UNIVERSITY OF MUMBAI

PROJECT REPORT ON
A SYUDY OF CHANGING TRENDS IN THE CAPITAL MARKET

MASTER OF COMMERCE (Banking & Finance)

SUBJECT: RESEARCH METHODOLOGY
SEMESTER IV
2015-16
In Partial Fulfillment of the Requirement under Semester Based
Credit and Grading System for Post Graduates (PG)
Program under Faculty of Commerce

SUBMITTED BY
PARSHURAM .B. OMKAR
Roll No: 38

PROJECT GUIDE
Subject Teacher name
Dr. RAJESHWARY G.

K.P.B HINDUJA COLLEGE OF COMMERCE

315, NEW CHARNI ROAD, MUMBAI-400 004

1
 4th SEMESTER

A STUDY OF CHANGING TRENDS IN THE CAPITAL MARKET

SUBMITTED BY
PARSHURAM OMKAR
Roll No: 38

2
 Smt. P.D. Hinduja Trusts

K.P.B. HINDUJA COLLEGE OF COMMERCE

315, New Charni Road, Mumbai 400 004 Tel.: 022- 40989000 Fax: 2385 93 97. Email:
hindujacollege@gmail.com
NAAC Re-Accredited A
ISO 9001:2008 THE BEST COLLEGE OF UNIVERSITY OF MUMBAI FOR THE ACADEMIC YEAR 2010-
Prin. Dr. Minu Madlani (M. Com., Ph. D.)

CERTIFICATE

This is to certify that Mr. PARSHURAM OMKAR of M.Com (Banking &

Finance) Semester 4th [2015-2016] has successfully completed the Project on A

STUDY OF CHANGING TRENDS IN CAPITAL MARKET under the

guidance of Dr. RAJESHWARY G.

________________ ________________
Project Guide Co-coordinator

________________ ________________
Internal Examiner External Examiner

________________ ________________
Principal College Seal

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 DECLARATION

I Mr. PARSHURAM OMKAR student of M.Com-Banking & Finance, 4th

semester (2015-2016), hereby declare that I have completed the project on A
STUDY OF CHANGING TRENDS IN CAPITAL MARKET

The information submitted is true and original copy to the best of our knowledge.

(Signature)

Student

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 TABLE OF CONTENTS

SR. PARTICULARS PAGE NO.

NO

1.1 INTRODUCTION 6-7

1.2 OBJECTIVES OF THE STUDY 6

1.3 HYPOTHESIS 6

1.4 NEED OF THE STUDY 6

1.5 RESEARCH METHODOLOGY 7

1.6 REVIEW OF LITREATURE 8

1.7 LIMITATION OF THE STUDY 9

2 PROFILE OF THE RESPONDENTS 10-16

3 CONCLUSION 17-22

3.1 INTRODUCTION 17-18

3.2 ANALYSIS 19
3.3 CONCLUSION 20
3.4 SUGGESTIONS AND RECOMMENDATIONS 21

3.5 BIBLOGRAPHY 22

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CHAPTER 1

1.1 INTRODUCTION

After a period of sustained growth, the Indian capital markets suffered a slowdown due to the
global financial crisis. However, since early 2009, the markets have recovered. Indices have
gained over 80%, and market cap has more than doubled, making India one of the top
performing markets.
In a new report, Indian Capital Markets: Trends and Prospects, Celent analyzes trends and
opportunities in various segments of the Indian capital market including the equity, debt, and
derivatives segment. The report focuses on the drivers of growth in each area and the roadblocks
hampering development. It also studies trends in the retail and institutional segments, with a
focus on the issues responsible for the current lull in the retail investment space.

Capital market research is an essential activity for companies because it enables them to
provide products and services that are useful for the targeted consumers. Such a focused and
logical approach enhances the profit making possibilities of companies.
The companies can earn more dividends and at the same time minimize risks as a result of
research on capital markets. One big advantage of capital market research is establishment of
proper communication between the companies and the customers. The customer reactions to
various services provided by the companies can be measured as a result of capital market
research.

The companies can thus do away with wrong policies and look to take the right steps. The
companies can also locate the right opportunities through market research. If the company
undertakes capital market research before launching a new product or service then it stands a
better chance of getting a good return. Risk minimization is another reason for
undertaking capital market research.
Through this research, the exact needs of the market and the general public can be gauged and
the products and services can be made very demand oriented.

The companies can also analyze whether they are making progress in the right direction. Capital
market research should be done as early as possible in order to avoid problems in the future.
Before investing in the stock market, capital market research needs to be undertaken. Research
involves finding the companies and stock prices that would best suit the financial situation of the
investor. The company profile needs to be studied and the size of the company is another
important parameter of stock market investment research.
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Gathering information on the history of the company is another facet. Its history of profits and
popularity and its performance in the past must be analyzed before investing in the shares of that
company. Research on the products and services of various companies is also very important.
Investments should be made for the long term. This minimizes risk and increases profitability.
Lastly, investment should be made wisely and regularly and this results from a good capital
market research.

1.2 Objectives of the study:

1. To examine the changing trend of the capital structure.

2. To examine the changing patterns in capital market.

3. To provide suggestions.

1.3 HYPOTHESIS
H1: The changing trends are useful to the customers.

The above hypothesis has been proved. It has proved in table no. 11.

H2: The customer is satisfied by the changing trends.

The above hypothesis has been proved. It has proved in table no.10 and 11.

1.4 Need of the Study:

In this study, we try to find out the ways in which different companies at different times and in
different institutional environments have financed their operations and to identify possible
implications of these financing patterns. The central issue we address is to examine the trend of
changes in the capital structure of Indian companies and impact of liberalization on the capital
structure decisions of Indian companies. We also try to find out the factors that determine the
financing pattern of capital structure of Indian companies, particularly in the private sector.

1.5 Research Methodology

The sample size for this study is 30 customers from banks which located at Mumbai, Andheri.
Convenience sampling technique was used for this study to distribute questionnaires to the customers
of the banks.

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1.6 Review of Literature
Raghunathan and Varma (1992a) point out that any comparison of the Indian stock market with
those elsewhere must be carried out on a common currency base. They find that in dollar terms,
the SENSEX return over the 1960-92 period is only about 0.5%, while during the same period
the returns in the U.S. (based on the S & P Index) and the Japanese (based on the NIKEI index)
are 6.1% and 11.4% per year respectively. Over the twelve year period 1980-92, the dollar
returns for SENSEX, S & P and NIKEI indices turn out to be 6.5%, 10.65% and 13.6%
respectively. For a shorter span of seven years, namely 1985-92, the returns for the three indices
turn out to be quite comparable at 15%, 13% and 14% respectively.

Venkateshwar (1991) explores the relationships of the Indian stock markets as reflected by the
Bombay Stock Exchange Index, vis-a-vis other prominent international stock markets. 23
international Stock indices are used over the period 1983-87. He concludes that there is
practically no meaningful relationship between the BSE index and other international stock
market indices, though the British and South Korean indices are inversely related to BSE.

Pandya (1992) observes that as a regulatory and development body, SEBI's efforts in the
direction of investor protection are varied and unlimited. The measures brought in by SEBI
broadly cover measures for allocative efficiency in the primary market with fair degree of
transparency, reforms in the secondary market for visible and mutual funds, regulation of various
market intermediaries and above all for the protection of the investing public.

Barua (1993)). Dhillon (1993), in his doctoral dissertation studies the regulatory policies of
Bombay Stock Exchange (BSE) over a four year period (July 1986 - June 1990). His findings
show that regulatory authorities decide changes in their margin policy on the basis of market
activity. He finds that the margins are prompted by changes in settlement returns, price volatility,
trading volume and open positions. Granger causality results show that there is limited causality
in the reverse direction: margin changes do not affect returns, and have only a limited impact on
price volatility, trading volume and open positions. Event study methodology applied to daily
margins show similar results, except that daily margin on sellers do not appear to be affected by
market variables.

Reference:
1. Raghunathan V & Varma J R (1992) Why the Dollars do not Flow into India,
Unpublished Paper, Indian Institute of Management, Ahmedabad.

2. Venkiteswaran N (1990), Guidelines on Share Valuation: How Fair is Fair Value?

3. Pandya V H (1992), Securities and Exchange Board of India: Its Role, Powers,
Functions and Activities, Chartered Secretary.

4. Barua S K & Dhillon (1993), RBI Autonomy and the Indian Financial Sector.

8
1.7 LIMITATION OF THE STUDY
This study was applied in a smaller scope which is related to capital market only. In the future,
this study must be carried for the changing trends in capital market. The result shows on this
study is only the proposed variables which referred from the related journal. Probably some other
factors might influence in determining customer service quality level in capital market.

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Chapter 2

Profile of the Respondents

1. Age Distribution

Particulars Frequency Percentage

<= 30 years 6 20%

31-40 years 13 43.33%

41-50 years 9 30%

>50 years 2 6.67%

Total 30 100%

Out of 30 people, 20% people are <=30 years, 43.33% people are 31-40 years,
30% people are 41-50 years and 6.67% people are >50 years.

2. Educational Qualification:

Particulars Frequency Percentage

Undergraduate 3 10%

Graduate 18 60%

Post-Graduate 9 30%

Total 30 100%

Out of 30 people, 10% people are under-graduate, 60% people are graduate and
30% people are post-graduate.

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 3. Occupation of the investors:

Particulars Frequency Percentage

Government Service 2 6.67%

Private Service 15 50%

Business 11 36.67%

Others 2 6.67%

Total 30 100%

Out of 30 people, 6.67% people are having government service, 50% people are
having private service, 36.67% people are having business and 6.67% people are
working others.

4. Monthly Family Income:

Particulars Frequency Percentage

10,001-15,000 2 6.67%

15,001-20,000 7 23.33%

20,001-30,000 12 40%

>30,000 9 30%

Total 30 100%

Out of 30 people, 6.67% people are having income between 10,001-15,000,

23.33% people are having income between 15,001-20,000, 40% people are having
income between 20,001-30,000 and 9% people are having income between
>30,000.

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 5. Invested in Different kind of investments:

Particulars Frequency Percentage

Insurance 4 13.33%

Shares/Debentures 9 30%

Mutual Fund 12 40%

Real Estate 5 16.67%

Total 30 100%

Out of 30 people, 13.33% are invested in insurance, 30% are invested in

shares/debentures, 40% are invested in mutual fund and 16.67% are invested in
real estate.

6. Preference of factors while investing:

Particulars Frequency Percentage

Liquidity 0 0%

Low Risk 10 33.33%

High Returns 18 60%

Trust 2 6.67%

Total 30 100%

Out of 30 people, 33.33% people prefer low risk factor while investing, 60%
people prefer high risk factor while investing, 6.67% people prefer trust factor
while investing.

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 7. Which channel will you prefer while investing in Capital Market?

Particulars Frequency Percentage

Financial Advisor 14 46.66%

Bank 9 30%

Asset Management 7 23.33%

Company
Total 30 100%

Out of 30 people, 46.66% prefer financial advisor while investing in Capital

Market, 30% people prefer bank while investing in capital market and 23.33%
people prefer Asset Management Company while investing in capital market.

8. Mode of investment preferred by you:

Particulars Frequency Percentage

One Time Investment 10 33.33%

Systematic Investment Plan 20 66.67%

(SIP)

Total 30 100%

Out of 30 people, 33.33% people prefer one time investment as mode of

investment, 66.67% people prefer systematic investment plan as mode of
investment.

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 9. No. of years of experience in Capital Market:

Particulars Frequency Percentage

<3years 4 13.33%

3 years---5 years 11 36.67%

5 years---10 years 15 16.67%

>10 years 0 0

Total 30 100%

Out of 30 people, 13.33% people are having <3 years of experience in capital
market, 36.67% people are having 3-5 years of experience in capital market,
16.67% people are having 5-10 years of experience in capital market.

10. Are you aware about Capital Market and its changing trends?

Particulars Frequency Percentage

Yes 27 90%

No 3 10%

Total 30 100%

Out of 30 people, 90% people are aware about the capital market and its changing
trends and 10% people are not aware about the capital market and its changing
trends.

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 11. Are you satisfied with the services provided by the capital market in all its
instruments?

Particulars Frequency Percentage

Highly Satisfied 7 23.33%

Satisfied 17 56.67%

Neutral 4 13.33%

Not Satisfied 2 6.67%

Total 30 100%

Out of 30 people, 23.33% people are highly satisfied with the services provided by
capital market in all its instruments, 56.67% people are satisfied with the services
provided by capital market in all its instruments

12. Does the pattern of services provided by the capital market inspire you to continue
with the capital market?

Particulars Frequency Percentage

Yes 26 86.67%

No 2 6.67%

Cannot Say 2 6.66%

Total 30 100%

Out of 30 people, 86.67% people are inspired to continue with capital market,
6.67% people are not inspired to continue with capital market and 6.67% people
cannot say to continue with capital market.

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 13. Preferred Portfolios by you:

Particulars Frequency Percentage

Equity 4 13.33%

Debt 4 13.34%

Balanced 22 73.33%

Total 30 100%

Out of 30 people, 13.33% people prefer equity, 13.33% people prefer debt,
73.33% people prefer balanced portfolio.

14. Option preferred by you for getting return:

Particulars Frequency Percentage

Dividend Payout 2 6.67%

Dividend Reinvestment 10 33.33%

Growth 18 60%

Total 30 100%

Out of 30 people, 6.67% people prefer dividend payout option for getting returns,
33.33% people prefer dividend reinvestment option for getting returns and 60%
people prefer Growth option for getting return.
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CHAPTER 3

Conclusion

3.1 Introduction: An Overview of Indian Capital Market

The Indian Capital market is more than a century old. Its history goes back to 1875, when 22
brokers formed the Bombay Stock Exchange (BSE). Over the period, the Indian securities
market has evolved continuously to became one of the most dynamic, modern and efficient
securities markets in Asia.

Indian market confirms to best international practices and standards both in terms of structure
and in terms of operating efficiency. Indian securities markets are mainly governed by a) The
Companys Act 1956, b) The Securities Contracts (Regulation) Act 1956 (SCRA Act), and c)
The Securities and Exchange Board of India (SEBI) Act, 1992. A brief background of these
above regulations are given below

a) The Companies Act 1956 deals with issue, allotment and transfer of securities and
various aspects relating to company management. It provides norms for disclosures in the
public issues, regulations for underwriting, and the issues pertaining to use of premium
and discounts on various issues.

b) SCRA provides regulations for direct and indirect control of stock exchanges with an aim
to prevent undesirable transactions in securities. It provides regulatory jurisdiction to
Central Government over stock exchanges, contracts in securities and listing of securities
on stock exchanges.

c) The SEBI Act empowers SEBI to protect the interest of investors in the securities market,
to promote the development of securities market and to regulate the security market.

The Indian securities market consists of primary (new issues) as well as secondary (stock)
market in both equity and debt. The primary market provides the channel for sale of new
securities, while the secondary market deals in trading of securities previously issued. The
issuers of securities issue create and sell new securities in the primary market to raise funds for
investment. They do so either through public issues or private placement. There are two major
types of issuers who issue securities. The corporate entities issue mainly debt and equity
instruments (shares, debentures, etc.), while the governments (central and state governments)
issue debt securities (dated securities, treasury bills). The secondary market enables participants
who hold securities to adjust their holdings in response to changes in their assessment of risk and

17
return. A variant of secondary market is the forward market, where securities are traded for
future delivery and payment in the form of futures and options.

The futures and options can be on individual stocks or basket of stocks like index. Two
exchanges, namely National Stock Exchange (NSE) and Stock Exchange, Mumbai (BSE)
provide trading of derivatives in single stock futures, index futures, single stock options and
index options. Derivatives trading commenced in India in June 2000.

Other leading cities in stock market operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After
1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were
floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers
formed The Ahmadabad Share and Stock Brokers Association.

What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to
Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta. After
the Share Mania in 1861-65, in the 1870s there was a sharp boom in jute shares, which was
followed by a boom in tea shares in the 1880s and 1890s and a coal boom between 1904 and
1908. On June 1908, some leading brokers formed The Calcutta Stock Exchanges Association.

In the beginning of the 20 century, the industrial revolution was on the way in India with the
Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company Limited in
1907, an important stage in industrial advancement under Indian enterprise was reached.
Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally
enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange functioning in
its midst, under the name and style of The Madras Stock Exchange with 100 members.
However, when boom faded, the number of members stood reduced from 100 to 3, by 1923, and
so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was a rapid
increase in the number of textile mills and many plantation companies were floated. In 1937, a
stock exchange was once organized in Madras- Madras Stock Exchanges Association (Pvt)
Limited. In 1957, the name was changed to Madras Stock Exchange Limited).
Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the
Punjab Stock Exchange Limited, which was incorporated in 1936.

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3.2 Analysis
In Mumbai in the age group of 31-40 years were more in numbers. The second most
investors were in the age group of 41-50 years. The third most investors were in the age
group of <=30 years and the least were in the age group of >50 years.

In Mumbai most of the investors were Graduate or Post Graduate and below HSC there
were few in numbers.

In occupation group most of the investors were private employees, the second most
investors were business persons and the least were government employees and others.

In family income group, between Rs. 20,001-30,000 were more in numbers, the second
most were in the income group of >30,000, the third most were in the income group of
15,001-20,000 and the least were in the income group of 10,001-15,000.

About 40% respondents are invested in mutual funds, 30% respondents are invested in
shares/debentures, 16.67% are invested in real estate and 13.33% are invested in
insurance.

Mostly respondents preferred high returns while investment, the second most preferred is
low risk then trust and least preferred liquidity.

46.66% investors preferred to invest through financial advisors, 30% through Bank and
23.33% through Asset Management Company (means direct investment).

66.67% respondent prefer systematic investment plan and 33.33% respondent prefer one
time investment as mode of investment.

36.67% respondents have experience of 3-5 years, 16.67% respondents have experience
of 5-10 years and 13.33% respondents have <3 years of experience.

90% respondents are aware about the capital market and 10% are not.

56.67% respondents are satisfied with the services, 23.33% are highly satisfied with the
services, 13.33% respondents are neutral with the services and 6.67% are not satisfied
with the services.

86.67% respondents are inspired and 6.67% respondents are not.

The most preferred portfolio was balanced portfolio, the second was equity and debt.

The most preferred option is growth, second is dividend reinvestment and least is
dividend payout.

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3.3 Conclusion

Running a successful Capital Market requires complete understanding of the peculiarities

of the Indian Stock Market and also the psyche of the small investors. This study has
made an attempt to understand the financial behavior of Capital Market investors in
connection with the preferences of Brand (AMC), Products, Channels etc.

We researcher observed that many of people have fear of Capital Market. They think
their money will not be secure in Capital Market. They need the knowledge of Capital
Market and its related terms. Many of people do not have invested in Capital Market due
to lack of awareness although they have money to invest. As the awareness and income is
growing the number of Capital Market investors are also growing.

Brand plays important role for the investment. People invest in those Companies where
they have faith or they are well known with them. There are many AMCs in Mumbai but
only some are performing well due to Brand awareness. Some AMCs are not performing
well although some of the schemes of them are giving good return because of not
awareness about Brand.

Distribution channels are also important for the investment in Capital Market. Financial
Advisors are the most preferred channel for the investment in Capital Market. They can
change investors mind from one investment option to others. Many of investors directly
invest their money through AMC because they do not have to pay entry load. Only those
people invest directly who know well about Capital Market and its operations and those
have time.

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3.4 Suggestions and Recommendations

The most vital problem spotted is of ignorance. Investors should be made aware of the
benefits. Nobody will invest until and unless he is fully convinced. Investors should be
made to realize that ignorance is no longer bliss and what they are losing by not
investing.

Capital Market offers a lot of benefit which no other single option could offer. But most
of the people are not even aware of what actually a Capital Market is? They only see it as
just another investment option. So the advisors should try to change their mindsets. The
advisors should target for more and more young investors. Young investors as well as
persons at the height of their career would like to go for advisors due to lack of expertise
and time.

Capital Market Company needs to give the training of the Individual Financial Advisors
about the Fund/Scheme and its objective, because they are the main source to influence
the investors.

Before making any investment Financial Advisors should first enquire about the risk
tolerance of the investors/customers, their need and time (how long they want to invest).
By considering these three things they can take the customers into consideration.

Younger people aged under 35 will be a key new customer group into the future, so
making greater efforts with younger customers who show some interest in investing
should pay off.

Customers with graduate level education are easier to sell to and there is a large untapped
market there. To succeed however, advisors must provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative products launched by Assets
Management companies very recently in the industry. SIP is easy for monthly salaried
person as it provides the facility of do the investment in EMI. Though most of the
prospects and potential investors are not aware about the SIP. There is a large scope for
the companies to tap the salaried person.

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BIBLIOGRAPHY:

Books:

Endo, Tadashi. 1998, The Indian Securities Market A Guide for Foreign and Domestic
Investors, Vision Books, India

Euro money, 1996, World Equity Guide, UK: Euro money Publications.

Articles:

DAVID, S (2010), articlestorehouse.com/Art/.../Why-Customer-Service-Is-Important.html

The journal of Banking Studies, April 2004, Bankers College New Delhi, p.22.

Websites:

1) Kevin, C. (2005). www.qualitydigest.com/sept00/html/satisfaction.html

2) Richardson, M. (2010), www.customers1st.blogspot.com, www.communication-is-

importantin-customer.html.

3) www. Money control. com

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 QUESTIONNAIRE

A STUDY OF CHANGING TRENDS IN CAPITAL MARKET

Please tick the appropriate in below mentioned questions.

Name: _______________________________________________________________________

Gender: a) Male ______________ b) Female ______________

1) Age distribution:

a) < = 30 years ______ b) 31-40 years ______ c) 41-50 years ______ d) > 50 years

2) Educational Qualification:

a) Undergraduate ________ b) Graduate ________ c) Post-graduate ________

3) Occupation of the investors:

a) Government Service ______ b) Private Service ______ c) Business_____ d) Others _____

4) Monthly Family Income of the investors:

a) 10,001-15,000 _____ b) 15,001-20,000 _____ c) 20,000-30,000 _____d) > 30,000_____

5) Invested in different kind of Investments:

a) Insurance ______ b) Shares/Debentures______ c) Mutual Fund_____ d) Real Estate______

6) Preference of factors while investing:

a) Liquidity _____ b) Low Risk _____ c) High Returns _____ d) Trust_____

7) Which channel will you prefer while investing in Capital Market?

a) Financial Advisor _____ b) Bank_____ c) Asset Management Company______

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8) Mode of investment preferred by you:
a) One Time Investment ___________ b) Systematic Investment Plan (SIP) ___________

9) No. of years of experience in Capital Market:

a) < 3 years ____ b) 3 years 5 years____ c) 5 years 10 years ____ d) > 10 years ____

10) Are you aware about Capital Market and its changing trends?
a) Yes ____ b) No ____

11) Are you satisfied with the services provided by the capital market in all its
instruments?
a) Highly Satisfied ____ b) Satisfied ____ c) Neutral ____ d) Not Satisfied ____

12) Does the pattern of services provided by the capital market inspire you to continue
with the capital market?
a) Yes _______ b) No _______ c) Cannot Say ______

13) Preferred Portfolios by you:

a) Equity ______________ b) Debt _______________ c) Balanced ______________

14) Option preferred by you for getting returns:

a) Dividend Payout ______ b) Dividend Reinvestment ______ c) Growth _______

24