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7/31/2019 An Internship Experience Report by Ayush Gupta]
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Summer Internship Report
Made by:-
Jenu Varghese
. j
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Acknowledgement
The project as we see today in its present form is an outcome of persistent efforts & a great
deal of dedication & has drawn intellectual support from various sources, both within the
organization & out of the organization.
I would like to thank to all those who helped me in my endeavor in achieving something
worthwhile and enduring. I have no words to express my gratitude to my industry guide Mr .
Mukesh Goel for putting his trust on me and giving me an opportunity to work at Jyoti
Portfolio Ltd. He was always there to guide me and solve my problems. His appreciation
mixed with constructive advice not only made my work interesting but also laid a strong
foundation for my project. Without his unfailing guidance, this report couldnt have been
possible. It has been a great learning experience working under him.
I genuinely offer my sincere regards and heartfelt gratitude to Mrs. Shraddha Sharma, my
faculty guide, for providing the valuable help and guidance at every step during the project.
Last but definitely not the least, I am also thankful to my friends and family for their whole-
hearted cooperation and help at all stages of my endeavor. They have been a source of
inspiration and knowledge to me during the making of the report.
Signature of the student
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TABLE OF CONTENTS
Introduction 5Main Body 6
Fundamental Analysis 8
Technical Analysis 16
Factors affecting stock market 23
Golden rules of investing 26
Derivatives Market 28
A Study of Indian Individual Investors Behavior 31
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Introduction
As we are doing a finance course, I choose my area of internship as finance. I made up my
mind to work at a broking firm because every aspect of finance revolves around stock market.
I went to Jyoti Portfolio Ltd. with my curriculum vitae on 12 th May 2010. They accepted me
and my internship began from the very next day.
I chose my title as Investment Analyst. An investment analyst analyses investment
avenues and evaluates the same. They advise their clients on where to invest. This internship
will give a start in my professional career. It will lay a foundation of knowledge and practical
experience in my career.
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Main Body
About the organization:
Jyoti Portfolio Ltd is a firm that primarily provides broking services. It is owned and
managed by Mr. Mukesh Goel. Its services include:
Trading in equities
Trading in commodities
Trading in derivatives
Mutual Funds
IPOs
Debentures/Bonds
Provide market predictions/guidance
Hierarchy of the firm
Manager
Employee 1 Employee 2 Employee 3 Employee 4
Peon
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ManagerMr. Mukesh Goel is the manager and makes all the decisions by himself. He is the
top authority there. He is the one who started this firm and has invested all the capital. He
operates on the NSE counter. At the end of the day, he clears all the transactions that took
place.
Employees 3 out of 4 employees sit at their desk with their respective computers and
operate on the terminal. They execute orders on behalf of their clients. 1 employee handles
the paper work and maintains accounts. There are four counters NSE, NSE/BSE,
Futures/Options and Commodities.
Peon He does all the travelling part as employees cant leave their counters. He collects
cheques, does the bank work, etc. Besides, he makes tea for the entire staff and clients.
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Fundamental Analysis
Fundamental analysis is the process of looking at a business at the basic or fundamentalfinancial level. This type of analysis examines key ratios of a business to determine itsfinancial health and gives you an idea of the value its stock. This type of analysis is mostlydone by medium or long-term investors.
It includes:
Economic Analysis -analyzing economic conditions
Industry Analysis -analyzing industry conditions
Company Analysis -analyzing the company
Many investors use fundamental analysis alone or in combination with other tools to evaluatestocks for investment purposes. The goal is to determine the current worth and, moreimportantly, how the market values the stock.
Basically, Fundamental Analysis is used to determine
Whether a stock is underpriced or over priced What are the future prospects or future earnings of a company
If an analyst concludes that a stock is under priced, he will buy them at that moment and sellin the near future. If a stock is overpriced, he wont buy it. Similarly if the future prospects ofa company are good, he will buy them now as the price of that stock will rise in the nearfuture.
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Various Fundamental Analysis tools and techniqes
Ratio Analysis
a) EPS (earning per share)
It can be defined as the portion of a company's profit allocated to each outstanding share ofcommon stock. Earnings per share serves as an indicator of a company's profitability.
EPS = Net Earnings / Outstanding Shares
For example, companies A and B both earn $100, but company A has 10 sharesoutstanding, while company B has 50 shares outstanding. Which companys stock do
should we own?
Company A had earnings of $100 and 10 shares outstanding, which equals an EPS of10 ($100 / 10 = 10). Company B had earnings of $100 and 50 shares outstanding,which equals an EPS of 2 ($100 / 50 = 2). Thus company As stock is a better optionto go for.
The EPS is helpful in comparing one company to another, assuming they are in thesame industry, but it doesnt tell you whether its a good stock to buy or what themarket thinks of it. For that information, we need to look at some other ratios.
b. Price-to-earnings ratio :
It is a valuation ratio of a company's current share price compared to its per-shareearnings.
Calculated as: P/E = Stock Price / EPS
For example, a company with a share price of $40 and an EPS of 8 would have a P/Eof 5 ($40 / 8 = 5).
The P/E gives us an idea of what the market is willing to pay for the companysearnings. The higher the P/E the more the market is willing to pay for the companysearnings. Some investors read a high P/E as an overpriced stock and that may be thecase, however it can also indicate the market has high hopes for this stocks future andhas bid up the price. Conversely, a low P/E may indicate a vote of no confidence bythe market or it could mean this is a sleeper that the market has overlooked. Known asvalue stocks, many investors made their fortunes spotting these diamonds in therough before the rest of the market discovered their true worth.
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The P/E is the most popular way to compare the relative value of stocks based onearnings.
c. Projected earnings growth :
Because the market is usually more concerned about the future than the present, it isalways looking for some way to project out the future earnings of a company. Thisvaluation technique has become more popular in recent years.
PEG = P/E / (projected growth in earnings)
Suppose Stock A has a p/e ratio of 15 and is expected to grow at 20%. Stock B has ap/e ratio of 30 and is expected to grow at 25%. The PEG ratio of stock A is 75%(15/20*100) and that of B is 120 % (30 /25*100). According to this ratio, stock A is a
better option.
d. Price to book ratio:
Value investors look for some other indicators besides earnings growth and so on.One of the metrics they look for is the Price to Book ratio or P/B. This measurementlooks at the value the market places on the book value of the company.
P/B = Share Price / Book Value per Share
Like the P/E, the lower the P/B, the better the value. Value investors would use a lowP/B to identify potential candidates.
e. Dividend payout ratio :
The DPR measures what a company pays out to investors in the form of dividends.
DPR = Dividends per Share / EPS
For example, if a company paid out $1 per share in annual dividends and had $3 inEPS, the DPR would be 33%. ($1 / $3 = 33%)
The real question is whether 33% is good or bad and that is subject to interpretation.Growing companies will typically retain more profits to fund growth and pay lower orno dividends.
Companies that pay higher dividends may be in mature industries where there is littleroom for growth and paying higher dividends is the best use of profits.
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Either way, we must view the whole DPR issue in the context of the company and itsindustry. By itself, it tells us very little.
f. Dividend yield :
This measurement tells what percentage return a company pays out to shareholders inthe form of dividends. Older, well-established companies tend to payout a higherpercentage than younger companies and their dividend history can be more consistent.
Dividend Yield = annual dividend per share / stock's price per share
For example, if a companys annual dividend is $1.50 and the stock trades at $25, theDividend Yield is 6%. ($1.50 / $25 = 0.06)
g. Return on equity :
Return on Equity (ROE) is one measure of how efficiently a company uses its assetsto produce earnings. It compares companies in the same industry to get a betterpicture.
ROE = Net Income after Tax/ Shareholders equity
While ROE is a useful measure, it does have some flaws that can give a false picture,so we can never rely on it alone. For example, if a company carries a large debt andraises funds through borrowing rather than issuing stock it will reduce its book value.A lower book value means youre dividing by a smaller number so the RO E isartificially higher. There are other situations such as taking write-downs, stock buybacks, or any other accounting slight of hand that reduces book value, which willproduce a higher ROE without improving profits.
It may also be more meaningful to look at the ROE over a period of the past fiveyears, rather than one year to average out any abnormal numbers.
ROE is a useful tool in identifying companies with a competitive advantage. All otherthings roughly equal, the company that can consistently squeeze out more profits withtheir assets, will be a better investment in the long run.
h. Price to sales ratio :
We have a number of tools available when it comes to evaluating companies withearnings. That doesnt mean companies that dont have any earnings are badinvestment. But one should approach companies with no history of actually making
money with caution. The Internet boom of the late 1990s was a classic example ofhundreds of companies coming to the market with no history of earning. In such a
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case, we can use price to sales ratio. This metric looks at the current stock pricerelative to the total sales per share. We can calculate the P/S by dividing the marketcap of the stock by the total revenues of the company. We can also calculate the P/Sby dividing the current stock price by the sales per share.
P/S = Market Cap / RevenuesorP/S = Stock Price / Sales Price Per Share
Much like P/E, the P/S number reflects the value placed on sales by the market. Thelower the P/S, the better the value, at least thats the conventional wisdom. However,this is definitely not a number one can use in isolation. When dealing with a youngcompany, there are many questions to answer and the P/S supplies just one answer.
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Balance sheet valuation:
Analyst often look at the balance sheet of the firm to get a handle o n some valuation
measures. Three measures derived from the balance sheet are
1. Book Value- Book value per share is simply the net worth of the company(which isequal to the paid up equity capital plus reserves and surplus) divided by the number of
outstanding equity shares.
ExampleIf net worth of Z ltd is 37 million and the no. of outstanding equity shares
is 2 million, then the book value per share works out to be 37 million divided by 2
million which is equal to 18.50.
This measure can be misleading as it is firmly rooted in the financial accounting
which represents a objective measure of value. The accounting policies and
conventions are characterized by great deal of subjectivity and arbitrariness. Besides
these, historical balance sheet figures diverges the current economic value.
2. Liquidation Value- The liquidation value per share is equal to :
Value realized from - Amount to be paid to all the creditors and
liquidating all the assets of the firm preference shares
Number of Outstanding Equity Shares
This method is more realistic than book value method. But it is very difficult to
estimate what amounts would be realized from the sale of assets. And also the
liquidation value doesnt represent the earnings.
3. Replacement Cost- Another balance sheet measure considered by analysts in valuing
a firm is replacement cost of its assets less liabilities. The use of this measure is basedon the premise that the market value of a firm cannot deviate too much from its
replacement cost. The ratio of market price to replacement cost is called tobin q, after
James Tobin a Nobel Laureate in economics. A major limitation of this concept is
that organizational capital, a very valuable asset, is not shown on the balance sheet.
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Dividend Discount Model
According to dividends discount model, the value of an equity share is equal to the present
value of dividends expected from its ownership plus the present value of the sale priceexpected when the equity share is sold.
Assumptions of the model
i. Dividends are paid annually
ii. The first dividend is received one year after the equity share is received
Single-period Valuation Model: It is a case where the investors expect to hold the equity
shares for one year. The price of the equity share will be:
P0 = D1/ (1 + r) + P1/ (1 + r)
Where P0 = current price of the equity share
D1 = expected dividend
P1 = expected price of share 1 year hence
r = required rate of return on equity
ExampleX ltd. Equity shares expected dividend = Rs. 2
Expected future price of the share = Rs. 18 after 1 year.
Required rate of return = 12 %
Its current price will be: P0 = 2/ (1 + .12) + 18/( 1 + .12)
= Rs. 17.86
Multi-period Valuation Model: Since equity shares have no maturity period, they expect to
bring a dividend stream of infinite duration.
P0 = D1/ (1 + r) + D2/ (1 + r)2 + D3/ (1 + r)3. + D/ (1+r)
= Dt/ (1 + r)t + Pn/ (1 + r)
n
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There are various modifications to these models
a) Zero Growth Model In this, it is assumed that the dividend per share remains
constant year after year
b) Constant Growth Model (Gordon Model)It is one of them most popular models.
It was originally proposed by Myron J. Gordon. It assumes that dividend per share
grows at a constant rate (g).
c) H Model - The H model is a two-stage model for growth, but unlike theclassical two-stage model, the growth rate in the initial growth phase is not constant
but declines linearly over time to reach the stable growth rate in steady stage. Thismodel was presented in Fuller and Hsia (1984) and is based upon the assumptionthat the earnings growth rate starts at a high initial rate (ga) and declines linearlyover the extraordinary growth period (which is assumed to last 2H periods) to astable growth rate (gn). It also assumes that the dividend payout and cost of equityare constant over time and are not affected by the shifting growth rates.
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Technical Analysis
Technical analysis is a security analysis discipline for forecasting the direction of prices
through the study of past market data, primarily price and volume.Technical analysts seek to
identify price patterns and trends in financial markets and attempt to exploit those patterns.
While technicians use various methods and tools, the study of price charts is primary.
Technicians especially search for archetypal patterns, such as the well-known head and
shoulders or double top reversal patterns, study indicators such as moving averages, and look
for forms such as lines of support, resistance, channels, and more obscure formations such as
flags, pennants, balance days and cup and handle patterns.
Technical analysis is frequently contrasted with fundamental analysis. Technical analysis
holds that prices already reflect all such influences before investors are aware of them, hence
the study of price action alone. Some traders use technical or fundamental analysis
exclusively, while others use both types to make trading decisions.
Users of technical analysis are most often called technicians or market technicians. Some
prefer the term technical market analyst or simply market analyst. An older term, chartist, is
sometimes used, but as the discipline has expanded and modernized the use of the term
chartist has become less popular.
Technical analysis employs models and trading rules based on price and volume
transformations, such as the relative strength index, moving averages, regressions, inter-
market and intra-market price correlations, cycles or, classically, through recognition of chart
patterns.
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Some Principles:
Market action discounts everything
Based on the premise that all relevant information is already reflected by prices, pure
technical analysts believe it is redundant to do fundamental analysis they say news and
news events do not significantly influence price
Prices move in trends
A market trend is a putative tendency of a financial market to move in a particular direction
over time.These trends are classified as secular trends for long time frames, primary trends
for medium time frames, and secondary trends lasting short times. The terms bull market andbear market describe upward and downward market trends respectively.
Some market trends
Bull market:
A bull market is associated with increasing investor confidence, and increased investing in
anticipation of future price increases (capital gains). A bullish trend in the stock market often
begins before the general economy shows clear signs of recovery. It is a win-win situation forthe investors.
Example- India's Bombay Stock Exchange Index, SENSEX, was in a bull market trend for
about five years from April 2003 to January 2008 as it increased from 2,900 points to 21,000
points
Bear market:
A bear market is a general decline in the stock market over a period of time.[6] It is a
transition from high investor optimism to widespread investor fear and pessimism.
Example - A bear market followed the Wall Street Crash of 1929
Market top
A market top (or market high) is usually not a dramatic event. The market has simply reached
the highest point that it will, for some time (usually a few years). It is retroactively defined as
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market participants are not aware of it as it happens. A decline then follows, usually
gradually at first and later with more rapidity.
Example - The peak of the dot-com bubble (as measured by the NASDAQ-100) occurred on
March 24, 2000. The index closed at 4,704.73 and has not since returned to that level.
Market bottom:
A market bottom is a trend reversal, the end of a market downturn, and precedes the
beginning of an upward moving trend (bull market).
It is very difficult to identify a bottom (referred to by investors as "bottom picking") while it
is occurring. The upturn following a decline is often short-lived and prices might resume their
decline
Example - A decline associated with the subprime mortgage crisis starting at 14164.41 on 9
October 2007 and caused a bottom of 6,440.08 on 9 March 2009.
History tends to repeat itself
Technical analysts believe that investors collectively repeat the behavior of the investors that
preceded them. "Everyone wants in on the next Microsoft," "If this stock ever gets to $50
again, I will buy it," "This company's technology will revolutionize its industry, therefore this
stock will skyrocket" these are all examples of investor sentiment repeating itself. To a
technician, the emotions in the market may be irrational, but they exist. Because investor
behavior repeats itself so often, technicians believe that recognizable (and predictable) price
patterns will develop on a chart.
Technical analysis is not limited to charting, but it always considers price trends. For
example, many technicians monitor surveys of investor sentiment. These surveys gauge the
attitude of market participants, specifically whether they are bearish or bullish. Technicians
use these surveys to help determine whether a trend will continue or if a reversal could
develop; they are most likely to anticipate a change when the surveys report extreme investor
sentiment. Surveys that show overwhelming bullishness, for example, are evidence that an
uptrend may reversethe premise being that if most investors are bullish they have already
bought the market (anticipating higher prices). And because most investors are bullish and
invested, one assumes that few buyers remain. This leaves more potential sellers than buyers,
despite the bullish sentiment. This suggests that prices will trend down, and is an example of
contrarian trading.
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Some techniques of technical analysis-
Moving Averages:
Moving averages are one of the oldest and most popular technical analysis tools. Nowadays
we get moving averages readily available on most of the websites. Suppose if the stock price
is above its 25 day moving average, it means that investor's current expectations (the current
price of the stock) are higher than their average expectations over the last 25 days, and that
investors are becoming increasingly bullish on this stock and result is that the stock price may
go up. Conversely, if today's price is below then its 25 day moving average, it shows that
current expectations are below average expectations over the last 25 days and this may bring
stock price lower. The moving average is used to observe changes in prices. Investors
typically buy when a stock price rises above its moving average and sell when the price falls
below its moving average.
Line charts:
A chart shown below is the Line chart is the simplest type of chart.
As shown in the chart the single line represents the stocks closing price on each day. Dates
are displayed along the bottom of the chart and prices are displayed on the side(s).
Line charts are typically displayed using stocks closing prices.
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Candlestick charts
A candlestick chart displays stocks open high, low, and closing price.
These types of charts are the most popular type of all charts.
As shown below the top of each vertical bar represents the highest price of the stock and the
bottom of the bar represents the lowest price of the stock it reached on that day. A closing
price (last price) is displayed on the right side of the bar.
The red bar indicates that stock has closed lower then its open price and white bar indicates
that the stock has closed above its open price. At the bottom we can see time frame.
Support and Resistance
Support and Resistance prices are very important in stock market and in technical analysis.
Support - The support level is considered when the stock is falling down. The support is the
level at which the stock price gets support when the stock is falling down, and if the support
breaks then that stock may witness further down movement.
Resistance - The Resistance is taken into picture when stock price is moving up. The
resistance level is the price at which stock price get stoppage and if this stoppage/resistance
breaks then further upside is expected in that stock price.
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Generally, stocks comes to support and resistance points and get constant before further
movement and further movement either down side or upside depends on buyers expectation
and other technical aspects.
The breaking of support and resistance levels can also be triggered by fundamental changes,and that is up to investor expectations (fundamental changes like changes in profits,
expansion, takeover, management etc).
Indicators
Indicators are used to predict or analyze future changes in stock price.
There are hundreds of indicators. Some most widely used indicators are -
MACD (Moving Average Convergence Divergence)
This is one of the widely used indicator. MACD stands for Moving Average Convergence
Divergence. This indicator is based on moving averages
Nowadays MACD is readily available on any web sites.
The MACD is calculated by subtracting a long term moving average of a security's price
from a short term moving average of its price. The result is that MACD is an indicator that
goes above and below zero.
How to trade on MACD indicator?
Have a look on following chart of MACD -
Red line is short term moving average and blue line is long term moving average.
When the short term moving average crosses above the long term moving average (as shown
in following chart) in the upward direction, it means investor expectations are becoming
bullish and there may be rise in stock price. As it is shown in following chart with green lines
how price increases.
When the short term moving average crosses below the long term moving average (as shown
in following chart) in the downward direction, it means investor expectations are becoming
bearish and there may be decrease in stock price. As it shown in following chart with red
lines lines how orice decreases.
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Factors that affect stock market
Market sentiment: The price of the stock of a company is affected most of the time by the
general market direction during a session. In a bull market, the stock price of mostcompanies will rise and in a bear market the stock price of most companies will fall. One can
gauge the market sentiment by looking at stock indexes or its future price movement. The
stock indexes are S&P 500, Dow Jones Industrial Index, Nasdaq (USA), ASX100, ASX
(Australia), Nikkei 225 (Japan), Euronext 100, Euronext 150 (Europe Union), DAX,
TECDAX (Germany), FTSE 100, FTSE All Shares, FTSE Techmark (United Kingdom).
The performance of the industry: The performance of the sector or industry that the company
is in also plays in part in determining the stock price of the company. Most of the times, thestock price of the companies in the same industry will move in tandem with each other. This
is because market conditions will generally affects the companies in the same industry the
same way. Of course, there are exceptions to this. Sometimes, the stock price of a company
will benefit from a piece of bad news in its competitor if the companies are competing for the
same target market.
The earning results and earning guidance: The main objective of a company is to make
profit. Therefore, investors and traders always assess a company based on its Earning PerShare (bottom line) and Revenue (top line) and its future earning potential. In US, companies
generally report the earnings results every quarter-yearly. A company that achieves good
earning results (EPS and Revenue) expects a boost in its share price and one that delivers
poor earning result shall see a beating in its share price. Sometimes, besides reporting the
EPS and Revenue for the past quarter, a company may also issue guidance (expected value)
for the EPS and Revenue in coming quarter or coming years. This is also closely monitored
by investors and is an important factor that will affect the company stock price.
Take-over or merger: In general, a company being taken-over is anticipated to get a stock
price boost and the company taking over another company shall experience a drop in its share
price. This is assuming that the company is being taken over at a premium, meaning it is
being bought over at a higher price than its last traded stock price. Depends on the agreed
term, a company can be bought over by cash or stock (of the acquirer) or a combination of
the two. In some minority cases, the stock price of the acquirer may get a boost if it is
perceived that the acquisition shall contribute to its earning or revenue in the near future.
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New product introduction to markets or introduction of an existing product to new markets:The introduction of new product to market is seen as a revenue enhancer for a company. Thisalso applies to an existing product that breaks into new markets. Sometimes, the prospect ofa new product introduction suffices to improve the stock price of a company, this is oftenobserved in surges in stock prices of pharmaceuticals companies after the announcement
of successful clinical trials, or FDA approvals for new drugs.
New major contracts or major Government Orders: A company that is able to obtain new
major contracts or major government order is expected to see a bull run in its stock price.
Those companies that fail in the contract bidding normally experience the fate of sell-off in
its stocks.
Share buy-back: The act of share buy-back by a company will reduce the number of share
available in the open market. Due to the law of supply and demand, a reduction in share
available for trading in this case will cause a drop in supply, this will normally help increase
the share price. Also, the continuing buying back of share of a company will also acts as a
support for the share price that helps to maintain or increase the share price. The investors
may also see the share buy-back by company as a confidence booster for them in the
company itself. Therefore, share buy-back is quite often used as a tool to deliver value to the
investors.
Dividend: After the announcement of a dividend. The stock price may increase by an
amount close to the dividend per share value. However, the stock price may drop on the ex-
dividend date by the dividend per share amount. This is because anyone buying a stock on or
after the ex-dividend date are not entitled to the corresponding dividend payment.
Stock splits: Stock split in theory, should not have an impact to the stock price. However, it
is generally observed that the stock price increases (after taking into account the increase in
the number of share) after a stock split. Some attributed to the better affordability of thestock after stock split, some attributed this to the perception ofcheap stockdue to the lower
stock price after the stock split. Some however believes that stock split has no real impact on
the stock price (effective stock price, taking into account the change in number of shares), as
the stock price will increase regardless of stock split.
Insider trading: Insiders include CEO, COO, CFO, Chairman, board directors etc, who has
first hand information about the operations and the financial status of a company. Therefore,
the buying or selling of stocks by these insiders may herald some good or bad news about thecompany. This is being watched closely by savvy stock investors/traders. However, do be
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aware that due to compensation package that comes in the form of stock or stock options, the
insiders may sell their stocks/stock options to cash-in their compensation benefits. So in this
case, it may not signal anything significant about the company. A savvy investor should
know how to observe and filter out this piece of information from your investment or trading
decisions.
Investment Gurus / Hedge Funds trading: The investment decision of highly revered
investment gurus like Warren Buffett, George Soros, Carl Icahn are closely monitored by
investors and therefore will move the market. Hedge fund stock buying and selling are
another source of information regarding the flow of "smart money".
Analyst upgrade / downgrades: Analyst upgrade and downgrade to a stock may have positiveor negative impact to the stock prices. However, one needs to be wary of the fact that quite
often analysts' upgrades or downgrades happen "after" some important news about a
company. For example following a extremely disappointing earning result, many analysts
will likely to downgrade the company stock. So, it is very likely that by then the stock price
of that company has already priced-in the poor earning result, and analyst downgrade may
not have further impact to the stock price.
Addition/Removal to/from Stock Index: Stock Index Fund are those funds that invest inthose company stocks that are included in a particular stock index (e.g. S&P 500, Nasdaq-
100, Dow Jones U.S. Large Cap etc.) . Therefore, an inclusion of a company stock to a stock
index will generate buying interest in the stock for these stock index fund managers. The
stock index fund managers will dispose of the stock that has been removed from the stock
index.
News: When you get positive news about a company then it can increase the buying interest
in the market. On the other hand, when there is a negative press release, it can ruin the
prospect of a stock. In this case you should remember that news should not matter much but
the overall performance of the company matters more. So, news is another factor affecting
stock price.
Others: These include news about new technology, patent approval, war, natural disaster,product recalls and lawsuits that shall have positive and negative impact to the relevantcompany stocks. The health or mishap of a key leader in a company may also affect thestock price of the company.
http://www.articlesbase.com/investing-articles/the-10-factors-that-affect-and-predict-stock-prices-617610.htmlhttp://www.articlesbase.com/investing-articles/the-10-factors-that-affect-and-predict-stock-prices-617610.html7/31/2019 An Internship Experience Report by Ayush Gupta]
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Some Golden Rules for Investors
1. Don't be greedy: Do keep in mind that it is not always that one would be able to buy a
stock when it is as its lowest price and sell it when it is at its highest. Do not be greedy. Invest
smartly, with some professional help and some study on your own.
2. Avoid 'hot tips': Stay away from 'experts'. There are a large number of so-called experts
floating all around. Stay away from them. Our broker, neighbour, cousin or business
journalist friend may suggest surefire picks. Success may not come as fast, as we are in
unchartered territory. Use your own judgement.
3. Avoid trading/timing the market: Like in the previous point, don't try to time the market by
betting on when the stock price will be highest or lowest. In most cases, such 'timing' leads to
huge monetary losses and mental tension.
4. Avoid actions based on sentiments: Don't be emotionally attached to stocks: Some people,for sentimental reasons, tend to stick with certain stocks even though they might not bring
them good value.
5. Don't panic if the market drops: Be patient and hold on to the scrip until some semblance
of sanity prevails in the market. Don't rush to sell the stock. Hold onto your winners and sell
your losers. Consult a professional and then act accordingly.
6. Stay invested, possibly continue to invest more: It is natural to book profits with the
markets at higher levels. This should be done, but we suggest people should also stay
invested in the equity markets.
7. Buy stocks if there is a 5-8 per cent drop in the market (in a Bull Market) : In a bull
market, a 5-8 per cent drop in prices offers you a good opportunity to buy scrips.
8. Avoid checking the price of stocks or mutual funds after you've sold them: The grass on
the other side will always seem greener and can rarely bring you happiness.
9. Diversify: At these record levels, there will be certain amount of risks. One should
diversify a bit, looking at stocks, mutual funds, commodities and gold (for a longer-term).
10. Don't expect to be a millionaire overnight. Patience pays, so be realistic.
11. Distinguish between stocks for keeps and trading: When you buy a stock, be clear about
your objective behind the purchase - whether you have bought the stock as an investment or a
trading bet. Trading stocks are not bad as such. But they require you to work harder and act
quicker.
Buy with adequate margin of safety: That's where attractive purchase prices can help. As a
matter of fact, selling stocks is no different from buying them. Keep a sufficient margin of
safety when buying a stock and don't rely on making a good sale ever.
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12. Sell when value is realised: Some stocks may rise sooner than you may have anticipated.
In a frenzied bull run, investors may see their target prices being met in a matter of days.
Here time should not be of any consequence.
If you feel that your investments are adequately valued, you should exit regardless of how
long you have held them. There are times when stocks begin to quote at extraordinarily high
levels within a short period after you have invested in them.
Although investors are often advised to invest for the long term in equities, if you get
extraordinarily high returns within a short span, it is wiser to get out, say experts.
13. If you realise a mistake, exit: Even while we are talking about selling stocks in a bull
market, experts emphasise that if investors make mistakes, they should exit immediately even
at a loss.
If you realise your analysis was flawed or that you got carried away for any reason, it's goodto get rid of a stock as soon as possible. Waiting for a better price at such instances may
prove to be quite dangerous.
14. Try to invest in things you know .
15. Try to adopt a long-term perspective with regard to investing.
16. Know your risk: It is critical to understand where you stand and where you want to be.
What level and amount of investment are you comfortable with, regardless of what market
experts tell you? Therefore, take some time to evaluate your risk-bearing capacity. This is a
golden rule that should be applied at almost all times.
17. Play safe, invest in a mutual fund: For those who are still not sure about their research, we
suggest you invest through a mutual fund. The advantages would be the risks would be
minimized and you would stay invested for a longer-term in equities.
18. Encash when stock prices dip: We reiterate it is important to bring some money home,
when you have made profits in earlier times. 19. Don't blindly follow media reports on
corporate developments, as they could be misleading.
19. Don't blindly imitate investment decisions of others who may have profited from theirinvestment decisions.
20. Don't fall prey to promises of guaranteed return
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Derivatives Market
A derivative is a financial instrument - or more simply, an agreement between two people or
two parties - that has a value determined by the price of something else (called the
underlying). It is a financial contract with a value linked to the expected future price
movements of the asset it is linked to - such as a share or a currency. There are many kinds of
derivatives, with the most notable being swaps, futures, and options.
Derivatives are usually broadly categorized by the:
relationship between the underlying and the derivative (e.g., forward, option, swap) type of underlying (e.g., equity derivatives, foreign exchange derivatives, interest rate
derivatives, commodity derivatives or credit derivatives) market in which they trade (e.g., exchange-traded or over-the-counter) pay-off profile (Some derivatives have non-linear payoff diagrams due to embedded
optionality)
Another arbitrary distinction is between:
vanilla derivatives (simple and more common) and exotic derivatives (more complicated and specialized)
Derivatives are used by investors to
speculate and to make a profit if the value of the underlying asset moves the way they
expect (e.g., moves in a given direction, stays in or out of a specified range, reaches a
certain level)
hedge or mitigate risk in the underlying, by entering into a derivative contract whose
value moves in the opposite direction to their underlying position and cancels part or
all of it out
arbitrage when the current buying price of an asset falls below the price specified in a
futures contract to sell the asset.
http://en.wikipedia.org/wiki/Underlyinghttp://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Option_%28finance%29http://en.wikipedia.org/wiki/Swap_%28finance%29http://en.wikipedia.org/wiki/Equity_derivativehttp://en.wikipedia.org/wiki/Foreign_exchange_derivativehttp://en.wikipedia.org/wiki/Interest_rate_derivativehttp://en.wikipedia.org/wiki/Interest_rate_derivativehttp://en.wikipedia.org/wiki/Credit_derivativeshttp://en.wikipedia.org/wiki/Over-the-counter_%28finance%29http://en.wikipedia.org/wiki/Over-the-counter_%28finance%29http://en.wikipedia.org/wiki/Credit_derivativeshttp://en.wikipedia.org/wiki/Interest_rate_derivativehttp://en.wikipedia.org/wiki/Interest_rate_derivativehttp://en.wikipedia.org/wiki/Foreign_exchange_derivativehttp://en.wikipedia.org/wiki/Equity_derivativehttp://en.wikipedia.org/wiki/Swap_%28finance%29http://en.wikipedia.org/wiki/Option_%28finance%29http://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Underlying7/31/2019 An Internship Experience Report by Ayush Gupta]
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Types of derivatives markets:
In broad terms, there are two distinct groups of derivative contracts, which are distinguished
by the way they are traded in the market:
Over-the-counter (OTC) derivatives are contracts that are traded (and privatelynegotiated) directly between two parties, without going through an exchange or other
intermediary. Products such as swaps, forward rate agreements, and exotic options are
almost always traded in this way. The OTC derivative market is the largest market for
derivatives, and is largely unregulated with respect to disclosure of information
between the parties, since the OTC market is made up of banks and other highly
sophisticated parties, such as hedge funds. Reporting of OTC amounts are difficult
because trades can occur in private, without activity being visible on any exchange.
According to the Bank for International Settlements, the total outstanding notional
amount is $684 trillion (as of June 2008). Of this total notional amount, 67% are
interest rate contracts, 8% are credit default swaps (CDS), 9% are foreign exchange
contracts, 2% are commodity contracts, 1% are equity contracts, and 12% are other.
Because OTC derivatives are not traded on an exchange, there is no central counter-
party. Therefore, they are subject to counter-party risk, like an ordinary contract, since
each counter-party relies on the other to perform.
Exchange-traded derivative contracts(ETD) are those derivatives instruments that
are traded via specialized derivatives exchanges or other exchanges. A derivatives
exchange is a market where individuals trade standardized contracts that have been
defined by the exchange. A derivatives exchange acts as an intermediary to all relatedtransactions, and takes Initial margin from both sides of the trade to act as a
guarantee. The world's largest derivatives exchanges (by number of transactions) are
the Korea Exchange (which lists KOSPI Index Futures & Options), Eurex (which lists
a wide range of European products such as interest rate & index products), and CME
Group (made up of the 2007 merger of the Chicago Mercantile Exchange and the
Chicago Board of Trade and the 2008 acquisition of the New York Mercantile
Exchange). According to BIS, the combined turnover in the world's derivatives
exchanges totaled USD 344 trillion during Q4 2005. Some types of derivative
instruments also may trade on traditional exchanges. For instance, hybrid instruments
such as convertible bonds and/or convertible preferred may be listed on stock or bond
exchanges. Also, warrants (or "rights") may be listed on equity exchanges.
Performance Rights, Cash xPRTs and various other instruments that essentially
consist of a complex set of options bundled into a simple package are routinely listed
on equity exchanges. Like other derivatives, these publicly traded derivatives provide
investors access to risk/reward and volatility characteristics that, while related to an
underlying commodity, nonetheless are distinctive.
http://en.wikipedia.org/wiki/Over-the-counter_%28finance%29http://en.wikipedia.org/wiki/Swap_%28finance%29http://en.wikipedia.org/wiki/Forward_rate_agreementhttp://en.wikipedia.org/wiki/Exotic_optionhttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Bank_for_International_Settlementshttp://en.wikipedia.org/wiki/Interest_rate_derivativehttp://en.wikipedia.org/wiki/Credit_default_swaphttp://en.wikipedia.org/wiki/Credit_risk#Counterparty_riskhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Exchange-traded_derivative_contracthttp://en.wikipedia.org/wiki/Exchange-traded_derivative_contracthttp://en.wikipedia.org/wiki/Derivatives_exchangehttp://en.wikipedia.org/wiki/Initial_marginhttp://en.wikipedia.org/wiki/Korea_Exchangehttp://en.wikipedia.org/wiki/KOSPIhttp://en.wikipedia.org/wiki/Eurexhttp://en.wikipedia.org/wiki/CME_Grouphttp://en.wikipedia.org/wiki/CME_Grouphttp://en.wikipedia.org/wiki/Chicago_Mercantile_Exchangehttp://en.wikipedia.org/wiki/Chicago_Board_of_Tradehttp://en.wikipedia.org/wiki/New_York_Mercantile_Exchangehttp://en.wikipedia.org/wiki/New_York_Mercantile_Exchangehttp://en.wikipedia.org/wiki/Warrant_%28finance%29http://en.wikipedia.org/wiki/Warrant_%28finance%29http://en.wikipedia.org/wiki/New_York_Mercantile_Exchangehttp://en.wikipedia.org/wiki/New_York_Mercantile_Exchangehttp://en.wikipedia.org/wiki/Chicago_Board_of_Tradehttp://en.wikipedia.org/wiki/Chicago_Mercantile_Exchangehttp://en.wikipedia.org/wiki/CME_Grouphttp://en.wikipedia.org/wiki/CME_Grouphttp://en.wikipedia.org/wiki/Eurexhttp://en.wikipedia.org/wiki/KOSPIhttp://en.wikipedia.org/wiki/Korea_Exchangehttp://en.wikipedia.org/wiki/Initial_marginhttp://en.wikipedia.org/wiki/Derivatives_exchangehttp://en.wikipedia.org/wiki/Exchange-traded_derivative_contracthttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Credit_risk#Counterparty_riskhttp://en.wikipedia.org/wiki/Credit_default_swaphttp://en.wikipedia.org/wiki/Interest_rate_derivativehttp://en.wikipedia.org/wiki/Bank_for_International_Settlementshttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Exotic_optionhttp://en.wikipedia.org/wiki/Forward_rate_agreementhttp://en.wikipedia.org/wiki/Swap_%28finance%29http://en.wikipedia.org/wiki/Over-the-counter_%28finance%297/31/2019 An Internship Experience Report by Ayush Gupta]
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Common derivative contract types
There are three major classes of derivatives:
1. Futures/Forwards are contracts to buy or sell an asset on or before a future date at a
price specified today. A futures contract differs from a forward contract in that thefutures contract is a standardized contract written by a clearing house that operates an
exchange where the contract can be bought and sold, whereas a forward contract is a
non-standardized contract written by the parties themselves.
2. Options are contracts that give the owner the right, but not the obligation, to buy (in
the case of a call option) or sell (in the case of a put option) an asset. The price at
which the sale takes place is known as the strike price, and is specified at the time the
parties enter into the option. The option contract also specifies a maturity date. In the
case of a European option, the owner has the right to require the sale to take place on
(but not before) the maturity date; in the case of an American option, the owner canrequire the sale to take place at any time up to the maturity date. If the owner of the
contract exercises this right, the counter-party has the obligation to carry out the
transaction.
3. Swaps are contracts to exchange cash (flows) on or before a specified future date
based on the underlying value of currencies/exchange rates, bonds/interest rates,
commodities, stocks or other assets.
More complex derivatives can be created by combining the elements of these basic types. For
example, the holder of a swaption has the right, but not the obligation, to enter into a swap onor before a specified future date.
http://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Contractshttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Clearing_house_%28finance%29http://en.wikipedia.org/wiki/Option_%28finance%29http://en.wikipedia.org/wiki/Call_optionhttp://en.wikipedia.org/wiki/Put_optionhttp://en.wikipedia.org/wiki/Strike_pricehttp://en.wikipedia.org/wiki/European_optionhttp://en.wikipedia.org/wiki/American_optionhttp://en.wikipedia.org/wiki/Swap_%28finance%29http://en.wikipedia.org/wiki/Swaptionhttp://en.wikipedia.org/wiki/Swaptionhttp://en.wikipedia.org/wiki/Swap_%28finance%29http://en.wikipedia.org/wiki/American_optionhttp://en.wikipedia.org/wiki/European_optionhttp://en.wikipedia.org/wiki/Strike_pricehttp://en.wikipedia.org/wiki/Put_optionhttp://en.wikipedia.org/wiki/Call_optionhttp://en.wikipedia.org/wiki/Option_%28finance%29http://en.wikipedia.org/wiki/Clearing_house_%28finance%29http://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Contractshttp://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Futures_contract7/31/2019 An Internship Experience Report by Ayush Gupta]
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A Study of Indian Individual Investors Behavior
Indian investor today have to endure a sluggish economy, the steep market declines prompted
by deteriorating revenues, alarming reports of scandals ranging from illegal corporateaccounting practices like that of Satyam to insider trading to make investment decisions.Stock markets performance is not simply the result of intelligible characteristics but also dueto the emotions that are still baffling to the analysts. Despite loads of informationbombarding from all directions, it is not the cold calculations of financial wizards, orcompanys performance or widely accepted criterion of stock performance butthe investorsirrational emotions like overconfidence, fear, risk aversion, etc., seem to decisively drive anddictate the fortunes of the market.
Indian investors are high income, well educated, salaried, independent in makinginvestment decisions and conservative investors. From the empirical study it was found thatirrespective of gender, most of the investors (41%) are found have low risk tolerance level
and many others (34%) have high risk tolerance level rather than moderate risk tolerancelevel. Television is the media that is largely influencing the investors decisions.
When the BSE Sensex was hovering around the 21000 levels in the month of January 2008,
irrational exuberance was the order of the day. Then, few investors would have foreseen a fall
of over 70% in the subsequent 12 months period. Expectedly, the exuberance has been
forgotten and despondency has set in. The market is so volatile that its behavior is
unpredictable. In the past couple of years, the movement of share prices exceeded all the
limits and had gone remarkably low and high levels. These dramatic prices of the shares ruin
the concept of intrinsic value and rational investment behavior. The traditional finance
theories assume that investors are rational but they are unable to explain the behavior and
pricing of the stock market completely.
Indian Investors have to endure a sluggish economy, the steep market declines prompted
by deteriorating revenues, including alarming reports of scandals like that of Satyam
computers, ranging from illegal corporate accounting practices to insider trading etc to invest
their money in the stock market. Whether or not Stock markets performance is simply the
result of intelligible characteristics of the investor is the question that still baffles the analysts.
Despite loads of information bombarding from all directions, it is not the cold calculations of
financial wizards, company performance or widely accepted criterion of stock performancebut the investors irrational emotions like overconfidence, fear, risk aversion, etc., seem to
decisively driving and dictating the fortunes of the market is increasingly realized by the
analysts.
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Need for the Study
Stock market has been subjected to speculations and inefficiencies, which are beached
to the rationality of the investor. Traditional finance theory is based on the two assumptions.
Firstly, investors make rational decisions; and secondly investors are unbiased in their
predictions about future returns of the stock. However financial economist have now realized
that the long held assumptions of traditional finance theory are wrong and found that
investors can be irrational and make predictable errors about the return on investment on their
investments.
This empirical study on Individual Investors Behavior is an attempt to know the profile of
the investor and also know the characteristics of the investors so as to know their preference
with respect to their investments. The study also tries to unravel the influence of demographic
factors like gender and age on risk tolerance level of the investor.
Objectives of the Study
(1) To develop a profile of sample Indian individual investor in terms of their demographics.
(2) To identify the objective of investment plan of an Indian individual investor.
(3) To know the preferred investment avenues of the Indian individual investor.
(4) To know the extent of financial literacy of individual investors
(5) To identify the preferred sources of information influencing investment decisions.
(6) To know the risk tolerance level of the individual investor
(7) To know the demographic factors (Gender and Age) of the investor and his/her risk
tolerance level.
Sample DesignMany investors were reluctant to divulge their investment details especially the amount of
money invested so; referral sampling method is used for this empirical study. It has been
carried out with a sample size of 150 investors.
Analysis of the Survey
Table 1 and Table 2 show the Demographics and other characteristics of the sample
investors.
Table 1: Demographics of the Sample Investor.
Parameter No. of Investors Percentage
Gender
Male 120 80
Female 30 20
Total 150 100
Age (in years)
Below 35 55 36.735-50 80 53.3
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51-60 10 06.7
60 and above 5 03.3
Total 150 100
Marital Status
Unmarried 33 22Married 117 78
Total 150 100
Employment Status
Salaried 98 65.3
Self-Employed(Business) 43 28.7
Retired 9 06
Total 150 100
Monthly Earnings (in Rs.)Up to Rs. 10000 0 0
Rs. 10001-20000 6 04
Rs. 20001-30000 35 23.3
Rs. 30000 and above 109 72.7
Total 150 100
Education Level
Under Graduate 15 10
Graduate 65 43.3
Post Graduate & Above 70 46.6
Total 150 100
Financially Responsible
Only yourself 18 12.0
1 person in addition to yourself 16 10.7
2-3 persons in addition to yourself 53 35.3
4-5 persons in addition to yourself 49 32.7
More than 5 person besides yourself 14 09.3
Total 150 100
OccupationAccounts/Finance/Investment 65 43.3
Professionals 58 38.7
Others 27 18.0
Total 150 100.0
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Interpretation
Table 1 above shows, that 120 (80%) of the investors are men and the rest 30(20%) are
females. Generally males bear the financial responsibility in Indian society, and therefore
they have to make investment (and other) decisions to fulfill the financial obligations. Whenit comes to age, it was found that 36.7% are young and significant number (53.3%)of them
are in the age group of 35 to 50. The marital status of 78% of the investors was found to be
married and the rest are unmarried. This is because a married individual is considered to have
dependents so relatively more invested and involved in making financial investments. Nearly
65% of the investors belong to the salaried class, 29% were business class and the rest were
retired. It was found that 109(73%) of investors whose monthly earnings above rupees 30000
are interested in investments since these people have surplus amount due to which they are
able to think of investments. 70(47%) of the individual investors covered in the study are
postgraduates; 65(43%) investors are graduates and 15(10%) of the investors are under-
graduates. From table 1, it is interesting to note that most investors (covered in the study) can
be said to possess higher education (Bachelor Degree and above), and this factor will increase
the reliability of conclusions drawn about the matters under investigation. 65(43%) of the
investors covered in the study have been found to be in professions related to finance,
accountancy, investment, banking, broking, and financial management etc and 58(39%) of
the respondents are software engineers, architects, medical and dental practitioners, teachers,
lawyers etc. 27(18%) of the respondents can be said to belong to 'non-accounting or non-
financial' occupations and the other occupations.
Table 2: Other Characteristics of Sample Investor.
Parameter Number of Investors Percentage
Reading Behavior4 or more sources 59 39.3
23 sources 40 26.7
Only 1 source 51 34.0
Total 150 100.0
Investment Decisions are basedTaken on own initiative 111 74.0
Taken on own initiative but with helpfrom an expert
27 18.0
Made by expert on investors behalf 12 08.0
Total 150 100.0
Regularity of Investment DecisionsFrequently 89 59.3
Not so frequently 61 40.7
Total 150 100.0
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Interpretation:
The study has attempted to enquire about other characteristics of investor such as the reading
behavior of the Investors. From table 2, it is noteworthy to find that 59 (39%) of the investorsread four or more sources, 40 (27%) of the investors read two to three sources, 51 (34%) of
the investors only one source. One may infer from the figures of table 2 that most investors
tend not to depend upon expert advice and help while making investment decisions.
However, the majority of the investors 111 (74%) make investment decisions without the
help and advice from experts; only 27 (18%) investors consult some experts, for advice in
investment decisions. And 12 (8%) of the investors allow the expert to take decision on their
behalf. Most of the investors 89 (59%) make investment decisions on a regular basis.
Objective of Investment Plan
When investor was queried about his/her objective behind any investment, given that all theavailable investment avenues available to him will assure safety, liquidity and tax benefit, theobjective of investment plan of the investors is shown in the following table 3.
Table 3: Objectives of investment plan.
Parameter Number of Investors PercentageObjective of investment PlanCapital Appreciation 63 42
Balance of capital appreciation andcurrent income
65 43.3
Supplement to their current income 22 14.7
Total 150 100
Based on table 3, we can conclude that the investors objective of investment plan is capitalappreciation or balance of capital appreciation and current income. It is clear that investorsinvest to accumulate wealth rather as an avenue to supplement their income.
Preferred Investment Avenues
Based on the quantity of risk, the investment avenues are classified as follows - FixedDeposits/Bonds, Insurance schemes, Mutual Fund Schemes, Equities, Commoditiesand Real Estate. Investors were asked to choose preferred avenues.
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Table 4: Preferred Investment Avenues.
Investment Avenues Percentage
Fixed Deposits/ Bonds/PPF 26.7
Insurance Schemes 23.3
Mutual Fund Schemes 18Equities 20
Commodities/ Derivatives 10
Real Estate 2
Total 100
From table 4, it can be concluded that the investors prefer FDs/Bonds/PPFs avenues thaninsurance schemes next to Equities and Mutual Funds. It was interesting to know that Indianindividual investors still prefer to invest their surplus amount in risk free investment avenuesnext to insurances schemes. Table 4 confirms that Indian investors are conservative investors.
Financial literacy
When investors were queried about their financial literacy i.e. their ability or knowledgeabout financial terms or aspects of investments, it was found that most of the investors arefinancial illiterates. And the responses are shown in table 5.
Table 5: Financial literacy.
Parameters No. of People Percentage
Financial Literates 56 37.3
Financial Illiterates 94 62.7
Total 150 100.0
In spite of majority of the occupants (65) are from accounts and financial related jobs most ofthem astonishingly expressed ignorance about the mechanism of investments, and thedynamics of risk and returns.
Sources of Investment Information
When investors were asked to rank their various sources of investment information,the following Weighted Mean Values were obtained which are given in table 6.
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Table 6: Sources of investment information.
Sources of Investment
InformationNo. of people who opt for
News Paper/ Magazines 103
Electronic Media (T.V) 128
Peer group/ Friends 47
Broker/ Financial Advisor 36
Internet 18
Most of the investors get their information related to investment through electronic media(TV- NDTV Profit, CNBC and some business news channels) next to print media (Newspaper/ Business news paper/ Magazines). This could be because Print/Electronic media iseasy and readily accessible investment information when compared to the other sources ofinvestment information.
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Findings
The study reveals that male investors dominate the investment market in India.
Most of the investors possess higher education like graduation and above.
Majority of the Investors belong to accountancy and related employment, non-financial management and some other occupations are very few.
Most investors read two or more sources of information to make investmentdecisions.
The investors decisions are based on their own initiative.
The investment habit was noted in a majority of the people who participated in thestudy.
The objective of investment was either capital appreciation or balance of capitalappreciation and current income.
Investors prefer to park their funds in avenues like PPF/FD/Bonds next to Equitiesand Mutual Funds Scheme.
Most of the investors get their information related to investment through electronicmedia (TV) next to print media (News paper/ Business news paper/
Magazines)
Most of the investors are financial illiterates.
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Conclusion
The Present study has important implications for investment managers as it has come outwith certain interesting facets of an individual investor. The individual investor still prefers toinvest in financial products which give risk free returns. This confirms that Indian investorseven if they are of high income, well educated, salaried, independent are conservativeinvestors who prefer to play safe. The investment product designers can design productswhich can cater to the investors who are low risk tolerant and use TV as a marketing media asthey seem to spend long time watching TVs.
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Bibliography
Google.com
Investment Analysys and Portfilio Management - Prasannna Chandra
About.com
Wikipedia.org