A

PROJECT REPORT
ON
THE INVESTORS PREFERENCES IN THE SHARE MARKET
IN
INDIA INFO LINE
HYDERABAD

ABSTRACT

The value of shares certificate representing one unit of ownership line a

corporation, mutual fund, or ltd partnership.
The shares place a vital role in stock exchange where each share contains
a special value of different companies by the process of purchase and sale
through the brokers.
This share transaction are been done to know the value of each share in
the each company whether the share value is less or more.
The role in the effective management of the funds of the organization and
thus lead to the achievement of the goal of financial management of more
return on investment than the cost of acquiring the funds for investment.
People purchase and sell shares for many reasons.
Some purchase shares as investment of surplus money which can be
easily converted into cash whenever the need arises.
Some purchase shares as a source of income in the form of dividends.
There is one more category of persons which purchase and sell shares for
speculation purpose all categories of person are interested in knowing the
value share purchased or sold by them the term value or Yield value the
face value or Market value intrinsic value or Yield value the fare value of
a share is the value assigned to it by promoters of the company and this
value of a share is the value share certificate the market value is the
value is based on the worth of the company yield value of share of a
company is ascertained on the basis of its prospective yield or income.

CONTENTS
S.NO

CONTENTS

PAGENO

CHAPTER-I
1

INTRODUTION
OBJECTIVES OF THE STUDY
NEEDS OF THE STUDY
SCOPE OF THE STUDY
RESEARCH & METHODS
MEANS OF DATA -COLLECTION

CHAPTER-II
INDUSTRY PROFILE
COMPANY PROFILE

1-7

8-55

CHAPTER-III
3

56-58
REVIEW OF LITERATURE
CHAPTER-IV

59-71
DATA ANALYSIS & INTERPRETATION
CHAPTER-V

5
FINDING
SUGGESTIONS
CONCLUSION

CHAPTER-VI
ANNEXURE
BIBILOGRAPHY
REFRENCES

72-74

75-78

CHAPTER-I
INTRODUCTION
OBJECTIVES
NEED OF STUDY
RESEARCH & METHODS
MEANS OF DATA
-COLLECTION
ANALYZING TECHNIQUE

INTRODUCTION
Investment may be defined as an activity that commits funds in any financial form in
the present with an expectation of receiving additional return in the future. The expectations
bring with it a probability that the quantum of return may vary from a minimum to a
maximum. This possibility of variation in the actual return is known as investment risk. Thus
every investment involves a return and risk.

Investment is an activity that is undertaken by those who have savings. Savings can
be defined as the excess of income over expenditure. An investor earns/expects to earn
additional monetary value from the mode of investment that could be in the form of financial
assets.

The three important characteristics of any financial asset are:

Return-the potential return possible from an asset.

Risk-the variability in returns of the asset form the chances of its value going
down/up.

Liquidity-the ease with which an asset can be converted into cash.

Investors tend to look at these three characteristics while deciding on their individual
preference pattern of investments. Each financial asset will have a certain level of each of
these characteristics.

INVESTORS PROFILE

An investor normally prioritizes his investment needs before undertaking an

investment. So different goals will be allocated to different proportions of the total
disposable amount. Investments for specific goals normally find their way into the
debt market as risk reduction is of prime importance, this is the area for the riskaverse investors and here, Investors preferences are generally the best option. One
can avail of the benefits of better returns with added benefits of anytime liquidity by
investing in open-ended debt funds at lower risk, this risk of default by any
company that one has chosen to invest in, can be minimized by investing in share
market as the fund managers analyze the companies financials more minutely than
an individual can do as they have the expertise to do so.
Moving up the risk spectrum, there are people who would like to take some risk and
invest in equity funds/capital market. However, since their appetite for risk is also
limited, they would rather have some exposure to debt as well. For these investors,
balanced funds provide an easy route of investment, armed with expertise of
investment techniques, they can invest in equity as well as good quality debt thereby
reducing risks and providing the investor with better returns than he could otherwise
manage. Since they can reshuffle their portfolio as per market conditions, they are
likely to generate moderate returns even in pessimistic market conditions.
Next comes the risk takers, risk takers by their nature, would not be averse to
investing in high-risk avenues. Share markets find their fancy more often than not,
because they have historically generated better returns than any other avenue,
provided the money was judiciously invested. Though the risk associated is generally
on the higher side of the spectrum, the return-potential compensates for the risk
attached.

OBJECTIVES
To find if there is any relationship between income levels and the investment
scheme preferred in capital markets.
To rate the areas of their knowledge based on a scale of 1-10- on the capital
market instruments.
To analyze if there is a pattern between the occupation and the types of
investments of the investors preferences
To find out the preferences in the way of trading in stocks (Online/offline
trading)
To know the time period for their Investments in the capital markets.
To study the origin, growth, and the regulation of capital markets in India.

NEED OF THE STUDY

It is to find out that people want to Invests in which type of Instruments

To analyses Indian capital markets.

SCOPE OF THE STUDY

The study mainly focuses on Indian Share market its history and latest
development in the country in Share market.
The study also keeps a birds-eye view on global Share market and its
development.
The study vastly covered the aspects of Share market trading, clearing and
settlement mechanisms in India commodity exchanges.
The scope of the study is limited to Investors preferences share market.

RESEARCH & METHODS

Research population: people of Hyderabad and Secunderabad.

Sample Size:200
Techniques used to select the sample: Simple Random Sampling.

Questionnaire is designed in such a manner that it has minimal ambiguity, and the
respondents can easily analyze it.

MEANS OF DATA COLLECTION

Primary data collections through Questionnaire, Telephonic Interview,
meetings.
Secondary data collection through External studies such as articles,
newspapers, published journals or books.

Analyzing Technique:
Chi-square technique and simple percentages.

Assumptions:
The assumptions that will be taken into consideration during this study are :

The sample of 200 being chosen is a reflection of all the people in Hyderabad
and Secunderabad.
The factors effecting the decision of the population are limited to those
mentioned in the Questionnaire.

SAMPLING TECHNIQUE:

As already mentioned above, we have chosen people based on the random sampling
technique. Hence, the sampling frame associated here was the population of
Hyderabad and Secunderabad. And over here, the sampling technique used, will
enable us to use Chi-square technique, which helps us in obtaining valuable
information from the data acquired through the research.

CHAPTER II
INDUSTRY PROFILE
COMPANY PROFILE

BRIEF HISTORY OF INDIAN CAPITAL MARKETS

The origination of the Indian securities market may be traced back to 1875, when 22
enterprising brokers under a Banyan tree established the Bombay Stock Exchange
(BSE). Over the last 125 years, the Indian securities market has evolved continuously
to become one of the most dynamic, modern and efficient securities Markets in Asia.
Today, Indian markets conform to international standards both in Terms of structure
and in terms of operating efficiency.
There are 22 stock exchanges in India, the first being the Bombay Stock Exchange
(BSE), which began formal trading in 1875, making it one of the oldest in Asia. Over
the last few years, there has been a rapid change in the Indian securities market,
especially in the secondary market. Advanced technology and online-based
transactions have modernized the stock exchanges. In terms of the number of
companies listed and total market capitalization, the Indian equity market is
considered large relative to the countrys stage of economic development. The number
of listed companies increased from 5,968 in March 1990 to about 10,000 by May
1998 and market capitalization has grown almost 11 times during the same period.
The capital market consists of primary and secondary markets. The primary market in
which public issue of securities is made through a prospectus is a retail market and
there is no physical location. Offer for subscription to securities is made to investing
community.

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 industrial units (PSUs), statutory and other authorities
such as state electricity boards and port trusts also issue bonds/debt instruments.

Since 1991/92, the primary market has grown fast as a result of the removal of
investment restrictions in the overall economy and a repeal of the restrictions imposed
by the Capital Issues Control Act. In 1991/92, Rs.62.15 billion was raised in the
primary market. This figure rose to Rs. 276.21 billion in 1994/95. since 1995/996,
however, smaller amounts have been raised due to the overall downtrend in the
market and tighter entry barriers introduced by SEBI for investor protection.
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 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 continues
market and they can liquidate their investments.
India has seen a tremendous change in the secondary market for equity. Its equity
market will most likely be comparable with the worlds most advanced secondary
markets within a year or two. The key ingredients that underlie market quality in
Indias equity markets are:
Exchanges based on open electronic limit order book;
Nationwide integrated market with a large number of informed traders and
fluency of short or long positions; and
No counter party risk.
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 important infrastructure services for both primary and
secondary markets.

POLICY AND
REGULATION

THE NATIONAL
STOCK
EXCHANAGE
PLAYERS

ASSEST
CLASSES

RATING
AGENCIES

ACCOUNTING
STANDARDS

SEBI, RBI

ELECTRONIC TRADING AND

SETTLEMENT SYSTEM

MFs,FIIs,Eedge, Funds,equity,
investors, Bkg arms of Banks.

PRIVATIVE EQUITY,
DEBT, EQUITIES,
DERIVATIVES

ICRA, FITCH, CARE, CRISIL

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. 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:

The Capital Issues Control Act 1947, which restricted access to the securities
market and controlled the pricing of issues.
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.
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.

INTRODUCTION TO BOMBAY STOCK EXCHANGE

Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich
heritage. Popularly known as BSE, it was established as The Native Share & Stock
Brokers Association in 1875. It is the first stock exchange in the country to obtain
permanent recognition in 1956 from the Government of India under the Securities
Contracts (Regulation) Act, 1956..

The Exchanges pivotal and preeminent role in the development of the Indian capital
market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an
Association of Persons (AOP), The Exchange is now a demutualised and corporatized
entity incorporated under the provisions of the Companies Act, 1956, pursuant to the
BSE (Corporatizations and Demutualization) Scheme, 2005 notified by the Securities
and Exchange Board of India (SEBI).

In terms of organization structure, the Board formulates larger policy issues and
exercises over-all control. The committees constituted by the Board are broad based.
The Managing Director and a management team of professionals manage the day-today operations of the Exchange.

The Exchange has a nation-wide reach with a presence in 417 cities and towns of
India. The systems and processes of the Exchange are designed to safeguard market
integrity and enhance transparency in operations. During the year 2004-2005, the
trading volumes on the Exchange showed robust growth.
The Exchange provides an efficient the transparent market for trading in equity, debt
instruments and derivatives.

The BSEs On Line Trading System (BOLT) is a

proprietary system for the Exchange and is BS 7799-2-2002 certified.

The

surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000
certified.

Equity
Shares

Preference
shares

Bonds

Warrants

Derivatives

INTRODUCTION TO NATIONAL STOCK EXCHANGE

The National Stock Exchange of India was promoted by leading financial institution
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 (Regulations) 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, while operations in
the Derivates segment commenced in June 2000.
The National Stock Exchange of India (NSE) is one of the largest and most advanced
stock markets in India. The NSE is the worlds third largest stock exchange in terms
of transactions. It is located in Mumbai, the financial capital of India. The NSE
VSAT has 2791 terminals that cover 334 cities across India.

NSE has remained in the forefront of modernization of Indias capital and

financial markets and its pioneering efforts include:

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.

Co-promoting and setting up of National Securities Depository Limited, first

depository in India.

Setting up of S&P CNX Nifty.

NSE pioneered commencement of Internet Trading in February 2000, which

led to the wide popularization of the NSE in the broker community.

Being the first exchange that, in 1996, proposed exchange traded derivatives,
particularly on the equity index, in India. After four years of policy and
regulatory debate and formulations, the NSE was permitted to start trading
equity derivatives three days after the BSE.

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

INTRODUCTION TO SECURITIES AND EXCHANGE BOARD

OF INDIA SEBI
In 1988 the Securities and Exchange Board of India (SEBI) was established by
Government of India through and executive resolution, and was subsequently
upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the
passing of the Securities and Exchange Board of India Act (SEBI Act) on 30 th
January 1992. in place of

Government Control, statutory and autonomous

regulatory boards with defined responsibilities, to cover both development &

regulation of the market, and independent powers have been set up. Paradoxically
this is a positive outcome of the Securities Scam of 1990-91.
The regulatory body for the investment market in India. The purpose of this board
is to maintain stable and efficient markets by crating and enforcing regulations in
the market place.
The Securities and exchange Board of India is similar to U.S. SEC. the SEBI is
relatively new (1992) but is a vital component in improving the quality of the
financial markets in India both to attract foreign investors and to protect Indian
investors.

Its main functions are providing for

Regulating the business in stock exchange and any other securities

markets.
Registering and Regulating the working of stock brokers, sub-brokers,
share transfer agents, bankers to an issue, trustees of trust deeds, registrars
to an issue, merchant bankers, underwriters, portfolio managers,
investment advisers and such other intermediaries who may be associated
with securities markets in any manner.
Registering and Regulating the working the depositories, participants,
custodians of securities, foreign institutional investor, credit rating
agencies and such other intermediaries as the Board may, by notification,
specify in this behalf.
Registering and Regulating the working of venture capital funds and
collective investment schemes including mutual funds;
Promoting and Regulating self-regulatory organizations;
Prohibiting fraudulent and unfair trade practices relating to securities
markets;
Promoting Investors education and training of intermediaries of
securities markets;
Prohibiting insider trading in securities;
Regulating substantial acquisition of shares and takeover of companies;

 Calling for information from, undertaking inspection, conducting inquires

and audits of the stock exchanges, mutual funds and other persons
associated with the securities market and intermediaries and selfregulatory organizations in the securities market;

Calling for information and record from any bank or any other authority
or board or corporation established or constituted by or under any Central,
State or Provincial Act in respect of any transaction in securities which is
under investigation or inquiry by the Board.

Performing such functions and exercising such powers under the

provisions of securities Contracts (Regulation) Act, 1956, as may be
delegated to it by the Central Government.

Levying fees or other charges for carrying out the purpose of this section;

Performing such other functions as may be prescribed.

PERSONAL INVESTMENTS PREFERENCES

Before I dive into the definition of financial terms it is important that you have a basic
understanding of stocks and bonds. There are certainly more variations of each than I
will cover here, but I dont want to confuse you, so I will keep it simple.
Stocks represent shares of ownership I a public company. Examples of public
companies include IBM, Microsoft, Ford, Coca-Cola, and General Mills. Stocks are
the most common ownership investment traded on the market.

Stock is the capital raised by a corporation, through the issuance and sale of shares. A
shareholder is any person or organization which owns one or more shares of a
corporations stock. The aggregate value of a corporations issued shares is its market
capitalization.
In finance, a bond is a debt security, in which the issuer owes the holders a debt and is
obliged to repay the principal and interest (the coupon). Other stipulations may also
be attached to the bond issue, such as the obligation for the issuer to provide certain
information to the bond holder, or limitations on the behavior of the issuer. Bonds are
generally issued for a fixed term (the maturity) longer than one year.

A bond is just a loan, but in the form of a security, although terminology used is rather
different. The issuer is equivalent to the borrower, the bond holder to the lender and
the coupon to the interest. Bonds enable the issuer to finance long-term investments
with external funds.

There are many other types of investments other than stocks and bonds (including
annuities, real estate, and precious metals), but the majority of people invest in stocks
and/or bonds.

MUTUAL FUNDS
History:

When three Boston securities executives pooled their money together in 1924 to
create the first mutual fund, they had no idea how popular mutual funds would
become.
The idea of pooling money together for investing purposes started in Europe in the
mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty and
staff of Harvard University On March 21 st,1924 the first official mutual fund was
born. It was called the Massachusetts Investors Trust.

The mutual fund industry in India started in 1963 with the information of Unit Trust
of India, at the initiative of the Government of India and Reserve Bank the though the
growth was slow, but it accelerated from the year 1987 when non-UTI players entered
the industry.

Definition:
A Mutual Fund is nothing more than a collection of stocks and /or bonds. You can
think of a mutual fund as a company that brings together a group of people and
invests their money in stocks, bonds, and other securities. Each investor owns shares,
which represent a portion of the holdings of the fund.

A mutual fund is simply a financial intermediary that allows a group of investor to

pool their money together with predermined investment objective. The mutual fund
will have a fund manager who is responsible for investing the pooled money into
specific securities (usually stocks or bonds). When you invest in a mutual fund, you
are buying shares (or portions) of the mutual fund and become a shareholder of the
fund.
Mutual funds are one of the best investments ever created because they are very cost
efficient and very easy to invest in (you dont have to figure out which stocks or
bonds to buy).
By pooling money together in a mutual fund, investors can purchase stocks or bonds
which much lower trading costs then if they tried to do it on their own. But the biggest
advantage to mutual funds is diversification.

You can make money from a mutual fund in three ways:

1) Income is earned from dividends on stocks and interest on bonds. A fund pays
out nearly all of the income it receives over the year to fund owners in the
form of distribution.
2) If the fund sells securities that have increased in price, the fund has a capital
gain. Most funds also pass on these gains to investor in a distribution.
3) If fund holdings increase in price but are not sold by the fund manager, the
funds shares increase in price. You can then sell your mutual fund shares for
a profit.

Advantages of investing in Mutual Funds:

Professional Management
Investment diversification
Liquidity
Explicit investment goals
Simple reinvestment programs

Disadvantages of investing in Mutual Funds:

Many funds charge hefty fees, leading to lower overall returns.
Over time, statistics have shown that most actively managed funds tend to
underperform their benchmark averchmark averages.
Mutual funds cannot be bought or sold during regular trading hours, but
instead are priced just once per day.

EQUITITES:
An instrument that signifies an ownership position (called equity) in a corporation,
and represents a claim on its proportional share in the corporations assets and profits.
Ownership in the company is determined by the number of shares a person owns
divided by the total number of shares outstanding. For example, if a company has
1000 shares of stock outstanding and a person owns 50 of them, then he/she owns 5%
of the company. Most stock also provides voting rights, which give shareholders a
proportional vote in certain corporate decisions. Only a certain type of company
called a corporation has stock; other types of companies such as sole proprietorships
and limited partnerships do not issue stock also called equity or stock or corporate
stock.

IPO:
IPO-Initial Public Offering is the first sale of stock by a private company to the
public. IPO are often smaller, younger companies seeking capital to expand their
business.
An Initial Public Offering (IPO) is the first sale of a corporations common shares to
public investors. The main purpose of an IPO is to raise capital for the corporation.
While IPOs are effective at raising capital, they also impose heavy legal compliance
and reporting requirements. The term only refers to the first public issuance of a
companys shares; any later public issuance of shares is referred to as a Secondary
Market Offering.

A companys first sale of stock to the public. Securities offered in an IPO are often,
but not always, those of young, small companies seeking outside equity capital and a
public market for their stock. Investors purchasing stock in IPOs generally must be
prepared to accept very large risks for the possibility of large gains. IPOs by
investment companies (closed end funds) usually contain underwriting fees, which
represent a load to buyers.

DERIVATIVES

Introduction:
The term Derivative indicates that it has no independent value i.e. its value is
entirely derived from the value of the underlying asset. The underlying asset can be
securities, commodities, bullion, currency, livestock or anything else. In other words,
Derivative means a forward, future, option or any other hybrid contract of pre
determined fixed duration, linked for the purpose of contract fulfillment o the value of
a specified real or financial asset or to an index of securities.

With Securities Laws (Second Amendment) Act, 1999, Derivatives has been included
in the definition of Securities.

The term Derivative has been defined in Securities Contracts (Regulations) Act,
as:-

A Derivative includes:
A security derived from a debt instrument, share, loan, whether secured or
unsecured, risk instrument or contract for differences or any other from of
security;
A contract which derives its value from the prices, or index of prices, of
underlying securities;

INTRODUCTION OF DERIVATIVES IN INDIA

The initial steps to launch derivatives were taken in 1995 with the introduction of
the Securities Laws (Amendment) Ordinance, 1995 that withdrew the prohibition
on trading in options on securities in the Indian stock market. In November 1996,
a 24-member committee was set up by the Securities Exchange Board of India
(SEBI) under the chairmanship of LC Gupta to develop an appropriate regulatory
framework for derivatives trading. The committee recommended that the
regulatory framework applicable to the trading of securities would also govern the
trading of derivatives.

The plan to introduce derivatives in India was initially mooted by the National
Stock Exchange (NSE) in 1995. The main purpose of this plan was to encourage
greater participation of foreign institutional investors (FIIs) in the Indian stock
exchanges.

Derivatives were introduced in a phased manner. Initially, trading was restricted to

index futures contracts based on the S&P CNX Nifty Index and BSE-30 (Sensex)
Index. Later, trading was extended to index options (based on the same indices) in
June 2009, and options on individual securities in July 2009. SEBI also permitted
the launch of futures contracts on individual stocks in November 2009

On June 9, 2009, the Bombay Stock Exchange (BSE) introduced Indias first
derivative instrument- the BSE- 30 (Sensex) index futures. It was introduced with
three month trading cycle-the near month (one), the next month (two) and the far
month (three). The National Stock Exchange (NSE) followed a few days later, by
launching the S&P CNX Nifty index futures on June 12, 2009.

In spite of these encouraging developments. Industry analysts felt that the

derivatives market had not yet realized its full potential. Analysts pointed out that
the equity derivative markets on the BSE and NSE had been limited to only four
products- index futures, index options and individual stock futures and options
which were limited to certain certain select stocks.

PARTICIPANTS IN DERIVATIVES MARKET

Hedgers:
Hedgers are those who protect themselves from the risk associated with the price of
an asset by using derivatives. A person keeps a close watch upon the prices discovered
in trading and when the comfortable price is reflected according to his wants, he sells
futures contracts. In this way be gets an assured fixed price of his produce.
In general, hedgers use futures for protection against adverse future price movements
in the underlying cash commodity. Hedgers are often businesses, or individuals, who
at one point or another deal in the underlying cash commodity.

Speculators:
Speculators are somewhat like a middleman. They are never interested in actual
owing the commodity. They will just buy from one end and sell it to the other in
anticipation of future price movements. They actually bet on the future movement in
the price of an asset. They are the second major group of future players. These
participants include independent floor traders and investors. They handle trades for
their personal clients or brokerage firms.

Buying a futures contract in anticipation of price increases is known as going long.

Selling a futures contract in anticipation of a price decrease is known as going long.
Selling a futures contract in anticipation in futures trading has increased with the
availability of alternative methods of participation.
Arbitrators:

According to dictionary definition, a person who has been officially chosen to make a
decision between two people or groups who do not agree is known as Arbitrator. In
commodity market Arbitrators are the people who take the advantage of a discrepancy
between prices in two different markets. If he finds future prices of a commodity
edging out with the cash price, he will take offsetting positions in both the markets to
lock in a profit. Moreover the commodity futures investor is not charged interest on
the difference between margin and the full contract value.

What is the Structure of Derivative Markets in India?

Derivative trading in India takes one place either place either on separate and
independent Derivative Exchange or on a separate segment of an existing Stock
Exchange. Derivative Exchange/Segment function as a Self-Regulatory Organization
(SRO) and SEBI acts as the oversight regulator. The clearing & settlement of all
trades on the Derivative Exchange/Segment would have to be through a Clearing
Corporation/House, which is independent in governance and membership from the
Derivative Exchange/Segment.

What is a Futures Contract?

Futures Contract means a legally binding agreement to buy or sell the underlying
security on a future date. Future contracts are the organized/standardized contracts in
terms of quantity, quality (in case of commodities), delivery time and pace for
settlement on any date in future. The contract expires on a pre-specified date which is
called the expiry date of the contract. On expiry, futures can be settled by delivery of
the underlying asset or cash.. Cash settlement enables the settlement of obligations
arising out of the future/option contract in cash.

What is an Option Contract?

Options Contract is a type of Derivatives Contract, which gives the buyer/holder of
the contract the right (but not the obligation) to buy/sell the underlying asset at a
predetermined price within or at end of a specified period. The buyer/holder of the
option purchases the right from the seller/writer for a consideration which is called the
premium. The seller/writer of an option is obligated to settle the option as per the
terms of the contract when the buyer/holder exercises his right. The underlying asset
could include securities, an index of prices of securities etc.

What are Index Futures and Index Option Contracts?

Futures contra cat based on an index i.e. the underlying asset is the index, are known
as index Futures contracts. For example, futures contract on NIFTY Index and BSE30 Index. These contracts derive their value from the value of the underlying index.

Similarly, the options contracts, which are based on some index, are known as
Index options contract. However, unlike Index Futures, the buyer of Index Option
Contracts has only the right but not the obligation to buy/sell the underlying index on
expiry. Index Option Contracts are generally European Style options i.e. they can be
exercised/assigned only on the expiry date.

An Index in turn derives its value from the prices of securities that constitute the
index and is created to represent the sentiments of the market as a whole or of a
particular sector of the economy.

Indices that represent the whole market are broad based indices and those that
represent a particular sector are sect oral indices.

 In the beginning futures and options were permitted only on S&P Nifty and
BSE Sensex. Subsequently, sect oral indices were also permitted for
derivatives trading subject to fulfilling the eligibility criteria.

Derivative

contracts may be permitted on an index if 80% of the index constituents are

individually eligible for derivative trading.
However, no single ineligible stock in the index shall have a weight age of
more than 5% in the index. The index is required to fulfill the eligibility
criteria even after derivatives trading on the index have begun. If the index
does not fulfill the criteria for 3 consecutive months, then derivative contracts
on such index would be discontinued.

By its very nature, index cannot be delivered on maturity of the Index future
or Index option contracts therefore, these contracts are essentially cash settled
on Expiry.

What is the regulatory framework of Derivatives markets in India?

With the amendment in the definition of securities under SC(R) A (to include
derivatives contracts in the definition of securities), derivatives trading takes place
under the provisions of the Securities Contracts (Regulation) Act, 1956 and the
Securities and Exchange Board of India Act, 1992.
Dr.L.C Gupta Committee constituted by SEBI had laid down the regulatory
framework for derivative trading in India. SEBI has also framed suggestive byelaw
for Derivatives Exchanges/Segments and their Clearing Corporation/House, which
lays down the provisions for trading and settlement of derivative contracts. The
Rules, Bye-laws & Regulations of the Derivatives Segment of the Exchanges and
their Clearing Corporation/House have to be framed in line with the suggestive Byelaws. SEBI has also laid the eligibility conditions for Derivative Exchange/Segment
and its Clearing Corporations/House.

The eligibility conditions have been framed to ensure that Derivatives

Exchange/Segment & Clearing Corporation/House provide transparent trading
environment, safety & integrity and provide facilities for redressal of investor
grievances.

Some of the important eligibility conditions are: Derivatives trading to take place through on on-line screen based Trading
System.
The Derivatives Exchange/Segment shall on-line surveillance capability to
monitor positions, prices, and volumes on a real time basis so as to deter
market manipulation.
The

Derivatives

Exchange/Segment

should

have

arrangements

for

dissemination of information about trades, quantities and quotes on a real time

basis through at least two information-vending networks, which are easily
accessible to investors across the country.
The Derivatives Exchange/Segment should have arbitration and investor
grievances redressal mechanism operative from all the four areas/regions of
the country.
The Derivatives Exchange/Segment should have satisfactory system of
monitoring investor complaints and preventing irregularities in trading.
The Derivative Segment of the Exchange would have a separate Investor
Protection Fund.
The Clearing Corporation/House shall perform full innovation, i.e., the
Clearing Corporation/House shall interpose itself between both legs of every
trade, becoming the legal counterparty to both or alternatively should provide
an unconditional guarantee for settlement of all trades.
The Clearing Corporation/House shall have the capacity to monitor the overall
position of Members across both derivatives market and the underlying
securities market for those Members who are participating in both.

 The level of initial margin on Index Futures Contracts shall be related to the
risk of loss on the position. The concept of value-at-risk shall be used in
calculating required level of initial margins. The initial margins should be
large enough to cover the one-day loss that can be encountered on the position
on 99% of the days.
The Clearing Corporation/House shall establish facilities for electronic funds
transfer (EFT) for swift movement of margin payments.
In the event of a Member defaulting in meeting its liabilities, the Clearing
Corporation/House shall transfer client positions and assets to another solvent
Member or close-out all open positions.
The Clearing Corporation/House should have capabilities to segregate initial
margins deposited by clearing Members for trades on their own account and
on account of his client. The Clearing Corporation/House shall hold the client
margin money in trust for the client purposes only and should not allow its
diversion for any other purpose.
The Clearing Corporation/House shall have a separate Trade Guarantee Fund
for the trades executed on Derivative Exchange/Segment.
Presently, SEBI has permitted Derivative trading on the Derivative Segment of
BSE and the F&O Segment of NSE.

INTRODUCTION TO COMMODITY MARKET

Commodity markets are markets where raw or primary products are exchanged. These
raw commodities are traded on regulated exchanges, in which they are bought and
sold in standardized Contracts. Commodity markets define and trade contracts for
delivery of any product or service that can be characterized in an interchangeable way.
They are complex, and include a wide array of instruments to manage risk.

History:
Historically, dating from ancient Sumerian use of sheep or goats, or other peoples
using pigs, rare seashells, or other items
As commodity money, people have sought ways to standardize and trade contracts in
the delivery of such items, to render trade itself more smooth and predictable.
The modern commodity markets have their roots in the trading of agricultural
products. While wheat and corn, cattle and pigs, were widely traded using standard
instruments in the 19th century in the United Sates, other basic foodstuffs as soybeans
were only added quite recently in most markets. For a commodity market to be
established there must be very broad consensus on the variations in the product that
make it acceptable for one purpose or another.
The economic impact of the development of commodity markets is hard to overestimate. Though the 19th century the exchanges became effective spokesmen for,
and innovators of, improvements in transportation, warehousing, and financing, which
paved the way to expanded interstate and international trade.

Overview of commodities exchanges in India.

Forward Markets Commission (FMC) headquartered at Mumbai is a regulatory
authority, which is overseen by the Ministry of Consumer Affairs and Public
Distribution, Government of India. It is a statutory body set up in 1953 under the
Forward Contracts (Regulation) Act, 1952.

Introduction to NCDEX-Mumbai
National Commodity & Derivatives Exchange Limited (NCDEX) is a professionally
managed online multi commodity exchange promoted by ICICI Bank Limited (ICICI
Bank), Life Insurance Corporation of India (LIC), National Bank for Agriculture and
Rural Development (NABARD) and National Stock Exchange of India Limited
(NSE). Punjab National Bank (PNB), CRISIL Limited (formerly the Credit Rating
Information Services of India Limited), Indian Farmers Fertilizer Cooperative Limited
(IFFCO) and Canara Bank by subscribing to the equity shares have joined the initial
promoters as shareholders of the Exchange. NCDEX is the only commodity exchange
in the county promoted by national level institutions. This unique parentage enables it
to offer a bouquet of benefits, which are currently in short supply in the commodity
markets. The institutional promoters of NCDEX are prominent players in their
respective fields and bring with them institutional building experience, trust,
nationwide reach, technology and risk management skills.
NCDEX is a public limited company incorporated on April 23,2003 under the
Companies Act, 1956. It has commenced its operations on December 15, 2003.
NCDEX is a nation-level, technology d driven de-metalized on-line commodity
exchange with an independent Board of Directors and professionals not having any
vested interest in commodity markets. It is committed to provide a world-class

commodity exchange platform for market participants to trade in a wide spectrum of

commodity derivatives driven by best global practices, professionalism and
transparency.
Forward Market Commission regulates NCDEX in respect of fates trading in
commodities. Besides, NCDEX is subjected to various laws of the land like the
Companies Act, Stamp Act, Contracts Act, Forward Commission (Regulation) Act
and various other legislations, which impinge on its working. NCDE is located in
Mumbai and offers facilities to its members in more than 550 NCDEX currently
facilitates trading of 48 commodities centers throughout India.

Introduction to MCX- Mumbai

MCX is an independent and de-mutual zed multi commodity exchange. It was

inaugurated on November 10, 2003 by Mr.Mukesh Ambani, Chairman and Managing
Director, Reliance Industries, Ltd. And has permanent recognition from the
Government of India for facilitating online trading, clearing and settlement operations
for commodity futures markets across the country.

Headquartered in the financial capital of India, Mumbai, MCX is led by an expert

management team with deep domain knowledge of the commodity futures markets.

The integration of dedicated resources, robust technology and scalable infrastructure,

has helped MCX record many firsts since its inception.

Being a nation-wide commodity exchange having a robust infrastructure, offering

multiple commodities for trading with wide reach and penetration, MCX is well
placed to tap the vast potential poised by the commodities market.

MCX offers a wide spectrum of opportunities to a large cross section of participants

including Producers/Processors, Traders, Corporate, Regional Trading Centers,
Importers, Exporters, Co-operatives and Industry Associations amongst others.

Introduction to NMCE-Ahmadabad

NMCE commenced futures trading in 24 commodities on 26th November, 2002 on a

national scale and the basket of commodities has grown substantially since then to
include cash crops, food grains, plantations, spices, oil seeds, metals & bullion among
others.
Research Desk of NMCE is constantly in the process of identifying the hedging needs
of the commodity economy and the basket of products is likely to grow even further.
NMCE has also made immense contribution in raising awareness about and
catalyzing implementation of policy reforms in the commodity sector.

NMCE was the first Exchange to take up the issue of differential treatment of
speculative loss. It was also the first Exchange to enroll participation of high networth corporate securities brokers in commodity derivatives market.

It was the first Exchange to complete the contractual groundwork for

dematerialization of the warehouse receipts.

Innovation is the way of life at NMCE.

NMCE facilitates electronic derivatives trading through robust and tested trading
platform, Derivative Trading Settlement System (DTSS), provided by CMC. When an
order is placed on the exchange, the server at NMCE scans through the orders posted
on it from all its trading terminals. It then locates and matches the best counteroffers/bids by maintaining anonymity of the counter-parties.

Anonymity helps in eliminating formation of cartels and other unfair practices,

thereby protecting the efficiency of price-discovery at the exchange.

NMCE was the first commodity exchange to provide trading facility through Internet,
through Virtual Private Network (VPN).

PORTFOLIO MANGAMENT SERVICES

Managing money has always been difficult. You require a great deal of expertise to
evaluate various savings and investment plans. You simply dont have the time to do it
yourself. Until and unless the investments are large it might also turn out to be
expensive trying to set up your won investment wing. It might be prudent asking a
professional to manage your funds for a small fee. You are sure your money will be
deployed after scientifically analyzing pros and cons.

In finance, a portfolio is a collection of investments held by an institution or a private

individual. In building up an investment portfolio a financial institution will typically
conduct its own investment analysis, whilst a private individual may make use of the
services of a financial advisor or a financial institution, which offers portfolio
management services. Holding a portfolio is part of an investment and risk-limiting
strategy called diversification.

By owning several assets, certain types of risk (in particular specific risk) can be
reduced. The assets in the portfolio could include stocks, bonds, options, warrants,
gold certificates, real estate, futures contracts, production facilities, or any other item
that is expected to retain its value.

Portfolio Management is the management of selected groupings of investments using

integrated strategic planning, integrated architectures, and measures of performance,
risk management techniques transition plans, and portfolio investment strategies.
Portfolio management involves deciding what assets to include in the portfolio, given
the goals of the portfolio owner and changing economic conditions. Selection
involves deciding what assets to purchase, how many to purchase, when to purchase
them and what assets to divest. These decisions always involve some sort of
performance measurement, most typically expected return on the portfolio, and the
risk associated with this return (i.e. the standard deviation of the return).

Typically the expected returns from portfolios comprised of different asset bundles
are compared.

The unique goals and circumstances of the investor must also be considered. Some
investors are more risk averse than others. Mutual funds have developed particular
techniques to optimize their portfolio holdings.

See fund management for details.

If you own more than one security, you have an investment portfolio. You build the
portfolio by buying additional stocks, bonds, mutual funds, or other investment. Your
goal is to increase the portfolios value by selecting investments that you believe will
go up in price.

According to modern portfolio theory, you can reduce your investment risk by
creating a diversified portfolio that includes enough different types, or classes, of
securities so that at least some of them may produce strong returns in any economy.

COMPANY PROFILE
THE INDIA INFOLINE LIMITED
Origin:
India info line was founded in 1995 by a group of professional with
impeccable educational qualifications and professional credentials. Its institutional
investors include Intel Capital (world's) leading technology company, CDC (promoted
by UK government), ICICI, TDA and Reeshanar.

India info line group offers the in tire gamut of investment products including
stock broking, Commodities broking, Mutual Funds, Fixed Deposits, GOI Relief
bonds, Post office savings and life Insurance. India Info line is the leading corporate
agent of icici Prudential Life Insurance Company, which is India' No. Private sector
life insurance Company.

www.indiainfoline. Com has been the only India Website to have been listed
by none other than Forbes in it's 'Best of the Web' survey of global website, not just
once but three times in a row and counting... a must read for investors in south Asia is
how they choose to describe India info line. It has been rated as No.l the category of
Business News in Asia by Alexia rating.

Stock and Commodities broking is offered under the trade name 5paisa. India
Infoline Commodities pvt Ltd., a wholly owned subsidiary of India Info line Ltd.,
holds membership of MCX and NCDEX.

Main Objects Of The Company

Main objects as contained in its Memorandum or Association are:

To engage or undertake software and internet based services, data processing

IT enabled services, software development services, selling advertisement
space on the site, web consulting and related services including web designing
and web maintenance, software product development and marketing, software
supply services, computer consultancy services, E-Commerce of all types
including electronic financial intermediation business and E-broking, market
research, business and management consultancy.
To undertake, conduct, study, carry on, help, promote any kind of research,
probe, investigation, survey, developmental work on economy, industries,
corporate business houses, agricultural and mineral, financial institutions,
foreign financial institutions, capital market on matters related to investment
decisions primary equity market, secondary equity market, debentures, bond,
ventures, capital funding proposals, competitive analysis, preparations of
corporate / industry profile etc. and trade / invest in researched securities.

Products: the India Info line pvt ltd offers the following products
A. E-broking.
B. Distribution
C. Insurance

A. E-Broking:
It refers to Electronic Broking of Equities, Derivatives and
under the brand name of 5paisa

Equities

Derivatives

Commodities

B. Distribution:
1. Mutual funds
2. Govt. of India bonds.
3. Fixed deposits

C. Insurance:
1. Life insurance policies
2. Corporate sector of icici
3. Prudential life insurance.

Commodities

THE CORPORATE STRUCTURE

The India Info line group comprises the holding company, India Info line Ltd, which
has 5 wholly-owned subsidiaries, engaged in engaged in distinct yet complementary
businesses which together offer a whole bouquet of products and services to make
your money grow.

The corporate structure has evolved to comply with oddities of the regulatory
framework but still beautifully help attain synergy and allow flexibility to adapt to
dynamics of different businesses.

The parent company, India Info line Ltd owns and managers the web properties www.
India info line, Com and www.5paisa.com. it also undertakes research. Customized
and off-the-shelf.

Indian Info line Securities Pvt. Ltd. is a member of BSE, NSE and DP with NSDL. Its
business encompasses securities broking Portfolio Management services.
India Infoline.com Distribution Co. Ltd. Mobilizes Mutual Funds and other personal
investment products such as bonds, fixed deposits, etc.

India Info line Insurance Services Ltd. Is the corporate agent of ICICI Prudential Life
Insurance, engaged in selling Life Insurance products.

India Info line Commodities Pvt. Ltd. is a registered commodities broker MCX and
offers futures trading in commodities.
India Info line Ltd.
Research and Online Media Property
India Info line Securities Pvt. Ltd.
Secondary market securities trading and
Portfolio Management Services
India Infoline.com Distribution Co. Ltd.
Mobilization of Mutual Funds and other
Personal investment Products
India Infoline Insurance Services Ltd.
Corporate agent for ICICI Prudential Life Insurance Company
India Infoline Commodities Pvt.Ltd.
Commodities trading
India Infoline Investment Services Pty.Ltd
Margin Funding

IN CAPABLE HANDS
India Infoline is a professionally Managed Company. The promoters who run the
company/s day-to-day affairs as executive directors have impeccable academic
professional track records.
Nirmal Jain, chairman and Managing/ director, is a Chartered Accountant, (All India
Rank 2); Cost Account, (All India Rank l) and has a post-graduate management
degree from IIM Ahmedabad. He had a successful career with Hindustan Lever,
where he inter alia handled Commodities trading and export business. Later he was
CEO of an equity research organization.
R. Venkataraman, Director, is armed with a post- graduate management degree from
IIM Bangalore, and an Electronics Engineering degree from IIT, Kharagpur. He spent
eight fruitful years in equity research sales and private equity with the cream of
financial houses such as ICICI group, Barclays de Zoette and G.E. Capital.
The non-executive directors on the board bring a wealth of experience and expertise.
Satpal khattar -Reeshanar investments, Singapore the key management team
comprises seasoned and qualified professionals.
Mukesh Sing-

Director, India Infoline Securities Pvt Ltd.

Seshadri Bharathan-

Director, India Infoline. Com Distribution Co Ltd

S Sriram-

Vice President, Technology

Sandeepa

Vig Arora-Vice President, Portfolio Management services

Dharmesh Pandya-

Vice President, Alternate Channel

Toral Munshi-

Vice President, Research

Anil Mascarenhas-

Chief Editor

INDIA INFOLINE COMMODITIES PVT.LTD (IICPL)

II was incorporated on March 29, 2005 as a private limited company under the
company under the companies Act, 1956. IICPL is a member of National
Commodities and Derivatives Exchange Limited (NCDEX) and the Multi Commodity
Exchange of India Limited (MCX) and offers commodities derivatives trading facility
to its customers.
The Board Of Directors Of IICPL Comprises:
Mr. Nirmal Jain
Mr. R. Venkataraman

Mr. Dharmesh Pandya

Non-Executive Director

Non-Executive Director
-

Executive Director

The Shareholding pattern of IICPL as on the date of filling of this Red Herrinj
Prospectus is as follows

Name of shareholders

Number of Equity shares

Mr. Nirmal Jain as nominee of IIL

56000

Mr. R.Venkatraman as nominee of IIL

54000

IIL

1,99,000

Total

209,000

1. Including an allotment of 11,39,000 shares on February 11, 2010

CHAPTER -III
REVIEW LITERATURE

REVIEW LITERATURE
Geoffrey Soutar, Marilyn Clark-Murphy presents in their article individual
investor Preferences: A Segmentation Analysis (Journal of Behavior of Finance
2008) Individuals are being the encouraged to take responsibility for their retirement
income. Despite the importance of individual investment decisions, we know very
little about what factors influence them. Having identified characteristics that are
important to individual investors in shares using a conjoint analysis approach, this
study uses cluster analysis and discriminate analysis to look for subgroups with
differing attitudes and approaches to investment alternatives, results suggest that four
significant subgroups exist within the investor sample, each with different investment
preferences and goals. The results have implications for providers of financial
services and for those involved in educating individual investors.

Julie R. Agnew presents in his article Asset Allocation and Information

Overload: The Influence of Information Display, Asset Choice, and Investor
Experience. This paper examines whether information overload might partially
explain why defined contribution plan participants tend to follow the path of least
resistance In two experiments, we test how three common differences among defined
contribution plans (the number of investment choices) lead to varying degrees of
information

overload and the probability of opting for the default. Notably, we

control for the financial aptitude of each individual. The findings suggest that the
success of certain plan features depends strongly on the financial background of the
participant.

We find that low-knowledge individuals opt for the default allocation more often than
high-knowledge individuals (experiment 1:20% versus 2%).
The results emphasizethe importance of plan design, especially the selection of plan
defaults, and the need to improve the financial literacy of participants.

Enrico Rubaltelli presents in his article Numerical Information Format and

Investment Decisions: Implications for the Disposition Effect and the Status Quo
Bias. Investment decisions are very difficult because they involve money and can
impact our quality of life. According to the axioms of rationality, different but
equivalent information formats should not affect investment strategies.

The authors perform two experiments here, and find evidence of a strong absolute
magnitude effect on investment decisions. In Experiment 1, participants (students)
chose to sell a losing fund more often when returns were expressed as a percentage of
variation between the buying value and the actual value (e.g., 24%) than when they
were expressed as a monetary difference between the buying price and the actual price
(e.g., $0.24). In the context of the experiment, the percentage format decreased the
disposition effect significantly.

Furthermore, describing the stock returns as ratios (e.g., ) increased the

tendency toward the status quo bias. In Experiment 2, the authors showed that the
absolute magnitude of the numbers shaped participants satisfaction with fund returns,
and was responsible for the different choices of investment strategies.

Alexander Anderson presents in his article Limit Order Trading Behavior

and Individual Investor Performance. Using highly detailed data from a major
Australian online broker, we investigate individual investor limit order behavior and
performance. We examine relative performance categorized by number and size of
limit order placed, and by proportion of orders that execute. We find that individuals
who place the most orders and have the highest number of transactions. The best
performers have the highest proportion of orders execute and place smaller orders
than the worst performers. These findings are robust after controlling for stock
characteristics with the Fama and French [1992] factor model.

CHAPTER IV
DATA ANALYSIS AND INTERPRETATION

DATA INTERPRETATION
TABLE 1 AGE WISE CLASIFICATION
AGE

NO. OF PEOPLE

19-25
26-35
36-45
>45

78
67
34
21

ANALYSIS:
Most of the Investors are in the age group of 19-25
It can be inferred that most of the people are in the age were they are mostly
towards investing in capital markets.
This may be because as they see earnings opportunity in Indian capital
markets which is growing.

TABLE2-

OCCUPATION WISE CLASSIFICATION

OCCUPATION

NO.OF PEOPLE

BUSINESS
SERVICE
STUDENTS
OTHERS

74
87
28
11

OCCUPATION

ANALYSIS:
In the sample size of 200, most of the people (43%) are there from the service
class.
We can infer from this that most of the service class people invest in IPO and
equity as it gives risk less and easy returns to the investors.
Sample size consists of less no students. As they dont have practical exposure
in capital markets.

TABEL3- INCOME WISE CLASSIFICATION

INCOME

NO. OF PEOPLE

5000-15000
15000-25000
25000-35000
>35000

28
91
46
35

ANALYSIS:

Sample size consists of most of the people in income group of 15000-25000.

It can be inferred from this that people in this Income group are more toward
investing in capital markets.

TABLE4- INTRESTED IN TRADING/INVESTING:

NO. OF PEOPLE INTRESTED IN TRADING
YES
NO

117
83

ANALYSIS:

42% of the people gave a negative response on the capital markets.

It may because of speculation and fluctuations in India securities market.
58% of people prefer/interested in Indian capital markets as they see
opportunity to earn or to make profits in fluctuating markets.

TABLE5- MAIN REASON BEHIND TRADING/INVESTING

REASONS

NO.OF PEOPLE

FUTURE PLANNING
EARNINGS
EXEMPTION IN TAX

43
136
21

ANALYSIS:
it can be
interpreted
that most of
the people
wants
to
book profits
in
the
bullish
market.
Future planning has been preferred by less no of people, as people want to earn in
the emerging market like India.
People dont in capital markets to get an exemption in taxes, as there is no longterm capital gain in the securities market.

TABLE 6 - INVESTMENT PREFERNCES

INVESTMENSTS

NO. OF PEOPLE

MUTUAL FUNDS
EQUITY
IPO
COMMODTY
DERIVATIVES
PMS

25
57
78
7
27
6

ANALYSIS:
Most of people Invest in Initial Public Offer as it offer higher return and less
risk to investors.
Inspite of high risk and volatile markets investors still prefer secondary
markets for investing in equities.

TABLE-7 KNOWLEDGE LEVEL OF THE INVESTORS IN PERCENTAGES

INVESTMENTS
MUTUAL FUNDS
EQUITY
IPO
COMMODITY
DERIVATIVES
PMS

PERCENTAGES
63.9
65.8
83.33
15.4
30.3
35.7

ANALYSIS:
When collected the data on knowledge level of respondents on a scale of 1-10
83.3% people were comfortable while investing in IPOs.
Knowledge level on commodity and derivatives is very less as it is new to
Indian markets and the investors should be educated.
Portfolio management services is also very less as most of the investors are
self-investors.

TABLE8 - TIME PERIOD OF THE INVESTMENT DONE

TIME PERIOD
SHORT TERM
MEDIUM TERM
LONG TERM

NO. OF PEOPLE
39
113
48

TIME PERIOD OF INVESTMENTS

ANALYSIS:
Most of he investors are medium term (1-3 months) as they make profits
whenever available to them in the markets.
Short-term investors are the people who do intraday trading i.e., invest for a
week or so in the markets. These are the people who are extremely intelligent
and have a high knowledge based on capital markets instruments.

TABLE 9 WAY OF TRADING IN STOCK MARKETS

WAY OF TRADING
NO. OF PEOPLE
ONLINE
OFFLINE

113
87

ANALYSIS:

Majority of the respondents prefer online trading accounts as it is easy and fast
and it does not require any paperwork.
Service class and the students mostly preferred online trading as it easy for them.
Because they can invest in markets at any point of time.
Respondents who prefer accounts is because of less brokerage and the people are
not IT savvy.

ANLYSIS:

USING CHI-SQUARE TECHNIQUE

Null Hypothesis (H0): there is no relationship between the occupation of people and
the investment option chosen.
Alternate Hypothesis (H1): there is a relationship between the occupation of people
and the investment option chosen.
Contingency Table of Income Levels and Investment preferred.

INVESTMENTS MUTUAL

EQUITY

IPO

DERIVATIVES

TOTAL

OCCUPATION
BUSINESS
SERVICE
STUDENT
TOTAL

18
26
10
54

28
37
7
72

10
12
5
27

68
81
27
176

FUNDS
12
6
5
23

Degree of Freedom: (no. of rows-1)* (no. of columns-1)

= (3-1)*(4-1) =6
Significance Level ( )=0.05
Chi-Square Critical (2c)=1.64

Expected Cell Frequency Table:

INVESTMENTS MUTUAL

EQUITY

IPO

DERIVATIVES

FUND
BUSINESS

8.88

20.86

27.81

10.43

SERVICE

10.58

24.85

33.13

12.42

STUDENT

3.5284

8.28

11.045

4.14

Chi-Square (2) = [(Fi-ei)2/ei]

2=6.640597

It is seen that Chi-Square value for this contingency table is 6.640597 and the critical
Chi-Square value for a significance level of 0.05 and degrees of freedom: 6 is 1.64.
Hence, the null hypothesis is rejected.

There is a relationship between the OCCUPATION and the INVESTMENTS

preferred.
Similarly, the relation between the Age group and the Investments preferred.

(AGE GROUP * INVESTMENTS PREFERRED)

Null Hypothesis (H0): There is no relationship between the age groups and the
investment preferred.

Alternate Hypothesis (H1): There is a relationship between the age groups and the
investment preferred.

Contingency table of AGE GROUP and INVESTMENTS preferred.

INVESTMENTS MUTUAL

EQUITY

IPO

DERIVATIVES

TOTAL

AGE GROUP
19-25
26-35
36-45
>45
TOTAL

30
16
5
6
57

33
29
11
5
78

7
9
6
5
27

75
62
29
21
187

FUND
5
8
7
5
25

Degrees of Freedom: ( no. of rows-1)*(no. of columns-1)

= (4-1)*(4-1) =9
Significance Level () = 0.05
Chi Square Critical (2c)=3.33

Expected Cell Frequency Table:

INVESTMENTS MUTUAL

EQUITY

IPO

DERIVATIVES

AGE GROUP
19-25
26-35

22.8609
18.8983

31.283
25.860

10.8288
8.9518

FUND
10.0267
8.288

36-45
>45

3.877
2.8074

8.83
6.4010

12.096
8.759

4.1871
3.0320

Chi Square (2) = [(Fi-ei)2/ei]

2 = 16.72279
It is seen that Chi Square value for this contingency table is 16.72279 and the critical
Chi Square value for a significance level of 0.05 and degrees of freedom: 9 is 3.33.
Hence, the null hypothesis is rejected. Here is a relationship between the AGE
GROUP and the INVESTMENTS preferred.

CHAPTER V
FINDINGS,
SUGGESTIONS
& CONCLUSION

FINDINGS
Today the Indian Capital Markets present a vastly different picture from what it was
a decade ago.

Lots of checks and balances with efficient and electronic trading, and
settlement systems.
A range of players that include mutual funds, FIIs, hedge funds, corporate and
other institutions.
Expansion of asset classes.

Some of the major developments in the markets have been in the area of
Primary markets
Extent of Participation of Institutional Players
Introduction and progress of Derivatives
Settlement and monitoring systems

The Indian capital market has witnessed some significant reforms on the structural,
operational and regulatory front over a period of time. The changes such as abolition
of controller of capital issues, establishment of market regulator [SEBI], introduction
of a nationwide screen-based trading, dematerialization of securities, electronic
trading, sophisticated risk-management techniques, derivative trading, rolling
settlement, shortening of settlement cycle, ban on deferral products, formation of
Clearing Corporation of India and demutualization of stock exchanges have marked a
new era in the functioning of the capital market.

CONCLUSIONS

58% of the people are interested in investing in capital markets as they see a
huge growth in Indian financial markets. It can be seen that maximum service
class people invest in IPO because of less risk and reasonable returns.
Knowledge level on commodity and derivatives trading is very less when
compared to equity and IPO. It may be because investors are very cautious on
those instruments most of the respondents are medium term investors as they
are looking for profit making in markets.
It can be concluded from the chi square test 1 that their exists a relationship
between the OCCUPATION and the INVESTMENTS preferred i.e., people
with service class prefer IPOs than equity as it offers easy returns.
Respondents with business background prefer to invest in equities as they can
afford to take risk.
It may be concluded from the chi square test- 2 that exist a relationship
between the AGE GROUP and the INVESTMENTS preferred i.e., people
with the age above 45 would like to invest in mutual funds and people with the
age group 19-25 would like to invest in more IPOs and equities.

SUGGESTIONS
Enhance awareness among Investors preferences who can be play pivotal role in
Share market.

Bring awareness among funds depositors about their respective

Share market.

Arranging free seminars in different organizations about mutual fund

investment /options on derivatives in mutual funds.

An advertisements program in Public places is a good publicity.

More advertisements need to come to explain the various advantages of

Investors preferences schemes and even the various commodities available to
trade in

share market.

CHAPTER VI
ANNEXURE
BIBLIOGRAPHY
REFERENCES

Annexure-I
MARKET RESEARCH ON INVESTORS PREFERENCES
(CAPITAL MARKETS)
1. Personal Details:
Name:
Address:
Contact No:
E-mail ID:
2. Age:
[

] 19-25

] 26-35

36-45

] Above 45

3. Occupation:
[

] Business

[ ] Service

] Student

] Others

4. Income:
[ ] Rs.5000-15000 [ ] Rs.15000-25000

[ ] Rs.25000-35000

Rs.>35000

5. Are you interested in Trading/Investing?

[

] Yes

] No

If no, reason ---------------------------------------------------

6. If provided proper guidance are you interested in Trading /Investing?

[

] Yes

No

7. What is the main reason behind Trading/Investing?

[ ] Future Planning

[ ] Earning

[ ] Exemption in Tax

[ ] Others

8. What type of investment would you prefer?

[

] Mutual Funds [

[ ] PMS

] Equities
] IPO

[ ] Commodities
[ ] Derivatives

9. Your investments are usually for

[ ]

Short term

] Medium term [

] Long term

10. In a scale of 1-10 rate the areas of your knowledge.

[

Mutual Funds

PMS

[
[

] Equities
] IPO

] Commodities

] Derivatives

11. Do you have a D-mat Account?

[

] Yes

No

If yes, where do you have your D-mat Account?

12. Do you prefer?

[

] Online trading/investment

For Official use:

1) Interviewers Opinion.

] Offline trading/investment

BIBLIOGRAPHY

BOOKS
Investment Analysis and Portfolio Management

- Prasanna Chandra

Investment Management

- Preeti Singh

Investment Management

- V.A. Avadhani

Capital Markets (dealers) module workbook

WEBSITES
www.indianinfoline.com
www.investopedia.com
www.investwords.com
www.wikipedia.org
www.sebi.gov.in
www.baseindia.com
http://finance.indiamart.com
www.answers.com
www.nseindia.com

JOURNALS :
The Hindu
Business times
Deccan chronicle.

NCFM

REFERENCES

1. Eng Tuck Cheah, Wen Li Chan, Corinne Lin Lin Chieng (2007) The Corporate
Social Responsibility of Pharmaceutical Product Recalls: An Empirical Examination
of U.S. and U.K.Markts. Journal of Business Ethics.

2. Julie R.Agneew- The College of William and Mary Lisa R.Szykman-The College
of William and Mary.

3. Enrico Rubaltelli-University of Modena and Reggio EmiliaSandro Rubichi

University

of

Modena

and

Reggio

EmiliaLucia

Savadori-University

of

TrentoMarcello Tedeschi-University of Modena and Reggio EmiliaRiccardo.

4. Alexander Anderson-Deutsche Bank Julia Henker-University of New South Wales

Sian Owen-University of New South Wales Ferretti-University of Modena and
Reggio Emilia.