CHAPTER –I

INTRODUCTION

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 CHAPTER –I
INTRODUCTION
Investing isn’t about beating others at their game. It’s about controlling yourself
at your own game.”
- Robert
Arnott

Every investment decision has its own qualities and shortcoming. Some alternative
tries to accomplish more returns however with related high hazard. Further give
wellbeing however at the expense of liquidity and development. Other alternative, for
example, FDs offer wellbeing and liquidity, yet at the expense of return. Mutual funds
look to consolidate the upsides of putting resources into curve of these option while
supply with the deficiency. Indian securities exchange is semi-effective by nature and,
is considered as a standout amongst the most regarded securities exchanges, where
data is rapidly and broadly conveyed, in this manner permitting every security's cost to
alter rapidly in a reasonable way to new data so that, it mirrors the nearby speculation
esteem.
Funds frame a critical part of the economy of any country. With the funds put
resources into different choices accessible to the general population, the cash goes
about as the driver for development the nation. Indian budgetary scene excessively
displays a plenty of boulevards, making it impossible to the financial specialists.
Despite the fact that unquestionably not the best or most profound of business sectors
on the planet, it has sensible alternatives for a customary man to investment his funds.
One needs to invest and gain return on their unmoving assets and produce a
predetermined Sum of cash for a particular objective in life and make procurement for
an unverifiable future. One of the essential reasons why one needs to contribute
shrewdly is to meet the expense of inflation. Swelling is the rate at which the typical
cost for basic items increments.
The sprint of the mill cost for fundamental things is basically what it cost to buy
the items and organizations you need to live. Swelling causes money to lose regard
since it won't buy the same measure of a nice or organization later on as it does now or

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did beforehand. The sooner one starts contributing the better. By contributing early
you allow your hypotheses more chance to create, whereby the thought of heightening
forms your compensation, by storing up the first and the premium or profit earned on
it, after an apparently unending measure of time. The 3 brilliant guidelines for all
financial specialists are Invest early, invest long haul and not for short term and invest
regularly
Finance concept has been in a process of rapid development during this last century.
The Modern Portfolio Theory that was developed by mid 1950s and the subsequent
financial models that emerged to play a big role in this rapid development. These
theories aim to bring an objective perspective to finance in the traditional sense and
express the investment preferences of the individual in mathematical terms.
The models and techniques covered by the traditional finance literature and sited
above assist the individuals in their preferences and each individual is expected to
make rational preferences as a standard. This principal of rationality that is one the
assumptions required to be able to standardize investment preferences attracts
attention as the most important assumption of modern finance.
This assumption of traditional finance has been under criticism by people since the
first day and the issue of whether or not humans make rational preferences has been a
matter of investigation. As we know, humans are social creatures that have unique
values and that tend to make decisions in accordance with their emotions and
behaviour. One should not expect humans to make decisions solely based on objective
factors. It is at this point that Behavioural Finance brings a novel perspective to
analyse those areas that traditional finance failed to explain or had difficulty in
explaining. Behavioural Finance argues that behaviours and mood states of humans
are determinant factors in shaping their investment preferences and has demonstrated
great progress in the last 30 years and has been the main theme of numerous
interdisciplinary studies. Thus, it is expected that this particular area of finance would
be researched in more detail and that research would focus on this field.

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Field of finance is basically about decision making as to investment decision, working
capital decision, dividend decision and fund allocation decision whereas field of
economics is about decision making as to what to produce, how to produce and for
whom to produce. In the same way, the emerging field of behavioural finance also
deals with the complex activity of decision making. Though the fields of economics
and finance have contributed many theories over the years, it could not explain why
people sometimes take irrational financial decision.
There are studies in the field of finance which gives us theories with explanation and
proofs about how market operates and how the investors take their investment
decisions. They explain the dynamics of investment and rules to apply for investment
decision. The rules seem to be simple but investor’s feels difficulty in applying those
rules. Due to inefficiency in applying rules, investor’s trade too much, buy or sell at
wrong time, allow emotions to overrule logic and misjudge probabilities.
The present study focused on the concept of behaviour, the definition of behavioural
finance and have emphasized the studies carried out in this field, later on moving to an
analysis aimed at understanding the behavioural patterns of the investors in our
country and coming up with an application geared towards assessing the financial
preferences of these investors.

Behaviour
Before moving on to behavioural finance, it would be helpful to give certain
definitions related to behaviour, in terms of understanding investor behaviour in the
financial context. According to Skinner, human behaviour is difficult to analyse due to
its extremely complex nature. Human behaviour is mainly based on a cause-result
relation
[1]. Human beings take action due to the complex influence of both internal and
external stimulants (drive) and display certain actions (reaction). In psychology, this
interaction is called behaviour.
The term Behaviour is defined in the dictionaries and encyclopaedias as “the mode of
action, or the way humans react” while in the psychology literature it is defined as “all
reactions of the organisms as a response to stimulants”. Accordingly, behaviour is
both the internal psychic conditions and the actions reflected to the outside world. In

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the general psychology books on the other hand, it is defined as the mutual relations
between the stimulant, organism and the reactions.
A general definition we can make based on these definitions would be as follows
[2]. “The collection of reactions that involve numerous actions which the organism
carries out via its physical and mental skills, traits and emotional mechanisms as well
as bodily motions that carry various verbal and non-verbal messages.” Behaviour can
also be defined as everything that an individual might do or try. In other words,
behaviour is every kind of action existing in and carried out by an organism. For
example; all kinds of actions carried out by the organism such as speaking, walking,
watching TV, eating, reading and dancing as well are considered to be behaviour. In
addition to visible actions of the organism such as walking and eating, the organism
also has some internal experiences invisible to others such as thinking, feeling,
rejoicing, frustration, remembering, forgetting, learning and dreaming. These as well
are considered to be behaviour
[3]. The behaviour is categorised under three groups. The first one is the directly
observable behaviour. Gestures, mimics and speech are examples of this. These
behaviours can be observed and can be expressed numerically. The second one is
indirectly observable behaviour. Such behaviours cannot be observed directly buy can
be felt or expected. For example; behaviours such as being loved, understanding and
forgetting. The third one is the behaviours occurring by means of the nervous system.
These occur at the sense organs by means of muscles.
It might not always be possible to predict behaviour based on manners. There might
be some other factors that affect the process. For example, while job satisfaction
ratings might be high at a work place, turnover as well might be high. The reason of
this is the fact that people take into consideration the possible consequences or effects
of their acts before they act. Human behaviour depends mostly on two determinants.
These are individual influence and social influence. Individual influence means that
the individual makes a positive or negative assessment of its behaviours before
displaying that behaviour.

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Investing is an emotional and enthusiastic activity where it is associated with
necessities and dreams and when uncertainty rises it puts your planning for your need
and dreams at stake. The COVID-19 shock was unprecedented in our lifetime;
however so was our response. Investing activity in the pandemic has become more
emotional experience for the investor because of the high volatility and
unpredictability of the markets and the changed sentiments of the investors.
The pandemic has hit the economy at that point of time when markets were all time
high, globe was being characterized by lowest unemployment rates investor was
feeling sure and stable about their portfolio and abruptly the economy reached virtual
stop where a huge number of individuals lost their business, occupations suddenly the
economy came to virtual stop where millions of people lost their business, jobs,
demands were suddenly reduced and economic certainty becomes prevalent.
The first COVID-19 case in India was registered in Kerala on 30 January 2020. On 2
March 2020, the BSE SENSEX witnessed a flash crash due to the Union Health
Ministry's announcement of two new confirmed cases. On 12 March 2020, after
WHO's declaration of the outbreak as a pandemic, Indian stock markets experienced
their worst crash since June 2017. The lockdown has adversely have affected service
sector like banks, restaurants, food vendors, hospitality industry Nevertheless, every
crisis throws up some opportunities, and the few sectors like Technology, including
education technology, online gaming and select ecommerce, Consumer goods,
Pharmaceutical, Agricultural products, Specialty chemicals have shot in prominence.
The stock market has shown a drastic recovery of more than 80% till the end of
December 2020 from the dip in March 2020.The Indian markets have shown good
recovery in short span of time but definitely a hesitation has come in the minds of
retails investors. Covid 19 European Journal of Molecular & Clinical Medicine ISSN
2515-8260 Volume 7, Issue 11, 2020 5646 has not only impacted the investment
portfolio or investment patterns but overall approach of human being towards the life.
Focus has been shifted and health investments have become the priority. Investors
have switched to safer and stable investment avenues which carry low risk. Safety and
liquidity have become the number one parameter for doing the investment.

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The objective of this research paper is to study the Impact of Covid-19 on the
Investment pattern of Investors with specific reference to Traditional Investment (Real
estate and Gold) and Market based financial products (Equities) in Mumbai.
The study has shown that Behavioural biases become more predominant during the
market crisis. Investor preferences are dynamic. They are influenced by investor
behaviour and no of external factors. This research has made an honest attempt to
comprehend the of preferences of investors in pre and post COVID-19 situations.
Generally, Investors prefer asset classes that ensure constant and steady returns at
minimum risk. Ultimately Investment is a rational decision that depends on the
individual’s risk appetite and return expectations arising out subjective assessment of
multiple factors.
The New Normal' as it is being called, is going to be laced with newer work patterns,
modified organizational policies and deeper corporate challenges. The COVID-19
outbreak may serve as a wake-up call to challenge traditional thinking. People may go
beyond their comfort zones to create and utilize information from new sources in time
cycles that have not been seen in the past. In a post-COVID-19 financial environment,
where fears of a recession and stock market crash are constantly looming high over
the head, a prudent investor should imperatively consider the below mentioned key
essentials while designing a holistic and well diversified savings and investments
portfolio No investment strategy can be successful if you aren't able to stick with it
consistently. When you understand risks and identify threats proactively, you can
build systems that help you to reinforce good habits, even in difficult markets.
Diversification helps to reduce the risk that your investment success will be
threatened by an unexpected event, and this resilience can be bolstered by using the
3L framework to build a portfolio that reflects your financial plan.
Not only does this help you to meet your goals, but it can also give you the context
and the peace of mind that your short-term financial objectives are secure even when
there is a massive disruption to financial markets, thus helping you avoid the
temptation to react to European Journal of Molecular & Clinical Medicine ISSN 2515-
8260 Volume 7, Issue 11, 2020 5647 markets. Considering a global pandemic was not
really a part of anybody’s plan, investing in a health insurance covering a sufficient

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amount and number of diseases is not only a wise bet, but an important decision to
survive in the new world order.
Investment in real estate or property can reap long term benefits. With all time low
interest rates and rental income remaining intact this is the good time to build the
investor portfolio.
In the post-COVID-19 pandemic scenario, Investors need to be extra cautious, but
broadly the definition of the best fund remains the same

Concept of Behavioural Finance

Behavioural Finance is a concept that has become widely popular in recent years.
Even though the concept has just recently found its place in the literature, it would not
be wrong to say that Behavioural Finance has had its place in the subconscious of
humans since the times humans started to be engaged in investment and consumption
activities. The principles of behaviour used by Behavioural Finance in practice, are
based on psychology and sociology. These behavioural principles are; possibility
theory, regret fullness and lack of comprehension, clinging on an idea, cognitive
segmentation, over confidence, over reaction and lack of reaction, separation effect,
gambling behaviour and speculation, magical thinking, imaginary thinking, interest in
anomalies, availability of things that facilitate discovery, socio-cultural influence and
global culture.
Behavioural Finance focuses on how investors interpret knowledge in order make
investment decisions based on information and how they act with their investment
decisions. Behavioural Finance has developed as a result of increasing interest of
psychologists in economics. As we know, one of the most important factors in
investment decisions is the emotions. Behavioural Finance approach investigates the
influence of emotions on investment decisions. In the traditional financial research,
first a model is proposed. Then the validity of this model is assessed via experimental
methods; with Behavioural Finance approach, first the behavioural patterns in the
market are analysed; and then, based on the results of these observations, a model that
aims to explain the behavioural patterns is developed. The models developed in
Behavioural Finance, aims to understand not how people should act in financial
markets, but how they actually act in such setting.

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Behavioural finance is the study of the influence of psychology on the behaviour of
investors or financial analysts. It also includes the subsequent effects on the markets.
It focuses on the fact that investors are not always rational, have limits to their self-
control, and are influenced by their own biases.
Behavioural finance helps to explain the difference between expectations of efficient,
rational investor behaviour and actual behaviour. Incorporating behavioural
finance into their practice is key to enhancing the client experience, deepening
relationships, retaining clients and potentially delivering better outcomes.
Behavioural finance is a field of study that suggest that investment decisions are
influenced by psychological and emotional factors to a large extent. noted
that behavioural finance studies the impact of psychology on financial
decision making and financial markets.
Behavioural finance helps us understand how financial decisions around things like
investments, payments, risk, and personal debt, are greatly influenced by human
emotion, biases, and cognitive limitations of the mind in processing and responding to
information.
Behavioural finance, a sub-field of behavioural economics, proposes psychology-
based theories to explain stock market anomalies, such as severe rises or falls in stock
price. The purpose is to identify and understand why people make certain financial
choices. Within behavioural finance, it is assumed the information structure and the
characteristics of market participants systematically influence individuals' investment
decisions as well as market.
Behavioural finance – the field that combines psychology, economics and other social
sciences to identify and understand why people make certain financial choices – can
help advisors develop long-term relationships with their clients and build portfolios
better suited to their clients. Investors are human, and therefore have the tendency to
make emotional, biased investment decisions. Understanding the psychological or
emotional factors that predispose investors to behavioural biases can help advisors
differentiate their services and ultimately better serve their clients.
Market volatility can make even the most seasoned investors nervous, so with the 10-
year bull market expected by many to end soon, it’s important that advisors
understand how attitudes, preferences and biases can impact investor decision-making.

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The two pillars of behavioural finance are cognitive psychology (how people think)
and the limits to arbitrage (when markets will be inefficient).

PSYCHOLOGY SOCIOLOGY

BEHAVIOURAL
FINANCE

FINANCE

Figure 1: Evolution of behavioural finance

BEHAVIORAL FINANCE CONCEPTS

There are three types of biases:
HEURISTIC DRIVEN BIASES
OVERCONFIDENCE
People tend to be overconfident and hence overestimate the accuracy of their
forecasts. Overconfidence stems partly from the illusion of knowledge. The human
mind is perhaps designed to extract as much information as possible from what is
available, but may not be aware that the available information is not adequate to
develop an accurate forecast in uncertain times.
ANCHORING
After forming an opinion, people are often unwilling to change it, even though they
receive new information that is relevant. Suppose that investors have formed an

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opinion that ‘A’ company has above average long-term earnings prospect. Suddenly,
‘A’ reports much lower earnings than expected.
FAMILIARITY
People are comfortable with things that are familiar to them. The human brain often
uses the familiarity shortcut in choosing investments. Indeed, familiarity breeds
investment. That is why people tend to invest more in the stocks of their Employer
Company, local company and domestic companies.
CONFORMATION BIAS
People tend to overlook information that is contrary to their views in favour of
information that confirms their views. Investors often only hear what they want to
hear. They spend more time searching for reasons supporting their views and less time
searching for reasons opposing their views.
INNUMERACY
People have difficulty with numbers. People confuse between nominal changes and
real changes. Economists call this money illusion. People have difficulty in figuring
out the true probabilities. Put differently the odds are that they don’t know what the
odds are. People tend to pay more attention to big numbers and less weight to small
figures.
FRAME DEPENDENCE
PROSPECT THEORY
Proposed by Kahneman and Tversky, prospect theory, perhaps the most important
concept of behavioural finance, provides an alternative description of how people
frame and value a decision involving uncertainty. Under this description, utility does
not depend on the level of the wealth as in standard traditional theory, but on changes
in the wealth from the current level. The utility function is concave foe gains.
MENTAL ACCOUNTING
Traditional finance holds that wealth in general and money in particular must be
regarded as fungible and every financial decision should be based on a rational
calculation of its effects on overall wealth position. In reality, however, people do not
have the computational skills and will power to evaluate decision in terms of their
impact on overall wealth.
NARROW FRAMING

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Ideally investors should pay attention to changes in their total wealth. Narrow framing
in the cross-sectional sense means that investors tend to look at each investment
separately rather than the portfolio in its reality. Hence, they are more focused on
price changes in individual stocks and less concerned about the behaviour of the
overall portfolio.
SHADOW OF THE PAST
After experiencing a gain, people are willing to make more risk. After winning money
in a gamble, amateur gamblers somehow don’t fully consider the winning as their own
and are hence are tempted to risk it in further. Gamblers refer to this as the house
money effect. After incurring a loss, people are less inclined to take risk. This is
sometimes referred to as the snake bite effect. A loss is akin to a snake bite that makes
a person more cautions.
EMOTIONAL AND SOCIAL INFLUENCES
EMOTIONAL EFFECT
Emotions have a bearing on risk tolerance and risk tolerance influences portfolio
selection. Investors have a variety of emotions as they consider alternatives, decide
how much risk to take, watch their decisions play out, assess whether the initially
strategy needs modification, and finally learn how far they have succeeded in
achieving their financial objectives.
HEARD INSTINCTS / INFORMATION CASCADE
There is a natural desire on the part of human beings to be a part of a group. So,
people tend to herd together. Moving with the herd, however, magnifies the
psychological biases. It induces one to decide on the feel of the herd rather than on
rigorous independent analysis. This tendency is accentuated in the case of decision
involving high uncertainty

TRADITIONAL FINANCE VS BEHAVIORAL FINANCE

The key difference between the traditional finance and behavioural finance are as
follows:
TRADITIONAL FINANCE
 Assumes that people process data approximately and correctly.

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 Presupposes that people view all decisions through the transparent and
objective lens of risk and return.
 Assumes that people are guided by reasons and logic and independent
judgment.
 Argues that markets are efficient implying that the price of each security in an
unbiased estimate of its
 Intrinsic value.
BEHAVIORAL FINANCE
 It recognizes that people employ imperfect rules of thumb to process.
 It recognizes that emotions and heard instincts play an important role in
influencing decisions.
 It suggests that the perceptions of risk and return are influenced by how
decisions problem is framed.
 Argues that there is lack between market price and fundamental value are often
caused by behavioural biases
 It arrives that price are pushed by investors to unsustainable levels in both
directions.

1.1. Theoretical background of study

Over the past several decades, studies of financial theories and research were
developed in order to establish a better understanding of the financial markets through
using models which describe investors as “rational”. Such description indicates that
there are usually risk and return trade-off in all types of financial decisions especially
the stock investment decisions. Quite a few financial theories assumed that investors
face little difficulty in making decisions in stocks’ investment because they are well-
informed, careful and consistent. Among the most important financial theories were
two theories: Modern Portfolio Theory and Capital Asset Pricing Model (CAPM)
which revealed that investors were not confused by the way they get information
which was not controlled by their behavioural finance factors. However, the results of
applied studies in the developed global capital markets found that many phenomena
regarding the stock investment decisions cannot be explained. Meanwhile, behavioural

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finance had been growing specifically because of the fact that investors rarely behave
according to the assumptions suggested in these financial theories.
The domain of behavioural finance seeks to better understand and explain how stock
investment decision-making was influenced by financial behavioural factors, as better
understanding of these factors helps the investors to select a better stock investment
decision making policy.
This research main aim is to verify the important factors that may affect stock
investment decision-making at where the applied research results had differed in
identifying any of those factors as the most influential on stock investment decision
making. Several studies pointed out to the following factors: overconfidence (over-
estimate investors’ knowledge, under-estimate risks, and overstress their ability to
control events), risk perception (individual’s assessment of the inherent risk in a given
situational problem, herding (following the trend), and loss aversion (avoiding losses
is more important than acquiring gains).
Investors in capital asset exchanges, typically take many different and important
decisions, the most common are taking investment decisions in order to maximize
their wealth; whereas other investors are involved in considering market timing
techniques to maximize their wealth. On the contrary, some investors are more risk
averters as they follow stocks that have low risk levels; other investors deal with high-
risk stocks but apply some diversification techniques to control the haphazard risks.
Therefore, this research seeks to investigate whether these related variables in investor
decision-making process will be affected by behavioural financial factors.
Behavioural finance was defined as the study of the influence of psychology on the
behaviour of financial practitioners and the subsequent effect on markets which help
to explain why and how markets might be inefficient.
The work of Kahneman & Tversky (1974) revealed that people do not employ
statistical methods in their decision-making, but they rely on a limited number of
heuristic principles in their decision-making. Kahneman & Tversky are considered the
fathers of behavioural finance. Since the 1960s they have published about 200 papers
and articles, most of them were related to the concepts of behavioural finance.
Islam (2012) was more specific in defining behavioural finance by underlining the
buying and selling decisions regarding stock market investors. According to Gather et

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al. (2010) behavioural finance is the better understanding of the investment decisions
that affects market prices which relate to human and social cognitive and emotional
biases. Ritter (2003) also defined behavioural finance as behavioural factors affecting
individuals' decision-making.
According to Appiah & McMahon (2002), behavioural finance is the study of how
financial practitioners act and interact on financial information and the subsequent
effects on markets. Pompeian (2006) argued that behavioural finance tackles the
behavioural factors that affect financial decisions.
The importance of studying such topic comes from the consequences that these
behavioural biases could have on the investors’ gains and losses and on the stock
market as a whole.
This study investigates the effect of behavioural biases on investment decision. In
specific, the effects of overconfidence bias, familiarity bias, loss aversion bias,
disposition bias, availability bias, representativeness bias, confirmation bias and
herding bias are investigated.

1.2. Identifying the research gap

Several studies have been conducted on the various aspects of the
behavioural finance in the past. These studies mainly relate to various factors
influencing investment attitudes of an investor. However, the smaller amount of
research work has been done on investment patterns amongst the young age group of
the working population and investor’s perceptions. For long researchers have
researched on the demographic factors that influence the investment decisions of an
individual. The focus has mostly remained on core factors such as age, gender,
income, marital status, profession, education and financial knowledge. A number of
research studies have been undertaken in India and abroad to identify the investment
behaviour of retail investors and households. Apart from this, the present study
focusing on reasons for slowdown in investment in pandemic situation.
1.3. Statement of the Problem

According to conventional financial theory, the investors are the most important part of
wealth maximisers and exhibit rational behaviour in purchasing decisions. However, there

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are many instances were emotion and psychology influence investors’ decision making,
causing them to behave in unpredictable or irrational manner. Such anomalies can be
explained with the help of behavioural finance. One of the major impediments in making the
rational investment decision is the extent of investors’ biases present in the traditional and
modern investment avenues. So, in order to make efficient investment decision investor has
to identify these investors’ biases present in the market. The present study has made an
attempt to identify these investor’s biases.

1.4. Objective of the study

The research focuses on achieving the following objectives:
 To analyse the factors influencing investor’s behaviour.
 To analyse the investors attitude towards savings.
 To analyse the various factors influencing towards equity investment.
 To study the investment behaviour of the salaried class employees.
 To measure and assess satisfaction level of salaried class employees towards
various investment avenues.

1.5. Hypothesis
Hypothesis Testing
Hypothesis – 1
H0 – There is no relationship between Educational qualifications and types of
investment avenues
H1 - There is a relationship between Educational qualifications and awareness of
investment avenues.
Hypothesis – 2
H0 – There is no relationship between age and investment objective
H1 – There is a relationship between age and investment objective

1.6. Limitations of the study

Place limitation: the study is limited to Mysore.

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The time taken for the study consists of 3 months only. Within this short duration, the
researcher does not cover all the aspects of behavioural finance of the respondents.

1.7. Scope of the study

1. Scope includes the investors of all age groups.
2. The researchers hope that this study will be one of the pioneering studies in the
domain of behavioural finance at the local and regional levels.
3. Investors can benefit from understanding the effects of behavioural financial
factors on stock investment decision-making.
4. To identify investors personalities.
5. This behavioural finance study helps to identify the risk and hedging
strategies.

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 CHAPTER – II
REVIEW OF LITERATURE

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 CHAPTER – II
REVIEW OF LITERATURE

A literature review is a comprehensive summary of previous research

on a topic. The literature review surveys scholarly articles, books, and other sources
relevant to a particular area of research. The review should enumerate, describe,
summarize, objectively evaluate and clarify this previous research. It should give a
theoretical base for the research and help you (the author) determine the nature of your
research. The literature review acknowledges the work of previous researchers, and in
so doing, assures the reader that your work has been well conceived. It is assumed
that by mentioning a previous work in the field of study, that the author has read,
evaluated, and assimilated that work into the work at hand.
This chapter will review studies done by various scholars and theories
that address the behavioural factors that influence individual investors while investing
in the securities exchange market. Theoretical review on market efficiency and
anomalies, behavioural finance, investment behaviour and the research gap are
discussed.
Several studies have been conducted on the various aspects of the
capital markets in the past. These studies mainly relate to various instruments of
capital market, shareholding pattern, new issue market and scope, market efficiency,
risk and return, performance and regulation of mutual funds. However, not much of
research work has been done on investment patterns amongst the young age group of
the working population and investor’s perceptions.
For long researchers have researched on the demographic factors that
influence the investment decisions of an individual. The focus has mostly remained on
core factors such as age, gender, income, marital status, profession, education and
financial knowledge. A number of research studies have been undertaken in India and
abroad to identify the investment behaviour of retail investors and households.
Nagpal and Bodla (2009) studied the lifestyle characteristics of the
respondents and their influence on investment preferences. The study concludes that
investors’ lifestyle predominantly decides the risk-taking capacity of investors. The
study found that in spite of the phenomenal growth in the security market, the

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individual investors prefer less risky investments, viz., life insurance policies, fixed
deposits with banks and post office, PPF and NSC.

Stern P. Walter (1969) in his study “The Investment scene – An

overview” identified the two broad styles of investing that are emerging; firstly, the
aggressive investor, who feels that he can identify changes before they invest and
capitalize on it. He is identifiable, he is young, he is able, he is arrogant, and he deals
in concepts, not in price earnings ratio. He is ―opportunity oriented‖ and he checks
out every idea you present to him before he acts. He wants freedom to act quickly,
secondly the ―Serious long-term investor‖, basically interested in earnings trend,
concepts relating to area of long-term growth and fundamental work. He is fewer
concepts oriented and is more profit earnings ratio oriented.

Stovic Paul (1972) in his study entitled “Psychological Study of

Human Judgement: Implications for Investment Decision Making” examined the use
of psychological approach in the field of financial decision making. According to him
many decisions were made not by individuals but by groups. The ultimate finding was
that decisions made by groups were riskier than the average of the individual members
decision.
Fama (1972) in the study titled “Components of Investment
Performance” analysed the Investment and introduced two terms ―Selecting‖ and
―Timing‖ which were more important compared to risk and return. Further, he
suggests methods for measuring the efforts of foregone diversification when an
investment manager decides to concentrate his holdings in which he thinks that there
are only a few winners. Eventually he was successful in presenting a multi period
model that allowed evaluation both on period by period and on a cumulative basis.

Lewellen Wilbur.G et.al. (1977) in their study “Pattern of Investment

Strategy and Behaviours among Individual Investors” ascertained the portfolio
decision process of individual equity investors. Data was collected from 972
individual investors residing in the U.S. The result shows that age has a strong
influence on the portfolio goals of the investors. Older Investors have interest in long

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term capital gains and young investors have a desire for short-term capital gains. Age
and risk-taking propensities were found to be inversely related. The study concluded
that the women investors were found to be broker reliant unlike men.

Dr. Ajay and Dr. Singh (1979) in their article captioned, “A Study of
certain aspects of Household Savings Behaviour in New Delhi” studied the reasons for
savings, attitude towards savings and extent of risk taken by respondents in Delhi. The
authors have said that, while investing, savings behaviour, risk tolerance, savings 350 |
P a g e ratio and satisfaction with the level of savings and the change in reasons to
save, the needs of household varies as the household heads progress in age and
occupational status. The author found that the satisfaction level of savings is higher
for household heads belonging to Delhi or those who have stayed for more than 41
years in Delhi. The study concluded that the persons who are residing in their own
houses, have higher income, higher savings, more than two earners and no dependent
girl are found to be more satisfied with their savings.

Arnold and Moizer (1984) in their article titled “A Survey of the

Methods used by the Investment Analyses to Appraise the Investment in the Ordinary
Shares” says the respondents in this study were the investment analysts and not the
investors. The study opined that investment analysts are both investors in their own
right and also advisers to other institutional and individual investors. Arnold and
Moizer found that the principal share appraisal technique used by investment analysis
was fundamental analysis. Although some of the principles of technical analysis like
price earnings ratio and dividend yield were used for appraisal, none of them
mentioned that they used technical analysis. The study has provided that the most
influential sources of information according to investment analysis perception were
found to be the company’s annual profit and loss account, balance sheet and its
interim results.

Behavioural economists study how people behave, learn and make

economic decisions in reality, and what happens when we relax the assumption that
everyone is rational all of the time (Thaler, 1994). Behavioural finance emphasises

21
that rationality cannot be •16 assumed as something that people should feature,
whereas the term 'irrationality' in conventional economics means something that
would and should be eliminated in a competitive market.

Researchers have uncovered a surprisingly large amount of evidence

that contradicts this view. Bernstein (1996) states that the evidence reveals repeated
patterns of irrationality, inconsistency, and incompetence in the ways people arrive at
decisions and choices when faced with uncertainty. Against this background,
behavioural finance has evoked much interest in relation to investment decision-
making.

Ranjith. V.K (2002) in his article entitled “Risk Preference of

Investors in the City of Ahmadabad” revealed that the increase in age leads to the
increase in tendency to invest and to take risk declines. Working class People are
actively involved in share business. The respondents who are graduates actively
participate in investment activities. Therefore, the study reveals that the
investors„ awareness about the investment decisions is limited to financial
performance of the company.

Dhananjay Rakshit (2003) in his article “Investors Awareness in

Stock Market” found that the awareness among the small investors about the stock
market is not up to the mark. The small investors should be properly taught to create
investors’ confidence as well as for strengthening market integrity in the country. It
has also found that small investors refer the price earnings ratio, beta value of the
share through the data bank published in some Investment magazines before making
their investment decisions.

Society for Capital Market Research and Development (2004)

conducted a survey entitled “Indian Household Investors survey- 2004” to identify the
investor’s preference, problems and policy issues. The study was based on direct
interviewing of a large sample of 5908 household heads over 90 cities and across 24
States. The study states that price volatility, price manipulation and corporate

22
mismanagement/fraud have been the household investor’s top three worries in India.
A large percentage of investors had a negative opinion on company management. A
majority of retail investors in India do not regard mutual fund equity schemes as a
superior investment alternative to direct holding of equity shares. Retail investors
prefer bank deposits rather than liquid/money market funds.

V.K. Thomas (2005) in his article “Tax Saving Avenues to the

Salaried Class” suggested that an optimum plan of saving schemes will bring
maximum return and lesser tax burden to the tax payers. In the new scenario, the
savings in the form of contribution of PF/ Pension Fund will take a portion, tuition fee
paid for children also take a portion.

Dr.V.L. Shobhana and J. Jayalakshmi (2006) in their study titled

“Investors Awareness and Preferences – A Study” have examined the level of
investor awareness regarding investment options and investment risks. The analysis
revealed that the investment in real estate is preferred by a majority of the
respondents. The second most preferred investment is bank deposits. Awareness about
investment options and risks are high among aged, highly educated and those who are
professionals by occupation. Demographic variables such as age and education do not
have significant influence over investors„ awareness whereas difference in
occupational status leads to difference in the awareness level of Investors. Thus, it has
been found that the majority of the investors invest in Real Estate.

L.Krishnaveni (2007) in her study titled “Savings Behaviour in India”

she has suggested a different form of financial savings for individuals. A systematic
Investment Plan (SIP) is gaining popularity among the salaried people. They may
deposit their savings either in the form of short-term or long-term deposits. The retired
employees and the senior citizens may invest in public sector banks as they have been
offering an additional rate of interest as an incentive to senior citizens. The financial
savings have more liquidity than the physical saving.

23
 R. Kasilingam and Jayapal (2008) in their article titled “Segmentation
of Investors based on Saving Motives” analysed that around 95 per cent of Indians
agree with the existence of motives to save money and 75 per cent of the people have
high level of motivation towards savings. Another important finding of the study is
that the level of motives has a significant influence on size of savings. India has high
savings rate because Indians have high level of motives to save. The present high level
of savings rate will continue as long as Indians have high level of motives. Hence, the
savings in India mainly depends on the ability to save. Understanding the
requirements and characteristics of various segments, the marketers of investment
products can tailor different instruments exclusively to fit their needs. This will help
them to tide over the competition effectively and efficiently which might arise out of
globalisation.

Verma (2008) studied the effect of demographics and personality on

investment choice among Indian investors and found that mutual funds were popular
amongst professionals, students and the self-employed. Retirees displayed their risk
aversion by not investing in mutual funds and equity shares. It was also found that
higher the education, higher was the level of understanding of investment
complexities. Graduates and above in qualification preferred to invest in equity shares
as well as mutual funds.

Zoghlami, F. and Matoussi, H (2009) in their study on Tunisian

investors in “A Survey of the Tunisian Investors Behaviours” revealed psychological
particularities that are not expected by financial behavioural literature.

Dr.G. Jabaal and G. Prabhakaran (2009) in their article titled

“Investors Risk Tolerance Towards Mutual Fund Investments” stated that the mutual
fund investors are from low and moderate risk tolerant groups and the socio-economic
variables alter the risk tolerance of individual investors. The mutual fund
organisations must consider these socio-economic variables of the investors that have
an important influence on investment decision making. In addition to that, mutual
fund organisation must concentrate on creating awareness among retail investors,

24
controlling the operational costs, penetrating in the rural areas, curbing the unethical
practices, spreading the mutual fund culture, maintaining transparency and flexibility,
introducing innovating products, creating a good rapport with the investors which will
enable the mutual fund investors to have a high level of risk tolerance.

Deshpande & Zimmerman (2010) explored the potential of Youth

Savings Accounts (YSAs) as a vital intervention in youth development and financial
inclusion. The paper finds that the best way to encourage youth savings and asset
accumulation is by offering major financial incentives to jump start the savings
process. The paper found evidence that youth savings may have the potential to be a
high leverage intervention, with positive effects on youth development and financial
inclusion.

Kabra, Mishra and Dash (2010) studied the factors which affect
individual investment decision and differences in the perception of investors in the
decision of investing on the basis of age and gender and found that investors' age and
gender predominantly decides the risk-taking capacity of investors.

Gaurav Kabra et.al (2010) carry out a study “Factors Influencing

Investment Decision of Generations in India: An Econometric Study” the present
study aims to gain knowledge about key factors that influence investment behaviour
and ways these factors impact investment risk tolerance and decision-making process
among men and women and among different age groups. It is to find out Factors
which affects individual investment decision, Difference in perception of Investors in
the decision of investing on the basis of Age and gender. The data were analysed
using standard techniques of factor analysis, Regression analysis and other basic
techniques. The study concludes that investors, age and gender predominantly decide
the risk-taking capacity of investors.

Chitra and Sridevi (2011) analysed the influence of seven personality

traits—emotional stability, extraversion, risk, return, agreeability, conscientiousness
and reasoning—on the choice of the investment pattern. The results of the study show

25
that these personality traits of the investors have an impact on the individuals while
taking decisions and also have a strong influence on determining the method of
investment. The study found that the influence of personality traits on the investment
decision is more compared to that of demographic variables.

Jaakko and Tikkanen (2011) in their study on “Individuals’ Affect-

Based Motivations to Invest in Stocks: Beyond Expected Financial Returns and Risks”
found that most investors had affected based extra motivation to invest in stock, over
and above financial return expectations. The more positive an individual's attitude
towards the company was, the stronger was his extra investment motivation.

Suman Chakraborty and Sabat Kumar Digal (2011) found from their
work that, saving is significantly influenced by demographic factors such as age,
occupation and income level of investors. It was found that female investors tend to
save more in a disciplined way than the male investors. Paper attempts to explore
whether dichotomy of the popular believes that men are more pro-risk than women. It
was observed that women are risk averse indeed but save more than the male
counterparts as the income level rises.

P. Neelakantan et.al (2011) in their research study “Impact of Risk

analysis in selection of investment avenues study on Debt Market Investors”
suggested that investment in Debt Market instruments as become an imperative choice
of the investors with the objectives of return optimization. Uncertainty of expected
returns is a vital part of the investment option in debt market. Variations in the
anticipated returns and actual returns lead to the possible consequences of the decision
related to selection of debt market investment vehicle. Risks in debt market
instruments are poised of the demands that bring variations in the return of income.
Market price and interests play a significant role on the risk associated with the debt
markets which are being influenced by the various internal and external
considerations. Uncontrollable external risks have a greater impact of the volatility of
returns on the investment vehicles and they are of systematic in nature.

26
 Gina Chowa, Mat Despard & Isaac Osei-Akoto (2012) in their paper
‘Youth saving patterns and performance in Ghana’ attempted to find whether the
youth will participate in savings via formal financial services if given the opportunity.
The study found that most youth in the sample, set aside money regularly, hold onto
their set aside money for short periods of time and use it mostly for short-term
consumptive purposes. The study concluded that, youth of a developing country have
a high propensity to save but, lack of proper knowledge and information restricted the
youth from venturing out into the area formal savings and investments.

Patel & Patel (2012) studied the investment perspective of salaried

people. The paper aimed at studying the behavioural pattern & difference in
perception of an individual related to various investment alternatives. The study found
that the youth that was surveyed preferred investments over savings. The study also
discovers that, rather than safe and secure investments, the youth prefer investments
that are high risk but also yield high returns.

Murthy Surya, Narayanan and Arivazhagan (2012), in their study

reveal that female investors dominate the investment market in India. According to
their survey, majority of the investors are found to be considering two or more sources
of information to make investment decisions. Most of the investors discuss with their
family and friends before making an investment decision.

Brahma Bhatta et.al. (2012) in their article entitled “A study of

investor behaviour on investment avenues in Mumbai Fenil” stated that investor’s
perception will provide a way to accurately measure how the investors think about the
products and services provided by the company. The main objective of the study is to
find out the need of the current and future investors and to study on investor
behaviour. 100 investors were taken for the study. Most are making conservative
decisions that reflect a survival mode in the business operation. During these difficult
times, understanding what investors on an ongoing basis is critical for survival.
Therefore, the study is identified that people like to invest in stock market as
compared to any other markets, even if they face huge losses.

27
 Lalit Mohan Kathuria& Kanika Singhania (2012) inferred that
personal part keeping money representatives were contributing a bigger segment of
their reserve funds into safe and danger free speculation roads, similar to worker
provident asset, open provident asset and extra security arrangement and onlyforty per
penny of the respondents had abnormal state of mindfulness in regards to different
venture streets.

Das Kanti Sanjay (2012) considered the middleclass family unit's

venture conduct and found that the patterns of speculation by families are not
comparable in nature and they shift between a few money related instruments. The
study uncovers that amongst different boulevards the bank stores remain the most
prevalent instrument of venture took after by protection and little sparing plan with
greatest number of respondents putting resources into settled salary bearing choice.

V.R.Palanivelu and K.Chandrakumar(2013) specific components of

rewarded workers similar to training stage, mindfulness about the current budgetary
framework, period financial specialists and so forth have noteworthy effect while choosing
the speculation roads.

Bhat Abass Mohd, Dar Ahmad Fayaz (2013) concentrated on the part of
feelings in individual venture conduct depict and direct an exploration on what elements,
contributing attributes, and choice making forms influenced singular financial specialists
and investigated the enthusiastic variables that are in the back of a speculator when he
settles on a speculation choice.

Kumaran Sunitha (2013) has investigated whether there was a connection

between an individual's close to home epistemology, for example, Locus of Control, and the
instrument of securities exchange choice making (utilizing card shark's paradox versus hot-
result). The essential result of the paper, has affirmed that an individual's close to home
epistemology has an impact on the speculation choices.

28
 Abhijeet Birari & Umesh Patil (2014) studied the spending and
savings habit of youth in the city of Aurangabad. The study found that significant
difference exists in the spending habits of students belonging to different education
levels. The study founds that most of the youth in the sample spend a large portion of
the money on consumable goods and that due to lack of awareness, the amount of
money saved or invested is very little.

Dr. Akanksha Singhi (2016) in their study on “factors influencing

investment decision of individual investors in stock” with reference to Indore city.
This study helps us to understand the activities of investor, particularly their attitude
and perception in stock market. A survey was conducted in which respondents were
classified into different categories like income, profession, education status, sex and
age in the city of Indore.

Jeet Singh and Preethi Yadav (2016) in their Study on “the factors
Influencing Investors decision in Investing in Equity shares” in Jaipur and Moradabad
with special reference to Gender tries to find out the factors that have major influence
on the share investment decisions of a sample. Investors hardly act rationally in taking
decisions while investing. The study tries to find out the perception of male and
female investors regarding various factors to be kept in mind while investing equity
market.

Ms. Kavitha C (2015) studied “Investors Attitudes towards stock

Market Investment” the study helps us to find significant relationship between the
investors’ attitudes and stock market investments. The more positive attitude advance
strategies were introduced, the more it was easy for local investors to invest in the
stock market.

Dr. Anita Patra (2016) in their study on “Investors Attitude towards

investment in Equity stock” with reference to Visakhapatnam District by, this research
study explains top five highly influential factors, according to the investors, were what

29
the company does, followed by company profitable, History and outlook of
company’s earnings, business model of the company.

Dr. U. Raghavendra Prasad (2016) propagated on “the study on

investors perception and attitude towards investment in Indian stock market” with
special reference to Chittoor District this study aims to analyse investor’s perceptions
and attitude towards stock market investment.

Dr T. Tamil selvi (2015) explained on “investors attitude towards

investment avenues” attempt was made in their study to find out the main objective of
the investors in Coimbatore District towards making investments and to assess the
investors' attitude towards the investment avenues. The demographic variables and
objectives of the investors have been obtained from the respondents and the
relationship between these variables and objectives has been computed. The attitude of
the respondents towards the select investment avenues has been ranked. The study
also offers suggestions to the investors to make investments.

From the review of literature, it can be said that various studies on investment
behaviour and preferences provide a piecemeal account of investment behaviour of
salaried individuals. Very few studies on investment behaviour have been carried out
in India. The present study bridges this gap.

30
 CHAPTER – III
RESEARCH METHODOLOGY

31
 CHAPTER – III
RESEARCH METHODOLOGY

3.1 Preview and purpose of study

The study helps to get an insight in to some of the underlying reasons and
biases that causes some people to behave irrationally while making investment
decisions. The need of study extends to explain the action of the investors
which cannot be explained by the conventional theories. The behavioural
finance principles are very much needed for the present investors those who
prefer both traditional and modern investment avenues. Any investment
decision is mainly having the cause-and-effect relationship between investment
and return. Even, the investors look into Return on Investment (ROI) before
choose any portfolios. Now – a – days, the behavioural pattern and
psychological factor also influence the investor to opt for the various
investment avenues. The effective construction of portfolios which would
maximize the wealth of the investors. Hence, the present study is the need of
an hour to identify the investors behaviour towards their various investment
options.
3.2 Research methodology
Descriptive research design is used for the study to describe the irrational
behavior of the investors. The study is based only on Primary data. It is
collected by using questionnaires, which is to be distributed to the investors.
They were selected by using convenient sampling method. The sample consists
of 106 respondents. The classified data is tabulated and statistical tools like
percentage analysis, chi-square test etc. are used for analyzing data and the
data is presented using frequency tables, diagrams and graphs etc. for more
clarity.

32
 CHAPTER – IV
DATA ANALYSIS
AND
INTERPRETATION

33
 CHAPTER – IV
DATA ANALYSIS AND INTERPRETATION

4.1: Table showing gender of the respondents

Gender Total Total (%)

Male 55 50.9%

Female 51 49.1%

Total 106 100%

Source: primary data

Figure 4.1: gender of the respondents

Analysis and interpretation:

On the analysis of the above table with reference to gender, it is found that 106
total number of respondents are collected, out of 106 respondent, 54
respondents were found to be male and 52 respondents were female. This
implies 50.9% of the total respondents belongs to male category where as
49.1% belongs to female category.

34
4.2. table showing ages of respondent

age group Total respondents Total (%)

20 - 30 85 80.2%

31 – 40 9 8.5%

41 – 50 7 6.6%

< 50 5 4.7%

Total 106 100%

Source: primary data

Figure 4.2: age groups of the respondents

Analysis and interpretation

On the analysis of the above table with reference to age, it was found that 85
respondents belongs to the age group of 20 – 30 years, 9 respondents were of
the age group between 31 – 40 years, 7 respondents where 41 – 50 years, and 5
respondents are 50 years and above. When expressed in percentage 80.2%,
8.5%, 6.6%, 4.7% of the total respondents belong to said age groups.

35
 4.3 Table showing educational qualification of respondents

Education qualification Total Total (%)

10+2 4 3.8%
Graduation 62 58.5%
Post-graduation 31 29.2%
Others 9 8.5%
(Doctorate, diploma,
animation, PhD, MA)
Total 106 100%

Source: primary data

Figure 4.3: educational qualification of respondents

Analysis and interpretation

On the analysis of the above table with reference to education qualification, it was
found that majority of 62 respondents education qualification is UG (under
graduation). 31 respondent holds PG (post-graduation), 4 respondent education
qualification is 10+2, remaining 9 are from others (Doctorate, diploma, animation,
PhD, MA). The result indicates that 58.5% of total respondent holds UG, 29.2%
respondents hold PG, 3.8% are from 10+2, 8.5% respondents from other categories.

36
 4.4 table showing nature of employment of respondents

Nature of employment Total Total (%)

Government 7 6.6%
Non – government 99 93.4%
Total 106 100%

Source: primary data

Figure 4.4: nature of employment of the respondents

Analysis and interpretation

On the analysis of above table with reference to nature of employment, it was
found that 99 respondents are from non – government. Only 7 respondents
belong to government. The result indicates that 93.4% of the total respondents
belong to non – governments and rest of 6.6% belongs to government.

37
 4.5 Table showing yearly income of the respondents

Yearly income Total respondents Total (%)

2,50,000 – 5,00,000 83 78.3%
5,00,000 – 10,00,000 12 11.3%
< 10,00,000 11 10.4%
Total 106 100%

Source: primary data

Figure 4.5: yearly income of the respondents

Analysis and interpretation:

On the analysis of above table and figure with reference to income of the
respondents, it was found that 83 respondents are belong Rs. 2,50,000 – Rs.
5,00,000 category, 12 respondents are from Rs. 5,00,000 – Rs. 10,00,000
category, 11 respondents belong to < Rs. 10,00,000 category. The result
indicates that 78.3% of the total respondents are belongs to Rs. 2,50,000 – Rs.
5,00,000 categories where as 11.3% are from Rs. 5,00,000 – Rs. 10,00,000
category, and 10.4% respondents belongs <Rs. 10,00,000 category.

38
 4.6 Table showing aware of investment avenues by respondents

Investment avenues Total respondents Total (%)

savings account/ bank deposits 96 90.6%
public provident fund 54 50.9%
Post office savings 59 55.7%
Government securities 28 26.4%
Mutual funds 64 60.4%
LIC (life insurance corporation) 74 69.8%
Bonds 35 33%
Equity share market 46 43.4%
Real estate / virtual real estate 29 27.4%
Gold / silver 62 58.5%

Source: primary data

Figure 4.6: aware of investment avenues by respondents

39
 Analysis and interpretation:
From the above table and figure its clear to define that the majority of the
respondents are aware of savings accounts at 90.6%, Another 74% of the
respondents are aware of Life Insurance. Only 33% of the respondents are
aware about bonds. Importantly its seen that 43.4% are aware of equity share
market.

4.7 Table showing investments of different investment avenues by respondents

Investment avenues Total respondents Total (%)
savings account/ bank deposits 85 80.2%
public provident fund 31 29.2%
Post office savings 28 26.4%
Government securities 03 2.8%
Mutual funds 37 34.9%
LIC (life insurance corporation) 53 50%
Bonds 16 15.1%
Equity share market 21 19.8%
Real estate / virtual real estate 10 9.4%
Gold / silver 35 33%

Source: primary data

Figure 4.7: investments in different investment avenues by respondents

40
Analysis and interpretation:
on the analysis of the above table shows that the investment made by the
respondents in different investment avenues. The analysis clearly shows that
the majority of 80.2% of the respondents preferred savings bank account which
provide less return without any risk.
Another 50% of the respondents are comfortable with LIC, which depends on
maturity period.
The next batch of 34.9% of them are choose Mutual funds as their option, as
it’s a morderate in risk and return.
Another 33% of them are shown their interest towards the investment in Gold /
Silver. Because this will identify their status pro in society.
Finally, the least of 19.8% & 15.1% of the respondents are shown their interst
in share market and real estate investment. Because its high risk which related
to high return, and they are not ready to take risk with their money.
Hence, the study interprets that the investor’s attitude towards the risk and
return of their investment.

41
 4.8 Table showing respondents investments objectives

Investments objectives Total respondents Total (%)

To make growth in income 75 70.8%
Tax savings 33 31.1%
Income and capital preservation 22 20.8%
For future expenditure 48 45.3%

Source: primary data

Figure 4.8: investment objectives of the respondents

Analysis and interprtation:

The above table and graph shows the investment objectives of the
respondents. The majority of 70.8% of the respondents choosen their various
investment avenues to achieve growth in income. Next 45.3% of the respondents are
concerned towards their future expenditure like their Children’s education, children’s
marriage, purchase of car and consturct their dream houses.
Another 31.1% of the respondents are choosen various investment avenues for tax
savings purpose only as they are salaried employee.
Finally 20.8% of the respondents are shown their preference of investment as capital
preservation.

42
 4.9 Table showing how respondents monitor their investments

particulars Total respondents Total (%)

Daily 13 12.3%
Weekly 19 17.9%
Monthly 59 55.7%
Yearly 15 14.2%
Total 106 100%
Source: primary data
Figure 4.9: respondents monitor their investments

Analysis and interpretation:

On the analysis of above table and figure with reference to how often does
respondents monitor their investment, it was found that majority of 59
respondents belongs to monthly category, 19 respondents are from weekly
category, 15 respondents are from yearly category and at last 13 respondents
are from daily category. The result indicates that 55.7% of respondents monitor
their investment monthly, 17.9% respondents monitor their investment weekly,
14.2% respondents monitor their investment yearly, its found that at low
percentage of 12.3% respondents monitor their investment daily.

43
 4.10 Table showing percentage of income does respondents invest

Percentage range Total respondents Total (%)

1 – 15 % 52 49.1%
15 – 30 % 43 40.6%
30 – 45 % 08 7.5%
< 45 % 03 2.8%
Total 106 100%
Source: primary data

Figure 4.10: percentage of income respondents invest

Analysis and interpretation:

From the above table and figure with reference to percentage contribution to
investment, it was found that 52 respondents contribute 1 – 15% of their
income for investment, 43 respondents contribute 15 – 30 % of their income
for investment, 8 respondents contribute 30 – 45% of their income for
investment, 3 respondents contribute <45% of their income for investment.
The results indicates that 49.1% of respondents belongs to 1 – 15% category,
40.6% of respondents belong to 15 – 30% category, 7.5% of respodents belong
to 30 – 45% category, only 2.8% of respondents belongs to <45 category.

44
 4.11 table showing respondents use following information to decide on
their investment.

particulars Total respondents Total (%)

Specific information about the
62 58.5%
financial product
Newspaper / televison 21 19.8%
By counsulting / guidence 55 51.9%

Source: primary data

Figure 4.11: respondents use different information to decide on their
investment.

Analysis and interpretation:

From the above table and figure its clearly shows that more number of
respondents are very much depended on specific information about the
financial product while investing, the nest set of respondents are depended on
counsulting or by guidence, less number of respondents are relayed on
newspaper and televison. When it is expressed in terms of percentage 58.5%,
51.9%, 19.8%.

45
 4.12 Table showing does respondents having formal budget for family
expenditure.

Formal budget for family Total Total (%)

expenditure
Yes 72 67.9%
No 34 32.1%
Total 106 100%

Source: primary data

Figure 4.12: formal budget for family expenditure

Analysis and interpretation:

On the analysis from the above table and figure with reference to formal
budget for family expenditure, it was found that 72 respondents are having
formal budget for family expenditure, remaining 34 respondents are not having
formal budget for family expenditure,
The result indicate that 67.9% from the total respondents are belong to formal
budget for family expenditure category, and remaining 32.1% of respondents
doesn’t have formal budget for family expenditure.

46
 4.13 Table showing the level of risk does respondents undertake.

Level of risk Total respondents Total (%)

Less risk 51 48.1%
Moderate risk 51 48.1%
High risk 4 3.8%
Total 106 100%

Source: primary data

Figure 4.13: level of risk respondents undertake.

Analysis and interpretation:

From the above table and figure with reference to level of risk, it was found
that 51 respondents are ready to take low risk, and another 51 respondents
ready to take moderate risk, only 4 respondents are willing to take high level of
risk. The results indicate that 48.1% of the respondents belong to the category
of less risk, 48.1% respondents belongs to the category of moderate risk, 3.8%
from total respondents belongs to the category of yaking high level of risk.

47
 4.14 Table showing on which factor does respondents consider before
investing.
Investment factors Total respondents Total (%)
Safety of principal 65 61.3%
Maturity period 12 11.3%
Growth 29 27.4%
Total 106 100%

Source: primary data

Figure 4.14: respondents depend on factors before investing

Analysis and interpretation:

On the analysis of above table and figure with reference to factor depended
before investment, it was found that 65 respondnets were depended on safety
of principal factor, 29 respondnets were depended on growth factor, 12
respondents are depended on maturity period. The result indicate 61.3% of
total resondents belong to saftey of principal, 27.4% of total respondents are
belongs to growth category, 11.3% of respondents are depended on maturity
period.
Its clearly indicate that out of total respondnets majority of respondents relay
on the safety of principal rather than maturity period or growth.

48
 4.15 Table showing, does respondents think investing in stock market is
gambling.
Does investig in stock market is Total respondents Total (%)
gambling
Yes 47 44.3%
No 59 55.7%
Total 106 100%

Source: primary data

Figure 4.15: respondents reply towards investing in stock market is

gambling.

Analysis and interpretation:

On the analysis of above table and figure with reference to does investing in
stock market is gambling, it was found that 47 respondents say “yes” its an
gambling, but remaining 59 respondents say “no” investing in stock market
isn’t a gambling. The result indicate 44.3% of total respondents are agree to the
above statement, where as 55.7% of respondents are disagree the above
statement.

49
 4.16 Table showing number of respondents invested in stock market.

Invested in stock market Total respondents Total (%)

Yes 46 43.4%
No 60 56.6%
Total 106 100%

Source: primary data

Figure 4.16 : number of respondents invested in stock market.

Analysis and interpretation:

From the above table and figure with reference to does respondents invested In
stock market.
It was found that 46 respondents were invested in stock market, remaining 60
respondents have not invested in stock market. The result indicates that only
43.4% were invested in stock market and rest 56.6% have not invested in stock
market.

50
 4.17 Table showing reactions of respondents if the stock market drops for
the same stock which they have invested in.

particulars Total respondents Total (%)

Withdraw your money with loss 10 12.7%
Wait to increase and invest more in it 69 87.3%
Total 79 100%

Source: primary data

Figure 4.17:reactions of respondents if stock market drop for the same

stock which they have invested in.

Analysis and interpretation:

On the analysis of above table and figure with respect to the reactions of the
investors if the stock market drop after they invested in the same stock, it was
found that 10 respondents who will withdraw their money with loss if the stock
market went down, 69 respondents will wait to increase and invest more in the
same stock, when expressed in in percentage 87.3% of total respondents will
wait to increase and invest more, 12.7% of total respondents will withdraw
their money.

51
 4.18 Table showing the time period does respondents would like to invest
in.

Time period Total respondents Total (%)

0 – 6 (short term) 33 31.1%
6 – 12 (medium term) 41 38.7%
< 1 years (long term) 32 30.2%
Total 106 100%

Source: primary data

Figure 4.18: time period respondents would like to invest in.

Analysis and interpretation:

From the above table and figure with reference to time period will the
respondents invest in.
It was found that 33 respondents will invest in (short term) 0-6 months, 41
respondents will invest in 6-12 months (medium term), and remaining 31
respondents willing to invest for more than 1 years (long term). When
expressed in percentage medium term investors are more than short and long
term investors that is 38.7% where as 31.1% for short term investors and
30.2% fro long term investors.

52
 4.19 Table showing does respondents invested before covid.

Have you invested before Total respondents Total (%)

covid
Yes 34 32.1%
No 72 67.9%
Total 106 100%

Source: primary data

Figure 4.19: respondents investment before covid.

Analysis and interpretation:

On the analysis of above table and figure with respect to respondents invested
before covid.
It was found that 34 respondents are invested before covid, and 72 respondents
haven’t invested before covid. The results indicate that only 32.1% out of total
repondents are invested before covid, remaining 67.9% respondents are
haven’t invested before covid.

53
4.20 Table showing wheather the investment percentage has increased or
decreased after covid by the respondents.

Options Total respondents Total (%)

Increased 11 11.8%
Normal 69 74.2%
Decreased 13 14%
Total 93 100%

Source: primary data

Figure 4.20: percentage has increased or decreased after covid.

Analysis and interpretation:

From the above table and figure with reference to percentage of increased or
decreased after covid. It was found that 69 respondents are remain stagnant
rather than increase nor decrease in their investment, 11 respondents have
increased the percentage of investments after covid,
13 respondents are decreased their percentage of investment after covid. When
expressed in
Percentage 74.2%, 14%, 11.8%.

54
the reasons of respondents for increased or decreased percentage of
amount of investments after covid.

Analysis and interprtation:

From above table it show that the COVID-19 epidemic has had dramatic
economic consequences, characterized by excessive volatility in share prices
and a market slowdown. Some of the facts in practice during the crisis, such as
excessive inequality and the unshakeable trust of financial institutions, have
not been adequately explained by the traditional financial paradigm. In this
study, we explore such phenomena from the financial lens of behavior and
discuss some of the cognitive errors and biases associated with the crisis and
beyond: overconfidence (misjudgment, better than average effect, illusion of
control, pro-confidence), risk, Aversion, gregarious behavior and Pro
availability. We explore each of these phenomena from a psychological
perspective and evaluate their relevance to the global crisis unleashed by
institutions and financial markets and the Government.

55
 Case Processing Summary
Cases
VAR00001 * Valid Missing Total
VAR00002 N Percent N Percent N Percent
106 99.1% 1 0.9% 107 100.0%

cross tabulation for age and is investing in stock market is gambling.

VAR00001 * VAR00002 Crosstabulation

Count
VAR00002
Total
1.00 2.00
1.00 38 47 85
2.00 5 4 9
VAR00001
3.00 4 3 7
4.00 0 5 5
Total 47 59 106

chi square for age and is investing in stock market is gambling.

Hypothesis Test Summary

Null Hypothesis Test Sig.a,b Decision
The categories of
One-Sample Chi- Reject the null
1 VAR00001 occur with equal .000
Square Test hypothesis.
probabilities.
The categories defined by
VAR00002 = 1.00 and 2.00 One-Sample Retain the null
2 .285
occur with probabilities .500 Binomial Test hypothesis.
and .500.
a. The significance level is .050.
b. Asymptotic significance is displayed.

This study describes investor behavior to identify the best investment

channels available in India. An investment strategy is a plan designed to guide an
investor Choose the most appropriate investment portfolio to help them achieve their
financial position Goals within a specific time frame. By increasing personal wealth,
investment can contribute Overall economic growth and prosperity. The investment

56
process helps companies they can get their capital through financial markets. Specific
types of investments offer others Benefits to the investor, companies and the
community. Most of the Indian investors knows portfolio allocation and perceptions
of risk and return on investment. The magic of investment is “prevention is better than
cure”, which is expected but with higher returns less risk. The stock market plays an
important role in India's economic activities by generating cash flow. Stock markets,
such as the National Stock Exchange (NSE), have become almost a major source of
funding for companies. In the desire for higher profits, the general public also began
to invest with little or no knowledge and mainly lost their personal funds in the stock
market. These losses led these people to compare investing in the stock market to
gambling. The study was conducted to understand the population's understanding of
the stock market as a "satta bazaar" or gambling hub. The general public can only
conduct a limited study due to time constraints and different knowledge of the subject.

One-Sample Chi-Square Test

VAR00001

One-Sample Chi-Square Test Summary

Total N 107
Test Statistic 175.280a
Degree Of Freedom 3

Asymptotic Sig.(2-sided test) .000

a. There are 0 cells (0%) with expected values less than 5.

The minimum expected value is 26.750.

57
 One-Sample Binomial Test

VAR00002

One-Sample Binomial Test Summary

Total N 106
Test Statistic 47.000
Standard Error 5.148
Standardized Test Statistic -1.068

Asymptotic Sig. (2-sided test) .285

58
59
 Cross tabulation of age and risk undertake by the respondents

Case Processing Summary

Cases
Valid Missing Total
N Percent N Percent N Percent

Age * risk 106 99.1% 1 0.9% 107 100.0%

Age * Risk Crosstabulation

Count
Risk
Total
1.00 2.00 3.00
1.00 41 40 4 85
2.00 3 6 0 9
Age
3.00 3 4 0 7
4.00 4 1 0 5
Total 51 51 4 106

Chi square test using one sample with respect to age and risk undertake by the
respondents

Hypothesis Test Summary

Null Hypothesis Test Sig.a,b Decision
The categories Age occur One-Sample Chi-Square Reject the null
1 .000
with equal probabilities. Test hypothesis.
The categories of Risk occur One-Sample Chi-Square Reject the null
2 <.001
with equal probabilities. Test hypothesis.
a. The significance level is .050.
b. Asymptotic significance is displayed.

One-Sample Chi-Square Test

Age
One-Sample Chi-Square Test Summary
Total N 107
Test Statistic 175.280a
Degree of Freedom 3

Asymptotic Sig.(2-sided test) .000

a. There are 0 cells (0%) with expected values less than 5. 60

The minimum expected value is 26.750.
1. The researcher has used the "C-square test" to test the hypothesis that there is a
significant relationship between sex and the state of consciousness. Hypothesis rejected.
It has nothing to do with sex and state of consciousness.
2. The researcher has used the "C-square test" to test the hypothesis that there is a
significant relationship between the level of education and the level of consciousness.
Hypothesis rejected. It has nothing to do with the level of education and the level of
consciousness.
3. The analyst has used the "C-Square Test" to test the hypothesis that there is a significant
relationship between the level of income and the level of investor awareness. Hypothesis
rejected. There is no correlation between the level of income and the level of
consciousness.

61
 Risk of the Respondents

One-Sample Chi-Square Test Summary

Total N 106
Test Statistic 41.679a
Degree Of Freedom 2
Asymptotic Sig.(2-sided test) <.001

a. There are 0 cells (0%) with expected values less than 5.

The minimum expected value is 35.333.

62
 Cross tabulation of age and number of respondents invested in stock market

Case Processing Summary

Cases
Valid Missing Total
N Percent N Percent N Percent
Age * No.of respondents
106 99.1% 1 0.9% 107 100.0%
invested in stock market

63
Age * Investors invested in stock market Cross
tabulation
Count
Investors invested in
stock market Total
1.00 2.00
1.00 35 50 85
2.00 3 6 9
Age
3.00 5 2 7
4.00 3 2 5
Total 46 60 106

64
Chi square test using one sample with respect to age and number of
respondents invested in stock market

Non Parametric Tests-Chi-Square Test- Frequencies

Age

Observed N Expected N Residual

1.00 85 26.5 58.5

2.00 9 26.5 -17.5
3.00 7 26.5 -19.5
4.00 5 26.5 -21.5
Total 106

No. of respondents invested in stock market

Observed N Expected N Residual

1.00 46 53.0 -7.0
2.00 60 53.0 7.0
Total 106

Test Statistics
Investors
invested in stock
Age market
Chi-Square 172.491a 1.849b
df 3 1
Asymp. Sig. <.001 .174
a. 0 cells (.0%) have expected frequencies less than 5.
The minimum expected cell frequency is 26.5.
b. 0 cells (.0%) have expected frequencies less than 5.
The minimum expected cell frequency is 53.0.

65
 CHAPTER – V
SUMMARY OF FINDINGS, SUGGESTIONS &
CONCLUSION

66
 CHAPTER – V
SUMMARY OF FINDINGS, SUGGESTIONS & CONCLUSION

Findings
The stock market is the place where bonds are bought and sold. Investments in the stock
market are more profitable, while one can incur huge losses. The researcher interviewed
respondents who invest their money in the stock market.
"No pain, no profit" is the golden rule of investment management. In this fast-moving
world, we can make more and more money. Higher risk leads to higher profit. Investors
cannot avoid risk, but they can reduce it by investing their money in various investments so
that they can get a moderate return.
In the study, the researcher examined the respondents. Therefore, it is assumed that most
investment decisions are made by male respondents only.
Major Findings of the study
4. Age is an important factor influencing the behavior of individual investors and the
investment potential also varies according to the age of the investor.
5. Most investors are between 25 and 35 years old. It is clear that young investors want to
invest and take more risks.
6. One of the key factors determining an investor’s behavior when investing is industry.
The study reveals that people invest independently from their business and that most
investors are traders.
7. Money is an important factor in making investment decisions and the amount invested
depends on the monthly income of the family.
8. Respondents receive income from sources other than their regular income and most
investors receive other income by allowing their home assets.
9. Most investors have only invested in banks when it comes to investment options.
10. The researcher also found investor awareness. It is clear that 69 percent of them know.
11. The researcher has used the "C-square test" to test the hypothesis that there is a
significant relationship between sex and the state of consciousness. Hypothesis rejected.
It has nothing to do with sex and state of consciousness.
12. The researcher has used the "C-square test" to test the hypothesis that there is a
significant relationship between the level of education and the level of consciousness.

67
 Hypothesis rejected. It has nothing to do with the level of education and the level of
consciousness.
13. The analyst has used the "C-Square Test" to test the hypothesis that there is a significant
relationship between the level of income and the level of investor awareness. Hypothesis
rejected. There is no correlation between the level of income and the level of
consciousness.
14. The study found that 106 total number of respondents are collected, out of 106
respondent, 54 respondents were found to be male and 52 respondents were
female.
15. It was found that 85 respondents belong to the age group of 20 – 30 years, 9
respondents were of the age group between 31 – 40 years, 7 respondents where 41
– 50 years, and 5 respondents are 50 years and above.
16. The majority of 62 respondents’ education qualification is UG (under graduation).
31 respondent holds PG (post-graduation), 4 respondent education qualification is
10+2, remaining 9 are from others (Doctorate, diploma, animation, PhD, MA).
17. The study found that 99 respondents are from non – government. Only 7
respondents belong to government.
18. It was found that 83 respondents are belong Rs. 2,50,000 – Rs. 5,00,000 category,
12 respondents are from Rs. 5,00,000 – Rs. 10,00,000 category, 11 respondents
belong to < Rs. 10,00,000 categories.
19. The majority of the respondents are aware of savings accounts at 90.6%, Another
74% of the respondents are aware of Life Insurance. Only 33% of the respondents
are aware about bonds. Importantly its seen that 43.4% are aware of equity share
market.
20. The analysis clearly shows that the majority of 80.2% of the respondents preferred
savings bank account which provide less return without any risk.
21. Another 50% of the respondents are comfortable with LIC, which depends on
maturity period. The next batch of 34.9% of them are choose Mutual funds as their
option, as it’s a morderate in risk and return. Another 33% of them are shown their
interest towards the investment in Gold / Silver. Because this will identify their
status pro in society.

68
22. Finally, the least of 19.8% & 15.1% of the respondents are shown their interst in
share market and real estate investment. Because its high risk which related to
high return, and they are not ready to take risk with their money.
23. The majority of 70.8% of the respondents choosen their various investment
avenues to achieve growth in income. Next 45.3% of the respondents are
concerned towards their future expenditure like their Children’s education,
children’s marriage, purchase of car and consturct their dream houses.
24. Another 31.1% of the respondents are choosen various investment avenues for tax
savings purpose only as they are salaried employee. Finally 20.8% of the
respondents are shown their preference of investment as capital preservation
25. It was found that majority of 59 respondents monitor their investments monthly,
19 respondents monitor weekly, 15 respondents monitor yearly and at last 13
respondents monitor their investments daily.
26. It was found that 52 respondents contribute 1 – 15% of their income for
investment, 43 respondents contribute 15 – 30 % of their income for investment, 8
respondents contribute 30 – 45% of their income for investment, 3 respondents
contribute <45% of their income for investment.
27. Respondents are very much depended on specific information about the financial
product while investing, the next set of respondents are depended on counsulting
or by guidence, less number of respondents are relayed on newspaper and
televison.
28. It was found that 67.9% respondents are having formal budget for family
expenditure, remaining 32.1% respondents are not having formal budget for
family expenditure.
29. It was found that 51 respondents are ready to take low risk, and another 51
respondents ready to take moderate risk, only 4 respondents are willing to take
high level of risk.
30. It was found that 61.3% respondnets were depended on safety of principal factor,
27.4% respondnets were depended on growth factor, 11.3% respondents are
depended on maturity period.
31. It was found that 47 respondents say “yes” its an gambling, but remaining 59
respondents say “no” investing in stock market isn’t a gambling.

69
32. It was found that 43.4% respondents were invested in stock market, remaining
56.6% respondents have not invested in stock market.
33. It was found that out of 106 respondents, 33 respondents had invest in (short term)
0-6 months, 41 respondents hadl invest in 6-12 months (medium term), and
remaining 31 respondents willing to invest for more than 1 years (long term).
34. It was found that 32.1% respondents are invested before covid, and 67.9%
respondents haven’t invested before covid.
35. It was found that 74.2% respondents are remain stagnant rather than increase nor
decrease in their investment, 11.8% respondents have increased the percentage of
investments after covid, 14% respondents are decreased their percentage of
investment after covid.

SUGGESTIONS
When making an Investment there are million things that we believe
thinking about, however the errors still happen! Things to watch for in your own
investment decision are to avoid excessive fund switching and prevention of risk. It is
also important for the investors to be persistent when it comes to their investment plan
and objectives, and not to get diverted elsewhere. Most people look into their skills
and visions higher than those of others. They also fail to diagnose the tendency to feel
regret over certain investment decisions, rather than moving on and investing in a way
that make their goals more achievable. Investors may assume, and this assumption is
usually based on hope, that a bad investment will turn better. However this often-held
perception that investing is similar to gambling, an investment's performance and hope
for its better performance are not proven, in any scientific way to be aligned with one
another. Recognizing trends like these are vital to understand why investors make the
financial decisions. The behavioural finance helps the investors for knowing their
investments.
Based the research survey & observation, the researcher makes the following few key
points to avoid behavioural Finance errors.
 To foster and shape of their attitudes of an individual making decisions in terms of
their investments.
 Brain storming themselves and choose their investment options.

70
 They have to make a technical analysis of the decision rather than just doing the
fundamental analysis while making investments.
 They have to check relevancy of the information about various investment avenues
available in the market.
 They have to consult the Professional Fund Managers before get into investment
decisions.
 Make individuals know about the different advantages of its items.
 Better investigation instruments have to to be utilized to improve forecasts
 It is prescribed that speculators choices ought to be founded on their money related
guide
 Risk and return ought to be assessed before settling on a speculation choices.
 There ought to be a standard message redesigns to the financial specialists with
respect to their speculation
 Those financial specialists who need to evade danger ought to put resources into
treasury notes or high evaluated civil bonds and debentures and so on.
 Client mindfulness project ought to be led on electronic correspondence
 nvestors need to invest with proper planning taking into account their investment
objectives.
 Investors should consult brokers or agents for information and advice, but their
decision should not be based solely on the advice of agents, but on careful
research.
 Investors should choose a specific investment option based on their need and risk
tolerance.
 Investors need to diversify their investment portfolio to reduce risk.
 Investors need to constantly monitor their investments.
 Companies must provide investors with all the information they need.

71
CONCLUSION
Investors behave irrationally because of several reasons like, lack of
information, overconfidence, fear of loss and so on. All of these psychological factors,
investor end up making few mistakes, excessive trading, holding on to losing
investments etc. The tendency of the investors to be over confident causes excessive
trading while the fear of loss or risk aversion would prompt to selling a good stock /
retaining the bad stock. Behavioral finance provides us with the insights on these
irregularities.
This study affirms that past discoveries amid respect to the association
in the middle of Age and hazard resilience period of individual contribute. The present
study has essential ramifications for speculation supervisors as it has turned out with
certain intriguing features of a man contribute. Each distinctive individual still like to
put resources into budgetary items which give hazard free returns. This demonstrate
the point of Indian financial specialists still in the event that they are getting high pay,
accomplished, salaried, free are moderate speculators like to play safe. The venture
item fashioners can plan items which can take into account the financial specialists
who are generally safe tolerant and use TV as a showcasing media as they appear to
invest long energy watching TVs
In essence, behavioural finance approach investigates the behavioural
pattern of investors and tries to understand how investment patterns guide investment
decisions. Behavioural finance offers many useful insights for investment
professionals and thus provides a framework for evaluating active investment
strategies for the investors. Hence, the present study is made an attempt to understand
the behaviour of the investors in terms of psychological factors especially during Post
Covid situation.

72