A Summer Internship Project Report on

A Study of risk perception and portfolio management of Equity

Investors

Submitted in partial fulfillment of the requirement for the degree of

Master of Business Administration

(Affiliated to Savitribai Phule Pune University)

By
Pooja Khatal

Roll No.D1-F12

Under the guidance of

Prof. Amrita Karnawat

A study conducted for

Motilal Oswal Financial Services

At

Indira School of Business Studies

Tathawade, Pune – 411033

2019-2021
Acknowledgement
The satiation and euphoria that accompany the successful completion of the project would be
incomplete without the mention of the people who made it possible.

First of all, I would like to thank Motilal Oswal Financial Services Ltd. for giving me an
opportunity to do my internship at their esteemed organization.

I would also like to take the opportunity to express my deep sense of gratitude to my corporate
mentor Mr Shivshankar Bind. I am greatly indebted to him for providing his valuable guidance at
all stages of my study. His advice, constructive suggestions and continuous encouragement,
without which it would not have been possible to complete the project.

I am extremely thankful to my Faculty guide Prof Amrita Karnawat, for her timely assistance and
support throughout the training.

I extend my gratitude to ISBS, Pune for giving me this excellent opportunity.

It was indeed a true learning experience for me.

Pooja Khatal

D1F-12 / 2019-2021
i
Certificate from ISBS

ii
Certificate from the Company

iii
Executive Summary

This report is based on risk perceptions and portfolio management of equity investors. Risk is a
crucial factor for any investor in making all types of financial investments. It is a psychological
and mental process of decision making based on an individual’s frame of reference that changes
from time to time. This report explores individual investor’s preference for portfolio choices and
investigates impacts of risk tolerance and risk perception on their investment decision. An attempt
is also made to understand the factors affecting risk appetite of a person.

So basic objectives are:

1. To find out the risk perception of equity investors

2. To bring out the importance of portfolio management of equity investors

3. To know about the Investors knowledge and experience of investing in equities

4. To find out the objectives behind investments.

The purpose of the report is analysing the risk perceptions of current and potential investors and
understanding how the decisions are made based on an individual’s risk tolerance capacity. An
attempt is also made to find out the factors that forms an investor’s risk perception. This is done
by identifying the needs and goals of customers, understanding their psychology, finding out their
financial problems and then offering them a suitable investment product and create a profitable
portfolio for them during the course of internship. The investor could be a novice who has no prior
experience about investment market or a wizard in the same market. The analysis of risk perception
of equity investors also helps the companies who are into the business of asset management or
stock broking to identify and target the appropriate market and individuals with suitable products
available in their basket.

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Index / Table of Contents

Sr. No. Contents Pg. No.

1 Introduction 1

2 Sector Analysis 7

3 Company Analysis 15

4 News Analysis (w.r.t selected sector & 24

company)

5 Review of Literature/ Theoretical 27

Background

6 Objectives 31

7 Research Methodology 33

8 Data Analysis/ Data visualization, 36

Results and Interpretation

9 Conclusions / Learnings from the 48

Project

10 Limitations of the project 51

11 Recommendations 53

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12 -Bibliography 55

-Appendices

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List of Tables

Sr
No Table No Table Name Page No
1 8.1 Gender of the Respondents 35
2 8.2 Age of the Respondents 35
3 8.3 Marital Status of the Respondents 35
4 8.4 Family Annual Income of the Respondents 35
5 8.5 Educational Qualification of the Respondents 36
6 8.6 Risk Level Score 37
7 8.7 Scale Statistics 37
8 8.8 Overall Risk Perception 39
9 8.9 Gender * Investment Choices Crosstabulation 42
10 8.10 Marital Status * Investment Choices Crosstabulation 43
Investment Choices*Overall risk perception level
11 8.11 Crosstabulation 44

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List of Figuers

Sr No Figure No Figure Name Page No

1 2.1 Advantage India 8
2 2.2 Porter’s Five Forces Model 11
3 8.1 Capital Appreciation graph 38
4 8.2 Dividend graph 39
5 8.3 Tax Benefits graph 40
6 8.4 Protection against Inflation graph 40
7 8.5 Quick gain graph 41

viii
Abbreviations

List of Abbrevation
Sr no Abbrevation Full form
1 MSME Micro, Small and Medium Enterprises
2 SEBI Securities and Exchange Board of India
3 MOFS Motilal Oswal Financial Services
4 MORE Motilal Oswal Real Estate
5 FD Fixed Deposit
6 SIP Systematic Investment Plan

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Chapter 1: Introduction

1
1.1 About the topic:
Portfolio management concerns the constructions and maintenance of a collection of investment.
It is investment of funds in different securities in which the total risk of the portfolio is minimized,
while expecting maximum return from it. It primarily involves reducing risk rather than increasing
return. Return is obviously important though, and the ultimate objective of portfolio manager is to
achieve a chosen level of return by incurring the least possible risk. Determinants of risk attitudes
of individual investors are of great interest in a growing area of finance known as behavioral
finance. Behavioral finance focuses on the individual attributes, Psychological or otherwise, that
shape common financial and investment practices. Unlike traditional assumptions of expected
utility maximization with rational investors in efficient markets, behavioral finance assumes
people are normal. Despite great interest in this area, not much research looks at the underlying
factors that may lead to individual differences and play a significant role in determining people’s
financing and investment strategies in emerging markets Study of risk perception and its impact
on investment behavior is one of the core.

Risk, Behavioral Finance and Portfolio Management

Risk is a personal and psychological perception of certain circumstances when you expose
yourself to a situation of danger, harm or loss. The biggest danger in finance is losing money or
not having adequate money. It is a highly personal process of making a decision based on an
individual’s frame of reference that has evolved over time. Risk appetite of an investor is one of
the most significant elements in investment opportunities. An investor behaves in the volatile
market, decides its strategies of buying and selling according to his/her risk tolerance. Investors,
brokers, institutions, firms or individuals create a portfolio keeping in mind their risk tolerance
and expected returns in accordance with the risk.

It is observed that preferences of individual investors are not based on what the conventional
finance suggests but there are various psychological, socio- cultural and environmental factors
which affect investment behaviour and choices of an individual. “Investors cannot be rational; they
can only have bounded rationality.” During the course of the research process, it is also understood
that unlike what standard finance theory suggests, investors act according to their psychology, risk
appetite and environmental conditions.

1.2 Purpose and Scope

The purpose of the report is analysing the risk perceptions of current and potential investors and
understanding how the decisions are made based on an individual’s risk tolerance capacity. An

2
attempt is also made to find out the factors that forms an investor’s risk perception. This is done
by identifying the needs and goals of customers, understanding their psychology, finding out their
financial problems and then offering them a suitable investment product and create a profitable
portfolio for them during the course of internship. The investor could be a novice who has no prior
experience about investment market or a wizard in the same market.

The analysis of risk perception of equity investors also helps the companies who are into the
business of asset management or stock broking to identify and target the appropriate market and
individuals with suitable products available in their basket.

1.3 Objectives
• To find out the risk perception of equity investors
• To bring out the importance of portfolio management of equity investors
• To know about the Investors knowledge and experience of investing in equities
• To find out the objectives behind investments.

1.4 Salient Contributions to the project:

• The study will help to determine the risk appetite and perceptions of investors.
• The study will help to create more awareness about the equity market to the potential
customers.
• The study will help to know the objectives on investors behind investment.
• The study will help the AMC to target the appropriate market and individuals with suitable
products available in their product range.

1.5 Outline of the project

This research is strategically divided into three categories to make it easier to form conclusions
and create an easy relationship between risk perception and portfolio management. The first part
of the research is understanding individual investor on the basis of behavioural finance. Secondly,
risk perception and psychology of each individual is studied thoroughly by asking different
psychological questions related to personality and risk taking. Lastly, the risk tolerance is

3
calculated based on the observations about the answers given by the investor of the questions about
their personality and then analysing their portfolio choice carefully.

1. Understanding Investors with respect to Behavioural Finance

2. Risk Perception of an Individual
3. Risk appetite and Portfolio Management

I. Understanding Investors with respect to Behavioural Finance

It is believed that most individual investor would demonstrate different risk attitude when they
face investment alternatives. Behavioural finance is the arm of finance that deals with reactions
and responses of investors on the changes happening in equity market. It also aims to understand
and answer various questions such as

1) Why individual investors trade?

2) What is the psychology they follow while trading?

3) How and where do they get the motivation and knowledge about trading and equity market?

4) How do they choose their portfolios to conform to their conditions and goals?

In order to understand investors on these grounds a qualitative research is conducted. Qualitative

research techniques are relatively unstructured measurement approaches that permit a range of
detailed responses. There can be different types of questions asked while in the process of
conducting the survey. In this process of information gathering, one answer leads to another
question and hence the process further goes on until the purpose of the research is met. This
research process gives the freedom to probe according to the researcher’s ease and respond
according to what the subject desires. This research is rather indirect in nature and hence,
researcher does not directly jump into the subject matter of the research rather it is always
necessary to build the relationship with the customer, have an insight into the psychology of the
investor and then make an attempt to analyse the responses in terms of making financial decisions.
Questions and reactions are recorded to under the deep psychology of the investor.

By doing an experimental research with various investors and non-investors it is observed that
different investors have different risk attitude irrespective of their age, gender or income group. In

4
this research, an attempt is made to have a close attention towards behavioural finance, especially
in financial products choices (investment) and behaviour of individual investor otherwise in other
products for savings.

II. Risk Perception of an Individual

In the second part of research, it is aimed to analyse what an investor thinks about risk. Since risk
is known to have a huge impact on individual’s decision, an attempt is made to figure out the
factors that influence the degree of risk an investor is willing to take. Financial risk tolerance is
defined as the maximum amount of uncertainty that someone is willing to accept when making a
financial decision. Risk perception represents one person’s attitude towards taking risk. To analyse
the risk perception of an investor various questions regarding market scenario is asked. Various
situations were put forward in front of the respondents and were asked about their opinions on
those situations.

Various theories regarding risk perception are also studied to understand more about the risk and
perception of individuals in line with such theories. These theories explain that risk is formed out
of a person’s internal and external environment. Therefore, these theories can help us to identify
what factors worked or influenced a particular investor and in what ways.

Some of these theories are –

Social Action Theory- This theory talks about peer pressure and says that people observe their
peers and if their community as a whole has a low risk perception and talk negatively about a
particular asset, then because of peer pressure or because of the fear of non-acceptance by the
society, that person will also have a negative sentiment about that particular asset class.

Bounded Rationality Theory- In this theory, it is suggested that the rationality in decision making
of a person is bounded/limited by the knowledge and information he has about the subject.
Selecting the company, deciding how many shares to buy, understanding when to buy and when
to sell a share are some of the decisions that are explained by bounded rationality theorem.

Risk Compensation/Risk Homeostasis Theory- This theory explains that if people are given more
security in higher risk avenues, then they will take high risks. If people subjectively perceive that
the level of risk is less than acceptable then they modify their behaviour to increase their exposure

5
to risk. In other words, individuals tend to adjust their risk-taking behaviour if they feel that there
is some sense of safety involved in a particular investment avenue.

III. Risk appetite and Portfolio Management

Risk tolerance represents one person’s attitude towards taking risk. It could be high, low, medium
or anything. This concept is indicated as an important step that has implications for investors and
financial service providers like banks, brokers and other asset management firms. No two
individuals can have same psychological level and risk appetite. In terms of different risk
perception or risk tolerance level, individual investor may show different reaction based upon their
psychological factor and economic situation, which would lead to heterogeneous portfolio choice
for each individual investor. For this purpose, it is crucial to analyse the factors that are affecting
an investor’s risk tolerance and how these investors make their investment choices. Here the
decision making plays a vital role in this investment process, due to investment are subject to
market risk.

In General, each and every investor is associated with risk tolerance, while investing in the stock
markets. So therefore, in order to gather the data to find out how people make portfolio decisions
based on their risk appetite, ample of questions are raised like, (how to invest and where to invest)
to the investors towards risk so as to make a relation between each investor’s risk aversion and
portfolio decision. There could be millions of factors that could possibly affect the risk tolerance
level of an individual. However, for this study, experience, knowledge and a few psychological
questions are asked to understand the appetite and to form a relationship between their choice of
investment and risk-taking capacity.

6
Chapter 2: Sector Analysis

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2. Sector Analysis

2.1 Overview and structure of sector:

India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth
of existing financial services firms and new entities entering the market. The sector comprises
commercial banks, insurance companies, non-banking financial companies, co-operatives, pension
funds, mutual funds and other smaller financial entities. The banking regulator has allowed new
entities such as payments banks to be created recently thereby adding to the types of entities
operating in the sector. However, the financial sector in India is predominantly a banking sector
with commercial banks accounting for more than 64 percent of the total assets held by the financial
system.

The Government of India has introduced several reforms to liberalise, regulate and enhance this
industry. The Government and Reserve Bank of India (RBI) have taken various measures to
facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs). These
measures include launching Credit Guarantee Fund Scheme for Micro and Small Enterprises,
issuing guideline to banks regarding collateral requirements and setting up a Micro Units
Development and Refinance Agency (MUDRA). With a combined push by both government and
private sector, India is undoubtedly one of the world's most vibrant capital markets. In 2017, a new
portal named 'Udyami Mitra' has been launched by the Small Industries Development Bank of
India (SIDBI) with the aim of improving credit availability to Micro, Small and Medium
Enterprises' (MSMEs) in the country. India has scored a perfect 10 in protecting shareholders rights
on the back of reforms implemented by Securities and Exchange Board of India (SEBI).

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(Fig. 2.1 )Advantage India

2.2 Porter’s 5 forces model

Porter's Five Forces Framework is a method for analyzing competition of a business. It draws

from industrial organization economics to derive five forces that determine the competitive

intensity and, therefore, the attractiveness of an industry in terms of its profitability. In financial

service sectors, Banks play a vital role rather than other financial institutions like NBFC, Privet

financial companies related to the stock market, etc.

Porter’s 5 forces model of Financial Service sector:

• Threat of New Entrants: Financial and banking regulation requires the approval of
the regulator RBI and SEBI (Stock Market) before setting up a new bank or financial
institution so the threat of new Entrants is Low.
1. Factors Affecting New Entrants
2. Customer Preferences the biggest barrier of entry for the banking and financial
service industry is trust
3. Low Customer Reliability on New Banks and the new financial institution it is
nearly impossible for a new financial institution to enter the industry offering the
trust and full range of services as major banks and institutions.

9
 4. The Rules and regulations of RBI and SEBI are very difficult. It is extremely
difficult for new entrants to complete these rules and regulations.
5. Another threat of new entrants like interest rate means if new entrants offering very
good financial services to the customers so they charge a high brokerage and high-
interest rate.
• The Bargaining power of supplier: In the BFSI Sector Capital is the primary resource
on any Financial Institution like the bank, NBFC and there are four major suppliers
(various other suppliers [like fees] contribute to a lesser degree) of capital in the
industry.
1. Customer deposits.
2. Mortgages and loans.
3. mortgage-backed securities.
4. Loans from other financial institutions.

By utilizing these four major suppliers, the financial institution can be sure that they
have the necessary resources required to service their customers' borrowing needs
while maintaining enough capital to meet withdrawal expectations.The power of the
suppliers is largely based on the market, their power is often considered to fluctuate
between medium to high.

• The Bargaining power of buyers: In the BFSI Sector Bargaining power of buyers is
high because this sector provides homogenous kinds of services to the customers. To
try and convince customers to switch to their bank and financial services provider
institutions they will often times lower the price of switching, though most people still
prefer to stick with their current bank and financial services provider institutions. The
internet has greatly increased the power of the consumer in the finance industry. The
internet has greatly increased the ease and reduced the cost for consumers to compare
the prices of opening/holding accounts as well as the rates offered at various banks.

• The Threat of Substitute: Some of the Finance industry's largest threats of

substitution are not from a rival financial institution but from non-financial
competitors. The industry does not suffer any real threat of substitutes as far as deposits

10
 or withdrawals, however, insurances, mutual funds, and fixed income securities are
some of the many banking services that are also offered by non-banking companies.
There is also the threat of payment method substitutes and loans are relatively high
forthe industry. For example, big-name electronics, jewelers, car dealers, and more tend
to offer preferred financing on "big ticket" items. Often times these non-banking
companies offer lower interest rates on payments then the consumer would otherwise
get from a traditional bank loan.

• Power of Competitive Rivalry: The Financial industry is considered highly

competitive.The financial services industry has been around for hundreds of years, and
just about everyone who needs banking services already has them. Because of this,
banks and financial institutes must attempt to lure clients away from competitor banks
and financial institutes. They do this by offering lower financing, higher rates,
investment services, and greater conveniences than their rivals. The banking
competition is often a race to determine which bank can offer both the best and fastest
services but has caused banks to experience a lower ROA (Return on Assets). Given
the nature of the industry, it is more likely to see further consolidation in the banking
industry. Major banks tend to prefer to acquire or merge with other banks than to spend
money marketing and advertising.
2.3 Market Size

The MF industry’s Assets Under Management (AUM) has grown from Rs 10.96 trillion (US$
156.82 billion) in October 2014 to Rs 28.18 trillion (US$ 403.32 billion) in January 2020.

Another crucial component of India’s financial industry is the insurance industry. The insurance
industry has been expanding at a fast pace. The total first year premium of life insurance companies
reached Rs 214,673 crore (US$ 30.72 billion) during FY19.

Along with the secondary market, the market for Initial Public Offers (IPOs) has also witnessed
rapid expansion. In FY19, Rs 14,674 crore (US$ 2.10 billion) has been raised from Initial Public
Offerings (IPOs).

11
Furthermore, India’s leading bourse Bombay Stock Exchange (BSE) will set up a joint venture
with Ebix Inc to build a robust insurance distribution network in the country through a new
distribution exchange platform.

2.4 Investments/Developments

• In 2019, FPI investments in Indian equities touched a five-year high of Rs 101,122 crore
(US$ 14.47 billion).
• Total Merger and Acquisition (M&A) worth US$ 25.162 billion was recorded in first ten
months of 2019.
• Total value of Private Equity (PE)/Venture Capital (VC) investments grew 44 per cent over
past three years in value terms to reach US$ 48 billion in 2019.
• Mutual Funds asset base stood at Rs 27,22,937 crore (US$ 389.60 billion) at end of
February 2020.
• In November 2019, the government will invest Rs 10,000 crore (US$ 1.43 billion) in the
Rs 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF).
• In October 2019, ICICI Lombard General Insurance Company acquired Unbox
Technologies for an aggregate cash consideration of Rs 225 crore (US$ 32.19 million).
• In 2018, Rs 30,959 crore (US$ 4.43 billion) were raised from initial public offerings (IPOs)
whereas in financial year 2019, total funds raised stood at Rs 19,900 crore (US$ 2.85
billion).
• The equity mutual funds registered a net inflow of Rs 6,489 crore in September 2019.
• There were 9,659 non-banking financial companies (NBFCs) registered with the Reserve
Bank as on March 31, 2019.
• In FY19, over 3,133 core digital transactions were registered and reached 1,527 crore in
FY20 (till September 2019).

2.5 Government Initiatives

• In November 2019, government allocated Rs 10,000 crore to set up AIFs for revival of
stalled housing projects.

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 • Under the Interest Subvention Scheme for MSMEs, Rs 350 crore (US$ 50.07 million) has
been allocated under Union Budget 2019-20 for 2 per cent interest subvention for all GST
registered MSMEs, on fresh or incremental loans.
• In December 2018, Securities and Exchange Board of India (SEBI) proposed direct
overseas listing of Indian companies and other regulatory changes.
• Bombay Stock Exchange (BSE) introduced weekly futures and options contracts on Sensex
50 index from October 26, 2018.
• In September 2018, SEBI asked for recommendations to strengthen rules which will
enhance the overall governance standards for issuers, intermediaries or infrastructure
providers in the financial market.
• The Government of India launched India Post Payments Bank (IPPB), to provide every
district with one branch which will help increase rural penetration. As of August 2018, two
branches out of 650 branches are already operational.

2.6 Road Ahead

• India is expected to be fourth largest private wealth market globally by 2028.

• India is today one of the most vibrant global economies, on the back of robust banking and
insurance sectors. The relaxation of foreign investment rules has received a positive
response from the insurance sector, with many companies announcing plans to increase
their stakes in joint ventures with Indian companies. Over the coming quarters there could
be a series of joint venture deals between global insurance giants and local players.
• The Association of Mutual Funds in India (AMFI) is targeting nearly five-fold growth in
assets under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a more than
three times growth in investor accounts to 130 million by 2025.
• India's mobile wallet industry is estimated to grow at a Compound Annual Growth Rate
(CAGR) of 150 per cent to reach US$ 4.4 billion by 2022 while mobile wallet transactions
to touch Rs 32 trillion (USD $ 492.6 billion) by 2022.

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2.7 Future and prospects post COVID-19:

• The Indian Financial industry witnessed unprecedented growth since the 2008 financial
crisis up until about a couple of months before the COVID-19 outbreak
• A looming slowdown has now been exacerbated as the entire economy comes to a
screeching halt.
• The crisis, however, is also providing the BFSI space with an unparalleled opportunity
to bring about a fundamental change in the way that it functions. India is a cash-driven
economy that, despite large-scale measures such as demonetization, has not been
outgrowing its dependence on cash.
• This seems to be changing, as the viral nature of the novel coronavirus has made Indians
circumspect of cash.
• Doing so will pave the way for a stronger, more future-ready business ecosystem that
is built on the strong foundation of a tech-driven BFSI framework.
• The time is perfect for players in the BFSI space to reinvent themselves and test newer
business models that are more digitally-driven.
• By leveraging advanced technologies and digitizing their existing set of offerings, they
can supplant legacy processes with newer, more optimized workflows, and address
inefficiencies that have plagued the Indian BFSI space since time immemorial.

14
Chapter 3: Company Analysis

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Company Analysis
3.1 About the Company

Motilal Oswal Financial Services Ltd (MOFSL)

Motilal Oswal Financial Services Ltd (MOFSL) was set up by Motilal Oswal and Raamdeo
Agarwal as a broking house in 1987.The company entered into investment banking in 2005,
followed by private equity fund in 2006.On February 2006, Motilal Oswal Financial Services Ltd.
acquired Peninsular Capital Markets, a Cochin, Kerala based broking company for Rs. 35 crore.
The company tied up with State Bank of India in 2006,Punjab National Bank in 2007 [7] and Axis
Bank in 2013to offer online trading to its customers. On January 2010, Motilal Oswal Financial
Services Ltd. set up Mutual fund business named as Motilal Oswal Asset Management Company
(MOAMC). On 2013, Motilal Oswal Financial Services Ltd. laid foundation of Aspire Home
Finance Corporation Limited (AHFCL).The company offers loans for home, construction,
composite, improvement, and extension in India.

• Type: Financial Services

• Traded as: BSE: 532892
NSE: MOTILALOFS
• Industry: Finance
• Founded: Mumbai, India, 1987
• Founder: Motilal Oswal
• Headquarters: Motilal Oswal Tower, Prabhadevi, Mumbai.
• Services: Broking, Mutual funds, Wealth management, Investment banking, Home
finance.
• Subsidiaries: Motilal Oswal Securities Ltd.
Motilal Oswal Investment Services,
Motilal Oswal Investment Advisors Pvt Ltd
Motilal Oswal Asset Management Co. Ltd
16
3.2 Vision/ Mission

To be well-respected and preferred global financial services organization enabling wealth creation
for all our customers.

Today MOFSL is a well-diversified financial services firm offering a range of financial products
and services

MOFSL have a diversified client base that includes retail customers (including High Net worth
Individuals), mutual funds, foreign institutional investors, financial institutions and corporate
clients, had a network spread over 550 cities and towns comprising 2500+ Business Locations
operated by our Business Partners and us and 14,00,000+ customers.

Our consistent efforts towards quality equity research have reflected in an increase in the ratings
and rankings across various categories in the Asia Money Brokers Poll over the years. Motilal
Oswal Financial services have also been awarded the Best Performing Equity Broker (National)
at the CNBC TV18 Financial Advisor Awards for five years in a row & got inducted in ‘Hall of
Fame’ at the 10th Financial Advisory Awards 2019.

3.3 Products and Services

Equities Long-

Term Wealth Creation: Equities as an asset class provide you the dual advantage of protecting
your wealth from inflation along with enhancing your purchasing power. The key to successful
equity investments lies in investing with a long-term perspective and keeping away from day-to-
day uncertainties. Historical Data proves that equity as an asset class has performed better than
any other asset class over the years.

Derivatives

Take The Benefits Of Equity One Step Further: Derivatives do away with the need to invest a large
amount of capital upfront and allowing you to benefit from market movements. This gives you
greater liquidity than most other assets. They are an excellent avenue to help you leverage on
anticipated market movements and an effective tool to hedge your risks, speculate and earn returns
in a relatively shorter duration.

Currencies

World 's Largest Market - Driven By Fundamentals: A market that attracts about $5.2 trillion in
daily volume, recognized as world 's largest market, accessible 24 globally 24 hours a day - that is

17
exactly what the Currency market is made up of! The advantage of small margin requirements and
lower entry barriers makes it an important part of a retail investor 's portfolio. What 's more, you
can trade in currencies through your existing equity account.

Mutual Funds

Convenient Way Into The Stock Markets: Mutual funds are ideal for investors who want to invest
in various kinds of schemes with different investment objectives but do not have sufficient time
and expertise to pick winning stocks. Mutual funds give you the advantage of professional
management, lower transaction costs, and diversification, liquidity and tax benefits

Portfolio Management Services

Premium Investment Vehicle With Range Of Investment Options: Portfolio Management Service
offers professional management of your investments with an aim to deliver consistent returns. It
relieves you from all monitoring hassles with benefits like regular reviews, strong risk
management flexibility and makes it an ideal investment avenue for high net worth investors

IPOs

Participate Early In Growth Stories: The primary market provides investor 's opportunities to buy
shares at a reasonable price prior to its listing price. Additionally retail investors also enjoy
discounted rates while applying for IPO 's. Holding on to the shares also provide an opportunity
to participate in the future success of these companies 25

Insurance

Risk & Financial Protection : Our family is our priority and we all want to see them happy, safe,
protected and cushioned for any eventuality. Insurance is all about risk and financial protection.
Bearing a financial loss alone can be major drain on your resources, insurance helps you
circumvent that. It is an essential tool to save you from potential losses faced from unexpected
instances.

Awards and Recognitions:

• Rated ‘Best Overall Country Research’ for a Local Brokerage in the 2007 AsiaMoney
Brokers poll
• Rated India’s top broking house in terms of total number of trading terminals by the Dun
& Bradstreet survey

18
 • Rated ‘Outstanding Commodity Broking House-2007’ by Globoil India
• Ranked second best for Customer Responsiveness in the Financial Sector at the Avaya
GlobalConnect Customer Responsiveness awards.

3.4 Competitors of Motilal Oswal

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3.5. Financial Analysis of Motial Oswal Financial Services Ltd

Particulars March 20 March 19 March 18 March 17 March 16

Investment Valuation Ratios

Face Value 1 1 1 1 1
Dividend Per Share 4 8.5 8.5 5.5 3.5
Operating Profit Per Share (Rs) 21.36 33.25 43.04 8.74 6.33
Net Operating Profit Per Share
85.74 83.56 93.42 9.12 7.73
(Rs)
Profitability Ratios
Operating Profit Margin(%) 24.91 39.79 46.07 95.87 81.93
Profit Before Interest And Tax
21.92 37.34 43.78 90.01 73.99
Margin(%)
Gross Profit Margin(%) 22.56 38.31 43.9 90.62 74.64
Cash Profit Margin(%) 17.34 27.35 31.53 92.18 49.4
Adjusted Cash Margin(%) 17.34 27.35 31.53 92.18 49.4
Net Profit Margin(%) 15.5 26.47 29.01 65.5 42.53
Adjusted Net Profit Margin(%) 15.06 25.81 28.93 65.05 42.16
Return On Capital Employed(%) 7.7 12.4 16.38 11.71 8.81
Return On Net Worth(%) 7.11 12.42 16.51 12.89 7.87
Adjusted Return on Net
7.11 12.47 16.75 17.24 7.87
Worth(%)
Return on Assets Excluding
186.68 178.03 164.14 46.32 41.74
Revaluations
Return on Assets Including
186.68 178.03 164.14 46.32 41.74
Revaluations
Return on Long Term Funds(%) 7.7 12.4 16.38 15.64 11.96

20
Liquidity And Solvency Ratios
Current Ratio 1.05 1.38 1.16 0.81 0.81
Quick Ratio 1.05 1.38 1.16 2.74 4.88
Debt Equity Ratio 0.52 0.55 0.53 0.53 0.59
Long Term Debt Equity Ratio 0.52 0.55 0.53 0.15 0.17
Debt Coverage Ratios
Interest Cover 2.5 4.77 6.45 24.65 2.81
Total Debt to Owners Fund 0.52 0.55 0.53 0.53 0.59
Financial Charges Coverage
2.73 4.95 6.76 26.07 3.08
Ratio
Financial Charges Coverage
2.75 4.26 5.55 20.1 2.85
Ratio Post Tax
Fixed Assets Turnover Ratio 2.61 2.75 3.12 0.74 0.62
Total Assets Turnover Ratio 0.3 0.3 0.37 0.13 0.12

Asset Turnover Ratio 0.31 0.32 0.58 0.13 0.11

Profit & Loss Account Ratios

Selling Distribution Cost
0.42 0.45 0.51 -- 0.16
Composition
Expenses as Composition of
0.89 1.12 0.86 -- --
Total Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 63.47 38.39 25.75 41.57 106.68
Dividend Payout Ratio Cash
55.11 36.35 23.96 38.48 91.06
Profit
Earning Retention Ratio 36.53 61.77 74.63 68.91 -6.68
Cash Earning Retention Ratio 44.89 63.79 76.37 70.66 8.94
AdjustedCash Flow Times 6.31 4.16 2.97 2.92 6.36

21
3.6 SWOT analysis of MOFS

SWOT assumes that strengths and weaknesses are frequently internally-related, while
opportunities and threats commonly focus are due to the external environment.[2] The name is an
acronym for the four parameters the technique examines:

• Strengths: characteristics of the business or project that give it an advantage over others.
• Weaknesses: characteristics of the business that place the business or project at a disadvantage
relative to others.
• Opportunities: elements in the environment that the business or project could exploit to its
advantage.
• Threats: elements in the environment that could cause trouble for the business or project.

STRENGTHS:

• Promoters increasing shareholding

• Rising Net Cash Flow and Cash from Operating activity
• Growth in Net Profit with increasing Profit Margin (QoQ)
• Company able to generate Net Cash - Improving Net Cash Flow for last 2 years
• Company with Zero Promoter
• Pledge FII / FPI or Institutions increasing their shareholding

WEAKNESS:

• Inefficient use of capital to generate profits - RoCE declining in the last 2 years
• Inefficient use of shareholder funds - ROE declining in the last 2 years
• Inefficient use of assets to generate profits - ROA declining in the last 2 years
• Annual net profit declining for last 2 years

OPPORTUNITIES:

• Rising Delivery Percentage Compared to Previous Day and Month, Strong Volumes
• Brokers upgraded recommendation or target price in the past three months
• Turnaround companies- loss to profit QoQ
• Decrease in Provision in recent results

22
THREATS:

• Company with negative growth and promoters

• decreasing shareholding Stocks with high PE (PE > 40)

23
Chapter 4: News Analysis (w.r.t selected
sector & company)

24
News Analysis (w.r.t selected sector & company)

1. Motilal Oswal S&P 500 Index Fund NFO: Go global and diversify your
portfolio (Published on April 18, 2020)

Valuation of world’s largest index appears attractive with PE multiples of 16-17 times
The on-going global market correction can be a buying opportunity for long-term
investors to diversify their portfolios. The new fund offer (NFO) of Motilal Oswal
AMC’s Motilal Oswal S&P 500 Index Fund provides domestic investors an
opportunity to go global by investing in the world’s largest index, S&P 500 index.
It is a passively managed, open-ended mutual fund scheme tracking the S&P 500
index of the US. The scheme is open for subscription till April 23. It is India’s first
passive fund mirroring the S&P 500 index

2. Motilal Oswal Real Estate raises ₹1,150 cr for fourth realty fund (Published
on April 20, 2020)

Motilal Oswal Real Estate (MORE) has raised a total of ₹1,150 crore for its fourth
real estate fund, primarily from High Networth Individuals and family offices.
MORE is part of Motilal Oswal Private Equity (MOPE), the alternative investments
platform of Motilal Oswal Group.
“Investing in real estate is one of the Group’s core strategies and while we continue
to focus on residential real estate, we will also evaluate investing in other asset
classes as the sector transforms in the coming years,” said MOPE Managing
Director and Chief Executive Officer Vishal Tulsyan.
Fund deployment
The fund, India Realty Excellence Fund IV (IREF IV), will deploy the capital in
mid-income and affordable residential projects and select commercial projects

25
across the top six cities. MORE has already committed ₹550 crore across nine
investments in Chennai, Pune, Hyderabad, and Ahmedabad from the fund.
IREF IV’s investment strategy is an extension of the investment strategy of
MORE’s earlier two funds (IREF II and IREF III). MOPE has more than ₹7,000
crore of cumulative Assets Under Management (AUM), of which, 50 per cent is
growth capital and remaining 50 per cent is for real estate. MORE has an AUM
of ₹3,600 crore.
“Existing investors from our previous funds have provided commitments to this
fund notwithstanding the NBFC crisis, during which we raised the IREF IV fund,”
said Sharad Mittal, Director and CEO, MORE.
“With IREF IV, we have adequate dry powder to make new investments. However,
considering the global outbreak of Covid-19 and its impact, we will maintain a
cautious approach towards new investment commitments. At this point in time, our
priority would be to focus on managing our existing portfolio,” Mittal added.
MORE has invested capital in the real estate sector through four real estate funds
and through the PMS route.

26
Chapter 5: Review of Literature/ Theoretical
Background

27
Review of Literature/ Theoretical Background

Numerous studies and research have been conducted by various researchers and scholars of
different universities and research centers from all over the world to understand about investor’s
perception and psychology while investing in different markets. The literature relevant to risk
perception was studied to know the factors that are already been studied related to psychology of
investors and conclusions drawn by other researchers was also studied. In this section, the literature
review including three parts. First, behavior finance perspective of individual investor. Second,
individual investor’s risk perception, risk tolerance and portfolio choice. Third, individual
investor’s socio-economic status differential and risk tolerance. The results for gender, education
level and income level are consistent with the earlier literature. Previous literature indicating those
factors on risk-taking and risk tolerance are gender, age, marital status, occupation, income level,
education level and economic environments expectations, which might influence an individual
investor’s level of risk taking, but the factor of education level might not. Those studies are
classified by three catalogers

Behavior Finance Perspective of Individual Investor

As a result of traditional finance theory appears to play a limited role in understanding this issues
such as

(1) why do individual investors trade,

(2) how do they perform the task,
(3) how do they choose their portfolios to conform their conditions, and
(4) why do returns vary so quickly even across stocks for reasons other than risk.

In the new arena of behavior finance or so called behavior economic, we could to interpret about
individual investors behave in their invest choice more completely. Most of behavioral finance
researchers often claimed that the reality results presents no unified theory unlike traditional
finance theory appears expected utility maximizations using rational beliefs. Its means those
scholars in this field actually postulate whole investors in financial market are rationales; they
can’t influenced through any factors only maximum profit for themselves. Most authors show
behavior finance perspective on individual investor, such as Deaux and Emswiller (1974), Lenney

28
(1977), Maital et al. (1986), Thaler and Johnson (1990) and Beyer and Bowden (1997). Those
authors are to exclaim that individual investor would demonstrate different risk attitude when
facing investment alternatives. Later instruction in our research, we called risk perception and risk
tolerance of individual investor. Comparing with previously research, current study is to focus on
external factors and psychological factors how to affect investor’s investment decision and
portfolio choice. For instance, Annaert et al. (2005), Wang et al. (2006) indicate the impact of
information asymmetric problem on investor behave, this is another subject in behavioral finance
field. Most of these researches are pay close attention to behavioral finance, especially in financial
products choices (investment) and behave of individual investor invest related.

Risk Perception, Risk Tolerance and Portfolio Choice

Financial risk tolerance is defined as the maximum amount of uncertainty that someone is willing
to accept when making a financial decision. Although the importance of assessing financial risk
tolerance is well documented, in practice the assessment process tends to be very difficult due to
the subjective nature of risk taking (the risk of investor willing to reveal their risk tolerance) and
objective factors such as Grable and Joo (1997), Grable and Lytton (1999), and Grable (2000).
Risk tolerance represents one person’s attitude towards taking risk. This indicated is an important
concept that has implications for both financial service providers (asset management institution or
other financial planner) and consumers (investors). For the latter, risk tolerance is one factor which
may determine the appropriate composition of many assets in a portfolio which is optimal and
satisfied investors invest preference in terms of risk and return relative to the needs of the
individual investors Droms, (1987), Hallahan et al., (2004). There are some empirical evidence
showing the impact of risk perception; risk tolerance and socio-economic on portfolio choice, for
instance, Carducci and Wong (1998), Grable and Joo (1997), Grable and Lytton (1999), Grable
(2000), Hallahan et al., (2003), Hallahan et al., (2004), Frijns et al., (2008), and Veld and Veld-
Merkoulova (2008). In terms of different risk perception or risk tolerance level, individual investor
may show different reaction base upon their psychology factor and economic situation, which
would lead to heterogeneous portfolio choice for individual investors. For this reason, it is crucial
to recognize and attitudinal how individual investors with different risk perceptions and risk
tolerance make their invest products choice on investment plan, in particular socioeconomic status
differentials may make their choice vary and difference.

29
Investor’s Socio-Economic Status and Risk Tolerance

Some researchers have indicated that the validity of widely used demographics as determinants of
risk tolerance is noteworthy as the relationship between socio-economic status differences
including gender, age, income level, net assets, marital status, educational level and investment
decision or portfolio choice. With regard to the financial risk tolerance literatures, there is much
interest in the demographic determinants and risk attention (involving three risk types: risk
aversion, risk moderate and risk seeking) is particularly focused on age, gender, education level,
income level, marital status, the number of dependents and net assets. Specifically, although debate
remains on some issues, a range of common findings are generally observed. There are five
phenomenons in socio-economic status variables differential and portfolio choice as the following:
First, risk tolerance decreases with age (e.g., Morin and Suarez 1983; Roszkowski, Snelbecker,
and Leimberg 1993). Second, females have a lower preference for risk than males (e.g.,
Roszkowski, Snelbecker, and Leimberg 1993; Grable 2000). Third, risk tolerance increases with
education level (e.g., Roszkowski, Snelbecker, and Leimberg 1993; Haliassos and Bertaut 1995).
Fourth, risk tolerance increases with income level and net assets (e.g., Cohn et al. 1975;
Roszkowski, Snelbecker, and Leimberg 1993; Bernheim, Skinner, and Weinberg 2001). Fifth,
single (i.e., unmarried) investors are more risk tolerant than married (e.g., Roszkowski,
Snelbecker, and Leimberg 1993).

30
Chapter 6: Objectives

31
Objectives
1. To find out the risk perception of equity investors
2. To bring out the importance of portfolio management of equity investors
3. To know about the Investors knowledge and experience of investing in equities
4. To find out the objectives behind investments.

32
Chapter 7: Research Methodology

33
Research Methodology
7.1 Data Sources

Collection of data is the most essential part of this study as it gives the first-hand knowledge about
customers’ and investors’ psychology and decision making. The task of collecting data begins after
a research problem has been defined and plan is chalked out. For this study, the research is
conducted and insights are captured using both primary data such as surveys, questionnaires,
personal interviews and secondary data like data thorough review of journals, stock market
analysis, research papers etc.

Primary research is conducted by generating leads through references, personal contacts and other
sources. This is done in order to understand and analyse about the psychology of equity investors
while investing in stock market and other portfolios. This would also give an insight about the
mentality of new investors and their strategies while entering investment market. The research was
both qualitative and quantitative in nature with a mix of closed and open-ended questions.
Secondary research was also done in order to understand about the studies that are already done
and to give a background information about the topic. This was done through magazines, books,
reading journals, articles etc.

7.2 Research Approaches

There are different ways to collect primary data such as through observations like ethnographic
research, focus group, surveys, experiments, behavioural research and so on. To efficiently fulfil
the purpose of the study and gather relevant data, surveys and personal interview is used. Survey
approach is undertaken in order to assess people’s knowledge, attitudes, choices and satisfaction
related to investment choices. Surveys were conducted in residential area and online. In addition
to this, an online survey was also conducted to gather more appropriate data. The survey was kept
short and simple so as to make it easier for respondents to understand and answer it appropriately.
Apart from the survey questionnaire, 8 personal interviews were also done to understand more
about investors psychology and decision-making techniques.

7.3 Research Instrument

34
Research instrument is the tool for collecting primary information through various methods
discussed above. There are three main options of research instrument that a researcher can choose
from, such as, through questionnaires, qualitative measures, and technological devices. The
research instrument that is used, in this study, to collect primary data is majorly through
questionnaires .

7.4 Development of the Questionnaire

A questionnaire is considered to be the most flexible, structured and efficient way of collecting
primary data as it is cost and time effective. In this survey, a self-administered questionnaire
isprepared and used to gather the data from the respondents. The survey is conducted using
closeended. A five-point likert scale is used to analyse the risk appetite of the investors. In order
tounderstand the various objectives for which an investor invests, rating scale was used. Other
Multiple-Choice Questions (MCQs) were also used to understand their demography and financial
literacy. Open ended questions were asked only during the personal interviews to dive deep into
the psychology of an investor. No open-ended questions were used in the questionnaire.

7.5 Sampling

Sampling Unit: In order to have an overall understanding of the research perspective of

investors, the data is collected from investors who have an experience in trading, brokers who

usually deals with people who wants to invest, novice investors who are new to investing in

risky assets and lastly, people who do not have an experience in asset market but want to invest

and have a knowledge of stock market and financial markets in general.

Sampling Size: It is often said that large samples are much more reliable and hence, an attempt

was made to gather as much data as possible. The data from respondents residing

were gathered. However, due to incomplete information, 8 of the responses were discarded and

100 were accepted. Hence, a sample of 100 respondents is used to complete the survey and

analysis of this report.

35
Chapter 8: Data Analysis/ Data
visualization, Results and Interpretation

36
Data Analysis/ Data visualization, Results and Interpretation

Analysis

I. Demographic Profile of the Respondents

Gender of the Respondents (Table 8.1)

Gender Frequency Percentage

Male 68 68%
Female 32 32%
Total 100 100%

Age of the Respondents (Table 8.2)

Age Frequency Percentage

20-29 35 35%
30-39 38 38%
40-49 22 22%
50-59 4 4%
above 60 1 1%
Total 100 100%

Marital Status of the Respondents (Table8.3)

Marital Status Frequency Percentage

married 58 58%
Unmarried 42 42%
Total 100 100%

Family Annual Income of the Respondents (Table 8.4)

Family Annul Income Frequency Percentage

Below 2lakhs 11 11%
Rs 2 lakh-Rs 5 lakh 28 28%
Rs 5 lakh-Rs 8 lakh 42 42%

37
 Rs 8 lakh- rs 15 lakh 17 17%
Above 15 lakh 2 2%
Total 100 100%

Educational Qualification of the Respondents (Table 8.5)

Qualification Frequency Percentage

Undergraduate 8 8%
Graduate 48 48%
Post graduate 38 38%
Ph. D 0 0%
Others 5 5%
Total 99 100%

II. Risk Scale Construction

The scale considered for this study contains 5 items which was used to understand the
risktaking appetite of the individuals. Since a score of 5,4,3,2, and 1 was given to the
respondents for their response of strongly agree, agree, moderately agree, disagree, and
strongly disagree, respectively, the maximum one respondent can score in each of the items
is 5. Therefore, the maximum possible score is 25 (5 × 5). Similarly, the minimum one
respondent can score in each of the items is 1 and, therefore, the minimum possible score
is 5 (5 × 1). The difference between maximum and minimum possible score is 20 (25 - 5).
In order to establish the overall risk perception at five different levels, this range 20 is then
divided by 5. It is found to be 4. Adding 4 with 5 (lowest possible score), we get 9, which
becomes the very low level of risk perception range (4 - 9). Similarly, adding 4 with
subsequent value, next higher range is obtained. Table 2.2 shows the overall risk perception
level score of the scale.
Below (Table ) is the final interpretation of the level of risk perception of individuals. After
constructing this scale, a final score of each individual was calculated and were put in the
category they belonged to, to get the final level of risk perception of each individual.

38
Risk Level Score (Table 8.6)
5-9 Very Low Level of Risk
9-13 Low Level of Risk
13-17 Moderate Level of Risk
17-21 High Level of Risk
21-25 Very HighLevel of Risk

The mean value of the scale statistic is found to be 16.99 which lies in the interval of 13-
17 representing a moderate level of overall risk perception among individuals.
(Table 8.7)

Scale Statistics
Mean Varience Std. Deviation No. of items
16.99 8.27 2.88 5

The overall risk perceptions of the respondents are calculated by adding their score in the
Likert scale, and then its value was interpreted using Table 3.2. The overall level of risk
perception is presented in Table below.
(Table 8.8)

Overall Risk Perception

Code Level Scale Frequency Percentage
1 Very low level of risk 5 to 9 0 0%
2 Low level of risk 9 to 13 12 12%
3 Moderate level of risk 13 to 17 47 47%
4 High level of risk 17 to 21 34 34%
5 Very high level of risk 21 to 25 7 7%
Total 100 100%

Interpretation- According to the data represented in Table it can be said that majority of
the respondents (47%) have moderate level of risk. Whereas, there are only 12 persons
(5%) and none for very low level and 7% very high level of risk perception, respectively.
There is also small difference between people with moderate and high level of overall risk
perception. From this, it can be concluded that on an average, people have developed some
risk perception over the years perhaps due to more knowledge of finance because we can

39
 see that majority of the respondents are either graduated or post graduated. Also, one of
the respondents is also Ph.D. holder. Hence, because of more literacy level we could say
that a greater number of people have moderate to high level of risk perception.
III. Objectives of Investors for Investment
The question regarding the level of importance of the below mentioned objectives were
asked from the investors, on a 5-point likert scale, to understand their psychology and
reason behind their choice of investment avenues.
The objectives were as follow:
o Capital Appreciation
o Dividend
o Quick Gain
o Tax Benefits
o Protection against Inflation

Figure 8.1 to Figure 8.5 explains about the importance of each objective on a scale of 1 to
5 where 1 being least important and 5 being the most important.

Capital Appreciation

(Fig.8.1) Capital Appreciation

For capital appreciation objective, 39% of the respondents consider it to be the most
important objective. None of the investors has given 1-2 score to capital appreciation. It

40
 could be because of the very high-risk level of investor or the bounded rationality of the
respondent while filling the questionnaire. This implies that majority of the investors look
out for capital appreciation in their investment avenue. Capital appreciation could be
considered the most important objective out of all for any investor as the importance level
lies from somewhat important (3) to extremely important (5).

Dividend

(Fig.8.2) Dividend

Regular Dividends is the most important factor for only 35% of the respondents. 22 number
of respondents feel that regular dividend is somewhat important, which means that even if,
in an investment option, there won’t be any dividend in their investment avenue, they
would not mind much.

41
Tax Benefits:

(Fig.8.3) Tax Benefits

As far as tax benefits of the investment avenue is concerned, 2% of the respondents gave
it an importance level of 1( least important), 30% of the respondents feel that having tax
benefit in their investment option should be important, 27% feel that it is somewhat
important, 30% are of the view that their investment avenue should have major tax benefits
and gave it a rating of 4(very important) and lastly, for 38% of the respondents tax benefits
is extremely important.

Protection against Inflation

(Fig.8.4) Protection against Inflation

42
 Only 1out of 100 respondents want an investment that does not provide them protection
against inflation. It can be said that, every investor who invests in any kind of investment
option does so with the main motive of having protection against increasing inflation in the
economy. Hence, if any asset does not give an investor protection of inflation, he would
not take it, keeping other things constant.

Quick Gain

(Fig.8.5) Quick Gain

From figure , it can be inferred that 38% of the respondents are neutral about the quick gain
however 13% of the investors feel that having quick gain with their choice of investment
is most important for them. These could be the investors that have high to very high-risk
perception and they try to gain more in less time by investing in stock market and trading
on a regular basis.

IV. Chi Square Analysis of Gender and Choice of Investment

Chi square analysis test is used to check the significance of two categorical variables. In
this chi square test, it is aimed to find out if there is a significant relationship between
Gender (Male/ Female) and their choices of investment avenues (Fixed deposits/ Mutual
funds/ Equity stocks). In other words, we are analysing the dependency of one variable
over other. It is analysed whether Gender and choice of investment are independent of each
other or not.
Hypothesis

43
 Null Hypothesis- Ho: No significant relationship between Gender and Choice of
Investment
Alternate Hypothesis- Ha: There is a significant relationship between Gender and choice
of investment

(Table 8.9)

Gender * Investment Choices Crosstabulation

investment choices

FD/
Mutual Funds/SIP Equity Stocks Total
Deposits

count 12 22 34 68
Male
expected count 14.96 20.4 32.64 68.0
Gender
count 10 8 14 32
Female
expected count 7.04 9.6 15.36 32.0
Total count 22 30 48 100

Table gives us the details about the observed frequency of males’ and females’ choices of
investment. As we can see in the table, it can be observed that there are 34 males and 14
females investing in equity stocks. Similarly, 12% of males and 10 % of females choose
FD or other safe deposits to invest their money. Mutual Funds/ SIP (Systematic Investment
Planning) have 22 and 8, Males and Females respectively. The crosstabulation gives us an
overall data frequency of the two categorical variables.

Pearson Chi square test

value 5.991
Degree of freedom 2
alpha 0.05
p value 0.301

To understand the significant relationship between gender and choice of investment we

will consider Pearson Chi- Square in Table. The chi square statistic value is 5.991 and our
degrees of freedom is 2. The asymptotic significance value is our p-value which we use to
test the significance of variables. Our alpha (α) value is 0.05. Here as we can see that our
α is less than p value which is 0.301, we accept our null hypothesis which said that there is
no significant relationship between gender and their corresponding choice of investment.
In other words, it is safe to say, according to our data and analysis of chi square, that gender

44
 has no relationship with the choice of investment options i.e. Mutual Funds, Equity Stocks
and Fixed Deposits. There could be other factors that influence the choice of avenue where
individuals like to invest but gender is not one of the significant factors. Gender plays no
role on the psychology of investors and does not contribute to the decision-making process.

V. Chi- Square Analysis of Marital Status and Choice of Investment

There are many studies by scholars and researchers like Barber and Odean (2001) that says
that there is a significant relationship between marital status of investors and risk
perception. However, some scholars opined that marital status does not play any role in
choosing investment options and it also does not affect the risk perception of an investor.
(Table 8.10)

Marital Status * Investment Choices Crosstabulation

investment choices

FD/ Mutual Equity

Total
Deposits Funds/SIP Stocks

count 4 14 24 42
Marital Unmarried expected
Status count 9.24 13.44 20.16 42.0
count 16 18 24 58
Married expected
count 12.76 18.56 27.84 58.0
count 22 32 48 100
Total expected
count 22.0 30.0 48.0 100.0

In any chi-square test, a close attention has to be paid to the expected and observed values.
If the observed and expected values diverge more form each other, the chi square value
likely becomes higher. Hence, the model becomes more significant and we reject the null
hypothesis and conclude that the variables are associated with each other. In the above
table we can see that, there are more unmarried people investing in stock market as
expected count also, there are more married people investing in F.D / Deposits than the
expected count. However, it is important to analyse whether these differences are big
enough to conclude that Marital Status and Investments choices are associated with each
other. This is where chi-square statistic test comes into play.

Hypothesis Ho: No significant relationship between Marital Status and Choice of

Investment
Ha: There is a significant relationship between Marital Status and Choice of Investment

45
 Pearson Chi square test
value 5.991
Degree of freedom 2
alpha 0.05
p value 0.078

Chi-Square statistic value is 5.991 and p-value for this analysis is 0.078 which is greater
than alpha (α) value of 0.05 which means that we will accept our null hypothesis that says
that there is no significant relationship between marital status and choice of investment. In
other words, marital status and choice of investment avenues, where investors like to
invest, are independent of each other and marital status of an investor does not influence
his investment choices. Table suggests that risk defines the choice of investment and since,
table proves that there is no significant relationship between marital status and choice of
investment, it is safe to conclude that there is also no significant relationship between
marital status and risk perception. It cannot be said that single men/ women tend to take
more risk as both these variables are independent of each other according to our study and
analysis.

VI. Chi-Square Analysis of Level of Overall Risk Perception and Investment Choices
In order to analyse if the overall risk perception influence the choice of investment, we do
a chi square analysis.

(Table 8.11)

Investment Choices*Overall risk perception level Crosstabulation

Overall risk perception level

very very total

low moderate high
low high

count 0 8 10 0 0 22
FD/ Deposits
expected count 0 2.42 10.34 7.48 1.54 22
investment count 0 2 21 10 0 30
Mutual Funds/SIP
choices expected count 0 3.3 14.1 10.2 2.1 30
count 0 1 16 24 7 48
Equity Stocks
expected count 0 5.28 22.56 16.32 3.36 48
count 0 11 47 34 7 100
Total
expected count 0 11 47 34 7 100

46
In the table, it can be seen that no respondents with low level of risk perception opt for
Fixed Deposits or other safe options to invest their money in. It can also be seen that no
person with very low level of risk perception opt for either mutual funds or equity stocks.
According to the data, more people have moderate to high level of risk and only seven
people have very high level of risk who have opted for equity stock investment option

To check if there actually is any relationship between risk taking capacity and the choice
of investment, we run a chi-square test below.
Hypothesis
Ho: No significant relationship between Overall Risk Perception and Choice of Investment
Ha: There is a significant relationship between Overall Risk Perception and Choice of
Investment
While doing chi-square analysis, an assumption is followed that for a larger table, no more
than 20% of all cells may have an expected frequency of < 5 and all expected frequencies
should be > 1. In this case, the expected frequency of some of the variables is less than 1.
And hence, in such cases, instead of checking the statistical value of Pearson Chi-square,
we check the value of likelihood ratio and compare it with alpha(α) of 0.05.
By rejecting null hypothesis, we say that there is a significant relationship between risk and
investment choices of an investor. Hence, risk perception of an individual and their choice
of investment are not independent and influence the decision of investor. As it can be seen
from the table 7.1, we can conclude that people with high degree of risk-taking capacity
opt for either mutual funds or equity stocks. And no person with low or very low level of
risk chooses equity stocks for investment. Risk perception plays an important role in the
decision making of the investors to choose where to invest.

47
Chapter 9: Conclusions / Learnings from the
Project

48
Conclusion and Learning From the Project

1. It is observed that the overall risk perception of investors lies between moderate to high
level with very minute difference between the two levels. Since, maximum frequency lies
in the moderate level, we can conclude that majority of investors have an overall risk
perception of moderate level. This is a little different from the findings of other researchers
where they concluded that people have high level of risk perception.
2. The decision-making process is complicated and does not only depend on risk- return
relationship. People make decision based on the importance of the objectives as well. The
objectives could be tax savings, capital appreciation, dividends etc. Investors who look for
tax saving options do not trade and keep their investment for long term or they invest in
fixed deposits where they do not have to pay extra tax on the appreciation. Capital
appreciation is one of the most important objectives for all the investors. Also, very few
investors find it important to have a quick short-term gain on their investment avenue.
3. It is also observed that demographic identity of an individual like age, marital status and
gender does not affect the choice of investment of an individual. However, experience and
financial literacy do have a significance on the level of risk of an investor and his choice
of investment avenue. The results are inconsistent with the previous study done by Chen
and Volpe (2002) and Barber and Odean (2011) who opined that gender plays an important
role in decision making.
4. There is also a direct relationship between experience of an investor in stock market and
his risk-taking capacity. In other words, if the experience of an investor increases in the
stock market, he becomes more confident and starts taking more risk as long as that risk is
proven to be fruitful due to loss aversion personality bias. Exposure to a risky situation
influences a person to make an investment in a risky asset.
5. The study is made to find out “Risk perception and portfolio management of equity
investors”. The study reveals that the investors are not aware of portfolio which would
minimize risk and maximize the return. And also it is clear that the investors in have low
level of understanding about risk and the importance of portfolio management as they are
not aware these factors. Hence proper steps should to be taken in order to improve the
awareness level in the minds of the investors.

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Chapter 10. Limitations of the project

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Limitations of the Project

• The demographic and environmental conditions of the country highly effect the results
and perceptions of the equity investors and hence, the ongoing threat of corona virus
pandemic could highly influence the decisions of the customers and investors as the
market is highly volatile as compared to regular days.
• The economy is at the verge of entering into recession which could affect the market
scenario and hence, the decisions of the investors could be biased.
• There were time constraints to gather adequate data, analyse and interpret the market
scenario and investors’ psychology.
• There was a lack in the consistency of the responses given by a few customers.
• The study could be biased because it is moreover restricted to a online mode of data
collection due to COVID 19 pandemic and it could/ could not be proven true because of
the fact that the study is entirely based on psychology and psychological factors highly
depends upon culture, ethnicity, religious background and other things.

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Chapter 11. Recommendations

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Recommendations

1. Most of the respondents showed keen interest in equity market but they have a low risk
appetite because of lack of knowledge about how to invest, where to invest and so on.
Hence, an attempt should be made to increase the awareness about equity market among
general public. An attempt should also be made to not just improve the knowledge about
equity market but about finance in general. Our study suggest that investors do not have
much knowledge about complex finance concepts.
2. Efforts should be made to popularise equity markets through various social media measures
and create awareness as some people think that taking high risk would mean less returns.
Efforts could be made to make people understand that in long run, the chances of loss
become highly negative.
3. More new studies should be conducted to understand about latest relationship between
demography, risk taking appetite and choice of portfolio as the available studies have
become outdated and does not align with my study of investors where there is no
relationship between gender, marital status and risk perception.

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Chapter 12 - Bibliography - Appendices

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Bibliography

1. Bhattacharjee, Jayashree, and Ranjit Singh. 2017. Awareness about equity investment
among retail investors: A kaleidoscopic view- Qualitative Research in Financial Market
2. Barber, B. M. Odean, T, 2001. Boys will be Boys: Gender, Overconfidence, and Common
Stock Investment. The Quarterly Journal of Economics, 116(1), pp261-292 3. Chen, H.
Volpe, R. P., 2002. “Gender Differences in Personal Financial Literacy
3. https://www.ibef.org/industry/financial-services (30/05/2020)
4. Veld, Chris, and Yulia Veld-Merkoulova. 2008. The risk perceptions of individual
investors.
5. https://www.moneycontrol.com/annual-report/motilaloswalfinancialservices/directors-
report(06/06/2020)
6. https://www.motilaloswalgroup.com/

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Appendices

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