories
depending on the risk.

They are:

1. Low risk / risk free investments.

2. Medium risk investments.

3. High risk investments.

There are traditional investment avenues and emerging investment avenues

1. VARIOUS WAYS OF INVESTMENT AVAILABLE IN INDIA

Safe / Low Risk Avenue

•Savings account

• Fixed bank deposit

• Public provident fund

• National savings certificate

• Post office Saving

• Government securities

Moderate risk avenues

•Mutual Funds

•Life insurance

• Bonds and debenture

7
High risk avenues

• Equity market

• Raw materials market

• FOREX market

Traditional avenues

• Real estate (property)

•Gold/Silver

• Chit funds

Emerging avenues

• Virtual real estate

• Hedge funds / Private Equity Investments

• Art and passion

DESCRIPTION OF THE VARIOUS INVESTMENT OPPORTUNITIES

SAVING ACCOUNT FOR SECURE / LOW RISK AVENUES

As the name suggests, this account is perfect for parking your temporary savings. These
accounts are one of the most popular deposits for individual accounts. These accounts provide
ease of control and great flexibility for depositing and withdrawing funds from the account.
Most banks have rules for the maximum number of withdrawals in a period and the maximum
withdrawal amount, but no bank applies them. However, banks have every right to enforce
these limits if it is felt that the account is being misused as a checking account. Currently,
interest on these accounts is regulated by the Reserve Bank of India. Currently, Indian banks
offer 3.50% per year. Interest rates on these deposits. This account gives the customer a nominal
interest rate and can withdraw money as needed. The account position is shown in a small book
called a "Pass Book". These accounts should be treated as a temporary parking area because
the interest rate is much lower than that of fixed deposits. As soon as his savings add up to an
amount he can save for a certain period of time, transfer this money to the fixed deposit. The
returns on the money kept in the Savings Bank account will be lower but the freedom of
withdrawal is the highest.
FIXED DEPOSITS / TERM DEPOSITS
8
 The term "fixed" in fixed deposits means the term or duration. The fixed deposit therefore
provides for a period during which the depositor decides to keep the money with the Bank and
the interest rate payable to the depositor is determined by this mandate. The interest rate differs
from bank to bank. Normally, the rate is highest for deposits for 3-5 years. This does not mean,
however, that the depositor loses all rights to the money during the tenor period decided.
Deposits can be withdrawn before the end of the period. However, the amount of interest
payable to the depositor, in such cases, decreases. All banks offer fixed deposit systems with a
wide range of tenures for periods ranging from 7 days to 10 years. Therefore, depositors are
expected to continue these fixed deposits for the length of time that the depositor decides to
keep the money with the bank. However, if necessary, the depositor can request the closure of
the fixed deposit in advance by paying a penalty. Soon, some banks even introduced variable
rate deposits.

The interest rate on these deposits will continue to fluctuate with prevailing market rates, that
is, it will increase if the market interest rate goes up and decrease if the market rate goes down.
Tax deduction: banks should deduct withholding tax on interest paid beyond Rs. 5000 per year
to any depositor. It is not by deposit but by individual. Therefore, if an individual has 5 deposits
and the total interest earned on these is Rs. 7000 although in each individual deposit, the interest
should not exceed Rs. 2000, tax should be withheld at source.

PUBLIC PROVIDENCE FUND (PPF)

PPF is a 30-year constitutional plan of the central government which aims to provide security
of retirement benefits to unorganized division workers and the self-employed. Currently, there
are almost 30 lakhs of PPF account holders in India in banks and post offices.

Eligibility: Any employee or self-employed person can open a PPF account. He can also sign
up on behalf of a minor, HUF, AOP and BOI. Even NRIs can open a PPF account. A person can
only contain one PPF account. In addition, two adults cannot open a combined PPF account.
The annual collective payment by an individual for himself his minor child and HUF
/ AOP / BOI (of which the individual is a member) may not exceed Rs.70, 000 otherwise the
excess amount will be returned without interest.

9
 Subscription: The annual contribution to the PPF account varies from a minimum of Rs.500 to
a maximum of Rs.70, 000 payable in multiples of Rs.5 either in a lump sum or in practical
payments, not exceeding 12 in one year.

Penalty in case of non-subscription: The account will become obsolete if the required
minimum of Rs.500 is not deposited during a year. The amount already deposited will continue
to earn interest, but without the possibility of taking out a loan or making withdrawals. The
account can be regularized by depositing for each year of default, arrears of Rs.500 as well as a
penalty of Rs.100.

Where to open: A PPF account can be opened in any branch of the State Bank of India or its
subsidiaries or in some national banks or in post offices. When the account is opened a
passbook will be issued in which all the amounts of deposits, withdrawals, loans and
repayments as well as the interest due will be entered.

The account can also be transferred to any bank or post office in India.

Interest rate: Deposits on the account bear interest at the rate notified from time to time by the
central government. Interest is calculated on the lowest balance of the fifth and last day of the
calendar month and is allocated to the account on March 31 of each year. So, to get the
maximum, deposits should be made between the 1st and 5th day of the month, as this also allows
you to earn interest on your savings bank A / C for the previous month.

Duration of the mandate: Even if the PPF is a 15-year plan, but the effective period
corresponds to 16 years, that is to say the year of opening of the account and 15 additional years.
The amount paid during the 16th financial year will bear no interest, but we will be able to benefit
from the tax rebate.

Withdrawal: the investor is authorized to make a withdrawal each year from the seventh
financial year for an amount not exceeding 50% of the balance at the end of the fourth year or
for the financial year immediately preceding the withdrawal, whichever is less high being
retained. This facility to make partial withdrawals provides liquidity and the amount withdrawn
can be used for any purpose.

10
NATIONAL SAVINGS CERTIFICATE (NSC)

The National Savings Certificate (NSC) is a long-term, fixed-rate investment instrument. NSCs
are issued by the Indian Government Post Department. Since they are supported by the
government of India, NSCs are a virtually risk-free investment route. They can be purchased
at authorized post offices. The NSC have a maturity of 6 years. They offer a rate of return of
8% per year. This interest is calculated every six months and is merged with the principal. In
other words, the interest is reinvested and is paid with the principal at the time of maturity. For
each Rs. 100 invested, you receive Rs. 160.10 at maturity. NSCs are eligible for investment
under section 80C of the Income Tax Act (IT Act). Even the interest earned each year is

Section 80C this means that investments in NSC and the interest earned on it each year, up to
Rs. 1 Lakh, are deductible from the investor's income.

There is no withholding tax (TDS).

Features of NSC

- Minimum investment Rs. 500 / - No maximum limit.

- Interest rate of 8% compounded semi-annually.

- Rs. 1000 / - go to Rs. 1601 / - in six years.

- Two adults, individuals and minors per tutor can buy.

- Companies, trusts, companies and other institutions not eligible for purchase.

- Non-resident Indians / HUF cannot buy.

- No premature cashing.

POSTAL SAVINGS

There are various investment schemes available in post offices, such as KVP (KisanVikas
Patra), MIS (Monthly Income Scheme) and many others. All of these schemes are completely
risk free, and you do not need to have a large sum of money to start investing in these postal
schemes. Some plans offer tax benefits and some offer tax-free returns. So you have to find a
scheme according to your needs. These are some of the safe and secure investments that you
can choose from. Although interest rates are not that high, you still need to invest some of your

11
money in one of these investment vehicles. It's your hard earned money, so play it safer and
also invest part of it in secure funds.

Section 80C this means that investments in NSC and the interest earned on it each year, up to
Rs. 1 Lakh, are deductible from the investor's income.

There is no withholding tax (TDS).

Features of NSC

- Minimum investment Rs. 500 / - No maximum limit.

- Interest rate of 8% compounded semi-annually.

- Rs. 1000 / - go to Rs. 1601 / - in six years.

- Two adults, individuals and minors per tutor can buy.

- Companies, trusts, companies and other institutions not eligible for purchase.

- Non-resident Indians / HUF cannot buy.

- No premature cashing.

POSTAL SAVINGS

There are various investment schemes available in post offices, such as KVP (KisanVikas
Patra), MIS (Monthly Income Scheme) and many others. All of these schemes are completely
risk free, and you do not need to have a large sum of money to start investing in these postal
schemes. Some plans offer tax benefits and some offer tax-free returns. So you have to find a
scheme according to your needs. These are some of the safe and secure investments that you
can choose from. Although interest rates are not that high, you still need to invest some of your
money in one of these investment vehicles. It's your hard earned money, so play it safer and
also invest part of it in secure funds.

GOVERNMENT TITLES (G-secs)

Government securities (G-secs) are supreme securities that are issued by the Reserve Bank of
India on behalf of the Indian government instead of the central government market borrowing
program

12
The term government securities includes:

- Central government securities.

- Government securities

Treasury Bills

The central government borrows funds to finance its "budget deficit". Borrowing on the central
government market is increased by the issuance of dated securities and 364-day Treasury bills,
either by auction or by floating loans. In addition to the above, 91-day Treasury bills are issued
to manage temporary government cash asymmetries. These are not part of the central
government's borrowing program.

Features

- Issued at face value

- No risk of default because the securities come with a sovereign guarantee.

- Sufficient liquidity because the investor can sell the security on the secondary market

- Semi-annual interest payment on nominal value

- No tax withheld at source

- Can be held in Demat form. - Repaid at its nominal value at maturity - The maturity varies
from 2 to 30 years.

- Securities are considered SLR investments (unless otherwise indicated).

Benefits of Investing in Government Securities

- No tax withheld at source

- Additional tax benefit u / s 80L of the Income Tax Act for individuals

- Qualifies for SLR

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- The risk of zero default being sovereign paper - Very liquid.

- Transparency in simplified settlement transactions and procedures via CSGL / NSDL.

ii. MODERATE RISK AVENUES

MUTUAL FUNDS

A mutual fund is a professionally managed collective investment company that pools the
money of many investors and invests it in stocks, bonds, short-term money market instruments
and / or other securities. In a mutual fund, the fund manager, also known as a portfolio manager,
trades the underlying securities of the fund, realizing capital gains or losses and collecting the
dividend or interest income. The proceeds of the investment are then passed on to individual
investors. The value of a mutual fund share, known as the net asset value per share (NAV), is
calculated daily based on the total value of the fund divided by the number of shares currently
issued and outstanding.

Benefits of Mutual Funds

1. Diversification

2. Professional management

3. Regulatory oversight

4. Liquidity

5. Convenience

6. Transparency

7. Flexibility

8. Choice of plans

9. Tax benefits

10. Well regulated

11. Disadvantages of mutual funds

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Here are the few disadvantages of mutual funds:

1. No warranty

2. Fees and commissions

3. Taxes

4. Management risk

LIFE INSURANCE

Life insurance is a contract between the policy holder and the insurer, in which the insurer
agrees to pay a sum of money at the time of the death of the insured person or the person or to
any other event, such as a terminal illness, a serious illness. In return, the policyholder agrees
to pay a fixed amount called premium at regular intervals or as a lump sum. Like other
insurance policies, life insurance is also a contract between the insurer and the policy owner
through which a benefit is paid to the named beneficiaries if an insured event occurs that is
covered by the policy. The assessment for the policyholder is not derived from an actual claim
event. But to some extent, it is the value derived from "peace of mind". Experienced by the
policyholder, due to the cancellation of the negative financial consequences caused by the death
of the Insured. To be a life insurance policy, the insured event must be based on the lives of the
persons named in the policy.

Benefits of a Life Insurance Policy

1. Financial security

2. Assists in diverting state resources for other purposes

3. Facilitates economic movements

4. Help take advantage of tax exemptions

BONDS AND DEBENTURES

Bonds and debentures, these two words can be used interchangeably. In the Indian markets, we
use the word bonds to designate debt securities issued by the government, semi-governmental
organizations and public sector financial institutions and enterprises.

15
We use the word debenture to denote debt securities issued by companies in the private sector.
Bonds - Debt securities issued by the government. Or Public sector companies Debentures -
Debt securities issued by private sector companies In other words, we can say that a bond is a
debt security, similar to an I.O.U. When you buy a bond, you are lending money to a
government, municipality, company, or public entity known as the issuer. The issuer agrees to
pay you a fixed interest rate over the life of the bond, in exchange for the loan. They also promise
to repay the face value of the bond (the principal) at maturity.

The following persons are authorized to issue bonds

1) Governments

2) The Municipalities

3) Variety of institutions

4) Companies

Purchase and holding of bonds: investors can subscribe to the main issues of companiesand
financial institutions (FI). It is common for FIs and businesses to raise funds for asset finance
or capital spending through primary bond issues. Certain bonds are also available on the
secondary market. The minimum investment for bonds can be 5,000 rupees or 10,000 rupees.
However, this amount varies from one issue to another. There is no upper limit prescribed for
your investment. The duration of a bond issue generally varies between 5 and 7 years.

Sale of bonds: the sale of bonds on the secondary market has its own disadvantages. First,
there is a liquidity problem, which means that it is difficult to find a buyer. Second, even if you
find a buyer, the prices can be greatly reduced compared to its intrinsic value. Third, you are
subject to market forces and therefore to market risk. If interest rates are high, bond prices will
fall and you may face losses. However, the debentures are still guaranteed

16
Debentures
A debenture is similar to a bond, except that the securitization conditions are different. A
debenture is generally not guaranteed in the sense that there is no lien or pledge on specific
assets. It is defined as a loan agreement certificate which is given under the seal of the company
and undertakes that the holder of the debenture obtains a fixed return (fixed on the basis of
interest rates) and the capital at each maturity of the debenture.

Debentures and bonds:

The debentures and bonds are similar, except for one difference, bonds are safer than
debentures. In both cases, you receive guaranteed interest that does not change in value
regardless of the company's assets. However, bonds are safer than debentures, but carry a lower
interest rate. The company provides collateral for the loan.

iii. HIGH-RISK AVENUES

STOCK MARKET

The first step is to understand the stock market. A share of stock is the smallest unit of
ownership in a business. If you hold a share in the shares of a business, you are considered the
co-owner of the business.

Stock trade

Stock market trading involves buying and selling company stocks as well as stock derivatives.
This type of trading usually takes place on an exchange, where companies must be listed before
their shares can be bought and sold. This trading market offers substantial profit potential and
is one of the most popular investment options.

Operation of the Stock Exchange

Stock market trading is normally done by brokers. Therefore, the first step is to find a reliable
investment broker. Stock exchange trading takes place on a physical stock exchange, where
buyers and sellers of the company's stock meet and agree on the price at which the transactions
would materialize. Traditional stock trading implies that an investor places an order for a
specific number of shares in a company with his broker present on the physical stock market.
The broker transmits the order to the floor clerk, who tries then locate a trader willing to sell
these stocks. The offers are then exchanged. The transaction does not end until the buyer agrees

17
to the price offered by the seller. This technique is also called open clamor because it involves
traders shouting their offers. Stock market trading will also be done online. This procedure is
much faster and less complicated than trading on the physical stock market. Online stock
trading absorbs the real-time placement of buy and sell orders for stocks. The transaction is
completed when the trading system is able to match the offers and a confirmation is received.

Benefits of Stock Exchange Trading

1. It promotes economic growth.

2. It helps businesses raise capital and manage their finances

3. It ensures that money is invested in businesses to increase the profit potential.

4. It helps investors make substantial profits.

Disadvantages of stock market trading

1. It offers lower leverage than other forms of trading, such as Forex trading.

2. Short selling of securities is difficult because stock prices do not appreciate significantly in
a short period of time. As a result, there is a waiting period before you can book good profits.

3. It is traded for limited hours in a day.

STOCK MARKET SCAM

Harshad Mehta scam

Harshad Mehta was an Indian stockbroker caught in a scandal beginning in 1992. He died of a
massive heart attack in 2001, while legal issues were still pending. At the beginning of life, the
Harshad Shantilal Mehta was born into a Gujarati Jain family with modest means. Her father
was a small businessman. His mother's name was Rasulaben Mehta. His early childhood took
place in an industrial city of Bombay. Due to the indifferent health of his father in the humid
environment of Bombay, The family moved their residence in the mid-1960s to Raipur in
Madhya Pradesh and currently the state capital of Chandigarh. A 1999 Amul advertisement
during the MUL controversy saying "The Great Bhool" (Bhool in Hindi means Blunder). He
studied at Holy Cross School, located in Byron Bazar.

18
After finishing high school, Harshad left Bombay. While doing odd jobs, he joined Lala Lajpat
Rai College for a bachelor's degree in commerce. After graduating, Harshad Mehta began his
professional life as an employee of the New India Assurance Company. During this period, his
family moved to Bombay and his brother Ashwin Mehta began to obtain a law degree from the
same college. Her younger brother Hitesh is a practicing surgeon at B.Y.L. Nair Hospital in
Bombay. After graduation, Ashwin joined ICICI Industrial Credit and Investment Corporation
of India. They had rented a small apartment in Ghatkopar to live. In the late 1970s, each
evening, Harshad and Ashwin began to analyze the advice generated by the respective offices
and the cyclostyled investment letters, which had appeared during this period.

At the start of the right, he quit his job and looked for a job with a P. Ambalal stock broker
affiliated with the Bombay Stock Exchange before becoming a jobber on the BSE for stock
broker P.D. Shukla.

In 1981, he became a sub-broker for the stock brokers J.L. Shah and Nandalal Sheth. After a
while, he could not maintain his overbought positions and decided to pay for his duties by
selling his house with the consent of his mother Rasilaben and his brother Ashwin. The next
day, Harshad went to see his brokers and offered the house papers as collateral. Broker Shah
and Sheth were moved by his gesture and gave him enough time to overcome his position. after
he got to this great fight for survival, he got stronger and his brother quit his job to team up
with Harshad to start their business Grow more Reseach and Asset Management company ltd.
While an ESB broker card was up for auction, the company made an offer for the same thing
with financial assistance from Shah and Sheth, who were former mentors to Harshad brokers.

He got up and survived the bear races, which earned him the nickname of Big Bull of the trading
room, and his actions, real or perceived, decided the course of the sensex movement aswell as
activities specific to scripts. At the end of the 1980s, the media began to project it as a"stock
market success", "a story of rags of wealth" and he too began to feed his own advertising.He was
proud of these achievements and showed his success to journalists through his "Madhuli"
mansion, which included a billiard room, a mini-theater and a nine-hole golf course.His brand
new Toyota Lexus and a fleet of cars gave credibility to his show off. Now is not thetime to
make him the indescribable broker of the financial world superstar.

At its peak in the early 1990s, he possessed an important resource of funds and finances as well
as personal wealth. After the fall in April 1992, the Indian stock market crashed, and Harshad
Mehta, the person who has always been considered the architect of the Bull Run, was blamed

19
for the entire accident. It turned out that he had manipulated the Indian banking systems to
siphon funds for the banking system and used liquidity to build large positions in a selected
group of actions. When the scam broke out, he was called by banks and financial institutions
to return the funds, which triggered a chain reaction, necessitating the liquidation and exit of
the positions he had built up in various stocks. The panic reaction ensued, and the stock market
reacted and collapsed within a few days. He was arrested on June 5, 1992 for his role in the
scam.

His favorite stocks included

-ACC

- Apollo tires

-Addiction

-Tata Iron and Steel Co. (TISCO)

-BPL

-Strelite

-Videocon

The actions that received the most attention were those of the Associated Cement Company
(ACC). The price of ACC was offered up to Rs. 10,000. For those who asked, Mehta had the
theory of replacement cost as an explanation. Essentially, the theory is that the old companies
should be valued on the basis of the amount of money that would be required to create another
of these companies. During the second half of 1991, Mehta was the darling of the business
media and won the nickname of the "Big Bull", which is said to have launched the Bull Run.
But where did Mehta get his countless reserves of money from? Nobody had a clue. On April
23, 1992, journalist Sucheta Dalal, in a Times of India column, exposed the dubious ways of
Harshad Mehta. The broker was illegally diving into the banking system to finance his
purchases. In 1992, when she told the story of the 600 crore he had swiped from the State Bank
of India, he visited his bank managers in the flashy Toyota Lexus that was revealing. These
days, the Lexus had just been launched on the international market and its importation cost a
neat package. Dalal wrote in his columns later. The crucial mechanism by which the scam was
carried out was the direct agreement.

20
The FR was essentially a short-term guaranteed loan (usually 15 days) from one bank to
another. Basically, the bank loan is used to lend against government securities, just like a
pawnbroker lends against jewelry. The borrowing bank actually uses it to sell the securities to
the lending bank and redeems them at the end of the loan period, usually at a slightly higher
price.

It is this direct agreement that Harshad Mehta and his friends have used with great success to
channel money from the banking system. A typical term loan agreement involved two banks
brought together by a broker instead of a commission. The broker does not manage cash or
securities, but this was not the case with the scam loan. In this settlement process, securities
deliveries and payments were made through the broker. In other words, the seller gave the
securities to the broker, who gave them to the buyer, while the buyer gave the check to the
broker, who made the payment to the seller. To maintain the appearance of legality, they
pretended to undertake transactions on behalf of the bank. Another widely used instrument was
the bank receipt (BR). In a forward transaction, the securities were not moved back and forth
in reality. Instead, the borrower, that is. the seller of securities, gave the buyer of the securities
a BR. A BR confirmed the sale of securities. It used to be a receipt for money received by the
selling bank. Hence the name BR. He promises to deliver the securities to the buyer. After
understanding this, Mehta needed banks, which could issue fake BRs or BRs not backed by
government securities. two small unknown banks were the Bank of Karad and the Metropolitan
Co-operative Bank. These banks were willing to issue BRs as costs were incurred. Once these
fake BRs were issued and passed on to the other banks, the banks in turn gave the money to
Mehta, obviously assuming that they were lending against government securities, which was
not really the case. . This money was used to push up stock prices on the market. When the
time came to return the money, the shares were sold for a profit and the BR was withdrawn.
The money owed to the bank has been returned.

The game continued As long as the share price continued to rise, no one had a clue how the
mehta worked. Once the scam was revealed, many banks found themselves holding BRs that
had no value, the banking system had been swindled by a huge crore of Rs.4000. Mehta made
a brief comeback as a fellow giving advice on his own website as well as a weekly column.
This time, he was in cahoots with the owners of a few companies and only recommended these
actions. This match did not last long in an interesting way at the time of his death, Mehta was
only found guilty of one of the many cases filed against him.

21
The extent to which Harshad Mehta has caused a securities scam, as the media has sometimes
described it, has hurt at least 10 major commercial banks in India, a number of foreign banks
operating in India, and the National Housing Bank or subsidiary of the Reserve Bank of India,
which is the central bank from India. As a result of the shock waves that engulfed the Indian
financial sector, the number of people in key positions in India's financial sectors has reportedly
been affected, including the arrest and sacking of KM.

Mahadevan, one of the managing directors of India's largest bank, the state bank of India. The
central investigative office, which is India's first investigative agency, has been tasked with
deciphering the mode of operation and the ramifications of the scam. Harshad Mehta was
arrested and investigations have continued for a decade.

While in police custody, while he was in Thane prison, Mumbai, he complained of chest pain
and was transferred to hospital on his death on December 31, 2001. His death remains a
mystery. Some believe that he was mercilessly murdered by an underground link. Rumor has
it they suspected that part of the huge well Harshad Mehta commanded at the height of 1992
was still hidden and believed that the only way to extract their share of the bill was to put
pressure on Harshad's family threatening its very existence. In this context, it should be noted
that a certain criminal allegedly linked to the Nexus had explicitly surrendered immediately
after the transfer of Harshad to Thane prison and had landed in prison in the same prison, in the
center next to that of Harshad Mehta.

Ketan Parekh Scam

The crash that shook the nation

The 176-point Sensex crash of March 1, 2001 was a major shock to the Indian government, the
stock markets and investors. Furthermore, while the European Union budget tabled a day earlier
had been acclaimed for its growth initiatives, ABD had caused an increase of 177 Sensexpoints.
This sudden collapse of the stock markets prompted the Securities Exchange Board of India
(SEBI) to immediately launch investigations into stock market volatility. SEBI also decided to
inspect the books of several brokers suspected of having triggered the accident.

Meanwhile, the Reserve Bank of India has ordered certain banks to provide capital market
exposure data. This happened after media reports of a private sector bank exceeding its
prudential capital exposure standards appeared, contributing to the volatility of the stock
markets. The panic continued on the stock exchanges and the resignation of the president of

22
The Bombay Stock Exchange, Anand Rathi, with the fall. Rane had to resign following
allegations that he used inside information that contributed to the accident. This can undermine
investor confidence in the overall functioning of the stock markets. At the end of March 2001,
at least eight people reportedly committed suicide and hundreds of investors were on the verge
of bankruptcy.

The scam opened the debate on the banks which finance operations on the capital market and
lend funds against guarantees. It also raises questions about the validity of dual oversight of
cooperative banks (analysts pointed out that RBI inspects accounts once every two years, which
has greatly amplified the rule violation).

The first arrest in the scam was noted bull Ketan Parikh on March 30, 2001 by the Central
Bureau of Investigative Reports are limited as to how Ketan Parikh alone had called one of the
biggest scams in the history of Indian finance markets. He has been charged with fraud at Bank
of India of approximately $ 30 million, among others. Ketan Parikh’s arrest was followed by
another stock market panic and the Sensex fell 147 points. By that time, the scam had become
the nation's topic of discussion, with intensive media coverage and unprecedented public
outcry.

The man who triggered the crash

Ketan Parikh was a chartered accountant by profession and used to run family businesses, NH
titles created by his father. Known for keeping a low profile, Ketan Parikh’s only claim to fame
dates back to 1992, when he was charged with stock market fraud. He was known as the
Bombay bull and had ties to movie stars, politicians and even leading international
entrepreneurs like Australian media mogul Kerry Packer, who associated Ketan pa in Ketan
Parikh V Ventures, a venture capital fund of $ 250 million which invested mainly in companies
of the new economy. Over the years, Ketan Parikh has built a network of companies, mainly in
Mumbai, involved in stock trading.

The rise of ICE (information, communications and entertainment) stocks around the world in
early 1999 also led to an increase in Indian stock markets. The dotcom boom contributed to the
bullish rum, led by an upward trend

NASDAQ

Companies in which Ketan Parikh had interests included Amitabh Bachchan corporation
limited (ABCL), Mukta arts, Tips and pritish nandy communications. He also had interests in

23
HCFL, Global Telesystems, Zee Telefilms, Crest Communications and PentaMedia Graphics
KP selected these companies for investment with the help of his research team, which identified
high growth companies with a small base of capital.

According to media reports, Ketan Parikh took advantage of the low liquidity of these shares,
which ultimately became the K-10 shares. The actions were helped by Ketan Parikh's company,
Triumph International. In July 1999, around 1.2 million shares. Ketan Parikh controlled
approximately 16% of the world's floating shares, 25% of Infosys, 15% of Zee and 15% of
HFCL. The dynamic stock market from January to July 1999 helped K-10 stocks increase their
value sustainability.

Mutual funds like Alliance Capital, ICICI Prudential Fund and UTI have also invested in K-10
stocks and have seen their net asset value skyrocket. In January 2000, K-10 shares were
regularly among the five most traded shares. HFCL trading volumes are up from 80,000 to
1,047,000 shares. Global's traded value in Sensex was Rs.51.8 billion. As a huge amount of
money was injected into the market, it became difficult for Ketan Parikh to control the moments
of the scripts. It has also been reported that the volumes are becoming too large for him.
Analysts and regulators have wondered how Ketan Parikh managed to buy such large stakes.

The factors that helped the man.

According to market sources, even though Ketan Parikh was a successful broker, he had no
money to buy big stakes. According to the report, 12 lakh shares of Global in July 1999 would
have cursed KP around 200 million rupees. The participation in Infosys would have cost him
Rs.50 billion, while HFCL and zee would have cost him Rs.2 50 billion each. Analysts said
Ketan Parikh had borrowed from various companies and banks for this purpose. His methods
of financing were quite simple. He bought stocks while they were trading at low prices and saw
prices rise in the bull market while continuing to trade. When the price was high enough, he
pledged shares with the banks as collateral for the funds. He also borrowed from companies like
HFCL.

This would not have been possible without the participation of the banks. A small Ahmedabad-
based bank, Madhavaoura Mercantile Cooperative Bank, was Ketan Parikh’s main ally in the
scam. Ketan Parikh and its associates began exploiting the MMCB to raise funds in early 2000.
In December 2000, when Ketan Parikh encountered liquidity problems in the colonies, it used
the MMCB in two different ways. The first was the payment order route, where Ketan Parikh
issued checks drawn on the Bank of India to MMCB, against which MMCB issued payment

24
Orders. Payment orders have been updated by BOI. It has been alleged that MMCB issued funds
to Ketan Parikh without adequate collateral and even exceeded its capital market exposure limits.
According to an RBI inspection report, MMCB loans to the stock markets were around Rs. 10
billion, of which more than Rs. 8 billion was loaned to Ketan Parikh and its companies.

The second route was through an MMCB branch in mandvi, where different companies owned
by Ketan Parikh and its associates had accounts. Ketan Parikh has used approximately 16 of
these accounts, directly or through other brokerage firms, to obtain funds. In addition to direct
borrowing from financial companies owned by Ketan Parikh, a few brokers also allegedly took
out loans on his behalf. It has been alleged that Madhur Capital, a company headed by Vinit
Parikh, the son of MMCB president Ramesh Parikh, acted on behalf of KP to borrow funds.
Ketan Parikh would have used its BOI accounts to discount 248 payment orders worth around
Rs. 24 billion between January and March 2001. BOI's losses eventually exceeded 1.2 billion.

The MMC be pay order has issued several public sector banks very hard. These included big
names like the State Bank of India, the Bank of India and the National Punjab Bank, all of
which lost huge amounts in the scam. It was also alleged that the global trust bank made loans
to Ketan Parikh and that its exposure to the capital markets was above the prescribed limits.

Ketan Parikh’s method of raising funds by offering shares as collateral to banks worked well
as long as stock prices rose, but reversed when markets started to collapse in March 2000. The
collapse, caused by the fall of NASDAQ since K-10 shares were also falling, Ketan Parikh was
asked to pledge more shares because the guarantees reimbursed part of the money borrowed in
both cases, this has put pressure on his finances. In April 2000, mutual funds significantly
reduced their exposure to K-10 stocks over the next 2 months, while Sensex fell 23% and
NASDAQ by 35.9%, K-10 declined. Alarmingly decreased by 67%, with improvement in the
global technology stock markets, k10 stocks started to rise in May 2000. The HFCL almost
doubled from 790 rupees to 1,353 rupees in July 2000, while with the overall short reaching
1,153 rupees, After Infosys also traded at RS. 1,000.

In December 2000, the NASDAQ crashed again and technology stocks suffered the hardest
blow ever recorded in the United States. Driven by doubts about the future of technology stocks,
prices began to fall around the world and mutual funds and brokers began to sell them.Ketan
Parikh started having liquidity problems and lost a lot of money to it bears of this period.

It has been alleged that the “hammering of the bear” of Ketan Parikh’s stocks ultimately
resulted in payment problems in the markets. One of the biggest setbacks for Ketan Parikh was

25
the Calcutta Stock Exchange Payment Crisis. The CSE was essential to the functioning of Ketan
Parikh for three reasons. First, the lack of regulation and supervision on the stock market has
enabled highly illegal and volatile bad activity. Second, the stock market had the third highest
volume in the country after NSE and BSE. Third, CSE helped Ketan Parikh to hedge its
operations from its rivals in Mumbai. CSE brokers helped KP cover its operations with its rivals
in Mumbai. CSE brokers purchased shares at the request of Ketan Parikh.

Although the official script was in the name of the brokers, Ketan Parikh unofficially owned
them. Ketan Parikh covered losses due to the lack of price of the scripts and paid weekly interest
of 2.25% to the brokers. In February 2001, the scripts held by Ketan Parikh brokers at the CSE
were reduced to approximately Rs 6 to 7 billion compared to their initial value of rupees. 12
billion. This situation worsened with the payment of Rs by badla from Ketan Parikh. 5-6 billion
were not honored in time for settlement and around 70 CSe brokers, including the first three
CSE brokers (Dinesh Singhania, Sanjay Khemani and Ashok Podar) defaulted on payments.

In mid-March, the value of the shares held by CSE brokers fell further to around Rs. 2.5-3
billion. CSE brokers began to pressure Ketan Parikh for payments. Ketan Parikh again turned
to the MMCB for loans. The cash outflows from MMCB had increased considerably since
January 2001. In addition, although loans prior to Ketan Parikh had been secured by appropriate
collateral and with adequate documentation, it was alleged that this time Ketan Parikh was
allowed to borrow without any guarantee.

To date, SEBI has implemented several measures to control damage. An additional 10% deposit
margin was imposed on current net sales on the stock markets. In addition, the limit forapplying
additional volatility margins has been lowered from 80% to 60%. To revive the markets, SEBI
imposed by deliveries. It suspended all the broker member administrators of theESB board of
directors. SEBI also prohibited trading by all stock market presidents, vice presidents and
treasurers. A historic decision to ban the Badla system in the country was taken,with effect from
July 2001, and a rolling settlement system for 200 Group A shares was introduced on the BSE.

The system behind these factors

Small investors who lost their savings felt that all parties to the operation of the market were
responsible for the scams. They believed that the broker-banker-promoter link, which was
deemed to have the acceptance of SEBI itself, was the main reason for the scams on the Indian
stock markets.

26
SEBI's measures have been widely criticized as being reactive rather than proactive. The
market regulator has been blamed for being lax in handling the issue of unusual price
movements and the enormous volatility of certain stocks over an 18-month period before
February 2001. Analysts also said the information on the SEBI market were also very poor.
Media reports have indicated that Ketan Parikh’s arrest was not due to the timely action of
SEBI but the result of BoI complaints.

A market observer said: "When prices went up, SEBI observed these" normal "market
movements. He ignored the large positions accumulated by certain operators. Worse, he asked
no questions. It had to investigate these things, not as a regulator, but as a deepening agency
that could coordinate with the agencies. Who will bear the loss that its inefficiencies have
caused? An equally crucial issue has been raised by the media regarding SEBI's ignorance of
the existence of an unofficial market at the CSE.

Interestingly enough, it has been reported that the arrest was motivated by government efforts
to dispel the Tehelka controversy.

Many stock exchanges were dissatisfied with the decision to ban the badla system because they
believed it would rig market liquidity. Analysts who opposed the ban argued that banning badla
without an appropriate alternative for all scripts, which were moved to a slippery settlement,
would fake market volatility. They argued that the lack of financial resources for all market
participants would allow the few who could access funds from the banking system - including
cooperative banks or promoters - to have undue influence on the markets.

The people the system deceived

KP was released on bail in May 2001. The duped investors could do nothing knowing that the
legal proceedings would last, perhaps for years. Observers estimated that despite the corrective
measures implemented, the KP scam had slowed the Indian economy by at least a year.
Responding to the scam, all of KP had to say, "I made mistakes." It was widely believed that
more than fraud, KP was an example of decay in the Indian financial and regulatory systems.
Analysts said if regulatory authorities had been vigilant, the huge erosion in values could have
been avoided or at least managed. After all, Rs. 200 billion is not a small sum, even for a nation
Participation of individual investors.

27
Retail Investors participation

Will retail investors return?

Unless greater efforts are made to increase financial literacy, increase the retail share of IPOs
and convince investors that the stock markets are not scammed, it is difficult to see this happen.

Why was this question not raised when the Sensex was at the 8000 level last year? Why does
everyone, including the retail investor, only ask this question when the market is in a bullish or
near-bullish phase? Is it possible that the big ones can remember the small investors only at
these times to create takers for their unloading or to sell new shares? It is a hard truth that most
want to make money from the retail investor and not for him. It is of course not surprising that
retail investors to catch the bait and miss the market for increased earnings. Will retail investors
now return in large numbers to the equity market? My sense is different.

The biggest problem remains the lack of confidence. In the past two decades, too many scams,
most of which have yet to be prosecuted, have become tedious. Punishing the scam stairs, and
punishing them adequately and quickly, is even greater. But the investor, what is even more
important than the punishment, is the compensation for him. The recent disgorgement of undue
profits From the IPO scam and the compensation of injured investors is a decisive event in the
history of the Indian capital market. Only more and faster indictments and several of these
compensation cases could restore confidence to the small investor.

The second constraint concerns policies. Although most of the reforms are carried out on behalf
of the small investor, he has rarely been the real beneficiary. Many politicians have in fact
worked against them. As an example, the retail allocation in most IPOs has been reduced to
just 3.5% of companies' capital. Or for that matter, while the government continues to strive to
broaden the investor base, its pricing of PSU offers works completely against this objective.
The cumbersome and intimidating processes. The number of documents, and the details once
and that, that an investor has to navigate which could even be the most savvy of discomfort.
For example, the investor must sign approximately 80 times on the KYC form. Finally, the lack
of financial education has worked as the main reason why most citizens remain comfortable to
park their savings in low income fixed deposits than in the stock market. The country's
population simply refuses to grow and in fact, their numbers have been tracked. Less than 1%
of our population invests directly on the stock market. Worse still, more than 3% of household
savings is invested in the capital market.

28
Although a series of laudable measures have emerged recently from the regulator, including
the revolutionary ASBA (Application Supported by Blocked Amount) process, much remains
to be done. There is for example that I have to relook the offer document which became too
large and the illegible and sebis mentions "the accuracy of the adequacy of the contents is not
guaranteed by Sebi" does not help either. It is also necessary to review certain instruments such
as risk factors, classification of IPOs and independent directors which only give a false sense
of security to the small investor.

If the Bull Run continues, it is likely that some retail investors would start investing more
money in stocks. Unfortunately, most of these investors generally, but unfortunately, seek
price, not value, and therefore engage in penny stocks. The "value" of a stock is something that
even the most sophisticated institutional investors are unable to determine with precision. For
a man on the street without the skills, the time and resources to do it is unimaginable. Therefore,
individual investors should be encouraged through mutual funds. For this to happen, the mutual
fund industry itself must be regulated and encouraged to work for the retail investor.

Unfortunately, we can also see more players, although stocks are the best class in the long run,
technology and market structure have narrowed the horizon to the days and, in fact, to the
hours. Almost 80% of its turnover on exchanges comes from day trading almost similar to
gambling.

The stock market is indeed reduced to a casino, the retail trade must realize that the casino never
loses. 9/10 small investors I have met in my life, and I have made thousands, have lost money
in the equity market.

"Retail investors should be part of the story of growth"

The banking and financial services sector, currently under stress, will be the main driver of
long-term growth. In an open discussion with the industry, Mr. Piyush Chanda, Executive Vice-
President, Edelweis Asset Management shared his views on the sectors likely to stimulate
growth, the strategies to be adopted by retail investors and the way forward for the country is
the activity of mutual funds.

Do individual investors in the country still hesitate to invest in the market? What should their
strategy be?

29
Retail investors are beginning to understand how to deal with market volatility. In fact, they
largely enter the market through the SIP channel. This is reflected in the constant increase in
SIPs. I think the investor should go through SIP and stay longer to get better returns.

Retail participation

India is a great story of growth and we believe that every retail investor should participate in
this growth. It is crucial that investors keep faith in the history of India. Discipline is the key to
any investment. It is best not to react to short-term volatility as this can cause considerable
long-term damage to the health of the investment. Investors should also look at equity to a great
extent as this will only yield good returns in the long run. Fixed income securities are essentially
a painless lack of equity gain, there is a slight risk, but if you are invested for the long term,
you are guaranteed to get good returns.

Collective mentality of Indian retail investors on the Indian stock market.

The trends discussed above and the stock market scams clearly show the herd mentality of
Indian retail investors in the stock market. Individual investors in India generally start investing
when the stock market or stock returns rise and various stocks show an upward recovery. As
retail investors exit the market, the market crash results in significant losses for retail investors
in India and this may also be a reason why retail investors consider the stock market to be very
risky. The above behavior of Indian retail investors shows an irrational approach to investment
and their herd mentality. Appropriately, investors should enter the stock market when the
market is down, as such a market creates good buying opportunities for various stocks and
investors must exit the market when the market goes up.

SEBI lags behind in order to increase retailers' participation in stocks.

The Securities and Exchange Board of India is far behind in its goal of bringing more retail
investors to the stock market. The market regulator has now embarked on a strategy to simplify
market investments in order to increase the participation of retailers.

“India has an 8% retail stake in market investment compared to 2,033% in South Korea and
China. We have a huge job to do to increase the participation of retailers.

The head of the SEBI is also for increased penetration of the capital market in investments in
small towns.

30
Currently, only 2.6% of India's total savings come from the capital market and 85% of total
trade comes from only 5 cities.

Eliminating bottlenecks for investing in the capital market is key to getting greater participation
from retailers, for example, the market regulator is working to simplify disclosures in initial
public offerings which are currently too bulky and unstructured.

Individuals' participation in Indian stock markets down July 7, 2011

The share of retail investors in the market capitalization of 2,486 shares actively traded on the
BSE has fallen to its lowest level in 5 years. This figure was around 19% in March 2006, which
is now 15.86% in March 2011.

It is not surprising that this share started to fall after the Indian stock market crash of 2008.
Which, even surprisingly, did not increase during the rise of the Indian stock market when the
Sensex rose to 21000, against 8000. This is surprising, since retail investors who are generally
lacking fully miss when they increase.

On the mutual fund side, the number of folios fell to 3 crore 80 lakhs in March 2011, above
four crore in March 2009, but the sad situation with the investment scenario in mutual funds
has blamed by the industry for SEBI rules that cut entry and exit charges, which invariably
reduces distributors' interest in recommending and selling mutual fund plans. In our view, this
is good for small investors, but is it not at the risk of retail investors? In our opinion, if the sebi
and the government seriously want to increase the participation of retail investors and this also
through mutual funds, it must then restore the entry and exit charge which, in turn, will
encourage Mutual fund companies offer their agents more incentive to sell mutual fund plans.
Maybe the government can cap artificially higher commissions on an NFOs and put rules that
alarm mutual funds to give the same condition to existing regimes while watching India set up
exponential growth in l The mutual fund industry is necessary to bring the maximum possible
participation of small equity investors as well as the best and only possible way to reduce the
dominance and influence of hot money on the Indian stock markets. We also recommend that
ESB and NSE exchanges carry out investor awareness programs on the basis of the foot of war
rather than just sitting on investor protection funds if they want to increase volumes.

31
COMMODITY TRADING

The terms commodities and futures are often used to describe commodity trading or futures
trading. It is similar to the way stocks and shares are used when investors talk about the stock
market. The raw materials are real physical goods like gold, crude oil, corn, soybeans, etc.
Futures contracts are commodity contracts that are traded on the commodity exchange like
MCX. In addition to numerous regional exchanges, India has three national commodity
exchanges, namely the multi-commodity exchange (MCX), the national commodity exchange
(NCDEX) and the national multi-commodity exchange (NMCE). The Forward Markets
Commission (FMC) is the regulator of the commodity market. It is one of the few areas of
investment where a person with limited capital can make extraordinary profits in a relatively
short time. Many people have become very wealthy by investing in the commodity markets.
The commodity trade has a bad reputation because it is too risky for the average person. The
fact is that trading in commodities is as risky as you want it to be. Those who treat trade as a
system of rapid development are likely to lose because they have to take big risks. If you act
with caution, treat your trading like a business and are ready to settle for a reasonable return,
the chances of success are very high. The course of commodity trading is also known as futures
trading. Unlike other types of investments, such as stocks and bonds, when you trade futures,
you either buy nothing or own nothing. You speculate on the future direction of the price of the
commodity you are trading. It is like a bet on the future direction of prices. The terms "buy" and
"sell" simply indicate the direction in which you expect future prices to move. If, for example,
you were speculating on wheat, you would buy a futures contract if you thought the price would
go up in the future. You would sell a futures contract if you thought the price of wheat would
go down. For each trade, there is always a buyer and a seller. No one must have wheat to
participate. But he must deposit sufficient capital with a brokerage firm to ensure that he will be
able to pay the losses if his transactions lose money. When you buy futures, you don't have to
pay the full amount, just a fixed percentage of the cost. This is called the margin. Suppose you
buy a Gold Futures contract. The minimum contract size for a gold future is 100 billion. 100
grams of gold can be worth Rs. 1,50,000. The gold margin set by MCX is 3.5%. So you only
pay 5,250 rupees. The low margin means that you can buy futures contracts representing a large
amount of gold by paying only a fraction of the price. So you bought the Gold Futures contract
when it was Rs. 1.50,000 per 100 grams. The next day, the price of gold rose to Rs 1.60,000 per
100 grams. Rs 10,000R(s 1,60,000 - Rs 1,50,000) will be credited to

32
your account. The next day, the price drops to Rs 1.55,000. Rs 5000 will be debited from your
account (Rs 1.60,000 - Rs 1.55,000).

FOREX MARKET

Forex trading is the immediate trade of one currency and the sale of another. Currencies are
traded through an agent or reseller and are traded in pairs. For example, the euro (EUR), the
US dollar (USD), the British pound (GBP) or the Japanese yen (JPY). Here you don't buy
anything physical; this type of business is confused. Consider buying a currency like buying a
share of a particular country. When you buy, for example, the Japanese yen, you are actually
buying a share of the Japanese financial system, because the price of money directly reflects
what the market thinks of the current and future health of the Japanese economy. In common,
the exchange rate of a currency in relation to other currencies reflects the situation of the
financial system of this country in relation to the financial system of other countries.

Unlike other financial markets like the New York Stock Exchange, the Forex spot market has
no physical location or central exchange. The Forex market is measured on an over-the-counter
(OTC) interbank market, use it to act on non-electronic markets in a network of banks
continuously over a 24 hour period. Until the late 1990s, only big players could play this game.
The first requirement was that you could only trade if you had about ten to fifty million dollars
to start with Forex.

Forex was originally intended for use by bankers and large institutions and not by little guys.
However, due to the rise of the Internet, online Forex trading companies are now able to offer
trading accounts to "retail" traders. All you need to get started is a computer, broadband Internet
connection and information.

The foreign exchange market is exclusive for the following reasons:

- Its trading volumes

- The enormous liquidity of the market

- Its geographic dispersion

- His long hours of trading

- The variety of factors that affect the exchange rates

33
- Low profit limits compared to other fixed income markets but profits can be high due to very
large trading volumes

- The use of leverage

Benefits of Forex Trading

1. Forex is the largest market.

No bulls or bears!

3. Online Forex Trading Offers Excellent Leverage

4. Forex prices are predictable.

5. Forex online trading is commission free

6. Online Forex trading is instant.

iv. TRADITIONAL AVENUES

REAL ESTATE AS AN INVESTMENT OPTION

The growth curve of the Indian economy is at a record level and the real estate sector in
particular is contributing to the recovery. Investments in Indian real estate have taken
precedence over other options for domestic and foreign investors. The boom in the sector has
been so attractive that real estate has proven to be a compelling investment compared to other
investment vehicles such as the capital and debt markets and the bullion market. It attracts
investors by offering the possibility of stable returns, moderate capital appreciation, tax
structuring advantages and greater security compared to other investment options. A survey by
the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young
predicted that the Indian real estate industry is fast becoming one of the most preferred
investment destinations for real estate companies and global investment over the next few
years. The potential of the Indian real estate market has a revolutionary effect on the global
economy of India because it transforms the horizon of Indian cities by mobilizing investment
segments ranging from commercial, residential, retail, industrial, hotel, health, etc.

34
But the maximum growth is attributed to its growth in the booming IT sector, as it is estimated
that 70% of new construction is for the IT sector.

Research in the real estate sector has also highlighted investment opportunities in the
commercial office segment in India. The demand for office space is expected to increase
considerably over the next few years, mainly due to the IT and ITES industry, which requires
more than 367 million square feet of office space until 2012-13.

INVESTMENT IN GOLD

Gold has much emotional value than monetary value in India. India is the largest consumer of
gold in the world. In western countries, you can find most of their gold in their central banks.
But in India, we mainly use gold as jewelry. If you look at gold in a trading sense, you will
understand that gold is one of the best investment tools of all time. My dear readers, today I
would like to discuss investment in gold and its potential.

Current scenario of the Indian gold market:

Size of the gold economy: more than Rs. 30,000 crores

Number of gold jewelry manufacturing units: 1,000,000

Number of people employed: 5,000,000

Precious stones and jewelry represent 25% of India's exports, around 10% of our import bill is
gold imports.

Number of banks authorized to import gold: 15 (Although this has recently been liberalized,
detailed notification is awaited)

Official gold stock estimates in India: 9,000 tonnes

Unofficial gold stock estimates in India: 12,000 - 14,000 tonnes

Gold held by the Reserve Bank of India: 358 tonnes Gold production in India: 2 tonnes per
year.

35
Demand for gold on the Indian market:

India has the highest demand for gold in the world and more than 90% of this gold is acquired
in the form of jewelry. Here are the factors that influence the demand for gold. The movement
of gold prices is one of the important variables determining the demand for gold. The increase
in irrigation, technological change in agriculture (thanks to mechanization and high-yielding
varieties), have generated a large marketable surplus and a much skewed distribution of rural
incomes is another factor contributing to demand. Additional gold. Gold supply: The main
economic effects that result from changes in the gold supply can be seen in relation to the
quantum of gold that already exists in the economy. The supply of gold is not up to the
requirements because the production of gold also decreases and the demand for goldincreases
very strongly.

Gold as an investment option:

Gold as an investment tool always gives good returns, flexibility, security and liquidity to
investors. Therefore, as a financial consultant, I would advise everyone to kindly allocate part
of your portfolio to investments in gold. Practice the habit of buying at least one gram of gold
each month.

36
 4.EMERGING INVESTMENT AVENUES

Wealthy Individuals [HNI] or Wealthy Investors Are Proactive in Portfolio Management, Risk
Management, Consolidation of Financial Assets and Use of Strategies diversification as
actively as large institutions. . HNIs are proactive in identifying new investment options and
gather feedback from professional advisers in volatile market conditions. HNIs are dynamic in
changing their asset allocation and were among the first investors to move from equities to
fixed income securities during the 2001-2002 stock market downturn.

They returned to equities when they identified favorable market trends.

Investment products and avenues

Managed products: Managed products service is the most popular investment strategy
adopted by wealthy investors worldwide

Real estate: Rich investors have found this asset class very attractive and have invested
directly in real estate and indirectly through real estate investment trusts.

Art and passion: wealthy investors also invest in art, wine, antiques and collectibles.

Precious metals: gold and other precious metals are attractive investment options for
balancing asset allocation.

Commodities: wealthy investors turned to commodities to offset the decline in yields on fixed
income securities.

Alternative investments: Hedge funds and Private Equity investments such as venture capital
funds are becoming increasingly popular with wealthy investors in order to reduce the
investment risks associated with stock market fluctuations. Indeed, these instruments have a
weak correlation with the performance of equity asset classes.

Investing in uncorrelated assets, such as commodities, helps improve portfolio diversification

under volatile market conditions.

INVESTMENT IN ART

Today, we are seeing an increasing number of people looking for alternative investments,
which offer them diversification away from a particular asset class. People are ready to invest

37
and are looking for areas other than the stock market to invest. Investing in vintage wine, coins,
stamps and art is now an indulgence that gives them the opportunity to profit from their hobbies,
without having the level of expertise required for other direct investments. Art is integrated into
the investor's overall decision on asset allocation. The art scene in the world is developing
considerably. With more and more investors viewing art as an alternative asset class and store of
long-term value, the average annual valuations of art have exceeded the average annual
valuations of the stock markets by more than three times since 2000.

HEDGING FUNDS

Over the past 15 years, hedge funds have become increasingly popular with wealthy individuals
as well as institutional investors. The number of hedge funds has grown by around 20% per
year and the growth rate of hedge fund assets has been even faster. A hedge fund is a private
investment fund, which receives a performance fee and is only open to a limited number of
investors. These funds are like mutual funds, which collect money from investors and use the
proceeds to buy stocks and bonds. They can invest on almost any type of opportunity; in any
market where good returns are expected with low levels of risk.

Risks related to hedge funds:

-Lack of transparency

- Limited liquidity

- Difficulty accessing quality hedge funds

- Unreliable or incomplete return data

- Valuation risk

- Asymmetric nature of hedge fund yield distributions [SKEW]

- Counterparty risk [leverage]

PRIVATE EQUITY INVESTMENTS

Is the most important source of finance in the entrepreneurial market? Private equity
investments help finance approximately 25 times the number of companies that venture

38
capitalists finance each year. Private equity investments generally come from a wealthy
individual who represents an essential source of finance for high-risk businesses at an early
stage. It is estimated that more than one-seventh of the 300,000 start-up or early-growth
businesses in the United States receive funding from angel investors. This translates into more
than $ 20 billion in investment in approximately 50,000 transactions each year. This investment
group exceeds the sources of venture capital which are estimated between $ 5 and $ 7 billion
spread over 1,000 venture capital investments each year.

A typical profile of a private equity investor:

- Does anyone prefer to invest in the day of the trip?

- Is very well educated

- Tends to invest collectively within a group of other private equity investors

- Usually invests in the range of $ 10,000 to $ 500,000, on average

$ 230,000

- Make an investment every two years

- Private equity investors have proven to be the most important players in the entrepreneurial
market. Private equity investors finance thirty to forty times more entrepreneurial businesses
than the entire venture capital industry, and estimates place the total amount at between $ 20
billion and $ 60 billion a year.

39
5.FACTORS INFLUENCING INVESTOR BEHAVIOUR

i. INVESTMENT EXPERIENCE

In the procedure for choosing speculators, experience is essential. The speculator evaluates and
buys budget items, focusing on his experience. The financial specialist's experience gives them
familiarity with the danger so that they can adequately assess chance (Harrison, 2003). Now
the speculator has expressed positive reviews for the trade when their past data is in time. In
any case, logical data avoid it (Muradoglu, 2002). Along these lines, financial specialists who
had higher experience in their speculation choices contain an abnormal state of resilience to
danger, prompting them to contain a highly dangerous portfolio. Again, the financial specialist
who had less speculative experience with regard to his business choices contains a low level of
resilience to dangers, which encourages him to contain less portfolio of dangers (Corter and
Yuh-Jia, 2006 ). The way people get information about the danger of risky items can influence
how they assess the danger and affect the danger they are willing to recognize. The choice to
do the writing recognizes at a very basic level particular routes in which individuals find danger

"Representation versus experience". The choices from the representation depend on

unequivocally expressed probabilities linked to the results. The choices in fact depend on the
examination of the imaginable results, which implies that the hidden probabilities must be
judged or presumed taking into account the evidence observed (Hadar and fox 2009; Hau et.al,
2008). By the time a tender financial specialist is satisfied with a choice of company, hecould
have a greater number of inclinations than that of master speculator. Subsequently, an
experienced financial specialist can switch or learn the choice by making predispositions, these
inclinations more than that of the master speculator. Subsequently, the occasions described by
the perspective hypothesis (Barron and Erev, 2003). By the time the hazard data is acquired
through experience, the probabilities associated with the results are unclear or unequivocally
expressed. Master speculators must accept either before making a decision, but individuals
must be allowed to test imaginable results. The choice to put resources in the stock exchange
system is not made based on probabilities; their instinct for the attractiveness of the sharing
exchange system comes from their assessment of how it has worked before. Given the
dispersions of indistinguishable hidden probabilities, the choices based on representation and
experience can be generously diverse, particularly for choices that include rare occasions.
Hertwig, Barron, Weber and Erev (2004) show that the choices based on numerical
representations of the results and their associated probabilities essentially vary from the choices

40
based on experience, in which the probabilities are discovered by pushing the captures to test
the imaginable results.

In the choice of companies, the variety of mindsets can, to a certain extent, influence the choices
concerning the designation of resources. For example, if we oppose individuals in an impartial
state of mind and the general population in a decent state of mind is likely to be satisfied with
a more idealistic choice of company. Likewise, individuals with a negative mindset can be
extremely critical when evaluating their projects. The mindset of financial specialists also
influences the decision to choose. In addition, it is invaluable in making choices (Lucey and
Dowling, 2005). Nevertheless, individuals, who are sometimes encouraged by this foundation,
can allow short-lived variables, similar to temperament, to have an impact on autonomous
choices. With this in mind, Lucey and Dowling (2005) found that this strategy is normally
linked to extreme choices, notably vulnerability and danger. The past gradual danger of
acquiring knowledge leads to generally secure recognition of the future company Reed and
(Storrud-Barnes, 2010). Doran and Wright (2010) explained the choice of companies by
making financial specialists, transferring intensely to the experience of past speculation. When
speculators have a successful business experience (exceptional return and small difference as
a result), then they fail to widen their interest in this specific stock and the expected future
prices are absolutely linked to the delay acquired. Financial specialists are intrigued to reinvest
in equities which give a marked advantage in the past instead of enduring unhappiness. In
addition, shares are sold and after that their cost has decreased in the corporate sector, the
financial specialist is delighted (Odean, Strahilevitz and Barber, 2004). They reported two
kinds of disappointing and delightful practices. The speculator laments the chance that he
realizes that after having sold, the cost of the shares has increased so that they feel sold so as
not to give the impression of being less fortunate stocks. While he is delighted with the chance
he has just realized that the stock the quality has decreased after the auction, so it feels better
to offer it rather than keep it. Odean et al., (2004) found that due to the limited intellectual
capacity of financial specialists to process data, speculators want to buy back / reinvest the
shares they have already sold for profit rather than unfortunately. The capacity in the company
creates the inclination to aim for standards or a behavioral point of view on subjective standards.
In this way, amid speculative choices, there is a distinction between experienced andgullible
financial specialists on strategic inclinations. East, Wright and Vanhuele (2008) suggest that
more experienced speculators are more dependent on states and see behavioral control, while
less masters are dependent on subjective norms. In addition, the dangerous

41
designations are noticeable both in the examination of experience and in the conditions of
accidental reconstitution. With regard to the distribution of risks, the distribution of danger will
increase, with less discernment of the danger, increased confidence in the hazardous asset and
a lower estimate of the probability of a misfortune.

ii. INVESTMENT INFORMATION

The speculator's choice to drive is also based on the data. Consequently, the nature of the data
also affected the choice, if the date could stretch without too much and assess and prepare
quickly, then the choice turned out to be relatively simple (Lee, Chungb and Kang 2008).
However, all speculators evaluate data in different ways depending on the impact of positive,
negative, successive and consolidated data. The financial specialist has given more weight to
negative data when it is provided at the same time as consecutively. In addition, young dealers
use more psychological inclination than financial education specialists. Therefore, negligence
and good faith are additional types of tilt. In addition, Bondt and Thaler (1985) observed that
people transfer their experience more on their own. Therefore, because of this bias, people have
chosen inappropriate choices with limited data (Shefrin and Statman, 1994). In the event of
additional carelessness, the predisposition and the hope provoked misfortunes. Now, because
of their inclination to have additional capacity, they assess their own particular assessment
capacity (Kahneman and Reipe, 1998). The choice of the financial specialist, also affected by
the efficiency of the business sector, despite the fact that the market is a waste but that the
speculator could invest resources in considering that it is productive, given that time and the
assets could force (Doran and Wright, 2010). In this way, the data accessible in time and
containing a validity reduce the observation of the danger (Wang, Shi and Fand, 2006). In
addition, financial specialists place more weight on the most recent data rather than the earlier
data (Bondt and Thaler, 1985).

To examine the exchange of conduct of the financial specialist, in particular his adaptation to
essential stunts in the estimation of resources, according to the individual contrast in the
affectability of two fundamental neurophysiological frameworks - the behavioral approach
system (BAS), the "Main axis" of human behavior, and the behavioral inhibition system (BIS),
"slowing mechanism".

We note that the distinctions in the affectability of BAS and BIS influence the exchange of
both “ordinary” and paralyzing exchange situations: in typical exchange conditions, people

42
with a more delicate BAS tend to lean towards more dangerous portfolios and create higher
individual general benefits. (Muehlfeld, Veitzel and Vitteloostuijn, 2013) the risks and the
return on resources linked to money intensely transfer the financial state of the nation, the
companies and the particular association. The effect on the economy last or behind is not the
same for all business enterprises in the economy. For example, in the monetary retirement
industry, the subsistence sector lasts very little because the contrast with the data from the
monetary explosion of the development industry helps to determine the specific resources
linked to the accessible currency in the corporate sector. In the financial explosion, the
speculator makes a dangerous business and demands important acts. While in subsidence,
financial specialists are reluctant to contribute cash, since they feel it more dangerous when the
arrival is low. Organizational, industrial and economic data is not an end in itself, the exam
provides valuable learning from the data. Data can be valuable when the source at the start is
real and data manipulation is simple (Wand, Shi, Fan, 2006: Lee, Chungb & Kang, 2008) .The
importance of the data also depends on the perspective. Speculators in the corporate sector. If
financial specialists trust an extremely efficient market, they trade inactively. It is not necessary
to process the data on the grounds that the market itself reflects all the accessible data and
confirms the costs in the same way. Consider demonstrating that the market is less efficient and
that data from specialized financial processes allow you to acquire higher than normal returns
or to try to beat the business sector (Doran and Wright, 2008). In this way, we can saythat data
assumes a crucial part in evaluating that danger discernment and return desire.

iii. RISK PERCEPTION

Hazard observation involves what a financial specialist knows about a hazard, and familiarity
with the hazard improves through the search for accessible data. In addition (Jordan and
Kaas, 2002), discovered distinctive types of danger, it included the risk of upside downside,
instability, ambiguity thereafter in any monetary choice, financial specialists assess all parts
of the dangers. All financial specialists are now continuing unexpectedly. The evaluation of
the measure of danger includes an impression of the circumstance, which implies that there is
a certain understanding of the reality of the objective in all cases, discernment is a procedure
which describes the approaches to interface with the business environment in which
speculators settle for prime collaboration in general includes data about the money-related
business sector or the feelings of the investigators. In addition, (Simon, 1986) shows that not
all financial specialists have the same level of mental maturity to prepare the data available to
them. In addition, due to the preparation of constraints, capacity speculators use heuristics

43
(Accessibility, representativeness, attachment, learning enrichment, etc.). Unravel the
complex choices of companies (Kahneman, Tevrsky, 1979-1998). In addition, the recognition
of opportunities is also affected by the way in which the data is offered, which is called
environmental impact. Speculators make choices by considering the saw as opposed to the
real danger like standard deviation or beta. Henceforth, Alderfer and Herold Bierman 1970, it
is described that the vision of danger is not part of the specialized danger representing Beta,
standard deviation or fluctuation, but rather an instinctive idea of danger which is the
probability of unhappiness. It has been made clear that the identical investor is prepared to
take distinctive danger measures in various examples of the physical danger vs. money
dangers connection.

iv. INVESTMENT DECISION

To examine changes in risky choice, risk perception and risk preference based on the success
or failure of a previous task, a decision environment is required that allows for repeated decision
making and has '' a set of choice alternatives large enough to manipulate objective risk
characteristics. The alternatives of choice should be described according to several dimensions
which can be requested if you wish to make the task realistic and interesting and provide a
means to test our hypothesis on the changes in the style of information acquisition and
processing according to the feedback. on the results. Finally, the results of decisions must be
manipulated so as to lead to series of successes or failures, giving the impression that they are
rigid. The decision environment chosen to meet these requirements was a personal computer
investment task. Participants were informed that they were piloting a new stock market
stimulus program and submitted an evaluation questionnaire on the simulation software at the
end of the experiment. The cover article asked them to come in pairs. investment sessions in
order to have enough simulation experience to evaluate. At the start of each session, an
endowment of funds was provided for each of the different investment periods of a session,
their task was to choose between six alternatives. Standard information on the financial
performance of each action can be obtained on request, one dimension at a time. When
investors indicated that they had sufficient information on all the alternatives they wished to
consider, they were asked to invest all or part of their current assets (endowment plus previous
gains minus previous losses) in an alternative to stock. The computer program kept track of

44
their information. Acquisition (i.e. the type and sequence of their information selection) and their
final investment selections. Participants received information on the performance of their
selected stocks and other stocks (not selected) at the end of the current investment period before
making another investment decision for the next investment period in the success session.
Largely positive for the selected security and negative for unselected securities. Investors
participated in both sessions of the simulation so that the effect of success and failure could be
assessed with sub-subjects, the order of the sessions being balanced.

v. MARKET TRENDS

Learning how these major factors shape long-term trends can provide insight into the reasons
why certain trends are developing, why a trend is in place and how future trends can occur.
Here are the main four factors:

1. Government

Governments largely dominate free markets. Fiscal and monetary policies have a profound
effect on the financial market. By raising and lowering interest rates, the government and the
Federal Reserve can effectively slow or try to accelerate growth within the country. This is called
monetary policy. If public spending increases or contracts, this is called fiscal policy and can
be used to reduce unemployment and stabilize prices. By changing interest rates and the amount
of dollars available on the open market, governments can change the amount of investment
entering and leaving the country.
2. International transactions

The flow of funds between countries has an impact on the strength of a country's economy and
its currency. The more money that leaves a country, the weaker its economy and currency.
Countries that export mainly, whether goods or physical services, continually bring money to
their country. This money can be reinvested and can stimulate the financial markets in these
countries.

3. Speculation and expectation

Speculation and expectation are an integral part of the financial system. The place where
consumers, investors and politicians believe the economy will go has an impact on how we act

45
 today. Expectation of future actions will depend on current actions and will shape current and
future trends. Sentiment indicators are commonly used to assess how certain groups feel about
the current economy. Analysis of these indicators as well as other forms of fundamental and
technical analysis can create a kiss or expectation of future price rates and trend direction.

4. Supply and demand

Supply and demand for products, foreign exchange and other investments create a lackluster
price push dynamic. Prices and rates change as supply or demand changes. If something is
asked for and the supply starts to decrease, prices will go up. If supply increases beyond current
demand, prices will fall. If supply is relatively stable, prices can move up and down as demand
increases or decreases.

Effect on short and long term trend

With these factors causing short and long term fluctuations in the market, it is important to
understand how all of these elements come together to create trends. Although these main
factors are categorically different, they are closely related to each other. Government mandates
have an impact on international transactions, which play a role in speculation, and supply and
demand play a role in each of these factors.

New versions, such as proposed changes to tax expenditure policy, as well as Federal Reserve
decisions to change or maintain interest rates can have a dramatic effect on long-term trends.
Lower interest rates and lower taxes encourage spending and economic growth. This tends to
drive up market prices, but the market does not always react this way as other factors are also
at play. Higher interest rates and taxes, for example, better spending and entail a contraction
for a long-term fall in market prices.

In the short term, these press releases can cause large price swings, as traders and investors buy
and sell in response to this information. Increasing the action around these ads can create a short
term trend, while longer term trends develop as investors fully grasp and absorb. What is the
impact of the media on the market?

46
 6.LITERATURE REVIEW

Meaning:

A review of the literature makes it possible to understand the importance, the context and the current
situation linked to the subject selected for research work. Going through the literature, it is observed
that many researchers / academics have thoroughly and thoroughly examined Western literature on
financial planning. This literature review aims to present the current state of financial planning. The
literature review is done through various books, articles, national and international journals,
reputable daily newspapers. The literature review mainly focuses on a variety of case studies as well
as reflections on esteemed research on asset management issues. It also gives an idea of the periodic
changes that occur during the financial management process. The literature review also highlights
the limitations and problems associated with financial management and future scope.

Book Review

1. Behavioral Finance by Alistair Byrne

Over the past fifty years, established financial theory has assumed that investors had little
difficulty making financial decisions and were knowledgeable, careful, and consistent.
Traditional theory maintains that investors are not confused by the way information is
presented to them and are not influenced by their emotions. But it is clear that reality does not
correspond to these assumptions.

Behavioral finance has grown over the past twenty years, not least because of the observation
that investors rarely behave according to the assumptions made in traditional financial theory.

2. How to Invest Money by George Garr Henry

Investing money is the business of a banker. When the average man has funds to invest, whether
he is a businessman or a pure investor, he should consult an experienced and reliable investment
banker just as he would consult a doctor or a lawyer if he needed medical or legal advice. This
book is not intended to replace the consultation of a banker, but to supplement it.

The advantage of such a consultation is demonstrated by the fact that if a man tries to rely on
his own judgment, he is almost certain not to do the best thing, even if his commercialinstinct
leads him to avoid business. Which are more obviously less promising or fraudulent. It should
be remembered, however, that widows and orphans are not the only ones trapped by attractive
advertisements and the promise of brilliant returns. In most cases, the funds of widows and
orphans [11] are protected by conscientious and conservative trustees, and it is the average
businessman who provides the money which is ultimately lost in all proposals that violate
fundamental investment laws.
47
3. Investment analysis and portfolio management by Kristina Levisauskait

The objective of the Investment Analysis and Portfolio Management course is to help
entrepreneurs and practitioners understand the investment field as it is currently understood
and practiced to make good investment decisions. Following this objective, key concepts are
presented to provide an appreciation of investment theory and practice, focusing on the
formation and management of investment portfolios. This course is designed to focus on the
theoretical and analytical aspects of investment decisions and deals with modern theoretical
concepts and instruments of investment. Descriptive and Quantitative documents on
investment are presented

4. Investor behavior by H. Kent Baker and Victor Ricciardi

The area of investor behavior attempts to understand and explain investor decisions by
combining the themes of psychology and investing both at the micro level (i.e. the decision
process of individuals and groups) and from a macro perspective (i.e. the role of financial
markets). Investors' decision-making process incorporates both a quantitative (objective) and
qualitative (subjective) aspect based on the specific characteristics of the investment product
or financial service. Investor behavior examines the cognitive (mental processes) and affective
(emotional) factors that individuals, financial experts and traders reveal during the financial
planning and investment management process. In practice, individuals make judgments and
decisions that are based on past events, personal beliefs and preferences.

5. The smart investor by Benjamin Graham

The distinction between investing and speculating in common stocks has always been helpful
and its disappearance is worrisome. We have often said that Wall Street, as an institution, would
be well advised to reinstate this distinction and to emphasize it in all its dealings with the public.
Otherwise, the stock exchanges could one day be accused of heavy speculative losses against
which those who suffered them were not properly warned. Ironically, once again, much of the
recent financial embarrassment of some brokerage firms appears to stem from the inclusionof
speculative common stocks in their own equity. We hope that the reader of this book will have
a fairly clear idea of the risks inherent in commitments in ordinary shares - risks inseparable
from the profit opportunities they offer, which must both be taken into account in the investor's
calculations.

48
6. The Little Book of Common Sense Investing by John C Bogle

Investing is common sense. Having a diversified portfolio of stocks and keeping it for the long
term is a winning game. Trying to beat the stock market is theoretically a zero-sum game (for
every winner, there must be a loser), but after deducting the substantial investment costs, it
becomes a loser's game. Common sense tells us - and history confirms - that the simplest and
most effective investment strategy is to buy and own all of the country's public enterprises at
very low cost. The classic index fund that holds this market portfolio is the only investment
that guarantees you your fair share of stock returns.
7. The future of investment management by Ronald N. Kahn

Over time, our understanding of risk has shifted from a general version of lost money to a
precisely defined statistic that we can measure and predict. Our understanding of expected
returns has evolved as the necessary data has become more available, as our understanding of
core value has grown, and as we slowly understood the link between return and risk and the
relevance of human behavior for both. Data and technology have advanced in parallel to
facilitate the implementation of better approaches.

Our systems for understanding this inherently uncertain investment activity continue to
develop, influencing the investment products we expect today and those we expect to see in
the future. It is equally difficult to imagine index funds and listed index funds (ETFs)
dominating the investment markets.

8. Common stocks and rare profits by Philip Fisher

The first of two steps is to sort through the extremely large number of potential companies to
invest in by targeting experienced, proven investors. The advantage of doing this is that,
through their daily work, these experts already have a valid opinion on the fifteen points to be
observed before purchasing the stock. In these discussions, Fisher likes to find out if the
company is already present or is headed for abnormally high sales, and if the market in which
the company operates is difficult for its competitors to penetrate. The second step comes into
play once a business has been found is a potentially attractive investment opportunity. The
investor must examine the financial statements himself, in particular by breaking down and
analyzing sales in the income statements and debt in the balance sheet. Then, the “Scuttlebutt
method” must be applied, and as many people connected to the company as possible must be
contacted
49
9. The future of investment management by Ronald N. Kahn

Over time, our understanding of risk has shifted from a general version of lost money to a
precisely defined statistic that we can measure and predict. Our understanding of expected
returns has evolved as the necessary data has become more available, as our understanding of
core value has grown, and as we slowly understood the link between return and risk and the
relevance of human behavior for both. Data and technology have advanced in parallel to
facilitate the implementation of better approaches.

Our systems for understanding this inherently uncertain investment activity continue to
develop, influencing the investment products we expect today and those we expect to see in
the future. It is equally difficult to imagine index funds and listed index funds (ETFs)
dominating the investment markets.

10. Common stocks and rare profits by Philip Fisher

The first of two steps is to sort through the extremely large number of potential companies to
invest in by targeting experienced, proven investors. The advantage of doing this is that,
through their daily work, these experts already have a valid opinion on the fifteen points to be
observed before purchasing the stock. In these discussions, Fisher likes to find out if the
company is already present or is headed for abnormally high sales, and if the market in which
the company operates is difficult for its competitors to penetrate. The second step comes into
play once a business has been found is a potentially attractive investment opportunity. The
investor must examine the financial statements himself, in particular by breaking down and
analyzing sales in the income statements and debt in the balance sheet. Then, the “Scuttlebutt
method” must be applied, and as many people connected to the company as possible must be
contacted

11. Investment analysis by Gareth D. Myles

The investment analysis includes a methodology to take into account the fundamental
uncertainty of the financial world. It provides the tools an investor can use to assess the
implications of their portfolio decisions and advises on the factors to consider when choosing
a portfolio. Analysis of investments cannot eliminate uncertainty, but it can show how to reduce
it. In addition, although it cannot guarantee to guide you to winners like Cephalon, it can

50
prevent you from being the investor who places all their wealth in Palm Inc. The starting point
for investment analysis is the market data on securities that describe how they performed in the
old days.

12. Analysis of stock market investment strategies by Graham Pentheny

Investing money in unpredictable, unstable and uncontrollable facets can be extremely risky.
As with the lottery, the success of stock market trading is partly attributed to luck. Many people
have lost huge sums of money because of the wrong investment decisions they made. Recently,
investors holding shares in loan companies, which were previously a fairly stable investment,
have suffered heavy losses as a result of the economic crisis. Investors must understand and
accept this risk as an intrinsic part of the investment. There are, however, attractive advantages
for successful financial investments.

JOURNAL REVIEW

1. Chalam G. V. (Dr) (2003) in his article “Investors Behavioral Pattern of Investment and Its
Preferences of Mutual Funds”. Published in SOUTHERN ECONOMIST, February 1, 2003,
concluded that of all strata of society, the group of households contributes a large part of the
capital, forming the cornerstone of the economy. According to his analysis, the mutual fund
industry in India is still in its infancy, as they currently only represent 15% of the market
capitalization. The success of mutual funds depends largely on product innovation, marketing,
customer service, fund management and the workforce involved. Investor investment patterns
reveal that a majority of investors prefer real estate investments, followed by mutual funds,
gold and other precious metals.

2. S Saravana Kumar (2010) in his article “An Analysis of Investor Preference Towards
Equity and Derivatives” published in The Indian journal of commerce, July-September 2010,
concluded that most investors are aware of the high risk associated with the derivative market.
To reduce risk in the market, investors must strictly follow the stop loss method. The study
finds that most investors prefer the cash market where the script can be held for the long term
and the risk is lower and it is transferable to others with a minimal period of time. Even if the
risk is higher, some investors prefer a derivative market where the return is also higher.
Investors are advised that before embarking on an investment, proper study of the script is
essential. Investors are very satisfied with participating stocks for many reasons namely –
liquidity, low investment, capital appreciation, etc.

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3. Singh J. and S. Chander (2006) in their article “Investors' preference for investing in

Mutual Funds: An Empirical Evidence,”published in The ICFAI Journal of Behavioral

Finance, 2006. Stressed that since interest rates on investments like public provident funds,
national savings certificates, deposits banking, etc. fall, the question to be answered is: What
investment alternative should a small investor adopt? Direct investment in the capital market
is an expensive proposition and it is not advisable to keep money in savings plans. One
alternative is to invest in the capital market through mutual funds. This allows the investor to
avoid the risks associated with direct investment. Given the mood of the general investor, this
article determined the preference attached to the various investment paths by investors. The
source from which the investor obtains information about mutual funds and experience
regarding the returns of mutual funds. The results showed that investors saw gold as the most
preferred form of investment, followed by NSC programs and post offices. Thus, the basic
psyche of an Indian investor, who still prefers to keep his savings in the form of yellow metal,
is indicated. Investors in the salaried category, and in the 20-35 age group, have shown a
tendency to favor short-term growth stock plans over other types of plans. The majority of
investors have based their investment decision on the advice of brokers, professionals and
financial advisers.

52
7.ANALYIS OF DATA

53
Q1.Which sector do you prefer to invest your money?

• Private Sector
• Public Sector
• Foreign Sector

INTERPRETATION

o From the above chart we can interpret that people prefer Private Sector more for
investing the money.
o Out of total respondents 38% prefer investing in the Public Sector and 29% in the
Foreign Sector.

54
Q2.What do you think is the best option for investing the money?

• Government
• Gold
• Properties
• Equity Market
• Mutual Fund
• Other

INTERPRETATION
o We can see that most of the people think mutual fund as better option for
investment may be because it is a safest type of investment.
o Then the preference is given to gold as it gives high return.
o People even think that properties can give high return in short span of time.
o Lastly Equity market and Government bond.

55
Q3.What are your investment objectives?

• Children’s Education
• Retirement
• Children’s Marriage
• Health
• Wealth Creation
• Tax Saving
• Future Endeavours
• Other

INTERPRETATION
o From the above graph we can interpret that the aim of people behind their
investment is health of their family.
o Wealth creation is a secondary purpose
o People in India also invest their money in such a scheme so that they can tax
saving from that investment.
o In India people also invest for their future expenses i.e. child’s marriage as well
as child’s education.
o They also take care of their retirement.

56
Q4. What will you consider before investing your money?

• Safety of money invested

• Return
• Risk
• Time period

INTERPRETATION
o We can interpret by the above pie chart that investor before investing mainly
considers safety of amount invested and also high return.
o Risk Factor is considered less as compared to other two.
o Time period is hardly considered.

57
Q5.How often do you monitor your Investment?

• Daily
• Monthly
• Quarterly
• Annually

INTERPRETATION
o From the above chart we can say that, most of the investors monitor their
investment monthly. These might be investors who have more of the medium
term investment.
o Investors who monitor their investment quarterly might be having long term
investment and those who monitor daily might be having short term investment.

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Q6. What is the horizon preferred by you for your investment?

• Short Term(0-1yr)
• Medium Term(1-5yr)
• Long Term(more than 5yr)

INTERPRETATION
o Investors in India mostly prefer medium term investments as it fulfills all their
requirement.
o Short term and long term investments are less preferred by the people.

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Q7.As an investor what is the percent of return you except on your Investment?

• 1 to15%
• 16 to30%
• Above 30%

14%
27%

1 to15%
16 to30%
Above 30%
59%

INTERPRETATION
o Most investors in India expect 16 to30% returns to their investment.
o 27% of people are satisfied with 1to15% return on their investment.
o Only 14% of the investors expect more than 30% returns in their investment.

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Q8. What is your source of Investment advice?

• Newspaper/Magazines
• News Channel
• Family, Friends and Relatives
• Internet
• Experts
• Certified Market Professional
• Brokers
• Other

INTERPRETATION

o From the above graph we come to know that investors come to know about their
various investments mostly from the experts, internet and from the family, friends as
well as from relatives.
o Also, investors come to know from certified market professional as well as from
news channel and newspaper, magazines.

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Q9.Which sector do you prefer for Investment?

• IT Sector
• Bank Sector
• Pharma Sector
• Multinational Companies
• Fast Moving Consumer Goods(FMCG)
• Energy Sector
• Other

INTERPRETATION

o From the above diagram it is proved that most of investors invest in bank sector due
to increasing price in stock market in bank sector.
o Secondly investors invest in pharma sector and then in multinational companies as
well as in fast moving consumer goods.
o People like to invest in IT sector and then in energy sector.

62
Q10.How many companies have you invested in?

• Less than 5 Companies

• 5-10 companies
• 10-20 companies
• Above 20 companies

INTERPRETATION

o From the above diagram it is proved that investors have invested mostly in between 5-
10 companies so that they can get high returns on investment.
o Secondly it is seen that investors have invested in less than 5 companies.
o Investors have less invested in above 20 companies,they have targeted on limited
no.companies.

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Q11.State the approximate size of investment in shares as on date.

• Below Rs 1lakh
• Rs 1lakh-2lakh
• Rs 2lakh and above

INTERPRETATION
o People have mostly invested below Rs 1lakh.
o Secondly they have invested between Rs1lakh-2lakh.

64
Q12.How do you analyse a stock?

• Fundamental
• Technical
• Both

INTERPRETATION

o From the above diagram it is proved that investors analyse with both Fundamental
as well as Technical, so that they can compare.
o Secondly they go with Technical method.

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Q13.State the indices you frequently prefer.

• Sensex
• S&P CNX Nifty
• CNX Nifty Junior
• CNX 100
• S&CNX 500
• CNX Mid-cap
• CNX Mid-cap 200
• Other

INTERPRETATION
o From the above pie chart it is shown, Investor mostly prefer Sensex as their
indices to know the market condition.
o Secondly they prefer CNX nifty Junior and then CNX Mid-cap as well as CNX
100.

66
 8.CONCLUSION

The study confirms previous findings regarding the relationship between age and the level of
risk tolerance of individual investors. This study has important implications for investment
managers as it has revealed some interesting facts of an individual investor. The individual
investor always prefers to invest in financial products that offer risk-free returns. This confirms
that Indian investors, even if they are high income, well educated, salaried, independent from
investors and prefer to play safely. Investment product designers can design products that can
cater to investors who are risk tolerant and use television as their marketing medium because
they appear to spend a lot of time watching television. In this report, the elements affecting the
individual conduct of speculators were inspected. A quantitative examination was conducted
to decide the relationship between the logical and reaction variables imagined. There were five
free variables, including: mastery of the field, high experience, use of bookkeeping data, and
importance of breaking down budget explanations and age which can influence anyone's choice
of speculation. The book on parish variables covered said to draw any conclusion; DAT danger,
English and interest in actions, avoidance, data asymmetry and speculation. Speculation One
Demonstrates That I Was A Man's Money-Related Education Builds Its Danger by Taking
Capacity Increases, Investigating Money-Related Joints, Information from Financial Specialist
Which Organization Can Give better capital injection. However, speculation identified with
experience and fondness for Hazard indicates that there is in a backward connection that
peculiers will experience expansion, it will put resources into less secure instruments; they can
be changed or high paid stocks. , this is alongside experience as a person holding accounting
data because he wants to put resources into a less dangerous business, the financial specialist
may recognize that he is falling but that he is not ready to bear a colossal misfortune. Normally,
seniority individuals, on the other hand, individuals end up with this idea. The interior shows a
reaction which says that the data cemetery invites the unfavorable choice of companies. To
overcome this problem, a theory has been tried, the results of which indicate that data
asymmetry can be reduced by breaking down more explanations related to money. The most
subtle speculative element will meditate better on the monetary proclamations of the imagined
organization. The mid-age connection and interest in actions survey shows that the two are in
a positive connection, but do not culminate in a positive way. As the age of a finance specialist
increases, he may want to put equity resources in place, but it is redundant that he puts equity
resources in with the intention of obtaining the capital increase, as has been expressed about
the fact that the old subjects are subject to a danger disciplinehsaot t hey can be selected as

67
their tilt projects due to the high profitability. Finally, it was felt that monetary skill and
bookkeeping data help financial specialists to reduce data asymmetry and allow financial
specialists to put resources into dangerous instruments. In any case, as the inclination of
financial specialists increases with age and meets less dangerous speculations, this does not
imply that the speculator does not like to put resources into offers, he will however do so with
the intention to obtain a return on profit rather than a capital increase.

68
 9.RECOMMENDATION

Certain recommendations are addressed to both financial consultants / financial service

providers and individual investors to contribute more effectively to the study of investor
behavior. The study provides recommendations to financial consultants, that is, those who
advise the growing market of individual investors on the need to understand the attitude of
clients towards investment in general and risk in particular. Failure to understand the
differences in investor behavior from individual investors can make it extremely difficult to
provide appropriate advice and long-term customer satisfaction.

Recommendations to financial consultants

• The results revealed that individual investors hardly consult the experts with regard to their
investment analysis, since it was not found that the influence of the experts' recommendation
had a great influence on the two sets preferably global, that is, actions compared to other
investments. The study recommends that financial consultants, including stock brokers / sub-
brokers, extend their relationships with investors by creating forums, organizing workshops
and seminars to expand their relationships with potential clients.

• Financial advisers should understand and follow the factors that influence individual investors
to invest and suggest investment options to suit their needs. The result recommends that
financial consultants consider the hierarchy of factors influencing investor preferences while
addressing them. The results of the study found that the most influential factor for investors
towards equity investing (high by the pre-investment analysis factor and the market information
factor In addition, the most influential factor for investors to invest in other investments (low
and medium risk investment) was the benefits factor, followed by the factor pocket friendly and
recommendation factor for family / friends Financial specialists armed with this type of
information will be better able to anticipate the needs of potential customers.

• The results revealed that individual investors declared their preference for other investments
(low and medium risk investment) over equities (high risk investment), which led to the
conclusion that the majority of individual investors in the market Indian scholars have an
attitude of risk aversion.

• Indian investors are risk tolerant and conservative investors who prefer to play it safe. The
study recommends that designers of investment products design and market products that are
aimed at this type of investor with low risk tolerance.

69
Recommendations to Individual Investors

• It has been observed that young investors, that is to say up to 30 years, have a low preference
for equities compared to other investments. The study suggests that young individual Indian
investors should increase their participation in the stock market, as young investors have the
ability to take greater exposure in asset selection compared to older age groups.

• It was found that the recommendation factor of the experts had little influence on the overall
preference for stocks and other investments. This fact showed that individual investors in India
consider themselves completely independent of any influence external to their personal
feelings. The study recommends that individual investors expand their relationships with
financial consultants and extract more knowledge and information when making investment
decisions.

• The results revealed that the investors in India are short-term investors since 70.7% of the
investors declared that they preferred an investment horizon of 1 to 5 years. Study recommends
that individual investors invest money over a broad investment horizon of 5 years that money
needs time to grow and so does the economy.

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 BIBLIOGRAPHY

Books

1.Byrne Alistair(2001).Behavioral Finance. State Street Global Advisors (United Kingdom).

2.Henry George.(2019)How to Invest Money.Good Press.

3.Kaln Ronald.(2018)The future of Investment Management.

4.Myles Gareth .(2016)Investment Analysis.

5.Fisher Philip.(1958).Common stocks and uncommon profits.

Websites

www.greekshares.com

www.adb.org

www.articles-finance.info

www.bseindia.com

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 ANNEXURE

Q1.) Which sector do you prefer to invest your money?

• Private Sector

• Public Sector

• Foreign Sector

Q2.) What do you think is the best option for investing the money?

• Government

• Gold

• Properties

• Equity Market

• Mutual Fund

• Other

Q3.) What are your investment objectives?

• Children’s Education

• Retirement

• Children’s Marriage

• Health

• Wealth Creation

• Tax Saving

• Future Endeavors

• Other

72
Q4.) What will you consider before investing your money?

• Safety of money invested

• Return

• Risk

• Time period

Q5.) How often do you monitor your Investment?

• Daily

• Monthly

• Quaterly

• Annually

Q6.) What is the horizon preferred by you for your investment?

• Short Term(0-1yr)

• Medium Term(1-5yr)

• Long Term(more than 5yr)

Q7.) As an investor what the percent is of return you except on your Investment?

• 1 to15%

• 16 to30%

• Above 30%

Q8.)How many companies have you invested in?

• Less than 5 Companies

• 5-10 companies

• 10-20 companies

• Above 20 companies

73
Q9.) What is your source of Investment advice?

• Newspaper/Magazines

• News Channel

• Family, Friends and Relatives

• Internet

• Experts

• Certified Market Professional

• Brokers

• Other

Q10.) Which sector do you prefer for Investment?

• IT Sector

• Bank Sector

• Pharma Sector

• Multinational Companies

• Fast Moving Consumer Goods(FMCG)

• Energy Sector

• Other

Q11.) State the approximate size of investment in shares as on date.

• Below Rs 1lakh

• Rs 1lakh-2lakh

• Rs 2lakh and above

74
Q12.) How do you analyse a stock?

• Fundamental

• Technical

• Both

Q13.) State the indices you frequently prefer.

• Sensex

• S&P CNX Nifty

• CNX Nifty Junior

• CNX 100

• S&CNX 500

• CNX Mid-cap

• CNX Mid-cap 200

• Other.

75