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“Analysis of investor perception, apprehension and decision

making in Indian stock markets”

Summer Training Report

Submitted to International institute of e-Business management In partial fulfillment of the requirements

For the degree Of

MASTER OF e- BUSINESS ADMINISTRATION

By

Lalit kumar

(2009/MeBA/07/139)

Mohali

2009-2011

PREFACE

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Practical knowledge is an important suffix to theoretical knowledge. One cannot

merely depend upon the theoretical knowledge. Classroom lectures make the

fundamental concepts of management clear. They also facilitate the learning of practical things.

However to develop healthy managerial and administrative skills potential managers, it is necessary

that they combine their classroom learning with real life project research plays a significant role in the

curriculum of Business Management Courses.

Any science without its practical application or knowledge is considered to be unsystematic. Since

management is a developing science, the students of

Management Degree courses are required to undergo a project in the final year of the course.

Thus for the fulfillment of the above requirement a project was undertaken by me on the topic

“ANALYSIS OF INVESTOR PERCEPTION, APPREHENSION AND DECISION MAKING IN INDIAN

STOCK MARKETS”. The project was a good

experience and helped me in widening my knowledge and sharpening my managerial skills.

ACKNOWLEDGEMENT

This humble endeavor bears the imprint of many persons who were in one way or

the other helpful in the completion of my summer training. I would like to take

this opportunity to present my vote of thanks to my guides who acted as lighting

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pillars to enlighten my way through out this project. This project would not have

been possible without the kind assistance and guidance of many people who

indeed were helpful, cooperative and kind during the entire course of my project.

I would like to express my gratitude to my corporate guide Mr. Ravinderjeet

singh, manager, India Infoline, mohali for giving me an opportunity to do my

summer training in the esteemed organization.

My special thanks are due towards Mr. Naval Verma (Branch manager, India

Infoline, Mohali) for his sincere advice and wholehearted cooperation that guided

me to the completion of this project.

The acknowledgement would not be complete without expressing my

indebtedness to my Hon’ble principle cum HOD, Mr. Manish Chandra and

revered and learned faculty guide Mr. Harbhajan singh, who guided me in this

project and was the constant source of reference for me and showed full interest

at each and every step of my project.

CERTIFICATE FROM FACULTY

This is to certify that Mr. Lalit kumar, Roll no. 139 of MeBA (III Semester) has successfully

completed his project titled “Analysis of investor perception, apprehension and decision making in

Indian stock markets” under my guidance. This project is in the partial fulfillment of his MeBA

curriculum (2009-2011)

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Wish him All the Best of future endeavors

Date: Assistant officer:-Mr. Harbhajan singh

Project Guide

DECLARATION

The Principal

Internatinoal Institute of e business Management

Mohali.

Respected Sir,

I, the undersigned, hereby declare that the summer training project report submitted to my college i.e.

Internanational Institute of e- business Management, Mohali (Pb) in partial fulfillment for the Degree

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of Master of e- Business administration on “Analysis of investor perception, apprehension and

decision making in Indian stock markets”, is a result of my own work under continuous guidance and

kind co-operation of our college faculty member, Mr. harbhajan singh I have not submitted this

training report to any other university for the award of any degree.

Lalit kumar

EXECUTIVE SUMMARY

The learning process of classroom is incomplete without any practical field experience. It is the

reason that even professional programmes have a compulsory research part in its curriculum to fill the

gap between classroom theory and practical field experience. This report portrays the research period

spent by me, in partial fulfillment of the requirements for the M.e.B.A. degree. This report contains the

insight into Indian stock markets.

I undertook my training India Infoline Ltd,

Mohali. During my training, I gained best experience and in depth knowledge of stock markets,

working of depositary participants and also how to deal with different situation.

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It contains the methods and techniques adopted by me while doing this research project under the

head ‘Research Methodology’. A structured questionnaire was designed and it consisted of close

ended and rating scale. Respondents were asked to tick one option in multiple choice questions and

were asked to rate certain given parameters on rating scale. Data is presented with the help of

self-explanatory charts. Interpretations have been made together. And the most crucial, the ‘Findings’

section bears my personal comments.

This report is a written account of what I learnt and experienced during training and I have tried to

complete this report with as much perfection as possible to make it more meaningful and purposeful.

CONTENTS

CHAPTERNO.

PARTICULARS PAGENO.

CHAPTER 1 INTRODUCTION TO EQUITIES AND INDIAN

CAPITAL MARKETS1 – 34

CHAPTER 2 COMPANY PROFILE 35 - 43

CHAPTER 3 OBJECTIVES OF THE STUDY 44

CHAPTER 4 RESEARCH METHODOLOGY 45 – 48

CHAPTER 5 OBSERVATIONS AND ANALYSIS

5.1 INTERPRETATIONS5.2 SWOT ANALYSIS

49 - 73

CHAPTER 6 FINDINGS AND DISCUSSIONS 74 – 77

CHAPTER 7 SUGGESTIONS 78 - 80

CHAPTER 8 LIMITATIONS 81 – 82

BIBLIOGRAPHY

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ANNEXURE

LIST OF TABLES

Table No. Title Page No.Table 1.1 List of various stock exchanges in India 8

Table 5.1 Distribution of respondents according to their nature 48

Table 5.2 Distribution of respondents who were investors according totheir tenure of investment

49

Table 5.3 Distribution of respondents who were traders according totheir type of trading

50

Table 5.4 Z-test calculations 52

Table 5.5 Awareness level of respondents about India infoline and itsproducts and services

54

Table 5.6 Distribution of respondents according to the number of demataccounts

55

Table 5.7 Distribution of respondents according to their preference ofdealing in two major stock exchange of India

56

Table 5.8 Distribution of respondents on the basis of their frequency oftrading

57

Table 5.9 Distribution of respondents according to their preferred modeof trading

58

Table 5.10 Distribution of respondents according to their preference oftrading with margin funding

59

Table 5.11 Distribution of respondents according to the exposure theydesire

59

Table 5.12 Mean score and importance attached 60-61

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Table 5.13 Chi-square test to test the hypothesis 63

Table 5.14 Chi-square test to test the hypothesis about most soughtinvestment instrument

65

Table 5.15 Importance of factors for choosing a brokerage house 67-69

Table 5.16 Distribution of respondents according to the returns theyexpect from share market

71

LIST OF FIGURES

Figure No. Title Page No.Figure 1.1 Share of India info line in Public Issue Procurement 34

CHAPTER 1

INTRODUCTION TO EQUITIES

1.1 ORIGIN OF EQUITIES:-

Equity, quite simply, means ownership. Equities, therefore, are shares that represent part ownership

of a business enterprise. The idea of share ownership goes back to medieval times. It became

widespread during the Renaissance, when groups of merchants joined to finance trading expeditions

and early bankers took part ownership of businesses to ensure repayment of loans. These early

shareholder-owned enterprises, however, were usually temporary ventures established for a limited

purpose, such as financing a single voyage by a ship, and were dissolved once their purpose was

accomplished.

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The first shareholder-owned business may have been the Dutch East India Company, which was

founded by Dutch merchants in 1602 and issued negotiable share certificates that were readily traded

in Amsterdam until the company failed almost two centuries later. By the late 17th century, traders in

London coffee houses earned their living dealing in the shares of joint-stock companies. But it was

not until the industrial revolution made it necessary to raise large amounts of capital to build factories

and canals that share trading become widespread.

1.2 THE INDIAN CAPITAL MARKET - AN OVERVIEW

The function of the financial market is to facilitate the transfer of funds from surplus sectors (lenders)

to deficit sectors (borrowers). Normally, households have investable funds or savings, which they lend

to borrowers in the corporate and public sectors whose requirement of funds far exceeds their

savings. A financial market consists of investors or buyers of securities, borrowers or sellers of

securities, intermediaries and regulatory bodies. Financial market does not refer to a physical

location. Formal trading rules, relationships and communication networks for originating and trading

financial securities link the participants in the market.

1.2.1 ORGANIZED MONEY MARKET:

Indian financial system consists of money market and capital market. The money market has two

components - the organized and the unorganized. The organized market is dominated by commercial

banks. The other major participants are the Reserve Bank of India, Life Insurance Corporation,

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General Insurance Corporation, and Unit Trust of India, Securities Trading Corporation of India Ltd.

and Discount and Finance House of India, other primary dealers, commercial banks and mutual

funds. The core of the money market is the inter-bank call money market whereby short-term money

borrowing/lending is effected to manage temporary liquidity mismatches. The Reserve Bank of India

occupies a strategic position of managing market liquidity through open market operations of

government securities, access to its accommodation, cost (interest rates), availability of credit and

other monetary management tools. Normally, monetary assets of short-term nature, generally less

than one year, are dealt in this market.

1.2.2 UN-ORGANIZED MONEY MARKET:

Despite rapid expansion of the organized money market through a large network of banking

institutions that have extended their reach even to the rural areas, there is still an active unorganized

market. It consists of indigenous bankers and moneylenders. In the unorganized market, there is no

clear demarcation between short-term and long-term finance and even between the purposes of

finance. The unorganized sector continues to provide finance for trade as well as personal

consumption. The inability of the poor to meet the "creditworthiness" requirements of the banking

sector make them take recourse to the institutions that still remain outside the regulatory framework of

banking. But this market is shrinking.

1.2.3 THE CAPITAL MARKETS:

It consists of primary and secondary markets. The primary market deals with the issue of new

instruments by the corporate sector such as equity shares, preference shares and debt instruments.

Central and State governments, various public sector industrial units (PSUs), statutory and other

authorities such as state electricity boards and port trusts also issue bonds/debt instruments.

The primary market in which public issue of securities is made through a prospectus is a retail market

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and there is no physical location. Offer for subscription to securities is made to investing community.

The secondary market or stock exchange is a market for trading and settlement of securities that

have already been issued. The investors holding securities sell securities through registered

brokers/sub-brokers of the stock exchange. Investors who are desirous of buying securities purchase

securities through registered brokers/sub-brokers of the stock exchange. It may have a physical

location like a stock exchange or a trading floor. Since 1995, trading in securities is screen-based and

Internet-based trading has also made an appearance in India.

The secondary market consists of 23 stock exchanges including the National Stock Exchange,

Over-the-Counter Exchange of India (OTCEI) and Inter Connected Stock Exchange of India Ltd. The

secondary market provides a trading place for the securities already issued, to be bought and sold. It

also provides liquidity to the initial buyers in the primary market to re-offer the securities to any

interested buyer at any price, if mutually accepted. An active secondary market actually promotes the

growth of the primary market and capital formation because investors in the primary market are

assured of a continuous market and they can liquidate their investments. The securities market

moved from T+3 settlement periods to T+2 rolling settlement with effect from April 1, 2003

1.2.4 Capital Market Participants:

There are several major players in the primary market. These include the merchant bankers, mutual

funds, financial institutions, foreign institutional investors (FIIs) and individual investors. In the

secondary market, there are the stock brokers (who are members of the stock exchanges), the mutual

funds, financial institutions, foreign institutional investors (FIIs), and individual investors. Registrars

and Transfer Agents, Custodians and Depositories are capital market intermediaries that provide

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important infrastructure services for both primary and secondary markets.

1.2.5 Market regulation:

It is important to ensure smooth working of capital market, as it is the arena where the players in the

economic growth of the country come together. Various laws have been passed from time to time to

meet this objective.

The financial market in India was highly segmented until the initiation of reforms in 1992-93 on

account of a variety of regulations and administered prices including barriers to entry. The reform

process was initiated with the establishment of Securities and Exchange Board of India (SEBI).

The legislative framework before SEBI came into being consisted of three major Acts

governing the capital markets:

1. The Capital Issues Control Act 1947, which restricted access to the securities market and

controlled the pricing of issues.

2. The Companies Act, 1956, which sets out the code of conduct for the corporate sector in relation to

issue, allotment and transfer of securities, and disclosures to be made in public issues.

3. The Securities Contracts (Regulation) Act, 1956, which regulates transactions in securities through

control over stock exchanges. In addition, a number of other Acts, e.g., the Public Debt Act, 1942, the

Income Tax Act, 1961, the Banking Regulation Act, 1949, have substantial bearing on the working of

the securities market.

1.2 HISTORY OF STOCK EXCHANGE

The trading in securities in India was started in the early of 1973. The stock exchange operating in the

19th century was those of Bombay set up in 1875 and Ahmedabad set up in 1894. These were

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organized as voluntary non-profit making associations of brokers to regulate and protect their

interests. Before the control on securities trading becomes a control on securities trading became a

central subject under the constitution in 1950. It was a state subject and the Bombay securities

contact (control) act, 1925 used to regulate trading in securities. Under this act, Bombay stock

exchange was securities in 1927 and Ahmedabad stock exchange in 1927 and Ahmedabad stock

exchange in 1937. During the war boom, a number of stock exchanges were organized at Bombay,

Ahmedabad and other centers but they were not recognized. Soon after it became a central subject,

central legislation was proposed and a committee headed by Mr. A.D. GORWALA went into bill for

securities regulation. On the basis of securities regulation, Securities Contract (control) Act became

law in 1956. At present there are 23 recognized stock exchanges in India. Number of Investors is

increasing day by day.

The stock exchange is a double auction market. Quite distinct from the common market in which only

one seller and many buyers in a stock exchange a number of potential buyers and potential sellers

co-exist all competing both among themselves and with one another in making bids, counter-bids,

offers and counter-offers.

1.3.1 WHO BENEFITS FROM STOCK EXCHANGE?

INVESTORS: It provides them liquidity, marketability, safety etc. of Investment.

COMPANIES: It provides them access to market funds, higher rating and public interests.

BROKERS: They receive commission in lieu of their services to investors.

ECONOMY AND COUNTRY: There is large of saving, better growth moves industries, higher

income.

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S.

NO.

Name of stock exchange Years of

establishmen

t

Type of

organization

1 Bombay stock exchange 1875 Voluntary non-profit

organization

2 Ahmedabad stock exchange 1897 Voluntary non-profit

organization

3 Calcutta stock exchange 1908 Public limited company

4 M.P. Stock exchange 1930 Voluntary non-profit

organization

5 Madras stock exchange 1937 Co. limited by

guarantee

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6 Hyderabad stock exchange 1943 Co. limited by

guarantee

7 Delhi stock exchange 1947 public

TABLE 1.1 LIST OF VARIOUS STOCK EXCHANGES IN INDIA

8 Bangalore

stock exchange

1957 Pvt. Converted into public limited

co.

9 Cochin stock

exchange

1978 Public limited co.

10 U.P. Stock

exchange.

Kanpur

1982 Public limited co.

11 Pune stock

exchange

1982 Co. limited by guarantee

12 Ludhiana stock

exchange

1983 Public limited co.

13 Jaipur stock

exchange

1983 Public limited co.

14 Guahati stock

exchange

1984 Public limited co.

15 Kannar stock

exchange

1985 Public limited co.

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16 Magadh stock exchange 1986 Co. limited by

guarantee

17 Bhuvneshwar stock exchange 1989 Co. limited by

guarantee

18 Saurashtra stock exchange,

Kutch

1989 Co. limited by

guarantee

19 Vadora stock exchange 1990 N.D

20 Meerut stock exchange 1991 N.D

21 O.T.C.I

(Over the counter

exchange board of india)

1993 Pure demutualized

22 National stock exchange 1995 Pure demutualized

23 Coimbatore stock exchange 1996 N.D

24 Sikkim stock exchange 1997 N.D

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1.4 NATIONAL STOCK EXCHANGE

1.4.1 ORIGIN

The National Stock Exchange of India was promoted by leading financial institutions at the behest of

the Government of India, and was incorporated in November 1992 as a tax-paying company. In April

1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956.

NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The

Capital Market (Equities) segment of the NSE commenced operations in November 1994 and

Derivatives in June 2000. It was set up as a first step in reforming the securities market through

improved technology and introduction of best practices in management. It started with the concept of

an independent governing body without any broker representation thus ensuring that the operators'

interests were not allowed to dominate the governance of the exchange. It is the largest stock

exchange in India and the third largest in the world in terms of volume of transactions. NSE is

mutually-owned by a set of leading financial institutions, banks, insurance companies and other

financial intermediaries in India but its ownership and management operate as separate entities. As of

2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In July 2007,

the NSE had a total market capitalization of 42, 74,509 crore INR making it the second-largest stock

market in South Asia in terms of market-capitalization

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Before the NSE was set up, trading on the stock exchanges in India used to take place through open

outcry without use of information technology for immediate matching or recording of trades. This was

time consuming and inefficient. The practice of physical trading imposed limits on trading volumes

and, hence, the speed with which new information was incorporated into prices. To obviate this, the

NSE introduced screen-based trading system (SBTS) where a member can punch into the computer

the quantities of shares and the prices at which he wants to transact. The transaction is executed as

soon as the quote punched by a trading member finds a matching sale or buy quote from

counterparty. SBTS electronically matches the buyer and seller in an order-driven system or finds the

customer the best price available in a quote-driven system, and, hence, cuts down on time, cost and

risk of error, as well as on the chances of fraud. SBTS enables distant participants to trade with each

other, improving the liquidity of the markets. The high speed with which trades are executed and the

large number of participants who can trade simultaneously allows faster incorporation of price

sensitive information into prevailing prices. This increases the informational efficiency of markets.

With SBTS, it becomes possible for market participants to see the full market, which helps to make

the market more transparent, leading to increased investor confidence. The NSE started nation-wide

SBTS, which have provided a completely transparent trading mechanism. Regional exchanges lost a

lot of business to NSE, forcing them to introduce SBTS. Today, India can boast that almost 100%

trading take place through electronic order matching.

Prior to the setting up of NSE, trading on stock exchanges in India took place without the use of

information technology for immediate matching or recording of trades. The practice of physical trading

imposed limits on trading volumes as well as the speed with which the new information was

incorporated into prices. The unscrupulous operators used this information asymmetry to manipulate

the market. The information asymmetry helped brokers to perpetrate a manipulative practice known

as "gala". Gala is a practice of extracting highest price of the day for "buy" transaction irrespective of

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the actual price at which the purchase was actually done and give lowest price of the day for "sell"

transactions irrespective of the price at which sale was made. The clients did not have any method of

verifying the actual price. The electronic and now fully online trading introduced by the NSE has made

such manipulation difficult. It has also improved liquidity and made the entire operation more

transparent and efficient.

1.4.2 INNOVATIONS

NSE has remained in the forefront of modernization of India's capital and financial markets, and its

pioneering efforts include:

1. Being the first national, anonymous, electronic limit order book (LOB) exchange to trade

securities in India. Since the success of the NSE, existent market and new market structures

have followed the "NSE" model.

2. Setting up the first clearing corporation "National Securities Clearing Corporation Ltd." in India.

NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives

market) trades in India.

3. Co-promoting and setting up of National Securities Depository Limited, first depository in India.

4. Setting up of S&P CNX Nifty.

5. NSE pioneered commencement of Internet Trading in February 2000, which led to the wide

popularization of the NSE in the broker community.

6. Being the first exchange that, in 1996, proposed exchange traded derivatives, particularly on

an equity index, in India. After four years of policy and regulatory debate and formulation, the

NSE was permitted to start trading equity derivatives three days after the BSE.

7. Being the first exchange to trade ETFs (exchange traded funds) in India.

8. NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-TV18, a

leading business news channel in India.

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1.4.3 MARKETS

Currently, NSE has the following major segments of the capital market. This include:

Equity

Futures and Options

Retail Debt Market

Wholesale Debt Market

1.4.5 NSE Group

National Securities Clearing Corporation Ltd. (NSCCL)

It is a wholly owned subsidiary, which was incorporated in August 1995 and commenced clearing

operations in April 1996. It was formed to build confidence in clearing and settlement of securities, to

promote and maintain the short and consistent settlement cycles, to provide a counter-party risk

guarantee and to operate a tight risk containment system.

NSE IT Ltd.

It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is uniquely

positioned to provide products, services and solutions for the securities industry. NSE.IT primarily

focus on in the area of trading, broker front-end and back-office, clearing and settlement, web-based,

insurance, etc. Along with this, it also provides consultancy and implementation services in Data

Warehousing, Business Continuity Plans, Site Maintenance and Backups, Stratus Mainframe Facility

Management, Real Time Market Analysis & Financial News.

India Index Services & Products Ltd. (IISL)

It is a joint venture between NSE and CRISIL Ltd. to provide a variety of indices and index related

services and products for the Indian Capital markets. It was set up in May 1998. IISL has a consulting

and licensing agreement with the Standard and Poor's (S&P), world's leading provider of investable

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equity indices, for co-branding equity indices.

National Securities Depository Ltd. (NSDL)

NSE joined hands with IDBI and UTI to promote dematerialization of securities. This step was taken

to solve problems related to trading in physical securities. It commenced operations in November

1996.

DotEx International Limited

DotEx was formed to provide a well structured inter trading platform for the members to further offer

online trading facilities to their customers. With this facility, the members can serve a larger clientele

with the use of automated risk management features and hence increase the volume. The investors

also get comprehensive and updated information through it.

INDICES

NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and

has launched several stock indices, including:

1. S&P CNX Nifty

2. CNX Nifty Junior

3. CNX 100 (= S&P CNX Nifty + CNX Nifty Junior)

4. S&P CNX 500 (= CNX 100 + 400 major players across 72 industries)

5. CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

1.5 BOMBAY STOCK EXCHANGE

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native

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Share and Stock Brokers Association". It is located at Dalal Street, Mumbai. It is the oldest one in

Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary

non-profit making Association of Persons (AOP) and is currently engaged in the process of converting

itself into demutualized and corporate entity. It has evolved over the years into its present status as

the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have

obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts

(Regulation) Act, 1956. There are around 4,800 Indian companies listed with the stock exchange, and

has a significant trading volume. As of May 2007, the equity market capitalization of the companies

listed on the BSE was about Rs. 40.7 trillion (US $ 999 billion). The BSE SENSEX (SENSITIVE

INDEX), also called the "BSE 30", is a widely used market index in India and Asia. As of 2005, it is

among the five biggest stock exchanges in the world in terms of transactions volume.

In the past and even now, it plays a pivotal role in the development of the country's capital market.

This is recognized worldwide and its index, SENSEX, is also tracked worldwide. Earlier it was an

Association of Persons (AOP), but now it is a demutualized and corporatized entity incorporated

under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatization and

Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).

The Exchange, while providing an efficient and transparent market for trading in securities, debt and

derivatives upholds the interests of the investors and ensures redressal of their grievances whether

against the companies or its own member-brokers. It also strives to educate and enlighten the

investors by conducting investor education programmes and making available to them necessary

informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies and regulates the

affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the

broking community (one third of them retire ever year by rotation), three SEBI nominees, six public

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representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer.

The Executive Director as the Chief Executive Officer is responsible for the day-to-day administration

of the Exchange and he is assisted by the Chief Operating Officer and other Heads of Departments.

The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations pertaining to

constitution of the Executive Committee of the Exchange. Accordingly, an Executive Committee,

consisting of three elected directors, three SEBI nominees or public representatives, Executive

Director & CEO and Chief Operating Officer has been constituted. The Committee considers judicial

& quasi matters in which the Governing Board has powers as an Appellate Authority, matters

regarding annulment of transactions, admission, continuance and suspension of member-brokers,

declaration of a member-broker as defaulter, norms, procedures and other matters relating to

arbitration, fees, deposits, margins and other monies payable by the member brokers to the

Exchange, etc.

1.5.1 BSE INDICES

The BSE SENSEX (also known as the BSE 30 index) is a value-weighted index composed of thirty

scrips, with the base April 1979 = 100. The set of companies which make up the index has been

changed only a few times in the last twenty years. These companies account for around one-fifth of

the market capitalization of the BSE.

Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses other stock

indices as well which are:

1. BSE Sensex

2. BSE 100 Index

3. BSE 200 Index

4. BSE 500 Index

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5. BSE MIDCAP Index

6. BSE SMLCAP Index

7. BSE TECH Index

8. BSE PSU Index

9. BSE AUTO Index

10. BSE BANKEX

11. BSE CG Index

12. BSE CD Index

13. BSE FMCG Index

14. BSE HC Index

15. BSE IT Index

16. BSE Metal Index

17. BSE Oil & Gas Index

1.5.2 BSE Vision

The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock exchange by

establishing global benchmarks."

1.5.3 BSE Management

Bombay Stock Exchange is managed professionally by Board of Directors. It comprises of eminent

professionals, representatives of Trading Members and the Managing Director. The Board is an

inclusive one and is shaped to benefit from the market intermediaries participation.

The Board exercises complete control and formulates larger policy issues. The day-to-day operations

of BSE are managed by the Managing Director and its school of professionals as a management

team.

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1.5.4 BSE NETWORK

The Exchange reaches physically to 417 cities and towns in the country. The framework of it has

been designed to safeguard market integrity and to operate with transparency. It provides an efficient

market for the trading in equity, debt instruments and derivatives. Its online trading system, popularly

known as BOLT, is a proprietory system and it is BS 7799-2-2002 certified. The BOLT network was

expanded, nationwide, in 1997. The surveillance and clearing & settlement functions of the Exchange

are ISO 9001:2000 certified.

1.5.5 BSE's International Convention Hall

The Bombay Stock Exchange provides convention hall for listed companies and other Institutions to

hold their Annual/ordinary General Meetings, Listing ceremonies, Analyst and any other important

event.

It is centrally located at which can be easily reached from Churchgate or CST (VT) railway stations. It

has a capacity of around 700 to 900 persons with state-of-the-art infrastructure. The hall has

Projection Equipment, Web-cast facility and a Business Room with Facsimile, Internet, Photocopier

and telecom equipment.

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1.6 CAPITAL MARKET INTERMEDIARIES

There are several institutions, which facilitate the smooth functioning of the securities market. They

enable the issuers of securities to interact with the investors in the primary as well as the secondary

arena.

MERCHANT BANKERS

Among the important financial intermediaries are the merchant bankers. The services of merchant

bankers have been identified in India with just issue management. It is quite common to come across

reference to merchant banking and financial services as though they are distinct categories. The

services provided by merchant banks depend on their inclination and resources - technical and

financial. Merchant bankers (Category 1) are mandated by SEBI to manage public issues (as lead

managers) and open offers in take-overs. These two activities have major implications for the integrity

of the market. They affect investors' interest and, therefore, transparency has to be ensured. These

are also areas where compliance can be monitored and enforced.

Merchant banks are rendering diverse services and functions. These include organizing and

extending finance for investment in projects, assistance in financial management, acceptance house

business, raising Euro-dollar loans and issue of foreign currency bonds. Different merchant bankers

specialize in different services. However, since they are one of the major intermediaries between the

issuers and the investors, their activities are regulated by:

(1) SEBI (Merchant Bankers) Regulations, 1992.

(2) Guidelines of SEBI and Ministry of Finance.

(3) Companies Act, 1956.

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(4) Securities Contracts (Regulation) Act, 1956.

Merchant banking activities, especially those covering issue and underwriting of shares and

debentures, are regulated by the Merchant Bankers Regulations of Securities and Exchange Board of

India (SEBI). SEBI has made the quality of manpower as one of the criteria for renewal of merchant

banking registration. These skills should not be concentrated in issue management and underwriting

alone. The criteria for authorization take into account several parameters. These include: (a)

professional qualification in finance, law or business management, (b) infrastructure like adequate

office space, equipment and manpower, (c) employment of two persons who have the experience to

conduct the business of merchant bankers, (d) capital adequacy and (e) past track record,

experience, general reputation and fairness in all their transactions.

SEBI authorizes merchant bankers for an initial period of three years, if they have a minimum net

worth of Rs. 5 crore. An initial authorization fee, an annual fee and renewal fee is collected by SEBI.

According to SEBI, all issues should be managed by at least one authorized merchant banker

functioning as the sole manager or lead manager. The lead manager should not agree to manage any

issue unless his responsibilities relating to the issue, mainly disclosures, allotment and refund, are

clearly defined. A statement specifying such responsibilities has to be furnished to SEBI. SEBI

prescribes the process of due diligence that a merchant banker has to complete before a prospectus

is cleared. It also insists on submission of all the documents disclosing the details of account and the

clearances obtained from the ROC and other government agencies for tapping peoples' savings. The

responsibilities of lead manager, underwriting obligations, capital adequacy, due diligence

certification, etc., are laid down in detail by SEBI. The objective is to facilitate the investors to take an

informed decision regarding their investments and not expose them to unknown risks.

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CREDIT RATING AGENCIES

The 1990s saw the emergence of a number of rating agencies in the Indian market. These agencies

appraise the performance of issuers of debt instruments like bonds or fixed deposits. The rating of an

instrument depends on parameters like business risk, market position, operating efficiency, adequacy

of cash flows, financial risk, financial flexibility, and management and industry environment.

The objective and utility of this exercise is twofold. From the point of view of the issuer, by assigning a

particular grade to an instrument, the rating agencies enables the issuer to get the best price. Since

all financial markets are based on the principle of risk/reward, the less risky the profile of the issuer of

a debt security, the lower the price at which it can be issued. Thus, for the issuer, a favourable rating

can reduce the cost of borrowed capital.

From the viewpoint of the investor, the grade assigned by the rating agencies depends on the

capacity of the issuer to service the debt. It is based on the past performance as well as an analysis

of the expected cash flows of a company when viewed on the industry parameters as well as

company performance. Hence, the investor can judge for himself whether he wants to place his

savings in a "safe" instrument and get a lower return or he wants to take a risk and get a higher

return.

The 1990s saw an increase in activity in the primary debt market. Under the SEBI guidelines all

issuers of debt have to get the instruments rated. They also have to prominently display the ratings in

all that marketing literature and advertisements. The rating agencies have thus become an important

part of the institutional framework of the Indian securities market.

R& T AGENTS - REGISTRARS TO ISSUE

R&T Agents form an important link between the investors and issuers in the securities market. A

company, whose securities are issued and traded in the market, is known as the Issuer. The R&T

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Agent is appointed by the Issuer to act on its behalf to service the investors in respect of all corporate

actions like sending out notices and other communications to the investors as well as despatch of

dividends and other non-cash benefits. R&T Agents perform an equally important role in the

depository system as well.

STOCK BROKERS

Stockbrokers are the intermediaries who are allowed to trade in securities on the exchange of which

they are members. They buy and sell on their own behalf as well as on behalf of their clients.

Traditionally in India, individuals owned firms providing brokerage services or they were partnership

firms with unlimited liabilities. There were, therefore, restrictions on the amount of funds they could

raise by way of debt. With increasing volumes in trading as well as in the number of small investors,

lack of adequate capitalization of these firms exposed investors to the risks of these firms going bust

and the investors would have no recourse to recovering their dues. With the legal changes being

effected in the membership rules of stock exchanges as well as in the capital gains structure for

stock-broking firms, a number of brokerage firms have converted themselves into corporate entities.

In fact, NSE encouraged the setting up of corporate broking members and has today has only 10% of

its members who are not corporate entities.

CUSTODIANS

In the earliest phase of capital market reforms, to get over the problems associated with paper-based

securities, large holding by institutions and banks were sought to be immobilized. Immobilization of

securities is done by storing or lodging the physical security certificates with an organization that acts

as a custodian - a securities depository. All subsequent transactions in such immobilized securities

take place through book entries. The actual owners have the right to withdraw the physical securities

from the custodial agent whenever required by them. In the case of IPO, a jumbo certificate is issued

in the name of the beneficiary owners based on which the depository gives credit to the account of

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beneficiary owners. The Stock Holding Corporation of India was set up to act as a custodian for

securities of a large number of banks and institutions who were mainly in the public sector. Some of

the banks and financial institutions also started providing "Custodial" services to smaller investors for

a fee. With the introduction of dematerialization of securities there has been a shift in the role and

business operations of Custodians. But they still remain an important intermediary providing services

to the investors who still hold securities in a physical form.

MUTUAL FUNDS

Mutual funds are financial intermediaries, which collect the savings of small investors and invest them

in a diversified portfolio of securities to minimize risk and maximize 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

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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.

DEPOSITORIES

The depositories are important intermediaries in the securities market that is scrip-less or moving

towards such a state. In India, the Depositories Act defines a depository to mean "a company formed

and registered under the Companies Act, 1956 and which has been granted a certificate of

registration under sub-section (IA) of section 12 of the Securities and Exchange Board of India Act,

1992." The principal function of a depository is to dematerialize securities and enable their

transactions in book-entry form.

.

A depository established under the Depositories Act can provide any service connected with recording

of allotment of securities or transfer of ownership of securities in the record of a depository. A

depository cannot directly open accounts and provide services to clients. Any person willing to avail of

the services of the depository can do so by entering into an agreement with the depository through

any of its Depository Participants.

DEPOSITORY PARTICIPANTS

A Depository Participant (DP) is described as an agent of the depository. They are the intermediaries

between the depository and the investors. The relationship between the DPs and the depository is

governed by an agreement made between the two under the Depositories Act. In a strictly legal

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sense, a DP is an entity who is registered as such with SEBI under the provisions of the SEBI Act. As

per the provisions of this Act, a DP can offer depository related services only after obtaining a

certificate of registration from SEBI. SEBI (D&P) Regulations, 1996 prescribe a minimum net worth of

Rs. 50 lakh for stockbrokers, R&T agents and non-banking finance companies (NBFC), for granting

them a certificate of

registration to act as DPs. No minimum net worth criterion has been prescribed for other categories

of DPs. However, depositories can fix a higher net worth criterion for their DPs. NSDL requires a

minimum net worth of Rs. 100 lakh to be eligible to become a DP as against Rs. 50 lakh prescribed

by SEBI (D&P) Regulations.

CHAPTER 2

COMPANY PROFILE

2.1 INTRODUCTION

India infoline is a leading full service securities firm providing the entire gamut of financial services

with a presence in more than 650 locations across India. A group of professionals formed this

company under the name of probity research & services Pvt. Ltd. and the name was later changed to

India Infoline Ltd. The objective was to provide unbiased and independent information to market

intermediaries and investors. The quality of research soon caught the imagination of all major

participants in the financial market. IIL provides a breadth of financial and advisory services including

wealth management, investment banking, corporate advisory, brokerage & distribution of equities,

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commodities, mutual funds and insurance, structured products - all of which are supported by

powerful research teams. The firm's philosophy is entirely client centric, with a clear focus on

providing long term value addition to clients, while maintaining the highest standards of excellence,

ethics and professionalism. In last 10 years, IIL experienced numerous ups and downs, but has never

compromised on integrity. It continues to ensure highest standards of corporate governance.

2.2 IIL CORE STRENGTHS

Breadth of Services

In line with its client-centric philosophy, the firm offers to its clients the entire spectrum of financial

services ranging from brokerage services in equities and commodities, distribution of mutual

funds, Mortgages, personal loans and insurance products, portfolio management services,

research and content services, investment banking, corporate finance and corporate advisory. SO

Financial services is everything to do with money…in a gist, IT’S ALL ABOUT MONEY HONEY!

Clients deal with a relationship manager who leverages and brings together the product specialists

from across the firm to create an optimum solution to the client needs.

Management Team

IIL brings together a highly professional core management team that comprises of individuals with

extensive business as well as industry experience.

In-Depth Research

2

The research expertise is at the core of the value proposition that IIL offers to its clients. Research

teams across the firm continuously track various markets and products. The aim is however common

- to go far deeper than others, to deliver incisive insights and ideas and be accountable for results.

2.3 MILESTONES

1995

Incorporated on October 18, 1995 as Probity Research & Services.

1999:

Launched Internet Portal www.indiainfoline.com in may 1999.

2000:

Initiated Wealth Management Services.

Launched online trading in shares and securities branded as www.5paisa.com in July 2000.

2001:

Started life insurance agency business in December 2000 as a corporate agent of ICICI

PRUDENTIAL LIFE INSURANCE.

Become a depository participant of NSDL In September 2001.

2003:

Launched stock messaging services in May 2003.

2004:

Acquired Commodities brokering license in March 2004.

Launched portfolio Management services.

2005:

Listed on NSE and BSE on May 17, 2005.

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Acquired NBFC License in May 2005.

Acquired 75% stake holding in Moneytree consultancy services , which is a distributor of

mortgages and other loan products, in October 2005.

Bennett Coleman & co ltd (BCCL) Invested Rs.20 crores in India infoline by way of preferential

allotment in December 2005.

2006:

Become a depository participant of CDSL in June 2006.

2007:

Merger of India infoline securities private limited with India infoline limited in January 2007.

Entered into an alliance with bank of Baroda for Baroda e_trading in February 2007.

IRDA license for insurance broking in April 2007

2.4 MANAGEMENT TEAM

Senior Management at IIL comprises a diverse talent pool that brings together rich experience from

across industry as well as financial services.

Mr. Nirmal Jain – CEO & MD

Mr. R. Venkatraman – Executive Director

Plus 17 years of experience in Financial Services

2.5 SELECT INSTITUTIONAL CLIENTS OF IIL

Industrial groups: Mckinsey, Birla’s - Birla Sunlife, Grasim, Hindalco, Indo Gulf, Transworks;

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Vedanta- Balco, Hindustan unilever, Sterlite, Vedanta; Tata’s- Tata Investments, Tisco, Tata Motors,

Trent, VSNL

Banks / FIs: CITI Bank, Bank of India, BOB, ICICI, Canara Bank, HDFC Ltd, IDFC, GIC, LIC, PNB,

AXIS Bank

Corporates : CRISIL, D&B, FI’S, FII’S, Crompton Greaves, Dabur, Datamatics, DCM, Deepak

Fertilizers, DSL Software, East India Hotels, Emami, GE Shipping, Globus, Godrej, Gokuldas Exports,

Gujarat Ambuja, Gujarat Pipavav, HCL group, Himat Singka Siede, ICICI Ventures, Infosys PF, ITC,

Jet Airways, Jindal Group, L&T, Mastek, M&M, NCDEX, Radico Khaitan, Raymond, Sonata Software,

Varun Shipping, West Coast Paper, Wipro

2.6 BUSINESS PROFILE

1. Wealth Management – IIL provides wealth management services to both individuals as well as

institutions. Affluent individuals and Big Corporate and Institutional treasuries need

sophisticated advice and strategic guidance to capitalize on opportunities to preserve, grow

and transfer their wealth. IIL offers the most extensive platform of customized servicing,

individual strategies and products to help meet the requirements of the investors. It provides

comprehensive, integrated investment strategies to address their wealth management needs.

Working closely with specialists across firm PROBITY offers an array of products & services,

which includes IIL's highly-rated research. The product offered under wealth management

includes equity and derivatives, Mutual Funds, Depository Services, Commodities, Insurance

and IPOs. Wealth Management branches of IIL are situated at Mumbai, Delhi, Kolkata,

Chennai, Bangalore, Hyderabad, Dubai and Bangkok.

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2. Investment Banking & Corporate Finance - IIL Investment Banking provides comprehensive

services to clients including raising money in the equity capital markets to identifying strategic

alliances, mergers and acquisition opportunities and debt financing & restructuring advisory.

The IIL Corporate Finance team helps clients manage their debt-financing needs by profiling

business and cash-flow risks, defining the alternative sources of funding, building in multiple

variables such as currencies, fixed-floating, tenure, collateral etc. in a comprehensive manner

and finally negotiating with the prospective lenders / buyers.

The team has also built an impressive track-record in debt restructuring based on its

superior understanding of business needs and relationships with key lenders. The Corporate

Finance team has handled assignments in businesses like paper, hospitality, telecom, textiles

and sugar.

Investment banking & Corporate Finance services are available at Mumbai, Delhi, Chennai,

Kolkata, Bangalore and Hyderabad.

The company has been book runner for various book building issues by companies like

Emami, Sri Ram Rupai Balaji Steels, Provogue, Prithvi Information Solution, Bombay Rayon

Fashions, Gallantt Metal Limited and Plethico Pharmaceuticals.

Figure 2.1 Share of IIL in Public Issue Procurement

The above figure shows the market share of IIL group in Investment Banking & Corporate

Finance is increasing at a rapid rate.

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3. Brokerage and Distribution – With presence in more than 650 locations in India, the IIL

group is the leading broking and distribution house. Its clientage covers Institutional clients

including most leading Mutual Funds, Banks and Insurance Companies, Individuals, Families &

Corporates across India and Non-Resident Indians. It has more than 1, 00,000 clients across

the nation and has been one of the leading distributor of IPO’s. The products offered includes

Equities, Derivatives, Commodities, IPOs, Mutual Funds, Life & Non-Life Insurance, Depository

Services, Bonds and Value-add services backed by independent research teams and real-time

support to clients.

CHAPTER 3

OBJECTIVE OF STUDY

Whenever a study is conducted, it is done on the basis of certain objectives in mind. A successful

completion of a project is based on the objectives of the study that could be stated as under: -

1. To study the expectations and apprehensions of Investors and Traders and also their way of

working in Indian stock markets.

2. To study the time period for which investments are generally made by investors in the stock

markets.

3. To study how comfortable people investing in stock markets are.

4. To determine the awareness level of people about India infoline ltd and its products and

services and the factors affecting the choice of a brokerage house.

5. To study the importance of various factors which according to investors and traders affect the

share prices.

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6. To study the decision making criterions of those investing in stock markets.

7. To determine the most preferred investment avenues of those dealing in stock markets.

CHAPTER 4

RESEARCH METHODOLOGY

Research Methodology is a systematic way to solve the research problem. It may be understood as a

science of studying how research is done scientifically.

The present study was undertaken for the Study of Indian Stock Markets. This chapter gives us the

Research Design, Sampling Plan, Method of Data Collection and Tools used for Data Analysis &

Interpretation.

The study was conducted by designing a questionnaire. Before going for the research I conducted a

Pilot Run with 15 respondents which threw light on few aspects which needed improvement. This

pilot run also gave me few new things which I took care off while doing the research. Then I

personally contacted 100 respondents to get the questionnaires filled.

UNIVERSE

The universe of the study included respondents of tri-city Chandigarh who are currently dealing into

stock markets.

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SAMPLING PLAN

Sampling is an effective step in collection of primary data and has a great influence on the quality of

results. The sampling plan includes the population, sample size and sampling design.

POPULATION

The study is aimed to include all those people who are currently dealing into stock markets.

SAMPLE SIZE

The sample was drawn from the population using convenience sampling technique. The sample size

for the research was kept at 100.

SAMPLING DESIGN

The selection of the respondents was done on the basis of convenience sampling as the universe

under the coverage area of the study was too large.

METHOD OF DATA COLLECTION

To observe and probe into the perceptions of the investors and traders present in Stock Markets in

India, I have prepared a questionnaire containing 16 questions. I personally contacted 100

respondents to get the questionnaires filled. All possible efforts were made to gather information in

some rational way to remove biasness.

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DATA ANALYSIS & INTERPRETATION:

For the purpose of analyzing, raw data was summarized into charts and the results have been carried

out. The questions, which have alternative choices, were analyzed by taking percentages. Proper

analysis of the data has been made to get proper results.

STATISTICAL TOOLS

Various statistical tools of analysis like frequency distribution, percentages, mean, Z-test and

Chi-square test have been used to meet the objectives of the study. The details of the techniques

used are as follows:

LIKERT SCALE

The response to the opinion statement was measured on a 3 point scale. The scale consisted of the

options of very important, important and not important. The weights assigned to these scales are 2, 1

and 0.

MEAN SCORE

The options were given scores (Sn) according to their importance or intensity. The total scores (T)

were calculated by finding the summation of Sn x FN where FN is the frequency of response for every

option. The mean scores (M) are calculated by dividing the total score (T) thus obtained by the

number of respondents.

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Z-TEST

The z-test was used to determine whether the investors and traders are comfortable in investing in

the stock markets or not. The test was applied as under:

Where:

Xp : Population Mean

Xs : Sample Mean

N : Sample Size

S.E. : Standard Error

For the z-test following null hypothesis was formulated.

H0 : The investors and traders are not comfortable while investing in stock markets.

CHAPTER 5

ANALYSIS AND INTERPRETATIONS

This chapter presents the analysis of the primary data collected from the respondents.

5.1 INTERPRETATIONS

5.1.1 NATURE OF INVESTMENT

A total of 100 respondents were studied. The split up of the respondents according to the nature

of their investment is as given in table 5.1

Table 5.1 Distribution of respondents according to their nature

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NATURE NUMBER PERCENTAGE

Investor 68 68%

Trader 32 32%

68% of the respondents were investors and 32% were traders. Thus most of the respondents covered

during the course of survey were investors who invested their funds for certain period of time.

5.1.2 TERM OF INVESTMENT BY INVESTORS

The investors were also asked to mark their choice for the term of their investments. The sample

size for this purpose remained at 68.

Table 5.2 Distribution of respondents who were investors according to their tenure of investment

TERM NUMBER PERCENTAGE

Short Term 27 39.7

Medium Term 31 45.58

Long Term 10 14.72

The study showed that around 40% of the respondents were short term investors; around 46%

medium term investors and only 14% were long term investors. Thus, it can be concluded that most

investors in share markets are either short or medium term investors.

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5.1.3 TYPE OF TRADING BY TRADERS

The traders were asked to mark their choice for the most preferred type of trading. The sample

size for this purpose was 32.

Table 5.3 Distribution of respondents who were traders according to their type of trading

TYPE OF TRADING NUMBER PERCENTAGE

Intraday 14 43.75

Cash/Delivery 8 25

Futures & Options 10 31.25

The study showed that around 44% of traders do intraday trading, 25% do cash or delivery based

trading and rest 31% trade in futures and options. Therefore, it can be clearly concluded that intraday

trading is the most preferred type of trading by traders, followed very closely by futures and options.

5.1.4 COMFORATABILITY LEVEL OF INVESTORS AND TRADERS

In the present rally in stock markets, it becomes really important to know whether the investors

and traders dealing in stock markets are comfortable investing in stocks or not.

An effort has been made in this project to know the comfortability level of those who are currently

dealing into stock markets. The respondents were asked to give their opinion about their

comfortability level on a 5 point likert scale. The points of scale being very comfortable, somewhat

comfortable, indifferent, somewhat uncomfortable and not at all comfortable.

The weights attached to these waits were 5,4,3,2 and 1 respectively. Z-test has been used to

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check the hypotheses, with null hypotheses being set as:

H0 : The investors are not comfortable.

H1 : The investors are comfortable

Table 5.4 Z-test calculations

N f nf D D2 fD fD2

5 19 95 2 4 38 76

4 21 84 1 1 21 21

3 36 108 0 0 0 0

2 13 26 -1 1 -13 13

1 11 11 -2 4 -22 44

∑f = 100 ∑nf = 324 ∑D2 = 10 ∑fD=24 ∑fD2 = 154

Mean = ∑nf/∑f

= 324/100

Sample mean = 3.24

Population mean = 2

(Assumed i.e. hypotheses)

Standard Deviation = 1.22

Standard Error = 0.122

Z calculated is found out by dividing the difference of sample mean and population mean by

the standard error.

Zc = 10.164

Zt = 1.96

Since Zc > Zt therefore H0 is rejected and H1 is accepted

This shows that the investors are quite comfortable at this point of time while investing funds in

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stock markets.

Thus it is clear from the Z-test that the investors are quite comfortable while investing their funds in

stock markets. It signifies the investor’s confidence in Indian capital markets.

5.1.5 AWARENESS REGARDING INDIA INFOLINE AND ITS PRODUCTS AND

SERVICES

One of the major objectives of the study was to find out the level of awareness among the

respondents about India Infoline Group and its product and its services.

The respondents were asked that in their opinion to what extent they were aware about India Infoline

Group and its products and services. They were asked to give their opinion by ticking any one of the

following option which they thought was appropriate and best suited their opinion:

1. I have detailed knowledge about India Infoline and its products and services.

2. I have fair knowledge about India infoline and its products and services.

3. I have just heard about India infoline and its products and services.

4. I have not heard about India infoline and its products and services.

The results are given in table 5.5

Table 5.5 Awareness level of respondents about India infoline and its products and

services

KNOWLEDGE NUMBER PERCENTAGE

Detailed 14 14

Fair 22 22

Just Heard 18 18

Not Heard 46 46

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The table clearly shows that only 14% respondents had detailed knowledge about the company and its

products and services. Thus, huge part of the population is still not aware of India infoline ltd and its

products and services. 22% had a fair knowledge followed by 18% respondents who had just heard

about the company. As much as 46% respondents had not even heard about India infoline and its

products and services which is quite high.

5.1.6 NUMBER OF DEMAT ACCOUNTS

The respondents also had to mark for the number of demat accounts they currently hold.

Table 5.6 Distribution of respondents according to the number of demat accounts

NUMBER OF DEMAT

ACCOUNTS

NUMBER PERCENTAGE

0 – 2 60 60

2 – 4 29 29

4 & Above 11 11

As it is evident from the table, 60% of the respondents only had one demat account whereas 29%

had either 2 or 3 demat accounts and only 11% had 4 or more number of demat accounts. Therefore,

it is clear that most people deal through one demat. Account and less people have multiple number of

demat accounts.

5.1.7 PREFERENCE OF STOCK EXCHANGE

All the respondents had to mark their choice for the most preferred stock exchange. Results have

been shown below:

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Table 5.7 Distribution of respondents according to their preference of

dealing in two major stock exchange of India

STOCK EXCHANGE NUMBER PERCENTAGE

NSE 63 63

BSE 37 37

63% of the respondents marked their preference for NSE and only 37% for BSE. This clearly shows

that NSE outperforms BSE by a big margin and is the most preferred choice of people to trade in.

5.1.8 FREQUENCY OF TRADING

The respondents were asked to mark their choice as to their general frequency of trading.

Table 5.8 Distribution of respondents on the basis of their frequency of trading

FREQUENCY NUMBER PERCENTAGE

Daily 29 29

Once a week 16 16

Once a month 7 7

Depends 48 48

The study revealed that 29% of the respondents traded daily, 16% traded once a week, 7% traded

once a month and 48% traded depending upon the market availability and availability of funds. Thus,

most people trade in tandem to markets and availability of funds.

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5.1.9 PREFERRED MODE OF TRADING

The respondents were asked to mark their most preferred mode of trading among the following four

choices:

1. Dial and trade

2. Online Trading

3. Software loaded at their PC’s

4. At Broker’s House

Table 5.9 Distribution of respondents according to their preferred mode of trading

MODE OF TRADING NUMBER PERCENTAGE

Dial and trade 37 37

Online trading 18 18

Software 9 9

Broker house 36 36

The above table shows that 37% of the respondents preferred dial and trade, 18% preferred online

trading, only 9% preferred trading by softwares loaded on their PCs and 36% preferred to trade at the

broker’s house. Thus, it can be concluded that dial and trade and trading at broker’s place are the two

most preferred mode of trading of respondents.

5.1.10 PREFERENCE OF TRADING WITH MARGING FUNDING

Margin funding is a facility provided by brokers at a charge of some rate of interest on the amount

funded. Respondents were asked to mark their general preference for it.

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Table 5.10 Distribution of respondents according to their preference of trading with margin funding

FACILITY NUMBER PERCENTAGE

Yes 28 28

No 31 31

Sometimes 41 41

28% of the respondents preferred to trade with the facility of margin funding, 31% did not prefer

trading with margin funding and 41% traded on margin funding depending upon the market

conditions. Thus, market conditions play a major role for preference of margin funding by respondents

.

5.1.11 EXPOSURE DESIRED

Exposure is the number of times an investor can trade over and above his available funds.

Respondents had to mark their choice for the exposure they desired in normal market conditions.

Table 5.11 Distribution of respondents according to the exposure they desire

EXPOSURE NUMBER PERCENTAGE

0 – 2 Times 41 41

2 - 4 Times 28 28

4 - 6 Times 19 19

6 - 8 Times 8 8

8 & more Times 4 4

As evident from the table, 41% of respondents desired exposure of only one time, 28% desired of two

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or three times, 19% desired of four or five times, only 8% desired of six or seven times and only 4%

desired for exposure of eight times or more. Thus, most of the respondents do not want themselves to

be exposed to more of risk.

5.1.12 FACTORS AFFECTING MARKET PRICES OF SHARES

Today’s capital markets are dependent on a number of factors. In this study an attempt has been

made to understand the various factors that an investor thinks is responsible for changes in

market prices of shares.

The respondents were given a set of factors and were asked to rate them on a 3 point scale. The

points on the scale were very important, important and not important. The relative weights

attached to these options were 2, 1 and 0. Weighted means for each factor were calculated.

Inferences were drawn based on the following:

Table 5.12 Mean score and importance attached

MEAN IMPORTANCE

1.25 to 1.5 Fairly Important

Above 1.5 Very Important

Table 5.12.1 Factors considered responsible for changes in market prices of shares

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SCORE 2 1 0

FACTORS Very imp. Important Not imp. Total score Mean score

Demand &

Supply

79 21 0 179 1.79

Companies

Business

Developmen

ts

73 16 11 162 1.62

Global

Markets

76 21 3 173 1.73

Indian

Economy

58 31 11 147 1.47

Interest

Rates

39 40 21 118 1.18

The factors having mean score ranging between 1.25 to 1.50 are considered to be fairly important

and factors having mean score more than 1.50 are very important from the investor’s perspective.

As it is clear from the table, Indian economy fall under the category of fairly important factors with

mean score of 1.47. Thus, it may be noted that the economy plays a vital role in development of

capital markets.

Three factors with mean score greater than 1.5 are in the category of very important factors. At the

top is the demand and supply factor. Its mean score is 1.79 which is on the higher side. Global

markets are another important factor that affects capital markets with mean score of 1.73 which is

quite high. The third important factor that affects market prices of shares is a company’s own

business development. Its mean score is 1.62.

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It is evident from the table that interest rates falls under the category of unimportant factors. Thus,

most respondents are of the view that interest rates have a relatively less bearing on share prices

as compared to other factors.

5.1.13 FACTORS AFFECTING BUY OR SELL DECISION DURING TRADING

SESSION

There are a number of factors that influences the decision of investors to either buy or sell shares

during the trading session i.e. when the markets are operational. An effort has been made to

understand such factors.

Investors were asked to mark the most influential factor they thought which affects their buying or

selling decision during the trading session and the observed numbers (O) were noted. Expected

values (E) were set to be as equal i.e. all factors are equally responsible for the investor’s

decision.

Null hypotheses H0 : There is no significant difference between the factors and have equal

bearings on investor’s decision.

Chi-square was used to check the hypotheses. The observed and the expected values were used

and chi-square was calculated. Chi-square was applied as shown below:

Table 5.13 Chi-square test to test the hypothesis

Observed

Value (O)

Estimated

Value (E)

(O-E)2 (O-E)2 / E

Own 21 25 16 0.64

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judgement

Companions at

trading centre

28 25 9 0.36

Research

Calls/Tips

34 25 81 3.24

Market News 17 25 64 2.56

Total 6.8

Table value at 95% confidence level (at degrees of freedom 3) = 7.81

As calculated value is less than table value therefore null hypothesis is accepted and alternate

hypothesis is rejected.

Thus, it can be concluded that an investor’s decision to buy or sell shares during the trading session

is influenced by a number of factors, the majority of them being own judgement, companions at the

trading centre, research calls/tips and market news and an investor’s decision is influenced by each of

them in some or the other way.

5.1.14 MOST SOUGHT INVESTMENT INSTRUMENTS

There are many investment instruments were an individual can invest his savings. Major among

those are in Stock markets, Fixed Deposits, Insurance and Mutual funds. Respondents were

asked to mark only that option from among the above mentioned 4 investment instruments in

which they invest most part of their savings.

The observed values (O) were noted and Expected values (E) were set to be as equal i.e. all

investment instruments are equally invested in by all investors.

Null hypotheses H0 : There is no significant difference between different investment instruments.

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Chi-square was used to check the hypotheses. The observed and the expected values were

used and chi-square was calculated. Chi-square was applied as shown below:

Table 5.14 Chi-square test to test the hypothesis about most sought investment instrument

Observed

Value (O)

Estimated

Value (E)

(O-E)2 (O-E)2 / E

Stock Markets 20 25 25 1

Fixed Deposits 41 25 256 10.24

Insurance 17 25 64 2.56

Mutual Funds 22 25 9 0.36

Total 14.16

Table value at 95% confidence level (at degrees of freedom 3) = 7.81

As calculated value is greater than table value therefore null hypothesis is rejected and alternate

hypothesis is accepted.

So we can say that different investors invest in different investment instruments according to their

perceptions and pros and cons of different investment instruments

41% of the respondents invested in fixed deposits which is quite high. The various factors that could

be attributed to this can be liquidity, high security of money and less but guaranteed returns.

22% of respondents invested most part of their savings in mutual funds. The reason for this can be

liquidity, high returns, lower risk and tax advantages.

20% of the respondents invested mostly in stock markets, signifying thereby, their ability to take

higher risks, lust for higher returns and high amount of liquidity involved.

Only 17% respondents invested mostly in insurance products. The reason why people invest less in

insurance is its inability to provide good returns and liquidity to its investors. Although, insurance has

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tax soaps attached to it, even then it’s the least preferred investment avenue.

Therefore, from an investor’s point of view, the following factors are taken into account while

considering any investments:

1. Risk Involved in the investment

2. Liquidity of money

3. Tax advantages and

4. Returns

5.1.15 CHOOSING A BROKERAGE HOUSE

The respondents were asked to rank their choices from 1 to 4 for the factors they thought that

influenced their decision to choose a brokerage house. The choices being:

1. Account Opening Charges and Annual Charges

2. Brokerage

3. Services(Margin Funding, Research Calls etc)

4. Geographical location

Each of the factors was analyzed individually and mean was found out. The factors were then

arranged in ascending orders of the value of their mean. The factor with the lowest mean will be the

most important factor and factor with the highest mean will be the most unimportant factor.

Table 5.15.1 Mean of Account Opening charges and Annual Charges

Ranks(x) Frequency(f) Fx

1 46 46

2 31 62

3 16 48

2

4 7 28

∑f = 100 ∑fx = 184

Mean = ∑fx/∑f

= 184/100

= 1.84

Table 5.15.2 Mean of Brokerage

Ranks(x) Frequency(f) Fx

1 19 19

2 45 90

3 30 90

4 6 24

∑f = 100 ∑fx = 223

Mean = ∑fx/∑f

= 223/100

= 2.23

Table 5.15.3 Mean of Services

Ranks(x) Frequency(f) Fx

1 28 28

2

2 15 30

3 34 102

4 23 92

∑f = 100 ∑fx = 252

Mean = ∑fx/∑f

= 252/100

= 2.52

Table 5.15.4 Mean of Location

Ranks(x) Frequency(f) fx

1 7 7

2 9 18

3 20 60

4 64 256

∑f = 100 ∑fx = 341

Mean = ∑fx/∑f

= 341/100

= 3.41

Table 5.15 Importance of factors for choosing a brokerage house

FACTOR MEAN SCORE

Account Opening Charges & Annual Charges 1.84

Brokerage 2.23

2

Services 2.52

Location 3.41

Thus, it is clear from the study that the most important factor that influences the choice of a brokerage

house is the account opening charges and the annual charges.

The second factor that affects the choice of a brokerage house is the rate of brokerage charged.

Therefore, brokerage houses should charge brokerage at very competitive rates.

The third factor which is important is the services provided by the brokerage house such as margin

funding, research calls, collection of delivery instruction slip, periodic holding statements etc.

The forth factor is the location of the brokerage house which the respondents have choose to be their

last important factor.

5.1.16 EXPECTED RATE OF RETURN

Respondents were asked to mark the rate of return they expected per annum out of their funds

invested in share markets.

Table 5.16 Distribution of respondents according to the returns they expect from share market

RETURN NUMBER PERCENTAGE

0 – 10% 12 12

10% - 20% 34 34

20% - 30% 31 31

30% & Above 23 23

The above table shows that just 12% of the respondents expect 0 – 10% returns, 34% expect 10 –

20% returns, 31% expect 20 – 30% returns and 23% expect 30% and above returns. Thus, it can be

concluded that most people dealing in share markets are optimistic in nature and expect returns on a

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higher end.

5.2 SWOT ANALYSIS OF INDIAN STOCK MARKETS

Strengths

o World’s second fastest growing economy

o High Turnover with daily turnover averaging around 55,000 crores.

o Most sought Investment destination in Asia

o Large amount of Liquidity as flow of money has been continuous from foreign

sources.

o SEBI as a regulator efficacy

o Third largest Investor base in the World with more than 25 million investors

o Macroeconomic Stability

o Technological Advanced

o One of the world’s lowest transaction cost based on screen based transactions,

paperless trading and a T+2 settlement cycle.

o P/E ratios of companies are moving in positive directions from last few years.

o Level of inflation has also stayed at comfortable levels from quite some time.

WEAKNESSES

o Higher interdependence on global markets like U.S. The recent example in this

regard is the subprime loan mortgage defaults in USA which has triggered panic in

Indian stock markets, though; Indian companies are not exposed to it.

o Higher volatility and lack of stability

o Speculative in nature

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o Monetary and fiscal measures

OPPORTUNITIES

o Large amount of unutilized money with Public Sector Undertakings (PSU’s).

o Pension Funds in the near future are to tap Indian stock markets.

o Large numbers of investors are still not exposed to stock markets, thus large amount

of savings still to reach stock markets.

THREATS

o Indian economy is getting overheated. Growth of around 10% is unsustainable.

o Inflationary Trend.

o Tightening of liquidity norms by RBI.

o Chinese Economy.

CHAPTER 6

FINDINGS AND DISCUSSIONS

In a nation with population of more than 1.1 billion, only a handful of them invest in stock markets. It is

a place for all those who dream of a better, financially comfortable tomorrow as stock markets are

obviously the perfect place to invest-especially when stock markets can make them considerably rich

in a short span of time, provided they play their cards right.

Therefore, stock markets is all about taking right decision at the right time in the light of all the

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information available and keeping a close watch on various factors affecting the stock markets.

This study aimed at analyzing the behaviour and expectations of those dealing in stock markets and

finding such factors which they think are responsible for price fluctuations.

The study revealed that most of the people dealing in stock markets are investors as against traders.

This signifies that stock markets, despite of its risky nature is a good investment avenue for investors

who are generally looking for short to medium term investment. On the other hand, people with

trading nature that prefer investment for very short term mostly trade in cash/delivery, followed very

closely by intraday and futures and options.

The study also discovered that many people in stock markets are dealing through multiple demat

accounts which not only exaggerates the investor base, but provides a false picture of Indian capital

markets. Thus, it can be concluded that capital markets are still not among the favoured investment

destination for most and huge amount of savings are still unavailable to capital markets. The study

also found that dial and trade and trading at broker’s house are undoubtedly the preferred mode of

trading for most people but online trading is also catching up fast. This can be taken as a potential

market for depository participants to tap up. It was also clear from the study that most people traded

depending upon the market conditions and availability of funds which clearly throws light on the

behaviour of people dealing in stock markets indicating that swing in the market and liquidity also

plays its part in stock markets.

It was also found out in the study that most people preferred to trade in National Stock Exchange

(NSE) as compared to Bombay Stock Exchange (BSE). The most stated reason for it was said to be

availability of futures and options on NSE and lesser volatility of the NSE index Nifty as compared to

BSE’s Sensex.

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It was also clear from the study that most of the people currently investing in stock markets are quite

comfortable investing in it. This is a clear indication of investor’s confidence in Indian capital markets

and a positive sign for India’s growth. It was much more evident when many of them answered in

positive for the facility of margin trading and indicated for higher exposure they desired in the normal

market.

One of the most important objectives of the study was to determine most important factors

responsible for price fluctuation according to people dealing in stock markets, analyze the decision

making criterion for investment and their expectations from markets.

Though, stock markets are driven by a number of factors, yet from among the major factors given as

choices, the study revealed that most people gave high amount of importance to demand and supply

factors, global markets and a company’s business developments. Indian economy was also

considered to be an important factor whereas interest rate factor was considered to be unimportant by

the most. The study found out that people depended upon a number of factors such as own

judgement, companions at the trading centre, research calls/tips and market news to buy or sell

shares during trading session and they were more or less equally important. The study was also

aimed at finding out the returns that people expect out of their funds invested in stock markets and

most of the answers ranged between 10%-30% which is a sheer sign of optimism among investors.

The study also made it clear that most people still are not much risk takers when it comes to investing

most part of their savings. They prefer to invest in one of the safest investment instrument called fixed

deposits followed by mutual funds, stock markets and insurance.

Other objective of the study was to find out the most important factor that influences the decision of

the people in stock markets for the choice of a brokerage house and awareness regarding India

2

infoline and its products and services.

The most important factors which emerged were the account opening and annual charges and

brokerage charged, clearly indicating that brokerage houses should keep such charges at the

minimum to attract maximum customers. The other factor which influenced the choice of many was

the service being provided by brokerage house. This should be taken as a potential area to work upon

by all brokerage houses. The awareness regarding India infoline and its products and services was

found to be very low as compared to the group’s stature. The company needs to seriously work on its

strategies to have a presence in the market, the suggestions for which have been given personally by

me in the next chapter.

CHAPTER 7

SUGGESTIONS

This section contains my suggestions to the company which can be beneficial for its growth. As this

study was carried out in Chandigarh and its surroundings, these suggestions may be best suited for

the branch office of India infoline situated in Chandigarh.

Marketing activities - As is evident from the study that most people are still not aware of the

India infoline and its products and services, it needs to work out a concrete plan to step up its

marketing activities because customer’s decision these days are influenced by company’s

marketing strategies and the frequency of such strategies coming to their sight. Following

suggestions are given for such marketing activities:

1. Advertisements – The Company should spend some amount on advertising to capture the

growing market. Advertisements in print media as well as audio visual media are must at the

2

local level. Medium of print media used can be local newspapers etc and for audio visual

media can be local television or regional channels and radio channels having significant

number of subscribers or listeners. Other medium of advertisement that can be used is display

of hoardings at easily noticeable places.

2. Canopies – The Company should set up more and more canopies at market places and

exhibitions to reach to maximum number of people as Chandigarh is one of such places where

exhibitions are frequently held and visited by public at large.

3. Investor Camps – The Company in order to augment its market presence in the city should

set up investors’ camps for public in general and its investors in particular which will be very

helpful in increasing its volume of business.

4. Service Marketing - The Company apart from increasing its clientele should focus on

providing better services to its existing clients. Such services may be providing complete

assistance to the clients by giving regular research tips, collection of delivery instruction slips

etc and making personal relations with them.

Product Related Strategies - The Company should design new and innovative products to

attract the customers. One such product that can be evolved is charging zero brokerage on

transactions where client is incurring losses. Though such products or schemes can be offered

for limited period only, yet, such a thing will increase investor’s confidence in the company

which may culminate into shifting of customers from other brokerage houses resulting into

broadening of its data base. Other thing as was evident from the study which influences

investors’ decision to choose a brokerage house is account opening and annual maintenance

charges, the company should fix such charges competitively in accordance with its peers

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having strong presence in the city and its surroundings.

Focus on Client Benefits – Customer satisfaction, now a days is foremost for a company for

its growth. Such satisfaction can only surface if the company has more experienced and

efficient officials capable of generating higher profits for their clients or at least minimizing their

losses. Thus, the company should focus on availing the services of specialists and

experienced fund managers.

CHAPTER 8

LIMITATIONS OF THE STUDY

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Though every care has been taken to make this report authentic in every sense, yet there were a few

uncomfortable factors, which might have their influence on the final report. Linking factors can be

stated as: -

Time Constraint

Due to lack of time i.e. 8 weeks, it was not possible to deeply study every aspect of stock markets and

devote enough time for research work. But still sincere efforts were put to reach to the reliable

conclusion.

Data Collection Constraints

There were many problems regarding the collection of data which are as follows:

Primary Data Constraints

1. As the questionnaires were filled during the working hours, the respondents had little time to

devote for filling the questionnaires.

2. Some respondents didn’t have their serious attitude towards the questionnaire and hence their

responses may not reflect the real picture.

3. Some of the respondents were not candid enough to reveal all the required information. They

might have given inflated or wrong data.

4. The survey was conducted in the Chandigarh and its surrounding areas. Thus the respondents

belonged only to this region of country. This could have brought biasness into the study.

5. However all the efforts were made to remove the biasness but it cannot be denied that there is

no possibility of individual biasness on the part of respondent.

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Secondary Data Constraints

It was tried very harder to include the best of information from published and unpublished sources

available on internet, books and magazines but some of the data required for the detailed study was

not available freely.

BIBLIOGRAPHY

Books

Marc Levinson, Guide to Financial Markets

Naresh K. Malhotra , Marketing Research

Web Sites

www.india infoline.com

www.surfindia.com

www.wikipedia.com

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ANNEXURE

QUESTIONNAIRE

2

Dear Sir/Madam,This information provided by you will be utilized in completion of our MBA summer training project.We will be thankful for the time & effort you will spend in filling the questionnaire.

o Name………………………………………………………………

o Address……………………………………………………………

o Phone number…………………………………………………….

o Profession………………………………………………………….

1. Are you a:Investor

Trader

If an investor, go to Q2 otherwise proceed to Q3.

2. What type of investor you are:

Short Term

Medium Term

Long Term

3. As a trader which type of trading you do the most:

Intra Day

Cash/Delivery

Futures and Options

4. How comfortable you are while investing in current phase of stock markets:

Very Comfortable

Somewhat Comfortable

Indifferent

Somewhat Uncomfortable

2

Not at all comfortable

5. To what extent you are aware about India infoline and its products and services:

Detailed Knowledge

Not detailed knowledge

Heard about it

Not Heard

6. How many demat accounts do you have?

0 - 2

2 – 4

7. In which equity market you prefer to work the most and why(Please specify):

NSE BSE

…..........................................................................................................

8. How often do you trade in stock market?Daily

Once in a week

Once in a month

Depends on the market conditions and availability of funds

9. What is your preferred mode of trading?

Dial and trade

Online trading

Software loaded at your PC

At the broker house

10. Do you prefer trading with the facility of margin funding?

Yes

No

Sometimes, when the market is in full swing

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11. What is the exposure you desire in the normal market?

12. What importance does the following factors have in the change in market prices of

Shares in the share market: (Tick the appropriate option)

Very Important Important Not Important

Demand & Supply

Companies Business Developments

Global Markets

Indian Economy

Interest Rates

13. Which is the major factor that lures you to buy or sell shares during the trading session?

Own judgment

Companions at the trading centre

Research Calls/Tips

Market News

14. In which of the following investment instruments you invest most part of your savings:

(Tick only one)

Stock Markets

Fixed Deposits

Insurance

Mutual Funds

15. What are the factors that influence your decision to choose a brokerage house:(Rank:1

For most important criterion and 4 for least important criterion)

2

Account Opening Charges & Annual Charges

Brokerage

Services (Margin Funding, research calls)

Location

16. What percentage of return you expect per annum from your funds invested in share market?

0 - 10%

10% - 20%

20% - 30%

30% & above