Project Final

"A STUDY ON ROLE OF INSTITUTIONAL
AND SMALL INVESTOR IN INDIAN CAPITAL MARKET "
A Project Submitted to
University of Mumbai for the partial completion of the degree of
Bachelor of Management studies in the field of finance
By
Varun Baheti
Under the guidance of

Dr. Lipi Mukherjee
RSET’S
Ghanshyamdas Saraf College of Arts and Commerce
Affiliated to the University Of Mumbai
S.V. road , malad west
Mumbai - 400064
(APRIL-2024)
RSET’S
Ghanshyamdas saraf college of Arts and Commerce
Affiliated to the University Of Mumbai
S.V. road , malad west
Mumbai -400064
CERTIFICATE
This is to certify that Mr. Varun Baheti , Roll no:__04_, has worked and duly completed his Project
Work for the degree of Bachelor of Management Studies under the Faculty of Commerce in the subject
of finance and her/his project is entitled, “ A study on Role of Institutional and Small Investor in
Indian Capital Market “ under my supervision.
I further certify that the entire work has been done by the learner under my guidance and that no part of
it has been submitted previously for any Degree or Diploma of any University.
It is his own work and facts reported by his personal findings and investigations.
Name & Signature of:
Project Guide: Principal:

Date:
External Examiner: College SealCollege

Seal
Date:
lOMoAR cPSD| 37280857
DECLARATION
I, the undersigned, Mr Varun Baheti, a student of Ghanshyamdas Saraf College of Arts

& Commerce, Malad (West) T.Y.B.M.S. SEMESTER – VI hereby declare that the work
embodied in this project work titled “A Study on Role of Institutional and Small
Investor in Indian Capital Market, forms my own contribution to the research work
carried out under the guidance of Dr . Lipi Mukherjee is a result of my own research
work and has not been previously submitted to any other University for any other
Degree/Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.
I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.
Name and Signature of the Student
Certified by
Name and Signature of the Guiding Teacher

ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so numerous and the depth
is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me the chance to
do this project.
I would like to thank my Principal Dr. Ashwat Desai for providing the necessary
facilities required for completion of this project.
I take this opportunity to thank our Vice-Principal (SFD) Dr. Lipi Mukherjee and BMS
Coordinator Prof. Prajna Shetty for their moral support and guidance.
I would also like to express my sincere gratitude towards Dr. Lipi Mukherjee whose
guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference books
and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my Parents and Peers who supported
me throughout my project
Executive summary
The purpose of choosing this topic was to understand the capital market of India in
detail and the Role of institutional and small investor in the capital market. The paper
gives detailed information about the capital market of India. Capital markets are where
savings and investments are channelled between suppliers—people or institutions with
capital to lend or invest—and those in need. Suppliers typically include banks and
investors while those who seek capital are businesses, governments, and individuals.
Capital markets are composed of primary and secondary markets. The most common
capital markets are the stock market and the bond market.
This paper discusses the various features, functions, types of capital market etc in detail.
The 1st chapter of this project is about the meaning definition, various capital market
instruments , Role of institutional and small investor ,etc . The 2nd chapter shows the
research design , objectives, sampling method , data collection method, etc. In this
particular project I have collected primary data as well as secondary data.
With the help of the primary data, the depictions of pie chart and bar graphs give us and
idea about whether the respondents are aware about the capital market or not. This
research paper contains the records of the responses.
In the conclusion, people should be made more aware about the capital market and its
benefits. There should be awareness programs, webinars, seminar, etc to make people
more aware about the capital market.
INDEX
Sr no topic Page no
1 Chapter 1 1-32
introduction
1.1 Meaning of 1-18

capital market
1.1.2 Definition of 1
capital market
1.1.3 Capital market 2
1.1.4 Features of 3
capital market
1.1.5 Functions of 4
capital market
1.1.6 Nature and 5
participants of
capital market
1.1.7 Capital market 5
instruments
1.1.8 Types of capital 12

market
1.2 Role of 19-26

Institutional
investor
1.2.1 Role of Insurance 19
Companies
1.2.2 Role of Mutual 20

funds
1.2.3 Role of banks 21
1.2.4 Role of Asset 23

Manager
1.2.5 Role of 24
Endowment
funds
1.2.6 Role of Pension 25

Funds
1.3 ROLE OF 27-32

SMALL
INVESTOR
1.3.1 Role of DAY 27
TRADER
1.3.2 Role of RETAIL 28
INVESTOR
1.3.3 ROLE OF 30
SWING
TRADER
1.3.4 ROLE OF 31
HEDGE FUND
INVESTOR
2 Chapter 33-38
2Research
methodology
2.1 Meaning and 33
definition
2.2 Research 35
objectives
2.3 Research design 36
2.4 Data collection 37

method
2.5 Sampling 38
2.6 Statistical tools 38

used
3 Chapter 3 39-45
review of
literature
4 Chapter 4- data 46-65
analysis and
interpretation
5 Chapter 5 66-68
conclusion
5.1 Findings 66
5.2 Suggestions 67
5.3 Conclusion 67
References 69
Webliography 71
appendix 72
CHAPTER 1 – INTRODUCTION
1.1-Meaning of capital market-

Capital markets are financial markets for the buying and selling of long-term debt or long-term
securities having a maturity-period (age) of one year or more. These markets channel the wealth of
savers to those who can put it to long-term useful use, such as companies or governments making
long-term investments/capital spending. Financial regulators such as the Securities and Exchange
Board of India (SEBI), direct the capital markets in their areas to protect investors against fraud among
other duties.
1.1.2- Definitions of capital market-

Capital markets help channelise surplus funds from savers to institutions which then invest them into
productive use. Generally, this market trades mostly in long-term securities.
Capital market consists of primary markets and secondary markets. Primary markets deal with trade
of new issues of stocks and other securities, whereas secondary market deals with the exchange of
existing or previously-issued securities. Another important division in the capital market is made on
the basis of the nature of security traded, i.e., stock market and bond market.
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Capital market is defined by W.H Husband and J.C Dockerbay as “the capital market is used to
designate activities in long term credit, which is characterized mainly by securities of investment type”
According to V.K Bhalla “capital market is defined as the mechanism which channelizes savings into
investments or productive use. Capital market allocates the resources amongst alternative uses. It
intermediates flow of savings of those who save a part of their income from those who want to invest
it into productive assets”
1.1.3- Capital market-
The capital market is the place where the financial are made in financial instruments which result in
either direct or indirect formation of the capital. The capital market includes various financial
institutions and operational mechanisms where the funds from investments are pooled to meet the
short term, medium term and long-term requirements of the governments, corporate, business firms,
individuals etc. Capital market provides the venue for both the suppliers and receivers of the capital
such that a balance is attained among these diverse market participants. Capital market are the places
where the outstanding securities are passed onto the investors. The investment investments are
independent of the individual savings capacity and investment time period but the returns on the
investments are dependent on these factors. There are instruments where the present consumption is
more in the yield bearing securities in comparison with the future consumption. The composition of
saving changes when held less in the form of the unused money or fruitless assets, mainly because of
the availability of the diversified and liquid assets for investment for the users. Capital market is
crucial in supporting economic development through technical advancements. The capital markets are
liquid in nature and helps in funding the long-term capitalintensive projects.
The major function of the capital market is that it assists the mobilization of the savings of multiple
individuals and pools into capital formation which is subsequently utilized towards the economic
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development of the nation. The success of the capital market depends on the utilizing of the pooled
resources by the corporate sector for the economic development and at the same time protects the
interest and investments of the individual investors in these corporate securities. An efficient capital
market strikes the balance and the required mechanism between the capital formation for the economic
activities and the protection of the investors. It may not be possible for the corporate sector to raise
the capital for their business activities if the interests of the investors are not taken cared.
The major characteristics and functions of capital market include the factors like: pooling of funds
towards capital formation, provision of capital for the corporate through procurement of equities,
ensuring adequate liquidity to the investor while selling the assets, adoption of pricing mechanism
which improves the competence of capital formation and allocation, enables the mechanism towards
the valuation of the securities, channelize the available funds through investments followed by
disinvestment and reinvestments, creates a mechanism for integration of financial sectors and its
financial instruments through long term, medium term and short-term funds, provide the effective
information for the participants in the market about the avenues for investment, disinvestment and
reinvestment of the funds, ensures that there is operational efficiency through simplified procedures,
reduced transaction costs, reduced settlement times, and provides protection to the investors through
investment protection fund along with the trading of derivatives in the market.
1.1.4- Features of capital market-
1-Link between savers and investment opportunities-
The capital market serves as a crucial link between the saving and investment process as it transfers
money from savers to entrepreneurial borrowers.
2-Deals in long term investment-
It helps the investors to invest in long-term investments.
3-Helps intermediaries-
While transferring shares and money from one investor to another, it takes help from intermediaries
like brokers, banks, etc. thus helping them in conducting their business.
4-Determinant of capital formation-
The capital market offers opportunities for those investors who have a surplus amount of money and
want to park their money In some type of investment and also take the benefit of the power of
compounding.
5-Government rules and regulations-

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The capital markets operate under the rules and regulations of the government thus making it a safe
place to trade.
1.1.5-Functions of capital market-

While from a broader perspective, capital markets are viewed as market of financial assets with long
or infinite maturity, it actually plays a very important role in mobilizing resources and allocating them
to productive channels. So, it can be said that the process of economic growth of a country is facilitated
by the capital markets. The important functions of capital market are discussed below.
1-Economic growth-
Capital markets help to accelerate the process of economic growth. It reflects the general condition
of the economy. The capital market helps in the proper allocation of resources from the people who
have surplus capital to the people who are in need of capital, so we can say that it helps in the expansion
of industry and trade of both public and private sectors leading to balanced economy in the country.
2-Promotes saving habits-
After the development of capital markets, the taxation system and the banking institutions provide
facilities and provisions to the investors to save more. In the absence of capital markets, they might
have invested in unproductive assets like land or gold or might have indulged in unnecessary spending.
3-Stable and unsystematic security prices-
Apart from the mobilization of funds, capital markets help to stabilize the prices of stocks. Reduction
in speculative activities and providing capital to borrowers at a lower interest rate help in the
stabilization of the security prices.
4-Availability of funds-
Investments are made in capital markets on a continues basis. Both the buyers and sellers interact and
trade their capital and assets.
4
1.1.6- Nature and participants of capital market-

The nature of the capital market is wider. The capital market consists of a number of individuals and
institution. The government is also an important player in capital market. The constituents of
exchange, commercial banks, co-operative banks, savings banks, insurance companies, investment
trust and companies etc.
Individuals invest in these markets directly by investing in shares or debentures of companies through
bond issues of public sector units or through mutual funds. Corporate who has more savings than their
requirements for funds also are participants in this market.
Capital Market Participants –
1. Individuals
2. Corporate
3. Government
4. Foreign countries
5. Banks
6. Provident funds
7. Financial institutions
1.1.7- Capital market instruments-

Financial instruments that are used for raising capital resources in the capital market are known as
capital market instruments. The changes that are sweeping across the Indian capital especially in the
recent past are something phenomenal. It has been experiencing metamorphic in the last decade,
thanks to a host of measures of liberalization, globalization and privatization that have been initiated
by the government.
Articulated changes have happened in the domain of modern arrangement, Licensing approach, money
related administrations industry, loan costs, and so on. The challenge has gotten extraordinary and
genuine in both mechanical division and money related administrations industry. Because of these
changes, the budgetary administrations industry has come to present various instruments so as to
encourage obtaining from participants.
Capital Market comprise of Primary Capital Market and Secondary Capital Market where the financial
instruments are traded. Some of the significant capital market instruments are listed below:
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1-Equity Shares – Rights Shares, Bonus Shares, Blue chip Shares.
Equity shares are long-term financing sources for any company. These shares are issued to the general
public and are non-redeemable in nature. Investors in such shares the right vote, share profits and
claim assets of a company. The value in case of equity shares can be expressed in various terms like
par value, face value, book value and so on.
Bonus Shares -
These types of equity shares are issued out of retained earnings of a business, wherein the profits are
distributed among investors in the form of an additional stake in a company. Contrary to other types
of equity instruments, bonus shares do not increase total market capitalisation value of a company. It
just represents capitalisation of excess funds generated from production.
Rights Shares -
These shares are issued by a company to premium investors at a discounted price as an invitation to
increase its stake in the respective business. A firm only sells shares to rights for a stipulated time to
raise the required finances to meet its expenditures incurred.
2-Preference Shares-
Preference shares are a long-term source of finance for a company. They are neither completely similar
to equity nor equivalent to debt. The law treats them as shares but they have elements of both equity
shares and debt. For this reason, they are also called ‘hybrid financing instruments. These are also
known as preferred stock, preferred shares, or only preferred in a different part of the world. There are
various types of preference shares used as a source of finance.
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3-Debentures –
Debenture is used to issue the loan by government and companies. The loan is issued at the fixed
interest depending upon the reputation of the companies. When companies need to borrow some
money to expand themselves, they take the help of debentures.
There are various types of debentures that company can issue
1-Secured Debentures-
These are debentures that are secured against an asset of the company. This means a charge is created
on such an asset in case of default in repayment of such debentures. So, in case, the company does not
have enough funds to repay such debentures, the said asset will be sold to pay such a loan. The charge
may be fixed, i.e., against a specific asset or floating, i.e. against all assets of the firm.
2. Unsecured Debentures-
These are not secured by any charge against the assets of the company, neither fixed nor floating.
Normally such kinds of debentures are not issued by companies in India.
3-Redeemable Debentures-
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These debentures are payable at the expiry of their term. Which means at the end of a specified period
they are payable, either in the lump sum or in instalments over a time period. Such debentures can be
redeemable at par, premium or at a discount.
4. Irredeemable Debentures-
Such debentures are perpetual in nature. There is no fixed date at which they become payable. They
are redeemable when the company goes into the liquidation process. Or they can be redeemable after
an unspecified long-time interval.
5- Fully Convertible Debentures-
These shares can be converted to equity shares at the option of the debenture holder. So, if he wishes
then after a specified time interval all his shares will be converted to equity shares and he will become
a shareholder.
6- Partly Convertible Debentures-
Here the holders of such debentures are given the option to partially convert their debentures to shares.
If he opts for the conversion, he will be both a creditor and a shareholder of the company.
7-Non-Convertible Debentures-
As the name suggests such debentures do not have an option to be converted to shares or any kind of
equity. These debentures will remain so till their maturity, no conversion will take place. These are the
most common type of debentures
4-Derivatives –
Index Futures, Index Options, Stock Futures, Stock Options, Currency Futures, Currency Options,
Commodity Futures, Commodity Options.
A derivative is a financial instrument whose characteristics and value depend upon the characteristics
and value of some underlying asset typically commodity, bond, equity, currency, index, event etc.
Advanced investors sometimes purchase or sell derivatives to manage the risk associated with the
underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or
decline. Derivatives are often leveraged, such that a small movement in the underlying value can cause
a large difference in the value of the derivative.
Derivatives are usually broadly categorised by:
• The relationship between the underlying and the derivative (e.g., forward, option, swap)
• The type of underlying (e.g., equity derivatives, foreign exchange derivatives and credit derivatives)
• The market in which they trade (e.g., exchange traded or over-the-counter)
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5- Mutual funds-
Mutual funds are financial intermediaries, which collect the savings of small investors and invest them
in a diversified portfolio of securities to minimise risk and maximise returns for their participants.
Mutual funds have given a major fillip to the capital market - both primary as well as secondary. The
units of mutual funds, in turn, are also tradable securities. Their price is determined by their net asset
value (NAV) which is declared periodically.
The operations of the private mutual funds are regulated by SEBI with regard to their registration,
operations, administration and issue as well as trading.
There are various types of mutual funds, depending on whether they are open ended or close ended
and what their end use of funds is. An open-ended fund provides for easy liquidity and is a perennial
fund, as its very name suggests. A closed-ended fund has a stipulated maturity period, generally five
years. A growth fund has a higher percentage of its corpus invested in equity than in fixed income
securities, hence the chances of capital appreciation (growth) are higher. In growth funds, the dividend
accrued, if any, is reinvested in the fund for the capital appreciation of investments made by the
investor.
An Income fund on the other hand invests a larger portion of its corpus in fixed income securities in
order to pay out a portion of its earnings to the investor at regular intervals.
A balanced fund invests equally in fixed income and equity in order to earn a minimum return to the
investors. Some mutual funds are limited to a particular industry; others invest exclusively in certain
kinds of short-term instruments like money market or government securities. These are called money
market funds or liquid funds. To prevent processes like dividend stripping or to ensure that the funds
are available to the managers for a minimum period so that they can be deployed to at least cover the
administrative costs of the asset management company, mutual funds prescribe an entry load or an
exit load for the investors. If investors want to withdraw their investments earlier than the stipulated
period, an exit load is chargeable. To prevent profligacy, SEBI has prescribed the maximum that can
be charged to the investors by the fund managers
6 -Bonds : Convertible Bonds , Non convertible bonds , Redeemable Bonds , Irredemable bonds ,
Fully convertible Bonds , Partially convertible bonds.
Bonds are issued by organizations generally for a period of more than one year to raise money by
borrowing.
Organizations in order to raise capital issue bond to investors which is nothing but a financial contract,
where the organization promises to pay the principal amount and interest (in the form of coupons) to
the holder of the bond after a certain date. (Also called maturity date). Some Bonds do not pay interest
to the investors; however, it is mandatory for the issuers to pay the principal amount to the investors.
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Types of Bonds
Following are the types of bonds:
1-Fixed Rate Bonds-
In Fixed Rate Bonds, the interest remains fixed throughout the tenure of the bond. Owing to a constant
interest rate, fixed rate bonds are resistant to changes and fluctuations in the market.
2-Floating Rate Bonds-
Floating rate bonds have a fluctuating interest rate (coupons) as per the current market reference rate.
3-Zero Interest Rate Bonds-

Zero Interest Rate Bonds do not pay any regular interest to the investors. In such types of bonds,
issuers only pay the principal amount to the bond holders.
4-Inflation Linked Bonds-
Bonds linked to inflation are called inflation linked bonds. The interest rate of Inflation linked bonds
is generally lower than fixed rate bonds.
5-Perpetual Bonds-
Bonds with no maturity dates are called perpetual bonds. Holders of perpetual bonds enjoy interest
throughout.
6-Subordinated Bonds-
Bonds which are given less priority as compared to other bonds of the company in cases of a close
down are called subordinated bonds. In cases of liquidation, subordinated bonds are given less
importance as compared to senior bonds which are paid first.
7-Bearer Bonds-
Bearer Bonds do not carry the name of the bond holder and anyone who possesses the bond certificate
can claim the amount. If the bond certificate gets stolen or misplaced by the bond holder, anyone else
with the paper can claim the bond amount.
8-War Bonds-
War Bonds are issued by any government to raise funds in cases of war.
9-Serial Bonds- Bonds maturing over a period of time in instalments are called serial bonds.
10-Climate Bonds-
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Climate Bonds are issued by any government to raise funds when the country concerned faces any
adverse changes in climatic conditions.
7- Euro Convertible Bonds, Euro Equities-
Euro-convertible Bonds (ECBs) are bonds that are issued and sold outside the home country of the
currency. Hence, an ECB issued by an Indian company refers to bonds issued in any country other
than India.
Euro equity is newly-issued stock that is simultaneously sold to investors in more than one national
market, rather than just in the country where the company is domiciled, as part of an initial public
offering (IPO).
8 - American Depository Receipt, Global Depository Receipt, European Depository
Receipt, International Depository-
A negotiable certificate held in the bank of one country (depository) representing a specific number of
shares of a stock traded on an exchange of another country. GDR facilitate trade of shares, and are
commonly used to invest in companies from developing or emerging markets. GDR prices are often
close to values of related shares, but they are traded and settled independently of the underlying share.
Listing on a foreign stock exchange requires compliance with the policies of those stock exchanges.
Many times, the policies of the foreign exchanges are much more stringent than the policies of
domestic stock exchange. However, a company may get listed on these stock exchanges indirectly –
using ADRs and GDRs.
If the depository receipt is traded in the United States of America (USA), it is called an American
Depository Receipt, or an ADR. If the depository receipt is traded in a country other than USA, it is
called a Global Depository Receipt, or a GDR.
But the ADRs and GDRs are an excellent means of investment for NRIs and foreign nationals wanting
to invest in India. By buying these, they can invest directly in Indian companies without going through
the hassle of understanding the rules and working of the Indian financial market – since ADRs and
GDRs are traded like any other stock, NRIs and foreigners can buy these using their regular equity
trading accounts! Ex-
HDFC Bank, ICICI Bank, Infosys have issued both ADR and GDR
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1.1.8- Types of capital market-
1-Primary Market-
The primary market is also known as the new issues market. It deals with new securities being issued
for the first time. The functions of Primary market is to facilitate the transfer of investible funds savers
to entrepreneurs seeking to establish new enterprise or to expand existing ones through the issue of
securities for the first time. The investors in this market are banks, financial institutions, insurance
companies, mutual funds and individuals. Methods of floatation new issue in the primary market are
offer through Prospectus, Offer for Sale, Private Placement, Right issue etc.
Companies issue securities from time to time to raise funds in order to meet their financial
requirements for modernization, expansions and diversification programs. These securities are issued
directly to the investors (both individuals as well as institutional) through the mechanism called
primary market or new issue market. The primary market refers to the set-up, which helps the industry
to raise the funds by issuing different types of securities. This set-up consists of the type of securities
institutions framework. available, the primary financial regulatory market and the discharges the
important function of transfer of savings especially of the individuals to the companies, the mutual
funds, and the public sector undertakings. Individuals or other investors with surplus money invest
their savings in exchange for shares, debentures and other securities. In the primary market the new
IPO issue of securities are presented in the form of public issues, right issues or private placement.
Firms that seek financing, exchange their financial liabilities, such as shares and debentures, in return
for the money provided by the financial intermediaries or the investors directly. These firms then
convert these funds into real capital such as plant and machinery etc. The structure of the capital
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market where the firms exchange their financial liabilities for long-term financing is called the primary
market. The primary market has two distinguishing features:
1- It is the segment of the capital market where capital formation occurs; and
2-In order to obtain required financing, new issues of shares, debentures securities are sold in the
primary market. Subsequent trading in these securities occurs in other segment of the capital market,
known as secondary market.
The securities that are often resorted for raising funds are equity shares, preference shares, bonds,
debentures, warrants, cumulative convertible preference shares, zero interest convertible debentures,
etc. Public issues of securities may be made through:
1-Prospectus,
2- Offer for sale,
3-Book building process and
4- Private placement
The investors directly subscribe the securities offered to public through a prospectus. The company
through different media generally makes wide publicity about the public offer.
Activities in the Primary Market

1-Appointment of merchant bankers 2-Collection of money.
3- Pricing of securities being issued
4- Minimum subscription
5- Communication/ Marketing of the issue

6- Listing on the stock exchange(s) » Information on credit risk
7- Allotment of securities in demat/ physical mode
8-Making public issues
9- Record keeping
Functions of Primary Market

1-Organization- Deals with the origin of the new issue. The proposal is analysed in terms of the nature
of the security, the size of the issued timings of the issue and flotation method of the issue.
2-Underwriting -Underwriting is a kind of guarantee undertaken by an institution or firm of brokers

ensuring the marketability of an issue. it is a method whereby the guarantor makes a promise to the
13
stock issuing company that he would purchase a certain specific number of shares in the event of their
not being invested by the public.
3-Distribution: The third function is that of distribution of shares. Distribution means the function of
sale of shares and debentures to the investors. This is performed by brokers and agents. They maintain
regular lists of clients and directly contact them for purchase and sale of securities.
Role of Primary Market
1-Capital formation It provides attractive issue to the potential investors and with this company can
raise capital at lower costs.
2-Liquidity - As the securities issued in primary market can be immediately sold in secondary market
the rate of liquidity is higher.
3-Diversification - Many financial intermediaries invest i there is less risk if there is failure primary
market; therefore. investment as the company does not depend on a single investor. The diversification
of investment reduces the overall risk.
4-Reduction in cost - Prospectus containing all details about the securities are given to the investors
hence reducing the cost is searching and assessing the individual securities.
Features of Primary Market.

1- It is the new issue market for the new long-term capital.
2- Here company issues the securities directly to the investors and not through any intermediaries.
3- On receiving the money from the new issues, the company will issue the security certificates
to the investors.
4- The amount obtained by the company after the new issues are utilized for expansion of the
present business or for setting up new ventures.
5- External finance for longer term such as loans from financial institutions is not included in
primary market. There is an option called 'going public' in which the borrowers in new issue market
raise capital for converting private capital into public capital.
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Types of issues
Primary market Issues can be classified into four types.
1- Initial Public Offer (IPO)-
When an unlisted company makes either a fresh issue of securities or an offer for sale of its existing
securities or both, for the first time to the public, the issue is called as an Initial Public Offer.
2-Follow on Public Offer (FPO):
When an already listed company makes either a fresh issue of securities to the public or an offer for
sale of existing shares to the public, through an offer document, it is referred to as Follow on Offer
(FPO).
3-Rights Issue-
When a listed company proposes to issue fresh securities to its existing shareholders, as on a record
date, it is called as a rights issue. The rights are normally offered in a particular ratio to the number of
securities held prior to the issue. This route is best suited for companies who would like to raise capital
without diluting stake of its existing shareholders.
4- A Preferential issue-
A Preferential Issue is an issue of shares or of convertible securities by listed. companies to a select
group of persons under Section 81 of the Companies Act, 1956, that is neither a rights issue nor a
public issue. This is a faster way for a company to raise equity capital. The issuer company has to
comply with the Companies Act and the requirements contained in the chapter, pertaining to
preferential allotment in SEBI guidelines, which inter alia include pricing, disclosures in notice etc.
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2-SECONDARY MARKET-
The secondary market is also known as the stock market or stock exchange. It is a market for the
purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to
enter the market. It also provides liquidity and marketability to existing securities.
Secondary market refers to the network/system for the subsequent sale and purchase of securities. An
investor can apply and get allotted a specified number of securities by the issuing company in the
primary market. However, once allotted the securities can thereafter be sold and purchased in the
secondary market only. An investor who wants to purchase the securities can buy these securities in
the secondary market. The secondary market is market for subsequent sale/purchase and trading in the
securities. A security emerges or takes birth in the primary market but its subsequent movements take
place in secondary market. The secondary market consists of that portion of the capital market where
the previously issued securities are transacted. The firms do not obtain any new financing from
secondary market. The secondary market provides the life-blood to any financial system in general,
and to the capital market in particular.
The secondary market is represented by the stock exchanges in any capital market. The stock
exchanges provide an organized market place for the investors to trade in the securities. This may be
the most important function of stock exchanges. The stock exchanges. theoretically speaking, is a
perfectly competitive market, as a large number of sellers and buyers participate in it and the
information regarding the securities is publicly available to all the investors. A stock exchange permits
the security prices to be determined by the competitive forces. They are not set by negotiations off the
floor, where one party might have a bargaining advantage. The bidding process flows from the demand
and supply underlying each security. This means that the specific price of a security is determined,
more or less, in the manner of an auction. The stock exchanges provide market in which the members
of the stock exchanges (the share brokers) and the investors participate to ensure liquidity to the latter.
In India, the secondary market, represented by the stock exchanges network, is more than 100 years
old when in 1875, the first stock exchange started operations in Mumbai. Gradually, stock exchanges
at other places have also been established and at present, there are 23 stock exchanges operating in
India. The secondary market in India got a boost when. the Over-the-Counter Exchange of India
(OTCEI) and the National Stock Exchange (NSE) were established. Out of the 23 stock exchanges,
20 stock exchanges are operating at Mumbai (BSE), Kolkata, Chennai, Ahmadabad, Delhi, and Indore.
Bangalore, Hyderabad, Cochin, Kanpur, Pune, Ludhiana, Guwahati, Mangalore, Patna, Jaipur,
Bhubaneswar, Rajkot, Vadodara and Coimbatore. Besides, there is one ICSE established by 14
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Regional Stock Exchanges. It may be noted that out of 23 stock exchanges, only 2, i.e., the NSE and
the Over-the-Counter Exchange of India (OTCEI) have been established by the All-India Financial
Institutions while other stock exchanges are operating as associations or limited companies. In order
to protect and safeguard the interest of the investors, the operations, functioning and working of the
stock exchanges and their members (i.e., share brokers) are supervised and regulated by the Securities
Contracts (Regulations) Act, 1956 and the SEBI Act, 1992.
Activities in the Secondary Market
1- Trading of securities
2- Risk management
3-Clearing and settlement of trades
4- Delivery of securities and funds
Importance of Secondary Market-
1-Providing liquidity and marketability to existing securities
2- Pricing of securities
3-Safety of transaction
4-Contribution to economic growth
5- Providing scope for speculation
Role of Secondary Market
For the general investor, the secondary market provides an efficient platform for trading of his
securities. For the management of the company, Secondary equity markets serve as a monitoring and
control conduit by facilitating value-enhancing control activities, enabling implementation of
incentive-based management contracts, and aggregating information (via price discovery) that guides
management decisions.
Products in secondary markets
1-Equity Shares
Sometimes you'll hear a dealer market referred to as an over-the-counter (OTC) market. The term
originally meant a relatively unorganized system where trading did not occur at a physical place, as
we described above, but rather through dealer networks. The term was most likely derived from the
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off-Wall Street trading that boomed during the great bull market of the 1920s, in which shares were
sold "over-the-counter" in stock shops.
In other words, the stocks were not listed on a stock exchange - they were "unlisted".
2- Third and Fourth Markets-
You might also hear the terms "third" and "fourth markets". These don't concern. individual investors
because they involve significant volumes of shares to be transacted per trade. These markets deal with
transactions between broker-dealers and large institutions through over-the-counter electronic
networks. The third market comprises OTC transactions. between broker-dealers and large
institutions. The fourth market is made up of transactions that take place between large institutions.
The main reason these third and fourth market transactions occur is to avoid placing these orders
through the main exchange, which could greatly affect the price of the security. Because access to the
third and fourth markets is limited, their activities have little effect on the average investor.
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1.2 ROLE OF INSTITUTIONAL INVESTOR IN INDIA
1.2.1 ROLE OF INSURANCE COMPANY

Insurance companies play a significant role in the Indian capital market, contributing to its depth, stability,
and efficiency in various ways. Their involvement is multifaceted, impacting both the equity and debt
segments of the market. Below are the key roles insurance companies play in the Indian capital market:
1. Investors : Insurance companies are among the largest institutional investors in the Indian capital markets.
They collect premiums from policyholders and, in turn, invest a portion of these funds into the capital market
to meet their future liabilities and claims. Their investments are typically diversified across equities,
government securities, corporate bonds, and other financial instruments. By investing in these assets, insurance
companies provide liquidity to the markets and help in the price discovery process.
2. Market Stabilizers: Given their long-term investment horizon, insurance companies often adopt a buy-
and-hold strategy, which can help stabilize the market. They are less likely to engage in speculative trading,
providing a counterbalance to short-term market volatility. This stabilizing effect is particularly valuable
during periods of market stress or uncertainty.
3. Funding for Corporates: By investing in corporate bonds and equities, insurance companies provide a
crucial source of funding to businesses. This support is essential for companies looking to expand operations,
invest in new projects, or refinance existing debt. The availability of capital from insurance companies can
lead to lower borrowing costs and improved access to capital for corporations.
4. Development of Bond Markets: Insurance companies are significant players in the fixed income or bond
market. Their substantial investments in government securities and corporate bonds contribute to the
development and deepening of the bond market in India. A well-developed bond market is crucial for economic
development, as it provides an alternative to bank financing for companies and the government.
5. Innovative Financial Products: Insurance companies often innovate by creating new financial products
that cater to the diverse needs of investors and policyholders. These products can include unit-linked insurance
plans (ULIPs) that invest in the capital market, providing policyholders with the dual benefits of insurance
cover and investment growth. Such innovations can attract more participants to the capital market and
encourage savings and investment among the public.
6. Corporate Governance: As significant shareholders in listed companies, insurance companies have a

vested interest in ensuring good corporate governance practices. They can influence the management of these
companies by exercising their voting rights to protect their investments. This role is crucial in promoting
transparency, accountability, and sustainability in the corporate sector, ultimately leading to a more robust
capital market.
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7. Risk Management: Through their operations, insurance companies help individuals and businesses manage
risk. By providing a safety net against unforeseen events, they enable economic agents to undertake
investments they might otherwise avoid due to risk concerns. This risk management function supports
economic stability and growth, indirectly benefiting the capital market.
In conclusion, insurance companies are pivotal to the functioning and development of the Indian capital
market. Their role as investors, market stabilizers, sources of corporate funding, contributors to bond market
development, innovators of financial products, promoters of corporate governance, and risk managers
underscores their importance in fostering a vibrant and resilient capital market ecosystem in India.
1.2.2 ROLE OF MUTUAL FUNDS
Mutual funds play a significant role in the Indian capital market, contributing to its growth, stability, and
diversity. The role of mutual funds in India’s capital market encompasses several key aspects:
1. Mobilizing Savings: Mutual funds pool the savings of small and individual investors, converting them
into productive investments. They offer a variety of schemes tailored to the risk tolerance and
investment goals of a wide investor base, facilitating the mobilization of savings across the country.
2. Diversification: By investing in a diversified portfolio of securities, mutual funds reduce the risk associated
with investing directly in the stock market. This diversification benefits small investors who may not have the
expertise or the resources to build a diversified portfolio on their own.
3. Professional Management: Mutual funds are managed by professional fund managers who have the
expertise and resources to analyze market trends and make informed investment decisions. This professional
management helps in optimizing returns for investors, who may lack the time or expertise to manage their
investments.
4. Market Liquidity: Mutual funds enhance market liquidity by ensuring continuous buying and selling of
securities. This liquidity is crucial for the smooth functioning of the capital markets, as it facilitates the efficient
pricing of securities and enables investors to buy and sell shares with ease.
5. Financial Inclusion: Mutual funds play a vital role in financial inclusion by making capital market
investments accessible to the general public, including those with limited financial knowledge and small
amounts of capital. Through systematic investment plans (SIPs) and other such instruments, mutual funds
have significantly lowered the entry barrier for retail investors.
6. Capital Formation: By channeling savings into the capital market, mutual funds support capital formation
and economic growth. The funds collected are invested in various sectors of the economy, including
infrastructure, technology, and manufacturing, thereby facilitating job creation and economic development.
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7. Market Stability: The presence of large institutional investors like mutual funds can contribute to market
stability. Their long-term investment horizon and professional management can help moderate excessive
volatility in the capital markets.
8. Innovation and Product Development: Mutual funds have been at the forefront of financial innovation in
India, introducing a range of products and services to meet the evolving needs of investors. These include
equity funds, debt funds, balanced/hybrid funds, index funds, and more recently, exchange-traded funds
(ETFs) and fund-of-funds (FoF) schemes.
In summary, mutual funds are a crucial component of the Indian capital market, playing a pivotal role in
mobilizing savings, providing investment opportunities to retail investors, enhancing market efficiency, and
contributing to the overall growth and stability of the financial system.
1.2.3 ROLE OF BANKS
Banks play a significant role in the Indian capital market, which is crucial for economic growth and
development. Their involvement ranges from facilitating transactions to providing a platform for companies
and governments to raise funds. Here's a detailed look at the roles banks play in the Indian capital market:
1. Facilitating Savings and Investments:

Banks are the primary institutions where individuals and businesses save their money. By offering various
deposit schemes, they mobilize savings from the public. These savings are then directed towards investments
in different financial instruments available in the capital market, such as stocks, bonds, and mutual funds.
2. Credit Provision
Banks provide credit to individuals, businesses, and the government, which can be used for various purposes,
including investment in capital markets. Through loans and advances, banks enable companies to invest in
expansion and growth, indirectly supporting the capital market ecosystem.
3. Underwriting Services
Banks, particularly through their investment banking divisions, play a critical role in underwriting public
offerings of stocks and bonds. This means they guarantee the sale of a certain number of securities, reducing
the risk for issuing companies. This service is vital for companies looking to raise capital through the capital
market.
4. Brokerage Services
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Many banks offer brokerage services, either directly or through subsidiaries, allowing individuals and
institutions to buy and sell securities in the capital market. This facilitates liquidity and ensures that investors
can participate in the market efficiently.
5. Market Making
Some banks, through their trading desks, act as market makers for certain securities. They commit to buying
and selling these securities at stated prices, ensuring liquidity and continuous trading, which is crucial for the
healthy functioning of the capital markets.
6. Custodian Services
Banks offer custodian services, holding securities on behalf of their clients. This includes safekeeping of
physical or electronic securities and managing corporate actions like dividend payments and rights issues. This
service reduces the risk and complexity for investors, encouraging participation in the capital market.
7. Providing Financial Advice

Banks often provide financial advisory services to their clients, including advice on investments in the capital
market. This can range from investment in direct equities to mutual funds and bonds. Such advice is crucial
for investors looking to navigate the complexities of the capital market.
8. Wealth Management
For high-net-worth individuals and institutional investors, banks offer wealth management services, which
include portfolio management and investment advice tailored to the client's financial goals. This often involves
significant investment in the capital market.
9. Developmental Role
Banks, especially state-owned banks in India, play a developmental role by channeling funds into priority
sectors. By doing so, they support the broader economic objectives, including capital market development.
10. Innovation and Product Development

Banks are at the forefront of developing innovative financial products and services that cater to the evolving
needs of investors and issuers in the capital market. This includes structured products, derivatives, and hybrid
instruments that offer diversified investment and risk management options.
In summary, banks are integral to the functioning and development of the Indian capital market. Their diverse
roles help in mobilizing savings, providing liquidity, facilitating investments, and ensuring the smooth
operation of the market, contributing to the overall economic development of the country.\
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1.2.4 ROLE OF ASSET MANAGER

In the Indian capital market, an asset manager plays a crucial role in managing various types of financial assets
on behalf of clients or investors. Here are some key functions and roles of an asset manager in the Indian
capital market:
1. Portfolio Management: Asset managers are responsible for creating and managing investment
portfolios for their clients. They analyze various investment options available in the market, consider client
objectives and risk tolerance, and construct portfolios that align with these factors.
2. Investment Research: Asset managers conduct thorough research on different asset classes such as
stocks, bonds, mutual funds, and other securities available in the Indian capital market. They analyze market
trends, company financials, economic indicators, and other relevant data to make informed investment
decisions.
3. Risk Management: Asset managers assess and manage the risk associated with investment portfolios.
They employ various risk management techniques such as diversification, hedging, and asset allocation to
minimize potential losses and maximize returns for their clients.
4. Client Relationship : Management: Asset managers maintain strong relationships with their clients by
understanding their financial goals, providing regular updates on portfolio performance, and offering
personalized investment advice. They also address client concerns and provide guidance on investment
strategies.
5. Compliance and Regulation: Asset managers operate within the regulatory framework set by the
Securities and Exchange Board of India (SEBI) and other regulatory authorities. They ensure compliance with
applicable laws, rules, and regulations governing the capital markets to protect the interests of their clients.
6. Asset Allocation: Asset managers determine the appropriate allocation of assets within investment
portfolios based on factors such as investment objectives, time horizon, and risk appetite. They adjust asset
allocation strategies as market conditions change to optimize portfolio performance.
7. Performance Monitoring and Reporting: Asset managers continuously monitor the performance
of investment portfolios and provide regular performance reports to clients. They evaluate portfolio
performance against benchmarks and make adjustments to investment strategies as needed to achieve desired
outcomes.
8. Product Development: Asset managers develop new investment products and strategies tailored to
meet the evolving needs of investors in the Indian capital market. They innovate to offer products that address
specific market segments or investment themes.
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Overall, asset managers play a pivotal role in the Indian capital market by efficiently managing investment
portfolios, mitigating risk, and helping investors achieve their financial objectives. Their expertise and
guidance are instrumental in navigating the complexities of the market and maximizing investment returns.
1.2.5 ROLE OF ENDOWMENT FUNDS
Endowment funds play a significant role in the Indian capital market by providing a stable source of funding
and investment capital. These funds are established by universities, non-profit organizations, foundations, and
trusts to support their activities, scholarships, research, and development over the long term. In the context of
India, where the capital market is evolving rapidly, endowment funds contribute in several ways:
1. Long-term Investment : Endowment funds, by their nature, are designed for long-term investment
horizons. They allocate their capital in various asset classes, including equities, bonds, real estate, and
alternative investments, contributing to the depth and breadth of the Indian capital market. Their long-term
outlook helps in stabilizing the market, as they are less likely to withdraw investments during short-term
market volatility.
2. Market Stability: Given their perpetual existence and long-term investment strategy, endowment funds
can provide stability to the capital markets. They are less prone to making knee-jerk reactions to market
volatility, which can help in reducing market fluctuations.
3. Innovation and Growth Funding : Endowment funds often invest in innovative startups and growth-
oriented companies through private equity and venture capital investments. This is particularly important in
India, where there's a burgeoning startup ecosystem requiring patient capital to grow and scale. Such
investments not only yield returns for the funds but also contribute to economic growth and job creation.
4. Corporate Governance: As institutional investors, endowment funds can play a crucial role in
promoting good corporate governance practices among companies they invest in. Their long-term investment
horizon aligns with the interest of enhancing company value through sustainable practices, transparency, and
accountability.
5. Socially Responsible Investing (SRI): There is a growing trend among endowment funds globally,
including in India, to consider environmental, social, and governance (ESG) criteria in their investment
decisions. By channeling capital towards companies and projects that meet these criteria, endowment funds
can influence the market towards more sustainable and socially responsible practices.
6. Financial Education and Research: Endowments, especially those linked to educational

institutions, often support financial education, research, and innovation. This can include funding academic
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research on capital markets, scholarships for students studying finance, and incubation centers for fintech
startups. Such activities enrich the ecosystem and contribute to the market's overall growth and sophistication.
Despite their potential, the development and impact of endowment funds in India are still nascent compared
to their counterparts in more developed markets like the United States. The regulatory environment, tax
treatment, and awareness about the benefits of endowment funds are evolving. As these aspects improve, it is
expected that endowment funds will play an increasingly significant role in the Indian capital market, aiding
in its maturation and global integration.
1.2.6 ROLE OF PENSION FUND
Pension funds play a significant role in the Indian capital market, much like they do in other countries, by
influencing market stability, providing capital, and fostering long-term investment strategies. The Indian
pension system includes various schemes aimed at providing retirement income to the population. These
include the Employees' Provident Fund (EPF), Public Provident Fund (PPF), National Pension System (NPS),
and other private pension funds. Here are some ways through which pension funds impact the Indian capital
market:
1. Source of Long-term Capital: Pension funds collect contributions over long periods, which means
they are a source of long-term capital. They invest in various instruments, including stocks, bonds, and
government securities, providing much-needed long-term capital for companies and the government. This is
crucial for funding infrastructure projects and other long-term developmental activities in India.
2. Market Stability: Given their long-term investment horizon, pension funds are less likely to engage in
speculative trading, making them a stabilizing force in the capital markets. Their investment decisions are
based on thorough research and analysis of fundamentals, contributing to market stability.
3. Institutional Investment Growth: As the Indian population ages and more people become part of
pension schemes, the amount of capital managed by these funds is expected to grow. This increase in
institutional investment can significantly impact the capital market by increasing liquidity and potentially
reducing volatility.
4. Corporate Governance: Pension funds, as significant institutional investors, have the power to
influence corporate governance practices. They can advocate for transparency, better management practices,
and shareholder rights, improving the overall investment environment in the country.
5. Diversification and Innovation in Financial Instruments: The growing size and sophistication
of pension funds can lead to greater diversification and innovation in financial instruments in the Indian capital
market. To meet their liabilities and maximize returns, pension funds might seek new investment opportunities,
encouraging the development of new financial products and services.
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6. Interest Rates: By being major investors in government securities and bonds, pension funds can
influence interest rates in the country. Their demand for these instruments can affect their yields, which in turn
influences the overall interest rate environment, impacting economic activities like borrowing and lending.
7. Social and Environmental Impact: Increasingly, pension funds worldwide, including in India, are
considering Environmental, Social, and Governance (ESG) criteria in their investment decisions. This can
drive companies to adopt better practices in these areas, contributing to sustainable economic development.
In summary, pension funds are pivotal to the growth and stability of the Indian capital market. Their role is
likely to expand as the economy grows and the population ages, necessitating more robust retirement savings
and investment strategies.
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1.3 ROLE OF SMALL INVESTOR IN CAPITAL MARKET
1.3.1 ROLE OF DAY TRADERS

Day traders play a significant role in the Indian capital market, as they do in other global markets. Their
activities can influence market liquidity, volatility, and price discovery. Here's an overview of the roles and
impacts of day traders in the Indian capital market:
1. Market Liquidity
Day traders often buy and sell securities within the same trading day. Their high-frequency trading activities
contribute significantly to the trading volume, providing the necessary liquidity to the market. This liquidity
is crucial for the execution of large orders without a significant impact on the market price, thus benefiting all
market participants.
2. Price Discovery
Price discovery is the process through which the prices of securities are determined in the market, based on
supply and demand dynamics. Day traders, through their constant buying and selling activities, contribute to
this process by reflecting their perceptions of a security's intrinsic value at any given moment. This helps in
maintaining an efficient market where prices reflect all available information.
3. Market Efficiency
The presence of day traders can enhance market efficiency. By exploiting short-term price discrepancies and
arbitrage opportunities, they help ensure that prices across markets are consistent and reflect all available
information. Their activities can, therefore, contribute to the alignment of prices with fundamental values over
time.
4. Volatility
While day traders contribute to liquidity and efficiency, their activities can also lead to increased short-term
volatility. This is because day trading involves a high volume of trades over short periods, which can amplify
price movements. However, opinions vary on the long-term impact of this volatility, with some arguing it is a
natural part of price discovery in an efficient market.
5. Innovation and Adoption of Technology

Day traders often utilize sophisticated trading platforms, algorithms, and real-time data analytics to make
trading decisions. This demand for advanced trading tools and infrastructure has spurred innovation in
financial technology within the Indian capital market. Brokers and financial service providers are continually
improving their offerings to meet the needs of day traders, which benefits the market ecosystem as a whole.
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6. Regulatory Focus
The activities of day traders, especially those engaged in high-frequency trading, can sometimes lead to
regulatory scrutiny. Concerns over market manipulation, unfair trading practices, or systemic risks may lead
to the implementation of new regulations or the adjustment of existing ones. The Securities and Exchange
Board of India (SEBI) monitors trading activities to ensure a fair and transparent market environment for all
participants.
In summary, day traders are an integral part of the Indian capital market, contributing to its liquidity, efficiency,
and technological advancement. While their impact on market volatility is a point of debate, their role in the
price discovery process and market dynamics is undeniably significant.
1.3.2 ROLE OF RETAIL INVESTOR
Retail investors play a significant role in the Indian capital market, contributing to its liquidity, stability, and
growth. The participation of retail investors has been on the rise, especially with the advent of digital trading
platforms that have made access to the stock market easier for the general public. Here are several key roles
and impacts of retail investors in the Indian capital market:
1. Market Liquidity
Retail investors contribute significantly to the liquidity of the capital markets. With a large number of
individuals buying and selling securities, it becomes easier for other participants to execute their trades
promptly and at predictable prices. This liquidity is crucial for the smooth functioning of the market and helps
in reducing the cost of trading.
2. Price Discovery
The collective actions of retail investors can influence the price discovery process. By reacting to news,
earnings reports, and other market events, retail investors help in the accurate valuation of securities. Their
investment decisions, based on diverse perspectives and information sources, contribute to the efficient
functioning of the market.
3. Market Stability
While institutional investors often make large trades that can significantly impact the market, the diverse and
numerous transactions by retail investors can help stabilize the market. The varied investment strategies and
timelines of retail investors can cushion against market volatility, although, in certain situations, herd behavior
among retail investors can also lead to increased volatility.
4. Corporate Governance
Retail investors, especially when they act collectively, can play a role in corporate governance. By exercising
their voting rights in shareholder meetings, retail investors can influence company policies, management
decisions, and corporate actions, thereby promoting transparency and accountability.
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5. Capital Formation
Retail investors contribute to capital formation in the economy by investing in stocks and bonds. This
investment is crucial for companies looking to raise funds for expansion or projects, thereby aiding in
economic growth and development.
6. Democratization of the Market
The increasing participation of retail investors represents the democratization of the capital market. With
technological advancements and regulatory support, more individuals have the opportunity to invest in the
stock market, which was once considered the domain of the wealthy and institutional investors.
7. Innovation and Competition

The growing number of retail investors encourages brokerages and financial technology firms to innovate and
improve their offerings. This competition leads to better services, lower costs, and more accessible financial
education for all market participants.
8. Financial Inclusion
By participating in the capital market, retail investors not only grow their wealth but also contribute to broader
financial inclusion. This participation helps in spreading the culture of savings and investment among a larger
section of society, which is crucial for the overall financial health of the country.
The Indian government and regulatory bodies like the Securities and Exchange Board of India (SEBI) have
introduced various measures to protect and encourage retail investors. These include improved transparency,
investor education programs, and simplified processes for participating in the capital market. As the number
of retail investors continues to grow, their role in shaping the Indian capital market will likely become even
more significant.
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1.3.3 ROLE OF SWING TRADERS
Swing traders play a significant role in the Indian capital market, as they do in other global markets. Their
activities can influence market liquidity, volatility, and price discovery. Here's a detailed look at their role:
1. Providing Liquidity
Swing traders contribute to market liquidity by frequently buying and selling securities. Liquidity is vital for
the efficient functioning of the capital markets because it ensures that transactions can occur smoothly without
causing significant price changes. This liquidity is beneficial for all market participants, as it allows investors
to enter and exit positions with relative ease.
2. Price Discovery
The price discovery process is crucial in capital markets, helping to determine the fair value of securities based
on supply and demand dynamics. Swing traders, through their speculative activities, contribute to this process
by reacting to market news, earnings reports, economic indicators, and other relevant information. Their
trading decisions based on such analyses help in adjusting the prices of securities to reflect their true value
more accurately over time.
3. Market Volatility
Swing trading can contribute to market volatility, both positively and negatively. On one hand, their trading
activities can add to the short-term volatility because they often seek to capitalize on market trends and price
movements. On the other hand, by providing liquidity and participating in the price discovery process, they
can also help stabilize prices in the longer term by ensuring that securities are more accurately priced.
4. Psychological Impact
Swing traders, like other market participants, contribute to the psychological dynamics of the market. Their
reactions to news, trends, and other market events can influence the sentiment and confidence of other
investors. For instance, a significant number of swing traders moving in the same direction based on their
market analysis can reinforce bullish or bearish trends, impacting the decision-making of other investors.
5. Bridging Short-term and Long-term Investing

Swing trading sits somewhere between day trading and long-term investing. Swing traders hold their positions
for several days to several weeks, unlike day traders who might hold positions for just a day and long-term
investors who may hold for months to years. This approach allows them to capitalize on short-term market
trends while also considering longer-term fundamentals to some extent. This can add a unique dynamic to the
market, as their trading decisions are influenced by a mix of technical and fundamental analysis.In the Indian
capital market, as in others, swing traders play a multifaceted role that impacts liquidity, price discovery, and
market volatility. Their activities are an integral part of the ecosystem, contributing to its dynamism and
efficiency. Understanding the role of swing traders can provide valuable insights into market movements and
investor behavior within India's financial landscape.
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1.3.4 ROLE OF HEDGE FUNDS INVESTOR
Hedge fund investors play a significant role in the Indian capital market, just as they do in other global markets.
Their involvement can influence market dynamics, liquidity, and even the strategic direction of companies.
However, it's important to note that the Indian market has its unique regulations and characteristics, which can
affect the extent and nature of hedge fund activities. Here are some key roles and impacts of hedge fund
investors in the Indian capital market:
1. Liquidity Providers
Hedge funds often trade in large volumes, which can provide much-needed liquidity to the market. This
liquidity is crucial for the efficient functioning of the capital market, as it allows investors to enter and exit
positions with relative ease.
2. Price Discovery
By taking positions based on extensive research and market analysis, hedge funds contribute to the price
discovery process. Their trades, often based on sophisticated strategies and in-depth analysis of market
fundamentals, can help in reflecting the true value of securities in the market prices.
3. Risk Management:
Hedge funds use various strategies to manage risk, including short selling, leverage, and derivatives. These
strategies can help in stabilizing the market by hedging against potential downturns, although they can also
introduce systemic risks if not properly managed.
4. Market Efficiency:
The strategies employed by hedge funds can contribute to market efficiency. By arbitraging price
discrepancies across different markets or securities, they help in aligning prices with their intrinsic values,
thus reducing market anomalies and inefficiencies.
5. Innovation and Sophistication:

Hedge funds are known for their innovative investment strategies and use of sophisticated financial
instruments. Their presence in the Indian capital market can foster innovation and sophistication, encouraging
other market participants to adopt advanced investment techniques and risk management practices.
6. Corporate Governance:
Hedge funds sometimes take significant stakes in companies and can play an active role in corporate
governance. They can influence management decisions, advocate for strategic changes, or push for actions
that enhance shareholder value. This activism can lead to improvements in company performance and
governance standards.
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7. Regulatory Challenges and Concerns

The activities of hedge funds are subject to regulatory scrutiny. In India, the Securities and Exchange Board
of India (SEBI) is the regulatory authority that oversees hedge funds (categorized under Alternative Investment
Funds or AIFs). The regulatory framework aims to ensure transparency, protect investors, and mitigate
systemic risks. However, the global and often opaque nature of hedge fund operations can present regulatory
challenges.
In conclusion, hedge fund investors contribute to the dynamism and efficiency of the Indian capital market.
Their role as liquidity providers, price discoverers, and risk managers, among others, can have a positive
impact on market functioning. However, their activities also necessitate robust regulatory frameworks to
mitigate potential risks and ensure the stability of the financial system.
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CHAPTER 2- RESEARCH METHODOLOGY
2.1- Meaning and definition-

Research methodology is the specific procedures or techniques used to identify, select, process, and
analyse information about a topic. In a research paper, the methodology section allows the reader to
critically evaluate a study's overall validity and reliability. The techniques or the specific procedure
which helps the students to identify, choose, process, and analyse information about a subject is called
Research Methodology. Methodology is the systematic analysis of the methods applied to a field of
study. It comprises the theoretical analysis of the body of methods and principles associated with a
branch of knowledge. A methodology does not set out to provide solutions. It offers the theoretical
base for understanding which method can be applied to a certain case.
Webster dictionary defines research methodology as “The systematic study of methods that are, can
be or have been applied within a discipline”
Features of research methodology-
1- Systematic process
2- Reliance on empirical evidence
3- Commitment to objectivity
4- Verifiability
5- Ethical neutrality
6- Development of principles and theories
7- Multipurpose activity
Types of research methodology-
1-Qualititative research methodology-
The qualitative research methodology is descriptive and subjective irrespective of facts. Observation
and description are more important in this type of Methodology. The main aim of this type of
Methodology is to evaluate knowledge, attitudes, behaviours, and opinions of people about the
33
Research’s topic. The method works using grounded Research, case study, action research, disclosure
analysis, ethnography, etc. The qualitative research methodology is based on the quality of the
phenomenon.
In qualitative methods, intensity, amount or frequency of Data is immaterial. It focuses on non-

rigorous examination or measurement of data. For qualitative Research, size doesn’t matter. It
understands feelings, viewpoints, and impressions. The useful qualitative method encompasses highly
focused, flexible, and provides quick results.
However, there is a scope of misunderstanding and misuse of qualitative methods.
2-Quantitative research methodology-
This type of research methodology tests the importance of the Hypothesis of Research. This is a
systematic research methodology and is in numbers. The quantitative research methodology includes
laboratory experiments, econometric, mathematical calculations, surveys, simulation etc. The
measurement, quantity or amount is the critical factor in Quantitative research methodology.
In quantitative research methodology, the analysis and measurement of data and relationship between
variables are essential. It involves number-based Research which measures attitude, behaviour, and
performance in numbers. This method makes data easier to interpret. It requires those techniques
which can apply to a larger view. The data received for the purpose to use in quantitative research
methodology can effectively convert into graphs or charts. So, there will be a difficulty for an
interpreter to influence it.
In this method, the data concerned can be analysed in numbers. The results obtained from this research
method are analysed and interpreted easily. As the term suggests, the quantitative way is the collection
and analysis of data which can be found in numeric form. Large-scale and representative sets of data
are required for adopting this type of Research Methodology. This method is comparatively expensive.
3-Applied research-
To solve real-life problems, the applied research method is best suited. Unlike basic research methods,
used research methods solve practical problems which require scientific methods to incorporate.
A researcher solves problems with already known and proved theories when they apply applied
research methods. The Research which provides immediate outcomes and helps basic Research as
well is involved Research. Case studies, experimental Research, and interdisciplinary Research are
applied Research. This type of Research is of practical use such as Research on pollution control,
inventing vaccines for a new disease, increasing efficiency and production of machinery.
For instance: To find a specific cure for a disease. The study of medical science teaches students to
take care of humans.
34
4-Analytical Research-
Analytical research is undertaken to collect facts or data, or the facts that are readily available. The
researcher attempts to critically evaluate such facts and data so as to arrive at a conclusion. This type
of research establishes the cause-and-effect relationship. It also helps to focus on those variables that
have greater positive effect and to eliminate those variables that have negative effect on the situation.
5-Empirical Research-
Empirical research can be defined as “research based on experimentation or observations”.it is a way

of gaining knowledge by means of direct and indirect observation or experiment. Such research is
conducted to test a hypothesis.
6- Descriptive research-
Descriptive research provides data about the population or data being studies. But it can only describe
the” who, what, when, where, and how” of a situation. It does not describe what caused a particular
situation. Therefore, descriptive research is used when the objective is to provide a systematic
description that is as factual and accurate as possible.
5- Basic research-
Basic research is also called as pure or fundamental research. It is undertaken to develop a theory or a
body of knowledge. The main goal of basic research is to expand man’s knowledge. Basic research
advances fundamental knowledge about the world. It focuses on refuting or supporting theories that
explains observed phenomena.
2.2- Research objectives-

The main objective of research is to identify the awareness utilization patterns of the people. About
what they think about capital markets and are they aware about its benefits or not. The objective of
present study can be accomplished by conducting systematic research.
The following are the objectives of the study-
1-To understand different types of capital market.
2-To study about various capital market instruments.
3-To study features and functions of capital market.
35
4- To study the history of Indian capital market.
2.3-Research design-
Research design refers to the framework of market research methods and techniques that are chosen
by a researcher. The design that is chosen by the researchers allow them to utilise the methods that are
suitable for the study and to set up their studies successfully in the future as well.
According to Kerlinger F.N., “research design is the plan, structure and the strategy of the
investigations conceived so as to obtain answer of research questions and to control variance.”
According to David & Nachmias, “Research design actually constitutes the blue print for the
collection, measurement and analysis of the data”
According to Phillips Bernard Research design is defined as “A logical and systematic plan prepared
for directing a research study. It specifies the objectives of the study; the methodology and techniques
to be adopted for achieving the objectives”
The sketch of how research should be conducted can be prepared using research design. Hence, the
market research study will be carried out on the basis of research design. The design of a research
topic is used to explain the type of research (experimental, survey, correlational, semi-experimental,
review) and also its sub-type (experimental design, research problem, and descriptive case-study).
There are three main sections of research design: Data collection, measurement, and analysis.
The type of research problem an organization is facing will determine the research design and not
vice-versa. Variables, designated tools to gather information, how will the tools be used to collect and
analyse data and other factors are decided in research design on the basis of a research technique is
decided.
An impactful research design usually creates minimum bias in data and increases trust on the collected
and analysed research information. Research design which produces the least margin of error in
experimental research can be touted as the best.
This research project is analytical in nature.
Factors affecting research design-
1. Availability of scientific information
2. Availability of sufficient data
3. Time availability
36
4. Proper exposure to the data source
5. Availability of the money
6. Manpower availability
7. Magnitude of the management problem
8. Degree of Top management’ s support
9. Ability, knowledge, skill, technical understanding and technical background of the researcher
10. Controllable variables
11. Un – controllable variables
12. Internal variables
13. External variables
Advantages of research design
1. Consumes less time.

2. Ensures project time schedule.
3. Helps researcher to prepare himself to carry out research in a proper and a systematic way.
4. Better documentation of the various activities while the project work is going on.
5. Helps in proper planning of the resources and their procurement in right time.
6. Provides satisfaction and confidence, accompanied with a sense of success from the beginning of
the work of the research project.
2.4-Data collection method-
1-Primary data-
A primary data source is an original data source, that is, one in which the data are collected first-hand
by the researcher for a specific research purpose or project. Primary data can be collected in a number
of ways. However, the most common techniques are self-administered surveys, interviews, field
observation, and experiments. Primary data collection is quite expensive and time consuming
compared to secondary data collection. Notwithstanding, primary data collection may be the only
suitable method for some types of research.
37
Secondary data refer to the data that are gathered by a secondary party other than the user himself. The
common sources of the secondary data for social science include statements, the data collected by
government agencies, organisational documents, and the data that are basically collected for other
research objectives. Secondary data are basically second-hand pieces of information. These are not
gathered from the source as the primary data. To put it in other words, the secondary data are those
that are already collected. So, these are comparatively less reliable than the primary data. These are
usually used when the time for the enquiry is compact and the exactness of the enquiry can be settled
to an extent data.
2- Secondary data-
In this particular project study, both primary and secondary data are used. Primary data
with the help of survey method. Survey method questionnaire is conducted with the help of
google form to collect the responses. Secondary data was also used like research papers,
articles, books, internet, etc.
2.5- Sampling-
Sampling design is a plan designed to select the appropriate sample in order to collect the right data
so as to achieve research objectives. A sample is a part of the universe that can be used as
respondents to a survey or for the purpose of experimentation, in order to collect relevant
information to solve a particular problem.
Donald Tull and Dell Hawkins define sample as "those individuals chosen from the population of
interest as subjects in an experiment or to be the respondents to a survey.”
• Sampling method- In this particular research study, convenience sampling is used.
• Sample unit- Individual respondents
• Sample size- 105 respondents
2.6-Statistical tools used-

The tools which are used in this study is pie chart diagram and line bar graph as mentioned in the
Google form which is prepared for the survey. Analyse the data and interpret the result by using
percentage analysis. Simple percentage analysis refers to a ratio. With the help of absolute figures, it
will be difficult to interpret any meaning from the collected data, but when percentage are found out
then it becomes easy to find the relative difference between two or more attributes.
Percentage = No. of respondents ÷ Total number of respondents × 100
38
CHAPTER 3: REVIEW OF LITERATURE
1-Sk Barua & V Raghunathan (1986):
Efficient pricing of securities and maintenance of parity between risk and return are absolutely
essential for a well-functioning capital market. In this paper (Research on The Indian Capital Market)
they discuss a clear case of observed inefficiency in the Indian capital market. They show, taking the
case of Reliance, that an investor can earn returns incommensurate with the degree of risk assumed
by operating on rights issues of shares and convertible debentures simultaneously in forward and cash
markets. Although the government policy of granting a low premium on rights shares and convertible
debentures aids inefficiency, the market is also to be blamed since it is unable to adjust quickly the
prices of securities so that the returns earned are in line with the risks assumed.
2-Ramesh Gupta (1987):
Based on the way the markets actually function, Ramesh Gupta questions in this article (Is the Indian
Capital Market Inefficient or Excessively Speculative?) the validity of the assumptions used in
arguing that the Indian capital market is inefficient. Far more than inefficiency; he says that the
problem with the Indian market is its excessively speculative character, by permitting trading on low
margins in carry forward transactions. He also makes suggestions on how to restrict speculation and
protect the interest of investors.
3-Sk Barua et al (1994):
In this paper (Inefficiency of the Indian Capital Market) they present a review of research done in the
field of Indian capital markets during the fifteen years from 1977 to 1992. The research work included
in the survey were identified by two search procedures. Firstly, they wrote to 118 Indian university
departments and research institutions requesting information on the works done in this field in their
department/institution. After three reminders, they obtained responses from 53 institutions.
Simultaneously, they searched through various Indian journals in their library, located books listed in
the library catalogue and traced through the list of references provided in various research works.
Considering the size, vintage and development of the Indian capital market, the total volume of
research on it appears to be woefully modest - about 0.1 unit of work per institution per year!
Moreover, a large number of works are merely descriptive or prescriptive without rigorous analysis.
Certain areas such as arbitrage pricing theory, option pricing theory, agency theory, and signalling
theory are virtually unresearched in the Indian context. Besides, very little theoretical work has been
done by researchers in India. However, with improved availability of databases and computing
resources, and with increasing global interest in Indian markets, they expect an explosion of work in
the near future.
39
4-R Vaidyanathan & Kanti Kumar Gali:
In this paper (efficiency of the Indian capital market) the researchers have tested for the weak form
efficiency of the capital market. They have tested for randomness using the test runs, serial correlation
and filter rule tests based on the daily closing prices of ten shares actively traded on the Bombay stock
exchange. The evidence from all the three tests supports the weak form of efficient market hypothesis.
However, with an unrealistic assumption of zero transaction cost, it may be possible to identify
profitable opportunities for using filter rules provided the patterns are stable over time.
5-L M Bhole (1995):
With the objective of developing a balanced perspective on the role of industrial securities market in
India, this paper (The Indian Capital Market At Crossroads) analyses major trends, changes, problems,
and issues relating to primary and secondary markets over a period of 40 years and suggests various
reforms for restoring the health of the capital market. However, in terms of quality, there has been a
regress and the market has tended to become dysfunctional. In this paper he says there is a need to
change our outlook on the role, importance and working of the capital market, especially the stock
market.
6-Subir Gokarn (1996):
In this paper (Indian capital market reforms,1992-96) uses conceptual framework that draws on the
theory of regulation on the one hand and the new political economy on the other to make an assessment
of the wide-ranging reforms that have been initiated in the Indian stock market over the past four
years. Based on the framework the various reforms are classified into categories reflecting their
regulatory effectiveness and their impact of sources on market failure. He arrives at a generally
positive assessment of the reforms, but points out three areas of concern; the lack of a fixed term
appointment for the regulators; the persistence of the non-competitive conditions in the market; and
the excessive entry of new scripts into the market, although he says in recent days some steps have
been taken to address this problem as well.
7-R Nagaraj (1996):
In this study (India’s capital market growth) he documents India’s capital market boom, and its
proximate causes. Household sector substituted its shares and debentures for bank deposits, and
corporate sector securitised its debts. He says there is no association between growth rates of the
capital market mobilisation and aggregate saving rate, corporate physical investment and value added.
Long term decline in the contribution of internal finance to corporate fixed investment and in
profitability in 1980s are noted, despite a fall in ratio of corporate tax to gross profit. In sum, India’s
capital market witnessed a rapid growth since around 1980.
40
8-L C Gupta (1998):
The evidence presented in this paper (what ails the Indian capital market) the researcher suggests that
an important factor underlying the withdrawal of retail investors from the capital market is the erosion
of investors’ confidence in corporate
India. The government has shown a little seriousness in creating the necessary confidence by stricter
regulation to ensure that corporate India behaves more responsibly towards investors. On the contrary,
some of the government’s proposals incorporated in the companies’ bill pending before parliament,
are bound to reduce corporate managements’ accountability to shareholders. The researcher says that
corporate governance problem basically arises due to separation of ownership from control.
9-Sanjay Sehgal & I Balakrishnan (2002):
The research article (contrarian and momentum strategies in the Indian capital market) attempts to
evaluate if there is any systematic pattern in stock returns for Indian market. The empirical findings
reveal that there is a reversal in long term returns, once the short term momentum effect has been
controlled by maintain a one-year gap between portfolio formation period and the portfolio holding
period. The researcher says that a contrarian strategy based on long term past return provides
moderately positive returns.
Further there is continuation in the short term returns and a momentum strategy based on it provides
significantly positive payoffs. The results in general are in conformity with those for developed capital
markets such as the US. The study points at probable stock market inefficiencies especially relating to
the momentum factor.
10- Sayuri Shirai (2004):
In this paper (impact of financial and capital market reforms on corporate finance in India) India’s
financial and capital market reforms since the early 1990s have had a positive impact on both the
banking sector and capital markets. Nevertheless, the capital markets remain shallow, particularly
when it comes to differentiating high quality firms from low quality ones. While some high-quality
firms have substituted bond finance for bank loans, this has not occurred to any significant degree for
many other types for firm. This reflects that most bonds are privately placed. As a result, bank remains
major financiers for both high- and low-quality firms. The researcher argues that India should build
an infrastructure that will foster sound capital markets and strengthen bank’s incentives for better risk
management.
11-R H Patil (2006):
41
In this article (Current state of the Indian capital market) the journalist says that the Indian capital
market have witnessed a radical transformation in just one decade, there is hardly any country which
has witnessed such a massive change in its capital market in such a short time. In the early 1990s India
figured low in the global ranking of the state capital markets. The adoption of sophisticated IT tools
in trading and settlement mechanisms has now placed India in the lead. The national stock exchange
has played a important role in this transformation. Shorter settlement periods and dematerialisation
have been other major developments. But all is not positive. The introduction of individual stock
futures poses a major risk and also the large inflow of funds through participatory notes. He suggests
not treat market as a rational organism.
12- P K Mishra (2009):
The capital market of India has undergone radical reforms since early 1990s. Thus, it is no longer
isolated from global economic environment. Recently India has witnessed bouts of volatility in its
market. Some of which had their origin in global events such as US sub-prime crisis. In this paper
(Indian capital market-revisiting market efficiency) it examines the informational efficiency of Indian
capital market particularly the efficiency of stock exchange over a period of 18 years 1991 to 2009
using random walk and generalised autoregressive conditional heteroscedasticity models. And, it
provides the evidence of weak from inefficiency of the market. Market efficiency is also, an indicative
of sub-optimal allocation of portfolios into Indian capital market.
13-Joy Pathak (2010):
The paper (what determines capital structure of listed firms in India?) studies the leverage decisions
of Indian firms. The study examines the structure using a regression model. Six major factors
(tangibility, firm size, liquidity, growth profitability) and one second tier(R&D) are identified and their
relations to leverage are studied. They found that leverage increases with increase in firm size,
tangibility and growth. In contrast they found that leverage increases with decrease in business risk,
profitability and liquidity.
14- Jumba Shelly (2010):
In her project report (A project on capital market) she has ascertained that performance
of the company’s or corporate earnings is one of the factors which have direct impact
on capital market in a country. Weak corporate earnings show that the demand for
goods and services in the economy is less due to slow growth in per capita income of
people. Because of which there is slow growth in employment which means slow
growth in demand in the near future. Thus, weak corporate earnings indicate average
or not so good prospects for the economy. In such a scenario the investors would vary
42
to invest in capital market and thus there is a bear market like situation. The researcher
has also added that the macroeconomic numbers also influence the capital market. It
includes index of industrial pollution (IIP), wholesale price index (WPI), core
infrastructure industries (coal, crude oil, refining power, cement and finished steel), etc.
These indicators indicate the state of the economy and the direction in which it is headed
and therefore impacts the capital market.
15-P K Mishra et al (2010):

This research paper (capital market efficiency and economic growth: the case of India)
examines the impact of capital market efficiency on economic growth in India using
the time series data on market capitalization, total market turnover and stock price index
over the period spanning from the first quarter of 1991 to the first quarter of 2010. The
application of multiple regression shows that the capital market in India has the
potential of contributing to the economic growth of the country. Thus, the market
organizations and regulations should be such that large number of domestic as well
foreign investors enter the market with huge listings, investments, and trading so that
the very objective of optimal allocation of economic resources for the sustainable
growth for the country can be ensured.
16-Rakesh Gupta & Junhao Yang (2011):

In this paper (testing weak form efficiency in the Indian capital market) the researchers
test the weak form efficiency or random walk hypothesis for the two major equity
markets (BSE and NSE) in India for the period 1997 to 2011. The results are mixed as
for quarterly data, all three methods ADF, PP and KPSS tests support the weak form
efficiency for later sample period 2007-2011, but slight conflict for earlier period 1997-
2007 as only pp test shows weak form efficiency; for monthly data all three-test method
are consistent on the weak form efficiency for the period 2007-2011 and not efficient
for earlier period 1997-2007. For daily and weekly data all three methods rejects weak
form efficiency during all sample periods.
17-Mohd. Shamin Ansari (2012):

In this research paper (Indian capital market review: issues, dimensions and
performance analysis) the researcher says that the purpose of an efficient capital market
is to mobilize funds from those who have it and route them to those who can utilize it
in the best possible way. India’s financial market is multi-faced but not balanced. It has
state of art equity market but relatively less developed and immature bond corporate
43
market. The Indian capital market in the recent year has undergone a lot of innovation
in term regulation and mode of operations. A well-developed bond market is essential
for financial stability, efficiency and overall growth. However, if we look at the Indian
capital market, we find that the households have traditionally preferred parking their
surpluses in bank deposits, government savings schemes and less of their 10%
investments in financial assets in shares, debentures and mutual funds. The Indian
capital market has put behind the worst behind and moved towards strong growth. The
researchers aims to identify various grey points of Indian capital market, evaluated how
it performed during post financial crisis and suggests necessary policy reforms for a
matured capital market.
18-Juhi Ahuja (2012):

The research paper (Indian capital market) review of Indian capital market & its
structure. in last decade or so, it has been observed that there has been a paradigm shift
in the Indian capital market. The application of many reforms and development in
Indian capital market has made it comparable with international capital markets now.
It features a developed regulatory mechanism and a modern market infrastructure with
growing market capitalization, market liquidity and mobilization of resources.
However, the market has witnessed its worst time with recent global financial global
crisis that originated from the Us sub-prime mortgage market and spread over to the
entire world as a contagion. The Indian capital market delivered a sluggish
performance.
19-Dr Himanshu Barot & Dr Nilesh B. Gajjar (2013):

In this paper (role and growth of financial derivatives in Indian capital market) the
innovative practises always catch-up the eyes of concerned people where ideas and
innovation become the hallmark progress. And even capital market is no far away from
this, whereas financial derivatives have given drastic change in the growth of the
financial market. The figure seems that the total turnover of the financial derivatives
segment increased by Rs 31,349,732 crore during 2011-12 as compared with Rs 2,365
crore during 2000-01. India’s experience with launch of equity derivatives market has
been extremely positive. Derivatives market is playing an important role in shaping
capital market.
20-Rajasekhara Mouly Potluri et al (2014):

The paper (a critical analysis on capital market developments in India: pre and post
liberalization period) aims to critically examine capital market developments in India
44
pre and post liberalization period. The paper examines the Indian capital market from
its inception to the latest developments related to both primary and secondary markets.
It also sheds light on the regulatory framework for investor protection. The study further
highlights the future roadmaps for the radical development for the Indian capital
market.
21-Parray Firdous Ahmad &Tiwari Anshuja (2015):

The present review article (Indian capital market: a review) is an attempt by the
researchers to make a descriptive as well as analytical study of work done in the field
of Indian capital market. It studies various loopholes in the financial system. Lot of
contributions have been made in this area. In this review emphasis are given to bring to
light all the hard work done by various researchers and to uncover the gap of future
research. It also highlights some important capital reforms since 1991. The researchers
have arrived that there is generally a constructive assessment of the economic reforms
on Indian capital market, but also points some areas of concern: the lack of concern of
a fixed term appointment for the regulators; the persistence of non-competitive conditions in the market.
45
Chapter 4- Data Analysis and Interpretation

In this method, a questionnaire consists of a number of questions printed or typed in definite order on
a form or set of forms. In my research, the source of primary data is well designed Questionnaire. My
questionnaire consists of 19 questions which need answer in one word. The responds to this
questionnaire were collected through online survey.
In this primary data survey, I have collected data from friends, family, business individual & employee
working in capital market. All the question are related to finance & capital market.
Questionnaire-
1-What is your gender?
2-Which age group do you fall in?
3-What is your occupation?
4-what is your annual income bracket?
5-Do you know about capital market?
6- Which knowledge best describes your knowledge of investments?
7-How do you get information regarding these markets?
8-You like investing in financial products through?
9-What type of market you prefer the most?
10-How will you invest your money in secondary market?
11-How much experience do you have in investing?
12-Are you investing into equity market?
13-What investment options are you considering?
14- 14-What is your motive for making investment in capital market?
15- If you are considering investment, what type of investor are you?
16-What attracts you to equity market?

17- Proportion of investment you are investing in shares and securities?
18-What sources of funds do you utilize to invest or trade in capital market?
19-According to you, will the pandemic affect the capital market in future?
46
1-What is your gender?
Gender Number of respondents
Male 55
Female 50
Interpretation-
The sample size of questionnaire was 105 respondents. The above pie chart makes easier to understand
in a better and easier way. The pie chart shows us that the number of male respondents is 55 i.e., 52.4%
and the number of female respondents is 50 i.e., 47.6%.
47
2-Which age group do you fall in?
Age group No of respondents
18-30 92
30-45 9
45-60 4
Above 60 0
Interpretation-
The above pie chart represents the age of the respondents
• 92 respondents out of 105 respondents i.e., 87.6% are from the age group from the age 18 to
30.
• 9 respondents out of 105 respondents i.e., 8.6% are from the age group of 30 to
45.
• 4 respondents out of 105 i.e., 3.8% respondents are from age 45 to 60.
• No respondents are above 60 years of age
48
Interpretation-
From the above pie chart, the data collected through this survey consists of students as the major
responders. The percentage of student among others is 58.1%. A simple observation can be made that
the students are educated enough and are ready to invest in capital market since they start earning. 26
respondents i.e., 24.8% of the respondents are employees.15 respondents out of 105 i.e., 14.3% are
business people. The other respondents are engaged in other activities.
49
4-what is your annual income bracket?
Interpretation-
The above pie chart represents the annual income of the respondents. The most voted income bracket
is “50,000-1,20,000” i.e., 60% of the respondents. The income bracket
1,20,000-3,00,000 is chosen by 22 respondents out of 105 respondents i.e., 21%. The income bracket
3,00,000-5,00,000 is chosen by 6 respondents i.e., 5.7% and the income bracket of above 5,00,000 is
chosen by 14 respondents i.e., 13,3%.
50
5-Do you know about capital market?
Interpretation-
From the above data, the number of respondents who know about capital market are 71 i.e., 67.6%.
The capital market has huge potential and this potential can be fully utilised only if people are aware
about the concept of capital market. Since there are so many benefits one can avail by investing into
the capital market and by proper knowledge and awareness one can benefit more than the rate of
inflation. The percentage of the remaining respondents i.e., 32.4% are not aware about capital market.
51
6- Which knowledge best describes your knowledge of investments?
Interpretation-
From the above data, we can see the knowledge of respondents about investments in capital market.
50 respondents out of 105 respondents i.e., 47.6% have very little knowledge about investments. 51
respondents i.e., 48.6% have moderate knowledge about investments and 4 respondents out of 105
i.e., 3.8% have extensive knowledge about investments. So, we can see that respondents have
moderate knowledge about investments.
52
7-How do you get information regarding these markets?
Interpretation-
According to the above data the respondents get information regarding these markets through
advertisement, company sales force, friends/relatives, magazines/ newspapers and other sources like
college subjects’ internet etc. Most respondents get information through advertisement and
friends/relatives i.e., 57.1% and 46.7%. And 31.4% through magazines and newspapers.
53
Interpretation-
In the above data 94 respondents have answered this question. Out of 94 72.3% like investing in
financial products through primary market. Primary market includes IPOs, private placement, etc. Out
of 94 27.7% like investing in secondary market. Secondary market includes equity as well debt
markets, preference shares, debentures, etc. Most of the respondents like investing in financial
products through primary market.
54
9-What type of market you prefer the most?
Interpretation-
From the above data, out of 105 respondents only 96 have answered this question. 53.1% prefer the
share capital market,36.5% prefer the mutual funds market and 10.4% prefer the currency market. We
can see that no one prefers the derivatives market. The market which most people usually prefer is
share capital market.
55
10-How will you invest your money in secondary market?
Interpretation-
From the above pie chart, we can see that 56.5% invests through any stock broking company and
43.5% likes to invest through banks. Most respondents prefer investing through stock broking
companies because they give proper knowledge about the market.
56
11-How much experience do you have in investing-
Interpretation-
From the above data, out of 105 respondents, 79 respondents i.e.,75.2% have experience of only 0-1
years. 21 respondents i.e., 20% have 1 to 5 years of experience and 5 respondents i.e., 4.8% have
experience of 5 years or more. Most of the respondents don’t have much experience in investing maybe
due to lack of awareness,
etc.
57
Interpretation-
From the above pie chart, the equity market is the most vital area of a market economy because it
gives companies access to capital and investors a slice of ownership in a company with the potential
to realize gains based on its future performance. from the survey conducted the majority percentage
of response is “NO” i.e., 46.7% of the responses. This implies that the equity market is not very well
known in the market. Proper awareness and knowledge can break this barrier and allow other potential
investors to invest in the market and increase the flow of cash in the economy. 34.3% people are
investing into equity market.
58
Interpretation-
From above data, in this survey people choose to invest their money in order -
1. stock/equity
2. Mutual funds
4. Fixed deposit
5. gold/silver
6. Government securities
Fixed deposits because its safe investment depends on Banks with fixed annual interest, Mutual funds
because it’s managed by professional with SIP plans, Real estate because it’s a physical investment,
commodity because increasing demand and necessity, equity stocks because only knowledgeable
people invest there because of market risk, Gsec. Because of safest option in country but with low
return. Many have not invested in any of the above.
59
14-What is your motive for making investment in capital market?
Interpretation-
From the above pie chart, we can see that the maximum number of people i.e., 52.6% invest in capital
market for regular income in the form of interest/dividend. 36 respondents out of 97 i.e., 37.1% want
to invest for capital gain. 9 respondents i.e.,
9.3% wants to invest for tax planning.
60
15- If you are considering investment, what type of investor are you?
Interpretation-
From above data, my interpretation is as any investment require time period as we can see 64.6% %
people choose long term investment option. As investor prefer long term investment because long term
investment comes with higher profit. 35.4% invest for short term.
61
16-what attracts you to equity market?
Interpretation-
From the above data, it shows that respondents are highly attracted to the equity market for “high
returns”. Money invested in the equity market beats inflation and also the rate of return provided in
banks. An individual invests in stocks which yield a high return.
High return also depends upon the time period of investment. Second most favourable option is
“dividend”. Then stock split, speculation and liquidity of invested fund.
62
17- Proportion of investment you are investing in shares and securities?
Interpretation-
From the above data, 54.3% respondents are investing up to 5% maybe because they are not well
aware about the returns and risk. 29.3% respondents are investing 5 to 10% of their income. 8.7% are
investing up to 10 to 25% and 7.6% are investing more than 25% of their income. Maximum number
of respondents are investing only up to 5%.
63
18-What sources of funds do you utilize to invest or trade in capital market?
Interpretation-
From the above pie chart, maximum number of respondents i.e., 95.7% use their savings and personal
funds to invest in the market. People in India mostly use their savings for investing and don’t prefer
loan. The percentage of loan is 3.3%. So, we can interpret that Indian people don’t prefer loan and
pledging over savings and personal funds.
64
Interpretation-
From the above data, 44 respondents out of 105 think that the pandemic will affect the capital market.
10 respondents i.e.,9.5% think that pandemic will not affect the capital market and 48.6% respondents
have marked maybe because they are not sure that the pandemic will affect the pandemic or not.
65
CHAPTER 5- CONCLUSION
5.1- Findings
• Majority of the respondents are aware about what capital market is.
• Majority of the respondents have moderate knowledge about capital market.
• Many respondents get information about the capital market through friends and relatives.
• Majority of the respondents like investing in financial products through primary market.
• Majority of the respondents prefer share capital as their investment option.
• Majority of the respondents like to invest through any stock broking company as it is easier
and they have proper knowledge about investing.
• Majority of the respondents don’t have much experience in investing they have
0 to 1 years of experience.
• The majority of the respondents are not investing into equity market due to lack of proper
knowledge.
• The respondents consider fixed deposit and stock/equity as an option to consider as a future
investment option. As Fixed deposit is the safer option.
• Many of the respondents are considering investment for long term as long-term investment
gives good return.
• High return and good dividend attract majority of the respondents. As many people invest only
for good returns.
• Majority of the respondents are investing only up to 5% as they don’t have proper knowledge
about the market.
• Majority of the respondents use their saving and personal income to invest as people don’t
consider taking loan for investment option.
• Majority of the respondents are not sure that the pandemic will affect the capital market or not.
66
5.2- Suggestions-
1- Increased investor education and awareness in semi-urban centres to cover each and every corner
of the country. It is necessary to increase the awareness among general public in rural area as they are
less aware. Investor Camps / Investor Awareness Programmes should be organized on continuous
basis.
2-Appropriate measures should be initiated to make financial services companies to focus on ethical
selling practices and enhanced disclosures.
3-Indirect Investor participation should be enhanced through mutual funds and longterm retirement
products.
4-High net-worth Non-resident Indians (NRIs) should be targeted by facilitating account opening and
introducing reforms to simplify profit repatriation.
5-Stringent Rules/ Regulations be introduced for better monitoring of companies post IPO/FPO for
use of funds. There should be provision for refund in case the discrepancies are noted.
5.3- Conclusion-
The Indian capital market has undergone many changes after the challenges and the irreparable loss
faced over years. There have been massive and revolutionary changes over years, and some significant
changes that have reduced the financial scam cases. There has been a reduction of malpractices of
trade over the years. The capital market has made tremendous progress in terms of institution building.
They have transformed and developed the lives of investors and market intermediaries. The market
has been friendlier by boosting performance and eliminating the challenges.
From the Survey conducted, I have observed few things pertaining to the study of capital market in
India. The main reason to do this survey was how much an individual know about the Capital market
there is lack of experience and non-adequate knowledge of the capital market.
There should be more awareness of the Capital Market and its different types of investment options;
which can be done through seminars, webinars, and awareness spreading campaigns. In the coming
future, investment is not an option but a necessity. Investing is an approach to put aside money while
you are occupied with life and have that money work for you, so you can completely receive the
benefits of your work later on. Investing is a means to a happier ending. Legendary investor Warren
Buffett defines investing as “the process of laying out money now to receive more money in the future”
The goal of investing is to put your money to work in one or more types of investment vehicles in the
hopes of growing your money over time; and what better place than capital market?
67
Capital markets play a vital role in facilitating the smooth operation of capitalist economies by
allocating resources and creating liquidity for businesses and entrepreneurs. Capital markets create
securities products that provide a return for those who have excess funds (Investors/lenders) and make
these funds available to those who need additional money (borrowers).
As per world economic forum India has a higher growth ratio in current markets assuming that the
market trend takes a bullish turn globally few months down the line India will see a big win in terms
of sales as well as a bull run can be felt in the stock market and higher valuations can be seen. So now
it’s a right time to invest in capital markets to earn good returns and make your money grow.
68
References-
1-Gokarn, S. (1996). Indian Capital Market Reforms, 1992-96: An Assessment. Economic and
Political Weekly, 956-961.
2-Mishra, P. K. (2009). Indian capital market-Revisiting market efficiency. Indian Journal of Capital
Markets, 2(5).
3-Vaidyanathan, R., & Gali, K. K. (1994). Efficiency of the Indian capital market. Indian journal of
finance and research, 5(2), 35-38.
4- Barua, S. K., Raghunathan, V., & Varma, J. R. (1994). Research on the Indian capital market: a
review. Vikalpa, 19(1), 15-32.
5-Barua, S. K., & Raghunathan, V. (1986). Inefficiency of the Indian capital market. Vikalpa, 11(3),
225-230.
6-Gupta, L. C. (1998). What ails the Indian capital market? Economic and Political Weekly, 1961-
1966.
7- Bhole, L. M. (1995). The Indian Capital Market at Crossroads. Vikalpa, 20(2), 29-
41.
8- Sehgal, S., & Balakrishnan, I. (2002). Contrarian and momentum strategies in the Indian capital
market. Vikalpa, 27(1), 13-20.
9- Patel, R. K. To Study the Role and Importance of Capital Market in Indian Financial System.
10-Ahmad, P., & Anshuja, T. Indian capital market: A review.
11-Patil, R. H. (2006). Current State of the Indian Capital Market. Economic and Political Weekly,
1001-1011.
12- Nagaraj, R. (1996). India's capital market growth: trends, explanations and evidence. Economic
and Political Weekly, 2553-2563.
13-Mohana Krishna Irrinki, 2019 Pramana Research Journal Volume 9, Issue 4, 2019
ISSN NO: 2249-2976
14-Barot, H., & Gajjar, N. B. (2013). Role and Growth of Financial Derivative in the Indian Capital
Market. International Journal for Research in Management and Pharmacy, 2(6), 1-23.
69
15-Potluri, R. M., Pasha, S. A. M., & Challagundla, S. (2014). A Critical Analysis on Capital Market
Developments in India: Pre and Post Liberalization Period. Journal of Distribution Science, 12(10), 5-
9.
16-Ansari, S. (2012). Indian capital market review: Issues, dimensions and performance analysis.
UTMS Journal of Economics, 3(2), 181-191.
17-Pathak, J. (2010). What Determines Capital structure of listed firms in India?: Some empirical
evidences from the Indian capital market. Some Empirical Evidences from The Indian Capital Market
(April 21, 2010).
18-Shirai, S. (2004). Impact of financial and capital market reforms on corporate finance in India. Asia
Pacific Development Journal, 11(2), 33-52.
19-Mishra, P. K., Mishra, U. S., Mishra, B. R., & Mishra, P. (2010). Capital market efficiency and
economic growth: The case of India. European Journal of Economics, Finance and Administrative
Sciences, 27(18), 130-138.
20-Ahuja, J. (2012). Indian capital market: An overview with its growth. VSRD International Journal
of Business & Management Research, 2(7), 386-399.
21-Jain, N., & Padmavathi, C. (2012). Underpricing of initial public offerings in Indian capital market.
Vikalpa, 37(1), 83-96.
22-Marisetty, N., & Madasu, P. (2021). Corporate Announcements and Market Efficiency: A Case on
Indian Capital Market. International Journal of Business and Management, 16(8).
23-Barot, H., & Gajjar, N. B. (2013). Role and Growth of Financial Derivative in the Indian Capital
Market. International Journal for Research in Management and Pharmacy, 2(6), 1-23.
24-Tripathi, P., & Qadri, J. A STUDY ON ROLE OF SEBI AS A REGULATORY AUTHORITY IN

INDIAN CAPITAL MARKET.
25-B.K. Muhammed Juman and M.K. Irshad, An Overview of India Capital Markets, Bonfring
International Journal of Industrial Engineering and Management Science, Vol. 5, No. 2, June 2015
26-Gupta, R., & Yang, J. (2011). Testing weak form efficiency in the Indian capital market.
International Research Journal of Finance and Economics, 75(1), 108-119.
70
Webliography-
1--https://economictimes.indiatimes.com/definition/capital-market
2--https://www.elearnmarkets.com/blog/indian-capital-market
3-29-https://www.mbaknol.com/financial-management/an-overview-of-indian-capital market/
4-https://groww.in/p/secondary-market
5-https://blog.ipleaders.in/overview-of-capital-market-and-its-regulation-in-india-acritical-analysis/
6-https://www1.nseindia.com/int_invest/content/regulatory_framework.htm
7-https://theintactone.com/2019/03/03/brm-u2-topic-1-research-design-feature-of-agood-research-
design/
8-https://indiafreenotes.com/research-design-types-of-research-design/
9-https://theintactone.com/2019/05/04/brm-u2-topic-1-research-design-meaningclassification-and-
elements/
10-https://www.voxco.com/blog/research-design/
11-https://www.scribd.com/book/256263194
71
APPENDIX
1-What is your name?
2-Your email id?
3- What is your gender?
o Male
o Female
o Prefer not to say
4-You fall under which age group?
o 18-30
o 30-45
o 45-60
o Above 60
o Student
o Business
o Employee
o Other
6-What is your annual income bracket?
o 50,000-1,20,0000
o 1,20,000-3,00,000 o
72
o 3,00,000-5,00,000
o Above 5,00,000
7-Do you know about capital
market
o Yes o No
8-Which statement best describes your knowledge of investments?
o Very little knowledge
o Moderate knowledge
o Extensive knowledge
9-How do you get information regarding these capital markets?
Advertisement
Company sales force
Magazines / newspaper
Other
o Primary market
o Secondary market
11-Which type of market you prefer the most?
o Share capital
o Derivatives
o Mutual funds
o Currency market
73
12-How will you invest your money in any secondary market?
o Through any stock broking
company
o Through banks
13-How much experience do you have in investing?

o 0-1 years
o 1-5 years
o 5 years or more
o Yes
o No
o Maybe
Fixed deposits
Stock/equity
Government securities
Mutual funds
Real estate
Gold/silver (commodity)
I haven’t invested yet
16-What is your motive for making investment in capital market?
o Regular income in the form
of income/dividend
o Tax planning
o Capital gain
74
17-If you are considering investment, what type of investor are you?
o Short term
o Long term
18-What attracts you to equity market?
High returns
Speculation
Dividend
Liquidity of invested funds
Stock split
19-Proportion of investment you are investing in shares and securities?
o Up to 5%
o 5 to 10%
o 10 to 25%
o More than 25%
20-What sources of funds do you utilize to invest or trade in the capital market?
o Savings/personal
o Loans
o Pledging
o Yes
o No
o maybe
75
76

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"A STUDY ON ROLE OF INSTITUTIONAL

AND SMALL INVESTOR IN INDIAN CAPITAL MARKET "

Under the guidance of

Name & Signature of:

Project Guide: Principal:

External Examiner: College SealCollege

I, the undersigned, Mr Varun Baheti, a student of Ghanshyamdas Saraf College of Arts

Name and Signature of the Student

Name and Signature of the Guiding Teacher

1.1 Meaning of 1-18

1.1.8 Types of capital 12

1.2 Role of 19-26

1.2.2 Role of Mutual 20

1.2.4 Role of Asset 23

1.2.6 Role of Pension 25

1.3 ROLE OF 27-32

2.4 Data collection 37

2.6 Statistical tools 38

1.1-Meaning of capital market-

1.1.2- Definitions of capital market-

1.1.3- Capital market-

1.1.4- Features of capital market-

1-Link between savers and investment opportunities-

2-Deals in long term investment-

It helps the investors to invest in long-term investments.

4-Determinant of capital formation-

5-Government rules and regulations-

1.1.5-Functions of capital market-

2-Promotes saving habits-

3-Stable and unsystematic security prices-

1.1.6- Nature and participants of capital market-

Capital Market Participants –

1.1.7- Capital market instruments-

1-Equity Shares – Rights Shares, Bonus Shares, Blue chip Shares.

There are various types of debentures that company can issue

5- Fully Convertible Debentures-

6- Partly Convertible Debentures-

Derivatives are usually broadly categorised by:

• The market in which they trade (e.g., exchange traded or over-the-counter)

Following are the types of bonds:

1-Fixed Rate Bonds-

2-Floating Rate Bonds-

3-Zero Interest Rate Bonds-

4-Inflation Linked Bonds-

7- Euro Convertible Bonds, Euro Equities-

8 - American Depository Receipt, Global Depository Receipt, European Depository

Receipt, International Depository-

1.1.8- Types of capital market-

2- Offer for sale,

3-Book building process and

Activities in the Primary Market

3- Pricing of securities being issued

5- Communication/ Marketing of the issue

7- Allotment of securities in demat/ physical mode

8-Making public issues

Functions of Primary Market

2-Underwriting -Underwriting is a kind of guarantee undertaken by an institution or firm of brokers

Role of Primary Market

Features of Primary Market.

1- Initial Public Offer (IPO)-

2-Follow on Public Offer (FPO):

Activities in the Secondary Market

3-Clearing and settlement of trades