JHANVI TAYAL

Sec- B
Role of Market Information in Decision Making
BBA LLB(H)
FIBA- 205 PSDA- 2
A3221520099
 ROLE OF MARKET INFORMATION IN
DECISION MAKING
DECISION MAKING

Decision-making is a complex process. It includes in-depth analysis of several factors and

follows various steps. Decision-making is based primarily on two things i.e., personal
resources or factors, and technical factors. Similarly, when we make decisions related to
investment in stock market or otherwise, investors tend to rely on these two factors only.
Apart from market information, decision making by individual investors is also based on their
personal factors such as age, education, income, and investment portfolio, etc.

Investment decisions are derived from complex models of finance. These models include
those based on expected risk and return associated with an investment, and risk-based asset
pricing models like CAPM (Capital Asset Pricing Model). However, these decisions should
be made only by relying on numerous personal resources and complex models along with
situational factors. Situational factors are extended not only to the problem faced by the
decision maker, but also to the environment. So, in order to make appropriate decision, one
needs to analyse the variables of the problem by mediating them. Decision making can be
defined as the process of choosing a particular alternative from several alternatives. It is an
activity that follows proper evaluation of all the alternatives. Hence, decision makers need to
keep themselves up to date by obtaining information/knowledge from diversified fields so
that they can accomplish the tasks they have to work upon.

Investment decision is of great significance as the process involves taking risks for an
anticipated return. Stock market is known for its volatility and unpredictability as various
factors affect the prospects of the market. Hence, investors need to be privy of variable
factors in analysing the market trend before committing their funds to a particular stock. Here
investors are influenced largely by their own analysis and judgments of the stock market and
the company whose shares are quoted on the stock market. Many people rely on brokers or
friends who are involved in this line of investment for their guidance and opinion. A third
source which is relied upon in this context is the media reports and reviews of stocks market
trends and the experts who have special knowledge about the stock market and their
assistance is relied upon by a good number of investors.

MARKET INFORMATION

In the recent years, an increased interest in the provision of market information can be seen.
In part, this reflects the movement away from state-sponsored marketing in many countries
and especially those which have been undergoing structural adjustment. This has been
accompanied by a recognition that if marketing activities formerly carried out by the state are
to be taken over by the private sector, then some government support needs to be provided to
promote the creation of a competitive market. Even countries in which the private sector has
always played a thriving role in agricultural marketing are increasingly coming to recognise
the need for a greater measure of official assistance in areas such as legislation, infrastructure
provision, marketing extension and Market Information Services (MIS).

When we talk about the importance of market information in trading or investment, we

concur that it is the first data set analysed by an investor or a financial advisor about a
specific market. It is all about gathering information on various data sets, analysing it and
using it to facilitate efficient decision making.

Efficient market information provision can be shown to have positive benefits for traders as
well as policymakers. Up-to-date, or current market information enables traders to invest in a
viable stock option or financial instrument from a position of greater strength.

Well-analysed historical market information enables them to make informed decisions in line
with urban demand. Market information can be regarded as a public good, particularly where
there are numerous laymen who are benefitting from it and are becoming financially aware
and intelligent. The availability of timely and accurate information to all interested parties is
therefore essential, whether it be provided by the government itself or by the private sector.

STOCK MARKET ANALYSIS

Stock market analysis helps the investors to identify the intrinsic worth of a security even
before investing in it. All the tips that influence investor behaviours are formulated after in-
depth research by experts. Stock analysts aim to decipher the anticipated activity of a
financial instrument/sector/market.

By using this, investors, traders as well as people seeking investment avenues arrive at equity
buying and selling decisions. Studying and evaluating the past patterns and current market
data helps them to gain a additional edge in the markets to make informed decisions.
Fundamental Research and technical research are used to first thoroughly analyse and then
value a security.

IMPORTANCE OF STOCK MARKET ANALYSIS

Nowadays, in the increasing competitive market where we research across various platforms
before making a simple purchase, it is imperative, and inevitable that we must perform
adequate research before investing. It is only after a thorough research that we can make
assumptions regarding the value and future performance of an investment. Following stock
trading tips, doing some research, analysing market information can help us to get maximum
returns.

Before buying a car or even a phone, we do some degree of research pertaining to its
performance and quality. So, when we invest in equity we purchase portions of a business
expecting to make money upon increase in its value. Thus, we must have the knowledge as to
what we are investing in.

HOW MARKET INFORMATION HELPS IN BETTER DECISION

MAKING?

Marketing research is considered briefly as the collecting, analysing and interpreting of data
and information for someone else to use. Creative use of market information helps investors
to attain and maintain a competitive advantage. Hence, marketing research is defined as input
information to decision making, not simply the analysis of decisions which you took.

Market research alone, however, does not have the capacity to guarantee success; the clever
use of market research is the key to maximum returns. A competitive edge of the trader or
investor relies on how information is used by you than others don’t have or if doesn’t use the
information. Marketing decisions contains problem that range from fundamental move in the
positioning of a business or the decision to penetrate a new market to list tactical questions.

Investment decisions are made by investors and investment managers. Investors commonly
perform investment analysis by making use of fundamental analysis, technical analysis and
judgment. Investment decisions are often supported by decision tools. It is assumed that
information structure and the factors in the market systematically influence individuals’
investment decisions as well as market outcomes. Investor market behaviour derives from
psychological principles of decision making to explain why people buy or sell stocks.

FUNDAMENTAL RESEARCH

The main aim of fundamental research in decision making is to ascertain the relative
attractiveness of the given business. It is pre-emptively assumed that the market price doesn’t
reflect the true value of the company due to some uncontrollable external factors like investor
sentiments. As the market approaches equilibrium, the real value will be equal to its market
price in the long run. It believes that paying a higher price for a stock will affect return on
investment adversely.
In this, we majorly try to find the value of an equity share using the information provided in
the financial statements of the company. The aspects analysed include competitive advantage,
financial soundness, quality of management and competition.

KEY INDICATORS IN FUNDAMENTAL RESEARCH

Return on Equity

Return On Equity = [(Income – Preference

Dividend)/ (Average Shareholders’ Equity)]*100

Debt- Equity Ratio

Debt-Equity (D/E) Ratio = Total Debt/Total Equity

Earnings per Share

Earning Per Share = (Net Income – Preference

Dividend)/Weighted Average Number of Shares

TECHNICAL RESEARCH

Here, the investor studies the past stock prices to predict their trend in future. It highlights the
direction of movement of the share prices. With this, it is possible to identify whether there
will be a sharp rise or fall in the price of the share. This is, however, not directly dependent
on market information but rather on investor psychology which in turn is affected by news
and events. It only gives meaningful results for stocks which are high in demand and are
traded in large volumes.

Technical research uses different types of charts; bar chart, candlestick chart etc. to
understand the pattern of stock prices. Daily charts are used by short term traders to examine
the immediate movement in the stock prices whereas weekly/monthly charts predict the
probability to earn more in the long term.

HDFC BANK
HDFC Bank Ltd, India’s largest private sector bank by assets, and HDFC Securities Ltd have
invested $1 million in Borderless Softtech Pvt. Ltd., a subsidiary of US-based Borderless
Investing Inc., which runs Stockal, a global investment platform, as part of the latter's Pre-
Series A funding.
This partnership will widen the company’s subscriber base by expanding growth
opportunities, allowing Indian investors access to over 5,500 US-listed companies' fractional
stocks, and expert-curated Stacks & ETFs, a release issued by Stockal said.

HDFC Securities was the first financial institution to partner with Stockal to help drive its
growth in the country.

Their funding decision was based on the strength and resilience the Stockal platform has
shown in India, especially in the past few months…With the demand for US stocks growing
in the country and the trust they had in the deal, developed working with the team, they
believe that this will be able to create a one-stop solution to all investment needs for their
subscriber base as per Smita Bhagat country head to HDFC Bank.

The decision was largely based on market information making it extremely beneficial for
both the parties. Stockal processed about $550 million in transactions last financial year and
by March 2021, the platform processed more than $50million in monthly transactions.

CONCLUSION

“Knowledge is power if a man knows what facts not to bother with.”

Similarly, having adequate knowledge about all the pros and cons of a situation before
reaching a final decision streamlines the decision-making process and leads to success.
However, interpreting the market information available is a bigger task as focusing on non-
reliable and volatile factors might bring much more loss than profit.

Thus, it can be concluded that investing in a stock blindly is not viable. While venturing into
stocks, it is important to conduct a thorough analysis before buying any stock. It is prudent
not to invest more than 10% in any single company.

REFERENCES

 The Feedback Effect: How the Financial Markets Affect Decisions in the 'Real
Economy' - Knowledge@Wharton (upenn.edu)
 http://fhyzics.com/decision-making-by-marketing-research.html
 https://cleartax.in/s/stock-market-analysis
 https://www.investopedia.com/articles/investing/082614/how-stock-market-works.asp
 Role-of-Accounting-Information-in-Making-Share-Investment-Decisions_-A-Survey-
of-Investors-in-Nepalese-Stock-Market.pdf (ace.edu.np)
 http://www.ijhssnet.com/journals/
Vol_4_No_4_Special_Issue_February_2014/11.pdf#:~:text=Investment%20decisions
%20are%20made%20by%20investors%20and%20investment,of%20securities%20for
%20his%20or%20her%20own%20account.