a study of indian stock market
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share holder documentTRANSCRIPT
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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
2
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