Chapter 1: Introduction

1.1. Introduction
1.1.1. History & Evolution of Stock Exchanges in India
Before we explore the dynamic history of Stock Market, let us first know what are:
a) Stock Markets,
b) Stock exchanges.
a) Stock Markets: Stock Market is a market where the trading of company stock, both listed
securities and unlisted takes place. It is different from stock exchange because it includes all the
national stock exchanges of the country. For example, we use the term, "the stock market was up
today" or "the stock market bubble."
b) Stock Exchanges: Stock Exchanges are an organized marketplace, either corporation or
mutual organization, where members of the organization gather to trade company stocks or other
securities. The members may act either as agents for their customers, or as principals for their
own accounts. Stock exchanges also facilitates for the issue and redemption of securities and
other financial instruments including the payment of income and dividends. The record keeping
is central but trade is linked to such physical place because modern markets are computerized.
The trade on an exchange is only by members and stock broker do have a seat on the exchange.

1.1.2. History of Indian Stock Market

Indian stock market marks to be one of the oldest stock market in Asia. It dates back to the close
of 18th century when the East India Company used to transact loan securities. In the 1830s,
trading on corporate stocks and shares in Bank and Cotton presses took place in Bombay.
Though the trading was broad but the brokers were hardly half dozen during 1840 and 1850.
An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall
of Bombay from the mid-1850s, each investing a (then) princely amount of Rupee 1. This
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banyan tree still stands in the Horniman Circle Park, Mumbai. In 1860, the exchange flourished
with 60 brokers. In fact the 'Share Mania' in India began with the American Civil War broke and
the cotton supply from the US to Europe stopped. Further the brokers increased to 250. The
informal group of stockbrokers organized themselves as the Native Share and Stockbrokers
Association which, in 1875, was formally organized as the Bombay Stock Exchange (BSE).
BSE was shifted to an old building near the Town Hall. In 1928, the plot of land on which the
BSE building now stands (at the intersection of Dalal Street, Bombay Samachar Marg and
Hammam Street in downtown Mumbai) was acquired, and a building was constructed and
occupied in 1930.
Premchand Roychand was a leading stockbroker of that time, and he assisted in setting out
traditions, conventions, and procedures for the trading of stocks at Bombay Stock Exchange and
they are still being followed.
Several stock broking firms in Mumbai were family run enterprises, and were named after the
heads of the family.
The following is the list of some of the initial members of the exchange, and who are still
running their respective business:

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

Jamnadas Morarjee (now known as JM)

Champaklal Devidas (now called Cifco Finance)

Brijmohan Laxminarayan

In 1956, the Government of India recognized the Bombay Stock Exchange as the first stock
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exchange in the country under the Securities Contracts (Regulation) Act.

The most decisive period in the history of the BSE took place after 1992. In the aftermath of a
major scandal with market manipulation involving a BSE member named Harshad Mehta, BSE
responded to calls for reform with intransigence. The foot-dragging by the BSE helped radicalize
the position of the government, which encouraged the creation of the National Stock Exchange
(NSE), which created an electronic marketplace. NSE started trading on 4 November 1994.
Within less than a year, NSE turnover exceeded the BSE. BSE rapidly automated, but it never
caught up with NSE spot market turnover. The second strategic failure at BSE came in the
following two years. NSE embarked on the launch of equity derivatives trading. BSE responded
by political effort, with a friendly SEBI chairman (D. R. Mehta) aimed at blocking equity
derivatives trading. The BSE and D. R. Mehta succeeded in delaying the onset of equity
derivatives trading by roughly five years. But this trading, and the accompanying shift of the spot
market to rolling settlement, did come along in 2000 and 2001 - helped by another major scandal
at BSE involving the then President Mr. Anand Rathi. NSE scored nearly 100% market share in
the runaway success of equity derivatives trading, thus consigning BSE into clearly second
place. Today, NSE has roughly 66% of equity spot turnover and roughly 100% of equity
derivatives turnover. Stock Exchange provides a trading platform, where buyers and sellers can
meet to transact in securities.

1.2. Objectives of the Study

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

To study factors Affecting their investment behavior.

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

1.3. Research Methodology

1.3.1. Primary Data
The primary data was collected by conducting a semi structure interview with the individual
investors and obtained necessary information through sample survey conducted by handing out
the detailed questionnaire to the investors.
A) Sample survey
This study follows the survey research methodology. A questionnaire was constructed to measure
the investment pattern of individuals on the basis of age and gender. The questionnaire was
administered to the total number of 128 individuals. Here we are using minimum age as 18 years
since we are considering that an individual starts earning after this age.
B) Sample
The target of 128 individual chosen for this study was the investor, who regularly invests. They
will invest fewer amounts but invest regularly according to their earning.
C) Survey Instruments
A four page questionnaire consisting of two sections, one section deals with demographic
information such as age, gender, income(monthly) and educational qualification. Another
section, measures the investment pattern of individuals on the basis of financial statements,
accounting instruments, economic variables, source of investment advice, company factor, stock
price, total investment, government policies, scams and investment objectives.
Each eight questions consisted of different options which were ranked on the basis of their
importance ranging from 1(very important) to 5(not important). Two questions were answered in
yes or no. One question consisted of different alternatives and investor had to select one
appropriate answer.
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1.3.2. Secondary Data:

Relevant theoretical information was obtained from different reference book, available in college
library and central library. Different journals, Government website, Business websites also
proved instrumental for researching necessary data relevant for our study.

1.4. Limitations of the Study

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

1.4.2. Factors
We focused on technical, financial and economic factors which help the investors to evaluate and
choose stock of the company and eventually affecting investors behavior with regards to stock
investment decision.

1.4.3. Investor grievance redressal mechanism

We restricted ourselves into just measuring satisfaction level of investor with investor grievance
redressal mechanism in place by SEBI.

1.4.4. Data analysis:

The data collected was analyzed by ascertaining average ranking with the help of arithmetic
mean and not with other complex statistical tools such as correlation, regression etc.

1.5. Chapter Scheme of the Study

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This study has divided into three chapters and appendices:

Chapter 1 Introduction
This chapter explores the history and evolution of stock exchange, objectives of the study,
research methodology and limitation of the study.
Chapter 2 Capital markets
This chapter introduces the capital market, delves into prominent stock exchanges of India,
Settlement cycle, the securities exchange board of India (SEBI), Role, powers and structure of
SEBI and most prominently importance of small investor and role played by SEBI in protecting
and educating the investor in Indian capital market.
Chapter 3 Finding and analysis
This chapter mainly deals with finding and analysis, conclusion and suggestion which are drawn
by the study conducted.

Chapter 2: Capital Market

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2.1. Introduction
The recent years have seen a sea change in the Indian capital market. Possibly, the greatest
beneficiary of the reforms process has been the securities market segment. No other sector has
seen the magnitude and quality of reforms, proactive legislation, stringent regulation, and results
as the securities market. It is the result of these proactive steps which has seen India emerges as a
favorite investment destination. Earlier India was popular only amongst US and West European
investors but now even other countries such as Japan, Korea, etc., are equally interested in Indian
securities. Some of the reforms introduced in India are not even present in western markets.
The Capital Market is divided into 2 segments which are:-

2.1.1. Primary Market

It refers to that segment wherein a company makes an issue of securities to the investing public
directly, i.e., the funds flow into the company. This would include, Initial Public Offers, Public
Issues, Private Placements, Rights Issues, Foreign Direct Investment, etc. The primary market
may further be bifurcated into the equity/ equity-linked segment and the debt segment. The
primary market may also be bifurcated into domestic offerings and international offerings. While
the domestic offerings would cover all issues made by Indian companies in India to local
investors, the foreign offerings would cover issues of American Depository Receipts, Global
Depository Receipts, Foreign Currency Convertible Bonds, External Commercial Borrowings,
etc., made by Indian companies to foreign investors.

2.1.2. Secondary Market

The secondary market is that segment of the capital market where the outstanding securities
issued by the Central and the State Governments, public bodies, and corporate entities are traded.
However, we will be discussing the securities issued by companies. Traditionally, this was an
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open auction market where buyers and sellers meet and evolve a competitive price for the
securities.
In the first place, it is only an organized securities market which can provide sufficient
marketability and price continuity for shares so necessary for the needs of the investors.
Secondly, it is only such a market that can provide a reasonable measure of safety and fair
dealing in the buying and selling of securities.
Thirdly, through the interplay of demand for and supply of securities a properly organized stock
exchange assists in a reasonably correct evaluation of securities in terms of their intrinsic worth.
Lastly, through such evaluation of securities, the stock exchange helps in the orderly flow of
distribution of savings as between different types of competitive investments.
Secondary markets facilitate the existing (previously issued) securities to change hands among
investors. That is, they facilitate maturity transformation (an investor has a certain idea of the
period for which he can commit the funds. Usually, this period is not sufficient for the funds user
to remit them back. Therefore, the investor has to find another investor who is willing to make
available funds to the user. This he does by selling the securities issued by the funds user to the
other investor.)

2.2. Stock Exchange & Settlement Cycle

2.2.1. Prominent Stock Exchanges of India

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

An informal group of 22 stockbrokers had been trading under a banyan tree opposite the Town
Hall of Bombay from mid-1850s. This banyan tree still stands in Horniman Circle Park,
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Mumbai. This informal group of stockbrokers organized themselves as The Native Share and
Stockbrokers Association which, in 1875, was formally organized as the Bombay Stock
Exchange (BSE). BSE is the oldest stock exchange in Asia, the second being the Tokyo Stock
Exchange, established in 1878.Premchand Roychand was a leading stockbroker of that time, and
he assisted in setting out traditions, conventions, and procedures for the trading of stocks at
Bombay Stock Exchange and they are still being followed.
BSE is the first stock exchange in the country which obtained permanent recognition (in 1956)
from the Government of India under the Securities Contracts (Regulation) Act 1956. BSEs
pivotal and pre-eminent role in the development of the Indian capital market is widely
recognized. It migrated from the open outcry system to an online screen-based order driven
trading system in 1995. Earlier an Association Of Persons (AOP), BSE is now a
corporatized and demutualised entity incorporated under the provisions of the Companies Act,
1956, pursuant to the BSE (Corporatization and Demutualization) Scheme, 2005 notified by the
Securities and Exchange Board of India (SEBI). With demutualization, BSE has two of worlds
best exchanges, Deutsche Brse and Singapore Exchange, as its strategic partners.
Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by
providing it with an efficient access to resources. There is perhaps no major corporate in India
which has not sourced BSEs services in raising resources from the capital market.
The BSE Index, SENSEX, is Indias first stock market index that enjoys an iconic stature, and is
tracked worldwide. It is an index of 30 stocks representing 12 major sectors. The SENSEX is
constructed on a free-float methodology, and is sensitive to market sentiments and market
realities. Apart from the SENSEX, BSE offers 21 indices, including 12 sect oral indices.
BSE provides an efficient and transparent market for trading in equity, debt instruments and
derivatives. It has a nation-wide reach with a presence in more than 450 cities and towns of
India. BSE has always been at par with the international standards. The systems and processes
are designed to safeguard market integrity and enhance transparency in operations. BSE is the
first exchange in India and the second in the world to obtain an ISO 9001:2000 certifications. It
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is also the first exchange in the country and second in the world to receive Information Security
Management System Standard BS 7799-2-2002 certification for its BSE On-line Trading System
(BOLT).

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

The National Stock Exchange (NSE) is India's leading stock exchange covering 364 cities and
towns across the country. NSE was set up by leading institutions to provide a modern, fully
automated screen-based trading system with national reach. The Exchange has brought about
unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities
that serve as a model for the securities industry in terms of systems, practices and procedures.
NSE has played a catalytic role in reforming the Indian securities market in terms of
microstructure, market practices and trading volumes. The market today uses state-of-art
information technology to provide an efficient and transparent trading, clearing and settlement
mechanism, and has witnessed several innovations in products & services viz. demutualization of
stock exchange governance, screen based trading, compression of settlement cycles,
dematerialization and electronic transfer of securities, securities lending and borrowing,
professionalization of trading members, fine-tuned risk management systems, emergence of
clearing corporations to assume counterparty risks, market of debt and derivative instruments
and intensive use of information technology.
NSE's mission is setting the agenda for change in the securities markets in India. The NSE was
set-up with the following objectives:

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

Ensuring equal access to investors all over the country through an appropriate
Communication network,
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Providing a fair, efficient and transparent securities market to investors using electronic
trading systems,

Enabling shorter settlement cycles and book entry settlements systems, and

Meeting the current international standards of securities markets.

2.2.1.c. Pune Stock Exchange (PSE):Pune Stock Exchange: There are many regional stock exchanges in India. Our regional stock
exchange i.e. Pune Stock Exchange Limited stands 7th in the country. Pune Stock Exchange Ltd.
is a company limited by guarantee. The Exchange was established on 2nd Sept. 1982 to cater to
the needs of the growing investor community in the city.
Starting small, with 35 members and a few lakhs rupees business initially, the exchange has
grown tremendously to over 185 members and about 15-20 crores of business daily. Much of the
work is computerized with a smooth settlement system. Over 310 companies are listed with the
Stock Exchange.

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

The Bangalore Stock Exchange Limited (BgSE), established in 1963, is the one of the leading
Stock Exchanges of India. BgSE is a Self Regulatory Organization located in the garden city of
India. The Exchange is managed by the Governing Board consisting of three Public Interest
Directors nominated by Securities Exchange Board of India (SEBI), Six Shareholder Directors
(elected by Poll), three Trading Member Directors (elected from amongst members through poll)
and Executive Director. BgSE has been proactive in keeping pace with the emerging
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technological and financial market trends and is fully computerized. BgSE launched its own
BEST (Bangalore Electronic Securities Trading), its On-line trading system on 29th July 1996,
the first exchange to do so in the South India.

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

DSE, one of the oldest Stock Exchanges in the country, located in Delhi, was established in the
year 1947, the year of Indian Independence. Since then, it has played a key role in the
development of the economy by facilitating investments in different sectors, thereby creating a
reasonably encouraging equity cult in the northern belt of India. DSE, from the inception, has
been helping the companies around, in terms of creation of capital and net-worth. It has
contributed in its inimitable way, in spreading financial literacy amongst the larger populace.

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

OTCEI was incorporated in 1990 as a Section 25 company under the Companies Act 1956 and is
recognized as a stock exchange under Section 4 of the Securities Contracts Regulation Act, 1956.
The Exchange was set up to aid enterprising promoters in raising finance for new projects in a
cost effective manner and to provide investors with a transparent & efficient mode of trading.

2.2.2. Settlement Cycle

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The settlement cycle refers to the process of settling the trades executing on a stock
exchange. The Settlement cycle is on T+2 rolling settlement basis from 1st April,
2003. In case of a Rolling Settlement trades executed during the day are settled
based on the net obligations for the day. Earlier, the trades for a 5 day week
(Monday to Friday in case of the BSE) were aggregated and then settled. Further,
different exchanges had different settlement cycles. Now all exchanges have an
uniform T+2 rolling settlement cycle.
A T+2 day basis means a settlement where T stands for the trade day. Hence,
trades executed on Tuesday would be settled on Thursday (T + 2 working days).
The payment of funds and securities known as pay-in and pay-out would be done on
the T+2 day. Thus, on this day, the broker for the buyer would pay the money to the
exchange and the broker for the seller would give delivery of the shares to the
exchange. The exchanges have to ensure that the pay out of funds and securities to
the clients is done by the broker within 24 hours of the payout. The pay-in and payout
days for funds and securities are prescribed as per the Settlement Cycle. A
typical Settlement Cycle of Normal Settlement is given below:

Settlement Cycle of Normal Settlement

Activity

DAY

Trading

Rolling Settlement Trading

Clearing

Custodial Confirmation

T+1 working days

Delivery Generation

T+1 working days

Securities and Funds pay in

T+2 working days

Securities and Funds pay Out

T+2 working days

Settlement

Table No. 2.1

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

With the announcement of the reforms package in 1991, the volume of business in both the
primary and secondary segment of the capital market has been increased enormously till now. A
multicrore securities scam rocked the Indian financial system in 1992(Harshad Mehta scam). The
then existing regulatory framework was found to be fragmented and inadequate and hence, a
need for an autonomous, statutory, and integrated organization to ensure the smooth functioning
of capital market was felt. To fulfill this need, the Securities and Exchange Board of India
(S.E.B.I), which was already in existence since April 1988, was conferred statutory powers to
regulate the capital market.
The SEBI got legal teeth through an ordinance issued on 30 January 1992. The ordinance
conferred wide- ranging powers on the SEBI, including the authority to prohibit insider
tradingand regulate substantial acquisition of sharesand takeover of business. The function
of market development includes containing risk, board basing, maintaining market integrity and
promoting long-term investment. The SEBI Act, 1992 which establishes the SEBI with four-fold
objectives of protection of the interests of investors in securities, development of the securities
market, regulation of the securities market and matters connected therewith and incidental
thereto.
The capital market, i.e., the market for equity and debt securities is regulated by the Securities
and Exchange Board of India (SEBI). The SEBI has full autonomy and authority to regulate and
develop the capital market. The government has framed rules under the securities contracts
(regulation) Act (SCRA), the SEBI Act and the Depositories Act.
The SEBI has framed regulations under the SEBI Act and the Depositories Act for registration
and regulation of all market intermediaries, for prevention of unfair trade practices, and insider
trading. As everyone could know that these i.e. the Government and the SEBI issue notifications,
14

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

2.3.1. Role of SEBI

1. Power to make rules for controlling stock exchange:

SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI
fixed the time of trading 9 AM and 5 PM in stock market.

2. To provide license to dealers and brokers:

SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any
financial product is of capital nature, then SEBI can also control to that product and its dealers.
One of main example is ULIPs case. SEBI said, It is just like funds and all banks and financial
and insurance companies who want to issue it, must take permission from SEBI."

3. To Stop fraud in Capital Market:

SEBI has many powers for stopping fraud in capital market. It can ban on the trading of those
brokers who are involved in fraudulent and unfair trade practices relating to stock market. It can
impose the penalties on capital market intermediaries if they involve in insider trading.

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

Many big companies in India want to create monopoly in capital market. So, these companies
buy all other companies or deal of merging. SEBI sees whether this merge or acquisition is for
development of business or to harm capital market.

5. To audit the performance of stock market:

SEBI uses his powers to audit the performance of different Indian stock exchange for bringing
transparency in the working of stock exchanges.

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

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

7. To create relationship with ICAI:

ICAI is the authority for making new auditors of companies. SEBI creates good relationship with
ICAI for bringing more transparency in the auditing work of company accounts because audited
financial statements are mirror to see the real face of company and after these investors can
decide to invest or not to invest. Moreover, investors of India can easily trust on audited financial
reports. After Satyam Scam, SEBI is investigating with ICAI, whether CAs are doing their duty
by ethical way or not.

8. Introduction of derivative contracts on Volatility Index:

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For reducing the risk of investors, SEBI has now been decided to permit Stock Exchanges to
introduce derivative contracts on Volatility Index, subject to the condition that;
a. The underlying Volatility Index has a track record of at least one year.

b. The Exchange has in place the appropriate risk management framework for such derivative
contracts. Before introduction of such contracts, the Stock Exchanges shall submit the following:
i. Contract specifications
ii. Position and Exercise Limits
iii. Margins
iv. The economic purpose it is intended to serve
v. Likely contribution to market development
vi. The safeguards and the risk protection mechanism adopted by the exchange to ensure market
integrity, protection of investors and smooth and orderly trading.
vii. The infrastructure of the exchange and the surveillance system to effectively monitor trading
in such contracts, and
viii. Details of settlement procedures & systems
ix. Details of back testing of the margin calculation for a period of one year considering a call
and a put option on the underlying with a delta of 0.25 & -0.25 respectively and actual value of
the underlying.

9. To require report of Portfolio Management Activities:

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SEBI has also power to require report of portfolio management to check the capital market
performance. Recently, SEBI sent the letter to all Registered Portfolio Managers of India for
demanding report.

10. To educate the investors:

Time to time, SEBI arranges scheduled workshops to educate the investors. On 22 may 2010
SEBI imposed workshop. If you are investor, you can get education through SEBI leaders by
getting update information on this page.

2.3.2. Powers of SEBI

For the purpose of regulation of the securities market, SEBI has vested with all the powers of a
Civil Court as per Code of Civil Procedures, 1908. The powers include:
1.
2.
3.
4.

The discovery and production of any books of accounts and other documents.
Summoning and enforcing the attendance of persons, and examining them on oath.
Inspection of any books, registers and other documents.
To inspect any book, register, other documents and records of a listed company or a
public company (not being any of the intermediaries mentioned above) intending to
gets it securities listed on a stock exchange where the Board suspects the company of
indulging in insider trading or fraudulent and unfair trade practices related to the

securities market.
5. Issuing commission for the examination of witnesses or documents.
6. During an investigation or a pending enquiry, In order to protect the interests of
investors or the securities market, the board may
a. Suspend trading of a stock in stock exchange.
b. Restrain persons from accessing the securities market and prohibit any person
associated with the securities market to buy, sell or deal in securities.
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c. Suspend any office bearer of any stock exchange or self- regulatory authority.
d. Impend and retain the proceeds or securities of any transaction under investigation.
7. With respect to prospectus, offer documents and advertisements soliciting money, the
board may for protection of investors,
a. Specify by regulation
- Matters relating to issue of capital, transfer of securities and matters incidental
there to.
- The manner in which such matters are disclosed.
b. Specify by special orders
- Prohibit any company from issuing prospectus, any offer document or issue
advertisements, soliciting money for issue of securities.
- Specify the conditions subject to which these documents can be issued.
8. The board may specify the requirements for listing and transfer of securities. In
addition to the above, the others powers of SEBI are:
Levy penalties for certain offenses.
Levy fees and other charges.
Issue orders/directions in the interest of investors or orderly development of
securities market. However, such orders can be issued only after conduct of an

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

listing of their securities.

Suspend or cancel the registration of any intermediary.

2.3.3. SEBIs Structure

SEBI as the name suggests is a Board and hence, in all its Regulations it is referred to as the
Board. The Board is constituted under s.3 of the SEBI Act, 1992. It is
appointed by the Central Government and consists of 9 members - a Chairman, 2
members from the Finance Ministry, 1 member from the RBI and 5 other members
of which includes the whole-time members. Each Whole Time Member heads a
Functional Unit within which Executive Directors head the Departments.
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2.4. Importance of Small Investors in Indian Capital Market

Small investors are the backbone of Indian Capital Market. Their active participation results in
channeling savings into various infrastructural and productive activities. As per the latest
estimate made by SEBI, there were 19 million share owning individuals in India. This is too
small a figure considering the fact that the population of our country exceeds one billion. In
many developed countries like USA, a large proportions of people ark their investment in capital
market instruments. It is true that Indian capital market underwent radical changes as a result of
liberalization measures. However such reforms have not proved instrumental in attracting the
majority of investors into the capital market. Considering the fact that individual savings
represent a major chunk of domestic savings, more investors must be brought to the mainstream
of the capital market. Hence there is a need to instill confidence in capital market investment in
the minds of investors.
Individual investors in our country suffer from certain inherent drawbacks. There is a general
reluctance on the part of the people to invest either directly or indirectly in capital market. This
may be due to many reasons.
Firstly, successful investment in capital market can be done only by those who have a fairly good
knowledge of capital market. Consequently people shy away from investing in it.
Secondly, investors encounter various impediments created by other market participants.
Consequent investor complaints keep escalating year after year. The standard of service
information being provided to shareowners in India by companies and stock brokers are not only
below world standards but leave a majority of Indian shareowners dissatisfied.
Thirdly, the series of securities scams unearthed over the past few years have dampened the sprit
and enthusiasm of investors.
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2.5. Role of SEBI on Investor Protection and Education

SEBI was established in 1988 as a non-statutory body to deal with all matters relating to the
development and regulation of the securities market and protecting the interests of investors.
Subsequently, it was armed with statutory powers through the promulgation of SEBI Act, 1992.
It is also vested with the power of a civil court and can summon all categories of market
intermediaries to investigate on their working, to impose penalty and to initiate prosecution
against them.

For the effective functioning of the capital market, it has issued several guidelines;
notable among them is that on disclosure and investor protection. It contains a substantial
body of requirements for the issuers and intermediaries to ensure higher standards of
integrity and fair dealing. In order to ensure that no malpractice taken place, a
representative of SEBI supervises the allotment process.

SEBI has also issued an advertisement code for the issuers to ensure that the
advertisement remains fair and does not contain statements that mislead the investor or
vitiate their informed judgment. Its regulatory polices and actions are found to have a
great bearing on the efficiency of the capital market and though it on the efficiency of the
whole economy.

Investors can approach SEBI by filing their complaints against companies and brokers. It
has set up certain procedures like the categorization of complaints and their regular
21

follow-up with defaulting companies, Registrars and Merchant Bankers. With a view to
handle a large volume of complaints, the grievances redress cell has been computerized.

2.6. Factors influencing Investors Stock Investment (Technical, Financial and

Economic)

2.6.1. Financial Statements

2.6.1.a. Profit & Loss Statement: A financial statement that summarizes the revenues, costs
and expenses incurred during a specific period of time - usually a fiscal quarter or year is called
as Profit & Loss Statement. These records provide information that shows the ability of a
company to generate profit by increasing revenue and reducing costs. The P&L statement is also
known as a "statement of profit and loss", an "income statement" or an "income and expense
statement".

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

provides interested parties with an objective attestation as to reasonable conformity of the
financial statement to Generally Accepted Accounting Principles (GAAP). The independent
auditors are giving an opinion as to the conformity of the GAAP, As well as to the estimates,
22

disclosures, and the presentation of financial statements. A qualified report, an adverse opinion or
a disclaimer of opinion, is rare and therefore suggest that a careful evaluation of the firm is
made. An unqualified opinion with explanatory language should be reviewed carefully.

2.6.1.c. Cash Flow statement: It is one of the quarterly financial reports any publicly traded
company is required to disclose to the SEC and the public. The document provides aggregate
data regarding all cash inflows a company receives from both its ongoing operations and external
investment sources, as well as all cash outflows that pay for business activities and investments
during a given quarter.

2.6.1.d. Balance sheet: Balance Sheet is a financial statement that summarizes a company's
assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet
segments give investors an idea as to what the company owns and owes, as well as the amount
invested by the shareholders.

2.6.2. Accounting Instruments

2.6.2.a. Earnings per share (EPS): It is the portion of a company's profit allocated to each
outstanding share of common stock. Earnings per share serve as an indicator of a company's
profitability.
Calculated as:

23

EPS is one of the important measures of economic performance of a corporate entity. The flow of
capital to the companies under the imperfect capital market conditions would be made on the
evaluation of EPS. Investor lacking inside and detailed information would look upon the EPS as
the best base to take their investment decisions. A higher EPS means better capital productivity.

2.6.2.b. Return On Equity (ROE): The amount of net income returned as a percentage of
shareholders equity is said to be as Return On Equity. Return on equity measures a corporation's
profitability by revealing how much profit a company generates with the money shareholders
have invested.
ROE is expressed as a percentage and calculated as:
Return on Equity = Net Income/Shareholder's Equity

Investors look for ROE exceeding 15% since these returns that add to shareholder value. Low
debt and a significant re-investment of earnings ensure that the company can magnify its
performance over time. Shareholders cant expect high returns in the long term if the ROE is
low. Companies with low ROE should be handing back profits to shareholders by invoking high
payout ratios since retaining earnings to magnify poor performance will destroy value.

2.6.2.c. Net Operating Profit After Tax: It the net profit earned by the company after deducting
all expenses like interest, depreciation and tax. PAT can be fully retained by a company to be
used in the business. However dividend is paid to the shareholders from this residue.

2.6.2.d. Price Earning ratio (P/E): Price-earning (P/E) ratio is commonly used while taking
investment decisions by many investors. P/E ratio is the ratio between the market price and
earnings per share. The ratio indicates the market price of a share vis-a-vis its earnings.
24

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

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

board of directors, to a class of its shareholders is called as Dividends Rate. The dividend is most
often quoted in terms of the dollar amount each share receives (dividends per share). It can also
be quoted in terms of a percent of the current market price, referred to as dividend yield. Also
referred to as "Dividend Per Share (DPS)."

2.6.3. Economic Variables

2.6.3.a. Gross Domestic Product (GDP): GDP (Gross Domestic Product) is the sum total of
value of all the goods and services produced in an economy during a given year. In short, it is the
X-Ray report of how the economy is performing. GDP is the most crucial economic indicator
which tells us about the health of our economy. It can help companies decide on what strategies
they should adopt as also indicate to the policy makers, the effectiveness of the steps and
decisions they have undertaken.

GDPS Impact on Stock Market

GDP has a massive impact on almost all the economic factors in a country. Even a small change
in GDP can have far reaching affects on the economy. Let us see how.

25

Impact of Increasing & Higher GDP Growth rate

Fig. No. 2.1

You can see from the above diag. the impact of increasing and higher GDP growth rate. Over the
last 5-6 years the GDP of our country has been growing at a healthy rate of over 8% (average)
annually. With a growing economy, India has seen higher employment opportunity for the people
which have led to an increase in their disposable income. With higher demand in place,
companies have seen a surge in their profits leading to a rise in their stock prices. To cater to the
increasing demand, companies have also increased their investment activities adding new plants,
factories, offices etc. This adds to the future expectation of revenue growth of the companies
which if sustained can lead to further increase in the stock prices.

2.6.3.b. Fiscal Deficit: The fiscal deficit, as the name suggests, is the difference between the
government's total expenditure and its total receipts (excluding borrowing). The elements of the
fiscal deficit are the revenue deficit, which is the difference between the government's current (or
revenue) expenditure and total current receipts (excluding borrowing) and capital expenditure.
The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also
26

called deficit financing or money creation) and market borrowing (from the money market,
which is mainly from banks).

Fiscal Deficits Impact on Stock Market

Financing of fiscal deficits has two significant negative impacts like inflation and rise in interest
rates. Because of these impacts, stock market reacts sharply to the news of increasing fiscal
deficits. A high fiscal deficit is generally linked to inflation. This is because that the part of the
fiscal deficit which is financed by borrowing from the RBI leads to an increase in the money
stock and a higher money stock automatically leads to inflation since "more money chases the
same goods". Another fiscal deficit financing effect is rise in interest rates. To reduce the Fiscal
Deficit government borrows from the money market. Large amount of borrowings by
government results in higher interest rates. Higher interest rates crowds out the private
investment. This rise in interest rate in turn impacts sectors like realty. Also, higher borrowings
by Govt. suck out liquidity, leaving less scope for banks to lend to private players.

2.6.3.c. Growth Rate: The amount of increase that a specific variable has
gained within a specific period and context is called as Growth
Rate. For investors, this typically represents the compounded annualized rate
of growth of a company's revenues, earnings, dividends and even macro
concepts - such as the economy as a whole. Expected forward-looking or
trailing growth rates are two common kinds of growth rates used for analysis.

2.6.3.d. Inflation: "The rate at which the general level of prices for goods and services is
rising. There are many varying measures of inflation in use because different prices affect
different people. The most widely known indices are the Consumer Price Index (CPI) which
measures the change in nominal consumer prices and the GDP deflator which measures inflation
in new products and services created.

Inflation Effect`s on Stock Market

27

Generally stock markets and inflation are believed to be inversely related. Lets see how.
For businesses higher inflation means that raw materials become expensive which leads to higher
costs of production. The companies usually pass on a fraction of the price rise to its final
consumers; however invariably they have to absorb a fraction themselves. Thus, it adversely
affects the earnings of the companies. Lower earnings by companies can make them less
attractive for investors and hence the stock price may fall.

Impact of High Inflation on Stock Market

Fig. No. 2.2

Also, during a high inflation period investors are looking for better rate of return on their
investments in order to maintain or improve the purchasing power of their income. The investors
will find better returns only when the P/E ratios are relatively lower. Thus in high inflationary
periods the P/E ratio should be ideally lower and similarly at lower inflation rates P/E ratios
would be higher.
Stock prices have risen considerably even while inflation was high and rising. The reason for this
was the Net inflows brought by the FIIs and the FDIs.

Result of Net inflow of FIIs, FDIs in the economy

28

Fig. No. 2.3

2.6.3.e. Foreign Direct Investment (FDI): The foreign direct investment is profitable both to
the country receiving investment (foreign capital and funds) and the investor. For the investor
company FDI offers an exclusive opportunity to enter into the international or global business,
new markets and marketing channels, elusive access to new technology and expertise, expansion
of company with new or more products or services, and cheaper production facilities. While the
host country receives foreign funds for development, transfer of new profitable technology,
wealth of expertise and experience, and increased job opportunities

There are several benefits of foreign direct investment in stock market which can be listed as:
a) Access to global market A developing country like India is benefitted by inviting FDI as
Indian economy got the access to the global market which will help Indian economy to grow at a
fast rate.
b) Advancement in technology FDIs have the power from which they have the ability to
introduce the advanced and world class technology along with its technical knowhow which
helps an economy to progress at a faster rate. Experts from foreign also help in the up gradation
of the existing technology in any country which helps in saving the cost which would have been
incurred if we have opted for the new technology.
c) Competition increases Foreign Direct Invest in countrys stock market has allowed in
increasing competition amongst the investors in domestic market. Competition increased due to
29

up gradation of technology and invention of technology.

2.6.3.f. Interest Rates: Interest Rate in simple words means the cost of borrowing funds. It is
the payment we make to the lender for the facility of using his money for our own purpose.
Many times our spending decisions are also guided by the interest burden that we would be
bearing.

Impact of Interest Rate on Stock Market

Interest rate does not have a direct impact on stock prices but its indirect impact cannot be
undermined. As you can see from the diagram there are two sides of the economy
a) The Business Side
b) The Consumer Side.

30

Impact of Interest rate on Stock Prices

Fig. No. 2.4

A continuous rise in interest rate affects the stock price from both the investment and
consumption side. Combining the effects from both the sides, it spells a gloomy situation for the
economy. The overall future revenue growth of the companies would be adversely effected
which would lead to negative sentiments in the market leading to deflated stock prices. Also, at
higher interest rate, people tend to invest more in fixed deposits and bonds as it would be
offering higher returns at very low risk. Hence it moves funds out of stock market affecting the
stock prices adversely.

31

2.6.4. Sources of Investment Advice

2.6.4.a. Newspaper: The Economic Times, financial express, Business standard, fortune India,
investment today and business line are some of the newspaper and periodicals that carry on
regular basis a wealth of stock market information, market quotation reviews of stock market
trend and very incisive and thought provoking articles on current development affecting stock
market future and other matters of interest to the investor.

2.6.4.b. Broker: Broker is an individual or firm that charges a fee or commission for executing
buy and sells orders submitted by an investor. Choosing a broker isn't all that different from
choosing a stock - it requires a lot of careful contemplation, and not all brokers are right for all
investors. There are two types of brokers out there: those who deal directly with their clients (regular
brokers), and those who act as intermediaries between the client and a larger broker.

2.6.4.c. News channels: Business news channel play an important role in affecting investment
pattern of an individual. It keeps an individual updated regarding recent trend in the market,
stock price quotation etc. It is one of a stupendous medium which inform regarding major events,
unearthed security scams which directly or indirectly affect stock prices and eventually affects
individuals investment decision.

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

customers for compensation is known as Financial Advisor. Financial advisors can provide many
different services, such as investment management, income tax preparation and estate planning.
They must carry the Series 65 license in order to conduct business with the public. A wide
variety of licenses are available for the services that a financial advisor can provide.

32

2.6.4.e. Family or Friends: Investors also seek advice from their colleagues, family members,
who are active players as far as investing in stock market is concerned.

2.6.4.f. Internet: "Internet website such as moneycontrol.com" keeps an investor updated with
regards to trend and pattern of fluctuation in stock prices.

2.6.5. Aspects of the Company

The following important aspects of the company which greatly influences the Investors in
evaluation of Stock Investment are:

Board of Directors which is a group of individuals that are elected as, or elected to act as,
representatives of the stockholders to establish corporate management related policies
and to make decisions on major company issues.

There are two ways you can classify a company by size: revenue and market
capitalization. Most people dont use revenue because differences in industries distort
how large or small a company is based solely on revenue. Market capitalization or market
cap is the standard measure of company size. You compute market cap by multiplying the
number of outstanding shares by the current stock price.

Goodwill expresses the prudent value that a company can have beyond its assets, by way
of a good reputation and a solid customer base, for example.
Product/Service or Business of the company refers to the goods; the company is dealing
with, activities which company is engaged in.

Business Strategy is the art, science, and craft of formulating, implementing and
evaluating cross-functional decisions that will enable an organization to achieve its longterm objectives.
33

Assurance given by management also plays a vital role in stock pricing. If the management of a
certain company is encouraging, investors choose to invest into that company otherwise they will
look for other companies. In case a company appoints a well-known international CEO, stock
prices can rise overnight. Good news and optimistic predictions from the management play a
vital role to raise the stock price. For instant the shares of Apple reached $600 for the first time
on 15th March 2012. Apple Stock has gone up by around 58% since Steve Jobs Death in Oct. 5
2011. The price of a share was around $378.25 when the new management took over the
company.

2.6.6. Past Stock Prices

Historical stock price would allow the investors to realize the stocks conditions of companies in
detail as well as based on those information; they could find the intuitive and real price of the
stock.

2.6.7. Government policies and Scams

2.6.7.a. Tax Policy: Another apparent reason for individual investor trading is tax
considerations. Given that Tax laws treat various components of investment returns such as
interests, dividends, and Capital gains differently, rational investors who face tax obligations are
expected to trade so as to take advantage of the tax laws.
There is a short term capital gain tax in our country. For a short term (less than one year) you
have to pay tax on any capital gain you make though the stock market trading. How much % tax
you have to pay, depends on which "tax bracket" you fall in.
Just to give you an idea. If I make Rs.100 though a transaction in the stock market, since I fall in
the 33% tax bracket, it has to pay Rs.33 of that to the government!!
The government encourages you to be a long term-investor by having no long term capital gain
tax. If you make a capital gain by investing for a period greater than one year, then you do not
have to pay any tax on the money you make.
34

2.6.7.b. EXIM Policy: Indian EXIM Policy contains various policy related decisions taken by
the government in the sphere of Foreign Trade, i.e., with respect to imports and exports from the
country and more especially export promotion measures, policies and procedures related thereto.
Trade Policy is prepared and announced by the Central Government (Ministry of Commerce).
India's Export Import Policy also know as Foreign Trade Policy, in general, aims at developing
export potential, improving export performance, encouraging foreign trade and creating
favorable balance of payments position.
Since India is importer of oil products, the illustration will help to understand how EXIM policy
affects the Indian stock market oil price increase raises the production cost in industrial oil
consuming countries. Due to increase in Oil price, it is expected to raise the cost of imported
capital goods, therefore it may adversely affecting the prospects of higher profits for firms traded
in Indian stock markets. On the demand side, oil price increases drive up the general level of
prices, which translates into lower real disposable income, and consequently reduces demand.
Besides the direct impact on general price levels, oil prices also have secondary effects on wage
levels, which in combination with high general prices result in increased inflation. Inflationary
pressures are usually controlled by central banks through increase in interest rates. Given the
higher interest rates, bond investments will become more attractive than stock investments,
which will result in lower stock prices.

2.6.7.c. Monetary Policy: The actions of a central bank, currency board or other regulatory
committee that determine the size and rate of growth of the money supply, which in turn affects
interest rates is known as Monetary Policy. Monetary policy is maintained through actions such
as increasing the interest rate, or changing the amount of money banks need to keep in the
vault (bank reserves).
Monetary policy variables such as money and quasi money growth and interest rates proxied by
lending rate as well as intermediate target of monetary policy inflation rate measured at
consumer price index have long run relationship with stock market performance measured by
growth of market capitalization.

35

2.6.7.d. Political Stability: Two of the major political events which can cause wild price
changes in the stock market trading are when a government decides to change the interest rate
level to control inflation. A government will raise interest rates if it believes inflation is on the
rise. When interest rates go higher investors tend to get out of high risk stocks and move into
other less risky investments such as government stocks and treasuries. Other factors which can
cause stock market prices to fall sharply are political unrest and wars. Initial reaction to such
events is for stock prices to fall sometimes quite appreciably; however, as the unrest continues
and once the initial shock is over, stocks start to recover. In addition oil prices tend to rise
whenever there is unrest or war and oil and stocks have a negative correlation, so rising oil prices
due to political or social unrest usually signals falling stock prices especially those stocks
denominated in dollars and energy stocks.
Stable governments and governments that have economic policies that promote growth and
wealth have a positive affect on the stock markets particularly as a country moves out of
recession into growth.
Political instability too plays a huge role and this in turn affects the market. If you try to
investigate the market then you would find that there are times when political instability has
affected the market to a lot extent and the investors have to suffer for this. You would also find
that examples like 2G spectrum that created political instability and it had a lot of bad impacts on
the market.

2.6.7.e. Scams: Different security scams such as 2G spectrum scams, Ketan Parekh security
scam and scam involving Harshad Mehta had a deep impact on the minds of investor which
dampen confidence with regards to stock market investment. Scams are the fraudulent activity
especially in securities which have adverse fluctuation in stock prices and ultimately affect
individual investor behavior.

2.6.8. Stock Investment Objective

36

Investor invest in stock with the following major objectives such as

Children Education/Marriage

Growth & Income

Retirement

To fund major Purchase (House, car)

Chapter 3: Finding & Analysis

3.1. Data Analysis:

3.1.1. AGE
Table (Age)
% of
Respondents
39.06%
25.78%
15.63%
19.53%
128

Age:
18-30
31-45
46-55
56 & above
Number of Respondents
Number of respondents who skipped this question

Table No. 3.1

37

Number of
Respondents
50
33
20
25

Chart (Age)

Fig. No. 3.1

Analysis:

According to the survey conducted, among the total sample size, 39.06% respondents fall
between the age group of 18-30 and 25.78% of total respondents fall between the age
group of 31-45. Whereas, 15.63% and 19.53% of total respondents fall in the age group
of 46-55 and 56-above respectively. As a result, an individual starts investing at a young
age. Among the total sample, 64.84% of total respondents fall between the age group 1845 which substantiates young investor are not diffident as far as investing in risky
securities are concerned.

3.1.2. INCOME GROUP (MONTHLY)

Table (Income Group)

38

% of
Respondents
53.17%
19.05%
15.87%
11.90%
126

Income Group (Monthly):

15000-24999
25000-39999
40000-74999
75000 & above
Number of Respondents
Number of respondents who skipped this question

Table No. 3.2

Chart (Income Group)

Fig. No. 3.2

39

Number of
Respondents
67
24
20
15

Analysis:

According to the survey conducted, 53.17% of total respondents fall into Income bracket
Rs.15000 - 24999 p. m. 19.05% of total respondents fall in the income group Rs.25000 39999 p. m. Whereas 15.87% and 11.90% fall in Income bracket of Rs.40000 - 74999 p. m.
and Rs.75000 and above respectively. 72.22% of total respondents fall in the Income
bracket of Rs.15000 - 39999 p. m. More than 60% of the respondents begin investing at a
young age and are in early phase of their professional career. Hence, majority of
respondents fall in the income group of Rs.15000 - 39999 p. m.

3.1.3. EDUCATION
Table (Education)
% of
Respondents
3.91%
6.25%
48.44%
38.28%

Education:
SSC
HSSC
Degree
Post Graduate
Degree
Other (Specify)
Number of Respondents
Number of respondents who skipped this question

Table No. 3.3

Chart

40

3.13%
128
0

Number of
Respondents
5
8
62
49
4

Fig. No. 3.3

Analysis:

According to the survey conducted, among the total sample size, 48.44% respondents are
with Degree and 38.28% of total respondents are with Post Graduate Degree, 3.13%
respondents are with others educational qualification such as doctorate. Whereas, 3.91%
and 6.25% of total respondents are with S.S.C. and H.S.S.C. respectively. As a result, an
individual starts investing when he/she has achieved qualification of a Degree or a post
graduate degree as evidenced by the findings. Among the total sample, 89.85% of total
respondents start investing after attaining a Degree or post graduate degree.

3.1.4. GENDER
Table (Gender)
% of
Respondents

Gender:
41

Number of
Respondents

MALE
FEMALE
Number of Respondents
Number of respondents who skipped this question

77.34%
22.66%
128
0

Table No. 3.4

Chart (Gender)

Fig. No. 3.4

42

99
29

Analysis:

According to the Survey conducted, among the total sample size 77.34% respondents are
Male and 22.66% are Female respondents. As a result, Stock Market Investments is
dominated by Male counterparts.

3.1.5. FINANCIAL STATEMENTS

Table (Financial Statements)
Importance of financial statements taken into consideration by an individual investor for making
stock investment decision.

Profit & Loss

Statement
Audit reports
Cash Flow &
Funds Flow
statement
Balance Sheet

VERY
IMPORTANT

IMPORTANT

MODERATELY
IMPORTANT

SLIGHTLY
IMPORTANT

NOT
IMPORTANT

73% (94)

17% (22)

7% (9)

2% (3)

39% (50)
35% (45)

25% (32)
26% (34)

18% (24)
23% (30)
7% (9)

67% (87)
14% (18)
Number of Respondents
Number of respondents who skipped this question

0% (0)

No. of
Respondent
s
128

Average
Rankin
g
1.38

13% (17)
10% (13)

3% (5)
4% (6)

128
128

2.18
2.23

8% (11)

2% (3)

128

1.63

128
0

Table No. 3.5

43

Chart (Financial Statements)

Fig. No. 3.5

Analysis:

As per the findings, the importance ranked by the total respondents for all financial
statements is below 2.99. As a result, small investors give due importance to all the
financial statements. However, Profit & Loss and Balance Sheet is considered pre-requisite
for making stock investment decision since average ranking on the basis of their
importance stand as 1.38 and 1.63 respectively. Whereas, Audit report and Cash Flow
statement have the average rank of 2.18 and 2.23 respectively.

3.1.6. ACCOUNTING INSTRUMENTS

Table (Accounting Instruments)
Importance of accounting instruments taken into consideration by an individual investor to evaluate
companys performance for Stock Investment.
44

Earnings Per
Share (EPS)
Return On Equity
(ROE)
Net Operating
Profit After Tax
Price Earning
ratio (P/E)
Dividends rate
Risk/Return
calculation using
Scientific method

VERY
IMPORTANT
66% (85)

IMPORTANT

57% (74)

25% (32)

9% (12)

1% (2)

6% (8)

128

1.73

40% (52)

31% (40)

18% (24)

3% (5)

4% (6)

127

2.00

49% (63)

29% (38)

10% (14)

5% (7)

4% (6)

128

1.87

35% (45)
24% (31)

24% (31)
19% (25)

18% (24)
14% (19)

14% (18)
14% (18)

7% (10)
27% (35)

128
128

2.35
3.01

21% (28)

MODERATELY
IMPORTANT
5% (7)

SLIGHTLY
IMPORTANT
2% (3)

NOT
IMPORTANT
3% (5)

Number of Respondents
Number of respondents who skipped this question

No. of
Respondents
128

128
0

Table No. 3.6

Chart (Accounting Instruments)

Fig. No. 3.6

Analysis:
45

Average
Ranking
1.55

As per the findings, Respondents take Earning per share, Return on equity and Price earning
ration as an imperative criteria to assess the companys performance and risk towards investment
based on the findings. Above mentioned accounting instrument is ranked as 1.55, 1.73, and 1.87
respectively by the respondents. On the other hand, Net Operating Profit after tax and Dividend
rate form as secondary criteria for small investors which are ranked as 2 and 2.35 respectively by
the total respondents. Whereas, scientific methods for assessing the Risk/Return is least used by
the respondent whose overall ranking stand at 3.01.

3.1.7. ECONOMIC VARIABLES

Table (Economic Variables)

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

GDP (Gross
Domestic
Product)
Fiscal Deficit
Growth rate
Inflation
FDI (Foreign
Direct
Investment)
Interest rates

VERY
IMPORTANT

IMPORTANT

MODERATELY
IMPORTANT

SLIGHTLY
IMPORTANT

NOT
IMPORTANT

47% (61)

22% (29)

14% (19)

7% (10)

22% (29)
40% (52)
46% (59)
40% (51)

28% (37)
33% (43)
21% (28)
28% (36)

23% (30)
17% (23)
19% (25)
14% (18)
17% (22)

33% (43)
30% (39)
Number of Respondents
Number of respondents who skipped this question

7% (9)

No. of
Respondent
s
128

Average
Rankin
g
2.04

10% (13)
3% (5)
10% (13)
10% (13)

14% (19)
3% (5)
2% (3)
7% (9)

128
128
128
127

2.66
1.97
2.01
2.16

5% (7)

13% (17)

128

2.34

128
0

Table No. 3.7

46

Chart

Fig. No. 3.7

Analysis:

Growth rate, Inflation and Gross Domestic Product are the most important economic
variables which stand as a basis for stock market investment for small investors since
overall ranking of such variable stand at 1.97, 2.01 and 2.04 respectively. Although the
overall ranking of FDI, Interest rates and Fiscal deficit stand at 2.16, 2.34 and 2.66
respectively, they are not regarded as important as above mentioned variables by the
respondents.

3.1.8. SOURCE OF INVESTMENT ADVICE

Table (Source of Investment Advice)
Importance of source of Investment advice taken into consideration by an individual investor to
evaluate stock investment decision.
Newspaper

VERY
IMPORTANT
21% (28)

IMPORTANT
28% (37)

MODERATELY
IMPORTANT
17% (23)

47

SLIGHTLY
IMPORTANT
10% (14)

NOT
IMPORTANT
20% (26)

No. of
Respondents
128

Average
Ranking
2.79

Broker
News channels
Financial
Planner/Advisor
Family or Friends
Internet
(eg:moneycontrol.com
)

37% (48)
39% (50)
37% (47)

26% (34)
32% (42)
24% (31)

10% (13)
17% (23)
17% (22)

7% (9)
6% (8)
8% (11)

18% (24)
3% (5)
12% (16)

128
128
127

2.43
2.03
2.35

13% (17)
39% (51)

8% (11)
24% (31)

19% (25)
14% (18)

28% (31)
6% (8)

30% (39)
15% (20)

128
128

3.54
2.34

Number of Respondents
Number of respondents who skipped this question

128
0

Table No. 3.8

Chart (Source of Investment Advice)

Fig. No. 3.8

Analysis:
48

The respondents seek or rely for Investment advice abundantly on Business News
channels and Internet website such as moneycontrol.com whose overall ranking stand at
2.03 and 2.34 respectively. Investment advice from financial advisor, Broker and
Newspaper is considered secondary as evidenced by overall ranking of these sources
which stand at 2.35, 2.45 and 2.71 respectively. According to the findings, Family and
Friends are least consulted by the respondents whose overall ranking stand at 3.54.

3.1.9. ASPECTS OF THE COMPANY

Table (Aspects of the Company)
Important aspect of the company taken into consideration by an individual investor to evaluate stock
investment decision.
VERY
IMPORTANT
53% (68)

IMPORTANT

28% (37)

31% (40)

26% (34)

7% (10)

5% (7)

128

2.30

64% (82)

25% (33)

6% (8)

2% (3)

1% (2)

128

1.52

51% (66)

30% (39)

10% (14)

5% (7)

1% (2)

128

1.75

48% (61)
25% (32)
Number of Respondents
Number of respondents who skipped this question

13% (17)

6% (8)

7% (9)

127

1.99

Management
Team/Board of
Directors
Size of the
company
Reputation &
Goodwill of the
company
Product/Service or
Business of the
company
Business strategy

17% (22)

MODERATELY
IMPORTANT
17% (23)

SLIGHTLY
IMPORTANT
3% (5)

NOT
IMPORTANT
7% (10)

No. of
Respondents
128

128
0

Table No. 3.9

Chart (Aspects of the Company)

49

Average
Ranking
1.96

Fig. No. 3.9

Analysis:

Overall rankings of Reputation & Goodwill of the company and Product and Service in
which company deals stand at 1.52 and 1.75 respectively. The figures indicate that small
investors copiously analyze the two aspects of the company before investing. Other
important aspects such as Management Team/ Board of Directors, Business strategy and
Size of the company are of secondary importance for small investors whose overall
ranking stand at 1.96, 1.99 and 2.30 respectively.

3.1.10. PAST STOCK PRICES

Table (Past Stock Prices)
Importance of past stock prices taken into consideration by an individual investor to evaluate stock
investment decision.

Last year stock

prices

VERY
IMPORTANT

IMPORTANT

MODERATELY
IMPORTANT

SLIGHTLY
IMPORTANT

NOT
IMPORTANT

35% (46)

25% (32)

10% (14)

5% (7)

22% (29)

50

No. of
Respondent
s
128

Average
Rankin
g
2.54

Last 2 years
stock prices
Last 3 years
stock prices
More than 5
years stock
prices

14% (18)

32% (42)

25% (33)

7% (9)

20% (26)

128

2.87

16% (21)

25% (32)

16% (24)

15% (20)

24% (31)

128

3.06

34% (44)

14% (19)

13% (17)

10% (13)

27% (35)

128

2.81

Number of Respondents
Number of respondents who skipped this question

128
0

Table No. 3.10

Chart (Past Stock Prices)

Fig. No. 3.10

Analysis:

51

Historical data of previous preceding year is given due importance whose overall ranking
stand at 2.54. Respondents regard historical stock prices of past 5 years as also important
whose overall ranking stands at 2.81. Whereas historical data of past 2 years and 3 years
is of least importance since its average ranking stand at 2.87 and 3.06 respectively.

3.1.11. TOTAL INVESTMENT IN STOCKS

Table (Total Investment in Stocks)
% of
Respondents
31.45%
28.23%
25%
9.68%
5.65%
124

Investor's % of total Investment in stocks.

1% - 10%
11% - 20%
21% - 30%
31% - 50%
51% & above
Number of Respondents
Number of respondents who skipped this question

Table No. 3.11

Chart (Total Investment in Stocks)

52

Number of
Respondents
39
35
31
12
7

Fig. No. 3.11

Analysis:

Majority of respondents are young investors (18-45) and are in initial stage of their career
which reflects the figure of total investment in stock. As per the findings, 84.68% of total
respondents have total investment in stock which ranges from 1% to 30%. Respondents
having total investment of constituting 31% to 50% and 51% and above are experienced
investors who fall in the age group of 46-55 and 56 and above and are well versed with
critical aspects of investing.

3.1.12. OTHER IMPORTANT VARIABLES

Table (Other Important Variables)
Importance of the following variables taken into consideration by an individual investor to evaluate
stock investment decision.
VERY

IMPORTANT

MODERATELY
53

SLIGHTLY

NOT

No. of

Average

IMPORTANT
Tax policy
EXIM policy
Monetary
policy
Political
stability
Scams

IMPORTANT

33% (43)
13% (17)
42% (55)

28% (36)
31% (40)
32% (42)

19% (25)
31% (40)
14% (18)

10% (13)
7% (10)
2% (3)

8% (11)
16% (21)
7% (10)

Respondent
s
128
128
128

42% (54)

25% (33)

14% (18)

8% (11)

9% (12)

128

2.17

19% (25)

16% (21)

28% (36)

128

3.16

21% (27)
14% (19)
Number of Respondents
Number of respondents who skipped this question

IMPORTANT

IMPORTANT

128
0

Table No. 3.12

Chart (Other Important Variables)

Fig. No. 3.12

Analysis:
54

Rankin
g
2.32
2.83
1.99

Monetary policy and Political stability are most important variables which are looked
upon by the small investors before making an investment decision as evidenced by the
overall ranking of 1.99 and 2.17 respectively. Other variables such as Tax policy and
EXIM policy is also considered important reflected from their average ranking which
stand at 2.32 and 2.83 respectively. Surprisingly, Scams are least looked upon by
investors whose average rating stand at 3.16.

3.1.13. STOCK INVESTMENT OBJECTIVE

Table (Stock Investment Objective)
Individual investors important Stock Investment objective.

Children
Education/
Marriage
Growth &
Income
Retirement
To fund major
Purchase
(House, Car)

VERY
IMPORTANT

IMPORTANT

MODERATELY
IMPORTANT

SLIGHTLY
IMPORTANT

NOT
IMPORTANT
20% (26)

No. of
Respondent
s
127

Average
Rankin
g
2.91

15% (20)

29% (37)

23% (30)

11% (14)

71% (92)

18% (24)

3% (5)

3% (4)

2% (3)

128

1.45

25% (33)
8% (11)

23% (30)
21% (27)

25% (32)
25% (32)

10% (14)
14% (19)

14% (19)
29% (38)

128
127

2.66
3.36

Number of Respondents
Number of respondents who skipped this question

128
0

Table No. 3.13

55

Chart (Stock Investment Objective)

Fig. No. 3.13

Analysis:

As per the findings, Growth & Income is the primary objective of small investors since
the overall ranking stand at 1.45. Other objectives such as Retirement, Children
Education/ Marriage are a secondary stock investment objective whose ranking stand at
2.91 and 2.66 respectively. According to findings, small investors do not invest for
funding major Purchase as a most important objective in mind, its overall ranking stand
at 3.36.

3.1.14. SATISFACTION LEVEL OF INVESTORS WITH RESPECT TO

INVESTOR GRIEVANCE REDRESSAL MECHANISM

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

Redressal Mechanism)
56

% of
Respondents

Satisfaction level of investor with respect to

investor grievance redressal mechanism.
Yes
No
Number of Respondents
Number of respondents who skipped this question

82.68%
17.32%
127

Number of
Respondents
105
22

Table No. 3.14

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

Redressal Mechanism)

Fig. No. 3.14

57

Analysis:

According to the survey conducted, among the total sample size, 82.68% respondents are
satisfied with the investor grievance redressal mechanism and 17.32% respondents
express their dissatisfaction stating that this mechanism has to take prompt action and all
the department should coordinate. Among the dissatisfied investors few individuals were
not aware of the investor grievance redressal mechanism in place.

3.1.15. SATISFACTION LEVEL OF INVESTORS WITH RESPECT TO

ROLE PLAYED BY S.E.B.I IN PROTECTING THE INVESTOR

Table (Satisfaction Level of Investors w. r. t. Role played by SEBI in

protecting the Investor)
Satisfaction level of investors with respect to role
played by SEBI in protecting the investor.
Yes
No
Number of Respondents
Number of respondents who skipped this question

% of
Respondents
87.30%
12.70%
126

Number of
Respondents
110
16

Table No. 3.15

Chart (Satisfaction Level of Investors w. r. t. Role played by SEBI in

protecting the Investor)

58

Fig. No. 3.15

Analysis:

According to the survey conducted, out of the total sample size, 87.30% respondents are
satisfied with the role played by SEBI in protecting the investor and 12.70% respondents
are dissatisfied with the role played by SEBI in protecting the investor. However
regulatory watch dogs to tighten more nerves and safe guard against manipulation
disclosures like fudged accounts etc.

3.2. Conclusion

Financial Statements:
The study reveals that investors extensively use "profit and loss statement" and "balance sheet"
to evaluate stock investment decision. So, we may conclude that most of them ensure that these 2
59

statements will let them know a good image of financial background of the company which they
are investing in. Hence, it plays crucial role in influencing investors behavior.

Accounting Instruments:
The study reveals that, accounting instrument especially "earning per share" and "return on
equity" and "price earning ratio" are heavily used and relied upon by the investor to assess
company company's performance and relative risk associated with the investment. However, risk
return calculation using scientific methods (NPV, IRR etc) are least used by the investors. So we
concluded that, investor make prudent investment decision on the basis of company's earning
capacity and how profitably the company employs their money rather than riding on the fame or
following the footsteps of other investors.

Economic Variables:
The study reveals that, investors do not ignore different economic variables which have
tremendous effect on stock market and consequently impact investors decision. The most
prominent economic variables taken into consideration by the respondents covered in the survey
are "Growth rate", "Inflation" and "GDP". So we conclude that, any changes in such variables
will directly impact the investment behavior of an individual.

Source of Investment Advice:

The study reveals that, "business news channels" and "broker" provide vital financial advice
which consequently plays an instrumental role in affecting individual investment decision.
Whereas, "internet website such as moneycontrol.com" keeps a investor updated with regards to
trend and pattern of fluctuation in stock prices. Many investors expressed that news channels
play a prominent role in influencing their investment decision by telecasting shows exclusively
meant for small investors and advices from experts are pretty useful.
60

 Aspects of the Company:

The study reveals that, investors give utmost importance to reputation and goodwill of company
and business of the company before investing. Hence, the two aspects immensely influence
individual investment decision. Investors also pay attention to competence of the management
team of the company in which they are investing.

Past Stock Prices:

The study reveals that, investors use historical stock prices of previous year and last 2 years in
order to determine future stock prices of the companies. So we conclude that, historical stock
prices especially of last year and last 2 years play an important role in investment decision of an
individual.
Total Investment in Stocks:
The study reveals that, majority of investors have total investment ranging from 1% to 30% in
stock, and most of them are young investors in terms of age and experience. Similarly investors
having investment ranging from 31%-50% and above are pretty much veteran in terms of age
and experience. So we conclude that, as the age of individual progresses, the total investment in
stock gradually increases since he finds stability in his earning and also becomes a experienced
player in stock market arena.

Government policies and Scams:

The study reveals that, "monetary policy", "political stability" and "tax policy" of the country is
abundantly analyzed and looked upon by the investors in order to evaluate their stock investment
decision, Whereas, scams (e.g. 2g spectrum scams and security scams) have minimal effect on
their investment decision. So we conclude, the above 3 mentioned variables have a significant
effect on investment behavior of an individual.
61

 Investment Objective:
The study reveals that, the ultimate objectives behind stock investment for small investors is
earning additional income and multiply their wealth. Retirement is also one of the important
objectives as evidenced by the study.

3.3. Suggestions
Beware of free advice:

Too many people in the capital market offer free advice; these come through TV, print
media, websites, emails and SMS.

Dont act blindly on such advice; remember free advice carries no accountability.

Dont get taken in by advertisements

Advertisements are to make you feel good.

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

Dont get carried away by upward arrows, big percentages and deceptive numbers.

Deal only with registered intermediaries

There are many unregistered operators in the market who will lure you with promises of
high returns, and then vanish with your money or they will mis-sell or they will undertake
unauthorized transactions.

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

62

 Dont take decisions based just on summary accounts

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

Check out for Other Income and unusual expenses

Look out especially for entries relating to related party transactions, sundry debtors,
subsidiaries accounts, cash/bank balances.

Follow life-cycle investing

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

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

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

Credential of the company.

Before investing, please check about the credentials of the company, its management,
fundamentals and recent announcements made by them and other disclosures made under
various regulations. The sources of information are the websites of the exchanges and
companies, databases of data vendors, business newspapers and magazines etc.

Assess the risk-return profile of the investment as well as the liquidity and safety
aspects before making your investment Decision.

63

 Transact only through SEBI-recognized stock exchanges.

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

Read carefully and complete all required formalities for opening an account with
the broker (Client registration, Client-Trade Member agreement etc).

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

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

The cash flow statement is one of the least manipulated financial statements. The
other two financial statements viz. the Profit & Loss and Balance Sheet, are often
subjected to many manipulations.

Many companies find that the best way to grow is through mergers and
acquistions. And investors usually take comfort in the idea that a merger will
deliver enhanced market power. But, think again. Sometimes, the real picture
might actually be different. In fact, at times M&As might prove to be dangerous
to shareholder value as the real purpose behind them could be to portray a fake
picture of the companys financial health.

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

the broader picture i.e. industry/sector analysis. However, analyzing an industry is
important to understand a companys business and performance as also gauge the
opportunities and threats for future growth.
64

 INVESTOR GRIEVANCE REDRESSAL MECHANISM: (suggestions by

respondents)
1. Constitution of the investor grievance redressal board should have wider
representation and not restricted to brokerage fraternity as they constitute
majority.
2. A forum is required wherein investors grievance in met, and fast, easy, relief is
granted without delay. Immediate action taking committee be formed.

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

respondents )
1. SEBI should have more powers to punish guilty
2. SEBI should increase funding to investor protection fund
3. Securities Appellate Tribunal (SAT) to be dismissed, appeal against SEBI
decisions to be directed to higher court.
4. SEBI should periodically review and keep a check on daily circuit broker stocks
and warn investor about investing in such stock. SEBI can release a monthly
magazine related to circuit broker stock for the month, stocks in which insider
trading has been taking place for a while heavily.
5. SEBI to take stringent action against any unfair trade practices, which actions are
seen and felt and have deterrent effect on the wrong doers.

65

BIBLIOGRAPHY
BOOKS
1. THE ICFAI UNIVERSITY PRESS, Introduction to Security Analysis
2. ICAI PUBLICATION- COMMITEE ON FINANCIAL MARKETS AND INVESTORS
PROTECTION, HANDBOOK ON CAPITAL MARKET REGULATION
3. Bharati V Pathak V.THE INDIAN FINANCIAL SYSTEM, DORLING KINDERSLEY
PVT. LTD
4.

PRINCIPLES OF STRATEGIC FINANCIAL MANAGEMENT, FedUni, october 2004

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

PVT. LTD
6. M.Y KHAN, FINANCIAL MANAGEMENT, TATA McGREW HILL
7. JAIN P.K., FINANCIAL MANAGEMENT, PUBLISHING COMP LTD.

66

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

LTD.

WEBSITES

www.bseindia.com
www.bgse.co.in
www.dseindia.org.in

www.otcei.net
www.sebi.gov.in
www.investopedia.com
stockshastra.moneyworks4me.com
zenithresearch.org.in

67

QUESTIONNAIRE
Ranking:
1- Very Important
Important
2- Important
3- Moderately Important

4- Slightly
5- Not Important

1.Personal Information:
Name:
Age:

18-30 31-45 46-55 56 & above

68

Gender:

M F

Income Group (Monthly):

15000-24999
25000-39999
40000-74999
75000 & above
Education:
SSC HSSC

Degree Post Graduate Degree

Other _______________
2. Rank the importance of financial statements you look
into for making your stock investment decision.
A. Profit & Loss statement
1 2 3 4
5
B. Audit reports
1 2 3
4 5
C. Cash Flow & Funds Flow statement
1 2 3 4
5
D. Balance sheet
1 2 3
4 5

3. Rank the following accounting instruments which

enable you to evaluate companys performance for
Stock Investment.
A. Earnings Per Share (EPS)
1 2 3 4
5
B. Return On Equity (ROE)
1 2 3 4
5
C. Net Operating Profit After Tax
1 2 3 4
5
69

D. Price Earning ratio (P/E)

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

1 2 3 4
1 2 3

1 2 3

4. Rank the following important Economic Variables

which help you in evaluation of Stock Investment.
A. GDP (Gross Domestic Product)
1 2 3 4
5
B. Fiscal Deficit
1 2 3
4 5
C. Growth rate
1 2 3
4 5
D. Inflation
1 2 3
4 5
E. FDI (Foreign Direct Investment)
1 2 3 4
5
F. Interest rates
1 2 3
4 5
5. Rank the following source of Investment advice.
A. Newspaper
1
2 3 4 5
B. Broker
1
2 3 4 5
C. News channels
1
2 3 4 5
D. Financial Planner/Advisor
1
2 3 4 5
E. Family or Friends
1
2 3 4 5
F. Internet (eg:moneycontrol.com)
1
2 3 4 5
70

6. Rank the important aspect of the company in

evaluation of the Stock Investment.
A. Management Team/ Boards of Directors
1 2
3 4 5
B. Size of the company
1
2 3 4 5
C. Reputation & Goodwill of the company
1
2 3 4 5
D. Product/ Service or Business of the company
1 2
3 4 5
E. Business strategy
1
2 3 4 5
7. Rank the following past stock prices in order to
evaluate your investment decision.
A. Last year stock prices
1
2 3 4 5
B. Last 2 years stock prices
1
2 3 4 5
C. Last 3 years stock prices
1
2 3 4 5
D. More than 5 years stock prices
1
2 3 4 5

8. What % of your total Investment is in stocks?

1 % - 10 %
11 % - 20 %
21 % - 30 %
31 % - 50 %
51 % & above
9. Rank the following based on their importance in
evaluation of your Stock Investment.
A. Tax policy
2 3 4 5
71

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

1
1
1

10.
Rank the following Stock Investment objective.
A. Children Education/ Marriage
1
2 3 4 5
B. Growth & Income
1
2 3 4 5
C. Retirement
1
2 3 4 5
D. To fund major Purchase (House, Car)
1
2 3 4 5
11.
Are you satisfied with the investor grievance
redressal mechanism?
Yes
No
Suggestion: ______________________________________________
______________________________________________

12.
Are you satisfied with the role played by SEBI in
protecting the Investor?
Yes
No
Suggestion: _____________________________________________
72

_____________________________________________

ANNEXURE

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

SR.
NO.

Name of the Exchange & Location

Date of Initial
Recognition

The Bombay Stock Exchange, Mumbai

31-03-1957

The Ahmedabad Stock Exchange Association Ltd., 16-09-1957

Ahmedabad

The Calcutta Stock Exchange Ltd, Kolkata

10-10-1957

Madras stock Exchange Ltd., Chennai

15-10-1957

73

The Delhi Stock Exchange Association Ltd., New 09-12-1957

Delhi

The Hyderabad Stock Exchange, Hyderabad

20-09-1958

Madhya Pradesh Stock Exchange, Indore

24-12-1958

Bangalore Stock Exchange Ltd., Bangalore

16-02-1963

Cochin Stock Exchange Ltd.,Ernakulam, Cochin

10-05-1979

10

The Uttar Pradesh Stock Exchange Association Ltd., 03-06-1982

Kanpur

11

Pune Stock Exchange Ltd., Pune

12

Ludhiana Stock Exchange Association Ltd., Ludhiana 29-04-1983

13

The Gauhati Stock Exchange Association Ltd., 01-05-1984

Gauhati

14

Kanara Stock Exchange Association Ltd., Mangalore

09-09-1985

15

The Magadh Stock Exchange Ltd., Patna

11-12-1980

16

Jaipur Stock Exchange Association Ltd., Jaipur

09-01-1989

17

Bhubaneswar Stock Exchange Association Ltd., 05-06-1989

02-09-1982

74

Bhubaneswar
18

Saurashtra kutch Stock Exchange Association Ltd., 10-07-1989

Rajkot

19

The Vadodara Stock Exchange Association Ltd.. 05-01-1990

Baroda

20

The Coimbatore Stock Exchange Association Ltd., 18-09-1991

Coimbatore

21

The Meerut Stock Exchange Association Ltd., Meerut 20-09-1991

22

National Stock Exchange, Mumbai

23

Over The Counter Exchange of India (OTCEI), 23-08-1994

Mumbai

26-04-1993

Top 15 Broking Companies in India

Company
Name
India Infoline Ltd.
Angel Broking
Ltd.
Indiabulls
Securities Ltd.
Religare Securities
Ltd.
SMC Global
Securities Ltd.

No. of
Employees

Terminals

Sub Brokers

13711
6397

658
14436

1666
7031

4884

2292

4598

10371

1301

3242

7680

1950

75

Karvy Stock
Broking Ltd.
Anand Rathi Share
Brokers Ltd.
Kotak Securities
Ltd.
Unicon Securities
Ltd.
Bonanza Portfolio
Ltd.
Sharekhan Ltd.
Motilal Oswal
Securities Ltd.
Nirmal Bang
Securities Ltd.
HDFC Securities
Ltd.
Reliance Securities
Ltd.

3051

2992

490

2806

5332

668

2547

2198

2422

2498

2616

72

1827

5293

1278

1582
1232

2024
8300

431
1517

1163

2509

750

1160

1518

--

1107

2822

2943

Source: D & B website

The Securities and Exchange Board of India (SEBI), in 1991 made a compilation of
common investor grievances, relevant legal provisions and various remedies available
to the investors. The grievances were grouped under the following heads. Grievances
1

Refund Order/ Allotment Advise1

Non-Receipt of Dividend

Non-Receipt of share certificates after transfer

Debentures

Non-Receipt of letter of offer for rights

Collective Investment schemes

Mutual funs/ venture capital funds/ Foreign Ventures/ Capital Investors/

Foreign Institutional Investors/ Portfolio manager, Custodians

Brokers/Securities lending Intermediaries/ Merchant Bankers/ Registrars

and Transfer agents/ Debenture Trustees/ Bankers to Issue/ Credit Rating
76

Agencies Trustees/ Underwriters/ Depository Participants

9

Securities Exchanges/ Clearing and settlement organizations/

Depositories

10

Derivative Trading

11

Corporate Governance/ Corporate Restructuring/ substantial Acquisition

and Takeovers/ Buyback/ delisting/ Compliance with Listing conditions.

Apart from the above grievances, investors face certain other problems as well. This is mainly
due to lack of market liquidity in many securities, excessive speculation in the market, price
rigging on many scrips, insider trading by those possessing price sensitive information, excessive
premium charged by some company promoters under the guise of free pricing norms etc.

77