Chapter 1: Introduction

1.1. Introduction

1.1.1. History & Evolution of Stock Exchanges in India

Before we explore the dynamic history of Stock Market, let us first know what are:

a) Stock Markets,

b) Stock exchanges.

a) Stock Markets: Stock Market is a market where the trading of company stock, both listed

securities and unlisted takes place. It is different from stock exchange because it includes all the

national stock exchanges of the country. For example, we use the term, "the stock market was up

today" or "the stock market bubble."

b) Stock Exchanges: Stock Exchanges are an organized marketplace, either corporation or

mutual organization, where members of the organization gather to trade company stocks or other

securities. The members may act either as agents for their customers, or as principals for their

own accounts. Stock exchanges also facilitates for the issue and redemption of securities and

other financial instruments including the payment of income and dividends. The record keeping

is central but trade is linked to such physical place because modern markets are computerized.

The trade on an exchange is only by members and stock broker do have a seat on the exchange.

1.1.2. History of Indian Stock Market

Indian stock market marks to be one of the oldest stock market in Asia. It dates back to the close

of 18th century when the East India Company used to transact loan securities. In the 1830s,

trading on corporate stocks and shares in Bank and Cotton presses took place in Bombay.

Though the trading was broad but the brokers were hardly half dozen during 1840 and 1850.

An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall

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of Bombay from the mid-1850s, each investing a (then) princely amount of Rupee 1. This

banyan tree still stands in the Horniman Circle Park, Mumbai. In 1860, the exchange flourished

with 60 brokers. In fact the 'Share Mania' in India began with the American Civil War broke and

the cotton supply from the US to Europe stopped. Further the brokers increased to 250. The

informal group of stockbrokers organized themselves as the Native Share and Stockbrokers

Association which, in 1875, was formally organized as the Bombay Stock Exchange (BSE).

BSE was shifted to an old building near the Town Hall. In 1928, the plot of land on which the

BSE building now stands (at the intersection of Dalal Street, Bombay Samachar Marg and

Hammam Street in downtown Mumbai) was acquired, and a building was constructed and

occupied in 1930.

Premchand Roychand was a leading stockbroker of that time, and he assisted in setting out

traditions, conventions, and procedures for the trading of stocks at Bombay Stock Exchange and

they are still being followed.

Several stock broking firms in Mumbai were family run enterprises, and were named after the

heads of the family.

The following is the list of some of the initial members of the exchange, and who are still

running their respective business:

D.S. Prabhudas & Company (now known as DSP, and a joint venture partner with Merrill

Lynch)

Jamnadas Morarjee (now known as JM)

Champaklal Devidas (now called Cifco Finance)

Brijmohan Laxminarayan

In 1956, the Government of India recognized the Bombay Stock Exchange as the first stock

exchange in the country under the Securities Contracts (Regulation) Act.

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The most decisive period in the history of the BSE took place after 1992. In the aftermath of a

major scandal with market manipulation involving a BSE member named Harshad Mehta, BSE

responded to calls for reform with intransigence. The foot-dragging by the BSE helped radicalize

the position of the government, which encouraged the creation of the National Stock Exchange

(NSE), which created an electronic marketplace. NSE started trading on 4 November 1994.

Within less than a year, NSE turnover exceeded the BSE. BSE rapidly automated, but it never

caught up with NSE spot market turnover. The second strategic failure at BSE came in the

following two years. NSE embarked on the launch of equity derivatives trading. BSE responded

by political effort, with a friendly SEBI chairman (D. R. Mehta) aimed at blocking equity

derivatives trading. The BSE and D. R. Mehta succeeded in delaying the onset of equity

derivatives trading by roughly five years. But this trading, and the accompanying shift of the spot

market to rolling settlement, did come along in 2000 and 2001 - helped by another major scandal

at BSE involving the then President Mr. Anand Rathi. NSE scored nearly 100% market share in

the runaway success of equity derivatives trading, thus consigning BSE into clearly second

place. Today, NSE has roughly 66% of equity spot turnover and roughly 100% of equity

derivatives turnover. Stock Exchange provides a trading platform, where buyers and sellers can

meet to transact in securities.

1.2. Objectives of the Study

To study specific factors facilitating investors to evaluate and choose stock of the

company

To study factors Affecting their investment behavior.

To study the role played by SEBI in protecting the investors.

1.3. Research Methodology3

1.3.1. Primary Data

The primary data was collected by conducting a semi structure interview with the individual

investors and obtained necessary information through sample survey conducted by handing out

the detailed questionnaire to the investors.

A) Sample survey

This study follows the survey research methodology. A questionnaire was constructed to

measure the investment pattern of individuals on the basis of age and gender. The questionnaire

was administered to the total number of 128 individuals. Here we are using minimum age as 18

years since we are considering that an individual starts earning after this age.

B) Sample

The target of 128 individual chosen for this study was the investor, who regularly invests. They

will invest fewer amounts but invest regularly according to their earning.

C) Survey Instruments

A four page questionnaire consisting of two sections, one section deals with demographic

information such as age, gender, income(monthly) and educational qualification. Another

section, measures the investment pattern of individuals on the basis of financial statements,

accounting instruments, economic variables, source of investment advice, company factor, stock

price, total investment, government policies, scams and investment objectives.

Each eight questions consisted of different options which were ranked on the basis of their

importance ranging from 1(very important) to 5(not important). Two questions were answered in

‘yes’ or ‘no’. One question consisted of different alternatives and investor had to select one

appropriate answer.

1.3.2. Secondary Data:

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Relevant theoretical information was obtained from different reference book, available in college

library and central library. Different journals, Government website, Business websites also

proved instrumental for researching necessary data relevant for our study.

1.4. Limitations of the Study

1.4.1. Sample

The total size of the sample is circumscribed to 128 individuals due to time constraints.

1.4.2. Factors

We focused on technical, financial and economic factors which help the investors to evaluate and

choose stock of the company and eventually affecting investor’s behavior with regards to stock

investment decision.

1.4.3. Investor grievance redressal mechanism

We restricted ourselves into just measuring satisfaction level of investor with investor grievance

redressal mechanism in place by SEBI.

1.4.4. Data analysis:

The data collected was analyzed by ascertaining average ranking with the help of arithmetic

mean and not with other complex statistical tools such as correlation, regression etc.

1.5. Chapter Scheme of the Study

This study has divided into three chapters and appendices:

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Chapter 1 – Introduction

This chapter explores the history and evolution of stock exchange, objectives of the study,

research methodology and limitation of the study.

Chapter 2 – Capital markets

This chapter introduces the capital market, delves into prominent stock exchanges of India,

Settlement cycle, the securities exchange board of India (SEBI), Role, powers and structure of

SEBI and most prominently importance of small investor and role played by SEBI in protecting

and educating the investor in Indian capital market.

Chapter 3 – Finding and analysis

This chapter mainly deals with finding and analysis, conclusion and suggestion which are drawn

by the study conducted.

Chapter 2: Capital Market

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2.1. Introduction

The recent years have seen a sea change in the Indian capital market. Possibly, the greatest

beneficiary of the reforms process has been the securities market segment. No other sector has

seen the magnitude and quality of reforms, proactive legislation, stringent regulation, and results

as the securities market. It is the result of these proactive steps which has seen India emerges as a

favorite investment destination. Earlier India was popular only amongst US and West European

investors but now even other countries such as Japan, Korea, etc., are equally interested in Indian

securities. Some of the reforms introduced in India are not even present in western markets.

The Capital Market is divided into 2 segments which are:-

2.1.1. Primary Market

It refers to that segment wherein a company makes an issue of securities to the investing public

directly, i.e., the funds flow into the company. This would include, Initial Public Offers, Public

Issues, Private Placements, Rights Issues, Foreign Direct Investment, etc. The primary market

may further be bifurcated into the equity/ equity-linked segment and the debt segment. The

primary market may also be bifurcated into domestic offerings and international offerings. While

the domestic offerings would cover all issues made by Indian companies in India to local

investors, the foreign offerings would cover issues of American Depository Receipts, Global

Depository Receipts, Foreign Currency Convertible Bonds, External Commercial Borrowings,

etc., made by Indian companies to foreign investors.

2.1.2. Secondary Market

The secondary market is that segment of the capital market where the outstanding securities

issued by the Central and the State Governments, public bodies, and corporate entities are traded.

However, we will be discussing the securities issued by companies. Traditionally, this was an

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open auction market where buyers and sellers meet and evolve a competitive price for the

securities.

In the first place, it is only an organized securities market which can provide sufficient

marketability and price continuity for shares so necessary for the needs of the investors.

Secondly, it is only such a market that can provide a reasonable measure of safety and fair

dealing in the buying and selling of securities.

Thirdly, through the interplay of demand for and supply of securities a properly organized stock

exchange assists in a reasonably correct evaluation of securities in terms of their intrinsic worth.

Lastly, through such evaluation of securities, the stock exchange helps in the orderly flow of

distribution of savings as between different types of competitive investments.”

Secondary markets facilitate the existing (previously issued) securities to change hands among

investors. That is, they facilitate maturity transformation (an investor has a certain idea of the

period for which he can commit the funds. Usually, this period is not sufficient for the funds user

to remit them back. Therefore, the investor has to find another investor who is willing to make

available funds to the user. This he does by selling the securities issued by the funds user to the

other investor.)

2.2. Stock Exchange & Settlement Cycle

2.2.1. Prominent Stock Exchanges of India

2.2.1.a. Bombay Stock Exchange (BSE):-

An informal group of 22 stockbrokers had been trading under a banyan tree opposite the Town

Hall of Bombay from mid-1850s. This banyan tree still stands in Horniman Circle Park,

Mumbai. This informal group of stockbrokers organized themselves as “The Native Share and

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Stockbrokers Association” which, in 1875, was formally organized as the Bombay Stock

Exchange (BSE). BSE is the oldest stock exchange in Asia, the second being the Tokyo Stock

Exchange, established in 1878.Premchand Roychand was a leading stockbroker of that time, and

he assisted in setting out traditions, conventions, and procedures for the trading of stocks at

Bombay Stock Exchange and they are still being followed.

BSE is the first stock exchange in the country which obtained permanent recognition (in 1956)

from the Government of India under the Securities Contracts (Regulation) Act 1956. BSEʹs

pivotal and pre-eminent role in the development of the Indian capital market is widely

recognized. It migrated from the open outcry system to an online screen-based order driven

trading system in 1995. Earlier an Association Of Persons (AOP), BSE is now a

corporatized and demutualised 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). With demutualization, BSE has two of world’s

best exchanges, Deutsche Börse and Singapore Exchange, as its strategic partners.

Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by

providing it with an efficient access to resources. There is perhaps no major corporate in India

which has not sourced BSEʹs services in raising resources from the capital market.

The BSE Index, SENSEX, is India’s first stock market index that enjoys an iconic stature, and is

tracked worldwide. It is an index of 30 stocks representing 12 major sectors. The SENSEX is

constructed on a ʹfree-floatʹ methodology, and is sensitive to market sentiments and market

realities. Apart from the SENSEX, BSE offers 21 indices, including 12 sect oral indices.

BSE provides an efficient and transparent market for trading in equity, debt instruments and

derivatives. It has a nation-wide reach with a presence in more than 450 cities and towns of

India. BSE has always been at par with the international standards. The systems and processes

are designed to safeguard market integrity and enhance transparency in operations. BSE is the

first exchange in India and the second in the world to obtain an ISO 9001:2000 certifications. It

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is also the first exchange in the country and second in the world to receive Information Security

Management System Standard BS 7799-2-2002 certification for its BSE On-line Trading System

(BOLT).

2.2.1.b. National Stock Exchange (NSE):-

The National Stock Exchange (NSE) is India's leading stock exchange covering 364 cities and

towns across the country. NSE was set up by leading institutions to provide a modern, fully

automated screen-based trading system with national reach. The Exchange has brought about

unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities

that serve as a model for the securities industry in terms of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms of

microstructure, market practices and trading volumes. The market today uses state-of-art

information technology to provide an efficient and transparent trading, clearing and settlement

mechanism, and has witnessed several innovations in products & services viz. demutualization of

stock exchange governance, screen based trading, compression of settlement cycles,

dematerialization and electronic transfer of securities, securities lending and borrowing,

professionalization of trading members, fine-tuned risk management systems, emergence of

clearing corporations to assume counterparty risks, market of debt and derivative instruments

and intensive use of information technology.

NSE's mission is setting the agenda for change in the securities markets in India. The NSE was

set-up with the following objectives:

Establishing a nation-wide trading facility for equities, debt instruments and hybrids,

Ensuring equal access to investors all over the country through an appropriate

Communication network,

Providing a fair, efficient and transparent securities market to investors using electronic

trading systems,

Enabling shorter settlement cycles and book entry settlements systems, and10

Meeting the current international standards of securities markets.

2.2.1.c. Pune Stock Exchange (PSE):-

Pune Stock Exchange: There are many regional stock exchanges in India. Our regional stock

exchange i.e. Pune Stock Exchange Limited stands 7th in the country. Pune Stock Exchange Ltd.

is a company limited by guarantee. The Exchange was established on 2nd Sept. 1982 to cater to

the needs of the growing investor community in the city.

Starting small, with 35 members and a few lakhs rupees business initially, the exchange has

grown tremendously to over 185 members and about 15-20 crores of business daily. Much of the

work is computerized with a smooth settlement system. Over 310 companies are listed with the

Stock Exchange.

2.2.1.d. Bangalore Stock Exchange (BgSE):-

The Bangalore Stock Exchange Limited (BgSE), established in 1963, is the one of the leading

Stock Exchanges of India. BgSE is a Self Regulatory Organization located in the garden city of

India. The Exchange is managed by the Governing Board consisting of three Public Interest

Directors nominated by Securities Exchange Board of India (SEBI), Six Shareholder Directors

(elected by Poll), three Trading Member Directors (elected from amongst members through poll)

and Executive Director. BgSE has been proactive in keeping pace with the emerging

technological and financial market trends and is fully computerized. BgSE launched its own

BEST (Bangalore Electronic Securities Trading), it’s On-line trading system on 29th July 1996,

the first exchange to do so in the South India.

2.2.1.e. Delhi Stock Exchange (DSE):-

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DSE, one of the oldest Stock Exchanges in the country, located in Delhi, was established in the

year 1947, the year of Indian Independence. Since then, it has played a key role in the

development of the economy by facilitating investments in different sectors, thereby creating a

reasonably encouraging equity cult in the northern belt of India. DSE, from the inception, has

been helping the companies around, in terms of creation of capital and net-worth. It has

contributed in its inimitable way, in spreading financial literacy amongst the larger populace.

2.2.1. f. Over The Counter Stock Exchange of India (OTCEI):-

OTCEI was incorporated in 1990 as a Section 25 company under the Companies Act 1956 and is

recognized as a stock exchange under Section 4 of the Securities Contracts Regulation Act, 1956.

The Exchange was set up to aid enterprising promoters in raising finance for new projects in a

cost effective manner and to provide investors with a transparent & efficient mode of trading.

2.2.2. Settlement Cycle

The settlement cycle refers to the process of settling the trades executing on a stock

exchange. The Settlement cycle is on T+2 rolling settlement basis from 1st April,

2003. In case of a Rolling Settlement trades executed during the day are settled

based on the net obligations for the day. Earlier, the trades for a 5 day week

(Monday to Friday in case of the BSE) were aggregated and then settled. Further,

different exchanges had different settlement cycles. Now all exchanges have an

uniform T+2 rolling settlement cycle.

A T+2 day basis means a settlement where T stands for the trade day. Hence,

trades executed on Tuesday would be settled on Thursday (T + 2 working days).

The payment of funds and securities known as pay-in and pay-out would be done on

the T+2 day. Thus, on this day, the broker for the buyer would pay the money to the

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exchange and the broker for the seller would give delivery of the shares to the

exchange. The exchanges have to ensure that the pay out of funds and securities to

the clients is done by the broker within 24 hours of the payout. The pay-in and payout

days for funds and securities are prescribed as per the Settlement Cycle. A

typical Settlement Cycle of Normal Settlement is given below:

Settlement Cycle of Normal Settlement

Activity DAY

Trading Rolling Settlement Trading T

Clearing Custodial Confirmation T+1 working days

Delivery Generation T+1 working days

Settlement Securities and Funds pay in T+2 working days

Securities and Funds pay Out T+2 working days

Table No. 2.1

2.3. The Securities and Exchange Board of India (S.E.B.I)

With the announcement of the reforms package in 1991, the volume of business in both the

primary and secondary segment of the capital market has been increased enormously till now. A

multicrore securities scam rocked the Indian financial system in 1992(Harshad Mehta scam). The

then existing regulatory framework was found to be fragmented and inadequate and hence, a

need for an autonomous, statutory, and integrated organization to ensure the smooth functioning

of capital market was felt. To fulfill this need, the Securities and Exchange Board of India

(S.E.B.I), which was already in existence since April 1988, was conferred statutory powers to

regulate the capital market. 13

The SEBI got legal teeth through an ordinance issued on 30 January 1992. The ordinance

conferred wide- ranging powers on the SEBI, including the authority to prohibit ‗insider

trading‘and ‗regulate substantial acquisition of shares‘and ‗takeover of business‘. The function

of market development includes containing risk, board basing, maintaining market integrity and

promoting long-term investment. The SEBI Act, 1992 which establishes the SEBI with four-fold

objectives of protection of the interests of investors in securities, development of the securities

market, regulation of the securities market and matters connected therewith and incidental

thereto.

The capital market, i.e., the market for equity and debt securities is regulated by the Securities

and Exchange Board of India (SEBI). The SEBI has full autonomy and authority to regulate and

develop the capital market. The government has framed rules under the securities contracts

(regulation) Act (SCRA), the SEBI Act and the Depositories Act.

The SEBI has framed regulations under the SEBI Act and the Depositories Act for registration

and regulation of all market intermediaries, for prevention of unfair trade practices, and insider

trading. As everyone could know that these i.e. the Government and the SEBI issue notifications,

guidelines and circulars which need to be complied with by market participants. All the rules and

regulations are administered by the SEBI.

2.3.1. Role of SEBI

1. Power to make rules for controlling stock exchange:

SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI

fixed the time of trading 9 AM and 5 PM in stock market.

2. To provide license to dealers and brokers:

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SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any

financial product is of capital nature, then SEBI can also control to that product and its dealers.

One of main example is ULIPs case. SEBI said, “It is just like funds and all banks and financial

and insurance companies who want to issue it, must take permission from SEBI."

3. To Stop fraud in Capital Market:

SEBI has many powers for stopping fraud in capital market. It can ban on the trading of those

brokers who are involved in fraudulent and unfair trade practices relating to stock market. It can

impose the penalties on capital market intermediaries if they involve in insider trading.

4. To Control the Merge, Acquisition and Takeover the companies:

Many big companies in India want to create monopoly in capital market. So, these companies

buy all other companies or deal of merging. SEBI sees whether this merge or acquisition is for

development of business or to harm capital market.

5. To audit the performance of stock market:

SEBI uses his powers to audit  the performance of different Indian stock exchange for bringing

transparency in the working of stock exchanges.

6. To make new rules on carry - forward transactions:

Share trading transactions carry forward can not exceed 25% of broker's total transactions. 90

day limit for carry forward.

7. To create relationship with ICAI:

ICAI is the authority for making new auditors of companies. SEBI creates good relationship with

ICAI for bringing more transparency in the auditing work of company accounts because audited

financial statements are mirror to see the real face of company and after these investors can

decide to invest or not to invest. Moreover, investors of India can easily trust on audited financial

reports. After Satyam Scam, SEBI is investigating with ICAI, whether CAs are doing their duty

by ethical way or not.

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8. Introduction of derivative contracts on Volatility Index:

For reducing the risk of investors, SEBI has now been decided to permit Stock Exchanges to

introduce derivative contracts on Volatility Index, subject to the condition that;

a. The underlying Volatility Index has a track record of at least one year.

b. The Exchange has in place the appropriate risk management framework for such derivative

contracts. Before introduction of such contracts, the Stock Exchanges shall submit the following:

i. Contract specifications

ii. Position and Exercise Limits

iii. Margins

iv. The economic purpose it is intended to serve

v. Likely contribution to market development

vi. The safeguards and the risk protection mechanism adopted by the exchange to ensure market

integrity, protection of investors and smooth and orderly trading.

vii. The infrastructure of the exchange and the surveillance system to effectively monitor trading

in such contracts, and

viii. Details of settlement procedures & systems

ix. Details of back testing of the margin calculation for a period of one year considering a call

and a put option on the underlying with a delta of 0.25 & -0.25 respectively and actual value of

the underlying. 

9. To require report of Portfolio Management Activities:

SEBI has also power to require report of portfolio management to check the capital market

performance. Recently, SEBI sent the letter to all Registered Portfolio Managers of India for

demanding report.

10.  To educate the investors:

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Time to time, SEBI arranges scheduled workshops to educate the investors. On 22 may 2010

SEBI imposed workshop. If you are investor, you can get education through SEBI leaders by

getting update information on this page.

2.3.2. Powers of SEBI

For the purpose of regulation of the securities market, SEBI has vested with all the powers of a

Civil Court as per Code of Civil Procedures, 1908. The powers include:

1. The discovery and production of any books of accounts and other documents.

2. Summoning and enforcing the attendance of persons, and examining them on oath.

3. Inspection of any books, registers and other documents.

4. To inspect any book, register, other documents and records of a listed company or a

public company (not being any of the intermediaries mentioned above) intending to

gets it securities listed on a stock exchange where the Board suspects the company of

indulging in insider trading or fraudulent and unfair trade practices related to the

securities market.

5. Issuing commission for the examination of witnesses or documents.

6. During an investigation or a pending enquiry, In order to protect the interests of

investors or the securities market, the board may

a. Suspend trading of a stock in stock exchange.

b. Restrain persons from accessing the securities market and prohibit any person

associated with the securities market to buy, sell or deal in securities.

c. Suspend any office bearer of any stock exchange or self- regulatory authority.

d. Impend and retain the proceeds or securities of any transaction under investigation.

7. With respect to prospectus, offer documents and advertisements soliciting money, the

board may for protection of investors,

a. Specify by regulation

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- Matters relating to issue of capital, transfer of securities and matters incidental

there to.

- The manner in which such matters are disclosed.

b. Specify by special orders

- Prohibit any company from issuing prospectus, any offer document or issue

advertisements, soliciting money for issue of securities.

- Specify the conditions subject to which these documents can be issued.

8. The board may specify the requirements for listing and transfer of securities. In

addition to the above, the others powers of SEBI are:

Levy penalties for certain offenses.

Levy fees and other charges.

Issue orders/directions in the interest of investors or orderly development of

securities market. However, such orders can be issued only after conduct of an

inquiry.

Hear appeals by companies against the decision of stock exchanges to refuse

listing of their securities.

Suspend or cancel the registration of any intermediary.

2.3.3. SEBI’s Structure

SEBI as the name suggests is a Board and hence, in all its Regulations it is referred to as the

Board. The Board is constituted under s.3 of the SEBI Act, 1992. It is

appointed by the Central Government and consists of 9 members - a Chairman, 2

members from the Finance Ministry, 1 member from the RBI and 5 other members

of which includes the whole-time members. Each Whole Time Member heads a

Functional Unit within which Executive Directors head the Departments.

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2.4. Importance of Small Investors in Indian Capital Market

Small investors are the backbone of Indian Capital Market. Their active participation results in

channeling savings into various infrastructural and productive activities. As per the latest

estimate made by SEBI, there were 19 million share owning individuals in India. This is too

small a figure considering the fact that the population of our country exceeds one billion. In

many developed countries like USA, a large proportions of people ark their investment in capital

market instruments. It is true that Indian capital market underwent radical changes as a result of

liberalization measures. However such reforms have not proved instrumental in attracting the

majority of investors into the capital market. Considering the fact that individual savings

represent a major chunk of domestic savings, more investors must be brought to the mainstream

of the capital market. Hence there is a need to instill confidence in capital market investment in

the minds of investors.

Individual investors in our country suffer from certain inherent drawbacks. There is a general

reluctance on the part of the people to invest either directly or indirectly in capital market. This

may be due to many reasons.

Firstly, successful investment in capital market can be done only by those who have a fairly good

knowledge of capital market. Consequently people shy away from investing in it.

Secondly, investors encounter various impediments created by other market participants.

Consequent investor complaints keep escalating year after year. “The standard of service

information being provided to shareowners in India by companies and stock brokers are not only

below world standards but leave a majority of Indian shareowners dissatisfied”.

Thirdly, the series of securities scams unearthed over the past few years have dampened the sprit

and enthusiasm of investors.

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2.5. Role of SEBI on Investor Protection and Education

SEBI was established in 1988 as a non-statutory body to deal with all matters relating to the

development and regulation of the securities market and protecting the interests of investors.

Subsequently, it was armed with statutory powers through the promulgation of SEBI Act, 1992.

It is also vested with the power of a civil court and can summon all categories of market

intermediaries to investigate on their working, to impose penalty and to initiate prosecution

against them.

For the effective functioning of the capital market, it has issued several guidelines;

notable among them is that on disclosure and investor protection. It contains a substantial

body of requirements for the issuers and intermediaries to ensure higher standards of

integrity and fair dealing. In order to ensure that no malpractice taken place, a

representative of SEBI supervises the allotment process.

SEBI has also issued an advertisement code for the issuers to ensure that the

advertisement remains fair and does not contain statements that mislead the investor or

vitiate their informed judgment. Its regulatory polices and actions are found to have a

great bearing on the efficiency of the capital market and though it on the efficiency of the

whole economy.

Investors can approach SEBI by filing their complaints against companies and brokers. It

has set up certain procedures like the categorization of complaints and their regular

follow-up with defaulting companies, Registrars and Merchant Bankers. With a view to

handle a large volume of complaints, the grievances redress cell has been computerized.

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2.6. Factors influencing Investor’s Stock Investment (Technical, Financial and

Economic)

2.6.1. Financial Statements

2.6.1.a. Profit & Loss Statement: A financial statement that summarizes the revenues, costs

and expenses incurred during a specific period of time - usually a fiscal quarter or year is called

as Profit & Loss Statement. These records provide information that shows the ability of a

company to generate profit by increasing revenue and reducing costs. The P&L statement is also

known as a "statement of profit and loss", an "income statement" or an "income and expense

statement".

2.6.1.b. Audit reports: It is an independent audit of the financial statement is important as it

provides interested parties with an objective attestation as to reasonable conformity of the

financial statement to Generally Accepted Accounting Principles (GAAP). The independent

auditors are giving an opinion as to the conformity of the GAAP, As well as to the estimates,

disclosures, and the presentation of financial statements. A qualified report, an adverse opinion

or a disclaimer of opinion, is rare and therefore suggest that a careful evaluation of the firm is

made. An unqualified opinion with explanatory language should be reviewed carefully.

2.6.1.c. Cash Flow statement: It is one of the quarterly financial reports any publicly traded

company is required to disclose to the SEC and the public. The document provides aggregate

data regarding all cash inflows a company receives from both its ongoing operations and external

investment sources, as well as all cash outflows that pay for business activities and investments

during a given quarter.

2.6.1.d. Balance sheet: Balance Sheet is a financial statement that summarizes a company's

assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet

segments give investors an idea as to what the company owns and owes, as well as the amount

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invested by the shareholders.

2.6.2. Accounting Instruments

2.6.2.a. Earnings per share (EPS): It is the portion of a company's profit allocated to each

outstanding share of common stock. Earnings per share serve as an indicator of a company's

profitability.

Calculated as:

EPS is one of the important measures of economic performance of a corporate entity. The flow

of capital to the companies under the imperfect capital market conditions would be made on the

evaluation of EPS. Investor lacking inside and detailed information would look upon the EPS as

the best base to take their investment decisions. A higher EPS means better capital productivity.

2.6.2.b. Return On Equity (ROE): The amount of net income returned as a percentage of

shareholders equity is said to be as Return On Equity. Return on equity measures a corporation's

profitability by revealing how much profit a company generates with the money shareholders

have invested.  

ROE is expressed as a percentage and calculated as:

Return on Equity = Net Income/Shareholder's Equity

Investors look for ROE exceeding 15% since these returns that add to shareholder value. Low

debt and a significant re-investment of earnings ensure that the company can magnify its

performance over time. Shareholders can’t expect high returns in the long term if the ROE is

low. Companies with low ROE should be handing back profits to shareholders by invoking high

payout ratios since retaining earnings to magnify poor performance will destroy value.

22

2.6.2.c. Net Operating Profit After Tax: It the net profit earned by the company after

deducting all expenses like interest, depreciation and tax. PAT can be fully retained by a

company to be used in the business. However dividend is paid to the shareholders from this

residue.

2.6.2.d. Price Earning ratio (P/E): Price-earning (P/E) ratio is commonly used while taking

investment decisions by many investors. P/E ratio is the ratio between the market price and

earnings per share. The ratio indicates the market price of a share vis-a-vis its earnings.

According to one view, lower the P/E ratio, the better it is for investors, as there are chances of

higher appreciation.

2.6.2.e. Dividends Rate: A distribution of a portion of a company's earnings, decided by the

board of directors, to a class of its shareholders is called as Dividends Rate. The dividend is most

often quoted in terms of the dollar amount each share receives (dividends per share). It can also

be quoted in terms of a percent of the current market price, referred to as dividend yield. Also

referred to as "Dividend Per Share (DPS)."

2.6.3. Economic Variables

2.6.3.a. Gross Domestic Product (GDP): GDP (Gross Domestic Product) is the sum total of

value of all the goods and services produced in an economy during a given year. In short, it is the

X-Ray report of how the economy is performing. GDP is the most crucial economic indicator

which tells us about the health of our economy. It can help companies decide on what strategies

they should adopt as also indicate to the policy makers, the effectiveness of the steps and

decisions they have undertaken.

GDP’S Impact on Stock Market

GDP has a massive impact on almost all the economic factors in a country. Even a small change

in GDP can have far reaching affects on the economy. Let us see how.

23

Impact of Increasing & Higher GDP Growth rate

Fig. No. 2.1

You can see from the above diag. the impact of increasing and higher GDP growth rate. Over the

last 5-6 years the GDP of our country has been growing at a healthy rate of over 8% (average)

annually. With a growing economy, India has seen higher employment opportunity for the

people which have led to an increase in their disposable income. With higher demand in place,

companies have seen a surge in their profits leading to a rise in their stock prices. To cater to the

increasing demand, companies have also increased their investment activities adding new plants,

factories, offices etc. This adds to the future expectation of revenue growth of the companies

which if sustained can lead to further increase in the stock prices.

2.6.3.b. Fiscal Deficit: The fiscal deficit, as the name suggests, is the difference between the

government's total expenditure and its total receipts (excluding borrowing). The elements of the

fiscal deficit are the revenue deficit, which is the difference between the government's current (or

revenue) expenditure and total current receipts (excluding borrowing) and capital expenditure.

The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also

called deficit financing or money creation) and market borrowing (from the money market,

which is mainly from banks).

24

Fiscal Deficit’s Impact on Stock Market

Financing of fiscal deficits has two significant negative impacts like inflation and rise in interest

rates. Because of these impacts, stock market reacts sharply to the news of increasing fiscal

deficits. A high fiscal deficit is generally linked to inflation. This is because that the part of the

fiscal deficit which is financed by borrowing from the RBI leads to an increase in the money

stock and a higher money stock automatically leads to inflation since "more money chases the

same goods". Another fiscal deficit financing effect is rise in interest rates. To reduce the Fiscal

Deficit government borrows from the money market. Large amount of borrowings by

government results in higher interest rates. Higher interest rates crowds out the private

investment. This rise in interest rate in turn impacts sectors like realty. Also, higher borrowings

by Govt. suck out liquidity, leaving less scope for banks to lend to private players.

2.6.3.c. Growth Rate: The amount of increase that a specific variable has gained within

a specific period and context is called as Growth Rate. For investors, this typically represents

the compounded annualized rate of growth of a company's revenues, earnings, dividends and

even macro concepts - such as the economy as a whole. Expected forward-looking or trailing

growth rates are two common kinds of growth rates used for analysis.

2.6.3.d. Inflation: "The rate at which the general level of prices for goods and services is

rising”. There are many varying measures of inflation in use because different prices affect

different people. The most widely known indices are the Consumer Price Index (CPI) which

measures the change in nominal consumer prices and the GDP deflator which measures inflation

in new products and services created.   

Inflation Effect`s on Stock Market

Generally stock markets and inflation are believed to be inversely related. Let’s see how.

For businesses higher inflation means that raw materials become expensive which leads to higher

costs of production. The companies usually pass on a fraction of the price rise to its final

consumers; however invariably they have to absorb a fraction themselves. Thus, it adversely

25

affects the earnings of the companies. Lower earnings by companies can make them less

attractive for investors and hence the stock price may fall.

Impact of High Inflation on Stock Market

Fig. No. 2.2

Also, during a high inflation period investors are looking for better rate of return on their

investments in order to maintain or improve the purchasing power of their income. The investors

will find better returns only when the P/E ratios are relatively lower. Thus in high inflationary

periods the P/E ratio should be ideally lower and similarly at lower inflation rates P/E ratios

would be higher.

Stock prices have risen considerably even while inflation was high and rising. The reason for this

was the Net inflows brought by the FIIs and the FDIs.

Result of Net inflow of FIIs, FDIs in the economy

Fig. No. 2.3

2.6.3.e. Foreign Direct Investment (FDI): The foreign direct investment is profitable both to

the country receiving investment (foreign capital and funds) and the investor. For the investor

company FDI offers an exclusive opportunity to enter into the international or global business,

new markets and marketing channels, elusive access to new technology and expertise, expansion

of company with new or more products or services, and cheaper production facilities. While the

26

host country receives foreign funds for development, transfer of new profitable technology,

wealth of expertise and experience, and increased job opportunities

There are several benefits of foreign direct investment in stock market which can be listed as:

a) Access to global market – A developing country like India is benefitted by inviting FDI as

Indian economy got the access to the global market which will help Indian economy to grow at a

fast rate.

b) Advancement in technology – FDI’s have the power from which they have the ability to

introduce the advanced and world class technology along with its technical knowhow which

helps an economy to progress at a faster rate. Experts from foreign also help in the up gradation

of the existing technology in any country which helps in saving the cost which would have been

incurred if we have opted for the new technology.

c) Competition increases – Foreign Direct Invest in country’s stock market has allowed in

increasing competition amongst the investors in domestic market. Competition increased due to

up gradation of technology and invention of technology.

2.6.3.f. Interest Rates: Interest Rate in simple words means the cost of borrowing funds. It is

the payment we make to the lender for the facility of using his money for our own purpose.

Many times our spending decisions are also guided by the interest burden that we would be

bearing.

Impact of Interest Rate on Stock Market

Interest rate does not have a direct impact on stock prices but its indirect impact cannot be

undermined. As you can see from the diagram there are two sides of the economy

a) The Business Side

b) The Consumer Side.

27

Impact of Interest rate on Stock Prices

Fig. No. 2.4

A continuous rise in interest rate affects the stock price from both the investment and

consumption side. Combining the effects from both the sides, it spells a gloomy situation for the

economy. The overall future revenue growth of the companies would be adversely effected

which would lead to negative sentiments in the market leading to deflated stock prices. Also, at

higher interest rate, people tend to invest more in fixed deposits and bonds as it would be

offering higher returns at very low risk. Hence it moves funds out of stock market affecting the

stock prices adversely.

2.6.4. Sources of Investment Advice

2.6.4.a. Newspaper: The Economic Times, financial express, Business standard, fortune India,

investment today and business line are some of the newspaper and periodicals that carry on

regular basis a wealth of stock market information, market quotation reviews of stock market

28

trend and very incisive and thought provoking articles on current development affecting stock

market future and other matters of interest to the investor.

2.6.4.b. Broker: Broker is an individual or firm that charges a fee or commission for executing

buy and sells orders submitted by an investor. Choosing a broker isn't all that different from

choosing a stock - it requires a lot of careful contemplation, and not all brokers are right for all

investors. There are two types of brokers out there: those who deal directly with their clients (regular

brokers), and those who act as intermediaries between the client and a larger broker. 

2.6.4.c. News channels: Business news channel play an important role in affecting investment

pattern of an individual. It keeps an individual updated regarding recent trend in the market,

stock price quotation etc. It is one of a stupendous medium which inform regarding major events,

unearthed security scams which directly or indirectly affect stock prices and eventually affects

individual’s investment decision.

2.6.4.d. Financial Planner/Advisor: One who provides financial advice or guidance to

customers for compensation is known as Financial Advisor. Financial advisors can provide many

different services, such as investment management, income tax preparation and estate planning.

They must carry the Series 65 license in order to conduct business with the public. A wide

variety of licenses are available for the services that a financial advisor can provide.

2.6.4.e. Family or Friends: Investors also seek advice from their colleagues, family members,

who are active players as far as investing in stock market is concerned.

2.6.4.f. Internet: "Internet website such as moneycontrol.com" keeps an investor updated with

regards to trend and pattern of fluctuation in stock prices.

2.6.5. Aspects of the Company

The following important aspects of the company which greatly influences the Investors in

evaluation of Stock Investment are:

29

Board of Directors which is a group of individuals that are elected as, or elected to act as,

representatives of the stockholders to establish corporate management related policies

and to make decisions on major company issues.

There are two ways you can classify a company by size: revenue and market

capitalization. Most people don’t use revenue because differences in industries distort

how large or small a company is based solely on revenue. Market capitalization or market

cap is the standard measure of company size. You compute market cap by multiplying

the number of outstanding shares by the current stock price.

Goodwill expresses the prudent value that a company can have beyond its assets, by way

of a good reputation and a solid customer base, for example.

Product/Service or Business of the company refers to the goods; the company is dealing

with, activities which company is engaged in.

Business Strategy is the art, science, and craft of formulating, implementing and

evaluating cross-functional decisions that will enable an organization to achieve its long-

term objectives.

Assurance given by management also plays a vital role in stock pricing. If the management of a

certain company is encouraging, investors choose to invest into that company otherwise they will

look for other companies. In case a company appoints a well-known international CEO, stock

prices can rise overnight. Good news and optimistic predictions from the management play a

vital role to raise the stock price. For instant the shares of Apple reached $600 for the first time

on 15th March 2012. Apple Stock has gone up by around 58% since Steve Job’s Death in Oct. 5

2011. The price of a share was around $378.25 when the new management took over the

company.

2.6.6. Past Stock Prices

Historical stock price would allow the investors to realize the stocks conditions of companies in

detail as well as based on those information; they could find the intuitive and real price of the

stock.

30

2.6.7. Government policies and Scams

2.6.7.a. Tax Policy: Another apparent reason for individual investor trading is tax

considerations. Given that Tax laws treat various components of investment returns such as

interests, dividends, and Capital gains differently, rational investors who face tax obligations are

expected to trade so as to take advantage of the tax laws.

There is a “short term capital gain tax” in our country. For a short term (less than one year) you

have to pay tax on any capital gain you make though the stock market trading. How much % tax

you have to pay, depends on which "tax bracket" you fall in.

Just to give you an idea. If I make Rs.100 though a transaction in the stock market, since I fall in

the 33% tax bracket, it has to pay Rs.33 of that to the government!!

The government encourages you to be a long term-investor by having no long term capital gain

tax. If you make a capital gain by investing for a period greater than one year, then you do not

have to pay any tax on the money you make.

2.6.7.b. EXIM Policy: Indian EXIM Policy contains various policy related decisions taken by

the government in the sphere of Foreign Trade, i.e., with respect to imports and exports from the

country and more especially export promotion measures, policies and procedures related thereto.

Trade Policy is prepared and announced by the Central Government (Ministry of Commerce).

India's Export Import Policy also know as Foreign Trade Policy, in general, aims at developing

export potential, improving export performance, encouraging foreign trade and creating

favorable balance of payments position.

Since India is importer of oil products, the illustration will help to understand how EXIM policy

affects the Indian stock market oil price increase raises the production cost in industrial oil

consuming countries. Due to increase in Oil price, it is expected to raise the cost of imported

capital goods, therefore it may adversely affecting the prospects of higher profits for firms traded

in Indian stock markets. On the demand side, oil price increases drive up the general level of

prices, which translates into lower real disposable income, and consequently reduces demand.

31

Besides the direct impact on general price levels, oil prices also have secondary effects on wage

levels, which in combination with high general prices result in increased inflation. Inflationary

pressures are usually controlled by central banks through increase in interest rates. Given the

higher interest rates, bond investments will become more attractive than stock investments,

which will result in lower stock prices.

2.6.7.c. Monetary Policy: The actions of a central bank, currency board or other regulatory

committee that determine the size and rate of growth of the money supply, which in turn affects

interest rates is known as Monetary Policy. Monetary policy is maintained through actions such

as increasing the interest rate, or changing the amount of money banks need to keep in the

vault (bank reserves).

Monetary policy variables such as money and quasi money growth and interest rates proxied by

lending rate as well as intermediate target of monetary policy inflation rate measured at

consumer price index have long run relationship with stock market performance measured by

growth of market capitalization.

2.6.7.d. Political Stability: Two of the major political events which can cause wild price

changes in the stock market trading are when a government decides to change the interest rate

level to control inflation. A government will raise interest rates if it believes inflation is on the

rise. When interest rates go higher investors tend to get out of high risk stocks and move into

other less risky investments such as government stocks and treasuries. Other factors which can

cause stock market prices to fall sharply are political unrest and wars. Initial reaction to such

events is for stock prices to fall sometimes quite appreciably; however, as the unrest continues

and once the initial shock is over, stocks start to recover. In addition oil prices tend to rise

whenever there is unrest or war and oil and stocks have a negative correlation, so rising oil prices

due to political or social unrest usually signals falling stock prices especially those stocks

denominated in dollars and energy stocks.

32

Stable governments and governments that have economic policies that promote growth and

wealth have a positive affect on the stock markets particularly as a country moves out of

recession into growth.

 Political instability too plays a huge role and this in turn affects the market. If you try to

investigate the market then you would find that there are times when political instability has

affected the market to a lot extent and the investors have to suffer for this. You would also find

that examples like 2G spectrum that created political instability and it had a lot of bad impacts on

the market.

2.6.7.e. Scams: Different security scams such as 2G spectrum scams, Ketan Parekh security

scam and scam involving Harshad Mehta had a deep impact on the minds of investor which

dampen confidence with regards to stock market investment. Scams are the fraudulent activity

especially in securities which have adverse fluctuation in stock prices and ultimately affect

individual investor behavior.

2.6.8. Stock Investment Objective

Investor invest in stock with the following major objectives such as

Children Education/Marriage

Growth & Income

Retirement

To fund major Purchase (House, car)

Chapter 3: Finding & Analysis33

3.1. Data Analysis:

3.1.1. AGE

Table (Age)

Age: % of Respondents

Number of Respondents

18-30 39.06% 5031-45 25.78% 33

46-55 15.63% 20

56 & above 19.53% 25

Number of Respondents 128

Number of respondents who skipped this question 0

Table No. 3.1

Chart (Age)

Fig. No. 3.1

Analysis:

34

According to the survey conducted, among the total sample size, 39.06% respondents fall

between the age group of 18-30 and 25.78% of total respondents fall between the age

group of 31-45. Whereas, 15.63% and 19.53% of total respondents fall in the age group

of 46-55 and 56-above respectively. As a result, an individual starts investing at a young

age. Among the total sample, 64.84% of total respondents fall between the age group 18-

45 which substantiates young investor are not diffident as far as investing in risky

securities are concerned.

3.1.2. INCOME GROUP (MONTHLY)

Table (Income Group)

Income Group (Monthly): % of Respondents

Number of Respondents

15000-24999 53.17% 6725000-39999 19.05% 24

40000-74999 15.87% 20

75000 & above 11.90% 15

Number of Respondents 126

Number of respondents who skipped this question 2

Table No. 3.2

Chart (Income Group)

35

Fig. No. 3.2

Analysis:

According to the survey conducted, 53.17% of total respondents fall into Income bracket

Rs.15000 - 24999 p. m. 19.05% of total respondents fall in the income group Rs.25000 -

39999 p. m. Whereas 15.87% and 11.90% fall in Income bracket of Rs.40000 - 74999 p. m.

and Rs.75000 and above respectively. 72.22% of total respondents fall in the Income

bracket of Rs.15000 - 39999 p. m. More than 60% of the respondents begin investing at a

young age and are in early phase of their professional career. Hence, majority of

respondents fall in the income group of Rs.15000 - 39999 p. m.

3.1.3. EDUCATION

36

Table (Education)

Education: % of Respondents

Number of Respondents

SSC 3.91% 5HSSC 6.25% 8Degree 48.44% 62

Post Graduate Degree

38.28% 49

Other (Specify) 3.13% 4

Number of Respondents 128

Number of respondents who skipped this question 0

Table No. 3.3

Chart

Fig. No. 3.3

Analysis:37

According to the survey conducted, among the total sample size, 48.44% respondents are

with Degree and 38.28% of total respondents are with Post Graduate Degree, 3.13%

respondents are with others educational qualification such as doctorate. Whereas, 3.91%

and 6.25% of total respondents are with S.S.C. and H.S.S.C. respectively. As a result, an

individual starts investing when he/she has achieved qualification of a Degree or a post

graduate degree as evidenced by the findings. Among the total sample, 89.85% of total

respondents start investing after attaining a Degree or post graduate degree.

3.1.4. GENDER

Table (Gender)

Gender: % of Respondents

Number of Respondents

MALE 77.34% 99FEMALE 22.66% 29

Number of Respondents 128

Number of respondents who skipped this question 0

Table No. 3.4

Chart (Gender)

38

Fig. No. 3.4

Analysis:

According to the Survey conducted, among the total sample size 77.34% respondents are

Male and 22.66% are Female respondents. As a result, Stock Market Investments is

dominated by Male counterparts.

3.1.5. FINANCIAL STATEMENTS

39

Table (Financial Statements)

Importance of financial statements taken into consideration by an individual investor for making stock investment decision.

VERY IMPORTANT

IMPORTANT MODERATELY IMPORTANT

SLIGHTLY IMPORTANT

NOT IMPORTANT

No. of Respondents

Average Ranking

Profit & Loss Statement

73% (94) 17% (22) 7% (9) 2% (3) 0% (0) 128 1.38

Audit reports 39% (50) 25% (32) 18% (24) 13% (17) 3% (5) 128 2.18Cash Flow & Funds Flow statement

35% (45) 26% (34) 23% (30) 10% (13) 4% (6) 128 2.23

Balance Sheet 67% (87) 14% (18) 7% (9) 8% (11) 2% (3) 128 1.63Number of Respondents 128

Number of respondents who skipped this question 0

Table No. 3.5

Chart (Financial Statements)

Fig. No. 3.5

Analysis:

40

As per the findings, the importance ranked by the total respondents for all financial

statements is below 2.99. As a result, small investors give due importance to all the

financial statements. However, Profit & Loss and Balance Sheet is considered pre-requisite

for making stock investment decision since average ranking on the basis of their

importance stand as 1.38 and 1.63 respectively. Whereas, Audit report and Cash Flow

statement have the average rank of 2.18 and 2.23 respectively.

3.1.6. ACCOUNTING INSTRUMENTS

Table (Accounting Instruments)

Importance of accounting instruments taken into consideration by an individual investor to evaluate company’s performance for Stock Investment.

VERY IMPORTANT

IMPORTANT MODERATELY IMPORTANT

SLIGHTLY IMPORTANT

NOT IMPORTANT

No. of Respondents

Average Ranking

Earnings Per Share (EPS)

66% (85) 21% (28) 5% (7) 2% (3) 3% (5) 128 1.55

Return On Equity (ROE)

57% (74) 25% (32) 9% (12) 1% (2) 6% (8) 128 1.73

Net Operating Profit After Tax

40% (52) 31% (40) 18% (24) 3% (5) 4% (6) 127 2.00

Price Earning ratio (P/E)

49% (63) 29% (38) 10% (14) 5% (7) 4% (6) 128 1.87

Dividends rate 35% (45) 24% (31) 18% (24) 14% (18) 7% (10) 128 2.35Risk/Return

calculation using Scientific method

24% (31) 19% (25) 14% (19) 14% (18) 27% (35) 128 3.01

Number of Respondents 128Number of respondents who skipped this question 0

Table No. 3.6

Chart (Accounting Instruments)

41

Fig. No. 3.6

Analysis:

As per the findings, Respondents take Earning per share, Return on equity and Price earning

ration as an imperative criteria to assess the company’s performance and risk towards investment

based on the findings. Above mentioned accounting instrument is ranked as 1.55, 1.73, and 1.87

respectively by the respondents. On the other hand, Net Operating Profit after tax and Dividend

rate form as secondary criteria for small investors which are ranked as 2 and 2.35 respectively by

the total respondents. Whereas, scientific methods for assessing the Risk/Return is least used by

the respondent whose overall ranking stand at 3.01.

3.1.7. ECONOMIC VARIABLES

42

Table (Economic Variables)

Importance of Economic Variables taken into consideration by an individual investor to evaluate stock investment decision.

VERY IMPORTANT

IMPORTANT MODERATELY IMPORTANT

SLIGHTLY IMPORTANT

NOT IMPORTANT

No. of Respondents

Average Ranking

GDP (Gross Domestic Product)

47% (61) 22% (29) 14% (19) 7% (10) 7% (9) 128 2.04

Fiscal Deficit 22% (29) 28% (37) 23% (30) 10% (13) 14% (19) 128 2.66Growth rate 40% (52) 33% (43) 17% (23) 3% (5) 3% (5) 128 1.97

Inflation 46% (59) 21% (28) 19% (25) 10% (13) 2% (3) 128 2.01FDI (Foreign

Direct Investment)

40% (51) 28% (36) 14% (18) 10% (13) 7% (9) 127 2.16

Interest rates 33% (43) 30% (39) 17% (22) 5% (7) 13% (17) 128 2.34Number of Respondents 128

Number of respondents who skipped this question 0

Table No. 3.7

Chart

Fig. No. 3.7

Analysis:

43

Growth rate, Inflation and Gross Domestic Product are the most important economic

variables which stand as a basis for stock market investment for small investors since

overall ranking of such variable stand at 1.97, 2.01 and 2.04 respectively. Although the

overall ranking of FDI, Interest rates and Fiscal deficit stand at 2.16, 2.34 and 2.66

respectively, they are not regarded as important as above mentioned variables by the

respondents.

3.1.8. SOURCE OF INVESTMENT ADVICE

Table (Source of Investment Advice)

Importance of source of Investment advice taken into consideration by an individual investor to evaluate stock investment decision.

VERY IMPORTANT

IMPORTANT MODERATELY IMPORTANT

SLIGHTLY IMPORTANT

NOT IMPORTANT

No. of Respondents

Average Ranking

Newspaper 21% (28) 28% (37) 17% (23) 10% (14) 20% (26) 128 2.79Broker 37% (48) 26% (34) 10% (13) 7% (9) 18% (24) 128 2.43

News channels 39% (50) 32% (42) 17% (23) 6% (8) 3% (5) 128 2.03Financial

Planner/Advisor37% (47) 24% (31) 17% (22) 8% (11) 12% (16) 127 2.35

Family or Friends 13% (17) 8% (11) 19% (25) 28% (31) 30% (39) 128 3.54Internet

(eg:moneycontrol.com)39% (51) 24% (31) 14% (18) 6% (8) 15% (20) 128 2.34

Number of Respondents 128Number of respondents who skipped this question 0

Table No. 3.8

Chart (Source of Investment Advice)

44

Fig. No. 3.8

Analysis:

The respondents seek or rely for Investment advice abundantly on Business News

channels and Internet website such as moneycontrol.com whose overall ranking stand at

2.03 and 2.34 respectively. Investment advice from financial advisor, Broker and

Newspaper is considered secondary as evidenced by overall ranking of these sources

which stand at 2.35, 2.45 and 2.71 respectively. According to the findings, Family and

Friends are least consulted by the respondents whose overall ranking stand at 3.54.

3.1.9. ASPECTS OF THE COMPANY

45

Table (Aspects of the Company)

Important aspect of the company taken into consideration by an individual investor to evaluate stock investment decision.

VERY IMPORTANT

IMPORTANT MODERATELY IMPORTANT

SLIGHTLY IMPORTANT

NOT IMPORTANT

No. of Respondents

Average Ranking

Management Team/Board of

Directors

53% (68) 17% (22) 17% (23) 3% (5) 7% (10) 128 1.96

Size of the company

28% (37) 31% (40) 26% (34) 7% (10) 5% (7) 128 2.30

Reputation & Goodwill of the

company

64% (82) 25% (33) 6% (8) 2% (3) 1% (2) 128 1.52

Product/Service or Business of the

company

51% (66) 30% (39) 10% (14) 5% (7) 1% (2) 128 1.75

Business strategy 48% (61) 25% (32) 13% (17) 6% (8) 7% (9) 127 1.99Number of Respondents 128

Number of respondents who skipped this question 0

Table No. 3.9

Chart (Aspects of the Company)

Fig. No. 3.9

Analysis:

46

Overall rankings of Reputation & Goodwill of the company and Product and Service in

which company deals stand at 1.52 and 1.75 respectively. The figures indicate that small

investors copiously analyze the two aspects of the company before investing. Other

important aspects such as Management Team/ Board of Directors, Business strategy and

Size of the company are of secondary importance for small investors whose overall

ranking stand at 1.96, 1.99 and 2.30 respectively.

3.1.10. PAST STOCK PRICES

Table (Past Stock Prices)

Importance of past stock prices taken into consideration by an individual investor to evaluate stock investment decision.

VERY IMPORTANT

IMPORTANT MODERATELY IMPORTANT

SLIGHTLY IMPORTANT

NOT IMPORTANT

No. of Respondents

Average Ranking

Last year stock prices

35% (46) 25% (32) 10% (14) 5% (7) 22% (29) 128 2.54

Last 2 years stock prices

14% (18) 32% (42) 25% (33) 7% (9) 20% (26) 128 2.87

Last 3 years stock prices

16% (21) 25% (32) 16% (24) 15% (20) 24% (31) 128 3.06

More than 5 years stock

prices

34% (44) 14% (19) 13% (17) 10% (13) 27% (35) 128 2.81

Number of Respondents 128Number of respondents who skipped this question 0

Table No. 3.10

Chart (Past Stock Prices)

47

Fig. No. 3.10

Analysis:

Historical data of previous preceding year is given due importance whose overall ranking

stand at 2.54. Respondents regard historical stock prices of past 5 years as also important

whose overall ranking stands at 2.81. Whereas historical data of past 2 years and 3 years

is of least importance since its average ranking stand at 2.87 and 3.06 respectively.

3.1.11. TOTAL INVESTMENT IN STOCKS

48

Table (Total Investment in Stocks)

Investor's % of total Investment in stocks. % of Respondents

Number of Respondents

1% - 10% 31.45% 3911% - 20% 28.23% 3521% - 30% 25% 31

31% - 50% 9.68% 12

51% & above 5.65% 7

Number of Respondents 124

Number of respondents who skipped this question 4

Table No. 3.11

Chart (Total Investment in Stocks)

Fig. No. 3.11

Analysis:

49

Majority of respondents are young investors (18-45) and are in initial stage of their career

which reflects the figure of total investment in stock. As per the findings, 84.68% of total

respondents have total investment in stock which ranges from 1% to 30%. Respondents

having total investment of constituting 31% to 50% and 51% and above are experienced

investors who fall in the age group of 46-55 and 56 and above and are well versed with

critical aspects of investing.

3.1.12. OTHER IMPORTANT VARIABLES

Table (Other Important Variables)

Importance of the following variables taken into consideration by an individual investor to evaluate stock investment decision.

VERY IMPORTANT

IMPORTANT MODERATELY IMPORTANT

SLIGHTLY IMPORTANT

NOT IMPORTANT

No. of Respondents

Average Ranking

Tax policy 33% (43) 28% (36) 19% (25) 10% (13) 8% (11) 128 2.32EXIM policy 13% (17) 31% (40) 31% (40) 7% (10) 16% (21) 128 2.83

Monetary policy

42% (55) 32% (42) 14% (18) 2% (3) 7% (10) 128 1.99

Political stability

42% (54) 25% (33) 14% (18) 8% (11) 9% (12) 128 2.17

Scams 21% (27) 14% (19) 19% (25) 16% (21) 28% (36) 128 3.16Number of Respondents 128

Number of respondents who skipped this question 0

Table No. 3.12

Chart (Other Important Variables)

50

Fig. No. 3.12

Analysis:

Monetary policy and Political stability are most important variables which are looked

upon by the small investors before making an investment decision as evidenced by the

overall ranking of 1.99 and 2.17 respectively. Other variables such as Tax policy and

EXIM policy is also considered important reflected from their average ranking which

stand at 2.32 and 2.83 respectively. Surprisingly, Scams are least looked upon by

investors whose average rating stand at 3.16.

3.1.13. STOCK INVESTMENT OBJECTIVE

51

Table (Stock Investment Objective)

Individual investor’s important Stock Investment objective.VERY IMPORTANT

IMPORTANT MODERATELY IMPORTANT

SLIGHTLY IMPORTANT

NOT IMPORTANT

No. of Respondents

Average Ranking

Children Education/Marriage

15% (20) 29% (37) 23% (30) 11% (14) 20% (26) 127 2.91

Growth & Income

71% (92) 18% (24) 3% (5) 3% (4) 2% (3) 128 1.45

Retirement 25% (33) 23% (30) 25% (32) 10% (14) 14% (19) 128 2.66To fund major

Purchase (House, Car)

8% (11) 21% (27) 25% (32) 14% (19) 29% (38) 127 3.36

Number of Respondents 128Number of respondents who skipped this question 0

Table No. 3.13

Chart (Stock Investment Objective)

Fig. No. 3.13

Analysis:

52

As per the findings, Growth & Income is the primary objective of small investors since

the overall ranking stand at 1.45. Other objectives such as Retirement, Children

Education/ Marriage are a secondary stock investment objective whose ranking stand at

2.91 and 2.66 respectively. According to findings, small investors do not invest for

funding major Purchase as a most important objective in mind, its overall ranking stand

at 3.36.

3.1.14. SATISFACTION LEVEL OF INVESTORS WITH RESPECT TO INVESTOR GRIEVANCE REDRESSAL MECHANISM

Table (Satisfaction Level of Investors w. r. t. Investor Grievance Redressal Mechanism)

Satisfaction level of investor with respect to investor grievance redressal mechanism.

% of Respondents

Number of Respondents

Yes 82.68% 105No 17.32% 22

Number of Respondents 127

Number of respondents who skipped this question 1

Table No. 3.14

Chart (Satisfaction Level of Investors w. r. t. Investor Grievance Redressal Mechanism)

53

Fig. No. 3.14

Analysis:

According to the survey conducted, among the total sample size, 82.68% respondents are

satisfied with the investor grievance redressal mechanism and 17.32% respondents

express their dissatisfaction stating that this mechanism has to take prompt action and all

the department should coordinate. Among the dissatisfied investors few individuals were

not aware of the investor grievance redressal mechanism in place.

3.1.15. SATISFACTION LEVEL OF INVESTORS WITH RESPECT TO ROLE PLAYED BY S.E.B.I IN PROTECTING THE INVESTOR

54

Table (Satisfaction Level of Investors w. r. t. Role played by SEBI in protecting the Investor)

Satisfaction level of investors with respect to role played by SEBI in protecting the investor.

% of Respondents

Number of Respondents

Yes 87.30% 110No 12.70% 16

Number of Respondents 126

Number of respondents who skipped this question 2

Table No. 3.15

Chart (Satisfaction Level of Investors w. r. t. Role played by SEBI in protecting the Investor)

Fig. No. 3.15

Analysis:

55

According to the survey conducted, out of the total sample size, 87.30% respondents are

satisfied with the role played by SEBI in protecting the investor and 12.70% respondents

are dissatisfied with the role played by SEBI in protecting the investor. However

regulatory watch dogs to tighten more nerves and safe guard against manipulation

disclosures like fudged accounts etc.

3.2. Conclusion

Financial Statements:

The study reveals that investors extensively use "profit and loss statement" and "balance sheet"

to evaluate stock investment decision. So, we may conclude that most of them ensure that these 2

statements will let them know a good image of financial background of the company which they

are investing in. Hence, it plays crucial role in influencing investor’s behavior.

Accounting Instruments:

The study reveals that, accounting instrument especially "earning per share" and "return on

equity" and "price earning ratio" are heavily used and relied upon by the investor to assess

company company's performance and relative risk associated with the investment. However, risk

return calculation using scientific methods (NPV, IRR etc) are least used by the investors. So we

concluded that, investor make prudent investment decision on the basis of company's earning

capacity and how profitably the company employs their money rather than riding on the fame or

following the footsteps of other investors.

Economic Variables:

56

The study reveals that, investors do not ignore different economic variables which have

tremendous effect on stock market and consequently impact investor’s decision. The most

prominent economic variables taken into consideration by the respondents covered in the survey

are "Growth rate", "Inflation" and "GDP". So we conclude that, any changes in such variables

will directly impact the investment behavior of an individual.

Source of Investment Advice:

The study reveals that, "business news channels" and "broker" provide vital financial advice

which consequently plays an instrumental role in affecting individual investment decision.

Whereas, "internet website such as moneycontrol.com" keeps a investor updated with regards to

trend and pattern of fluctuation in stock prices. Many investors expressed that news channels

play a prominent role in influencing their investment decision by telecasting shows exclusively

meant for small investors and advices from experts are pretty useful.

Aspects of the Company:

The study reveals that, investors give utmost importance to reputation and goodwill of company

and business of the company before investing. Hence, the two aspects immensely influence

individual investment decision. Investors also pay attention to competence of the management

team of the company in which they are investing.

Past Stock Prices:

The study reveals that, investors use historical stock prices of previous year and last 2 years in

order to determine future stock prices of the companies. So we conclude that, historical stock

prices especially of last year and last 2 years play an important role in investment decision of an

individual.

Total Investment in Stocks:57

The study reveals that, majority of investors have total investment ranging from 1% to 30% in

stock, and most of them are young investors in terms of age and experience. Similarly investors

having investment ranging from 31%-50% and above are pretty much veteran in terms of age

and experience. So we conclude that, as the age of individual progresses, the total investment in

stock gradually increases since he finds stability in his earning and also becomes a experienced

player in stock market arena.

Government policies and Scams:

The study reveals that, "monetary policy", "political stability" and "tax policy" of the country is

abundantly analyzed and looked upon by the investors in order to evaluate their stock investment

decision, Whereas, scams (e.g. 2g spectrum scams and security scams) have minimal effect on

their investment decision. So we conclude, the above 3 mentioned variables have a significant

effect on investment behavior of an individual.

Investment Objective:

The study reveals that, the ultimate objectives behind stock investment for small investors is

earning additional income and multiply their wealth. Retirement is also one of the important

objectives as evidenced by the study.

3.3. Suggestions

Beware of free advice:

Too many people in the capital market offer free advice; these come through TV, print

media, websites, emails and SMS.

Don’t act blindly on such advice; remember free advice carries no accountability.

58

Don’t get taken in by advertisements

Advertisements are to make you feel good.

Don't get carried away by attractive headlines, appealing visuals/messages.

Don’t get carried away by upward arrows, big percentages and deceptive numbers.

Deal only with registered intermediaries

There are many unregistered operators in the market who will lure you with promises of

high returns, and then vanish with your money or they will mis-sell or they will undertake

unauthorized transactions.

Deal with registered intermediaries, it also allows recourse to regulatory action.

Don’t take decisions based just on summary accounts

Read through the schedules as well as qualifications and notes to the accounts.

Check out for “Other Income” and unusual expenses

Look out especially for entries relating to related party transactions, sundry debtors,

subsidiaries’ accounts, cash/bank balances.

Follow life-cycle investing

You can afford to take greater risks when you are young.

As you cross 50, you should consider gradually getting out of risk instruments.

59

By 60, you may exit risk instruments. (To not lose your capital when you have stopped

earning new money).

Credential of the company.

Before investing, please check about the credentials of the company, its management,

fundamentals and recent announcements made by them and other disclosures made under

various regulations. The sources of information are the websites of the exchanges and

companies, databases of data vendors, business newspapers and magazines etc.

Assess the risk-return profile of the investment as well as the liquidity and safety

aspects before making your investment Decision.

Transact only through SEBI-recognized stock exchanges.

Deal only through SEBI-registered brokers/sub-brokers.

Read carefully and complete all required formalities for opening an account with

the broker (Client registration, Client-Trade Member agreement etc).

Give clear and unambiguous instructions to your broker/sub-broker/DP. Pay the

brokerage/ payments/ margins etc. to an authorized person only.

60

The cash flow statement is one of the least manipulated financial statements. The

other two financial statements viz. the Profit & Loss and Balance Sheet, are often

subjected to many manipulations.

Many companies find that the best way to grow is through mergers and

acquistions. And investors usually take comfort in the idea that a merger will

deliver enhanced market power. But, think again. Sometimes, the real picture

might actually be different. In fact, at times M&As might prove to be dangerous

to shareholder value as the real purpose behind them could be to portray a fake

picture of the company’s financial health.

While many of us know how to go about analyzing a company, we tend to ignore

the broader picture i.e. industry/sector analysis. However, analyzing an industry is

important to understand a company’s business and performance as also gauge the

opportunities and threats for future growth.

INVESTOR GRIEVANCE REDRESSAL MECHANISM: (suggestions by

respondents)

1. Constitution of the investor grievance redressal board should have wider

representation and not restricted to brokerage fraternity as they constitute

majority.

2. A forum is required wherein investor’s grievance in met, and fast, easy, relief is

granted without delay. Immediate action taking committee be formed.

Role played by SEBI IN PROTECTING THE INVESTOR: (suggestions by

respondents )61

1. SEBI should have more powers to punish guilty

2. SEBI should increase funding to investor protection fund

3. Securities Appellate Tribunal (“SAT”) to be dismissed, appeal against SEBI

decisions to be directed to higher court.

4. SEBI should periodically review and keep a check on daily circuit broker stocks

and warn investor about investing in such stock. SEBI can release a monthly

magazine related to circuit broker stock for the month, stocks in which insider

trading has been taking place for a while heavily.

5. SEBI to take stringent action against any unfair trade practices, which actions are

seen and felt and have deterrent effect on the wrong doers.

62

BIBLIOGRAPHY

BOOKS

1. THE ICFAI UNIVERSITY PRESS”, Introduction to Security Analysis  

2. ICAI PUBLICATION- COMMITEE ON FINANCIAL MARKETS  AND

INVESTORS’ PROTECTION, HANDBOOK ON CAPITAL MARKET REGULATION

3. Bharati V Pathak V.THE INDIAN FINANCIAL SYSTEM, DORLING KINDERSLEY

PVT. LTD

4. PRINCIPLES OF STRATEGIC FINANCIAL MANAGEMENT, FedUni, october 2004

5. Kishore M. Ravi, FINANCIAL MANAGEMENT, TAXMANN ALLIED SERVICES

PVT. LTD

6. M.Y KHAN, FINANCIAL MANAGEMENT, TATA McGREW HILL

7. JAIN P.K., FINANCIAL MANAGEMENT, PUBLISHING COMP LTD.

8. PANDEY I. M., FINANCIAL MANAGEMENT, VIKAS PUBLISHING HOUSE PVT.

LTD.

WEBSITES

www.bseindia.com

www.bgse.co.in

www.dseindia.org.in

www.otcei.net

www.sebi.gov.in

www.investopedia.com63

stockshastra.moneyworks4me.com

zenithresearch.org.in

64

QUESTIONNAIRE

Ranking:1- Very Important 4- Slightly Important2- Important 5- Not Important3- Moderately Important

1. Personal Information:

Name: Age: 18-30 31-45 46-55 56 & above Gender: M F Income Group (Monthly): 15000-24999 25000-39999 40000-74999 75000 & above Education: SSC HSSC Degree Post Graduate Degree Other _______________

2. Rank the importance of financial statements you look into for making your stock investment decision.

65

A. Profit & Loss statement 1 2 3 4 5B. Audit reports 1 2 3 4 5C. Cash Flow & Funds Flow statement 1 2 3 4 5D. Balance sheet 1 2 3 4 5

3. Rank the following accounting instruments which enable you to evaluate company’s performance for Stock Investment.

A. Earnings Per Share (EPS) 1 2 3 4 5B. Return On Equity (ROE) 1 2 3 4 5C. Net Operating Profit After Tax 1 2 3 4 5D. Price Earning ratio (P/E) 1 2 3 4 5

E. Dividends rate 1 2 3 4 5 F. Risk/ Return calculation using Scientific method 1 2 3 4 5

4. Rank the following important Economic Variables which help you in evaluation of Stock Investment.

A. GDP (Gross Domestic Product) 1 2 3 4 5B. Fiscal Deficit 1 2 3 4 5C. Growth rate 1 2 3 4 5D. Inflation 1 2 3 4 5E. FDI (Foreign Direct Investment) 1 2 3 4 5

F. Interest rates 1 2 3 4 5

5. Rank the following source of Investment advice.A. Newspaper 1 2 3 4 5B. Broker 1 2 3 4 5C. News channels 1 2 3 4 5D. Financial Planner/Advisor 1 2 3 4 5E. Family or Friends 1 2 3 4 5F. Internet (eg:moneycontrol.com) 1 2 3 4 5

6. Rank the important aspect of the company in evaluation of the Stock Investment.

66

A. Management Team/ Boards of Directors 1 2 3 4 5B. Size of the company 1 2 3 4 5C. Reputation & Goodwill of the company 1 2 3 4 5D. Product/ Service or Business of the company 1 2 3 4 5E. Business strategy 1 2 3 4 5

7. Rank the following past stock prices in order to evaluate your investment decision.

A. Last year stock prices 1 2 3 4 5B. Last 2 years stock prices 1 2 3 4 5C. Last 3 years stock prices 1 2 3 4 5D. More than 5 years stock prices 1 2 3 4 5

8. What % of your total Investment is in stocks? 1 % - 10 % 11 % - 20 % 21 % - 30 % 31 % - 50 % 51 % & above

9. Rank the following based on their importance in evaluation of your Stock Investment.

A. Tax policy 1 2 3 4 5B. EXIM policy 1 2 3 4 5C. Monetary policy 1 2 3 4 5D. Political stability 1 2 3 4 5E. Scams 1 2 3 4 5

10.Rank the following Stock Investment objective.A. Children Education/ Marriage 1 2 3 4 5

67

B. Growth & Income 1 2 3 4 5C. Retirement 1 2 3 4 5D. To fund major Purchase (House, Car) 1 2 3 4 5

11. Are you satisfied with the investor grievance redressal mechanism? Yes No

Suggestion: ______________________________________________ ______________________________________________

12. Are you satisfied with the role played by SEBI in protecting the Investor? Yes No

Suggestion: _____________________________________________

_____________________________________________

ANNEXURE

68

The names of the stock exchanges with their geographical location, and the date of receiving government recognition are given in the following table.

SR. NO.

Name of the Exchange & Location Date of Initial Recognition

1 The Bombay Stock Exchange, Mumbai 31-03-19572 The Ahmedabad Stock Exchange Association Ltd.,

Ahmedabad16-09-1957

3 The Calcutta Stock Exchange Ltd, Kolkata 10-10-19574 Madras stock Exchange Ltd., Chennai 15-10-19575 The Delhi Stock Exchange Association Ltd., New

Delhi09-12-1957

6 The Hyderabad Stock Exchange, Hyderabad 20-09-19587 Madhya Pradesh Stock Exchange, Indore 24-12-19588 Bangalore Stock Exchange Ltd., Bangalore 16-02-19639 Cochin Stock Exchange Ltd.,Ernakulam, Cochin 10-05-197910 The Uttar Pradesh Stock Exchange Association Ltd.,

Kanpur03-06-1982

11 Pune Stock Exchange Ltd., Pune 02-09-198212 Ludhiana Stock Exchange Association Ltd., Ludhiana 29-04-198313 The Gauhati Stock Exchange Association Ltd.,

Gauhati01-05-1984

14 Kanara Stock Exchange Association Ltd., Mangalore 09-09-198515 The Magadh Stock Exchange Ltd., Patna 11-12-198016 Jaipur Stock Exchange Association Ltd., Jaipur 09-01-198917 Bhubaneswar Stock Exchange Association Ltd.,

Bhubaneswar05-06-1989

18 Saurashtra kutch Stock Exchange Association Ltd., Rajkot

10-07-1989

19 The Vadodara Stock Exchange Association Ltd.. Baroda

05-01-1990

20 The Coimbatore Stock Exchange Association Ltd., Coimbatore

18-09-1991

21 The Meerut Stock Exchange Association Ltd., Meerut 20-09-199122 National Stock Exchange, Mumbai 26-04-199323 Over The Counter Exchange of India (OTCEI),

Mumbai23-08-1994

Top 15 Broking Companies in India

69

Company Name

No. of Employees

Terminals Sub Brokers

India Infoline Ltd. 13711 658 1666Angel Broking Ltd.

6397 14436 7031

Indiabulls Securities Ltd.

4884 2292 3

Religare Securities Ltd.

4598 10371 1301

SMC Global Securities Ltd.

3242 7680 1950

Karvy Stock Broking Ltd.

3051 2992 490

Anand Rathi Share Brokers Ltd.

2806 5332 668

Kotak Securities Ltd.

2547 2198 2422

Unicon Securities Ltd.

2498 2616 72

Bonanza Portfolio Ltd.

1827 5293 1278

Sharekhan Ltd. 1582 2024 431Motilal Oswal Securities Ltd.

1232 8300 1517

Nirmal Bang Securities Ltd.

1163 2509 750

HDFC Securities Ltd.

1160 1518 --

Reliance Securities Ltd.

1107 2822 2943

Source: D & B websiteThe Securities and Exchange Board of India (SEBI), in 1991 made a compilation of common investor grievances, relevant legal provisions and various remedies available

70

to the investors. The grievances were grouped under the following heads. Grievances

1 Refund Order/ Allotment Advise1

2 Non-Receipt of Dividend

3 Non-Receipt of share certificates after transfer

4 Debentures

5 Non-Receipt of letter of offer for rights

6 Collective Investment schemes

7 Mutual funs/ venture capital funds/ Foreign Ventures/ Capital Investors/ Foreign Institutional Investors/ Portfolio manager, Custodians

8 Brokers/Securities lending Intermediaries/ Merchant Bankers/ Registrars and Transfer agents/ Debenture Trustees/ Bankers to Issue/ Credit Rating Agencies Trustees/ Underwriters/ Depository Participants

9 Securities Exchanges/ Clearing and settlement organizations/ Depositories

10 Derivative Trading

11 Corporate Governance/ Corporate Restructuring/ substantial Acquisition and Takeovers/ Buyback/ delisting/ Compliance with Listing conditions.

Apart from the above grievances, investors face certain other problems as well. This is mainly

due to lack of market liquidity in many securities, excessive speculation in the market, price

rigging on many scrips, insider trading by those possessing price sensitive information, excessive

premium charged by some company promoters under the guise of free pricing norms etc.

71